SASCO ANNUAL REPORT 2019 ENG

A YEAR OF GROWTH AND EXCELLENCE

2019

Custodian of the Two Holy Mosques

King Salman bin Abdul Aziz Al Saud

His Royal Highness

Prince Mohammad bin Salman bin Abdul Aziz Al Saud The Crown Prince Vice President of the Council of Ministers & Minister of Defence

Table of Contents

Board of Directors

6

Chairman’s Statement

10

Vice Chairman and Managing Director’s Statement

12

Chief Executive Officer’s Statement

14

Vision and Mission

16

SASCO Overview

18

Plans, Decisions, key Achievements and predictions

23

Board of Directors and Committees

32

Financial Statement at SASCO Level

60

Operation Sector

78

SASCO Palm Co.

84

SASCO Waha Co.

88

Ostool Al-Naqil Co.

92

Saudi Automobile & Touring Association, SATA

96

Auto & Equipment Investment Co.

100

Al-Nakhla Al-Oula Co.

104

SASCO Franchise Co.

106

Other Administrative and Operational Information

108

Risks Management

112

Internal Control

118

Corporate Governance

122

Conclusion

125

6

Board of Directors

The Board of Directors is pleased to present to you SASCO Annual Report for the fiscal year ending on December 31, 2019. 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 members.

Annual Report 2019

7

Board of Directors Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman | Head of Executive Committee Qualifications and experience: A businessman, holding the Secondary school certificate with more than thirty eight years in corporate management.

He occupied various positions including the deputy Chairman of the Saudi Chambers of Commerce. He also participated in the boards of CMA-listed and unlisted shareholding companies such as Al-Madaen Star Group, Akwan Real Estate Co., Ibrahim bin Mohammed Al-Hudaithi Investment Co., Zawaya Real Estate Co., Nahaz Investment Co. and other companies working in the fields of real estate, services, investment and financial services inside and outside the Kingdom of Saudi Arabia.

Mr. Sultan bin Mohammed Al-Hudaithi Vice Chairman | Managing Director | Member of Executive Committee Qualifications and experience: He holds the Bachelor’s Degree in Accounting with honour degree from King Saud University and Masters of Business Administration (MBA) from London Business School. He held leading positions in many public and private companies in Saudi Arabia. He enjoys experience in corporate restructuring, strategic planning and investment management in securities, private equity and real estate investment. He was a member of boards and committees in public and private companies including Saudi Chemical, Nahaz Investment Co., Zawaya Real Estate Co., Al-Madaen Star Group, Middle East Battery Company (MEBCO), Mulkia Investment Co. and United Wire Factories Company (ASLAK).

Mr. Nasser bin Abdullah Al Awfi Board Member | Head of Audit Committee Qualifications and experience: He holds Master’s Degree in Accounting, Master’s Degree in Business Administration from Southern New Hampshire University in the USA and Bachelor’s Degree in Accounting from King Saud University. He enjoys more than thirty two years of experience in the management of joint stock companies as well as financial, administrative and strategic consultation.

He also participated in various boards of shareholding companies and board committees (Audit Committee) such as Al Jouf Agricultural Development Company Taiba Holding Company and United Cement Industrial Company.

Mr. Suleiman Bin Ali Al Khudair Board Member | Member of Nomination and Remuneration Committee Qualifications and experience: He holds a university degree in sciences from the USA. He held many administrative positions, as he worked as a computer engineer in the Ministry of Defence. Then, he moved to the private sector where he worked as a technical director, a sales director and deputy general director in Nahil Computers Company and now he is its General Director.

He participated in boards of many joint stock companies.

Mr. Majid bin Muhammad Al Othman Board Member | Member of Nomination and Remuneration Committee Qualifications and experience: He is a businessman, holding Secondary school certificate and enjoying more than thirty one years in real estate, contracting and automobile services. He is the Managing Director of Al-Madaen Star Group and board member of Ibrahim bin Mohammed Al-Hudaithi Investment Co., Bilda Specialized Commercial Centers Co. and board member of Zawaya Real Estate Co.

