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r e g i s t e r e d t r a d e m a r k s o f t h e A m e r i c a n B u r e a u o f S h i p p i n g .

© 1 9 9 9 A m e r i c a n B u r e a u o f S h i p p i n g

of a Changing World.

M i s s i o nThe mission of ABS is to serve the

public interest as well as the needs of our clients by promoting the security of life, property and the naturalenvironment primarily through thedevelopment and verification of standardsfor the design, construction andoperational maintenance of marine-related facilities.

Q u a l i t yIt is the policy of ABS to provide

quality services in support of our missionand to be responsive to the individual andcollective needs of our clients as well asthose of the public at large.

All of our client commitments,supporting actions, and services delivered must be recognized asexpressions of quality.

M i s s i o nThe mission of ABS Group of

Companies and its operating subsidiariesis to assist its clients to improve the safetyof their operations, to enhance thequality of their services, and to minimizethe environmental impact of theiractivities.

ABS Group pursues this mission by offering integrated services related to awareness, evaluation, training,implementation, verification andcertification.

We pledge to monitorour performance as anongoing activity and tostrive for continuousimprovement.

1998American Bureauof Shipping

Q u a l i t yIt is the policy of ABS Group to

provide quality services in support of ourmission and to be responsive to theindividual and collective needs of ourclients, as well as those of the public atlarge. All of our client commitments,supporting actions and services deliveredmust be recognized as expressions of quality.

We pledge to monitor ourperformance as an ongoing activity and to strive for continuous improvement.

The renewal of ABS began in thesummer of 1990. It followed a severerecession in the maritime industries,which nearly sank our classificationsociety. That fundamental renewal wasaimed at ensuring the financial stabilityof ABS by streamlining our managementprocesses, decentralizing our operations,and diversifying our resources, servicesand markets. At the same time thatrenewal was intended to reinforce thededication to our historic mission ofpromoting the security of life, propertyand the environment.

Our progress over the past eight yearshas been steady, but the outward resultsof this renewal have never been sopronounced as in 1998. ABS experiencedone of the best years in its 136-yearhistory. Classification revenues benefitedfrom robust activity in the shipbuildingand offshore industries, rising 15 percentover the previous year to a record

$238 million. The total tonnage under ABSclassification increased 5 percent to reachthe 100m gross ton level. At year end a22.5 percent share of all tonnage underconstruction or on order, was slated to bebuilt to ABS class, most bearing theunique ABS SafeHull notation.

The diversification of ABS also beganto return meaningful dividends in 1998 asits non-classification activities produced$69 million in revenue from services to awide range of industries. The totalinvestment by ABS of $23.5 million overthe past eight years in the formation ofthe ABS Group of Companies, Inc.produced $5 million in after-tax incomefor the year. This noteworthy resultrepresents 7 percent profitability and a22.5 percent return on the ABSinvestment. Through the acquisition lastyear of two companies, one specializing inenvironmental training and the other inrisk assessment, as well as the formationof a joint venture software company, ABSGroup positioned itself for further growthon a broad front. The Group’s vision is tobecome a premier global organizationdedicated to improving the safety,enhancing the quality and minimizing theenvironmental impact of its clients’ activities.

As ABS plans for the new century, wecontinue to pursue two concurrentstrategies: to strengthen our role as aleading classification society, whilediversifying our activities through thecontinued growth of ABS Group. Bothstrategies are predicated upon sustaineddedication to our mission — promotingthe security of life, property and theenvironment — through the developmentand provision of diverse services to meetthe challenges of a changing world.

The renewal of ABS and thedevelopment of ABS Group have given usthe opportunity to greatly expand ouremployee base from 1,400 to almost 2,300over the past eight years. Our employeesrepresent a wide range of knowledge,experience and talent. Their diversity willbe our continued strength. This annualreview is dedicated to their story.

F r a n k J . I a r o s s iC h a i r m a n

Diverse Services to Meet the Challenges

of a Changing World

ABS GROUP 1

History will show 1998 to have been awatershed year for ABS Group. It marksthe point at which the growing activitiesof each of the subsidiaries of the ABSGroup of Companies came together in aunified, integrated strategic direction.

This transition is reflected in thefinancial performance of the Group,which posted new records in everymeasurable category. That is anachievement in which every employee cantake pride. But the greater accoladebelongs to every member of the ABS

Group staff for the manner in which theyhave lived with change.

This ability to anticipate and adapt toa rapidly changing business environmentwill secure our future. Change is themedium of opportunity and growth. ABSGroup has taken the opportunity toanticipate the changes that will impactour client’s activities. In 1998 weresponded by changing ourselves to meetthat challenge. We cannot lead unless wehave a clear vision of the challenges and

opportunities that confront our clients,and first prepare ourselves to meet them.

The changes affecting modernbusiness come from many directions.Technology is evolving at breathtakingspeed. Business practices are subject toconstant amendment. Traditionalrelationships are no longer secure.Regulatory impacts can be bewildering.To succeed within such a dynamicenvironment requires a clear vision,decisive action and a willingness to be anagent of change, not a follower.

The vision of ABS Group is clear. It is toprovide integrated services to our clientswhich assist them in improving the safetyof their operations, enhancing the qualityof their services and minimizing theenvironmental impact of their activities.

We implement this vision bydeveloping integrated services that focuson developing an awareness of the issuesthat will affect the safety, quality andenvironmental actions of our clients.

From this awareness we are able toevaluate the adequacy of those actionsand develop pro-active strategies whichwill not only ensure short-termcompliance but also assist the client toimplement safety, quality andenvironmental management systems thatwill encourage continuous improvement.

We verify compliance, providecertification when appropriate, and offerinformation management systems thatwill facilitate continuing compliance.

We pledge to provide these serviceswhile maintaining the highest levels ofintegrity and expertise. And we havedeveloped a strategy to deliver theseservices through a global network of safety,quality and environmental professionals.

This vision and strategy resulted in anaggressive corporate reorganization andexpansion in 1998. By year's end, thevarious subsidiaries of the ABS Group ofCompanies were brought together as asingle operating unit, ABS Group Inc.,delivering a portfolio of fully integratedsafety, quality and environmental servicesto clients worldwide.

During the year we enhanced ourcapabilities through a strategy of

F r a n k J . I a r o s s iC h a i r m a n a n dC h i e f E x e c u t i v eO f f i c e rA B S G r o u p

“The vision of ABS Group isclear. It is to provideintegrated services to ourclients which assist them inimproving the safety of theiroperations, enhancing thequality of their services and minimizing the environmentalimpact of their activities.”

ABS GroupDiversifying for Global Success

ABS GROUP 2

carefully structured joint ventures andacquisitions. As a consequence, ABSGroup is poised to become the premierglobal training and consulting companywithin the areas of safety, quality andenvironmental management.

ABS Group is poised to become thepremier global organization offeringadvanced analysis, consulting and trainingservices dedicated to reducing the riskand improving the reliability of ourclient’s activities.

ABS Group is poised to become thepremier global enterprise promoting afully integrated approach to safety,quality and environmental certification.

And ABS Group is poised to institute aglobal information network designed toacquire, store and analyze informationrelated to safety, quality andenvironmental management systems.

Few companies have the experience orstructure to function effectively in theglobal marketplace. It requires a

multicultural workforce and familiaritywith differing laws, customs and businesspractices. Few companies have thefinancial resources to invest in a globalnetwork, able to respond quickly to theneeds of every client. Few companies havethe management expertise to think, actand operate globally.

ABS Group has each of thoseresources. We are an affiliate of theAmerican Bureau of Shipping, a near 140year old organization which offerscomparable services specifically tailored tothe international marine industry. ABSGroup has the perspective, the experienceand the international infrastructure todeliver a diversified suite of services to ourclients wherever they, or wherever theiractivities, may be located.

We believe change favors industryleaders. They are most accustomed toanticipating and adapting to the dynamicsof the business environment. ABS Group issuch a leader. We stand ready to serve.

ABS GROUP 3

Speaking five languages helps PatriciaFitzgerald establish common ground whenworking with her worldwide list of clients.The environmental management systemcertification process is as much aboutcommunication as it is about verification.

“My work takes me around the world,dealing directly with clients and auditors,”says Patricia, Manager of the ABS QualityEvaluations ISO 14000 EnvironmentalCertification Program. “Maintaining andimproving the quality of the environmenthas become a global concern for many

companies. Today’s premier organizationsare more aware of the environmentalimpacts of their activities, products andservices and of the associated businessadvantages than ever before.”

Established in 1996, ISO 14001 is aninternationally recognized and acceptedenvironmental management systemstandard. ABS Quality Evaluations, Inc. is aleading global registrar in certifyingcompanies to the ISO 14001 Standard.

“The certification process examines acompany’s environmental practices,”Patricia explains. “Our assessment verifiesthe organization’s commitment to asystematic approach to businessoperations and to continuousimprovement of the EnvironmentalManagement System (EMS).”

“Our goal at ABS is to supply ourclients with a highly trained audit staffthat understands not only the intent ofthe standard, but can also make a fairevaluation of a company’s commitment toenvironmental performance.”

Committing to the Environment

P a t r i c i a F i t z g e r a l dP r o g r a m M a n a g e rI S O 1 4 0 0 0A B S Q u a l i t yE v a l u a t i o n s

“Maintaining and improving thequality of the environment hasbecome a global concern formany companies.”

