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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-13944
NORDIC AMERICAN TANKER SHIPPING LIMITED
__________________________________________________________________
(Exact name of Registrant as specified in its charter)
ISLANDS OF BERMUDA
__________________________________________________________________
(Jurisdiction of incorporation or organization)
Cedar House
41 Cedar Avenue
Hamilton HM EX
Bermuda
__________________________________________________________________
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section
12(b) of the Act.
Name of each exchange
Title of each class on which registered
Common Shares American Stock Exchange
_________________________ _________________________
Securities registered or to be registered pursuant to Section
12(g) of the Act: None
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Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer's
classes of capital or common stock as of the close of the period
covered by the annual report.
Common Shares, par value $0.01 9,706,606
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark which financial statement item the
Registrant has elected to follow.
Item 17 X Item 18
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TABLE OF CONTENTS (1)
Page
Part I Item 1 Description of Business.................. 4
Item 2 Description of Property.................. 11
Item 3 Legal Proceedings........................ 11
Item 4 Control of Registrant.................... 11
Item 5 Nature of Trading Market................. 12
Item 7 Taxation................................. 12
Item 8 Selected Financial Data.................. 13
Item 9 Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 14
Item 10 Directors and Officers of Registrant..... 16
Item 11 Compensation of Directors and Officers... 19
Item 13 Interest of Management in Certain
Transactions......................... 19
Part IV Item 17 Financial Statements..................... 19
Item 19 Financial Statements and Exhibits........ 19
___________________
(1) Items omitted are inapplicable.
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ITEM 1 - DESCRIPTION OF BUSINESS
Nordic American Tanker Shipping Limited (the "Company") was
incorporated on June 12, 1995, under the laws of the Islands of
Bermuda ("Bermuda") for the purpose of acquiring, disposing,
owning, leasing, and chartering three double hull Suezmax oil
tankers (the "Vessels") and engaging in activities necessary,
suitable or convenient to accomplish, or in connection with or
incidental to, the foregoing. The principal executive offices of
the Company are located at: Cedar House, 41 Cedar Avenue,
Hamilton HM EX, Bermuda, and its telephone number is (441) 295-
2244.
In September 1995, the Company offered and sold to the public
11,731,613 warrants ("Warrants") at the initial public offering
price of $5.00 per Warrant. The exercise price of a Warrant was
$10.21. Prior to September 30, 1997 (the "Exercise Date"), the
Company did not have any operations other than certain limited
operations related to the acquisition of the Vessels, of which
all three were delivered in the last half of 1997. The Company
now owns three modern double hull 150,000 dead-weight tonne
("dwt") Suezmax tankers (the "Vessels"). The Vessels were built
at Samsung Heavy Industries Co. Ltd. in South Korea (the
"Builder").
On September 30, 1997, all of the outstanding Warrants of the
Company were exercised at an exercise price of $10.21 per
Warrant. The Company received a total of $119,779,768.73 by
issuing a total of 11,731,613 new Common Shares (the "Shares").
There is a total of 11,813,850 Shares in issue. Expenses in the
total amount of approximately $337,000 related to the exercise of
the Warrants have been deducted from the proceeds of the
exercise.
On October 6, 1997, the Company paid to the Charterer for
payment to the Builder a total of $119,490,000 for final payment
of the three Vessels.
On November 30, 1998, the Company's shareholders approved a
proposal to allow the Company to borrow money for the purpose of
repurchasing its Shares. On December 28, 1998, the Company
purchased 2,107,244 Shares through a "Dutch Auction" self-tender
offer at a price of $12.50 per Share. In addition, the Company
paid $715,000 in transaction costs. After the repurchase, a
total of 9,706,606 Shares are in issue, down from 11,813,850
Shares.
Pursuant to an agreement (the "Management Agreement") between
the Company and its Manager, Ugland Nordic Shipping ASA (the
"Manager"), the Manager provides certain management,
administrative and advisory services to the Company.
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Vessels owned by the Company
Each Vessel acquired by the Company is a newly built,
approximately 150,000 dwt double hull Suezmax oil tanker built at
the shipyard of the Builder in South Korea. The purchase price of
each Vessel is approximately $56.9 million per Vessel (the
"Original Contract Price"). The Vessels were delivered between
August and December 1997 and have been designed according to the
specifications set forth in the shipbuilding contracts between
the Builder and the Company (the "Shipbuilding Contracts").
Each Vessel is registered in Bermuda and flies the British
flag.
Chartering Operations Commenced on September 30, 1997
By their terms, each Vessel is chartered to BP Shipping Ltd.
(the "Charterer"), pursuant to separate "hell and high water"
bareboat charters (the "Charters). The initial term of these
charters is from September 30, 1997 and will end approximately
seven years after the such date, subject to extension at the
option of the Charterer for up to seven successive one-year
periods. Under each Charter, the Charterer is required to
provide the Company with at least twelve months' prior notice of
each such extension. The Company's dividend policy is to pay
dividends to the holders of the Company's Shares in amounts
substantially equal to the amounts received by it under the
Charters, less expenses. In 1998, a portion of these dividends
was considered return of capital for United States federal income
tax purposes.
The daily charterhire rate payable under each Charter is
comprised of two components: (i) a fixed minimum rate of
charterhire of $13,500 per Vessel per day (the "Base Rate"), paid
quarterly in advance, and (ii) additional charterhire (which will
be determined and paid quarterly in arrears and may equal zero)
which would equal the excess, if any, of a weighted average of
the daily time charter rates for two round-trip trade routes
traditionally served by Suezmax tankers (Bonny, Nigeria to/from
the Louisiana Offshore Oil Port, and Hound Point, U.K. to/from
Philadelphia, Pennsylvania (the "Reference Ports")), over the sum
of (A) an agreed amount of $8,500 representing daily operating
costs and (B) the Base Rate ("Additional Hire"). The amount of
Additional Hire, if any, will be determined by the London Tanker
Brokers Panel or another panel of ship brokers mutually
acceptable to the Charterer and the Company (the "Brokers
Panel"). In 1998, the Company received Additional Hire for the
first quarter.
