B Plus H Ocean Carriers Ltd - Annual and Transition Report (foreign private issuer) (20-F)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

F O R M 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

Commission file number 001-09987

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

(Exact name of Registrant as specified in its charter)

Liberia

(Jurisdiction of incorporation or organization)

3rd Floor, Par La Ville Place

14 Par La Ville Road

Hamilton HM 08, Bermuda

(Address of principal executive offices)

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

Name of each exchange

Title of each class on which registered

Common Stock, par value $0.01 per share American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NONE

The number of shares outstanding of the registrant's common stock, $.01 par value, at December 31, 2007 was 6,964,745 shares.

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

Yes X No ____

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

Yes X No ____

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

Yes X No ____

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

Large accelerated filer ____ Accelerated filer ____ Non-accelerated filer X

Indicate by check mark which basis of accounting the registrant has used to prepare the statements included in this filing:

International Financial Reporting Standards as issued

US GAAP X by the International Accounting Standards BoardOther Other

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

Item 17 Item 18 X

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

Yes No X

Item 1.	Identity of Directors, Senior Management and Advisers	1
Item 2.	Offer Statistics and Expected Timetable	1
Item 3.	Key Information	1
Item 4.	Information on the Company	16
Item 5.	Operating and Financial Review and Prospects	29
Item 6.	Directors, Senior Management and Employees	46
Item 7.	Major Shareholders and Related Party Transactions	49
Item 8.	Financial Information	54
Item 9.	The Offer and Listing	55
Item 10.	Additional Information	56
Item 11.	Quantitative and Qualitative Disclosures About Market Risk	57
Item 12.	Description of Securities Other than Equity Securities	58
Item 13.	Defaults, Dividend Arrearages and Delinquencies	58
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	58
Item 15.	Controls and Procedures	58
Item 16A.	Audit Committee Financial Expert	59
Item 16B.	Code of Ethics	59
Item 16C.	Principal Accountant Fees and Services	59
Item 16D.	Exemptions from the Listing Standards for Audit Committees	59
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	60
Item 17	Financial Statements	61
Item 18.	Financial Statements	61
Item 19.	Exhibits	62

PART I


Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable

Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable

Item 3. KEY INFORMATION

A. Selected financial data

The following selected consolidated financial data of the Company and its subsidiaries are derived from and should be read
in conjunction with the Consolidated Financial Statements and notes thereto appearing elsewhere in this annual report.


Income Statement Data:	Year ended December 31,
	2007			2006			2005			2004			2003
Voyage, time and bareboat charter revenues	$	111,835,094		$	95,591,276		$	71,388,561		$	51,362,910		$	55,156,875
Other operating income		581,737			1,287,775			514,491			-			-
Voyage expenses		(27,882,163	)		(14,792,322	)		(6,033,470	)		(9,663,653	)		(19,373,318	)
Vessel operating expenses		(39,366,478	)		(34,159,942	)		(26,369,749	)		(19,742,875	)		(25,089,187	)
Depreciation and amortization		(21,542,550	)		(16,812,342	)		(11,917,359	)		(7,763,640	)		(9,024,806	)
Gain (loss) on sale of vessels		-			-			828,115			(4,682,965	)		(16,187,604	)
General and administrative expenses		(7,349,371	)		(5,254,323	)		(3,797,613	)		(3,755,136	)		(3,897,885	)
Income (loss) from operations		16,276,269			25,860,122			24,612,976			5,754,641			(18,415,925	)
Gain on retirement of 9 7/8 First Preferred
Ship Mortgage Notes		-			-			-			-			6,803,965
Minority interest in net loss of consolidated subsidiary		-			-			-			-			23,866
Interest expense, net		(9,619,621	)		(8,298,750	)		(4,383,627	)		(1,328,896	)		(1,504,191	)
Income from investment in Nordan OBO 2 Inc.		790,288			1,262,846
Loss on derivative instruments		(4,670,192	)
Other expense		(757,567	)		(49,905	)		(130,704	)		(1,730	)		-
Net income (loss)	$	2,019,177		$	18,774,313		$	20,098,645		$	4,424,015		$	(13,092,285	)

Basic earnings (loss) per share (1)	$	0.29		$	2.67		$	3.44		$	1.15		$	(3.41	)
Diluted earnings (loss) per share (2)	$	0.29		$	2.59		$	3.30		$	1.00		$	(3.41	)
Dividends declared per share	$	-		$	-		$	-		$	-		$	-

(1) Based on weighted average number of shares outstanding of 6,994,843 in 2007, 7,027,343 in 2006, 5,844,301 in 2005, 3,839,242 in 2004 and 3,835,269 in 2003.
(2) Based on the weighted average number of shares outstanding, increased in 2007, 2006, 2005 and 2004 by the net effects of stock options using the
treasury stock method and by the assumed distribution of all shares to BHM under the 1998 agreement (See Item 7). The denominator for the diluted
earnings per share calculation is 7,031,210 in 2007, 7,237,453 in 2006, 6,092,522 in 2005, 4,404,757 in 2004 and 3,835,269 in 2003.


	Year ended December 31,
Balance Sheet Data:	2007			2006			2005			2004			2003

Current assets	$	97,408,642		$	85,870,618		$	65,719,790		$	19,344,004		$	6,534,213
Total assets	$	405,833,474		$	366,822,444		$	281,423,286		$	82,902,304		$	70,830,212
Current liabilities	$	83,142,107		$	63,688,354		$	44,305,700		$	20,073,194		$	17,024,634
Long-term liabilities	$	190,254,745		$	167,153,908		$	117,063,472		$	18,465,472		$	13,310,674
Working capital (deficit)	$	14,266,535		$	22,182,264		$	21,414,090		$	(729,190	)	$	(10,490,421	)
Shareholders' equity	$	132,436,622		$	135,980,182		$	120,054,114		$	44,363,637		$	40,494,904

B. Capitalization and indebtedness

Not applicable

C.	Reasons for the offer and use of proceeds

Not applicable

D. Risk factors

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

Industry Specific Risk Factors

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

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

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

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

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

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

The operation of its vessels is affected by the requirements set forth in the International Management Code for the Safe Operation of Ships and Pollution Prevention (the “ISM Code”). The ISM Code requires shipowners and bareboat charterers to develop and maintain an extensive “Safety Management System” that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies. The failure of a shipowner or bareboat charterer to comply with the ISM Code may subject such party to increased liability, may decrease available insurance coverage for the affected vessels, and may result in a denial of access to, or detention in, certain ports. Currently, each of the vessels in its fleet is ISM Code-certified.

The United States Oil Pollution Act of 1990, (“OPA90”), provides that owners, operators and bareboat charterers are strictly liable for the discharge of oil in U.S. waters, including the 200 nautical mile zone off the U.S. coasts. OPA90 provides for unlimited liability in some circumstances, such as a vessel operator’s gross negligence or willful misconduct. However, in most cases OPA90 limits liability to the greater of $1,200 per gross ton or $10 million per vessel. OPA90 also permits states to set their own penalty limits. Most states bordering navigable waterways impose unlimited liability for discharges of oil in their waters.

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

The U.S. has established strict deadlines for phasing-out single-hull oil tankers, and both the IMO and the European Union have proposed similar phase-out periods. Under OPA90, all oil tankers that do not have double hulls will be phased out by 2015 and will not be permitted to come to United States ports or trade in United States waters. Two of the Company’s product tankers, or approximately 11% by deadweight ton (“DWT”) of the Company’s combined fleet, will be prohibited from carrying crude oil and oil products in U.S. waters by August 2010, with the phase out of such tankers occurring over the course of the period from August 2009 until August 2010.

In December 2003, the IMO adopted a proposed amendment to the International Convention for the Prevention of Pollution from Ships to accelerate the phase out of single-hull and non-qualifying double sided tankers from 2015 to 2010 unless the relevant flag states extend the date to 2015. This amendment took effect in April 2005. The Company expects that its double sided medium range (“MR”) tanker and its double sided Panamax product tanker will be unable to carry crude oil and petroleum products in many markets commencing between 2009 and 2010. Moreover, the IMO or other regulatory bodies may adopt further regulations in the future that could adversely affect the useful lives of its tankers as well as the Company’s ability to generate income from them. Also, new IMO regulation came into force as of January 1, 2007 requiring vegetable oils to be carried on IMO type 2 chemical tankers. This regulation effectively excluded the Company’s six MR ships from this trade. The Company therefore decided to convert these ships to meet the new requirements for both IMO Annex II and also Annex I, which regulates petroleum products. Four of the ships were converted in 2006 and 2007. The Company then decided to sell one MR product tanker and to convert the two remaining MR tankers to bulk carriers. The Company is also converting a Panamax product tanker to a bulk carrier. Two of these conversions were in process at December 31, 2007.

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

These requirements can affect the resale value or useful lives of the Company’s vessels. As a result of accidents such as the November 2002 oil spill relating to the loss of the M/T Prestige , a 26-year old single-hull tanker, the Company believes that regulation of the tanker industry will continue to become more stringent and more expensive for the Company and its competitors. Substantial violations of applicable requirements or a catastrophic release from one of the Company’s vessels could have a material adverse impact on its financial condition and results of operations as well as its reputation in the crude oil and refined petroleum products sectors, and could therefore negatively impact its ability to obtain charters in the future.

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

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

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

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

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

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

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

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

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

The shipping business is subject to the effect of world events

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

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

Company Specific Risk Factors

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

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

Single hull and double sided vessels are being phased out

Six of the Company’s product tankers, or approximately 31% by DWT of its combined fleet, are single hull or double sided vessels. Under the United States Oil Pollution Act of 1990, all oil tankers that do not have double hulls will be phased out over a 20-year period (1995-2015) based on size, age and place of discharge, unless retrofitted with double-hulls, and will not be permitted to come to United States ports or trade in United States waters. The European Union has required the phase out of single hull vessels carrying “heavy oil” and as a result its single hull vessels are prohibited from carrying this product to European Union ports. In addition, due to regulations adopted by the IMO under Annex I (oil) of MARPOL single hull vessels carrying petroleum products tankers must be phased out over the course of the period between 2005 and 2010. As a result of the MARPOL regulations, the Company expects that its three remaining single hulled MR product tankers will be unable to carry crude oil and petroleum products in many markets commencing between 2007 and 2009. Two of the Company’s MR tankers were retrofitted with double-hulls in 2006 and early 2007 and two more were completed during 2007. The Company decided to sell one of the MR tankers and to convert the remaining MR tanker and a Panamax product tanker to bulk carriers. These conversions are in process at December 31, 2007.

The Company’s fleet consists of second-hand vessels

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

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

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

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

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

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

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

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

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

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

·	marine disaster;

piracy;

·	environmental accidents;

·	cargo and property losses or damage; and

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

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

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

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

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

·	general economic and market conditions affecting the shipping industry;

·	competition from other shipping companies;

·	types and sizes of vessels;

·	other modes of transportation;

·	cost of building new vessels;

·	governmental or other regulations;

·	prevailing level of charter rates; and

·	technological advances.

If the Company sells vessels at a time when vessel prices have fallen, the sale may be at less than the vessel’s carrying amount on its financial statements, resulting in a loss and a reduction in earnings.

In addition, the Company’s mortgage indebtedness at December 31, 2007 of $200.3 million is secured by mortgages on the existing fleet of vessels of the Company and its subsidiaries. If the market value of its fleet declines, the Company may not be in compliance with certain provisions of its existing credit facilities and the Company may not be able to refinance its debt or obtain additional financing. If the Company is unable to pledge additional collateral, its lenders could accelerate its debt and foreclose on its fleet.

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

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

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

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

In general, the costs to maintain a vessel in good operating condition increase with the age of the vessel. As of December 31, 2007, the average age of the vessels in its fleet was 20 years. Older vessels are typically less fuel efficient and more costly to maintain than more recently constructed vessels due to improvements in engine technology. Cargo insurance rates increase with the age of a vessel, making older vessels less desirable to charterers.

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

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

The market for product tanker and OBO charters is highly competitive

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

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

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

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

The Company may be dependent on the spot market for charters

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

The Company is dependent upon certain significant customers

At December 31, 2007, the Company’s largest five accounts receivable balances represented 86% of total accounts receivable. At December 31, 2006, the Company’s largest three accounts receivable represented 74% of total accounts receivable. The allowance for doubtful accounts was $336,000 at December 31, 2007 and $120,000 at December 31, 2006. To date, the Company’s actual losses on past due receivables have not exceeded our estimate of bad debts.

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

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

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

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

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

The Company’s majority shareholders, which are affiliated with Mr. Michael S. Hudner, own 50.1% of the Company and also own BHM. Mr. Hudner is also BHM’s Chairman and Chief Executive Officer. These responsibilities and relationships could create conflicts of interest between us, on the one hand, and BHM, on the other hand. These conflicts may arise in connection with the chartering, purchase, sale and operations of the vessels in its fleet versus vessels managed by other companies affiliated with BHM and Mr. Hudner. In particular, BHM may give preferential treatment to vessels that are beneficially owned by related parties because Mr. Hudner and members of his family may receive greater economic benefits.

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

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

The Company’s growth will depend on:

·	locating and acquiring suitable vessels;

·	identifying and consummating acquisitions or joint ventures;

·	integrating any acquired business successfully with its existing operations;

·	enhancing its customer base;

·	managing its expansion; and

·	obtaining required financing.

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

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

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

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

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

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

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

·	incur additional indebtedness;

·	create liens on its assets;

·	sell capital stock of its subsidiaries;

·	engage in mergers or acquisitions;

·	make capital expenditures;

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

·	sell its vessels.

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

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

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

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

The Company had net income of $2.0 million on gross revenue of $112.4 million in 2007. Income from vessel operations was $16.3 million for the year-end December 31, 2007. At December 31, 2007, the Company had approximately $200.3 million in indebtedness. There can be no assurance that future charter rates will be sufficient to generate adequate revenues or that the Company will be able to maintain efficiency levels to permit the Company to operate profitably or to service its indebtedness.

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

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

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

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

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

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

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

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

The Company is subject to the reporting requirements of Sarbanes Oxley

Effective for its first fiscal year ending on or after July 15, 2009, the Company is subject to full compliance with all provisions of the Sarbanes Oxley Act of 2002. As directed by Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), the Securities and Exchange Commission adopted rules requiring public companies to include a report of management on the Company’s internal control over financial reporting in their annual reports on Form 20-F. Such a report is required to contain an assessment by management of the effectiveness of a company’s internal controls over financial reporting. In addition, the independent registered public accounting firm auditing a public company’s financial statements must attest to and report on the effectiveness of the Company’s internal controls over financial reporting. While the Company would expend significant resources in developing the necessary documentation and testing procedures required by Section 404, there is a risk that the Company would not comply with all of the requirements imposed by Section 404. If the Company fails to implement required new or improved controls, the Company may be unable to comply with the requirements of Section 404 in a timely manner. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of its financial statements, which could cause the market price of its common stock to decline and make it more difficult for us to finance its operations.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Item 4. INFORMATION ON THE COMPANY.

A. History and development of the Company

B+H Ocean Carriers Ltd. (the "Company"*) was organized on April 28, 1988 to engage in the business of acquiring, investing in, owning, operating and selling vessels for dry bulk and liquid cargo transportation. As of December 31, 2007, the Company owned and operated seven MR product tankers, two Panamax product tankers and six OBOs. The Company also owns a 50% interest in a company which is the disponent owner of a 1992-built 75,000 DWT Combination Carrier, effected through a lease structure. Each vessel accounts for a significant portion of the Company’s revenues.

