** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION****Washington, D.C. 20549**

 

**FORM 10-K**

 

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

 

**For the fiscal year ended December 31, 2005**

 

**o****Transition Report Pursuant to Section 13 or 15(d)of theSecurities Exchange Act of 1934**

 

**for the transition period from                to                **

 

**Commission file number 001-16531**

 

**GENERAL MARITIME CORPORATION**(Exact name of registrant as specified inits charter)

 
| **Republic of the Marshall Islands**                             | ** ** | **06-159-7083**                       |
|------------------------------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction of  incorporation or organization) |       | (I.R.S. Employer  Identification No.) |
| ** **                                                       | ** ** | ** **                            |
| **299  Park Avenue, New York, New York**                         | ** ** | **10171**                             |
| (Address of principal  executive office)                         |       | (Zip Code)                            |

 

Registrant’s telephonenumber, including area code:**(212) 763-5600**

 

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

 

Title of Each Class

**Common Stock, par value $.01 pershare**

 

Name of Each Exchangeon Which Registered

**New York Stock Exchange**

 

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

**None**

 

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

 

Yes  ý    No  o

 

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 or 15(d)of the Act.

 

Yes  o    No  ý

 

Indicate by check mark whether theregistrant (1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (orfor 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  ý    No  o

 

Indicate by check mark if disclosure ofdelinquent filers pursuant to Item 405 of Regulation S-K is not containedherein and will not be contained, to the best of the registrant’s knowledge, indefinitive proxy or information statements incorporated by reference in PartIII of this Form 10-K or any amendment to this Form 10-K. o

 

Indicate by check markwhether registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

 

Large Accelerated FilerýAccelerated Filer oNon-Accelerated Filer o

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).

 

Yes oNo ý

 

The aggregate market value of the votingstock of the registrant held by non-affiliates of the registrant as of June 30,2004 was approximately $742.2 million, based on the closing price of $27.44 pershare.

 

The number of shares outstanding of the registrant’scommon stock as of March 8, 2006 was 33,864,314 shares.

 

DOCUMENTS INCORPORATEDBY REFERENCE

 

ProxyStatement for the 2006 Annual Meeting of Stockholders, to be filed with theSecurities and Exchange Commission not later than 120 days after December 31,2005, is incorporated by reference in Part III herein.

 

 

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**PART I**

 

**ITEM1. BUSINESS**

 

**OVERVIEW**

 

We are a leading provider of international seaborne crude oiltransportation services. Our current fleet consists of 30 wholly owned vessels,consisting of 19 Aframax (nine of which are held for sale) and eight Suezmax vesselsand three newbuilding Suezmax contracts, making us a large mid-sized vesseloperator in the world. The 27 vessels that we currently operate (including ninevessels held for sale) have a total of 3.1 million dwt, all of which is double-hulled.Many of the vessels in our fleet are “sister ships”, which provide us withoperational and scheduling flexibility, as well as economies of scale in theiroperation and maintenance.

 

With the majority of our vessels currently operating in the Atlanticbasin, we have one of the largest fleets in this region, which includes portsin the Caribbean, South and Central America, the United States, Western Africa,the Mediterranean, Europe and the North Sea. Transportation of crude oil to theU.S. Gulf Coast and other refining centers in the United States requires vesselowners and operators to meet more stringent environmental regulations than inother regions of the world. We have focused our operations in the Atlanticbasin because we believe that these stringent operating and safety standardsgive us a potential competitive advantage. We have established a niche in theregion due to our high quality vessels, all of which are double-hulled, ourcommitment to safety and our many years of experience in the industry. Althoughthe majority of our vessels operate in the Atlantic basin, we also currentlyoperate vessels in the Black Sea, the Far East and in other regions, which webelieve enables us both to take advantage of market opportunities and toposition our vessels in anticipation of drydockings. Our customers include mostof the major international oil companies such as Amerada Hess, BP, ChevronCorporation, CITGO Petroleum Corp., ConocoPhillips, Petrobras, Shell OilCompany and Sun International Ltd.

 

We actively manage the deployment of our vessels between spot marketvoyage charters, which generally last from several days to several weeks, andtime charters, which can last up to several years. We continuously and activelymonitor market conditions in an effort to take advantage of changes in charterrates and to maximize our long-term cash flow by changing this charteringdeployment profile. We design our fleet deployment to provide greater cash flowstability through the use of time charters for part of our fleet, whilemaintaining the flexibility to benefit from improvements in market rates bydeploying the balance of our vessels in the spot market.

 

Our net voyage revenues, which are voyage revenuesminus voyage expenses, have grown from $12.0 million in 1997 to $430.7 millionin 2005. Net voyage revenues decreased by $152.6 million, or 26.2%, to $430.7million for the year ended December 31, 2005 compared to $583.3 million for theyear ended December 31, 2004 due to lower freight rates and the smaller size ofour fleet. We have also grown our fleet of tankers from six (none of which weredouble-hull) as of December 31, 1997 to our current fleet of 27 vessels (all ofwhich are double-hull, including nine vessels held for sale). We consummatedour initial public offering in June 2001.Our fleet was 43 vessels at December31, 2004. Since October 2005, we have sold or agreed to sell 17 of ournon-double hull vessels and 9 of our OBO vessels, which we considered to benon-core assets, in four separate transactions. As a result, we believe thatour fleet profile has become more attractive to our customers. We have alsogenerated additional capital which we may use to support potential futuregrowth.

 

**AVAILABLE INFORMATION**

 

We file annual,quarterly, and current reports, proxy statements, and other documents with theSecurities and Exchange Commission, or the SEC, under the Securities ExchangeAct of 1934, or the Exchange Act. The public may read and copy any materialsthat we file with the SEC at the SEC’s Public Reference Room at 100 F Street,NE, NW, Washington, DC 20549. The public may obtain information on theoperation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.Also, the SEC maintains an Internet website that contains reports, proxy andinformation statements, and other information regarding issuers, including us,that file electronically with the SEC. The public can obtain any documents thatwe file with the SEC at www.sec.gov.

 

In addition, our companywebsite can be found on the Internet at www.generalmaritimecorp.com. Thewebsite contains information about us and our operations. Copies of each of ourfilings with the SEC on Form 10-K, Form 10-Q and Form 8-K, and all amendmentsto those reports, can be viewed and downloaded free of charge as soon asreasonably practicable after the reports and amendments are electronicallyfiled with or furnished to the SEC. To view the reports, accesswww.generalmaritimecorp.com, click on Press Releases, and then SEC Filings.

 

Any of the abovedocuments can also be obtained in print by any shareholder upon request to ourInvestor Relations Department at the following address:

 

Corporate InvestorRelations

 

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General MaritimeCorporation

299 Park Avenue

New York, NY 10171

 

**BUSINESSSTRATEGY**

 

Our strategy is to employ our existing competitive strengths to enhanceour position within the industry and maximize long-term cash flow. Ourstrategic initiatives include:

 

•              *Managing Environmentally Safe, Yet Cost Efficient Operations.*We aggressively manage our operating and maintenance costs. At the same time,our fleet has an excellent safety and environmental record that we maintainthrough acquisitions of high-quality vessels and regular maintenance andinspection of our fleet. We maintain operating standards for all of our vesselsthat emphasize operational safety, quality maintenance, continuous training ofour officers and crews and compliance with U.S. and international environmentaland safety regulations. Our in-house safety staff oversees many of theseservices. We believe the age and quality of the vessels in our fleet, coupledwith our excellent safety and environmental record, position us favorablywithin the sector with our customers and for future business opportunities.

 

•              *Balancing Vessel Deployment to Maximize Fleet Utilization and CashFlows*. We actively manage the deployment of our fleet between timecharters and spot market voyage charters. Our vessel deployment strategy isdesigned to provide greater cash flow stability through the use of timecharters for part of our fleet, while maintaining the flexibility to benefitfrom improvements in market rates by deploying the balance of our vessels inthe spot market. Our goal is to be the first choice of our customers for crudeoil transportation services. We constantly monitor the market and seek toanticipate our customers’ crude oil transportation needs and to respond quicklywhen we recognize attractive chartering opportunities.

 

•              *Growing and Managing the Profile of Our Fleet*. We are anindustry consolidator focused on opportunistically acquiring high-qualitymid-sized vessels. During the past eight years we have grown our fleet from sixvessels to our current fleet of 27 vessels (nine of which are held for sale) plusthree newbuilding contracts. We are continuously and actively monitoring themarket in an effort to take advantage of expansion and growth opportunities. Wealso evaluate opportunities to monetize our investment in vessels by sellingthem when conditions are favorable to generate return on invested capital, toadjust the profile of our fleet to fit customer demands such as preference fordouble-hull vessels and to generate capital for potential value enhancinginvestments in the future. During 2005 we contracted to sell 17 non-double-hullvessels for approximately $432 million.

 

•              *Maintaining a Prudent Capital Structure.* We are committed tomaintaining prudent financial policies aimed at preserving financial stabilityand increasing long-term cash flow. During the year ended December 31,2002, our debt to capitalization ratio declined from 40.6% to 36.8%. As ofMarch 31, 2003, after giving effect to the $525.0 million acquisitioncosts of the 19 vessels from Metrostar Management Corporation and the financingof those vessels, our debt to capitalization ratio would have been 59.9% and asof December 31, 2003 there was a reduction to 53.5%. During 2004, a year inwhich we used $168.5 million in investing activities, we reduced our debt tocapitalization ratio to 35.3% as of December 31, 2004 from 53.5% as of December31, 2003. As of December 31, 2005 we further reduced our debt to capitalizationratio to 12.2%. As of December 31, 2005 we had the ability to draw down anadditional $662.4 million on our revolving credit facility.

 

**OURFLEET**

 

Ourcurrent fleet consists of 27 vessels and is comprised of 19 Aframax vessels (includingnine OBO Aframax vessels held for sale) and eight Suezmax vessels. Thefollowing chart provides information regarding our 27 vessels.

 

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| ** **                    | ** ** | **YARD**     | ** ** | **YEAR  BUILT** | ** ** | **YEAR  ACQUIRED** | ** ** | **DEADWEIGHT  TONS** | ** ** | **EMPLOYMENT  STATUS** | ** ** | **FLAG**         | ** ** | **SISTER  SHIPS(2)** | ** ** |
|-------------------------------|------------|--------------|------------|-----------------|------------|--------------------|------------|----------------------|------------|------------------------|------------|------------------|------------|----------------------|------------|
| OUR CURRENT  FLEET            |       |         |       |            |       |               |       |                 |       |                   |       |             |       |                 |       |
| AFRAMAX TANKERS               |       |         |       |            |       |               |       |                 |       |                   |       |             |       |                 |       |
| Genmar Strength** (1)**  |       | Sumitomo     |       | 2003            |       | 2004               |       | 105,674              |       | Spot                   |       | Liberia          |       | A                    |       |
| Genmar Defiance** (1)**  |       | Sumitomo     |       | 2002            |       | 2004               |       | 105,538              |       | Spot                   |       | Liberia          |       | A                    |       |
| Genmar Ajax **(1)**           |       | Samsung      |       | 1996            |       | 1998               |       | 96,183               |       | Spot                   |       | Liberia          |       | B                    |       |
| Genmar Agamemnon **(1)** |       | Samsung      |       | 1995            |       | 1998               |       | 96,214               |       | Spot                   |       | Liberia          |       | B                    |       |
| Genmar Minotaur **(1)**       |       | Samsung      |       | 1995            |       | 1998               |       | 96,226               |       | Spot                   |       | Liberia          |       | B                    |       |
| Genmar Revenge** (1)**   |       | Samsung      |       | 1994            |       | 2004               |       | 96,755               |       | Spot                   |       | Liberia          |       |                 |       |
| Genmar  Constantine**(1)**    |       | S. Kurushima |       | 1992            |       | 1998               |       | 102,335              |       | Spot                   |       | Liberia          |       | C                    |       |
| Genmar Alexandra  **(1)**     |       | S. Kurushima |       | 1992            |       | 2001               |       | 102,262              |       | Spot                   |       | Marshall Islands |       | C                    |       |
| Genmar Champ *                |       | Hyundai      |       | 1992            |       | 2001               |       | 100,001              |       | TC                     |       | Liberia          |       | D                    |       |
| Genmar Hector *               |       | Hyundai      |       | 1992            |       | 2001               |       | 96,027               |       | TC                     |       | Marshall Islands |       | D                    |       |
| Genmar Pericles  *            |       | Hyundai      |       | 1992            |       | 2001               |       | 100,001              |       | TC                     |       | Marshall Islands |       | D                    |       |
| Genmar Spirit *               |       | Hyundai      |       | 1992            |       | 2001               |       | 96,027               |       | TC                     |       | Liberia          |       | D                    |       |
| Genmar Star *                 |       | Hyundai      |       | 1992            |       | 2001               |       | 100,001              |       | TC                     |       | Liberia          |       | D                    |       |
| Genmar Trust *                |       | Hyundai      |       | 1992            |       | 2001               |       | 96,027               |       | TC                     |       | Liberia          |       | D                    |       |
| Genmar  Challenger *          |       | Hyundai      |       | 1991            |       | 2001               |       | 96,027               |       | TC                     |       | Liberia          |       | D                    |       |
| Genmar Endurance  *           |       | Hyundai      |       | 1991            |       | 2001               |       | 100,001              |       | TC                     |       | Liberia          |       | D                    |       |
| Genmar Trader *               |       | Hyundai      |       | 1991            |       | 2001               |       | 100,001              |       | TC                     |       | Liberia          |       | D                    |       |
| Genmar Princess** (1)**  |       | Sumitomo     |       | 1991            |       | 2003               |       | 96,648               |       | TC                     |       | Liberia          |       | E                    |       |
| Genmar Progress **(1)**       |       | Sumitomo     |       | 1991            |       | 2003               |       | 96,765               |       | TC                     |       | Liberia          |       | E                    |       |
|                          |       |         |       |            |       |               |       |                 |       |                   |       |             |       |                 |       |
|                          |       |         |       |            |       |               |       | 1,878,713            |       |                   |       |             |       |                 |       |
|                          |       |         |       |            |       |               |       |                 |       |                   |       |             |       |                 |       |
| SUEZMAX TANKERS               |       |         |       |            |       |               |       |                 |       |                   |       |             |       |                 |       |
| Genmar Harriet G** (1)** |       | TSU          |       | 2006            |       | 2006               |       | 150,205              |       | Spot                   |       | Liberia          |       |                 |       |
| Genmar Orion **(1)**          |       | Samsung      |       | 2002            |       | 2003               |       | 159,992              |       | Spot                   |       | Marshall Islands |       |                 |       |
| Genmar Argus** (1)**     |       | Hyundai      |       | 2000            |       | 2003               |       | 164,097              |       | Spot                   |       | Marshall Islands |       | F                    |       |
| Genmar Spyridon**(1)**        |       | Hyundai      |       | 2000            |       | 2003               |       | 153,972              |       | Spot                   |       | Marshall Islands |       | F                    |       |
| Genmar Hope **(1)**           |       | Daewoo       |       | 1999            |       | 2003               |       | 153,919              |       | Spot                   |       | Marshall Islands |       | G                    |       |
| Genmar Horn **(1)**           |       | Daewoo       |       | 1999            |       | 2003               |       | 159,475              |       | Spot                   |       | Marshall Islands |       | G                    |       |
| Genmar Phoenix **(1)**        |       | Halla        |       | 1999            |       | 2003               |       | 149,999              |       | Spot                   |       | Marshall Islands |       |                 |       |
| Genmar Gulf **(1)**           |       | Daewoo       |       | 1991            |       | 2003               |       | 149,803              |       | Spot                   |       | Marshall Islands |       |                 |       |
|                          |       |         |       |            |       |               |       |                 |       |                   |       |             |       |                 |       |
|                          |       |         |       |            |       | TOTAL              |       | 1,241,462            |       |                   |       |             |       |                 |       |
|                          |       |         |       |            |       |               |       |                 |       |                   |       |             |       |                 |       |
|                          |       |         |       | FLEET TOTAL     |       | 3,120,175          |       |                 |       |                   |       |             |       |

 

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TC= Time Chartered

 

*              Oil/Bulk/Orecarrier (O/B/O) vessel. Each of these vessels is held for sale.

 

(1)           Each vesselis collateral for our $800 million credit facility.

(2)           Each vesselwith the same letter is a “sister ship” of each other vessel with the sameletter.

 

During March 2003 and May2003, we acquired 19 vessels from Metrostar Management Corporation, anunaffiliated entity, consisting of 14 Suezmax and five Aframax vessels for anaggregate purchase price in cash of $525 million. The acquisitions werefinanced through the use of cash and borrowings under our then existingrevolving credit facilities together with the incurrence of additional debt. DuringApril 2004 and July 2004, we acquired nine vessels, consisting of three Aframaxvessels, two Suezmax vessels and four Suezmax newbuilding contracts, and atechnical management company from Soponata SA, an unaffiliated entity, for anaggregate purchase price of $248.1 million in cash. One of the four newbuildingSuezmax vessels was delivered in March 2006, and the remaining three arescheduled for delivery as follows: one in 2006, one in 2007 and one in 2008. Theacquisitions were financed through the use of cash and borrowings under ourrevolving credit facilities.

 

DuringNovember 2002, we sold our oldest vessel, *Stavanger Prince*,for scrap. During March 2003 and December 2003 we sold the *Kentucky*and the *West**Virginia*,respectively. During November 2003, December 2003 and February 2004, we soldthree double-bottomed 1986-built Aframax vessels that we acquired during 2003. DuringAugust 2004 and October 2004, we sold four

 

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single-hullSuezmax vessels. During 2005, we sold six Aframax and seven Suezmax vessels,all of which were either single-hull or double-sided. During January 2006, wesold one double-sided Aframax vessel and three single-hull Suezmax vessels. OnFebruary 10, 2006, we signed agreements to sell nine OBO Aframax vessels. As ofJanuary 31, 2006, all of our vessels are double-hull, consisting of 19 Aframaxvessels (including nine OBO Aframax vessels held for sale), eight Suezmaxvessels and three Suezmax newbuilding contracts.

 

Commercialmanagement for our vessels is provided through our wholly-owned subsidiary,General Maritime Management LLC, and our indirect wholly-owned subsidiary, GeneralMaritime Management (UK) LLC, which was formed in March 2003.

 

**FLEETDEPLOYMENT**

 

Westrive to optimize the financial performance of our fleet by deploying ourvessels on time charters and in the spot market. We believe that our fleetdeployment strategy provides us with the ability to benefit from increases intanker rates while at the same time maintaining a measure of stability throughcycles in the industry. The following table details the percentage of our fleetoperating on time charters and in the spot market during the past three years.

 
| ** **                    | ** ** | **TIME CHARTER VS. SPOT MIX  (as % of operating days)  YEAR ENDED  DECEMBER 31,** | ** ** |
|-------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                    | ** ** | **2005**                                                                                                                       | ** ** | **2004** | ** ** | **2003** | ** ** |
| Percent in Time  Charter Days |       | 28.3                                                                                                                           | %          | 28.2 | % | 19.7 | % |
| Percent in Spot  Days         |       | 71.7                                                                                                                           | %          | 71.8 | % | 80.3 | % |
| Total Vessel Operating  Days  |       | 14,073                                                                                                                         |       | 15,482 |   | 14,267 |   |

 

Vesselsoperating on time charters may be chartered for several months or years whereasvessels operating in the spot market typically are chartered for a singlevoyage that may last up to several weeks. Vessels operating in the spot marketmay generate increased profit margins during improvements in tanker rates,while vessels operating on time charters generally provide more predictablecash flows. Accordingly, we actively monitor macroeconomic trends and governmentalrules and regulations that may affect tanker rates in an attempt to optimizethe deployment of our fleet. Our current fleet has 11 vessels on time chartercontracts expiring on dates between March 2006 and July 2006, nine of whichrelate to OBO vessels held for sale.

 

**CLASSIFICATIONAND INSPECTION**

 

Allof our vessels have been certified as being “in-class” by Det Norske Veritas,the American Bureau of Shipping or Lloyd’s Registry. Each of theseclassification societies is a member of the International Association ofClassification Societies. Every commercial vessel’s hull and machinery isevaluated by a classification society authorized by its country of registry.The classification society certifies that the vessel has been built andmaintained in accordance with the rules of the classification society andcomplies with applicable rules and regulations of the vessel’s country ofregistry and the international conventions of which that country is a member.Each vessel is inspected by a surveyor of the classification society in threesurveys of varying frequency and thoroughness: every year for the annualsurvey, every two to three years for the intermediate survey and every four tofive years for special surveys. Special surveys always require drydocking. Vesselsthat are 15 years old or older are required, as part of the intermediate surveyprocess, to be drydocked every 24 to 30 months for inspection of the underwaterportions of the vessel and for necessary repairs stemming from the inspection.

 

Inaddition to the classification inspections, many of our customers regularlyinspect our vessels as a precondition to chartering them for voyages. Webelieve that our well-maintained, high-quality vessels provide us with acompetitive advantage in the current environment of increasing regulation andcustomer emphasis on quality.

 

We have implemented theInternational Safety Management Code, which was promulgated by theInternational Maritime Organization, or IMO (the United Nations agency formaritime safety and the prevention of marine pollution by ships), to establishpollution prevention requirements applicable to tankers. Prior to July 1, 1998,we obtained documents of compliance for our offices and safety managementcertificates for all of our vessels for which the certificates are required bythe IMO.

 

**OPERATIONSAND SHIP MANAGEMENT**

 

Weemploy experienced management in all functions critical to our operations,aiming to provide a focused marketing effort, tight quality and cost controlsand effective operations and safety monitoring. Through our wholly ownedsubsidiaries, General Maritime Management LLC, General Maritime Management(Portugal) Lda, General Maritime Management (UK) LLC and General MaritimeManagement (Hellas) Ltd. (which we expect to close during 2006), we currentlyprovide the commercial and technical management necessary for the operations ofmost of our vessels, which include ship maintenance, officer staffing,technical support, shipyard supervision, and risk management services throughour wholly owned subsidiaries.

 

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On February 10, 2006, wesigned agreements to sell nine OBO Aframax vessels. In connection with thatdecision, we determined one technical management office outside the U.S. wouldadequately service our current fleet and as such decided to close our office inPiraeus, Greece, operated by General Maritime Management (Hellas) Ltd.

 

We currently anticipatethat this office will cease its operations by July 2006 and estimates that thecost of closing this office to be approximately $1.5 million, primarilyattributable to employee severance costs, as well as professional fees and therent associated with the remainder of the lease which expires at the end of2006. We anticipate that approximately $0.8 million of this total expectedcost, which will be a component of general and administrative other expense onour statement of operations, will be recognized during the first quarter of2006, with the remainder recognized as a component of general andadministrative expense on our statement of operations later in 2006. Weestimate that substantially all of these costs will result in future cashexpenditures.

 

Ourcrews inspect our vessels and perform ordinary course maintenance, both at seaand in port. We regularly inspect our vessels. We examine each vessel and makespecific notations and recommendations for improvements to the overallcondition of the vessel, maintenance of the vessel and safety and welfare ofthe crew. We have an in-house safety staff to oversee these functions andretain Admiral Robert North (Ret.), formerly of the U.S. Coast Guard, as asafety and security consultant.

 

Thefollowing services are performed by General Maritime Management LLC, GeneralMaritime Management (Portugal) Lda and General Maritime Management (Hellas)Ltd. (which we expect to close during 2006):

 

•              supervisionof routine maintenance and repair of the vessel required to keep each vessel ingood and efficient condition, including the preparation of comprehensivedrydocking specifications and the supervision of each drydocking;

 

•              oversightof maritime and environmental compliance with applicable regulations, includinglicensing and certification requirements, and the required inspections of each vesselto ensure that it meets the standards set forth by classification societies andapplicable legal jurisdictions as well as our internal corporate requirementsand the standards required by our customers;

 

•              engagementand provision of qualified crews (masters, officers, cadets and ratings) andattendance to all matters regarding discipline, wages and labor relations;

 

•              arrangementto supply the necessary stores and equipment for each vessel; and

 

•              continualmonitoring of fleet performance and the initiation of necessary remedialactions to ensure that financial and operating targets are met.

 

Ourchartering staff, which is currently located in New York City and in London,monitors fleet operations, vessel positions and spot market voyage charterrates worldwide. We believe that monitoring this information is critical tomaking informed bids on competitive brokered charters.

 

**CREWINGAND EMPLOYEES**

 

Asof December 31, 2005, we employed approximately 133 office personnel.Approximately 56 of these employees manage the commercial operations of ourbusiness, of which 52 employees are located in New York City and four employeesare located in London, England. The other 77 employees are located in Piraeus,Greece and Lisbon, Portugal and manage the technical operations of ourbusiness. Our 49 employees located in Greece are subject to Greece’s nationalemployment collective bargaining agreement which covers terms and conditions oftheir employment. Our 28 employees located in Lisbon, Portugal are subject to alocal company employment collective bargaining agreement which covers the mainterms and conditions of their employment.

 

Asof December 31, 2005, we employed approximately 216 seaborne personnel to crewour fleet of 30 vessels, consisting of captains, chief engineers, chiefofficers and first engineers. The balance of each vessel’s crew is staffed byemployees of a third party with whom we contract for crew management services.We believe that we could obtain a replacement provider for these services, orcould provide these services internally, without any adverse impact on ouroperations.

 

Weplace great emphasis on attracting qualified crew members for employment on ourvessels. Recruiting qualified senior officers has become an increasinglydifficult task for vessel operators. We pay competitive salaries and providecompetitive benefits to our personnel. We believe that the well-maintainedquarters and equipment on our vessels help to attract and retain motivated and

 

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qualifiedseamen and officers. Our crew management services contractors have collectivebargaining agreements that cover all the junior officers and seamen whom theyprovide to us.

 

**CUSTOMERS**

 

Ourcustomers include most oil companies, as well as oil producers, oil traders, vesselowners and others. During the years ended December 31, 2005 and 2003, no singlecustomer accounted for more than 10% of our voyage revenues. During the yearended December 31, 2004, Sun International Ltd. accounted for approximately15.4% of our voyage revenues.

 

**COMPETITION**

 

Internationalseaborne transportation of crude oil and other petroleum products is providedby two main types of operators: fleets owned by independent companies andfleets operated by oil companies (both private and state-owned). Many oilcompanies and other oil trading companies, the primary charterers of the vesselswe own, also operate their own vessels and transport oil for themselves andthird party charterers in direct competition with independent owners andoperators. Competition for charters is intense and is based upon price, vessellocation, the size, age, condition and acceptability of the vessel, and thequality and reputation of the vessel’s operator.

 

Wecompete principally with other Aframax and Suezmax owners. However, competitionin the Aframax and Suezmax markets is also affected by the availability ofalternative size vessels. Panamax size vessels can compete for some of the samecharters for which we compete. Because ULCCs and VLCCs cannot enter the portswe serve due to their large size, they rarely compete directly with our vesselsfor specific charters.

 

Othersignificant operators of multiple Aframax and Suezmax vessels in the Atlanticbasin include Frontline, Ltd., Malaysian International Shipping CorporationBerhad, OMI Corporation, Overseas Shipholding Group, Inc., Teekay ShippingCorporation and Tsakos Energy Navigation. There are also numerous, smaller vesseloperators in the Atlantic basin.

 

**INSURANCE**

 

Theoperation of any ocean-going vessel carries an inherent risk of catastrophicmarine disasters and property losses caused by adverse weather conditions,mechanical failures, human error, war, terrorism and other circumstances orevents. In addition, the transportation of crude oil is subject to the risk ofspills, and business interruptions due to political circumstances in foreigncountries, hostilities, labor strikes and boycotts. The U.S. Oil Pollution Actof 1990, or OPA, has made liability insurance more expensive for ship ownersand operators imposing potentially unlimited liability upon owners, operatorsand bareboat charterers for oil pollution incidents in the territorial watersof the United States. We believe that our current insurance coverage isadequate to protect us against the principal accident-related risks that weface in the conduct of our business.

 

Ourprotection and indemnity insurance, or P&I insurance, covers third-partyliabilities and other related expenses from, among other things, injury ordeath of crew, passengers and other third parties, claims arising fromcollisions, damage to cargo and other third-party property and pollutionarising from oil or other substances. Our current P&I insurance coveragefor pollution is the maximum commercially available amount of $1.0 billion pertanker per incident and is provided by mutual protection and indemnityassociations. Each of the vessels currently in our fleet is entered in aprotection and indemnity association which is a member of the InternationalGroup of Protection and Indemnity Mutual Assurance Associations. The 14protection and indemnity associations that comprise the International Groupinsure approximately 90% of the world’s commercial tonnage and have enteredinto a pooling agreement to reinsure each association’s liabilities. Eachprotection and indemnity association has capped its exposure to this poolingagreement at $4.3 billion. As a member of protection and indemnityassociations, which are, in turn, members of the International Group, we aresubject to calls payable to the associations based on its claim records as wellas the claim records of all other members of the individual associations andmembers of the pool of protection and indemnity associations comprising theInternational Group.

 

Ourhull and machinery insurance covers risks of actual or constructive loss fromcollision, fire, grounding and engine breakdown. Our war risk insurance coversrisks of confiscation, seizure, capture, vandalism, sabotage and otherwar-related risks. Our loss-of-hire insurance covers loss of revenue for up to90 days resulting from vessel off hire for each of our vessels, with a 20 daydeductible.

 

**ENVIRONMENTAL AND OTHERREGULATION**

 

Governmentregulation significantly affects the ownership and operation of our vessels.They are subject to international conventions, national, state and local lawsand regulations in force in the countries in which our vessels may operate orare registered. We cannot predict the ultimate cost of complying with theserequirements, or the impact of these requirements on the resale value or usefullives of our vessels.

 

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Variousgovernmental and quasi-governmental agencies require us to obtain permits,licenses and certificates for the operation of our vessels.

 

We believe that theheightened level of environmental and quality concerns among insuranceunderwriters, regulators and charterers is leading to greater inspection andsafety requirements on all vessels and may accelerate the scrapping of older vesselsthroughout the industry. Increasing environmental concerns have created ademand for vessels that conform to the stricter environmental standards. Wemaintain operating standards for all of our vessels that emphasize operationalsafety, quality maintenance, continuous training of our officers and crews andcompliance with U.S. and international regulations. **We believe that theoperation of our vessels are in substantial compliance with applicableenvironmental laws and regulations; however, because such laws and regulationsare frequently changed and may impose increasingly stricter requirements, wecannot predict the ultimate cost of complying with these requirements, or theimpact of these requirements on the resale value or useful lives of our vessels.**

 

Ourvessels are subject to both scheduled and unscheduled inspections by a varietyof governmental and private entities, each of which may have uniquerequirements. These entities include the local port authorities (U.S. Coast Guard,harbor master or equivalent), classification societies, flag stateadministration (country of registry) and charterers, particularly terminaloperators and oil companies. Failure to maintain necessary permits or approvalscould require us to incur substantial costs or temporarily suspend operation ofone or more of our vessels.

 

**INTERNATIONALMARITIME ORGANIZATION**

 

The International Maritime Organization, or IMO (theUnited Nations agency for maritime safety), has adopted the InternationalConvention for the Prevention of Marine Pollution from Ships, 1973, as modifiedby the Protocol of 1978 relating thereto, which has been updated throughvarious amendments, or the MARPOL Convention. The MARPOL Convention relates toenvironmental standards including oil leakage or spilling, garbage management,as well as the handling and disposal of noxious liquids, harmful substances inpackaged forms, sewage and air emissions. These regulations, which have beenimplemented in many jurisdictions in which our vessels operate, provide, inpart, that:

 

•              25-year oldtankers must be of double-hull construction or of a mid-deck design withdouble-sided construction, unless:

 

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

 

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

 

•              30-year oldtankers must be of double-hull construction or mid-deck design withdouble-sided construction; and

 

•              all tankerswill be subject to enhanced inspections.

 

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

 

•              is thesubject of a contract for a major conversion or original construction on orafter July 6, 1993;

 

•              commences amajor conversion or has its keel laid on or after January 6, 1994; or

 

•              completes amajor conversion or is a newbuilding delivered on or after July 6, 1996.

 

Our vessels are alsosubject to regulatory requirements, including the phase-out of single-hulltankers, imposed by the IMO. Effective September 2002, the IMO acceleratedits existing timetable for the phase-out of single-hull oil tankers. Theseregulations require the phase-out of most single-hull oil tankers by 2015 orearlier, depending on the age of the tanker and whether it has segregatedballast tanks. As of December 31, 2004, we owned five single-hull vessels whichwere built in 1989 or later. Between November 2005 and January 2006, we soldour five single-hull vessels.

 

Under the regulations, the flag state may allow forsome newer single hull ships registered in its country that conform to certaintechnical specifications to continue operating until the 25th anniversary oftheir delivery. Any port state, however, may deny entry of those single hulltankers that are allowed to operate until their 25th anniversary to ports oroffshore terminals. These regulations have been adopted by over 150 nations,including many of the jurisdictions in which our tankers operate.

 

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As a result of the oil spill in November 2002relating to the loss of the *MT Prestige*,which was owned by a company not affiliated with us, in December 2003, theMarine Environmental Protection Committee of the IMO, or MEPC, adopted anamendment to a MARPOL Convention, which became effective in April 2005. Theamendment revised an existing regulation 13G accelerating the phase-out ofsingle hull oil tankers and adopted a new regulation 13H on the prevention ofoil pollution from oil tankers when carrying heavy grade oil. Under the revisedregulation, single hull oil tankers must be phased out no later than April 5,2005 or the anniversary of the date of delivery of the ship on the date or inthe year specified in the following table:

 
| **Category of Oil Tankers**                                                                                                                                                                                                                                                                                                                                                                | ** ** | **Date or Year**                                                                                                                                                                                                                                                                                                                              |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Category 1 oil tankers of 20,000  dwt and above carrying crude oil, fuel oil, heavy diesel oil or lubricating  oil as cargo, and of 30,000 dwt and above carrying other oils, which do not  comply with the requirements for protectively located segregated ballast  tanks                                                                                                                |       | April 5, 2005 for ships delivered on April 5, 1982  or earlier; or  2005 for ships delivered after April 5, 1982                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                       |       |                                                                                                                                                                                                                                                                                                                                          |
| Category 2 - oil tankers of 20,000  dwt and above carrying crude oil, fuel oil, heavy diesel oil or lubricating  oil as cargo, and of 30,000 dwt and above carrying other oils, which do  comply with the protectively located segregated ballast tank requirements  andCategory 3 - oil tankers of 5,000 dwt and above but less than the  tonnage specified for Category 1 and 2 tankers. |       | April 5, 2005 for ships delivered on April 5, 1977  or earlier  2005 for ships delivered after April 5, 1977 but before January 1, 1978  2006 for ships delivered in 1978 and 1979  2007 for ships delivered in 1980 and 1981   2008 for ships delivered in 1982  2009 for ships delivered in 1983  2010 for ships delivered in 1984 or later |

 

Under the revised regulations, the flag state mayallow for some newer single hull oil tankers registered in its country thatconform to certain technical specifications to continue operating until theearlier of the anniversary of the date of delivery of the vessel in 2015 or the25th anniversary of their delivery. Any port state, however, may deny entry ofthose single hull oil tankers that are allowed to operate until the earlier oftheir anniversary date of delivery in 2015 or the year in which the shipreaches 25 years of age after the date of its delivery, whichever is earlier.

 

The MEPC, in October 2004, adopted a unifiedinterpretation to regulation 13G that clarified the date of delivery fortankers that have been converted. Under the interpretation, where an oil tankerhas undergone a major conversion that has resulted in the replacement of thefore-body, including the entire cargo carrying section, the major conversioncompletion date of the oil tanker shall be deemed to be the date of delivery ofthe ship, provided that:

 

•      theoil tanker conversion was completed before July 6, 1996;

 

•      theconversion included the replacement of the entire cargo section and fore-bodyand the tanker complies with all the relevant provisions of MARPOL Conventionapplicable at the date of completion of the major conversion; and

 

•      theoriginal delivery date of the oil tanker will apply when considering the 15years of age threshold relating to the first technical specifications survey tobe completed in accordance with MARPOL Convention.

 

In December 2003, the MEPC adopted a newregulation 13H on the prevention of oil pollution from oil tankers whencarrying heavy grade oil, or HGO, which includes most of the grades of marinefuel. The new regulation bans the carriage of HGO in single hull oil tankers of5,000 dwt and above after April 5, 2005, and in single hull oil tankers of 600dwt and above but less than 5,000 dwt, no later than the anniversary of theirdelivery in 2008.

 

Under regulation 13H, HGO means any of the following:

 

•      crudeoils having a density at 15oC higher than 900 kg/m3;

 

•      fueloils having either a density at 15oC higher than 900 kg/m3 or akinematic viscosity at 50oC higher than 180 mm2/s; or

 

•      bitumen,tar and their emulsions.

