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

                                    FORM 20-F
(Mark One)
[  ]            REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                                       OR

[X]                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2005

                                       OR

[  ]            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                        For the transition period from to
                                    (degree)
                        Commission file number 333-08878

                                       OR

[  ]            SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
             Date of event requiring this shell company report: N/A


                          ULTRAPETROL (BAHAMAS) LIMITED

             (Exact name of Registrant as specified in its charter)

                           COMMONWEALTH OF THE BAHAMAS

                 (Jurisdiction of incorporation or organization)

                          Ultrapetrol (Bahamas) Limited
                          H & J Corporate Services Ltd.
                        Ocean Centre, Montague Foreshore
                                  East Bay St.
                                 Nassau, Bahamas
                                P.O. Box SS-19084
                    (Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:
None

Securities registered or to be 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: 9% First Preferred Ship Mortgage Notes due 2014

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

Common Shares, $0.01 par value                     2,134,452 Shares Outstanding

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.

                                                   Yes [  ]         No [X]

If this report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.

                                                   Yes [  ]         No [X]

Note - Checking the box above will not relieve any registrant required to file
reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
from their obligations under those Sections.

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                                   Yes [X]         No [  ]

Indicate by check mark whether registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check
one):

Large accelerated filer[  ]  Accelerated filer [  ]  Non-accelerated filer [X]


Indicate by check mark which financial statement item the Registrant has elected
to follow.

                                          Item 17 [  ]  Item 18 [X]

If this is an annual report, indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act).

                                                   Yes [  ]         No [X]




<PAGE>


                          INDEX TO REPORT ON FORM 20-F

Part I

     Item 1. Identity of Directors, Senior Management and Advisors        1

     Item 2. Offer Statistics and Expected Timetable                      1

     Item 3. Key Information                                              1

     Item 4. Information on the Company                                  20

     Item 5. Operating and Financial Review and Prospects                48

     Item 6. Directors, Senior Management and Employees                  70

     Item 7. Major Shareholders and Related Party Transactions           72

     Item 8. Financial Information                                       76

     Item 9. The Offer and Listing                                       76

     Item 10. Additional Information                                     76

     Item 11. Quantitative and Qualitative Disclosures about
              Market Risk                                                80

     Item 12. Description of Securities Other than Equity Securities     80

Part II

     Item 13. Defaults, Dividend Arrearages and Delinquencies            80

     Item 14. Material Modifications to the Rights of
              Security Holders and Use of Proceeds                       80

     Item 15. Controls and Procedures                                    80

     Item 16A. Audit Committee Financial Expert                          81

     Item 16B. Code of Ethics                                            81

     Item 16C. Principal Accountant Fees and Services                    81

     Item 16D. Exemption From Listing Standards for Audit Committees     82

     Item 16E. Purchases of Equity Securities by the
               Issuer and Affiliated Persons                             82

Part III

     Item 17. Financial Statements                                       82

     Item 18. Financial Statements                                       82

     Item 19. Exhibits                                                   A-1



<PAGE>



CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

     Our disclosure and analysis in this report concerning our operations, cash
flows and financial position, including, in particular, the likelihood of our
success in developing and expanding our business, include forward-looking
statements. Statements that are predictive in nature, that depend upon or refer
to future events or conditions, or that include words such as "expects,"
"anticipates," "intends," "plans," "believes," "estimates," "projects,"
"forecasts," "will," "may," "should," and similar expressions are
forward-looking statements. Although these statements are based upon assumptions
we believe to be reasonable based upon available information, including
projections of revenues, operating margins, earnings, cash flow, working
capital, and capital expenditures, they are subject to risks and uncertainties
that are described more fully in this report in the section titled "Risk
Factors" in Item 3.D of this report. These forward-looking statements represent
our estimates and assumptions only as of the date of this report and are not
intended to give any assurance as to future results. As a result, you should not
place undue reliance on any forward-looking statements. We assume no obligation
to update any forward-looking statements to reflect actual results, changes in
assumptions or changes in other factors, except as required by applicable
securities laws. Factors that might cause future results to differ include, but
are not limited to, the following:

-    future operating or financial results;

-    pending or recent acquisitions, business strategy and expected capital
     spending or operating expenses, including drydocking and insurance costs;

-    shipping industry trends, including charter rates and factors affecting
     supply and demand;

-    our ability to obtain additional financing;

-    our financial condition and liquidity, including our ability to obtain
     financing in the future to fund capital expenditures, acquisitions and
     other general corporate activities;

-    our expectations about the availability of vessels to purchase, the time
     that it may take to construct new vessels, or vessels' useful lives;

-    general market conditions and trends, including charter rates, vessel
     values and factors affecting vessel supply and demand;

-    changes in governmental rules and regulations or actions taken by
     regulatory authorities;

-    potential liability from future litigation; and

-    other factors discussed in the section titled "Risk Factors" in Item 3.D of
     this report.



<PAGE>

                                     PART I

ITEM 1 - IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

         Not Applicable.

ITEM 2 - OFFER STATISTICS AND EXPECTED TIMETABLE

         Not Applicable.

ITEM 3 - KEY INFORMATION

A. SELECTED FINANCIAL DATA

     The following summary financial information set forth below for Ultrapetrol
(Bahamas) Limited (the "Company") is for the years ended December 31, 2001,
2002, 2003, 2004 and 2005 and has been derived from the Company's Financial
Statements.

<TABLE>
<CAPTION>

                                                                          Year Ended December 31,
                                                   ----------------------------------------------------------------------
                                                       2001          2002          2003         2004(1)         2005
                                                       ----          ----          ----         ----            ----

                                                                     (dollars in thousands)
<S>                                                  <C>         <C>          <C>            <C>            <C>
Statement of Operations Data:
Revenues:.................................           $111,208    $   73,124   $   75,233     $  95,160      $125,361
Operating expenses(2).....................            (60,504)      (37,582)     (41,303)      (40,815)      (73,061)
  Depreciation and amortization...........            (23,443)      (24,807)     (22,567)      (18,688)      (21,333)
  Management fees to related parties(3)...             (3,250)       (3,176)      (2,863)       (1,513)       (2,118)
  Administrative and commercial expenses..             (4,520)       (3,642)      (4,955)       (7,494)       (7,617)
  Other operating income (expenses)(4)....              1,534         1,741       (2,124)          784        22,021
  Loss on involuntary conversion Arg.
   Receivable(5)..........................                 --        (2,704)          --            --             --
                                                   -----------   -----------   ----------     ---------      ---------
Operating profit..........................             21,025         2,954         1,421       27,434        43,253
Financial expense.........................            (17,698)      (16,763)     (16,207)      (16,134)      (19,141)
Financial gain (loss) on extinguishment of
  debt(6).................................                                         1,782        (5,078)
Financial income..........................                296           326          201           119         1,152
Investment in affiliates(7)...............               (692)          (45)       3,140           406          (497)
Other income (expenses)...................               (126)          (43)        (337)          174           384
Income (loss) before income tax and minority
  interest................................              2,805       (13,571)     (10,000)        6,921         25,151
Income taxes..............................               (390)         (150)        (185)         (642)         (786)
Minority interest(8)......................                             (132)      (1,333)       (1,140)       (9,797)
                                                    ---------          -----       ------       ------        -------
Net income (loss).........................         $    2,415    $  (13,853)  $  (11,518)   $    5,139    $   14,568
                                                   ==========    ==========   ==========    ==========    ==========

Balance Sheet Data (end of period):
Cash and cash equivalents.................         $    5,872    $    4,724   $    8,248    $   11,602    $    7,914
Current  restricted cash..................                 --         1,662        1,155         2,975         3,638
Working capital(9)........................             18,920        21,013       15,416        13,441        26,353
Vessels and equipment.....................            135,289       134,797      120,803       160,535       182,069
Total assets..............................            225,576       213,546      208,161       273,648       277,747
Total debt................................            165,445       168,994      155,814       220,413       211,275
Shareholders' equity......................             47,838        35,089       23,793        28,910        43,474

EBITDA(10)................................         $   43,946    $   27,867   $   25,659    $   45,681    $   55,858

</TABLE>

(1)  In a series of related transactions,  on April 23, 2004, through two wholly
     owned subsidiaries,  we acquired from American Commercial Barge Lines Ltd.,
     or ACL, the remaining 50% equity interest in UABL Limited, or UABL, that we
     did not  previously  own,  along with a fleet of 50 river  barges and seven
     river pushboats. The results of UABL's operations have been included in our
     consolidated financial statements since that date.

(2)  Operating  expenses  include  voyage  expenses  and running  costs.  Voyage
     expenses, which are incurred when a vessel is operating under a contract of
     affreightment  (as well as any time when they are not operating  under time
     or  bareboat  charter),  comprise  all costs  relating  to a given  voyage,
     including port charges,  canal dues and fuel (bunkers)  costs,  are paid by
     the vessel owner and are recorded as voyage expenses.  Voyage expenses also
     include  charter hire payments made by us to owners of vessels that we have
     chartered in. Running costs, or vessel operating expenses, include the cost
     of all vessel  management,  crewing,  repairs and  maintenance,  spares and
     stores, insurance premiums and lubricants and certain drydocking costs.

(3)  Management  fees  to  related  parties  include  payments  to  our  related
     companies   Ravenscroft  Shipping  (Bahamas)  S.A.,  or  Ravenscroft,   and
     Oceanmarine  S.A., or Oceanmarine,  for ship management and  administration
     services that they provide to us. We purchased the business of  Ravenscroft
     and hired the  administrative  personnel and  purchased the  administrative
     related assets of Oceanmarine in March 2006; accordingly,  we do not expect
     to pay  fees to  these  related  parties  after  those  acquisitions.  Ship
     management and  administration  costs will appear as expenses in our future
     results.

(4)  Other income in 2005  includes  approximately  $21.8  million gain from the
     sale of our Capesize bulk carrier,  the Cape Pampas.  This vessel was owned
     directly by Ultracape (Holdings) Ltd., or Ultracape,  a company of which we
     own 60%.  Accordingly,  the gain on sale  attributable to the remaining 40%
     that we do not own is deducted from income as minority interest.  (See note
     8).

(5)  This relates to a loss resulting from the involuntary conversion of certain
     receivables from U.S.  dollars to Argentine pesos.  This conversion was the
     result of legislation  passed by the Argentine  government in January 2002.
     Under this law, U.S. dollar  obligations  between private parties due after
     January 6, 2002 were to be  liquidated  in Argentine  pesos at a negotiated
     rate of exchange which reflects a sharing of the impact of the devaluation.
     Our settlement in Argentine pesos of the U.S. dollar denominated agreements
     was completed in 2002 and resulted in a loss of $2.7 million.

(6)  During 2003, we repurchased  $6.7 million  principal  amount of our 10 1/2%
     First  Preferred  Ship  Mortgage  Notes due 2008,  or the Prior Notes for a
     price of $4.8 million and realized a gain of $1.8 million.  During 2004, we
     repurchased $5.7 million principal amount of our Prior Notes for a price of
     $4.3  million and  realized a gain of $1.3  million,  and we incurred  $6.4
     million in expenses in relation to our tender offer and  repurchase  of our
     Prior Notes.

(7)  Prior to April 2004,  we owned 50% of UABL through a joint venture with ACL
     and, accordingly, we accounted for it using the equity method.

(8)  We own 60% of Ultracape,  which owned the Capesize  bulk carrier,  the Cape
     Pampas prior to its sale in May 2005, and  accordingly  recognize  minority
     interest  for the 40% we do not own.  Figures in 2003 and 2004  principally
     represent 40% of the income earned by Ultracape, from operation of the Cape
     Pampas.  The figure in 2005 represents 40% of the income from operations of
     the Cape Pampas as well as 40% of the gain on the sale of the vessel in May
     2005.

(9)  Current assets less current liabilities.


(10) EBITDA  consists of net income  (loss)  prior to  deductions  for  interest
     expense and other  financial gains and losses,  income taxes,  depreciation
     and   amortization   of  drydock  expense  and  financial  gain  (loss)  on
     extinguishment  of debt. We have provided  EBITDA in this report because we
     believe  it  provides  useful  information  to  investors  to  measure  our
     performance and evaluate our ability to incur and service indebtedness.  We
     believe  that EBITDA is  intended to exclude all items that affect  results
     relating  to  financing  activities.  The gain and losses  associated  with
     extinguishment  of debt that are a direct  financing  item that affects our
     results, and as such we have not included these items in our calculation of
     EBITDA.  We  do  not  intend  for  EBITDA  to  represent  cash  flows  from
     operations,  as defined by GAAP (on the date of calculation) and should not
     be  considered  as an  alternative  to net  income as an  indicator  of our
     operating  performance  or to cash  flows from  operations  as a measure of
     liquidity.  This  definition  of EBITDA may not be  comparable to similarly
     titled measures disclosed by other companies.  Generally, funds represented
     by EBITDA are available for management's discretionary use.

    The following table reconciles our EBITDA to our net income (loss).

<TABLE>
                                                                          For the year ended December 31,
Reconciliation between EBITDA and Net income (loss) for
the years
<CAPTION>

                                                                   2001          2002        2003            2004        2005
                                                                   ----          ----        ----            ----        ----
                                                                               (dollars in thousands)
<S>                                                              <C>         <C>         <C>            <C>          <C>
EBITDA
Net Income (loss) for the year.                                   2,415      (13,853)    (11,518)         5,139      14,568
   Plus
   Financial expense                                             17,698        16,763      16,207        16,134      19,141
   Financial gain on extinguishments of debts                                             (1,782)       (1,344)
   Financial losses on extinguishments of debts                                                           6,422
   Income taxes                                                     390           150         185           642         786
   Depreciation and amortization
                                                                 23,443        24,807      22,567        18,688      21,333
                                                           ------------- ------------- ----------- ------------- -----------
   EBITDA                                                       $43,946       $27,867     $25,659       $45,681     $55,828
                                                           ============= ============= =========== ============= ===========
</TABLE>

B. CAPITALIZATION AND INDEBTEDNESS

         Not Applicable.

C. REASONS FOR THE OFFER AND USE OF PROCEEDS

         Not Applicable.

D. RISK FACTORS

     Please note: In this section, "we", "us" and "our" all refer to the Company
and its subsidiaries.

Risks Relating to Our Industry

The oceangoing cargo transportation industry is cyclical and volatile, and this
may lead to reductions of, and volatility in, our charter rates and volatility
in our results of operations.

     The oceangoing cargo transportation industry is both cyclical and volatile,
with frequent and large fluctuations in charter rates. The charter rates earned
by the vessels in our Ocean Business will depend in part upon the state of the
vessel market at the time we seek to charter them. We can not control the forces
affecting the supply and demand for these vessels or for the goods that they
carry or predict the state of the vessel market on any future date. If the
vessel market is in a period of weakness when our vessels' charters expire, we
may be forced to re-charter our vessels at reduced rates or even possibly at a
rate at which we would incur a loss on operation of our vessels.

     Some of the factors that influence the demand for oceangoing vessel
capacity include:

o    global production of and demand for petroleum and petroleum products and
     dry bulk commodities;

o    the distance that these products and commodities must be transported by
     sea;

o    the globalization of manufacturing and other developments in international
     trade;

o    global and regional economic and political conditions;

o    environmental and other regulatory developments;

o    weather; and

o    changes in seaborne and other transportation patterns and the supply of and
     rates for alternative means of transportation.

     Some of the factors that influence the supply of oceangoing vessel capacity
include:

o    the number of newbuilding deliveries;

o    the scrapping rate of older vessels;

o    the price of steel;

o    the number of vessels that are out of service at a given time;

o    changes in environmental and other regulations that may limit the useful
     life of vessels; and

o    port or canal congestion.

Our River Business can be affected by factors beyond our control, particularly
adverse weather conditions that can affect production of the goods we transport
and navigability of the river system.

     We derive a significant portion of our River Business revenue from
transporting soybeans and other agricultural products produced in the Hidrovia
Region. Droughts and other adverse weather conditions, such as floods, could
result in a decline in production of these products, which would likely result
in a reduction in demand for our services. In 2005, our results of operations
and financial condition were negatively impacted due to the decline in soybean
production associated with that year's drought. Further, most of the operations
in our River Business occur on the Parana and Paraguay Rivers, and any changes
adversely affecting navigability of either of these rivers, such as low water
levels, could reduce or limit our ability to effectively transport cargo on the
rivers.

     The rates we charge and the quantity of freight we transport in our River
Business can also be affected by:

o    demand for the goods we ship on our barges;

o    adverse river conditions, such as flooding or lock outages, that slow or
     stop river traffic;

o    any accidents or operational disruptions to ports, terminals or bridges
     along the rivers on which we operate;

o    changes in the quantity of barges available for river transport;

o    the availability of transfer stations and cargo terminals for loading of
     freight on and off barges; and

o    the availability and price of alternate means of transporting goods out of
     the Hidrovia Region.

A prolonged drought or other series of events that is perceived by the market to
have an impact on the region, the navigability of the Parana or Paraguay Rivers
or our River Business in general may, in the short term, result in a reduction
in the market value of the barges and pushboats that we operate in the region.
These barges and pushboats are designed to operate in wide and relatively calm
rivers, of which there are only a few in the world. If it becomes difficult or
impossible to operate our barges and pushboats profitably in the Hidrovia Region
and we are forced to sell them to a third party located outside of the region,
there is a limited market in which we would be able to sell these vessels, and
accordingly we may be forced to sell them at a substantial loss.

Demand for our PSVs depends on the level of activity in offshore oil and gas
exploration, development and production.

     The level of offshore oil and gas exploration, development and production
activity has historically been volatile and is likely to continue to be so in
the future. The level of activity is subject to large fluctuations in response
to relatively minor changes in a variety of factors. A prolonged, material
downturn in oil and natural gas prices is likely to cause a substantial decline
in expenditures for exploration, development and production activity, which
would likely result in a corresponding decline in the demand for platform supply
vessels, or PSVs, and thus decrease the utilization and charter rates of our
PSVs. Such decreases could have an adverse effect on our financial condition and
results of operations. Moreover, increases in oil and natural gas prices and
higher levels of expenditure by oil and gas companies may not result in
increased demand for our PSVs. The factors affecting the supply and demand for
PSVs are outside of our control, and the nature, timing and degree of changes in
industry conditions are unpredictable. If the PSV market is in a period of
weakness when our vessels' charters expire, we may be forced to re-charter our
vessels at reduced rates or even possibly at a rate at which we would incur a
loss on operation of our vessels.

     Some of the factors that influence the supply and demand for PSVs include:

o    worldwide demand for oil and natural gas;

o    prevailing oil and natural gas prices and expectations about future prices
     and price volatility;

o    the cost of offshore exploration for, and production and transportation of,
     oil and natural gas;

o    consolidation of oil and gas service companies operating offshore;

o    availability and rate of discovery of new oil and natural gas reserves in
     offshore areas;

o    local and international political and economic conditions and policies;

o    technological advances affecting energy production and consumption;

o    weather conditions;

o    environmental regulation;

o    volatility in oil and gas exploration, development and production activity;

o    the number of newbuilding deliveries; and

o    deployment of PSVs to areas in which we operate.

Our vessels and our reputation are at risk of being damaged due to operational
risks that may lead to unexpected consequences, which may adversely affect our
earnings.

     Our vessels and their cargos are at risk of being damaged or lost because
of events such as marine disasters, bad weather, mechanical failures, structural
failures, human error, war, terrorism, piracy and other circumstances or events.
All of these hazards can also result in death or injury to persons, loss of
revenues or property, environmental damage, higher insurance rates or loss of
insurance cover, damage to our customer relationships that could limit our
ability to successfully compete for charters, delay or rerouting, each of which
could adversely affect our business. Furthermore, if one of our vessels were
involved in an accident with the potential risk of environmental contamination,
the resulting media coverage could adversely affect our business.

     If our vessels suffer damage, they may need to be repaired. The costs of
repairs are unpredictable and can be substantial. We may have to pay repair
costs that our insurance does not cover in full. The loss of revenue while these
vessels are being repaired and repositioned, as well as the actual cost of these
repairs, would decrease our earnings. In addition, space at repair facilities is
sometimes limited and not all repair facilities are conveniently located. We may
be unable to find space at a suitable repair facility or we may be forced to
travel to a repair facility that is not conveniently located to our vessels'
positions. The loss of earnings while these vessels are forced to wait for space
or to travel to more distant drydocking facilities would decrease our earnings.

Because the fair market value of vessels fluctuates significantly, we may incur
losses when we sell vessels.

     Vessel values have historically been very volatile. The market value of our
vessels may fluctuate significantly in the future, and we may incur losses when
we sell vessels, which would adversely affect our earnings. Some of the factors
that affect the fair market value of vessels, all of which are beyond our
control, are:

o    general economic, political and market conditions affecting the shipping
     industry;

o    number of vessels of similar type and size currently on the market for
     sale;

o    the viability of other modes of transportation that compete with our
     vessels;

o    cost and number of newbuildings and vessels scrapped;

o    governmental or other regulations;

o    prevailing level of charter rates; and

o    technological advances that can render our vessels inferior or obsolete.

Compliance with safety, environmental, governmental and other requirements may
be very costly and may adversely affect our business.

     The shipping industry is subject to extensive and changing international
conventions and treaties, national, state and local environmental and
operational safety laws and regulations in force in international waters and the
jurisdictional waters of the countries in which the vessels operate, as well as
in the country or countries in which such vessels are registered. These laws and
regulations govern, among other things, the management and disposal of hazardous
materials and wastes, the cleanup of oil spills and other contamination, air
emissions, water discharges and ballast water management, and include (i) the
U.S. Oil Pollution Act of 1990, as amended, or OPA, (ii) the International
Convention on Civil Liability for Oil Pollution Damage of 1969, and its
protocols of 1976, 1984, and 1992, (iii) International Convention for the
Prevention of Pollution from Ships or, MARPOL, (iv) the International Maritime
Organization, or IMO, International Convention for the Safety of Life at Sea of
1974, or SOLAS, (v) the International Convention on Load Lines of 1966, (vi) the
U.S. Maritime Transportation Security Act of 2002 and (vii) the International
Ship and Port Facility Security Code, among others. In addition, vessel
classification societies also impose significant safety and other requirements
on our vessels. Many of these environmental requirements are designed to reduce
the risk of oil spills and other pollution, and our compliance with these
requirements can be costly.

     These requirements can affect the resale value or useful lives of our
vessels, require a reduction in cargo-capacity or other operational or
structural changes, lead to decreased availability of insurance coverage for
environmental matters, or result in the denial of access to, or detention in,
certain ports. Local, national and foreign laws, as well as international
treaties and conventions, can subject us to material liabilities in the event
that there is a release of petroleum or other hazardous substances from our
vessels. We could also become subject to personal injury or property damage
claims relating to exposure to hazardous materials associated with our current
or historic operations. In addition, environmental laws require us to satisfy
insurance and financial responsibility requirements to address oil spills and
other pollution incidents, and subject us to rigorous inspections by
governmental authorities. Violations of such requirements can result in
substantial penalties, and in certain instances, seizure or detention of our
vessels. Additional laws and regulations may also be adopted that could limit
our ability to do business or increase the cost of our doing business and that
could have a material adverse effect on our operations. Government regulation of
vessels, particularly in the areas of safety and environmental impact, may
change in the future and require us to incur significant capital expenditure on
our vessels to keep them in compliance, or to even scrap or sell certain vessels
altogether. For example, beginning in 2003 we sold all of our single hull
oceangoing tanker vessels in response to regulatory requirements in Europe and
the United States. In addition, Annex VI of MARPOL, which became effective May,
2005, sets limits on sulphur oxide, nitrogen oxide and other emissions from
vessel exhausts and prohibits deliberate emissions of ozone depleting
substances, such as chlorofluorocarbons. Future changes in laws and regulations
may require us to undertake similar measures, and any such actions may be
costly. We believe that regulation of the shipping industry will continue to
become more stringent and more expensive for us and our competitors. For
example, various jurisdictions are considering regulating the management of
ballast water to prevent the introduction of non-indigenous species considered
to be invasive, which could increase our costs relating to such matters.

     All of our vessels will be subject to Annex VI regulations. While we expect
that our newbuilding vessels will meet relevant Annex VI requirements at the
time of their delivery and that our existing fleet will comply with such
requirements, subject to classification society surveys, such compliance could
require modifications to the engines or the addition of expensive emissions
control systems, or both, as well as the use of low sulphur fuels. We expect
that any such modifications will be fitted to existing vessels in the next
intermediate or special survey for each vessel. We are still evaluating the
costs of implementing these requirements, but do not expect them to have a
material adverse effect on our operating costs.

     MARPOL requirements impose phase-out dates for vessels that are not
certified as double hull. Two of our Suezmax OBO vessels currently do not meet
the configuration criteria and will require modifications to comply with these
criteria before the end of 2010. These modifications will not involve major
steel work. Our vessel, Miranda I, does not currently comply with the double
hull requirement unless she limits her loading to center tanks only. However, we
expect to retrofit her to full double hull compliance during the course of 2010.

     In the United States, 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. 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 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 IMO and the European Union, or EU, also have adopted
separate phase-out schedules applicable to non-double hull tankers operating in
international and EU waters. These regulatory programs may require us to
introduce modifications or changes to tank configuration to meet the EU double
hull standards for our vessels or remove them from operation.

     Under OPA, with certain limited exceptions, all newly built or converted
tankers operating in U.S. waters must be built with double hulls conforming to
particular specifications. Tankers that do not have double hulls are subject to
structural and operational measures to reduce oil spills and will be precluded
from operating in U.S. waters in most cases by 2015 according to size, age, hull
configuration and place of discharge unless retrofitted with double hulls. In
addition, OPA specifies annual inspections, vessel manning, equipment and other
construction requirements applicable to new and existing vessels that are in
various stages of development by the U.S. Coast Guard, or USCG.

     Under OPA, and per USCG interpretations, our Aframax and Suezmax OBOs will
be precluded from operation in U.S. waters in 2014. The following information
has been extracted from the TVEL/COC corresponding to the vessels' last
inspection at a U.S. Port.

Name                        Phase-out date*       Last TVEL/COC issuance date**
----                        ---------------       -----------------------------
Princess Katherine........       N/A                  March 26, 2003
Princess Nadia............   January 2014             August 26, 2001
Princess Susana...........   November 2014            February 18, 2003
Princess Marina...........   March 2014               August 29, 2002

------------
* As per the last Tank Vessel Examination Letter, or TVEL/Certificate of
Compliance, or COC.

** The USCG inspects vessels upon entry to U.S. ports and determines when such
vessels will be phased out under OPA, the dates of which are recorded in the
TVEL or the COC. On April 30, 2001, the USCG replaced the TVEL with a newly
generated document, the COC. The USCG, issues the COC for each tanker if and
when the vessel calls on a U.S. port and the COC is valid for a period of two
years, with mid-period examination. All above TVEL are therefore expired and
these vessels must be re-inspected upon their next entry into a U.S. Port.

     There was no phase-out date imposed on Princess Katherine at the time of
its last inspection by the USCG. Although Princess Nadia, Princess Marina and
Princess Susana are double hull vessels, due to configuration requirements under
the U.S. double hull standards, the phase-out dates indicated above are
applicable. For the same reasons, Princess Katherine could be given a phase out
date if or when next inspected by the USCG.

     In 2010, the IMO will enforce mandatory SOLAS requirements so that all
passenger vessels operating must be built under regulation SOLAS 60, Part H,
restricting use of combustible material and requiring that all passenger vessels
be fully outfitted with sprinklers in both the passenger and engine room spaces.

     The Grand Victoria was built according to the rules of regulation SOLAS 60,
but using method II, along with a sprinkler system installed during
construction. However, under method II generally there was no restriction on any
type of internal division and this method allowed combustible material to be
used during construction which is now generally not permissible pursuant to the
SOLAS amendments. Therefore, for trading beyond 2010, this vessel will require a
complete refurbishment that we cannot assure you will be economically viable.

The oceangoing cargo transportation industry is highly competitive, and we may
not be able to compete successfully for charters with new entrants or
established companies with greater resources.

     We employ our vessels in highly competitive markets. The oceangoing market
is international in scope and we compete with many different companies,
including other vessel owners and major oil companies, such as Transpetro, a
subsidiary of Petrobras. In our Offshore Supply Business, we compete with
companies that operate PSVs, such as Maersk, Seacor and Tidewater. Some of these
competitors are significantly larger than us and have significantly greater
resources than we do. This may enable these competitors to offer their customers
lower prices, higher quality service and greater name recognition than we do.
Accordingly we may be unable to retain our current customers or to attract new
customers. Further, some of these competitors, such as Transpetro, are
affiliated with or owned by the governments of certain countries, and may
receive government aid or legally imposed preferences or other assistance, that
are unavailable to us.

Increased inspection procedures and tighter import and export controls could
increase costs and disrupt our business.

     International shipping is subject to various security and customs
inspection and related procedures in countries of origin and destination.
Inspection procedures can result in the seizure of our vessels or their cargos,
delays in the loading, offloading or delivery and the levying of customs duties,
fines or other penalties against us.

     It is possible that changes to inspection procedures could impose
additional financial and legal obligations on us. Furthermore, changes to
inspection procedures could also impose additional costs and obligations on our
customers and may, in certain cases, render the shipment of certain types of
cargo uneconomical or impractical. Any such changes or developments may have a
material adverse effect on our business, financial condition, results of
operations and ability to pay dividends.

Compliance with safety and other vessel requirements imposed by classification
societies or flag states may be very costly and may adversely affect our
business.

     The hull and machinery of our offshore supply fleet, ocean fleet, passenger
fleet and parts of our river fleet are classed by a classification society. The
classification society certifies that a vessel is in class and may also issue
the vessel's safety certification in accordance with the applicable rules and
regulations of the country of registry of the vessel and SOLAS. Our classed
vessels are currently enrolled with classification societies that are members of
the International Association of Classification Societies.

     A classed vessel must undergo Annual Surveys, Intermediate Surveys and
Special Surveys. In lieu of a Special Survey, a vessel's machinery may be placed
on a continuous survey cycle, under which the machinery would be surveyed
periodically over a five-year period. Our vessels are on Special Survey cycles
for hull inspection and continuous survey cycles for machinery inspection.
Generally, classed vessels are also required to be drydocked every two to three
years for inspection of the underwater parts of such vessels. However, classed
vessels must be drydocked for inspection at least twice every five years.

     If a vessel does not maintain its class, that vessel will, in practical
terms, be unable to trade and will be unemployable, which would negatively
impact our revenues, and could cause us to be in violation of certain covenants
in our loan agreements and/or our insurance policies.

Our vessels could be subject to seizure through maritime arrest or government
requisition.

     Crew members, suppliers of goods and services to a vessel, shippers of
cargo and other parties may be entitled to a maritime lien against a vessel for
unsatisfied debts, claims or damages. In many jurisdictions, a maritime
lienholder may enforce its lien by arresting the vessel or, under the "sister
ship" theory of liability followed in some jurisdictions, arrest the vessel that
is subject to the claimant's maritime lien or any other vessel owned or
controlled by the same owner. In addition, a government could seize ownership of
one of our vessels or take control of a vessel and effectively become her
charterer at charter rates dictated by the government. Generally, such
requisitions occur during a period of war or emergency. The maritime arrest,
government requisition or any other seizure of one or more of our vessels could
interrupt our operations, reducing related revenue and earnings, and may require
us to pay very large sums of money to have the arrest lifted.

The impact of terrorism and international conflict on the world or regional
economy could lead to reduced demand for our services, which would adversely
affect our revenues and earnings.

     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 markets and may affect our business, results of operations and financial
condition. The conflict in Iraq may lead to additional acts of terrorism,
regional conflict and other armed conflict around the world, which may
contribute to further instability in the global markets. In addition, future
terrorist attacks could result in a an economic recession affecting the United
States or the entire world. The effects of terrorism on financial markets could
also adversely affect our ability to obtain additional financing on terms
acceptable to us or at all.

     Terrorist attacks have, in the past, targeted shipping interests, including
ports or vessels. For example in October 2002, there was a terrorist attack on
the VLCC Limburg, a vessel not related to us. Any future attack in the markets
we serve may negatively affect our operations or demand for our services, and
such attacks may also directly impact our vessels or our customers. Furthermore,
insurance may not cover our loss or liability for terrorist attacks on our
vessels, cargo or passengers either fully or at all. Any of these occurrences
could have a material adverse impact on our operating results, revenue and
costs.

Demand for cruises in our Passenger Business may be affected by many factors
that are outside our control.

     Demand for cruises in our Passenger Business may be affected by a number of
factors. Sales are dependent on the underlying economic strength of the
countries in which we operate and the country of origin of our passengers, which
is currently primarily countries in Europe. Adverse economic conditions can
reduce the level of consumers' disposable income that is available for their
vacation choices. In addition, events or circumstances that make cruises
relatively less attractive relative to other vacation or leisure alternatives
will reduce consumer demand for cruises. Finally, the overall increase in
passenger capacity in the cruise industry could lead to reduced demand for our
vessels, and if the charterer of one of our vessels does not perform under the
charter, we will be unable to re-charter that vessel in the middle of a cruise
season.

     Moreover, adverse incidents involving passenger vessels and adverse media
publicity concerning the cruise industry in general or our vessels in particular
may reduce demand. The operation of passenger vessels involves the risk of
accidents and other incidents, which may bring into question passenger safety
and security and adversely affect future industry performance. Any accidents and
other incidents involving our passenger vessels would adversely affect our
future revenues and earnings. In addition, adverse media publicity concerning
the cruise industry in general could impact customer demand and, therefore, have
an adverse impact on our revenues and earnings.

     In addition, armed conflicts or political instability in areas where our
passenger vessels operate can adversely affect demand for our cruises to those
areas. Also, acts of terrorism and threats to public health can have an adverse
effect on the public's attitude toward the safety and security of travel and the
availability of air service and other forms of transportation, which some of our
passengers use to travel.

Environmental, health, safety and security legislation and regulation of
passenger vessels could increase our operating costs in our Passenger Business.

     Some environmental groups have lobbied for more stringent regulation of
passenger vessels. Some groups also have generated negative publicity about the
cruise industry and its environmental impact. As a result of these and other
actions, governmental and regulatory authorities around the world may enact new
environmental, health, safety and security legislation and regulations, such as
those governing wastewater discharges. Stricter environmental, health, safety
and security legislation and regulations could increase the cost of compliance
and adversely affect the cruise industry.

     In addition, as a result of the 2002 Protocol of the Athens Convention and
any similar legislation, vessel operators are, and may be in the future,
required to adopt enhanced security procedures and approved vessel security
plans. Stricter environmental, health, safety, insurance and security
legislation and regulations could increase the cost of compliance and adversely
affect the cruise industry. We cannot assure you that our costs of complying
with current and future laws and regulations, or liabilities arising from past
or future releases of, or exposure to, hazardous substances, or to vessel
discharges, will not have a material adverse effect on our financial results.

Risks Relating to Our Company

Our earnings may be lower and more volatile if we do not efficiently deploy our
vessels between longer term and shorter term charters.

     We employ our ocean and offshore vessels on spot voyages, which are
typically single voyages for a period of less than 60 days for our ocean vessels
and five days for our PSVs, and on time charters and contracts of affreightment,
which are longer term contracts for periods of typically three months to three
years or more. As of December 31, 2005, three of our six oceangoing vessels were
employed under time charters expiring on dates ranging between four and 33
months, the vast majority of our fleet of pushboats and barges in our River
Business were employed under contracts of affreightment, ranging from one month
to four years and one of our two PSVs was chartered for the duration of drilling
of two wells, which typically lasts three to four months. In addition, our third
PSV delivered in February 2006 is time chartered for six months with an option
to extend the charter for an additional month.

     Although time charters and contracts of affreightment provide steady
streams of revenue, vessels committed to such contracts are unavailable for spot
voyages or for entry into new longer term time charters or contracts of
affreightment. If such periods of unavailability coincide with a time when
market prices have risen, such vessels will be unable to capitalize on that
increase in market prices. If our vessels are available for spot charter or
entry into new time charters or contracts of affreightment, they are subject to
market prices, which may vary greatly. If such periods of availability coincide
with a time when market prices have fallen, we may have to deploy our vessels on
spot voyages or under long term time charters or contracts of affreightment at
depressed market prices, which would lead to reduced or volatile earnings and
may also cause us to suffer operating losses.

We may not be able to grow our business or effectively manage our growth.

     A principal focus of our strategy is to continue to grow, in part by
increasing the number of vessels in our fleet. The rate and success of any
future growth will depend upon factors which may be beyond our control,
including our ability to:

o    identify attractive businesses for acquisitions or joint ventures;

o    identify vessels for acquisitions;

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

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

o    identify new markets;

o    expand our customer base;

o    improve our operating and financial systems and controls; and

o    obtain required financing for our existing and new operations.

We may not be successful in executing our growth plans and could incur
significant expenses and losses in connection therewith.

Our planned investments in our River Business vessels are subject to significant
uncertainty.

     We intend to invest in expanding the size of our barges and installing new
engines that burn less expensive fuel in our line pushboats. It is possible that
these initiatives will fail to result in increased revenues and lower fuel costs
and that they will lead to other complications that would adversely affect our
business.

     The increased capacity created by expanding the size of our barges may not
be utilized by the local transportation market at prevailing prices or at all.
Our expansion activities may also be subject to delays, which may result in cost
overruns or lost Revenues. Any of these developments would adversely affect our
revenue and earnings.

     While we expect the heavier fuel that our new engines burn to continue to
be available at a discount to the price of the fuel that we currently use, the
heavier fuel may not be available at such a large discount or at any discount at
all. In addition, operating our new engines will require specially trained
personnel, and such personnel may not be readily available. Higher fuel or
personnel costs would adversely affect our profitability. The operation of these
new engines may also result in other complications that cannot easily be
foreseen and that may adversely affect the quantity of freight we carry or lead
to additional costs, which could adversely affect our revenue and earnings.

We may not be able to charter our new offshore supply vessels at attractive
rates.

     We have contracted with a shipyard in Brazil to build three new PSVs and
expect to take delivery of these vessels during 2006 and 2007 and are
negotiating with other shipyards to construct a further four new PSVs for
deliveries beyond 2007. These vessels are not currently subject to charters and
may not be subject to charters on their date of delivery. Although we intend to
charter these vessels to Petrobras and other charterers, we may not be able to
do so. Even if we do obtain charters for these vessels, the charters may be at
rates lower than those that currently prevail or those that we anticipated at
the time of ordering the vessels. If we fail to obtain charters or if we enter
into charters with low charter rates our financial condition and results of
operations could suffer.

We may face delays in delivery under our newbuilding contracts for PSVs which
could adversely affect our financial condition and results of operations.

     Our three PSVs currently under construction and additional newbuildings for
which we intend to enter into contracts may be subject to delays in their
respective deliveries or non-delivery from the shipyards. The delivery of our
PSVs could be delayed, canceled, become more expensive or otherwise not
completed because of, among other things:

o    quality or engineering problems;

o    changes in governmental regulations or maritime self-regulatory
     organization standards;

o    work stoppages or other labor disturbances at the shipyard;

o    bankruptcy or other financial crises of the shipyard;

o    economic factors affecting the yard's ability to continue building the
     vessels as originally contracted;

o    a backlog of orders at the shipyard;

o    weather interference or a catastrophic event, such as a major earthquake or
     fire or any other force majeure;

o    our requests for changes to the original vessel specifications;

o    shortages of or delays in the receipt of necessary construction materials,
     such as steel;

o    our inability to finance the purchase of the PSVs;

o    our inability to obtain requisite permits or approvals or to receive the
     required classifications for the vessels from authorized classification
     societies; or

o    a shipbuilder's failure to otherwise meet the scheduled delivery dates for
     the PSVs or failure to deliver the vessels at all.

     If the delivery of any PSV is materially delayed or canceled, especially if
we have committed that PSV to a charter for which we become responsible for
substantial liquidated damages to the customer as a result of the delay or
cancellation, our business, financial condition and results of operations could
be adversely affected. Although the building contracts typically incorporate
penalties for late delivery, we cannot assure you that the vessels will be
delivered on time or that we will be able to collect the late delivery payment
from the shipyards.

     We cannot assure you that we will be able to repossess the vessels under
construction or their parts in case of a default of the shipyards and in those
cases where we may have performance guarantees, we cannot assure that we will
always be able to collect or that it will be in our interest to collect these
guarantees.

Secondhand vessels are more expensive to operate and repair than newbuildings
and may have a higher likelihood of accidents.

     We purchased all of our oceangoing vessels and substantially all of our
other vessels, except our PSVs, secondhand and our current business strategy
includes growth through the acquisition of additional secondhand vessels. While
we inspect secondhand vessels prior to purchase, we may not discover defects or
other problems with such vessels prior to purchase. Any such hidden defects or
problems, when detected, may be expensive to repair, and if not detected, may
result in accidents or other incidents for which we are liable to third parties.

