On The Activities And Achievements of The Company For The Period From 1/1/2017 to 31/12/2017 PROJECTS UNDER EXECUTION
Otaiqah Central Market
PROJECTS UNDER STUDY AND DESIGN
COMMERCIAL CENTERS
Refrigeration and Freezing Stores (3) Commercial - Residential And Administrative Strip Center
Master Plan to Develop Attameer Public Transport Dhahira Area Center Development Project COMPLETED PROJECTS
COMMERCIAL CENTERS
Attameer Riyadh Market Attameer Wholesale Center
Attameer Plaza III Attameer Plaza II Attameer Plaza I
SERVICE & PUBLIC UTILITY PROJECTS
Cold And Freezing Stores Attameer Public Transportation Center Commercial Administrative Building
Attameer Meat Attameer Vegetable and Fruit Attameer International Car and Vegetable Market Wholesale Market Auction
REAL ESTATE PROJECTS
Attameer Sunrise Cities Attameer Technical Services City Attameer Riyadh Hills
Custodian of the Two Holy Mosques King Salman Bin Abdulaziz
His Royal Highness His Royal Highness His Royal Highness Prince Faisal Bin Bandar Prince Muhammad Prince Muhammad Bin Bin Abdulaziz Bin Salman Bin Abdulaziz Abdurahman Bin Abdulaziz Governor of Riyadh Region Deputy Crown Prince Deputy Governor Honorary President of the Board The Second Deputy Premeir of Riyadh Region of Directors Minister Of Defense
BOARD OF DIRECTORS
Eng. Tariq Bin Abdulaziz Al-Faris Chairman
Dr. Tami Bin Hudaif Albugmi Eng. Ali Bin Abdullah Alhassoon Vice Chairman Member - CEO
Mansur Bin Abdullah Alzeer Dr. Nasser Bin Ali Alzilfawi Dr. Ali Bin Abdulaziz Alkhudairi Member Member Member
Mr. Ebraheem Bin Fahad Al Assaf Eng. Nasir Bin Saad Al Arifi Member Member
# Ststement Pages No 1 Contents 9
2 Board of Director’s Report 11 3 Independent Auditor’s Report 39 4 Financial Statements 44 5 Notes to the Financial Statements 48
THE BOARD OF DIRECTORS’ REPORT TO THE SHAREHOLDERS OF ARRIYADH DEVELOPMENT COMPANY ON THE COMPANY’S WORKS AND ACCOMPLISHMENTS FOR THE PERIOD From 1/1/2018 to 31/12/2018
Respective Shareholders Greetings, The board of directors of Arriyadh Development Co. is pleased to present its annual report to the company general assembly, reviewing in brief the accomplishments made during the period from 1/1/2018 to 31/12/2018 in addition to the financial position list, income list, money use sources, the company’s accounts auditor report and commitment by the company to the principle of transparency and disclosure in the Saudi Capital Market regulation for that period.
Company Overview The company was incorporated as a national joint stock company per the Royal Decree No. (M/2) dated 9/2/1414H with capital of SR 1,333,333,330 Saudi Riyals One Billion, in order to participate in developing the Riyadh central area and to fulfill investment aspirations all over the Kingdom. The Company is working for accomplishment of its shareholders’ aspirations by investment in the service and public interest projects in participations with the government and private sector and investment in all types of real estate planning and development .
Company’s Vision To be a leading company in the field of real estate development and public interest service projects.
Company’s Mission Participation in meeting the society’s needs of various real estate products (residential, commercial, office, recreational, hotel, etc.) at the highest level of planning and technical quality and contribution to providing the public interest services at the best quality and know-how. Company’s Strategy The Company’s board of directors has approved in its fourth meeting «seventh session» convened on 24/11/2013 the strategic plan of the company extending till 2020. The most important initiatives for accomplishment of the strategic plan included restructuring of Arriyadh Development Co. to be transformed into a holding company. The top management concentrates on strategic planning, business development, investment and financing, providing the Company’s projects at present and in the future to be separated in subsidiaries gradually, in a way each of them shall perform the operational tasks independently, besides the possibility of entering into strategic joint ventures with third parties pursuant to the conditions serving the Company’s interests. The strategic plan initiatives included conducting feasibility studies for all new projects of the Company, whether residential, commercial, office, recreational or hotel projects.
Geographic Scope At present the company>s projects are concentrated in Riyadh city. However, the company’s bylaws allow the Company to invest in all parts of the Kingdom.
12 2018 The Projects First : Projects Under Execution 1- Otaiqa Central Market Development Project: The Company signed on 25/11/2013 a contract for development of Otaiqa Central Market with a national company. The contract value is more than SR 242 million. The execution period is 24 months and the market area is 186,000 sq. meter. The project includes more than 660 shops for the activities of palm dates, honey, dairies, poultry, eggs, supplies, fish and meat and 660 vegetable and fruit shops and 33 and the number (87), an administrative office commercial exhibitions for various activities besides the offices allocated for the Company’s management and more than 2500 car parking. The project includes a yard for multiple purposes of seasonal festivals and celebrations, truck parking and parking for the employees. The market is provided with shaded passageways to protect shoppers from sun and facilitate their movement inside the market. The Company shall finance this project from its own resources. has been the completion of the first phase, which constitute about 70% of the market space .The procedures for the delivery of electricity to the second phase of the project are completed with the Electricity Company.
2- The land of Al thmama : Al thmama Soil Sand is located in the north-eastern district of the city of Riyadh filtername No. (1) Diploma No. (2) Diploma (3), with a total area of 3 million m 2 and represent the company’s share and the rate of 69.38% of the total of the component units of the first real estate fundRiyad reconstruction, which is run by the development company for investment. Work began on the development of the infrastructure and the beginning of the 1/05/2016m, with the adoption of the general plan and planned by the secretariat of the Executive Board of the city of Riyadh as well as designs have been the adoption of the road network and the network of rain drainage and lighting systems, the water and sanitation network and is currently working on the adoption of the electricity and telephone network designs, it was also the start of the work of the roads and the it is expected the completion of all development work during the second quarter of the year والردم pieces 2019M.
3- Developing Tameer Public Transport Center Project: On 23/12/1434H corresponding to 28/10/2013 the Company signed the minutes of meeting with Arriyadh Development Authority to use the piece of land located to the north of the Tameer Public Transport Center on the southern ring road, of area 18,000 sq. meter as a station for the trains and buses. The Projects and Planning Center at Arriyadh Development Authority shall construct a building consisting of the ground floor and three floors without costs on the Company. The ground floor will be allocated for various commercial and service shops, for the Company to serve the station. The first floor and second floor will be car parking for use by King Abdulaziz Project for Public Transport in Riyadh city, which will be managed by Arriyadh Development Authority. The third floor will be used by the Company as commercial and administrative shops for serving the station. The project›s work completion is expected to synchronize with completion of King Adulaziz Public Transportation Project at the city of Riyadh.
2018 13
Second: Project Under Study and Design 1 -Commercial, residential, administrative and refrigerated and freezing warehouses (3): The company has begun to study and design these two projects located south of the construction market for vegetables and fruits and south of the reconstruction center for public transport, respectively, but because the Supreme Authority for the development of Riyadh city comprehensive study of the region, the company felt the importance of the delay in the design of these two projects until the completion of the study and They are 12,000 m2 and 30,000 m2 respectively.2- Project of Master Plan for Developing Dhahira Area:
2 - Project of Master Plan for Developing Dhahira Area: The project includes preparation of the master plan and economic feasibility study for developing Dhahira area in the Riyadh city center. The Australian consultant Urbis JHD has prepared and presented economic feasibility study and reports of the project’s fifth (final) stage.
Members of Development Alliance: • Arriyadh Development Co. • General Organization of Social Insurance. • Al Meaiklia Commercial Center Saudi Company • Saudi Real Estate Company • Dar Al Arkan Company • Solidair Saudi Company • FAS Saudi Company Recently MOU was signed with Solidair International Company to introduce changes to the plan based on the comemnts received from the Saudi Tourism and Antiquities Authority and Arriyadh City Development Authority besides comments received from some members of the development alliance. The plan was submitted and is still under study by Arriyadh Development Authority.
3. The project to establish exhibitions parking adjacent to the car auction: The Company owns the land area (250,000 m2 next to the international automobile auction, the north- east of the city of Riyadh, the company is currently planning a dissident parking in coordination with the secretariat of the Riyadh region, the supreme authority for the Development of Riyadh
Third: Projects established on the land of the company leased under B.O.T system: 1. The company on 13/5/1425 H - lease a land owned by Azizia south of the city of Riyadh, an area of 31.080 m 2 BOT (building - operation - conversion) that the investor to establish all facilities and the delivery of all services such as electricity, water, sanitation, telephone and other services And operating them against an annual rental fee of SR 4,351,286. The investor has established a commercial center (Gardena Mall), containing shops divided into (145) shops, hypermarket, amusement park, car parks and other service buildings. All of these facilities will be owned by the company on 30/10/1447 AH, which will have a positive impact on increasing the company’s revenues. 2. The company has leased a land owned by Al-Aziziyah area south of the city of Riyadh with an area of 15.576 m2 under the BOT system. The investor will establish all the facilities and deliver all the services such as electricity, water, sewage, telephone and other services. And operating them against an annual rental fee of SR 2,758,578. The investor has established a commercial center on the land, which is a shop for prestigious companies. All the facilities will be owned by the company on 12/5/1447 AH, which will have a positive impact on increasing the revenues of the company. Operational Aspects Attameer Wholesale Center: The center is located in the central area of Riyadh city on King Fahad road in the Government Palace area on a plot owned by the Company of area 104,475 sq. meter. The center is characterized by its diversified activities through more than 1000 rental residential, office and commercial units including supplies for men, women and children, accessories perfumes, food stuff, mobile telephone deices, etc.
Attameer Plaza Center (1): The center is located in the Riyadh city center on King Fahad road on a plot owned by the Company, of area 1200 sq. meter, including 19 shops for the accessories and food stuffs activities as complementary activities to Tameer wholesale center activity.
Attameer Plaza Center (2): The center is located in Riyadh city center on three main streets (Al Meqaibra street, Imam Mohammed Ibn Saudi Street and Al Sabala Street) on a plot owned by the Company, of area 5000 sq. meter. It includes 83 shops specialized in the activities (men clothes, perfumes, Ouds, food material and sweets).
16 2018 Attameer Plaza Project 3): The center is located in the center of the city of Riyadh on King Fahd road on the land area of 7,000 square meters, the project includes the 110 stores 38 administrative office, in addition to provide a number of services and parking, the project is the expansion and extension of the Center for reconstruction sentence Deira district in the area of the palace of the rule in the center of the city of Riyadh.
Attameer International Car Auction: The auction is located northeast of Riyadh on the Riyadh-Dammam Road in Al-Remal district on a land owned by the company with an area of 241,495 m 2. The building area is 28,820 m 2. It includes 9 tracks for bidding, which are managed by 1800 cars sold every three hours. Its surface area can accommodate 20,000 cars on paved, planned and paved land. It also has modern infrared security systems and accurate surveillance cameras to keep the cars in it. The auction stores, cleans, examines and then displays them for sale. The auction offers its services to customers as a neutral intermediary for the sale of cars without the exercise of any of its proponents of the purchase. This is done through an integrated work environment (traffic, passports, insurance companies, car rental companies, other services, etc.).
2018 17 Attameer Public Transport Center: The center is located south of Riyadh City adjacent to the Center for reconstruction of public transport in Riyadh from the east and consists of a commercial building residential, the project involves 31 shops and apartments up to 128 apartment, in addition to free parking and a number of other services and facilities, and the project area of 5,000 square meters...
Project For Construction Of Commercial And Residential Center At Tameer Public Transport Center: The Company signed on 25/11/2013 a contract for building a commercial and residential center located near the public transport center in Riyadh with a national company. The contract value is more than SR 26 million and execution period is 18 months. The project includes construction of 33 shops and 134 residential flats besides car parking and other services and utilities. The project area is 5000 sq. meter. The Company shall finance this project from its own resources.
18 2018 Attameer Fruit and Vegetable Wholesale Market: The market is located to south of Riyadh city on the southern ring road to rear side of Riyadh Tameer market at Azizia quarter on a piece of land owned by the Company, of area 299,226 sq. meter . the market provides services to farmers as sellers, and buyers as traders and consumers.
Riyadh Attameer Market, Refrigeration And Freezing Stores And The New Commercial Building: The market is divided into three segments:
Riyadh Tameer Market: The market is located in Riyadh city on the southern ring road t Azizia quarter on a plot owned by the Company, of area 24,377 sq. meter. The markey includes (155) rental units (offices, shops). The dominating activity of the market is specialization in palm dates trade.
2018 19 Refrigeration and Freezing Stores The refrigeration and freezing stores are located in Azizia quieter south of Riyadh city, near Tameer Fruit & Vegetable Wholesale Market, on a piece of land owned by the Company of area 27,864 sq. meter . the project includes 56 units, characterized by flexible temperature control (refrigeration and freezing) (+5 to -20 O C. We started renting in the 3rd quarter of the year 2013.
The New Commercial Building Located on Hayer road in Riyadh city, Azizia quarter on a plot owned by the Company, of area 2,000 sq. meter. The project includes 26 rental units (offices and shops) for diversified activities. Renting started in the 4th quarter of 2013.
Attameer Meat And Vegetable Market At Bat’ha The market is located in Riyadh city center on both King Abdulaziz and Tareq Ibn Ziyad roads on a piece of land leased from Riyadh province Municipality, of area 13,691 sq. meter. The market is characterized by customer stability as a specialized market in selling meat, fish and vegetables.