 

Under the regulation 13H, the flag state may allowcontinued operation of oil tankers of 5,000 dwt and above, carrying crude oilwith a density at 15oC higher than 900 kg/m3 but lower than 945 kg/m3,that conform to certain technical specifications and, in the opinion of thesuch flag state, the ship is fit to continue such operation, having regard tothe size, age, operational area and structural

 

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conditionsof the ship and provided that the continued operation shall not go beyond thedate on which the ship reaches 25 years after the date of its delivery. Theflag state may also allow continued operation of a single hull oil tanker of600 dwt and above but less than 5,000 dwt, carrying HGO as cargo, if, in theopinion of the such flag state, the ship is fit to continue such operation,having regard to the size, age, operational area and structural conditions ofthe ship, provided that the operation shall not go beyond the date on which theship reaches 25 years after the date of its delivery.

 

The flag state may also exempt an oil tanker of 600dwt and above carrying HGO as cargo if the ship is either engaged in voyagesexclusively within an area under the its jurisdiction, or is engaged in voyagesexclusively within an area under the jurisdiction of another party, providedthe party within whose jurisdiction the ship will be operating agrees. The sameapplies to vessels operating as floating storage units of HGO.

 

Any port state, however, can deny entry of single hulltankers carrying HGO which have been allowed to continue operation under theexemptions mentioned above, into the ports or offshore terminals under itsjurisdiction, or deny ship-to-ship transfer of HGO in areas under itsjurisdiction except when this is necessary for the purpose of securing thesafety of a ship or saving life at sea.

 

During the fourth quarterof 2003, we recorded an $18.8 million impairment on five of the ninesingle-hull vessels we owned at that time and shortened the useful lives of allnine of the single-hull vessels for financial reporting purposes. This changein estimate resulted in an increase in annual depreciation expense ofapproximately $8.5 million through 2009 on the Company’s nine single-hullvessels owned as of December 31, 2003. During 2004, the Company sold four ofthese single-hull vessels. This change in estimate resulted in an increase inannual depreciation expense of approximately $4.7 million through 2009 on theCompany’s five remaining single-hull vessels owned as of December 31, 2004. During2005, the Company sold, or is carrying on its December 31, 2005 balance sheetas held for sale, these five remaining single-hull vessels. Consequently, as ofDecember 31, 2005, there is no additional depreciation expense attributable toany of the Company’s single-hull vessels.

 

**InSeptember 1997, the IMO adopted Annex VI to the International Conventionfor the Prevention of Pollution from Ships to address air pollution from ships.Annex VI was ratified in May 2004, and became effective May 19, 2005. Annex VIsets limits on sulfur oxide and nitrogen oxide emissions from ship exhausts andprohibits deliberate emissions of ozone depleting substances, such aschlorofluorocarbons. Annex VI also includes a global cap on the sulfur contentof fuel oil and allows for special areas to be established with more stringentcontrols on sulfur emissions.**We believe that all ourvessels are currently compliant in all material respects with theseregulations. Additional or new conventions, laws and regulations may be adoptedthat could adversely affect our business, cash flows, results of operations andfinancial condition.

 

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

 

Therequirements contained in the International Safety Management Code, or ISMCode, promulgated by the IMO, also affect our operations. The ISM Code requiresthe party with operational control of a vessel to develop an extensive safetymanagement system that includes, among other things, the adoption of a safetyand environmental protection policy setting forth instructions and proceduresfor operating its vessels safely and describing procedures for responding toemergencies. We intend to rely upon the safety management system that we andour third party technical managers have developed.

 

TheISM Code requires that vessel operators obtain a safety management certificatefor each vessel they operate. This certificate evidences compliance by a vessel’smanagement with code requirements for a safety management system. No vessel canobtain a certificate unless its manager has been awarded a document of compliance,issued by each flag state, under the ISM Code. We have obtained documents ofcompliance for our offices and safety management certificates for all of our vesselsfor which the certificates are required by the IMO. We are required to renewthese documents of compliance and safety management certificates annually.

 

Noncompliancewith the ISM Code and other IMO regulations may subject the shipowner orbareboat charterer to increased liability, may lead to decreases in availableinsurance coverage for affected vessels and may result in the denial of accessto, or detention in, some ports. The U.S. Coast Guard and European Unionauthorities have indicated that vessels not in compliance with the ISM Code bythe applicable deadlines will be prohibited from trading in U.S. and EuropeanUnion ports, as the case may be.

 

TheIMO has negotiated international conventions that impose liability for oilpollution in international waters and a signatory’s territorial waters.Additional or new conventions, laws and regulations may be adopted which couldlimit our ability to do business and which could have a material adverse effecton our business and results of operations.

 

Although the United States is not a party to theseconventions, many countries have ratified and follow the liability plan adoptedby the IMO and set out in the International Convention on Civil Liability forOil Pollution Damage of **1969. Under this convention** and depending on whether thecountry in which the damage results is a party to the 1992 Protocol to theInternational Convention on Civil Liability for Oil Pollution Damage, a vessel’sregistered owner is strictly liable for pollution damage caused in theterritorial waters of a contracting state by discharge of persistent oil,subject to certain complete defenses. Under an amendment **to the**

** **

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** **

**1992 Protocol that became effective on November **1, 2003, for vessels of 5,000to 140,000 gross tons (a unit of measurement for the total enclosed spaces withina vessel), liability will be limited to approximately $6.58** million plus $921** for each additional gross tonover 5,000. For vessels of over 140,000 gross tons, liability will be limitedto approximately $**131.0** million. As the conventioncalculates liability in terms of a basket of currencies, these figures arebased on **currency exchange rates on January 20, 2006.** The right to limit liabilityis forfeited under the International Convention on Civil Liability for OilPollution Damage where the spill is caused by the owner’s actual fault andunder the 1992 Protocol where the spill is caused by the owner’s intentional orreckless conduct. Vessels trading to states **that******areparties to these conventions must provide evidence of insurance covering theliability of the owner. In jurisdictions where the International Convention onCivil Liability for Oil Pollution Damage has not been adopted, variouslegislative schemes or common law govern, and liability is imposed either onthe basis of fault or in a manner similar to that convention. We believe thatour P&I insurance **will cover******theliability under the plan adopted by the IMO.

 

**U.S.OIL POLLUTION ACT OF 1990 AND COMPREHENSIVE ENVIRONMENTAL RESPONSE,COMPENSATION AND LIABILITY ACT**

 

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

 

UnderOPA, vessel owners, operators and bareboat charterers are “responsible parties”who are jointly, severally and strictly liable (unless the spill results solelyfrom the act or omission of a third party, an act of God or an act of war) forall containment and clean-up costs and other damages arising from oil spillsfrom their vessels. These other damages are defined broadly to include:

 

•      naturalresource damages and related assessment costs;

 

•      realand personal property damages;

 

•      netloss of taxes, royalties, rents, profits or earnings capacity;

 

•      netcost of public services necessitated by a spill response, such as protectionfrom fire, safety or health hazards; and loss of subsistence use of naturalresources.

 

OPAlimits the liability of responsible parties to the greater of $1,200 per grosston or $10 million per tanker that is over 3,000 gross tons (subject topossible adjustment for inflation). The act specifically permits individualstates to impose their own liability regimes with regard to oil pollutionincidents occurring within their boundaries, and some states have enactedlegislation providing for unlimited liability for discharge of pollutantswithin their waters. In some cases, states which have enacted this type oflegislation have not yet issued implementing regulations defining tanker owners’responsibilities under these laws. CERCLA, which applies to owners andoperators of vessels, contains a similar liability regime and provides forcleanup, removal and natural resource damages. Liability under CERCLA islimited to the greater of $300 per gross ton or $5 million.

 

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

 

OPA requires owners andoperators of vessels to establish and maintain with the U.S. Coast Guardevidence of financial responsibility sufficient to meet the limit of theirpotential strict liability under the act. The U.S. Coast Guard has enactedregulations requiring evidence of financial responsibility in the amount of$1,500 per gross ton for tankers, coupling the OPA limitation on liability of$1,200 per gross ton with the CERCLA liability limit of $300 per gross ton.Under the regulations, evidence of financial responsibility may be demonstratedby insurance, surety bond, self-insurance or guaranty. Under OPA regulations,an owner or operator of more than one tanker is required to demonstrate evidenceof financial responsibility for the entire fleet in an amount equal only to thefinancial responsibility requirement of the tanker having the greatest maximumstrict liability under OPA and CERCLA. We have provided such evidence andreceived certificates of financial responsibility from the U.S. Coast Guard foreach of our vessels required to have one.

 

Weinsure each of our vessels with pollution liability insurance in the maximumcommercially available amount of $1.0 billion. A catastrophic spill couldexceed the insurance coverage available, in which event there could be amaterial adverse effect on our business.

 

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UnderOPA, with certain limited exceptions, all newly-built or converted vesselsoperating in U.S. waters must be built with double-hulls, and existing vesselsthat do not comply with the double-hull requirement will be prohibited fromtrading in U.S. waters over a 20-year period (1995-2015) based on size, age andplace of discharge, unless retrofitted with double-hulls. Notwithstanding theprohibition to trade schedule, the act currently permits existing single-hulland double-sided tankers to operate until the year 2015 if their operationswithin U.S. waters are limited to discharging at the Louisiana Offshore OilPort or off-loading by lightering within authorized lightering zones more than60 miles off-shore. Lightering is the process by which vessels at sea off-loadtheir cargo to smaller vessels for ultimate delivery to the discharge port.

 

Ourcurrent fleet of 27 vessels (including nine OBO Aframax vessels which are heldfor sale) are all double-hull vessels.

 

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

 

•      addressa “worst case” scenario and identify and ensure, through contract or otherapproved means, the availability of necessary private response resources torespond to a “worst case discharge”;

 

•      describecrew training and drills; and

 

•      identifya qualified individual with full authority to implement removal actions.

 

Wehave obtained vessel response plans approved by the U.S. Coast Guard for our vesselsoperating in the waters of the United States. In addition, the U.S. Coast Guardhas announced it intends to propose similar regulations requiring certainvessels to prepare response plans for the release of hazardous substances.

 

**OTHERREGULATION**

 

**In July 2003, inresponse to the *M.T. Prestige* oil spill inNovember 2002, the European Union adopted legislation that prohibits allsingle-hull tankers from entering into its ports or offshore terminals by 2010.The European Union has also banned all single-hull tankers carrying heavygrades of oil from entering or leaving its ports or offshore terminals oranchoring in areas under its jurisdiction. Commencing in 2005, certainsingle-hull tankers above 15 years of age will also be restricted fromentering or leaving European Union ports or offshore terminals and anchoring inareas under European Union jurisdiction. The European Union is also** consideringlegislation that would: (1) ban manifestly sub-standard vessels (defined asthose over 15 years old that have been detained by port authorities at leasttwice in a six month period) from European waters and create an obligation ofport states to inspect vessels posing a high risk to maritime safety or the marineenvironment; and (2) provide the European Union with greater authority andcontrol over classification societies, including the ability to seek to suspendor revoke the authority of negligent societies. **The sinking of the *M.T.**Prestige* andresulting oil spill in November 2002 has led to the adoption of otherenvironmental regulations by certain European Union nations, which couldadversely affect the remaining useful lives of all of our vessels and ourability to generate income from them.** It is impossibleto predict what legislation or additional regulations, if any, may bepromulgated by the European Union or any other country or authority.

 

Inaddition, most U.S. states that border a navigable waterway have enactedenvironmental pollution laws that impose strict liability on a person forremoval costs and damages resulting from a discharge of oil or a release of ahazardous substance. These laws may be more stringent than U.S. federal law.

 

**Vessel SecurityRegulations**

** **

Since the terrorist attacks of September 11, 2001,there have been a variety of initiatives intended to enhance vessel security. OnNovember 25, 2002, the U.S. Maritime Transportation Security Act of 2002, orMTSA, came into effect. To implement certain portions of the MTSA, in July2003, the U.S. Coast Guard issued regulations requiring the implementation ofcertain security requirements aboard vessels operating in waters subject to thejurisdiction of the United States. Similarly, in December 2002, amendments toSOLAS created a new chapter of the convention dealing specifically withmaritime security. The new chapter became effective in July 2004 and imposesvarious detailed security obligations on vessels and port authorities, most ofwhich are contained in the International Ship and Port Facilities SecurityCode, or the ISPS Code. The ISPS Code is designed to protect ports andinternational shipping against terrorism. After July 1, 2004, to tradeinternationally, a vessel must attain an International Ship SecurityCertificate from a recognized security organization approved by the vessel’sflag state. Among the various requirements are:

 

•      on-board installation of automatic identificationsystems to provide a means for the automatic transmission of safety-relatedinformation from among similarly equipped ships and shore stations, includinginformation on a ship’s identity,

 

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position, course,speed and navigational status;

 

•      on-board installation of ship security alert systems,which do not sound on the vessel but only alerts the authorities on shore;

 

•      the development of vessel security plans;

 

•      ship identification number to be permanently marked ona vessel’s hull;

 

•      a continuous synopsis record kept onboard showing avessel’s history including, name of the ship and of the state whose flag theship is entitled to fly, the date on which the ship was registered with that state,the ship’s identification number, the port at which the ship is registered andthe name of the registered owner(s) and their registered address; and

 

•      compliance with flag state security certificationrequirements.

 

The U.S. Coast Guard regulations, intended to alignwith international maritime security standards, exempt from MTSA vesselsecurity measures non-U.S. vessels that have on board, as of July 1, 2004, avalid ISSC attesting to the vessel’s compliance with SOLAS securityrequirements and the ISPS Code. We have implemented the various securitymeasures addressed by MTSA, SOLAS and the ISPS Code, and our fleet is incompliance with applicable security requirements.

 

**ITEM 1A. RISK FACTORS**

 

**ADDITIONALFACTORS THAT MAY AFFECT FUTURE RESULTS**

 

This annual report onForm 10-K contains forward-looking statements made pursuant to the safe harborprovisions of the Private Securities Litigation Reform Act of 1995. Theseforward-looking statements are based on management’s current expectations andobservations. Included among the factors that, in our view, could cause actualresults to differ materially from the forward looking statements contained inthis annual report on Form 10-K are the following: (i) changes in demand; (ii) amaterial decline or prolonged weakness in rates in the tanker market; (iii) changesin production of or demand for oil and petroleum products, generally or inparticular regions; (iv) greater than anticipated levels of tanker newbuildingorders or lower than anticipated rates of tanker scrapping; (v) changes inrules and regulations applicable to the tanker industry, including, withoutlimitation, legislation adopted by international organizations such as theInternational Maritime Organization and the European Union or by individualcountries; (vi) actions taken by regulatory authorities; (vii) changes intrading patterns significantly impacting overall tanker tonnage requirements; (vii)changes in the typical seasonal variations in tanker charter rates; (ix) changesin the cost of other modes of oil transportation; (x) changes in oiltransportation technology; (xi) increases in costs including withoutlimitation: crew wages, insurance, provisions, repairs and maintenance; (xii) changesin general domestic and international political conditions; (xiii) changes inthe condition of our vessels or applicable maintenance or regulatory standards(which may affect, among other things, our anticipated drydocking ormaintenance and repair costs);****(xiv) changesin the itineraries of the Company’s vessels; (xv) any failure of a vessel saleagreement to close, for instance, due to failure to meet a condition to closing;and (xvi)****those other risks and uncertainties describedunder the heading “ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS”, andother factors listed from time to time in our filings with the Securities andExchange Commission.

 

Our ability to paydividends in any period will depend upon factors including, applicableprovisions of Marshall Islands law and the final determination by the Board ofDirectors each quarter after its review of our financial performance. Thetiming and amount of dividends, if any, could also be affected by factorsaffecting cash flows, results of operations, required capital expenditures, orreserves. As a result, the amount of dividends actually paid may vary from theamounts currently estimated. The closing of the vessel sales will be subject tocustomary closing conditions.

 

The following riskfactors and other information included in this report should be carefullyconsidered. The risks and uncertainties described below are not the only oneswe face. Additional risks and uncertainties not presently known to us or thatwe currently deem immaterial also may impair our business operations. If any ofthe following risks occur, our business, financial condition, operating resultsand cash flows could be materially adversely affected and the trading price ofour common stock could decline.

 

**RISK FACTORS RELATED TO OURBUSINESS & OPERATIONS**

 

**An increase in the supply oftanker capacity without an increase in demand for tanker capacity could causecharter rates to decline, which could materially and adversely affect ourfinancial performance.**

 

Historically, the tankerindustry has been cyclical. The profitability of companies and asset values inthe industry have

 

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fluctuated based onchanges in the supply of, and demand for, tanker capacity. The supply oftankers generally increases with deliveries of new tankers and decreases withthe scrapping of older tankers, conversion of tankers to other uses, such asfloating production and storage facilities, and loss of tonnage as a result ofcasualties. If the number of new vessels delivered exceeds the number oftankers being scrapped and lost, tanker capacity will increase. If the supplyof tanker capacity increases and the demand for tanker capacity does notincrease correspondingly, the charter rates paid for our vessels couldmaterially decline.

 

**A decline or prolonged weakness incharter rates or an increase in costs could materially and adversely affect ourfinancial performance.**

 

Our revenues depend onthe rates that charterers pay for transportation of crude oil by Aframax andSuezmax tankers. Because many of the factors influencing the supply of anddemand for tanker capacity are unpredictable, the nature, timing and degree ofchanges in charter rates are unpredictable. If charter rates fall, or remainweak for a prolonged period, our revenues, cash flows and profitability couldbe materially and adversely affected.

 

Our vessel operatingexpenses are comprised of a variety of costs including crew costs, provisions,deck and engine stores, lubricating oil, insurance, maintenance and repairs,many of which are beyond our control and affect the entire shipping industry. Someof these costs, particularly relating to crew and maintenance costs, aredenominated in Euros, which result in higher costs during periods in which theU.S. dollar is weaker against the Euro. Also, costs such as insurance andenhanced security measures implemented after September 11, 2001 are stillincreasing. If costs continue to rise, that could materially and adverselyaffect our cash flows and profitability.

 

**Our revenues may be adverselyaffected if we do not successfully employ our vessels.**

 

We seek to deploy our vesselsbetween spot market voyage charters and time charters in a manner thatmaximizes long-term cash flow. Currently, 11 of our vessels are contractuallycommitted to time charters, with the remaining terms of these charters expiringon dates between March 2006 and July 2006. Although these time chartersgenerally provide reliable revenues, they also limit the portion of our fleetavailable for spot market voyages during an upswing in the tanker industrycycle, when spot market voyages might be more profitable.

 

We earned approximately 80%of our net voyage revenue from spot charters for the year ended December 31,2005. The spot charter market is highly competitive, and spot market voyagecharter rates may fluctuate dramatically based primarily on the worldwidesupply of tankers available in the market for the transportation of oil and theworldwide demand for the transportation of oil by tanker. Factors affecting thevolatility of spot market voyage charter rates include the quantity of oilproduced globally, shifts in locations where oil is produced or consumed,actions by OPEC, the general level of worldwide economic activity and thedevelopment and use of alternative energy sources. We cannot assure you thatfuture spot market voyage charters will be available at rates that will allowus to operate our vessels profitably.

 

**The market value of our vessels may fluctuatesignificantly, and we may incur losses when we sell vessels following a declinein their market value.**

 

The fair market value of our vessels may increase anddecrease depending on a number of factors including:

 

•      generaleconomic and market conditions affecting the shipping industry;

•      competitionfrom other shipping companies;

•      typesand sizes of tankers;

•      supplyand demand for tankers;

•      othermodes of transportation;

•      costof newbuildings;

•      governmentalor other regulations;

•      prevailinglevel of charter rates; and

•      technologicaladvances.

 

If the fair market value of our vessels declines belowtheir carrying values, we may be required to take an impairment charge or may incurlosses if we were to sell one or more of our vessels at such time, which wouldadversely affect our business and financial condition as well as our earnings.

 

**A decline in demand for crude oilor a shift in oil transport patterns could materially and adversely affect ourrevenues.**

 

The demand for tankercapacity to transport crude oil depends upon world and regional oil markets. Anumber of factors influence these markets, including:

 

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•      global andregional economic conditions;

 

•      increases anddecreases in production of and demand for crude oil;

 

•      developments ininternational trade;

 

•      changes inseaborne and other transportation patterns;

 

•      environmentalconcerns and regulations; and

 

•      weather.

 

Historically, the crudeoil markets have been volatile as a result of the many conditions and eventsthat can affect the price, demand, production and transport of oil, includingcompetition from alternative energy sources. Decreased demand for oiltransportation may have a material adverse effect on our revenues, cash flowsand profitability.

 

**The market for crude oiltransportation services is highly competitive and we may not be able toeffectively compete.**

 

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

 

Our market share maydecrease in the future. We may not be able to compete profitably as we expandour business into new geographic regions or provide new services. New marketsmay require different skills, knowledge or strategies than we use in ourcurrent markets, and the competitors in those new markets may have greaterfinancial strength and capital resources than we do.

 

**We may not be able to grow or toeffectively manage our growth.**

 

A principal focus of ourstrategy is to continue to grow by taking advantage of changing marketconditions, which may include expanding our business in the Atlantic basin, theprimary geographic area and market where we operate, by expanding into otherregions, or by increasing the number of vessels in our fleet. Our future growthwill depend upon a number of factors, some of which we can control and some ofwhich we cannot. These factors include our ability to:

 

•              identifybusinesses engaged in managing, operating or owning vessels for acquisitions orjoint ventures;

 

•              identifyvessels and/or shipping companies for acquisitions;

 

•              integrateany acquired businesses or vessels successfully with our existing operations;

 

•              hire,train and retain qualified personnel to manage and operate our growing businessand fleet;

 

•              identifyadditional new markets outside of the Atlantic basin;

 

•              improveour operating and financial systems and controls; and

 

•              obtainrequired financing for our existing and new operations.

 

Our ability to grow is inpart dependent on our ability to expand our fleet through acquisitions ofsuitable double-hull vessels. We may not be able to acquire newbuildings orsecondhand double-hull vessels on favorable terms, which could impede ourgrowth and negatively impact our financial condition and ability to paydividends. We may not be able to contract for newbuildings or locate suitablesecondhand double-hull vessels or negotiate acceptable construction or purchasecontracts with shipyards and owners, or obtain financing for such acquisitionson economically acceptable terms.

 

The failure toeffectively identify, purchase, develop and integrate any vessels or businessescould adversely affect our business, financial condition and results ofoperations.

 

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**Our operating results mayfluctuate seasonally.**

 

We operate our vessels inmarkets that have historically exhibited seasonal variations in tanker demandand, as a result, in charter rates. Tanker markets are typically stronger inthe fall and winter months (the fourth and first quarters of the calendar year)in anticipation of increased oil consumption in the Northern Hemisphere duringthe winter months. Unpredictable weather patterns and variations in oilreserves disrupt vessel scheduling. While this seasonality has not materiallyaffected our operating results since 1997, it could materially affect operatingresults in the future.

 

**If we lose any of our customersor a significant portion of our revenues, our operating results could bematerially adversely affected.**

 

We derive a significantportion of our voyage revenues from a limited number of customers. During theyears ended December 31, 2005 and 2003 no single customer accounted for morethan 10% of our voyage revenues. During the year ended December 31, 2004, SunInternational Ltd. accounted for 15.4% of our voyage revenues. If we lose asignificant customer, or if a significant customer decreases the amount ofbusiness it transacts with us, our revenues, cash flows and profitability couldbe materially and adversely affected.

 

**There may be risks associatedwith the purchase and operation of secondhand vessels.**

 

Our current businessstrategy includes additional growth through the acquisition of additionalsecondhand vessels. Although we inspect secondhand vessels prior to purchase,this does not normally provide us with the same knowledge about their conditionthat we would have had if such vessels had been built for and operatedexclusively by us. Therefore, our future operating results could be negativelyaffected if some of the vessels do not perform as we expect. Also, we do notreceive the benefit of warranties from the builders if the vessels we buy areolder than one year, which is the case for the five vessels acquired in thefirst half of 2004.

 

**We may face unexpected repaircosts for our vessels.**

 

Repairs and maintenancecosts are difficult to predict with certainty and may be substantial. Many ofthese expenses are not covered by our insurance. Large repair expenses coulddecrease our cash flow and profitability and reduce our liquidity.

 

**Compliancewith safety and other vessel requirements imposed by classification societiesmay be very costly and may adversely affect our business.**

 

The hull and machinery of every commercial tanker mustbe classed by a classification society authorized by its country of registry.The classification society certifies that a tanker is safe and seaworthy inaccordance with the applicable rules and regulations of the country of registryof the tanker and the Safety of Life at Sea Convention. All of our vessels havebeen certified as being “in-class” by Det Norske Veritas, the American Bureauof Shipping or Lloyd’s Registry. Each of these classification societies is amember of the International Association of Classification Societies.

 

A vessel must undergo annual surveys, intermediatesurveys and special surveys. In lieu of a special survey, a vessel’s machinerymay be on a continuous survey cycle, under which the machinery would besurveyed periodically over a five-year period. Our vessels are on specialsurvey cycles for hull inspection and on special survey or continuous surveycycles for machinery inspection. Every vessel is also required to be drydockedevery two to five years for inspection of the underwater parts of such vessel.

 

If a vessel in our fleet does not maintain its classand/or fails any annual survey, intermediate survey or special survey, it willbe unemployable and unable to trade between ports. This would negatively impactour results of operations.

 

**We depend on our key personneland may have difficulty attracting and retaining skilled employees.**

 

The loss of the servicesof any of our key personnel or our inability to successfully attract and retainqualified personnel, including ships’ officers, in the future could have amaterial adverse effect on our business, financial condition and operatingresults. Our future success depends particularly on the continued service ofPeter C. Georgiopoulos, our Chairman, President and Chief Executive Officer.

 

**Shipping is an inherently riskybusiness and our insurance may not be adequate.**

 

Our vessels and theircargoes are at risk of being damaged or lost because of events such as marinedisasters, bad weather, mechanical failures, human error, war, terrorism,piracy and other circumstances or events. In addition, transporting crude oilcreates a risk of business interruptions due to political circumstances inforeign countries, hostilities, labor strikes and boycotts. Any of these eventsmay result in loss of revenues, increased costs and decreased cash flows. Futurehostilities or other political instability could affect our trade patterns andadversely affect our operations and our revenues, cash flows and profitability.

 

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We carry insurance toprotect against most of the accident-related risks involved in the conduct ofour business. We currently maintain $1 billion in coverage for each of our vesselsfor liability for spillage or leakage of oil or pollution. We also carryinsurance covering lost revenue resulting from vessel off-hire for all of our vessels.Nonetheless, risks may arise against which we are not adequately insured. Forexample, a catastrophic spill could exceed our insurance coverage and have amaterial adverse effect on our financial condition. In addition, we may not beable to procure adequate insurance coverage at commercially reasonable rates inthe future and we cannot guarantee that any particular claim will be paid. Inthe past, new and stricter environmental regulations have led to higher costsfor insurance covering environmental damage or pollution, and new regulationscould lead to similar increases or even make this type of insuranceunavailable. Furthermore, even if insurance coverage is adequate to cover ourlosses, we may not be able to timely obtain a replacement ship in the event ofa loss. We may also be subject to calls, or premiums, in amounts based not onlyon our own claim records but also the claim records of all other members of theprotection and indemnity associations through which we receive indemnityinsurance coverage for tort liability. Our payment of these calls could resultin significant expenses to us which could reduce our cash flows and placestrains on our liquidity and capital resources.

 

**The risks associated with oldervessels could adversely affect our operations.**

 

In general, the costs tomaintain a vessel in good operating condition increase as the vessel ages. Asof December 31, 2005, the average age of the 17 vessels in our fleet as ofDecember 31, 2005 (excluding 13 vessels that are held for sale as of that date)was 9.4 years compared to an average age of 11.9 years as of December 31, 2004.Due to improvements in engine technology, older vessels typically are lessfuel-efficient than more recently constructed vessels. Cargo insurance ratesincrease with the age of a vessel, making older vessels less desirable tocharterers.

 

Governmental regulations,safety or other equipment standards related to the age of tankers may requireexpenditures for alterations or the addition of new equipment to our vessels,and may restrict the type of activities in which our vessels may engage. Wecannot assure you that, as our vessels age, market conditions will justify anyrequired expenditures or enable us to operate our vessels profitably during theremainder of their useful lives.

 

**Compliance with safety,environmental and other governmental requirements and related costs mayadversely affect our operations.**

 

The shipping industry ingeneral, our business and the operation of our vessels in particular, areaffected by a variety of governmental regulations in the form of numerousinternational conventions, national, state and local laws and national andinternational regulations in force in the jurisdictions in which such tankersoperate, as well as in the country or countries in which such tankers areregistered. These regulations include:

 

•              theU.S. Oil Pollution Act of 1990, or OPA, which imposes strict liability for thedischarge of oil into the 200-mile United States exclusive economic zone, theobligation to obtain certificates of financial responsibility for vesselstrading in United States waters and the requirement that newly constructedtankers that trade in United States waters be constructed with double-hulls;

 

•              theInternational Convention on Civil Liability for Oil Pollution Damage of 1969entered into by many countries (other than the United States) relating tostrict liability for pollution damage caused by the discharge of oil;

 

•              theInternational Maritime Organization, or IMO, International Convention for thePrevention of Pollution from Ships with respect to strict technical andoperational requirements for tankers;

 

•              the IMOInternational Convention for the Safety of Life at Sea of 1974, or SOLAS, withrespect to crew and passenger safety;

 

•              theInternational Ship and Port Facilities Securities Code, or the ISPS Code, whichbecame effective in 2004;

 

•              theInternational Convention on Load Lines of 1966 with respect to the safeguardingof life and property through limitations on load capability for vessels oninternational voyages; and

 

•              theU.S. Marine Transportation Security Act of 2002.

 

More stringent maritimesafety rules are also more likely to be imposed worldwide as a result of theoil spill in November 2002 relating to the loss of the *M.T.Prestige*, a 26-year old single-hull tanker owned by a company notaffiliated with us. Additional laws and regulations may also be adopted thatcould limit our ability to do business or increase the cost of our doingbusiness and that

 

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could have a materialadverse effect on our operations. In addition, we are required by variousgovernmental and quasi-governmental agencies to obtain certain permits,licenses and certificates with respect to our operations. In the event of waror national emergency, our vessels may be subject to requisition by thegovernment of the flag flown by the vessel without any guarantee ofcompensation for lost profits. We believe our vessels are maintained in goodcondition in compliance with present regulatory requirements, are operated incompliance with applicable safety/environmental laws and regulations and areinsured against usual risks for such amounts as our management deemsappropriate. The vessels’ operating certificates and licenses are renewedperiodically during each vessel’s required annual survey. However, governmentregulation of tankers, particularly in the areas of safety and environmentalimpact may change in the future and require us to incur significant capitalexpenditures on our ships to keep them in compliance.

 

**Our vessels may be requisitionedby governments without adequate compensation.**

 

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

 

**Increases in tonnage taxes on ourvessels would increase the costs of our operations.**

 

Our vessels are currentlyregistered under the flags of the Republic of Liberia and the Republic of theMarshall Islands. These jurisdictions impose taxes based on the tonnagecapacity of each of the vessels registered under their flag. The tonnage taxesimposed by these countries could increase, which would cause the costs of ouroperations to increase.

 

**Arrests of our vessels bymaritime claimants could cause a significant loss of earnings for the relatedoff hire period.**

 

Crew members, suppliersof goods and services to a vessel, shippers of cargo and other parties may beentitled to a maritime lien against a vessel for unsatisfied debts, claims ordamages. In many jurisdictions, a maritime lienholder may enforce its lien by “arresting”or “attaching” a vessel through foreclosure proceedings. The arrest or attachmentof one or more of our vessels could result in a significant loss of earningsfor the related off-hire period.

 

In addition, injurisdictions where the “sister ship” theory of liability applies, a claimantmay arrest both the vessel which is subject to the claimant’s maritime lien andany “associated” vessel, which is any vessel owned or controlled by the sameowner. In countries with “sister ship” liability laws, claims might be assertedagainst us, any of our subsidiaries or our vessels for liabilities of othervessels that we own.

 

**Portions of our income may besubject to U.S. tax.**

 

If we do not qualify foran exemption pursuant to Section 883 of the U.S. Internal Revenue Code of 1986,or the Code, then we will be subject to U.S. federal income tax on our shippingincome that is derived from U.S. sources. If we are subject to such tax, ournet income and cash flow would be reduced by the amount of such tax.

 

We will qualify forexemption under Section 883 if, among other things, our stock is treated asprimarily and regularly traded on an established securities market in theUnited States. Under the final Section 883 regulations, we might not satisfythis publicly-traded requirement in any taxable year in which 50% or more ofour stock is owned for more than half the days in such year by persons whoactually or constructively own 5% or more of our stock, or 5% shareholders.

 

We believe that based onthe ownership of our stock in 2005, we satisfied the publicly-tradedrequirement under the final Section 883 regulations. However, we can give noassurance that future changes and shifts in the ownership of our stock by 5%shareholders would permit us to qualify for the Section 883 exemption in 2005or in the future.

 

If we do not qualify forthe Section 883 exemption, our shipping income derived from U.S. sources, or50% of our gross shipping income attributable to transportation beginning orending in the United States, would be subject to a 4% tax imposed withoutallowance for deductions. For the fiscal year of 2005, the majority ourrevenues were attributable to transportation beginning or ending in the UnitedStates. If we were subject to this 4% tax on our gross shipping income during2005, assuming that all of our voyages began or ended in the United States, suchtax would be approximately $11.3 million.

 

**RISK FACTORS RELATED TO OURFINANCINGS**

 

**Our 2005 Credit Facility imposes,and it is possible that any indenture for debt securities we may issue willimpose, significant operating and financial restrictions that may limit ourability to operate our business**.

 

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Our 2005 Credit Facilitycurrently imposes, and it is possible that any indenture for debt securitiesthat we may issue will impose, significant operating and financial restrictionson us. These restrictions will limit our ability to, among other things:

 

•      incur additional debt;

 

•      pay dividends or make other restricted payments;

 

•      create or permit certain liens;

 

•      sell vessels or other assets;

 

•      create or permit restrictions on the ability of oursubsidiaries to pay dividends or make other distributions to us;

 

•      engage in transactions with affiliates; and

 

•      consolidate or merge with or into other companies orsell all or substantially all of our assets.

 

These restrictions couldlimit our ability to finance our future operations or capital needs, makeacquisitions or pursue available business opportunities.

 

In addition, our 2005Credit Facility requires us to maintain specified financial ratios and satisfyfinancial covenants. We may be required to take action to reduce our debt or toact in a manner contrary to our business objectives to meet these ratios andsatisfy these covenants. Events beyond our control, including changes in theeconomic and business conditions in the markets in which we operate, may affectour ability to comply with these covenants. We cannot assure you that we willmeet these ratios or satisfy these covenants or that our lenders will waive anyfailure to do so. A breach of any of the covenants in, or our inability tomaintain the required financial ratios under, our 2005 Credit Facility wouldprevent us from borrowing additional money under the facility and could resultin a default under them. If a default occurs under our 2005 Credit Facility,the lenders could elect to declare that debt, together with accrued interestand other fees, to be immediately due and payable and proceed against thecollateral securing that debt, which constitutes all or substantially all ofour assets. Moreover, if the lenders under the 2005 Credit Facility or otheragreement in default were to accelerate the debt outstanding under thatfacility, it could result in a default under our other debt obligations thatmay exist at such time, including our debt securities.

 

**We could incur a substantialamount of debt, which could materially and adversely affect our financialcondition, results of operations and business prospects and prevent us fromfulfilling our obligations under our debt securities.**

 

Our 2005 Credit Facilitypermits us to incur additional debt, subject to certain limitations. If weincur additional debt, our increased leverage could:

 

•              make it more difficult for us to satisfy ourobligations under debt securities or other indebtedness and, if we fail tocomply with the requirements of the indebtedness, could result in an event ofdefault;

 

•              require us to dedicate a substantial portion of ourcash flow from operations to required payments on indebtedness, therebyreducing the availability of cash flow for working capital, capitalexpenditures and other general business activities;

 

•              limit our ability to obtain additional financing inthe future for working capital, capital expenditures, acquisitions, if any, andother general corporate activities;

 

•              limit our flexibility in planning for, or reacting to,changes in our business and the industry in which we operate or detract fromour ability to successfully withstand a downturn in our business or the economygenerally; and

 

•              place us at a competitive disadvantage against otherless leveraged competitors.

 

The occurrence of any oneof these events could have a material adverse effect on our business, financialcondition, results of operations, prospects and ability to satisfy our obligationsunder our 2005 Credit Facility and debt securities.