`` `` `` `` `` `` `` `` `` ``

Present Occupations:

`` Board member and Head of Audit Committee of United Cement Industrial Company.

`` Board member and Head of Audit Committee of Takaful Alrajhi Company.

`` Head of Saudi Ceramics Audit Committee.

Previous Occupations:

`` Head of Al Jouf Agricultural Development Company Audit Committee.

`` Member of Taiba Holding Company Audit Committee. `` Director of Financial, Administrative and Investment

Department of Saudi Pharmaceutical Industries & Medical Appliances Corporation. `` Deputy General Director for Financial and Administrative Affairs of Saudi Livestock Trading Co. `` Director for Financial and Administrative Affairs of Taiba Investment Company.

Present Occupations:

` ` General Director of Nahil Computers Company.

Previous Occupations:

` ` Technical Director of Nahil Computers Company. ` ` Sales Director of Nahil Computers Company. ` ` Deputy General Director of Nahil Computers Co.

`` `` `` `` `` `` `` `` ``

8

Present Occupations: SASCO Managing Director.

Board member of Al-Madaen Star Group Vice Chairman Zawaya Real Estate Company.

Board member of Mulkia Investment Company.

Board member of Nahaz Investment Company.

Previous Occupations: CEO of Ibrahim Modern Investment Company.

Chief Executive Officer of Zaiti Petroleum Services.

Deputy General Manager for Financial and Administrative Affairs at Al Madaen Star Group.

Board member of Saudi Chemical Company.

Board member of United Wire Factories Company (ASLAK)

Present Occupations: Managing Director of Al-Madaen Star Group.

Board member Zawaya Real Estate Co. Board member Bilda Specialized Commercial Centers Co. Board member Ibrahim Mohammed Al-Hudaithi Investment Co. Chairman of Al-Masharea Star Contracting Company.

Chairman of Fun Gate Company.

Managing Director, Al-Madaen Stars Group Previous Occupations: General Director of Al-Madaen Star Group for Contracting.

General Director of Al-Madaen Star Group for Automobile Services.

Present Occupations:

Previous Occupations:

`` `` `` `` `` ``

`` `` `` ``

Chairman of Al-Madaen Star Group.

Chairman of Mulkia Investment Co. Board member of Nahaz Investment Co. Chairman of the board of Zawaya Real Estate Co. Chairman of the board of Balda Specialized Trading Centers Co. Chairman of the board of Akwan Real Estate Co.

Vice Chairman of the Saudi Chambers of Commerce.

Chairman of Al Kharj Industrial Chambers of Commerce.

Member of Al Kharj Governorate Local Council.

Board member of Solidarity Company.

Mr. Riyad bin Saleh Al Malik Board Member | Member of Executive Committee | Chief Executive Officer Qualifications and experience: He holds the Bachelor’s Degree in Business Administration from King Abdulaziz University. He enjoys a vast experience in corporate management, particularly fuel station companies. He served as the General Director of Al Tas’helat Marketing Company Ltd., Deputy General Director of Riyadh Development Company and board member of the board of directors of many companies.

Present Occupations:

`` SASCO Chief Executive Officer. `` Member of Customs Council of Federation Internatio-

nale de l’Automobile.

`` Member of the National Committee of Fuel Station `` `` `` `` `` ``

Companies in the Council of Saudi Chambers.

Previous Occupations: General Director of Al Tas’helat Marketing Company Ltd. Deputy General Director of Riyadh Development Co. Director of Marketing Department of Saudi Real Estate Company (Al Akaria).

Sales Director of Saudi Hotels & Resorts Company.

Head of Customs Council of Federation Internationale de l’Automobile.

Head of the National Committee of Fuel Station Companies in the Council of Saudi Chambers.

