ON THE ACTIVITIES AND ACHIEVEMENTS OF THE COMPANY FOR THE PERIOD FROM 1/1/2014 TO 31/12/2014 ANNUAL REPORT 2014
COMPLETED PROJECTS
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
COMMERCIAL CENTERS
Attameer Wholesale Center
Attameer Riyadh Market Attameer Plaza II Attameer Plaza I
2 0 1 4 EXPANSION OF EXISTING PROJECTS
Expansion of Attameer Meat & Vegetable Market at Bat’ha
PROJECTS-UNDER EXECUTION
OTAIQA Central Market Attameer Plaza III Commercial & Residential Center
PROJECTS-UNDER STUDY AND DESIGN
Refrigeration and Freezing Attameer Public Transport Master Plan to Develop Stores (3) Center Development Project Dhahira Area
2 0 1 4
ANNUAL REPORT 2014
Custodian of the Two Holy Mosques King Salman Bin Abdulaziz
His Royal Highness His Royal Highness Prince Migrin Bin Abdulaziz Prince Muhammad Bin Naif Crown Prince, Deputy Premier Bin Abdulaziz Deputy Crown Prince, the Second Deputy Premeir and Minister of Interior
His Royal Highness Prince Faisal Bin Bandar Bin Abdulaziz Governor of Riyadh Region Honorary President of the Board of Directors
2 0 1 3
ANNUAL REPORT 2014
BOARD OF DIRECTORS
Eng0 Ibrahim Bin Muhammad Al-Sultam Dr. Tami Bin Hudaif Albugmi Chairman Vice Chairman
Dr. Ali Bin Abdulaziz Alkhudairi Eng. Ali Bin Abdullah Alhassoon Member Member - CEO
Dr. Ayedh Bin Farhan Alqahtani Mansur Bin Abdullah Alzeer Dr. Nasser Bin Ali Alzilfawi Member Member Member
Fawaz Bin Hamad Alfawaz Eng. Mishari Bin Nasir Alshethri Dr. Abdul Aziz Bin Hamad Almeshaal Member Member Member
2 0 1 3
ANNUAL REPORT 2014
Contents 9
Board of Director’s Report 11
Auditor’s Report 39
Financial Statements 40
Notes to the Financial Statements 44
2 0 1 3 9
ANNUAL REPORT 2014
The Board of Directors’ Report to The Shareholders of ARRIYADH DEVELOPMENT COMPANY on The Company’s Works and Accomplishments for the period From 1/1/2014 to 31/12/2014
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 1/1/2014 to 31/12/2014 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 , 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 with capital of SR 1,333,333,330 Saudi Riyals . 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.
2 0 1 3 11 ANNUAL REPORT 2014
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, offices, 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 Regions of the Kingdom.
12 2 0 1 4 The Projects First: Projects Executed 1- Project Of Building Expansion For Attameer Meat & Vegetable Market at Bat’ha: The project is located to south east of Attameer meat and vegetable market building at Bat’ha, as an expansion to this building, on a total area of 500 sq. meter, including construction of 12 one-floor shops and (2) kiosks, and (8) Booths.
Second: 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 16 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 will finance this project from its own resources.
2 0 1 4 13 ANNUAL REPORT 2014
14 2 0 1 4 2- Building Expansion of the Wholesale Attameer Center (Attameer Plaza 3 Project): The Company has signed on 25/11/2013 a contract for construction of Attameer Plaza (3) complex of an area 7000 sq. meter with a national company. The contract value is more than SR 23 million. The execution period is 14 months. The project includes construction of 109 shops and 38 administration offices, besides provision of services and car parking. The project is an expansion of Attameer Wholesale Center at Dira quarter in the Government Palace area, central Riyadh. The Company will finance this project from its own resources.
3- Project For Construction Of Commercial And Residential Center At Attameer 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 31 shops and 128 residential flats besides car parking and other services and utilities. The project area is 8.300 sq. meter. The Company will finance this project from its own resources.
2 0 1 4 15 ANNUAL REPORT 2014
Third: Projects Under Study and Design
1- Refrigeration and Freezing Stores (3): The project is located to the south of Attameer Public Transportation Center – Azizia – Riyadh, of area 30,000 sq. meter. It consists of refrigeration and freezing stores including all services needed such as the infrastructure, parking, administrative offices, buffets and truck parking.
2- Attameer Public Transport Center Development 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 Attameer 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 in the city of Riyadh.
3- Master Plan to Develop 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. • Public Pension Agency • 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.
16 2 0 1 4 MARKETING The Company is characterized by its diversified service and real estate projects. Through the Marketing and Public Relations Department, the Company is seeking to draw appropriate marketing strategies.
OPERATIONAL ASPECTS Attameer Wholesale Center: The center is located in the central area of Riyadh city on King Fahad road in the Gevernment 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 devices, 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.
2 0 1 4 17 ANNUAL REPORT 2014
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).
Attameer International Car Auction The auction is located in the north-east of Al-Riyadh city, on Al-Riyadh- al- Dammam road, al-remal avenue on land owned to the company. On a piece of land of area 241.495 sq. meter. The auction offers its services for the customers as a neutral mediator for selling cars throughout integrating work environment (traffic, companies insurance, cars rental companies, and supermarket …etc) and as a desire of the company to develop the actions of The of international reconstruction auction for cars and to increase its income, a contract of establishing a company with limited responsibility has been assigned, with 50% for al-Riyadh company for construction and 50% for the company of Saeed Mohammad Al-bassamy with capital of one million RS to handle the management and operating the auction through renting it from al-Riyadh company for construction in order to develop and improve the performance of the of international reconstruction auction for cars and expanding the activities related to cars whether selling and buying directly or through the internet or any other mean or offering extra services such as fixing and mending cars and selling spare parts and accessories in all their types and all its requirements in addition to the other programs such as helping on the road, insurance, guarantee expansion, issuing international licenses and customs crossing notes and everything related to that of arrangements and expanding all over the kingdom.
18 2 0 1 4 Attameer Public Transport Center The center is located to south of Riyadh city on the southern ring road at Azizia quarter on a piece of land owned by the Company, of area 148,303 sq. meter. The center provides service to the travelers on land using buses and rent cars in a scheduled trips round-the-clock daily inside the Kingdom and abroad.
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 Attameer 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: 1- Riyadh Attameer 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
2 0 1 4 19 ANNUAL REPORT 2014
market includes (155) rental units (offices, shops). The dominating activity of the market is specialization in palm dates trade.
2- Refrigeration and Freezing Stores The refrigeration and freezing stores are located in Azizia quarter south of Riyadh city, near Attameer 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.
20 2 0 1 4 3- The New Commercial Building Located on Hayer road in Riyadh city, Azizia quarter on a plot owned by the Company, of area 1,951.7 sq. meter. The project includes 25 rental units (offices and shops) for diversified activities. Renting started on 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.