The Company’s fleet of product tankers consist of “handy-size” vessels which are between 30,000 and 50,000 summer deadweight tons ("DWT"), and are able, by reason of their smaller size, to transport commodities to and from most ports in the world, including those located in less developed third-world countries. The Company’s Panamax product tankers are 61,000 and 68,500 DWT. Product tankers are single-deck oceangoing vessels designed to carry simultaneously a number of segregated liquid bulk commodities, such as refined petroleum products, vegetable oils, caustic soda and molasses. The Company’s fleet of OBOs are between 74,000 and 98,000 DWT. OBOs are combination carriers used to transport liquid, iron ore or bulk products such as coal, grain, bauxite, phosphate, sugar, steel products and other dry bulk commodities.

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

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

·	Recent acquisitions, disposals and other significant transactions

On January 29, 2007, the Company, through a wholly-owned subsidiary, entered into a $27 million term loan facility to finance the acquisition of the M/V SAKONNET, which vessel it had acquired in January 2006 under an unsecured financing agreement.

In June 2007, the Company, through a wholly-owned subsidiary, acquired a 45,000 DWT product tanker built in 1990 for $19.6 million. On October 25, 2007, the Company drew down an additional $19.6 million on one of its senior secured term loans to finance the purchase price.

On September 7, 2007, the Company, through a wholly-owned subsidiary, entered into an $25,500,000 million term loan facility to finance the conversions of three of its MR product tankers to double hulled vessels. On December 7, 2007, the facility was amended to allow for an additional $8.5 million to finance the fourth MR conversion.

On October 25, 2007 the Company entered into an amended and restated $26.7 floating rate loan facility (the “amended loan facility”). The amended loan facility made available an additional $19.6 million for the purpose of acquiring the M/T CAPT. THOMAS J HUDNER and changed the payment terms for the $7.1 million balance of the loan (“Tranche 1”).

On February 26, 2008, the Company, through a wholly-owned subsidiary, sold the M/T ACUSHNET for $7.8 million. The book value of the vessel of approximately $20.4 million was classified as held for sale at December 31, 2007.

On March 27, 2008, the Company, through a wholly-owned subsidiary, sold the OBO SACHUEST for $31.3 million. The book value of the vessel of approximately $4.6 million was classified as held for sale at December 31, 2007.

·	Prior year acquisitions, disposals and other significant transactions

In January 2006, the Company, through a wholly-owned subsidiary, acquired a 1993-built, 83,000 DWT Combination Carrier for $36.4 million through an existing lease structure. The acquisition also included the continuation of a five-year Time Charter which commenced in October 2005. The Company purchased the vessel and terminated the lease in January 2007.

Also in January 2006, the Company, through a wholly-owned subsidiary, acquired a 50% shareholding in a company which is the disponent owner of a 1992-built 75,000 DWT Combination Carrier, effected through a lease structure. The terms of the transaction were based on a vessel value of $30.4 million. The vessel was fixed on a three-year charter commencing in February 2006. The charter includes a 50% profit sharing arrangement above a guaranteed minimum daily rate. On September 5, 2006, the Company, entered into an $8 million term loan facility agreement to finance a portion of the purchase price.

In June 2006, the Company, through a wholly-owned subsidiary, acquired a 61,000 DWT Panamax product tanker built in 1988 for $12.55 million. On October 17, 2006, the Company entered into a $12 million senior secured term loan to finance a portion of the purchase price.

On May 25, 2005, the Company completed a private placement of 3,243,243 shares of Common Stock of the Company at a price of $18.50 per share, for aggregate gross proceeds of approximately $60 million. The newly issued shares traded over the counter in Norway until the Company obtained a listing on the Oslo Stock Exchange on April 12, 2006.

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

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

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

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

B. Business overview

Management of the Company

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

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

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

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

Marketing and operations of vessels

The Company’s vessels are time chartered to Product Transport Corp. Ltd, (“PROTRANS”), a Bermuda Corporation and wholly-owned subsidiary of the Company, on an open rate basis as described hereunder.

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

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

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

Vessel Technical Management

At December 31, 2007, BHM was the technical manager of all of the Company's vessels, under technical management agreements. BHM employs B+H Equimar Singapore Pte. Ltd. ("BHES"), a Singapore corporation, under agency agreements to assist with certain of its duties under the technical management agreements. The vessel technical manager is responsible for all technical aspects of day-to-day vessel operations, including physical maintenance, provisioning and crewing, and receives compensation of $13,296 per MR product tanker per month and $16,099 per Panamax product tanker or OBO per month, which may be adjusted annually for any increases in the Consumer Price Index. Such supervision includes the establishment of operating budgets and the review of actual operating expenses against budgeted expenses on a regular basis.

Insurance and Safety

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

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

Competition

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

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

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

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

Seasonality

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

Inspection by Classification Society

A vessel must be inspected by a surveyor of the classification society every year ("Annual Survey"), every two and a half years ("Intermediate Survey") and every five years ("Special Survey"). In lieu of a Special Survey, a shipowner has the option of arranging with the classification society for the vessel's machinery to be on a continuous survey cycle, under which the machinery would be surveyed over a five-year period. The Company's vessels are on Special Survey cycles for hull inspection and continuous survey cycles for machinery inspection. Every vessel 15 years and older is also required to be drydocked at least twice in a five-year period for inspection of underwater parts of the vessel.

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

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

Regulation

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

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

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

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

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

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

The phase out dates for the purposes of carriage of petroleum products under MARPOL, for the vessels currently owned by the Company, are set out in the table below. In October 2004, a revision was adopted to MARPOL Annex II where noxious liquid substances (NLS) such as all vegetable oils will be required to be carried on vessels complying with the International Bulk Chemical Code (IBC). The revision comes into force on January 1, 2007. These regulatory changes have led the Company to believe that structural modifications to its existing fleet may provide the best solution to the phase-out issues for single hull tankers. Accordingly, four of the Company’s MR tankers were retrofitted with double-hulls in 2006 and 2007 and one is currently being converted to a bulk carrier.

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

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

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

·	all tankers are subject to enhanced inspections.

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

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

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

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

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

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

Under the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention, or ISM Code, promulgated by the IMO, the party with operational control of a vessel is required to develop an extensive safety management system that includes, among other things, the adoption of a safety and environmental protection policy setting forth instructions and procedures for operating its vessels safely and describing procedures for responding to emergencies. In 1994, the ISM Code became mandatory with the adoption of Chapter IX of SOLAS. We intend to rely on the safety management system that BHM has developed.

The ISM Code requires that vessel operators obtain a safety management certificate for each vessel they operate. This certificate evidences compliance by a vessel’s management with code requirements for a safety management system. No vessel can obtain a certificate unless its operator has been awarded a document of compliance, issued by each flag state, under the ISM Code. We believe that has all material requisite documents of compliance for its offices and safety management certificates for vessels in our fleet for which the certificates are required by the IMO. BHM will be required to review these documents of compliance and safety management certificates annually.

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

Environmental Regulation-OPA 90/CERCLA. OPA 90 established an extensive regulatory and liability regime for environmental protection and cleanup of oil spills. OPA 90 affects all owners and operators whose vessels trade with the United States or its territories or possessions, or whose vessels operate in the waters of the United States, which include the United States territorial sea and the two hundred nautical mile exclusive economic zone of the United States. The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) applies to the discharge of hazardous substances, which the Company’s vessels are capable of carrying.

Under OPA 90, vessel owners, operators and bareboat (or “demise”) charterers are “responsible parties” who are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all oil spill containment and clean-up costs and other damages arising from oil spills caused by their vessels. These other damages are defined broadly to include (i) natural resource damages and the costs of assessment thereof, (ii) real and personal property damages, (iii) net loss of taxes, royalties, rents, fees and other lost natural resources damage, (v) net cost of public services necessitated by a spill response, such as protection from fire, safety or health hazards, (iv) loss of profits or impairment of earning capacity due to injury, destruction or loss of real property, personal property and natural resources, and (v) loss of subsistence use of natural resources. OPA 90 limits the liability of responsible parties to the greater of $1,200 per gross ton or $10 million per tanker that is over 3,000 gross tons and $600 per gross ton or $500,000 for non-tanker vessels (subject to possible adjustment for inflation). CERCLA, which applies to owners and operators of vessels, contains a similar liability regime and provides for cleanup, removal and natural resource damages. Liability under CERCLA is limited to the greater of $300 per gross ton or $5 million. These limits of liability would not apply if the incident were proximately caused by violation of applicable United States federal safety, construction or operating regulations, or by the responsible party’s gross negligence or willful misconduct, or if the responsible party fails or refuses to report the incident or to cooperate and assist in connection with the oil removal activities. OPA and CERCLA each preserve the right to recover damages under other laws, including maritime tort law. OPA 90 specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, and some states that have enacted legislation providing for unlimited liability for oil spills. In some cases, states, which have enacted such legislation, have not yet issued implementing regulations defining tanker owners’ responsibilities under these laws. Moreover, OPA 90 and CERCLA preserve the right to recover damages under existing law, including maritime tort law. The Company intends to comply with all applicable state regulations in the ports where its vessels call.

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

Under OPA 90, with certain limited exceptions, all newly built or converted tankers operating in United States waters must be built with double-hulls, and existing vessels that do not comply with the double-hull requirement must be phased out over a 20-year period (1995-2015) based on size, age and place of discharge, unless retrofitted with double-hulls. Notwithstanding the phase-out period, OPA 90 currently permits existing single-hull tankers to operate until the year 2015 if their operations within United States waters are limited to discharging at the Louisiana Off-Shore Oil Platform, or off-loading by means of lightering activities within authorized lightering zones more than 60 miles offshore.

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

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

Owners or operators of tankers operating in the waters of the United States were required to file vessel response plans with the Coast Guard, and their tankers were required to be operating in compliance with their Coast Guard approved plans by August 18, 1993. Such response plans must, among other things, (i) address a “worst case” scenario and identify and ensure, through contract or other approved means, the availability of necessary private response resources to respond to a “worst case discharge,” (ii) describe crew training and drills, and (iii) identify a qualified individual with full authority to implement removal actions. The Company has vessel response plans approved by the Coast Guard for tankers in its fleet operating in the waters of the United States. The Coast Guard has announced it intends to propose similar regulations requiring certain tank vessels to prepare response plans for the release of hazardous substances.

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

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

VESSEL (as of MARCH 31, 2008)	HULL	DATE BUILT	DWT	PHASE OUT FOR CARRIAGE OF PETROLEUM PRODUCTS

				MARPOL/ EU	OPA 90
M/T AGAWAM	DH	Jun-82	38,937	N/A	N/A
M/T ALGONQUIN (1)	DH	Jan-83	40,454	N/A	N/A
M/T ANAWAN	DH	Aug-81	38,937	N/A	N/A
M/T AQUIDNECK	DH	Sep-81	38,937	N/A	N/A
M/T PEQUOD	DH	Jan-82	38,238	N/A	N/A
M/T SACHEM (2)	DH	Mar-88	60,959	N/A	N/A
M/T SAGAMORE (3)	DS	Feb-91	68,536	Feb-10	Feb-15
M/T CAPT THOMAS J HUDNER	DS	May-90	44,999	May-10	May-15
OBO SACHUEST	DH	Sep-86	98,000	N/A	N/A
OBO RIP HUDNER	DH	Jul-94	83,155	N/A	N/A
OBO BONNIE SMITHWICK	DH	Dec-93	83,155	N/A	N/A
OBO SEAROSE G	DH	Apr-94	83,155	N/A	N/A
OBO ROGER M JONES	DH	Nov-92	74,868	N/A	N/A
OBO SAKONNET	DH	May-93	83,155	N/A	N/A
OBO SEAPOWET (4)	DH	Sep-92	75,000	N/A	N/A

1.	Conversion to dry bulk carrier in progress. Completion date expected to be July 2008.

2.	Conversion to dry bulk carrier in progress. Completion date expected to be April 2008.

3.	Vessel must comply with Reg.13F by Feb-10.

4.	50% owner of the entity which is the disponent owner through a bareboat charter party..

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

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

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

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

European Union Tanker Restrictions. In July 2003, in response to the MT Prestige oil spill in November 2002, the European Union adopted legislation that accelerates the IMO single hull tanker phase-out timetable and, by 2010 will prohibit all single-hulled tankers used for the transport of oil from entering into its ports or offshore terminals. The European Union, following the lead of certain European Union nations such as Italy and Spain, has also banned, as of October 21, 2003, all single-hulled tankers carrying heavy grades of oil, regardless of flag, from entering or leaving its ports or offshore terminals or anchoring in areas under its jurisdiction. Commencing in 2005, certain single-hulled tankers above 15 years of age will also be restricted from entering or leaving European Union ports or offshore terminals and anchoring in areas under European Union jurisdiction. The European Union is also considering legislation that would: (1) ban manifestly sub-standard vessels (defined as those over 15 years old that have been detained by port authorities at least twice in a six-month period) from European waters and create an obligation of port states to inspect vessels posing a high risk to maritime safety or the marine environment; and (2) provide the European Union with greater authority and control over classification societies, including the ability to seek to suspend or revoke the authority of negligent societies. It is impossible to predict what legislation or additional regulations, if any, may be promulgated by the European Union or any other country or authority.

In jurisdictions where the CLC has not been adopted, various legislative schemes or common law govern, and liability is imposed either on the basis of fault or in a manner similar to the CLC.

C. Organizational Structure

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

As of March 31, 2008, the Company’s subsidiaries are as follows:

B+H OCEAN CARRIERS LTD.	Parent
CLIASHIP HOLDINGS LTD.	100% Wholly-owned
Subsidiaries:
ALGONQUIN SHIPPING CORP	100% Wholly-owned	Owns M/T ALGONQUIN
SACHUEST SHIPPING LTD.	100% Wholly-owned	Owns M/V SACHUEST
TJH SHIPHOLDING LTD.	100% Wholly-owned	Owns M/T CAPT. THOMAS J. HUDNER

BOSS TANKERS LTD.	100% Wholly-owned
Subsidiaries:
AGAWAM SHIPPING CORP.	100% Wholly-owned	Owns M/T AGAWAM
ANAWAN SHIPPING CORP.	100% Wholly-owned	Owns M/T ANAWAN
AQUIDNECK SHIPPING CORP.	100% Wholly-owned	Owns M/T AQUIDNECK
ISABELLE SHIPHOLDINGS CORP.	100% Wholly-owned	Owns M/T PEQUOD

OBO HOLDINGS LTD.	100% Wholly-owned
Subsidiaries:
BHOBO ONE LTD.	100% Wholly-owned	Owns M/V BONNIE SMITHWICK
BHOBO TWO LTD.	100% Wholly-owned	Owns M/V RIP HUDNER
BHOBO THREE LTD.	100% Wholly-owned	Owns M/V SEAROSE G
RMJ SHIPPING LTD.	100% Wholly-owned	Owns M/V ROGER M JONES
SAGAMORE SHIPPING CORP.	100% Wholly-owned	Owns M/T SAGAMORE

SEASAK OBO HOLDINGS LTD.	100% Wholly-owned
Subsidiaries:
SAKONNET SHIPPING LTD.	100% Wholly-owned	Owner of M/V SAKONNET
SEAPOWET TRADING LTD.	100% Wholly-owned	Disponent Owner of 50% of M/V SEAPOWET (1)
SACHEM SHIPPING LTD.	100% Wholly-owned	Owns M/T SACHEM

(1) Disponent owner of M/V SEAPOWET as 50% owner of Nordan OBO II Ltd. which is disponent owner through a bareboat charter party.

D. Property, Plant and Equipment

Fleet

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

Other

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

Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A.	Operating results

The following is a discussion of our financial condition and results of operations for the years ended December 31, 2007, 2006 and 2005. You should read this section together with the consolidated financial statements including the notes to those financial statements for the periods mentioned above.

