Our Greatest Strength Is Our Team Spirit

Annual Report 2018

Custodian of the Two Holy Mosques King Salman bin Abdul Aziz

( May Allah protect him )

His Royal Highness Prince Mohammad bin Salman bin Abdul Aziz

Crown Prince Vice President of the Council of Ministers & Minister of Defence ( May Allah protect him ) Table of Contents Board of Directors 8 Chairman’s Statement 10 Vice Chairman and Managing Director’s Statement 12

Operation Sector 80 SASCO Palm Co. 88 SASCO Al Waha Co. 92

Chief Executive Officer’s Statement 14 Vision 16 Mission 17

Ostool Al-Naqil Co. 94 Saudi Automobile & Touring Association, SATA 98 Auto & Equipment Investment Co. 102 Al-Nakhla Al-Oula Co. 106 SASCO Franchise Co. 108 SASCO Overview 18 Main Business Sectors 20 Plans and Decisions 22

Other Administrative and Operational 110 Information Risks Management 114 Internal Control 120 Corporate Governance 124 Most Important Achievements in 2018 26 Financial Statements 128 Board of Directors and Committees 32 Financial Statement at SASCO Level 62 Board of Directors

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

6 Annual Report 2018 7 Board of Directors

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

Qualifications and experience: He is a businessman, holding the Secondary school certificate and enjoying more than thirty seven years in corporate Present Occupations: Previous Occupations: management. He occupied many positions including the deputy Chairman of the Saudi Chambers of Commerce. He also `` Chairman of Al-Madaen Star Group. `` Vice Chairman of the Saudi Chambers of Commerce. participated in the boards of CMA-listed and unlisted shareholding companies such as Al-Madaen Star Group, Akwan `` Chairman of Mulkia Investment Co. `` Chairman of Al Kharj Industrial Chambers of Commerce. Real Estate Co., Ibrahim bin Mohammed Al-Hudaithi Investment Co., Zawaya Real Estate Co., Nahaz Investment Co. and `` Board member of Nahaz Investment Co. `` Member of Al Kharj Governorate Local Council. other companies working in the fields of real estate, services, investment and financial services inside and outside the `` Board member of Solidarity Company. Kingdom of Saudi Arabia.

Mr. Sultan bin Mohammed Al-Hudaithi Present Occupations: Mr. Riyad bin Saleh Al Malik de l’Automobile. Vice Chairman | Managing Director | Member of `` SASCO Managing Director. Board Member | Member of Executive Committee | Chief `` Member of the National Committee of Fuel Station Executive Committee `` Board member of United Wire Factories Company Executive Officer Companies in the Council of Saudi Chambers. Qualifications and experience: (ASLAK) Qualifications and experience: Previous Occupations: He holds the Bachelor’s Degree in Accounting with honour `` Board member of Mulkia Investment Co. He holds the Bachelor’s Degree in Business Administration `` General Director of Al Tas’helat Marketing Company Ltd. degree from King Saud University and Masters of Business `` Board member of Nahaz Investment Co. from King Abdulaziz University. He enjoys a vast `` Deputy General Director of Riyadh Development Administration from London Business School. He held Previous Occupations: experience in corporate management, particularly fuel Company. leading positions in many public and private companies `` CEO of Ibrahim Modern Investment Company. stations. He served as the General Director of Al Tas’helat `` Director of Marketing Department of Saudi Real Estate in Saudi Arabia. He enjoys experience in corporate `` Chief Executive Officer of Zaiti Petroleum Services. Marketing Company Ltd., Deputy General Director of Company (Al Akaria). restructuring, strategic planning and investment `` Deputy General Manager for Financial and Riyadh Development Company and board member of `` Sales Director of Saudi Hotels & Resorts Company. management in securities, private ownership and real Administrative Affairs at Al Madaen Star Group. many companies. `` Head of Customs Council of Federation Internationale estate investment. He was a member of boards and `` Board member of Saudi Chemical Co. de l'Automobile. committees in public and private companies including Present Occupations: `` Head of the National Committee of Fuel Station Saudi Chemical, Nahaz Investment Co., Zawaya Real Estate `` SASCO Chief Executive Officer. Co., Al-Madaen Star Group, Middle East Battery Company Companies in the Council of Saudi Chambers. `` Head of Customs Council of Federation Internationale (MEBCO), Mulkia Investment Co. and United Wire Factories Company (ASLAK). Mr. Ali bin Mohammed Aba Al Khail and Aviation and Inspector General. He also worked as Board Member | Head of Nomination and Remuneration an administrative counsellor in the High Commission for Committee Administrative Organization and Deputy Chairman of the Qualifications and experience: Board of Directors of Sanad Investment Company. Mr. Nasser bin Abdullah Al Awfi Present Occupations: He holds the Bachelor’s Degree in Political Sciences Present Occupations: `` Board Member | Head of Audit Committee Board member and Head of Audit Committee of from the Faculty of Administrative Sciences, King Saud `` Vice Chairman of the Board of Directors of Sanad Qualifications and experience: United Cement Industrial Company. University and the Master’s Degree in Government Investment Company. `` He holds the Master’s Degree in Accounting, the Master’s Head of Al Jouf Agricultural Development Company Management from Harvard University, United Sates of Present Occupations: Degree in Business Administration from Southern New Audit Committee. America. He is the secretary of the Head of the Royal Diwan, `` Deputy Director of the Political Affairs Department of `` Hampshire University in the USA and the Bachelor’s Head of Saudi Ceramics Audit Committee. the Deputy Director of the Political Affairs Department the Royal Diwan. `` Degree in Accounting from King Saud University. He Member of Taiba Holding Company Audit Committee. of the Royal Diwan and secretary of Office of Presidency `` Administrative counsellor in the High Commission for enjoys more than thirty one years of experience in Previous Occupations: of Prime Minister. He was appointed in the Office of the Administrative Organization. `` the management of joint stock companies as well as Director of Financial, Administrative and Investment Second Deputy of Prime Minister, Minister of Defence financial, administrative and strategic consultation. He Department of Saudi Pharmaceutical Industries & also participated in the many boards of shareholding Medical Appliances Corporation (SPIMACO). companies and board committees (Audit Committee) `` Vice General Director for Financial and Administrative Mr. Fawaz bin Suleiman Al Rajhi and member of audit committees in a number of joint- such as Al Jouf Agricultural Development Company Affairs of Saudi Livestock Trading Company. Board Member | Member of Audit Committee stock companies. He spent more than a decade in banking. (JADCO), Taiba Holding Company and United Cement `` General Director for Financial and Administrative Qualifications and experience: He held many positions in Corporate Financing Division of Industrial Company. Affairs of Taiba Investment and Real Estate He holds the Bachelor’s Degree in Accounting and Rajhi Bank. He took part in establishing the department Development Company. Information Systems Management from King Fahd of corporate loans and financing subscription of large University of Petroleum and Minerals (KFUPM) and also corporations. He was the person in charge of establishing Mr. Suleiman Bin Ali Al Khudair holds the Master’s Degree in Business Management from the Share and Subscription Department of Al Rajhi Capital Board Member | Member of Nomination and Present Occupations: Stanford University, USA. He is the Chairman of AlRajhi Company. `` Remuneration Committee General Director of Nahil Computers Co. United Investment Holding Company; it is a company Present Occupations: Qualifications and experience: Previous Occupations: investing in capital markets and private transactions `` Chairman of the Board of Directors of Union Al Rajhi. He holds a university degree in sciences from the USA. He `` Technical Director of Nahil Computers Co. on the local, regional and international levels. He has `` Chief Executive Officer of Al Rajhi Union. held many administrative positions, as he worked as a `` Sales Director of Nahil Computers Co. computer engineer in the Ministry of Defence. Then, he `` Deputy General Director of Nahil Computers Co. been leading and directing the Company’s efforts since Present Occupations: moved to the private sector where he worked as a techni- its inception based on the strategy of diversifying the `` Chief Operating Officer of Al Rajhi Capital. cal director, a sales director and deputy general director investment portfolio through a deliberate choice of `` Director of Sales and Distribution, Al Rajhi Capital. in Nahil Computers and now he is its General Director. markets and industries in selected geographical locations, `` Head of Corporate Banking at Al Rajhi Bank. with focus being placed on emerging technology and `` Chief Financial Analyst at Al Rajhi Bank. He participated in boards of many joint stock companies. income-generating real estates. He is also a board member `` Systems analyst at Procter & Gamble.

Mr. Majid bin Muhammad Al Othman Present Occupations: Mr. Majid Bin Nasser Al Sabei›e Present Occupations: Board Member | Member of Nomination and `` Chairman of Al-Madaen Star Group. Board Member | Member of Executive Committee `` CEO of Nasser Bin Mohammed Alsubeaei & Sons Remuneration Committee `` Chairman of Fun Gate Company. Qualifications and experience: Investment Company Qualifications and experience: `` Managing Director of Al-Madaen Star Group. He holds the Bachelor’s Degree in Political Sciences from Previous Occupations: He is a businessman, holding the Secondary school Previous Occupations: King Saud University and enjoys more than fifteen years `` Manager of real estate projects at Nasser Bin certificate and enjoying more than thirty years in real `` General Director of Al-Madaen Star Group for in corporate governance. He held many leading positions Mohammed Alsubeaei & Sons Investment Company. estate, contracting and automobile services. He is Contracting. such as the director of real estate projects at Nasser Bin `` Financial Analyst of Morgan Stanley & Co. the Managing Director of Al-Madaen Star Group and `` General Director of Al-Madaen Star Group for Mohammed Alsubeaei & Sons Investment Company, `` Managing Director of Morgan Stanley & Co. board member of Ibrahim bin Mohammed Al-Hudaithi Automobile Services. financial analyst and managing director of Morgan Investment Co., Bilda Specialized Commercial Centers Co. Stanley & Co. He is currently the Chief Executive Officer and Zawaya Real Estate Co. of Nasser Bin Mohammed Alsubeaei & Sons Investment Company.

8 Annual Report 2018 9 ffCompleting the procedures of increasing SASCO capital from SAR to reach SR 201,456,232. The operating revenues of Ostool Al-Naqil 540 million to SAR 600 million. Co. increased by 16% compared to last year to SR 26,359,082. The ffConcluding the procedures of distributing dividends to operating revenues of SASCO Al Waha Co. rose by 47% compared to shareholders for the fiscal year 2017 and depositing them with last year reaching SR 3,911,567. The operating revenues of the Saudi their respective accounts. Automobile & Touring Association, SATA, went down by 47%. It has ff Net operating income during the year 2018 Compared to last year, SASCO assets rose to SAR 1,6 billion at been affected by the political events experienced by some Arab 6,24%. countries in addition to the entering of peer clubs unauthorized by SR 2,056,081,002 ffPurchasing an additional share in the capital of Middle East Federation Internationale de l’Automobile. Battery Company (MEBCO) raising SASCO contribution to MEBCO from 7,94% to 12,79%. This is in addition to the achievements across SASCO and all ffThe Saudi Automobile & Touring Association, Ltd SATA signed an subsidiaries indicated in this report. Net operating income during the year 2017 agreement with the Saudi Customs to give effect to the Customs Convention on the International Transport of Goods as per In 2019, SASCO will continue to achieve its objectives according to SR 1,212,329,807 international land transport books. its strategic plan developed by the Board of Directors, consider the ffContinuing to study the options of selling some of SASCO owned horizontal and vertical acquisition opportunities at all operating sites and leasing them for long periods with the aim to obtain levels in consistency with Saudi Vision 2030 and work toward With an increase, of offers matching SASCO interests and goals. overcoming all obstacle and challenges. ffSASCO obtained the Most Innovative Fuel Station Company 69.60% Award in the World for 2018 on the margin of the achievements In conclusion, on behalf of the members of the Board of Directors, attained during 2018. I extend thanks and appreciation to all shareholders of the Saudi ffLaunching Commercial Franchise Granting Program of operating Automotive Services Company (SASCO) for their trust in SASCO the brands of “ SASCO Stations” and “Palm Stores”. management. I also thank all SASCO executive management and Chairman’s Statement ffContinuing to update the regulations, policies and standards staff for their efforts and dedication in performing their jobs in the Mr. Ibrahim bin Mohammed Al-Hudaithi required by the supervisory bodies. required manner, helping achieve the desired goals throughout this ffSigning many facilities agreements with local banks. year. We are looking forward to achieving further successes in the ffContinuously developing SASCO accounting and operating coming years. systems. Messrs. / Shareholders of the Saudi Automotive Services Company Shareholders’ equity recorded SAR 751,862,914 compared to SAR ffContinuing to attract qualified cadres to meetSASCO need I would also like to direct my sincere thanks and appreciation to the (SASCO), the highly regarded, 729,110,511, i.e. an increase of 3,12%. of various administrative functions, especially in leadership Custodian of the Two Holy Mosques, King Salman bin Abdul Aziz, positions. may Allah protect him, and His Highness the Crown Prince, His Royal May Allah’s Peace, Mercy and Blessings be upon you, As a result, the Board recommended to distribute to SASCO ffContinuing Saudization of jobs according to the Ministry of Highness Prince Mohammed bin Salman bin Abdul Aziz, may Allah shareholders a dividend of SAR 0,50 per share for the fiscal year Labour’s requirements. protect him, for all of the great efforts and unlimited assistance they The Board of Directors of the Saudi Automotive Services Company ending on 31 Dec. 2018 with a total amount of SR 30,000,000 ffCompleting the construction of (3) sites and developing (14) sites offer to develop this country, support its economy and stimulate the (SASCO) is pleased to present to you SASCO Annual Financial representing 5% of SASCO capital. The entitlement to these according to SASCO identity. business environment in favor of Saudi Vision 2030. Report for the fiscal year ended on December 31st, 2018. It includes dividends would be for shareholders registered with the Securities ffContinuing to study the options of acquiring new sites in different the performance and achievements of SASCO and its subsidiaries Depository Center (Tadawul) by the end of the second trading day parts of the Kingdom. as well as the financial results and key financial indicators. on which the General Assembly convened. ffPurchasing 10 new trucks to support fleet in addition to Thanks to Allah and the efforts of all members of the Board, the purchasing 8 fuel and water tanks, 8 transport goods containers May Allah Grant Us All Success, executive management, and staff, SASCO achieved in 2018 net Some of the most important achievements during 2018 are as and 1 reefer truck. operating sales of SAR 2,056,081,002 compared to SAR 1,212,329,807 follows: ffExpanding dry transport though contracting with new clients. Chairman in 2017, i.e. an increase of 69.60%, which reflected positively ffSASCO Al Waha Co. contracted with many companies with respect Ibrahim bin Mohammed Al-Hudaithi on the increase in gross profit at 3,13% and operating profit at to its hotels. 18,7%. In addition, in 2018, SASCO recorded a net profit of SAR ffParticipating in many exhibitions and awareness campaigns 35,451,309 compared to SAR 27,985,133 in the previous year, 2017, confirmingSASCO contribution to social responsibility. i.e. an increase of 26.68%. This, in turn, led to an increase of 0.47 in share profits compared to 0.59 of last year. At the end of 2018, When it comes to the operating revenues of subsidiaries, SASCO Palm Stores’ operating revenues rose by 23% compared to last year

10 Annual Report 2018 11 pilgrims whether inside or outside the Kingdom. Social Responsibility By God’s grace, we concluded strategic partnerships with many Based on its belief in its active role in the community and in international and local companies specialized in operating highlighting our homeland’s achievements, SASCO participated in restaurants and café and automotive maintenance with the aim many awareness-raising campaigns, including: to rent and operate some SASCO facilities to offer high quality Profit before interest, Zakat, Depreciation and and integrated services. These efforts led to increasing clients ff“Express Your Homeland Campaign” in the Kingdom’s National Day. Amortization (EBITDA) at the end of 2018 nationwide and raising their satisfaction and loyalty. The Campaign highlighted the major achievements of our beloved SR 92,750,036 homeland under the wise leadership of the Custodian of the Two SASCO Palm Stores Mosques and his Crown Prince. 6 new branches were added in 2018. At the end of 2018, the total ffLearn Early Campaign, in consistency with the Royal Decree of number of branches was 67. SASCO Palm Stores contains a full basket Women Driving. An infographic was posted on SASCO social media Profit before Interest, Zakat, Depreciation and of items that were carefully studied to meet clients’ needs and website. Amortization (EBITDA) at the end of 2017 achieve their satisfaction. Change of client basket reached 18,75%, ffMinutes Equal Years Campaign. It is an awareness campaign on the SR 82,673,032 rising from SR 16 to 19 in 2018. benefits of breast cancer early testing. ffThis comes in addition to several awareness campaigns and other Accommodation Sector (SASCO Al-Waha Co.) communal participations.

With an increase, of In 2018, two motels carrying Motel Al-Waha brand were opened. The first one is located on Abu Hadreya-Dammam Road and the second In conclusion, we ask Allah, the Almighty, to bless these efforts 12.19% is located near Al Adeed outlet on Batha’a-Salwa road in addition to and grant us success in continuously achieving SASCO plans and Motel Waha on Riyadh-Dammam highway at Kilo 154. So, the total goals and the aspirations of shareholders as well as improving number of SASCO Al-Waha motels rose to 3. performance and strengthening efficiency. I extend thanks and Vice Chairman and Managing appreciation to all shareholders and board members for their Ostool Al-Naqil Co. continued support, keenness and distinguished ideas. I also thank Director’s Statement SASCO increased its truck fleet in 2018 to 108 compared to 95 trucks all brothers in the Executive Management and all SASCO employees Mr. Sultan bin Mohammed Al-Hudaithi in 2017. The number of trailers rose to 121 in 2107 compared to 101 in for their great efforts, which contributed to achieving SASCO vision 2017. and goals and strengthening its pioneering position in the market. Ostool Al-Naqil Co. provides transport services of fuel, water and Messrs. / Shareholders of the Saudi Automotive Services Company the end of 2018 were SR 84,508,044 compared to SR 68,439,549 at the sewage to SASCO and Zaiti and transport services of fuel and May Allah Grant Us All Success, (SASCO), the highly regarded end of 2017, i.e. an increase of 23%. As a result, share profit increased cargo to other companies. It also expanded its business to include compared to last year and was SR 0,55 in 2018 compared to SR 0,48 dry transport using multi-purpose containers. It also received Managing Director May Allah’s Peace, Mercy and Blessings be upon you, IN 2017, with an increase of 12,7%. qualification from the National Water Company and the Saudi Sultan bin Mohammed Al-Hudaithi Electricity Company. It is thanks to Allah’s grace that 2018 witnessed SASCO continued Following are some of the most important achievements in different achievements and expansions according to its approved strategic sectors of SASCO and its subsidiaries: Saudi Automobile & Touring Association (SATA) plan. The Board seeks to keep its promise and commitment to SASCO In spite of the events experienced by the region which led to large shareholders and customers and preserve its pioneering position in Retail Sector depression in issuing transit books among the Arab countries, the field of operating fuel stations and retail as well as all sectors in This sector provides a set of excellent services to clients through more than 32,000 customs transit books were issued to passengers which it operates. SASCO sites spread nationwide. The sites have increased to 220 sites in addition to 62,000 internal driving licenses. According to the It gives me pleasure to present to you a brief overview highlighting compared to 213 in 2017, i.e. an increase of 7 sites. Operating sites Agreement on International Road Transport, SATA continued to the most important 2018 activities and developments on the and stations rose to 158, of which 94 are according to SASCO identity encourage the official authorities in the Kingdom and in Gulf operational and financial levels. SASCO achieved total operation and 54 are operating according to Zaiti Petroleum Services Company Cooperation Countries to activate the Agreement under the revenues of SR1,212,329,807 compared to SR 1,094,122,754 in 2017, identity. Other sites are under development or preparation and supervision of the International Road Transport Union (IRU). It also with an increase of 10,80%. This led to an increase of 2018 net profits construction or stopped for lack of economic feasibility from participated in some relevant seminars within the Gulf Cooperation which were SR 29,980,831 compared to SR 25,980,831 in 2017, i.e. operating them. Countries. increase of 14,78%. Such increase in operating revenues is attributed to many reasons, notably the continued expansion plan and opening The Retail Sector offered its services to about 12,700,000 vehicles, a number of new sites. with an increase of 11.8% compared to 2017, including 8,300,000 Earnings before interest, Zakat, depreciation and amortization at

12 Annual Report 2018 13 the margin of achievements it has made in 2018. Under the Convention, the Saudi Automobile & Touring Association, SATA, is considered the issuer of TIR books and the guarantor of When it comes to SASCO Palm Stores Co., SASCO continued its trucks exporting under the TIR system in Saudi Arabia. Thanks to expansion plan inside and outside SASCO sites. In 2018, the first this Convention, SASCO aims to activate SATA role to change from independent branch of SASCO Palm Stores in Dammam City, with a member represented in the International Road Transport Union Total profit by the end of 2018 the number of Palm Stores to reach 69 sites at the level of the to an active member to represent the Kingdom of Saudi Arabia and Kingdom, through which it offers a full basket of items that were issue TIR books. SR 37,683,502 carefully studied to meet clients’ needs, whether travellers on the road between cities or vehicle drivers and passengers inside cities. In the field ofSASCO Al Waha Co., Super 8 Hotel was honored by SASCO introduced new items leading to change of client basket at the Technical and Vocational Training Corporation (TVTC) and the 6,32%, rising from SR 19 in 2017 to SR 20,2 in 2018. General Sports Authority on the margin of the National Festival Total profit by the end of 2017 of Heritage and Culture (Al Janadriyah Festival 32). During 2018, 2 SR 31,915,742 In October 2018 and in a conference attended by many stakeholders, motels carrying the Brand “Waha Motel” were opened on Al-Hijra SASCO launched the Commercial Franchise Granting Program of Road (Mecca/Medina) with the number of SASCO Al Waha Co. operating the brands of “ SASCO Stations” and “Palm Stores”. The motels to rise to 5 motels. The Company continued to operate Super Program is considered the first initiative of its kind to grant the 8 Hotel in Riyadh and is currently constructing a hotel in Zalim area

With an increase, of right of commercial franchise to “SASCO Stations” and “Palm Stores on Riyadh-Taif Road. Centers” affiliated toSASCO Palm Stores Co. The Program also aims 18.07% to create new investment opportunities for SASCO and increase To this end, SASCO continued to attract qualified human cadres and its revenues and profitability through granting the franchise of create new job opportunities in favor Saudis to support the Ministry operating commercial brands to other operators, resulting in of Labour’s programs to Saudize jobs. creating real opportunities for citizens to participate in pioneering Chief Executive Officer’s projects in line with the Kingdom’s orientation. Many other achievements, particularly social participation, detailed Statement in the Board’s 2018 Annual Report were implemented with the In the transport sector, Ostool Al-Naqil Co., Ltd expended in 2018 attempt to achieve SASCO goals and cope up with the developments Mr. Riyadh bin Saleh Al Malik paticularly in the field of dry transport. It contracted with many witnessed by the Kingdom in its efforts to achieve Vision 2030. clients and companies. It also continued to transport fuel and water to third parties. To achieve such expansion, its fleet was supported by Messrs. / Shareholders of the Saudi Automotive Services Company 0,59. At the end of 2018, shareholders’ equity recorded SR 751,862,914 10 new trucks, 8 fuel and water tanks, 5 transport goods containers In conclusion, I extend thanks and appreciation to all shareholders (SASCO), the highly regarded compared to SR 729,110,511 in 2017, i.e. an increase of 3,12%. and 1 reefer truck for the size of fleet to reach 116 carriers and 132 of the Saudi Automotive Services Company (SASCO) for their trust trailers through which Ostool Al-Naqil offers transport services in SASCO management. I also extend thanks and appreciation May Allah’s Peace, Mercy and Blessings be upon you, Operational Performance: to the sites of SASCO operating sector, enabling it to acquire an to SASCO Board of Directors for their continued support to the During 2018, the number of fuel stations grew to 166 operating sites, additional market share and continue to contract with new clients. Executive Management. I also thank all SASCO employees for their Achieving the Board’s strategy, SASCO continued to achieve its goals with an increase of 14 operating sites. SASCO acquired many sites Saudi Automobile & Touring Association, SATA, was largely affected great efforts contributing to achieving SASCO goals. We hope more and plans in all SASCO main departments and subsidiaries. Thanks inside and outside cities, some of them have been already received in its revenues by the events recently experienced by the Arab Region success and progress to all. to Allah, and then to the directions of the Board and our colleagues, and the other is waiting the signing of contracts. SASCO completed and accession of new parallel clubs unauthorized by Federation SASCO could attain many financial and operating achievements the construction and operation of 3 new sites, namely SASCO Plus Internationale de l’Automobile, which acquired a market share of May Allah Grant Us All Success, during 2018; the foremost of which are the following: Station (Jubail 2) on Dammam/Jubail Road, SASCO Plus Station international driving licenses and customs transit (Trip-Tik). (Zalim) in Zalim area on Riyadh/Taif Road and Taneem Station in Chief Executive Officer Financial Performance: Mecca area. We continued to develop many existing sites located Based on the International Road Transport Agreement concluded Riyadh bin Saleh Al Malik In the fiscal year of 2018,SASCO achieved an increase of net profits inside and outside cities according to SASCO identity; 14 sites were in 2012 by Saudi Automobile & Touring Association, SATA, with the at 26,68% compared to 2017, raising the net income to SR 35,451,309. developed according to SASCO identity. work is underway to develop International Road Transport Union (IRU), the Saudi Automobile Total profits also increased at 3,13% and were SR 81,981,605. In the rest of sites according to the established development plan. & Touring Association, SATA, signed in 2018 with the Saudi addition, net operating profits scored an increase of 18,07% and When it comes to the automation of SASCO operating processes, it Customs an agreement to activate the Customs Convention on recorded SR 37,683,502. Revenue increase had a positive impact on initiated the automation of pumps and fuel tanks and the use of the International Transport of Goods under international carriage such increases. 2018 revenues scored SR 2,056,081,002 compared to smart cards and RFID System under the name of “Control Program”. of goods by rail (TIR); a simplified system making trade easier and SR 1,212,329,807 in 2017 with an increase of 69,60%, a matter which SASCO obtained the Most Innovative Fuel Station Company Award cheaper, being the only international transit and guarantee system. raised share profitability compared to last year from SR 0,47 to SR in the World for 2018 presented by International Finance Awards on

14 Annual Report 2018 15 Vision To be the first company in terms of the quality of the service and its integration, and to be the ideal model to be followed in the field of the service of vehicles, the equipment, and the management of guest houses and motels on highways in the Kingdom of Saudi Arabia.

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

16 Annual Report 2018 17 SASCO Overview non-refrigerated boxes, and all kinds of tankers after obtaining Sasco Overview the necessary licenses from the competent authorities. ff Formation Granting franchise to third parties in respect of SASCO trademarks. ff Saudi Automotive Services Co. (SASCO) is a Saudi joint stock company Establishing, managing, maintaining, operating, and cleaning established under Ministerial Decision No. 563 dated 23/12/1402 AH residential and commercial buildings and third parties’ and corresponding to 12/10/1982 AD. SASCO-owned fuel stations.

Activities Capital ffEstablishing and operating auto and passenger service centres SASCO capital is SR 600,000,000 divided into SR 60,000,000 shares, within cities and on the main and intercity roads. each with a value of SAR 10. On 22 May 2018, the 12th Extraordinary ffEstablishing and operating rest houses, motels, and restaurants General Assembly agreed to increase SASCO capital from SR on highways. 540,000,000 to SR 600,000,000 with a 11,11% increase through bonus ffProviding first-aid means using the latest international methods, shares. One free share shall be granted to each 9 shares of the owned including the use of helicopters, with the approval of competent shares through capitalizing SR 60 million of the retained profits. The authorities. aim is to strengthen SASCO financial ability to meet current and ffImporting, selling and distributing spare parts, car hardware, and future expansion of all activities for achieving better growth rates equipment as well as parts, accessories, and materials necessary in the coming years and preserving financial solvency. to provide best maintenance and repair services for cars and equipment and to meet the needs of maintenance operations in The Fiscal Year workshops and service stations, and to sell them directly to the SASCO fiscal year ends on December 31st of each calendar year. public. ffBuying, selling, renting, and leasing lands and real estate Auditor for the year 2018 properties required to serve SASCO purposes, and managing third Office: Allied Accountants - Chartered Accountants and Auditors parties’ properties. ffSubmitting contracting tenders on car and equipment Investment Restrictions maintenance for individuals, companies, and institutions. There are no restrictions on the listed shares of the Company in ff Checking cars to issue the roadability certificates upon obtaining accordance with the content of the rules regulating the investment the approval of the Ministry of Interior. of Qualified Foreign Financial Institutions in the listed shares, ffProviding an automobile club to issue international driving amended by the resolution of the CMA Board number 1-3-8102 dated licenses and customs transit (Trip-Tik) books and supporting 22 Rabi Thani 1439H corresponding to 9 January 2018 in Article 14, motor sport and tourism. para (A3) and (A4). ffImporting and exporting all types of vehicles for SASCO business as well as trading in them after obtaining the approval of the Additional Information ff competent authorities. Please visit SASCO website: (www.sasco.com.sa) ff ffManufacturing, re-manufacturing, and renewing auto parts, Please read SASCO profile on Tadawul website: equipment, and car batteries after obtaining the necessary (www.tadawul.com.sa) under code (4050) ff licenses from the competent authorities. SASCO International Code (SA0007870070). ffManufacturing light and heavy trailers, vehicles, refrigerated and

18 Annual Report 2018 19 Main Business Sectors Main Business Sectors

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

SASCO Palm Company SASCO Al-Waha Company It provides supply services through It manages of all SASCO motels managing all Sasco Palm Stores spread nationwide in addition to spread nationwide with the aim super 8 hotels. to meet all needs of motorists and travellers inside and outside the cities.

Ostool Al-Naqil Company Saudi Automobile & Touring Association It provides transport services to It possesses licenses from Sasco and Zaiti locations (fuel, Fédération Internationale de water, and sewage transport) l’automobile (FIA) to issue in addition to provide transport Customs Transit Books (Trip-Tik) services (fuel and cargo) to third and international licenses. It parties. works through many sale outlets and network of clients in all parts of the Kingdom of Saudi Arabia. It is deemed the only guarantor of TIR books in Saudi Arabia under the Convention signed with the Saudi Customs and its convention with the International Road Transport Union. Auto & Equipment Investment Al Nakhla Al Oula Contracting Company Company It was established with the It was established with the aim to independently manage aim to carry out operation, SASCO investment activities. It maintenance and cleaning works for SASCO sites in order to شركة النخلة األولى للمقاوالت possesses 12.79% of the capital Al Nakhla Al Oula Contracting Company of Middle East Battery Company improve the quality of services (MEBCO). provided to clients. It specializes in public contracting works of إستثمارات السيارات والمعدات buildings, and constructing, managing, maintaining and operating residential and commercial buildings as well as road works.

SASCO Franchise Company

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

20 Annual Report 2018 21 f Plans and Decisions f Developing the transport fleet in line with the increasing number Plans and Decisions of SASCO sites and the transport market in the Kingdom. The Strategic Plan ffEstablishing new alliances with international and leading companies operating in service sectors associated with the Proceeding from the strategic plans adopted by the Board of Directors activities of SASCO and its subsidiaries. f in its ninth session in 2009, and after a specialized third party reviewed f Applying the concept of total quality (TQ) to all SASCO sectors. f the strategic plan within SASCO Governance and Strategy Evaluation f Developing services provided by Saudi Automobile and Touring Project, as well as restructuring posts and job descriptions and Association, increasing market share in Trip-Tik and international setting the powers of each function, the Board of Directors adopted licenses sales, and activating the TIR Convention and its activity in a comprehensive, development and strategic business plan that the field of motor sport. f includes SASCO financial, administrative, and operational position. f Activating the role of subsidiaries. f The Board considered the priorities in achieving the goals set in the f Strengthening control over operation and service quality. f plan, whether they are qualitative, quantitative, administrative, or f Maintaining the competitive position of Saudi Automobile and regulatory. The development strategic business plan included a list of Touring Association. f these goals in addition to a mechanism to control it and measure the f Enhancing SASCO financial efficiency. f achieved performance periodically. f Disassociating from unexploited assets. ffContinuing distribution of dividends to shareholders. f In 2018, we contracted with an external entity to study SASCO f Continuing the utilization of technology and service automation. f trends. It presented many recommendations that were taken into f Attracting distinctive administrative expertise and competencies. consideration when developing the strategic plan. The most important objectives achieved are as follows: f Main considerations of SASCO strategy considered were as follows: f Increasing the number of stations as per SASCO expansion policy. f ffTo identify the items in previous strategies that would remain f Continuing to develop the existing sites according to SASCO appropriate and existing for the coming years. identity to cope with customer expectations. f ffTo identify the items in the previous strategies that require f Continuing to conduct general maintenance of all facilities at updating or amendment, which fits with the coming years. SASCO installations. f ffTo define the way through whichSASCO can manage its existing f Continuing the establishment of strategic partnerships to raise the assets effectively. level of service provided to enhance customer satisfaction. f ffTo determine the human resources required to support growth. f Branding the services offered by SASCO within its sites. f ffTo work towards providing excellent services in terms of value f Continuing the distribution of dividends to shareholders. f added and maintaining SASCO competitive position. f Building a distinct work team. f ffTo identify strengths, weaknesses, opportunities, and threats. f Saudizing jobs and maintaining the green zone of SASCO and its subsidiaries according to the rating of Nitaqat Program issued by The most important objectives of the developmental plan are as the Ministry of Labour. f follows: f Signing an agreement with the Saudi Customs to give effect to ffConducting a comprehensive market study for all sectors of SASCO the Customs Convention on the International Transport of Goods and its subsidiaries. related to the sales of TIR books. f ffAccelerating the decentralization plan to reduce costs, improve f Continuing to develop SASCO Enterprise Resource Planning (ERP) profitability, and increase operational efficiency. System. f ffExpanding and penetrating the market through strategic f Developing the operational and administrative systems for all partnerships and acquisitions. SASCO business units. f ffProviding logistics services and a comprehensive distribution f Motivating employees and creating a distinguished work network. environment. f ffConcentrating on customer satisfaction. f Continuing the dissociation from some untapped assets to ffProviding value-added services and innovative products. enhance profitability and provide funding sources. f ffTaking advantage of technology to facilitate service provision. f Signing Sharia-compliant credit facility agreements with local and ffConcentrating on social responsibility. international banks. f ffContinuing the development of the quality of services provided. f Social engagement. ffBuilding a network of stations inside and outside cities so that SASCO be among the three largest companies operating in this Executive Plan: field. In light of SASCO developmental strategic business plan, SASCO ffContinuing the development of stations, rest houses, and service management prepares an executive action plan annually through centres on highways. which it divides the basic activities and links them to an implementation

22 Annual Report 2018 23 timeline on an annual basis under the supervision of the Managing companies in the sites to continue to provide distinct services to Director. The actual achievements are reviewed monthly to ensure the customers. realization of the objectives set in the strategic plan. ffContinuing to negotiate with local banks in order to conclude facility agreements of distinguished conditions to SASCO. Most Important Future Expectations ffExpanding the field of transport to third parties (water transport, ffExpanding SASCO sites according to well-studied plans with the fuel transport, dry transport) and increasing the number of fleet aim to develop the network in sites of distinct investment income. trucks. This includes running the competitions offered by different ffOpening and developing motels carrying SASCO Al-Waha Co. government bodies in addition to investment opportunities trademark. available by non-governmental bodies (individuals, institutions, ffFinding new sale outlets to customs transit books and international bodies and corporations). driving licenses. ffEstablishing new sites in favor of SASCO Palm Stores inside and ffGiving effect to the agreement signed with the Saudi Customs and outside cities. starting the sales of TIR books. ffContinuing the development of all sites and establishing new sites ffDeveloping the services provided by Saudi Automobile and Touring carrying SASCO identity. Association (SATA) and expanding its business. ffEstablishing new strategic partnerships with service provision ffActivating the granting of commercial franchise to third parties.

