SASCO Annual Report 2018 by Paul Dominic Raña

Our Greatest Strength Is Our Team Spirit Annual Report 2018

Custodian of the Two Holy Mosques

King Salman bin Abdul Aziz ( May Allah protect him )

His Royal Highness

Prince Mohammad bin Salman bin Abdul Aziz Crown Prince Vice President of the Council of Ministers & Minister of Defence ( May Allah protect him )

Chairman’s Statement

8 10

Vice Chairman and Managing Director’s Statement

Board of Directors

Table of Contents

Chief Executive Officer’s Statement Vision Mission

SASCO Overview Main Business Sectors Plans and Decisions

14 16 17

18 20 22

Most Important Achievements in 2018 Board of Directors and Committees Financial Statement at SASCO Level

26 32 62

Operation Sector SASCO Palm Co. SASCO Al Waha Co.

80 88 92

Ostool Al-Naqil Co. Saudi Automobile & Touring Association, SATA Auto & Equipment Investment Co. Al-Nakhla Al-Oula Co. SASCO Franchise Co.

Other Administrative and Operational Information Risks Management Internal Control Corporate Governance Financial Statements

110 114 120 124 128

94 98 102 106 108

Board of Directors

The Board of Directors is pleased to present to you SASCO Annual Report for the fiscal year ending on December 31st, 2018. It includes the Board of Directorsâ&#x20AC;&#x2122; Report on SASCO financial results, its various activities, as well as the achievements made thanks to Allah, and then to the efforts of all members of the Board, the executive management, and all staff.

Annual Report 2018

Board of Directors Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman | Head of Executive Committee Qualifications and experience: He is a businessman, holding the Secondary school certificate and enjoying more than thirty seven years in corporate management. He occupied many positions including the deputy Chairman of the Saudi Chambers of Commerce. He also participated in the boards of CMA-listed and unlisted shareholding companies such as Al-Madaen Star Group, Akwan Real Estate Co., Ibrahim bin Mohammed Al-Hudaithi Investment Co., Zawaya Real Estate Co., Nahaz Investment Co. and other companies working in the fields of real estate, services, investment and financial services inside and outside the Kingdom of Saudi Arabia.

Mr. Sultan bin Mohammed Al-Hudaithi Vice Chairman | Managing Director | Member of Executive Committee Qualifications and experience: He holds the Bachelor’s Degree in Accounting with honour degree from King Saud University and Masters of Business Administration from London Business School. He held leading positions in many public and private companies in Saudi Arabia. He enjoys experience in corporate restructuring, strategic planning and investment management in securities, private ownership and real estate investment. He was a member of boards and committees in public and private companies including Saudi Chemical, Nahaz Investment Co., Zawaya Real Estate Co., Al-Madaen Star Group, Middle East Battery Company (MEBCO), Mulkia Investment Co. and United Wire Factories Company (ASLAK).

Mr. Nasser bin Abdullah Al Awfi Board Member | Head of Audit Committee Qualifications and experience: He holds the Master’s Degree in Accounting, the Master’s Degree in Business Administration from Southern New Hampshire University in the USA and the Bachelor’s Degree in Accounting from King Saud University. He enjoys more than thirty one years of experience in the management of joint stock companies as well as financial, administrative and strategic consultation. He also participated in the many boards of shareholding companies and board committees (Audit Committee) such as Al Jouf Agricultural Development Company (JADCO), Taiba Holding Company and United Cement Industrial Company.

Mr. Suleiman Bin Ali Al Khudair Board Member | Member of Nomination and Remuneration Committee Qualifications and experience: He holds a university degree in sciences from the USA. He held many administrative positions, as he worked as a computer engineer in the Ministry of Defence. Then, he moved to the private sector where he worked as a technical director, a sales director and deputy general director in Nahil Computers and now he is its General Director.

Present Occupations:

` SASCO Managing Director. ` Board member of United Wire Factories Company (ASLAK)

` Board member of Mulkia Investment Co. ` Board member of Nahaz Investment Co. Previous Occupations:

` CEO of Ibrahim Modern Investment Company. ` Chief Executive Officer of Zaiti Petroleum Services. ` Deputy General Manager for Financial and Administrative Affairs at Al Madaen Star Group.

` Board member of Saudi Chemical Co.

Present Occupations:

` Board member and Head of Audit Committee of United Cement Industrial Company.

` Head of Al Jouf Agricultural Development Company Audit Committee.

` Head of Saudi Ceramics Audit Committee. ` Member of Taiba Holding Company Audit Committee. Previous Occupations:

` Director of Financial, Administrative and Investment

Department of Saudi Pharmaceutical Industries & Medical Appliances Corporation (SPIMACO). ` Vice General Director for Financial and Administrative Affairs of Saudi Livestock Trading Company. ` General Director for Financial and Administrative Affairs of Taiba Investment and Real Estate Development Company.

Present Occupations:

` General Director of Nahil Computers Co. Previous Occupations:

` Technical Director of Nahil Computers Co. ` Sales Director of Nahil Computers Co. ` Deputy General Director of Nahil Computers Co.

He participated in boards of many joint stock companies.

Mr. Majid bin Muhammad Al Othman Board Member | Member of Nomination and Remuneration Committee Qualifications and experience: He is a businessman, holding the Secondary school certificate and enjoying more than thirty years in real estate, contracting and automobile services. He is the Managing Director of Al-Madaen Star Group and board member of Ibrahim bin Mohammed Al-Hudaithi Investment Co., Bilda Specialized Commercial Centers Co. and Zawaya Real Estate Co.

Present Occupations:

` Chairman of Al-Madaen Star Group. ` Chairman of Fun Gate Company. ` Managing Director of Al-Madaen Star Group. Previous Occupations:

` General Director of Al-Madaen Star Group for Contracting.

` General Director of Al-Madaen Star Group for Automobile Services.

Present Occupations:

Previous Occupations:

` Chairman of Al-Madaen Star Group. ` Chairman of Mulkia Investment Co. ` Board member of Nahaz Investment Co.

` ` ` `

Vice Chairman of the Saudi Chambers of Commerce. Chairman of Al Kharj Industrial Chambers of Commerce. Member of Al Kharj Governorate Local Council. Board member of Solidarity Company.

Mr. Riyad bin Saleh Al Malik Board Member | Member of Executive Committee | Chief Executive Officer Qualifications and experience: He holds the Bachelor’s Degree in Business Administration from King Abdulaziz University. He enjoys a vast experience in corporate management, particularly fuel stations. He served as the General Director of Al Tas’helat Marketing Company Ltd., Deputy General Director of Riyadh Development Company and board member of many companies. Present Occupations:

` SASCO Chief Executive Officer. ` Head of Customs Council of Federation Internationale

de l’Automobile.

` Member of the National Committee of Fuel Station ` ` ` ` ` `

Companies in the Council of Saudi Chambers. Previous Occupations: General Director of Al Tas’helat Marketing Company Ltd. Deputy General Director of Riyadh Development Company. Director of Marketing Department of Saudi Real Estate Company (Al Akaria). Sales Director of Saudi Hotels & Resorts Company. Head of Customs Council of Federation Internationale de l'Automobile. Head of the National Committee of Fuel Station Companies in the Council of Saudi Chambers.

Mr. Ali bin Mohammed Aba Al Khail Board Member | Head of Nomination and Remuneration Committee Qualifications and experience: He holds the Bachelor’s Degree in Political Sciences from the Faculty of Administrative Sciences, King Saud University and the Master’s Degree in Government Management from Harvard University, United Sates of America. He is the secretary of the Head of the Royal Diwan, the Deputy Director of the Political Affairs Department of the Royal Diwan and secretary of Office of Presidency of Prime Minister. He was appointed in the Office of the Second Deputy of Prime Minister, Minister of Defence

and Aviation and Inspector General. He also worked as an administrative counsellor in the High Commission for Administrative Organization and Deputy Chairman of the Board of Directors of Sanad Investment Company. Present Occupations: ` Vice Chairman of the Board of Directors of Sanad Investment Company. Present Occupations: ` Deputy Director of the Political Affairs Department of the Royal Diwan. ` Administrative counsellor in the High Commission for Administrative Organization.

Mr. Fawaz bin Suleiman Al Rajhi Board Member | Member of Audit Committee Qualifications and experience: He holds the Bachelor’s Degree in Accounting and Information Systems Management from King Fahd University of Petroleum and Minerals (KFUPM) and also holds the Master’s Degree in Business Management from Stanford University, USA. He is the Chairman of AlRajhi United Investment Holding Company; it is a company investing in capital markets and private transactions on the local, regional and international levels. He has been leading and directing the Company’s efforts since its inception based on the strategy of diversifying the investment portfolio through a deliberate choice of markets and industries in selected geographical locations, with focus being placed on emerging technology and income-generating real estates. He is also a board member

and member of audit committees in a number of jointstock companies. He spent more than a decade in banking. He held many positions in Corporate Financing Division of Rajhi Bank. He took part in establishing the department of corporate loans and financing subscription of large corporations. He was the person in charge of establishing the Share and Subscription Department of Al Rajhi Capital Company. Present Occupations: ` Chairman of the Board of Directors of Union Al Rajhi. ` Chief Executive Officer of Al Rajhi Union. Present Occupations: ` Chief Operating Officer of Al Rajhi Capital. ` Director of Sales and Distribution, Al Rajhi Capital. ` Head of Corporate Banking at Al Rajhi Bank. ` Chief Financial Analyst at Al Rajhi Bank. ` Systems analyst at Procter & Gamble.

Mr. Majid Bin Nasser Al Sabei›e Board Member | Member of Executive Committee Qualifications and experience: He holds the Bachelor’s Degree in Political Sciences from King Saud University and enjoys more than fifteen years in corporate governance. He held many leading positions such as the director of real estate projects at Nasser Bin Mohammed Alsubeaei & Sons Investment Company, financial analyst and managing director of Morgan Stanley & Co. He is currently the Chief Executive Officer of Nasser Bin Mohammed Alsubeaei & Sons Investment Company.

Present Occupations:

` CEO of Nasser Bin Mohammed Alsubeaei & Sons Investment Company Previous Occupations: ` Manager of real estate projects at Nasser Bin Mohammed Alsubeaei & Sons Investment Company. ` Financial Analyst of Morgan Stanley & Co. ` Managing Director of Morgan Stanley & Co.

Annual Report 2018

Net operating income during the year 2018

SR 2,056,081,002 Net operating income during the year 2017

SR 1,212,329,807 With an increase, of

69.60% Chairman’s Statement Mr. Ibrahim bin Mohammed Al-Hudaithi Messrs. / Shareholders of the Saudi Automotive Services Company (SASCO), the highly regarded,

Shareholders’ equity recorded SAR 751,862,914 compared to SAR 729,110,511, i.e. an increase of 3,12%.

May Allah’s Peace, Mercy and Blessings be upon you,

As a result, the Board recommended to distribute to SASCO shareholders a dividend of SAR 0,50 per share for the fiscal year ending on 31 Dec. 2018 with a total amount of SR 30,000,000 representing 5% of SASCO capital. The entitlement to these dividends would be for shareholders registered with the Securities Depository Center (Tadawul) by the end of the second trading day on which the General Assembly convened.

The Board of Directors of the Saudi Automotive Services Company (SASCO) is pleased to present to you SASCO Annual Financial Report for the fiscal year ended on December 31st, 2018. It includes the performance and achievements of SASCO and its subsidiaries as well as the financial results and key financial indicators. Thanks to Allah and the efforts of all members of the Board, the executive management, and staff, SASCO achieved in 2018 net operating sales of SAR 2,056,081,002 compared to SAR 1,212,329,807 in 2017, i.e. an increase of 69.60%, which reflected positively on the increase in gross profit at 3,13% and operating profit at 18,7%. In addition, in 2018, SASCO recorded a net profit of SAR 35,451,309 compared to SAR 27,985,133 in the previous year, 2017, i.e. an increase of 26.68%. This, in turn, led to an increase of 0.47 in share profits compared to 0.59 of last year. At the end of 2018,

Some of the most important achievements during 2018 are as follows:

f Completing the procedures of increasing SASCO capital from SAR 540 million to SAR 600 million. f Concluding the procedures of distributing dividends to shareholders for the fiscal year 2017 and depositing them with their respective accounts. f Compared to last year, SASCO assets rose to SAR 1,6 billion at 6,24%. f Purchasing an additional share in the capital of Middle East Battery Company (MEBCO) raising SASCO contribution to MEBCO from 7,94% to 12,79%. f The Saudi Automobile & Touring Association, Ltd SATA signed an agreement with the Saudi Customs to give effect to the Customs Convention on the International Transport of Goods as per international land transport books. f Continuing to study the options of selling some of SASCO owned sites and leasing them for long periods with the aim to obtain offers matching SASCO interests and goals. f SASCO obtained the Most Innovative Fuel Station Company Award in the World for 2018 on the margin of the achievements

to reach SR 201,456,232. The operating revenues of Ostool Al-Naqil Co. increased by 16% compared to last year to SR 26,359,082. The operating revenues of SASCO Al Waha Co. rose by 47% compared to last year reaching SR 3,911,567. The operating revenues of the Saudi Automobile & Touring Association, SATA, went down by 47%. It has been affected by the political events experienced by some Arab countries in addition to the entering of peer clubs unauthorized by Federation Internationale de l’Automobile.

attained during 2018. f Launching Commercial Franchise Granting Program of operating the brands of “ SASCO Stations” and “Palm Stores”. f Continuing to update the regulations, policies and standards required by the supervisory bodies. f Signing many facilities agreements with local banks. f Continuously developing SASCO accounting and operating systems. f Continuing to attract qualified cadres to meet SASCO need of various administrative functions, especially in leadership positions. f Continuing Saudization of jobs according to the Ministry of Labour’s requirements. f Completing the construction of (3) sites and developing (14) sites according to SASCO identity. f Continuing to study the options of acquiring new sites in different parts of the Kingdom. f Purchasing 10 new trucks to support fleet in addition to purchasing 8 fuel and water tanks, 8 transport goods containers and 1 reefer truck. f Expanding dry transport though contracting with new clients. f SASCO Al Waha Co. contracted with many companies with respect to its hotels. f Participating in many exhibitions and awareness campaigns confirming SASCO contribution to social responsibility.

I extend thanks and appreciation to all shareholders of the Saudi Automotive Services Company (SASCO) for their trust in SASCO management. I also thank all SASCO executive management and staff for their efforts and dedication in performing their jobs in the required manner, helping achieve the desired goals throughout this year. We are looking forward to achieving further successes in the coming years.

This is in addition to the achievements across SASCO and all subsidiaries indicated in this report. In 2019, SASCO will continue to achieve its objectives according to its strategic plan developed by the Board of Directors, consider the horizontal and vertical acquisition opportunities at all operating levels in consistency with Saudi Vision 2030 and work toward overcoming all obstacle and challenges. In conclusion, on behalf of the members of the Board of Directors,

I would also like to direct my sincere thanks and appreciation to the Custodian of the Two Holy Mosques, King Salman bin Abdul Aziz, may Allah protect him, and His Highness the Crown Prince, His Royal Highness Prince Mohammed bin Salman bin Abdul Aziz, may Allah protect him, for all of the great efforts and unlimited assistance they offer to develop this country, support its economy and stimulate the business environment in favor of Saudi Vision 2030.

May Allah Grant Us All Success, Chairman Ibrahim bin Mohammed Al-Hudaithi

When it comes to the operating revenues of subsidiaries, SASCO Palm Stores’ operating revenues rose by 23% compared to last year

Annual Report 2018

Profit before interest, Zakat, Depreciation and Amortization (EBITDA) at the end of 2018

SR 92,750,036 Profit before Interest, Zakat, Depreciation and Amortization (EBITDA) at the end of 2017

SR 82,673,032 With an increase, of

12.19%

Vice Chairman and Managing Director’s Statement Mr. Sultan bin Mohammed Al-Hudaithi

Messrs. / Shareholders of the Saudi Automotive Services Company (SASCO), the highly regarded May Allah’s Peace, Mercy and Blessings be upon you, It is thanks to Allah’s grace that 2018 witnessed SASCO continued achievements and expansions according to its approved strategic plan. The Board seeks to keep its promise and commitment to SASCO shareholders and customers and preserve its pioneering position in the field of operating fuel stations and retail as well as all sectors in which it operates. It gives me pleasure to present to you a brief overview highlighting the most important 2018 activities and developments on the operational and financial levels. SASCO achieved total operation revenues of SR1,212,329,807 compared to SR 1,094,122,754 in 2017, with an increase of 10,80%. This led to an increase of 2018 net profits which were SR 29,980,831 compared to SR 25,980,831 in 2017, i.e. increase of 14,78%. Such increase in operating revenues is attributed to many reasons, notably the continued expansion plan and opening a number of new sites. Earnings before interest, Zakat, depreciation and amortization at

the end of 2018 were SR 84,508,044 compared to SR 68,439,549 at the end of 2017, i.e. an increase of 23%. As a result, share profit increased compared to last year and was SR 0,55 in 2018 compared to SR 0,48 IN 2017, with an increase of 12,7%. Following are some of the most important achievements in different sectors of SASCO and its subsidiaries: Retail Sector This sector provides a set of excellent services to clients through SASCO sites spread nationwide. The sites have increased to 220 sites compared to 213 in 2017, i.e. an increase of 7 sites. Operating sites and stations rose to 158, of which 94 are according to SASCO identity and 54 are operating according to Zaiti Petroleum Services Company identity. Other sites are under development or preparation and construction or stopped for lack of economic feasibility from operating them. The Retail Sector offered its services to about 12,700,000 vehicles, with an increase of 11.8% compared to 2017, including 8,300,000

pilgrims whether inside or outside the Kingdom. By God’s grace, we concluded strategic partnerships with many international and local companies specialized in operating restaurants and café and automotive maintenance with the aim to rent and operate some SASCO facilities to offer high quality and integrated services. These efforts led to increasing clients nationwide and raising their satisfaction and loyalty. SASCO Palm Stores 6 new branches were added in 2018. At the end of 2018, the total number of branches was 67. SASCO Palm Stores contains a full basket of items that were carefully studied to meet clients’ needs and achieve their satisfaction. Change of client basket reached 18,75%, rising from SR 16 to 19 in 2018. Accommodation Sector (SASCO Al-Waha Co.) In 2018, two motels carrying Motel Al-Waha brand were opened. The first one is located on Abu Hadreya-Dammam Road and the second is located near Al Adeed outlet on Batha’a-Salwa road in addition to Motel Waha on Riyadh-Dammam highway at Kilo 154. So, the total number of SASCO Al-Waha motels rose to 3. Ostool Al-Naqil Co. SASCO increased its truck fleet in 2018 to 108 compared to 95 trucks in 2017. The number of trailers rose to 121 in 2107 compared to 101 in 2017. Ostool Al-Naqil Co. provides transport services of fuel, water and sewage to SASCO and Zaiti and transport services of fuel and cargo to other companies. It also expanded its business to include dry transport using multi-purpose containers. It also received qualification from the National Water Company and the Saudi Electricity Company.

Social Responsibility Based on its belief in its active role in the community and in highlighting our homeland’s achievements, SASCO participated in many awareness-raising campaigns, including: f “Express Your Homeland Campaign” in the Kingdom’s National Day. The Campaign highlighted the major achievements of our beloved homeland under the wise leadership of the Custodian of the Two Mosques and his Crown Prince. f Learn Early Campaign, in consistency with the Royal Decree of Women Driving. An infographic was posted on SASCO social media website. f Minutes Equal Years Campaign. It is an awareness campaign on the benefits of breast cancer early testing. f This comes in addition to several awareness campaigns and other communal participations. In conclusion, we ask Allah, the Almighty, to bless these efforts and grant us success in continuously achieving SASCO plans and goals and the aspirations of shareholders as well as improving performance and strengthening efficiency. I extend thanks and appreciation to all shareholders and board members for their continued support, keenness and distinguished ideas. I also thank all brothers in the Executive Management and all SASCO employees for their great efforts, which contributed to achieving SASCO vision and goals and strengthening its pioneering position in the market. May Allah Grant Us All Success, Managing Director Sultan bin Mohammed Al-Hudaithi

Saudi Automobile & Touring Association (SATA) In spite of the events experienced by the region which led to large depression in issuing transit books among the Arab countries, more than 32,000 customs transit books were issued to passengers in addition to 62,000 internal driving licenses. According to the Agreement on International Road Transport, SATA continued to encourage the official authorities in the Kingdom and in Gulf Cooperation Countries to activate the Agreement under the supervision of the International Road Transport Union (IRU). It also participated in some relevant seminars within the Gulf Cooperation Countries.

Annual Report 2018

Total profit by the end of 2018

SR 37,683,502

Total profit by the end of 2017

SR 31,915,742 With an increase, of

18.07%

Chief Executive Officer’s Statement Mr. Riyadh bin Saleh Al Malik Messrs. / Shareholders of the Saudi Automotive Services Company (SASCO), the highly regarded

0,59. At the end of 2018, shareholders’ equity recorded SR 751,862,914 compared to SR 729,110,511 in 2017, i.e. an increase of 3,12%.

May Allah’s Peace, Mercy and Blessings be upon you,

Operational Performance: During 2018, the number of fuel stations grew to 166 operating sites, with an increase of 14 operating sites. SASCO acquired many sites inside and outside cities, some of them have been already received and the other is waiting the signing of contracts. SASCO completed the construction and operation of 3 new sites, namely SASCO Plus Station (Jubail 2) on Dammam/Jubail Road, SASCO Plus Station (Zalim) in Zalim area on Riyadh/Taif Road and Taneem Station in Mecca area. We continued to develop many existing sites located inside and outside cities according to SASCO identity; 14 sites were developed according to SASCO identity. work is underway to develop the rest of sites according to the established development plan. When it comes to the automation of SASCO operating processes, it initiated the automation of pumps and fuel tanks and the use of smart cards and RFID System under the name of “Control Program”. SASCO obtained the Most Innovative Fuel Station Company Award in the World for 2018 presented by International Finance Awards on

Achieving the Board’s strategy, SASCO continued to achieve its goals and plans in all SASCO main departments and subsidiaries. Thanks to Allah, and then to the directions of the Board and our colleagues, SASCO could attain many financial and operating achievements during 2018; the foremost of which are the following: Financial Performance: In the fiscal year of 2018, SASCO achieved an increase of net profits at 26,68% compared to 2017, raising the net income to SR 35,451,309. Total profits also increased at 3,13% and were SR 81,981,605. In addition, net operating profits scored an increase of 18,07% and recorded SR 37,683,502. Revenue increase had a positive impact on such increases. 2018 revenues scored SR 2,056,081,002 compared to SR 1,212,329,807 in 2017 with an increase of 69,60%, a matter which raised share profitability compared to last year from SR 0,47 to SR

the margin of achievements it has made in 2018. When it comes to SASCO Palm Stores Co., SASCO continued its expansion plan inside and outside SASCO sites. In 2018, the first independent branch of SASCO Palm Stores in Dammam City, with the number of Palm Stores to reach 69 sites at the level of the Kingdom, through which it offers a full basket of items that were carefully studied to meet clients’ needs, whether travellers on the road between cities or vehicle drivers and passengers inside cities. SASCO introduced new items leading to change of client basket at 6,32%, rising from SR 19 in 2017 to SR 20,2 in 2018. In October 2018 and in a conference attended by many stakeholders, SASCO launched the Commercial Franchise Granting Program of operating the brands of “ SASCO Stations” and “Palm Stores”. The Program is considered the first initiative of its kind to grant the right of commercial franchise to “SASCO Stations” and “Palm Stores Centers” affiliated to SASCO Palm Stores Co. The Program also aims to create new investment opportunities for SASCO and increase its revenues and profitability through granting the franchise of operating commercial brands to other operators, resulting in creating real opportunities for citizens to participate in pioneering projects in line with the Kingdom’s orientation. In the transport sector, Ostool Al-Naqil Co., Ltd expended in 2018 paticularly in the field of dry transport. It contracted with many clients and companies. It also continued to transport fuel and water to third parties. To achieve such expansion, its fleet was supported by 10 new trucks, 8 fuel and water tanks, 5 transport goods containers and 1 reefer truck for the size of fleet to reach 116 carriers and 132 trailers through which Ostool Al-Naqil offers transport services to the sites of SASCO operating sector, enabling it to acquire an additional market share and continue to contract with new clients. Saudi Automobile & Touring Association, SATA, was largely affected in its revenues by the events recently experienced by the Arab Region and accession of new parallel clubs unauthorized by Federation Internationale de l’Automobile, which acquired a market share of international driving licenses and customs transit (Trip-Tik). Based on the International Road Transport Agreement concluded in 2012 by Saudi Automobile & Touring Association, SATA, with the International Road Transport Union (IRU), the Saudi Automobile & Touring Association, SATA, signed in 2018 with the Saudi Customs an agreement to activate the Customs Convention on the International Transport of Goods under international carriage of goods by rail (TIR); a simplified system making trade easier and cheaper, being the only international transit and guarantee system.

Under the Convention, the Saudi Automobile & Touring Association, SATA, is considered the issuer of TIR books and the guarantor of trucks exporting under the TIR system in Saudi Arabia. Thanks to this Convention, SASCO aims to activate SATA role to change from a member represented in the International Road Transport Union to an active member to represent the Kingdom of Saudi Arabia and issue TIR books. In the field of SASCO Al Waha Co., Super 8 Hotel was honored by the Technical and Vocational Training Corporation (TVTC) and the General Sports Authority on the margin of the National Festival of Heritage and Culture (Al Janadriyah Festival 32). During 2018, 2 motels carrying the Brand “Waha Motel” were opened on Al-Hijra Road (Mecca/Medina) with the number of SASCO Al Waha Co. motels to rise to 5 motels. The Company continued to operate Super 8 Hotel in Riyadh and is currently constructing a hotel in Zalim area on Riyadh-Taif Road. To this end, SASCO continued to attract qualified human cadres and create new job opportunities in favor Saudis to support the Ministry of Labour’s programs to Saudize jobs. Many other achievements, particularly social participation, detailed in the Board’s 2018 Annual Report were implemented with the attempt to achieve SASCO goals and cope up with the developments witnessed by the Kingdom in its efforts to achieve Vision 2030.

In conclusion, I extend thanks and appreciation to all shareholders of the Saudi Automotive Services Company (SASCO) for their trust in SASCO management. I also extend thanks and appreciation to SASCO Board of Directors for their continued support to the Executive Management. I also thank all SASCO employees for their great efforts contributing to achieving SASCO goals. We hope more success and progress to all. May Allah Grant Us All Success, Chief Executive Officer Riyadh bin Saleh Al Malik

Annual Report 2018

Vision To be the first company in terms of the quality of the service and its integration, and to be the ideal model to be followed in the field of the service of vehicles, the equipment, and the management of guest houses and motels on highways in the Kingdom of Saudi Arabia.

Mission To provide a range of integrated services to motorists and travellers, inside and outside the cities, to the highest domestic and international standards, always ensuring customer satisfaction with an emphasis on added value.

Annual Report 2018

Sasco Overview

SASCO Overview

non-refrigerated boxes, and all kinds of tankers after obtaining the necessary licenses from the competent authorities. f Granting franchise to third parties in respect of SASCO trademarks.

Formation Saudi Automotive Services Co. (SASCO) is a Saudi joint stock company established under Ministerial Decision No. 563 dated 23/12/1402 AH corresponding to 12/10/1982 AD.

residential and commercial buildings and third partiesâ&#x20AC;&#x2122; and SASCO-owned fuel stations. Capital

Activities f Establishing and operating auto and passenger service centres within cities and on the main and intercity roads. f Establishing and operating rest houses, motels, and restaurants on highways. f Providing first-aid means using the latest international methods, including the use of helicopters, with the approval of competent authorities. f Importing, selling and distributing spare parts, car hardware, and equipment as well as parts, accessories, and materials necessary to provide best maintenance and repair services for cars and equipment and to meet the needs of maintenance operations in workshops and service stations, and to sell them directly to the public. f Buying, selling, renting, and leasing lands and real estate properties required to serve SASCO purposes, and managing third partiesâ&#x20AC;&#x2122; properties. f Submitting

f Establishing, managing, maintaining, operating, and cleaning

contracting

tenders

car

and

equipment

maintenance for individuals, companies, and institutions. f Checking cars to issue the roadability certificates upon obtaining the approval of the Ministry of Interior. f Providing an automobile club to issue international driving licenses and customs transit (Trip-Tik) books and supporting motor sport and tourism. f Importing and exporting all types of vehicles for SASCO business as well as trading in them after obtaining the approval of the competent authorities. f Manufacturing, re-manufacturing, and renewing auto parts, equipment, and car batteries after obtaining the necessary licenses from the competent authorities.

SASCO capital is SR 600,000,000 divided into SR 60,000,000 shares, each with a value of SAR 10. On 22 May 2018, the 12th Extraordinary General Assembly agreed to increase SASCO capital from SR 540,000,000 to SR 600,000,000 with a 11,11% increase through bonus shares. One free share shall be granted to each 9 shares of the owned shares through capitalizing SR 60 million of the retained profits. The aim is to strengthen SASCO financial ability to meet current and future expansion of all activities for achieving better growth rates in the coming years and preserving financial solvency. The Fiscal Year SASCO fiscal year ends on December 31st of each calendar year. Auditor for the year 2018 Office: Allied Accountants - Chartered Accountants and Auditors Investment Restrictions There are no restrictions on the listed shares of the Company in accordance with the content of the rules regulating the investment of Qualified Foreign Financial Institutions in the listed shares, amended by the resolution of the CMA Board number 1-3-8102 dated 22 Rabi Thani 1439H corresponding to 9 January 2018 in Article 14, para (A3) and (A4). Additional Information f Please visit SASCO website: (www.sasco.com.sa) f Please read SASCO profile on Tadawul website: (www.tadawul.com.sa) under code (4050) f SASCO International Code (SA0007870070).

f Manufacturing light and heavy trailers, vehicles, refrigerated and

Annual Report 2018

Main Business Sectors

Operations Sector It is SASCO key sector that manage all its stations, including Zaiti Petroleum Services Company. It also provides fuel, renting, café and restaurant services.

SASCO Palm Company It provides supply services through managing all SASCO Palm Stores spread nationwide with the aim to meet all needs of motorists and travellers inside and outside the cities.

SASCO Al-Waha Company It manages of all SASCO motels spread nationwide in addition to super 8 hotels.

Ostool Al-Naqil Company

Saudi Automobile & Touring Association It possesses licenses from Fédération Internationale de l’automobile (FIA) to issue Customs Transit Books (Trip-Tik) and international licenses. It works through many sale outlets and network of clients in all parts of the Kingdom of Saudi Arabia. It is deemed the only guarantor of TIR books in Saudi Arabia under the Convention signed with the Saudi Customs and its convention with the International Road Transport Union.

It provides transport services to SASCO and Zaiti locations (fuel, water, and sewage transport) in addition to provide transport services (fuel and cargo) to third parties.

‫إستثمارات السيارات والمعدات‬

Auto & Equipment Investment Company It was established with the aim to independently manage SASCO investment activities. It possesses 12.79% of the capital of Middle East Battery Company (MEBCO).

‫شركة النخلة األولى للمقاوالت‬ Al Nakhla Al Oula Contracting Company

Al Nakhla Al Oula Contracting Company It was established with the aim to carry out operation, maintenance and cleaning works for SASCO sites in order to improve the quality of services provided to clients. It specializes in public contracting works of buildings, and constructing, managing, maintaining and operating residential and commercial buildings as well as road works.

SASCO Franchise Company It grants franchise to other operators through concluding contracts to operate trademarks of (SASCO stations) and (SASCO Palm Stores)

Annual Report 2018

Plans and Decisions

f Developing the transport fleet in line with the increasing number

The Strategic Plan

f Establishing new alliances with international and leading

Proceeding from the strategic plans adopted by the Board of Directors in its ninth session in 2009, and after a specialized third party reviewed the strategic plan within SASCO Governance and Strategy Evaluation Project, as well as restructuring posts and job descriptions and setting the powers of each function, the Board of Directors adopted a comprehensive, development and strategic business plan that includes SASCO financial, administrative, and operational position. The Board considered the priorities in achieving the goals set in the plan, whether they are qualitative, quantitative, administrative, or regulatory. The development strategic business plan included a list of these goals in addition to a mechanism to control it and measure the

of SASCO sites and the transport market in the Kingdom. companies operating in service sectors associated with the activities of SASCO and its subsidiaries. f Applying the concept of total quality (TQ) to all SASCO sectors. f Developing services provided by Saudi Automobile and Touring Association, increasing market share in Trip-Tik and international licenses sales, and activating the TIR Convention and its activity in the field of motor sport. f Activating the role of subsidiaries. f Strengthening control over operation and service quality. f Maintaining the competitive position of Saudi Automobile and Touring Association. f Enhancing SASCO financial efficiency.

achieved performance periodically.

f Disassociating from unexploited assets.

In 2018, we contracted with an external entity to study SASCO

f Continuing the utilization of technology and service automation.

trends. It presented many recommendations that were taken into consideration when developing the strategic plan. Main considerations of SASCO strategy considered were as follows: f To identify the items in previous strategies that would remain appropriate and existing for the coming years. f To identify the items in the previous strategies that require updating or amendment, which fits with the coming years. f To define the way through which SASCO can manage its existing assets effectively. f To determine the human resources required to support growth. f To work towards providing excellent services in terms of value added and maintaining SASCO competitive position. f To identify strengths, weaknesses, opportunities, and threats. The most important objectives of the developmental plan are as follows: f Conducting a comprehensive market study for all sectors of SASCO and its subsidiaries. f Accelerating the decentralization plan to reduce costs, improve profitability, and increase operational efficiency. f Expanding and penetrating the market through strategic partnerships and acquisitions. f Providing logistics services and a comprehensive distribution network. f Concentrating on customer satisfaction. f Providing value-added services and innovative products. f Taking advantage of technology to facilitate service provision. f Concentrating on social responsibility. f Continuing the development of the quality of services provided. f Building a network of stations inside and outside cities so that SASCO be among the three largest companies operating in this field. f Continuing the development of stations, rest houses, and service centres on highways.

f Continuing distribution of dividends to shareholders. f Attracting distinctive administrative expertise and competencies. The most important objectives achieved are as follows: f Increasing the number of stations as per SASCO expansion policy. f Continuing to develop the existing sites according to SASCO identity to cope with customer expectations. f Continuing to conduct general maintenance of all facilities at SASCO installations. f Continuing the establishment of strategic partnerships to raise the level of service provided to enhance customer satisfaction. f Branding the services offered by SASCO within its sites. f Continuing the distribution of dividends to shareholders. f Building a distinct work team. f Saudizing jobs and maintaining the green zone of SASCO and its subsidiaries according to the rating of Nitaqat Program issued by the Ministry of Labour. f Signing an agreement with the Saudi Customs to give effect to the Customs Convention on the International Transport of Goods related to the sales of TIR books. f Continuing to develop SASCO Enterprise Resource Planning (ERP) System. f Developing the operational and administrative systems for all SASCO business units. f Motivating employees and creating a distinguished work environment. f Continuing the dissociation from some untapped assets to enhance profitability and provide funding sources. f Signing Sharia-compliant credit facility agreements with local and international banks. f Social engagement. Executive Plan: In light of SASCO developmental strategic business plan, SASCO management prepares an executive action plan annually through which it divides the basic activities and links them to an implementation

Annual Report 2018

timeline on an annual basis under the supervision of the Managing Director. The actual achievements are reviewed monthly to ensure the

companies in the sites to continue to provide distinct services to customers.

realization of the objectives set in the strategic plan.

f Continuing to negotiate with local banks in order to conclude

Most Important Future Expectations

f Expanding the field of transport to third parties (water transport,

facility agreements of distinguished conditions to SASCO. f Expanding SASCO sites according to well-studied plans with the aim to develop the network in sites of distinct investment income. This includes running the competitions offered by different government bodies in addition to investment opportunities available by non-governmental bodies (individuals, institutions, bodies and corporations). f Establishing new sites in favor of SASCO Palm Stores inside and outside cities. f Continuing the development of all sites and establishing new sites carrying SASCO identity. f Establishing new strategic partnerships with service provision

fuel transport, dry transport) and increasing the number of fleet trucks. f Opening and developing motels carrying SASCO Al-Waha Co. trademark. f Finding new sale outlets to customs transit books and international driving licenses. f Giving effect to the agreement signed with the Saudi Customs and starting the sales of TIR books. f Developing the services provided by Saudi Automobile and Touring Association (SATA) and expanding its business. f Activating the granting of commercial franchise to third parties.

Annual Report 2018

Most Important Achievements in 2018

The most important achievements during the year 2018

` Acquiring some stations, including those already received and

At the Level of Network Expansion and Development

` Opening the first independent branch of SASCO Palm Stores in

operated and those still in the process of contracting.

❖ Completing the establishment of the following (3) new sites

Dammam city.

according to SASCO identity:

` Expanding dry transport through contracting with several

❖ SASCO Plus station (Jubail 2) on Dammam-Jubail highway.

customers and companies and continuing to transport fuel

❖ SASCO Plus station (Zalim 2) at Zalim area on Riyadh-Taif road.

and water to third parties.

❖ Al Taneem Station in Mecca area.

` Purchasing (10) new trucks supporting SASCO fleet.

` Continuing to develop many existing sites inside and outside

` Purchasing (8) fuel tanks in addition to 5 containers to transport

cities according to SASCO identity. 14 sites were developed

goods and 1 reefer truck.

according to SASCO identity while work is underway to develop

` Opening Abu Hadreya, Al Adeed, Shalalha and Akhal motels for

the rest of sites according to the established development plan.

` Running

many

government

competitions

SASCO Al-Waha Co.

establishing and operating fuel stations and service centers.

The following table shows a summary of the number of sites

SASCO was granted one of the sites affiliated to the Ministry of

(operating and under construction) depending on the nature of

Finance (5th site: Riyadh-Sadir-Qassim Road)

ownership:

Statement

2014

2015

2016

2017

2018

Operating-Owned

Non-operating-Owned Sites

Non-Owned Sites

137

145

152

156

Total

121

189

197

204

208

The annual growth rate

6.14%

56.20%

4.23%

3.55%

1.96%

16 rapid service centers of SASCO Palm Co. has been excluded from the above statement and converted into the statement of SASCO Palm Stores because these sites do not contain the fuel service.