2 0 1 4 21 ANNUAL REPORT 2014
Company Properties
First: Lands Owned by the Company, on which facilities are constructed:
Department/Center Area Sq. Meter Attameer Fruit and Vegetable Market 299,226.68 sq. meter Attameer International Car Auction 241,495.35 sq. meter Attameer Public Transportation Center 148,303.58 sq. meter Attameer Wholesale Center 104,475.00 sq. meter Riyadh Attameer Market 24,377.52 sq. meter Attameer Plaza Center (1) 1,190.00 sq. meter Refrigeration and Freezing Stores 27,864 sq. meter Attameer Plaza Center (2) 5,016.92 sq. meter Total 817,275.05 sq. meter
Second: Developed Lands Owned by the Company:
Department/Center Area Sq. Meter Shorooq cities lands and technical service city 410,277 sq. meter lands (common – sales not completed*) Technical services city lands 197,377 sq. meter Azizia area lands 40,951.82 sq. meter Government Palace lands 39,962.74 sq, meter Telal Riyadh lands 22,964.51 sq. meter Land Thumama 2,550,000 sq. meter Total 3,261,533.07 sq. meter * For Shorooq cities lands and technical service city lands, sales started not yet completed.
22 2 0 1 4 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 As man is the most important production element, in this year emphasis was made in the operation jobs. Considerable efforts were made in filling the vacant jobs at the Company by qualified workers specially in the operation jobs at the centers and markets which were witnessing a high percentage of infiltration, leading to a considerable job stability.
Information technology As a result of the company’s interest of walking hand in hand with the modern technologies and developing and accelerating performance, the information technology administration has developed the operating systems in the wholesale market, transportation center, cars auction, and the estate investment system and increasing Censorship of the processes of getting in and out movements which leads to strict financial supervision in addition to fixing computer network and equipping rooms for servers, communications, and surveillance systems in the new projects under construction.
Financial Results • The Company accomplished total revenues for the fiscal year ending on 31/12/2014 reached (SR 269,175,702 ) including (SR 251,287,927) as activity revenues and (SR 17,887,775) other revenues, with decrease and increase by 29% and 225% respectively, for the year 2013. • The Company expenses reached (SR 75,159,069) including (SR 62,765,789) activity expenses and (SR 12,393,280) administrative and marketing expenses. • Net profit of the Company reached before deduction of Zakat (SR 194,016,633). • Zakat allocation for the year 2014 reached (SR 4,650,816). • An amount of (SR 18,936,582 ) was transferred to the general reserve which is equivalent to (10%) of the Company’s net profits after deduction of Zakat.
2 0 1 4 23 ANNUAL REPORT 2014
Effect of Operational Activities on Company Works
Common Operation Statement Lease Activity Land Activity Assets & Total Activity Liabilities
For the year ending on 31 December 2014
Total Assets 369.327.589 990.774.724 903.715.807 92.092.499 2.355.910.619
Total Liabilities 37.299.941 37.353.063 464.374.784 107.879.412 646.907.200
Operation Revenues 129.231.736 81.136.286 40.919.905 - 251.287.927
Operation Costs 26.756.486 21.487.932 14.521.371 - 62.765.789
Total Income 102.475.250 59.648.354 26.398.534 - 188.522.138
For the year ending on 31 December 2013
Total Assets 317.651.535 1.000.125.236 70.467.103 470.538.360 1.858.782.234
Total Liabilities 14.032.225 37.825.669 18.952.239 105.559.512 176.369.645
Operation Revenues 125.820.163 76.803.438 153.222.247 - 355.845.848
Operation Costs 27.373.326 18.287.092 47.370.328 - 93.030.746
Total Income 98.446.837 58.516.346 105.851.918 - 262.815.101
Comparative Analytic Presentation of Operation Results
Actual Data Actual Data Difference Difference Statement 2014 2013 R.S %
Operation Revenues 251.287.927 355.845.848 -104.557.921 -29%
Operation Costs 62.765.789 93.030.747 30.264.958 33%
Total Profit 188.522.138 262.815.101 -74.292.963 -28%
Administrative & Marketing Expenses 12.393.280 12.433.496 40.216 0.3%
Operation Profit 176.128.858 250.381.605 -74.252.747 -30%
There is an decreased of 28 % in the company total profit and an decreased of 30 % in the operation profit due to the following reasons:
• The operation activity revenue decreased at a rate of 29 % with an amount of 104.557.921 SAR because of the decreased in Lands sales. • The operation costs decreased at a rate of 33 % with an amount of 30.264.958 SAR
24 2 0 1 4 Regulatory Due Payments Statement
Statement 2014 2013
Legal Zakat 4.650.816 6.206.412
GOSI 778.538 1.054.951
Chamber of Commerce & Industry 5.200 5.200
Capital Market - Tadawul 400.000 400.000
Total 5.834.554 7.666.563
FINANCIAL STATEMENTS FOR THE LAST FIVE YEARS Balance Sheet as of 31 December ( in Million Riyals )
Statement 2014 2013 2012 2011 2010
Total Assets 2355.91 1858.78 1717,67 1667,31 1643,64
Total Liabilities 646.91 176.37 183,46 170,37 175,33
Total Equities of Shareholders 1709.00 1682.41 1534,21 1496,94 1468,31
Income Statement for the fiscal years ending on 31 December (in Million Riyals) Statement 2014 2013 2012 2011 2010
Operation revenue 251.29 355.85 347.41 196,94 162,98
Other revenues 17.89 5.51 4,78 8,98 4,44
Total revenues 269.18 361.36 352,19 205,92 167,42
Operation Costs 62.77 93.03 97,17 55,03 51,40
Other profit & revenue 206.41 268.33 255,02 150,88 116,02
Total Expenses 17.04 18.64 26,08 20,70 19,40
Net profit 189.37 249.69 228,94 130,17 96,62
Operation profit 176.13 250.38 234.33 129,54 99,32
2 0 1 4 25 ANNUAL REPORT 2014
Cash flow Statement for the fiscal years ending on 31 December (in Million Riyals) Statement 2014 2013 2012 2011 2010
Cash flows from operation activity 177.10 156.41 162.12 140,03 93.64
Cash flows from investment activity 465.93- 57.26- 21.39 30,23- 32.22-
Cash flows from finance activity 295.84 99.96- 186.57- 98,93- 49.74-
OTHER INVESTMENTS The company carried out various investment operations including: - Investing the company liquidity in Murabha Islamic Funds as per legally admitted contracts. - shareholding in Tabuk Cement Co. with a sum of 600,000 SAR for 12.000 shares (now reaching 77.142 shares after dividend and profit distribution as shares) the market value as of 31/12/2014 reached 1.913.122 SAR.
RETAINED PROFITS The balance of retained profits as of 31/12/2014 reached 201.958.089 SAR
REMUNERATION OF DIRECTORS & EXECUTIVE COMMITTEE The remuneration for attending the meetings of the board and the committees thereof reached 384.000 SAR
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:
26 2 0 1 4 I) 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.