We are a provider of international liquid and dry bulk seaborne transportation services, carrying petroleum products, crude oil, vegetable oils and dry bulk cargoes. The Company operates a fleet consisting of six MR product tankers, two Panamax product tankers and seven combination carriers. The MR product tankers are all medium range or “handy-size” vessels which are between 30,000 and 50,000 summer deadweight tons (“DWT”), and are able, by reason of their small size, to transport commodities to and from most ports in the world, including those located in less developed third-world countries. The Panamax product tankers are 61,000 and 68,500 DWT. Product tankers are single-deck oceangoing vessels designed to carry simultaneously a number of segregated liquid bulk commodities, such as petroleum products and vegetable oils. The combination carriers, known as an OBOs (oil-bulk-ore carrier), are between 74,000 and 98,000 DWT (Aframax). Combination carriers can operate as tankers or as bulk carriers. They can be used to transport liquid cargo including crude, fuel oils and clean petroleum products (CPP), and they can also be used to transport dry bulk commodities, such as iron ore, coal, and grain.

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

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

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

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

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

Twelve Months Ended December 31, 2007 versus December 31, 2006

	2007			2006
Gross revenue	$	112,416,831		$	96,879,000
Voyage expenses		(27,882,163	)		(14,792,000	)
Net revenue		84,534,668			82,087,000


Gross voyage revenue		42,909,357			18,662,000
Less: direct voyage expenses		(20,505,424	)		(9,294,000	)
Time charter equivalent ("TCE") revenue		22,403,933			9,368,000

Time charter revenue		68,925,737			76,929,000
Less: brokerage commissions		(2,113,286	)		(1,226,000	)
Time charter revenue		66,812,451			75,703,000

Less: other voyage expenses		(5,263,453	)		(4,272,000	)
Other		581,737			1,288,000
Net revenue	$	84,534,668		$	82,087,000

Days revenue on voyage		1,763			746
Days revenue on time charter		2,870			3,719
		4,633			4,465

TCE rate	$	12,708		$	12,558
Average time charter rate	$	24,016		$	20,685
Net revenue per day	$	18,246		$	18,385

Revenues

Revenues from voyage and time charters increased $16.2 million or 17% from 2006. The increase is due to a 4% increase in the number of total on-hire days from 2006 to 2007 and due to the fact that there were 1,017 (136%) more voyage days in 2007 than in 2006. Revenue from voyage charters is recorded on a gross basis, before voyage expenses. The TCE rate increased $151 per day (1%). Approximately 34% of the increase in voyage charter days is due to acquisitions in 2006 and 2007. The M/T Sachem, purchased in June 2006, was on time charter from its acquisition to February of 2007, but on voyage charters thereafter. The Capt. Thomas J. Hudner, which was acquired in June 2007, spent the remainder of the year in the spot market. Another 16% of the increase in voyage charter days was attributable to vessels positioned for conversion during 2007. Voyage charters allowed the Company more flexibility with respect to this positioning. Finally, the spot market provided the best employment for the Company’s MR fleet, post conversion. At December 31, 2007, five of the Company’s seven MR product tankers were employed in the voyage charter market and one on a short term time charter. The six combination carriers and one of its Panamax product tankers were employed on long-term time charters. The remaining MR tanker and Panamax tanker are being converted to bulk carriers.

Other revenue primarily includes $0.5 million earned in respect of the profit sharing arrangement with the charterer of one of the OBOs acquired in 2005.

Voyage expenses

Voyage expenses consist of port, canal and fuel costs that are unique to a particular voyage and commercial overhead costs, including commercial management fees paid to BHM. Under a time charter, the Company does not incur port, canal or fuel costs. Voyage expenses increased $13.1 million, or 88%, to $27.9 million for the twelve month period ended December 31, 2007 compared to $14.8 million for the comparable period of 2006. This is due to the increase in voyage days from 746 in 2006 to 1,763 in 2007. Direct voyage expenses on a per day basis decreased 7% or $827 per day, predominantly due to decreases in port charges.

Vessel operating expenses

The increase in vessel operating expenses is due to the increase in the number of vessels, as noted above. Vessel operating expenses increased $5.3 million (15%) from 2006 to 2007. Approximately $3.3 million (63%) of the increase related to vessels acquired in June 2006 and June 2007. In addition, there was an increase in average daily operating expenses of $402 per day for a total of $2.1 million.

Depreciation and amortization

Depreciation increased by $0.2 million, or 2%, to $15.2 million for the twelve months ended December 31, 2007 compared to $14.9 million for the prior period. Amortization of deferred charges, which includes amortization of conversion costs, special surveys and debt issuance costs increased $4.5 million due predominantly to the completed conversions of three MR tankers to double hull and to additional amortization of special survey costs incurred in 2007.

	2007	2006

Depreciation of vessels	$ 15,201,000	$ 14,959,000
Amortization of special survey costs	4,020,000	1,195,000
Amortization of vessel conversion costs	1,714,000	258,000
Amortization of debt issuance costs	607,000	401,000
Total depreciation and amortization	$ 21,542,000	$ 16,813,000

General and administrative expenses

General and administrative expenses include all of our onshore expenses and the fees that BHM charges for administration. Management fees increased by $1.0 million, or 84%, to $2.3 million for the twelve month period ended December 31, 2007 compared to $1.2 million for the prior period. The increase is due to the issuance of 60,000 shares of common stock to BHM resulting in compensation expense of $1.1 million. Fees for consulting and professional fees and other expenses increased $1.1 million or 26%. The increase is partly attributable to the issuance of 2,500 shares of the Company’s common stock to each director, resulting in compensation expense of $0.4 million. Another $0.4 million of the increase is attributable to an increase in legal fees, and the balance includes increases in charitable contributions and mortgagees interest insurance premiums.

Interest Expense and Interest Income

The $2.1 million (19%) increase in interest expense is due to the increase in outstanding debt. The average long-term debt balance for 2007 was approximately $175.9 million, as compared to approximately $143.8 million for 2006. The Company entered into a new loan agreement totaling $34.0 million on September 7, 2007 to finance conversions of four of its MR tankers, of which $8.5 million was drawn down in October. The Company also drew an additional $19.6 million on its Cliaship Holdings facility to finance the purchase of the MR tanker acquired in June 2007.

Both the interest paid on the Company’s debt and the interest earned on its cash balances are based on LIBOR. Interest income for 2007 of $3.1 million represented an increase of $0.7 million or 31% of the prior year’s interest income of $2.4 million. The increase in interest income is due to the fact that the Company had a higher average cash balance during 2007 as compared to 2006. In addition, average LIBOR rates of 5.25% for 2007 were approximately 3% higher than the 2006 average of 5.1%.

Equity in income of Nordan OBO II

Equity in income of Nordan OBO II of $0.8 million represents income from the Company’s 50% interest in an entity which is the disponent owner of a 1992-built 75,000 DWT combination carrier through a bareboat charter party which was acquired in March 2006. The decrease from 2006 of $0.5 million is due to the fact that the ship was offhire for special survey work during a portion of 2007.

Loss on fair value of derivatives

During 2007, the Company entered into interest rate swap agreements to mitigate the risk associated with variable rate debt. Two of these interest rate swap agreements do not qualify for hedge accounting under US GAAP and, as such, the changes in the fair value of these swaps are reflected in the Company’s Statements of Income. For the years ended December 31, 2007 and 2006, the Company recognized aggregate losses of $1.3 million and gains of $0.3 million, respectively, on these non-qualifying swap agreements. The aggregate fair value of these non-qualifying swap agreements is a liability of $0.9 million at December 31, 2007 and an asset of $0.3 million at December 31, 2006. The other swap agreements have been designated as cash flow hedges by the Company and as such, the changes in the fair value of these swaps are reflected as a component of other comprehensive income. The fair value of these cash flow hedges are liabilities of $828,000 at December 31, 2007 and an asset of $18,000 at December 31, 2006.

In 2007 and 2006, the Company bought put options costing a total of $11.1 million to mitigate the risk associated with the possibility of falling time charter rates. These put options do not qualify for special hedge accounting under US GAAP and, as such, the aggregate changes in the fair value of these option contracts are reflected in the Company’s Consolidated Statements of Income. The aggregate unrealized loss on the value of the contracts totaled $3.4 million at December 31, 2007 and $0.3 million at December 31, 2006.

Loss on investment

The Company invested in an oil drilling operation during 2007. The investment of $0.6 million was written off in the 4 th quarter, when it was determined the wells would not result in any production.

Twelve Months Ended December 31, 2006 versus December 31, 2005

	2006			2005
Gross revenue	$	96,879,000		$	71,903,000
Voyage expenses		(14,792,000	)		(6,033,000	)
Net revenue		82,087,000			65,870,000


Gross voyage revenue		18,662,000			5,871,000
Less: direct voyage expenses		(9,294,000	)		(1,621,000	)
Time charter equivalent (TCE) revenue		9,368,000			4,250,000

Time charter revenue		76,929,000			65,518,000
Less: brokerage commissions		(1,226,000	)		(1,202,000	)
Time charter revenue		75,703,000			64,316,000

Less: other voyage expenses		(4,272,000	)		(3,210,000	)
Other		1,288,000			514,000
Net revenue	$	82,087,000		$	65,870,000

Days revenue on voyage		746			201
Days revenue on time charter		3,719			3,527
		4,465			3,728

TCE rate	$	12,558		$	21,144
Average time charter rate	$	20,685		$	18,576
Net revenue per day	$	18,385		$	17,669

Time Charter Equivalent (“TCE”) revenues, which is voyage revenues less voyage expenses, serves as an industry standard for measuring and managing fleet revenue and comparing results between geographical regions and among competitors.

Revenues

Revenues from voyage and time charters increased $24.2 million or 34% from 2005. The increase is due to a 20% increase in the number of total on-hire days from 2005 to 2006 and due to the fact that there were 545 more voyage days in 2006 than in 2005. Revenue from voyage charters is recorded on a gross basis, before voyage expenses. TCE increased $716 per day (4%). The number of voyage charter days increased after all of the MR tankers came off time charters during 2006 and were scheduled for conversion to double hull. Voyage charters allowed the Company more flexibility with respect to positioning for the conversions. Also, a combination carrier scheduled for special survey work was operated on voyage charters after the expiration of the two year time charter it was on since it was acquired in 2004. At December 31, 2006, the Company’s six MR product tankers were employed in the voyage charter market. The six combination carriers and two Panamax product tankers were employed on long-term time charters.

Other revenue primarily includes $0.8 million earned in respect of the combination carrier acquired in 2006, in lieu of timecharter revenue, from the January 15, 2006 effective date of the purchase until the closing date and $0.5 million representing settlement proceeds from the various insurance claims.

Voyage expenses

Voyage expenses consist of port, canal and fuel costs that are unique to a particular voyage and commercial overhead costs, including commercial management fees paid to BHM. Under a time charter, the Company does not incur port, canal or fuel costs. Voyage expenses increased $8.8 million, or 145%, to $14.8 million for the twelve month period ended December 31, 2006 compared to $6.0 million for the comparable period of 2005. This is due to the increase in voyage days from 201 in 2005 to 746 in 2006. Direct voyage expenses on a per day basis increased 54% or $4,400 per day, predominantly due to increases in port charges and bunkers. However, these increases are intrinsic in the gross voyage revenue rates, as indicated by the TCE rate discussed above.

Vessel operating expenses

The increase in vessel operating expenses is due to the increase in the number of vessels, as noted above. Vessel operating expenses increased $7.8 million (30%) from 2005 to 2006. The increase in total operating days of 1,036 (27%) accounted for approximately $6.9 million of the increase. In addition, there was an increase in average daily operating expenses of $380 per day for a total of $1.8 million. This was offset by a decrease in expenses for intermediate drydocking of approximately $0.9 million.

Depreciation and amortization

Depreciation and amortization, which includes depreciation of vessels as well as amortization of special surveys and debt issuance costs, increased by $4.9 million, or 41%, to $16.8 million for the twelve months ended December 31, 2006 compared to $11.9 million for the prior period. The increase is due to the increase in the number of vessels comprising the Company’s fleet, the completed conversion of one MR tanker to a double hull and the additional amortization of special survey costs incurred in 2006.

	2006	2005

Depreciation of vessels	$ 14,959,000	$ 10,199,000
Amortization of special survey costs	1,195,000	1,475,000
Amortization of vessel conversion costs	258,000	-
Amortization of debt issuance costs	401,000	243,000
Total depreciation and amortization	$ 16,813,000	$ 11,917,000

General and administrative expenses

General and administrative expenses include all of our onshore expenses and the fees that BHM charges for administration. Management fees increased by $0.3 million, or 36%, to $1.2 million for the twelve month period ended December 31, 2006 compared to $0.9 million for the prior period. The increase is due to the increase in the number of vessels and therefore the number of months during which fees were incurred also increased. Fees for consulting and professional fees and other expenses increased $1.1 million or 39%. The increase is comprised of increases in travel expenses, consulting fees and director and officer insurance premiums.

Interest Expense and Interest Income

The $5.1 million (90%) increase in interest expense is due to the increase in outstanding debt. The total long-term debt balance outstanding at December 31, 2006 was $201.9 million, as compared to $149.7 million at December 31, 2005 and $29.3 million at December 31, 2004. The Company incurred $12 million in new mortgage debt on October 12, 2006 for the acquisition of one vessel purchased in June 2006 and $8 million of additional new borrowings on September 5, 2006 to finance the acquisition of a 50% share in Nordan OBO 2 Inc. The Company also issued $25 million of Floating Rate Bonds in December 2006, of which $5 million were subscribed to by the Company. Both the interest paid on the Company’s debt and the interest earned on its cash balances are based on LIBOR. Interest income for 2006 of $2.4 million represented an increase of $1.2 million or 95% of the prior year’s interest income of $1.2 million. The increase in interest income is due to the fact that the Company had an average of $54.8 million in cash during 2006 as compared to $43.1 in 2005. In addition, average LIBOR rates of 5.1% for 2006 were approximately 1.7% higher than the 2005 average of 3.4%.

Equity in income of Nordan OBO II

Equity in income of Nordan OBO II of $1.3 million represents income from the Company’s 50% interest in an entity which is the disponent owner of a 1992-built 75,000 DWT combination carrier through a bareboat charter party which was acquired in March 2006.

Gain on fair value of interest rate swaps

During 2006, the Company entered into three interest rate swap agreements to mitigate the risk associated with the variable rate debt. Two of these interest rate swap agreements do not qualify for hedge accounting under US GAAP and as such, the changes the fair value of these swaps are reflected in the Company’s Consolidated Statements of Income. For the year ended December 31, 2006, the Company recognized aggregate gains of $0.3 million on these non-qualifying swap agreements. The aggregate fair value of these non-qualifying swap agreements is $0.3 million at December 31, 2006. The third swap agreement has been designated as a cashflow hedge by the Company and as such, the changes in the fair value of this swap are reflected as a component of other comprehensive income. The fair value of this cashflow hedge is $18,000 at December 31, 2006.

Loss on value of put option contracts

In 2006, the Company bought put options to mitigate the risk associated with the possibility of falling time charter rates. These put options do not qualify for special hedge accounting under US GAAP and as such, the aggregate changes in the fair value of these option contracts is reflected in the Company’s statement of operations. The aggregate unrealized loss on the value of the contracts totaled $0.3 million at December 31, 2006.

B.	Liquidity and capital resources

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

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

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

Cash at December 31, 2007, amounted to $61.6 million, a decrease of $16.8 million as compared to December 31, 2006. The decrease in the cash balance is attributable to net inflows from operations of $40.9 million and inflows from financing activities of $10.6 million. These inflows were offset by outflows for investing activities of $68.3 million, primarily related to the conversion of existing vessels and the acquisition of an additional vessel. Approximately $27.0 million of the Company’s cash is anticipated to be used in 2008 to convert three of the Company’s tankers to bulk carriers. The remaining cash is expected to be used for operating activities and additional fleet expansion.