ABS GROUP 5

Information can be a curse or ablessing. The difference lies in how it ismanaged. Competitive advantage accruesto the company that is able to capture,integrate, analyze, store and retrieveinformation in the most effective manner.Doing so is a challenge. And that is thereason Evan Michaelides is so enthusiasticabout his responsibilities with ABSNautical Systems.

As Vice President ProductDevelopment, Evan heads a team ofindustry and computer experts who workwith clients to develop the integrated

software modules that lie at the heart ofSafeNet. That software addresses everymajor operational expense associated withthe technical and personnel managementof a ship or oil rig, including machinerymaintenance and repair, purchasing,inventory, crewing, crew payroll, andstructural maintenance, among others.

Evan came to ABS Nautical Systems inlate 1998 from its joint venture partner,Nautical Technology Corp. “As part ofABS Group, our product has beenimmediately enhanced through itsintegration with ABS SafeNet,” he says.“But the real excitement is that we arenow able to service clients on a globalbasis, something we could not doeffectively as a small independent systems developer.”

ABS Nautical Systems helps a companysimplify the management of a singlevessel or an entire fleet. “SafeNet is atotally integrated management system,”Evan explains. “Data need only be enteredonce to be accessible through any of themanagement modules. A sophisticatedreplication manager means that every shipwithin an operator’s fleet, every office,every warehouse has access to the same,constantly updated data. The result is thatour clients have found they are dealingwith much reduced paperwork andreduced administrative and operationalcosts,” he says.

For the moment the principalchallenge facing the Nautical Systemsteam is its own success, Evan reveals.“Since the marriage of the ABS and NTCprograms, the growth has beenphenomenal,” he says excitedly. “We haveestablished a global sales and supportnetwork, developed new managementmodules and signed on a significantnumber of new clients. This really is thestart of something big.”

Managing Information

E v a n M i c h a e l i d e sV i c e P r e s i d e n tP r o d u c tD e v e l o p m e n t A B S N a u t i c a lS y s t e m s

“SafeNet is a totally integratedmanagement system. Dataneed only be entered once tobe accessible through any ofthe management modules. Theresult is that our clients havefound they are dealing withmuch reduced paperwork andreduced administrative andoperational costs.”

ABS GROUP 6

Water is a valuable commodity in thedesert. A desalination plant capable ofconverting 25 million gallons a day isquenching the thirst of a desert refineryin Al Khafji. Tom Dwyer, ABS Group’sGeneral Manager for Saudi Arabia, isoverseeing the provision of third partyengineering verification for thatdesalination plant.

“We provide worldwide procurementinspections for all the valves and piping,”Tom says. “That’s the advantage of beinga global organization. ABS Group peoplein Japan, the Philippines, and Europe areall contributing to this job. Our on-siteteam includes civil, mechanical, electricaland instrumentation engineers, plus adiver. Together, they act as the eyes andears of the owner to make sure the plantis built to specifications.”

The project is an example of ABSGroup’s diversification and global strategy.It isn’t that the type of work is different, itis the way the work is being conducted.“We are using a wide variety ofengineering, inspection and verificationexpertise,” Tom explains. “We’re doingeverything on this one project. As acompany, that’s the direction we want tobe heading.”

Fielding Technical Support

To m D w y e rG e n e r a l M a n a g e rA B S G r o u pS a u d i A r a b i a

“ABS Group people in Japan,the Philippines, and Europeare all contributing to thisjob. Together, they act asthe eyes and ears of theowner to make sure the plantis built to specifications.”

ABS GROUP 7

The city was already abandonedbecause of contaminated soil. But whenthe emergency exhaust system for ahazardous waste incinerator, designed to clean the soil, failed, the public was inan uproar.

“People were worried: ‘I’m going to besick. My kids are going to be sick. My cowsare going to be sick,’” recalls MichelleJohnson, a Risk and Reliability SeniorEngineer with ABS Group. “Issues oftenbecome emotional and scientific-basedassessment is needed to provide data tocomplete the full picture.”

Michelle was called upon to providethe details. “They needed to know if theirnew system was going to be reliable andthey needed to know right then,” shesays. Using qualitative tools, Michelle andher colleagues reviewed all thecomponents of the system to identify notonly what could fail, but what could bedone to fix the weaknesses.

“We prepared a list ofrecommendations,” Michelle recalls. “Ihelped them select the right techniques

because I knew the methods. But theclient knew the system.” Such teamworkwith clients is a common approach usedby ABS Group experts. “A lot of times the client has what is needed to solvetheir own problems, we just help them. It is a case of marrying our knowledge of the tools with their knowledge of the process.”

Determining Risk

M i c h e l l e J o h n s o nS e n i o r E n g i n e e rR i s k & R e l i a b i l i t yA B S G r o u p

“They needed toknow if their newsystem was going to be reliable andthey needed to know right then.”

ABS GROUP 9

To be successful in business in Japan, itis essential to understand the differencesin culture, philosophy and practices.

When Julie Hong, a Program Managerfor ABS Group, began preparing aseminar for a Japanese company, shestarted with research. She made sure shewas aware of key cultural differences thatshe would encounter in dealing with herclients. She learned a few Japanesephrases to greet them upon arrival inYokohama. She learned to present herbusiness card with both hands as a sign of respect.

“We took a lot of time to familiarizeourselves with the culture,” Julie explains.“I think it is important to know as muchas you can about the people with whomyou will be working if you are to buildsolid and successful relationships in theglobal marketplace.” Her homework paid

off. “Our Japanese clients were verypleased,” she beams. “Participants told usthey felt the course had been tailoredspecifically for their needs. We were ableto introduce many innovative andemerging technologies.”

On this occasion the client was one ofthe largest environmental engineeringfirms in Tokyo. The firm had becomeaware of the environmental trainingcourses offered by ABS Group through itsmany instructional books.

Julie’s proactive approach turned arequest for information into acomprehensive, on-site, customizedseminar. She worked closely with theclient in developing the program agenda.“We helped them identify the mostcommon, successfully implemented,remedial technologies,” Julie explains.

Under Julie’s supervision, a four-day“Site Remediation and RestorationSeminar” was prepared for presentationin Yokohama to a team of topengineering experts with technologydesign experience. Presentations coveredsubjects such as soil vapor extraction andfeasibility studies.

Although all the participants spokeEnglish, Julie also used a translator tomake certain there were nocommunication problems, particularlywith the technical information. “We werevery well received,” Julie says. “The veryhigh feedback scores we receivedconfirmed that success.”

She is confident ABS Group succeededin fostering new relationships with morethan just this one company. “Word ofmouth carries a great deal of weight inthis tight knit industry,” Julie notes. “Wegot our foot in the door. It is up to us nowto build on this exposure. Going global isreally exciting.”

J u l i e H o n gP r o g r a m M a n a g e rTr a i n i n g &C o n s u l t i n gA B S G r o u p

“I think it is important to know as much as you canabout the people with whomyou will be working if you are to build solid andsuccessful relationships in the global marketplace.”

DeliveringGlobal Training

“Our client’s own customers requireproof that a ship is in good condition,”says John Krousouloudis. “That is why theshipowners come to us.”

From his London headquarters John andhis team of marine survey and engineeringexperts is busy working on a contract withone of the largest shipping companies in

Scandinavia. It represents a significantexpansion of ABS Group’s marine business.

“It’s significant because it’s for aScandinavian-based shipowner,” Johnnotes. “ABS Group carries out projects allover the world. But a large marinecontract in Scandinavia is like winning agame away from home.”

ABS Group is applying leading edgetechnology to evaluate the structuralcondition of about 50 vessels in thecompany’s fleet. It is providing an industryrecognized rating and, in some cases, alsoprojecting the expected lifespan of keystructural components.

“We work very closely with clients tominimize the disruption in theiroperation,” John explains. “We are awareof the business implications of taking aship out of service but we must alsoadhere to our mission of safety.”

John views personal service andadvanced technology as the keys tosuccess. “Our vessel condition assessmentprograms are being used as bench marksto evaluate others in the market. Youcannot receive a better compliment thanthat in this business.”

“Our vessel conditionassessment programs arebeing used as bench marks to evaluate others in themarket. You cannot receive a better compliment than that in this business.”

ABS GROUP 10

Applying Technologyto Expand the Market

J o h n K r o u s o u l o u d i sV i c e P r e s i d e n tE u r o p e a n d M i d d l e E a s t A B S G r o u p

“The Cantarell Field project has pulledtalented people from all over the company,”says Shari Petrash, ABS Group ProposalManager for the project. Cantarell is thesite of Mexico’s largest oil field. PEMEX,the state-owned oil company, hasembarked on a multi-billion dollar projectto modernize and expand the field. ABSGroup was chosen to participate.

“ABS is multi-dimensional. That’s whywe are able to provide the wide range of

services demanded by the client. Wherewe add value is by fully integrating theseservices,” Shari adds. “For us, the CantarellField project has involved staff and officesin the Americas, Pacific, and Europe. It hasdrawn engineers and inspectors from ourEngineering & Facility Verification team,called on quality auditors from ourCertification & Compliance group, tappedinto our marine and offshore expertise,and it has relied on the classificationexpertise of our parent company, ABS.”