 

**Fluctuations in the market valueof our fleet may adversely affect our liquidity and may result in breachesunder our financing arrangements and sales of vessels at a loss.**

 

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The market value of vesselsfluctuates depending upon general economic and market conditions affecting thetanker industry, the number of tankers**in the worldfleet, the price of constructing new tankers, or newbuildings, types and sizesof tankers, and the cost of other modes of transportation. The market value ofour fleet may decline as a result of a downswing in the historically cyclicalshipping industry or as a result of the aging of our fleet. Declining tankervalues could affect our ability to raise cash by limiting our ability torefinance vessels and thereby adversely impact our liquidity. In addition,declining vessel values could result in a breach of loan covenants, which couldgive rise to events of default under our 2005 Credit Facility. Due to thecyclical nature of the tanker market, the market value of one or more of our vesselsmay at various times be lower than their book value, and sales of those vesselsduring those times would result in losses. If we determine at any time that a vessel’sfuture limited useful life and earnings require us to impair its value on ourfinancial statements, that could result in a charge against our earnings andthe reduction of our shareholders’ equity. Please refer to the section “INTERNATIONALMARITIME ORGANIZATION” for a discussion of an impairment charge taken in 2003on five of our single-hull vessels and a reduction in the useful lives of ournine single-hull vessels that we owned at that time. If for any reason we sell vesselsat a time when vessel prices have fallen, the sale may be at less than the vessel’scarrying amount on our financial statements, with the result that we would alsoincur a loss and a reduction in earnings.

 

**If we default under our 2005Credit Facility, we could forfeit our rights in certain of our vessels andtheir charters.**

 

We have pledged 18 of ourvessels, our three newbuilding contracts and related collateral as security tothe lenders under our 2005 Credit Facility. Default under this loan agreement,if not waived or modified, would permit the lenders to foreclose on themortgages over the vessels and the related collateral, and we could lose ourrights in the vessels and their charters.

 

When final payment is dueunder our loan agreement, we must repay any borrowings outstanding, includingballoon payments. To the extent that our cash flows are insufficient to repayany of these borrowings, we will need to refinance some or all of our loanagreements or replace them with an alternate credit arrangement. We may not beable to refinance or replace our loan agreements at the time they become due. Inaddition, the terms of any refinancing or alternate credit arrangement mayrestrict our financial and operating flexibility.

 

**We are a holding company, and wedepend on the ability of our subsidiaries to distribute funds to us in order tosatisfy our financial and other obligations.**

 

We are a holding company,and our subsidiaries conduct all of our operations and own all of our vessels. Wehave no significant assets other than the equity interests of our subsidiaries.As a result, our ability to pay dividends depends on the performance of oursubsidiaries and their ability to distribute funds to us. The ability of oursubsidiaries to make distributions to us may be restricted by, among otherthings, restrictions under our credit facility, applicable corporate andlimited liability company laws of the jurisdictions of their incorporation ororganization and other laws and regulations. If we are unable to obtain fundsfrom our subsidiaries, we will not be able to pay dividends or make payment onour credit facility unless we obtain funds from other sources. We cannot assureyou that we will be able to obtain the necessary funds from other sources.

 

**RISK FACTORS RELATED TO OURCOMMON STOCK**

 

**Anti-takeover provisions in ourfinancing agreements and organizational documents, as well as our shareholderrights plan, could have the effect of discouraging, delaying or preventing amerger or acquisition, which could adversely affect the market price of ourcommon stock.**

 

Our existing financingagreement imposes restrictions on changes of control of our company and ourship-owning subsidiaries. These include requirements that we obtain the lenders’consent prior to any change of control and that we make an offer to redeemcertain indebtedness before a change of control can take place.

 

Several provisions of ouramended and restated articles of incorporation and our by-laws coulddiscourage, delay or prevent a merger or acquisition that shareholders mayconsider favorable. These provisions include:

 

•              authorizingour board of directors to issue “blank check” preferred stock withoutshareholder approval;

 

•              providingfor a classified board of directors with staggered, three-year terms;

 

•              prohibitingus from engaging in a “business combination” with an “interested shareholder”for a period of three years after the date of the transaction in which theperson became an interested shareholder unless certain provisions are met;

 

•              prohibitingcumulative voting in the election of directors;

 

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•              authorizingthe removal of directors only for cause and only upon the affirmative vote ofthe holders of at least 80% of the outstanding shares of our common stockentitled to vote for the directors;

 

•              prohibitingshareholder action by written consent unless the written consent is signed byall shareholders entitled to vote on the action;

 

•              limitingthe persons who may call special meetings of shareholders; and

 

•              establishingadvance notice requirements for nominations for election to our board ofdirectors or for proposing matters that can be acted on by shareholders atshareholder meetings, which requirements were amended on December 2, 2005.

 

In addition to theprovision described above, on December 2, 2005, our board of directors adopteda shareholder rights plan and declared a dividend distribution of one Right foreach outstanding share of our common stock to shareholders of record on the closeof business on December 7, 2005. Each Right is nominally exercisable, upon theoccurrence of certain events, for one one-hundredth of a share of Series AJunior Participating Preferred Stock, par value $.01 per share, at a purchaseprice of $175.00 per unit, subject to adjustment. The Rights may furtherdiscourage a third party from making an unsolicited proposal to acquire us, asexercise of the Rights would cause substantial dilution to such third partyattempting to acquire us.

 

**We cannot assure you that we willpay any dividends.**

 

On January 26, 2005 ourboard of directors initiated a cash dividend policy. The actual declaration offuture cash dividends, and the establishment of record and payment dates, issubject to final determination by our board of directors each quarter after itsreview of our financial performance. Our ability to pay dividends in any periodwill depend upon factors including satisfying the requirements under our 2005Credit Facility and applicable provisions of Marshall Islands law.

 

The timing and amount ofdividends, if any, could be affected by factors affecting cash flows, resultsof operations, required capital expenditures, or reserves. Maintaining thedividend policy will depend on our cash earnings, financial condition and cashrequirements and could be affected by factors, including the loss of a vessel,required capital expenditures, reserves established by the board of directors,increased or unanticipated expenses, additional borrowings or future issuancesof securities, which may be beyond our control. The declaration and payment ofdividends is subject to certain conditions and limitations under our 2005Credit Facility.

 

Under Marshall Islandslaw, a company may not declare or pay dividends if it is currently insolvent orwould thereby be made insolvent. Marshall Islands law also provides that acompany may declare dividends only to the extent of its surplus, or if there isno surplus, out of its net profits for the then current and/or immediatelypreceding fiscal years.

 

Our dividend policy maybe changed at any time, and from time to time by our board of directors.

 

**Future sales of our common stockcould cause the market price of our common stock to decline.**

 

The market price of ourcommon stock could decline due to sales of a large number of shares in themarket, including sales of shares by our large shareholders, or the perceptionthat these sales could occur. These sales could also make it more difficult orimpossible for us to sell equity securities in the future at a time and pricethat we deem appropriate to raise funds through future offerings of commonstock. We have entered into registration rights agreements with thesecurityholders who received shares in our recapitalization transactions thatentitle them to have an aggregate of 2,192,793 shares registered for sale inthe public market. In addition, those shares became eligible for sale in thepublic markets beginning on June 12, 2002, pursuant to Rule 144 under theSecurities Act. We also registered on Form S-8 an aggregate of 4,400,000 sharesissuable upon exercise of options we have granted to purchase common stock orreserved for issuance under our equity compensation plans.

 

**Our incorporation under the lawsof the Republic of the Marshall Islands may limit the ability of ourshareholders to protect their interests.**

 

Our corporate affairs aregoverned by our amended and restated articles of incorporation and by-laws andby the Republic of the Marshall Islands Business Corporations Act. Theprovisions of the Republic of the Marshall Islands Business Corporations Actresemble provisions of the corporation laws of a number of states in the UnitedStates. However, there have been few judicial cases in the Republic of theMarshall Islands interpreting the Republic of the Marshall Islands BusinessCorporations Act. For example, the rights and fiduciary responsibilities ofdirectors under the laws of the Republic of the Marshall Islands are not asclearly established as the rights and fiduciary responsibilities of directorsunder statutes or judicial precedent in existence in certain U.S.jurisdictions.

 

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Although the Republic ofthe Marshall Islands Business Corporations Act does specifically incorporatethe non-statutory law, or judicial case law, of the State of Delaware and otherstates with substantially similar legislative provisions, our publicshareholders may have more difficulty in protecting their interests in the faceof actions by management, directors or controlling shareholders than wouldshareholders of a corporation incorporated in a U.S. jurisdiction.

 

**It may not be possible for ourinvestors to enforce U.S. judgments against us.**

 

We are incorporated inthe Republic of the Marshall Islands and most of our subsidiaries are organizedin the Republic of Liberia and the Republic of the Marshall Islands. Substantiallyall of our assets and those of our subsidiaries are located outside the UnitedStates. As a result, it may be difficult or impossible for U.S. investors toserve process within the United States upon us or to enforce judgment upon usfor civil liabilities in U.S. courts. In addition, you should not assume thatcourts in the countries in which we or our subsidiaries are incorporated orwhere our assets or the assets of our subsidiaries are located (1) wouldenforce judgments of U.S. courts obtained in actions against us or oursubsidiaries based upon the civil liability provisions of applicable U.S.federal and state securities laws or (2) would enforce, in original actions,liabilities against us or our subsidiaries based upon these laws.

 

**ITEM 1B. UNRESOLVED STAFFCOMMENTS**

 

Not applicable.

 

**ITEM2. PROPERTIES**

 

Welease four properties, all of which house offices used in the administration ofour operations: a property of approximately 24,000 square feet in New York, NewYork, a property of approximately 12,000 square feet in Lisbon, Portugal, aproperty of approximately 11,100 square feet in Piraeus, Greece, and a propertyof approximately 2,000 square feet in London, England. We do not own or leaseany production facilities, plants, mines or similar real properties.

 

**ITEM3. LEGAL PROCEEDINGS**

 

**LEGALPROCEEDINGS**

 

We arenot aware of any material pending legal proceedings, other than ordinary routinelitigation incidental to our business, to which we or our subsidiaries are aparty or of which our property is the subject. From time to time in the future,we may be subject to legal proceedings and claims in the ordinary course ofbusiness, principally personal injury and property casualty claims. Thoseclaims, even if lacking merit, could result in the expenditure by us ofsignificant financial and managerial resources.

 

We are cooperating in an investigation beingconducted by the Office of the U.S. Attorney, District of Delaware with respectto alleged false or inaccurate entries in the log books of the *Genmar Ajax* concerning an alleged violation of the MARPOLprotocol, which could possibly be a violation of U.S. law.  We believethat the investigation may relate to an alleged discharge of waste oil ininternational waters in excess of permissible legal limits. On December 15,2004, following a routine Coast Guard inspection, U.S. Coast Guard officialstook various documents, logs and records from the vessel for further review andanalysis.  During 2005, the custodian of records for the *Genmar Ajax* received four subpoenas duces tecum requestingsupplemental documentation pertaining to the vessel in connection with apending grand jury investigation, all of which have been complied with. We have denied any wrongdoing by us or any of our employees.  We do notbelieve that this matter will have a material effect on the Company.

 

On February 4, 2005, the *Genmar Kestrel* was involved in a collision with theSingapore-flag tanker *Trijata*, whichnecessitated the trans-shipment of the *Genmar Kestrel’s*cargo and drydocking the vessel for repairs. The incident resulted in theleakage of some oil to the sea. Due to a combination of prompt clean upefforts, a light viscosity cargo onboard at the time of collision and favorableweather conditions, we believe that the incident resulted in minimalenvironmental damage and expect that substantially all of the liabilitiesassociated with the incident will be covered by insurance.

 

Forthe year ended December 31, 2005, we increased our reserve for customer claimsby $4.2 million in connection with the 24 month time charter contracts for ournine OBO Aframax vessels. These arrangements require that the vessels meetspecified speed and bunker consumption standards. The charterer has assertedclaims for eight vessels for the first 12 months of their charter that thevessels did not meet these standards during some periods. The charterer maymake further claims under the contracts. With the additional increase to ourreserves, we believe that they are adequate for claims relating to all of thesevessels for all periods through December 31, 2005. However, if the charterer issuccessful in prevailing on these claims, it may be entitled to amounts inexcess of our related reserves. We intend to contest these claims.

 

22

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**ITEM4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

Nomatter was submitted to a vote of security holders, through the solicitation ofproxies or otherwise, during the fourth quarter of the fiscal year endedDecember 31, 2005.

 

**PART II**

 

**ITEM5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS ANDISSUER PURCHASES OF EQUITY SECURITIES**

 

**MARKETINFORMATION, HOLDERS AND DIVIDENDS**

 

Ourcommon stock has traded on the New York Stock Exchange under the symbol “GMR”since our initial public offering on June 12, 2001. The following table setsforth for the periods indicated the high and low prices for the common stock asof the close of trading as reported on the New York Stock Exchange:

 
| **FISCAL YEAR ENDED DECEMBER 31, 2005** | ** ** | **HIGH** | ** ** | **LOW** | ** ** |
|------------------------------------------------------------------|------------|----------|------------|---------|------------|
| 1st Quarter                                                      |       | $        | 52.00      |    | $          | 35.95 |   |
| 2nd Quarter                                                      |       | $        | 50.07      |    | $          | 40.75 |   |
| 3rd Quarter                                                      |       | $        | 45.49      |    | $          | 34.15 |   |
| 4th Quarter                                                      |       | $        | 41.22      |    | $          | 33.15 |   |

 
| **FISCAL YEAR ENDED DECEMBER 31, 2004** | ** ** | **HIGH** | ** ** | **LOW** | ** ** |
|------------------------------------------------------------------|------------|----------|------------|---------|------------|
| 1st Quarter                                                      |       | $        | 25.55      |    | $          | 17.61 |   |
| 2nd Quarter                                                      |       | $        | 27.58      |    | $          | 18.51 |   |
| 3rd Quarter                                                      |       | $        | 35.53      |    | $          | 24.61 |   |
| 4th Quarter                                                      |       | $        | 49.21      |    | $          | 33.86 |   |

 

Asof December 31, 2005, there were approximately 121 holders of record of ourcommon stock.

 

On January 26, 2005 ourboard of directors initiated a cash dividend policy. Under the policy, we planto declare quarterly dividends to shareholders in April, July, October andFebruary of each year based on our EBITDA after interest expense and reserves,as established by the board of directors. During 2005, we paid $110.4 millionof cash dividends. Our 2005 Credit Facility imposes limitations on the paymentof dividends. See “Dividend Policy” under the heading “LIQUIDITY AND CAPITALRESOURCES” in ITEM 7.

 

**During the year ended December 31, 2005, werepurchased 677,800 shares of our common stock for $24.7 million (average pershare purchase price of $36.55) pursuant to our share repurchase program.**

 
| **Period**                         | ** ** | **Total Number  of Shares  Purchased** | ** ** | **Average  Price Paid  Per Share** | ** ** | **Total Dollar  Amount as Part of  Publicly Announced  Plans or Programs** | ** ** | **Maximum Dollar  Amount that May  Yet Be Purchased  Under the Plans or  Programs** | ** **  |
|------------------------------------|------------|--------------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------|-------------|
| Oct. 1, 2005 –  Oct. 31, 2005 |       | 270,000                                          |       | $                                            | 36.70      |                                                                                                     | $          | 9,907,669                                                                                                    |        | $ | 190,092,331 |   |
| Nov. 1, 2005 –  Nov. 31, 2005 |       | 407,800                                          |       | $                                            | 36.45      |                                                                                                     | 14,863,652 |                                                                                                         | 175,228,679 |   |
| Dec. 1, 2005 –  Dec. 31, 2005 |       | —                                           |       | $                                            | —     |                                                                                                     | —     |                                                                                                         |        |   |
| Total                              |       | 677,800                                          |       | $                                            | 36.55      |                                                                                                     | $          | 24,771,321                                                                                                   |        | $ | 175,228,679 |   |

 

**ITEM6. SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA**

 

Setforth below are selected historical consolidated and other data of GeneralMaritime Corporation at the dates and for the fiscal years shown.

 

23

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| ** **                                                        | ** ** | **Year Ended December 31,** | ** ** |
|-------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                        | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| **INCOME  STATEMENT DATA**                                        |       |                                       |       |   |   |   |   |   |   |   |   |
| (Dollars in  thousands, except per share data)                    |       |                                       |       |   |   |   |   |   |   |   |   |
| Voyage revenues                                                   |       | $                                          | 567,901    |   | $ | 701,291 |   | $ | 454,456 |   | $ | 226,357 |   | $ | 217,128 |   |
| Voyage expenses                                                   |       | 137,203                                    |       | 117,955 |   | 117,810 |   | 80,790 |   | 52,099 |   |
| Direct vessel  operating expenses                                 |       | 86,681                                     |       | 96,818 |   | 91,981 |   | 55,241 |   | 42,140 |   |
| General and  administrative expenses                              |       | 43,989                                     |       | 31,420 |   | 22,866 |   | 12,026 |   | 9,550 |   |
| Gain on sale of  vessels                                          |       | (91,235                                    | )          | (6,570 | ) | (1,490 | ) | (266 | ) | — |   |
| Impairment  charge                                                |       | —                                     |       | — |   | 18,803 |   | 13,366 |   | — |   |
| Depreciation and  amortization                                    |       | 97,320                                     |       | 100,806 |   | 84,925 |   | 60,431 |   | 42,820 |   |
| Operating income                                                  |       | 293,943                                    |       | 360,862 |   | 119,561 |   | 4,769 |   | 70,519 |   |
| Net interest  expense                                             |       | 28,918                                     |       | 37,852 |   | 35,043 |   | 14,511 |   | 16,292 |   |
| Other expense                                                     |       | 52,668                                     |       | 7,901 |   | — |   | — |   | 3,006 |   |
| Net income  (loss)                                                |       | $                                          | 212,357    |   | $ | 315,109 |   | $ | 84,518 |   | $ | (9,742 | ) | $ | 51,221 |   |
|                                                              |       |                                       |       |   |   |   |   |   |   |   |   |
| Earnings (loss)  per common share:                                |       |                                       |       |   |   |   |   |   |   |   |   |
| Basic                                                             |       | $                                          | 5.71       |   | $ | 8.51 |   | $ | 2.29 |   | $ | (0.26 | ) | $ | 1.70 |   |
| Diluted                                                           |       | $                                          | 5.61       |   | $ | 8.33 |   | $ | 2.26 |   | $ | (0.26 | ) | $ | 1.70 |   |
|                                                              |       |                                       |       |   |   |   |   |   |   |   |   |
| Dividends  declared per common share                              |       | $                                          | 2.86       |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
|                                                              |       |                                       |       |   |   |   |   |   |   |   |   |
| Weighted average  basic shares outstanding, thousands:            |       |                                       |       |   |   |   |   |   |   |   |   |
| Basic                                                             |       | 37,164                                     |       | 37,049 |   | 36,967 |   | 36,981 |   | 30,145 |   |
| Diluted                                                           |       | 37,874                                     |       | 37,814 |   | 37,356 |   | 36,981 |   | 30,145 |   |
|                                                              |       |                                       |       |   |   |   |   |   |   |   |   |
| **BALANCE  SHEET DATA, at end of period**                         |       |                                       |       |   |   |   |   |   |   |   |   |
| (Dollars in  thousands)                                           |       |                                       |       |   |   |   |   |   |   |   |   |
| Cash                                                              |       | $                                          | 96,976     |   | $ | 46,921 |   | $ | 38,905 |   | $ | 2,681 |   | $ | 17,186 |   |
| Current assets,  including cash                                   |       | 471,324                                    |       | 152,145 |   | 102,473 |   | 43,841 |   | 45,827 |   |
| Total assets                                                      |       | 1,149,126                                  |       | 1,427,261 |   | 1,263,578 |   | 782,277 |   | 850,521 |   |
| Current  liabilities, including current portion of long-term debt |       | 32,906                                     |       | 84,120 |   | 89,771 |   | 77,519 |   | 83,970 |   |
| Current portion  of long-term debt                                |       | —                                     |       | 40,000 |   | 59,553 |   | 62,003 |   | 73,000 |   |
| Total long-term  debt, including current portion                  |       | 135,020                                    |       | 486,597 |   | 655,670 |   | 280,011 |   | 339,600 |   |
| Shareholders’  equity                                        |       | 976,125                                    |       | 890,426 |   | 568,880 |   | 481,636 |   | 495,690 |   |
| **OTHER  FINANCIAL DATA**                                         |       |                                       |       |   |   |   |   |   |   |   |   |
| (Dollars in  thousands)                                           |       |                                       |       |   |   |   |   |   |   |   |   |
| EBITDA (1)                                                        |       | $                                          | 338,595    |   | $ | 453,767 |   | $ | 204,486 |   | $ | 65,200 |   | $ | 110,333 |   |
| Net cash  provided by operating activities                        |       | 249,614                                    |       | 363,238 |   | 178,112 |   | 43,637 |   | 83,442 |   |
| Net cash  provided (used) by investing activities                 |       | 318,169                                    |       | (168,477 | ) | (502,919 | ) | 2,034 |   | (261,803 | ) |
| Net cash  provided (used) by financing activities                 |       | (517,728                                   | )          | (186,745 | ) | 361,031 |   | (60,176 | ) | 172,024 |   |
| Capital  expenditures                                             |       |                                       |       |   |   |   |   |   |   |   |   |
| Vessel sales  (purchases), gross including deposits               |       | 324,087                                    |       | (165,796 | ) | (501,242 | ) | 2,251 |   | (256,135 | ) |
| Drydocking or  capitalized survey or improvement costs            |       | (38,039                                    | )          | (17,050 | ) | (14,137 | ) | (13,546 | ) | (3,321 | ) |
| Weighted average  long-term debt, including current portion       |       | 410,794                                    |       | 650,196 |   | 601,086 |   | 313,537 |   | 283,255 |   |
| **FLEET  DATA**                                                   |       |                                       |       |   |   |   |   |   |   |   |   |
| Total number of  vessels at end of period                         |       | 30.0                                       |       | 43.0 |   | 43.0 |   | 28.0 |   | 29.0 |   |
| Average number  of vessels (2)                                    |       | 41.9                                       |       | 44.0 |   | 40.6 |   | 28.9 |   | 21.0 |   |
| Total voyage  days for fleet (3)                                  |       | 14,073                                     |       | 15,482 |   | 14,267 |   | 10,010 |   | 7,374 |   |
| Total time  charter days for fleet                                |       | 3,983                                      |       | 4,371 |   | 2,804 |   | 1,490 |   | 1,991 |   |
| Total spot  market days for fleet                                 |       | 10,090                                     |       | 11,111 |   | 11,463 |   | 8,520 |   | 5,383 |   |
| Total calendar  days for fleet (4)                                |       | 15,311                                     |       | 16,123 |   | 14,818 |   | 10,536 |   | 7,664 |   |
| Fleet utilization (5)                                             |       | 91.9                                       | %          | 96.0 | % | 96.3 | % | 95.0 | % | 96.2 | % |
| **AVERAGE  DAILY RESULTS**                                        |       |                                       |       |   |   |   |   |   |   |   |   |
| Time charter  equivalent (6)                                      |       | $                                          | 30,605     |   | $ | 37,676 |   | $ | 23,596 |   | $ | 14,542 |   | $ | 22,380 |   |
| Direct vessel  operating expenses (7)                             |       | 5,661                                      |       | 6,005 |   | 6,207 |   | 5,243 |   | 5,499 |   |
| General and  administrative expenses (8)                          |       | 2,873                                      |       | 1,949 |   | 1,543 |   | 1,136 |   | 1,246 |   |
| Total vessel  operating expenses (9)                              |       | 8,534                                      |       | 7,954 |   | 7,750 |   | 6,379 |   | 6,745 |   |
| EBITDA                                                            |       | 22,114                                     |       | 28,144 |   | 13,800 |   | 7,437 |   | 14,788 |   |

 

24

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| ** **                      | ** ** | **Year Ended December 31,** | ** **  |
|---------------------------------|------------|--------------------------------------------|-------------|
| **EBITDA Reconciliation**  | ** ** | **2005**                                   | ** **  | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| (Dollars in thousands)          |       |                                       |        |   |   |   |   |   |   |   |   |
| **Net Income**                  | ** ** | **$**                                      | **212,357** | ** ** | **$** | **315,109** | ** ** | **$** | **84,518** | ** ** | **$** | **(9,742** | **)** | **$** | **51,221** | ** ** |
| + Net interest expense          |       | 28,918                                     |        | 37,852 |   | 35,043 |   | 14,511 |   | 16,292 |   |
| + Depreciation and amortization |       | 97,320                                     |        | 100,806 |   | 84,925 |   | 60,431 |   | 42,820 |   |
| **EBITDA**                      | ** ** | **$**                                      | **338,595** | ** ** | **$** | **453,767** | ** ** | **$** | **204,486** | ** ** | **$** | **65,200** | ** ** | **$** | **110,333** | ** ** |

 

----

(1)  EBITDA representsnet income plus net interest expense and depreciation and amortization. EBITDAis included because it is used by management and certain investors as a measureof operating performance. EBITDA is used by analysts in the shipping industryas a common performance measure to compare results across peers. Management ofthe Company uses EBITDA as a performance measure in consolidating monthlyinternal financial statements and is presented for review at our board meetings.The Company believes that EBITDA is useful to investors as the shippingindustry is capital intensive which often brings significant cost of financing.EBITDA is not an item recognized by accounting principles generally accepted inthe United States of America (GAAP), and should not be considered as analternative to net income, operating income or any other indicator of a company’soperating performance required by GAAP. The definition of EBITDA used here may notbe comparable to that used by other companies.

 

(2)  Average number ofvessels is the number of vessels that constituted our fleet for the relevantperiod, as measured by the sum of the number of days each vessel was part ofour fleet during the period divided by the number of calendar days in thatperiod.

 

(3)  Voyage days forfleet are the total days our vessels were in our possession for the relevantperiod net of off hire days associated with major repairs, drydockings orspecial or intermediate surveys.

 

(4)  Calendar days arethe total days the vessels were in our possession for the relevant periodincluding off hire days associated with major repairs, drydockings or specialor intermediate surveys.

 

(5)  Fleet utilizationis the percentage of time that our vessels were available for revenuegenerating voyage days, and is determined by dividing voyage days by calendardays for the relevant period.

 

(6)  Time CharterEquivalent, or TCE, is a measure of the average daily revenue performance of avessel on a per voyage basis. Our method of calculating TCE is consistent withindustry standards and is determined by dividing net voyage revenue by voyagedays for the relevant time period. Net voyage revenues are voyage revenuesminus voyage expenses. Voyage expenses primarily consist of port, canal andfuel costs that are unique to a particular voyage, which would otherwise bepaid by the charterer under a time charter contract.

 

(7)  Daily direct vesseloperating expenses, or DVOE, is calculated by dividing DVOE, which includescrew costs, provisions, deck and engine stores, lubricating oil, insurance andmaintenance and repairs, by calendar days for the relevant time period.

 

(8)  Daily general andadministrative expense is calculated by dividing general and administrativeexpenses by calendar days for the relevant time period.

 

(9)  Total Vessel Operating Expenses, or TVOE,is a measurement of our total expenses associated with operating our vessels. DailyTVOE is the sum of daily direct vessel operating expenses, or DVOE, and dailygeneral and administrative expenses.

 

**ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

**General**

 

The following is a discussion of our financialcondition at December 31, 2005 and 2004 and our results of operationscomparing the years ended December 31, 2005 and 2004 and the years ended December 31,2004 and 2003. You should read this section together with the consolidatedfinancial statements including the notes to those financial statements for theyears mentioned above.

 

We are a leading provider of internationalseaborne crude oil transportation services with one of the largest mid-sized vesselfleets in the world. As of December 31, 2005 our fleet consisted of 30 vessels(20 Aframax and 10 Suezmax vessels) with a total cargo carrying capacity of 3.5million deadweight tons. Included in our December 31, 2005 fleet are oneAframax vessel and three Suezmax

 

25

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vesselswhich were sold during January 2006 and nine OBO Aframax vessels which weagreed to sell between March and June 2006. In addition, we have fourSuezmax vessels, one of which was delivered in March 2006, and three ofwhich are scheduled to be delivered between 2006 and early 2008 comprising anadditional 0.6 million deadweight tons.

 

**Spot and Time Charter Deployment**

 

We actively manage the deployment of our fleetbetween spot market voyage charters, which generally last from several days toseveral weeks, and time charters, which can last up to several years. A spotmarket voyage charter is generally a contract to carry a specific cargo from aload port to a discharge port for an agreed upon total amount. Under spotmarket voyage charters, we pay voyage expenses such as port, canal and fuelcosts. A time charter is generally a contract to charter a vessel for a fixedperiod of time at a set daily rate. Under time charters, the charterer pays voyageexpenses such as port, canal and fuel costs.

 

Vessels operating on time charters provide morepredictable cash flows, but can yield lower profit margins than vesselsoperating in the spot market during periods characterized by favorable marketconditions. Vessels operating in the spot market generate revenues that areless predictable but may enable us to capture increased profit marginsduring periods of improvements in tanker rates although we are exposed to therisk of declining tanker rates. We are constantly evaluating opportunities toincrease the number of our vessels deployed on time charters, but only expectto enter into additional time charters if we can obtain contract terms thatsatisfy our criteria.

 

**Net Voyage Revenues as Performance Measure**

 

For discussion and analysis purposes only, weevaluate performance using net voyage revenues. Net voyage revenues are voyagerevenues minus voyage expenses. Voyage expenses primarily consist of port,canal and fuel costs that are unique to a particular voyage, which wouldotherwise be paid by a charterer under a time charter. We believe thatpresenting voyage revenues, net of voyage expenses, neutralizes the variabilitycreated by unique costs associated with particular voyages or the deployment ofvessels on time charter or on the spot market and presents a more accuraterepresentation of the revenues generated by our vessels.

 

Our voyage revenues and voyage expenses arerecognized ratably over the duration of the voyages and the lives of thecharters, while direct vessel expenses are recognized when incurred. Werecognize the revenues of time charters that contain rate escalation schedulesat the average rate during the life of the contract. We calculate time charterequivalent, or TCE, rates by dividing net voyage revenue by voyage days for therelevant time period. We also generate demurrage revenue, which represents feescharged to charterers associated with our spot market voyages when thecharterer exceeds the agreed upon time required to load or discharge a cargo.We allocate corporate income and expenses, which include general andadministrative and net interest expense, to vessels on a pro rata basis basedon the number of months that we owned a vessel. We calculate daily directvessel operating expenses and daily general and administrative expenses for therelevant period by dividing the total expenses by the aggregate number ofcalendar days that we owned each vessel for the period.

 

**RESULTS OF OPERATIONS**

 

Margin analysis for the indicated items as apercentage of net voyage revenues for the years ended December 31, 2005,2004 and 2003 are set forth in the table below.

 

**INCOME STATEMENT MARGIN ANALYSIS(% OF NET VOYAGE REVENUES)**

 
| ** **                           | ** ** | **YEAR ENDED DECEMBER 31,** | ** ** |
|--------------------------------------|------------|--------------------------------------------|------------|
| ** **                           | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| INCOME STATEMENT DATA                |       |                                       |       |   |   |   |   |
|                                 |       |                                       |       |   |   |   |   |
| Net voyage revenues(1)               |       | 100                                        | %          | 100 | % | 100 | % |
| Direct vessel expenses               |       | 20.1                                       |       | 16.6 |   | 27.3 |   |
| General and administrative           |       | 10.2                                       |       | 5.4 |   | 6.8 |   |
| Impairment (gain on sale) of vessels |       | (21.2                                      | )          | (1.2 | ) | 5.2 |   |
| Depreciation and amortization        |       | 22.6                                       |       | 17.3 |   | 25.2 |   |
| Operating income                     |       | 68.3                                       |       | 61.9 |   | 35.5 |   |
| Net interest expense                 |       | 6.7                                        |       | 6.5 |   | 10.4 |   |
| Other expense                        |       | 12.2                                       |       | 1.4 |   | — |   |
| Net income                           |       | 49.4                                       |       | 54.0 |   | 25.1 |   |

 

26

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----

(1)           Net voyagerevenues are voyage revenues minus voyage expenses. Voyage expenses primarilyconsist of port, canal and fuel costs that are unique to a particular voyage,which would otherwise be paid by a charterer under a time charter.

 
| ** **          | ** ** | **YEAR ENDED DECEMBER 31,** | ** ** |
|---------------------|------------|--------------------------------------------|------------|
| ** **          | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **          | ** ** | **(dollars in thousands)**       | ** ** |
| Voyage revenues     |       | $                                          | 567,901    |   | $ | 701,291 |   | $ | 454,456 |   |
| Voyage expenses     |       | (137,203                                   | )          | (117,955 | ) | (117,810 | ) |
| NET VOYAGE REVENUES |       | $                                          | 430,698    |   | $ | 583,336 |   | $ | 336,646 |   |

 

**YEAR ENDED DECEMBER 31, 2005 COMPARED TO THEYEAR ENDED DECEMBER 31, 2004**

 

VOYAGEREVENUES-****Voyage revenues decreased by $133.4million, or 19.0%, to $567.9 million for the year ended December 31, 2005compared to $701.3 million for the prior year. This decrease is due to the lowerspot market for Suezmax and Aframax vessels during the year ended December 31,2005 compared to the prior year. Also contributing to this decrease is a 9.1% decreasein the number of vessel operating days during 2005 to 14,073 days in 2005 from15,842 days in the prior year period, attributable to a decrease in the size ofour fleet and a heavier drydocking schedule as compared to the prior year.The average size of our fleet decreased to 41.9 (25.5 Aframax, 16.4 Suezmax) vesselsduring the year ended December 31, 2005 compared to 44.0 vessels (25.0Aframax, 19.0 Suezmax) during the prior year. This decrease is consistent withour strategy to selectively sell older vessels when and if appropriateopportunities are identified in order to adjust our fleet characteristics and profileto suit customer preferences and to monetize investments in vessels to generatecapital for potential future growth. However, there can be no assurance that wewill grow our fleet in 2006. Voyage revenues are expected to decrease during2006 due to our smaller fleet size.

 

VOYAGEEXPENSES-****Voyage expenses increased $19.2million, or 16.3%, to $137.2 million for the year ended December 31, 2005compared to $118.0 million for the prior year. Substantially all of our voyageexpenses relate to spot charter voyages, under which the vessel owner isresponsible for voyage expenses such as fuel and port costs. $11.9 million ofthis increase is attributable to higher fuel costs during the year ended December 31,2005 compared to the prior year period. In addition, during the year ended December 31,2005, we incurred $6.6 million more costs than in the prior year relating totransit through the Suez Canal. This increase in voyage expenses occurred inspite of a decrease in the number of days our vessels operated under spot charters.During the year ended December 31, 2005, the number of days our vesselsoperated under spot charters decreased by 1,021, or 9.2%, to 10,090 days (4,529days Aframax, 5,561 days Suezmax) from 11,111 days (4,738 days Aframax, 6,373days Suezmax) during the prior year. Voyage expenses are expected to decreaseduring 2006 due to our smaller fleet size.

 

NETVOYAGE REVENUES-****Net voyage revenues, which arevoyage revenues minus voyage expenses, decreased by $152.6 million, or 26.2%,to $430.7 million for the year ended December 31, 2005 compared to $583.3 millionfor the prior year. Approximately $105 million of this decrease is due to theweaker spot market for Suezmax and Aframax vessels during the year ended December 31,2005 compared to the prior year as well as a 4.7% decrease in the average sizeof our fleet. Our average TCE rates declined 18.8% to $30,605 during the yearended December 31, 2005 compared to $37,676 during the year ended December 31,2004. The average size of our fleet decreased 4.7% to 41.9 vessels (25.5Aframax, 16.4 Suezmax) for the year ended December 31, 2005 compared to 44.0vessels (25.0 Aframax, 19.0 Suezmax) for the prior year. Voyage expenses areexpected to decrease during 2006 due to our smaller fleet size.