24 Annual Report 2018 25 Most Important Achievements in 2018 The most important achievements during `` Acquiring some stations, including those already received and the year 2018 operated and those still in the process of contracting. At the Level of Network Expansion and Development `` Opening the first independent branch ofSASCO Palm Stores in ❖❖Completing the establishment of the following (3) new sites Dammam city. according to SASCO identity: `` Expanding dry transport through contracting with several ❖❖SASCO Plus station (Jubail 2) on Dammam-Jubail highway. customers and companies and continuing to transport fuel ❖❖SASCO Plus station (Zalim 2) at Zalim area on Riyadh-Taif road. and water to third parties. ❖❖Al Taneem Station in Mecca area. `` Purchasing (10) new trucks supporting SASCO fleet. `` Continuing to develop many existing sites inside and outside `` Purchasing (8) fuel tanks in addition to 5 containers to transport cities according to SASCO identity. 14 sites were developed goods and 1 reefer truck. according to SASCO identity while work is underway to develop `` Opening Abu Hadreya, Al Adeed, Shalalha and Akhal motels for the rest of sites according to the established development plan. SASCO Al-Waha Co. `` Running many government competitions related to establishing and operating fuel stations and service centers. The following table shows a summary of the number of sites SASCO was granted one of the sites affiliated to the Ministry of (operating and under construction) depending on the nature of Finance (5th site: Riyadh-Sadir-Qassim Road) ownership:

Statement 2014 2015 2016 2017 2018

Operating-Owned 31 35 32 34 33

Non-operating-Owned Sites 16 17 20 18 19

Non-Owned Sites 74 137 145 152 156

Total 121 189 197 204 208

The annual growth rate 6.14% 56.20% 4.23% 3.55% 1.96%

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

2018 166 1012 20

2017 152 12 20 20

2016 140 20 24 13

2015 136 13 37 3

2014 73 11 34 3

0 50 100 150 200 250

Stopped Under Construction Sites Stopped for Development Operating & leased sites

26 Annual Report 2018 27 Operating Site Distribution At Business Development Level of Saudi Arabia. ffSASCO was awarded the ‘Best Fuel Stations Company of 2018’ by ffContinuing in Al Ahli Capital portfolio which is run by Mulkia the International Finance Awards on the sidelines of the company’s Investment Co. within the limits of the agreement previously achievements in 2018. concluded with it. ffRenewing the credit facility agreement concluded with Riyadh Bank. ffRenewing and amending the credit facility agreement concluded with the Saudi British Bank (SAB). Southern Province 3.0% ffAuto & Equipment Investment Co. Ltd (subsidiary) to purchase an additional share in the capital of Middle East Battery Company Qassim Province 4.8% (MEBCO) raising SASCO contribution to MEBCO capital from 7.94% to 12.79% with the number of shares to rise from 794 to 1,279. Northern Province 9.0% ffCompleting the procedures of increasing SASCO capital from SR 540,000,000 to SR 600,000,000 and finalizing to deposit the amounts obtained from selling the fractions of shares resulting Western Province 16.9% from the increase of capital. ffConcluding the procedures of distributing dividends to shareholders for the fiscal year 2017 and depositing them with their Central Province 44.6% respective accounts. ffApproval of the 2019 budget. ffCompleting a comprehensive inventory of SASCO sites for the fiscal Eastern Province 21.7% year 2018 in accordance with agreed work procedures. ffThe Saudi Automobile & Touring Association, Ltd SATA’s signing of an agreement with the Saudi Customs to give effect to the Customs Convention on the International Transport of Goods as ffContinuing to negotiate with a number of financial institutions per international land transport books. and investment companies with the aim to obtain offers matching ffOpening new sale outlets for the Saudi Automobile and Touring SASCO interests and goals with respect to selling some of SASCO Association (SATA). owned sites and leasing them for long periods. ffLaunching Commercial Franchise Granting Program of operating ffPreparing feasibility studies for the projects SASCO wants to the brands of “ SASCO Stations” and “Palm Stores”. undertake after the final approval of these studies. ffDeveloping SASCO ERP system to achieve SASCO objectives. ffFollowing-up with the Consulting Office to develop the designs ffActivating the automation project of pumps and fuel tanks and the necessary for SASCO new headquarters. use of smart cards and RFID System. ffIssuing building license for the new headquarters of SASCO after Owned Sites approving its designs. ffContinuing to sign many agreements with international restaurant and café companies to enhance services provided to SASCO clients and to achieve a qualitative and quantitative shift for all its sites 2018 35 17 inside and outside cities towards the realization of SASCO approach to develop the station and rest house sector in the Kingdom. 2017 37 15 ffContinuing the update of the website of SASCO and its subsidiaries. ff 2016 37 15 Developing SASCO application on smart phones (Apple and Android). 2015 34 16 2 ffSigning a cooperation agreement between SASCO and STC PAY with the aim to provide digital payment service at SASCO stations. ffContinuing to sign a number of agreements for future supply with 2014 28 15 4 ffExpanding transport through Ostool Al-Naqil contracting with agents and marketers of food and non-food supplies many clients. ffContinuing preventive and periodic maintenance of SASCO sites. 0 10 20 30 40 50 60 ffSaudi Automobile & Touring Association, SATA’s success in issuing ffWorking for reducing the maintenance costs through contracting international driving licenses via its website. with maintenance materials and spare parts suppliers and using Purchase during year Owned & Under Construction Owned & Existing ffContracting with more companies and tourist companies at (Super LED lighting to rationalize the consumption of electrical power. 8) hotel in Riyadh. ffContinuing to dig and operate water wells to reduce water supply costs. At the Level of Finance and Financial & Operational Control ffHonouring (Super 8) Hotel from the Technical and Vocational ffApproval of SASCO final accounts and Board of Directors’ Report. Training Corporation (TVTC) on the margin of the Annual Heritage ffContinuing to apply the International Financial Reporting & Culture Festival (Janadriyah Festival 32). Standards in consistency with the IFRS approved in the Kingdom

28 Annual Report 2018 29 At the Level of Organizational and Administrative he interviewed the Chairman of SASCO in his capacity as the Development Kingdom’s representative. ffApproval of the General Assembly to amend SASCO Articles of ffLaunching “From SASCO To Russia Campaign” to support the Saudi Association in accordance with the new Companies Law. national team in 2018 World Cup. ffFinalizing the transfer of Auto & Equipment Investment Co. Ltd (subsidiary) into a one partner company (SASCO). ffElecting a new board of directors for the 12th session and approving the composition of the Board and its committees. ffContinuing to activate governance regulations and increasing transparency and disclosure. ffFollowing up and applying any new legislations issued by the competent bodies. ffContinuing to attract and Saudize qualified cadres to meetSASCO needs of various administrative functions, especially in leadership positions. ffContinuing Saudization of jobs and preserving SASCO and its subsidiaries classification within the green zone. ffOrganizing many training courses for all administrative levels of ffSASCO Marketing Department to present a lecture for women SASCO (the foremost of which are the course of Skills for Raising At the Level of Corporate Social Responsibility (CSR): ffwww.sataclub.com.sa the Levels of Performance and Productivity and the course of under the title of “Safe Driving” to highlight the main driving rules, ffMosque service in different sites inside and outside cities and on ffhttps://twitter.com/sasco_ksa Managing Change and Communications in Business). how to apply for a driving license and types of fuel. highways. ffhttps://twitter.com/SATAclub ffLaunching the women driving campaign titled “Nothing to Stop ffHajj and Omra service. ffhttps://twitter.com/sasco_palm At the Level of Corporate Social Responsibility You” in addition to offering awards and free fuel coupons for the ffFree toilet service. ffhttps://twitter.com/Super8R ffParticipating in the Saudi International Franchise Expo held in first 37 women to arrive toSASCO Plus Stations. ff ffhttps://www.facebook.com/SaudiAutomotiveServicesCo/?fref=ts Riyadh city during the period from 5-7 Feb. 2018. ffHonouring the first Saudi woman to carry an international driving Paying attention to health and cleanliness. f ff ffSaudi Automobile and Touring Association (SATA)’s participation in license by the Saudi Automobile & Touring Association, Ltd SATA. f Paying attention to environment. /https://www.facebook.com/Sataksa_ f a global campaign titled “3500 Lives”; a global campaign launched ffProviding camps during Hajj in some of its sites on the highways. f /https://www.facebook.com/sasco-palm-613438065491715_ by the Federation Internationale de l’Automobile (FIA) to spread ffhttps://www.facebook.com/Super-8-Hotel-/ awareness in the society about the golden rules that would help Riyadh-1777669312470879 you save your life and the lives of others. The campaign calls on all ffhttp://instagram.com/sasco_ksa_ governments to give priority to traffic and road safety as recent ffhttp://instagram.com/sata_ksa_ statistics have concluded that about 3500 persons are killed on a ffhttp://instagram.com/sasco_palm_ daily basis out of road accidents. ffhttp://instagram.com/super8.riyadh_ ffhttp://cutt.us/dxrT_ ffhttps://plus.google.com/117174656605659302922_ ffwww.youtube.com/sasasco ffwww.flickr.com/photos/sasco At the Level of Marketing Activities and Social Media ffParticipating in the Continuous update of the website of SASCO and its subsidiaries To update SASCO application on (iOS / Android) smart phones. awareness campaign (www.gasco.com.sa), in addition to their accounts on social media ffhttps://appsto.re/sa/BVIaH.i to celebrate World on the following links: ffhttps://appsto.re/sa/Hg1Ocb.i Alzheimer’s Month. The campaign aims to introduce the initial symptoms, necessary ffParticipating in “Ramadan is in Our District” Exhibition during diagnosis, early intervention, and educating the society about which the messages of the awareness campaign on the golden symptoms and means of protection against it. rules that would reduce road accidents were disseminated. ffInaugurating the “Station Forestation” Project to increase the ffOrganizing an awareness campaign in favor of fuel filling up staff level of forestation in SASCO stations as part of Riyadh Forestation of SASCO about security and safety to raise the level of performance Campaign under the supervision of Riyadh Development Authority of staff in this context. in cooperation with the Saudi Arabian Boy Scouts Association. ffHonouring the French filmmaker David Coulia during his visit to Riyadh to film the trip (we love road trip). During his visit,

30 Annual Report 2018 31 Board of Director’s and Committees Board of Director’s and Committees

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

Members’ Classification

Membership No. Name Position Category

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

2 Mr. Sultan bin Mohammed Al-Hudaithi Vice Chairman – Managing Director - Member of Executive Committee Executive

3 Mr. Nasser bin Abdullah Al-Awfi Board Member – Head of Audit Committee Non-Executive

4 Mr. Suleiman bin Ali Al-Khudair Board Member – Member of Nomination and Remuneration Committee Non-Executive

5 Mr. Majid bin Mohammed Al-Othman Board Member – Member of Nomination and Remuneration Committee Non-Executive

6 Mr. Riyadh bin Saleh Al-Malik Board Member – Member of Executive Committee - CEO Executive

7 Mr. Ali bin Mohammed Aba Al-Khail Board Member –Head of Nomination and Remuneration Committee Independent

8 Mr. Fawaz bin Suleiman Al-Rajhi Board Member – Member of Audit Committee Independent

9 Mr. Majid Bin Nasser Al Sabei’e Board Member – Member of Executive Committee Independent

� The membership of Mr. Ajlan bin Abdulrahman Al-Ajlan in the Board and the committees (independent member) expired at the end of the eleventh session on 29 June 2018.

32 Annual Report 2018 33 Allowances and Remunerations Paid to Board Members and Senior Executives Remunerations Paid to Senior Executives Remuneration of the Board of Directors The following statement shows the payments to Board members in 2018: The following statement shows the payments to Top Five Senior Executives who received Allowances and Remunerations, including the CEO and CFO during 2018:

Fixed Remuneration Changing Remuneration Fixed Remuneration Changing Remuneration

Statement Indemnity Grand total Grand Total Total Total plans plans

Description Profits Salaries Periodic Periodic the Council if any Allowances Granted shares Granted Remunerations In kind benefits Total reward executives for for executives reward Total Long-term incentive incentive Long-term Short-term incentive Short-term incentive - - - - - Total - Certain amount Certain Board attending for Allowance meetings attending for allowance Total meetings committee In kind benefits of technical, Remuneration works or consulting administrative of Chairman, Remuneration if or Secretary Director managing member he is a Board Total ratio Profit remuneration Periodic plans Short-term incentive plans incentive Long-term shares Granted Total Indemnity total Grand Allowance Expenditure 374,300 7,033,523 1,226,100 1,828,929 1,828,929 3,604,194 4,830,294 First: Independent Members

Mr. Ali bin Mohammed Aba ------

Al-Khail 12,000 12,000 224,000 224,000 200,000 Remunerations Paid to Committee Members

Mr. Fawaz bin Suleiman ------The following statement shows the payments to committee members in 2018: 6,000 12,000 218 . 000

Al-Rajhi 218,000 200,000

Mr. Majid Bin Nasser Al Sabei’e Fixed remunerations except Meeting attendance ------Statement Total

6,000 6,000 meeting attendance allowance allowance 12,000 (12th session) 12.000 Mr. Ajlan bin Abdulrahman Executive Committee Members

Al-Ajlan ------6,000 6,000 212 . 000 212,000 Mr. Ibrahim bin Mohammed Al-Hudaithi - 9,000 9,000 (11th session) 200,000 Mr. Sultan bin Mohammed Al-Hudaithi - 12,000 12,000

Total ------36,000 30,000 666,000 666,000

600,000 Mr. Riyadh bin Saleh Al-Malik - 12,000 12,000

Second: Non-Executive Members Mr. Majid Bin Nasser Al Sabei’e - 6,000 6,000 (12th session) Mr. Ibrahim bin Mohammed ------Total - 39,000 39,000 9,000 9,000

Al-Hudaithi 218,000 218,000 200,000 Audit Committee Members Mr. Nasser bin Abdullah ------15,000 Al-Awfi 12,000 Mr. Nasser bin Abdullah Al-Awfi 50,000 15,000 65,000 227,000 227,000 200,000

Mr. Fawaz bin Sulieman Al Rajhi 50,000 6,000 56,000 Mr. Suleiman bin Ali ------

Al-Khudair 12,000 12,000

224,000 224,000 Mr. Turki bin Muhamma Al Quraini 200,000 40,000 9,000 49,000 (12th session) Mr. Majed bin Mohammed ------Mr. Suleiman bin Ali Al-Khudair 1 2,000

12,000 25,000 6,000 31,000 Al-Othman 224,00 224,00 200,000 (11th session) Mr. Abdurrahman bin Ibrahim Al Humaid

------40,000 6,000 46,000 Total (11th session) 45,000 48,000 893,000 893,000 800,000 Total 205,000 42,000 247,000 Third: Executive Members Remuneration & Nomination Committee Members Mr. Sultan bin Mohammed ------Mr. Ali bin Mohammed Aba Al-Khail - 12,000 12,000 12,000 12,000 Al-Hudaithi 47,398 1,800,000 224,000 200,000 2,024,000 * Mr. Majed bin Mohammed Al-Othman - 12,000 12,000

Mr. Riyadh bin Saleh Al-Malik ------Mr. Suleiman bin Ali Al-Khudair 12,000 12,000 64,442

224,000 224,000 - 6,000 6,000 200,000 (12th session) Mr. Ajlan bin Abdulrahman Al-Ajlan

------6,000 6,000 Total (11th session) 111,840 24,000 24,000 448,000 400,000 1,800,000 2,248,000 Total - 36,000 36,000 * Pursuant to Section Two (Article 3) of the regulatory controls and procedures issued in implementation of the Companies Act with respect to listed shareholding companies issued by the Capital Market Authority and based on SASCO Remuneration Policy, an annual remuneration shall be cashed to the Managing Director (in consideration of works as well as executive and administrative positions entrusted to him in SASCO in his capacity as Managing Director) and shall be determined by a decision from the Board of Directors following a recommendation from the Remuneration Committee. The decision shall be renewed in each new session of the Board.

34 Annual Report 2018 35 Remuneration Policy Number of SASCO requests for Shareholders Register According to the payments made to the Board members, formed Incentives, Bonuses and Commissions Policy Manual in a committees and senior executives, the most important clauses of the manner that does not conflict with their employment contracts. The following table shows the number of SASCO requests for Shareholders Register as well as the dates and reasons for such requests: Remuneration Policy are as follows: A remuneration shall be approved before being paid by the ffpaying (3) thousand Saudi Riyals (per each member / per meeting ) Remuneration after obtaining the Board’s recommendation. No. Request Date Request Reasons for board meeting attendance. The Remuneration Policy of Board members, formed committees and ffPaying an annual remuneration to the Managing Director. It shall senior executives, which was approved by the Thirty Sixth Ordinary 1 05/02/2018 Following up the change in Shareholders Register be determined by a board resolution upon a recommendation General Meeting held on 24 Dec. 2017, can be accessed via SASCO from the Remuneration Committee. The resolution is renewed at website (www.sasco.com.sa). the outset of each board session (3% of net profits at the end of 2 01/05/2018 Following up the change in Shareholders Register each fiscal year, being not less than SR 1000,000). Deviation from Remuneration Policy ffPaying a meeting attendance allowance of SR (3) thousand (per There is no deviation between the granted remunerations, whether 3 22/05/2018 Twelfth Extraordinary General Meeting each member/per one meeting) to committee members. paid to Board members, committees or senior executives, and the ffPaying an annual remuneration of SR 80,000 to a non-board Audit applicable Remuneration Policy. 4 30/08/2018 Following up the change in Shareholders Register Committee member. ffPaying an annual remuneration of SR 50,000 to a board Audit Board Meetings 5 11/12/2018 Following up the change in Shareholders Register Committee member. The Board Members dedicated a sufficient time to undertake their ffPaying an annual remuneration to the CEO according to a responsibilities and prepare for the Board meetings and committees. Procedures taken by the Board to familiarize its members mechanism that pays attention to quantitative and qualitative The Board was keen on scheduling its meetings and preparing the Board Declarations f performance in accordance with his employment contract. Such meetings in advance making sure that all board members attend the f Account records were properly prepared. (non-executive in particular) with the shareholders’ mechanism shall be approved by the Remuneration Committee by meetings and discuss all items of the proposed agenda. ffThe Internal Control System was established on sound foundations proposals and remarks about SASCO performance. a recommendation from the Managing Director. The following table shows the attendance record of Board meetings and implemented effectively. ffSASCO Investor Relation Department independently receives and ffSenior Executives’ remuneration is paid according to the Staff in 2018 (eleventh and twelfth sessions): ffThere is no doubt in SASCO ability to continue its activities. submits shareholders’ proposals, if any, to the Board for discussion in its meetings and taking the appropriate resolution. Board Confirmations ffSASCO didn’t receive any proposals or remarks from shareholders ffNo Board member or a senior executive waived any salary or about its performance in the current fiscal year other than that has 11th session 12th session remuneration under any arrangements or assignment agreement. been discussed in the shareholders general meetings and included No. of meetings (2) No. of meetings (2) Attendance No shareholder waived any rights to profit under any arrangements in the minutes of meetings. No. Member Name Ratio or assignment agreement. ffIn case of any proposals or remarks on SASCO performance, such Meeting No. (1) Meeting No. (2) Meeting No. (3) Meeting No. (4) ffThere is no description of classes and numbers of transferable proposals and remarks shall be discussed as part of the periodic 13/03/2018 22/05/2018 11/09/2018 18/12/2018 debt instruments, contractual securities, rights memorandum, or board meetings agenda. 1 Mr. Ibrahim bin Mohammed Al-Hudaithi × 75% similar rights issued or granted by SASCO during the current fiscal year. There is no compensation gained by SASCO in return for this. 2 Mr. Sultan bin Mohammed Al-Hudaithi 100% ffThere is no description of any transfer or underwriting rights

3 Mr. Nasser bin Abdullah Al-Awfi 100% under transferable debt instruments, contractual securities, rights memorandum, or similar rights issued or granted by SASCO. 4 Mr. Suleiman Ali Al-Khudair 100% ffSASCO did not recover, purchase, or cancel any recoverable debt instruments. 5 Mr. Majed bin Mohammed Al-Othman 100% ffSASCO did not establish any investments or reserves in the interest 6 Mr. Riyadh bin Saleh Al-Malik 100% of its employees. ffSASCO did not receive from shareholders possessing 5% or more 7 Mr. Ali bin Mohammed Aba Al-Khail By phone 100% of its capital or account auditor any request for holding a general meeting or for adding an item to the agenda of the meeting in the 8 Mr. Fawaz Suleiman Al-Rajhi 100% current fiscal year. Date of membership in the board 9 Mr. Majid Bin Nasser Al Sabei’e 100% 30/06/2018 Date of expiry of membership 10 Mr. Ajlan Abdulrahman Al-Ajlan 100% 29/06/2018

Attendance in person × Authorizing one of the Board members

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

36 Annual Report 2018 37 Transactions and Contracts in which Board Members and Executive Directors have an Interest Reporting There are interest-related transactions and contracts for some Board members as follows: Contract Reporting to Agency Contracts/Business Related Parties Statement Duration to Board General Meeting Reporting Contract Reporting to Agency Contracts/Business Related Parties Statement Duration to Board General Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman of Madaen Star Real Estate Meeting Zaiti Petroleum Five (possessing a direct and indirect share of A site lease from Nahaz Madaen Services Company Contract renewable Contract 97.75% of capital). Investment Co. to use Mr. Ibrahim bin Mohammed Al-Hudaithi Star Real rents station No. 10 value is SR years from Nahaz In- Value is SAR Mr. Majid bin Mohammed Al-Othman as headquarters and (Board member possessing 0.02% of capital). Estate from Madaen Star Real 800,000 29 April vestment 368,000 One year Board member of Madaen Star Real Estate. labour accommodation Mr. Sultan bin Mohammed Al-Hudaithi Estate 2015 Co. annually Mr. Sultan bin Mohammed Al-Hudaithi for Ostool Al-Naqil Co. (Board member possessing 0.02% of capital). Board member of Madaen Star Real Estate. (subsidiary)

DAKKIN Mr. Ibrahim bin Mohammed Al-Hudaithi Publicity Advertis- (possessing 33.34% of capital) and Providing services in Mr. Ibrahim bin Mohammed Al-Hudaithi ing and Mr. Majed bin Mohammed Al-Othman advertising the field of promotion One year Chairman of Madaen Star Real Estate Design (possessing 33.33% of capital) of SAR Zaiti Petroleum Contract and advertising (possessing a direct and indirect share of Consul- Mr. Sultan bin Mohammed Al-Hudaithi 139,65 Madaen Services Company value is SR 97.75% of capital) tancy (possessing 33.33% of capital) Star Real rents station No. 11 250,000 on One year Mr. Majed bin Mohammed Al-Othman Estate from Madaen Star Real an annual Board member of Madaen Star Real Estate Mr. Ibrahim bin Mohammed Al-Hudaithi Estate basis Mr. Sultan bin Mohammed Al-Hudaithi (Board member possessing 17.67% of capital). To be A contract Board member of Madaen Star Real Estate Mr. Suleiman Ali Al-Khudair to manage termi- Mulkia Managing an (possessing 0.67% of capital). a portfolio nated by Invest- investment portfolio Mr. Majid bin Mohammed Al-Othman of SAR a 30-day ment Co. in Ahli Capital (possessing 0.67% of capital). 50,000,000 written Mr. Ibrahim bin Mohammed Al-Hudaithi Ten renew- Mr. Sultan bin Mohammed Al-Hudaithi notice Chairman of Madaen Star Real Estate able years Zaiti Petroleum Contract (Board member possessing 21.45% of capital). (possessing a direct and indirect share of from 1 Au- Madaen Services Company value is SR 97.75% of capital) gust 2007. Mr. Ibrahim bin Mohammed Al-Hudaithi Star Real rents station No. 12 150,000 on Zaiti Petroleum Mr. Majed bin Mohammed Al-Othman Site was Board member of Nahaz Investment Co. Contract For five Estate from Madaen Star Real an annual Nahaz In- Services Company Board member of Madaen Star Real Estate evacuated (possessing 0.02% of capital) value is SR renewable Estate basis vestment rents stations No. 1 Mr. Sultan bin Mohammed Al-Hudaithi on 1 May Mr. Sultan bin Mohammed Al-Hudaithi 1.1 million years as of Co. and 2 from Nahaz Board member of Madaen Star Real Estate 2018 Board member of Nahaz Investment Co. 01/01/2018 Investment Co. (possessing 0.02% of capital)

Mr. Ibrahim bin Mohammed Al-Hudaithi Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman of Madaen Star Real Estate Contract The value Zaiti Petroleum Nahaz Investment Board member of Nahaz Investment Co. (possessing a direct and indirect share of value is SR Nahaz In- of 2018 fuel Madaen Services Company Co. purchases fuel (possessing 0.02% of capital) 97.75% of capital) 300,000 on vestment purchases One year Star Real rents station No. 8 One year from Zaiti Petroleum Mr. Sultan bin Mohammed Al-Hudaithi Mr. Majed bin Mohammed Al-Othman an annual Co. was SR Estate from Madaen Star Real Services Company Board member of Nahaz Investment Co. Board member of Madaen Star Real Estate basis 78,700 Estate (possessing 0.02% of capital) Mr. Sultan bin Mohammed Al-Hudaithi Board member of Madaen Star Real Estate

Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman of Zawaya Real Estate Co. Mr. Ibrahim bin Mohammed Al-Hudaithi (possessing a direct and indirect share 42.96% Chairman of Madaen Star Real Estate Zaiti Petroleum The value of capital). Madaen Star Real (possessing a direct and indirect share of Zawaya Services Company Contract Madaen of 2018 fuel Mr. Majid bin Mohammed Al-Othman Estate purchases fuel 97.75% of capital) Real rents station No. 9 value is SR One year Star Real purchases One year Board member of Zawaya Real Estate Co. from Zaiti Petroleum Mr. Majed bin Mohammed Al-Othman Estate Co from Madaen Star Real 400,000 Estate was SR (possessing a share 0.29% of capital). Services Company Managing Director of Madaen Star Real Estate Estate 188,600 Mr. Sultan bin Mohammed Al-Hudaithi Mr. Sultan bin Mohammed Al-Hudaithi Managing Director of Zawaya Real Estate Co. Board member of Madaen Star Real Estate (possessing a share 1.8% of capital).

38 Annual Report 2018 39 Reporting Contract Reporting to Agency Contracts/Business Related Parties Statement Duration to Board General Meeting

The value Mr. Majid Al-Othman Mr. Majed of 2018 fuel purchases fuel from Al- Mr. Majid bin Mohammed Al-Othman purchases One Year Zaiti Petroleum Othman was SR Services Company 15,900

Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman of Zawaya Real Estate Co. (possessing a direct and indirect share 42.96% The value Zawaya Real Estate of capital). Zawaya of 2018 fuel Co. purchases fuel Mr. Majid bin Mohammed Al-Othman Real purchases One Year from Zaiti Petroleum Board member of Zawaya Real Estate Co. Estate Co. was SR Services Company (possessing a share 0.29% of capital). 10,700 Mr. Sultan bin Mohammed Al-Hudaithi Managing Director of Zawaya Real Estate Co. (possessing a share 1.8% of capital).

Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman of Zawaya Real Estate Co. (possessing a direct and indirect share 42.96% Zawaya Real Estate of capital). Zawaya 2018 value Co. rents advertising Mr. Majid bin Mohammed Al-Othman Real was SR One Year boards at station No. Board member of Zawaya Real Estate Co. Estate Co. 25,000 (9) (possessing a share 0.29% of capital). Mr. Sultan bin Mohammed Al-Hudaithi Managing Director of Zawaya Real Estate Co. (possessing a share 1.8% of capital).

Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman of Fun Gate Co. (possessing a direct and indirect share of Fun Gate Co. rents 10 2018 value Fun Gate 97.75% of capital). residential rooms at was SR One Year Co. Mr. Majid bin Mohammed Al-Othman station No. 2. 50,000 Managing Director of Fun Gate Co. Mr. Sultan bin Mohammed Al-Hudaithi Board member of Madaen Star Real Estate.

Reported.

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

40 Annual Report 2018 41 Competencies and Duties ffTo consider SASCO strategic and operational plans and budgets to ffTo amend technical designs and specifications and present proper Executive Committee submit them to the Board. recommendations thereon. ffTo review and follow up the implementation of all SASCO projects, ff It comprises: To make appropriate decisions on issues authorized by the Board to make decisions under Committee authorized powers, and to the Committee to discuss, address, and make appropriate decisions Mr. Ibrahim bin Mohammed Al-Hudaithi Present Occupations: discuss the obstacles facing the implementation of different thereon. Chairman | Head of Executive Committee ff Chairman of Al-Madaen Star Group. projects to examine their reasons and remedies and recommend ffTo perform all acts that would drive business and achieve SASCO Qualifications & Experiences: ff Chairman of Mulkia Investment Co. proper solutions. objectives within the regulations, rules, and decisions issued by the He is a businessman, holding the Secondary school ff Board member of Nahaz Investment Co. ffTo consider and present initial approvals to high importance issues Board. certificate and having more than 36 years in corporate Previous Occupations: that require Board decisions. ffTo conduct purchases and acquisitions of existing stations or management. He occupied many positions including the ff Vice Chairman of the Saudi Chambers of ffTo make decisions on issues authorized to the Committee by the lands for constructing stations thereon within the limits of SASCO deputy Chairman of the Saudi Chambers of Commerce. Commerce. Board outside the competency of SASCO Managing Director and competencies. He also participated in the boards of CMA-listed and ff Chairman of Al Kharj Industrial Chambers of CEO. These issues may include topics related to investments, ffTo perform the activities referred by the Board or the Chairman for unlisted shareholding companies such as Al-Madaen Star Commerce. human resources (HR), remuneration, information technology consideration or execution. Group, Akwan Real Estate Co., Ibrahim bin Mohammed ff Member of Al Kharj Governorate Local Council. (IT), capital expenses (CAPEX), procurements, and other issues Al-Hudaithi Investment Co., Zawaya Real Estate Co., Nahaz ff Board member of Solidarity Company. authorized to the Committee. Most Important Achievements Investment Co. and other companies working in the fields ffTo identify SASCO investment objectives and policies, including: ffFollowing up the signing of the agreement with the Saudi Customs of real estate, services, investment and financial services ❖❖Assets subject to investment according to the adopted regulatory and approving the Saudi Automobile & Touring Association, Ltd inside and outside the Kingdom of Saudi Arabia. restrictions. SATA as a guarantor of TIR books in the Kingdom. ❖❖Asset types. ffFollowing up SASCO lawsuits. ❖❖Investment-related long-term policies and objectives, risk ff Mr. Sultan bin Mohammed Al-Hudaithi Present Occupations: Following up the governmental bodies concerned with SASCO Vice Chairman | Managing Director | Member of Executive ff SASCO Managing Director. appetite, asset diversification, investment currencies, and lands and sites. Committee ff Board member of United Wire Factories internal or external investments. ffFollowing up the acquisition of new sites for SASCO. ❖❖ Qualifications & Experiences: Company (ASLAK) Nature of investment management arrangements and related ffFollowing up the goals and recommendations of SASCO strategic He holds the Bachelor’s Degree in Accounting with honour ff Board member of Mulkia Investment Co. controls. plan. degree from King Saud University and Master of Business ff Board member of Nahaz Investment Co. ❖❖Appointment of investment portfolio managers and trustees, ffApproving the estimated budgets of SASCO and its subsidiaries Administration from London Business School. He held Previous Occupations: and evaluating their performance periodically. and submitting recommendations to the Board for approval. leading positions in many public and private companies in ff Chief Executive Director of Ibrahim bin ❖❖Method and frequency of performance analysis. ffFollowing up the financial and operational performance ofSASCO Saudi Arabia. He has experience in corporate restructure, Mohammed Al-Hudaithi Investment Co. ❖❖Approval of different investment processes as per the established and its subsidiaries. strategic planning and investment management in ff Chief Executive Director of Zaiti Petroleum investment policy. The Executive Committee can authorize ffStudying the operating sites and endeavouring to extend their securities, private ownership and real estate investment. Services Company. their powers of approval within certain financial limits to the lease contracts and reduce their costs. He was a member of boards and committees in public and ff Deputy Director General of Financial and General Manager/FCO either jointly or severally according to the ffFollowing the project of selling some sites and releasing them. private companies including Saudi Chemical Co., Nahaz Administrative Affairs, Al-Madaen Star Group. conditions of the authorization granted. ffEvaluating SASCO investments and liquidity and submitting Investment Co., Zawaya Real Estate Co., Al-Madaen Star ff Board member of Saudi Chemical Co. ❖❖Reviewing and examining SASCO investment policies based on recommendations thereon to the Board. Group, Middle East Battery Company (MEBCO), Mulkia performance evaluation. ffCoordinating with SASCO Management to find ways to reduce Investment Co. and United Wire Factories Company ❖❖Evaluating investment outcomes to identify the success of costs. (ASLAK). implemented investment strategies, reporting investment ffMaking recommendations on bank facility agreements. outcomes to the Board as well as ensuring the adherence to the ffExamining the investment opportunities available for SASCO. Mr. Riyadh bin Saleh Al-Malik Present Occupations: investment policy and key guidelines. ffFollowing up the financial and operational performance Board Member | Member of Executive Committee | Chief ff SASCO Chief Executive Officer. ffTo follow up the implementation and development of SASCO subsidiaries. Executive Officer Previous Occupations: organizational structures and decisions that ensure the quick ffFollowing up the implementation of SASCO projects. Qualifications & Experiences: ff General Director of Al Tas’helat Marketing implementation and development thereof. ffFollowing up the approval of the Headquarters design and issuing He holds the Bachelor’s Degree in Business Administration Company Ltd. ffTo review the administrative regulations with SASCO management the required building license. from King Abdulaziz University. He has a vast experience ff Deputy General Director of Riyadh Development and make decisions that enable the management to put them in in corporate management, particularly fuel stations. He Company. place. Meetings served as the General Director of Al Tas’helat Marketing ff Director of Marketing Department of Saudi Real ffTo contact senior officers at governmental and national bodies to The following table shows the attendance record of Executive Company Ltd., Deputy General Director of Riyadh Estate Company (Al Akaria). facilitate the obstacles facing SASCO business and explain SASCO Committee meetings during 2018 (eleventh and twelfth sessions): Development Company and board member of many ff Sales Director of Saudi Hotels & Resorts programs to them. companies. He is now the Head of Customs Council of Company. Federation Internationale de l’Automobile and Head National Committee of Fuel Station Companies in the 11th session 12th session Council of Saudi Chambers. No. of meetings (2) No. of meetings (2) Attendance No. Member Name Ratio Mr. Majid Bin Nasser Al Sabei’e Present Occupations: Meeting No. (1) Meeting No. (2) Meeting No. (3) Meeting No. (4) Board Member | Member of Executive Committee ff Chief Executive Officer of Nasser Bin Mohammed 12/03/2018 21/05/2018 02/09/2018 17/12/2018 Qualifications & Experiences: Alsubeaei & Sons Investment Company Mr. Ibrahim bin Mohammed Al-Hudaithi He holds the Bachelor’s Degree in Political Sciences from Previous Occupations: 1 Apologized 75% King Saud University and enjoys more than fifteen years ff Manager of real estate projects at Nasser Bin Committee Head in corporate governance. He held many leading positions Mohammed Alsubeaei & Sons Investment Mr. Ibrahim bin Mohammed Al-Hudaithi such as the director of real estate projects at Nasser Bin Company. 2 100% Mohammed Alsubeaei & Sons Investment Company, ff Financial Analyst of Morgan Stanley & Co. Committee Head ff financial analyst and managing director of Morgan Managing Director of Morgan Stanley & Co. Mr. Riyadh bin Saleh Al-Malik Stanley & Co. He is currently the Chief Executive Officer 3 100% Committee Member of Nasser Bin Mohammed Alsubeaei & Sons Investment (Membership Committee Company. Mr. Majid Bin Nasser Al Sabei›e Date of membership in the 4 100% acurrent session) Committee Member Committee 30/06/2018

Personal attendance

42 Annual Report 2018 43 Audit Committee Competencies and Duties ffTo review the account auditor’s plan and activities and make sure It comprises: ffTo review the preliminary and annual financial statements before he does not perform any works beyond the limits of audit tasks submitting them to the Board and present opinions and make commissioned to him and present opinions in this regard. recommendations thereon to ensure integrity, accuracy and ffTo Respond to the auditor’s questions. transparency. ffStudy the auditor’s report and remarks on the financial statements Mr. Nasser bin Abdullah Al-Awfi Present Occupations: ffTo present technical opinions – upon request from the Board and follow up the procedures taken in this regard. Board Member | Head of Audit Committee ff Board member and Head of Audit Committee of Qualifications & Experiences: United Cement Industrial Company. – whether the Board’s report and financial statements are fair, ffTo review the results of supervisory reports and ensure SASCO takes He holds the Master’s Degree in Accounting, the Master’s ff Head of Al Jouf Agricultural Development Company balanced and understood and contain the information that allows the required procedures. Degree in Business Administration from Southern New Audit Committee. shareholders and investors to evaluate SASCO financial position, ffTo verify SASCO complies with the relevant laws, regulations and Hampshire University in the USA and the Bachelor’s Degree ff Head of Saudi Ceramics Audit Committee. in Accounting from King Saud University. He enjoys more ff Member of Taiba Holding Company Audit performance, business model and strategy. policies. than thirty one years of experience in the management of Committee. ffTo review any important or unfamiliar issue contained in the ffReview contracts and transactions to be concluded by SASCO with joint stock companies as well as financial, administrative Previous Occupations: financial reports. related parties and present recommendations thereon to the and strategic consultation. He also participated in the many ff Director of Financial, Administrative and Investment boards of shareholding companies and board committees Department of Saudi Pharmaceutical Industries & ffTo accurately consider any issues raised by Chief Financial Officer, Board. (Audit Committee) such as Al Jouf Agricultural Development Medical Appliances Corporation (SPIMACO). the persons assuming his duties, compliance officer or account ffSubmit to the Board the issues and matters for which necessary Company (JADCO), Taiba Holding Company and United ff Deputy General Director for Financial and auditor. actions should be taken and recommend proper procedures. Cement Industrial Company. Administrative Affairs of Saudi Livestock Trading Company. ffTo verify accounting estimations in major issues of financial Most Important Achievements ff Director for Financial and Administrative Affairs reports. ffApproval and follow-up of SASCO internal audit action plan. of Taiba Investment and Real Estate Development ffTo review SASCO accounting policies and present opinions and ffExamining the structure of Internal Audit Department and submit Company. make recommendations thereon to the Board. recommendations thereon. ffTo study and review systems of financial internal systems and risk ffExamination of annual and quarterly financial statements and management. submit recommendations thereon. Mr. Fawaz bin Suleiman Al-Rajhi Present Occupations: ffTo consider internal audit reports and follow-up the implementation ffRecommending the amendment of some financial policies. Board Member | Member of Audit Committee ff Chairman of AlRajhi United Investment Holding of corrective procedures regarding the remarks so raised. ffEnsuring the independency of SASCO external auditor. Qualifications & Experiences: Company. ffTo submit recommendation to the Board of the need to hire an ffFollowing up the reports developed by the Shifting Counsellor on He holds the Bachelor’s Degree in Accounting and Information ff Chief Executive Officer of AlRajhi United Investment Systems Management from King Fahd University of Petroleum Holding Company. internal auditor. shifting to the International Financial Reporting Standards and and Minerals (KFUPM) and also holds the Master’s Degree in Previous Occupations: ffTo submit recommendation to the Board concerning the work progress according to them. Business Management from Stanford University, USA. He is ff Head of Private Placement Operations in Al Rajhi appointment and remuneration of Internal Audit Department ffDeveloping the Audit Committee’s annual report and submitting it the Chairman of AlRajhi United Investment Holding Company; Capital Company. it is a company investing in capital markets and private ff Director of Sales and Distribution in Al Rajhi Capital director or the internal auditor. to the General Assembly of shareholders. transactions on the local, regional and international levels. Company. ffTo monitor and supervise the internal auditor and Internal Audit ffReviewing the different internal audit reports and submit He has been leading and directing the Company’s efforts ff Head of Corporate Banking Services Team in Rajhi Department’s performance and activities to verify their efficiency recommendations thereon. since its inception based on the strategy of diversifying the Bank. investment portfolio through a deliberate choice of markets ff Senior credit analyst in Rajhi Bank. in undertaking their duties and responsibilities and the availability ffFollowing up risk assessment reports with a consulting office and and industries in selected geographical locations, with focus ff System Analyst of Procter & Gamble Co. of the required resources. submit recommendations thereon. being placed on emerging technology and income-generating ffTo recommend to the Board the appointment of account auditors, ffRecommending SASCO chartered accountants. real estates. He is also a board member and member of audit committees in a number of joint-stock companies. He spent dismiss them, set their fees, assess their performance, make sure ffRecommending amendments to the Business Regulation of the more than a decade in banking. He held many positions in of independence and review their scope of work and employment Audit Committee. Corporate Financing Division of Rajhi Bank. He took part in conditions. Meetings establishing the department of corporate loans and financing subscription of large corporations. He was the person in ffTo ensure that the account auditor is independent, just, fair and The following table shows the attendance record of Audit Committee charge of establishing the Share and Subscription Department efficient, taking into account relevant rules and standards. meetings during 2018 (eleventh and twelfth sessions): of Al Rajhi Capital Company.

