Bahri Annual Report-2014

The National Shipping Company of Saudi Arabia ( )

Annual Report 2014

In the name of Allah the Most Gracious, the Most Merciful

The National Shipping Company of Saudi Arabia ( )

Contents

Description

Page

6 - 7

Board of Directors

Chairman’s Message

CEO Message

Board of Directors’ Report

Information about the Company and its Subsidiaries

About the Company

Subsidiaries

20 – 21

Company’s Strategic Direction - Merger of Vela’s Fleet and Operations with Bahri

Major Achievements of 2014

Strategic Business Units and Support Departments

Oil Transportation Sector

Gas and Marine Services Business Sector

Chemical Transportation Sector

General Cargo Transportation Sector

Dry Bulk Cargo Transportation Sector

Ship Management (including operations)

Finance Division

Financing and Investment

Operational Risk Management

Planning Division

Communications Department

Corporate Social Responsibility

Information Technology Department

Internal Audit Department

Annual Report 2014

Description

Page

Human Resources Department

Quality Department

Environment and Safety

Financial Statements and Business Results

Financial Results and Business Performance of the Company and its Subsidiaries

Statement of Assets and Liabilities

Revenue of the Company’s Core Sectors

Distribution of Assets and Liabilities by Sector

Capital of Subsidiaries as of end of 2013-2014

Summary of Financial Results of Subsidiaries in 2014

Murabaha Financing and Long-term Loans in 2014

Regular Payments

Dividend Distribution Policy

Financial Statements of Business Results

Disclosure and Transparency

Shareholders’ Equity and Communications

Disclosure

Annual Audit Results

Corporate Governance

Board of Directors

Board Committees

Executive Management

Conclusion

Financial Report

The National Shipping Company of Saudi Arabia ( )

Board of Directors 2014-2016

Abdulrahman Mohammed Al Mofadhi Chairman

Mohammed Abdulaziz Al Sarhan Vice Chairman

Annual Report 2014

Essam Hamad Al Mubarak Board Member

Saleh Abdullah Al Debasi Board Member

Farraj Mansour Abu Thinin Board Member

Abdullah Ali Al Ajjaji Board Member

Saleh Nasser Al Jasser Board Member

Said Abdullatif Al Hadrami Board Member

Bader Abdulqadir Ghouth Board Member

The National Shipping Company of Saudi Arabia ( )

Chairman’s Message

Dear Shareholders,

May the Peace, Mercy, and Blessings of Allah be upon you.

The Board of Directors of The National Shipping Company of Saudi Arabia (Bahri) is pleased to present to you the “Annual Report of the Company’s Business for the year 2014”. The year witnessed several notable achievements and changes, never- theless the Company managed to meet its planned objectives. During 2014, the net profits made by the Company amounted to SAR 533.840 million. Considering the current situation of the world economy and the lower shipping rates of some of the

Annual Report 2014

Company’s services, such profits are remarkable.

2014 was marked with many achievements, including:

 Merger of Vela’s fleet and operations with Bahri completed. The process started in 2012 and involved 20 tankers. In August 2014, Bahri evaluated the tankers through international ship mediators, and the evaluation showed an increase in the tankers’ value as compared with the evaluation carried out in 2012.  Increasing of The Company’s share capital from SAR 3,150,000,000 to SAR 3,937,500,000 by issuing 78,750,000 ordinary shares with a face price of. SAR 10 per share. The shares resulting from the capital increase will be evaluated that is, SAR 22,25, per share as agreed with the Saudi Arabian Oil Company (Saudi Aramco), i.e. an addition of SAR 12.25 to the face value. Accordingly, the total value of the new shares will be SAR 1,752,187,500 and will be owned by Saudi Aramco Development Co., which is totally owned by Saudi Aramco.  In September 2014, a Royal Decree was issued to renew the contract with the Ministry of Defense for additional (5) years ending in 2019, with a total amount of SAR 383 million. According to this contract, Bahri will remain the official shipping agency for the different divisions of the armed forces of the Ministry, providing all logistic services related to maritime, air, and land cargo throughout the contract term.  In March 2014, the last dry bulk vessel, contracted in 2012, was received by Bahri Dry Bulk (a subsidiary company owned by 60% by Bahri). The company started its operations in 2010 by leasing five (5) dry bulk vessels to the Arabian Agricultural Services Company (ARASCO). Currently, Bahri Dry Bulk operates its own five (5) dry bulk vessels.

 The Company appointed external consultants to prepare a comprehensive strategic plan for next five years (2015-2019). Such plans will define the strategic objectives of the different business units.

Finally, I would like to extend my deep appreciation and gratitude to the Saudi government, the Custodian of the Two Holy Mosques, the Crown Prince, and Second Deputy. I would also like to thank members of the Board of Directors for their contin- ued efforts to help the Company meet its planned objectives. Similarly, I would like to thank the Company’s owners, clients, as well as staff for their dedication to meet the inspirations and expectations of the shareholders and clients.

