| ANNUAL REPORT CONTENTS

CONTENTS

CORPORATE OVERVIEW 06 Chairman’s and CEO’s Statement 10 About L’azurde 16 Key Milestones 18 Profile of the Board 24 Profile of Executive Management

STRATEGIC BUSINESS REVIEW 30 L’azurde’s Principal Business Activities 36 Business Description 38 Business Model 60 L’azurde’s Ownership Structure

FINANCIAL PERFORMANCE 70 Key Financial Highlights 86 Dividend Policy 90 Risk Factors

CORPORATE GOVERNANCE 98 Board Formation 116 Policies and Code of Governance 134 Communication with Shareholders 140 Audit Committee Report

CONSOLIDATED FINANCIAL STATEMENTS 144 Consolidated Financial Statements

2 3 �� CORPORATE OVERVIEW

4 5 01 | CORPORATE OVERVIEW CHAIRMAN AND CEO’S STATEMENT

CHAIRMAN’S AND CHAIRMAN'S AND CEO'S STATEMENT Despite the Company’s net loss generated by all the above- 2020 was unlike any other year. With the global pandemic and a mentioned factors, the Group has managed to generate a worldwide lockdown, the past year was challenging for all. For significant positive cash inflow from its operations amounting CEO’S STATEMENT L’azurde, 2020 was also marked by a sharp increase in gold to SAR 58.7 million in 2020. This was achieved by increasing prices and the tripling of KSA VAT to 15%. As a result of these collection from wholesale customers and higher sales in the major market shocks, L’azurde posted a substantial loss in retail channel. The Group has also reduced its gold working 2020. Despite this, we are pleased to have produced a positive capital by 36% from 6.6 Tons in December 2019 to 4.2 tons in cashflow and to have made major advances in executing the December 2020. transformation program that we announced in 2019. Of the positives that came out of 2020, the Company’s new L’azurde is implementing major changes to its business model e-commerce business launched in April 2020 achieved and mix to meet modern consumer trends while at the same revenues of SAR 6.6 Million, representing already 2% of the time building on our strong brand and 40-year experience total Group operating revenues. Those revenues amounted to in the jewelry industry. This strategy includes the expansion 15% of the Miss L’ products sold online and offline. On a run- of our retail presence in top malls and an increased focus rate basis, e commerce sales accounted for 5.5% % of total on the affordable and fashion jewelry segments, the fastest retail sales in the fourth quarter. growing parts of our market. To this end, we have acquired Relaunched with a new creative direction, an attractive the Tous fashion jewelry franchise for Saudi Arabia, launched packaging design and a trendy modern assortment, Miss our own new brand, Miss L’, targeting the fashion segment L’ increased its brand value and secured a strong market with affordable gold jewelry and achieving SAR 44 million in position, which resulted in a significant increase in revenues sales in 2020, expanded our L’azurde and Kenaz retail network from SAR 14 million in 2019 to SAR 44 million in 2020. and developed a new, fashion line, L’azurde Instyle, to be sold through our traditional channels in the gold souks. We have also committed major resources to the E-Commerce channel, MAIN ACTIVITIES AND KEY achieving in 2020 sales of SAR 6.6 million since its launch in ACHIEVEMENTS IN 2020 April 2020. For the first time in 2020, L’azurde started selling gold jewelry At the same time, we have not been neglecting our traditional by piece in its core wholesale channel with the aim of enhancing business centered on selling gold by weight through the gold its gross margin and reducing its working capital. The first line souks. 2020 was a difficult year for our customers, with the sold by piece in the wholesale channel was launched under the convergence of COVID 19, high gold prices and increased name of L’azurde Instyle in the Fourth quarter. It has started VAT. We therefore took the decision to recall a large quantity well and shows a promising potential. It is worth noting that of products from this channel to help our customers survive with Instyle, L’azurde is not only selling gold jewelry by piece difficult times and reposition for growth. This also reduced in the wholesale channel for the first time, but it is also using

our credit risk and materially reduced our working capital. At the latest Radio Frequency Identification (RFID) technology the same time, we streamlined our sales force and revamped for jewelry, which will enable the Company to boost its selling our product designs. In a major new initiative, we introduced efficiency, optimize its investment in gold working capital and

Mohammed Ebrahim Juma Al Shroogi Selim Chidiac L’azurde Instyle. This is a new line of fashion jewelry to be reduce its costs. sold by piece, rather than by weight, through our traditional Chairman Chief Executive Officer Instyle features exquisite pieces of jewelry encrusted with channels. This new line, which is complementary to our diamonds, pearls and precious stones. As its name suggests, traditional assortment, will help our long-standing customers “ Instyle promises all L’azurde jewelry lovers fashionable and to rebound from the market shocks of 2020. ultra-modern ornaments which can be styled in glamorous looks to keep up with the latest design and color trends in the 2020 NET INCOME AND worlds of fashion and jewelry. BUSINESS PERFORMANCE The new brand Miss L’ has performed successfully in 2020, 2020 was unlike any other year. With the global pandemic In 2020, L’azurde witnessed a decrease in its wholesale channel building on its new positioning as a young brand and a and a worldwide lockdown, the past year was challenging revenues in both KSA and Egypt. In KSA, wholesale revenues new creative direction offering attractive assortment and were 45.2% lower than last year, negatively impacted by the packaging. With new collections launched regularly, the for all. complete closure of gold souks and malls from mid-March brand’s revenues raised significantly despite the challenging to end of April, reduced working hours in May and June due circumstances. Marked by regular collaborations with top to COVID-19, the tripling of VAT to 15% from 1 July 2020 and influencers in both KSA and Egypt, Miss L’ has attracted a the sharp increase in gold price. Wholesale revenues in Egypt loyal base of young customers with its fashionable, trendy and “ also declined by 24.0% compared to last year due to reduced colorful jewelry assortment, all crafted in the highest-quality working hours enforced in Egypt’s malls and souks in the first gold at amazing prices. half of the year due to COVID-19 and the sharp increase in gold price. While the traditional wholesale business selling jewelry by weight represented a lower share of revenues in 2020 While retail revenues decreased by 37.5% in KSA, they compared to 2019, the Company expects that the share however increased in Egypt by 24.4% organically and due to of jewelry sold by piece will continue growing rapidly, the opening of five new locations in 2020 for selling Miss L’ and which will enhance gross margins and reduce the Group’s diamond jewelry. working capital.

6 7 01 | CORPORATE OVERVIEW CHAIRMAN AND CEO’S STATEMENT

CHAIRMAN’S AND CEO’S STATEMENT

On another note, L’azurde worked on strengthening its retail network in the past year through the opening of five new locations in Egypt during 2020 for selling Miss L’ and diamond jewelry, a step that contributed to overcoming the impact of reduction in working hours after precautionary actions were taken due to COVID-19.

As a key and unprecedented step, 2020 also saw the launch of L’azurde’s new fast growing e-commerce business in the past month of April. The new business which has already generated revenues of SAR 6.6 million in 2020, offers customers a modern and convenient style of shopping, and a safe one too especially at the time where people were confined to their homes because of the COVID-19 pandemic.

Last but not least, the Company restructured itself in 2020 by recalling products from wholesale customers to clear the wholesale channel and set it up for growth in 2021, with the objective of reducing risk and supporting L’azurde’s customers in the face of COVID-19.

OUTLOOK FOR 2021 4. Rebuilding the volume and optimize the traditional wholesale business selling jewelry by weight through working capital L’azurde has a very solid brand name, a strong heritage, a deep reduction and costs efficiencies. jewelry industry knowledge, an experienced management team and a very committed Board of Directors all of which will 5. Leveraging our solid customers’ network in the traditional ensure the successful transformation of the Company and its gold jewelry market to fully develop the recently launched future success. In 2021, we will be focusing on a number of L’azurde Instyle jewelry line sold by piece. As the market key drivers, namely: leader, L’azurde will help reshape and transform the traditional Gold jewelry segment by offering a new jewelry 1. Developing the fast-growing Miss L’ fashion j e w e l r y line meeting the consumers’ latest trends and offering line to its full potential through our own retail points of sales, retailers very attractive commercial terms. e-Commerce and 3rd party retailers in modern trade. 6. Scaling our promising fast growing e-Commerce business 2. Expanding our successful L’azurde retail business in Egypt through more investments in technology, infrastructure, through new points of sales and a stronger assortment. systems and a state-of-the-art digital organization.

3. Expanding the TOUS global franchise business in KSA 7. Maintaining our strong cash position and durable banking through e-commerce and more investments in marketing relationships to support the Company’s transformation. and products assortment. We plan to grow our KSA users’ base and turn TOUS into a strong household brand name in 8. Digitization of the wholesale B2B market through RFID KSA, similar to what we did with L’azurde. technology and developing the retail omni-channel strategy.

Building on the corrective initiatives L’azurde has taken over the past period, and considering the underlying fundamentals supporting the jewelry industry on the long run, we believe that the Group is well positioned to continue leading the Middle East and North Africa region’s jewelry market, as the largest gold and jewelry designer, manufacturer, and distributor, and as one of the highly renowned brands in the Arab world.

To conclude, we do look forward to a fresh and strong start in 2021, and we would like to express our thanks to our customers, shareholders, employees and partners for their continued trust and commitment in our success.

Mohammed Ebrahim Selim Chidiac Juma Al Shroogi Chief Executive Officer Chairman 8 9 01 | CORPORATE OVERVIEW ABOUT L’AZURDE

ABOUT L’AZURDE

ABOUT L'AZURDE Founded in the Kingdom of Saudi Arabia in 1992, L’azurde Company for Jewelry (“L’azurde”) is the largest designer, manufacturer, wholesaler and retailer of gold jewelry in the Middle East and North Africa (“MENA”) region and the fourth largest gold jewelry manufacturer in the world. L’azurde sells over one million pieces of jewelry every year in more than 20 countries globally. L’azurde has established itself as a household name across the MENA region, thanks to its high quality jewelry, excellent reputation, brand ambassadors and innovative marketing strategies. The company is well recognized with its distinctive, exceptional, elegant and intricate jewelry pieces. The year 2018 was a key milestone as the Company embarked on a new growth strategy by moving from a mono-brand organization to a House of Brands strategy, where the Company will focus on L’azurde and few top global franchise brands. The first step was the acquisition in 2018 of the KSA franchise for the global affordable jewelry brand TOUS.

In line with its strategy to become a ‘house of brands’, on October 2018 L’azurde finalized the acquisition to become the exclusive TOUS franchisee in KSA. TOUS is an international lifestyle brand focused on affordable luxury, covering a wide range of products including fine jewelry with diamond, gold and silver, handbags, fragrances and accessories lines as well. TOUS has been present in KSA since 2008 with a network of 27 stores across the Kingdom until the present date.

During 2019, L’azurde launched its new high potential fashion jewelry line Miss L’. Miss L’ has a wide variety of 18K gold collections that are stylish, effortlessly chic and produced according to the highest standards of jewelry making. Miss L’ jewelry is the best companion of the modern woman of today, as it reflects her personality and allows her to express her mood at any time of the day. Miss L’ offers classic and fashion jewelry products sold by piece in many malls in KSA and Egypt.

In 2020, L’azurde has over 1,500 employees and produces more than 4,000 different jewelry models every year in 21-karat and 18-karat gold as well as classic and fashion diamond jewelry. L’azurde’s international design team uses advanced, high-tech equipment including 3D printing, micro setting, laser cutting, and other modern technologies. Manufactured at the Company’s factories in Saudi Arabia and Egypt, L’azurde jewelry is distributed to more than 1,300 retailers across the GCC and MENA regions, and is exported to European countries as well.

10 11 01 | CORPORATE OVERVIEW ABOUT L’AZURDE

A SUMMARY OF THE MAIN ACTIVITIES OF THE MISSION THE COMPANYS STRATEGY HAS BEEN CRYSTALLIZED ON THE BASIS OF (6) AXES TO ENHANCE COMPANY ITS GROWTH: To lighten up the life of women with incomparable, elegant, • Article (3) of the company’s statute stipulates the fashionable and innovative jewelry brands through the state of 1. On November 16, 2020, L’azurde Jewelry announced its transformational strategy for growth and expansion in the sale of gold objectives of its practice, which mainly include production, art design, manufacturing, wholesale and retail capabilities. pieces at affordable prices, through the launching of its new brands and collections: Miss L’ and L’azurde In Style in the markets manufacturing, shaping and crafting of gold crafts, of Saudi Arabia and Egypt. This step follows the company’s efforts to diversify its revenue streams by adding new brands, and jewelry, gold bars, gemstones, gold sets wrought with GOVERNANCE entering new channels, in an attempt to meet the current changes in the customers’ tastes and buying behaviour in addition to precious stones, wholesale and retail trade in precious the sharp rise in gold prices. This is considered to be an important development in the company’s strategy, which in the past has metals, gem stones, gold jewelry, and goldsmiths. We are committed to maintain the highest standards of mainly relied on the sale of gold jewelry by weight in traditional gold markets. governance as a substantial tool for protecting shareholders’ In addition to contributing in the establishment of companies equity and achieving the highest possible value for their long- 2. Miss L’ is currently being sold in L’azurde stores and kiosks in Saudi Arabia and Egypt, as well as at the established points of sale in a way to control it, working in wholesale and retail trade term investments, enhancing oversight mechanisms and in malls. The company plans to open Miss L’ retail stores in Saudi Arabia and Egypt in 2021. of gold and jewelry machinery, production and distribution of supervision by activating the role of the Board of Directors eyeglasses, watches and leather products, exportation of gold and its committees, and ensuring the implementation of our 3. Although no plans have been made at the moment to open L’azurde In Style stores, the financial impact of the launching and jewelry, gold and silver alloys, production, manufacturing and vision and mission. sale of L’azurde In Style products will start to bear fruit in the first quarter of 2021. However, it is currently difficult to accurately sale of diamonds and diamond artefacts. The company also estimate its forth-comings. operates in maintenance, cleaning and operational contracts STRATEGY for buildings, factories, machines, and obtaining intellectual 4. The company will continue to develop the scope of wholesale jewelry by weight, which is expected to decrease the company’s property rights, concession agreements, commercial L’azurde strives to become the leading designer, manufacturer, revenues and profits, in the process of the changing buying patterns of customers which shifted from gold by weight to classic agencies and copyrights. Moreover, its business covers trade, distributor and retailer of gold, diamond and affordable gold jewelry, preferring to keep up with fashionable pieces. As a result, L’azurde will be able to reduce its working capital and thus distribution, import and export of ready-to-wear and waxed fashion jewelry in the MENA region. To achieve this vision, the its high financing cost. garments, trade and distribution of silver products, supplies company has adopted the following business strategy: 5. The e-commerce platform was successfully launched in 2020, and is still under development. At the moment, it is mainly directed and accessories for men’s clothing made of silver and other 1. Developing Miss L’ as a fast-growing modern jewelry towards the brand selling of Miss L’ jewelry and other products. While it is known that the contribution of e-commerce to revenue metals, business filtering and refining of pure gold from brand, in order to reach maximum growth, and benefit and income is not yet significant, it is growing at a rapid pace. The company will complete its expansion, the development of minerals and suspended impurities, and using advanced from its wide distribution through our points of sales, its e-commerce, and its presence in the regional market, taking into account the significant change in the buying patterns of technological and chemical methods to obtain pure gold bars e-commerce, as well as retail agents. consumers, and their tendency towards online shopping. (ingots). 2. Working to expand our successful retail business in 6. Today, L’azurde possesses a resilient brand, a long-standing tradition, a well-founded knowledge of jewelry and gold wares, • The company’s commercial record data indicates that L’azurde, Egypt, through new points of sale and a stronger a management team characterized by an undeniable expertise, and a highly experienced and proficient board of directors, all the activity it is licensed to practice is (the production line-up. committed to achieving success amidst the company’s transformation and adoption of a new strategy. of precious ores from gold, and of precious ores from precious metals in the platinum group, and wrought gold, 3. Enhancing profitability of L’azurde’ s retail sector in Saudi the production of precious or semi-precious stones, the Arabia, by streamlining the business network, developing manufacture of precious metals and gemstones, and the business activities in leading stores, intensifying production of wrought diamond). employees’ training, and reducing inventory.

• The company may establish branches, offices or agencies 4. Working to improve the performance of the business within the Kingdom by a decision of the Chairman or sector related to the traditional wholesale trade, and the CEO. The establishment of branches, offices or agencies sale of gold artefacts, by reducing the working capital, and outside the Kingdom requires a decision from the Board increasing its efficiency. of Directors. As of the date of publishing this prospectus, the company has established nine (9) branches distributed 5. As a market leader, L’azurde will hugely contribute by over the Kingdom’s regional regions (Riyadh, Dammam selling gold pieces to restructure and transform the and Jeddah). traditional gold wares sector, and offering a new variety of gold items that meet the latest trends, and provide • Likewise, the company may establish on its own companies retailers with very attractive offers. with limited liability or closed shareholding, provided that the capital is not less than (5) million riyals. The company 6. We are willing to develop the company’s business by making may also have an interest, or participate in any way with use of the promising and fast-growing e-commerce, other companies that engage in activities similar to their investing further in technology, infrastructure, and work or may help it to achieve its purpose. It may also systems, in addition to collaborating with experienced acquire shares and stakes in other existing companies or digital organizations. merge with them, and have the right to participate with others in establishing joint-stock companies or limited 7. We are planning to expand the TOUS brand’s global liability companies, after fulfilling the requirements of business in Saudi Arabia, through e-commerce, and further the applicable regulations and instructions in this regard. investments in marketing and product diversification Besides, the company may dispose of these shares or activities. stakes, provided that this does not include mediation in its trading. 8. With the aim of supporting the company, we strive to maintain positive cash flows and solid banking VISION relationships.

L’azurde aims to become the most trusted and inspiring house 9. We are pursuing new investment opportunities that add to of jewelry brands in the MENA region. our profitability, and enhance our strategic position in the market by broadening the TOUS brand.

12 13 01 | CORPORATE OVERVIEW ABOUT L’AZURDE

14 15 01 | CORPORATE OVERVIEW KEY MILESTONES

KEY MILESTONES

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Company is established The “L’azurde” The “L’azurde” “OroEgypt” Company Establishment of Legal form is changed L’azurde Group acquires A consortium under the name of “the trademark is brand is launched is established by Mr the International to a closed joint stock 100% ownership comprising Investcorp, Saudi Gold & Pearl registered. in Jeddah, KSA. Abdulaziz Al Othaim Company for Jewelry company under the name of “OroEgypt”. Eastgate and The Factory Owned by Mr. as L’azurde’s first Manufacturing in “L’azurde Company for National Investor Abdulaziz Saleh Al factory in Egypt Egypt (currently known Jewelry” with a capital L’azurde Group signs companies acquires an Othaim” in Riyadh. as L’azurde Egypt of SAR 200,000,000. an endorsement with indirect interest of 77.5% for Jewelry LLC). Lebanese superstar Elissa. in L’azurde Holding.

L’azurde’s capital is More retail showrooms increased from SAR 200 are opened in million to SAR 300 million the Kingdom of through a capitalization Saudi Arabia. from the company’s retained earnings.

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A second factory with The capital of the L’azurde completes An exclusive Duty Free The KSA franchise of the TOUS as a global Promising Miss L’ A new strategy to grow and expand a total capacity of 15 company is increased its successful Initial distribution agreement retailer in the affordable jewelry sector is launched as an into selling gold jewelry by piece tons is established in to SAR 430 million Public Offering on June is signed with Saudi- is acquired and gives the company a key affordable fashion at affordable prices is launched Egypt under L’azurde by way of issuing 13 29 and begins trading French Duty Free growth engine by stepping into the fast and sold by piece gold in KSA and Egypt markets. Egypt for Jewellery million new shares. on the Saudi Stock Company at Riyadh, growing segment of affordable luxury. jewelry fashion line. LLC (previously, Exchange (Tadawul). Jeddah and Dammam L’azurde E-Commerce platform International Company A collaboration International Airports. A new production unit in Egypt is is successfully launched. for Jewellery agreement is signed to Kenaz Jewelry – L’azurde’s successfully completed. Manufacturing) produce Gold Wedding second jewelry brand is Six new L’azurde retail The new collection L’azurde In style is Bands in Egypt for launched in Saudi Arabia showrooms open in Seven L’azurde retail shops are opened in Egypt. brought to the traditional gold souks the purpose of selling providing diamond jewelry KSA and Egypt. market and sold by piece through a them in the markets at affordable prices. The first wholesale office is opened in Oman large network of third party retailers. of the MENA Region A memorandum of to strengthen the Gold wholesale business. with BMA, a leading L’azurde takes the understanding is signed to Myriam Fares is appointed as the company in the Wedding franchise rights for acquire a leading retailer top brand ambassador. Bands sector that has a ‘Amazing Jewelry’, an in the affordable luxury wide experience in the international franchise jewelry sector in KSA. design and production of brand launched in wedding bands in Turkey. Copenhagen, Denmark.

16 17 01 | CORPORATE OVERVIEW PROFILE OF THE BOARD

PROFILE OF THE BOARD

MR. MOHAMMED MR. ABDULLAH EBRAHIM JUMA AL SHROOGI ABDULAZIZ AL-OTHAIM

CHAIRMAN - NON-EXECUTIVE DIRECTOR VICE CHAIRMAN - NON-EXECUTIVE DIRECTOR

The chairman of L’azurde Company for Jewelry has been elected for three years Mr. Abdullah Al Othaim joined L’azurde Company for Jewelry on 5 by General Assembly convened on 22 April 2018, for current term of the board September 2013. He has been re-elected for three years by General that has been started on 26 April 2018 and ends 25 April 2021. Assembly convened on 22 April 2018, for current term of the board that Current Positions: has been started on 26 April 2018 and ends 25 April 2021. • Board member of APM Terminals Company, Bahraini Joint Stock Company, Current Positions: specializing in the Transportation & Logistics Sector in the Kingdom of Bahrain, • Chairman of Mad’a Investment Company, a Limited Liabilities Company, since 2010. Specialised in construction and real estate investments since 2017. • Vice Chairman of Al Baraka Banking Group, a Bahraini Joint Stock Company, • Director at Abdulaziz Al Othaim & Sons Holding Company, a Limited specialised in Banking and Financial services, in the Kingdom of Bahrain, since Liabilities Company, Specialised in direct investments in various sectors 2010. since 2010. • Board member of Wisayah Investment Company, a Limited Liability Company • Board member at Smart Medical Company, a Limited Liabilities Company, a wholly owned subsidiary of Saudi Aramco, specializing in investment sector, Specialised in private medical service since 2017. Saudi Arabia, since 2018. • Board member at Arkan Business Group (ABG), a Limited Liabilities • Chairman of the Board of Gulf Cooperation Council Board Directors Institute, Company, Specialised in services sector, since 2018. non-profit organization, in the Kingdom of Bahrain, since 2015. • Board member at Family Souk Ventures Ltd, a Limited Liabilities • Director of the National US-Arab Chamber of Commerce, USA, since 1995. Company, Specialised in manages and distributes parenting and children Past Professional Experience: products in the Middle East and North Africa since 2018. • Advisor to Investcorp Bank B.S.C. a Bahrain shareholding company specialised in • Board member at Thaat Education Company, a Limited Liabilities banking and financial services; in the Kingdom of Bahrain, from 2018 to 2020. Company, Specialised in Early Learning and Childcare since 2016. • Co-Chief Executive Officer, Investcorp Bank B.S.C., a Bahrain shareholding • Partner and Board member at ITS, a Limited Liabilities Company, company, banking and financial services; in the Kingdom of Bahrain, from 2015 to Specialised in Ads and marketing services, Lebanon, since 2019. 2018. • Partner and Board member at Hyper B, a Limited Liabilities Company, • Director at the Crown Prince’s International Scholarship Program, non-profit Specialised in Payment solution and systems services, Saudi Arabia, organization, in the Kingdom of Bahrain, from 2018 to 2020. since 2017. • Board member at Bahrain Maritime & Mercantile International, a Bahrain • Partner and Board member at Gowar Medical Center, a Limited Liabilities shareholding company, retail and distribution; in the Kingdom of Bahrain, from Company, Specialised in medical services, Saudi Arabia, since 2019. 2012 to 2016. • Partner and Board member at Naqla Marketing Co., a Limited Liabilities • Chairman of Investcorp Saudi Arabia Financial Investments Company, a Limited Company, Specialised in Marketing services, Saudi Arabia, since 2017. Liability Company, specialized in Financial Services, Saudi Arabia, from 2013 to Past Professional Experience: 2017. • Strategic Planning Director at Abdulaziz AI Othaim & Sons Holding • CEO of Gulf Business, Investcorp Bank B.S.C. a Bahrain, specialised in, banking Company, a limited liability company, Specialised in investments, from and financial services and investing in private equity transactions in the MENA 2012 to 2017. region and Country of Turkey; in the Kingdom of Bahrain, from 2009 to 2015. • Director at Aswar United Real Estate Development Company, a • Founding Member of the Board of Injaz al Arab, a non-profit organization that limited liability company, Specialised in real estate development, from promotes youth education and training in the Arab World; in the Kingdom of 2012 to 2016. Bahrain, from 2006 to 2009. • Restructuring Committee Member for the purposes of restructuring, • Division Executive for the MENA region and Pakistan, Citigroup Inc. specialized in designing bylaws and internal procedures, Manazel Construction Financial Services, from 2004 to 2009. Company, specialized in construction and real estate, from January 2012 • Chairman of Citi Islamic Investment Bank, Bahrain joint Stocks Company, to July 2013. specialised in Islamic Wholesale Bank, banking and financial services, in the • Business Analyst, RBC (Direct Investing), Joint Stock Company, Kingdom of Bahrain, from 1996 to 2006. specialized in banking and financial services, from 2011 to 2012. • Head of Treasury and Chief Executive Officer of Bahrain and the Gulf - Citigroup, • Financial Analyst, Al-Othaim Holding Company, a Limited Liabilities Inc. specialized in Financial Services, from 1986 to 2004. Company, specialized in investment sector, from 2010 to 2011. • A member at the board of trustees of Bahrain Center for studies and research, Academic and Professional Qualifications: Bahraini Research Institute, in the Kingdom of Bahrain, from 1995 to 1999. • Bachelor in Finance, Suffolk University, Boston, Massachusetts, United Academic and Professional Qualifications: States of America, 2010. • Executive Program, Harvard University, Boston, Massachusetts, United States of America, 1989; and • Bachelor in Commerce, Kuwait University, Kuwait City, Kuwait, 1970.

18 19 01 | CORPORATE OVERVIEW PROFILE OF THE BOARD

MR. BRIAN NORMAN DICKIE MR. ADEL ABDULLAH AL-MAIMAN MR. ABDUL KAREEM MR. AMIN MOHAMED ASSAD ABU ALNASR AKEF AL-MAGHRABI NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR CHAIRMAN OF EXECUTIVE COMMITTEE MEMBER OF AUDIT COMMITTEE INDEPENDENT DIRECTOR INDEPENDENT DIRECTOR MEMBER OF AUDIT COMMITTEE MEMBER OF NOMINATION AND RENUMERATIONS COMMITTEE CHAIRMAN OF NOMINATION AND REMUNERATION COMMITTEE MEMBER OF NOMINATION AND REMUNERATIONS COMMITTEE Amin Al-Maghrabi joined L’azurde Company for Jewelry since 1 March 2016 as a board member. He has been re- Adel Al-Maiman joined L’azurde Company for Jewelry on 6 December Abdul Kareem Abu Alnasr joined L’azurde Company for Jewelry on 1 elected for three years by General Assembly convened on 2017 as a board member. He has been re-elected for three years by March 2016 as a board member. He has been re-elected for three years Brian Dickie joined L’azurde Company for Jewelry on 15 October 2015 22 April 2018, for current term of the board that has been General Assembly convened on 22 April 2018, for current term of the by General Assembly convened on 22 April 2018, for current term of the as a board member. He has been re-elected for three years by General started on 26 April 2018 and ends 25 April 2021. board that has been started on 26 April 2018 and ends 25 April 2021. board that has been started on 26 April 2018 and ends 25 April 2021. Assembly convened on 22 April 2018, for current term of the board that Current Positions: has been started on 26 April 2018 and ends 25 April 2021. Current Positions: Current Positions: • President and CEO of Magrabi Retail, a Limited Liability Current Positions: • Head of Continental Office, The National Commercial Bank, Treasury • Director of Abdul Latif Jameel United Finance Company, a Closed Joint Company operating in eyewear retail categories, position Group, KSA, since January 2019. Stock Company, since April 2015. • Board of Managers Chairman, Hydrasun Limited Co., a Limited Liability held since 2008. • EVP-Head of Treasury Sales, Treasury Group, The National • Director of Safanad Limited, Dubai, DIFC, UAE, a Limited Liability Company, Oil field Services, distributing and manufacturing hydraulic • Chairman of Magrabi Hospitals and Centers, a Limited Commercial Bank, KSA, since 2013. Company, since May 2015. machines, devices and related products for international oil industry, Liability Company operating in medical care since, position since 2013. Past Professional Experience: • Director of Hasana, the Investment Arm Company of the General held since January 2008. Organization for Social Insurance, a Closed Joint Stock Company since • Chairman, at X+Bricks S.A; a limited Liability company (PLC), • Heading the Sales of Treasury Group to the Private Banking, Retail, • Director of Al Amin Medical Instruments Co. (AMICO Group), 2017. Luxembourg; Real Estate Investment Company, Germany, since July and Corporate segments, The National Commercial Bank, KSA., a Limited Liability Company operating in medical equipment 2018. January 2013 to December 2013. • Director of Kafalah, a Government and Banking Sector Loan Guarantee and healthcare products distribution, position held since Program for the SMEs, since 2016. • Director at SCP Group; International Private Investment Firm • Head of Treasury Sales, Central & Eastern Regions, Treasury January 2010. Luxembourg, LLC, Investments sector since 2016. Division, The National Commercial Bank, Saudi Arabia, 2010 to 2012. • Director of Health Water Bottling Company, a Closed Joint Stock • Independent Director at Ghassan Ahmed AlSulaiman Company, since September 2018. • Non-Executive Director, NDT Corrosion Control Services Co., a Limited • Co-Head of Wealth Management, Jadwa Investment Company, a Furniture Trading Company LTD. (IKEA), a Limited Liability Company, specialised in Technical inspection Services based in Saudi Closed Joint Stock Company, investment sector. Saudi Arabia, • Chairman of the board of Silah Development Company, a limited liability Liability Company operating in Retail, Saudi Arabia, since KSA, since April 2018. 2008 to 2010. company, since December 2017. November 2016. • Senior Advisor, Redline Capital, Luxembourg, (Investment Fund),a • Head of HNW-Wealth Management, Investment Services, NCB Past Professional Experience: • Shareholder and Board Member at MAGRABI Optical venture capital fund specialized in investments in technology businesses, Company LTD , a Limited Liability Company operating in Capital, KSA, 2006 to 2008. • Director of Yanbu National Petrochemical Company (Yansab), a Saudi since 2012. Retail sector, - Saudi Arabia, since May 2003. • Strategic Business Unit Head, Investment & Derivatives Sales, Joint Stock Company, from March 2013 to March 2020. • Senior Advisor, Investcorp International Ltd., a limited company, • Non-Executive Director at ARP Global Capital, LLC – a Treasury, The National Commercial Bank, KSA , 2005 to 2006. • Director of Savola Group, a Saudi Joint Stock Company from 2013 until specialized in investments in European private equity, UK, since 2010. Limited Liability Company operating in Investments sector, • Manager, Sales & Marketing, Treasury, Saudi American Bank 2016. Past Professional Experience: UAE -since December 2018. (SAMBA), KSA, 2000 to May 2003. • Director of Kinan Real Estate Development Company, a Limited Liability • Board Member at MAGRABi Foundation, None-for-profit • Chairman, Icopal AS, Denmark, privately owned holding company Academic and Professional Qualifications: Company from 2015 until 2016. (LLC),manufacturer of building products, 2007-2016. organization, Egypt - since January 2012. • B.S. degree in Finance, King Fahad University of Petroleum & • Director of Mohammed Abdulaziz Al-Rajhi & Sons Holding Company • Board Member, Africa Eye Foundation, None-for-profit • Director, Polyconcept Group, Partnership; USA, a global provider of Minerals, KSA, 1995 to 2000. (MARS), a Closed Joint Stock Company, from 2013 until 2015. promotional products, 2006 to 2016. organization, Switzerland- since 2010. • Advanced Management Program (AMP71), the Wharton School, • Director of Saudia Aerospace Engineering Industries (SAEI), a Closed Past Professional Experience: • Director, Sistema JSFC, Russia, joint stock company, a diversified Philadelphia, 2016. Joint Stock Company, from March 2014 until September 2018. company listed in Moscow and London, 2012 to 2016. • Chief Finance Officer for Magrabi Retail from 2004 until • Executive Leadership Program - General Manager Leadership • Director of Ahmed Mohammed Saleh Baeshen & Co., a Closed Joint Stock 2008. • Managing Director, Investcorp International Limited, investment in Program: The Cross-Functional Leader. Columbia Business School, Company, from 2017 until July 2018. European Private Equity, London, UK, 2003 to 2010. • Regional General Manager for Magrabi Retail, from 2002 New York, 2015. • CEO and Director of NCB, a Saudi Joint Stock Company from 2007 until until 2004. • President, North America, TXU Energy, Energy Company, serving • Executive Leadership Program, Aligning Sales & Strategy, Harvard, 2013. residential and business customers, based in Dallas, USA, 1999 to 2003. • Marketing Manager for Magrabi Retail, Cairo, Egypt from Boston, 2012. • Chairman of the Regional Advisory Council, MasterCard Company for 1999 until 2002. • President and Chief Operating Officer, Booz, Allen & Hamilton Inc, global • Executive Leadership Program designed specifically for a group of MENA, from 2007 until 2013. management consulting firm, based in Singapore and New York, 1981 to • Mergers and Acquisitions Associate Programme, JP 30 senior managers of NCB, INSEAD Business School, 2007. • Director of Union of Arab Banks, Lebanon, from 2006 until 2013. 1999. Morgan, New York, USA; operating in financial services from • Member of the Board of Trustees, Arab Academy for Banking and Academic and Professional Qualifications: 1998 until 1999. Financial Sciences, Jordan, from 2006 until 2013. • Master of Business Administration, Harvard University, Boston, United • Senior Retail Broker, Flemings Investment Bank, Cairo, Academic and Professional Qualifications: States of America, 1978. Egypt; specializing in Investments, from 1995 until 1998. • Master of Business Administration -The American University - Cairo, • Master of Arts in English Language and Literature, Oxford University, Academic and Professional Qualifications: Egypt (1989). Oxford, England, 1976. • B.A. in Economics and Political Science, University of • Bachelor of Business Administration - California State University, Richmond, London, UK, 1996. Sacramento, USA (1985).

20 21 01 | CORPORATE OVERVIEW PROFILE OF THE BOARD

MRS. SABAH KHALIL ALMUAYYED MR. KHALIFA AL-JALAHMA MR. BANDER TALAAT HAMOOH

INDEPENDENT DIRECTOR NON-EXECUTIVE DIRECTOR INDEPENDENT DIRECTOR CHAIRWOMEN OF AUDIT COMMITTEE MEMBER OF AUDIT COMMITTEE MEMBER OF NOMINATION AND REMUNERATIONS COMMITTEE

Mrs. Sabah Almoayyed joined L’azurde Company for Jewelry on 22 Khalifa Al Jalahma has been appointed by the Board of Directors Bander Talaat Hamooh has been appointed by the Board of Directors November 2016. She has been re-elected for three years by General temporarily as a non-executive director on December 10, temporarily as an independent director on March 18, 2020 based Assembly convened on 22 April 2018, for current term of the board that 2019 based on the recommendation of the Nominations and on the recommendation of the Nominations and Remuneration has been started on 26 April 2018 and ends 25 April 2021. Remuneration Committee. This appointment is effective from Committee. This appointment is effective from March 18, 2020 and Current Positions: December 10, 2019 and up to end of current Board term on 25 up to end of current Board term on 25 April 2021. This appointment • Member of the Board of Directors, Bahrain Development Bank, April 2021. This appointment will be final upon the approval at the has been approved by the Ordinary General Assembly meeting on 3 development financial institutions, financial and banking services, since first Ordinary General Assembly meeting. June 2020. March 2016 and Chair of the Investment and Credit Committee; Since Current Positions: Current Positions: 2016. • Vice President, Private Equity – MENA Region, Investcorp • Chief Executive Officer of Panda Retail Company, grocery retailing • Member of the Risk Committee for National Bank of Bahrain B.s.c. Since Financial Services BSC, Bahrain, focusing on private equity company - Panda Retail has been operating under the retail umbrella 2018. transactions in the MENA region, since October 2010G. of the Savola Group, since 2017. • Board Member of the Higher Education Council, Bahrain, Governmental • Non- Executive board member, Al-Burj Company for Medical • Non-executive board member at Al Kabeer Group of Companies, organization, since 2012; Chair of the Finance & Administration Laboratories, Closed Joint Stock Company, specialised in medical a closed joint stock company in the Kingdom of Saudi Arabia, Committee. services, since 2018. specializing in food industries since 2018. • Managing Partner, Intellect Resources Management Company - W.L.L., • Director at Development Opportunities Company, a Limited • Member of the non-executive board of directors and a member Consultancy Management and Training, since 2014. Liability Company, Saudi Arabia: since June 2013. of the Nominations and Remuneration Committee of Jamjoom • Chairman of Flat6Labs Bahrain W.L.L., Start-up Accelerator Since 2016. • Director at GOF Industrial Services Holding Company a Limited Pharma for Pharmaceutical Industries, a limited liability company, Liability Company, Saudi Arabia since September 2013. in the Kingdom of Saudi Arabia, specializing in the pharmaceutical • Member of the Board of Directors - Audit & Risk Committee, Investcorp industries since 2018. Financial Services B.S.C. financial services sector, since May 2019. • Director at Gulf Forth Gemstone Saudi Company a Limited Liability Company, Saudi Arabia since December 2008. • Chairman of the Board of Directors of Modawa Medical Company, a • Partner of Droob Consultancy , a Limited Liability Company operating in limited liability company in the Kingdom of Saudi Arabia, specializing Consultancy services , since 2019. • Director at Gulf Fifth Gemstone Saudi Company a Limited Liability in healthcare since 2013. Company, Saudi Arabia since December 2008. Past Professional Experience: • Board Member at Al Salam Home Medical Services Company, a • General Manager and Executive Board Member at Eskan Bank Bahrain, • Director at L’azurde Holding Company a Limited Liability Limited Liability Company. Saudi Arabia, , specializes in Medical largest public sector mortgage and property development bank, from Company, Saudi Arabia since December 2019. Services since 2015 . 2004 to 2013. • Director at Care and Innovation Company Closed Joint Stock • Member of the Executive Management of the First Health Cluster at • Chief Executive Officer and member of the Board of Directors of Ahli Company, since October 2016. the Ministry of Health, a non-profit governmental institution in the United Bank Bahrain, financial and banking services, 1996 - 2014. • Director at Commercial Growth Development Company a Limited Kingdom of Saudi Arabia, specialized in health care since 2018. • Assistant General Manager, Corporate Banking/Financial Institution and Liability Company, Saudi Arabia since December 2015. • Member of the Board of Directors of Zuhair Fayez & Partners, Trade Finance of Bahrain National Bank, financial and banking services, • Director at Saudi Care Sector Fund, financial institution since a professional private company in the Kingdom of Saudi Arabia, 1988 - 1996. September 2016. specializing in engineering and project management since 2017. • Vice President of United Gulf Bank in Bahrain, Investment Division, • Director at Opportunistic Solutions Company a Limited Liability Past Professional Experience: financial and banking services, from 1982 to 1987. Company, Saudi Arabia since June 2015. • General Manager and Deputy Minister at the Saudi Ministry of Health • Manager at Citibank Bahrain, the retail division, financial and banking Past Professional Experience: - a government agency specialized in health care from 2014 to 2015. services, from 1977 to 1981. • Analyst, Middle East Investment Banking, Citigroup Global • Chief Executive Officer of Nahdi Medical Company, specializing in Academic and Professional Qualifications: Markets Limited, Dubai, UAE, focused on M&A advisory, 2008 to managing a chain of pharmacies in the retail sector in the Kingdom • MBA, Kelastat Business School, Finance and Management University of 2010. of Saudi Arabia from 2006 to 2014. DePaul, Chicago, USA - 2005. • Analyst, Investment Banking – Basic Industrials Group, Citigroup • Chief Executive Officer of GlaxoSmithKline Saudi Arabia Ltd., • Bachelors, Economics and Business Administration, American University Global Markets Limited, London, United Kingdom, focused on specializing in healthcare from 1996 to 2006. of Beirut, Lebanon 1975. M&A advisory in the industrials sector, April 2010 – August 2010. • Assistant General Manager for Sales and Marketing at Tabuk • Executive Leadership Program, Darden College, University of Virginia, • Analyst, Treasury and Corporate Banking departments, Bank Pharmaceuticals Manufacturing Company , specializing in 2001. of Bahrain and Kuwait BSC, Manama, Bahrain, focusing on in developing, manufacturing, marketing and distributing medicines banking services for clients, 2006. from 1995 to 1996. • Advanced Management Program (AMP), Wharton Business School, University of Pennsylvania, USA, 1999. Academic and Professional Qualifications: Academic and Professional Qualifications: • Bachelor’s degree in Corporate Finance and Accounting, Bentley • Bachelor of Science, Pharmacy major from King Saud University, University, USA , 2006). Kingdom of Saudi Arabia, 1989. • M.B.A in Finance Bentley University, USA,2007.

22 23 01 | CORPORATE OVERVIEW PROFILE OF EXECUTIVE MANAGEMENT

PROFILE OF EXECUTIVE MANAGEMENT MR. SELIM CHIDIAC MR. AYMAN GAMIL

CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER

Joined L’azurde Company for Jewelry on 8 February Joined L’azurde Company for Jewelry on 22 September 2010. 2014.

Academic and Professional Qualifications: Academic and Professional Qualifications: • Engineering Degree, Electronic Physics Chemistry, Lyon, • Bachelor in Commerce, Cairo University, Egypt, 1991. France, 1995G. • Chartered Certified Accountant, the Association of Chartered • Executive Education at INSEAD, Harvard Business School, Certified Accountants, United Kingdom, 1999. IMD Lausanne, London Business School, IMD Lausanne. • Certified Internal Auditor, the Institute of Internal Auditors, Current Positions: United States of America, 2001. • Chief Executive Officer, L’azurde Company for Jewelry, Joint • Certified Treasury Professional, the Association for Stock Company, since 2010G. Financial Professionals, United States of America, 2002. • Board Director at Theeb Car Rental Company, a joint-stock • Investment Management Specialization - University of company in Saudi Arabia, specialized in cars rental services, Geneva, Switzerland, 2020. since Feb 2020. • MicroMaster Digital Leadership – Boston University, USA, Past Professional Experience: 2020. • Executive Board Member, L’azurde Company for Jewelry, • MicroMaster Digital Product Management – Boston Joint Stock Company, from December 2018G to March 2020. University, USA, 2020. • Chief Executive Officer, Red Bull North America, Inc., fast Current Positions: moving consumer goods, 2007G–2010G. • Group Chief Financial Officer, L’azurde Company for Jewelry • Chief Executive Officer and Regional President Asia, since 2014. Pacific, Middle East and Africa, Red Bull Japan, fast moving Past Professional Experience: consumer goods, 2006G until 2007G. • Group Chief Financial Officer, National Printing Company, a • Regional President Asia Pacific, Middle East and Africa, Red Joint Stock Company, packaging and printing, 2012 to 2014. Bull FZE, fast moving consumer goods, 2004G until 2005G. • International Markets Controller (for Africa, Middle & Near • Regional Manager Middle East, North Africa and Greece, East, Russia, Ukraine, Central Asia, Turkey & Pakistan), SC Red Bull GmbH, fast moving consumer goods, 1999G until Johnson Company, fast moving consumer goods, 2010 to 2003G. 2012. • Marketing Manager, Switzerland Austria, Procter & Gamble • Regional Financial Manager (the Middle East and North AG, fast moving consumer goods, 1997G until 1999G. Africa) SC Johnson, specialized in consumer goods, since • Brand Manager, Switzerland, Procter & Gamble AG, General 2006 to 2010. Partnership, fast moving consumer goods, 1995G until • Financial Manager (Egypt) SC Johnson, operating in retail 1997G. industry, specialised in consumer goods, since 2004 to 2006. • Finance Director, Fromageries Bel Egypt, a Joint Stock Company, fast moving consumer goods, 2001 to 2004. • Financial Controller, GlaxoSmithKline, a Joint Stock Company, pharmaceutical, 1997 to 2001. • Senior Accountant, Ernst & Young, a partnership, audit, 1994 to 1997. • Accounting Manager, CR&S Company, a partnership, information technology, 1992 to 1994.

24 25 01 | CORPORATE OVERVIEW PROFILE OF EXECUTIVE MANAGEMENT

MR. MOHAMMED AYMAN HAFFAR MRS. MAY KANOUNJI MR. ABDULLAH OBEID MR. IHAB IBRAHIM

EXECUTIVE GENERAL MANAGER KSA AND INTERNATIONAL CHIEF DIGITAL AND CUSTOMER OFFICE ADMINISTRATION AND LEGAL DIRECTOR, EXECUTIVE GENERAL MANAGER EGYPT

Joined L’azurde Company for Jewelry on 22 February 1994. Joined L’azurde Company for Jewelry on 1 October Joined L’azurde Company for Jewelry on 1 September Joined L’azurde Company for Jewelry on 1 May 2005. 2018. 1995. Academic and Professional Qualifications: Academic and Professional Qualifications: • Executive Program, Harvard University, Massachusetts, United States of Academic and Professional Qualifications: Academic and Professional Qualification: • Bachelor in Commerce – Business Administration, Helwan America, 2007. • Master of Arts, Financial Economics, American University of • Business Administration Diploma, Al Khaleej Institute, KSA, University, Cairo, Egypt, 1990. • Driving Strategic Innovation Program, Massachusetts Institute of Beirut, Lebanon; 2003 to 2005. 1995. • Computer Science Diploma, American University in Cairo, Technology (MIT), Massachusetts, United States of America, 2006. • Bachelor of Arts, Economics (Distinction, Minor: Business Current Positions: Egypt, 1990. • Strategic Marketing diploma at Toledo University, Ohio, United States of Finance), American University of Beirut, Beirut, Lebanon; • Administration and Legal Director, L’azurde Company for • Chartered Institute of Marketing Diploma in Marketing, America, 1998. 2000 to 2003. Jewelry since 2006. American University in Cairo, Egypt, 2007. • Bachelor in Business Administration, 1991. Current Positions: Past Professional Experience: Current Positions: Current Positions: • Chief Digital and Customer office, L’azurde Company • Public Relations Manager, L’azurde Company for Jewelry, • Executive General Manager – Egypt, L’azurde Company for • Executive General Manager, L’azurde Company for Jewelry since January for Jewelry, Joint Stock Company, Saudi Arabia, 1995 to 2000. Jewelry, since 2011. 2006. since August 2020. • Government Relations Manager, Saudi Telecom Company, a Past Professional Experience: Past Professional Experience: Past Professional Experience: Joint Stock Company, telecommunications, 1990 to 1994. • Commercial Manager, Oro Egypt Company for Manufacturing • Vice President - Marketing & Sales, L’azurde Company for Jewelry, 2005. • Chief Marketing Officer, L’azurde Company for Jewelry, Precious Metals, a Joint Stock Company, working in the Joint Stock Company, Saudi Arabia, from October 2018 until • Marketing and Sales Director, L’azurde Company for Jewelry, 2002 to business of manufacturing, forging and selling of jewelries, July 2020. 2004. 2009 to 2011. • Marketing Director, Zohoor Alreef Group, Fragrance • Senior Marketing Manager, L’azurde Company for Jewelry, 1995 to 2002. • Marketing and Sales Manager, Oro Egypt Company for manufacturing and retailing, 2013–2018. Manufacturing Precious Metals, a Joint Stock Company, • Senior Sales Manager, L’azurde Company for Jewelry, 1994 to 1995. • Head of Marketing, Al Hokair Group, Fashion Retail, 2010 working in the business of manufacturing, forging and • Sales Manager, Matajer Al Arabia, individual institution, fashion industry, until 2013. selling of jewelries, 2003 to 2009. since 1990 to 1993. • Marketing Research project manager, Ipsos, global market • Deputy General Manager, Senior Sales Manager and research company, 2008- 2010. Regional Manager, Arab Trade & Distribution Co., Joint Stock Company, 1992 to 2003. • Marketing Research manager, Integration, global market research company, 2005 - 2007.

26 27 �� STRATEGIC BUSINESS REVIEW

28 29 02 | STRATEGIC BUSINESS REVIEW L’AZURDE PRINCIPAL BUSINESS ACTIVITIES

The company launched in 2020 for the first time“ ever the sale of Gold“ and Diamonds jewelry on its own E-commerce platforms.

L’AZURDE PRINCIPAL BUSINESS ACTIVITIES L'AZURDE GROUP'S PRINCIPAL ACTIVITIES CONSIST OF THE FOLLOWING FOUR KEY OPERATIONAL SEGMENTS: DESIGN AND MANUFACTURING OF GOLD AND DIAMOND JEWELRY SEGMENT: This segment primarily consists of design and production of gold and diamond jewelry with precious and semi-precious stones. WHOLESALE SEGMENT: This segment primarily consists of wholesale to more than 1,600third party independent retailers of gold and diamond jewelry in the MENA region, mainly in Saudi Arabia and Egypt. RETAIL SEGMENT: This segment primarily consists of selling classic and fashion diamond and gold jewelry across L’azurde mono brand retail shops, TOUS global brand franchise stores, new Miss L’ mono brand retail shops and kiosks, Kenaz kiosks and Travel Retail locations at KSA airports. E-COMMERCE: The Company launched in 2020 for the time ever the sale of Gold and Diamonds jewelry on its own E-Commerce platforms L’azurde.com and Miss L’.Com. This new channel expanded rapidly during the COVID-19 crisis, and ended up reaching revenues of SARx Million in 2020, representing x% of the total group revenues. The Company is expanding its E-Commerce platforms with more investments in products assortments, improving the UX/UI consumer experience and expanding the reach, traffic and conversion to sales.