20 2018 Company Properties First: Lands Owned by the Company, on which facilities are constructed:
Description Area Sq. Meter
Attameer Fruit and Vegetable Market 299,226 sq. meter Attameer International Car Auction 241,495 sq. meter Attameer Public Transportation Center 148,303 sq. meter Attameer Wholesale Center 104,475 sq. meter Riyadh Attameer Market 25,001 sq. meter Attameer Plaza Center (1) 1,200 sq. meter Refrigeration and Freezing Stores 27,864 sq. meter Attameer Plaza Center (2) 5,000 sq. meter Lands of the Azizia area - developed by net B.O.T 46,656 sq. meter Attameer Plaza Center (3) 7,000 sq. meter Total 906,220 sq. meter
Second: Developed Lands Owned by the Company:
Description Area Sq. Meter
Shorooq cities lands and technical service city lands (common 75.175 sq. meter – sales not completed*) Technical services city lands 250.000. sq. meter Lands of public utilities of the cities of Sunrise and the city of 80.752 sq. meter technical services (common) Government Palace lands 39.963 sq, meter Telal Riyadh lands 22.965 sq. meter Land Thumama 2.081.400 sq. meter Total 2.550.255 sq. meter
* For Shorooq cities lands and technical service city lands, sales started not yet completed.
2018 21
Public Relations and Shareholders Relations
The Public Relations is seeking introduction with the Company’s existing projects and extending bridges for communication with the Company’s shareholders and customers through the media channels, covering the Company’s internal and external activities.
Administrative, Technical and Financial Affairs
Human Resources Human capital is the basis of evolution and development process God has entrusted with the task of building land , So the interest in this element comes in the list of priorities for all organizations. If the perception of the human element must be centered on the considered investment , So it has been careful and focus on filling operational vacancies company competencies and qualified personnel in the centers and markets, especially in Central vintage market , which recently joined the markets and centers of the company as well as the strengthening of international automotive Riyadh certain competencies auction to keep pace with the evolution in his career and development.
Information Technology Interests of the company to keep pace with new technologies and the development and accelerate the performance has made IT management application and use of Google applications (Google Apps) In administrative work and reduce the use of paper. A quantum leap in the company ‘s real estate system as happened So that it is able to distribute the revenue and ages of debt As reflected in the performance monitoring also helps management in decision - making. And I saw the rest of the night Alchg systems (reconstruction center for public transport system - and the system of reconstruction market for phrase fruit and vegetables - The auction system reconstruction of Q Aarat) developed markedly and additions commensurate with the operational requirements And increased control.
Financial Results • The company achieved total revenues for the fiscal year ended 31.12.2018 amounted (289.622.598) riyals, an decrease from the 2017 amount of 13%. • The Company expenses reached (SR 85.696.132). • Net profit of the Company reached before deduction of Zakat (SR 209.213.368). • Zakat allocation for the year 2018 reached (SR 5.286.902). • An amount of (SR 20.392.647 ) was transferred to the general reserve which is equivalent to (10%) of the Company’s net profits after deduction of Zakat.
2017 23 Effect of Operational Activities on Company Works
Operation Common Assets Descripition Lease Activity Land Activity Total Activity & Liabilities
For the year ending on 31 December 2018 Total Assets 293.991.289 1.162.171.361 23.046.050 932.393.580 2.411.602.280 Total Liabilities 37.413.399 74.556.472 107.394.359 124.688.649 344.052.879 Operation Revenues 148.218.258 134.771.893 - - 282.990.151 Operation Costs 28.251.938 39.383.603 - - 67.635.541 Total Income 119.966.319 95.388.291 - - 215.354.610 For the year ending on 31 December 2017 Total Assets 298.274.853 1.177.376.214 23.046.050 836.567.705 2.335.264.822 Total Liabilities 29.890.575 109.996.392 107.394.359 123.075.621 370.356.947 Operation Revenues 163.322.908 114.665.146 36.105.283 - 314.093.337 Operation Costs 29.208.228 35.915.771 1.124.809 - 66.248.808 Total Income 134.114.680 78.749.375 34.980.474 - 247.844.529
Comparative Analytic Presentation of Operation Results
Actual Data Actual Data Descripition 2018 2017 Difference R.S Difference % unconsolidated unconsolidated Operation Revenues 282.990.151 314.093.337 -31.103.186 - 9.9% Operation Costs 67.635.541 66.248.808 -1.386.733 - 2% Total Profit 215.354.610 247.844.529 -32.489.919 - 13% Administrative & Marketing Expenses 12.773.689 12.709.373 -64.316 -0.5% Operation Profit 202.580.921 235.135.156 -32.554.235 - 14%
Certain comparative year figures have been reclassified to conform with the presentation forthe current year The data for 2017/2018 are prepared according to the International Accounting Standards adopted in the Kingdom of Saudi Arabia
There is a decrease in the total profit of the company by 13% and a decrease in operating profit of 14% due to: Land sales decreased during 2018 compared to 2017
Regulatory Due Payments Statement
Descripition 2018 2017
Charged amounts are Zakat expenses Government Legal Zakat 5.286.902 5.409.131 Requirement Charged amounts are the social insurance expenditures according Government GOSI 934.892 995.932 to the labor system in the Kingdom of Saudi Arabia Requirement Chamber of Government Commerce & 25.864 - Fees Requirement Industry Capital Market Government - Tadawul 400.000 400.000 Fees Requirement Government Total 6.647.658 6.805.063 Requirement
24 2018 Financial Statements for the Last Five Years Balance Sheet as of 31 December (in Million Riyals) 2016 2015 Descripition 2018 2017 2014 consolidated consolidated Total Assets 2411.60 2335.26 2642.56 2573.47 2355.91 property rights Non-controling interests - - 0.26 - 0.24 - Total Equities of Shareholders 2067.55 1964.90 1894.42 1878.21 1709.00 Total Liabilities 344.05 370.36 747.88 695.50 646.91
The data for 2016/2017/2018 are prepared according to the International Accounting Standards adopted in the Kingdom of Saudi Arabia
Income Statement for the fiscal years ending on 31 December (in Million Riyals) 2016 2015 Descripition 2018 2017 2014 consolidated consolidated Operation revenue 282.99 314.09 1235.76 425.31 251.29 Other revenues 6.63 19.04 10.62 2.68 17.89 Total revenues 289.62 333.13 1246.38 427.99 269.18 Operation Costs 67.64 66.25 938.12 91.83 62.77 Other profit & revenue 221.98 266.88 308.26 336.16 206.41 Total Expenses 18.06 44.54 46.53 42.46 17.04 Net profit before of minority 203.92 222.34 261.73 293.70 189.37 interests the share of Non-controling interests - - - 0.73 - of minority interests Net profit 203.92 222.34 261.73 294.43 189.37 Operation profit 202.58 235.14 297.65 333.48 176.13
The data for 2016/2017/2018 are prepared according to the International Accounting Standards adopted in the Kingdom of Saudi Arabia
Cash flow Statement for the fiscal years ending on 31 December (in Million Riyals) 2016 2015 Descripition 2018 2017 2014 consolidated consolidated Cash flows from operation activity 197.09 289.16 209.85 221.66 177.10 Cash flows from investment activity -22.92 288.52 - 101.15 54.46 465.93- Cash flows from finance activity -174.67 -624.09 - 235.81 131.57- 295.84
Certain comparative year figures have been reclassified to conform with the presentation forthe current year The data for 2016/2017/2018 are prepared according to the International Accounting Standards adopted in the Kingdom of Saudi Arabia
2018 25 Other Investments The company carried out various investment operations including:
1. Contribute to Tabuk Cement Company at a cost of (600,000 rials) to the number of 12,000 shares (now amounted to 77.142 shares after the retail and distribution of profits in the image of shares).- 2. Investing in shares is managed by a licensed financial institution portfolio under the approved portfolio management agreements by the Capital Market Authority, at a cost of SR 50 million. 3. Investment in Saudi hospitality heritage (Saudi closed joint stock company) the number of shares million shares with a total value of 20 million riyals and 8% of the share capital, the company has to pay 5 million Saudi riyals down of its stake in this investment. 4. Investment in Riyadh Tameer Real Estate Fund at Al-Inma Investment Company (a closed real estate development fund licensed by Capital Market Authority and in accordance with legal standards and controls and established as special offer as per article 4-b-4 of investment funds regulations), with 5730 units and cost of (SR 573.000.000) and participation percentage of (69.38%) of total units from which the fund capital formed. 5. Invest in long and short-term investment murabahat deposits with Al-Inma Bank for SAR 200,000,000.
Retained Earnings The balance of retained profits as of 31/12/2018 reached 364.903.312 SAR
Remuneration of Directors & Executive Committee The remuneration for attending the meetings of the board and the committees thereof reached 201.000 SAR
26 2018 Corporate Governance Responding to the demands of capital market authority, its regulatory bylaws and in order that the company apply the best practices of disclosure and transparency , the company discloses the following to its respectful shareholders:
1- The applicable and the inapplicable provisions of corporate governance bylaw & relevant reasons: The following schedule details the company compliance with Saudi corporate governance bylaw issued by Capital Market Authority.
Partially Not ap- No. Article No. Provision applied plied 2) to develop required mechanisms that enable each of boards of di- rectors and executive administrative obtains continuously training This article is still guided and the company 1 39th/ Training √ programs and courses, in order to develop their skills and knowl- will apply it when it will be compulsory. edge in fields related to the company›s activities. A)According to suggestion of nomination committee, the board of directors develop required mechanisms to annually evaluate performance of the board, its members and executive committees, throughout adequate performance measurement indictors which Evaluation should be done without to put 2 41st/ Evaluation √ linked with extent of strategic objectives achievement for the com- performance measurement indicators pany and quality of risk management and competence of internal control systems, aspects of weakness and strength and to propose treatments in accordance with the company interest. H) The board of directors takes required arrangements to obtain an This article is still guided and the company 3 41st/ Evaluation evaluation from external authority for its performance every three √ will apply it when it will be compulsory. years. A committee called (risk management committee) should be formed by a decision of board of directors, its chairman and mem- 70th/ formation of risk man- Risk monitoring is within authorities of au- 4 bers must be from non-executive of board of directors. Their mem- √ agement committee diting committee bers must has adequate level of knowledge in risk management and financial affairs. Risk record must be annually presented to 72nd/ meetings of risk man-Risk management committee hold its meeting at least (every six 5 √ the auditing committee and board of direc- agement committee months), whenever needed. tors B) unit or department of internal auditing prepares a written general report and to be submitted to the board of directors and auditing System of internal auditing requires pre- 78th/ report of internal au-committee regarding auditing operations which done during fiscal sentation of the report to auditing commit- 6 √ diting year and to be compared with the approved plan, in which causes tee which submits important results of the of any defect or deviation must be explained – if any- during next report. quarter of end of the concerned fiscal year. 1)To constitute committee or to hold specialized workshops to lis- This article is still guided and the company 7 85th/ staff motivation ten to opinions of the company›s employees and to discuss them in √ will apply it when it will be compulsory. issues and subjects related to important decisions. 2)Programs that grant employees shares in the company or portion This article is still guided and the company 8 85th/ staff motivation from achieved profits and retirement programs, to establish an in- √ will apply it when it will be compulsory. dependent fund regarding expenses of these programs. This article is still guided and the company 9 85th/ staff motivation 3)To establish social institutions for employees of the company. √ will apply it when it will be compulsory. As per a proposition from board of directors, the ordinary general assembly develop a policy which ensures balance between its ob- 10 87th/ social responsibility jectives and purposes that community looks forward to achieve, √ It will be approved when it is compulsory. in order to develop social and economical conditions of the com- munity. 1)To develop measurement indictors which connect the company 88th/ initiatives of social This article is still guided and the company 11 performance with initiatives of social work and compare this with √ work will apply it when it will be compulsory. other companies with similar activity. 2)To disclose objectives of social responsibility adapted by the 88th/ initiatives of social This article is still guided and the company 12 company towards their employees, beside awareness and education √ work will apply it when it will be compulsory. in this regard. If the board of directors constitutes specialized committee in cor- porate governance, it must be authorized with prescribed powers Monitoring of governance and update of 95th/ formation of corporate according to 94th article of this regulations, this committee has to its requirements are within authorities of 13 √ governance committee follows each subject regarding governance applications, and to legal department, if the company has no provide the board of directors at least every year with concluded governance committee reports and recommendations.
2018 27 2- Ranking the directors, the number of meetings during the year the record of attendance, the names of the stocking companies of which board the directors are acting as directors:
a- Composition of the Board of Directors
No. Director’s Name Independent Non-Executive Executive
Eng./ Tariq Abulaziz Alfaris, 1 √ riyadh municipality representative 2 Eng. Ali Abdullah Al Hassoun √ 3 Dr. Tami Hadif Al Baqami √ 4 Mr. Mansour Abdullah Al Zeir √ 5 Dr. Nasser Ali Al-Thilfawi √ 6 Dr. Ali Abdulaziz Al Khudairi √ 7 Mr. Ibrahim Fahad Al Assaf √ 8 Eng. Nasser Saad AlArifi √
company received on Thursday 13/06/1436 A.h. 01/03/2018m The Speech of His Excellency the Minister of Municipal and Rural Affairs to appoint His Excellency the Secretary of the Riyadh region, Engineer Tariq bin Abdulaziz alfaris and a member of the Board of the company, the representatives of the secretariat of the Riyadh region, instead of His Excellency the Secretary of the Riyadh region, former chairman of the Council Engineer Ibrahim bin Mohammed Sultan (an independent member) who was appointed advisor in the Royal Court the rank of minister. The Board of Directors has decided to elect His Excellency as President of the Council during the remainder of the current session of the Council as of 13/06/1439 H corresponding to 01/03/2018.
