Annual Report Contents
Message to Business Key Figures Performances The Special the Board of Lines in 2020 Results in Adminstration Thanks Directors 2020 System
2 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 3 4 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 5 Message to the
Board of Directors 7 new restaurants were also opened, and new sale lines were added to the frozen meats and bakeries sectors. Our Dear Esteemed Shareholders at Herfy Food Services Company It is with great pleasure that the Company’s Board In accordance with the company’s expansion plan, 12 new restaurants will be opened in of Directors is presenting the Annual Report for the year 2021, as well as continuing increasing the sales lines for its industrial sectors. the fiscal year ending in December 31st, 2020. This report highlights the company’s activities The company, represented by its Board of Directors and executive management, will and most prominent achievements, as well as its continue its pursuit towards maintaining and increasing its market shares and towards financial results and auditors’ report for the year improving its performance, in addition to abiding to the disclosure and transparency 2020. policy through applying corporate governance regulations and other relevant Despite the exceptional economic challenges faced by the entire business sector in regulations issued by the Capital Market Authority and the Ministry of Commerce and 2020 due to the global pandemic of Covid-19, which in turn affected market competition Investment. and consumer spending behavior, and led to the closure of a number of activities, the company, with the grace of God, managed to maintain its market share in all its sectors. The Board of Directors is honored to discuss this report and answer any questions The company was able to generate annual profits as well as achieve growth in some of during the general assembly which will be held on the approved upon date by the its sectors, i.e bakeries, meat factory and the confectionary shops. regulatory authorities. 7 new restaurants were also opened, and new sale lines were added to the frozen meats and bakeries sectors. Lastly, we look forward to your compliace with the details mentioned in this report.
Please accept our sincere gratitude for your kindness and support.
Herfy Company Board of Directors March 2021
6 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 7 First: The Company’s Main Business Lines
8 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 9 The Company’s Main Business Lines
The company operates the below main business lines:
Herfy Food Services Co. is a Saudi joint stock Operation and management of a chain of fast-food chain of restaurants under its unique identity. company, registered in the Kingdom of Saudi Arabia under Ministerial Production of all kinds of baked goods in 2 factories in Riyadh, in addition to the operation and management of a chain of chocolate & confectionary shops, Resolution under its unique identity. No. (302 / S) on 11/22/1428 H and Commercial Registry No. 1010037702 dated 4/5/1401 AH
Production of all kinds of processed meats in the factory located in the city of Riyadh, under its own unique identity.
10 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 11 Company Timeline Facts & Figures
Establishment of Herfy Transformation of Herfy Food Food Services Company. Services Company to Joint Stock Company. Launch of Herfy’s 1st restaurant in KSA. Expansion of Herfy’s restaurant network to 172 branches in KSA.
33 million burgers sold in 2020
Opening Herfy’s bakery in Opening Herfy factory for cake KSA. and pastries.
Startup of Herfy’s factory Herfy’s restaurant chain for products used in becomes 368 branches serving meals and sandwiches at KSA. the 2nd Industrial area. years serving our restauranst across great nation the Kingdom
First year to begin Herfy’s restaurant chain supplying food products in becomes 388 branches serving online orders through the the Saudi market. KSA. application
12 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 13 Second: The Company’s Key Figures in 2020
14 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 15 Key Figures in Year 2020
A) Highlights & Summary B) Statement of Financial Position As of 31 December, for a period of 5 years, from 2016 to 2021(Million Saudi Riyals)
Net Sales Net Profit Assets 2016 2017 2018 2019 2020 52.84 Total Current Assets 301.943 305.393 339.143 849.350 367.304 Total Non-current Assets 1,040.119 1,085.283 1,103.257 1,614.682 1,581.774 nillion Riyals million Riyals
The net sales for year 2020 amounted The company achieved a net profit of Total Assets 1,342.062 1,390.676 1,442.400 2,463.033 1,949.078 to 1,076 billion riyals compared to 52.84 million riyals in 2020 vs. 196.09 1,288 billion riyals the preceding year. million riyals in 2019, resulting in a drop of 72.7% in net profit due to the Covid-19 pandemic impact. Liabilities & Shareholders’ Equity
Gross Profit Total Current Liabilities 241.600 268.880 298.656 408.116 401.989
Total Non-current Liabilities 297.753 254.981 210.876 627.360 587.694 million Riyals Total Liabilities 539.353 523.861 509.532 1,035.476 989.683
The Company’s gross profit in year 2020 amounted to 249.50 million riyals versing 392.63 million riyals in the preceding year. Shareholders’ Equity
Net Profit Capital 462.000 646.800 646.800 646.800 646.800 Operating Profits Statutory Reserve 138.968 38.972 59.389 499.80 85.783
71.148 Retained Profits 201.741 181.043 226.678 270.687 226.812 million Riyals million Riyals Total Equity 802.709 866.816 932.867 997.986 959.395 The company distributed 71.148 million The Company’s operating profits as profits to its shareholders during amounted to 91.33 million riyals in year 2020 at an average of 1.1 riyal /share, Total Liabilities & 1,342.062 1,390.676 1,442.400 2,463.033 1,949.078 2020 versing 238.5 million riyals in the for the second half of the year, and Shareholders’ Equity preceding year. those profits represented 11% of the nominal value/share.
16 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 17 C) Income Statement E) Analysis Of The Company’s Net Sales For 5 years, from 2016 to 2021 (Million Saudi Riyals) Based on the major business sectors over years 2019 and 2020 (Million Saudi Riyals)
Statement 2016 2017 2018 2019 2020 Major Sectors 2020 2019 change +/- change %
Net Sales 1,156.68 1,157.79 1,227.27 1,288.31 1,076.083 Restaurants 831.408 1,092.053 -260.645 -24%
Sales cost 809.080 816.05 882.20 895.67 826.494 Processed Meat Factory 75.355 43.815 31.540 72%
Gross Profit 347.60 341.74 345.07 392.64 249.589 Bakery, Factories & Other Sectors 169.320 152.442 16.878 11%
Net Profit 217.57 200.04 204.17 196.09 52.839 Total 1,076.083 1,288.310 -212.227 -16%
D) Comparative Income Statement For year 2020 in comparison to the preceding year 2019 (Million Saudi Riyals) Statement 2020 2019 change +/- change % Net Sales 1,076.083 1,288.310 -212.227 -16%
Sales cost 826.494 895.673 -69.179 -8% Company’s Net Sales Based on the major business sectors in year 2020 Gross Profit 249.589 392.637 -143.048 -36%
General & 99.190 85.476 13.714 16% Administrative Restaurants expenses
Sales, Marketing, & 84.003 85.573 -1.570 -0.2% 7% Distribution Expenses 16% Income from major 66.396 221.588 -155.192 -70% Bakeries operations
Other Expense & Income 77% Financing expenditures 33.132 37.858 -4.726 -12%
Net other income 24.935 17.416 7.519 43% Processed Meats
Income before Zakat 58.199 201.146 -142.947 -71%
Zakat 5.360 5.058 0.302 6% Restaurants Bakeries Processed Meats Net income for the period 52.839 196.088 -143.249 -73%
The drop in net profit is mainly due to the impact of the pandemic Covid-19
18 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 19 F) Net Sales Analysis G) Company Net Sales Based on geographic distribution within KSA for 2020 & 2019 (Million Saudi Riyals) For the period of 5 years 2016-2020 (Million Saudi Riyals)
Region 2020 2019 change +/- change % 2016 2017 2018 2019 2020 Central Region 628.880 747.212 -118.332 -16% 1,156.683 1,157.792 1,227.270 1,288.310 1,076.083 Eastern Region 137.398 167.483 -30.085 -18%
Southern Region 111.012 141.716 -30.704 -22%
Northern Region 100.855 103.066 -2.211 -2% H) Company Net Profit For the period of 5 years 2016-2020 (Million Saudi Riyals) Western Region 97.938 128.833 -30.895 -24%
Total 1,076.083 1,288.310 -212.227 -16% 2016 2017 2018 2019 2020
217.080 200.042 204.170 196.087 52.839 Geo-demographic Analysis
Northern I) Shareholders’ Equity For the period of 5 years 2016-2020 (Million Saudi Riyals)
2016 2017 2018 2019 2020
812.550 866.815 932.867 997.986 959.395 Central
Eastern Western J) Shareholders Profit Distribution Growth Rate For the period of 5 years 2016-2020 (Million Saudi Riyals)
2016 2017 2018 2019 2020
Southern 138.600 135.780 137.678 137.561 73.148
20 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 21 H) Outstanding Long-Term Loan at The End Of The Fiscal Year *During the period 2011 to 2017, the total bank facilities from Alrajhi Bank amounted to 610 In compliance with Shariah laws, Herfy Food Services Company is always compliant in its million Saudi riyal, with a maturity period of 5 years effective from the dates of any withdrawal financial dealings, especially with respect to loan policies, whereas all the company’s loans (In 2019 the company repaid an amount of 87.94 million Saudi riyal), and in 2020 it repaid an are issued according to Shariah laws, and hereafter is statement for statement for the long- amount of 46,17 million Saudi riyal. term loans that are obtained by the company: **Throughout the period 2005 to 2018, and pursuant to an industrial financing agreement, the Long-Term Loans Statement As On 31St Of December 2020 (In Million Saudi Riyal) company has executed a loan to establish the meat factory and subsequent expansions, at a total loan amount of 26.454,98 million Saudi riyal and maturity period of 6 years including a Loan Principle grace period of one year. Bank Name Maturity value 2020 2019 2018 2017 2016 /Lender of the loan /Year *** Over the period 2012 to 2018, and according to another industrial financing agreement at 4 70.000 47.516 93.690 181.627 296.896 321.451 Alrajhi Bank* an amount of (45 million Saudi riyal) to establish a factory for cake and bakery and to expand 120.000 production lines, the company withdrew a total amount of 37.98 million Saudi riyal based on a 160.000 150.000 maturity period of 6 years inclusive of a one year grace period. 110.000 In year 2019 the company repaid an amount of 10.3 million Saudi riyal and it also repaid an amount of 14 million Saudi riyal in year 2020. Saudi 6 16.579 3.642 17.630 27.911 32.934 39.103 Industrial 11.880 For additional clarification, please refer to the resolutions of paragraph 17 in correlation to the Development 45 financial statement and auditor’s report. Fund**/*** 3.6 ****Furthermore, it is vital to mention that on the 25th of January 2018, the company has entered Saudi British 5 15.6 110.218 83.984 15.702 Bank – SABB 70 into a Murabaha/Tawarruq agreement with Saudi British Bank – SABB, over a maturity period 30 of 5 years providing that the interest margin shall be priced every three month, and accordingly the company withdraw an amount of 15.6 million Saudi riyal in year 2018, and afterwards Alriyadh Bank 5 20 0 0 20.111 based on the same agreement it withdrew an additional amount of 70 million Saudi riyal in year 2019, and an additional amount of 30 million Saudi riyal in year 2020. In addition the Total 161.376 195.304 245.351 329.830 360.554 company has executed two repayments whereas it repaid an amount of 3.9 million Saudi riyal in 2020 and 1.9 million Saudi riyal in 2019. Minus: Rolling portion I) Total Outstanding Long-Term Loans Payment Schedule (Million Saudi Riyal): Alrajhi Bank 17.586 48.442 90.948 120.300 115.477 Years ending as on Commercial Banks Saudi Industrial Development Total Saudi Industrial Development 2.642 15.135 8.840 16.982 5.5 31 December (Saudi Riyal) Fund (Saudi Riyal) Fund 2021 121.954 2.642 124.596
Saudi British Bank – SABB 104.368 74.234 0.103 2022 18.524 1.000 19.524 Alriyadh Bank 0 0 0.111 2023 17.256 - - Total Rolling Portion 124.596 137.811 100.002 137.282 120.977 Total 157.734 3.642 161.376 Total Non-Current Portion 36.780 57.493 145.349 192.548 239.577 The repayments during year 2020 against long-term loan amounted to a total of 64.07 million Saudi riyal.