Wishing you all success and May Allah guide you.

Chairman Abdul Rahman Mohammed Al Mofadhi

The National Shipping Company of Saudi Arabia ( )

CEO’s Message

Dear Shareholders,

May the Peace, Mercy, and Blessings of Allah be upon you.

On behalf of myself, my colleagues in the executive management, and all staff of the Company, I would like to extend my deep appreciation to the Board of Directors and valued clients for the support they have provided to the Company’s management to achieve its planned objectives. Despite the continued world economic crisis and fierce competition in the maritime transpor- tation sector, the Company managed to achieve good financial results in the fiscal year 2014. In addition, the Company is in

Annual Report 2014

the process of finalizing its comprehensive strategy (2015-2019) which will focus on enhancing and expanding the different activities of the Company, as well as ensuring efficiency of the operational processes.

The good financial results achieved by the Company are attributed to the Company’s commitment to excellence and speedy, flexible response to meeting its clients needs, in addition to its ability to adapt the unstable conditions of the world markets.

The Company continued to achieve the planned objectives of 2014, making use of its experience and resources to meet its obligations in a very cost-efficient manner. Whilst preserving the environment, the Company continues to enhance its growth by keeping pace with the latest developments in the maritime transportation industry; developing capacity and skills of its staff; and supporting initiatives and programs of the Corporate Social Responsibility. Finally, I would like to express my gratitude to my colleagues in the executive management and all of our employees for their valued efforts which helped reinforce the Company’s status in becoming a world pioneering company in the field of maritime transportation.

"…and the journey continues"

May Allah guide you.

CEO Ibrahim Abdul Rahman Al Omar

The National Shipping Company of Saudi Arabia ( )

Board of Directors’ Report Information about the Company and its Subsidiaries

Annual Report 2014

Introduction The National Shipping Company of Saudi Arabia (Bahri) is the Kingdom’s leading shipping company. Through its multiple offices, subsidiaries, and network of agents, Bahri exerts distinguished efforts in providing excellent services which cover several markets around the world with a large fleet of ships and VLCCs sailing around the globe. This helped linking Saudi economy with other economies. In addition, Bahri always strives to provide quality and efficient specialized services and to diversify its strategic investments and activities to ensure the maximum returns to its shareholders.

The National Shipping Company of Saudi Arabia ( )

Bahri Abha

Annual Report 2014

2013 General cargo vessel 225 m

Year built

: : : : : : :

Type

Length

32.30 m 17 knots 9.50 m 26,000 t

Beam Speed Draft DWT

The National Shipping Company of Saudi Arabia ( )

Bahri Arasco

Annual Report 2014

2013 Dry bulk transportation vessel 229.50 m 32.26 m 14.50 knots

Year built

: : : : : : :

Type

Length

Beam Speed Draft DWT

14.45 m 81.500 t

The National Shipping Company of Saudi Arabia ( )

About the Company The The National Shipping Company of Saudi Arabia (Bahri), based in Riyadh, was established by Royal Decree No. M/5 dated January 22, 1978 and listed on the on the Saudi Stock Exchange (Tadawul). Bahri began its operations in the general cargo shipping sector in 1983. Two years later, Bahri entered the petrochemicals shipping market, and in the mid 90s, expanded its operations to include oil transportation, followed by invest- ing in the business of liquefied petroleum gas (LPG). By acquiring a share in Petredec Ltd. In 2010, Bahri added dry bulk cargo as a new line of business. Today, Bahri is among the leading maritime transportation companies in the world, in which the Public Investment Fund (PIF) holds 22% of its shares followed by Saudi Aramco with (20%), while the remaining shares are owned by individuals and corporate investors. In 2012, Bahri signed binding agreements with Saudi Aramco and Vela International Marine Ltd., a wholly owned subsidiary of Saudi Aramco, to merge the fleet and operations of Vela with Bahri. In accordance with this agreement, the whole fleet of Vela (i.e. 14 double-hull VLCCs, one floating storage oil tanker, and 5 tankers of refined oil products) will be transferred to Bahri. The transfer process was completed in December 15, 2014. Bahri has received several awards, which are reflections of its excellence and client confidence. Bahri has reinforced this position by adopting a policy of comprehensive disclosure and transparency, especially with respect to its operational results. Bahri implements very high safety standards in all of its operations and takes environmental consid- erations into account. The Company is also committed to adopting Corporate Social Responsibility (CSR), achieving continued growth, utilizing available resources optimally, and fulfilling its mission and objectives. Due to the expansion of its activities and fleet, the Company incorporated the Mideast Ship Management Ltd in 1996 to provide technical services to the vessels and tankers of Bahri and its subsidiaries.