28 2018 b) Current and previous job titles of of board of directors, their educational qualifications and experiences:
No. Member Name Current Job Title Previous Job Title Qualifications & Experiences
President of projects He holds a Master of Civil Engineering and works as and planning Head of the Center for Projects and Planning for the Eng./ Tariq Abulaziz Alfaris, Governor of Riyadh 1 centers under High Supreme Commission for the Development of Riyadh riyadh municipality representative Region Commission for City. He also served as Deputy Minister of Municipal Development of Riyadh and Rural Affairs
Master degree of in architectural engineering and chief executive 2 Eng./ Ali Abdullah Al-Hassoun Managing director planning, experience in field of real estate and its officer investments and architectural and engineering maps
Doctorate in Dawaa and calculation, worked as a lawyer Member of Shura 3 Dr. Tami Hidaif Al-Bagami Retired and economical and administrative studies for many Council companies.
Bachelor degree in media and performed many works Consultant at Khalid 4 Mansour Abdullah Al-Zeer Retired in field of real estate investments and supervision on Al-Baltan Group commercial and housing buildings.
State doctorate in custom activities to face evasion in jurisprudence and law. Prepared many studies and General Director of 5 Dr. Nasser Ali Al-Zulfawi Retired participated in development of administrative work and Raqie Customs improvement of production and marketing performance level.
Doctorate in Arabic literature, has his own private Member of Shura 6 Dr. Ali Abdulaziz Al-Khudhairi Retired business in field of real estate, participated in real estate Council contributions.
Acting chief executive Master degree in business administration, worked in may chief executive officer for 1st Company leadership positions, has long experience in real estate 7 Ibrahim Fahad Al-Assaf officer – Musharaka for Real Estate investment, managed any successful investments on Financial Co. Development local and regional levels.
Bachelor degree in engineering, has experience in real 8 Eng./ Nasser Saad Al-Arifi Businessman Businessman estate development, contracting and operation.
2018 29 C) The names of the companies inside and outside the Kingdom, of which the member of the Board of Directors of the Company is a member of its current and previous boards of directors or of its directors
Names Of Companies The Names Of The In Which The Inside The Companies In Which The Inside The Board Member Kingdom/ Member Of The Board Kingdom/ The The Legal No. Member Name Is A Member Outside The Of Directors Is A Member Outside The Legal Entity Of Its Current Kingdom Of Its Previous Board Of Kingdom Entity Board Of Directors Or Its Directors Directors Or Its Directors
Eng./ Tariq Abulaziz Alfaris, inside the 1 Arriyadh Holding Holding ------riyadh municipality representative kingdom al-ahsa development co. inside the 2 eng. ali abdullah al hassoun ------kingdom inside the 3 dr. tami hadif al baqami ------al-ahsa development co. kingdom 4 mr. mansour abdullah al zeir ------
5 dr. nasser ali al-thilfawi ------
6 dr. ali abdulaziz al khudairi ------musharaka inside the inside the 1st company for real estate inside the 7 mr. ibrahim fahad al assaf financial co. kingdom kingdom development kingdom inside the inside the inside the 8 eng. nasser saad alarifi ijzala ijzala kingdom kingdom kingdom
d) Current and previous job titles of executive administration, their educational qualifications and experiences:
No. Member Name Current Job Title Previous Job Title Qualifications & Experiences
Master in architectural engineering and planning, has Chief executive 1 Ali Abdullah Al-Hassoun Managing director experience in field of real estate and its investments officer and architectural and engineering maps
Head of legal affair Bachelor degree in law, has experience in field of legal 2 Fayez Abdullah Al-Ahmari Legal consultant unit consultations Bachelor degree in accounting, fellowship of legal Manager of financial Head of accounting 3 Mamdouh Ahmed Shahatah accountants association, has experience in field of department department internal auditing. Director of Taamir Director of Etaiqa Central 4 Bandar Abdulaziz Al-Shibrain Vegetables & Fruits Secondary school certificate Market Wholesales Market Director of Taamir Secondary school certificate, worked as public 5 Saad Ibrahim Al-Dossari Manager of CEO Office Wholesales Center relations officer
e) Actions taken by the Board of Directors to inform stakeholders - particularly executives - of shareholders’ proposals and their comments about the Company and its performance: The Chairman of the Board of Directors, at the first meeting of the Board of Directors - especially the non-executive - shall be informed of the shareholders’ proposals, their remarks about the companies and their performance
30 2018 The board of directors held (5) meetings from 01/01/2018 to 31/12/2018
1st Meeting 2nd Meeting 3rd Meeting 4th Meeting 5th Meeting Attendance No. Director’s Name 1/3/2018 16/4/2018 12/7/2018 18/10/2018 27/12/2018 %
Eng./ Tariq Abulaziz Alfaris, 1 Attendant Attendant Attendant Attendant Attendant 100% riyadh municipality representative 2 Eng. Ali Abdullah Al Hassoun Attendant Attendant Attendant Attendant Attendant 100% 3 Dr. Tami Hadif Al Baqami Attendant Attendant Attendant Attendant Attendant 100% 4 Mr. Mansour Abdullah Al Zeir Attendant Attendant Attendant Attendant Attendant 100% 5 Dr. Nasser Ali Al-Thilfawi Attendant Attendant Attendant Attendant Attendant 100% 6 Dr. Ali Abdulaziz Al Khudairi Attendant Attendant Attendant Attendant Attendant 100% 7 Mr. Ibrahim Fahad Al Assaf Attendant Attendant Attendant Attendant Attendant 100% 8 Eng. Nasser Saad Alarifi Attendant Attendant Attendant Attendant Attendant 100% f) The means on which the Board of Directors relied on evaluating its performance and the performance of its committees and members, the external entity that evaluated the company and its relationship with the company. The Nomination and Remuneration Committee shall investigate the strengths and weaknesses of the Board of Directors, study them, determine their causes and propose their treatment in the interest of the Company.
3 - Interests & Equities of Directors, Senior Executives & Their Wives & Minors: Interests & Equities of Directors
Period Start Period End No. Director’s Name % % 01/01/2018 31/12/2018
Eng. Ibrahim Mohammad Al Sultan Municipality Subjective 1 0.04% -- 0.04% Riyadh Municipality Representative 26.666 Shares 26.666 Shares
Municipality Subjective Eng./ Tariq Abulaziz Alfaris, 2 -- 0.02% riyadh municipality representative 26.666 Shares 0 Shares
3 Eng. Ali Abdullah Al Hassoun 28,133 Shares 0.021 % 28,133 Shares 0.022% 4 Dr. Tami Hadif Al Baqami 6,666 Shares 0.005 % 6,666 Shares 0.005% 5 Mr. Mansour Abdullah Al Zeir 4,547 Shares 0.003 % 4,547 Shares 0.003% 6 Dr. Nasser Ali Al-Thilfawi 1,333 Shares 0.001 % 1,333 Shares 0.001% 7 Dr. Ali Abdulaziz Al Khudairi 18,666 Shares 0.014 % 50.000 Shares 0.017% 8 Eng. Nasser Saad Alarifi 10,000 Shares 0.0075 % 10,000 Shares 0.0075% 9 Mr. Ibrahim Fahad Al Assaf 1,000 Shares 0.00075 % 17,217 Shares 0.0075%
2018 31 Key Executives Interests & Equities
Period Start Period End Name Job Title % % 01/01/2018 31/12/2018 Eng. Ali Abdullah Al Hassoun Chief Executive Officer -Ceo 28.133 Shares 0.021 % 28.133 Shares 0.021 % Mr. Fayez Abdullah Al Ahmari Head Of Legal Affairs Unit 26.400 Shares 0.019 % 26.400 Shares 0.019 % Mr. Mamdouh Ahmed Shehata Farag Director Of Finance Department 0 0% 0 0%
4- Board Committees Competencies Executive Committee
Brief Description of Committee Tasks : Studying the executive plans , the operation policies and developing the company projects besides approving consultation studies, systems and researches for projects and work programs in addition to performing any works or assignments assigned by the board of directors.
Committee Members & Number of Meetings in 2018 : 1st Meeting No. Committee members 25/12/2018 1 Eng. Ali bin Abdullah Al Hassoun “Chairman of the Committee“ Attendant 2 Dr. Nasser bin Saad al-Arifi, “Deputy Chairman of the Committee“ Attendant 3 Mr. Mansour bin Abdullah Al- Zeer “ member “ Attendant
Commission review A brief description of the tasks : Supervise the Internal Audit Department of the company : in order to ensure its effectiveness in the implementation of the business and the tasks set for them by the Board of Directors .
• The study of the internal control system and the development of a written report and its recommendations on the matter . • Study the internal audit reports and follow up the implementation of corrective actions for the notes contained therein . • Recommendation of the Governing Council to appoint a accountants to lawyers and their dismissal and determine their fees, and taken into account when recommending appointments to ensure their independence . • Follow the work of Chartered Accountants , and the adoption of any work outside the scope of audit work assigned to them while they work review . • Study audit plans with the chartered accountant and express Mlhozadtha them . • Study Notes chartered accountant on the financial statements and follow up on what was in the will . • Study and preliminary annual financial statements before submission to the Board of Directors and opinion , and in that recommendation . • Study of accounting policies and to express an opinion and recommendation of the Governing Council in the matter .
32 2018 Committee members and the number of meetings for the year 2018:
1St Meeting 2Nd Meeting 3Rd Meeting 4Th Meeting 5Th Meeting No. Committee Members 1/3/2018 16/4/2018 12/7/2018 18/10/2018 18/10/2018
1 Dr. Ali bin Abdulaziz Al-Khudairi, “Chairman of the Committee“ Attendant Attendant Attendant Attendant Attendant
2 A / Ibrahim bin Fahd Al-Assaf, “ Deputy Chairman of the Committee“ Attendant Attendant Attendant Attendant Attendant
3 D. Tami Ben Hdev Buqami “member“ Attendant Attendant Attendant Attendant Attendant
Committee Nomination and Remuneration A brief description of the functions of the Commission : Recommendation of the Governing Council candidacy for membership of the Board in accordance with approved policies and standards , taking into account not to nominate any person previously convicted of a crime involving moral turpitude and Secretariat.
• Annual audit required for the needs of the right skills for membership of the Board of Directors and prepare a description of the capabilities and qualifications required for membership of the Board of Directors . • A review of the structure of the Board of Directors and make recommendations regarding changes that can be made . • To identify weaknesses and strengths in the Board of Directors, and the proposal dealt with in accordance with the company ‘s interest . • On an annual basis to make sure the independence of independent members and the absence of any conflict of interest if the member is a member of the Board of Directors of another company . • Develop clear policies for the compensation and remuneration of the Board of Directors and senior executives, and taken into account when setting those policies using criteria linked to performance .
Organizing Policy of administrative board members and determination mechanism: The council approved the regulation which was prepared as per laws and legislations issued by concerned authorities as the following below: 1. Article (44) of the company basic regulations stated that (taking into consideration what other relevant rules require) annual net profits of the company should be distributed after deduction of all general expenses and other costs, included Zakat legally imposed, as below: (A)- (10%) of net profits should set aside as a regular reserve, normal general assembly has the right to stop this procedure when the above mentioned reserve reaches 30% of the paid capital. (B)-After that the rest will be distributed to shareholders as first payment that equivalent (5%) of the paid capital. (C)-(5%) will be specified as reward for members of directors board taking into account decisions or instructions issued by concerned authorities in this regard, then the rest should be distributed to shareholders as an addition portion of profits. 2. Committee of nominations and rewards should recommend the administrative board with a mechanism to calculate amount of annual reward for each member. 3. The administrative board submits recommendation of committee of nominations and rewards to general assembly for approval. 4. The reward should be equitable and suitable with duties and responsibilities of the member.
2018 33 5. Reward worth must be adequate with number of meetings attended by the member during the fiscal year. 6. A member of administrative board deserves to obtain a reward of (SR2000) for each meetings of the administrative board or its emerging committees. 7. Reward can be different between members of administrative board according to attending of meetings. 8. Reward should be sufficient and reasonable and its maximum limit must not exceed (500.000) as per paragraph (2) from article (76) of companies law. 9. Members of administrative board are not authorized to vote in meeting of general assembly on article of rewards related to members of administrative council.
Committee members and the number of meetings for the year 2018 AD : 1st Meeting No. Committee members 28/12/2018 1 Dr. Nasser bin Ali Zlfawi “Chairman of the Committee“ Attendant 2 Dr. Ali bin Abdulaziz Al-Khudairi, “Deputy Chairman of the Committee“ Attendant 3 Eng. Ali bin Abdullah Al Hassoun “ member “ Attendant
Investment Committee A brief description of the functions of the Commission : The Committee on Investment tasks proposal and examine investment opportunities and make recommendations to the Council around a no management and supervision of the stages of preparation of economic feasibility study of the projects .