Cantarell is an important milestone forABS Group, marking the future directionof the company. “We are constantlyseeking ways to integrate our full rangeof services to provide total solutions tothe safety, quality and environmentalmanagement system challenges our clientsface,” says Shari. “Cantarell brings allthese services together under the umbrellaof safety and certification. That is a real partnership.”

ABS GROUP 11

Integrating Services

“ABS is multi-dimensional...we are able to provide the widerange of services demanded by the client.”

S h a r i P e t r a s hP r o p o s a l M a n a g e rC a n t a r e l l F i e l dP r o j e c t A B S G r o u p

ABS GROUP 13

It’s an unpredictable job. Weeks go bywith ships and their crews on passage andtrouble-free, leaving the team at ABSGroup’s Marine Casualty Response Center(MCRC) to focus on routine tasks. Butabout once a month, MCRC is called intoaction to assist a client with a ship in peril.

The Oil Pollution Act of 1990 requirestankers entering United States waters tohave a designated person in the US readyto respond to emergencies. ABS Groupoffers two emergency assistanceprograms, the Rapid Response DamageAssessment (RRDA), a worldwide service,and the Qualified Individual (QI) Program,as required by OPA 90. “We are on call 24hours a day,” says Kristen Alves, ProgramAnalyst with MCRC.

Kristen’s colleagues deal directly witha ship in distress. When they do, however,it is her meticulous work in writing thevessel’s oil pollution contingency plan thatdirects their actions. “I deal with what theships need to do in emergency situations,”Kristen says. “The key is preparation. You never know when we will be calledinto action.”

When the alarm is sounded, a highlytrained team of ABS Group marineveterans responds. Within the hour, theMCRC team will have assembled to begindeveloping the required technicalresponse. Regardless of the casualty,whether an oil spill, collision, grounding,fire or explosion. these early minutes are vital.

RRDA, available to clients’ vesselsworldwide, requires a computerizedmodel of each ship to be built and storedwith the Houston-based response team.“It is crucially important to have access tothe full technical specifications of theship,” Kristen stresses. “Our navalarchitects and engineers are able to drawon this information to develop the mosteffective technical response.”

In many instances the quicker thetechnical response, the higher theprobability of either limiting oil outflowor of preventing further damage or eventhe complete loss of the vessel. “We canload the model and use it to provide rapidguidance on complex stability or structuralproblems,” says Kristen.

“Our clients are really the best ones totell our story,” she adds. “I’m just one ofthe team. When we come together, weare focused on saving life and propertyand protecting the environment in whichwe all live.”

Responding in an Emergency

K r i s t e n A l v e s P r o g r a m A n a l y s tM a r i n e C a s u a l t yR e s p o n s e C e n t e rA B S G r o u p

“Our clients are really the best ones to tell our story,I’m just one of the team. When we come together, we are focused on saving lifeand property and protectingthe environment in which we all live.”

1998

ABS GROUP 14

Record revenues, a successful programof acquisitions, strong operating income,and a strategic reorganization were thehallmarks of the most successful year inthe history of ABS Group of Companies.

The pattern was established early withthe successful completion of the acquisitionof Government Institutes Inc., located inthe Washington DC area. Established 25 years before, the company held a pre-eminent position as a provider oftraining courses relating to safety, qualityand environmental issues. GI alsopublishes regulatory and legal texts, booksand electronic information products.

ABS Group’s aggressive expansionstrategy continued with the acquisition in June of JBF Associates Inc. of Knoxville,Tennessee, a prominent firm of systemreliability and safety engineeringconsultants. The company specialized inanalyzing engineered or managementsystems to assess risks and developappropriate risk mitigating solutions forthe nuclear, chemical manufacturing, andoil and gas processing industries. Theacquisition strengthened ABS Group’sability to offer a full range of servicesaddressing safety, quality andenvironmental management.

JBFA also offered a substantialportfolio of related training courses,offered through its Process Safety Instituteand System Reliability Institute, furtherstrengthening ABS Group’s burgeoningtraining and consulting activities.

As the year progressed, a strategicreorganization of ABS Group’s activitieswas undertaken to maximize theexpanded range of services stemmingfrom these successful acquisitions. Existingactivity within the fields of verificationand certification was reviewed. As aresult, services were allocated to fourprincipal business lines: Risk andReliability; Training and Consulting;Certification and Compliance; andEngineering and Facility Verification,which includes the Group’s traditionalstrong business within the marine andoffshore sectors.

In concert with this reorganization, areview of the ABS Group’s global networkof offices was undertaken to improve the

ABS Group Year in Review

R E V E N U E B Y R E G I O N

R E V E N U E B Y B U S I N E S S L I N E

Risk & Reliability13%

Engineering & Facility Verification

50%

Certification & Compliance25%

InformationManagement1%

North America60%

Pacific14%

Europe18%

South America8%

Training & Consulting11%

ABS GROUP 15

delivery of services. A further expansion of ABS Group’s

activities occurred in September with theestablishment of a new joint venturecompany, ABS Nautical Systems LLC inwhich the ABS Group subsidiary, ABSInfolink Inc. took a majority holding.Partnering ABS Group in this new ventureis Nautical Technology Corp. of New York,which contributed its successful suite ofNTC Ship Manager software to the existingABS SafeNet fleet management program.

The new alliance created the mostcomprehensive, most advanced and mostpractical fleet management programavailable to the maritime and offshoreindustries. Marketed under the ABSSafeNet product name, the expandedsuite of information managementprograms received immediate supportwithin the industry resulting in an influxof new orders during the fourth quarter.

This dramatic series of acquisitionsovershadowed steady performance ineach of the existing areas of ABS Groupactivities — quality management systemcertification, non-classification marinetechnical and consulting services,industrial verification, and offshoreengineering, inspection and consultancy.Contracted services were provided aroundthe world, with significant engineeringand verification contracts beingundertaken in Singapore, Mexico and theMiddle East among others.

A principal area of ABS Group activitythroughout the year continued to be theservices provided to PEMEX relating tothe modernization of the Cantarelloffshore oil field. The multi-year contract,awarded to ABS Group in 1997, remainsthe single largest individual contract everundertaken by ABS or any of its affiliates.It is representative of the completelyintegrated safety, quality andenvironmental management serviceswhich the Group is structured to provideas part of major industrial projects.

The end of 1998 marked the openingof a new chapter in the history of ABSGroup. With a clear vision, a definedstrategy, expanded expertise and a globalnetwork in place, the company is positionedfor further success in 1999 and beyond.

A B S G R O U P E M P L O Y E E G R O W T H

E X P A N S I O N O F B U S I N E S S L I N E S

555

A B S G R O U P O P E R A T I N G R E V E N U E

69.1 M

Engineering & Facility Verification

Certification & Compliance

Training & Consulting

Risk & Reliability

Information Management

ABS

ABS 1

Safety. Standards. Service. Three wordsstand at the center of ABS. Together theyensure the ongoing success of thisorganization. It is our belief that whenevery maritime organization embracesthese three principles, the industry will berid of many of the problems that confrontus all.

Safety should be the paramountconsideration. Too often too many withinthe industry indicate by their actions thatsafety is considered no more than anotherbusiness expense. Such operators will findno tolerance for their actions within ABS.Human life is not negotiable. Yet pressreports continue to reflect evidence that asmall, yet significant number of operatorshave a very low regard for seafarer safety.

Those that ignore safety for perceivedincremental commercial advantage havefailed to understand that, by improving

the safety of their operations, they willreap even greater financial benefit. Otherindustries, which have a more progressiveapproach to modern management, haveclearly shown the positive returnsspawned by the adoption ofcomprehensive safety and qualitymanagement systems.

The establishment and application ofstandards have been the core activities ofABS from the time of its foundation.Governments also play a significant role,establishing standards through regulation.

Many owners argue eloquently thatshipping is an over-regulated industry.Most of these complainants are reputable,responsible operators who understand theimportance of safety, standards andservice. Looked at in isolation, theirargument is valid. Unfortunately they donot operate in isolation. The term ‘sub-

Safety is Not Negotiable

R o b e r t D .S o m e r v i l l eP r e s i d e n t a n dC h i e f O p e r a t i n gO f f i c e rA B S

ABS 2

standard’, whether applied to a ship, anowner or a manager will not soon beerased from the maritime lexicon.

These sub-standard elements are aplague on the industry, destabilizing whatshould be a free and fair market,jeopardizing the lives of seafarers andendangering the coastlines of the world.

At ABS we constantly review thosestandards for which we are responsible,our Rules, seeking ways to make themmore current, more practical, less onerousand more effective. We support similar

initiatives being undertaken by a handfulof flag and port states to improve theregulations that already exist, rather thancontinue to attempt to legislate the sub-standard elements into extinction. Such

legislation often serves only to penalizethe responsible operator.

Effective implementation is the more appropriate response. We acceptthat we must start the process byreviewing ourselves. During the last yearwe have taken swift, remedial actionwhenever we have found ourselves tohave fallen short of the standards weexpect of others.

The shipping business is a servicebusiness. We each exist to serve another.At ABS we never lose sight of the needsof our clients. That does not mean wecompromise either our commitment tosafety, or our responsibilities indeveloping and verifying standards. Itmeans listening to our clients, developingpractical solutions to their problems,responding promptly and professionallywhatever the requirement and whereverthe need, and charging fairly for theservices rendered.