22 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 23 J) A Brief For The Company’s Plans, Decisions, And Future Forecasting
In-line with the company’s policies for business expansion, it is planned to launch 12 new Nevertheless, the company is determined to elevate its operational efficiency during restaurants in year 2021 at different regions in KSA, based on the new contemporary 2021, to control and decrease the influence of any increase in operating cost, which may interior design of the company’s restaurant, which was effectively approved by the include the increase of customs tariffs in connection to some types of raw material, and company’s management in year 2013. And despite the severe impact of the pandemic the increase expatriate labor fees, and the increase in commercial outlets licensing fees. COVID 19 which forced safety precautions and lockdowns, during the fiscal year 2020 the company exhibited the launch of 7 large-scale restaurants, wherein all these In year 2021 the company shall pursue its expansion in the sales force and distribution restaurants accommodated singles and family sections, as well as drive-thru service, fleet of the cake and pastry factory, and introduce new products in the retail market, to and home-delivery service, whereas this expansion represented a prolongation for the cope with the production capacity of the factory. company’s remarkable achievement starting in year 2015 by opening 45 restaurants, then launching 36 restaurants in 2016, and exhibiting 25 restaurants in 2017, plus 22 restaurants in 2018, in addition to 19 restaurants in 2019, towards reaching a total number of 400 restaurants by the end of year 2021.
Moreover, it is planned for in 2021 to further develop Herfy Mobile App to embrace Herfy’s restaurant chain, while 2021 shall also witness digital transformation in marketing, by applying it to the display of the restaurant menus, inside the restaurant and across the drive-thru area. Year 2019 witnessed the opening of the new outlet “Bakery House Duke” which has specialized in cakes, ice cream, and premium sandwiches, under the umbrella of 3 branches with a plan to expand into 5 new additional branches in year 2021.
In year 2021 the company’s meat factory shall maintain the introduction of new products in the retail market, as well as increasing sales channels among hypermarkets.
Furthermore, Herfy continues its journey as a world-class player to expand on a global It is noteworthy that the company has distributed profits in 2020, despite scale, in compliance with vision 2030 as announced by his royal highness the crown Corona’s pandemic, along its precautionary measures and lockdown of prince Mohammad Bin Salman, and therefore the company is anticipating its forthcoming economic activities, whereas an amount of 71.148 million Saudi riyal was presence in international territories, as Far East, Gulf region, and Africa. The company distributed in year 2020 against the 2nd half of the fiscal year 2019, as franchised 4 Herfy restaurant branches in Bangladesh along a 5th branch that opened approved by the General Assembly meeting held on 25/04/2020. recently in 2021, in addition to that, Herfy restaurant is present in Kuwait throughout 8 branches, and the company is currently into an advanced stage of negotiations to Furthermore, the company anticipates completing the finishing touches of penetrate Iraq marketplace, while a non-binding memorandum of understanding is the office building, which is owned and constructed by the company, across executed to establish 50 branches in Nigeria, by launching 5 branches every year over King Fahd road at Al Aqiq neighborhood. 10 years.
24 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 25 Third: Business Lines Performance Results in 2020
26 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 27 A. Restaurants B. Processed Meats Located in the industrial zone since 2005, the factory operates using state-of-art technologies to provide all the needs of the restaurants of processed meat and poultry, and that is to ensure the quality of products used in the restaurants. new restaurants total number of The factory also produces high-quality products to consumers through a wide range of supplies in 2020 Herfy restaurants to the major markets and stores in the Saudi market. The fiscal year ending on December 31, 2020 witnessed a remarkable increase in the market sales value of meat factory products reaching 75 million riyals, compared to 43.8 million riyals The company opened 7 new restaurants in the year 2020, to become a total of 388 operated in 2019, with an increase of 42%. restaurants, whether owned or rented, by the company as of 31 December, 2020, which were The confrontation of the pandemic led to a decrease in the sales value of the restaurants 383 restaurants in December 31, 2019. sector in 2020, which amounted to 80.4 million riyals compared to 101.4 million riyals in 2019, a decrease of 20%. The net profits of the meat factory increased to reach 50 million riyals The restaurant sector is the company’s leading business line, as its revenues represent during the fiscal year ending on December 31, 2020 compared to 41 million riyals in 2019, an about 84% of the company’s revenues. The company’s operation is based on continuous increase of 9 million riyals, at a rate of 22% compared to the previous year, 2019. expansion plans of the restaurants, by opening new restaurant branches annually, taking into consideration the geographical expansion to cover all parts of the Kingdom.
Existing restaurants have also underwent an interior and exterior renovation based on a new design. This represents a distinct shift in the external appearance and interior design, in order to be able to better serve our customers in an attractive and comfortable environment.
In response to the global pandemic that started in 2020, a compliance with the prevention methods had to be taken into consideration, which included closing Herfy restaurants in commercial centers, and limiting the service to some restaurants to: Home delivery orders C. Bakeries & Others Reducing working hours in branches Launched in 2012 in Almurouj district for bakeries and in the Industrial City for cakes & This led to a decrease in sales to 831 million riyals pastries, these factories operate 4 product lines led by the burger buns. The production of in 2020 compared to 1092 million riyals in 2019, akes & croissants started in 2015. A total number of 10 shops in Riyadh have been opened with a decrease of 24%. to showcase elegant desserts and chocolates. In early 2019, 3 shops were opened that are Losses amounted to 30 million riyals focused on luxury retail of desserts, icecream sandwiches and other delicacies, and another 5 aagainst a profit of 123 million riyals in 2019. more shops are scheduled to open in the year 2021. Total bakeries sales amounted to 186.16 million riyals during the fiscal year ending on December 31, 2020, at an increase of 7% over the sales of the previous year 2019. Internal sales value of that sector amounted to 16.8 million riyals, and the market sales of the bakery products increased in 2020 to 169.3 million riyals compared to 152.4 million riyals in 2019, at an increase of 11%. The company is expected to continue its expansion plans for that sector by continuing to increase the capabilities of the sales and distribution fleet, as well as increasing the sales team to utilize the available production capacities.Net profit of the bakeries and other activities sector increased to 32.75 million riyals during the fiscal year 2020 compared to 31.7 million riyals in 2019, at an increase of 3% - compared to the previous year 2019.
28 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 29 Fourth (A): Due paid regulatory payments as on 31/12/2020 to empower the process of disclosure and transparency, whereas the company fulfilled the Amount in thousand Saudi Riyal requirements of the Saudi Capital Market Authority and the Ministry of Trade and Investment, with respect to the implementation of the list of corporate governance and disclosure policies Statement 2020 that are not executed by the company and the reasons for that. Since year 2010 the company issued “Herfy’s Corporate Governance Regulations Manual” upon approval by the company’s Paid Due at the End of the Brief Justification board of directors, wherein this manual accommodated the provisions, policies, procedures, Fiscal Year and Not Paid Description rules, standards, including the specific regulations and declared rules that governs dealings Zakat 5,359.98 5,057.70 brief description Regulatory Zakat and relationships with the company’s shareholders and stakeholders, based on preset declared payment against laws and procedures, in accordance to the policies of the Saudi Capital Market Authority and the year 2020 company’s corporate system, and the company’s Corporate Governance Regulations Manual, and the company’s articles of association. The manual as well defines the business practices Regulatory taxes that are conducted by the company and not mentioned in the aforementioned rules, policies, Tax Qualitative tax payment against 68,077.51 7,994.44 December 2020 and regulations. In addition Herfy’s Corporate Governance Regulations Manual is under regular development in accordance to changes that may possibly occur in laws, policies, and regulations issued by the respective regulatory bodies. The company disclosed a statement in General Regulatory Organization subscriptions in subscriptions form no. 8 listing the corporate governance regulations that are implemented and those which For Social 15,607.50 2,382.83 social insurance payment against are not. It is notable to mention that the provisions that are not implemented by the company Insurance 2020 December are few indicative terms, including other policies that are partially implemented in connection to updates for the company’s executive plan, goals and policies, to be in synergy with the dynamics of the business sector, as elaborated in the list hereafter: Expenses Against Visas 37,354.50 - fees against issuing Systemic And Pass- Iqamas and visas regulation ports Article/Section Paragraph/Article Partially Un- Reasons & Details Implemented implemented Article 21 The company’s board of The Board of Directors has Labor Office 646,009 - fees against issuing Systemic /Section B directors is liable for the authorized the company’s CEO Fees the labor office work regulation business practice, despite by the power of the regularity permit any delegation given to authorities, to be responsible committees, or bodies, or for practices such as buying individuals to perform some and selling, controlling of its responsibilities. In agreements and business deals. Fourth (B): Statement of values against any investments or other reserves that addition, under all conditions, This authority is integral to are issued for the benefit of the company’s employees: it is prohibited for the smoothly manage the company’s company’s board of directors administrative and executive The company provides its employees with loans, and advanced payment, and credit facilities to issue types of delegations performance. for some purchases and services, in which those payments are duly collected by installments that are general or not timebound. from the monthly salaries, whereas the balance of those credit lines reached a total amount of 1.02 million Saudi riyal as on 31/12/2020 with a decrease of 0.85 million Saudi riyal in Article 26 It is within the company’s Whereas the changes and /Part 2 executive management developments witnessed in the comparison to the balance as on 31/12/2019. responsibility to advocate business sector shall have a and execute policies and direct impact on the execution mechanisms with respect of policies and mechanisms to investment, financing, that relate to investment, Fifth: Implementations of the Corporate Governance Regulations, risk management, and crisis financing, risk management, and management. crisis management, therefore Unimplementations, and Their Reasons the company’s executive The company abided with mainly all the corporate governance policies issued by the Saudi management is in the process of completing those updates for Capital Market Authority, in recognition by the company to the importance of those policies the policies that shall cope with the current and future changes in the business sector.