Annual Report 2014

Vision

Connecting economies, sharing prosperity and driving excellence in global logistics services.

Mission By consistently focusing on our values and responsible business fundamentals, we will be a leading service provider applying the international best practices to run a world-class fleet, whilst building beneficial relationships with all stakeholders.

Values

Commitment, Relentless, Transparent, Considereds.

Commitment

All of the Company’s employees are committed to supporting and serving all its customers, and to fulfilling the Com- pany’s mission to shareholders and society.

Efficiency

The Company’s efficiency lies in its work ethics, commitment to customers and operational credibility.

The National Shipping Company of Saudi Arabia ( )

Information about the Company and its Subsidiaries The following table shows the companies that are wholly or partially owned by Bahri:

Geo- graphic scope of activity

Place of incorpo- ration

Incor- poration date

Owner- ship (2014)

Company name

Core activity

NSCSA (America) Inc.

Agent

USA

Global

1991

100%

Technical ship management Chemical transportation Dry bulk cargo transportation

Mideast Ship Management Ltd.

UAE

Global

1996

100%

National Chemical Carriers Ltd. Co. (NCC)*

KSA

Global

1990

80%

Bahri Dry Bulk Co. (BDB)

KSA

Global

2010

60%

LPG transportation and trading Manufacturing of float glass

Petredec Ltd.

Bermuda

Global

1980

30.3%

Arabian United Float Glass Co.

KSA

Local

2006

4.69%

* Owns a subsidiary in the UAE under the name of “National Chemicals Carriers JLT” since 2013 that manages operations of NCC fleet commercially.

Company Strategy Bahri enhances its competitiveness in global markets through expanding its business activities, increasing its fleet, and consolidating its financial and operational position by diversifying and managing the investments in accordance with the Company’s strategic plans.

The Company’s strategic plan for 2014 included the following:

 Receiving the remaining ships under construction

 Finalizing the merger of Vela’s fleet and operations with Bahri

Exploring investment opportunities



 Improving operational performance in all sectors and business units of Bahri

 Start preparing a new strategic plan for the next five (5) years.

Annual Report 2014

Merger of Vela’s Fleet and Operations with Bahri On November 4, 2012, the Company signed the final binding agreements with Saudi Aramco and Vela, International Marine Ltd.,, a totally owned subsidiary of Saudi Aramco, to merge Vela’s fleet and operations with Bahri. Pursuant to the agreements, Bahri would pay SAR 4.9 billion to Vela, including SAR 3.12 billion in cash and issuance of 78.75 million new shares in Bahri. This deal and related decisions proved to be beneficial for the Company and its shareholders and will contribute to the Company’s future by enhancing its financial and commercial position, realizing growth and expansion strategies, and bringing in an added value to the shareholders on the long run. Accordingly, the Bahri extraordinary General Assembly meeting held on June 19, 2014, , approved finalizing the merger as stated in the prospectus of capital increase published by Bahri and approved by the board of Capital Market Authority on May 25, 2014. This merger is considered a milestone in the history of maritime transportation in Saudi Arabia and the emergence of a prominent company in the field of maritime in the world. The process resulted in the formation of a large, multiple purpose fleet of 72 vessels, making Bahri the third largest company in the world represented in the large number of VLCCs. Moreover, this merger will provide significant competitiveness in the international markets, increase operational efficiency, and reduce overhead costs. The merger deal included a full transfer of Vela’s fleet comprising of 14 double-hull VLCCs, one floating storage carrier, and 5 tankers for refined oil products. It also included embedding entire crew of Vela’s carriers, some office staff, and part of its systems within Bahri’s organizational structure. In accordance with the referenced deal, Bahri will be the exclusive provider of VLCC crude oil shipping services sold by Saudi Aramco on the basis of delivery including using VLCCs under a long-term shipping contract. According to the agreed conditions, Bahri will be protected in case the freight rates drop below the agreed minimum rate. However, in case freight rates exceed the agreed maximum rate (compensation threshold), Bahri shall compensate Saudi Aramco for the amounts it had paid to Bahri when freight rates were below the minimum rate. In this respect, the first VLLC was received from Vela on July 21, 2014, marking the effective date of the long-term Contract of Affreightment. The remaining Vela’s tankers were received according to the agreed schedule in a smooth and professional manner, ensuring integrating the transferred tankers directly into the commercial business of Bahri. The last of Vela’s tanker was transferred on December 15, 2014.