Committee members and the number of meetings for the year 2018 AD : 1st Meeting 2nd Meeting M Committee members 16/8/2018 1/11/2018 1 Mr. Mansour bin Abdullah Al- Zeer “Chairman of the Committee“ Attendant Attendant
2 Dr. Tami Ben Hdev Buqami “Deputy Chairman of the Committee” Attendant Attendant
3 Eng. Ali bin Abdullah Al Hassoun “member” Attendant Attendant
Remuneration & Compensation: Five Of Senior Executives Who Received The Highest No. Statement Remunerations And Compensations Including Ceo (Director) And The Financial Manager 1 Salaries & Compensation 4.274.202 2 Allowances 27.000 3 Regular & Annual Remuneration 500.000 4 Incentive Plans 1.240.911 Any Other Compensation Or Benefit Paid 5 - Monthly Or Annually
34 2018 املكافآت الثابتة Fixed Rewards Total Total name Indemnity Shares granted In-kind benefits total summation Periodic bonuses A certain amount A Expense Allowance percentage of profits Long - term incentive plan Short - term incentive plan Director or the Secretary if he is a member Instead of attending meetings the Council Technical, administrative and advisory work Technical, Total attendance allowance for committee meetings Total The remuneration of the Chief Magistrate, Managing
First: Independent members
1 - Eng / Ibrahim bin Mohammed Sultan representative of the Secretariat of the Riyadh 0 0 0 0 500.000 0 500.000 0 0 0 500.000 0 500.000 0 region
2- Eng / Tarek bin Abdullah Al-Fares representative of the Secretariat of the Riyadh 0 15.000 0 0 -- 15.000 0 0 0 0 0 0 0 15.000 0 region
3 - Dr. Tami bin Hadeef al-Buqami 0 15.000 21.000 0 0 0 36.000 0 500.000 0 0 0 500.000 0 536.000 0
4 - Mr / Mansour bin Abdullah Al-Zair 0 15.000 9.000 0 0 0 24.000 0 500.000 0 0 0 500.000 0 524.000 0
5- Dr. Nasser bin Ali Al-Zulfawi 0 15.000 3.000 0 0 0 18.000 0 500.000 0 0 0 500.000 0 518.000 0
6- Dr. Ali bin Abdulaziz Al-Khudairi 0 15.000 18.000 0 0 0 33.000 0 500.000 0 0 0 500.000 0 533.000 0
7- Mr / Ibrahim bin Fahad Al-Assaf 0 15.000 15.000 0 0 0 30.000 0 500.000 0 0 0 500.000 0 530.000 3.636
8. Eng / Nasser bin Saad Al-Arifi 0 15.000 3.000 0 0 0 18.000 0 500.000 0 0 0 500.000 0 518.000 0
Total 0 105.000 69.000 0 0 0 174.000 0 3.500.000 0 0 0 3.500.000 0 3.674.000 3.636
Second: Non-executive members
Third: Executive members
1-Eng / Ali bin Abdullah Al-Hassoun 0 15.000 12.000 0 0 0 27.000 0 500.000 0 0 0 500.000 0 527.000 0
2018 35 Remuneration of committee members Fixed Rewards Name (except attending Instead of Total meetings) attending sessions Members of the Audit Committee 1 Dr. Ali bin Abdulaziz Al-Khudairi 0 15.000 15.000 2 Mr . Ibrahim bin Fahad Al-Assaf 0 15.000 15.000 3 Dr. Tami bin Hadeef al-Buqami 0 15.000 15.000 Total 0 15.000 15.000 Members of the Investment Committee 1 Mr . Mansour bin Abdullah Al-Zair 0 6.000 6.000 2 Dr. Tami bin Hadeef al-Buqami 0 6.000 6.000 3 Eng . Ali bin Abdullah Al-Hassoun 0 6.000 6.000 Total 0 18.000 18.000 Members of Nominations and Remuneration Committee 1 Dr. Nasser bin Ali Al-Zulfawi 0 3.000 3.000 2 Dr. Ali bin Abdulaziz Al-Khudairi 0 3.000 3.000 3 Eng . Ali bin Abdullah Al-Hassoun 0 3.000 3.000 Total 0 0 9.000 Members of the Executive Committee 1 Eng . Ali bin Abdullah Al-Hassoun 0 3.000 3.000 2 Eng . Nasser bin Saad Al-Arifi 0 3.000 3.000 3 Mr / Mansour bin Abdullah Al-Zair 0 3.000 3.000 Total 0 9.000 9.000
6- Results of Annual Audit for the efficiency of internal audit processes The external auditor tasks include reviewing the final financial data of the company besides the assessment of the internal audit system including the accounting system from the theoretical and the applied aspects; the company provides a report about the weaknesses of the system and the ways adopted to handle them in addition to enabling the auditor to review the reports of the internal audit unit for the related period. The internal audit unit under the supervision of audit committee will carry out continuous financial, operational and technological processes to verify the efficiency of the internal audit systems in terms of protecting the company assets in addition to the assessment of work risks and measuring the sufficiency of performance; the internal audit unit will submit quarterly regular reports to the audit committee, including the results of internal audit assessment. The annual report of the audit committee asserted the effectiveness and the quality of internal audit processes and it revealed no essential weakness during the year 2018 G.
Board Resolutions • The accounts records have been duly developed accounting to the accounting standards issued by the Saudi commission of chartered accountants. • There is no doubt to be mentioned concerning the company ability to continue its operation. • The internal audit system has been developed on sound bases and it has been carried out perfectly.
36 2018 Disclosures
• Company Represents That It Has No Outstanding Credits. • The company declares that none of the directors, the chief executive officer, the financial director or a related person, has any direct or indirect interest in the works which are carried out for the company. Moreover, all the directors have no subscription in any loan; the company does not guarantee any director for any loan or commitment. • There are no contracts with any parties related to the board of directors, the chief executive office, his deputy, the financial manager or anyoneof their relatives. • The company has no knowledge about any arrangements of agreements under which a director or a senior executive has transferred any salary or compensation. • The company has no knowledge about any arrangements of agreements under which any a corporate shareholder has assigned its rights in the profits. • There no other investments or provisions created for the interest of anyone working for the company. • The company had no notification concerning any interest in the category of shares with voting rights and any change thereof during the last fiscalyear. • The company has no debt instruments transferable to shares and any preemption rights, underwriting rights or similar rights. • The company has not issued any transfer rights or underwriting under debt instruments transferable to shares, any preemption rights, underwriting rights or similar rights. • The company has not refunded, purchased or precluded any refundable debt instruments . • In its meeting held on 21/2/2019 board of directors recommended the next general assembly to pay amount of (SR 106.666.666.40) as profits of the second half of the year 2018 for the company shareholders about (80 hallals) for each share.
General Assemblies
The Attendance Record No Name The Extraordinary General Assembly Meeting 16/4/2018 Eng./ Tariq Abulaziz Alfaris, 1 riyadh municipality representativeRiyadh Attendant Municipality Representative 2 Eng. Ali Abdullah Al Hassoun Attendant 3 Dr. Tami Hadif Al Baqami Attendant 4 Mr. Mansour Abdullah Al Zeir Attendant 5 Dr. Nasser Ali Al-Thilfawi Attendant 6 Dr. Ali Abdulaziz Al Khudairi Attendant 7 Mr. Ibrahim Fahad Al Assaf Attendant 8 Eng. Nasser Saad AlArifi Attendant
Dividend distribution
Dividends distributed during the year Proposed dividend rates at Gross profit Earnings for the Earnings for the the end of the year second half 2017 first half 2018 The ratio 8% 5% 8% 21% Total 106666666.4 SR 66666666.5 SR 106666666.4 SR 279999999.3 SR
2018 37 Shareholders› record applications and dates
Number of the company›s applications for the register of shareholders
1 3/1/2018 Corporate Actions 2 16/4/2018 General Assembly 3 18/4/2018 Profit File 4 31/7/2018 General Assembly
Risks Facing The Company The risks indicated hereunder do not include all the risks that might face the company, there may be additional risks and they are not known to the company or the company may deem them unessential and they may hinder the company operations.
Fluctuation in the company processes and dependence on service projects The company works depend on two main aspects: (1) public utility & service projects 2) commercial centers & real-estate projects. The revenue of such projects may be affected in the future by the extend of demand, which might result in adverse effect on the company financial position and operation results besides affecting the company activity in the service projects, which may change the demand of such projects in various seasons particularly in Riyadh and generally in the kingdom. However, the kingdom tended to projects providing miscellaneous services and commodities in the fields of transport, vehicles, vegetables, fruits, meats and commercial centers whose growth is positively related with the population growth.
Revenue Collection The sources of the company revenues constitute centers and markets and entail the collection by checks, the bank deposits and particularly the cash collection, however, the company faced such risks through preparing precise documentary courses and applying auto-systems besides electronic control systems to limit such risks.
Expansion Strategy Arriyadh development Co. has adopted five plan in the previous years and it has resulted inan unprecedented growth in the operation profits during the last five years; the company approved new projects in the two fields of public utility and real-estate development. The new projects of the company. The new projects of the company may be subject to fluctuations in the tastes of consumers and the volume of demand, which might affect adversely on the results of operational processes of the company and its financial position. Company Works Progress Obstruction The company depends for its activity on the infrastructure of its projects which increases the confidence of the dealing parties. Necessary precautions have been processed to protect its properties from natural disasters or terroristic acts by applying the highest standards of safety through the regular maintenance
38 2018 and the exploitation of security protection. However, there is no guarantee for the company that its work progress will not be affected, even indirectly, by anyone of those hindrances.
Saudization The company has no risks because it is ranked in the premium domain as per the classification made by Ministry of Labor, however, there is nothing to guarantee the company ability to maintain the current percentage of Saudization; most importantly, the company has precise updated and documented regulations for all the practical assignments, besides the firm policy to circulate position, continuous training and Saudization.
Profit Distribution Policy As a general policy adopted in this concern, the board of directors recommends in the end of each fiscal year to distribute the net profits of the company after deducting the all general expenses and other costs including the legally applicable Zakat as indicated in article (44) of the company articles of association as follows:
1. 10 % of the net profits will be withheld to compose the regulatory reserve; the ordinary general meeting may stop such withholding if the said reserve becomes equal to half of the capital. 2. An amount equal to 5 % of the paid up capital will be distributed to shareholders out of the remaining profit. 3. 5 % of the remaining profit will be provisioned as a remuneration to the directors, considering relevant resolutions and instruction issued by the competent authorities; then the balance of profit will be distributed to the shareholders as additional dividends.
Conclusion We take this opportunity to cite the support provided by the custodian of the two holy mosques King Salman Bin Abdulaziz Al Saud and the crown prince / Mohammed Bin Salman. to the private sector. We further cite the contribution of HRH prince / Faisal Bin Bandar Bin Abdulaziz, vice-mayor Riyadh region for the efforts exerted through continuous guidance and follow up to serve the purposes stated in the company articles of association; and His Royal Highness Prince Mohammed bin Abdulrahman bin Abdulaziz, Deputy Governor of Riyadh Region, for his support of the company in everything that would improve and improve performance and serve the public interest. We also thank you for replying this invitation and your confidence in the board of directors, furthermore, we thank all the employees of the company for their faithful efforts to improve the company performance and the growth of shareholders equities.
Directors of The Board
2018 39
FINANCIAL STATEMENTS & INDEPENDENT AUDITOR’S REPORT For The Year Ended 31 December 2018
STATEMENT OF FINANCIAL POSITION As Of December 31, 2018
Non- Consolidated Non- Consolidated January 1 Consolidated December 31 2017 Description Note December 31 2017 )Adjusted( 2018 )Adjusted( )Note (6 SR )Note (6 SR SR ASSETS NON-CURRENT ASSETS Property, plant and equipment, net 11 896,017 1,276,181 976,597 Real estate investments, net 10 1,334,622,509 1,335,842,548 1,346,616,323 Projects under constructions 9 74,019,863 99,473,468 97,962,061 Investments as at fair value through gain or loss 7 - 183,958,871 455,257,090 Investments as at fair value through other comprehensive income 8 712,694,727 635,341,927 609,383,027 Murabaha investment deposits - long term 175,000,000 - - Prepayments - - 5,957,399 TOTAL NON-CURRENT ASSETS 2,297,233,116 2,255,892,995 2,516,152,497 CURRENT ASSETS Accounts receivable, prepayments and other assets, net 12 58,253,439 47,753,243 47,756,059 Murabaha investment deposits 25,000,000 - 35,000,000 Cash at banks 31,115,725 31,618,584 43,022,093 TOTAL CRRENT ASSETS 114,369,164 79,371,827 125,778,152 TOTAL ASSETS 2,411,602,280 2,335,264,822 2,641,930,649 SHAREHOLDER’S EQUITY AND LIABILITIES SHAREHOLDER’S EQUITY Share capital 1 1,333,333,330 1,333,333,330 1,333,333,330 Statutory reserve 17 271,132,685 250,740,038 229,723,891 Retained earnings 364,903,312 358,902,826 334,608,231 Revaluation reserve investments through OCI 98,180,074 21,931,681 )2,961,335( TOTAL SHAREHOLDER’S EQUITY OWNERS 2,067,549,401 1,964,907,875 1,894,704,117 Non-controlling interest - - 258,188 TOTAL SHAREHOLDER’S EQUITY 2,067,549,401 1,964,907,875 1,894,962,305 NON-CURRENT LIABILITIES Long term loan - - 298,606,078 End-of-service indemnities 15 10,194,439 9,384,871 8,837,830 TOTAL NON-CURRENT LIABILITIES 10,194,439 9,384,871 307,443,908 CURRENT LIABILITIES Long term loan – current portion - - 148,606,079 Due to related party - - 4,099,442 Accounts payable, accrued expenses and other payables 13 255,352,526 285,205,047 206,122,859 Dividends payable 14 63,876,452 61,015,338 57,810,422 Provision for Zakat 16 14,629,462 14,751,691 22,885,634 TOTAL CURRENT LIABILITIES 333,858,440 360,972,076 439,524,436 TOTAL LIABILITIES 344,052,879 370,356,947 746,968,344 TOTAL SHAREHOLDER’S EQUITY AND LIABILITIES 2,411,602,280 2,335,264,822 2,641,930,649
The attached notes (1) to (31) form an integral part of these financial statements.