30 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 31 Article/Section Paragraph/Article Partially Un- Reasons & Details Article/Section Paragraph/Article Partially Un- Reasons & Details Implemented implemented Implemented implemented
Article 39 1- Preparing orientation programs As for the members of Board of Article 41 c) The performance appraisal has Assessment is conducted without Section 1-2 for the newly appointed executive Directors and the executive directors, Clause A, B, to accommodate the skills and performance indicators measures management to introduce the they have to be exposed to the C, D, E competencies that are possessed company’s workflow and business company’s business activities and by the council, and specify its activities. its different respective sectors, by strength and weakness, in order 2- Establishing the necessary visiting those sectors to understand to improve weakness aspects mechanisms for the members their workflows and results. They via relevant methods such as the of the Board of Directors and the are authorized to correspond to the nomination of professional experts executive management, in order company’s executive management that are capable to elevate the to furnish training programs and for guidance, though most of the performance of the council, based courses for them on a regular Members of Board of Directors are on the assessment of the council’s basis, with the aim to sharpen their knowledgeable in the company’s performance with respect to knowledge and skills in their fields business sectors, nevertheless it is set business practices in general. of responsibility which relate to the to articulate the current mechanisms company’s activities. in the form of programs to reflect d) The individualized evaluation the witnessed expansion of the of the members of the Board of company, as well as the changes that Directors has to take into account the business sector is going through, the extent of the active participation which will cope with the plans and of the member, his level of activities of the company along its commitment to the performance of strategy, and it is expected to be fully his duties and responsibilities, and completed in light of its current state his overall contribution to Herfy, as an indicative policy and before with emphasize to areas that the it becomes a compulsory policy for council or management may believe implementation. they can improve, in addition to his attendance for the council sessions and its committees based on adequate time-allocation. a) The council of Board of Directors Assessment is conducted without Article 41 is accounted to set resolutions for a performance indicators measures e) Non-executive members of the Clause A, B, performance appraisal mechanism, Board of Directors have to conduct C, D, E in connection to the Board Members a periodic assessment for the and their committees including the performance of the chairman, executive management, wherein over a discussion session for the annual performance indicators this designated purpose without are issued based on a proposal engaging the attendance of the from the nomination committee, chairman, in order to identify whereas those performance strength and weakness aspects, indicators are defined to evaluate and propose remedies to further the extent of achievements with develop in accordance to the the company’s strategic objective, company’s interest. quality of risk management, adequacy of internal monitoring systems, and other parameters, for analyzing strength and weakness levels, to accordingly propose improvements in compliance with the company’s interest.
b) The performance appraisal has to be disclosed clearly in writing among the Board of Directors, including any personnel in charge for the appraisal mechanism.
32 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 33 Article/Section Paragraph/Article Partially Un- Reasons & Details Article/Section Paragraph/Article Partially Un- Reasons & Details Implemented implemented Implemented implemented
Article 70 Pursuant to a company’s Board The liability to monitor risks is Article 88 The Board of Directors sets These programs will be executed after of Directors resolution, a risk currently subject to the Board of the programs and defines the the General Assembly approves the management committee is formed Directors, which authorized the Chief necessary instruments to introduce policies that will be presented by the with a president and committee Executive Officer for Financial and the company›s initiatives in the field Board of Directors based on article (87) members that are mainly non- Administrative Affairs to follow up the of social works. which is indicative for guidance. executive Board of Directors, risks, and the roles of the committee and restricted to members are planned to be activated in the who possess adequate level of future, while this article is indicative knowledge in risk management and for guidance. financial affairs. In the event when the Board Since this article is indicative for Article 95 of Directors establishes a guidance, currently the Corporate specialized committee for Governance assignments are Article 71 Specializations of the risk It shall be specified upon the activation Corporate Governance, then the delegated to the Nominations and management committee. of the risk management committee, Board of Directors must delegate Remunerations committee. while this article is indicative for to the committee the respective guidance. regulations that are established in accordance with Article 94, and this committee must track any matters in relevance to Corporate Governance implementation, and Meetings of the risk management No meetings are conducted since the provide the Board of Directors with Article 72 committee risk management committee is not reports and recommendations at present, while this article is indicative least once per annum. for guidance.
2- Programs for the company’s This article is indicative for guidance Article (85) employees to grant them shares and it shall be implemented when it clause (2-3) in the company or portions from becomes compulsory. its achieved profits, in addition to a retirement program, under an independent fund to be established to finance such programs.
3- Introducing social organizations for the company’s employees
Article 87 The Ordinary General Assembly This policy shall be commissioned based on a proposal from the in light of the company›s updated council of Board of Directors, business strategy and executive it brings forward a policy that plans, and it shall be proposed to the ensures a balance among its goals General Assembly, while this article is and the ones the society aspires to indicative for guidance, the company achieve, with the aim of developing is already active with initiatives in the social and economic conditions corporate social responsibility. of the community.
34 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 35 Sixth: Company Administration System
36 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 37 Names Of Members of The Board of Directors, Members of Committees and Names Of Members of The Board of Directors, Members of Committees and Executive Management, Their Current and Previous Positions, Qualifications Executive Management, Their Current and Previous Positions, Qualifications and Experiences and Experiences
A) Members of the Board of Directors, December 31, 2020 B) Committee Members, December 31, 2020 Num Name Current Past Qualifications Experiences Num Name Current Past Qualifications Experiences Positions Positions Positions Positions 1 Issam Managing Managing Bachelor of Sci- Managing Director of Abdul Nomination and Remuneration Committee: Director of Abdul Director of Abdul ence and Statis- Kadir AlMuhaidib Company for Abdulkader 1 Eng. Ahmad CEO for CEO of Tashelat Bachelor’s degree Real estate investment, Kadir AlMuhaidib Kadir AlMuhaidib tics specialization 22 years, responsible for stra- Almuhaidib Altamtheel Marketing Co- in Civil Engineer- marketing and food industries Company Company from King Saud tegic planning, directing and Mohamed Alraeda CEO of Al Mashreq ing, University of University managing the group’s business, Alfaleh Company Contracting Co Petroleum and establishing joint projects and (Chairman of - CEO of Olayan Minerals alliances at local & internation- the Nomination Food Services Co, al level. and Burger King 2 Ahmad Hamad CEO and CEO and Master of Management of industrial and Remuneration Alsaid Managing Managing Business Admin- commercial companies and Committee) Director of Herfy Director of Herfy istration from the institutions operating in the 2 Eng. Motaz A businessman A businessman Bachelor of 25 years in investments, trade Food Food University of food industry sector and the Kusay Alazzawi who runs his own who runs his own Computer and corporate management Services Services California construction sector group of group of Engineering, King Company Company (Member of the Nomination and companies companies Saud University 3 Anis Ahmad CEO of Savola CEO of SEDCO Master of Over 27 years in financial and Remuneration Group Holding Group - Business private institutions Momenah Committee) General Administration Manager and (Honors) from The 3 Mohamed CEO of Astra Director of Bachelor of Management of companies and George Washington Industrial Group Investment Finance Sciences industrial establishments and Chief Credit University Alhagbani Officer at Bachelor of (Member of the Research at GOSI University of financial investments Samba Group Civil Engineering Nomination and - Director of the Virginia Mutual Fund at (Honors) from The Remuneration George Washington AlRajhi Bank University Committee) 4 Abdullah Retired CEO of the Saudi MSC in Industrial Cement and mining industries Abdullatif Alsaif Laboratories Cor- Engineering from - laboratories and material poration - General Arizona State Uni- inspection - management and Director of the versity - BSC in manufacture of food & dairy 4 Morhaf HR Executive Director of Human Master of Extensive experience in human Saudi Organiza- Mining Engineer- products Mohamed Director, Savola Resources at Information & resources tion for Industrial ing, BSC Indus- Alsamman Group Crystal Systems Estates - General trial Engineering, International Management, Uni- Director of Al-Safi University of Group versity of Chicago. Dairy Factories Washington Professional Studies in Human 5 Khaled Ahmad CEO for the General Manager Bachelor’s degree Real estate investment and Resource operation and of Investment at in Business food industries Alsaid Management production sector Herfy Food Administration, of Herfy Food Ser- Services Company University of vices Company Illinois 6 Motaz Kusay A businessman A businessman Bachelor of Com- 25 years in investments, trade Alazzawi who runs his own who runs his own puter Engineer- and corporate management group of group of ing, King Saud companies companies University 7 Ahmad CEO for CEO of Tashelat Bachelor’s degree Real estate investment, Mohamed Altamtheel Marketing Co- in Civil Engineer- marketing and food industries Alfaleh Alraeda CEO of Al Mashreq ing, University of Company Contracting Co Petroleum and - CEO of Olayan Minerals Food Services Co, Burger King 8 Mohamed CEO of Astra Director of Invest- Bachelor of Management of companies and Alhagbani Industrial Group ment Research at Finance Sciences industrial establishments and GOSI - Director of University of financial investments the Mutual Fund at Virginia AlRajhi Bank 38 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 39 Names Of Members of The Board of Directors, Members of Committees and Names Of Members of The Board of Directors, Members of Committees and Executive Management, Their Current and Previous Positions, Qualifications Executive Management, Their Current and Previous Positions, Qualifications and Experiences and Experiences
B) Committee Members, December 31, 2020 C) Executive Management Num Name Current Past Qualifications Experiences Num Name Current Past Qualifications Experiences Positions Positions Positions Positions Audit Committee: 1 Ahmad Hamad CEO and CEO and Master of Management of industrial and Managing Managing Business Admin- commercial companies and 1 Eng. Abdullah Retired CEO of the Saudi MSC in Industrial Cement and mining industries Alsaid Director of Herfy Director of Herfy istration from the institutions operating in the Laboratories Engineering from - laboratories and material Abdullatif Alsaif Food Food University of food industry sector and the Corporation. Arizona State inspection - management and (Chairman of Services Services California construction sector General University. manufacture of food and dairy the Audit Company Company Director of the BSC in Mining products Committee) Saudi O Engineering. 2 Khaled Ahmad CEO for the General Manager Bachelor’s degree Real estate investment and rganization for BSC Industrial Alsaid operation and of Investment at in Business food industries Industrial Estates. Engineering, production sector Herfy Food Administration, General Director University of of Herfy Food Ser- Services Company University of of Al-Safi Dairy Washington vices Company Illinois Factories 3 Saleh CFO and Senior Financial Master of Accounting and Finance 2 Saleh Muqbel Owner of the Executive Director Bachelor of Financial accounting and Abdulrahman Administrative Manager for Accounting Alkhalaf office of Khalaf of Internal Audit, Accounting, auditing Alfadel Officer at Herfy Alrajhi Capital. Sciences. (Member of the Certified Public National Water King Saud Food Services Financial Master of Audit Accountants and Company. University. Company Manager for the Financial Sci- Auditors Director of Poli- American Fellow- Manafea Equities ences, University Committee, not cies and Proce- ship for Certified Unit of Illinois, USA. in the Board of dures Public Bachelor of Directors) Department, Accountants (CPA) Business Saudi Telecom Administration, Company. King Saud University. 3 Dr. Ahmad Vice Dean of the Lecturer at PhD in Financial accounting and Abdullah College of the Accounting Accounting, auditing 4 Salem Bader Executive Director Operations Bachelor’s degree Management, operation and Almuneif Business Department, King University of of the restaurants Manager at in Accounting, development of restaurants (Member of the Administration for Saud University, Dundee. sector in Herfy McDonald’s University of New Academic Teaching Master of Food Services restaurants, USA Jersey Audit Affairs, King Saud Assistant, Research in Company Committee, not University Department of Financial Ac- in the Board of 5 Dr. Mohamed General Manager Director of Master and PhD in Food industries and services Accounting, King counting, Univer- of Planning & Planning & Business sector Directors) Alshareef Saud University sity of Glaxo Development, Development Administration Master of Science Herfy Food at Alromansiah in Accounting, Services Company Company University of Central Tennessee. Bachelor of Accounting, King Saud University 4 Dr. Abd Alraouf Independant First Deputy PhD in Financial Consulting Sulaiman Banja Financial Advisor CEO of AlAwwal Economics, (Member of the Financial Services University of Audit Company California Committee, not in the Board of Directors)