Pursuant to the terms of the Charters, the Charterer's
obligation to pay charterhire is absolute, regardless whether
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there is loss or damage to a Vessel of any kind or whether such
Vessel or any part thereof is rendered unfit for use or is
requisitioned for hire or for title, and regardless of any other
reason whatsoever. The Charterer is also obligated to indemnify
and hold the Company harmless from all liabilities arising from
the operation, design and construction of the Vessels prior to
and during the term of the Charters, including environmental
liabilities, other than liabilities arising out of the gross
negligence or willful misconduct of the Company. The obligations
of the Charterer are guaranteed by BP Amoco p.l.c., the successor
company following the merger between The British Petroleum
Company p.l.c., the original guarantor, and Amoco Corp.
The Charters will end approximately seven years after the
Exercise Date, unless extended as noted above. At least six
months prior to the end of the term (including any extension
thereof) of a Charter, the holders of the Common Shares will be
entitled to vote on a proposal to sell the related Vessel and to
distribute the net proceeds of such sale to the holders of the
Common Shares to the extent permitted under Bermuda law. The
Board of Directors of the Company (the "Board") will make a
recommendation as to that proposal, which recommendation may
favor such sale or an alternative plan, such as the operation,
rechartering or other disposition of the Vessel. The proposal to
sell the Vessel and distribute the resulting net proceeds shall
be adopted if approved by the holders of a majority of the Common
Shares voting at the meeting called for such purpose.
Industry Conditions; Highly Cyclical Nature
The amount of Additional Hire payable under the Charters, if
any, as well as the ability of the Manager to sell or recharter a
Vessel upon expiration or termination of the related Charter and
the amount of any proceeds therefrom, is dependent upon, among
other things, economic conditions in the oil tanker industry.
The oil tanker industry has been highly cyclical, experiencing
volatility in profitability and vessel values resulting from
changes in the supply of and demand for crude oil and in tanker
capacity. The demand for tankers is influenced by global and
regional economic conditions, developments in international
trade, changes in seaborne and other transportation patterns,
weather patterns, oil production, armed conflicts, port
congestion, canal closures, embargoes and strikes, among other
factors. In addition, the Company anticipates that the future
demand for Suezmax oil tankers, such as the Vessels, also will be
dependent upon continued economic growth in the United States and
Canada, Continental Europe and the Far East. While many of the
countries in each of these regions have experienced significant
economic growth since 1993, there can be no assurance that this
trend will continue. Adverse economic, political, social or
other developments in these regions could have an adverse effect
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on the Company's business and results of operations. In
addition, even if demand for crude oil grows in these areas,
demand for Suezmax tankers may not necessarily grow or even
remain constant. Demand for crude oil is affected by, among
other things, general economic conditions, commodity prices,
environmental concerns, taxation, weather and competition from
alternatives to oil. Demand for the seaborne carriage of oil
depends partly on the distance between areas that produce crude
oil and areas that consume it and their demand for oil. The
supply of tanker capacity is a function of the delivery of new
vessels and the number of older vessels scrapped, in lay-up,
converted to other uses, reactivated or lost. Such supply may be
affected by regulation of maritime transportation practices by
governmental and international authorities. Many of the factors
influencing the supply of and demand for vessel capacity are
outside the control of the Company, and the nature, timing and
degree of changes in industry conditions are unpredictable.
Furthermore, the amount of Additional Hire will be determined
quarterly with reference to two round-trip trade routes between
the Reference Ports. Therefore, the demand for oil in the areas
of the United States serviced by such routes could have a
significant effect on whether any Additional Hire would be
payable and, if so, the amount that would be payable. There can
be no assurance that Additional Hire will be payable for any
quarter.
Additional Information
BP Amoco p.l.c., the successor company following the merger
between Amoco Corp and The British Petroleum Company p.l.c.,
files annual reports on Form 20-F (File No. 005-42076) and
periodic reports on Form 6-K with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
Competition
The tanker industry is highly fragmented, with the largest
tanker owner owning no more than 5% of the world tanker fleet (by
dwt). International seaborne oil and petroleum products
transportation services are mainly provided by two types of
operators: major oil company captive fleets (both private and
state owned) and independent shipowner fleets. Both types of
operators transport oil under short-term contracts (including
single voyage "spot charters") and long-term charters with oil
companies, oil traders, large oil consumers, petroleum product
producers and government agencies. The oil companies own, or
control through long-term time charters, approximately one-third
of the current world tanker capacity, while independent companies
own or control the balance of the fleet. The oil companies use
their fleets not only to transport their own oil, but also to
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transport oil for third-party Charterers in direct competition
with independent owners and operators in the tanker charter
market.
Environmental and Other Regulations
The operation of the Vessels is affected by environmental
protection laws and other regulations. Such laws and regulations
are subject to extensive and material changes. Compliance with
such laws and regulations may entail significant expenses,
including expenses for ship modifications and changes in
operating procedures. Although all such expenses are payable by
the Charterer during the term of the Charters, such expenses
could have an adverse effect on the Company at any time after the
expiration or termination of a Charter or in the event the
Charterer and BP Amoco p.l.c. (as the guarantor of the
obligations of the Charterer) fail to make any such payment.
Certain proposals in the United States for new regulatory
requirements could create significant additional expenses in such
event. In particular, certain legislation has been proposed that
would, among other things, impose minimum wage requirements on
foreign crews, impose restrictions on the use of foreign-flagged
vessels (such as the Vessels) in United States trade and impose
additional costs on operators of foreign-built vessels (such as
the Vessels).
