Bahri Annual Report-2013

The National Shipping Company of Saudi Arabia (A Saudi Joint Stock Company) Notes To The Consolidated Financial Statements December 31, 2013 (In Thousands Saudi Riyals)

25. Agreements with Aramco and Vela On November 4, 2012 the Company signed an agreement with Saudi Aramco whereby the total ownership of Vela International Marine Ltd’s fleet (Vela) will be transferred to the Company after obtaining required regulatory approvals. The Vela’s fleet consists of fourteen VLCCs, one VLCC for floating storage and five refined petroleum product tankers. Pursuant to the merger agreement, Bahri will pay Vela a total consideration of approximately SR 4.88 billion (equivalent to US$1.3 billion), consisting of a cash consideration amounting to SR 3.12 billion (equivalent to US$ 832.75 million) in addition to 78.75 million new Bahri shares to be issued to Vela at an agreed price of SR 22.25 per share. The Company’s post-merger issued number of shares will be 393.75 million shares and the new shares issued to Vela which are wholly owned by Saudi Aramco will equal 20% of Bahri’s share capital. Saudi Aramco will have a fair representation in Bahri’s Board. The Company plans to fund the cash consideration through Sharia compliant financing agreements. According to the terms of a long-term shipping contract for a minimum period of 10 years, the Company will be the exclusive carrier to Saudi Aramco for the transportation of crude oil sold by Saudi Aramco on the FOB basis. According to this contract and to meet Saudi Aramco’s future demand which is estimated to be 50 VLCCs the Company plans to best optimize the utilization of its post merger fleet which will total 31 VLCCs in addition to charter VLCCs when necessary. The long-term shipping contract includes an agreed upon terms to protect the Company when freight rates falls below the minimum agreed limit. On the other hand, if freight rates increased above specific limit agreed upon (compensation limit), the Company will compensate Saudi Aramco against the amounts paid to the Company upon the fall of freight prices below the minimum limit.

Bahri and Vela have also agreed on temporary arrangements for the operation of the VLCCs owned currently by Bahri within Saudi Aramco’s program to transport oil via VLCCs. The temporary arrangement started on Safar 19, 1434H (corresponding to January 1, 2013) until the long-term shipping contract becomes effective according to the terms of the merger agreement. The merger agreement is subject to various terms including the approval of the Extraordinary General Assembly of the Company on the merger and capital increase and obtaining other regulatory approvals such as the Capital Market Authority and the Supreme Council for Petroleum and Mineral Affairs which is in process. The approval of the Competition Protection Council in Saudi Arabia has already been obtained. 26. Approval of the Consolidated Financial Statements The board of directors has approved the consolidated financial statements for the year ended 31 December 2013 on 23 Rabie’ Thani 1435H (corresponding to 23 February 2014). 27. Reclassifications Certain amounts previously reported in the 2012 consolidated financial statements have been reclassified to conform to the current year presentation.

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