New vessels may experience initial operational difficulties.

     New vessels, during their initial period of operation, have the possibility
of encountering structural, mechanical and electrical problems. Normally, we
will receive a warranty from the yard but we cannot assure you that it will
always be effective to resolve the problem without additional costs to us.

As our fleet ages, the risks and costs associated with older vessels increase.

     The costs to operate and maintain a vessel in operation increase with the
age of the vessel. Charterers may prefer newer vessels which carry lower cargo
insurance rates and are more fuel-efficient than older vessels. Governmental
regulations, safety or other equipment standards related to the age of vessels
may require expenditures for alterations, or the addition of new equipment, to
our vessels and may restrict the type of activities in which these vessels may
engage. As our vessels age, market conditions may not justify the expenditures
necessary for us to continue operation of our vessels, and charterers may no
longer charter our vessels at attractive rates or at all. Either development
could adversely affect our earnings.

We depend on a few significant customers for a large part of our revenues, and
the loss of one or more of these customers could adversely affect our revenues.

     In each of our business segments, we derive a significant part of our
revenues from a small number of customers. In 2005, our largest customer
accounted for 25% of our total revenues, our second largest customer accounted
for 17% of our total revenues, and our six largest customers in terms of
revenues, in aggregate, accounted for 70% of our total revenues. In addition,
some of our customers, including many of our most significant customers such as
Petrobras and Archer Daniels Midland, operate vessels of their own. These
customers may decide to cease or reduce the use of our services for any number
of reasons, including in order to utilize their own vessels. The loss of any one
or a number of our significant customers, whether to our competitors or
otherwise, could adversely affect our revenues and earnings.

Our success depends upon our management team and other employees, and if we are
unable to attract and retain key management personnel and other employees, our
results of operations may be negatively impacted.

     Our success depends to a significant extent upon the abilities and efforts
of our management team and our ability to retain them. In particular, many
members of our senior management team, including our CEO and Executive Vice
President, have extensive experience in the shipping industry and have held
their roles with us since our inception. If we were to lose their services for
any reason, it is not clear whether any available replacements would be able to
manage our operations as effectively. The loss of any of the members of our
management team could adversely affect our business prospects and results of
operations and could lead to an immediate decrease in the price of our common
stock. We do not maintain "key man" insurance on any of our officers. Further,
the efficient and safe operation of our vessels requires skilled and experienced
crew members. Difficulty in hiring and retaining such crew members could
adversely affect the operation of our vessels, and in turn adversely affect our
results of operations.

We are an international company that is exposed to the risks of doing business
in many different, and often less developed and emerging market countries.

     We are an international company and conduct almost all of our operations
outside of the United States, and we expect to continue doing so for the
foreseeable future. Some of these operations occur in countries that are less
developed and stable than the United States, such as Argentina, Bolivia, Brazil,
Chile, Paraguay and Uruguay. Some of the risks we are exposed to by operating in
these countries include among others:

o    political and economic instability, changing economic policies and
     conditions, and war and civil disturbances;

o    recessions in economies of countries in which we have business operations;

o    the imposition of additional withholding taxes or other taxes on our
     foreign income, tariffs or other restrictions on foreign trade or
     investment, including currency exchange controls and currency repatriation
     limitations;

o    the imposition of executive and judicial decisions upon our vessels by the
     different governmental authorities associated with some of these countries;

o    the imposition of or unexpected adverse changes in foreign laws or
     regulatory requirements;

o    longer payment cycles in foreign countries and difficulties in collecting
     accounts receivable;

o    difficulties and costs of staffing and managing our foreign operations; and

o    acts of piracy or terrorism.

     These risks may result in unforeseen harm to our business and financial
condition. Also, some of our customers are headquartered in South America, and a
general decline in the economies of South America, or the instability of certain
South American countries and economies, could adversely affect that part of our
business.

     Our business in emerging markets requires us to respond to rapid changes in
market conditions in these countries. Our overall success in international
markets depends, in part, upon our ability to succeed in different legal,
regulatory, economic, social and political conditions. We may not continue to
succeed in developing and implementing policies and strategies which will be
effective in each location where we do business. Furthermore, the occurrence of
any of the foregoing factors may have a material adverse effect on our business
and results of operations.

We may not have adequate insurance to compensate us if our vessels are damaged
or lost or if we harm third parties or their property or the environment.

     We insure against tort claims and some contractual claims (including claims
related to environmental damage and pollution) through memberships in protection
and indemnity, or P&I, associations, or clubs. We also procure hull and
machinery insurance and war risk insurance for our fleet. In most instances, we
do not procure loss of hire insurance, which covers business interruptions that
result in the loss of use of a vessel.

     All insurance policies that we carry include deductibles (and some include
limitations on partial loss) and since it is possible that a large number of
claims may be brought, the aggregate amount of these deductibles could be
material. Further, our insurance may not be sufficient to fully compensate us
against losses that we incur, whether from damage to or loss of our vessels,
through liability to a third party, for harm to the environment or for other
catastrophic claims. For example, our protection and indemnity insurance has a
coverage limit of $1 billion regarding oil spills and related harm to the
environment. Although this is a significant sum, it may be insufficient to fully
compensate us, and any uninsured losses that we incur may be substantial and may
have a very significant effect on our financial condition. In addition, our
insurance may be voidable by the insurers as a result of certain of our actions,
such as our ships failing to maintain certification with applicable maritime
self-regulatory organizations or lack of payment of premium.

     We cannot assure you that we will be able to renew our existing insurance
policies on the same or commercially reasonable terms, or at all, in the future.
For example, more stringent environmental regulations have led in the past to
increased costs for, and in the future may result in lack of availability of,
protection and indemnity insurance against risks of environmental damage or
pollution. Each of our policies is also subject to limitations and exclusions,
and our insurance policies may not cover all types of losses that we could
incur. Any uninsured or under insured loss could harm our business, financial
condition and operating results. Furthermore, we cannot assure you that the P&I
clubs to which we belong will remain viable. We may also become subject to
funding calls due to our membership in the P&I clubs which could adversely
affect our profitability. Also certain claims may be covered by our P&I
insurance, but subject to the review and at the discretion of the board of the
P&I club. We can not assure you that the board will exercise its discretion to
vote to approve the claim.

Labor disruptions in the shipping industry could adversely affect  our business.

     As of December 31, 2005 we employed 110 land-based employees and
approximately 770 seafarers as crew on our vessels. These seafarers are covered
by industry-wide collective bargaining agreements that set basic standards
applicable to all companies who hire such individuals as crew. Because most of
our employees are covered by these industry-wide collective bargaining
agreements, failure of industry groups to renew these agreements may disrupt our
operations and adversely affect our earnings. In addition, we cannot assure you
that these agreements will prevent labor interruptions. Any labor interruptions
could disrupt our operations and harm our financial performance.

Certain conflicts of interest may adversely affect us.

     Certain of our directors and officers hold similar positions with other
related companies. Felipe Menendez R., who is our President, Chief Executive
Officer, and a Director, is a Director of Oceanmarine, a related company that
previously provided administrative services to the Company and has entered into
joint ventures with the Company in salvage operations. Oceanmarine also operates
slot charter container services between Argentina and Brazil, an activity in
which the Company does not engage at the present time. Ricardo Menendez R., who
is our Executive Vice President and one of our Directors, is the President of
Oceanmarine, and is also the Chairman and President of The Standard Steamship
Owners' Protection and Indemnity Association (Bermuda) Limited, or Standard, a
P&I club with which some of our vessels are entered. Both Mr. Ricardo Menendez
R. and Felipe Menendez R. are Directors of Maritima SIPSA, a company owned 49%
by us and 51% by SIPSA (a related company), which has entered into agreements to
purchase and resell to and from our subsidiaries our vessel Princess Marina, and
Directors of I. Shipping Services, a company that provides vessel agency
services for third parties in Argentina and occasionally for the Company's
vessels calling at Buenos Aires and other Argentinean ports. The Company is not
engaged in the vessel agency business and the services provided by I. Shipping
Services to the Company amounted to less than $10,000 in 2005. Although these
directors and officers attempt to perform their duties within each company
independently, in light of their positions with such entities, these directors
and officers may face conflicts of interest in selecting between our interests
and those of Oceanmarine, I. Shipping Services and the Standard. In addition, I.
Shipping Services and Oceanmarine are indirectly controlled by the Menendez
family, including Felipe Menendez R. and Ricardo Menendez R. These conflicts may
limit our fleet's earnings and adversely affect our operations. We refer you to
"Related Party Transactions" in Item 7.B in this report for more information on
our related party transactions.

To service our indebtedness, we will require a significant amount of cash. Our
ability to generate cash depends on many factors beyond our control.

     Our ability to make payments on and to refinance our indebtedness,
including our 9% First Preferred Ship Mortgage Notes due 2014, or the Notes, and
any amounts borrowed under any of our subsidiaries' credit facilities, and to
fund our operations, will depend on our ability to generate cash in the future,
which, to a certain extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond our
control. We cannot assure you that our business will generate sufficient cash
flow from operations, that currently anticipated business opportunities will be
realized on schedule or at all or that future borrowings will be available to us
in amounts sufficient to enable us to service our indebtedness, including the
Notes and any amounts borrowed under our subsidiaries' credit facilities, or to
fund our other liquidity needs.

     If we cannot service our debt, we will have to take actions such as
reducing or delaying capital investments, selling assets, restructuring or
refinancing our debt or seeking additional equity capital. We cannot assure you
that any of these remedies could, if necessary, be effected on commercially
reasonable terms, or at all. In addition, the indenture for the Notes and the
credit agreements governing our subsidiaries' various credit facilities may
restrict us from adopting any of these alternatives.

We may not be able to fulfill our obligations in the event we undergo a change
of control.

     If we undergo a change of control, we will be required to make an offer to
repurchase the Notes at a price of 101% of their principal amount plus accrued
and unpaid interest. Under certain circumstances, a change of control of our
company may also constitute a default under our credit facilities resulting in
our lenders' right to accelerate their loans. We cannot assure you that we will
be able to satisfy our obligations if a change of control occurs.

Our subsidiaries' credit facilities and the indenture governing our Notes impose
significant operating and financial restrictions on us that may limit our
ability to successfully operate our business.

     Our subsidiaries' credit facilities and the indenture governing the Notes
impose significant operating and financial restrictions on us, including those
that limit our ability to engage in actions that may be in our long term
interests. These restrictions limit our ability to, among other things:

o    incur additional debt;

o    pay dividends or make other restricted payments;

o    create or permit certain liens;

o    make investments;

o    engage in sale and leaseback transactions;

o    sell vessels or other assets;

o    create or permit restrictions on the ability of our restricted subsidiaries
     to pay dividends or make other distributions to us;

o    engage in transactions with affiliates; and

o    consolidate or merge with or into other companies or sell all or
     substantially all of our assets.

     In addition, some of our subsidiaries' credit facilities require that our
subsidiaries maintain specified financial ratios and satisfy financial
covenants. We may be required to take action to reduce our debt or to act in a
manner contrary to our business objectives to meet these ratios and satisfy
these covenants. Events beyond our control, including changes in the economic
and business conditions in the markets in which our subsidiaries operate, may
affect their ability to comply with these covenants. We cannot assure you that
our subsidiaries will meet these ratios or satisfy these covenants or that our
subsidiaries' lenders will waive any failure to do so. A breach of any of the
covenants in, or our inability to maintain the required financial ratios under,
our subsidiaries' credit facilities would prevent our subsidiaries from
borrowing additional money under the facilities and could result in a default
under them.

     If a default occurs under our credit facilities or of those of our
subsidiaries, the lenders could elect to declare that debt, together with
accrued interest and other fees, to be immediately due and payable and proceed
against the collateral securing that debt. Moreover, if the lenders under a
credit facility or other agreement in default were to accelerate the debt
outstanding under that facility, it could result in a default under other debt.
If all or any part of our debt were to be accelerated, we may not have or be
able to obtain sufficient funds to repay it or to repay the Notes upon
acceleration.

If we are unable to fund our capital expenditures, we may not be able to
continue to operate some of our vessels, which would have a material adverse
effect on our business and our ability to pay dividends.

     In order to fund our capital expenditures, we may be required to incur
borrowings or raise capital through the sale of debt or equity securities. Our
ability to obtain credit facilities and access the capital markets through
future offerings may be limited by our financial condition at the time of any
such offering as well as by adverse market conditions resulting from, among
other things, general economic conditions and contingencies and uncertainties
that are beyond our control. Our failure to obtain the funds necessary for
future capital expenditures would limit our ability to continue to operate some
of our vessels and could have a material adverse effect on our business, results
of operations and financial condition and our ability to pay dividends. Even if
we are successful in obtaining such funds through financings, the terms of such
financings could further limit our ability to pay dividends.

We are a holding company, and we depend entirely on the ability of our
subsidiaries to distribute funds to us in order to satisfy our financial and
other obligations.

     We are a holding company, and as such we have no significant assets other
than the equity interests of our subsidiaries. Our subsidiaries conduct all of
our operations and own all of our operating assets. As a result, our ability to
pay dividends and service our indebtedness depends on the performance of our
subsidiaries and their ability to distribute funds to us. The ability of our
subsidiaries to make distributions to us may be restricted by, among other
things, restrictions under our credit facilities and applicable laws of the
jurisdictions of their incorporation or organization. For example, some of our
subsidiaries' credit agreements contain significant restrictions on the ability
of our subsidiaries to pay dividends or make other transfers of funds to us. See
"Description of Credit Facilities and Other Indebtedness" in Item 5.B of this
report. Furthermore, some countries in which our subsidiaries are incorporated
require our subsidiary to receive central bank approval before transferring
funds out of that country. In addition, under limited circumstances, the
indenture governing the Notes permits our subsidiaries to enter into additional
agreements that can limit our ability to receive distributions from such
subsidiaries. If we are unable to obtain funds from our subsidiaries, we will
not be able to pay dividends or service our debt, unless we obtain funds from
other sources, which may not be possible.

We are exposed to U.S. dollar and foreign currency fluctuations and devaluations
that could harm our reported revenue and results of operations.

     We are an international company and, while our financial statements are
reported in U.S. dollars, some of our operations are conducted in foreign
currencies. For example, in 2005, 84% of our revenues were denominated in U.S.
dollars, 11% were denominated in Euros, and 5% were denominated in British
pounds. If the value of the dollar appreciates relative to the value of these
other currencies, the U.S. dollar value of the revenues that we report on our
financial statements could be materially affected. Changes in currency exchange
rates could adversely affect our reported revenues and could require us to
reduce our prices to remain competitive in foreign markets, which could also
have a material adverse effect on our results of operations. Further, we incur
costs in multiple currencies that are different than, or in a proportion
different to, the currencies in which we receive our revenues. Accordingly, if
the currencies in which we incur a large portion of our costs appreciate in
value against the currencies in which we receive a large portion of our revenue,
our margins could be adversely affected. We have not historically hedged our
exposure to changes in foreign currency exchange rates and, as a result, we
could incur unanticipated losses.

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

     Under the United States Internal Revenue Code of 1986, as amended, or the
Code, 50% of the gross shipping income of our vessel owning or chartering
subsidiaries attributable to transportation that begins or ends, but that does
not both begin and end, in the U.S. will be characterized as U.S. source
shipping income. Such income will be subject to a 4% U.S. Federal income tax
without allowance for deduction, unless our subsidiaries qualify for exemption
from tax under Section 883 of the Code and the Treasury Regulations promulgated
thereunder, which became effective for our calendar year subsidiaries on January
1, 2005.

     Our subsidiaries filed U.S. tax returns for 2004 and 2003 and took the
position on those returns that they qualified for the exemption on their U.S.
source shipping income under Section 883 based on the determination that more
than 50% of their stock was beneficially owned by qualified shareholders.
However, that claim for exemption by our subsidiaries may not prevail if
challenged on audit. In the absence of the availability of the exemption for
2004 and 2003, our subsidiaries would be subject to a 4% Federal income tax of
approximately $0 and $249,264, respectively. For the calendar year 2005, our
subsidiaries did not derive any U.S. source shipping income and therefore were
not subject to any U.S. Federal income tax regardless of their qualification for
exemption under Section 883.

Our OBOs are less desired by certain charterers in the tanker market.

     OBOs are versatile because they can transport both petroleum products and
dry bulk cargos. Unlike the more traditional type of tanker, an OBO has fewer
tanks, but each tank is generally larger. Prior to the advent of computerized
loading systems, due to the amount of available free space and the possibility
of cargo shifting and causing the vessel to become unstable, extra caution had
to be used when loading an OBO. While this problem, like other problems
originally linked to OBOs, have been solved with new technology, OBOs are still
less desired by certain charterers who prefer to use the more traditional form
of tanker to transport oil and other petroleum products. To the extent any
charterers elect not to use our OBOs and instead use standard tankers, this
could have a negative impact on our business and financial results.

Rising fuel prices may adversely affect our profits.

     Fuel is the largest operating expense in our River Business where most of
our contracts are contracts of affreightment under which we are paid per ton
of cargo shipped. Currently, many of these agreements permit the adjustment of
freight rates based on changes in the price of fuel. We may not be able to
include this provision in these contracts when they are renewed or in future
contracts with new customers. In our Ocean, Offshore Supply and Passenger
Businesses, the risk of variation of fuel prices under the vessels' current
employment is generally borne by the charterers, since the charterers are
generally responsible for the supply of fuel. In the future we may become
responsible for the supply of fuel to such vessels, in which case variations in
the price of fuel could affect our earnings.

     To the extent our contracts do not pass on changes in fuel prices, we will
be forced to bear the cost of fuel price increases. We may hedge in the futures
market all or part of our exposure to fuel price variations. We cannot assure
you that we will be successful in hedging our exposure. In the event of a
default by our charterers or other circumstance affecting the performance of a
contract of affreightment, we are subject to exposure under, and may incur
losses in connection with, our hedging instruments.

     In certain jurisdictions, the price of fuel is affected by high local taxes
and may become more expensive than prevailing international prices. We may not
be able to pass onto our customers the additional cost of such taxes and may
suffer losses as a consequence.


ITEM 4  - INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF THE COMPANY

     In this annual report, unless the context otherwise indicates, the terms
"we," "us" and "our" (and similar terms) refer to Ultrapetrol (Bahamas) Limited
and its subsidiaries and joint ventures.

     We were originally formed by members of the Menendez family with a single
ocean going vessel in 1992, and were incorporated in our current form as a
Bahamas corporation on December 23, 1997.

     Our Ocean Business has grown through the investment of capital from the
operation of our fleet along with other sources of capital to acquire additional
vessels. In 1998, we issued $135.0 million of 10 1/2% First Preferred Ship
Mortgage Notes due 2008, or the Prior Notes. By 2001, our fleet reached 13
oceangoing vessels with a total carrying capacity of 1.1 million dwt. During
2003, in an effort to remain ahead of changing environmental protection
regulations, we began to sell all of our single hull Panamax and Aframax tankers
(five vessels in total), a process that we completed in early 2004.

     We began our River Business in 1993 with a fleet consisting of one pushboat
and four barges. In October 2000, we formed a joint venture with American
Commercial Barge Lines Ltd., or ACL. From 2000 to 2004, we built UABL into the
leading river barge company in the Hidrovia Region of South America. Using some
of the proceeds from the sale of our single hull Panamax tankers, in 2004, we
purchased from ACL their 50% equity interest in UABL.

     During 2000, we received a $50.0 million equity investment from Solimar
Holdings, Ltd., or Solimar, a wholly-owned subsidiary of the AIG-GE Capital
Latin American Infrastructure Fund, or the Fund. The Fund was established at the
end of 1996 to make equity investments in South America, Mexico, Central America
and the Caribbean countries. The Fund was also our partner in other ventures,
including UP Offshore.

     In December 2002, we began our relationship with International Finance
Corporation, or IFC, which is the private sector arm of the World Bank Group
that provides loans, equity, and other services to support the private sector in
developing countries. In total, IFC, together with its participant bank and
co-lender, KfW, has provided us with $115.0 million of credit and equity
commitments to support our River and Offshore Supply Businesses.

     We formed our Offshore Supply Business during 2003 in a joint venture
with LAIF XI Ltd., or LAIF, a wholly-owned subsidiary of the Fund, and Comintra
Enterprise Ltd.. We capitalized the business with $ 45 million of common equity
and $70 million of debt and preferred equity from IFC to construct our initial
fleet of six PSVs.

     In November 2004, we issued $180.0 million of 9% First Preferred Ship
Mortgage Notes due 2014, or the Notes. The proceeds of the Notes offering were
used principally to prepay the Prior Notes and to buy an additional Ocean
Business asset, further invest in our River Business and to diversify into the
Passenger Business with the acquisition of two passenger vessels.

     In March 2006, we acquired a 66.67% equity interest in UP Offshore
(Bahamas) Limited, or UP Offshore, the entity through which we operate our
Offshore Supply Business, from LAIF XI Ltd., or LAIF, bringing our ownership in
UP Offshore to 94.45%.

     In March 2006, we also acquired Ravenscroft Shipping (Bahamas) S.A., or
Ravenscroft, the entity through which we manage the vessels in our Offshore
Supply, Ocean, and Passenger Businesses, from other related companies.

B. BUSINESS OVERVIEW

Our Company

     We are a diverse marine transportation company involved in the global
carriage of dry bulk and liquid cargos, supplies, equipment and passengers. We
serve the shipping markets for grain, forest products, minerals, crude oil,
petroleum, and refined petroleum products, as well as the offshore oil platform
supply market, and the leisure passenger cruise market through our operations in
the following four segments of the marine transportation industry.

Our Lines of Business

Revenues                                                    2005
                                        ---------------------------------------
   Attributable to River Business                $54,546              43.5%
   Attributable to Offshore Supply Business        6,532               5.2
   Attributable to Ocean Business                 49,874              39.8
   Attributable to Passenger Business             14,409              11.5
                                                ----------          ----------
                                   Total        $125,361             100.0%

     River Business. Our River Business is the leading river transportation
company in the Hidrovia Region. Our River Business, which we operate through our
subsidiary UABL, has approximately 490 barges with approximately 798,000 dwt
capacity and 23 pushboats. We own 446 dry barges that transport agricultural and
forestry products, iron ore and other cargos and 44 tanker barges that carry
petroleum products, vegetable oils and other liquids. We believe that we have
more than twice the number of barges and dwt capacity as our nearest competitor.
In addition, we use one 35,000 dwt barge designed for ocean trading, the Alianza
G2, as a transfer station to provide storage and transshipment services of cargo
from river barges to ocean export vessels.

     We are in the process of expanding the size of some of our barges to
increase their cargo carrying capacity and maximize our fleet utilization. We
believe that enlarging our existing barges is the most cost-effective way of
growing our fleet's cargo carrying capacity. We also have begun a program to
replace the engines in all 16 of our line pushboats. The new engines will
consume heavier grades of fuel which been less expensive than the diesel fuel we
currently consume.

     We operate our pushboats and barges on the navigable waters of the Parana,
Paraguay and Uruguay Rivers and part of the River Plate in South America, also
known as the Hidrovia Region. At over 2,200 miles in length, the Hidrovia Region
is comparable to the Mississippi River in the United States and produces and
exports a significant and growing amount of agricultural products. For example,
Argentina, Brazil, Paraguay, and Bolivia produced, in the aggregate, 41.5
million tons of soybeans in 1994 compared to an estimated 105.5 million tons in
2005, a compound annual growth rate of 8.9%. These countries accounted for over
47% of world soybean production in 2005, growing from only 30% in 1995. In
addition to agricultural products, companies in the Hidrovia Region are
expanding and initiating the production of other goods, including forest
products, iron ore, and pig iron.

     Through joint ventures, we own and operate terminals at certain key
locations to provide integral transportation services to our customers from
origin to destination. We also own a drydock and repair facility to carry out
fleet maintenance and have a long-term lease on another facility where we intend
to conduct part of the barge enlargement program. We utilize night-running
technology, which allows for night navigation and improves asset efficiency.

     Offshore Supply Business. Our Offshore Supply Business, which we operate
through UP Offshore, is focused on serving companies that are involved in the
complex and logistically demanding activities of deepwater oil exploration and
production. We have ordered the construction of six proprietarily designed and
technologically advanced PSVs. We received delivery of and placed into service
three of these vessels in 2005 and early 2006, and we expect the remaining three
to be delivered and placed into service in 2006 and 2007. Our PSVs are designed
to transport supplies, equipment, drill casings and pipes on deck, along with
fuel, water, drilling fluids and bulk cement in under-deck tanks and a variety
of other supplies to drilling rigs and platforms. We employ two of these vessels
in the spot market in the North Sea and employ the third on time charter in
Brazil with Petrobras. Upon delivery of the three PSVs we currently have under
construction, we intend to employ them in Brazil and other international
markets. We are negotiating the construction of four additional PSVs of our
proprietary design, for a total fleet of ten PSVs. Through one of our Brazilian
subsidiaries, we have the competitive advantage of being able to trade a number
of our PSVs in the Brazilian market with cabotage trading privileges, enabling
the PSVs to obtain employment in preference to non-Brazilian flagged vessels.

     Ocean Business. In our Ocean Business, we own and operate six oceangoing
vessels including one semi-integrated oceangoing tanker barge unit under the
trade name, Ultrapetrol. Our three Suezmax OBO vessels transport liquid cargo,
such as petroleum and petroleum products, as well as dry cargo, such as iron ore
and coal, on major routes around the globe. Our Aframax tanker carries both
crude oil and a variety of refined petroleum products internationally. Our
semi-integrated tug barge Alianza G-3/Alianza Campana operates under long-term
charter as a support vessel in North Brazil. Our chemical/product carrier,
Miranda I, transports chemicals and petroleum products in the regional trade of
Argentina and Brazil. Our current ocean fleet has an aggregate cargo carrying
capacity in excess of 600,000 dwt and an average age of approximately 17.2
years.

     Our Suezmax OBO vessels are able to carry either petroleum products or dry
bulk cargos to take advantage of changing market conditions. Given the rise
during 2003 and early 2004 in spot market prices for dry cargo globally, we
employed these vessels in the carriage of dry bulk cargos on trade routes around
the world, mostly transporting coal and iron ore from South America, Australia
and South Africa to Europe, China and other Far East countries. Currently,
however, the market prices for carrying petroleum and petroleum products surpass
the market prices for carrying dry cargo, and accordingly we are employing our
Suezmax OBO vessels as tankers, as was the case with the Princess Susana in
February 2006. During 2005, we derived over 84% of our Ocean Business revenues
from charterers in Europe and Asia, some of which are Cargill, SwissMarine and
Pan Ocean Shipping. Over the same period, we derived approximately 96% of our
Ocean Business revenues from time charters with at least three months duration
and 4% from spot voyages.

     Our Aframax tanker, Princess Marina, has been employed under a long-term
charter in Chile with ENAP which expires in April 2006 and has been renewed for
three to four months at a substantially improved current market rate.

     We currently employ Miranda I, our chemical/product carrier, on a
three-year charter with an option for an additional two years to Petrobras, a
major oil company serving the regional trade of Argentina and Brazil, through
September 2008.

     All of our oceangoing vessels, with the exception of Miranda I, are double
hull. However, they are not all certified as double hull tankers by their
respective certification societies at this time. We expect that Princess Susana
will receive Class Certification as double hull after her drydock in the fourth
quarter of 2006 as her sister vessel Princess Nadia already received in March
2005. Miranda I may be used as double hull when carrying petroleum products in
her center tanks only and we intend to have her retrofitted and certified as
double hull for all products before the end of 2006.

     Passenger Business. In our Passenger Business, we own and operate two
vessels that we purchased in 2005, the New Flamenco, with a 1,010 person
capacity and 401 cabins, and the Grand Victoria, with a 583 person capacity and
242 cabins. We recently completed an extensive refurbishment of the New
Flamenco, including all passenger areas, and we conducted work to recertify the
Grand Victoria and upgraded some of her passenger areas. We currently employ
these vessels under seasonal charters with European tour operators cruising the
Mediterranean, Black Sea and Norwegian Fjords.

     The charter for the New Flamenco is a two-year, "full-service charter,"
extendable for an additional year at the charterer's option, pursuant to which
we are responsible for operating and maintaining the vessel, paying the full
vessel's staff and providing passenger services such as entertainment and food
and beverages, while our charterer is responsible for marketing and ticket sales
as well as fuel and port charges. Pursuant to the charter, our charterer pays us
an agreed amount per passenger, per day, which escalates each year, and is
subject to a guaranteed minimum occupancy equivalent to an average of
approximately 80% of the lower berth capacity. We also receive the revenues, as
applicable, from on board sales of goods and services, a portion of which are
shared with the charterer or concessionaire.

     In the current charter for the Grand Victoria, we are responsible only for
operating and maintaining the vessel and paying the vessel's deck and engine
staff. Our charterer is responsible for all passenger services, including paying
the passenger services staff, paying all fuel and port charges and marketing and
ticket sales to passengers. Pursuant to this charter, we are paid a fixed daily
fee.

     The structure of our seasonal contracts for our Passenger Business provides
us with a stable revenue stream as well as the flexibility to operate the
vessels in other regions of the world at the end of the seasonal contract term.
We are currently negotiating opportunities to operate these vessels during
periods other than the European travel season.



<PAGE>
<TABLE>
Ultrapetrol Fleet Summary
<CAPTION>

                                        Number of
          River Fleet                    Vessels            Capacity                    Description
---------------------------------     --------------    ------------------    --------------------------------
<S>                                   <C>               <C>                    <C>
Alianza G2/Alianza Rosario                   1             35,000 tons               Transfer Station
Pushboat Fleet                              23              77,7502HP          Various Sizes and Horse Power
                                                                               Carry Liquid Cargo (Petroleum
Tank Barges                                 44              95,578 m3               Products, Veg. Oil)
                                                                                      Carry Dry Cargo
Dry Barges                                 446            702,700 tons                (Soy, Iron Ore)
---------------------------------     --------------    ------------------    --------------------------------

Total                                      514                 N/A
---------------------------------     --------------    ------------------    --------------------------------


                                                            Capacity                     Delivery
     Offshore Supply Fleet            Year Built              (DWT)                        Date
---------------------------------     --------------    ------------------    --------------------------------

In Operation
-------------
UP Esmeralda (1)                          2005              4,200                          2005
UP Safira (1)                             2005              4,200                          2005
UP Agua-Marinha                           2006              4,200                          2006

On Order
---------
UP Topazio (EI-482)                       2006              4,200                         2006(e)
UP Diamante (El - 483)                    2006              4,200                         2006(e)
UP Rubi (El- 484)                         2007              4,200                         2007(e)
---------------------------------     --------------    ------------------    --------------------------------
Total                                                      25,200
(1) Under bare boat charter

          Ocean Fleet                  Year Built              DWT                      Description
---------------------------------     --------------    ------------------    --------------------------------

Princess Nadia                            1987              152,328                     Suezmax OBO
Princess Susana                           1986              152,301                     Suezmax OBO
Princess Katherine                        1986              164,100                     Suezmax OBO
Princess Marina(1)                        1986               83,930                   Aframax Tanker
Alianza/G-3                               1993(2)            43,164                Semi Integrated Tug/
                                                                                        Barge Unit
Miranda I                                 1995                6,575                  Product Carrier/
                                                                                      Chemical Tanker
---------------------------------     --------------    ------------------    --------------------------------
Total                                                       602,398

(1)  We currently hold the Princess Marina through our 49% ownership of Maritima
     SIPSA S.A., a company controlled by Chilean citizens, to whom we sold the
     Princess Marina upon the beginning of her charter in Chile in May 2003. As
     part of this arrangement, we have contracted to repurchase the Princess
     Marina upon the expiry of the charter in June 2006. We recognize as charter
     revenue on this transaction the difference between our sale price to
     Maritima SIPSA and their sale price back to us, of this vessel. See
     "Related Party Transactions - Maritima SIPSA S.A." in Item 7.B of this
     report.

(2)  Originally built in 1982, converted in 1993 to double hull
     product tank barge.

</TABLE>
                                           Total                       Total
                                         Capacity                      Number
Passenger Fleet                        (Passengers)                  of Cabins
---------------                        ------------                  ---------

New Flamenco                               1,010                        401
Grand Victoria                               575                        242

Total                                      1,585                        643


Chartering Strategy

     We continually monitor developments in the shipping industry and make
charter-related decisions based on an individual vessel and segment basis, as
well as on our view of overall market conditions. In our River Business, we have
contracted a substantial portion of our fleet's capacity on a one- to four-year
basis to major clients. These contracts provide fixed pricing, minimum volume
requirements and fuel price adjustment formulas, and we intend to develop new
customers and cargos as we grow our fleet capacity.

     In our Offshore Supply Business, we plan to charter our PSV fleet in Brazil
for medium-term (one to six months) charters or long-term employment (up to
seven years). Currently there is no spot market in Brazil for PSVs. In the North
Sea, we intend to continue to operate our PSVs in the spot market (short
duration, one day or more) combined with longer-term charters.

     We historically have operated our Ocean Business vessels in both the spot
market, which allows us to take advantage of potentially higher market rates,
and under period charters, which allows us to achieve high utilization rates. We
intend to continue to operate some of our ocean vessels in the spot market and
others under period charters.

     We intend to employ our passenger vessels primarily in conjunction with
tour operators that will at least partially guarantee the vessels' revenue.

Our Fleet Management

     We conduct the day-to-day management and administration of our operations
in-house and through our wholly-owned subsidiaries.

     Following our recent acquisition of Ravenscroft and after acquiring the
administrative-related assets and the hiring of personnel of Oceanmarine
associated with the administration and accounting services, all technical,
commercial and administrative management functions are conducted in-house.

     Ravenscroft, operating from its office in Coral Gables, Florida, employs 36
persons and will continue to undertake all technical and marine related
management for our offshore, ocean and passenger vessels including the
purchasing of supplies, spare parts and husbandry items, crewing,
superintendency and preparation and payment of all related accounts on our
behalf. Ravenscroft also continues to be responsible for the administration and
execution of the onboard services and management accounting system on our
Passenger vessels New Flamenco and Grand Victoria. For the New Flamenco,
Ravenscroft monitors the shore excursion sales, the performance of the Food &
Beverage and Entertainment concessionaires and also controls certain aspects of
onboard revenue such as the duty free shop which generate additional income for
us. Ravenscroft is a self-contained full service ship management company which
includes a commercial department and is certified for ISM and is also ISO
9001:2000 certified. It holds Documents of Compliance for the management and
operation of OBOs, tankers, bulk carriers, PSVs, general cargo vessels,
passenger vessels and also for the ship management of vessels sold for
demolition.

     Ravenscroft will continue to manage vessels for and on behalf of vessels
owners who are not related to us. In the case of our River Business, our
commercial and technical management continues to be performed in-house by UABL
personnel.

Customers

     For 2005 service for Cargill and its subsidiaries accounted for 25 % of our
total revenues and service for SwissMarine Serv. accounted for 17% of total
revenues.

Competition

River Business

     We own the largest fleet of pushboats and barges in the Hidrovia Region. We
compete based on reliability, efficiency and price. Key competitors include
Horamar, and Fluviomar. In addition, some of our customers, including ADM and
Rio Tinto, have some of their own dedicated barge capacity, which they can use
to transport cargoes in lieu of hiring a third party. Our River Business also
indirectly competes with other forms of land-based transportation such as truck
and rail.

Offshore Supply Business

     In our Offshore Supply Business, our main competitors are the Brazilian
offshore companies that own and operate modern PSVs. The largest of these
companies is CBO, which currently owns four modern PSVs and is building an
additional PSV in Brazil. Also, some of the international offshore owners, such
as Tidewater and Maersk have built Brazilian-flagged PSVs.

Ocean Business

     We face competition in the transportation of crude oil and petroleum
products as well as other bulk commodities from other independent ship owners
and from vessel operators who primarily charter-in vessels to meet their cargo
carrying needs. The charter markets in which our vessels compete are highly
competitive. Competition is primarily based on prevailing market charter rates,
vessel location and vessel manager reputation. Our primary competitor in crude
oil and petroleum products transportation within Argentina, and between
Argentina and other South American countries, as well as in Chile, is Antares
Naviera S.A. and its affiliated companies, including Ultragas, Lauderdale
Tankers Corp., and Sonap S.A., an independent tanker owner and operator. The
other major participant in the Argentina/Brazil trade is Transpetro. Transpetro
is a subsidiary of Petrobras, our primary customer in Brazil. In other South
American trades our main competitors are Heidmar Inc., Naviera Sur Petrolera
S.A., Naviera El Cano (through their various subsidiaries) and Sonacol S.A.
These companies and other smaller entities are regular competitors of ours in
our primary tanker trading areas. In our dry bulk trades, we operate our vessels
internationally where we compete against the main fleets of Capesize ships, with
companies such as the Offer Group, Frontline, Bocimar and others.

Passenger Business

     The tour operators that are our clients in the Passenger Business compete
for consumers' leisure-time dollars with both other cruise lines and a wide
array of other vacation options located throughout the world, including numerous
land-based destinations and package holiday, tour and timeshare vacation
operators. Many of these operators attempt to obtain a competitive advantage by
lowering prices and/or by improving their products, such as by offering
different vacation experiences and locations. In the event that we or the tour
operators that are our clients do not compete effectively with other cruise
companies and other vacation operators, our results of operations from our
Passenger Business would be adversely affected.

Industry Conditions

River Business

     Key factors driving cargo movements in the Hidrovia Region are agricultural
production and exports, particularly soybeans, from Argentina, Brazil, Paraguay
and Bolivia, exports of Brazilian iron ore, regional demand and Paraguay and
Bolivia imports of petroleum products. Exports of Argentine forest products and
other commodities are also significant. Practically all the cargos transported
in the Hidrovia Region are export or import-related cargos.

     The Parana/Paraguay, the High Parana and the Uruguay rivers consist of over
2,200 miles of a single natural interconnected navigable river system serving
five countries namely Brazil, Bolivia, Paraguay, Uruguay and Argentina.

Dry Bulk Cargo

     Soybeans. According to industry sources, Argentina, Brazil, Paraguay, and
Bolivia accounted for about 45% of world soybean production in 2004, growing
from only 30% in 1994.

     According to industry sources, within the five countries of the Hidrovia
Region, acreage harvested in soybeans has increased from approximately 18.9 Mha
(million hectares, 1 hectare = 2.47 acres) in 1993 to 40.2 Mha in 2004, a CAGR
of 7.8%. Further, with advances in technology, productivity of farmland has also
improved.

     The installation of crushing plants in Bolivia and Paraguay has generated a
large volume of vegetable oils and soybean meal that are also shipped via the
river for export. According to industry sources, Soybean meal exports from
Bolivia and Paraguay totaled about 1.5 mt in 2004, while soybean oil exports
were about 0.4 mt.

     Iron Ore. In the Corumba area in Brazil, two large iron ore mines owned by
international mining companies Rio Tinto and Companhia Vale do Rio Doce, or
CVRD, are located near the High Paraguay river.

     Forest Products. Areas adjacent to the Hidrovia Region in Northern
Argentina comprise most of Argentina's forest and forest product producing
areas. According to industry sources, higher value added sectors of the forest
products industry have grown at high rates, while lower value added sectors
(e.g. logs, fuel wood) have remained stable or declined.

Oil transportation

     The Hidrovia Region is a key link in Argentina's oil supply network.
According to industry sources, in 2003, Argentine oil demand was estimated at
about 430,000 barrels per day, or bpd, while production for 2005 was estimated
at approximately 770,000 bpd, and total refining capacity is estimated at about
625,000 bpd.

     Paraguay has no indigenous sources of petroleum. Barges using the rivers in
the Hidrovia Region are currently the preferred method of supplying Paraguay
with crude and petroleum products, according to industry sources totaling
between 1.1 million cubic meters to 1.3 million cub meters per year in the last
6 years.

     All the petroleum products travel north to destinations in Northern
Argentina, Paraguay and Bolivia, creating synergies with dry cargo volumes that
mostly travel south.

     Brazil does not yet transport any significant quantity of petroleum
products via the rivers in the Hidrovia Region, mainly due to lack of discharge
facilities. However, incentives exist to switch to barge transportation for
petroleum product distribution to Brazilian cities near the river. Currently,
interior regions of Brazil near the Hidrovia are supplied over land by truck.

Fleet developments and utilization

     In the last 10 years the barge fleet in the Hidrovia Region has more than
doubled, maintaining a high level of utilization. This has occurred not only due
to the growth of production in the area, but also because cargo that in the past
was transported by truck started to shift to river transport as the
infrastructure developed. We believe that the available barge fleet in the area
consists approximately of 1,000 dry and tank barges, in contrast with
approximately 27,900 barges in the Mississippi River System in the United
States.

     UABL owns and operates approximately 43% of total dry cargo capacity. The
closest competitor, Fluviomar, operates approximately 19% of the dry cargo
tonnage capacity. There are approximately 10 different companies operating dry
cargo barges in the Hidrovia Region.