In addition, although the United States Oil Pollution Act of
1990, as amended ("OPA"), limits the strict liability of owners,
operators and charterers by demise i.e., bareboat charterers) of
vessels (the "Responsible Parties") to the greater of $1,200 per
gross ton or $10 million per tanker (subject to possible
adjustment for inflation) for removal costs and damages that
result from a discharge of oil, these limits do not apply if the
discharge is caused by gross negligence or willful misconduct, or
the violation of an applicable U.S. federal safety, construction
or operating regulation by a Responsible Party.
Pursuant to interim implementing regulations promulgated by
the United States Coast Guard ("USCG"), Responsible Parties must
meet new financial responsibility requirements that are
significantly greater than those previously required. The
protection and indemnity associations ("P&I Associations"), which
have historically provided shipowners and operators financial
assurance, have refused to furnish evidence of insurance to
Responsible Parties and therefore, Responsible Parties have had
to obtain financial assurance from other sources at additional
cost. While the Charterer is responsible for compliance during
the term of the Charters, the inability of the Company to comply
with these regulations following the expiration or termination of
the Charters would have an adverse effect on the Company's
business and results of operations.
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The International Maritime Organization, an agency of the
United Nations ("IMO") has adopted regulations that are designed
to reduce oil pollution in international waters. In complying
with OPA and the IMO regulations and other regulations that may
be adopted, shipowners and operators may be forced to incur
additional costs in meeting new maintenance and inspection
requirements, in developing contingency arrangements for
potential spills and in obtaining insurance coverage.
The operation of the Vessels is also affected by the newly
adopted requirements set forth in the IMO's 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 an extensive "Safety
Management System," which includes policy statements, manuals,
standard procedures and lines of communication. Noncompliance
with the ISM Code may subject the shipowner or bareboat charterer
to increased liability and may lead to decreases in available
insurance coverage for affected the vessels. Although compliance
with the ISM Code is the responsibility of the Charter during the
term of the Charters, the Company would become primarily
responsible for compliance with the ISM Code if the Charterer
were to default in its obligations under the Charters.
Risk of Loss and Liability Insurance
General. There are a number of risks that are associated
with the operation of the Vessels, including mechanical failure,
collision, property loss, cargo loss or damage and business
interruption due to political circumstances in foreign countries,
hostilities and labor strikes. In addition, the operation of any
vessel is subject to the inherent possibility of marine disaster,
including oil spills and other environmental mishaps, and the
liabilities arising from owning and operating vessels in
international trade. OPA, which imposes virtually unlimited
liability upon owners, operators and demise charterers of any
vessel trading in the United States exclusive economic zone for
certain oil pollution accidents in the United States, has made
liability insurance more expensive for ship owners and operators
trading in the United States market and has also caused insurers
to consider reducing available liability coverage. Pursuant to
the Charters, the Charterer bears all risks associated with the
operation of the Vessels, including, without limitation, any
total loss of one or more Vessels. The Charterer will also
indemnify the Company, and BP Amoco p.l.c. guarantees such
obligation, for all liabilities arising during the term of the
Charters in connection with the operation of the Vessels,
including under environmental protection laws and regulations,
other than liabilities arising from the Company's gross
negligence or willful misconduct. However, the operation of any
ocean-going vessel has an inherent risk of marine disaster, such
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as environmental mishaps, cargo and property losses or damage and
business interruptions caused by mechanical failure, human error,
political action in various countries, labor strikes, adverse
weather conditions, loss of revenue during vessel off-hire
periods and other circumstances or events. Any such circumstance
or event could result in loss of revenues or increased costs.
Pursuant to the Charters, the Charterer is the responsible
party for securing all insurance coverage with respect to the
Vessels. The Company expects that the arrangements made by the
Charterer adequately protect the Company against the accident-
related risks involved in the conduct of its business and provide
appropriate levels of environmental damage and pollution
insurance coverage, consistent with industry practice. Under the
terms of the Charters, the Charterer may self-insure against
certain risks.
Hull and Machinery Insurance. The Charterer is entitled to
self-insure the Marine (Hull and Machinery) risk on each Vessel.
In event of loss, following full payments of charterhire under a
Charter's "hell and high water" provisions, a lump sum payment
will be made to the Company as additional charterhire on
expiration of the Charter, based upon three independent
shipbroker's evaluations of values of similar vessels at the
expiry of the Charter.
Protection and Indemnity Insurance. Protection and indemnity
insurance covers the legal liability of the Charterer and the
Company for its shipping activities. This includes the legal
liability and other related expenses of injury or death of crew,
passengers and other third parties, loss or damage to cargo,
claims arising from collisions with other vessels, damage to
other third-party property, pollution arising from oil or other
substances, and salvage, towing and other related costs,
including wreck removal. The Charterer obtained unlimited
coverage through P&I Associations, with the exception of oil
pollution liability, which is only available up to $500 million
per Vessel per accident. Each of the Vessels was entered into a
P&I Association that is a member of the International Group of
P&I Associations. As a member of a mutual association, the
Charterer (and, under certain circumstances, the Company) is
subject to calls payable to the association based on its claim
records as well as the claim record of all other members of the
association.
Excess Oil Pollution Insurance. In addition to the $500
million of oil pollution insurance currently available through
the P&I Associations, the Charterer purchased from an insurer
controlled by it $200 million of excess coverage for the Vessels
for liabilities arising from oil pollution for a total coverage
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of $700 million per Vessel per incident or such other limit as
may be commercially available from time to time.