The National Shipping Company of Saudi Arabia ( )

Pursuant to the merger agreements, Saudi Aramco will own 78,750,000 new shares of Bahri, representing 20% of Bahri’s total shares after the issuance process. The new shares were listed in the portfolio of Saudi Aramco Development Company on September 15, 2014. Saudi Aramco now has a fair representation in Bahri’s Board. In addition, Saudi Aramco will continue to directly manage all crude oil marketing and client sales, while Bahri will provide reliable shipping services to Saudi Aramco. Both parties will explore further viable opportunities to expand their cooperation in maritime activities.

The merger process included a number of agreements as follows:

 Business operation and asset agreement

Service agreement



Cargo contract

Amended promotional sale forms



Relation agreement Term leasing agreement

Borrowing agreement



Annual Report 2014

Main achievements of 2014  Merger of Vela’s fleet and operations with Bahri completed. The process started in 2012 and involved 20 tankers. In August 2014, Bahri evaluated the tankers through international ship mediator, and the valuation showed an increase in the tanker’s value compared with the evaluation carried out in 2012.  The Memorandum of Understanding (MoU) signed in 2013 between Bahri, Saudi Aramco, and Sembcorp Maritime Ltd. - a major international company in maritime and engineering services based in Singapore, was extended until October, 29, 2015. It will remain effective until finalizing the economic feasibility studies of constructing a maritime shipyard in the Kingdom of Saudi Arabia.  Increasing of The Company’s share capital from SAR 3,150,000,000 to SAR 3,937,500,000 by issuing 78,750,000 ordinary shares with a face price of. SAR 10 per share. The shares resulting from the capital increase will be evaluated that is, SAR 22.25, per share as agreed with Saudi Arabian Oil Company (Saudi Aramco), i.e. an addition of SAR 12.25 to the face value. Accordingly, the total value of the new shares will be SAR 1,752,187,500 and will be owned by Saudi Aramco Development Co., which is totally owned by Saudi Aramco.  In September 2014, and by a Royal Decree, the contract with the Ministry of Defense for additional (5) years ending in 2019, with a total amount of SAR 383 million. Under this contract, Bahri will remain the official shipping carrier for the different divisions of the armed forces of the Ministry, providing all logistic services related to maritime, air and land cargo throughout the contract term.  In March 2014, the last dry bulk vessel, contracted in 2012, was received by Bahri Dry Bulk (a subsidiary company 60% owned by Bahri). The company started its operations in 2010 by leasing five (5) dry bulk vessels to Arabian Agricultural Services Company (ARASCO). Currently, Bahri Dry Bulk operates its own five (5) dry bulk vessels.  The Company appointed external consultants to develop a comprehensive strategic plan for 2015- 2019. Such plan will define the strategic objectives of the different business units and ensure that the objectives are in line with the overall strategy of the Company. The plan is being reviewed by the Strategy and Investment Committee and will require the Board’s approval before implementation.

The National Shipping Company of Saudi Arabia ( )

Strategic Business Units and Support Departments

Annual Report 2014

Strategic Sectors The Company organizes its business activities internally through a number of strategic sectors. They are: crude oil transportation, gas and marine services, chemical transportation, general cargo transportation, dry bulk cargo transportation and ship management. Operations related to chemical transportation are conducted by the National Chemicals Carriers Ltd. Co. (NCC); 80% owned by Bahri. Dry bulk transportation is handled by Bahri Dry Bulk Company LLC (BDB); 60% owned by Bahri. Ship management services are managed by Mideast Ship Management Ltd., 100% owned by Bahri. Business units provide necessary support, in coordination with the Headquarters and support departments, to realize the Company’s objectives.

The National Shipping Company of Saudi Arabia ( )

NCC Fajr

Annual Report 2014

2013 Chemicals Carriers 228 m

Year built

: : : : : : :

Type

Length

36.80 m 14 knots 30 tank 75,000 t

Beam Speed Draft DWT

The National Shipping Company of Saudi Arabia ( )

Bahri Habari

Annual Report 2014

2008 Oil Carriers 333 m 60 m 16.70 knots 17 tank 318,000 t

Year built

: : : : : : :

Type

Length

Beam Speed Draft DWT

The National Shipping Company of Saudi Arabia ( )

Oil Transportation Shortly after receiving regulatory approvals during the first half of 2014, Bahri finalized the merger process with Vela’s fleet. In this respect, “Rain Star” was the first VLCC to be transferred to Bahri on July 21, 2014, which was renamed “Nisalah”. In addition, the remaining Vela’s carriers were transferred to Bahri according to the agreed delivery schedule. Transfer of Vela’s fleet, operations, and staff was finalized in mid-December 2014. Under the merger merger agreement Bahri will become the exclusive transporter of Saudi Aramco oil cargoes sold on a Carriage, Insurance and Freight (CIF) basis and originating from Saudi ports. This agreement has been formalized under a Contract of Affreightment (CoA) between the two parties. The merger is a quantum leap for Bahri business that will give the company a strong financial basis on which to build for the future and enhance its position in the field of marine transportation. The new organizational structure that has resulted from the unification of the commercial teams from Bahri and Vela will ensure that customers continue to receive the highest levels of service from Bahri Oil Transportation. Saudi Aramco is to be commended on the close coordination and planning arrangements that they provided throughout the transition process that permitted a smooth transfer of Vela’s assets.