L’azurde Group’s core wholesale business model consists of distributing and selling gold jewelry by weight to a large network of more than 1,600third party retailers across the MENA region. L’azurde borrows gold from financial institutions through facilities that are in accordance with the Sharia, and sells gold jewelry by weight to retailers who are required to pay in the form of physical weight of the gold sold, in addition to the labor service charge in SAR, USD or EGP. As part of its strategy to manage Gold price volatility risks, and instead of buying gold or being exposed to gold price fluctuations, L’azurde Group borrows its entire gold needs from banks with different terms, and it does not own any Gold. This ensures that its gold assets, represented in accounts receivable and inventory, always equal its liabilities of gold facilities, at all times. The Group launched a major initiative to sell for the first time L’azurde Instyle, a line Gold and Diamonds jewelry sold by piece in the wholesale network of customers. This new line will contribute to improving the Gross Margin and reduce the working capital. DISTRIBUTING AND SELLING GOLD JEWELRY TO A LARGE NETWORK OF MORE THAN 1,600THIRD PARTY RETAILERS ACROSS THE MENA REGION.

30 31 02 | STRATEGIC BUSINESS REVIEW L’AZURDE PRINCIPAL BUSINESS ACTIVITIES

MARKET OVERVIEW products and basic services. These factors have cumulatively THE GCC COUNTRIES THE ARAB REPUBLIC OF EGYPT weakened consumer confidence leading to a subsequent The economies of the Gulf Cooper ation Council (GCC) countries downturn in consumer spending. As a result, there has been a The retail industry in the GCC countries has seen tough times The Egyptian economy began to show signs of recovery since highly depend on oil and gas revenues, and the slowdown change in the general preferences of consumers from luxury in recent years, but the long-term fundamentals of this sector 2014, following a period of political turmoil. Moreover, Egypt in oil prices since mid-year 2014 has impacted the regional products to more affordable goods, forcing manufacturers, remain intact. Regional growth has been undermined by an has managed to mitigate the negative effects on the consumer economic activity. According to the International Monetary wholesalers and retailers to replenish their portfolios extended period of low oil prices and weak domestic demand. goods market, caused by political unrest, to a minimum, Fund (IMF), the GDP growth in the region dropped from and stocks of brands at reasonable prices for consumers Nevertheless, the years 2019 and 2020 witnessed stabilization thanks to the rapid population growth that Egypt is witnessing, 3.2% in 2013 to 0.5% in 2020. As a result, the governments interested in price and value even though the implementation in oil prices, and measures taken by regional governments, which adds nearly one million new consumers every year. of the GCC countries have taken several austerity measures, of VAT since the beginning of 2018 and VAT increase in 2020 such as organizing and structuring infrastructure for the retail Egypt’s large population makes it the biggest market in the such as cutting subsidies and slashing spending, along with have had impact on consumer spending. However, stabilizing sector, and boosting investment within the sector. Besides, Arab world. fiscal reforms, ranging from introducing new taxes (such as oil prices and increasing tourist arrivals shall drive the overall the anticipated mega-events in the short term are expected The retail and wholesale sectors in Egypt have developed value-added tax) to privatizing state-owned companies. For growth in the future. to have a positive impact on the retail sector. The changing example, Saudi Arabia plans to raise nearly US $ 200 billion trends in the retail sector in the GCC, such as the adoption significantly in recent years. Retail sales increased due to the by 2030 (excluding the Aramco IPO) from the privatization of With the exception of the year 2020, which witnessed the of digital transformation, new fashion brands, and increasing large and youthful population, the emergence of a wealthier government entities in various sectors, including healthcare, spread of an unprecedented pandemic (novel Covid-19), the preferences for a healthy lifestyle and leisure will all provide middle class, a vibrant tourism industry, and the growing education, airports, and grain silos. While these measures jewelry sector, whether wholesale or retail in the Kingdom new revenue streams for jewelry retailers. Consequently, the acceptance of modern retail concepts. were directed to ensure long-term economic diversification, and the GCC countries, noted good activity in the volume of jewelry sector is expected to regain positive momentum on the they also had a short-term impact on domestic demand. operations through various points of sale, with great emphasis back of government proactive measures to support economic on e-commerce and online retail spaces. Despite the current activity, complemented by factors such as expanding the The Middle East region, which is primarily represented by the challenging times, long-term fundamentals such as economic population base, rising GDP per capita, and a growing GCC countries, is one of the richest regions in the world with recovery, expanding the consumer base, increasing the tourism sector. an average GDP per capita of US $18,961 compared to a global number of inbound tourists and huge international events, and average of US $ 11,670 according to IMF statistics. The rising a growing e-commerce market will lead to a moderate growth purchasing power of the community has improved the lifestyle in the jewelry and gold sector in the Kingdom and the GCC of consumers, which has led to a strong appetite for high- countries. value luxury goods over the years. The gold jewelry industry in the Kingdom of Saudi Arabia and The rapid shift towards e-commerce has eroded traditional the GCC is considered one of the main pillars for sustainable retail models, and forced luxury merchants to adopt multi- economic development within the region. Although the sector channel strategies targeting millennials. Local retailers witnessed rough times in recent years amid fluctuations in oil recognized the competitive advantages of e-commerce, prices, rising global gold prices and the introduction of value- in particular the rationalization of operating costs, the added tax, it is likely to regain its momentum, primarily driven improvement of efficiencies, and the ability to expand its reach by the expansion of the population base and the rise in the GDP within the region. As a result, luxury goods merchants have per capita and the other growing economic sectors. Add to revamped their business models and are actively collaborating that the measures taken by the governments of the Kingdom with online payment platforms to increase sales and boost and the GCC countries in restructuring and organizing the consumer traffic in online selling platforms. infrastructure of all economic activities and strengthening them, including the jewelry and gold sector. The jewelry sector This market summary has been prepared by the Company is expected to attract more investments, in addition to the - Jewelry Sector Analysis Studies - and the Retail Sector spread of regional and international brands. These proactive Analysis Report in the GCC countries in 2019. initiatives and upcoming major events, such as the Dubai Expo 2021, will positively contribute to this sector and strengthen THE KINGDOM OF SAUDI ARABIA its position against the backdrop of the increase in the The kingdom of Saudi Arabia represents the largest retail number of young people, the availability of stylish exclusively market within the GCC countries. This is mainly due to its designed jewelry, and the growing economic development in large population base which constitutes around 58.7% of the Kingdom. In addition, the spread of e-commerce and the the total population in the region. The growing population of expansion of online selling activities among many global and millennials, the expansion, employment and empowerment of local jewelry manufacturers, who are pioneers in the jewelry the female consumer base, the mounting urbanization, tourism and gold industry across KSA are expected to help grow the expansion, and the rise in ultra-high net worth individuals gold and diamonds jewelry market in the coming years. are supporting the industry development. The majority of consumers in the Kingdom are aware of brands, and they are influenced by global consumption patterns, which drive the demand for high-end international luxury products with an entertainment nature. The growing exposure to global trends has led the Kingdom to witness an influx of global brands as local manufacturers and merchants continue to expand in order to meet the growing demand from the wealthy class.

Changes in the domestic and global economic environment have led to a slowdown in the growth rates of the jewelry sector. This can be attributed to the deceleration in economic activity, which led to slightly higher unemployment rates, lower wages in the public sector, and the removal of subsidies on energy

32 33 02 | STRATEGIC BUSINESS REVIEW L’AZURDE PRINCIPAL BUSINESS ACTIVITIES

GROWTH DRIVERS OF THE JEWELRY AND stores to online shopping. As a result, traditional retailers GOLD SECTOR are hiring IT companies to create their own online selling platforms, while either investing or collaborating with The population of the Kingdom and the GCC countries is them, so as to enhance their digital presence and logistical expected to grow at an annual rate of 2.3% between 2021 and capabilities. Although the e-commerce market in the GCC is 2025. The growing consumer base, which is dominated by a still in its nascent stage, it is starting to flourish. high percentage of expatriates, youth, and the working-class population, is the main driver. The Covid-19 pandemic has prompted customers and consumers to shop online. Consumers feel increasingly Increase the GDP per capita at a steady rate in KSA according to comfortable shopping online for jewelry and gold artefacts. the targeted plan, and the countries of the GCC at a compound The end consumer is likely to make higher value purchases annual growth rate of 0.4% during the next five years. online than five years ago. The closure restrictions resulting Therefore, the expected recovery in economic conditions is from the spread of the Covid-19 virus, along with the Kingdom’s likely to improve consumer sentiment and spending. efforts to shift towards digital transformation and the growing online shopping activity. Since the outbreak of Covid-19, the The retail and crafts industry in the Kingdom and the GCC Kingdom has witnessed a double digit growth in retail sales states will witness a major transformation in the coming for specific products over the Internet. In addition, a massive years with the possibility of introducing artificial intelligence increase of online orders was noticed during 2020, compared technologies, virtual reality, image recognition and electronic to 2019. vision technologies through computers. This technological advancement will improve profit margins and focus on THE CHALLENGES FACING THE JEWELRY AND customers through a better understanding of changing GOLD SECTOR CHARACTERISTICS OF THE JEWELRY SECTOR consumer preferences using data analytics. The growing number of international brands operating in The Saudi jewelry and gold sector is known to comprise gold and diamond jewelry, as it has four basic characteristics, all outlined National brands are gaining great popularity, and have in the section below. the Kingdom and the region has resulted in intensifying exhibited a strong presence among global brands. the competition in the gold and jewelry market, especially for the retail sector. Thus, retailers were prompted to rely 1- Social and Cultural Importance Many major malls and shopping centers are currently being on aggressive promotional campaigns, by offering large developed in the GCC countries, amidst investments by The Saudi consumption rate of gold remains among the highest in terms of individual use. It is driven by the strong cultural affinity discounts to support increased revenues. Although such governments, and private entities specialized in developing for gold, and its social importance at birth events, weddings and other special occasions. Jewelry is particularly important to women strategies should increase profit growth, they have created infrastructure in order to complement the population growth, who conceive it as a trendy and a mean to save wealth. In addition, gold is considered a safe investment of wealth. pressure on margins. the flourishing tourism sector, and the increase in GDP per 2- Observed Traditions capita. The implementation of the value-added tax had a negative impact on the purchasing power of consumers, notably with The growth of the electronic retail market in the Kingdom Gold artefacts are still largely sold, across the Kingdom, by weight rather than by piece, as is the custom in Western markets. Gold the tripling of VAT rate, starting July 1, 2020.Therefore, many and the GCC states continued to expand due to the increasing is mainly sold in traditional markets located in urban and rural areas where retailers are concentrated in close proximity to one retailers decided to absorb the tax to keep attracting sales prevalence of smartphones, and the use of social media another. Most of these merchants are deemed as well-established domestic companies (whether locally or nationally), while their which created pressure on margins. exhibitions feature jewelry crafted by several limited-brand manufacturers. Additionally, traditional family retailers continue to play platforms. Moreover, providing access to secure payment an important role in the jewelry trade (especially diamonds), as these merchants are known for their trustworthiness and integrity. gateways and gradual improvement in logistical capabilities The counterfeit products of original trademarks continue to increases penetration levels leading to industry growth. perturb the gold jewelry industry in the Kingdom and the GCC 3- An industry Driven by Skill and Technology countries, which is leading to an erosion of profit margins and Other growth driver factors are the encouragement of Saudi global brands’ image. The gold and diamond jewelry industry in the Kingdom includes a small number of recognized manufacturing companies that enjoy women to work, the increase in the GDP per capita in terms of advanced design and manufacturing facilities. It also includes a large proportion of small family-owned workshops with limited wealth and disposable income, and high rates of urbanization capabilities. Traditionally, workers and skilled craftsmen have always been major assets for manufacturers, providing them with across the Kingdom. the opportunity to produce unique designs by producing exclusive jewelry pieces that are difficult to imitate. Today, however, large companies are taking advantage of modern technology to differentiate their products, and ensure their uniqueness in a commodity The presence of a large and growing local and international market - for example. L’azurde is currently the only company that applies the latest 3D printing technique. demand for jewelry and gold artefacts provides a large and strong market for extravagance and luxury products, jewelry 4- A Volatile Sector for Small Manufacturing Firms and gold artefacts in the Group’s main markets.

Unlike large manufacturing firms that have the ability to protect gold consumption from fluctuations in gold prices (like L’azurde), The rate of market growth is driven by strong repetitive small manufacturing firms are under severe financial pressure during the surge in gold prices. Small jewelry manufacturers and purchasing patterns and behaviours as consumers enjoy a high wholesalers, who use basic manufacturing techniques, have limited control over the size of the gold content in the jewelry they level of exposure to the jewelry and gold artefacts markets, in create. As a result, they are hindered from producing lightweight jewelry, in order to preserve customers’ cash expenditure which addition to increased levels of knowledge of gemology. exposes them to increased vulnerability to price fluctuations. Contrarily, previously inactive firms can regain part of their ability to operate during periods of low gold prices. However, high capital requirements and local labor regulations make scalability more E-COMMERCE SECTOR difficult, forcing small businesses to lose their market share as a result. Thus, this market volatility represents a huge impediment The e-commerce industry in the Kingdom and the GCC to the entry of small firms. countries is witnessing rapid development, mainly driven 5- Restrictions on Entering the Saudi Market by the growing number of technology-savvy populations, the widespread use of Internet and smartphones, and the The jewelry market in the Kingdom is characterized by the presence of restrictions for new companies due to the large working increasing demand for international luxury products. The capital requirements, the presence of consumers attracted to brands, in addition to the requirements of in-depth knowledge of the e-commerce market has gained momentum across the local market, consumer tastes, and the high competition among companies distinguished in terms of their technological capabilities. Kingdom and the GCC as the retail sector has witnessed a Furthermore, Saudi labor laws, especially Saudization regulations, impose legal and administrative restrictions on the growth and regular shift in consumers buying patterns from traditional expansion of small companies in the future.

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• Pressing: The use of automated or hand operated machinery, • Shopping malls: Stores in malls selling jewelry items that BUSINESS specially designed for minting gold and silver using hydraulic are more commonly sold by piece rather than by weight. force. The designs are usually basic, cheap and fast to manufacture. Retail gold customers are typically DESCRIPTION segmented into four categories: • Casting: The process of creating a model pattern in wax that will then be used to hold hot metal (gold, silver etc.) to shape • Occasion driven consumption: Primarily driven by social it into uniform items based on the model. It offers higher events such as weddings, births, occasions like celebrations quality than pressing, and can produce high volumes from of Valentine’s Day, Mothers’ Day, and anniversaries. the same mould. • Fashion driven consumption: Driven by increasing • Other advanced techniques such as 3D printing and Micro urbanization, and the rising disposable income of the younger Setting: 3D printing is the process of making jewelry using a population. Purchases are typically made by young female three dimensional digital model. Micro setting is a technique consumers for the daily use of attending social events. revolving around setting small diamonds of a uniform size in interlocked rows using high magnification. These techniques • Savings driven consumption: Typically considers gold jewelry enable manufacturers to maintain tight control over the gold purchases, especially 21k jewelry, as storage of wealth. In the content of the jewelry pieces, and to increase their labor Kingdom and Egypt, gold jewelry is traditionally considered service charge, due to the exclusivity of the designs. In the to preserve women’s wealth after marriage, and is used as a Kingdom, gold and diamond jewelry is fabricated either in money proxy in times of hardship or high inflation. small local workshops, or in relatively large manufacturing facilities. The first relies on basic manufacturing techniques, • Investment-driven consumption: In the form of coins and such as pressing and casting. While the latter utilizes more bars of 24k gold. Gold is used as a hedge against volatility advanced technologies (e.g. micro setting, laser cutting, during times of economic, political and social uncertainty. 3D printing) that enable manufacturers to produce higher volumes at a lower cost. E. E-COMMERCE

C. WHOLESALE AND DISTRIBUTION The e-commerce industry in the Kingdom and the GCC countries is experiencing rapid development, driven mainly Several different wholesaler roles are currently present by the growing number of technology-savvy populations, the in the key jewelry markets, and they are the following: increased penetration of the Internet and smartphones, and the demand for luxury international products. The e-commerce • Pure wholesaler: Primarily works with retailers that do market has gained momentum across the Kingdom and the not have direct contact with the manufacturers. These GCC as the retail sector has witnessed a regular shift in manufacturers can either be based in the Kingdom, or buying patterns from traditional stores to online shopping. abroad (mainly in Far East Asia). Moreover, retailers prefer As a result, traditional retailers are hiring IT companies to work with wholesalers, since the latter can offer discounts to build their own online selling platforms, investing in or and accept credit payments rather than cash. collaborating with them to enhance their digital presence and logistical capabilities. Although the e-commerce market in • Fully integrated manufacturer and retailer: Manufacturers the GCC is still in its nascent stage, it is starting to flourish. with established vertical integration and a private retail network. The aforementioned retail outlets exclusively hold The Covid-19 pandemic has prompted customers and items produced by the managing manufacturer. Wholesalers consumers to shop online. Consumers feel increasingly in this category do not compete with wholesalers in other comfortable shopping online for jewelry and gold artefacts. configurations, as they are not targeting the general jewelry The end consumer is likely to make higher value purchases retail market. online than five years ago. The closure restrictions resulting • Manufacturer/wholesaler: Manufacturers operating and from the spread of the Covid-19 virus along with the efforts of managing their own private wholesale channels. This the Kingdom of Saudi Arabia towards the digital transformation configuration allows for higher profit margins since gold of the Kingdom and the increase in online shopping activity, jewelry retail outlets can drive down the overall profitability since the beginning of the outbreak of the Covid-19 virus, INDUSTRY VALUE CHAIN of the manufacturer. Manufacturers in this role focus on triggered this expansion. The Kingdom of Saudi Arabia has expanding their capacity to supply the wide network of witnessed a double digit growth in retail sales over the Internet independent jewelry retailers across the Kingdom. for specific products. In addition, there has been a massive A. SOURCING B. DESIGN AND FABRICATION increase in online applications in 2020, compared to 2019.

Gold in the Kingdom is primarily sourced from three channels: • Design: Jewelry designs vary from one region to another, D . R E T A I L (1) Banks and commodity traders; (2) Gold mines and (3) Ore as tastes differ according to both geographic location as E-COMMERCE SECTOR processing scrap recovery. well as motives for purchase. In rural and more traditional Retail activity in the Kingdom can be found across: areas, consumers prefer 21k jewelry designs. Urban The e-commerce sector is concentrated mainly around Diamonds are imported from multiple sources including consumers, on the other hand, demand more trendy and • Gold souks: Bazaar like marketplaces that have a high sales operations of classic and modern gold and diamond Belgium, India and South Africa. Typically, imported diamonds fashionable jewelry in 18K. density of shops selling both low and high-end jewelry. This is jewelry, which are carried out through the company’s are already polished to be used directly in the jewelry the most common retail destination in the Kingdom for gold electronic platforms Lazurde.com, MissL.com and its manufacturing. • Fabrication: In the gold and diamond jewelry industry, jewelry by weight. subsidiary company Kenaz (www.kenazjewelry.com). This three major manufacturing techniques are typically platform is registered with the Ministry of Commerce in adopted: • High streets: Stand-alone shops located on high streets in line with the requirements of the e-commerce system. city centers. These retailers primarily sell diamond jewelry by piece, as retail operations require higher margins.

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BUSINESS MODEL

The core business model of L’azurde Group consists “of designing,“ manufacturing and selling gold jewelry by weight in its wholesale network.

UNIQUE SUPPLY CHAIN OF PURE GOLD L'azurde does not take any exposure position to volatility of Sharia Advisory Committee of the Council of Saudi Chambers, gold prices in global markets where total assets and liabilities a number of Sharia Scholars, and the conclusion of meetings of gold are always equal. between these Scholars and the Group’s management. Credit sales are only offered to the Group’s wholesale customers and Most of its Gold input comes through Shar ia compliant financial not retail customers. facilities agreements, in form of Murabaha or Tawarruq with local banks, and a small part of the Gold comes through By the end of 2020, nine banks classified L’azurde share as financing facilities agreements with international banks. Sharia compliant and included it in their quarterly list of Sharia compliant shares. These banks are Al Bilad Bank, Alinma DISTRIBUTION OF FINISHED GOLD JEWELRY Bank, Al Jazeera Bank, Saudi Fransi Bank, NCB Capital, PRODUCTS Riyadh Bank, Arab Bank, SAMBA Bank and Saudi Investment Bank. L’azurde has two distribution channels, wholesale and retail channels. Wholesale primarily consists of wholesale to more Moreover, L’azurde share is included in the Sharia compliant than 1,600third party independent retailers of gold jewelry shares list for all listed companies, which is issued on BUSINESS MODEL in the MENA region, with the vast majority in KSA and Egypt. quarterly basis by the Senior Scholar, HE Sheikh Mohamed Al L’azurde core wholesale consists of selling Gold jewelry Othaimi, a specialist in the jurisprudence of Islamic financial The core business model of L’azurde Group consists of L’azurde Group conducts the manufacturing operations of by weight. However in 2020, L’azurde launched for the first transactions. designing, manufacturing and selling gold jewelry by weight gold jewelry through a well-established and efficient business time ever a new promising L’azurde Instyle selling Gold and in its wholesale network. In addition, L’azurde has several model offering it a significant competitive edge. Diamonds jewelry by piece in the wholesale network. This L’azurde second distribution channel is retail which primarily own mono brands retail showrooms and a global franchise move came part of the Company transformation to reduce consists of selling classic and fashion gold and diamond brand TOUS where it sells gold and diamond jewelry by piece, This model comprises an operating cycle that consists of working Capital and enhance the gross margin by leverage jewelry to end consumers across L’azurde mono-brand retail to secure a higher gross margin and no competition with its three main stages, and value is added at each stage. The by brand strength. L’azurde Instyle has a promising start with shops, TOUS stores, Kenaz kiosks, Miss L’ stores and kiosks wholesale channel. first stage includes the unique supply chain of pure gold, the solid acceptance and support from retailers keen to innovate and travel retail locations in KSA. second stage comprises manufacturing of gold and diamonds and enhance the economics of the traditional wholesale Gold L’azurde activities related to gold jewelry by weight in the jewelry, and the third stage involves the distribution of finished jewelry market. wholesale network represent its core business that utilizes gold and diamonds jewelry products. most of its resources and generates almost half of the Accounts receivable originate from offering term facilities to company revenues. While Diamond jewelry sold by piece, The following is a detailed explanation of the gold operations’ the Group’s wholesale customers to pay their commitments, precious and semi-precious stones, are gaining traction and business model: including the value of the gold purchased. These credit terms taking over time a higher share of the business. are in response to the demand of Group’s wholesale customers, and are considered to be in compliance with the Sharia provisions, according to the recommendations issued by the

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BELOW STRUCTURE SHOWING ALL THE BRANDS AND WHOLESALE VS. RETAIL

L'AZURDE IS DIVERSIFYING AND EXPANDING ITS REVENUE STREAMS BY ADDING NEW BRANDS AND ENTERING NEW CHANNELS

NEW BUSINESS UNITS L'AZURDE GROUP

WHOLESALE RETAIL E-COMMERCE

L A Z U R D E I N S T Y L E L A Z U R D E 2 2 MI S S L' KENAZ G O L D B Y G O L D B Y TOUS MI S S L' LOCATIONS KENAZ MI S S L' W E I G H T P I E C E 2 7 50 CUSTOMER 6 T R A V E L 14 LOCATIONS 6 LOCATIONS L'AZURDE, TOUS AND 1 , 6 0 0 1 0 0 LOCATIONS CUSTOMER CUSTOMER RETAIL INSTYLE TO LAUNCH SOON

L’azurde Group maintains a balanced and diversified wholesale MISS L' CONCEPT THE COMPANY'S COMPETITIVE ADVANTAGES customers’ base, and generates revenues through sales to During 2019, L’azurde launched its new high potential fashion There are a number of factors that give L’azurde Group an facility (Tawarruq) to finance the purchase of gold, where end consumers from L’azurde Group’s retail shops. jewelry line Miss L’, by L’azurde. Miss L’ offers classic and advantage over existing and potential new competitors, and banks buy goods other than gold or silver and then sell them fashion jewelry products sold by piece at Malls in KSA and With an aim to develop its business and grow its revenues, provide a platform for sustainable and profitable growth, and to the group on a credit basis. The group sells the goods to Egypt and on the Group E-Commerce platforms. Miss L’ is L’azurde Group is expanding its retail segment through the thereby increase shareholders’ wealth. These include: a third party, and the bank immediately purchases the gold building on the fast-growing segment of affordable fashion acquisition of top global franchise brands and the development using the cash sales proceeds of the commodity. L’azurde jewelry globally and in the region. Miss L’ is sold today at A. L’azurde Group’s resilient business model allows it to be of own collections and brands. This new growth strategy was has marketed its brand to become one of the leading brands L’azurde mono-brand shops, through its own dedicated Miss relatively immune to fluctuations and volatility in gold aligned in 2018 and started with the acquisition of the KSA in the MENA region, through television, electronic, print and L’ shops and kiosks, online and key 3rd party fashion retailers prices. Moreover, Group’s technology and manufacturing franchisee for the global affordable jewelry brand TOUS. On online advertising campaigns, in addition to adopting a group in Malls. This is a high potential growth opportunity for the capabilities, strong brand and design capabilities, allow it to top of TOUS, L’azurde has its own network of mono brand retail of celebrities as brand ambassadors. The L’azurde Group has Company where for the very first time L’azurde enters a major protect its market share in case of volatile gold prices. During shops. The L’azurde mono-brand retail business is different also developed its marketing strategy, shifting the majority of fast-growing segment through a separate sub-brand at high periods of high gold prices, L’azurde has the technology from the gold jewelry wholesale business as the Group its investments to e-marketing and the retail sector, through gross margin, very low working capital and highly attractive and craftsmanship capabilities to produce jewelry at lower focuses on diamond jewelry sold by piece in its own shops. In the sale of gold jewelry by piece, at reasonable prices, via its value proposition to consumers. Miss L’ products prices range weight and hence meet the right consumer price points. In addition, almost all of the L’azurde branded retail shops are new brands and collections, Miss L’ and L’azurde Instyle , in from SAR475 to 5,000. addition, L’azurde has very low gold loss in the manufacturing located in shopping malls whereas majority of gold wholesale Saudi Arabia and Egypt. process, which puts limited financial pressure at high gold customers are located in gold souks or street shops. Miss L’ was launched by L’azurde with a vision that reflects prices. As part of its commodity price risk management D. L’azurde has solid retail capabilities with its multi brand and the group’s drive to enter a new market segment by producing L’azurde Group identified in 2017 an opportunity to launch a strategy, instead of buying gold and being exposed to risk of multi store formats across its portfolio of brands: L’azurde, and selling luxury jewelry pieces at affordable prices. The new diamond jewelry value brand under a separate brand called gold price fluctuations, L’azurde gets its entire gold needs TOUS, Kenaz, Miss L’ and travel retail. The Group succeeds endeavour will be of great added value to L’azurde, drawing on ‘Kenaz’. While L’azurde is a premium high-quality brand, directly from banks whilst matching, at all times, its gold in acquiring and fully developing retail shops across a wide the Company’s brand expertise as the largest gold and jewelry Kenaz is a value brand targeted at daily wear occasions and assets with its gold liabilities, thus mitigating the risk of gold network of malls and street locations. The Group plans to designer, manufacturer, and distributor in the region, and gifting sold mainly at kiosks in key Malls in KSA. price fluctuations. L’azurde intends to continue using gold expand and retail more jewelry brands to fully leverage its its reputation spanning 40 years of perfection in the jewelry facility agreements to mitigate its exposure to gold price capabilities and offer different consumers an attractive wide industry. fluctuations. offering of brands and products.

Miss L’ has a wide variety of 18K gold collections that are B. L’azurde has marketed its brand to be the leading jewelry E. L’azurde Group’s manufacturing facilities enable it to efficiently stylish, effortlessly chic and produced according to the brand in the MENA region. This was achieved over the years design and produce a wide variety of unique products to meet highest standards in jewelry making. Miss L’ jewelry is the through major TV, print, outdoor and on-line advertising the evolving demands of consumers. L’azurde introduces best companion of the modern woman of today as it reflects campaigns, as well as using many celebrities as brand over 5,000 designs each year, maintaining its status of a her personality and allows her to express her mood at any ambassadors, such as Myriam Fares, Nelly Karim and others. leading trend setter in the market. Also, L’azurde maintains a time of the day. Through Miss L’, fashionable women can now L’azurde evolved its marketing strategy where it diverted a significant technological advantage with a park of more than express their style and their positive outlook on life in creative majority of its marketing investments online. 500 jewelry manufacturing machines. and fun ways. Miss L’ jewelry is therefore the perfect gift to every woman who has a passion for style and who is constantly C. The Group has Islamic Murabaha facilities to obtain gold F. Through its successful operational and financial looking for new ways to express herself. from various banks with maturity periods ranging from 1 performance, brand identity and operational and advertising month to 3 months, and for the purpose of financing working initiatives, L’azurde has achieved a competitive position in the capital requirements at agreed profit rates. All these industry in the MENA region. The market’s share of L’azurde facilities comply with the provisions of Islamic Sharia law, grew consistently during the past years to reach 20% to 25% according to the Sharia certificates issued by the internal in the Kingdom and Egypt, making it the leading provider of Sharia committees of these banks, including the Murabaha wholesale jewelry in these two markets.

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G. L’azurde Group’s senior management team comprises consists of selling classic and fashion gold, and diamond As consumers increasingly seek out brands which resonate with their own lives, L’azurde is dedicated to putting the customer at the experienced executives with a long and proven track record of jewelry to end consumers across L’azurde mono-brand retail heart of everything it does. That is why it has chosen to focus on establishing and leveraging a range of brands, each with its own financial and operational success, and a thorough knowledge shops, Miss L’ stores and kiosks, TOUS stores, Kenaz kiosks unique voice and personality that will attract new and existing customers. Whether buying for themselves or as a gift, to celebrate an and understanding of every facet of financing, manufacturing, and travel retail locations in KSA. occasion or to keep up with the latest fashions, L’azurde aims to offer brands which appeal to a clientele of all ages and outlooks and marketing and retailing of gold and diamond jewelry. Over the deliver a personalized experience to each and every customer. By developing both own brand collections as well as brand franchise years, the senior management has been working efficiently I. L’azurde Group maintains a balanced and diversified opportunities in this way, L’azurde objective is to further expand its business and grow its revenues. as a team to identify, evaluate, and execute L’azurde Group’s wholesale customers’ base and also generates revenues expansion plans, and growth initiatives. through sales to end consumers from L’azurde Group’s retail shops. With an aim to develop its business and grow H. Distribution of Finished Gold Jewelry Products its revenues, L’azurde Group is expanding its retail segment through the acquisition of top global franchise brands. This L’azurde has two distribution channels, wholesale and retail new growth strategy started in 2018 with the acquisition of channels. Wholesale primarily consists of wholesale to more the KSA franchisee for the global affordable jewelry brand than 1,600third party independent retailers of gold jewelry TOUS. On top of TOUS, L’azurde has its own network of mono in the MENA region. Wholesale consists of offering term brand retail shops. The L’azurde mono-brand retail business facilities to the Group’s wholesale customers to pay their is different from the gold jewelry wholesale business as the commitments, including the value of the gold purchased. Group focuses on diamond jewelry sold by piece in its own These credit terms are in response to the demand of shops. In addition, almost all of the L’azurde branded retail Group’s wholesale customers, and are authorized by a shops are located in shopping malls whereas majority of gold number of contemporary Sharia Scholars, according to the wholesale customers are located in gold souks and on street recommendations of the Sharia panel discussion held by the shops. Council of Saudi Chambers under the title: Credit Terms in Gold Trade, in the presence of a number of Sharia Scholars J. L’azurde Group identified launched in 2017 a diamond jewelry and experts in gold industry and trade, and according to the value brand under a separate brand called ‘Kenaz’. While Sharia opinion issued by the Sharia Advisory Committee of L’azurde is a premium high-quality brand, Kenaz is a value the Council of Saudi Chambers. Credit sales are only offered brand targeted at daily wear occasions or gifting, and is sold to the Group’s wholesale customers and not retail customers. at kiosks and some shops in key malls in KSA. L’azurde second distribution channel is retail which primarily

RESILIENT BUSINESS MODEL AND FINANCIAL PERFORMANCE L’azurde Group’s resilient business model allows it to be relatively immune to fluctuations in gold prices throughout the manufacturing and sales process. Moreover, the Group’s technology and manufacturing capabilities, strong brands and design capabilities, allow it to protect its market share in case of volatile gold prices.

Despite gold price volatility in the past, L’azurde was able to sustain its market leading position whilst securing a steady stream of revenues and profitability, as it has always been able to adapt to changing market conditions, using innovative designs, a large variety of manufacturing techniques, a strong brand and a large distribution and sales organization. During periods of high gold price, L’azurde has the technology and craftsmanship capabilities to produce jewelry at lower weight and hence meet the right consumer price points. Most small manufacturers have basic manufacturing techniques which do not allow them to produce high volume of low weight jewelry. In addition, L’azurde has very low gold loss in the manufacturing process, which puts limited financial pressure at high gold prices. Competitors with no similar capabilities are under financial pressure during a period of high gold price.

During periods of low gold prices, previously dormant players were able to restore some of their capacity, even though high capital requirements and Saudization challenges make their scalability increasingly difficult, thus, their ability to increase market share limited. On the other hand, low gold prices help to increase the overall market size allowing L’azurde to compensate any loss of market share due to more competition from small players.

In all cases, and at any gold price point, L’azurde maintains no position in gold by ensuring that its gold assets, represented in accounts receivable and inventories, always equal its liabilities of gold borrowed from banks. Many other competitors have limited financial capabilities and creditworthiness to borrow gold from banks, thus they are forced to buy gold from the open market at the spot rate and accordingly their gold assets are exposed to gold price fluctuation. L’azurde buys precious and semi-precious stones directly from the external market at the market price.

The new House of Brands strategy offers also the L’azurde Group more resilience as the Groups diversifies its revenues streams and markets various brands with different positioning and price points. CONSUMER MARKETING L'AZURDE'S HOUSE OF BRANDS Since the L’azurde brand was launched several decades ago, it has become synonymous with exquisite jewelry which combines stylish beauty and outstanding craftsmanship. Underpinned by this reputation, it has established a market-leading position across the Middle East and North Africa. Today, L’azurde’ vision is centered on building on its own strong brand to create a house of jewelry brands which are trusted, endearing and inspiring.

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FRANCHISE BRAND TOUS L'A Z U R D E I N S T Y L E L’azurde identified opportunities to leverage its well-established In 2020, L’azurde launched a new gold jewelry line to be sold by expertise and capabilities across the MENA by acquiring or piece, for the first time, in traditional gold souks through a large introducing selected global franchise brands in the region. network of third-party retailers. The new collection launched Within this perspective, the Company acquired the exclusive under the name of L’azurde Instyle features exquisite pieces of franchise of Tous in KSA, as a significant milestone in the Group’s meticulously made jewelry, all crafted in the highest-quality multi-brand strategy, which contributed to establishing a strong gold and encrusted with diamonds, pearls, precious and semi- presence in the fastest growing segment of the jewelry industry precious stones, according to the highest standards in jewelry and adding a new source of growth and profitability. TOUS is making. As its name suggests, Instyle promises all L’azurde an international fashion jewelry brand with a long-standing jewelry lovers fashionable and ultra-modern ornaments which heritage of offering affordable luxury products. In 2020, L’azurde can be styled in glamorous looks to keep up with the latest design invested in marketing TOUS, strengthening its organization and and color trends in the world of fashion and jewelry. capabilities to secure a strong growth potential in the future. The new line was launched in collaboration with L’azurde’s brand With the objective of increasing the brand awareness, TOUS ambassador, the Queen of Stage, Myriam Fares in a bold, modern collaborated for the first time with local celebrity Nour Arida, and super stylish advertising campaign targeting women who a famous social media personality with more than 8 million seek to look and feel glamorous, confident and unique at any time followers and who was featured in number of marketing of day. campaigns for international brands. A special photoshoot was run in Spain featuring Arida along her husband and daughter to The Instyle jewelry line started off well and is showing a promising cover Valentine’s and Mother’s Day as the major key consumption potential for selling gold jewelry by piece in the wholesale periods of the year. Arida’s photos and videos were used across channel, with its versatile pieces embodying the different sides digital ads, in-store and window displays in addition to organic of every modern woman. The jewels of the collection are vibrant posts, in a campaign that fully achieved its intended purpose. with color, reflecting a happy and confident outlook on life, with beautifully made designs all encrusted with precious stones, The same campaign represented a ray of hope in the period diamonds, pearls and zirconia so that every woman finds her following the lockdown imposed as a precautionary measure to perfect match. contain the spread of coronavirus. Arida’s marketing campaign and several other awareness-raising initiatives were run post KENAZ JEWELRY COVID-19 as a way to spread positive messages in the Saudi Kenaz Jewelry is one of the fastest growing diamond value market. In the same spirit, the Best Day Ever campaign was also fashion brands in Saudi Arabia today, having only been launched L'AZURDE MONO BRAND As life was going back to normal, and the stores returned to their launched by Tous in the month of August 2020, to motivate people by L’azurde as its first stand-alone brand 2017. The brand to return back to their normal routines. The L’azurde brand is renowned in the Middle East, the GCC usual operating hours, the sales in both major markets in Egypt promises to deliver “luxury within your reach” which is attracting and KSA hit a sales record in the month of November, supported a new segment of customers to the L’azurde family, as well as and beyond as a brand with a solid name, a strong heritage In 2020, Tous rode the wave of the all-famous Tiktok trends and by a successful marketing campaign entitled “Gold Friday” and extending its scope with existing clients. There are now sixteen spanning 40 years of experience, and a great traditional high- devised a Tous special campaign in collaboration with a number an attractive visual advertising in store windows and across (16) Kenaz-branded retail kiosks across the Kingdom, very well quality craftsmanship mixed with modern contemporary jewelry of famous Tiktokers, creating a Tiktok trend around the brand. digital materials. located in leading malls and shopping centers. design and the latest in the field of precision technologies. This The campaign, a first in Saudi Arabia, was done by Tous for its positioning is underpinned by ongoing investments in marketing In the month of Ramadan last year, L’azurde jewelry products fans around the world. To support higher conversion, Kenaz marketing activities both through traditional means such as broadcast and print were featured in the series starring the brand’s ambassador included mainly attractive marketing materials to support point media, and through digital and social media, together with a As another first-of-its-kind initiative taken by Tous KSA, a car superstar actress Nelly Karim with full credits going to the of sale with messages related to the consumption period or to variety of carefully selected celebrity brand ambassadors as draw campaign was organized in collaboration with Fiat car Company. This contributed to promoting the brand’s visibility and the launch of multi-colored stones or innovative pearl variety part of its multi-celebrity marketing strategy. company. Under the slogan “Buy Tous and get the chance to win its already strong presence in the Arab region. that are offered at affordable prices to the female customer who a car, the campaign was both fun and popular and was successful In 2020, L’azurde celebrated its fortieth anniversary with a wants to own diamonds but is on limited budget. As part of the drive to appeal to a more diverse customer among Tous fans and customers. creative campaign under the slogan “40 years of perfection”. base, L’azurde launched several new collections in 2020 which As part of the campaign, the Company launched a collection of Last but not least and as part of Tous expansion in KSA, L’azurde were highly welcomed by customers and influencers alike. iconic statement pieces engraved with L’azurde brand name and organized a special Nakheel Mall – Dammam opening event, A special 18K Gold collection was launched and endorsed by encrusted with diamonds that were an instant hit among L’azurde during which all COVID-19 precautionary measures were taken. L’azurde’s brand ambassador, Myriam Fares who made several fans. The 40-year anniversary was marked by unprecedented The event highlighted the amazing product assortment offered appearances wearing the 18K Gold pieces at the beginning of times with the coronavirus pandemic hitting almost every country by Tous and contributed to the growing success of the brand in the year. Many prominent female media figures in Saudi Arabia in the world, and L’azurde chose to demonstrate its appreciation the Kingdom. followed suit, revealing the reasons they’d prefer 18 K gold as and commitment to its customers and partners on this occasion their go-to jewelry choice. by supporting its community. Several awareness campaigns were L’azurde Group continues to search for additional strong brands to run as a franchise mainly in KSA, Egypt and potentially across conducted by the Company to spread information about COVID-19 For Valentine’s Day 2020, a special collection was unveiled by the region. This expansion can happen through the acquisition and the precautionary measures that needed to be adhered to L’azurde, featuring exquisite jewelry pieces encrusted with of existing franchises or through launching of new franchises in in order to reduce the spread of the virus. The campaigns were diamonds and heart-shaped rubies. The success of the collection the market. run in stores and communicated across L’azurde’s social media was imminent as L’azurde fans found in it a way to express their channels and various platforms. love and passion for partners and soul mates.

With the pandemic crisis, came KSA’s decision to triple VAT to 2020 also saw the launch of L’azurde Instyle, a line of gold 15% starting April of 2020. Aiming at supporting its customers, jewelry with special visual identity, packaging, display materials the Company launched the VAT freeze campaign to encourage and marketing support. Instyle was especially made to be sold them to purchase their favorite jewelry pieces at the same price. by piece in traditional gold souks in KSA. The new line was massively supported by Saudi influencers who visited L’azurde’s wholesale partners and endorsed the initiative.

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M I S S L' L'AZURDE CELEBRITY COLLABORATIONS ADVANCED DESIGN AND The 3rd factory in Egypt, is Al- Madinah Munawwara factory Miss L’, launched by L’azurde in 2019, offers classic and fashion As the Middle East’s largest gold and diamonds jewelry designer, MANUFACTURING FACILITIES located in Qalyubia employed xx craftsmen and employees as at 31 December 2020. jewelry products sold by piece at malls in KSA and Egypt. manufacturer and distributor, L’azurde has a focused marketing L’azurde Group’s manufacturing facilities enable it to efficiently Building on the fast-growing segment of fashion affordable strategy designed to maintain and build its presence across design and produce a wide variety of unique products to meet LEADERSHIP POSITION jewelry globally and in the region, Miss L’ is sold today at L’azurde the region. A key driver of the ongoing success of this strategy the evolving demands of consumers. L’azurde introduces over mono-brand shops, through its own dedicated kiosks and key 3rd is L’azurde collaboration with superstars from the worlds of 5,000 designs each year, enabling it to maintain its status as Through its successful operational performance, financial party fashion retailers in malls, and online at missl.com. fashion, film and music. an influential trend setter in the market. L’azurde maintains a performance, brand strength and advertising initiatives, L’azurde significant technological advantage with a park of more than has achieved a competitive position in the industry in the MENA Miss L’ has a wide variety of 18K gold collections with precious This multi-celebrity approach is ideally aligned with L’azurde 500 advanced jewelry manufacturing machines. For example, region. The market’s share of L’azurde grew consistently during and semi-precious stones that are stylish, effortlessly chic and clientele, which is diverse and multi-faceted. Mother, daughter, L’azurde Group was the first manufacturer in the Kingdom to the past years to reach approximately 20% to 25% today in the produced according to the highest standards in jewelry making. businesswoman, celebrity – L’azurde wants to help women of all implement 3D printing as part of the design and manufacturing Kingdom and Egypt, making it the leading supplier of jewelry. Through Miss L’, fashionable women can express their style and ages and outlooks, from every walk of life, showcase their beauty process. Furthermore, L’azurde Group’s efficient management of L’azurde works continuously on implementing new products their positive outlook on life in creative and fun ways. at its best. Therefore, it has carefully selected each celebrity for the supply chain provides it with the flexibility to change designs. initiatives, new collections, and innovative technologies to her diversity and achievements, creating a portfolio of brand Finally, L’azurde has streamlined labor intensive processes to continue winning more consumers and expanding its market Despite the challenging times, 2020 was a remarkable year for ambassadors which appeals different audiences and markets drive the ef ficienc y of its production processes. These advantages share. Miss L’ marked by the launch of the new Miss L’ website built across the Arab World and beyond. enable L’azurde to charge a premium labor service charge, meet using UX/UI designs. The new website was accompanied by a a wide variety of consumer tastes, and create distinguished GEOGRAPHICAL LOCATIONS new visual identity for the brand featuring a new Miss L’ logo and Nevertheless, the celebrities that L’azurde chooses to work with pieces of jewelry. AND OPERATIONS creative direction imagined by an international premium agency all have something in common. Like the brand itself, they are based in France with an impressive portfolio of top internationally Middle Eastern, glamorous, confident, independent and proud. L’azurde Group’s head office is located in the city of Riyadh, MANUFACTURING FACILITIES Kingdom of Saudi Arabia. As at 31 December 2020, L’azurde Group recognizable brands and dedicated to providing luxury brands That is why they represent such strong brand ambassadors for AND CAPACITY with a unique communication and creative direction. the Company – they show the variety amongst all women and how operated through (16) wholesale offices located in the Kingdom, they all shine within the different roles in their lives. L’azurde operates more than 32,000 square meters of United Arab Emirates, Egypt, and three manufacturing facilities In 2020, Miss L’ launched new collections regularly in time manufacturing space for gold and diamond jewelry. The (one in the Kingdom and three in Egypt), 22 retail showrooms for holidays and special occasions. In celebration of the Saudi Through distinctive collaborations and campaigns for each Kingdom’s factory located in Riyadh employed 470 craftsmen L’azurde jewelry mono-brand (located across the Kingdom and National Day, Miss L’ launched the limited-edition My Kingdom celebrity, which include digital and social media as well as and employees as at 31 December 2020. It was established on 23 Egypt), 15 Kiosks and showrooms for Kenaz brand, 6 Miss L’ necklace depicting the KSA map in a creative three-dimensional traditional advertisements and appearances, L’azurde is able to January, 1992 and manufactures gold and diamond jewelry to be mono-brand locations, in addition to 6 travel retail outlets at design made to perfection using pure 18 karat L’azurde yellow showcase its unique and exquisite jewelry to a broad range of sold in both the Kingdom and international markets. There are Saudi airports. gold. The name itself expressed a proud sense of ownership women. Such partnerships have helped L’azurde successfully three factories in Egypt which manufacture products mainly for for a homeland that is committed to delivering the best to its strengthen its brand awareness and support revenue growth. sale in the local Egyptian market. The first one, located in Cairo, The acquired company “Izdiad Commercial Company of Arabia”, people. The My Kingdom campaign was featured by Facebook as was established on 8 January, 2003 and employed 130 craftsmen the operator of TOUS, added to L’azurde retail network additional a successful example of Saudi National Day campaigns. and employees as at 31 December 2020. The second factory in (30) TOUS mono-brand showrooms in KSA. In addition, L’azurde Egypt, located in Qalyubia, was acquired on 30 July, 2012 and Group sells its products in (10) countries through a network of Among the successful campaign launches for Miss L’ was employed 922 craftsmen and employees as at 31 December 2020. exclusive and non-exclusive distributors, wholesalers and third- My World collection which unveiled the famous Unstoppable party retailers. necklace as part of the breast awareness campaign during the month of October. Addressed to women fighters as a way to show CORE BUSINESS GOLD WHOLESALE support and appreciation for their efforts in remaining strong in the face of challenges, the necklace was gifted to women fighting REACHING 1,500 3RD PARTY RETAILERS cancer in Baheya Foundation for Early Detection and Treatment of Breast Cancer in Egypt, in an awareness-raising event organized in collaboration with L’azurde’s brand ambassador, the Egyptian superstar actress Nelly Karim. Parts of the sales of the necklace were also donated to Zahra Breast Cancer in Saudi Arabia as a contribution to its dedicated efforts in fighting the disease.

In the past year, Miss L’ also launched My Jewels my Way, the first EGYPT customizable collection of gold pieces enabling customers to UAE engrave their initials, their memorable dates or special symbols. The collection was instantly loved by Miss L’ fans, especially OMAN Millennials who are always seeking to express themselves in fun and unique ways. KSA For the holidays and the end-of-year celebrations, a special Miss L’ Christmas Tree was illuminated in the Mall of Egypt. The tree was instantly recognizable as it was fully decorated with Miss L’ gift boxes and customers were invited to spin a digital wheel for the chance to win valuable gifts from Miss L’.

Throughout the past year, Miss L’ was worn by many celebrities and social media influencers across the Middle East.

L’azurde Locations KSA Egypt UAE Total

Factories 1 2 - 3

Wholesale offices 4 11 1 17

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RETAIL DISTRIBUTION COVERAGE

EGYPT

KSA

L’azurde Group Retail locations

KSA Egypt Total

L’azurde 5 17 222

Travel Retail 6 - 6

TOUS 26 - 26

Kenaz 16 - 16 DISTRIBUTION CHANNELS GOLD JEWELRY WHOLESALE M i s s L’ - 6 6 L’azurde Group designs and manufactures gold jewelry in the Kingdom and Egypt and sells gold jewelry across more than 10 countries mainly in the MENA region through more than 1,600third party independent retailers. L’azurde operated directly through Details of L’azurde Group’s geographical presence as at 31 December 2020: 16 wholesale offices within the Kingdom, Egypt and the United Arab Emirates. Sales are primarily made by a well-established and professional wholesale sales team which continually reinforces collaboration and Country City Operating company Nature of presence partnership with customers and key accounts. The sales team is continuously seeking opportunities to expand jewelry distribution to new customers while preserving and developing the brand image. L’azurde Group maintains a strong marketing presence in the L’azurde Company for Jewelry, Joint Stock Kingdom of Saudi Arabia Riyadh Company, listed on Tadawul Factory, wholesale offices and retail shops windows of third-party retailers through the supply of branded L’azurde displays and effective trade marketing strategies.