11th session 12th session No. of meetings (2) No. of meetings (3) Mr. Turki bin Muhamma Al Quraini Present Occupations: Attendance No. Member Name Meeting Meeting No. Meeting No. Meeting No. Meeting No. Non-Board Member ff Governance and compliance counsellor and Ratio Qualifications & Experiences: specialist in shareholding companies listed in the No. (1) (2) (3) (4) (5) He holds the bachelor of accounting from King Saud Saudi Capital Market (Tadawul). 13/03/2018 24/04/2018 18/07/2018 08/10/2018 23/10/2018 University, M.A in financial management from Sydney Previous Occupations: University of Technology, Australia, and the Certificate ff Director of Compliance with Corporate Governance Mr. Nasser bin Abdullah Al-Awfi 1 100% of Capital Market Exam (CME-1). He enjoys experience Rules – Capital Market Authority. Committee Head in corporate governance, measurement of corporate ff Director of Corporate Governance Standards - compliance levels, development of corporate governance Capital Market Authority. Mr. Fawaz bin Suleiman Al-Rajhi systems, organizational structures, organizational ff General Director of Governance and Board Secretary 2 Apologized By Phone Apologized Apologized 40% regulations of the government sector as well as listed and - Jabal Omar Development Co. Committee member unlisted shareholding companies. He also has experience ff General Director of Governance and Risks - National Date of membership in the Mr. Riyadh bin Saleh Al-Malik in internal audit and risk management. Housing Company. 3 Committee 100% Non-Board Member 30/06/2018

� The membership of Dr. Abdulrahman bin Ibrahim Al-Hamid and Mr. Suleiman bin Ali Al-Khudair in the Audit Committee expired at the end of the Mr. Abdurrahman bin Ibrahim Al Humaid Date of expiry of membership 4 100% Eleventh Session on 29 July 2018. Non-Board member 29/06/2018 Mr. Suleiman bin Ali Al-Khudair Date of expiry of membership 5 100% Committee member 29/06/2018

Personal attendance

44 Annual Report 2018 45 Nomination and Remuneration Committee Competencies and Duties It comprises: ffTo develop clear policies for remunerations and rewards of Board absence of any conflict of interest if the Board member is a member members, board committees and senior executives and present of another company’s board on a regular basis. such policies to the Board for consideration and approval by the ffTo develop a description of executive and non-executive members, General Meeting. Performance-related criteria when setting those independent members and senior executives. Mr. Ali bin Mohammed bin Ali Aba Al-Khail Present Occupations: policies should be employed. ffDevelop procedures for the case where one position of a board Board Member | Head of Nomination and ff Vice Chairman of the Board of Directors of Sanad Remuneration Committee Investment Company. ffTo define the relation between paid remunerations and the member or of a senior executive falls vacant. Qualifications & Experiences: Previous Occupations: applicable remuneration policy and clarify any major deviation. ffTo identify weaknesses and strengths in the Board and propose He holds the Bachelor’s Degree in Political Sciences from the ff Deputy Director of the Political Affairs Department Faculty of Administrative Sciences, King Saud University of the Royal Diwan. ffTo conduct periodic review of the remuneration policy and assess solutions in line with SASCO best interests. and the Master’s Degree in Government Management from ff Administrative counsellor in the High Commission to what extent it is efficient in achieving the desired outcomes. Most Important Achievements Harvard University, United Sates of America. He is the secretary for Administrative Organization. of the Head of the Royal Diwan, the Deputy Director of the ffTo recommend to Board the remunerations and rewards of Board ffApproval of biographies of those applying for the membership Political Affairs Department of the Royal Diwan and secretary of Office of Presidency of Prime Minister. He was appointed in members, board committees and senior executives according to of the Board for the twelfth session policies and present the Office of the Second Deputy of Prime Minister, Minister of the approved policy. recommendations thereon. Defence and Aviation and Inspector General. He also worked f f as an administrative counsellor in the High Commission for f To propose clear membership policies and criteria in Board and f Ensuring the independence of Board members. Administrative Organization and Deputy Chairman of the Executive Management. ffPeriodical review of Board structure. Board of Directors of Sanad Investment Company. ffTo recommend nominations to Board membership in accordance ffRecommending the payment of remuneration to the Board with the approved policies and standards, considering not to members for the fiscal year of 2017. Mr. Suleiman bin Ali Al-Khudair Present Occupations: ff Board Member | Member of Nomination and ff General Director of Nahil Computers. nominate any person who has previously been convicted with a Recommending the benefits and remuneration of the Managing Remuneration Committee Previous Occupations: crime involving moral turpitude and dishonesty. Director during the twelfth session of the Board pursuant to the Qualifications & Experiences: ff Technical Director of Nahil Computers. f He holds a university degree in sciences from the USA. He held ff Sales Director of Nahil Computers. f To prepare a description of capabilities and qualifications required Remuneration Policy of Board members, Board committees and many administrative positions, as he worked as a computer ff Deputy General Director of Nahil Computers. for Board membership and occupying administrative management Senior Executive Management. engineer in the Ministry of Defence. Then, he moved to the private sector where he worked as a technical director, a sales positions. ffRecommending the appointment of some leading positions. director and deputy general director in Nahil Computers and ffTo set the time a member should devote to board works. ffApproval of 2017 remunerations and incentives. now he is its General Director. ffTo conduct an annual review of the required needs in terms of ffAdopting the 2018 quarterly incentives and remunerations He participated in boards of many joint stock companies. adequate Board membership skills and executive management according to the approved policies. functions. ffObtainment of Board approval of the Committee’s 2019 plan. ffTo review the structure of the Board and senior executive Meetings management in SASCO, as well as make recommendations The following table shows the attendance record of the Nomination Mr. Majid bin Mohammed Al-Othman Present Occupations: Board Member | Member of Nomination and ff Chairman of Al-Madaen Star Group. regarding changes that can be made. and Remuneration Committee meetings in 2018 (eleventh and Remuneration Committee ff Chairman of Fun Gate Company. ff Qualifications & Experiences: ff Managing Director of Al-Madaen Star Group. To ensure the independence of the independent members and the twelfth sessions): He is a businessman, holding the Secondary school certificate Previous Occupations: and enjoying more than thirty years in real estate, contracting ff General Director of Al-Madaen Star Group for 11th session 12th session and automobile services. He is the Managing Director of Contracting. Al-Madaen Star Group and board member of Ibrahim bin ff General Director of Al-Madaen Star Group for No. of meetings (2) No. of meetings (2) Mohammed Al-Hudaithi Investment Co., Bilda Specialized Automobile Services. Attendance No. Member Name Commercial Centers Co. and Zawaya Real Estate Co. Ratio Meeting No. (1) Meeting No. (2) Meeting No. (3) Meeting No. (4) 25/02/2018 30/05/2018 10/09/2018 12/12/2018

� The membership of Dr. Abdulrahman bin Ibrahim Al-Hamid and Mr. Suleiman bin Ali Al-Khudair in the Audit Committee expired at the end of the Eleventh Mr. Ali bin Mohammed bin Ali Aba Al-Khail Session on 29 July 2018. 1 100% Committee Head (12th session)

Mr. Suleiman bin Ali Al-Khudair Date of membership in the 2 100% Committee member Committee 30/06/2018

Mr. Majed bin Mohammed Al-Othman 3 100% Committee member

Mr. Ajlan bin Abdulrahman Al-Ajlan Date of expiry of membership 4 100% Committee Head (11th session) 29/06/2018

Personal attendance

46 Annual Report 2018 47 Ownership of Substantial Shares Statement of Board Members’ Participations on other Boards The following table shows the bodies holding substantial shares in SASCO and the changes made during 2018: The following table shows the names of the Board members on Boards of other companies:

Ownership Percentage No. Name Beginning of period Change* December 31st, 2018 Change Ratio* Companies in which Board member is on Companies in which Board member was on their their current boards or of their directors previous boards or of their directors 11.56% 11.56% 1 Mr. Ibrahim bin Mohammed Al-Hudaithi 693,928 shares 11.11% (6,245,352 shares) (6,939,280 shares) Legal entity Inside/ Legal entity Name 11.75% 705,338 shares 7.25% Inside/outside Listed/unlisted outside Listed/unlisted 2 Nahaz Investment Co. (31.47%) Name of Company Name of Company (6,348,046 shares) (2,703,384 shares) (4,350,000 shares) the Kingdom joint stock/limited the joint stock/limited liability company Kingdom liability company

Change includes shares granted to increase capital (11.11%). Unlisted shareholding Inside Listed shareholding * Al-Madaen Star Group Inside KSA Solidarity Company company KSA company * Declaration: with respect to notices related to ownership of large shares and their change during the year according to Article 43 and Article Unlisted shareholding 45 of Registration and Listing Rules issued by the Capital Market Authority (CMA), SASCO would like to advise you that it did not receive any Akwan Real Estate Inside KSA company notice from shareholders of any change to their ownership during the year. In stocktaking of information, SASCO relies on the information Ibrahim bin Mohammed Al- Unlisted shareholding provided by Saudi Stock Exchange (Tadawul). Inside KSA Hudaithi Investment Co. company Unlisted shareholding Zawaya Real Estate Co. Inside KSA company Unlisted shareholding Nahaz Investment Inside KSA company Bilda Specialized Unlisted shareholding Inside KSA Commercial Centers Co. company Unlisted shareholding Mulkia Investment Co. Inside KSA company

Mr. Ibrahim bin Mohammed Al-Hudaithi bin Mohammed Ibrahim Mr. DAKKIN Advertising and Limited liability Inside KSA Design Consultancy company Limited liability Saudi Finance Company Inside KSA company

United Wire Factories Unlisted shareholding Saudi Chemical Inside Listed shareholding Inside KSA Company company Company KSA company

Unlisted shareholding Inside Limited liability Al-Madaen Star Group Inside KSA Madaen Star Group company KSA company

Unlisted shareholding Real Estate National Inside Limited liability Zawaya Real Estate Co. Inside KSA company Group KSA company Ibrahim bin Unlisted Unlisted shareholding Mohammed Al- Inside Nahaz Investment Co. Inside KSA shareholding company Hudaithi Investment KSA company Co. Unlisted shareholding Mulkia Investment Inside KSA company DAKKIN Advertising and Limited liability Inside KSA Design Consultancy company Limited liability Mulkia Trading Co. Inside KSA

Mr. Sultan bin Mohammed Al-Hudaithi bin Mohammed Sultan Mr. company Ma’areb Company for Limited liability Investment and Real Estate Inside KSA company Development Middle East Battery Limited liability Inside KSA Company (MEBCO) company

48 Annual Report 2018 49 50

Name Company for Investment Knowledge &Childhood Zaiti Petroleum Services Mulkia InvestmentMulkia Co. Tamadon AlHadeetha ARZAQ AGRICULTURAL Dur AlKuttab Limited Al-Nakhla Al-OulaCo. Real Estate REITFund Real Estate REITFund Tamdeen Real Estate Saudi Automobile & SASCO Franchise Co. Touring Association SASCO Al-Waha Co. Name Company of Investment co., LTD Auto &Equipment Ostool Al-Naqil Co.Ostool Al-Naqil Mulkia RealMulkia Estate Tamadon AlOla SASCO Palm Co. Investment Co. for Real Estate for Real Estate Mulkia Gulf Mulkia Mulkia Gulf Mulkia Company Company Company Companies inwhichBoard member ison their current boards theirdirectors orof Inside/outside the Kingdom Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA joint stock/limited joint stock/limited liability companyliability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Listed/unlisted Legal entity company company company company company company company company company company company company company company company company company company Name Company of Companies inwhichBoard member was ontheir previous boards theirdirectors orof Kingdom outside Inside/ the joint stock/limited joint stock/limited liability companyliability Listed/unlisted Legal entity

Mr. Suleiman bin Mr. Nasser bin Abdullah Mr. Majed bin Mohammed Al-Othman Name Ali Al-Khudair Al-Awfi Ibrahim binMohammed DAKKIN Advertising and Commercial Centers Co. Al-Hudaithi Investment Zawaya Real Estate Co. Al-Madaen Star Group Design Consultancy Madaen Star Group FUNGATE Company Name Company of Nahil ComputersNahil Bilda SpecializedBilda United Cement Industrial Co.Industrial Companies inwhichBoard member ison their current boards theirdirectors orof Inside/outside the Kingdom Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Unlisted shareholding Unlisted shareholding Unlisted shareholding Unlisted shareholding Unlisted shareholding joint stock/limited joint stock/limited liability companyliability Limited Liability Limited Liability Limited Liability Limited Liability Limited Liability Limited Liability Limited Liability Listed/unlisted Legal entity company company company company company company company company company Development Company Al-Madaen Star Group Al JoufAgricultural Name Company of Services Company Zaiti Petroleum Companies inwhichBoard member was ontheir for Automotive Food Products Company (JADCO) previous boards theirdirectors orof Kingdom outside Inside/ Inside Inside Inside Inside KSA KSA KSA KSA the Annual Report 2018 Listed shareholding Listed shareholding joint stock/limited joint stock/limited liability companyliability Limited Liability Limited Liability Listed/unlisted shareholding Legal entity company company company company Unlisted 51 52 * Amember notbegiven shall remunerations, benefits orprofits when heisaboard member in ofSASCOany subsidiaries. Mr. Majid bin Mr. Ali bin Mr. Fawaz bin Suleiman Al-Rajhi Mohammed Mr. Riyadh bin Saleh Al-Malik* Name Nasser AlSubeaei Aba Al-Khail Sanad Investment Company Al Rajhi UnitedInvestment Al Rajhi AlphaInvestments Zaiti Petroleum Services Nasser BinMohammed Foroseya for Trading & Al-Nakhla Al-OulaCo. Investment Company Saudi Automobile & Touring Association Name Company of SASCO Al-Waha Co. SASCO Al-Waha Co. Auto &Equipment Ostool Al-Naqil Co.Ostool Al-Naqil Eskan Investment Alsubeaei &Sons SASCO Palm Co. RAJ RealRAJ Estate Investment Co. Rak Ceramics Services Ltd. Holding Co Company Companies inwhichBoard member ison their current boards theirdirectors orof Inside/outside the Kingdom Outside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Inside KSA Unlisted shareholding Unlisted shareholding Unlisted shareholding Listed shareholding joint stock/limited joint stock/limited liability companyliability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Listed/unlisted Legal entity company company company company company company company company company company company company company Al Tas’helatMarketing Sara Communications Sahl Transportation Name Company of Companies inwhichBoard member was ontheir Company. Company previous boards theirdirectors orof Kingdom outside Inside/ Inside Inside Inside KSA KSA KSA the joint stock/limited joint stock/limited liability companyliability Limited liability Limited liability Limited liability Limited liability Limited liability Limited liability Listed/unlisted Legal entity company company company (including that theirwives of and minorchildren): followingThe table shows theBoard members’ and senior executives’ SASCO ownership of shares Board Members’ and Senior Executives’ Shares of Ownership ** * Change includesshares granted to increase capital (11.11%). No. 10 12 13 11 9 6 8 4 2 3 5 7 1 Membership starts from Membershipthe12thsessionon30June2018. thebeginningof starts Mr. Saud binSuleiman AlOtaiby Mr. Ahmad Islam Mohammed Khairi Mr. Muhammad AlMotlaq binAbdullah Mr.David Whales Mr. Ibrahim binMohammed Al-Hudaithi Mr. Suleiman AliAl-Khudair Mr. Nasser Al-Awfi binAbdullah Mr. Sultan binMohammed Al-Hudaithi Mr. MajedbinMohammed Al-Othman Mr. Fawaz Suleiman Al-Rajhi Mr. AlibinMohammed AbaAl-Khail Mr. Riyadh binSaleh Al-Malik Mr. MajidbinNasser AlSubeaei Name ** 6,245,352 shares6,245,352 198,658 shares 62,448 shares62,448 67,249 shares Beginning of Beginning of 3,500 shares 1,000 shares 1,200 shares 1,200 shares 1,200 shares Period - - - - 693,928 shares shares 392٫291 122,042 shares 60,770 shares 22,073 shares 133 shares 133 shares 111 shares Change 7,472 - - - - * Ownership 6,939,280 shares December 31st, 123,242 shares 395,791 shares 220,731 shares 123,218 shares 74,721 shares 1,333 shares1,333 1,333 shares1,333 1,111 shares 2018 - - - - Annual Report 2018 % 11٫208.31 10,170.17 % Change 97.31 % Ratio 11.11 % 11.11 % 11.11 % 11.11 % 11.11 % 11.11 % - - - - * 53 Shareholders’ Meetings in 2018 Shareholders’ Meetings in 2018

Twelfth Extraordinary General Meeting ff First meeting and second meeting (after an hour) on 22 May 2018.

Names of Attending Board Members

No. Member Name Capacity

1 Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman

2 Mr. Sultan bin Mohammed Al-Hudaithi Vice Chairman – Managing Director

3 Mr. Nasser bin Abdullah Al-Awfi Board Member

4 Mr. Suleiman bin Ali Al-Khudair Board Member

5 Mr. Ajlan bin Abdulrahman Al-Ajlan Board Member

6 Mr. Majed bin Mohammed Al-Othman Board Member

7 Mr. Riyadh bin Saleh Al-Malik Board Member - CEO

8 Mr. Fawaz Suleiman Al-Rajhi Board Member

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

54 Annual Report 2018 55 ff All agenda items were approved as follows:: ability to meet the current and future expansions in between SASCO and Nahaz Investment Co. and license the same for a period of one year, a company all its activities to achieve better growth rates in the license the same for a period of one year, a company in which some Board members have a direct interest. 1. Approve the Board’s report for fiscal year ending on coming years and preserve financial solvency. The in which some Board members have a direct interest, These members are Mr. Ibrahim bin Mohammed 31 Dec. 2017. entitlement would be for shareholders registered namely Mr. Ibrahim bin Mohammed Al-Hudaithi and Al-Hudaithi, owning a share of 17,67% of its capital, 2. Approve Auditor’s report for fiscal year ending on 31 with the Securities Depository Center Company (Idaa) Mr. Sultan bin Mohammed Al-Hudaithi, who have a Mr. Sultan bin Mohammed Al-Hudaithi, owning a Dec. 2017. by the end of the second trading day following the share of 0,02% of capital per each. Such business is share of 21,45% of its capital, Mr. Suleiman bin Ali Al- 3. Approve SASCO consolidated financial statements for date on which the Extraordinary General Assembly to let Ostool Al-Naqil Co., Ltd (subsidiary) to lease Khudair, owning a share of 0,67% of its capital and Mr. fiscal year ending on 31 Dec. 2017. convened. Share fractions shall be combined in a a site from Nahaz Investment Co. at an annual Majed bin Mohammed Al-Othman, owning a share of 4. Approve Board members’ acquittance for fiscal year single portfolio for all shareholders and shall be sum of SR 368,000 to be used as headquarters and 0,67% of its capital. Such business is an agreement ending on 31 Dec. 2017. sold in the market price, with their value shall be labour accommodation for Ostool Al-Naqil Co. These to manage an investment portfolio in Al Ahli Capital 5. Approve the Board’s recommendation to distribute proportionately distributed to entitled shareholders business and contracts have no preferential terms. with a value of SR 50 million. These business and cash profits at SR 0,5 per each share equivalent to 5% within a period not exceeding 30 days from 12. Approve the business and contracts to be undertaken contracts have no preferential terms. of SASCO capital in a total amount of SR 27 million. determining shares entitled to each shareholder. between SASCO and DAKKIN Advertising and license 14. Approve the business and contracts to be undertaken The entitlement would be for shareholders registered 7. Approve the amendment of Article 7 of SASCO Articles the same for a period of one year, a company in between Zaiti Petroleum Services Company (SASCO with the Securities Depository Center Company (Idaa) of Association related to capital. which some Board members have a direct interest. subsidiary) and Nahaz Investment Co. and license by the end of the second trading day following the 8. Approve the amendment of Article 8 of SASCO Articles These members are Mr. Ibrahim bin Mohammed Al- the same for a period of one year, a company in date on which the Extraordinary General Assembly of Association related to subscription into shares. Hudaithi, owning a share of 33,34%, Mr. Majed bin which some Board members have a direct interest. convened. The date and method of distribution shall 9. Approve the payment of a remuneration to the Board Mohammed Al-Othman, owning a share of 33,33% of These members are Mr. Ibrahim bin Mohammed be announced later. members at a total amount of SR 1,8 million, with its capital and Mr. Sultan bin Mohammed Al-Hudaithi, Al-Hudaithi and Mr. Sultan bin Mohammed Al- 6. Approve the Board’s recommendation to increase each member to receive SR 200,000 for the fiscal year owning a share of 33,33% of its capital. Such business Hudaithi, who have a share of 0,02% of capital per SASCO capital from SR 540 million to SR 600,000,000 of 2017. is to offer services and works in the field of publicity each. Such business is a lease contract under which (no. of shares before the increase of capital was 54 10. Approve and set the fees of the Audit Committee’s and advertising, with the amount of business in 2017 Zaiti Petroleum Services Company shall lease two million shares and rose to 60 million) at an increase nominated auditor “Allied Accountants – Chartered reaching an amount of SR 639,000. These business stations No. 1 and No. 2 from Nahaz Investment Co. rate of 11,11% through granting one free share for Accountants and Auditors,” to audit the financial and contracts have no preferential terms. against an annual sum of SR 800,000. These business every 9 owned shares. Capital increase shall be done statements of the second, third and fourth quarters 13. Approve the business and contracts to be undertaken and contracts have no preferential terms. through capitalizing SR 60 million of the retained of fiscal year 2018 and the first quarter of 2019. between SASCO and Mulkia Investment Co. and 15. Approve the business and contracts to be undertaken profits. The aim of this is to strengthenSASCO financial 11. Approve the business and contracts to be undertaken

56 Annual Report 2018 57 between Zaiti Petroleum Services Company No. 9 from Zawaya Real Estate Co. against an annual Sultan bin Mohammed Al-Hudaithi, Board member. the same for a period of one year, a company in (SASCO subsidiary) and Al-Madaen Star Real Estate sum of SR 400,000. These business and contracts Such business is a lease contract under which Zaiti which some Board members have a direct interest. and license the same for a period of one year, a have no preferential terms. Petroleum Services Company shall lease station No. 11 These members are Mr. Ibrahim bin Mohammed Al- company in which some Board members have a 17. Approve the business and contracts to be undertaken from Al-Madaen Star Real Estate against an annual Hudaithi and Mr. Sultan bin Mohammed Al-Hudaithi, direct interest. These members are Mr. Ibrahim bin between Zaiti Petroleum Services Company sum of SR 250,000. These business and contracts have who have a share of 0,02% of capital per each. Such Mohammed Al-Hudaithi, owning a share of 97,75% (SASCO subsidiary) and Al-Madaen Star Real Estate no preferential terms. business is fuel purchases from Nahaz Investment Co. of the capital of Al-Madaen Star Real Estate and and license the same for a period of one year, a 19. Approve the business and contracts to be undertaken against a sum of SR 986,000 in 2017. These business occupying the position of the Chairman, Mr. Majed company in which some Board members have a between Zaiti Petroleum Services Company and contracts have no preferential terms. bin Mohammed Al-Othman, Board member and Mr. direct interest. These members are Mr. Ibrahim bin (SASCO subsidiary) and Al-Madaen Star Real Estate 21. Approve the business and contracts to be undertaken Sultan bin Mohammed Al-Hudaithi, Board member. Mohammed Al-Hudaithi, owning a share of 97,75% and license the same for a period of one year, a between Zaiti Petroleum Services Company (SASCO Such business is a lease contract under which Zaiti of the capital of Al-Madaen Star Real Estate and company in which some Board members have a subsidiary) and Al-Madaen Star Group and license Petroleum Services Company shall lease station No. 8 occupying the position of the Chairman, Mr. Majed direct interest. These members are Mr. Ibrahim bin the same for a period of one year, a company in from Al-Madaen Star Real Estate against an annual bin Mohammed Al-Othman, Board member and Mr. Mohammed Al-Hudaithi, owning a share of 97,75% which some Board members have a direct interest. sum of SR 300,000. These business and contracts have Sultan bin Mohammed Al-Hudaithi, Board member. of the capital of Al-Madaen Star Real Estate and These members are Mr. Ibrahim bin Mohammed no preferential terms. Such business is a lease contract under which Zaiti occupying the position of the Chairman, Mr. Majed Al-Hudaithi, owning a direct and indirect share of 16. Approve the business and contracts to be undertaken Petroleum Services Company shall lease station No. bin Mohammed Al-Othman, Board member, and Mr. 97,75% of the capital of Al-Madaen Star Group and between Zaiti Petroleum Services Company (SASCO 10 from Al-Madaen Star Real Estate against an annual Sultan bin Mohammed Al-Hudaithi, Board member. occupying the position of the Chairman, Mr. Majed subsidiary) and Zawaya Real Estate Co. and license sum of SR 800,000. These business and contracts Such business is a lease contract under which Zaiti bin Mohammed Al-Othman, Managing Director of Al- the same for a period of one year, a company in have no preferential terms. Petroleum Services Company shall lease station No. Madaen Star Group, and Mr. Sultan bin Mohammed which some Board members have a direct interest. 18. Approve the business and contracts to be undertaken 12 from Al-Madaen Star Real Estate against an annual Al-Hudaithi, Board member. Such business is fuel These members are Mr. Ibrahim bin Mohammed Al- between Zaiti Petroleum Services Company sum of SR 150,000. These business and contracts have purchases from Zaiti Petroleum Services Company Hudaithi, owning a share of 42,96% of the capital of (SASCO subsidiary) and Al-Madaen Star Real Estate no preferential terms. against a sum of SR 1,997,000 in 2017. These business Zawaya Real Estate Co. and occupying the position and license the same for a period of one year, a 20. Approve the business and contracts to be undertaken and contracts have no preferential terms. of the Chairman, Mr. Majed bin Mohammed Al- company in which some Board members have a between Zaiti Petroleum Services Company (SASCO 22. Approve the business and contracts to be undertaken Othman, Board member owning a share of 0,29% direct interest. These members are Mr. Ibrahim bin subsidiary) and Nahaz Investment Co. and license between Zaiti Petroleum Services Company (SASCO of its capital and Mr. Sultan bin Mohammed Al- Mohammed Al-Hudaithi, owning a share of 97,75% Hudaithi, Board member owning a share of 1,8% of its of the capital of Al-Madaen Star Real Estate and capital. Such business is a lease contract under which occupying the position of the Chairman, Mr. Majed Zaiti Petroleum Services Company shall lease station bin Mohammed Al-Othman, Board member, and Mr.

58 Annual Report 2018 59 subsidiary) and Mr. Majed bin Mohammed Al- a direct and indirect share of 97,75% of the capital Executive Directors Othman and license the same for a period of one of Fungate Co. and occupying the position of the They are as follows: year. Such business is fuel purchases by Mr. Majed Chairman, Mr. Majed bin Mohammed Al-Othman, bin Mohammed Al-Othman from Zaiti Petroleum Managing Director of Fungate Co., and Mr. Sultan Services Company against a sum of SR 94,000 in 2017. bin Mohammed Al-Hudaithi, Board member. These business and contracts have no preferential Such business is a lease contract by Fungate Co. of Mr. Mohammed bin Abdullah Al-Mutlaq Tabuk Fisheries Company (closed joint stock company). terms. residential rooms in Station No. 2 of Zaiti Petroleum General Manager of Zaiti Petroleum Services Present Occupations: 23. Approve the business and contracts to be undertaken Services Company against an annual sum of SR Company ff Assistant CEO the Saudi Automotive Services Qualifications & Experiences: Company (SASCO). between Zaiti Petroleum Services Company (SASCO 50,000. These business and contracts have no He holds the Bachelor’s Degree in Business Previous Occupations: subsidiary) and Zawaya Real Estate Co. and license preferential terms. Management from King Saud University. He held ff General Director of Zaiti Petroleum Services the same for a period of one year, a company in 26. Approve the amendment of Article 32 of SASCO many administrative positions in the private sector. Company. which some Board members have a direct interest. Articles of Association regarding calling for general He is a member of the National Committee of Fuel These members are Mr. Ibrahim bin Mohammed Al- meetings. Stations Companies in the Council of Saudi Chambers Hudaithi, owning a share of 42,96% of the capital of 27. Approve the amendment of Article 43 of SASCO of Commerce and a member of Audit Committee of Zawaya Real Estate Co. and occupying the position of Articles of Association regarding committee reports. the Chairman, Mr. Majed bin Mohammed Al-Othman, 28. Approve the amendment of Article 49 of SASCO Board member owning a share of 0,29% of its capital Articles of Association regarding financial documents. Mr. Islam Muhammed Khairi Ahmad lead working teams. Finance Manager Present Occupations: and Mr. Sultan bin Mohammed Al-Hudaithi, Board 29. Approve the amendment of Article 50 of SASCO Qualifications & Experiences: ff Director of Finance Management of the Saudi member owning a share of 1,8% of its capital. Such Articles of Association regarding profit distribution. He holds the Bachelor’s Degree in Accounting from Automotive Services Company (SASCO). business is fuel purchases from Zaiti Petroleum 30. Elect Board members from among those nominated Ain Shams University, Egypt. He is a finance director Previous Occupations: Services Company by Zawaya Real Estate Co. against for 12th session starting on 30 June 2018 for three for more than ten years, enjoying a wide experience ff Head of Accounts Department in Al-Madaen an annual sum of SR 66,000 in 2017. These business years ending to 29 June 2021 (by way of cumulative in leading and developing successful financing teams Star Group. and contracts have no preferential terms. voting. These are 9 members according to SASCO in several finance and accounting activities, including ff Chief Financial Officer of Zaiti Petroleum the development of annual budgets and controlling Services Company. 24. Approve the business and contracts to be undertaken Articles of Association. They are ordered according to major accounts. He is able to address functions and between Zaiti Petroleum Services Company (SASCO the votes they obtained as follows: subsidiary) and Zawaya Real Estate Co. and license • Mr. Ibrahim bin Mohammed Al-Hudaithi the same for a period of one year, a company in • Mr. Sultan bin Mohammed Al-Hudaithi Mr. David Whales Present Occupations: which some Board members have a direct interest. • Mr. Majed bin Mohammed Al-Othman General Manager of SASCO Palm Co. ff General Director of SASCO Palm Stores These members are Mr. Ibrahim bin Mohammed Al- • Mr. Ali bin Mohammed Aba Al-Khail Qualifications & Experiences: (subsidiary). Hudaithi, owning a share of 42,96% of the capital of • Mr. Suleiman bin Ali Al-Khudair He holds the International General Certificate for Previous Occupations: Zawaya Real Estate Co. and occupying the position of • Mr. Riyadh bin Saleh Al-Malik Secondary Education (IGCSE). He worked for many ff Director of Supplies Sector at many British the Chairman, Mr. Majed bin Mohammed Al-Othman, • Mr. Nasser bin Abdullah Al-Awfi British retailers and held many supplies jobs, including corporations. Director of Supplies Sector and Operations Manager at ff Regional Director of Operations at British Board member owning a share of 0,29% of its capital • Mr. Fawaz bin Suleiman Al-Rajhi many British corporations. He acted as Deputy General corporations. and Mr. Sultan bin Mohammed Al-Hudaithi, Board • Mr. Majid bin Nasser AlSubeaei Director of Operations at City Center Hypermarket. ff Deputy General Director of Operations at City member owning a share of 1,8% of its capital. Such 31. Approve the composition of the Audit Committee and Center Hypermarket. business is a lease contract by Zawaya Real Estate specify its functions, work rules and remuneration of Co. of advertising boards in Station No. 9 of Zaiti its members for the 12th session commencing on 30 Petroleum Services Company against an annual sum June 2018 and ending on 29 June 2021. Following are Mr. Saud Sulieman Al Otaiby Present Occupations: of SR 25,000. These business and contracts have no the names of its members: Director of Operations Sector ff Director of Operations Sector of the Saudi preferential terms. • Mr. Nasser bin Abdullah Al-Awfi, Qualifications & Experiences: Automotive Services Company (SASCO). 25. Approve the business and contracts to be undertaken Committee Head He holds the Bachelor’s Degree of General Previous Occupations: Administration from King Abdulaziz University in ff Head of Western Province Operations, Al between Zaiti Petroleum Services Company (SASCO • Mr. Fawaz bin Suleiman Al-Rajhi, Jeddah. He enjoys more than 15 years of experience Tas’helat Marketing Company Ltd. subsidiary) and Fungate Co. and license the same for Committee member in the field of fuel station companies. He held many ff General Director of Distributors in Kia Motors a period of one year, a company in which some Board • Mr. Turki bin Muhamma Al Quraini, administrative positions in the private sector. Saudi Arabia. members have a direct interest. These members are Committee member (non-board member) ff Director of Western and Northern Provinces Mr. Ibrahim bin Mohammed Al-Hudaithi, owning in the Saudi Automotive Services Company (SASCO). Recommendation Regarding the Auditor Transactions and Contracts in which Board Members and Executive Directors have an Interest The Board or the Audit Committee has no observations or reservations regarding the current auditor, “Allied Accountants – Chartered Accoun- __ � There are no transactions or contracts in which the CEO, Chief Financial Officer, any executive tants and Auditors,” noting that 2018 was the fourth year for this auditor to deal with SASCO. The auditor’s activities include auditing SASCO director or relevant person has interest. financial statements for the fiscal year 2018 and the first quarter of the fiscal year 2019.