Number of voyages performed by VLCCs during 2014 compared to 2013

2014

2013

Type of operation

No. of voyages No. of VLCCs No. of voyages No. of VLCCs

VLCCs operating in the spot market

177

VLCCs operating under time charter agreements

Total

180

Annual Report 2014

Break-down of VLCC voyages by route during 2014 compared to 2013

2014

2013

Route

Total number of voyages

2014 (%)

2013 (%)

Arabian Gulf - USA

35%

47%

Arabian Gulf - Far East

The Caribbean - West Africa - Asia

30%

45%

Arabian Gulf - Red Sea

Yanbu - Ain Sokhna

24%

Sidi Kerir - Rotterdam

Total

180

Oil transportation voyages in 2014 compared to 2013

2014

2013

Country

Total number of voyages

Volume shipped (m/b)

Total number of voyages

Volume shipped (m/b)

Arabian Gulf - USA

132.30

86.4

Europe

111.28

India

67.20

51.9

Singapore - China

33.80

20.7

Rest of the World

20.78

12.5

Total

180

365.36

171.5

The VLCCs operating in the spot market and under time charter agreements shipped a total of around 365.36 million barrels in 2014 compared to 171.5 million barrels in 2013.

The National Shipping Company of Saudi Arabia ( )

VLCC fleet in 2014

Length (m)

No. of tanks

Speed (knot)

VLCC name Year built

Type

Beam (m)

DWT

Ramlah

1996

Double hull

340

300,361

Ghawar

1996

Double hull

340

300,361

Watban

1996

Double hull

340

300,361

Hawtah

1996

Double hull

340

300,361

Safaniyah 1997

Double hull

340

300,361

Harad

2001

Double hull

333

302,700

17.1

Marjan

2002

Double hull

333

302,700

17.1

Safwa

2002

Double hull

333

302,700

17.1

Abqaiq

2002

Double hull

333

302,700

17.1

Tinat

2002

Double hull

333

316,502

Hilwa

2002

Double hull

333

316,502

Lulu

2003

Double hull

333

316,502

Shiblah

2003

Double hull

333

316,502

Wafrah

2007

Double hull

333

318,000

16.7

Layla

2007

Double hull

333

318,000

16.7

Jana

2008

Double hull

333

318,000

16.7

Habari

2008

Double hull

333

318,000

16.7

Shaybah

2008

Double hull

333

319,428

Manifah

2008

Double hull

333

319,428

Jaham 2008

Double hull

333

319,428

Jaladi

2008

Double hull

333

319,428

Khuzama

2008

Double hull

333

319,428

Karan

2009

Double hull

333

319,428

Kahla

2009

Double hull

333

318,000

16.7

Dorra

2009

Double hull

333

318,000

16.7

Ghazal

2009

Double hull

333

318,000

16.7

Sahba

2009

Double hull

333

318,000

16.7

Farha

2010

Double hull

333

319,300

Ghinah

2010

Double hull

333

319,300

Niban

2010

Double hull

333

319,300

Nisalah

2010

Double hull

333

319,300

Total DWT

9,716,381

Annual Report 2014

Gas and Marine Business Unit Marine services

A new business unit called “Gas and Marine Services Business Unit” was established in July 2013. The new unit is tasked to evaluate available investment opportunities in the offshore sector, in line with Bahri’s strategic plan for business expansion and diversification. In 2013, Bahri announced signing a memorandum of understanding with Saudi Aramco and Sembcorp Maritime Ltd. Under the MoU, the three parties will develop a detailed feasibility study to construct a world-class maritime shipyard in the Kingdom of Saudi Arabia. The shipyard will provide engineering, building and repairing services for offshore platforms, as well as commercial and offshore service vessels. Gas In addition to the new offshore activities, the Gas and Marine Services Business Unit will also supervise and develop Bahri’s investments in the liquefied petroleum gas (LPG) through Petredec Ltd. which is the largest independent company in the world in the field of LPG trade and distribution. Petredec, in which Bahri owns 30.3% shares, owns and operates a fleet of 63 carriers of different sizes. Bahri’s share in Petredec helped significantly to increase the former’s profits in 2014, i.e. SAR 132 million, compared to SAR 291 million 2013, representing a decline of 54.6 percent. Bahri’s share in Petredec’s business results included non-accrued loss of SAR 61.71 million in 2014, compared to non-accrued gain of SAR 53.57 million in 2013. New initiatives and plans In coordination with Saudi Aramco, the business unit considers the strategic projects and initiatives aiming to develop offshore industry in the Kingdom of Saudi Arabia. One of these initiatives is to construct a shipyard for vessel construction and maintenance in Ras Al Khair, and the partners are currently developing a feasibility study through specialized international firms. This initiative aims to create a first-class offshore provider which keeps up with the growth of Saudi offshore production of oil and gas.