2017

140

2015

136

2014 0

11 34

100

12 20

152

2016

Stopped

166 10 12

2018

20 24 13

13 3

3 150

Under Construction Sites

200

250

Stopped for Development

Operating & leased sites

Annual Report 2018

Operating Site Distribution

Qassim Province

3.0% 4.8%

Northern Province

9.0%

Western Province

16.9%

Central Province

44.6%

Eastern Province

21.7%

Southern Province

Owned Sites

2018 2017

2016

2015

2014 10

Purchase during year

16 15

28 0

4 50

Owned & Under Construction

60 Owned & Existing

At Business Development Level

of Saudi Arabia.

f SASCO was awarded the ‘Best Fuel Stations Company of 2018’ by

f Continuing in Al Ahli Capital portfolio which is run by Mulkia

the International Finance Awards on the sidelines of the company’s

Investment Co. within the limits of the agreement previously

achievements in 2018.

concluded with it. f Renewing the credit facility agreement concluded with Riyadh Bank. f Renewing and amending the credit facility agreement concluded with the Saudi British Bank (SAB). f Auto & Equipment Investment Co. Ltd (subsidiary) to purchase an additional share in the capital of Middle East Battery Company (MEBCO) raising SASCO contribution to MEBCO capital from 7.94% to 12.79% with the number of shares to rise from 794 to 1,279. f Completing the procedures of increasing SASCO capital from SR 540,000,000 to SR 600,000,000 and finalizing to deposit the amounts obtained from selling the fractions of shares resulting from the increase of capital. f Concluding

the

procedures

distributing

dividends

shareholders for the fiscal year 2017 and depositing them with their respective accounts. f Approval of the 2019 budget. f Completing a comprehensive inventory of SASCO sites for the fiscal year 2018 in accordance with agreed work procedures. f The Saudi Automobile & Touring Association, Ltd SATA’s signing of an agreement with the Saudi Customs to give effect to the Customs Convention on the International Transport of Goods as f Continuing to negotiate with a number of financial institutions and investment companies with the aim to obtain offers matching SASCO interests and goals with respect to selling some of SASCO owned sites and leasing them for long periods. f Preparing feasibility studies for the projects SASCO wants to undertake after the final approval of these studies. f Following-up with the Consulting Office to develop the designs necessary for SASCO new headquarters.

per international land transport books. f Opening new sale outlets for the Saudi Automobile and Touring Association (SATA). f Launching Commercial Franchise Granting Program of operating the brands of “ SASCO Stations” and “Palm Stores”. f Developing SASCO ERP system to achieve SASCO objectives. f Activating the automation project of pumps and fuel tanks and the use of smart cards and RFID System.

f Issuing building license for the new headquarters of SASCO after approving its designs. f Continuing to sign many agreements with international restaurant and café companies to enhance services provided to SASCO clients and to achieve a qualitative and quantitative shift for all its sites inside and outside cities towards the realization of SASCO approach to develop the station and rest house sector in the Kingdom. f Continuing the update of the website of SASCO and its subsidiaries. f Developing SASCO application on smart phones (Apple and Android). f Signing a cooperation agreement between SASCO and STC PAY with the aim to provide digital payment service at SASCO stations. f Expanding transport through Ostool Al-Naqil contracting with many clients. f Saudi Automobile & Touring Association, SATA’s success in issuing international driving licenses via its website. f Contracting with more companies and tourist companies at (Super 8) hotel in Riyadh.

f Continuing to sign a number of agreements for future supply with agents and marketers of food and non-food supplies f Continuing preventive and periodic maintenance of SASCO sites. f Working for reducing the maintenance costs through contracting with maintenance materials and spare parts suppliers and using LED lighting to rationalize the consumption of electrical power. f Continuing to dig and operate water wells to reduce water supply costs.

At the Level of Finance and Financial & Operational Control

f Honouring (Super 8) Hotel from the Technical and Vocational

f Approval of SASCO final accounts and Board of Directors’ Report.

Training Corporation (TVTC) on the margin of the Annual Heritage

f Continuing to apply the International Financial Reporting

& Culture Festival (Janadriyah Festival 32).

Standards in consistency with the IFRS approved in the Kingdom

Annual Report 2018

At the Level of Organizational and Administrative Development f Approval of the General Assembly to amend SASCO Articles of Association in accordance with the new Companies Law.

he interviewed the Chairman of SASCO in his capacity as the Kingdom’s representative. f Launching “From SASCO To Russia Campaign” to support the Saudi national team in 2018 World Cup.

f Finalizing the transfer of Auto & Equipment Investment Co. Ltd (subsidiary) into a one partner company (SASCO). f Electing a new board of directors for the 12th session and approving the composition of the Board and its committees. f Continuing to activate governance regulations and increasing transparency and disclosure. f Following up and applying any new legislations issued by the competent bodies. f Continuing to attract and Saudize qualified cadres to meet SASCO needs of various administrative functions, especially in leadership positions. f Continuing Saudization of jobs and preserving SASCO and its subsidiaries classification within the green zone. f Organizing many training courses for all administrative levels of SASCO (the foremost of which are the course of Skills for Raising

f SASCO Marketing Department to present a lecture for women

the Levels of Performance and Productivity and the course of

under the title of “Safe Driving” to highlight the main driving rules,

Managing Change and Communications in Business).

how to apply for a driving license and types of fuel. f Launching the women driving campaign titled “Nothing to Stop

At the Level of Corporate Social Responsibility

You” in addition to offering awards and free fuel coupons for the

f Participating in the Saudi International Franchise Expo held in

first 37 women to arrive to SASCO Plus Stations.

Riyadh city during the period from 5-7 Feb. 2018. f Saudi Automobile and Touring Association (SATA)’s participation in

f Honouring the first Saudi woman to carry an international driving license by the Saudi Automobile & Touring Association, Ltd SATA.

a global campaign titled “3500 Lives”; a global campaign launched by the Federation Internationale de l’Automobile (FIA) to spread awareness in the society about the golden rules that would help you save your life and the lives of others. The campaign calls on all governments to give priority to traffic and road safety as recent statistics have concluded that about 3500 persons are killed on a daily basis out of road accidents.

f Participating awareness to

campaign

celebrate

Alzheimer’s

the World

Month.

The campaign aims to introduce the initial symptoms, necessary f Participating in “Ramadan is in Our District” Exhibition during which the messages of the awareness campaign on the golden rules that would reduce road accidents were disseminated.

symptoms and means of protection against it. f Inaugurating the “Station Forestation” Project to increase the

f Organizing an awareness campaign in favor of fuel filling up staff

level of forestation in SASCO stations as part of Riyadh Forestation

of SASCO about security and safety to raise the level of performance

Campaign under the supervision of Riyadh Development Authority

of staff in this context.

in cooperation with the Saudi Arabian Boy Scouts Association.

f Honouring the French filmmaker David Coulia during his visit to Riyadh to film the trip (we love road trip). During his visit,

diagnosis, early intervention, and educating the society about

At the Level of Corporate Social Responsibility (CSR):

f www.sataclub.com.sa

f Mosque service in different sites inside and outside cities and on

f https://twitter.com/sasco_ksa

highways.

f https://twitter.com/SATAclub

f Hajj and Omra service.

f https://twitter.com/sasco_palm

f Free toilet service.

f https://twitter.com/Super8R

f Paying attention to health and cleanliness.

f https://www.facebook.com/SaudiAutomotiveServicesCo/?fref=ts

f Paying attention to environment.

f /https://www.facebook.com/Sataksa_

f Providing camps during Hajj in some of its sites on the highways.

f /https://www.facebook.com/sasco-palm-613438065491715_ f https://www.facebook.com/Super-8-Hotel-/ Riyadh-1777669312470879 f http://instagram.com/sasco_ksa_ f http://instagram.com/sata_ksa_ f http://instagram.com/sasco_palm_ f http://instagram.com/super8.riyadh_ f http://cutt.us/dxrT_ f https://plus.google.com/117174656605659302922_ f www.youtube.com/sasasco f www.flickr.com/photos/sasco

At the Level of Marketing Activities and Social Media Continuous update of the website of SASCO and its subsidiaries

To update SASCO application on (iOS / Android) smart phones.

(www.gasco.com.sa), in addition to their accounts on social media

f https://appsto.re/sa/BVIaH.i

on the following links:

f https://appsto.re/sa/Hg1Ocb.i

Annual Report 2018

Board of Directorâ&#x20AC;&#x2122;s and Committees

Board of Director’s and Committees Board Formation The Board of Directors was entrusted with SASCO management it the twelfth session as of 30/6/2018 for a period of three years ending on 29/6/2021.

Members’ Classification No.

Name

Membership Category

Position

Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman – Head of Executive Committee

Non-Executive

Mr. Sultan bin Mohammed Al-Hudaithi

Vice Chairman – Managing Director - Member of Executive Committee

Executive

Mr. Nasser bin Abdullah Al-Awfi

Board Member – Head of Audit Committee

Non-Executive

Mr. Suleiman bin Ali Al-Khudair

Board Member – Member of Nomination and Remuneration Committee

Non-Executive

Mr. Majid bin Mohammed Al-Othman

Board Member – Member of Nomination and Remuneration Committee

Non-Executive

Mr. Riyadh bin Saleh Al-Malik

Board Member – Member of Executive Committee - CEO

Executive

Mr. Ali bin Mohammed Aba Al-Khail

Board Member –Head of Nomination and Remuneration Committee

Independent

Mr. Fawaz bin Suleiman Al-Rajhi

Board Member – Member of Audit Committee

Independent

Mr. Majid Bin Nasser Al Sabei’e

Board Member – Member of Executive Committee

Independent

� The membership of Mr. Ajlan bin Abdulrahman Al-Ajlan in the Board and the committees (independent member) expired at the end of the

eleventh session on 29 June 2018.

Annual Report 2018

Allowances and Remunerations Paid to Board Members and Senior Executives Remuneration of the Board of Directors The following statement shows the payments to Board members in 2018:

Expenditure Allowance

Grand total

Indemnity

Total

Granted shares

Long-term incentive plans

Short-term incentive plans

Periodic remuneration

Profit ratio

Total

Changing Remuneration Remuneration of Chairman, managing Director or Secretary if he is a Board member

Remuneration of technical, administrative or consulting works

In kind benefits

Total allowance for attending committee meetings

Certain amount

Description

Allowance for attending Board meetings

Fixed Remuneration

224,000 218,000 12,000 212,000 666,000

224,000 218.000 12.000 212.000 666,000

6,000 30,000

12,000 6,000

6,000 36,000

6,000

12,000 6,000

200,000

Total

Mr. Ajlan bin Abdulrahman Al-Ajlan (11th session)

600,000

Mr. Majid Bin Nasser Al Sabeiâ&#x20AC;&#x2122;e (12th session)

12,000

Mr. Fawaz bin Suleiman Al-Rajhi

200,000

Mr. Ali bin Mohammed Aba Al-Khail

200,000

First: Independent Members

218,000 227,000

224,000

224,00

893,000

218,000 227,000 224,000 224,00 893,000

9,000 15,000 12,000 48,000

12,000

9,000 12,000

Total

45,000

12,000

200,000

12,000

Mr. Majed bin Mohammed Al-Othman

800,000

Mr. Suleiman bin Ali Al-Khudair

200,000

Mr. Nasser bin Abdullah Al-Awfi

200,000

Mr. Ibrahim bin Mohammed Al-Hudaithi

200,000

Second: Non-Executive Members

47,398 64,442 111,840

2,024,000 224,000 2,248,000

* 1,800,000 1,800,000

224,000 224,000 448,000

12,000 24,000

12,000

200,000

Total

12,000

Mr. Riyadh bin Saleh Al-Malik

400,000

Mr. Sultan bin Mohammed Al-Hudaithi

200,000

Third: Executive Members

* Pursuant to Section Two (Article 3) of the regulatory controls and procedures issued in implementation of the Companies Act with respect to listed shareholding companies issued by the

Capital Market Authority and based on SASCO Remuneration Policy, an annual remuneration shall be cashed to the Managing Director (in consideration of works as well as executive and administrative positions entrusted to him in SASCO in his capacity as Managing Director) and shall be determined by a decision from the Board of Directors following a recommendation from the Remuneration Committee. The decision shall be renewed in each new session of the Board.

Remunerations Paid to Senior Executives The following statement shows the payments to Top Five Senior Executives who received Allowances and Remunerations, including the CEO and

Grand total 7,033,523

Indemnity 374,300

the Council if any

Total 1,828,929

Granted shares -

plans

Long-term incentive

plans

Short-term incentive

Profits -

Remunerations

Total 4,830,294

Periodic

In kind benefits -

1,828,929

Allowances

Changing Remuneration

1,226,100

Total

3,604,194

Statement

Salaries

Fixed Remuneration

Total reward executives for

CFO during 2018:

Remunerations Paid to Committee Members The following statement shows the payments to committee members in 2018: Statement

Fixed remunerations except meeting attendance allowance

Meeting attendance allowance

Total

Executive Committee Members Mr. Ibrahim bin Mohammed Al-Hudaithi

9,000

Mr. Sultan bin Mohammed Al-Hudaithi

12,000

Mr. Riyadh bin Saleh Al-Malik

12,000

Mr. Majid Bin Nasser Al Sabeiâ&#x20AC;&#x2122;e (12th session)

6,000

Total

39,000

Audit Committee Members Mr. Nasser bin Abdullah Al-Awfi

50,000

15,000

65,000

Mr. Fawaz bin Sulieman Al Rajhi

50,000

6,000

56,000

Mr. Turki bin Muhamma Al Quraini (12th session)

40,000

9,000

49,000

Mr. Suleiman bin Ali Al-Khudair (11th session)

25,000

6,000

31,000

Mr. Abdurrahman bin Ibrahim Al Humaid (11th session)

40,000

6,000

46,000

205,000

42,000

247,000

Total

Remuneration & Nomination Committee Members Mr. Ali bin Mohammed Aba Al-Khail

12,000

Mr. Majed bin Mohammed Al-Othman

12,000

Mr. Suleiman bin Ali Al-Khudair (12th session)

6,000

Mr. Ajlan bin Abdulrahman Al-Ajlan (11th session)

6,000

36,000

Total

Annual Report 2018

Remuneration Policy According to the payments made to the Board members, formed

Incentives, Bonuses and Commissions Policy Manual in a

committees and senior executives, the most important clauses of the

manner that does not conflict with their employment contracts.

Remuneration Policy are as follows:

A remuneration shall be approved before being paid by the

f paying (3) thousand Saudi Riyals (per each member / per meeting ) for board meeting attendance.

Remuneration after obtaining the Board’s recommendation. The Remuneration Policy of Board members, formed committees and

f Paying an annual remuneration to the Managing Director. It shall

senior executives, which was approved by the Thirty Sixth Ordinary

be determined by a board resolution upon a recommendation

General Meeting held on 24 Dec. 2017, can be accessed via SASCO

from the Remuneration Committee. The resolution is renewed at

website (www.sasco.com.sa).

the outset of each board session (3% of net profits at the end of each fiscal year, being not less than SR 1000,000).

Deviation from Remuneration Policy

f Paying a meeting attendance allowance of SR (3) thousand (per each member/per one meeting) to committee members.

There is no deviation between the granted remunerations, whether paid to Board members, committees or senior executives, and the

f Paying an annual remuneration of SR 80,000 to a non-board Audit

applicable Remuneration Policy.

Committee member. f Paying an annual remuneration of SR 50,000 to a board Audit Committee member.

The Board Members dedicated a sufficient time to undertake their

f Paying an annual remuneration to the CEO according to a

responsibilities and prepare for the Board meetings and committees.

mechanism that pays attention to quantitative and qualitative

The Board was keen on scheduling its meetings and preparing the

performance in accordance with his employment contract. Such

meetings in advance making sure that all board members attend the

mechanism shall be approved by the Remuneration Committee by

meetings and discuss all items of the proposed agenda.

a recommendation from the Managing Director.

The following table shows the attendance record of Board meetings

f Senior Executives’ remuneration is paid according to the Staff

No.

Member Name

12th session

No. of meetings (2)

Meeting No. (2) 22/05/2018

Meeting No. (3) 11/09/2018

Meeting No. (4) 18/12/2018

Attendance Ratio

Mr. Ibrahim bin Mohammed Al-Hudaithi

Mr. Sultan bin Mohammed Al-Hudaithi

100%

Mr. Nasser bin Abdullah Al-Awfi

100%

Mr. Suleiman Ali Al-Khudair

100%

Mr. Majed bin Mohammed Al-Othman

100%

Mr. Riyadh bin Saleh Al-Malik

100%

Mr. Ali bin Mohammed Aba Al-Khail

Mr. Fawaz Suleiman Al-Rajhi

Mr. Majid Bin Nasser Al Sabei’e

Mr. Ajlan Abdulrahman Al-Ajlan

Attendance in person ?

in 2018 (eleventh and twelfth sessions):

11th session

Meeting No. (1) 13/03/2018

Board Meetings

By phone

75%

100% 100%

Date of membership in the board 30/06/2018

100% Date of expiry of membership 29/06/2018

100%

× Authorizing one of the Board members

No board member has submitted a written request to hold a board meeting in 2018 and no member has objected to the Board’s agenda and resolutions.

Number of SASCO requests for Shareholders Register The following table shows the number of SASCO requests for Shareholders Register as well as the dates and reasons for such requests: No.

Request Date

Request Reasons

05/ 02/ 201 8

Following up the change in Shareholders Register

01/ 05/ 201 8

Following up the change in Shareholders Register

22/ 05/ 2018

Twelfth Extraordinary General Meeting

30/ 08 / 2018

Following up the change in Shareholders Register

11/ 1 2/ 2018

Following up the change in Shareholders Register

Board Declarations

Procedures taken by the Board to familiarize its members

f Account records were properly prepared.

(non-executive in particular) with the shareholders’

f The Internal Control System was established on sound foundations

proposals and remarks about SASCO performance.

and implemented effectively. f There is no doubt in SASCO ability to continue its activities.

f SASCO Investor Relation Department independently receives and submits shareholders’ proposals, if any, to the Board for discussion in its meetings and taking the appropriate resolution.

Board Confirmations

f SASCO didn’t receive any proposals or remarks from shareholders

f No Board member or a senior executive waived any salary or

about its performance in the current fiscal year other than that has

remuneration under any arrangements or assignment agreement.

been discussed in the shareholders general meetings and included

No shareholder waived any rights to profit under any arrangements

in the minutes of meetings.

or assignment agreement. f There is no description of classes and numbers of transferable debt instruments, contractual securities, rights memorandum, or

f In case of any proposals or remarks on SASCO performance, such proposals and remarks shall be discussed as part of the periodic board meetings agenda.

similar rights issued or granted by SASCO during the current fiscal year. There is no compensation gained by SASCO in return for this. f There is no description of any transfer or underwriting rights under transferable debt instruments, contractual securities, rights memorandum, or similar rights issued or granted by SASCO. f SASCO did not recover, purchase, or cancel any recoverable debt instruments. f SASCO did not establish any investments or reserves in the interest of its employees. f SASCO did not receive from shareholders possessing 5% or more of its capital or account auditor any request for holding a general meeting or for adding an item to the agenda of the meeting in the current fiscal year.

Annual Report 2018

Transactions and Contracts in which Board Members and Executive Directors have an Interest There are interest-related transactions and contracts for some Board members as follows:

Agency

Contracts/Business

Nahaz Investment Co.

A site lease from Nahaz Investment Co. to use as headquarters and labour accommodation for Ostool Al-Naqil Co. (subsidiary)

DAKKIN Advertising and Design Consultancy

Mr. Ibrahim bin Mohammed Al-Hudaithi (Board member possessing 0.02% of capital). Mr. Sultan bin Mohammed Al-Hudaithi (Board member possessing 0.02% of capital).

Mr. Ibrahim bin Mohammed Al-Hudaithi (possessing 33.34% of capital) Providing services in Mr. Majed bin Mohammed Al-Othman the field of promotion (possessing 33.33% of capital) and advertising Mr. Sultan bin Mohammed Al-Hudaithi (possessing 33.33% of capital)

Mulkia Investment Co.

Managing an investment portfolio in Ahli Capital

Mr. Ibrahim bin Mohammed Al-Hudaithi (Board member possessing 17.67% of capital). Mr. Suleiman Ali Al-Khudair (possessing 0.67% of capital). Mr. Majid bin Mohammed Al-Othman (possessing 0.67% of capital). Mr. Sultan bin Mohammed Al-Hudaithi (Board member possessing 21.45% of capital).

Nahaz Investment Co.

Zaiti Petroleum Services Company rents stations No. 1 and 2 from Nahaz Investment Co.

Mr. Ibrahim bin Mohammed Al-Hudaithi Board member of Nahaz Investment Co. (possessing 0.02% of capital) Mr. Sultan bin Mohammed Al-Hudaithi Board member of Nahaz Investment Co. (possessing 0.02% of capital)

Zaiti Petroleum Services Company rents station No. 8 from Madaen Star Real Estate

Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman of Madaen Star Real Estate (possessing a direct and indirect share of 97.75% of capital) Mr. Majed bin Mohammed Al-Othman Board member of Madaen Star Real Estate Mr. Sultan bin Mohammed Al-Hudaithi Board member of Madaen Star Real Estate

Zaiti Petroleum Services Company rents station No. 9 from Madaen Star Real Estate

Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman of Zawaya Real Estate Co. (possessing a direct and indirect share 42.96% of capital). Mr. Majid bin Mohammed Al-Othman Board member of Zawaya Real Estate Co. (possessing a share 0.29% of capital). Mr. Sultan bin Mohammed Al-Hudaithi Managing Director of Zawaya Real Estate Co. (possessing a share 1.8% of capital).

Madaen Star Real Estate

Zawaya Real Estate Co

Related Parties

Statement

Contract Value is SAR 368,000 annually

Publicity and advertising of SAR

Contract Duration

One year

139,65

A contract to manage a portfolio of SAR 50,000,000

To be terminated by a 30-day written notice

Contract value is SR 1.1 million

For five renewable years as of 01/01/2018

Contract value is SR 300,000 on an annual basis

Contract value is SR 400,000

One year

Reporting to Board

Reporting to General Meeting

Statement

Contract Duration

Zaiti Petroleum Services Company rents station No. 10 from Madaen Star Real Estate

Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman of Madaen Star Real Estate (possessing a direct and indirect share of 97.75% of capital). Mr. Majid bin Mohammed Al-Othman Board member of Madaen Star Real Estate. Mr. Sultan bin Mohammed Al-Hudaithi Board member of Madaen Star Real Estate.

Contract value is SR 800,000

Five renewable years from 29 April 2015

Zaiti Petroleum Services Company rents station No. 11 from Madaen Star Real Estate

Contract value is SR 250,000 on an annual basis

One year

Madaen Star Real Estate

Zaiti Petroleum Services Company rents station No. 12 from Madaen Star Real Estate

Contract value is SR 150,000 on an annual basis

Ten renewable years from 1 August 2007. Site was evacuated on 1 May 2018

Nahaz Investment Co.

Nahaz Investment Co. purchases fuel from Zaiti Petroleum Services Company

The value of 2018 fuel purchases was SR 78,700

One year

Madaen Star Real Estate purchases fuel from Zaiti Petroleum Services Company

Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman of Madaen Star Real Estate (possessing a direct and indirect share of 97.75% of capital) Mr. Majed bin Mohammed Al-Othman Managing Director of Madaen Star Real Estate Mr. Sultan bin Mohammed Al-Hudaithi Board member of Madaen Star Real Estate

The value of 2018 fuel purchases was SR 188,600

One year

Agency

Madaen Star Real Estate

Contracts/Business

Related Parties

Reporting to Board

Reporting to General Meeting

Annual Report 2018

Agency

Mr. Majed AlOthman

Zawaya Real Estate Co.

Fun Gate Co.

Contracts/Business

Related Parties

Statement

Contract Duration

One Year

Mr. Majid Al-Othman purchases fuel from Zaiti Petroleum Services Company

Mr. Majid bin Mohammed Al-Othman

The value of 2018 fuel purchases was SR 15,900

Zawaya Real Estate Co. purchases fuel from Zaiti Petroleum Services Company

The value of 2018 fuel purchases was SR 10,700

One Year

Zawaya Real Estate Co. rents advertising boards at station No. (9)

2018 value was SR 25,000

One Year

Fun Gate Co. rents 10 residential rooms at station No. 2.

Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman of Fun Gate Co. (possessing a direct and indirect share of 97.75% of capital). Mr. Majid bin Mohammed Al-Othman Managing Director of Fun Gate Co. Mr. Sultan bin Mohammed Al-Hudaithi Board member of Madaen Star Real Estate.

2018 value was SR 50,000

One Year

Reporting to Board

Reporting to General Meeting

Reported. All above business and contracts were approved for a coming year in the eleventh extraordinary general meeting held on 22 May 2018. The renewal of the same shall be approved by the next shareholdersâ&#x20AC;&#x2122; general meeting. These business and contracts have no preferential terms.

Annual Report 2018

Executive Committee It comprises:

(Membership Committee acurrent session)

Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman | Head of Executive Committee Qualifications & Experiences: He is a businessman, holding the Secondary school certificate and having more than 36 years in corporate management. He occupied many positions including the deputy Chairman of the Saudi Chambers of Commerce. He also participated in the boards of CMA-listed and unlisted shareholding companies such as Al-Madaen Star Group, Akwan Real Estate Co., Ibrahim bin Mohammed Al-Hudaithi Investment Co., Zawaya Real Estate Co., Nahaz Investment Co. and other companies working in the fields of real estate, services, investment and financial services inside and outside the Kingdom of Saudi Arabia.

Present Occupations: f Chairman of Al-Madaen Star Group. f Chairman of Mulkia Investment Co. f Board member of Nahaz Investment Co. Previous Occupations: f Vice Chairman of the Saudi Chambers of Commerce. f Chairman of Al Kharj Industrial Chambers of Commerce. f Member of Al Kharj Governorate Local Council. f Board member of Solidarity Company.

Mr. Sultan bin Mohammed Al-Hudaithi Vice Chairman | Managing Director | Member of Executive Committee Qualifications & Experiences: He holds the Bachelor’s Degree in Accounting with honour degree from King Saud University and Master of Business Administration from London Business School. He held leading positions in many public and private companies in Saudi Arabia. He has experience in corporate restructure, strategic planning and investment management in securities, private ownership and real estate investment. He was a member of boards and committees in public and private companies including Saudi Chemical Co., Nahaz Investment Co., Zawaya Real Estate Co., Al-Madaen Star Group, Middle East Battery Company (MEBCO), Mulkia Investment Co. and United Wire Factories Company (ASLAK).

Present Occupations: f SASCO Managing Director. f Board member of United Wire Factories Company (ASLAK) f Board member of Mulkia Investment Co. f Board member of Nahaz Investment Co. Previous Occupations: f Chief Executive Director of Ibrahim bin Mohammed Al-Hudaithi Investment Co. f Chief Executive Director of Zaiti Petroleum Services Company. f Deputy Director General of Financial and Administrative Affairs, Al-Madaen Star Group. f Board member of Saudi Chemical Co.

Mr. Riyadh bin Saleh Al-Malik Board Member | Member of Executive Committee | Chief Executive Officer Qualifications & Experiences: He holds the Bachelor’s Degree in Business Administration from King Abdulaziz University. He has a vast experience in corporate management, particularly fuel stations. He served as the General Director of Al Tas’helat Marketing Company Ltd., Deputy General Director of Riyadh Development Company and board member of many companies. He is now the Head of Customs Council of Federation Internationale de l’Automobile and Head National Committee of Fuel Station Companies in the Council of Saudi Chambers.

Present Occupations: f SASCO Chief Executive Officer. Previous Occupations: f General Director of Al Tas’helat Marketing Company Ltd. f Deputy General Director of Riyadh Development Company. f Director of Marketing Department of Saudi Real Estate Company (Al Akaria). f Sales Director of Saudi Hotels & Resorts Company.

Mr. Majid Bin Nasser Al Sabei’e Board Member | Member of Executive Committee Qualifications & Experiences: He holds the Bachelor’s Degree in Political Sciences from King Saud University and enjoys more than fifteen years in corporate governance. He held many leading positions such as the director of real estate projects at Nasser Bin Mohammed Alsubeaei & Sons Investment Company, financial analyst and managing director of Morgan Stanley & Co. He is currently the Chief Executive Officer of Nasser Bin Mohammed Alsubeaei & Sons Investment Company.

Present Occupations: f Chief Executive Officer of Nasser Bin Mohammed Alsubeaei & Sons Investment Company Previous Occupations: f Manager of real estate projects at Nasser Bin Mohammed Alsubeaei & Sons Investment Company. f Financial Analyst of Morgan Stanley & Co. f Managing Director of Morgan Stanley & Co.

Competencies and Duties

f To consider SASCO strategic and operational plans and budgets to submit them to the Board. f To review and follow up the implementation of all SASCO projects, make decisions under Committee authorized powers, and to discuss the obstacles facing the implementation of different projects to examine their reasons and remedies and recommend proper solutions. f To consider and present initial approvals to high importance issues that require Board decisions. f To make decisions on issues authorized to the Committee by the Board outside the competency of SASCO Managing Director and CEO. These issues may include topics related to investments, human resources (HR), remuneration, information technology (IT), capital expenses (CAPEX), procurements, and other issues authorized to the Committee. f To identify SASCO investment objectives and policies, including: ❖ Assets subject to investment according to the adopted regulatory restrictions. ❖ Asset types. ❖ Investment-related long-term policies and objectives, risk appetite, asset diversification, investment currencies, and internal or external investments. ❖ Nature of investment management arrangements and related controls. ❖ Appointment of investment portfolio managers and trustees, and evaluating their performance periodically. ❖ Method and frequency of performance analysis. ❖ Approval of different investment processes as per the established investment policy. The Executive Committee can authorize their powers of approval within certain financial limits to the General Manager/FCO either jointly or severally according to the conditions of the authorization granted. ❖ Reviewing and examining SASCO investment policies based on performance evaluation. ❖ Evaluating investment outcomes to identify the success of implemented investment strategies, reporting investment outcomes to the Board as well as ensuring the adherence to the investment policy and key guidelines. f To follow up the implementation and development of SASCO organizational structures and decisions that ensure the quick implementation and development thereof. f To review the administrative regulations with SASCO management and make decisions that enable the management to put them in place. f To contact senior officers at governmental and national bodies to facilitate the obstacles facing SASCO business and explain SASCO programs to them.

No.

Member Name

f To amend technical designs and specifications and present proper recommendations thereon. f To make appropriate decisions on issues authorized by the Board to the Committee to discuss, address, and make appropriate decisions thereon. f To perform all acts that would drive business and achieve SASCO objectives within the regulations, rules, and decisions issued by the Board. f To conduct purchases and acquisitions of existing stations or lands for constructing stations thereon within the limits of SASCO competencies. f To perform the activities referred by the Board or the Chairman for consideration or execution.

Most Important Achievements

f Following up the signing of the agreement with the Saudi Customs and approving the Saudi Automobile & Touring Association, Ltd SATA as a guarantor of TIR books in the Kingdom. f Following up SASCO lawsuits. f Following up the governmental bodies concerned with SASCO lands and sites. f Following up the acquisition of new sites for SASCO. f Following up the goals and recommendations of SASCO strategic plan. f Approving the estimated budgets of SASCO and its subsidiaries and submitting recommendations to the Board for approval. f Following up the financial and operational performance of SASCO and its subsidiaries. f Studying the operating sites and endeavouring to extend their lease contracts and reduce their costs. f Following the project of selling some sites and releasing them. f Evaluating SASCO investments and liquidity and submitting recommendations thereon to the Board. f Coordinating with SASCO Management to find ways to reduce costs. f Making recommendations on bank facility agreements. f Examining the investment opportunities available for SASCO. f Following up the financial and operational performance subsidiaries. f Following up the implementation of SASCO projects. f Following up the approval of the Headquarters design and issuing the required building license.

Meetings

The following table shows the attendance record of Executive Committee meetings during 2018 (eleventh and twelfth sessions):

11th session

12th session

No. of meetings (2)

Meeting No. (1) Meeting No. (2) 12/03/2018 21/05/2018

Meeting No. (3) Meeting No. (4) 02/09/2018 17/12/2018

Attendance Ratio

Mr. Ibrahim bin Mohammed Al-Hudaithi Committee Head

100%

Mr. Riyadh bin Saleh Al-Malik Committee Member

100%

Mr. Majid Bin Nasser Al Sabei›e Committee Member

Apologized

Date of membership in the Committee 30/06/2018

75%

100%

Personal attendance Annual Report 2018

Audit Committee It comprises:

Mr. Nasser bin Abdullah Al-Awfi Board Member | Head of Audit Committee Qualifications & Experiences: He holds the Master’s Degree in Accounting, the Master’s Degree in Business Administration from Southern New Hampshire University in the USA and the Bachelor’s Degree in Accounting from King Saud University. He enjoys more than thirty one years of experience in the management of joint stock companies as well as financial, administrative and strategic consultation. He also participated in the many boards of shareholding companies and board committees (Audit Committee) such as Al Jouf Agricultural Development Company (JADCO), Taiba Holding Company and United Cement Industrial Company.

Present Occupations: f Board member and Head of Audit Committee of United Cement Industrial Company. f Head of Al Jouf Agricultural Development Company Audit Committee. f Head of Saudi Ceramics Audit Committee. f Member of Taiba Holding Company Audit Committee. Previous Occupations: f Director of Financial, Administrative and Investment Department of Saudi Pharmaceutical Industries & Medical Appliances Corporation (SPIMACO). f Deputy General Director for Financial and Administrative Affairs of Saudi Livestock Trading Company. f Director for Financial and Administrative Affairs of Taiba Investment and Real Estate Development Company.

Mr. Fawaz bin Suleiman Al-Rajhi Board Member | Member of Audit Committee Qualifications & Experiences: He holds the Bachelor’s Degree in Accounting and Information Systems Management from King Fahd University of Petroleum and Minerals (KFUPM) and also holds the Master’s Degree in Business Management from Stanford University, USA. He is the Chairman of AlRajhi United Investment Holding Company; it is a company investing in capital markets and private transactions on the local, regional and international levels. He has been leading and directing the Company’s efforts since its inception based on the strategy of diversifying the investment portfolio through a deliberate choice of markets and industries in selected geographical locations, with focus being placed on emerging technology and income-generating real estates. He is also a board member and member of audit committees in a number of joint-stock companies. He spent more than a decade in banking. He held many positions in Corporate Financing Division of Rajhi Bank. He took part in establishing the department of corporate loans and financing subscription of large corporations. He was the person in charge of establishing the Share and Subscription Department of Al Rajhi Capital Company.

Present Occupations: f Chairman of AlRajhi United Investment Holding Company. f Chief Executive Officer of AlRajhi United Investment Holding Company. Previous Occupations: f Head of Private Placement Operations in Al Rajhi Capital Company. f Director of Sales and Distribution in Al Rajhi Capital Company. f Head of Corporate Banking Services Team in Rajhi Bank. f Senior credit analyst in Rajhi Bank. f System Analyst of Procter & Gamble Co.

Mr. Turki bin Muhamma Al Quraini Non-Board Member Qualifications & Experiences: He holds the bachelor of accounting from King Saud University, M.A in financial management from Sydney University of Technology, Australia, and the Certificate of Capital Market Exam (CME-1). He enjoys experience in corporate governance, measurement of corporate compliance levels, development of corporate governance systems, organizational structures, organizational regulations of the government sector as well as listed and unlisted shareholding companies. He also has experience in internal audit and risk management.

Present Occupations: f Governance and compliance counsellor and specialist in shareholding companies listed in the Saudi Capital Market (Tadawul). Previous Occupations: f Director of Compliance with Corporate Governance Rules – Capital Market Authority. f Director of Corporate Governance Standards Capital Market Authority. f General Director of Governance and Board Secretary - Jabal Omar Development Co. f General Director of Governance and Risks - National Housing Company.

� The membership of Dr. Abdulrahman bin Ibrahim Al-Hamid and Mr. Suleiman bin Ali Al-Khudair in the Audit Committee expired at the end of the Eleventh Session on 29 July 2018.

Competencies and Duties

f To review the account auditor’s plan and activities and make sure he does not perform any works beyond the limits of audit tasks commissioned to him and present opinions in this regard. f To Respond to the auditor’s questions. f Study the auditor’s report and remarks on the financial statements and follow up the procedures taken in this regard. f To review the results of supervisory reports and ensure SASCO takes the required procedures. f To verify SASCO complies with the relevant laws, regulations and policies. f Review contracts and transactions to be concluded by SASCO with related parties and present recommendations thereon to the Board. f Submit to the Board the issues and matters for which necessary actions should be taken and recommend proper procedures.

f To review the preliminary and annual financial statements before submitting them to the Board and present opinions and make recommendations thereon to ensure integrity, accuracy and transparency. f To present technical opinions – upon request from the Board – whether the Board’s report and financial statements are fair, balanced and understood and contain the information that allows shareholders and investors to evaluate SASCO financial position, performance, business model and strategy. f To review any important or unfamiliar issue contained in the financial reports. f To accurately consider any issues raised by Chief Financial Officer, the persons assuming his duties, compliance officer or account auditor. f To verify accounting estimations in major issues of financial reports. f To review SASCO accounting policies and present opinions and make recommendations thereon to the Board. f To study and review systems of financial internal systems and risk management. f To consider internal audit reports and follow-up the implementation of corrective procedures regarding the remarks so raised. f To submit recommendation to the Board of the need to hire an internal auditor. f To submit recommendation to the Board concerning the appointment and remuneration of Internal Audit Department director or the internal auditor. f To monitor and supervise the internal auditor and Internal Audit Department’s performance and activities to verify their efficiency in undertaking their duties and responsibilities and the availability of the required resources. f To recommend to the Board the appointment of account auditors, dismiss them, set their fees, assess their performance, make sure of independence and review their scope of work and employment conditions. f To ensure that the account auditor is independent, just, fair and efficient, taking into account relevant rules and standards.