 

Thefollowing is additional data pertaining to net voyage revenues:

 

27

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| ** **                             | ** ** | **Year ended December 31,** | ** ** | ** ** | ** ** |
|----------------------------------------|------------|--------------------------------------------|------------|------------|------------|
| ** **                             | ** ** | **2005**                                   | ** ** | **2004**   | ** ** | **Increase  (Decrease)** | ** ** | **% Change** | ** ** |
| **Net voyage revenue (in thousands):** |       |                                       |       |       |       |   |   |   |   |
| Time charter:                          |       |                                       |       |       |       |   |   |   |   |
| Aframax                                |       | $                                          | 83,658     |       | $          | 82,894 |   | $ | 764 |   | 0.9 | % |
| Suezmax                                |       | 1,469                                      |       | 3,902      |       | (2,433 | ) | -62.4 | % |
| Total                                  |       | 85,127                                     |       | 86,796     |       | (1,669 | ) | -1.9 | % |
|                                   |       |                                       |       |       |       |   |   |   |   |
| Spot charter:                          |       |                                       |       |       |       |   |   |   |   |
| Aframax                                |       | 125,146                                    |       | 175,791    |       | (50,645 | ) | -28.8 | % |
| Suezmax                                |       | 220,425                                    |       | 320,749    |       | (100,324 | ) | -31.3 | % |
| Total                                  |       | 345,571                                    |       | 496,540    |       | (150,969 | ) | -30.4 | % |
|                                   |       |                                       |       |       |       |   |   |   |   |
| TOTAL NET VOYAGE REVENUE               |       | $                                          | 430,698    |       | $          | 583,336 |   | $ | (152,638 | ) | -26.2 | % |
|                                   |       |                                       |       |       |       |   |   |   |   |
| **Vessel operating days:**             |       |                                       |       |       |       |   |   |   |   |
| Time charter:                          |       |                                       |       |       |       |   |   |   |   |
| Aframax                                |       | 3,936                                      |       | 4,182      |       | (246 | ) | -5.9 | % |
| Suezmax                                |       | 47                                         |       | 189        |       | (142 | ) | -75.1 | % |
| Total                                  |       | 3,983                                      |       | 4,371      |       | (388 | ) | -8.9 | % |
|                                   |       |                                       |       |       |       |   |   |   |   |
| Spot charter:                          |       |                                       |       |       |       |   |   |   |   |
| Aframax                                |       | 4,529                                      |       | 4,738      |       | (209 | ) | -4.4 | % |
| Suezmax                                |       | 5,561                                      |       | 6,373      |       | (812 | ) | -12.7 | % |
| Total                                  |       | 10,090                                     |       | 11,111     |       | (1,021 | ) | -9.2 | % |
| TOTAL VESSEL OPERATING DAYS            |       | 14,073                                     |       | 15,482     |       | (1,409 | ) | -9.1 | % |
| AVERAGE NUMBER OF VESSELS              |       | 41.9                                       |       | 44.0       |       | (2.1 | ) | -4.7 | % |
|                                   |       |                                       |       |       |       |   |   |   |   |
| **Time Charter Equivalent (TCE):**     |       |                                       |       |       |       |   |   |   |   |
| Time charter:                          |       |                                       |       |       |       |   |   |   |   |
| Aframax                                |       | $                                          | 21,255     |       | $          | 19,822 |   | $ | 1,433 |   | 7.2 | % |
| Suezmax                                |       | $                                          | 31,260     |       | $          | 20,646 |   | $ | 10,614 |   | 51.4 | % |
| Combined                               |       | $                                          | 21,373     |       | $          | 19,857 |   | $ | 1,516 |   | 7.6 | % |
|                                   |       |                                       |       |       |       |   |   |   |   |   |   |   |
| Spot charter:                          |       |                                       |       |       |       |   |   |   |   |
| Aframax                                |       | $                                          | 27,632     |       | $          | 37,099 |   | $ | (9,467 | ) | -25.5 | % |
| Suezmax                                |       | $                                          | 39,638     |       | $          | 50,331 |   | $ | (10,693 | ) | -21.2 | % |
| Combined                               |       | $                                          | 34,249     |       | $          | 44,689 |   | $ | (10,440 | ) | -23.4 | % |
|                                   |       |                                       |       |       |       |   |   |   |   |   |   |   |
| TOTAL TCE                              |       | $                                          | 30,605     |       | $          | 37,676 |   | $ | (7,071 | ) | -18.8 | % |
|                                        |            |                                            |            |            |            |  |  |  |  |  |  |  |  |

 

Asof December 31, 2005, 11 of our vessels (including our nine OBO Aframaxvessels which will be sold in 2006) are on time charters expiring between March 2006and July 2006.

 

DIRECTVESSEL EXPENSES-****Direct vessel expenses, whichinclude crew costs, provisions, deck and engine stores, lubricating oil,insurance, maintenance and repairs decreased by $10.1 million, or 10.5%, to $86.7million for the year ended December 31, 2005 compared to $96.8 million forthe prior year. This decrease is due to a decrease in crewing costs associatedwith lower crew travel costs during the year ended December 31, 2005compared to the prior year as well as a 4.7% decrease in the size of our fleet.On a daily basis, direct vessel expenses per vessel decreased by $344, or 5.7%,to $5,661 ($5,493 Aframax, $5,922 Suezmax) for the year ended December 31,2005 compared to $6,005 ($5,676 Aframax, $6,438 Suezmax) for the prior year, primarilyas the result of a decrease in crewing costs. Although daily direct vesseloperating expenses have decreased during 2005 compared to 2004, we anticipatethat daily direct vessel operating expenses will increase during 2006 due tohigher crew, lubricating oils and insurance costs. Total direct vesseloperating expenses are expected to decrease in 2006, due to the smaller size ofour fleet at the end of 2005 compared to at the end of 2004.

 

GENERALAND ADMINISTRATIVE EXPENSES-****General andadministrative expenses increased by $12.6 million, or 40.0%, to $44.0 millionfor the year ended December 31, 2005 compared to $31.4 million for theprior year. The primary components of this increase for the year ended December 31,2005 compared to the prior year are:

 

(a) a$6.7 million increase in restricted stock amortization, salaries and bonusaccruals for our U.S.-based personnel, which included amortization ofrestricted stock grants made in February, April, May and December 2005;

 

28

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(b) a$1.9 million increase in professional fees attributable to consultation, legaland accounting costs associated with strategic advisory services associatedwith an unsolicited acquisition proposal, senior executive employment agreementsand Sarbanes-Oxley 404 compliance;

 

(c) a$1.6 million increase in the costs of operating our foreign subsidiaries inGreece and the United Kingdom, which reflects increases in number of personnel;

 

(d) $1.6 million of lease payments and expenses associated with our lease of anaircraft which the Company entered into during February 2004; and

 

(e) $0.5 millionincrease in occupancy costs attributable to rent paid on both our former NewYork City office which we occupied until April 2005 and our new corporateheadquarters for which our lease began in December 2004.

 

General and administrative expenses as apercentage of net voyage revenues increased to 10.2% for the year ended December 31,2005 from 5.4% for the prior year. Daily general and administrative expensesper vessel increased $924, or 47.4%, to $2,873 for the year ended December 31,2005 compared to $1,949 for the prior year.

 

We anticipate that general and administrativeexpenses during 2006 will be relatively unchanged from 2005. We expect an increasein amortization of restricted stock awards of approximately $3 million during2006 as compared to 2005, offset by anticipated decreases in certain otherareas including an approximate $1.5 million decrease in the cost of operatingour office in Greece due to our plan to close that office by July 2006.

 

DEPRECIATIONAND AMORTIZATION-Depreciation and amortization, which include depreciation of vesselsas well as amortization of drydocking, special survey and loan fees, decreasedby $3.5 million, or 3.5%, to $97.3 million for the year ended December 31,2005 compared to $100.8 million for the prior year. This decrease is primarilydue to the reduction in the size of our fleet during 2005, which decreasedvessel depreciation by $9.4 million, or 11.1%, to $75.6 million during the yearended December 31, 2005 compared to $85.0 million during the prior year,partially offset by increases in drydock amortization.

 

Amortization of drydocking increased by $6.2million, or 52.4%, to $18.0 million for the year ended December 31, 2005compared to $11.8 million for the prior year. This increase includesamortization associated with $38.0 million of capitalized expenditures relatingto our vessels for the year ended December 31, 2005 as well as a full yearof amortization associated with $17.1 million of capitalized drydocking for theprior year. We anticipate that the amortization associated with drydocking ourvessels will decrease in 2006 because of the reduction in the size of our fleetduring 2005.

 

GAINON SALE OF VESSELS- During 2005, we agreed to sell our four single-hull Suezmaxvessels, our six double-sided Suezmax vessels, our one single-hull Aframaxvessel and our six double-sided Aframax vessels in order to transform ourfleet to exclusively double-hull vessels. Through December 31, 2005, 13 ofthese vessels were delivered to their new owners for aggregate net proceeds of$334.7 million, for a net gain on sale of vessels of $91.2 million.

 

During July 2004, we agreed to sell four ofour single-hull Suezmax vessels in order to reduce the number of single-hullvessels in the Company’s fleet. These vessels were sold during August and October 2004for aggregate net proceeds of approximately $84.2 million, resulting in a gainon sale of vessels of $6.6 million.

 

In addition, as of December 31, 2005, wereclassified our nine Aframax OBO vessels from Vessels to Vessels held for sale.We decided to sell these vessels to reduce the average age of our fleet.

 

NETINTEREST EXPENSE-Net interest expense decreased by $8.9 million, or 23.6%, to $28.9million for the year ended December 31, 2004 compared to $37.8 million forthe prior year. This decrease is primarily the result of a 36.8% decrease inour weighted average outstanding debt of $410.8 million for the year ended December 31,2005 compared to $650.2 million for the year ended December 31, 2004. Thisdecrease is primarily attributable to decreases in our floating rate debt whichbears lower interest rates than our Senior Notes. The effect of the retirementof substantially all of our Senior Notes as of December 31, 2005, did nothave a significant effect on 2005 interest expense because this retirementoccurred on December 30, 2005. However, based on our debt composition andlevels as of December 31, 2005, net interest expense is expected todecrease significantly during 2006.

 

OTHER EXPENSE- During 2005, other expense consistedprimarily of a $45.8 million loss relating to our repurchase of $250.0 millionof our Senior Notes, inclusive of a $5.7 million write-off of deferredfinancing costs. Also, in October 2005, we entered into

 

29

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an $800 million credit facility, refinancing our $825million credit facility, at which time we wrote off as a non-cash charge $5.0 millionassociated with the unamortized deferred financing costs associated with the$825 million credit facility.

 

On July 1, 2004, we entered into an $825 millioncredit facility, refinancing our First, Second and Third Credit Facilities. Uponconsummation of this refinancing, unamortized deferred financing costsassociated with the First, Second and Third Credit Facilities aggregating $7.9million was written off as a non-cash charge in July 2004.

 

Wecurrently anticipate that our technical office in Piraeus, Greece, operated byGeneral Maritime Management (Hellas) Ltd., will cease its operations by July 2006.We estimate the cost of closing that office to be approximately $1.5 million,primarily attributable to employee severance costs, as well as professionalfees and the rent associated with the remainder of the lease which expires atthe end of 2006. We anticipate that approximately $0.8 million of this totalexpected cost, which will be a component of general and administrative expense onour statement of operations, will be recognized during the first quarter of2006, with the remainder recognized as a component of other expense on ourstatement of operations later in 2006. We estimate that substantially all ofthese costs will result in future cash expenditures.

 

NETINCOME-Net income was $212.4 million for the year ended December 31, 2004compared to net income of $315.1 million for the prior year.

 

**YEAR ENDED DECEMBER 31, 2004 COMPARED TO THEYEAR ENDED DECEMBER 31, 2003**

 

VOYAGEREVENUES-****Voyage revenues increased by $246.8million, or 54.3%, to $701.3 million for the year ended December 31, 2004compared to $454.5 million for the prior year. This increase is due to thestronger spot market for Suezmax and Aframax vessels during the year ended December 31,2004 compared to the prior year as well as an 8.4% increase in the average sizeof our fleet and the greater proportion of our fleet during 2004 that iscomprised of Suezmax vessels, which usually generate more voyage revenue thanAframax vessels. The average size of our fleet increased to 44.0 (25.0 Aframax,19.0 Suezmax) vessels during the year ended December 31, 2004 compared to40.6 vessels (25.4 Aframax, 15.2 Suezmax) during the prior year.

 

VOYAGE EXPENSES-****Voyage expenses were relatively unchanged, at $118.0million for the year ended December 31, 2004 compared to $117.8 millionfor the prior year. Substantially all of our voyage expenses relate to spotcharter voyages, under which the vessel owner is responsible for voyageexpenses such as fuel and port costs. During the year ended December 31,2004, the number of days our vessels operated under spot charters decreased by352, or 3.1%, to 11,111 days (4,738 days Aframax, 6,373 days Suezmax) from11,463 days (6,514 days Aframax, 4,949 days Suezmax) during the prior year. Voyageexpenses for the year ended December 31, 2004 did not decrease inproportion to the decrease in number of spot days due to the increasedproportion during 2004 of the number of spot days being attributable to Suezmaxvessels. Suezmax vessels generally earn higher daily voyage revenue than doAframax vessels but also incur higher voyage expenses particularly with respectto fuel consumption.

 

NETVOYAGE REVENUES-****Net voyage revenues, which arevoyage revenues minus voyage expenses, increased by $246.7 million, or 73.3%,to $583.3 million for the year ended December 31, 2004 compared to $336.6million for the prior year. This increase is due to the stronger spot marketfor Suezmax and Aframax vessels during the year ended December 31, 2004compared to the prior year as well as an 8.4% increase in the average size ofour fleet and the greater proportion of our fleet during 2004 that is comprisedof Suezmax vessels, which usually generate more voyage revenue than Aframaxvessels. Our average TCE rates improved 59.7% to $37,676 during the year ended December 31,2004 compared to $23,596 during the year ended December 31, 2003. Theaverage size of our fleet increased 8.4% to 44.0 vessels (25.0 Aframax, 19.0Suezmax) for the year ended December 31, 2004 compared to 40.6 vessels(25.4 Aframax, 15.2 Suezmax) for the prior year.

 

30

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The following is additional data pertaining to net voyage revenues:

 
| ** **                             | ** ** | **Year ended December 31,** | ** ** | **Increase** | ** ** | ** **     | ** ** |
|----------------------------------------|------------|--------------------------------------------|------------|--------------|------------|----------------|------------|
| ** **                             | ** ** | **2004**                                   | ** ** | **2003**     | ** ** | **(Decrease)** | ** ** | **% Change** | ** ** |
|                                   |       |                                       |       |         |       |           |       |   |   |
| **Net voyage revenue (in thousands):** |       |                                       |       |         |       |           |       |   |   |
| Time charter:                          |       |                                       |       |         |       |           |       |   |   |
| Aframax                                |       | $                                          | 82,894     |         | $          | 52,012         |       | $ | 30,882 |   | 59.4 | % |
| Suezmax                                |       | 3,902                                      |       | 6,731        |       | (2,829         | )          | -42.0 | % |
| Total                                  |       | 86,796                                     |       | 58,743       |       | 28,053         |       | 47.8 | % |
|                                   |       |                                       |       |         |       |           |       |   |   |
| Spot charter:                          |       |                                       |       |         |       |           |       |   |   |
| Aframax                                |       | 175,791                                    |       | 141,475      |       | 34,316         |       | 24.3 | % |
| Suezmax                                |       | 320,749                                    |       | 136,428      |       | 184,321        |       | 135.1 | % |
|                                   |       |                                       |       |         |       |           |       |   |   |
| Total                                  |       | 496,540                                    |       | 277,903      |       | 218,637        |       | 78.7 | % |
|                                   |       |                                       |       |         |       |           |       |   |   |
| TOTAL NET VOYAGE REVENUE               |       | $                                          | 583,336    |         | $          | 336,646        |       | $ | 246,690 |   | 73.3 | % |
|                                   |       |                                       |       |         |       |           |       |   |   |
| **Vessel operating days:**             |       |                                       |       |         |       |           |       |   |   |
| Time charter:                          |       |                                       |       |         |       |           |       |   |   |
| Aframax                                |       | 4,182                                      |       | 2,457        |       | 1,725          |       | 70.2 | % |
| Suezmax                                |       | 189                                        |       | 347          |       | (158           | )          | -45.5 | % |
| Total                                  |       | 4,371                                      |       | 2,804        |       | 1,567          |       | 55.9 | % |
|                                   |       |                                       |       |         |       |           |       |   |   |
| Spot charter:                          |       |                                       |       |         |       |           |       |   |   |
| Aframax                                |       | 4,738                                      |       | 6,514        |       | (1,776         | )          | -27.3 | % |
| Suezmax                                |       | 6,373                                      |       | 4,949        |       | 1,424          |       | 28.8 | % |
| Total                                  |       | 11,111                                     |       | 11,463       |       | (352           | )          | -3.1 | % |
|                                   |       |                                       |       |         |       |           |       |   |   |
| TOTAL VESSEL OPERATING DAYS            |       | 15,482                                     |       | 14,267       |       | 1,215          |       | 8.5 | % |
|                                   |       |                                       |       |         |       |           |       |   |   |
| AVERAGE NUMBER OF VESSELS              |       | 44.0                                       |       | 40.6         |       | 3.4            |       | 8.4 | % |
|                                   |       |                                       |       |         |       |           |       |   |   |
| **Time Charter Equivalent (TCE):**     |       |                                       |       |         |       |           |       |   |   |
| Time charter:                          |       |                                       |       |         |       |           |       |   |   |
| Aframax                                |       | $                                          | 19,822     |         | $          | 21,172         |       | $ | (1,350 | ) | -6.4 | % |
| Suezmax                                |       | $                                          | 20,646     |         | $          | 19,402         |       | $ | 1,244 |   | 6.4 | % |
| Combined                               |       | $                                          | 19,857     |         | $          | 20,953         |       | $ | (1,095 | ) | -5.2 | % |
|                                   |       |                                       |       |         |       |           |       |   |   |
| Spot charter:                          |       |                                       |       |         |       |           |       |   |   |
| Aframax                                |       | $                                          | 37,099     |         | $          | 21,719         |       | $ | 15,381 |   | 70.8 | % |
| Suezmax                                |       | $                                          | 50,331     |         | $          | 27,569         |       | $ | 22,763 |   | 82.6 | % |
| Combined                               |       | $                                          | 44,689     |         | $          | 24,243         |       | $ | 20,446 |   | 84.3 | % |
|                                   |       |                                       |       |         |       |           |       |   |   |
| TOTAL TCE                              |       | $                                          | 37,676     |         | $          | 23,596         |       | $ | 14,080 |   | 59.7 | % |

 

Thefollowing table summarizes the portion of our fleet on time charter as of March 9,2005:

 
| **Vessel**         | ** ** | **Vessel Type** | ** ** | **Expiration Date** | ** ** | **Average Daily Rate (1)** | ** ** |
|--------------------|------------|----------------------|------------|--------------------------|------------|-------------------------------------------|------------|
| Genmar Pericles    |       | Aframax              |       | October 3,  2005    |       | $                                         | 19,700     |   |
| Genmar Trust       |       | Aframax              |       | October 15,  2005   |       | $                                         | 19,700     |   |
| Genmar Spirit      |       | Aframax              |       | November 5,  2005   |       | $                                         | 19,700     |   |
| Genmar Hector      |       | Aframax              |       | October 31,  2005   |       | $                                         | 19,700     |   |
| Genmar Challenger  |       | Aframax              |       | December 6,  2005   |       | $                                         | 19,700     |   |
| Genmar Trader      |       | Aframax              |       | December 16,  2005  |       | $                                         | 19,700     |   |
| Genmar Champ       |       | Aframax              |       | January 10,  2006   |       | $                                         | 19,700     |   |
| Genmar Star        |       | Aframax              |       | January 25,  2006   |       | $                                         | 19,700     |   |
| Genmar Endurance   |       | Aframax              |       | February 13,  2006  |       | $                                         | 19,700     |   |
| Genmar Princess    |       | Aframax              |       | May 9, 2005         |       | $                                         | 25,000     |   |
| Genmar Constantine |       | Aframax              |       | July 9,  2005       |       | $                                         | 28,355     |   |

 

----

(1) Before brokers’commissions.

 

DIRECTVESSEL EXPENSES-****Direct vessel expenses, whichinclude crew costs, provisions, deck and engine stores, lubricating oil,insurance, maintenance and repairs increased by $4.8 million, or 5.3%, to $96.8million for the year ended December 31, 2004 compared to $92.0 million forthe prior year. This increase is primarily due to the growth of our fleet,which increased 8.4% during the year ended December 31, 2004 compared tothe prior year. This increase is offset by a decrease in maintenance andrepairs during the year ended December 31, 2004 on our Suezmax vessels ascompared to the prior year as well as the timing of certain purchases,maintenance and repair costs. In addition, during the year ended December 31,2004, the Company sold four Suezmax vessels which had higher historic operatingcosts than the other vessels in our fleet. On a daily basis, direct vesselexpenses per vessel decreased by $202, or 3.3%, to $6,005 ($5,676 Aframax,$6,438 Suezmax) for the year ended December 31, 2004 compared to $6,207($5,679 Aframax, $7,081 Suezmax) for the prior year, primarily as the result ofa decrease in maintenance and repairs on our Suezmax vessels.

 

31

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GENERALAND ADMINISTRATIVE EXPENSES-****General andadministrative expenses increased by $8.5 million, or 37.4%, to $31.4 millionfor the year ended December 31, 2004 compared to $22.9 million for theprior year. The primary components of this increase are: (a) $2.4 millionof lease payments and expenses associated with our lease of an aircraft whichthe Company entered into during February 2004; (b) $1.7 million ofoffice related expenses of General Maritime Management (Portugal) Lda which weacquired during April 2004; (c)  a $1.7 million increase in payrollexpenses (salaries, benefits, incentive bonus and amortization of restrictedstock awards) in our offices in New York and Greece in connection with theoperation of a larger fleet during the year ended December 31, 2004compared to the prior year; and (d) a $1.4 million increase inprofessional fees during the year ended December 31, 2004 compared to theprior year primarily due to increases in accounting fees associated withcompliance with Section 404 of the Sarbanes-Oxley Act of 2002. General andadministrative expenses as a percentage of net voyage revenues decreased to5.4% for the year ended December 31, 2004 from 6.8% for the prior year. Dailygeneral and administrative expenses per vessel increased $406, or 26.3%, to$1,949 for the year ended December 31, 2004 compared to $1,543 for theprior year.

 

DEPRECIATIONAND AMORTIZATION-Depreciation and amortization, which include depreciation ofvessels as well as amortization of drydocking, special survey and loan fees,increased by $15.9 million, or 18.7%, to $100.8 million for the year ended December 31,2004 compared to $84.9 million for the prior year. This increase is primarilydue to the growth in the average number of vessels in our fleet, whichincreased 8.4% during the year ended December 31, 2004 compared to theprior year as well as an increase in drydock amortization described in moredetail below.

 

Amortization of drydocking increased by $4.7million, or 66.6%, to $11.8 million for the year ended December 31, 2004compared to $7.1 million for the prior year. This increase includesamortization associated with $17.1 million of capitalized expenditures relatingto our vessels for the year ended December 31, 2004 as well as a full yearof amortization associated with $14.1 million of capitalized drydocking for theprior year.

 

GAINON SALE OF VESSELS- During July 2004, we agreed to sell four of oursingle-hull Suezmax vessels in order to reduce the number of single-hullvessels in the Company’s fleet. These vessels were sold during August and October 2004for aggregate net proceeds of approximately $84.2 million, resulting in a gainon sale of vessels of $6.6 million.

 

IMPAIRMENTCHARGE/ GAIN ON SALE OF VESSELS-  During2003, we sold two vessels held for sale as of December 31, 2002, resultingin an aggregate gain on sale of vessels of $2.7 million. Also during 2003,three double-bottom Aframax vessels acquired in 2003 were sold for an aggregateloss on sale of vessels of $1.2 million. Of these three vessels, two weredelivered to their new owners in 2003 and one was delivered to its new owner inFebruary 2004.

 

The Company had no impairment charges relatingto any of the vessels in its fleet during the year ended December 31,2004.

 

In December 2003, the IMO adopted aproposed amendment to the International Convention for the Prevention ofPollution from Ships to accelerate the phase-out of certain single-hull tankersfrom 2015 to 2010 unless the flag state extends the date to 2015. Managementdetermined that the useful lives of its nine single-hull vessels would end in2010, which is four to six years earlier than the 25-year useful lives thevessels had previously been ascribed. Because of the reduction in the usefullives of these single-hull vessels and the consequent reduction in projectedcash flows, it was determined that an aggregate impairment charge of $18.8million was required on five vessels, which represented the amount by which thecarrying value of these vessels exceeded their fair value as determined by anindependent third party appraiser.

 

NETINTEREST EXPENSE-Net interest expense increased by $2.8 million, or 8.0%, to$37.8 million for the year ended December 31, 2004 compared to $35.0million for the prior year. This increase is primarily the result of an 8.2%increase in our weighted average outstanding debt of $650.2 million for theyear ended December 31, 2004 compared to $601.1 million for the year endedDecember 31, 2003.

 

OTHER EXPENSE- On July 1, 2004, we entered into an$825 million credit facility, refinancing our First, Second and Third CreditFacilities. Upon consummation of this refinancing, unamortized deferredfinancing costs associated with the First, Second and Third Credit Facilitiesaggregating $7.9 million was written off as a non-cash charge in July 2004.

 

NETINCOME-Net income was $315.1 million for the year ended December 31, 2004compared to net income of $84.5 million for the prior year.

 

32

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**Effects of Inflation**

 

The Company does notconsider inflation to be a significant risk to the cost of doing business inthe current or foreseeable future. Inflation has a moderate impact on operatingexpenses, drydocking expenses and corporate overhead.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

**Sources and Uses of Funds; Cash Management**

 

Since our formation, our principal sources offunds have been equity financings, issuance of long-term debt securities,operating cash flows, long-term bank borrowings and opportunistic sales of ourolder vessels. Our principal use of funds has been capital expenditures toestablish and grow our fleet, maintain the quality of our vessels, comply withinternational shipping standards and environmental laws and regulations, fundworking capital requirements and repayments on outstanding loan facilities. Beginningin 2005, we also adopted policies to use funds to pay dividends and, from timeto time, to repurchase our common stock. See below for descriptions of ourDividend Policy and our Share Repurchase Program.

 

Ourpractice has been to acquire vessels using a combination of funds received fromequity investors, bank debt secured by mortgages on our vessels and shares ofthe common stock of our shipowning subsidiaries, and long-term debt securities.Because our payment of dividends is expected to decrease our available cash,while we expect to use our operating cash flows and borrowings to fundacquisitions, if any, on a short-term basis, we also intend to review debt andequity financing alternatives to fund such acquisitions. Our business iscapital intensive and its future success will depend on our ability to maintaina high-quality fleet through the acquisition of newer vessels and the selectivesale of older vessels. These acquisitions will be principally subject tomanagement’s expectation of future market conditions as well as our ability toacquire vessels on favorable terms.

 

Weexpect to rely on operating cash flows as well as long-term borrowings andfuture equity offerings to implement our growth plan, dividend policy, andshare repurchase. We believe that our current cash balance as well as operatingcash flows and available borrowings under our credit facilities will besufficient to meet our liquidity needs for the next year.

 

Ouroperation of ocean-going vessels carries an inherent risk of catastrophicmarine disasters and property losses caused by adverse severe weatherconditions, mechanical failures, human error, war, terrorism and othercircumstances or events. In addition, the transportation of crude oil issubject to business interruptions due to political circumstances, hostilitiesamong nations, labor strikes and boycotts. Our current insurance coverageincludes (1) protection and indemnity insurance coverage for tortliability, which is provided by mutual protection and indemnity associations, (2) hulland machinery insurance for actual or constructive loss from collision, fire,grounding and engine breakdown, (3) war risk insurance for confiscation,seizure, capture, vandalism, sabotage and other war-related risks and (4) lossof hire insurance for loss of revenue for up to 90 days resulting from a vesselbeing off hire for all of our vessels.

 

**Dividend Policy**

 

On January 26,2005 we announced that our board of directors has initiated a cash dividendpolicy. Under the policy, we plan to declare quarterly dividends toshareholders in April, July, October and February of each year basedon our EBITDA after net interest expense and reserves, as established by theboard of directors. These reserves, which the board of directors expects toreview on at least an annual basis, will take into account normal maintenanceand drydocking of existing vessels as well as capital expenditures for vesselacquisitions to ensure the indefinite renewal of our fleet. Our board ofdirectors expects to review these reserves from time to time and at leastannually, taking into account the remaining useful life and asset value of thefleet, among other factors. We intend to utilize proceeds from the sale of 17 single-hulland double-sided Suezmax and Aframax vessels, which we have either sold or agreedto sell as of December 31, 2005, to pay down debt, and therefore suchproceeds will be excluded in the calculation of our dividend for the applicablequarters.

 

On June 13,2005, we paid $68.4 million of dividends to our shareholders relating to thequarter ended March 31, 2005. On September 7, 2005, we paid $32.5million of dividends to our shareholders relating to the quarter ended June 30,2005. On December 13, 2005, we paid $9.5 million of dividends to ourshareholders relating to the quarter ended September 30, 2005. On February 21,2006, our board of directors announced that we will be paying a quarterlydividend of $2.00 per share on or about March 17, 2006 to the shareholdersof record as of March 3, 2006. The aggregate amount of the dividend isexpected to be $68.1 million, which we anticipate will be funded from cash onhand at the time payment is to be made.

 

Anydividends paid will be subject to the terms and conditions of our 2005 CreditFacility and applicable provisions of Marshall Islands law.

 

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**ShareRepurchase Program**

 

In October 2005and February 2006, the Company’s Board of Directors approved repurchasesby the Company of its common stock under a share repurchase program for up to anaggregate total of $400 million. The Board will periodically review theprogram. Share repurchases will be made from time to time for cash in openmarket transactions at prevailing market prices or in privately negotiatedtransactions. The timing and amount of purchases under the program will bedetermined by management based upon market conditions and other factors.Purchases may be made pursuant to a program adopted under Rule 10b5-1under the Securities Exchange Act. The program does not require the Company topurchase any specific number or amount of shares and may be suspended orreinstated at any time in the Company’s discretion and without notice.Repurchases will be subject to the terms of our 2005 Credit Facility, which aredescribed in further detail below.

 

ThroughJanuary 30, 2006, the Company has acquired 5,120,556 shares of its commonstock for $189.1 million using borrowings under its credit facility and fundsfrom operations. All of these shares have been retired.

 

**Debt Financings**

 

**2005Credit Facility**

 

On October 26,2005, we entered into an $800 million revolving credit facility (the “2005Credit Facility”) with a syndicate of commercial lenders. The 2005 CreditFacility has been used to refinance the existing term borrowings under our 2004Credit Facility described below (the “2005 Refinancing”). Pursuant to the 2005Refinancing, we repaid $175 million outstanding under the term loan of our 2004Credit Facility primarily by making an initial drawdown of $162.8 million andusing the $13.1 million cash held in escrow described below.

 

Upon consummating the 2005Refinancing, unamortized deferred financing costs associated with the 2004Credit Facility aggregating $5.7 million was written off as a non-cash chargein October 2005. This non-cash charge is classified as Other expense on ourstatement of operations.

 

The2005 Credit Facility provides a four year nonamortizing revolving loan withsemi annual reductions of $44.5 million beginning October 26, 2009 and abullet reduction of $533 million at the end of year seven. Up to $50 million of the 2005 Credit Facilitywill be available for the issuance of stand by letters of credit to supportobligations of the Company and its subsidiaries that are reasonably acceptableto the issuing lenders under the facility. As of December 31, 2005, we haveoutstanding letters of credit aggregating $2.6 million which expire between January andDecember 2006, leaving $47.4 million available to be issued.

 

The2005 Credit Facility permits us to pay out dividends under our current policy,repurchase shares of our common stock and repurchase our Senior Notes inaccordance with its terms and conditions. This facility allows us to pay dividendsor repurchase our common stock in an amount not exceeding the net proceeds fromthe sale of all non-collateralized vessels (which are expected to aggregateapproximately $675 million), including the 13 vessels we sold during November andDecember 2005 and the 13 vessels we have classified as held for sale as ofDecember 31, 2005. In addition, we are permitted to pay dividends withrespect to any fiscal quarter up to an amount equal to EBITDA (as defined) forsuch fiscal quarter less fleet renewal reserves, which are established by ourboard of directors, net interest expense and cash taxes, in the event taxes arepaid, for such fiscal quarter.

 

The2005 Credit Facility carries an interest rate of LIBOR plus 75 basis points(or, depending on our long term foreign issuer credit rating and leverageratio, 100 basis points) on the outstanding portion and a commitment fee of26.25 basis points on the unused portion. As of December 31, 2005, $135.0million of the facility is outstanding. The facility is collateralized by,among other things, 17 of our double-hull vessels and our four new buildingSuezmax contracts, with carrying values as of December 31, 2005 of $564.6million and $88.5 million, respectively, as well as the Company’s equityinterests in its subsidiaries that own these assets, insurance proceeds of thecollateralized vessels, and certain deposit accounts related to the vessels. Eachsubsidiary of the Company with an ownership interest in these vessels or whichhas otherwise guaranteed our Senior Notes also provides an unconditionalguaranty of amounts owing under the 2005 Credit Facility. Our remaining 13vessels (all of which are classified as Vessels held for sale as of December 31,2005) are unencumbered.

 

Our ability to borrow amounts under the 2005Credit Facility is subject to satisfaction of certain customary conditionsprecedent, and compliancewith terms and conditions included in the credit documents. The various covenants in the 2005 Credit Facility are generallyconsistent with the types of covenants that were applicable under the 2004 Credit Facility. These covenantsinclude, among other things, customary restrictions on our ability to incur indebtedness or grant liens, pay dividends or make stockrepurchases (except as otherwise permitted as described above), engage in businesses other than those engaged in on the effective date of the creditfacility and similar or related businesses, enter into transactions with affiliates, amend its governingdocuments or documents related to our Senior Notes, and merge, consolidate, or dispose of assets. We are also required to comply withvarious ongoing financial covenants, including with respect to our leverage ratio, minimum cash balance, networth, and collateral maintenance. If we do not comply with the various financial and other covenants andrequirements of the 2005 Credit Facility,the

 

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lenders may, subject tovarious customary cure rights, require the immediate payment of all amounts outstandingunder the facility. Asof December 31, 2005 we are in compliance with all of the covenants underour 2005 Credit Facility.

 

**2004Credit Facility- Refinanced by the 2005 Credit Facility**

 

On July 1,2004, we closed on an $825 million senior secured bank financing facility (“2004Credit Facility”) consisting of a term loan of $225 million and a revolvingloan of $600 million. The term loan had a five year maturity at a rate of LIBORplus 1.0% and was to amortize on a quarterly basis with 19 payments of $10million and one payment of $35 million. The revolving loan component, which didnot amortize, had a five year maturity at a rate of LIBOR plus 1.0% on the usedportion and a 0.5% commitment fee on the unused portion.

 

Concurrent with the closing of the 2004 CreditFacility, pursuant to which we borrowed $225 million under the term loan and$290 million under the revolving credit facility, we retired our existingFirst, Second and Third Credit Facilities described below (the “Refinancing”). Atthe time of the Refinancing, the 2004 Credit Facility was secured by the 42vessels which collateralized the First, Second and Third Credit Facilities andfive vessels which were acquired during 2004. In addition, each of oursubsidiaries which had an ownership interest in any vessel that was secured bythe 2004 Credit Facility had provided unconditional guaranties of all amountsowing under the 2004 Credit Facility. Deferred financing costs incurredrelating to the 2004 Credit Facility aggregated $6.9 million.

 

Upon consummating the Refinancing, unamortizeddeferred financing costs associated with the First, Second and Third CreditFacilities aggregating $7.9 million was written off as a non-cash charge in July 2004.This non-cash charge is classified as Other expense on the statement ofoperations.

 

In August and October 2004, we sold foursingle-hull Suezmax vessels. Pursuant to amendments to the 2004 CreditFacility, we were permitted, until August 2006 to substitute as collateralfuture vessel acquisitions with a fair value equivalent to the vessels sold. Hadthis amendment not been agreed to, we would, upon the sale of these fourvessels, have had to repay $13.1 million associated with the $225 million termloan and the $600 million revolving credit facility would have been permanentlyreduced by $35.2 million. In accordance with amendments to the 2004 CreditFacility, we placed $13.1 million in escrow. This amount of cash held in escrowis classified as Other assets on our balance sheet. Pursuant to the 2005 Refinancing,these funds were used to repay a portion of the 2004 Credit Facility.

 

Under this credit facility, we were required to maintain certain ratios such as: vessel market values to total outstanding loans and undrawn revolving credit facilities, EBITDA to net interest expense and to maintain minimum levels of working capital. In addition, the 2004 Credit Facility, as amended, permitted us to pay dividends with respect to any fiscal quarter up to an amount equal to EBITDA (as defined) for such fiscal quarter less fleet renewal reserves, which are established by our board of directors, net interest expense and cash taxes, in the event taxes are paid, for such fiscal quarter. Such amount was to be reduced to the extent that the aggregate amount permitted to be paid for dividends for all fiscal quarters since January 1, 2005 is a negative amount. However, we would not have been permitted to pay dividends if certain significant defaults as defined under the 2004 Credit Facility were to occur. During the year ended December 31, 2005, we paid dividends of $110.4 million.