     The barge business in the Parana river has seasonal fluctuations due to the
agricultural aspect of the trade. The high season in 1993 was from March through
July, and in 2003 the high season had extended from February through September.
However, the October through January period is now much more active due to the
construction of a large soybean crushing plant along the Parana river that works
most of the year.

     Freight levels are much less cyclical than in ocean transportation and are
based on local supply and demand factors that are generally not related to ocean
freights.

Mode Comparison

     Along with growth in production of commodities transported by barge in the
Hidrovia Region, cost, safety and environmental incentives exist to shift
commodity transport to barges.

     Inland barge transportation is generally the most cost efficient, safest
and cleanest means of transporting bulk commodities as compared with railroads
and trucks.


     According to industry sources, in terms of unit transportation cost for
most dry bulk cargos, barge is cheapest, rail is second cheapest, and truck is
third cheapest. There are clear and significant incentives to build port
infrastructure and switch from truck to barge to reduce cost.

Offshore Supply Business

     The market for offshore supply vessels, or OSVs, both on a worldwide basis
and within Brazil, is driven by a variety of factors. On the demand side, the
driver is the growth in offshore oil development/production activity, which in
the long term is driven by the price of oil and the cost of developing the
particular offshore reserves. Demand for OSVs is further driven by the location
of the reserves, with fields located further offshore and in deeper waters
requiring more vessels per field and larger, more technologically sophisticated
vessels. The supply side is driven by the availability of the vessel type needed
(i.e., appropriate size and technology), which in turn is driven by historical
newbuilding patterns and scrapping rates as well as the current employment of
vessels in the worldwide fleet (i.e., whether under long-term charter) and the
rollover schedule for those charters. Technological developments also play an
important role on the supply side, with technology such as dynamic positioning
better able to meet certain support requirements.

     Both demand for and supply of OSVs are heavily influenced by cabotage laws.
Since most offshore supply activities occur within the jurisdiction of a
country, they fall within that country's cabotage laws. This distinguishes the
OSV sector from most other types of shipping. Cabotage laws may restrict the
supply of tonnage, give special preferences to locally flagged ships or require
that any vessel working in that country's waters be flagged, crewed, and in some
cases, constructed in that country.

     OSVs generally support oil exploration, production, construction and
maintenance activities on the continental shelf and have a high degree of cargo
capacity and flexibility relative to other offshore vessel types. They utilize
space above and below deck to transport dry and liquid cargo, including heavy
equipment, pipe, drilling fluids, provisions, fuel, dry bulk cement and drilling
mud.

     The OSV sector includes conventional supply vessels, or SVs, and platform
supply vessels, or PSVs. PSVs are large and often sophisticated vessels
constructed to allow for economic operation in environments requiring some
combination of deepwater operations, long distance support, economies of scale,
and demanding operating conditions. PSVs serve drilling and production
facilities and support offshore construction and maintenance work for clusters
of offshore locations and/or relatively distant deepwater locations. They have
larger deck space and larger and more varied cargo handling capabilities
relative to other offshore support vessels to provide more economic service to
distant installations or several locations. Some vessels may have dynamic
positioning which allows close station keeping while underway. PSVs can be
designed with certain characteristics required for specific offshore trades such
as the North Sea or deepwater Brazilian service.

Brazilian Offshore Industry

     The primary customer for PSVs in Brazil is Petrobras, the Brazilian
national oil company. The Brazilian government has also allowed foreign
companies to participate in offshore oil and gas exploration and production
since 1999. Other companies active in Brazil in offshore oil and gas exploration
and production industry include Total, Shell, BP and ChevronTexaco. The
deepwater Campos Basin, an area located about 80 miles offshore, has been the
leading area for offshore activity. Activities have been extended to the
deepwater Santos and Espirito Santo Basins as well with activities now taking
place in areas of water depths of over 9,000 ft.

     Deepwater service favors modern vessels that can provide a full range of
flexible services while providing economies of scale to installations distant
from shore. Cabotage laws favor employment of Brazilian flag vessels. However,
according to industry sources, many of the Brazilian flag PSV's and supply
vessels are old, with approximately half of the national fleet are at least 20
years of age. Temporary authority is granted for foreign vessels to operate only
if no Brazilian flag vessels are available.


     According to industry sources, of a total of approximately 71 Brazilian
flag offshore vessels, 42 are categorized as PSVs and SVs, including four large
PSVs of 4,000 dwt or more. The current orderbook for Brazilian flag PSVs and SVs
is 15 vessels, including nine large PSVs.

The North Sea Market

     The North Sea is a similarly demanding offshore market due to difficult
weather and sea conditions, significant water depths, long distances to be
traveled, and sophisticated technical requirements.

     According to industry sources, high demand led to increases in large PSV
rates, averaging approximately $15,900 per day in 2004 and $30,400 per day in
2005. Large PSVs do not have a long rate history due to their relatively recent
entry into service. After averaging about $16,900 per day in early 2006, large
PSV rates increased to about $38,000 per day in early 2006.

Oil Tanker Industry Overview

     The demand for tankers is a function of the volume of crude oil and
petroleum products to be transported by sea and the distance between areas of
oil consumption and oil production. The volume of crude oil and petroleum
products transported is affected by overall demand for these products, which in
turn is influenced by, among other things, general economic conditions, oil
prices, weather, competition from alternative energy sources, and environmental
concerns.

Tanker Classifications and Primary Trade Routes

     The world oil tanker fleet is generally divided into six vessel sizes
classified by dwt, which is an approximate measure of a vessel's cargo carrying
capacity. In general, VLCC's/ULCC's primarily transport crude oil on long-haul
trade routes (where oil producers are located more than approximately 5,000
miles from the end user, such as from the Arabian Gulf to the Far East, from the
Arabian Gulf to Rotterdam via the Cape of Good Hope, from the Arabian Gulf to
the Red Sea, and from the Arabian Gulf to the US Gulf/Caribbean. Suezmax tankers
trade on long-haul and short-haul routes as discussed below, while Aframax,
Panamax, and Handy tankers serve routes typically in short-haul, regional
markets (e.g., Latin America, Mediterranean, Southeast Asia).

     Suezmax vessels are active in dirty trades (i.e., the transportation of
crude oil and dirty petroleum products) from West Africa to the Americas, and in
some Latin American dirty trades, including backhauls (return trips with a short
ballast leg) to Europe and North America. Other major Suezmax trades include
cross Mediterranean and intra-European trades.

     Aframax tankers are active in Latin American dirty trades. Since Aframax
tankers are the largest vessels capable of entering many U.S. ports, these
vessels are often utilized on Latin America to U.S. trade routes to take
advantage of economies of scale. Other major Aframax dirty trades include
intra-European and cross-Mediterranean trades. In Aframax clean trades, major
routes include voyages from the Middle East to Japan, Southeast Asia, and South
Asia.

Factors Affecting Supply of Oil Tankers

     The supply of tankers is determined by the size and technical suitability
of the available fleet (i.e., size of a vessel versus port constraints, clean
versus dirty cargo capabilities, charterer acceptability, etc.). Tanker owners
include oil companies, government-owned shipping companies and independent
vessel owners. There are also operators who do not own vessels but who charter
their tonnage from independent vessel owners. The existing tanker fleet
increases by newbuilding deliveries and decreases by the number of tankers
scrapped or otherwise removed from the fleet. Fleet size also decreases when
vessel tonnage becomes unavailable due to floating storage, layup, or repair.
Newbuilding, scrapping, and vessel unavailability are affected by current and
expected future vessel prices, charter hire rates, operating costs, age profile
of the fleet, and government and industry regulation. For example, compared to
historical averages, 2004-2005 earnings were high, while scrapping was low. If
vessel earnings were to decrease, repair and retention of older vessels would
become less economically attractive, and industry scrapping could increase.

     The International Maritime Organization, or IMO, adopted accelerated
phase-out regulations for single hull tankers of 5,000 dwt or more carrying
petroleum or petroleum products which entered into force in April 2005. The
regulations are a complex set of requirements that accelerate the phase-out of
pre-International Convention for the Prevention of Pollution from Ships, or
MARPOL, "Category 1" tankers without protectively located segregated ballast to
2005. Single hull tankers with protectively located segregated ballast are to be
phased out in 2010. Flag States may make exceptions for certain single hull,
double bottom, or double sided vessels meeting determined quality and/or
structural requirements that allow the vessels to continue in service until age
25 or the year 2015, whichever is earlier. Single hull vessels are also to be
banned from carriage of certain heavy oils, with some exceptions allowed for
double bottom or double sided vessels meeting certain quality criteria. Certain
crude oils have been exempted. Port states may recognize the Flag State
exemptions or may choose to enforce the earlier phase-out dates. The effects of
the regulations are complex but will tend to accelerate the phase-out of single
hull vessels. Actual scrapping behavior will depend upon many variables
including the state of the market and future Flag State and Port State
implementation.

     The European Union has had regulations in effect since 2003 that require
double hull vessels be used for certain heavy oils, with no exceptions. These
regulations apply to tankers of 5,000 dwt or more registered in European Union
countries or entering waters within jurisdiction of European Union countries.

     Along with mandatory regulations, other factors encourage scrapping of
single hull tankers. Many charterers require or show preference for double hull
vessels. This preference tends to reduce utilization of single hull vessels and
to encourage scrapping.

     Also, port congestion and canal congestion serve to limit effective supply
at any one time.

Passenger Vessel Industry

     Passenger vessel demand is a function of overall demand for the global
cruise industry. Principal sources of cruise passengers are North America,
Europe, Asia and the South Pacific (including Australia and New Zealand), and
South America.

Environmental and Government Regulation

     Government regulation significantly affects our operations, including the
ownership and operation of our vessels. Our operations are subject to
international conventions, national, state and local laws, and regulations in
force in international waters and the jurisdictional waters of the countries in
which our vessels may operate or are registered, including OPA, the
Comprehensive Environmental Response, Compensation, and Liability Act, or
CERCLA, the U.S. Port and Tanker Safety Act, the Act to Prevent Pollution from
Ships, regulations adopted by the IMO and the European Union, various volatile
organic compound emission requirements, the IMO/U.S. Coast Guard pollution
regulations and various SOLAS amendments, as well as other regulations.
Compliance with these requirements entails significant expense, including vessel
modifications and implementation of certain operating procedures.

     A variety of governmental and private entities, each of which may have
unique requirements, subject our vessels to both scheduled and unscheduled
inspections. These entities include the local port authorities (U.S. Coast
Guard, harbor master or equivalent), classification societies, flag state
administration (country of registry) and charterers, particularly terminal
operators. Certain of these entities require us to obtain permits, licenses and
certificates for the operation of our vessels. Failure to maintain necessary
permits or approvals could require us to incur substantial costs or temporarily
suspend operation of one or more of our vessels.

     We believe that the heightened level of environmental and quality concerns
among insurance underwriters, regulators and charterers is leading to greater
inspection and safety requirements on all vessels and may accelerate the
scrapping of older vessels throughout the industry. Increasing environmental
concerns have created a demand for vessels that conform to the stricter
environmental standards. We are required to maintain operating standards for all
of our vessels for operational safety, quality maintenance, continuous training
of our officers and crews, and compliance with U.S. and international
regulations. We believe that the operation of our vessels is in substantial
compliance with applicable environmental laws and regulations; however, because
such laws and regulations are frequently changed and may impose increasingly
stricter requirements, such future requirements may limit our ability to do
business, increase our operating costs, force the early retirement of our
vessels, and/or affect their resale value, all of which could have a material
adverse effect on our financial condition and results of operations.

Environmental Regulation--International Maritime Organization, or IMO

     The IMO has negotiated international conventions that impose liability for
oil pollution in international waters and a signatory's territorial waters. For
example, the International Convention for the Prevention of Pollution from Ships
or MARPOL, imposes environmental standards on the shipping industry relating to
oil spills, management of garbage, the handling and disposal of noxious liquids,
harmful substances in packaged forms, sewage and air emissions. In particular,
MARPOL requirements impose phase-out dates for vessels that are not certified as
double hull. Two of our Suezmax OBO vessels currently do not meet the
configuration criteria and will require modifications to comply with these
criteria before the end of 2010. These modifications will not involve major
steel work. Our vessel, Miranda I, does not currently comply with the double
hull requirement unless she limits her loading to center tanks only. However, we
expect to retrofit her to full double hull compliance during the course of 2010.
Annex III of MARPOL regulates the transportation of marine pollutants, including
standards on packing, marking, labeling, documentation, stowage, quality
limitations and pollution prevention. These requirements have been expanded by
the International Maritime Dangerous Goods Code, which imposes additional
standards for all aspects of the transportation of dangerous goods and marine
pollutants by sea. In September 1997, the IMO adopted Annex VI to the
International Convention for the Prevention of Pollution from Ships to address
air pollution from ships. Annex VI was ratified in May 2004, and became
effective in May 2005. Annex VI sets limits on sulphur oxide and nitrogen oxide
emissions from vessel exhausts and prohibits deliberate emissions of ozone
depleting substances, such as chlorofluorocarbons. Annex VI also includes a
global cap on the sulphur content of fuel oil and allows for special areas to be
established with more stringent controls on sulphur emissions. Additional or new
conventions, laws and regulations may be adopted that could adversely affect our
ability to manage our ships.

     The operation of our vessels is also affected by the requirements set forth
in the ISM Code. The ISM Code requires vessel owners and bareboat charterers to
develop and maintain 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 safe operation and describing
procedures for dealing with emergencies. The ISM Code requires that vessel
operators obtain a safety management certificate for each vessel they operate.
No vessel can obtain a certificate unless its manager has been awarded a
document of compliance, issued by each flag state, under the ISM Code. The
failure of a vessel owner 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 our fleet is ISM
code-certified. However, there can be no assurance that such certification will
be maintained indefinitely.

Environmental Regulations--The United States Oil Pollution Act of 1990, or OPA

     The United States Oil Pollution Act of 1990, or OPA, established an
extensive regulatory and liability regime for the protection and cleanup of the
environment from oil spills. OPA affects all owners and operators whose vessels
trade in the United States, its territories and possessions or whose vessels
operate in United States waters, which includes the United States territorial
sea and its 200 nautical mile exclusive economic zone.

     Under OPA, vessel owners, operators and bareboat charterers are
"responsible parties" and are liable without regard to fault (unless the spill
results solely from the act or omission of a third party, an act of God or an
act of war) for all containment and clean-up costs and other damages arising
from discharges or threatened discharges of oil from their vessels, including
bunkers (vessel fuel).

     OPA limits liability of a responsible party to the greater of $1,200 per
gross ton or $10 million per tanker that is over 3,000 gross tons (subject to
possible adjustment for inflation). OPA also limits the liability of responsible
parties to the greater of $600 per gross ton or $0.5 million per dry bulk vessel
that is over 300 gross tons (subject to possible adjustment for inflation).
These OPA liability limits do not apply if an incident was caused by a violation
of certain construction or operating regulations or a 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 oil removal
activities. In addition, CERCLA, which applies to the discharge of hazardous
substances (other than oil) whether on land or at sea, 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, unless the incident is caused by gross negligence, willful misconduct,
or a violation of certain regulations, in which case liability is unlimited.

     We currently maintain, for each of our vessels, pollution liability
coverage insurance in the amount of $1 billion per incident. If the damages from
a catastrophic spill exceeded our insurance coverage, it could have a material
adverse effect on our business and the results of operations.

     The financial responsibility regulations issued under OPA require owners
and operators of vessels to establish and maintain with the United States Coast
Guard evidence of financial responsibility in the amount of $1,500 per gross
ton, which combines the OPA limitation on liability of $1,200 per gross ton and
the CERCLA limit of $300 per gross ton. Under the regulations, vessel owners and
operators may evidence their financial responsibility by showing proof of
insurance, surety bond, self-insurance, or guaranty and are required only to
demonstrate evidence of financial responsibility in an amount sufficient to
cover the vessels in the fleet having the greatest maximum liability under OPA.

     The Coast Guard's regulations concerning certificates of financial
responsibility provide, in accordance with OPA, that claimants may bring suit
directly against an insurer or guarantor that furnishes certificates of
financial responsibility. In the event that such insurer or guarantor is sued
directly, it is prohibited from asserting any contractual 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
organizations, which had typically provided certificates of financial
responsibility under pre-OPA laws, including the major protection and indemnity
organizations, have 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. Under the self-insurance provisions, the vessel owner
or operator must have a net worth and working capital, measured in assets
located in the United States against liabilities located anywhere in the world,
that exceeds the applicable amount of financial responsibility. We have complied
with the Coast Guard regulations by providing a financial guaranty evidencing
sufficient self-insurance.

     OPA expressly permits individual states to impose their own liability
regimes with regard to oil pollution incidents occurring within their
boundaries, and some states have enacted legislation providing for unlimited
liability for oil spills. In some cases, states which have enacted such
legislation, have not yet issued implementing regulations defining vessels
owners' responsibilities under these laws. OPA also amended the Federal Water
Pollution Control Act to require owners and operators of vessels to adopt
contingency plans for reporting and responding to oil spill scenarios up to a
"worst case" scenario and to identify and ensure, through contracts or other
approved means, the availability of necessary private response resources to
respond to a "worst case discharge." In addition, periodic training programs for
shore and response personnel and for vessels and their crews are required. The
U.S. Coast Guard has approved our vessel response plans.

     OPA also requires that tankers over 5,000 gross tons calling at U.S. ports
have double hulls if contracted after June 30, 1990 or delivered after January
1, 1994. Furthermore, under OPA, oil tankers without double hulls will not be
permitted to come to U.S. ports or trade in U.S. waters by 2015. Although all of
our oceangoing vessels are double hull, four of these vessels are subject to
phase-out under OPA due to configuration requirements. Based on current OPA
requirements, these four vessels will not be eligible to carry oil as cargo
within the 200 nautical mile United States exclusive economic zone starting in
2014, except that these tankers may trade in U.S. waters until 2015 if their
operations are limited to discharging their cargoes at the Louisiana Offshore
Oil Port of off-loading by lightering within authorized lightering zones more
than 60 miles offshore.

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

Environmental Regulation--Other Environmental Initiatives

     In July 2003, in response to the m.t. Prestige oil spill in November 2002,
the European Union adopted regulation that accelerates the IMO single hull
tanker phase-out timetable. The European Union is also considering legislation
that will affect the liability of owners for oil pollution. It is difficult to
predict what legislation, if any may be promulgated by the European Union or any
other country or authority.

     Although the United States is not a party thereto, many countries have
ratified and follow the liability scheme adopted by the IMO and set out in the
International Convention of Civil Liability for Oil Pollution Damage, or the
CLC, and the Convention for the Establishment of an International Fund for Oil
Pollution of 1971, as amended. 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. Many of the countries that have ratified the CLC have
increased the liability limits through a 1992 Protocol to the CLC. The liability
limits in the countries that have ratified this Protocol are, currently,
approximately $6.5 million plus approximately $909 per gross registered ton
above 5,000 gross tons with an approximate maximum of $129.3 million per vessel.
As the CLC calculates liability in terms of a basket of currencies, these
figures are based on currency exchange rates as of March 1, 2006. The right to
limit liability is forfeited under the CLC where the spill is caused by the
owner's actual fault or privity and, under the 1992 Protocol, where the spill is
caused by the owner's intentional or reckless conduct. Vessels trading to
contracting states must provide evidence of insurance covering the limited
liability of the owner. In jurisdictions where the CLC has not been adopted,
various legislative schemes or common law govern, and liability is imposed
either on the basis of fault or in a manner similar to the CLC.

     In addition, a U.S. District Court ruled in March 2005 that the U.S.
Environmental Protection Agency (or U.S. EPA) lacks the authority to exclude
discharges of vessel ballast water from permitting requirements under the Clean
Water Act and ordered the U.S. EPA to repeal regulations it had adopted
exempting discharges of ballast water from such permitting requirements. Unless
this decision is overturned on appeal or the relief in question is modified,
vessels entering waters subject to the Clean Water Act's jurisdiction would be
required to have a permit to discharge ballast water. This could require the
instillation of equipment on our vessels to treat ballast water before it is
discharged at substantial cost and/or otherwise restrict some or all of our
vessels from entering waters of the United States that are subject to this
ruling.

Vessel Security Regulations

     Since the terrorist attacks of September 11, 2001, there have been a
variety of initiatives intended to enhance vessel security. On November 25,
2002, the U.S. Maritime Transportation Security Act of 2002 (MTSA) came into
effect. To implement certain portions of the MTSA, in July 2003, the U.S. Coast
Guard issued regulations requiring the implementation of certain security
requirements aboard vessels operating in waters subject to the jurisdiction of
the United States. Similarly, in December 2002, amendments to SOLAS created a
new chapter of the convention dealing specifically with maritime security. The
new chapter went into effect in July 2004 and imposes various detailed security
obligations on vessels and port authorities, most of which are contained in the
newly created International Ship and Port Facilities Security, or the ISPS Code.
We are in compliance with the ISPS Code. Among the various requirements are:

               -    on-board installation of automatic information systems, or
                    AIS, to enhance vessel-to-vessel and vessel-to-shore
                    communications;

               -    on-board installation of vessel security alert systems;

               -    the development of vessel security plans; and

               -    compliance with flag state security certification
                    requirements.

Inspection by Classification Societies

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

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

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

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

     Intermediate Surveys. Extended annual surveys are referred to as
intermediate surveys and typically are conducted two and one-half years after
commissioning and each class renewal. Intermediate surveys may be carried out on
the occasion of the second or third annual survey.

     Special Surveys. Special surveys, also known as class renewal surveys, are
carried out every five years for the vessel's hull, machinery, including the
electrical plant, and for any special equipment classed, at the intervals
indicated by the character of classification for the hull. At the special
survey, the vessel is thoroughly examined, including audio-gauging to determine
the thickness of the steel structures. Should the thickness be found to be less
than class requirements, the classification society would prescribe steel
renewals. The classification society may grant a one-year grace period for
completion of the special survey. Substantial amounts of funds may have to be
spent for steel renewals to pass a special survey if the vessel experiences
excessive wear and tear. In lieu of the special survey, a vessel owner has the
option of arranging with the classification society for the vessel's hull or
machinery to be on a continuous survey cycle, in which every part of the vessel
would be surveyed within a five-year cycle. This process is also referred to as
continuous class renewal. We have made arrangements with the classification
societies for our vessels to be on a continuous survey cycle.

     Currently our oceangoing vessels are scheduled for intermediate surveys and
special surveys as follows:

      Intermediate survey                              Special survey
--------------------------------------     ------------------------------------
   Year           No. of vessels            Year            No. of vessels
   ----           --------------            ----            --------------
   2006                 0                   2006                 2
   2007                 3                   2007                 4
   2008                 2                   2008                 0
   2009                 7                   2009                 1
   2010                 0                   2010                 4
   2011                 0                   2011                 3

     All areas subject to survey as defined by the classification society are
required to be surveyed at least once per class period, unless shorter intervals
between surveys are prescribed elsewhere. The period between two subsequent
surveys of each area must not exceed five years.

     Most oceangoing vessels are also drydocked every 30 to 36 months for
inspection of the underwater parts and for repairs related to inspections. If
any defects are found, the classification surveyor will issue a "recommendation"
which must be rectified by the vessel owner within prescribed time limits.

     Most insurance underwriters make it a condition for insurance coverage that
a vessel be certified as "in class" by a classification society which is a
member of the International Association of Classification Societies. All our
oceangoing vessels are certified as being "in class."

Risk of Loss and Liability Insurance

General

     The operation of any cargo vessel includes risks such as mechanical
failure, collision, property loss, cargo loss or damage and business
interruption due to political circumstances in foreign countries, hostilities
and labor strikes. In addition, there is always an inherent possibility of
marine disaster, including oil spills and other environmental mishaps, and the
liabilities arising from owning and operating vessels in international trade.

     We believe that we maintain insurance coverage against various casualty and
liability risks associated with our business that we consider to be adequate
based on industry standards and the value of our fleet, including hull and
machinery and war risk insurance, loss of hire insurance at certain times for
certain vessels and protection and indemnity insurance against liabilities to
employees and third parties for injury, damage or pollution and other customary
insurance. While we believe that our present insurance coverage is adequate, we
cannot guarantee that all risks will be insured, that any specific claim will be
paid, or that we will always be able to obtain adequate insurance coverage at
reasonable rates or at all.

Hull and Machinery and War Risk Insurance

     We maintain marine hull and machinery and war risk insurance, which
includes the risk of actual or constructive total loss, for our wholly-owned
vessels. At times, we also obtain for part of our fleet increased value coverage
and additional freight insurance during periods of improved market rates, where
applicable. This increased value coverage and additional freight coverage
entitles us, in the event of total loss of a vessel, to some recovery for
amounts not otherwise recoverable under the hull and machinery policy. When we
obtain these additional insurances, our vessels will each be covered for at
least their fair market value, subject to applicable deductibles (and some may
include limitations on partial loss). We cannot assure you, however, that we
will obtain these additional coverages on the same or commercially reasonable
terms, or at all, in the future.

Loss of Hire

     We maintain loss of hire insurance at certain times for certain vessels.
Loss of hire insurance covers lost earnings resulting from unforeseen
incidents or breakdowns that are covered by the vessel's hull and machinery
insurance and result in loss of time to the vessel. Although loss of hire
insurance will cover up to ninety days of lost earnings, we must bear the
applicable deductibles which generally range between the first 14 to 30 days of
lost earnings. We intend to renew these insurance policies or replace them with
other similar coverage if rates comparable to those on our present policies
remain available. There can be no assurance that we will be able to renew these
policies at comparable rates or at all. Future rates will depend upon, among
other things, our claims history and prevailing market rates.

Protection and Indemnity Insurance

     Protection and indemnity insurance covers our legal liability for our
shipping activities. This includes the legal liability and other related
expenses of injury or death of crew, passengers and other third parties, loss or
damage to cargo, fines and other penalties imposed by customs or other
authorities, claims arising from collisions with other vessels, damage to other
third-party property, pollution arising from oil or other substances and
salvage, towing and other related costs, wreck removal and other risks. Coverage
is limited for vessels in our Ocean Business to approximately $4.25 billion with
the exception of oil pollution liability, which is limited to $1.0 billion per
vessel per incident. Vessels in our River Business have lower amounts of
coverage.

     This protection and indemnity insurance coverage is provided by protection
and indemnity associations, or P&I Clubs, which are non-profit mutual assurance
associations made up of members who must be either ship owners or ship managers.
The members are both the insured parties and the providers of capital. The P&I
Clubs in which our vessels are entered are currently members of the
International Group of P&I Associations, or the International Group and are
reinsured themselves and through the International Group in Lloyds of London and
other first class reinsurance markets. We may be subject to calls based on each
Club's yearly results. Similarly, the same P&I Clubs provide freight demmurage
and defense insurance which, subject to applicable deductibles, covers all legal
expenses in case of disputes, arbitrations and other proceedings related to our
vessels.

Legal Proceedings

     Our subsidiary, Ultrapetrol S.A., was involved in a customs dispute with
the Customs Authority of Bahia Blanca in Argentina over the alleged unauthorized
operation of the Princess Pia in Argentina during 2001. As a result, the Customs
Authority of Bahia Blanca issued a resolution claiming the sum of 4.69 million
Argentine pesos (approximately $1.61 million) as import taxes and the sum of
4.69 million Argentine pesos (approximately $1.61 million) as fines. In response
to said resolution, on March 16, 2004, Ultrapetrol S.A. submitted an appeal with
the Argentine Tax Court arguing that it did not breach any applicable customs
laws since the Princess Pia operated within Argentine territory only during the
periods in which it was expressly authorized by the competent authorities. The
Argentine Tax Court entered judgment in favor of the Company. This decision is
final and binding upon the parties. Costs shall be borne by the Customs
Authority.

     Ultrapetrol S.A. is involved in a customs dispute with the Brazilian
Customs Tax Authorities over the alleged infringement of customs regulations by
the Alianza G-3 and Alianza Campana (collectively, the "Alianza Campana") in
Brazil during 2004. As a result, the Brazilian Customs Tax Authorities commenced
an administrative proceeding and applied the penalty of apprehension of the
Alianza Campana which required the Alianza Campana to remain in port or within a
maximum of five nautical miles from the Brazilian maritime coast. The maximum
customs penalty that could be imposed would be confiscation of the Alianza
Campana, which is estimated by the Brazilian Customs tax authorities to be
valued at $4.56 million. On February 22, 2005, we were notified of the decision
that grounds on which the tax assessment was based were ratified. In response to
this decision, on February 28, 2005, we presented a specific request
clarification of the decision. We simultaneously presented a petition to the
Secretary of the Brazilian Internal Revenue Service requesting the replacement
of the confiscation penalty applied to the Alianza Campana by a penalty
corresponding to one percent (1%) of the value of the Alianza Campana. The tax
authorities determined that the petition requesting for clarification of the
decision could not be considered because the Decree that regulates the
administrative proceeding does not provide the possibility of filing this
petition. The Secretary of the Brazilian Internal Revenue Service sent the
administrative proceeding to tax authorities in Fortaleza, Brazil, for them to
consider if the vessel could be imported under the REPETRO regime. In accordance
with informal information that we received, tax authorities stated that they
would not be qualified to analyze such issue. Currently, the administrative
proceeding is in Rio de Janeiro, Brazil, waiting for a report of tax authorities
in which the REPETRO issue will be analyzed.

     On the same day that Ultrapetrol S.A. presented its defense to the above
mentioned administrative proceeding, a writ of injunction was filed on behalf of
Ultrapetrol S.A. seeking a judicial authorization allowing the return of the
Alianza Campana to Boias de Xareu, which is located approximately 20 nautical
miles from the Brazilian coast, so that the Alianza Campana could resume its
prior services. The preliminary injunction was granted by the court in favor of
Ultrapetrol S.A. on September 17, 2004, conditioned on the weekly presentation
of shipping letters describing the location of the Alianza Campana, and the
Alianza Campana is now back in service at Boias de Xareu. The tax authorities
filed an unsuccessful interlocutory appeal against the preliminary injunction
that was granted in our favor. In view of this decision, tax authorities filed
an appeal to the Superior Court of Justice and Ultrapetrol filed its
counterargument. Currently, our lawsuit and the appeal of tax authorities are
pending judgment.

     Based upon the facts and circumstances of the case, including the fact that
the Alianza Campana was operating under a specific written authorization
officially granted by the Brazilian government, and the existing regulations, we
do not believe that the outcome of this matter will have a material impact on
our financial position or results of operations. In case we are not successful
on the merits, under our insurance coverage we could request an indemnity
corresponding to the value of the Alianza Campana from The Standard Club, the
Alianza Campana's P&I insurer.

     On September 21, 2005, the local customs authority of Ciudad del Este,
Paraguay issued a finding that certain UABL entities owe taxes to that authority
in the amount of $2.2 million, together with a fine for non-payment of the taxes
in the same amount, in respect of certain operations of our River Business for
the prior three-year period. This matter was referred to the Central Customs
Authority of Paraguay (the "Paraguay Customs Authority"). We believe that this
finding is erroneous and UABL has formally replied to the Paraguay Customs
authority contesting all of the allegations upon which the finding was based. We
are awaiting the determination of the Paraguay Customs Authority in this matter.
That determination, if adverse to UABL, is subject to court review upon
application. We intend to vigorously contest in court any adverse determination.
We have been advised by UABL's counsel in the case that there is only a remote
possibility that a court would find UABL liable for any of these taxes or fines.

     Various other legal proceedings involving us may arise from time to time in
the ordinary course of business. However, we are not presently involved in any
other legal proceedings that, if adversely determined, would have a material
adverse effect on us.

Dividend Policy

     The payment of dividends is in the discretion of our board of directors. We
anticipate retaining most of our future earnings, if any, for use in our
operations and the expansion of our business. Any determination as to dividend
policy will be made by our board of directors and will depend on a number of
factors, including the requirements of Bahamian law, our future earnings,
capital requirements, financial condition and future prospects and such other
factors as our board of directors may deem relevant. Bahamian law generally
prohibits the payment of dividends other than from surplus, when a company is
insolvent or if the payment of the dividend would render the company insolvent.

     Our ability to pay dividends is restricted by the Notes, which we issued in
2004. In addition, we may incur expenses or liabilities, including extraordinary
expenses, which could include costs of claims and related litigation expenses,
or be subject to other circumstances in the future that reduce or eliminate the
amount of cash that we have available for distribution as dividends or for which
our board of directors may determine requires the establishment of reserves. The
payment of dividends is not guaranteed or assured and may be discontinued at any
time at the discretion of our board of directors. Because we are a holding
company with no material assets other than the stock of our subsidiaries, our
ability to pay dividends is dependent upon the earnings and cash flow of our
subsidiaries and their ability to pay dividends to us. If there is a substantial
decline in any of the markets in which we participate, our earnings will be
negatively affected, thereby limiting our ability to pay dividends.

C. ORGANIZATIONAL STRUCTURE

     Ultrapetrol (Bahamas) Limited is a company organized and registered as a
Bahamas Corporation since December 1997.

     Ultrapetrol (Bahamas) Limited has an ownership in the following companies:


COMPANY NAME                                                   INCORPORATION
                                                               JURISDICTION
Ultrapetrol (Bahamas) Limited                                  (Bahamas)
   - 100% of Kattegat Shipping Inc.                            (Panama)
   - 100% of Majestic Maritime Ltd.                            (Bahamas)
   - 100% of Avemar Holdings (Bahamas)  Ltd.                   (Bahamas)
   - 100% of Mansan S.A.                                       (Uruguay)
   - 100% of Massena Port S.A.                                 (Uruguay)
      - 100% of Dampierre Holdings Spain S.L.                  (Spain)
         - 99% of Oceanpar S.A.                                (Paraguay)
            - 7% of Ultrapetrol S.A.                           (Argentina)
         - 50% of Parfina S.A.                                 (Paraguay)
         - 93% of Ultrapetrol S.A.                             (Argentina)
   - 100% of Internationale Maritime S.A.                      (Bahamas)
   - 100% of Parkwood Commercial Corp.                         (Panama)
     - 50% of Agriex Importadora e Exportadora de
           Generos Alimenticios Ltda.                          (Brazil)
   - 100% of Princely International Finance Corp.              (Panama)
      - 100% of Baldwin Maritime Inc.                          (Panama)
      - 100% of Corporacion de Navegacion Mundial S.A.         (Chile)
         - 49% of Maritima SIPSA S.A.                          (Chile)
         - 50% of Parfina S.A.                                 (Paraguay)
      - 100% of Danube Maritime Inc.                           (Panama)
      - 100% of General Ventures Inc.                          (Liberia)
      - 100% of Imperial Maritime Ltd.                         (Bahamas)
      - 100% of Imperial Maritime Ltd. (Bahamas) Inc.          (Panama)
      - 100% of Fulton Shipping Inc.                           (Panama)
      - 100% of Brinkley Shipping Inc.                         (Panama)
      - 100% of Pelorus Maritime Inc.                          (Panama)
      - 100% of Panpetrol Shipping S.A.                        (Panama)
      - 100% of Kingly Shipping Ltd.                           (Bahamas)
      - 100% of Monarch Shipping Ltd.                          (Bahamas)
      - 100% of Noble Shipping Ltd.                            (Bahamas)
      - 1% of Oceanpar S.A.                                    (Paraguay)
      - 100% of Oceanview Maritime Inc.                        (Panama)
      - 100% of Regal International Investments S.A.           (Panama)
         - 100% of Bayham Investments S.A.                     (Panama)
            - 50% of Agriex Importadora e
                  xportadora de Generos Alimenticios Ltda.     (Brazil)
          - 100% of Draco Investments S.A.                     (Panama)
         - 100% of Cavalier Shipping Inc.                      (Panama)
      - 100% of Riverview Commercial Corp.                     (Panama)
      - 100% of Sovereign Maritime Ltd.                        (Bahamas)
      - 100% of Tipton Marine Inc.                             (Panama)
      - 100% of Ultrapetrol International S.A.                 (Panama)
   - 100% of Stanmore Shipping Inc.                            (Panama)
   - 60% of Ultracape (Holdings) Ltd.                          (Bahamas)
      - 100% of Ultracape Delaware, LLC.                       (USA)
         - 99.99% of Parque Ecologico Industrial
                  de Altamira S.A. de C.V.                     (Mexico)
      - 100% of Palmerston Shipping Inc.                       (Panama)
      - 100% of Ultracape International S.A.                   (Panama)
         - 100% of Invermay Shipping Inc.                      (Panama)
         - 100% of Braddock Shipping Inc.                      (Panama)
      - 100% of Wallasey Shipping Inc.                         (Panama)
   - 27.78% of UP Offshore (Bahamas) Ltd.                      (Bahamas)
      - 100% of UP Offshore (Panama) S.A.                      (Panama)
         - 100% of Packet Maritime Inc.                        (Panama)
         - 100% of Padow Shipping Inc.                         (Panama)
         - 100% of Pampero Navigation Inc.                     (Panama)
        - 100% of UP Offshore (UK) Ltd.                        (United Kingdom)
        - 100% of UP Offshore Uruguay S.A.                     (Uruguay)
      - 99.99% of UP Offshore Apoio Maritimo Ltda.             (Brazil)
        - 100% of UP Offshore Apoio Maritimo (Panama) Inc.     (Panama)
   - 100% of UP Offshore (Holdings) Ltd.                       (Bahamas)
   - 92.86% of UP River (Holdings) Ltd.                        (Bahamas)
      - 50% of UABL Limited                                    (Bahamas)
   - 100% of UP River Terminals (Panama) S.A.                  (Panama)
      - 50% of UABL Terminals Ltd.                             (Bahamas)
         - 100% of UABL Terminals (Paraguay) S.A.              (Panama)
            - 50% of Obras Terminales y Servicios S.A.         (Paraguay)
            - 50% of Puertos del Sur S.A.                      (Paraguay)
   - 100% of UPB (Panama) Inc.                                 (Panama)
      - 50% of UABL Terminals Ltd.                             (Bahamas)
      - 50% of UABL Limited                                    (Bahamas)
         - 100% of Arlene Investment Inc.                      (Panama)
             - 1% of Compaoia Naviera del Magdalena S.A.       (Colombia)
         - 100% of Blueroad Finance Inc.                       (Panama)
            - 1% of Compaoia Naviera del Magdalena S.A.        (Colombia)
         - 100% of Marine Financial Investment Corp.           (Panama)
            - 1% of Compaoia Naviera del Magdalena S.A.        (Colombia)
         - 100% of Corydon International S.A.                  (Uruguay)
            - 100% of Cedarino S.L.                            (Spain)
               - 90% of Parabal S.A.                           (Paraguay)
               - 97.5% of Riverpar S.A.                        (Paraguay)
               - 99.6% of Sernova S.A.                         (Argentina)
               - 97.5% of UABL Paraguay S.A.                   (Paraguay)
               - 96.6% of UABL S.A.                            (Argentina)
               - 90% of Yataity S.A.                           (Paraguay)
               - 63% of Agencia Maritima Argenpar S.A.         (Argentina)
         - 100% of Lonehort S.A.                               (Uruguay)
         - 100% of UP River Ltd.                               (Bahamas)
            - 100% of UABL International S.A.                  (Panama)
             - 96% of Compaoia Naviera del Magdalena S.A.      (Colombia)
            - 100% of Thurston Shipping Inc.                   (Panama)
               - 10% of Parabal S.A.                           (Paraguay)
              - 2.5% of Riverpar S.A.                          (Paraguay)
               - 0.4% of Sernova S.A.                          (Argentina)
               - 2.5% of UABL Paraguay S.A.                    (Paraguay)
               - 3.4% of UABL S.A.                             (Argentina)
              - 36.7% of Agencia Maritima Argenpar S.A.        (Argentina)
              - 10% of Yataity S.A.                            (Paraguay)
                 - 1% of Compaoia Naviera del Magdalena S.A.   (Colombia)
         - 100% of UABL Barges (Panama) Inc.                   (Panama)

D. PROPERTY PLANTS, AND EQUIPMENT

     Through our River Business, we own a drydock and a repair facility for our
river fleet at Pueblo Esther, Argentina, land for the construction of two
terminals in Argentina and 50% joint venture participations in two grain loading
terminals in Paraguay. UABL also rents offices in Asuncion, Paraguay and Buenos
Aires, Argentina and a drydock facility in Ramallo, Argentina. Also, through
Ultracape Delaware LLC, we own land for expansion of a liquids terminal in
Mexico.

     Through our acquisition of UP Offshore, we now hold a lease for office
space in Rio de Janeiro, Brazil. In addition, through our recent acquisition of
Ravenscroft, we own a building located at 3251 Ponce de Leon Boulevard, Coral
Gables, Florida, United States of America. Through our acquisition of the
administrative functions of Oceanmarine, a related party, we now hold a sublease
from it to an office in Buenos Aires, Argentina.