40 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 41 Member’s Names Of Inside/ Legal Entity Names Of Inside/ Legal Entity Name Companies Of Which a Outside Companies Of Which Outside Seventh: Names of Companies Inside/Outside the Kingdom of Which a Member of The Board of the a the Directors Is a Current Kingdom Member of The Board Kingdom Member of the Company’s Board of Directors is Currently/Previously a Member/ of Directors Is a Member/Manager in Its Board of Directors Manager at Their Board Previous Of Directors Member at Their Board Of Directors Member’s Names Of Inside/ Legal Entity Names Of Inside/ Legal Entity Elite Staff Company Inside the Limited Liability Muheel Facilities Inside the Limited Name Companies Of Which a Outside Companies Of Which Outside Kingdom Company, Management Co. Kingdom Liability Member of The Board of the a the Unlisted Directors Is a Current Kingdom Member of The Board Kingdom Ajdan Real Estate Inside the Unlisted Joint AlOula Real Estate Inside the Unlisted Member/ of Directors Is a Company Kingdom Stock Company Development Co. Kingdom Joint Stock Manager at Their Board Previous Company Of Directors Member at Their Board Of Tharwa AlSaudia Inside the Unlisted Joint BlomInvest Saudi Inside the Unlisted Directors Company Kingdom Stock Company Arabia Kingdom Joint Stock Company Savola Inside the Listed Joint Wathrah Real Estate Inside the Limited Group Kingdom Stock Development & Kingdom Liability Saudi Madinat Inside the Unlisted Joint AlArabia for Water Inside the Unlisted Company Investment Company Tharwa Company Kingdom Stock Company and Energy Kingdom Joint Stock Herfy Food Services Inside the Listed Joint Emaar Middle East Inside the Limited Development Company Company Kingdom Stock Company Kingdom Liability United Feeding Inside the Limited Liability, Saudi Tabreed Inside the Unlisted Company Manufacturer Kingdom Unlisted Kingdom Joint Stock Bawan Inside the Listed Joint Zohoor Alreef Inside the Unlisted Company Company Kingdom Stock Company Kingdom Joint Stock Amwal Aljyal Holding Inside the Limited Liability, Mayar Transport & Inside the Limited Company Company Issam Company Kingdom Unlisted Storage Company Kingdom Liability Abdulkader Panda Retail Inside the Unlisted Joint Ares Arabia Company Inside the Limited Issam Abdulkader Inside the Limited Liability Architecture Inside the Limited Almuhaidib Company Kingdom Stock Company Kingdom Liability Almuhaidib & Kingdom Company, Supplies Company Kingdom Liability Unlisted Abdul Kadir Inside the Unlisted Joint Al Yamamah Steel Inside the Unlisted Partners Company AlMuhaidib Company Kingdom Stock Company Industries Company Kingdom Joint Stock That Assawari Inside the Limited Liability, Masdar Commercial Inside the Limited & Sons Company Company Kingdom Unlisted Carpentry Material Kingdom Liability Company Almuhaidib Holding Inside the Limited Liability Thabat Construction Inside the Limited Inside the Limited Liability, International Timber Inside the Limited Issam Company Kingdom Company, Company Ltd. Kingdom Liability Alromansiah Limited Unlisted Kingdom Unlisted Company Kingdom Liability Abdulkader Company Almuhaidib Almuhaidib Inside the Limited Liability MEPCO Inside the Listed Joint Tanmiyat Alahlam Inside the Limited Liability, Ajdan Real Estate Inside the Limited Development Kingdom Company, Kingdom Stock Kingdom Unlisted Kingdom Liability Unlisted Contracting Co. Company Company Atheel Arabia Co. Inside the Limited Liability, United Feeding Inside the Limited Adar Real Estate Inside the Limited Liability Emdad for Manpower Inside the Unlisted Kingdom Unlisted Manufacturer Kingdom Liability Kingdom Company, Services Company Kingdom Joint Stock Development Co. Atheel Holding Co, Inside the Limited Liability, Inside the Unlisted Company Kingdom Unlisted Kingdom Inside the Limited Liability Al Salam Bank Inside the Public Joint AlQalaa Trading and Taj Alawfiya Co. Inside the Limited Liability, Inside the Kingdom Company, Bahrain Kingdom Stock Contracting Company Kingdom Unlisted Kingdom Unlisted Company, Listed Himma Logistics Co. Inside the Limited Liability, Kingdom Unlisted Mayar Food Company Inside the Limited Liability Nisaj Housing Inside the Limited Kingdom Company, Complex Real Estate Kingdom Liability Nestle Water Factory Inside the Limited Liability, Unlisted Co. Limited Company Kingdom Unlisted Masdar Company for Inside the Unlisted Joint Al Latifia Trading and Inside the Limited Manhal Water Factory Inside the Limited Liability, Building Materials Kingdom Stock Company Contracting Kingdom Liability Limited Company Kingdom Unlisted Buhairat Alkheir Real Inside the Limited Liability Amwal Alkhaleej Inside the Limited Alyanabeaa Water Inside the Limited Liability, Estate Development Kingdom Company, Investment Co. Kingdom Liability FactoryLimited Co. Kingdom Unlisted Unlisted Co. Shas Water Services Inside the Shas Water Services Inside the Limited Rafal Real Estate Inside the Unlisted Joint Albalad Alameen Inside the Unlisted Company Kingdom Company Ltd. Kingdom Liability Kingdom Stock Company Company Kingdom Joint Stock Development Co. Naqia Water Factory Inside the Company Limited Company Kingdom The National Housing Inside the Unlisted Joint Jadeer Logistics Inside the Limited Safnat Alarabia Inside the Company Kingdom Stock Company Services Company Kingdom Liability Contracting Company Kingdom
42 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 43 Member’s Names Of Inside/ Legal Entity Names Of Inside/ Legal Entity Member’s Names Of Inside/ Legal Entity Names Of Inside/ Legal Entity Name Companies Of Which a Outside Companies Of Which Outside Name Companies Of Which a Outside Companies Of Which Outside Member of The Board of the a the Member of The Board of the a the Directors Is a Current Kingdom Member of The Board Kingdom Directors Is a Current Kingdom Member of The Board Kingdom Member/ of Directors Is a Member/ of Directors Is a Manager at Their Board Previous Manager at Their Board Previous Of Directors Member at Their Of Directors Member at Their Board Of Board Of Directors Directors Riyad Bank Inside the Listed joint Merrill Lynch Inside the Unlisted Ahmad Altamtheel Alraeda Inside the Limited Alupco Aluminium Inside the Unlisted Kingdom stock company Kingdom of Saudi Kingdom Joint Stock Mohamed Commercial Co. Kingdom Liability Products Kingdom Joint Stock Arabia Company Alfaleh Company Savola Group Inside the Listed joint Technical United Inside the Limited Tashelat Marketing Inside the Limited Kingdom stock company Works Co, Kingdom Liability Company Kingdom Liability Arabian Cement Co. Inside the Listed joint Herfy Food Services Inside the Listed joint Sahel Markets Inside the Limited Kingdom stock company Co. Kingdom stock company Company Kingdom Liability Etihad Telecom Inside the Listed joint Mousa Almousa Real Inside the Unlisted Joint Sahel Transporation Inside the Limited Kingdom stock company Estate Co. Kingdom Stock Company Company Kingdom Liability Herfy Food Services Inside the Listed joint Sahel Investment Inside the Limited Kingdom stock company Co. Company Kingdom Liability Savola Food Co. Inside the Unlisted Joint Union Cell Company Inside the Limited Kingdom Stock Company Kingdom Liability United Sugar Co. Inside the Unlisted Joint Advanced Cell Inside the Limited Kingdom Stock Company Company Kingdom Liability Motaz Afyah Universal Outside Unlisted Joint Sahel Operations & Inside the Limited Kusay the Stock Company Maintenance Co. Kingdom Liability Alazzawi Kingdom Savola Group Inside the Listed joint SEDCO Holding Inside the Unlisted United Sugar Co. Outside Unlisted Joint Kingdom stock company Kingdom Joint Stock Egypt the Stock Company Company Kingdom Anis Herfy Food Services Inside the Listed joint Elaf Group Inside the Unlisted Alexandriah Sugar Outside Unlisted Joint Ahmad Co. Kingdom stock company Kingdom Joint Stock the Stock Company Momenah Company Kingdom Almarai Company Inside the Listed joint Dar Elaswaf Co. Inside the Unlisted AlMalikah Food Outside Unlisted Joint Kingdom stock company Kingdom Joint Stock Industries the Stock Company Company Kingdom Knowledge Economic Inside the Listed joint Ewan Universal for Inside the Unlisted AlFarasha Food Outside Unlisted Joint City Company Kingdom stock company Housing Co. Kingdom Joint Stock Industries the Stock Company Company Kingdom Savola Food Company Inside the Unlisted Joint SAMBA Universal Inside the Unlisted Qatrana Cement Outside Unlisted Joint Kingdom Stock Company Group Kingdom Joint Stock the Stock Company Company Kingdom Panda Retail Inside the Unlisted Joint Ready Mix Concrete Outside Listed joint Company Kingdom Stock Company and Construction the stock company Supplies Company Kingdom Kinan Real Estate Inside the Unlisted Joint Development Co. Kingdom Stock Company Saudi Industrial Inside the Limited Construction and Kingdom Company National Commercial Inside the Listed joint Kingdom stock company Engineering Projects Bank NCB Saudi Trading & Inside the Limited Diverse Foods Co. Inside the Unlisted Joint Kingdom Stock Company Technology Co. Ltd. Kingdom Company Factory (SATTEC) Dr. Soliman Fakeeh Inside the Unlisted Joint Kingdom Stock Company Mediators for Inside the Limited Hospital Development Kingdom Company United Sugar Co. Inside the Unlisted Joint Kingdom Stock Company Alkabeer holding Co. Outside Limited the Liability Kingdom
44 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 45 Member’s Names Of Inside/ Legal Entity Names Of Inside/ Legal Entity Eigth: The Formation of the Board of Directors and the Classification of its Name Companies Of Which a Outside Companies Of Which Outside Members as on 31/12/2020: Member of The Board of the a the Directors Is a Current Kingdom Member of The Board Kingdom Member/ of Directors Is a Based on Herfy’s Company Articles of Association, the members of the Board of Directors at Manager at Their Board Previous Of Directors Member at Their Herfy consist of 9 members, and upon the regular general assembly meeting on 23/04/2018 Board Of the Board of Directors were elected and reconstituted for a new session, over a period of three Directors years (starting from 01/05/2018 to 30/04/2021), and during this period, Ms. Huda Ali Rida; Mohamed Aljazira Capital Inside the Closed Joint National Inside the Public Joint Alhagbani Kingdom Stock Company Petrochemical Co. Kingdom Stock a non-executive member of the Board of Directors resigned on 30/06/2019, and the Board Company did not appoint a replacement. Currently the Board of Directors is comprised of 8 members, Astra Mining Co. Inside the Limited Bank AlJazira Inside the Public Joint Kingdom Liability Kingdom Stock 3 of them are independent members, and two of them are executive members, and 3 are Company non-executive members. The following list features the configuration and classification of the Herfy Food Inside the Listed joint Inside the Public Joint Board of Directors as on 31/12/2020: Services Co. Kingdom stock company Kingdom Stock Company Herfy Food Inside the Listed joint Printing & Inside the Listed joint Num Members Names Membership Classification Eng. A Services Co. Kingdom stock company Packaging Co. Kingdom stock company bdullah 1 Mr. Essam Abdulqader AlMuhaidib Non-executive Member Abdullatif Alqassim Cement Co. Inside the Listed joint Alsaif Kingdom stock (Chairman) company Private Laboratories Inside the Unlisted Kingdom Joint Stock Company 2 Mr. Ahmed Hamad Al Saeed Executive Member Elite Doctors Co. Inside the Unlisted (CEO) Kingdom Joint Stock Company Bazbaza International Inside the Limited Khaled Co. Kingdom Liability 3 Eng. Anees Ahmad Moumina Non-executive Member Ahmad Qitaf Real Estate Inside the Limited (Vice Chairman) Hamad Investment Co. Kingdom Liability Alsaid* Maslan Company Inside the Limited Kingdom Liability Herfy Food Inside the Listed joint 4 Mr. Abdullah Abdullatif Al Saif Independant Member Services Co. Kingdom stock company Inmaia Real Estate Inside the Unlisted Joint Investment & Kingdom Stock Company 5 Mr. Kahlid Ahmad Alsaeed Executive Member Development (Chief Executive Officer for Ahmed Alsaid Trading Inside the Individual Qitaf Real Estate Inside the Limited Operations and Production) Ahmad Est., Mama Sauces Kingdom Company Investment Co. Kingdom Liability Hamad Factory for Food Alsaid* Industries is affiliated to it 6 Eng. Moataz Qusai Al Azzawi Non-executive Member Herfy Food Inside the Listed joint Acacia Real Estate Inside the Limited Services Co. Kingdom stock Investment Co. Kingdom Liability company 7 Eng. Ahmad Mohammed Al Faleh Independant Member * Owning shares without occupying executive positions in these companies, except for Herfy Food Services Co.