 

**First,Second and Third Credit Facilities — Refinanced by the 2004 Credit Facility**

 

TheFirst Credit Facility was comprised of a $200 million term loan and a $100million revolving loan. The First Credit Facility was to mature on June 15,2006. The First Credit Facility bore interest at LIBOR plus 1.5%. We wereobligated to pay a fee of 0.625% per annum on the unused portion of therevolving loan on a quarterly basis. Due to the sale of three of the Aframax vesselssecuring the First Credit Facility, the revolving loan facility was reduced to$96.5 million.

 

TheSecond Credit Facility consisted of a $115 million term loan and a $50 millionrevolving loan. The Second Credit Facility was to mature on June 27, 2006.The Second Credit Facility bore interest at LIBOR plus 1.5%. We were obligatedto pay a fee of 0.625% per annum on the unused portion of the revolving loan ona quarterly basis.

 

On March 11,2003 in connection with the Metrostar acquisition, we entered into commitmentsfor $450 million in credit facilities. These credit facilities were comprisedof a first priority $350 million amortizing term loan, which we refer to as theThird Credit Facility, and a second priority $100 million non-amortizing termloan, which we refer to as the second priority term loan. Pursuant to theissuance of the Senior Notes described below, the Third Credit Facility wasreduced to $275 million and the second priority term loan was eliminated. TheThird Credit Facility was to mature on March 10, 2008 and bore interest atLIBOR plus 1.625%.

 

**InterestRate Swap Agreements**

 

In August and October 2001, we entered intointerest rate swap agreements with foreign banks to manage interest costs andthe risk associated with changing interest rates. At their inception, theseswaps had notional principal amounts equal to 50% of our outstanding term loansunder its First and Second Credit Facilities. The notional principal amountsamortize at the same rate as the term loans. The

 

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interest rate swap agreement entered into during August 2001hedged the First Credit Facility, described above, to a fixed rate of 6.25%. Thisswap agreement terminates on June 15, 2006. The interest rate swapagreement entered into during October 2001 hedged the Second CreditFacility, described above, to a fixed rate of 5.485%. This swap agreementterminates on June 27, 2006. As of December 31, 2005, the outstandingnotional principal amounts on the swap agreements entered into during August 2001and October 2001 are $9.0 million and $10.5 million, respectively. The Company has determined that, through June 30,2005, these interest rate swap agreements, which effectively hedged the Company’sFirst and Second Credit Facilities continued to effectively hedge, but notperfectly, the Company’s 2004 Credit Facility. As of July 1, 2005, theCompany stopped designating its interest rate swaps as ahedge. The Company did not designate these interest rate swaps as a hedgeagainst the 2005 Credit Facility.

 

**SeniorNotes**

 

On March 20, 2003,we issued $250 million of 10% Senior Notes which are due March 15, 2013. Interestis paid on the Senior Notes each March 15 and September 15. TheSenior Notes are general unsecured, senior obligations of the Company. Theproceeds of the Senior Notes, prior to payment of fees and expenses, were$246.2 million. The Senior Notes required us to apply a portion of its cashflow during 2003 to the reduction of its debt under our First, Second and Thirdfacilities. As of December 31, 2004, the discount on the Senior Notes is$3.4 million. This discount is being amortized as interest expense over theterm of the Senior Notes using the effective interest method. The Senior Notesare guaranteed by all of our “restricted” subsidiaries (all of which are 100%owned by us). These guarantees are full and unconditional and joint and severalwith the parent company General Maritime Corporation. The parent company,General Maritime Corporation, has no independent assets or operations.

 

Between September 23, 2005 and culminating on December 30,2005 with a cash tender offer, we purchased and retired $249,980,000 par valueof our Senior Notes for cash payments aggregating $286.9 million. Pursuant to thesepurchases, we recorded a loss of $40.8 million, which represents the amount bywhich the cash paid exceeds the carrying value of the Senior Notes as well asassociated brokerage and legal fees. In addition, we wrote off the unamortizeddeferred financing costs associated with the Senior Notes of $5.0 million as anon-cash charge. Both the loss on retirement and the write-off of theunamortized deferred financing costs are classified as Other expense on thestatement of operations.

 

In January 2006, pursuant to the completion ofthe cash tender offer, the second supplemental indenture entered into inconnection with the Senior Notes (the “Second Supplemental Indenture”) becameoperative. The Second Supplemental Indenture amends the indenture under whichthe Senior Notes were issued (the “Indenture”), to eliminate substantially allof the restrictive covenants and certain default provisions in the Indenture(the “Amendments”). The Amendments are binding upon holders of Senior Notes whodid not tender their Senior Notes pursuant to the cash tender offer even thoughsuch holders have not consented to the Amendments.

 

As of December 31, 2005, we are in compliancewith all of the covenants under our Senior Notes indenture.

 

Thetotal outstanding amounts as of December 31, 2005 associated with our 2005Credit Facility and Senior Notes as well as their maturity dates are asfollows:

 

**TOTAL OUTSTANDING DEBT (DOLLARS IN THOUSANDS)AND MATURITY DATE**

 
| ** **            | ** ** | **OUTSTANDING  DEBT** | ** ** | **MATURITY  DATE** | ** **        |
|-----------------------|------------|-----------------------|------------|--------------------|-------------------|
| Total long-term  debt |       |                  |       |               |              |
| 2005 Credit Facility  |       | $                     | 135,000    |               | October 2012 |   |
| Senior Notes          |       | 20                    |       | March 2013    |              |
|                       |            |                       |            |                    |                   |  |

 

**Cash and Working Capital**

 

Cash increased to $97.0 million as of December 31,2005 compared to $46.9 million as of December 31, 2004. Working capital iscurrent assets minus current liabilities, including the current portion oflong-term debt. Working capital was $438.4 million as of December 31, 2005(including $294.5 million of vessels held for sale), compared to $68.0 millionas of December 31, 2004. The current portion of long-term debt included inour current liabilities was $0 as of December 31, 2005 and $40.0 millionas of December 31, 2004.

 

**Cash Flows from Operating Activities**

 

Netcash provided by operating activities decreased 31.3% to $249.6 million for theyear ended December 31, 2005, compared to $363.2 million for the prioryear. This decrease is primarily attributable to net income of $212.4 millionfor the year ended December 31, 2005 compared to net income of $315.1 millionfor the prior year.

 

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Netcash provided by operating activities increased 104% to $363.2 million for theyear ended December 31, 2004, compared to $178.1 million for the prioryear. This increase is primarily attributable to net income of $315.1 million,depreciation and amortization of $100.8 million for the year ended December 31,2004 compared to net income of $84.5 million, depreciation and amortization of$84.9 million and a non-cash impairment charge of $18.8 million for the prioryear.

 

**CashFlows from Investing Activities**

 

Netcash provided by investing activities was $318.2 million for the year ended December 31,2005 compared to net cash used by investing activities of $168.5 million forthe prior year. During the year ended December 31, 2005, we received $334.7million from the sale of 13 vessels and paid $10.6 million of costs on our fourSuezmax newbuilding contracts (including capitalized interest of $3.5 million).During the year ended December 31, 2004, we paid $180.6 million to theseller for five vessels, and paid $76.0 million for four Suezmax newbuildingcontracts (of which $67.2 million was paid to the seller of those contracts and$8.8 million of installment payments were made to the shipyards).

 

Netcash used in investing activities was $168.5 million for the year ended December 31,2004 compared to $502.9 million for the prior year. During the year ended December 31,2004, we paid $180.6 million to the seller for five vessels, and paid $76.0million for four Suezmax newbuilding contracts (of which $67.2 million was paidto the seller of those contracts and $8.8 million of installment payments weremade to the shipyards). During the year ended December 31, 2004, wereceived $94.6 million of proceeds from the sale of one Aframax vessel and fourSuezmax vessels. During the year ended December 31, 2003, we expended$528.5 million for the purchase of 19 vessels and we received $27.3 million ofproceeds from the sale of four Aframax vessels.

 

**CashFlows from Financing Activities**

 

Netcash used by financing activities was $517.7 million for the year ended December 31,2005 compared to $186.7 million for the prior year. The change in cash providedby financing activities relates to the following:

 

•      Netproceeds from the issuance of long-term debt during the year ended December 31,2005, net of issuance costs of $5.3 million, were $157.5 million relating tothe initial borrowings under our 2005 Credit Facility. Net proceeds from theissuance of long-term debt during the year ended December 31, 2004, net ofissuance costs of $7.2 million, were $507.8 million relating the initialborrowings under our 2004 Credit Facility.

 

•      Duringthe year ended December 31, 2005, we retired our 2004 Credit Facility andrepaid the $175.0 million outstanding on that facility at the time of itsretirement. Additionally, during the year ended December 31, 2005, weretired $249,980,000 par value of our Senior Notes for $286.9 million. Duringthe year ended December 31, 2004, we retired our First, Second and ThirdCredit Facilities, and repaid the $448.3 million outstanding on those creditfacilities at the time of their retirement.

 

•      Principalrepayments of long-term debt were $30.0 million for the year ended December 31,2005 associated with permanent principal repayments under our 2005 CreditFacility. Principal repayments of long-term debt were $59.0 million for theyear ended December 31, 2004 associated with permanent principalrepayments under our First, Second, Third and 2004 Credit Facilities.

 

•      Duringthe year ended December 31, 2005, we repaid $62.8 million of revolvingdebt associated with our 2005 and 2004 Credit Facilities; during the year endedDecember 31, 2004, we repaid $177.0 million of revolving debt associatedwith our First, Second and 2004 Credit Facilities.

 

•      Duringthe year ended December 31, 2004, we sold three Suezmax vessels whichwould have required a $13.1 million repayment of the term loan portion of our2004 Credit Facility. Pursuant to an amendment to the 2004 Credit Facility, this$13.1 million was placed in an escrow account with the lender pending ourproviding substitute collateral. During the year ended December 31, 2005,we used these funds held in escrow to retire a portion of the 2004 CreditFacility at the time that credit facility was refinanced by the 2005 CreditFacility.

 

•      Duringthe year ended December 31, 2005, we paid $24.8 million to acquire 677,800shares of our common stock which we retired as of December 31, 2005.

 

•      Duringthe year ended December 31, 2005, we paid $110.4 million of dividends toshareholders.

 

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Netcash used by financing activities was $186.7 million for the year ended December 31,2004 compared to net cash provided by financing activities of $361.0 millionfor the prior year period. The change in cash provided by financing activitiesrelates to the following:

 

•      Netproceeds from the issuance of long-term debt during the year ended December 31,2004, net of issuance costs of $7.2 million, were $507.8 million relating theinitial borrowings under our 2004 Credit Facility. Net proceeds from issuanceof long-term debt during the year ended December 31, 2003 net of issuancecosts of $14.6 million was $506.6 million, which was comprised of $246.2 millionof proceeds from our Senior Notes offering and $275.0 million from our ThirdCredit Facility.

 

•      Duringthe year ended December 31, 2004, we retired our First, Second and ThirdCredit Facilities, and repaid the $448.3 million outstanding on those creditfacilities at the time of their retirement.

 

•      Principalrepayments of long-term debt were $59.0 million for the year ended December 31,2004 associated with permanent principal repayments under our First, Second,Third and 2004 Credit Facilities. Principal repayments of long-term debt were$91.6 million for the year ended December 31, 2003 associated withpermanent principal repayments under our First, Second and Third CreditFacilities.

 

•      Duringthe year ended December 31, 2004, we repaid $177.0 million of revolvingdebt associated with our First, Second and 2004 Credit Facilities; during theyear ended December 31, 2003, we repaid $54.1 million of revolving debtassociated with our First and Second Credit Facilities.

 

•      Duringthe year ended December 31, 2004, we sold three Suezmax vessels whichwould have required a $13.1 million repayment of the term loan portion of our2004 Credit Facility. Pursuant to an amendment to the 2004 Credit Facility, wehad until August 2005 to provide substitute collateral to the 2004 CreditFacility. This $13.1 million was placed in an escrow account with the lenderpending our providing substitute collateral.

 

**CapitalExpenditures for Drydockings and Vessel Acquisitions**

 

**Drydocking**

 

Inaddition to vessel acquisition, other major capital expenditures includefunding our maintenance program of regularly scheduled in-water survey ordrydocking necessary to preserve the quality of our vessels as well as tocomply with international shipping standards and environmental laws andregulations. Management anticipates that vessels which are younger than 15years are required to undergo in-water surveys 2.5 years after a drydock andthat vessels are to be drydocked every five years, while vessels 15 years orolder are to be drydocked every 2.5 years in which case the additional drydockstake the place of these in-water surveys. During 2006, we anticipate that wewill capitalize costs associated with drydocks or significant in-water surveyson four vessels and that the expenditures to perform these drydocks willaggregate approximately $11 million to $13 million. The ability to meet thismaintenance schedule will depend on our ability to generate sufficientcash flows from operations, utilize our revolving credit facilities or tosecure additional financing.

 

**VesselAcquisitions**

 

In July 2004, we acquired four Suezmaxnewbuilding contracts. The purchase price of these contracts aggregate $67.2million which was paid to the seller of those contracts. Also in July 2004,$8.8 million was paid to the shipyard as an installment on the construction ofthe vessels associated with these contracts. As of December 31, 2005, weare required to pay an additional aggregate amount of $146.3 million throughthe completion of construction of these four Suezmax vessels delivery of whichis expected to occur between March 2006 and January 2008. Theinstallments that comprise this $146.3 million are payable as follows: $71.3million in 2006, $42.4 million in 2007, and $32.6 million in 2008.

 

**OFF-BALANCE SHEET ARRANGEMENTS**

 

As of December 31,2005, we did not have any significant off-balance-sheet arrangements, asdefined in Item 303(a)(4) of SEC Regulation S-K.

 

**OtherCommitments**

 

In February 2004, the Company entered intoan operating lease for an aircraft. The lease has a term of five years andrequires

 

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monthlypayments by the Company of $125,000.

 

In December 2004, the Company entered intoa 15-year lease for office space in New York, New York. The monthly rental isas follows: Free rent from December 1, 2004 to September 30, 2005,$109,724 per month from October 1, 2005 to September 30, 2010,$118,868 per month from October 1, 2010 to September 30, 2015, and$128,011 per month from October 1, 2015 to September 30, 2020. Themonthly straight-line rental expense from December 1, 2004 to September 30,2020 is $104,603.

 

The following is a tabular summary of our futurecontractual obligations for the categories set forth below (dollars inmillions):

 

**TABULAR DISCLOSURE OF CONTRACTUALOBLIGATIONS AND COMMERCIAL COMMITMENTS**

 
| ** **                           | ** ** | **Total** | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **Thereafter** | ** ** |
|--------------------------------------|------------|-----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------------|------------|
| Debt payments                        |       | $         | 135.0      |     | $          | —   |       | $        | —     |     | $          | —   |       | $              | —     |   | $ | — |   | $ | 135.0 |   |
| Newbuilding installments             |       | 146.3     |       | 71.3     |       | 42.4     |       | 32.6     |       | —   |       | —   |       | —         |       |
| Aircraft lease                       |       | 4.6       |       | 1.5      |       | 1.5      |       | 1.5      |       | 0.1      |       | —   |       | —         |       |
| Senior officer employment agreements |       | 5.4       |       | 2.0      |       | 2.0      |       | 0.7      |       | 0.7      |       | —   |       | —         |       |
| New York office lease                |       | 21.0      |       | 1.3      |       | 1.3      |       | 1.3      |       | 1.3      |       | 1.3      |       | 14.5           |       |
| Total commitments                    |       | $         | 312.3      |     | $          | 76.1     |       | $        | 47.2       |     | $          | 36.1     |       | $              | 2.1        |   | $ | 1.3 |   | $ | 149.5 |   |

 

**OtherDerivative Financial Instruments**

 

***Forward Freight Agreements***

 

As part ofour business strategy, we may from time to time enter into arrangementscommonly known as forward freight agreements, or FFAs, to hedge and managemarket risks relating to the deployment of our existing fleet of vessels. TheFFAs being considered by the company are future contracts, or commitments toperform in the future a shipping service between ship owners, charters andtraders. Generally, these FFAs would bind us and each counterparty in thearrangement to buy or sell a specified tonnage freighting commitment “forward”at an agreed time and price and for a particular route. Although FFAs can beentered into for a variety of purposes, including for hedging, as an option,for trading or for arbitrage, if we decided to enter into FFAs, our objectivewould be to hedge and manage market risks as part of our commercialmanagement. If we determine to enter into FFAs, we may reduce our exposureto any declines in our results from operations due to weak market conditions ordownturns, but may also limit our ability to benefit economically duringperiods of strong demand in the market.

 

DuringSeptember and October 2005, we entered into four FFAs involvingcontracts to provide a fixed number of theoretical voyages at fixed rates. TheFFA contracts settle based on the monthly Baltic Tanker Index (“BITR”). TheBITR averages rates received in the spot market by cargo type, crude oil andrefined petroleum products, by trade route. The duration of a contract can beone month, quarterly or up to two years (currently our open positions extend toDecember 2005) with open positions settling on a monthly basis. We havetaken short positions in FFA contracts, which reduce a portion of our exposureto the spot charter market by creating synthetic time charters. At December 31,2005, the FFAs had no aggregate notional value, because the contracts expiredon December 31, 2005. The notional amount is based on a computation of thequantity of cargo (or freight) the contract specifies, the contract rate (basedon a certain trade route) and a flat rate determined by the market on an annualbasis. Each contract is marked to market for the specified cargo and traderoute. The fair value of forward freight agreements is the estimated amountthat we would receive or pay to terminate the agreements at the reporting date.As of December 31, 2005, we have recorded a liability of $0.3 millionrelated to the fair market value of these economic hedges. We have recorded theaggregate net realized and unrealized loss of $0.8 million for the year ended December 31,2005 as Other expense on the statement of operations.

 

***Currency Forward Contract***

 

As of December 31, 2005 we are party to a forwardcontract to acquire 5 million Euros on January 17, 2006 for $6.0 million. Changesin the fair value of this forward contract subsequent to July 19, 2005 (thedate on which we entered into the contract, at which time the fair value was$0) will be recorded as Other expense on our statement of operations. Weentered into this contract to guard against weakening in the dollar against theEuro. As of December 31, 2005, we have recorded a liability of $0.1million related to the fair market value of this derivative financialinstrument. We have recorded the aggregate net unrealized loss of $0.1 millionfor the year ended December 31, 2005 as Other expense on the statement ofoperations.

 

***Bunker Collar***

 

Duringthe year ended December 31, 2005, we entered into a “costless collar” toobtain a quantity of fuel between $220/metric ton (“MT”) and $300/MT. We usethis derivative as an economic hedge, but have not designated this derivativeas a hedge

 

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for accounting purposes. Assuch, changes in the fair value of the derivative are recorded to our statementof income each reporting period. Under this agreement, we have a right toreceive (call option) the amount by which the bunker price on a specified indexexceeds $300/MT and an obligation to pay (put option) the amount by which$220/MT exceeds the bunker price on a specified index. The term is for anotional 1,000 MT of bunkers per month for each month in the period between October 1,2005 and March 31, 2006. As of December 31, 2005, we have recorded anasset of $12,000 related to the fair market value of this economic hedge. Wehave recorded an aggregate net unrealized gain of $12,000, for the year ended December 31,2005 as Other expense on the statement of operations.

 

**Critical Accounting Policies**

 

The discussion and analysis of our financialcondition and results of operations is based upon our consolidated financialstatements, which have been prepared in accordance with accounting principlesgenerally accepted in the United States of America, or GAAP. The preparation ofthose financial statements requires us to make estimates and judgments thataffect the reported amount of assets and liabilities, revenues and expenses andrelated disclosure of contingent assets and liabilities at the date of ourfinancial statements. Actual results may differ from these estimates underdifferent assumptions or conditions.

 

Critical accounting policies are those thatreflect significant judgments or uncertainties, and potentially result inmaterially different results under different assumptions and conditions. Wehave described below what we believe are our most critical accounting policies.Except for a change in the estimated useful lives of our single-hull vesselseffective October 1, 2003 and the increase in residual scrap values of ourvessels effective January 1, 2004, we believe that there has been nochange in or additions to our critical accounting policies since December 2001.

 

REVENUE RECOGNITION. Revenue is generally 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. Our revenues are earned under time charters or voyage contracts. Revenue from time charters is earned and recognized on a daily basis. Certain time charters contain provisions which provide for adjustments to time charter rates based on agreed-upon market rates. Revenue for voyage contracts is recognized based upon the percentage of voyage completion. The percentage of voyage completion is based on the number of voyage days worked at the balance sheet date divided by the total number of days expected on the voyage.

 

ALLOWANCEFOR DOUBTFUL ACCOUNTS. We do not provide any reserve for doubtful accountsassociated with our voyage revenues because we believe that our customers areof high creditworthiness and there are no serious issues concerningcollectibility. We have had an excellent collection record during the past fiveyears ended December 31, 2005. To the extent that some voyage revenuesbecome uncollectible, the amounts of these revenues would be expensed at thattime. We provide a reserve for our demurrage revenues based upon our historicalrecord of collecting these amounts. As of December 31, 2005, we provided areserve of approximately 14% for these claims, which we believe is adequate inlight of our collection history. We periodically review the adequacy of thisreserve so that it properly reflects our collection history. To the extent thatour collection experience warrants a greater reserve we will incur an expenseas to increase this amount in that period.

 

In addition, certainof our time charter contracts contain speed and fuel consumption provisions. Wehave a reserve for potential claims, which is based on the amount of cumulativetime charter revenue recognized under these contracts which we estimate may needto be repaid to the charterer due to failure to meet these speed and fuelconsumption provisions.

 

DEPRECIATION ANDAMORTIZATION. We record the value of our vessels at their cost (which includesacquisition costs directly attributable to the vessel and expenditures made toprepare the vessel for its initial voyage) less accumulated depreciation. Wedepreciate our non-single-hull vessels on a straight-line basis over theirestimated useful lives, estimated to be 25 years from date of initial deliveryfrom the shipyard. We believe that a 25-year depreciable life for double-hulland double-sided vessels is consistent with that of other ship owners and withits economic useful life. Depreciation is based on cost less the estimatedresidual scrap value. Until December 31, 2003, we estimated residual scrapvalue as the lightweight tonnage of each vessel multiplied by $125 scrap valueper ton. Effective January 1, 2004, we changed our estimate of residualscrap value per lightweight ton to be $175, which we believe betterapproximates the historical average price of scrap steel. An increase in theuseful life of the vessel would have the effect of decreasing the annualdepreciation charge and extending it into later periods. An increase in theresidual scrap value (as was done in 2004) would decrease the amount of theannual depreciation charge. A decrease in the useful life of the vessel wouldhave the effect of increasing the annual depreciation charge. A decrease in theresidual scrap value would increase the amount of the annual depreciationcharge.

 

REPLACEMENTS,RENEWALS AND BETTERMENTS. We capitalize and depreciate the costs of significantreplacements, renewals and betterments to our vessels over the shorter of the vessel’sremaining useful life or the life of the renewal or betterment. The amountcapitalized is based on our judgment as to expenditures that extend a vessel’suseful life or increase the operational efficiency of a vessel. We believe thatthese criteria are consistent with GAAP and that our policy of capitalizationreflects the economics and market values of our vessels. Costs that are notdepreciated are written off as a component of direct vessel operating expenseduring the period incurred. Expenditures for routine maintenance and repairsare expensed as incurred. If the amount of the

 

40

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expenditureswe capitalize for replacements, renewals and betterments to our vessels werereduced, we would recognize the amount of the difference as an expense.

 

DEFERREDDRYDOCK COSTS. Our vessels are required to be drydocked approximately every 30to 60 months for major repairs and maintenance that cannot be performed whilethe vessels are operating. We capitalize the costs associated with the drydocksas they occur and amortize these costs on a straight line basis over the periodbetween drydocks. We believe that these criteria are consistent with GAAPguidelines and industry practice, and that our policy of capitalizationreflects the economics and market values of the vessels.

 

IMPAIRMENTOF LONG-LIVED ASSETS. We evaluate the carrying amounts and periods over whichlong-lived assets are depreciated to determine if events have occurred whichwould require modification to their carrying values or useful lives. Inevaluating useful lives and carrying values of long-lived assets, we reviewcertain indicators of potential impairment, such as undiscounted projectedoperating cash flows, vessel sales and purchases, business plans and overallmarket conditions. We determine undiscounted projected net operating cash flowsfor each vessel and compare it to the vessel carrying value. In the event thatimpairment occurred, we would determine the fair value of the related asset andwe record a charge to operations calculated by comparing the asset’s carryingvalue to the estimated fair value. We estimate fair value primarily through theuse of third party valuations performed on an individual vessel basis.

 

**Recent Accounting Pronouncements**

 

In December 2004,the FASB issued SFAS No. 123R that will require compensation costs relatedto share-based payment transactions to be recognized in the financialstatements. With limited exceptions, the amount of compensation cost will bemeasured based on the grant-date fair value of the equity or liabilityinstruments issued. In addition, liability awards will be remeasured eachreporting period. Compensation cost will be recognized over the period that anemployee provides service in exchange for the award SFAS 123R replaces SFAS No. 123,“Accounting for Stock-Based Compensation”, and supersedes APB 25. ThisStatement will be effective as of the beginning of the first fiscal year thatbegins after June 15, 2005. In March 2005, the SEC issued StaffAccounting Bulletin (“SAB”) No. 107 regarding the Staff’s interpretationof SFAS No. 123R. This interpretation provides the Staff’s views regardinginteractions between SFAS No. 123R and certain SEC rules andregulations and provides interpretations of the valuation of share-basedpayments for public companies. The interpretive guidance is intended to assistcompanies in applying the provisions of SFAS No. 123R and investors andusers of the financial statements in analyzing the information provided. TheCompany will follow the guidance prescribed in SAB No. 107 in connectionwith its adoption of SFAS No. 123R.

 

Entities that used the fair-value-based method foreither recognition or disclosure under SFAS No. 123 will apply thisrevised Statement using a modified version of prospective application. Underthis transition method, for the portion of outstanding awards for which therequisite service has not yet been rendered, compensation cost is recognized onor after required effective date based on the grant-date fair value of thoseawards calculated under SFAS No. 123 for either recognition or pro formadisclosures. For periods before the required effective date, those entities may electto apply a modified version of the retrospective application under whichfinancial statements for periods are adjusted on a basis consistent with thepro forma disclosures required for those periods by SFAS No. 123. Theimpact of adopting SFAS No. 123R will result in additional compensationexpense during, 2006 of approximately $140,000 which the Company does notconsider to be material.

 

SFAS No. 154, “AccountingChanges and Error Corrections, a Replacement of APB Opinion No. 20 andFASB Statement No. 3.” SFAS 154 establishes, unless impracticable,retrospective application as the required method for reporting a change inaccounting principle in the absence of explicit transition requirementsspecific to a newly adopted accounting principle. Previously, most changes inaccounting principle were recognized by including the cumulative effect ofchanging to the new accounting principle in net income of the period of thechange. Under SFAS No. 154, retrospective application requires (i) thecumulative effect of the change to the new accounting principle on periodsprior to those presented to be reflected in the carrying amounts of assets andliabilities as of the beginning of the first period presented, (ii) anoffsetting adjustment, if any, to be made to the opening balance of retainedearnings (or other appropriate components of equity) for that period, and (iii) financialstatements for each individual prior period presented to be adjusted to reflectthe direct period-specific effects of applying the new accounting principle.Special retroactive application rules apply in situations where it isimpracticable to determine either the period-specific effects or the cumulativeeffect of the change. Indirect effects of a change in accounting principle arerequired to be reported in the period in which the accounting change is made.SFAS No. 154 carries forward the guidance in APB Opinion 20 “AccountingChanges,” requiring justification of a change in accounting principle on thebasis of preferability. SFAS No. 154 also carries forward without changethe guidance contained in APB Opinion 20, for reporting the correction of anerror in previously issued financial statements and for a change in anaccounting estimate. SFAS No. 154 is effective for accounting changes andcorrections of errors made in fiscal years beginning after December 15,2005. The Company does not expect SFAS No. 154 will significantly impactits financial statements upon its adoption on January 1, 2006.

 

41

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**RelatedParty Transactions**

 

ThroughApril 2005, we leased office space of approximately 11,000 square feet forour principal executive offices in New York, New York in a building leased byGenMar Realty LLC, a company wholly owned by Peter C. Georgiopoulos, ourChairman, President and Chief Executive Officer. There was no lease agreementbetween us and GenMar Realty LLC. We paid an occupancy fee on a month to monthbasis in the amount of $55,000 for use of that space. In April 2005, wemoved our executive offices, and ceased using that space and paid that fee atthe end of that month.

 

During the fourth quarter of 2000, we lent $485,467 toPeter C. Georgiopoulos. This loan does not bear interest and is due and payableon demand. The full amount of this loan was outstanding as of December 31,2005.

 

**ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSUREOF MARKET RISK**

 

**INTEREST RATE RISK**

 

We are exposed to various market risks, includingchanges in interest rates. The exposure to interest rate risk relates primarilyto our debt. At December 31, 2005, we had $135.0 million of floating ratedebt with a margin over LIBOR ranging from 0.75% to 1.0% compared to December 31,2004 when we had $240.0 million of floating rate debt with margins over LIBOR of1.0%. Until July 1, 2005, we used interest rate swaps to manage the impactof interest rate changes on earnings and cash flows. As of July 1, 2005, westopped designating our interest rate swaps as a hedge. The differential to bepaid or received under these swap agreements is accrued as interest rateschange and was recognized as an adjustment to interest expense through June 30,2005 and other expense thereafter. As of December 31, 2005 and 2004, wewere party to interest rate swap agreements having aggregate notional amountsof $19.5 million and $45.5 million, respectively, which effectively fixed LIBORon a like amount of principal at rates ranging from 3.985% to 4.75%. If weterminate these swap agreements prior to their maturity, we may berequired to pay or receive an amount upon termination based on the prevailinginterest rate, time to maturity and outstanding notional principal amount atthe time of termination. As of December 31, 2005 the fair value of theseswaps was a net asset to us of $25,000. A one percent increase in LIBOR wouldincrease interest expense on the portion of our $115.5 million outstandingfloating rate indebtedness that is not economically hedged by approximately $1.2million per year from December 31, 2005.

 

**FOREIGN EXCHANGE RATE RISK**

 

The international tanker industry’s functionalcurrency is the U.S. Dollar. Virtually all of the Company’s revenues and mostof its operating costs are in U.S. Dollars. The Company incurs certainoperating expenses, drydocking, and overhead costs in foreign currencies, themost significant of which is the Euro, as well as British Pounds, Japanese Yen,Singapore Dollars, Australian Dollars and Norwegian Kroners. During the yearended December 31, 2005, at least 18% of the Company’s direct vesseloperating expenses and general and administrative expenses were denominated inthese currencies. The potential additional expense from a 10% adverse change inquoted foreign currency exchange rates, as it relates to all of thesecurrencies, would be approximately $2.4 million for the year ended December 31,2005.

 

As of December 31,2005, we are party to a forward contract to acquire 5 million Euros on January 17,2006 for $6.0 million. Changes in the fair value of this forward contractsubsequent to July 19, 2005 ([the date on which we entered into thecontract,] at which time the fair value was $0) will be recorded as Otherexpense on our statement of operations. We entered into this contract to guardagainst weakening in the dollar against the Euro. As of December 31, 2005,we have recorded a liability of $0.1 million related to the fair market valueof this derivative financial instrument. We have recorded the aggregate netunrealized loss of $0.1 million for the year ended December 31, 2005, whichis classified as Other expense on the statement of operations. A 10% decline inthe value of the Euro against the dollar as of December 31, 2005 wouldhave resulted in an additional net unrealized loss of $0.6 million for the yearended December 31, 2005.

 

**CHARTERRATE RISK**

 

As part ofour business strategy, we may from time to time enter into FFAs to hedgeand manage market risks relating to the deployment of our existing fleet ofvessels. Generally, these FFAs are futures contracts that would bind us andeach counterparty in the arrangement to buy or sell a specified tonnagefreighting commitment “forward” at an agreed time and price and for aparticular route. Our objective would be to hedge and manage market risks as part ofour commercial management. During September and October 2005, weentered into four FFAs involving contracts for short positions settled based onthe monthly BITR. Our open positions extended to December 2005 and settledon a monthly basis. At December 31, 2005, the FFAs had no aggregatenotional value, because the contracts expired on December 31, 2005. As of December 31,2005, we have recorded a liability of $0.3 million related to the fair marketvalue of these economic hedges. We have recorded an aggregate net realized andunrealized loss of $0.8 million for the year ended December 31, 2005,which is classified as Other expense on the statement of operations. A 10% increasein the BITR would have resulted in an additional net realized and unrealizedloss of $0.1 million for the year ended December 31, 2005.

 

42

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**FUELPRICE RISK**

 

Duringthe year ended December 31, 2005, we entered into a “costless collar” foreach month in the period between October 1, 2005 and March 31, 2006to obtain a notional 1,000 MT of bunkers per month between $220/MT and $300/MT.We use this derivative as an economic hedge, but we have not designated thisderivative as a hedge for accounting purposes. As such, changes in the fairvalue of the derivative are recorded to our statement of income each reportingperiod. As of December 31, 2005, we have recorded an asset of $12,000related to the fair market value of this economic hedge. We have recorded anaggregate net unrealized gain of $12,000, for the year ended December 31,2005, which is classified as Other expense on the statement of operations. Ifthe average bunker price dropped by 10% on January 1, 2006 from theDecember 31, 2005 level and stayed at that level until the expiration of thisderivative on March 31, 2006, we would not be required to make anypayments to the counter party during 2006.

 

**Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARYDATA**

 

**GENERAL MARITIME CORPORATION**

 

**INDEX TO CONSOLIDATED FINANCIALSTATEMENTS**

 
| CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31,  2005 AND 2004 AND FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003. |   |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                    |   |
| Report of Independent  Registered Public Accounting Firm                                                                                |   |
|                                                                                                                                    |   |
| Consolidated  Balance Sheets                                                                                                            |   |
|                                                                                                                                    |   |
| Consolidated  Statements of Operations                                                                                                  |   |
|                                                                                                                                    |   |
| Consolidated  Statements of Shareholders’ Equity                                                                                   |   |
|                                                                                                                                    |   |
| Consolidated  Statements of Cash Flows                                                                                                  |   |
|                                                                                                                                    |   |
| Notes to  Consolidated Financial Statements                                                                                             |   |

 

F-1

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REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders ofGeneral Maritime Corporation New York, New York

 

We have audited the accompanying consolidatedbalance sheets of General Maritime Corporation and subsidiaries (the “Company”)as of December 31, 2005 and 2004, and the related consolidated statementsof operations, shareholders’ equity, and cash flows for each of the three yearsin the period ended December 31, 2005. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audits.

 

We conducted our audits in accordance withthe standards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basisfor our opinion

 

In our opinion, such consolidated financialstatements present fairly, in all material respects, the financial position ofGeneral Maritime Corporation and subsidiaries at December 31, 2005 and2004, and the results of their operations and their cash flows for each of thethree years in the period ended December 31, 2005, in conformity withaccounting principles generally accepted in the United States of America.

