QATAR SHIPPING COMPANY Q.S.C

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MANAGEMENT REPORT for 2008dfdfdsfsdfsdfsdfsfsfsdfsdfsdfsdfsddfsdfdsfsfsfsfdsf

The year 2008 has, to say the least, been a turbulent year for the global shipping industry, which experienced extremes of high freight rates followed by a virtual collapse in most segments.

Q Ship’s strategy over the last three years has been two pronged, which was to exploit available opportunities by selling vessels at peak prices and entering into long term charters arrangements. During the period 2006-2008, Q Ship sold six vessels at peak prices, including it’s share through a Joint Venture company. The vessel values today for similar vessels are now at levels of about 60% compared to the values when sold. At a time when the timecharter rates were at their peak levels, all our wholly owned ocean going vessels were deployed on long term charters at attractive rates to very reputable charterers, including major oil companies. Q Ship will thus continue to enjoy the benefits of attractive rates even when the spot rates today are substantially lower, and are expected to remain so for sometime to come. The first of these ships on time charter would be redelivered from charter in June 2009 and the last will be delivered in mid 2011.

In July 2008, Q Ship entered into a Contract of Affreightment with Qatar Quarries and Building Materials Company (QQBMC) for the transportation of 30 to 35 million tonnes of aggregates from Fujairah (UAE) to Mesaieed ( Qatar) spread over a five year period, commencing from April 2010 and ending in March 2015. This contract, which has been signed at an attractive rate, will be serviced through owned / chartered tonnage.

Q Ship’s owned and operated deep-sea fleet traded worldwide and called at terminals operated by most of the Oil majors and leading international charterers. Throughout the year, all the vessels were on time charter, except the aframax tanker MESAIEED which traded briefly in the spot market on completion of a time charter before being fixed on a time charter to ExxonMobil for three years at an attractive rate. Q Ship continues to own one of the youngest fleets in the world with an average age of about four years.

Q Ship has a joint venture (JV) with ExxonMobil and the JV owned two Aframax tankers which were sold during the year at an attractive price.

The table below gives the voyages performed by vessels fully owned by Q Ship during the year 2008. Q Ship owned vessels performed a total of 112 voyages and transported about 4.6 million metric tonnes of cargo.

TABLE - I

The technical performance of the fleet continued to be excellent, with no significant down time during the year. In addition to the United States Coast Guard acceptance, all the vessels have had vetting inspections successfully done by most of the Oil majors and carried cargoes for most of them. The vessels have passed all port state control inspections flawlessly.

As in previous years, there was absolutely no pollution incident of any nature involving the Q Ship fleet and, while we are proud of this achievement, we continue to remain ever vigilant. The Q Ship oceangoing fleet continued to have no claims affecting the Hull and Machinery Insurance.

Gulf LPG Transport Company WLL, a 50:50 Joint Venture with Qatar Gas Transport Company (QGTC) was formed during the year to own four Very Large Gas Carriers (VLGCs), which were ordered by Q Ship in June 2005 and which were under construction at Hyundai Shipyard, South Korea. The Q Ship team at the shipyard continued with the supervision of the construction of these vessels. Three vessels were successfully delivered in 2008 and the fourth vessel is due to be delivered in March 2009, all deliveries being as per the contractual delivery dates. Gulf LPG Transport Company has entered into a pooling arrangement with Mitsui OSK Lines, Ltd (MOL) for the transportation of LPG cargoes.

Q Ship has investments in various types of joint ventures involving both shipping as well as non shipping activities.

I. LNG Shipping

Details of Q Ship's participation in LNG shipping are highlighted in table II below:

TABLE - II

As on 31 st Dec 2008, Q Ship’s investment in the LNG ships was about QR.446 million including shareholders loan.

II. Qatar Gas Transport Company (NAKILAT)

 Q Ship has invested a total of QR 844 million in Nakilat representing 15% of the share capital of this company, which was formed as an integral part of the LNG supply chain for the State of Qatar.

III. LPG Transportation: Gulf LPG Transport Company WLL (GLTC)

 Q Ship and Nakilat set up a 50:50 Joint Venture company, Gulf LPG Transport Company WLL, in April 2008 with an equity capital of QR. 400 million primarily for owning and operating the four Very Large Gas Carriers (VLGCs), which were ordered by Qship in June 2005.

 IV. Crude Oil Shipping: QM Tanker LLC

QM Tanker LLC is a 50:50 joint venture with Exxon Mobil. The JV owned two 1999 built Aframax crude oil tankers, which were sold in 2008 at attractive prices. The JV Company continues and may be used for future business development.

V. Offshore Services: Halul Offshore Services Company WLL ( HOSC)

Q Ship has 50% ownership in HOSC which owns and operates a fleet of vessels for offshore support services. During the year 2008 this Company owned a fleet of 31 offshore vessels.

VI. Qatar Engineering and Construction Company WLL (Qcon)

Q Ship fully owns Qcon, which is an Engineering Procurement & Construction (EPC) and general construction and maintenance services company serving the offshore and onshore oil, gas, petrochemical and industrial sector of Qatar. Qcon made a profit of QR.102 million on a Revenue of QR.887 million. All the three major divisions of the company namely Major projects, Maintenance and Marine Fabrication Yard contributed to the profits of the Company.

VII. Chemical Transportation: QIM Transport Inc (QIMT)

In QIMT, Q Ship has a one third (33%) participation along with Mitsui & Co and Iino Kaiun Kaisha Ltd of Japan. The JV was formed to jointly pursue chemical transportation business of mutual interest.

VIII. Qatar Quarries and Building Materials Company WLL (QQBMC)

Q Ship is a 25% stake holder in Qatar Quarries and Building Materials Company which was established in May 2004 with an authorized capital of QR.120 million and it’s present paid up capital stands at QR.60 million. QQBMC’s main objective is to stabilize the supply of Aggregates for construction activities in Qatar.

During 2008, QQBMC earned a profit of QR 105 million which added QR 26 million to Q Ship’s profit during 2008.

At the end of 2008, there were 5012 shareholders. Individuals held about 40% of the shares whereas Qatar Petroleum (QP) and Qatar Navigation (QN) held about 18% and 15% respectively. The remaining 27% shares were held by other companies and establishments.

The highest and lowest prices at which the shares were traded during the year were about QR. 86 and QR 31.5 respectively.

Market capitalization of the company was QR 4.13 billion or US$ 1.14 billion as on 31.12.2008.

K.K. Kothari

Chief Executive Officer