60 Annual Report 2018 61 Financial Statements at SASCO Level Financial Statements at SASCO Level

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

Statement 2014 2015 2016 2017 “Amended” 2018

Current assets 340,172,790 335,453,233 310,503,345 336,983,801 358,187,696

Non-current assets 791,550,290 946,464,664 1,182,055,527 1,169,679,455 1,242,554,192

Total Assets 1,131,723,080 1,301,917,897 1,492,558,872 1,506,663,256 1,600,741,888

Current Liabilities 242,486,686 233,134,630 364,594,629 415,126,524 458,879,874

Non-Current Liabilities 163,195,676 336,454,575 345,519,020 362,426,221 389,999,100

Total Liabilities 405,682,362 569,589,205 710,113,649 777,552,745 848,878,974

Total assets and liabilities

1,800,000,000

1,600,000,000

1,400,000,000

1,200,000,000

1,000,000,000

800,000,000

600,000,000

400,000,000

200,000,000

- 2014 2015 2016 2017 2018

Total assets Total liabilities

62 Annual Report 2018 63 Assets Liabilities and Shareholders’ Equity

1,800,000,000 900,000,000 1,600,000,000 800,000,000 1,400,000,000 Growth Rate in Shareholders› Equity 3.56% 700,000,000 1,200,000,000 600,000,000 1,000,000,000 500,000,000 800,000,000 400,000,000 600,000,000 300,000,000 400,000,000 200,000,000 200,000,000 100,000,000 0 0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Cash and cash equivalents Commercial Receivables Commodity Stock Total Assets Long-Term Assets Total Liabilities Capital Total Shareholders’ Equity

Change in Net Fixed Assets Income Statement The following table summarizes the data of the income statement for the past five years: 1,800,000,000

1,600,000,000 Statement 2014 2015 2016 2017 “Amended” 2018 Growth rate in total assets 41.44% 1,400,000,000 Sales 453,370,500 665,048,902 1,094,122,754 1,212,329,807 2,056,081,002

1,200,000,000 Direct Costs (416,105,976) (613,340,424) (1,036,023,378) (1,132,838,480) (1,974,099,397) 1,000,000,000 Income Margin 37,264,524 51,708,478 58,099,376 79,491,327 81,981,605 800,000,000 General & Administrative (28,717,195) (35,285,668) (38,686,162) (47,575,585) (44,298,103) 600,000,000 Expenses

400,000,000 Other Revenue (Expenses) 76,539,300 5,584,757 10,222,617 (135,609) 542,811

200,000,000 Zakat (3,036,000) (3,391,000) (3,655,000) (3,795,000) (2,775,004)

0 Net Income 82,050,629 18,616,567 25,980,831 27,985,133 35,451,309 2014 2015 2016 2017 2018

Net Fixed Assets Total Assets

64 Annual Report 2018 65 Analysis of Material Differences in Results

The following table shows the most important differences in the financial results compared to the previous fiscal year: 2,500,000,000

Statement 2018 2017 Change + (-) % of Change 2,000,000,000

Revenue 2,056,081,002 1,212,329,807 843,751,195 69.60% 1,500,000,000 Direct Costs (1,974,099,397) (1,132,838,480) 841,260,917 74.26%

1,000,000,000 Income Margin 81,981,605 79,491,327 2,490,278 3.13%

500,000,000 Sales and marketing expenses (2,189,061) (3,799,225) (1,610,164) (42.38%)

General & Administrative Expenses (40,020,290) (39,679,677) 340,613 0.86% 0 Structured Allowances (2,088,752) (4,096,683) (2,007,931) (49.01%) 2014 2015 2016 2017 2018

Net Operating Income 37,683,502 31,915,742 5,767,760 18.07% Sales Direct Costs Income Margin Net Income

Investment Revenue (Loss) 6,745,277 2,983,259 3,762,018 126.10%

Financial Burdens (8,070,599) (5,631,383) 2,439,216 43.31%

Misc. Revenue 1,868,133 2,512,515 (644,382) (25.65%)

80,000,000 Net Income Before Zakat 38,226,313 31,780,133 6,446,180 20.28%

Zakat (2,775,004) (3,795,000) (1,019,996) (26.88%)

60,000,000 Net Income After Zakat 35,451,309 27,985,133 7,466,176 26.68%

40,000,000

ffShare profitability of the same period was recalculated due to the 20,000,000 The following is a description of the main justifications for fundamental changes in SASCO business results: increase of capital from SR 540 million to SR 600 million. ff Increase of net income in the current period compared to the same period of last year is attributed to: 0 ??Increase of sales at 69,60%. )10,000,000( ??Decline of depreciation expenses and customs allowances. 2014 2015 2016 2017 2018 ??Increase of investment revenues in spite of the increase of sales, financing and general and administrative expenses ffThe comprehensive income of the current period was SR 51,55 General & Administrative Expenses Other Revenue (Expenses) Zakat million compared to SR 215,000 million for the same period of last year at an increase of 23,876% due to an increase in reassessing investments. ffShareholders’ equity recorded SR 751,86 million compared to SR 729,11 million for the same period, i.e. an increase of 3,12% (there is no minority equity).

66 Annual Report 2018 67 Cash Flow Statement Earnings per Share

The following table summarizes the data of the cash flow statement for the past five years: The following table summarizes earnings per share for the past five years:

Statement 2014 2015 2016 2017 2018 Statement 2014 2015 2016 2017 “Amended” 2018

Earnings per Share 1.52 0.34 0.48 0.47 0.59 Flows from Operating Activities 13,749,624 50,095,250 61,539,044 31,299,799 45,308,582

Flows from Investment Activities 116,172,277 (198,513,124) (168,464,284) (116,986,699) (78,101,689) 2.00 Flows from Financial Activities (78,098,773) 141,373,640 66,933,168 65,280,554 9,752,789 1.75 1.52 1.50

1.25

1.00 150,000,000 0.75 100,000,000 0.59 0.48 0.47 0.50 50,000,000 0.34 0.25 - 0.00 50,000,000 2014 2015 2016 2017 2018 100,000,000

150,000,000 Earnings Per Share

200,000,000 2014 2015 2016 2017 2018 Share Performance

Flows from Operating Activities Flows from Investment Activities Flows from Financial Activities The following graph summarizes share performance for the past five years:

30.00

25.00 200,000,000 180,000,000 20.00 160,000,000 140,000,000 15.00 120,000,000 100,000,000

80,000,000 10.00 193,415,355 60,000,000 137,316,422 40,000,000 130,462,199 117,203,850

5.00 100,479,857 20,000,000 - 0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018

Volume of Capital Spending Share Value in SAR

68 Annual Report 2018 69 Key Financial Indicators Efficiency Indicators

The following tables show the key financial indicators for the past five years: Statement 2014 2015 2016 2017 “Amended” 2018

Growth Indicators Debtors Turnover 13.00 18.15 13.97 13.06 14.74

Statement 2014 2015 2016 2017 “Amended” 2018 Inventory Turnover 19.53 22.15 37.92 31.18 38.56

Sales Growth 22.90% 46.69% 64.52% 10.80% 69.60% Asset Turnover 0.40 0.51 0.73 0.80 1.28

Net Income Growth 106.16% (77.31%) 39.56% 7.71% 26.68%

Asset Growth 4.26% 15.04% 14.64% 0.94% 6.24% Efficiency Indicators Equity Growth (0.36%) (0.36%) 6.84% (6.82%) 3.12%

40.00 Profit Indicators 35.00 38.56 37.92 Statement 2014 2015 2016 2017 “Amended” 2018 30.00

Return on Sales 18.10% 2.80% 2.37% 2.31% 1.72% 31.18 25.00 Return on Capital 18.23% 3.45% 4.81% 5.18% 5.91% 20.00 Return on Investment 10.37% 2.00% 2.20% 2.39% 2.85% 22.15

15.00 19.53 18.15 Return on Total Assets 7.25% 1.43% 1.74% 1.86% 2.21% 14.74

10.00 13.97 13.06 Return on Equity 11.30% 2.54% 3.32% 3.84% 4.72% 13.00 5.00 1.28 0.73 0.80 0.51 0.40 Profit Indicators 0.00 2014 2015 2016 2017 2018 20.00% 18.00% Debtors Turnover Inventory Turnover Asset Turnover 16.00% 14.00% 12.00% Liquidity & Indebtedness Indicators 10.00% 18.23%

8.00% 18.10% 5.91% Statement 2014 2015 2016 2017 “Amended” 2018 5.18% 4.81% 6.00% 4.72% 3.45% 3.84% 11.30% 3.32% 2.80% 2.54% 10.37% 2.85% Liquidity Ratio 1.40 1.52 0.85 0.81 0.78 2.31%

4.00% 2.37% 2.21% 2.39% 1.72% 2.20% 1.74% 2.00% 1.86% 1.43% 2.00% 7.25% Quick Liquidity Ratio 1.32 1.41 0.78 0.72 0.67 0.00%

2014 2015 2016 2017 2018 Ratio of Indebtedness to Equity 55.88% 57.56% 65.74% 76.19% 78.88%

Return on Sales Return on Capital Return on Investment Ratio of Indebtedness to Total Assets 35.85% 32.38% 34.46% 36.87% 37.05% Return on Total Assets Return on Equity

70 Annual Report 2018 71 Zakat and Regulatory Payments

Items of Income Statement as a Percentage of Revenue Zakat is calculated in accordance with the Zakat and Income Tax a consulting office specialized in Zakat and tax services to settle all System applicable in the Kingdom of Saudi Arabia. The due Zakat is issues concerning Zakat assessments for the period from 2009 to applied to the income statement and the amendments to the final 2017. Statement 2014 2015 2016 2017 2018 Zakat assessment, if any, are recorded in the assessment period. During fiscal year 2017, Zakat assessments outstanding with the Department of Zakat from 2000 to 2008 have been concluded Revenue 100% 100% 100% 100% 100% During the year ending on December 31st, 2017, SASCO established with the payment of a settlement amount of SR 3,694,215. Bank an allowance for regulatory Zakat dues of SAR (3,795,000). SASCO guarantees of SR 4,730,935 have been released and the remaining Direct Costs 91.78% 92.22% 94.69% 93.44% 96.01% also paid SAR (4,378,030) from the Zakat allowance until 2017. guarantee is about to be released.

Income Margin 8.22% 7.78% 5.31% 6.56% 3.99% SASCO follows up with the Department of Zakat and Income through The following table summarizes regulatory payments:

General & Administrative 6.33% 5.31% 3.54% 3.92% 2.15% 2018 Expenses Statement Brief Description Description of Reasons Due until end of annual Paid Other Revenue (Expenses) 16.88% 0.84% 0.93% (0.01%) 0.03% financial period but not paid

Amount of Zakat paid during Zakat 0.67% 0.51% 0.33% 0.31% 0.13% Zakat 3,428,479 2,775,004 Due for 2018 the year

Net Income 18.10% 2.80% 2.37% 2.31% 1.72% The due amount belongs Paid amount of value Value added tax 9,496,817 989,042 to December and is paid in added tax January 2019 The due amount belongs Paid amount of Withholding tax 4,699 to December and is paid in withholding tax Items of Income Statement as a Percentage of Revenue January 2019 The due amount belongs General Organization 3,748,422 361,584 Year dues to December and is paid in for Social Insurance % 100.00 January 2019 % 90.00 Costs of visas, Fees for visa, renewal of passports and labor 6,221,864 residence permit, exit and

% 80.00 96.01% 94.69% 92.22% 93.44% office return 91.78% % 70.00 Customs fees of SASCO and Customs Fees 232,969 Saudi Automobile & Touring % 60.00 Association % 50.00 Total 23,133,264 4,125,630 % 40.00 � These payments are within SASCO activity. % 30.00 18.10% % 20.00 16.88% 8.22% 7.78% 5.31% 6.33% 5.31%

3.54% Fines 6.56% 3.99% 2.15% 3.92% 2.31% 1.72% % 10.00 2.80% 2.37% 0.31% 0.03% 0.13% 0.33% 0.93% 0.51% 0.67% 0.84% The following statement shows the punishments, sanctions, violations, precautionary measures or precautionary attachments, if any, 0.00 imposed on SASCO during the year:

% 10,00- Punishment / sanction / -0.01% How to address and avoid the precautionary measure / pre- Reasons for violation Imposing body same in the future 2014 2015 2016 2017 2018 cautionary attachment Province Eamana - Ministry Completing the requirements for Direct Costs Income Margin General & Administrative Other Revenue Zakat Net Income Operating some sites without Fine of Municipal and Rural Affairs issuing and renewing licenses for license Expenses (Expenses) (MoMRA) the operation of sites Saudizing the job and making Employing non-Saudis in a Ministry of Labor and Social Fine sure Ministry of Labor’s Saudized job Development requirements are met Completing and regularly Shortage of some civil General Directorate of Saudi Civil Fine verifying the civil defense defense requirements Defense requirements Lack of license to operate Saudi Commission for Tourism and Efforts are exerted to issue it in Fine Motel Al Adeed National Heritage (SCTH) coordination with the SCTH

72 Annual Report 2018 73 Loans value became SAR (177,967,726), guaranteed by a promissory note, of SAR (150,000,000) in the form of a medium-term loan of SAR including a long-term loan of SAR (47,967,726) in addition to SAR (100,000,000) for a financing period of 54 months (18-month grace Article (22) of SASCO Articles of Association defines the powers of was given an additional grace period of one year and payment will (80,000,000) as bank letters of guarantee and short-term loans of period), provided the repayment of loan at equal semi-annual the Board of Directors. Paragraph (8) of the same article state as be effective as of 1 June 2018. The agreement aims to finance the SAR (50,000,000). The agreement aims to partially finance capital successive instalments. This is in addition to letters of guarantee of follows: “The Board of Directors may contract loans with financing purchase and building of new stations. SASCO again amended the expenses, purchase land, and build new fuel stations as well as to SAR (50,000,000). The agreement aims to expand SASCO projects, funds and institutions with whatever periods. It may also contract agreement amount on May 22nd, 2018, to be SAR (391,107,316). This finance the working capital. It will expire on January, 31th, 2019. The support its core activities, purchase new sites to build fuel stations commercial loans, obtain loans and other credit facilities from included the renewal of existing facilities of which SAR (140,107,316) agreement was amended on Dec. 10th, 2018 and its value became SAR as well as to finance the working capital. On 24 October 2016, the government institutions, commercial banks, financial institutions represent various credit facilities and SAR (251,000,000) represent (400,000,000), guaranteed by a promissory note, including a long- guarantees clause was amended and the value of total guarantees and any other credit companies, issue guarantee letters in favor of short, medium and long-term finance facilities guaranteed by a term loan of SAR (150,000,000) in addition to SAR (200,000,000) as was SAR (40,000,000) in addition to documentary credits of SAR any party if it sees it in SASCO interest, issue promissory notes and promissory note. The agreement aims to finance the purchase and bank letters of guarantee and short-term loans of SAR (50,000,000). (10,000,000). The agreement was renewed on Dec. 28st, 2017 and its other tradable documents and enter into all types of agreements and building of new stations. The agreement aims to partially finance capital expenses, purchase total value became SAR (98,528,114) and the value of total guarantees banking transactions for any period of time not exceeding the expiry land, and build new fuel stations as well as to finance the working became SAR (50,000,000) including medium-term loans of SAR of SASCO duration. Loans of maximum three years shall meet the During 2013, SASCO signed a Shariah-compliant credit facilities capital. It will expire on January, 31th, 2020. (48,528,114). On 31 October 2018, the agreement was renewed and following conditions: agreement with the National Commercial Bank (NCB) of SAR amended and the value of total guarantees became SAR (104,574,298) a. The Board of Directors shall determine, in its resolution, ways (90,000,000) in the form of a long-term commercial loan to expand On December 13th, 2015, SASCO signed a (Shariah-compliant) resales and the value of total guarantees became SAR (750,000,000) of use of loans and method of repayment. construction or acquisition of fuel stations. The agreement was for profit facilities agreement with the Gulf International Bank (GIB) including medium-term loans of SAR (29,574,298), guaranteed by a b. Loan conditions and provided guarantees shall not prejudice renewed on May 1st, 2014 and its value became SAR (91,125,000) as (a Bahraini joint-stock Corporation) of SAR (150,000,000) guaranteed promissory note. SASCO, shareholders and general guarantees of creditors.” a general credit ceiling, including long-term loan facilities of SAR by a promissory note. This agreement includes a medium-term loan During 2012, SASCO signed a Sharia-compliant facilities agreement (90,000,000) and profit margin swap of SAR (1,125,000) according to of SAR (50,000,000) with a finance period of five (5) years (2-year grace On December 21st, 2015, SASCO signed a (Shariah-compliant) facilities with Banque Saudi Fransi (BSF) of SAR (225,000,000) as a general the needs of ordinary course of business. period), provided the repayment of loan shall be at equal quarterly agreement with Riyadh Bank (a Saudi joint-stock company). The credit ceiling. This included letters of guarantee facilities of SAR instalments. This is in addition to issuing letters of guarantee of agreement includes bank letters of guarantee of SAR (50,000,000), (70,000,000), real estate loan facilities of SAR (90,000,000), loans to On August 25th, 2015, SASCO signed a new Shariah-compliant facilities SAR (100,000,000). The agreement aims to expand SASCO projects, aiming at expanding SASCO projects and supporting its core activities. finance and develop fuel stations of SAR (55,000,000), a short-term agreement with NCB of SAR (151,825,000), including long-term loans support its core activities, purchase new sites to build fuel stations The agreement was amended on March 8th, 2018 through adding SR finance of up to SAR (20,000,000), and multi-purpose short-term of SAR (101,125,000), bank letters of guarantee of SAR (25,000,000), as well as to finance the working capital. The agreement was 320,000,000 in the form of long-term finance of 235,000,000, short- import facilities of SAR (20,000,000). SASCO amended the agreement short-term loans of SAR (25,700,000). The agreement aims to expand renewed and amended on Sep. 6th, 2018 and its value became SAR term finance of SR 20,000,000, documentary credits of SR 20,000,000 amount on April 28th, 2015, to be SAR (550,940,648). This included SASCO projects, support its core activities, and purchase new sites (48,000,000) in the form of payment guarantees in favor of Aramco, and a hedge to set interest rates at SR 45,000,000 in addition to bank renewal of existing facilities of SAR (245,833,332) of which SAR to build fuel stations as well as to finance the working capital. The guaranteed by a promissory note. guarantees of SR 50,000,000 with the final value of the agreement (110,000,000) represent various credit facilities and SAR (135,833,332) agreement was renewed on May 1st, 2016 and its value became SAR to be 370,000,000, guaranteed by a promissory note in addition to represent medium-term finance facilities guaranteed by a promissory (201,325,000), including long-term loan facilities of SAR (150,625,000) On December 21st, 2015, SASCO signed a (Shariah-compliant) resales pledging real estate deeds. note and/or securities or a deposit and pledge of title deeds. This and bank letters of guarantee of SAR (25,000,000) and short-term for profit facilities agreement with the Alawwal Bank (a Saudi joint- was in addition to new facilities of SAR (305,107,316), of which SAR loans of SAR (25,700,000). The agreement aims to expand SASCO stock company). This agreement includes a general facility limit (55,107,316) for various credit facilities and SAR (250,000,000) for projects, support its core activities, and purchase new sites to build long-term finance facilities guaranteed by a promissory note. The fuel stations. The agreement was amended on April 30st, 2017 and its agreement aims to finance the purchase of new lands, building value became SAR (200,700,000), including long-term loans of SAR new stations, and improving and developing the existing stations. (150,700,000) and bank letters of guarantee of SAR (25,000,000) and Balance of loans at the end of year SASCO again amended the agreement amount on Feb. 17th, 2016, to short-term loans of SAR (25,000,000). The agreement aims to expand be SAR (502,500,000). This included renewal of existing facilities of SASCO projects, support its core activities, and purchase new sites to

SAR (237,500,000) of which SAR (150,000,000) represent various credit build fuel stations. The agreement was amended on 26 September BSF 200,800,000 facilities and SAR (87, 500,000) represent medium and long-term 2018 and its value became SAR (25,000,000) in the form of short-term finance facilities guaranteed by a promissory note and/or securities commercial facility guaranteed by a promissory note. The agreement National Commercial Bank (NCB) 25,000,000 or a deposit and pledge of title deeds. This was in addition to new aims to support the needs of working capital. Saudi British Bank (SABB) 108,962,882 facilities of SAR (265,107,316), of which SAR (39,000,000) for various credit facilities and SAR (226,000,000) for long-term finance facilities On May 25th, 2015, SASCO signed a new Shariah-compliant facilities Gulf International Bank (GIB) 238,214,286 guaranteed by a promissory note. The agreement aims to finance the agreement with the Saudi-British Bank (SABB) of SAR (150,000,000) Alawwal Bank 20,097,391 purchase of new lands and building new stations. SASCO amended effective from the date of signing thereof, provided the use thereof the agreement amount on April 16th, 2017, to be SAR (439,273,664). before January 31st, 2016, and guaranteed by a promissory note. This included renewal of existing facilities of which SAR (169,107,000) This agreement includes a long-term loan of SAR (100,000,000) and 0 50,000,000 100,000,000 150,000,000 200,000,000 250,000,000 represent various credit facilities and SAR (270,166,664) represent bank letters of guarantee of SAR (50,000,000). The agreement aims medium and long-term finance facilities guaranteed by a promissory to partially finance capital expenses, purchase land, and build new note and/or securities or a deposit and pledge of title deeds. SASCO fuel stations. The agreement was amended on Dec. 7th, 2017 and its

74 Annual Report 2018 75 Loan Maturity Loan Statement

Bank Loan Date Balance at the end of 2018 Balance at the end of 2017 Statement 2018 2017

BSF 31/05/2013 56,124,000 101,324,000 Less than 1 Year 215,688,892 204,479,080

BSF 30/06/2016 39,735,709 39,735,709 1 Year to 2 Years 86,700,386 114,479,080 BSF 29/08/2016 24,654,233 24,654,233 2 Years to 5 Years 222,935,643 224,894,103 BSF 13/12/2016 23,274,737 23,274,737 More than 5 Years 67,749,638 11,666,667 BSF 28/12/2016 12,305,262 12,305,262

BSF 28/12/2016 6,252,169 6,252,169 Loan Movement BSF 12/01/2017 3,966,562 3,966,562 Balance at Period in Paid during Bank Date of Issue Loan Value Term year begin- Due Date BSF 29/03/2017 13,235,873 13,235,873 Months year ning BSF 24/08/2017 1,251,455 1,251,455 BSF 31/05/2015 101,324,000 Long-term 72 101,324,000 45,200,000 31/12/2022 BSF 24/08/2018 20,000,000 20,000,000 BSF 30/06/2016 39,735,709 Long-term 78 39,735,709 - 31/12/2022 NCB 03/12/2013 - 5,000,000 BSF 29/08/2016 24,654,233 Long-term 76 24,654,233 - 31/12/2022 NCB 26/10/2015 - 22,500,000 BSF 19/08/2017 20,000,000 Short-term 12 20,000,000 20,000,000 19/08/2018 NCB 05/05/2017 - 70,000,000 BSF 19/08/2018 20,000,000 Short-term 12 - - 19/08/2019 NCB 10/12/2018 25,000,000 25,000,000 BSF 13/12/2016 23,274,737 Long-term 72 23,274,737 - 31/12/2022 Riyadh Bank 18/03/2018 181,071,429 - BSF 28/12/2016 18,557,431 Long-term 72 18,557,431 - 31/12/2022 Riyadh Bank 08/05/2018 37,142,857 - BSF 12/01/2017 3,966,562 Long-term 72 18,453,890 - 31/12/2022 Riyadh Bank 04/06/2018 20,000,000 - NCB 03/12/2013 90,000,000 Long-term 60 5,000,000 5,000,000 30/04/2018 SABB 01/06/2015 - 13,181,625 NCB 26/10/2015 30,000,000 Long-term 84 22,500,000 22,500,000 26/04/2022 SABB 19/04/2016 - 2,928,793 NCB 15/10/2017 25,000,000 Short-term 4 25,000,000 25,000,000 25/2/2018 SABB 19/04/2016 - 11,846,787 NCB 10/12/2018 25,000,000 Short-term 4 - - 27/02/2017 SABB 03/05/2016 - 1,183,076 NCB 05/05/2015 10,000,000 Long-term 84 70,000,000 70,000,000 29/01/2015 SABB 23/05/2016 - 2,313,569 SABB 01/06/2015 25,173,556 Long-term 72 13,181,625 13,181,625 28/11/2021 SABB 07/06/2016 - 7,791,424 SABB 19/04/2016 2,928,793 Long-term 67 2,928,793 2,928,793 28/11/2021 SABB 20/03/2017 - 5,147,780 SABB 19/04/2016 11,846,785 Long-term 67 11,846,787 11,846,787 28/11/2021 SABB 28/03/2017 - 3,574,670 SABB 03/05/2016 1,183,076 Long-term 66 1,183,076 1,183,076 28/11/2021 SABB 21/12/2017 50,000,000 50,000,000 SABB 23/05/2016 2,313,569 Long-term 66 2,313,569 2,313,569 28/11/2021 SABB 19/12/2018 58,962,882 - SABB 07/06/2016 7,791,424 Long-term 65 7,791,424 7,791,424 28/11/2021 50,000,000 - مGIB 27/12/2015 SABB 20/03/2017 5,147,785 Long-term 53 5,147,780 5,147,780 03/11/2021 33,333,333 16,666,667 مAlawwal Bank 28/12/2015 SABB 28/03/2017 3,574,670 Long-term 53 3,574,670 3,574,670 03/11/2021 3,773,370 2,264,022 مAlawwal Bank 13/12/2016 SABB 23/10/2018 1,159,500 Long-term 84 - - 23/10/2025 1,944,503 1,166,702 مAlawwal Bank 20/12/2016 SABB 10/12/2018 4,581,194 Long-term 84 - - 10/12/2025 Total 593,074,559 555,518,930

76 Annual Report 2018 77 Loan Movement (Continued) Debt Instruments are available on this link: www.sasco.com.sa ffThe following table shows the profits distributed to shareholders Balance at Period in Paid during SASCO and its subsidiaries did not issue debt instruments. since 2010: Bank Date of Issue Loan Value Term year begin- Due Date Months year ning Profit Distributions Cash Disbursements (Long-term 84 - - 29/11/2025 Pursuant to Article 50 (Profit Distribution) of SASCO Articles of Year (SR/Share 1,483,314 مSABB 29/11/2018 Association, SASCO annual net profits shall be distributed as follows: Long-term 84 - - 18/12/2025 2010 0.50 3,442,271 مSABB 18/12/2018 ffTen (10%) of net profit shall be retained to form a statutory reserve. Long-term 84 - - 19/12/2025 The Ordinary General Assembly may stop retention when the said 2011 0.50 4,119,030 مSABB 19/12/2018 reserve reaches 30% of the capital. Long-term 84 - - 03/12/2025 2012 0.50 1,213,781 مSABB 03/12/2018 ffThe Ordinary General Assembly may, by proposal from the Board 2013 0.75 Long-term 84 - - 22/10/2025 of Directors, retain a certain ratio of profits to form a consensual 4,364,226 مSABB 22/10/2018 reserve to be allocated to supporting SASCO financial position. 2014 0.50 Long-term 84 - - 19/09/2025 17,864,606 مSABB 19/09/2018 ffThe Ordinary General Assembly may decide to form other reserves 2015 0.50 Short-term 4 50,000,000 50,000,000 31/03/2018 to the extent that achieves SASCO interests or ensures the 50,000,000 مSABB 21/12/2017 distribution of fixed profits to shareholders as much as possible. 2017 0.50 Long-term 84 - - 19/09/2025 20,733,750 مSABB 19/09/2018 The Assembly may also deduct some amounts of net profits to Short-term 4 - - 10/02/2019 establish social institutions in favor of SASCO workers or to assist ffIn its session held on March 19th, 2019, SASCO Board of Directors 50,000,000 مSABB 10/11/2018 the existing social institutions. recommended to distribute cash dividends to shareholders for Long-term 84 - 13,928,571 18/03/2025 195,000,000 مRiyadh Bank 18/03/2018 ffThe rest is then distributed to shareholders at no less than (3%) of the fiscal year ending on December 31th, 2018, with a total of SAR Long-term 84 - 2,857,143 08/05/2025 the paid capital. (30,000,000), equivalent to (5%) of the nominal value of share 40,000,000 مRiyadh Bank 08/05/2018 ffIn accordance with the provisions of Article (28) of SASCO Articles of and at a rate of SAR (0.50) per share. The entitlement to these Short-term 12 - - 04/06/2019 20,000,000 مRiyadh Bank 04/06/2018 Association, after that, no more than (10%) of the rest is allocated dividends would be for shareholders registered with the Securities Medium- to Board remuneration. The entitlement would be determined Depository Center (Tadawul) by the end of the second day on which 2020/11/24 50,000,000 50,000,000 59 50,000,000 مGIB 27/12/2015 term proportionately by the number of sessions attended by a member. the General Assembly convened. Medium- According to Article (51) of SASCO Articles of Association (Interim 2019/12/31 16,666,667 33,333,333 48 50,000,000 مAlawwal Bank 31/12/2015 term Profits): Deviations from Applying Medium- ffThe Board of Directors shall have the authority to approve interim Alawwal Bank 13/12/2016 4,528,044 42 3,773,370 1,509,348 28/06/2020 Accounting Standards term profit disbursement to shareholders on a quarterly or biannual Accounting Standards applicable in the Medium- basis if SASCO financial position so permits and liquidity is Alawwal Bank 20/12/2016 2,333,403 42 1,944,503 777,802 28/06/2020 Kingdom of Saudi Arabia term available according to the rules and procedures developed by competent authorities. SASCO applies the accounting standards issued by the Saudi Total 1,012,295,449 555,518,930 371,407,255 According to Article (52) of SASCO Articles of Association (Profit Organization for Certified Public Accountants, and there is no Entitlement): deviation from the application of those standards. ffA shareholder shall be entitled to receive his share of profits Pledged Assets Other Guarantees according to the General Meeting’s decision in this regard. The International Financial Reporting decision shall set the dates of entitlement and distribution. Entitlement to profits shall be for shareholders registered with the Standards (IFRS) Site Entity Guarantee Bank Guarantee shareholders’ records at the end of day established for entitlement. With reference to the CMA letter No. S/1/12231/15 dated 27/10/1436 AH, Periodical Inspection Station According to Article (53) of SASCO Articles of Association (Profit corresponding to 12/8/2018, regarding the CMA Circular No. 4/2978 Riyadh Bank Pledge BSF A promissory note of SAR 391,107,316 in Riyadh Distribution to Preferred shares): dated 25/3/2014, concerning the application of the International Financial Reporting Standards (IFRS) to the financial statements of NCB A promissory note of SAR 27,500,000 ffIn case the profits of any fiscal year are not distributed, the profits of Jubail Station in Dammam Riyadh Bank Pledge next years may be distributed only after disbursing the percentage listed companies as of 1/1/2017 in accordance with the international SAAB A promissory note of SAR 400,000,000 stated in Article (10) of SASCO Articles of Association to preferred standards adopted by the Saudi Organization for Certified Public Takhassusi Station in Riyadh Riyadh Bank Pledge shareholders for that year. Accountants, SASCO issued all its preliminary and annual financial GIB A promissory note of SAR 48,000,000 ffIn case SASCO fails to pay such percentage of profits for three statements during 2017 and 2018 according to the IFRS. Jubail Station 2 in Dammam Riyadh Bank Pledge successive years, the Special Meeting of Preferred Shareholders Alawwal Bank A promissory note of SAR 104,574,298 may decide to attend the General Meetings and vote or appoint Treasury Stocks Uthman Bin Affan Station There are no treasury stocks retained by SASCO. Riyadh Bank Pledge representatives in the Board pro rata with their value of shares of in Riyadh Riyadh Bank A promissory note of SAR 320,000,000 capital. This shall apply until SASCO can pay all profits allocated to Auditor’s Report those shareholders for previous years. The auditor issued its report on SASCO financial statements for the ffSASCO Articles of Association and Policy of Share Profit Distribution period ending on December 31st, 2018, without any reservations.

78 Annual Report 2018 79 Retail Sector Retail Sector It is one of SASCO key sectors. All SASCO sites have been merged with or under construction, (23) sites under pre-construction procedures, Zaiti Company sites in this sector. It contains SASCO basic products as well as (20) sites stopped because the roads deviated away from offered to clients through (218) sites, divided into (162) operating them and for lack of economic feasibility from operating them at stations and rest houses operated by SASCO and (6) sites operated by present. third parties. This is in addition to (9) sites stopped for development

Covering more More than 105 Mosques with a total than 4,000 km mosques capacity of more than 10,000 Salat performers

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

Statistics of Company Site Visitors

109,344

Growth Ratio Number of Customers 92,465 18.25% 86,486

21,040 Growth Ratio Number of Vehicles 17,777 18.36%

16,019

Thousand 0 20,00 40,00 60,00 80,00 100,00 120,00

2018 2017 2016

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

Gasoline Gasoline Diesel 91 95

80 Annual Report 2018 81 According to the pricing approved by the Ministry of Commerce for Aramco, fares of transport from the nearest reservoir supposed to Number of sold litres - SASCO the sale of fuel to consumers in cities and governorates that have supply fuel is added to the retail sale prices specified to consumers, reservoirs of Saudi Aramco, and within a radius of 50 km from these by adding SAR 0.01395/litre/km for paved roads and SAR 0.01815/litre/ 997,971,241 reservoirs, prices are as shown in the following table. As for the cities, km for non-paved roads, from the nearest reservoir of Saudi Aramco, Change % of Gasoline 91 663,324,664 provinces and other centres where there are no reservoirs of Saudi provided that this is done by competent local committees. 50.45 % 568,670,086

93,266,802 Before 2015 Change % of Gasoline 95 258,443,751 Product Sale Price Cost from Profit Margin Profit Margin Ratio (%63.91) 253,671,756 Gasoline 91 45 Halalah 36 Halalah 9 Halalah 20 %

419,735,635 Gasoline 95 60 Halalah 51 Halalah 9 Halalah 15 % Change % of Diesel 355,976,099 Diesel 25 Halalah 21.5 Halalah 3.5 Halalah 14 % 17.91 % 373,509,987

Amendment in 2015 0 200,000,000 400,000,000 600,000,000 800,000,000 1,000,000,000 Product Sale Price Cost from Profit Margin Profit Margin Ratio 2018 2017 2016 Gasoline 91 75 Halalah 66 Halalah 9 Halalah 12 %

Gasoline 95 90 Halalah 81 Halalah 9 Halalah 10 % Rental Sector Through competent departments in all areas, Retail Sector leases Diesel 45 Halalah 41.55 Halalah 3.45 Halalah 7.67 % some facilities that SASCO authorizes third parties to manage, such as restaurants, car maintenance workshops, oil and tire services, as well as other shops serving clients and passengers. Increase as of 1 January 2018 (without value-added tax)

Product Sale Price Cost from Aramco Profit Margin Profit Margin Ratio

Gasoline 91 1.30 Halalah 1.21 Halalah 9 Halalah 6.92% Rental Gasoline 95 1.94 Halalah 1.85 Halalah 9 Halalah 4.64%

Diesel 45 Halalah 41.55 Halalah 3.45 Halalah 7.67%

Rental areas of more than The profit margin includes various expenses and costs borne by SASCO, most important of which are: exceeding 114,000 m2 ffTransport cost in direct relation with the increase in diesel prices. ffCosts of operation of stations due to the continued increase of power prices for services including electricity, logistics, maintenance and labour. ffWater cost. ffCosts of developing and improving the level of services according the requirements of the Ministry of Municipal and Rural Affairs in relation to companies qualified to manage fuel stations. SASCO also continued to sign strategic partnership agreements with ffIncreasing labour cost. several international and local competent companies specialized ffCosts of evaporation resulting during transport from Aramco to discharge site in the station. in operating restaurants, cafes, and car maintenance workshops to ffCosts of bank guarantees issued to Aramco. manage some of SASCO site facilities. This has had a positive impact in providing integrated and high-quality service, leading to an increase in number of customers in SASCO sites throughout the Kingdom.

82 Annual Report 2018 83 Café The following table shows the most important financial results at the Retail Sector level as well as the contribution ratio in income margin Palm Café offers all types of coffee and hot drinks, in addition to a agreements with global and local restaurant companies, which have compared to the previous fiscal year: range of snacks and pastries. Palm Café had (8) branches by the end already begun providing services in many SASCO sites inside and of 2018. outside cities and at border crossing posts. Contribution Ratio Contribution Ratio Direct Revenue Direct Costs Total Income To offer a better service in this field, SASCO contracted with major (in revenue) (Income Margin) international café companies to provide their services through SASCO sites spread throughout the Kingdom. 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017

1,851,348,389 1,034,959,662 90.05% 85.37% (1,798,497,107) (985,257,010) 52,851,282 49,702,652 64.47% 62.53%

Retail Sector

1,851,348,389 Operating revenues 1,034,959,662

(1,798,497,107) Operating costs (985,257,010)

Dining Pilgrims’ Services 52,851,282 SASCO restaurants offers convenient services to customers with SASCO provides these services through its rest houses and stations Total income 49,702,652 different tastes. at the Saudi border crossing posts, in addition to SASCO site network SASCO restaurants offer the following meals: spreading on all highways, especially those linking the holy lands ff Breakfast (Mecca and Medina). f f Appetizers During 2018, SASCO served more than 9,900,000 pilgrims, whether 0 500,000,000 1,000,000,000 1,500,000,000 2,000,000,000 ff Main courses they are from inside or outside the Kingdom. SASCO most important ff Beverages stations and rest houses spread over the following highways: 2018 2017 According to the priorities of SASCO strategy to attract companies ff Al-Hijra Road (Mecca/Medina) specialized in restaurant management and reduce the number of ff Mecca/Jeddah Highway. The following table shows revenue analysis of Retail Sector for the past five years: restaurants SASCO operates to improve service, provide a unique ff Mecca/Taif Road (Al Hoda/Al Sail) experience, achieve a quantum shift, enhance customer satisfaction, ff Riyadh/Taif highway 2014 2015 2016 2017 2018 assume leadership in this field, and advance the Stations and Rest ff Riyadh/Dammam Road Houses Sector in the Kingdom, SASCO continued to sign several ff Halat Amar/Tabuk/Medina Road 416,266,722 645,234,638 939,405,052 1,034,959,662 1,851,348,389

Revenue Growth of Retail Sector Pilgrims 2,000,000,000 1,800,000,000 1,100 1,600,000,000 Annual Compound Growth rate 35% Number of buses 1,100 1,400,000,000 1,200 1,200,000,000 1,000,000,000 9,900 800,000,000 Number of persons 8,300 600,000,000 9,700 400,000,000 200,000,000 0 2,000 4,000 6,000 8,000 10,000 0 2014 2015 2016 2017 2018 2018 2017 2016

Total Sector Revenue 84 Annual Report 2018 85 Performance at Geographical Level (Retail Sector) The following table shows province-level revenue analysis:

Sector 2018 % 2017 %

Central Province 813,495,006 43.93% 496,453,167 47.96%

Northern Province 118,231,379 6.39% 68,606,196 6.63%

Eastern Province 403,712,322 21.81% 243,897,828 23.57%

Western Province 380,384,808 20.55% 162,882,795 15.74%

Southern Province 63,344,155 3.42% 39,935,068 3.86%

Qassim Province 72,180,719 3.90% 23,184,608 2.24%

Total 1,851,348,389 100% 1,034,959,662 100%

Geographical Revenue of Retail Sector

Central Province 43.93%

Eastern Province 21.81%

Northern Province 6.39%

Southern Province 3.42%

Western Province 20.55% Qassim Province 3.90%

86 Annual Report 2018 87 SASCO Palm Co. SASCO Palm Co.

SASCO Palm Co. is a limited liability company, with a capital of SAR 500,000 divided into 50,000 equal cash shares, each of SAR 10. SASCO possesses 99% while Auto & Equipment Investment Co., Ltd possesses the remaining 1%.