Riyadh Almujawharat Almasiah, Limited Liability Company Trading of gold, silver and precious stones The marketing team supports the retailers with events in the market to help drive the sales of L’azurde Group’s jewelry. Customer knowledge and close collaboration is a major competitive advantage for L’azurde. L’azurde has its own wholesale team in the

Riyadh Kenaz, Limited Liability Company Trading of gold, silver and precious stones Kingdom, Egypt and the UAE whilst in other markets L’azurde Group sells through exclusive and non-exclusive distributors or sells directly to various retailers. Izdiad Commercial Company of Arabia – Limited Riyadh Liability Company owned by one person Retail

ORO Egypt Company for Manufacturing Precious Egypt Cairo Metals, Closed Joint Stock Company Factory and wholesale offices

El-Obour L’azurde Egypt for Jewelry, Limited Liability Company Factory ,wholesale offices and retail shops

L’azurde Company for Jewelry, Limited Liability Company. Wholesale office UAE Dubai L’azurde Group for Gold and Jewelry DMCC, Limited Liability Company. Trading of pearls and precious stones

Abu Dhabi L’azurde for Jewelry, Limited Liability Company Retail shop

State of Qatar Doha L’azurde for Jewelry, Limited Liability Company Wholesale office

Sultane of Oman Muscat L’azurde for Jewelry, Limited Liability Company Wholesale office

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R E T A I L c) Locations of L’azurde jewelry mono-brand retail Kiosks as at 31 December 2020: To diversify its revenues, enhance its margins and leverage its management capabilities, the Group decided to expand into the retail business. Country City Location Brand Opening Date L’azurde has established a dedicated and experienced retail management team with strong organizational support to grow the retail business. Egypt Kiosks Cairo Cairo Festival Mall L’azurde Mono Brand 01/04/2018 a) L’azurde mono brand retail shops: This network focuses on diamond jewelry products and Miss L’ fashion jewelry sold at the Cairo Point 90 Mall L’azurde Mono Brand 01/03/2019 Company own shops in the Kingdom and Egypt. As at 31 December 2020, L’azurde operates its own portfolio of 22 L’azurde branded jewelry stores and Kiosks, 4 shops in Saudi Arabia, 18 stores in Egypt, 17 shops and 5 Kiosks. During 2020, L’azurde Cairo City Stars Mall L’azurde Mono Brand 01/02/2019 expanded its retail network through the opening of 6 new showrooms at top locations in Egypt and closed 3 non profitable shops in Saudi Arabia and 1 showroom in Egypt for same reason. The retail business does not conflict with the wholesale business as Cairo City Center Maadi L’azurde Mono Brand 01/10/2019 the retail focus of L’azurde is on diamond jewelry sold by piece whilst the gold jewelry wholesale business sells gold jewelry by weight. In addition, L’azurde branded retail stores owned by L’azurde Group are mostly located in the shopping malls whereas the Cairo Mall of Egypt L’azurde Mono Brand 01/12/2019 majority of the gold wholesale customers are in gold souks. b) Locations of L’azurde jewelry mono-brand retail showrooms as at 31 December 2020:

Country City Location Brand Opening Date

The Kingdom Riyadh Nakheel Mall L’azurde Mono Brand 25/03/2015

Dammam Dhahran Mall L’azurde Mono Brand 02/01/2011

Jeddah Red Sea Mall L’azurde Mono Brand 03/01/2011

Jeddah Jeddah Mall L’azurde Mono Brand 29/03/2011

Egypt Cairo Cairo Festival City L’azurde Mono Brand 01/07/2014

Cairo Mall of Arabia L’azurde Mono Brand 01/07/2015

Cairo City Stars Mall L’azurde Mono Brand 01/04/2016

Cairo Mall of Egypt L’azurde Mono Brand 01/03/2017

Cairo Downtown Area L’azurde Mono Brand 01/12/2017

Cairo Kurba District L’azurde Mono Brand 01/12/2017

Cairo Maadi District L’azurde Mono Brand 01/08/2018

Giza Mohandseen District L’azurde Mono Brand 01/06/2018

Gharbia Al Oraba Mall L’azurde Mono Brand 01/07/2018

Alexandria City Centre L’azurde Mono Brand 01/03/2018

Mansoura Street Shop L’azurde Mono Brand 01/03/2019

Cairo Almaza City Center L’azurde Mono Brand 01/10/2019

Tanta Mall of Tanta L’azurde Mono Brand 01/12/2019

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d) TOUS: CUSTOMER KNOWLEDGE AND CLOSE COLLABORATION WITH RETAIL PARTNERS IS A MAJOR COMPETITIVE ADVANTAGE FOR LAZURDE GROUP. In 2018, the Group acquired the TOUS franchisee in KSA, providing it with 26 retails shops offering the Company an entry into the fast- growing segment of affordable jewelry. e) Travel Retail at Saudi Airports - Exclusive Distribution Agreement

TOUS is an international lifestyle brand focused on affordable luxury that has been in business for almost 100 years and with more During 2020, L’azurde renewed the exclusive distribution agreement with the Saudi French Duty Free Operations and Management than 620 stores in over 53 countries. As a franchisor, TOUS designs, manufactures and sells jewelry, bags and accessories for women company (a division of Lagardère Travel Retail) to be the exclusive retailer of gold and diamond jewelry at the International Airport and men. Their offering covers a wide range of products including fine jewelry with diamond, gold and silver, its core business, and showrooms in Riyadh, Jeddah, and Dammam, providing new revenue streams to the Company, and diversifying its revenues by handbags, fragrances and accessories. TOUS has been present in KSA since 2008 with a network today of 27 stores across the expanding its retail operations and targeting a new segment of customers. As December 31, 2020, there are 6 pop up stores Kingdom. Through the TOUS brand L’azurde will reinforce its jewelry portfolio and grow its customer base by diversifying revenues (kiosks) in KSA airports. and complementing its assortment. The Company management is proud to partner with TOUS, a world leader in jewelry. f) Kenaz Diamond Jewelry Retail:

Kenaz is a value brand targeted at daily wear occasions and gifting and it is offered at 12 exclusive mono-brand pop up kiosks Locations of TOUS franchise jewelry operations in KSA as at 31 December 2020: in major malls in Riyadh, Dammam and Jeddah and 2 shops in Riyadh. L’azurde Group’s vision is to accelerate the expansion of Kenaz diamond jewelry retail kiosks throughout the KSA initially and later on in Egypt and the GCC.

City Location Opening Date Locations of Kenaz Trademark jewelry operations as at 31 December 2020: TOUS - Saudi Arabia

Jeddah Tahlia Street 1/1/2008 City Location Opening Date

The Kingdom Jeddah Khayatt Street 3/25/2008

Kenaz Kiosks Jeddah Mall of Arabia 11/17/2016 Al Khobar Rashid Mall 9/22/2008

Riyadh Hayat Mall 3/30/2017 Riyadh Nakheel Mall 11/17/2009

Riyadh Hamra Mall 9/22/2017 Riyadh Panorama Mall 8/13/2010

Jeddah Andalus Mall 4/27/2017 Jeddah Stars Avenues 6/21/2012

Jeddah Yasmin Mall 8/5/2017 Jeddah Red Sea Mall 6/5/2013

Madinah Noor Mall 3/5/2017 Dhahran Dhahran Mall 11/17/2014

Jubail Galleria Mall 6/20/2017 Hasa Square Mall 3/7/2015

Abha Asser Mall 7/30/2017 Riyadh Hayat Mall 4/17/2015

Gizan Kadi Mall 8/22/2017 Madinah Noor Mall 10/7/2015

Dammam West Avenue 9/23/2018 Jeddah Arabia Mall 4/23/2016

Tabook Tabook Park 10/13/2018 Jeddah Salam Mall 12/29/2016

Riyadh Riyadh Park 7/18/2018 Riyadh Hamra Mall 12/30/2016

Kenaz Shops Riyadh Hayat Shop 5/29/2019 Jeddah Yasmeen Mall 6/13/2017

Riyadh Panorama Shop 6/30/2019 Makkah Makkah Mall 6/21/2017

Travel Retail Airports Kiosks Jeddah South International Terminal 12/20/2017 Jeddah Boulevard Street 7/27/2017

Jeddah North International Terminal 10/7/2017 Jeddah Jouri Mall 10/26/2017

Riyadh International - Terminal 1 8/23/2017 Al Khobar Al Shaikh Avenue 12/15/2017

Riyadh International - Terminal 2 8/24/2017 Riyadh Granda Mall 12/14/2017

Dammam International - Terminal 1 8/23/2017 Riyadh Park Mall 6/11/2018

Dammam International - Terminal 2 10/16/2017 Dhahran Dhahran 2 Mall 2/1/2018

Tabuk Tabuk Park 12/26/2018

Riyadh Kingdom Center 12/31/2018

Qasim Nakheel Plaza 12/31/2018

Makkah Abraj Al Bayat Mall 12/31/2018

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g) Miss L’ The following is the list of opened showrooms and Kiosks in Egypt and Saudi Arabia in 2020:

Miss L’ offers classic and fashion jewelry products sold by piece at Malls in KSA and Egypt. Miss L’ is building on the fast-growing segment of affordable fashion jewelry globally and in the region. Miss L’ is sold today at L’azurde Mono brand shops, through its Country City Location Brand Opening Date

own dedicated kiosks, on the Group E-Commerce platforms and key 3rd party fashion retailers in Malls. This is a high potential Saudi Arabia Dammam Nakheel Mall TOUS 01/07/2020 growth opportunity for the Company where for the very first time L’azurde enters a major fast-growing segment through a separate sub-brand at high gross margin, very low working capital and highly attractive value proposition to consumers. Miss L’ Egypt Alexandria City Centre Alex M i s s L’ 01/01/2020 products prices range from SAR 475 to SAR 5,000. Egypt Cairo Mall of Arabia M i s s L’ 01/01/2020 Launched by end of 2019, Miss L’ has a wide variety of 18K gold collections that are stylish, effortlessly chic and produced according to the highest standards in jewelry making. Miss L’ jewelry is the best companion of the modern woman of today as it Egypt Cairo Cairo festival Mall M i s s L’ 01/01/2020 reflects her personality and allows her to express her mood at any time of the day. Through Miss L’, fashionable women can now express their style and their positive outlook on life in creative and fun ways. Miss L’ jewelry is therefore the perfect gift of every Egypt Cairo Dandy Mall L’azurde mono brand 01/10/2020 woman who has a passion for style and who is constantly looking for new ways to express herself. A focused digital marketing strategy is adopted to reach the millennials who are particularly receptive to new technology and innovative ideas. Both macro and Egypt Cairo Point 90 Mall L’azurde mono brand 01/10/2020 micro influencers are used to endorse the brand values and feature the new collections launched in key consumption period with exciting shopping experience, either at own stores or at 3rd parties, to infuse a spirit of fun among customers while maintaining the sense of luxury. DISTRIBUTION OF JEWELRY MANUFACTURING MACHINERY Locations of L’azurde jewelry (Miss L’) retail kiosks as at 31 December 2020: In addition to the wholesale and retail jewelry and diamond businesses, L’azurde Group represents various manufacturers of jewelry machinery equipment, and sells their machinery in the Kingdom to various local manufacturers of gold and Country City Location Brand Opening Date diamond jewelry, such as jewelry casting, laser soldering and ultrasonic machines. This small but strategic business helps

Egypt Kiosks Cairo City Center Almaza M i s s L’ 01/10/2019 L’azurde strengthen its collaboration with global jewelry equipment manufacturers and stay up to date with the latest market developments. Cairo Mall of Egypt M i s s L’ 01/12/2019 The following table outlines L’azurde Group’s revenue from its operations by product category: Alexandria City Centre Alex M i s s L’ 01/10/2020

Cairo Mall of Arabia M i s s L’ 01/01/2020 2016 2017 2018 2019 2020 Country Cairo Point 90 Mall M i s s L’ 01/01/2020 SAR % Of SAR % Of SAR % Of SAR % Of SAR % Of Million Revenues Million Revenues Million Revenues Million Revenues Million Revenues Cairo Cairo festival Mall M i s s L’ 01/07/2020 Gold Jewelry 361.0 78% 266.2 75% 315.9 78% 313.2 65% 217.3 63%

CHANGES IN OUTLETS DURING 2020 Diamond Jewelry 80.2 20% 77.1 22% 67.3 17% 83.5 17% 67.9 20%

Management has a plan to improve the profitability of the L’azurde retail business in KSA by rationalizing our footprint, reinvigorating our Fashion Jewelry sales 0.0 0% 2.0 1% 12.6 3% 74.1 15% 50.2 14% flagship shops, leveraging our exclusive travel retail operations at airports and staff training, and driving the promising Miss L’ affordable fashion gold jewelry line through 3rd party retailers and own shops and kiosks. Machinery and others 9.2 2% 10.1 3% 10.7 3% 10.4 2% 12.0 3%

As part of above mentioned plan, 3 showrooms in Saudi Arabia, and 1 kiosk in Egypt have been closed during 2020 due to their negative Total 405.4 100% 355.4 100% 406.4 100% 481.2 100% 347.4 100% impact on company profitability which lead to the management to take this decision to improve the company performance and maximize shareholders’ equity.

List of closed showrooms in KSA 2020:

Country City Location Brand Closing Date

The Kingdom Jeddah Andalus Mall L’azurde mono brand 03/06/2020

Dammam Rashid Mall Kenaz 01/07/2020

Riyadh Panorama Mall Kenaz 01/03/2020

List of closed showrooms in Egypt 2020:

Country City Location Brand Closing Date

Egypt Cairo City Stars Mall L’azurde mono brand 02/06/2020

Five (5) showrooms have been opened in Egypt and only (1) in KSA in 2020, due to the growth of our successful retail operations following a solid performance for several years.

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ENVIRONMENT, HEALTH AND SAFETY no position to celebrate the occasion with their children, L’azurde • Factory shut-downs in both KSA and Egypt for a period of 3 3. Reducing the employee’s wages in proportion to the number L’azurde maintains strong security arrangements to thoroughly sent them special Mother’s Day gifts in an effort to alleviate, just months (from March to June 2020), to guarantee employees’ of actual work hours according to the amendments of working secure its production facilities, transportation of jewelry between a little bit, their pain and suffering and to wish them recovery and safety, caused a decline in gross profit margin due to hour system. its geographically dispersed locations, including security at its better times. continuously incurred fixed costs of revenue. The financial impact of the global Coronavirus pandemic may wholesale offices and all retail locations. L’azurde regularly In the month of October, and as part of the Breast Awareness • On March 16, 2020, based on the Saudi government directives extend to the first quar ter of 2021. However, due to the uncer taint y collaborates with security consultants to review and upgrade its Campaign, Miss L’ by L’azurde launched the Unstoppable to protect citizens and residents, and contain the spread of regarding the current and potential future conditions of its security procedures and standards. necklace addressed to women fighters as a way to show support the new Coronavirus (Covid-19) in the Kingdom, L’azurde repercussions, the Company is currently unable to determine its The Company is greatly interested in the safety of its production and appreciation for their efforts in remaining strong in the face Company for Jewelry temporarily closed its retail showrooms full financial impact. processes and the maintenance of safety standards. For these of challenges. Dozens of Unstoppable necklaces were presented across the Kingdom of Saudi Arabia. L’azurde management has taken proactive measures to lessen reasons, the Company adopts the slogan and policies of “Safety as gifts to women fighting cancer in Baheya Foundation for • On March 25, 2020, following the precautionary measures that the impacts of this pandemic on its operations, as follows: First” and “No Accidents”. Early Detection and Treatment of Breast Cancer in Egypt, in an awareness-raising event organized in collaboration with the Egyptian government has taken in regard to Coronavirus 1. Developing the fast-growing Miss L’ fashion jewelry line L’azurde is continuing to implement a lot of procedures and L’azurde’s brand ambassador, the Egyptian superstar actress (Covid-19), L’azurde Company for Jewelry has temporarily to its full potential through our own retail points of sales, controls, aligned with both local regulation (PME, MODON) and Nelly Karim. Parts of the sales of the necklace were also donated reduced working hours in retail stores across Egypt starting E-Commerce, and 3rd party retailers in modern trade. international safety standards to keep its employees safe and to Zahra Breast Cancer in Saudi Arabia as a contribution to its Wednesday, March 25, 2020 until further notice. During dedicated efforts in fighting the disease. this period, stores would operate on weekdays, Sundays provide high standards for Personal Protective Equipment (PPE) 2. Expanding our successful L’azurde retail business in Egypt that fit the nature of work and surrounding risks. to Thursdays, from 10:00 AM to 5:00 PM, while they would L’azurde’s CSR initiatives were conducted as part of the remain closed on Fridays and Saturdays. through new points of sales, and a modern assortment of fashionable products. L’azurde is continuing to make significant efforts to offer a Company’s efforts to stand by women and encourage them to shine through hardship and empower them to find the strength • The closure of malls and shopping centers in KSA, Egypt and safe and healthy environment for its jewelry craftsmen and all 3. Optimizing the traditional wholesale business selling jewelry its employees. L’azurde has adopted an Occupational Safety to achieve their goals in life. GCC countries for 3 months in 2020 due to the lockdown and precautionary measures, which were taken to contain the by weight through the reduction of working capital and the and Health Management System to ensure that it offers a safe increase of available resources’ efficiency. and healthy environment for all employees. L’azurde Group’s SIGNIFICANT EVENTS DURING 2020 spread of this pandemic by the Saudi government. Thus, the total closure of all L’azurde shops and wholesalers’ stores safety department provides training, coaching, monitoring 4. Scaling our promising fast growing E-Commerce business THE IMPACT OF NOVEL CORONAVIRUS during lockdown resulted in a decrease in sold quantities, and controlling procedures to ensure the implementation of through more investments in technology, infrastructure, (COVID-19) PANDEMIC ON notably that the Group did not have any other selling channel an effective system through an experienced health and safety systems and a state-of-the-art experienced digital L'AZURDE OPERATIONS such as digital platforms. Accordingly, the Company found team, equipped with up-to-date tools and systems. L’azurde organization. maintains clinics with doctors at its factories to provide The presence of coronavirus (Covid-19) was confirmed in early itself without any functioning sale channels during lockdown. immediate professional medical care and health surveillance for 2020. It spread across multiple geographic regions causing However, the Group has been granted rental-free periods and 5. Expanding the TOUS global franchise business in KSA its employees. disruptions in business and economic activity. In response to rental cost reductions by these sellers as a compensation. through e-commerce and more investments in marketing the outbreak of Covid-19 and the resulting turmoil in social and This status quo prompted the Group to launch an e-commerce and products assortment, to meet the latest fashion trends. L’azurde has maintained and upgraded several certifications economic activities, the Group’s management has mobilized a sales platform in order to reach customers in times of We plan to grow our KSA users’ base and turn TOUS into a for high international standards for Environment, Health and crisis management team to assess the potential impact on its restricted traffic. strong household brand name in KSA, similarly to what we Safety like Occupational Health and Safety Management System business in the Kingdom of Saudi Arabia and other geographic did with L’azurde. (ISO 45001:2018), Environmental Management Systems (ISO regions where the Group conducts its activities. The department • The decrease in the number of employees due to reduced 14001:2015) and Quality management system (ISO 9001:2015) and has also taken a series of preventive measures to ensure the activity during the Covid-19 pandemic resulted in an increase 6. Leveraging our solid customers’ network in the traditional Energy Management System (ISO 50001:2011). health and safety of its employees, customers, and its wider in layoffs. Gold jewelry market to launch a jewelry line sold by piece (not community as well as to secure the continuity of its operations. by weight). As a market leader, L’azurde will help reshape and • The suspension of all local and international flights which SOCIAL RESPONSIBLY AND transform the traditional Gold jewelry segment by offering a affected the activity of outlets sales at airports. CONTRIBUTIONS Due to the impact of economic conditions and other unusual new jewelry line meeting the consumers’ latest trends and and unprecedented factors resulting from the Covid-19 On the other hand, the Company benefited from some government offering retailers a very attractive commercial offer. As part of its continuous efforts to show appreciation to its pandemic outbreak, along with the sharp increase (28.3%) in initiatives to support private sector companies affected by the country and customers, L’azurde always strives to give back to its gold prices across global markets during the years 2019-2020, 7. Maintaining our strong cash position and great banking repercussions of the Covid-19 virus, which are as follows: community, reinforcing its moral obligations towards the people the Company’s performance has been greatly affected. As a relationships to support the Company’s transformation. it serves. consequence, precautionary measures were adopted by the 1. The initiative of the “SANED” system, whereby the General Kingdom of Saudi Arabia and other governments, where L’azurde 8. Abiding by the precautionary measures issued by Ministry In 2020 and particularly during the unprecedented times marked Organization for Social Insurance bears 60% of the salaries operates, in order to contain the spread of this virus. All of the of Health, and complying with all guiding regulations and by the pandemic, providing financial, kind and moral support to of Saudi employees, not exceeding 70% of the total number of above-mentioned factors led to the following consequences: government directives to protect public health and safety. social and charity organizations was more crucial than ever. Saudi workers. • The decline in sales and revenues at the beginning of the As fighting COVID-19 was the main concern among community 2. “HADAF” program to support 30% of the salary or 3,000 Saudi year 2020, as a result of the changes in consumers’ spending members, and with healthcare professionals being at the riyals, whichever is lower, to support Saudi employees who habits, which generated a decrease in the demand for luxury forefront of combating the pandemic, L’azurde’s social initiatives have been employed in the private sector as of the beginning goods, such as jewelry, a sector hugely affected by the value- focused on supporting the medical workforce and showing of July 2019. added tax tripling to 15% in the Kingdom of Saudi Arabia as of appreciation and gratitude to those everyday heroes. In that July 20. context, and as a gesture of appreciation for the devotion and hard work of nurses, L’azurde thought of a way to bring them a ray of happiness. The Company contributed with gifts of gratitude from L’azurde to nurses working in various hospitals in KSA.

On Mother’s Day, the Company collaborated with the Saudi Ministry of Health in a heartfelt gesture towards mothers infected with coronavirus and isolated in quarantine facilities in Riyadh. As those mothers were away from their families and in

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RISE IN GOLD PRICES AND SIGNIFICANT PLANS AND DECISIONS 2. The Company will continue to develop its wholesale operations 9. Opening 7 new showrooms in Egypt with the aim of promoting THE IMPACT OF VAT Throughout 2020, the Company executed some plans and for the sale of jewelry by weight,in addition to the new focus L’azurde operations in the retail sector, and optimizing its on selling jewelry by piece. There is a large market in the profitability potential following a track record of success for L’azurde succeeded in surmounting challenges since it was decisions that are crucial to achieve increased growth, and region for selling Gold jewelry by weight, where the Company the retail sector in Egypt. established 40 years ago and until present time. With the start ensure sustainable development of its revenues and profits in has a leading position. The new focus on selling jewelry piece of the year 2020, the Covid-19 crisis, which negatively impacted the coming years. The following is an overview of some of the will come on top of selling jewelry by weight and contribute to 10. Adopting a gradual transformation in the design, weight most companies around the world, in addition to the rapid sharp initiatives related to significant plans and decisions: reduce the Company working capital and enhance the gross and styles of jewelry and gold artefacts to ensure that new increase in gold prices and the triple value-added tax (VAT) rate, 1. On November 16, 2020, L’azurde Company for Jewelry margin. products meet the changing consumers’ preferences and led to the hardest predicament we have ever faced. In fact, the purchasing powers. wholesale sector, which relies on selling products by weight, announced its transformational strategy for growth and expansion in the field of selling gold jewelry at reasonable 3. The E-commerce platform which was successfully launched has exerted pressure on the Company’s business in the short 11. Accepting one-off costs related to the recall of heavy weight prices through its new brands and collections, Miss L’ and in 2020 has a great growth potential . It was mainly dedicated term since it is greatly affected by the increase in gold prices and and high value products in the KSA wholesale sector to make L’azurde In Style, in the markets of the KSA and Egypt. to selling Miss L’ jewelry while the Company launched end the rise in VAT rate, which coincided with the Covid-19 outbreak. 2020 the second E-Commerce platform L’azurde.com sure customers and wholesalers get the products they need. However, being optimistic about the future, we have started to act This was a direct result of the efforts made by Company to diversify its revenue streams through the introduction offering a wide portfolio of Gold and Diamonds jewelry.. While pro-actively to respond to this crisis by changing the Company’s the e-commerce contribution to the Company’s revenues is GROWTH OPPORTUNITIES direction (business transformation) a year ago, and introducing of new brands and the access to new channels, in order to AND FUTURE PLANS meet the changing consumers’ preferences, selling trends, still small at 2% of revenues in 2020, it is growing fast. The a new business model for selling gold jewelry by piece instead of Company will continue the expansion and development of its weight in malls and via e-commerce channels. and the sharp increase in gold prices. The Company has The Company continues to focus on the execution of the following already successfully launched its e-commerce platform e-commerce platforms to fully leverage the development in strategic initiatives: consumers’ behaviour towards online shopping. TRANSFORMATIONAL STRATEGY FROM for Miss L’ brand, and is currently envisaging an expansion of its e-commerce operations by launching more brands 1. Developing the fast-growing Miss L’ fashion jewelry line WHOLESALING TO FOCUSING ON 4. Due to the effect of unusual and unprecedented factors such and having access to leading markets. This development to its full potential through our own retail points of sales, RETAIL AND JEWELRY SALE BY PIECE as COVID-19 pandemic, the sharp increase in gold prices, is definitely significant considering that the Company’s E-Commerce, and 3rd party retailers. and the tripling of the VAT to 15% starting July 1, 2020, the On November 16, 2020, L’azurde Company for Jewelry announced strategy had been relying on selling gold jewelry by weight in Company took the decision to accept one-off cost of SAR its transformational strategy for growth and expansion in the traditional gold souks. 2. Expanding our successful L’azurde retail business in Egypt field of selling gold jewelry at reasonable prices through its 34.7 million related to the recall of some of its heavy weight through new points of sales and a stronger assortment. new brands and collections, Miss L’ and L’azurde In Style, in the Miss L’ is sold today at L’azurde mono brand shops, kiosks in products not meeting the latest consumers’ trends. The markets of KSA and Egypt. As a result of the shift in consumers’ KSA and Egypt, on the Group E-Commerce platforms and at purpose of this decision was to rationalize and optimize 3. Optimizing the traditional wholesale business that sells spending patterns from traditional souks to shopping centers, key third party fashion retailers in malls. The Company is also Company’s investment in gold working capital in order to jewelry by weight by rationalizing the business network, the Group began to concentrate its retail stores in major shopping planning to open Miss L’ retail stores in KSA and Egypt in 2021. reduce finance costs. developing commercial activities in leading stores, centers across KSA and Egypt. The Group has also actively The financial impact of opening new stores and kiosks will be intensifying employee training and reducing inventory. 5. On October 11, 2020, the Board of Directors issued a sought to improve its sales by closing low-performing stores in reflected starting H1 2021. recommendation to raise the Company’s capital by issuing 4. Improving the performance of the traditional wholesale trade certain locations, while expanding into key market areas through priority right shares worth SAR 145 million. The increase sector, and selling gold jewelry by weight by reducing working new stores, especially in Egypt. Therefore, the increased focus As for the new L’azurde Instyle products, they will be sold by piece is needed to support the expansion of the Company’s capital and increasing operational efficiency. on retail revenue has made it easier for the Group to focus on in traditional gold souks through a wide network of retailers. While there are no current plans to open L’azurde Instyle stores, future activities, and provide a working capital that would selling jewelry by piece, rather than by weight, as these retail 5. Leveraging our solid customers’ network in the traditional the financial impact of introducing and selling this jewelry brand enable the company to increase its operational capacity sales are in line with consumers’ preferences and future buying Gold jewelry market and launching our jewelry line sold by will also bear fruits starting from Q1 2021 . However, the exact and reduce debt-to-equity ratio. The eligibility of priority trends, notably in KSA. piece. As a market leader, L’azurde will help reshape and impact is difficult to assess at the moment. rights issue shall be for the shareholders owning shares on the extraordinary General Assembly meeting (EGM) date, transform the traditional Gold jewelry segment by offering a new jewelry line meeting the consumers’ latest trends and and as per the registered shareholders in the register of the Securities Depository Center Company, at the end of proposing to retailers a very attractive commercial offer. the second trading day following the EGM date. The rights offering awaits the approvals of the relevant regulatory 6. Scaling our promising fast growing e-Commerce business bodies and the Company’s EGM. through more investments in technology, infrastructure, systems and a state-of-the-art experienced digital 6. On October 20, 2020, Samba Capital and Investment organization. Management Company (Samba Capital Company) has been appointed as a financial advisor to manage the subscription 7. Expanding the TOUS global franchise business in KSA through e-commerce and more investments in marketing in the rights issue of shares. The appointment took place on 03-03-1442 H corresponding to 20-10-2020 AD. and products assortment. We plan to grow our KSA users’ base and turn TOUS into a strong household brand name in 7. On December 24, 2020, the application file related to raising KSA, similarly to what we did with L’azurde. the company’s capital by issuing priority right shares was submitted to the Capital Market Authority; the subject 8. Maintaining our strong cash position and great banking of the request was to increase the Company’s capital by relationships to support the Company transformation. issuing priority right shares, with a suggested increase to the Company’s capital worth SAR 145,000,000, through the 9. Improving manufacturing productivity by reducing costs, issuing of a total number of priority right shares equal to leveraging new technologies and 3D printing capabilities. (14,500,000) new ordinary shares, to ensure the increase of 10. Reducing working capital through the digitization of the the capital from SAR 430 million to SAR 575 million. route-to-market strategy in the wholesale sector, reduction 8. Investing in marketing and promotional initiatives of of old stocks and accounts receivable. TOUS brand in an aim to increase awareness of the brand, promoting its position, and developing it through new talent and continuous training.

58 59 02 | STRATEGIC BUSINESS REVIEW OWNERSHIP STRUCTURE

L’AZURDE OWNERSHIP L'AZURDE GROUP STRUCTURE AND SUBSIDIARIES L’azurde Co for Jewelry holds ownership direct and indirect shares in ten subsidiaries, located in the Kingdom of Saudi Arabia, the STRUCTURE Middle East, and North Africa Region (MENA). The following chart shows the current structure of L’azurde Group:

L’AZURDE COMPANY FOR JEWELRY Saudi Listed Company

98% 49% 99% 99.67% 99.125% 98% 100%

IZDIAD ORO EGYPT COMMERCIAL COMPANY OF L'AZURDE FOR L'AZURDE COMPANY FOR ALMUJAWHARAT L'AZURDE FOR ARABIA LLC JEWELRY LLC COMPANY FOR MANUFACTURING KENAZ ALMASIAH LLC JEWELRY LLC PRECIOUS COMPANY (Izdiad) (L’azurde Qatar) JEWELRY LLC 2% is held by (L’azurde Abu Dhabi) METALS - CJS LLC Owned by 51% is held by (L’azurde Dubai) L’azurde Abu Dhabi. 1% is held by 0.75% is held 2% is held by one person Ms. Wafiqah 0.33% is held by L’azurde Dubai. by Almujwharat L’azurde Abu Dhabi. Sultan Alissa L’azurde Abu Dhabi. 100% is held by Almasiah and 0.125% L’azurde Company is held by Kenaz. for Jewelry (Saudi Listed Company).

50% 50% 99% 100%

L'AZURDE EGYPT L'AZURDE FOR L'AZURDE GROUP FOR JEWELRY LLC JEWELRY LLC FOR GOLD AND (L’azurde Egypt) Sultanate of Oman JEWELRY DMCC LLC 50% is held by 99% is held by (DMCC) L’azurde Abu Dhabi L’azurde Dubai 100% is held by and 50% is held by 1% is held by L’azurde Dubai. L’azurde Dubai. L’azurde Abu Dhabi.

OVERVIEW OF SUBSIDIARIES L’azurde operates its business through a variety of subsidiaries across MENA. The Company maintains long term investments and exerts effective control, through its full capacity to lead and direct economic performance, financial policies and operational processes. L’azurde consolidates its financial operations and results as one business unit by issuing Consolidated Financial Statements at Group level after the elimination of all significant inter group balances and transactions.

The following table sets out the consolidated subsidiaries, companies’ names, capital, ownership interest, business activities, country of incorporation and country of operation. Note that there are no shares or debt instruments issued to any of these entities.

L’azurde Co for Jewellery and its subsidiaries have neither issued nor granted any class and number of any convertible debt instruments, contractual securities, pre-emptive rights or similar rights during the year 2020.

During 2020, the Company and its subsidiaries have not had any treasury shares retained, redeemed, purchased or cancellation of any redeemable debt instruments.

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THE FOLLOWING IS NOT APPLICABLE TO ALL L'AZURDE SUBSIDIARIES AS AT 31 DECEMBER 2020 ALMUJAWHARAT ALMASIAH COMPANY 1. No class and number of any convertible debt instruments, contractual securities, pre-emptive right or similar rights issued or granted by the company’s Almujawharat Almasiah Company (“Almujawharat Almasiah”) is a Limited Liability Company registered in Riyadh, Kingdom of Saudi subsidiaries during the fiscal year, as well there is no any compensation obtained by the company in this regard. Arabia under commercial registration No. 1010236734 dated 25/07/1428 H (08/08/2007 G). The head office of Almujawharat Almasiah 2. No conversion or subscription rights under any convertible debt instruments, contractually based securities, warrants or similar rights issued or granted is located in Riyadh City, P.O. Box 41270, Riyadh 11521- Kingdom of Saudi Arabia. The current share capital of Almujawharat Almasiah by the company. is SAR 300,000, divided into 50 shares with a fully paid nominal value of SAR 6,000 per share. 3. There is no redemption, purchase or cancellation by the company and its subsidiaries of any redeemable debt instruments. 4. There aren’t any arrangements or agreement under which a shareholder of the company has waived any rights to dividends. The following table summarises the ownership structure of Almujawharat Almasiah as at 31 December 2020:

Shareholders No. Of Shares Nominal Value per Share (SAR) Value of Shares (SAR) Ownership Percentage Ownership Capital Country of L’azurde Company for Jewelry - JSC 49 6,000 294,000 98% Capital 2020 2019 No Name of subsidiary (Foreign Business activities incorporation (SAR) currency) and operation Direct Indirect Direct Indirect L’azurde Company for Jewelry- LLC1 1 6,000 6,000 2% interest (%) interest (%) interest (%) interest (%) Total 50 6,000 300,000 100% Almujawharat Almasiah Trading of precious stones 1 Company (1) -- 300,000 and gold jewelry Saudi Arabia 98% 2% 98% 2% 1. L’azurde Company for Jewelry is a Limited Liability Company incorporated in Abu Dhabi, United Arab Emirates.

Trading of precious stones 2 Kenaz Company (2) -- 3,000,000 and gold jewelry Saudi Arabia 98% 2% 98% 2%

L’azurde Company The following table summarises the ownership structure of Almujawharat Almasiah before share capital increase as at 31 3 for Jewelry AED 300,000 306,000 Wholesale office Dubai, UAE 99.67% 0.33% 99.67% 0.33% December 2020:

Abu Dhabi, United 4 L’azurde for Jewelry AED 300,000 306,000 Retail showrooms Arab Emirates 99% 1% 99% 1% Shareholders No. Of Shares Nominal Value per Share (SAR) Value of Shares (SAR) Ownership Percentage

5 L’azurde for Jewelry QAR 200,000 206,044 Wholesale office Qatar 49% -- 49% -- L’azurde Company for Jewelry - JSC 49 1,000 49,000 98%

L’azurde Company for Jewelry- LLC1 1 1,000 1,000 2% L’azurde Egypt for Manufacturing, wholesale 6 Jewelry (3) EGP 143,250,000 33,463,370 offices and retail shops Egypt -- 100% -- 100% Total 50 1,000 300,000 100% Oro Egypt Company 7 for Manufacturing EGP 40,000,000 8,436,006 Manufacturing, wholesale Egypt 99.125% 0.875% 99.125% 0.875% Precious Metals offices and retail shops The principal activities of Almujawharat Almasiah include the trading of gold, silver products, and precious stones. Almujawharat 8 L’azurde Group for Gold AED 50,000 51,000 Trading of pearls, precious Dubai, UAE -- 100% -- 100% Almasiah was established primarily for the purpose of holding shares in certain subsidiaries, and does not have any operational and Jewelry (DMCC) stones and gold jewelry business activities as at 31 December 2019.

Gold Manufacturing and 9 L’azurde for Jewelry OMR 20.000 195,000 wholesale offices Sultanate of Oman -- 100% -- --

Izdiad Commercial 10 Company of Arabia -- 12,000,000 Retail showrooms Saudi Arabia 100% -- 100% -- – LLC (4)

1. On 23 April 2017, the partners approved an increase in Company’s share capital to SAR 0.3 million (Saudi Riyals three hundred thousand) by paying the required amount in cash through bank transfer and issuing new shares equal to proposed increase in Company’s share capital. All Partners’ are obliged to pay capital increase value pro-rata to their respective current shareholding. The regulatory procedures for updating the Company’s commercial register and article of association have been completed on 24 June 2019. 2. On 23 April 2017, the Partners approved an increase in Company’s share capital to SAR 3.0 million (Saudi Riyals three million) by paying the required amount through Partners’ current account in year 2017 and issuing new shares equal to proposed increase in Company’s share capital. All Partners’ are obliged to pay capital increase value pro-rata to their respective current shareholding. The regulatory procedures for updating the Company’s commercial register and article of association have been completed on 17 June 2019. 3. On 22 December, 2019, the partners approved an increase in the Company’s share capital to EGP 143.25 million (SR 33.46 million), by paying the required amount in cash and issuing new shares equal to proposed increase in the Company’s share capital. All partners are obliged to pay capital increase value pro-rata to their respective current shareholding. The regulatory procedures for updating the Company’s commercial register and article of association have been completed on 29 December, 2019. 4. On 31 October 2018, the Company has completed the acquisition of 100% shares in Izdiad Commercial Company of Arabia, in accordance with the terms and conditions of the Share Purchase Agreement, signed on 5 August 2018. Izdiad is the sole-franchisee and operator of TOUS international franchise in KSA. TOUS is an international lifestyle brand focused on affordable luxury that has been in business for almost 100 years and with more than 620 stores in over 53 countries. As a franchisor, TOUS designs, manufactures and sells jewelry, bags and accessories for women and men. Their offering covers a wide range of products including fine jewelry with diamond, gold and silver, as part of its core business, in addition to handbags, fragrances, and accessories. TOUS has been present in KSA since 2008, with a network today of 26 stores across the Kingdom. Through the TOUS brand, L’azurde will reinforce its jewelry portfolio and grow its customer base by diversifying revenues and complementing its assortment. The Company’s management is proud to partner with TOUS, a world leader in jewelry. This transaction represents a great strategic fit with the L’azurde Group, which is striving to enter the affordable luxury jewelry segment that provides solid margins and profits, and helps diversify the Company’s portfolio, addressing a totally new product offering.

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KENAZ COMPANY The following table summarises the ownership structure of L’azurde Dubai as at 31 December 2020: Kenaz Company (“Kenaz”) is a Limited Liability Company registered in Riyadh, Kingdom of Saudi Arabia under commercial registration Nominal Value per No. 1010352574 dated 21/11/1433 H (06/10/2012 G). The head office of Kenaz is located in Riyadh City, Second Industrial Area, P.O. Box Shareholders No. Of Shares Share (SAR) Value of Shares (AED) Value of Shares (SAR) Ownership Percentage 41270, Riyadh 11521 - Kingdom of Saudi Arabia. The current share capital of Kenaz is SAR 3,000,000 divided into 50 shares with a fully paid nominal value of SAR 60,000 per share. L’azurde Company for Jewelry - JSC 297 1,000 297,000 302,940 99%

The following table summarises the ownership structure of Kenaz as at 31 December 2020: L’azurde Company for Jewelry- LLC1 3 1,000 3,000 3,060 1%

Total 300 1,000 300,000 306,000 100%

Shareholders No. Of Shares Nominal Value per Share (SAR) Value of Shares (SAR) Ownership Percentage 1 L’azurde Company for Jewellery is a limited liability company incorporated in Dubai, United Arab Emirates. L’azurde Company for Jewelry - JSC 49 60,000 2,940,000 98% The principal activities of L’azurde Abu Dhabi include the retail trade in jewellery, diamond, precious,and semi-precious stone, and

L’azurde Company for Jewelry- LLC1 1 60,000 60,000 2% watches.

Total 50 60,000 300,000,000 100% As at December 31, 2020, L’azurde Abu Dhabi holds an ownership interest of EGP 71,625,500 (equivalent to SAR 16,731,685) in L’azurde Egypt (representing 50% of its capital). 1. L’azurde Company for Jewelry is a Limited Liability Company incorporated in Abu Dhabi, United Arab Emirates. L'AZURDE EGYPT FOR JEWELRY

The following table summarises the ownership structure of Kenaz before share capital increase as at 31 December 2020: L’azurde Egypt is a Limited Liability Company registered in Cairo, Egypt under commercial registration No. 14997 dated 01/05/1426 H (08/06/2005 G). The head office of L’azurde Egypt is located in the First Industrial Zone, P.O. Box 62, El-Obour City, Egypt. The current paid up capital of L’azurde Egypt is EGP 143,250,000 divided into 143,250,000 shares (equivalent to SAR 33,463,370 as per exchange rates as at 31 December 2020). Shareholders No. Of Shares Nominal Value per Share (SAR) Value of Shares (SAR) Ownership Percentage The following table summarises the ownership structure of L’azurde Egypt as at 31 December 2020: L’azurde Company for Jewelry - JSC 49 1,000 49,000 98%

L’azurde Company for Jewelry- LLC1 1 1,000 1,000 2% Nominal Value per Shareholders No. Of Shares Share (SAR) Value of Shares (EGP) Value of Shares (SAR) Ownership Percentage Total 50 1,000 50,000 100% L’azurde Company for Jewelry- LLC1 71,625,000 1 71,625,000 16,731,685 50%

The principal activities of Kenaz include the trading of gold and silver products and precious stones. L’azurde Company for Jewelry- LLC2 71,625,000 1 71,625,000 16,731,685 50% L'AZURDE COMPANY FOR JEWELRY - (UAE- DUBAI) Total 143,250,000 1 143,250,000 33,463,370 100% L’azurde Company for Jewellery (“L’azurde Dubai”) is a Limited Liability Company registered in Dubai, United Arab Emirates under 1. L’azurde Company for Jewelry is a Limited Liability Company incorporated in Abu Dhabi, United Arab Emirates. commercial registration No. 1039193 dated 25/12/1429 H (23/12/2008 G).The head office of L’azurde Dubai is located in Al Ras District, 2. L’azurde Company for Jewelry is a Limited Liability Company incorporated in Dubai, United Arab Emirates. P.O. Box 60843, Dubai, United Arab Emirates. The current share capital of L’azurde Dubai is AED 300,000 (equivalent to SAR 306,000), divided into 300 shares, with a fully paid nominal value of AED 1,000 (equivalent to SAR 1.02 per share). The following table summarises the ownership structure of L’azurde Egypt before share capital increase as at 31 December 2020: The following table summarises the ownership structure of L’azurde Dubai as at 31 December 2020:

Nominal Value per Shareholders No. Of Shares Share (SAR) Value of Shares (EGP) Value of Shares (SAR) Ownership Percentage Nominal Value per Shareholders No. Of Shares Share (SAR) Value of Shares (AED) Value of Shares (SAR) Ownership Percentage L’azurde Company for Jewelry- LLC1 46,142,500 1 46,142,500 9,714,211 50% L’azurde Company for Jewelry - JSC 299 1,000 299,000 304,980 99.67% L’azurde Company for Jewelry- LLC2 46,142,500 1 46,142,500 9,714,211 50% L’azurde Company for Jewelry- LLC1 1 1,000 1,000 1,020 0.33% Total 92,285,000 1 92,285,000 19,428,422 100% Total 300 1,000 300,000 306,000 100%

1. L’azurde Company for Jewelry is a Limited Liability Company incorporated in Abu Dhabi, United Arab Emirates. The principal activities of L’azurde Egypt include the establishment and operation of a plant for the design, manufacturing, distribution, and sale of gold and diamond jewellery. The principal activities of L’azurde Dubai include trading in jewelry, pearls, precious and semi-precious stones, watches, their spare parts, and the forging of gold and jewellery.

As at December 31, 2020, L’azurde Dubai holds an ownership interest of EGP 71,625,500 (equivalent to SAR 16,731,685) in L’azurde Egypt (representing 50% of its share capital). L’azurde Dubai also holds 100% ownership in L’azurde Group for Gold and Jewellery (DMCC), a Limited Liability Company. L'AZURDE COMPANY FOR JEWELLERY (ABU DHABI) L’azurde Company for Jewellery (“L’azurde Abu Dhabi”) is a Limited Liability Company registered in Abu Dhabi, United Arab Emirates under commercial registration No. 1060233 dated 19 October 2003. The head office of L’azurde Abu Dhabi is located at Gold Center Market, Madinat Zaid, P.O. Box 72147, Abu Dhabi, UAE. The current share capital of L’azurde Abu Dhabi is AED 300,000 (equivalent to SAR 306,000), divided into 300 shares with a fully paid nominal value of AED 1,000 (equivalent to SAR 1,02) per share.

64 65 02 | STRATEGIC BUSINESS REVIEW OWNERSHIP STRUCTURE

L'AZURDE FOR JEWELLERY (QATAR) L'AZURDE GROUP FOR GOLD AND JEWELLERY DMCC ("L'AZURDE DMCC") L’azurde for Jewellery (“L’azurde Qatar”) is a Limited Liability Company registered in the State of Qatar under commercial registration L’azurde DMCC is a Limited Liability Company registered with Dubai Multi Commodities Centre Authority, U.A.E under No. 60716 dated 11/07/1434 H (21/05/2013 G). The head office of L’azurde Qatar is located in Gabar Ban Mohamed Street, P.O. Box Trade License No. DMCC 108442 dated 26 February 2015. The principal activity of L’azurde DMCC is the trading of pearls, 20464, Doha, Qatar. The current capital of L’azurde Qatar is QAR 200,000 (equivalent to SAR 206,054), divided into 200 shares with a precious stones, and gold jewellery. As of 31 December 2019, L’azurde DMCC is fully owned by L’azurde Company for Jewellery fully paid nominal value of QAR 1,000 (equivalent to SAR 1,030 per share). (“L’azurde Dubai”).

The following table summarises the ownership structure of L’azurde Qatar as at 31 December 2020: L'AZURDE COMPANY FOR JEWELLERY ("L'AZURDE SULTANATE OF OMAN") L’azurde Company for Jewellery (“L’azurde Oman”) is a Limited Liability Company registered in the Sultanate of Oman under Nominal Value per Shareholders No. Of Shares Value of Shares (QAR) Value of Shares (SAR) Ownership Percentage commercial registration No. 1320525 dated 30 May 2018. The head office of L’azurde Sultanate of Oman is located in Al Seeb Share (QAR) Market, Muscat P.O. Box 122, Muscat 125, Sultanate of Oman. The current capital of L’azurde Oman is OMR 20,000 (equivalent to Wafiqah Sultan Al Essa 102 1,000 102,000 105,082 51% SAR 195,000), divided into 20.000 shares with a fully paid nominal value of OMR 1 (equivalent to SAR 9.75 per share).

L’azurde Company for Jewelry The following table summarises the ownership structure of L’azurde Oman as at 31 December 2020: - Listed Company 98 1,000 98,000 100,962 49%

Total 100 1,000 200,000 206,044 100% Nominal Value per Shareholders No. Of Shares Value of Shares (EGP) Value of Shares (SAR) Ownership Percentage Share (EGP) The principal activities of L’azurde Qatar include trading in gold, unworked precious metals, jewellery, gold and silver jewellery L’azurde Company for Jewelry 19,800 1 19,800 193,050 51% and wares, in addition to forging gold, precious metals and jewels, repairing gold, jewellery, jewels and wares, and implementing (UAE - Dubai) alterations thereto. L’azurde Company for Jewelry (Abu Dhabi) 200 1 200 1,950 49% ORO EGYPT COMPANY FOR MANUFACTURING PRECIOUS METALS Oro Egypt is a Closed Joint Stock Company registered in Cairo, Egypt under commercial registration No. 7877 dated 14/11/1423 Total 20,000 1 20,000 195,000 100% H (17/01/ 2003 G). The head office of Oro Egypt is located in Obour Market, P.O. Box 3067, Qalyubia, Egypt. The current capital of Oro Egypt is EGP 40,000,000 (equivalent to SAR 9,344,047) divided into 1,600,000 shares with a fully paid nominal value of EGP 25 The principal activities of L’azurde Oman include manufacturing, and trading of jewelry made from precious metals or stones. (equivalent to SAR 5.84 per share). IZDIAD COMMERCIAL COMPANY OF ARABIA The following table summarises the ownership structure of Oro Egypt as at 31 December 2020: Izdiad Commercial Company of Arabia (“Izdiad”) is a Limited Liability Company owned by one person registered in Riyadh, Kingdom of Saudi Arabia under commercial registration No. 1010458294 dated 5 September 2015. The head office of Izdiad is Nominal Value per Shareholders No. Of Shares Value of Shares (EGP) Value of Shares (SAR) Ownership Percentage Share (EGP) located in Riyadh, P.O. Box 41270, Riyadh 11521 Kingdom of Saudi Arabia. The current capital of Izdiad is SR 12,000,000, divided into 100 shares with a fully paid nominal value of SR 120,000. L’azurde Company for Jewelry 1,586,000 25 39,650,000 9,262,287 99.125% - Listed Company The following table summarises the ownership structure of Izdiad Commercial Company of Arabia as at 31 December 2020:

Almujwharat Almasiah – LLC 12,000 25 300,000 70,080 0.750% Nominal Value per Shareholders No. Of Shares Value of Shares (SAR) Ownership Percentage Share (SAR) Kenaz - LLC 2,000 25 50,000 11,680 0.125% L’azurde Company for Jewelry Listed Company 100 120,00 12,000,000 100% Total 1,600,000 25 40,000,000 9,344,047 100% The principal activities of Izdiad Commercial Company of Arabia include trading of jewellery, perfume, men and women The principal activities of Oro Egypt include the establishment and operation of a plant for the manufacturing of jewellery, gold wares, accessories, leather products, and managing franchises and trademarks. and precious stones of all types, in addition to the establishment of a training centre. Oro Egypt operates a manufacturing unit in Qalyubia, and six branches across Egypt. On 31 October 2018, the Company has completed the acquisition of 100% shares in Izdiad Commercial Company of Arabia in accordance with the terms and conditions of the Share Purchase Agreement signed on 5 August 2018. Izdiad is the sole- franchisee and operator of TOUS international franchise in KSA. TOUS is an international lifestyle brand focused on affordable luxury that has been in business for almost 100 years and with more than 620 stores in over 53 countries.