Following termination or expiration of the Charters, the
Company intends to maintain hull and machinery insurance,
including insurance for actual or constructive loss, war risk
insurance and protection and indemnity insurance subject to
customary deductibles and limitations. Insurance underwriters
may require additional premiums for hull and machinery insurance
and war risk insurance prior to any Vessel entering certain
geographical areas. Although historically shipowners have been
able to obtain such insurance, there can be no assurance that the
Company will be able to procure sufficient insurance to cover the
repair or replacement of any Vessel which is damaged or
destroyed, or to cover the Company's liability in the event of a
catastrophic marine or ecological disaster.
ITEM 2 - DESCRIPTION OF PROPERTY
Other than the three Vessels, the Company has no interest in
any property.
ITEM 3 - LEGAL PROCEEDINGS
To the best of the Company's knowledge, no material legal
proceedings involving the registrant or any directors, officers
or affiliate of the registrant are currently pending and no such
proceedings are known to be contemplated by any governmental
authorities.
ITEM 4 - CONTROL OF REGISTRANT
The Company has one class of common stock authorized and
outstanding. As of the date of this report, 9,706,606 Shares,
par value $0.01, were outstanding. The following table sets
forth, as of April 21, 1999, information regarding ownership of
the Company's Shares.
Number of
Shareholder Shares Owned Percentage
Ugland Nordic Shipping ASA 2,043,771 21.06%
Fidelity International Limited 1,188,000 12.24%
Schneider Capital Management
Corporation 562,300 5.79%
ITEM 5 - NATURE OF TRADING MARKET
The primary trading market for the Shares is the American
Stock Exchange (the "AMEX"), on which the Shares are listed under
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the symbol NAT. The secondary trading market for the Shares is
the Oslo Stock Exchange (the "OSE") also with the symbol NAT.
The high and low bid prices for the Shares (Warrants before
September 30, 1997), by quarter, in 1997 and 1998 are as follows:
AMX AMX OSE OSE
Low High Low High
For the quarter ended:
March 31, 1997 $ 3 3/4 $ 4 5/8 NOK 24.00 NOK 30.00
June 30, 1997 $ 3 5/8 $ 5 NOK 25.00 NOK 34.00
September 30, 1997 $ 5 $ 7 5/8 NOK 35.00 NOK 48.00
December 31, 1997 $16 3/8 $19 1/8 NOK 110.00 NOK 130.00
March 31, 1998 $14 7/8 $16 1/2 NOK 110.00 NOK 120.00
June 30, 1998 $14 3/4 $16 1/4 NOK 115.00 NOK 129.00
September 30, 1998 $11 3/4 $15 1/2 NOK 125.00 NOK 125.00
December 31, 1998 $10 3/4 $13 1/2 NOK 95.00 NOK 99.00
These bid quotations represent interdealer quotations,
without retail mark-ups, mark-downs or commissions, and do not
necessarily represent actual transactions.
On December 31, 1998, the closing price of the Shares as
quoted on the AMEX was $11 1/2 and as quoted on the OSE was NOK
95.00. On such date, there were 9,706,606 Shares issued and
outstanding.
ITEM 7 - TAXATION
The Company is incorporated in Bermuda. Under current
Bermuda law, the Company is not subject to tax on income or
capital gains, and no Bermuda withholding tax will be imposed
upon payments of dividends by the Company to its shareholders.
No Bermuda tax is imposed on holders with respect to the sale or
exchange of Shares. Furthermore, the Company has received from
the Minister of Finance of Bermuda under the Exempted
Undertakings Tax Protection Act 1966, as amended, an assurance
that, in the event of there being enacted in Bermuda any
legislation imposing tax computed on profits or income or
computed on, any capital asset, gain or appreciation, then the
imposition of any such tax shall not be applicable. The
assurance will also provide that such taxes, and any tax in the
nature of estate duty or inheritance tax, shall not be applicable
to the shares, debentures or other obligations of the Company.
There are no provisions of any reciprocal tax treaty between
Bermuda and the United States affecting withholding.
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ITEM 8 - SELECTED FINANCIAL INFORMATION
The following balance sheet as of December 31, 1998 and
Income Statement for the period January 1, 1998 through December
31, 1998, have been derived from the Financial Statements of the
Company which are included herein and which have been audited by
Deloitte & Touche, independent auditors, whose report thereon is
also included herein. The balance sheet information provided
below should be read in conjunction with the accompanying
Financial Statements and the related notes thereto, and the
discussion under Management's Discussion and Analysis of
Financial Condition and Results of Operations herein.
Year Ended December 31,
1998 1997
_____________ ____________
Income Statement Data
Operating Revenues $ 16,006,199 $ 5,265,880
Commissions Paid (184,781) (47,081)
Administration Expenses (412,779) (461,674)
Interest Income 105,999 147,504
Accrued Interest (Bank loan) (43,781) 0
Bank changes (10,306) (330)
____________ ____________
Net Profit 8,629,512 3,196,492
Assets
Bank deposits $ 3,637,758 $ 3,664,499
Bare-Boat -hire receivable 0 1,499,380
Prepaid finance costs 86,875 0
Prepaid insurance 83,333 95,836
____________ ____________
Total current assets 3,807,966 5,259,715
Long term assets
Vessels 162,237,124 169,068,163
____________ ____________
Total long-term assets 162,237,124 169,068,163
TOTAL ASSETS 166,045,090 174,327,878
____________ ____________
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LIABILITIES AND
SHAREHOLDERS EQUITY 1998 1997
____________ _____________
Current liabilities
Dividend payable 0 1,181,385
Prepaid hire 0 3,645,000
Accounts payable 675,384 0
Accrued interest on
Bank loan 43,781 0
____________ ____________
Total Current Liabilities 719,165 4,826,385
Long-term liabilities
Mortgage Loan 30,000,000 0
____________ ____________
Total Long-term liabilities 30,000,000 0
____________ ____________
Shareholders Equity
Share Capital 97,066 118,138
Other Shareholders Equity 135,228,859 169,383,355
____________ ____________
Total Shareholders Equity 135,325,925 169,501,493
TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY 166,045,090 174,327,878
____________ ____________
ITEM 9 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company owns three modern double hull 150,000 dead weight
tonne Suezmax tankers (the Vessels), which were delivered in the
last half of 1997. The Vessels were built at Samsung Heavy
Industries Ltd. in South Korea.