48 2018 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For The Year Ended December 31, 2018
2017 2018 SR Description Note SR (Adjusted) Note (6)
Revenue 18 282,990,151 314,093,337 Cost of revenue 19 )67,635,541( )66,248,808( Gross operating profit 215,354,610 247,844,529 General and administrative expenses 20 )12,773,689( )12,709,373( Net profit from main operations 202,580,921 235,135,156 Finance cost - )26,423,135( Income from murabha deposits 1,242,695 302,944 Realized gain from investments as at fair value through profit or loss 2,982,147 7,536,130 Unrealized gain from investments as at fair value through profit or loss 7 - 2,316,667 Cash dividends investments as at fair value through OCI 8 A 1,104,407 1,065,884 Other income 21 1,303,198 7,819,560 Net profit for the year before zakat 209,213,368 227,753,206 Zakat 16 )5,286,902( v)5,409,131( Net profit for the year 203,926,466 222,344,075 Other Comprehensive Income Items that not reclassified subsequently to Statement of profit or loss The movement of fair value for investments through OCI - unrealized gain 8 A 76,248,393 24,893,016 Total comprehensive income for the year 280,174,859 247,237,091 Earnings per share 25 Basic and diluted earnings per share from main operations 1.52 1.76 Basic and diluted earnings per share from net profit for the year 1.53 1.67
The attached notes (1) to (31) form an integral part of these financial statements.
2018 49 ( ( ( - - SR equity holders’ holders’ - share Total 177,033,333 258,188 177,533,333 284,006 ) ) ) 1,894,678,299 1,894,962,305 222,344,075 24,893,016 2,067,549,401 76,248,393 1,964,907,875 203,926,466 ( ------SR ling interest 258,188 - Non-control ) 258,188 258,188 ( ( - - - SR Total 177,033,333 177,533,333 1,894,420,111 284,006 1,894,704,117 ) ) 222,344,075 24,893,016 2,067,549,401 76,248,393 1,964,907,875 203,926,466 ( ( ( ------SR Revalua - tion reserve tion reserve investments 2,704,245 257,090 2,961,335 through OCI through ) ) ) 24,893,016 98,180,074 76,248,393 21,931,681 ( ( ( ( - SR earnings Retained 21,016,147 177,033,333 20,392,647 177,533,333 ) ) ) ) 541,096 - - 364,903,312 334,067,135 222,344,075 334,608,231 358,902,826 203,926,466 ------SR reserve Statutory 271,132,685 229,723,891 - 229,723,891 21,016,147 250,740,038 - 20,392,647 ------SR For The Year Ended December 31, 2018 Ended December Year The For Share capital Share 1,333,333,330 1,333,333,330 1,333,333,330 1,333,333,330 The attached notes (1) to (31) form an integral part of these financial statements. STATEMENT OF CHANGES IN SHAREHOLDER’S EQUITY OF STATEMENT Description Balance as at 1 January 2017 previously disclosed Balance as at 1 January 2017 (adjusted) Other comprehensive income (adjusted) Balance as at 1 January 2018 (adjusted) 2018 Balance as at 31 December Effect of adoption IFRS No. 9 & 15 Effect Net profit for the year (adjusted) Transferred to statutory reserve Transferred dividends Other comprehensive income Liquidation of subsidiary company Dividends and rewards of B.O.D (Note 24) Net profit for the year to statutory reserve Transferred
50 2018 STATEMENT OF CASH FLOWS For The Year Ended December 31, 2018 (Adjusted) 2018 Note (6) Description SR 2017 SR OPERATING ACTIVITIES Net profit for the year 203,926,466 222,344,075 Adjustments to reconcile net profit with net cash provided from operating activities: Depreciation 29,134,025 28,488,655 Gain from sale of real estate investments - )34,980,474( Finance cost - 26,423,135 Income from murabha deposits )1,242,695( )302,944( (Reversal) / formed provision for expected credit loss )2,342,134( 51,186 Impairment of prepared consultancy fees 1,233,018 - Unrealized gain from investments through P & L - )2,316,667( Expenses related to projects under constructions 3,697,145 - Gains from sale of property, plant and equipment - )8,135( End-of-service indemnities formed 1,029,690 751,591 Adjustments on zakat provision - )15,876( Zakat formed 5,286,902 5,409,131 240,722,417 245,843,677 Operating assets and liabilities: Accounts receivable, prepayments and other assets )8,148,385( 5,700,640 Accounts payable, accrued expenses and other payables )29,852,521( 80,196,187 Due to related party - )4,099,442( Finance cost paid - )24,749,292( Zakat paid )5,409,131( )13,527,198( End-of-service indemnities paid )220,122( )204,550( Net cash provided from operating activities 197,092,258 289,160,022 INVESTING ACTIVITIES Purchase of investments through OCI )1,104,407( )1,065,884( Purchase of investments through P & L 183,958,871 273,614,886 Murabaha investment deposits )200,000,000( - Income from murabha deposits proceeds - 511,333 Purchase of property, plant and equipment )257,298( )1,072,933( Proceeds from sale of property, plant and equipment - 8,347 Proceeds from sale of real estate investments - 36,105,283 Projects under construction addition )5,520,064( )19,577,959( Net cash provided from (used in) investing activities )22,922,898( 288,523,073 FINANCING ACTIVITIES Loans Paid - )450,000,000( Non-controlling interest - )258,188( Cash dividends paid )174,672,219( )173,828,416( Net cash used in financing activities )174,672,219( )624,086,604( Net decrease in cash at banks )502,859( )46,403,509( cash at banks at beginning of the year 31,618,584 78,022,093 cash at banks at end of the year 31,115,725 31,618,584 Non-cash transactions Dividends payable 2,861,114 3,987,611 Real estate additions from projects under construction 27,276,524 18,066,552 Provision for expected credit loss used 83,031 - The movement of fair value for investments through OCI 76,248,393 24,893,016
The attached notes (1) to (31) form an integral part of these financial statements.
2018 51 NOTES TO THE FINANCIAL STATEMENTS For The Year Ended December 31, 2017
1- ACTIVITIES Arriyadh Development Co. is Saudi Joint Stock Company was founded according to the royal decree No. m/2 dated Safar 9, 1414H corresponding to July 28, 1993. The Company is registered in the Kingdom of Saudi Arabia under the Commercial Registration No. 1010124500, issued in Riyadh dated Thu Al-Qa’dah 29, 1414H (corresponding to May 10, 1994). The paid-up capital of the company 1,333,333,330 SR from 133,333,333 shares at a par value of 10 SR per share.
The Company’s Head Office is located at King Fahad Road Addira District, P.O. Box 7442, Riyadh 11462, Kingdom of Saudi Arabia.
The principle activities of the company are to build up facilities, commercial and residential buildings, services building, public parks, tourism and residential compounds and sales or renting cash or installment, managing construction projects, build up commercial and industrial exhibition for renting or selling or managing and practicing all the necessary activities required to achieve the company objectives.
2- BASIS OF PREPARATION FINANCIAL STATEMENTS 2-1 Statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed in Saudi Arabia and other standards and pronouncements endorsed by the Saudi Organization for Certified Public Accountants (SOCPA).
The Capital Market Authority of Saudi Arabia has decided that the options for using the revaluation model of property, plant and equipment and intangible assets in IAS 16 and IAS 38 and the option to use the fair value model for investment properties in IAS 40, Will not be available during the first three years of the transition date from 2017 to 2019 for listed companies.
2-2 Preparation the financial statements The accompanying financial statements have been prepared on the basis of historical cost except investments in equity instruments by fair value.
The financial statements are presented in Saudi Riyals, which is the Company’s functional and presentation currency.
3- CHANGES IN SIGNIFICANT ACCOUNTING POLICIES Except that we mentioned below, the accounting policies adopted in these financial statements are the same as those adopted in financial statements for the year ended 31 December 2017.
As of 1 January 2018, the Company has adopted the following standards:
IFRS No. 9: the company has reclassified its financial investments (Note 6). IFRS No. 15: adjustments on revenues in accordance with the concept of the client obtaining control over the service provided (Note 6).
52 2018 As follows the affect of adopted these standards on the adopted policies by the company
3-1 IFRS 9 Financial Instruments (amended version in 2009, 2010, 2013, 2014) IFRS 9 determine the requirements for the recognition and measurement of financial assets and financial liabilities and some of contracts of purchase or sale of non- financial items. This standard replaces IAS 39 financial instruments (recognition and measurement). Details of the new accounting policies and the nature of changes in previous accounting policies are as follows:
3-1-1 Classification – Financial assets IFRS 9 contains three principal classification categories for financial assets: measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). The standard eliminates the existing IAS 39 categories of held to maturity, loans and receivables and available for sale. IFRS 9 requires that derivatives embedded in the contracts should not be separated from the host contract which is a financial asset instead the hybrid financial instrument as a whole is assessed for classification.
3-1-2 Impairment IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with a forward-looking ‘expected credit loss’ (ECL) model. This will require considerable judgement as to how changes in economic factors affect ECLs, which will be determined on a probability-weighted basis. The new impairment model will apply to financial assets measured at amortized cost or FVOCI, except for investments in equity instruments, and to contract assets. Under IFRS 9, loss allowances will be measured on either of the following bases: - 12-month ECLs are those that result from possible default events within the 12 months after the reporting date; and - Lifetime ECLs are those that result from all possible default events over the expected life of a financial instrument. Lifetime ECL measurement applies if the credit risk of a financial asset at the reporting date has increased significantly since initial recognition and 12-month ECL measurement applies if it has not. An entity may determine that a financial asset’s credit risk has not increased significantly if the asset has low credit risk at the reporting date. However, lifetime ECL measurement always applies for trade receivables and contract assets without a significant financing component; an entity may choose to apply this policy also for trade receivables and contract assets with a significant financing component.
3-1-3 Classification – Financial Liabilities IFRS 9 largely retains the existing requirements in IAS 39 for the classification of financial liabilities. However, under IAS 39 all fair value changes of liabilities designated as at FVTPL are recognized in profit or loss, whereas under IFRS 9 these fair value changes are generally presented as follows: - the amount of change in the fair value that is attributable to changes in the credit risk of the liability is presented in OCI - the remaining amount of change in the fair value is presented in profit or loss.
3-1-4 Hedge accounting IFRS 9 Introduces a new hedge accounting model that is designed to be more closely aligned with how entities undertake risk management activities when hedging financial and non-financial risk exposures.
3-2 IFRS 15 Revenue from Contracts with Customers IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programs. Adjustments have been made to the revenues in accordance with the performance of the service to the customer and the concept of the customer’s gaining control of that service, in line with the requirements of IFRS 15, (note No. 6).
2018 53 4- STANDRAD ISSUED AND NOT YET EFFECTIVE IFRS 16 Leases (start at 1/1/2019) This standard start adoption in the future years that start at or after 1 January 2019, with available for early adoption.
IFRS 16 specifies how an IFRS reporter will recognize, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17. The Company is in the process of preparing the necessary studies to determine the impact on the financial statements from the adoption of this standard.
5- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies adopted by the company
Use of estimates The preparation of financial statements in accordance with International Financial Reporting Standards requires the use of estimates and assumptions that may affect the value of restricted assets and liabilities, and disclosure of potential assets and liabilities in the date of the financial statements, and the value of revenue and expenses were disclosure to the period of the financial statement’s preparation. Although these estimates and judgments are based on management’s best knowledge and events available to the management in the date of the financial statements, it is possible that actual final results differ from these estimates. These estimates and assumptions are reviewed on a continual basis and effects resulting from these accounting changes will be disclosed in the year and future period which are affected by it.
The estimates and assumptions that are at significant risk that could significantly change the carrying amounts of assets and liabilities during the subsequent financial years are as follows:
Impairment of Non-financial assets The Company assesses at each reporting date whether there is an indication that the asset has been impaired. If any indication exists, the Company estimates the recoverable amount of the asset. The recoverable amount of the asset is the higher of the fair value of the asset less costs to sell and its value in use. In assessing the value in use, the estimated future cash flows of the asset are discounted to their present value using a discount rate that reflects current market assessments of the time value of funds and the risks specific to the asset. When determining fair value less costs to sell, the latest market transactions are taken into consideration. If the recoverable amount of the asset is estimated at less than it carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognized immediately in the statement of profit or loss. If a subsequent impairment loss is reversed, the carrying amount of the asset is increased to the revised value of its recoverable amount, but only to the extent that the carrying amount does not exceed the carrying amount that would have been determined in the event that there is no impairment loss on the asset Previous years. An impairment loss is recognized directly in the statement of profit or loss.
Provisions Provisions are recognized when the Company has contingent liabilities (legal or constructive) arising from past events and the payment of the liability is probable and can be reliably measured. The amount recognized as an allowance is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. When an allowance is measured using estimated cash flows to settle the present liability, its carrying amount is the present value of those cash flows. If some or all of the economic benefits required to settle a provision from a third party are expected to be recovered, the amount due is recognized as an asset if the amount is certain to be recovered and the amount of the receivable can be reliably measured.
54 2018 Useful lives for real estate investments & property, plant and equipment The Company’s management determines the estimated useful lives of property, property, plant and equipment for the purpose of calculating depreciation. This estimate is made after taking into account the expected use of the asset or the actual obsolescence. The management periodically reviews the estimated useful lives at least annually and the depreciation method to ensure that the method and periods of depreciation are consistent with the expected pattern of economic benefits of the assets.
Assumptions of liabilities of employees benefits After-service benefits represent liabilities that will be settled in the future and require the use of assumptions against expected liabilities. IAS 19 “Employee Benefits” requires management to use more assumptions regarding variables such as discount rates, rate of compensation increases, return on original, mortality rates, turnover, and future health care costs. The Company’s management leads an actuarial valuation of the liability account. Changes in key assumptions can have a significant impact on expected benefit liabilities and / or periodic employee benefit costs incurred.
Zakat Zakat is calculated pursuant to Zakat Regulation in the Kingdom of Saudi Arabia and recognized in the respective subsidiaries or in the statement of profit or loss in each period, The provision is based on an estimate of Zakat that is adjusted in the financial period in which the final assessment of Zakat is issued by the General Authority of Zakat and Tax (“GAZT”), Any change in the estimate resulting from the final assessment is recognized in that period.