8 Mr. Mohammad Abdullah AlHaqbani Independant Member
46 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 47 Ninth: Number of Meetings of the Board of Records with the Attendance Records Eleventh: Brief Description for the Committees’ Specializations and Tasks: As per the company’s articles of association, the Board of Directors is accounted to formulate the company’s strategies and future plans including general policies, and set financial Committees that are selected from the Board of Directors: objectives to approve them, and monitor business managerial practices, and evaluate the Herfy’s Board of Director formulates an adequate quantity of committees according to the overall performance of the company and its senior management, as well as to protect and company’s prerequisites and conditions, to enable its performance with efficiency, wherein empower the shareholder’s interests. The Company’s Board of Directors held 6 meetings those committees accommodate a sufficient figure of Board Members that are nominated from during the fiscal year 2020, as detailed in the following schedule: non-executive members and independent ones, in order to avoid any conflict of interest in their committees’ respective tasks, as to ensure the integrity of financial and non-financial reports, and examine business deals in connection to any members of the board, and to nominate memberships in the Board of Directors, and conform the individuality of the independent Member Membership Classification Meeting 1 11/3/2020 Meeting 2 20/4/2020 Meeting 3 9/9/2020 Meeting 4 26/10/2020 Meeting 5 15/12/2020 Meeting 6 30/12/2020 Notes members, and recommend remuneration for the members of Board of Directors, and infuse 1 Mr. Essam Abdulqader AlMuhaidib Non-executive (Chairman of the Board) 6/6 a clear compensation scheme to reward senior executives, whereupon the General Assembly meeting on 23/04/2018, the Board of Directors was elected for a period of 3 years, effective 2 Mr. Ahmed Hamad Al Saeed CEO 6/6 from 1/05/2018 till 30/04/2021, in addition to that members of the audit committee were 3 Eng. Anees Ahmad Moumina Non-executive 6/6 nominated for 3 years over the period 1/05/2018 to 30/4/2021. (Vice Chairman) The Board of Directors held its first meeting on 1/05/2018 wherein this meeting assigned 4 Mr. Abdullah Abdullatif Al Saif Independant 6/6 the nominations and remunerations committee, over a period of 3 years from 1/05/2018 to 30/4/2021, accordingly the committees that are derived from the Board of Directors to assist 5 Mr. Kahlid Ahmad Alsaeed Executive 6/6 the latter became two and they are the Audit committee and nominations and remunerations 6 *Eng. Moataz Qusai Al Azzawi Non-executive 6/6 committee. 7 Eng. Ahmad Mohammed Al Faleh Independant 6/6 As on 22/05/1017 the unordinary General Assembly approved the roles of responsibilities of the committees, based on the corporate governance laws that are issued on 13/02/2017, in 8 Mr. Mohammad Abdullah AlHaqbani Independant 6/6 addition the unordinary General Assembly held another meeting on 30/04/2019 and it decided * Members of the Board of Directors are representatives of the Savola Group. in that meeting to update the roles and responsibilities of the Audit committee as well as the nominations and remunerations committee, based on the following statement from the board Number of Company’s Requests for the Shareholders Registry in 2020: committees: As per the following schedule, the shareholder registry was requested 4 times: 1. Audit Committee Num Date Request Justification It consists of four members as they were elected by the General Assembly of the company on 1 18/4/2020 General Assembly Meeting 20/4/2020 23/04/2018, when it decided to appoint the Audit committee along its head, over the period 2 18/4/2020 Second Quarter of 2019 Profit Distribution 1/05/2018 to 30/04/2021, whereas one of the members was an independent member of the 3 11/11/2020 Other Board of Directors, and the other three members were from outside the Board of Directors, while two of them were specialized in financial affairs. The committee members consist of Eng. 4 6/12/2020 Other Abdullah AlSaif, Dr. Abdulraouf Banaja, Mr. Saleh Al-Khalaf, and Dr. Ahmad Al-Mouneef , and they exhibited five committee meetings in year 2020 in which their major tasks were executed Tenth: Actions taken by the Board of Directors to Inform its Members, Especially mainly to inspect the implementation of the internal audit system in the company, and verify Non-executive ones, with the Shareholders Propositions and Remarks about the extent of its effectiveness in carrying out its audit tasks, and introduce recommendations the Company and its Performance: in connection to developments that may apply to empower the audit system, and protect the The propositions and remarks of the shareholders are received through the company’s interests of the company including its shareholders and stakeholders. During the same year management and Investors Relationship Officer, in addition to direct correspondence over in 2020, the committee performed its duties based on the company’s corporate governance the General Assembly meetings, while all those mentioned inputs are documented based on laws, and Herfy’s corporate governance policy, and the Board of Directors resolutions, whereas statements and minutes of meetings held by the General Assembly, they remain accessible those scaled many roles and responsibilities, such as, not limited to: from executive and non-executive board members, whereas the Investors Relationship Officer is responsible to keep them informed, knowing that during this year none of the shareholders reported any remark or suggestion in connection to company and its performance.
48 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 49 • Check the initial and final financial statements and recommend to the Board of Directors As on 1/5/2018 the Nominations and Remunerations Committee was reconstituted in light for approval. of the election of the Board of Directors for its new session of three years starting from • Supervise duties of the company’s internal audit department to inspect the level of 1/5/2018 to 30/4/2021, and this committee consisted of Eng. Ahmad Mohammed Al Faleh, efficiency in implementation. Eng. Moataz Qusai Al Azzawi, and Mr. Mohammad Abdullah Al-Haqbani, in addition to Ms. • Review internal audit reports and follow up on the implementation of corrective measures Huda Ali Rida a non-executive member of the Board of Directors that ended its membership for the notes contained therein. upon its resignation on 30/06/2019, while Mr. Morhif Mohammad Al-Samman entered as a • Study the internal audit system and draw up a written report on its recommendations non-executive member from outside the Board of Directors as on 11/9/2019, whereas the regarding it. committee held two meetings over the year to track and execute its duties according to the • Recommend statutory accountants to the Board of Directors including who to hire or fire, Corporate Governance Regulations based on the following: as well as their fees, and make sure they are sovereign before appointment. • Inspect the notes of chartered accountants on the financial statements and track what has • Recommending to the Board of Directors the nominated members, in accordance to the been done in them. given rules and policies, while it is disregarded to nominate members who were involved in • Study the implemented accounting policies and analyze them to brief opinions and any case of dishonor or fraud. recommendations for the Board of Directors in this regard. • Review the annual requirements of the Board of Directors by conducting the pertaining • Review transactions with related parties. expertise to be furnished. The committee retains track of regular follow-up, for higher competency and proficiency, and • Review the structure of the Board of Directors and publish recommendations concerning it provided the Board of Directors with the results of the internal audit committee performance, possible changes. via the committee minutes of meetings and its annual report, and it included recommendations • Propose the appropriate mechanisms to assess the performance of the Board of Directors. in correlation to the competency and proficiency of the internal audit committee, whereas this • Verify the individuality of the independent members on a yearly basis and confirm the lack input is scheduled to be introduced to the Company’s General Assembly. of any conflict of interest in case any member is part a different company’s Board of Directors. • Set up clear policies for the nominations and remunerations of the Board of Directors and Below Is the List of the Audit Committee Members and their Meetings’ Attendance Report: Senior Management (CEO and Managing Director, Chief Executive Officer for Operations and Production, Chief Executive Officer for Financial and Administrative Affairs).
The committee is also accounted to periodically review the company’s corporate governance
Member Membership Classification Meeting 1 18/2/2020 Meeting 2 14/5/2020 Meeting 3 9/8/2020 Meeting 4 20/10/2020 Meeting 5 25/10/2020 Notes regulations and issue propositions and recommendations to the Board Of Directors in compliance with the company’s goals and interests, whereas the committee members names 1 Mr. Abdullah Abdullatif Al Saif Non-executive 5/5 (Independant Board Member) are listed hereunder along their meetings’ attendance report:
2 Dr. Abdulraouf Banja Committee Member, 5/5 not in the Board of Directors
3 Mr. Saleh Muqbel Alkhalaf Specialist in Financial Affairs, 5/5 Member Membership Classification Meeting 1 16/8/2020 Meeting 2 3/11/2020 Notes not in the Board of Directors 1 Eng. Ahmad Mohammed Al Faleh Chairman of the Board 4 Dr. Ahmad Abdullah Almuneef Specialist in Financial Affairs, 4/5 (Independant Board Member) 2/2 not in the Board of Directors 2/2 The position of the committee rapporteur is held by Mr. Ashraf Abdulfattah, Director of the 2 Eng. Moataz Qusai Al Azzawi Non-executive Board Member Internal Audit Department, and he attended all the committee meetings held in total of 5 3 Mr. Mohammad Abdullah AlHaqbani Independant Board Member 2/2 meetings. 4 Mr. Morhaf Alsamman Member not in the Board of 2/2 2. Nominations & Remunerations Committee Directors The company executes article (50 clause 7) from the corporate governance regulations, The position of the committee rapporteur is held by Mr. Ashraf Abdulfattah, Director of the wherein the Nominations and remunerations committees were merged under one committee Internal Audit Department, and he attended all the committee meetings held in total of 2 named Nominations and remunerations committee, whereas the committee was formed on meetings. 31/12/2020 to consist of four members including two independent members from the Board of Directors, and one non-executive Board of Directors member, and one member from outside the Board of Directors.