Safety. Standards. Service. We measureour success by these three criteria.Certainly, financial success is essential toensure survival and growth. Together,these principles provide ABS with thefinancial resources needed to underwriteour future.

But there are other indicators ofsuccess. A steady reduction in the numberof ABS classed vessels subject to Port Statedetention for class-related deficiencies,and a steady reduction in the number ofdamage incidents to which our surveyorsare called, provide examples.

But the greatest satisfaction comesfrom the knowledge that we are notalone in promoting these core principles.After years of widespread apathy, there isclear evidence that a growing number ofparticipants have recognized that aproactive approach to safety andstandards will benefit the entire industry.

Change takes courage and weapplaud those that have dared toconfront the unacceptable practices andpractitioners within the maritimecommunity. Together we are drawing thesafety net more tightly around theactivities of the sub-standard operator. Weshould not rest until the task is complete.

“Safety. Standards. Service.Three words stand at thecenter of ABS. Together theyensure the ongoing success of this organization. It is ourbelief that when everymaritime organizationembraces these threeprinciples, the industry will berid of many of the problemsthat confront us all.”

ABS 3

Don Birney carries a mental atlasinside his head. It includes the location ofthe more than 200 offices scattered acrossthe globe that represent ABS or one of itsaffiliates. Each of those offices must bestaffed with appropriately trainedemployees. As ABS Vice President, HumanResources, it is Don who is father to thisdiverse, yet united family.

“More than half our staff now comesfrom countries other than the US,” saysDon. “We have found the best way to

serve our clients is to have someone whois familiar with the country, the customsand the language as their first point of contact.”

Don is proud of ABS' recent efforts toinvest in many of these countries throughan expanded, international program ofeducational scholarships.

A snapshot of the program todayshows students from many countries —China, Japan, Korea, Greece, Italy and theUnited Kingdom, among others.

ABS established the scholarships toencourage talented students to pursuecareers in naval architecture, marineengineering and ocean sciences.

“Everything we do at ABS is foundedon the bedrock of maritime safety,” saysDon thoughtfully. “This gives us anopportunity to cultivate the marineindustry’s future leaders, no matter whatcountry they call home.”

Investing in the Future

D o n B i r n e yV i c e P r e s i d e n tH u m a n R e s o u r c e sA B S

“More than half our staff nowcomes from countries otherthan the US.”

ABS 4

In the tanker business, time is money.An owner wants to keep his ship moving.Idle time means it is not earning. Aclassification society, however, needs timeto conduct the periodic inspectionsrequired to keep the vessel in class.

“We recognize the commercialpressures our owners face,” says DuncanPeart, an ABS Surveyor stationed inDubai. “What we try to do is work withthem to develop a strategy so that thesurveys can be carried out with theminimum disruption to the vessel’soperation. All it usually takes iscommunication and cooperation.Provided the owner realizes that wecannot compromise our standards, bothsides can come away happy.”

As evidence Duncan cites a recentsurvey he conducted on a 25 year old vlcc.

“I worked with the Owner’sSuperintendent to draw up a strategy forthe tank examinations,” he recalls. “Tominimize the inspection time, I flew toCape Town to join the ship on the ballastvoyage back to the Arabian Gulf. TheOwner’s Super joined me on board andwe carried out all the close-up surveysusing inflatable rafts. That gave us theadvantage of also being able to completethe hydro-testing of the tank bulkheads atthe same time.”

This cooperative approach allowedDuncan to complete the survey while‘riding ship’ in 16 days. “ABS Dubai is able to respond to owners’ requests forsurveys on very short notice,” Duncansays. “Even if we need to fly a surveyor tojoin a ship in Singapore or South Africa,we are ready.”

Cooperating forCommercial Success

D u n c a n P e a r tS u r v e y o rU n i t e d A r a bE m i r a t e sA B S E u r o p e

ABS 5

In a country that holds trust andrelationships in the highest regard, thereis no better person to represent ABS thanKen Okabayashi. Ken has forged a uniquerapport with Japanese shipyards andowners. His efforts have established ABS as the alternative classificationsociety in Japan.

In so doing he has earned the title of “respected businessman”, somethingthat takes many years to earn in thistraditional society.

“The biggest challenge has been

building relationships with the shipyardsand the owners,” he says. He isundaunted. He is a formidable competitorwho is serious about his businessdevelopment role. “We are positioningourselves with SafeHull, SafeNet, and new construction,” he says firmly.

“Everyone knows about SafeHull,” he continues “but I must explain the costbenefit of using SafeHull — explain thebusiness benefits of safety. Yes, it can costa little more, but I can make a strongbusiness case for using it.”

It is easy to understand why he is sosuccessful. Ken applies the “golden rule”daily. “We work as a team here in Japan. I have about 115 people. They all workvery hard. So my story is really the successstory of all of these people.”

Breaking Down Barriers

K e n O k a b a y a s h iC o u n t r y M a n a g e rJ a p a nA B S P a c i f i c

“My story is really the successstory of all of these people.”

ABS 7

She is known as “Guan Jie” at theshipyards in China. Faith Lee’s affectionatetitle translates to “Sister Kuan”. In Chineseculture, the “Sister” title, coupled withher maiden name “Kuan”, connotesrespect laced with a comfortablefamiliarity. The near 30-year ABS veteran’swork relationships allow her to blendfriendship with business. She marriestechnical credibility and the all-importanthuman element to create a uniquelyindividual ABS service.

The business side of her relationshipsin China start at the shipyards. “I wasvisiting the Chinese shipyards and theirdesign centers,” Faith recalls. “We wereintroducing the yards and their designersto SafeHull. At each shipyard I started atraining course. After each course we

maintained these relationships so that wecould exchange information.”

After all, Sister Kuan is the TechnologyTransfer Director at ABS.

As a result Faith began to develop aunique relationship between ABS, theChinese designers and SafeHull. Thisrelationship spurred the development of aChinese language version of SafeHull. Andit led to the establishment of a dedicatedSafeHull training center as part of theMarine Design and Research Institute ofChina (MARIC) in Shanghai.

More recently Faith has been workingwith the Dalian University of Technologyand the China Ship Scientific ResearchCenter at Wuxi. ABS is sponsoring researchprojects at both institutions.

“We are planning to offer shortcourses and training classes in theuniversities, and we continue to developcourses on topics that are requested bythe shipyards based on their needs,”Faith adds. “All the major yards have alsomade requests to send their engineers to the ABS New York office to gainvaluable experience.”

“Addressing the needs of our clients isan on-going priority of ABS’ technologyteam,” Faith emphasizes. “All of our workis targeted towards making sure the needsof our clients are being met.” It was forthat reason that ABS established a fulltechnical office in Shanghai.

“It means we are not just offeringleading technology. We are able to provideresponsive, local service too. We no longerneed to forward plans or problems toJapan for approval or solutions. We havebrought ABS closer to the customer. That’sthe purpose of diversification.”

Building Bridges

F a i t h L e eTe c h n o l o g yTr a n s f e r D i r e c t o rA B S

“Addressing the needs of our clients is an on-goingpriority of ABS’ technologyteam. All of our work istargeted towards making surethe needs of our clients arebeing met.”

ABS 8

Mutual respect has enabled ABS Brasilto become a principal provider ofclassification services to state-owned oilmajor, Petrobras. “The company isinvolved in some of the most exciting newtechnology currently being developed forthe offshore sector,” says J.C. Pacheco,ABS Country Manager, Brasil.

“The amount of money being investedin developing the huge Campos Basin,deepwater fields is enormous,” heexplains. “The risks are equally great. Itcontains the largest oil reserves in thecountry. But the technology needed tofind and produce oil from the field is in

advance of the leading edge. That is whyABS has been selected to assist with somany of these projects. Trust in ourabilities is essential. Respect for thetechnical skill we bring to the projects iswhat secures the business.

“The technology development, drivenby our client, has prompted ABS torespond with either new standards, suchas our Guidance Notes for SyntheticMoorings, or for updated standards thatproperly address these developments.”ABS has played an important role inidentifying these technologies. We havebeen able to make significantcontributions to our own technicalexpertise in the process.”

Pacheco is quick to point out thatteamwork has been a key to success.“When you listen, respect, and respond tothe client, the business relationshipbecomes more long-term. And long-termrelationship building is what it’s all aboutin South America.”

Forging Relationships

J . C . P a c h e c oC o u n t r y M a n a g e rB r a s i lA B S A m e r i c a s

“Respect for the technical skillwe bring to the projects iswhat secures the business.”

ABS 9

“ABS has maintained a fullengineering office in Piraeus for manyyears,” says Dimitri Houliarakis, RegionalVice President. “It allows us to respondquickly to any technical problem a localowner may have.” When the officerecently reviewed 51 bulk carriers for localGreek clients against new structuralcriteria, the importance of a local full-service office was strongly revalidated.

“On the bulk carrier issue, we wereable to initiate direct discussions betweenan owner’s technical staff and ourengineers. That way there were nomisunderstandings over the requirementsor their interpretation. We were able toquickly detail the work that needed to bedone, and then worked with owners tominimize any disruption to a vessel.