Article number as per the corporate Fully Partially No. Incompliant Cause of Incompliance governance bylaw compliant compliant
1 General rights of shareholders √ (4) : Facilitating the shareholders 2 practice of their rights and their √ attainment of information (5) : shareholders rights concerning 3 √ general meetings Clause (b) cumulative voting 4 (6) : Voting Rights √ it has been rejected after voting in the general meeting 5 (7) : shareholders rights of share profits √
6 (8) : disclosure Policies & Processes √
7 (9) : Disclosure in the board report √ (10) : Main Functions of the board of 8 √ directors Act (6) funding has been obtained from Inmaa bank for five years and allowance period of the first √ 9 (11) : Board Responsibilities two years and will be exposed in the next meeting of the ordinary General Assembly. 10 (12) : Board Composition √ (13) : Board Committees & Their 11 √ Independence 12 (14) : Audit Committee √ (15): Nomination & Remuneration 13 √ Committee 14 (16) : Board meetings & agenda √ (17): directors Remunerations & 15 √ Compensations Act (1) land has been bought in partnership with Adeer Real Estate Company whose ownership belongs to the admiration council member, DR ayed al-qahtany who is a related party. And the assembly will be informed in the next meeting also the reporting will be attached with a special report from the Chartered Accountant. √ 16 (18): Directors’ Conflict of Interest Also, a delayed sale contract with options has been assigned with Adeer Real Estate Company which gives al-Riyadh Construction Company the option right of selling its whole share of land or what s at least 35% with 5% increase of the purchase price and will be exposed to the next meeting of the ordinary General Assembly.
2 0 1 4 27 ANNUAL REPORT 2014
II) 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 :
Stocking companies of which No. Director’s Name Ranking board the directors are acting as directors
Chairman Eng. Abdullah Abdulrahman Al Moqbel 1 Independent SAPTCO Riyadh Municipality Representative Non-Executive
2 Eng. Ali Abdullah Al Hassoun Executive AlAhsaa Development Co.
Independent 3 Dr. Tami Hadif Al Baqami AlAhsaa Development Co. Non-Executive
Independent 4 Dr. Ayedh Farhan Al Qahtani SMOU REAL-ESTATE Co. Non-Executive
Independent 5 Mr. Mansour Abdullah Al Zeir N/A Non-Executive
Independent 6 Dr. Nasser Ali Al-Thilfawi N/A Non-Executive
Independent 7 Dr. Abdulaziz Hamad Al Mashaal N/A Non-Executive
Independent 8 Dr. Ali Abdulaziz Al Khudairi N/A Non-Executive
Independent 9 Eng. Meshari Nasser AlShithri N/A Non-Executive
Independent 10 Mr. Fawaz Hamad AlFawaz Umm Al-Qura Cement Company Non-Executive
28 2 0 1 4 The board of directors held (5) meetings from 01/01/2014 to 31/12/2014
1st Meeting 2nd Meeting 3rd Meeting 4th Meeting 5th Meeting Attendance No. Director’s Name 02/01/2014 14/04/2014 14/07/2014 27/10/2014 30/12/2014 %
Eng. Abdullah Abdulrahman Al Moqbel Non- 1 Attendant Attendant Attendant Attendant 80% Riyadh Municipality Representative Attendant
2 Eng. Ali Abdullah Al Hassoun Attendant Attendant Attendant Attendant 100% Non- 3 Dr. Tami Hadif Al Baqami Attendant Attendant Attendant Attendant 80% Attendant Non- Non- 4 Dr. Ayedh Farhan Al Qahtani Attendant Attendant Attendant 60% Attendant Attendant 5 Mr. Mansour Abdullah Al Zeir Attendant Attendant Attendant Attendant Attendant 100% 6 Dr. Nasser Ali Al-Thilfawi Attendant Attendant Attendant Attendant Attendant 100% 7 Dr. Abdulaziz Hamad Al Mashaal Attendant Attendant Attendant Attendant Attendant 100% 8 Dr. Ali Abdulaziz Al Khudairi Attendant Attendant Attendant Attendant Attendant 100% 9 Eng. Meshari Nasser AlShithri Attendant Attendant Attendant Attendant Attendant 100% 10 Mr. Fawaz Hamad AlFawaz Attendant Attendant Attendant Attendant Attendant 100%
III) Interests & Equities of Directors, Senior Executives & Their Wives & Minors Interests & Equities of Directors
Period Start Period End No. Director’s Name % % 01/01/2014 31/12/2014
Eng. Abdullah Abdulrahman Al Moqbel 1 20,000 shares 0.02% 26,666 shares 0.02% Riyadh Municipality Representative
2 Eng. Ali Abdullah Al Hassoun 21,100 shares 0.021 % 28,133 shares 0.022%
3 Dr. Tami Hadif Al Baqami 5,000 shares 0.005 % 6,666 shares 0.005%
4 Dr. Ayedh Farhan Al Qahtani 1,000 shares 0.001 % 1,333 shares 0.001%
5 Mr. Mansour Abdullah Al Zeir 2,000 shares 0.002 % 2,666 shares 0.002%
6 Dr. Nasser Ali Al-Thilfawi 1,000 shares 0.001 % 1,333 shares 0.001%
7 Dr. Abdulaziz Hamad Al Mashaal 100,000 shares 0.1 % 1,000 shares 0.1%
8 Dr. Ali Abdulaziz Al Khudairi 14,000 shares 0.014 % 18,666 shares 0.014%
9 Eng. Meshari Nasser AlShithri 15,100 shares 0.015 % 20,133 shares 0.015%
10 Mr. Fawaz Hamad AlFawaz 1,000 shares 0.001 % 1,333 shares 0.001%
2 0 1 4 29 ANNUAL REPORT 2014
Key Executives Interests & Equities
Period Start Period End Name Job Title % % 01/01/2013 31/12/2013
Eng. Ali Abdullah Al Hassoun Chief Executive Officer -Ceo 21.100 shares 0.021 % 28.133 shares 0.021 %
Mr. Fayez Abdullah Al Ahmari Head Of Legal Affairs Unit 0 shares 0% . 0 shares 0% .
Mr. Mamdouh Farag Ahmed Sehata Director Of Finance Department 0 shares 0% . 0 shares 0% .
En. Mahmoud Ahmed Ahmed Projects & Maintenance Manager 0 shares 0% . 0 shares 0% .
IV) 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 2014 During the period from 01/01/2014 to 31/12/2014
No. Committee Members Number of Meetings 1 Eng. Ali Abdullah Al Hassoun “Committee Chairman” 2 Mr. Mansour Abdullah Al Zeir “Committee Member” 3 3 Dr. Abdulaziz Hamad Al Mashaal “Committee Member” 4 Eng. Meshari Nasser AlShithri “Committee Member”
Audit Committee
Brief Description of Committee Tasks :
• Supervising the internal audit management in the company to verify the extend of its efficiency to perform works and assignments specified by the board of directors. • Studying the internal audit system and submitting a written report about the company recommen- dations in this concern. • Studying the internal audit reports and following up the performance of corrective processes to the stated remarks. • Providing the board with nomination to appoint the chartered accountants besides removal of the same and specifying their fees; they must be ensured to be independent upon nominating them. • Following up the works of chartered accountants and approving any work beyond the scope of audit assigned there to upon performing the audit works.