ITEM 4A - UNRESOLVED STAFF COMMENTS

None.

ITEM 5 - OPERATING AND FINANCIAL REVIEW AND PROSPECTS

     The following discussion should be read in conjunction with the information
included under the caption "Selected Financial Data," our historical
consolidated financial statements and their notes included elsewhere in this
annual report. This discussion contains forward-looking statements. For a
discussion on the accuracy of these statements please refer to the section of
this report titled "Cautionary Statement Regarding Forward Looking Statements"
that reflect our current views with respect to future events and financial
performance. Our actual results may differ materially from those anticipated in
these forward-looking statements as a result of certain factors, such as those
set forth in the section entitled "Risk Factors" in Item 3.D of this report and
elsewhere in this annual report.

A. OPERATING RESULTS

Our Company

     We are a diverse marine transportation company involved in the global
carriage of dry bulk and liquid cargos, supplies, equipment and passengers. We
serve the shipping markets for grain, forest products, minerals, crude oil,
petroleum, and refined petroleum products, as well as the offshore oil platform
supply market, and the leisure passenger cruise market through our operations in
the following four segments of the marine transportation industry.

     o    Our River Business, with approximately 490 barges, is the largest
          owner and operator of river barges and pushboats that transport dry
          bulk and liquid cargos through the Hidrovia Region of South America, a
          large area with growing agricultural, forest and mineral related
          exports. This region is crossed by navigable rivers which flow through
          Argentina, Bolivia, Brazil, Paraguay and Uruguay, to ports serviced by
          ocean export vessels. According to Doll Shipping Consultancy, as a
          whole, these countries accounted for approximately 47% of world
          soybean production in 2005, growing from 30% in 1995.

     o   Our Offshore Supply Business owns and operates vessels that provide
         critical logistical and transportation services for offshore petroleum
         exploration and production companies, primarily in the North Sea and
         the coastal waters of Brazil. Our Offshore Supply Business fleet
         currently consists of proprietarily designed, technologically advanced
         platform supply vessels, or PSVs, including three in operation and
         three under construction to be delivered in 2006 and 2007.

     o   Our Ocean Business owns and operates six oceangoing vessels, including
         three versatile Suezmax/Oil-Bulk-Ore, or Suezmax OBO, vessels, one
         Aframax tanker, one semi-integrated tug/barge unit and one
         chemical/product carrier. Our Ocean Business fleet has an aggregate
         capacity of approximately 600,000 dwt, and our three Suezmax OBOs are
         capable of carrying either dry bulk or liquid cargos, providing
         flexibility as dynamics change between these market sectors.

     o   Our Passenger Business fleet consists of two vessels with a total
         carrying capacity of approximately 1,600 passengers, and operates
         primarily in the European cruise market. We currently employ each of
         our passenger vessels under seasonal charters with a tour operator. In
         addition, we are currently negotiating opportunities to operate these
         vessels during periods outside the European travel season.

     Our business strategy is to continue to operate as a diversified marine
transportation company with an aim to maximize our growth and profitability
while limiting our exposure to the cyclical behavior of individual sectors of
the transportation industry.

Developments in 2005

     On January 7, 2005, International Finance Corporation, or IFC, and KfW
disbursed the remaining $7.5 million of the $30.0 million loan granted to UABL
in 2002. These funds were used to finance the purchase and transportation from
the United States to the Hidrovia Region of 35 dry barges. Additionally the
Company used existing funds to purchase two pushboats and other auxiliary
equipment.

     On March 4, 2005, we entered into a contract to sell our capesize dry-bulk
carrier, Cape Pampas, owned through our 60% joint venture, Ultracape, for
approximately $37.9 million, net of the related expenses. The vessel was
delivered to the new owners on May 6, 2005.

     On March 4, 2005, we entered into a contract to purchase the passenger
vessel, New Flamenco, for a price of $13.5 million. This transaction was
consummated on March 24, 2005, and we continued her employment with a European
tour operator during the European travel season. In November 2005, we commenced
an extensive refurbishment of the passenger and public spaces.

     On April 6, 2005, we purchased the passenger vessel, World Renaissance,
renamed Grand Victoria, at auction for a price of $3.4 million. This vessel was
delivered and fully paid for on April 19, 2005, but was not certified and did
not enter service in 2005. This vessel has since been re-classified and is now
being refurbished to re-enter into service in 2006.

     On April 29, 2005, we agreed to purchase the product tanker, Sun Chemist,
renamed Miranda I, for a total price of $10.3 million. The vessel was delivered
and fully paid on July 7, 2005 and entered service in Argentina under a
long-term charter with a major oil company in October 2005.

     On July 25, 2005, our option to repurchase 25,212 of our shares from Los
Avellanos for a total price of $0.9 million was extended until July 25, 2006.

     On October 7, 2005, we financed 90% of the acquisition cost of 11 barges in
our River Business with $2.9 million in funds available from restricted cash.

     On December 1, 2005 we substituted barges TN 1502, TN1503, TN1505 and
TN1506 with barges ACL 700 and ACL 701 in the collateral pool securing the
Notes. The substituted barges are newer and of a higher value than the original
barges.

     On December 28, 2005, we drew $3.0 million under the $10.0 million facility
provided by IFC to UABL Paraguay, one of our subsidiaries. These funds will be
used primarily to increase the size and capacity of some of our existing barges.

Recent Developments

     In March 2006, we commenced preparation for an initial public offering of
the shares of our common stock to be registered in the United States of America.
The shares held directly by our existing shareholders prior to the initial
public offering will be entitled to seven votes per share and the shares held by
all other holders will be entitled to one vote per share. The special voting
rights of the existing shareholders will not be transferable. Following the
completion of the initial public offering, our existing shareholders will
continue to have a majority of the voting power of our common shares.

     On March 20, 2006, we purchased all of the issued and outstanding capital
stock of Ravenscroft Shipping (Bahamas) S.A. from two of our related parties,
Crosstrade Maritime Inc., and Crosstrees Maritime Inc., for the purchase price
of $11.5 million. The purchase price included a building in Coral Gables,
Florida, U.S., independently valued at $4.5 million. Ravenscroft Shipping
(Bahamas) S.A. is a holding company that is the ultimate parent of our vessel
managers, Ravenscroft Ship Management Inc., which manages the vessels in our
Ocean Business and Offshore Supply Business, and Elysian Ship Management Inc.,
which manages the vessels in our Passenger Business. We have the option to cause
Crosstrade Maritime Inc., and Crosstrees Maritime Inc, to purchase from us all,
but not less than all, of the Ravenscroft shares purchased for the original
consideration at any time prior to September 30, 2006, but not later than the
closing of our initial public offering of common stock. The purchase price of
this acquisition was paid in the form of a non-interest bearing promissory note
secured by the pledged shares of Ravenscroft payable upon the earlier of (i) the
closing of our initial public offering of common stock or (ii) September 30,
2006. In compliance with the requirements of our indenture related to Notes, we
obtained a fairness opinion from an internationally recognized accounting firm
in connection with this acquisition.

     Separately, we purchased 66.67% of the issued and outstanding capital stock
of UP Offshore (Bahamas) Ltd., a company through which we operate our Offshore
Supply Business, from LAIF, an affiliate of Solimar, one of our shareholders,
for a purchase price of $48.0 million on March 21, 2006. Following this
acquisition, we hold 94.45% of the issued and outstanding shares of UP Offshore.
We have the option to cause LAIF to purchase from us all, but not less than all,
of the UP Offshore shares purchased for the original consideration at any time
prior to September 30, 2006, but not later than the closing of our initial
public offering. The purchase price of this acquisition was paid in the form of
a non-interest bearing promissory note payable upon the earlier of (i) the
closing of our initial public offering or (ii) September 30, 2006. In compliance
with the requirements of our indenture related to the Notes, we obtained a
fairness opinion from an internationally recognized accounting firm in
connection with this acquisition.

     We have reached an understanding with IFC to purchase from IFC the 7.14% of
UP River (Holdings) Ltd., an entity that owns 50% of UABL, that we do not own
for the price of $6.0 million. As part of this understanding, IFC agreed to
waive its option to convert its interest in UP River to shares in our company
and its right to participate in our initial public offering. This understanding
is subject to the successful completion of an initial public offering and our
obligation under this understanding will be paid from proceeds of our initial
public offering.

     On March 20, 2006, Los Avellanos and Avemar Holdings (Bahamas) Ltd., or
Avemar, two of our shareholders, subject to the successful completion of an
initial pubic offering, cancelled their agreement pursuant to which Avemar had
previously granted Los Avellanos an irrevocable proxy to vote our shares owned
by Avemar. The shareholders have further agreed to cancel the shares owned by
Avemar upon the closing of an initial public offering. As a consequence, if we
effect an initial public offering, Solimar will own 63.36% of our shares and the
remaining 36.64% will be directly and indirectly owned by Los Avellanos.

     On March 20, 2006, we exercised our option to repurchase from Los Avellanos
25,212 shares of our common stock for a total consideration of $894,999, and the
$894,999 note originally issued in connection with the option was cancelled.

Factors Affecting Our Results of Operations

     We have organized our business and evaluate performance by the operating
segments of the Ocean Business, River Business, and, beginning in 2005, the
Offshore Supply Business and Passenger Business. The accounting policies of the
reportable segments are the same as those for the consolidated financial
statements. Other than for allocation of overhead, we do not have significant
intersegment transactions.

Revenues

     In our River Business, we currently contract substantially all of our
capacity under COAs, most of which have terms from one to four years. Most of
these COAs currently provide for adjustments to the freight rate based on
changes in the price of fuel.

     In our Offshore Business, during the second half of 2005, two PSV vessels
owned by UP Offshore were, by virtue of chartering arrangements, operated by us
in the North Sea. The revenues of these charters are recognized in our year-end
financial statements.

     In our Ocean Business, we contract our cargo vessels either on a time
charter basis or on a contract of affreightment, or COA, basis. Some of the
differences between time charters and COAs are summarized below.

        Time Charter

          o    We derive revenue from a daily rate paid for the use of the
               vessel, and

          o    the charterer pays for all voyage expenses, including fuel and
               port charges.

        Contract of Affreightment (COA)

          o    We derive revenue from a rate based on tonnage shipped expressed
               in dollars per metric ton of cargo, and

          o    we pay for all voyage expenses, including fuel and port charges.

     Our ships on time charters generate both lower revenues and lower expenses
for us than those under COAs. At comparable price levels both time charters and
COAs result in approximately the same operating income, although the operating
margin as a percentage of revenues may differ significantly.

     The structure of our seasonal contracts for our Passenger Business provides
us with a stable revenue stream as well as the flexibility to operate the
vessels in other regions of the world at the end of the contract term. We are
currently negotiating opportunities to employ these vessels during periods other
than the European travel season.

     Time charter revenues accounted for 56% of the total revenues from our
businesses for 2005, and COA revenues accounted for 44%. With respect to COA
revenues in 2005, 87% were in respect of repetitive voyages for our regular
customers and 13% in respect of single voyages for occasional customers.

     In our River Business, demand for our services is driven by agricultural,
mining and forestry activities in the Hidrovia Region. In addition, droughts and
other adverse weather conditions, such as floods, could result in a decline in
production of the agricultural products we transport, which would likely result
in a reduction in demand for our services. In 2005, our results of operations
were negatively impacted due to the decline in soybean production associated
with that year's drought. Further, most of the operations in our River Business
occur on the Parana and Paraguay Rivers, and any changes adversely affecting
navigability of either of these rivers, such as low water levels, could reduce
or limit our ability to effectively transport cargo on the rivers, as was the
case in 2005.

     In our Ocean Business, we employed a significant part of our ocean fleet on
time charter to different customers during 2005. During the first half of 2005,
the international dry-bulk freight market maintained average rates above those
experienced in 2004. In the second half, those average freight rates generally
decreased below the average levels experienced in 2004.

     In our Passenger Business, demand for our services is driven primarily by
movements of tourists during the European summer cruise season.

Expenses

     Our operating expenses generally include the cost of all vessel management,
crewing, spares and stores, insurance, lubricants, repairs and maintenance.
Generally, the most significant of these expenses are repairs and maintenance,
wages paid to marine personnel, catering and marine insurance costs. However,
there are significant differences in the manner in which these expenses are
recognized in the different segments in which we operate.

     In addition to the vessel operating expenses, our other primary operating
expenses in 2005 included general and administrative expenses as well as vessel
management and administration fees paid to Oceanmarine and Ravenscroft, both
related parties, that provided certain administrative services and vessel
management services respectively. We paid Oceanmarine a monthly fee of $10,000
per oceangoing cargo vessel for administrative services including general
administration and accounting (financial reporting and preparation of tax
returns), use of office premises, a computer network, secretarial assistance and
other general duties. We also paid Ravenscroft a monthly technical vessel
management fee of $12,500 per PSV and oceangoing vessel and (euro)20,000
(equivalent to US $23,590 as of December 31, 2005) per passenger vessel for
services, including technical management, crewing, provisioning, superintendence
and related accounting functions. We also paid Ravenscroft a (euro)25,000
(equivalent to US $29,488 as of December 31, 2005) administrative and
operational fee per month per passenger vessel for all operational functions as
well as administering the subcontractors, concessions and credit card/collection
system onboard. In the first quarter of 2006, we acquired Ravenscroft and the
administrative-related assets and personnel of Oceanmarine. Accordingly, these
tasks are now performed in-house.

     In our River Business, prior to our acquisition of the remaining 50% equity
interest in UABL in 2004, our subsidiaries that owned pushboats and barges
contracted with Lonehort, Inc., a subsidiary of UABL, for vessel management
services and we generally paid operating expenses through Lonehort. Our
operating expenses include the cost of all vessel management, crewing, spares
and stores, insurance, lubricants, repairs and maintenance. Following our
acquisition of the remaining 50% equity interest in UABL, all vessel management
services have been performed, and all operating expenses paid, in-house. UABL
employs the services of Tecnical Services S.A., a related party, to provide crew
recruitment services in Argentina and Paraguay. We pay Tecnical Services S.A.
$144,000 per year, plus an additional $50 for each active crew member hired.
Since Tecnical Services S.A. is now a wholly-owned subsidiary of Ravenscroft,
beginning in the first quarter of 2006 these services will be performed
in-house. We do not expect to pay fees to any related entity other than those
described here for management and administration functions.

     In our River Business, our voyage expenses include port expenses and
bunkers as well as charter hire paid to third parties.

     In our Offshore Supply Business, voyage expenses include the charterhire
paid by us to UP Offshore and brokerage commissions paid by us to third parties
including Gulf Offshore North Sea (UK) which provide brokerage services.

     In our Passenger Business, operating expenses include all vessel
management, crewing, stores, insurance, lubricants, repairs and maintenance and
may include catering, housekeeping and entertainment staff if the charter party
so specifies. Voyage expenses may include port expenses and bunkers if such
services are for our account. Similarly, they may include the cost of food and
beverages if such amounts are for our account under the charter agreement.

     Through our River Business, we own a drydock and a repair facility for our
river fleet at Pueblo Esther, Argentina, land for the construction of two
terminals in Argentina and 50% joint venture participations in two grain loading
terminals in Paraguay. UABL also rents offices in Asuncion, Paraguay and Buenos
Aires, Argentina and a drydock facility in Ramallo, Argentina. Also, through
Ultracape Delaware LLC, we own land for expansion of a liquids terminal in
Mexico.

     Through our acquisition of UP Offshore, we now hold a lease for office
space in Rio de Janeiro, Brazil. In addition, through our recent acquisition of
Ravenscroft, we own a building located at 3251 Ponce de Leon Boulevard, Coral
Gables, Florida, United States of America. Through our acquisition of the
administrative functions of Oceanmarine, a related party, we now hold a sublease
from it to an office in Buenos Aires, Argentina.

Foreign Currency Transactions

     During 2005, 84% of our revenues were denominated in U.S. dollars. Also,
for the year ended December 31, 2005, 11% of our revenues were denominated and
collected in Euros and 5% of our revenues were denominated and collected in
British Pounds. However, 13% of our total revenues were denominated in U.S.
dollars but collected in Argentine Pesos and Paraguayan Guaranies. Significant
amounts of our expenses were denominated in dollars and 22% of our total out of
pocket operating expenses were paid in Argentine Pesos and Paraguayan Guaranies.

     Our operating results, which we report in U.S. dollars, may be affected by
fluctuations in the exchange rate between the U.S. dollar and other currencies.
For accounting purposes, we use U.S. dollars as our functional currency.
Therefore, revenue and expense accounts are translated into U.S. dollars at the
average exchange rate prevailing on the month of each transaction.

Inflation and Fuel Price Increases

     We do not believe that inflation has had a material impact on our
operations, although certain of our operating expenses (e.g., crewing, insurance
and drydocking costs) are subject to fluctuations as a result of market forces.

     In 2005 and prior, in our River Business, we adjusted the fuel component of
our cost into the freights on a seasonal or yearly basis, and therefore we were
adversely affected during that particular period by rising bunker prices only
partially offset by a hedge of a minor part of our consumption and by bunker
price adjustment formulas on some of our contracts. In 2006, we have negotiated
and intend to continue to negotiate fuel price adjustment clauses in most of our
2006 contracts.

     In Offshore Supply and Passenger Businesses, the risk of variation of fuel
prices under the vessels' current employment is generally borne by the
charterers, since the charterers are generally responsible for the supply of
fuel.

     In our Ocean Business, inflationary pressures on bunker (fuel oil) costs
are not expected to have a material effect on our immediate future operations
which are currently chartered to third parties, since it is the charterers who
pay for fuel. When our ocean vessels are employed under COAs, freight rates for
voyage charters are generally sensitive to the price of a vessel's fuel.
However, a sharp rise in bunker prices may have a temporary negative effect on
results since freights generally adjust only after prices settle at a higher
level.

Seasonality

     Each of our businesses has seasonal aspects, which affect their revenues on
a quarterly basis. The high season for our River Business is generally between
the months of March and September, in connection with the South American harvest
and higher river levels. However, growth in the soy pellet manufacturing,
minerals and forest industries may help offset some of this seasonality. The
Offshore Supply Business operates year-round, particularly off the coast of
Brazil, although weather conditions in the North Sea may reduce activity from
December to February. In the Ocean Business, demand for oil tankers tends to be
strongest during the winter months in the Northern hemisphere. Demand for dry
bulk transportation tends to be fairly stable throughout the year, with the
exceptions of the Chinese New Year in our first quarter and the European summer
holiday season in our third quarter, which generally show lower charter rates.
Under existing arrangements, our Passenger Business currently generates its
revenue during the European cruise season, from May through October of each
year.

<PAGE>

Results of Operations

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

     The following table sets forth certain historical income statement data for
the periods indicated derived from our statements of operations expressed in
thousands of dollars.

<TABLE>
<CAPTION>

                                                        Year Ended December 31,
                                                      ---------------------------
                                                        2005              2004               Percent Change
                                                        ----              ----               --------------
<S>                                                       <C>                 <C>                    <C>
Revenues
   Attributable to River Business                         $54,546             $41,111                32.68%
   Attributable to Offshore Supply Business                 6,532                 - -                   - -
   Attributable to Ocean Business                          49,874              54,049                -7.72%
   Attributable to Passenger Business                      14,409                 - -                   - -
                                                           ------            --------               -------
                                   Total                  125,361              95,160                31.74%
                                                          -------            --------

Voyage expenses
   Attributable to River Business                        (25,710)            (15,340)                67.60%
   Attributable to Offshore Supply Business               (4,980)                 - -                   - -
   Attributable to Ocean Business                         (1,371)               (583)               135.16%
   Attributable to Passenger Business                     (1,766)                 - -                   - -
                                                          -------           ---------              --------
                                   Total                 (33,827)            (15,923)               112.44%
                                                         --------           ---------

Running cost
   Attributable to River Business                        (17,820)            (12,512)                42.42%
   Attributable to Offshore Supply Business               (1,218)                  - -                  - -
   Attributable to Ocean Business                        (12,636)            (12,380)                 2.07%
   Attributable to Passenger Business                     (7,560)                 - -                   - -
                                                          -------        -------------             --------
                                   Total                 (39,234)             (24,892)               57.62%
                                                          -------        -------------

Amortization of drydocking expense                        (6,839)              (5,195)               31.65%
Depreciation of vessels and equipment                    (14,494)             (13,493)                7.42%
Management fees and administrative and
commercial expenses                                       (9,735)              (9,007)                8.08%
                                                          -------         -------------
Other operating income                                     22,021                  784              2708.8%
                                                          -------             --------              -------
Operating profit                                           43,253               27,434               57.66%
                                                          -------         ------------
Financial expense                                       $(19,141)            $(16,134)               18.64%

Financial gain (loss) on extinguishment
of debt                                                        --              (5,078)                  - -

Other income (expenses)                                     1,039                  699               48.64%
                                                        ---------         ------------
                          Total other expenses           (18,102)             (20,513)              -11.75%
                                                        ---------         ------------

Income before income taxes and
minority interest                                          25,151                6,921               263.4%
Income taxes                                                (786)                (642)               22.43%
Minority interest                                         (9,797)              (1,140)              759.39%
                                                        ---------             ---------
Net Income                                               $14,568                $5,139              183.48%
                                                        =========         =============

</TABLE>

<PAGE>



     Revenues. Total revenues from our River Business increased by 33% from
$41.1 million in 2004 to $54.6 million in 2005. This increase is primarily
attributable to the consolidation of UABL since the second quarter of 2004,
while in the first quarter of 2004 revenues from our river fleet only included
the net charter proceeds which we received from chartering some of our vessels
from UABL.

     Total revenues from our Offshore Supply Business increased from $0 in 2004
to $6.5 million in 2005. This increase is attributable to the time charter
revenues of our new PSVs UP Esmeralda and UP Safira, which we operated
temporarily under a bareboat charter by our subsidiary Corporacion de Navegacion
Mundial S.A. during the last six months of 2005.

     Total revenues from our Ocean Business decreased from $54.0 million in 2004
to $49.8 million in 2005, or a decrease of 8%. This decrease is attributable to
the sale of the Cape Pampas in 2005 and the lower time charter rate of the
Princess Susana. These decreases were partially offset by the higher time
charter rates of the Princess Nadia and Princess Katherine during the first six
months of 2005 and by the revenues generated by our newly acquired vessel,
Miranda I, in the fourth quarter of 2005.

     Total revenues from our Passenger Business were $14.4 million in 2005. We
did not earn revenues in our Passenger Business in 2004. The new revenue is
attributable to the effect of the revenues of the New Flamenco, which was
acquired and first placed in service during this period.

     Voyage expenses. In 2005, voyage expenses of our River Business were $25.7
million, as compared to $15.3 million for 2004, an increase of $10.4 million.
The increase is attributable to the increase of the price of fuel oils and the
consolidation of UABL as our subsidiary in the second quarter of 2004.

     In 2005, voyage expenses of our Offshore Supply Business were $5.0 million,
as compared to $0 in 2004. The increase is primarily attributable to the
bareboat charter paid for our new PSVs UP Esmeralda and UP Safira during the
last six months of 2005.

     In 2005, voyage expenses of our Ocean Business were $1.4 million, as
compared to $0.6 million for 2004. The increase is primarily attributable to
brokerage commission partially offset by a decrease primarily attributable to
the voyage expenses of the Princess Eva, which was sold during 2004.

     In 2005, voyage expenses of our Passenger Business were $1.8 million. We
did not operate any passenger vessels in 2004.

     Running costs. In 2005, running costs of our River Business were $17.8
million, as compared to $12.5 million in 2004, an increase of $5.3 million. The
increase is primarily attributable to the effect of the consolidation of UABL as
our subsidiary since the second quarter of 2004.

     In 2005, running costs of our Offshore Supply Business were $1.2 million,
as compared to $0 in 2004. This increase is attributable to the running cost
incurred with the new PSVs UP Esmeralda and UP Safira owned by UP Offshore and
operated temporarily by our subsidiary Corporacion de Navegacion Mundial S.A.
under a bareboat charter during the second half of 2005.

     In 2005, running costs of our Ocean Business were $12.6 million, as
compared to $12.4 million in 2004, an increase of 2%. This increase is mainly
attributable to the operation of our newly acquired vessel Miranda I and was
partially offset by the decrease of running cost attributable to the sale of the
vessels Princess Eva in 2004 and by the sale of Cape Pampas in 2005.

     In 2005, running costs of our Passenger Business were $7.6 million,
compared to $0 in 2004. This increase is attributable to the effect of the
running cost of our vessel New Flamenco, which we acquired in 2005. We did not
operate any passenger vessels in 2004.

     Amortization of drydocking. Amortization of drydocking and special survey
costs increased by $1.6 million, or 31%, to $6.8 million in 2005 as compared to
$5.2 million in 2004. The increase is primarily attributable to the amortization
expenses of Alianza G-3, Princess Katherine, Princess Susana and Princess Nadia
and the increase in the numbers of vessels in our river fleet, partially offset
by the decrease of amortization of drydocking expense attributable to the sale
of the vessels Princess Eva in 2004 and Cape Pampas in 2005.

     Depreciation of vessels and equipment. Depreciation increased by $1.0
million, or 7%, to $14.5 million in 2005 as compared to $13.5 million in 2004.
This increase is primarily due to the purchase of new tugs and river barges, the
additional passenger vessel New Flamenco as well as the depreciation of the UABL
fleet attributable to the effect of the consolidation of UABL as our subsidiary,
which was partially offset by the sale of the vessels Princess Eva in 2004 and
Cape Pampas in 2005.

     Management fees and administrative expenses. Management fees and
administrative expenses were $9.7 million in 2005 as compared to $9.0 million in
2004. This increase of $0.7 million is attributable mainly to an increase in the
overhead expenses produced by the consolidation of UABL and the management fees
attributable to the new passenger vessel.

     Other operating income (expenses). Other operating income was $22.0 million
in 2005 as compared to $0.8 million in 2004. This increase is attributable to
the effect of the sale of the vessel Cape Pampas in 2005.

     Operating profit. Operating profit for the year 2005 was $43.2 million, an
increase of $15.8 million from 2004. The difference is mainly attributable to
the effect of the sale of the Cape Pampas in 2005, higher charter rates obtained
for the vessel Princess Nadia, the sale of the vessels Princess Marisol and
Princess Laura in 2004, as well as the results attributable to our new passenger
vessel, partially offset by a decrease in our River Business results.

     Financial expense. Financial expense increased by approximately $3.0
million or 19%, to $19.1 million in 2005 as compared to $16.1 million in 2004.
This variation is mainly attributable to the higher level of financial debt
related to the acquisition of our new vessels, as well as an increase in the
interest rate of our variable rate debt in our River Business.

     Financial gain (loss) on extinguishment of debt. In 2004, we recognized a
gain of $1.3 million from repurchases of our Prior Notes and paid $6.4 million
in expenses in connection with our tender offer and repurchase of our Prior
Notes.

     Minority interest. Minority interest increased by $8.7 million to $9.8
million in 2005 as compared to $1.1 million in 2004. This variation is mainly
attributable to 40% of the gain of the sale of the Cape Pampas in 2005.


<PAGE>


      Year Ended December 31, 2004 Compared to year Ended December 31, 2003

     The following table sets forth certain historical income statement data for
the periods indicated derived from the Company's statements of operations
expressed in thousands of dollars.

<TABLE>

<CAPTION>
                                                    Year Ended December 31,
                                                  ---------------------------
                                                         2004              2003              Percent Change
                                                         ----              ----              --------------
<S>                                                      <C>               <C>               <C>
Revenues
    Attributable to River Business                        $41,111            $10,246             301.24%
   Attributable to Ocean Business                          54,049             64,987             -16.83%
                                                       ----------          ---------            --------
                          Total                            95,160             75,233              26.49%
                                                       ----------          ---------            --------

Voyage expenses
 Attributable to River Business                          (15,340)               (39)          39,233.33%
      Attributable to Ocean Business                        (583)           (12,605)             -95.37%
                                                       ----------          ---------            --------
                          Total                          (15,923)           (12,644)              25.93%
                                                       ----------          ---------            --------

Running cost
   Attributable to River Business                        (12,512)            (6,696)              86.86%
   Attributable to Ocean Business                        (12,380)           (21,963)             -43.63%
                                                       ----------          ---------            --------
                          Total                          (24,892)           (28,659)             -13.14%
                                                       ----------          ---------            --------

Amortization of drydocking expense                        (5,195)            (7,232)             -28.17%

Depreciation of vessels and equipment                    (13,493)           (15,335)             -12.01%

Management fees and administrative and                    (9,007)            (7,818)              15.21%
commercial expenses

Other operating income (expenses)                             784            (2,124)            -136.91%
                                                       ----------          ---------            --------

Operating profit                                           27,434              1,421             1830.61
                                                       ----------          ---------            --------

Financial expense                                        (16,134)           (16,207)              -0.45%

Financial  gain  (loss) on  extinguishment  of           $(5,078)             $1,782            -384.96%
debts

Other income (expense)                                        699              3,004             -76.73%
                                                       ----------          ---------            --------
                                                         (20,513)           (11,421)              76.91%
                                                       ----------          ---------            --------
Income (loss) before income taxes                           6,921           (10,000)            -169.21%
and minority interest

Income taxes                                                (642)              (185)             247.03%

Minority interest                                         (1,140)            (1,333)             -14.48%
                                                       ----------          ---------            --------
Net income (loss)                                          $5,139          $(11,518)            -144.62%
                                                       ==========          =========            ========
</TABLE>

     Revenues. Total revenues from our River Business increased by 301% from
$10.2 million to $41.1 million. This increase is primarily attributable to the
consolidation of UABL since the second quarter of 2004, while in 2003 river
revenues only included the net proceeds for those of our vessels that we owned
and chartered to UABL.

     Total revenues from our Ocean Business decreased from $65.0 million in 2003
to $54.0 million in 2004, or a decrease of 17%. This decrease is primarily
attributable to the sale of the vessels Princess Veronica, Princess Pia,
Princess Eva, Princess Laura and Princess Marisol as well as Alianza G1 during
2003 and 2004. These reductions were partially offset by the higher time charter
rates of our Princess Nadia, Princess Susana, Princess Katherine and Cape Pampas
during 2004.

     Our revenues in 2004 were also negatively affected by the Cape Pampas and
the Alianza G-3 being out of service for a total of 167 days due to major
repairs and the fact that Princess Marina was out of service for 52 days due to
accidents during the first quarter. Part of this off hire time was compensated
by our loss of hire insurance.

     Voyage expenses. In 2004, voyage expenses of our River Business were $15.3
million, as compared to $0 for 2003, an increase of $15.3 million. The increase
is attributable to the effect of the consolidation of UABL as our subsidiary in
the second quarter of 2004.

     In 2004, voyage expenses of our Ocean Business were $0.6 million, as
compared to $12.6 million for 2003, a decrease of $12.0 million, or 95%. The
decrease is primarily attributable to the combined effect of a large portion of
the Panamax fleet that were under COA employment during 2003 being sold during
2003 and 2004 and the Princess Susana operating under time charter employment
instead of COA employment.

     Running costs. In the year ended 2004, running expenses of our River
Business were $12.5 million, as compared to $6.7 million for 2003, an increase
of $5.8 million. The increase is attributable to the effect of the consolidation
of UABL as our subsidiary in the second quarter of 2004.

     Running costs of our Ocean Business decreased by about 44%, to $12.4
million in 2004 as compared to $22.0 million in 2003. This decrease is mainly
attributable to the sale of Princess Pia, Princess Veronica, Princess Eva,
Princess Marisol, Princess Laura and Alianza G1 during 2003 and 2004.

     Amortization of drydocking. Amortization of drydocking and special survey
costs decreased by $2.0 million, or 28%, to $5.2 million in 2004 as compared to
$7.2 million in 2003. The decrease is primarily attributable to the vessels sold
during 2003 and 2004. The unamortized balance is included in the gain or loss
resulting from the sale of the vessels.

     Depreciation of vessels and equipment. Depreciation decreased by $1.8
million, or 12%, to $13.5 million in 2004 as compared to $15.3 million in 2003.
This decrease is primarily due to the sale of the Princess Veronica, Princess
Laura, Princess Pia, Princess Eva, Princess Marisol and Alianza G1 during 2003
and 2004, which was partially offset by the purchase of a new tug and river
barges and the depreciation of our river fleet.

     Management fees and administrative expenses. Management fees and
administrative expenses were $9.0 million in 2004 as compared to $7.8 million in
the same period in 2003. This increase of $1.2 million is attributable mainly to
an increase in the overhead expenses of $2.7 million produced by the
consolidation of UABL, which was partially offset by a decrease in management
fees of our ocean fleet in the amount of $1.6 million resulting from a reduced
number of vessels in operation.

     Other operating income (expenses). Our other operating income was $0.8
million in 2004 and an expense of $2.1 million in 2003. The difference is
attributable to the combined effect of the following: a reduction in the loss
from the sale of vessels and equipment of $3.7 million (a loss of $3.7 million
in 2003, as compared to a loss of $0 in 2004) and a decrease in income from
claims against insurance companies of $0.9 million (income of $1.6 million in
2003, as compared to income of $0.7 million in 2004).

     Operating profit. Operating profit for the year ended 2004 was $27.4
million, an increase of $26.0 million in 2003. In comparing these figures, the
difference is mainly attributable to the higher results obtained from the
vessels Princess Susana, Princess Nadia, Princess Katherine and Cape Pampas, the
sale of our Princess Marisol, Princess Veronica, Princess Pia, Princess Eva,
Princess Laura and Alianza G1 in 2003 and 2004 as well as the consolidation of
the results of UABL following the acquisition of the remaining 50% equity
interest in that company, partially counter-balanced by the negative effect
produced by the periods out of service experienced by our vessels Alianza G-3
and Alianza Campana.

     Financial expense. Financial expense decreased by about 1%, to $16.1
million in 2004 as compared to $16.2 million in the equivalent 2003 period. This
variation is primarily attributable to the lower level of financial debt and
interest rates on our ocean vessels and related interest costs, offset by an
increase of $1.7 million in interest expenses attributable to the effect of the
consolidation of UABL as our subsidiary.

     Financial gain (loss) on extinguishment of debt. During 2004, we recognized
a gain of $1.3 million from repurchases of our Prior Notes as compared with a
gain of $1.8 million during 2003. Also during the fourth quarter of 2004, we
paid $6.4 million in expenses in connection with our tender offer and repurchase
of debts of our Prior Notes.

B. LIQUIDITY AND CAPITAL RESOURCES

     We are a holding company and operate in a capital-intensive industry
requiring substantial ongoing investments in revenue producing assets. Our
subsidiaries have historically funded their vessel acquisitions through a
combination of bank indebtedness, shareholder loans, cash flow from operations
and equity contributions.

     The ability of our subsidiaries to make distributions to us may be
restricted by, among other things, restrictions under our credit facilities and
applicable laws of the jurisdictions of their incorporation or organization.

     As of December 31, 2005, we had total indebtedness of $211.2 million,
consisting of $180.0 million due under the Notes and the indebtedness of our
subsidiary UABL, as follows: $19.8 million in a senior loan facility with IFC
and $9.7 million with other lenders plus accrued interest of $1.7 million.

     During 2005, we partially funded the construction of some of the vessels
being built for UP Offshore in Brazil. The total outstanding for this financing
on December 31, 2005 was $13.7 million. This amount was repaid by UP Offshore to
us on February 14, 2006.

     At December 31, 2005, we had cash and cash equivalents on hand of $7.9
million. In addition, we had $3.6 million in current restricted cash.

Operating Activities

     In 2005, we generated $16.7 million in cash flow from operations compared
to $23.1 million in 2004. Net income for the year ended December 31, 2005 was
$14.6 million as compared to $5.1 million in 2004, an increase of $9.5 million.

     Net cash provided by operating activities consists of our net income
increased by non-cash expenses, such as depreciation and amortization of
deferred charges, and adjusted by changes in working capital and expenditures
for drydocking.

Investing Activities

     During the year ended December 31, 2005, we disbursed $12.7 million in the
purchase of pushboats, river barges and additional equipments; $28.1 million in
the purchase of the passenger vessels, towards the refurbishment of the New
Flamenco and recertification of the Grand Victoria and $10.6 million in the
purchase of Miranda I, which we paid partially with funds available in
restricted cash. Also we received net proceeds of $37.9 million from the
proceeds of the Cape Pampas sale.

Financing Activities

     Net cash provided by financing activities was $6.4 million during the year
2005, compared to net cash provided by financing activities of $37.8 million
during 2004. The decrease in cash provided by financing activities in this
period is mainly attributable to the repayments of principal of our financial
debt made during 2005 and the retirement of minority interest in our subsidiary
Ultracape (Holdings) Ltd. partially offset with the application of $29.2 million
of restricted cash to the purchase of the two passenger vessels and one product
tanker, and $7.5 million disbursed from IFC and KfW which is the remainder of
the $30.0 million loan granted to UABL in 2002. Also, on December 28, 2005 we
drew the first $3.0 million from the $10.0 million facility provided by IFC to
UABL Paraguay.

Future Capital Requirements

     Our near-term cash requirements are primarily related to funding
operations. We cannot assure you that our actual cash requirements will not be
greater that we currently expect. If we cannot generate sufficient cash flow
from operations, we may obtain additional funding through capital market
transactions, although it is possible these sources will not be available to us.

Critical Accounting Policies and Estimates

     This 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 U.S. GAAP. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, we evaluate our
estimates, including those related to bad debts, useful lives of vessels,
deferred tax assets, and certain accrued liabilities. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. We believe the following
critical accounting policies affect our more significant judgments and estimates
used in the preparation of our consolidated financial statements.

     Critical accounting policies are those that reflect significant judgments
or uncertainties, and potentially lead to 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 our audited consolidated
financial statements.

Revenues and related expenses

     Revenue is recorded when services are rendered, we have a signed charter
agreement or other evidence of an arrangement, pricing is fixed or determinable
and collection is reasonably assured. Revenues are earned under time charters,
bareboat charters, consecutive voyage charters or affreightment/voyage
contracts. Revenue from time charters and bareboat charters is earned and
recognized on a daily basis. Revenue for the affreightment contracts and
consecutive voyage charters is recognized based upon the percentage of voyage
completion. A voyage is deemed to commence upon the departure of discharged
vessel of previous cargo and is deemed to end upon the completion of discharge
of the current cargo. The percentage of voyage completion is based on the miles
transited at the balance sheet date divided by the total miles expected on the
voyage. Revenue from our passenger vessels business is recognized upon
completion of voyages, together with revenues from on board and other
activities.

     Vessels voyage costs, primarily consisting of port, canal and bunker
expenses that are unique to a particular charter, are paid for by the charterer
under time charter arrangements or by us under voyage charter arrangements. The
commissions paid in advance are deferred and amortized over the related voyage
charter period to the extent revenue has been deferred since commissions are
earned as our revenues are earned. Bunker expenses and gift shop for resale are
capitalized when acquired as operating supplies and subsequently charged to
voyage expenses as consumed/resold. All other voyage expenses and other vessel
operating expenses are expensed as incurred.

Vessels and equipment, net

     Vessels and equipment are stated at cost less accumulated depreciation.
This cost includes the purchase price and all directly attributable costs
(initial repairs, improvements and delivery expenses, interest and on-site
supervision costs incurred during the construction periods). Subsequent
expenditures for conversions and major improvements are also capitalized when
they appreciably extend the life, increase the earning capacity or improve the
safety of the vessels.

     Depreciation is computed net from the estimated scrap value and is recorded
using the straight-line method over the estimated useful lives of the vessels.
Acquired secondhand vessels are depreciated from the date of their acquisition
over the remaining estimated useful life. At the time vessels are disposed of,
the assets and related accumulated depreciation are removed from the accounts,
and any resulting gain or loss is recorded in other operating income (expense).

     Listed below are the estimated useful lives of vessels and equipment:

                                                         Useful lives (in years)
                                                       -------------------------
           Ocean-going vessels                                 24
           Passenger vessels                                   45
           River barges and pushboats                          35
           Furniture and equipment                             5 to 10

     Long-lived assets are reviewed for impairment in accordance with SFAS No.
144, "Accounting for the Impairment or Disposal of Long-lived Assets," whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable. If the sum of the expected future undiscounted cash flows is less
than the carrying amount of the asset, a loss is recognized for the difference
between the fair value and carrying value of the asset.

     The Company's vessels must be periodically drydocked and pass inspections
to maintain their operating classification, as mandated by maritime regulations.
Costs incurred to drydock the vessels are deferred and amortized over the period
to the next drydocking, generally 24 to 36 months. Drydocking costs are
comprised of painting the vessel hull and sides, recoating cargo and fuel tanks,
and performing other engine and equipment maintenance activities to bring the
vessel into compliance with classification standards. Costs include actual costs
incurred at the yard, cost of fuel consumed, and the cost of hiring riding crews
to effect repairs. The unamortized portion of dry dock costs for vessels that
are sold are written off to income when the vessel is sold.