As a franchisor, TOUS designs, manufactures and sells jewelry, bags, and accessories for women and men. Their offering covers a wide range of products including fine jewelry with diamond, gold and silver, as part of its core business, in addition to handbags, fragrances and accessories. TOUS has been present in KSA since 2008, with a network today of 26 stores across the Kingdom. Through TOUS, L’azurde will reinforce its jewelry portfolio, and grow its customer base, by diversifying revenues and complementing its assortment.

The Company management is proud to partner with TOUS, a world leader in jewelry. This transaction represents a great strategic fit with the L’azurde Group vision to enter the affordable luxury jewelry segment, which provides solid margins and profits, and helps diversify the Company’s portfolio, addressing a totally new product offering.

66 67 �3 FINANCIAL PERFORMANCE

68 69 03 | FINANCIAL PERFORMANCE KEY FINANCIAL HIGHLIGHTS

KEY FINANCIAL HIGHLIGHTS

GROUPS OPERATING GROUPS OPERATING GROUPS GROSS REVENUE BY REVENUE BY PROFIT REVENUE BY REGION (M SAR) DISTRIBUTION REGION (M SAR) CHANNEL (M SAR)

600 600 400 481 350 500 405 406 13 500 300 288 400 37 355 10 347 400 245 244 209 1 83 214 250 217 26 166 113 138 183 300 300 200 141 152 175 117 100 186 150 121 85 107 200 200 323 267 100 260 243 269 217 230 230 160 175 127 146 100 100 50 124 132 77 - - - 2016G 2017G 2018G 2019G 2020G 2016G 2017G 2018G 2019G 2020G 2016G 2017G 2018G 2019G 2020G

Saudi Arabia Egypt Other GCC Wholesale Retail Saudi Arabia Outside Saudi Arabia

CURRENT ASSETS CURRENT LIABILITIES E Q U I T Y DIVIDENDS (SAR M) (SAR M) (SAR M) (SAR M)

1,600 600 60 55 1,417

1,400 1,244

1,203 500 50

2,000 1,737 418 1,179 426 406 1,200 402 1,104 1,569 1,548 400 40 1,500 1,469 1,000 1,394

800 300 297 30 22 1,000 600 200 20 400 500 100 10 200 ------2016G 2017G 2018G 2019G 2020G 2016G 2017G 2018G 2018G 2020G 2016G 2017G 2018G 2019G 2020G 2016G 2017G 2018G 2019G 2020G

70 71 03 | FINANCIAL PERFORMANCE KEY FINANCIAL HIGHLIGHTS

L'AZURDE KEY FINANCIAL HIGHLIGHTS (SAR MILLION) 2016 2017 2018 2019 2020

Statements of Income and financial position for the last five years: CASH FLOW STATEMENT:

Cash flow generated from/(used in) operating activities (8) (12) (20) 30 59

Cash flow in investing activities (24) (20) (144) (12) (10) 2016 2017 2018 2019 2020

STATEMENT OF INCOME: Cash flow used in/generated from financing activities (excluding dividends paid) (37) (72) (156) (14) 38

Gold Revenues 1,613 1,397 1,506 1,495 931 Dividends paid (55) (22) - - - Operation Revenues 405 355 406 481 347 KEY INDICATORS: Cost of Revenues (1,774) (1,535) (1,668) (1,689) (1,095) Return to operating revenue 17.7% 8.9% 4.3% -3.6% -34.7% Gross Profit 245 217 244 288 183 EBITDA to operating revenue 19.3% 24.0% 20.0% 19.0% -3.9% Selling and marketing expenses (134) (105) (132) (180) (165)

EBIT to operating revenue 16.8% 21.2% 17.2% 9.7% -16.9% General and administrative expenses (43) (38) (42) (43) (42) Return on operating assets 4.7% 1.9% 1.0% -0.9% -7.3% Impairment and Inventories (18) Return on equity 17.9% 7.8% 4.1% -4.2% -40.5% Loss on recall of products (35) Current ratio 1.3 1.3 1.3 1.2 1.1 Operating Profit/Loss 68 75 70 47 (59) Operating revenue growth -12.3% 14.4% 18.4% -27.8% Finance costs - net (36) (31) (36) (51) (50) Earnings/(Loss) per share 1.67 0.73 0.41 (0.41) (2.80) Other income/(expenses) - net 58 (1) (4) 1 0

Zakat and income tax (19) (12) (12) (14) (12)

Net profit/(loss) 72 32 18 (18) (120)

Inventories 806 915 789 859 818

Accounts receivable 425 460 570 625 264

Other current assets 29 27 39 99 101

Cash and Gold Margins 171 110 102 100 70

Cash and cash equivalents 39 57 48 54 141

Total current assets 1,469 1,569 1,548 1,737 1,394

Non-current assets 70 79 236 278 256

Total assets 1,539 1,648 1,783 2,015 1,650

Short-term murabaha facilities 1,021 1,134 1,106 1,137 858

Other current liabilities 83 69 73 280 386

Total current liabilities 1,104 1,203 1,179 1,417 1,244

Non-current liabilities 33 38 178 180 109

Total liabilities 1,137 1,241 1,357 1,597 1,353

Equity 578 582 602 584 462

Foreign currency translation reserve (176) (175) (176) (166) (165)

Total shareholders equity 402 406 426 418 297

Total liabilities and shareholders equity 1,539 1,648 1,783 2,015 1,650

72 73 03 | FINANCIAL PERFORMANCE KEY FINANCIAL HIGHLIGHTS

REVENUES Wholesale channel revenues decreased by 35.5% compared to last year. In KSA, wholesale revenues were 45.2% lower than last year, Revenue includes revenue from gold and revenue from operations. Revenue from gold relates to the value of gold weight used in negatively impacted by complete closure of gold souks and malls since mid-March 2020 to end of April and then reduced working generating the operating revenues from wholesale channels. The presentation of revenue from gold serves as statistical information hours in May and June due to COVID-19 precautionary measures taken by Government. Also, revenues were affected due to the only as the Group does not generate any profit or loss from selling gold through wholesale channels. While revenue from operations tripling of VAT to 15% from 1 July 2020 and sharp increase in gold price. Wholesale revenues in Egypt declined by 24.0% compared relates to the value-added component of the jewelry piece, namely labor service charge revenue, value of additions and other sources to last year due to reduced working hours enforced in Egypt’s malls and souks in first half of the year due to COVID-19 and the sharp of revenue generated through wholesale channels and gold and diamond jewelry sold in retail channels, which represent the real increase in gold price. revenue of the Group. Retail channel revenues decreased by 18.2% compared to last year. In KSA, retail revenues decreased by 37.5% due to complete closure of malls since mid-March 2020 to end of April and then reduced working hours in May and June due to COVID-19 precautionary measures taken by Government. Also tripling of VAT to 15% has impacted revenues in the current period, partially offset by promising Analysis for the Group’s gold revenues: results of the new affordable fashion jewelry Miss L’ brand. In Egypt, retail revenues increased by 24.4% organically and by opening of five new locations in 2020 selling Miss L’ and diamond jewelry, overcoming the impact of reduction in working hours after precautionary actions were taken due to COVID-19. Groups gold revenues: Revenue from operations can be analyzed as follows:

SAR million 2020 2019 Variance %

Gold 31 December 2020 31 December 2019 931 1,495 -37.7% 31 December 2020 31 December 2019 Accounts receivables revenues SAR SAR

SAR % Of total SAR % Of total Accounts receivables - Gross 298,336,378 644,391,062 Group gold revenues for the year ended 31 December 2020 were SAR 931 million, a decrease of 37.7% compared to SAR 1,495 million On cash basis 197,753,562 56.9% 223,989,004 37.7% Provision for expected last year. credit losses (34,271,778) (19,323,187)

On credit 149,662,772 43.1 257,215,707 62.3% Analysis for the Group’s operating revenue: basis Accounts Receivable - Net 264,064,600 625,067,875 Total revenues from 347,416,338 100.0% 481,204,711 100.0% operations Groups operating revenue by region:

SAR million 2020 % Of revenue 2019 % Of revenue Variance % Accounts receivable originate from offering term facilities to the Group’s wholesale customers to pay their commitments, including the Saudi Arabia 160 46% 260 54% -38.3% value of the gold purchased. These credit terms are in response to the demand of Group’s wholesale customers and are considered to be in compliance with Shari’a provisions according to Shari’a opinion issued by the Shari’a Advisory Committee of the Council of Saudi Egypt 186 54% 209 43% -10.8% Chambers, a number of Shari’a Scholars and the conclusion of the meetings between these Scholars and the Group’s management. Credit sales are only offered to the Group’s wholesale customers and not retail customers. Other GCC 1 0% 13 3% -91.6%

Total 347 100% 481 100% -27.8%

Summary of major changes in Group’s financial results:

Group operating revenues for the year ended 31 December 2020 amounted SAR 347 million which represents the real revenues of the Group after excluding gold metal value, decreased by 27.8% compared to last year of SAR 481 million. 2020 2019 SAR million Variance % Below is the Group’s operating revenue analysis by distribution channel: SAR % Of revenue SAR % Of revenue

Operating revenue 347 100.0% 481 100.0% -27.8%

Cost of operating revenues (164) -47.3% (193) -40.2% -15.0% Groups operating revenue analysis by distribution channel: Gross profit 183 52.7% 288 59.8% -36.4% SAR million 2020 % Of revenue 2019 % Of revenue Variance % Operating expenses (207) -59.6% (223) -46.4% -7.4% Wholesale gold and 172 50% 267 55% -35.5% Impairment of 0 0.0% (18) -3.7% -100.0% diamond inventories

Loss on recall Retail 175 50% 214 45% -18.2% of products (35) -10.0% - - -

Total 347 100% 481 100% -27.8% Operating profit (59) -16.9% 47 9.7% -225.4%

Net loss (12) -34.7% (18) -3.6% 586.6%

74 75 03 | FINANCIAL PERFORMANCE KEY FINANCIAL HIGHLIGHTS

Group operating revenues of SAR 347 million for 2020 have decreased by 27.8% compared to SAR 481 million in last year. Movement in short-term facilities during the year was as follows:

Operating cost of revenues decreased by 15% compared to last year due to lower operating revenues.

Group gross profit of SAR 183 million for the year 2020 was 36.4% lower than last year of SAR 288 million mainly due to lower 2020 2019 SAR SAR operating revenues.

At the beginning Operating loss was SAR 59 million in 2020 compared to operating profit of SAR 47 million in last year due to lower operating revenues of the year 1,117,990,648 1,091,731,614 despite reduction in operating expenses by 11.8% in 2020, due to the effect of unusual and unprecedented factors such as COVID-19, the tripling of VAT and sharp increase in gold price. Also due to the Company’s decision to accept a one-off cost of SAR 35 million Facilities taken related to the recall of some of its heavy weight products not meeting the latest consumers’ trends and price levels. The purpose of during year 12,098,810,690 14,746,524,188 this decision was to rationalize and optimize Company’s investment in gold working capital in order to reduce finance costs. Facilities taken Net loss for year 2020 amounted to SAR 120 million compared to net loss of SAR 18 million in last year due to lower operating during the year (12,379,201,069) (14,720,265,154) revenues mainly due to impact of COVID-19 outbreak and other reasons, as explained above. At the end of the year 837,600,269 1,117,990,648 GOLD PROCUREMENT, SHORT-TERM GOLD AND CASH FACILITIES As at 31 December, the details are as follows: All the short-term murabaha facilities of the Group have been taken by the parent company, Lazurde Company for Jewelry, and no banking facilities have been taken by the subsidiaries. 31 December 2020 31 December 2019 Notes SAR SAR

Murabaha facilities (Gold) a 709,354,312 1,024,049,730

Cash facilities (Tawaruq) b 128,245,957 93,940,918

837,600,269 1,117,990,648

Total gold procurement facilities of the company at 31 December 2020 amounted to SAR 709 million compared to SAR 1,024 million at 31 December 2019. All outstanding financial facilities agreements are in the form of Murabaha and Tawaruq agreements to finance the supply of pure gold.

Total cash facilities (Tawaruq) of the company at 31 December 2020 amounted to SAR 128 million compared to SAR 94 million at 31 December 2019.

The cash and gold margins against gold procurement facilities of the Company as at 31 December 2020 amounted to SAR 70 million compared with SAR 100 million as at 31 December 2019.

All the outstanding financial facilities agreements are in the form of Murabaha and Tawaruq agreements.

Notes: a. Total gold procurement facilities of the Group at 31 December 2020 amounted to SAR 0.71 billion (31 December 2019: SAR 1.0 billion). All outstanding financial facilities agreements are in the form of Murabaha and Tawaruq agreements to finance the supply of pure gold. The Group has Islamic Murabaha facilities to obtain gold from various banks to finance gold working capital requirements, with maturity periods ranging from 1 to 3 months (2019: 1 to 3 months) with agreed profit rates. All of these financial facilities are compliant with Shari’a principles as per Shari’a certificates issued by banks’ internal Shari’a Committees including Murabaha facilities (Tawaruq) to finance the purchase of gold, as banks buy commodities other than gold or silver and then sell them to the Group on a credit basis. The Group then sells the goods to a third party, and the bank immediately buys the gold using cash sales proceeds of the commodity. b. Represents Islamic Tawaruq cash facilities from various banks solely to finance working capital requirements of the Group, with agreed profit rates and maturity periods ranging from 1 to 9 months.

76 77 03 | FINANCIAL PERFORMANCE KEY FINANCIAL HIGHLIGHTS

COMPLIANCE WITH SHARI'A RULES for Islamic Financial Institutions (AAOIFI), as well as issuance In accordance with Shari’a Standard no. 21 “Financial Paper of Shari’a opinion by the Shari’a Advisory Committee of the (Shares and Bonds)” issued by the Shari’a Committee of the Council of Saudi Chambers; based on a request of the National Accounting and Auditing Organization for Islamic Financial Committee for Precious Metals and Gemstones regarding sale Institutions (AAOIFI). Following are the conclusions of Company’s of gold jewelry by gold traders and manufacturers, where their management: conclusion stipulated the permissibility of gold and silver credit sales between retailers and wholesalers and manufacturers, a) The Group’s main operations of gold and jewelry subject to the following guidelines: manufacturing is a Shari’a compliant activity in principle. • Ensures the permissibility of gold ornaments b) All credit facilities and financing availed by the Group manufacturing. from banks during the audit period are in compliance with Islamic Shari’a provisions. • Ensures that fabricated ornament has a significant value, and not an unreal cover to usury provisions. c) Cash sales through retail outlets and cash wholesale sales on credit are in compliance with Shari’a. • Ensures that ornament’s fabricated gold is required for purchase by itself and not only the pure gold. The Group relies in its policies for wholesale gold sales on selling gold jewelry on credit basis against gold or crushed gold that is This is one of the legitimate conclusions on dealing in the trade equal to it in weight plus an additional charge for workmanship, of gold jewelry and is not considered a breach of the Group’s based on the Shari’a opinion which permits selling of gold compliance with the Shari’a rules and does not affect the Shari’a jewelry on credit basis. This is the point of view of a group of classification of the Group’s activities. scholars of Islamic jurisprudence, including Imam Ibn Taymiyah As at 31 December 2020, the following financial institutions and his disciple Ibn al-Qayyim, which also includes a number have classified L’azurde Company for Jewelry in their Shariaa of contemporary scholars, including a number of members of compliant list. Only Shariaa Committee of Rajhi Bank is the Shari’a Board of the Accounting and Auditing Organization classifying L’azurde under non-compliant list.

Financial Institutions International Agencies Independent Specialists

Al- Bilad Bank Intelligent Rating Shariyah Review Bureau Agency Standard & Sheik Mohammed Al-Othaimi Alinma Bank Poor Global Agency National Commercial Bank - NCB Bank Al-Jazira Saudi Investment bank Riyadh Bank Saudi Fransi Bank SAMBA Bank Arab National Bank Falcom Capital Jadwa investment

78 79 03 | FINANCIAL PERFORMANCE KEY FINANCIAL HIGHLIGHTS

EMPLOYEES' END OF SERVICE BENEFITS PREPARATION OF THE CONSOLIDATED RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS The Company has applied, without any exception, all the The following is the movement in employees’ end of service benefits: IFRSs endorsed by SOCPA, which were effective as at Management is responsible for the preparation and fair 31 December 2020. presentation of the consolidated financial statements in 2020 2019 accordance with IFRSs, as endorsed in the Kingdom of Saudi SAR SAR The interim consolidated financial statements are issued Arabia and other standards and pronouncements issued by with a limited review report and annual consolidated SOCPA, applicable requirements of Regulation for Companies financial statements are issued with an audit report by the At the beginning 29,334,858 32,645,186 and by-laws of the Group and for such internal control as of the year external auditor. management determines is necessary to enable the preparation of consolidated financial statements that are free from material Charge for the year 5,518,008 3,243,699 Bakertilly MKM & Co. was appointed as external auditor for the misstatement, whether due to fraud or error. year 2020 and first quarter of 2021, after the Audit Committee submitted its recommendation to the Board of Directors. The In preparing the consolidated financial statements, management Payments during the year (6,746,642) (4,991,328) Board of Directors requested the approval for appointment of is responsible for assessing the Group’s ability to continue as Bakertilly MKM & Co. and their audit fee at the General Assembly a going concern, disclosing, as applicable, matters related to meeting held on 3 June 2020. The General Assembly approved going concern and using the going concern basis of accounting Actuarial gains (609,656) (1,705,537) this appointment. unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. After auditing the consolidated financial statements for the Foreign exchange 11,973 142,838 differences year ended 31 December 2020, Bakertilly MKM & Co. issued an Those charged with governance, being the “Audit Committee”, unqualified audit report, expressing an audit opinion that the are responsible for overseeing the Group’s financial reporting At the end of the year 27,508,541 29,334,858 consolidated financial statements as a whole present fairly, in process. all material aspects, the financial position of the Group and its financial performance and its cash flows, in accordance with MANAGEMENTS ANNUAL REPORT IFRSs, as endorsed in the Kingdom of Saudi Arabia by SOCPA ON INTERNAL CONTROL OVER The Group provides end of service benefits to all its employees in compliance with the Labor laws. The Group has not yet established and other standards and pronouncements endorsed by SOCPA. FINANCIAL REPORTING Moreover, the audit opinion stated that the consolidated financial a scheme for granting its shares or a percentage of the profits to its employees, except for employees of Egypt subsidiaries who L’azurde’s management is responsible for establishing and are entitled to 10% of distributed profit pursuant to Companies’ Law of Egypt. However, the General Assembly has approved an statements, taken as a whole, comply with the applicable requirements of the Regulations for Companies and by-laws of maintaining effective internal control over financial reporting. amendment in the Bye-laws to empower the Company to buy-back its shares for the purposes of allocating them to the employees of Internal control over financial reporting is a process designed the Company as part of Employees Share Plan. The Group has not yet established any pension program for employees or set up an the Group in so far as they affect the preparation and presentation of the consolidated financial statements. to provide reasonable assurance regarding the reliability of independent fund for such program, other than Governmental obligatory social insurance programs. financial reporting and the preparation of financial statements EXTERNAL AUDITORS AUDIT REPORT for external purposes in accordance with IFRSs, as endorsed STATUTORY CHARGES, PENALTIES AND SANCTIONS by SOCPA. L’azurde’s internal control over financial reporting The external auditor’s report for the year ended 31 December includes those policies and procedures that: 2020 contained other matters as follows: a. Payments during 2020: 1) pertain to the maintenance of records that are in reasonable OTHER INFORMATION INCLUDED IN detail and accurately and fairly reflect the transactions and L’azurde is committed to paying certain taxes, fees and any other expenses to the Saudi Arabian Government as per applicable THE GROUPS ANNUAL REPORT dispositions of L’azurde’s assets; laws and regulations. These expenses are charged as a result of the Company’s operations. The following table shows the Other information consists of the information included in the 2) provide reasonable assurance that transactions are recorded statutory charges paid during year 2020 with a brief description and reason for each charge. Group’s 2020 annual report, other than the financial statements to permit preparation of consolidated financial statements and our auditor’s report thereon. Management is responsible for in accordance with IFRSs, and that L’azurde’s receipts the other information in its annual report. and expenditures are being made only in accordance with 2020 2019 Type of payment Statutory organization Description Reason (SAR’m) (SAR’m) Our opinion on the consolidated financial statements does cover authorizations of L’azurde’s management and directors; and the other information and we do not and will not express any form 3) provide reasonable assurance regarding prevention or timely Zakat expense and Government requirement of assurance or conclusion thereon. Zakat and Value General Authority of 15.7 18.6 Value Added Tax paid in / Zakat and Value Added detection of unauthorized acquisition, use, or disposition of Added Tax Zakat and Income Tax accordance with laws Tax laws and regulations and regulations In connection with our audit of the consolidated financial L’azurde’s assets that could have a material effect on the statements, our responsibility is to read the other information consolidated financial statements. Visa’s and passports Ministry of Interior 0.2 0.7 Amounts paid or charged as Government requirement identified above and, in doing so, consider whether the other visa and passport expenses Due to its inherent limitations, internal control over financial information is materially inconsistent with the consolidated reporting may not prevent or detect misstatements. Also, financial statements or our knowledge obtained in the audit, or Iqama expenses Ministry of Labor 1.9 3.3 Amounts paid or charged Government requirement projections of any evaluation of effectiveness to future periods are as iqama expenses otherwise appears to be materially misstated. subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with Amounts paid or charged as Government requirement/ If, based on the work we have performed, we conclude that there Social Insurance General Organization 2.4 3.6 social insurance expense Labor and Social Insurance the policies or procedures may deteriorate. for Social Insurance according to Labor and laws and regulations is a material misstatement of this other information; we are Social Insurance Laws required to report that fact. We have nothing to report in this L’azurde’s management conducted an evaluation of the regard. Total 20.2 26.2 effectiveness of internal control over financial reporting and based on this evaluation, management concluded that L’azurde’s internal control over financial reporting was effective as at 31 b. Penalties and Sanctions December 2020. L’azurde was not exposed to any material amount of penalty, or any sanction or any precaution by any supervisory regulatory or judicial unit.

80 81 03 | FINANCIAL PERFORMANCE CAPTIAL, INVESTORS AND SHAREHOLDERS

B. SHAREHOLDERS OWNERSHIP NOTIFICATION CAPITAL, INVESTORS AND SHAREHOLDERS According to Article (68) of The Rules on the Offer of Securities and Continuing Obligations, related to substantial shareholders, and Article (33) of the Listing Rules issued by the Capital Market Authority (CMA), L’azurde has not received any new ownership A. CAPITAL notification from a shareholder to inform the company about his ownership percentage that is equal to or more than 5.0% of the company’s issued shares according to the CMA regulations. Moreover, the list hasn’t included the presence of an increase change in The following table is summarizing L’azurde Company for Jewelry share capital as at 31 December 2020: any of the shareholders’ s ownership that is equal or greater than 5%. However, it mentioned a decrease of the company’s ownership to less than 5% of the substantial shareholders during 2020.

Description Value / No. Of Share As of Monday November 18, 2020, L’azurde Holding Company has sold its entire shareholding in L’azurde Company for Jewelry, through a series of transactions on the Saudi Stock Market. Authorized share capital SAR 430,000,000 We would like to reiterate that we do not foresee any impact from this change in ownership structure on the financial position of Issued shares 43,000,000 L’azurde Company for Jewelry, its operations and future growth plans. L’azurde Company for Jewelry is a separate legal entity Free float shares 43,000,000 managed by a professional, long-tenured and independent Management team and Board of Directors.

Paid up capital SAR 430,000,000 The following table outlines the ownership of the substantial shareholders, estimated at 5.0% or more of the issued shares until December 31, 2020: Par value /share SAR 10 DIRECT OWNERSHIP OF 5% OR MORE OF THE ISSUED SHARES AND CHANGE TO SUCH INTERESTS DURING 2020 Paid-up value/share SAR 10

Number of shares at the Number of shares MAJOR SHAREHOLDERS AND OWNERSHIP CHANGES beginning of the year at the end of the year Net change By the end of 2020, L’azurde had 31,708 shareholders. Individual investors (natural person) represent the great majority, with a Shareholders Percentage of Percentage of % Of shares % Of total rate equal to 99.4% of the total share ownership. Number of shares ownership Number of shares ownership Number of shares ownership issued shares

Only an individual investor possesses more than 1 million shares, representing 14.89% of the company’s issued shares. L’azurde Holding Company 23,673,976 55.05% 23,673,976 55.05% (23,673,976) (100) (55.05) The following tables gives a description of L’azurde’ s shareholders:

Mr. Abdulaziz Saleh Alothaim 6,404,850 14.89% 6,404,850 14.89% ------L’AZURDE SHAREHOLDERS ACCORDING TO NATURE OF INVESTORS

Shareholder type Number of shareholders Number of shares Percentage of ownership

Individuals Investors 31,687 42,721,276 99.4%

Corporate Investors 21 278,724 0.6%

Total 31,708 43,000,000 100%

L’AZURDE INVESTORS ACCORDING TO NATIONALITY

Shareholder nationality Number of shareholders Number of shares Percentage of ownership

Saudi 30,946 41,964,413 97.59%

GCC 7 41,248 0.02%

Other nationalities 755 994,339 2.39%

Total 31,708 43,000,000 100%

* L’azurde downloaded shareholders reports from Tadawul a total of 14 times during FY 2020 for internal compliance purposes and General Assembly Meetings purposes..

82 83 03 | FINANCIAL PERFORMANCE CAPTIAL, INVESTORS AND SHAREHOLDERS

C. OWNERSHIP NOTIFICATION FOR BOARD MEMBERS, SENIOR EXECUTIVES AND THEIR RELATIVES During 2020, no one of the board members, senior executives and their relatives had any interest, contractual securities, rights issued on shares or debt instruments of the company or its affiliates, except for Mr. Abdullah Abdulaziz Saleh Al Othaim, Vice- Chairman and Non-Executive Director.

The following table illustrates shares held by members of the Board of Directors, their spouses and minors in 2020:

Number of shares Number of shares Member Name at the beginning at the end of Net change Change % of the year the year

Mr. Abdullah Abdulaziz Saleh Al Othaim 41,000 41,000 -- --

During the year 2020, the company has not issued or granted any class and number of any convertible debt instruments, contractual securities, pre-emptive rights or similar rights. Besides, the company has not had any treasury shares retained, redeemed, purchased or cancellation of any redeemable debt instruments. There were no arrangements or agreements by which any of the Board Members waived any salary or compensation. Furthermore, no arrangement or agreement were conducted, under which a shareholder of the company has waived any rights to dividends.

Board of Directors Members

Board of Directors Appointed on 06/08/1439 H (22/04/2018 G)

Owned Shares

Date of Name Position Type of Membership Appointment Nationality Age Direct Indirect

Number %

Non-executive Mr. Mohammed Ebrahim Chairman 26/04/2018 Bahraini 68 None None None None Juma Al Shroogi Non-independent

Non-executive Mr. Abdullah Abdulaziz Vice Chairman 26/04/2018 Saudi 32 41,000 0.095348% None None Saleh Al Othaim Non-independent

Non-executive Mr. Khalifa Hassan Board Member 10/12/2019 Bahraini 35 None None None None Al Jalahma Non-independent

Non-executive Mr. Brian Norman Dickie Board Member 22/04/2018 Irish 65 None None None None Non-independent

Non-executive Mr. Adel Abdullah Board Member 22/04/2018 Saudi 45 None None None None Al-Maiman Non-independent

Non-executive Mr. Bander Talaat Hamooh Board Member 18/03/2020 Saudi 53 None None None None Non-independent

Non-executive Mr. Abdul Kareem Board Member 22/04/2018 Saudi 59 None None None None Assad Abu Alnasr Non-independent

Non-executive Mr. Amin Mohamed Board Member 22/04/2018 Saudi 46 None None None None Akef Al-Maghrabi Non-independent

Non-executive Mrs. Sabah Khalil Board Member 22/04/2018 Bahraini 66 None None None None Almuayyed Non-independent

84 85 03 | FINANCIAL PERFORMANCE DIVIDEND POLICY

DIVIDEND POLICY POLICY OBJECTIVES This policy is designed to ensure that the process for determination, 3. Thereafter, the remainder shall be distributed amongst declaration and distribution of dividend of L’azurde is clear, the shareholders as a first instalment equal to 5% of the transparent and is in the best interests of both the Company and paid-up capital. its shareholders. 4. Without prejudice to the provisions of Article 20 of the by-laws Shareholders are entitled to receive their share of dividend as per and Article 76 of the Companies Law, in addition to the above, the decision of the General Assembly in respect of distribution no more than 5% of the remaining profits shall be distributed of final dividend to shareholders or the board resolution for as a bonus to the members of the Board of Directors, provided distributing interim dividend. that the bonus is commensurate with the number of sessions attended by each member. The resolution shall specify the record date and the distribution date provided that the resolution shall be executed as per 5. The remainder shall be distributed to the shareholders as the Regulatory Rules and Procedures issued pursuant to the an additional portion in the profits, or shall be transferred to Companies Law related to Listed Joint Stock Companies. the retained earnings, as may be determined by the Ordinary General Assembly, based on the recommendation of the Board DIVIDEND PAY-OUT of Directors. Each year, the Board will estimate a dividend payment for the year, 6. The Board of Directors may recommend the distribution of which will be subject to reduction or increase at the end of the interim quarterly or semi-annual profits provided that they year based on the Company’s by-laws and certain circumstances, are later endorsed by the Ordinary General Assembly. Such including changing market conditions and restrictions under laws resolutions must be notified to CMA, and disclosed to the of the Kingdom, if applicable. Stock Exchange.

On an annual basis and at the end of the year, the Board will 7. The General Assembly shall approve the dividend and the date recommend to the General Assembly to distribute dividend as a of distribution. This dividend, whether in the form of cash or percentage of share capital. The Company’s by-laws state that the bonus shares, shall be given, as of right, to the shareholders net annual profits shall, after deduction of all general expenses, who are listed in the records kept at the Securities Depository be divided as follows: Centre (currently operated by Exchange) as they appear at the end of trading session on the day on which the General 1. 10% of the annual net profits shall be set aside to form a Assembly is convened. statutory reserve. Such setting aside may be discontinued by the Ordinary General Assembly when the said reserve total 8. The dividend declared by the General Assembly or the Board has reached an amount equal to 30% of the share capital of (for interim dividend) shall be paid by L’azurde to the respective Company’s share capital. If the said reserve exceeds 30% shareholders within 15 business days from the issuance of the of the paid-up capital, the General Assembly may resolve to resolution. distribute the excess to the shareholders. Shareholders shall be entitled to their dividend within the specified 2. The Ordinary General Assembly, upon a proposal by the period from the General Assembly’s approval of the percentage of Board of Directors, may set aside 10% of the net profits to share capital to be distributed as dividend. The Board of Directors constitute a consensual reserve to be allocated for a certain shall ensure that the timeline is strictly adhered to and that the purpose or purposes. The consensual reserve may not be exact date of payment should be declared in advance. used for a purpose or purposes other than the purpose or purposes for which it was established without a resolution of the Extraordinary General Assembly, upon a recommendation from the Board of Directors.

86 87 03 | FINANCIAL PERFORMANCE DIVIDEND POLICY

A. DIVIDEND DISTRIBUTIONS As per Article 47 of L’azurde by-laws, each shareholder is entitled to a share of dividend in accordance with the decision of the Board of Directors regarding the distribution of interim dividends or in accordance with the resolution of the General Assembly. The decision or resolution shall be annotated with the due date and the date of distribution. The shareholders registered in the Shareholders’ Register shall be entitled to the dividend at the end of the day on which maturity occurs.

The profits distributed to shareholders shall be paid at the locations and time determined by the Board of Directors, in compliance with Companies Law and CMA’s instructions.

L’azurde has achieved an average dividend pay-out ratio of approximately 50% of the annual net profit for the years 2012 to 2016 included. While for the years from 2017 to 2019 the general assembly approved the board of directors’ recommendation to not distribute dividends to support Company’s financial position.

Despite the fact that Company expects, as per its past dividend distribution practice, to distribute annual cash dividend, there are no guarantees for the distribution of dividend on an ongoing basis. There are no guarantees to the value and percentage of expected dividend each year.

Cash dividend is approved or recommended according to dividend policy and a number of aspects including profit achieved, future cash flows, new capital investment, taking into account the importance of maintaining a strong financial position.

There are no arrangements or agreement under which a shareholder of the company has waived his rights to dividend. B. DIVIDEND HISTORY The following table provides details related to L’azurde Group’s dividend payments during last five years.

Dividend paid compared to net income and share capital (SAR million).

General Assembly not to pay a dividend on 9 March 2020. This recommendation will be presented to the General Assembly for voting which is planned to take place on April 19, 2020.

Dividend distributed Description 2013 2014 2015 2016 2017 2018 2019

Net profit for the year 74,177,974 86,290,539 100,567,197 71,951,900 31,543,923 17,665,938 (17,547,550)

Dividend paid 37,088,987 43,145,269 55,000,000 21,500,000 ------

% Of dividend at the end of the year 50% 50% 55% 30% ------

Capital 300,000,000 300,000,000 430,000,000 430,000,000 430,000,000 430,000,000 430,000,000

Capital Return 12% 14% 13% 5% ------

Board of Directors reviews dividend policy on an annual basis and makes a recommendation to the General Assembly based on its assessment of the Company’s financial situation and opportunities for investment. For 2020, the Board has recommended to the General Assembly not to pay a dividend on 30 March 2021. This recommendation will be presented to the General Assembly for voting.

88 89 03 | FINANCIAL PERFORMANCE RISK FACTORS AND BUSINESS CONTINUITY

A. RISK MANAGEMENT POLICY B. RISK MANAGEMENT GOVERNANCE Globally and across the last three decades, many legislative, The Board has delegated to the Audit Committee the responsibility economic and commercial changes, especially in MENA, have RISK FACTORS AND for reviewing the effectiveness of the Group’s systems of internal impacted the business environment and activities in different control and risk management methodology. sectors and have exposed them to additional elements of risk. The Board of L’azurde supervises risk management process L’azurde has defined its internal control and risk management BUSINESS CONTINUITY through the Audit Committee that takes upon reviewing the risk processes according to the global best practices and principles. management framework to make sure it effectively identifies all L’azurde’ s Board of directors and senior management use these areas of potential risk The adequacy of policies and processes principles in the course of setting the strategy and making have been designed and implemented by management to detect decisions. Management then plans, organizes and directs and oversee identified risks and annually report them to the the performance of sufficient actions to provide reasonable Board and the General Assembly. assurance that the Company’s objectives can be achieved while ensuring that associated risks are kept within the agreed risk The Audit Committee regularly reviews the Group’s established appetite at all times. internal control systems, including all related functions, policies and procedures to ensure that they are appropriate The Board is responsible for overseeing the Group’s risk and sufficient to identify and mitigate risks. In the case of highly management and internal controls system and reviewing its complex transactions and contracts, we work with advisers to effectiveness. The system is designed to identify and manage, mitigate risks. rather than eliminate the risk of failure. This is done to achieve the Group’s strategic objectives and provide reasonable but not The Executive Management is responsible for setting the tone of absolute guarantee against material misstatement or loss. the risk management. Management at all levels is responsible for identifying and appropriately managing risks related to The Board has an overall responsibility for determining the their business area. Group functions support and facilitate the nature and extent of the principal risks it is willing to take in implementation of the risk process. achieving its strategic objectives, and for ensuring that risks are managed effectively. The Board has delegated to the Audit C. RISK MANAGEMENT ACTIVITIES Committee the responsibility for reviewing the effectiveness of the Group’s systems of internal control and risk management In 2020, we focused on mitigating and managing key risks methodology. The Internal Control processes consist of the reported in the year 2019. L’azurde has focused on increasing following five closely-related components: awareness of risk management across the Company and its subsidiaries and defining roles and responsibilities for identifying a. Control environment business risks.

b. Risk assessment At L’azurde, we prioritize risks to establish a focus on the most relevant risks. Risks are evaluated based on the potential impact c. Control activities and likelihood analysis. Relevant actions are implemented to d. Communication manage or mitigate the risk.

e. Continuous monitoring The L’azurde approach to risk management begins with establishing the context in which the Company and the relevant L’azurde management gives attention to the risk management business units operate, including consideration of relevant process, as a mean of identifying, assessing, prioritizing and strategic and business objectives. All types of risks are managed mitigating risks across its subsidiaries and business units. All through the same process. that is executed with a coordinated and cost-effective application of resources to minimize, monitor, and control both the The primary responsibility for risk management at L’azurde probability and the impact of adverse events so as to maximize rests with the business unit, in particular with management. the realization of opportunities. Management is responsible for identifying, analyzing, monitoring, controlling and reporting risks within the business. It is therefore Risks are effectively managed by L’azurde through the effective a key part of L’azurde risk management framework. implementation of various controls, which include:

• Board approved risk management framework

• Documented policies and procedures

• Maintenance of registers

• Ongoing monitoring of regulatory obligations

• Internal and external reports

EFFECTIVE MANAGEMENT OF RISK IS ESSENTIAL TO THE EXECUTION OF THE GROUPS STRATEGIES, THE ACHIEVEMENT OF SUSTAINABLE SHAREHOLDER VALUE, THE PROTECTION OF THE BRAND AND THE GUARANTEE OF GOOD GOVERNANCE.

90 91 03 | FINANCIAL PERFORMANCE RISK FACTORS AND BUSINESS CONTINUITY

D. L'AZURDE RISK FACTORS As a consequence, the financial impact of this global pandemic 6. IMPACT OF GOLD PRICE FLUCTUATIONS AND 8. RISKS RELATED TO THE VALUE OF RETURNED INCREASE: STONES WITH PROCEEDS OF GOLD ARTEFACTS Managing risk appropriately is critical to the direct and future (Coronavirus) may extend until the first quarter of 2021. However, success of L’azurde; therefore, the company has developed due to the uncertainty of the current situation and the potential future circumstances of the repercussions of this pandemic, it International gold prices have significantly fluctuated over the The company collects gold in exchange for gold from its a risk management methodology aligned with the Board of past few years and more frequently this year. Periods of high wholesale customers, in order to avoid the effect of price Directors and managed by the Executive Management Board. is not possible for the company at this stage to determine full financial impact of the COVID-19’s outbreak. fluctuations create uncertainty and can delay the purchase fluctuation of gold between the dates of sale and collection. The This methodology is dynamic and constantly evolving, thereby decision until gold price stabilizes. High gold prices may collection received from the customers is in the form of either allowing L’azurde to manage its risks efficiently, ensuring that 2. THE RISKS OF RELYING ON MAJOR SUPPLIERS reduce the quantity of gold jewelry bought by wholesalers and used gold coins bought from the consumers, or gold bars. In the short and long term strategic and business-related objectives end consumers and in particular demand for heavier weight event that they are used gold artefacts, they may contain some can be met. The group”s subsidiary company (Izdiad Al-Arabia Trading gold jewelry. If L’azurde is unable to change its product mix stones, which upon melting, lose their weight equivalent to gold. company)has an exclusive franchise right for the “TOUS” brands to manufacture and offer lighter weight gold jewelry within a If the collection rate of used gold artefacts containing a high As a publicly listed company, L’azurde operates in a highly and products, and it mainly depends on the franchisor (the reasonable time, this may have a negative impact on L’azurde percentage of stones is high, an increase of the cost incurred regulated environment, which is increasingly complex and Spanish company TOUS) from which the purchases represent Group’s sales to wholesale customers and end consumers. by the company will occur. The company currently takes gold demanding. The company is therefore required to comply with a 90% of the general purchases, with an amount of 12.8 million In addition to the possible decline on gold jewelry sales when artefacts with stones. Nonetheless, if it decides to no longer number of regulatory requirements and legal obligations. The key Saudi riyals. As a matter of fact, the Spanish company TOUS is the gold price fluctuates and increases, the rise in gold prices accept these stones from customers or consumers in the future, regulators of L’azurde Group’s activities are the Capital Market exclusive supplier for most TOUS products sold by the subsidiary increases the value of the gold facilities utilized, which L’azurde the costs related to the stones will decrease which may have Authority (CMA), the Saudi Stock Exchange (TADAWUL) and other company Izdiad Al -Arabia. Any change in the terms, prices, Group obtains from banks, and may subsequently increase the an impact on relations with both customers and consumers. Governmental bodies, mainly the Ministry of Commerce and or quality of the supplied materials, or a sudden interruption finance charges and the cash margin requirements. If L’azurde In this case, future sales and gold collection may be negatively Investment (MOCI). L’azurde is also subject to a number of other of supply for any reason, will directly and negatively affect the Group is unable to reduce its working capital and gold facilities affected. Knowing that the company can’t predict the quantity or GCC and regional legislative requirements. company’s business and its operational results. This, in turn, will utilization, the finance charges and cash margin requirements percentage of stones that will be returned from customers and The risks set out below represent the principal risks and lead to a decrease in the group’s profitability, an increase in its might increase. All the above may have a material adverse consumers in the future, it will be exposed to many economic and uncertainties which may adversely impact the performance of losses, and its financial position being negatively affected. impact on L’azurde Group’s business, financial condition, results social factors that are difficult to predict. the Group and execution of its key strategies: of operations or prospects. 3. CHANGING END CONSUMER PREFERENCES: 9. SECURITY, TRANSPORT AND FRAUD RISKS: 1. THE RISKS OF THE CORONAVIRUS (COVID-19) 7. RISKS RELATED TO INTANGIBLE ASSETS The jewelry industry is characterized by changing fashion L’azurde Group operates in a business that is susceptible to theft, PANDEMIC AND GOODWILL trends and changing or evolving end consumer preferences. and the high value of its inventory makes it even more susceptible. The new Coronavirus (COVID-19) began to spread in December The L’azurde Group strives to anticipate, identify and capitalize On 05/08/2018, the company acquired 100% of the international The transportation of L’azurde Group’s gold and diamond jewelry 2019, and the World Health Organization declared the virus a on emerging fashion trends by designing, developing, marketing franchise operator “TOUS” in the Kingdom of Saudi Arabia, for an products to wholesale customers and its own retail outlets also global pandemic in March 2020, and thereafter the virus has and delivering innovative, good quality, well priced classic estimated fee of 185.5 million Saudi riyals. Goodwill amounting exposes L’azurde to security risks. spread widely and rapidly to affect more than 194 countries and fashionable jewelry. Failing to achieve the above can have to 109.9 million Saudi riyals, was recorded within the long-term In addition, any security breach at the company’s factories, around the world which were all facing an unprecedented significant negative impact on the consumer demand on L’azurde intangible assets in the company’s financial statements as of offices, and shops or any failure in transport logistics may result health and economic crisis. In the second half of February 2020, products and its revenues. December 2019. In accordance with the requirements of the state in a material loss in inventory, and may have a material adverse when the virus spread and reached many countries around the standards for the preparation of financial reports, this goodwill 4. DECREASE IN END CONSUMER SPENDING: impact on L’azurde Group’s business, financial condition, and world, governments began imposing public health containment is subjected to test a decline in the value on an annual basis. It is considered to a challenging issue due to estimates, complex results of operations or prospects. measures to delay its spread and strengthen the capacity of the Different economic fluctuations in the Kingdom and other health sector. The situation in this way led to a sudden halt in accounting requirements, and significant judgments required in countries where L’azurde conducts its business can negatively determining the assumptions used in estimating the recoverable 10. ABILITY TO EXECUTE THE TARGETED economic activities and a sharp decline in economic prospects. affect the end consumer consumption and behaviour patterns BUSINESS PLAN AND GROWTH STRATEGY: As a result, the spread of the virus had a significant impact on amount. Consequently, any significant change or reduction in towards luxury products and leisure goods notably gold and future estimates and assumptions for the results of the brand’s the global economy and put pressure on individuals, companies, L’azurde Group’s future performance depends on the successful diamond jewelry. Moreover, due to the decrease in end consumer business, financial position and cash flows, including estimates and governments. execution of its business plan and growth strategy. Due to the disposable income, the increase in gold prices, high inflation, the of future sales growth rates, terminal value growth rates, and diversity of L’azurde Group’s activities and its international changes in fashion trends, and many other factors, consumers weighted average cost of capital (discount rate) may lead to a The government of the Kingdom of Saudi Arabia has imposed geographical spread, its ability to successfully expand to new may tend to resell, return or exchange their gold jewelry. In some reduction in the goodwill value, which may have an impact on health and economic measures to contain the consequences markets or expand its penetration in already existing ones is countries, L’azurde Group’s internal policies accept returns and the company’s profitability, results of operations and future of the increasing outbreak of the virus, like many countries in dependent on a number of factors, some of which are outside the exchanges of gold jewelry under specific conditions. prospects. the world and the region. Health measures included imposing control of the company. There can be no assurance that L’azurde a complete and partial closure of economic and government If these returns and exchanges exceed the usual levels due to will be able to successfully execute its business plan and growth activities, quarantine, and travel restrictions and prevention. the above-mentioned factors, this may have a material adverse strategy. Any failure to execute L’azurde Group’s business plan Economic measures included financial support for citizens effect on L’azurde’ s business, financial conditions, and results of and growth strategy may have a material adverse effect on its and people affected by the Corona pandemic, family and operations or prospects. business, financial condition, results of operations or prospects. sickness leaves paid by the state, expansion of unemployment compensation, delayed tax payments, and other measures to 5. IMPACT OF SEASONALITY ON L'AZURDE support companies. GROUP'S REVENUES

Like other companies, L’azurde’ s activities were affected The jewelry industry is seasonal in nature and the demand for during the year 2020. Wholesale and retail sales decreased by L’azurde Group’s products is event driven. As a result, L’azurde a large percentage compared to the year 2019, as a result of the Group’s sales are subject to seasonal fluctuations. Due to these temporary closure of retail showrooms in the Kingdom of Saudi seasonal factors, comparison of sales and operating results Arabia, and all activities within the commercial complexes, between different periods within a single financial year may except supermarkets and pharmacies in the Kingdom of Saudi not be meaningful and should not be relied upon as indicator of Arabia. The suspension of all domestic and international flights L’azurde Group’s annual performance. In addition, this seasonal had also a huge impact on sales in different outlets at airports. consumption pattern may cause L’azurde Group’s operating Moreover, a complete and partial curfew was imposed during results and financial condition to fluctuate from period to period. the period from March 23 to June 21, 2020, Hence, production operations were affected due to the reduction of working hours and employees number. All these factors reflected negatively on the performance of the company, and had an unfortunate effect on its operations and business. 92 93 03 | FINANCIAL PERFORMANCE RISK FACTORS AND BUSINESS CONTINUITY

11. OPERATIONAL AND MARKET Oro Egypt Co. has been exempted from corporate tax from 1 F. GENERAL RISK CATEGORIES RISKS ASSOCIATED WITH January 2005 to 31 December 2014 while L’azurde Egypt has The following are some of the general risks that affect L’azurde Group’s business environment: INTERNATIONAL OPERATIONS been exempted from corporate tax from 1 January 2009 to 31 L’azurde generates substantial revenue outside the Kingdom. December 2018. Therefore, Oro Egypt and L’azurde Egypt will Business Risks Market Risks Economic and Regulatory Risks It also provides foreign manufacturing operations to Egypt and have to start paying corporate tax starting from 2015 and 2019 foreign suppliers. As a result, the company is subject to the respectively. However, there is no guarantee that the tax laws and regulations in Egypt will not change without prior notice, or risks of doing business outside the Kingdom, such as potentially Unexpected business interruption Gold prices fluctuations Economic and political risk adverse tax consequences, including changes in taxation policies that the tax authorities may challenge the exemptions status of or inconsistent enforcement. Furthermore, it can be subject to the Egyptian entities and subject them to tax, which may have a Gold facility agreements General slowdown in economy Regulatory risk different, complex and changing laws, regulations and court material adverse impact on L’azurde Group’s business, financial systems of multiple jurisdictions and compliance with a wide condition, and results of operations or prospects. variety of foreign laws, treaties and regulations. In addition to Adequacy of insurance coverage Foreign exchange rates Labor force regulation Besides, the Company pays zakat on behalf of its shareholders. import and export licensing requirements and regulations, as It has submitted zakat returns on due dates. Nonetheless, there well as unforeseen changes in regulatory requirements, and is still a risk that the General Authority of Zakat and Tax in Saudi Protection of intellectual property Competitive environment restrictions on repatriation of the foreign subsidiaries’ profits Arabia may refer to a specific historical year and challenge the to L’azurde. Most importantly, the Group’s results of operations submitted zakat returns while imposing an assessment on the may be affected positively or negatively by volatility in currency Dependence on “L’azurde” brand Fall in demand of jewelry company and requesting it to pay additional zakat. This may exchange rates and its ability to effectively manage currency have a material adverse impact on L’azurde Group’s business, transaction risks, especially in relation to the Egyptian Pound, in financial condition, results of operations or prospects. light of its fluctuation over the past couple of years. Lease agreements not renewed Expansion strategy

14.RISKS ASSOCIATED WITH 12. CLIENT CREDIT RISK IMPLEMENTING VALUE ADDED TAX (VAT) G. BUSINESS CONTINUITY Credit risk is the peril of financial loss due to the default of The Value Added Tax (VAT) regulation has become effective in The nature of our business requires our ability to provide rapid recovery of key products, models, designs and after-sale-services L’azurde Group’s wholesale customers in meeting their financial the Kingdom of Saudi Arabia as of January 1, 2018. The value- in the event of business interruptions. L’azurde is efficiently using a methodology of Business Continuity Management to counter obligations towards it. The Group’s credit risk is mainly related added tax (VAT) is an indirect tax that is imposed on every stage interruptions to business activities and to protect critical business processes from the effects of major failures or disasters. to its accounts receivable. L’azurde may not be able to obtain of the supply chain, from production and distribution to the final Therefore, there are no significant doubts concerning L’azurde and its subsidiaries’ ability to continue their operations. There are no collaterals in support of all its accounts receivable. There can sale of a good or service, with some exceptions. The Kingdom of plans or decisions related to restructuring or discontinuing the operations of the company or its subsidiaries. be no assurance that L’azurde would be able to evaluate the Saudi Arabia imposes value-added tax (VAT) at a standard rate of current financial condition of its wholesale customers and 5% on all gold products and diamond jewelry. Therefore, there accurately determine the ability of such counter-parties to is a risk that VAT will be applied in general, and in particular fulfil their relevant financial obligations. Some customers may on the sector elegant jewelry and products, which may affect be highly leveraged and subject to their own operating and consumer demand in the Kingdom of Saudi Arabia and thus the regulatory risks, which increases the risk that they may default sales volume. on obligations to the Group. The inability or failure of significant wholesale customers to meet their obligations to the company, On 10/17/1441 H, corresponding to 06/09/2020 G., the Board of and their insolvency or liquidation may have a material adverse Directors of the General Authority for Zakat and Income issued impact on L’azurde Group’s business, financial condition, and Decision No. (20-3-2) to increase the value-added tax (VAT) rate, results of operations or prospects. to become 15% of the sale price, starting from 07/01/2020 AD. Since the value-added tax (VAT) is by nature borne by the final 13. TAX AND ZAKAT LIABILITY consumer, the company has added the value-added tax (VAT) to its prices, which led to an increase in the prices of the company’s The company is currently subject to several types of taxes other products, and this may lead to a significant decline in sales, than zakat, like taxes on business and industrial profits in Egypt which may have a significant negative impact on the business of and other types of taxes. In case new taxes are implemented on L’azurde Group or its financial position, results of its operations, companies or new fees other than those implemented nowadays, or future prospects. this will have a material adverse impact on the company’s net profits.