50 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 51 Twelfth: Evaluation of the Performance of the Board of Directors and its • They have to be in accordance with the nature of the company’s business, activity, and size, Committees in addition to the company’s prerequisites of essential skills and expertise. It is within the area of responsibility of the Nominations and Remunerations committee to assess the performance of the Board of Directors and its committees, wherein year 2019 • Remunerations have to be an attraction aspect to conduct members for the Board of Directors, witnessed the commissioning of an external independent body to assess the Board of among the calibers who possess distinctive academic and work expertise that can empower Directors, and for the same purpose a survey was conducted in year 2020 by the Nominations the company’s ability to meet its business goals. and Remunerations committee. • The remuneration is based on a specific amount, and it may be released to the members of the Thirteenth: Remuneration of members of the Board of Directors and Executive Board of Directors in the form of shares from the company’s profit, but without exceeding 10% Management of the company’s net profit, as governed by article (76) in the company’s law. Furthermore, it is vital to synchronize the specific amount of remuneration for the members upon the attendance Objective: report of each, in the presence of a maximum limit of five hundred thousand Saudi riyals not Herfy sets the remunerations policy for its Board of Directors and emanating permanent to be exceeded annually for each member, against his compensation which may include the committees, with an aim to organize a remuneration scheme that is capable to attract highly remunerations and other financial advantages. qualified calibers for the Board of Directors and its committees, for them to perform their duties with excellence and upmost efficiency, as a result of what Herfy is determined to achieve • It is permitted to grant additional remunerations for each of the Chairman and Managing in the remunerations policy. Director, apart from the designated remunerations that are provided to the members of Board Furthermore, Herfy aims to build up an attractive working environment that enables the of Directors and authorized by them. attraction of human assets with applicable skills, and it retains the latter to contribute in sustainable growth and meet Company’s goals, based on a remuneration scheme for its senior • The amount of five hundred thousand Saudi riyals, as governed by article (76) in the company’s management in compliance with the company’s policies and regulation in this regard. law, is the maximum limit and total remuneration that is permitted be paid against each individual membership in the Board of Directors, however this limit does not include any fees Rules and regulation governing remuneration: against the participation of the Board of Directors member in the Audit committee formed by It is based on resolutions that governs remunerations for the Board of Directors and its the General Assembly, and it does not compensate the Board of Directors member against any emanating permanent committees, as per the corporate system, and corporate governance additional executive positions and duties, that may entail a professional license for execution. regulations, in addition to the executive rules and regulations of the listed Joint Stock Companies, and the company’s articles of association, and the company’s corporate governance laws, • The company adopts a fixed payment scheme for the annual remunerations of the members whereas those remunerations are set for the Board of Directors and its emanating permanent of the Board of Directors, and they are released during the year based on board membership committees, according to the following: term.
A. Board of Directors Members and its Emanating Committees • A Member of the Board of Directors participating in the committees of the Board, is entitled to The Board of Directors determines the remunerations for it members and emanating permanent an annual remuneration of SAR 100,000 against his participation in one committee, whereas committees, based on a recommendation from the Nominations and remunerations committee, this current reward was approved in the General Assembly meeting on 30/4/2019 as to according to the following criteria: increase from SAR 50,000 to SAR 100,000, and it was reflected on the remunerations policies • The remuneration scheme has to be organized in compliance with the company’s strategic that apply to the members of Board of Directors, committees, and executive management. goals, and it shall be an incentive for the Board of Directors and its emanating permanent committees, to achieve the designated strategic goals and empower the company’s capacity • A committee member who is not part of the Board of Directors, is entitled to an annual towards developing and sustaining its business. remuneration of SAR 100,000, against his participation in one committee, whereas this current reward was approved in the General Assembly meeting on 30/4/2019 as to increase from SAR • Remunerations have to be fair and set adequately based on the expertise and responsibilities 50,000 to SAR 100,000, and it was reflected on the remunerations policies that apply to the of the members of the Board of Directors. members of Board of Directors, committees, and executive management.
52 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 53 • A head of committee, who is appointed from the Board of Directors or outside, is entitled to The Nomination and Remuneration Committee studies and compares the relationship between SAR 100,000 annually as a remuneration against his participation in one committee. the bonuses awarded and the applicable remuneration policy, and also studies deviations from that policy. • Members of the Board of Directors and its committees are entitled to an allowance of SAR The following is a statement that includes remuneration and payments to executive and non- 3,000 against each attended meeting, with an additional amount of SAR 2,000 for members executive board members, and five of the company’s senior executives, according to the who are not residents in Riyadh to compensate their accommodation and transportation. following: Remuneration of the members of the Board of Directors paid during the year 2020 (value in • The company has the right to claim a compensation, to repay all the remunerations and thousand riyals) costs that were incurred by the company, and released to a member of the Board of Directors, Fixed Bonuses who caused any damage for the company’s corporate reputation, as detailed in the following Expenditure Council Committee Received by members allowance for members from conditions: Sessions Sessions of the council as Fixed administrators, and what Total outside Riyadh Name Amount Attendance Attendance they were paid in return for attending Allowance Allowance for technical/advisory council • The initiation of a member of the Board of Directors for an act that may connote dishonor, sessions Total work corruption, fraud, or any action against the rule and regulations of KSA. First: Independant Members • The failure of a member of the Board of Directors to carry out his responsibilities, duties, and Abdullah Al Saif 300 18 15 0 333 0 tasks, in a manner that results harm for the company’s interests. Ahmad Alfaleh 300 18 6 0 324 0
• The termination of a membership in the Board of Directors based on the decision of the Mohamed Alhagbani 300 18 6 0 324 0 General Assembly, due to the absence of this member for three consecutive meetings in a Total 900 54 27 0 981 0 year, without submitting a vindication that is accepted by the Board of Directors. Second: Non-executive Members
• In the events when the Audit Committee or the Capital Market Authority, may realize that Issam Almuhaidib 300 18 0 0 318 6 certain remunerations were released to a member of the Board of Directors, based on false 300 18 and misleading information that were presented by the member. Motaz Alezzawi 6 0 324 0 Aniss Ahmad Momenah 300 18 0 0 318 6 B. Senior Executives: 900 54 Senior executives are entitled to fixed monthly wages plus other job allowances such as Total 6 0 960 12 housing allowance, transportation allowance, medical insurance, etc. In addition to that, the Third: Executive Members Board of Directors shall decide annual remunerations for senior executives, and based on the *Ahmad Hamad Alsaid 300 18 0 2719 3037 0 recommendation of the Nominations and Remuneration committee, in which the remunerations Khaled Ahmad Alsaid 300 18 0 915 1233 are based on the annual assessment and performance indicators of the executives, including 0 the following criteria: Total 600 36 0 3634 4270 0 • In compliance with the company’s strategic goals, as an incentive for senior executives, to * An amount of 1.657 million riyals includes fees for management at a rate of 3% of the profits before achieve the designated strategic goals and empower the company’s capacity to develop and the statutory reserve account, according to the decision of the Board of Directors, and based on the sustain its business. powers granted to the Board of Directors in the articles of association of the company. • In accordance with the nature of the company’s business, activity, and size, in addition to the company’s prerequisites of essential skills and expertise. The Board of Directors recommended to the General Assembly to spend 300,000 riyals as an • Capable to attract highly qualified calibers among senior executives, with distinctive academic annual bonus for each member of the Board of Directors for the year 2020, to be disbursed and professional track records and able to achieve the company’s objectives. according to the term of membership of the Board of Directors, and the Board of Directors • In line with a benchmark that evaluates remunerations based on market prices in other recommended that an additional remuneration be paid to the Chairman of the Board of 176,000 companies. riyals, bringing the total remuneration of the proposed Board of Directors for In 2020, the value • In correlation to jobs level, duties and responsibilities, skills and performance levels, including of 2.576 million riyals will be disbursed upon voting with approval after the general assembly academic and professional records. meeting.
54 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 55 Remunerations Paid to Members of Board Committees In 2020 (In Thousand Riyals) Fourteenth: Any penalty, punishment, precautionary measure, or precautionary restriction imposed on the company by the authority or by any supervisory, Fixed Session Relocation Total regulatory or judicial authority, the causes of the violation, the party that signed Name Annual Attendance & Living in Thousand Bonuses Allowance Allowances* Riyals it, means of treatment and avoiding its occurrence in the future. Government Entity Violation Type Total Fines Suggested Solutions Audit Committee Region Sub- municipality 494,000 SAR Eng. Abdullah Alsaif, Committee 100 15 - 115 Non-compliance with the Preseident, Independant Board Member Saudi Food and Drug emergency requirements Implementing Authority surrounding 1500 SAR requirements Dr. Abdulraouf Banjah 100 15 2 117 Covid-19 Pandemic in progress not in the Board of Directors Ministry of Commerce and Investment 1000 SAR Mr. Saleh Alkhalaf 100 15 - 115 not in the Board of Directors Fifteenth: Results of the annual review for the efficiency of the internal control Dr. Ahmad Abdullah Almuneif 100 12 - 112 procedures not in the Board of Directors The company’s internal control system is based on sound foundations, with the presence Total 400 57 2 459 of a specialized department in the field of auditing and internal control, and its efficiency is Nomination and Remuneration Committee strengthened through the presence of the audit committee, which supports the reinforcement of best practices in the field of control and governance. The audit committee shall be presented Mr. Ahmad Alfaleh 100 6 - 106 Preseident, Independant Board Member with reports for the sectors and activities subject to audit, in a way that enables continuous assessment for the internal control system and its extent of efficiency, whereas the internal Eng. Motaz Alezzawi 100 6 - 106 Non-executive Board Member audit department ensures it duty is met in accordance to an annual plan that is initiated by the department and approved by the audit committee, for the purpose of maintaining the Mr. Mohamed Alhagbani 100 6 - 106 internal control system towards guarding the company›s assets and identifying business Independant Board Member risks. Furthermore, the company’s management shall continue tracking the implementation Mr. Morhaf Alsamman 100 6 - 106 of the control procedures, and rectify any deficiency in the internal control system, whereas not in the Board of Directors its procedures shall be regularly updated and developed to cope with the current changes Total 400 24 - 424 and the size of company’s expansion. It was evident during year 2020 that the internal audit * Relocation and living expenses allowance for members who do not reside in Riyadh. department did not report any substantial weakness in the company’s internal control system. Remuneration for Senior Executives (In Thousand Riyals) Nevertheless, the results that are derived from the examination of the internal control system Total executi- are taken care of by the company, and the observations that are revealed are dealt with, and End of ves Total alterations are treated to prevent their recurrence by issuing the respective regulations. Name renume- Salaries Allow- Benefits Total Periodic Total Service Sum The results of the internal audit reflected the efficiency and proficiency of the company’s ances* Bonuses Bonus ration, if any internal control procedures, as presented by the internal audit committee to the Board of CEO & Managing Director 780 260 - 1040 1679** 2719 - 300 319 Directors through the committee’s minutes and annual report, which portrayed the outcomes Chief Operating Officer & 712 178 - 890 25 915 - 300 1215 of the internal audit, and its recommendations in connection to the efficiency and proficiency Production Sector of the company’s internal audit, whereby it implicated a prerequisite to finalise the process of 3 Senior Executives incl. 2805 1397 141 4343 70 4413 - - 4413 publishing and updating the company›s internal policies, in order to cope with current changes CFO*** including the size of the company›s expansion, in addition to the consideration of any repetitive * Includes transportation allowance, housing allowance, vacation pay allowance, travel allowance ... remark that is reported as well by the Internet Audit department. etc. Therefore, the company’s internal control system and procedures are effective, as per the ** Included amount of 1.657 million riyals the fees for management at a rate of 3% of the profits before outcomes of the annual audit which did not highlight any substantial observations, while the the statutory reserve account, according to the decision of the Board of Directors, and based on the powers granted to the Board of Directors in the articles of association of the company. audit committee’s report shall be presented to the forthcoming General Assembly, and it is *** The company undertook to disclose the components of the senior executives’ remuneration in currently available with the company’s management for the Shareholder’s examination. total in accordance with the statutory requirements contained in subparagraph (4) of Article 93 of the Corporate Governance Regulations, but the company disclosed the remuneration and compensation of senior executives in line with Paragraph (b) of Article ( 60) of the Rules for the Offer of Securities and Sixteenth: The prerequisite to appoint an internal auditor Continuing Obligations. The audit committee did not recommend the appointment of an internal auditor, since the company has an internal audit department.