During the year ended December 31, 2007, inflows for financing activities were primarily attributable to mortgage proceeds of $88.7 million to finance the acquisition of an MR product tanker and the vessel acquired under an unsecured debt facility in 2006, as well as to finance the conversion of four of the Company’s MR product tankers to fully double hulled vessels. The Company also issued treasury shares for the total option price of $0.2 million. This total was offset by the payment of mortgage principal of $38.9 million, payments for equity and debt issuance costs of $1.6 million, payment of unsecured debt of $31.4 million and the purchase of an aggregate of 381,096 shares of common stock for treasury, for an aggregate price of $6.4 million.

During the year ended December 31, 2007, outflows for investing activities were attributable to the purchase of one MR product tanker for $19.6 million, to vessel conversion costs of $39.1 million, the investment in put contracts of $10.0 million and to other investments of $0.2 million. This is offset by a net decrease in the investment in Nordan OBO 2 Inc. of $0.6 million.

The Company had working capital totaling $14.3 million at December 31, 2007 as compared to $22.2 million at December 31, 2006. It is important to note that it is customary for shipping companies and their lenders to exclude the current portion of long-term debt in any working capital analysis. Excluding the current portion of long-term debt, the Company had working capital of $51.1 million at December 31, 2007 as compared to $62.0 million at December 31, 2006.

Trade accounts receivable increased $2.2 million at December 31, 2007 over 2006. The increase is predominantly attributable to the amount of demurrage revenue earned during the year. Demurrage revenue accounted for $8.9 million of revenue in 2007 and $2.2 million in 2006. Demurrage balances are typically outstanding for six months to one year and frequently require greater collection efforts. The Company has evaluated its demurrage receivable balance and believes that amounts deemed doubtful are properly included in the allowance for doubtful accounts.

During 2007, revenues from one customer accounted for $35.6 million (31.6%) of total revenues. Revenue from one customer accounted for $32.9 million (34.0%) of total revenues in 2006. In 2005, revenues from three significant customers accounted for $23.9 million (32.0%), $13.5 million (18.1%) and $9.8 million (13.1%) of total revenues, respectively.

Inventories increased $0.9 million predominantly due to the fact that seven of the Company’s vessels owned their inventory at December 31, 2007 versus six at December 31, 2006. Bunker inventory is owned by the shipowner when the vessel is on a voyage or offhire, but is owned by the charterer when the vessel is on time charter.

Vessels and capital improvements, net of accumulated depreciation, amounted to approximately $282.5 million at December 31, 2007, an increase of $20.8 million as compared with December 31, 2006. The increase is attributable to the purchase of one MR product tanker for a total of $19.6 million, to the investment in conversion projects of $39.1 million and to the investment in capital improvements of $8.0 million. This was offset by the reclass of vessels held for sale of $25.0 million to current liabilities and to depreciation and amortization of special survey and conversion costs totaling $20.9 million.

At December 31, 2007, the Company is party to put option agreements which are designed to mitigate the risk associated with changes in charter rates. These put option agreements, which were entered into during 2006 and 2007, do not qualify for hedge accounting under SFAS No. 133; and the changes in their fair value is therefore recorded in operations. At December 31, 2007 and 2006, the aggregate fair value of these non-qualifying put options is $7.3 million and $0.7 million, respectively and is reflected within Fair Value of Derivative Instruments on the accompanying balance sheets. During the years ended December 31,

2007 and 2006, the Company recorded $3.4 million and $0.3 million of expense in the consolidated statements of income related to the change in fair value.

Other assets increased $1.0 million as a result of debt issuance costs incurred relating to the new loans, as detailed below.

Accounts payable increased $23.7 million and accrued liabilities decreased $0.8 million from December 31, 2006 to December 31, 2007. The net increase in accounts payable and accrued liabilities is due to the conversions of three tankers to double hulled vessels which were financed under an installment plan with the shipyard and to the conversion of two vessels to bulk carriers which are ongoing at December 31, 2007.

Deferred income of $6.6 million at December 31, 2007 represents a decrease of $0.8 million as compared to 2006. The decrease is predominantly due to the fact that the M/T SACHEM was on timecharter at the end of 2006, but is being converted to a bulk carrier at the end of 2007.

During 2007 and 2006, the Company entered into interest rate swap agreements to mitigate the risk associated with its variable rate debt. The aggregate fair value of these non-qualifying swap agreements is a liability of $0.9 million at December 31, 2007. As of December 31, 2006, the fair value of these swaps was an asset of $0.3 million.

On January 24, 2007, the Company, through a wholly-owned subsidiary, entered into a $27 million term loan facility to refinance the acquisition of the M/T SAKONNET, acquired in January 2006 under an unsecured financing agreement.

The loan is payable in four quarterly installments of $825,000 beginning on April 30, 2007, twelve quarterly installments of $1,000,000 and sixteen quarterly installments of $750,000.

Interest on the Reducing Revolving and Term Loan facility is equal to LIBOR plus 0.875%. Expenses associated with the loan of $395,000 were capitalized and will be amortized over the 8 year term of the loan.

The loan facility contains certain restrictive covenants and mandatory prepayment in the event of the total loss or sale of a vessel. It also requires minimum value adjusted equity of $50 million, a minimum value adjusted equity ratio (as defined) of 30% and an EBITDA to fixed charges ratio of at least 125%. The Company is also required to maintain liquid assets, as defined, in an amount equal to the greater of $15.0 million or 6% of the aggregate indebtedness of the Company on a consolidated basis, positive working capital and adequate insurance coverage. At December 31, 2007, the Company was in compliance with these covenants.

On September 7, 2007, the Company, through a wholly-owned subsidiary, entered into a $25,500,000 million term loan facility to finance the conversions of three of its MR product tankers to double hulled vessels. On December 7, 2007, the facility was amended to allow for an additional $8.5 million to finance the fourth MR conversion.

The facility contains certain restrictive covenants on the Company and requires mandatory prepayment in the event of the total loss or sale of a vessel and a loan to value ratio of 120%. The facility requires minimum value adjusted equity of $50 million, a minimum value adjusted equity ratio (as defined) of 30% and an EBITDA to fixed charges ratio of at least 115% if 75% of the vessels are on fixed charters of twelve months or more and 120% if 50% of the vessels are on fixed charters of twelve months or more and 125% at all times otherwise. The Company is also required to maintain liquid assets, as defined, in an amount equal to the greater of $15.0 million or 6% of the aggregate indebtedness of the Company on a consolidated basis, positive working capital and adequate insurance coverage. At December 31, 2007, the Company was in compliance with these covenants.

The loan is repayable in sixteen quarterly installments of varying amounts, beginning on March 7, 2007 and a balloon payment on March 7, 2012. Interest on the facility is equal to LIBOR plus 2.0%. Expenses associated with the loan of $586,000 were capitalized and will be amortized over the four year term of the loan.

In order to mitigate a portion of the risk associated with the variable rate interest on this loan, the Company entered into an interest rate swap agreement to hedge the interest on $25.5 million of the loan. Under the terms of the swap, which the Company has designated as a cash flow hedge, interest is converted from variable to a fixed rate of 4.910%.

On October 25, 2007 the Company entered into an amended and restated $26,700,000 floating rate loan facility (the “amended loan facility”). The amended loan facility made available an additional $19.6 million for the purpose of acquiring the M/T CAPT. THOMAS J HUDNER and changed the payment terms for the $7.1 million balance of the loan.

The amended loan facility is apportioned into two tranches, Tranche A being payable in full on the April 30, 2009. Tranche B is payable in thirteen quarterly installments of $812,500 beginning on July 30, 2009 and a balloon payment of $9,037,500 due on October 30, 2012. Interest on the facility is equal to LIBOR plus 1.0%.

Expenses associated with the amended loan facility of approximately $344,000, were capitalized and are being amortized over the five-year period of the loan.

The facility contains certain restrictive covenants on the Company and requires mandatory prepayment in the event of the total loss or sale of a vessel and a loan to value ratio of 120%. The facility requires minimum value adjusted equity of $50 million, a minimum value adjusted equity ratio (as defined) of 30% and an EBITDA to fixed charges ratio of at least 115% if 75% of the vessels are on fixed charters of twelve months or more, 120% if 50% of the vessels are on fixed charters of twelve months or more and 125% at all times otherwise. The Company is also required to maintain liquid assets, as defined, in an amount equal to the greater of $15.0 million or 6% of the aggregate indebtedness of the Company on a consolidated basis, positive working capital and adequate insurance coverage. At December 31, 2007, the Company was in compliance with these covenants.

Management does not expect to incur expense for in-water survey, drydock and related repair work performed during 2008. The expenses for drydock and related repair work totaled $0.5 million in 2007 for three vessels, $0.1 million for one vessel in 2006 and $0.9 million in 2005. At December 31, 2007 there were two vessels in the shipyard being converted to bulk carriers. The capitalized costs for scheduled classification survey and related vessel upgrades were $8.0 million for five vessels in 2007, $7.1 million for three vessels in 2006 and $2.1 million in 2005 for two vessels. Such capitalized costs are depreciated over the remaining useful life of the respective vessels.

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

Critical accounting policies

Basis of accounting:

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

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

Principles of consolidation:

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

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

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

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

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

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash equivalents and trade receivables. The Company maintains its cash accounts with various high quality financial institutions in the United States, the United Kingdom and Norway. The Company performs periodic evaluations of the relative credit standing of these financial institutions. At various times throughout the year, the Company may maintain certain US bank account balances in excess of Federal Deposit Insurance Corporation limits. The Company does not believe that significant concentration of credit risk exists with respect to these cash equivalents.

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

Vessels, capital improvements and depreciation:

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

Capital improvements to vessels made during special surveys are capitalized when incurred and amortized over the 5-year period until the next special survey. The capitalized costs for scheduled classification survey and related vessel upgrades were $8.0 million for five vessels in 2007, $7.1 million for three vessels in 2006 and $2.1 million in 2005 for two vessels. Such capitalized costs are depreciated over the remaining useful life of the respective vessels. Conversion costs are capitalized and will be amortized over the period remaining to 30 years.

Payments for special survey costs are characterized as operating activities on the Consolidated Statements of Cash Flows. Amortization of special survey costs is characterized as amortization of deferred charges on the Consolidated Statements of Income and of Cash Flows. Amortization of special survey costs was previously included in depreciation and amortization on the Consolidated Statements of Income and of Cash Flows. Conversion costs are capitalized and will be amortized over the period remaining to 30 years.

Repairs and maintenance:

Expenditures for repairs and maintenance and interim drydocking of vessels are charged against income in the year incurred. Repairs and maintenance expense approximated $2.2 million,$1.9 million and $1.8 million for the years ended December 31, 2007, 2006 and 2005, respectively. Interim drydocking expense was approximately $0.5 million, $0.1 million and $0.9 million for the years ended December 31, 2007, 2006 and 2005, respectively.

Impairment of long-lived assets:

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

Derivatives and hedging activities:

The Company accounts for derivatives in accordance with the provisions of SFAS No. 133, as amended, “ Accounting for Derivative Instruments and Hedging Activities ,” (“SFAS No. 133”). The Company uses derivative instruments to reduce market risks associated with its operations, principally changes in interest rates and changes in charter rates. Derivative instruments are recorded as assets or liabilities and are measured at fair value.

Derivatives designated as cash flow hedges pursuant to SFAS No. 133 are recorded on the balance sheet at fair value with the corresponding changes in fair value recorded as a component of accumulated other comprehensive income (equity). At December 31, 2007, the Company is party to two interest rate swap agreements that qualify as cash flow hedges; the aggregate fair value of these cash flow hedges are a liability of $0.8 million at December 31, 2007 and an asset of $18,183 at December 31, 2006. See NOTE 7-BONDS PAYABLE.

Derivatives that do not qualify for hedge accounting pursuant to SFAS No. 133 are recorded on the balance sheet at fair value with the corresponding changes in fair value recorded in operations. At December 31, 2007 and 2006, the Company is party to two interest rate swap agreements having an aggregate notional value of $47.4 million, which do not qualify for hedge accounting pursuant to SFAS No. 133. These swap agreements were entered into to hedge debt tranches of 5.07%, expiring in December 2010. The aggregate fair value of these two non-qualifying swap agreements is a liability of $0.9 million at December 31, 2007 and an asset of $0.3 million at December 31, 2006, which is reflected within Fair Value of Derivative Instruments on the accompanying balance sheet and is recorded as income (loss) from changes in fair value in the consolidated statements of operations.

Additionally, at December 31, 2007, the Company is party to put option agreements which are designed to mitigate the risk associated with changes in charter rates. These put option agreements, which were entered into during 2007 and 2006, do not qualify for hedge accounting under SFAS No. 133; and the changes in their fair value is therefore recorded in operations. At December 31, 2007 and 2006, the aggregate fair value of these non-qualifying put options is $7.3 million and $0.7 million, respectively and is reflected within Fair Value of Derivative Instruments on the accompanying balance sheet. During the years ended December 31, 2007 and 2006, the Company recorded $3.4 million and $0.3 million of expense in the consolidated statements of operations related to the change in fair value of these instruments.

The Company is exposed to credit loss in the event of non-performance by the counter party to the interest rate swap agreements; however, the Company does not anticipate non-performance by the counter party.

The Company is party to foreign currency exchange contracts which are designed to mitigate the risk associated with changes in foreign currency exchange rates. These contracts, which were entered into during 2007, do not qualify for hedge accounting under SFAS No. 133; and the changes in their fair value is therefore recorded in operations. At December 31, 2007, the aggregate fair value of these non-qualifying foreign exchange contracts is $30,000 and is reflected within Fair Value of Derivative Instruments on the accompanying balance sheet and statements of income.

Recent accounting pronouncements:

During 2006, the Company adopted the requirements of Statement of Financial Accounting Standards No. 123R “Accounting for Stock Based Compensation” (“SFAS No. 123R”). The adoption of SFAS No. 123R did not materially impact the Company’s 2006 statement of operations due to the fact that all of the Company’s previously existing stock options were fully vested at December 31, 2005 with no new options issued in 2006. Additionally, shares issued under the Company’s performance plan, vest immediately upon granting and have historically been reflected in operations.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements,” (“SFAS No. 157”) which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 is applicable for the Company as of January 1, 2008, the first day of fiscal 2008. The FASB issued FASB Staff Position FAS 157-b, “Effective Date of FASB Statement No. 157,” which deferred the effective date of the Statement for certain non-financial assets and liabilities until fiscal 2009. The Company does not expect the adoption of SFAS No. 157 to have a material impact on its consolidated balance sheets and results of operations.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for the Company beginning January 1, 2008. The Company does not expect the adoption of SFAS No. 159 to have a material impact on its consolidated balance sheets and results of operations.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (Revised 2007), “Business Combinations,” (“SFAS No. 141R”), which makes certain modifications to the accounting for business combinations. Theses changes include (1) the requirement for an acquirer to recognize all assets acquired and liabilities assumed at their fair value on the acquisition date; (2) the requirement for an acquirer to recognize assets or liabilities arising from contingencies at fair value as of that acquisition date; and (3) the requirement that an acquirer expense all acquisition related costs. This Statement is required to be applied prospectively to business combinations for which the acquisition date is on or after the beginning of fiscal 2009. The Company does not expect the adoption of SFAS No. 141 to have a material impact on its consolidated balance sheets and results of operations.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements,” (“SFAS No. 160”) which requires noncontrolling (minority) interests in subsidiaries to be initially measured at fair value and presented as a separate component of shareholders’ equity. Current practice is to present noncontrolling interests as a liability or other item outside of equity. This Statement is required to be applied prospectively after the beginning of fiscal 2009, although the presentation and disclosure requirements are required to be applied on a retrospective basis. The Company does not expect the adoption of SFAS No. 160 to have a material impact on its consolidated balance sheets or results of operations.

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

Not applicable

D. Trend information

The Company’s fleet of product tankers consists of four double hull Medium Range (MR) tankers of about 40,000 DWT, and one double sided Long Range (LR) Panamax tanker. Three of the MRs are currently operated in the spot market, one is on a short-term time charter and one is being converted to a dry bulk carrier. One of the Panamax tankers is on a time charter with original length of three years and one is being converted to a dry bulk carrier.

