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Business Context and Reporting Period

Company: Nordic American Tanker Shipping Limited (Bermuda)

Filing Type: Form 6-K (Report of Foreign Private Issuer)

Reporting Period: January 2004 (Notice dated January 22, 2004)

Context: The Company owns three Suezmax oil tankers chartered to BP Shipping Limited under "hell and high water" bareboat charters expiring September 30, 2004. BP has not exercised its option to extend the charters. The filing announces a Special General Meeting of Shareholders scheduled for March 15, 2004, to vote on the Company's future direction.

Key Financial Metrics

Revenue Model: Charterhire based on the greater of a base rate ($13,500/day) or spot market rates less operating costs ($8,500/day), effectively a floor of $22,000/day.

Debt: $30 million principal outstanding under a loan agreement with Den norske Bank ASA, maturing September 2004. Interest is fixed at 5.8% via swap.

Dividends:

• Total distributions since inception (1995) through Dec 31, 2003: $13.91 per share.
• Recent dividend announced Jan 14, 2004: $1.15 per share (payable Feb 16, 2004).

Valuation Estimates (as of Jan 7, 2004):

• Estimated vessel value: $45 million to $47 million per vessel (average $46 million).
• Estimated net proceeds per share if vessels sold in 2004: ~$13.23.
• Estimated net present value per share if business continues for 7 years: ~$17.38.

Liquidity: The filing does not provide a specific cash balance figure, noting that the Company distributes substantially all available cash quarterly.

Material Changes and Proposals

The filing centers on two critical proposals requiring shareholder votes:

1. Proposal 1 (Sale vs. Continuation): Shareholders must vote to either sell the vessels upon charter expiration and distribute proceeds, or continue the Company in business. The Board recommends continuing the business, citing a higher estimated return ($17.38/share vs. $13.23/share) and the ability to pursue business combinations.
2. Proposal 2 (Bye-Law Amendment): If the Company continues, shareholders must vote to amend Bye-Law 84 to remove restrictions on business activities. Currently, the Company is limited to specific activities until charters expire. The Board recommends amending the bye-laws to allow the Company to operate as a traditional shipowner immediately.

Outlook, Risks, and Management Commentary

Management Strategy:

• PFIC Status: The Company is currently a Passive Foreign Investment Company (PFIC). The Board intends to convert to an operating company in 2004 by amending bye-laws and potentially converting BP charters from bareboat to time charters. This would reduce the maximum U.S. federal income tax rate for non-corporate U.S. shareholders from 35% to 15% on qualifying dividends starting in 2005.
• Operational Shift: If continued, the Company will assume full operational risk (maintenance, crewing, insurance) previously borne by BP. Management fees are expected to rise from $250,000 to $550,000 annually.

Risks and Contingencies:

• Market Volatility: The tanker market is highly cyclical. Continued operation exposes the Company to spot market volatility without the guaranteed base rate protection of the current bareboat charters.
• Refinancing Risk: The $30 million loan matures in September 2004. Failure to refinance could force a sale of vessels regardless of shareholder votes.
• Operational Liability: Transitioning to an operating company exposes the Company to pollution, tort, and default risks.
• Conflict of Interest: The Manager (Scandic American Shipping Ltd.) is owned by the Company's Chairman and a Director, creating potential conflicts regarding performance monitoring.

Investor Verification Checklist

• Refinancing Status: Verify if the Company has secured a commitment to refinance the $30 million loan maturing in September 2004.
• BP Charter Conversion: Confirm the likelihood of BP agreeing to convert bareboat charters to time charters, which is critical for achieving PFIC status change in 2004.
• Vessel Valuation Sensitivity: Assess the impact of a 10% decline in vessel values (estimated to reduce distribution by ~$1.33/share) on the liquidation scenario.
• Operational Cost Budget: Review the Manager's budget for the $7,000/day operating cost assumption per vessel under the continuation scenario.
• Proxy Voting Thresholds: Note that Proposal 1 requires a majority of votes cast, while Proposal 2 requires a supermajority (66-2/3%) of outstanding shares.