SASCO offers supply service through (SASCO Palm Stores), for which SASCO opened (4) branches during 2018, bringing the total number of (SASCO Palm Stores) branches to (69) in various regions of the Kingdom at the end of the year after excluding two branches in 2018 to be run by third parties.

Revenue of SASCO Palm Stores square meters in 2018 rose to SR 15,300 compared to SR 12.3, i.e. an increase of 24.39% for all sites. Client basket change was 6.32% rising from SR 19 in 2017 to SR 20.2 in 2018.

Number of SASCO Palm Stores Branches Geographical Distribution of Branches

70

Central 39 69 65 Eastern 13 67

60 61 Western 10

55 Northern 7 2018 2017 2016

(SASCO Palm Stores) contains an integrated basket of carefully ff Prepaid communication cards. selected products to meet the needs of our customers, whether ff Electronics. travellers on intercity roads, vehicle drivers, and passengers inside ff Mobile phone accessories. cities. The following are the classifications of these items: ff Perfumes and cosmetics. ff Food supplies. The following table shows the most important financial results at ff Non-food supplies. SASCO Palm Stores level as well as the percentage of contribution and ff Dairy products and cold drinks. income margin compared to previous fiscal year: ff Instruments, tools, and accessories. ff Trip supplies.

% of Contribution % of Contribution Direct Revenue Direct Costs Total Income (in revenues) (Income Margin)

2018 2017 2018 2017 2018 2017 2018 2017 2018 2017

201,456,232 163,719,373 9.80% 13.50% (190,488,260) (157,234,487) 10,967,972 6,484,886 13.38% 8.16%

88 Annual Report 2018 89 The following table shows province-level revenue analysis:

Sasco Palm Company Sector 2018 % 2017 %

Central Province 126,231,352 62.66% 96,753,245 59.10%

250,000,000 Northern Province 10,794,365 5.36% 10,539,418 6.44% 200,000,000

Eastern Province 28,988,690 14.39% 24,333,262 14.86% 150,000,000

100,000,000 Western Province 35,441,825 17.59% 32,093,448 19.60% 201,456,232 201,456,232 190,488,260

157,234,487 157,234,487 6,484,886 10,967,972 10,967,972 163,719,373 163,719,373 50,000,000 Total 201,456,232 100% 163,719,373 100% 0 Operating Revenue Operating costs Total income

2018 2017

SASCO Palm Stores Geographical Revenue

Growth of SASCO Palm Stores Revenue

250,000,000 Central Province 62.66%

200٫000٫000 Western Province 17.59% Annual Compound Growth rate 10%

150٫000٫000

Eastern Province 14.39% 100٫000٫000 Northern Province 5.36%

50٫000٫000

0

2015 2016 2017 2018

Total Sector Revenue

90 Annual Report 2018 91 SASCO Al-Waha Co. SASCO Al-Waha Co.

SASCO Al-Waha Co. is a limited liability company with a capital of SASCO Al-Waha Co. manages all SASCO motels spread all over the SAR 5000,000, divided into 50,000 equal cash shares, each of SAR Kingdom. SASCO integrated in its strategy the development of these 100. SASCO possesses 99% of its capital while Auto & Equipment motels to carry its own brand “Waha Motel”. During 2018, two motels Investment Co., Ltd possesses the remaining 1%. SASCO Al-Waha Co. were opened on Al-Hijra Road between Mecca and Medina, bringing was established to manage this activity independently to achieve the the number of motels carrying the brand of “Waha Motel” to 5. best returns from it.

Number of Motels

6 5 4 3 2 1 1 1 1 0 SASCO Al-Waha Co. Super 8

2018 2017 2016

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

% of Contribution % of Contribution Direct Revenue Direct Costs Total Income (in revenues) (Income Margin)

2018 2017 2018 2017 2018 2017 2018 2017 2018 2017

3,911,567 2,651,845 0.19% 0.22% (3,760,683) (3,150,188) 150,884 (498,343) 0.18% (0.63%)

SASCO Al-Waha Co.

4٫000٫000

3٫000٫000

2٫000٫000 3,911,567 3,911,567 3,760,683

1٫000٫000 3,150,188 3,150,188 2,651,845 2,651,845 150,884 150,884

(498,343) 0

-1٫000٫0000 Operating Revenue Operating costs Total income

2018 2017

92 Annual Report 2018 93 Ostool Al-Naqil Co. Ostool Al-Naqil Co.

Ostool Al-Naqil Co. is a limited liability company with a capital of Thanks to the expansion of business, the fleet size increased at the end SAR 5,000,000 divided into 50,000 equal cash shares each of SAR of 2018 to (116) tankers and (132) trailers through which the company 100. SASCO possesses 99% while Auto & Equipment Investment Co., provides the transportation service to SASCO sites (fuel, water, and Ltd possesses the remaining 1%. Moreover, both the National Water sewage transport). Ostool Al-Naqil Co. continued to provide transport Company and the Saudi Electricity Company qualified Ostool Al-Naqil services (fuel and cargo) to a number of large retail and distribution Co.. companies and expanded its business to include dry transport using An integrated headquarters was prepared for Ostool Al-Naqil Co. multi-purpose containers. Distance passed by Ostool Al-Naqil Co. in Riyadh, including fleet management buildings and integrated tankers during 2018 in order to provide service to its clients exceeded workshop for tankers maintenance. This headquarters is considered 14 million km2 compared to 12 million in 2017, i.e. an increase of the starting point of the Company’s trucks. Ostool Al-Naqil Co. has 16,67%. two branches, one in the Eastern Province and the other is in the Western Province.

Fleet Size

140 132 121 120 116 108 101 100 95 88 91 80 64 68 60 40 20 0

2014 2015 2016 2017 2018

Tankers No. Trailers No.

To offer service to our clients, we went a long drive of more than 14 More than million km2 2,900 trips by our containers.

94 Annual Report 2018 95 The following table shows the most important financial results at Ostool Al-Naqil Co. level as well as the percentage of contribution and income Revenue Growth of Ostool Al-Naqil Co. margin compared to previous fiscal year: 30٫000٫000

% of Contribution % of Contribution Direct Revenue Direct Costs Total Income 25٫000٫000 (in revenues) (Income Margin) Annual Compound Growth rate 21%

20٫000٫000 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018

26,359,082 22,759,754 1.28% 1.88% (18,011,444) (15,375,734) 8,347,638 7,384,020 10.18% 9.29% 15٫000٫000

10٫000٫000 The following chart shows the financial results Ostool Al-Naqil Co. 5٫000٫000 Ostool Al-Naqil Co. 0

35,000,000 2014 2015 2016 2017 2018 25,000,000

20,000,000 Total Revenue of Ostool Al-Naqil Co.

15,000,000

26,359,082 26,359,082 � Ostool Al-Naqil Co. revenues are geographically interrelated with the Retail Sector. 8,347,638 8,347,638 7,384,020 7,384,020

10,000,000 22,759,754 18,011,444 18,011,444

5,000,000 15,375,734

0 Operating Revenue Operating costs Total income

2018 2017

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

Transported Litres 1٫600٫000٫000

1٫400٫000٫000

1٫200٫000٫000

1٫000٫000٫000

1,488,539,000 1,377,300,000 1,377,300,000

800٫000٫000

600٫000٫000 1,116,003,000 1,116,003,000

932,274,000 400٫000٫000

200٫000٫000 572,113,400 572,113,400 64 95 108 116 88 0

2014 2015 2016 2017 2018

Transported in Liters Tankers No.

96 Annual Report 2018 97 Saudi Automobile & Touring Association - SATA Saudi Automobile & Touring Association - SATA Saudi Automobile & Touring Association SATA was established as a Touring Association, SATA, signed in 2018 with the Saudi Customs an limited liability company with a capital of SR 500,000 divided into agreement to activate the Customs Convention on the International 50,000 equal cash shares, each of SAR 10. SASCO possesses 99% while Transport of Goods under international carriage of goods by rail (TIR); Auto & Equipment Investment Co., Ltd possesses the remaining 1%. a simplified system making trade easier and cheaper, being the only international transit and guarantee system. Under the Convention, Saudi Automobile & Touring Association has a license from the the Saudi Automobile & Touring Association, SATA, is considered the Fédération Internationale de l’automobile (FIA) to issue Trip-Tik issuer of TIR books and the guarantor of trucks exporting under the customs books and works through many sale outlets widespread TIR system in Saudi Arabia. throughout all regions of the Kingdom, in addition to a network of agents and distributors in the Kingdom. All of them adopt world-class Through this Convention, SASCO aims to activate SATA role to change terms, specifications, and performance standards. from a member represented in the International Road Transport Union to an active member to represent the Kingdom of Saudi Arabia The most important services offered by Saudi Automobile & Touring and issue TIR books. Association include the following: ff Issuing Trip-Tik customs books. Through managing car and motorcycle sports-related activities, and ff Issuing international driving licenses. in coordination with concerned authorities, SATA seeks to obtain ff Issuing TIR books. sport activities license to engage in this sport professionally. ff Organizing sport activities for cars and motorcycles as well as More than 16,000 passengers traveling via Trip-Tik books. holding, operating, and managing various categories of motor- More than 33,000 passengers issued international licenses. racing tracks The number of passengers benefitting from customs transit books during 2017 was more than 32,000, and more than 62,000 passengers were issued international driving licenses. More than 16 thousand passengers through the The number of passengers benefitting from customs transit books books of the terrestrial during 2018 was more than 16,000, and more than 33,000 passengers were issued international driving licenses.

The sales of Saudi Automobile & Touring Association SATA were affected over the past years because of political events experienced by some neighbouring countries in addition to the existence of parallel clubs that do not have a license from the FIA to practice their business in the Kingdom but took a market share of sales of Trip-Tik customs books and international driving licenses.

As part of Saudi Automobile & Touring Association’s agreement More than 33 thousand passengers issued an of 2012 with the International Road Transport Union (IRU), “an international license international body concerned with serving the interests of road transport industry worldwide and operators of buses, taxis and trucks to ensure economic growth and prosperity through sustainable movement of passengers and goods and reduce immaterial barriers crippling trade, tourism and road transport through reducing The following table shows the most important financial results at long waiting times on borders, simplifying customs procedures, the level of Saudi Automobile & Touring Association - SATA as well harmonizing border control, applying information systems and as the percentage of contribution to revenues and income margin common border and ensuring integrity”, the Saudi Automobile & compared to previous fiscal year:

of Contribution (in % of Contribution % شركة النادي السعودي للسيارات Saudi Automobile Association Co. Direct Revenue Direct Costs Total Income revenues) (Income Margin)

2017 م2018 2017 2018 2017 2018 2017 2018 2017 2018

12,012,231 22,723,350 0.58% 1.87% (2,348,402) (6,305,238) 9,663,829 16,418,112 11.79% 20.65%

98 Annual Report 2018 99 Saudi Automobile & Touring Association

25,000,000 #IT BECAME _ EASIER GET 20,000,000

IT!

15,000,000 12,012,231

9,663,829 9,663,829 Now you can

10,000,000 6,305,238 electronically apply for 22,723,350 22,723,350 2,348,402 the international driving 16,418,112 5,000,000 license from the Saudi 0 Automobile & Touring Operating Revenue Operating costs Total income Association - SATA

2018 2017

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

Statement 2014 2015 2016 2017 2018

Sales 23,184,295 20,292,812 20,471,234 22,723,350 12,012,231

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

Association Sales Per Type TIR book is the solution for transporting SATA Revenues goods and moving better around the world 25٫000٫000

20٫000٫000

15٫000٫000

10٫000٫000

Trip-Tik Sudan 40.91% 5٫000٫000

0 Trip-Tik International 38.38% 2014 2015 2016 2017 2018 International Driving Licenses 14.43%

SATA Total Revenues Trip-Tik Yemen 6.28%

100 Annual Report 2018 101 Auto & Equipment Investment Co. Auto & Equipment Investment Co.

Auto & Equipment Investment Co. was established with a capital Auto & Equipment Investment Co., since the latter holds 1% of the of SAR 500,000, fully owned by SASCO, divided into 50,000 cash capital of Ostool Al-Naqil Co., 1% of the capital of Saudi Automobile & shares each of SAR 10. The company was established to provide Touring Association, 1% of the capital of SASCO Palm Stores Co., 1 % of infrastructure, human resources, and expertise required to manage the capital of SASCO Al-Waha Co., 1% of the capital of SASCO Franchise SASCO investments independently and impartially and, thus, Co., and 1% of the capital of SASCO Al-Nakhla Al-Oula Co. increase SASCO diversity of income sources and enable it to manage its operational and investment processes efficiently and effectively. When it comes to investment in other companies and during 2018, The most important activities of Auto & Equipment Investment Co. Auto & Equipment Investment Co. completed a deal of purchase 485 include: additional shares of Middle East Battery Company (MEBCO), which f f Manufacturing industries. is one of the biggest car battery manufacturing companies in the f f Construction. Middle East and specialized in the production of ACDelco batteries as f f Trade. one of the partners sold a part of his share. The deal value was SR 21,8 f f Finance, business and other services. million and thus the company’s contribution in MEBCO capital rose f f Possess land and real estate and erect buildings thereon for from 7,94 to 12,79 and the number of shares rose from 794 to 1,279 operation, sale, or lease. shares. ff Build car and heavy equipment maintenance workshops as well as car and passenger service centres. Purchasing such shares, the Company aims to increase its f f Build rest houses, motels, and restaurants. investments in companies with investment feasibility and activities f f Import and sell equipment and tools and construct roads and that complement car sector business and support its profitability bridges. through distributing periodic profits received from MEBCO. SASCO operates most of its investments in its subsidiaries through

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

Value of Nominal No. Company Name No. of Shares Total Ownership Ratio Share

Middle East Battery 1 1,279 5,750 7,354,250 12.79% Company (MEBCO)* National Company of 2 3 500,000 1,500,000 0.36% Tourism (Syahya)

3 United Racing Company 125 1,000 125,000 25%

Total 8,979,250

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

Illustration of Investment Ratios of Total Investment Portfolio

National Company of Tourism (Syahya) 16.71%

United Racing Company 1.39% إستثمارات السيارات والمعدات Middle East Battery Company (MEBCO)* 81.90%

102 Annual Report 2018 103 Dividends Received from Investments

6,000,000

5,000,000

4,000,000 5,710,088 5,710,088 3,000,000

2,000,000 3,603,408 3,603,408 1,287,190 1,287,190 1,000,000 0 0 Companies Investments Securities Investments

2018 2017

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

Invested Amount Investment Amount Accounting Treatment الجهة as at 31/12/2018

Mulkia Investment Co. SAR 34,384,679 SAR 17,358,284 Securities held for sale

104 Annual Report 2018 105 Al-NakhlaAl-Oula Co. Al-Nakhla Al-Oula Co.

It is a limited liability company, established to carry out the operation, Al-Nakhla Al-Oula is specialized in: maintenance, and cleaning of SASCO sites to improve the quality of ff General contracting (construction, repair, demolition, and service provided to customers, with a capital of SAR 500,000 divided restoration). into 50,000 equal cash shares each of SAR 10. SASCO possesses 99% ff Construction, management, maintenance, and operation of while Auto & Equipment Investment Co., Ltd possesses the remaining residential and commercial buildings. ff 1%. Road works.

شركة النخلة األولى للمقاوالت Al Nakhla Al Oula Contracting Company

106 Annual Report 2018 107 SASCO Franchise Co. SASCO Franchise Co.

After a specialized company completed the project of granting Stores” in a conference held in the evening of Thursday 29 Muharram franchise to operate “SASCO fuel stations” and “Palm Stores”, the 1440 AH, corresponding to 9 October 2018 at Hyatt Regency Riyadh establishment of “SASCO Franchise Co.” was completed with a capital Hotel. The Program is considered the first initiative of its kind to grant of SAR 500,000 divided into 50,000 equal cash shares each of SAR the right of commercial franchise to “SASCO Stations” and “Palm 10. SASCO possesses 99% while Auto & Equipment Investment Co., Stores Centers” affiliated toSASCO Palm Stores Co. The Program Ltd possesses the remaining 1%. “SASCO Franchise Co.” grants third aims to create new investment opportunities for SASCO and increase parties a franchise to operate “SASCO fuel stations” and “Palm Stores”. its revenues and profitability through granting the franchise of operating commercial brands to other operators, resulting in creating In October 2018, SASCO launched the Commercial Franchise Granting real opportunities for citizens to participate in pioneering projects in Program to operate the brands of “ SASCO Stations” and “Palm line with the Kingdom’s orientation.

108 Annual Report 2018 109 Other Administrative & Operational Information Other Administrative and Operational Information Lawsuits United Racing Company Lawsuit The partners of the United Racing Company filed lawsuit No. 5475/2/k SASCO possesses 3 sites in Medina granted to it by the State pursuant before the Administrative Judicature Court in Jeddah versus SASCO. to Royal Decree No. 214/4/M dated 08/02/1405 AH. The Secretariat They demanded the liquidation of their company. After the Panel didn’t give the sites to SASCO. So, SASCO, through its Law Firm, filed reviewing the case ordered compulsory liquidation. it appointed a lawsuit against Medina Secretariat before the Administrative Osama Abdullah Al-Khuraiji & Partner - Chartered Accountants and Judicature Court. The lawsuit was recorded under No. 2856. Business Consultants, to carry out the liquidation procedures, and The Court passed a judgment that cancelled the defendant’s (Medina execution is still underway with the chartered accountant’s office. Secretariat) decision of abstaining from delivering the plots outlined As per the latest report of SASCO Law Firm, liquidation is subject to in Royal Decree to the plaintiff (SASCO). the following: Secretariat challenged the judgment. The Court of Appeal passed a I. Completing the requirements for opening United Racing judgment, which states as follows: Company Zakat file at the Department of Zakat. I. Cancel the above judgement passed by the Administrative II. Approval of debt balances. Department of Medina Administrative Judicature Court. III. SASCO Law Firm’s obtaining of the details and documents II. Reject the lawsuit filed by SASCO against Medina of lawsuits filed by or against SASCO. Secretariat. The Administrative Judicature Court in Jeddah passed a judgement Other Miscellaneous Lawsuits binding the United Racing Company to pay to one of the creditors SASCO filed some suits related to amounts due to it from some an amount of SR 2 million. On 19 Nov. 2017, the Firm stated that a tenants and debtors to collect its dues for previous years. There are judgment effecting the amount was passed. For lack of liquidity in some other financial and labour lawsuits versusSASCO and its Legal United Racing Company balances, the liquidator requested partners Department follows up these financial rights and collection thereof, to proportionately (each as per his shares of capital) pay the amount. either by amicable or judicial means. A lawsuit was filed by the liquidator before Jeddah Commercial Court Following are some of the most important lawsuits: registered under No. 4328 of 1439 AH in this regard. As the liquidator’s One important case is the one SASCO filed before the Office of the law firm was absent, the lawsuit was cancelled. SASCO Law Firm still Public Defender (Ombudsman) No. 6972/1/k on 12/5/1433 AH versus follows up the case. both the Ministry of Municipal and Rural Affairs and the Ministry of Jeddah Land Grant Lawsuit Housing. SASCO possesses land in Hafr Al-Batin area and the Ministry of Housing, through Hafr Al-Batin Municipality, took part of this land. SASCO possesses 4 sites in Jeddah Governorate granted to it by the The lawsuit was referred to Riyadh General Court and, then, to the State pursuant to Royal Decree No. 214/4/M dated 08/02/1405 AH. Review Board, which in turn referred it to Hafr Al-Batin Municipality The Secretariat didn’t give the sites to SASCO. So, SASCO, through to check the site and determine the overlap between the two plots. its Law Firm, filed a lawsuit against Jeddah Secretariat before the Consequently, Hafr Al-Batin Municipality issued its letter stating that Administrative Judicature Court. The lawsuit was recorded under the Ministry of Housing had infringed upon 41,713 m2 of SASCO plot. No. 7078 dated 15/11/1438 AH, was referred to the second Judicial Therefore, the assessment was referred to an authorized assessor. Department and delayed for many hearings. Based on its assessment, a judgment was passed in favor of SASCO, and a reasonable compensation for the usurped land was determined. On 17 May 2018, SASCO received a judgment in its favor. According to The judgment was challenged by the Ministry of Housing. We are the judgment, Jeddah Secretariat’s negative decision of abstaining waiting for the confirmation or rejection of judgment by Riyadh from delivering the plots outlined in Royal Decree No. 214/4/M dated Court of Cassation. 08/02/1405 AH shall be cancelled and the Secretariat challenged the ff SASCO is also following lawsuit No. 2136385/34 filed on 7/9/1434 judgment. AH before the General Court in Tabuk versus the Saudi Industrial Property Authority (Modon) and the Secretariat of the City of On December 2018, the Court of Appeal passed a judgment, which Tabuk regarding the overlap with SASCO-owned land in Tabuk states as follows: Industrial Zone, as well as claiming a compensation for the I. Cancel the judgement passed with respect to lawsuit No. value of land if SASCO cannot receive it. The case is still under 7078/2/k of 1438 AH by Jeddah Administrative Judicature Court. review before Riyadh General Court. II. Reject the lawsuit filed by SASCO. ff The lawsuit filed by SASCO versus Al Khaldi Holding Company, Medina Land Grant Lawsuit lessor of SASCO site on Dammam-Riyadh road at 205 km

110 Annual Report 2018 111 Subsidiaries

because Al Khaldi failed to hand over the station after the expiry SASCO filed a lawsuit against Jeddah Municipality before the The following table shows the summary of (limited liability) subsidiaries and their status of incorporation. of contract in 2014. The case is still under review before Khobar Administrative Judicature Court registered under No. 203/1439 Court to pass a judgment. AH binding the Municipality to pay the amounts it received. Headquarters % of Direct & Indirect ff The lawsuit filed bySASCO versus Jubbah Municipality for In the hearing dated 22/12/1439 AH, a judgment was passed in No. Subsidiary Name Core Business Foundation Remarks Ownership terminating contracts, releasing letters of guarantee and SASCO favor with an amount of SR 831,000. The Municipality Country compensating SASCO against the damages it incurred due to appealed against the judgment before Jeddah Administrative Build car and equipment repair workshops non-handover of sites. In brief, on 3/8/1432 SASCO contracted Judicature Court. No judgment has been passed to date. Auto & Equipment – wash and lubricate cars - import and Kingdom of Incorporated in with the Municipality to lease sites on Ha’el-Al Jouf International 1 Investment Co., Ltd export spare parts - establish training Saudi Arabia 100 % SASCO 2010 Road, while SASCO did not finally receive the said sites as they Human Resources (SAR 500,000) centres - import and sell tools -buy and Riyadh invest in lands. are not fit for the purposes of contracting. A judgment was The following table shows human resources analysis of SASCO and passed in favor of SASCO, binding Jubbah Municipality to pay SR its subsidiaries: Transport goods and equipment - 1,027,750 to SASCO, and execution of judgment is underway. An transport petroleum products - import, Ostool Al-Naqil Co., Kingdom of export, and wholesale – establish, operate, Incorporated in award was passed to issue an enhancement order by Ha’el city No. Category 2018 2017 2 Ltd Saudi Arabia 100 % SASCO and lease maintenance workshops – 2010 to Jubbah Municipality to pay the amount. (SAR 5,000,000) Riyadh provide advertising services on tankers ff The lawsuit filed bySASCO versus Jeddah Municipality. SASCO 1 Senior Management 1 1 and vehicles. leased a plot from Jeddah Municipality in Al Hijra District with an area of 20164,66 m2 and paid the rent of the first year. As 2 Middle & Executive Management 264 253 Subscribe in local and international car and motorcycle clubs as well as the Municipality could not hand over the site as the Transport 3 Workers and Technicians 1457 1244 local and international societies and Ministry didn’t allow to create an entrance and an exit for the Saudi Automobile & bodies interested in car and motorcycle station and the Municipality didn’t repay the paid amounts. Kingdom of Total 1722 1498 Touring Association, affairs, issue Trip-Tik customs books and Incorporated in 3 Saudi Arabia 100 % SASCO Ltd SATA international driving licenses, build, 2012 Riyadh (SAR 500,000) manage, maintain and operate car & motorcycles sports tracks, hold races and car & motorcycle sport events - participate in races and motorsport events.

General contracting for buildings, Kingdom of Al-Nakhla Al-Oula Co. establish, maintain and operate Incorporated in 4 Saudi Arabia 100 % SASCO (SAR 500,000) residential and commercial buildings and 2012 Riyadh road works.

Kingdom of SASCO Palm Co. Incorporated in 5 Import and sale of foods. Saudi Arabia 100 % SASCO (SAR 500,000) 2014 Riyadh

Kingdom of SASCO Al Waha Co. Incorporated in 6 Provide accommodation services. Saudi Arabia 100 % SASCO (SAR 5,000,000) 2016 Riyadh

Kingdom of SASCO Franchise Co. Grant franchise to operate “SASCO fuel Incorporated in 7 Saudi Arabia 100 % SASCO (SAR 500,000) stations” and “Palm Stores”. 2015 Riyadh

Zaiti Petroleum Kingdom of Incorporated 8 Services Company Build, manage, and operate fuel stations. Saudi Arabia 100 % SASCO in 2007 and (SAR 37,500,000) Riyadh acquired in 2015

112 Annual Report 2018 113 Risks Management Risks Management

SASCO Risk Management Concept Risk management is the process of measuring and assessing possible plans. risks as well as developing strategies to manage them to ensure ffConsistency of the activity objectives. addressing mitigation and redressing thereof. It also means early ffAdequacy of activity objectives with all important operations. detection of actual problems to reduce their negative impacts on ffIdiosyncrasy of the activity objectives. SASCO. Sufficiency of Objective-Related Resources: ffIdentifying important objectives (important success factors) to In the ideal risk management scenario, SASCO adopts prioritization, achieve SASCO objectives. i.e. to address more likely and profoundly serious risks/ loss first. ffInvolvement of all management levels in setting objectives and the extent of their interest in achieving these objectives. Risk management should integrate with SASCO culture as well as senior management effective policies and programs. SASCO risk ?? Risk: management translates its strategy to measurable objectives, ffSufficiency of mechanisms to identify risks originating from and SASCO determines policies and responsibilities towards risk external sources. management as part of job description of its entire staff. ffSufficiency of mechanisms to identify risks originating from internal sources SASCO Risk Management Objectives ffIdentifying important risks of every important activity. ffAchieve close control and monitoring of risks in activities and ffAnalysing risks at SASCO level and activity level and changing the business. method of risk analysis since many risks are difficult to quantify. ffIdentify specific treatment for each type of risk at all levels. Analysis includes: ffPrevent and minimize losses through immediate control or by 1. Asses risk significance. transferring them to external parties. 2. Asses the possibility of risk occurrence (recurrence). ffIdentify actions and procedures to be taken in terms of certain risks 3. Impact of risk. to control incidents and monitor losses. 4. Consider how to manage risks and evaluate steps to be ffPrepare studies before and after losses to prevent or minimize taken. likely losses, identify which risks are to be controlled, and use tools that help prevent recurrence of such risks. SASCO addresses risks within four key groups: ffProvide shareholders, creditors, and customers with confidence to 1. Avoidance of Risks: protect the ability to generate profit despite any occasional losses This means to attempt to avoid activities that lead to certain risks, that may lead to minimize profit or non-achievement thereof. such as not purchasing a property or not engaging in a certain work. 2. Minimization of Risks: SASCO Techniques to Address Risks By reducing investments facing a certain risk, which an investor ?? Assessment: does not like to take, or by involving others in risks. An assessor focuses on the method the management adopts to 3. Transfer of Risks: set objectives, analyse risks, and manage change, including their This consists of means that help another party accept risk, usually relevance and adequacy to SASCO activities through contracts or financial hedging. Insurance is an example of SASCO-Wise Objectives: risk transfer through contracts. ffHow far SASCO objectives provide profound data and guidance in 4. Acceptance: terms of SASCO aims while sufficiently specific to be directly linked This means to accept losses when they happen. This method is to SASCO. an acceptable strategy in case of small risks in which the cost of ffEffectiveness of communicating objectives to staff and the Board. insurance against risk by time is higher than total losses (accepted ffLinks between strategies and their consistency with SASCO should be all risks that are not preventable or transferrable). objectives. Based on the Board belief in the importance of risk management ffConsistency of business plans and budgets with SASCO objectives, being one of management foundations to protect shareholders’ strategic plans, and current conditions. investments and related parties’ rights, the Board continually Activity-Wise Objectives: develops risk management, policies, and procedures consistent with ffLink between activity objectives, SASCO objectives, and strategic governance and internal control policies through setting a general

114 Annual Report 2018 115 strategic plan for SASCO to face these risks and ensure expeditious of its license periodically from the Ministry of Transport. Although it operational and financial processes. The ERP system may serve more HR-Related Risks treatment thereof and providing necessary solutions in a manner does not encounter any difficulties in renewing the license, it does than one department. SASCO departments use the following systems: Legislations in the Kingdom require a Saudization ratio of total staff that reduces their impacts. not guarantee to renew it in the future, which would affect its ability ffFinance Department: AX 2012. in companies through Nitaqat Program. SASCO has achieved the The most important risks SASCO may face and their mitigations are to continue operation in this field. In addition, any change in systems ffHuman Resources Management: AX 2012. required Saudization ratio and continually seeks to Saudize various classified as follows: and regulations related to company business in terms of loading, ffSASCO Palm Stores sales: NCR Aloha. administrative functions in line with its expansion plan that requires transporting, unloading, and storing petroleum products as well as ffFuel Sales: Gilbarco. many workers in its different sites. Most Important Risks SASCO may Face and environment protection requirements shall increase its costs and ffSASCO Al-Waha Co. Sales: Opera and Nazeel system for motels. their Mitigations financial burdens. ffMaintenance Department: reporting system BMC. SASCO signed an agreement with the Human Resources Fund to Operational Risks As SASCO is eager to avoid any expected problems, it monitors the support the Saudization plan in accordance with the regulations ?? Retail Sector: To manage risks related to Ostool Al-Naqil Co., parameters have been updating of department systems periodically through a specialized and laws issued in this respect. Although SASCO believes in the Retail Sector is one of the sectors characterized by easy entry by developed for internal control through: office. Moreover, SASCO concluded a contract with a company importance of Saudization as a national development requirement, new competitors or expansion of existing ones, increasing the total ffCovering operational objectives of transportation sector and specialized in storing information to create a backup copy of SASCO it faces difficulties and challenges because of the nature of its competition therein, in addition to price fluctuations that affect helping officers improve, develop, and schedule supply. data. business, inadequacy of its works to national jobseekers, and its land price, property lease, construction costs, or supply. Moreover, ffFollowing up adherence to security and safety laws and procedures main dependence on expatriate workforce. Therefore, it is difficult this sector mainly depends on providing petroleum services. Since and recommending rectifications to violations. Risks of Issuing New Regulations on Fuel Stations and Service to achieve the Saudization ratio. Accordingly, risks in this regard the sector is linked to supplies received from the Arab Oil Company ffChecking quality assurance procedures and complying with Centres continue, particularly the higher cost of labour and recruitment. “Saudi Aramco”, any change in contract provisions negatively affects specific quality standards. The new Regulations on Fuel Stations and Service Centers, issued SASCO activity. by the Ministry of Municipal and Rural Affairs, includes stringent Parameters have been developed for internal control through: To manage competition risks in the Retail Sector, parameters for ?? Saudi Automobile & Touring Association (Subsidiary) standards for the geographical distribution of fuel stations and 1. Continuous follow up of updates and requirements of Labour Office internal control were set as follows: Business of Saudi Automobile & Touring Association, which works service centres so that they would not cause any disturbance, in relation to Saudization and Nitaqat Program. 1. Requiring the development of accurate studies for every site that under the umbrella of UN- controlled international bodies, is an traffic jams, or damage to nearby facilities. It also sets the area of 2. Making sure that the staff get sufficient training to perform their include fixed standards to ensure the investment feasibility of these essential cornerstone of SASCO operational business. Profit from its stations inside cities, design standards, and safety and environment duties effectively. sites. business, arising from sales of international driving licenses and Trip- preservation conditions. 3. Ensuring the periodical monitoring and assessment of performance. 2. Conducting a comprehensive developmental program for the Tik customs books, represents a material share of SASCO operating SASCO business may be affected in the future if it fails to obtain 4. Following up Saudization of supervisory functions in all sectors to existing sites to ensure quality service and availability of all services revenue. This activity depends on holding an international license the necessary construction and operation licenses, whether for the increase Saudization ratio. the customer needs. This is in addition to approval of increase in from the FIA to issue those documents for several years now in return existing or new stations. market share inside cities and focus on acquiring relatively important for international financial obligations and burdens that greatly add Market-Related Risks sites, whether in terms of population density or traffic. to the cost of selling the document. Legislative Environment Risks They comprise: 3. Setting financial goals and enforcing monthly control thereon to Political events in some neighbouring countries, activities of SASCO operates in a dynamic legislative environment, and changes ?? Growth and Expansion-Related Risks: address or benefit from deviations. some local competitors (parallel clubs) and the emergence of new to systems and laws applicable in the Kingdom of Saudi Arabia may Since SASCO growth depends to opening and adding new sites, 4. Setting operational goals and enforcing the oversight role by organizations affect the financial performance of Saudi Automobile affect SASCO business positively or negatively. To reduce the negative SASCO, to realize its expansion policies, selects sties and review them supervisors in stations, provinces, and sectors, as well as by paying & Touring Association. effect of these changes, if any, SASCO always gets timely access to comprehensively to make proper decisions of purchase or rent. surprise periodical visits and monitoring customer complaints to amendments to regulations and studies their impact on its business. SASCO ability to continue its growth relies on the availability of address them through allocating a toll-free phone number to raise To minimize competition risks and increase its market share, Saudi Accordingly, SASCO takes the necessary steps to minimize the impact human resources, such as administrative competencies, operational specific quality of services. Automobile & Touring Association is in the process of developing an of these amendments or attempt to exploit them to serve its business. expertise, and labour on time. SASCO exerts necessary efforts to expansion plan to increase its branches and products, enhance its provide these resources. ?? Ostool Al-Naqil Co. (Subsidiary) integration, and deal with strategic dealers. Parameters have been The most prominent existing risks include the fact that SASCO should Delay in construction and development projects because of Ostool Al-Naqil Co. started its business as a SASCO sector in 2009. developed for the internal control through: obtain/renew the license to practice its business from the Ministry contractors’ non-abidance by the set completion schedule leads to Following restructuring this sector, its name changed to “Ostool Al- 1. Holding periodical meetings with strategic dealers to increase of Municipal and Rural Affairs and Civil Defence periodically; this is delay in operating sites according to the operational plan. SASCO Naqil Co.”. SASCO increases its operational capacity continually in line coordination in terms of market shares. connected with the property insurance policy. SASCO business may concerned departments continually follows up the contractors’ works with providing human cadres to manage and supervise the fleet in a 2. Developing a plan to increase points of sale to market some be affected in the future if it fails to obtain or renew such licenses. and implementation procedures. manner that ensures maximum benefit from transportation services products and follow up on them monthly. to SASCO sites, lowers the internal transport costs, and provides other 3. Setting financial objectives and following them up monthly. Legal Risks ?? Competitive Environment Risks: customers with transport services. Ostool Al-Naqil Co. offers the 4. Conducting periodic monitoring of customs claims and trying to In addition, SASCO faces legal risks in relation to financial claims due Station and rest house sector witnesses fierce competition to provide following services: reduce them. for it from some tenants and debtors, namely collecting amounts due best services. SASCO growth and profit levels depends on its ability to ffTransportation services of all types of fuel. for it for previous years. Moreover, there are some labour lawsuits filed compete successfully and maintain a leading position among other ffWater and sewerage transport services. ERP-Related Risks versus SASCO, and its Legal Department follows up these financial companies. ffDry transport services. All departments of SASCO and its subsidiaries depend mainly on rights to collect them, either by amicable or judicial means. The most prominent risks faced by Ostool Al-Naqil Co. is the renewal the use of Enterprise Resource Planning (ERP) system in all their

116 Annual Report 2018 117 or will be handed over to it in the future at an adequate fare while The issuance of a ministerial decision to increase tariffs in the future ?? Risks Related to Highway Network Development cash surplus, SASCO invests it by entering into new investment emphasizing utilization of sites for the purpose for which they are may lead to low income margin. (Transport Alternatives) portfolios or real estate investment funds or depositing it as a short- allocated. Currently, SASCO is working with government agencies to The State develops highway networks continuously, which may term bank deposit. receive and determine the rent value of land. SASCO may be adversely In this context, SASCO always gets timely access to amendments and change routes on which SASCO rest houses and stations are located. affected in case of delayed handover of these sites by relevant resolutions and studies their impact on its business. Accordingly, This is in addition to starting the execution of public transport SASCO also possesses several investment portfolios in securities in the government authorities, or because of higher rent value. SASCO SASCO takes the necessary steps to minimize the impact of these projects, subway network, and railway lines to link the Kingdom Saudi market managed by specialized companies. These investments assesses the site and rent value initially before deciding whether to resolutions. regions with each other, which can adversely affect SASCO level of are vulnerable to fluctuations in stock prices according to the invest in the site. operational profit. prevailing market variables. In this regard, SASCO develops control in this regard through: ?? Strategic Risks ffStudying new road and railway line projects and the road network ?? Insurance-Related Risks To reduce the impact of these risks, SASCO: These are unknown and non-systematic risks which cannot be f expansion plans in the Kingdom periodically to strategically plan Insurance policies cover all employees and properties of SASCO and its f Examines the financial position of the investee companies and absorbed or assessed within a clear approach or model. In case SASCO SASCO sites, examine options and solutions for existing sites, and subsidiaries. SASCO financial results or subsidiaries may be affected assesses their performance quarterly and annually. falls vulnerable to such strategically affecting events or risks, it may f check whether they are vulnerable due to the development of road by any future losses not covered under the insurance policies. f Works to dissociate from some investments to focus on its SASCO not only suffer a slight decline in profits, but such danger may also networks. core business whenever the opportunity comes. destroy it fully through bankruptcy and lay-offs. ?? Credit-related Risks ?? Risks Related to Issuance of Auto and Motorcycle Club The credit-related risks comprise of the inability of one party to fulfil ?? Risks Related to Increased Energy Prices Act its obligations, resulting in a financial loss to the other party. In order The increased sale tariff of electrical energy products and the rise in The Act includes some points that would affect the business of to reduce the impact of these risks, SASCO policy states that all post- prices of fuel and water affect the margin of income from operations. Saudi Automobile & Touring Association. SASCO studies the Act and paid customers are subject to credit due diligence and their ability to identifies the expected impact on the Association works to take the meet the obligations. necessary measures towards addressing the Act requirements. ?? Financing Risks ?? Risks Related to Customs Claims of the Association SASCO obtained financing from several banks to expand its projects, covered by the FIA Insurance Policy support its core activities, purchase new sites to build fuel stations, There are customs claims not covered by the FIA insurance policy since and finance the working capital and, thus, make profits and maximize some countries are not included in the insurance coverage. Saudi shareholders’ equity in the future. Automobile & Touring Association checks all supporting documents when issuing Trip-Tik customs books, and forms a provision in the In this respect, SASCO developed controls by setting financial and form of a percentage of monthly sales of books to cover this claim. operational objectives and activating controls on them on a monthly basis to address deviations or take advantage of them, including but ?? Risks Related to Granting Land and Land Handed over not limited to: by State ffMonitoring the achievement of expansion targets - numerically. On 18/5/1401 AH, Royal Decree No. 11499 was issued to hand over to ffMonitoring the achievement of financial performance targets. SASCO the necessary lands while keeping its ownership to the State. ffConducting, analysing, and comparing budgets with the actual Moreover, Royal Decree No. 214/M was issued on 8/2/1405 AH to grant results and reasons for deviations. SASCO (34) sites handed over to it. Therefore, SASCO requested the ffReviewing and improving cash flows continually. receipt of the sites to build rest houses thereon. ffScheduling expansions.