The Charterer has agreed to charter each Vessel for a period
of seven years from September 30, 1997. Each Charter is subject
to extension at the option of the Charterer for up to seven
successive one-year periods. During the term of each Charter
(including any extension thereof) the Charterer is obligated to
pay (i) the Base Rate, which is charterhire at a fixed minimum
daily rate of $13,500 per Vessel per day (time charter equivalent
of $22,000 per day), payable quarterly in advance and (ii)
Additional Hire, to the extent spot charter rates exceed certain
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levels, payable quarterly in arrears, from January 1998. The
amount of Additional Hire for each quarter, if any, will be
determined by the Brokers Panel.
In January 1999, the Brokers Panel in London determined that
there would be no Additional Hire for the period October 1 to
December 31, 1998. The total charterhire for 1998 was thus
$16,006,199. Charterhire (time charter equivalent) in the first,
second, third and fourth quarter of 1998 was $26,532, $22,000,
$22,000 and $22,000 per day per Vessel, respectively.
On January 4, 1999, the Company received $3,645,000 in Base
Hire from the Charterer for the period from January 1 up to
March 31, 1999.
Results of Operations
Year Ended December 31, 1998 Compared to Year Ended December 31,
1997.
Operating Revenues
Operating revenues increased for the year ended December 31,
1998 by $10,740,319, or 304%, to $16,006,199 (time charter
equivalent of $23,117 per day per Vessel) compared to $5,265,880
for the year ended December 31, 1997. The increase in revenues
was due to the receipt of charter hire from the Charterer for a
full year. The average daily rates of charter hire earned by the
Vessels remained the same at $13,500 per Vessel. The Company
received $14,782,500 in Base Hire and Additional Hire for the
period January 1 to March 31, 1998 of $1,233,699 ($4,532 per day
per Vessel).
Operating Expenses
Because the Company owned the Vessels for a full year,
depreciation in the year ended December 31, 1998 increased by
$5,123,232, or 300%, to $6,831,039 from $1,707,807 for the year
ended December 31, 1997.
General and administrative expenses increased for the year
ended December 31, 1998 by $1,436,703 to $1,798,284 from $361,581
for the year ended December 31, 1997.
Net Operating Income
As a result of the foregoing factors, net operating income
increased by $5,432,831 or 170% to $8,629,323 for the year ended
December 31, 1998 compared to $3,196,492 for the year ended
December 31, 1997.
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Dividend Payment
Total dividend paid out in 1998 was $16,893,806.10, or $1.43
per Share. The dividend payments in 1998 have been as follows:
1. quarter $0.40 per share
2. quarter $0.41 per share
3. quarter $0.32 per share
4. quarter $0.30 per share
Total dividend for the year 1998 derived from hire received
in 1998 was $15,712,421.10 or $1.33 per Share.
Income Taxes
The Company is incorporated in Bermuda. Under current
Bermuda law, the Company is not subject to tax on income or
capital gains, and no Bermuda withholding tax will be imposed
upon payments of dividends by the Company to its shareholders.
No Bermuda tax is imposed on holders with respect to the sale or
exchange of Shares. Furthermore, the Company has received from
the Minister of Finance of Bermuda under the Exempted
Undertakings Tax Protection Act 1966, as amended, an assurance
that, in the event that Bermuda enacts any legislation imposing
any tax computed on profits or income, including any dividend or
capital gains withholding tax, or computed on any capital asset,
appreciation, or any tax in the nature of an estate, duty or
inheritance tax, then the imposition of any such tax shall not be
applicable. The assurance further provides that such taxes, and
any tax in the nature of estate duty or inheritance tax, shall
not be applicable to the Company or any of its operations, nor to
the shares, debentures or other obligations of the Company, until
March 2016.
Year Ended December 31, 1997
Results of Operations
The Company had no revenue for the period from January 1,
1997 through September 30, 1997. After September 30, 1997, its
revenues consisted of the charter hire payable under the
Charters. The Company's revenues from the charter hire for the
period September 30 to December 1, 1997 came from the minimum
hire of $3,766,500 ($13,500 per day per Vessel) and the
determined Additional Hire of $1,499,380 ($5,374 per day per
Vessel). Total charter hire for the period from September 30 to
December 31, 1997 was $5,265,880.
Net costs including interest income during the report period
were $2,069,388, of which three months depreciation of the
Vessels constituted $1,707,807.
16
<PAGE>
Year Ended December 31, 1996
Results of Operations
The Company had no revenue for the period from January 1,
1996 through December 31, 1996.
Expenses for the year ended December 31, 1996 were $430,000.
Such expenses resulted from accrual of a portion of the
management fee (the "Management Fee") paid to the Manager and the
payment of the insurance premium in respect of the Company's
directors' and officers' and general liability insurance. In
September 1995 the Company prepaid the Management Fee for the
period through and including September 30, 1997.
The Company had no income tax liabilities for the year ended
December 31, 1996.
Liquidity and Capital Resources
Total assets of the Company at December 31, 1998 were
$166,045,090, compared to $174,327,878 at December 31, 1997.
Cash held at December 31, 1998 was $3,637,758.