No.

4 5

Member Name

Most Important Achievements f Approval and follow-up of SASCO internal audit action plan. f Examining the structure of Internal Audit Department and submit recommendations thereon. f Examination of annual and quarterly financial statements and submit recommendations thereon. f Recommending the amendment of some financial policies. f Ensuring the independency of SASCO external auditor. f Following up the reports developed by the Shifting Counsellor on shifting to the International Financial Reporting Standards and work progress according to them. f Developing the Audit Committee’s annual report and submitting it to the General Assembly of shareholders. f Reviewing the different internal audit reports and submit recommendations thereon. f Following up risk assessment reports with a consulting office and submit recommendations thereon. f Recommending SASCO chartered accountants. f Recommending amendments to the Business Regulation of the Audit Committee.

Meetings The following table shows the attendance record of Audit Committee meetings during 2018 (eleventh and twelfth sessions):

11th session

12th session

No. of meetings (2)

No. of meetings (3)

Meeting

Meeting No.

No. (1)

(2)

(3)

(4)

(5)

13/03/2018

24/04/2018

18/07/2018

08/10/2018

23/10/2018

Mr. Nasser bin Abdullah Al-Awfi

Committee member Mr. Riyadh bin Saleh Al-Malik Non-Board Member Mr. Abdurrahman bin Ibrahim Al Humaid Non-Board member Mr. Suleiman bin Ali Al-Khudair Committee member

Ratio

100%

Committee Head Mr. Fawaz bin Suleiman Al-Rajhi

Attendance

Apologized

By Phone

Apologized

Date of membership in the Committee 30/06/2018

40%

100% Date of expiry of membership 29/06/2018

100%

Date of expiry of membership 29/06/2018

100%

Personal attendance Annual Report 2018

Nomination and Remuneration Committee It comprises:

Mr. Ali bin Mohammed bin Ali Aba Al-Khail Board Member | Head of Nomination and Remuneration Committee Qualifications & Experiences: He holds the Bachelor’s Degree in Political Sciences from the Faculty of Administrative Sciences, King Saud University and the Master’s Degree in Government Management from Harvard University, United Sates of America. He is the secretary of the Head of the Royal Diwan, the Deputy Director of the Political Affairs Department of the Royal Diwan and secretary of Office of Presidency of Prime Minister. He was appointed in the Office of the Second Deputy of Prime Minister, Minister of Defence and Aviation and Inspector General. He also worked as an administrative counsellor in the High Commission for Administrative Organization and Deputy Chairman of the Board of Directors of Sanad Investment Company.

Present Occupations: f Vice Chairman of the Board of Directors of Sanad Investment Company. Previous Occupations: f Deputy Director of the Political Affairs Department of the Royal Diwan. f Administrative counsellor in the High Commission for Administrative Organization.

Mr. Suleiman bin Ali Al-Khudair Board Member | Member of Nomination and Remuneration Committee Qualifications & Experiences: He holds a university degree in sciences from the USA. He held many administrative positions, as he worked as a computer engineer in the Ministry of Defence. Then, he moved to the private sector where he worked as a technical director, a sales director and deputy general director in Nahil Computers and now he is its General Director.

Present Occupations: f General Director of Nahil Computers. Previous Occupations: f Technical Director of Nahil Computers. f Sales Director of Nahil Computers. f Deputy General Director of Nahil Computers.

He participated in boards of many joint stock companies.

Mr. Majid bin Mohammed Al-Othman Board Member | Member of Nomination and Remuneration Committee Qualifications & Experiences: He is a businessman, holding the Secondary school certificate and enjoying more than thirty years in real estate, contracting and automobile services. He is the Managing Director of Al-Madaen Star Group and board member of Ibrahim bin Mohammed Al-Hudaithi Investment Co., Bilda Specialized Commercial Centers Co. and Zawaya Real Estate Co.

Present Occupations: f Chairman of Al-Madaen Star Group. f Chairman of Fun Gate Company. f Managing Director of Al-Madaen Star Group. Previous Occupations: f General Director of Al-Madaen Star Group for Contracting. f General Director of Al-Madaen Star Group for Automobile Services.

� The membership of Dr. Abdulrahman bin Ibrahim Al-Hamid and Mr. Suleiman bin Ali Al-Khudair in the Audit Committee expired at the end of the Eleventh Session on 29 July 2018.

Competencies and Duties f To develop clear policies for remunerations and rewards of Board members, board committees and senior executives and present such policies to the Board for consideration and approval by the General Meeting. Performance-related criteria when setting those

absence of any conflict of interest if the Board member is a member of another companyâ&#x20AC;&#x2122;s board on a regular basis. f To develop a description of executive and non-executive members, independent members and senior executives. f Develop procedures for the case where one position of a board

policies should be employed. f To define the relation between paid remunerations and the applicable remuneration policy and clarify any major deviation. f To conduct periodic review of the remuneration policy and assess

member or of a senior executive falls vacant. f To identify weaknesses and strengths in the Board and propose solutions in line with SASCO best interests.

Most Important Achievements

to what extent it is efficient in achieving the desired outcomes. f To recommend to Board the remunerations and rewards of Board

f Approval of biographies of those applying for the membership

members, board committees and senior executives according to

of the Board for the twelfth session policies and present recommendations thereon.

the approved policy. f To propose clear membership policies and criteria in Board and

f Ensuring the independence of Board members. f Periodical review of Board structure.

Executive Management. f To recommend nominations to Board membership in accordance with the approved policies and standards, considering not to nominate any person who has previously been convicted with a

f Recommending the payment of remuneration to the Board members for the fiscal year of 2017. f Recommending the benefits and remuneration of the Managing Director during the twelfth session of the Board pursuant to the

crime involving moral turpitude and dishonesty. f To prepare a description of capabilities and qualifications required for Board membership and occupying administrative management

Remuneration Policy of Board members, Board committees and Senior Executive Management. f Recommending the appointment of some leading positions.

positions. f To set the time a member should devote to board works.

f Approval of 2017 remunerations and incentives.

f To conduct an annual review of the required needs in terms of

f Adopting the 2018 quarterly incentives and remunerations

adequate Board membership skills and executive management

according to the approved policies. f Obtainment of Board approval of the Committeeâ&#x20AC;&#x2122;s 2019 plan.

functions. f To review the structure of the Board and senior executive

Meetings

management in SASCO, as well as make recommendations

The following table shows the attendance record of the Nomination

regarding changes that can be made.

and Remuneration Committee meetings in 2018 (eleventh and

f To ensure the independence of the independent members and the

No.

11th session

12th session

No. of meetings (2)

Member Name Meeting No. (1) 25/02/2018

twelfth sessions):

Meeting No. (2) 30/05/2018

Meeting No. (3) 10/09/2018

Meeting No. (4) 12/12/2018

Mr. Ali bin Mohammed bin Ali Aba Al-Khail

100%

Committee Head (12th session) Mr. Suleiman bin Ali Al-Khudair Committee member

Date of membership in the Committee 30/06/2018

100%

Mr. Majed bin Mohammed Al-Othman

100%

Committee member Mr. Ajlan bin Abdulrahman Al-Ajlan Committee Head (11th session)

Attendance Ratio

Date of expiry of membership 29/06/2018

100%

Personal attendance

Annual Report 2018

Ownership of Substantial Shares The following table shows the bodies holding substantial shares in SASCO and the changes made during 2018:

Ownership Percentage No.

Name Beginning of period

Mr. Ibrahim bin Mohammed Al-Hudaithi

Nahaz Investment Co.

11.56% (6,245,352 shares)

Change*

693,928 shares

December 31st, 2018

11.56% (6,939,280 shares)

11.75%

705,338 shares

7.25%

(6,348,046 shares)

(2,703,384 shares)

(4,350,000 shares)

Change Ratio*

11.11% (31.47%)

* Change includes shares granted to increase capital (11.11%). * Declaration: with respect to notices related to ownership of large shares and their change during the year according to Article 43 and Article 45 of Registration and Listing Rules issued by the Capital Market Authority (CMA), SASCO would like to advise you that it did not receive any notice from shareholders of any change to their ownership during the year. In stocktaking of information, SASCO relies on the information provided by Saudi Stock Exchange (Tadawul).

Statement of Board Membersâ&#x20AC;&#x2122; Participations on other Boards The following table shows the names of the Board members on Boards of other companies:

Mr. Sultan bin Mohammed Al-Hudaithi

Mr. Ibrahim bin Mohammed Al-Hudaithi

Name

Companies in which Board member is on their current boards or of their directors

Name of Company

Inside/outside the Kingdom

Legal entity Listed/unlisted joint stock/limited liability company

Al-Madaen Star Group

Inside KSA

Unlisted shareholding company

Akwan Real Estate

Inside KSA

Unlisted shareholding company

Ibrahim bin Mohammed AlHudaithi Investment Co.

Inside KSA

Unlisted shareholding company

Zawaya Real Estate Co.

Inside KSA

Unlisted shareholding company

Nahaz Investment

Inside KSA

Unlisted shareholding company

Bilda Specialized Commercial Centers Co.

Inside KSA

Unlisted shareholding company

Mulkia Investment Co.

Inside KSA

Unlisted shareholding company

DAKKIN Advertising and Design Consultancy

Inside KSA

Limited liability company

Saudi Finance Company

Inside KSA

Limited liability company

United Wire Factories Company

Inside KSA

Al-Madaen Star Group Zawaya Real Estate Co.

Companies in which Board member was on their previous boards or of their directors

Name of Company

Inside/ outside the Kingdom

Legal entity Listed/unlisted joint stock/limited liability company

Solidarity Company

Inside KSA

Listed shareholding company

Unlisted shareholding company

Saudi Chemical Company

Inside KSA

Listed shareholding company

Inside KSA

Unlisted shareholding company

Madaen Star Group

Inside KSA

Limited liability company

Inside KSA

Unlisted shareholding company

Real Estate National Group

Inside KSA

Limited liability company

Nahaz Investment Co.

Inside KSA

Unlisted shareholding company

Ibrahim bin Mohammed AlHudaithi Investment Co.

Inside KSA

Unlisted shareholding company

Mulkia Investment

Inside KSA

Unlisted shareholding company

DAKKIN Advertising and Design Consultancy

Inside KSA

Limited liability company

Mulkia Trading Co.

Inside KSA

Limited liability company

Maâ&#x20AC;&#x2122;areb Company for Investment and Real Estate Development

Inside KSA

Limited liability company

Middle East Battery Company (MEBCO)

Inside KSA

Limited liability company

Annual Report 2018

Name

Companies in which Board member is on their current boards or of their directors

Name of Company

Inside/outside the Kingdom

Legal entity Listed/unlisted joint stock/limited liability company

Mulkia Real Estate Investment Co.

Inside KSA

Limited liability company

Mulkia Gulf Real Estate REIT Fund

Inside KSA

Limited liability company

Mulkia Investment Co.

Inside KSA

Limited liability company

Mulkia Gulf Real Estate REIT Fund

Inside KSA

Limited liability company

Knowledge & Childhood Company for Investment

Inside KSA

Limited liability company

Tamadon Al Ola for Real Estate

Inside KSA

Limited liability company

ARZAQ AGRICULTURAL Company

Inside KSA

Limited liability company

Tamadon Al Hadeetha for Real Estate

Inside KSA

Limited liability company

Dur Al Kuttab Limited

Inside KSA

Limited liability company

Tamdeen Real Estate Company

Inside KSA

Limited liability company

Auto & Equipment Investment co., LTD

Inside KSA

Limited liability company

Ostool Al-Naqil Co.

Inside KSA

Limited liability company

SASCO Palm Co.

Inside KSA

Limited liability company

Al-Nakhla Al-Oula Co.

Inside KSA

Limited liability company

Saudi Automobile & Touring Association

Inside KSA

Limited liability company

Zaiti Petroleum Services Company

Inside KSA

Limited liability company

SASCO Al-Waha Co.

Inside KSA

Limited liability company

SASCO Franchise Co.

Inside KSA

Limited liability company

Companies in which Board member was on their previous boards or of their directors

Name of Company

Inside/ outside the Kingdom

Legal entity Listed/unlisted joint stock/limited liability company

Name

Companies in which Board member is on their current boards or of their directors

Mr. Majed bin Mohammed Al-Othman

Mr. Suleiman bin Ali Al-Khudair

Mr. Nasser bin Abdullah Al-Awfi

Name of Company

United Cement Industrial Co.

Inside/outside the Kingdom

Inside KSA

Nahil Computers

Inside KSA

Al-Madaen Star Group

Inside KSA

Zawaya Real Estate Co.

Bilda Specialized Commercial Centers Co. Ibrahim bin Mohammed Al-Hudaithi Investment DAKKIN Advertising and Design Consultancy

Inside KSA

Madaen Star Group

Inside KSA

FUNGATE Company

Inside KSA

Legal entity Listed/unlisted joint stock/limited liability company

Companies in which Board member was on their previous boards or of their directors Inside/ outside the Kingdom

Legal entity Listed/unlisted joint stock/limited liability company

Inside

Listed shareholding

KSA

company

Food Products

Inside

Listed shareholding

Company

KSA

company

Unlisted shareholding

Zaiti Petroleum

Inside

company

Services Company

KSA

Unlisted shareholding

Al-Madaen Star Group

Inside

Limited Liability

company

for Automotive

KSA

company

Unlisted shareholding company

Name of Company

Al Jouf Agricultural Development Company (JADCO)

Limited Liability company

Unlisted shareholding company

Unlisted shareholding company Unlisted shareholding company Limited Liability company Limited Liability company Limited Liability company

Annual Report 2018

Inside/outside the Kingdom

Legal entity Listed/unlisted joint stock/limited liability company

Name of Company

Inside KSA

Limited liability company

Al Tasâ&#x20AC;&#x2122;helat Marketing

Inside KSA

Limited liability company

Sahl Transportation

Inside

Company

KSA

Ostool Al-Naqil Co.

Inside KSA

Limited liability company

Sara Communications

Inside

Company.

KSA

SASCO Palm Co.

Inside KSA

Limited liability company

Al-Nakhla Al-Oula Co.

Inside KSA

Limited liability company

Inside KSA

Limited liability company

Zaiti Petroleum Services

Inside KSA

Limited liability company

SASCO Al-Waha Co.

Inside KSA

Limited liability company

SASCO Al-Waha Co.

Inside KSA

Limited liability company

Mr. Ali bin Mohammed Aba Al-Khail

Companies in which Board member was on their previous boards or of their directors

Sanad Investment Company

Inside KSA

Limited liability

Inside KSA

Unlisted shareholding company

Mr. Fawaz bin Suleiman Al-Rajhi

Name

Companies in which Board member is on their current boards or of their directors

Al Rajhi United Investment

Inside KSA

Unlisted shareholding company

Rak Ceramics

Outside KSA

Listed shareholding company

Al Rajhi Alpha Investments

Inside KSA

Limited liability

RAJ Real Estate

Inside KSA

Limited liability

Inside KSA

Unlisted shareholding company

Name of Company

Foroseya for Trading & Services Ltd. Auto & Equipment

Mr. Majid bin Nasser AlSubeaei

Mr. Riyadh bin Saleh Al-Malik*

Investment Co.

Saudi Automobile & Touring Association

Eskan Investment Company

Holding Co

Nasser Bin Mohammed Alsubeaei & Sons Investment Company

Inside/ outside the Kingdom

Legal entity Listed/unlisted joint stock/limited liability company

Inside

Limited liability company

KSA

* A member shall not be given remunerations, benefits or profits when he is a board member in any of SASCO subsidiaries. 52

Limited liability company Limited liability company

Board Members’ and Senior Executives’ Ownership of Shares The following table shows the Board members’ and senior executives’ ownership of SASCO shares (including that of their wives and minor children): Ownership No.

Name

Beginning of Period

Change

December 31st, 2018

Change

6,245,352 shares

693,928 shares

6,939,280 shares

11.11 %

62,448 shares

60,770 shares

123,218 shares

97.31 %

1,200 shares

133 shares

1,333 shares

11.11 %

Ratio

Mr. Ibrahim bin Mohammed Al-Hudaithi

Mr. Sultan bin Mohammed Al-Hudaithi

Mr. Nasser bin Abdullah Al-Awfi

Mr. Suleiman Ali Al-Khudair

198,658 shares

22,073 shares

220,731 shares

11.11 %

Mr. Majed bin Mohammed Al-Othman

67,249 shares

7,472

74,721 shares

11.11 %

Mr. Riyadh bin Saleh Al-Malik

1,200 shares

122,042 shares

123,242 shares

10,170.17 %

Mr. Ali bin Mohammed Aba Al-Khail

1,200 shares

133 shares

1,333 shares

11.11 %

Mr. Fawaz Suleiman Al-Rajhi

1,000 shares

111 shares

1,111 shares

11.11 %

Mr. Majid bin Nasser AlSubeaei

3,500 shares

392٫291 shares

395,791 shares

11٫208.31 %

Mr. Muhammad bin Abdullah Al Motlaq

Mr. David Whales

Mr. Islam Mohammed Khairi Ahmad

Mr. Saud bin Suleiman Al Otaiby

* Change includes shares granted to increase capital (11.11%). ** Membership starts from the beginning of the 12th session on 30 June 2018.

Annual Report 2018

Shareholdersâ&#x20AC;&#x2122; Meetings in 2018

Shareholdersâ&#x20AC;&#x2122; Meetings in 2018 Twelfth Extraordinary General Meeting First meeting and second meeting (after an hour) on 22 May 2018.

Names of Attending Board Members

No.

Member Name

Capacity

Mr. Ibrahim bin Mohammed Al-Hudaithi

Chairman

Mr. Sultan bin Mohammed Al-Hudaithi

Vice Chairman â&#x20AC;&#x201C; Managing Director

Mr. Nasser bin Abdullah Al-Awfi

Board Member

Mr. Suleiman bin Ali Al-Khudair

Board Member

Mr. Ajlan bin Abdulrahman Al-Ajlan

Board Member

Mr. Majed bin Mohammed Al-Othman

Board Member

Mr. Riyadh bin Saleh Al-Malik

Board Member - CEO

Mr. Fawaz Suleiman Al-Rajhi

Board Member

* Board member, Mr. Ali bin Mohammed Aba Al-Khail apologized for special circumstances.

Annual Report 2018

ability to meet the current and future expansions in

All agenda items were approved as follows::

all its activities to achieve better growth rates in the 1. 2. 3. 4. 5.

Approve the Board’s report for fiscal year ending on

coming years and preserve financial solvency. The

31 Dec. 2017.

entitlement would be for shareholders registered

Approve Auditor’s report for fiscal year ending on 31

with the Securities Depository Center Company (Idaa)

Dec. 2017.

by the end of the second trading day following the

Approve SASCO consolidated financial statements for

date on which the Extraordinary General Assembly

fiscal year ending on 31 Dec. 2017.

convened. Share fractions shall be combined in a

Approve Board members’ acquittance for fiscal year

single portfolio for all shareholders and shall be

ending on 31 Dec. 2017.

sold in the market price, with their value shall be

Approve the Board’s recommendation to distribute

proportionately distributed to entitled shareholders

cash profits at SR 0,5 per each share equivalent to 5%

within a period not exceeding 30 days from determining shares entitled to each shareholder.

of SASCO capital in a total amount of SR 27 million. The entitlement would be for shareholders registered

by the end of the second trading day following the

Approve the payment of a remuneration to the Board

be announced later.

members at a total amount of SR 1,8 million, with

Approve the Board’s recommendation to increase

each member to receive SR 200,000 for the fiscal year of 2017.

SASCO capital from SR 540 million to SR 600,000,000 (no. of shares before the increase of capital was 54

10. Approve and set the fees of the Audit Committee’s

million shares and rose to 60 million) at an increase

nominated auditor “Allied Accountants – Chartered

rate of 11,11% through granting one free share for

Accountants and Auditors,” to audit the financial

every 9 owned shares. Capital increase shall be done

statements of the second, third and fourth quarters of fiscal year 2018 and the first quarter of 2019.

through capitalizing SR 60 million of the retained profits. The aim of this is to strengthen SASCO financial

Approve the amendment of Article 8 of SASCO Articles of Association related to subscription into shares.

date on which the Extraordinary General Assembly convened. The date and method of distribution shall

Approve the amendment of Article 7 of SASCO Articles of Association related to capital.

with the Securities Depository Center Company (Idaa)

11.

Approve the business and contracts to be undertaken

between SASCO and Nahaz Investment Co. and

license the same for a period of one year, a company

in which some Board members have a direct interest.

in which some Board members have a direct interest,

These members are Mr. Ibrahim bin Mohammed

namely Mr. Ibrahim bin Mohammed Al-Hudaithi and

Al-Hudaithi, owning a share of 17,67% of its capital,

Mr. Sultan bin Mohammed Al-Hudaithi, who have a

Mr. Sultan bin Mohammed Al-Hudaithi, owning a

share of 0,02% of capital per each. Such business is

share of 21,45% of its capital, Mr. Suleiman bin Ali Al-

to let Ostool Al-Naqil Co., Ltd (subsidiary) to lease

Khudair, owning a share of 0,67% of its capital and Mr.

a site from Nahaz Investment Co. at an annual

Majed bin Mohammed Al-Othman, owning a share of

sum of SR 368,000 to be used as headquarters and

0,67% of its capital. Such business is an agreement

labour accommodation for Ostool Al-Naqil Co. These

to manage an investment portfolio in Al Ahli Capital

business and contracts have no preferential terms.

with a value of SR 50 million. These business and

12. Approve the business and contracts to be undertaken

contracts have no preferential terms.

between SASCO and DAKKIN Advertising and license

14. Approve the business and contracts to be undertaken

the same for a period of one year, a company in

between Zaiti Petroleum Services Company (SASCO

which some Board members have a direct interest.

subsidiary) and Nahaz Investment Co. and license

These members are Mr. Ibrahim bin Mohammed Al-

the same for a period of one year, a company in

Hudaithi, owning a share of 33,34%, Mr. Majed bin

which some Board members have a direct interest.

Mohammed Al-Othman, owning a share of 33,33% of

These members are Mr. Ibrahim bin Mohammed

its capital and Mr. Sultan bin Mohammed Al-Hudaithi,

Al-Hudaithi and Mr. Sultan bin Mohammed Al-

owning a share of 33,33% of its capital. Such business

Hudaithi, who have a share of 0,02% of capital per

is to offer services and works in the field of publicity

each. Such business is a lease contract under which

and advertising, with the amount of business in 2017

Zaiti Petroleum Services Company shall lease two

reaching an amount of SR 639,000. These business

stations No. 1 and No. 2 from Nahaz Investment Co.

and contracts have no preferential terms.

against an annual sum of SR 800,000. These business

13. Approve the business and contracts to be undertaken between SASCO and Mulkia Investment Co. and

and contracts have no preferential terms. 15.

Approve the business and contracts to be undertaken

Annual Report 2018

between

Company

No. 9 from Zawaya Real Estate Co. against an annual

(SASCO subsidiary) and Al-Madaen Star Real Estate

Zaiti

Petroleum

Services

sum of SR 400,000. These business and contracts

and license the same for a period of one year, a company in which some Board members have a

Approve the business and contracts to be undertaken

direct interest. These members are Mr. Ibrahim bin

between

Mohammed Al-Hudaithi, owning a share of 97,75%

(SASCO subsidiary) and Al-Madaen Star Real Estate

of the capital of Al-Madaen Star Real Estate and

and license the same for a period of one year, a

occupying the position of the Chairman, Mr. Majed

company in which some Board members have a

bin Mohammed Al-Othman, Board member and Mr.

direct interest. These members are Mr. Ibrahim bin

Sultan bin Mohammed Al-Hudaithi, Board member.

Mohammed Al-Hudaithi, owning a share of 97,75%

Such business is a lease contract under which Zaiti

of the capital of Al-Madaen Star Real Estate and

Petroleum Services Company shall lease station No. 8

occupying the position of the Chairman, Mr. Majed

from Al-Madaen Star Real Estate against an annual

bin Mohammed Al-Othman, Board member and Mr.

sum of SR 300,000. These business and contracts have

Sultan bin Mohammed Al-Hudaithi, Board member.

no preferential terms.

Zaiti

Petroleum

Services

Company

Such business is a lease contract under which Zaiti

16. Approve the business and contracts to be undertaken

Petroleum Services Company shall lease station No.

between Zaiti Petroleum Services Company (SASCO

10 from Al-Madaen Star Real Estate against an annual

subsidiary) and Zawaya Real Estate Co. and license

sum of SR 800,000. These business and contracts

the same for a period of one year, a company in which some Board members have a direct interest.

have no preferential terms. 17.

have no preferential terms. 18. Approve the business and contracts to be undertaken

These members are Mr. Ibrahim bin Mohammed Al-

between

Hudaithi, owning a share of 42,96% of the capital of

(SASCO subsidiary) and Al-Madaen Star Real Estate

Zaiti

Petroleum

Services

Company

Zawaya Real Estate Co. and occupying the position

and license the same for a period of one year, a

of the Chairman, Mr. Majed bin Mohammed Al-

company in which some Board members have a

Othman, Board member owning a share of 0,29%

direct interest. These members are Mr. Ibrahim bin

of its capital and Mr. Sultan bin Mohammed Al-

Mohammed Al-Hudaithi, owning a share of 97,75%

Hudaithi, Board member owning a share of 1,8% of its

of the capital of Al-Madaen Star Real Estate and

capital. Such business is a lease contract under which

occupying the position of the Chairman, Mr. Majed

Zaiti Petroleum Services Company shall lease station

bin Mohammed Al-Othman, Board member, and Mr.

Sultan bin Mohammed Al-Hudaithi, Board member.

the same for a period of one year, a company in

Such business is a lease contract under which Zaiti

which some Board members have a direct interest.

Petroleum Services Company shall lease station No. 11

These members are Mr. Ibrahim bin Mohammed Al-

from Al-Madaen Star Real Estate against an annual

Hudaithi and Mr. Sultan bin Mohammed Al-Hudaithi,

sum of SR 250,000. These business and contracts have

who have a share of 0,02% of capital per each. Such

no preferential terms.

business is fuel purchases from Nahaz Investment Co.

19. Approve the business and contracts to be undertaken between

Zaiti

Petroleum

Services

Company

against a sum of SR 986,000 in 2017. These business and contracts have no preferential terms.

(SASCO subsidiary) and Al-Madaen Star Real Estate

21. Approve the business and contracts to be undertaken

and license the same for a period of one year, a

between Zaiti Petroleum Services Company (SASCO

company in which some Board members have a

subsidiary) and Al-Madaen Star Group and license

direct interest. These members are Mr. Ibrahim bin

the same for a period of one year, a company in

Mohammed Al-Hudaithi, owning a share of 97,75%

which some Board members have a direct interest.

of the capital of Al-Madaen Star Real Estate and

These members are Mr. Ibrahim bin Mohammed

occupying the position of the Chairman, Mr. Majed

Al-Hudaithi, owning a direct and indirect share of

bin Mohammed Al-Othman, Board member, and Mr.

97,75% of the capital of Al-Madaen Star Group and

Sultan bin Mohammed Al-Hudaithi, Board member.

occupying the position of the Chairman, Mr. Majed

Such business is a lease contract under which Zaiti

bin Mohammed Al-Othman, Managing Director of Al-

Petroleum Services Company shall lease station No.

Madaen Star Group, and Mr. Sultan bin Mohammed

12 from Al-Madaen Star Real Estate against an annual

Al-Hudaithi, Board member. Such business is fuel

sum of SR 150,000. These business and contracts have

purchases from Zaiti Petroleum Services Company

no preferential terms.

against a sum of SR 1,997,000 in 2017. These business

20. Approve the business and contracts to be undertaken

and contracts have no preferential terms.

between Zaiti Petroleum Services Company (SASCO

22. Approve the business and contracts to be undertaken

subsidiary) and Nahaz Investment Co. and license

between Zaiti Petroleum Services Company (SASCO

Annual Report 2018

subsidiary) and Mr. Majed bin Mohammed Al-

a direct and indirect share of 97,75% of the capital

Othman and license the same for a period of one

of Fungate Co. and occupying the position of the

year. Such business is fuel purchases by Mr. Majed

Chairman, Mr. Majed bin Mohammed Al-Othman,

bin Mohammed Al-Othman from Zaiti Petroleum

Managing Director of Fungate Co., and Mr. Sultan

Services Company against a sum of SR 94,000 in 2017.

bin

These business and contracts have no preferential

Such business is a lease contract by Fungate Co. of

terms.

residential rooms in Station No. 2 of Zaiti Petroleum

Mohammed

Al-Hudaithi,

Board

member.

23. Approve the business and contracts to be undertaken

Services Company against an annual sum of SR

between Zaiti Petroleum Services Company (SASCO

50,000. These business and contracts have no

subsidiary) and Zawaya Real Estate Co. and license

preferential terms.

the same for a period of one year, a company in

26. Approve the amendment of Article 32 of SASCO

which some Board members have a direct interest.

Articles of Association regarding calling for general

These members are Mr. Ibrahim bin Mohammed Al-

meetings.

Hudaithi, owning a share of 42,96% of the capital of

27. Approve the amendment of Article 43 of SASCO

Zawaya Real Estate Co. and occupying the position of the Chairman, Mr. Majed bin Mohammed Al-Othman,

Articles of Association regarding committee reports. 28. Approve the amendment of Article 49 of SASCO

Board member owning a share of 0,29% of its capital

Articles of Association regarding financial documents.

and Mr. Sultan bin Mohammed Al-Hudaithi, Board

29. Approve the amendment of Article 50 of SASCO

member owning a share of 1,8% of its capital. Such

Articles of Association regarding profit distribution.

business is fuel purchases from Zaiti Petroleum

30. Elect Board members from among those nominated

Services Company by Zawaya Real Estate Co. against

for 12th session starting on 30 June 2018 for three

an annual sum of SR 66,000 in 2017. These business

years ending to 29 June 2021 (by way of cumulative

and contracts have no preferential terms.

voting. These are 9 members according to SASCO

24. Approve the business and contracts to be undertaken

Articles of Association. They are ordered according to

between Zaiti Petroleum Services Company (SASCO

the votes they obtained as follows:

subsidiary) and Zawaya Real Estate Co. and license

• Mr. Ibrahim bin Mohammed Al-Hudaithi

the same for a period of one year, a company in

• Mr. Sultan bin Mohammed Al-Hudaithi

which some Board members have a direct interest.

• Mr. Majed bin Mohammed Al-Othman

These members are Mr. Ibrahim bin Mohammed Al-

• Mr. Ali bin Mohammed Aba Al-Khail

Hudaithi, owning a share of 42,96% of the capital of

• Mr. Suleiman bin Ali Al-Khudair

Zawaya Real Estate Co. and occupying the position of

• Mr. Riyadh bin Saleh Al-Malik

the Chairman, Mr. Majed bin Mohammed Al-Othman,

• Mr. Nasser bin Abdullah Al-Awfi

Board member owning a share of 0,29% of its capital

• Mr. Fawaz bin Suleiman Al-Rajhi

and Mr. Sultan bin Mohammed Al-Hudaithi, Board

• Mr. Majid bin Nasser AlSubeaei

member owning a share of 1,8% of its capital. Such

31. Approve the composition of the Audit Committee and

business is a lease contract by Zawaya Real Estate

specify its functions, work rules and remuneration of

Co. of advertising boards in Station No. 9 of Zaiti

its members for the 12th session commencing on 30

Petroleum Services Company against an annual sum

June 2018 and ending on 29 June 2021. Following are

of SR 25,000. These business and contracts have no

the names of its members:

preferential terms. 25. Approve the business and contracts to be undertaken between Zaiti Petroleum Services Company (SASCO subsidiary) and Fungate Co. and license the same for a period of one year, a company in which some Board members have a direct interest. These members are

• Mr. Nasser bin Abdullah Al-Awfi, Committee Head • Mr. Fawaz bin Suleiman Al-Rajhi, Committee member • Mr. Turki bin Muhamma Al Quraini, Committee member (non-board member)

Mr. Ibrahim bin Mohammed Al-Hudaithi, owning

Recommendation Regarding the Auditor The Board or the Audit Committee has no observations or reservations regarding the current auditor, “Allied Accountants – Chartered Accountants and Auditors,” noting that 2018 was the fourth year for this auditor to deal with SASCO. The auditor’s activities include auditing SASCO financial statements for the fiscal year 2018 and the first quarter of the fiscal year 2019.

Executive Directors They are as follows:

Mr. Mohammed bin Abdullah Al-Mutlaq General Manager of Zaiti Petroleum Services Company Qualifications & Experiences: He holds the Bachelor’s Degree in Business Management from King Saud University. He held many administrative positions in the private sector. He is a member of the National Committee of Fuel Stations Companies in the Council of Saudi Chambers of Commerce and a member of Audit Committee of

Tabuk Fisheries Company (closed joint stock company). Present Occupations: f Assistant CEO the Saudi Automotive Services Company (SASCO). Previous Occupations: f General Director of Zaiti Petroleum Services Company.

Mr. Islam Muhammed Khairi Ahmad Finance Manager Qualifications & Experiences: He holds the Bachelor’s Degree in Accounting from Ain Shams University, Egypt. He is a finance director for more than ten years, enjoying a wide experience in leading and developing successful financing teams in several finance and accounting activities, including the development of annual budgets and controlling major accounts. He is able to address functions and

lead working teams. Present Occupations: f Director of Finance Management of the Saudi Automotive Services Company (SASCO). Previous Occupations: f Head of Accounts Department in Al-Madaen Star Group. f Chief Financial Officer of Zaiti Petroleum Services Company.

Mr. David Whales General Manager of SASCO Palm Co. Qualifications & Experiences: He holds the International General Certificate for Secondary Education (IGCSE). He worked for many British retailers and held many supplies jobs, including Director of Supplies Sector and Operations Manager at many British corporations. He acted as Deputy General Director of Operations at City Center Hypermarket.

Present Occupations: f General Director of SASCO Palm Stores (subsidiary). Previous Occupations: f Director of Supplies Sector at many British corporations. f Regional Director of Operations at British corporations. f Deputy General Director of Operations at City Center Hypermarket.

Mr. Saud Sulieman Al Otaiby Director of Operations Sector Qualifications & Experiences: He holds the Bachelor’s Degree of General Administration from King Abdulaziz University in Jeddah. He enjoys more than 15 years of experience in the field of fuel station companies. He held many administrative positions in the private sector.

Present Occupations: f Director of Operations Sector of the Saudi Automotive Services Company (SASCO). Previous Occupations: f Head of Western Province Operations, Al Tas’helat Marketing Company Ltd. f General Director of Distributors in Kia Motors Saudi Arabia. f Director of Western and Northern Provinces in the Saudi Automotive Services Company (SASCO).

Transactions and Contracts in which Board Members and Executive Directors have an Interest _ � There are no transactions or contracts in which the CEO, Chief Financial Officer, any executive

director or relevant person has interest.

Annual Report 2018

Financial Statements at SASCO Level

Financial Statements at SASCO Level Financial Position The following table summarizes the data of the financial position statement for the past five years:

Statement

2014

2015

2016

2017 â&#x20AC;&#x153;Amendedâ&#x20AC;?

2018

Current assets

340,172,790

335,453,233

310,503,345

336,983,801

358,187,696

Non-current assets

791,550,290

946,464,664

1,182,055,527

1,169,679,455

1,242,554,192

Total Assets

1,131,723,080

1,301,917,897

1,492,558,872

1,506,663,256

1,600,741,888

Current Liabilities

242,486,686

233,134,630

364,594,629

415,126,524

458,879,874

Non-Current Liabilities

163,195,676

336,454,575

345,519,020

362,426,221

389,999,100

Total Liabilities

405,682,362

569,589,205

710,113,649

777,552,745

848,878,974

Total assets and liabilities 1,800,000,000 1,600,000,000 1,400,000,000 1,200,000,000 1,000,000,000 800,000,000 600,000,000 400,000,000 200,000,000 2014

2015 Total assets

2016

2017

2018

Total liabilities

Annual Report 2018

Assets 1,800,000,000 1,600,000,000 1,400,000,000 1,200,000,000 1,000,000,000 800,000,000 600,000,000 400,000,000 200,000,000 0 2014 Cash and cash equivalents

2015

2016

Commercial Receivables

2017

Commodity Stock

2018

Total Assets

Long-Term Assets

2017

2018

Change in Net Fixed Assets 1,800,000,000 1,600,000,000 Growth rate in total assets 41.44%

1,400,000,000 1,200,000,000 1,000,000,000 800,000,000 600,000,000 400,000,000 200,000,000 0 2014

2015 Net Fixed Assets

2016

Total Assets

Liabilities and Shareholders’ Equity

900,000,000 800,000,000 Growth Rate in Shareholders› Equity 3.56%

700,000,000 600,000,000 500,000,000 400,000,000 300,000,000 200,000,000 100,000,000 0 2014

2015

2016

Total Liabilities

Capital

2017

2018

Total Shareholders’ Equity

Income Statement The following table summarizes the data of the income statement for the past five years:

Statement

2014

2015

2016

2017 “Amended”

2018

453,370,500

665,048,902

1,094,122,754

1,212,329,807

2,056,081,002

(416,105,976)

(613,340,424)

(1,036,023,378)

(1,132,838,480)

(1,974,099,397)

Income Margin

37,264,524

51,708,478

58,099,376

79,491,327

81,981,605

General & Administrative Expenses

(28,717,195)

(35,285,668)

(38,686,162)

(47,575,585)

(44,298,103)

Other Revenue (Expenses)

76,539,300

5,584,757

10,222,617

(135,609)

542,811

Zakat

(3,036,000)

(3,391,000)

(3,655,000)

(3,795,000)

(2,775,004)

Net Income

82,050,629

18,616,567

25,980,831

27,985,133

35,451,309

Sales Direct Costs

Annual Report 2018

2,500,000,000 2,000,000,000 1,500,000,000 1,000,000,000 500,000,000 0 2014 Sales

2015 Direct Costs

2016 Income Margin

2017

2018

Net Income

80,000,000

60,000,000

40,000,000

20,000,000

0 )10,000,000( 2014

2015

General & Administrative Expenses

2016

2017

Other Revenue (Expenses)

2018

Zakat

Analysis of Material Differences in Results The following table shows the most important differences in the financial results compared to the previous fiscal year:

Statement

2018

2017

Change + (-)

% of Change

Revenue

2,056,081,002

1,212,329,807

843,751,195

69.60%

Direct Costs

(1,974,099,397)

(1,132,838,480)

841,260,917

74.26%

Income Margin

81,981,605

79,491,327

2,490,278

3.13%

Sales and marketing expenses

(2,189,061)

(3,799,225)

(1,610,164)

(42.38%)

General & Administrative Expenses

(40,020,290)

(39,679,677)

340,613

0.86%

Structured Allowances

(2,088,752)

(4,096,683)

(2,007,931)

(49.01%)

Net Operating Income

37,683,502

31,915,742

5,767,760

18.07%

Investment Revenue (Loss)

6,745,277

2,983,259

3,762,018

126.10%

Financial Burdens

(8,070,599)

(5,631,383)

2,439,216

43.31%

Misc. Revenue

1,868,133

2,512,515

(644,382)

(25.65%)

Net Income Before Zakat

38,226,313

31,780,133

6,446,180

20.28%

Zakat

(2,775,004)

(3,795,000)

(1,019,996)

(26.88%)

Net Income After Zakat

35,451,309

27,985,133

7,466,176

26.68%

The following is a description of the main justifications for fundamental changes in SASCO business results:

f Share profitability of the same period was recalculated due to the increase of capital from SR 540 million to SR 600 million.

f Increase of net income in the current period compared to the same period of last year is attributed to: ? Increase of sales at 69,60%. ? Decline of depreciation expenses and customs allowances. ? Increase of investment revenues in spite of the increase of sales, financing and general and administrative expenses f The comprehensive income of the current period was SR 51,55 million compared to SR 215,000 million for the same period of last year at an increase of 23,876% due to an increase in reassessing investments. f Shareholdersâ&#x20AC;&#x2122; equity recorded SR 751,86 million compared to SR 729,11 million for the same period, i.e. an increase of 3,12% (there is no minority equity).