In relation to grants that have title deeds already received, SASCO ?? Investment Risks assessed them by a number of specialized companies, and listed them SASCO has investment portfolios in other companies, which may be in accounting records. As for lands granted with no title deeds, SASCO vulnerable to financial, operational, or administrative risks related coordinates with the concerned authorities to get its title deeds and to those companies or the market where they operate. To minimize receive these sites. the impact of these risks, SASCO conducts in-house or outsourced studies by specialist consultants on the status of these investments In addition to the granted lands, SASCO received some sites from to assess the feasibility of keeping them. SASCO also gets continually the State against receipt minutes. SASCO has built fuel stations on and periodically familiarized with the results of investee companies some of these sites and is seeking to receive others to utilize them. to determine their conditions in general. Royal Decree No. 1315/M issued on 24/11/1420 AH limited SASCO sites to those previously granted and lease out those already handed over Although SASCO focuses on its core business, in case of an untapped

118 Annual Report 2018 119 Internal Control Internal Control Periodic Audit of Financial and Accounting Procedures and Financial Reporting SASCO Internal Control Concept In coordination with the external auditor, SASCO periodically ensures Internal control is one of the basic pillars of the oversight system the integrity of the financial and accounting procedures and that they of any organization to assist it to evaluate management risks. It is are consistent with the widely accepted professional standards and considered an objective and independent business of a consultative the related laws governing financial and accounting practices and nature designed to increase the value of an organization, enhance reporting. its operations, and achieve its goals. External parties can provide internal control services to ensure high quality of this service. Internal Audit Internal control is a series of procedures and processes conducted SASCO management contracted a specialized office to carry out the by the Board, management, and employees to provide a reasonable internal audit based on risk assessment. SASCO works with the Internal confirmation with regard to achieving the following objectives: Audit Department to develop a risk-based plan in coordination with ffEffectiveness and efficiency of operations. the Audit Committee, SASCO management, and department officials. ffReliability of financial reports. Based on this plan, an action internal audit plan was developed. The ffCompliance with the related laws and instructions. plan aims to describe how to deal with these risks and determine how and when their consequences will be avoided or reduced. SASCO Roles and Responsibilities ffEveryone in SASCO is responsible for part of internal control. The internal (risk-based) audit plan included the following objectives: However, the Board is the body responsible for SASCO internal ffEvaluate the effectiveness and efficiency of the internal control control system. The CEO is the person finally responsible for the system and processes. oversight system. ffUnderstand policies and procedures. ffA number of parties provides internal control, each of whom has ffEnsure compliance with laws and regulations as well as SASCO important responsibilities. The Board (either directly or through contracts and policies. its committees), management, internal auditors, and other staff ffEnsure the preservation of SASCO assets. all submit important contributions to an effective internal control ffEnsure the reliability and integrity of financial and operational system. information. ffCompare the current SASCO practices with the best practices Most Important Tools and Methods used in Annual followed. Audit of Internal Control Effectiveness ffIdentify the opportunities available to enhance the internal control Departments’ Monthly Report includes Key Performance of activities and operations. Indicators (KPIs) 1. An analysis to compare budget with the actual results and reasons All (field and periodic) audit reports filed to the Board, senior for deviations. management, and various departments included observations and 2. Ratio of sites achieving the budget. weaknesses of internal control procedures in the audited departments 3. Fuel interruptions. or operations along with their potential impact on the integrity of 4. Service-related customer complaints. SASCO business processes and transactions with a focus on high- 5. Surprise field visits. value activities because of the increasing volume of risks. The reports 6. Operation licenses. also focused on the effectiveness of internal control system, since a 7. Daily deposits. weak control system increases the prospects of loss and the volume of 8. Staff training. risk, while an effective control system reduces the probability of such 9. Correct the views of products. risks. In addition, every report included all recommendations on how 10. Supplies interruptions. to deal with these observations to raise the level of internal control 11. Develop supply plan. procedures. 12. Design and implement periodic maintenance program. 13. Achieve expansion targets -numerically. The most important focus points in internal audit reports included 14. Achieve financial performance targets. the following: 15. Develop a marketing plan. ffEnsure that the department plans are consistent with the overall 16. New products and alliances SASCO objectives. 17. Attraction and appointment. ffVerify that fixed assets represent actual values owned by SASCO. 18. Security and safety. ffEnsure the provision of the necessary and adequate resources and 19. Inventory and property monitor. skills to support business. ffEnsure that the IT facilities and services both support SASCO

120 Annual Report 2018 121 strategic objectives and preserve its competitive features. Following are the most important recommendations raised by the ffFollow up inventory mechanism and the failure of current Audit Committee: automated software. 1. Disclose the investment portfolios opened in the note of unrealized ffEnsure scheduling of operations to guarantee sufficient quantities loss from the re-evaluation of investments in the financial position of stock. statement. ffEnsure that the available cash covers the continuity of planned 2. Work towards collection of the amounts due for SASCO. operations. 3. Enforce the internal control systems in SASCO Palm Stores. ffAnnounce SASCO bylaws, instructions, and policies conspicuously. 4. Consider the feasibility to convert current investments to available- ffCheck the training of current employees to perform multiple tasks. for-sale investments. ffCreate periodic/preventative maintenance programs for 5. Revise the constituent appropriations to ensure their efficiency. equipment and vehicles. 6. Extend the term of SASCO Zakat Advisor. ffFollow up expiry dates of operational licenses periodically. 7. Apply the International Accounting Standards (IAS) by the Finance ffCheck security and safety procedures. Department and hire a consultant if required. ffEnsure the availability of financial analysis of the cash flow 8. The need to provide functional competencies to cope up with the statement to make adequate financial and administrative progress witnessed by SASCO. decisions. 9. The need for SASCO to cope up with the technological progress and ffAvoid supply stoppage to the minimum. the use of technology and all its applications. ffEnsure the existence of registered contracts for all tenants 10. The importance of considering and following up the observations compatible with the conditions and objectives of SASCO plan. of Internal Audit Department, particularly the specific ones having relation to enforcing the internal control system. Procedures undertaken by the Audit Committee On its part, SASCO works to close off all recommendations by the In the light of the internal audit risk assessment and the Audit Committee in a timely manner. recommendations raised by the Audit Committee regarding the development of SASCO internal control system and given the contents Conflict with Audit Committee’s Recommendations of chartered auditor’s letter to the management, SASCO is going to There are no Audit Committee recommendations in conflict with develop its internal control systems and risk management. Based the Board’s Resolutions or the Board refused to take into account on the reports received, the Committee did not note any important with respect to the appointment, dismissal, fee determination or observations affecting the effectiveness of SASCO internal control performance assessment of the internal auditor. system.

122 Annual Report 2018 123 Corporate Governance Corporate Governance Regulation and Adopted Procedures During the fiscal year 2009, SASCO developed “Corporate Governance No. 8-16-2017 dated 16/05/1438 AH, corresponding to February 13th, Regulation”, which includes the rules, standards, and controls of 2017 pursuant to Companies Law passed by Royal Decree No. M/3 managing SASCO to enhance and ensure the application of the best dated 18/01/1437. SASCO Board approve the updated Corporate governance practices towards the protection of shareholders and Governance Regulations on 1 August 2017. stakeholders’ rights. In 2013, SASCO developed the said Regulation in accordance with the Corporate Governance Regulations issued by the Application of Governance Regulation CMA. SASCO applies all articles of its Corporate Governance Regulations In 2017, SASCO developed the said Regulation in accordance with the issued by the CMA Board except the following: Corporate Governance Regulations issued by the CMA under Decision

No. Regulation Article No. Paragraph Article/Paragraph Text Reasons of Non-Application

The Board shall develop, based on the proposal of the Nomination Committee, the necessary mechanisms to annually assess the performance of the Board, its members and committees and the Executive Management using key performance indicators linked to A the extent to which the strategic objectives Guiding Article: the mechanism has been 1 Forty-one Guiding of the Company have been achieved, the developed and it is under approval. quality of the risk management and the efficiency of the internal control systems, among others, provided that weaknesses and strengths shall be identified and a solution shall be proposed for the same in the best interests of the Company.

Guiding Article: The Chairman of the Audit Committee in the current session ending on 29 June 2021 has passed 9 years in SASCO. This is not consistent with B The Chairman of the Audit Committee shall 2 Fifty-four independence and SASCO will address Guiding be an independent director. the matter in the future according to Capital Market Authority Resolution of compulsory independence as of the Board’s session following 1 January 2019.

The Company’s Board shall, by resolution therefrom, form a committee to be named the “Risk Management Committee.” Guiding Article: the formation of the Chairman and majority of its members shall 3 Seventy Guiding committee shall be subsequently be Non-Executive Directors. The members of considered. that committee shall possess an adequate level of knowledge in risk management and finance.

a) For the purposes of implementing the approved internal control system, the Company shall establish units or departments for the assessment and management of risks and for internal The Internal Audit Department is already auditing. existing. It has been assigned with carrying 4 Seventy-four a, b b) The Company may utilize external out risk management in consistency entities to perform the duties and with the Company’s contracting with an competencies of the units or departments external office to conduct the same. of risk assessments and management and internal control without prejudice to the Company’s responsibility for those duties and competencies.

124 Annual Report 2018 125 No. Regulation Article No. Paragraph Article/Paragraph Text Reasons of Non-Application

The Company shall establish programs for developing and encouraging the participation and performance of the Company’s employees. The programs shall particularly include the following: 1) Forming committees or holding specialized workshops to consider the opinions of the Note Company’s employees and discuss the issues 1, 2 and 3 Guiding Article: it shall be subsequently 5 Eighty-five and topics that are subject to important Guiding considered. decisions; With reference to paragraph 9 of Article (22) of the Corporate Governance Regulations issued 2) Establishing a scheme for granting by the CMA, which stipulates “Among the main functions and competencies of the Board are the Company shares or a percentage of the following: preparing the Company’s interim and annual financial statements and approving them Company profits and pension programs for before publishing them; and whereas paragraph (a/1) of Article (55) of the Corporate Governance employees, and setting up an independent Regulations states “the duties of the Audit Committee shall particularly include the following: fund for such programs; and 3) Establishing social organizations for the analyzing the Company’s interim and annual financial statements before presenting them to the benefit of the Company’s employees. Board and providing its opinion and recommendations thereon to ensure their integrity, fairness and transparency”; the Board adopted a mechanism to approve the interim financial statements. The Ordinary General Assembly, based on the Board’s recommendation, shall establish The Audit Committee has the mandate to authorize interim financial statements and approve a policy that guarantees a balance between Guiding Article: it shall be subsequently publication thereof on Tadawul website, provided these interim financial statements be approved 6 Eighty-seven Guiding its objectives and those of the community considered. and signed by the Managing Director. After this approval, they shall be sent to the Board members to for the purposes of developing the social and review in the meeting following the announced interim financial period. economic conditions of the community.

The Board shall establish programs and determine the necessary methods for proposing social work initiatives by the Company, which include: Conclusion 1) Establishing measurement indicators that link the Company’s performance with its social initiatives and comparing it with other companies that engage in similar business; In conclusion, the Chairman, Board members and the executive management extend their thanks 1, 2, 3 and 4 2) Disclosing the objectives of the Company’s Guiding Article: it shall be subsequently 7 Eighty-eight and appreciation to the shareholders of the Saudi Automotive Services Company (SASCO), its social responsibility to its employees and Guiding considered. employees and all those who contributed to achieving its objectives and vision. raising their awareness and knowledge of social responsibility; 3) Disclosing plans for achieving social They also extend heartfelt thanks and appreciation to the Custodian of the Two Holy Mosques, King responsibility in the periodical reports on Salman bin Abdul Aziz, may Allah protect him, His Highness the Crown Prince, His Royal Highness the activities of the Company; and Prince Mohammed bin Salman bin Abdul Aziz, Vice President of the Council of Ministers, Minister 4) Developing awareness programs to the of Defence and Chairman of the Council of Economic and Development Affairs, may Allah protect community to familiarize them with the him, for all great efforts and unlimited assistance to develop this country, support its economy, and Company’s social responsibility. stimulate the business environment. The Board of Directors is looking forward to the participation If the Board forms a corporate governance of its shareholders in the General Assembly, and welcomes any suggestions and views enhancing the committee, it shall assign to it the Company’s business performance. competences stipulated in Article (94) of these Regulations (Corporate Governance Guiding Article: the formation of the May Allah Grant Us All Success, 8 Ninety-five Guiding Regulations). Such committee shall oversee committee shall be subsequently any matters relating to the implementation considered. Board of Directors of governance and shall provide the Board with its reports and recommendations at least annually.

126 Annual Report 2018 127 Financial Statements

Consolidated Accountants RSM Dr. Abdelgadir Bannaga & Partners Company

Saudi Automotive Services Company (SASCO) (Saudi Joint Stock Company)

Consolidated Financial Statements & Independent Auditors’ Report For the year ending on 31 December 2018

128 Annual Report 2018 129 Consolidated Accountants RSM Consolidated Accountants RSM Dr. Abdelgadir Bannaga & Partners Company Dr. Abdelgadir Bannaga & Partners Company

Orouba Road Core Audit Issue How it is addressed in auditing Olaya District, Building No. 3193, 1st Floor Tax Number: 300003 34 30001034 Adoption of the International Financial Reporting Standard • We selected a sample of settlements (including calculation P.O. Box Riyadh 12333 – 8235 Tel: 0164169361 No. (9) “Financial Instruments” and the International Financial and registration) made to different balances and transactions Fax: 0184169349 Reporting Standard No. (15) “ Revenue from Contracts with in order to be in consistency with the International Financial Kingdom of Saudi Arabia Customers” (Continued) Reporting Standard No. (9) “Financial Instruments” and the www.rsmksa.com Please refer to Note No. 7 on consolidated financial statements for International Financial Reporting Standard No. (15) “ Revenue Independent Auditors’ Report more details about the impact of adoption and reclassification from Contracts with Customers”. resulting from applying the International Financial Reporting • We assessed the consistency of disclosures related to the Messrs. / Shareholders of the Saudi Automotive Services Company (SASCO), Saudi Joint Stock Company, the highly regarded Standard No. (9) “Financial Instruments” and the International impact of applying the International Financial Reporting Financial Reporting Standard No. (15) “ Revenue from Contracts Standard No. (9) “Financial Instruments” and the International May Allah’s Peace, Mercy and Blessings be upon you, with Customers”. Financial Reporting Standard No. (15) “Revenue from Contracts with Customers”. Opinion Revenue Realization With respect to revenues, we took the following steps: We audited the consolidated financial statements of the Saudi Automotive Services Company (SASCO) “a Saudi joint-stock company” (the Revenues are a major and determinant factor of the Group’s • In our audit, we paid attention to what extent the accounting “Company”) and its subsidiaries, together referred to as (the “Group”). They include the consolidated financial position statement as at 31 performance and profits. Here arises a risk when revenues are policies are consistent with generating revenues in favor December 2018, statement of profit or loss and other consolidated comprehensive income, changes in consolidated shareholders’ equity, recorded higher than their real value to increase profits. Due to of the Group and assessing to what extent such policies are consolidated cash flows for the year ending on that date, notes attached to consolidated financial statements and brief of important the importance of the amount and the risk of recording revenues consistent with the IFRS. accounting policies. higher than their real values, we see that realization of revenues • We examined the internal control procedures with respect are an important aspect of audit as there is a risk that revenues to revenue realization and studying the procedures taken by In our opinion, the attached consolidated financial statements fairly demonstrate, from all major aspects, the consolidated financial may be false due to the Management’s negligence of controls the Group for purposes of completing the factors of revenue position of Saudi Automotive Services Company (SASCO) “Group” as at 31 December 2018, its financial performance and its consolidated and that the time and amount of revenues recorded in the realization. cash flows for the year ending on that date according to the International Financial Reporting Standards (IFRS) approved in the Kingdom financial period may have a substantial impact on the financial • We conducted a substantive analysis on important revenue of Saudi Arabia and other standards issued by Saudi Organization for Certified Public Accountants. performance. flows through developing expectations based on sizes and rates. We also got explanations of major differences. Grounds of Opinion • We examined a sample of recorded revenue transactions and compared them to supporting documents to verify the Our audit was conducted according to the International Financial Reporting Standards (IFRS) approved in the Kingdom of Saudi Arabia. registered revenues. Our responsibility according to the IFRS is detailed in this report in the paragraph titled “Auditor’s Responsibility for auditing consolidated financial statements”. We are independent from the Group pursuant to the Professional Ethics approved in the Kingdom of Saudi Arabia Fair value investments through consolidated other comprehensive With respect to fair value investments through the consolidated relevant to our audit of these consolidated financial statements. We also met the requirements of other professional ethics. We believe income statement other comprehensive income statement, we took the following that audit grounds we obtained are sufficient to constitute a basis for our opinion about the audit. SASCO possesses fair value investments through items of steps: consolidated other comprehensive income statement with a total • Verify the calculation of difference in the fair value and adding Core Audit Issues value of SR 103,5 million as at 31 December 2018. it to the items of consolidated other comprehensive income as The fair value of investments, through consolidated other well as adding it to the net change of fair value investments As per our professional assessment, core audit issues refer to such matters that had utmost importance in our audit of financial statements comprehensive income statement, not circulating in an active through consolidated other comprehensive income. of the current year. Such matters have been addressed in the context of our audit of financial statements as a whole and in developing market, is determined through applying assessment methods • Assess the sufficiency of the Group’s disclosures towards these our opinion. We do not present a separate opinion about such matters. Following is a description of each separate core audit issue and which often include practicing discretions by the Management investments. how it is addressed: and the use of assumptions and estimates. • We assessed the design and application of Management’s The state of uncertainty of investments, not circulating in an control over the investments classified through consolidated Core Audit Issue How it is addressed in auditing active market, is estimated using the techniques of the following other comprehensive income and not traded in an active Adoption of the International Financial Reporting Standard With respect to adopting the International Financial Reporting internal models: market. We also tested the efficiency of major procedures of No. (9) “Financial Instruments” and the International Financial Standard No. (9) “Financial Instruments” and the International • Important observable assessment inputs (i.e. investments these transactions. Reporting Standard No. (15) “ Revenue from Contracts with Financial Reporting Standard No. (15) “ Revenue from Contracts with classified as per Level 2). • We evaluated the methodology and consistency of assessment Customers” Customers”, we took the following steps: • Important unobservable assessment inputs (i.e. investments methods and inputs used in determining the value of fair As of 1 January 2018, the Group must adopt the International • We assessed the adequacy of adopted accounting policies. classified as per Level 3). value investments through consolidated other comprehensive Financial Reporting Standard No. (9) “Financial Instruments” and • We assessed action papers related to technical matters, Investments at fair value are assessed through the items of income. the International Financial Reporting Standard No. (15) “ Revenue detailed application plans and differences according to consolidated other comprehensive income statement at fair • We tested the samples of operations used in assessing from Contracts with Customers” the accounting standards widely accepted in Saudi Arabia value with registering profit or loss compared to difference of investments through consolidated other comprehensive We have considered this a core audit issue because the adoption of and issued by the Saudi Organization for Certified Public fair value within items of consolidated other comprehensive income not traded in an active market. As part of audit the International Financial Reporting Standard No. (9) “Financial Accountants which the Group identified. income statement to be added as part of reassessing investments procedures, we assessed major inputs and assumptions used Instruments” and the International Financial Reporting Standard • We compared the expected credit loss model developed by at fair value through consolidated other comprehensive income in determining values such as the anticipated cash flows, No. (15) “ Revenue from Contracts with Customers” has an the Management as required by the International Financial statement with shareholders’ equity. risk free rates, credit margins through comparing them with important impact on consolidated financial statements thanks of Reporting Standard No. (9) “Financial Instruments”, examined Assessment of investments at fair value was considered in 2 and external data. the judgments and estimates used in applying the future credit the reasonableness of methodology compared to accepted 3 Levels as a core audit issue due to the complexity of assessing loss model. best practices and verified the accounting accuracy of the these financial instruments and the importance of judgments model. and estimates conducted by the Management.

130 Annual Report 2018 131 Consolidated Accountants RSM Consolidated Accountants RSM Dr. Abdelgadir Bannaga & Partners Company Dr. Abdelgadir Bannaga & Partners Company

Other Information We communicated with governance officers with respect to planned audit scope, timing and important notes, including any internal control The Management is responsible for other information, including information stated in the Group’s Annual Report, but not including the system failure identified in our audit. consolidated financial statements and our audit report about them. It is expected to have access to the annual report after the date of this report. We also provided them with a statement that we complied with independence-related ethical requirements, made them familiar with all matters Our opinion does not cover the consolidated financial statements of other information and we have no confirmation about them. that may reasonably affect our independence and present relevant commitment parameters if necessary. When it comes to our audit of consolidated financial statements, our responsibility is to read the other information stated above when made accessible. When doing so, we taken into account whether such information is fundamentally inconsistent with the consolidated financial The issues reported to governance officers include such issues that had utmost importance when auditing consolidated financial statements of statements or our knowledge which we obtained during audit or it appears that it contains significant errors. When we read the annual report the current year. Therefore, they are considered core audit issues. We are going to highlight such issues in our report unless this is prohibited by and find significant errors in such information, we are required to report these facts to Governance officers. a disclosure law or regulation. However, in very rare circumstances, we decide not to report the same as it is reasonably expected that negative consequences would overcome the public interest of reporting. Management’s & Governance Officers’ Responsibility for Consolidated Financial Statements Management is responsible for developing and fairly presenting consolidated financial statements as per the IFRS adopted in Saudi Arabia, the other standards issued by Saudi Organization for Certified Public Accountants, the provisions of Companies Law and the Company’s Articles of Allied Accountants Association. It is also responsible for internal control systems that are deemed necessary for developing consolidated financial statements free Dr. Abdelgadir Bannaga & Partners Company from significant errors, whether such errors are arising from fraud or omission.

The Management’s responsibility for developing consolidated financial statements includes an assessment of the Group’s ability to continue business, disclosure, as the case may be, of matters related to Group’s continuity and use of continuation basis in accounting unless the Management wishes to dissolve the Group or cease its operations or no logical alternative is available. Governance officers are responsible for supervising the development of financial reports. Mohammed bin Farhan bin Nadir License No. (435) Auditor’s Responsibility Riyadh, Kingdom of Saudi Arabia We aim to get a reasonable confirmation whether the consolidated financial statements as a whole are free from significant errors - whether 12 Rajab 1440 AH, corresponding to 19 March 2019 such errors are arising from fraud or omission – and to issue the audit report that includes our opinion about such statements. A reasonable confirmation is a high level of confirmation. Our audit, which was conducted according to the IFRS adopted in Saudi Arabia, does not always guarantee the detection of significant errors, if any. Errors may arise out of fraud or omission. They are deemed significant if, individually or collectively, reasonably affecting the economic decisions of the users of consolidated financial statements.

As part of the audit process, undertaken according to the IFRS adopted in Saudi Arabia, we practice professional judgment and apply the principle of professional scepticism in all aspects of audit in addition to the following:

• Identify and assess the risks of significant errors of consolidated financial statements, whether arising from fraud or omission, design and implement audit procedures responding to such risks and obtain sufficient evidences that provide a ground for our opinion. The risk of failing to detect significant errors arising out of fraud is higher than that arising out of omission. This is because fraud may include collusion or counterfeiting, deliberate deletion or misstatements, or intrusion of internal audit systems. • Understand audit-related internal control systems for the purpose of developing proper audit procedures according to the circumstances and not for raising an opinion about the efficiency of corporate internal control systems. • Assess the consistency of applicable accounting policies and the reasonability of relevant Management-prepared accounting estimates and notes. • Obtain a conclusion as to the consistency of Management’s use of the principle of continuity in accounting based on audit evidences we obtained. We work to know if there is a significant uncertainty in relation to events or circumstances that may raise big doubts about the Group’s ability to continue to run business as a continuous establishment. If it comes to our knowledge that there exists a significant uncertainty, we are required to attract attention in our audit report to the relevant notes outlined in the consolidated financial statements. If disclosure of such information is not sufficient, we will amend our opinion. Our deductions rely on audit evidences obtained until the date of our audit report. However, future events or circumstances may cause company’s discontinuity to run business as a continuous establishment. • Assess general presentation as well as structure and content of consolidated financial statements, including notes, and whether consolidated financial statements represent transactions and events in a manner that achieves fair presentation.

132 Annual Report 2018 133 Saudi Automotive Services Co. (SASCO) Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018 Notes to the consolidated financial statements For the year ended 31 December 2018 ______

31 Dec. 2018 31 Dec. 2017 31 Jan. 2017 Note (SR) (SR) (SR) 2018 2017 (Amended - Note 7) (Amended - Note 7) Note (SR) (SR) (Amended) Assets Non-current assets Revenues 21 2,056,081,002 1,212,329,807 Costs of revenues (1,974,099,397) (1,132,838,480) (SR) Net properties and equipment 8 1,087,947,299 1,068,977,536 873,569,463 Total Profit 81,981,605 79,491,327 Net intangible assets 9 11,032,084 10,064,600 8,599,160 Capital works under execution 10 40,011,413 25,000,017 150,783,566 Fair value investments through other comprehensive consolidated income 11 103,563,396 65,637,302 93,406,731 Sale and marketing expenses (2,189,061) (3,799,225) Recorded cash - - 24,273,438 General and administrative expenses 22 (42,109,042) (43,776,360) Total non-current assets 1,242,554,192 1,169,679,455 1,150,632,358 Net year profit from core operations 37,683,502 31,915,742 Financing costs (8,070,599) (5,631,383) Current assets Profit distributions of fair value investments through other 5,635,089 3,603,408 comprehensive income Unrealized losses from fair value investments through profit or loss (582,102) (990,140) Net inventory 13 51,193,500 36,337,406 27,323,999 Realized profit from fair value investments through profit or loss 330,099 369,991 Net receivables, advance payments, and other receivables 12 226,785,816 172,068,045 137,075,254 Profit distributions of fair value investments through profit or loss 1,362,191 - Fair value investments through profit or loss 14 5,973,368 31,303,020 31,423,169 Other revenues 23 1,868,133 2,512,515 Cash and balances with banks 15 74,235,012 97,275,330 117,681,676 Net year profit before Zakah 38,226,313 31,780,133 Zakah 19 (2,775,004) (3,795,000) Total current assets 358,187,696 336,983,801 313,504,098

Total assets 1,600,741,888 1,506,663,256 1,464,136,456 Net annual profit 35,451,309 27,985,133

Shareholders’ equity and liabilities Other comprehensive income Items to be subsequently reclassified into income statement Capital 1 600,000,000 540,000,000 540,000,000 Statutory reserve 20 44,397,367 40,852,236 37,870,221 Net change in fair value of fair value investments through other 11 (16,101,094) (27,769,429) Retained earnings 31,917,651 88,811,473 63,808,355 comprehensive income Reserve for reassessing fair value investments through other 11 75,547,896 59,446,802 87,216,231 comprehensive income Total year comprehensive income 51,552,403 215,704 Total Shareholders’ equity 751,862,914 729,110,511 728,894,807

Non-current liabilities Share profitability 26

Actual dividend per share from core operations 0,63 0,53 Financing of resale for profit and long-term loans 16 377,385,669 351,039,850 335,767,608 Commitments for employee benefit plan 12,613,431 11,386,371 9,751,412 Actual year dividend per share 0,59 0,47

Total non-current liabilities 389,999,100 362,426,221 345,519,020

Current liabilities

*Notes from No. 1 to 31 constitute an integral part of these consolidated financial statements. Financing of resale for profit and short-term loans 16 115,000,000 95,000,000 44,594,800 Current portion of financing of resale for profit and long-term loans 16 100,688,892 109,479,080 134,043,817 Dividends Payable to shareholders 18 39,715,364 38,718,206 38,823,795 Payables and other creditors 17 200,297,924 168,102,768 167,850,717 Provision for Zakah 19 3,177,694 3,826,470 4,409,500

Total current liabilities 458,879,874 415,126,524 389,722,629

Total liabilities 848,878,974 777,552,745 735,241,649

Total shareholders’ equity and liabilities 1,600,741,888 1,506,663,256 1,464,136,456

*Notes from No. 1 to 31 constitute an integral part of these consolidated financial statements.

134 Annual Report 2018 135 136

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018 ______

Reserve for reassessing fair Statutory Retained value investments Total Capital (SR) reserve (SR) profits (SR) through other (SR) comprehensive income (SR) Balance on 1 Jan. 2017 as previously disclosed 540,000,000 37,870,221 120,320,281 84,254,721 782,445,223 Amendments of previous years as per International - - (13,128,000) - (13,128,000) Financial Reporting Standard No. 8

Balance after amendment 540,000,000 37,870,221 107,192,281 84,254,721 769,317,223 Impact of adopting the International Financial - - (43,383,926) 2,961,510 (40,422,416) Reporting Standard No. 9 Balance on 1 Jan. 2017 as amended 540,000,000 37,870,221 63,808,355 87,216,231 728,894,807 Net annual profit - - 27,985,133 - 27,985,133 Transfer to statutory reserve - 2,982,015 (2,982,015) - - Other comprehensive income (amended) - - - (27,769,429) (27,769,429) Balance on 31 Dec. 2017 540,000,000 40,852,236 88,811,473 59,446,802 729,110,511

Balance on 1 Jan. 2018 as previously disclosed 540,000,000 40,852,236 147,158,411 55,485,941 783,496,588 Amendments of previous years as per International - - (13,128,000) - (13,128,000) Financial Reporting Standard No. 8 Balance after amendment 540,000,000 40,852,236 134,030,411 55,485,941 770,368,588 Impact of adopting the International Financial - - (45,218,938) 3,960,861 (41,258,077) Reporting Standard No. 9 Balance on 1 Jan. 2018 as amended 540,000,000 40,852,236 88,811,473 59,446,802 729,110,511 Items changed to increase capital 60,000,000 - 60,000,000 - - Profit distributions - - (27,000,000) - (27,000,000) Remuneration for Board Directors - - (1,800,000) - (1,800,000) Net annual profit - - 35,451,309 - 35,451,309 Transfer to statutory reserve - 3,545,131 (3,545,131) - - Other comprehensive income - - - 16,101,094 16,101,094 Balance on 31 Dec. 2018 540,000,000 44,397,367 31,917,651 75,547,869 751,862,914

* Notes from No. 1 to 31 constitute an integral part of these consolidated financial statements ______Notes to theconsolidated financial statements For the year ended 31December 2018 (Saudi joint-stock company) Saudi Automotive Services Co. (SASCO Profits of selling properties properties and equipmentof selling Profits Component Zakah of provision Component commitments of for employee benefit plan projectsClosing of under execution Realized profitfrom fair value investments through profit orloss Unrealized lossesfrom fair value investments through profit orloss Component provision of for expected credit losses Component provision of for other receivables Component customs of claimsprovision Amortization intangible of assets Consumption Property, of plant and equipment Amendments to settlenetprofit to netcash availablefrom operating activities: Net annual profit Cash flowsfrom operating activities *Notes from No. 1to 31 constitute an integral theseconsolidated of part financial statements. Items changed from and properties equipment to intangible assets other comprehensive income Unrealized(loss) profitfrom reassessing fair value investments through Items changed from projects under execution to and properties equipment transactions Non-cash Cash and balances withbanks at theend year of Cash and balances withbanks at year thebeginningof incash Net deficit and balances withbanks Net cashavailable from financing activities Net cashusedfor investment activities commitments of Paid part employee of benefit plan Zakah of Paid part provision Payables, accruedexpenses and other liabilities Inventory Receivables, advance payments, and other assets Changes inoperating assetsand liabilities: Paid remuneration board of directors Net change inshareholders’ entitlements Registered cash Net change inloans and profits for sale Cash flowsfrom activities financing Additions to intangible assets Additions to capital projects under construction Sums collected from sale and properties of equipment Additions to and properties equipment Cash paidto purchase fair value investments through other comprehensive income Sums collected from fair selling value investments through profit orloss Cash paidto purchase fair value investments through profit orloss Cash flowsfrom investment activities Net cashavailable from operating activities ) (190,330,099) (48,409,500) (26,002,842) (14,856,094) (21,825,000) (58,502,393) 31 2018 Dec. (78,101,689) (32,040,318) (1,800,000) (51,857,336) 215,407,748 (2,699,481) 84,902,871 45,308,582 (3,423,780) 34,817,094 35,451,309 97,275,330 16,101,094 74,253,012 21,611,979 32,195,156 (1,827,123) (330,099) 37,555,631 44,721,127 2,088,752 2,775,004 1,695,870 9,752,789 3,054,183 1,731,997 (47,429) 582,102 (SR) - - - - Annual Report 2018 (116,986,699) (20,406,346) (38,060,939) (39,089,474) 204,785,634 31 2017 Dec. (27,769,429) (Amended) 44,096,294 (4,378,030) (9,190,898) (79,142,911) 117,681,676 65,280,554 31,299,799 24,273,438 97,275,330 4,096,683 (1,200,721) 91,722,812 2,630,662 (500,000) 27,985,133 2,835,680 3,795,000 23,126,137 41,112,705 (369,991) (105,589) 1,165,222 990,140 140,826 252,051 177,491 (5,607) 717,151 (SR) - 137 Saudi Automotive Services Co. (SASCO) Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018 Notes to the consolidated financial statements For the year ended 31 December 2018 ______

1. Composition & Business Attached consolidated financial statements include the accounts of the Group and the following subsidiaries and branches: -- Saudi Automotive Services Company (SASCO) is a Saudi shareholding company established by the Ministerial Decree No. 563 dated 23/12/1402 H corresponding to 12/10/1982. It is headquartered in Riyadh under Commercial Register No. 1010054361 dated 28/07/1404 H corresponding to 30/4/1984. No. Commercial Register No. Core Business City -- SASCO mainly provides a variety of services which include car and passenger services through establishing central workshops for the highest level of 1. 1018000425 SASCO branch Riyadh maintenance and establishing car service stations. It also provides motels, restaurants, the import and sale of equipment, along with the provision of food, beverages, soft drinks and the raw materials required. It imports and trades in cars and all types of spare parts after obtaining the required licenses, 2. 2050093628 SASCO branch Dammam implements all kinds of contacting with respect to constructing, managing, maintaining and operating residential and commercial buildings, undertakes 3. 4030254775 SASCO branch Jeddah contacting activities of car and equipment maintenance for individuals and corporations and contracts with institutions or corporations practicing similar business or merge with them or establishes subsidiaries possessed by SASCO or with third parties. 4. 1131030559 Zaiti branch Buraidah

-- SASCO’s capital is SR 540,000,000 divided into 54,000,000 shares, each with a value of SAR 10. In 2018, the 12th Extraordinary General Assembly agreed on the 5. 5850029530 Zaiti branch Abha recommendation of the Board of Directors to increase SASCO capital from SR 540,000,000 to SR 600,000,000 with a 11,11% increase through bonus shares. 6. 5850064608 Zaiti branch Abha One free share shall be granted to each 9 shares of the owned shares in favor of shareholders possessing shares at the end of the trading day on which the 12th Extraordinary General Assembly was held. Capital increase shall be done through capitalizing SR 60 million of the retained profits. Thus, the number of 7. 5850064609 Zaiti branch Abha shares shall be increased from 54,000,000 shares to 60,000,000, with the increase of 6,000,000 shares. 8. 1128010283 Zaiti branch Unaizah -- The Main Office of the Group is located at the following addressed: 9. 1011012857 Zaiti branch Al Kharj -- Saudi Automotive Services Company (SASCO) -- Riyadh – Malaz – Al Ahsa St,. Al Ahsa intersection with Omar bin Abdulaziz 10. 2055025642 SASCO Palm Stores Co. branch Al Jubail -- Kingdom of Saudi Arabia 11. 2050112261 SASCO Palm Stores Co. branch Dammam -- Consolidated financial statements as at 31 Dec. 2018 include the financial statements of the following subsidiaries and branches: % of direct Name of Company Core Business & indirect 2. Grounds on which consolidated financial statements are developed ownership 2-1 Statement of Compliance Ostool Al-Naqil Co. Transporting oil products and commodities for payment pursuant to the Ministry of 100% Transport’s License No. 010111046000 and license to expire on 5/3/1440H. These consolidated financial statements were developed according to the International Financial Reporting Standards (IFRS) approved in the Kingdom of Saudi Arabia and other standards approved by Saudi Organization for Certified Public Accountants. Saudi Automobile & -- Subscribing in local and international car and motorcycle clubs and local and 100% Touring Association, Ltd SATA international associations and bodies interested in the affairs of cars and motorcycle. According to the Saudi Capital Market Authority (CMA), options of using reassessment model of properties, machinery, equipment and intangible assets in IFRS -- Issuing transit books (Trip Ticket) and international driving licenses No. 16 and IFRS No. 38 and option of using fair value model for real estate investments in IFRS No. 40 will not be available in the first three years as of the date of -- Organizing, managing, maintaining and operating car and motorcycle racing tracks transformation beginning from 2017 till 2019 for listed companies. -- Organizing and participating in car and motorcycle racings and events Auto & Equipment Investment Co., Ltd -- Establishing car and heavy equipment repair workshops as well as car and passenger 100% 2-2 Development of consolidated financial statements service stations on the main roads between the cities of the Kingdom to offer fuel, oils and maintenance of cars and heavy equipment The attached consolidated financial statements were developed on the basis of historical costs according to maturity principle with the exception of investments -- Establishing rest houses, motels and restaurants and offering food, beverages, soft held for sale at fair value through other comprehensive income at fair value and investments held for sale at fair value through profit or loss. drinks for passengers. -- Washing and lubricating cars and equipment Items of consolidated financial statements appear in Saudi Riyal (SR). It is the currency of operation and disclosure. -- Importing and selling equipment and tools -- Constructing roads and bridges 2-3 Use of estimates Undertaking general contracting (establishing, repairing, demolishing and rebuilding) Al-Nakhla Al-Oula Co. 100% The development of consolidated financial statements according to IFRS’s approved in Saudi Arabia requires the Management to set judgments, estimates and for building, establishing, maintaining and operating residential and commercial assumptions that affect the application of accounting policies and disclosed amounts of assets, liabilities, revenues and expenses. These estimates and their buildings as well as road works. related assumptions are based on previous experience and other factors believed to be reasonable in the current circumstances; which results constitute a basis SASCO Palm Stores Co. Import and sale of food, beverages, soft drinks and equipment 100% for taking judgments related to the book value of assets and liabilities not easily made clear from their sources. Actual results may differ from these estimates. Estimates and their related assumptions are continuously audited. Amendments to accounting estimates are recognized with a future effect. SASCO Al Waha Co. Hotels 100% Following are estimates and assumptions that are vulnerable to substantial risks that may lead to making a significant amendment to the book value of assets and liabilities in the subsequent fiscal years: Zaiti Petroleum Services Company Establishing, managing and operating fuel stations 100% SASCO Franchise Co. Manufacturing industries and their branches as per industrial licenses, business 100% services, other services, trade and information technology.