 

We have also audited, in accordance with thestandards of the Public Company Accounting Oversight Board (United States), theeffectiveness of the Company’s internal control over financial reporting as of December 31,2005, based on the criteria established in *InternalControl—Integrated Framework* issued by the Committee of SponsoringOrganizations of the Treadway Commission and our report dated March 13, 2006 expressed an unqualified opinion on management’s assessment of theeffectiveness of the Company’s internal control over financial reporting and anunqualified opinion on the effectiveness of the Company’s internal control overfinancial reporting.

 
| /s/ Deloitte &  Touche LLP |   |
|-------------------------------------|--------|
|                                |
|                                |
| March 13,  2006                |
| New York, New  York                 |

 

 

F-2

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**GENERAL MARITIME CORPORATION AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**DECEMBER 31, 2005 AND 2004**

**(Dollars in thousands except per share data)**

 
| ** **                                                                                                                                                                                           | ** ** | **DECEMBER 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                           | ** ** | **2005**              | ** ** | **2004** | ** ** |
| ** **                                                                                                                                                                                           | ** ** | ** **            | ** ** | ** ** | ** ** |
| ASSETS                                                                                                                                                                                               |       |                  |       |   |   |
| CURRENT ASSETS:                                                                                                                                                                                      |       |                  |       |   |   |
| Cash                                                                                                                                                                                                 |       | $                     | 96,976     |   | $ | 46,921 |   |
| Due from charterers, net                                                                                                                                                                             |       | 47,281                |       | 73,883 |   |
| Vessels held for sale                                                                                                                                                                                |       | 294,527               |       | — |   |
| Prepaid expenses and other current assets                                                                                                                                                            |       | 32,540                |       | 31,341 |   |
| Total current assets                                                                                                                                                                                 |       | 471,324               |       | 152,145 |   |
| NONCURRENT ASSETS:                                                                                                                                                                                   |       |                  |       |   |   |
| Vessels, net of accumulated depreciation of $118,981  and $280,215, respectively                                                                                                                     |       | 564,609               |       | 1,139,594 |   |
| Vessel construction in progress                                                                                                                                                                      |       | 88,485                |       | 77,909 |   |
| Other fixed assets, net                                                                                                                                                                              |       | 5,212                 |       | 3,849 |   |
| Deferred drydock costs, net                                                                                                                                                                          |       | 12,788                |       | 23,101 |   |
| Deferred financing costs, net                                                                                                                                                                        |       | 4,463                 |       | 11,860 |   |
| Other assets                                                                                                                                                                                         |       | 1,000                 |       | 13,050 |   |
| Goodwill                                                                                                                                                                                             |       | 1,245                 |       | 5,753 |   |
| Total noncurrent assets                                                                                                                                                                              |       | 677,802               |       | 1,275,116 |   |
| TOTAL ASSETS                                                                                                                                                                                         |       | $                     | 1,149,126  |   | $ | 1,427,261 |   |
|                                                                                                                                                                                                 |       |                  |       |   |   |
| LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                                                                                            |       |                  |       |   |   |
| CURRENT LIABILITIES:                                                                                                                                                                                 |       |                  |       |   |   |
| Accounts payable and accrued expenses                                                                                                                                                                |       | $                     | 32,862     |   | $ | 36,799 |   |
| Accrued interest                                                                                                                                                                                     |       | 44                    |       | 7,321 |   |
| Current portion of long-term debt                                                                                                                                                                    |       | —                |       | 40,000 |   |
| Total current liabilities                                                                                                                                                                            |       | 32,906                |       | 84,120 |   |
| NONCURRENT LIABILITIES:                                                                                                                                                                              |       |                  |       |   |   |
| Deferred voyage revenue                                                                                                                                                                              |       | 2,140                 |       | 5,558 |   |
| Long-term debt                                                                                                                                                                                       |       | 135,020               |       | 446,597 |   |
| Other noncurrent liabilities                                                                                                                                                                         |       | 2,552                 |       | — |   |
| Derivative liability                                                                                                                                                                                 |       | 383                   |       | 560 |   |
| Total noncurrent liabilities                                                                                                                                                                         |       | 140,095               |       | 452,715 |   |
| TOTAL LIABILITIES                                                                                                                                                                                    |       | 173,001               |       | 536,835 |   |
| COMMITMENTS AND CONTINGENCIES                                                                                                                                                                        |       |                  |       |   |   |
| SHAREHOLDERS’ EQUITY:                                                                                                                                                                           |       |                  |       |   |   |
| Common stock, $0.01 par value per share; authorized  75,000,000 shares; issued  and outstanding 38,040,320 and 37,895,870 shares at December 31, 2005  and December 31, 2004, respectively |       | 380                   |       | 379 |   |
| Paid-in capital                                                                                                                                                                                      |       | 473,855               |       | 424,021 |   |
| Restricted stock                                                                                                                                                                                     |       | (45,516               | )          | (3,646 | ) |
| Retained earnings                                                                                                                                                                                    |       | 547,406               |       | 470,217 |   |
| Accumulated other comprehensive loss                                                                                                                                                                 |       | —                |       | (545 | ) |
| Total shareholders’ equity                                                                                                                                                                      |       | 976,125               |       | 890,426 |   |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                                                                                      |       | $                     | 1,149,126  |   | $ | 1,427,261 |   |

 

See notes to consolidated financial statements.

 

 

F-3

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**GENERAL MARITIME CORPORATION**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

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

**(Dollars in thousands except per share data)**

 
| ** **                                   | ** ** | **2005**   | ** ** | **2004**   | ** ** | **2003**   | ** ** |
|----------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| VOYAGE REVENUES:                             |       |       |       |       |       |       |       |
| Voyage revenues                              |       | $          | 567,901    |       | $          | 701,291    |       | $ | 454,456 |   |
| OPERATING EXPENSES:                          |       |       |       |       |       |       |       |
| Voyage expenses                              |       | 137,203    |       | 117,955    |       | 117,810    |       |
| Direct vessel expenses                       |       | 86,681     |       | 96,818     |       | 91,981     |       |
| General and administrative                   |       | 43,989     |       | 31,420     |       | 22,866     |       |
| Depreciation and amortization                |       | 97,320     |       | 100,806    |       | 84,925     |       |
| Gain on sale of vessels                      |       | (91,235    | )          | (6,570     | )          | (1,490     | )          |
| Impairment charge                            |       | —     |       | —     |       | 18,803     |       |
| Total operating expenses                     |       | 273,958    |       | 340,429    |       | 334,895    |       |
| OPERATING INCOME                             |       | 293,943    |       | 360,862    |       | 119,561    |       |
| OTHER EXPENSE:                               |       |       |       |       |       |       |       |
| Interest income                              |       | 3,482      |       | 979        |       | 462        |       |
| Interest expense                             |       | (32,400    | )          | (38,831    | )          | (35,505    | )          |
| Other expense                                |       | (52,668    | )          | (7,901     | )          | —     |       |
| Net other expense                            |       | (81,586    | )          | (45,753    | )          | (35,043    | )          |
| Net income                                   |       | $          | 212,357    |       | $          | 315,109    |       | $ | 84,518 |   |
|                                         |       |       |       |       |       |       |       |
| Earnings per common share:                   |       |       |       |       |       |       |       |
| Basic                                        |       | $          | 5.71       |       | $          | 8.51       |       | $ | 2.29 |   |
| Diluted                                      |       | $          | 5.61       |       | $          | 8.33       |       | $ | 2.26 |   |
|                                         |       |       |       |       |       |       |       |
| Weighted average shares outstanding- basic   |       | 37,164,321 |       | 37,049,266 |       | 36,967,174 |       |
|                                         |       |       |       |       |       |       |       |
| Weighted average shares outstanding- diluted |       | 37,874,378 |       | 37,813,929 |       | 37,355,764 |       |

 

See notes toconsolidated financial statements.

 

 

F-4

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**GENERAL MARITIME CORPORATION**

**CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY**

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

**(Dollars in thousands except per share data)**

 
| ** **                                                    | ** ** | **Common  Stock** | ** ** | **Paid-in  Capital** | ** ** | **Restricted  Stock** | ** ** | **Retained  Earnings** | ** ** | **Accumulated  Other  Comprehensive  Income (Loss)** | ** ** | **Comprehensive  Income  (Loss)** | ** ** | **Total** | ** ** |
|---------------------------------------------------------------|------------|-------------------|------------|----------------------|------------|-----------------------|------------|------------------------|------------|-----------------------------------------------------------|------------|-----------------------------------|------------|-----------|------------|
| Balance as of January 1, 2003                            |       | $                 | 376        |                 | $          | 418,782               |       | $                      | (3,742     | )                                                         | $          | 70,590                            |       | $         | (4,370     | ) |   |   | $ | 481,636 |   |
| Net Income                                                    |       |              |       |                 |       |                  |       | 84,518                 |       |                                                      |       | $                                 | 84,518     |      | 84,518     |   |
| Unrealized derivative gains on cash flow hedge                |       |              |       |                 |       |                  |       |                   |       | 1,890                                                     |       | 1,890                             |       | 1,890     |       |
|                                                          |       |              |       |                 |       |                  |       |                   |       |                                                      |       | $                                 | 86,408     |      |       |   |
| Issuance of 155,000 shares of restricted stock                |       |              |       | 2,260                |       | (2,260                | )          |                   |       |                                                      |       |                              |       | —    |       |
| Restricted stock amortization                                 |       |              |       |                 |       | 689                   |       |                   |       |                                                      |       |                              |       | 689       |       |
| Exercise of stock options                                     |       | —            |       | 147                  |       |                  |       |                   |       |                                                      |       |                              |       | 147       |       |
| Balance as of December 31, 2003                          |       | 376               |       | 421,189              |       | (5,313                | )          | 155,108                |       | (2,480                                                    | )          |                              |       | 568,880   |       |
| Net Income                                                    |       |              |       |                 |       |                  |       | 315,109                |       |                                                      |       | $                                 | 315,109    |      | 315,109    |   |
| Unrealized derivative gains on cash flow hedge                |       |              |       |                 |       |                  |       |                   |       | 1,935                                                     |       | 1,935                             |       | 1,935     |       |
|                                                          |       |              |       |                 |       |                  |       |                   |       |                                                      |       | $                                 | 317,044    |      |       |   |
| Restricted stock amortization                                 |       |              |       |                 |       | 1,667                 |       |                   |       |                                                      |       |                              |       | 1,667     |       |
|                                                          |       |              |       |                 |       |                  |       |                   |       |                                                      |       |                              |       |      |       |
| Exercise of stock options                                     |       | 3                 |       | 2,832                |       |                  |       |                   |       |                                                      |       |                              |       | 2,835     |       |
| Balance as of December 31, 2004                          |       | 379               |       | 424,021              |       | (3,646                | )          | 470,217                |       | (545                                                      | )          |                              |       | 890,426   |       |
|                                                          |       |              |       |                 |       |                  |       |                   |       |                                                      |       |                              |       |      |       |
| Comprehensive income:                                         |       |              |       |                 |       |                  |       |                   |       |                                                      |       |                              |       |      |       |
| Net income                                                    |       |              |       |                 |       |                  |       | 212,357                |       |                                                      |       | $                                 | 212,357    |      | 212,357    |   |
| Unrealized derivative gains on cash flow hedge                |       |              |       |                 |       |                  |       |                   |       | 545                                                       |       | 545                               |       | 545       |       |
| Comprehensive income                                          |       |              |       |                 |       |                  |       |                   |       |                                                      |       | $                                 | 212,902    |      |       |   |
|                                                          |       |              |       |                 |       |                  |       |                   |       |                                                      |       |                              |       |      |       |
| Cash dividends paid                                           |       |              |       |                 |       |                  |       | (110,404               | )          |                                                      |       |                              |       | (110,404  | )          |
| Exercise of stock options                                     |       | 1                 |       | 1,503                |       |                  |       |                   |       |                                                      |       |                              |       | 1,504     |       |
| Issuance of 1,079,600 shares of restricted stock              |       | 7                 |       | 48,331               |       | (48,338               | )          |                   |       |                                                      |       |                              |       | —    |       |
| Acquisition and retirement of 677,800 shares of  common stock |       | (7                | )          |                 |       |                  |       | (24,764                | )          |                                                      |       |                              |       | (24,771   | )          |
| Restricted stock amortization                                 |       |              |       |                 |       | 6,468                 |       |                   |       |                                                      |       |                              |       | 6,468     |       |
| Balance as of December 31, 2005                          |       | $                 | 380        |                 | $          | 473,855               |       | $                      | (45,516    | )                                                         | $          | 547,406                           |       | $         | —     |   |   |   | $ | 976,125 |   |

 

 

F-5

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**GENERAL MARITIME CORPORATION**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

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

**(Dollars in thousands)**

 
| ** **                                                                         | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                                                               |       |     |       |     |       |     |       |
| CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:                                       |       |     |       |     |       |     |       |
| Net income                                                                         |       | $        | 212,357    |     | $          | 315,109  |       | $ | 84,518 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities: |       |     |       |     |       |     |       |
| Gain on sale of vessels                                                            |       | (91,235  | )          | (6,570   | )          | (1,490   | )          |
| Impairment charge                                                                  |       | —   |       | —   |       | 18,803   |       |
| Depreciation and amortization                                                      |       | 97,320   |       | 100,806  |       | 84,925   |       |
| Write-off of deferred financing costs of refinanced  credit facilities             |       | 5,660    |       | 7,901    |       | —   |       |
| Loss on retirement of Senior Notes                                                 |       | 45,778   |       | —   |       | —   |       |
| Amortization of discount on Senior Notes                                           |       | 243      |       | 254      |       | 185      |       |
| Restricted stock compensation expense                                              |       | 6,468    |       | 1,667    |       | 689      |       |
| Changes in assets and liabilities:                                                 |       |     |       |     |       |     |       |
| Decrease (increase) in due from charterers                                         |       | 26,602   |       | (37,674  | )          | (10,850  | )          |
| Increase in prepaid expenses and other current and  noncurrent assets              |       | (2,811   | )          | (13,502  | )          | (4,819   | )          |
| (Decrease) increase in other current and noncurrent  liabilities                   |       | (2,034   | )          | 13,548   |       | 7,261    |       |
| (Decrease) increase in accrued interest                                            |       | (7,277   | )          | (479     | )          | 7,441    |       |
| (Decrease) increase in deferred voyage revenue                                     |       | (3,418   | )          | (772     | )          | 5,586    |       |
| Deferred drydock costs incurred                                                    |       | (38,039  | )          | (17,050  | )          | (14,137  | )          |
| Net cash provided by operating activities                                          |       | 249,614  |       | 363,238  |       | 178,112  |       |
|                                                                               |       |     |       |     |       |     |       |
| CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:                                |       |     |       |     |       |     |       |
| Purchase of vessels                                                                |       | —   |       | (182,457 | )          | (528,519 | )          |
| Payments for vessel construction in progress                                       |       | (10,576  | )          | (77,909  | )          | —   |       |
| Purchase of other fixed assets                                                     |       | (5,918   | )          | (2,544   | )          | (1,677   | )          |
| Proceeds from sale of vessels                                                      |       | 334,663  |       | 94,570   |       | 27,277   |       |
| Acquisition of business net of cash received                                       |       | —   |       | (137     | )          | —   |       |
| Net cash provided (used) by investing activites                                    |       | 318,169  |       | (168,477 | )          | (502,919 | )          |
|                                                                               |       |     |       |     |       |     |       |
| CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:                                |       |     |       |     |       |     |       |
| Proceeds from Senior Notes offering                                                |       | —   |       | —   |       | 246,158  |       |
| Long-term debt borrowings                                                          |       | 162,788  |       | 515,000  |       | 275,000  |       |
| Payments to retire Senior Notes                                                    |       | (286,851 | )          | —   |       | —   |       |
| Payments to retire credit facilities                                               |       | (175,000 | )          | (448,305 | )          | —   |       |
| Principal payments on long - term debt                                             |       | (30,000  | )          | (59,022  | )          | (91,584  | )          |
| Net payments on revolving credit facilitities                                      |       | (62,788  | )          | (177,000 | )          | (54,100  | )          |
| Deferred financing costs paid                                                      |       | (5,256   | )          | (7,203   | )          | (14,590  | )          |
| Cash released from (placed in) escrow with lender                                  |       | 13,050   |       | (13,050  | )          | —   |       |
| Payments to acquire and retire common stock                                        |       | (24,771  | )          | —   |       | —   |       |
| Proceeds from exercise of stock options                                            |       | 1,504    |       | 2,835    |       | 147      |       |
| Cash dividends paid                                                                |       | (110,404 | )          | —   |       | —   |       |
| Net cash (used) provided by financing activities                                   |       | (517,728 | )          | (186,745 | )          | 361,031  |       |
|                                                                               |       |     |       |     |       |     |       |
| Net increase in cash                                                               |       | 50,055   |       | 8,016    |       | 36,224   |       |
| Cash, beginning of the year                                                        |       | 46,921   |       | 38,905   |       | 2,681    |       |
| Cash, end of year                                                                  |       | $        | 96,976     |     | $          | 46,921   |       | $ | 38,905 |   |
|                                                                               |       |     |       |     |       |     |       |
| Supplemental disclosure of cash flow information:                                  |       |     |       |     |       |     |       |
| Cash paid during the year for interest (net of  amount capitalized)                |       | $        | 39,677     |     | $          | 39,310   |       | $ | 28,064 |   |
| Restricted stock granted to employees (net of  forfeitures)                        |       | $        | 48,338     |     | $          | —   |       | $ | 2,260 |   |

 

See notes to consolidated financial statements.

 

 

F-6

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**GENERAL MARITIME CORPORATION**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003**

**(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND PERTON DATA)**

 

**1. SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES**

 

NATUREOF BUSINESS.  General MaritimeCorporation (the “Company”) through its subsidiaries provides internationaltransportation services of seaborne crude oil. The Company’s fleet is comprisedof both Aframax and Suezmax vessels. The Company operates its business in onebusiness segment, which is the transportation of international seaborne crudeoil.

 

TheCompany’s vessels are primarily available for charter on a spot voyage or timecharter basis. Under a spot voyage charter, which generally lasts between twoto ten weeks, the owner of a vessel agrees to provide the vessel for thetransport of specific goods between specific ports in return for the payment ofan agreed upon freight per ton of cargo or, alternatively, for a specifiedtotal amount. All operating and specified voyage costs are paid by the owner ofthe vessel.

 

Atime charter involves placing a vessel at the charterer’s disposal for a setperiod of time during which the charterer may use the vessel in return for thepayment by the charterer of a specified daily or monthly hire rate. In timecharters, operating costs such as for crews, maintenance and insurance aretypically paid by the owner of the vessel and specified voyage costs such asfuel, canal and port charges are paid by the charterer.

 

BASISOF PRESENTATION.  The financialstatements of the Company have been prepared on the accrual basis ofaccounting. A summary of the significant accounting policies followed in thepreparation of the accompanying financial statements, which conform toaccounting principles generally accepted in the United States of America, ispresented below.

 

BUSINESS GEOGRAPHICS.  Non-U.S. operations accounted for 100% ofrevenues and net income. Vessels regularly move between countries ininternational waters, over hundreds of trade routes. It is thereforeimpractical to assign revenues or earnings from the transportation ofinternational seaborne crude oil products by geographical area.

 

SEGMENTREPORTING.  The Company has determinedthat it operates in one reportable segment, the transportation of crude oilwith its fleet of midsize vessels.

 

PRINCIPLESOF CONSOLIDATION.  The accompanyingconsolidated financial statements include the accounts of General MaritimeCorporation and its wholly owned subsidiaries. All intercompany accounts andtransactions have been eliminated on consolidation.

 

REVENUEAND EXPENSE RECOGNITION.  Revenue andexpense recognition policies for voyage and time charter agreements are asfollows:

 

VOYAGECHARTERS.  Voyage revenues and voyageexpenses are recognized on a pro rata basis based on the relative transit timein each period. Estimated losses on voyages are provided for in full at thetime such losses become evident. A voyage is deemed to commence upon thecompletion of discharge of the vessel’s previous cargo and is deemed to endupon the completion of discharge of the current cargo. Voyage expensesprimarily include only those specific costs which are borne by the Company inconnection with voyage charters which would otherwise have been borne by thecharterer under time charter agreements. These expenses principally consist offuel, canal and port charges. Demurrage income represents payments by thecharterer to the vessel owner when loading and discharging time exceed thestipulated time in the voyage charter. Demurrage income is measured inaccordance with the provisions of the respective charter agreements and thecircumstances under which demurrage claims arise and is recognized on a prorata basis over the length of the voyage to which it pertains. At December 31,2005 and 2004, the Company has a reserve of approximately $2,093 and $2,320,respectively, against its due from charterers balance associated with demurragerevenues.

 

TIME CHARTERS.  Revenue from time charters is recognized on astraight line basis as the average revenue over the term of the respective timecharter agreement. Direct vessel expenses are recognized when incurred. As ofDecember 31, 2005 and 2004, the Company has recorded a reserve associated withits estimated performance claims against its due from charterers balance of$6,571 and $2,386, respectively.

 

VESSELS,  NET.  Vessels, net is stated at cost lessaccumulated depreciation. Included in vessel costs are acquisition costsdirectly attributable to the vessel and expenditures made to prepare the vesselfor its initial voyage. Vessels are depreciated on a straight-line basis overtheir estimated useful lives, determined to be 25 years from date of initialdelivery from the shipyard for non-single-hull vessels. During the fourthquarter of 2003, management determined that single-hull vessels can only tradeuntil 2010, when regulatory 

 

F-7

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restrictions require their phase out unless certainconditions are met. Therefore, the Company reduced the estimated useful livesof its single-hull vessels from 25 years to lives ranging from to 19 to 21years from the date of initial delivery from the shipyard. This change inestimate resulted in an increase in annual depreciation expense ofapproximately $8,500, or $0.23 per share, through 2009 on the Company’s ninesingle-hull vessels owned as of December 31, 2003. During 2004, the Companysold four of these single-hull vessels. The change in estimate resulted in anincrease in annual depreciation expense of approximately $4,700, or $0.13 pershare, through 2009 on the Company’s five remaining single-hull vessels ownedas of December 31, 2004. During 2005, the Company sold, or is carrying on itsDecember 31, 2005 balance sheet as held for sale, these five remaining single-hullvessels. Consequently, as of December 31, 2005, there is no additionaldepreciation expense attributable to any of the Company’s single-hull vessels.

 

Effective January 1, 2004, the Company increasedresidual scrap value of its vessels from $125 per light weight ton to $175 perlight weight ton, which the Company believes better approximates the historicalaverage price of scrap steel. The impact of this change is to reducedepreciation expense on the Company’s vessels owned at that time byapproximately $3,600, or $0.10 per share, per year subsequent toDecember 31, 2003.

 

Depreciationis based on cost less the estimated residual scrap value. The costs ofsignificant replacements, renewals and betterments are capitalized anddepreciated over the shorter of the vessel’s remaining useful life or the lifeof the renewal or betterment. Undepreciated cost of any asset component beingreplaced is written off as a component of direct vessel operating expense.Expenditures for routine maintenance and repairs are expensed as incurred.

 

CONSTRUCTION IN PROGRESS.  Construction in progress represents the costof acquiring contracts to build vessels, installments paid to shipyards,certain other payments made to third parties and interest costs incurred duringthe construction of vessels (until the vessel is substantially complete andready for its intended use). During the years ended December 31, 2005 and 2004,the Company capitalized $3,475 and $1,270, respectively, of interest expense.

 

OTHERFIXED ASSETS, NET.  Other fixed assets,net is stated at cost less accumulated depreciation. Depreciation is computedusing the straight-line method over the following estimated useful lives:

 
| **DESCRIPTION**                          | ** ** | **USEFUL LIVES** | ** ** |
|------------------------------------------|------------|------------------|------------|
| Furniture,  fixtures and other equipment |       | 10 years         |       |
| Vessel  equipment                        |       | 5 years          |       |
| Computer  equipment                      |       | 4 years          |       |

 

IMPAIRMENT OF LONG-LIVED ASSETS.  The Company follows Statement of FinancialAccounting Standards (“SFAS”) No. 144, *Accounting for theImpairment or Disposal of Long-Lived Assets*, which requiresimpairment losses to be recorded on long-lived assets used in operations whenindicators of impairment are present and the undiscounted cash flows estimatedto be generated by those assets are less than the asset’s carrying amount. Inthe evaluation of the fair value and future benefits of long-lived assets, theCompany performs an analysis of the anticipated undiscounted future net cashflows of the related long-lived assets. If the carrying value of the relatedasset exceeds the undiscounted cash flows, the carrying value is reduced to itsfair value. Various factors including future charter rates and vessel operatingcosts are included in this analysis.

 

DEFERREDDRYDOCK COSTS, NET.  Approximately every30 to 60 months the Company’s vessels are required to be drydocked for majorrepairs and maintenance, which cannot be performed while the vessels areoperating. The Company capitalizes costs associated with the drydocks as theyoccur and amortizes these costs on a straight line basis over the periodbetween drydocks. Amortization of drydock costs is included in depreciation andamortization in the statement of operations. For the years ended December 31,2005, 2004 and 2003, amortization was $17,957, $11,783 and $7,072,respectively. Accumulated amortization as of December 31, 2005 and 2004 was$3,052 and $15,878, respectively.

 

DEFERREDFINANCING COSTS, NET.  Deferred financingcosts include fees, commissions and legal expenses associated with securingloan facilities. These costs are amortized over the life of the related debt,which is included in depreciation and amortization. Amortization was $1,968,$3,142 and $3,468 for the years ended December 31, 2005, 2004 and 2003,respectively. Accumulated amortization as of December 31, 2005 and 2004 was$102 and $2,070, respectively.

 

GOODWILL. As of January 1, 2002, the Companyadopted the provisions for SFAS No. 142 “Goodwill and Other Intangible Assets.”  This statement requires that goodwill andintangible assets with indefinite lives no longer be amortized, but instead betested for impairment at least annually and written down with a charge tooperations when the carrying amount exceeds the estimated fair value. Prior tothe adoption of SFAS No. 142, the Company amortized goodwill. The amount ofsuch unamortized goodwill was $5,753 as of January 1, 2002 related to theCompany’s acquisition in June 2001 of a technical management company. Inaccordance with SFAS No. 142 the Company discontinued the amortization ofgoodwill effective January 1, 2002. During 2005, in connection with thereclassification of 26 vessels to vessels held for sale, $4,508 of the goodwillassociated with certain of these vessels was reclassified to Vessels held forsale leaving a balance at December 31, 2005 of $1,245. The Company determinedthat there was no impairment of goodwill as of the transition date and duringthe years ended December 31, 2005, 2004 and 2003.

 

 

F-8

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INCOMETAXES.  The Company is incorporated inthe Republic of the Marshall Islands. Pursuant to the income tax laws of theMarshall Islands, the Company is not subject to Marshall Islands income tax.Additionally, pursuant to the U.S. Internal Revenue Code, the Company is exemptfrom U.S. income tax on its income attributable to the operation of vessels ininternational commerce. Pursuant to various tax treaties, the Company’sshipping operations are not subject to foreign income taxes. Therefore, noprovision for income taxes is required.

 

DEFERREDVOYAGE REVENUE.  Deferred voyage revenueprimarily relates to cash received from charterers prior to it being earned.These amounts are recognized as income when earned in the appropriate futureperiods.

 

COMPREHENSIVEINCOME.  The Company follows Statement ofFinancial Accounting Standards No. 130 “Reporting Comprehensive Income”, whichestablishes standards for reporting and displaying comprehensive income and itscomponents in financial statements. Comprehensive income is comprised of netincome less charges related to the adoption and implementation of SFAS No. 133.

 

STOCK BASED COMPENSATION*.  *The Company follows the provisionsof Accounting Principles Board Opinion (“APB”) No. 25, *Accountingfor Stock Issued to Employees* to account for its stock option plan.The Company provides pro forma disclosure of net income and earnings per shareas if the accounting provision of SFAS No. 123, *Accountingfor Stock-Based Compensation* had been adopted. Options granted areexercisable at prices equal to the fair market value of such stock on the datesthe options were granted. The fair values of the options were determined on thedate of grant using a Black-Scholes option pricing model. These options werevalued based on the following assumptions: an estimated life of five years forall options granted, volatility of 53%, 47%, 63% and 54% for options grantedduring 2004, 2003, 2002 and 2001, respectively, risk free interest rate of3.85%, 3.5%, 4.0% and 5.5% for options granted during 2004, 2003, 2002 and2001, respectively, and no dividend yield for any options granted. The fairvalue of the 860,000 options to purchase common stock granted on June 12,2001 is $8.50 per share. The fair value of the 143,500 options to purchasecommon stock granted on November 26, 2002 is $3.42 per share. The fairvalue of the 50,000, 12,500 and 29,000 options to purchase common stock grantedon May 5, 2003, June 5, 2003 and November 12, 2003 is $3.95 pershare, $4.52 per share, and $6.61 per share, respectively. The fair value ofthe 20,000 options to purchase common stock granted on May 20, 2004 is $11.22per share.

 

Had compensation cost for the Company’s stock option plans beendetermined based on the fair value at the grant dates for awards under thoseplans consistent with the methods recommended by SFAS No. 123, the Company’snet income and net income per share for the years ended December 31, 2005, 2004and 2003, would have been stated at the pro forma amounts indicated below:

 
| ** **                                                    | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|---------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net Income:                                                   |       |     |       |     |       |     |       |
|                                                          |       |     |       |     |       |     |       |   |   |   |
| As reported                                                   |       | $        | 212,357    |     | $          | 315,109  |       | $ | 84,518 |   |
| Stock based compensation expense using the  fair value method |       | 309      |       | 458      |       | 201      |       |
| Pro forma                                                     |       | $        | 212,048    |     | $          | 314,651  |       | $ | 84,317 |   |
|                                                          |       |     |       |     |       |     |       |
| Earnings per  common share (as reported):                     |       |     |       |     |       |     |       |
| Basic                                                         |       | $        | 5.71       |     | $          | 8.51     |       | $ | 2.29 |   |
| Diluted                                                       |       | $        | 5.61       |     | $          | 8.33     |       | $ | 2.26 |   |
|                                                          |       |     |       |     |       |     |       |
| Earnings per  common share (pro forma):                       |       |     |       |     |       |     |       |
| Basic                                                         |       | $        | 5.71       |     | $          | 8.49     |       | $ | 2.28 |   |
| Diluted                                                       |       | $        | 5.60       |     | $          | 8.32     |       | $ | 2.26 |   |

 

ACCOUNTINGESTIMATES.  The preparation of financialstatements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosures ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of revenues and expenses during the reporting period.Actual results could differ from those estimates.

 

EARNINGSPER SHARE.  Basic earnings per share arecomputed by dividing net income by the weighted average number of common sharesoutstanding during the year. Diluted earnings per share reflects the potentialdilution that could occur if securities or other contracts to issue commonstock were exercised.

 

FAIRVALUE OF FINANCIAL INSTRUMENTS.  The estimatedfair values of the Company’s financial instruments other than its 

 

 

F-9

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SeniorNotes approximate their individual carrying amounts as of December 31, 2005 and2004 due to their short-term maturity or the variable-rate nature of therespective borrowings. The estimated fair value of the Company’s Senior Notesis based on quoted market prices.

 

DERIVATIVE FINANCIAL INSTRUMENTS.  In addition to interest rate swaps described below, the Company isparty to other derivative financial instruments to guard against the risks of(a) a weakening U.S. Dollar that would make future Euro-based expendituremore costly, (b) rising fuel costs which would increase future voyageexpenses, and (c) declines in future spot market rates, which would reducerevenues on future voyages of vessels trading on the spot market. The Companyconsiders the derivative financial instruments the Company has entered to beeconomic hedges against these risks, although they do not qualify as hedges foraccounting purposes. As such, the Company records the fair value of thederivative financial instruments on its balance sheet as a net Derivativeliability or asset, as applicable. Changes in fair value in the derivativefinancial instruments, as well as payments made to, or received fromcounterparties, to periodically settle the derivative transactions, arerecorded as Other expense or income on the statement of operations asapplicable.

 

INTEREST RATERISK MANAGEMENT.  The Company is exposedto the impact of interest rate changes. The Company’s objective is to managethe impact of interest rate changes on earnings and cash flows of itsborrowings. The Company uses interest rate swaps to manage net exposure tointerest rate changes related to its borrowings and to lower its overallborrowing costs. Significant interest rate risk management instruments held bythe Company during the years ended December 31, 2005, 2004 and 2003 includedpay-fixed swaps. As of December 31, 2005, the Company is party to pay-fixedinterest rate swap agreements that expire in 2006 which effectively convertfloating rate obligations to fixed rate instruments. During the years endedDecember 31, 2005, 2004 and 2003, the Company recognized a credit to othercomprehensive loss (OCI) of $545, $1,935 and $1,890, respectively. Theaggregate asset (liability) in connection with a portion of the Company’sinterest rate swaps as of December 31, 2005 and 2004 was $25 and $(560),respectively, and is presented as Derivative liability for cash flow hedge onthe balance sheet.

 

CONCENTRATIONOF CREDIT RISK.  Financial instrumentsthat potentially subject the Company to concentrations of credit risk are tradereceivables. With respect to accounts receivable, the Company limits its creditrisk by performing ongoing credit evaluations and, when deemed necessary,requiring letters of credit, guarantees or collateral. Management does notbelieve significant risk exists in connection with the Company’s concentrationsof credit at December 31, 2005.

 

RECENT ACCOUNTING PRONOUNCEMENTS.  In December 2004, the FASB issued SFASNo. 123R that will require compensation costs related to share-basedpayment transactions to be recognized in the financial statements. With limitedexceptions, the amount of compensation cost will be measured based on the grant-datefair value of the equity or liability instruments issued. In addition,liability awards will be remeasured each reporting period. Compensation costwill be recognized over the period that an employee provides service inexchange for the award. SFAS 123R replaces SFAS No. 123, “Accounting forStock-Based Compensation”, and supersedes APB 25. This Statement will beeffective as of the beginning of the first fiscal year that begins afterJune 15, 2005. In March 2005, the SEC issued Staff Accounting Bulletin (“SAB”)No. 107 regarding the Staff’s interpretation of SFAS No. 123R. Thisinterpretation provides the Staff’s views regarding interactions between SFASNo. 123R and certain SEC rules and regulations and provides interpretations ofthe valuation of share-based payments for public companies. The interpretiveguidance is intended to assist companies in applying the provisions of SFAS No.123R and investors and users of the financial statements in analyzing theinformation provided. The Company will follow the guidance prescribed in SABNo. 107 in connection with its adoption of SFAS No. 123R.

 

Entitiesthat used the fair-value-based method for either recognition or disclosureunder SFAS No. 123 will apply this revised Statement using a modifiedversion of prospective application. Under this transition method, for theportion of outstanding awards for which the requisite service has not yet beenrendered, compensation cost is recognized on or after required effective datebased on the grant-date fair value of those awards calculated under SFASNo. 123 for either recognition or pro forma disclosures. For periodsbefore the required effective date, those entities may elect to apply amodified version of the retrospective application under which financialstatements for periods are adjusted on a basis consistent with the pro formadisclosures required for those periods by SFAS No. 123. The effects of theadoption of SFAS 123R on prior periods are presented in the Stock BasedCompensation section of this footnote. Besides the effect of stock optionspreviously issued, the Company believes that the adoption of SFAS No. 123Rwill result in additional compensation expense during 2006 of approximately$140 which the Company does not consider to be material.

 

SFAS No. 154, “Accounting Changes and Error Corrections, a Replacementof APB Opinion No. 20 and FASB Statement No. 3.” SFAS 154 establishes, unlessimpracticable, retrospective application as the required method for reporting achange in accounting principle in the absence of explicit transitionrequirements specific to a newly adopted accounting principle. Previously, mostchanges in accounting principle were recognized by including the cumulativeeffect of changing to the new accounting principle in net income of the periodof the change. Under SFAS No. 154, retrospective application requires (i) thecumulative effect of the change to the new accounting principle on periodsprior to those presented to be reflected in the carrying amounts of assets andliabilities as of the beginning of the first period presented, (ii) anoffsetting adjustment, if any, to be made to the opening balance of retainedearnings (or other appropriate components of equity) for that period, and (iii)financial statements for each individual prior period presented to be adjustedto reflect the direct period-specific effects of applying the new accountingprinciple. Special retroactive application rules 

 

 

F-10

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apply in situations where it is impracticable to determine either theperiod-specific effects or the cumulative effect of the change. Indirecteffects of a change in accounting principle are required to be reported in theperiod in which the accounting change is made. SFAS No. 154 carries forward theguidance in APB Opinion 20 “Accounting Changes,” requiring justification of achange in accounting principle on the basis of preferability. SFAS No. 154 alsocarries forward without change the guidance contained in APB Opinion 20, forreporting the correction of an error in previously issued financial statementsand for a change in an accounting estimate. SFAS No. 154 is effective foraccounting changes and corrections of errors made in fiscal years beginningafter December 15, 2005. The Company does not expect SFAS No. 154 willsignificantly impact its financial statements upon its adoption on January 1,2006.

 

**2. ACQUISITIONS**

 

Duringthe period from March 2003 to May 2003, the Company acquired 19 vesselsfrom an unaffiliated entity consisting of 14 Suezmax vessels and five Aframaxvessels. The aggregate purchase price of these vessels was $525,000, which wasfinanced through the use of cash and borrowings under the Company’s existingrevolving credit facilities together with the incurrence of additional debtdescribed in Note 8.

 

In March 2004, the Company agreed to acquire three Aframaxvessels, two Suezmax vessels, four newbuilding Suezmax contracts and atechnical management company from an unaffiliated entity for cash. The threeAframax vessels, two Suezmax vessels and the technical management company wereacquired between April and June 2004. The four newbuilding Suezmaxcontracts were acquired in July 2004. The purchase price of these assetswas approximately $248,100, which were financed through cash on hand andborrowings under the Company’s then existing revolving credit facilities. This$248,100 purchase price was allocated as follows:  $180,599 for the five vessels, $67,242 forthe four newbuilding Suezmax contracts and $266 for the technical managementcompany the net assets of which are comprised of $107 of cash, other currentassets of $738, noncurrent assets of $82 and current liabilities of $661. Inaddition, $8,777 was paid to the shipyard as an installment on the constructionprice of the four newbuilding contracts.