The Company’s operates seven OBOs of 74,000 to 98,000 DWT. All seven of these OBOs are currently on time charters with original length of two years or more.

The Company expects to operate these vessels in both the voyage (spot) markets and on long-term time charters as the existing time charters expire.

E. Off-balance sheet arrangements

The Company periodically enters into interest rate swaps to manage interest costs and the risk associated with increases in variable interest rates. As of December 31, 2007, the Company had interest rate swaps aggregating notional amounts of $82.9 million designed to hedge debt tranches within a range of 4.76% to 5.07%, expiring from December 2010 to December 2013. The Company pays fixed-rate interest amounts and receives floating rate interest amounts based on three month LIBOR settings (for a term equal to the swaps’ reset periods). Two of the swap agreements have been designated as cash flow hedges by the Company and as such, the changes in the fair value of these swaps are reflected as a component of other comprehensive income. The aggregate fair value of swap agreements designated as cash flow hedges are liabilities of $828,000 at December 31, 2007 and an asset of $18,000 at December 31, 2006. The aggregate fair value of non-qualifying swap agreements is a liability of $0.9 million at December 31, 2007 and an asset of $0.3 million at December 31, 2006.

F. Tabular disclosure of contractual obligations

At December 31, 2007, the Company’s contractual obligations consist of the OBO Holdings, Ltd., the Cliaship Holdings Corp., the Seapowet Trading Ltd. and the Sachem Shipping Ltd. floating rate facilities and the B+H Ocean Carriers, Ltd. Open Bond Issue 2006/2013. The mortgage interest rates are stated as a margin (which varies from 1% to 4%) over LIBOR. The aggregate maturities, including an estimate of the interest payable are as follows:

	Principal		Interest 1		Total

2008	$	36,808,000	$	5,850,000	$	42,658,000
2009		46,155,000		3,985,000		50,140,000
2010		38,390,000		2,843,000		41,233,000
2011		55,104,000		1,801,000		56,905,000
2012		17,167,000		689,000		17,856,000
Thereafter		6,678,000		344,000		7,022,000
	$	200,302,000	$	15,512,000	$	215,814,000

1 Interest is calculated using the 3 month LIBOR rate in effect at March 31, 2008 (due to the fact that there was a significant drop in interest rates in the first quarter of 2008) and the balance outstanding for the period. The Company does not expect changes in the rate to have a material impact on the Company’s financial statements due to the mitigation of some of such risk resulting from interest rate swaps.

G. Safe harbor

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

Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and senior management

The directors and executive officers of the Company are as follows:

Name	Age	Position with the Company

Michael S. Hudner	61	Chairman of the Board, President and Chief Executive Officer and Class A Director
Trevor J. Williams	65	Vice President and Class A Director
R. Anthony Dalzell	63	Treasurer and Chief Financial Officer and Class B Director
Charles L. Brock	65	Class B Director
John M. LeFrere	63	Class A Director
Anthony J. Hardy	68	Class A Director
Per Ditlev-Simonsen	75	Class B Director
O. Michael Lewis	58	Class B Director

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

Pursuant to the Company's Articles of Incorporation, the Board of Directors is divided into two classes of at least three persons each. Each class is elected for a two-year term. The Class A directors will serve until the 2008 annual meeting and the Class B directors will serve until the 2009 annual meeting of shareholders. Officers are appointed by the Board of Directors and serve until their successors are appointed and qualified.

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

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

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

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

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

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

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

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

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

B.	Compensation

The Company does not pay salaries or provide other direct compensation to its executive officers. Directors who are not officers of the Company are entitled to receive annual fees of $30,000, and the Chairman of the Audit Committee is entitled to receive an additional fee of $2,000 per month. Each director was also awarded 2,500 shares of the Company’s stock during 2007. Certain directors and executive officers of the Company earn compensation indirectly through entities which provide services to the Company. (See Item 7).

C. Board practices

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

D . Employees

The Company employed, as of December 31, 2007, four non-salaried individuals on a part-time basis as officers of the Company and, through its vessel-owning subsidiaries, utilizes the services of approximately 212 officers and crew. The Company's vessels are manned principally by crews from the Philippines, Pakistan, Croatia, Turkey and India.

E. Share ownership

See “Item 7.A. Major shareholders.”

Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.	Major shareholders

The following table sets forth information as of June 5, 2008, concerning the beneficial ownership of the common stock of the Company by (i) the only persons known by the Company's management to own beneficially more than 5% of the outstanding shares of common stock, (ii) each of the Company's directors and executive officers, and (iii) all executive officers and directors of the Company as a group:

Name of Beneficial Owner	Number of Shares Beneficially Owned	Percent of Common Stock (a)
Northampton Holdings Ltd.	2,011,926	29.30%
Michael S. Hudner (b)	3,686,809	53.69%
Fundamental Securities International Ltd.	1,415,243	20.61%
Devonport Holdings Ltd. (c)	1,415,243	20.61%
Harbor Holdings Corp. (d)	202,500	2.95%
Charles L. Brock	2,500	0.04%
R. Anthony Dalzell (e)	57,140	0.83%
Dean Investments Ltd.	54,540	0.83%
John M. LeFrere	2,500	0.04%
Anthony J. Hardy	2,500	0.04%
Per Ditlev-Simonsen	—	*
Trevor J. Williams (f)	3,486,809	50.78%
O. Michael Lewis	2,500	0.04%
HBK Investments L.P. (g)	532,400	7.80%
Caiano Ship AS (g)	1,146,667	16.70%
Goldman Sachs International/Orkla Finans (g)	561,130	8.2%

All executive officers and directors as a group (8 persons)	3,699,309	53.87%

*Less than 1%

(a)

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

(b)

Comprised of shares shown in the table as held by Northampton Holdings Ltd. (“NHL”), Fundamental Securities International Ltd. (“Fundamental”), Harbor Holdings Ltd.. (“Harbor”) and Dean Investments (“Dean”). Mr. Hudner is a general partner in the partnership which is the ultimate parent of Fundamental and a general partner in the ultimate owner of the general partner of B+H/Equimar 95 Associates, L.P. (“95 Associates”), which is a 60.6% owner of NHL. Fundamental is a 30.3% shareholder of NHL. Mr. Hudner and a trust for the benefit of his family own Harbor, a Connecticut corporation. Anthony Dalzell is a beneficial owner of Dean Investments, a Cayman Islands corporation. Mr. Dalzell and Dean Investments executed a Voting Agreement, dated as of September 29, 2006 (the “Voting Agreement”), with the other entities noted above. Under the Voting Agreement, Mr. Dalzell and Dean Investments agreed to vote Shares as determined by the majority in interest of the group. Accordingly, Mr. Hudner may be deemed to share voting and dispositive power as an indirect beneficial owner of the shares held by NHL, Fundamental, Harbor and Dean.

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

(d)	Comprised of shares reissued by the Company during 2007, upon exercise of options granted to B+H Management Ltd.

(e)	Includes 57,040 shares held by Dean.

(f)

Comprised of shares shown in the table for NHL, Fundamental, Dean and 2,500 shares held individually. Mr. Williams is president and a director of Fundamental and the president and a director of 95 Associates. Accordingly, Mr. Williams may be deemed to share voting and dispositive power as an indirect beneficial owner of the shares held by NHL, Fundamental and Dean.

(g) Per VPS Registered Shareholder list.

B. Related party transactions

BHM/NMS/BHES/PROTRANS

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

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

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

Currently, the Company pays BHM a monthly rate of $6,476 per vessel for general, administrative and accounting services, which may be adjusted annually for any increases in the Consumer Price Index. During the years ended December 31, 2007, 2006 and 2005, the Company paid BHM fees of approximately $1,126,000, $970,000 and $797,000, respectively for these services. The total fees vary due to the change in the number of fee months resulting from changes in the number of vessels owned during each period.

The Company also pays BHM a monthly rate of $13,296 per MR product tanker and $16,099 per Panamax product tanker or OBO for technical management services, which may be adjusted annually for any increases in the Consumer Price Index. Vessel technical managers coordinate all technical aspects of day to day vessel operations including physical maintenance, provisioning and crewing of the vessels. During the years ended December 31, 2007, 2006 and 2005, the Company paid BHM fees of approximately $2,539,000, $2,360,000 and $2,040,000, respectively for these services. Technical management fees are included in vessel operating expenses in the Consolidated Statements of income. The total fees have steadily increased due to the vessel acquisitions in 2007, 2006 and 2005.

The Company engages BHM to provide commercial management services at a monthly rate of $10,545 per vessel, which may be adjusted annually for any increases in the Consumer Price Index. BHM obtains support services from Protrans (Singapore) Pte. Ltd., which is owned by BHM. Commercial managers provide marketing and operations services. During the years ended December 31, 2007, 2006 and 2005, the Company paid BHM fees of approximately $1,835,000, $1,558,000 and $1,238,000, respectively, for these services. Commercial management fees are included in voyage expenses in the Consolidated Statements of Income. The total fees increased in 2006 and 2007 due to the increase in the number of fee months resulting from the increase in the number of vessels owned.

The Company engaged Centennial Maritime Services Corp. (“Centennial”), a company affiliated with the Company through common ownership, to provide manning services at a monthly rate of $1,995 per vessel and agency services at variable rates, based on the number of crew members placed on board. During the years ended December 31, 2007, 2006 and 2005, the Company paid Centennial manning fees of approximately $662,000, $519,000 and $370,000, respectively. Manning fees are included in vessel operating expenses in the Consolidated Statements of Income.

BHM received arrangement fees of $196,000 in connection with the financing of the M/T CAPT. THOMAS J HUDNER in October 2007, $340,000 in connection with the financing of the four MR conversions in December 2007 and $270,000 in connection with the financing of the OBO SAKONNET in January 2007. BHM received brokerage commissions of $85,000 in connection with the sale of the M/T COMMUTER in August 2005. The Company also paid BHM standard industry chartering commissions of $717,000 in 2007, $672,000 in 2006 and $333,000 in 2005 in respect of certain time charters in effect during those periods. Clearwater Chartering Corporation, a company affiliated through common ownership, was paid $1,362,000, $1,062,000 and $1,194,000 in 2007, 2006 and 2005, respectively for standard industry chartering commissions. Brokerage commissions are included in voyage expenses in the Consolidated Statements of Income.

During 2007, 2006 and 2005, the Company paid fees of $501,000, $501,000 and $60,000 to J.V. Equities, Inc. for consulting services rendered. J.V. Equities is controlled by John LeFrere, a director of the Company.

During 2007, 2006 and 2005, the Company paid fees of $186,000, $36,000 and $49,334, respectively, to R. Anthony Dalzell or to Dean Investments for consulting services rendered. Dean Investments is deemed to be controlled by R. Anthony Dalzell, the Chief Financial Officer, Vice President and a director of the Company.

During 1998, the Company’s Board of Directors approved an agreement with BHM whereby up to 110,022 shares of common stock of the Company will be issued to BHM for distribution to individual members of management, contingent upon certain performance criteria. The Company will issue the shares of common stock to BHM at such time as the specific requirements of the agreement are met. During 2007, 2,275 shares, bringing the total to 64,522 shares, have been issued from treasury stock where these shares were held for this purpose. Compensation cost of $34,000, $259,000 and $102,000, based on the market price of the shares at the date of issue, was included as management fees to related parties in the Consolidated Statement of Operations for the years ended December 31, 2007, 2006 and 2005, respectively.

Effective December 31, 2000, the Company granted 600,000 stock options, with a value of $78,000 to BHM as payment for services in connection with the acquisition of the Notes. The exercise price is the fair market value at the date of grant and the options are exercisable over a ten-year period. At December 31, 2007 all of the options have been exercised.

Information regarding these stock options is as follows:

	Shares	Option Price

Outstanding at January 1, 2007	200,690	$ 1.00
Granted	-	-
Exercised	200,690	$ 1.00
Canceled	-	-
Outstanding at December 31, 2007	-

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

For the policy year ending February 20 2008, the Company placed the following insurance with Northampton Assurance Ltd (“NAL”):

·	65% of its Hull & Machinery (“H&M”) insurance for claims in excess of minimum $120/125,000 each incident, which insurance NAL fully reinsured.

·	70% of its H&M insurance on 6 vessels of up to $50,000 in excess of $120/125,000 each incident; and

·	70% of its H&M insurance on 1 vessel up to $100,000 in excess of $120/125,000 each incident.

For the policy period ending February 20, 2007, the Company placed 60% of its H&M insurance for machinery claims in excess of claims of $125,000 each incident with NAL, up to a maximum of $50,000 each incident on six vessels. It also placed an average of 37.5% of its H&M insurance for machinery claims in excess of $125,000 each incident with NAL up to a maximum of $37,500 each incident on one vessel. In addition, the Company placed (a) 75% of its H&M insurance in excess of between $125,000 and $220,000 each incident and (b) 100% of its Loss of Hire insurance in excess of 14 or 21 days deductible with NAL, which risks NAL fully reinsured with third party carriers.

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

For the periods ending December 31, 2007, 2006 and 2005, vessel operating expenses on the Consolidated Statements of Income include approximately $896,000, $972,000 and $1,033,000, respectively, of insurance premiums paid to NAL (of which $813,000, $884,000 and $851,000, respectively, was ceded to reinsurers) and approximately $188,000, $185,000, and $189,000, respectively, of brokerage commissions paid to NAL.

The Company had accounts payable to NAL of $135,000 and $295,000 at December 31, 2007 and 2006, respectively. NAL paid consulting fees of $174,000 during each of the three years ending December 31, 2007 to a company deemed to be controlled by Mr. Dalzell.

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

C.	Interests of experts and counsel

Not applicable

Item 8. FINANCIAL INFORMATION

A.	Consolidated statements and other financial information

See Item 18.

A.7. Legal proceedings

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

A.8. Policy on dividend distributions

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

B. Significant changes

Not applicable

Item 9. THE OFFER AND LISTING

A. Offer and listing details

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

Sales price	High	Low

1 st Quarter	19.60	14.61
2 nd Quarter	18.85	17.00
3 rd Quarter	18.82	14.75
4 th Quarter	20.40	12.09

July	18.82	17.10
August	18.00	14.75
September	18.28	16.10
October	20.40	16.00
November	16.91	12.09
December	15.36	13.23

2006

1 st Quarter	20.55	18.21
2 nd Quarter	20.00	17.30
3 rd Quarter	18.00	15.75
4 th Quarter	16.30	13.80

Annual

2005	24.40	9.50
2004	27.43	7.60
2003	16.65	6.50
2002	8.20	4.90
2001	6.25	0.40

As of December 31, 2007, there were 185 record holders of Common Stock, 145 of whom, holding approximately 78% of the outstanding shares of Common Stock, had registered addresses in the United States.

B.	Plan of distribution

Not applicable

C. Markets

The Company's Common Stock has been publicly held and listed for trading on the American Stock Exchange since the completion of the Company's public offering in August 1988. The symbol for the Company's Common Stock on the American Stock Exchange is "BHO." The Company also has a Secondary listing on the Oslo Stock Exchange under BHOC.

Item 10. ADDITIONAL INFORMATION

A.	Share capital

Not applicable

B.	Memorandum and articles of association

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

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

C.	Material contracts

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

D. Exchange controls

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

E. Taxation

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

F. Dividends and paying agents

Not applicable

G. Statements by experts

Not applicable

H. Documents on display

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

Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

Credit risk with respect to trade accounts receivable is limited due to the long standing relationships with significant customers and their relative financial stability. The Company performs ongoing credit evaluations of its customers’ financial condition and maintains allowances for potential credit losses.