“Being Greek, in Greece, assistingGreek owners means that we have a farbetter understanding of their concerns,”he explains.“ I know many of our clientspersonally from my university years ormy time in the Navy or at the shipyard.Many of my staff have developed similarrelationships during their professionalcareers. It means that we are able togive our clients the individual attentionthey deserve.

“In shipping everything has to bedone yesterday,” he adds. “So it’s not onlythe trust, but the speed of response thatowners need.” He takes the day-to-daypressures in stride, referring to them onlyas opportunities. “My work in Greece isintertwined with who I am. It is muchmore than just a job.”

Responding Locally

D i m i t r i H o u l i a r a k i sV i c e P r e s i d e n tE a s t e r n R e g i o nA B S E u r o p e

ABS 11

“The maritime world is changing theway it thinks about safety,” says KenNelson, Head of ABS’ Safety andEnvironmental System Certification. “Forthe first time in its history the industry hasbegun to deal with the fact that mostaccidents involving ships and pollution areactually caused by human error.”

If, as a result, the maritime industry“truly develops a safety culture,” hecontends, “it could change the currentinspection regime.” That is an enticingcarrot to dangle before an industry whichfrequently complains that it is over-regulated. “To make that case therewould have to be a demonstrableimprovement in loss ratios, casualtyincidents, Port State detentions and otheraccepted measures,” Ken warns. “Thoseresults could provide the backing themaritime industry needs to make acompelling case for more self-regulation.”

The term ‘safety culture’ has yet topenetrate deep within the industry’sconscience, even as the first foundationfor such a culture, the ISM Code, is beingassimilated into many operators’management practices. The first phase ofthe Code entered force on 1 July 1998. Itis the first step towards addressing thehuman component, the way in whichships are operated, and the people whoare involved. “Both the peopleassociated with the ship and itsstructural integrity are of equalimportance,” says Ken.

As with every other maritime safetyinitiative, there have been a small numberof operators who view the ISM Code as animpediment to the manner in which theyprefer to operate. The majority ofoperators could best be described asreluctant adopters of the Code. “Initially,many of them complied with the newcertification simply because they had to,”Ken admits.

“What is encouraging is that, nowthat they have had time to adjust, manyof them are describing it as a helpful tool.They’re telling us how they’ve gottenbenefits — some tangible some not sotangible,” he recounts. “After all, it isdifficult to measure the impact and thecost of the accident you didn’t have.”

Safety is difficult to measure, butdangerous to disregard. The ISM code isthe first step towards a safety culture. ABShas recognized this new direction and hasadopted a leadership position, developingan integrated Safety, Quality andEnvironmental (SQE) standard.

This activity is a far cry from thetraditional engineering-basedresponsibilities of a classification society.“There is a revolution taking place,” saysKen. “Most of the players in the industryare not aware of it. Yet it has alreadychanged the way we at ABS think and act.”

Changing Attitudes Towards Safety

K e n N e l s o nH e a d o f S a f e t y a n d E n v i r o n m e n tS y s t e mC e r t i f i c a t i o nA B S

“The maritime world is changingthe way it thinks about safety.For the first time in its historythe industry has begun to dealwith the fact that mostaccidents involving ships andpollution are actually causedby human error.”

ABS 12

Who but a visionary would ever haveconceived a fleet of 11,000 gt, 40 knotpassenger/car ferries? Italian ingenuity,coupled with ABS technical expertiseturned that dream into reality for theferry operator, Tirrenia, during 1998.

“ABS Italy has been a partner in thischallenge from the beginning,” saysOreste Del Conte, ABS Country Manager.

“Classing these new vessels has been awonderful experience for our engineersand surveyors. They have been given thechance to further extend our technicalknowledge in this area. We were alreadythe leaders in developing and applying

technical standards for the newgeneration of high speed, high capacitymono-hull car ferries. This project hasallowed us to extend that lead.”

The owners and shipyards chose ABSbecause of its technical capabilities andexperience Oreste explains. “The designersasked for our participation right whenthey started the project.” These ferries arethe first craft to be designed under thenew ABS High Speed Craft Rules. Theproject has thus provided an opportunityto further refine them.

“They represent a perfect example ofhow ABS develops new technology, inconcert with industry, so that previousbarriers can be safely broken,” says Oresteproudly. “Our Rules are in a constant stateof evolution. They must always reflect thelatest technology, and embody our entirestore of technical knowledge.”

Speeding Development

O r e s t e D e l C o n t e C o u n t r y M a n a g e rI t a l yA B S E u r o p e

“Our Rules are in a constantstate of evolution.”

ABS 13

ABS has always understood theimportance of having a local presencewhen working with clients. When some ofthose clients moved into the new frontier,oil boom area of the Caspian Sea, ABSmoved right alongside them. “We lookedat the area and decided we had to have apresence,” says Bill Sember, ABS EuropeVice President, Western Region.

The icy waters of the Caspian Sea maybe daunting, but they hold the promise ofhuge oil reserves that are, as yet, largelyuntapped. ABS has staked its claim.“We’re bringing in experience, and we’remaking sure quality standards are beingmet,” Bill stresses.

Although oil prices are at an all timelow, and some fledgling players in thehigh stakes Caspian game have pulled

out, “we believe in the potential forgrowth in the region,” says Bill. “Ourclients continue to believe in thatpotential and we are committed to our clients.”

The remoteness of the area is posingsome unique operational and technicalproblems. ABS has the skills to providevalued assistance to the offshoreoperators, struggling to develop equallyunique solutions to these problems.”

“With our new office in Baku we havea better feel for what’s needed,” Bill adds.“We are able to maintain direct, openlines of communication with our clients.We do the listening. This is a developingarea. Everything is fluid. It is the sort ofsituation that brings out the best in ABS.It’s a very exciting time.”

Keeping Pace with Our Clients

W i l l i a m S e m b e rV i c e P r e s i d e n tW e s t e r n R e g i o nA B S E u r o p e

ABS 14

“When a ship is being designed thereis always a trade-off between vesselstrength and the amount and weight ofthe steel that goes into its structure,”says Gary Horn, Manager of the ABSSafeHull program.

“A designer certainly doesn’t want toadd excess steel as it will detract from thevessel’s cargo carrying capabilities. Equally,too little steel can create costly, andpotentially dangerous, structural problems,such as cracking and fatigue-inducedfailure over the ship’s life. SafeHull givesdesigners a tool to better balance these

issues. By applying SafeHull, the designercan maximize vessel strength by placingmaterial where it is needed most.

Gary explains, “What SafeHull does isclearly indicate where steel needs to beadded in the highly stressed areas, andwhere less steel may be acceptablebecause of the low stress values.”

“In developing SafeHull, we did notignore all the accumulated wisdom andexperience we had gained from applyingthe more technically simplistic, prescriptiveRules to vessel design,” Gary stresses. “ButSafeHull has provided an infinitely more

Improving Safety with Technology

G a r y H o r nS a f e H u l l M a n a g e rA B S

ABS 15

advanced, more analytical and moreaccurate method of evaluating the design.”

In essence, SafeHull brings the sameengineering principles of the DynamicLoading Approach (DLA), to the task.While not as complete an analysis asDLA, SafeHull offers a much fasterapproach, suitable for all but the mostcomplex structures.

As removed from personalinteraction as all this may sound, Garyreassuringly points out the personaltouches ABS provides as part of theSafeHull package. “My department is

heavily involved with providing technicalsupport and training to our clients,particularly the principal shipyards inAsia,” he says.

“We have stationed SafeHull expertsin each of our principal engineeringoffices. Clients are in contact with theseengineers in our local offices. Usingmodern communications we are all ableto electronically trade information on thedesigns, and then use SafeHull to analyzethese ships. SafeHull provides ownerswith stronger, safer ships than waspreviously possible.”

ABS 16

“We need to be always looking aheadso that we can improve our Rules andprovide sophisticated technical support toother departments within ABS, and tooutside clients,” says Dr. Yung S. Shin. Heis one of the most senior researchers inthe Technology department of ABS. “Ourefforts have laid the groundwork formany pioneering and successful projects— including SafeHull.”

His specialty is the determination of the impact of waves, and the loadsthese place on a ship or offshore rig’sstructure. Analyzing environmental data,mainly wind, wave and current, Shincalculates how a ship will respond at seato determine if the strength criteriaapplied to the evaluation of the designis adequate.

Some of the topics assigned to himand his team include: Dynamic LoadingApproach Using 3D panels (DLA3D); HighPerformance Ships Analysis (SESS, SWATH,Trimaran); wave impact due to bottomslamming and bow flare; and OffshoreStructure Analysis System (OSAS).

His research is evaluated, usingmodels, in some of the world’s leadinghydrodynamic laboratories. He is morethan a theorist; he tests his conclusionsand makes decisions that will affectfuture ships not yet on a designer'sdrafting table.

“I believe our R&D efforts improve thereliability of ships and offshore structures,and ultimately enhance the safety of life,property, and the marine environment,”Shin says. “What we do speaks to theheart of the ABS mission.”