The National Shipping Company of Saudi Arabia ( )

Chemical Transportation Sector Maritime transportation industry depends largely on the growth of world economy. Growth prospects indicate a decline in new refinery activities announced previously in the Middle East due to slower growth of the world economy. In addition, demand for chemicals is growing in lower rates compared to the years shortly before the world financial crisis. Such lower demand is expected in Asia, especially in China and India amid uncertainty in Europe with the shrinking economy. As of December 2014, the global chemical carrier fleet consisted of 3,384 carriers with a total capacity of 38.7 million DWT. In addition, the total number of new carriers under construction is 229 with a total capacity exceeding 5.1 million DWT, representing around 13.1% of the current fleet.

Prices of ship fuel started to decline as a response to the decline in crude oil prices, noting that lower growth of the world economy affects consumption of chemicals, along with the increasing supply of carriers especially oil product carriers.

Main achievements of 2014   In 2013, NCC JLT carriers became operational through shipping contracts or in the spot market after acquiring the share of Norwegian Odfjell SE in NCC Odfjell Chemical Tankers (NOCT),.   A number of shipping contracts were signed with strategic manufacturers in the GCC, leading to a larger market share in the region

 Automated systems were fully applied to all NCC activities.

Annual Report 2014

Voyages performed by NCC carriers in 2014 compared to 2013

Type of operation

Voyages in 2014

Voyages in 2013

Carriers operating in the spot market

145

Carriers operating under time charter agreements

203

Total

348

156

Volume of cargo transported by NCC in 2014 compared to 2013

Volume of cargo trans- ported in 2014 (million metric ton)

Type of operation

Carriers operating in the spot market

5.12

3.10

Carriers operating under time charter agreements

2.48

2.58

Total

7.60

5.68

Main routes of NCC fleet around the world in 2014

1. Middle East - Far East

2. Middle East - Europe

3. Middle East (regional)

4. Middle East (regional)

5. Europe - Middle East

6. Far East - Europe

7. Europe - USA

8. USA - Europe

The National Shipping Company of Saudi Arabia ( )

Growth of NCC fleet in 2014

 NCC did not sign any contract to construct new carriers.

Growth of NCC fleet

Description

Total capacity (DWT)

No. of carriers

NCC fleet in 2014

1,099,500

Main ports of chemical carriers worldwide

Annual Report 2014

Operating NCC fleet as of December 31, 2014

Speed (knot)

Carriers

Year built Length (m) Beam (m)

DWT

No. of tanks

NCC Makkah* *

1995

183.10

32.2

37,500

NCC Riyadh*

1995

183.10

32.2

37,500

NCC Jubail* *

1996

183.10

32.2

37,500

NCC Najed

2005

183.02

32.2

46,200

NCC Al Hijaz

2005

183.02

32.2

46,200

NCC Tihama

2006

183.02

32.2

46,200

NCC Abha

2006

183.02

32.2

46,200

NCC Tabuk

2006

183.02

32.2

46,200

NCC Qassim

2006

183.02

32.2

46,200

NCC Rabegh

2007

183.02

32.2

46,200

NCC Sudair

2007

183.02

32.2

46,200

NCC Dammam

2008

183.02

32.2

46,200

NCC Hail

2008

183.02

32.2

46,200

NCC Noor

2011

183.00

32.2

45,000

NCC Huda

2011

183.00

32.2

45,000

NCC Amal

2011

183.00

32.2

45,000

NCC Safa

2011

183.00

32.2

45,000

NCC Danah

2011

183.00

32.2

45,000

NCC Nesmah

2011

183.00

32.2

45,000

NCC Shams

2012

183.00

32.2

45,000

NCC Nejem

2012

183.00

32.2

45,000

NCC Reem

2012

183.00

32.2

45,000

NCC Samaa

2012

183.00

32.2

45,000

NCC Fajr

2013

228.00

36.8

75,000

Total capacity (DWT) 1,099,500 * Carriers NCC Makkah, NCC Riyadh and NCC Jubail are chartered to Odfjell as bareboats chartersfor 10 years under a bareboat agreement which include the right to purchase the carriers after the third year according to specified prices.