Repurchase of Common Stock
On December 28, 1998, the Company repurchased 2,107,244
Shares through a "Dutch Auction" self-tender offer at a price of
$12.50 per Share. After the repurchase, a total of 9,706,606
Shares are in issue, down from 11,813,850 Shares. Payment for
the repurchased Shares was made at the end of December 1998.
The Company has drawn down upon a Loan of $30 million with
Den norske Bank ASA, Oslo (DnB) to finance the repurchase of
Shares. The total purchase price of the Shares including the
costs associated with the transaction was $ 27.1 million. The
balance of approximately $2.9 million will remain in the Company
until it has been decided how these funds should be utilised.
An important objective of the repurchase of Shares was to
increase the Company's cash distribution to shareholders while
the Vessels are on charter to the Charterer. While the Vessels
are on charter, the minimum cash distribution per Share is
expected to increase by $0.09, from $1.20 to $1.29 per year, an
increase of 7.5%.
The Company has entered into an interest swap agreement with
DnB, enabling the Company to pay a fixed interest on the loan of
5.80% p.a. including the margin of 0.525% for the next 6 years.
The swap agreement terminates on the final repayment date of the
Loan, i.e. the fourth quarter of the year 2004.
17
<PAGE>
ITEM 10 - DIRECTORS AND OFFICERS OF REGISTRANT
Directors and Senior Management of the Company and the Manager
Pursuant to the Management Agreement, the Manager provides
management, administrative and advisory services to the Company
with respect to the Vessels.
Set forth below are the names and positions of the directors
and executive officers of the Company and the Manager. Directors
of both the Company and the Manager are elected annually, and
each director elected holds office until a successor is elected.
Officers of both the Company and the Manager are elected from
time to time by vote of the respective board of directors and
hold office until a successor is elected.
The Company
Name Age Position
Herbjorn Hansson 51 Director and President
John D. Campbell 56 Director and Secretary
Niels Erik Feilberg 37 Vice President and Treasurer
Tharald Brovig 56 Director
Hon. Sir David Gibbons 71 Director
George C. Lodge 71 Director
Axel Stove Lorentzen 46 Director
Andreas Ove Ugland 44 Director
The Manager
Name Age Position
Arve Andersson 44 Director
Herbjorn Hansson 50 Director; President and
Chief Executive Officer
Axel Stove Lorentzen 46 Director
Tharald Brovig 56 Director
Njal Hansson 56 Director
Christian Rytter Jr 43 Director
Andreas Ove Ugland 44 Director, Chairman
Certain biographical information with respect to each
director and executive officer of the Company and the Manager is
set forth below.
Herbjorn Hansson has been President and Chief Executive
Officer of the Company and of the Manager since July 1995 and
September 1993, respectively, and has served as a director of the
Manager since its organization in June 1989 and as a director of
the Company since July 1995. Mr. Hansson formerly served as the
18
<PAGE>
Chairman of the Board of the Manager from June 1989 to September
1993. Mr. Hansson has been involved in various aspects of the
shipping industry and international finance since the early
1970s, including serving as Chief Economist of Intertanko, the
International Association of Tanker Owners and independent
operators, from 1975-1980. He was an officer of the Anders
Jahre/Kosmos Group from 1980 to 1989, serving as Chief Financial
Officer from 1983 to 1988.
John D. Campbell has been Secretary of the Company and a
director of the Company since July 1995. Mr. Campbell has been
the Senior Partner of the law firm of Appleby, Spurling & Kempe,
Bermuda counsel to the Company, since December 1987.
Mr. Campbell has also served as a director of ADT Limited (new
Tyes International Limited), from September 1984 to August 1991
and Sea Containers Limited since February 1980.
Niels Erik Feilberg has been Vice President and Treasurer of
the Company since July 1995 and is Chief Financial Officer of the
Manager, which he has been with since 1994. He was working in
the Treasury Department of Anders Jahre/Kosmos Group from 1987
and in the same area in the Skaugen Group from 1989 to the end of
1993.
Tharald Brovig has been a director of the Company since July
1995 and has been a director of the Manager since its
organization in June 1989.
Sir David Gibbons has been a director of the Company since
September 1995. Sir David served as the Prime Minister of
Bermuda from August 1977 to January 1982. Sir David has served
as Chairman of The Bank of N.T. Butterfield and Son Limited since
1986 and as Chief Executive Officer of Edmund Gibbons Ltd. since
1954.
George C. Lodge has been a director of the Company since
September 1995. Professor Lodge has been a member of the Harvard
Business School faculty since 1963. He was named associate
professor of business administration at Harvard in 1968 and
received tenure in 1972.
Axel Stove Lorentzen has been a director of the Company
since September 1995. Mr. Stove Lorentzen has also served as a
director and Chairman of the Manager since May 1991 and September
1993 to June 1996, respectively, a director and Chairman of
Lorentzen & Stemoco A/S since January 1981 and November 1994,
respectively, and as a director of Skipskredittforeningen AS from
March 1988 to May 1996. Mr. Stove Lorentzen formerly served as a
director of Grand Hotel A/S from May 1986 to October 1993 and a
director of Belships Company Ltd. Ships A/S from February 1984 to
June 1993.
19
<PAGE>
Njal Hansson has been a director of the Manager since its
organization in June 1989. Mr. Hansson is a private investor and
owns the company Siv.ing, Njal Hansson A/S is a company engaged
in the importing and distribution of consumer electronics in
Norway. Mr. Hansson is the brother of Herbjon Hansson.
Arve Andersson has been a director of the Manager since
June 1996. Mr Andersson is a director of Andreas Ugland & Sons
AS.