138 Annual Report 2018 139 Saudi Automotive Services Co. (SASCO) Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018 Notes to the consolidated financial statements For the year ended 31 December 2018 ______

a.) Depreciation of non-financial assets d.) Estimation of productive lifetime of properties, machinery, equipment and remaining value

On the date of each financial position statement, the Group assesses the assets to find any evidence that these assets have incurred a depreciation. In case such The Group’s Management determines the estimated productive lifetime of properties, machinery and equipment for the purpose of calculating depreciation. This evidence exists, the asset redeemable value is estimated. A redeemable value is the fair value of the asset minus selling cost or value of use, whichever higher. When estimation is made after taking into consideration the expected use of asset or actual prescription. The Management periodically checks the estimated productive assessing the used value, estimated future cash flows of an asset are deducted to the present value using a discount rate reflecting the current market assessments lifetimes at least annually and the method of consumption to make sure that the method and consumption periods are consistent with the expected pattern of of time value of funds and risks determining the asset. When determining the fair value of the asset minus selling cost, the recent market dealings are taken into asset economic benefits. account. In case the redeemable value of an asset is estimated lower than the book value, the book value of asset is reduced to the redeemable value. Depreciation losses are directly recognized in the profit or loss statement. e.) Assumptions of end-of-service benefit obligations

In case the depreciation loss is subsequently reflected in value, the asset book value is increased to the amended value of the redeemable value. However, only to End-of-service benefits represent liabilities that will be settled in the future and require the use of assumptions toward the expected liabilities. International the extent that the book value does not exceed the book value that would have been redeemable should there is no depreciation loss of asset book value in the Accounting Standard 19 “Employee Benefits” requires the Management to use more variable-related assumptions such as discount rates, rate of compensation previous years. Reverse of ddepreciation losses are directly recognized in the profit or loss statement. increase, return on asset, mortality rates, operation turnover and costs of future healthcare. The Group leads an actuarial evaluation to calculate obligation. Changes in core assumptions may have a great impact on expected benefit liabilities and/or costs of periodic incurred employee benefits. b.) Measurement of fair value f.) Provision of stagnant and slow inventory Fair value represents the value on which an asset is exchanged or an obligation is paid among parties having knowledge and desire to do so on fair dealing conditions. Company’s financial instruments are disclosed as per historical cost principle with the exception of financial assets recorded in fair value through profit The Group’s Management estimates the provision to reduce the value of inventory to the net verifiable value in case the cost of inventory is irredeemable or or loss. The measure of a fair value is based on the assumption that the transaction of an asset selling or determination of an obligation takes place: the inventory is damaged or wholly or partially vulnerable to inscription or if the selling price is less than the cost or any other factors causing a depreciation of • Through the main market of the asset or obligation; or redeemable value less than book value. • Through the most preferred market of the asset or obligation in case the main market is absent. Zakat Discretionary Zakat is an obligation on the Group according to the laws applicable by the Saudi General Authority for Zakat and Tax. It is set right and allocated to The main market (most preferred market) must be available for the Company in the measurement date. the profit or loss statement. Additional Zakat liabilities, if any, related to assessments of previous years, are calculated by the Authority in the year during which A fair value of an asset or obligation is measured according to assumptions used by market participants when pricing the asset or obligation on the assumption final assessments are issued. that market parties act for achieving the best interests for themselves. With respect to non-financial assets, this measurement takes into consideration the market participants’ ability to generate economic benefits through using the 3- Changes to important accounting policies asset to achieve the best interests or selling it to another market party to achieve the best interests. With the exception of the below, the accounting policies applied to these consolidated financial statements are the same ones applied to financial statements of The Company uses assessment methods appropriate for circumstances. Such methods have sufficient data to measure the fair value; in that proper observable the previous year for the year ending on 31 December 2017. inputs are used instead of non-observable ones. As at 1 January 2018, the Company applied the following standards: All assets and obligations measured by fair value or their value is disclosed in financial statements are classified as per a hierarchy of fair value measurement levels International Financial Reporting Standard No. (9): items of Group’s financial investments were reclassified (as indicated in Note No. 7) below based on the minimum level of measurement input which is crucial for measuring the fair value as a whole. International Financial Reporting Standard No. (15): settlements to revenues have been made according to the concept of customer’s access to full control of service provided (as indicated in Note No. 7). Used inputs are classified in fair value measurement methods as per the following hierarchy: Level One: prices declared (unamended) and tradable in active asset or obligation market similar to the one measured. The impact of applying these standards on Group’s applicable accounting policies: Level Two: inputs that can be directly or indirectly observed or controlled for the asset or obligation other than declared prices listed in Level One. Level Three: inputs that are non-observable for the asset or obligation. 3-1 International Financial Reporting Standard No. 9 – Financial Instruments (versions amended in 2009, 2010, 2013 and 2014) The Company hires independent expert assessors, with recognized and relevant professional qualifications and experience in the location and type of assets under assessment, to measure the fair value of assets. The Company reviews the independent assessor’s report to evaluate the assumptions, employed assessment The International Financial Reporting Standard No. 9 classifies and measures financial assets, financial liabilities and some contracts of purchase or selling non- methods and the reasonability of assessment as a whole. financial items. It replaces the International Reporting Standard No. 39 “Financial Instruments – Recognition and Measurement”. Following are the details of new important accounting principles and the nature of changes made to previous accounting principles: c.) Provisions 3-1-1 Classification of financial assets Provisions are recognized when the Group has emerging (legal or implied) liabilities due to previous events. The payment of liabilities is possible and their value can be credibly measured. An amount recognized as a provision is the best estimation of the amount required to settle the current obligation on the date of report, IFRS No. 9 includes three main classification categories of financial assets: financial assets measured by amortized cost, financial assets measured by fair value taking into consideration risks and doubts about the obligation. When a provision is measured using the cash flows estimated for settling the current obligation, through other comprehensive income, financial assets measured by fair value through profit or loss statement and consolidated other comprehensive income. This the book value shall be the current value of these flows. In case the redemption of some or all economic benefit required for settling a provision from a third party, Standard excludes the current categories of International Accounting Standard No. 39, which are retained till date of maturity as well as loans and receivables and the due amount shall be recognized as an asset in case it is certain to redeem the amount and that the value of due amount can be reliably measured. through other comprehensive income. As per IFRS No. 9, contract-embedded derivatives, in which the core instrument is financial assets within the standard scope, are not divided. Instead, mixed financial instrument is assessed as a whole for classification purposes.

140 Annual Report 2018 141 Saudi Automotive Services Co. (SASCO) Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018 Notes to the consolidated financial statements For the year ended 31 December 2018 ______

3-1-2 Measurement of financial assets 4- New Standards IFRS No. 16 – Lease Contracts

The following accounting policies are applied to the subsequent measurement of financial assets: IFRS No. 16 “Lease Contracts” (effective as of 1 January 2019) This Standard is effective for annual periods commencing from or after 1 January 2019. Early application is allowed. It has not been applied by the Group when - Financial assets at fair value through profit or loss: subsequent measurement of these assets is made at fair value. Net profit and loss are recorded. They shall developing these consolidated financial statements. include any interest or income of profit distribution within profit or loss. IFRS No. 16 identifies the way a developer of consolidated financial statements according to the IFRS recognizes, measures, presents and discloses lease contracts. This Standard provides lessees with a single accounting model, which requires them to recognize assets and liabilities of all lease contracts unless the lease term - Financial assets at amortized cost: subsequent measurement of these assets is made at amortized cost using the actual interest method. Amortized cost is is 12 months or less or if the asset is of a little value. reduced by depreciation loss. Interest revenues, profits & loss of foreign currency exchange and deprecation are recorded in profits or loss. Any profit or loss is While lessors continue to classify lease contracts as operating or financing lease contracts, the approach of IFRS No. 16 regarding lessor accounting did not recorded in profits or loss. significantly change from the previous one, namely IAS No. 17. It is not expected that the adoption of this Standard during subsequent periods will have a major impact on the Group’s financial statements. - Investments in debt instruments at fair value through other comprehensive income: subsequent measurement of these assets is made at fair value. Interest revenues calculated using the actual interest method, profits & loss of foreign currency exchange and deprecation are recorded in profits or loss. Other net 5- Basics of Consolidation profits and loss are recorded in other comprehensive income. When recording is stopped, profit and loss accumulating in comprehensive income are reclassified into profit or loss. These consolidated financial statements include the consolidated financial position statement, the statement of profit or loss and other comprehensive income, consolidated shareholders’ equity change statement, consolidated cash flow statement, and notes complementing the consolidated financial statements of the - Investment in equity instruments at fair value through other comprehensive income: subsequent measurement of these assets is made at fair value. Profit Group. They include assets, liabilities and results of the Group and its subsidiaries’ business as indicated in Note No. 1. Subsidiaries are those companies controlled distributions, deprecation profits & loss, profits & loss of foreign currency exchange are recorded in profits or loss unless profit distributions clearly represent the by the Group. The Group controls the company when it is entitled with different revenues due to participating in the company and its ability to affect these redemption of a part of investment cost. Other profits and loss are recorded in other comprehensive income and are not reclassified into profit or loss. revenues through controlling the company. Subsidiaries are consolidated as of the date of Group’s acquisition over subsidiaries until ceasing to practice such control. The Group uses the purchasing method to account for gathering operations when transferring control to the group. Acquisition cost is measured by 3-2-2 Depreciation fair value of obtained assets. The increased cost of acquisition is registered in addition to the fair value of non-controlling equity in the net assets specified and acquired as reputation in the consolidated financial position statement. Non-controlling equity is measured by its share of Group’s net-controlled assets The IFRS 9 replaces the incurred loss model of International Accounting Standard No. 39 with expected future credit loss model. This requires a major appreciation at the date of acquisition. The group presents share of profit or loss and net non-controlled assets as an independent item in the statement of profit or loss and of how changes of economic factors affect the expected future credit loss model, which will be determined on the basis of weighted probability. other comprehensive income and within the shareholders’ equity in the statement of profit or loss and other comprehensive income. All unrealized transactions, The new depreciation model will be applied to financial assets measured by amortized cost or fair value through consolidated other comprehensive income with balances, profits and losses arising from dealings among the Group’s companies. Subsidiaries’ accounting policies are amended when necessary to ensure they are the exception of investments in equity instruments and also applied to contract assets. consistent with the group’s policies. The Group and its subsidiaries develop their financial statements for the same reporting periods.

As per IFRS No. 9, loss appropriations will be measured according to one of the following principles: 6- Summary of Major Accounting Policies

1.) Credit loss expected throughout 12 months. Such loss arises from payment default events which are likely to occur within 12 months after the report date. Following is a summary of Group’s major accounting policies: Properties, machinery and equipment 2.) Credit loss expected throughout the lifetime of a financial instrument. Such loss arises from all payment default events which occur throughout the expected Properties, machinery and equipment appear in costs after entering accumulated amortizations. They include costs to expenses directly ascribed to acquisition of lifetime of a financial instrument. assets. When parts of one item of properties, machinery and equipment have different productive lives, they are counted as separate items (main components) of properties, machinery and equipment. Expenses of repair and maintenance are revenue expenses while improvement expenses are capital expenses. Amortizations As for credit loss expected throughout the lifetime, measurement is applied in case credit risks of financial assets largely increase on the report date since initial are counted on the basis of their estimated productive life using the straight-line method. Sold or excluded assets and their accumulated amortization are deleted recognition thereof. Credit loss expected throughout 12 months in case these credit risks do not largely increase. An establishment may determine that credit risks from accounts on the date of selling or exclusion. do not largely increase if the instrument is subject to low credit risks at the report date. However, measurement of credit loss expected throughout the lifetime is always applied to commercial receivables and contract assets without any significant financing components. An establishment may choose to apply this policy to Following is the amortization percentage of main items of these assets: commercial receivables and contract assets without significant financing components.

3-1-4 Classification of Financial Liabilities Statement % Percentage Buildings 2-3% IFRS No. 9 largely retains the current requirements of IAS No. 39 with the aim to classify financial liabilities. However, IAS No. 39 signifies that all changes to fair Furniture 10% value of liabilities classified by fair value through statement of profit or loss and other comprehensive income are recognized in statement of profit or loss and other comprehensive income. According to IFRS No. 9, the change to fair value related changes in credit risks of liabilities is demonstrated in the statement of profit or Cars and trucks 7-20% loss and other comprehensive income, while the remaining amount of change in fair value is presented in the statement of profit or loss and other comprehensive Machinery, equipment, trailers and transport mechanisms 10% income. Communication devices and phones 25% 3-2-4 Hedge Accounting Computer and software 15% Electrical devices 10% IFRS No. 9 presents a new hedge accounting model designed to closely cope up with how the establishment practices risk management activities when hedging against financial and non-financial risks. Advertising boards 15% Improvements to buildings 4% or duration of lease contract, whichever less 3-1 IFRS No. 15 - Revenue from Contracts with Customers

IFRS No. 15 establishes a comprehensive concept framework to determine the amount and timing of revenue recognition. This Standard replaces the guidelines for Productive life and consumption method are periodically reviewed to make sure that method and period of consumption are consistent with the economic benefits demonstrating current revenues. IFRS No. 18 includes revenues while IFRS No. 11 includes construction contracts and international explanation No. 13 “customer expected from properties and equipment. loyalty programs”. During 2017, the Group selected the cost model to register properties, machinery and equipment according to CMA’s Resolution dated 16/01/1438 AH corresponding The Group records revenues when performing service in favor of customer and customer’s access to control of service provided as per the requirements of IFRS No. to 17 October 2016 binding listed shareholding companies to use the cost model. 15. Therefore, there is no significant impact from applying IFRS No. 15 “Revenue from Contracts with Customers” on recording the Group’s revenues.

142 Annual Report 2018 143 Saudi Automotive Services Co. (SASCO) Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018 Notes to the consolidated financial statements For the year ended 31 December 2018 ______

a.) Financial assets a.) Financial Assets Determined at Fair Value through Profit or Loss

On the date of each financial position statement, values of financial assets are reviewed to know if there is something to indicate any depreciation. Financial assets Financial assets retained for trading are classified through the consolidated statement of profit or loss when they are retained for trading purposes or selected to are like receivables and assets that are individually assessed as not depreciating. They are assessed for depreciation on a collective basis. A substantive proof of be so classified. depreciation of receivables portfolio may include the Group’s previous experience with respect to payment collection and increase of late payments which may exceed the period of debt. It may also include remarkable changes in local and international economic conditions related to default of receivables. The listed value Financial assets retained for trading are classified if they: of a financial asset is directly reduced by the amount of depreciation loss for all financial assets with the exception of commercial receivables. A listed value is reduced through creating a provision account. When one of receivables are considered uncollectable, the amount of receivable and the corresponding amount are - Are acquired mainly for being sold in the near future. deleted in the provision account. - Represent a part of well-known financial instruments portfolio run by the Group and includes a real pattern of a financial instrument that achieves profits on Changes to the value listed in the provision account are recognized in the consolidated statement of profit or loss and other comprehensive income. the short term.

When it comes to instruments of shareholders’ equity though other comprehensive income, the previously acknowledged losses of depreciation are not reflected - Represent a financial derivative but not classified or active as a hedging instrument. in the consolidated statement of profit or loss and other comprehensive income. Any increase in fair value coming after a depreciation loss is directly recognized in the consolidated statement of change in shareholders’ equity. Financial assets not retained for trading can be classified as financial assets determined at fair value through statement of profit or loss and other comprehensive income at initial registration in the following cases: a.) Non-financial assets - Such classification cancels or largely reduces any inconsistent measurement or calculation that may result unless classification is done this way. On the date of each financial position statement, the Group reviews the listed values of its assets to find any evidence that these assets have incurred depreciation losses. In case such evidence exists, the asset redeemable value is estimated to determine the depreciation loss, if any. In case it is not possible to estimate the - A financial asset represents a part of a set of financial assets or liabilities or both, which are run and their performance is assessed on fair value basis as per redeemable value of a certain asset, the Group estimates the redeemable value of cash generating unit to which the assets affiliates. When reasonable and fixed the Group’s risk management or documented investment strategy. Information about the set of financial assets or liabilities is internally obtained on this basis. distribution bases are identified, joint assets are distributed to specific cash generating units or distributed to the smaller group of cash generating units for which it is possible to determine reasonable and fixed distribution bases. - The financial asset represents a part of a contract that contains a derivative including one or more, and that IAS No. 39 related to financial instruments A redeemable value is the fair value of the asset minus selling cost or value of use, whichever higher. allows a turnkey compound contract to be classified as financial assets determined at fair value through consolidated statement of profit or loss and other comprehensive income. In case the redeemable value of an asset (cash generating unit) is estimated lower than the listed value, the listed value of asset (cash generating unit) is reduced to the redeemable value. Depreciation losses are directly recognized in the consolidated statement of profit or loss and other comprehensive income, unless the Financial assets determined by fair value through statement of profit or loss and other comprehensive income appear with their fair value. Any profit or loss asset is reassessed, then the depreciation losses are recorded as a reduction from the reassessment provision. resulting from reassessing through statement of profit or loss and other comprehensive income is recognized.

Cancellation of Recognition Net profit or loss includes any profit distributions or interest due from the financial asset and included in the consolidated statement of profit or loss and other comprehensive income. The company cancels recognition of a financial asset only at the expiry of contractual rights related to receipt of cash flows from the financial asset, substantially the transfer of all ownership risks and benefits to another establishment. If the Group fails to transfer or chooses to substantially retain ownership risks and b.) Financial Assets Determined by Fair Value through other comprehensive income statement benefits and continuously control the transferred asset, the Group recognizes its retained share in the transferred asset and related liabilities within limits of amounts expected to be paid. In case all ownership risks and benefits of a transferred asset are substantially retained by the Group, it continues to recognize the The Group’s owned listed shares – circulated in an active financial market as financial assets – are classified through other comprehensive income and included at financial asset. fair value. The Group also possesses investments in unlisted shares not traded in active markets but so classified as financial assets through other comprehensive income and registered at fair value as Management sees it is possible to measure their fair value in an authentic manner. Profits and losses arising out of change Financial Instruments in fair value are included within other comprehensive income items, which are added to the item of accumulated changes in fair value of investments within equity with the exception of depreciation losses. Such depreciation losses are included in the statement of profit or loss and other comprehensive income in case Financial assets and liabilities are recognized when the Group becomes a party to the contractual provisions of these instruments. of excluding investment or there is a depreciation in its value. Profits or losses resulting from previous assessment and recorded in the reserve for reassessing Financial assets and liabilities are initially assessed by fair value. Costs of transaction directly related to purchasing or issuing financial assets and liabilities (other investments are included in the other comprehensive income statement. than financial assets and liabilities with fair value through consolidated statement of profit or loss and other comprehensive income) are added to the fair value of Any revenues from distribution of profits investments through other comprehensive income are recognized when the Group has an emerging right to receive financial assets and liabilities or deducted from the same, when necessary, at initial recognition. Costs of transaction directly related to purchasing financial assets payments for profits of these investments. and liabilities, which are measured by fair value through consolidated statement of profit or loss and other comprehensive income, are directly recognized in the consolidated statement of profit or loss and other comprehensive income. c.) Receivables

First: Financial Assets Receivables are underivative financial assets of fixed or identifiable payments, not listed in any active market. Receivables, including commercial and other receivables, bank balances and cash with amortized cost are measured using the actual interest method without any loss or depreciation, which is determined in Financial assets are classified into the following categories: financial assets at fair value through consolidated statement of profit or loss and other comprehensive profits or losses. income, financial assets through other comprehensive income and loans and receivables. Classification depends on the nature and objective of financial assets and is determined at the time of initial recognition. Recognition of all financial asset sale and purchase operations is conducted by normal means on the basis Interest revenues are identified by applying the actual interest rate, with the exception of short-term receivables when the impact of deduction is not significant. of dealing date. Operations of sale or purchase by normal means are purchases and sales of financial assets requiring the delivery of assets within definite time framework pursuant to regulations or market norms.

144 Annual Report 2018 145 Saudi Automotive Services Co. (SASCO) Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018 Notes to the consolidated financial statements For the year ended 31 December 2018 ______

Second: Financial Liabilities 4.) Allocating a price for the transaction: contract performance obligations: for a contract containing more than one performance obligation, the company shall Financial liabilities (including loans and receivables) are initially and subsequently measured by amortized cost using actual interest method. allocate the transaction price for each performance obligation at an amount determining the consideration made by the Company and also determining the The Group ceases to recognize financial liabilities when an obligation is complied with, canceled or terminated. Difference between book value of excluded amount of consideration the company expects to get against fulfilling each obligation. financial liabilities and paid amount is recorded in the consolidated statement of profit or loss and other comprehensive income. 5.) Recognizing the revenues when (as) the entity fulfills the performance obligation. Method of Actual Interest Rate

The method of actual interest rate is a means to calculate the amortized cost of debt instrument and distribute revenues of interests on the relevant year. An actual Lease Contracts interest rate is the one that exactly discounts estimated future cash payments (including all fees and paid or received points, that constitute an integral part of actual interest rate, transaction costs, installments or other discounts) through the expected life of debt instrument or a shorter period – when necessary – to net Lease contracts are classified as financing leases when risks and ownership benefits are substantially transferred to the lessee under lease contract terms and book value at initial recognition. conditions. Other types of lease contracts are classified as operational lease contracts.

Cash and balances with banks Expenses

Cash and balances with banks include balances with banks, resales for profit and other high liquidity investments transferrable into known cash amounts and All expenses that are direct and related to realization of business revenues consist of salaries, wages and commodity costs that are indirect and credited on sales payable within three months or less as of the date of purchase. costs. Expenses of selling and marketing include sales staff salaries and any other expenses related to selling and marketing in the Group’s favor. Other expenses The Group has long-term financial obligations for which cash amounts have been credited. Such amounts are classified as cash recorded in non-current assets. are classified within administrative and general expenses. Joint expenses are distributed between sales costs and administrative and general expenses. Joint expenses are distributed as per constant rules. Receivables Zakat Provision Commercial receivables appear in the original amount of the invoice after deducting provisions by doubtedly-collected debts. A provision of expected credit losses is formed in case there is a substantive evidence indicating the Group’s inability to collect due amounts according to the original conditions of receivables. Bad Discretionary Zakat is an obligation on the Group. It is set right in the attached consolidated financial statements by allocating it to the consolidated statement debts are deleted when they are determined against their related provisions. Provisions are allocated to the profit or loss statement. Any subsequent redemptions of profit or loss and other comprehensive income according to Zakat Standard and opinion of Saudi Organization for Certified Public Accountants. It is credited by of amounts of receivables, previously deleted, shall be added to revenues. estimation to the year as per principle of maturity.

Zakat is calculated at the end of year based on the amended net consolidated profit or loss or Zakat Base, whichever is larger, pursuant to the laws applicable in Capital Business under Construction the General Authority for Zakat and Tax. The Group obtained the General Authority for Zakat and Tax’s approval to submit a consolidated Zakat declaration for the Group. Capital business under construction appears in costs. It includes the cost of constructions, equipment and direct expenses. Capital business under construction is Differences between provision and final assessment are addressed in the year in which assessment is received. not amortized; but it will be consumed by the Group when it is ready for use as it will be transferred into properties, machinery and equipment.

Long-Term Loans Inventory Loans are recorded in the net received value. Commissions on loans are recorded using the actual commission rate. Commissions on long-term loans are recorded Inventory is valued by cost or net realizable value, whichever is less. Cost is determined by weighted average method. Provision of stagnant goods is recorded in the during the period in which they are due. Commissions on long-term loans for financing capital business under construction are capitalized as part of the expenses statement of profit or loss and other comprehensive income according to the Group’s Policy. The net realizable value represents the estimated sale price within the of this business. ordinary course of business minus estimated costs and estimated necessary costs to complete the selling process.

Borrowing Costs Reputation Borrowing costs, used directly for acquiring, constructing or producing an asset that is qualified for the conditions of capitalizing the borrowing costs, are Reputation represents the increase of investment costs on fair value of acquired assets at business combination. Reputation is annually assessed to determine capitalized as part of the costs of that asset. Qualified assets are those that necessarily require a long time to be ready for use. Other borrowing costs are recorded depreciation and is recorded with costs minus depreciation losses. Depreciation losses are not reflected after being recorded. Profits or losses of establishment as expenses in the consolidated profit or loss statement in the period during which they were incurred by the Group. exclusion include the book value of reputation related to sold establishment. In case the cost of acquired investment is less than its fair value in the acquisition date, such difference is settled by reducing the fair value of non-current assets of acquired group on pro rata basis with their book value with the exception of long-term investments in securities. Staff Remuneration

Payables -- End of Service Gratuity End of service gratuity is determined using expected unit cost method along with conducting an actuarial evaluation at the end of each annual financial Obligations are recorded against amounts payable in the future for received services, whether respective invoices are provided by suppliers. period. Remeasurement, which includes actuarial gains and losses, is included in the consolidated financial position statement. However, expenses or credit amounts are included in the consolidated statement of profit or loss and other comprehensive income of the period in which they were incurred. Recognized remeasurement is immediately included in other comprehensive income within retained profits and not reincluded in profit or loss. Revenues -- Retirement Benefits Revenues from sales are recorded when delivering goods and providing services to clients. Revenues of commodity sales are recognized based on a five-step model The Group pays retirement subscriptions in favor of its Saudi employees to the General Organization for Social Insurance, representing a certain contribution as indicated in IFRS No. 15: plan. Payments are considered expenses when incurred. -- Short Term Staff Remuneration 1.) Identifying the contract with customer: a contract is defined as an agreement between two or more parties. It creates enforceable rights or obligations and Commitment to benefits payable to employees in terms of wages, salaries, annual leave and sick leave is recognized in the year in which the relevant service determines the standards that must be met. is provided in the undiscounted amount for benefits expected to be paid in consideration of this service.

2.) Identifying the contract performance obligations: a performance obligation is a promise with the customer to transport a commodity or offer a service. -- Actuarial Study The Group conducted an actuarial study to staff end of service benefits as at 31 December 2016, 2107 and 2018. There was no substantial difference between 3.) Determining the transaction price: a transaction price is the amount of money a company expects to achieve against transferring commodities or promised the end of service balance according to the actuarial study and the end of service balance recorded in 31 December 2016, 2017 and 2018 in Group’s consolidated services to the customer with the exception of combined amounts on behalf of third parties. financial statements.

146 Annual Report 2018 147 Saudi Automotive Services Co. (SASCO) Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018 Notes to the consolidated financial statements For the year ended 31 December 2018 ______

Intangible Assets 7-2 Impact of application on consolidated statement of changes in shareholders’ equity for the year ending on 31 December 2017:

Intangible assets, except reputation, are measured in costs minus accumulated amortization and depreciation losses, if any. Intangible assets were amortized on Reserve for reassessing a straight-line basis throughout the economic lifetime. investments through other Profit Distribution comprehensive Capital Statutory Reserve Retained earnings income Total Profit distributions of the Group’s shareholders are recognized within other liabilities item in the Group’s consolidated financial statements in the period in which (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) profit distributions are approved by the Group’s shareholders. Balance as at 13 Dec. 2017 as 540,000,000 40,852, 236 147,185,411 55,485,941 783,496,588 previously disclosed Sector Information Amendments of previous years as - - (13,128,000) - (13,128,000) Business Sector represents a set of assets and operations both jointly provide products or services subject to risks and revenues different from that related to per IAS No. 8 sectors of other activities, which are measured as per reports employed by the Chief Executive Director and senior decision maker in the Group. The geographical sector provides products in a certain economic environment subject to risks and revenues different from that related to business sectors in ------economic environments. Balance as at 31 Dec. 2017 (amended) 540,000,000 40,852, 236 88,811,473 59,446,802 723,110,511 Set-Off

A set-off is made to financial assets and liabilities. The net amount is presented in the consolidated financial position statement when there is a binding legal right 7-3 Impact of application on consolidated statement of profit or loss and other comprehensive income to make a set-off between these amounts. The Group intends to settle on the basis of the net of these amounts or recognize the asset and settle the obligation at or the year ending on 31 December 2017: the same time. Amounts previously Balance after recorded Impact of amendment Transfer of foreign currency 31 Dec. 2017 application (Saudi 31 Dec. 2017 (Saudi Riyal) Riyal) (Saudi Riyal) Transactions conducted in foreign currency are transferred into Saudi Riyal at the exchange rates prevailing at the time of transaction. Cash assets and liabilities undertaken in foreign currency as at the date of the consolidated financial position statement are transferred into Saudi Riyal at the exchange rates prevailing General and administrative expenses (42,940,399) (835,661) (43,776,360) at the end of year. Profits and losses arising out of payments or foreign currency exchange are included in the consolidated statement of profit or loss and other Earnings unrealized from investments at fair value through profit or loss 9,211 (999,351) (990,140) comprehensive income. Movement of fair value of investments through other comprehensive income (28,768,780) 999,351 (27,769,429) 7- Impact of applying International Financial Reporting Standards (IFRS) No. 9 and amendments of previous years according to International Financial Reporting Standards No. 8 7-4 Impact of application and amendment on consolidated financial position statement as at 1 January 2017: - As of 1 January 2018, the Group applied IFRS No. 9, deleted receivables of SR 28,422,416, recorded receivables allowances at SR 12,000,000 as at 1 January 2017 Reclassification Impact of as part of the retained profits as per the requirements of International Accounting Standard (IAS) No. 9 and deleted receivables of SR 835,661 during the year Amounts previously in line with the amendments Balance after ending on 31 December 2017 as the Group’s Management sees there are no expectations to redeem such amounts. recorded as at 1 Jan. Impact of presentation of made to amendment 1 Jan. 2017 application present year previous years 2017 - Allowances of SR 13,128,000 were recorded as at 1 January 2017. The aim was to address customs and government claims as the Group’s Management found (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) that there are potential claims for previous periods and did not take into account such allowances and available information during such periods. Therefore, Net receivables, advance payments, 171,708,591 (28,422,416) (6,210,921) - 137,075,254 according to IAS No. 8 “Accounting Policies, Changes in Accounting Estimates and Errors”, these amendments were considered an accounting error as there and other assets was information on previous periods and was not included in such periods. Following is the impact of the application and amendments on previous years: Investments at fair value through 124,829,900 (31,423,169) - - 93,406,731 7-1 Impact of application and amendment on consolidated financial position statement as at 31 December 2017: other comprehensive income Investments at fair value through - 31,423,169 - - 31,423,169 profit or loss Reclassification Impact of Amounts previously in line with the amendments Balance after Payables and other liabilities 142,722,717 12,000,000 - 13,128,000 167,850,717 recorded as at 31 Impact of presentation of made to amendment as at 31 Dec. 2017 application present year previous years Dec. 2017 Earnings retained after applying 120,320,281 (43,383,926) - (13,128,000) 63,808,355 (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) IFRS No. 9 and amendments of Net receivables, advance payments, 203,386,106 (29,258,077) (2,059,984) - 172,068,045 previous years as per IAS No. 8 and other assets 7-5 Notes on Settlements Investments at fair value through 96,061,120 (30,423,818) - - 65, 637,302 other comprehensive income -- Receivables of SR 28,422,416 were deleted, receivables allowances of SR 12,000,000 were recorded as at 1 January 2017 as part of the retained profits as per the requirements of International Accounting Standard (IAS) No. 9 and receivables of SR 835,661 were deleted during the year ending on 31 December 2017 Investments at fair value through 879,202 30,423,818 - - 31,303,020 as the Group’s Management sees there are no expectations to redeem such amounts. profit or loss -- -- The Group’s investment in the investment portfolio with Al Ahli Capital run by Mulkia Investment Co. were reclassified at SR 31,423,169 as at 1 January 2017 Payables and other liabilities 142,974,768 12,000,000 - 13,128,000 168,102,768 from investments held for sale into investments at fair value through profit or loss according to the Group’s Business Model related to this investment according to the requirements of IFRS No. 9 – Financial Instruments. Earnings retained after applying 147,158,411 (45,218,938) - (13,128,000) 88,811,473 -- IFRS No. 9 and amendments of -- Unrealized profit related to fair value investments was reclassified at SR 2,982,015 as at 1 January 2017 from reserve of reclassifying investments held for previous years as per IAS No. 8 sale into accumulated losses as well as an amount of SR 999,351 as at 31 Dec. 2018 from reserve of reclassifying investments held for sale into reserve of reclassifying investments through profit or loss according to the requirements of IFRS No. 9 – Financial Instruments.

148 Annual Report 2018 149 150

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018 ______

8- Net Properties & Equipment Machines equip- ment trailers Communica- Computers Vehicles & transportation tion devices and and Electrical Advert. Improving Lands Buildings Furniture trucks equipment telephones software equipments Signs buildings Total (SR) (SR) (SR) (SR) (SR) (SR) (SR) (SR) (SR) (SR) (SR) Cost

1 January 2018 419,803,172 626,200,090 23,222,419 41,862,458 69,340,421 1,783,199 10,233,669 34,303,103 19,651,870 161,964,837 1,358,364,238 (amended) Additions 20,665,099 549,568 946,597 3,399,548 7,732,933 18,017 2,248,346 1,366,358 4,880,259 6,617,324 48,409,500 Items Converted to - 27,630,326 178,002 - 895,163 - - 446,869 - 7,659,580 36,840,940 projects (Note 10) Exclusions (20,665,099) (120,413) (1,168,783) (1,076,787) (852,606) (70,356) (30,600) (825,386) (204,637) (84,929) (25,089,596)

31/12/2018 419,802,172 654,259,571 23,178,535 44,158,219 77,115,911 1,715,813 12,461,415 35,291,124 24,327,492 126,192,830 1,418,530,082 Accumulated consumptions

1 January 2018 - 169,154,224 15,859,816 18,194,196 27,378,531 1,506,635 4,980,638 15,380,470 10,426,810 26,469,382 289,386,702 (amended) Additions - 17,635,065 1,071,905 3,368,955 7,144,319 129,241 1,620,236 2,781,092 2,363,314 8,606,990 44,721,127 Exclusions - (61,716) (1,158,122) (527,743) (665,096) (70,344) (30,599) (801,975) (204,619) (14,833) (3,252,046)

31/12/2018 - 186,717,572 15,773,599 21,035,408 33,857,764 1,565,532 6,580,275 17,359,588 12,622,505 35,061,539 330,582,783 Net book value 419,802,172 167,531,998 7,404,936 23,149,811 43,258,147 150,281 5,881,140 17,931,536 11,705,987 91,131,291 1,087,947,299 At 31/12/2018 At 31/12/2017 419,802,172 457,045,866 7,362,603 23,668,262 41,961,890 276,564 5,253,031 18,922,633 9,189,060 85,495,455 1,068,977,536

b.) The buildings item includes buildings which cost in the accounting registers scored SR 405,730,469 (2017: SR 377,437,302) erected on plots leased under operational lease contracts with a duration of renewable 535- years.

c.) Properties, machinery and equipment include lands and buildings which cost in registers scored SR 40,896,233 (2017: SR 40,896,233). Their title deeds are pledged against facilities granted to the Group from banks to get bank facilities (Note 16).