56 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 57 Seventeenth: The Existence of a Conflict between the Recommendations of the Audit Ninteenth: General Assemblies Held in 2020 Committee and the Decisions of the Board of Directors. A general assembly was held on 20/4/2020, and the following is the attendance record The Audit committee did not present in its recommendation any contradictions with, and in members of the Board of Directors: between the Board of Directors, and it did not report any rejection by the Board of Directors, Name General Assembly Attendance with respect to the appointment or dismissal of a company auditor including the determination in 20/4/2020 of his respective fees and assessment, in addition to the appointment of the internal auditor. Mr. Issam Abdulkader Almuhaidib (Chairman of Board of Directors)
Eighteenth: Details of the Company’s Social Contributions Mr. Ahmad Alsaid (CEO) In light of Herfy’s persistence to contribute in the development of the society where it belongs, Mr. Aniss Momenah (Deputy Chairman of the Board) the Board of Directors shall set respective social responsibility programs and define their necessary means to activate them further. In year 2020 the company exhibited notable Mr. Abdullah Alsaif contributions in corporate social responsibility via monetary releases and in-kind giveaways from Herfy’s products. Furthermore, the company endorsed Aamal Organization for the Mr. Khaled Ahmad Alsaid Development of the Family and Community, and it initiated several economic and social participations to mitigate the impact of the pandemic Covid-19, as per the activities listed Eng. Motaz Alezzawi hereunder during 2020: Eng. Ahmad Mohamed Alfaleh A- Participation via in-kind contribution from Herfy’s products • Care for the Prisoners in Riyadh (Tarahoum) Mr. Mohamed Alhagbani • Endorsement for patients with Autism Spectrum Disorder • Celebration of the national day ceremony with Orphans and their sponsoring families Twentieth: Description of Any Interest, Contractual Securities & Subscription • Engagement in the “Happiest Human” initiative, done for charity winter clothing. Rights of members of Board of Directors, Senior Executives and their Relatives • Endorsement for Disabled Children’s Association in the Shares/Debts of the Company: • Bonyan organization None • Participation at “Mawaddah Charity association” on Mother’s Day A. Members of the Board of Directors # of shares in # of shares in Net change Percentage • Sponsorship for Dar Al Uloum School end-of-year event early 2020 late 2020 through the of Change • King Faisal specialized hospital and Research Center year (share) • Participation with “Itaam association” in the global day for voluntary work 1 Mr. Essam Abdulqader AlMuhaidib 1,960 1,960 - - Chairman of the Board • Al-Wafa Women Charity Association • The Comprehensive Rehabilitation Center for Females 2 Mr. Ahmed Hamad Al Saeed 13,130,040 13,130,040 - - • Al Milwan Endowment Establishment CEO • Sarah Al-Bahli House • Ad Diriyah Gate Management ceremony 3 Eng. Aniss Ahmad Mouminah 64 64 - - Vice Chairman • Tahfeez Al Quran school at Ad-Dweish mosque in Al-Fayha neighborhood • Al-Awqaf Health Fund 4 Mr. Abdullah Abdullatif Al Saif 140,000 140,000 - -
B. Participation through Cash Contribution 5 Mr. Kahlid Ahmad Alsaid 179,701 73,609 106,092 -59% Amount From Chief Operation & Production Officer - 10,000 SAR Disabled Childrens Association (Sponsor of Illustration Book) 6 Eng. Moataz Qusai Al Azzawi 1,400 1,400 - 50,000 SAR FatayatAlqassim (Diamon Sponsor) - 7 Eng. Ahmad Mohammed Al Faleh - - - 50,000 SAR Qoot Dates Festival (Golden Sponsor) - 8 Mr. Mohammad Abdullah - - - 10,000 SAR King Saud University Graduate & Career Week AlHaqbani 50,000 SAR Fitr Eid Celebrations of Riyadh Municipality There is no interest, contractual securities and subscription rights belonging to relatives, members of the Board of Directors of the company and Senior Executives, in the shares/debts of the company.
58 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 59 Twentyfifth: Profit Distribution Policy The company’s annual net profits are distributed after deducting all general expenses and B. Senior Executives other costs as follows: Senior executives do not own any shares or have a direct/indirect interest in the company as on 1/1/2020 and 31/12/2020, except for Mr. Ahmad Hamad Alsaid, CEO & Managing Director, 1- From the net profits, (10%) is set aside to top up the statuary reserve, whereas this deduction and Mr. Khalid Ahmad Alsaid, Chief Operation & Production Officer, who own shares that were may be spared by the General Assembly, when the statuary reserves becomes equivalent to disclosed through a statement of the shares of the members of the Board of Directors. 30% of the paid-up capital. 2- A percentage of the net profits may be set aside to form a contractual reserve, for purposes C. Persons Other than Members of the Company’s Board of Directors, Senior to be determined in its due course by the Board of Directors. Executives, and their Relatives 3- The Ordinary General Assembly may decide to set up other reserves, to an extent that The company was not informed by any person other than the members of the company›s board achieves the company’s interest or secures the distribution of fixed profits among shareholders of directors, chief executives and their relatives of any statement disclosing the ownership or and the aforementioned assembly, and it may also deduct from the net profits to establish interest of what is equivalent to 5 % or more of any of the classes of shares with voting rights social organizations for the company’s employees or to endorse the ones which are already or debt instruments that are convertible into shares. present. 4- From the remainder a profit share of no less than (5%) of the paid-up capital is released to Twentyfirst: Listing the Main Owners. shareholders. A statement of the names, number of shares, and percentage of ownership of the main 5- Accordingly onward the aforementioned a percentage that does not exceed (10%) of net shareholders who possess 5% or more in year 2020: profits shall be allocated as a remuneration for the members of the Board of Directors, wherein the total value of financial and in-kind rewards received by the member must not exceed SAR
# of Shares Ownership # of Shares Ownership 500,000 annually, as per the conditions set by the competent authority. Investor Nationality beginning % beginning end % end 6- The company may distribute semi-annual profits or quarterly profits, onward fulfilling the of 2020 of 2020 of 2020 of 2020 regulations set by the respective jurisdiction parties. 7- The company may not authorize the distribution of profits among shareholders upon a Safola Group Saudi Company 31,693,200 % 49 31,693,200 % 49 decision of the Board of Directors that is approved by the General Assembly. Mr. Ahmad Alsaid Saudi 13,130,040 % 20.3 13,130,040 % 20.3 In accordance to the company’s policy, the Board of Directors has decided in its session held on 19/4/2010 to distribute semi-annual profits starting from year 2010, and the Board of Directors authorized the assessment of this foresaid decision on a regular basis based upon its urgency to do so, and furthermore it has been decided to set a maximum limit for the Twenty-second: A description of the categories and numbers of any debt distribution of net profits in equivalence to 70% of the company’s net profits. instruments convertible into shares, and any contractual securities or subscription rights notes or similar rights issued by the company or granted The following statement illustrates the percentage and total of profits distributed in year 2020, during the fiscal year, with an explanation of any compensation that the including other suggested profits against year 2020, as per the company’s declaration through company obtained during the fiscal year: Tadawul on 9/3/2021. Not available
The percentage of distributed profits during year Percentage of Total Twenty-third: A description of any transfer or subscription rights based on 2020, on the distribution date 7/5/2020, against suggested profits Profit convertible debt instruments, contractual securities, subscription rights notes, the 2nd half of year 2019. against year 2020 or similar rights issued or granted by the company: Not available Percentage % 11 % 10 -
Total (Riyal) 71,148,000 *64,680,000 135,82,8000 Twenty-fourth: A description of any redemption, purchase, or cancellation by the company of any recoverable debt instruments, and the value of the remaining securities, with distinction between the listed securities purchased * Not yet distributed and recommended to the General Assembly by a resolution to pass through the by the company and those purchased by the company’s subsidiaries: Board of Directors on 9/3/202, and it shall be released upon the approval of the General Assembly, Not available whereas the profits are 35 million Saudi Riyal from the profits of year 2020 and 29,68 million Saudi Riyal from the balance of earlier retained profits.
60 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 61 Twentysixth: Dealings with Related Parties The company has been operational in the Saudi market for a period of 40 years, and it has transactions and agreements to lease real-estate, buy raw material, and sell products, over Responsible Description Type of Number of Notes extended long-term relationships with related parties, such as Kanan Co. and Al Azizia Panda Parties Contract Contracts Hypermarket Co. (subsidiaries of Savola Group), Mr. Ahmad Alsaid, Mr. Khaled Alsaid, Bazbaza Bazbazah Board member Renting 3 Herfy 3 Herfy 139 is in Tabuk, with a rental International Mr. Khaled Alsaid locations num value of 125,000 riyals. The lease c for International Trade, Qitaf Company, Almarai Company, AlMottahida for Sugar, and Taza Company (lessor) owns 139, 312, 360 ontract is since 2007 for a period of 10 shares in it years and is being renewed. Restaurant Chain, whereas all involved parties are represented in the company’s Board Herfy 312 is in Taif, with a rental value of Directors, either in person or through the companies they represent, and hereafter is a of 150,000 riyals annually, the duration of the contract is 7 years, starting from statement detailing the nature and size of transitions among the mentioned parties, in 2020. 10/2016. A. Rental Contracts Herfy 360 is in Makkah Al-Mukarramah, Sharaya Al-Mujahideen, with an annual Responsible Description Type of Number of Notes rental value of 160,000 riyals for a Parties Contract Contracts period of 7 years, starting from Panda Subsidiaries to Renting 7 Herfy 7 The stores are located in 01/07/2017. Company Savola Group locations num Riyadh. Rent amount Khaled Ahmad Board Member Renting 2 Herfy 1 The land is in AlAhsa area, the rent val- represented by 3, 7, 10, 15, 170, represents a percentage of sales Alsaid (Lessor) land 143 ue is 200,000 riyals, area is 1354 square the Board of 157, 13 ranging between 8% - 10% annually. meters, the contract is since 2007 for a Directors (rented) Some contracts date back to 1995 and period of 20 years. for members of 1 Herfy Cafe are being renewed, with a total of 1.756 Bazbazah Board member Renting 3 Herfy 3 2 stores are located in Riyadh, and the the board: previously million riyals. International Mr. Khaled Alsaid locations num third in Makkah, with a rental value of - Mr. Issam Company (lessor) owns 77, 321, 220 78,000 riyals, 119,000 riyals, and 50,000 Abdulkader shares in it riyals, respectively. The contracts go Almuhaidib Renting 5 Herfy 5 The shops are located in back to 2002 for a period ranging from - Eng. Aniss locations num Riyadh, except for 174 and 37 Herfy 5-20 years and with renewal. Momenah 17, 126, 141, 174, restaurants in Buraidah and Jizan, - Eng. Motaz 37 respectively. Total rent is 769,000 Qitaf Company Board member Renting a fully 1 The building is located in Dawadmi area Alezzawi riyals (the shop’s rent ranges between Mr. Khaled Alsaid finished building (Herfy 203) next to Panorama Al 100,000 riyals and 300,000 (lessor) owns of two floors Dawadmi Commercial Center. The riyals). Some contracts date back to shares in it contract period is 20 Hijri years starting 2005 and are renewed. from 1/3/1433 AH. The rental value is 400,000 riyals annually for an area of Rental value of 300,000 riyals annually, 680 meters. Renting Herfy 1 dating back to the contract for the year land 191 2012 Renting a fully 1 The store is located in Buraidah finished building (Herfy 232). The contract period is 18 Rental value of 50,000 riyals annually, years and ten months starting from Renting labor 1 dating back to the contract for the year 10/10/2013 - including a grace peri- housing 2012 od of 40 days - the rental value is 250 1 Herfy Cafe thousand riyals annually for an area of previosly 158 meters.