30 2 0 1 4 • Studying the plans of audit with the chartered accountant and providing remarks about them. • Studying the remarks of the chartered accountant concerning the financial statements and follow- ing up the relevant results. • Studying the initial and the annual financial statements before presenting them to the board of directors, expressing opinion and providing recommendation in this regard. • Studying the adopted accounting policies, expressing opinion and providing recommendation in this regard.
Committee Members & Number of Meetings in 2014 :
During the period from 01/01/2014 to 31/12/2014
No. Committee Members Number of Meetings 1 Dr. Tami Hadif Al Baqami “Committee Chairman” 2 Fawaz Hamad Al Fawaz “Committee Member” 4 3 Dr. Ali Abdulaziz Al Khudairi “Committee Member” 4 Dr. Ayedh Farhan Al Qahtani “Committee Member”
Nomination & Remuneration Committee
Brief Description of Committee Tasks :
• Providing nominations to the board of directors for the board directorship according to the approved policies and parameters, considering not to nominate anyone preciously convicted of any crime of dishonesty and dishonor. • Annual review of the required needs of appropriate skills for the board directorship besides developing a description for the capabilities and the qualifications required for the board directorship. • Revising the board structure and forwarding recommendations concerning the changes that can be carried out in this regard. • Specifying the aspects of strength and weakness in the board of directors and suggesting to handle them in conformity with the company interests. • Conducting annual assurance concerning the independent directors besides ensuring that there is no conflict of interests if the director occupies a directorship in a another company board. • Developing clear policies for the remunerations and the compensations of the directors and the senior executives, taking into consideration to use performance related parameters upon developing such policies.
2 0 1 4 31 ANNUAL REPORT 2014
Committee Members & Number of Meetings in 2014 : During the period from 01/01/2014 to 31/12/2014
No. Committee Members Number of Meetings 1 Dr. Ali Abdulaziz Al Khudairi “Committee Chairman” 2 Eng. Ali Abdullah Al Hassoun “Committee Member” 1 3 Dr. Tami Hadif Al Baqami “Committee Member” 4 Dr. Nasser Ali Al-Thilfawi “Committee Member”
Investment Committee
Brief Description of Committee Tasks : • The investment committee will assume the tasks of proposing and studying investment opportunities and providing recommendations to the board of directors besides supervising the phases of preparing the economic feasibility study for the projects.
Committee Members & Number of Meetings in 2014 : During the period from 01/01/2014 to 31/12/2014
No. Committee Members Number of Meetings 1 Dr. Abdulaziz Hamad Al Mashaal “Committee Chairman” 2 Eng. Ali Abdullah Al Hassoun “Committee Member” 12 3 Mr. Fawaz Hamad AlFawaz “Committee Member” 4 Mr. Mansour Abdullah Al Zeir “Committee Member”
V) Remuneration & Compensation: Five of Senior Executives (Independent) who received the highest Executive Non- remunerations and No. Statement Directors Executive compensations including CEO Directors (director) and the Financial manager 1 Salaries & Compensation 2.301.345 - 3.769.819 2 Allowances 80.000 315.000 80.000 3 Regular & Annual Remuneration 200.000 1.600.000 200.000 4 Incentive Plans 528.000 - 356.350 Any other compensation or benefit paid 5 - - - monthly or annually
32 2 0 1 4 VI) 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 2014 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.
DISCLOSURES • Long term fund of (450.000.000 SR)has been obtained from the bank of Inmaa , and the funding duration lasts for 5 years starting from 10/12/2014 a.c, with allowance period for the first and second years in order for financing part of purchasing value of the company’s share which reaches 85% of the whole land in the north-east of al-Riyadh city ,which has been bought from Ithraa real estate company, and its space reaches 3.000.000 Sqm for 332 RS for the meter the purchasing cost for the company is 846.600.00 RS and the rest of the land space which is about 15% has been bought by Adeer Real Estate Company with the same purchasing price of the company whose ownership belongs to the admiration council member, DR Ayed Al-qahtany who is a related man, the admiration council member has paid his whole share of the deal which reaches 149.400.000 RS, and the company didn’t fund his share, and the issue will be exposed in the next meeting of the ordinary General Assembly of the company. • The company has assigned a delayed sale contract with options with Adeer Real Estate Company which belongs to the admiration council member, DR Ayed bin Farhaan al-qahtany which gives al-Riyadh construction company
2 0 1 4 33 ANNUAL REPORT 2014
the option right of selling its whole share or at least 35% of its land share with 382 RS for each meter with an crease of 15% of purchasing value before 1/12/2015, and he is a related person. Except for this, there are no other contracts with parties related to the administration council members or the executive president or his assistants or the Chief financial officer or any of 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 there of during the last fiscal year. • 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 . • 150 million RS has been distributed on 28/4/2014 for the shareholders of the company by 1.5 RS for each share as annual profits of the period lasting from 1/1/2013 till 31/12/2013. • The capital has been increased from 1.000.000.000 RS to 1.333.333.330 RS, with increase ratio of 33.33%, and shares number before the increase was 100.000.000 shares, shares number after the increase was133.333.333 shares as an increase in the capital through guaranteeing free shares to the shareholders of the company that 1 share has been given for every 3 shares. The capital increase has been achieved in the capital through capitalizing 33.333.330 RS from the remaining profits act. The Eligibility of the guarantee shares for the shareholders registered in the company books at stocks deposit center (Circulation) at the end of the Circulation of the assembly holding day on 14/6/1435 HA , 14/4/2014. • The seventh act of the basic system of the company has been modified in accordance with the capital increase after the assembly acceptance on 14/6/1435HA, 14/4/2014. • The Bonus shares has resulted fractions with the number of 8.269 shares, these shares fractions have been sold on 24/6/1435HA , 24/4/2014 with total sum of 201.934.44 RS and with price mean of 24.42 RS, and the resulting cash of shares fractions sale has been put to the deservers of these fractions on 30/7/1435 HA , 29/5/2014.
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.
34 2 0 1 4 FLUCTUATION IN THE COMPANY PRO- CESSES 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 in an 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 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.
2 0 1 4 35
ANNUAL REPORT 2014
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:
• 10 % of the net profits will be withheld to compose the regulatory reserve; the ordinary general meeting may stop such with holding if the said reserve becomes equal to half of the capital. • An amount equal to 5 % of the paid up capital will be distributed to shareholders out of the remaining profit. • 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 / Muqrin Bin Abdulaziz and the Deputy Crown, The Second Deputy Primeir and Minister of Interior Prince /Mohammed Bin Nayef 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; 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.