94 95 �4 CORPORATE GOVERNANCE

96 97 04 | CORPORATE GOVERNANCE BOARD FORMATION

BOARD FORMATION GENERAL ASSEMBLY OF SHAREHOLDERS

BOARD OF DIRECTORS CHAIRMAN

NOMINATIONS AND CHIEF EXECUTIVE EXECUTIVE AUDIT COMMITTEE RENUMERATION OFFICER COMMITTEE COMITTEE

INTERNAL AUDIT BOARD SECRETARY

A. CORPORATE GOVERNANCE CODE The purpose of this code is to set out L’azurde approach to The Board’s actions are subject to laws, regulations and corporate governance. L’azurde is committed to maintaining shareholders in the General Assembly Meeting. high standards of corporate governance, and considers good corporate governance as an essential tool for maximizing long L’azurde Corporate Governance Manual has been prepared term shareholders’ value and consistency, with its commitment according to CGR issued by CMA and international principles to quality in all of its processes. The policies and rules set out in of corporate governance, and should be viewed as setting the the Company’s Corporate Governance Manual are considered to framework for corporate governance within the Company. It be mandatory for all directors and staff of L’azurde, and can only should also be viewed within the context of the broader legislative be amended by a resolution of the Board of Directors or General framework of Saudi Arabia. In particular, the stipulation of the Assembly, as appropriate, and as required by the CGR. following requirements which have not all been incorporated in this manual, need to be borne in mind when considering Corporate governance is defined as “the system by which corporate governance issues: business corporates are directed and controlled”. The corporate governance structure specifies the distribution of authorities, - The regulations of CMA and Saudi Stock Market and responsibilities among different participants in the “Tadawul”. Company, such as Board members, managers, shareholders and other concerned parties. Moreover, it dictates the rules and - The Companies’ Law of Saudi Arabia and associated procedures for making decisions on corporate affairs. Thus, it ministerial directives of the Ministry of Commerce and provides a structure through which the Company’s objectives, Investment. the means of attaining them, and monitoring performance are - L’azurde by-laws. set. The Board of Directors is responsible for L’azurde Corporate Governance Manual. The Board of Directors will approve amendments to the Corporate Governance framework from time to time, or invite the General The shareholders’ role in governance is to appoint directors, Assembly to approve any amendment that requires shareholders’ audit committee and independent auditors, and to guarantee approval, to comply with changing legal environment, thus the implementation of an appropriate governance structure. The ensuring sound application of governance practices. responsibilities of the Board include setting Company’s strategic aims, providing the leadership to put them into effect, supervising management of the business, and reporting to shareholders on their stewardship, in accordance with Companies’ Law and CGR.

98 99 04 | CORPORATE GOVERNANCE BOARD FORMATION

B. THE BOARD OF DIRECTORS 2. BOARD OF DIRECTORS' Specific key decisions and matters have been reserved for RESPONSIBILITIES approval by the Board. These include decisions on the Group’s strategy, the annual budget and operating plans, major capital It is the responsibility of the Board to support management in expenditure and transactions, financial results, the dividend and 1. BOARD OF DIRECTORS FORMATION its strategic aims, in order to enable the Company to keep on other capital returns, the approval of the Group’s risk appetite successfully and sustainably performing for our shareholders The Board is appointed by shareholders with primary responsibility for operating the Company in their long term best interests. and other governance issues. L’azurde General Assembly provides a Board of Directors structure of nine (9) members using accumulated voting method based on and wider stakeholders. pre-recommendation of Nomination and Remuneration Committee for a three-year renewable term. The majority of Board members The Board is ultimately responsible for promoting the long- 4. BOARD EFFECTIVENESS are non-executive, one (1) executive member and three (3) independent members. term success of the Group. The Board leads and provides The Board operated very effectively during the year, particularly direction for management, by setting strategy and overseeing The Chairman and the Vice-Chairman shall be elected by the Board members for three (3) years. All Board members, the Chairman to support the important changes taking place, and to its implementation by management. The Board also undertakes and the Vice Chairman can be re-elected. If a Board seat becomes vacant, the Board may appoint a temporary director, provided that manage the significant changes in legislative, economic and the supervision of the Group’s systems of governance, internal such appointment shall be approved by the next Ordinary General Assembly Meeting. business environment, amidst the Coronavirus pandemic control and risk management. and its repercussions on the global legislative, economic, and The Extraordinary General Assembly held on 22/4/2018 re-elected the existing Board of Directors by an accumulated voting for three commercial environment. years and effective from 25/04/2018. The Board represents all shareholders, and performs its duties of care and loyalty in managing the Company’s affairs, and The Chairman collaborated with the Chief Executive Officer to set undertakes all actions in the general interest of the Company, so The following table illustrates current Board members’ names, position, membership status and nationality: the Board’s agenda, and ensure the effective implementation of as to develop it, and maximize its value. the decisions and procedures adopted by the Board. The responsibility of the Board is to protect and maximize the During the year, the Chairman maintained regular contact and interests of the shareholders in the long term. For this purpose, Name Nationality Position Membership Status Appointment Date met separately with the independent directors and other non- the Board bears the full responsibility of corporate governance, executive directors. including setting up the strategy of the Company, and the goals Mr. Mohammed Ebrahim Shroogi Bahraini Chairman Non-Independent Non-Executive 26 April 2018 of the Executive Management, in addition to overseeing the 5. BOARD SECRETARY implementation to achieve such goals. Mr. Abdullah Abdulaziz Al Othaim Saudi Vice-chairman Non-Independent Non-Executive 26 April 2018 The Board Secretary’s main responsibilities are to provide The Board sets the Company’s strategic goals, as well as secretarial services to the Board of Directors. This includes oversees the Executive Management of the Company. The day- assisting with Board calendar, notices and meetings’ agendas, Mr. Brian Norman Dickie Irish Board Member Non-Independent Non-Executive 26 April 2018 to-day operation of the Company is the responsibility of Executive board packs, minutes, and following up on resolutions and action Management, but the Board as a whole ensures and certifies that items originated through board meetings. Such powers comprise the Company’s internal control systems are effective and that Mr. Adel Abdullah Al-Maiman Saudi Board Member Non-Independent Non-Executive 26 April 2018 all duties stipulated by Article (37) paragraph (A) of Corporate the Company’s activities comply with the strategy, frameworks, Governance regulations, and are as following: policies, and procedures approved by the Board, as required by Mr. Khalifa Hassan Al Jalahma Bahraini Board Member Non-Independent Non-Executive 10 December 2019 laws and regulations. 1. To document Board’s meetings, prepare Minutes that include the carried discussions and conducted 3. BOARD OF DIRECTORS' AUTHORITIES Mr. Bander Talaat Hossein Hamooh Saudi Board Member Independent Non-Executive 18 March 2020 deliberations, keep copies of Board’s decisions and voting results, and retain records. The Company is supervised by a Board of Directors consisting Mr. Abdul Kareem Abu Alnasr Saudi Board Member Independent Non-Executive 26 April 2018 of professional and highly experienced persons. The Board is 2. To retain the reports submitted to the Board and vested with full powers to manage the business of the Company prepared by it. and supervise its affairs. The Board delegates responsibility for Mr. Amin Mohamed Al-Maghrabi Saudi Board Member Independent Non-Executive 26 April 2018 overall day-to-day management of the Company to Company’s 3. To provide Board members with the Board meetings’ executive management. agenda and related worksheets, documents, and Ms. Sabah Khalil Almuayyed Bahraini Board Member Independent Non-Executive 26 April 2018 information. The Board of Directors has delegated certain powers to two Committees which consist of Board members who both report to 4. To make sure that Board members comply with the the Board. These two committees are the Executive Committee procedures approved by the Board. During the first meeting of the Board of Directors in current term, after re-election on 26 April, 2018, the members elected both Mr. and the Nominations and Remuneration Committee (collectively Mohammed Ebrahim Shroogi, and Mr. Abdullah Abdulaziz Al Othaim as Board Chairman and Vice-chairman respectively. In addition indicated as the “Board Committees”). 5. To notify Board Members of meetings sufficiently to Mr. Ayman Jamil as Board secretary. ahead of time. The Committees can engage third-party consultants and The Board of Directors accepted on 18/03/2020, the recommendation of the NRC to increase the number of Independent Members, and appointed Mr. Talaaat independent professional advisers, and call upon other resources 6. To present Minutes’ drafts to the Board members who Bander Hamooh, as an independent Member of the Board. Due to the Company’s Law stipulating that the members of the Board shouldn’t exceed nine (9), the of the Group to assist them in discharging their respective will give their opinion before signing. resignation of Mr. Selim Chidiac, Executive Board Member and Chief Executive Officer (CEO) was approved by the Board. On11/10/1441 H (03/06/2020 G), the responsibilities. Ordinary General Assembly session appointed Mr. Khalifa Hassan Al Jalahma as a non-executive member of the Board of Directors starting from the date of 7. To coordinate among Board members. his appointment on 12/10/2019, to complete the Board’s term until the end of the current session on 04/25/2021, succeeding the previous member Mr. Sunil In addition to the relevant Committee members and the Company Bhilotra, a non-executive member. The General Assembly also approved the Board of Directors recommendation to appoint Mr. Bander Talaat Hamooh, an Secretary, external advisers, other directors and members of 8. To regulate the disclosure register of the Board and independent member of the Board of Directors, starting from March 18, 2020, to complete the Board’s term, succeeding the previous member, Mr. Selim the senior management team may attend Committee meetings Executive Management as per Article (92) of Corporate Chidiac (Executive Member) and approved the Board of Directors decision to appoint Mr. Khalifa Hassan Al-Jalahma, non-executive member of the Audit on occasion, but only at the invitation of the relevant Committee’ Governance Regulation issued by CMA. Committee, starting from 12/10/2019 until the end of the current committee’s term, effective on 04/25/2021, as a successor of the previous Committee member s Chairman. Mr. Sunil Bhilotra, a non-executive member, provided that the appointment takes effect from the date of the recommendation decision issued on 12/10/2019, The Board Secretary may not be dismissed except pursuant to a and comes in accordance with the Audit Committee’s work regulation. When considered necessary, the Board of Directors has the power decision of the Board. to form any number of committees for effective governance, oversight and operations of the Company, or to delegate some of its powers to third parties.

100 101 04 | CORPORATE GOVERNANCE BOARD FORMATION

6. EVALUATING PERFORMANCE The Nomination and Remuneration Committee will take upon the study of all candidates’ applications. Then, it will send its The Board shall evaluate, on annual basis, its own performance, requires authorization from the Ordinary General Assembly, recommendations, and the list of qualified candidates for the next session of the Board; knowing that the voting will be first restricted the performance of its committees, and Executive Management provided that such businesses and contracts are carried out in to those who submitted their candidacy to the Ordinary General Assembly, according to the criteria required by the policy of the Board and compare it to the predefined financial and non-financial key the same conditions and settings followed by the company with membership. This policy will be announced by the Company, according to paragraph (A) of Article (8) of the Corporate Governance, performance indicators (KPIs). The performance assessment all contractors and dealers, and are within the normal course of issued by the Capital Market authority. The voting will also be limited to those who were approved by the competent authorities, by should be led by the Nominations and Remuneration Committee, the Company’s activities. use of cumulative voting. and may consider the need for any external counsellors / The date of the General Assembly meeting to elect Board Members will be announced later, after obtaining the legal procedures, and facilitators. The Chairman of the Board of Directors shall inform the Ordinary General Assembly, upon convening, of the transactions and the necessary approvals from the competent authorities. The NRC ran a Board self-assessment for the year 2019, through contracts in which any director has a direct or indirect interest. The Board of Directors requires every candidate of the current BOD Members who would like to be re-elected, or even external an external consulting firm specialized in corporate governance Such notification shall be accompanied by a special report from candidates, to have the required skills and qualities, which will help them to effectively contribute in the Company’s management. The best practices and Board performance evaluation. The overall the Company’s external auditor. Board recommends that shareholders vote for the election of the BOD Members for the next session, among the qualified candidates outcome of the feedback came as following: 8. TERMINATION OF A mentioned in the General Assembly’s yearly agenda of the 2020. 1. The Board and its Committees effectively operated BOARD MEMBERSHIP throughout the year, notably to support the arising changes MEMBERSHIP IN OTHERS COMPANIES' BOARD OF DIRECTORS due to the Coronavirus pandemic on the economic, regulatory Membership of the Board of Directors shall be terminated upon The following tables include Directors’ names, positions, membership status in other joint stock companies, and attendance at Board and legislative environment. the expiration of the Board term. Termination of membership shall meetings held during 2020, noting that these meetings were planned, and the Chairman did not receive any request by two or more of also occur if the member becomes unsuitable for membership, the Board Members to arrange emergency meetings during 2020. 2. The Board consisted of highly qualified, experienced, and under any law or regulation prevailing in the Kingdom, by a skilled non-executive and independent directors, who focus resolution adopted by the Board of Directors, preceded by a written Some of L’azurde Board members hold a Board membership or executive positions in other companies whether in or outside KSA as on the business and corporate governance. The interactions request from a Board Member to the Chairman of the Board. follows: among Board Members, and between the Board and the Executive Management were unanimously considered to be At all times, the General Assembly may dismiss all or any of the very positive. members of the Board of Directors, even though the by-laws provide Members Name Company Name Position Legal Form Location Current / Past otherwise, without prejudice to the dismissed member’s right for 3. During the coming year, the Board should ensure compensation, if the dismissal was on due to an unacceptable Investcorp Bank of Bahrain Advisor Bahraini Joint Stock Company Bahrain Current the continuity of focusing on important strategic matters, reason or at inappropriate time. The General Assembly may also, and keeping track with the Group’s progress and development as per the Board’s recommendation, terminate the membership in-line with its key strategic priorities, production and of any member who missed three consecutive meetings without a Islamic Investment Bank Chairman Bahraini Joint Stock Bahrain Current expertise work plan. legitimate excuse. Gulf Cooperation Council In addition to the external assessment, the NRC held a meeting 9. ELECTION OF BOD MEMBERS Board Directors Institute Chairman Non-profit organization Bahrain Current to discuss the Board Members’ performance and Committees effectiveness during the fourth quarter of 2020, for the purpose The Extraordinary General Assembly that was held on 22 April Mr. Mohammed Crown Prince’s International Scholarship Program Director Board Member Non-profit organization Bahrain Current of raising any relevant key issues. The feedback was positive. The 2018, appointed the existing Board of Directors via accumulated Ebrahim Shroogi Board Members successfully lead the Company amidst arising voting for three years ending 25 April 2021. Board of trustees of Bahrain significant changes in the Saudi jewelry industry. Center for studies and research Member Non-profit organization Bahrain Current On 26 April 2018, during the first Board meeting, and after Both the NRC and BOD discussed the Chairman’s performance, election, Board Members elected the Chairman and Vice- National US-Arab Chamber and came to the conclusion that he perfectly succeeded in chairman, and formed the committees for the current term. of Commerce Board Member Non-profit organization Bahrain Current providing effective leadership and motivating Board Members and Executive Management, which led to the necessary stability The re-election process of the next BOD session in December Bahrain Maritime & Board Member Joint Stock Company Bahrain Past in the context of economic changes. 2020 started by announcing on the Saudi Exchange Tadawul site Mercantile International the opening of nominations for the membership to the Board of Co-Chief Executive 7. MANAGING CONFLICTS OF INTEREST Directors for the next session, that will resume starting 26 April Investcorp Bank B. S. C Officer Bahraini Joint Stock Company Bahrain Past 2021, and for 3 years. All directors have a duty, under the internal conflict of interest Investcorp Bank B.S.C President Bahraini Joint Stock Bahrain Past policy, to avoid a situation in which they have, or could have a The Nomination and Remuneration Committee announced on 30 direct or indirect conflict of interest or possible conflict of November, 2020 on Tadawul website the opening of nominations interest with the Company and the Group, except with a prior for the membership to the Board of Directors for the next term, authorization from the Ordinary General Assembly, which is to that starts on 26 April, 2021 and lasts until 25 April, 2024, since be renewed annually. the current Board term will expire on 25 April, 2021.

A director may not have any interest, whether directly or The nomination for the membership to the Board of Directors will indirectly, in the transactions or contracts concluded for the be in accordance with the provisions of the Company’s Law issued company, unless through prior authorization from the Ordinary by the Ministry of Commerce, and the Corporate Governance General Assembly, to be annually renewed. regulations issued by the Capital Market authority in addition to the policy, standards, and procedures of the Board of Directors’ A director must declare to the Board of Directors any direct or membership approved by the General Assembly. Candidates will indirect interest that he may have in the transactions or contracts be elected at the next General Assembly meeting, which will be concluded for the Company, and this member shall not participate announced later after obtaining the necessary approvals from in voting for the resolution to be adopted in this respect in the the competent authorities. Board of Directors and the shareholders’ meetings.

The businesses and contracts with a Board Member to meet his/her personal needs shall not be deemed as an interest that

102 103 04 | CORPORATE GOVERNANCE BOARD FORMATION

Members Name Company Name Position Legal Form Location Current / Past Members Name Company Name Position Legal Form Location Current / Past

Closed Saudi Joint Kingdom of Mad’a Investment Company Chief Executive Officer Limited Liability Company Current Abdul Latif Jameel United Finance Company Non-Executive Director Stock Company Saudi Arabia Current

Non-Executive Director SmartMed Medical Company Board Member Limited Liability Company Current Safanad Limited Limited Liability UAE Current Audit Committee Chairman Company

Non-Executive Director Family Market Ventures Ltd. Board Member Limited Liability Company Current Hasana, the Investment Arm Company of the Closed Saudi Joint Kingdom of Current General Organization for Social Insurance NRC Committee Member Stock Company Saudi Arabia

Kafalah Government and Banking Kingdom of ITS Ltd. Company Board Member Limited Liability Company Current Sector Loan Guarantee Program Non-Executive Director Government Saudi Arabia Current

Non-Executive Director Hyper B Company Board Member Limited Liability Company Current Health Water Bottling Company Closed Saudi Joint Kingdom of Current NRC Committee Member Stock Company Saudi Arabia Mr. Abdullah Abdulaziz Saleh Al Othaim Saudi Limited Liability Kingdom of Jiwar Medical Center Chairman Limited Liability Company Current Silah Development Company Chairman Company Saudi Arabia Current

Non-Executive Director Al Naqla Marketing for IT Company Board Member Limited Liability Company Current Yanbu National Petrochemical Company Saudi Joint Stock Kingdom of Past Audit Committee Chairman Company Saudi Arabia

Akran Business Group (ABG) Board Member Limited Liability Company Current Savola Group Non-Executive Director Joint Stock Company Kingdom of Past Mr. Abdul Kareem Saudi Arabia Assad Abu Alnasr Abdulaziz Al Othaim & Limited Liability Kingdom of Sons Holding Company Board Member Limited Liability Company Current Kinan Real Estate Development Company Non-Executive Director Company Saudi Arabia Past

Aswar United Real Estate Mohammed Abdulaziz Al-Rajhi Closed Saudi Joint Kingdom of Development Company Boarc Member Limited Liability Company Past & Sons Holding Company Non-Executive Director Stock Company Saudi Arabia Past

Hydrasun Group Holding Ltd Chairman Limited Liability Company United Kingdom Current Saudia Aerospace Engineering Industries Non-Executive Director Closed Saudi Joint Kingdom of Past Stock Company Saudi Arabia

Closed Saudi Joint Kingdom of X Bricks AG Chairman Limited Liability Germany Current Ahmed Mohammed Saleh Baeshen & Co. Non-Executive Director Stock Company Saudi Arabia Past

Kingdom of Sistema Finance company Board Member Joint Stock Company Germany Current The National Commercial Bank Non-Executive Director Joint Stock Company Saudi Arabia Past

Chairman of the Regional Kingdom of SCP Group Holding Board Member Limited Liability Germany Current MasterCard Company Advisory Council Branch Saudi Arabia Past

NDT Corrosion Control Services Under the umbrella Board Member Limited Liability Kingdom of Saudi Arabia Current Co. Ltd of the Arab Union of Arab Banks Non-Executive Director Administrative Lebanon Past Development Organization (AADO) Redline Capital Board Member Limited Liability Germany Current

Limited Liability Kingdom of Magrabi Retail Company President Company Saudi Arabia Current Mr Brian Norman Dickie Icopal AS Chairman Limited Liability Company Denmark Past

Limited Liability Kingdom of Magrabi Hospitals & Centers Board Member Company Saudi Arabia Current Polyconcept Group Non-Executive Director Limited Liability Company Holland Past

Al Amin Medical Instruments Co. Board Member Limited Liability Kingdom of Current Mr. Amin Mohamed Company Saudi Arabia Sistema JSFC, Non-Executive Director Listed Joint Stocks Russia Past Akef Al-Maghrabi Ghassan Ahmed AlSuleiman Furniture Limited Liability Kingdom of Trading CO / IKEA / KSA Board Member Company Saudi Arabia Current Moody International Chairman Limited Liability Company United Kingdom Past

Limited Liability Kingdom of Magrabi Optical Lid. Board Member Company Saudi Arabia Current French Autodistribution Group Board Member Limited Liability Company France Past

Limited Liability A.R.P Global Capital Ltd Board Member Company UAE Current Booz, Allen & Hamilton In Executive Director Limited Liability Company USA Past

North America, TXU Energy Chairman Limited Liability Company USA Past Corporation

Mr. Abdel Abdullah Al-Maiman Mr. Adel Abdullah Al-Maiman does not occupy membership in any other companies Board

104 105 04 | CORPORATE GOVERNANCE BOARD FORMATION

BOARD MEETINGS REGISTER Members Name Company Name Position Legal Form Location Current / Past During 2020, the Board held four quarterly long meetings for one day, seven conference calls and short online meetings, based on Joint Stock the Chairman’s invitation. The details of attendance and dates of Board Meetings during 2020 are as follows: Bahrain Development Bank Board Member Company Bahrain Current

Kingdom of Meetings Attendance Register During 2020 Investcorp Bank B. S. C Board Member Bahraini Joint Current Stock Company Bahrain Membership Members Name Status Attendance Rate February 19, 2020 April 19, 2020 September 30, 2020 December 07, 2020 Audit Committee Joint Stock Kingdom of National Bank of Bahrain Member Company Bahrain Current Mr. Mohammed Ebrahim Al Shroogi Non-Executive Attended Attended Attended Attended 100% Kingdom of Flat 6 labs Bahrain Company Chairman Limited Liability Current Company Bahrain Mr. Abdullah Abdulaziz Al Othaim Non-Executive Attended Attended Attended Attended 100% Mrs. Sabah Khalil Almoayyed Limited Liability Droub consultancy company Partner Company Bahrain Current Mr. Brian Norman Dickie Non-Executive Attended Attended Attended Attended 100% Higher Education Council, Governmental Kingdom of Kingdom of Bahrain Board Member Organization Bahrain Current Mr. Adel Abdullah Al-Maiman Non-Executive Attended Attended Attended Attended 100% Intellect Resources Limited Liability Kingdom of Management Company Managing Partner Company Bahrain Current Mr. Abdul Kareem Abu Alnasr Independent Attended Attended Attended Attended 100% Executive Board Joint Stock Kingdom of Eskan Bank in Bahrain member Company Bahrain Past

Mr. Amin Akef Al-Maghrabi Independent Attended Attended Attended Attended 100% Executive Board Joint Stock Kingdom of Ahli United Bank in Bahrain member Company Bahrain Past

Mrs. Sabah Khalil Almoayyed Independent Attended Attended Attended Attended 100% Al-Burj Company for Closed Joint Kingdom of Medical Laboratories Board Member Stock Company Saudi Arabia Current

Mr. Bander. Talaat Hamooh -- Not Applicable Attended Attended Attended -- Limited Liability Kingdom of Alforas Trading Est. Company Board Member Company Saudi Arabia Current

Mr. Khalifa Hassan Al Jalahma Non-Executive Attended - Attended Attended -- Alforas Trading Est. Limited Liability Kingdom of Company for Growth Board Member Company Saudi Arabia Current

Al Jawd Holding for Limited Liability Kingdom of Industrial Services Board Member Company Saudi Arabia Current The Board of Directors accepted on 18/03/2020, the recommendation of the NRC to increase the number of Independent Members, and appointed Mr. Talaaat Bander Hamooh, as an independent Member of the Board. Due to the Company’s Law stipulating that the members of the Board shouldn’t exceed nine (9), the resignation of Mr. Selim Chidiac, Executive Board Member and Chief Executive Officer (CEO) was approved by the Board. On11/10/1441 H (03/06/2020 G), the Saudi Gulf Fourth Gemstone Limited Liability Kingdom of Holding CO Ltd Board Member Company Saudi Arabia Current Ordinary General Assembly session appointed Mr. Khalifa Hassan Al Jalahma as a non-executive member of the Board of Directors starting from the date of his appointment on 12/10/2019, to complete the Board’s term until the end of the current session on 04/25/2021, succeeding the previous member Mr. Sunil Khalifa Hassan Al Jalahma Bhilotra, a non-executive member. The General Assembly also approved the Board of Directors recommendation to appoint Mr. Bander Talaat Hamooh, an Saudi Gulf Fifth Gemstone Limited Liability Kingdom of Holding CO Ltd Board Member Company Saudi Arabia Current independent member of the Board of Directors, starting from March 18, 2020, to complete the Board’s term, succeeding the previous member, Mr. Selim Chidiac (Executive Member) and approved the Board of Directors decision to appoint Mr. Khalifa Hassan Al-Jalahma, non-executive member of the Audit Committee, starting from 12/10/2019 until the end of the current committee’s term, effective on 04/25/2021, as a successor of the previous Committee member Limited Liability Kingdom of L’azurde Holding Board Member Company Saudi Arabia Current Mr. Sunil Bhilotra, a non-executive member, provided that the appointment takes effect from the date of the recommendation decision issued on 12/10/2019, and comes in accordance with the Audit Committee’s work regulations.

Limited Liability Kingdom of Riaya Wal Ibtikar Company Board Member Company Saudi Arabia Current

Limited Liability Kingdom of Tanmiya Basic For Trading Services Board Member Company Saudi Arabia Current

Limited Liability Kingdom of Healthcare Development Fund Board Member Company Saudi Arabia Current

Closed Joint Kingdom of Al Kaheer Group Board Member Stock Company Saudi Arabia Current

Limited Liability Kingdom of Jamjoum Pharmaceuticals Company Board Member Company Saudi Arabia Current

Limited Liability Kingdom of Mr. Bandar Talaat Hamoui Modawa Medical Company Board Member Company Saudi Arabia Current

Limited Liability Kingdom of Al Salam Home Medical Services Board Member Company Saudi Arabia Current

Kingdom of Zuhair Fayez Partnership Board Member Joint Venture Saudi Arabia Current

106 107 04 | CORPORATE GOVERNANCE BOARD FORMATION

The Board of Directors convenes via conference calls or online meetings, monthly or when required, to follow up business operations, monthly and quarterly financial results, and supervise executive management performance during 2020.

Conference Calls Attendance Register During 2020 Attendance Members Name Rate March March April May July August November 12, 2020 23, 2020 02, 2020 20, 2020 13, 2020 18, 2020 04, 2020

Mr. Mohammed Ebrahim Attended Attended Attended Absent Attended Attended Attended 100% Al Shroogi

Mr. Abdullah Abdulaziz Absent Attended Absent Attended Attended Attended Attended 100% Al Othaim

Mr. Brian Norman Dickie Attended Attended Attended Attended Attended Attended Attended 100%

Mr. Adel Abdullah Al-Maiman Attended Attended Attended Attended Attended Attended Attended 100%

Mr. Abdul Kareem Abu Alnasr Attended Attended Attended Absent Attended Attended Attended 100%

Mr. Amin Akef Al-Maghrabi Attended Absent Absent Attended Absent Attended Attended 86%

Mrs. Sabah Khalil Almoayyed Attended Attended Attended Attended Attended Attended Attended 100%

Mr. Bander Talaat Hamooh Attended Attended Attended Attended Attended Attended Attended 100%

Mr. Khalifa Hassan Al Jalahma Attended Attended Attended Attended Attended Attended Attended 100%

108 109 04 | CORPORATE GOVERNANCE BOARD FORMATION

C. BOARD COMMITTEES 1. AUDIT COMMITTEE The following table illustrates the names, positions and attendance of Committee members: The Audit Committee (“AC”, or “the Committee”) was appointed 1. Audit Committee (AC) by the Ordinary General Assembly, to monitor the Company’s Membership 2. Executive Committee (Ex Com) internal control system, financial reports, internal and external Members Position Status Appointment Date audit, and ensure the Company’s compliance with laws and 3. Nominations and Remuneration Committee (NRC) regulations. Furthermore, the General Assembly delegated Mrs. Sabah Khalil Almoayyed (4) Chairman of the Audit Committee Independent 22 April 2018 the Committee to undertake responsibilities for overseeing the These Committees have been established by the Board, except Company’s risk management, as mentioned in the approved for the AC, which has been elected by the General Assembly. The Charter, dated 8 January 2018. Mr. Brian Norman Dickie Member of the Audit Committee Non-Executive 22 April 2018 number of members in each Committee is from three (3) to five (5). The General Assembly approved the Charter of AC and NRC. FORMATION OF AC AND ITS OBJECTIVES Mr. Adel Al-Maiman Member of the Audit Committee Non-Executive 22 April 2018 The Committee is formed of a minimum of three (3) members The Board has the power to form any number of Committees and a maximum of (5) five members, and a specialist in finance it considers necessary for effective governance, to oversee Mr. Khalifa Hassan Member of the Audit Committee Non-Executive 10 December 2019 and accounting issues. The members of AC shall be appointed Al Jalahma (6) operations, and specify authorities, objectives, and mechanisms by a resolution of the General Assembly of shareholders, for a to prepare relevant reports. On annual basis, the Board period coinciding with each member’s term as director, and may reviews, then either ratifies or modifies the authorities of its be removed or replaced by the General Assembly at any time. 1 Mrs. Sabah Khalil Almuayyed, is an independent Board member, the Chairwoman of the Audit Committee, and a specialist in finance and accounting. subcommittees, to ensure that their delegation of privileges remains appropriate. 2 The Ordinary General Assembly adopted the appointment of Mr. Khalifa Hassan Al Jalahma, as a non-executive Board member, since his nomination on December 10, 2019, to continue Committee members should be selected to ensure a range of the Board term, until the end of the current one, on 25/04/2021, and as a successor to the previous member Sunil Bhilotra, a non-executive member. different backgrounds, skills and experiences, and a sound The Board Committees submit their annual reports to the board understanding of the industry in which L’azurde operates. At to inform it of their activities, findings, recommendations, or Moreover, the Board decision to appoint Mr. Khalifa Hassan Khalifa Al Jalahma, a non-executive member and member of the AC least one member should have sound accounting or financial decisions with complete transparency. The Board regularly starting 10/12/2019, and till the end of the current Committee work on 25/04/2021, as a successor to the previous Board member, experience. follows up the activities of its Committees to ensure the Mr. Sunil Bhilotra, a non-executive member. This appointment is effective from 10 December 2019, and it follows the work of the AC. performance of the duties delegated to them. Hence, the Executive Directors and the Board Chairman are not eligible for Committees’ Chairmen turn in a quarterly report to the Board. Committee membership. Any person who works or has worked in the Company’s finance department, the Executive Management, The Committees can engage third-party consultants and or for Company’s external auditor during the preceding two years AUDIT COMMITTEE MEETINGS IN 2020 independent professional advisers, and can call upon other is also not eligible for Committee membership. At least one of resources of the Group to assist them in discharging their During 2020, AC held ten meetings, two physical, and eight online, via modern technological means. AC organizes meetings quarterly, the Committee members shall be an Independent Director. respective responsibilities. In addition to the relevant committee or when needed, to follow up activities, and review financial data or other related topics. members and the Company Secretary, external advisers If a position in the Committee becomes vacant, the Board The following table illustrates the attendance of each AC member: and, on occasion, other directors and members of the senior shall assign a temporary member to the AC within 40 days of management team can attend committee meetings, but only at the vacancy, upon recommendation of the NRC. A permanent the invitation of the relevant Committee Chairman. Attendance member shall be subsequently appointed by the shareholders in Attendance Register during 2018 Rate the first General Assembly after the position becomes vacant. Each Board Committee is responsible before the Board for Members 11 March 17 August 12 October 2 November its activities. However, this does not relieve the Board of its The primary duty of the Audit Committee is to guarantee an 22 Jan 2020 19 Feb 2020 2020 22 April 2020 6 May 2020 19 May 2020 8 June 2020 2020 2020 2020 responsibility for such activities, duties and powers that it has audit oversight mechanism in order to support the accuracy previously delegated to its Committees. and fairness of the Company reports, financial statements Mrs. Sabah Khalil Almoayyed Attended Attended Attended Attended Attended Attended Attended Attended Attended Attended 100% and data. Moreover, it takes upon ensuring both the integrity AC is responsible before the General Assembly for the and effectiveness of the Company’s internal control and risk performance of its duties and responsibilities, and shall prepare Mr. Brian Norman Dickie Attended Attended Attended Attended Attended Attended Attended Attended Attended Attended 100% management systems, while verifying the Company’s compliance and present a yearly report of its works to the General Assembly. with regulations, and overseeing its transactions. The Board Committees comprise sufficient number of Executives, Mr. Adel Al-Maiman Attended Attended Attended Attended Attended Attended Attended Attended Attended Attended 100% In general, the Committee has the authority to investigate any Non-Executives and Independent Directors. The Chairman of the activity within its terms of reference, or any tasks specifically Board can be member of Board Committees, but not the Audit requested by the Board. The Committee has unrestricted access Mr. Khalifa Hassan Al Jalahma Attended Attended Attended Attended Attended Attended Absent Attended Attended Attended 90% Committee, and is not eligible to be Chairman of NRC. to all records and staff of L’azurde (including internal audit), Committees have full access to all employees, office premises, and the external auditors. The Committee is authorized by the records, systems, legal consultants, etc. in order to discharge Board of Directors to obtain external legal or other independent On March 7, 2020, the Board of Directors has reviewed and approved the AC activities report of 2020. their responsibilities. professional advice as necessary to assist the Committee in its work.

To ensure the independence of the AC work, internal and external auditors can communicate directly with the AC, without any intermediary.

110 111 04 | CORPORATE GOVERNANCE BOARD FORMATION

AUDIT COMMITTEE DUTIES 2. Review disclosures required to be included in financial AND RESPONSIBILITIES statements, in accordance with all regulatory requirements.

The AC undertakes the full duties and responsibilities of an 3. Provide its technical opinion, at the request of the Board, Audit Committee as recommended by CGR, and supervises the regarding whether the Board’s report and the Company’s Company’s risk management. The AC makes recommendations financial statements are fair, balanced, understandable, and for approval to the Board of Directors or shareholders, as contain information that allows shareholders and investors appropriate. to assess the Company’s financial position, performance, business model and strategy. The AC oversees the Company’s financial reporting, risk management and internal control systems, so as to fulfil its 4. Review with management, the external statutory auditor responsibilities and duties. The Committee shall: and the Company’s legal department, as appropriate, any legal, regulatory or compliance matters, that could have a WITH RESPECT TO THE EXTERNAL significant impact on the Company’s financial statements, STATUTORY AUDITORS including significant changes in accounting standards or rules. 1. Provide recommendations to the Board to appoint external auditors, dismiss them, determine their remunerations, 5. Examine the accounting estimates and policies, concerning and assess their performance, after having verified their significant matters that are included in the financial reports. independence, and reviewed the scope of their work, and the terms of their contracts. 6. Obtain explanations from management for unusual variances in the Company’s annual financial statements from year 2. Verify the independence of the external statutory auditor, to year, and review the external statutory auditor’s letter his objectivity, fairness, and effectiveness in carrying out of recommendation presented to management, and the audit activities, taking into account the relevant rules and management’s response in return. standards.

3. Supervise and be directly responsible for the work’s WITH RESPECT TO THE INTERNAL AUDIT supervision of the external statutory auditors (including FUNCTION AND INTERNAL CONTROLS resolving disagreements between management and external 1. Supervise the Company’s internal audit function, to ensure statutory auditors, regarding financial reporting), for the its effectiveness in executing activities and duties. purpose of preparing audit reports or related works. 2. Recommend to the Board, the appointment and replacement 4. Review with the external statutory auditor the audit plan, of the Chief Internal Auditor (“CIA”), and suggest his/ scope of work, and approach, whilst ensuring that he is her remuneration. The Committee shall also review the providing technical and administrative works, within his qualifications of the CIA. scope framework, and expressing his opinion thereon. 3. Review the performance and effectiveness of the internal 5. Have the sole authority to review in advance, and recommend audit function internally every year, and externally, once to the Board all auditing services to be provided by the every five (5) years. external statutory auditor. 4. Ensure that the internal audit function is independent from 6. Review and approve all non-auditing services to be provided Executive Management; the internal auditor shall report by the external statutory auditor (which should be disclosed functionally to the Committee and administratively to the in the periodic reports). CEO.

7. Review the external statutory auditor’s reports and 5. On a regular basis, meet separately with the internal auditor comments on the financial statements, and follow up the to discuss any matters that the Committee and internal audit adopted procedures related therewith. believe should be discussed privately.

WITH RESPECT TO FINANCIAL STATEMENTS 6. Review and approve the internal audit plan and all major changes to the plan. 1. Review and discuss with management and the external statutory auditor, the Company’s interim financial 7. Review the internal audit reports and pursue the statements, and annual audited financial statements prior to implementation of the corrective measures in respect of such statements being presented to the Board for approval. comments included in such reports. The Committee will give its opinion and recommendations to the Board, with respect to such statements to ensure their integrity, fairness and transparency.

112 113 04 | CORPORATE GOVERNANCE BOARD FORMATION

WITH RESPECT TO RISK MANAGEMENT 1. Develop a strategy and comprehensive policies for risk 5. During the year, the AC reviewed Baker Tilly consolidated management that are consistent with the nature and volume audit scope and non-audit services, and approved its fees. of the Company’s activities, monitor their implementation, review and update them, based on the Company’s internal 6. According to the Companies Law and Company’s by-laws, and external changing factors. external auditors shall be appointed annually and according to the Company’s needs, provided that their appointment shall 2. Ensure the feasibility of the Company’s continuation, the not exceed five consecutive years. Furthermore, according successful continuity of its activities, and determine the risks to Article no. 81 of CGR that relates to appointment of the that threaten its existence during the following twelve (12) external auditor, the number of nominees shall not be less months. than t wo audit fir ms. Accor dingly, the AC requested pr opos al s from other audit firms and received offers. After discussing 3. Oversee the Company’s risk management system, assess its and meeting with other audit firms, the AC nominated the effectiveness and mechanisms, to determine and monitor the following three audit firms to the General Assembly based risks that menace the Company, in order to detect areas of on their experience, capabilities and reasonableness of their inadequacy therein. quoted fees:

4. Provide recommendations to the Board on matters related to a) RSM Saudi - Dr. Abdelgadir Bannaga & Partners Company risk management. (Allied Accountants).

5. Receive bi-annual reports on incidents and complaints, and b) PKF -Ibrahim Ahmed Al-Bassam & Co. Certified Public ensure that any adopted corrective action following such Accountants. incidents and complaints is adequate. c) Baker Tilly MKM & Co. Certified Public WITH RESPECT TO COMPLIANCE Accountants.

1. Review the effectiveness of the monitoring compliance system 7. There is no conflict between the AC’s recommendations and with laws, regulations, and the results of any management Board resolutions during 2020. investigation, and follow up any instance of non-compliance (including disciplinary action).

2. Obtain regular updates from management and the Company’s legal counsel, regarding compliance matters;

3. Review contracts and related parties’ transactions, and present recommendations to the Board. SUMMARY OF AC'S ACTIVITIES DURING 2020 1. The AC reviewed the consolidated interim financial statements and recommended the Board to approve;

2. The Committee reviewed the 2020 Consolidated Financial Statements in conjunction with the External Auditors, Baker Tilly (“BT”). Based on this review and discussions with management, the Committee was satisfied that the Consolidated Financial Statements were prepared in accordance with applicable accounting standards in KSA (International Financial Reporting Standards approved by SOCPA) and fairly presents the Group’s financial position and results of its operations for the year ended 31 December 2020.

3. The Committee therefore recommended the Consolidated Financial Statements for the year ended 31 December 2020 to be approved by the Board and General Assembly.

4. Pursuant to the CMA recommendation and listing rules, the Committee obtained a written assurance letter from Baker Tilly firm as External Auditor confirming its independence. The Committee agreed that the External Auditor is and has been independent throughout the conduct of the audit engagement, in accordance with the terms of all relevant professional and regulatory requirements, and has met the criteria of suitability.

114 115 04 | CORPORATE GOVERNANCE POLICIES AND CODE OF GOVERNANCE

• The remuneration of the Internal Audit Department’s The Annual Financial Statements, taken as a whole, are required POLICIES AND CODE OF manager shall be determined by a recommendation of the to be fair, balanced and understandable and provide the Audit Committee, as per Company policies. information necessary for shareholders to assess the Group’s position and performance, business model and strategy. The GOVERNANCE • The Department shall be given access to information and Board is satisfied that it has met this requirement. documents, and shall be able to obtain the same without any restrictions. BOARD OF DIRECTORS RESPONSIBILITY RELATED TO INTERNAL CONTROL SYSTEMS MAINTAINING INTERNAL AUDIT REPORTS The Board of Directors is committed to ensure that the internal The Company shall keep records of the audit reports and audit which is functionally linked to the AC is one of the necessary business documents, which shall clarify its accomplishments, tools to control, improve, and supervise performance in order to findings, recommendations, and all actions taken in this regard. improve internal policies, practices and corporate governance. The basic functions of the Board of Directors in internal audit INTERNAL AUDIT PLAN matters include: The Internal Audit Department shall operate pursuant to a 1. To ensure the safety of financial and accounting systems comprehensive audit plan approved by the Audit Committee. The including systems related to the preparation of financial plan shall be updated annually. Key activities and operations, reports. including the activities of the risk management and compliance departments, shall be reviewed at least annually. 2. To guarantee the application of a transparent control system for risk management by selecting the general perception of risks that may face L’azurde and its subsidiaries. BOARD OF DIRECTORS CONFIRMATION The Audit Committee directly supervises Internal Audit, while 3. To conduct annual audit of the competence of internal control Internal Audit continuously examines the competence and systems, and procedures within L’azurde and its subsidiaries. effectiveness of the Company’s internal control systems. Accordingly, the Board of Directors, based on the reports and THE EFFECTIVENESS OF INTERNAL recommendations of the Audit Committee, and in line with its CONTROL SYSTEMS AND PROCEDURES business plan, confirms the following: The Board, through the AC, has conducted an assessment of • No matters were brought to the Board’s attention that would the Group’s principal risks, and the Group’s internal control lead the Board to believe that there was a fundamental lack framework, and has examined the internal control across the of safety in financial and accounting systems. Group for the year 2020, covered by the Annual Report and Accounts and up to the date of its approval by the Board. • The control systems are effectively functioning and facilitating the mitigation of potential risks that L’azurde This covered the material controls including financial, operational and its subsidiaries may face; and no matters relating to the and compliance controls, and risk management arrangements. functioning of internal controls were brought to the Board’s The system of internal controls is designed to manage rather attention that would require disclosure. than eliminate the risk of failing to achieve business objectives, and can only provide reasonable and not absolute assurance • All necessary arrangements and corrective actions have against material misstatement or loss. been taken on all notes, and recommendations raised by RESULT OF INTERNAL AUDIT PROCEDURES DUTIES OF THE INTERNAL AUDIT DEPARTMENT internal and external audit to the Audit Committee. There is a range of responsibilities and reporting lines involved in the efficient running of risk management system at L’azurde. INTERNAL CONTROL SYSTEM The Internal Audit Department shall assess and monitor the The AC directly supervises the internal audit at L’azurde. The FINANCIAL REPORTING ACTIVITIES implementation of the internal control system, and verify that internal audit department regularly examines and assesses the The Board shall approve an internal control system for the the Company and its employees comply with the applicable Management is responsible for establishing and maintaining competence and efficiency of the internal control systems. Company, in order to assess the policies and procedures relating laws, regulations, instructions, and the Company’s policies and adequate internal controls over financial reporting. These to risk management, implementation of the provisions of the procedures. controls are designed to provide reasonable assurance regarding The following are the results of the annual review of the Company’s governance rules approved by the Company and in the reliability of financial reporting, and the preparation of competence and effectiveness of the internal control systems compliance with the relevant laws and regulations. Such system COMPOSITION OF THE INTERNAL financial statements for external reporting purposes. and procedures of the Company, and the opinion of the AC with shall ensure compliance with clear accountability standards AUDIT DEPARTMENT respect to the adequacy of Company’s internal control system for at all executive levels in the Company, and that Related Party The Group has comprehensive planning, budgeting, forecasting, the year ended 31 December 2020: transactions are implemented in accordance with the relevant The Internal Audit Department is composed of an internal and monthly reporting processes in place. A summary of the provisions and controls. auditor manager whose appointment is recommended by the Group’s financial results is provided to the Board each month. 1. The Group’s risk management and internal control systems Audit Committee. This internal auditor is responsible before were effective. the Audit Committee and some competent employees. The ESTABLISHING INDEPENDENT The reporting process is supported by transactional and formation and operation of the Internal Audit Department takes 2. The Group adopted the necessary control mechanisms to DEPARTMENTS WITHIN THE COMPANY consolidation finance systems. Reviews of controls are carried into consideration the following: out by senior finance management. The results of these reviews monitor and correct non-compliance. For purposes of implementing the approved internal control are considered by the Board as part of its monitoring of the system, the Company has established departments for the • Employees of such department shall be competent, performance of controls around financial reporting. 3. The Group satisfactorily complied with the requirements of assessment and management of risks and for internal auditing. independent and adequately trained, and shall not be the CGR, in respect of risk management and internal control The Company may utilize external entities to perform the duties entrusted with any functions other than internal audit duties The Audit Committee reviews the application of financial systems. and competencies of the units or departments of risk assessment and internal control system. reporting standards, and any significant accounting judgments and management, and internal control without prejudice to the made by management. These matters are also discussed with Company’s responsibility for those duties and competencies. • The Internal Audit Department shall report to the Audit the external auditor. Committee, and shall be subordinate and accountable to it.

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EXECUTIVE COMMITTEE Executive Committee Meetings During the Year 2020: The Corporate Governance (CGR) issued by the Capital Market Authority (CMA) recommend that the Board of Directors may form specialized committees to address business needs as appropriate. The Board of Directors of L’azurde has formed an Executive Committee ( “Excom” or the “Committee”) with the following objectives: Meetings Attendance Register During 2020 Members Attendance Rate 1. To recommend and monitor implementation of Company’s strategies, future plans, policies and internal regulations. February 19, 2020 April 19, 2020 September 30, 2020 December 7, 2020

2. To recommend and monitor implementation of Company’s investment projects and objectives. Mr. Brian Norman Dickie Present Present Present Present 100% 3. To monitor Company’s budgets and performance. Mr. Abdullah Al Othaim Not Applicable Present Present Not Applicable 100% 4. To approve certain matters on behalf of the Board up to the level of delegation of authority provided to the Committee by the Board. Mr. Selim Chidiac Present Present Present Present 100% 5. To address specific tasks delegated to the Committee by the Board where further study and analysis are needed. Not Applicable Mr. Khalifa Hassan Al-Jalahma Present 100% The Executive Committee is considered as a Board Committee and reports directly to the Board of Directors through its Chairman. The appointment was made on October 7, 2020 The Committee’s Chairman brings to the attention of the Board any matters requiring Board approval and action in the earliest scheduled Board meeting. In performing its duties, the Executive Committee shall have direct access to the resources of the Company, as it may reasonably require, and shall seek to maintain effective working relationships with management.