     Expenditures for maintenance and minor repairs are expensed as incurred.

Insurance claims receivable

     Insurance claims receivable represent costs incurred in connection with
insurable incidents for which the Company expects to be reimbursed by the
insurance carriers, subject to applicable deductibles. Deductible amounts
related to covered incidents are generally expensed in the period of occurrence
of the incident. Expenses incurred for insurable incidents in excess of
deductibles are recorded as receivables pending the completion of all repair
work and the administrative claims process. The credit risk associated with
insurance claims receivable is considered low due to the high credit quality and
funded status of the insurance underwriters and P&I clubs in which we are a
member. Insurance claims receivable were approximately $6.2 million and $10.3
million as of December 31, 2005 and 2004, respectively.

Recent accounting pronouncements

     SFAS No. 154 "Accounting Changes and Error Corrections" provides guidance
on the accounting for and reporting of accounting changes and error corrections.
It establishes, unless impracticable, retrospective application as the required
method for reporting a change in accounting principle in the absence of explicit
transition requirements specific to the newly adopted accounting principle. It
also provides guidance for determining whether retrospective application of a
change in accounting principle is impracticable and for reporting a change when
retrospective application is impracticable.

Quantitative and Qualitative Disclosures about Market Risks

Inflation and Fuel Price Increases

     We do not believe that inflation has had a material impact on our
operations, although certain of our operating expenses (e.g., crewing, insurance
and drydocking costs) are subject to fluctuations as a result of market forces.

     In 2005 and prior, in our River Business, we adjusted the fuel component of
our cost into the freights on a seasonal or yearly basis, and therefore we were
adversely affected during that particular period by rising bunker prices only
partially offset by a hedge of a minor part of our consumption and by bunker
price adjustment formulas on some of our contracts. In 2006, we have negotiated
and intend to continue to negotiate fuel price adjustment clauses in most of our
2006 contracts.

     In Offshore Supply and Passenger Businesses, the risk of variation of fuel
prices under the vessels' current employment is generally borne by the
charterers, since the charterers are generally responsible for the supply of
fuel.

     In our Ocean Business, inflationary pressures on bunker (fuel oil) costs
are not expected to have a material effect on our immediate future operations
which are currently chartered to third parties, since it is the charterers who
pay for fuel. When our ocean vessels are employed under COAs, freight rates for
voyage charters are generally sensitive to the price of a vessel's fuel.
However, a sharp rise in bunker prices may have a temporary negative effect on
results since freights generally adjust only after prices settle at a higher
level.

Interest Rate Fluctuation

     We are exposed to market risk from changes in interest rates, which may
adversely affect our results of operations and financial condition. Our policy
is not to use financial instruments for trading or other speculative purposes,
and we are not a party to any leveraged financial instruments.

     Short term variable rate debt composed approximately $5.9 million of our
total debt as of December 31, 2005. Long term variable rate debt composed
approximately $23.0 million of our total debt as of December 31, 2005. Our
variable rate debt had an average interest rate of approximately 8.25% as of
December 31, 2005. A 1.0% increase in interest rates on $28.9 million of debt
would cause our interest expense to increase on average approximately $0.3
million per year over the term of the loans, with a corresponding decrease in
income before taxes.

Foreign Currency Fluctuation

     We are an international company and, while our financial statements are
reported in U.S. dollars some of our operations are conducted in foreign
currencies. We use U.S. dollar as our functional currency, and therefore, our
future operating results may be affected by fluctuations in the exchange rate
between the U.S. dollar and other currencies. A large portion of our revenues
are denominated in U.S. dollars as well as a significant amount of our expenses.
However, changes in currency exchange rates could affect our reported revenues,
and even our margins if costs incurred in multiple currencies are different
than, or in a proportion different to, the currencies in which we receive our
revenues.

     We have not historically hedged our exposure to changes in foreign currency
exchange rates and, as a result, we could incur unanticipated future losses.

Description Of Credit Facilities And Other Indebtedness

9% First Preferred Ship Mortgage Notes due 2014

     On November 24, 2004, we completed an offering of $180 million of 9% First
Preferred Ship Mortgage Notes due 2014, or the Notes, through a private
placement to institutional investors eligible for resale under Rule 144A and
Regulation S, or the Note Offering. The net proceeds of the Note Offering were
used to repay our 10.5% First Preferred Ship Mortgage Notes due 2008, or the
Prior Notes, certain other existing credit facilities and to fund an escrow
account.

     Interest on the Notes is payable semi-annually on May 24 and November 24 of
each year. The Notes are senior obligations guaranteed by some of our
subsidiaries directly involved in our Ocean, and Passenger Businesses. The Notes
are secured by first preferred ship mortgages on 18 vessels, two oceangoing
barges and 193 river barges.

     The Notes are subject to certain covenants, including, among other things,
limiting our's and our subsidiaries' ability to incur additional indebtedness or
issued preferred stock, pay dividends to shareholders, incur liens or execute
sale leasebacks of certain principal assets and certain restrictions on our
consolidating with or merging into any other person.

     Upon the occurrence of a change of control event, each holder of the Notes
shall have the right to require us to repurchase such notes at a purchase price
in cash equal to 101% of the principal amount thereof plus accrued and unpaid
interest. After the completion of our initial public offering, a change of
control means:

-    if any person beneficially owns more than 35% of our voting stock and
     Solimar, Los Avellanos SIPSA S.A. and their affiliate, or the Permitted
     Holders, together own a lesser percentage and do not control the election
     of the majority of the board of directors of the Company, or

-    during any period of two consecutive years, individuals who at the
     beginning of such period constituted our board of directors (together with
     any new directors whose election by such board of directors or whose
     nomination for election by our shareholders was approved by a vote of 66
     2/3% of our directors then still in office who were either directors at the
     beginning of such period or whose election or nomination for election was
     previously so approved) cease for any reason to constitute a majority of
     the board of directors then in office; or

-    our merger or consolidation with or into another person or the merger of
     another person with or into us, or the sale of all or substantially all of
     our assets (determined on a consolidated basis) to another person other
     than (A) a transaction in which the survivor or transferee is a person that
     is controlled by the Permitted Holders or (B) a transaction following which
     (1) in the case of a merger or consolidation transaction, holders of
     securities that represented 100% of our common stock eligible to vote on
     matters requiring a shareholder vote immediately prior to such transaction
     (or other securities into which such securities are converted as part of
     such merger or consolidation transaction) own directly or indirectly at
     least a majority of the voting power of the common stock eligible to vote
     on matters requiring a shareholder vote of the surviving Person in such
     merger or consolidation transaction immediately after such transaction and
     (2) in the case of a sale of assets transaction, each transferee becomes an
     obligor in respect of the Notes and a subsidiary of the transferor of such
     assets.

     We registered the Notes under a registration statement on Form F-4
(Registration No. 333-122254) under the Securities Act, which was declared
effective on March 4, 2005. On April 8, 2005, we completed an exchange offer
whereby the unregistered notes were exchanged for substantially identical senior
notes registered under the Securities Act.

Loan Agreements with IFC and KfW entered into by UABL Barges (Panama)

On December 17, 2002, UABL Barges, a subsidiary in the River Business, entered
into a loan agreement with International Finance Corporation, or IFC in an
aggregate principal amount of $20.0 million.

This loan is divided into two tranches:

-    Tranche A, in the amount of $15.0 million, is payable in 14 semiannual
     installments of $1.07 million each, beginning on June 15, 2005 and ending
     on December 15, 2011, and accrues interest at LIBOR plus 3.75% per annum;
     and

-    Tranche B, in the amount of $5.0 million, is payable in 10 semiannual
     installments of $500,000 each, beginning on June 15, 2005 and ending on
     December 15, 2009, and accrues interest at LIBOR plus 3.50% per annum.

The aggregate outstanding principal balance of the loan was $16.9 million at
December 31, 2005.

In addition, on February 27, 2003, UABL Barges, a subsidiary in our River
Business, entered into a loan agreement with KfW in an aggregate principal
amount of $10.0 million.

This loan is payable in 10 semiannual installments of $1.0 million each,
beginning on June 15, 2005 and ending on December 15, 2009, and accrues interest
at LIBOR plus 3.50% per annum.

The aggregate outstanding principal balance of the loan was $8.0 million at
December 31, 2005.

Each of the IFC loan and the KfW loan is guaranteed by UABL Limited, the parent
of UABL Barges. Each loan is also secured by mortgages on existing and future
barges and pushboats belonging to the subsidiaries of UABL Limited and by a
stock pledge of 100% of the stock of UABL Barges. Each loan requires that at all
times, the vessels pledged as security have a fair market value of at least 175%
of the then outstanding loan amount. The obligations under these loans are
secured by 221 barges and two pushboats.

Each loan also contains certain restrictive covenants applicable to UABL Barges,
including, among other customary covenants and restrictions: a minimum debt
service coverage ratio not lower than 1.00; a limitation on the incurrence of
additional debt; a limitation on making expenditures for assets; a prohibition
on paying dividends or other distributions or repurchasing, redeeming or
otherwise acquiring its stock without the consent of IFC or KfW, as applicable;
a limitation on transactions with affiliates; a limitation on selling, leasing,
transferring, pledging or disposing of its assets and a prohibition to enter
into any derivative transaction other than any for which IFC is the transaction
counter party. Each loan also contains customary events of default. If an event
of default occurs and is continuing, IFC or KfW, as applicable, may require that
the entire amount of the applicable loan be immediately repaid in full.

In addition, as guarantor of the loans, UABL Limited is subject to certain
restrictive covenants, including, among other customary covenants and
restrictions: a minimum consolidated debt service coverage ratio of 1.25 until
June 15, 2005, and 1.5 thereafter; a maximum consolidated debt to equity ratio
of 1.0; a limitation on its or its subsidiaries incurrence of indebtedness; a
limitation on it or its subsidiaries making expenditures for assets; a
prohibition on its payment of dividends or other distributions, or the purchase,
redemption or other acquisition of its shares of stock, unless the proposed
distribution or payment is out of retained earnings; a limitation on its and its
subsidiaries ability to enter into transactions with affiliates; and a
limitation on its or its subsidiaries selling, transferring, pledging or
disposing of their respective assets. Each loan also contains a limitation on
changes of control, including the sale or pledge by us of the stock we hold in
the parent entities of UABL Limited.

     Neither UABL Barges nor UABL Limited, nor any subsidiaries of UABL Limited,
is a subsidiary guarantor of the Notes. With IFC's and KfW's consent,
approximately $16.0 million of barges owned by certain subsidiaries of UABL
Limited have been pledged as collateral to secure the Notes.

     During January 2006, UABL Paraguay S.A., our river subsidiary, rolled over
its fuel supply contract for another year that could be considered as a "take or
pay" contract. UABL Limited, the parent company of UABL Paraguay S.A. and our
river subsidiary guaranteed the compliance with this contract and UABL S.A., our
river subsidiary, mortgaged its pushboat San Jose V to secure such contract.
These facts resulted in the noncompliance with sections 16 (g) and (h) of the
Guarantee Agreement by UABL Limited in favor of IFC and KfW. On February 28,
2005 (for the years 2005 and 2006), IFC signed a waiver to sections 16 (g) and
(h) of the Guarantee Agreement in order to allow UABL Paraguay S.A. to enter
into the "take or pay" fuel supply contract, allow UABL S.A. to mortgage its
push boat San Jose V as a security for the fuel supply contract and UABL Limited
to guarantee the compliance with this contract. On February 12, 2004, KfW signed
a waiver to sections 16 (g) and (h) of the Guarantee Agreement for all years.

     At December 31, 2005, UABL Limited's consolidated debt service coverage
ratio was 1.37.

     On December 19, 2005, IFC agreed to waive the requirement of Section 15 (i)
of each of the guarantee agreement (that UABL Limited shall maintain a guarantor
debt service coverage ratio, calculated on a consolidated basis, of not less
than 1.5) provided that:

     (a)  From June 15, 2005 until the date of the second disbursement under the
          UABL Paraguay loan agreement UABL Limited shall maintain a guarantor
          debt service coverage ratio, calculated on a consolidated bases, of
          not less than 1.35; and

     (b)  From after the date of the second disbursement under the UABL Paraguay
          loan agreement UABL Limited shall maintain a guarantor debt service
          coverage ratio, calculated on a consolidated basis, of not less than
          1.5.

     On January 24, 2006, KfW waived compliance with the provision of Section
(j) of the Guarantee Agreement, dated December 17, 2002, solely for the purpose
of allowing UABL Limited to maintain a guarantor debt service coverage ratio, of
1.25, up to and including March 31, 2006, and not less than 1.5 thereafter. On
September 1, 2005, IFC granted a waiver to UABL Limited and its subsidiaries for
the purpose of allowing the companies to enter into derivative transactions with
others parties than IFC to hedge against fluctuations in fuel cost not
exceeding, individually or in the aggregate, the equivalent of 1 year of fuel
consumption. On September 11, 2005, KfW granted a waiver to this matter. Loan
Agreement with IFC entered into by UABL Paraguay

     On March 27, 2003, UABL Paraguay, a subsidiary in the River Business,
entered into a loan agreement with IFC in an aggregate principal amount of $10.0
million.

     This loan is divided into two tranches:

-    Tranche A, in the amount of $5 million payable in eight semiannual
     installments of $625,000 each, beginning on June 15, 2006 and ending on
     December 15, 2009, which accrues interest at LIBOR plus 5% per annum; and

-    Tranche B, in the amount of $5 million payable in eight semiannual
     installments of $625,000 each, beginning on June 15, 2006 and ending on
     December 15, 2009, which accrues interest at LIBOR plus 5% per annum.

     On December 28, 2005, UABL Paraguay received the first disbursement and the
aggregate outstanding principal balance of the loan was $3.0 million.

     We must pay a fee of 0.50% per annum on the unused portion of the loan on a
semiannual basis.

     This loan is guaranteed by UABL Limited, the parent company of UABL
Paraguay, and UABL S.A., Sernova S.A. and UABL International S.A., all of the
related companies of UABL Paraguay, and secured by a second ranking mortgage
taken on existing barges and tugboats belonging to UABL Limited and its
subsidiaries. UABL Paraguay's obligations under these loans are secured by 199
barges with a book value of $36.6 million at December 31, 2005.

     The funds deriving from such loans shall be used for (a) the acquisition
and refurbishing of barges, (b) the enlargement of existing barges to be used by
UABL Paraguay and its related companies and (c) the construction of new barges.

     UABL Paraguay has agreed to keep a debt service coverage ratio not less
than 1.0 and a debt to equity ratio at not greater than 1.5 at all times.

     UABL Limited assumed the same guaranties and covenants for this loan
afforded to the loan entered by UABL Barges with IFC.

C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

         Not Applicable.

D. TREND INFORMATION

     We believe the following developments and initiatives will have a
significant impact on the operations of our different businesses.

River Business

     o   New vessels - During 2005, we acquired 35 barges and two pushboats for
         use in our River Business. Our 2006 operating results will reflect the
         deployment of these vessels for a full year.

     o   Expansion and fuel efficiency initiatives - We have begun a three year
         program to expand the size of many of our barges and we are working on
         a four year program to replace the diesel engines in our line pushboats
         with new engines that will burn less expensive heavy fuel oil. We
         anticipate the most significant impact from these programs on our
         operations will occur after 2006.

Offshore Supply Business

     o   Acquisition of additional 66.67% interest - In March 2006, we acquired
         an additional 66.67% of UP Offshore, which is the holding company for
         our Offshore Supply Business, raising our ownership to 94.45%. Prior to
         this transaction, we used the equity method of accounting for our
         investment in UP Offshore. As a result of the transaction, we will
         consolidate UP Offshore into our financial results. In compliance with
         the requirements of the indenture governing our 9% First Preferred Ship
         Mortgage Notes due 2014, or, the Notes, we obtained a fairness opinion
         from an internationally recognized accounting firm in connection with
         this acquisition.

     o   New vessels - During 2005, UP Offshore took delivery of two newly built
         PSVs and placed them into service. The 2005 operating results of UP
         Offshore reflect only the operation of these two vessels for less than
         half-a-year as they were the first vessels UP Offshore put into
         service. Our 2006 operating results will reflect the deployment of
         these vessels for a full year. Those results will also reflect the
         partial year operations of another newly built PSV we received and
         placed into service in March 2006 and two other newly built PSVs we
         expect to receive and deploy during the second half of 2006. We have
         also contracted to receive a sixth newly built PSV in 2007.

Ocean Business

     o   Vessel acquisitions and dispositions in our Ocean Business - In May
         2005, we disposed of our Capesize bulk carrier, the Cape Pampas, and in
         July 2005 we purchased our chemical/products tanker, Miranda I, which
         we placed into service in October 2005. Our 2006 operating results will
         reflect the operation of the Miranda I for a full year and the loss of
         revenue and costs associated with the Cape Pampas. We are also
         exploring the acquisition of one or more additional vessels in our
         Ocean Business for delivery in 2006.

Passenger Business

     o   Vessel deployment in our Passenger Business - We purchased the
         passenger vessel, the Grand Victoria, in 2005 and are currently in the
         final stages of completing a refurbishment and re-classification of the
         vessel. We did not put the Grand Victoria into service in 2005, but we
         have contracted to employ her for the full European travel season in
         2006. Following the complete refurbishment of our vessel, the New
         Flamenco, we are also exploring the deployment of both our passenger
         vessels outside of the European travel season.

Vessel Management

     o Acquisition of Ravenscroft - In March 2006, we acquired Ravenscroft, the
technical manager for our Offshore, Ocean and Passenger businesses. We expect
this transaction to open new business opportunities for us and to eliminate the
management fees paid to related parties, while bringing the costs of ship
management in-house. In compliance with the requirements of the indenture
governing our Notes, we obtained a fairness opinion from an internationally
recognized accounting firm in connection with this acquisition.

E. OFF-BALANCE SHEET ARRANGEMENTS

     We do not have any off-balance sheet arrangements.

F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

     The following schedule summarizes our contractual obligations and
commercial commitments as of December 31, 2005, which includes both principal
and interest payments:
<TABLE>

                                                           CONTRACTUAL OBLIGATIONS
                                                           As of December 31, 2005
<CAPTION>
                                                                              Payments due by period
                                                   --------------------------------------------------------------------------------
                                                                Less than one     One to three    Three to five        After five
     Contractual Obligations                        Total            year            years            years               years
     -----------------------                       --------------------------------------------------------------------------------
<S>                                                 <C>              <C>           <C>             <C>                <C>
1.   Long - Term Debt Obligations
     - International Finance Corporation (a)
                     * Tranche A (UABL Barges)      $ 12,857      $ 2,143         $  $4,286       $   4,286        $   2,142
                     * Tranche B (UABL Barges)         4,000        1,000             2,000           1,000                -
                     * UABL Paraguay                   3,000          750             1,500             750                -
     - KFW (a)                                         8,000        2,000             4,000           2,000                -
     - Citibank NA (a)                                   988            -               494             494                -
     - Transamerica Leasing Inc. (a)                     706          706                 -               -                -
     9% First Preferred Ship Mortgage
     Notes due 2014 (a)                              180,000            -                 -               -          180,000
                                                   ---------  -----------      ------------      ----------        ---------

     Total contractual cash obligations              209,551        6,599            12,280           8,530          182,142
                                                   ---------  -----------      ------------      ----------        ---------

     Estimated interest on contractual debt
     obligation (b)
     - International Finance Corporation
                     * Tranche A (UABL Barges)         3,569        1,092             1,541             807              129
                     * Tranche B (UABL Barges)           745          321               366              58                -
                     * UABL Paraguay                     655          277               326              52                -
     - KFW                                             1,491          621               746             124                -
     - Citibank NA                                       192           59                96              37                -
     - Transamerica Leasing Inc.                          42           42                                 -
     - 9% First Preferred Ship Mortgage
       Notes due 2014                                145,800       16,200            32,400          32,400           64,800
                                                   ---------  -----------      ------------      ----------        ---------

     Total estimated interest on contractual
     obligation                                      152,494       18,612            35,475          33,478           64,929
                                                   ---------  -----------      ------------      ----------        ---------



2.   Purchase obligations                                                                      --------------

     -- Fuel supply contract (c)                      18,000       18,000                 -               -                -
                                                   ---------  -----------      ------------      ----------        ---------

3.   Other Long-Term Liabilities Reflected on the Company's Balance Sheet under GAAP of the primary financial statements
     -- Minority interest subject to put rights        4,898            -                 -               -            4,898
                                                   ---------  -----------      ------------      ----------        ---------
     Grand total                                   $ 384,943     $ 43,211         $  47,755       $  42,008      $   251,969

                                                ============   ==========      ============    ============      ===========


(a)  Represents principal amounts due on outstanding debt obligations, current
     and long-term, as of December 31, 2005. Amount does not include interest
     payments.

(b)  All interest expense calculations begin January 1, 2006 and end on the
     respective maturity dates. The LIBOR rates are the rates in effect as of
     December 31, 2005.

</TABLE>


The interest rate and term assumptions used in these calculations are contained
in the following table:

<TABLE>
<CAPTION>
                                                  Principal at                                          Interest
                 Obligation                     December 31, 2005          From              To          rate
---------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>                   <C>                <C>           <C>
International Finance Corporation
                *  Tranche A (UABL Barges)            12,857            1/1/2006      12/15/2011       8.42%
                *  Tranche B (UABL Barges)             4,000            1/1/2006      12/15/2009       8.17%
                *  UABL Paraguay                       3,000            1/1/2006      12/15/2009       9.71%
KfW                                                    8,000            1/1/2006      12/15/2009       8.17%
Citibank NA                                              988            1/1/2006      12/31/2010       5.90%
Transamerica Leasing Inc.                                706            1/1/2006       5/31/2006       8.00%
9% First Preferred ship Montages Notes due 2014
2014                                                 180,000            1/1/2006      11/24/2014       9.00%


For additional disclosures regarding these obligations and commitments, see Note 6 to the accompanying financial statements.
</TABLE>



(c)  UABL Paraguay S.A., a subsidiary in our River Business, entered into a fuel
     supply contract with Repsol-YPF. For the calculations we use the market
     prices as of December 31, 2005.

     We believe, based upon current levels of operation, cash flow from
operations, together with other sources of funds, that we will have adequate
liquidity to make required payments of principal and interest on our debt,
including obligations under the Notes, complete anticipated capital expenditures
and fund working capital requirements.

     Our ability to make scheduled payments of principal of, or to pay interest
on, or to refinance, our indebtedness, including the Notes, or to fund planned
capital expenditures will depend on our ability to generate cash from our
operationin the future. Our ability to generate cash is subject to general
economic, financial, competitive, legislative, regulatory and other factors that
are beyond our control.

Future Capital Requirements

     Our near-term cash requirements are related primarily to funding
operations, the construction of new vessels, and the acquisition of second-hand
vessels. We cannot provide assurance that our actual cash requirements will not
be greater than we currently expect. If we cannot generate sufficient cash flow
from operations, we may obtain additional sources of funding through capital
market transactions, although it is possible these sources will not be available
to us.

G. SAFE HARBOR

     Forward-looking information discussed in this Item 5 include assumptions,
expectations, projections, intentions and beliefs about future events. These
statements are intended as "forward-looking statements". We caution that
assumptions, expectations, projections, intentions and beliefs about future
events may and often do vary from actual results and the differences can be
material. Please see "Cautionary Statement Regarding Forward-Looking Statements"
in this Report.

ITEM 6. - DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. DIRECTORS AND SENIOR MANAGEMENT

     Set forth below are the names, ages and positions of our directors and
executive officers. Our board of directors is elected annually, and each
director elected holds office until his successor has been duly elected and
qualified, except in the event of his death, resignation, removal or the earlier
termination of his term of office. Officers are elected from time to time by
vote of our board of directors and hold office until a successor is elected. The
business address of each of our executive officers and directors is H&J
Corporate Services Ltd., Ocean Centre, Montagu Foreshore, East Bay St., P.O. Box
SS-19084, Nassau, Bahamas.


          Name             Age                    Position
          ----             ---                    --------
Felipe Menendez R.......   51    Chief Executive Officer, President and Director
Ricardo Menendez R......   57    Executive Vice President and Director; Chief
                                 Executive Officer of UP Offshore
Leonard J. Hoskinson....   52    Chief Financial Officer, Secretary and Director
James F. Martin.........   51    Director
Katherine A. Downs......   51    Director


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

     Felipe Menendez R. Mr. Menendez has been President, Chief Executive Officer
and a Director of the Company since incorporation in December 1997, and is the
brother of Ricardo Menendez. He is also President, and has been a Director of
Ultrapetrol S.A. since its incorporation in 1992 as well as the President and
CEO of UABL. Mr. Menendez is also a Director of SIPSA S.A., or SIPSA, a Chilean
publicly traded company controlled by the Menendez family. Mr. Menendez has
been, and continues to be, actively involved in other businesses associated with
the Menendez family, as well as other companies affiliated with SIPSA.

     Ricardo Menendez R. Mr. Menendez is the Executive Vice President of the
Company and CEO of UP Offshore and has been a Director since incorporation in
December 1997, and is the brother of Felipe Menendez. Mr. Menendez began his
career in the shipping industry in 1970 with Compania Chilena de Navegacion
Interoceania S.A., and has continuously been involved in the management of the
Menendez family's shipping interests. He is the President of Oceanmarine, and
has been the Executive Vice President and a Director of Ultrapetrol S.A. since
it was formed in 1992. Mr. Menendez is also a Director of SIPSA, and remains
involved in the management of other Menendez family businesses. Mr. Menendez has
been a member of the board of The Standard Steamship Owners' Protection &
Indemnity Association (Bermuda) Limited (a member of the International Group of
Protection & Indemnity Associations) since 1993 and is currently its President
and Chairman. Mr. Menendez is also a Director of UABL.

     Leonard J. Hoskinson. Mr. Hoskinson is the Chief Financial Officer of the
Company, was appointed Director of the Company in March 2000 and assumed the
position of Secretary six months later. Mr. Hoskinson has been employed by the
Company and its subsidiaries for over 16 years. Prior to that he had an
international banking career specializing in ship finance spanning over 18 years
and culminating as the Head of Shipping for Marine Midland Bank NA in New York
(part of the HSBC banking group). He is also a Director of UABL.

         James F. Martin. Mr. Martin has been a Director since 2000. He is a
Managing Director with Emerging Markets Partnership, or EMP, principal adviser
     to the Bermuda-based AIG-GE Capital Latin America Infrastructure Fund L.P.,
where he heads a sector team focusing on transportation, environmental services,
and oil and gas investments. Prior to joining EMP in 1997, Mr. Martin was head
of a team responsible for investments in water and environmental infrastructure
at International Finance Corporation. Mr. Martin is also a Director of UABL and
UP Offshore.

     Katherine A. Downs. Ms. Downs has been a Director since 2000. Ms. Downs is
a Director with EMP, where she focuses on transportation, environmental
services, and oil and gas investments. Prior to joining EMP in 1997, Ms. Downs
was a Managing Vice President in the private placement group of the Prudential
Insurance Company of America. Ms. Downs is also a Director of UABL and UP
Offshore.

B. COMPENSATION

     The aggregate annual net cost to us for the compensation paid to members of
the board of directors and our executive officers was $1.3 million for the
fiscal year ended December 31, 2005 ($0.4 million as monitoring fees and $0.9
million as a bonus to certain directors and officers).

     We have no funds set aside or accrued to provide pension, retirement or
similar benefits for our directors or officers. Although we intend to negotiate
employment contracts, we do not currently have employment contracts with any of
our senior executives or directors.

Management Agreements

     For the day to day management of our operations, we and/or our subsidiaries
have entered into administrative and management agreements to provide specific
services for our operations. We refer you to "Related Party Transactions" in
Item 7.B of this report.

C. BOARD PRACTICES

     As provided in our organizational documents and the International Business
Companies Act, 1986, each of our elected directors holds office until a
successor is elected or until his earlier death, resignation or removal.
Officers are elected from time to time by vote of the Board of Directors and
hold office until a successor is elected. Our Board of Directors has not
appointed an audit or a compensation committee. Our full board performs the
functions of the audit and compensation committees.

D. EMPLOYEES

     As of December 31, 2005, we employed approximately 773 employees,
consisting of 110 land-based employees and approximately 663 seafarers as crew
on our vessels, of which 236 were in our River Business, 28 were in our Offshore
Supply Business, 176 were in our Ocean Business, and 223 were in our Passenger
Business. These employees were employed through various manning agents depending
on the nationality as listed below:


 o Indian crew:               Orient Ship Management & Manning Pvt., Ltd.,
                                Mumbai, India
 o Argentine crew:            Tecnical Services S.A.,  Montevideo, Uruguay
 o Filipino crew:             C.F. Sharp Crew Management, Manila, Philippines
 o Ukrainian crew:            South Star Ltd., Odessa, Ukraine
 o Romanian crew:             Corona Shipping SRL, Constantza, Romania
 o Indonesian crew:           Indomarimo Maju PT, Jakarta, Indonesia
 o Chilean crew:              Maritima SIPSA, a related company, Santiago, Chile
 o Greek and Eastern crew:    Nova Manning Services, Piaraeus, Greece
 o Paraguayan crew:           Tecnical Services S.A.,  Montevideo, Uruguay

     Our crews are employed under the standard collective bargaining agreements
with the seafarers' union in their respective countries. The crew is employed on
contractual terms valid for a fixed duration of service on board the vessels. We
ensure that all the crew employed on board our vessels have the requisite
experience, qualifications and certification to comply with all international
regulations and shipping conventions. Our training requirements for the crew
exceed the applicable statutory requirements. We always man our vessels above
the safe manning requirements of the vessels' flag state in order to ensure
proper maintenance and safe operation of the vessels. We have in force special
programs such as a performance-related incentive bonus, which is paid to some of
our senior officers upon rejoining our ships. This ensures retention of
qualified and competent staff.

E. SHARE OWNERSHIP

For information concerning the share ownership in our Company of our officers
and directors, please see Item 7 -- Major Shareholders and Related Party
Transactions.

ITEM 7 - MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS


     The following table sets forth information regarding the owners of more
than five percent of our common stock as of the April 15, 2006. The address of
each of the shareholders set forth below is Ocean Centre, Montagu Foreshore,
East Bay St., P.O. Box SS-19084, Nassau, Bahamas



                            Shares Beneficially Owned
                             Prior to the Offering


                    Number                        Number             Percent
                     of                        of Shares            of Class
                    shares       Voting        Beneficially       Beneficially
      Name           Owned      Percentage        Owned               Owned
      ----            -----     ----------     -------------       -------------
Solimar              996,009        47.22%        1,015,929((3))    48.17%(3)
Holdings Ltd.
(1)((2))(3)

Inversiones Los      496,221        23.52%        1,113,231((4))      52.78%
Avellanos
S.A.(3)(4)(5)

Hazels                79,866        3.79%             79,866          3.79%
(Bahamas)
Investments Inc.

Avemar Holdings      537,144        -----             -----            ----
(Bahamas)
Limited((4))

All directors         -----        52.78%        1,113,231((4))      52.78%
and executive
officers as a
group((4))

-----------------------

(1)  Solimar is a wholly-owned subsidiary of the AIG-GE Capital Latin American
     Infrastructure Fund L.P., a Bermuda limited partnership.
(2)  Solimar and Los Avellanos have entered into an agreement pursuant to which
     they have agreed to vote their respective shares together in all matters
     where a vote of the shareholders of the Company is required. See "Related
     Party Transactions" in Item 7.B of this report
(3)  Includes warrants entitling Solimar to purchase up to 19,920 shares of the
     Company's non-voting common stock at an exercise price of $50.20 per share.
(4)  The full voting power over the shares owned by Avemar has been granted to
     Los Avellanos by irrevocable proxy. Los Avellanos is controlled by members
     of the Menendez family, including Felipe Menendez R., our President, Chief
     Executive Officer and a director, and Ricardo Menendez R., our Executive
     Vice President and a director. The sole shareholder of Los Avellanos is
     SIPSA S.A. Avemar is our wholly-owned subsidiary.
(5)  Includes 79,866 shares owned by Hazels, a wholly-owned subsidiary of Los
     Avellanos.


B. RELATED PARTY TRANSACTIONS

     Our revenues derived from transactions with related parties for each of the
years ended December 31, 2003, 2004 and 2005 amounted to approximately $12.2
million, $5.2 million and $2.0 million, respectively. As of December 31, 2004
and 2005, the net balances of the accounts receivable and payables from all
related parties were approximately $5.7 million and $17.9 million, respectively.

     We and our subsidiaries also contracted with related parties for various
services. Certain of our respective owning/operating subsidiaries contracted
with Oceanmarine for administrative services. Oceanmarine is indirectly
controlled by the Menendez family, which includes Felipe Menendez R. and Ricardo
Menendez R. We paid Oceanmarine a monthly fee of $10,000 per oceangoing vessel
for these services. For the years ended December 31, 2005, 2004 and 2003, these
payments to Oceanmarine amounted to approximately $0.6 million, $0.7 million and
$1.2 million, respectively. Certain of our owning/operating subsidiaries
contracted with Ravenscroft for ship management services for the vessels used in
our Ocean Business. Prior to our purchase of Ravenscroft it was indirectly
controlled by the Menendez family, which includes Felipe Menendez R. and Ricardo
Menendez R. For these services we paid Ravenscroft a monthly fee of $12,500 per
oceangoing vessel, plus certain other expenses. For the years ended December 31,
2005, 2004 and 2003, these payments to Ravenscroft amounted to approximately
$1.5 million, $0.8 million and $1.6 million, respectively. Ravesncroft
occasionally performed ship brokering services on our behalf. We paid
Ravenscroft industry standard rates for such services when used. For the years
ended December 31, 2005, 2004 and 2003, ship broker fees paid to and accrued for
Ravenscroft for such services amounted to $0.7 million, $0.7 million and $0.4
million, respectively.

Voyage expenses paid to related parties

     For the three years ended December 31, 2003, 2004 and 2005, the voyage
expenses paid to related parties were as follows:

                                   2003            2004                  2005
                                 -----------    -----------          -----------
     Bareboat charter paid (1)          -               -               $3,977
     Ship management fees (2)      $6,691          $1,736                    -
     Other                            $42               -                    -
     Total                         $6,733          $1,736               $3,977

     (1)  Through our subsidiary, Corporacion Naviera Mundial S.A., the Company
          entered into a bareboat charter with UP Offshore (Panama) S.A., a
          wholly owned subsidiary of UP Offshore (Bahamas) Ltd. for the rental
          of the two PSVs named UP Safira and UP Esmeralda for a six-month
          period for a daily lease amount for each one.

     (2)  Certain of our companies subsidiaries, have had a ship management
          agreement with Lonehort S.A., a wholly owned subsidiary of UABL
          Limited, to provide operating and technical ship management services
          for the river barges and push boat rented by us to UABL Limited and
          its subsidiaries. Since April 23, 2004, the date of UABL Limited
          acquisition, our financial statements included the operations of
          Lonehort S.A., a wholly owned subsidiary of UABL Limited, or a
          consolidated basis. Therefore, these transactions have been eliminated
          in the consolidated financial statements. Prior to acquisition, the
          equity method was used.

Administration agreement with UP Offshore

On July 25, 2003 the Company signed an administration agreement with UP
Offshore.

Under this agreement Ultrapetrol agrees to assist UP Offshore by providing
management services required by the latter, including providing the services of
the Chief Executive Officer and to provide ongoing management and commercial
advisory services up to 2013.

The parties agreed that Ultrapetrol professional fees under this agreement shall
be 2% of UP Offshore annual EBITDA. In 2005 the professional fee amounted $28.
No fees were recognized in 2004 and 2003, because UP Offshore had no EBITDA.

Maritima SIPSA S.A.

     A significant part of our revenue from related parties is derived from the
chartering activity of Maritima SIPSA S.A. In May 2003, the Princess Marina was
chartered by a Chilean national petroleum company under a time charter that
required her to be flagged in Chile. Pursuant to Chilean Law in order for her to
be flagged in Chile, she needed to be owned by a legal entity controlled by
Chilean citizens. Maritima SIPSA S.A. is controlled by Chilean citizens. We own
49% of Maritima SIPSA S.A., and the other shareholder of Maritima SIPSA S.A.,
SIPSA S.A., is a Chilean public company that is controlled by members of the
Menendez family, which includes Felipe Menendez R., our President and Chief
Executive Officer and Director, and Ricardo Menendez R., our Executive Vice
President and Director. In order to effect the re-flagging of the vessel, we
sold the Princess Marina to Maritima SIPSA S.A. for a purchase price of
approximately $15.1 million, and partially financed the sale by lending Maritima
SIPSA S.A. $7.4 million. Under the terms of our agreement, Maritima SIPSA S.A.
pays us installments of the purchase price on a monthly basis that we record as
charter revenue. For the year ended December 31, 2005, this charter revenue
amounted to approximately $2.0 million, and for the year ended December 31,
2004, this charter revenue amounted to approximately $2.5 million. We are
obligated to repurchase (and Maritima SIPSA S.A. is obligated to sell to us) the
Princess Marina in June 2006 at a purchase price of $7.7 million, to be paid
with $0.3 million in cash, and the balance through the cancellation of debt
which Maritima SIPSA S.A. owes to us.

I. Shipping Services S.A.

     We and our subsidiaries also contract with related parties for various
services. Pursuant to an agency agreement with us, I. Shipping Services S.A. has
agreed to perform the duties of port agent for us in Argentina. I. Shipping
Services S.A. is indirectly controlled by the Menendez family, which includes
Felipe Menendez R. and Ricardo Menendez R. For these services, we pay I.
Shipping Services S.A. fees ranging from $800 to $1,875 per port call. For each
of the years ended December 31, 2003, 2004 and 2005 the amounts paid and/or
accrued for such services amounted to $0.1 million, $0.02 million, and $0.0
million respectively. We believe that payments made under the above agreements
reflect market rates for the services provided and are similar to what third
parties pay for similar services.

     Certain of our directors and senior management hold similar positions with
our related parties. Felipe Menendez R., who is our President, Chief Executive
Officer and a director, is also a Director of Maritima SIPSA S.A., and I.
Shipping Services S.A. Ricardo Menendez R., who is our Executive Vice President
and one of our directors, is also the President of I. Shipping Services S.A.,
and is a director of Maritima SIPSA S.A. In light of their positions with such
entities, these officers and directors may experience conflicts of interest in
selecting between our interests and those of Maritima SIPSA S.A. and I. Shipping
Services Inc.

Ravenscroft Acquisition

     On March 20, 2006, we purchased all of the issued and outstanding capital
stock of Ravenscroft Shipping (Bahamas) S.A. from two of our related companies,
Crosstrade Maritime Inc., and Crosstrees Maritime Inc., for the purchase price
of $11.5 million. The purchase price included a building in Coral Gables,
Florida, U.S., independently valued at $4.5 million. Ravenscroft Shipping
(Bahamas) Inc. is a holding company that is the ultimate parent of our vessel
managers, Ravenscroft Ship Management Inc., which manages the vessels in our
Ocean Business and Offshore Supply Business, and Elysian Ship Management Inc.,
which manages the vessels in our Passenger Business. We have the option to cause
Crosstrade Maritime Inc. and Crosstrees Maritime Inc. to purchase from us all,
but not less than all, of the Ravenscroft shares purchased for the original
consideration at any time prior to the earlier of (i) the closing of an initial
public offering and (ii) September 30, 2006. The purchase price of this
acquisition was paid in the form of a non-interest bearing promissory note
secured by a pledge of the shares of Ravenscroft and payable upon the earlier of
(i) the closing of an initial public offering or (ii) September 30, 2006. In
compliance with the requirements of our indenture related to the 9% First
Preferred Ship Mortgage Notes due 2014, we obtained a fairness opinion from an
internationally recognized accounting firm in connection with this acquisition.

UP Offshore Acquisition

     Separately, we purchased 66.67% of the issued and outstanding capital stock
of UP Offshore (Bahamas) Ltd., the company through which we operate our Offshore
Supply Business, from LAIF, an affiliate of Solimar Holdings Ltd, our of our
shareholders, for a purchase price of $48.0 million on March 21, 2006. Following
this acquisition, we hold 94.45% of the issued and outstanding shares of UP
Offshore. We have the option to cause LAIF to purchase from us, all, but not
less than all, of the UP Offshore shares purchased for the original
consideration at any time prior to the earlier of (i) the closing of an initial
public offering or (ii) September 20, 2006. The purchase price of this
acquisition was paid in the form of a non-interest bearing promissory note
secured by a pledge of the purchased shares of UP Offshore and payable upon the
earlier of (i) the closing of an initial public offering or (ii) September 30,
2006. In compliance with the requirements of our indenture related to the 9%
First Preferred Ship Mortgage Notes due 2014, we obtained a fairness opinion
from an internationally recognized accounting firm in connection with this
acquisition.

UP River (Holdings) Ltd.