Mr. Ali bin Mohammed Aba Al Khail Board Member | Head of Nomination and Remuneration Committee Qualifications and experience: He holds Bachelor’s Degree in Political Sciences from the Faculty of Administrative Sciences, King Saud University and Master’s Degree in Government Management from Harvard University, United Sates of America. He was the secretary of the Head of the Royal Diwan, the Deputy Director of the Political Affairs Department of the Royal Diwan and secretary of Head of the Office of Prime Minister. He was appointed in the Office of the Second Deputy Prime Minister, Minister of Defence and

Aviation and Inspector General. He also worked as an administrative counsellor in the High Commission for Administrative Organization and Deputy Chairman of the Board of Directors of Sanad Investment Company.

Present Occupations: `` Vice Chairman of the Board of Directors of Sanad Investment Company.

Present Occupations: `` Deputy Director of the Political Affairs Department of the Royal Diwan. `` Administrative counsellor in the High Commission for Administrative Organization.

Mr. Fawaz bin Suleiman Al Rajhi Board Member | Member of Audit Committee Qualifications and experience: He holds the Bachelor’s Degree in Accounting and Information Systems Management from King Fahd University of Petroleum and Minerals (KFUPM) and also holds Master’s Degree in Business Management from Stanford University, USA. He is the Chairman of AlRajhi United Investment Holding Company; a company investing in capital markets and private transactions on the local, regional and international levels. He has been leading and directing the Company’s efforts since its inception based on the strategy of diversifying the investment portfolio through a deliberate choice of markets and industries in selected geographical locations, with focus being placed on emerging technology and income-generating real estates. He is also a board member and member of audit committees in a number of joint-stock companies.

He spent more than a decade in banking. He held many positions in Corporate Financing Division of Al-Rajhi Bank.

He took part in establishing the department of corporate loans and financing subscription of large corporations. He was the person in charge of establishing the Share and Subscription Department of Al Rajhi Capital Company.

He participates in many charitable initiatives in the Kingdom of Saudi Arabia and the developing world. He also offers investment, strategic and corporate governance consultation in favor of family companies and individual investors in the states of the Gulf Cooperation Council.

Present Occupations: `` Chairman of AlRajhi United Investment Holding Co. `` Board member Raas Alkhaima Ceramic Company. `` Chairman of the board of Zaj Real Estate Co. `` CEO of AlRajhi United Investment Holding Company.

Present Occupations: `` Chief Operating Officer of Al Rajhi Capital. `` Director of Sales and Distribution, Al Rajhi Capital. `` Head of Corporate Banking at Al Rajhi Bank. `` Chief Financial Analyst at Al Rajhi Bank. `` Systems analyst at Procter & Gamble.

Mr. Majid Bin Nasser Al Sabei›e Board Member | Member of Executive Committee Qualifications and experience: He holds Bachelor’s Degree in Economical Sciences from King Saud University and enjoys more than sixteen years in corporate governance. He held many leading positions such as the director of real estate projects at Nasser Bin Mohammed Alsubaei & Sons Investment Company, financial analyst and managing director of Morgan Stanley & Co. He is currently the Chief Executive Officer of Nasser Bin Mohammed Alsubaei & Sons Investment Company.

Present Occupations:

`` CEO of Nasser Bin Mohammed Alsubeaei & Sons Investment Company

`` Board member Riyadh Development Co. Previous Occupations:

`` Manager of real estate projects at Nasser Bin

Mohammed Alsubeaei & Sons Investment Company.

`` Financial Analyst of Morgan Stanley & Co. `` Managing Director of Morgan Stanley & Co.

Annual Report 2019

9

The company’s market value by the end of 2019

SR 1.76 Billion The company’s market value by the end of 2018

SR 1.01 Billion Chairman’s Statement Mr. Ibrahim bin Mohammed Al-Hudaithi

With an increase, of

74.26%

Messrs. / Shareholders of the Saudi Automotive Services Company (SASCO), the highly regarded, May Allah’s Peace, Mercy and Blessings be upon you, The Board of Directors of the Saudi Automotive Services Company (SASCO) is pleased to present to you the report of the Board of Directors for the fiscal year ended on December 31st, 2019. The report includes the performance and achievements of SASCO and its subsidiaries as well as the financial results and key financial indicators. Thanks to Allah and the efforts of all members of the Board, the executive management, and staff.