May Peace and God’s mercy and blessing be upon you
Directors of The Board
2 0 1 3 37
ANNUAL REPORT 2014
INDEPENDENT AUDITORS’ REPORT
SHAREHOLDERS OF ARRIYADH DEVELOPMENT CO. (A Saudi Joint Stock Company)
Scope of Audit: We have audited the accompanying balance sheet of ARRIYADH DEVELOPMENT CO. (A Saudi Joint Stock Company) as of December 31, 2014 and the related statements of income, cash flows and changes in shareholders equity for the year then ended, and the notes from (1) to (30) which are an integral part of these financial statements. These financial statements are the responsibility of the Company’s management in accordance with Article (123) of the Companies Regulations. Our responsibility is to express our opinion on these financial statements based on our audit and the informations and explanations we obtained which we considered necessary for the purposes of our audit.
We conducted our audit in accordance with auditing standards generally accepted in the Kingdom of Saudi Arabia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.
Unqualified Opinion: In our opinion, the financial statements referred to above:
1. Present fairly, in all material respects, the financial position of ARRIYADH DEVELOPMENT CO. (A Saudi Joint Stock Company) as of December 31, 2014 and the results of its operations and its cash flows and changes in shareholders equity for the year then ended based on the presentation and disclosure of the information included in the financial statements and in conformity with generally accepted accounting principles in the Kingdom of Saudi Arabia which are suitable to the Company’s operations.
2. Comply with the financial statement preparation and presentation requirement of the Commercial Code and the Company’s by-laws.
AlAzem & AlSudairy Certified Public Accountants
Abdullah M. AlAzem License No. 335
24 Rabi Awal 1436H (January 15, 2015) Riyadh, Saudi Arabia
2 0 1 3 39 ANNUAL REPORT 2014
BALANCE SHEET AS OF DECEMBER 31, 2014 (Saudi Riyals)
ASSETS 2014 2013 Current Assets: Banks balances (Note 3b) 30,579,651 23,571,874 Investment in securities for trading (Note 3c) 30,000,000 - Accounts receivable, net (Notes 3d and 4) 35,852,663 25,606,252 Prepayments and other assets (Note 5) 17,841,972 5,170,176 Total current assets 114,274,286 54,348,302 Non-current Assets: Deferred financing expenses (Notes 3e and 6) 5,575,685 - Investments with bank available for sale (Note 8) - 455,887,983 Investments in securities available for sale (Notes 3c and 7a) 41,371,009 2,183,121 Projects under progress (Note 9a) 915,174,211 32,961,469 Real Estate Investments, net (Notes 3f and 10) 1,278,946,337 1,312,901,390 Property and Equipment, net (Notes 3g and 11) 569,091 499,969 Total non-current assets 2,241,636,333 1,804,433,932 Total assets 2,355,910,619 1,858,782,234 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities: Accounts payable (Notes 3i and 12) 35,812,403 33,207,509 Accrued expenses and other liabilities (Note 13) 56,484,112 48,220,619 Deferred revenue (Note 14) 34,648,176 28,011,526 Accrued dividends distribution (Note 15) 49,638,624 46,426,185 Zakat provision (Notes 3k and 16b) 13,993,376 15,548,972 Total current liabilities 190,576,691 171,414,811 Non-current liabilities: Long term loans (Note 17) 450,000,000 - End of Service Benefits (Note 3l) 6,330,509 4,954,834 Total non-current liabilities 456,330,509 4,954,834 Total liabilities 646,907,200 176,369,645 Shareholders’ Equity: Capital (Note 18) 1,333,333,330 1,000,000,000 Statutory reserve (Note 19) 174,103,866 155,167,284 Retained earnings 210,958,089 525,662,184 Unrealized (losses) gains on investment in securities available for sale (Notes 3c and 7a) (9,391,866) 1,583,121 Total Shareholders’ equity 1,709,003,419 1,682,412,589 Total liabilities and Shareholders’ equity 2,355,910,619 1,858,782,234 The accompanying notes from (1) to (30) are an integral part of these financial statements
40 2 0 1 4 STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2014 (Saudi Riyals)
2014 2013
Revenue (Notes 3m and 21) 251,287,927 355,845,848
Cost of Revenue (Notes 3n and 22) (62,765,789) (93,030,747)
Gross profit 188,522,138 262,815,101
Marketing expenses (Notes 3n and 23) (104,774) (406,679)
General and administrative expenses (Notes 3n and 24) (12,288,506) (12,026,817)
Net profit from main operations 176,128,858 250,381,605
Other revenue (Notes 3m and 25) 17,887,775 5,511,212
Net profit for the year before Zakat 194,016,633 255,892,817
Zakat (Notes 3k and 16b) (4,650,816) (6,206,412)
Net profit for the year 189,365,817 249,686,405
Net profit per share for the year (Note 3o) 1,53 2,50
The accompanying notes from (1) to (30) are an integral part of these financial statements
2 0 1 4 41 ANNUAL REPORT 2014
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2014 (Saudi Riyals) 2014 2013 Cash Flows from Operating Activities: Net profit for the year 189,365,817 249,686,405 Adjustments to reconcile net profit to net cash provided by operating activities: Depreciation 19,728,776 18,544,674 End of service benefits 2,532,202 1,219,009 Zakat provision 4,650,816 6,206,412 Gain from selling assets - (20,832) Gain from selling real estate investments (26,398,534) (105,773,602) Changes in assets and liabilities: Accounts receivable (10,246,411) 632,180 Prepayments and other assets (12,671,797) 2,266,403 Accounts payable 2,604,894 3,959,644 Deferred Revenue 6,636,650 (9,150,570) Accrued expenses and other liabilities 8,263,493 338,403 End of service benefits paid during the year (1,156,527) (1,324,466) Zakat paid during the year (6,206,412) (10,170,030) Net cash provided by operating activities 177,102,967 156,413,630 Cash Flows from Investing Activities: Investments in securities for trading (30,000,000) 275,424,229 Investments with bank available for sale 455,887,983 (455,887,983) Investments in securities available for sale (50,162,875) - Purchase of property and equipment (364,216) (222,749) Projects under progress (882,212,742) (29,985,298) Proceeds from disposal of assets - 29,750 Proceeds from disposal of real estate investments 40,919,905 153,384,944 Net cash used in investing activities (465,931,945) (57,257,107) Cash Flows from Financing Activities: Deferred financing expenses (5,575,685) - Long term loan 450,000,000 - Dividend distribution paid (148,587,560) (99,964,878) Net cash provided by (used in) financing activities 295,836,755 (99,964,878) Net increase (decrease) in banks balances 7,007,777 (808,355) Banks balances at beginning of the year 23,571,874 24,380,229 Banks balances at end of the year 30,579,651 23,571,874 Non-cash item: Transfer from project under progress - 73,239,813 Accrued dividends distribution 3,212,439 1,835,122 Unrealized (losses) gain on re-evaluation in securities available for sale (10,974,987) 312,426 The accompanying notes from (1) to (30) are an integral part of these financial statements
42 2 0 1 4 STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED DECEMBER 31, 2014 (Saudi Riyals)
2014 2013 Capital (Note 18): Beginning of the year 1,000,000,000 1,000,000,000 Transfer from retained earnings 333,333,330 - End of the year 1,333,333,330 1,000,000,000 Statutory Reserve (Note 19): Beginning of the year 155,167,284 130,198,643 Transfer from retained earnings 18,936,582 24,968,641 End of the year 174,103,866 155,167,284 Retained Earnings: Beginning of the year 525,662,184 402,744,420 Transfer to statutory reserve (18,936,582) (24,968,641) Transfer to capital (333,333,330) - Dividends distribution (Note 20) (151,800,000) (101,800,000) Net profit for the year 189,365,817 249,686,405 End of the year 210,958,089 525,662,184 Unrealized (Losses) Gains on investment in securities available for sale (Notes 3c and 7a): Beginning of the year 1,583,121 1,270,695 Unrealized (losses) gains on investment in (10,974,987) 312,426 securities available for sale End of the year (9,391,866) 1,583,121 Total Shareholders’ Equity 1,709,003,419 1,682,412,589
The accompanying notes from (1) to (30) are an integral part of these financial statements
2 0 1 4 43 ANNUAL REPORT 2014
NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014 (Saudi Riyals)
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 was One bil- lion Saudi Riyals comprising of 100 million shares at a par value of Saudi Riyals 10 per share; during 2014, the capital was increased to reach SAR 1,333,333,330 from 133,333,333 shares at a par value of Saudi Riyals 10 per share .