Creating Leading Technology

D r. Yu n g S . S h i nS t a f f C o n s u l t a n tR e s e a r c h a n dD e v e l o p m e n tA B S

ABS 17

1998AYear of Accomplishment:A Time of Change

Each year poses different, oftenunique challenges to ABS. 1998 was noexception. Economic uncertainty buffetingAsia and threatening the global economy,falling oil prices and marshmallow rates inthe principal shipping markets erected atriple barrier to growth for the marine andoffshore industries.

There were some notable financialcasualties as a consequence. Many otherssought survival through retrenchment,consolidation and equipment lay-up.Caution became the watchword.

ABS was not immune to these forces.Responsiveness was our mantra.Persistence and flexibility shaped ouractions. Success was our reward.

As a result 1998 proved to be a recordyear for ABS as past policies of efficiencyimprovement and technical innovation borefruit. Responding to the precarious marketconditions confronting many of our owners,ABS was able to maintain its fees at thesame level first imposed four years earlier,in January 1994. It has not been easy tocreate and pass on to our clients such asignificant financial benefit. That we havebeen able to do so is directly attributable tosweeping, and ongoing changes in themanner in which we approach our ownadministration and operations.

With each improvement in efficiencywe have been able to offer more complete,

more responsive service, and improvedtechnology and products to our clients. Wehave been heartened by the marketrecognition that has been accorded theseactions, particularly in 1998.

F l e e t G r o w t h

Technical innovation led to thedevelopment of SafeHull, still the mostadvanced ship design and structuralevaluation method available to theindustry. Shipowner and shipyardacceptance of SafeHull propelled the fleetof ABS classed vessels past the 100 milliongross ton mark by year end. This is thefirst time that the ABS fleet has exceededthis figure in more than a decade.

More importantly, owner demand forSafeHull approved new vessels pushed theABS orderbook to 11.9m gross tons, therebyre-securing the future of the organization.These orders included contracts for thelargest containerships yet conceived,designed and evaluated using SafeHull.

Owners have come to understand thata SafeHull ship is a stronger, safer ship,unlikely to exhibit the same pattern ofstructural cracking which affects manylarge vessels approved to traditionalprescriptive rules. As a result, ABS receiveda predominance of the new vlcc tankertonnage ordered in 1998, and experiencedsignificant growth in our orderbook forbulk carriers.

This upsurge in the ABS classed fleethas cemented our position as the thirdlargest classification society in terms oftonnage. ABS has long been the dominantclassification society in total number ofvessels classed, with a fleet of more than11,000 vessels.

O f f s h o r e S u c c e s s e s

Comparable success was achieved inthe offshore sector during 1998. AlthoughABS continued to invest in newtechnology, such as developing the newGuidance Notes for Synthetic MooringLines, it was our dedication to servicedelivery that proved most effective inbuilding client loyalty.

Des igned forserv i ce in watersup to 10 ,000 f tdeep , DEEPWATERPATHF INDER i s thef i r s t o f a four sh ipser ies o f 56 ,000gtdynamica l lypos i t ioned ,deepwater d r i l lsh ips bu i ld ing to ABS c lass a t Samsung .

ABS SHARE OF NEWBUILDING CONTRACTS

ABS 18

As the leading classification societyserving the dynamic, fast moving andtechnically innovative offshore industry,ABS has developed engineering andsurvey services tailored to meet theunique demands of the offshore operator.A well-orchestrated recruitment andtraining program throughout the yearallowed us to offer responsive,professional support to each of themultitude of projects brought to ABS.

Notable achievements during the yearwere recorded in the deepwater drill shipsector, which remained largely imperviousto the downturn in oil prices. Thesesuccesses included the ‘super’ drillshipsdelivered to Conoco/Reading & Bates bySamsung, a 73,000gt drill ship underconstruction at Samsung for Saipem, anda 41,000gt drill ship building at Harland &Wolff for Global Marine.

ABS activity remained strong in otheroffshore sectors, particularly conversionwork involving FPSOs, upgrades ofexisting units, new self-elevating MODUs,and OSVs. ABS provided classification forthe first TLP to enter service in the Gulf ofMexico, and also participated in a complexand demanding contract to convert andprepare a former Arctic production rig forservice off eastern Russia.

Responding to offshore client needs,ABS also expanded its presence in theCaspian Sea region and West Africa, thetwo most important new explorationareas. In April, ABS opened an exclusiveoffice in Baku, Azerbaijan, on the WesternCoast of the Caspian Sea. Staffed by two

experienced surveyors, this office providesa full range of offshore services tocompanies working in this area. Service toclients operating in West Africa washeightened with the addition of new staffin the region and increased support foractivities in Angola.

And an important expansion of ABSresponsibilities within the offshore sectorcame with the US Coast Guard's recognitionof ABS to act on its behalf under theAlternative Compliance Program (ACP) formobile offshore drilling units (MODUs).

S a f e t y M a n a g e m e n t S y s t e m s

No recent event has imposed greaterchange on the maritime industry than the1998 implementation of the ISM(International Safety Management) Code.For the first time the management ofboth the ship, and the administrativeoffice responsible for the ship is nowrequired to meet specified standards,established as part of the SOLAS (Safety ofLife at Sea) Convention.

No one pretended that the applicationof these new requirements within aninherently conservative industry wouldoccur without difficulty. In the periodleading up to the effective date, ABSallocated considerable financial and

B u l k c a r r i e r o w n e r s w e r e c o n f r o n t e dw i t h e x c e p t i o n a l l y t o u g h m a r k e tc o n d i t i o n s i n 1 9 9 8 . N e v e r t h e l e s s , A B Sr e c e i v e d c l a s s i f i c a t i o n c o n t r a c t s f o r 4 4n e w b u l k c a r r i e r s , t o t a l i n g 1 . 7 m g t ,d u r i n g t h e y e a r, a l m o s t h a l f o f w h i c ha r e f o r p a n a m a x v e s s e l s s u c h a s M I S C ' sr e c e n t l y d e l i v e r e d BUNGA SAGA ENAMb u i l t b y S u m i t o m o H I .

M a n y o w n e r s o f l a r g e c o n t a i n e r s h i p sa r e a s k i n g f o r S a f e H u l l a p p r o v e dd e s i g n s . O p e r a t o r s o f s m a l l e r v e s s e l sh a v e a l s o r e c o g n i z e d t h e t e c h n i c a l a n do p e r a t i o n a l b e n e f i t s o f c l a s s i n g w i t hA B S . C o s c o , Wa n H a i , K i e n H u n g , A . P.M o l l e r a n d M I S C a r e a m o n g t h o s e w h op l a c e d c o n t r a c t s d u r i n g t h e y e a r f o rc o n t a i n e r s h i p s i n t h e 8 , 0 0 0 - 1 8 , 0 0 0 g r o s st o n r a n g e , s u c h a s t h e 1 0 9 2 t e u MAERSK AHRAM .

ABS 19

people resources towards assisting ourclients understand, prepare for, andcomply with the new standards.

Despite widespread predictions to thecontrary, implementation proceededrelatively smoothly. ABS is proud of thepart it has played in this criticalimprovement in ship safety.

The importance of ISM cannot bedownplayed. It forms one of the threelegs of the developing new approach tosafety standards for the industry. In thefuture, successful shipowners will basetheir operations on the safety, quality andenvironmental management standardsestablished by the ISM Code, the ISO 9000Quality Management System standard,and the more recent ISO 14000Environmental Management Systemrequirements. ABS, together with the ABSGroup, is now able to assist with theimplementation of all three standards.

R e s e a r c h a n d Te c h n o l o g y

1998 research activities focused in fourareas: wave loads and ship motions,strength of ship structures, human factorsand formal safety assessment, andoffshore technology.

The ABS wave database has doubledwith the addition of five years of hindcastwave data, covering the Northern andSouthern hemispheres. This informationhas immediate applicability to site-specificstructures, such as FPSOs, where localizedinformation on wave loads is needed.Non-linear ship motion analysisprocedures at ABS have been enhanced tobetter account for impact loads due tobow flare and bottom slamming. Thistechnology is being applied to SafeHull aswell as DLA analysis of ships.

Detailed studies have been completedon bulk carrier double bottom structuresand torsional strength of ship hull girders.To support recent activities within the

IMO, ABS has identified enhancementsneeded to the interim methodology forassessing tanker designs on the basis ofprobabilistic oil flow calculations. ABS hasalso studied the various technicalconsiderations related to carrying outballast transfer at sea in a safe andefficient manner.

Continuing the research which led tothe 1997 issuance of the ABS GuidanceNotes on the Application of Ergonomics inMarine Systems, studies are beingundertaken addressing criteria for designof navigational bridge systems and enginecontrol room configurations.

In the offshore technology area,emphasis was given to improving theunderstanding of problems associatedwith floating production systems anddeepwater development. This involves theparticipation in a number of joint industryprojects related to structural integrity,instrumentation, vibration in risers,anchors and foundations, synthetic fiberrope for mooring systems, and fatigue ofstudless chains.

T h e w o r l d ` s f a s t e s t m o n o h u l l f e r r i e s ,b u i l t a t F i n c a n t i e r i t o A B S c l a s s f o rT i r re n i a , e n t e re d s e r v i c e i n 1 9 9 8 . T h e s e1 1 , 4 0 0 g ro s s t o n p a s s e n g e r a n d v e h i c l ef e r r i e s h a v e a s e r v i c e s p e e d o f 4 1 k n o t s .