Andreas Ove Ugland has been a director of the Company since
February 1997. Mr. Ugland has also served as director and
Chairman of: Ugland International Holding Plc, a
shipping/transport company listed on the London Stock Exchange,
Andreas Ugland & Sons AS, Grimstad, Norway, Hoegh Ugland
Autoliners AS, Oslo and Buld Associates Inc., Bermuda. Mr. Ugland
has had his whole career in shipping in the Ugland family owned
shipping group.
Christian Rytter Jr has been a director of the Manager
since May 1996. Mr. Rytter is Managing Director of L.Giil-
Johannessen AS and is also Chairman of Seabulk a.s.
ITEM 11 - COMPENSATION OF DIRECTORS AND OFFICERS
Pursuant to the Management Agreement, the Manager will pay
from the Management Fee the annual directors' fees of the
Company, currently estimated at an aggregate amount of $60,000
per annum.
From the inception of the Company through December 31, 1998,
an aggregate of $0 has been paid to the Company's directors and
executive officers as a group for services rendered by them to
the Company in all capacities.
ITEM 13 - INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
The Manager owns 2,043,771 Shares in the Company as of the
date hereof and is party to the Management Agreement with the
Company, pursuant to which the Manager is entitled to a
management fee of $250,000 per annum.
ITEM 17 - FINANCIAL INFORMATION
See pages F-1 through F-6, which are attached hereto and
incorporated herein.
20
<PAGE>
ITEM 19 - FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements, together with the report
of Deloitte & Touche LLP thereon, are filed as part of this
annual report:
Index to Financial Statements
Page
Independent Auditors' Report F-1
Financial Statements for the Year Ended
December 31, 1998 and for the Period From
January 1, 1998 Through December 31, 1998:
Balance Sheets F-2
Statement of Operations F-3
Statements of Cash Flows F-4
Notes to Financial Statements F-5-6
21
<PAGE>
Deloitte & Touche
(LOGO)
Radhusgt. 1, PO. Box 35
N-3101 Tonsberg, Norway
Telephone: (47) 33 30 06 00
Facsimile: (47) 33 30 06 06
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of
Nordic American Tanker Shipping Limited
Bermuda
We have audited the accompanying balance sheets of Nordic
American Tanker Shipping Limited as of December 31, 1998 and the
related statements of operations, shareholders' equity and cash
flows for the year ended December 31, 1998. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of Nordic American
Tanker Shipping Limited as of December 31, 1998 and the results
of its operations and its cash flows for the year ended
December 31, 1998 in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche
March 24, 1999
Deloitte Touche
Tohmatsu
F-1
<PAGE>
BALANCE SHEET AT DECEMBER 31.
(all figures are in US dollars)
ASSETS
Current assets 1998 1997
Bank deposits Note 1 $3,637,758 $3,664,499
Bare-Boat -hire receivable 0 1,499,380
Prepaid finance costs Note 6 86,875 0
Prepaid insurance 83,333 95,836
________ ________
Total current assets 3,807,966 5,259,715
Long term assets
Vessels Note 3 162,237,124 169,068,163
___________ ___________
Total long-term assets 162,237,124 169,068,163
TOTAL ASSETS 166,045,090 174,327,878
___________ ___________
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities 1998 1997
Dividend payable 0 1,181,385
Prepaid hire 0 3,645,000
Accounts payable Note 5 675,384 0
Accrued interest on
Bank loan Note 6 43,781 0
___________ ___________
Total Current Liabilities 719,165 4,826,385
Long-term liabilities
Mortgage Loan Note 6 30,000,000 0
___________ ___________
Total Long-term liabilities 30,000,000 0
___________ ___________
Shareholders Equity
Share Capital Note 7 97,066 118,138
Other Shareholders Equity Note 7 135,228,859 169,383,355
___________ ___________
Total Shareholders Equity 135,325,925 169,501,493
F-2
<PAGE>
TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY 166,045,090 174,327,878
___________ ___________
F-3
<PAGE>
PROFIT AND LOSS ACCOUNT
(all figures are in US dollars)
1998 1997
Operating revenues $16,006,199 $5,265,880
Commissions paid (184,781) (47,081)
Administrative expenses Note 2,4 (412,779) (461,674)
Depreciation Note 3 (6,831,039) (1,707,807)
____________ ___________
Net operating income 8,577,600 3,049,318
Interest income 105,999 147,504
Accrued interest Bank Loan Note 6 (43,781) 0
Bank charges (10,306) (330)
____________ ___________
Net financial income 51,912 147,174
NET PROFIT BEFORE TAX 8,629,512 3,196,492
____________ ___________
Tax expense 0 0
NET PROFIT FOR THE YEAR 8,629,512 3,196,492
____________ ___________
F-4
<PAGE>
STATEMENT OF CASH FLOW
(all figures are in US dollars)
1998 1997
CASH FLOW FROM OPERATING ACTIVITIES
Net profit (loss) $8,629,512 $3,196,492
Depreciation 6,831,039 1,707,807
Increase (decrease) in receivables
and payables (2,682,212) 2,341,428
____________ ___________
Net cash used in operating activities 12,778,339 7,245,727
____________ ___________
CASH FLOW FROM INVESTING ACTIVITIES
Investment in Vessels 0 (119,551,210)
____________ ___________
Cash flow used in investing activities 0 (119,551,210)
____________ ___________
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from sale of common stock 0 119,442,862
Additional warrant issue costs (36,676) 0
Dividends paid (15,712,421) (3,544,155)
Repurchase of B Stock 0 (12,000)
Bank Loan 30,000,000 0
Repurchase of Common Stock (27,055,933) 0
____________ ___________
Cash flow provided by financing
activities (12,768,354) 115,886,707
____________ ___________
NET (DECREASE) INCREASE IN CASH (26,691) 3,581,224
____________ ___________
CASH AND CASH EQUIVALENT, BEGINNING
OF YEAR 3,664,449 83,275
____________ ___________
CASH AND CASH EQUIVALENT, END OF YEAR 3,637,758 3,664,499
____________ ___________
F-5
<PAGE>
NORDIC AMERICAN TANKER SHIPPING LIMITED
NOTES TO FINANCIAL STATEMENTS
PERIOD JANUARY 1, 1998 THROUGH DECEMBER 31, 1998
_________________________________________________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash on Deposit - Cash and cash on deposit
consists of all cash and demand deposits with a maturity of
three months or less.