 

Theremaining installments on the four newbuilding Suezmax contracts to be paid bythe Company subsequent to December 31, 2005 aggregate $146,339 and are payableas follows: $71,310 in 2006, $42,444 in 2007 and $32,585 in 2008.

 

**3. EARNINGSPER COMMON SHARE**

 

Thecomputation of basic earnings per share is based on the weighted average numberof common shares outstanding during the year. The computation of diluted earningsper share assumes the exercise of all dilutive stock options (see Note 16)using the treasury stock method and the lapsing of restrictions on unvestedrestricted stock awards (see Note 17), for which the assumed proceeds uponlapsing the restrictions are deemed to be the amount of compensation costattributable to future services and not yet recognized using the treasury stockmethod, to the extent dilutive. For the years ended December 31, 2005 and2004, all stock options were considered to be dilutive. For the year endedDecember 31, 2003, 267,000 stock options were excluded from the computation ofdiluted earnings per common share as they were anti-dilutive.

 

Thecomponents of the denominator for the calculation of basic earnings per shareand diluted earnings per share are as follows:

 
| ** **                                           | ** ** | **Year ended December 31,** | ** ** |
|------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                           | ** ** | **2005**                    | ** ** | **2004** | ** ** | **2003** | ** ** |
|                                                 |       |                        |       |   |   |   |   |
| Common  shares outstanding, basic:                   |       |                        |       |   |   |   |   |
| Weighted average common shares outstanding,  basic   |       | 37,164,321                  |       | 37,049,266 |   | 36,967,174 |   |
|                                                 |       |                        |       |   |   |   |   |
| Common shares  outstanding, diluted:                 |       |                        |       |   |   |   |   |
| Weighted average common shares outstanding,  basic   |       | 37,164,321                  |       | 37,049,266 |   | 36,967,174 |   |
| Stock options                                        |       | 58,306                      |       | 111,572 |   | 52,176 |   |
| Restricted stock awards                              |       | 651,751                     |       | 653,091 |   | 336,414 |   |
| Weighted average common shares outstanding,  diluted |       | 37,874,378                  |       | 37,813,929 |   | 37,355,764 |   |

 

During January 2006, the Company acquired and retired 4,442,756 sharesof its common stock for $164,355.

 

**4. IMPAIRMENTCHARGE/ GAIN ON SALE OF VESSELS**

 

During2003, a 1980-built single-hull Aframax vessel and a 1981-built single-hullAframax vessel, which were classified as vessels held for sale as of December31, 2002, were sold, resulting in an aggregate gain on sale of vessels of$2,664. Also during 2003, three 

 

 

F-11

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double-bottomAframax vessels acquired in 2003 were sold, in order to reduce the age profileof the Company’s fleet, for an aggregate loss on sale of vessels of $1,174. Ofthese three vessels, two were delivered to their new owners in 2003 and one wasdelivered to its new owner in February 2004.

 

In December 2003, the International Maritime Organization adopted aproposed amendment to the International Convention for the Prevention ofPollution from Ships to accelerate the phase-out of certain single-hull vesselsfrom 2015 to 2010, unless the flag state extends the date to 2015. Managementdetermined that the useful lives of its nine single-hull vessels would end in2010, which is four to six years earlier than the 25-year useful lives thevessels had previously been ascribed. Because of the reduction in the usefullives of these single-hull vessels, an impairment evaluation was performed inaccordance with the guidelines of SFAS No. 144, “Accounting for the Impairmentor Disposal of Long-Lived Assets”. The completion of the Company’s evaluationindicated that the carrying value of five of its nine single-hull vesselsexceeded the expected undiscounted future cash flows attributable to theseassets, resulting in an impairment. The total impairment charge recognizedduring the fourth quarter of 2003 was $18,803. In accordance with the Company’spolicy, the impairment loss was determined to be equal to the amount by whichthe carrying value of these five vessels exceeded their estimated fair value. Fairvalues were determined using fair valuations performed by third parties.

 

Inaddition to the impairment charge taken on five single-hull vessels, effectiveOctober 1, 2003, the estimated useful lives of the nine single-hull vesselswere reduced to useful lives ranging from 19 to 21 years. This change inestimate resulted in an increase in annual depreciation expense ofapproximately $8,500 through 2009 on the Company’s nine single-hull vesselsowned as of December 31, 2003. During 2004, the Company sold four of thesesingle-hull vessels. This change in estimate resulted in an increase in annualdepreciation expense of approximately $4,700 through 2009 on the Company’s fiveremaining single-hull vessels owned as of December 31, 2004.

 

DuringJuly 2004, the Company agreed to sell four of its single-hull Suezmaxvessels in order to reduce the number of single-hull vessels in the Company’sfleet. These vessels were sold during August and October 2004 for aggregate netproceeds of approximately $84,182, for a gain on sale of vessels of $6,570.

 

During2005, the Company agreed to sell its four single-hull Suezmax vessels, its sixdouble-sided Suezmax vessels, its one single-hull Aframax vessel and its sixdouble-sided Aframax vessels in order to transform the Company’s fleet toexclusively double-hull vessels. In addition, as of December 31, 2005, theCompany reclassified its nine Aframax OBO vessels from Vessels to Vessels heldfor sale. The Company decided to sell these vessels to reduce the average ageof its fleet. Through December 31, 2005, 13 of these vessels were delivered totheir new owners for aggregate net proceeds of $334,663, and a net gain on saleof vessels of $91,235. The aggregate book value of remaining three single-hullSuezmax vessels, one double-sided Aframax vessel and nine Aframax OBO vesselsof $294,527 are carried as Vessels held for sale on the Company’s balance sheetas of December 31, 2005. The three single-hull Suezmax vessels and one double-sidedAframax vessel were delivered to their new owners in January 2006.

 

**5. PREPAIDEXPENSES AND OTHER CURRENT ASSETS**

 

Prepaidexpenses and other current assets consist of the following:

 
| ** **                        | ** ** | **December 31,  2005** | ** ** | **December 31,  2004** | ** ** |
|-----------------------------------|------------|------------------------|------------|------------------------|------------|
| Bunkers and  lubricants inventory |       | $                      | 13,699     |                   | $          | 16,734 |   |
| Insurance  claims receivable      |       | 9,447                  |       | 7,108                  |       |
| Other                             |       | 9,394                  |       | 7,499                  |       |
| Total                             |       | $                      | 32,540     |                   | $          | 31,341 |   |

 

Insuranceclaims receivable consist substantially of payments made by the Company forrepairs of vessels that the Company expects to recover from insurance.

 

**6. OTHERFIXED ASSETS**

 

Otherfixed assets consist of the following:

 

 

F-12

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| ** **                        | ** ** | **December 31,  2005** | ** ** | **December 31,  2004** | ** ** |
|-----------------------------------|------------|------------------------|------------|------------------------|------------|
| Other fixed  assets:              |       |                   |       |                   |       |
|                              |       |                   |       |                   |       |
| Furniture, fixtures and equipment |       | $                      | 4,113      |                   | $          | 1,050 |   |
| Vessel equipment                  |       | 740                    |       | 2,881                  |       |
| Computer equipment                |       | 1,118                  |       | 978                    |       |
| Total cost                        |       | 5,971                  |       | 4,909                  |       |
|                              |       |                   |       |                   |       |
| Less:  accumulated depreciation   |       | 759                    |       | 1,060                  |       |
| Total                             |       | $                      | 5,212      |                   | $          | 3,849 |   |

 

**7. ACCOUNTSPAYABLE AND ACCRUED EXPENSES**

 

Accountspayable and accrued expenses consist of the following:

 
| ** **              | ** ** | **December 31,  2005** | ** ** | **December 31,  2004** | ** ** |
|-------------------------|------------|------------------------|------------|------------------------|------------|
| Accounts  payable       |       | $                      | 11,756     |                   | $          | 14,839 |   |
| Accrued  operating      |       | 16,463                 |       | 17,763                 |       |
| Accrued  administrative |       | 4,643                  |       | 4,197                  |       |
| Total                   |       | $                      | 32,862     |                   | $          | 36,799 |   |

 

**8. LONG-TERMDEBT**

 

Long-termdebt consists of the following:

 
| ** **                               | ** ** | **December 31,  2005** | ** ** | **December 31,  2004** | ** ** |
|------------------------------------------|------------|------------------------|------------|------------------------|------------|
| 2004 Credit  Facility                    |       |                   |       |                   |       |
| Term Loan                                |       | $                      | —     |                   | $          | 205,000 |   |
| Revolving Credit Facility                |       | —                 |       | 35,000                 |       |
| 2005 Credit  Facility                    |       | 135,000                |       | —                 |       |
| Senior  Notes, net of discount           |       | 20                     |       | 246,597                |       |
| Total                                    |       | $                      | 135,020    |                   | $          | 486,597 |   |
|                                     |       |                   |       |                   |       |   |   |
| Less:  Current portion of long-term debt |       | —                 |       | 40,000                 |       |
| Long-term  debt                          |       | $                      | 135,020    |                   | $          | 446,597 |   |

 

**2005 Credit Facility**

 

On October 26, 2005, the Company entered into an $800,000revolving credit facility (the “2005 Credit Facility”) with a syndicate ofcommercial lenders. The 2005 Credit Facility has been used to refinance theexisting term borrowings under the Company’s 2004 Credit Facility describedbelow (the “2005 Refinancing”). Pursuant to the 2005 Refinancing, the Companyrepaid $175,000 outstanding under the term loan of the Company’s 2004 CreditFacility primarily by making an initial drawdown of $162,788 and using the$13,050 cash held in escrow described below.

 

Upon consummating the 2005Refinancing, unamortized deferred financing costs associated with the 2004Credit Facility aggregating $5,660 was written off as a non-cash charge inOctober 2005. This non-cash charge is classified as Other expense on thestatement of operations. In connection with the 2005 Refinancing, the Companyincurred deferred financing costs of $4,565.

 

The 2005 Credit Facility provides a four year nonamortizing revolvingloan with semiannual reductions of $44,500 beginning October 26, 2009 anda bullet reduction of $533,000 at the end of year seven. Up to $50,000 of the 2005 Credit Facility willbe available for the issuance of stand by letters of credit to supportobligations of the Company and its subsidiaries that are reasonably acceptableto the issuing lenders under the facility. As of December 31, 2005, the Companyhas outstanding letters of credit aggregating $2,608 which expire betweenJanuary and December 2006, leaving $47,392 available to be issued.

 

 

F-13

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The 2005 Credit Facility permits the Company to pay out dividends underits current policy, repurchase shares of its common stock and repurchase theCompany’s Senior Notes in accordance with its terms and conditions. Thisfacility allows the Company to pay dividends or repurchase its common stock inan amount not exceeding the net proceeds from the sale of all non-collateralizedvessels, including the 13 vessels the Company sold during November and December2005 and the 13 vessels the Company has classified as held for sale as ofDecember 31, 2005. In addition, the Company is permitted to pay dividendswith respect to any fiscal quarter up to an amount equal to EBITDA (as defined)for such fiscal quarter less fleet renewal reserves, which are established bythe Company’s Board of Directors, net interest expense and cash taxes, in theevent taxes are paid, for such fiscal quarter.

 

The 2005 Credit Facility carries an interest rate of LIBOR plus 75basis points (or, depending on the Company’s long term foreign issuer creditrating and leverage ratio, 100 basis points) on the outstanding portion and acommitment fee of 26.25 basis points on the unused portion. As of December 31,2005, $135,000 of the facility is outstanding. The facility is collateralizedby, among other things, 17 of the Company’s double-hull vessels and its fournew building Suezmax contracts, with carrying values as of December 31, 2005 of$564,609 and $88,485, respectively, as well as the Company’s equity interestsin its subsidiaries that own these assets, insurance proceeds of thecollateralized vessels, and certain deposit accounts related to the vessels. Eachsubsidiary of the Company with an ownership interest in these vessels or whichhas otherwise guaranteed the Company’s Senior Notes also provides an unconditionalguaranty of amounts owing under the 2005 Credit Facility. The Company’sremaining 13 vessels (all of which are classified as Vessels held for sale asof December 31, 2005) are unencumbered.

 

The Company’s ability to borrowamounts under the 2005 Credit Facility is subject to satisfaction of certaincustomary conditions precedent,and compliance with terms and conditions included in the credit documents. The various covenantsin the 2005 Credit Facility aregenerally consistent with the types of covenants that were applicable under the 2004 Credit Facility. These covenantsinclude, among other things, customary restrictions on the Company’s ability to incurindebtedness or grant liens, paydividends or make stock repurchases (except as otherwise permitted as describedabove), engage in businesses otherthan those engaged in on the effectivedate of the credit facility and similar or related businesses, enter into transactions withaffiliates, amend its governing documents or documentsrelated to its Senior Notes, and merge,consolidate, or dispose of assets.The Company is also required tocomply with various ongoing financial covenants, including with respect to the Company’s leverage ratio, minimum cashbalance, net worth, and collateral maintenance. If the Company does not comply with the various financial and other covenants andrequirements of the 2005 Credit Facility,the lenders may, subject to various customary cure rights, require theimmediate payment of all amounts outstanding under the facility.

 

**2004 Credit Facility- Refinanced by the 2005Credit Facility**

 

On July 1, 2004, the Company closed on an $825,000 senior securedbank financing facility (“2004 Credit Facility”) consisting of a term loan of$225,000 and a revolving loan of $600,000. The term loan had a five yearmaturity at a rate of LIBOR plus 1.0% and was to amortize on a quarterly basiswith 19 payments of $10,000 and one payment of $35,000. The revolving loancomponent, which did not amortize, had a five year maturity at a rate of LIBORplus 1.0% on the used portion and a 0.5% commitment fee on the unused portion.

 

Concurrent with the closing of the 2004 Credit Facility,pursuant to which the Company borrowed $225,000 under the term loan and$290,000 under the revolving credit facility, the Company retired its existingFirst, Second and Third Credit Facilities described below (the “Refinancing”). Atthe time of the Refinancing, the 2004 Credit Facility was secured by the 42vessels which collateralized the First, Second and Third Credit Facilities andthe five vessels described in Note 2 which were acquired during 2004. Inaddition, each of the Company’s subsidiaries which had an ownership interest inany vessel that was secured by the 2004 Credit Facility had providedunconditional guaranties of all amounts owing under the 2004 Credit Facility. Deferredfinancing costs incurred relating to the 2004 Credit Facility aggregated$6,905.

 

Upon consummating the Refinancing, unamortized deferredfinancing costs associated with the First, Second and Third Credit Facilitiesaggregating $7,886 was written off as a non-cash charge in July 2004. Thisnon-cash charge is classified as Other expense on the statement of operations.

 

As described in Note 4, in August and October 2004, theCompany sold four single-hull Suezmax vessels. Pursuant to amendments to the2004 Credit Facility, the Company was permitted, until August 2006 tosubstitute as collateral future vessel acquisitions with a fair valueequivalent to the vessels sold. Had this amendment not been agreed to, theCompany would, upon the sale of these four vessels, have had to repay $13,050associated with the $225,000 term loan and the $600,000 revolving creditfacility would have been permanently reduced by $35,194. In accordance withamendments to the 2004 Credit Facility, the Company placed $13,050 in escrowwhich will be returned to the Company if collateral is substituted as describedabove. This amount of cash held in escrow is classified as Other assets on theCompany’s balance sheet. Pursuant to the 2005 Refinancing, these funds wereused to repay a portion of the 2004 Credit Facility.

 

 

F-14

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Under this credit facility, the Company was required to maintain certain ratios such as: vessel market values to total outstanding loans and undrawn revolving credit facilities, EBITDA to net interest expense and to maintain minimum levels of working capital. In addition, the 2004 Credit Facility, as amended, permitted the Company to pay dividends with respect to any fiscal quarter up to an amount equal to EBITDA (as defined) for such fiscal quarter less fleet renewal reserves, which are established by the Company’s Board of Directors, net interest expense and cash taxes, in the event taxes are paid, for such fiscal quarter. Such amount was to be reduced to the extent that the aggregate amount permitted to be paid for dividends for all fiscal quarters since January 1, 2005 is a negative amount. However, the Company would not have been permitted to pay dividends if certain significant defaults as defined under the 2004 Credit Facility were to occur. During the year ended December 31, 2005, the Company paid dividends of $110,404.

 

**First, Second and Third Credit Facilities- Refinanced by the 2004Credit Facility**

 

The First Credit Facility was comprised of a $200,000term loan and a $100,000 revolving loan. The First Credit Facility was tomature on June 15, 2006. The term loan was repayable in quarterlyinstallments. The principal of the revolving loan was to be payable atmaturity. The First Credit Facility bore interest at LIBOR plus 1.5%. TheCompany was obligated to pay a fee of 0.625% per annum on the unused portion ofthe revolving loan on a quarterly basis. Due to the sale of three of theAframax vessels securing the First Credit Facility, the revolving loan facilitywas reduced to $96,519. As of June 30, 2004, the Company had $69,493outstanding on the term loan and $50,000 outstanding on the revolving loan. Allof these outstanding balances were repaid during the Refinancing on July 1,2004. The Company’s obligations under the First Credit Facility were secured by17 vessels.

 

The Second Credit Facility consisted of a $115,000 term loan and a$50,000 revolving loan. The Second Credit Facility was to mature onJune 27, 2006. The term loan was repayable in quarterly installments. Theprincipal of the revolving loan was to be payable at maturity. The SecondCredit Facility bore interest at LIBOR plus 1.5%. The Company was obligated topay a fee of 0.625% per annum on the unused portion of the revolving loan on aquarterly basis. As of June 30, 2004, the Company had $45,000 outstandingon the term loan and $50,000 outstanding on the revolving loan. All of theseoutstanding balances were repaid during the Refinancing on July 1, 2004. TheCompany’s obligations under the Second Credit Facility agreements were securedby nine vessels.

 

On March 11, 2003 in connection with the 19 vesselsacquired by the Company as discussed in Note 2, the Company entered into commitmentsfor $450,000 in credit facilities. These credit facilities were comprised of afirst priority $350,000 amortizing term loan (the “Third Credit Facility”) anda second priority $100,000 non-amortizing term loan (the “Second Priority TermLoan”). Pursuant to the issuance of the Senior Notes described below, the ThirdCredit Facility was reduced to $275,000 (such reduction from $350,000 istreated as a prepayment of the first six installments due under this facility)and the Second Priority Term Loan was eliminated. The Third Credit Facility wasto mature on March 10, 2008, was to be repayable in 19 quarterlyinstallments and bore interest at LIBOR plus 1.625%. As of June 30, 2004, theCompany had outstanding $233,812 on the Third Credit Facility. This outstandingbalance was repaid during the Refinancing on July 1, 2004. The Company’sobligations under the Third Credit Facility were secured by 16 vessels.

 

Interestrates during the year ended December 31, 2005 ranged from 3.44% to 5.06% on the2004 and 2005 Credit Facilities.

 

**Interest Rate Swap Agreements**

 

In August and October 2001, the Company entered into interestrate swap agreements with foreign banks to manage interest costs and the riskassociated with changing interest rates. At their inception, these swaps hadnotional principal amounts equal to 50% the Company’s outstanding term loansunder its First and Second Credit Facilities. The notional principal amountsamortize at the same rate as the term loans. The interest rate swap agreemententered into during August 2001 hedged the First Credit Facility,described above, to a fixed rate of 6.25%. This swap agreement terminates onJune 15, 2006. The interest rate swap agreement entered into duringOctober 2001 hedged the Second Credit Facility, described above, to afixed rate of 5.485%. This swap agreement terminates on June 27, 2006. Thedifferential to be paid or received for these swap agreements was recognized asan adjustment to interest expense as incurred through June 30, 2005. As ofDecember 31, 2005, the outstanding notional principal amount on the swapagreements entered into during August 2001 and October 2001 are$9,000 and $10,500, respectively. The changes in the notional principal amountsof the swaps during the years ended December 31, 2005 and 2004 are as follows:

 
| ** **                                    | ** ** | **December 31,  2005** | ** ** | **December 31,  2004** | ** ** |
|-----------------------------------------------|------------|------------------------|------------|------------------------|------------|
| Notional  principal amount, beginning of year |       | $                      | 45,500     |                   | $          | 71,500 |   |
| Amortization  of swaps                        |       | (26,000                | )          | (26,000                | )          |
| Notional  principal amount, end of the year   |       | $                      | 19,500     |                   | $          | 45,500 |   |

 

The Company has determined that, through June 30, 2005,these interest rate swap agreements, which effectively hedged the Company’sFirst and Second Credit Facilities continued to effectively hedge, but notperfectly, the Company’s 2004 Credit Facility. As of July 1, 2005, the Companystopped designating its interest rate swaps as a hedge.

 

 

F-15

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Interestexpense pertaining to interest rate swaps for the years ended December 31,2005, 2004 and 2003 was $338, $1,873 and $2,919, respectively.

 

TheCompany would have received (paid) approximately $25 and $(560) to settle alloutstanding swap agreements based upon their aggregate fair values as ofDecember 31, 2005 and 2004, respectively. This fair value is based uponestimates received from financial institutions.

 

**Senior Notes**

 

On March 20, 2003, the Company issued $250,000 of10% Senior Notes which are due March 15, 2013. Interest is paid on theSenior Notes each March 15 and September 15. The Senior Notes are generalunsecured, senior obligations of the Company. The proceeds of the Senior Notes,prior to payment of fees and expenses, were $246,158. The Senior Notes containincurrence covenants which, among other things, restrict the Company’s futureability to incur future indebtedness and liens, to apply the proceeds of assetsales freely, to merge or undergo other changes of control and to paydividends, and required the Company to apply a portion of its cash flow during2003 to the reduction of its debt under our First, Second and Third facilities.As of December 31, 2004, the discount on the Senior Notes is $3,403. Thisdiscount is being amortized as interest expense over the term of the SeniorNotes using the effective interest method. The Senior Notes are guaranteed byall of the Company’s present subsidiaries and future “restricted” subsidiaries(all of which are 100% owned by the Company). These guarantees are full andunconditional and joint and several with the parent company General MaritimeCorporation. The parent company, General Maritime Corporation, has noindependent assets or operations. Additionally, certain defaults on other debtinstruments, such as failure to pay interest or principal when due, are deemedto be a default under the Senior Notes agreement.

 

Between September 23, 2005 and culminating on December30, 2005 with a cash tender offer, the Company purchased and retired $249,980par value of its Senior Notes for cash payments aggregating $286,851. Pursuantto these purchases, the Company recorded a loss of $40,753, which representsthe amount by which the cash paid exceeds the carrying value of the SeniorNotes as well as associated brokerage and legal fees. In addition, the Companywrote off the unamortized deferred financing costs associated with the SeniorNotes of $5,025 as a non-cash charge. Both the loss on retirement and the write-offof the unamortized deferred financing costs are classified as Other expense onthe statement of operations.

 

In accordance with the terms of its Senior Notes, theCompany cannot make cumulative “restricted payments” in excess of the sum of(1) 50% of net income earned subsequent to December 31, 2002, (2) cashproceeds from common stock issued subsequent to December 31, 2002, and (3)$25,000. “Restricted payments” principally include dividends, purchases of theCompany’s common stock, and repayments of debt subordinate to the Senior Notesprior to their maturity.

 

In January 2006, pursuantto the completion of the cash tender offer, the second supplemental indentureentered into in connection with the Senior Notes (the “Second SupplementalIndenture”) became operative. The Second Supplemental Indenture amends theindenture under which the Senior Notes were issued (the “Indenture”), toeliminate substantially all of the restrictive covenants and certain defaultprovisions in the Indenture (the “Amendments”). The Amendments are binding uponholders of Senior Notes who did not tender their Senior Notes pursuant to thecash tender offer even though such holders have not consented to theAmendments.

 

As of December 31, 2005, the Company is in compliancewith all of the financial covenants under its 2005 Credit Facility and itsSenior Notes.

 

Based on borrowings as of December 31, 2005, aggregatematurities under the Senior Notes and the 2005 Credit Facility are as follows:

 
| **PERIOD ENDING DECEMBER 31,** | ** ** | **2005 Credit  Facility** | ** **  | **Senior  Notes** | ** ** | **TOTAL**   | ** ** |
|--------------------------------|------------|---------------------------|-------------|-------------------|------------|-------------|------------|
| 2006                           |       | $                         | —      |              | $          | —      |       | $ | — |   |
| 2007                           |       | —                    |        | —            |       | —      |       |
| 2008                           |       | —                    |        | —            |       | —      |       |
| 2009                           |       | —                    |        | —            |       | —      |       |
| 2010                           |       | —                    |        |              |       | —      |       |
| Thereafter                     |       | 135,000                   |        | 20                |       | **135,020** |       |
|                           |       |                      |        |              |       |        |       |
| ** **                     | ** ** | **$**                     | **135,000** | ** **        | **$**      | **20**      | ** ** | **$** | **135,020** | ** ** |

 

Interestexpense under all of the Company’s credit facilities, Senior Notes and interestrate swaps aggregated $32,400, $38,831 and 

 

 

F-16

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$35,505for the years ended December 31, 2005, 2004 and 2003, respectively.

 

**9. DERIVATIVE FINANCIAL INSTRUMENTS**

 

Asof December 31, 2005, the Company is party to the following derivativefinancial instruments:

 

*Interestrates.  *The Company is party to two pay-fixedinterest rate swap agreements that expire in June 2006 which, throughJune 30, 2005, effectively converted floating rate obligations to fixedrate instruments. Effective during the third quarter of 2005, the Company hasstopped designating its interest rate swaps as a hedge. During the years endedDecember 31, 2005, 2004 and 2003, the Company recognized a derivative gain oncash flow hedge, a component of other comprehensive loss, to Accumulated othercomprehensive loss of $545, $1,935 and $1,890, respectively. The aggregaterecorded asset (liability) in connection with the Company’s interest rate swapsas of December 31, 2005 and 2004 was $25 and $(560), respectively, and ispresented as a component of Derivative liability on the balance sheet. TheCompany has recorded an aggregate net realized and unrealized loss of $76, forthe year ended December 31, 2005, which is classified as Other expense onthe statement of operations.

 

*Foreign currency*. The Company is party to a forwardcontract to acquire 5 million Euros on January 17, 2006 for $6,033. Changesin the fair value of this forward contract subsequent to July 19, 2005(the date on which the Company entered into the contract, at which time thefair value was $0) will be recorded as Other expense on the Company’s statementof operations. The Company entered into this contract to guard againstweakening in the dollar against the Euro. As of December 31, 2005, theCompany has recorded a liability of $126 related to the fair market value ofthis derivative financial instrument. The Company has recorded an aggregate netunrealized loss of $126, for the year ended December 31, 2005, which isclassified as Other expense on the statement of operations.

 

*Fuel.  *Duringthe year ended December 31, 2005, the Company entered into a “costlesscollar” to obtain a quantity of fuel between $220/metric ton (“MT”) and $300/MT.The Company uses this derivative as an economic hedge to the Company, but hasnot designated this derivative as a hedge for accounting purposes. As such,changes in the fair value of the derivative are recorded to the Company’sstatement of income each reporting period. Under this agreement, the Companyhas a right to receive (call option) the amount by which the bunker price on aspecified index exceeds $300/MT and an obligation to pay (put option) theamount by which $220/MT exceeds the bunker price on a specified index. The termis for a notional 1,000 MT of bunkers per month for each month in the periodbetween October 1, 2005 and March 31, 2006. As of December 31,2005, the Company has recorded an asset of $12 related to the fair market valueof this economic hedge. The Company has recorded an aggregate net unrealizedgain of $12 for the year ended December 31, 2005, which is classified asOther expense on the statement of operations.

 

*Freight rates.  *DuringSeptember and October 2005, the Company entered into four forward freightagreements (“FFA”). The Company uses FFAs as economic hedges to the Company,but has not designated FFA as hedges for accounting purposes, and, as such,changes in the fair value of FFAs are recorded to the Company’s statement ofincome each reporting period. These FFAs involve contracts to provide a fixednumber of theoretical voyages at fixed rates. The FFA contracts settle based onthe monthly Baltic Tanker Index (“BITR”). The BITR averages rates received inthe spot market by cargo type, crude oil and refined petroleum products, and bytrade route. The duration of a contract can be one month, quarterly or up totwo years (currently our open positions extend to December 2005) with openpositions settling on a monthly basis. The Company has taken short positions inFFA contracts, which reduce a portion of the Company’s exposure to the spotcharter market by creating synthetic time charters. At December 31, 2005, theFFAs had no aggregate notional value, because the contracts expired on December31, 2005. The notional amount is based on a computation of the quantity ofcargo (or freight) the contract specifies, the contract rate (based on acertain trade route) and a flat rate determined by the market on an annualbasis. Each contract is marked to market for the specified cargo and traderoute. The fair value of forward freight agreements is the estimated amountthat the Company would receive or pay to terminate the agreements at thereporting date. As of December 31, 2005, the Company has recorded a liabilityof $294 related to the fair market value of these economic hedges. The Companyhas recorded the aggregate net realized and unrealized loss of $849, for theyear ended December 31, 2005, which is classified as Other expense on thestatement of operations.

 

 

F-17

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**10.FAIR VALUE OF FINANCIAL INSTRUMENTS**

 

Theestimated fair values of the Company’s financial instruments are as follows:

 
| ** **                                                 | ** ** | **December 31, 2005** | ** ** | **December 31, 2004** | ** ** |
|------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                                 | ** ** | **Carrying  Value**   | ** ** | **Fair  Value**       | ** ** | **Carrying  Value** | ** ** | **Fair  Value** | ** ** |
| Cash                                                       |       | $                     | 96,976     |                  | $          | 96,976 |   | $ | 46,921 |   | $ | 46,921 |   |
| Floating rate debt                                         |       | 135,000               |       | 135,000               |       | 240,000 |   | 240,000 |   |
| Senior Notes                                               |       | 20                    |       | 23                    |       | 246,597 |   | 288,750 |   |
| Derivative financial instruments - net  liability position |       | 383                   |       | 383                   |       | 560 |   | 560 |   |
|                                                            |            |                       |            |                       |            |  |  |  |  |  |  |  |  |

 

Thefair value of term loans and revolving credit facilities is estimated based oncurrent rates offered to the Company for similar debt of the same remainingmaturities. The carrying value approximates the fair market value for thevariable rate loans. The fair value of interest rate swaps (used for purposesother than trading) is the estimated amount the Company would pay to terminateswap agreements at the reporting date, taking into account current interestrates and the current credit-worthiness of the swap counter-parties. The fairvalue of the Senior Notes has been determined based quoted market prices as ofDecember 31, 2005 and 2004.

 

**11.REVENUE FROM TIME CHARTERS**

 

Totalrevenue earned on time charters for the years ended December 31, 2005, 2004 and2003 was $86,225, $87,944 and $58,743, respectively. Future minimum timecharter revenue, based on vessels committed to non-cancelable time chartercontracts, and excluding any performance claims, as of December 31, 2005 willbe $33,212 during 2006.

 

**12.LEASE PAYMENTS**

 

InFebruary 2004, the Company entered into an operating lease for an aircraft.The lease has a term of five years and requires monthly payments by the Companyof $125.

 

InDecember 2004, the Company entered into a 15-year lease for office space in NewYork, New York. The monthly rental is as follows: Free rent from December 1,2004 to September 30, 2005, $110 per month from October 1, 2005 to September30, 2010, $119 per month from October 1, 2010 to September 30, 2015, and $128per month from October 1, 2015 to September 30, 2020. The monthly straight-linerental expense from December 1, 2004 to September 30, 2020 is $105.

 

Futureminimum rental payments on the above leases for the next five years are asfollows: 2006- $2,817, 2007- $2,817, 2008- $2,817, 2009-$1,442, 2010- $1,344,thereafter- $14,456.

 

**13.SIGNIFICANT CUSTOMERS**

 

Forthe years ended December 31, 2005 and 2003, the Company did not earn 10% ormore of its voyage revenues from any single customer. For the year endedDecember 31, 2004, the Company earned $108,034 from one customer whichrepresented 15.4% of voyage revenues.

 

**14.RELATED PARTY TRANSACTIONS**

 

Thefollowing are related party transactions not disclosed elsewhere in thesefinancial statements:

 

ThroughApril 2005, the Company rented office space as its principal executive officesin a building currently leased by GenMar Realty LLC, a company wholly owned byPeter C. Georgiopoulos, the Chairman and Chief Executive Officer of theCompany. There is no lease agreement between the Company and GenMar Realty LLC.The Company paid an occupancy fee on a month to month basis in the amount of$55. For the years ended December 31, 2005, 2004 and 2003, the Company’soccupancy fees were $220, $660 and $660, respectively.

 

During2000, the Company loaned $486 to Mr. Peter C. Georgiopoulos. This loan isincluded in prepaid expenses and other current assets. This loan does not bearinterest and is due and payable on demand. The full amount of this loan wasoutstanding as of December 31, 2005.

 

Duringthe years ended December 31, 2005, 2004 and 2003, the Company incurred legalservices (primarily in connection with vessel acquisitions and dispositions ineach period as well as flag changes of certain vessels in 2004) aggregating$150, $284 and $249, respectively, from the father of Mr. Peter Georgiopoulos. Asof December 31, 2005 and 2004, the Company owes $138 and $0, respectively, tothe father of Mr. Georgiopoulos.

 

 

F-18

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During July 2005, Genco Shipping & Trading Limited (“Genco”),a company whose Chairman is Peter C. Georgiopoulos, chartered the Company’scorporate aircraft. In October 2005, the Company billed Genco $113, whichwas paid by Genco during 2005.

 

InJuly 2004, the Company paid $200 of professional fees associated with its 2004acquisitions described in Note 2 to American Marine Advisors, Inc., a companywhich has a senior vice president that is also a member of the Company’s boardof directors.

 

**15.SAVINGS PLAN**

 

InNovember 2001, the Company established a 401(k) Plan (the “Plan”) which isavailable to full-time employees who meet the Plan’s eligibility requirements.This Plan is a defined contribution plan, which permits employees to makecontributions up to 25 percent of their annual salaries with the Companymatching up to the first three percent until April 2003 and six percent thereafter.The matching contribution vests immediately. During 2005, 2004 and 2003, theCompany’s matching contribution to the Plan was $354, $272 and $178,respectively.

** **

**16.STOCK OPTION PLAN**

 

OnJune 10, 2001, the Company adopted the General Maritime Corporation 2001 StockIncentive Plan. Under this plan the Company’s compensation committee, anotherdesignated committee of the board of directors or the board of directors, maygrant a variety of stock based incentive awards to employees, directors andconsultants whom the compensation committee (or other committee or the board ofdirectors) believes are key to the Company’s success. The compensationcommittee may award incentive stock options, nonqualified stock options, stockappreciation rights, dividend equivalent rights, restricted stock, unrestrictedstock and performance shares.

 

On May 5, 2003, the Company granted options to purchase 50,000 sharesof common stock to the Company’s chief financial officer at an exercise priceof $8.73 (the closing price on the date of grant). These options were scheduledto vest in four equal installments on each of the first four anniversaries ofthe date of grant. During 2003, all of these options were forfeited.

 

On June 5, 2003, the Company granted options to purchase an aggregateof 12,500 shares of common stock to five outside directors of the Company at anexercise price of $9.98 (the closing price on the date of grant). These optionswill vest in four equal installments on each of the first four anniversaries ofthe date of grant.

 

On November 12, 2003, the Company granted options to purchase anaggregate of 29,000 shares of common stock to certain employees of the Companyat an exercise price of $14.58 (the closing price on the date of grant). Theseoptions will vest in four equal installments on each of the first fouranniversaries of the date of grant.

 

On May 20, 2004, the Company granted options to purchase an aggregateof 20,000 shares of common stock to certain members of the Company’s board ofdirectors at an exercise price of $22.57 (the closing price on the date ofgrant). These options will vest in four equal installments on each of the firstfour anniversaries of the date of grant.

 

The Company follows the provisions of APB 25 to account for its stockoption plan. The Company provides pro forma disclosure of net income andearnings per share as if the accounting provision of SFAS No. 123 had beenadopted. Options granted are exercisable at prices equal to the fair marketvalue of such stock on the dates the options were granted. The fair values ofthe options were determined on the date of grant using a Black-Scholes optionpricing model. These options were valued based on the following assumptions: anestimated life of five years for all options granted, volatility of 53%, 47%,63% and 54% for options granted during 2004, 2003, 2002 and 2001, respectively,risk free interest rate of 3.85%, 3.5%, 4.0% and 5.5% for options grantedduring 2004, 2003, 2002 and 2001, respectively, and no dividend yield for any optionsgranted. The fair value of the 860,000 options to purchase common stock grantedon June 12, 2001 is $8.50 per share. The fair value of the 143,500 optionsto purchase common stock granted on 

November 26, 2002 is $3.42 per share. The fair value of the50,000, 12,500 and 29,000 options to purchase common stock granted on 

 

 

F-19

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May 5, 2003, June 5, 2003 and November 12, 2003 is $3.95 pershare, $4.52 per share, and $6.61 per share, respectively. The fair value ofthe 20,000 options to purchase common stock granted on May 20, 2004 is $11.22per share.