SASCO achieved in 2019 net operating revenues of SAR 2,482,842,898 compared to SAR 2,056,081,002 in 2018, i.e. an increase of 20.76%. the increase in such revenues in addition to the amendment in profit margin of fuels led to increase in the gross profit and the operating profit with 91.02%, 170.64% consecutively, so that the gross profit reaches SAR 156,597,737 and net operating profit of SAR 101,987,313 by the end of 2019.

10

In addition, in 2019, SASCO recorded a net profit of SAR 121,810,982 compared to SAR 35,451,309 in the previous year, 2018, i.e. an increase of 243.60%. This, in turn, led to an increase in share profits from 0.59 to 2.03 than last year. At the end of 2019, Shareholders’ equity recorded SAR 851,445,860 compared to SAR 751,862,914 by the end of 2018 i.e. an increase of 13.24%.

The company’s market value increased during 2019 to reach 1.76 Billion SAR compared to 1.01 Billion SAR during 2018, i.e. 74.26%.

Some of the key achievements during 2019 are as follows: ffCompleting the procedures of distributing the profits to shareholders for the fiscal year 2018 and deposit the same at their own accounts. ffStarting implementation of the company’s new headquarters building after its designs have been approved. ffAcquisition of several stations, some of which were received and operated, and some that are in the contracting stage. ffAdding (35) sites throughout the Kingdom so that the number of network of operating stations becomes (201) stations. ffContinuing the development of many existing sites inside and outside the cities according to the company’s brand, where (12) sites were developed with the company’s brand, and work is underway to develop the rest of the sites according to the established development plan. ffContinuing to develop automation of fuel pumps and tanks, and the use of smart cards “Control” and .RFID system ffAdding (13) sites for the SASCO Palm Stores at the various sites of the company, and developing (19) sites of SASCO Palm Stores. ffOperating a central warehouse of SASCO Palm in Riyadh city. ffPurchase of (12) new trucks and (10) fuel and water tanks in addition to (3) refrigerators in support of the company’s fleet. ffExpansion of dry transport by contracting with multiple clients and companies, while continuing to transfer fuel and water to others. ffActivating the Saudi Automobile & Touring Association, Ltd (SATA) for the customs agreement of international transport of goods according to the international road transport cards (TIR) ffThe establishment and development of (4) motels is completed throughout the Kingdom. ffThe First Palm Contracting Company contracts with a global company to supply electric vehicle charging devices, to be the first company in the Kingdom to provide such service. ffContinued periodic and basic maintenance of the company’s sites. ffUpdating the company’s articles of association after the shareholders ’general assembly agreed to amend it based on the amendments made to the companies’ law. ffContinuing to activate governance systems, increase transparency and disclosure, and update the company’s bylaws. ffContinue to recruit qualified employees and Saudization thereof to meet the company’s requirements for various administrative positions, especially leadership positions. ffContinue to localize jobs and maintain the classification of the company and its subsidiaries within the green domain. ffContinue to study the options available in the project for selling some sites owned by the company and re-renting them with longterm contracts. ffThe company’s assets have grown by 53.74% than the previous year to reach 2.5 billion riyals. ffSigning several facility agreements with local banks.

ffContinue developing the company’s accounting and operating systems. ffParticipation in many exhibitions and awareness campaigns to confirm the company’s contribution to social responsibility.

At the level of operating revenues of subsidiaries, the operating revenues of SASCO Palm increased by 6.11% than the previous year, to reach SR 213,774,890, while the Transportation Fleet Company’s operating revenues increased by 10.61% than the previous year to reach 29,156,246 riyals, and the operating revenues of SASCO Oasis Company increased by 39.57% than the previous year to reach 5,459,311 riyal, while the operating revenues of the Saudi Automobile & Touring Association, Ltd (SATA) increased by 18.65%.

This is in addition to the detailed achievements contained in this report at the level of SASCO and all its subsidiaries.