Annual Report 2018

Cash Flow Statement The following table summarizes the data of the cash flow statement for the past five years:

Statement

2014

2015

2016

2017 â&#x20AC;&#x153;Amendedâ&#x20AC;?

2018

Flows from Operating Activities

13,749,624

50,095,250

61,539,044

31,299,799

45,308,582

Flows from Investment Activities

116,172,277

(198,513,124)

(168,464,284)

(116,986,699)

(78,101,689)

(78,098,773)

141,373,640

66,933,168

65,280,554

9,752,789

2015

2016

Flows from Financial Activities

150,000,000 100,000,000 50,000,000 50,000,000 100,000,000 150,000,000 200,000,000

2015

Flows from Investment Activities

2016

2017

Volume of Capital Spending

2018 Flows from Financial Activities

100,479,857

2014

2017

117,203,850

137,316,422

200,000,000 180,000,000 160,000,000 140,000,000 120,000,000 100,000,000 80,000,000 60,000,000 40,000,000 20,000,000 -

130,462,199

Flows from Operating Activities

193,415,355

2014

2018

Earnings per Share The following table summarizes earnings per share for the past five years:

Statement

2014

2015

2016

2017

2018

Earnings per Share

1.52

0.34

0.48

0.47

0.59

2.00 1.75

1.52

1.50 1.25 1.00 0.75 0.50

0.34

0.48

0.47

2016

2017

0.59

0.25 0.00 2014

2015

2018

Earnings Per Share

Share Performance The following graph summarizes share performance for the past five years:

30.00 25.00 20.00 15.00 10.00 5.00 0 2014

2015

2016

2017

2018

Share Value in SAR

Annual Report 2018

Key Financial Indicators The following tables show the key financial indicators for the past five years:

Growth Indicators Statement

2014

2015

2016

2017 “Amended”

2018

Sales Growth

22.90%

46.69%

64.52%

10.80%

69.60%

Net Income Growth

106.16%

(77.31%)

39.56%

7.71%

26.68%

Asset Growth

4.26%

15.04%

14.64%

0.94%

6.24%

Equity Growth

(0.36%)

6.84%

(6.82%)

3.12%

2014

2015

2016

2017 “Amended”

2018

Return on Sales

18.10%

2.80%

2.37%

2.31%

1.72%

Return on Capital

18.23%

3.45%

4.81%

5.18%

5.91%

Return on Investment

10.37%

2.00%

2.20%

2.39%

2.85%

Return on Total Assets

7.25%

1.43%

1.74%

1.86%

2.21%

Return on Equity

11.30%

2.54%

3.32%

3.84%

4.72%

Profit Indicators Statement

Profit Indicators 20.00% 18.00% 16.00% 14.00%

0.00% 2014

2015

2016

Return on Sales

Return on Capital

Return on Total Assets

Return on Equity

2017 Return on Investment

2018

4.72%

5.91% 2.85% 2.21%

1.72%

3.84%

5.18% 2.39% 1.86%

2.31%

3.32%

2.20%

1.74%

2.37% 4.81%

2.00% 1.43% 2.54%

2.00%

2.80% 3.45%

4.00%

11.30%

6.00%

18.23%

8.00%

10.37% 7.25%

10.00%

18.10%

12.00%

Efficiency Indicators Statement

2014

2015

2016

2017 “Amended”

2018

Debtors Turnover

13.00

18.15

13.97

13.06

14.74

Inventory Turnover

19.53

22.15

37.92

31.18

38.56

Asset Turnover

0.40

0.51

0.73

0.80

1.28

Efficiency Indicators

37.92

38.56

40.00 35.00

31.18

30.00 25.00

1.28

14.74 0.80

0.73

0.40

5.00

13.06

13.97

10.00

0.51

13.00

15.00

18.15

19.53

22.15

20.00

0.00 2014

2015

Debtors Turnover

2016

2017

Inventory Turnover

2018

Asset Turnover

Liquidity & Indebtedness Indicators Statement

2014

2015

2016

2017 “Amended”

2018

Liquidity Ratio

1.40

1.52

0.85

0.81

0.78

Quick Liquidity Ratio

1.32

1.41

0.78

0.72

0.67

Ratio of Indebtedness to Equity

55.88%

57.56%

65.74%

76.19%

78.88%

Ratio of Indebtedness to Total Assets

35.85%

32.38%

34.46%

36.87%

37.05%

Annual Report 2018

Items of Income Statement as a Percentage of Revenue Statement

2014

2015

2016

2017

2018

Revenue

100%

Direct Costs

91.78%

92.22%

94.69%

93.44%

96.01%

Income Margin

8.22%

7.78%

5.31%

6.56%

3.99%

General & Administrative Expenses

6.33%

5.31%

3.54%

3.92%

2.15%

Other Revenue (Expenses)

16.88%

0.84%

0.93%

(0.01%)

0.03%

Zakat

0.67%

0.51%

0.33%

0.31%

0.13%

Net Income

18.10%

2.80%

2.37%

2.31%

1.72%

Items of Income Statement as a Percentage of Revenue

96.01%

93.44%

92.22%

% 80.00

91.78%

% 90.00

94.69%

% 100.00

% 70.00 % 60.00 % 50.00

% 10,002014 Direct Costs

0.13% 1.72%

2.15% 0.03%

3.99%

2.31%

0.31%

3.92% -0.01%

0.00

6.56%

3.54% 0.93% 0.33% 2.37%

5.31%

0.51% 2.80%

5.31% 0.84%

18.10%

7.78%

% 10.00

0.67%

% 20.00

8.22%

% 30.00

6.33% 16.88%

% 40.00

Income Margin

2016

2017

General & Administrative Expenses

Other Revenue (Expenses)

2015

2018 Zakat

Net Income

Zakat and Regulatory Payments Zakat is calculated in accordance with the Zakat and Income Tax System applicable in the Kingdom of Saudi Arabia. The due Zakat is applied to the income statement and the amendments to the final Zakat assessment, if any, are recorded in the assessment period. During the year ending on December 31st, 2017, SASCO established an allowance for regulatory Zakat dues of SAR (3,795,000). SASCO also paid SAR (4,378,030) from the Zakat allowance until 2017.

a consulting office specialized in Zakat and tax services to settle all issues concerning Zakat assessments for the period from 2009 to 2017. During fiscal year 2017, Zakat assessments outstanding with the Department of Zakat from 2000 to 2008 have been concluded with the payment of a settlement amount of SR 3,694,215. Bank guarantees of SR 4,730,935 have been released and the remaining guarantee is about to be released.

SASCO follows up with the Department of Zakat and Income through

The following table summarizes regulatory payments:

2018 Statement

Brief Description

Description of Reasons

2,775,004

Amount of Zakat paid during the year

Due for 2018

989,042

Paid amount of value added tax

The due amount belongs to December and is paid in January 2019

4,699

Paid amount of withholding tax

The due amount belongs to December and is paid in January 2019

361,584

Year dues

The due amount belongs to December and is paid in January 2019

Paid

Due until end of annual financial period but not paid

Zakat

3,428,479

Value added tax

9,496,817

Withholding tax

General Organization for Social Insurance

3,748,422

Costs of visas, passports and labor office

6,221,864

Fees for visa, renewal of residence permit, exit and return

232,969

Customs fees of SASCO and Saudi Automobile & Touring Association

Customs Fees

Total

23,133,264

4,125,630

ďż˝ These payments are within SASCO activity.

Fines The following statement shows the punishments, sanctions, violations, precautionary measures or precautionary attachments, if any, imposed on SASCO during the year: Punishment / sanction / precautionary measure / precautionary attachment

Reasons for violation

Imposing body

How to address and avoid the same in the future

Fine

Operating some sites without license

Province Eamana - Ministry of Municipal and Rural Affairs (MoMRA)

Completing the requirements for issuing and renewing licenses for the operation of sites

Fine

Employing non-Saudis in a Saudized job

Ministry of Labor and Social Development

Saudizing the job and making sure Ministry of Laborâ&#x20AC;&#x2122;s requirements are met

Fine

Shortage of some civil defense requirements

General Directorate of Saudi Civil Defense

Completing and regularly verifying the civil defense requirements

Fine

Lack of license to operate Motel Al Adeed

Saudi Commission for Tourism and National Heritage (SCTH)

Efforts are exerted to issue it in coordination with the SCTH

Annual Report 2018

Loans Article (22) of SASCO Articles of Association defines the powers of

was given an additional grace period of one year and payment will

the Board of Directors. Paragraph (8) of the same article state as

be effective as of 1 June 2018. The agreement aims to finance the

follows: â&#x20AC;&#x153;The Board of Directors may contract loans with financing

purchase and building of new stations. SASCO again amended the

funds and institutions with whatever periods. It may also contract

agreement amount on May 22nd, 2018, to be SAR (391,107,316). This

commercial loans, obtain loans and other credit facilities from

included the renewal of existing facilities of which SAR (140,107,316)

government institutions, commercial banks, financial institutions

represent various credit facilities and SAR (251,000,000) represent

and any other credit companies, issue guarantee letters in favor of

short, medium and long-term finance facilities guaranteed by a

any party if it sees it in SASCO interest, issue promissory notes and

promissory note. The agreement aims to finance the purchase and

other tradable documents and enter into all types of agreements and

building of new stations.

banking transactions for any period of time not exceeding the expiry of SASCO duration. Loans of maximum three years shall meet the

During 2013, SASCO signed a Shariah-compliant credit facilities

following conditions:

agreement with the National Commercial Bank (NCB) of SAR

a. The Board of Directors shall determine, in its resolution, ways

(90,000,000) in the form of a long-term commercial loan to expand

of use of loans and method of repayment.

construction or acquisition of fuel stations. The agreement was

b. Loan conditions and provided guarantees shall not prejudice

renewed on May 1st, 2014 and its value became SAR (91,125,000) as

SASCO, shareholders and general guarantees of creditors.â&#x20AC;?

a general credit ceiling, including long-term loan facilities of SAR

During 2012, SASCO signed a Sharia-compliant facilities agreement

(90,000,000) and profit margin swap of SAR (1,125,000) according to

with Banque Saudi Fransi (BSF) of SAR (225,000,000) as a general

the needs of ordinary course of business.

credit ceiling. This included letters of guarantee facilities of SAR (70,000,000), real estate loan facilities of SAR (90,000,000), loans to

On August 25th, 2015, SASCO signed a new Shariah-compliant facilities

finance and develop fuel stations of SAR (55,000,000), a short-term

agreement with NCB of SAR (151,825,000), including long-term loans

finance of up to SAR (20,000,000), and multi-purpose short-term

of SAR (101,125,000), bank letters of guarantee of SAR (25,000,000),

import facilities of SAR (20,000,000). SASCO amended the agreement

short-term loans of SAR (25,700,000). The agreement aims to expand

amount on April 28th, 2015, to be SAR (550,940,648). This included

SASCO projects, support its core activities, and purchase new sites

renewal of existing facilities of SAR (245,833,332) of which SAR

to build fuel stations as well as to finance the working capital. The

(110,000,000) represent various credit facilities and SAR (135,833,332)

agreement was renewed on May 1st, 2016 and its value became SAR

represent medium-term finance facilities guaranteed by a promissory

(201,325,000), including long-term loan facilities of SAR (150,625,000)

note and/or securities or a deposit and pledge of title deeds. This

and bank letters of guarantee of SAR (25,000,000) and short-term

was in addition to new facilities of SAR (305,107,316), of which SAR

loans of SAR (25,700,000). The agreement aims to expand SASCO

(55,107,316) for various credit facilities and SAR (250,000,000) for

projects, support its core activities, and purchase new sites to build

long-term finance facilities guaranteed by a promissory note. The

fuel stations. The agreement was amended on April 30st, 2017 and its

agreement aims to finance the purchase of new lands, building

value became SAR (200,700,000), including long-term loans of SAR

new stations, and improving and developing the existing stations.

(150,700,000) and bank letters of guarantee of SAR (25,000,000) and

SASCO again amended the agreement amount on Feb. 17th, 2016, to

short-term loans of SAR (25,000,000). The agreement aims to expand

be SAR (502,500,000). This included renewal of existing facilities of

SASCO projects, support its core activities, and purchase new sites to

SAR (237,500,000) of which SAR (150,000,000) represent various credit

build fuel stations. The agreement was amended on 26 September

facilities and SAR (87, 500,000) represent medium and long-term

2018 and its value became SAR (25,000,000) in the form of short-term

finance facilities guaranteed by a promissory note and/or securities

commercial facility guaranteed by a promissory note. The agreement

or a deposit and pledge of title deeds. This was in addition to new

aims to support the needs of working capital.

facilities of SAR (265,107,316), of which SAR (39,000,000) for various

credit facilities and SAR (226,000,000) for long-term finance facilities

On May 25th, 2015, SASCO signed a new Shariah-compliant facilities

guaranteed by a promissory note. The agreement aims to finance the

agreement with the Saudi-British Bank (SABB) of SAR (150,000,000)

purchase of new lands and building new stations. SASCO amended

effective from the date of signing thereof, provided the use thereof

the agreement amount on April 16th, 2017, to be SAR (439,273,664).

before January 31st, 2016, and guaranteed by a promissory note.

This included renewal of existing facilities of which SAR (169,107,000)

This agreement includes a long-term loan of SAR (100,000,000) and

represent various credit facilities and SAR (270,166,664) represent

bank letters of guarantee of SAR (50,000,000). The agreement aims

medium and long-term finance facilities guaranteed by a promissory

to partially finance capital expenses, purchase land, and build new

note and/or securities or a deposit and pledge of title deeds. SASCO

fuel stations. The agreement was amended on Dec. 7th, 2017 and its

value became SAR (177,967,726), guaranteed by a promissory note,

of SAR (150,000,000) in the form of a medium-term loan of SAR

including a long-term loan of SAR (47,967,726) in addition to SAR

(100,000,000) for a financing period of 54 months (18-month grace

(80,000,000) as bank letters of guarantee and short-term loans of

period), provided the repayment of loan at equal semi-annual

SAR (50,000,000). The agreement aims to partially finance capital

successive instalments. This is in addition to letters of guarantee of

expenses, purchase land, and build new fuel stations as well as to

SAR (50,000,000). The agreement aims to expand SASCO projects,

finance the working capital. It will expire on January, 31th, 2019. The

support its core activities, purchase new sites to build fuel stations

agreement was amended on Dec. 10th, 2018 and its value became SAR

as well as to finance the working capital. On 24 October 2016, the

(400,000,000), guaranteed by a promissory note, including a long-

guarantees clause was amended and the value of total guarantees

term loan of SAR (150,000,000) in addition to SAR (200,000,000) as

was SAR (40,000,000) in addition to documentary credits of SAR

bank letters of guarantee and short-term loans of SAR (50,000,000).

(10,000,000). The agreement was renewed on Dec. 28st, 2017 and its

The agreement aims to partially finance capital expenses, purchase

total value became SAR (98,528,114) and the value of total guarantees

land, and build new fuel stations as well as to finance the working

became SAR (50,000,000) including medium-term loans of SAR

capital. It will expire on January, 31th, 2020.

(48,528,114). On 31 October 2018, the agreement was renewed and amended and the value of total guarantees became SAR (104,574,298)

On December 13th, 2015, SASCO signed a (Shariah-compliant) resales

and the value of total guarantees became SAR (750,000,000)

for profit facilities agreement with the Gulf International Bank (GIB)

including medium-term loans of SAR (29,574,298), guaranteed by a

(a Bahraini joint-stock Corporation) of SAR (150,000,000) guaranteed

promissory note.

by a promissory note. This agreement includes a medium-term loan of SAR (50,000,000) with a finance period of five (5) years (2-year grace

On December 21st, 2015, SASCO signed a (Shariah-compliant) facilities

period), provided the repayment of loan shall be at equal quarterly

agreement with Riyadh Bank (a Saudi joint-stock company). The

instalments. This is in addition to issuing letters of guarantee of

agreement includes bank letters of guarantee of SAR (50,000,000),

SAR (100,000,000). The agreement aims to expand SASCO projects,

aiming at expanding SASCO projects and supporting its core activities.

support its core activities, purchase new sites to build fuel stations

The agreement was amended on March 8th, 2018 through adding SR

as well as to finance the working capital. The agreement was

320,000,000 in the form of long-term finance of 235,000,000, short-

renewed and amended on Sep. 6th, 2018 and its value became SAR

term finance of SR 20,000,000, documentary credits of SR 20,000,000

(48,000,000) in the form of payment guarantees in favor of Aramco,

and a hedge to set interest rates at SR 45,000,000 in addition to bank

guaranteed by a promissory note.

guarantees of SR 50,000,000 with the final value of the agreement to be 370,000,000, guaranteed by a promissory note in addition to

On December 21st, 2015, SASCO signed a (Shariah-compliant) resales

pledging real estate deeds.

for profit facilities agreement with the Alawwal Bank (a Saudi jointstock company). This agreement includes a general facility limit

Balance of loans at the end of year

200,800,000

BSF National Commercial Bank (NCB)

25,000,000 108,962,882

Saudi British Bank (SABB)

238,214,286

Gulf International Bank (GIB) Alawwal Bank

20,097,391

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

Annual Report 2018

Loan Statement

Bank

Loan Date

Balance at the end of 2018

Balance at the end of 2017

BSF

31/05/2013

56,124,000

101,324,000

BSF

30/06/2016

39,735,709

BSF

29/08/2016

24,654,233

BSF

13/12/2016

23,274,737

BSF

28/12/2016

12,305,262

BSF

28/12/2016

6,252,169

BSF

12/01/2017

3,966,562

BSF

29/03/2017

13,235,873

BSF

24/08/2017

1,251,455

BSF

24/08/2018

20,000,000

NCB

03/12/2013

5,000,000

NCB

26/10/2015

22,500,000

NCB

05/05/2017

70,000,000

NCB

10/12/2018

25,000,000

Riyadh Bank

18/03/2018

181,071,429

Riyadh Bank

08/05/2018

37,142,857

Riyadh Bank

04/06/2018

20,000,000

SABB

01/06/2015

13,181,625

SABB

19/04/2016

2,928,793

SABB

19/04/2016

11,846,787

SABB

03/05/2016

1,183,076

SABB

23/05/2016

2,313,569

SABB

07/06/2016

7,791,424

SABB

20/03/2017

5,147,780

SABB

28/03/2017

3,574,670

SABB

21/12/2017

50,000,000

SABB

19/12/2018

58,962,882

GIB

27/12/2015‫م‬

50,000,000

Alawwal Bank

28/12/2015‫م‬

16,666,667

33,333,333

Alawwal Bank

13/12/2016‫م‬

2,264,022

3,773,370

Alawwal Bank

20/12/2016‫م‬

1,166,702

1,944,503

Total

593,074,559

555,518,930

Loan Maturity 2018

2017

Less than 1 Year

215,688,892

204,479,080

1 Year to 2 Years

86,700,386

114,479,080

2 Years to 5 Years

222,935,643

224,894,103

More than 5 Years

67,749,638

11,666,667

Statement

Loan Movement Bank

Date of Issue

Loan Value

Term

Period in Months

Balance at year beginning

Paid during year

Due Date

BSF

31/05/2015

101,324,000

Long-term

101,324,000

45,200,000

31/12/2022

BSF

30/06/2016

39,735,709

Long-term

39,735,709

31/12/2022

BSF

29/08/2016

24,654,233

Long-term

24,654,233

31/12/2022

BSF

19/08/2017

20,000,000

Short-term

20,000,000

19/08/2018

BSF

19/08/2018

20,000,000

Short-term

19/08/2019

BSF

13/12/2016

23,274,737

Long-term

23,274,737

31/12/2022

BSF

28/12/2016

18,557,431

Long-term

18,557,431

31/12/2022

BSF

12/01/2017

3,966,562

Long-term

18,453,890

31/12/2022

NCB

03/12/2013

90,000,000

Long-term

5,000,000

30/04/2018

NCB

26/10/2015

30,000,000

Long-term

22,500,000

26/04/2022

NCB

15/10/2017

25,000,000

Short-term

25,000,000

25/2/2018

NCB

10/12/2018

25,000,000

Short-term

27/02/2017

NCB

05/05/2015

10,000,000

Long-term

70,000,000

29/01/2015

SABB

01/06/2015

25,173,556

Long-term

13,181,625

28/11/2021

SABB

19/04/2016

2,928,793

Long-term

2,928,793

28/11/2021

SABB

19/04/2016

11,846,785

Long-term

11,846,787

28/11/2021

SABB

03/05/2016

1,183,076

Long-term

1,183,076

28/11/2021

SABB

23/05/2016

2,313,569

Long-term

2,313,569

28/11/2021

SABB

07/06/2016

7,791,424

Long-term

7,791,424

28/11/2021

SABB

20/03/2017

5,147,785

Long-term

5,147,780

03/11/2021

SABB

28/03/2017

3,574,670

Long-term

3,574,670

03/11/2021

SABB

23/10/2018

1,159,500

Long-term

23/10/2025

SABB

10/12/2018

4,581,194

Long-term

10/12/2025

Annual Report 2018

Loan Movement (Continued) Bank

Date of Issue

Loan Value

Term

Period in Months

Balance at year beginning

Paid during year

Due Date

SABB

29/11/2018‫م‬

1,483,314

Long-term

29/11/2025

SABB

18/12/2018‫م‬

3,442,271

Long-term

18/12/2025

SABB

19/12/2018‫م‬

4,119,030

Long-term

19/12/2025

SABB

03/12/2018‫م‬

1,213,781

Long-term

03/12/2025

SABB

22/10/2018‫م‬

4,364,226

Long-term

22/10/2025

SABB

19/09/2018‫م‬

17,864,606

Long-term

19/09/2025

SABB

21/12/2017‫م‬

50,000,000

Short-term

50,000,000

31/03/2018

SABB

19/09/2018‫م‬

20,733,750

Long-term

19/09/2025

SABB

10/11/2018‫م‬

50,000,000

Short-term

10/02/2019

Riyadh Bank

18/03/2018‫م‬

195,000,000

Long-term

13,928,571

18/03/2025

Riyadh Bank

08/05/2018‫م‬

40,000,000

Long-term

2,857,143

08/05/2025

Riyadh Bank

04/06/2018‫م‬

20,000,000

Short-term

04/06/2019

GIB

27/12/2015‫م‬

50,000,000

24/11/2020

Alawwal Bank

31/12/2015‫م‬

50,000,000

33,333,333

16,666,667

31/12/2019

Alawwal Bank

13/12/2016

4,528,044

3,773,370

1,509,348

28/06/2020

Alawwal Bank

20/12/2016

2,333,403

1,944,503

777,802

28/06/2020

555,518,930

371,407,255

Total

Mediumterm Mediumterm Mediumterm Mediumterm

1,012,295,449

Pledged Assets Site

Other Guarantees Entity

Guarantee

Periodical Inspection Station in Riyadh

Riyadh Bank

Pledge

Jubail Station in Dammam

Riyadh Bank

Pledge

Takhassusi Station in Riyadh

Riyadh Bank

Pledge

Jubail Station 2 in Dammam

Riyadh Bank

Pledge

Uthman Bin Affan Station in Riyadh

Riyadh Bank

Pledge

Bank

Guarantee

BSF

A promissory note of SAR 391,107,316

NCB

A promissory note of SAR 27,500,000

SAAB

A promissory note of SAR 400,000,000

GIB

A promissory note of SAR 48,000,000

Alawwal Bank

A promissory note of SAR 104,574,298

Riyadh Bank

A promissory note of SAR 320,000,000

Debt Instruments SASCO and its subsidiaries did not issue debt instruments.

are available on this link: www.sasco.com.sa f The following table shows the profits distributed to shareholders since 2010: Cash Disbursements

Profit Distributions Pursuant to Article 50 (Profit Distribution) of SASCO Articles of

Year

(SR/Share)

Association, SASCO annual net profits shall be distributed as follows:

2010

0.50

The Ordinary General Assembly may stop retention when the said

2011

0.50

reserve reaches 30% of the capital.

2012

0.50

2013

0.75

2014

0.50

2015

0.50

2017

0.50

f Ten (10%) of net profit shall be retained to form a statutory reserve.

f The Ordinary General Assembly may, by proposal from the Board of Directors, retain a certain ratio of profits to form a consensual reserve to be allocated to supporting SASCO financial position. f The Ordinary General Assembly may decide to form other reserves to the extent that achieves SASCO interests or ensures the distribution of fixed profits to shareholders as much as possible. The Assembly may also deduct some amounts of net profits to establish social institutions in favor of SASCO workers or to assist the existing social institutions. f The rest is then distributed to shareholders at no less than (3%) of the paid capital.

f In its session held on March 19th, 2019, SASCO Board of Directors recommended to distribute cash dividends to shareholders for the fiscal year ending on December 31th, 2018, with a total of SAR (30,000,000), equivalent to (5%) of the nominal value of share

f In accordance with the provisions of Article (28) of SASCO Articles of

and at a rate of SAR (0.50) per share. The entitlement to these

Association, after that, no more than (10%) of the rest is allocated

dividends would be for shareholders registered with the Securities

to Board remuneration. The entitlement would be determined

Depository Center (Tadawul) by the end of the second day on which

proportionately by the number of sessions attended by a member.

the General Assembly convened.

According to Article (51) of SASCO Articles of Association (Interim Profits): f The Board of Directors shall have the authority to approve interim profit disbursement to shareholders on a quarterly or biannual basis if SASCO financial position so permits and liquidity is available according to the rules and procedures developed by competent authorities.

Deviations from Applying Accounting Standards

Accounting Standards applicable in the Kingdom of Saudi Arabia SASCO applies the accounting standards issued by the Saudi

According to Article (52) of SASCO Articles of Association (Profit

Organization for Certified Public Accountants, and there is no

Entitlement):

deviation from the application of those standards.

f A shareholder shall be entitled to receive his share of profits according to the General Meeting’s decision in this regard. The decision shall set the dates of entitlement and distribution. Entitlement to profits shall be for shareholders registered with the shareholders’ records at the end of day established for entitlement. According to Article (53) of SASCO Articles of Association (Profit Distribution to Preferred shares): f In case the profits of any fiscal year are not distributed, the profits of next years may be distributed only after disbursing the percentage stated in Article (10) of SASCO Articles of Association to preferred shareholders for that year. f In case SASCO fails to pay such percentage of profits for three successive years, the Special Meeting of Preferred Shareholders may decide to attend the General Meetings and vote or appoint representatives in the Board pro rata with their value of shares of capital. This shall apply until SASCO can pay all profits allocated to those shareholders for previous years. f SASCO Articles of Association and Policy of Share Profit Distribution

International Financial Reporting Standards (IFRS) With reference to the CMA letter No. S/1/12231/15 dated 27/10/1436 AH, corresponding to 12/8/2018, regarding the CMA Circular No. 4/2978 dated 25/3/2014, concerning the application of the International Financial Reporting Standards (IFRS) to the financial statements of listed companies as of 1/1/2017 in accordance with the international standards adopted by the Saudi Organization for Certified Public Accountants, SASCO issued all its preliminary and annual financial statements during 2017 and 2018 according to the IFRS.

Treasury Stocks There are no treasury stocks retained by SASCO.

Auditor’s Report The auditor issued its report on SASCO financial statements for the period ending on December 31st, 2018, without any reservations.

Annual Report 2018

Retail Sector

Retail Sector It is one of SASCO key sectors. All SASCO sites have been merged with

or under construction, (23) sites under pre-construction procedures,

Zaiti Company sites in this sector. It contains SASCO basic products

as well as (20) sites stopped because the roads deviated away from

offered to clients through (218) sites, divided into (162) operating

them and for lack of economic feasibility from operating them at

stations and rest houses operated by SASCO and (6) sites operated by

present.

third parties. This is in addition to (9) sites stopped for development

Covering more than 4,000 km

More than 105 mosques

Mosques with a total capacity of more than 10,000 Salat performers

In 2018, Retail Sector offered its services to about 21 million vehicles, with an increase of 18,36% over the previous year, and 109 million customers, with an increase of 18,25% over the previous year.

Statistics of Company Site Visitors 109,344 Number of Customers

Growth Ratio 18.25%

92,465 86,486

21,040 Number of Vehicles

17,777

Growth Ratio 18.36%

16,019 Thousand 0

20,00 40,00

2018

60,00 80,00 100,00 120,00

2017

2016

The Retail Sector manages all fuel stations and provides the following services:

Fuel Services

Diesel

Gasoline

Annual Report 2018

According to the pricing approved by the Ministry of Commerce for

Aramco, fares of transport from the nearest reservoir supposed to

the sale of fuel to consumers in cities and governorates that have

supply fuel is added to the retail sale prices specified to consumers,

reservoirs of Saudi Aramco, and within a radius of 50 km from these

by adding SAR 0.01395/litre/km for paved roads and SAR 0.01815/litre/

reservoirs, prices are as shown in the following table. As for the cities,

km for non-paved roads, from the nearest reservoir of Saudi Aramco,

provinces and other centres where there are no reservoirs of Saudi

provided that this is done by competent local committees.

Before 2015 Product

Sale Price

Cost from

Profit Margin

Profit Margin Ratio

Gasoline 91

45 Halalah

36 Halalah

9 Halalah

20 %

Gasoline 95

60 Halalah

51 Halalah

9 Halalah

15 %

Diesel

25 Halalah

21.5 Halalah

3.5 Halalah

14 %

Amendment in 2015 Product

Sale Price

Cost from

Profit Margin

Profit Margin Ratio

Gasoline 91

75 Halalah

66 Halalah

9 Halalah

12 %

Gasoline 95

90 Halalah

81 Halalah

9 Halalah

10 %

Diesel

45 Halalah

41.55 Halalah

3.45 Halalah

7.67 %

Increase as of 1 January 2018 (without value-added tax) Product

Sale Price

Cost from Aramco

Profit Margin

Profit Margin Ratio

Gasoline 91

1.30 Halalah

1.21 Halalah

9 Halalah

6.92%

Gasoline 95

1.94 Halalah

1.85 Halalah

9 Halalah

4.64%

Diesel

45 Halalah

41.55 Halalah

3.45 Halalah

7.67%

The profit margin includes various expenses and costs borne by SASCO, most important of which are: f Transport cost in direct relation with the increase in diesel prices. f Costs of operation of stations due to the continued increase of power prices for services including electricity, logistics, maintenance and labour. f Water cost. f Costs of developing and improving the level of services according the requirements of the Ministry of Municipal and Rural Affairs in relation to companies qualified to manage fuel stations. f Increasing labour cost. f Costs of evaporation resulting during transport from Aramco to discharge site in the station. f Costs of bank guarantees issued to Aramco.

Number of sold litres - SASCO 997,971,241 Change % of

663,324,664

Gasoline 91

50.45 % 568,670,086 93,266,802 Change % of

258,443,751

Gasoline 95

(%63.91)

253,671,756 419,735,635 Diesel

Change % of

355,976,099

17.91 %

373,509,987

200,000,000

400,000,000

2018

600,000,000

2017

800,000,000

1,000,000,000

2016

Rental Sector Through competent departments in all areas, Retail Sector leases some facilities that SASCO authorizes third parties to manage, such as restaurants, car maintenance workshops, oil and tire services, as well as other shops serving clients and passengers.

RENTAL

Rental areas of more than exceeding 114,000 m2

SASCO also continued to sign strategic partnership agreements with several international and local competent companies specialized in operating restaurants, cafes, and car maintenance workshops to manage some of SASCO site facilities. This has had a positive impact in providing integrated and high-quality service, leading to an increase in number of customers in SASCO sites throughout the Kingdom.

Annual Report 2018

Café Palm Café offers all types of coffee and hot drinks, in addition to a

agreements with global and local restaurant companies, which have

range of snacks and pastries. Palm Café had (8) branches by the end

already begun providing services in many SASCO sites inside and

of 2018.

outside cities and at border crossing posts.

To offer a better service in this field, SASCO contracted with major international café companies to provide their services through SASCO sites spread throughout the Kingdom.

Dining

Pilgrims’ Services

SASCO restaurants offers convenient services to customers with

SASCO provides these services through its rest houses and stations

different tastes.

at the Saudi border crossing posts, in addition to SASCO site network

SASCO restaurants offer the following meals:

spreading on all highways, especially those linking the holy lands

Breakfast

(Mecca and Medina).

Appetizers

During 2018, SASCO served more than 9,900,000 pilgrims, whether

Main courses

they are from inside or outside the Kingdom. SASCO most important

Beverages

stations and rest houses spread over the following highways:

According to the priorities of SASCO strategy to attract companies

Al-Hijra Road (Mecca/Medina)

specialized in restaurant management and reduce the number of

Mecca/Jeddah Highway.

restaurants SASCO operates to improve service, provide a unique

Mecca/Taif Road (Al Hoda/Al Sail)

experience, achieve a quantum shift, enhance customer satisfaction,

Riyadh/Taif highway

assume leadership in this field, and advance the Stations and Rest

Riyadh/Dammam Road

Houses Sector in the Kingdom, SASCO continued to sign several

Halat Amar/Tabuk/Medina Road

Pilgrims 1,100 1,100

Number of buses

1,200 9,900 Number of persons

8,300 9,700

4,000

2,000

2018 84

6,000

2017

2016

8,000

10,000

The following table shows the most important financial results at the Retail Sector level as well as the contribution ratio in income margin compared to the previous fiscal year:

Contribution Ratio (in revenue)

Direct Revenue

Direct Costs

Total Income

Contribution Ratio (Income Margin)

2018

2017

2018

2017

2018

2017

2018

2017

2018

2017

1,851,348,389

1,034,959,662

90.05%

85.37%

(1,798,497,107)

(985,257,010)

52,851,282

49,702,652

64.47%

62.53%

Retail Sector 1,851,348,389 Operating revenues

1,034,959,662 (1,798,497,107)

Operating costs

(985,257,010)

52,851,282 Total income

49,702,652

500,000,000

1,000,000,000

2018

1,500,000,000

2,000,000,000

2017

The following table shows revenue analysis of Retail Sector for the past five years: 2014

2015

2016

2017

2018

416,266,722

645,234,638

939,405,052

1,034,959,662

1,851,348,389

Revenue Growth of Retail Sector 2,000,000,000 1,800,000,000 Annual Compound Growth rate 35%

1,600,000,000 1,400,000,000 1,200,000,000 1,000,000,000 800,000,000 600,000,000 400,000,000 200,000,000 0 2014

2015

2016

2017

2018

Total Sector Revenue Annual Report 2018

Performance at Geographical Level (Retail Sector) The following table shows province-level revenue analysis: Sector

2018

2017

Central Province

813,495,006

43.93%

496,453,167

47.96%

Northern Province

118,231,379

6.39%

68,606,196

6.63%

Eastern Province

403,712,322

21.81%

243,897,828

23.57%

Western Province

380,384,808

20.55%

162,882,795

15.74%

Southern Province

63,344,155

3.42%

39,935,068

3.86%

Qassim Province

72,180,719

3.90%

23,184,608

2.24%

Total

1,851,348,389

100%

1,034,959,662

100%

Geographical Revenue of Retail Sector

Central Province

43.93%

Eastern Province Northern Province Southern Province

21.81% 6.39% 3.42%

20.55% Qassim Province 3.90%

Western Province

Annual Report 2018

SASCO Palm Co.

SASCO Palm Co. SASCO Palm Co. is a limited liability company, with a capital of SAR 500,000 divided into 50,000 equal cash shares, each of SAR 10. SASCO possesses 99% while Auto & Equipment Investment Co., Ltd possesses the remaining 1%. SASCO offers supply service through (SASCO Palm Stores), for which SASCO opened (4) branches during 2018, bringing the total number of (SASCO Palm Stores) branches to (69) in various regions of the Kingdom at the end of the year after excluding two branches in 2018 to be run by third parties. Revenue of SASCO Palm Stores square meters in 2018 rose to SR 15,300 compared to SR 12.3, i.e. an increase of 24.39% for all sites. Client basket change was 6.32% rising from SR 19 in 2017 to SR 20.2 in 2018.