REAL ESTATE INVESTMENTS Real estate investments are recognized and represented in the buildings and lands which are used for rental purposes or that are kept for long periods to achieve a financial return from the increase in market value below its cost net of accumulated depreciation, if any, there are no depreciation of lands, building depreciation is computed using the straight-line method over its estimated useful lives based on the following annual percentage rate.
Building 4% – 1.51%
Investments land include lands fully owned to the company and land shares with others, all recorded in the costs with addition to development expenses. Real estate investments are stated at cost in accordance with IAS 40, the standard give choices for recording its investment properties are at cost or at fair value provided that there is no impediment to the ability to reliably determine the value of the investment. The management has chosen the cost model to record its investments in accordance with the Circular issued by the Capital Market Authority on 16/10/1438 H corresponding to 17/10/2016.
Impairment A- Financial Assets A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if there is objective evidence of result of one or more events that occurred after the initial recognition of the asset, and that loss events had an impact on the estimated future cash flows of that asset that can be estimated reliably. Objective evidence that financial assets are impaired can include default or delinquency by a debtor, restructuring of an amount due to the company on terms that the company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers in the company, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment. For available-for-sale equity instruments that cannot be reversed, they are recognized directly in the statement of changes in equity.
2018 55 B- Non-financial Assets Non-financial assets (other than biological assets measured at fair value, inventories and deferred tax assets) are reviewed at each reporting date to identify circumstances indicating occurrence of impairment loss or reversal of impairment loss. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss or reversal of impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in Condensed Statement of Profit or Loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Derecognition A financial asset is primarily derecognized when the contractual rights to receive cash flows fromthe asset have expired, or the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ·passthrough’ arrangement; and either the Company has transferred substantially all the risks and rewards of the asset. or the Company has neither transferred nor retained substantially all the risks and rewards of the asset. but has transferred control of the asset
Property, plant and equipment Property and equipment are stated at cost net of accumulated depreciation. The cost is including the expenses related to purchase the asset. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components). Expenditure on maintenance and repairs is expensed, while expenditure for betterment is capitalized. Depreciation is computed using the straight- line method over the estimated useful lives of the assets. Sold or disposed asset is deleted from the books at date of sale or disposal along with its accumulated depreciation. The percentage rates of depreciation are as follow:
Description Percentage Machinery and equipment 25% Furniture and fixtures 25% Motor vehicles 25%
The assets’ residual values, useful lives and impairment indicators are reviewed periodically to ensure that the method and period of depreciation are suitable with the expected economic benefits of the property and equipment. In 2017, the Company selected the cost model for recording property, plant and equipment in accordance with the Capital Market Authority›s decision dated 16/01/1438 H corresponding to 17/10/2016, which obligates listed companies to use the cost model.
56 2018 Financial instruments Financial assets and financial liabilities are recognized when a Company entity becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.
Financial assets Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available-for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends on the nature and purpose ofthe financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.
A- Financial assets at fair value through statement of profit & loss Financial assets are classified as at FVTPL when the financial asset is (i) contingent consideration that may be paid by an acquirer as part of a business combination to which IFRS 3 applies, (ii) held for trading, or (iii) it is designated at FVTPL by the Company. A financial asset is classified as held for trading if: • it has been acquired principally for selling it in the near term. • on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking. • it is a derivative that is not designated and effective as a hedging instrument. A financial asset other than a financial asset held for trading or contingent consideration that may be paid by an acquirer as part of a business combination may be designated as at FVTPL upon initial recognition if:
• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or • the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed, and its performance is evaluated on a fair value basis, in accordance with the Company’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis. • it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract to be designated as at FVTPL. Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. Dividends or interest earned on the financial asset are included in the ‘other income / charges’ line item in the statement of profit or loss.
B- Financial assets at fair value through other comprehensive income The Listed shares which owned by the company and traded in an active market are classified as available-for-sale financial assets and are stated at fair value. The Company also has investments in unlisted shares that are not traded in active markets but are also classified as available-for-sale financial assets and are carried at fair value, in the belief that the fair value can be reliably measured. Gains and losses arising from changes in fair value are included in other comprehensive income and are added to the revaluation reserve under equity except for impairment losses that are recognized in profit or loss. If the investment is disposed of or is impaired, the cumulative gain or loss previously recognized in the revaluation reserve is included in other comprehensive income. Any income from dividends related to the investments available of sale are recorded when the company have the rights to receive those dividends.
2018 57 B- Receivables Receivables are non-derivative financial assets with fixed or determinable payments that arenot quoted in an active market. Receivables including trade and other receivables, bank balances and cash are measured at amortized cost using the effective interest method, less any impairment loss which is recognized in profit or loss. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the effect of discounting is immaterial.
Financial liabilities financial liabilities (including borrowings and trade and other payables) are initially and subsequently measured at amortized cost using the effective interest method. The Company derecognizes financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.
Effective interest method The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Cash and bank balances Cash and bank balances include cash balances, banking murabhat and other investments which can be liquidated in three months or less.
Accounts Receivable Accounts receivable balance appear in the original invoices amount after deduction of doubtful provision against any amount inapplicable to being collected. An estimate for the doubtful receivable is made when the company cannot collect the balances and doubtful receivables are written-off when incurred. The provisions appear in the statement of income. Any subsequent recovery in the accounts receivable previously written- off is added to the revenue.
Accounts payable Liabilities are recognized for amounts to be paid in the future for services, whether billed by the supplier or not.
Zakat provision Zakat is a company obligation and the estimated Zakat is provided within the accompanying financial statements and is charged to the statement of income, in accordance with Zakat standards issued by the Saudi Organization for Certified Public Accountants. As it is computed approximately in accordance with the accrual concept. The zakat charge is computed at end of the year according to the actual Saudis ownership based on adjusted net income or zakat base, whichever is higher. Tax is computed at end of the year according to the actual non-Saudis ownership based on adjusted net income according to the Regulations of the Department of Zakat and Income Tax (“DZIT”) in the Kingdom of Saudi Arabia. Any difference in the estimate is recorded when the final assessment is provided.
Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The Company does not have any finance leases.
58 2018 Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Employee benefits • End-of-service indemnities The end of service benefits provision, which is a defined benefit plan, is determined using the projected unit credit method, with actuarial valuations being carried out at the end of annual reporting period. Remeasurements, comprising actuarial gains and losses, are reflected immediately in the statement of financial position with a charge or credit recognized in other comprehensive income in the period in which they occur. Remeasurements recognized in other comprehensive income are reflected immediately in retained earnings and will not be reclassified to profit or loss.
• Retirement benefits The Company pays retirement contributions for its Saudi Arabian employees to the General Organization for Social Insurance. This represents a defined contribution plan. The payments made are expensed as incurred.
• Short-term employee benefits A liability is recognized for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service. Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.
Revenue A) Revenues from sale of real estate investments; The proceeds from the sale of the investment land for sale (developed or undeveloped) are recognized when the sale is completed and the significant risks and rewards of ownership are transferred to the buyer. The income from the sale of the land (under development) is recognized when the sale contract is concluded and a share certificate is issued to the new owner.
B) Rental income Revenue generated from the lease and operation of investment properties is recognized at the time of the contract or when the service is rendered. Revenue is recognized for the period in respect of the financial period on a straight-line basis over the lease and other income is recognized when earned.
Expenses Expenses by the company comprise of management and maintenance real estate expenses and their depreciations which are classified as direct costs, other expenses are classified as general and administrative expenses.
Provisions Provisions are made when the Company has any present obligation (legal or constructive) as a result of past events for which the cost payment is probable.
Provisions are measured to the best of the expected fair value of the liability as at the balance sheet date, taking into account risks and uncertainties surrounding the obligation. When an allowance is measured using estimated cash flows to settle the present obligation, the receivable is recognized as an asset if the receipt and replacement of the amount is confirmed and the amount can be measured reliably.
Segmental Reporting An operating segment is a sum of assets and processes that jointly engage in the rendering of products or services subject to risks and rewards that are different from those of other operating segments and which are measured according to reports used by the chief executive officer and the chief decision maker.
2018 59 The geographical segment is associated with the provision of products in a specific economic environment that are subject to risks and rewards that differ from those of business segments in economic environments.
Offsetting Financial assets and financial liabilities are offset, and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to offset recognized amounts and there is an intention to settle on a net basis. to realize the assets and settle the liabilities simultaneously.
Earnings per share Basic and diluted earnings per share was calculated based on the weighted average number of normal shares as at the end of the year.
Foreign currency transactions Foreign currency transactions are translated into Saudi Riyals at the rates of exchange prevailing at the time of the transaction. Monetary assets and liabilities denominated in foreign currencies at the statement of financial position date are translated at the exchange rates prevailing at that date. Gains and losses from settlement and translation of foreign currency transactions are included in the statement of profit or loss.
6- ADOPTION OF IFRS No. 9 &15 As from 1 January 2018, the Company’s management has adopted IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers and has reclassified certain financial investments in accordance with its business model. And has made adjustments to the revenues in line with the concept of the client gaining control over the service. The following are the effect of these adjustments on the financial statements as at 31 December 2017 and 1 January 2017:
6-1 EFFECT OF ADOPTION ON THE STATEMENT OF FINACIAL POSITION AS AT 31 DECEMBER 2017
The balance Balance after as previously Effect of adjustment Description disclosed Adoption 31 Dec. 2017 31 Dec. 2017 SR SR SR
Real estate investments, net 1,194,971,855 140,870,693 1,335,842,548 Project under construction 255,720,908 )156,247,440( 99,473,468 Investments available for sale 819,300,798 )819,300,798( - Investments as at fair value through gain or loss - 183,958,871 183,958,871 Investments as at fair value through other comprehensive income - 635,341,927 635,341,927 Retained earning 346,179,122 12,723,704 358,902,826 Revaluation reserve investments through OCI 24,505,438 )2,573,757( 21,931,681 Accounts payable, accrued expenses and other payables – deferred 310,731,741 )25,526,694( 285,205,047 revenue
60 2018 6-2 EFFECT OF ADOPTION ON STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY AT 31 DECEMBER 2017: Revaluation reserve Statutory Retained Share capital investments Total Description reserve earning SR through SR SR SR OCI SR Balance as at 31 December 2017 as previously disclosed 1,333,333,330 250,740,038 346,179,122 24,505,438 1,954,757,928 Effect of adoption IFRS adoption and reclassification - - 12,723,704 )2,573,757( 10,149,947 Balance at 31 December 2017 (adjusted) 1,333,333,330 250,740,038 358,902,826 21,931,681 1,964,907,875
6-3 EFFECT OF ADOPTION ON PROFIT OR LOSS AND COMPREHENSIVE INCOME AS AT 31 DECEMBER 2017: The balance Balance after as previously Effect of adjustment Description disclosed Adoption 31 Dec. 2017 31 Dec. 2017 SR SR SR
Revenues 289,480,888 24,612,449 314,093,337 Cost of revenues 51,502,300 14,746,508 66,248,808 Income from investments available for sale 8,602,014 )8,602,014( - Realized gain from investments as at fair value through profit or loss - 7,536,130 7,536,130 Unrealized gain from investments as at fair value through profit or - 2,316,667 2,316,667 loss Cash dividends investments as at fair value through OCI - 1,065,884 1,065,884 Other comprehensive income Items that not reclassified subsequently to Statement of profit or loss Transaction on Investments as at fair value through other 27,209,683 )2,316,667( 24,893,016 comprehensive income
6-4 EFFECT OF ADOPTION ON THE STATEMENT OF FINACIAL POSITION AS AT 1 January 2017 The balance Balance as previously Effect of after adjust- Description disclosed Adoption ment Jan. 2017 1 SR Jan. 2017 1 SR SR Real estate investment, net 1,215,901,292 130,715,031 1,346,616,323 Project under construction 229,307,331 )131,345,270( 97,962,061 Investment available for sale 1,064,640,117 )1,064,640,117( - Investments as at fair value through gain or loss - 455,257,090 455,257,090 Investments as at fair value through other comprehensive income - 609,383,027 609,383,027 Retained earning 334,067,135 541,096 334,608,231 Revaluation reserve investments through OCI )2,704,245( )257,090( )2,961,335( Accounts payable, accrued expenses and other payables – deferred 207,037,104 )914,245( 206,122,859 revenue
2018 61 6-5 EFFECT OF ADOPTION ON STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY AT 1 January 2017:
Revaluation Non- Statutory Retained reserve Share capital controlling Total Description reserve earning investments SR interest SR SR SR through OCI SR SR Balance as at 1 January 2017 as 1,333,333,330 229,723,891 334,067,135 )2,704,245( 258,188 1,894,678,299 previously disclosed Effect of adoption IFRS adoption and - 541,096 )257,090( - 284,006 reclassification - Balance as at 1 January 2017 adjusted 1,333,333,330 229,723,891 334,608,231 )2,961,335( 258,188 1,894,962,305
6-6 NOTES ABOUT ADJUSTMENTS
First: Adjustments resulting from the adoption of IFRS 9 “Financial Instruments”
IFRS 9 Financial Instruments provides that financial investments are classified according to the business model of the Company for each investment. The reclassifications and adjustments relating to financial investments are as follows:
A) The Company’s investment in Al-Mubarak Trading Fund was reclassified at 455,257,090 SR and 183,958,871 SR as at 1 January 2017 and 31 December 2017 respectively from available-for-sale investments to investments at fair value through profit or loss in accordance with the Company’s business model in accordance with the requirements of International Financial Reporting Standard No. 9 - Financial Instruments.
B) The unrealized gain on the above investment was reclassified to 257,090 SR and 2,573,757 SR as at 1 January 2017 and 31 December 2017 respectively from revaluation reserve of investments through other comprehensive income to retained earnings in accordance with the requirements of the International Financial Reporting Standard No. 9 - Financial Instruments.