 

Thefollowing table summarizes stock option activity since the inception of optiongrants by the Company:

 
| ** **                      | ** ** | **Number of  Options** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Weighted  Average  Fair Value** | ** ** |
|---------------------------------|------------|------------------------|------------|----------------------------------------|------------|-----------------------------------|------------|
|                            |       |                   |       |                                   |       |                              |       |
| Outstanding,  January 1, 2003   |       | 413,500                |       | $                                      | 13.86      |                              | $          | 6.74 |   |
|                            |       |                   |       |                                   |       |                              |       |   |   |
| Granted                         |       | 91,500                 |       | $                                      | 10.35      |                              | $          | 4.87 |   |
| Exercised                       |       | (24,375                | )          | $                                      | 6.06       |                              | $          | 3.42 |   |
| Forfeited                       |       | (87,250                | )          | $                                      | 12.82      |                              | $          | 4.66 |   |
| Outstanding,  December 31, 2003 |       | 393,375                |       | $                                      | 13.75      |                              | $          | 6.97 |   |
|                            |       |                   |       |                                   |       |                              |       |   |   |
| Granted                         |       | 20,000                 |       | $                                      | 22.57      |                              | $          | 11.22 |   |
| Exercised                       |       | (186,850               | )          | $                                      | 15.15      |                              | $          | 7.23 |   |
| Forfeited                       |       | (13,500                | )          | $                                      | 16.86      |                              | $          | 7.82 |   |
| Outstanding,  December 31, 2004 |       | 213,025                |       | $                                      | 13.68      |                              | $          | 6.13 |   |
|                            |       |                   |       |                                   |       |                              |       |   |   |
| Granted                         |       | —                 |       |                                   |       |                              |       |
| Exercised                       |       | (106,825               | )          | $                                      | 14.12      |                              | $          | 6.84 |   |
| Forfeited                       |       | (18,800                | )          | $                                      | 9.05       |                              | $          | 4.99 |   |
| Outstanding,  December 31, 2005 |       | 87,400                 |       | $                                      | 13.76      |                              | $          | 6.78 |   |

 

Thefollowing table summarizes certain information about stock options outstandingas of December 31, 2005

 
| ** **                        | ** ** | **Options Outstanding, December 31, 2005** | ** ** | **Options Exercisable,  December 31, 2005** | ** ** |
|-----------------------------------|------------|--------------------------------------------|------------|---------------------------------------------|------------|
| **Range of Exercise Price**       | ** ** | **Number of  Options**                     | ** ** | **Weighted  Average  Exercise Price**       | ** ** | **Weighted  Average  Remaining  Contractual  Life** | ** ** | **Number of  Options** | ** ** | **Weighted  Average  Exercise  Price** | ** ** |
|                              |       |                                       |       |                                        |       |   |   |   |   |   |   |
| $   6.06           |       | 29,500                                     |       | $                                           | 6.06       |   | 6.9 |   | 1,500 |   | $ | 6.06 |   |
| $   9.98  - $14.58 |       | 18,750                                     |       | $                                           | 13.05      |   | 7.7 |   | 3,250 |   | $ | 12.81 |   |
| $ 18.00 - $22.57             |       | 39,150                                     |       | $                                           | 19.90      |   | 6.7 |   | 24,150 |   | $ | 18.24 |   |
|                              |       | 87,400                                     |       | $                                           | 13.76      |   | 7.0 |   | 28,900 |   | $ | 16.99 |   |
|                                   |            |                                            |            |                                             |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

**17.RESTRICTED STOCK AWARDS**

 

On November 26, 2002, the Company made grants of restricted commonstock in the amount of 500,000 shares to its Chief Executive Officer, and125,000 shares to its President and Chief Operating Officer. The restrictionson these shares will lapse seven years from 

 

 

F-20

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the date of grant (or earlier upon the death, disability, dismissalwithout cause or resignation for good reason of the recipient or upon a changeof control of the Company). Upon grant of the restricted stock, an amount ofunearned compensation equivalent to the market value at the date of grant, or$3,788, was charged to Shareholders’ Equity.

 

OnNovember 12, 2003, the Company made grants of restricted common stock in theamount of 155,000 shares to certain officers and employees of the Company. Ofthis total, 75,000 restricted shares were granted to the chief executiveofficer of the Company and 30,000 restricted shares were granted to thepresident of General Maritime Management LLC (“GMM”), a wholly-owned subsidiaryof the Company. The remaining 50,000 restricted shares were granted to otherofficers and employees of the Company and GMM. The restrictions on these shareslapse 25% on each anniversary date from the date of grant and become fullyvested after four years. Upon grant of the restricted stock, an amount ofunearned compensation equivalent to the market value at the date of grant, or$2,260, was charged to Shareholders’ Equity. Through December 31, 2005, restrictionshave lapsed on 77,500 of these shares and 5,000 of these shares have beenforfeited.

 

OnFebruary 9, 2005, the Company made grants of restricted common stock inthe amount of 304,500 shares to certain officers and employees of the Company. Ofthis total, 150,000, 10,000 and 10,000 restricted shares were granted to theCEO, chief financial officer and chief administrative officer, respectively, ofthe Company and 50,000 restricted shares were granted to the president of GMM. Theremaining 84,500 restricted shares were granted to other officers and employeesof the Company and GMM. The restrictions on the 150,000 shares granted to theCEO of the Company will lapse on November 16, 2014. The restrictions onthe remaining 154,500 shares will lapse as to 20% of these shares onNovember 16, 2005 and as to 20% of these shares on November 16 ofeach of the four years thereafter, and will become fully vested onNovember 16, 2009. Upon grant of the restricted stock, an amount ofunearned compensation equivalent to the market value at the date of grant, or$14,631, was charged to Shareholders’ Equity. Through December 31, 2005,restrictions have lapsed on 30,100 of these shares and 7,200 of these shareshave been forfeited.

 

On April 6, 2005, the Company granted to the CEO 350,000 shares ofrestricted common stock, with restrictions on all such shares to lapse onDecember 31, 2014. Restrictions on the restricted stock will also lapse infull if the CEO is dismissed without cause or resigns for good reason, or upona change of control of the Company and will lapse on a straight-line basis uponhis death or disability. Upon grant of the restricted stock, an amount ofunearned compensation equivalent to the market value at the date of grant, or$17,042, was charged to Shareholders’ Equity

 

On May 26, 2005, the Company granted a total of 4,800 shares ofrestricted common stock to four of the Company’s independent Directors.Restrictions on the restricted stock will lapse, if at all, on May 26,2006 or the date of the Company’s 2006 Annual Meeting of Shareholders,whichever occurs first. Restrictions on each director’s stock will also lapsein full upon such director’s death or disability or a change of control of theCompany. The value of these restricted shares aggregate $206.

 

OnDecember 21, 2005, the Company made grants of restricted common stock in theamount of 437,500 shares to certain officers and employees of the Company. Ofthis total, 250,000, 18,000 and 15,000 restricted shares were granted to theCEO, chief financial officer and chief administrative officer, respectively, ofthe Company and 50,000 restricted shares were granted to the president of GMM. Theremaining 104,500 restricted shares were granted to other officers andemployees of the Company and GMM. The restrictions on the 250,000 sharesgranted to the CEO of the Company will lapse on November 15, 2015. Therestrictions on 93,000 shares (including shares granted to individuals namedabove, exclusive of the CEO) will lapse as to 20% of these shares onNovember 15, 2006 and as to 20% of these shares on November 15 ofeach of the four years thereafter, and will become fully vested onNovember 15, 2010. The restrictions on the remaining 94,500 shares willlapse as to 25% of these shares on November 15, 2006 and as to 25% ofthese shares on November 15 of each of the three years thereafter, andwill become fully vested on November 15, 2009. Upon grant of therestricted stock, an amount of unearned compensation equivalent to the marketvalue at the date of grant, or $16,879, was charged to Shareholders’ Equity.

 

Thefollowing table summarizes the amortization, which will be included in generaland administrative expenses, of all of the Company’s restricted stock grants asof December 31, 2005:

 

| ** **                        | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **Thereafter** | ** ** | **Total** | ** ** |
|-----------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------------|------------|-----------|------------|
| **Restricted  Stock Grant Date:** |       |     |       |     |       |     |       |     |       |     |       |           |       |      |       |
|                              |       |     |       |     |       |     |       |     |       |     |       |           |       |      |       |   |   |   |   |   |   |   |
| November 26, 2002                 |       | $        | 541        |     | $          | 541      |       | $        | 541        |     | $          | 495            |       | $         | —     |   | $ | — |   | $ | 2,118 |   |
| November 12, 2003                 |       | 281      |       | 111      |       | —   |       | —   |       | —   |       | —         |       | 392       |       |
| February 9, 2005                  |       | 2,613    |       | 1,852    |       | 1,364    |       | 996      |       | 738      |       | 2,861          |       | 10,424    |       |
| April 6, 2005                     |       | 1,749    |       | 1,749    |       | 1,753    |       | 1,749    |       | 1,749    |       | 7,000          |       | 15,749    |       |
| May 26, 2005                      |       | 82       |       | —   |       | —   |       | —   |       | —   |       | —         |       | 82        |       |
| December 21, 2005                 |       | 4,537    |       | 2,847    |       | 2,033    |       | 1,485    |       | 1,101    |       | 4,748          |       | 16,751    |       |
| Total by year                     |       | $        | 9,803      |     | $          | 7,100    |       | $        | 5,691      |     | $          | 4,725          |       | $         | 3,588      |   | $ | 14,609 |   | $ | 45,516 |   |

 

 

F-21

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**18.STOCK REPURCHASE PROGRAM**

 

In October 2005, the Company’s Board of Directors approved a sharerepurchase program for up to a total of $200,000 of the Company’s common stock.The Board will periodically review the program. Share repurchases will be madefrom time to time for cash in open market transactions at prevailing marketprices or in privately negotiated transactions. The timing and amount ofpurchases under the program will be determined by management based upon marketconditions and other factors. Purchases may be made pursuant to a programadopted under Rule 10b5-1 under the Securities Exchange Act. The programdoes not require the Company to purchase any specific number or amount ofshares and may be suspended or reinstated at any time in the Company’sdiscretion and without notice. Repurchases will be subject to the restrictedpayments covenant under the Company’s outstanding Senior Notes indenture andrestrictions under our 2005 Credit Facility.

 

Through December 31, 2005, the Company repurchased and retired 677,800shares of its common stock for $24,771.

 

**19.LEGAL PROCEEDINGS**

 

Fromtime to time the Company has been, and expects to continue to be, subject tolegal proceedings and claims in the ordinary course of its business,principally personal injury and property casualty claims. Such claims, even iflacking merit, could result in the expenditure of significant financial andmanagerial resources. The Company is not aware of any legal proceedings orclaims that it believes will have, individually or in the aggregate, a materialadverse effect on the Company or on its financial condition or results of operations.

 

The Company is cooperating in an investigation being conducted by theOffice of the U.S. Attorney, District of Delaware with respect to alleged falseor inaccurate entries in the log books of the *Genmar Ajax*concerning an alleged violation of the MARPOL protocol, which could possibly bea violation of U.S. law.  The Company believes that the investigation mayrelate to an alleged discharge of waste oil in international waters in excessof permissible legal limits. On December 15, 2004, following a routineCoast Guard inspection, U.S. Coast Guard officials took various documents, logsand records from the vessel for further review and analysis.  During2005, the custodian of records for the *Genmar Ajax*received four subpoenas duces tecum requesting supplemental documentationpertaining to the vessel in connection with a pending grand jury investigation,all of which have been complied with.  The Company has denied anywrongdoing by us or any of our employees.  The Company does not believethat this matter will have a material effect on the Company.

 

On February 4, 2005, the *Genmar Kestrel*was involved in a collision with the Singapore-flag tanker *Trijata*,which necessitated the trans-shipment of the *GenmarKestrel’s* cargo and drydocking the vessel for repairs. The incidentresulted in the leakage of some oil to the sea. Due to a combination of promptclean up efforts, a light viscosity cargo onboard at the time of collision andfavorable weather conditions, the Company believes that the incident resultedin minimal environmental damage and expects that substantially all of theliabilities associated with the incident will be covered by insurance.

 

For the year ended December 31, 2005, theCompany increased its reserve for customer claims by $4,186 in connection withthe 24 month time charter contracts for its nine OBO Aframax vessels. Thesearrangements require that the vessels meet specified speed and bunkerconsumption standards. The charterer has asserted claims for eight vessels forthe first 12 months of their charter that the vessels did not meet thesestandards during some periods. The charterer may make further claims under thecontracts. With the additional increase to the Company’s reserves, the Companybelieves that they are adequate for claims relating to all of these vessels forall periods through December 31, 2005. However, if the charterer is successfulin prevailing on these claims, it may be entitled to amounts in excess of theCompany’s related reserves. The Company intends to contest these claims.

 

**20.SUBSEQUENT EVENTS**

 

On January 4, 2006, theCompany entered into an agreement to repurchase 4,176,756 of its common sharesfrom Oaktree Capital’s OCM Principal Opportunities Fund, L.P. (an entityaffiliated with a director of the Company) in a privately negotiatedtransaction at $37.00 per share for a total purchase price of $154,540. Paymentfor these shares was fully made by January 18, 2006.

 

On January 17, 2006,pursuant to the completion of the cash tender offer, the second supplemental indentureentered into in connection with the Senior Notes (the “Second SupplementalIndenture”) became operative. The Second Supplemental Indenture amends theindenture under which the Senior Notes were issued (the “Indenture”), toeliminate substantially all of the restrictive covenants and certain defaultprovisions in the Indenture (the “Amendments”). The Amendments are binding uponholders of Senior Notes who did not tender their Senior Notes pursuant to thecash tender offer even though such holders have not consented to theAmendments.

 

OnFebruary 10, 2006, the Company signed contracts to sell its nine OBO Aframaxvessels which were held for sale as of December 

 

 

F-22

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31,2005 to a single purchaser for an aggregate purchase price of $247,500. Thesesales are expected to result in a gain on sale of vessels of approximately$16,600. This gain will be recognized during 2006 as the vessels are deliveredto their new owner.

 

In connection with the sale of the OBO Aframax vessels, managementdetermined one technical management office outside the U.S. would adequatelyservice its current fleet and as such decided to close its office in Piraeus,Greece, operated by General Maritime Management (Hellas) Ltd. The Companycurrently anticipates that this office will cease its operations by July 2006and estimates that the cost of closing this office to be approximately $1,500,primarily attributable to employee severance costs, as well as professionalfees and the rent associated with the remainder of the lease which expires atthe end of 2006. The Company anticipates that approximately $800 of this totalexpected cost, which will be a component of general and administrative expenseon the Company’s statement of operations, will be recognized during the firstquarter of 2006, with the remainder recognized as a component of general andadministrative expense on the Company’s statement of operations later in 2006. TheCompany estimates that substantially all of these costs will result in futurecash expenditures.

 

On February 21, the Company’s board of directors announced that theCompany will be paying a quarterly dividend of $2.00 per share on or aboutMarch 17, 2006 to the shareholders of record as of March 3, 2006. The aggregateamount of the dividend is expected to be $68,100, which we anticipate will befunded from cash on hand at the time payment is to be made.

 

 

F-23

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**ITEM8. SUPPLEMENTARY DATA**

** **

**QuarterlyResults of Operations (Unaudited)**

**(Inthousands, except per share amounts)**

** **
| ** **                           | ** ** | **2005 Quarter Ended** | ** ** | **2004 Quarter Ended** | ** ** |
|--------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                           | ** ** | **March 31**           | ** ** | **June 30**            | ** ** | **Sept. 30** | ** ** | **Dec. 31** | ** ** | **March 31** | ** ** | **June 30** | ** ** | **Sept. 30** | ** ** | **Dec. 31** | ** ** |
|                                 |       |                   |       |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Voyage  revenues                     |       | $                      | 161,642    |                   | $          | 135,475 |   | $ | 114,403 |   | $ | 156,381 |   | $ | 171,588 |   | $ | 140,229 |   | $ | 156,261 |   | $ | 233,213 |   |
| Operating  income                    |       | 76,376                 |       | 39,670                 |       | 16,630 |   | 161,267 |   | 87,981 |   | 51,461 |   | 72,260 |   | 149,160 |   |
| Net Income                           |       | 68,491                 |       | 32,061                 |       | 7,177 |   | 104,628 |   | 78,274 |   | 41,685 |   | 54,622 |   | 140,528 |   |
|                                 |       |                   |       |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings Per  Common Share:          |       |                   |       |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                |       | $                      | 1.84       |                   | $          | 0.86 |   | $ | 0.19 |   | $ | 2.83 |   | $ | 2.12 |   | $ | 1.13 |   | $ | 1.47 |   | $ | 3.79 |   |
| Diluted                              |       | $                      | 1.80       |                   | $          | 0.84 |   | $ | 0.19 |   | $ | 2.78 |   | $ | 2.08 |   | $ | 1.10 |   | $ | 1.44 |   | $ | 3.70 |   |
|                                 |       |                   |       |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted Average Shares Outstanding: |       |                   |       |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                |       | 37,216                 |       | 37,237                 |       | 37,273 |   | 36,932 |   | 36,991 |   | 37,032 |   | 37,051 |   | 37,121 |   |
| Diluted                              |       | 38,062                 |       | 38,066                 |       | 38,076 |   | 37,619 |   | 37,672 |   | 37,779 |   | 37,875 |   | 37,942 |   |

 

**ITEM 9.****               ****CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURE**

 

Nochanges were made to, nor was there any disagreement with the Company’sindependent auditors regarding, the Company’s accounting or financialdisclosure.

 

**ITEM9A. CONTROLS AND PROCEDURES**

 

**EVALUATIONOF DISCLOSURE CONTROLS AND PROCEDURES.**

 

Underthe supervision and with the participation of our management, including ourChief Executive Officer and Chief Financial Officer, we have evaluated theeffectiveness of the design and operation of our disclosure controls andprocedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934 as ofthe end of period covered by this Report. Based upon that evaluation, our ChiefExecutive Officer and Chief Financial Officer have concluded that our disclosurecontrols and procedures are effective in timely alerting them at a reasonableassurance level material information required to be included in our periodicSecurities and Exchange Commission filings

 

**INTERNAL CONTROL OVER FINANCIAL REPORTING**

 

**MANAGEMENT REPORT ON INTERNAL CONTROL OVERFINANCIAL REPORTING**

 

Ourmanagement is responsible for establishing and maintaining adequate internalcontrol over financial reporting. General Maritime Corporation’s internalcontrol over financial reporting is designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generallyaccepted accounting principles.

 

Ourinternal control over financial reporting includes those policies andprocedures that:

 

•      Pertainto the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of General MaritimeCorporation;

 

•      Providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally acceptedaccounting principles, and that our receipts and expenditures are being madeonly in accordance with authorizations of General Maritime Corporation’smanagement and directors; and

 

 

F-24

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•      Providereasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effecton the financial statements.

 

Becauseof its inherent limitations, internal control over financial reporting may notprevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls maybecome inadequate because of changes in conditions, or that the degree orcompliance with the policies or procedures may deteriorate.

 

Managementassessed the effectiveness of General Maritime Corporation’s internal controlover financial reporting as of December 31, 2005. In making this assessment,management used the criteria set forth by the Committee of SponsoringOrganizations of the Treadway Commission (COSO) in Internal Control-IntegratedFramework. Based on our assessment and those criteria, management believes thatGeneral Maritime Corporation maintained effective internal control overfinancial reporting as of December 31, 2005.

 

##### ***General Maritime Corporation’s independent registered publicaccounting firm has audited and issued their report on management’s assessmentof General Maritime Corporation’s internal control over financial reporting,which appears below.***

 

 

F-25

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of

General Maritime Corporation

New York, New York

 

We have audited management’s assessment, included in the accompanyingManagement Report on Internal Control over Financial Reporting, that GeneralMaritime Corporation and subsidiaries (the “Company”) maintained effectiveinternal control over financial reporting as of December 31, 2005, based onInternal Control - Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission. The Company’s management isresponsible for maintaining effective internal control over financial reportingand for its assessment of the effectiveness of internal control over financialreporting. Our responsibility is to express an opinion on management’sassessment and an opinion on the effectiveness of the Company’s internalcontrol over financial reporting based on our audit.

 

We conducted our audit in accordance with the standards of the PublicCompany Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whethereffective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internal controlover financial reporting, evaluating management’s assessment, testing andevaluating the design and operating effectiveness of internal control, andperforming such other procedures as we considered necessary in thecircumstances. We believe that our audit provides a reasonable basis for ouropinions.

 

A company’s internal control over financial reporting is a processdesigned by, or under the supervision of, the company’s principal executive andprincipal financial officers, or persons performing similar functions, andeffected by the company’s board of directors, management, and other personnelto provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles. A company’s internalcontrol over financial reporting includes those policies and procedures that(1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assetsof the company; (2) provide reasonable assurance that transactions are recordedas necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures ofthe company are being made only in accordance with authorizations of managementand directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition, use, or dispositionof the company’s assets that could have a material effect on the financialstatements.

 

Because of the inherent limitations of internal control over financialreporting, including the possibility of collusion or improper managementoverride of controls, material misstatements due to error or fraud may not beprevented or detected on a timely basis. Also, projections of any evaluation ofthe effectiveness of the internal control over financial reporting to futureperiods are subject to the risk that the controls may become inadequate becauseof changes in conditions, or that the degree of compliance with the policies orprocedures may deteriorate.

 

In our opinion, management’s assessment that the Company maintainedeffective internal control over financial reporting as of December 31, 2005, isfairly stated, in all material respects, based on the criteria established inInternal Control-Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission. Also in our opinion, the Companymaintained, in all material respects, effective internal control over financialreporting as of December 31, 2005, based on the criteria established inInternal Control-Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission.

 

We have also audited, in accordance with the standards of the PublicCompany Accounting Oversight Board (United States), the consolidated financialstatements as of and for the year ended December 31, 2005 and our report dated March13, 2006 expressed an unqualified opinion on those financial statements.

 

/s/ Deloitte & Touche LLP

 

New York, New York

March 13, 2006

 

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**CHANGESIN INTERNAL CONTROLS**

 

Therehave been no significant changes in our internal controls or in other factorsthat could have significantly affected those controls subsequent to the date ofour most recent evaluation of internal controls.

 

**ITEM9B. OTHER INFORMATION**

 

None.

 

**PART III**

 

**ITEM10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT**

 

Information regarding General Maritime’s directors and executiveofficers is set forth in General Maritime’s Proxy Statement for its 2006 AnnualMeeting of Shareholders to be filed with the Securities and Exchange Commissionnot later than 120 days after December 31, 2005 (the “2006 Proxy Statement”)and is incorporated by reference herein. Information relating to our Code ofConduct and Ethics and to compliance with Section 16(a) of the 1934 Act is setforth in our 2006 Proxy Statement relating and is incorporated by referenceherein.

 

We intend to satisfy the disclosure requirements under Item 5.05 ofForm 8-K regarding amendment to, or waiver from, a provision of the Code ofEthics for Chief Executive and Senior Financial Officers by posting suchinformation on our website, www.generalmaritimecorp.com.

 

Pursuant to Section 303A.12(a) of the New York Stock ExchangeListed Company Manual, the Company submitted the Annual CEO Certification tothe New York Stock Exchange during 2005.

 

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**ITEM11. EXECUTIVE COMPENSATION**

 

Informationregarding compensation of General Maritime’s executive officers and informationwith respect to Compensation Committee Interlocks and Insider Participation incompensation decisions is set forth in the 2006 Proxy Statement and isincorporated by reference herein.

 

**ITEM12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**

 

Informationregarding the beneficial ownership of shares of General Maritime’s common stockby certain persons is set forth in the 2006 Proxy Statement and is incorporatedby reference herein.

 

**ITEM13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**

 

Informationregarding certain transactions of General Maritime is set forth in the 2006Proxy Statement and is incorporated by reference herein.

 

**ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**

 

Informationregarding our accountant fees and services is set forth in the 2006 ProxyStatement and is incorporated by reference herein.

 

**PART IV**

 

**ITEM15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K**

 

(a)           The followingdocuments are filed as a part of this report:

 

1.             Thefinancial statements listed in the “Index to Consolidated Financial Statements.”

 

3.             Exhibits:

 

3.1           Amended andRestated Articles of Incorporation of General Maritime Ship Holdings Ltd.(1)

 

3.2           Articles ofAmendment to Amended and Restated Articles of Incorporation, changing name fromGeneral Maritime Ship Holdings Ltd. to General Maritime Corporation.(1)

 

3.3           Amended andRestated By-Laws of General Maritime Ship Holdings Ltd.(1)

 

3.4           Amendment toBy-Laws of General Maritime Corporation.(2)

 

3.5           Certificateof Designation of Series A Junior Participating Preferred Stock.(2)

 

4.1           Form ofCommon Stock Certificate of General Maritime Corporation.(3)

 

4.2           Formof Registration Rights Agreement.(4)

 

4.3           Formof 10% Senior Global Notes Due 2013, issued pursuant to Rule 144A andRegulation S.(5)

 

4.4           Form ofIndenture relating to 10% Senior Notes, due 2013.(5)

 

4.5           FirstSupplemental Indenture, dated December 29, 2005, by and among General MaritimeCorporation, certain subsidiaries of General Maritime Corporation and LaSalleBank National Association, as trustee.(6)

 

4.6           SecondSupplemental Indenture, dated December 30, 2005, by and among General MaritimeCorporation, certain subsidiaries of General Maritime Corporation and LaSalleBank National Association, as trustee.(6)

 

4.7           RightsAgreement, dated December 5, 2005, between General Maritime Corporation andMellon Investor Services LLC, as Rights Agent, together with Exhibits A, B andC attached thereto.(2)

 

----

 

10.1         CreditAgreement, dated, July 1, 2004, among General Maritime Corporation, the Lendersparty thereto from time to time and Nordea Bank Finland PLC, New York Branch,as Administrative Agent and Collateral Agent under the Security Documents.(7)

 

10.2         FirstAmendment to Credit Agreement, dated August 31, 2004, among General MaritimeCorporation, the Lenders party from time to time to the Credit Agreement andNordea Bank Finland PLC, New York Branch, as Sole Lead Arranger, SoleBookrunner and Administrative Agent.(7)

 

10.3         SecondAmendment to the Credit Agreement, dated March 25, 2005, among General MaritimeCorporation, the Lenders party from time to time to the Credit Agreement andNordea Bank Finland PLC, New York Branch, as Sole Lead Arranger, Sole Bookrunnerand Administrative Agent.(8)

 

10.4         SubsidiariesGuaranty, dated July 1, 2004, among the Guarantors set forth on the signaturepage thereto and Nordea Bank Finland PLC, New York Branch, as AdministrativeAgent.(7)

 

10.5         Pledgeand Security Agreement, dated July 1, 2004, among the Pledgors set forth on thesignature page thereto and Nordea Bank Finland PLC, New York Branch, asAdministrative Agent, Pledgee and Deposit Account Bank.(7)

 

10.6         CashCollateral Account Agreement, dated August 31, 2004, among General MaritimeCorporation, as Assignor and Nordea Bank Finland PLC, New York Branch, asDeposit Account Bank and Collateral Agent.(7)

 

10.7         Formof First Preferred Ship Mortgage on Marshall Islands Flag Vessel, related toCredit Agreement, dated July 1, 2004.(7)

 

10.8         Formof First Preferred Ship Mortgage on Liberian Flag Vessel, related to CreditAgreement, dated July 1, 2004.(7)

 

10.9         Form ofFirst Preferred Ship Mortgage on Malta Flag Vessel, related to CreditAgreement, dated July 1, 2004.(7)

 

10.10       Amended and Restated 2001 Stock IncentivePlan, effective December 21, 2005.(9)

 

10.11       Form of Outside Director Stock OptionGrant Certificate.(1)

 

10.12       Formof Incentive Stock Option Grant Certificate.(3)

 

10.13       RestrictedStock Grant Agreement dated November 26, 2002 between General MaritimeCorporation and Peter C. Georgiopoulos.(10)

 

10.14       RestrictedStock Grant Agreement dated November 26, 2002 between General MaritimeCorporation and John P. Tavlarios.(10)

 

10.15       IncentiveStock Option Agreement dated November 26, 2002 between General MaritimeCorporation and John C. Georgiopoulos.(10)

 

10.16       RestrictedStock Grant Agreement dated November 12, 2003 between General MaritimeCorporation and Peter C. Georgiopoulos.(10)

 

10.17       RestrictedStock Grant Agreement dated November 12, 2003 between General MaritimeCorporation and John P. Tavlarios.(10)

 

10.18       RestrictedStock Grant Agreement dated November 12, 2003 between General MaritimeCorporation and John C. Georgiopoulos.(10)

 

10.19       StockOption Agreement for Non-Employee Directors dated May 20, 2004 between GeneralMaritime Corporation and Andrew M. L. Cazalet.(10)

 

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10.20       StockOption Agreement for Non-Employee Directors dated May 20, 2004 between GeneralMaritime Corporation and William J. Crabtree.(10)

 

10.21       StockOption Agreement for Non-Employee Directors dated May 20, 2004 between GeneralMaritime Corporation and Rex W. Harrington.(10)

 

10.22       StockOption Agreement for Non-Employee Directors dated May 20, 2004 between GeneralMaritime Corporation and Peter S. Shaerf.(10)

 

10.23       Agreementof Lease between Fisher-Park Lane Owner LLC, and General Maritime Corporationdated as of November 30, 2004. (10)

 

10.24       RestrictedStock Grant Agreement dated February 9, 2005 between General Maritime Corporationand Peter C. Georgiopoulos.(11)

 

10.25       Formof Restricted Stock Grant Agreement dated February 9, 2005 between GeneralMaritime Corporation and certain senior executive officers.(11)

 

10.26       EmploymentAgreement dated April 5, 2005, between General Maritime Corporation and PeterC. Georgiopoulos.(12)

 

10.27       RestrictedStock Grant Agreement dated April 6, 2005, between General Maritime Corporationand Peter C. Georgiopoulos.(12)

 

10.28       EmploymentAgreement dated April 22, 2005, between General Maritime Corporation and JohnP. Tavlarios.(13)

 

10.29       EmploymentAgreement dated April 22, 2005, between General Maritime Corporation andJeffrey D. Pribor.(13)

 

10.30       EmploymentAgreement dated April 22, 2005, between General Maritime Corporation and JohnC. Georgiopoulos.(13)

 

10.31       GeneralMaritime Corporation Change of Control Severance Program for U.S.Employees.(13)

 

10.32       CreditAgreement dated October 26, 2005, among General Maritime Corporation, NordeaBank Finland plc, New York Branch, DnB NOR Bank AG, New York Branch, and HSHNordbank ASA.(14)

 

10.33       Agreementand General Release dated November 22, 2005, between John M. Ramistella andGeneral Maritime Management LLC.(15)

 

10.34       RestrictedStock Grant Agreement dated December 21, 2005 between General MaritimeCorporation and Peter C. Georgiopoulos.(*)

 

10.35       Formof Restricted Stock Grant Agreement dated December 21, 2005 between GeneralMaritime Corporation and certain senior executive officers.(*)

 

12.1         Computationof Ratio of Earnings to Fixed Charges.(*)

 

21.1         Subsidiariesof General Maritime Corporation.(*)

 

23.1         Consent ofIndependent Registered Public Accounting Firm.(*)

 

31.1         Certificationof Chief Executive Officer pursuant to Rule 13(a) – 14(a) and 15(d) – 14(a) ofthe Securities Exchange Act of 1934, as amended.(*)

 

31.2         Certificationof Chief Financial Officer pursuant to Rule 13(a) – 14(a) and 15(d) – 14(a) ofthe Securities Exchange Act of 1934, as amended.(*)

 

32.1         Certificationof Chief Executive Officer pursuant to 18 U.S.C. Section 1350.(*)

 

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32.2         Certificationof Chief Financial Officer pursuant to 18 U.S.C. Section 1350.(*)

 

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(*)           Filedherewith.

(1)           Incorporatedby reference to Amendment No. 5 to General Maritime’s Registration Statement onForm S-1, filed with the Securities and Exchange Commission on June 12, 2001.

(2)           Incorporatedby reference to General Maritime’s Report on Form 8-K filed with the Securitiesand Exchange Commission on December 7, 2005.

(3)           Incorporatedby reference to Amendment No. 4 to General Maritime’s Registration Statement onForm S-1, filed with the Securities and Exchange Commission on June 6, 2001.

(4)           Incorporatedby reference to Amendment No. 3 to General Maritime’s Registration Statement onForm S-1, filed with the Securities and Exchange Commission on May 25, 2001.

(5)           Incorporatedby reference to General Maritime’s Form S-4 filed with the Securities andExchange Commission on June 20, 2003.

(6)           Incorporatedby reference to General Maritime’s Report on Form 8-K filed with the Securitiesand Exchange Commission on December 30, 2005.

(7)           Incorporatedby reference to General Maritime’s Quarterly Report on Form 10-Q filed with theSecurities and Exchange Commission on November 9, 2004.

(8)           Incorporatedby reference to General Maritime’s Report on Form 8-K filed with the Securitiesand Exchange Commission on March 29, 2005.

(9)           Incorporatedby reference to General Maritime’s Report on Form 8-K filed with the Securitiesand Exchange Commission on December 22, 2005.

(10)         Incorporatedby reference to General Maritime’s Annual Report on Form 10-K filed with theSecurities and Exchange Commission on March 16, 2005.

(11)         Incorporatedby reference to General Maritime’s Quarterly Report on Form 10-Q filed with theSecurities and Exchange Commission on May 10, 2005.

(12)         Incorporatedby reference to General Maritime’s Annual Report on Form 10-K filed with theSecurities and Exchange Commission on April 7, 2005.

(13)         Incorporatedby reference to General Maritime’s Annual Report on Form 10-K filed with theSecurities and Exchange Commission on April 26, 2005.

(14)         Incorporatedby reference to General Maritime’s Quarterly Report on Form 10-Q filed with theSecurities and Exchange Commission on November 9, 2005.

(15)         Incorporatedby reference to General Maritime’s Annual Report on Form 10-K filed with theSecurities and Exchange Commission on November 29, 2005.

 

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SIGNATURES

 

Pursuantto the requirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.

 
|   | GENERAL  MARITIME CORPORATION |
|--------|-------------------------------|
|   |                          |   |
|   | By:                           | /s/  Peter C. Georgiopoulos |   |
|   |                          | Name:  Peter C. Georgiopoulos |
|   |                          | Title:  Chairman and Chief Executive Officer |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed by the following persons on behalf of the registrant and in thecapacity and on March 13, 2006.

 

 
| **SIGNATURE**               | ** **              | **TITLE**                                         |
|-----------------------------|-------------------------|---------------------------------------------------|
|                        |                    |                                              |
| /s/  Peter C. Georgiopoulos |                    | CHAIRMAN,  CHIEF EXECUTIVE OFFICER, PRESIDENT AND |
|                        | Peter  C. Georgiopoulos |                                              | DIRECTOR  (PRINCIPAL EXECUTIVE OFFICER) |
|                        |                    |                                              |
|                        |                    |                                              |
| /s/  Jeffrey D. Pribor      |                    | VICE  PRESIDENT AND CHIEF FINANCIAL OFFICER       |
|                        | Jeffrey  D. Pribor      |                                              | (PRINCIPAL  FINANCIAL AND ACCOUNTING OFFICER) |
|                        |                    |                                              |
|                        |                    |                                              |
| /s/  John P. Tavlarios      |                    | DIRECTOR                                          |
|                        | John  P. Tavlarios      |                                              |   |
|                        |                    |                                              |
|                        |                    |                                              |
| /s/  William J. Crabtree    |                    | DIRECTOR                                          |
|                        | William  J. Crabtree    |                                              |   |
|                        |                    |                                              |
|                        |                    |                                              |
| /s/  Rex W. Harrington      |                    | DIRECTOR                                          |
|                        | Rex  W. Harrington      |                                              |   |
|                        |                    |                                              |
|                        |                    |                                              |
| /s/  John O. Hatab          |                    | DIRECTOR                                          |
|                        | John  O. Hatab          |                                              |   |
|                        |                    |                                              |
|                        |                    |                                              |
| /s/  Stephen A. Kaplan      |                    | DIRECTOR                                          |
|                        | Stephen  A. Kaplan      |                                              |   |
|                        |                    |                                              |
|                        |                    |                                              |
| /s/  Peter S. Shaerf        |                    | DIRECTOR                                          |
|                        | Peter  S. Shaerf        |                                              |   |

 

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