The following table illustrates the names, positions and attendance of the Executive Committee members: During the meeting held on 7 October, 2020 at 5 pm sharp, the 6. Approve capital expenditures not adopted in Company’s Board of Directors approved the resignation of Mr. Abdullah annual budget with a value not exceeding five hundred AbdulAziz Al-Othaim from the N&RC and Executive Committee of thousand Saudi Riyals (SAR 500,000) for each case and the Board, according to the letter of resignation submitted to the which total value do not exceed two million Saudi Riyals (SAR Members Position Board Membership Status Board Chairman. Mr. Abdullah Al-Othaim will preserve his title 2,000,000) during each financial year. and position as a Non-executive Board member, in conformity 7. Review Company’s performance at each Executive Committee Mr. Brian Norman Dickie Chairman of the Executive Committee Non-Executive with the N&RC recommendation. meeting and assess performance against targets; analyse The Executive Committee convenes quarterly every three and make enquiries about underlying factors, trends and Mr. Khalifa Hassan Khalifa Member of the Executive Committee Non-Executive months or as required, on its Chairman’s invitation to follow up major developments and advise management accordingly. Al-Jalahma activities, executive operations, and other related topics. 8. Review Company’s performance on a monthly basis against Mr. Selim Chidiac Member of the Executive Committee A member from outside the Board On 7 March, 2020, the Board of Directors reviewed and approved agreed objectives and budgets, based on an agreed set of the annual activities report for the Executive Committee and its reports to be supplied monthly by Company management recommendations during 2020. and alert management and the board of any significant During the meeting held on 7 October, 2020 at 5 pm sharp, the Board of Directors approved the recommendation of the N&RC to developments observed. If necessary, request the Company’s appoint Board member of the Executive Committee, and successor of the resigning member Mr. Abdullah Abdul Aziz Al-Othaim, RESPONSIBILITIES AND DUTIES management to convene an additional committee meeting. according to the internal regulations of the Executive Committee. Effective from 7 October, 2020 until the Committee’s end of term, on April 25, 2021. Without prejudice to the powers reserved to the Board, the 9. Review and assess the Company’s business plan and Executive Committee shall have all the necessary powers and annual budget and submit recommendations to the Board in authorities to undertake the following tasks: connection therewith.

1. Prepare and recommend to the Board the strategies, future 10. Provide advice to the Board on the setting of dividends, plans, policies, and internal regulations of the Company and taking into account any recommendations made by the Audit its subsidiaries and supervise implementation thereof. Committee in this regard.

2. Submit recommendations to the Board in connection with 11. Review policies and procedures developed by Executive adopting the Company’s investment projects and objectives Management but do not approve anything requiring Board and supervise implementation thereof. approval.

3. Appoint external parties to provide consultancy services to 12. Carry out other specific requests from the Board of Directors. L’azurde.

4. Approve the opening and closure of new retail shops.

5. Approve the set-up of new subsidiaries.

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3. NOMINATIONS AND WITH RESPECT TO NOMINATION NOMINATION AND REMUNERATION COMMITTEE (N&RC) MEETINGS REMUNERATION COMMITTEE • To suggest policy and criteria for membership of the Board. The Nomination and Remuneration Committee convened in (7) seven meetings during 2020. The Nominations and Remuneration Committee (“N&RC” or the “Committee”) has been established by the Board for the primary • To recommend to the Board on candidates for nomination or The following table illustrates the meetings attendance register and rate of N&RC during 2020: objective to assist with recommending candidates for nomination re-nomination to the Board and Company’s Committees. or re-nomination to the Board; recommending remuneration policy and individual remuneration packages for Board • To assess various matters related to nomination and Attendance Register During 2020 performance of the Board, its Committees and Executive members, Committee members and Executive Management; Members Attendance Rate Management and provide recommendations to the Board. February November November and various matters related to performance evaluation of the 16, 2 020 March 19, 2020 April 19, 2020 July 20, 2020 4, 2020 18, 2020 Board, Company’s Committees and Executive Management. • To review Board of Directors succession plans. Mr. Abdul Kareem Assaad Abu N&RC is considered a Board Committee and it reports directly Present Present Present Present Present Present 100% • To review recruitment, retention, and termination policies of Al Nasr to the Board of Directors through its Chairman. The Committee’s Executive Management members. Chairman brings to the attention of the Board any matters Mr. Brian Norman Dickie Present Present Present Present Present Present 100% requiring Board approval and/or action in the earliest scheduled WITH RESPECT TO REMUNERATION board meeting. The Committee shall be comprised of not less Mr. Adel Abdullah Saleh than three (3) members, two (2) of non-executive Directors and Present Present Present Present Present Present 100% • To recommend to the Board, the remuneration policy for Al- Maiman one (1) Independent Board member. The Chairman shall be from the Board members and its Committees and the Executive Independent Directors. Executive Directors are not eligible for Management. Mr. Bander Talaat Hamooh Not applicable Not applicable Not applicable Not applicable Present Present 100% Committee membership. Members of the Committee shall be appointed by the Board of Directors for a term coinciding with • To recommend individual remuneration packages for Board the term of the Board of Directors. members and its Committees and the Executive Management Mr. Abdullah Al-Othaim Present Present Present Present Not applicable Not applicable 100% in accordance with the established policy. In performing its duties, the Committee shall have direct access to the resources of the company as it may reasonably require • To highlight any material deviations from the established The Committee convenes quarterly every 3 months, or as required to follow up activities and other relevant issues. and shall seek to maintain effective working relationships with policy and periodically reviewing the policy. management. The following are key objectives: On 7 March, 2020, the Board reviewed and approved the annual report of the N&RC activities and its recommendations for the year • To elaborate incentive schemes. 2020.

• Retirement arrangements. NEW TERM BOARD MEMBERS ELECTION The Nomination and Remuneration Committee (N&RC) started the preparation process of the new term Board members’ election on The below table illustrates the names, positions and attendance of the Nomination and Remuneration Committee (N&RC) Members: December 2020, by announcing on the Saudi Stock Exchange website Tadawul the opening of nomination for the new term of Board membership beginning on 26 April, 2020 and for three years.

The N&RC announced on 30 November 2020 on Tadawul website the opening of the nomination for the new term Board of Directors membership beginning from 26 April, 2021 and ending on 25 April, 2024 since the current term will end on 25 April, 2021. Members Board Membership Status Position The N&RC reviewed the candicacy applications for the Board membership according to the provisions contained in the Companies

Chairman of the Nominations Law issued by the Ministry of Commerce and the Corporate Governance Regulations issued by the Capital Market Authority (CMA) , in Mr. Abdul Kareem Abu Al Nasr Independent and Remunerations Committee addition to the policies, standards and procedures for Board membership, and approved by the General Assembly, as the nominated members will be elected during the next General Assembly meeting of the company , which date will be announced later after Member of the Nominations Mr. Brian Norman Dickie Non-Executive obtaining the necessary approvals from the competent authorities. and Remunerations Committee After having studied and reviewed all candidates applications, the N&RC recommended to the Board a list of qualified candidates Member of the Nominations Mr Bandar Tallat Hamooh Independent for the new term Board membership. It is noteworthy that voting in the General Assembly will be limited to those who nominated and Remunerations Committee themselves for the membership of the Board of Directors, in accordance with the conditions and criteria stated in the policies, Member of the Nominations standards, and procedures of the Board of Directors’ membership. The Company will provide information about the aforementioned Mr. Adel Abdul lah Non-Executive Saleh Al-Maiman and Remunerations Committee candidates according to paragraph (A) of Article (8) of the Corporate Governance Code issued by the CMA, and about those who were approved by the competent authorities using cumulative voting.

During the meeting held on October 7, 2020, the Board of Directors approved the recommendation of the N&RC to appoint Member of the Board of Directors Mr. Bander Talaat Hamooh as a member of the N&RC affiliated to the Board of Directors, and to succeed the resigning member Mr. Abdullah Abdulaziz Al-Othaim, according to the internal regulations of the Committee. The appointment will take effect on 7 October, 2020 until the end of term of the current Committee, on 25 April , 2021.

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REPORT OF THE NOMINATION AND REMUNERATION COMMITTEE FOR THE YEAR2020 SUMMARY OF WORK • Appointment of an executive search firm to identify possible During 2020, the activities undertaken by the NRC were as candidates for selected senior executive positions and review THE NOMINATIONS AND REMUNERATION COMMITTEE follows: of potential candidates. The Nominations and Remuneration Committee (“NRC” or the “Committee”) is appointed by and operates under the delegation of the • Review and approval of nominations to positions on the • Consideration of changes to Company bylaws to amend the Board of Directors under the terms of its Charter which was approved by the Board of Directors in compliance with the guidance and Board of Directors and its Committees for the consideration number of directors from nine to seven following the exit of regulation of the CMA. of the Board, for acting appointments for positions vacated the two Private Equity investors and recommendation of such to the Board of Directors. The members of the Committee during 2020 were: during the year. • Completion and reporting of the Board Self-Assessment • Initiation of the Director nomination process for 2021. Process and the Assessment of the Chairman for 2020. Members Position Status All of the duties undertaken by the Committee were performed in • Approval of compensation actions involving members of accordance with the Company’s Corporate Governance Manual senior Executive management. and, in the case of compensation actions, in accordance with Mr. Abdul Kareem Abu Al Nasr Chairman Independent Director well-established policies and processes, and with due notice of • Approval of salary guidelines and bonus pools for staff other market conditions and practices. than senior Executive management. Mr. Brian Norman Dickie Member Non-Executive Director The Committee performed all its duties in accordance with the • Review of Saudization compliance. Company’s Corporate Governance Code. In case of compensation, Mr. Adel Al Maiman Member Non-Executive Director it proceeded in compliance with the well-established policies • Review of measures taken to protect employees and and processes, and with due notice of market conditions and customers during the Covid 19 pandemic. practices. Mr. Abdullah Al-Othaim* Member Non-Executive Director • Review of emergency compensation measures to be THE CHANGES MADE ON THE NOMINATION AND considered during the pandemic, including suspension of the REMUNERATION COMMITTEE IN 2021 Mr. Bander Hammooh* Member Independent Director bonus program during 2020. On April 25, 2021, the Board of Directors and subordinate

* Mr. Al Othaim ceased to be a member of the Committee in 7 October, 2020, and Mr Hamooh joined the Committee in same date. • Recommend to the Board of Directors the remuneration committees including the N&RC will end. Hence a new N&RC for the Chairman Pursuant to the board of directors and will be formed in the beginning of the new Board term on 26 executives’ remuneration policy. April, 2021. MEETINGS • Continued work on succession planning for both the The committee meets at least twice per year with additional meetings and Conference Calls held as and when necessary. The Management organization and the Board of Directors. committee held seven meetings whether through physical meeting or Conference Calls during the year 2020. The Company’s Chief Chairman of the Nomination and Remuneration Committee Executive Officer was invited to the meetings when required, to facilitate direct communication as well as to provide clarification on • Appointment of an executive search firm to identify possible Abdul Kareem Abu Al-Nasr compensation and related personnel matters. future independent directors and review of potential candidates. Minutes of each meeting were documented and tabled for confirmation at the next NRC meeting and subsequently presented to the Board for approval.

N&RC MEETINGS ATTENDANCE REGISTER D. BOARD AND EXECUTIVE MANAGEMENT REMUNERATION Below are the details of attendance of the Committee members during the financial year 2020: BOARD OF DIRECTORS AND EXECUTIVES 1. POLICY OBJECTIVES AND PRINCIPLES REMUNERATION POLICY Attendance Register During 2020 a - The remuneration of the Board Members and Senior Board Members and Senior Company Executives Remuneration Executives is set to achieve the following objectives: Members Attendance Rate February March 19, 2020 April 19, 2020 July 20, 2020 November November Policy is organizing and setting clear standards regarding the 16, 2 020 4, 2020 18, 2020 remuneration of Board members, Committees and Executive 1. Enable the Company to maintain an appropriate level of Management of L’azurde Company for Jewelry. experience and qualification among Board Members. Mr. Abdul Kareem Assaad Abu Attended Attended Attended Attended Attended Attended 100% Al Nasr The remuneration policy of Board members, Committees and 2. Support the Company in coping with the competitive Executive Management has been prepared in accordance with pressures of the sectors in which it operates. Mr. Brian Norman Dickie Attended Attended Attended Attended Attended Attended 100% the requirements of the Companies Law and the Corporate Governance Regulations issued by the Capital Market Authority 3. Motivate members to achieve the Company’s business Mr. Adel Al- Maiman strategy and goals. Attended Attended Attended Attended Attended Attended 100% (CMA).

This policy has been in effect since 2016. The General Assembly 4. Align members interests with the Company and Mr. Bander Talaat Hamooh* Not applicable Not applicable Not applicable Not applicable Attended Attended 100% adopted and approved the aforementioned remuneration policy shareholders long-term interests. on January 8, 2018 in accordance with the requirements of the b - The remuneration of Board Members and Senior Executives Corporate Governance Regulations issued by the CMA. Mr. Abdullah Al-Othaim* Attended Attended Attended Attended Not applicable Not applicable 100% shall be determined according to the following principles:

1. The remuneration shall be fair, proportionate, and reasonably * Mr. Al Othaim ceased to be a member of the Committee in 7 October, 2020, and Mr Hamooh joined the Committee in same date. sufficient to attract, retain, and motivate members who have an appropriate level of experience and qualification.

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2. The sector in which the Company operates, its size 9. Board members shall not vote on the agenda item relating The below table illustrates in detail remuneration and compensation paid to Board members and Senior Executives during 2020: and annual goals must be taken into consideration when to the Remuneration of Board members at the General determining the remuneration of Board members and Senior Assembly’s meeting. Executives. 10. The Remunerations of different Board members may vary A. BOARD RENUMERATIONS 3. To the extent appropriate, the remuneration shall be in line depending on the Board members’ experience, expertise, with the remuneration received by comparable companies. duties he/she undertakes and independence and number of Board meetings he/she attended in addition to other Fixed remunerations Variable remunerations 4. When determining remuneration, members’ experience, considerations. competence, efforts, scope of work and attendance record must be taken into account. 11. If it is evidenced to the audit committee that the Remuneration paid to any Board member was based on false or misleading 5. Remunerations of members and executives may be paid information presented to the General Assembly or included monthly, quarterly, or yearly. in the annual Board report, the Board member shall return Total such Remuneration to the Company, and the Company may 6. The setting of remuneration shall be in compliance with the request such Board member to return such Remuneration. Total Total

Company’s by-laws, Companies laws and CMA instructions End of service award In-kind benefits Board meetings Specific amount Specific committee meetingscommittee

related to listed companies. the Remunerations of Allowance attending for REMUNERATION OF BOARD MEMBERS remunerationsPeriodic Percentage of the Profits or Secretary, if a member Long-term incentive plans Short-term incentive plans Remunerations for technical, technical, Remunerations for Total Allowance attending for Total AND EXECUTIVES FOR 2020 chairman, Director Managing Granted shares (insert the value) managerial and consultative work consultative and managerial 2. RULES OF REMUNERATION DETERMINATION Members of the Board of Directors do not receive any annual 1. The remuneration of all Board Members shall be remuneration for their role in managing the Company unless First Independent Directors: recommended by the Board of Directors to the Company’s approved by the General Assembly. During 2020, only independent General Assembly of shareholders for approval on an annual board members and only one of non-executive member have Mr. Abdul Kareem Assad Abu Alnasr 200,000 24,000 - - - - 224,000 ------224,000 - basis based on the recommendation of the Company’s N&RC. deserved remunerations based on board of directors and executives remunerations policy and NRC recommendation. Mr. Amin Mohamed 200,000 21,000 - - - - 221,000 ------221,000 - 2. The recommendations of the N&RC and the Board of Directors More details are available in the below tables. Akef Al-Maghrabi shall be in compliance with the applicable laws, regulations Mr. Bander Talaat 150,000 16,500 - - - - 166,500 ------166,500 - and Company by-laws. Independent Directors receive a fixed remuneration based on Hamooh the General Assembly approval on 24 April 2019, to maintain their Mrs. Sabah Khalil 3. The remuneration of Members could be in the form of specific independence as recommended by CMA Guidance regarding Almouyyed 200,000 24,000 - - - - 224,000 ------224,000 - cash payments, in-kind benefits, attendance allowances, corporate governance implementation, where independent a percentage of the Company’s annual net profits or a director remuneration should not link to Company’s profit. Total 750,000 85,500 - - - - 835,500 ------835,500 - combination of any of the foregoing. Mr. Brian Dickie, a non-executive director, has a consultancy Second Non-Executive Directors: 4. Determine all paid amounts, allowances, dividends and the agreement for a year that is approved by General Assembly on like, periodic or annual bonuses, based on job level, duties 3 June 2020. For more details about this agreement refer to Mr. Mohammed Ebrahim Juma 225,000 21,000 - - - - 246,000 ------246,000 - and responsibilities, educational qualifications, practical related party transactions section. Al Shroogi experience, skills and level of performance; except the actual Mr. Abdullah Abdulaziz reasonable expenses and fees incurred by the company to Except for the remuneration of Mr. Brian Norman Dickie, a non- Saleh Al Othaim ------enable the Board member to perform his duties. executive board member, the remaining non-executive members did not get any remuneration during the year 2020. Mr. Brian Norman Dickie 400,000 - - - 502,500 - 902,500 ------902,500 - 5. Where the remuneration of Members is distributed as a percentage of the Company’s net profits, the maximum total The Senior Executives, including the Chief Executive Officer and Mr. Khalifa Al Jalahma ------annual remuneration may not exceed 5% of the Company’s the Chief Financial Officer, receive remunerations according net profits after deducting the relevant reserves and after to their employment contracts and Board of Directors and Mr. Adel Abdullah Al-Maiman ------distributing profits to the Company’s shareholders at a Executives Remuneration policy.

minimum rate of 5% of the Company’s paid-up capital. Total 625,000 21,000 - - 502,500 - 1,148,500 ------1,148,500 - 6. Board member remuneration against his/her role as member of Board and Committees formed by the Board shall not exceed five hundred thousand Saudi Riyal. Worthy to mention the following: - There is no substantial deviation between the remuneration given to Board members, Committee members and Senior Executives on related compensation 7. Board member may receive additional remuneration, policies in force. which shall not be subject to the maximum limit of five - Directors’ remuneration is determined according to the remunerations policy for the Board of Directors and Executives and N&RC recommendation. There hundred thousand, Saudi Riyal for his/her membership are no arrangements or agreements whereby any Board member, Committee members and Senior Executives waive any remuneration. in the Audit Committee formed by The General Assembly. - There is neither an arrangement nor an agreement whereby any of the Company shareholders waives rights in dividends. Also any additional executive, technical, managerial or consultative duties carried out by the Board member should be remunerated in addition to the Remuneration he/she may receive in his/her capacity as a member in the Board and in the committees formed by the Board, pursuant to the Companies’ Law and the Company’s by-laws.

8. The remuneration of independent Members shall not be in the form of a percentage of the Company’s net profits and shall not be, directly or indirectly, based on the profitability of the Company.

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B. REMUNERATIONS OF SENIOR EXECUTIVES C. BOARD MEMBERS AND EXECUTIVES OWNERSHIP • Senior Executives, including the Chief Executive Officer and the Chief Financial Officer, receive remuneration based on the remunerations policy for the Board of Directors and executives and N&RC recommendation.

The following table illustrates details of remuneration and compensation paid to Senior Executives during 2020 (including CEO and CFO) 1.BOARD MEMBERS The following table illustrates shares held by Board members, their spouses and minors and any changes which have occurred in 2020. Except for Board member Mr. Abdullah Abdul Aziz Saleh Al-Othaim, no member of the Board owns shares in L’azurde Company Aggregate End-of- Total for Jewelry. Fixed remunerations Variable remunerations service remunerations Amount award

Number of Net change Change % Member Name Note Number of shares at the shares at the beginning of the year end of the year Total Total Salary Profits In-kind In-kind Granted benefits Periodic Periodic the value) Long-term Short-term Allowances

shares (insert Mr. Abdullah Abdulaziz remunerations incentive plans incentive plans Al Othaim Personal property 41,000 41,000 -- 0% Top Five Executives Total Remuneration 2020 4,532,194 2,410,083 -- 6,942,277 -- -- 1,078,005 -- -- 1,078,005 525,376 -- 8,545,658

Top Five Executives Total Remuneration 2019 5,315,880 2,393,940 -- 7,709,820 -- -- 1,861,880 -- -- 1,861,880 477,588 -- 10,049,288 There is an internal system to notify and improve the directors’ c) During 2020, a consultancy agreement between the Company awareness regarding the restriction periods during which Board and Mr. Brian Norman Dickie, a non-executive board member members are not allowed to deal in the Company shares, as per with total fees of SAR 502,500, was approved by the General The Company committed to disclose total remuneration of the senior executive management in accordance with the requirements of Article 93(4-b) of the Corporate Governance Rules. In Article (69) of Rules of Offering and Continuing Obligations. Assembly. The main scope of this agreement is to advise the order to protect the interests of the Company, its shareholders and its employees, and to avoid any damage that may result from the disclosure in details as per job titles and positions hence Chief Executive Officer and top management of the Company description of remuneration is not presented pursuant to Appendix (1) Remuneration Schedule of Corporate Governance Rules related to Senior Executives. The Internal audit and compliance function regularly sends in relation to Company’s strategy, financial performance and alerts and notifications to the board members regarding the operations. This Agreement is subject to annual review and 7. COMMITTEES MEMBERS REMUNERATIONS rules of trading in Company’s shares and the restriction periods. approval by the General Assembly of the Company.

There is an internal policy to improve the awareness of Company d) During 2020, there are fixed paid remuneration to some Fixed Remuneration employees regarding Market Conducting Rules and directs directors based on internal directors and executives (Except for the allowance for all restricted persons to stop any direct or indirect trading in remunerations policy. Details of these remunerations have attending Board meetings) Company securities based on internal information, prohibits been disclosed annual report as required by Article no (76) of Audit Committee Members disclosing any internal information to any external party for the Companies Law and Corporate Governance Regulation. purpose of trading in Company’s securities. Restricted persons Mr. Brian Norman Dickie - - - include all L’azurde Group employees including Key Management e) During the year, independent members of the Board of Personnel, Executives and senior employees of the Company and Directors received fixed remuneration based on their Mr. Khalifa Al Jalahma - - - its subsidiaries. agreement and directors and executives remunerations Mrs. Sabah Khalil Almouyyed 200,000 19,500 219,500 policy as approved by the General Assembly on 8 January 2.OWNERSHIP OF SENIOR MANAGERS, 2018. In line with the recommendations of the Capital Market Mr. Adel Abdullah Al-Maiman - - - SPOUSES AND MINORS Authority, these remunerations were not linked to Company’s profits, in order to maintain directors’ independence. Except None of the senior managers, spouses and minors have any Total 200,000 19,500 219,500 for the remuneration of Mr. Brian Norman Dickie, a non- interests in Company’s shares. According to the internal policy executive board member, the remaining non-executive Nomination & Remuneration related to “dealing in L’azurde securities”, all employees and Committee Members members did not get any remuneration during 2020. their family members are restricted persons and must not trade in Company’s shares, based on internal information, whether Mr. Bandar Talaat Hamooh 25,000 4,500 29,500 f) As per annual declaration received from all board members by themselves or through any member of their family or other for 2020, concerning the conflict of interests, and except for Mr. Abdullah Abdulaziz Saleh Al Othaim - - - related party over which they have influence or control. the aforementioned consultancy agreement with Mr. Brian Norman Dickie, none of the board members have any interest, Mr. Brian Norman Dickie - - - RELATED PARTY TRANSACTIONS whether financial or non financial, direct or indirect, in the Mr. Adel Abdullah Al-Maiman - - - businesses and contracts that are related to the Company’s a) Related parties include major shareholders, board members operations. and seniors executives of the Group and entities controlled or Mr. Abdul Kareem Assad Abu Alnasr 200,000 10,500 210,000 significantly influenced by such parties. g) None of the board members had any participation, directly Total 225,000 15,000 240,000 or indirectly, in any businesses that may compete with the b) L’azurde Corporate Governance Manual guards against Company or lead to competing with the Company, directly or Executive Committee Members conflicts of interest and remedies potential conflict situations indirectly, in respect of any of its activities. for directors, executives and shareholders. The General Mr. Abdullah Abdulaziz Al-Othaim - - - Assembly shall be notified of any conflict of interest where request of approval should be raised. Mr. Khalifa Al Jalahma - - -

Mr. Brian Norman Dickie - - -

Mr. Selim Chidiac - - -

Total - - -

* Mr. Al Othaim ceased to be a member of the Committee in 7 October, 2020, and Mr Hamooh joined the Committee in same date. Except above mentioned personnel, the Company has not paid any compensation to rest of the Non-executive Board members. There are no written arrangements or agreements under which a Director or a Senior Executive of the Company has waived any salary or compensation.

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Following are the details of the related party balances as at end of the year and the related party transactions during the year: Independence and quality control:

We have complied with independence and other ethical requirements in accordance with the Code of Ethics and Professional Conduct endorsed in the Kingdom of Saudi Arabia, which contain the fundamental principles of integrity, objectivity, professionalism, due care, Amount of Transactions Balances confidentiality, and professional conduct. Member Name Nature of Transactions 2020 2019 2020 2019 In addition, we comply with the International Standard on Quality Control (1) as endorsed in the Kingdom of Saudi Arabia, in order to SAR SAR SAR SAR maintain a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable regulatory requirements. Amounts due from related parties: Summary of the Performed Procedures: - - L’azurde Holding Company Services and payment on behalf - 333,746 The procedures performed in a limited assurance engagement differ in nature, timing, and less in scope than those performed in a reasonable assurance engagement. As a result, the level of assurance that is obtained in the limited assurance engagement is significantly less than the assurance that would be obtained if a reasonable assurance engagement was performed. Amounts due to related parties: The performed procedures included, but were not limited to, the following: Board of Directors Re-numerations 1,941,000 1,485,500 147,950 - • Obtain the attached letter that includes a list of business and contracts in which the members of the Board of Directors have a direct or indirect interest during the year ended December 31, 2020. Mr. Brian Norman Dickie Consultancy 502,500 502,500 125,625 - • Obtain an understanding of the nature of the transactions that took place during the year ended December 31, 2020 between the Company and the entities in which the members of the Board of Directors have a direct or indirect interest.

• Obtain statement of account for the entities in which the members of the Board of Directors have a direct or indirect interest as mentioned in the letter, and compare the total volume of transactions with what was mentioned in the letter submitted and INDEPENDENT LIMITED ASSURANCE REPORT ON THE TRANSACTIONS AND approved by the Chairman of the Board of Directors. BALANCES BETWEEN THE COMPANY AND THE RELATED PARTIES • Examine, on a sample basis, the transactions to their supporting documents to verify their correctness.

To the Shareholders of • Review the minutes of meetings of the Company’s General Assembly of shareholders which approved the business and contracts L'azurde Company for Jewelry and its subsidiaries which will be completed during the year 2020. (Saudi Joint Stock Company) • Ensure the business and contracts included in the letter match with the disclosures reported in the audited consolidated financial Riyadh Kingdom Saudi Arabia statements.

We have performed a limited assurance engagement to determine whether it has come to our attention a matter that makes us Limited Assurance Conclusion: believe that what has been detailed in the subject paragraph below (the “Subject Matter”) has not been reported and fairly presented, in all material respects, in accordance with the relevant criteria (“Applicable Criteria”) hereinafter referred to below. Based on the limited assurance procedures performed, and the evidence obtained, nothing came to our attention that caused us to believe that what was detailed in the above Subject Matter paragraph and reported in the attached letter, has not been reported and Subject Matter: presented fairly, in all material respects, in accordance with the applicable criteria.

The subject of the limited assurance engagement relates to the letter submitted and approved by the Chairman of the Board of Restriction of Use: Directors of L’azurde Company for Jewelry and its subsidiaries regarding the business and contracts in which the Board members have direct or indirect interest during the year ending December 31, 2020, as attached to this report. This report has been solely prepared on the request of the Company’s Management to assist the Company in fulfilling its obligations in reporting to the General Assembly under Article (71) of the Companies’ Law. The report may not be used for any other purpose Applicable Criteria: or distributed to any other parties other than the Ministry of Commerce, the Capital Market Authority, and the Shareholders of the Company. In addition, no quote or reference can be made to this report without our prior consent. Article (71) of the Companies’ Law issued by the Ministry of Commerce.

Management Responsibility: Bakertilly MKM and Co. Certified Public Accountants Management of the Company is responsible for the preparation and fair presentation of the information mentioned in the above Majed Moneer AlNemer Subject Matter paragraph in accordance with the Applicable Criteria. In addition, the Management is responsible for implementing (License No. 381) internal control systems that are deemed necessary to prepare and present the information contained in the above Subject Matter Riyadh on Rajab 23,1442H paragraph free from any material misstatements, whether due to fraud or error, and to apply appropriate controls, maintain adequate records, and make reasonable estimates according to the relevant circumstances and events. Corresponding to March 7, 2021 Our Responsibility:

Our responsibility is to express a limited assurance conclusion on the above Subject Matter based on the assurance engagement we performed in accordance with the International Standard on Assurance Engagement (ISAE) 3000: “Assurance Engagements Other than Audits or Reviews of Historical Financial Information” as endorsed by the Kingdom of Saudi Arabia, along with the terms and conditions related to this engagement which have been agreed with the Company’s Management.

Our procedures have been designed to obtain a limited level of assurance that is sufficient to provide a basis for expressing our conclusion. Accordingly, we have not obtained all of the evidence required to provide a reasonable level of assurance. The implemented procedures depend on our professional judgment, including the risk of material misstatements in the Subject Matter, whether due to fraud or error. We also took into consideration the effectiveness of internal control systems when determining the nature and extent of our procedures, and our engagement was not designed to provide assurance about the effectiveness of those systems.

128 129 04 | CORPORATE GOVERNANCE POLICIES AND CODE OF GOVERNANCE

DISCLOSURE AND TRANSPARENCY POLICY 14. There is no penalty, sanction, precautionary measure or COMPANY DECLARATIONS L’azurde seeks to provide accurate and regularly updated • When information has been given to L’azurde in confidence restriction imposed on the company by the competent authority The Company acknowledges the following: information to all its stakeholders and other interested parties. and where disclosure could give rise to an action for breach of or any other supervisory, regulatory or judicial authority. This policy reflects L’azurde current activities and will be updated confidence. 1. Apply all provisions contained in the Corporate Governance 15. There is no conflict between the recommendations of the as and when those activities change. Regulations issued by the Capital Market Authority, with the • Personal information about L’azurde employees, Board Audit Committee and the decisions of the Board of Directors, exception of the provisions listed below: L’azurde publishes and regularly updates information about its members or other individuals where to do so may be in breach which include the appointment of the Company’s auditor and corporate structure and operations, partners, investments and of data protection principles. determining his fees for the financial year 2020. 2. That there are no refunds, purchases or cancellations by the other commercial activities and performance related information. Company of any refundable debt instruments. 16. The Company’s financial statements were prepared during the As a publicly listed company, L’azurde also recognizes its • Where disclosure would or would be likely to prejudice fiscal year 2019 in accordance with the standards approved 3. That there are no businesses, and the Company has not obligation to respond appropriately to legitimate questions from the investigation, prevention or detection of crime, or the by the Saudi Organization for Certified Public Accountants concluded any contracts in which there is a substantial interest investors, consumers, customers, government, the media and administration of justice. (SOCPA). for a member of the Board of Directors, a Senior Executive, or other stakeholders. • When information is subject to legal privilege. any person related to any of them other than those disclosed in 17. All published information by the Company, whether directly or the related parties section. L’azurde understands the needs of shareholders to information indirectly, is accurate and true statement of material fact or to make informed decision. Accordingly, L’azurde discloses BOARD DECLARATIONS a statement of opinion not for the purpose of influencing the 4. That there are no arrangements or agreements under which a information as required and when allowed by related regulations share price. member of the Board of Directors or a Senior Executive waived using appropriate disclosure methods that enable the shareholders The Board of Directors has taken care to ensure the professional any salaries or remunerations. and other stakeholders to access the financial and non-financial performance of the Company during 2020 and certifies the information pertaining to the Company’s performance and following: 5. That there are no arrangements or agreements under which a information in respect of ownership of shares and to obtain a shareholder of the company waived his rights to profits. comprehensive view of the Company’s position. 1. There are no equity shares or debt instruments belonging to subsidiaries. 6. That the auditors ’report shows that the consolidated financial All disclosures to shareholders and investors are made without statements are free from any material errors, and there are no 2. There were no convertible debt instruments or any securities discrimination in a clear, correct and non-misleading fashion reservations about them. or contractual rights of initial public offering or similar rights and in a timely, regular and accurate manner in order to enable issued or granted by L’azurde or its subsidiaries during 2020 shareholders and other Stakeholders to exercise their rights to 7. That the Board of Directors did not issue a recommendation to and there was no compensation obtained by L’azurde in return. change the auditor before the end of his term for which he was the fullest extent. appointed. 3. There were no rights of conversion or initial public offering under Information disclosed by L’azurde under this policy is available on convertible debt instruments or any securities or contractual various websites including the Company’s website (www.lazurde rights of initial public offering or similar rights issued or granted com) and the Saudi Stock Exchange (Tadawul) website (www. by L’azurde or its subsidiaries during 2020. tadawul.com.sa). 4. No redemption, purchase, or cancellation by L’azurde or any of The following information is updated and published annually or as its subsidiaries of any redemption of debt instruments occurred required by the law and relevant rules and regulations. This is not during 2020. an exhaustive list; other useful information is also disclosed as required: 5. There were no substantial operational conflicts of interest during 2020, other than what has been disclosed. • Board Members. 6. We did not receive a request from the Independent Auditors to • Board Committee Membership. call a meeting of the General Assembly during 2020.

• Board Reports. 7. We did not receive a request from shareholders owning 5% or more of the Company’s share capital to call a meeting of the • Quarterly Reports and Financial Statements. General Assembly during 2020.

• Annual Reports and Financial Statements. 8. There was no procedure that might lead to obstruction of the shareholders’ rights of voting. • Accounting Policies. 9. Except for the outbreak of Covid-19 pandemic and its negative • Related Party Transactions. impact, there were no significant events affecting the integrity of the financial position of the Company after the Financial • Review of Principle Activities. Year 2020 requiring disclosure, other than information that is available and declared. • Auditors Report. 10. The Company did not provide loans or credit facilities to any • Fundamental changes to the Company’s activities. member of the Board of Directors.

• Material events that have a material impact on the company’s 11. Proper books of account have been maintained. business. 12. The System of Internal Control is sound and has been effectively In the following circumstances, L’azurde will not routinely publish implemented. information: 13. There are no significant doubts concerning L’azurde ability to • Where disclosure would or would be likely to, prejudice the continue as a going concern. commercial interests of L’azurde, its business partners or other third parties and where the public interest in disclosure does not outweigh the public interest in maintaining the exemption. 130 131 04 | CORPORATE GOVERNANCE POLICIES AND CODE OF GOVERNANCE

IMPLEMENTED AND NON-IMPLEMENTED PROVISIONS OF CORPORATE GOVERNANCE REGULATIONS AND RELATED JUSTIFICATIONS: This report sets out the Board’s approach and work during the financial year 2020 includes details of how the Company has applied and complied with the principles and provisions of the Corporate Governance Regulation issued by the Capital Market Authority. The directors consider that the Company has complied with the provisions of the regulation throughout the year, except the following articles:

No. Article/Subject Description Note Reasons for non-implement

The Audit Committee has been appointed by the General Assembly to monitor the Company’s financial The Company’s Board shall, by resolution there from reporting, internal and external audit and ensure form a committee to be named the “Risk Management compliance with applicable laws and regulations. Article 70 - Composition of the Committee”. Its Chairman and the majority of its Furthermore, the General Assembly based on Risk Management Committee members shall be Non-executive Directors. The the Board recommendation, delegated the Audit Article 71- Competencies of the members of that Committee shall possess an adequate Committee to undertake responsibilities for oversight level of knowledge in risk management and finance. 1 Risk Management Committee Guiding of Company’s risk management. All competencies of Competencies of the Risk Management Committee Article risk management committee, as mentioned in article Article 72 - Meetings of the Risk 71, have been assigned to the Audit committee. Management Committee The Risk Management Committee shall convene periodically at least once every six months, and as may According to Corporate Governance practices, it’s be necessary. permissible for formed committees to practice duties and responsibilities of other optional committees that are stipulated in guiding articles.

The Company is developing and encouraging the The Company shall establish programmes for developing participation and performance of the Company’s and encouraging the participation and performance employees through organizing specialised workshops of the Company’s employees. The programmes to hear the opinions of the Company’s employees shall particularly include the following: and discuss the issues and topics that are subject to 1) Forming committees or holding specialized important decisions; workshops to hear the opinions of the Company’s The Company has not established a scheme for granting employees and discuss the issues and topics Company shares or a percentage of the Company’s 2 Article 85 - Employee Incentives that are subject to important decisions; Guiding profits and pension programs for employees. However, 2) Establishing a scheme for granting Company shares Article the topic is part of the N&RC plan for study during 2021 or a percentage of the Company profits and pension and its recommendation will presented to the board. programmes for employees and setting up an The current bylaws has been updated by adds new independent fund for such programme; and article related to buy-back company shares which empower the Company to buy-back its shares for the 3) Establishing social organizations for the purpose of allocating them to the employees of the benefit of the Company’s employees. Company as part of an Employee Share Program. This update has been approved by the General Assembly on 24 April 2019.

The ordinary General Assembly, based on the Board recommendation, shall establish a policy that The Social Responsibility Policy is under preparation 3 Article 87 - Social Responsibility guarantees a balance between its objectives and those of Guiding by management and expected to be endorsed by the the community for purposes of developing the social and Article board during the year 2021 then presented to the economic conditions of the community. general assembly for approval.

The Board shall establish programmes and determine the necessary methods for proposing social initiatives by the Company, which include: 1) Establishing indicators that link the Company’s performance with its social initiatives and comparing it with other companies that engage in similar activities; 2) Disclosing the objectives of the Company’s social The requirements of Article no. (88) - Social Initiatives 4 Article 88 - Social Initiatives responsibility to its employees and raising their Guiding - are under study by the Management and Executive awareness and knowledge of social responsibility; Article Committee, their recommendation will be presented to the Board of Directors during 2021. 3) Disclosing plans for achieving social responsibility in the periodical reports on the activities of the Company’s; and 4) Establishing awareness programmes to the community to familiarize them with the Company’s social responsibility.

The Board established governance rules for the Company in accordance with the provisions of Corporate Governance Regulation issued by CMA. The If the Board forms a Corporate Governance Committee, Board is monitoring their implementation, verifying it shall assign to it the competences stipulated in their effectiveness, and amending them as necessary 5 Article 95 - Formation of a Article (94) of these Regulations. Such Committee shall Guiding based on recommendations of Audit Committee and Corporate Governance Committee oversee any matters relating to the implementation of Article Internal Audit Function and the Company utilizes the governance and shall provide the Board with its reports external consultancy firms to perform external review and recommendations at least annually. to corporate governance rules when required based on the Audit Committee recommendation and Board approval.

132 133 04 | CORPORATE GOVERNANCE COMMUNICATION WITH SHAREHOLDERS

SHAREHOLDERS SHAREHOLDERS RIGHTS AND COMMUNICATION METHODS RIGHTS AND MEANS OF A. GENERAL ASSEMBLY During 2020, only one General Assembly Meeting has been convened which is the ordinary General Assembly Meeting usually held in the headquarters in Riyadh, and scheduled 3 June, 2020 (11 Shawwal 1440 H) 6:30 pm. The Board’s invitation to the shareholders was announced on Tadawul website on 07/05/2020, but was done online via modern technology means for the safety of shareholders COMMUNICATION and in the support of preventive and precautionary measures applied by the CMA’s circular which enable shareholders to participate in deliberations and vote for the agenda listed in the meeting online. All these actions were taken to support preventional procedures adopted by competent and relevant health authorities to address the emerging Coronavirus (Covid-19).

All Board members attended except for Board member Mr. Amin Mohamed Akef Al-Maghrabi who didn’t participate in the meeting due to urgent circumstances.

On 25 November, 2020, L’azurde Company for Jewelry announced the invitation for shareholders to attend the extraordinary General Assembly meeting (First Meeting) by means of modern technology on Tuesday evening 07/05/1442 H corresponding to 22/12/2020 G, to debate and vote on the amendment of Article (18) of the Company Regulations Code related to (Board Members) to reduce the number of Board Members from (9) nine to (7) seven,as of the beginning of the next Board term on 26 April, 2021.

The first and second meetings of the Company’s extraordinary General Assembly were respectively scheduled (6:30 pm) and (7:30 pm) Tuesday 07/05/1442 H corresponding to 22/12/2020 G, and expected to be done by modern technology means on Tadawulati Platform. However, they didn’t take place due to lack of legal quorum required to convene as attendance rates for the first meeting only reached (20.98%), and (21.03%) for the second meeting . Therefore, it was decided to postpone the General Assembly and call for a third meeting on 20 January, 2021.

The following are the details of the General Assembly meetings that have been convened during the year 2020, and the names of the Board members who attended:

Name 24/06/2019 22/12/2020 Position Didn’t take place due to 03/04/2020 lack of legal quorum

Mr. Mohammed Ebrahim Shroogi Chairman of Board of Directors Present Present

Mr. Abdullah Abdulaziz Vice-chairman of Saleh Al Othaim Board of Directors Present Present

Board Member Mr. Brian Norman Dickie Chairman of Executive Present Present Committee

Mr. Adel Abdullah Al-Maiman Board Member Present Present

Mr. Bandar Talaat Hamooh Board Member Present Present

Board Member Mr. Abdul Kareem Present Present Assad Abu Alnasr NRC Chairman

Board Member and Chairwoman Mrs. Sabah Khalil AMoayyed of Audit Committee Present Present

Board Member and Chairman Mr. Khalifa Hasan Al Jalahma of Audit Committee Present Present

Mr. Amin Mohamed Akef Al-Maghrabi Board Member Didn’t attend Present

Executive Administration

Mr. Ayman Gamil Ammar CFO Present Present

Mr. Selim Chidiac Board Member and CEO Present Present

L’azurde uses the General Assembly as an opportunity to participate and communicate with its shareholders and seek their input and proposals in the management of the Company. 134 135 04 | CORPORATE GOVERNANCE COMMUNICATION WITH SHAREHOLDERS

B. RIGHTS OF SHAREHOLDERS The Chief Executive Officer informs the Board members of the Hence, we pro-actively encourage shareholders’ participation • The Company invites the General Assembly Shareholders to AND GENERAL ASSEMBLY opinions and suggestions of the shareholders and discusses in the AGM, both by attending the meeting and voting, either in electronic voting on the agenda items through Tadawulaty these opinions and suggestions with them during board meetings. person or by proxy. The Company seeks to maximize shareholders’ services portal. L’azurde by-laws and Corporate Governance Manual ensure that ability to participate in the General Assembly process by: shareholders enjoy all rights related to shares, in particular the We aim to balance investors’ engagement throughout the year, • Shareholders are encouraged to participate in General right of receiving a share of approved dividends payments, the providing the opportunity for frequent interaction with investors • Appropriate arrangements for the General Assembly to Assembly or to appoint proxies to attend and vote at meetings right to receive a share of the Company assets upon liquidation, through a variety of forums including meetings, quarterly encourage greatest number of Shareholders’ participation, for and on their behalf if they are unable to attend the the right to attend Shareholders’ General Assembly meetings conference calls, investor conferences and management including determination of the appropriate place and time. meetings. (participate in their deliberations and vote on their decisions), presentations. During 2020, the executive management held the right of share disposal, the right to oversee the work of the conference calls and meetings with analysts and shareholders, • Making Directors, Executive Management, and the external TADAWUL ANNOUNCEMENTS Board of Directors, file responsibility litigation against the Board based on their requests to understand L’azurde business model, statutory auditor available to shareholders at the General members and the right to inquire and request information as long Company’s strategy, performance and plans to manage current Assembly. L’azurde had a busy year with a number of events and strategic as it does not compromise the interest of the Company and does changes in regulations and economic environment. activities announced to shareholders throughout the year. The not conflict with the Terms and Executive Regulations of the CMA. • Allowing shareholders in attendance at the General Assembly most important events, activities and strategic decisions were D. METHODS OF COMMUNICATION WITH an opportunity to inquire about the business agenda, announced on the official website of the Saudi Stock Exchange L’azurde allows the maximum participation of its shareholders in OUR SHAREHOLDERS including queries to the external statutory auditor regarding (Tadawul) and L’azurde Company website. In total, thirty seven General Assembly meetings and is keen to ensure that the choice the conduct of the audit and the preparation and content of (37) announcements were made to L’azurde shareholders within of time and venue enable full participation. L’azurde by-laws and L’azurde is committed to promoting effective and open the external statutory auditor’s report. the year 2020. Corporate Governance Manual also provide provision related to communication with all shareholders, ensuring consistency the Shareholders’ General Assembly, which include procedures and clarity of disclosure at all times. We aim to engage with our • The Company may invite the General Assembly Shareholders The following table summarizes those announcements by dates and precautions necessary to ensure that all Shareholders shareholders transparently and regularly in order to facilitate a to convene using methods of modern technology. and subjects: are exercising their regular rights. The Shareholders’ General mutual understanding of our respective objectives. We strive to Assembly has the highest power in the Company with sole be accessible to both institutional and private investors, and pro- authorities including the appointment and termination of Board The following table summarizes those announcements by date and subject: actively encourage all shareholders to participate at our Annual Members, approval of the Consolidated Financial Statements, General Meeting (AGM). L’azurde is committed to providing appointment of the external auditor and determination of their greater disclosure and transparency in its financial reporting fees, approval of dividend distribution as recommended by the No. Date Title of announcement whether the quarterly or annual financials with the aim of being Board of Directors, increasing or decreasing of the share capital industry leaders. L’azurde aims to deliver all financial and of the Company and the amendment of by-laws and Article of L‘azurde Company for Jewelry announces the invitation of its shareholders to strategic communications in a consistent and open way ensuring 1 27/12/2020 Association. attend the extraordinary General Assembly meeting (Third Meeting) wherever possible, the use of both languages Arabic and English to make such disclosures easily intelligible and in order to L’azurde Company for Jewelry announces the submission of the application file to increase the L’azurde provides sufficient access for its shareholders to read 2 27/12/2020 the minutes of the General Assembly meeting through uploading present a fair, balanced and understandable assessment of the Company’s capital by offering shares of priority rights to the Capital Market Authority on Company’s website and provides the CMA with a copy of the Company’s position and prospects. L’azurde welcomes feedback and suggestions for improvement, which can be submitted to L’azurde Company for Jewelery announces that the Company’s extraordinary Meeting minutes within (10) days of the date of the meeting. 3 23/12/2020 Investor Relations at the email address: [email protected]. (EGM) will not convene (First Meeting & Second Meeting will be held after 1 hour) Investor Relations (IR) function as a continuous communication L’azurde Company for Jewelry announces to its shareholders the commencement of the Electronic Voting All financial reports, corporate governance policies, General 4 20/12/2020 channel with investors which answers their questions during (E-Voting) on the items of the extraordinary General Assembly Meeting (First Meeting) (Reminder Announcement) working days and also works as a two-way communication channel Assembly minutes and regulatory announcements, as well as between the investors, the Board and Executive Management. associated materials including management presentations and L’azurde Company for Jewelery announces the invitation of its shareholders to attend the transcripts are made available on our website L’azurde.com on a 5 20/12/2020 EGM (First Meeting) by means of modern technology (Reminder Announcement) C. INVESTORS RELATION ACTIVITIES timely basis for all investors to access.

L’azurde understands the importance of communicating L’azurde Company for Jewelery announces to its shareholders the commencement of the E-Voting The Board recognizes the importance of regular open and 6 17/12/2020 constructive dialogue with shareholders and other stakeholders, effectively with shareholders and is committed to the constructive on the agenda items of the extraordinary General Assembly Meeting (First Meeting) not just ahead of the Annual General Meeting but throughout the use of the AGM for the Board, Chairman and Directors to meet Addendum announcement from L’azurde Company for Jewelery regarding the Board of Directors with shareholders, hear their views, and answer their questions 7 07/12/2020 year. The Group’s Investor Relations and the Board Secretary both recommendation to increase the Company’s capital through a rights issue offering act as the centre for ongoing communication with shareholders, and inquiries. investors and analysts. The Board receives regular updates on L’azurde Company for Jewelry announces the opening of candidacy for 8 20/11/2020 the views of the Group’s shareholders and their suggestions, membership of the Board of Directors for the next session in addition to remarks on the Company and its performance through Investors Relations Function and Board Secretary. L’azurde Company for Jewelry announces the invitation of its shareholders to attend the 9 25/11/2020 extraordinary General Assembly Meeting (First Meeting) by means of modern technology

L’azurde Company for Jewelry announces its strategy to expand into the field 10 16/11/2020 of crafting piece jewelry and develop its e-commerce platform

L’azurde Company for Jewelry announces the latest news that it will host an online earnings call to 11 12/11/2020 discuss the results of the third quarter of the financial year 2020 with investors and financial analysts

L’azurde Company for Jewelry announces that it will host an earnings call to discuss the results 12 11/11/2020 of the third quarter of the financial year 2020 with investors and financial analysts

L’azurde Company for Jewelry announces the interim financial results 13 5/11/2020 for the period ending on 30-09-2020 (Nine Months)

L’azurde Company for Jewelery announces the appointment of a financial 14 20/10/2020 advisor to manage subscription to rights issue

136 137 04 | CORPORATE GOVERNANCE COMMUNICATION WITH SHAREHOLDERS

SHAREHOLDERS RECORDS No. Date Title of announcement The Company analyzes and studies the shareholders’ register monthly in order to communicate with the shareholders for purposes L'azurde Company for Jewelery announces the Board of Directors ’recommendation to of General Assembly meetings. 15 11/10/2020 increase the Company's capital through a rights issue offering During 2020, fourteen (14) applications were submitted to the Stock Exchange Tadawul to obtain shareholders’ records on different L'azurde Company for Jewelry announces that it will host an online earnings call to discuss the results dates and for different reasons, including: 16 01/09/2020 of the second quarter of the financial year 2020 with investors and financial analysts

L'azurde Company for Jewelry announces that it will host an online earnings call to discuss the results 17 23/08/2020 Request # Request Date Request Type Reasons of the second quarter of the financial year 2020 with investors and financial analysts

L'azurde Company for Jewelry announces latest development regarding Covid-19 18 20/08/2020 1 02/01/2020 Quantities - at the level of identity Company Procedures pandemic (Coronavirus) and its impact on the Company businesses

2 09/02/2020 Quantities - at the level of identity Company Procedures 19 20/08/2020 L'azurde Company for Jewelry announces the condensed consolidated interim financial results for the period ended June 30, 2020 (Six Months)

3 31/03/2020 Quantities - at the level of identity Company Procedures L'azurde Company for Jewelry announces latest development related to temporary reducing opening hours of its 20 29/06/2020 subsidiaries retail showrooms in Egypt due to the Covid-19 pandemic in light of the imposed curfew restrictions

4 13/04/2020 Quantities - at the level of identity Company Procedures L'azurde Company for Jewelry announces the condensed consolidated interim financial 21 21/06/2020 results for the period ended March 31, 2020 (Three Months)

5 03/06/2020 Quantities - at the level of identity General Assembly Meetings L'azurde Company announces the latest developments related to the reopening of its retail stores, in light of 22 21/06/2020 the return to full operation after the Kingdom lifted the curfew in all regions and cities as of today.