C) Available-for-sale investments income amounting to 8,602,014 SR for the year ended 31 December 2017 has been reclassified to realized gains from investments at fair value through profit or loss and dividends on investments at fair value through other comprehensive income in accordance with International Financial Reporting Standards (IFRS) 9) - Financial instruments.
D) The movement in the fair value of investments through other comprehensive income was reclassified to SR 2,316,667 for the year ended 31 December 2017 relating to the unrealized gain arising from revaluation of the investment at fair value through profit or loss mentioned in the preceding paragraphs.
Second: Adjustments resulting from the adoption of IFRS 15 “Revenue from contracts with customers”
IFRS 15 Revenue from Contracts with Customers states in paragraph 31 that revenue is recognized when or when an entity meets performance obligations when goods or services are transferred when the customer obtains control of that asset. Of the rental of part of its properties and acquired rental income during the current year and prior years before receiving the building on a regular basis. According to this standard, an entity must recognize revenue when (or as soon as) the entity meets an obligation to perform by converting a commodity or service entrusted to a customer the asset has been changed the management of the company
62 2018 transferred the real estate assets from the projects under implementation to the real estate investments and began to amortize these properties retroactively. In accordance with International Accounting Standard No. 40, “Real Estate Investments”, we note the following effect of these adjustments:
A) The amount of 131,345,270 SR has been reclassified from projects under construction to real estate investments as at 1 January 2017, consisting of the cost of the first phase of Souq Ateeqa, which is ready for lease.
B) The amount of 630,239 SR relating to the depreciation of the first phase of Souq Ateeqa project, has been recorded where the balance of the investment property has been reduced and the retained earnings have been reduced to the same amount as of 1 January 2017.
6-6 NOTES ABOUT ADJUSTMENTS (continued)
C) The amount of 914,245 SR was reclassified from deferred revenue in accounts payable, accrued expenses and other creditors to retained earnings as of 1 January 2017 in respect of the revenues generated from the Souq Ateeqa project – first Phase, in accordance with the concept of the client gaining control of the service provided in accordance with the requirements International Financial Reporting Standard No. 15 ‘Revenue from Contracts with Customers’.
D) The amount of 18,066,552 SR has been reclassified from projects under construction to real estate investments as at 31 December 2017 consisting of the cost of the Plaza 3 building which is ready for leasing.
E) The amount of 25,526,694 SR was reclassified from deferred revenue in accounts payable, accrued expenses and other creditors to retained earnings as at 31 December 2017 for the revenues generated from the Souq Attika project and the Plaza 3 building at the Tameer Center according to the concept of the customer control of the service provided in accordance with the requirements of IFRS No. 15 ‘Revenue from Contracts with Customers’.
F) The amount of 7,910,890 SR relating to the depreciation of the first phase of Souq Ateeqa project and Plaza 3 building has been recognized on cost of revenue in the statement of profit or loss for the year ended 31 December 2017.
G) The revenues of the first phase of Souq Ateeqa and Plaza 3 building in the Tameer Center are shown in accordance with the concept of the customer control of the service provided on the profit or loss statement for the year ended 31 December 2017 amounting to 24,612,449 SR, In accordance with the requirements of International Financial Reporting Standard No. 15 - Revenue from contracts with customers.
H) Operating costs relating to the first phase of Souq Ateeqa were recognized in the statement of profit or loss for the year ended 31 December 2017 amounting to 6,835,618 SR which were classified under projects under construction.
7- INVESTMENT AS AT FAIR VALUE THROUGH PROFIT OR LOSS During the fourth quarter of 2016, the management invest into AlMubarak Trading Company at Al Arabi National Investment Company (open fund) that licensed by the Capital Market Authority (CMA) and compliant with Shari’a standards and controls. During the fourth quarter of 2018, the company sold the all the amount of investment by amount 326,941,018 SR which realized profits from this sale by amount 2,982,147 SR. The investment movement is as follows:
2018 63 31 December 31 December 1 January Description 2018 2017 2017 SR SR SR Beginning balance 183,958,871 455,257,090 - Addition during the year 140,000,000 345,000,000 455,000,000 Disposal during the year )323,958,871( )618,614,886( - Unrealized gain from investment revaluation - 2,316,667 257,090 - 183,958,871 455,257,090
8- INVESTMENT AS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
31 December 31 December 1 January Description 2018 2017 2017 SR SR SR Investments in traded shares (8A) 35,334,464 33,413,447 32,665,630 Investments in non-traded shares (8B) 5,000,000 5,000,000 5,000,000 Investments in real estate funds (8C) 672,360,263 596,928,480 571,717,397 712,694,727 635,341,927 609,383,027
A- INVESTMENTS IN TRADED SHARES
31 December 31 December 1 January Description 2018 2017 2017 SR SR SR Beginning balance (at cost) 53,872,430 52,806,546 51,948,918 Addition during the year 1,104,407 1,065,884 857,628 Unrealized losses from investment revaluation )1,180,189( )1,996,799( )1,678,732( 53,796,648 51,875,631 51,127,814 Provision for decrease in prices of securities * )18,462,184( )18,462,184( )18,462,184( 35,334,464 33,413,447 32,665,630
* During the third and the fourth quarters of the year 2015, the Company made a provision for the decrease in prices of securities based on management’s estimates and a study conducted at the time about the permanent decline in the value of investments. During 2018, a study was conducted on increasing the impairment of these securities, and did not result in an increase in the provision for decrease in prices of securities.
B- INVESTMENTS IN NON-TRADED SHARES The board of directors decided at its meeting held on January 15, 2015 to enter as a partner founder in Saudi Hospitality Heritage company (Closed Saudi Joint Stock Company) located in Riyadh, with 2,000,000 shares at total value 20 million SR and 8% of the company’s capital. The company paid 5,000,000 SR as a payment for its investment share and the full amount will be financed from the company’s own resources. The investment is recorded at cost due to the difficulty in determining the fair value.
64 2018 C- INVESTMENTS IN REAL ESTATE FUNDS The board of directors decided at its meeting held on November 2, 2015 to participate in a real estate investment fund established according to the financial market organization and related executive regulations managed by Al Inmaa Investment Company licensed from the Capital Market Authority. At June 30, 2016, the fund took control over the full share of the Company’s raw land located in north east of Riyadh, the Company owns 85% and Adeer Real Estate Company owns 15%. The Company’s share value is 974,100,000 SR, the fund paid 401,100,000 SR to the Company and the remaining 573,000,000 SR represents the Company’s contribution in Riyadh First Real Estate Development Fund which reached a market value of 672,360,263 SR as at December 31, 2018 according to the data provided by the management of the Fund as at 31 December 2018. The Fund has not issued the annual financial statements as of 31 December 2018 as at the reporting date of these financial statements, the valuation has been based on the unit value of the Fund from the data provided to us by the Fund’s management as at 31 December 2018. The investment is as follows:
31 December 31 December 1 January Description 2018 2017 2017 SR SR SR Beginning balance 573,000,000 573,000,000 - Addition during the year - - 573,000,000 Unrealized gain/(losses) from investment revaluation 99,360,263 23,928,480 )1,282,603( 672,360,263 596,928,480 571,717,397
9- PROJECTS UNDER CONSTRUCTION
Ateeqa Market Al-Zaheera Other the second development contracts & Total Description phase project projects SR SR SR SR As of December 31,2018: Beginning of the year 69,073,842 1,426,570 28,973,056 99,473,468 Additions during the year 2,162,499 - 3,357,565 5,520,064 Transfer to real estate investment (note 10) - - )27,276,524( )27,276,524( adjustments )3,697,145( - - )3,697,145( End of the year 67,539,196 1,426,570 5,054,097 74,019,863 As of December 31, 2017: Beginning of the year (adjusted) 52,630,619 1,426,570 43,904,872 97,962,061 Additions during the year 16,443,223 - 3,134,736 19,577,959 Transfer to real estate investment (note 10) - - )18,066,552( )18,066,552( End of the year 69,073,842 1,426,570 28,973,056 99,473,468
2018 65 10- REAL ESTATE INVESTMENTS, NET
Lands on which Lands buildings are Buildings Total Description SR constructed SR SR SR Cost The balance on 1 January 2018 211,123,342 401,428,705 1,006,084,405 1,618,636,452 Transferred from project under construction (note 9) - - 27,276,524 27,276,524 The balance on 31 December 2018 211,123,342 401,428,705 1,033,360,929 1,645,912,976 Accumulated depreciation The balance on 1 January 2018 - - 282,793,904 282,793,904 Charge for the year - - 28,496,563 28,496,563 The balance on 31 December 2018 - - 311,290,467 311,290,467 Net book value December 31, 2018 211,123,342 401,428,705 722,070,462 1,334,622,509
Within the real estate investments there is lands totaling amounting 29,104,800 SR not registered in the name of the company as it was expropriated under Royal Decree No. 4 / B / 2732 dated 8/3/1412H. The owners did not submit their dues and transfer the land ownership to the company until 31 December 2018). (note 13)
Real estate investments include buildings constructed on land leased from the Riyadh Municipality under 25-year lease from September 18, 1996, which are transferred to the Municipality at the end of the contract period. The net book value as at 31 December 2018 is 3.8 million SR.
Real estate investments include buildings constructed on land leased from the Riyadh Municipality under 23-year lease from March 30, 2011, which are transferred to the Municipality at the end of the contract. The net book value as at 31 December 2018 is 115.6 million SR.
The fair value of the real estate investments amounted to 3,734,597,917 SR as at 31 December 2018 (31 December 2017: 3,602,030,943 SR) in accordance with the valuation process carried out by the property evaluator (BASMA Company and its partner) for real estate valuation License Holder No. 1210000448 (independent evaluator authorized by the Saudi Organization for authorized evaluators).
All real estate investments are located in Saudi Arabia and are classified as third level in the fair value hierarchy.
66 2018 Lands on which Lands buildings are Buildings Total Description SR constructed SR SR SR Cost The balance on 1 January 2017 (adjusted) 212,248,151 401,428,705 988,017,853 1,601,694,709 Transferred from project under construction (note 9) - - 18,066,552 18,066,552 Disposal during the year )1,124,809( - - )1,124,809( The balance on 31 December 2017 211,123,342 401,428,705 1,006,084,405 1,618,636,452 Accumulated depreciation The balance on 1 January 2017 (adjusted) - - 255,078,386 255,078,386 Charge for the year - - 27,715,518 27,715,518 The balance on 31 December 2017 - - 282,793,904 282,793,904 Net book value December 31, 2017 211,123,342 401,428,705 723,290,501 1,335,842,548 January 1, 2017 212,248,151 401,428,705 732,939,467 1,346,616,323
11- PROPERTY, PLANT AND EQUIPMENT, NET
Machinery Furniture Motor Total Description and equipment and fixtures vehicles SR SR SR SR Cost The balance on 1 January 2018 9,805,408 4,812,255 1,492,620 16,110,283 Additions 211,248 6,050 40,000 257,298 The balance on 31 December 2018 10,016,656 4,818,305 1,532,620 16,367,581 Accumulated depreciation The balance on 1 January 2018 8,747,156 4,763,240 1,323,706 14,834,102 Charge for the year 475,181 20,773 141,508 637,462 The balance on 31 December 2018 9,222,337 4,784,013 1,465,214 15,471,564 Net book value December 31, 2018 794,319 34,292 67,406 896,017
2018 67 Machinery Furniture Motor Total Description and equipment and fixtures vehicles SR SR SR SR Cost The balance on 1 January 2017 8,749,375 4,805,555 1,577,620 15,132,550 Additions 1,066,233 6,700 - 1,072,933 Disposal )10,200( - )85,000( )95,200( The balance on 31 December 2017 9,805,408 4,812,255 1,492,620 16,110,283 Accumulated depreciation The balance on 1 January 2017 8,175,710 4,742,781 1,237,462 14,155,953 Charge for the year 581,434 20,459 171,244 773,137 Disposal )9,988( - )85,000( )94,988( The balance on 31 December 2017 8,747,156 4,763,240 1,323,706 14,834,102 Net book value on 31 December 2017 1,058,252 49,015 168,914 1,276,181 on 1 January 2017 573,665 62,774 340,158 976,597
12- ACCOUNTS RECEIVABLE, PREPAYMENTS AND OTHER ASSETS, NET 31 December 31 December 1 January Description 2018 2017 2017 SR SR SR Accounts receivable 57,430,042 52,916,811 50,317,984 Less: provision for expected credit loss )8,697,915( )11,123,080( )11,080,894( Accounts receivable, Net 48,732,127 41,793,731 39,237,090 Prepaid rents 3,264,190 - - Consultation fees 1,633,018 1,233,018 1,233,018 Accrued revenues from Murabaha Deposit 1,242,695 - 208,389 Advanced to supplier 1,240,472 1,645,921 3,689,959 Royalties 953,911 1,031,092 1,108,774 Employees’ custodies and loans 854,517 715,483 981,477 Restricted bank balances for dividends distribution 275,683 342,708 215,652 Insurance with others 335,193 255,697 255,697 Others 954,651 735,593 826,003 feesLess: Provision of Impairment of prepared consultancy )1,233,018( - - 58,253,439 47,753,243 47,756,059
68 2018 The movement of Provision for expected credit loss during the year as follows: 31 December 31 December 1 January Description 2018 2017 2017 SR SR SR Balance at beginning of the year 11,123,080 11,080,894 10,605,933 Charge for the year - 51,186 536,323 Revised during the year* )2,342,134( - - Used during the year )83,031( )9,000( )61,362( Balance at ending of the year 8,697,915 11,123,080 11,080,894
* In accordance with the management’s approval on 28 September 2018, the management of the Company changed its policy of creating the expected credit loss provision resulting in a revised amount 2,342,134 SR from the expected credit loss provision to the statement of profit or loss during the year according to the study for bad debt. (Note20).