The principle activities of the company are to build up facilities, commercial and residential buildings, services building, public parks, tourism and residential com- pounds 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 activity required to achieve the company objectives.
The Company held its general assembly meeting on 28 Jumad Thani 1433H which corresponds to May 19, 2012 to adjust some articles of the Statute of the company which (26.24.22.20.18.3) has obtaind with two-thirds majority votes represented in the meeting, according to the requirements of Article 92 of the Companies Law Ar- ticle 36 of the Statute should not be adjusted by the Assembly if the approval votes are less than two-thirds of the votes represented in the meeting.
The Company had 131 employees as of December 31, 2014 (145 employees as of December 31, 2013).
2- BASIS OF PREPARATION The accompanying financial statements have been prepared on the basis of histori- cal cost in accordance with the accrual concept, and prepared in accordance with generally accepted accounting principles issued by Saudi Organization for Certified Public Accountants – SOCPA.
Items appear in the financial statements for the Company in Saudi Riyals which is the functional currency and disclosure of the Company.
3- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the significant accounting policies adopted by the company:
a) Use of estimates -- The preparation of financial statements in accordance with the generally accepted accounting principles requires the use of estimates and assumptions that may af- fect the value of restricted assets and liabilities, and disclosure of potential assets
44 2 0 1 4 and liabilities in the date of the financial statements, and the value of revenue and expenses were disclosure to the period of the financial statements preparation. Al- though 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 ac- counting changes will be disclosed in the year and future period which are affected by it. b) Banks balances -- Banks balances comprised of Current balances of the Company. c) Investments in securities-- Investments in securities available for sales are reported in the accompanying fi- nancial statement at fair value in the non-current assets. Realized gains or losses on sale are recorded in the statement of income, and unrealized gains or losses are reported in the statement of shareholder’s equity section. Revenues from these investments are recorded upon the declaration of dividends distributions and the company decreases the current value for all investments and securities based on the permanent decrease in the value.
Investments in securities for trading are reported in the accompanying financial statement at market value in the current assets. Realized gains or losses on sale are recorded in the statement of income, and unrealized gains or losses are reported in the statement of shareholder’s equity section. Revenues from these investments are recorded upon the declaration of dividends distributions and the company de- creases the current value for all investments and securities based on the permanent decrease in the value. d) Accounts Receivable -- Accounts receivable balance appear in the financial statement in the original in- voices amount after deduction of doubtful provision against any amount inappli- cable to being collected. An estimate for the doubtful receivable is made when the company cannot collect the balances and doubtful receivable are written-off when incurred. e) Deferred financing expenses -- Deferred financing expenses which have long-term future benefit were considered as deferred expenses and are amortized over the estimated benefit of these ex- penses. f) Real estate investment -- Real estate investments are recognized and represented in the building 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 depre- ciation, if any, which 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.
2 0 1 4 45 ANNUAL REPORT 2014
Buildings 1.51 – 3.03%
Investments land include lands fully owned to the company and land shares with others, all recorded in the costs with addition to development expenses.
g) Property and equipment -- Property and equipment are stated at cost net of accumulated depreciation. Depre- ciation is computed using the straight-line method over the estimated useful lives of the assets based on the following annual percentage rates:
Machinery and equipments 25% Furniture and fixtures 25% Motor vehicles 25%
h) Impairment of property, plant and equipment and real estate investments -- Property, plant and equipment and real estate investments are reviewed for im- pairments, when events or changes in circumstances indicate that the book value is non-refundable in whole or in part. The loss resulting from the impairment is recorded in the income statement, when the book value of these assets exceeded the recoverable amount. The recoverable amount is the net sale value of the asset or the value in use, whichever is greater. The net selling price is the price obtained from the sale of an asset, either on a purely commercial basis, while the value when use is the present value of estimated future cash flows expected to result from the continued use of the asset and from its sale at the end of its useful life.
i) Accounts payable -- Liabilities are recognized for amounts to be paid in the future for services, whether billed by the supplier or not.
j) Borrowing cost -- The borrowing cost which belongs to assets that are still under progress are added to the value of the assets till it becomes ready for use or sale. and borrowing cost would be recorded in the period that came after the assets was ready as an expense belong to the period .
k) Zakat -- Zakat is a company obligation and the estimated Zakat is provided within the ac- companying financial statements and is charged to the statement of income, in ac- cordance with Zakat standards issued by the Saudi Organization for Certified Pub- lic Accountants.
46 2 0 1 4 l) End of service benefits -- Benefits payable to the employees of the Company at the end of their services are provided for in accordance with the guidelines set by the Saudi Arabian Labor Law.
m) Revenue -- Revenue from investment in developed land held for sale is recognized after the completion of the sale process as well as Revenue from sale of investments in contribution land (Under development) is recognized upon signing the sale con- tract and issuance of certificate for the new owner, and Revenue from rentals and operating investments property is recognized when the term of lease or contract is completed or service rendered. Revenue is recognized over the lease term on straight-line basis and recorded for the financial period to which it relates. Other income is recorded when earned.
n) Expenses -- Expenses by the company comprise of management and maintenance real estate expenses and their depreciations which are classified as direct costs, all expenses related to marketing, advertisement are classified under a separate line item as mar- keting expenses. Other expenses, which are not related to direct or marketing ex- penses are classified as general and administrative expenses.
o) Earnings per share -- Earning per share was calculated based on the weighted average number of normal shares as at the end of the year.
p) Transfer of foreign currencies -- The accompanying financial statements are denominated in Saudi Riyals. Appro- priate exchange rates have been used to translate transactions or balances denomi- nated in foreign currencies (If any). There were no material exchange gains or losses during the year.