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018 ______

8- Net Properties & Equipment (continued) Machines equip- ment trailers Communica- Computers Vehicles & transportation tion devices and and Electrical Advert. Improving Lands Buildings Furniture trucks equipment telephones software equipments Signs buildings Total (SR) (SR) (SR) (SR) (SR) (SR) (SR) (SR) (SR) (SR) (SR) Cost

As on 1 January 419,803,172 441,520,975 20,750,319 27,222,668 59,200,406 1,765,182 12,233,481 28,801,913 17,334,609 84,729,077 1,123,360,807 2017 (amended) Additions - 3,997,828 3,071,921 5,857,965 3,906,138 18,017 2,587,344 4,772,479 2,331,907 12,517,340 38,060,939 Items Converted - 180,712,287 593,213 - 7,011,458 - 56,110 1,274,916 93,051 15,044,599 304,785,634 from capital projects under construction (Note No. 10) Exclusions - (31,000) (193,034) (1,218,175) (777,581) - (43,259) (546,205) (107,697) (336,179) (3,243,130) Items Converted ------(4,600,012) - - - (4,600,012) into intangible assets (Note No. 9a) 31/12/2017 419,802,172 626,300,090 23,222,419 41,862,458 69,340,421 1,783,199 10,233,669 34,303,103 19,651,870 111,964,837 1,358,364,238 Accumulated consumptions

As a 1 January 2017 - 149,476,890 14,986,640 15,137,075 22,977,480 1,447,528 5,542,638 13,253,421 8,615,800 18,353,872 249,791,344 (amended) Additions - 19,690,236 1,019,213 3,909,020 5,167,624 59,107 1,447,111 2,533,939 1,934,581 8,335,463 44,096,294 Exclusions - (21,902) (146,037) (851,899) (766,573) - (39,761) (406,890) (87,571) (219,953) (2,531,586) Items Converted ------(1,969,350) - - - (1,969,350) into intangible assets (Note No. 9a) 31/12/2017 - 169,154,224 15,859,816 18,194,196 27,378,531 1,506,635 4,980,638 15,380,470 10,462,810 26,469,382 289,386,702 Net book value

Annual Report 2018 419,802,172 457,054,866 7,362,603 23,668,262 41,961,890 276,564 5,253,031 18,922,623 9,189,060 85,495,455 1,068,977,536 At 31/12/2017 At 31/12/2017 419,802,172 392,044,085 5,763,679 22,085,593 36,222,926 317,654 6,690,848 15,548,492 8,718,809 66,375,205 873,569,463 151 Saudi Automotive Services Co. (SASCO) Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018 Notes to the consolidated financial statements For the year ended 31 December 2018 ______

9- Net intangible assets Sensitivity towards assumption changes 1 Jan. 2017 31 Dec. 2018 31 Dec. 2017 (amended) With respect to estimating the current value, Management believes there are no reasonable possible changes in any of the above core assumptions, that may (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) lead to a major increase in unit book value including reputation compared to its redeemable value. Following are assumptions originating from changes to key Software licenses (Note 9-a) 6,723,091 5,755,607 4,290,167 assumptions: Reputation (Note 9-b) 4,308,993 4,308,993 4,308,993 a.) Sales growth-related assumptions 11,032,084 10,064,600 8,599,160 b.) Sales cost c.) Final value ratio 9-a- Software licenses 10- Projects under execution 31 Dec. 2018 31 Dec. 2017 1 Jan. 2017 (Saudi Riyal) (Saudi Riyal) (amended) (Saudi Riyal) This item, which value is SR 40,011,413, represents the cost of establishing oil stations in different parts of the Kingdom of Saudi Arabia. It is expected to conclude Cost as at 1 January (amended) 16,669,133 12,069,121 7,151,453 such projects during 2019, with their value being SR 48,5 million. Additions 2,699,481 - 4,917,668 Following is the movement of projects under execution for the year ending on 31 December: Items converted from properties, - 4,600,012 - machinery and equipment (Note 8) 31 Dec. 2018 31 Dec. 2017 1 Jan. 2017 (Saudi Riyal) (Saudi Riyal) (amended) As at 31 December 19,368,614 16,669,133 12,069,121 (Saudi Riyal)

Accumulated amortization Balance at the beginning of year 25,000,017 150,783,566 48,002,427 Additions during the year 51,857,336 79,142,911 155,750,748 As at 1 January (amended) (10,913,526) (7,778,954) (5,545,727) Items converted into properties, machinery and equipment (Note 8) (36,845,940) (204,785,634) (52,969,609) Year amortization (1,731,997) (1,165,222) (528,067) Closing of capital works under execution - (140,826) - Items converted from properties, - (1,969,350) (1,705,160) Balance at the end of year 40,011,413 25,000,017 150,783,566 machinery and equipment (Note 8)

As at 31 Dec. (12,645,523) (10,913,526) (7,778,954) 11- Investments at fair value through other comprehensive income Net book value a.) This item consists of the following: As at 31 Dec. 6,723,091 5,755,607 4,290,167 1 Jan. 2017 As at 1 Jan. 5,755,607 4,290,167 1,605,726 31 Dec. 2018 31 Dec. 2017 (amended) (Saudi Riyal) (Saudi Riyal) (Saudi Riyal)

9 - b- Reputation Investments at fair value through other comprehensive income in 103,563,396 65,637,302 93,406,731 stocks and shares of non - trading companies Reputation was obtained thanks to acquiring Zaiti Petroleum Services Company in 2015 as follows: 1 Jan. 2017 b.) Following is the movement on reserve of reassessing investments at fair value through other comprehensive income: 31 Dec. 2018 31 Dec. 2017 (amended) (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) 1 Jan. 2017 31 Dec. 2018 31 Dec. 2017 (amended) Zaiti Petroleum Services Company 4,308,993 4,308,993 4,308,993 (Saudi Riyal) (Saudi Riyal) (Saudi Riyal)

Balance at the beginning of year 59,446,802 87,216,231 98,005,687 Fair value movement for investments of stocks and shares of 16,101,094 (27,769,429) (10,789,456) A reputation test is conducted on an annual basis. Assets are tested to make sure of any depreciation through comparing book value with redeemable value, non - trading companies which is determined on the basis of information used in calculating the present value. The present value uses expected cash flows that are based on financial Balance at the end of year 75,547,896 59,446,802 87,216,231 expectations approved by Senior Management for a period of five years.

Key assumptions used in present value calculation

The Management relied, in its expectations regarding sales growth and total margin, on previous performance and its expectations with respect to market developments. Discount rates reflect Management’s expectations of sector-related specified risks. The relevant estimations relied on published information and movement of raw material prices in previous periods, which were used as indicators on future prices movement. Growth rates relied on average industry rates.

Calculation of present value is largely impacted by assumptions related to sales growth rates and inflation in cost of sales used in extracting cash flows for the period following budget for a period of five years and other factors used for calculation of final value. A final value is calculated using the price-to-earnings ratio.

152 Annual Report 2018 153 Saudi Automotive Services Co. (SASCO) Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018 Notes to the consolidated financial statements For the year ended 31 December 2018 ______

c.) Investments through other comprehensive income in stocks of non-trading companies 12- Net receivables, advance payments, and other assets

The Group possesses stocks and shares in non-trading companies. During 2018, the Group contracted with ALDUKHEIL FINANCIAL GROUP, a company licensed a.) This item consists of the following: by the Capital Market Authority, practicing its business in investment banking and consulting services. The aim of the contract was to assess and valuate the market value of companies on the basis of future cash flows, financial analysis and expected growth rates. The market value of Middle East Battery Company 31 Dec. 2017 1 Jan. 2017 (MEBCO) was SR 798,405,118 (2017: SR 794,190,000), while the market value of National Company of Tourism (Syahya) was SR 687,078,112 (2017: SR 681,560,000). 31 Dec. 2018 (amended) (amended) The Group did not assess investment in United Racing Company. Therefore, investment is processed by fair value method. As it was not possible to determine (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) its fair value, the best way to determine fair value was the cost. Debts of fuel clients and tenants - b 144,742,110 98,021,293 67,307.123 Minus- provision of expected credit loss – c (5,214,808) (5,214,808) (5,037,317) Following is the Group’s share: Net 139,527,302 92,806,485 62,269,806 As at 31 December 2018: Prepaid leases 40,779,772 38,766,894 41,402,226 Value of Group’s share at Group’s share at Advance payments to providers 16,860,272 15,545,499 17,976,072 Assessment purchase cost fair value Reassessment profit Advance payments to contractors 11,904,346 15,657,863 779,571 Statement Group’s share (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) Staff advance payments and loans 8,077,550 2,051,110 779,571 Middle East Battery Company (MEBCO) 12.79% 789,405,810 26,390,500 100,964,915 16,081,229 Guarantee letters (Note 27) 5,589,050 4,560,597 7,530,181 National Company of Tourism (Syahya) 0.36% 687,078,112 1,500,000 2,473,481 19,865 Recovered insurance - d 3,311,848 3,718,938 603,523 United Racing Company 25% - 125,000 125,000 - Customs claims 1,817,019 - - 1,485,483,230 28,015,500 103,563,396 16,101,094 Other 5,347,689 3,693,821 2,457,075 233,214,848 176,801,207 141,808,416 Other receivables provision (6,429,032) (4,733,162) (4,733,162) * On 6 September 2018, the Group concluded an agreement to increase its owned shares in Middle East Battery Company (MEBCO) against an amount of SR 226,785,816 172,068,045 137,075,254 21,825,000 and thus the Group’s owned shares rose to 1,279 shares. Consequently, the Group’s share became 12,79% as at 31 December 2018 (7,94%: 31 December 2017).

As at 31 December 2017: b.) The item of debts of fuel clients and tenants includes 49% of balances payable by government entities (2017: 19%) Value of Group’s share at Group’s share at Assessment purchase cost fair value Reassessment profit c.) Following is the movement of expected credit loss provision for the year ending on 31 December: Statement Group’s share (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) Middle East Battery Company (MEBCO) 7.94% 794,190,000 4,565,500 63,058,686 (27,774,914) 31 Dec. 2018 31 Dec. 2017 1 Jan. 2017 (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) National Company of Tourism (Syahya) 0.36% 681,560,000 1,500,000 2,453,616 5,485 Balance at the beginning of year 5,214,317 5,037,317 4,162,117 United Racing Company 25% - 125,000 125,000 - Component during the year - 177,491 875,200 1,475,750,000 6,190,500 65,637,302 (27,769,429) Balance at the end of year 5,214,317 5,214,808 5,037,317

Lives of receivables were as follows: As at 1 January 2017: Value of Group’s share at Group’s share at 31 Dec. 2018 31 Dec. 2017 1 Jan. 2017 Assessment purchase cost fair value Reassessment profit (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) Statement Group’s share (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) From 1 day – 90 days 56,105,774 56,105,953 36,546,852 Middle East Battery Company (MEBCO) 7.94% 1,144,000,000 4,565,500 90,833,600 (10,798,400) From 91 days – 180 days 31,734,490 36,887,905 29,177,965 National Company of Tourism (Syahya) 0.36% 680,036,388 1,500,000 2,448,131 8,944 From 181 days – 360 days 52,489,411 5,027,435 1,582,306 United Racing Company 25% - 125,000 125,000 - More than 360 days 7,416,435 - - 1,824,036,388 6,190,500 93,406,731 (10,789,456) 144,742,110 98,021,293 67,307,123

d.) Recovered insurance item includes an amount of SR 3,000,000 which is the value of a financial cash guarantee to pay customs fees to the Sudanese Customs Authority with respect to Saudi cars visiting Sudan with Customs transit books issued by Saudi Automobile & Touring Association, Ltd SATA (subsidiary).

154 Annual Report 2018 155 Saudi Automotive Services Co. (SASCO) Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018 Notes to the consolidated financial statements For the year ended 31 December 2018 ______

13- Net inventory b.) Following is the movement of fair value investments through profit or loss in investment funds during the year:

31 Dec. 2018 31 Dec. 2017 1 Jan. 2017 31 Dec. 2017 (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) 31 Dec. 2018 (amended) (Saudi Riyal) (Saudi Riyal) Commodity and petroleum 38,634,076 27,275,876 23,960,389 Balance at the beginning of year (amended) 879,202 - Inventory of spare parts 7,476,934 6,310,043 1,250,512 Purchases during the year 190,330,099 869,991 Customs transit books (Trip-Tik) and international driving licenses 1,816,620 1,321,215 1,338,957 Sales during the year (190,950,000) - Other 3,265,870 1,430,272 872,676 Change in fair value 4,967 9,211 Total 51,193,500 36,337,406 27,422,534 - - (98,535) Balance at the end of year 264,268 879,202 Minus: stagnant goods provision

51,193,500 36,337,406 27,323,999

15- Cash with the fund and balance with banks

Following is a statement of stagnant goods provision: 31 Dec. 2017 1 Jan. 2017 31 Dec. 2018 (amended) (amended) 31 Dec. 2018 31 Dec. 2017 1 Jan. 2017 (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) Cash with the fund 7,140,181 2,399,696 6,963,289 Balance at the beginning of year - 98,535 1,151,544 Balances with banks* 67,094,831 94,875,634 110,718,110 Component during the year - - 98,535 Provision no longer required - (98,535) (1,151,544) 74,235,330 97,275,330 117,681,676 Balance at the end of year - - 98,535 There are balances with banks in an amount of SR 39,715,364 representing a cash with banks against obligations in consideration shareholders’ entitlements. 14- Fair value investments through profit or loss 16- Financing of resales for profit as well as long and short-term loans

31 Dec. 2017 1 Jan. 2017 a.) Banque Saudi Fransi (BSF) 31 Dec. 2018 (amended) (amended) (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) On 13 August 2012, the Group signed a Sharia-compliant facilities (profit for sale) agreement with BSF of SAR (255,000,000). The agreement included letters Fair value investments through profit or loss in trading companies (L 14) 5,709,100 30,423,818 31,423,169 of guarantee facilities of SAR (70,000,000), real estate loan facilities of SAR (90,000,000), loans to finance and develop fuel stations of SAR (55,000,000), a Fair value investments through profit or loss in investment funds (14 -b) 264,268 879,202 - short-term finance of up to SAR (20,000,000), and documentary credits of SAR (20,000,000). The agreement expired on 31 July 2015. The Group amended the 5,973,368 33,303,020 31,423,169 agreement amount on April 28th, 2015, to be SAR (550,900,000). It included the renewal of existing facilities of SAR (245,800,000) (of which SAR 110,000,000 a.) Movement of fair value investments through profit or loss in stocks of trading companies represent various credit facilities and SAR 135,800,000 represent medium-term finance facilities) guaranteed by a promissory note and/or securities or a deposit and pledge of title deeds in addition to new facilities of SR 305,1 million, diversified credit facilities of SR 55,1 million and long-term financing facilities Fair value investments through profit or loss are represented in stocks of trading companies listed in the Saudi Capital Market Authority. Following is the of SR 250 million) guaranteed by a promissory note. The agreement aims to finance the purchase of new lands, building new stations, and improving and movement of these investments during the year: developing the existing stations. The Group again on Feb. 17th, 2017, signing the same on 20 June 2017, amended the agreement amount to SAR (502,500,000).

31 Dec. 2017 1 Jan. 2017 The agreement included short-term financing of SAR (20,000,000), issuing letters of guarantee and documentary credits of SAR (120,000,000), long-term 31 Dec. 2018 (amended) (amended) financing of SAR (338, 500,000) medium-term financing of SAR 24,000,000 guaranteed by a promissory note and/or securities or a deposit and pledge of (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) title deeds. The agreement aims to finance the purchase of new lands, building new stations and improving stations. The Group renewed and amended the Balance at the beginning of year (amended) 30,423,818 31,423,169 34,384,679 agreement amount on April 16th, 2017, to be SAR (439,200,000). This included renewal of existing facilities of which SAR (169,100,000) represent various credit Sales during the year (24,127,649 - - facilities and SAR (270,100,000) represent finance facilities. The Group was given an additional grace period of one year and payment will be effective as of 1 Unrealized losses from reassessing investments (587,069) (999,351) (2,961,510) June 2018. The agreement aims to finance the purchase and building of new stations. On 22 May 2018, the Group renewed the agreement to be SR 391 million. Balance at the end of year 5,973,368 30,423,818 31,423,169 In includes renewal of existing facilities, of which SR 140 million for diversified credit facilities and SR 251 million for short, medium and long-term facilities guaranteed by a promissory note. The agreement aims to finance the purchase and building of new stations.

During the year ending on 31 December 2014, an agreement was signed for managing an investment portfolio with Al Ahli Capital, which is run by Mulkia Investment Co. The aim was to diversify the Group’s investments and sources of income. During 2018, the Group’s Management decided to transfer the net portfolio value from investment held of sale account into an account of fair value investments through profit or loss. Therefore, investment was reclassified in comparison years.

156 Annual Report 2018 157 Saudi Automotive Services Co. (SASCO) Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018 Notes to the consolidated financial statements For the year ended 31 December 2018 ______

b.) NCB e.) Alawwal Bank

SASCO signed a Shariah-compliant credit facilities agreement with NCB of SAR (92,000,000) guaranteed by local share pledge with the aim to expand On December 21st, 2015, the Group signed a (Shariah-compliant) resales for profit facilities agreement with the Alawwal Bank (a Saudi joint-stock company). construction and acquisition of fuel stations. The agreement is valid until 1 June 2019. This agreement includes a general facility limit of SAR (150,000,000) in the form of a medium-term loan of SAR (100,000,000) for a financing period of 54 On August 25th, 2015, the Group signed a new Shariah-compliant facilities agreement with NCB of SAR (151,800,000), including long-term loans of SAR months (18-month grace period), provided the repayment of loan at equal semi-annual successive instalments. This is in addition to letters of guarantee (101,100,000), bank letters of guarantee of SAR (25,000,000), short-term loans of SAR (25,700,000). The agreement aims to expand SASCO projects, support its of SAR (40,000,000) and documentary credits of SAR (10,000,000). The agreement aims to expand the Group’s projects, support its core activities, purchase core activities, and purchase new sites to build fuel stations as well as to finance the working capital. The agreement was renewed on May 1st, 2016 and its new sites to build fuel stations as well as to finance the working capital. The agreement was renewed on Dec. 28st, 2018 and its total value became SAR value became SAR (201,300,000), including long-term loan facilities of SAR (150,600,000) and bank letters of guarantee of SAR (25,000,000) and short-term (98,500,000) and the value of total guarantees became SAR (50,000,000) including medium-term loans of SAR (48,500,000). On October 31st, 2018, the loans of SAR (25,700,000). The agreement is valid until 1 June 2019. agreement was renewed and amended and its total value became SAR (105,500,000) and the value of total guarantees became SAR (75,000,000) including The agreement was amended on April 30st, 2018 and its value became SAR (200,700,000), including long-term loans of SAR (150,700,000) and bank letters medium-term loans of SAR (29,500,000) guaranteed by a promissory note. of guarantee of SAR (25,000,000) and short-term loans of SAR (25,000,000). The agreement aims to expand SASCO projects, support its core activities, and purchase new sites to build fuel stations. The agreement was amended on 26 September 2018 and its value became SAR (25,700,000) in the form of short-term f.) Riyadh Bank commercial facility with a promissory note. The aim of the agreement is to support the needs of working capital. On December 21st, 2015, the Group signed a (Shariah-compliant) facilities agreement with Riyadh Bank (a Saudi joint-stock company). The agreement includes c.) SABB bank letters of guarantee of SAR (50,000,000), aiming at expanding SASCO projects, supporting its core activities, purchasing new sites to build fuel stations as well as to finance the working capital. On March 8th, 2018, the Group amended the agreement and added an amount of SR 320,000,000 guaranteed in On May 25th, 2015, the Group signed a new Shariah-compliant facilities agreement with SABB of SAR (150,000,000) effective from the date of signing thereof, the form of long-term finance of SR 235,000,000, short-term finance of 20,000,000, documentary credits of 20,000,000 and a hedge to set interest rates at SR provided the use thereof before January 31st, 2017, and guaranteed by a promissory note. This agreement includes a long-term loan of SAR (100,000,000) and 45,000,000. This was in addition to SR 50,000,000 and the final value of the agreement became 370,000.000 guaranteed by a promissory note, and real estate bank letters of guarantee of SAR (50,000,000). The agreement aims to partially finance capital expenses, purchase land, and build new fuel stations. It expired deed mortgage of SR 100,000,000. on 31 January 2016 and was extended to be valid until 31 January 2018. The agreement was amended on Dec. 7th, 2018 and its value became SAR (177,900,000), guaranteed by a promissory note, including a long-term loan of Following is the loan movement as at 31 December: SAR (47,900,000) in addition to SAR (80,000,000) in the form of bank letters of guarantee and short-term loans of SAR (50,000,000). The agreement aims to partially finance capital expenses, purchase land, and build new fuel stations as well as to finance the working capital. It will expire on January, 31th, 2019. 31 Dec. 2018 31 Dec. 2017 1 Jan. 2017 On May 10th, 2018, the Group renewed and amended the agreement, and its value became SR 400,000,000 guaranteed by a promissory note. This agreement (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) includes a long-term loan of SAR (150,000,000) and bank letters of guarantee of SAR (200,000,000) in addition to 50,000,000 as short-term loans. The Balance at the beginning of year 555,518,930 514,406,225 421,497,554 agreement aims to partially finance capital expenses, purchase land, and build new fuel stations as well as to finance the working capital. It expired on 31 Amounts received during the year 513,962,886 192,176,340 223,742,005 January 2020. Amounts paid during the year (476,407,255) (151,063,635) (140,833,334) Balance 593,074,561 555,518,930 514,406,225 d.) Gulf International Bank (GIB)

Financing of resales for profit and short-term loans 115,000,000 95,000,000 44,594,800 On December 13th, 2015, the Group signed a (Shariah-compliant) resales for profit facilities agreement with the Gulf International Bank (GIB) (a Bahraini joint- Trading portion from financing of resales for profit and long-term loans 100,688,892 109,479,080 134,043,817 stock corporation) of SAR (150,000,000) guaranteed by a promissory note. This agreement includes a medium-term loan of SAR (50,000,000) with a finance Financing of resales for profit and long-term loans 377,385,669 351,039,850 335,767,608 period of five (5) years (2-year grace period), provided the repayment of loan at equal quarterly instalments. This is in addition to issuing letters of guarantee of SAR (100,000,000). The agreement aims to expand the Group’s projects, support its core activities, purchase new sites to build fuel stations as well as to 17- Payables and other liabilities finance the working capital. On September 6th, 2018, the Group renewed and amended the agreement, and its value became SR 48,000,000 in the form of payment guarantees guaranteed by a promissory note. 31 Dec. 2017 1 Jan. 2017 31 Dec. 2018 (amended) (amended) (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) Petroleum providers 80,909,206 49,632,844 64,154,935 Revenues received in advance 52,460,050 36,856,497 33,926,435 Commodity and service providers 19,753,109 26,215,742 8,428,718 Customs claims provision 14,088,752 12,000,000 12,000,000 Due expenses 12,358,469 8,653,180 9,575,547 Performance bond guarantee 9,899,145 13,220,647 11,468,643 Lease claims provision 4,381,009 13,128,000 13,128,000 Deposits for third parties 1,284,539 2,471,569 9,768,068 Other 5,163,645 5,924,289 5,400,371 200,297,942 168,102,768 167,850,717

158 Annual Report 2018 159 Saudi Automotive Services Co. (SASCO) Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018 Notes to the consolidated financial statements For the year ended 31 December 2018 ______

18- Distributions payable to shareholders 20- Statutory Reserve

31 Dec. 2018 31 Dec. 2017 1 Jan. 2017 In accordance with the Saudi Companies Law, the Group transfers ten per cent (10%) of annual net profit to the statutory reserve. Such transfer shall continue (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) until reserve reaches 30% of capital. The statutory reserve is not distributable as dividends for shareholders. Profit distributions 17,019,249 15,959,366 16,020,787 Shares sold by auction 16,779,795 16,838,220 16,869,688 21- Revenues Subscription surplus – at incorporation 2,258,650 2,262,950 2,275,650 Surplus of capital decrease 2,199,778 2,199,778 2,199,778 Revenues of two years ending on 31 December are as follows: Subscription surplus – second installment 1,537,892 1,537,892 1,537,892

39,715,364 38,718,206 38,823,795 31 Dec. 2018 31 Dec. 2017 (Saudi Riyal) (Saudi Riyal) 19- Zakat Provision Fuel operation revenues 1,647,772,790 892,673,753 Grocery revenues 201,456,232 163,719,373

31 Dec. 2017 1 Jan. 2017 Lease revenues 125,451,863 129,165,765 31 Dec. 2018 (amended) (amended) Other 81,400,117 26,770,916 (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) 2,056,081,002 1,212,329,807 Shareholders’ equity 751,862,914 782,445,223 720,273,786 Net amended income 55,621,953 37,892,954 39,011,026 22- General and administrative expenses Additions 535,435,627 411,286,283 360,002,304 Deductions (1,237,736,458) (1,106,591,205) (996,552,300) 31 Dec. 2018 31 Dec. 2017 Total 105,184,036 125,033,255 122,734,816 (Saudi Riyal) (Saudi Riyal) Zakat base 105,184,036 125,033,255 122,734,816 Staff salaries, wages and benefits 27,668,290 22,820,117 Professional fees and consultation 3,668,987 1,609,708 Following is the movement of Sharia Zakat provision during the year ending on 31 December: Customs claims provision (Note 17) 2,088,752 4,096,683 Other receivables provision (Note 12) 1,695,870 - 31 Dec. 2017 1 Jan. 2017 Consumption of properties, machinery and equipment 1,547,636 2,973,689 31 Dec. 2018 (amended) (amended) Amortization of intangible assets 1,523,908 650,001 (Saudi Riyal) (Saudi Riyal) (Saudi Riyal) Leases 1,068,769 1,016,682 Balance at the beginning of year 3,826,470 4,409,500 3,962,922 Bank expenses 1,031,904 973,989 Amounts paid during the year (3,423,780) (4,378,030) (3,208,422) Electricity and water 200,851 187,867 Component during the year 2,775,004 3,125,831 3,655,000 Maintenance expenses 200,560 175,252 Component by increase over Zakat base during the year - 669,169 - Amounts paid during the year against Zakat assessments - 3,694,215 Balance at the end of year 3,177,694 3,826,470 4,409,500 Other 1,413,515 4,761,233 42,109,042 43,776,360 During 2013, Group obtained the General Authority for Zakat and Tax’s approval to submit a consolidated Zakat declaration for both Group and its subsidiaries according to letter No. 19181/16-1437. 23- Other evenues Group submitted its Zakat declarations and paid the amounts due until the year ending on 31 December 2017 and was given a final Zakat certificate for 2014 and a restricted Zakat certificate for 2017. Group received final Zakat assessments from the General Authority for Zakat and Tax for years 2000 – 2008 according 31 Dec. 2018 31 Dec. 2017 to Tax Appeals Commission’s Decision No. 1656 for 1438 AH approved by the Minister of Finance under Letter No. 2293 dated 19/3/1438 AH issued in the appeal (Saudi Riyal) (Saudi Riyal) submitted by the Group against Decision No. 10 of 1435 AH issued by the First Instance Committee on Zakat and Tax Objection in Riyadh regarding Zakat Delay fines 1,100,820 1,521,291 assessment conducted by the General Authority on the Group for years from 2002 to 2005 and appeal Decision No. 1669 of 1438 AH approved by the Minister Deposit revenues 426,920 270,685 of Finance under Letter No. 2832 dated 9/4/1438 AH issued in the appeal submitted by the Group against Decision No. 11 of 1435 AH issued by the First Instance Sale profits of property, machinery and equipment 47,429 5,607 Committee on Zakat and Tax Objection in Riyadh regarding Zakat assessment conducted by the General Authority on the Group for year 2008. Total Zakat Other 381,964 714,932 differences were SR 3,694,215. The Group paid the amount in full during the second quarter of 2017. The amount was included in Zakat item in the consolidated 2,512,515 1,868,133 profit or loss and other comprehensive income statement.

160 Annual Report 2018 161 Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018 ______Total Riyal) (Saudi 1,600,741,888 848,878,974 2,056,081,002 37,683,502 1,506,663,257 777,552,745 1,212,329,807 31,780,133

24- Sector Information

A sector is a main part of the Group. It sells/provides specific services (business sector) or sells/provides services in a certain economic environment (geographical sector). Its profits and losses are different that of other sectors. In reporting its sector information, the Group submits to the business sector. Joint assets and assets and Joint liabilities Riyal) (Saudi Following are the Group sectors: (289,300,673) (151,407,856) (72,583,050) - (746,318,115) (596,977,101) (34,848,175) - • Retail and Operation Sector: it includes station operation activities, including selling fuel, foods, drinks and operation of residential and commercial buildings. • Investment Sector: it includes investment in other companies and investments in securities. • Saudi Automobile & Touring Association Sector: It issues customs transit books and international driving licenses and runs sport activities. • Transport Fleet Services Sector: it is the one that provides services of transporting dry and liquid materials. SASCO Franchise Franchise SASCO Sector Riyal) (Saudi • Franchise Sector: it grants franchise for using the Group’s trademark. 447,925 - - (10,075) 500,000 42,000 - - Transport Fleet Transport Sector Services Riyal) (Saudi 42,060,526 16,198,157 26,359,078 6,082,233 33,448,807 13,561,618 22,759,754 5,112,723 Saudi Automobile & Automobile Saudi Association Touring Sector Riyal) (Saudi 31,516,419 15,708,473 12,012,231 3,116,786 26,529,313 10,665,266 22,723,350 8,270,256 Investment Sector Investment Riyal) (Saudi 125,348,759 16,194,591 - (27,640) 94,533,574 66,500 - - Retail and Operation Operation and Retail Sector Riyal) (Saudi 1,690,668,896 952,185,609 2,090,292,743 28,522,198 2,097,969,677 1,350,184,462 1,201,694,878 18,397,154 ) 31 December 2018 December 31 assets Total liabilities Total Net sales operations core from Income 2017 December 31 assets Total liabilities Total Net sales operations core from Income Saudi Automotive Services Co. ( SASCO Co. Services Automotive Saudi (Saudi joint-stock company) joint-stock (Saudi 2018 ended 31 December year For the statements financial the consolidated Notes to ______for the periodending on 31 December: sectors above of the data some financial are Following

162 Annual Report 2018 163 Saudi Automotive Services Co. (SASCO) Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018 Notes to the consolidated financial statements For the year ended 31 December 2018 ______

24- Financial instruments and risk management - Other price risks The Group is subject to price risks arising out of its equity investments in other companies. It retains investments in title deeds of other companies for strategic Fair value but not trading purposes. In addition, it does not actively trade in such investments. A fair value covers financial assets and liabilities. Financial assets include cash, the like, receivables and securities. However, financial liabilities include payables, loans and other payable balances. - Credit risk management Level One: market prices announced in active markets for the same financial instruments. A credit risk exists when one party to a financial instrument contract fails to comply with its contractual obligations. This leads the Group to incur financial Level Two: assessment methods depending on inputs affecting fair value and can be directly or indirectly noticed in the market. losses. The Group is subject to credit risks on its bank balances and receivables as follows: Level Three: assessment methods depending on inputs affecting fair value and cannot be directly or indirectly noticed in the market. 2017 19- Zakat Provision 2018 (amended) (Saudi Riyal) (Saudi Riyal) Cash and balances with banks 74,235,012 95,215,346 As at 31 December 2018 Level One Level Two Level Three Total Net receivables 139,527,302 94,866,469 Investments through other comprehensive income - 103,438,396 125,000 103,563,396 213,762,315 190,081,815 Investments at fair value through profit or loss 17,622,552 - - 17,622,552

17,622,552 103,438,396 125,000 121,185,948 - Liquidity risk management Liquidity risks are represented in difficulties an establishment faces in providing funds to meet obligations related to financial instruments. Liquidity risks may As at 31 December 2017 (amended) Level One Level Two Level Three Total result from inability to sell certain financial assets rapidly and at an amount equal to their fair value. Liquidity risks are managed by regularly controlling them to ensure the availability of funds necessary for fulfilling the Group’s future obligations. Investments through other comprehensive income - 65,512,302 125,000 65,637,302 Investments at fair value through profit or loss 31,303,020 - - 31,303,020 25- Debt Ratio 31,303,020 65,512,302 125,000 96,940,322

The Board of Directors periodically reviews capital structuring. As part of this review, the Board takes into account the cost of capital and risks related to each The value indicated in Level Three reflects the purchase cost of these assets and not their fair value due to lack of active market. Therefore, the Group’s category of capital and debt. The Group’s capital structure includes debts through borrowing. It hasn’t determined maximum debt ratio and does not expect an Management sees that the purchase cost is the ideal method to calculate the fair value of these assets, and their value is not depreciating. increase in debt ratio through issuing new debt releases in 2019.

Capital Risk Management Following is the debt ratio at the end year:

The Group manages its capital to ensure its durability. It gets the highest revenue from the ideal limit of debt and equity balances. Group’s total strategy of 2017 2017 did not change. 2018 (amended) (Saudi Riyal) (Saudi Riyal) Loans 593,074,561 555,518,930 The structuring of the Group’s capital includes shareholders’ equity which consists of capital, reserves, fair value reserve and retained profits as listed in Cash and balances with banks (74,235,012) (97,275,330) shareholders’ equity change statement. Net debts 518,839,549 458,243,600 Financial Risk Management Shareholders’ equity 751,862,914 729,110,511 Net debt / shareholders’ equity 69.01% 62.84% Group’s business may be substantially affected by financial risks arising out of the following: 26- Earnings per share - Foreign currency risk management The Group is not subject to significant risks related to foreign currency exchange. Therefore, there is no need to efficiently manage this issue. Earnings per share are calculated from net income by dividing net annual profit on weighted average of existing number of shares as at the end of year, being 60 million shares after takin into consideration with retroactive effect the increase of Group’s number of shares during the second quarter of 2018 (Note 1). Earnings - Interest rate risk management per share are calculated from core operations by dividing the income of core operations on weighted average of existing number of shares as at the end of year, The financial instruments in the consolidated financial position statement are not subject to interest rates and risks. being 60 million shares after takin into consideration with retroactive effect the increase of Group’s number of shares during the second quarter of 2018 (Note 1).

164 Annual Report 2018 165 Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2018 ______

27- Capital Commitments & Possible Obligations

The Group has capital commitments related to establishing assets and properties as at 31 December 2018 at a total amount of SR 8,5 million (2017: SR 24,9 million). The Group has possible obligations related to bank guarantees as at 31 December 2018 at an amount of SR 284,16 million (2017: SR 259,2 million). There are some lawsuits filed against the Group, during the ordinary business session. They are currently before the court and the final award cannot be certainly maintained. The Management does not expect that the results of these lawsuits shall have substantial impact on the consolidated financial statements.

28- Subsequent Events

Following the date of financial statements, the Group received a final judgment binding the Ministry of Housing to pay an amount of SR 8,217,461 as a charge in consideration of infringement on SASCO land located in Hafr Al-Batin-Riyadh Road. The matter relates to a lawsuit filed by SASCO against the Ministry of Housing on 29/07/1434 AH. The judgment was passed Riyadh General Court. The resulting effect will appear in the profit or loss statement, initial financial results, for the period ending on 31 March 2019. The Management believes there are no any other important subsequent events to be amended or disclosed after the date of financial statements until the issuance of these financial statements.

29- Dealings with related parties

Related parties are non-executive board members and senior management staff. Senior management staff, including directors, are those practicing authority and responsibility in planning, managing and directly or indirectly controlling the Group’s business.

Their dealings during the year were as follows:

2018 2017 Nature of dealing (Saudi Riyal) (Saudi Riyal) Non-executive board members Salaries, allowances and incentives 893,000 96,000 Senior management staff Salaries, allowances and incentives 7,033,523 5,894,292

30- Comparative Figures

Items, elements and notes of comparative consolidated financial statements were amended, reissued, presented and classified in consistency with the accounting policies applied in issuing, presenting, assorting and classifying the items, elements and notes of comparative consolidated financial statements of the present period, which have been developed according to the IFRS approved in Saudi Arabia and other standards issued by Saudi Organization for Certified Public Accountants. For more information, please refer to Note 7 (Application of new and amended International Financial Reporting Standards (IFRS)) of notes attached to consolidated financial statements for the year ending on 31 December 2018.

31- Approval of Consolidated Financial Statements

The consolidated financial statements have been approved by the Board of Directors on 12/7/1440 AH (corresponding to 19 March 2019).

166

Tel: +966 (11) 2068855 Fax: +966 (11) 2068833 Email: [email protected] Company website: (www.sasco.com.sa) The company file on Tadawul: (www.tadawul.com.sa) code 4050 International company code: (SA0007870070)