At December 31, 2007, the Company’s five largest accounts receivable balances represented 86% of total accounts receivable. At December 31, 2006, the Company’s three largest accounts receivable balances represented 74% of total accounts receivable. The allowance for doubtful accounts was $336,000 at December 31, 2007 and $120,000 at December 31, 2006. To date, the Company’s actual losses on past due receivables have not exceeded their estimate of bad debts.

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

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

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

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

Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not Applicable

PART II

Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not Applicable

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

Not Applicable

Item 15. CONTROLS AND PROCEDURES

The management of B+H Ocean Carriers, Ltd. is responsible for establishing and maintaining adequate internal control over financial reporting. This internal control system was designed to provide reasonable assurance to the company’s management and board of directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation

B+H Ocean Carriers, Ltd. management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2007. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on our assessment, we believe that, as of December 31, 2007, the company’s internal control over financial reporting is effective based on those criteria.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in the annual report.

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

Item 16A. Audit Committee Financial Expert

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

Item 16B. Code of Ethics

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

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

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

Item 16C. Principal Accounting Fees and Services

Fees, including reimbursements for expenses, for professional services rendered by Ernst & Young LLP for the audit of the Company’s financial statements for the years ended December 31, 2007 and 2006 were $144,000 and $109,100, respectively. Ernst & Young LLP does not provide other services to the Company.

Item 16D. Exemptions from the Listing Standards for Audit Committees.

Not applicable

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

Date	# of Shares Acquired	Share Price	Total Cost

12-Mar-07	14,400	$ 17.5500	$ 252,724
15-Mar-07	111,650	17.3892	1,941,509
25-Apr-07	50,000	18.0101	900,503
10-Oct-07	134,000	17.0400	2,283,364
19-Nov-07	4,700	13.4774	63,344
20-Nov-07	3,600	13.1182	47,226
21-Nov-07	3,400	13.2499	45,050
23-Nov-07	1,500	13.7152	20,573
26-Nov-07	4,200	14.2452	59,830
27-Nov-07	4,200	14.0509	59,014
28-Nov-07	4,200	13.1794	55,353
30-Nov-07	4,200	14.0509	59,014
3-Dec-07	3,600	13.4186	48,307
4-Dec-07	40	13.5238	541
5-Dec-07	1,900	13.9520	26,509
6-Dec-07	3,600	13.9510	50,224
7-Dec-07	3,600	13.8510	49,864
10-Dec-07	3,550	14.0511	49,881
11-Dec-07	3,550	13.9229	49,426
12-Dec-07	250	13.9350	3,484
14-Dec-07	3,550	14.2111	50,449
17-Dec-07	2,729	14.2514	38,892
18-Dec-07	2,729	14.2914	39,001
19-Dec-07	2,729	14.2142	38,790
20-Dec-07	2,729	14.2514	38,892
21-Dec-07	2,729	14.2563	38,905
24-Dec-07	3,200	14.2959	45,747
24-Dec-07	300	14.0500	4,215
26-Dec-07	261	14.1544	3,694
	381,096		$ 6,364,324

Item 17.

FINANCIAL STATEMENTS

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

Item 18.

FINANCIAL STATEMENTS.

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

	Page No.
Consolidated Financial Statements:

Report of Independent Registered Public Accounting Firm	F-2

Consolidated Balance Sheets at December 31, 2007 and 2006	F-3

Consolidated Statements of Income for the Years Ended
December 31, 2007, 2006 and 2005	F-4

Consolidated Statements of Stockholders’ Equity
for the Years Ended December 31, 2007, 2006 and 2005	F-5

Consolidated Statements of Cash Flows for the Years Ended
December 31, 2007, 2006 and 2005	F-6

Notes to Consolidated Financial Statements	F-7

Item 19. EXHIBITS.

I.	Loan Agreement between Sakonnet Shipping Ltd. and The Bank of Nova Scotia Asia, Ltd. dated January 24, 2007.

II.	$25,500,000 Term Loan Facility Agreement for Boss Tankers, Ltd. provided by Bank of Scotland dated September 7, 2007.

III.	$26,700,000 Term Loan Facility Agreement between Nordea Bank Norge ASA and Cliaship Holdings Ltd. dated October 25, 2007.

The following documents were filed as Exhibits to the 2006 Annual Report on Form 20-F of B+H Ocean Carriers Ltd., incorporated herein by reference:

Loan Agreement between B+H Ocean Carriers Ltd. and Norsk Tillitsmann ASA on behalf of Bondholders in the bond issue FRN B+H Ocean Carriers Ltd. Open Bond Issue 2006/2013 dated December 6, 2006.

$8,000,000 Term Loan Facility Agreement for Seapowet Trading Ltd. provided by Nordea Bank Norge ASA dated September 5, 2006.

$202,000,000 Reducing Revolving Credit Facility Agreement between Nordea Bank Norge ASA and OBO Holdings Ltd. dated August 29, 2006.

Loan Agreement providing for a Senior Secured Term Loan of up to $12,000,000 to be made available to Sachem Shipping Ltd. and B+H Ocean Carriers Ltd. by DVB Bank America NV dated October 10, 2006.

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

B+H OCEAN CARRIERS LTD.

(Registrant)

Date: May 19, 2008

By: /s/Michael S. Hudner

Chairman of the Board, President and Chief Executive Officer

Item 18. FINANCIAL STATEMENTS.

B+H Ocean Carriers Ltd.

Index to Consolidated Financial Statements


Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2007 and 2006	F-3
Consolidated Statements of Income for the three years ended December 31, 2007	F-4
Consolidated Statements of Shareholders’ Equity for the three years ended December 31, 2007.	F-5
Consolidated Statements of Cash Flows for the three years ended December 31, 2007.	F-6
Notes to Consolidated Financial Statements	F-7

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

B+H Ocean Carriers Ltd.

We have audited the accompanying consolidated balance sheets of B+H Ocean Carriers Ltd. as of December 31, 2007 and 2006, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of B+H Ocean Carriers Ltd. at December 31, 2007 and 2006 and the consolidated results of its operations and its cash flows for the each of the three years in the period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.

Ernst & Young LLP

Providence, RI

May 19, 2008

F-2

B+H Ocean Carriers Ltd.

Consolidated Balance Sheets

December 31, 2007 and 2006

 ASSETS
   2007
     2006
  
 
 CURRENT ASSETS:
            
 
 Cash and cash equivalents
   $ 61,604,868     $ 78,391,028  
 
 Marketable equity securities
     982,300       990,105  
 
 Trade accounts receivable, less allowance for doubtful accounts
   of $336,000 and $120,000 in 2007 and 2006, respectively
     4,748,262       2,532,710  
 
 Vessels held for sale
     24,984,092          
 
 Inventories
     3,406,856       2,547,776  
 
 Prepaid expenses and other current assets
     1,682,264       1,408,999  
 
 Total current assets
     97,408,642       85,870,618  
 
                 
 
 Vessels, at cost:
                
 
 Vessels
     344,351,597       312,999,593  
 
 Less - Accumulated depreciation
     (61,888,379 )     (51,312,468 )
 
      282,463,218       261,687,125  
 
                 
 
 Investment in Nordan OBO 2 Inc.
     9,991,686       10,576,398  
 
 Investment in debt securities
     5,000,000       5,000,000  
 
 Fair value of derivative instruments
     7,325,622       1,070,559  
 
 Other assets
     3,644,306       2,617,744  
 
                 
 
 Total assets
   $ 405,833,474     $ 366,822,444  
 
                 
 
 LIABILITIES AND SHAREHOLDERS' EQUITY
                
 
 CURRENT LIABILITIES:
                
 
 Accounts payable
   $ 35,178,817     $ 11,457,925  
 
 Accrued liabilities
     3,111,242       3,877,579  
 
 Accrued interest
     1,232,131       1,090,477  
 
 Current portion of mortgage payable and unsecured debt
     36,807,601       39,765,472  
 
 Deferred income
     6,578,016       7,346,190  
 
 Other liabilities
     234,300       150,711  
 
 Total current liabilities
     83,142,107       63,688,354  
 
                 
 
 Fair value of derivative liability
     1,760,149       -  
 
 Mortgage payable
     163,494,596       118,450,000  
 
 Unsecured debt
     -       23,703,908  
 
 Floating rate bonds payable
     25,000,000       25,000,000  
 
                 
 
 Commitments and contingencies (Note 7)
     -       -  

 
                 


 
 SHAREHOLDERS' EQUITY:
                
 
Preferred stock, $0.01 par value; 20,000,000 shares authorized;
          
 
      no shares issued and outstanding
     -       -  
 
Common stock, $0.01 par value; 30,000,000 shares authorized;
          
 
      7,557,268 shares issued, 6,866,615 and 6,964,745 shares
                
 
      outstanding as of December 31, 2007 and 2006, respectively
     75,572       75,572  
 
 Paid-in capital
     93,863,094       93,861,215  
 
 Retained earnings
     50,699,429       48,680,252  
 
 Accumulated other comprehensive (loss) income
     (824,786 )     18,183  
 
 Treasury stock
     (11,376,687 )     (6,655,040 )
 
 Total shareholders' equity
     132,436,622       135,980,182  
 
 Total liabilities and shareholders' equity
   $ 405,833,474     $ 366,822,444  
 
 

 
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F- 3


 

B+H Ocean Carriers Ltd.
Consolidated Statements of Income
For the years ended December 31, 2007, 2006 and 2005

    2007
     2006
     2005
  
 
 Revenues:
                  
 
 Voyage and time charter revenues
   $ 111,835,094     $ 95,591,276     $ 71,388,561  
 
 Other revenue
     581,737       1,287,775       514,491  
 
 Total revenues
     112,416,831       96,879,051       71,903,052  
 
                         
 
 Operating expenses:
                        
 
 Voyage expenses
     27,882,163       14,792,322       6,033,470  
 
 Vessel operating expenses, drydocking and survey costs
     39,366,478       34,159,942       26,369,749  
 
 Depreciation
     15,201,220       14,958,342       10,199,359  
 
 Amortization of deferred charges
     6,341,330       1,854,000       1,718,000  
 
 Gain on sale of vessels
     -       -       (828,115 )
 
 General and administrative:
                        
 
      Management fees to related party
     2,252,608       1,223,496       898,490  
 
      Consulting and professional fees, and other expenses
     5,096,763       4,030,827       2,899,123  
 
 Total operating expenses
     96,140,562       71,018,929       47,290,076  
 
                         
 
 Income from vessel operations
     16,276,269       25,860,122       24,612,976  
 
                         
 
 Other income (expense):
                        
 
 Interest expense
     (12,740,894 )     (10,676,048 )     (5,604,637 )
 
 Interest income
     3,121,273       2,377,298       1,221,010  
 
 Income from investment in Nordan OBO 2 Inc.
     790,288       1,262,846       -  
 
 Loss on fair value of derivatives
     (4,670,192 )     -       -  
 
 Other losses
     (757,567 )     (49,905 )     (130,704 )
 
 Total other expenses, net
     (14,257,092 )     (7,085,809 )     (4,514,331 )
 
                         
 
 Net income
   $ 2,019,177     $ 18,774,313     $ 20,098,645  
 
                         
 
 Basic earnings per common share
   $ 0.29     $ 2.67     $ 3.44  
 
                         
 
 Diluted earnings per common share
   $ 0.29     $ 2.59     $ 3.30  
 
                         
 
 Weighted average number of common shares outstanding:
                        
 
 Basic
     6,994,843       7,027,343       5,844,301  
 
 Diluted
     7,031,210       7,237,453       6,092,522

The accompanying notes are an integral part of these consolidated financial statements.
 
F- 4

B+H Ocean Carriers Ltd.
Consolidated Statements of Shareholders' Equity

                            Accumulated Other
  
 
    Common
     Treasury
     Paid-in
     Retained
     Comprehensive
        
 
    Stock
     Stock
     Capital
     Earnings
     Income
     Total
  
 
                                     
 
 Balance, December 31, 2004
     43,140       (3,025,466 )     37,538,669       9,807,294       -       44,363,637  
 
                                                 
 
 Net income
     -       -       -       20,098,645       -       20,098,645  
 
 Common stock issued (3)
     32,432       -       56,643,497               -       56,675,929  
 
 8,065 Treasury shares issued (1)
     -       48,240       53,382       -       -       101,622  
 
 61,540 Treasury shares issued (2)
     -       254,778       (193,238 )     -       -       61,540  
 
 70,170 Treasury shares acquired (4)
     -       (1,247,259 )     -       -       -       (1,247,259 )
 
 Balance, December 31, 2005
     75,572       (3,969,707 )     94,042,310       29,905,939       -       120,054,114  
 
                                                 
 
 Net income
     -       -       -       18,774,313       -       18,774,313  
 
 Change in fair value of cash flow hedge                                       18,183         18,183   
 
 Comprehensive income
     -       -       -       18,774,313       18,183       18,792,496  
 
 Common stock issued (3)
     -       -       (234,649 )     -       -       (234,649 )
 
 13,855 Treasury shares issued (1)
     -       93,960       165,133       -       -       259,093  
 
 30,770 Treasury shares issued (2)
     -       142,349       (111,579 )     -       -       30,770  
 
 161,800 Treasury shares acquired (4)
     -       (2,921,642 )     -       -       -       (2,921,642 )
 
 Balance, December 31, 2006
     75,572       (6,655,040 )     93,861,215       48,680,252       18,183       135,980,182  
 
                                                 
 
 Net income
     -       -       -       2,019,177       -       2,019,177  
 
 Change in fair value of cash flow hedge
     -       -       -       -       (842,969 )     (842,969 )
 
 Comprehensive income
                             2,019,177       (842,969 )     1,176,208  
 
 Common stock issued (3)
     -               (45,646 )     -       -       (45,646 )
 
 Treasury shares issued (1)
     -       16,878       16,634       -       -       33,512  
 
 Treasury shares issued (2)
     -       1,088,239       (887,549 )     -       -       200,690  
 
 Treasury shares issued (5)
     -       537,560       918,440       -       -       1,456,000  
 
 Treasury shares acquired (4)
     -       (6,364,324 )     -       -       -       (6,364,324 )
 
 Balance, December 31, 2007
     75,572       (11,376,687 )     93,863,094       50,699,429       (824,786 )     132,436,622

Shares outstanding at December 31, 2007, 2006 and 2005 totaled 6,866,615, 6,964,745 and 7,081,920, respectively.

(1)  
 Treasury shares issued per 1998 Agreement, see NOTE 5.

(2)  
 Pursuant to a program to repurchase up to 600,000 shares for reissuance to B+H Management Ltd. (“BHM”) when options are exercised. See NOTE 5.

(3)  
 Expenses related to private placement of shares in 2005, see NOTE 3.

(4)  
 Pursuant to a program to repurchase up to 10% of the Company’s shares, which was authorized by the Board of Directors in October 2005.

(5)  
 Shares granted to BHM and to the Board of Directors.

The accompanying notes are an integral part of these consolidated financial statements.
 