Number of SASCO Palm Stores Branches

Geographical Distribution of Branches

Eastern

Western

Northern

Central

55 2018

2017

2016

(SASCO Palm Stores) contains an integrated basket of carefully

Prepaid communication cards.

selected products to meet the needs of our customers, whether

Electronics.

travellers on intercity roads, vehicle drivers, and passengers inside

Mobile phone accessories.

cities. The following are the classifications of these items:

Perfumes and cosmetics.

Food supplies.

The following table shows the most important financial results at

Non-food supplies.

SASCO Palm Stores level as well as the percentage of contribution and

Dairy products and cold drinks.

income margin compared to previous fiscal year:

Instruments, tools, and accessories.

Trip supplies.

Direct Revenue

% of Contribution (in revenues)

Direct Costs

Total Income

% of Contribution (Income Margin)

2018

2017

2018

2017

2018

2017

2018

2017

2018

2017

201,456,232

163,719,373

9.80%

13.50%

(190,488,260)

(157,234,487)

10,967,972

6,484,886

13.38%

8.16%

Annual Report 2018

Sasco Palm Company

250,000,000

Operating Revenue

Operating costs 2018

6,484,886

10,967,972

157,234,487

50,000,000

190,488,260

100,000,000

163,719,373

150,000,000

201,456,232

200,000,000

Total income

2017

Growth of SASCO Palm Stores Revenue 250,000,000

200٫000٫000 Annual Compound Growth rate 10% 150٫000٫000

100٫000٫000

50٫000٫000

0 2015

2016 Total Sector Revenue

2017

2018

The following table shows province-level revenue analysis:

Sector

2018

2017

Central Province

126,231,352

62.66%

96,753,245

59.10%

Northern Province

10,794,365

5.36%

10,539,418

6.44%

Eastern Province

28,988,690

14.39%

24,333,262

14.86%

Western Province

35,441,825

17.59%

32,093,448

19.60%

Total

201,456,232

100%

163,719,373

100%

SASCO Palm Stores Geographical Revenue

Central Province

62.66%

Western Province

17.59%

Eastern Province

14.39%

Northern Province

5.36%

Annual Report 2018

SASCO Al-Waha Co.

SASCO Al-Waha Co. SASCO Al-Waha Co. is a limited liability company with a capital of

SASCO Al-Waha Co. manages all SASCO motels spread all over the

SAR 5000,000, divided into 50,000 equal cash shares, each of SAR

Kingdom. SASCO integrated in its strategy the development of these

100. SASCO possesses 99% of its capital while Auto & Equipment

motels to carry its own brand “Waha Motel”. During 2018, two motels

Investment Co., Ltd possesses the remaining 1%. SASCO Al-Waha Co.

were opened on Al-Hijra Road between Mecca and Medina, bringing

was established to manage this activity independently to achieve the

the number of motels carrying the brand of “Waha Motel” to 5.

best returns from it.

Number of Motels 6 5

Super 8

SASCO Al-Waha Co. 2018

2017

2016

“Super 8” Hotel, located on Thumama road in Riyadh, contains high class rooms, a restaurant, meeting rooms and a gym. SASCO is currently constructing Al-Waha Motel Hotel on Riyadh/Taif Road in Zalim area. The following table shows the most important financial results at SASCO Al-Waha Co. level as well as the percentage of contribution to revenues and income margin compared to previous fiscal year:

Direct Revenue

% of Contribution (in revenues)

Direct Costs

Total Income

% of Contribution (Income Margin)

2018

2017

2018

2017

2018

2017

2018

2017

2018

2017

3,911,567

2,651,845

0.19%

0.22%

(3,760,683)

(3,150,188)

150,884

(498,343)

0.18%

(0.63%)

SASCO Al-Waha Co. 4٫000٫000

(498,343)

150,884

3,760,683

3,150,188

1٫000٫000

2,651,845

2٫000٫000

3,911,567

3٫000٫000

0 -1٫000٫0000 Operating Revenue

Operating costs 2018

Total income

2017 Annual Report 2018

Ostool Al-Naqil Co.

Ostool Al-Naqil Co. Ostool Al-Naqil Co. is a limited liability company with a capital of

Thanks to the expansion of business, the fleet size increased at the end

SAR 5,000,000 divided into 50,000 equal cash shares each of SAR

of 2018 to (116) tankers and (132) trailers through which the company

100. SASCO possesses 99% while Auto & Equipment Investment Co.,

provides the transportation service to SASCO sites (fuel, water, and

Ltd possesses the remaining 1%. Moreover, both the National Water

sewage transport). Ostool Al-Naqil Co. continued to provide transport

Company and the Saudi Electricity Company qualified Ostool Al-Naqil

services (fuel and cargo) to a number of large retail and distribution

Co..

companies and expanded its business to include dry transport using

An integrated headquarters was prepared for Ostool Al-Naqil Co.

multi-purpose containers. Distance passed by Ostool Al-Naqil Co.

in Riyadh, including fleet management buildings and integrated

tankers during 2018 in order to provide service to its clients exceeded

workshop for tankers maintenance. This headquarters is considered

14 million km2 compared to 12 million in 2017, i.e. an increase of

the starting point of the Companyâ&#x20AC;&#x2122;s trucks. Ostool Al-Naqil Co. has

16,67%.

two branches, one in the Eastern Province and the other is in the Western Province.

Fleet Size 140 120 100 80 60

88 64

101

108

121

132 116

40 20 0 2014

2015

2016 Tankers No.

More than

2,900 trips by

2017

2018

Trailers No.

To offer service to our clients, we went a long drive of more than 14 million km2

our containers.

Annual Report 2018

The following table shows the most important financial results at Ostool Al-Naqil Co. level as well as the percentage of contribution and income margin compared to previous fiscal year:

% of Contribution (in revenues)

Direct Revenue

Direct Costs

Total Income

2018

2017

2018

2017

2018

2017

2018

2017

2018

2017

26,359,082

22,759,754

1.28%

1.88%

(18,011,444)

(15,375,734)

8,347,638

7,384,020

10.18%

9.29%

The following chart shows the financial results Ostool Al-Naqil Co.

Ostool Al-Naqil Co. 35,000,000

5,000,000

8,347,638

7,384,020

10,000,000

15,375,734

15,000,000

18,011,444

20,000,000

22,759,754

26,359,082

25,000,000

0 Operating Revenue

Operating costs

2018

Total income

2017

The following chart shows the number of litres transported by Ostool Al-Naqil Co. during the past five years:

Transported Litres 1٫600٫000٫000

2014

2015 Transported in Liters

2016

2017 Tankers No.

116

108

200٫000٫000

400٫000٫000

572,113,400

600٫000٫000

932,274,000

800٫000٫000

1,116,003,000

1٫000٫000٫000

1,377,300,000

1٫200٫000٫000

1,488,539,000

1٫400٫000٫000

% of Contribution (Income Margin)

2018

Revenue Growth of Ostool Al-Naqil Co. 30٫000٫000 25٫000٫000

Annual Compound Growth rate 21%

20٫000٫000 15٫000٫000 10٫000٫000 5٫000٫000 0 2014

2015

2016

2017

2018

Total Revenue of Ostool Al-Naqil Co. � Ostool Al-Naqil Co. revenues are geographically interrelated with the Retail Sector.

Annual Report 2018

Saudi Automobile & Touring Association - SATA

‫شركة النادي السعودي للسيارات‬ Saudi Automobile Association Co.

Saudi Automobile & Touring Association - SATA

Saudi Automobile & Touring Association SATA was established as a limited liability company with a capital of SR 500,000 divided into 50,000 equal cash shares, each of SAR 10. SASCO possesses 99% while Auto & Equipment Investment Co., Ltd possesses the remaining 1%. Saudi Automobile & Touring Association has a license from the Fédération Internationale de l’automobile (FIA) to issue Trip-Tik customs books and works through many sale outlets widespread throughout all regions of the Kingdom, in addition to a network of agents and distributors in the Kingdom. All of them adopt world-class terms, specifications, and performance standards. The most important services offered by Saudi Automobile & Touring Association include the following: f Issuing Trip-Tik customs books. f Issuing international driving licenses. f Issuing TIR books. f Organizing sport activities for cars and motorcycles as well as holding, operating, and managing various categories of motorracing tracks The number of passengers benefitting from customs transit books during 2017 was more than 32,000, and more than 62,000 passengers were issued international driving licenses.

Touring Association, SATA, signed in 2018 with the Saudi Customs an agreement to activate the Customs Convention on the International Transport of Goods under international carriage of goods by rail (TIR); a simplified system making trade easier and cheaper, being the only international transit and guarantee system. Under the Convention, the Saudi Automobile & Touring Association, SATA, is considered the issuer of TIR books and the guarantor of trucks exporting under the TIR system in Saudi Arabia. Through this Convention, SASCO aims to activate SATA role to change from a member represented in the International Road Transport Union to an active member to represent the Kingdom of Saudi Arabia and issue TIR books. Through managing car and motorcycle sports-related activities, and in coordination with concerned authorities, SATA seeks to obtain sport activities license to engage in this sport professionally. More than 16,000 passengers traveling via Trip-Tik books. More than 33,000 passengers issued international licenses.

More than thousand passengers through the books of the terrestrial

The number of passengers benefitting from customs transit books during 2018 was more than 16,000, and more than 33,000 passengers were issued international driving licenses. The sales of Saudi Automobile & Touring Association SATA were affected over the past years because of political events experienced by some neighbouring countries in addition to the existence of parallel clubs that do not have a license from the FIA to practice their business in the Kingdom but took a market share of sales of Trip-Tik customs books and international driving licenses. As part of Saudi Automobile & Touring Association’s agreement of 2012 with the International Road Transport Union (IRU), “an international body concerned with serving the interests of road transport industry worldwide and operators of buses, taxis and trucks to ensure economic growth and prosperity through sustainable movement of passengers and goods and reduce immaterial barriers crippling trade, tourism and road transport through reducing long waiting times on borders, simplifying customs procedures, harmonizing border control, applying information systems and common border and ensuring integrity”, the Saudi Automobile &

Direct Revenue

% of Contribution (in revenues)

More than thousand passengers issued an international license

The following table shows the most important financial results at the level of Saudi Automobile & Touring Association - SATA as well as the percentage of contribution to revenues and income margin compared to previous fiscal year:

Direct Costs

Total Income

% of Contribution (Income Margin)

2018

2017

2018

2017

2018

2017

2018

2017

2018‫م‬

2017

12,012,231

22,723,350

0.58%

1.87%

(2,348,402)

(6,305,238)

9,663,829

16,418,112

11.79%

20.65%

Annual Report 2018

Saudi Automobile & Touring Association

5,000,000

9,663,829

16,418,112

10,000,000

6,305,238

15,000,000

2,348,402

20,000,000

22,723,350

12,012,231

25,000,000

0 Operating costs

Operating Revenue

2018

Total income

2017

The following table shows the revenue analysis for Saudi Automobile & Touring Association for the past five years:

Statement

2014

2015

2016

2017

2018

Sales

23,184,295

20,292,812

20,471,234

22,723,350

12,012,231

� SATA sales are centralized from its headquarters in Riyadh according to the nature of its activity.

Association Sales Per Type SATA Revenues 25٫000٫000 20٫000٫000 15٫000٫000 10٫000٫000 5٫000٫000

Trip-Tik Sudan

40.91%

Trip-Tik International

38.38%

International Driving Licenses

14.43%

2014

2015

2016

SATA Total Revenues

100

2017

2018

Trip-Tik Yemen

6.28%

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Annual Report 2018

101

Auto & Equipment Investment Co.

‫إستثمارات السيارات والمعدات‬

102

Auto & Equipment Investment Co. Auto & Equipment Investment Co. was established with a capital of SAR 500,000, fully owned by SASCO, divided into 50,000 cash shares each of SAR 10. The company was established to provide infrastructure, human resources, and expertise required to manage SASCO investments independently and impartially and, thus, increase SASCO diversity of income sources and enable it to manage its operational and investment processes efficiently and effectively. The most important activities of Auto & Equipment Investment Co. include: f Manufacturing industries. f Construction. f Trade. f Finance, business and other services. f Possess land and real estate and erect buildings thereon for operation, sale, or lease. f Build car and heavy equipment maintenance workshops as well as car and passenger service centres. f Build rest houses, motels, and restaurants. f Import and sell equipment and tools and construct roads and bridges. SASCO operates most of its investments in its subsidiaries through

Auto & Equipment Investment Co., since the latter holds 1% of the capital of Ostool Al-Naqil Co., 1% of the capital of Saudi Automobile & Touring Association, 1% of the capital of SASCO Palm Stores Co., 1 % of the capital of SASCO Al-Waha Co., 1% of the capital of SASCO Franchise Co., and 1% of the capital of SASCO Al-Nakhla Al-Oula Co. When it comes to investment in other companies and during 2018, Auto & Equipment Investment Co. completed a deal of purchase 485 additional shares of Middle East Battery Company (MEBCO), which is one of the biggest car battery manufacturing companies in the Middle East and specialized in the production of ACDelco batteries as one of the partners sold a part of his share. The deal value was SR 21,8 million and thus the companyâ&#x20AC;&#x2122;s contribution in MEBCO capital rose from 7,94 to 12,79 and the number of shares rose from 794 to 1,279 shares. Purchasing such shares, the Company aims to increase its investments in companies with investment feasibility and activities that complement car sector business and support its profitability through distributing periodic profits received from MEBCO.

SASCO holds equity in other companies, and the following table shows the details of these investments:

No.

Company Name

Middle East Battery Company (MEBCO)*

National Company of Tourism (Syahya)

United Racing Company

No. of Shares

Value of Nominal Share

Total

Ownership Ratio

1,279

5,750

7,354,250

12.79%

500,000

1,500,000

0.36%

125

1,000

125,000

25%

Total

8,979,250

ďż˝ The share in the Middle East Battery Company (MEBCO) is registered in the name of Auto & Equipment Investment Co. (a subsidiary).

Illustration of Investment Ratios of Total Investment Portfolio

National Company of Tourism (Syahya)

16.71%

United Racing Company

1.39%

Middle East Battery Company (MEBCO)*

81.90%

Annual Report 2018

103

Dividends Received from Investments

3,000,000 2,000,000

1,287,190

4,000,000

3,603,408

5,000,000

5,710,088

6,000,000

1,000,000 0 Companies Investments

2018

Securities Investments

2017

Investment Portfolios according to Investment Regulations issued by CMA As of 2 Oct. 2016, the Balance of Al Ahli Capital portfolio has been transferred to the portfolio run by Mulkia Investment Co. in accordance with the agreement previously signed with them. On grounds of the Board’s approval, the portfolio was transferred from long-term investment to investment held for sale as of 1 October 2018, which financial impact is processed at the end of each financial period in investments and cash the financial position statement, and difference of change between periods directly on income statement.

104

‫الجهة‬

Investment Amount

Invested Amount as at 31/12/2018

Accounting Treatment

Mulkia Investment Co.

SAR 34,384,679

SAR 17,358,284

Securities held for sale

Annual Report 2018

105

Al-NakhlaAl-Oula Co.

‫شركة النخلة األولى للمقاوالت‬ Al Nakhla Al Oula Contracting Company

106

Al-Nakhla Al-Oula Co. It is a limited liability company, established to carry out the operation,

Al-Nakhla Al-Oula is specialized in:

maintenance, and cleaning of SASCO sites to improve the quality of

restoration).

service provided to customers, with a capital of SAR 500,000 divided into 50,000 equal cash shares each of SAR 10. SASCO possesses 99%

Construction, management, maintenance, and operation of residential and commercial buildings.

while Auto & Equipment Investment Co., Ltd possesses the remaining 1%.

General contracting (construction, repair, demolition, and

Road works.

Annual Report 2018

107

SASCO Franchise Co.

108

SASCO Franchise Co. After a specialized company completed the project of granting

Stores” in a conference held in the evening of Thursday 29 Muharram

franchise to operate “SASCO fuel stations” and “Palm Stores”, the

1440 AH, corresponding to 9 October 2018 at Hyatt Regency Riyadh

establishment of “SASCO Franchise Co.” was completed with a capital

Hotel. The Program is considered the first initiative of its kind to grant

of SAR 500,000 divided into 50,000 equal cash shares each of SAR

the right of commercial franchise to “SASCO Stations” and “Palm

10. SASCO possesses 99% while Auto & Equipment Investment Co.,

Stores Centers” affiliated to SASCO Palm Stores Co. The Program

Ltd possesses the remaining 1%. “SASCO Franchise Co.” grants third

aims to create new investment opportunities for SASCO and increase

parties a franchise to operate “SASCO fuel stations” and “Palm Stores”.

its revenues and profitability through granting the franchise of operating commercial brands to other operators, resulting in creating

In October 2018, SASCO launched the Commercial Franchise Granting

real opportunities for citizens to participate in pioneering projects in

Program to operate the brands of “ SASCO Stations” and “Palm

line with the Kingdom’s orientation.

Annual Report 2018

109

Other Administrative & Operational Information

110

Other Administrative and Operational Information Lawsuits

United Racing Company Lawsuit The partners of the United Racing Company filed lawsuit No. 5475/2/k

SASCO possesses 3 sites in Medina granted to it by the State pursuant

before the Administrative Judicature Court in Jeddah versus SASCO.

to Royal Decree No. 214/4/M dated 08/02/1405 AH. The Secretariat

They demanded the liquidation of their company. After the Panel

didn’t give the sites to SASCO. So, SASCO, through its Law Firm, filed

reviewing the case ordered compulsory liquidation. it appointed

a lawsuit against Medina Secretariat before the Administrative

Osama Abdullah Al-Khuraiji & Partner - Chartered Accountants and

Judicature Court. The lawsuit was recorded under No. 2856.

Business Consultants, to carry out the liquidation procedures, and execution is still underway with the chartered accountant’s office. As per the latest report of SASCO Law Firm, liquidation is subject to the following: I.

Completing the requirements for opening United Racing

Company Zakat file at the Department of Zakat. II.

Approval of debt balances.

III.

SASCO Law Firm’s obtaining of the details and documents

The Court passed a judgment that cancelled the defendant’s (Medina Secretariat) decision of abstaining from delivering the plots outlined in Royal Decree to the plaintiff (SASCO). Secretariat challenged the judgment. The Court of Appeal passed a judgment, which states as follows: I. II.

of lawsuits filed by or against SASCO. The Administrative Judicature Court in Jeddah passed a judgement binding the United Racing Company to pay to one of the creditors an amount of SR 2 million. On 19 Nov. 2017, the Firm stated that a

Cancel the above judgement passed by the Administrative

Department of Medina Administrative Judicature Court. Reject the lawsuit filed by SASCO against Medina

Secretariat.

Other Miscellaneous Lawsuits SASCO filed some suits related to amounts due to it from some tenants and debtors to collect its dues for previous years. There are

judgment effecting the amount was passed. For lack of liquidity in

some other financial and labour lawsuits versus SASCO and its Legal

United Racing Company balances, the liquidator requested partners

Department follows up these financial rights and collection thereof,

to proportionately (each as per his shares of capital) pay the amount.

either by amicable or judicial means.

A lawsuit was filed by the liquidator before Jeddah Commercial Court

Following are some of the most important lawsuits:

registered under No. 4328 of 1439 AH in this regard. As the liquidator’s

One important case is the one SASCO filed before the Office of the

law firm was absent, the lawsuit was cancelled. SASCO Law Firm still

Public Defender (Ombudsman) No. 6972/1/k on 12/5/1433 AH versus

follows up the case.

both the Ministry of Municipal and Rural Affairs and the Ministry of

Jeddah Land Grant Lawsuit

Housing. SASCO possesses land in Hafr Al-Batin area and the Ministry

SASCO possesses 4 sites in Jeddah Governorate granted to it by the State pursuant to Royal Decree No. 214/4/M dated 08/02/1405 AH. The Secretariat didn’t give the sites to SASCO. So, SASCO, through its Law Firm, filed a lawsuit against Jeddah Secretariat before the Administrative Judicature Court. The lawsuit was recorded under No. 7078 dated 15/11/1438 AH, was referred to the second Judicial Department and delayed for many hearings.

of Housing, through Hafr Al-Batin Municipality, took part of this land. The lawsuit was referred to Riyadh General Court and, then, to the Review Board, which in turn referred it to Hafr Al-Batin Municipality to check the site and determine the overlap between the two plots. Consequently, Hafr Al-Batin Municipality issued its letter stating that the Ministry of Housing had infringed upon 41,713 m2 of SASCO plot. Therefore, the assessment was referred to an authorized assessor. Based on its assessment, a judgment was passed in favor of SASCO, and a reasonable compensation for the usurped land was determined.

On 17 May 2018, SASCO received a judgment in its favor. According to

The judgment was challenged by the Ministry of Housing. We are

the judgment, Jeddah Secretariat’s negative decision of abstaining

waiting for the confirmation or rejection of judgment by Riyadh

from delivering the plots outlined in Royal Decree No. 214/4/M dated

Court of Cassation.

08/02/1405 AH shall be cancelled and the Secretariat challenged the

AH before the General Court in Tabuk versus the Saudi Industrial

judgment.

Property Authority (Modon) and the Secretariat of the City of

On December 2018, the Court of Appeal passed a judgment, which

Tabuk regarding the overlap with SASCO-owned land in Tabuk

states as follows: I.

Industrial Zone, as well as claiming a compensation for the

Cancel the judgement passed with respect to lawsuit No.

value of land if SASCO cannot receive it. The case is still under

7078/2/k of 1438 AH by Jeddah Administrative Judicature Court. II.

Reject the lawsuit filed by SASCO.

Medina Land Grant Lawsuit

SASCO is also following lawsuit No. 2136385/34 filed on 7/9/1434

review before Riyadh General Court. f

The lawsuit filed by SASCO versus Al Khaldi Holding Company, lessor of SASCO site on Dammam-Riyadh road at 205 km

Annual Report 2018

111

because Al Khaldi failed to hand over the station after the expiry

SASCO filed a lawsuit against Jeddah Municipality before the

of contract in 2014. The case is still under review before Khobar

Administrative Judicature Court registered under No. 203/1439

Court to pass a judgment.

AH binding the Municipality to pay the amounts it received.

The lawsuit filed by SASCO versus Jubbah Municipality for

In the hearing dated 22/12/1439 AH, a judgment was passed in

terminating contracts, releasing letters of guarantee and

SASCO favor with an amount of SR 831,000. The Municipality

compensating SASCO against the damages it incurred due to

appealed against the judgment before Jeddah Administrative

non-handover of sites. In brief, on 3/8/1432 SASCO contracted

Judicature Court. No judgment has been passed to date.

with the Municipality to lease sites on Ha’el-Al Jouf International Road, while SASCO did not finally receive the said sites as they

Human Resources

are not fit for the purposes of contracting. A judgment was

The following table shows human resources analysis of SASCO and

passed in favor of SASCO, binding Jubbah Municipality to pay SR

its subsidiaries:

1,027,750 to SASCO, and execution of judgment is underway. An award was passed to issue an enhancement order by Ha’el city to Jubbah Municipality to pay the amount. f

The lawsuit filed by SASCO versus Jeddah Municipality. SASCO leased a plot from Jeddah Municipality in Al Hijra District with an area of 20164,66 m2 and paid the rent of the first year. As the Municipality could not hand over the site as the Transport Ministry didn’t allow to create an entrance and an exit for the station and the Municipality didn’t repay the paid amounts.

112

No.

Category

2018

2017

Senior Management

Middle & Executive Management

264

253

Workers and Technicians

1457

1244

1722

1498

Total

Subsidiaries The following table shows the summary of (limited liability) subsidiaries and their status of incorporation.

No.

Core Business

Headquarters Foundation Country

% of Direct & Indirect Ownership

Remarks

Auto & Equipment Investment Co., Ltd (SAR 500,000)

Build car and equipment repair workshops – wash and lubricate cars - import and export spare parts - establish training centres - import and sell tools -buy and invest in lands.

Kingdom of Saudi Arabia Riyadh

100 % SASCO

Incorporated in 2010

Ostool Al-Naqil Co., Ltd (SAR 5,000,000)

Transport goods and equipment transport petroleum products - import, export, and wholesale – establish, operate, and lease maintenance workshops – provide advertising services on tankers and vehicles.

Kingdom of Saudi Arabia Riyadh

100 % SASCO

Incorporated in 2010

Kingdom of Saudi Arabia Riyadh

100 % SASCO

Incorporated in 2012

Kingdom of Saudi Arabia Riyadh

100 % SASCO

Incorporated in 2012

100 % SASCO

Incorporated in 2014

Subsidiary Name

Subscribe in local and international car and motorcycle clubs as well as local and international societies and bodies interested in car and motorcycle affairs, issue Trip-Tik customs books and international driving licenses, build, manage, maintain and operate car & motorcycles sports tracks, hold races and car & motorcycle sport events - participate in races and motorsport events.

Saudi Automobile & Touring Association, Ltd SATA (SAR 500,000)

Al-Nakhla Al-Oula Co. (SAR 500,000)

General contracting for buildings, establish, maintain and operate residential and commercial buildings and road works.

SASCO Palm Co. (SAR 500,000)

Import and sale of foods.

SASCO Al Waha Co. (SAR 5,000,000)

Provide accommodation services.

Kingdom of Saudi Arabia Riyadh

100 % SASCO

Incorporated in 2016

SASCO Franchise Co. (SAR 500,000)

Grant franchise to operate “SASCO fuel stations” and “Palm Stores”.

Kingdom of Saudi Arabia Riyadh

100 % SASCO

Incorporated in 2015

Zaiti Petroleum Services Company (SAR 37,500,000)

Build, manage, and operate fuel stations.

Kingdom of Saudi Arabia Riyadh

100 % SASCO

Incorporated in 2007 and acquired in 2015

Kingdom of Saudi Arabia Riyadh

Annual Report 2018

113

Risks Management

114

Risks Management SASCO Risk Management Concept Risk management is the process of measuring and assessing possible

plans.

risks as well as developing strategies to manage them to ensure

f Consistency of the activity objectives.

addressing mitigation and redressing thereof. It also means early

f Adequacy of activity objectives with all important operations.

detection of actual problems to reduce their negative impacts on

f Idiosyncrasy of the activity objectives.

SASCO.

Sufficiency of Objective-Related Resources: f Identifying important objectives (important success factors) to

In the ideal risk management scenario, SASCO adopts prioritization, i.e. to address more likely and profoundly serious risks/ loss first.

achieve SASCO objectives. f Involvement of all management levels in setting objectives and the extent of their interest in achieving these objectives.

Risk management should integrate with SASCO culture as well as senior management effective policies and programs. SASCO risk

? Risk:

management translates its strategy to measurable objectives,

f Sufficiency of mechanisms to identify risks originating from

and SASCO determines policies and responsibilities towards risk management as part of job description of its entire staff.

external sources. f Sufficiency of mechanisms to identify risks originating from internal sources

SASCO Risk Management Objectives

f Identifying important risks of every important activity.

f Achieve close control and monitoring of risks in activities and

f Analysing risks at SASCO level and activity level and changing the

business. f Identify specific treatment for each type of risk at all levels. f Prevent and minimize losses through immediate control or by transferring them to external parties. f Identify actions and procedures to be taken in terms of certain risks to control incidents and monitor losses. f Prepare studies before and after losses to prevent or minimize

method of risk analysis since many risks are difficult to quantify. Analysis includes: 1.

Asses risk significance.

Asses the possibility of risk occurrence (recurrence).

Impact of risk.

Consider how to manage risks and evaluate steps to be

taken.

likely losses, identify which risks are to be controlled, and use tools that help prevent recurrence of such risks. f Provide shareholders, creditors, and customers with confidence to

SASCO addresses risks within four key groups:

1. Avoidance of Risks:

protect the ability to generate profit despite any occasional losses

This means to attempt to avoid activities that lead to certain risks,

that may lead to minimize profit or non-achievement thereof.

such as not purchasing a property or not engaging in a certain work.

2. Minimization of Risks: SASCO Techniques to Address Risks

? Assessment: An assessor focuses on the method the management adopts to

By reducing investments facing a certain risk, which an investor does not like to take, or by involving others in risks.

3. Transfer of Risks:

set objectives, analyse risks, and manage change, including their

This consists of means that help another party accept risk, usually

relevance and adequacy to SASCO activities

through contracts or financial hedging. Insurance is an example of

SASCO-Wise Objectives: f How far SASCO objectives provide profound data and guidance in

risk transfer through contracts.

4. Acceptance:

terms of SASCO aims while sufficiently specific to be directly linked

This means to accept losses when they happen. This method is

to SASCO.

an acceptable strategy in case of small risks in which the cost of

f Effectiveness of communicating objectives to staff and the Board.

insurance against risk by time is higher than total losses (accepted

f Links between strategies and their consistency with SASCO

should be all risks that are not preventable or transferrable).

objectives. f Consistency of business plans and budgets with SASCO objectives, strategic plans, and current conditions.

Based on the Board belief in the importance of risk management being one of management foundations to protect shareholdersâ&#x20AC;&#x2122; investments and related partiesâ&#x20AC;&#x2122; rights, the Board continually

Activity-Wise Objectives:

develops risk management, policies, and procedures consistent with

f Link between activity objectives, SASCO objectives, and strategic

governance and internal control policies through setting a general Annual Report 2018

115

strategic plan for SASCO to face these risks and ensure expeditious

of its license periodically from the Ministry of Transport. Although it

treatment thereof and providing necessary solutions in a manner

does not encounter any difficulties in renewing the license, it does

that reduces their impacts.

not guarantee to renew it in the future, which would affect its ability

The most important risks SASCO may face and their mitigations are

to continue operation in this field. In addition, any change in systems

classified as follows:

and regulations related to company business in terms of loading,

Most Important Risks SASCO may Face and their Mitigations

transporting, unloading, and storing petroleum products as well as environment protection requirements shall increase its costs and financial burdens.

Operational Risks

? Retail Sector:

To manage risks related to Ostool Al-Naqil Co., parameters have been

Retail Sector is one of the sectors characterized by easy entry by

developed for internal control through:

new competitors or expansion of existing ones, increasing the total

f Covering operational objectives of transportation sector and

competition therein, in addition to price fluctuations that affect land price, property lease, construction costs, or supply. Moreover, this sector mainly depends on providing petroleum services. Since the sector is linked to supplies received from the Arab Oil Company “Saudi Aramco”, any change in contract provisions negatively affects

helping officers improve, develop, and schedule supply. f Following up adherence to security and safety laws and procedures and recommending rectifications to violations. f Checking quality assurance procedures and complying with specific quality standards.

SASCO activity. To manage competition risks in the Retail Sector, parameters for

? Saudi Automobile & Touring Association (Subsidiary)

internal control were set as follows:

Business of Saudi Automobile & Touring Association, which works

1. Requiring the development of accurate studies for every site that

under the umbrella of UN- controlled international bodies, is an

include fixed standards to ensure the investment feasibility of these

essential cornerstone of SASCO operational business. Profit from its

sites.

business, arising from sales of international driving licenses and Trip-

2. Conducting a comprehensive developmental program for the

Tik customs books, represents a material share of SASCO operating

existing sites to ensure quality service and availability of all services

revenue. This activity depends on holding an international license

the customer needs. This is in addition to approval of increase in

from the FIA to issue those documents for several years now in return

market share inside cities and focus on acquiring relatively important

for international financial obligations and burdens that greatly add

sites, whether in terms of population density or traffic.

to the cost of selling the document.

3. Setting financial goals and enforcing monthly control thereon to

Political events in some neighbouring countries, activities of

address or benefit from deviations.

some local competitors (parallel clubs) and the emergence of new

4. Setting operational goals and enforcing the oversight role by

organizations affect the financial performance of Saudi Automobile

supervisors in stations, provinces, and sectors, as well as by paying

& Touring Association.

surprise periodical visits and monitoring customer complaints to address them through allocating a toll-free phone number to raise

To minimize competition risks and increase its market share, Saudi

specific quality of services.

Automobile & Touring Association is in the process of developing an expansion plan to increase its branches and products, enhance its

? Ostool Al-Naqil Co. (Subsidiary)

integration, and deal with strategic dealers. Parameters have been

Ostool Al-Naqil Co. started its business as a SASCO sector in 2009.

developed for the internal control through:

Following restructuring this sector, its name changed to “Ostool Al-

1. Holding periodical meetings with strategic dealers to increase

Naqil Co.”. SASCO increases its operational capacity continually in line

coordination in terms of market shares.

with providing human cadres to manage and supervise the fleet in a

2. Developing a plan to increase points of sale to market some

manner that ensures maximum benefit from transportation services

products and follow up on them monthly.

to SASCO sites, lowers the internal transport costs, and provides other

3. Setting financial objectives and following them up monthly.

customers with transport services. Ostool Al-Naqil Co. offers the

4. Conducting periodic monitoring of customs claims and trying to

following services:

reduce them.

f Transportation services of all types of fuel.

116

f Water and sewerage transport services.

ERP-Related Risks

f Dry transport services.

All departments of SASCO and its subsidiaries depend mainly on

The most prominent risks faced by Ostool Al-Naqil Co. is the renewal

the use of Enterprise Resource Planning (ERP) system in all their

operational and financial processes. The ERP system may serve more

HR-Related Risks

than one department. SASCO departments use the following systems:

Legislations in the Kingdom require a Saudization ratio of total staff

f Finance Department: AX 2012.

in companies through Nitaqat Program. SASCO has achieved the

f Human Resources Management: AX 2012.

required Saudization ratio and continually seeks to Saudize various

f SASCO Palm Stores sales: NCR Aloha.

administrative functions in line with its expansion plan that requires

f Fuel Sales: Gilbarco.

many workers in its different sites.

f SASCO Al-Waha Co. Sales: Opera and Nazeel system for motels. f Maintenance Department: reporting system BMC.

SASCO signed an agreement with the Human Resources Fund to

As SASCO is eager to avoid any expected problems, it monitors the

support the Saudization plan in accordance with the regulations

updating of department systems periodically through a specialized

and laws issued in this respect. Although SASCO believes in the

office. Moreover, SASCO concluded a contract with a company

importance of Saudization as a national development requirement,

specialized in storing information to create a backup copy of SASCO

it faces difficulties and challenges because of the nature of its

data.

business, inadequacy of its works to national jobseekers, and its main dependence on expatriate workforce. Therefore, it is difficult

Risks of Issuing New Regulations on Fuel Stations and Service

to achieve the Saudization ratio. Accordingly, risks in this regard

Centres

continue, particularly the higher cost of labour and recruitment.

The new Regulations on Fuel Stations and Service Centers, issued by the Ministry of Municipal and Rural Affairs, includes stringent

Parameters have been developed for internal control through:

standards for the geographical distribution of fuel stations and

1. Continuous follow up of updates and requirements of Labour Office

service centres so that they would not cause any disturbance,

in relation to Saudization and Nitaqat Program.

traffic jams, or damage to nearby facilities. It also sets the area of

2. Making sure that the staff get sufficient training to perform their

stations inside cities, design standards, and safety and environment

duties effectively.

preservation conditions.

3. Ensuring the periodical monitoring and assessment of performance.

SASCO business may be affected in the future if it fails to obtain

4. Following up Saudization of supervisory functions in all sectors to

the necessary construction and operation licenses, whether for the

increase Saudization ratio.

existing or new stations. Market-Related Risks Legislative Environment Risks

They comprise:

SASCO operates in a dynamic legislative environment, and changes

? Growth and Expansion-Related Risks:

to systems and laws applicable in the Kingdom of Saudi Arabia may

Since SASCO growth depends to opening and adding new sites,

affect SASCO business positively or negatively. To reduce the negative

SASCO, to realize its expansion policies, selects sties and review them

effect of these changes, if any, SASCO always gets timely access to

comprehensively to make proper decisions of purchase or rent.

amendments to regulations and studies their impact on its business.

SASCO ability to continue its growth relies on the availability of

Accordingly, SASCO takes the necessary steps to minimize the impact

human resources, such as administrative competencies, operational

of these amendments or attempt to exploit them to serve its business.

expertise, and labour on time. SASCO exerts necessary efforts to provide these resources.

The most prominent existing risks include the fact that SASCO should

Delay in construction and development projects because of

obtain/renew the license to practice its business from the Ministry

contractorsâ&#x20AC;&#x2122; non-abidance by the set completion schedule leads to

of Municipal and Rural Affairs and Civil Defence periodically; this is

delay in operating sites according to the operational plan. SASCO

connected with the property insurance policy. SASCO business may

concerned departments continually follows up the contractorsâ&#x20AC;&#x2122; works

be affected in the future if it fails to obtain or renew such licenses.

and implementation procedures.

Legal Risks

? Competitive Environment Risks:

In addition, SASCO faces legal risks in relation to financial claims due

Station and rest house sector witnesses fierce competition to provide

for it from some tenants and debtors, namely collecting amounts due

best services. SASCO growth and profit levels depends on its ability to

for it for previous years. Moreover, there are some labour lawsuits filed

compete successfully and maintain a leading position among other

versus SASCO, and its Legal Department follows up these financial

companies.

rights to collect them, either by amicable or judicial means.

Annual Report 2018

117

? Risks Related to Highway Network Development (Transport Alternatives) The State develops highway networks continuously, which may change routes on which SASCO rest houses and stations are located. This is in addition to starting the execution of public transport projects, subway network, and railway lines to link the Kingdom regions with each other, which can adversely affect SASCO level of operational profit.

or will be handed over to it in the future at an adequate fare while emphasizing utilization of sites for the purpose for which they are allocated. Currently, SASCO is working with government agencies to receive and determine the rent value of land. SASCO may be adversely affected in case of delayed handover of these sites by relevant government authorities, or because of higher rent value. SASCO assesses the site and rent value initially before deciding whether to invest in the site.