D u r i n g 1 9 9 8 , s i x v l c c s w e re b ro u g h t i n t o A B S c l a s s i n c l u d i n g t h e 3 0 0 , 1 5 5 d w t GOLDEN V ICTORY b u i l t t o S a f e H u l l c r i t e r i a b y H i t a c h i Z o s e n f o r G o l d e n O c e a n .

ABS 20

CONTRACTS RECEIVED

TOTAL INCOMING GT

TOTAL TONNAGE IN CLASS

ORDERBOOK

1998ABS At a Glance

M a n p o w e r R e s o u r c e s

ABS . . . . . . . . . . . . . . . . . . . . . . .1,692ABS Group of Companies . . . . . . .555

G o v e r n m e n t A u t h o r i z a t i o n s

ABS has been authorized to act onbehalf of many governments for theconduct of surveys and issuance ofStatutory Certificates, either wholly or in part. These authorizations number as follows:

Loadline . . . . . . . . . . . . . . . . . . . .101Tonnage Admeasurement . . . . . . .69Safety of Life at Sea (SOLAS) . . . . .91Marine Pollution Prevention (MARPOL) . . . . . . . . . . . . . . . . . . . .73ISM Code . . . . . . . . . . . . . . . . . . . . .51

A B S S h a r e o f N e w B u i l d i n g C o n t r a c t s * b y C o u n t r y

World . . . . . . . . . . . . . . . . . . . .22.5%Japan . . . . . . . . . . . . . . . . . . . . . .24%Korea . . . . . . . . . . . . . . . . . . . . . .25%Singapore . . . . . . . . . . . . . . . . . .60%Denmark . . . . . . . . . . . . . . . . . . .84%Croatia . . . . . . . . . . . . . . . . . . . . .32%United Kingdom . . . . . . . . . . . . .42%

* Orderbook based on GT

100.1mGT

11.9mGT

7.6mGT

Existing

New

8.4mGT

1998 proved to be a remarkable yearfor ABS as classification activity reachedlevels not seen in almost twenty years.Fueled by a strong influx of new contracts,the ABS orderbook rose steadilythroughout the year, re-establishing ABSas a market leader. At the close, the ABSworld orderbook market share, measuredin gross tons, stood at a solid 22.5 percent.

This performance was attributed tostrong acceptance of ABS in both theshipowning and shipbuilding sectors,becoming the classification society ofchoice for owners domiciled in Greece, theUK, Taiwan and Singapore, with strongsupport also in Denmark, China, Italy andPoland, among others. Within the yards,ABS ranked second in both of the world's

shipbuilding powerhouses — Japan andKorea — with near 25 percent shares ofthe total gross tons on order in each. ABSalso dominated the shipbuilding contractsplaced with Danish, US, Singaporean andTaiwanese shipbuilders.

Totals for both new and existing vesselsaccepted into class also tallied sizeableincreases over 1997 as the industry turnedto ABS at an increasing rate. Recognitionby shipowners that SafeHull approveddesigns result in stronger, and thereforesafer ships, played a major part in the 1998ABS success story. As a result, the ABS fleetof existing ships and offshore structuresgrew to over 100 million gross tons by yearend — a level that had not previously beenexperienced since the end of the ship orderboom of the 1970s through early 1980s.

V e s s e l s C l a s s e d

During 1998 ABS classed a total of 713new and existing vessels aggregating7.59m gross tons. This represented a 20percent surge in activity over the strong1997 performance. Of the total vesselsclassed, 405 of 5.27m gross tons were newbuildings and 162 of 1.95m gross tonswere vessels previously in the class ofanother society or unclassed. In addition,146 more vessels that had been previouslydropped from ABS class were re-instatedfollowing necessary survey.

V e s s e l s R e m o v e d

Removed from the ABS classed fleetduring 1998 were 729 propelled and non-propelled vessels. Of these 66 werescrapped, 294 were withdrawn at theowner’s request, and 369 were droppedfor non-compliance with the ABS Rules.Among those dropped, 70 were ocean-service merchant ships, and the remaindersmall vessels and barges.

C l a s s e d F l e e t

The positive net result of this activitypropelled the ABS classed fleet to a total11,298 vessels aggregating 100.1m grosstons at the close of the year. These vesselsflew the flags of 95 different nations. This

ABS 21

ABS PERCENTAGE OF WORLD DELIVERIESSelf-propelled vessels > 100 GT

1998Classification Activity

SURVEYORS & ENGINEERSBureau – 43% Growth from 1993-1998

Surveyors

Engineers

1,070

21.5

ABS 22

robust growth saw ABS add almost 5mgross tons to the fleet compared to 1997,a year which itself represented theculmination of an unbroken four yearperiod of growth.

N e w C o n t r a c t s R e c e i v e d

A steady flow of new requests for ABS class throughout the year resulted incontracts totaling 8.4m gross tons beingbooked for the year. Once again, thisrepresented a strong increase over theprevious year's already healthyperformance. A cumulative gain of 28percent was registered over 1997 in thethree major categories of tanker, bulkcarrier and containership, as newcontracts received during the yearincluded 148 vessels of these three types.

O r d e r b o o k

At the close of 1998 there were morethan 700 ships and offshore structuresbuilding or contracted to be built to ABSclass totaling 11.9m gross tons. Thisrepresented a solid 8 percent increase inthe number of vessels compared to 1997,and a jump of 29 percent in gross tonnage.These totals included orders for 99 tankers,70 bulk carriers and 66 containerships.

Ta n k e r s

In 1998 ABS received formal requests toclass 85 new tankers aggregating 4.8mgross tons, including 14 vlccs and 24aframax vessels. This unprecedented surgeof tanker orders — more than double theyear earlier — is attributable to increasedindustry-wide demand for the application

of SafeHull technology to this vessel type.From the close of 1997 to the close of 1998,the tanker orderbook posted a significantincrease to 99 tankers of 5.5m gross tons,up by 27 vessels and 1.4m gross tons.

During the year ABS also classed 48new tankers of 2.4m gross tons, bringingthe ABS classed tanker fleet to 891 vesselsof 41.9m gross tons, an increase of 5percent in number and 9 percent in grosstonnage over year-end 1997.

B u l k C a r r i e r s

ABS also showed solid growth inclassification activity for bulk carriersduring the year. Contracts were receivedfor 44 new vessels — almost half of whichare to panamax dimensions — totaling1.7m gross tons. This represented an almosttwofold increase in the total gross tonnagecontracted compared to the prior year.

This surge in new orders helped drivethe ABS orderbook for new bulk carriersto 70 vessels totaling 2.3m gross tons bythe end of 1998. This representedincreases of more than 15 and 25 percentrespectively from prior year figures.During the year 31 bulk carriers wereclassed, adding 1.2m gross tons to the ABS fleet. At the close of the year the ABS classed bulk carrier fleet stood at 780 vessels totaling 21.5 m gross tons.

C o n t a i n e r s h i p s

Indicative of the continuing success ofABS within the containership sector was theacceptance into class of the SVENBORGMAERSK and SINE MAERSK. At 91,600 grosstons, these are the largest containerships inthe world. Designed to SafeHull criteria,and the subject of DLA, these ships havedrawn on the industry-leading technologyoffered by ABS to containership owners.

For the year, ABS classed 28containerships aggregating 789,600 grosstons, 10 of which exceeded 50,000 grosstons. During the year contracts werereceived to class 19 new containerships ofwhich eight are over 65,000 gross tons. Thisactivity brought the ABS containershiporderbook, to 66 vessels of 2.5m gross tonsby the close of the year, an increase of300,000 gross tons over prior year figures.At the close of the year the fleet of ABSclassed containerships numbered 360vessels, totaling 11.1m gross tons, asubstantial increase over 1997.

ABS CLASSED VESSELSend 1998, based on GT

Tankers42%

Bulk Carriers21%

Containerships11%

General Cargo6%

Offshore Related4%

Other16%

ABS 23

As of 31 December 1998 As of 31 December 1998 During 1998Vessels in Class Vessels on Order New Vessels Classed

Type No. Gross Tons No. Gross Tons No. Gross Tons

Barge 4,587 6,850,262 110 258,084 124 263,633

Bulk Carrier 780 21,480,800 70 2,284,563 31 1,203,134

Combination (Dry/Liq) 21 759,305 – – – –

Container Carrier 360 11,092,041 66 2,479,659 28 789,571

Dredge 47 114,372 3 2,790 – –

Drill Ship 16 170,341 4 226,193 – –

Dry Cargo 582 5,605,552 1 4,990 13 172,498

Ferry/Passenger Cargo 118 545,089 11 187,889 5 75,975

Fishing Vessel 41 42,740 12 7,668 1 725

Launch/Crewboat 191 21,133 32 4,124 14 3,054

Liquidfied Gas Carrier 68 2,568,331 4 190,800 4 88,242

Mobile Offshore Unit 524 3,488,072 23 183,214

Other 320 483,369 47 104,324 26 13,721

Passenger (Cruise) Vessels 85 720,280 13 17,883 2 43,578

Platform (Fixed) 101 7,572 – – – –

Research/Survey Vessels 122 215,924 11 10,027 5 6,539

Single Point Moorings 27 – 6 688 3 0

Supply & Tug/Supply 898 567,037 58 84,706 26 37,582

Tanker (Liquid Cargo) 891 41,884,669 99 5,457,694 48 2,429,828

Tug 1,065 311,701 58 23,683 37 12,565

Underwater Vehicle 59 383 9 282 – –

Vehicle/Barge Carrier 105 3,069,515 8 315,868 6 271,667

Yacht 290 63,906 64 20,057 23 3,570

TOTAL 11,298 100,062,394 709 11,865,186 396 5,415,882

1998ABS Activity

BUREAU OPERATING REVENUE GROWTHMarine Class Business Relative to 1993

BUREAU DIRECT LABOR (Surveyors & Engineers)