4- ACCOUNTS RECEIVABLE, NET Accounts receivable comprised of the following as of December 31:
2014 2013 Accounts Receivable 45,018,638 35,191,721 Allowance for doubtful accounts (9,165,975) (9,585,469) Net 35,852,663 25,606,252
2 0 1 4 47 ANNUAL REPORT 2014
5- PREPAYMENTS AND OTHER ASSETS Prepayments and other assets comprised of the following as of December 31:
2014 2013 Advance to suppliers 12,271,297 452,364 Royalties 2,611,982 1,338,081 Advisory fees 1,233,018 1,233,018 Employee loans and floats 692,165 1,032,792 Insurance for others 255,697 255,697 Restricted bank balances for dividends distribution 196,080 112,020 Vehicle and building insurance 5,214 222,967 Others 576,519 523,237 17,841,972 5,170,176
6- DEFERRED FINANCING EXPENSES These deferred financing expenses had been deducted by the bank and once in the amount of SAR 5,625,000 in advance as fee structuring facilities and are amortized over the useful life of the loan.
7- INVESTMENT IN SECURITIES AVAILABLE FOR SALE a) Investment in securities available for sale comprised of the following as of December 31:
2014 2013 Investment in securities available for sale 600,000 600,000 Addition during the year (note 7b) 50,000,000 - Realized dividend income 162,875 - Unrealized (losses) gains from re-evaluation securities available for sale (9,391,866) 1,583,121 41,371,009 2,183,121
b) During the third quarter of 2014, the company opened an investment portfolio that amounted to SAR 50 million as available for sale in the Saudi stock market. It is managed by a licensed financial institution approved by the Capital MarketAuthority Portfolio Management agreement.
8- INVESTMENTS WITH BANK AVAILABLE FOR SALE Investments with Bank available for sale includes an Islamic deposit made based on an agreement with a local bank amounting to SAR 455 887 983 as of 31 December 2013. The company has requested the bank for withdrawal of the deposit when it bought the land located in the north-eastern region of Riyadh, during December 2014 year.
48 2 0 1 4 .9- PROJECTS UNDER PROGRESS a) Projects under progress comprised of the following as of December 31:
Al-Zaheera Al Thoma- Other Outaiqa Riyadh development ma project Contract Total Market Market project note(9b) & projects
As of December 31,2014:
Beginning of the year 28,073,581 1,456,434 - - 3,431,454 32,961,469 Additions during the year 23,724,930 1,088 - 847,770,075 10,747,601 882,243,694 Disposal during the year - (30,952) - - - (30,952) Transferred during the year ------End of the year 51,798,511 1,426,570 - 847,770,075 14,179,055 915,174,211 As of December 31, 2013:
Beginning of the year 14,713,916 1,417,493 58,763,496 - 1,321,079 76,215,984 Additions during the year 13,359,665 38,941 13,546,317 - 3,040,375 29,985,298 Disposal during the year ------Transferred during the year - - (72,309,813) - (930,000) (73,239,813) End of the year 28,073,581 1,456,434 - - 3,431,454 32,961,469
b) The Company purchased 85% of raw land located at the north east of Riyadh City with an area of 3,000,000 square meter at the price per square meter of SAR 332 amounting to SAR 846,600,000, the remainder of the land area in the amounting to 15% was purchased by Adair real estate company that returning its ownership to member the Board of Directors Dr / Ayed Bin Farhan Al-Qahtani, a person with a relationship, which has paid the full value of his share.
2 0 1 4 49 ANNUAL REPORT 2014
10- REAL ESTATE INVESTMENTS, NET Real estate investments comprised of the following as of December 31:
Land on which Lands buildings are Buildings Total Constructed Cost Beginning of the year 258,244,395 401,428,705 848,941,819 1,508,614,919 Additions during the year - - - - Disposals during the year (14,521,371) - - (14,521,371) End of the year 243,723,024 401,428,705 848,941,819 1,494,093,548 Depreciations Beginning of the year - - 195,713,529 195,713,529 Additions during the year - - 19,433,682 19,433,682 Disposals during the year - - - - End of the year - - 215,147,211 215,147,211 Net Book Value
December 31, 2014 243,723,024 401,428,705 633,794,608 1,278,946,337 December 31, 2013 258,244,395 401,428,705 653,228,290 1,312,901,390
11- PROPERTY AND EQUIPMENT, NET Property and equipment comprised of the following as of December 31:
Machinery and Furniture and Motor vehicles Total equipment Fixture
Cost Beginning of the year 8,367,292 4,809,171 1,335,920 14,512,383 Additions during the year 197,361 11,255 155,600 364,216 Disposals during the year - - - - End of the year 8,564,653 4,820,426 1,491,520 14,876,599 Depreciations Beginning of the year 7,934,590 4,801,574 1,276,250 14,012,414 Additions during the year 234,828 3,208 57,058 295,094 Disposals during the year - - - - End of the year 8,169,418 4,804,782 1,333,308 14,307,508 Net Book Value
December 31, 2014 395,235 15,644 158,212 569,091 December 31, 2013 432,702 7,597 59,670 499,969
50 2 0 1 4 Depreciation amounted to SAR 295,094 and SAR 309,112 for the years ended December 31, 2014 and 2013, respectively.
12- ACCOUNTS PAYABLE Accounts payable comprised of the following as of December 31:
2014 2013 Real estate payable 29,104,800 29,104,800 Other payable balances 6,707,603 4,102,709 35,812,403 33,207,509
13- ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities comprised of the following as of December 31:
2014 2013 Accrued expenses 26,390,862 9,842,077 Insurance for others 9,500,683 9,342,349 Contractor retention 7,798,620 7,375,796 Due to investment projects partners 6,199,040 6,213,629 Advance from lessee 2,645,178 14,099,714 Corporative fund 646,710 631,132 Others 3,303,019 715,922 56,484,112 48,220,619
14- DEFERRED REVENUE Deferred revenue represents revenue from investment property rental contracts and did not belong to the year ended December 31, 2014.
15- ACCRUED DIVIDENED DISTRIBUTION
Accrued dividend distribution balance which appears in the accompanying balance sheet represents the remaining balance for the amounts which are (decided in the common general assembly meeting) dividend distribution for the previous years which are not received by the shareholders up to December 31, 2014
16- ZAKAT PROVISION a) The company has submitted all the Zakat declaration for the previous years up to 2013, and obtained the Zakat clearance up to 2006. The company objected on
2 0 1 4 51 ANNUAL REPORT 2014
the Zakat clearance for the years 2005 and 2006 and they are waiting a reply from DZIT.
b) The following is an analysis of movements in the provision for Zakat during the years ended December 31:
2014 2013 Balance, beginning for the year 15,548,972 19,512,590 Zakat provision for the year:- 4,650,816 6,206,412 Provision for current year Zakat paid during the year (6,206,412) (10,170,030) Balance, end of the year 13,993,376 15,548,972
c) Following is a summary of the main items included in the Zakat base for the years ended December, 31:
2014 2013 Non-current assets 2,241,636,333 1,804,433,932 Non-current liabilities 456,330,509 4,954,834 Shareholders’ Equity 1,709,003,419 1,682,412,589 Adjusted net profit for the year 186,032,657 245,695,885
17- LONG TERM LOAN On 17/12/2014, the Company has signed a long-term financing agreement with the AL Inma Bank for the value of SAR 450,000,000 for a period of 5 years from the signing and give two years as allowing period to guarantee the history of mortgage land deed, to financing the purchase of part of the raw land (referred to in Note 9 b ) in the north-east of Riyadh city and the remaining was financed from the company using it own resources.