In this regard, SASCO develops control in this regard through: f Studying new road and railway line projects and the road network

? Insurance-Related Risks

expansion plans in the Kingdom periodically to strategically plan

Insurance policies cover all employees and properties of SASCO and its

SASCO sites, examine options and solutions for existing sites, and

subsidiaries. SASCO financial results or subsidiaries may be affected

check whether they are vulnerable due to the development of road

by any future losses not covered under the insurance policies.

networks.

? Credit-related Risks ? Risks Related to Issuance of Auto and Motorcycle Club

The credit-related risks comprise of the inability of one party to fulfil

Act

its obligations, resulting in a financial loss to the other party. In order

The Act includes some points that would affect the business of

to reduce the impact of these risks, SASCO policy states that all post-

Saudi Automobile & Touring Association. SASCO studies the Act and

paid customers are subject to credit due diligence and their ability to

identifies the expected impact on the Association works to take the

meet the obligations.

necessary measures towards addressing the Act requirements.

? Financing Risks ? Risks Related to Customs Claims of the Association

SASCO obtained financing from several banks to expand its projects,

covered by the FIA Insurance Policy

support its core activities, purchase new sites to build fuel stations,

There are customs claims not covered by the FIA insurance policy since

and finance the working capital and, thus, make profits and maximize

some countries are not included in the insurance coverage. Saudi

shareholdersâ&#x20AC;&#x2122; equity in the future.

Automobile & Touring Association checks all supporting documents when issuing Trip-Tik customs books, and forms a provision in the

In this respect, SASCO developed controls by setting financial and

form of a percentage of monthly sales of books to cover this claim.

operational objectives and activating controls on them on a monthly basis to address deviations or take advantage of them, including but

? Risks Related to Granting Land and Land Handed over

not limited to:

by State

f Monitoring the achievement of expansion targets - numerically.

On 18/5/1401 AH, Royal Decree No. 11499 was issued to hand over to

f Monitoring the achievement of financial performance targets.

SASCO the necessary lands while keeping its ownership to the State.

f Conducting, analysing, and comparing budgets with the actual

Moreover, Royal Decree No. 214/M was issued on 8/2/1405 AH to grant

results and reasons for deviations.

SASCO (34) sites handed over to it. Therefore, SASCO requested the

f Reviewing and improving cash flows continually.

receipt of the sites to build rest houses thereon.

f Scheduling expansions.

In relation to grants that have title deeds already received, SASCO

? Investment Risks

assessed them by a number of specialized companies, and listed them

SASCO has investment portfolios in other companies, which may be

in accounting records. As for lands granted with no title deeds, SASCO

vulnerable to financial, operational, or administrative risks related

coordinates with the concerned authorities to get its title deeds and

to those companies or the market where they operate. To minimize

receive these sites.

the impact of these risks, SASCO conducts in-house or outsourced studies by specialist consultants on the status of these investments

In addition to the granted lands, SASCO received some sites from

to assess the feasibility of keeping them. SASCO also gets continually

the State against receipt minutes. SASCO has built fuel stations on

and periodically familiarized with the results of investee companies

some of these sites and is seeking to receive others to utilize them.

to determine their conditions in general.

Royal Decree No. 1315/M issued on 24/11/1420 AH limited SASCO sites to those previously granted and lease out those already handed over 118

Although SASCO focuses on its core business, in case of an untapped

cash surplus, SASCO invests it by entering into new investment portfolios or real estate investment funds or depositing it as a shortterm bank deposit. SASCO also possesses several investment portfolios in securities in the Saudi market managed by specialized companies. These investments are vulnerable to fluctuations in stock prices according to the

The issuance of a ministerial decision to increase tariffs in the future may lead to low income margin. In this context, SASCO always gets timely access to amendments and resolutions and studies their impact on its business. Accordingly, SASCO takes the necessary steps to minimize the impact of these resolutions.

prevailing market variables.

? Strategic Risks To reduce the impact of these risks, SASCO:

These are unknown and non-systematic risks which cannot be

f Examines the financial position of the investee companies and

absorbed or assessed within a clear approach or model. In case SASCO

assesses their performance quarterly and annually. f Works to dissociate from some investments to focus on its SASCO core business whenever the opportunity comes.

falls vulnerable to such strategically affecting events or risks, it may not only suffer a slight decline in profits, but such danger may also destroy it fully through bankruptcy and lay-offs.

? Risks Related to Increased Energy Prices The increased sale tariff of electrical energy products and the rise in prices of fuel and water affect the margin of income from operations.

Annual Report 2018

119

Internal Control

120

Internal Control SASCO Internal Control Concept Internal control is one of the basic pillars of the oversight system of any organization to assist it to evaluate management risks. It is considered an objective and independent business of a consultative nature designed to increase the value of an organization, enhance its operations, and achieve its goals. External parties can provide internal control services to ensure high quality of this service. Internal control is a series of procedures and processes conducted by the Board, management, and employees to provide a reasonable confirmation with regard to achieving the following objectives: f Effectiveness and efficiency of operations. f Reliability of financial reports. f Compliance with the related laws and instructions.

SASCO Roles and Responsibilities f Everyone in SASCO is responsible for part of internal control. However, the Board is the body responsible for SASCO internal control system. The CEO is the person finally responsible for the oversight system. f A number of parties provides internal control, each of whom has important responsibilities. The Board (either directly or through its committees), management, internal auditors, and other staff all submit important contributions to an effective internal control system.

Most Important Tools and Methods used in Annual Audit of Internal Control Effectiveness Departmentsâ&#x20AC;&#x2122; Monthly Report includes Key Performance Indicators (KPIs) 1. An analysis to compare budget with the actual results and reasons for deviations. 2. Ratio of sites achieving the budget. 3. Fuel interruptions. 4. Service-related customer complaints. 5. Surprise field visits. 6. Operation licenses. 7. Daily deposits. 8. Staff training. 9. Correct the views of products. 10. Supplies interruptions. 11. Develop supply plan. 12. Design and implement periodic maintenance program. 13. Achieve expansion targets -numerically. 14. Achieve financial performance targets. 15. Develop a marketing plan. 16. New products and alliances 17. Attraction and appointment. 18. Security and safety. 19. Inventory and property monitor.

Periodic Audit of Financial and Accounting Procedures and Financial Reporting In coordination with the external auditor, SASCO periodically ensures the integrity of the financial and accounting procedures and that they are consistent with the widely accepted professional standards and the related laws governing financial and accounting practices and reporting.

Internal Audit SASCO management contracted a specialized office to carry out the internal audit based on risk assessment. SASCO works with the Internal Audit Department to develop a risk-based plan in coordination with the Audit Committee, SASCO management, and department officials. Based on this plan, an action internal audit plan was developed. The plan aims to describe how to deal with these risks and determine how and when their consequences will be avoided or reduced. The internal (risk-based) audit plan included the following objectives: f Evaluate the effectiveness and efficiency of the internal control system and processes. f Understand policies and procedures. f Ensure compliance with laws and regulations as well as SASCO contracts and policies. f Ensure the preservation of SASCO assets. f Ensure the reliability and integrity of financial and operational information. f Compare the current SASCO practices with the best practices followed. f Identify the opportunities available to enhance the internal control of activities and operations. All (field and periodic) audit reports filed to the Board, senior management, and various departments included observations and weaknesses of internal control procedures in the audited departments or operations along with their potential impact on the integrity of SASCO business processes and transactions with a focus on highvalue activities because of the increasing volume of risks. The reports also focused on the effectiveness of internal control system, since a weak control system increases the prospects of loss and the volume of risk, while an effective control system reduces the probability of such risks. In addition, every report included all recommendations on how to deal with these observations to raise the level of internal control procedures. The most important focus points in internal audit reports included the following: f Ensure that the department plans are consistent with the overall SASCO objectives. f Verify that fixed assets represent actual values owned by SASCO. f Ensure the provision of the necessary and adequate resources and skills to support business. f Ensure that the IT facilities and services both support SASCO

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strategic objectives and preserve its competitive features.

Following are the most important recommendations raised by the

f Follow up inventory mechanism and the failure of current automated software.

Audit Committee: 1. Disclose the investment portfolios opened in the note of unrealized

f Ensure scheduling of operations to guarantee sufficient quantities of stock.

loss from the re-evaluation of investments in the financial position statement.

f Ensure that the available cash covers the continuity of planned operations.

2. Work towards collection of the amounts due for SASCO. 3. Enforce the internal control systems in SASCO Palm Stores.

f Announce SASCO bylaws, instructions, and policies conspicuously.

4. Consider the feasibility to convert current investments to available-

f Check the training of current employees to perform multiple tasks.

for-sale investments.

f Create

5. Revise the constituent appropriations to ensure their efficiency.

periodic/preventative

maintenance

programs

for

equipment and vehicles.

6. Extend the term of SASCO Zakat Advisor.

f Follow up expiry dates of operational licenses periodically.

7. Apply the International Accounting Standards (IAS) by the Finance

f Check security and safety procedures.

Department and hire a consultant if required.

f Ensure the availability of financial analysis of the cash flow

8. The need to provide functional competencies to cope up with the

statement to make adequate financial and administrative

progress witnessed by SASCO.

decisions.

9. The need for SASCO to cope up with the technological progress and

f Avoid supply stoppage to the minimum.

the use of technology and all its applications.

f Ensure the existence of registered contracts for all tenants

10. The importance of considering and following up the observations

compatible with the conditions and objectives of SASCO plan.

of Internal Audit Department, particularly the specific ones having relation to enforcing the internal control system.

Procedures undertaken by the Audit Committee

On its part, SASCO works to close off all recommendations by the

In the light of the internal audit risk assessment and the

Audit Committee in a timely manner.

recommendations raised by the Audit Committee regarding the development of SASCO internal control system and given the contents

Conflict with Audit Committeeâ&#x20AC;&#x2122;s Recommendations

of chartered auditorâ&#x20AC;&#x2122;s letter to the management, SASCO is going to

There are no Audit Committee recommendations in conflict with

develop its internal control systems and risk management. Based

the Boardâ&#x20AC;&#x2122;s Resolutions or the Board refused to take into account

on the reports received, the Committee did not note any important

with respect to the appointment, dismissal, fee determination or

observations affecting the effectiveness of SASCO internal control

performance assessment of the internal auditor.

system.

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123

Corporate Governance

124

Corporate Governance Regulation and Adopted Procedures During the fiscal year 2009, SASCO developed “Corporate Governance

No. 8-16-2017 dated 16/05/1438 AH, corresponding to February 13th,

Regulation”, which includes the rules, standards, and controls of

2017 pursuant to Companies Law passed by Royal Decree No. M/3

managing SASCO to enhance and ensure the application of the best

dated 18/01/1437. SASCO Board approve the updated Corporate

governance practices towards the protection of shareholders and

Governance Regulations on 1 August 2017.

stakeholders’ rights. In 2013, SASCO developed the said Regulation in accordance with the Corporate Governance Regulations issued by the

Application of Governance Regulation

CMA.

SASCO applies all articles of its Corporate Governance Regulations

In 2017, SASCO developed the said Regulation in accordance with the

issued by the CMA Board except the following:

Corporate Governance Regulations issued by the CMA under Decision No.

Regulation Article No.

Forty-one

Fifty-four

Seventy

Seventy-four

Paragraph

Article/Paragraph Text

Reasons of Non-Application

A Guiding

The Board shall develop, based on the proposal of the Nomination Committee, the necessary mechanisms to annually assess the performance of the Board, its members and committees and the Executive Management using key performance indicators linked to the extent to which the strategic objectives Guiding Article: the mechanism has been of the Company have been achieved, the developed and it is under approval. quality of the risk management and the efficiency of the internal control systems, among others, provided that weaknesses and strengths shall be identified and a solution shall be proposed for the same in the best interests of the Company.

B Guiding

Guiding Article: The Chairman of the Audit Committee in the current session ending on 29 June 2021 has passed 9 years in SASCO. This is not consistent with The Chairman of the Audit Committee shall independence and SASCO will address be an independent director. the matter in the future according to Capital Market Authority Resolution of compulsory independence as of the Board’s session following 1 January 2019.

Guiding

The Company’s Board shall, by resolution therefrom, form a committee to be named the “Risk Management Committee.” Guiding Article: the formation of the Chairman and majority of its members shall committee shall be subsequently be Non-Executive Directors. The members of considered. that committee shall possess an adequate level of knowledge in risk management and finance.

a, b

a) For the purposes of implementing the approved internal control system, the Company shall establish units or departments for the assessment and management of risks and for internal auditing. b) The Company may utilize external entities to perform the duties and competencies of the units or departments of risk assessments and management and internal control without prejudice to the Company’s responsibility for those duties and competencies.

The Internal Audit Department is already existing. It has been assigned with carrying out risk management in consistency with the Company’s contracting with an external office to conduct the same.

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125

No.

126

Regulation Article No.

Eighty-five

Eighty-seven

Eighty-eight

Ninety-five

Paragraph

Article/Paragraph Text

Reasons of Non-Application

1, 2 and 3 Guiding

The Company shall establish programs for developing and encouraging the participation and performance of the Company’s employees. The programs shall particularly include the following: 1) Forming committees or holding specialized workshops to consider the opinions of the Company’s employees and discuss the issues Guiding Article: it shall be subsequently and topics that are subject to important considered. decisions; 2) Establishing a scheme for granting Company shares or a percentage of the Company profits and pension programs for employees, and setting up an independent fund for such programs; and 3) Establishing social organizations for the benefit of the Company’s employees.

Guiding

The Ordinary General Assembly, based on the Board’s recommendation, shall establish a policy that guarantees a balance between Guiding Article: it shall be subsequently its objectives and those of the community considered. for the purposes of developing the social and economic conditions of the community.

1, 2, 3 and 4 Guiding

The Board shall establish programs and determine the necessary methods for proposing social work initiatives by the Company, which include: 1) Establishing measurement indicators that link the Company’s performance with its social initiatives and comparing it with other companies that engage in similar business; 2) Disclosing the objectives of the Company’s Guiding Article: it shall be subsequently social responsibility to its employees and considered. raising their awareness and knowledge of social responsibility; 3) Disclosing plans for achieving social responsibility in the periodical reports on the activities of the Company; and 4) Developing awareness programs to the community to familiarize them with the Company’s social responsibility.

Guiding

If the Board forms a corporate governance committee, it shall assign to it the competences stipulated in Article (94) of these Regulations (Corporate Governance Guiding Article: the formation of the Regulations). Such committee shall oversee committee shall be subsequently any matters relating to the implementation considered. of governance and shall provide the Board with its reports and recommendations at least annually.

Note With reference to paragraph 9 of Article (22) of the Corporate Governance Regulations issued by the CMA, which stipulates “Among the main functions and competencies of the Board are the following: preparing the Company’s interim and annual financial statements and approving them before publishing them; and whereas paragraph (a/1) of Article (55) of the Corporate Governance Regulations states “the duties of the Audit Committee shall particularly include the following: analyzing the Company’s interim and annual financial statements before presenting them to the Board and providing its opinion and recommendations thereon to ensure their integrity, fairness and transparency”; the Board adopted a mechanism to approve the interim financial statements. The Audit Committee has the mandate to authorize interim financial statements and approve publication thereof on Tadawul website, provided these interim financial statements be approved and signed by the Managing Director. After this approval, they shall be sent to the Board members to review in the meeting following the announced interim financial period.

Conclusion In conclusion, the Chairman, Board members and the executive management extend their thanks and appreciation to the shareholders of the Saudi Automotive Services Company (SASCO), its employees and all those who contributed to achieving its objectives and vision. They also extend heartfelt thanks and appreciation to the Custodian of the Two Holy Mosques, King Salman bin Abdul Aziz, may Allah protect him, His Highness the Crown Prince, His Royal Highness Prince Mohammed bin Salman bin Abdul Aziz, Vice President of the Council of Ministers, Minister of Defence and Chairman of the Council of Economic and Development Affairs, may Allah protect him, for all great efforts and unlimited assistance to develop this country, support its economy, and stimulate the business environment. The Board of Directors is looking forward to the participation of its shareholders in the General Assembly, and welcomes any suggestions and views enhancing the Company’s business performance. May Allah Grant Us All Success, Board of Directors

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127

Financial Statements

128

Consolidated Accountants RSM

Dr. Abdelgadir Bannaga & Partners Company

Saudi Automotive Services Company (SASCO) (Saudi Joint Stock Company) Consolidated Financial Statements & Independent Auditorsâ&#x20AC;&#x2122; Report For the year ending on 31 December 2018

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Consolidated Accountants RSM

Dr. Abdelgadir Bannaga & Partners Company Orouba Road Olaya District, Building No. 3193, 1st Floor Tax Number: 300003 34 30001034 P.O. Box Riyadh 12333 – 8235 Tel: 0164169361 Fax: 0184169349 Kingdom of Saudi Arabia www.rsmksa.com Independent Auditors’ Report Messrs. / Shareholders of the Saudi Automotive Services Company (SASCO), Saudi Joint Stock Company, the highly regarded May Allah’s Peace, Mercy and Blessings be upon you, Opinion We audited the consolidated financial statements of the Saudi Automotive Services Company (SASCO) “a Saudi joint-stock company” (the “Company”) and its subsidiaries, together referred to as (the “Group”). They include the consolidated financial position statement as at 31 December 2018, statement of profit or loss and other consolidated comprehensive income, changes in consolidated shareholders’ equity, consolidated cash flows for the year ending on that date, notes attached to consolidated financial statements and brief of important accounting policies. In our opinion, the attached consolidated financial statements fairly demonstrate, from all major aspects, the consolidated financial position of Saudi Automotive Services Company (SASCO) “Group” as at 31 December 2018, its financial performance and its consolidated cash flows for the year ending on that date according to the International Financial Reporting Standards (IFRS) approved in the Kingdom of Saudi Arabia and other standards issued by Saudi Organization for Certified Public Accountants. Grounds of Opinion Our audit was conducted according to the International Financial Reporting Standards (IFRS) approved in the Kingdom of Saudi Arabia. Our responsibility according to the IFRS is detailed in this report in the paragraph titled “Auditor’s Responsibility for auditing consolidated financial statements”. We are independent from the Group pursuant to the Professional Ethics approved in the Kingdom of Saudi Arabia relevant to our audit of these consolidated financial statements. We also met the requirements of other professional ethics. We believe that audit grounds we obtained are sufficient to constitute a basis for our opinion about the audit. Core Audit Issues As per our professional assessment, core audit issues refer to such matters that had utmost importance in our audit of financial statements of the current year. Such matters have been addressed in the context of our audit of financial statements as a whole and in developing our opinion. We do not present a separate opinion about such matters. Following is a description of each separate core audit issue and how it is addressed:

130

Core Audit Issue

How it is addressed in auditing

Adoption of the International Financial Reporting Standard No. (9) “Financial Instruments” and the International Financial Reporting Standard No. (15) “ Revenue from Contracts with Customers” As of 1 January 2018, the Group must adopt the International Financial Reporting Standard No. (9) “Financial Instruments” and the International Financial Reporting Standard No. (15) “ Revenue from Contracts with Customers” We have considered this a core audit issue because the adoption of the International Financial Reporting Standard No. (9) “Financial Instruments” and the International Financial Reporting Standard No. (15) “ Revenue from Contracts with Customers” has an important impact on consolidated financial statements thanks of the judgments and estimates used in applying the future credit loss model.

With respect to adopting the International Financial Reporting Standard No. (9) “Financial Instruments” and the International Financial Reporting Standard No. (15) “ Revenue from Contracts with Customers”, we took the following steps: • We assessed the adequacy of adopted accounting policies. • We assessed action papers related to technical matters, detailed application plans and differences according to the accounting standards widely accepted in Saudi Arabia and issued by the Saudi Organization for Certified Public Accountants which the Group identified. • We compared the expected credit loss model developed by the Management as required by the International Financial Reporting Standard No. (9) “Financial Instruments”, examined the reasonableness of methodology compared to accepted best practices and verified the accounting accuracy of the model.

Consolidated Accountants RSM

Dr. Abdelgadir Bannaga & Partners Company How it is addressed in auditing

Core Audit Issue Adoption of the International Financial Reporting Standard No. (9) “Financial Instruments” and the International Financial Reporting Standard No. (15) “ Revenue from Contracts with Customers” (Continued) Please refer to Note No. 7 on consolidated financial statements for more details about the impact of adoption and reclassification resulting from applying the International Financial Reporting Standard No. (9) “Financial Instruments” and the International Financial Reporting Standard No. (15) “ Revenue from Contracts with Customers”.

•

Revenue Realization Revenues are a major and determinant factor of the Group’s performance and profits. Here arises a risk when revenues are recorded higher than their real value to increase profits. Due to the importance of the amount and the risk of recording revenues higher than their real values, we see that realization of revenues are an important aspect of audit as there is a risk that revenues may be false due to the Management’s negligence of controls and that the time and amount of revenues recorded in the financial period may have a substantial impact on the financial performance.

With respect to revenues, we took the following steps: • In our audit, we paid attention to what extent the accounting policies are consistent with generating revenues in favor of the Group and assessing to what extent such policies are consistent with the IFRS. • We examined the internal control procedures with respect to revenue realization and studying the procedures taken by the Group for purposes of completing the factors of revenue realization. • We conducted a substantive analysis on important revenue flows through developing expectations based on sizes and rates. We also got explanations of major differences. • We examined a sample of recorded revenue transactions and compared them to supporting documents to verify the registered revenues.

Fair value investments through consolidated other comprehensive income statement SASCO possesses fair value investments through items of consolidated other comprehensive income statement with a total value of SR 103,5 million as at 31 December 2018. The fair value of investments, through consolidated other comprehensive income statement, not circulating in an active market, is determined through applying assessment methods which often include practicing discretions by the Management and the use of assumptions and estimates. The state of uncertainty of investments, not circulating in an active market, is estimated using the techniques of the following internal models: • Important observable assessment inputs (i.e. investments classified as per Level 2). • Important unobservable assessment inputs (i.e. investments classified as per Level 3). Investments at fair value are assessed through the items of consolidated other comprehensive income statement at fair value with registering profit or loss compared to difference of fair value within items of consolidated other comprehensive income statement to be added as part of reassessing investments at fair value through consolidated other comprehensive income statement with shareholders’ equity. Assessment of investments at fair value was considered in 2 and 3 Levels as a core audit issue due to the complexity of assessing these financial instruments and the importance of judgments and estimates conducted by the Management.

With respect to fair value investments through the consolidated other comprehensive income statement, we took the following steps: • Verify the calculation of difference in the fair value and adding it to the items of consolidated other comprehensive income as well as adding it to the net change of fair value investments through consolidated other comprehensive income. • Assess the sufficiency of the Group’s disclosures towards these investments. • We assessed the design and application of Management’s control over the investments classified through consolidated other comprehensive income and not traded in an active market. We also tested the efficiency of major procedures of these transactions. • We evaluated the methodology and consistency of assessment methods and inputs used in determining the value of fair value investments through consolidated other comprehensive income. • We tested the samples of operations used in assessing investments through consolidated other comprehensive income not traded in an active market. As part of audit procedures, we assessed major inputs and assumptions used in determining values such as the anticipated cash flows, risk free rates, credit margins through comparing them with external data.

•

We selected a sample of settlements (including calculation and registration) made to different balances and transactions in order to be in consistency with the International Financial Reporting Standard No. (9) “Financial Instruments” and the International Financial Reporting Standard No. (15) “ Revenue from Contracts with Customers”. We assessed the consistency of disclosures related to the impact of applying the International Financial Reporting Standard No. (9) “Financial Instruments” and the International Financial Reporting Standard No. (15) “Revenue from Contracts with Customers”.

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Consolidated Accountants RSM

Dr. Abdelgadir Bannaga & Partners Company

Other Information The Management is responsible for other information, including information stated in the Group’s Annual Report, but not including the consolidated financial statements and our audit report about them. It is expected to have access to the annual report after the date of this report. Our opinion does not cover the consolidated financial statements of other information and we have no confirmation about them. When it comes to our audit of consolidated financial statements, our responsibility is to read the other information stated above when made accessible. When doing so, we taken into account whether such information is fundamentally inconsistent with the consolidated financial statements or our knowledge which we obtained during audit or it appears that it contains significant errors. When we read the annual report and find significant errors in such information, we are required to report these facts to Governance officers. Management’s & Governance Officers’ Responsibility for Consolidated Financial Statements Management is responsible for developing and fairly presenting consolidated financial statements as per the IFRS adopted in Saudi Arabia, the other standards issued by Saudi Organization for Certified Public Accountants, the provisions of Companies Law and the Company’s Articles of Association. It is also responsible for internal control systems that are deemed necessary for developing consolidated financial statements free from significant errors, whether such errors are arising from fraud or omission. The Management’s responsibility for developing consolidated financial statements includes an assessment of the Group’s ability to continue business, disclosure, as the case may be, of matters related to Group’s continuity and use of continuation basis in accounting unless the Management wishes to dissolve the Group or cease its operations or no logical alternative is available. Governance officers are responsible for supervising the development of financial reports. Auditor’s Responsibility We aim to get a reasonable confirmation whether the consolidated financial statements as a whole are free from significant errors - whether such errors are arising from fraud or omission – and to issue the audit report that includes our opinion about such statements. A reasonable confirmation is a high level of confirmation. Our audit, which was conducted according to the IFRS adopted in Saudi Arabia, does not always guarantee the detection of significant errors, if any. Errors may arise out of fraud or omission. They are deemed significant if, individually or collectively, reasonably affecting the economic decisions of the users of consolidated financial statements. As part of the audit process, undertaken according to the IFRS adopted in Saudi Arabia, we practice professional judgment and apply the principle of professional scepticism in all aspects of audit in addition to the following: •

• • •

•

132

Identify and assess the risks of significant errors of consolidated financial statements, whether arising from fraud or omission, design and implement audit procedures responding to such risks and obtain sufficient evidences that provide a ground for our opinion. The risk of failing to detect significant errors arising out of fraud is higher than that arising out of omission. This is because fraud may include collusion or counterfeiting, deliberate deletion or misstatements, or intrusion of internal audit systems. Understand audit-related internal control systems for the purpose of developing proper audit procedures according to the circumstances and not for raising an opinion about the efficiency of corporate internal control systems. Assess the consistency of applicable accounting policies and the reasonability of relevant Management-prepared accounting estimates and notes. Obtain a conclusion as to the consistency of Management’s use of the principle of continuity in accounting based on audit evidences we obtained. We work to know if there is a significant uncertainty in relation to events or circumstances that may raise big doubts about the Group’s ability to continue to run business as a continuous establishment. If it comes to our knowledge that there exists a significant uncertainty, we are required to attract attention in our audit report to the relevant notes outlined in the consolidated financial statements. If disclosure of such information is not sufficient, we will amend our opinion. Our deductions rely on audit evidences obtained until the date of our audit report. However, future events or circumstances may cause company’s discontinuity to run business as a continuous establishment. Assess general presentation as well as structure and content of consolidated financial statements, including notes, and whether consolidated financial statements represent transactions and events in a manner that achieves fair presentation.

Consolidated Accountants RSM

Dr. Abdelgadir Bannaga & Partners Company

We communicated with governance officers with respect to planned audit scope, timing and important notes, including any internal control system failure identified in our audit. We also provided them with a statement that we complied with independence-related ethical requirements, made them familiar with all matters that may reasonably affect our independence and present relevant commitment parameters if necessary. The issues reported to governance officers include such issues that had utmost importance when auditing consolidated financial statements of the current year. Therefore, they are considered core audit issues. We are going to highlight such issues in our report unless this is prohibited by a disclosure law or regulation. However, in very rare circumstances, we decide not to report the same as it is reasonably expected that negative consequences would overcome the public interest of reporting.

Allied Accountants Dr. Abdelgadir Bannaga & Partners Company

Mohammed bin Farhan bin Nadir License No. (435) Riyadh, Kingdom of Saudi Arabia 12 Rajab 1440 AH, corresponding to 19 March 2019

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133

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018 ________________________________________________________________________________________________________________________________

Note

31 Dec. 2018 (SR)

31 Dec. 2017 (SR) (Amended - Note 7)

31 Jan. 2017 (SR) (Amended - Note 7)

1,087,947,299 11,032,084 40,011,413 103,563,396 -

(SR) 1,068,977,536 10,064,600 25,000,017 65,637,302 -

873,569,463 8,599,160 150,783,566 93,406,731 24,273,438

1,242,554,192

1,169,679,455

1,150,632,358

51,193,500 226,785,816 5,973,368 74,235,012

36,337,406 172,068,045 31,303,020 97,275,330

27,323,999 137,075,254 31,423,169 117,681,676

Assets Non-current assets Net properties and equipment Net intangible assets Capital works under execution Fair value investments through other comprehensive consolidated income Recorded cash

8 9 10 11

Total non-current assets Current assets Net inventory Net receivables, advance payments, and other receivables Fair value investments through profit or loss Cash and balances with banks

13 12 14 15

Total current assets Total assets

358,187,696

336,983,801

313,504,098

1,600,741,888

1,506,663,256

1,464,136,456

600,000,000 44,397,367 31,917,651 75,547,896

540,000,000 40,852,236 88,811,473 59,446,802

540,000,000 37,870,221 63,808,355 87,216,231

751,862,914

729,110,511

728,894,807

377,385,669 12,613,431

351,039,850 11,386,371

335,767,608 9,751,412

389,999,100

362,426,221

345,519,020

115,000,000 100,688,892 39,715,364 200,297,924 3,177,694

95,000,000 109,479,080 38,718,206 168,102,768 3,826,470

44,594,800 134,043,817 38,823,795 167,850,717 4,409,500

458,879,874

415,126,524

389,722,629

Shareholdersâ&#x20AC;&#x2122; equity and liabilities Capital Statutory reserve Retained earnings Reserve for reassessing fair value investments through other comprehensive income

1 20 11

Total Shareholdersâ&#x20AC;&#x2122; equity Non-current liabilities Financing of resale for profit and long-term loans Commitments for employee benefit plan

Total non-current liabilities Current liabilities Financing of resale for profit and short-term loans Current portion of financing of resale for profit and long-term loans Dividends Payable to shareholders Payables and other creditors Provision for Zakah

Total current liabilities

16 16 18 17 19

Total liabilities

848,878,974

777,552,745

735,241,649

Total shareholdersâ&#x20AC;&#x2122; equity and liabilities

1,600,741,888

1,506,663,256

1,464,136,456

*Notes from No. 1 to 31 constitute an integral part of these consolidated financial statements.

134

Note Revenues Costs of revenues

Total Profit Sale and marketing expenses General and administrative expenses

2018 (SR)

2017 (SR) (Amended)

2,056,081,002 (1,974,099,397)

1,212,329,807 (1,132,838,480)

81,981,605

79,491,327

(2,189,061) (42,109,042)

(3,799,225) (43,776,360)

37,683,502 (8,070,599) 5,635,089

31,915,742 (5,631,383) 3,603,408 (990,140) 369,991 2,512,515

Net year profit from core operations Financing costs Profit distributions of fair value investments through other comprehensive income Unrealized losses from fair value investments through profit or loss Realized profit from fair value investments through profit or loss Profit distributions of fair value investments through profit or loss Other revenues

(582,102) 330,099 1,362,191 1,868,133

Net year profit before Zakah Zakah

38,226,313 (2,775,004)

31,780,133 (3,795,000)

35,451,309

27,985,133

(16,101,094)

(27,769,429)

51,552,403

215,704

Actual dividend per share from core operations

0,63

0,53

Actual year dividend per share

0,59

0,47

Net annual profit

Other comprehensive income Items to be subsequently reclassified into income statement Net change in fair value of fair value investments through other comprehensive income

Total year comprehensive income

Share profitability

*Notes from No. 1 to 31 constitute an integral part of these consolidated financial statements.

Annual Report 2018

135

136 40,852,236 3,545,131 44,397,367

540,000,000 540,000,000 540,000,000 540,000,000 540,000,000 60,000,000 540,000,000

Balance on 1 Jan. 2017 as amended Net annual profit Transfer to statutory reserve Other comprehensive income (amended)

Balance on 31 Dec. 2017

Balance on 1 Jan. 2018 as previously disclosed Amendments of previous years as per International Financial Reporting Standard No. 8

Balance after amendment Impact of adopting the International Financial Reporting Standard No. 9

Balance on 1 Jan. 2018 as amended Items changed to increase capital Profit distributions Remuneration for Board Directors Net annual profit Transfer to statutory reserve Other comprehensive income

Balance on 31 Dec. 2018

* Notes from No. 1 to 31 constitute an integral part of these consolidated financial statements

40,852,236 -

40,852,236

37,870,221 2,982,015 -

37,870,221 -

540,000,000 -

Balance after amendment Impact of adopting the International Financial Reporting Standard No. 9

37,870,221 -

540,000,000 -

Statutory reserve (SR)

Balance on 1 Jan. 2017 as previously disclosed Amendments of previous years as per International Financial Reporting Standard No. 8

Capital (SR)

31,917,651

88,811,473 60,000,000 (27,000,000) (1,800,000) 35,451,309 (3,545,131) -

134,030,411 (45,218,938)

147,158,411 (13,128,000)

88,811,473

63,808,355 27,985,133 (2,982,015) -

107,192,281 (43,383,926)

120,320,281 (13,128,000)

Retained profits (SR)

75,547,869

59,446,802 16,101,094

55,485,941 3,960,861

55,485,941 -

59,446,802

87,216,231 (27,769,429)

84,254,721 2,961,510

84,254,721 -

Reserve for reassessing fair value investments through other comprehensive income (SR)

751,862,914

729,110,511 (27,000,000) (1,800,000) 35,451,309 16,101,094

770,368,588 (41,258,077)

783,496,588 (13,128,000)

729,110,511

728,894,807 27,985,133 (27,769,429)

769,317,223 (40,422,416)

782,445,223 (13,128,000)

Total (SR)

________________________________________________________________________________________________________________________________

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018

31 Dec. 2018 (SR)

31 Dec. 2017 (SR) (Amended)

35,451,309 44,721,127 1,731,997 2,088,752 1,695,870 582,102 (330,099) 3,054,183 2,775,004 (47,429)

27,985,133 44,096,294 1,165,222 4,096,683 177,491 990,140 (369,991) 140,826 2,835,680 3,795,000 (5,607)

84,902,871

91,722,812

Receivables, advance payments, and other assets Inventory Payables, accrued expenses and other liabilities Paid part of Zakah provision Paid part of commitments of employee benefit plan

(58,502,393) (14,856,094) 32,195,156 (3,423,780) (1,827,123)

(39,089,474) (9,190,898) 252,051 (4,378,030) (1,200,721)

Net cash available from operating activities

45,308,582

31,299,799

(190,330,099) 215,407,748 (21,825,000) (48,409,500) 21,611,979 (51,857,336) (2,699,481)

(500,000) 23,126,137

Cash flows from operating activities Net annual profit Amendments to settle net profit to net cash available from operating activities: Consumption of Property, plant and equipment Amortization of intangible assets Component of customs claims provision Component of provision for other receivables Component of provision for expected credit losses Unrealized losses from fair value investments through profit or loss Realized profit from fair value investments through profit or loss Closing of projects under execution Component of commitments for employee benefit plan Component of Zakah provision Profits of selling properties and equipment

Changes in operating assets and liabilities:

Cash flows from investment activities Cash paid to purchase fair value investments through profit or loss Sums collected from selling fair value investments through profit or loss Cash paid to purchase fair value investments through other comprehensive income Additions to properties and equipment Sums collected from sale of properties and equipment Additions to capital projects under construction Additions to intangible assets Net cash used for investment activities

(38,060,939) 717,151 (79,142,911)

(78,101,689)

(116,986,699)

37,555,631 (26,002,842) (1,800,000)

41,112,705 24,273,438 (105,589)

9,752,789

65,280,554

(32,040,318) 97,275,330 74,253,012

(20,406,346) 117,681,676 97,275,330

34,817,094

204,785,634 (27,769,429)

Cash flows from financing activities Net change in loans and profits for sale Registered cash Net change in shareholdersâ&#x20AC;&#x2122; entitlements Paid remuneration of board directors Net cash available from financing activities Net deficit in cash and balances with banks Cash and balances with banks at the beginning of year Cash and balances with banks at the end of year Non-cash transactions Items changed from projects under execution to properties and equipment Unrealized profit (loss) from reassessing fair value investments through other comprehensive income Items changed from properties and equipment to intangible assets

16,101,094 -

2,630,662

*Notes from No. 1 to 31 constitute an integral part of these consolidated financial statements.

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1. Composition & Business -

Saudi Automotive Services Company (SASCO) is a Saudi shareholding company established by the Ministerial Decree No. 563 dated 23/12/1402 H corresponding to 12/10/1982. It is headquartered in Riyadh under Commercial Register No. 1010054361 dated 28/07/1404 H corresponding to 30/4/1984.

SASCO mainly provides a variety of services which include car and passenger services through establishing central workshops for the highest level of maintenance and establishing car service stations. It also provides motels, restaurants, the import and sale of equipment, along with the provision of food, beverages, soft drinks and the raw materials required. It imports and trades in cars and all types of spare parts after obtaining the required licenses, implements all kinds of contacting with respect to constructing, managing, maintaining and operating residential and commercial buildings, undertakes contacting activities of car and equipment maintenance for individuals and corporations and contracts with institutions or corporations practicing similar business or merge with them or establishes subsidiaries possessed by SASCO or with third parties.

SASCO’s capital is SR 540,000,000 divided into 54,000,000 shares, each with a value of SAR 10. In 2018, the 12th Extraordinary General Assembly agreed on the recommendation of the Board of Directors to increase SASCO capital from SR 540,000,000 to SR 600,000,000 with a 11,11% increase through bonus shares. One free share shall be granted to each 9 shares of the owned shares in favor of shareholders possessing shares at the end of the trading day on which the 12th Extraordinary General Assembly was held. Capital increase shall be done through capitalizing SR 60 million of the retained profits. Thus, the number of shares shall be increased from 54,000,000 shares to 60,000,000, with the increase of 6,000,000 shares.