F- 5

B+H Ocean Carriers Ltd.
Consolidated Statements of Cash Flows
For the years ended December 31, 2007, 2006 and 2005



    2007
     2006
     2005
  
 
 CASH FLOWS FROM OPERATING ACTIVITIES:
                  
 
 Net income
   $ 2,019,177     $ 18,774,313     $ 20,098,645  
 
Adjustments to reconcile net income to net cash provided by operating activities:
                  
 
 Vessel depreciation
     15,201,220       14,958,342       10,199,748  
 
 Amortization of deferred charges
     6,341,330       1,854,000       1,717,611  
 
 Gain on sale of vessels
     -       -       (828,115 )
 
 Loss on value of interest rate swaps
     1,250,395       -       -  
 
 Loss on value of put contracts
     3,419,797                  
 
 Increase (reduction) in allowance for uncollectible accounts
     216,000       (109,000 )     92,000  
 
 Other losses, net
     128,707       49,905       130,704  
 
 Compensation expense recognized under stock awards
     1,489,512       -       -  
 
 Changes in assets and liabilities:
                        
 
 (Increase) decrease  in trade accounts receivable
     (2,431,552 )     (165,138 )     3,194,932  
 
 Increase in inventories
     (859,080 )     (1,692,690 )     (84,705 )
 
 Increase in prepaid expenses and other current assets
     (341,350 )     (198,084 )     (444,088 )
 
 Increase (decrease) in accounts payable
     23,720,892       7,432,006       (1,305,109 )
 
 (Decrease) increase in accrued liabilities
     (766,337 )     2,129,670       (550,915 )
 
 Increase in accrued interest
     141,654       635,857       186,778  
 
 (Decrease) increase in deferred income
     (768,174 )     1,930,774       4,116,002  
 
 Increase (decrease) in other liabilities
     83,589       90,875       (16,250 )
 
 Payments for special surveys
     (7,984,217 )     (7,100,744 )     (2,084,866 )
 
 Total adjustments
     38,842,386       19,815,773       14,323,727  
 
 Net cash provided by operating activities
     40,861,563       38,590,086       34,422,372  
 
                         
 
 CASH FLOWS FROM INVESTING ACTIVITIES:
                        
 
 Purchase and investment in vessels
     (19,600,000 )     (16,190,000 )     (167,750,000 )
 
 Proceeds from sale of vessels
     -       -       7,918,810  
 
 Investment in conversion to double hull vessels
     (39,107,941 )     (7,881,467 )     -  
 
 Investment in Nordan OBO II Inc.
     (790,288 )     (14,326,398 )     -  
 
 Dividends from Nordan OBO II Inc.
     1,375,000       3,750,000       -  
 
 Investment in put option contracts
     (10,008,075 )     (1,055,813 )     -  
 
 Purchase of debt securities
     -       (5,000,000 )     -  
 
 Purchase of equity securities
     (163,455 )     (469,006 )     (500,000 )
 
 Net cash used in investing activities
     (68,294,759 )     (41,172,684 )     (160,331,190 )
 
                         
 
 CASH FLOWS FROM FINANCING ACTIVITIES:
                        
 
 Payments for debt financing costs
     (1,526,501 )     (1,481,505 )     (1,318,385 )
 
 Issuance of common stock, net of issuance costs
     (45,646 )     (234,649 )     56,675,929  
 
 Purchase of treasury stock
     (6,364,324 )     (2,921,642 )     (1,247,259 )
 
 Issuance of treasury shares
     200,690       289,863       163,162  
 
 Proceeds from mortgage financing
     88,700,000       22,263,000       145,000,000  
 
 Proceeds from issuance of floating rate bonds
     -       25,000,000       -  
 
 Payments of unsecured debt
     (31,402,960 )     (1,356,092 )     -  
 
 Payments of mortgage principal
     (38,914,223 )     (21,413,000 )     (24,600,000 )
 
 Net cash provided by financing activities
     10,647,036       20,145,975       174,673,447  
 
                         
 
 Net (decrease) increase in cash and cash equivalents
     (16,786,160 )     17,563,377       48,764,629  
 
 Cash and cash equivalents, beginning of year
     78,391,028       60,827,651       12,063,022  
 
 Cash and cash equivalents, end of year
   $ 61,604,868     $ 78,391,028     $ 60,827,651  
 
 

 
Supplemental schedule of noncash financing and investing transactions (NOTE 9).

The accompanying notes are an integral part of these consolidated financial statements.
 
F- 6
 
  
 
  

 
 
  
 
 

NOTE 1-ORGANIZATION

B+H Ocean Carriers Ltd. (the "Company"), a Liberian Corporation, was incorporated in April 1988 and was initially capitalized on June 27, 1988. The Company is engaged in the business of acquiring, investing in, owning, 
operating and selling product tankers and bulk carriers. In August 1988, the Company completed a public offering of 4,000,000 shares of its common stock. In May 2005, the Company made a private offering of 3,243,243 shares of its 
common stock. See NOTE 3.

As of December 31, 2007, the Company owned and operated seven medium range and two panamax product tankers and six OBO (Ore/Bulk/Oil) combination carriers. The Company also owns a 50% interest in the disponent 
owner of a combination carrier through its interest in Nordan OBO II (“Nordan”), which was acquired in March 2006. The Company accounts for its interest in Nordan  under  the equity method. As of December 31, 2006, the Company 
owned and operated six product tankers, two panamax product tankers and six combination carriers.

NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of accounting:

The accompanying Consolidated Financial Statements are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. A summary of significant accounting 
policies follows. 
Principles of consolidation:

The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries, including Cliaship Holdings Ltd. (“Cliaship”), OBO Holdings Ltd. (“OBO Holdings”), Product Transport Corporation Ltd. (“Protrans”), Boss Tankers, Ltd. (Boss), and Seasak Holdings Ltd. (“Seasak”). Additionally, the 2007 and 2006 consolidated financial statements reflect the Company’s equity investment and related earnings associated with Nordan. All significant intercompany transactions and accounts have been eliminated in consolidation.

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

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

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

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

Basic and diluted net income per common share:

Basic net income per common share is computed by dividing the net income for the year by the weighted average number of common shares outstanding in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 128 (“SFAS No. 128”), Earnings per Share. Diluted earnings per share (“EPS”) is calculated by dividing net income for the year by the weighted average number of common shares, increased by potentially dilutive securities. Diluted EPS reflects the net effect on shares outstanding, using the treasury stock method, of the stock options granted to BHM in 2000 and the treasury shares held to satisfy the 1998 agreement discussed in NOTE 5.

	2007	2006	2005

Weighted average number of shares outstanding - basic	6,994,843	7,027,343	5,844,301
Net effect of outstanding stock options	36,367	207,834	232,090
Stock compensation shares not issued	-	2,276	16,131

Weighted average number of shares outstanding - diluted	7,031,210	7,237,453	6,092,522

Cash and cash equivalents:

Cash and cash equivalents include cash, certain money market accounts and overnight deposits with a maturity of 90 days or less when acquired.

Marketable Securities :

Marketable equity securities are recorded at fair value determined on the basis of quoted market price. Such investments are classified as trading securities in accordance with SFAS No. 115, Accounting For Investments In Debt And Equity Securities (“SFAS No. 115”). Changes in the fair value of such investments are recorded in other income in the Consolidated Statements of Income.

Marketable debt securities are recorded at cost which approximates fair value and are classified as trading securities in accordance with SFAS No. 115.

Fair value of financial instruments:

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

The carrying amounts reported in the accompanying Consolidated Balance Sheets for cash and cash equivalents and accounts receivable approximate their fair values due to the current maturities of such instruments.

The carrying amounts reported in the accompanying Consolidated Balance Sheets for short-term debt approximates its fair value due to the current maturity of such instruments coupled with interest at variable rates that are periodically adjusted to reflect changes in overall market rates. The carrying amount of the Company’s variable rate long-term debt approximates fair value.

Vessels, capital improvements and depreciation:

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

Repairs and maintenance:

Impairment of long-lived assets:

Segment Reporting:

The Company has determined that it operates in one reportable segment, the international transport of dry bulk and liquid cargo.

Inventories:

Inventories consist of engine and machinery lubricants and bunkers (fuel) required for the operation and maintenance of each vessel. Inventories are valued at cost, using the first-in, first-out method. Expenditures on other consumables are charged against income when incurred.

Taxation:

The Company is not subject to corporate income taxes on its profits in Liberia because its income is derived from non-Liberian sources. The Company is not subject to corporate income tax in other jurisdictions.

Derivatives and hedging activities:

Derivatives designated as cash flow hedges pursuant to SFAS No. 133 are recorded on the balance sheet at fair value with the corresponding changes in fair value recorded as a component of accumulated other comprehensive income (equity). At December 31, 2007, the Company is party to two interest rate swap agreements that qualify as cash flow hedges; the aggregate fair value of these cash flow hedges is a liability of $0.8 million at December 31, 2007 and an asset of $18,183 at December 31, 2006. See NOTE 7-BONDS PAYABLE.

Additionally, at December 31, 2007, the Company is party to put option agreements which are designed to mitigate the risk associated with changes in charter rates. These put option agreements, which were entered into during 2007 and 2006, do not qualify for hedge accounting under SFAS No. 133; and the changes in their fair value is therefore recorded in operations. At December 31, 2007 and 2006, the aggregate fair value of these non-qualifying put options is $7.3 million and $0.7 million, respectively and is reflected within Fair Value of Derivative Assets on the accompanying balance sheet. During the years ended December 31, 2007 and 2006, the Company recorded $3.4 million and $0.3 million of expense in the consolidated statements of operations related to the change in fair value of these instruments.

The Company is party to foreign currency exchange contracts which are designed to mitigate the risk associated with changes in foreign currency exchange rates. These contracts, which were entered into during 2007, do not qualify for hedge accounting under SFAS No. 133; and the changes in their fair value is therefore recorded in operations. At December 31, 2007, the aggregate fair value of these non-qualifying foreign exchange contracts is $30,000 and is reflected within Fair Value of Derivative Assets on the accompanying balance sheet and statements of income.

Use of estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions.

Term loan issuance costs:

Term loan issuance costs are amortized over the life of the obligation using the straight-line method, which approximates the interest method.

Recent accounting pronouncements:

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for the Company beginning January 1, 2008. The Company does not expect the adoption of SFAS No. 159 to have a material impact on its consolidated balance sheets and results of operations.

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), “ Business Combinations,” (“SFAS No. 141R”), which makes certain modifications to the accounting for business combinations. Theses changes include (1) the requirement for an acquirer to recognize all assets acquired and liabilities assumed at their fair value on the acquisition date; (2) the requirement for an acquirer to recognize assets or liabilities arising from contingencies at fair value as of that acquisition date; and (3) the requirement that an acquirer expense all acquisition related costs. This Statement is required to be applied prospectively to business combinations for which the acquisition date is on or after the beginning of fiscal 2009. The Company does not expect the adoption of SFAS No. 141R to have a material impact on its consolidated balance sheets and results of operations.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements”, (“SFAS No. 160”) which requires noncontrolling (minority) interests in subsidiaries to be initially measured at fair value and presented as a separate component of shareholders’ equity. Current practice is to present noncontrolling interests as a liability or other item outside of equity. This Statement is required to be applied prospectively after the beginning of fiscal 2009, although the presentation and disclosure requirements are required to be applied on a retrospective basis. The Company does not expect the adoption of SFAS No. 160 to have a material impact on its consolidated balance sheets or results of operations.

NOTE 3-ACQUISITIONS AND OTHER SIGNIFICANT TRANSACTIONS:

On May 25, 2005, the Company executed a private placement of 3,243,243 shares of Common Stock of the Company at a price of $18.50 per share, for aggregate gross proceeds of approximately $60 million. The newly issued shares traded over the counter in Norway until the Company obtained a listing on the Oslo Stock Exchange on April 12, 2006. The proceeds from the private placement have been and are expected to continue to be used for the acquisition of vessels, refinancing of debt and general working capital purposes.

Vessel acquisitions and related amendments of loan facility:

On October 25, 2007 the Company entered into an amended and restated $26.7 million floating rate loan facility (the “amended loan facility”). The amended loan facility made available an additional $19.6 million for the purpose of acquiring the M/T CAPT. THOMAS J HUDNER and changed the payment terms for the $7.1 million balance of the loan (“Tranche 1”).

In January 2006, the Company, through a wholly-owned subsidiary, acquired a 1993-built, 83,000 DWT Combination Carrier for $36.4 million through an existing lease structure. The acquisition also included the continuation of a five-year time charter which commenced in October 2005. The Company made a down payment of $3.6 million and a entered into an agreement to recorded a corresponding liability

Also in January 2006, the Company, through a wholly-owned subsidiary, acquired a 50% shareholding in Nordan which is the disponent owner of a 1992-built 75,000 DWT combination carrier, effected through a lease structure. The terms of the transaction were based on a vessel value of $30.4 million. The vessel was fixed on a three-year charter commencing in February 2006. The charter includes a 50% profit sharing arrangement above a guaranteed minimum daily rate. On September 5, 2006, the Company, entered into an $8 million term loan facility agreement to finance a portion of the purchase price. See NOTE 6-MORTGAGE PAYABLE

On February 4, 2005, the Company, through a wholly-owned subsidiary, acquired three 83,000 DWT combination tanker/bulk carriers built in 1993 and 1994, for a total of $110.2 million. Two of the vessels are time chartered for five years at $26,600, $24,600, $23,600, $22,600 and $20,600 per day for the first through fifth years, respectively. The third vessel is time chartered for five years at $26,000, $24,000, $23,000, $22,000 and $20,000, respectively, for years one through five. The Company has a profit sharing arrangement with the charterers which entitles the Company to 35% of the charterer’s profits from this vessel for years 2 through 5. In conjunction with the acquisition, the Company entered into a floating rate loan facility totaling $102 million. This loan facility was refinanced on August 29, 2006, when the Company entered into a $202.0 million floating rate loan facility. See NOTE 6-MORTGAGE PAYABLE

On June 15, 2005, the Company, through a wholly-owned subsidiary, acquired a 74,800 DWT combination carrier built in 1992 for $33.25 million. The vessel is time chartered for three years at $23,500 per day. On November 8, 2005, the Company completed an additional drawdown on its floating rate facility to finance a portion of the purchase price. See NOTE 6-MORTGAGE PAYABLE.

On August 19, 2005, the Company, through a wholly-owned subsidiary, acquired a 68,500 DWT Panamax product tanker built in 1991 for $24.3 million. The vessel is time chartered for three years at $23,500 per day commencing January 2006. On November 8, 2005, the Company completed an additional drawdown on its floating rate facility to finance a portion of the purchase price. See NOTE 6-MORTGAGE PAYABLE.

Vessel disposals:

NOTE 4-OTHER ASSETS:

Other assets is comprised of the following:

	2007	2006

Debt financing and related fees, net	$ 3,367,728	$ 2,470,631
Other assets	276,578	147,113
Total other assets	$ 3,644,306	$ 2,617,744

Mortgage commitment and related fees incurred in connection with the Company’s loan facilities are being amortized over the terms of the respective loans.

NOTE 5-RELATED PARTY TRANSACTIONS:

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

Currently, the Company pays BHM a monthly rate of $6,476 per vessel for general, administrative and accounting services, which may be adjusted annually for any increases in the Consumer Price Index. During the years ended December 31, 2007, 2006 and 2005, the Company paid BHM fees of approximately $1,126,000, $970,000 and $797,000, respectively, for these services. These fees are included in management fees to related party in the Consolidated Statements of Income. The total fees vary due to the change in the number of fee months resulting from changes in the number of vessels owned during each period.

The Company also pays BHM a monthly rate of $13,296 per MR product tanker and $16,099 per Panamax product tanker or OBO for technical management services, which may be adjusted annually for any increases in the Consumer Price Index. Vessel technical managers coordinate all technical aspects of day to day vessel operations including physical maintenance, provisioning and crewing of the vessels. During the years ended December 31, 2007, 2006 and 2005, the Company paid BHM fees of approximately $2,539,000, $2,360,000 and $2,040,000, respectively, for these services. Technical management fees are included in vessel operating expenses in the Consolidated Statements of Operations. The total fees have increased due to the vessel acquisitions in 2007, 2006 and 2005.

The Company engages BHM to provide commercial management services at a monthly rate of $10,545 per vessel, which may be adjusted annually for any increases in the Consumer Price Index. BHM obtains support services from Protrans (Singapore) Pte. Ltd., which is owned by BHM. Commercial managers provide marketing and operations services. During the years ended December 31, 2007, 2006 and 2005, the Company paid BHM fees of approximately $1,835,000, $1,558,000 and $1,238,000, respectively, for these services. Commercial management fees are included in voyage expenses in the Consolidated Statements of Income. The total fees have increased due to the vessel acquisitions in 2007, 2006 and 2005.