     We have reached an understanding with International Finance Corporation, or
IFC, to purchase from IFC the 7.14% of UP River (Holdings) Ltd., an entity that
owns 50% of UABL, for the price of $6.0 million. As part of this understanding,
IFC has agreed to waive its option to convert its interest in UP River to shares
in our company and its right to participate in an initial public offering of our
common stock. This understanding is subject to the successful completion of an
initial public offering and our obligation under this understanding will be paid
from the proceeds of an initial public offering.

Shareholders Arrangements

     On March 20, 2006 Los Avellanos and Avemar, two of our shareholders,
subject to the successful completion of an initial public offering, cancelled
their agreement pursuant to which Avemar had previously granted Los Avellanos an
irrevocable proxy to vote our shares owned by Avemar. The shareholders have
further agreed to cancel the shares owned by Avemar upon the closing of an
initial public offering. As a consequence, Solimar would own 63.36% of our
shares and the remaining 36.64% would be directly and indirectly owned by Los
Avellanos.

Share Repurchase

     On March 20, 2006, we exercised our option to repurchase from Los Avellanos
25,212 shares of our common stock for a total consideration of $900,000, and the
$900,000 note originally issued in connection with the option was cancelled.



Solimar Holdings Ltd. Warrants

     Under the terms of the warrant agreement dated March 16, 2000, our
shareholder Solimar owns warrants to purchase up to 19,920 non-voting shares of
our common stock at an exercise price of $50.20. These warrants may be exercised
at any time up to and including March 1, 2010.

C. INTERESTS OF EXPERTS AND COUNSEL

     Not Applicable.


ITEM 8 - FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

     See Item 18.

B. SIGNIFICANT CHANGES

     Not Applicable.

ITEM 9 - THE OFFER AND LISTING

     Not Applicable.

ITEM 10 - ADDITIONAL INFORMATION

A. SHARE CAPITAL

     Not Applicable.

B. MEMORANDUM AND ARTICLES OF ASSOCIATION

     The following summarizes certain provisions of the Company's Amended and
Restated Memorandum and Articles of Association. This summary is qualified in
its entirety by reference to the International Business Companies Act, 2000 and
the Company's Amended and Restated Memorandum and Articles of Association.
Information on where investors can obtain copies of the Memorandum and Articles
of Association is described under the heading "Documents on Display" under this
Item.

Objects and Purposes

     The Company is incorporated in the Commonwealth of the Bahamas ("The
Bahamas") under the name Ultrapetrol (Bahamas) Limited. The Registered Office of
the Company is situated at H & J Corporate Services Ltd., Ocean Centre, Montague
Foreshore East Bay Street, P.O. Box SS-19084 Nassau, Bahamas. The Registered
Agent of the Company is H & J Corporate Services Ltd., Ocean Centre, Montague
Foreshore East Bay Street, P.O. Box SS-19084, Nassau, Bahamas.

     Clause 4 of the Company's Memorandum of Association provides that its
objects include the carrying out of the management and exploitation of vessels
of its own or third parties, as well as to act as representatives of other
owners and ship owners or to engage in other related activities; the handling of
maritime, fluvial and lacustrine transportation, domestic and international, of
cargoes, correspondence and maritime works and services in general; the
rendering of training services to personnel relative to sea navigation; the
owning, hiring, and leasing vessels on time charter, bareboat charter, or under
any other charter; to engage in the activities of transportation, transshipment
and unloading operations and cargo complement; to develop loading, discharge and
stowing operations; to render towage services; to act as ship brokers and/or
freighters, to act as maritime agents and to represent vessels of its own or of
third parties; to build vessels and naval appliances as well as to exploit
public and private franchises of any kind, to participate in bids, to construct
ports and also to operate them and represent third parties in any manner in the
maritime business; to effect the purchase, sale, building, management and
exploitation of real estates; and to execute all kinds of acts, representations,
agencies, commissions, consignments, business activities, and management of
properties, stocks and enterprises in general.

Directors

     The business and affairs of the Company shall be managed by the directors.
The Company shall pay to each director an annual fee of US$75,000.00 which
salary shall be paid out of the funds of the Company. Directors shall also be
paid out of funds of the Company all expenses, including travelling expenses,
properly incurred by them in connection with the business of the Company, as may
be approved by resolution of directors and subject to any resolution of the
shareholders. The Amended and Restated Memorandum and Articles of Association do
not place a general prohibition on a director voting in respect of any agreement
or transaction in which he has a financial interest other than by virtue of his
interest in shares of the Company. To this extent, the Company is governed by
the International Business Companies Act, 2000, which states that subject to any
limitations in the Memorandum and Articles of Association and any unanimous
shareholder agreement, no such agreement or transaction is void or voidable by
reason that the director is present at the meeting of directors that approves
the agreement or transaction or that the vote of the director is counted for
that purpose. Such agreement or transaction is valid if the material facts of
the director's interest in the agreement or transaction and his interest in or
relationship to any other party to the agreement or transaction are disclosed in
good faith or are known to the shareholders entitled to vote at a meeting of the
shareholders and the agreement or transaction is approved or ratified by
resolution of the shareholders. A director who has an interest in any particular
business to be considered at a meeting of directors may be counted for the
purpose of determining whether the meeting is duly constituted. A director need
not be a member of the Company and no shareholding qualification shall be
necessary to qualify a person as a director.

Share Rights, Preferences, Restrictions

     Subject to the rights of holders of shares entitled to special rights as to
dividends, all dividends shall be declared and ranked pari passu to shareholders
of record at the date of the declaration of the dividend; but no dividend shall
be paid on those shares which are held by the Company as Treasury shares.
Dividends shall only be paid out of the net profits of the Company and shall
only be paid in cash and are subject to the restrictions, terms and conditions
which may be imposed on the Company by lenders, bondholders or other financial
institutions, and/or those limitations imposed by the contracts, agreements or
other financial instruments, including any trust indenture into which the
Company may have entered. Also before making distributions, the Company shall
also make adequate reserves as the Board of Directors may deem necessary for the
Company's commitments. The directors may, before recommending any dividend, set
aside out of the profits of the Company such sum as they think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for special
dividends or bonuses, or for repairing, improving, maintaining any of the
property of the Company, and for such other purposes as the directors shall in
their absolute discretion think conducive to the interests of the Company. If
several persons are registered as joint holders of any share, any of them may
give effectual receipt for any dividend or other moneys payable in respect of
the share.

     Subject to certain voting requirements, the Company may alter or modify the
conditions contained in the Articles and Memorandum of Association as originally
prepared or as amended by resolution of the shareholders.

     No business shall be transacted at any general meeting unless a quorum of
members is present. A quorum shall consist of a shareholder or shareholders
holding not less than sixty-five percent (65%) of the issued and outstanding
shares entitled to vote, provided that for the period beginning on the date of
the Shareholders Agreement and ending on the last Installment Date (both as
defined in the Amended and Restated Articles of Association of the Company), the
presence of Solimar Holdings LDC shall be required to constitute a quorum.
Subject to certain voting requirements contained in Section 1.7 (c) and (e) of
Article I and the exceptions thereto contained in Section 1.8 of Article I, any
question presented to or action taken by the shareholders shall be approved or
disapproved at a meeting at which a quorum shall be present and acting
throughout in accordance with the votes of the shareholders holding a majority
of the shares of Common Stock or other voting Capital Stock of the Company
present at such meeting. At any general meeting of the shareholders unless a
poll is demanded by a shareholder present in person or by proxy, a declaration
by the Chairman of the meeting that a resolution has been carried and an entry
to that effect in the book of proceedings of the shareholders shall be
sufficient evidence of the fact, without proof of the number of proportion of
the votes recorded in favor of or against such resolution. If a poll is demanded
it shall be taken in such manner as the Chairman directs and the result of such
poll shall be deemed to be the resolution of the shareholders. Notice of
meetings of shareholders and other information or written statement required to
be given to shareholders, shall be given by personal service, or sent by
airmail, or by telex, telegram, telefax, cable or other electronic means at the
discretion of the directors.

     There are no limitations under the laws of The Bahamas on the rights of
non-resident or foreign shareholders to hold or exercise voting rights.

C. MATERIAL CONTRACTS

     On March 20, 2006, we entered into a Stock Purchase Agreement with
Crosstrade Maritime Inc. and Crosstrees Maritime Inc., two of our related
companies, in connection with our acquisition of all of the issued and
outstanding capital stock of Ravenscroft. For a description of the material
terms of this agreement, see "Related Party Transactions -- Ravenscroft
Acquisition" in Item 7.B of this report.

     On March 21, 2006, we entered into Stock Purchase Agreement with LAIF XI
LTD. in connection with our acquisition of 66.67% of the issued and outstanding
capital stock of UP Offshore that we did not already own. For a description of
the material terms of this agreement, see "Related Party Transactions -- UP
Offshore Acquisition" in Item 7.B of this report.

D. EXCHANGE CONTROLS

     We are incorporated as an International Business Company, or IBC, in the
Commonwealth of The Bahamas. Under the International Business Companies Act,
(Chapter 309 of the Statute Laws of The Bahamas, 2000 Edition), or the IBC Act,
provides that so long as our operations are conducted exclusively overseas, we
are exempt from the Exchange Control Regulations Act, (Chapter 360 of the
Statute Laws of The Bahamas, 2000 Edition) (the "ECR Act"), and any regulations
made thereunder. Accordingly, the import or export of capital and the remittance
of dividends, interest or other payments to non-resident holders of our
securities will not require the prior approval of The Central Bank of the
Bahamas, or the Central Bank, other than in respect of local Bahamian currency.
However, the prior approval of the Central Bank must be obtained in respect of
our operations that will not be exclusively overseas.

     With regard to an IBC whose operations are exclusively overseas, the
transfer of shares between non-resident persons and the issuance of shares to or
by such persons may be effected without specific consent under the ECR Act, and
any regulations made thereunder. Issues and transfers of shares involving any
person regarded as resident in The Bahamas for Exchange Control purposes require
specific prior approval under the ECR Act and any regulations made thereunder.

     The IBC Act states that an IBC shall be exempt for a period of twenty years
from its date of incorporation from any business licence fee, corporation tax,
capital gains tax or any other tax on income or distributions accruing to such
IBC provided that the IBC is not resident for Exchange Control purposes. There
is a tax information exchange agreement between the United States and the
Bahamas that came into effect in relation to criminal tax matters for the
taxable period commencing in January 2004 and that comes into effect in relation
to civil matters for the taxable period commencing in January 2006. That
arrangement cannot be used by the United States in relation to persons that do
not have U.S. tax liability. Further, there are anti-third party provisions,
which means that the U.S. cannot share this information with any other country
or its agents or employees.

E. TAXATION

     The following is a discussion of the material Bahamian and United States
federal income tax considerations relevant to an investment decision by a U.S.
Holder, as defined below, with respect to the common stock. This discussion does
not purport to deal with the tax consequences of owning common stock to all
categories of investors, some of which, such as dealers in securities, investors
whose functional currency is not the United States dollar and investors that
own, actually or under applicable constructive ownership rules, 10% or more of
our common stock, may be subject to special rules. This discussion deals only
with holders who purchase common stock in connection with this offering and hold
the common stock as a capital asset. You are encouraged to consult your own tax
advisors concerning the overall tax consequences arising in your own particular
situation under United States federal, state, local or foreign law of the
ownership of common stock.

Bahamian Tax Considerations

     We are incorporated in the Commonwealth of The Bahamas. Under current
Bahamian law, we are not subject to tax on income or capital gains, and no
Bahamian withholding tax will be imposed upon payments of dividends by us to our
shareholders for a period of twenty years from our date of incorporation.

United States Federal Income Tax Considerations

     The following discussion of United States federal income tax matters is
based on the United States Internal Revenue Code of 1986, as amended, or the
Code, judicial decisions, administrative pronouncements, and existing and
proposed regulations issued by the United States Department of the Treasury, all
of which are subject to change, possibly with retroactive effect. This
discussion is based in part upon Treasury Regulations promulgated under Section
883 of the Code in August of 2003, which became effective on January 1, 2005,
for calendar year taxpayers such as ourselves and our subsidiaries. The
discussion below is based, in part, on the description of our business as
described in "Business" above and assumes that we conduct our business as
described in that section. References in the following discussion to "we" and
"us" are to Ultrapetrol (Bahamas) Limited and its subsidiaries on a combined
basis.

     Under the United States Internal Revenue Code of 1986, as amended, or the
Code, 50% of the gross shipping income of our vessel owning or chartering
subsidiaries attributable to transportation that begins or ends, but that does
not both begin and end, in the U.S. will be characterized as U.S. source
shipping income. Such income will be subject to a 4% U.S. Federal income tax
without allowance for deduction, unless our subsidiaries are treated as
Qualified Foreign Corporations which qualify for exemption from tax under
Section 883 of the Code and the Treasury Regulations promulgated thereunder,
which became effective for our calendar year subsidiaries on January 1, 2005.

     A corporation will be considered a Qualified Foreign Corporation if (i) its
country of incorporation is a "Qualified Foreign Country" which, as defined, is
a foreign country that exempts US corporations from income tax on the type(s) of
shipping income (bareboat, time or voyage income) for which exemption is being
claimed (the "Incorporation Test"), (ii) it satisfies the "Ultimate Owner Test",
and (iii) it files a US Federal income tax return (Form 1120F) to claim the
Section 883 exemption.

     A foreign corporation will satisfy the Ultimate Owner Test if (a) more than
50% of the value of its stock is ultimately owned for more than half the days of
the tax year by "Qualified Shareholders" which, as defined, includes an
individual who is a tax resident of a Qualified Foreign Country, an individual
tax resident of a Qualified Foreign Country that is a beneficiary of a pension
plan administered in or by such Country or another Qualified Foreign Country,
the government (or a political subdivision or local authority) of a Qualified
Foreign Country and certain not-for-profit organizations organized in a
Qualified Foreign Country.

     For the 2005 tax year, although our subsidiaries will satisfy the
Incorporation Test, they may not be able to satisfy the Ultimate Owner Test. A
foreign corporation is required by the Section 883 regulations, as a condition
of being able to claim exemption, to obtain ownership statements, signed under
penalties of perjury, from each Qualified Shareholder and each intermediate
owner in the chain of ownership between the Qualified Shareholder and such
corporation to evidence that more than 50% of the value of its stock is
ultimately owned by Qualified Shareholders for more than half the days of the
tax year. We may not be able to satisfy this requirement for the 2005 tax year
or future tax years.

     For the tax year 2005, our subsidiaries will file a U.S. tax return on IRS
Form 1120F taking the position that they are exempt from tax under Section 883.
There is no assurance that the IRS will agree with their position for the 2005
tax year or any future tax year. However, since neither of our subsidiaries
earned any U.S. source shipping income for the 2005 tax year, our subsidiaries
have no U.S. federal income tax liability if the IRS disagrees with their
position.

Panamanian Tax Considerations

     Certain of our subsidiaries who are guarantors of our Registered Notes are
incorporated in Panama. We have been advised by our Panamanian counsel, Tapia,
Linares y Alfaro, that there are no taxes of withholding provisions of any
nature to which United States holders of our Registered Notes are subject under
the laws of Panama in respect of any payments that might be made by our
Panamanian subsidiaries under their guarantees of our Registered Notes.

     We have been advised by our Bahamas counsel, Higgs & Johnson, that there
are presently no taxes or withholding provisions of the Commonwealth of The
Bahamas to which any United States holders of our Registered Notes would be
subject.

     There is currently no reciprocal tax treaty in force between the United
States and any of Panama, the Bahamas or Argentina.

F.   DIVIDEND AND PAYING AGENTS

     Not Applicable.

G.   STATEMENTS BY EXPERTS

     Not Applicable.

H.   DOCUMENTS ON DISPLAY

     The Company is subject to the informational requirements of the Securities
and Exchange Act of 1934, as amended. In accordance with these requirements we
file reports and other information with the Securities and Exchange Commission.
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 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may
obtain information on the operation of the public reference room by calling 1
(800) SEC-0330, and you may obtain copies at prescribed rates from the Public
Reference Section of the Commission at its principal office in Washington, D.C.
20549. The SEC maintains a website (http://www.sec.gov.) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC. In addition, documents referred to in
this annual report may be inspected at the Company's headquarters at Ocean
Centre, Montague Foreshore East Bay Street, Nassau, Bahamas.

I.   SUBSIDIARY INFORMATION

     Not Applicable.

ITEM 11 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     See "Item 5 -- Operating and Financial Review and Prospects -- Quantitative
and Qualitative Disclosures About Market Risk."

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

     We carried out an evaluation under the supervision and with the
participation of our management, including our chief executive officer and chief
financial officer, of the effectiveness of the design and operation of our
disclosure controls and procedures, as of December 31, 2005. There are inherent
limitations to the effectiveness of any system of disclosure controls and
procedures, including the possibility of human error and the circumvention or
overriding of the controls and procedures. Accordingly, even effective
disclosure controls and procedures can only provide reasonable assurance of
achieving their control objectives. Based upon our evaluation, our chief
executive officer and chief financial officer concluded that the disclosure
controls and procedures as of December 31, 2005 were effective to provide
reasonable assurance that information required to be disclosed in the reports we
file and submit under the Securities Exchange Act of 1934, as amended, is
recorded, processed, summarized and reported as and when required.

     There has been no change in our internal control over financial reporting
during 2005 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

ITEM 16A AUDIT COMMITTEE FINANCIAL EXPERT

     The full board of directors of the Company performs the function of an
audit committee. The board of directors has not selected a financial expert to
serve on the board. The board of directors believes that a financial expert is
not required because the Company's equity securities are not publicly traded,
and its obligations and duties to Note holders are defined in the indenture
governing the Notes.

ITEM 16B CODE OF ETHICS

     The board of directors has elected to not adopt a code of ethics applicable
to the Company's principal executive officer and principal financial officer,
principal accounting officer or controller. The board of directors believes that
a code of ethics is not required because the Company's equity securities are not
publicly traded, and its obligations and duties to Note holders are defined in
the indenture governing the Notes.

ITEM 16C PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Pistrelli, Henry Martin y Asociados S.R.L. member of Ernst & Young Global
is the independent accounting firm that audits the financial statements of the
Company and its subsidiaries.

     Aggregate fee for professional services rendered for the Company by
Pistrelli, Henry Martin y Asociados S.R.L. and other member firms of Ernst &
Young Global in 2005 and 2004 in each of the following categories were:




                                                    Year ended December 31,
                                                --------------------------------
                                                        2005         2004
                                                ----------------   -------------
                                                  (in thousands of US dollars)

     Audit fees                                          301             440
     Audit-related fees                                  120              -
     Tax fees                                             25              27
                                                ---------------    -------------

         Total fees                                      446             467
                                                ===============   ==============


     Audit fees include fees associated with the annual audit of the Company and
subsidiaries, statutory audits of subsidiaries required internationally, comfort
letters and SEC filings.

     Audit related fees include fees associated with the documentation
assistance in connection with the requirements of Section 404 of the
Sarbanes-Oxley Act of 2002.

     Tax fees relate to tax compliance and tax advice.

The board of directors pre-approves all audit, audit-related, and non audit
services provided by our independent auditor prior to the engagement of the
independent auditor with respect to such services.

ITEM 16D. EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES.

Not Applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PERSONS.

Not Applicable.


PART III

ITEM 17 - FINANCIAL STATEMENTS

     Not Applicable.

ITEM 18 - FINANCIAL STATEMENTS

     The following financial statements listed below and set forth on pages F-1
through F-34, together with the report of independent registered public
accounting firm are filed as part of this annual report:

<PAGE>
                 ULTRAPETROL (BAHAMAS) LIMITED AND SUBSIDIARIES

             TABLE OF CONTENTS TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003


                    CONTENTS                                             PAGE


o    Report of Independent Registered Public Accounting Firm              F-1

o    Financial statements

     -    Consolidated balance sheets as of December 31, 2005 and 2004    F-2

     -    Consolidated statements of operations for the years ended
          December 31, 2005, 2004 and 2003                                F-13

     -    Consolidated statements of shareholders' equity for the
          years ended December 31, 2005, 2004 and 2003                    F-14

     -    Consolidated statements of cash flows for the years ended
          December 31, 2005, 2004 and 2003                                F-5

     -    Notes to consolidated financial statements for the years
          ended December 31, 2005, 2004 and 2003                          F-6

<PAGE>



                 ULTRAPETROL (BAHAMAS) LIMITED AND SUBSIDIARIES


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors of
ULTRAPETROL (BAHAMAS) LIMITED:


          We have audited the accompanying consolidated balance sheets of
Ultrapetrol (Bahamas) Limited and subsidiaries, as of December 31, 2005 and
2004, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 2005. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

          We conducted our audits in accordance with the 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. We were not
engaged to perform an audit of the Company's internal control over financial
reporting. Our audits 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 audits provide 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
Ultrapetrol (Bahamas) Limited and subsidiaries as of December 31, 2005 and 2004,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 2005, in conformity with
accounting principles generally accepted in the United States of America.


Buenos Aires, Argentina              PISTRELLI, HENRY MARTIN Y ASOCIADOS S.R.L.
   March 17, 2006                         Member of Ernst & Young Global



                                            EZEQUIEL A. CALCIATI
                                                  Partner





<TABLE>
                                   CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2005 AND 2004

                              (stated in thousands of US dollars, except par value and share amounts)
<CAPTION>

                                                                                               December 31,
                                                                                     ----------------------------------
                                                                                          2005              2004
                                                                                     ---------------- -----------------
 ASSETS

   CURRENT ASSETS

                                                                                   <C>              <C>
     Cash and cash equivalents                                                         $     7,914     $     11,602
     Restricted cash                                                                         3,638            2,975
     Accounts receivable, net of allowance for doubtful accounts of
        $324 and $739 in 2005 and 2004, respectively                                         9,017            6,385
     Receivables from related parties                                                       17,944            3,933
     Marine and river operating supplies                                                     3,547            2,194
     Prepaid expenses                                                                        3,239            4,101
     Other receivables                                                                       4,997            5,941
                                                                                     ---------------- -----------------
       Total current assets                                                                 50,296           37,131
                                                                                     ---------------- -----------------
   NONCURRENT ASSETS
     Other receivables                                                                       7,330            7,944
     Receivables from related parties                                                        1,995            2,540
     Restricted cash                                                                            68           30,010
     Vessels and equipment, net                                                            182,069          160,535
     Dry dock                                                                               12,743           11,716
     Investment in affiliates                                                               15,698           15,607
     Other assets                                                                            7,548            8,165
                                                                                     ---------------- -----------------
       Total noncurrent assets                                                             227,451          236,517
                                                                                     ---------------- -----------------
       Total assets                                                                    $   277,747    $    273,648
                                                                                     ================ =================
 LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS' EQUITY
   CURRENT LIABILITIES

     Accounts payable and accrued expenses                                             $    12,696    $      11,487
     Payables to related parties                                                             2,008              768
     Current portion of long-term financial debt                                             8,322           10,108
     Other payables                                                                            917            1,327
                                                                                     ---------------- -----------------
       Total current liabilities                                                            23,943           23,690
                                                                                     ---------------- -----------------
   NONCURRENT LIABILITIES
     Long-term notes                                                                       180,000          180,000
     Financial debt, net of current portion                                                 22,953           29,430
     Other payables                                                                              -              399
                                                                                     ---------------- -----------------
       Total noncurrent liabilities                                                        202,953          209,829
                                                                                     ---------------- -----------------
       Total liabilities                                                                   226,896         233,519
                                                                                     ---------------- -----------------
   MINORITY INTEREST                                                                         2,479            6,468
                                                                                     ---------------- -----------------
   MINORITY INTEREST SUBJECT TO PUT RIGHTS                                                   4,898            4,751
                                                                                     ---------------- -----------------
   SHAREHOLDERS' EQUITY

     Common stock, $.01 par value: authorized shares 2,134,452, issued
        and outstanding 2,109,240; 537,144 shares held in treasury                              21               21
     Additional paid-in capital                                                             68,884           68,884
     Treasury stock                                                                        (20,332)         (20,332)
     Accumulated other comprehensive income                                                    196              200
     Accumulated deficit                                                                    (5,295)         (19,863)
                                                                                     ---------------- -----------------
     Total shareholders' equity                                                             43,474          28,910
                                                                                     ---------------- -----------------
     Total liabilities, minority interests and shareholders' equity                    $   277,747    $    273,648
                                                                                     ================ =================

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

</TABLE>

<PAGE>


<TABLE>


                                               CONSOLIDATED STATEMENTS OF OPERATIONS

                                       FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003


                               (stated in thousands of US dollars, except share and per share data)
<CAPTION>

                                                                              Year ended December 31,
                                                               -------------------------------------------------------
                                                                     2005              2004               2003
                                                               ----------------- ------------------ ------------------
REVENUES

<S>                                                            <C>               <C>                <C>
    Revenues form third parties                                $     123,385     $     89,956       $     62,996
    Revenues from related parties                                      1,976             5,204             12,237
                                                               ------------------------------------ ------------------
    Total revenues                                                   125,361            95,160             75,233
                                                               ------------------------------------ ------------------

OPERATING EXPENSES (1)

    Voyage expenses                                                  (33,827)          (15,923)           (12,644)
    Running costs                                                    (39,234)          (24,892)           (28,659)
    Amortization of drydocking                                        (6,839)           (5,195)            (7,232)
    Depreciation of vessels and equipment                            (14,494)          (13,493)           (15,335)
    Management fees to related parties                                (2,118)           (1,513)            (2,863)
    Administrative and commercial expenses                            (7,617)           (7,494)            (4,955)
    Other operating income (expenses)                                 22,021               784             (2,124)
                                                               ----------------- ------------------ ------------------
                                                                     (82,108)          (67,726)           (73,812)
                                                               ----------------- ------------------ ------------------
  Operating profit                                                    43,253            27,434              1,421
                                                               ----------------- ------------------ ------------------

OTHER INCOME (EXPENSES)

    Financial expense                                                (19,141)          (16,134)           (16,207)
    Financial gain on extinguishment of debt                               -             1,344              1,782
    Financial loss on extinguishment of debt                               -            (6,422)                 -
    Financial income                                                   1,152               119                201
    Investment in affiliates                                            (497)              406              3,140
    Other income (expenses)                                              384               174               (337)
                                                               ----------------- ------------------ ------------------
    Total other expenses                                             (18,102)          (20,513)           (11,421)
                                                               ----------------- ------------------ ------------------

Income (loss) before income taxes and minority interest               25,151             6,921            (10,000)

    Income taxes                                                        (786)             (642)              (185)

    Minority interest                                                 (9,797)           (1,140)            (1,333)
                                                               ----------------- ------------------ ------------------
Net income (loss)                                              $      14,568      $      5,139       $     (11,518)
                                                               ================= ================== ==================

Net income (loss) per share, basic and diluted                 $        9.27      $      3.27        $     (7.33)

Weighted average number of shares, basic and diluted               1,572,096         1,572,096          1,572,096



(1)  In addition to management fees to related parties, operating expenses included $3,983, $1,757 and $6,833 in 2005, 2004, and
     2003, respectively, from related parties.


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

</TABLE>

<PAGE>

<TABLE>

                                          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                                       FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003


                                                (stated in thousands of US dollars)



<CAPTION>

                                                                                Accumulated
                                                       Additional                 other
                                              Common    paid-in    Treasury    comprehensive   Accumulated
                  Balance                     stock     capital     stock        income         deficit      Total
 --------------------------------------   ----------- ------------ ----------- -------------- ------------- ----------------


<S>       <C> <C>                            <C>      <C>         <C>            <C>         <C>           <C>
December 31, 2002                            $   21   $   68,884  $ (20,332)     $     -     $   (13,484)  $  35,089

-    Change in value of derivatives               -            -          -          222               -          222
-    Net loss                                     -            -          -            -         (11,518)     (11,518)
                                            --------- ------------ ----------- -------------- ------------- ----------------
Total comprehensive loss                          -            -          -            -               -      (11,296)

December 31, 2003                                21       68,884    (20,332)         222         (25,002)      23,793

Comprehensive income:
-    Changes in value of derivatives              -            -          -          (22)              -          (22)
-    Net income                                   -            -          -            -           5,139        5,139
                                            --------- ------------ ----------- -------------- ------------- ----------------
Total comprehensive income                        -            -          -          (22)          5,139        5,117
                                            --------- ------------ ----------- -------------- ------------- ----------------

December 31, 2004                                21       68,884    (20,332)         200         (19,863)      28,910

Comprehensive income:
-    Changes in value of derivatives              -            -          -           (4)              -           (4)
-    Net income                                   -            -          -            -          14,568       14,568
                                            --------- ------------ ----------- -------------- ------------- ----------------
Total comprehensive income                        -            -          -           (4)         14,568       14,564
                                            --------- ------------ ----------- -------------- ------------- ----------------

December 31, 2005                            $   21   $   68,884  $ (20,332)     $   196      $    (5,295)  $  43,474
                                            ========= ============ =========== ============== ============= ================


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

</TABLE>

<PAGE>


<TABLE>

                                               CONSOLIDATED STATEMENTS OF CASH FLOWS

                                       FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

                                                (stated in thousands of US dollars)

<CAPTION>
                                                                                    Year ended December 31,
                                                                        -----------------------------------------------
                                                                               2005           2004            2003
                                                                        --------------  --------------   --------------
CASH FLOWS FROM OPERATING ACTIVITIES

<S>                                                                        <C>           <C>              <C>
   Net income (loss)                                                       $   14,568    $   5,139        $ (11,518)

   Adjustments to reconcile net income (loss) to net cash
      provided by operating activities:
     Depreciation of vessels and equipment                                      14,494        13,493         15,335
     Amortization of drydocking                                                  6,839         5,195          7,232
     Expenditures for drydocking                                                (8,427)      (11,139)        (3,580)
     Note issuance expenses amortization                                         1,037           568            585
     Minority interest in equity of subsidiaries                                 9,797         1,140          1,333
     Financial gain on extinguishment of debt                                    -            (1,344)        (1,782)
     Financial loss on extinguishment of debt                                    -             6,422           -
     (Gain) loss on vessels disposal                                           (21,867)          (41)         3,686
     Net (gain) loss from investment in affiliates                                 497          (406)        (3,140)
     Allowance for doubtful accounts                                              (415)          355            882

   Changes in assets and liabilities, net of the effects
      from purchase of UABL Limited and UABL Terminals
      companies in 2004:
       (Increase) decrease in assets:
          Accounts receivable                                                   (2,217)        5,365          1,028
          Receivable from related parties                                         (905)        3,783          5,518
          Marine and river operating supplies                                   (1,353)          405            583
          Prepaid expenses                                                         862          (994)           725
          Other receivables                                                      2,114          (318)          (568)
       Increase (decrease) in liabilities:
          Accounts payable and accrued expenses                                  1,209         1,801          1,404
          Payables to related parties                                            1,240        (3,498)         1,387
          Other payables                                                          (583)         (251)          (363)
          Other                                                                   (219)       (2,546)          (145)
                                                                        --------------  --------------   --------------
          Net cash provided by operating activities                             16,671        23,129         18,602
                                                                        --------------  --------------   --------------


CASH FLOWS FROM INVESTING ACTIVITIES

   Purchase of vessels and equipment                                           (51,461)      (59,934)       (17,089)
   Increase in loan to affiliate                                               (13,141)         -            (1,750)
   Proceeds from disposals of vessels                                           37,888         6,430         14,423
   Purchase of UABL and UABL Terminals companies net of cash acquired            -            (1,713)          -
   Investment in affiliates                                                      -            (1,542)          -
   Other                                                                           (11)         (797)          -
                                                                        --------------  --------------   --------------

          Net cash used in investing activities                                (26,725)      (57,556)        (4,416)
                                                                        --------------  --------------   --------------


CASH FLOWS FROM FINANCING ACTIVITIES

   Payments of long-term debt                                                  (19,354)      (39,149)        (4,946)
   Decrease (increase) in restricted cash                                       29,279       (13,333)       (15,954)
   Proceeds from long-term debt                                                 10,500        27,700           -
   Redemption of minority interest                                             (13,400)        -               -
   Proceeds from 2014 Senior Notes                                               -           180,000           -
   Payments of deferred financing costs under 2014 Senior Notes                  -            (6,655)          -
   Minority interest in equity of subsidiaries                                   -            17,959         16,192
   Payments of 2008 Senior Notes                                                 -          (131,502)        (4,754)
   Proceeds from issuance of redeemable preference shares of subsidiary          -             3,000           -
   Funds used in acquisition of treasury stock                                   -              -            (1,200)
   Other                                                                          (659)         (239)          -
                                                                        --------------  --------------   --------------
          Net cash provided by (used in) financing activities                    6,366        37,781        (10,662)
                                                                        --------------  --------------   --------------
          Net increase (decrease) in cash and cash equivalents                  (3,688)        3,354          3,524
          Cash and cash equivalents at the beginning of year               $    11,602    $    8,248     $    4,724
                                                                        --------------  --------------   --------------
          Cash and cash equivalents at the end of year                     $     7,914    $   11,602     $    8,248
                                                                        ==============  ==============  ===============

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

</TABLE>

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         (stated in thousands of US dollars, except otherwise indicated)


1.   CORPORATE ORGANIZATION

     Ultrapetrol (Bahamas) Limited ("Ultrapetrol Bahamas", "the Company", "us"
     or "we") is a company organized and registered as a Bahamas Corporation
     since December 1997.

     The Company is a diversified ocean and river transportation company
     involved in the carriage of dry and liquid cargoes as well as passengers.
     In our Ocean Business, we are an owner and operator of oceangoing vessels
     that transport petroleum products and dry cargo. In our Passenger Business,
     we are an owner of cruise vessels that transport passengers primarily
     cruising the Mediterranean Sea. In our River Business we are an operator of
     river barges and push boats in the Hidrovia region of South America, a
     region of navigable waters on the Parana, Paraguay and Uruguay Rivers and
     part of the River Plate, which flow through Brazil, Bolivia, Uruguay,
     Paraguay and Argentina. In addition we made an investment in an offshore
     services transportation company, which has commenced operations in the
     third quarter of 2005.

     On June 28, 2001, the Company issued 138,443 new shares for $5,295 which
     were totally subscribed by Inversiones Los Avellanos SA, one of the
     Company's original shareholders and was paid $3,297 in 2001 and $1,104 in
     2002 and the balance are payable in July 2006. At December 31, 2005 and
     2004 the outstanding payment was $894 and was shown as a reduction of
     shareholders' equity. The Company has an option to repurchase 25,212 of its
     shares for a total price of $894 from Inversiones Los Avellanos S.A. until
     July 2006.

     At December 31, 2005 the shareholders of Ultrapetrol Bahamas are Solimar
     Holdings Ltd., Inversiones Los Avellanos S.A., Hazels (Bahamas) Investments
     Inc. (a wholly owned subsidiary of Inversiones Los Avellanos S.A.) and
     Avemar Holdings (Bahamas), a wholly owned subsidiary of the Company (see
     Note 12), in the proportion of 46.66%, 24.43%, 3.74% and 25.17%,
     respectively. Since Avemar Holdings (Bahamas) granted an irrevocable proxy
     to Inversiones Los Avellanos S.A. in full for all of its voting powers
     related to its interest in the Company, at December 31, 2005, Inversiones
     Los Avellanos S.A. held directly and indirectly 53.34% of the Company's
     voting rights. However, pursuant to a shareholder agreement between Solimar
     Holdings Ltd. and Inversiones Los Avellanos S.A., both shareholders hold
     sufficient participating rights in the operation of the Company that
     results in neither shareholder having control of the Company.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     a)   Basis of presentation and principles of consolidation

          The consolidated financial statements have been prepared in accordance
          with accounting principles generally accepted in the United States of
          America ("US GAAP").

          The consolidated financial statements include the accounts of the
          Company and its subsidiaries, both majority and wholly owned.
          Significant intercompany accounts and transactions have been
          eliminated in consolidation. Investments in 50% or less owned
          affiliates, in which the Company exercises significant influence, are
          accounted for by the equity method.

          The consolidated financial statements for 2004 and 2003 have been
          reclassified to conform with the 2005 presentation of certain items.

     b)   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 at the date of the financial
          statements, and the reported amounts of revenue and expenses during
          the years. Significant estimates have been made by management,
          including the allowance for doubtful accounts, insurance claims
          receivables, useful lives and valuation of vessels, realizability of
          deferred tax assets and certain accrued liabilities. Actual results
          may differ from those estimates.

     c)   Revenues and related expenses

          Revenue is recorded when services are rendered, the Company has a
          signed charter agreement or other evidence of an arrangement, pricing
          is fixed or determinable and collection is reasonably assured.
          Revenues are earned under time charters, bareboat charters,
          consecutive voyage charters or affreightment/voyage contracts. Revenue
          from time charters and bareboat charters is earned and recognized on a
          daily basis. Revenue for the affreightment contracts and consecutive
          voyage charters is recognized based upon the percentage of voyage
          completion. A voyage is deemed to commence upon the departure of
          discharged vessel of previous cargo and is deemed to end upon the
          completion of discharge of the current cargo. The percentage of voyage
          completion is based on the miles transited at the balance sheet date
          divided by the total miles expected on the voyage. Revenue from our
          passenger business is recognized upon completion of voyages, together
          with revenues from on board and other activities.

          Vessel voyage costs, primarily consisting of port, canal and bunker
          expenses that are unique to a particular charter, are paid for by the
          charterer under time charter arrangements or by the Company under
          voyage charter arrangements. The commissions paid in advance are
          deferred and amortized over the related voyage charter period to the
          extent revenue has been deferred since commissions are earned as the
          Company's revenues are earned. Bunker expenses and gift shop for
          resale are capitalized when acquired as operating supplies and
          subsequently charged to voyage expenses as consumed/resold. All other
          voyage expenses and other vessel operating expenses are expensed as
          incurred.

     d)   Foreign currency translation

          The Company uses the US dollar as its functional currency. Operations
          denominated in other currencies are remeasured into US dollars in
          accordance with SFAS No. 52, Foreign Currency Translation ("SFAS 52").
          Assets and liabilities denominated in foreign currencies are
          translated into US dollars at the rate of exchange at the balance
          sheet date, while revenues and expenses are translated using the
          average exchange rate for each month. Translation gains and losses
          resulting from changes in exchange rates for each year are included in
          the consolidated statements of operations.

     e)   Cash and cash equivalents

          The Company considers all highly liquid investments with an original
          maturity of three months or less to be cash equivalents. Cash
          equivalents consist of money market instruments and overnight
          investments. The credit risk associated with cash and cash equivalents
          is considered low due to the high credit quality of the financial
          institutions.

     f)   Restricted cash

          Certain of the Company's loan agreements require the Company to fund a
          loan retention account. The amount deposited is equivalent to either
          one sixth or one third of the loan installment (depending on the
          frequency of the repayment elected by the Company, i.e. quarterly or
          semi annually) plus interest that will fall due on the repayment date.
          At December 31, 2004 the noncurrent restricted cash included $30,000
          from the proceeds of the issuance of the 9% First Preferred Ship
          Mortgage Notes due 2014. This amount was released during 2005 in
          connection with the acquisition by the Company of additional vessels
          (see Notes 5 and 6).

     g)   Accounts receivable

          Substantially all of the Company<180>s accounts receivable are due
          from international oil companies and traders. The Company performs
          ongoing credit evaluations of its trade customers and generally does
          not require collateral. Expected credit losses are provided for in the
          consolidated financial statements for all expected uncollectible
          accounts.

          Changes in the allowance for doubtful accounts for the three years
ended December 31, 2005, were as follow:

                                         2005          2004          2003
                                     -------------- ------------ --------------

          Balance at January 1       $    739       $ 1,142      $    810
          Provision                       290           679           882
          Recovery                        (44)         (324)            -
          Amounts written off            (661)         (758)         (550)
                                     -------------- ------------ --------------
          Balance at December 31     $    324       $   739      $  1,142
                                     ============== ============ ==============

     h)   Insurance claims receivable

          Insurance claims receivable represent costs incurred in connection
          with insurable incidents for which the Company expects to be
          reimbursed by the insurance carriers, subject to applicable
          deductibles. Deductible amounts related to covered incidents are
          generally expensed in the period of occurrence of the incident.
          Expenses incurred for insurable incidents in excess of deductibles are
          recorded as receivables pending the completion of all repair work and
          the administrative claims process. The credit risk associated with
          insurance claims receivable is considered low due to the high credit
          quality and funded status of the insurance underwriters and P&I clubs
          in which the Company is a member. Insurance claims receivable,
          included in other receivables in the accompanying balance sheets,
          amounts $6,152 and $10,318 at December 31, 2005 and 2004,
          respectively.

     i)   Marine and river operating supplies

          Such amounts consist of fuel and supplies that are recorded for at the
          lower of cost or market and are charged to operating expenses as
          consumed determined on a first-in, first-out basis.

     j)   Vessels and equipment, net

          Vessels and equipment are stated at cost less accumulated
          depreciation. This cost includes the purchase price and all directly
          attributable costs (initial repairs, improvements and delivery
          expenses, interest and on-site supervision costs incurred during the
          construction periods). Subsequent expenditures for conversions and
          major improvements are also capitalized when they appreciably extend
          the life, increase the earning capacity or improve the safety of the
          vessels.