- - - - -

The Main Office of the Group is located at the following addressed: Saudi Automotive Services Company (SASCO) Riyadh – Malaz – Al Ahsa St,. Al Ahsa intersection with Omar bin Abdulaziz Kingdom of Saudi Arabia Consolidated financial statements as at 31 Dec. 2018 include the financial statements of the following subsidiaries and branches: Core Business

Name of Company

Ostool Al-Naqil Co.

Transporting oil products and commodities for payment pursuant to the Ministry of Transport’s License No. 010111046000 and license to expire on 5/3/1440H.

100%

Saudi Automobile & Touring Association, Ltd SATA

Subscribing in local and international car and motorcycle clubs and local and international associations and bodies interested in the affairs of cars and motorcycle. Issuing transit books (Trip Ticket) and international driving licenses Organizing, managing, maintaining and operating car and motorcycle racing tracks Organizing and participating in car and motorcycle racings and events

100%

Auto & Equipment Investment Co., Ltd

Establishing car and heavy equipment repair workshops as well as car and passenger service stations on the main roads between the cities of the Kingdom to offer fuel, oils and maintenance of cars and heavy equipment Establishing rest houses, motels and restaurants and offering food, beverages, soft drinks for passengers. Washing and lubricating cars and equipment Importing and selling equipment and tools Constructing roads and bridges

100%

- - -

- - - -

138

% of direct & indirect ownership

Al-Nakhla Al-Oula Co.

Undertaking general contracting (establishing, repairing, demolishing and rebuilding) for building, establishing, maintaining and operating residential and commercial buildings as well as road works.

100%

SASCO Palm Stores Co.

Import and sale of food, beverages, soft drinks and equipment

100%

SASCO Al Waha Co.

Hotels

100%

Zaiti Petroleum Services Company

Establishing, managing and operating fuel stations

100%

SASCO Franchise Co.

Manufacturing industries and their branches as per industrial licenses, business services, other services, trade and information technology.

100%

Attached consolidated financial statements include the accounts of the Group and the following subsidiaries and branches: No.

Commercial Register No.

Core Business

City

1018000425

SASCO branch

Riyadh

2050093628

SASCO branch

Dammam

4030254775

SASCO branch

1131030559

Zaiti branch

Buraidah

Jeddah

5850029530

Zaiti branch

Abha

5850064608

Zaiti branch

Abha

5850064609

Zaiti branch

Abha

1128010283

Zaiti branch

Unaizah

1011012857

Zaiti branch

Al Kharj

10.

2055025642

SASCO Palm Stores Co. branch

Al Jubail

11.

2050112261

SASCO Palm Stores Co. branch

Dammam

2. Grounds on which consolidated financial statements are developed 2-1 Statement of Compliance These consolidated financial statements were developed according to the International Financial Reporting Standards (IFRS) approved in the Kingdom of Saudi Arabia and other standards approved by Saudi Organization for Certified Public Accountants. According to the Saudi Capital Market Authority (CMA), options of using reassessment model of properties, machinery, equipment and intangible assets in IFRS No. 16 and IFRS No. 38 and option of using fair value model for real estate investments in IFRS No. 40 will not be available in the first three years as of the date of transformation beginning from 2017 till 2019 for listed companies.

2-2 Development of consolidated financial statements The attached consolidated financial statements were developed on the basis of historical costs according to maturity principle with the exception of investments held for sale at fair value through other comprehensive income at fair value and investments held for sale at fair value through profit or loss. Items of consolidated financial statements appear in Saudi Riyal (SR). It is the currency of operation and disclosure.

2-3 Use of estimates The development of consolidated financial statements according to IFRSâ&#x20AC;&#x2122;s approved in Saudi Arabia requires the Management to set judgments, estimates and assumptions that affect the application of accounting policies and disclosed amounts of assets, liabilities, revenues and expenses. These estimates and their related assumptions are based on previous experience and other factors believed to be reasonable in the current circumstances; which results constitute a basis for taking judgments related to the book value of assets and liabilities not easily made clear from their sources. Actual results may differ from these estimates. Estimates and their related assumptions are continuously audited. Amendments to accounting estimates are recognized with a future effect. Following are estimates and assumptions that are vulnerable to substantial risks that may lead to making a significant amendment to the book value of assets and liabilities in the subsequent fiscal years:

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a.) Depreciation of non-financial assets On the date of each financial position statement, the Group assesses the assets to find any evidence that these assets have incurred a depreciation. In case such evidence exists, the asset redeemable value is estimated. A redeemable value is the fair value of the asset minus selling cost or value of use, whichever higher. When assessing the used value, estimated future cash flows of an asset are deducted to the present value using a discount rate reflecting the current market assessments of time value of funds and risks determining the asset. When determining the fair value of the asset minus selling cost, the recent market dealings are taken into account. In case the redeemable value of an asset is estimated lower than the book value, the book value of asset is reduced to the redeemable value. Depreciation losses are directly recognized in the profit or loss statement. In case the depreciation loss is subsequently reflected in value, the asset book value is increased to the amended value of the redeemable value. However, only to the extent that the book value does not exceed the book value that would have been redeemable should there is no depreciation loss of asset book value in the previous years. Reverse of ddepreciation losses are directly recognized in the profit or loss statement.

b.) Measurement of fair value Fair value represents the value on which an asset is exchanged or an obligation is paid among parties having knowledge and desire to do so on fair dealing conditions. Company’s financial instruments are disclosed as per historical cost principle with the exception of financial assets recorded in fair value through profit or loss. The measure of a fair value is based on the assumption that the transaction of an asset selling or determination of an obligation takes place: • Through the main market of the asset or obligation; or • Through the most preferred market of the asset or obligation in case the main market is absent. The main market (most preferred market) must be available for the Company in the measurement date. A fair value of an asset or obligation is measured according to assumptions used by market participants when pricing the asset or obligation on the assumption that market parties act for achieving the best interests for themselves. With respect to non-financial assets, this measurement takes into consideration the market participants’ ability to generate economic benefits through using the asset to achieve the best interests or selling it to another market party to achieve the best interests. The Company uses assessment methods appropriate for circumstances. Such methods have sufficient data to measure the fair value; in that proper observable inputs are used instead of non-observable ones. All assets and obligations measured by fair value or their value is disclosed in financial statements are classified as per a hierarchy of fair value measurement levels below based on the minimum level of measurement input which is crucial for measuring the fair value as a whole. Used inputs are classified in fair value measurement methods as per the following hierarchy: Level One: prices declared (unamended) and tradable in active asset or obligation market similar to the one measured. Level Two: inputs that can be directly or indirectly observed or controlled for the asset or obligation other than declared prices listed in Level One. Level Three: inputs that are non-observable for the asset or obligation. The Company hires independent expert assessors, with recognized and relevant professional qualifications and experience in the location and type of assets under assessment, to measure the fair value of assets. The Company reviews the independent assessor’s report to evaluate the assumptions, employed assessment methods and the reasonability of assessment as a whole.

c.) Provisions Provisions are recognized when the Group has emerging (legal or implied) liabilities due to previous events. The payment of liabilities is possible and their value can be credibly measured. An amount recognized as a provision is the best estimation of the amount required to settle the current obligation on the date of report, taking into consideration risks and doubts about the obligation. When a provision is measured using the cash flows estimated for settling the current obligation, the book value shall be the current value of these flows. In case the redemption of some or all economic benefit required for settling a provision from a third party, the due amount shall be recognized as an asset in case it is certain to redeem the amount and that the value of due amount can be reliably measured.

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d.) Estimation of productive lifetime of properties, machinery, equipment and remaining value The Group’s Management determines the estimated productive lifetime of properties, machinery and equipment for the purpose of calculating depreciation. This estimation is made after taking into consideration the expected use of asset or actual prescription. The Management periodically checks the estimated productive lifetimes at least annually and the method of consumption to make sure that the method and consumption periods are consistent with the expected pattern of asset economic benefits.

e.) Assumptions of end-of-service benefit obligations End-of-service benefits represent liabilities that will be settled in the future and require the use of assumptions toward the expected liabilities. International Accounting Standard 19 “Employee Benefits” requires the Management to use more variable-related assumptions such as discount rates, rate of compensation increase, return on asset, mortality rates, operation turnover and costs of future healthcare. The Group leads an actuarial evaluation to calculate obligation. Changes in core assumptions may have a great impact on expected benefit liabilities and/or costs of periodic incurred employee benefits.

f.) Provision of stagnant and slow inventory The Group’s Management estimates the provision to reduce the value of inventory to the net verifiable value in case the cost of inventory is irredeemable or the inventory is damaged or wholly or partially vulnerable to inscription or if the selling price is less than the cost or any other factors causing a depreciation of redeemable value less than book value. Zakat Discretionary Zakat is an obligation on the Group according to the laws applicable by the Saudi General Authority for Zakat and Tax. It is set right and allocated to the profit or loss statement. Additional Zakat liabilities, if any, related to assessments of previous years, are calculated by the Authority in the year during which final assessments are issued.

3- Changes to important accounting policies With the exception of the below, the accounting policies applied to these consolidated financial statements are the same ones applied to financial statements of the previous year for the year ending on 31 December 2017. As at 1 January 2018, the Company applied the following standards: International Financial Reporting Standard No. (9): items of Group’s financial investments were reclassified (as indicated in Note No. 7) International Financial Reporting Standard No. (15): settlements to revenues have been made according to the concept of customer’s access to full control of service provided (as indicated in Note No. 7). The impact of applying these standards on Group’s applicable accounting policies:

3-1 International Financial Reporting Standard No. 9 – Financial Instruments (versions amended in 2009, 2010, 2013 and 2014) The International Financial Reporting Standard No. 9 classifies and measures financial assets, financial liabilities and some contracts of purchase or selling nonfinancial items. It replaces the International Reporting Standard No. 39 “Financial Instruments – Recognition and Measurement”. Following are the details of new important accounting principles and the nature of changes made to previous accounting principles:

3-1-1 Classification of financial assets IFRS No. 9 includes three main classification categories of financial assets: financial assets measured by amortized cost, financial assets measured by fair value through other comprehensive income, financial assets measured by fair value through profit or loss statement and consolidated other comprehensive income. This Standard excludes the current categories of International Accounting Standard No. 39, which are retained till date of maturity as well as loans and receivables and through other comprehensive income. As per IFRS No. 9, contract-embedded derivatives, in which the core instrument is financial assets within the standard scope, are not divided. Instead, mixed financial instrument is assessed as a whole for classification purposes.

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3-1-2 Measurement of financial assets The following accounting policies are applied to the subsequent measurement of financial assets: - Financial assets at fair value through profit or loss: subsequent measurement of these assets is made at fair value. Net profit and loss are recorded. They shall include any interest or income of profit distribution within profit or loss. - Financial assets at amortized cost: subsequent measurement of these assets is made at amortized cost using the actual interest method. Amortized cost is reduced by depreciation loss. Interest revenues, profits & loss of foreign currency exchange and deprecation are recorded in profits or loss. Any profit or loss is recorded in profits or loss. - Investments in debt instruments at fair value through other comprehensive income: subsequent measurement of these assets is made at fair value. Interest revenues calculated using the actual interest method, profits & loss of foreign currency exchange and deprecation are recorded in profits or loss. Other net profits and loss are recorded in other comprehensive income. When recording is stopped, profit and loss accumulating in comprehensive income are reclassified into profit or loss. - Investment in equity instruments at fair value through other comprehensive income: subsequent measurement of these assets is made at fair value. Profit distributions, deprecation profits & loss, profits & loss of foreign currency exchange are recorded in profits or loss unless profit distributions clearly represent the redemption of a part of investment cost. Other profits and loss are recorded in other comprehensive income and are not reclassified into profit or loss.

3-2-2 Depreciation The IFRS 9 replaces the incurred loss model of International Accounting Standard No. 39 with expected future credit loss model. This requires a major appreciation of how changes of economic factors affect the expected future credit loss model, which will be determined on the basis of weighted probability. The new depreciation model will be applied to financial assets measured by amortized cost or fair value through consolidated other comprehensive income with the exception of investments in equity instruments and also applied to contract assets. As per IFRS No. 9, loss appropriations will be measured according to one of the following principles: 1.) Credit loss expected throughout 12 months. Such loss arises from payment default events which are likely to occur within 12 months after the report date. 2.) Credit loss expected throughout the lifetime of a financial instrument. Such loss arises from all payment default events which occur throughout the expected lifetime of a financial instrument. As for credit loss expected throughout the lifetime, measurement is applied in case credit risks of financial assets largely increase on the report date since initial recognition thereof. Credit loss expected throughout 12 months in case these credit risks do not largely increase. An establishment may determine that credit risks do not largely increase if the instrument is subject to low credit risks at the report date. However, measurement of credit loss expected throughout the lifetime is always applied to commercial receivables and contract assets without any significant financing components. An establishment may choose to apply this policy to commercial receivables and contract assets without significant financing components.

3-1-4 Classification of Financial Liabilities IFRS No. 9 largely retains the current requirements of IAS No. 39 with the aim to classify financial liabilities. However, IAS No. 39 signifies that all changes to fair value of liabilities classified by fair value through statement of profit or loss and other comprehensive income are recognized in statement of profit or loss and other comprehensive income. According to IFRS No. 9, the change to fair value related changes in credit risks of liabilities is demonstrated in the statement of profit or loss and other comprehensive income, while the remaining amount of change in fair value is presented in the statement of profit or loss and other comprehensive income.

3-2-4 Hedge Accounting IFRS No. 9 presents a new hedge accounting model designed to closely cope up with how the establishment practices risk management activities when hedging against financial and non-financial risks.

3-1 IFRS No. 15 - Revenue from Contracts with Customers IFRS No. 15 establishes a comprehensive concept framework to determine the amount and timing of revenue recognition. This Standard replaces the guidelines for demonstrating current revenues. IFRS No. 18 includes revenues while IFRS No. 11 includes construction contracts and international explanation No. 13 “customer loyalty programs”. The Group records revenues when performing service in favor of customer and customer’s access to control of service provided as per the requirements of IFRS No. 15. Therefore, there is no significant impact from applying IFRS No. 15 “Revenue from Contracts with Customers” on recording the Group’s revenues.

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4- New Standards IFRS No. 16 – Lease Contracts IFRS No. 16 “Lease Contracts” (effective as of 1 January 2019) This Standard is effective for annual periods commencing from or after 1 January 2019. Early application is allowed. It has not been applied by the Group when developing these consolidated financial statements. IFRS No. 16 identifies the way a developer of consolidated financial statements according to the IFRS recognizes, measures, presents and discloses lease contracts. This Standard provides lessees with a single accounting model, which requires them to recognize assets and liabilities of all lease contracts unless the lease term is 12 months or less or if the asset is of a little value. While lessors continue to classify lease contracts as operating or financing lease contracts, the approach of IFRS No. 16 regarding lessor accounting did not significantly change from the previous one, namely IAS No. 17. It is not expected that the adoption of this Standard during subsequent periods will have a major impact on the Group’s financial statements.

5- Basics of Consolidation These consolidated financial statements include the consolidated financial position statement, the statement of profit or loss and other comprehensive income, consolidated shareholders’ equity change statement, consolidated cash flow statement, and notes complementing the consolidated financial statements of the Group. They include assets, liabilities and results of the Group and its subsidiaries’ business as indicated in Note No. 1. Subsidiaries are those companies controlled by the Group. The Group controls the company when it is entitled with different revenues due to participating in the company and its ability to affect these revenues through controlling the company. Subsidiaries are consolidated as of the date of Group’s acquisition over subsidiaries until ceasing to practice such control. The Group uses the purchasing method to account for gathering operations when transferring control to the group. Acquisition cost is measured by fair value of obtained assets. The increased cost of acquisition is registered in addition to the fair value of non-controlling equity in the net assets specified and acquired as reputation in the consolidated financial position statement. Non-controlling equity is measured by its share of Group’s net-controlled assets at the date of acquisition. The group presents share of profit or loss and net non-controlled assets as an independent item in the statement of profit or loss and other comprehensive income and within the shareholders’ equity in the statement of profit or loss and other comprehensive income. All unrealized transactions, balances, profits and losses arising from dealings among the Group’s companies. Subsidiaries’ accounting policies are amended when necessary to ensure they are consistent with the group’s policies. The Group and its subsidiaries develop their financial statements for the same reporting periods.

6- Summary of Major Accounting Policies Following is a summary of Group’s major accounting policies: Properties, machinery and equipment Properties, machinery and equipment appear in costs after entering accumulated amortizations. They include costs to expenses directly ascribed to acquisition of assets. When parts of one item of properties, machinery and equipment have different productive lives, they are counted as separate items (main components) of properties, machinery and equipment. Expenses of repair and maintenance are revenue expenses while improvement expenses are capital expenses. Amortizations are counted on the basis of their estimated productive life using the straight-line method. Sold or excluded assets and their accumulated amortization are deleted from accounts on the date of selling or exclusion. Following is the amortization percentage of main items of these assets: Statement

% Percentage

Buildings

2-3%

Furniture Cars and trucks

10% 7-20%

Machinery, equipment, trailers and transport mechanisms

10%

Communication devices and phones

25%

Computer and software

15%

Electrical devices

10%

Advertising boards Improvements to buildings

15% 4% or duration of lease contract, whichever less

Productive life and consumption method are periodically reviewed to make sure that method and period of consumption are consistent with the economic benefits expected from properties and equipment. During 2017, the Group selected the cost model to register properties, machinery and equipment according to CMA’s Resolution dated 16/01/1438 AH corresponding to 17 October 2016 binding listed shareholding companies to use the cost model.

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a.) Financial assets On the date of each financial position statement, values of financial assets are reviewed to know if there is something to indicate any depreciation. Financial assets are like receivables and assets that are individually assessed as not depreciating. They are assessed for depreciation on a collective basis. A substantive proof of depreciation of receivables portfolio may include the Groupâ&#x20AC;&#x2122;s previous experience with respect to payment collection and increase of late payments which may exceed the period of debt. It may also include remarkable changes in local and international economic conditions related to default of receivables. The listed value of a financial asset is directly reduced by the amount of depreciation loss for all financial assets with the exception of commercial receivables. A listed value is reduced through creating a provision account. When one of receivables are considered uncollectable, the amount of receivable and the corresponding amount are deleted in the provision account. Changes to the value listed in the provision account are recognized in the consolidated statement of profit or loss and other comprehensive income. When it comes to instruments of shareholdersâ&#x20AC;&#x2122; equity though other comprehensive income, the previously acknowledged losses of depreciation are not reflected in the consolidated statement of profit or loss and other comprehensive income. Any increase in fair value coming after a depreciation loss is directly recognized in the consolidated statement of change in shareholdersâ&#x20AC;&#x2122; equity.

a.) Non-financial assets On the date of each financial position statement, the Group reviews the listed values of its assets to find any evidence that these assets have incurred depreciation losses. In case such evidence exists, the asset redeemable value is estimated to determine the depreciation loss, if any. In case it is not possible to estimate the redeemable value of a certain asset, the Group estimates the redeemable value of cash generating unit to which the assets affiliates. When reasonable and fixed distribution bases are identified, joint assets are distributed to specific cash generating units or distributed to the smaller group of cash generating units for which it is possible to determine reasonable and fixed distribution bases. A redeemable value is the fair value of the asset minus selling cost or value of use, whichever higher. In case the redeemable value of an asset (cash generating unit) is estimated lower than the listed value, the listed value of asset (cash generating unit) is reduced to the redeemable value. Depreciation losses are directly recognized in the consolidated statement of profit or loss and other comprehensive income, unless the asset is reassessed, then the depreciation losses are recorded as a reduction from the reassessment provision.

Cancellation of Recognition The company cancels recognition of a financial asset only at the expiry of contractual rights related to receipt of cash flows from the financial asset, substantially the transfer of all ownership risks and benefits to another establishment. If the Group fails to transfer or chooses to substantially retain ownership risks and benefits and continuously control the transferred asset, the Group recognizes its retained share in the transferred asset and related liabilities within limits of amounts expected to be paid. In case all ownership risks and benefits of a transferred asset are substantially retained by the Group, it continues to recognize the financial asset.

Financial Instruments Financial assets and liabilities are recognized when the Group becomes a party to the contractual provisions of these instruments. Financial assets and liabilities are initially assessed by fair value. Costs of transaction directly related to purchasing or issuing financial assets and liabilities (other than financial assets and liabilities with fair value through consolidated statement of profit or loss and other comprehensive income) are added to the fair value of financial assets and liabilities or deducted from the same, when necessary, at initial recognition. Costs of transaction directly related to purchasing financial assets and liabilities, which are measured by fair value through consolidated statement of profit or loss and other comprehensive income, are directly recognized in the consolidated statement of profit or loss and other comprehensive income.

First: Financial Assets Financial assets are classified into the following categories: financial assets at fair value through consolidated statement of profit or loss and other comprehensive income, financial assets through other comprehensive income and loans and receivables. Classification depends on the nature and objective of financial assets and is determined at the time of initial recognition. Recognition of all financial asset sale and purchase operations is conducted by normal means on the basis of dealing date. Operations of sale or purchase by normal means are purchases and sales of financial assets requiring the delivery of assets within definite time framework pursuant to regulations or market norms.

144

a.) Financial Assets Determined at Fair Value through Profit or Loss Financial assets retained for trading are classified through the consolidated statement of profit or loss when they are retained for trading purposes or selected to be so classified. Financial assets retained for trading are classified if they: - Are acquired mainly for being sold in the near future. - Represent a part of well-known financial instruments portfolio run by the Group and includes a real pattern of a financial instrument that achieves profits on the short term. - Represent a financial derivative but not classified or active as a hedging instrument. Financial assets not retained for trading can be classified as financial assets determined at fair value through statement of profit or loss and other comprehensive income at initial registration in the following cases: - Such classification cancels or largely reduces any inconsistent measurement or calculation that may result unless classification is done this way. - A financial asset represents a part of a set of financial assets or liabilities or both, which are run and their performance is assessed on fair value basis as per the Groupâ&#x20AC;&#x2122;s risk management or documented investment strategy. Information about the set of financial assets or liabilities is internally obtained on this basis. - The financial asset represents a part of a contract that contains a derivative including one or more, and that IAS No. 39 related to financial instruments allows a turnkey compound contract to be classified as financial assets determined at fair value through consolidated statement of profit or loss and other comprehensive income. Financial assets determined by fair value through statement of profit or loss and other comprehensive income appear with their fair value. Any profit or loss resulting from reassessing through statement of profit or loss and other comprehensive income is recognized. Net profit or loss includes any profit distributions or interest due from the financial asset and included in the consolidated statement of profit or loss and other comprehensive income.

b.) Financial Assets Determined by Fair Value through other comprehensive income statement The Groupâ&#x20AC;&#x2122;s owned listed shares â&#x20AC;&#x201C; circulated in an active financial market as financial assets â&#x20AC;&#x201C; are classified through other comprehensive income and included at fair value. The Group also possesses investments in unlisted shares not traded in active markets but so classified as financial assets through other comprehensive income and registered at fair value as Management sees it is possible to measure their fair value in an authentic manner. Profits and losses arising out of change in fair value are included within other comprehensive income items, which are added to the item of accumulated changes in fair value of investments within equity with the exception of depreciation losses. Such depreciation losses are included in the statement of profit or loss and other comprehensive income in case of excluding investment or there is a depreciation in its value. Profits or losses resulting from previous assessment and recorded in the reserve for reassessing investments are included in the other comprehensive income statement. Any revenues from distribution of profits investments through other comprehensive income are recognized when the Group has an emerging right to receive payments for profits of these investments.

c.) Receivables Receivables are underivative financial assets of fixed or identifiable payments, not listed in any active market. Receivables, including commercial and other receivables, bank balances and cash with amortized cost are measured using the actual interest method without any loss or depreciation, which is determined in profits or losses. Interest revenues are identified by applying the actual interest rate, with the exception of short-term receivables when the impact of deduction is not significant.

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Second: Financial Liabilities Financial liabilities (including loans and receivables) are initially and subsequently measured by amortized cost using actual interest method. The Group ceases to recognize financial liabilities when an obligation is complied with, canceled or terminated. Difference between book value of excluded financial liabilities and paid amount is recorded in the consolidated statement of profit or loss and other comprehensive income.

Method of Actual Interest Rate The method of actual interest rate is a means to calculate the amortized cost of debt instrument and distribute revenues of interests on the relevant year. An actual interest rate is the one that exactly discounts estimated future cash payments (including all fees and paid or received points, that constitute an integral part of actual interest rate, transaction costs, installments or other discounts) through the expected life of debt instrument or a shorter period – when necessary – to net book value at initial recognition.

Cash and balances with banks Cash and balances with banks include balances with banks, resales for profit and other high liquidity investments transferrable into known cash amounts and payable within three months or less as of the date of purchase. The Group has long-term financial obligations for which cash amounts have been credited. Such amounts are classified as cash recorded in non-current assets.

Receivables Commercial receivables appear in the original amount of the invoice after deducting provisions by doubtedly-collected debts. A provision of expected credit losses is formed in case there is a substantive evidence indicating the Group’s inability to collect due amounts according to the original conditions of receivables. Bad debts are deleted when they are determined against their related provisions. Provisions are allocated to the profit or loss statement. Any subsequent redemptions of amounts of receivables, previously deleted, shall be added to revenues.

Capital Business under Construction Capital business under construction appears in costs. It includes the cost of constructions, equipment and direct expenses. Capital business under construction is not amortized; but it will be consumed by the Group when it is ready for use as it will be transferred into properties, machinery and equipment.

Inventory Inventory is valued by cost or net realizable value, whichever is less. Cost is determined by weighted average method. Provision of stagnant goods is recorded in the statement of profit or loss and other comprehensive income according to the Group’s Policy. The net realizable value represents the estimated sale price within the ordinary course of business minus estimated costs and estimated necessary costs to complete the selling process.

Reputation Reputation represents the increase of investment costs on fair value of acquired assets at business combination. Reputation is annually assessed to determine depreciation and is recorded with costs minus depreciation losses. Depreciation losses are not reflected after being recorded. Profits or losses of establishment exclusion include the book value of reputation related to sold establishment. In case the cost of acquired investment is less than its fair value in the acquisition date, such difference is settled by reducing the fair value of non-current assets of acquired group on pro rata basis with their book value with the exception of long-term investments in securities.

Payables Obligations are recorded against amounts payable in the future for received services, whether respective invoices are provided by suppliers.

Revenues Revenues from sales are recorded when delivering goods and providing services to clients. Revenues of commodity sales are recognized based on a five-step model as indicated in IFRS No. 15: 1.) Identifying the contract with customer: a contract is defined as an agreement between two or more parties. It creates enforceable rights or obligations and determines the standards that must be met. 2.) Identifying the contract performance obligations: a performance obligation is a promise with the customer to transport a commodity or offer a service. 3.) Determining the transaction price: a transaction price is the amount of money a company expects to achieve against transferring commodities or promised services to the customer with the exception of combined amounts on behalf of third parties.

146

4.) Allocating a price for the transaction: contract performance obligations: for a contract containing more than one performance obligation, the company shall allocate the transaction price for each performance obligation at an amount determining the consideration made by the Company and also determining the amount of consideration the company expects to get against fulfilling each obligation. 5.) Recognizing the revenues when (as) the entity fulfills the performance obligation.

Lease Contracts Lease contracts are classified as financing leases when risks and ownership benefits are substantially transferred to the lessee under lease contract terms and conditions. Other types of lease contracts are classified as operational lease contracts.

Expenses All expenses that are direct and related to realization of business revenues consist of salaries, wages and commodity costs that are indirect and credited on sales costs. Expenses of selling and marketing include sales staff salaries and any other expenses related to selling and marketing in the Groupâ&#x20AC;&#x2122;s favor. Other expenses are classified within administrative and general expenses. Joint expenses are distributed between sales costs and administrative and general expenses. Joint expenses are distributed as per constant rules.

Zakat Provision Discretionary Zakat is an obligation on the Group. It is set right in the attached consolidated financial statements by allocating it to the consolidated statement of profit or loss and other comprehensive income according to Zakat Standard and opinion of Saudi Organization for Certified Public Accountants. It is credited by estimation to the year as per principle of maturity. Zakat is calculated at the end of year based on the amended net consolidated profit or loss or Zakat Base, whichever is larger, pursuant to the laws applicable in the General Authority for Zakat and Tax. The Group obtained the General Authority for Zakat and Taxâ&#x20AC;&#x2122;s approval to submit a consolidated Zakat declaration for the Group. Differences between provision and final assessment are addressed in the year in which assessment is received.

Long-Term Loans Loans are recorded in the net received value. Commissions on loans are recorded using the actual commission rate. Commissions on long-term loans are recorded during the period in which they are due. Commissions on long-term loans for financing capital business under construction are capitalized as part of the expenses of this business.

Borrowing Costs Borrowing costs, used directly for acquiring, constructing or producing an asset that is qualified for the conditions of capitalizing the borrowing costs, are capitalized as part of the costs of that asset. Qualified assets are those that necessarily require a long time to be ready for use. Other borrowing costs are recorded as expenses in the consolidated profit or loss statement in the period during which they were incurred by the Group.

Staff Remuneration -

- - -

End of Service Gratuity

End of service gratuity is determined using expected unit cost method along with conducting an actuarial evaluation at the end of each annual financial period. Remeasurement, which includes actuarial gains and losses, is included in the consolidated financial position statement. However, expenses or credit amounts are included in the consolidated statement of profit or loss and other comprehensive income of the period in which they were incurred. Recognized remeasurement is immediately included in other comprehensive income within retained profits and not reincluded in profit or loss.

Retirement Benefits

The Group pays retirement subscriptions in favor of its Saudi employees to the General Organization for Social Insurance, representing a certain contribution plan. Payments are considered expenses when incurred.

Short Term Staff Remuneration

Commitment to benefits payable to employees in terms of wages, salaries, annual leave and sick leave is recognized in the year in which the relevant service is provided in the undiscounted amount for benefits expected to be paid in consideration of this service.

Actuarial Study

The Group conducted an actuarial study to staff end of service benefits as at 31 December 2016, 2107 and 2018. There was no substantial difference between the end of service balance according to the actuarial study and the end of service balance recorded in 31 December 2016, 2017 and 2018 in Groupâ&#x20AC;&#x2122;s consolidated financial statements.

Annual Report 2018

147

Intangible Assets Intangible assets, except reputation, are measured in costs minus accumulated amortization and depreciation losses, if any. Intangible assets were amortized on a straight-line basis throughout the economic lifetime.

Profit Distribution Profit distributions of the Group’s shareholders are recognized within other liabilities item in the Group’s consolidated financial statements in the period in which profit distributions are approved by the Group’s shareholders.

Sector Information Business Sector represents a set of assets and operations both jointly provide products or services subject to risks and revenues different from that related to sectors of other activities, which are measured as per reports employed by the Chief Executive Director and senior decision maker in the Group. The geographical sector provides products in a certain economic environment subject to risks and revenues different from that related to business sectors in economic environments.

Set-Off A set-off is made to financial assets and liabilities. The net amount is presented in the consolidated financial position statement when there is a binding legal right to make a set-off between these amounts. The Group intends to settle on the basis of the net of these amounts or recognize the asset and settle the obligation at the same time.

Transfer of foreign currency Transactions conducted in foreign currency are transferred into Saudi Riyal at the exchange rates prevailing at the time of transaction. Cash assets and liabilities undertaken in foreign currency as at the date of the consolidated financial position statement are transferred into Saudi Riyal at the exchange rates prevailing at the end of year. Profits and losses arising out of payments or foreign currency exchange are included in the consolidated statement of profit or loss and other comprehensive income.

7- Impact of applying International Financial Reporting Standards (IFRS) No. 9 and amendments of previous years according to International Financial Reporting Standards No. 8 - As of 1 January 2018, the Group applied IFRS No. 9, deleted receivables of SR 28,422,416, recorded receivables allowances at SR 12,000,000 as at 1 January 2017 as part of the retained profits as per the requirements of International Accounting Standard (IAS) No. 9 and deleted receivables of SR 835,661 during the year ending on 31 December 2017 as the Group’s Management sees there are no expectations to redeem such amounts. - Allowances of SR 13,128,000 were recorded as at 1 January 2017. The aim was to address customs and government claims as the Group’s Management found that there are potential claims for previous periods and did not take into account such allowances and available information during such periods. Therefore, according to IAS No. 8 “Accounting Policies, Changes in Accounting Estimates and Errors”, these amendments were considered an accounting error as there was information on previous periods and was not included in such periods. Following is the impact of the application and amendments on previous years:

7-1 Impact of application and amendment on consolidated financial position statement as at 31 December 2017:

148

Impact of application (Saudi Riyal)

Reclassification in line with the presentation of present year (Saudi Riyal)

Impact of amendments made to previous years (Saudi Riyal)

Balance after amendment as at 31 Dec. 2017 (Saudi Riyal)

203,386,106

(29,258,077)

(2,059,984)

172,068,045

Investments at fair value through other comprehensive income

96,061,120

(30,423,818)

65, 637,302

Investments at fair value through profit or loss

879,202

30,423,818

31,303,020

Payables and other liabilities

142,974,768

12,000,000

13,128,000

168,102,768

Earnings retained after applying IFRS No. 9 and amendments of previous years as per IAS No. 8

147,158,411

(45,218,938)

(13,128,000)

88,811,473

Amounts previously recorded as at 31 Dec. 2017 (Saudi Riyal) Net receivables, advance payments, and other assets

7-2 Impact of application on consolidated statement of changes in shareholders’ equity for the year ending on 31 December 2017:

Capital (Saudi Riyal)

Statutory Reserve (Saudi Riyal)

Retained earnings (Saudi Riyal)

Reserve for reassessing investments through other comprehensive income (Saudi Riyal)

540,000,000

40,852, 236

147,185,411

55,485,941

783,496,588

Amendments of previous years as per IAS No. 8

(13,128,000)

------------------------------------------

540,000,000

40,852, 236

88,811,473

59,446,802

723,110,511

Balance as at 13 Dec. 2017 as previously disclosed

Balance as at 31 Dec. 2017 (amended)

Total (Saudi Riyal)

7-3 Impact of application on consolidated statement of profit or loss and other comprehensive income or the year ending on 31 December 2017:

General and administrative expenses Earnings unrealized from investments at fair value through profit or loss Movement of fair value of investments through other comprehensive income

Amounts previously recorded 31 Dec. 2017 (Saudi Riyal)

Impact of application (Saudi Riyal)

Balance after amendment 31 Dec. 2017 (Saudi Riyal)

(42,940,399)

(835,661)

(43,776,360)

9,211

(999,351)

(990,140)

(28,768,780)

999,351

(27,769,429)

7-4 Impact of application and amendment on consolidated financial position statement as at 1 January 2017: Impact of application (Saudi Riyal)

Reclassification in line with the presentation of present year (Saudi Riyal)

Impact of amendments made to previous years (Saudi Riyal)

Balance after amendment 1 Jan. 2017 (Saudi Riyal)

171,708,591

(28,422,416)

(6,210,921)

137,075,254

Investments at fair value through other comprehensive income

124,829,900

(31,423,169)

93,406,731

Investments at fair value through profit or loss

31,423,169

Payables and other liabilities

142,722,717

12,000,000

13,128,000

167,850,717

Earnings retained after applying IFRS No. 9 and amendments of previous years as per IAS No. 8

120,320,281

(43,383,926)

(13,128,000)

63,808,355

Net receivables, advance payments, and other assets

Amounts previously recorded as at 1 Jan. 2017 (Saudi Riyal)

7-5 Notes on Settlements - - -

Receivables of SR 28,422,416 were deleted, receivables allowances of SR 12,000,000 were recorded as at 1 January 2017 as part of the retained profits as per the requirements of International Accounting Standard (IAS) No. 9 and receivables of SR 835,661 were deleted during the year ending on 31 December 2017 as the Group’s Management sees there are no expectations to redeem such amounts. The Group’s investment in the investment portfolio with Al Ahli Capital run by Mulkia Investment Co. were reclassified at SR 31,423,169 as at 1 January 2017 from investments held for sale into investments at fair value through profit or loss according to the Group’s Business Model related to this investment according to the requirements of IFRS No. 9 – Financial Instruments. Unrealized profit related to fair value investments was reclassified at SR 2,982,015 as at 1 January 2017 from reserve of reclassifying investments held for sale into accumulated losses as well as an amount of SR 999,351 as at 31 Dec. 2018 from reserve of reclassifying investments held for sale into reserve of reclassifying investments through profit or loss according to the requirements of IFRS No. 9 – Financial Instruments.

Annual Report 2018

149

150

(120,413)

(20,665,099)

419,802,172

31/12/2018

419,802,172

Net book value At 31/12/2018

457,045,866

167,531,998 7,362,603

7,404,936

15,773,599

1,071,905 (1,158,122)

15,859,816

23,178,535

(1,168,783)

946,597 178,002

23,222,419

Furniture (SR)

23,668,262

23,149,811

21,035,408

3,368,955 (527,743)

18,194,196

44,158,219

(1,076,787)

3,399,548 -

41,862,458

Vehicles & trucks (SR)

41,961,890

43,258,147

33,857,764

7,144,319 (665,096)

27,378,531

77,115,911

(852,606)

7,732,933 895,163

69,340,421

Machines equipment trailers transportation equipment (SR)

276,564

150,281

1,565,532

129,241 (70,344)

1,506,635

1,715,813

(70,356)

18,017 -

1,783,199

Communication devices and telephones (SR)

5,253,031

5,881,140

6,580,275

1,620,236 (30,599)

4,980,638

12,461,415

(30,600)

2,248,346 -

10,233,669

Computers and software (SR)

18,922,633

17,931,536

17,359,588

2,781,092 (801,975)

15,380,470

35,291,124

(825,386)

1,366,358 446,869

34,303,103

Electrical equipments (SR)

9,189,060

11,705,987

12,622,505

2,363,314 (204,619)

10,426,810

24,327,492

(204,637)

4,880,259 -

19,651,870

Advert. Signs (SR)

85,495,455

91,131,291

35,061,539

8,606,990 (14,833)

26,469,382

126,192,830

(84,929)

6,617,324 7,659,580

161,964,837

Improving buildings (SR)

1,068,977,536

1,087,947,299

330,582,783

44,721,127 (3,252,046)

289,386,702

1,418,530,082

(25,089,596)

48,409,500 36,840,940

1,358,364,238

Total (SR)

c.) Properties, machinery and equipment include lands and buildings which cost in registers scored SR 40,896,233 (2017: SR 40,896,233). Their title deeds are pledged against facilities granted to the Group from banks to get bank facilities (Note 16).

b.) The buildings item includes buildings which cost in the accounting registers scored SR 405,730,469 (2017: SR 377,437,302) erected on plots leased under operational lease contracts with a duration of renewable 535- years.