6 23/07/2020 Quantities - at the level of identity Company Procedures L'azurde Company announces latest development related to the temporary closure of retail showrooms in the Kingdom of Saudi 23 07/06/2020 Arabia to protect public health in light of the re-tightening of precautionary measures in the city of Jeddah for a period of 15 days

7 06/08/2020 Quantities - at the level of identity Company Procedures 24 04/06/2020 L'azurde Company for Jewelery announces the results of the ordinary General Assembly (First Meeting)

8 31/08/2020 Quantities - at the level of identity Company Procedures L'azurde Company for Jewelry announces latest development related to the temporary closure 25 31/05/2020 of retail showrooms in the Kingdom of Saudi Arabia to protect public health

9 04/10/2020 Quantities - at the level of identity Company Procedures L'azurde Company for Jewelry announces to its shareholders the commencement of E-Voting on 26 31/05/2020 the agenda items of the ordinary General Assembly meeting (First Meeting)

10 05/11/2020 Quantities - at the level of identity Company Procedures L'azurde Company for Jewelery announces latest development related to the temporary closure 27 14/05/2020 of retail showrooms in the Kingdom of Saudi Arabia to protect public health

11 18/11/2020 Quantities - at the level of identity Company Procedures Addendum announcement from L'azurde Company for Jewelery regarding the invitation of its 28 07/05/2020 shareholders to attend the ordinary General Assembly meeting ( (First Meeting)

12 21/11/2020 Quantities - at the level of identity Company Procedures 29 07/05/2020 L’azurde Company for Jewelery announces the invitation of its shareholders to attend the ordinary General Assembly meeting (First Meeting)

13 22/12/2020 Quantities - at the level of identity General Assembly Meetings L’azurde Company for Jewelery announces latest development related to the temporary closure 30 28/04/2020 of retail showrooms in the Kingdom of Saudi Arabia to protect public health

14 31/12/2020 Quantities - at the level of identity Company Procedures L’azurde Company for Jewelry announces the impact of recent government initiatives and decisions 31 08/04/2020 to mitigate the impact of the spread of the Coronavirus (COVID-19) and its control

L’azurde Company for Jewelry announces a temporary reduction in opening hours of its 32 25/03/2020 subsidiaries retail showrooms in Egypt due to the Coronavirus RECOMMENDATIONS TO THE GENERAL ASSEMBLY We are pleased, after reviewing the most important operational and financial activities for the financial year 2020, to attach the L’azurde Company for Jewelry announces that it will organize a conference call to discuss the Consolidated Financial Statements with the Auditor’s Report thereon. 33 24/03/2020 results of the financial year 2019 with financial analysts and investors We recommend that the General Assembly approves the Board of Directors Report and the Consolidated Financial Statements. The 34 19/03/2020 L’azurde Company for Jewelry announces the resignation and appointment of a Board of Directors’ member place and time of the General Assembly meeting and any other items on the agenda will be announced at a later date. The announcement for the 2020 Annual General Meeting will be published on Tadawul’s website, the Company’s website and in a 35 18/03/2020 L’azurde Company for Jewelery announces that it will not distribute cash dividends to shareholders for the financial year ended December 2019 local newspaper, at a later date, at least 21 working days before the meeting, after obtaining the required approvals from all the relevant regulatory bodies.

36 18/03/2020 L’azurde Company for Jewelry announces its annual financial results for the year ended December 31, 2019 All Board and Committees’ members, including the Chairmen of the Audit Committee and the Remuneration and Nomination Committee will attend the 2020 Annual General Meeting and will be available to respond to the shareholders’ questions.

37 16/03/2020 L’azurde Company for Jewelry announces a temporary closure of its retail showrooms in the Kingdom of Saudi Arabia to protect public health

138 139 04 | CORPORATE GOVERNANCE AUDIT COMMITTEE REPORT

ANNUAL AUDIT RIYADH, 10 FEBRUARY 2021 PREAMBLE The Audit Committee (the “Committee”) is delegated by the General Assembly with the responsibility to provide independent oversight COMMITTEE REPORT of the Group’s financial reporting, internal control systems, compliance with applicable laws and regulations and the adequacy of the External and Internal Audits activities. Further to that, the approved charter of the AC has assigned risk management supervision duty to the Committee.

FOR ���� During the year, the Committee has been provided with sufficient resources to perform its duties including support, as necessary, from the Internal Audit Department (“IAD”), the External Auditors (‘Baker Tilly” or “BT”), legal counsel and management to examine all matters relating to the Group’s adopted accounting principles and practices and in reviewing all material financial, operational and compliance control systems. The Committee’s charter and its terms of reference are available on the L’azurde website https://lazurde. com/.

The Committee comprises four board members including a specialist in financial and accounting matters, appointed by the General Assembly for a term coinciding with the term of the Board of Directors.

None of the Committee members are employed by or otherwise affiliated with the former or current auditors of L’azurde Group. The Committee members’ names are the following and biographies are set out in the Board and Committees section of the 2020 Annual Report.

Members Position Membership Status Appointment Date

Chairman of the Mrs. Sabah Khalil Almoayyed (1) Independent 22 April 2018 Audit

Member of the Mr. Brian Norman Dickie Non-Executive 22 April 2018 Audit Committee

Member of the Mr. Adel Al-Maiman Non-Executive 22 April 2018 Audit Committee

Member of the Mr. Khalifa Hassan Al Jalahma Non-Executive 10 December 2019 Audit Committee

1. Mrs. Sabah Khalil Al-Moayyed, is an independent board member, the chairwoman of the Audit Committee and specialist in finance and accounting matters.

140 141 04 | CORPORATE GOVERNANCE COMMUNICATION WITH SHAREHOLDERS

MEETINGS 4.EXTERNAL AUDIT 6. REVIEW OF ACCOUNTING, FINANCIAL REPORTING AND INTERNAL AUDIT FUNCTIONS The committee meets on a quarterly basis with additional - Reviewed accounting principles and practices proposed by The Committee is mandated to monitor the independence of the meetings and conference calls held as and when necessary. management. Group’s external auditor, Baker Tilly. The Committee obtained a The Audit Committee reviewed and was satisfied with the The committee held ten (10) meetings, 2 physical meetings and written assurance letter from Baker Tilly as External Auditors adequacy of the resources (internal and external outsourced), 8 over conference calls, during the year 2020 due to Covid-19 During the financial year, the activities undertaken by the Audit on 24 June 2020, confirming their independence. The Committee staff qualifications and experience, training programmes and pandemic and related implemented precautionary measures. Committee regarding major topics were as follows: agreed that the External Auditors are and have been independent budget of the Group’s accounting, financial reporting. Members’ attendance records are disclosed in the Corporate throughout the conduct of their audit engagement in accordance Governance Report contained in the Annual Report with an 1. FINANCIAL REPORTING with the terms of all relevant professional and regulatory As part of succession planning, the Audit Committee average attendance rate close to 100%. requirements and they have met the criteria of suitability. recommended a successor to the Head of Internal Audit knowing The Committee reviewed the quarterly financial statements for that the current manager will be leaving after Q2 2021. The Audit The Company’s Chief Executive Officer and Chief Financial Officer the first, second and third quarters of 2020. The Committee had undertaken an assessment of the suitability Committee also recommended outsourcing some projects to were invited to the meetings, when required, to facilitate direct and independence of the External Auditors in accordance with the ensure all the work was properly executed and support internal communication as well as to provide clarification on accounts, The Committee reviewed the 2020 Consolidated Financial Policy and Procedures for the Assessment of External Auditors. audit function with required resources. financials, and other specific matters. Statements in conjunction with the External Auditors, Baker Tilly (“BT”). Based on this review and discussions with management, In several conference calls held during 2020, the External Minutes of each meeting were documented and tabled for the Committee was satisfied that the Consolidated Financial Auditors reviewed together with the Audit Committee the results confirmation at the next Audit Committee meeting and Statements were prepared in accordance with applicable of their audit, the audit report, and recommendations in respect Audit Committee Chairwoman subsequently presented to the Board for approval. accounting standards in KSA (International Financial Reporting of improvements to the internal control procedures noted during Standards approved by SOCPA) and fairly presents the Group’s the course of their audit. Mrs. Sabah Almoayyed The Chairwoman of the Audit Committee conveyed to the Board financial position and results of its operations for the year ended matters of significant concern as and when raised by the External 31 December 2020. The Committee had four (4) private calls with the External Auditors or Internal Audit function. Auditors during 2020 without the presence of the Management The Committee therefore recommended the Consolidated and Internal Auditor. The feedback from BT during those There is no conflict between the recommendations of the Audit Financial Statements for the year ended 31 December 2020 to be sessions was consistent and did not raise any concerns on the Committee and the resolutions of the Board of Directors. approved by the Board and General Assembly. audit procedures and cooperation of management.

SUMMARY OF WORK 5. RE-APPOINTMENT OF EXTERNAL AUDITOR 2. REVIEW OF INTERNAL CONTROL SYSTEMS - Reviewed the Group’s quarterly and annual results and As required by corporate governance regulation, at least two financial statements. The internal control system has an important role to play in the success of any organization. L’azurde is committed to ensuring audit firms should be nominated to the General Assembly. - Reviewed the content of the annual report and has advised an effective internal control system to achieve regulatory The Audit Committee reviewed the audit services proposals the board that, the annual report taken as a whole is fair, objectives, asset protection, accurate internal and external submitted for 2021 and nominated the following two audit firms: balanced, and understandable and provides the information reporting, effective risk management, and adherence to 1. Dr. Abdelgadir Bannaga & Partners Company necessary for shareholders to assess the company’s regulatory requirements. (Allied Accountants). performance, business model and strategy. The Committee reviewed the effectiveness of the Group’s policies 2. Baker Tilly MKM & Co. Certified Public Accountants. - Reviewed, with both the external auditor and management, and procedures regarding internal control systems (including the financial, operational, IT, risk management, information the audit approach and methodology applied, and in particular 3. PKF - Ibrahim Ahmed Al-Bassam & Co. Certified security, outsourcing, legal, compliance and those controls to those Key Audit Matters included in the year end auditor’s Public Accountants. report. designed to detect material fraud) by reviewing (if any) the work and reports of the internal auditor and the Group’s external - Reviewed significant findings of the IAD, the external auditor auditor, and regular reports from management including those and regulators, and management’s response to their on risk management, regulatory compliance and legal matters. recommendations. In conjunction with the Risk Committee, the Committee reviewed - Reviewed reports on legal and regulatory compliance and concurred with the management confirmation that for the matters, including anti-bribery and anti-corruption matters year ended 31 December 2020, the Group’s risk management and and whistle-blowing disclosures. internal control systems were effective.

- Reviewed the adequacy and effectiveness of the Group’s The Committee is satisfied that the Group has adopted necessary internal control systems. control mechanisms to monitor and correct non-compliance and complied satisfactorily with the requirements of the Corporate - Overseeing the risk management function and assessing Governance Code in respect of risk management and internal the effectiveness of the systems and mechanisms for control systems. determining, and monitoring the risks, including monitoring the implementation of the risk policies and procedures. 3. RELATED PARTY TRANSACTIONS - Reviewed and monitored the external auditor’s independence The Committee reviewed the related party transactions of and engagement to perform non-audit services. the company. The Committee did not report any conflict of interest situation within the Company nor the Group including Reviewed the 2020 external audit engagement letters and fees any transaction, procedure or course that raises questions of and recommended it to the Board of Directors for approval. management integrity to the Board. The Committee reviewed the - Reviewed the External Auditors’ 2020 Audit Plan including External Auditor’s (Baker Tilly) limited review report regarding their scope of work. related parties transactions during 2020.

142 143 �5 CONSOLIDATED FINANCIAL STATEMENTS

144 145 05 | CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

INDEPENDENT AUDITOR'S REPORT 2 - Revenue recognition:

Refer to Note (5) for the accounting policy relating to revenue recognition and Note (32) for the relevant disclosures To the Shareholders Description of the key audit matter How the matter was addressed in our audit L’azurde Company for Jewelry and its Subsidiaries

(A Saudi Joint Stock Company) Our audit procedures in this area included, among others: • Assessed the appropriateness of the Group’s Riyadh, kingdom of Saudi Arabia revenue recognition accounting policies by considering the requirements of relevant accounting standards; The Group recognized total revenues of SR 1,278 • Evaluated key contractual arrangements REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS million (2019: SR 1,976 million). As the Group by considering relevant documentation and is mainly manufacturing and/or trading of gold agreements with the customers; jewelry and silver, almost all the Group’s sales OPINION arrangements are considered straightforward, being on a point-in-time basis of recognition and • Assessed the design and implementation, requiring less judgment to be exercised. and tested the effectiveness of the Group’s controls, over We have audited the consolidated financial statements of L’azurde Company for Jewelry (the “Company”) and its subsidiaries, the recognition of revenue as per the Group’s policy; Revenue recognition is considered a key audit collectively referred to as the “Group”, which comprise the consolidated statement of financial position as at 31 December 2020, and matter in view of the risk that management may the consolidated statement of profit or loss, consolidated statement of comprehensive income, consolidated statement of changes in override controls to intentionally misstate revenue • selecting a sample of sales transactions taking transactions and due to the importance of the place before and after the year-end to assess whether equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including amount of revenue and the inherent risks. revenue was recognized in the correct accounting period; a summary of significant accounting policies. • Considered the adequacy of the disclosure in the Group’s consolidated financial statements as In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial per the relevant financial reporting standard. position of the Group as at 31 December 2020, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (“IFRS”) that are endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements issued by the Saudi Organization for Certified Public Accountants (“SOCPA”).

BASIS FOR OPINION 3 - Valuation of inventories: We conducted our audit in accordance with International Standards on Auditing (“ISA”) that are endorsed in the Kingdom of Saudi Arabia. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Refer to Note (5) for the accounting policy relating to Valuation of inventories and Note (10) for the relevant disclosures Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the professional Description of the key audit matter How the matter was addressed in our audit code of conduct and ethics that are endorsed in the Kingdom of Saudi Arabia that are relevant to our audit of the consolidated financial statements and we have fulfilled our ethical responsibilities in accordance with these requirements. We believe that the Our audit procedures in this area included, among others: audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. The Group’s inventories balance was SR 842 million • Assessing the design and implementation as at 31 December 2020 (2019: 889 million) which are and testing of the operating effectiveness of the carried at lower of cost and net realizable value. key control relating to the Group processes over KEY AUDIT MATTERS The valuation of inventory is considered a key establishing a monitoring the inventory provision. audit matters due to the significant judgments in • Re-performing the calculation of provision for melting Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated determining an appropriate inventory provision. and slow-moving inventories in accordance with the Group’s policy. The factors considered in determining • Evaluating the inventory provision financial statements for the current year. These matters were addressed in the context of our audit of the consolidated financial this provision includes: methodology and key assumptions made by the statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. • Assessment of the level of slow- management in estimating the inventory provision. moving items inventories and the required provision • Determining the net realizable value (NRV) melting using the age analysis and historical of inventories by examining the sales subsequent to sales experience in each age bracket, and year-end for a sample of items comparing this NRV • Estimation of net realizable value based on with the carrying value of inventories at year-end to check appropriateness of associated provision future expectations. The following is a description of each key audit matter and how we addressed them during our audit. • Evaluating the adequacy of the disclosures, in accordance with the requirements 1 - Impairment assessment of goodwill: of the relevant accounting standards

Refer to Note (5) for accounting policy relating to goodwill and Note (9) for the goodwill details OTHER MATTER

Description of the key audit matter How the matter was addressed in our audit The consolidated financial statements of the Group for the year ended 31 December 2019, were audited by another auditor who

Our audit procedures in this area included, among others: expressed an unmodified opinion on those consolidated financial statements on 16 March 2020. The carrying value of goodwill as at 31 December 2020 • Evaluated the methodology used amounted to SR 110 million (2019: SR 110 million). by management to determine the recoverable OTHER INFORMATION INCLUDED IN THE GROUP'S ANNUAL REPORT amount based on value-in-use technique; The impairment assessment for the goodwill with indefinite useful lives is considered a key audit • Reviewed the appropriateness of the matter due to the significant judgments involved assumptions applied to key inputs such as sales growth Other information consists of the information included in the Group’s 2020 annual report, other than the financial statements and by the Management with respect to sales growth rates, discount rates and long-term growth rates, and our auditors’ report thereon. Management is responsible for the other information in its annual report thereon. The annual report is performed a sensitivity analysis on those key assumptions; rates, terminal value, and discount rate. expected to be made available after the date of this audit report. The Group’s management performs on an annual • Involved our valuation specialist to basis an impairment test on the recoverability of the assist in evaluating the appropriateness of the goodwill and assesses the recoverable amount of discount rates applied, which included comparing the Our opinion on the consolidated financial statements does cover the other information and we do not and will not express any form the cash-generating unit (CGU) to which the goodwill weighted‑average cost of capital with sector averages relates in order to determine if an impairment exists. for the relevant markets in which the CGU operates; of assurance or conclusion thereon. • Reviewed the adequacy of the Group’s financial statement disclosures for compliance with the requirements of the relevant accounting standards. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

146 147 05 | CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISA that are endorsed in Kingdom of Saudi Arabia will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISA, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure, and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation; and

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE CONSOLIDATED FINANCIAL STATEMENTS

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS Bakertilly MKM & Co. CPA as endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements issued by SOCPA, applicable requirements of Regulation for Companies and by-laws of the Company and for such internal control as management determines is necessary to Certified public accountant enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Majed Moneer AlNemer management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. (License No. 381) Those charged with governance, i.e. the “Board of Directors, are responsible for overseeing the Group’s financial reporting process. Riyadh, in Rajab XX, 1442H

Corresponding to March XX, 2021

148 149 05 | CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Consolidated statement of financial position as at 31 December 2020 Consolidated statement of financial position as at 31 December 2020

31 December 2020 31 December 2019 31 December 2020 31 December 2019 Notes Notes SAR SAR SAR SAR

ASSETS Current Liabilities

Non-Current Assets Accounts payable and other current liabilities 19 309,722,808 236,812,062

Property and equipment 7 80,923,715 87,426,984 Current portion of long-term murabaha facility 16 20,000,000 19,000,000

Right-of-use-assets 8 33,696,747 48,574,644 Current portion of lease liabilities 8 15,872,614 21,251,209

Intangible assets and goodwill 9 139,167,816 140,688,956 Current portion of long term payable 33 40,845,560 -

Other non-current assets 1,798,095 1,562,326 Short-term murabaha facilities 20 837,600,269 1,117,990,648

Total Non-Current Assets 255,586,373 278,252,910 Zakat and income tax liability 27 19,537,082 22,024,926

Current Assets Total Current Liabilities 1,243,578,333 1,417,078,845

Inventories 10 817,847,122 858.623,747 Total Liabilities 1,352,712,291 1,596,823,514

Accounts receivable 11 264,064,600 625,067,875 TOTAL EQUITY AND LIABILITIES 1,650,038,697 2,015,034,575

Other current assets 12 100,834,394 99,540,466

Gold margins 37,407,396 - AYMAN GAMIL MR. SELIM CHIDIAC SABAH ALMOAYYED Cash margins 32,935,190 99,974,368 CHIEF FINANCIAL OFFICER CHIEF EXECUTIVE OFFICER AUHTORIZED BOARD MEMBER

Cash and cash equivalents 13 141,363,622 53,575,209

Total Current Assets 1,394,452,324 1,736,781,665 The annexed notes from 1 – 36 form an integral part of these Consolidated Financial Statements.

TOTAL ASSETS 1,650,038,697 2,015,034,575

EQUITY AND LIABILITIES

Equity

Share capital 14 430,000,000 430,000,000

Statutory reserve 15 22,186,724 22,186,724

Retained Earnings 9,911,958 132,123,563

Foreign currency translation reserve (164,772,276) (166,099,226)

Total Equity 297,326,406 418,211,061

Liabilities

Non-Current Liabilities

Long term murabaha facility 16 55,000,000 75,000,000

Employees’ end of service benefits 17 27,508,541 29,334,858

Lease liabilities 8 13,581,649 22,631,499

Deferred tax liability 18 1,725,119 1,403,075

Long term payable 33 11,318,649 51,375,237

Total Non-Current Liabilities 109,133,958 179,744,669

150 151 05 | CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Consolidated statement of profit or loss for the year ended 31 December 2020 Consolidated statement of other comprehensive income for the year ended 31 December 2020

31 December 2020 31 December 2019 31 December 2020 31 December 2019 Notes SAR SAR SAR SAR

REVENUE NET LOSS FOR THE YEAR (120,488,372) (17,547,550)

Gold 32 931,024,057 1,495,209,023 OTHER COMPREHENSIVE INCOME

Operations 32 347,416,338 481,204,711 Items that will not be reclassified subsequently to profit or loss 609,656 1,705,537 Re-measurement on employees’ end of service benefits 1,278,440,395 1,976,413,734 Items that will be reclassified subsequently to profit or loss 1,326,950 9,929,550 COST OF REVENUE Exchange differences on translation of foreign operations

Other comprehensive income for the year - net of tax 1,936,606 11,635,087 Gold (931,024,057) (1,495,209,023)

TOTAL COMPREHENSIVE LOSS FOR THE YEAR (118,551,766) (5,912,463) Operations 22 (164,436,396) (193,394,537) TOTAL COMPREHENSIVE LOSS FOR THE GROSS PROFIT 182,979,942 287,810,174 YEAR ATTRIBUTABLE TO:

OPERATING EXPENSES Equity holders of the Parent Company (118,551,766) (5,912,463)

Selling and marketing expenses 23 (150,778,855) (174,876,053)

General and administrative expenses 24 (41,756,306) (43,373,761)

Consolidated statement of changes in equity for the year ended 31 December 2020 Provision for expected credit loss 11 (14,354,980) (5,060,150) Foreign Currency Impairment of inventories 10 - (17,764,781) Share Capital Statutory Reserve Retained Earnings Translation Reserve Total

Loss on recall of products (34,692,433) - SAR SAR SAR SAR SAR

OPERATING (LOSS)/PROFIT (58,602,632) 46,735,429 Balance at 1 January 2020 430,000,000 22,186,724 132,123,563 (166,099,226) 418,211,061

OTHER EXPENSES Net loss for the year - - (120,488,372) - (120,488,372)

Other income/(expenses) - net 25 428,816 1,012,214 Other comprehensive income for the year - - 609,656 1,326,950 1,936,606

Finance costs - net 26 (50,437,672) (50,872,646) Total comprehensive income for the year - - (119,878,716) 1,326,950 (118,551,766) LOSS BEFORE ZAKAT AND TAX (108,611,488) (3,125,003) Dividends (note 34) - - (2,332,889) - (2,332,889) Zakat 27 (8,092,933) (11,306,499)

BALANCE AT 31 DECEMBER 2020 430,000,000 22,186,724 9,911,958 (164,772,276) 297,326,406 Income Tax 27 (3,783,951) (3,116,048)

NET LOSS FOR THE YEAR (120,488,372) (17,547,550) Equity holders of the Parent Company Balance at 1 January 2019 430,000,000 22,186,724 149,927,579 (176,028,776) 426,085,527 LOSS PER SHARE

Net loss for the year - - (17,547,550) - (17,547,550) Basic 28 (2.80) (0.41)

Diluted 28 (2.80) (0.41) Other comprehensive income for the year - - 1,705,537 9,929,550 11,635,087

Total comprehensive income for the year - - (15,842,013) 9,929,550 (5,912,463)

Dividends (note 34) - - (1,962,003) - (1,962,003)

AYMAN GAMIL MR. SELIM CHIDIAC SABAH ALMOAYYED BALANCE AT 31 DECEMBER 2019 430,000,000 22,186,724 132,123,563 (166,099,226) 418,211,061

CHIEF FINANCIAL OFFICER CHIEF EXECUTIVE OFFICER AUHTORIZED BOARD MEMBER

The annexed notes from 1 – 36 form an integral part of these Consolidated Financial Statements. AYMAN GAMIL MR. SELIM CHIDIAC SABAH ALMOAYYED

CHIEF FINANCIAL OFFICER CHIEF EXECUTIVE OFFICER AUHTORIZED BOARD MEMBER

The annexed notes from 1 – 36 form an integral part of these Consolidated Financial Statements.

152 153 05 | CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Consolidated statement of cash flows for the year ended 31 December 2020 Consolidated statement of cash flows for the year ended 31 December 2020

31 December 2020 31 December 2019 31 December 2020 31 December 2019 Notes Notes SAR SAR SAR SAR

OPERATING ACTIVITIES INVESTING ACTIVITIES

Net loss before zakat and tax (108,611,488) (3,125,003) Purchase of property and equipment (9,635,533) (11,668,077)

Adjustments to reconcile loss before zakat Proceeds from sale of property and equipment 848,686 1,090,295 and tax to net cash from operating activities:

Depreciation on property and equipment 16,111,912 16,681,918 Purchase of intangible assets (686,051) (635,183)

Depreciation of right-of-use assets 26,677,602 25,940,026 Other non-current assets (235,769) (486,874)

Amortization of intangible assets 2,206,205 2,148,081 Net cash used in investing activities (9,705,667) (11,699,839)

Provision for employees’ end of service benefits 5,518,008 3,243,699 FINANCING ACTIVITIES

Provision for expected credit losses 14,354,980 5,060,150 Cash facilities (Tawaruq) 34,305,038 26,940,918

Finance costs – net 46,228,987 45,080,720 Long-term murabaha facility (19,000,000) (14,000,000)

(Gain)/loss on sale of property and (77,329) 2,450,580 equipment and intangible assets Repayments of lease liabilities (29,659,249) (28,096,672)

Melting costs and charge for slow moving inventory 13,793,057 27,312,838 Finance cost paid - cash facilities (12,553,597) (15,012,556)

Foreign currency exchange differences - net (1,670,133) (5,487,996) Cash margins 67,039,178 1,554,422

Operating income before changes in working capital 14,531,801 119,305,013 Dividends paid (2,332,889) (1,962,003)

Net cash generated from / (used Net changes in working capital: in) financing activities 37,798.481 (30,575,891)

Inventories 28,055,887 (91,508,977) Net change in cash and cash equivalents 86,772,690 2,636,179

Accounts receivable 346,863,525 (86,477,106) Cash and cash equivalents at beginning of the year 53,575,209 47,733,037

Other current assets 2,851,970 (29,737,065) Exchange differences on cash and cash equivalents 1,015,723 3,205,993

Accounts payable and other current liabilities 8,585,087 (8,601,489) Cash and cash equivalents at end of the year 141,363,622 53,575,209

Account payable for gold 63,039,727 193,896,938

Gold Margins (37,407,396) 0

Short term murabaha facilities (314,695,417) (681,884) AYMAN GAMIL MR. SELIM CHIDIAC SABAH ALMOAYYED

CHIEF FINANCIAL OFFICER CHIEF EXECUTIVE OFFICER AUHTORIZED BOARD MEMBER Cash generated from operating activities 111,825,184 96,195,430

Employees’ end of service benefits paid (6,746,642) (4,991,328)

Finance costs paid - gold facilities (32,220,565) (45,695,400)

Income taxes paid (2,958,056) (308,494)

Zakat paid (11,220,045) (15,300,855)

Net cash generated from operating activities 58,679,876 44,911,909

AYMAN GAMIL MR. SELIM CHIDIAC SABAH ALMOAYYED

CHIEF FINANCIAL OFFICER CHIEF EXECUTIVE OFFICER AUHTORIZED BOARD MEMBER

The annexed notes from 1 – 36 form an integral part of these Consolidated Financial Statements. The annexed notes from 1 – 36 form an integral part of these Consolidated Financial Statements.

154 155 05 | CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2. STATEMENT OF COMPLIANCE The subsidiaries’ operations results are included in consolidated The consolidated financial statements include consolidated profit or loss and other comprehensive income from the date of FOR THE YEAR ENDED 31 DECEMBER 2020 statement of financial position, consolidated statement of profit owning them, which is the date on which the control commences. d) L’azurde Jewellery LLC (“LJ Abu Dhabi”). or loss, consolidated statement of comprehensive income, 1. ORGANIZATION AND All transactions and balances between Group companies are consolidated statement of changes in equity, consolidated PRINCIPAL ACTIVITIES eliminated on consolidation, including unrealized gains and LJ Abu Dhabi is a Limited Liability Company incorporated in statement of cash flows, and notes to the consolidated financial losses on transactions between Group companies. Where L’azurde Company for Jewelry (the “Company”, “Parent the United Arab Emirates (Abu Dhabi) under Commercial statements. These consolidated financial statements are unrealized losses on intra-Group asset sales are reversed on Company”) is a Saudi Joint Stock Company registered in Riyadh, Registration number 1060233 dated 1 June 2004. The principal prepared in accordance with International Financial Reporting consolidation, the underlying asset is also tested for impairment Kingdom of Saudi Arabia under commercial registration number activity of LJ Abu Dhabi is trading of gold jewelry items. Standards (“IFRS”) endorsed by Saudi Organization for Certified from a Group perspective. Amounts reported in the financial 1010221531 and dated 26 Jumad Thani 1427H (corresponding to Public Accountants (“SOCPA”) and other standards and statements of subsidiaries have been adjusted where necessary 22 July 2006). The Company’s head office is located in Second e) L’azurde Company for Jewellery LLC (“LCJ Qatar”). pronouncements issued by SOCPA. Industrial Area, P.O. Box 41270, Riyadh 11521, Kingdom of Saudi to ensure consistency with the accounting policies adopted by Arabia. LCJ Qatar is a Limited Liability Company incorporated in the The consolidated financial statements for the year ended 31 the Group. State of Qatar under Commercial Registration number 60716 December 2020 were approved and authorized for issue by the Profit or loss and other comprehensive income of subsidiaries The Company and its subsidiaries (together referred to as dated 21 May 2013. The principal activity of LCJ Qatar is trading Board of Directors on **********. the “Group”) are engaged in the production, manufacturing, of gold jewelry items. acquired or disposed of during the year are recognized from forming and forging of golden wares, jewelry, precious stones 3.BASIS OF PREPARATION the effective date of acquisition, or up to the effective date of and golden alloys in accordance with the ministerial resolution f) Almujwharat Almasiah LLC (“AA”). disposal, as applicable. number 1354/S and dated15 Rabi Thani 1429H corresponding to BASIS OF MEASUREMENT AA is a Limited Liability Company incorporated in the Kingdom The Group attributes total comprehensive income or loss of 21 April 2008. The Group’s other permissible activities include These consolidated financial statements have been prepared of Saudi Arabia under Commercial Registration number subsidiaries between the owners of the parent and the non- distribution of glasses, watches, accessories, pens, perfumes, under historical cost basis as explained in the relevant 1010236734 dated 25 Rajab 1428H (corresponding to 8 August controlling interests based on their respective ownership leather products and export of gold wares, alloys and silver. accounting policies and measurement basis summarized below, 2007). The principal activities of AA are trading of gold and silver interests, if material. except for employees’ end of service benefits provision which has products and precious stones. The Group carries out its activities through various branches in been valued by an independent professional actuary and certain the Kingdom of Saudi Arabia and Kuwait and through subsidiaries BUSINESS COMBINATIONS g] Kenaz LLC (“Kenaz”). financial assets and financial liabilities which are measured at in the Kingdom of Saudi Arabia, the United Arab Emirates, the fair value. The Group accounts for the business combination using the Arab Republic of Egypt, the State of Qatar and the Sultanate of acquisition method when the control is transferred to the group. Oman. All these branches and subsidiaries are engaged in the Kenaz is a Limited Liability Company incorporated in the Kingdom of Saudi Arabia under Commercial Registration Historical cost is generally based on the fair value of the manufacturing and/or trading of gold jewelry and silver products. consideration given in exchange for goods and services. The consideration transferred in the acquisition is generally number 1010352574 dated 21 Dhul Qadah 1433H (corresponding measured at fair value, as are the identified net assets acquired. to 6 October 2012). The principal activities of Kenaz are trading of The Parent Company directly or indirectly owns 100% as at 31 BASIS OF CONSOLIDATION The consideration transferred does not include amounts related December 2020 (31 December 2019: 100%) share capital in each gold and silver products and precious stones. to the settlement of pre-existing relationship. Such amounts The Group’s financial statements consolidate those of the Parent subsidiary except L’azurde Company for Jewellery LLC (“LCJ are generally recognized in consolidated statement of profit or h) L’azurde Group for Gold and Jewellery DMCC Company and all its subsidiaries at each reporting date. All Qatar”) in the State of Qatar. The direct ownership of the Parent loss and other comprehensive income. Contingent consideration (“L’azurde DMCC”). subsidiaries year-end is 31 December. Company in LCJ Qatar is 49%, however, based on the agreement payable is measured at fair value at the acquisition date if the with the nominee shareholder of LCJ Qatar, the Parent Company L’azurde DMCC is a Limited Liability Company registered with contingent consideration was classified as equity. As a result, any is entitled to 98% of the economic benefits of LCJ Qatar. Group controls an entity when it is exposed to, or has rights to, Dubai Multi Commodities Centre Authority, UAE under Trade variable returns from its involvement with the entity and has transactions are treated through equity. Otherwise, subsequent License number DMCC 108442 dated 26 February 2015. The the ability to affect those returns through its power over the changes in the fair value of the contingent consideration are The Group carries out its activities through the following recognized in consolidated statement of profit or loss and other subsidiaries as set out below: principal activity of L’azurde DMCC is trading of pearls, precious invested entity. stones, and gold jewellery. comprehensive income. a) ORO Egypt for Manufacturing Precious Metals (“ORO”). The financial statements of the subsidiaries are included in i) L’azurde Jewellery LLC (“LJ Oman”). the consolidated financial statements from the date on which The excess of the cost of acquisition and amount of non- controlling interest if any over the fair value of the identifiable ORO is a Joint Stock Company incorporated in the Arab Republic controls commences until the date on which control ceases. net assets acquired is recorded as goodwill in the consolidated of Egypt under Commercial Registration number 7877 dated 27 LJ Oman is a Limited Liability Company registered in the statement of financial position. Any goodwill that arises is tested January 2003. The principal activities of ORO are gold jewelry Sultanate of Oman under Commercial Registration number Thus, the principle of control sets out the following three annually for impairment. manufacturing and trading. 1320525 dated 30 May 2018. The principal activity of LJ Oman elements of control: is manufacturing, and trading of jewelry made from precious FUNCTIONAL AND PRESENTATIONAL b) L’azurde Egypt for Jewellery LLC (“LJ Egypt”). metals or stones. a. Power of the investor over the investee. CURRENCY j) Izdiad Commercial Company of Arabia (“Izdiad”). b. Exposure, or rights, to variable returns on the investor from LJ Egypt is a Limited Liability Company incorporated in the Arab The consolidated financial statements are presented in Saudi Republic of Egypt under Commercial Registration number 14997 its involvement with the investee. Izdiad is a Limited Liability Company registered in the Kingdom Riyal (SAR), which is also the functional and presentational dated 08 June 2005. The principal activities of LJ Egypt are gold currency of the Parent Company. All amounts have been jewelry manufacturing and trading. of Saudi Arabia under Commercial Registration number c. The ability of the investor to use power over the investee. 1010458294 dated 25 Dhul Hijjah 1439 (corresponding to 5 rounded-off to the nearest Saudi Riyal unless otherwise stated. c) L’azurde Company for Jewellery LLC (“LCJ Dubai”). September 2018). The principal activity of Izdiad is the trading of jewellery, perfume, men and women accessories, leather LCJ Dubai is a Limited Liability Company incorporated in the products and managing franchises and trademarks. United Arab Emirates (Dubai) under Commercial Registration number 620369 dated 23 December 2008. The principal activity of LCJ Dubai is trading of gold jewelry items.

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4. SIGNIFICANT ACCOUNTING AMORTIZATION OF INTANGIBLE ASSETS FAIR VALUE MEASUREMENT The Group’s management believes that the new standards ESTIMATES AND ASSUMPTIONS The Group’s management determines the estimated useful lives, A number of the Group’s accounting policies and disclosures effective from 1 January 2020 do not have a material effect on The preparation of consolidated financial statements in residual values, and impairment indicators for intangible assets require the measurement of fair values, for both financial and the Group’s financial statements. accordance with IFRSs applicable in the Kingdom of Saudi Arabia annually. Intangible assets with infinite useful lives are checked non‑financial assets and liabilities. The Group has an established PROPERTY AND EQUIPMENT requires the use of certain critical estimates and assumptions annually for impairment. Amortization is reviewed annually and control framework with respect to the measurement of fair that affect the reported amounts of assets and liabilities and adjusted where management believes that future estimates will values. The Company regularly reviews significant unobservable Property and equipment are stated at cost less accumulated disclosure of contingent assets and liabilities at the reporting differ from those used in previous periods. inputs and valuation adjustments. When measuring the fair value depreciation and accumulated impairment losses, if any. Cost date and the reported amounts of revenues and expenses during of an asset or a liability, the Group uses observable market data includes any costs directly attributable to bringing the assets the reporting period. Actual results may differ from these INVENTORIES as far as possible. Fair values are categorized into different to the location and condition necessary for it to be capable of estimates. Management estimates the net realizable values of inventories, levels in a fair value hierarchy based on the inputs used in the operating in the manner intended by the Group’s management. considering the most reliable evidence available at each valuation techniques as follows: Estimates and judgments are continually evaluated and are reporting date. The future realization of these inventories may Depreciation is recognized so as to write off the cost of assets less based on historical experience and other factors, including be affected by future events or other market-driven changes that • Level 1: Quoted prices (unadjusted) in active markets for their residual values over their useful lives, using the straight- expectations of future events that are believed to be reasonable may reduce or increase future selling prices. identical assets or liabilities. line method. The estimated useful lives, residual values and under the circumstances. The Group makes estimates and depreciation method are reviewed at the end of annual reporting assumptions concerning the future. The resulting accounting When inventory items become old or obsolete, an estimate is • Level 2: Inputs other than quoted prices included in Level 1 period, with the effect of any changes in estimate accounted for estimates will, by definition, seldom equal the related actual made for their market value. For significant items, this estimation that are observable for the asset or liability, either directly on a prospective basis. results. is performed on an individual basis. Inventory items which are (i.e. as prices) or indirectly (i.e. derived from prices). not individually significant, but are old or obsolete, are assessed Leasehold improvements are depreciated on a straight-line Areas involving higher degree of judgment or complexity or • Level 3: Inputs for the asset or liability that are not based on collectively and a provision is applied based on inventory type, basis over the shorter of the useful life of the improvements, or areas where assumptions and estimates are significant to the observable market data (unobservable inputs). degree of ageing or obsolescence, and anticipated selling price. the term of the lease. consolidated financial statements are as follows: If the inputs used to measure the fair value of an asset or a At the reporting date, inventories were SAR 842.4 million (31 Expenditure for repair and maintenance are charged to the liability fall into different levels of the fair value hierarchy, then PROVISION FOR EXPECTED CREDIT December 2019: SAR 889.4 million) with a provision for melting consolidated statement of profit or loss as incurred with the the fair value measurement is categorized in its entirety in the LOSSES OF ACCOUNTS RECEIVABLE and slow-moving inventory items of SAR 24.6 million (31 exception of costs that extend the useful life of the asset or same level of the fair value hierarchy as the lowest level input December 2019: SAR 30.8 million). Differences between amounts increase its value, which are then capitalized. The Group uses a provision matrix to calculate ECLs for accounts that is significant to the entire measurement. actually realized and amounts expected to be realized in future receivable. The provision rates are based on days past due for The cost of replacing part of an item of property and equipment is periods will be recognized in the consolidated statement of profit groupings of various customer segments that have similar 5.SIGNIFICANT ACCOUNTING POLICIES recognized in the carrying amount of the item if it is probable that loss patterns. or loss. The accounting policies applied by the Group in these consolidated the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of The provision matrix is initially based on the Group’s historically IMPAIRMENT OF NON-FINANCIAL ASSETS financial statements for the year ended 31 December 2020 are the same as those applied by the Group in its consolidated day-to-day servicing of property and equipment are recognized observed default rates. The Group will adjust the matrix to The Group’s management periodically reviews the carrying financial statements for the year ended 31 December 2019, except in the consolidated statement of profit or loss. adjust the historical credit loss experience with forward-looking amounts of non-financial assets to determine whether there is for the following International Financial Reporting Standards information. For instance, if forecast economic conditions are any indication that those assets have suffered any impairment An item of property and equipment is de-recognized upon amendments and improvements that become effective after 1 expected to deteriorate over the next year which can lead to an loss. If any such indication exists, the recoverable amount of the disposal or when no future economic benefits are expected January 2020: increased number of defaults in the manufacturing sector, the asset is estimated to determine the extent of the impairment loss. to arise from the continued use of the asset. Any gain or loss historical default rates are adjusted. At every reporting date, the Where it is not possible to estimate the recoverable amount of an • Revised ‘Conceptual Framework for Financial Reporting. arising on the disposal of an item of property and equipment is historically observed default rates are updated and changes in individual asset, the Group estimates the recoverable amount of determined as the difference between the sales proceeds and the forward-looking estimates are analyzed. the cash generating unit to which the asset belongs. • Amendments to IFRS 3 Business Combinations to clarify the the carrying amount of the asset and is recognized in profit definition of a business. or loss. The assessment of the correlation between historically observed If the recoverable amount of an asset is estimated to be less default rates, forecast economic conditions and ECLs is a than its carrying amount, the carrying amount of the asset is • Amendments to IFRS 7 Financial Instruments: Disclosures Depreciation of property and equipment is calculated on a significant estimate. The amount of ECLs is sensitive to changes reduced to its recoverable amount. Impairment is recognized in and IFRS 9 Financial Instruments regarding pre-replacement straight-line basis over the estimated useful lives of assets. in circumstances and forecast economic conditions. The Group’s the consolidated statement of profit or loss. issues in the context of the IBOR reform. historical credit loss experience and forecast of economic The Group applies the following useful lives for depreciation to conditions may also not be representative of customer’s actual PROVISION FOR ZAKAT AND TAXES • Amendments to IAS 1 Presentation of Financial Statements its property and equipment: default in the future. In making estimates for the zakat and tax payable by the Group, and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors regarding the definition of material. USEFUL LIVES, RESIDUAL VALUES, management considers applicable laws and past decisions and judgments of the General Authority of Zakat and Tax in Kingdom OR DEPRECIATION METHOD OF • Amendments to IFRS 16 Leases provide lessees with an Assets Category Life in Years of Saudi Arabia and the regulations of relevant Tax Authorities in PROPERTY AND EQUIPMENT exemption from assessing whether a COVID-19-related rent all the jurisdictions where the Group operates. The Group’s management determines the estimated useful lives concession is a lease modification. Buildings 50 for property and equipment. This estimate is determined after PROVISION FOR EMPLOYEES END Machinery and equipment 10 considering the expected usage of the asset or physical wear OF SERVICE BENEFITS and tear. The liabilities relating to defined benefit plans are determined Furniture and fixtures 6-7 Management reviews the useful lives, residual values, or using the Projected Unit Credit Method, with actuarial valuations Motor vehicles 4 depreciation method for property and equipment annually. Future being carried out at the end of annual reporting period. The depreciation expense would be adjusted where management method involves making assumptions about discount rates, Office equipment 7 believes that useful lives, residual values, or depreciation future salary increases and mortality rates. Due to the long- method differ from those used in previous periods. term nature of these benefits, such estimates are subject to certain uncertainties. Significant assumptions used to carry out Tools, dies and other assets 4-7 the actuarial valuation have been disclosed in note 17 to these consolidated financial statements. Leasehold improvements Shorter of useful life or lease terms.

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CAPITAL WORK IN PROGRESS (CWIP) The Group has elected to account for short-term leases and GOODWILL CASH AND CASH EQUIVALENTS Capital work in progress is stated at cost less any impairment leases of low-value assets using the practical expedients. Goodwill represents the future economic benefits arising from Cash and cash equivalents are items which are readily losses. All expenditure incurred during installation and Instead of recognizing a right-of-use asset and lease liability, the a business combination that are not individually identified convertible to known amounts of cash and which are subject to construction period, in connection with specific assets, payments in relation to these are recognized as an expense in and separately recognized. Goodwill is carried at cost less insignificant risk of change in value. Cash and cash equivalents are carried to CWIP. The cost of CWIP is transferred to the profit or loss on a straight-line basis over the lease term. accumulated impairment losses, if any. in the consolidated statement of financial position comprise appropriate category of property and equipment when it is ready cash on hand and bank account balances and are initially and for use. The cost of CWIP comprises purchase price and costs INTANGIBLE ASSETS AND GOODWILL For the purposes of impairment testing, goodwill is allocated to subsequently recorded at fair value. directly attributable to bringing the CWIP for its intended use. each of the Group’s cash-generating units (or groups of cash- INTANGIBLE ASSETS generating units) that is expected to benefit from the synergies For the purposes of the statement of cash flows, cash and cash of the combination. equivalents comprise cash on hand and deposits held with banks, RIGHT-OF-USE ASSETS AND An intangible asset is initially recognized at cost which is equal all of which have maturities of 90 days or less and are available LEASE LIABILITIES to the fair value of consideration paid at the time of acquisition of A cash-generating unit to which goodwill has been allocated is for use by the Group unless otherwise stated. A lease is defined as ‘a contract, or part of a contract, that the asset. The Group applies the following estimated useful lives tested for impairment annually, or more frequently when there for amortization of intangible assets: is an indication that the unit may be impaired. If the recoverable conveys the right to use an asset (the underlying asset) for FINANCIAL INSTRUMENTS a period of time in exchange for consideration’. To apply this amount of the cash-generating unit is less than its carrying definition the Group assesses whether the contract meets three amount, the impairment loss is allocated first to reduce the Assets Category Life in Years RECOGNITION AND DERECOGNITION key evaluations which are whether: carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying Franchise agreement 20 Financial assets and financial liabilities are recognized when • The contract contains an identified asset, which is either amount of each asset in the unit. Any impairment loss for the Group becomes a party to the contractual provisions of the goodwill is recognized directly in the Consolidated Statement of explicitly identified in the contract or implicitly specified by Computer software 2 financial instrument. being identified at the time the asset is made available to the Profit or Loss. An impairment loss recognized for goodwill is not Group. reversed in subsequent periods. Financial assets are derecognized when the contractual rights An intangible asset is derecognized on disposal, or when no to the cash flows from the financial asset expire, or when the • The Group has the right to obtain substantially all the future economic benefits are expected from use or disposal. On disposal of the relevant cash-generating unit, the attributable financial asset and substantially all the risks and rewards economic benefits from the use of the identified asset Gains or losses arising from de-recognition of an intangible amount of goodwill is included in the determination of the profit are transferred. A financial liability is derecognized when it is throughout the period of use, considering its rights within the asset, measured as the difference between the net disposal or loss on disposal. extinguished, discharged, cancelled, or expires. defined scope of the contract. proceeds and the carrying amount of the asset are recognized An impairment loss is recognized for the amount by which the in consolidated statement of profit or loss when the asset is • The Group has the right to direct the use of the identified asset asset’s (or cash-generating unit’s) carrying amount exceeds its CLASSIFICATION AND INITIAL derecognized. throughout the period of use. The Group assesses whether it recoverable amount, which is the higher of fair value less costs MEASUREMENT OF FINANCIAL ASSETS has the right to direct ‘how and for what purpose’ the asset. of disposal and value-in-use. To determine the value-in-use, Except for those accounts receivable that do not contain a management estimates expected future cash flows from each significant financing component and are measured at the cash-generating unit and determines a suitable discount rate in MEASUREMENT AND RECOGNITION OF LEASES transaction price in accordance with IFRS 15, all financial assets order to calculate the present value of those cash flows. The data are initially measured at fair value adjusted for transaction costs, At lease commencement date, the Group recognizes a right- used for impairment testing procedures is directly linked to the where applicable. of-use asset and a lease liability on the balance sheet. The Group’s latest approved budget, adjusted as necessary to exclude right-of-use asset is measured at cost, which is made up of the the effects of future reorganizations and asset enhancements. Financial assets, other than those designated and effective as initial measurement of the lease liability, any initial direct costs Discount factors are determined individually for each cash- hedging instruments, are classified into the following categories: incurred by the Group, an estimate of any costs to dismantle and generating unit and reflect current market assessments of the remove the asset at the end of the lease, and any lease payments time value of money and asset-specific risk factors. • amortized cost. made in advance of the lease commencement date (net of any • fair value through profit or loss (FVTPL). incentives received). INVENTORIES The Group depreciates the right-of-use assets on a straight-line Inventories are stated at the lower of cost and net realizable • fair value through other comprehensive income (FVOCI). basis from the lease commencement date to the earlier of the value. Net realizable value represents the estimated selling end of the useful life of the right-of-use asset or the end of the price for inventories less all estimated costs of completion and In the periods presented the Group does not have any financial lease term. The Group also assesses the right-of-use asset for costs necessary to make the sale. Costs of other inventory items assets categorized as FVOCI. The classification is determined impairment when such indicators exist. are determined as follows: by both:

At the commencement date, the Group measures the lease • Raw materials in the form of gold are determined at purchase • the entity’s business model for managing the financial asset. liability at the present value of the lease payments unpaid at cost using the First-In-First-Out (FIFO) method and other raw • the contractual cash flow characteristics of the that date, discounted using the return rate implicit in the lease materials, consumables and other manufacturing materials financial asset. if that rate is readily available or the Group’s incremental are determined at purchase costs on weighted average basis. financing rate. All income and expenses relating to financial assets that are • Work in progress and finished goods are determined at cost recognized in profit or loss are presented within finance costs, Lease payments included in the measurement of the lease liability of direct material, labour and overheads based on a normal finance income or other financial items, except for impairment are made up of fixed payments (including in substance fixed), level of activity. of accounts receivable which is presented within selling and variable payments based on an index or rate, amounts expected marketing expenses. to be payable under a residual value guarantee and payments • Re-sellable goods are determined on specific arising from options reasonably certain to be exercised. identification basis.

Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in-substance fixed payments.

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SUBSEQUENT MEASUREMENT In applying this forward-looking approach, a distinction is made DERIVATIVE FINANCIAL INSTRUMENTS ZAKAT AND TAXES OF FINANCIAL ASSETS AND HEDGE ACCOUNTING between: Zakat is provided for on behalf of the Group and its effectively Derivative financial instruments, if any, are initially recognized wholly owned subsidiaries in accordance with the Saudi Arabian FINANCIAL ASSETS AT AMORTIZED COST • Financial instruments that have not deteriorated significantly at fair value on the date on which a derivative contract is entered fiscal regulations. The foreign subsidiaries provide for income in credit quality since initial recognition or that have low into and are subsequently remeasured at fair value. Derivatives tax liabilities, if any, in accordance with tax regulations of the Financial assets are measured at amortized cost if the assets credit risk (‘Stage 1’). meet the following conditions (and are not designated as FVTPL): are carried as financial assets when the fair value is positive and country in which they operate. Zakat and income tax provisions • Financial instruments that have deteriorated significantly in as financial liabilities when the fair value is negative. are charged to the consolidated statement of profit or loss and • they are held within a business model whose objective is credit quality since initial recognition and whose credit risk is consolidated statement of comprehensive income. The Group applies hedge accounting for transactions that meet to hold the financial assets and collect its contractual cash not low (‘Stage 2’). flows. specific criteria. In order to qualify for hedge accounting, the Deferred income tax is provided for foreign subsidiaries subject ‘Stage 3’ would cover financial assets that have objective evidence hedge should be expected to be highly effective i.e. the changes to tax, using the liability method, on all temporary differences at • the contractual terms of the financial assets give rise to cash of impairment at the reporting date. in fair value or cash flows of the hedging instrument should the reporting date between the tax bases of assets and liabilities flows that are solely payments of principal and interest on the effectively offset corresponding changes in the hedged item and their carrying amounts. principal amount outstanding. ‘12-month expected credit losses’ are recognized for the first and should be reliably measurable. At inception of the hedge, category while ‘lifetime expected credit losses’ are recognized the risk management objective and strategy is documented Deferred income tax assets and liabilities are measured at the After initial recognition, these are measured at amortized cost for the second category. including the identification of the hedging instrument, the related tax rates that are expected to apply to the period when the asset using the effective interest method. Discounting is omitted hedged item, the nature of risk being hedged, and how the Group is realized, or the liability is settled, based on laws that have where the effect of discounting is immaterial. The Group’s cash Measurement of the expected credit losses is determined by a will assess the effectiveness of the hedging relationship. A been enacted in the respective countries at the reporting date. and cash equivalents, accounts receivable collected in cash and probability-weighted estimate of credit losses over the expected formal assessment is undertaken by comparing the hedging most other receivables and cash margins placed with banks fall life of the financial instrument. instrument’s effectiveness in offsetting the changes in fair value DIVIDENDS into this category of financial instruments. or cash flows attributable to the hedged risk in the hedged item, Final dividends are recognized as a liability at the time of ACCOUNTS AND OTHER RECEIVABLES both at inception and at each quarter end on an ongoing basis. FINANCIAL ASSETS AT FAIR VALUE Prospective testing is performed mainly through matching the their approval by the General Assembly. Interim dividends are THROUGH PROFIT OR LOSS (FVTPL) For accounts receivable, the Group applies the simplified critical terms of both hedge item and instrument. recorded when approved by the Board of Directors. approach, which requires expected lifetime losses to be Financial assets that are held within a different business recognized from initial recognition of the accounts receivable. ACCOUNTS PAYABLE AND ACCRUALS REVENUE model other than ‘hold to collect’ or ‘hold to collect and sell’ To measure the expected credit losses, accounts receivable are categorized at fair value through profit and loss. Further, have been grouped based on shared credit risk characteristics Liabilities are recognized for amounts to be paid in the future for Revenue is recognized when the Group transfers the significant irrespective of business model financial assets whose and the days past due. Expected loss rates were derived from goods or services received, whether billed by the supplier or not. risks and rewards of ownership to the customer and cash contractual cash flows are not solely payments of principal and historical information of the Group and are adjusted to reflect recovery of the consideration is probable, when the associated interest are accounted for at FVTPL. costs and costs of goods can be estimated reliably, and there is the expected future outcome which also incorporates forward PROVISIONS looking information for macroeconomic factors such as inflation no continuing management control over the goods. Assets in this category are measured at fair value with gains or and gross domestic product growth rate. Provisions are recognized when the Group has an obligation losses recognized in profit or loss. The fair values of financial (legal or constructive) arising from a past event, and the costs Revenue is measured based on the consideration specified in assets in this category are determined by reference to active Other financial assets such as receivable from employees, bank to settle the obligation are both probable and can be measured a contract with a customer. To determine whether to recognize market transactions or using a valuation technique where no balances and cash and gold margin deposits have low credit risk reliably. Provisions are reviewed at each reporting date and revenue, the Group follows a 5-steps process in accordance with active market exists. Accounts receivable collected in gold are and the impact of applying ECL is immaterial. adjusted to reflect current best estimate. IFRS 15 as follows: classified under FVTPL. 1. Identifying the contract with a customer. CLASSIFICATION AND MEASUREMENT CONTINGENT LIABILITIES FINANCIAL ASSETS AT FAIR VALUE THROUGH OF FINANCIAL LIABILITIES 2. Identifying the performance obligations. OTHER COMPREHENSIVE INCOME (FVOCI) A contingent liability is disclosed when the Group has a possible The Group’s financial liabilities carried at amortized cost include obligation as a result of past event, whose existence will be 3. Determining the transaction price. The Group accounts for financial assets at FVOCI if the assets long term Murabaha facility, short term cash facilities, accounts confirmed only by the occurrence or non-occurrence, of one meet the following conditions: payable and other current liabilities. Short term gold facilities or more uncertain future events not wholly within the control 4. Allocating the transaction price to the performance are designated at FVTPL. of the Group; or the Group has a present legal or constructive obligations in the contract. • They are held under a business model whose objective it is obligation that arises from past events, but is not probable that “hold to collect” the associated cash flows and sell. Financial liabilities are initially measured at fair value, and, an outflow of the resources embodying economic benefits will be 5. Recognizing revenue when/as performance obligation(s) where applicable, adjusted for transaction costs unless the are satisfied. • The contractual terms of the financial assets give rise to cash required to settle the obligation, or the amount of the obligation Group designated a financial liability at fair value through profit cannot be measured with sufficient reliability. flows that are solely payments of principal and interest on the or loss. principal amount outstanding. REVENUE FROM GOLD EMPLOYEES END OF SERVICE BENEFITS Subsequently, financial liabilities are measured at amortized Revenue from sale of gold refers to the value of gold weight sold Any gains or losses recognized in other comprehensive income cost using the effective interest method except for derivatives (OCI) will be recycled upon derecognition of the asset. The Group provides end of service compensation to its employees to the wholesale customers. Revenue is recognized at the time and financial liabilities designated at FVTPL, which are carried in accordance with the provisions of the Labor Law applicable of issuing invoices and delivering the quantities of jewelry stated subsequently at fair value with gains or losses recognized in in the Kingdom of Saudi Arabia. The entitlement to these in the invoices when the Group has performed its obligation IMPAIRMENT OF FINANCIAL ASSETS profit or loss (other than derivative financial instruments that are benefits is based upon the employees’ final salary and length as agreed in the contract, at the then price of gold in the designated and effective as hedging instruments). The Group assesses on forward looking basis the Expected of service, subject to completion of a minimum service period. international markets. The expected costs of these benefits are accrued over the period Credit Losses (ECL) for the impairment of financial assets. All interest-related costs and, if applicable, changes in an of employment. Provision is made annually based on valuation Revenue from gold and cost of revenue from gold are equal instrument’s fair value that are reported in profit or loss are done by an independent professional actuary, in accordance and offsetting each other as the gold used in jewelries sold to Recognition of credit losses is no longer dependent on the Group included within finance costs or finance income. first identifying a credit loss event. Instead the Group considers with the requirements of IAS 19 “Employee Benefits” using customers is valued at the international gold prices prevailing on a broader range of information when assessing credit risk and Projected Unit Credit Method. Last valuation was carried out on the date of each transaction, without adding any margin. measuring expected credit losses, including past events, current 31 December 2020. conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument. All past service costs are recognized as an expense immediately. All actuarial gains and losses on defined benefit obligation are recognized in consolidated statement of comprehensive income.

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REVENUE FROM OPERATIONS BASIC AND DILUTED EARNINGS PER SHARE 6. APPLICATION OF NEW AND REVISED INTERNATIONAL Revenue from operations refers to the value-added component of The Group presents basic and diluted earnings per share (EPS) FINANCIAL REPORTING STANDARDS (IFRS) the jewelry piece namely labor service charge, value of additions, for its shareholders. Basic EPS is calculated by dividing the The Group has not yet early applied the following new standards, amendments and interpretations that have been issued but are not sales of diamond jewelry and other revenues generated through net income or loss attributable to ordinary shareholders of the yet effective: wholesale and retail channels. Parent Company by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is determined Revenue from operations is recognized in accordance with the by adjusting the net income or loss attributable to ordinary fair value of the consideration received or receivable at the shareholders and the weighted average number of ordinary Effective for annual periods New and revised IFRS beginning on or after time the performance obligation is satisfied. The performance shares outstanding for the effects of dilutive potential ordinary obligation is performed when the promised goods are delivered shares, if any. Amendments to IFRS 10 Consolidated Financial Statements to the customers. Revenue is reduced for applicable discounts and IAS 28 Investments in Associates and Joint Ventures Effective date deferred indefinitely relating to the items sold. relating to the treatment of the sale or contribution of assets SEGMENTAL REPORTING from an investor to its associate or joint venture.

FOREIGN CURRENCY TRANSACTIONS An operating segment is a component of the Group that engages Amendments to IAS 1 Presentation of Financial Statements in business activities from which it may earn revenues and regarding the classification of liabilities. 1 January 2023 Transactions in foreign currencies are translated into Saudi incur expenses, including revenues and expenses that relate Riyals (SAR) at the relevant exchange rates prevailing at the time to transactions with any of the Group’s other components. All IFRS 17 Insurance Contracts establishes the principles for the of the respective transactions. At the reporting date monetary operating segments’ operating results are reviewed regularly recognition, measurement, presentation, and disclosure of 1 January 2023 assets and liabilities denominated in foreign currencies are by the Group’s Executive Committee which makes decisions insurance contracts and supersedes IFRS 4 Insurance Contracts. converted into SAR at the exchange rates ruling on such date. about resources to be allocated to the segment and to assess Any resulting exchange differences are charged or credited to its performance, and for which discrete financial information is Amendments IFRS 3 Business Combination updating 1 January 2022 consolidated statement of profit or loss. available. Segment results include items directly attributable a reference to the Conceptual Framework to a segment as well as those that can be allocated on a TRANSLATION OF FOREIGN OPERATIONS reasonable basis. Amendments to IAS 16 Property, Plant and Equipment prohibiting a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while 1 January 2022 As at the reporting date, the assets and liabilities of these the company is preparing the asset for its intended use subsidiaries are translated into Saudi Riyal (SAR), at the rate of exchange ruling at the consolidated statement of financial Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets regarding the costs to include 1 January 2022 position date and their consolidated statements of profit or when assessing whether a contract is onerous loss are translated at the average exchange rates for the year. Components of equity, other than retained earnings, are translated Amendments to IFRS 4 Insurance Contracts, IFRS 7 Financial at the rate ruling at the date of occurrence of each component. Instruments: Disclosures, IFRS 9 Financial Instruments and IFRS 16 1 January 2021 Translation adjustments in respect of these components of Leases regarding replacement issues in the context of the IBOR reform equity are recorded through consolidated statement of other comprehensive income as a separate component of equity. Annual Improvements to IFRS 2018 – 2020 Cycle amending IFRS 1, IFRS 9, IFRS 16 and IAS 41. 1 January 2022 EXPENSES Selling and marketing expenses are those which specifically relate to marketing and promotional activities. All other expenses Management anticipates that these new standards, interpretations and amendments will be adopted in the Group’s consolidated are classified as general and administration expenses and cost financial statements for the period of initial application and adoption of these new standards, interpretations and amendments may of services. have no material impact on the consolidated financial statements of the Group in the period of initial application.

GOLD REVALUATION Transactions denominated in gold are recorded in Saudi Riyals at the relevant market rates prevailing at the time of the respective transactions. Asset and liability balances denominated in gold, except for gold inventory, are revalued at the market price ruling at the consolidated statement of financial position date. All realized and unrealized gains and losses from revaluation of gold related items are recognized in the consolidated statement of profit or loss.

164 165 05 | CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

7. PROPERTY AND EQUIPMENT

Machinery Tools, dies Construction Land Buildings and Furniture Motor Office and other Leasehold work in Total 2020 equipment and fixtures vehicles equipment assets improvements progress

SAR SAR SAR SAR SAR SAR SAR SAR SAR SAR

Cost

At the beginning of the year 344,482 84,839,632 68,711,277 26,058,716 7,978,164 24,986,885 13,602,693 44,310,600 1,941,169 272,773,618

Reclassifications - 2,912,511 (130) 368,167 230 2,297 - 900,974 (2,076,644) 2,107,405

Additions - 666,499 3,689,179 890,838 434,219 1,871,948 34,580 1,534,215 514,055 9,635,533

Disposals - - (650,936) (523,849) (391,553) (1,182,985) - (1,240,113) - (3,989,436)

Currency translation differences 4,881 308,917 294,013 43,845 28,062 187,245 37,754 218,588 25,076 1,148,381

At the end of the year 349,363 88,727,559 72,043,403 26,837,717 8,049,122 25,865,390 13,675,027 45,724,264 403,656 281,675,501

Accumulated depreciation

At beginning of the year - 46,285,095 55,092,475 20,437,132 6,838,232 20,237,052 11,764,017 24,692,631 - 185,346,634

Reclassifications - 1,270,818 (133) (9,651) 218 12,390 - 833,763 - 2,107,405

Depreciation charge for the year - 1,603,852 2,773,118 2,136,081 498,743 2,209,330 221,574 6,669,214 - 16,111,912

Relating to disposals - - (355,714) (383,707) (330,822) (1,156,061) - (991,775) - (3,218,079)

Currency translation differences - 26,924 97,802 24,631 14,141 125,581 24,641 90,194 - 403,914

At the end of the year - 49,186,689 57,607,548 22,204,486 7,020,512 21,428,292 12,010,232 31,294,027 - 200,751,786

Net book value:

As at 31 December 2020 349,363 39,540,870 14,435,855 4,633,231 1,028,610 4,437,098 1,664,795 14,430,237 403,656 80,923,715

166 167 05 | CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

8. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES Machinery Furniture Motor Office Tools, dies Leasehold Construction Land Buildings and and other work in Total 2019 The movement in recognized right-of-use assets relates to the following classes of assets: equipment and fixtures vehicles equipment assets improvements progress

SAR SAR SAR SAR SAR SAR SAR SAR SAR SAR Land SAR Buildings - shops SAR Total SAR Cost At the beginning of the year 2,622,593 45,952,051 48,574,644 At the beginning of the year 319,874 94,237,231 66,561,023 21,363,512 8,108,952 23,828,959 13,059,422 40,140,805 (13,357,565) 254,262,213 Additions - 11,799,705 11,799,705

Reclassifications - (10,403,760) 13,652 3,796,978 230 (928,817) 75,013 6,672,008 13,390,276 12,615,580 Depreciation charge for the year (193,667) (26,483,935) (26,677,602)

Additions - - 1,491,340 857,059 717,771 1,690,888 302,698 4,752,683 1,855,638 11,668,077 At the end of the year 2,428,926 31,267,821 33,696,747

Disposals - (500,000) (699,026) (136,654) (961,643) (471,507) - (8,245,935) (27,607) (11,042,372) The movement in lease liabilities is as follows: Currency translation differences 24,608 1,506,161 1,344,288 177,821 112,854 867,362 165,560 991,039 80,427 5,270,120

At the end of the year 355,482 84,839,632 68,711,277 26,058,716 7,978,164 24,986,885 13,602,693 44,310,600 1,941,169 272,773,618 Note 31 December 2020 31 December 2019

Accumulated depreciation At the beginning of the year 43,882,708 67,315,054

At beginning of the year - 43,468,213 52,877,333 14,435,094 7,183,869 17,516,609 11,388,132 15,278,308 - 162,147,558 Additions 11,799,705 269,920

Finance Costs 26 3,431,099 4,394,406 Reclassifications - 1,270,818 (133) 3,814,749 217 443,535 - 7,086,394 - 12,615,580

Payments (29,659,249) (28,096,672) Depreciation charge for the year - 1,551,103 2,508,154 2,211,196 545,795 2,063,121 268,470 7,534,079 - 16,681,918 At the end of the year 29,454,263 43,882,708 Relating to disposals - (103,750) (672,346) (132,207) (961,636) (307,852) - (5,546,590) - (7,724,381)

Currency translation - 98,711 379,467 108,300 69,987 521,639 107,415 340,440 - 1,625,959 differences Income relating to short-term leases was SAR 3.6 million (2019: expense of SAR 2.9 million). At the end of the year - 46,285,095 55,092,475 20,437,132 6,838,232 20,237,052 11,764,017 24,692,631 - 185,346,634

Net book value: 9. INTANGIBLE ASSETS AND GOODWILL As at 31 December 2019 344,482 38,554,537 13,618,802 5,621,584 1,139,932 4,749,833 1,838,676 19,617,969 1,941,169 87,426,984

31 December 2020 31 December 2019 Notes SAR SAR

Franchise agreement and computer software 9.1 29,189,965 30,711,105

Goodwill 9.2 109,977,951 109,977,851 Depreciation charge for the year has been allocated as follows: 139,167,816 140,688,956

Notes 31 December 2020 31 December 2019

SAR SAR

Cost of sales 22 5,444,975 5,316,819

Selling and marketing expenses 23 9,546,664 10,196,419

General and administrative expenses 24 1,120,273 1,168,680

16,111,912 16,681,918

168 169 05 | CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

9.1. Franchise agreement and computer software: 9.2. The goodwill relates to the acquisition of Izdiad Commercial Company of Arabia in 2018 (note 33).

Following is the movement in the net carrying amount of goodwill:

31 December 2020 31 December 2019 Notes SAR SAR 31 December 2020 31 December 2019 Notes Gross carrying amount: SAR SAR

As at 1 January 39,529,483 39,267,525 Gross carrying amount:

Additions 683,051 635,183 As at 1 January and 31 December 109,977,851 109,977,851

Disposals - (431,330) Accumulated impairment:

Foreign exchange differences 13,002 58,105 As at 1 January and 31 December - -

As at 31 December 40,225,536 39,529,483 Net carrying amount as at 31 December 109,977,851 109,977,851

Accumulated amortization:

As at 1 January 8,818,378 6,830,669

Charge for the year 2,206,205 2,148,081

Disposals - (208,446) Goodwill is subject to annual impairment testing. Assets are tested for impairment by comparing the carrying amount of each Cash- Generating Unit (CGU) to the recoverable amount which has been determined based on a value-in-use calculation using cash flow Foreign exchange differences 10,988 48,074 projections based on financial forecasts approved by senior management covering a period of 10 years. A 10-year projections period

As at 31 December 11,035,571 8,818,378 was used as it was in line with the tenure of the Franchise Agreement. The discount rate applied to cash flow projections is 7.5% (2019: 7.5%) as relevant for the CGU and the terminal value and cash flows beyond the 10 years period are extrapolated using a 2% Net carrying amount as at 31 December 29,189,965 30,711,105 (2019: 2%) growth rate.

KEY ASSUMPTIONS USED IN VALUE-IN-USE CALCULATIONS AND SENSITIVITY TO CHANGES IN ASSUMPTIONS:

(a) Sales growth assumption: The anticipated annual revenue growth included in the cash flow projections has been based on historical experience and expectations of future changes in the market conditions.

(b) Discount rate: Discount rate reflects the current market assessment of the risk specific to CGU. The discount rate is estimated based on the Weighted Average Cost of Capital (WACC).

(c) Growth rate used to extrapolate cash flows beyond the forecast period: The expected long-term perpetual growth rate assumed is 2%, being the expected inflation rate as published by International Monetary Fund (IMF), specific to the country of operations of the CGU.

Management believes that reasonable changes in the key assumptions would not trigger recognition of impairment losses.

170 171 05 | CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

10. INVENTORIES 11. ACCOUNTS RECEIVABLE

31 December 2020 31 December 2019 31 December 2020 31 December 2019

SAR SAR SAR SAR

By main components: Accounts receivable - Gross 298,336,378 684,580,488

Gold 701,225,633 725,440,465 Provision for expected credit losses (34,271,778) (19,323,187)

Diamonds, stones and pearls 111,848,589 137,608,030 Accounts receivable - Net 264,064,600 665,257,301

Other materials and accessories 29,402,753 26,359,540

842,476,975 889,408,035 Accounts receivable originate from offering term facilities to the Group’s wholesale customers to pay their commitments, including the Less: Provision for melting and slow-moving items (24,629,853) (30,784,288) value of the gold purchased. These credit terms are in response to the demand of Group’s wholesale customers and are considered to be in compliance with Shari’a provisions according to Shari’a opinion issued by the Shari’a Advisory Committee of the Council of Saudi 817,847,122 858,623,747 Chambers, a number of Shari’a Scholars and the conclusion of the meetings between these Scholars and the Group’s management (see note 35). Credit sales are only offered to the Group’s wholesale customers and not retail customers.

31 December 2020 31 December 2019 The Group applies the IFRS 9 simplified approach to measure expected credit losses and uses a lifetime expected loss allowance for all accounts receivable. See note 31.1 (b) on ageing analysis and credit risk of accounts receivable, which explains how the Group SAR SAR manages and measures credit quality of accounts receivable. By stage of completion: Movement in the provision for expected credit losses is as follows: Finished goods 436,823,735 457,211,614

Raw materials 404,453,707 431,572,140

Work in progress 1,199,533 624,281 31 December 2020 31 December 2019 842,476,975 889,408,035 SAR SAR

Less: Provision for melting (24,629,853) (30,784,288) and slow-moving items At beginning of the year 19,323,187 12,189,152

817,847,122 858,623,747 Charge for the year 14,354,980 5,060,150

Amounts recovered during the year 331,905 1,164,604

The movement in provision for melting and slow-moving inventory items is as follows: Foreign exchange differences 261,706 909,281

At the end of the year 34,271,778 19,323,187

31 December 2020 31 December 2019 Notes 12. OTHER CURRENT ASSETS SAR SAR

Balance at 1 January 30,784,288 13,246,470

Charge for the year 22 13,793,057 27,312,838 31 December 2019 31 December 2019

Utilization during the year (19,985,250) (10,010,382) SAR SAR

Foreign exchange differences 37,758 235,362 Prepayments 14,023,760 19,834,581

Advance to suppliers 14,475,765 9,990,734 Balance at 31 December 24,629,853 30,784,288

Advance to employees 3,580,254 3,196,459

Refundable VAT and other balances 16,204,107 15,938,237

Other receivables 52,550,508 10,391,029 EXCEPTIONAL CHARGE OF SAR 17.8 MILLION FOR MELTING AND SLOW-MOVING INVENTORY ITEMS: 100,834,394 59,351,040

Included in the SAR 27.3 million charge for melting and slow-moving inventory items for the year ended 31 December 2019 an exceptional impairment charge amounting to SAR 17.8 million which mainly related to the inventory items of the closed shops in Kingdom of Saudi Arabia.

172 173 05 | CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

13. CASH AND CASH EQUIVALENTS 17. EMPLOYEES' END OF SERVICE BENEFITS

GENERAL DESCRIPTION 31 December 2020 31 December 2019 The Group’s policy provides for end of service benefits for all employees who complete the qualifying period of service in accordance Note SAR SAR with the Labor laws.

Cash in hand 11,562,003 17,308,267 The annual provision is based on the actuarial valuations. The most recent actuarial valuation was performed by an independent actuary, using the Projected Unit Credit Method as at 31 December 2020. Cash at bank 111,051,619 36,266,942 The movements in employees’ end of service benefits during the years are as follows: Short term deposits 18,750,000 -

141,363,622 53,575,209

31 December 2020 31 December 2019 Note Short term deposit is placed with a commercial bank having maturity period of three months. SAR SAR

At the beginning of the year 29,334,858 32,645,186

14. SHARE CAPITAL Charge for the year 5,518,008 3,243,699 The authorized and paid up share capital of the Company as at 31 December 2020 is SAR 430,000,000 (31 December 2019: SAR Payments during the year (6,746,642) (4,991,328) 430,000,000), divided into 43,000,000 shares (31 December 2019: 43,000,000 shares) with a face value of SAR 10 per share. Actuarial gains (609,656) (1,705,537)

Foreign exchange differences 11,973 142,838 15. STATUTORY RESERVE At the end of the year 27,508,541 29,334,858 In accordance with Saudi Arabian Regulations for Companies and Company’s By-Laws, 10% of the net income for the year shall be transferred to the statutory reserve. The Company may resolve to discontinue such transfers when the reserve totals 30% of its Principal actuarial assumptions share capital. The reserve is not available for distribution to the shareholders. Financial assumptions:

Discount rate 1.4% - 1.6% 2.7% - 5.15% 16. LONG TERM MURABAHA FACILITY Salary increase 0% - 1.6% 0% - 5.15%

Demographic assumption:

31 December 2020 31 December 2019 Rate of employee turnover Heavy Heavy SAR SAR Cost recognized in consolidated statement of profit or loss: Long-term murabaha facility 75,000,000 94,000,000 Service costs: Less: current portion (20,000,000) (19,000,000)

Current service cost 4,740,422 1,846,179 Non-current portion 55,000,000 75,000,000

Interest cost on define benefit obligation 26 777,586 1,397,520

5,518,008 3,243,699

The Group has obtained a Murabaha finance facility from a bank to finance the acquisition of Izdiad Commercial Company of Arabia. The facility is for a period of seven years at profit rate of SAIBOR plus an agreed rate with the bank and payable in SENSITIVITY ANALYSIS semi-annual instalments. An increase or decrease of 0.5% in significant actuarial assumptions such as discount rate and salary increases will not result in a material increase or decrease in employees’ end of service benefits liability.

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18. DEFERRED TAX LIABILITY - NET 20. SHORT-TERM MURABAHA FACILITIES

Deferred tax liability relates to taxable temporary differences on property and equipment as follows: 31 December 2020 31 December 2019 Notes SAR SAR

31 December 2020 31 December 2019 Murabaha facilities (Gold) 20.1 709,354,312 1,024,049,730

SAR SAR Cash facilities (Tawaruq) 20.2 128,245,957 93,940,918 At the beginning of the year 1,403,075 982,726 837,600,269 1,117,990,648 Charge for the year 292,596 296,914

Foreign exchange differences 29,448 123,435 2 0 . 1

At the end of the year 1,725,119 1,403,075 Total gold procurement facilities of the Group as at 31 December 2020 amounted to SAR 0.71 billion (31 December 2019: SAR 1.02 billion). All outstanding financial facilities agreements are in the form of Murabaha and Tawaruq agreements to finance the supply of pure gold.

19. ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES The Group has Islamic Murabaha facilities to obtain gold from various banks to finance gold working capital requirements, with maturity periods ranging from 1 to 3 months (2019: 1 to 3 months) with agreed profit rates. All of these financial facilities are compliant with Shari’a principles as per Shari’a certificates issued by banks’ internal Shari’a Committees including Murabaha 31 December 2020 31 December 2019 facilities (Tawaruq) to finance the purchase of gold, as banks buy commodities other than gold or silver and then sell them to the Notes Group on a credit basis. The Group then sells the goods to a third party, and the bank immediately buys the gold using cash sales SAR SAR proceeds of the commodity. Accounts payable 28,175,172 22,243,121 20.2 Account payable for gold 19.1 256,936,665 193,896,938 Represents Islamic Tawaruq cash facilities from various banks solely to finance working capital requirements of the Group, with agreed profit rates and maturity periods ranging from 1 to 9 months. Accrued expenses 12,109,544 11,076,548

Accrued financial costs 1,838,184 1,172,331

Employees payables 1,671,906 1,869,805 21. REVENUE

Amounts due to related parties 29 273,575 493,625 Revenue includes revenue from gold and revenue from operations. Revenue from gold relates to the value of gold weight used in generating the operating revenues from wholesale channels. The presentation of revenue from gold serves as statistical information Other payables 8,717,762 6,059,694 only as the Group does not generate any profit or loss from selling gold through wholesale channels. While revenue from operations

309,722,808 236,812,062 relates to the value-added component of the jewelry piece, namely labor service charge revenue, value of additions and other sources of revenue generated through wholesale channels and gold and diamond jewelry sold in retail channels, which represents the real revenue of the Group.

19.1. Revenue from operations can be analyzed as follows: The Group provided a standby letter of credit amounting to SAR 500 million (31 December 2019: SAR 200 million) as a security against the gold.

31 December 2020 31 December 2019

SAR % Of total SAR % Of total

On cash basis 197,753,562 56.9% 223,989,004 46.5%

On credit basis 149,662,776 43.1% 257,215,707 53.5%

Total revenue from operations 347,416,338 100% 481,204,711 100%

176 177 05 | CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

22. COST OF OPERATIONS

31 December 2020 31 December 2019 Notes SAR SAR

Raw material consumed 104,377,256 133,302,373

Salaries and employees’ benefits 37,827,854 43,546,792

Melting costs and charge for slow-moving inventory 10 13,793,057 9,548,057

Depreciation of property and equipment 7 5,444,975 5,316,819

Other 2,993,254 1,680,496

164,436,396 193,394,537

23. SELLING AND MARKETING EXPENSES

31 December 2020 31 December 2019 Notes SAR SAR

Gold calibration costs 40,056,364 34,849,965

Salaries and employees’ benefits 28,635,698 34,733,735

Depreciation on right-to-use asset 25,776,473 24,894,749

Advertisements and promotional activities 22,042,070 34,256,992

Sales commissions 13,198,876 16,387,634

Depreciation on property and equipment 7 9,546,664 10,196,419

Amortization of intangible assets 1,966,052 1,964,703

Travel expenses 1,138,151 2,020,795

Insurance expenses 835,878 740,786

Rent 8 (3,564,095) 2,921,395

Other expenses 11,146,724 11,908,880

150,778,855 179,936,203

178 179 05 | CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

24. GENERAL AND ADMINISTRATIVE EXPENSES 27. ZAKAT AND INCOME TAX Zakat charge for the year amounts to SAR 8.1 million (2019: SAR 11.3 million). The Zakat base is as follows:

31 December 2020 31 December 2019 Notes 31 December 2020 31 December 2019 SAR SAR SAR SAR Salaries and employees’ benefits 28,744,257 29,650,733 Equity 581,977,399 600,152,300

Consultancy and professional fees 3,933,296 3,376,510 Opening provisions and other adjustments 218,578,812 74,705,017

Depreciation on property and equipment 7 1,120,273 1,168,680 Book value of long-term assets (420,358,649) (278,252,910) Printing, stationery and communication expenses 978,427 1,021,915 380,197,562 396,604,407

Travel expenses 623,062 2,036,177 Zakatable income for the year (74,945,443) 32,496,672

Repairs and maintenance expenses 489,216 497,518 Zakat base 305,252,119 429,101,079

Depreciation on right-of-use asset 120,991 41,510 STATUS OF ZAKAT ASSESSMENTS Other expenses 5,746,784 5,580,718 The Company has filed the zakat returns for all the years up to 2019 and obtained respective zakat certificates. In May 2020, the 41,756,306 43,373,761 Company received zakat assessment for year 2018 with additional zakat liability of approximately SAR 26.4 million which the Company appealed against. Later after discussions with the General Authority of Zakat and Tax (“GAZT”), the assessment was reduced to SAR 0.1 million which was agreed and settled by the Company in September 2020.

No claims or assessments for zakat are due from the Company for all the years till 2014 and the year 2018. The years 2015 to 2017 25. OTHER EXPENSES - NET and 2019 are still under review by GAZT and no assessment has been received yet.

INCOME TAX CHARGE

31 December 2020 31 December 2019 The income tax charge for the year consists of the following:

SAR SAR

31 December 2020 31 December 2019 Gain from foreign exchange differences – net 2,070,122 4,866,177

SAR SAR (Gain)/ loss on disposal of property and equipment 77,329 (2,450,580) Income tax 3,491,355 2,819,134 Bank charges (1,218,571) (1,682,527) Deferred tax 292,596 296,914 Miscellaneous (500,064) 279,144 3,783,951 3,116,048 428,816 1,012,214

ORO Egypt Company (“ORO”) and L’azurde Egypt for Jewellery LLC (“LJ Egypt”) have accrued income tax on their estimated taxable profit at 22.5%. L’azurde Company for Jewellery LLC (“LCJ Qatar”) and L’azurde Jewellery LLC (“LJ Oman”) have accrued income tax 26. FINANCE COSTS - NET on their estimated taxable profits, if any, at 10% and 15% respectively.

STATUS OF INCOME TAX ASSESSMENTS RELATED TO FOREIGN SUBSIDIARIES

31 December 2020 31 December 2019 ORO, registered in Arab Republic of Egypt, was exempt from Corporate Income Tax until 31 December 2014 according to the Egyptian Notes Law number 8 of the year 1997. ORO received tax assessments and settled its tax liabilities on non-exempt activities till the year 2014. SAR SAR ORO paid all taxes due on its non-exempt activities to date.

Financing costs 46,228,987 45,080,720 LJ Egypt, registered in Arab Republic of Egypt, was exempt from income tax on its commercial and manufacturing operations for a period of 10 years ended 31 December 2018. Interest on employees’ end of service benefits 17 777,586 1,397,520 L’azurde Jewellery LLC (“LJ Oman”), registered in the Sultanate of Oman, has filed its tax returns for year 2020 and no assessments Interest on lease liabilities 8 3,341,099 4,394,406 have been received yet.

50,437,672 50,872,646 L’azurde Company for Jewellery LLC (“LCJ Qatar”), registered in the State of Qatar, filed its tax return for year 2019 and the tax assessments for the company have been finalized up to year ended 31 December 2015.

L’azurde Company for Jeweller y LLC (“LCJ Dubai”), L’azurde Jeweller y LLC (“L J Abu Dhabi”) and L’azurde Group for Gold and Jeweller y DMCC (“L’azurde DMCC”) registered in the United Arab Emirates, operate in a tax-free country, so no tax returns have been filed.

180 181 05 | CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

28. EARNINGS PER SHARE - BASIC AND DILUTED 30. CONTINGENCIES AND COMMITMENTS

CONTINGENCIES: 31 December 2020 31 December 2019 The Group provided letters of guarantees amounting to SAR 7.3 million as at 31 December 2020 (31 December 2019: SAR 1.6 million) in relation to its operations. SAR SAR

Basic and diluted earnings per share CAPITAL COMMITMENTS:

Net loss for the year attributable to The Group has no capital commitments in respect of capital expenditures as at 31 December 2020 (31 December 2019: None). equity holders of the parent (in SAR) (120,488,372) (17,547,550)

Weighted average number of ordinary shares during the year 43,000,000 43,000,000 31. FINANCIAL INSTRUMENTS Basic and diluted (loss)/ earnings per share (in SAR) (2.80) (0.41) 31.1. RISK MANAGEMENT OF FINANCIAL INSTRUMENTS The Group activities expose it to variety of financial risks; market risk (including gold price risk, currency risk and interest rate risk), liquidity risk and credit risk. The Group’s overall risk management program focuses on the predictability of financial market and There is no dilution effect on the basic earnings per share of the Group as the Group has no convertible dilutive potential ordinary seeks to minimize potential adverse effect on the Group’s financial performance. The Group’s senior management carries out risk shares outstanding on 31 December 2020 (31 December 2019: nil). management under governance framework. 29. RELATED PARTY TRANSACTIONS AND BALANCES A. GOLD PRICE RISK Related parties of the Group include shareholders, Board of Directors, key management personnel and entities of which they are principal owners. Gold price risk is the risk that the value of assets and liabilities denominated in gold will fluctuate due to changes in the gold prices. The management minimizes its risk in gold by maintaining equal quantity of gold in assets and liabilities where deemed practical. The terms of the transactions with related parties are approved by the Group’s management. Transactions with related parties are entered in the normal course of the Group’s business. These balances are expected to be settled in the normal course of business. As at 31 December gold accounts were as follows: Pricing policies and terms of these transactions are at arm’s length. Transactions with related parties during the year and the balances as at end of the year are as follows:

31 December 2020 31 December 2019

Grams Grams Net gold (liabilities)/ asset SAR (24 Karat) SAR (24 Karat) Nature of transaction Amount of transactions Balances

Gold – inventories (non-financial asset) 646,861,344 2,837,146 659,191,983 3,590,032 December 2020 SAR December 2019 SAR December 2020 SAR December 2019 SAR

Due from related parties: Gold asset - margins 37,407,396 164,198 - -

Other affiliates Gold – accounts receivable 242,403,689 1,063,187 518,450,969 2,823,541

Board of Directors Renumertation 1,941,000 1,485,500 147,950 368,000 Gold - other current assets 39,734,410 174,276 40,189,426 218,876

Director Consultancy 502,500 1,988,000 273,575 125,625 Gold liabilities – payable for gold (256,936,665) (1,126,929) (193,896,343) (1,055,981)

Gold murabaha facilities (709,354,312) (3,111,234) (1,024,049,730) (5,577,046) 2,443,500 1,988,000 273,575 493,625

Net gold (liabilities)/ assets 115,862 644 (114,290) (578)

31 December 2020 31 December 2019 Remuneration to key management personnel SAR SAR

Salaries 4,532,194 5,315,880

Allowances 2,410,083 2,393,940

Short-term incentive plans 1,078,005 1,861,880

8,020,282 9,571,700

182 183 05 | CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

B. CREDIT RISK The geographical breakdown of the Group’s accounts receivable balance is as follows: Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss.

The Group seeks to limit its credit risk with respect to customers by setting credit limits for individual customers and by monitoring 31 December 2020 31 December 2019 outstanding accounts receivable and maintains accounts with reputable, creditworthy banks. SAR SAR The Group has established policies and procedures for timely recovery of accounts receivable and mitigates its exposure and credit risk by applying specific controls in accordance with the Group’s policies and procedures. Kingdom of Saudi Arabia 64,097,121 368,218,680

The table below shows Group’s maximum exposure to credit risk for the components of the consolidated statement of Arab Republic of Egypt 195,849,454 269,217,214 financial position: United Arab Emirates 1,701,807 22,270,159

31 December 2020 31 December 2019 Others 2,416,218 5,551,822 Notes SAR SAR Accounts receivable - Net 264,064,600 665,067,875

Other non-current assets 1,798,095 1,562,326

Accounts receivable 11 264,064,600 625,067,875 C. CURRENCY RISK Other current assets 72,334,869 69,715,151 Currency risk is the risk that value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Group is subject to fluctuations in foreign exchange rates in the normal course of its business. During the year, the Group undertook Bank balances 13 129,801,619 36,266,942 significant transactions in currencies other than Saudi Riyals such as US Dollars, Euros and Egyptian Pounds. Management regularly monitors the fluctuations in currency exchange rates and the effect of currency rates have been accounted for in the consolidated Cash margins 32,935,190 99,974,368 financial statements.

Gold margins 37,407,396 - Since Saudi Riyal is on a fixed parity with the US Dollar and the Group does not have material net assets in Euros, the Group is exposed to currency risk due to Egyptian Pound only. The quantitative data regarding the Group’s exposure to currency risk arising 538,341,769 832,586,662 from Egyptian Pound is as follows:

Cash balances are held with banks having sound credit ratings. The accounts receivable is shown net of allowance for expected credit losses. The Group applies the IFRS 9 simplified approach to measure expected credit losses and uses a lifetime expected loss allowance for all accounts receivable. To measure the expected credit losses, accounts receivable has been grouped based on 31 December 2020 31 December 2019 shared credit risk characteristics and the days past due. The historical loss rates are adjusted to reflect current and forward-looking information based on macroeconomic factors affecting the ability of the customers to settle the receivable balance. SAR SAR

As at 31 December, the ageing of unimpaired accounts receivable was as follows: Cash and cash equivalents 44,948,267 28,269,631

Accounts receivable 10,512,242 27,234,104 31 December 2020 31 December 2019 Accounts payable and other current liabilities (11,203,653) (6,078,934) SAR SAR

Neither past due nor impaired 177,125,947 399,363,743 Net statement of financial position exposure 44,256,856 49,424,801

Past due but not impaired: A strengthening/ (weakening) of the Egyptian Pound by 1% against Saudi Riyal would have affected the measurement of financial (a) Less than 180 days 40,456,326 209,629,396 instruments denominated in Egyptian Pound and would have increased/ (decreased) equity by SAR 0.4 million at year ended 31 December 2020 (31 December 2019: SAR 0.5). (b) 181 – 270 days 21,899,161 11,558,943

(c) 271 – 360 days 5,053,881 1,264,147

(d) 361 – 540 days 17,656,973 1,180,817

(e) Greater than 540 days 1,872,312 2,070,829

264,064,600 625,067,875

184 185 05 | CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

D. MARKET PRICE RISK 31.2 FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES Market price risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in Assets and liabilities measured at fair value in the consolidated statement of financial position are grouped into three levels of fair market prices (other than those arising from gold price risk or currency risk), whether those changes are caused by factors specific value hierarchies. This grouping is determined based on the lowest level of: to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The management is of the opinion that the Group’s exposure to market price risk is minimal. During the current year, the Group entered • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. into an interest rate swap arrangement with a local bank to swap its floating rate loan arrangements to fixed rate. • Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). E. LIQUIDITY RISK • Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). Liquidity risk is the risk that an enterprise will encounter difficulty in raising funds to meet commitments associated with financial liabilities. Liquidity requirements are monitored on a regular basis and management ensures that sufficient funds are available to The following table shows the fair value of financial assets and financial liabilities, including their levels in the fair value hierarchy. It meet any commitments as they arise. Following table represents the maturity profiles of the financial liabilities: does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

0-12 months Over 12 months Total 31 December 2020 Notes Fair value (in SAR) SAR SAR SAR 31 December 2020 Level 1 Level 2 Level 3 Total Financial liabilities:

Financial assets: Long term murabaha facility 16 20,000,000 55,000,000 75,000,000

Accounts receivable 242,403,689 - - 242,403,689 Long term payable 33 40,845,560 11,318,649 52,164,209 Other current assets 39,734,410 - - 39,734,410

Lease liabilities 8 15,872,614 13,581,649 29,454,263 Gold margins 37,407,396 - - 37,407,396

Accounts payable and other current liabilities 19 309,722,808 - 309,722,808 Financial liabilities:

Short-term murabaha facilities 20 837,600,269 - 837,600,269 Account payable for gold 256,936,665 - - 256,936,665

Total 1,224,041,251 79,900,298 1,303,941,549 Short-term murabaha facilities 709,354,312 - - 709,354,312

0-12 months Over 12 months Total 31 December 2019 Notes SAR SAR SAR Fair value (in SAR) 31 December 2019 Financial liabilities: Level 1 Level 2 Level 3 Total

Long term murabaha facility 16 19,000,000 75,000,000 94,000,000 Financial assets:

Accounts receivable 518,450,969 - - 518,450,969 Long term payable 33 - 51,375,237 51,375,237

Other current assets 40,189,426 - - 40,189,426 Lease liabilities 8 21,251,209 22,631,499 43,882,708

Financial liabilities: Accounts payable and other current liabilities 19 236,812,062 - 236,812,062

Account payable for gold 193,896,938 - - 193,896,938 Short-term murabaha facilities 20 1,117,990,648 - 1,117,990,648

Short-term murabaha facilities 1,024,049,730 - - 1,024,049,730 Total 1,395,053,919 149,006,736 1,544,060,655

F. CAPITAL MANAGEMENT The Board’s policy is to maintain an efficient capital base to maintain investors, creditors, and market confidence and to sustain the future development of its business. The Board of directors monitor the return on capital employed and the level of dividends to its shareholders.

The Group’s objectives when managing capital are: a) to safeguard the entity’s ability to continue as a going concern. b) to provide adequate return to shareholders.

186 187 05 | CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

32. SEGMENTAL INFORMATION 33. LONG TERM PAYABLE Operating segments are reported in a manner consistent with the internal reporting provided to chief operating decision makers On 30 October 2018, the Group acquired 100% of the equity instruments and obtained full of the Company. The chief operating decision makers, who are responsible for allocating resources and assessing performance of control of Izdiad Commercial Company of Arabia (“Izdiad”), the sole-franchisee and operator the operating segments have been identified as the Executive Management and Board of Directors. For management purpose, the of TOUS international franchise in KSA. Company is organized into the following business units and geographical segments: The fair value of the consideration transferred was SAR 185.5 million and the net assets A. OPERATING SEGMENTS acquired were SAR 44.6 million. The Company recognized Franchise Agreement intangible asset amounting to SAR 30.9 million (see note 9.1) with definite useful life of 20 years and Wholesale Retail Total also recognized goodwill balance of SAR 110.0 million (see note 9.2). 31 December 2020 SAR SAR SAR The Company settled the purchase consideration in cash through a SAR 108 million Murabaha cash facility taken from a financial institution and SAR 27 million was settled from 931,024,057 - 931,024,057 Revenues - Gold Company’s own cash resources. An amount of SAR 50.5 million was recorded as deferred - Operations consideration at the acquisition date, payable within four years from the date of acquisition 172,234,135 175,182,203 347,416,338 in two instalments. The fair value of this long-term payable at 31 December 2020 amounted to SAR 52.1 million (31 December 2019: SAR 51.4 million). Gross profit 102,290,673 80,689,269 182,979,942

Net book value of property and equipment 66,111,163 14,812,552 80,923,715 34.DIVIDENDS Total assets 1,324,280,591 325,758,106 1,650,038,697 During 2020, one of the Group’s subsidiary, ORO Egypt for Manufacturing Precious Metals, declared and paid dividends amounting to SAR 2,332,889 equivalent to EGP 9,785,536 (2019: Total liabilities (1,183,631,188) (169,081,103) (1,352,712,291) SAR 1,962,003 equivalent to EGP 9,000,000).

Wholesale Retail Total 31 December 2019 SAR SAR SAR 35. COMPLIANCE WITH SHARI'A RULES In accordance with Shari’a Standard no. 21 “Financial Paper (Shares and Bonds)” issued 1,495,209,023 - 1,495,209,023 Revenues - Gold by the Shari’a Committee of the Accounting and Auditing Organization for Islamic Financial - Operations Institutions (AAOIFI). Following are the conclusions of Company’s management: 266,914,983 214,289,728 481,204,711 a) The Group’s main operations of gold and jewelry manufacturing is a Shari’a compliant Gross profit 190,901,680 96,908,494 287,810,174 activity in principle.

Net book value of property and equipment 66,224,725 21,202,259 87,426,984 b) All credit facilities and financing availed by the Group from banks during the audit period are in compliance with Islamic Shari’a provisions.

Total assets 1,636,967,604 378,066,971 2,015,034,575 c) Cash sales through retail outlets and cash wholesale sales on credit are in compliance with Shari’a. Total liabilities (1,394,625,194) (202,198,320) (1,596,823,514) The Group relies in its policies for wholesale gold sales on selling gold jewelry on credit B. GEOGRAPHICAL SEGMENTS basis against gold or crushed gold that is equal to it in weight plus an additional charge for workmanship, based on the Shari’a opinion which permits selling of gold jewelry on credit basis. This is the point of view of a group of scholars of Islamic jurisprudence, including Imam Gulf Cooperation Council Arab Republic Ibn Taymiyah and his disciple Ibn al-Qayyim, which also includes a number of contemporary Countries (GCC) of Egypt Total 31 December 2020 scholars, including a number of members of the Shari’a Board of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), as well as issuance of Shari’a opinion SAR SAR SAR by the Shari’a Advisory Committee of the Council of Saudi Chambers; based on a request of 218,099,102 1,060,341,293 1,278,440,395 the National Committee for Precious Metals and Gemstones regarding sale of gold jewelry Total revenue by gold traders and manufacturers, where their conclusion stipulated the permissibility of Net book value of property and equipment 36,793,390 44,130,325 80,923,715 gold and silver credit sales between retailers and wholesalers and manufacturers, subject to the following guidelines:

Gulf Cooperation Council Arab Republic • Ensures the permissibility of gold ornaments manufacturing. Countries (GCC) of Egypt Total 31 December 2019 • Ensures that fabricated ornament has a significant value, and not an unreal cover to SAR SAR SAR usury provisions.

719,646,444 1,256,767,290 1,976,413,734 Total revenue • Ensures that ornament’s fabricated gold is required for purchase by itself and not only Net book value of property and equipment the pure gold. 51,395,777 36,031,207 87,426,984

188 189 05 | CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

36. COMPARATIVE FIGURES Certain comparative figures have been reclassified to conform to the presentation in the current period, as follows:

As previously reported Reclassification As reclassified 31 December 2019 SAR SAR SAR

Accounts receivable 665,257,301 (40,189,426) 625,067,875

Other current assets 59,351,040 40,189,426 99,540,466

190 191