The aging for accounts receivable as follows: 31 December 31 December 1 January Description 2018 2017 2017 SR SR SR Form one day to 90 days 13,027,071 16,432,752 24,870,814 From 91 days to 180 days 21,330,043 16,353,543 7,349,553 From 181 days to 360 days 3,552,714 4,539,132 3,487,845 More than 360 days 19,520,214 15,591,384 14,609,772 57,430,042 52,916,811 50,317,984
The total balances amounted to 19,983,274 SR are issued cases on the lessees, and was obtained Court ruling with amount 3,503,645 SR and it is under implementation.
13- ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER PAYABLES 31 December 31 December 1 January Description 2018 2017 2017 SR SR SR Amounts under settlement Al-Shorouq land (A) 87,664,963 87,664,963 23,264,318 Contractors retention 34,070,534 33,977,568 9,355,876 Deferred revenue (B) 33,016,614 60,968,600 58,363,976 Payable from obtain real estate (C) 29,104,800 29,104,800 29,104,800 Accounts Payable 14,924,869 22,137,086 14,672,652 provisions (D) 14,142,172 14,142,172 14,142,172 Insurance for others 13,946,461 13,834,679 12,988,144 Accrued wages and other benefits 4,379,218 6,415,191 6,509,748 Accrued expenses against services 3,343,381 3,944,667 3,958,926 Advances from lessee 1,508,103 1,899,121 16,651,786 Accrued board of directors’ attendance allowance - 76,339 81,000 Sundry payables 19,251,411 11,039,861 17,029,461 255,352,526 285,205,047 206,122,859 A- The amount represents the value of the sale of Al-Shorouq lands, and the liquidation of the
2018 69 contribution after deducting all the remaining costs is deducted from the shareholders of Al-Shorouq land to the Company. B- Income received in advance is the income received from the investment property lease contracts which are not for the year ended 31 December 2018. C- The amount represents the payable amounts to the owners of the properties that were expropriated under Royal Decree No. 4 / B / 2732 dated 8/3/1412 H. The owners did not submit their contributions until 31 December 2018. The amount of the provisions is the amount for the work of the implementation of a channel for the discharge of flood water and rain in the Shrouq land in Remal district.
14- ACCRUED DIVIDENDS The balance remaining in the financial statements represents the amounts approved by the ordinary general assembly of the company for previous years. The shareholders did not submit until 31 December 2018 to receive them amounting to 63,876,452 SR (31 December 2017: 61,015,338 SR) (1 January 2017: 57,810,422 SR).
15- END-OF-SERVICE INDEMNITIES In accordance with IAS 19 “Employee Benefits”, the management has conducted a test to assess the present value of its liabilities as defined in the statement of financial position date, in respect of employees ‘end of service benefits in accordance with local rules and contractual arrangements. The main actuarial assumptions used to calculate employees’ as following:
31 December 31 December 1 January Description 2018 2017 2017 SR SR SR Discount Rate 3.0% 3.1% 3.0% Salaries increase Rate 4.0% 3.5% 3.0%
The movement of End-of-service indemnities as follows:
31 December 31 December 1 January Description 2018 2017 2017 SR SR SR Beginning balance 9,384,871 8,837,830 6,938,479 formed on statement of profit or loss 1,029,690 751,591 2,472,121 Paid during the year )220,122( )204,550( )572,770( 10,194,439 9,384,871 8,837,830
16- ZAKAT PROVISION
31 December 31 December 1 January Description 2018 2017 2017 SR SR SR The balance at beginning of the year 14,751,691 22,885,634 17,225,647 Formed during the year 5,286,902 5,409,131 13,543,074 Paid during the year )5,409,131( )13,527,198( )7,883,087( Adjustments - )15,876( - The balance at end of the year 14,629,462 14,751,691 22,885,634
The company has submitted all the Zakat declarations up to 2017 and obtained the Zakat clearance up to 2006.
70 2018 The company objected on the Zakat clearance for the years 2005 and 2006 and they are waiting a reply from DZIT.
17- STATUTORY RESERVE In accordance with the Regulations for Companies and the Company’s Articles of Association in the Kingdom of Saudi Arabia, the Company established a statutory reserve by the appropriation of 10% of net income until the reserve equaled 30% of the share capital. This reserve is not available for dividend distribution.
18- Revenue Revenue for the years ended December 31, represented as follows: 2018 2017 Description SR SR Operational revenue 148,218,258 163,322,907 Rental revenue 134,771,893 114,665,147 Revenue from sale of investment lands - 36,105,283 282,990,151 314,093,337
19- Cost of Revenue Cost of revenue for the years ended December 31, represented as follows: 2018 2017 Description SR SR Rental costs 39,383,603 35,915,771 Operational costs 28,251,938 29,208,228 Cost of revenue from sale of investment lands (Note 10) - 1,124,809 67,635,541 66,248,808
20- GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses for the years ended December 31, represented as follows: 2018 2017 Description SR SR Employees’ salaries and benefits 11,700,980 10,491,970 Provision of Impairment of prepared consultancy fees 1,233,018 - Professional and consultation fees 700,250 597,506 Maintenance & operation 393,029 444,563 Marketing and advertising 263,676 275,700 Depreciation 221,448 246,472 Board of directors’ attendance allowance 201,000 192,000 Service contracts 137,768 130,569 Bank charges 115,806 52,772 Electricity and water 27,654 24,883 (Reversal) / formed provision for expected credit loss )2,342,134( 51,186 Others 121,194 201,752 12,773,689 12,709,373
2018 71 21- OTHER INCOME Other income for the years ended December 31, represented as follows: 2018 2017 Description SR SR Revenue from Al-Adel project and Bin Haian building 661,386 671,878 Supervision and development fees - 6,395,998 Gain from sale of property, plant and equipment - 8,135 Others 641,812 743,549 1,303,198 7,819,560
22- SEGMENT INFORMATION The segment information is attributable to the Company’s activities and business as approved by Company’s management to be used as a basis for the financial reporting preparation and consistent with the internal reporting process. Transactions between the business segments are conducted as another parties’ transactions. Segments’ assets, liabilities and the operational activities comprise items that are directly attributable to certain segment and items that can reasonably be allocated between various business segments. Unallocated items are included under joint assets and liabilities.
The following summary financial information sector in Saudi Riyal as of 31 December 2018, 2017 respectively according to the nature of the activity: Sale of Contribution Joint assets Description Operating Leasing land and liabilities Total SR SR SR SR SR As of December 31, 2018: Total assets 293,991,289 1,162,171,361 23,046,050 932,393,580 2,411,602,280 Total liabilities 37,413,399 74,556,472 107,394,359 124,688,649 344,052,879 Revenue 148,218,258 134,771,893 - - 282,990,151 Gross profit 119,966,319 95,388,291 - - 215,354,610 As of December 31, 2017: Total assets 298,274,853 1,177,376,214 23,046,050 836,567,705 2,335,264,822 Total liabilities 29,890,575 109,996,392 107,394,359 123,075,621 370,356,947 Revenue 163,322,908 114,665,146 36,105,283 - 314,093,337 Gross profit 134,114,680 78,749,375 34,980,474 - 247,844,529
23- FINANCIAL INSTRUMENTS AND RISK MANAGEMENT Fair Value The fair value of financial assets and financial liabilities includes financial assets, cash and cash equivalents, receivables and securities. Financial liabilities include payables, loans and other credit balances. First level: market prices which stated in active markets for the same financial instruments. Second level: Valuation techniques are based on inputs that effect on fair value and can be observable directly or indirectly in the market. Third level: Valuation techniques are based on inputs that effect on fair value and cannot be observable directly or indirectly in the market.
72 2018 First level Second level Third level Total Description SR SR SR SR As of December 31, 2018: Investments as at fair value through other comprehensive income 707,694,727 - 5,000,000 712,694,727 707,694,727 - 5,000,000 712,694,727
First level Second level Third level Total Description SR SR SR SR As of December 31, 2017: Investments as at fair value through 183,958,871 - - 183,958,871 profit or loss Investments as at fair value through other comprehensive income 630,341,927 - 5,000,000 635,341,927 814,300,798 - 5,000,000 819,300,798
The value stated in Level 3 reflects the cost of acquisition of these assets rather than their fair value because there is no active market for these assets. The company considers that the cost of acquisition is the most appropriate method of measuring the fair value of these assets and there is no impairment in value for these assets.
Capital risk management The company manages its capital to ensure that the company have ability to continue as a going concern, while achieving higher returns through optimizing debt and equity balances. The company’s overall strategy for the year 2017 has not changed. The capital structure of the Company includes the equity attributable to shareholders of the Company comprising capital, reserves, fair value reserve and retained earnings as included in the statement of changes in shareholders’ equity.
Financial risk management The Company’s activities may be exposed to financial risks arising from the following
Currency risk The Company is not exposed to significant risks associated with foreign currency exchange and therefore no effective management of such exposure is required
Interest rate risk The financial instruments in the statement of financial position are not subject to interest rate risk.
Other Prices risk The Company is exposed to price risk from its investments in the equity of other companies. The Company retains these investments for strategic purposes and not for trading purposes and the Company does not trading in those investments.
Credit risk Credit risk is the risk that one party will fail to discharge an obligation and will cause the other party to incur a financial loss. The Company is exposed to credit risk on its bank balances and accounts receivable as follows:
2018 73 2018 2017 Description SR SR Cash at banks 31,115,725 31,618,584 Accounts receivable, Net 48,732,127 41,793,731 79,847,852 73,412,315
Liquidity risk Liquidity risk is the risk that the company will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at an amount close to its fair value. The company manages its liquidity risk by ensuring that the necessary funds are available when needed.
24- DIVIDENDS DISTRIBUTION The general assembly agreed in its meeting held on 30 Ragab 1439 H (corresponding to 16 April 2018) on the recommendation of the board of directors to distribute 173,333,333 SR, which represents 13% of the capital in cash dividends for the year 2017 by (1.30 SR per share).
The amount Description SR semi-annual cash dividends during 2017 as per B.O.D decision 66,666,666 Remain dividends distributed during the year 106,666,667 Total dividends 173,333,333 board of directors’ rewards during the year 4,200,000 Total dividends and board of directors’ rewards 177,533,333
The board of directors agreed in its meeting held on 28 Shawal 1439 H (corresponding to 12 July 2018) as per the resolution no. 8/3/8/2018 based on the decision from the general assembly to distribute semi-annual cash dividends during the year for 2018 amounting 66,666,666 SR by (50 Halala per share).
25- EARNINGS PER SHARE Basic earnings per share for the year ended 31 December 2018 and ending 31 December 2017 was calculated by dividing the net profit from main operations and net profit for the year by the weighted average number of shares outstanding during the year amounting to 133,333,333 shares (31 December 2017: 133,333,333 shares).
Diluted earnings per share for the year ended 31 December 2018 and ending 31 December 2017 was calculated by dividing the net profit from main operations and net profit for the year by the weighted average number of shares outstanding during the year adjusted for the potential reduction in ordinary shares. As there is no contingent liability for equity instruments, the diluted earnings per share are not different from basic earnings per share.
74 2018 26- CONTINGENT LIABILITIES The capital commitments related to the projects under construction amounted to 28 million SR (31 December 2017: 40 SR).
There is a legal suit on Al Shorouq land which is owned by the company based on the official deed at a book value of 30,726,121 SR and the net book value of buildings constructed on it amounted to 42,181,222 SR, such amounts are shown as a part of real estate investments. The judgement was issued to cancel the retention on the land, which gives the Company the right to sell. The Company is currently selling these lands and transferring the ownership based on this decision.
27- TRANSACTIONS WITH RELATED PARTIES Related parties are non-executive board members and Key management personnel of the Company where the Key management personnel are those who exercise authority and responsibility in the planning, management and control of the Company’s activities, directly or indirectly, including managers. Their transactions during the year as follows:
2018 2017 Nature of transaction SR SR Non-executive board members salaries, allowances and bonuses 201,000 192,000 Key management personnel salaries, allowances and bonuses 6,142,113 6,921,090
28- GENERAL The figures in these financial statements are rounded to the nearest Saudi.
29- COMPARATIVE FIGURES The comparative financial statements have been modified, re-issued, presented and reclassified in accordance with the accounting policies applied in the issuance, presentation, classification and classification of the items and disclosures for the current year’s financial statements prepared in accordance with IFRS 9 Financial Instruments & IFRS 15 Revenue from Contracts with Customers for further information, refer to note 6 (ADOPTION OF IFRS No. 9 &15) in the notes to the financial statements for the year ended 31 December 2018.
30- APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved by the Board of Directors on 16 JumadaAl- Akhar 1440H (21 February 2019).
2018 75 31- SUBSEQUENT EVENTS Dated 16 Jumada Al-Akhar 1440 H (corresponding to 21 February 2019):
• The Board of Directors recommended the increase of the Company’s capital through the granting of bonus shares to the shareholders of the Company by one share for each three shares. The amount of increase in the share capital is SR 444,444,443.3 through the transfer of SAR 200,000,000 from retained earnings and 244,444,443.3 from the statutory reserve.
• The Board of Directors recommended that its meeting be held on that date for the next general assembly, to dividend distribution for the second half of 2018 by amount 80 halala per share representing 8% of the value of the share with total amount SR 106,666,666. that in addition to the dividends for the first half of 2018 with amount of 50 halal per share, so that the total distributions for the year 2018 (SR 1.30 per share) with a total amount of 173,333,333 Saudi riyals.
except the above, in the opinion of the management, there were no significant subsequent events after 31 December 2018 until the date of approval the financial statements by the Board of Directors which may have a material effect on the financial statements as at 31 December 2018.
76 2018