419,802,172

31/12/2018

At 31/12/2017

17,635,065 (61,716)

186,717,572

169,154,224

1 January 2018 (amended) Additions Exclusions

654,259,571

549,568 27,630,326

20,665,099 -

Accumulated consumptions

626,200,090

419,803,172

Buildings (SR)

1 January 2018 (amended) Additions Items Converted to projects (Note 10) Exclusions

Cost

Lands (SR)

8- Net Properties & Equipment

__________________________________________________________________________________________________________________________________________________________________________________

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018

Annual Report 2018

151

(31,000) -

419,802,172

Net book value At 31/12/2017

419,802,172

31/12/2017

At 31/12/2017

19,690,236 (21,902) -

392,044,085

457,054,866

169,154,224

149,476,890

626,300,090

3,997,828 180,712,287

419,802,172

441,520,975

419,803,172

Buildings (SR)

As a 1 January 2017 (amended) Additions Exclusions Items Converted into intangible assets (Note No. 9a)

Accumulated consumptions

31/12/2017

As on 1 January 2017 (amended) Additions Items Converted from capital projects under construction (Note No. 10) Exclusions Items Converted into intangible assets (Note No. 9a)

Cost

Lands (SR)

8- Net Properties & Equipment (continued)

5,763,679

7,362,603

15,859,816

1,019,213 (146,037) -

14,986,640

23,222,419

22,085,593

23,668,262

18,194,196

3,909,020 (851,899) -

15,137,075

41,862,458

36,222,926

41,961,890

27,378,531

5,167,624 (766,573) -

22,977,480

69,340,421

317,654

276,564

1,506,635

59,107 -

1,447,528

1,783,199

6,690,848

5,253,031

4,980,638

1,447,111 (39,761) (1,969,350)

5,542,638

10,233,669

15,548,492

18,922,623

15,380,470

2,533,939 (406,890) -

13,253,421

34,303,103

8,718,809

9,189,060

10,462,810

1,934,581 (87,571) -

8,615,800

19,651,870

66,375,205

85,495,455

26,469,382

8,335,463 (219,953) -

18,353,872

111,964,837

873,569,463

1,068,977,536

289,386,702

44,096,294 (2,531,586) (1,969,350)

249,791,344

1,358,364,238

(3,243,130) (4,600,012) (336,179) -

(107,697) (546,205) -

(43,259) (4,600,012)

(777,581) -

(1,218,175) -

(193,034) -

38,060,939 304,785,634

12,517,340 15,044,599

4,772,479 1,274,916

2,587,344 56,110

2,331,907 93,051

Total (SR)

1,123,360,807

18,017 -

3,906,138 7,011,458

5,857,965 -

3,071,921 593,213

1,765,182

Improving buildings (SR)

84,729,077

Advert. Signs (SR)

17,334,609

Electrical equipments (SR)

28,801,913

Computers and software (SR)

12,233,481

Communication devices and telephones (SR)

59,200,406

27,222,668

20,750,319

Furniture (SR)

Vehicles & trucks (SR)

Machines equipment trailers transportation equipment (SR)

__________________________________________________________________________________________________________________________________________________________________________________

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018

9- Net intangible assets 31 Dec. 2018 (Saudi Riyal)

31 Dec. 2017 (Saudi Riyal)

1 Jan. 2017 (amended) (Saudi Riyal)

6,723,091 4,308,993

5,755,607 4,308,993

4,290,167 4,308,993

11,032,084

10,064,600

8,599,160

31 Dec. 2018 (Saudi Riyal)

31 Dec. 2017 (Saudi Riyal)

1 Jan. 2017 (amended) (Saudi Riyal)

Cost as at 1 January (amended) Additions Items converted from properties, machinery and equipment (Note 8)

16,669,133 2,699,481 -

12,069,121 4,600,012

7,151,453 4,917,668 -

As at 31 December

19,368,614

16,669,133

12,069,121

As at 1 January (amended) Year amortization Items converted from properties, machinery and equipment (Note 8)

(10,913,526) (1,731,997) -

(7,778,954) (1,165,222) (1,969,350)

(5,545,727) (528,067) (1,705,160)

As at 31 Dec.

(12,645,523)

(10,913,526)

(7,778,954)

6,723,091 5,755,607

5,755,607 4,290,167

4,290,167 1,605,726

Software licenses (Note 9-a) Reputation (Note 9-b)

9-a- Software licenses

Accumulated amortization

Net book value As at 31 Dec. As at 1 Jan.

9 - b- Reputation Reputation was obtained thanks to acquiring Zaiti Petroleum Services Company in 2015 as follows:

Zaiti Petroleum Services Company

31 Dec. 2018 (Saudi Riyal)

31 Dec. 2017 (Saudi Riyal)

1 Jan. 2017 (amended) (Saudi Riyal)

4,308,993

A reputation test is conducted on an annual basis. Assets are tested to make sure of any depreciation through comparing book value with redeemable value, which is determined on the basis of information used in calculating the present value. The present value uses expected cash flows that are based on financial expectations approved by Senior Management for a period of five years.

Key assumptions used in present value calculation The Management relied, in its expectations regarding sales growth and total margin, on previous performance and its expectations with respect to market developments. Discount rates reflect Managementâ&#x20AC;&#x2122;s expectations of sector-related specified risks. The relevant estimations relied on published information and movement of raw material prices in previous periods, which were used as indicators on future prices movement. Growth rates relied on average industry rates. Calculation of present value is largely impacted by assumptions related to sales growth rates and inflation in cost of sales used in extracting cash flows for the period following budget for a period of five years and other factors used for calculation of final value. A final value is calculated using the price-to-earnings ratio.

152

Sensitivity towards assumption changes With respect to estimating the current value, Management believes there are no reasonable possible changes in any of the above core assumptions, that may lead to a major increase in unit book value including reputation compared to its redeemable value. Following are assumptions originating from changes to key assumptions: a.) Sales growth-related assumptions b.) Sales cost c.) Final value ratio

10- Projects under execution This item, which value is SR 40,011,413, represents the cost of establishing oil stations in different parts of the Kingdom of Saudi Arabia. It is expected to conclude such projects during 2019, with their value being SR 48,5 million. Following is the movement of projects under execution for the year ending on 31 December:

Balance at the beginning of year Additions during the year Items converted into properties, machinery and equipment (Note 8) Closing of capital works under execution Balance at the end of year

31 Dec. 2018 (Saudi Riyal)

31 Dec. 2017 (Saudi Riyal)

1 Jan. 2017 (amended) (Saudi Riyal)

25,000,017 51,857,336 (36,845,940) -

150,783,566 79,142,911 (204,785,634) (140,826)

48,002,427 155,750,748 (52,969,609) -

40,011,413

25,000,017

150,783,566

31 Dec. 2018 (Saudi Riyal)

31 Dec. 2017 (Saudi Riyal)

1 Jan. 2017 (amended) (Saudi Riyal)

103,563,396

65,637,302

93,406,731

11- Investments at fair value through other comprehensive income a.) This item consists of the following:

Investments at fair value through other comprehensive income in stocks and shares of non - trading companies

b.) Following is the movement on reserve of reassessing investments at fair value through other comprehensive income: 31 Dec. 2018 (Saudi Riyal)

31 Dec. 2017 (Saudi Riyal)

1 Jan. 2017 (amended) (Saudi Riyal)

Balance at the beginning of year Fair value movement for investments of stocks and shares of non - trading companies

59,446,802 16,101,094

87,216,231 (27,769,429)

98,005,687 (10,789,456)

Balance at the end of year

75,547,896

59,446,802

87,216,231

Annual Report 2018

153

c.) Investments through other comprehensive income in stocks of non-trading companies The Group possesses stocks and shares in non-trading companies. During 2018, the Group contracted with ALDUKHEIL FINANCIAL GROUP, a company licensed by the Capital Market Authority, practicing its business in investment banking and consulting services. The aim of the contract was to assess and valuate the market value of companies on the basis of future cash flows, financial analysis and expected growth rates. The market value of Middle East Battery Company (MEBCO) was SR 798,405,118 (2017: SR 794,190,000), while the market value of National Company of Tourism (Syahya) was SR 687,078,112 (2017: SR 681,560,000). The Group did not assess investment in United Racing Company. Therefore, investment is processed by fair value method. As it was not possible to determine its fair value, the best way to determine fair value was the cost. Following is the Group’s share: As at 31 December 2018:

Group’s share

Value of Assessment (Saudi Riyal)

Group’s share at purchase cost (Saudi Riyal)

Group’s share at fair value (Saudi Riyal)

Reassessment profit (Saudi Riyal)

Middle East Battery Company (MEBCO)

12.79%

789,405,810

26,390,500

100,964,915

16,081,229

National Company of Tourism (Syahya)

0.36%

687,078,112

1,500,000

2,473,481

19,865

25%

125,000

1,485,483,230

28,015,500

103,563,396

16,101,094

Statement

United Racing Company

* On 6 September 2018, the Group concluded an agreement to increase its owned shares in Middle East Battery Company (MEBCO) against an amount of SR 21,825,000 and thus the Group’s owned shares rose to 1,279 shares. Consequently, the Group’s share became 12,79% as at 31 December 2018 (7,94%: 31 December 2017). As at 31 December 2017:

Statement

Group’s share

Value of Assessment (Saudi Riyal)

Group’s share at purchase cost (Saudi Riyal)

Group’s share at fair value (Saudi Riyal)

Reassessment profit (Saudi Riyal)

Middle East Battery Company (MEBCO)

7.94%

794,190,000

4,565,500

63,058,686

(27,774,914)

National Company of Tourism (Syahya)

0.36%

681,560,000

1,500,000

2,453,616

5,485

25%

125,000

1,475,750,000

6,190,500

65,637,302

(27,769,429)

Group’s share

Value of Assessment (Saudi Riyal)

Group’s share at purchase cost (Saudi Riyal)

Group’s share at fair value (Saudi Riyal)

Reassessment profit (Saudi Riyal)

Middle East Battery Company (MEBCO)

7.94%

1,144,000,000

4,565,500

90,833,600

(10,798,400)

National Company of Tourism (Syahya)

0.36%

680,036,388

1,500,000

2,448,131

8,944

25%

125,000

1,824,036,388

6,190,500

93,406,731

(10,789,456)

United Racing Company

As at 1 January 2017:

Statement

United Racing Company

154

12- Net receivables, advance payments, and other assets a.) This item consists of the following:

31 Dec. 2018 (Saudi Riyal)

31 Dec. 2017 (amended) (Saudi Riyal)

1 Jan. 2017 (amended) (Saudi Riyal)

Debts of fuel clients and tenants - b

144,742,110

98,021,293

67,307.123

Minus- provision of expected credit loss – c

(5,214,808)

(5,037,317)

Net

139,527,302

92,806,485

62,269,806

Prepaid leases

40,779,772

38,766,894

41,402,226

Advance payments to providers

16,860,272

15,545,499

17,976,072

Advance payments to contractors

11,904,346

15,657,863

779,571

Staff advance payments and loans

8,077,550

2,051,110

779,571

Guarantee letters (Note 27)

5,589,050

4,560,597

7,530,181

Recovered insurance - d

3,311,848

3,718,938

603,523

Customs claims

1,817,019

Other

5,347,689

3,693,821

2,457,075

233,214,848 (6,429,032)

176,801,207 (4,733,162)

141,808,416 (4,733,162)

226,785,816

172,068,045

137,075,254

Other receivables provision

b.) The item of debts of fuel clients and tenants includes 49% of balances payable by government entities (2017: 19%) c.) Following is the movement of expected credit loss provision for the year ending on 31 December:

Balance at the beginning of year Component during the year Balance at the end of year

31 Dec. 2018 (Saudi Riyal)

31 Dec. 2017 (Saudi Riyal)

1 Jan. 2017 (Saudi Riyal)

5,214,317

5,037,317

4,162,117

177,491

875,200

5,214,317

5,214,808

5,037,317

31 Dec. 2018 (Saudi Riyal)

31 Dec. 2017 (Saudi Riyal)

1 Jan. 2017 (Saudi Riyal)

Lives of receivables were as follows:

From 1 day – 90 days

56,105,774

56,105,953

36,546,852

From 91 days – 180 days

31,734,490

36,887,905

29,177,965

From 181 days – 360 days

52,489,411

5,027,435

1,582,306

More than 360 days

7,416,435

144,742,110

98,021,293

67,307,123

d.) Recovered insurance item includes an amount of SR 3,000,000 which is the value of a financial cash guarantee to pay customs fees to the Sudanese Customs Authority with respect to Saudi cars visiting Sudan with Customs transit books issued by Saudi Automobile & Touring Association, Ltd SATA (subsidiary).

Annual Report 2018

155

13- Net inventory

Commodity and petroleum

31 Dec. 2018 (Saudi Riyal)

31 Dec. 2017 (Saudi Riyal)

1 Jan. 2017 (Saudi Riyal) 23,960,389

38,634,076

27,275,876

Inventory of spare parts

7,476,934

6,310,043

1,250,512

Customs transit books (Trip-Tik) and international driving licenses

1,816,620

1,321,215

1,338,957

Other

3,265,870

1,430,272

872,676

Total

51,193,500 -

36,337,406 -

27,422,534 (98,535)

51,193,500

36,337,406

27,323,999

31 Dec. 2018 (Saudi Riyal)

31 Dec. 2017 (Saudi Riyal)

1 Jan. 2017 (Saudi Riyal)

Balance at the beginning of year

98,535

1,151,544

Component during the year

98,535

Provision no longer required

(98,535)

(1,151,544)

Balance at the end of year

98,535

Minus: stagnant goods provision

Following is a statement of stagnant goods provision:

14- Fair value investments through profit or loss

31 Dec. 2018 (Saudi Riyal)

31 Dec. 2017 (amended) (Saudi Riyal)

1 Jan. 2017 (amended) (Saudi Riyal)

Fair value investments through profit or loss in trading companies (L 14)

5,709,100

30,423,818

31,423,169

Fair value investments through profit or loss in investment funds (14 -b)

264,268

879,202

5,973,368

33,303,020

31,423,169

a.) Movement of fair value investments through profit or loss in stocks of trading companies Fair value investments through profit or loss are represented in stocks of trading companies listed in the Saudi Capital Market Authority. Following is the movement of these investments during the year:

31 Dec. 2018 (Saudi Riyal)

31 Dec. 2017 (amended) (Saudi Riyal)

1 Jan. 2017 (amended) (Saudi Riyal)

Balance at the beginning of year (amended)

30,423,818

31,423,169

34,384,679

Sales during the year

(24,127,649

Unrealized losses from reassessing investments

(587,069)

(999,351)

(2,961,510)

Balance at the end of year

5,973,368

30,423,818

31,423,169

During the year ending on 31 December 2014, an agreement was signed for managing an investment portfolio with Al Ahli Capital, which is run by Mulkia Investment Co. The aim was to diversify the Groupâ&#x20AC;&#x2122;s investments and sources of income. During 2018, the Groupâ&#x20AC;&#x2122;s Management decided to transfer the net portfolio value from investment held of sale account into an account of fair value investments through profit or loss. Therefore, investment was reclassified in comparison years.

156

b.) Following is the movement of fair value investments through profit or loss in investment funds during the year: 31 Dec. 2017 (amended) (Saudi Riyal)

31 Dec. 2018 (Saudi Riyal) Balance at the beginning of year (amended) Purchases during the year

879,202

190,330,099

869,991

Sales during the year

(190,950,000)

Change in fair value

4,967

9,211

264,268

879,202

Balance at the end of year

15- Cash with the fund and balance with banks

31 Dec. 2018 (Saudi Riyal) Cash with the fund Balances with banks*

31 Dec. 2017 (amended) (Saudi Riyal)

1 Jan. 2017 (amended) (Saudi Riyal)

7,140,181

2,399,696

6,963,289

67,094,831

94,875,634

110,718,110

74,235,330

97,275,330

117,681,676

There are balances with banks in an amount of SR 39,715,364 representing a cash with banks against obligations in consideration shareholdersâ&#x20AC;&#x2122; entitlements.

16- Financing of resales for profit as well as long and short-term loans a.) Banque Saudi Fransi (BSF) On 13 August 2012, the Group signed a Sharia-compliant facilities (profit for sale) agreement with BSF of SAR (255,000,000). The agreement included letters of guarantee facilities of SAR (70,000,000), real estate loan facilities of SAR (90,000,000), loans to finance and develop fuel stations of SAR (55,000,000), a short-term finance of up to SAR (20,000,000), and documentary credits of SAR (20,000,000). The agreement expired on 31 July 2015. The Group amended the agreement amount on April 28th, 2015, to be SAR (550,900,000). It included the renewal of existing facilities of SAR (245,800,000) (of which SAR 110,000,000 represent various credit facilities and SAR 135,800,000 represent medium-term finance facilities) guaranteed by a promissory note and/or securities or a deposit and pledge of title deeds in addition to new facilities of SR 305,1 million, diversified credit facilities of SR 55,1 million and long-term financing facilities of SR 250 million) guaranteed by a promissory note. The agreement aims to finance the purchase of new lands, building new stations, and improving and developing the existing stations. The Group again on Feb. 17th, 2017, signing the same on 20 June 2017, amended the agreement amount to SAR (502,500,000). The agreement included short-term financing of SAR (20,000,000), issuing letters of guarantee and documentary credits of SAR (120,000,000), long-term financing of SAR (338, 500,000) medium-term financing of SAR 24,000,000 guaranteed by a promissory note and/or securities or a deposit and pledge of title deeds. The agreement aims to finance the purchase of new lands, building new stations and improving stations. The Group renewed and amended the agreement amount on April 16th, 2017, to be SAR (439,200,000). This included renewal of existing facilities of which SAR (169,100,000) represent various credit facilities and SAR (270,100,000) represent finance facilities. The Group was given an additional grace period of one year and payment will be effective as of 1 June 2018. The agreement aims to finance the purchase and building of new stations. On 22 May 2018, the Group renewed the agreement to be SR 391 million. In includes renewal of existing facilities, of which SR 140 million for diversified credit facilities and SR 251 million for short, medium and long-term facilities guaranteed by a promissory note. The agreement aims to finance the purchase and building of new stations.

Annual Report 2018

157

b.) NCB SASCO signed a Shariah-compliant credit facilities agreement with NCB of SAR (92,000,000) guaranteed by local share pledge with the aim to expand construction and acquisition of fuel stations. The agreement is valid until 1 June 2019. On August 25th, 2015, the Group signed a new Shariah-compliant facilities agreement with NCB of SAR (151,800,000), including long-term loans of SAR (101,100,000), bank letters of guarantee of SAR (25,000,000), short-term loans of SAR (25,700,000). The agreement aims to expand SASCO projects, support its core activities, and purchase new sites to build fuel stations as well as to finance the working capital. The agreement was renewed on May 1st, 2016 and its value became SAR (201,300,000), including long-term loan facilities of SAR (150,600,000) and bank letters of guarantee of SAR (25,000,000) and short-term loans of SAR (25,700,000). The agreement is valid until 1 June 2019. The agreement was amended on April 30st, 2018 and its value became SAR (200,700,000), including long-term loans of SAR (150,700,000) and bank letters of guarantee of SAR (25,000,000) and short-term loans of SAR (25,000,000). The agreement aims to expand SASCO projects, support its core activities, and purchase new sites to build fuel stations. The agreement was amended on 26 September 2018 and its value became SAR (25,700,000) in the form of short-term commercial facility with a promissory note. The aim of the agreement is to support the needs of working capital.

c.) SABB On May 25th, 2015, the Group signed a new Shariah-compliant facilities agreement with SABB of SAR (150,000,000) effective from the date of signing thereof, provided the use thereof before January 31st, 2017, and guaranteed by a promissory note. This agreement includes a long-term loan of SAR (100,000,000) and bank letters of guarantee of SAR (50,000,000). The agreement aims to partially finance capital expenses, purchase land, and build new fuel stations. It expired on 31 January 2016 and was extended to be valid until 31 January 2018. The agreement was amended on Dec. 7th, 2018 and its value became SAR (177,900,000), guaranteed by a promissory note, including a long-term loan of SAR (47,900,000) in addition to SAR (80,000,000) in the form of bank letters of guarantee and short-term loans of SAR (50,000,000). The agreement aims to partially finance capital expenses, purchase land, and build new fuel stations as well as to finance the working capital. It will expire on January, 31th, 2019. On May 10th, 2018, the Group renewed and amended the agreement, and its value became SR 400,000,000 guaranteed by a promissory note. This agreement includes a long-term loan of SAR (150,000,000) and bank letters of guarantee of SAR (200,000,000) in addition to 50,000,000 as short-term loans. The agreement aims to partially finance capital expenses, purchase land, and build new fuel stations as well as to finance the working capital. It expired on 31 January 2020.

d.) Gulf International Bank (GIB) On December 13th, 2015, the Group signed a (Shariah-compliant) resales for profit facilities agreement with the Gulf International Bank (GIB) (a Bahraini jointstock corporation) of SAR (150,000,000) guaranteed by a promissory note. This agreement includes a medium-term loan of SAR (50,000,000) with a finance period of five (5) years (2-year grace period), provided the repayment of loan at equal quarterly instalments. This is in addition to issuing letters of guarantee of SAR (100,000,000). The agreement aims to expand the Groupâ&#x20AC;&#x2122;s projects, support its core activities, purchase new sites to build fuel stations as well as to finance the working capital. On September 6th, 2018, the Group renewed and amended the agreement, and its value became SR 48,000,000 in the form of payment guarantees guaranteed by a promissory note.

158

e.) Alawwal Bank On December 21st, 2015, the Group signed a (Shariah-compliant) resales for profit facilities agreement with the Alawwal Bank (a Saudi joint-stock company). This agreement includes a general facility limit of SAR (150,000,000) in the form of a medium-term loan of SAR (100,000,000) for a financing period of 54 months (18-month grace period), provided the repayment of loan at equal semi-annual successive instalments. This is in addition to letters of guarantee of SAR (40,000,000) and documentary credits of SAR (10,000,000). The agreement aims to expand the Groupâ&#x20AC;&#x2122;s projects, support its core activities, purchase new sites to build fuel stations as well as to finance the working capital. The agreement was renewed on Dec. 28st, 2018 and its total value became SAR (98,500,000) and the value of total guarantees became SAR (50,000,000) including medium-term loans of SAR (48,500,000). On October 31st, 2018, the agreement was renewed and amended and its total value became SAR (105,500,000) and the value of total guarantees became SAR (75,000,000) including medium-term loans of SAR (29,500,000) guaranteed by a promissory note.

f.) Riyadh Bank On December 21st, 2015, the Group signed a (Shariah-compliant) facilities agreement with Riyadh Bank (a Saudi joint-stock company). The agreement includes bank letters of guarantee of SAR (50,000,000), aiming at expanding SASCO projects, supporting its core activities, purchasing new sites to build fuel stations as well as to finance the working capital. On March 8th, 2018, the Group amended the agreement and added an amount of SR 320,000,000 guaranteed in the form of long-term finance of SR 235,000,000, short-term finance of 20,000,000, documentary credits of 20,000,000 and a hedge to set interest rates at SR 45,000,000. This was in addition to SR 50,000,000 and the final value of the agreement became 370,000.000 guaranteed by a promissory note, and real estate deed mortgage of SR 100,000,000. Following is the loan movement as at 31 December: 31 Dec. 2018 (Saudi Riyal)

31 Dec. 2017 (Saudi Riyal)

Balance at the beginning of year

555,518,930

514,406,225

421,497,554

Amounts received during the year

513,962,886

192,176,340

223,742,005

Amounts paid during the year

(476,407,255)

(151,063,635)

(140,833,334)

593,074,561

555,518,930

514,406,225

44,594,800

Balance

1 Jan. 2017 (Saudi Riyal)

Financing of resales for profit and short-term loans

115,000,000

95,000,000

Trading portion from financing of resales for profit and long-term loans

100,688,892

109,479,080

134,043,817

Financing of resales for profit and long-term loans

377,385,669

351,039,850

335,767,608

31 Dec. 2018 (Saudi Riyal)

31 Dec. 2017 (amended) (Saudi Riyal)

1 Jan. 2017 (amended) (Saudi Riyal)

Petroleum providers

80,909,206

49,632,844

64,154,935

Revenues received in advance

52,460,050

36,856,497

33,926,435

17- Payables and other liabilities

Commodity and service providers

19,753,109

26,215,742

8,428,718

Customs claims provision

14,088,752

12,000,000

Due expenses

12,358,469

8,653,180

9,575,547

Performance bond guarantee

9,899,145

13,220,647

11,468,643

Lease claims provision

4,381,009

13,128,000

Deposits for third parties

1,284,539

2,471,569

9,768,068

Other

5,163,645

5,924,289

5,400,371

200,297,942

168,102,768

167,850,717

Annual Report 2018

159

18- Distributions payable to shareholders 31 Dec. 2018 (Saudi Riyal)

31 Dec. 2017 (Saudi Riyal)

1 Jan. 2017 (Saudi Riyal)

Profit distributions

17,019,249

15,959,366

16,020,787

Shares sold by auction

16,779,795

16,838,220

16,869,688

Subscription surplus – at incorporation

2,258,650

2,262,950

2,275,650

Surplus of capital decrease

2,199,778

Subscription surplus – second installment

1,537,892

39,715,364

38,718,206

38,823,795

31 Dec. 2018 (Saudi Riyal)

31 Dec. 2017 (amended) (Saudi Riyal)

1 Jan. 2017 (amended) (Saudi Riyal)

Shareholders’ equity

751,862,914

782,445,223

720,273,786

Net amended income

55,621,953

37,892,954

39,011,026

Additions

535,435,627

411,286,283

360,002,304

(1,237,736,458)

(1,106,591,205)

(996,552,300)

Total

105,184,036

125,033,255

122,734,816

Zakat base

105,184,036

125,033,255

122,734,816

31 Dec. 2017 (amended) (Saudi Riyal)

1 Jan. 2017 (amended) (Saudi Riyal)

19- Zakat Provision

Deductions

Following is the movement of Sharia Zakat provision during the year ending on 31 December:

31 Dec. 2018 (Saudi Riyal) Balance at the beginning of year

3,826,470

4,409,500

3,962,922

Amounts paid during the year

(3,423,780)

(4,378,030)

(3,208,422)

Component during the year

2,775,004

3,125,831

3,655,000

669,169

3,177,694

3,826,470

4,409,500

Component by increase over Zakat base during the year Balance at the end of year

During 2013, Group obtained the General Authority for Zakat and Tax’s approval to submit a consolidated Zakat declaration for both Group and its subsidiaries according to letter No. 19181/16-1437. Group submitted its Zakat declarations and paid the amounts due until the year ending on 31 December 2017 and was given a final Zakat certificate for 2014 and a restricted Zakat certificate for 2017. Group received final Zakat assessments from the General Authority for Zakat and Tax for years 2000 – 2008 according to Tax Appeals Commission’s Decision No. 1656 for 1438 AH approved by the Minister of Finance under Letter No. 2293 dated 19/3/1438 AH issued in the appeal submitted by the Group against Decision No. 10 of 1435 AH issued by the First Instance Committee on Zakat and Tax Objection in Riyadh regarding Zakat assessment conducted by the General Authority on the Group for years from 2002 to 2005 and appeal Decision No. 1669 of 1438 AH approved by the Minister of Finance under Letter No. 2832 dated 9/4/1438 AH issued in the appeal submitted by the Group against Decision No. 11 of 1435 AH issued by the First Instance Committee on Zakat and Tax Objection in Riyadh regarding Zakat assessment conducted by the General Authority on the Group for year 2008. Total Zakat differences were SR 3,694,215. The Group paid the amount in full during the second quarter of 2017. The amount was included in Zakat item in the consolidated profit or loss and other comprehensive income statement.

160

20- Statutory Reserve In accordance with the Saudi Companies Law, the Group transfers ten per cent (10%) of annual net profit to the statutory reserve. Such transfer shall continue until reserve reaches 30% of capital. The statutory reserve is not distributable as dividends for shareholders.

21- Revenues Revenues of two years ending on 31 December are as follows: 31 Dec. 2018 (Saudi Riyal)

31 Dec. 2017 (Saudi Riyal)

Fuel operation revenues

1,647,772,790

892,673,753

Grocery revenues

201,456,232

163,719,373

Lease revenues

125,451,863

129,165,765

Other

81,400,117

26,770,916

2,056,081,002

1,212,329,807

31 Dec. 2018 (Saudi Riyal)

31 Dec. 2017 (Saudi Riyal)

Staff salaries, wages and benefits

27,668,290

22,820,117

Professional fees and consultation

3,668,987

1,609,708

Customs claims provision (Note 17)

2,088,752

4,096,683

Other receivables provision (Note 12)

1,695,870

Consumption of properties, machinery and equipment

1,547,636

2,973,689

22- General and administrative expenses

Amortization of intangible assets

1,523,908

650,001

Leases

1,068,769

1,016,682

Bank expenses

1,031,904

973,989

Electricity and water

200,851

187,867

Maintenance expenses

200,560

175,252

3,694,215

1,413,515

4,761,233

42,109,042

43,776,360

31 Dec. 2018 (Saudi Riyal)

31 Dec. 2017 (Saudi Riyal)

Delay fines

1,100,820

1,521,291

Deposit revenues

426,920

270,685

Amounts paid during the year against Zakat assessments Other

23- Other evenues

Sale profits of property, machinery and equipment

47,429

5,607

Other

381,964

714,932

2,512,515

1,868,133

Annual Report 2018

161

24- Sector Information A sector is a main part of the Group. It sells/provides specific services (business sector) or sells/provides services in a certain economic environment (geographical sector). Its profits and losses are different that of other sectors. In reporting its sector information, the Group submits to the business sector. Following are the Group sectors: •

Retail and Operation Sector: it includes station operation activities, including selling fuel, foods, drinks and operation of residential and commercial buildings.

162

•

Investment Sector: it includes investment in other companies and investments in securities.

•

Saudi Automobile & Touring Association Sector: It issues customs transit books and international driving licenses and runs sport activities.

•

Transport Fleet Services Sector: it is the one that provides services of transporting dry and liquid materials.

•

Franchise Sector: it grants franchise for using the Group’s trademark.

Annual Report 2018

163

952,185,609

2,090,292,743

28,522,198

Total liabilities

Net sales

Income from core operations

2,097,969,677

1,350,184,462

1,201,694,878

18,397,154

Total assets

Total liabilities

Net sales

Income from core operations

31 December 2017

1,690,668,896

Total assets

31 December 2018

Retail and Operation Sector (Saudi Riyal)

66,500

94,533,574

(27,640)

16,194,591

125,348,759

Investment Sector (Saudi Riyal)

Following are some financial data of the above sectors for the period ending on 31 December:

8,270,256

22,723,350

10,665,266

26,529,313

3,116,786

12,012,231

15,708,473

31,516,419

Saudi Automobile & Touring Association Sector (Saudi Riyal)

5,112,723

22,759,754

13,561,618

33,448,807

6,082,233

26,359,078

16,198,157

42,060,526

Transport Fleet Services Sector (Saudi Riyal)

42,000

500,000

(10,075)

447,925

SASCO Franchise Sector (Saudi Riyal)

(34,848,175)

(596,977,101)

(746,318,115)

(72,583,050)

(151,407,856)

(289,300,673)

Joint assets and liabilities (Saudi Riyal)

31,780,133

1,212,329,807

777,552,745

1,506,663,257

37,683,502

2,056,081,002

848,878,974

1,600,741,888

Total (Saudi Riyal)

__________________________________________________________________________________________________________________________________________________________________________________

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018

24- Financial instruments and risk management Fair value A fair value covers financial assets and liabilities. Financial assets include cash, the like, receivables and securities. However, financial liabilities include payables, loans and other payable balances. Level One: market prices announced in active markets for the same financial instruments. Level Two: assessment methods depending on inputs affecting fair value and can be directly or indirectly noticed in the market. Level Three: assessment methods depending on inputs affecting fair value and cannot be directly or indirectly noticed in the market.

19- Zakat Provision As at 31 December 2018 Investments through other comprehensive income Investments at fair value through profit or loss

As at 31 December 2017 (amended) Investments through other comprehensive income Investments at fair value through profit or loss

Level One

Level Two

Level Three

Total 103,563,396

103,438,396

125,000

17,622,552

103,438,396

125,000

121,185,948

Level One

Level Two

Level Three

Total

65,512,302

125,000

65,637,302

31,303,020

65,512,302

125,000

96,940,322

The value indicated in Level Three reflects the purchase cost of these assets and not their fair value due to lack of active market. Therefore, the Group’s Management sees that the purchase cost is the ideal method to calculate the fair value of these assets, and their value is not depreciating.

Capital Risk Management The Group manages its capital to ensure its durability. It gets the highest revenue from the ideal limit of debt and equity balances. Group’s total strategy of 2017 did not change. The structuring of the Group’s capital includes shareholders’ equity which consists of capital, reserves, fair value reserve and retained profits as listed in shareholders’ equity change statement.

Financial Risk Management Group’s business may be substantially affected by financial risks arising out of the following: - Foreign currency risk management The Group is not subject to significant risks related to foreign currency exchange. Therefore, there is no need to efficiently manage this issue. - Interest rate risk management The financial instruments in the consolidated financial position statement are not subject to interest rates and risks.

164

- Other price risks The Group is subject to price risks arising out of its equity investments in other companies. It retains investments in title deeds of other companies for strategic but not trading purposes. In addition, it does not actively trade in such investments. - Credit risk management A credit risk exists when one party to a financial instrument contract fails to comply with its contractual obligations. This leads the Group to incur financial losses. The Group is subject to credit risks on its bank balances and receivables as follows:

2018 (Saudi Riyal)

2017 (amended) (Saudi Riyal)

Cash and balances with banks

74,235,012

95,215,346

Net receivables

139,527,302

94,866,469

213,762,315

190,081,815

- Liquidity risk management Liquidity risks are represented in difficulties an establishment faces in providing funds to meet obligations related to financial instruments. Liquidity risks may result from inability to sell certain financial assets rapidly and at an amount equal to their fair value. Liquidity risks are managed by regularly controlling them to ensure the availability of funds necessary for fulfilling the Group’s future obligations.

25- Debt Ratio The Board of Directors periodically reviews capital structuring. As part of this review, the Board takes into account the cost of capital and risks related to each category of capital and debt. The Group’s capital structure includes debts through borrowing. It hasn’t determined maximum debt ratio and does not expect an increase in debt ratio through issuing new debt releases in 2019. Following is the debt ratio at the end year:

2018 (Saudi Riyal)

2017 (amended) (Saudi Riyal)

Loans

593,074,561

555,518,930

Cash and balances with banks

(74,235,012)

(97,275,330)

Net debts

518,839,549

458,243,600

Shareholders’ equity

751,862,914

729,110,511

69.01%

62.84%

Net debt / shareholders’ equity

26- Earnings per share Earnings per share are calculated from net income by dividing net annual profit on weighted average of existing number of shares as at the end of year, being 60 million shares after takin into consideration with retroactive effect the increase of Group’s number of shares during the second quarter of 2018 (Note 1). Earnings per share are calculated from core operations by dividing the income of core operations on weighted average of existing number of shares as at the end of year, being 60 million shares after takin into consideration with retroactive effect the increase of Group’s number of shares during the second quarter of 2018 (Note 1).

Annual Report 2018

165

27- Capital Commitments & Possible Obligations The Group has capital commitments related to establishing assets and properties as at 31 December 2018 at a total amount of SR 8,5 million (2017: SR 24,9 million). The Group has possible obligations related to bank guarantees as at 31 December 2018 at an amount of SR 284,16 million (2017: SR 259,2 million). There are some lawsuits filed against the Group, during the ordinary business session. They are currently before the court and the final award cannot be certainly maintained. The Management does not expect that the results of these lawsuits shall have substantial impact on the consolidated financial statements.

28- Subsequent Events Following the date of financial statements, the Group received a final judgment binding the Ministry of Housing to pay an amount of SR 8,217,461 as a charge in consideration of infringement on SASCO land located in Hafr Al-Batin-Riyadh Road. The matter relates to a lawsuit filed by SASCO against the Ministry of Housing on 29/07/1434 AH. The judgment was passed Riyadh General Court. The resulting effect will appear in the profit or loss statement, initial financial results, for the period ending on 31 March 2019. The Management believes there are no any other important subsequent events to be amended or disclosed after the date of financial statements until the issuance of these financial statements.

29- Dealings with related parties Related parties are non-executive board members and senior management staff. Senior management staff, including directors, are those practicing authority and responsibility in planning, managing and directly or indirectly controlling the Groupâ&#x20AC;&#x2122;s business. Their dealings during the year were as follows:

Nature of dealing

2018 (Saudi Riyal)

2017 (Saudi Riyal)

Non-executive board members

Salaries, allowances and incentives

893,000

96,000

Senior management staff

Salaries, allowances and incentives

7,033,523

5,894,292

30- Comparative Figures Items, elements and notes of comparative consolidated financial statements were amended, reissued, presented and classified in consistency with the accounting policies applied in issuing, presenting, assorting and classifying the items, elements and notes of comparative consolidated financial statements of the present period, which have been developed according to the IFRS approved in Saudi Arabia and other standards issued by Saudi Organization for Certified Public Accountants. For more information, please refer to Note 7 (Application of new and amended International Financial Reporting Standards (IFRS)) of notes attached to consolidated financial statements for the year ending on 31 December 2018.

31- Approval of Consolidated Financial Statements The consolidated financial statements have been approved by the Board of Directors on 12/7/1440 AH (corresponding to 19 March 2019).

166

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