The National Shipping Company of Saudi Arabia ( )

Stainless Steel

Coated Chemical

12%

2,000

10%

3.0

10%

2.5

1,600

2.0

1,200

1.5

800

1.0

400

0.5

0.0

-2%

-0.5

-400

-2%

-4%

-1.0

-800

-4%

-6%

-1.5

-1,200

-6%

-8%

-2.0

Delivered

Scheduled Deliveries

Scrapped/Removed

Removals Scenario

% Fleet Growth YoY (RH Axis)

Membership of Subsidiaries, Business Units, and Divisions

 NCC is a member of Gulf Petrochemicals & Chemicals Association (GPCA).

Annual Report 2014

General Cargo Transportation Sector Expand cargo and RO/RO cargo operations

 In 2014, the Company completed the addition of 6 new “RoCon” general cargo vessels (DWT 26,000 each). The first 4 ves- sels were added to the Company’s fleet in 2013, while the remaining two vessels in 2014. These vessels represent the latest designs and have specialized features for specific types of transportation. They were built at Hyundai Mipo Dockyard. Each vessel has 2 heavy-lift cranes with a total capacity of 240 tons, providing them more capacity and options to lift cargo. To augment its utility, each vessel is also equipped with a stem loading ramp with a capacity of 250 tons, making each vessel truly a multi-purpose vessels and able to meet the varied needs of our clientele ranging from Project, heavy-lift, Ro/Ro, break bulk and container cargo in a single shipment.

 By increasing the number of vessels from 4 in 2013 to 6 in 2014, the Bahri General Cargo has been enabled to provide its clients with more efficient and speedy transportation service by reducing the frequency from 24 to 17 days.

 Bahri General Cargo sector was engaged in several transportation activities throughout the 2014 financial year, aiming to improve the extensive supply chain. On the eastbound route, the Company added 2 new ports (i.e. Jacksonville and Aqaba) to cover a larger number of ports to meet needs of the vehicle transportation sector. For the westbound route, the port of Izmir was added to facilitate transportation of agricultural equipment from Turkey to the United States. These decisions have strengthened Bahri General Cargo stature and expanded its transportation footprint at the international level.  The storage and container service yard at Jeddah Islamic port will remain a main location to provide container storage services under contracts with a growing base of clients and road haulers. The yard is equipped with a new inventory management system to provide timely storage and handling services for both full and empty containers.  By the end of Q1 of 2015, a study of the integrated services will be finalized, including internal transportation services and overseeing the customs documentation and clearance in order to develop an optimal way of processing customs clearance services for the benefit of the clients.  With a growing focus freight forwarding and clearance services, Bahri provides vital services of cargo transportation and logistics services to several international ports by air, sea and land using third party vessels and other means of transportation. This enables the sector to provide integrated logistics services to its clients with the convenience of a one stop solution. In this respect, the Company aims to help develop the infrastructure in the Kingdom by reinforcing its status as the No. 1 carrier in the Nation amid fierce competition with other companies. In 2014, many advances have been made by winning new contracts for cargo transportation involving under several projects, including mobile means of transportation, railway wagons, water desalination and power generation equipment, and military equipment for institutions providing services related to railways, energy, water, and defense.

The National Shipping Company of Saudi Arabia ( )

Current and expected market performance in the coming years

 World economic growth rate reached 3.5% in 2012, but dropped to 3.2% in 2013. It is expected that it will slightly increase to 3.4% in 2014 and 4% in 2015, according to the World Bank Global Economic Prospects. It is also expected that growth rate in the advanced economies will be 1.8% in 2014 compared to 2.4% in 2015. The projected growth rates play a decisive role in world expansion as well as improvement of emerging and developing economies. Therefore, growth rate in emerging economies is expected to be 4.6% in 2014 and 5.2% in 2015.

 Slower growth rates have a relative impact on the Company’s businesses. This was evident in Q4 of 2014, when the US export market of dry bulk cargo, project cargo, and RO/RO cargo to the Middle East and India witnessed a sharp decline.

 To enhance Ro/Ro cargo transportation, Bahri General Cargo will focus on the heavy vehicle sector to acquire a bigger market share between the Kingdom, India and United States.

Develop human resources and quality policy

 The Company recruited well-experienced professionals in the field of general cargo transportation in the local and regional offices of the Company

 The Company pays full attention to the Quality Department and continually improves its processes and operations via regular workshops and quality assessments. In addition, the Company has been fully endorsed via the ISO 9001:2008 certification. In 2014, Bahri’s General Cargo Transportation Co. in Baltimore, Maryland, United States, followed suite and successfully obtained the ISO 9001:2008 certificate. These achievements will ensure additional improvements in the regular operation of maritime routes heading to the east and west. Services of other sectors in the field of general cargo transportation are managed also through systematic application of documented processes and operational procedures subject to a rigid quality management system and precautionary procedures.

 Phase I of migrating from SIS system to MOVE system will be finalized in 2015.

Activities conducted in 2014

 Newly-added ports are: Jacksonville and Aqaba in the east bound route and Izmir in the west bound route.

