The structure of the near surface waters in the Southern Ocean, poleward of the Antarctic Polar Front but away from continental margins, is investigated with a three-dimensional time-dependent numerical model which resolves the annual sea ice cycle. The growth and decay of the ice field is predicted, using one of Semtner's (1976) thermodynamic ice models, in terms of specified atmospheric data and computed thermohaline characteristics of the ocean layers. The ice field is found to be sensitive to the lateral advection of heat by the oceanic circulation as well as vertical heat transports due to deep winter convection. The model treats the temperature minimum layer in the Southern Ocean as the remnant of a deep winter mixed layer which becomes capped by surface heating and precipitation in summer. The predicted thermohaline characteristics of the temperature minimum layer and the surface mixed layer are in good agreement with observations. Finally, the annual air-sea heat exchange predicted by the model is discussed. The model's predicted area averaged heat loss experienced by the ocean south of the Atlantic Polar Front is much smaller than was previously estimated. This is attributed to errors in the southern region of the model domain. It is suggested that models, which include the interactions between sea ice and surface, deep, and bottom waters along the continental margins, are needed to investigate this region.