During 1998, the Company’s Board of Directors approved an agreement with BHM whereby up to 110,022 shares of common stock of the Company will be issued to BHM for distribution to individual members of management, contingent upon certain performance criteria. The Company will issue the shares of common stock to BHM at such time as the specific requirements of the agreement are met. During 2007, 2,275 shares, bringing the total to 64,522 shares, have been issued from treasury stock where these shares were held for this purpose. Compensation cost of $34,000, $259,000 and $102,000, based on the market price of the shares at the date of issue, was included as management fees to related parties in the Consolidated Statement of Income for the years ended December 31, 2007, 2006 and 2005 respectively.

Effective December 31, 2000, the Company granted 600,000 stock options, with a value of $78,000 to BHM as payment for services in connection with the acquisition of bonds originally issued by the Company. The exercise price is the fair market value at the date of grant and the options are exercisable over a ten-year period. At December 31, 2007 all of the options have been exercised.

Information regarding these stock options is as follows:

	Shares	Option Price

Outstanding at January 1, 2007	200,690	$ 1.00
Granted	-	-
Exercised	200,690	$ 1.00
Canceled	-	-
Outstanding at December 31, 2007	-

For the policy year ending February 20 2008, the Company placed the following insurance with Northampton Assurance Ltd (“NAL”):

·	65% of its Hull & Machinery (“H&M”) insurance for claims in excess of minimum $120/125,000 each incident, which insurance NAL fully reinsured.

·	70% of its H&M insurance on 6 vessels of up to $50,000 in excess of $120/125,000 each incident; and

·	70% of its H&M insurance on 1 vessel up to $100,000 in excess of $120/125,000 each incident.

NOTE 6-MORTGAGE PAYABLE:

The loan is payable in four quarterly installments of $825,000 beginning on April 30, 2007, twelve quarterly installments of $1,000,000 and sixteen quarterly installments of $750,000.

Interest on the facility is equal to LIBOR plus 0.875%. Expenses associated with the loan of $395,000 were capitalized and will be amortized over the 8 year term of the loan.

The amended loan facility is apportioned into two tranches, Tranche A being payable in full on April 30, 2009. Tranche B is payable in thirteen quarterly installments of $812,500 beginning on July 30, 2009 and a balloon payment of $9,037,500 due on October 30, 2012. Interest on the facility is equal to LIBOR plus 1.0%.

Expenses associated with the amended loan facility amounted to approximately $351,000, which are capitalized and are being amortized over the five-year period of the loan.

The facility contains certain restrictive covenants on the Company and requires mandatory prepayment in the event of the total loss or sale of a vessel and a loan to value ratio of 120%. The facility requires minimum value adjusted equity of $50 million, a minimum value adjusted equity ratio (as defined) of 30% and an EBITDA to fixed charges ratio of at least 115% if 75% of the vessels are on fixed charters of twelve months or more, 120% if 50% of the vessels are on fixed charters of twelve months or more and 125% at all times otherwise. The Company is also required to maintain liquid assets, as defined, in an amount equal to the greater of $15.0 million or 6% of the aggregate indebtedness of the Company on a consolidated basis, positive working capital and adequate insurance coverage. At December 31, 2007, the Company was in compliance with these covenants.

On October 18, 2005 the Company, through certain wholly-owned subsidiaries entered into a $138,100,000 Reducing Revolving and Term Loan Facilities Agreement which amended the agreement entered into on February 23, 2005. The amendment made available an additional $43.0 million for the purpose of acquiring the OBO ROGER M JONES and the M/T SAGAMORE.

On August 29, 2006 the Company, through certain wholly-owned subsidiaries entered into a $202,000,000 Reducing Revolving and Term Loan Facilities Agreement which amended the agreement entered into on October 18, 2005.

The facility is payable in ten quarterly installments of $5,450,000 beginning on December 15, 2006, ten quarterly installments of $5,100,000 beginning on June 15, 2009 and a balloon payment of $21,500,000 due on December 15, 2011.

Interest on the facility is equal to LIBOR plus 1.0%. Expenses associated with the incremental borrowing on the loan of $670,000 were capitalized and will be amortized over the 5 year term of the loan.

The facility contains certain restrictive covenants and mandatory prepayment in the event of the total loss or sale of a vessel. It also requires a minimum value adjusted equity of $50 million, a minimum value adjusted equity ratio (as defined) of 30% and an EBITDA to fixed charges ratio of at least 125%. The Company is also required to maintain liquid assets, as defined, in an amount equal to the greater of $15.0 million or 6% of the aggregate indebtedness of the Company on a consolidated basis, positive working capital and adequate insurance coverage. At December 31, 2006, the Company was in compliance with these covenants.

On September 5, 2006, the Company, through a wholly-owned subsidiary, entered into an $8 million term loan facility to finance the acquisition of its 50% interest in an entity which is the disponent owner of the OBO SEAPOWET through a bareboat charter party.

The facility contains certain restrictive covenants on the Company and requires mandatory prepayment in the event of the total loss or sale of a vessel. The facility requires a minimum value adjusted equity of $50 million, a minimum value adjusted equity ratio (as defined) of 30% and an EBITDA to fixed charges ratio of at least 125%. The Company is also required to maintain liquid assets, as defined, in an amount equal to the greater of $15.0 million or 6% of the aggregate indebtedness of the Company on a consolidated basis, positive working capital and adequate insurance coverage. At December 31, 2007, the Company was in compliance with these covenants.

The loan is repayable in sixteen quarterly installments of $500,000, beginning on December 7, 2006. Interest on the facility is equal to LIBOR plus 1.75%. Expenses associated with the loan of $221,000 were capitalized and will be amortized over the 4 year term of the loan.

On October 10, 2006, the Company, through a wholly-owned subsidiary, entered into a $12 million term loan facility to finance the acquisition of the M/T SACHEM.

The facility contains certain restrictive covenants on the Company, which among other things, restrict the payment of dividends and restrict leverage, investment and capital expenditures without consent of the lender. In addition, the agreement requires mandatory prepayment in the event of the total loss or sale of a vessel. The facility requires a minimum value adjusted equity of $50 million, a minimum value adjusted equity ratio (as defined) of 30% and an EBITDA to fixed charges ratio of at least 125%. The Company is also required to maintain liquid assets, as defined, in an amount equal to the greater of $15.0 million or 6% of the aggregate indebtedness of the Company on a consolidated basis, positive working capital and adequate insurance coverage. At December 31, 2007, the Company was in compliance with these covenants.

The loan is repayable in sixteen quarterly installments of $550,000, beginning on January 17, 2007 and a balloon payment of $3,200,000 due on January 17, 2011. Interest on the facility is currently equal to LIBOR plus 1.25%. At such time as the vessel is fixed on a minimum two year charter at a sufficient rate (determined by the Administrative Agent), the applicable margin is reduced to 1.0% for the remainder of the term of such employment. Expenses associated with the loan of $135,000 were capitalized and will be amortized over the 4 year term of the loan. On January 17, 2008 the lender agreed to postpone two principal payments and add the total to the balloon payment due on January 17, 2011.

As of December 31, 2007, the aggregate maturities, including an estimate of the interest payable are as follows:

	Principal	Interest 1	Total

2008	$ 36,808,000	$ 5,850,000	$ 42,658,000
2009	46,155,000	3,985,000	50,140,000
2010	38,390,000	2,843,000	41,233,000
2011	55,104,000	1,801,000	56,905,000
2012	17,167,000	689,000	17,856,000
Thereafter	6,678,000	344,000	7,022,000
	$ 200,302,000	$ 15,512,000	$ 215,814,000

NOTE 7-BONDS PAYABLE:

On December 12, 2006, the Company issued $25 million of unsecured bonds of which the Company subscribed a total of $5 million. The net proceeds of the bonds will be used for general corporate purposes, including but not limited to: (i) product tanker conversion project (six vessels), (ii) conversion of the M/T SACHEM and M/T SAGAMORE to full double hull, (iii) acquisition of additional OBOs, (iv) acquisition of further product tankers, (v) continuance of share buy-back, and (vi) balance of equity payment on the OBO SAKONNET.

Interest on the bonds is equal to LIBOR plus 4%, payable quarterly in arrears. The bonds are in denominations of $100,000 each and rank pari passu. The term of the bond issue is seven years, payable in full on the maturity date. In order to mitigate the risk of interest rate volatility associated with the variable interest rate on these bonds, the Company entered into an interest rate swap agreement to hedge $10 million of these bonds. Under the term of the interest rate swap agreement, which has similar attributes to the debt, the interest rate on the $10 million is converted from a variable rate to a fixed rate of 4.995%. The Company has designated this interest rate swap agreement as a cash flow hedge pursuant to SFAS No. 133. At December 31, 2007 and 2006, the fair value of this interest rate swap was a liability of $355,948 and an asset of $18,183, respectively.

All or a portion of the bonds may be redeemed at any time between June 2010 and June 2011 at 104.5%, between June 2011 and June 2012 at 103.25%, between June 2012 and June 2013 at 102.25% and between June 2013 and the maturity date at 101.00%.

The bond facility contains certain restrictive covenants which restrict the payment of dividends. The facility requires a minimum value adjusted equity ratio (as defined) of 25%. At December 31, 2007, the Company was in compliance with these covenants.

NOTE 8-COMMITMENTS AND CONTINGENCIES:

As discussed in NOTE 5, the Company’s Board of Directors approved an agreement with BHM whereby up to 110,022 shares of common stock of the Company will be issued to BHM for distribution to individual members of management, contingent upon certain performance criteria. The Company will issue the shares of common stock to BHM at such time as the specific requirements of the agreement are met. During 2007, an additional 2,275 shares, bringing the total to 64,522 shares, have been issued from treasury stock being held for this purpose.

The Company has entered into contracts for the conversion of two single hull MR Product Tankers and one Panamax product tanker to bulk carriers. Carrying out such conversions completely eliminates the present regulatory phaseout dates applicable to these vessels. The Company expects to complete all three conversions in 2008.

NOTE 9-SUPPLEMENTAL CASH FLOW INFORMATION:

The Company re-issued 2,275 shares from treasury stock in 2007, 13,855 shares in 2006 and 8,065 in 2005 in accordance with the agreement discussed in NOTE 5. Compensation cost of $34,000, $259,000 and $102,000 based on the market price of the shares at the date of issue was included as management fees to related parties in the accompanying Consolidated Statements of Income during the years ended December 31, 2007, 2006 and 2005, respectively. The excess of the market value of the shares at the date of issuance over the cost of the shares to the Company was charged to paid in capital.

The Company re-issued 200,690 shares from treasury in 2007 in accordance with the option plan described in NOTE 5. The Company re-issued 20,000 shares from treasury as compensation to BHM and 2,500 shares from treasury for each director. Compensation cost of $1,092,000 and $364,000 based on the market price of the shares at the date of issue was included as management fees and general and administrative expenses, respectively, in the accompanying Consolidated Statements of Operations during 2007.

Cash paid for interest was $12,256,000, $9,971,000 and $5,347,000 during the years ended December 31, 2007, 2006 and 2005, respectively.

NOTE 10-SUBSEQUENT EVENTS:

On February 26, 2008, the Company, through a wholly-owned subsidiary, sold the M/T ACUSHNET for $7.8 million. The net book value of the vessel of approximately $4.6 million was classified as held for sale at December 31, 2007.

On March 27, 2008, the Company, through a wholly-owned subsidiary, sold the OBO SACHUEST for $31.3 million. The net book value of the vessel of approximately $20.4 millionwas classified as held for sale at December 31, 2007.

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ASSETS	2007			2006
CURRENT ASSETS:
Cash and cash equivalents	$	61,604,868		$	78,391,028
Marketable equity securities		982,300			990,105
Trade accounts receivable, less allowance for doubtful accounts of $336,000 and $120,000 in 2007 and 2006, respectively		4,748,262			2,532,710
Vessels held for sale		24,984,092
Inventories		3,406,856			2,547,776
Prepaid expenses and other current assets		1,682,264			1,408,999
Total current assets		97,408,642			85,870,618

Vessels, at cost:
Vessels		344,351,597			312,999,593
Less - Accumulated depreciation		(61,888,379	)		(51,312,468	)
		282,463,218			261,687,125

Investment in Nordan OBO 2 Inc.		9,991,686			10,576,398
Investment in debt securities		5,000,000			5,000,000
Fair value of derivative instruments		7,325,622			1,070,559
Other assets		3,644,306			2,617,744

Total assets	$	405,833,474		$	366,822,444

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	35,178,817		$	11,457,925
Accrued liabilities		3,111,242			3,877,579
Accrued interest		1,232,131			1,090,477
Current portion of mortgage payable and unsecured debt		36,807,601			39,765,472
Deferred income		6,578,016			7,346,190
Other liabilities		234,300			150,711
Total current liabilities		83,142,107			63,688,354

Fair value of derivative liability		1,760,149			-
Mortgage payable		163,494,596			118,450,000
Unsecured debt		-			23,703,908
Floating rate bonds payable		25,000,000			25,000,000

Commitments and contingencies (Note 7)		-			-

SHAREHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 20,000,000 shares authorized;
no shares issued and outstanding		-			-
Common stock, $0.01 par value; 30,000,000 shares authorized;
7,557,268 shares issued, 6,866,615 and 6,964,745 shares
outstanding as of December 31, 2007 and 2006, respectively		75,572			75,572
Paid-in capital		93,863,094			93,861,215
Retained earnings		50,699,429			48,680,252
Accumulated other comprehensive (loss) income		(824,786	)		18,183
Treasury stock		(11,376,687	)		(6,655,040	)
Total shareholders' equity		132,436,622			135,980,182
Total liabilities and shareholders' equity	$	405,833,474		$	366,822,444

											Accumulated Other
	Common		Treasury			Paid-in			Retained		Comprehensive
	Stock		Stock			Capital			Earnings		Income			Total

Balance, December 31, 2004		43,140		(3,025,466	)		37,538,669			9,807,294		-			44,363,637

Net income		-		-			-			20,098,645		-			20,098,645
Common stock issued (3)		32,432		-			56,643,497					-			56,675,929
8,065 Treasury shares issued (1)		-		48,240			53,382			-		-			101,622
61,540 Treasury shares issued (2)		-		254,778			(193,238	)		-		-			61,540
70,170 Treasury shares acquired (4)		-		(1,247,259	)		-			-		-			(1,247,259	)
Balance, December 31, 2005		75,572		(3,969,707	)		94,042,310			29,905,939		-			120,054,114

Net income		-		-			-			18,774,313		-			18,774,313
Change in fair value of cash flow hedge												18,183			18,183
Comprehensive income		-		-			-			18,774,313		18,183			18,792,496
Common stock issued (3)		-		-			(234,649	)		-		-			(234,649	)
13,855 Treasury shares issued (1)		-		93,960			165,133			-		-			259,093
30,770 Treasury shares issued (2)		-		142,349			(111,579	)		-		-			30,770
161,800 Treasury shares acquired (4)		-		(2,921,642	)		-			-		-			(2,921,642	)
Balance, December 31, 2006		75,572		(6,655,040	)		93,861,215			48,680,252		18,183			135,980,182

Net income		-		-			-			2,019,177		-			2,019,177
Change in fair value of cash flow hedge		-		-			-			-		(842,969	)		(842,969	)
Comprehensive income										2,019,177		(842,969	)		1,176,208
Common stock issued (3)		-					(45,646	)		-		-			(45,646	)
Treasury shares issued (1)		-		16,878			16,634			-		-			33,512
Treasury shares issued (2)		-		1,088,239			(887,549	)		-		-			200,690
Treasury shares issued (5)		-		537,560			918,440			-		-			1,456,000
Treasury shares acquired (4)		-		(6,364,324	)		-			-		-			(6,364,324	)
Balance, December 31, 2007		75,572		(11,376,687	)		93,863,094			50,699,429		(824,786	)		132,436,622

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