18- CAPITAL The paid up capital of the company is 1,333,333,330 Saudi Riyals fully paid, divided into 133,333,333 shares at a par value of Saudi Riyals 10 per share.
The General Assembly approved in its extra-ordinary meeting held on 14/06/1435 H corresponding to 14/04/2014 to increase the company’s capital from SAR 1,000,000,000 to SAR 1,333,333,330, by percentage 33.33%, by giving one free share for every three shares, that are covered by the proposed increase in capital through the transfer of SAR 333,333,330 from the retained earnings account as of 12/31/2013.
52 2 0 1 4 19- STATUTORY RESERVE In accordance with the Saudi Arabian Companies’ Regulations and the Company’s Articles of Association, 10% of the annual net income is required to be transferred to a statutory reserve until this reserve equals 50% of the capital. This reserve is not available for shareholders for dividend distribution.
20- DIVIDEND DISTRIBUTION The usual general assembly agreed in its meeting held on 06/14/1435H corresponding to 14/04/2014 on the recommendation of the Board of Directors to distribute SR 150 million, which represents 15% of the capital in cash dividends for the year 2013 by one riyal and fifty halala per share.
21- REVENUE Revenue comprised the following for the years ended December 31:
2014 2013 Operation revenue 129,231,735 125,820,162 Rental revenue 81,136,287 76,803,439 Revenue from selling of investment land 40,919,905 153,222,247 251,287,927 355,845,848
22- COST OF REVENUE Revenue costs comprised the following for the years ended December 31:
2014 2013 Operation costs 26,756,484 27,373,327 Rental costs 21,487,934 18,287,092 Cost of selling of investment land 14,521,371 47,370,328 62,765,789 93,030,747
23- MARKETING EXPENSES Marketing expenses comprised of the following for the years ended December 31:
2014 2013 Employees’ salaries and benefits 102,415 404,589 Depreciation 139 1,609 Others 2,220 481 104,774 406,679
2 0 1 4 53 ANNUAL REPORT 2014
24- GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses comprised of the following for the years ended December 31:
2014 2013 Employees’ salaries & benefits 9,786,580 9,500,781 Professional fees 578,294 538,133 Board of Directors attendance allowance 384,000 504,000 Maintenance 544,572 503,955 Advertisement 413,374 433,140 Service contracts 118,253 144,185 Depreciations 147,785 142,097 Bank charge 64,216 71,790 Others 251,432 188,736 12,288,506 12,026,817
25- OTHER REVENUE Other revenue comprised of the following for the years ended December 31:
2014 2013 Administrative fees revenue - Al Shuruq project 10,801,462 - Revenue from investment in funds and murabaha 6,180,507 4,629,643 Revenue from Al adel & bin haian project 585,352 679,075 Revenue from investments 301,731 131,141 Others 18,723 71,353 17,887,775 5,511,212
26- CONTINGENCIES The company had as of December 31, 2014 capital commitment for supervision contracts and implementation of various development project amounting to SAR 257,812,903 (SAR 290,140,914 as of December 31, 2013).
There is a legal suit on the Al Shuruq land which are owned by the company based on the official ownership documents at a book value of the land is SAR 76,767,975 and the cost of building contracting there on it amounted to SAR 49,908,878, such amounts are shown as a part of real estate investments.
54 2 0 1 4 27- SEGMENT INFORMATION
The segment information are attributable to the Company’s activities and business as approved by company 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 an other parties transactions.
Segments’ assets, liabilities and the operation activates 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 2014 , 2013 respectively according to the nature of the activity:
Sale of Joint assets Operating Leasing Contribution Total and liabilities land As of December 31, 2014: Total assets 369,327,589 990,774,724 903,715,807 92,092,499 2,355,910,619 Total liabilities 37,299,941 37,353,063 464,374,784 107,879,412 646,907,200 Revenue 129,231,736 81,136,286 40,919,905 - 251,287,927 Gross profit 102,475,250 59,648,354 26,398,534 - 188,522,138 As of December 31, 2013: Total assets 317,651,535 1,000,125,236 70,467,103 470,538,360 1,858,782,234 Total liabilities 22,490,921 29,366,973 18,952,239 105,559,512 176,369,645 Revenue 125,820,163 76,803,438 153,222,247 - 355,845,848 Gross profit 98,446,837 58,516,346 105,851,918 - 262,815,101
The operating segment represents the Company’s operational projects which provides general utility services that are presented in the Attameer Market for Vegetables and Fruits public transportation development center and Attameer International car auction in Al-Riyadh, Leasing segment represents real estate leased units which belongs to Attameer Wholesale Center, Attameer Market for Meat, Vegetables and Fruits, Al-Riyadh Development Market, And Lands selling, contribution lands represents the Company’s projects in selling the development lands through Shuruq Attameer Cities, Attameer Technical Services City, Tilal Attameer in Al-Riyadh and Al Thomama project.
2 0 1 4 55 ANNUAL REPORT 2014
28- RISK MANAGEMENT
Financial instruments carried on the balance sheet principally include cash and its equivalents, accounts receivables and other assets, investments, accounts payable, accruals and other non-current liabilities.
• Credit risk: is the risk that one party will fail to fulfill an obligation and will cause the other party to incur a financial loss. The company seeks to reduce its credit risk with respect to customers by regular monitoring of outstanding receivables.
• Liquidity risk: is the risk that the company will encounter difficulties in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell financial assets 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.
• Currency risk: is the risk that the value of financial instruments will fluctuate due to change in foreign exchange rates. The transactions of the company are principally in Saudi Riyals. Management keeps monitoring the associated currency risk which is mostly not material.
• Fair value: is the amount for which an asset could be exchanged, or a liability settled between knowledgeable willing parties in a arm’s length transaction. As the Company’s financial statements are prepared under the historical cost convention, differences can arise between book value and fair value estimates. Management believes that the fair values of the Company’s financial assets and liabilities are not materially different from their carrying values.
29- GENERAL
The figures in these financial statements are rounded to the nearest Saudi Riyal.
30- APPROVAL OF FINANCIAL STATEMENTS
These financial statements have been approved by the Board of Directors on 24 Rabi Awal 1436H corresponding to January 15, 2015.
The Board of Directors recommended on meeting held on 24 Rabi Awal 1436H corresponding to January 15, 2015 dividend to shareholders for 2014 by 1 SAR represent 10% of the nominal value per share totaling SAR 133,333,333.
56 2 0 1 4