Income and Expenses - The Company accounts for all income
and expenses using the accrual method of accounting.
Income taxes - The Company is not subject to taxation in
the United States of America.
2. RELATED PARTY TRANSACTION
The Company has entered into a management agreement with
Ugland Nordic Shipping ASA (UNS) under which UNS will
provide certain administrative, management and advisory
services to the Company for an amount of $250,000 per year.
In addition, a fee of $1.85 million was in 1995 paid by
the Company to UNS on the date of the issuance of the
warrants in consideration for certain of UNS' previous
activities on behalf of the Company prior to the
consummation of the offering.
This fee was included as part of the offering costs in
1995.
3. DEPRECIATION
Deprecitation is calculated on a straight-line basis over
the estimated lifetime of 25 years. The basis for the
depreciation is the actual cost price of the vessels in
1997, i.e $ 170,775,970 in total for the three vessels.
All vessels
Total cost price in 1997 $ 170,775,970
Accumulated depreciation per
January 1, 1998 $ 1,707,807
Depreciation January 1 through December 31, 1998 $ 6,831,039
____________
Book value per December 31, 1998 $ 162,237,124
British Harrier
Total cost price in 1997 $ 56,926,900
Accumulated depreciation per January 1, 1998 $ 569,269
F-6
<PAGE>
Depreciation January 1 through December 31, 1998 $ 2,277,076
____________
Book value per December 31, 1998 $ 54,080,555
British Hawk
Total cost price in 1997 $ 56,926,900
Accumulated depreciation per January 1, 1998 $ 569,269
Depreciation January 1 through December 31, 1998 $ 2,277,076
____________
Book value per December 31, 1998 $ 54,080,555
British Hunter
Total cost price in 1997 $ 56,922,170
Accumulated depreciation per January 1, 1998 $ 569,269
Depreciation January 1 through December 31, 1998 $ 2,276,887
____________
Book value per December 31, 1998 $ 54,076,014
4. ADMINISTRATIVE EXPENSES
Management fee, Ugland Nordic Shipping ASA $ 250,000
Directors and officers insurance $ 112,503
Other fees and expenses $ 50,276
Total administrative expenses $ 412,779
5. ACCOUNTS PAYABLE
The account payable of $675,384 is transaction costs from
the repurchase of shares in 1998. The total cost was
$715,383 of which $675,384 was outstanding as per
December 31, 1998.
6. MORTGAGE LOAN, ACCRUED INTEREST, PREPAID FINANCE COSTS
The Company has drawn upon a Loan of $ 30 mill with Den
norske Bank, Oslo (DnB) to finance the repurchase of
shares. The Company has entered into an interest swap
agreement with DnB, enabling the Company to pay a fixed
interest on the loan of 5.80% p.a. including the margin of
0.525% for the next 6 years. The swap agreement terminates
on the final repayment date of the Loan, i.e. the 4th
quarter of year 2004.
The first fixture of the SWAP agreement will be in March
1999. The Company fixed the interest period for the first
three months from December 1998 at LIBOR 5.3125%.
Accrued interest at December 31, 1998
$30 mill, LIBOR 5.3125%, plus margin on Loan 0.525% for 9
F-7
<PAGE>
days, $43,781.
Prepaid finance costs
In connection with the draw down of the Mortgage Loan of
$30 mill, the Company paid $86,875 in an arrangement fee
and commitment fee. The fees will be amortized over the
term of the Loan, i.e. with 1/6 every year from January 1,
1999.
7. STATEMENT OF SHAREHOLDERS EQUITY
YEAR ENDED DECEMBER 31, 1998 AND 1997
Common Stock Class B Stock
Issued Issued Other
Shares Amount Shares Amount Equity
__________ _______ _______ _______ ___________
BALANCE DECEMBER 31, 1996 82,237 822 12,000 12,000 51,586,857
__________________________________________________
Repurchase of B Stock -12,000 -12,000
Exercise of Warrants to
Common Stock 11,731,613 117,316 119,662,453
Common Stock issue cost -336,907
Transfer from other
equity 1) -1,529,048
__________ _______ _______ _______ ___________
BALANCE DECEMBER 31, 1997 11,813,850 118,138 0 0 169,383,355
__________ _______ _______ _______ ___________
Repurchase of Common Stock -2,107,244 -21,072 -26,319,478
Repurchase cost -715,383
Additional Warrant exercise
cost -36,676
Transfer from other
equity 1) -7,082,959
__________ _______ _______ _______ ___________
BALANCE DECEMBER 31, 1998 9,706,606 97,066 0 0 135,228,859
__________ _______ _______ _______ ___________
1) This is part of the amount that the Company paid out of
equity for dividends. As the Company distributes all available
cash, its distributions may exceed its net profit. The Company
has also paid additional capital transaction costs related to the
warrant exercise and repurchase of shares in 1997 and 1998.
* * *
F-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant certifies that it meets all of the
requirements for filing on Form 20-F and has duly caused this
annual report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NORDIC AMERICAN TANKER SHIPPING
LIMITED
By: /s/ Herbjorn Hansson
________________________
Herbjorn Hansson
President
Dated: April 29, 1999
F-9
01318002.AW2