Renting a partially 1 A store located in Al-Kharj (Herfy 177). Kinan Renting 2 Herfy 2 The first store is located in Yanbu, and finished building The contract period is 19 years starting International locations 171 and the second is located in Al-Rimal Center from 1/1/1436 - preceded by a grace Compant for 109 and a 1 in Riyadh. The rent of the stores is period of 3 months - the rental value is Real Estate warehouse 9% and 10% of the sales, with a value 450,000 riyals annually for an area of of 66.45 thousand riyals and 91.48 Development 1000 meters. thousand riyals, and the rent of the warehouse is 4800 riyals, the date of the Renting concrete 2 The shops are located in the cities contract goes back to 2006 structure of Afif, Al-Shammasi Buraidah Herfy Ahmad Hamad CEO and Renting 2 2 The two buildings in AlMorouj area and buildings Restaurants 333, 373 with an annual Alsaid Managing Director residential the industrial zone. The total rent is rent value of 400,000riyals, 500 ,000 (Lessor) buildings 200 thousand riyals and 180 thousand riyals 23 years, 18 years and the riyals, going back to 1991 and 2002, and contracts were signed on 8/2015. the duration of each contract is 3 years and is being renewed.
Renting land for 1 The land is in Abha, the rent value is 250 Herfy restaurant thousand riyals, an area of 1300 square 40 meters, the contract dates back to 2009 and is for a period of 15 years.
62 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 63 B. Purchasing Raw Materials C. Products Sales
The company purchases its raw materials and products from affliate companies of related The company markets part of its bakery products and meat factory products through affiliate parties, and the below is a detailed statement of the transactions made in the year 2020: companies. Below is a detailed statement of the transactions made in the year 2020:
Responsible Description Type of Purchase Value / 2020 Responsible Description Type of Purchase Value / 2020 Parties Contract Parties Contract Afiah A subsidiary of Savola Purchasing cooking oils for 2,810,638 Riyal Panda A subsidiary of Savola Selling Herfy bakery and- 37,943,139 Riyal International Group, members of the Herfy, yearly contract Retail Group, members of the processed meats Company Board of Directors of Herfy Company Board of Directors of Herfy products, yearly contract Mr. Essam Abdulkader Mr. Essam Abdulkader Almuhaidib, Eng. Anees Almuhaidib, Eng. Anees Momenah, Eng. Moataz Momenah, Eng. Moataz Alezzawi, hold positions Alezzawi, hold positions as members of the Board as members of the Board of Directors, and one of of Directors, and one of the senior executives of the senior executives of Savola, which owns the Savola, which owns the Afia International Panda Retail Company. Company. United Sugar A subsidiary of Savola Purchasing products for 2,628,752 Riyal Taza Board member Mr. Ahmad Selling Herfy products, 1,571,943 Riyal Company Group, members of the Herfy, yearly contract Restaurants Hamad Alsaid owns yearly contract Board of Directors of Herfy Chain shares in this company Mr. Essam Abdulkader Almuhaidib, Eng. Anees Bazbazah Board member Mr. Khaled Selling Herfy processed 490,310 Riyal Momenah, Eng. Moataz International Ahmad Alsaid owns meats products, Qusai Al-Azzawi, hold Company shares in this company yearly contract positions as members of Maslan Board member Mr. Khaled Selling Herfy products, 33,258 Riyal the Board of Directors, and Commercial and Ahmad Alsaid owns yearly contract a senior executive of shares in this company Savola, which owns the industrial United Sugar Company. Investment Company International A subsidiary of Savola Purchasing shortening and 3,943,974 Riyal Company for Food Group, members of the margarine for Herfy, yearly Industries Board of Directors of Herfy contract Green Leaves Owned by Ms. Jawaher Selling Herfy products, 13,489 Riyal Mr. Essam Abdulkader Company of Meals Alsaid, Marketing dept. yearly contract Almuhaidib, Eng. Anees employee Momenah, Eng. Moataz Qusai Al-Azzawi, hold positions as members of the Board of Directors, and a senior executive of Savola, which owns the United Sugar Company. Almarai Company Eng. Anis Ahmed is a Purchasing Almarai 3,714,245 member of Herfy Board products,yearly contract of Directorsas well as Almarai’s Ahmed Alsaid Owned by the Purchasing sauces for 13,652,481 Trading Est, President, CEO and Man- Herfy, yearly contract Mama Sauce aging Director Mr. Ahmed Factory Hamad Alsaid
64 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 65 It is applicable to clarify some aspects for the aforementioned agreements and contracts Twentyseventh: Declarations of the Board of Directors according to the following: • The leasing contracts have been determined by (a percentage of sales or a fixed rental value) As per the rules and the regulations of listing and registration, as well as the Corporate based on market prices at the time of their conclusion, and the company implements in these Governance laws issued by the Capital Market Authority, it is crucial in the annual report to agreements the same terms and that followed with others (Same terms of the prevailing present disclosure for all the necessary information according to the indicative annual report prices). that is presented by the authority, therefore the Board of Directors hereby acknowledges that • Commercial transactions contracts are set based upon the same terms and conditions that the following topics do not apply to the company and is committed to disclose it whenever it are following with other customers and suppliers (Same terms of the prevailing prices). applies to the company: • Most of these dealings are governed by long-term agreement and permanent conditions • There are no differences in the implementation of the accounting standards issued by the (Stores, and Buildings, and Lands leasing agreements), or extendible agreements that are Saudi Organization for Certified Public Accountants with respect to the review and assessment renewed annually and may entail alterations in their respective conditions, such as purchasing of the company’s final accounts. agreements, and sales in relevance to raw material in addition company’s products and • There are no subsidiaries for Herfy Food Services Company up to 31 December 2021, thus material, whereas the renewal of these agreements falls within Herfy’s framework of regular no shares or debit instruments are issued to any subsidiary. activity, in accordance to the common business practices of the market and fair competition • There are no high ranked shares or preferred shares system as both do not apply in the which preserves the interests of the shareholders. company, and furthermore no convertible debt instruments belong to members of the Board of • The company disclosed the transactions with parties in connection to members of the Board Directors, Senior executives and their wives and minor children, or any other person, whereas of Directors, and those transactions included reciprocal lease contracts, contracts for the convertible debt instruments to shares are not applicable in the company. sale and purchase of reciprocal materials, wherein the terms of those contracts have been • There are no treasury shares held by the company. disclosed in correlation to, the value of the contract, its duration, the contracting party, and • No agreement has been made with any member of the Board of Directors or Senior that they are set based on the prevailing terms and conditions. Some of the agreements terms Management in which a member of them accepted to waive his remuneration. were not disclosed as it won’t be in the company›s interest to disclose them, because they • No agreement has been concluded whereby any of the shareholders of the company waived allow other competitors to utilize them, such as financial and operational related matters that any rights in dividends. may entail information about discounts, credit periods, delivery dates, specifications, fines for • There are no investments or other reserves established for the benefit of the company›s non-compliance with the contract, and so on. employees. • Contracts and transactions with related parties are subject to evaluation by the company›s • The auditor›s report did not include any reservations on the annual financial statements. audit committee, in addition, rental values are periodically reviewed by a specialized real estate • No penalties or punishments were imposed on the company from the authority or any judicial appraisal office, and accordingly an independent report was issued by the external auditor authority. of the company for year 2019, and it was submitted to the Board of Directors in its session • The company confirms that it has not received from the company’s auditor a request to hold held on 11/3/2021 for votes, then it was approved by the General Assembly on 20/4/2020 for a General Assembly session which has not been considered during the ended fiscal year. permission throughout year 2020. • The Chairman of the Board of Directors did not receive any written request to hold emergency meetings of two or more members, during the ended fiscal year 2020. On 20/4/2020 the General Assembly issued a mandate to authorize the Board of Directors to • The Board of Directors did not recommend changing the auditor, before the end of the period authenticate the General Assembly, as per the license given in paragraph 1 article 71 of the for which he was appointed. Companies Law, over a period of one year starting from the acceptance date of the ordinary general assembly, or till the final session of the appointed Board of Directors (whichever is earlier), based on article (56) of the laws and regulations for listed joint stock. Moreover, the company’s board of directors acknowledges the following: • An independent report was issued for the aforementioned transactions by the company’s external auditor in year 2020, and it shall be submitted to the General Assembly in its • The account records were prepared correctly forthcoming session in 2021 for clearance and approval to maintain it, in compliance with article (71) of the companies law, whereas the respective transactions in connection to the • The internal control system was prepared on a solid foundation and implemented effectively. members of the Board of Directors, or executive management, shall be brought to the attention of the chairman. • There is no doubt about the company›s ability to continue its activity • The Board of Directors hereby acknowledges that there are no contracts or interests among the company and the Financial Manager.
66 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 67 Twentyeighth: Information in relevance to Risk
Every economic activity is subjected to potential risks, and Herfy is exposed to some risks under the nature of its activity throughout the production and sales of food products, and the management of restaurants and stores, whereby the company gained its experience over the past forty years in the fast food business and food manufacturing which generated its vast knowledge in risk management, and hereafter is a summary for the most prominent risks:
1. Operating Risk
- Risks in connection to the safety and quality of products: - The business nature of food and restaurants include exposure to risks associated with the safety and quality of products, therefore the company has an integrated program to ensure the safety and quality of foodstuffs, such as the implementation of safety and quality control procedures. The company has received the global certificates in this area from both HACCP and ISO.
- Risks of availability of raw materials and adequacy of supply: -The company›s confronts these risks by expanding its base of qualified suppliers while continuing to rely on it company›s factories and elevate its production efficiency.
2. Market and competition risk:
- The company operates in a highly competitive market, and the risk is connected to qualitative and numerical increase in competitors, which may affect the market share. To overcome these risks, the company maintains continuous development and diversification of products, and according to highest standards of quality and customer service.
3. Financial Risks
Risk of fluctuations in prices of raw materials: - The Company acts to face price fluctuations by precisely monitoring prices to execute purchase decisions based on thorough resolutions, in addition to that the company keeps expanding its supplier base, and it establishes annual agreements for the supply of raw material commodities to stabilize prices and utilize the advantages of bulk orders.
General Assembly session The shareholders of Herfy Food Services Company shall be notified of the date of the General Assembly along its agenda, after obtaining the approvals from the related authorities.
68 Herfy Food Services Company | 2020 Annual Report Herfy Food Services Company | 2020 Annual Report 69 The company’s Board of Directors is extremely pleased to express its deepest gratitude and appreciation to the Custodian of the Two Holy Mosques, and his esteemed Crown Prince - may God protect them - for their tireless efforts in achieving the welfare and security of our Kingdom.
The Board also extends its sincere appreciation to the government of the Custodian of the Two Holy Mosques for its constant support of the private sector, and we would lastly like to congratulate the Custodian of the Two Holy Mosques and His Highness the Crown Prince on the success of the G20 summit in 2020 in the Kingdom of Saudi Arabia, proving the strength of the Kingdom’s financial and political position in the world.
The Council extends its sincere gratitude to all the company’s clients, suppliers, banks, and regulatory & supervisory bodies for their continuous trust and support.
Sincere thanks and gratitude to the shareholders of the company for their generous support and precious trust, praying to God Almighty to crown this trust with further development and prosperity for the company.
Lastly, special thanks to the company’s management and employees for their sincere efforts and outstanding performance during the fiscal year 2020 despite the exceptional challenges faced and their consequent precautionary measures.
The Board of Directors is looking forward to more achievements and outstanding performace in the coming year 2021, God willing.
CEO & Managing Director Chairman Ahmad Hamad Alsaid Issam Abdulkader Almuhaidib
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