          Depreciation is computed net from the estimated scrap value and is
          recorded using the straight-line method over the estimated useful
          lives of the vessels. Acquired secondhand vessels are depreciated from
          the date of their acquisition over the remaining estimated useful
          life. At the time vessels are disposed of, the assets and related
          accumulated depreciation are removed from the accounts, and any
          resulting gain or loss is recorded in other operating income
          (expense).

          Listed below are the estimated useful lives of vessels and equipment:

                                                       Useful lives
                                                        (in years)
                                                    -------------------
           Ocean-going vessels                              24
           Passenger vessels                                45
           River barges and push boats                      35
           Furniture and equipment                       5 to 10

          Long-lived assets are reviewed for impairment in accordance with SFAS
          No. 144, "Accounting for the Impairment or Disposal of Long-lived
          Assets", whenever events or changes in circumstances indicate that the
          carrying amount may not be recoverable. If the sum of the expected
          future undiscounted cash flows is less than the carrying amount of the
          asset, a loss is recognized for the difference between the fair value
          and carrying value of the asset.

     k)   Dry dock costs

          The Companys vessels must be periodically drydocked and pass
          inspections to maintain their operating classification, as mandated by
          maritime regulations. Costs incurred to drydock the vessel are
          deferred and amortized over the period to the next drydocking,
          generally 24 to 36 months. Drydocking costs are comprised of painting
          the vessel hull and sides, recoating cargo and fuel tanks, and
          performing other engine and equipment maintenance activities to bring
          the vessel into compliance with classification standards. Costs
          include actual costs incurred at the yard, cost of fuel consumed, and
          the cost of hiring riding crews to effect repairs. The unamortized
          portion of dry dock costs for vessels that are sold are written off to
          income when the vessel is sold.

          Expenditures for maintenance and minor repairs are expensed as
incurred.

     l)   Investments in affiliates

          These investments are accounted for by the equity method. At December
          31, 2005 and 2004 includes our interest in 50% of Puertos del Sur S.A.
          and OTS S.A., 49% in Maritima Sipsa S.A. and 27.78% in UP Offshore
          (Bahamas).

          The Company capitalized interest on the amount invested in UP Offshore
          (Bahamas) Ltd. (Up Offshore) during the period that UP Offshore had
          its vessels under construction and until its planned principal
          operations commenced. Interest capitalized amounted to $557 and $685
          in 2005 and 2004, respectively.

     m)   Other assets

          This account includes costs incurred to issue debt net of amortization
          costs and which are being amortized over the debts' term.

     n)   Accounts payable and accrued expenses

          Accounts payable and accrued expenses included in current liabilities
          as of December 31, 2005 and 2004 consist of insurance payables,
          operating expenses, customers advances collected, among others.

     o)   Comprehensive Income (Loss)

          SFAS No. 130 "Reporting Comprehensive Income" ("SFAS 130"),
          establishes standards for the reporting and display of comprehensive
          income (loss), which is defined as the change in equity arising from
          non-owner sources. Comprehensive income (loss) is reflected in the
          consolidated statement of shareholders' equity.

     p)   Derivative financial instruments

          The Company from time to time uses forward fuel purchases to provide
          partial short-term protection against a sharp increase in diesel fuel
          prices. These instruments generally cover a portion of the Company's
          forecasted diesel fuel needs for push boat operations. The Company
          accounts for these instruments as cash flow hedges. In accordance with
          SFAS No.133, such financial instruments are marked-to-market and, as
          they qualify for hedge accounting, the offset is recorded to other
          comprehensive income and then subsequently recognized as a component
          of fuel expense when the underlying fuel being hedged is used.

          There are no forward fuel purchases outstanding at December 31, 2005.

     q)   Net income per share

          Basic net income per share is computed by dividing the net income by
          the weighted average number of common shares outstanding during the
          year net of the shares owned by our wholly-owned subsidiary, Avemar
          Holdings (Bahamas) Limited. Diluted net income per share reflects the
          potential dilution that could occur if securities or other contracts
          to issue common stock result in the issuance of such stock. The
          Company has no outstanding securities or other similar contracts which
          would dilute net income per share.

     r)   Fair value of financial instruments

          The following methods and assumptions were used to estimate the fair
          value of financial instruments included in the following categories:

          -    Cash and cash equivalents and restricted cash: the carrying
               amounts reported in the balance sheet approximate fair value due
               to the short-term nature of such instruments.

          -    Long-term notes and financial debt: the carrying amounts reported
               in the balance sheet of variable rate borrowings approximate fair
               value as the interest rates either adjust based on LIBOR. In the
               case of fixed rate borrowings, fair value approximates the
               estimated quoted market prices.

          The following table presents the carrying value and fair value of the
financial instruments at December 31.

                                       2005                       2004
                               -------------------        ----------------------

                               Carrying     Fair           Carrying       Fair
                                Value       value           Value         value
                                -----       -----           -----         -----

Cash and cash equivalents      $   7,914   $   7,914      $  11,602   $  11,602
Restricted cash                    3,638       3,638          2,975       2,975

Liabilities

Long-term notes (Note 6)       $ 180,000   $ 175,500      $ 180,000   $ 180,000
Financial debt (Note 6)           31,275      31,275         39,538      39,538

     s)   Concentration of credit risk

          Financial instruments that potentially subject the Company to
          significant concentrations of credit risk consist principally of cash
          and cash equivalents, restricted cash, investments, accounts
          receivable, receivables from affiliates and other receivables. The
          Company places its cash and cash equivalents with high credit
          qualified financial institutions. The Company performs periodic
          evaluations of the relative credit standing for those financial
          institutions. Concentrations of credit risk with respect to accounts
          receivable are limited due to the number of entities comprising the
          Company's customer base and their credit rating.

          The Company does not obtain rights to collateral to reduce its credit
risk.

     t)   Other operating income (expense)

          For the three years ended December 31, 2005, this account includes:

                                             2005         2004        2003
                                         ------------- ----------- -------------

Gain (Loss) on vessels disposal          $  21,867     $     41     $ (3,686)
Claims against insurance companies               -          743        1,562
Other                                          154            -            -
                                         ------------- ----------- -------------
                                         $  22,021     $    784     $ (2,124)
                                         ============= =========== =============

     u)   Income taxes

          Ultrapetrol Bahamas accounts for income taxes under the liability
          method in accordance with SFAS No. 109 "Accounting for Income Taxes".

          Under this method, deferred tax assets and liabilities are established
          for temporary differences between the financial reporting basis and
          the tax basis of the Company's assets and liabilities at each period
          end. Deferred tax assets are recognized for all temporary items and an
          offsetting valuation allowance is recorded to the extent that it is
          not more likely than not that the asset will be realized.

     v)   Recent accounting pronouncements

          SFAS No. 154 "Accounting Changes and Error Corrections" provides
          guidance on the accounting for and reporting of accounting changes and
          error corrections. It establishes, unless impracticable, retrospective
          application as the required method for reporting a change in
          accounting principle in the absence of explicit transition
          requirements specific to the newly adopted accounting principle. It
          also provides guidance for determining whether retrospective
          application of a change in accounting principle is impracticable and
          for reporting a change when retrospective application is
          impracticable.

3.   NEW OPERATIONS AND ORGANIZATION OF NEW AFFILIATES

     a)   Acquisition of UABL and river fleet

          On April 23, 2004, the Company acquired in a series of related
          transactions, through two wholly owned subsidiaries from ACBL
          Hidrovias Ltd. ("ACBL"), the remaining 50% equity interest in UABL
          Limited and UABL Terminals that it did not own (together "UABL"). In
          addition, it acquired from the same vendor a fleet of 50 river barges
          and 7 push boats, which UABL Limited and its subsidiaries previously
          leased from ACBL, certain receivables and liabilities.

          UABL operates a river transportation business on the Parana, Paraguay
          and Uruguay rivers in Argentina, Bolivia, Brazil, Paraguay and
          Uruguay. As a result of the acquisition, the Company is the leading
          barge transportation company in South America and has consolidated its
          position in the river business through the Hidrovia region. The
          results of UABL's operations have been consolidated in the
          consolidated financial statements since the date of acquisition.

          The aggregate purchase price was $26,100, including $24,100 in cash
          and 2,000 shares of ACBL acquired by the Company for $2,000 shortly
          before this transaction.

          The following table summarizes the estimated fair values of the assets
          acquired and liabilities assumed and allocation of purchase price at
          the date of acquisition.

           Current assets                                             $  10,472
           Property and equipment:
           o  Fair value                               $   68,627
           o  Re-allocation of purchase credit            (34,497)       34,130
                                                      -------------
           Other noncurrent assets                                        3,967
                                                                       ---------
                 Total assets acquired                                   48,569
                                                                       ---------
           Current liabilities                                           (8,592)
           Noncurrent liabilities                                       (13,877)
                                                                       ---------
                 Total liabilities assumed                              (22,469)
                                                                       ---------
                 Total purchase price                                 $   26,100
                                                                      ==========

          If the transaction had been consummated on January 1, 2003 the
          Company's unaudited pro forma revenues and net income (loss) for the
          years ended December 31, 2004 and 2003, would have been as shown
          below. However, such pro forma information is not necessarily
          indicative of what actually would have occurred had the transaction
          occurred on such date.

                                                 For the year ended December 31,
                                                          (unaudited)
                                                  ----------------------------
                                                       2004          2003
                                                  ----------------------------

        Revenues                                  $   103,473    $  111,131
        Net income (loss)                         $     5,591    $   (6,543)
        Basic and diluted earnings (loss) per     $      3.56    $    (4.16)
          share

     b)   UP Offshore (Bahamas) Ltd. and subsidiaries

          In April 2002, the Company formed a company in the Bahamas, named UP
          Offshore (Bahamas) Ltd (UP Offshore). The Company has a 27.78%
          interest in UP Offshore. UP Offshore has contracted for the
          construction of six Platform Supply Vessels (PSVs) whose deliveries
          commenced in the second quarter of 2005. At December 31, 2005 the
          amount invested in UP Offshore was $12,500. The Company has not
          guaranteed any debt of UP Offshore.

          UP Offshore was a restricted subsidiary under the indenture governing
          the Notes due 2008, since the Company had the right to control its
          Board of Directors. Accordingly, the Company consolidated UP Offshore'
          financial statements with its financial statements for 2003 and 2002.
          In connection with the discharge of the indenture governing the Notes
          due 2008, on November 24, 2004, the Company relinquished control of
          the Board of Directors of UP Offshore. Accordingly, UP Offshore is
          accounted for by the equity method since such date. At December 31,
          2005 and 2004, the Companys investment in UP Offshore was $13,096
          and $13,638, respectively and is presented in investment in affiliates
          in the consolidated balance sheets.

     c)   UP River (Holdings) Ltd.

          On June 2003, the Company sold to the International Finance
          Corporation (IFC) a 7.14% interest in UP River (Holdings) Ltd.

          Also, the Company agreed to pay to the IFC 7.14% of the amount of the
          respective Charter Party Payments pursuant to the Charter Party
          Agreements between Ultrapetrol and UABL.

          In full consideration for (a) the sale of the shares, and (b) the
          right to receive a portion of the Charter Party Payments, the IFC paid
          to the Company $5,000.

          During the period beginning on December 31, 2009 and ending on
          December 31, 2010 the IFC will be able to exercise an option to put
          all of the shares of UP River (Holdings) Ltd. then owned by it to UP
          River (Holdings) Ltd. for an amount in cash equal to $5,000 minus the
          amount of any cash received by IFC in respect of ownership of such
          shares (whether by dividend, proceeds from Charter Party Payments or
          otherwise) plus interest thereon, compounded annually calculated as a
          rate equal to LIBOR plus 200 basic points.

          Also, Ultrapetrol shall have the right, exercisable from time to time
          to purchase from the IFC all of the shares of UP River (Holdings) Ltd.
          then owned by IFC. The purchase price for the shares to be purchased,
          which shall be an amount sufficient to result in a realized internal
          return rate to the IFC on such shares equal to 18% per annum.

          Upon the occurrence of an Ultrapetrol IPO the IFC has the right to
          receive in exchange for all but not less than all of the shares owned
          by it in UP River (Holdings) Ltd., at the option of Ultrapetrol (a) a
          number of registered Ultrapetrol shares that, when multiplied by the
          Ultrapetrol IPO price, gives the IFC a realized internal return rate
          of 12% per annum on its investment in the UP River (Holdings)
          Ltds shares or (b) a number of Ultrapetrol shares (valued at the
          Ultrapetrol IPO price) and an amount of cash that, in the aggregate,
          gives the IFC a realized internal return rate of 12% per annum on its
          investment in the UP River (Holdings) LTDs shares.

          At December 31, 2005 and 2004, the Company presents $4,898 and $4,751,
          respectively, as a "Minority interest subject to put rights", which
          represents the initial proceeds received by the IFC plus accrued
          interest less Charter Party Payments made to the IFC.

4.   DRY DOCK

     The capitalized amounts in dry dock at December 31, 2005 and 2004 were
     as follows:

                                                  2005              2004
                                           ----------------- -----------------
     Original book value                    $     26,257      $     28,196
     Accumulated amortization                    (13,514)          (16,480)
                                           ----------------- -----------------
     Net book value                         $     12,743      $     11,716
                                           ================= =================

5.   VESSELS AND EQUIPMENT, NET

     The capitalized cost of all vessels and equipment and the related
     accumulated depreciation at December 31, 2005 and 2004 were as follows:

                                                2005                 2004
                                        ----------------------------------------
                                                   Original book value
                                        ----------------------------------------

     Ocean-going vessels                    $    126,776          $    134,825
     River barges and pushboats                  116,054               105,426
     Passenger vessels                            28,105                     -
     Furniture and equipment                       6,173                 4,672
     Land and operating base                       6,525                 4,758
     Prepayment to suppliers                           -                 1,242
                                       --------------------- -------------------
     Total original book value                   283,633               250,923
     Accumulated depreciation                   (101,564)              (90,388)
                                       --------------------- -------------------
     Net book value                         $    182,069          $    160,535
                                       ===================== ===================

     At December 31, 2005 the net book value of the assets pledged as a
     guarantee of the debt was approximately $164,659.

     During 2004 and 2003 the Company sold certain older single hull tankers
     serving the regional trade of Argentina and Brazil. A gain of $41 in 2004
     and a loss of $3,686 in 2003 relating to disposal of such vessels are
     presented in other operating income (expense).

     In January 2005 the Company purchased 35 dry barges for our river business.
     $7,500 was funded by a draw down of the loan granted to our river
     subsidiaries by the IFC and KFW in 2002 and the balance with available
     cash.

     In March 2005, the Company entered into an agreement to sell its vessel,
     Cape Pampas for a total price of approximately $37,880, net of the related
     expenses. The vessel was delivered to the new owners on May 6, 2005, at
     which time a gain on sale of $21,875 was recognized. The Company used part
     of the proceeds from the sale mentioned above to settle financial
     obligations related to the purchase of this vessel.

     In March 2005, the Company entered into a contract with Cruise Elysia Inc.
     to purchase a passenger vessel, named New Flamenco for a total purchase
     price of $13,500. 90% of the purchase price, $12,150, was funded by funds
     deposited in the Escrow Account and the balance with available cash.

     On April 28, 2005 the Company agreed to purchase the product tanker Mt Sun
     Chemist, renamed Miranda I, for a total price of $10,275. The vessel was
     delivered and fully paid for on July 7, 2005. 90% of the purchase price,
     $9,247 was funded by funds deposited in the Escrow Account and the balance
     with available cash.

     On April 29, 2005, the Company purchased at auction for a price of $3,493
     the cruise vessel World Renaissance, renamed Grand Victoria, which was
     delivered and fully paid for on April 19, 2005. 90% of the purchase price,
     $3,143 was funded by funds deposited in the Escrow Account and the balance
     with available cash.

     On October 7, 2005 the Company purchased 11 dry barges from our river
     subsidiary UABL International S.A. $2,900 was funded by funds deposited
     available in the Escrow Account. Since the transaction was between the
     parent and a subsidiary, the transaction was accounted for at historical
     cost and no gain or loss was recognized.

6.   LONG-TERM DEBT AND OTHER FINANCIAL DEBT

     10.5% First Preferred Ship Mortgage Notes due 2008

     At December 31, 2003 the aggregating outstanding amount related with its
     10.5% First Preferred Ship Mortgage Notes due 2008 ("Notes due 2008") was
     $128,341, due in full in 2008.

     In connection with the issue of its 9% First Preferred Ship Mortgage Notes
     due 2014, on November 24, 2004 the Company repaid all its Notes due 2008.

     9% First Preferred Ship Mortgage Notes due 2014

     On November 24, 2004 the Company completed an offering of $180 million of
     9% First Preferred Ship Mortgage Notes due 2014 (the "2014 Senior Notes"),
     through a private placement to institutional investors eligible for resale
     under Rule 144A and Regulation S (the "Offering"). The net proceeds of the
     Offering were used to repay the Notes due 2008, certain other existing
     credit facilities and to fund the Escrow Account.

     Interest on the 2014 Senior Notes is payable semi-annually on May 24 and
     November 24 of each year. The 2014 Senior Notes are senior obligations
     guaranteed by the majority of the Company's subsidiaries directly involved
     in our Ocean and Passenger Business. The Notes are secured by first
     preferred ship mortgages on 18 vessels, 2 oceangoing barges and 193 river
     barges.

     The 2014 Senior Notes are subject to certain covenants, including, among
     other things, limiting the parent's and guarantor subsidiaries' ability to
     incur additional indebtedness or issue preferred stock, pay dividends to
     stockholders, incur liens or execute sale leasebacks of certain principal
     assets and certain restrictions on the Company consolidating with or
     merging into any other person.

     Upon the occurrence of a change of control event, each holder of the 2014
     Senior Notes shall have the right to require the Company to repurchase such
     notes at a purchase price in cash equal to 101% of the principal amount
     thereof plus accrued and unpaid interest. Our indenture governing our 2014
     Senior Notes describes the circumstances that are considered a change of
     control event.

     In the first quarter of 2005 the SEC declared effective an exchange offer
     filed by the Company to register substantially identical senior notes to be
     exchanged for the 2014 Senior Notes pursuant to a registration rights
     agreement, to allow the 2014 Senior Notes be eligible for trading in the
     public markets.

     At the time of the Offering, approximately $30,000 was deposited in an
     Escrow Account, and classified as restricted cash, which was released in
     connection with the acquisition by the Company of the vessels above
     mentioned. To the extent that after December 31, 2005 amounts on deposit in
     the Escrow Account exceed $1,000, the Company will be required to redeem as
     much principal amount of Notes as can be redeemed with such amounts on
     deposit at a redemption price equal to 101% of the principal amount of such
     Notes together with accrued and unpaid interest thereon to the date of such
     redemption.

     Although Ultrapetrol (Bahamas) Limited, the parent company, subscribed the
     issued Notes, principal and related expenses will be paid through funds
     obtained from the operations of the Company's subsidiaries.

     Early Extinguishment of Debt

     In connection with the 2014 Senior Notes offering, the Company paid
     $122,641 to redeem principal of its Notes due 2008. In addition, an early
     extinguishment premium of $4,600 was paid. Such premium and a $1,822
     balance of unamortized deferred financial cost were charged to expenses for
     a total of $6,422 in 2004.

     Previously the Company recognized a gain on extinguishment of debt of
     $1,344 and $1,782 in 2004 and 2003, respectively related to the repurchases
     of its Notes due 2008.

     Loan Agreement with Deutsche Schiffbank Aktiengesellschaft ("DSB")

     On October 27, 2004, Braddock Shipping Inc. a 60% owned subsidiary
     ("Braddock"), entered into a $10 million loan agreement with DSB for the
     purpose of refinancing debt previously incurred in connection with the
     purchase of the vessel Cape Pampas. The loan accrued interest at LIBOR rate
     plus 1.625% per annum. The loan was secured by a mortgage on the Cape
     Pampas and a pledge of 100% of the stock of Braddock and is guaranteed by
     both the direct and indirect parents of Braddock.

     In March 2005, the Company entered into an agreement to sell its vessel
     Cape Pampas (see Note 5). After that the Company used part of the proceeds
     from the sale mentioned to cancel its financial obligation with a principal
     amount of $9,250.

     Loan Agreements with IFC and KfW entered into by UABL barges

     On December 17, 2002, UABL Barges, a subsidiary in the river business,
     entered into a loan agreement with the International Financial Corporation
     (IFC) in an aggregate principal amount of $20,000.

     This loan is divided into two tranches:

     -    Tranche A, amounting to $15,000, is payable in 14 semiannual
          installments of $1,071 each, beginning on June 15, 2005 and ending on
          December 15, 2011 and accrues interest at LIBOR plus 3.75% per annum,
          and

     -    Tranche B, amounting to $5,000, is payable in 10 semiannual
          installments of $500 each, beginning on June 15, 2005 and ending on
          December 15, 2009 and accrues interest at LIBOR plus 3.50% per annum.

     The aggregate outstanding principal balance of the loan was $16,858 and
     $15,000 at December 31, 2005 and 2004, respectively.

     In addition, on February 27, 2003, UABL Barges, a subsidiary in our river
     business, entered into a loan agreement with Kreditanstalt fur Wiederaufbau
     (KfW) in an aggregate principal amount of $10,000.

     This loan is payable in 10 semiannual installments of $1,000 each,
     beginning on June 15, 2005 and ending on December 15, 2009 and accrues
     interest at LIBOR plus 3.50% per annum.

     The aggregate outstanding principal balance of the loan was $8,000 and
     $7,500 at December 31, 2005 and 2004, respectively.

     Each of the IFC Loan and the KfW Loan is guaranteed by UABL Limited, the
     parent of UABL Barges. Each loan is also secured by mortgages on existing
     and future barges and push boats belonging to the subsidiaries of UABL
     Limited and by a stock pledge of 100% of the stock of UABL Barges. Each
     loan requires that at all times, the vessels pledged as security have a
     fair market value of at least 175% of the then outstanding loan amount. The
     Company's obligations under these loans are secured by 221 barges and 2
     pushboats with a book value of $42,597 at December 31, 2005.

     Each loan also contains certain restrictive covenants applicable to UABL
     Barges, including, among other customary covenants and restrictions: a
     minimum debt service coverage ratio not lower than 1.00; a limitation on
     the incurrence of additional debt; a limitation on making expenditures for
     assets; a prohibition on paying dividends or other distributions or
     repurchasing, redeeming or otherwise acquiring its stock without the
     consent of IFC or KfW, as applicable; a limitation on transactions with
     affiliates; a limitation on selling, leasing, transferring, pledging or
     disposing of its assets and a prohibition to enter into any derivative
     transaction other than any for which the IFC is the transaction counter
     party. Each loan also contains customary events of default. If an event of
     default occurs and is continuing, IFC or KfW, as applicable, may require
     that the entire amount of the applicable loan be immediately repaid in
     full.

     In addition, as guarantor of the loans, UABL Limited is subject to certain
     restrictive covenants, including, among other customary covenants and
     restrictions: a minimum consolidated debt service coverage ratio of 1.25
     until June 15, 2005, and 1.5 thereafter; a maximum consolidated debt to
     equity ratio of 1.0; a limitation on its or its subsidiaries incurrence of
     indebtedness; a limitation on it or its subsidiaries making expenditures
     for assets; a prohibition on its payment of dividends or other
     distributions, or the purchase, redemption or other acquisition of its
     shares of stock, unless the proposed distribution or payment is out of
     retained earnings; a limitation on its and its subsidiaries ability to
     enter into transactions with affiliates; and a limitation on its or its
     subsidiaries selling, transferring, pledging or disposing of their
     respective assets. Each loan also contains a limitation on changes of
     control, including the sale or pledge by Ultrapetrol (Bahamas) Limited of
     the stock it holds in the parent entities of UABL Limited.

     Neither UABL Barges nor UABL Limited, nor any subsidiaries of UABL Limited,
     is or will be a subsidiary guarantor of the 2014 Senior Notes. With IFC's
     and KfW's consent, approximately $16,000 of barges owned by certain
     subsidiaries of UABL Limited were pledged as collateral to secure the 2014
     Senior Notes.

     During January 2006, UABL Paraguay S.A., a river subsidiary of the Company,
     rolled over its fuel supply contract for another year that could be
     considered as a "take or pay" contract. UABL Limited, the parent company of
     UABL Paraguay S.A. and our river subsidiary guaranteed the compliance with
     this contract and UABL S.A., a river subsidiary of the Company, mortgaged
     its push boat "San Jose V" to secure such contract. These facts resulted in
     the noncompliance with sections 16 (g) and (h) of the Guarantee Agreement
     by UABL Limited in favor of IFC and KfW. On February 18, 2004 (for the
     years 2003 and 2004) and on February 28, 2005 (for the years 2005 and
     2006), the IFC signed a waiver to sections 16 (g) and (h) of the Guarantee
     Agreement in order to allow: UABL Paraguay S.A. to enter into the "take or
     pay" fuel supply contract, UABL S.A. to mortgage its push boat "San Jose V"
     as a security for the fuel supply contract and UABL Limited to guarantee
     the compliance with this contract. On February 12, 2004, KfW signed a
     waiver to sections 16 (g) and (h) of the Guarantee Agreement for all the
     years.

     At December 31, 2005 the UABL Limited's consolidated debt service coverage
     ratio was 1.37.

     On December 19, 2005, the IFC agreed to waive the requirement of Section 15
     (i) of each of the guarantee agreement (that UABL Limited shall maintain a
     guarantor debt service coverage ratio, calculated on a consolidated basis,
     of not less than 1.5) provided that:

     (a)  From June 15, 2005 until the date of the second disbursement under the
          UABL Paraguay loan agreement UABL Limited shall maintain a guarantor
          debt service coverage ratio, calculated on a consolidated basis, of
          not less than 1.35; and

     (b)  From and after the date of the second disbursement under the UABL
          Paraguay loan agreement UABL Limited shall maintain a guarantor debt
          service coverage ratio, calculated on a consolidated basis, of not
          less than 1.5.

     On January 24, 2006 KfW waived compliance with the provision of Section (j)
     of the Guarantee Agreement, dated December 17, 2002, solely for the purpose
     of allowing UABL Limited to maintain a guarantor debt service coverage
     ratio of 1.25 up to and including March 31, 2006 and not less than 1.5,
     thereafter.

     On September 1, 2005 the IFC granted a waiver to UABL Limited and its
     subsidiaries for the purpose of allowing the companies to enter into
     derivative transactions with others parties than the IFC to hedge against
     fluctuations in fuel cost and for any not exceeding, individually or in the
     aggregate, the equivalent of 1 year fuel consumption. On September 11,
     2005, KfW granted a waiver to this matter.

     Loan Agreement with IFC entered into by UABL Paraguay

     On March 27, 2003, UABL Paraguay, a subsidiary in the river business,
     entered into a loan agreement with the IFC in an aggregate principal amount
     of $10,000.

     This loan is divided into two tranches:

     -    Tranche A, amounting to $5,000 payable in 8 semiannual installments of
          $625 each, beginning on June 15, 2006 and ending on December 15, 2009
          which accrues interest at LIBOR plus 5.0% per annum, and

     -    Tranche B, amounting to $5,000 payable in 8 semiannual installments of
          $625 each, beginning on June 15, 2006 and ending on December 15, 2009
          which accrues interest at LIBOR plus 5.0% per annum.

     At December 31, 2005 UABL Paraguay received the first disbursement and the
     aggregate outstanding principal balance of the loan totaled $3,000.

     The Company must pay a fee of 0.50% per annum on the unused portion of the
     loan on a semiannual basis.

     This loan is guaranteed by UABL Limited, the parent company of UABL
     Paraguay, and UABL S.A., Sernova S.A. and UABL International S.A., all of
     these related companies of UABL Paraguay, and secured by a second ranking
     mortgage taken on existing barges and tugboats belonging to UABL Limited
     and its subsidiaries. UABL Paraguay's obligations under these loans are
     secured by 199 barges with a book value of $36,559 at December 31, 2005.

     The funds deriving from such loans shall be used to finance (a) the
     acquisition and refurbishing of barges, (b) the enlargement of existing
     barges to be used by UABL Paraguay and its related companies and the
     construction of new barges.

     UABL Paraguay has agreed to keep a debt service coverage ratio not less
     than 1 and a debt to equity ratio at not greater than 1.5 at all times.

     UABL Limited assumed the same guaranties and covenants for this loan
     afforded to the loan entered by UABL Barges with the IFC.

     Balances of financial debt at December 31, 2005 and 2004:

<TABLE>
<CAPTION>

                                                                     Nominal value
                                                                ------------------------
                         Financial institution/     Due-year     Current    Noncurrent    Accrued      Total         Average
                                 other                                                   interest                      rate
                        ------------------------ --------------- ---------- -----------  ------------ ------------ ---------------

<S>                                                   <C>         <C>       <C>          <C>         <C>             <C>
   Ultrapetrol Bahamas  Notes                         2014        $     -   $  180,000   $  1,620     $  181,620          9.00%
   UABL Barges          IFC                        Through 2011     2,143       10,715         51         12,909     Libor + 3.75%
   UABL Barges          IFC                        Through 2009     1,000        3,000         15          4,015     Libor + 3.50%
   UABL Barges          KfW                        Through 2009     2,000        6,000         31          8,031     Libor + 3.50%
   UABL Paraguay        IFC                        Through 2009       750        2,250          6          3,006     Libor + 5.00%
   UABL Paraguay        Citibank N.A.              Through 2010         -          988         -             988     Libor + 2.75%
   UABL Limited         Transamerica Leasing Inc.  Through 2006       706           -          -             706          8.00%
                                                                ----------- -----------  ------------- ----------
   December 31, 2005                                             $  6,599   $  202,953   $  1,723      $ 211,275
                                                                =========== ===========  ============= ==========

  December 31, 2004                                              $  8,337   $  209,430   $  1,771      $ 219,538
                                                                =========== ===========  ============= ==========

</TABLE>


<PAGE>

     Aggregate annual future payments due on the long-term debt:

             Year ending December 31:
       --------------------------------------

                       2006                         $      8,322
                       2007                                6,140
                       2008                                6,140
                       2009                                6,140
                       2010                                2,390
                    Thereafter                           182,143
                                             -----------------------
                                       Total        $    211,275
                                             =======================


7.   COMMITMENTS AND CONTINGENCIES

     The Company is subject to legal proceedings, claims and contingencies
     arising in the ordinary course of business. When such amounts can be
     estimated and the contingency is probable, management accrues the
     corresponding liability. While the ultimate outcome of lawsuits or other
     proceedings against the Company cannot be predicted with certainty,
     management does not believe the costs of such actions will have a material
     effect on the Company's consolidated financial position or results of
     operations.

     Argentinian Customs Dispute

     Ultrapetrol S.A., one of the Company's subsidiaries, was involved in a
     customs dispute with the Customs Authority of Bahia Blanca in Argentina
     over the alleged unauthorized operation of the Princess Pia in Argentina
     during 2001. As a result, the Customs Authority of Bahia Blanca issued a
     resolution claiming the equivalent to $1,610 as import taxes and the
     equivalent to $1,610 as fines. In response to said resolution, on March 16,
     2004, Ultrapetrol S.A. submitted an appeal with the Argentine Tax Court
     arguing that it did not breach any applicable customs laws since the
     Princess Pia operated within Argentine territory only during the periods in
     which it was expressly authorized by the competent authorities. The
     Argentine Tax Court entered judgments in favor of the Company. This
     decision is final and binding upon the parties. Costs shall be borne by the
     fiscal authorities.

     Brazilian Customs Dispute

     Ultrapetrol S.A. is involved in a customs dispute with the Brazilian
     Customs tax authorities over the alleged infringement of customs
     regulations by the Alianza G3 and Alianza Campana (collectively, the
     "Vessel") in Brazil during 2004. As a result, the Brazilian Customs tax
     authorities commenced an administrative proceeding and applied the penalty
     of apprehension of the Vessel which required the Vessel to remain in port
     or within a maximum of five nautical miles from the Brazilian maritime
     coast. The maximum custom penalty that could be imposed would be
     confiscation of the Vessel, which is estimated by the Brazilian Customs
     tax authorities to be valued at $4,560. On the same day that Ultrapetrol
     S.A. presented its defense to this administrative proceeding, a writ of
     injunction was filed on behalf of Ultrapetrol S.A. seeking a judicial
     authorization allowing the return of the Vessel to Boias de Xareu, which
     is located almost 20 nautical miles from the Brazilian maritime coast, so
     the Vessel could resume its prior services. The preliminary injunction was
     granted by the court in favor of Ultrapetrol S.A. on September 17, 2004,
     conditioned on the weekly presentation of shipping letters describing the
     location of the Vessel.

     On February 22, 2005, the Company was notified of the decision that grounds
     on which the tax assessment was based were ratified. In response to this
     decision, on February 28, 2005, the Company presented a specific request
     for clarification of the decision. The Company simultaneously presented a
     petition to the Secretary of the Brazilian Tax Authorities requesting the
     replacement of the confiscation penalty applied to the vessel by a penalty
     corresponding to 1% (one percent) of the value of the vessel. Both of the
     Company requests made on February 28, 2005 are still pending judgment.

     Based upon the facts and circumstances of the case, including the fact that
     the Vessel was operating under a specific written authorization officially
     granted by the Brazilian government and the existing regulations, the
     Company does not believe that the outcome of this matter should have an
     adverse impact on its financial position or results of operations. In case
     the Company is not successful on the merits, under applicable insurance
     coverage, it could request from the Vessel's P&I insurer an indemnity
     corresponding to the value of the Vessel.

     Paraguayan Customs Dispute

     On September 21, 2005 the local customs authority of Ciudad del Este,
     Paraguay issued a finding that certain UABL entities owe taxes to that
     authority in the amount of $2.2 million, together with a fine for
     non-payment of the taxes in the same amount, in respect of certain
     operations of our River Business for the prior three-year period. This
     matter was referred to the Central Customs Authority of Paraguay (the
     "Paraguay Customs Authority"). We believe that this finding is erroneous
     and UABL has formally replied to the Paraguay Customs Authority contesting
     all of the allegations upon which the finding was based. We are awaiting
     the determination of the Paraguay Customs Authority in this matter. That
     determination, if adverse to UABL, is subject to court review upon
     application. We intend to vigorously contest any adverse determination in
     court. We have been advised by UABL's counsel in the case that there is
     only a remote possibility that a court would find UABL liable for any of
     these taxes or fines.

     Fuel supply contract of UABL Paraguay

     In January 2006, UABL Paraguay, a river subsidiary of the Company, entered
     into a fuel supply contract. Under this contract, UABL Paraguay has
     contracted to purchase a minimum amount of fuel per month through the year
     2006 and to make a minimum annual payment of approximately $18,000. The
     price for the cubic meter is equivalent to the price in the international
     market plus a margin.

     Other

     At December 31, 2005, we employed many land-based employees and seafarers
     as crew on our vessels. These seafarers are covered by industry-wide
     collective bargaining agreements that set basic standards applicable to all
     companies who hire such individuals as crew. Because most of our employees
     are covered by these industry-wide collective bargaining agreements,
     failure of industry groups to renew these agreements may disrupt our
     operations and adversely affect our earnings. In addition, we cannot assure
     you that these agreements will prevent labor interruptions. We do not
     believe any labor interruptions will disrupt our operations and harm our
     financial performance.

8.   INCOME TAXES

     The Company operates through its subsidiaries, which are subject to several
     tax jurisdictions, as follows:

     a)   Bahamas

          The earnings from shipping operations were derived from sources
          outside Bahamas and such earnings were not subject to Bahamanian
          taxes.

     b)   Panama

          The earnings from shipping operations were derived from sources
          outside Panama and such earnings were not subject to Panamanian taxes.

     c)   Paraguay

          Our subsidiaries Parfina S.A., Oceanpar S.A., UABL Paraguay, Parabal
          S.A., Yataiti and Riverpar are subject to Paraguayan corporate income
          taxes.

     d)   Argentina

          Our subsidiaries Ultrapetrol S.A., UABL S.A. and Sernova S.A. are
          subject to Argentine corporate income taxes.

          In Argentina, the tax on minimum presumed income ("TOMPI"),
          supplements income tax since it applies a minimum tax on the potential
          income from certain income generating-assets at a 1% tax rate. The
          Company's tax obligation in any given year will be the higher of these
          two tax amounts. However, if in any given tax year tax on minimum
          presumed income exceeds income tax, such excess may be computed as
          payment on account of any excess of income tax over TOMPI that may
          arise in any of the ten following years.

     e)   Chile

          Our subsidiary Corporacion de Navegacion Mundial S.A. (Cor.Na.Mu S.A.)
          is subject to Chilean corporate income taxes.

     f)   The United States of America

          Pursuant to Section 883 of the US tax code and the final regulations
          thereunder which became effective for calendar year taxpayers
          commencing January 1, 2005, a foreign corporation which meets the
          definition of a "Qualified Foreign Corporation", will be exempt from
          United States of America corporate income tax on its U.S. source
          shipping income which, as defined, means 50% of the income derived by
          a corporation from the international operation of a ship or ships and
          the performance of certain services directly related thereto that is
          attributable to the transport of cargo to or from U.S. ports.

          A corporation will be considered a Qualified Foreign Corporation if
          (i) its country of incorporation is a "Qualified Foreign Country"
          which, as defined, is a foreign country that exempts US corporations
          from income tax on the type(s) of shipping income (bareboat, time or
          voyage income) for which exemption is being claimed (the
          "Incorporation Test"), (ii) it meets the "Ultimate Owner Test", and
          (iii) it files a US Federal income tax return (Form 1120F) to claim
          the Section 883 exemption.

          A foreign corporation meets the Ultimate Owner Test if (a) more than
          50% of the value of its stock is ultimately owned for more than half
          the days of the tax year by "Qualified Shareholders" which, as defined
          includes an individual who is a tax resident of a Qualified Foreign
          Country, an individual tax resident of a Qualified Foreign Country
          that is a beneficiary of a pension plan administered in or by such
          country or another Qualified Foreign Country, the government (or a
          political subdivision or local authority) of a Qualified Foreign
          Country and certain not-for-profit organizations organized in a
          Qualified Foreign Country.

          For the years ended December 31, 2004 and 2003, Princely and Ultracape
          (Holdings) Ltd. satisfied the Incorporation Test because they were
          incorporated in Panama and Bahamas, respectively, each of which has
          been recognized by the U.S. tax authorities as a Qualified Foreign
          Country as confirmed by Revenue Ruling 2001-48.

          For the tax year 2005, since neither Princely and Ultracape earned any
          U.S. source shipping income, each will file a U.S. tax return on IRS
          Form 1120F claiming exemption from tax on such basis.

     The provision for income taxes (which includes TOMPI) is comprised of:

                                 For the year ended December 31,
                               -----------------------------------
     Income tax expense            2005         2004        2003
                               ------------ ------------ ---------


         Current               $      178   $      570    $ 108
         Deferred                     608           72       77
                               ------------ ------------ ---------
                               $      786   $      642    $ 185
                               ============ ============ =========

     Ultrapetrol's pre-tax income for the three years ended December 31, 2005
     was taxed in foreign jurisdictions (principally Argentina and Paraguay).

     Reconciliation of tax provision to taxes calculated based on the statutory
     tax rate is as follows:

<TABLE>
<CAPTION>
                                                                              For the year ended December 31,
                                                                    ----------------------------------------------------
                                                                          2005            2004               2003
                                                                    ---------------- -----------------  -----------------

     <S>                                                            <C>              <C>               <C>
     Pre-tax income (loss)                                         $      25,151      $     6,921       $   (10,000)
     Sources not subject to income tax (tax exempt income)               (23,480)          (7,468)            5,271
                                                                   ----------------- ----------------  -----------------
                                                                           1,671             (547)           (4,729)
     Statutory tax rate                                                       35%              35%               35%
                                                                   ---------------- -----------------  -----------------
     Tax expense (benefit) at statutory tax rate                             585             (192)           (1,655)

     Decrease in valuation allowance                                         -                -                 (33)
     Rate differential                                                      (360)             -                   -
     Effects of foreign exchange changes related to Argentine
        subsidiary                                                           -               527              1,873
     Others                                                                  561             307                 -
                                                                   ---------------- -----------------  -----------------
     Income tax provision                                          $         786      $      642         $      185
                                                                   ================ =================  =================
</TABLE>

     At December 31, 2005, Argentine subsidiaries had a consolidated credit
     related to TOMPI of $1,514 which expires $2 in 2009, $260 in 2010, $239 in
     2011, $322 in 2012, $174 in 2013, $244 in 2014 and $273 in 2015.

