MIF Reports Lower First Half Profits

Hamilton, Bermuda, 3rd September 1998 - Today, MIF reported unaudited results for the first six months of 1999. Revenues for the first half grew 26.6% to a record $35.66 million. Income from Operations was also at a record height of $22.09 million, up 23.2% from the same period of 1998. Income before Depreciation slightly exceeded the year earlier peak and reached $12.5 million. The growth cited above was driven by the continued fleet expansion program. Since the end of 1997, MIF has added four newbuildings, including three 107,00 DWT Aframaxes built by Imabari and a 304,000 DWT VLCC bulit by Hyundai. Today's fleet of sixteen tankers represents over 1,420,000 DWT with an average tonnage of seven years.

The weight of heavier depreciation allowances and added interest expense to finance this expansion program reduced first half 1999 profits by 64.3% to a net income of $1.66 million. The depressed freight market was the principal factor contributing to this disappointing result. Special factors also impacted earnings. Late in the first half, M/T Panos G (Aframax) underwent an extended dry-docking (40 days) following a highly successful but demanding time charter. Additionally, M/T Tamyra (Aframax) experienced an unscheduled off-hire to implement a program of special maintenance and upgrading (45 days). The special non-recurring aspects of these two events reduced first half 1999 net income by over $750,000.

These unsatisfactory results, although exemplary considering the market conditions, reflect the spot and time charter rates available in today's environment. Rates have plummeted as the result of a severe supply/demand imbalance. A sharp contraction of crude and product inventories combined with the firm resolve of OPEC to restrict oil production led to scarcity of cargoes and a disorientation in the tanker freight market. Such unsettled conditions may continue until growth in energy usage forces a revival in crude and products shipments. Barring yet another mild winter in the northern hemisphere, we can hope for some recovery in 2000.

Meanwhile, the second half of 1999 will most likely embody an extremely negative economic environment for the tanker industry. Freight rates will remain below normal. Interest rates will most definitely trend higher. Bunker costs have soared and will remain high. Other operating costs could be pressured by a softer dollar. Despite the extreme conditions, we are optimistic about 2000 and beyond.

The world economy and particularly the Pacific Rim are mending and rebounding smartly. Europe is reawakening and the United States continues to prosper. These fundamentals are the seed of future energy consumption and demand for petroleum transportation.

We are confident that MIF is positioned to capitalize on a brighter tomorrow. The combination of a youthful modern fleet, financial probity and Management's emphasis on being a low cost provider of quality service are the elements supporting this confidence.

Recently, we were advised by Marine Money that MIF was selected as "the tanker company with the best return and profit margin for the fiscal year 1998". This is a pinnacle we intend to maintain.