Ratio to Management & Support Staff

61%1.72

Frank J. IarossiChairman & CEOAmerican Bureau of Shipping

Robert D. SomervillePresident & COOAmerican Bureau of Shipping

Donald LiuSenior Vice PresidentAmerican Bureau of Shipping

Robert KramekSenior Vice PresidentAmerican Bureau of Shipping

Vincent F. RothVice PresidentAmerican Bureau of Shipping

Robert J. BauerleVice President, Treasurer & CFOAmerican Bureau of Shipping

Donald M. BirneyVice PresidentAmerican Bureau of Shipping

Walter J. CzernyVice PresidentAmerican Bureau of Shipping

Gary A. LatinVice PresidentAmerican Bureau of Shipping

Antonio C. Lino CostaVice PresidentAmerican Bureau of Shipping

John S. SpencerVice PresidentAmerican Bureau of Shipping

Joseph E. VorbachVice President, General Counsel & SecretaryAmerican Bureau of Shipping

Stewart H. WadeVice PresidentAmerican Bureau of Shipping

Martha C. AdamsAssistant SecretaryAmerican Bureau of Shipping

ABS Officers,Board & Council

Lars CarlssonPresidentConcordia Maritime AB

Richard D. DeSimoneSr. Vice President/MarineThe Atlantic Mutual Companies

Richard T. duMoulinChairman & CEOMarine Transport Lines, Inc.

Peter George GoulandrisCapeside Steamship Company Ltd.

Frank J. IarossiChairman & CEOAmerican Bureau of Shipping

Paul IoannidisDirectorAlexander S. Onassis Foundation

Gerhard E. KurzPresidentMobil Shipping & Transportation Co.

Thomas R. MoorePresidentChevron Shipping Company

William C. O’MalleyChairman, President & CEOTidewater, Inc.

C. Robert PalmerPresident & COORowan Companies, Inc.

Robert D. SomervillePresident & COOAmerican Bureau of Shipping

C.C. TungChairmanOrient Overseas (International) Ltd.

C o r p o r a t e O f f i c e r s

B o a r d o f D i r e c t o r s

W. J. Amoss, Jr.PresidentMarine Logistics, Inc.

Kurt AndersenPresidentOdense Steel Shipyard Ltd.

John A. AngelicoussisDirectorAgelef Shipping Co. (London) Ltd.

Robert J. BauerleV. President, Treasurer & CFOAmerican Bureau of Shipping

William T. Bennett, Jr.President & CEOBennett & Associates LLC

Donald M. BirneyVice PresidentAmerican Bureau of Shipping

Lars CarlssonPresidentConcordia Maritime AB

John M. CarrasCarras (Hellas) Ltd.

Kendall G. ChenPresidentEnergy TransportationCorporation

T.H. ChenChairmanYangming Marine Transport Corp.

Fred W.Y. ChengPresidentGolden Ocean Agencies, Ltd.

John P. ClanceyPresident & CEOSea-Land Service Inc.

Peter R. CresswellPresident and CEOAlgoma Central Corporation

Walter J. CzernyPresidentABS Pacific

Richard D. DeSimoneSr. Vice President/MarineThe Atlantic Mutual Companies

T h e C o u n c i l

John William Devanney, IIIPresidentMartingale, Inc.

Dott. Ing. Saverio Di MaccoManaging DirectorFincantieri C.N.I. S.p.A.

Richard duMoulinChairman & CEOMarine Transport Lines, Inc.

John D. FafaliosDirectorFafalios Ltd.

W.(Bill) P. FricksChairmanNewport News Shipbuilding

Peter George GoulandrisCapeside Steamship Company Ltd.

Peter John GoulandrisOrion & Global Chartering Co., Inc.

John G. GoumasPresidentJ.G. Goumas (Shipping) Company S.A.

William O. GrayPresidentGray Maritime Company

Dott. Aldo GrimaldiGrimaldi Group

Clyde J. Hart, Jr.Maritime AdministratorMaritime Administration, U.S. Dept. of Transportation

Ran HettenaChairmanMaritime Overseas Corporation

John A. HickeyPresident & CEAmerican Hull Insurance Syndicate

John HuffChairman, President & CEOOceaneering International Inc.

J. Erik HvideChairman & CEOHvide Marine Inc.

Yung Wong HyunAdvisorHyundai Merchant Marine Co., Ltd.

Frank J. IarossiChairman & CEOAmerican Bureau of Shipping

Masaharu IkutaPresidentMitsui O.S.K. Lines, Ltd.

Paul J. IoannidisDirectorAlexander S. Onassis Foundation

R.F. KlausnerPresidentStandard Marine Services

Robert KramekPresidentABS Americas

Gerhard E. KurzPresidentMobil Shipping & Transportation Co.

John P. Laborde

Gary A. LatinVice PresidentAmerican Bureau of Shipping

Michael C. LemosDirectorC.M. Lemos & Co., Ltd.

Antonio C. Lino CostaPresidentABS Europe

Donald LiuSenior Vice PresidentAmerican Bureau of Shipping

George S. LivanosStar Maritime S.A.

Peter G. LivanosChairmanCeres Hellenic ShippingEnterprises Ltd.

Loh Wing SiewManaging DirectorKeppel Corporation Ltd.

Admiral James M. LoyCommandantUnited States Coast Guard

Malcolm W. MacLeodPresident & CEOMoran Towing Corporation

Dr. John J. McMullenChairmanJohn J. McMullen Associates, Inc.

Thomas R. MoorePresidentChevron Shipping Company

C. Bradley MulhollandPresident & CEOMatson Navigation Co.

William C. O’MalleyChairman, President & CEOTidewater, Inc.

C.R. PalmerPresident & CEORowan Companies, Inc.

Basil Phrixos PapachristidisChairmanPapachristidis Holdings Limited

T. Peter PappasPresidentAtlantic Maritime Ltd.

Manoel Pio Correa, Jr.PartnerInfrapart Consultants

Spyros M. PolemisManaging DirectorSeacrest Shipping Co. Ltd.

Thomas J. PrendergastPresidentThe Center Marine Managers, Inc.

Richard J. Quegan

Edwin J. Roland, Jr.PresidentBona Shipping (U.S.), Inc.

Robert E. RosePresident & CEOGlobal Marine Drilling Company

Dott. Alcide RosinaManaging DirectorPremuda S.p.A.

Vincent F. RothVice PresidentAmerican Bureau of Shipping

Basil ScarvelisTrident Maritime Agency, Inc.

Robert D. SomervillePresident & COOAmerican Bureau of Shipping

Cesare SorioPresidentS.J. Marine, Inc.

Dr. John S. SpencerVice PresidentAmerican Bureau of Shipping

Prabhat K. SrivastavaChairman & Managing DirectorThe Shipping Corporation of India Ltd.

Craig Stevenson, Jr.President & CEOOMI Corporation

Capt. Panagiotis N. TsakosTsakos Shipping & Trading S.A.

C.C. TungChairmanOrient Overseas (International) Ltd.

Capt. Antonio J. ValdesPresidentConoco Shipping Company

Joseph E. VorbachVice President, General Counsel &SecretaryAmerican Bureau of Shipping

Stewart H. WadeVice President, MarketingDevelopment & CommunicationsAmerican Bureau of Shipping

Douglas C. WolcottWolcott Associates

ABS Group of Companies Inc.

Dr. Victor L. ArnoldUniversity of Texas

Edward J. CampbellJ.I. Case Co. (Retired)

Frank J. IarossiChairman & CEOAmerican Bureau of Shipping

Peter PappasAtlantic Maritime Ltd.

Dan F. SmithLyondell Petrochemical Company

Christopher J. WiernickiABS Group of Companies, Inc.

B o a r d o f D i r e c t o r s

CHILEVALPARAISO

MEXICOMEXICO CITY

BRASILRIO DE JANEIROSAO PAULO

FRANCEHELESMES

GREECEPIRAEUS

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OMANPEOPLE’S REPUBLIC OF CHINA

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MANILAPOLANDQATAR

DOHASAUDI ARABIA

ALKHOBARSINGAPORESPAIN

VISCAYATAIWAN

TAIPEI

THAILANDBANGKOK

UNITED ARAB EMIRATESABU DHABIDUBAI

UNITED KINGDOMLONDON

UNITED STATESAIKEN ATLANTABALTIMOREBATON ROUGEBEAVERTONCHICAGOCLARKSVILLECLEVELAND CONIFERFREEDOM HEBER SPRINGS

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ABS Worldwide Offices

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AZERBAIJANBAKU

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INDONESIABATAM JAKARTASEMARANG SURABAYA

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IVORY COASTABIDJAN

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