     At December 31, 2005, Argentine subsidiaries had accumulated tax loss
     carryforwards ("NOLs") for a consolidated total of $317 that expire $46 in
     2006, $189 in 2009 and $82 in 2010. The use of the NOLs will depend upon
     future taxable income in Argentina.

                                                            At December 31,
                                                     ---------------------------
                                                           2005        2004
                                                    -------------- -------------
     Deferred tax assets
          NOLs                                       $    110        $     886
          TOMPI credit                                  1,514            1,250
          Other, net                                      100              149
                                                     -------------- ------------
          Total deferred assets                      $  1,724        $   2,285
                                                     -------------- ------------
     Deferred tax liabilities
          Vessels and equipment                           826              793
          Dry dock                                        269              519
                                                     -------------- ------------
          Total deferred liabilities                 $  1,095        $   1,312
                                                     -------------- ------------
          Net deferred tax assets (liabilities)      $    629        $     973
                                                     ============== ============

9.   RELATED PARTY TRANSACTIONS

     At December 31, 2005 and 2004, the balances of receivables from related
     parties, were as follows:

                                                          At December 31,
                                                --------------------------------
                                                      2005               2004
                                                ------------------ -------------
     Current:

      -   Ravenscroft Shipping Inc.             $    2,574          $    2,533
      -   UP Offshore and its subsidiaries (1)      13,726                  76
      -   Puerto del Sur S.A.                        1,612                   -
      -   Maritima Sipsa S.A.                           16                 754
      -   Comintra                                       -                 250
      -   Oceanmarine                                    -                 204
      -   Other                                         16                 116
                                                 -----------------   -----------
                                                 $  17,944           $   3,933
                                                 =================   ===========

(1)  This loan accrues interest at a nominal interest rate of 9.50% per year.
     The principal and the interest accrued have been repaid in full in
     February, 2006.

                                                        At December 31,
                                              ----------------------------------
                                                    2005               2004
                                              ------------------ ---------------
      Noncurrent:

      -   OTS S.A.                            $        -          $      260
      -   Puerto del Sur S.A. (1)                  1,995               2,280
                                              ------------------ ---------------
                                              $    1,995          $    2,540
                                              ================== ===============

     (1)  This loan accrues interest at a nominal interest rate of 3% per year,
          payable annually. The principal will be repaid in 8 equal annual
          installments, beginning on June 30, 2006.

     At December 31, 2005 and 2004 the balances of current payables to related
     parties were as follows:

                                                        At December 31,
                                           -----------------------------------
                                                 2005                    2004
                                           --------------------  -------------

      -   Ravenscroft Shipping Inc.        $    2,008              $      587
      -   OTS S.A.                                  -                     146
      -   Other                                     -                      35
                                           --------------------  -------------
                                           $    2,008              $      768
                                           ====================  =============

      For the three years ended December 31, 2005, the revenues derived from
related parties were as follows:

                                             2005          2004            2003
                                          --------------------------------------

      -   Maritima Sipsa S.A. (1)         $   1,976     $   2,467     $  1,953
      -   UABL and its subsidiaries (2)        -            2,737       10,284
                                          --------------------------------------
                                          $   1,976     $   5,204     $ 12,237
                                          ======================================

(1) Sale and repurchase of vessel Princess Marina:

          In March 2003 the Company entered into certain transactions to sell,
          and repurchase in March 2006, to and from Maritima Sipsa S.A., a 49%
          owned company, the vessel Princess Marina. The combined effect of the
          sale at $15,100, repurchase at $7,700 and a loan granted to Maritima
          Sipsa S.A. for $7,400 resulted in no cash flow on consolidated basis
          at the time of execution. The loan is repaid to the Company on a
          quarterly basis over a three-year period ending in June 2006, when the
          vessel will be delivered to the Company. The transaction was
          recognized in the Company's statements of operations as a lease,
          reflecting quarterly payments as charter revenues for $1,976, $2,467
          and $1,953 in 2005, 2004 and 2003, respectively, while the vessel
          remains presented in the accompanying balance sheets as an asset.

(2) River barges and push boat leases:

          Through its subsidiaries, the Company entered into a lease agreement
          with UABL Limited and its subsidiaries for the rental by UABL Limited
          of certain river barges and push boats for a daily lease amount for
          each river barge or push boat. Since April 23, 2004 the date of UABL
          Limited acquisition our financial statements included the operations
          of UABL Limited on a consolidated bases. Therefore, these transactions
          have been eliminated in the consolidated financial statements. Prior
          to acquisition, the equity method was used.

      Management fees to related parties

      For the three years ended December 31, 2005, management fees expensed to
these related parties for such services amounted to:

                                   2005          2004             2003
                               -----------   -------------   -------------

      Oceanmarine (1)          $     620     $        680    $     1,215
      Ravenscroft (2)              1,498              833          1,648
                               -----------   -------------   -------------
      Total                    $   2,118     $      1,513    $     2,863
                               ===========   =============   =============

(1)       The Company through certain of its subsidiaries has contracted with
          Oceanmarine, a company of the same control group as Inversiones Los
          Avellanos S.A., for certain administrative services. This agreement
          stipulates a fee of $10 per month and per ocean going cargo vessel.

(2)       Pursuant to the individual ship management agreement between
          Ravenscroft Ship Management Ltd., a Bahamas Corporation ("Ravenscroft
          Bahamas") a company of the same control group as Inversiones Los
          Avellanos S.A., and the Company's relevant vessel-owning subsidiaries,
          Ravenscroft Bahamas has agreed to provide certain ship management
          services for all of the Company's vessels. Ravenscroft Bahamas has
          subcontracted the provision of these services to Ravenscroft Shipping
          Inc., a Miami-based related party of the Company. This agreement
          stipulates a fee of $12.5 per month and per ocean going cargo vessel.

          Under these contracts, these related parties are to provide all
          services necessary for such companies to operate, including but not
          limited to crewing, insurance, accounting and other required services.
          Additionally, commissions and agency fees are paid to those related
          parties.

          In addition, the Company pays Ravenscroft a monthly technical ship
          management fee of (euro)20,000 (equivalent to $23.5 at December 31,
          2005) per passenger vessel for services including technical
          management, crewing, provisioning, superintendence and related
          accounting functions. The Company pays Ravenscroft for each passenger
          vessel (euro)25,000 (equivalent to $29.5 at December 31, 2005)
          administrative and operational fee per month for all operational
          functions as well as administering the subcontractors, concessions and
          credit card/collection system onboard.

      Brokerage commissions

      Ravenscroft from time to time acts as a broker in arranging charters for
      the Company's oceangoing vessels for which Ravenscroft charges a brokerage
      commissions of 1.25% on the freight, hire and demurrage of each such
      charter. Total commission expenses incurred by the Company under this
      arrangement amounted to $707, $694 and $429 respectively, for the three
      years ended December 31, 2005.

      Voyage expenses paid to related parties

      For the three years ended December 31, 2005, the voyage expenses paid to
related parties were as follows:

                                    2005         2004           2003
                                 -----------  -----------   -------------

      Bareboat charter paid (1)  $  3,977     $      -         $      -
      Agency fees (2)                   6           21              100
      Ship management fees (3)          -        1,736            6,691
      Other                             -            -               42
                                 ---------- --------------- -------------
      Total                      $  3,983      $ 1,757         $  6,833
                                 ========== =============== =============

(1)       Through our subsidiary, Corporacion Naviera Mundial S.A., the Company
          entered into a bareboat charter with UP Offshore (Panama) S.A., a
          wholly owned subsidiary of UP Offshore (Bahamas) Ltd. for the rental
          of the two PSVs named UP Safira and UP Esmeralda for a six-month
          period for a daily lease amount for each one.

(2)       Pursuant to an agency agreement with Ultrapetrol S.A., I. Shipping
          Services S.A., a company of the same control group as Inversiones Los
          Avellanos S.A., has agreed to perform the duties of port agent for the
          Company in Argentina.

(3)       Certain of our subsidiaries have had a ship management agreement with
          Lonehort S.A., a wholly owned subsidiary of UABL Limited, to provide
          operating and technical ship management services for the river barges
          and push boat rented by us to UABL Limited and its subsidiaries. Since
          April 23, 2004, the date of UABL Limited acquisition, our financial
          statements included the operations of Lonehort S.A., a wholly owned
          subsidiary of UABL Limited, on a consolidated basis. Therefore, these
          transactions have been eliminated in the consolidated financial
          statements. Prior to acquisition, the equity method was used.

      Financial advisory services

      Prior to the commencement of the offering of its 2014 Senior Notes, an
      affiliate of one of Ultrapetrol's shareholders provided advice to the
      initial purchaser on the terms and structure of the proposed offering for
      which it was paid a fee of $500 in 2004.

      Administration agreement with UP Offshore

      On June 25, 2003 the Company signed an administration agreement with UP
Offshore.

      Under this agreement Ultrapetrol agrees to assist UP Offshore by providing
      management services required by the latter, including providing the
      services of the Chief Executive Officer and to provide ongoing management
      and commercial advisory services up to 2013.

      The parties agreed that Ultrapetrol professional fees under this agreement
      shall be 2% of UP Offshore annual EBITDA as defined in the agreement. In
      2005 the professional fee amounted $28. No fees were recognized in 2004
      and 2003, because UP Offshore had no EBITDA.

      Acquisition of land for a liquids terminal in Mexico

      In October 2004 the Company through a subsidiary, purchased 99.99% of
      Parque Ecologico Industrial Altamira S.A. (PEISA) for $2,000 from a
      related party of its shareholder, LAIF. The only asset of PEISA is land
      for expansion of a liquids terminal in Mexico.

10.   BUSINESS AND GEOGRAPHIC SEGMENT INFORMATION

      Since 2004, the Company organizes its business and started to evaluate
      performance by its operating segments, Ocean, River, Offshore Supply and
      starting in 2005 the new Passenger Business. Prior to that date the
      Company operated with no segments. The accounting policies of the
      reportable segments are the same as those for the consolidated financial
      statements (Note 2). The Company does not have significant intersegment
      transactions. These segments and their respective operations are as
      follows:

      Ocean business: In our Ocean Business, we own and operate 5 oceangoing
      vessels and semi-integrated oceangoing tug barge units under the trade
      name Ultrapetrol. Our Suezmax and Aframax vessels transport dry and liquid
      bulk goods on major trade routes around the globe. Major products carried
      include liquid cargo such as petroleum and petroleum derivatives, as well
      as dry cargo such as iron ore, coal and other bulk cargoes.

      River business: In our River Business, we own and operate several dry and
      tanker barges, and push boats. In addition, we use one barge from our
      ocean fleet, the Alianza G2, as a transfer station. The dry barges
      transport basically agricultural and forestry products, iron ore and other
      cargoes, while the tanker barges carry petroleum products, vegetable oils
      and other liquids.

      We operate our push boats and barges on the navigable waters of Parana,
      Paraguay and Uruguay Rivers and part of the River Plate in South America,
      also known as the Hidrovia region.

      Offshore supply business: We operate our Offshore Supply Business, using
      PSVs of UP Offshore, in the spot market in the North Sea which are
      temporarily operated since July 2005 by our subsidiary Corporacion Naviera
      Mundial S.A. under six-month bareboat charters. PSVs are designed to
      transport supplies such as containerized equipment, drill casing, pipes
      and heavy loads on deck, along with fuel, water, drilling fluids and bulk
      cement in under deck tanks and a variety of other supplies to drilling
      rigs and platforms.

      Passenger business: We own and operate two vessels purchased in 2005.
Operations were concentrated in the Mediterranean Sea.

      Ultrapetrol's vessels operate on a worldwide basis and are not restricted
      to specific locations. Accordingly, it is not possible to allocate the
      assets of these operations to specific countries. In addition, the Company
      does not manage its operating profit on a geographic basis.

                                           For year ended December 31,
                               -------------------------------------------------
                                   2005              2004            2003
                               --------------   ------------- ------------
      Revenues (1)

      -   South America         $  55,455        $  39,871     $  23,739
      -   Europe                   59,245           30,356        21,349
      -   Asia                      9,989           21,647         5,188
      -   Central America             672            3,286        10,351
      -   North America                 -                -        14,606
                                -----------      ----------    -----------
                                $ 125,361        $  95,160     $  75,233
                                ===========      ==========    ===========

(1) Classified by country of domicile of charterers.

      Revenue by segment consists only of services provided to external
      customers, as reported in the consolidated statement of operations.
      Resources are allocated based on segment profit or loss from operations,
      before interest and taxes.

      Identifiable assets represent those assets used in the operations of each
segment.

      The following schedule presents segment information about the Company's
operations for the year ended December 31, 2005:

<TABLE>
                                                 Ocean            River          Passenger       Offshore
                                                business         business        business     supply business        Total
                                               ----------------------------------------------------------------------------
<S>                                            <C>              <C>             <C>              <C>             <C>
      Revenues                                 $  49,874        $ 54,546         $ 14,409        $  6,532         $ 125,361

      Running and voyage expenses                 14,007          43,530            9,326           6,198            73,061
      Depreciation and amortization               13,063           7,166            1,104               -            21,333
      Gain on disposal of vessels                 21,867               -                -               -            21,867
      Segment operating profit                    39,289             366            3,415             183            43,253
      Segment assets                              97,717          22,594    1      27,625          29,811           277,747
      Investments in affiliates                        -           2,060                -          13,638            15,698
      Loss from investment in affiliates             179             306                -              12               497
      Additions to long-lived assets              10,678          12,678           28,105               -            51,461

</TABLE>

      The following schedule presents segment information about the Company's
operations for the year ended December 31, 2004:

<TABLE>

                                                   Ocean       River         Offshore supply
                                                 business     business           business       Total
                                               ---------------------------------------------------------------
      <S>                                      <C>            <C>             <C>              <C>

      Revenues                                  $  54,049     $   41,111         $       -     $  95,160
      Running and voyage expenses                  12,963         27,852                 -        40,815
      Depreciation and amortization                13,483          5,205                 -        18,688
      Segment operating profit (losses)            22,831          5,217              (614)       27,434
      Segment assets                              150,959        109,592            13,097       273,648
      Investments in affiliates                       145          2,365            13,097        15,607
      Income (loss) from investment in
        affiliates                                    262            153                (9)          406
      Additions to long-lived assets                4,044         23,877            32,013        59,934
      Contributions to affiliates                       -              -             1,542         1,542

</TABLE>

      In 2005 revenues from one customer of Ultrapetrol ocean and river business
      represent approximately $31,000, or 25% of the Company's consolidated
      revenues, revenues from one customer of Ultrapetrol ocean business
      represent approximately $21,000, or 17% of the Company's consolidated
      revenues and the revenues for the only customer of the passenger business
      represent approximately $14,400, or 11% of the Company's consolidated
      revenues.

      In 2004 revenues from one customer of Ultrapetrol ocean and river business
      represent approximately $31,000, or 33% of the Company's consolidated
      revenues and revenues from one customer of Ultrapetrol ocean business
      represents approximately $17,000, or 18% of the Company's consolidated
      revenues.

      In 2003 revenues from three customers of the Company represent
      approximately $39,000, or 52% of the Company's consolidated revenues.

11.   SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

      Interest and income taxes paid for the three years ended December 31,
2005, were as follows:

                                         For year ended December 31,
                                  -----------------------------------------
                                      2005        2004           2003
                                  ------------ ------------- --------------

      Interest paid               $   17,932      $  18,346     $  14,983
      Income taxes paid           $      209      $     784     $     182

12.   TREASURY STOCK

      On October 12, 2000 the Company through a wholly owned subsidiary, Avemar
      Holdings (Bahamas) Limited ("Avemar"), purchased 537,144 shares of the
      Company previously owned by Societe Internationale D'Investissement S.A.
      (Bahamas) ("SII"). The nominal purchase price of said shares was $20,000,
      $8,000 of which was paid in 2000 and the balance of which was payable
      $6,400 in 2001, $4,400 in 2002 and $1,200 in 2003.

      At December 31, 2005 and 2004, the Company presents $20,332 in the
      "Treasury stock" account, $20,000 of which relates to the amount paid to
      SII and $332 relates to direct cost of acquisition.

13.   SUMMARIZED FINANCIAL INFORMATION OF UABL

      Summarized statements of operations of UABL Limited for the year ended
      December 31, 2003 for which such affiliate was accounted for by the equity
      method is presented below:

      Revenues                                                      $  60,260

      Operating expenses                                              (54,537)
                                                                    ------------
      Operating income                                                  5,723

      Other income (expense)                                           (1,359)
                                                                    ------------
      Income before tax on minimum presumed income and income tax       4,364

      Recovery of tax on minimum presumed income                          529
      Tax on minimum presumed income                                       (3)
      Income taxes                                                       (623)
                                                                    ------------
      Net income for the year                                       $   4,267
                                                                    ============

14.   SUPPLEMENTAL GUARANTOR INFORMATION

      On November 24, 2004, the Company issued $180 million 9% First Preferred
      Ship Mortgage Notes due 2014.

      The 2014 Senior Notes are fully and unconditionally guaranteed on a joint
      and several basis by the majority of the Company-s subsidiaries directly
      involved in our Ocean and Passenger Business.

      The Indenture provides that the 2014 Senior Notes and each of the
      guarantees granted by Subsidiaries, other than the Mortgage, are governed
      by, and construed in accordance with, the laws of the state of New York -
      Unites States of America. Each of the mortgaged vessels are registered
      under either the Panamanian flag, or another jurisdiction with similar
      procedures. All of the Subsidiary Guarantors are outside of the United
      States of America.

      Supplemental condensed combining financial information for the Guarantor
      Subsidiaries for the 2014 Senior Notes is presented below. This
      information is prepared in accordance with the Company's accounting
      policies. This supplemental financial disclosure has been prepared on the
      same basis as described in note 2, and should be read in conjunction with
      the consolidated financial statements.


<PAGE>

<TABLE>
<CAPTION>

                                                  SUPPLEMENTAL CONDENSED COMBINING BALANCE SHEET

                                                           AT DECEMBER 31, 2005


                                                   (stated in thousands of US dollars)


                                                               Combined         Combined                              Total
                                                               subsidiary       subsidiary     Consolidating       consolidated
                                               Parent         guarantors     non-guarantors     adjustments         amounts
                                           ------------      ------------   ---------------   ---------------    --------------
<S>                                       <C>                <C>              <C>                <C>              <C>
Current assets
Receivables from related parties           $    150,558      $      4,147      $     5,580       $   (142,341)     $     17,944
Other current assets                              3,207             11,200          17,945              -                32,352
                                          ---------------   --------------    --------------     --------------   ---------------
Total current assets                            153,765             15,347          23,525           (142,341)           50,296
                                          ---------------   --------------    --------------     --------------   ---------------

Noncurrent assets

essels and equipment, net                            -            128,589          54,696             (1,216)          182,069
Investment in affiliates                         68,150                  -          15,698            (68,150)           15,698
Other noncurrent assets                           6,260             14,128           9,296                  -            29,684
                                          ---------------   --------------    --------------     --------------   ---------------
Total noncurrent assets,                         74,410            142,717          79,690            (69,366)          227,451
                                          ---------------   --------------    --------------     --------------   ---------------
Total assets                               $    228,175      $     158,064    $    103,215       $   (211,707)     $    277,747
                                          ===============  ===============    ==============     ==============   ===============

Current liabilities
Payables to related parties                $      3,056      $     119,972    $     21,321       $   (142,341)     $      2,008
Current portion of long term financial
debt                                              1,620                  -           6,702                  -             8,322
Other current liabilities                            25              6,433           7,155                  -            13,613
                                          ---------------   --------------    --------------     --------------   ---------------
Total current liabilities                         4,701            126,405          35,178           (142,341)           23,943
                                          ---------------   --------------    --------------     --------------   ---------------

Noncurrent liabilities
Long-term notes                                 180,000                  -               -                  -           180,000
Financial debt, net of current portion                -                  -          22,953                  -            22,953
Other payables                                        -                  -               -                  -                 -
                                          ---------------   --------------    --------------     --------------   ---------------
Total noncurrent liabilities                    180,000                  -          22,953                  -           202,953
                                          ---------------   --------------    --------------     --------------   ---------------
Total liabilities                               184,701            126,405          58,131           (142,341)          226,896

Minority interests                                    -                  -               -              2,479             2,479

Minority interest subject to put right                -                  -               -              4,898             4,898

Shareholders' equity                       $     43,474      $      31,659    $     45,084       $    (76,743)     $     43,474
                                          ---------------   --------------    --------------     --------------   ---------------

 Total liabilities, minority interests
   and shareholders' equity                $    228,175      $     158,064    $    103,215       $   (211,707)     $    277,747
                                          ===============  ===============    ==============     ==============   ===============
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                    SUPPLEMENTAL CONDENSED COMBINING BALANCE SHEETS

                                                 AT DECEMBER 31, 2004


                                                               Combined         Combined                              Total
                                                               subsidiary       subsidiary     Consolidating       consolidated
                                               Parent         guarantors     non-guarantors     adjustments         amounts
                                           ------------      ------------   ---------------   ---------------    --------------
<S>                                       <C>                <C>              <C>                <C>              <C>
C

Current assets
Receivables from related parties           $    101,870      $       3,332      $     2,862      $   (104,131)     $      3,933
Other current assets                                627             11,440           21,131                 -            33,198
                                          ---------------   --------------    --------------     --------------   ---------------
Total current assets                            102,497             14,772           23,993          (104,131)           37,131
                                          ---------------   --------------    --------------     --------------   ---------------

Noncurrent assets
Vessels and equipment, net                            -             95,353           65,182                 -            160,535
Investment in affiliates                         71,646                  -           15,607           (71,646)            15,607
Other noncurrent assets                          36,588             15,305            8,482                 -             60,375
                                          ---------------   --------------    --------------     --------------   ---------------
Total noncurrent assets                         108,234            110,658           89,271           (71,646)           236,517
                                          ---------------   --------------    --------------     --------------   ---------------

 Total assets                              $    210,731      $     125,430     $    113,264      $   (175,777)     $    273,648
                                          ===============  ===============    ==============     ==============   ===============

Current liabilities
Payables to related parties                $          -       $     97,184     $      7,715      $   (104,131)     $        768
Current portion of long term financial
debt                                              1,620                  -            8,488                 -            10,108
Other current liabilities                           201              4,854            7,759                 -            12,814
                                          ---------------   --------------    --------------     --------------   ---------------
Total current liabilities                         1,821            102,038           23,962          (104,131)           23,690
                                          ---------------   --------------    --------------     --------------   ---------------

Noncurrent liabilities
Long-term notes                                 180,000                  -                -                 -           180,000
Financial debt, net of current portion                -                  -           29,430                 -            29,430
Other payables                                        -                  -              399                 -               399
                                          ---------------   --------------    --------------     --------------   ---------------
Total noncurrent liabilities                    180,000                  -           29,829                 -           209,829
                                          ---------------   --------------    --------------     --------------   ---------------
Total liabilities                               181,821            102,038           53,791          (104,131)          233,519

Minority interest                                     -                  -                -             6,468             6,468

Minority interest subject to put right                -                  -                -             4,751             4,751

Shareholders' equity                       $     28,910      $      23,392     $     59,473      $    (82,865)     $     28,910
                                          ---------------   --------------    --------------     --------------   ---------------

 Total liabilities, minority interests
   and shareholders' equity                $    210,731      $    125,430     $     113,264      $   (175,777)     $    273,648
                                          ===============  ===============    ==============     ==============   ===============
</TABLE>


<PAGE>



<TABLE>

                            SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF OPERATIONS

                                      FOR THE YEAR ENDED DECEMBER 31, 2005

                                       (stated in thousands of US dollars)
<CAPTION>



                                                           Combined          Combined                             Total
                                                           subsidiary        subsidiary     Consolidating      consolidated
                                            Parent         guarantors      non-guarantors    adjustments         amounts
                                       ---------------- ----------------- ---------------- ----------------- -----------------
<S>                                      <C>              <C>               <C>               <C>              <C>
Revenues                                  $     -          $   73,243        $   58,869       $   (6,751)       $   125,361

Operating expenses                            (1,606)         (49,725)          (37,509)           6,732            (82,108)
                                       ---------------- ----------------- ---------------- ----------------- -----------------
Operating profit (loss)                       (1,606)          23,518            21,360              (19)            43,253

Investment in affiliate                       15,768             -                 (497)         (15,768)              (497)
Other income (expenses)                          406          (14,842)           (3,169)               -            (17,605)
                                       ---------------- ----------------- ---------------- ----------------- -----------------
Income (loss) before income tax and           14,568            8,676            17,694          (15,787)            25,151
  minority interest

Income taxes                                    -                (409)             (377)               -               (786)
Minority interest                               -                -                 -              (9,797)            (9,797)
                                       ---------------- ----------------- ---------------- ----------------- -----------------
Net income (loss)                         $   14,568       $    8,267        $   17,317       $  (25,584)       $    14,568
                                       ================ ================= ================ ================= =================

</TABLE>

<TABLE>

                            SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF OPERATIONS

                                      FOR THE YEAR ENDED DECEMBER 31, 2004
<CAPTION>


                                                           Combined          Combined                             Total
                                                           subsidiary        subsidiary     Consolidating      consolidated
                                            Parent         guarantors      non-guarantors    adjustments         amounts
                                       ---------------- ----------------- ---------------- ----------------- -----------------
<S>                                      <C>              <C>               <C>               <C>              <C>
Revenues                               $    -           $   61,856        $   54,121       $  (20,817)       $    95,160

Operating expenses                         (1,222)         (39,667)          (47,654)          20,817            (67,726)
                                    ---------------- ----------------- ---------------------------------- -----------------
Operating profit (loss)                    (1,222)          22,189             6,467                -             27,434

Investment in affiliate                    14,317                -               356          (14,267)               406
Other income (expenses)                    (7,956)          (9,236)           (1,752)          (1,975)           (20,919)
                                    ---------------- ----------------- ------------------ --------------- -----------------
Income before income tax and                5,139           12,953             5,071          (16,242)             6,921
  minority interests

Income taxes                                    -              265              (907)               -               (642)
Minority interest                               -                -                 -           (1,140)            (1,140)
                                    ---------------- ----------------- ------------------ --------------- -----------------
Net income (loss)                      $    5,139       $   13,218        $    4,164       $  (17,382)       $    5,139
                                    ================ ================= ================== =============== =================

</TABLE>

<PAGE>


<TABLE>


                            SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF OPERATIONS

                                      FOR THE YEAR ENDED DECEMBER 31, 2003

                                        (stated in thousands of US dollars)

<CAPTION>


                                                        Combined             Combined                             Total
                                                        subsidiary           subsidiary     Consolidating      consolidated
                                            Parent      guarantors         non-guarantors    adjustments         amounts
                                       ---------------- ----------------- ---------------- ----------------- -----------------
<S>                                      <C>              <C>               <C>               <C>              <C>
Revenues                               $        -       $   67,523        $    7,710       $        -       $     75,233

Operating expenses                           (994)         (68,943)           (3,875)               -            (73,812)
                                    ---------------- ----------------- ------------------- -------------- -----------------
Operating profit (loss)                      (994)          (1,420)            3,835                -              1,421

Investment in affiliates                   (9,792)               -              (125)          13,057              3,140
Other income (expenses)                      (732)         (15,628)             (176)           1,975            (14,561)
                                    ---------------- ----------------- ------------------- -------------- -----------------
Income (loss) before income               (11,518)         (17,048)            3,534           15,032            (10,000)
   tax and minority interest

Income taxes                                    -             (185)                -                -               (185)
Minority interest                               -                -                 -           (1,333)            (1,333)
                                    ---------------- ----------------- ------------------- -------------- -----------------
Net income (loss)                      $  (11,518)      $  (17,233)       $    3,534       $   13,699       $    (11,518)
                                    ================ ================= =================== ============== =================

</TABLE>

<TABLE>

                                             SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOW

                                                      FOR THE YEAR ENDED DECEMBER 31, 2005
<CAPTION>


                                                        Combined             Combined                             Total
                                                        subsidiary           subsidiary     Consolidating      consolidated
                                            Parent      guarantors         non-guarantors    adjustments         amounts
                                       ---------------- ----------------- ---------------- ----------------- -----------------
<S>                                      <C>              <C>               <C>               <C>              <C>
Net income (loss)                     $    14,568      $     8,267       $    17,317      $   (25,584)       $   14,568
Adjustments to reconcile net income
  (loss) to net cash provided by
  operating activities:                   (15,057)           7,919           (16,343)          25,584             2,103
                                       ---------------- ----------------- ---------------- ----------------- -----------------
Net cash provided by (used in)               (489)          16,186               974             -               16,671
   operating activities

Intercompany sources                      (15,745)          (3,835)             (457)          20,037             -
Non-subsidiary sources                    (13,401)         (41,214)           27,890             -              (26,725)
                                       ---------------- ----------------- ---------------- ----------------- -----------------
Net cash provided by (used in)            (29,146)         (45,049)           27,433           20,037           (26,725)
   investing activities

Intercompany sources                        3,056           25,994            (9,013)         (20,037)            -
Non-subsidiary sources                     29,386             -              (23,020)            -                6,366
                                       ---------------- ----------------- ---------------- ----------------- -----------------
Net cash provided by (used in)             32,442           25,994           (32,033)         (20,037)            6,366
   financing activities
                                       ---------------- ----------------- ---------------- ----------------- -----------------
Net increase (decrease) in cash and
   cash equivalents                   $     2,807      $    (2,869)      $    (3,626)     $         -        $   (3,688)
                                      ================ ================== ================ ================= =================

</TABLE>


<PAGE>

<TABLE>

                                     SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOW

                                              FOR THE YEAR ENDED DECEMBER 31, 2004

                                               (stated in thousands of US dollars)


                                                           Combined          Combined                             Total
                                                           subsidiary        subsidiary     Consolidating      consolidated
                                            Parent         guarantors      non-guarantors    adjustments         amounts
                                       ---------------- ----------------- ---------------- ----------------- -----------------
<S>                                      <C>              <C>               <C>               <C>              <C>
Net income (loss)                     $     5,139      $    13,218       $     4,164      $   (17,382)      $     5,139
Adjustments to reconcile net income
  (loss) to net cash provided by
  operating activities:                    (7,155)          10,333            (2,570)          17,382            17,990
                                       ---------------- ----------------- ---------------- ----------------- -----------------
Net cash provided by (used in)             (2,016)          23,551             1,594                -            23,129
   operating activities
                                       ---------------- ----------------- ---------------- ----------------- -----------------
Intercompany sources                      (18,115)           6,402             2,154            9,559                 -
Non-subsidiary sources                          -          (14,982)          (42,574)               -           (57,556)
                                       ---------------- ----------------- ---------------- ----------------- -----------------

Net cash provided by (used in)            (18,115)          (8,580)          (40,420)           9,559           (57,556)
   investing activities

Intercompany sources                       (8,556)           2,224            15,891           (9,559)                -
Non-subsidiary sources                     28,063          (14,750)           24,468                -            37,781
                                       ---------------- ----------------- ---------------- ----------------- -----------------
Net cash provided by (used in)             19,507          (12,526)           40,359           (9,559)           37,781
   financing activities
                                       ---------------- ----------------- ---------------- ----------------- -----------------
Net increase in cash and cash
   equivalents                        $      (624)     $     2,445       $     1,533      $         -       $     3,354
                                      ================ ================== ================ ================= =================
</TABLE>


<TABLE>

                                            SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF CASH FLOW

                                                      FOR THE YEAR ENDED DECEMBER 31, 2003
<CAPTION>


                                                           Combined          Combined                             Total
                                                           subsidiary        subsidiary     Consolidating      consolidated
                                            Parent         guarantors      non-guarantors    adjustments         amounts
                                       ---------------- ----------------- ---------------- ----------------- -----------------
<S>                                      <C>              <C>               <C>               <C>              <C>



Net income (loss)                     $  (11,518)        $  (17,233)        $    3,534      $     13,699      $   (11,518)
Adjustments to reconcile net income
  (loss) to net cash provided by
  operating activities:                   13,825             27,407              2,587           (13,699)          30,120
                                       ---------------- ----------------- ---------------- ----------------- -----------------
Net cash provided by (used in)             2,307             10,174              6,121                 -           18,602
   operating activities

Net cash provided by (used in)
   investing activities                   14,384             (4,491)           (14,309)                -           (4,416)

Net cash provided by (used in)
   financing activities                  (16,644)            (3,299)             9,281                 -          (10,662)
                                       ---------------- ----------------- ---------------- ----------------- -----------------
Net increase (decrease) in cash and
   cash equivalents                   $       47         $    2,384        $     1,093      $          -      $     3,524
                                      ================ ================== ================ ================= =================

</TABLE>

15.   SUBSEQUENT EVENTS (UNAUDITED)

      Recently, the Company commenced preparation for an initial public offering
      of its common shares to be registered in the United States of America. The
      shares held directly by our existing shareholders are expressly entitled
      to seven votes per share and all other holders of our common shares will
      be entitled to one vote per share. The special voting rights of the
      existing shareholders are not transferable. Following the completion of
      the initial public offering, our existing shareholders will continue to
      have a majority of the voting power of our common shares.

      On March 20, 2006 we purchased, for $11.5 million all of the issued and
      outstanding capital stock of Ravenscroft Shipping (Bahamas) S.A.
      (Ravenscroft) from two of our related companies Crosstrade Maritime Inc.
      and Crosstrees Maritime Inc. Ravenscroft and its affiliated entities
      manage the vessels in our Ocean Business, Offshore Supply Business, and
      Passenger Business. The purchase price of this acquisition was paid in the
      form of a non-interest bearing promissory note payable upon the earlier of
      (i) the successful completion of the initial public offering or (ii)
      September 30, 2006. The promissory note is secured by a first-ranking
      pledge over the shares purchased. We have the option to cause Crosstrade
      Maritime Inc. and Crosstrees Maritime Inc. to repurchase all, but not less
      than all, of the Ravenscroft shares purchased for the original
      consideration. The put option shall commence on the first day after the
      closing of the acquisition and shall terminate upon the earlier of (i) the
      successful completion of the initial public offering or (ii) September 30,
      2006.

      Separately, on March 21, 2006, we purchased for $48 million, an additional
      66.67% of the issued and outstanding capital stock of UP Offshore
      (Bahamas) Ltd. (UP Offshore), from LAIF XI Ltd. (LAIF), an affiliate of
      Solimar Holdings Ltd, one of our shareholders. Following the acquisition
      of the shares of UP Offshore from LAIF, we hold 94.45% of the issued and
      outstanding shares of UP Offshore. The purchase price was paid in the form
      of a non-interest bearing promissory note payable upon the earlier of (i)
      the successful completion of the initial public offering of the Company or
      (ii) September 30, 2006. The promissory note is secured by a first-ranking
      pledge over the shares purchased. We have the option to cause LAIF to
      repurchase from us all, but not less than all, of the UP Offshore shares
      purchased for the original consideration. The put option shall commence on
      the first day after the closing of the transaction and shall terminate
      upon the earlier of (i) the successful completion of the initial public
      offering of the Company or (ii) September 30, 2006.

      The purchase price allocation for these two acquisitions has not yet been
      completed, but the purchase price in each transaction is expected to be in
      excess of the carrying value of the net assets acquired.

      Also, in March 2006 we hired the administrative personnel and purchased
      the administrative related assets of Oceanmarine.

      We have reached an understanding with the IFC, to purchase from the IFC
      the 7.14% of our subsidiary UP River (Holdings) Ltd., which we do not own
      for the price of $6 million. As part of this understanding the IFC will
      waive its option to convert its interest in UP River (Holdings) Ltd. to
      our shares and its right to participate in the initial public offering of
      the Company. This understanding is subject to the successful completion of
      the offering and the purchase price will be paid from proceeds of the
      offering.

      On March 20, 2006 two of our shareholders, Inversiones Los Avellanos S.A.
      and Avemar Holdings (Bahamas) Ltd. (Avemar) (our wholly owned subsidiary),
      subject to the successful completion of this offering, cancelled their
      agreement pursuant to which Avemar had previously granted Inversiones Los
      Avellanos S.A. an irrevocable proxy to vote our shares owned by Avemar. As
      a consequence, Solimar Holding Ltd. will own 63.36% of our shares and the
      remaining 36.64% will be owned directly and indirectly by Inversiones Los
      Avellanos S.A. This agreement to cancel the shares owned by Avemar is
      subject to the succesful completion of the offering.

      On March 20, 2006, we exercised our option to repurchase, from Inversiones
      Los Avellanos S.A., 25,212 shares of our common stock for a total price of
      $894,999 and the $894,999 Note issued in connection with the option was
      cancelled.


<PAGE>

ITEM 19 - EXHIBITS



EXHIBIT INDEX

Exhibit Number                    Description

 1.1    Articles of Incorporation and By-laws of Ultrapetrol (Bahamas) Limited.*

 1.2    Articles of Incorporation (English translation) and By-laws of Baldwin
        Maritime Inc.*

 1.3    Articles of Incorporation (English translation) and By-laws of Bayham
        Investments  S.A.*

1.4     Articles of Incorporation (English translation) and By-laws of Cavalier
        Shipping  Inc.*

 1.5    Bylaws (English translation) of Corporacion De Navegacion Mundial S.A.*

 1.6    Articles of Incorporation (English translation) and By-laws of Danube
        Maritime Inc.*

 1.7    Articles of Incorporation and By-laws of General Ventures Inc.*

 1.8    Articles of Incorporation (English translation) and By-laws of Imperial
        Maritime Ltd. (Bahamas) Inc.*

 1.9    Articles of Incorporation (English translation) and By-laws of Kattegat
        Shipping Inc.*

1.10    Memorandum of Association and Articles of Association of Kingly
        Shipping Ltd.*

1.11    Memorandum of Association and Articles of Association of Majestic
        Maritime Ltd.*

1.12    Articles of Incorporation and Bylaws of Massena Port S.A.
        (English translation)*

1.13    Memorandum of Association and Articles of Association of Monarch
        Shipping Ltd.*

1.14    Memorandum of Association and Articles of Association of Noble
        Shipping Ltd.*

1.15    Articles of Incorporation (English translation) and Bylaws
       (English translation) of Oceanpar S.A.*

1.16    Articles of Incorporation (English translation) and By-laws of
        Oceanview Maritime Inc.*

1.17    Articles of Incorporation and Bylaws of Parfina S.A.
        (English translation)*

1.18    Articles of Incorporation (English translation) and By-laws of
        Parkwood Commercial Corp.*

1.19    Articles of Incorporation (English translation) and By-laws of Princely
        International Finance Corp.*

1.20    Memorandum of Association (English translation) and Articles of
        Association of Regal International Investments S.A.*

1.21    Articles of Incorporation (English translation) and By-laws of Riverview
        Commercial Corp.*

1.22    Memorandum of Association and Articles of Association of Sovereign
        Maritime Ltd.*

1.23    Articles of Incorporation (English translation) and By-laws of Stanmore
        Shipping Inc.*

1.24    Articles of Incorporation (English translation) and By-laws of Tipton
        Marine Inc.*

1.25    Articles of Incorporation (English translation) and By-laws of
        Ultrapetrol International S.A.*

1.26    Articles of Incorporation and Bylaws of Ultrapetrol S.A.
        (English translation)*

1.27    Memorandum of Association and Articles of Association of UP Offshore
        (Holdings) Ltd.*

 2.1    Form of Global Exchange Notes (attached as Exhibit A to Exhibit 4.3).*

 2.2    Registration Rights Agreement dated November 10, 2004.*

 2.3    Indenture dated November 24, 2004.*

 2.4    Form of Subsidiary Guarantee (attached as Exhibit F to Exhibit 10.4).*

 4.1    Stock Purchase Agreement dated March 21, 2006 by and between Ultrapetrol
        (Bahamas) Limited and LAIF XI, LTD**

 4.2    Stock Purchase Agreement dated March 20, 2006 by and among Ultrapetrol
        (Bahamas) Limited, Crosstrade Maritime Inc, and Crosstrees
        Maritime Inc.**

  7     Statement of Ratio of Earning to Fixed Charges

12.1    Section 302 Certification of Chief Executive Officer

12.2    Section 302 Certification of Chief Financial Officer

13.1    Section 906 Certification of Chief Executive Officer

13.2    Section 906 Certification of Chief Financial Officer

----------
*    Incorporated by reference to the Registration Statement on Form F-4 of
     Ultrapetrol (Bahamas) Limited filed March 4, 2005 (Reg. No. 333-8878).

**   Incorporated by reference to the Registration Statement on Form F-1 of
     Ultrapetrol (Bahamas) Limited filed March 30, 2006 (Reg. No. 333-132856).


SIGNATURE


     The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf on April [ ]. 2006.

ULTRAPETROL (BAHAMAS) LIMITED


/s/ Felipe Menendez Ross
-------------------------
Felipe Menendez Ross
President