Current projects or to be completed in 2015

 The contract with the Ministry of Defense was renewed for additional 5 years

 A contract was signed with Doosan Heavy Industries to transport the desalination equipment under Phase III of Yanbu Project.

Annual Report 2014

Specifications of the general cargo transportation fleet as of December 31, 2014

Capacity (TEU con- tainer)

Weight (DWT)

Beam (m)

Length (m)

Horse- power

Speed (knots)

Ship

Year built

Draft (m)

1 Bahri Abha

2013

26,000

9.5

32.30

225

2,500

8,907

2 Bahri Hofuf

2013

26,000

9.5

32.30

225

2,500

8,907

3 Bahri Tabuk

2013

26,000

9.5

32.30

225

2,500

8,907

4 Bahri Jazan 2013

26,000

9.5

32.30

225

2,500

8,907

5 Bahri Jeddah 2014

26,000

9.5

32.30

225

2,500

8,907

6 Bahri Yanbu 2014

26,000

9.5

32.30

225

2,500

8,907

Statement of owned and chartered containers as of December 31, 2014

Type

2014

2013

20 ft. standard container

2604

2955

20 ft. open top container

40 ft. standard container

534

582

40 cubic ft. container

1282

1304

40 ft. open top container

126

20 ft. flat bed

40 ft. flat bed

116

143

20 ft. trailer (chassis)

40 ft. trailer (chassis)

20 ft. Mafi- 30 tons

20 ft. Mafi- 60 tons

20 ft. Mafi- 80 tons

20 ft. Mafi- 100 tons

482

361

20 ft. Mafi- 80 tons

62 ft. Mafi- 90 tons

62 ft. Mafi- 100 tons

The National Shipping Company of Saudi Arabia ( )

 After re-assessing the information systems and technological advancement, a decision was made to replace the current ship information system “SIS” with a more user-friendly system developed by Oracle called “MOVE”. The first phase of applying this software is expected to be completed in Q1 of 2015. The new system will develop the Company’s capacity to provide better services through better documentation management, intelligent business management and provision of communication among the stakeholders in all types of operations.

North America exports - dry bulk exported through the eastern route (million ton)

2014

2013

Other Companies

Bahri

Other Companies 112,856 M. Tons 61%

Bahri

63% 37%

39%

64,982 M. Tons

38,942 M. Tons

73,117 M. Tons

Other companies

112,856

64,982

Bahri

73,117

38,942

Percentage of Bahri share from the market

39%

37%

Total market (ton)

185,973

103,924

Annual Report 2014

North America exports - RO/RO cargo exported through the eastern route (million ton)

2014

2013

Other Companies

Bahri

122,722 M. Tons 88% Other Companies

Bahri

12%

87% 13%

69,891 M. Tons

10,375 M. Tons

16,015 M. Tons

Other companies

122,722

69,891

Bahri

16,015

10,375

Percentage of Bahri share from the market

12%

13%

Total market (ton)

138,738

80,266

North America exports - Containers exported through the eastern route (TEU container)

2014

2013

Other Companies

Bahri

565,214 M. Tons 99% Other Companies

1% Bahri

393,793 M. Tons 100% 0%

1,694 M. Tons

3,137 M. Tons

Other companies

565,214

393,793

Bahri

3,137

1,694

Percentage of Bahri share from the market

0.4%

Total market (ton)

568,351

395,488

The National Shipping Company of Saudi Arabia ( )

North America imports- dry bulk exported through the western route (million ton)

2014

2013

Other Companies

Bahri

106,708 M. Tons 61% Other Companies

Bahri

39%

46% 54%

53,150 M. Tons

62,427 M. Tons

67,165 M. Tons

Other companies

149,248

53,150

Bahri

93,743

62,427

Percentage of Bahri share from the market

39%

54%

Total market share (ton)

242,991

115,576

North America imports- RO/RO cargo through the western route (million ton)

2014

2013

Other Companies

Bahri

13,731 M. Tons 39% Other Companies

Bahri

58% 42%

61%

18,055 M. Tons

13,046 M. Tons

21,665 M. Tons

Other companies

13,731

18,055

Bahri

21,665

13,046

Percentage of Bahri share from the market

61%

42%

Total market share (ton)

35,396

31,101

Annual Report 2014

North America imports- Containers exported through the eastern route (TEU container)

2014

2013

Other Companies

Bahri

330,150 M. Tons 99% Other Companies

1% Bahri

99% 1%

251,415 M. Tons

2,808 M. Tons

4,459 M. Tons

Other companies

330,150

251,415

Bahri

4,459

2,808

Percentage of Bahri share from the market

Total market share (ton)

334,609

254,223

The National Shipping Company of Saudi Arabia ( )

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