The company will continue during the year 2020 to overcome all difficulties and challenges in order to achieve its goals according to its strategic plan and to consider acquisition and expansion opportunities in all its operational activities in line with the Kingdom’s 2030 vision.

In conclusion, and on behalf of my fellow members of the Board of Directors, I extend my thanks and gratitude to all the shareholders of the Saudi Automotive and Equipment Services Company (SASCO) for their continued confidence in the management of the company, and I also thank the executive management of the company and all its employees for their efforts and dedication to perform their work as required, which helped in achieving the potential objectives during this year. We are confident that the strength of synergy will lead to continue achieving the aspirations of the company’s shareholders and achieve more successes in the coming years.

I would also like to extend my sincere thanks and appreciation to the Custodian of the Two Holy Mosques King Salman bin Abdulaziz, may Allah protect him, and His Royal Highness the Crown Prince, Mohammed bin Salman bin Abdulaziz, may Allah protect him, for all their great efforts and unlimited support in order to stimulate the business environment in the private sector and develop the economy of this country to achieve the Kingdom 2030 vision.

May Allah Grant Us All Success, Chairman Ibrahim bin Mohammed Al-Hudaithi

Annual Report 2019

11

Profit before interest, Zakat, Depreciation and Amortization (EBITDA) at the end of 2019

SR 208,541,555 Profit before Interest, Zakat, Depreciation and Amortization (EBITDA) at the end of 2018

SR 92,750,036 Vice Chairman and Managing Director’s Statement Mr. Sultan bin Mohammed Al-Hudaithi

124.84%

Messrs. / Shareholders of the Saudi Automotive Services Company (SASCO), the highly regarded

Following are some of the key achievements in different sectors of SASCO and its subsidiaries:

May Allah’s Peace, Mercy and Blessings be upon you,

Operations Sector It is one of the key sectors in the company, as it provides fuel services to clients in addition to the real estate rental service, and this sector continued to provide a bundle of distinguished services through the company’s sites scattered within cities and on highways throughout the Kingdom.

Thanks to Allah’s grace and continuous efforts and as the SASCO board of directors is seeking to meet its obligations before the company’s shareholders and clients, and preserve its pioneering position in the field of operating fuel stations and retail as well as all sectors in which it operates. The year 2019 has witnessed various achievements throughout the company and its subsidiaries.

It gives me great pleasure to present to you a brief overview highlighting the key 2019 activities and developments on the operational and financial levels.

SASCO achieved total operation revenues in 2019 of SR 2,482,842,898 compared to SR 2.056.081.002 in 2018, with an increase of 20.76%. This led to an increase of 2019 net profits at 243.60%. Such increase in operating revenues is attributed to the amendment in fuel profit margin, as the company’s net profit in 2019 reached 121,810,982 SAR compared with 35,451,309 SAR during 2018 , which resulted in increase in share profit for the previous year from 0.59 to 2.03 SAR. Earnings before interest, Zakat, depreciation and amortization (EBITDA) at the end of 2019 were SR 208,541,555 compared to SR 92,750,036 at the end of 2018, i.e. an increase of 124.84%.

12

With an increase, of

The total number of company sites reached (242) Compared to (208) sites for the previous year, including (201) operating sites by the end of 2019, compared to (166) operating sites by the end of 2018, i.e. an increase of (35) sites, while the rest of the sites are in the development stage or in the preparation stage for construction or suspended because they are not economical to operate.

The operation sector offered its services to about 25,000,000 vehicles, with an increase of 20.29% compared to 2018, including and 129 million customers with increase of 18.01% compared to 2018, of which 10.8 million pilgrims and visitors whether inside or outside the Kingdom.

By God’s grace, we concluded strategic partnerships with many international and local companies specialized in operating restaurants, coffee shops and automotive maintenance with the aim to rent and operate some SASCO facilities to offer high quality and integrated services. These efforts led to increasing clients nationwide and raising their satisfaction and loyalty.

SASCO Palm Stores SASCO Palm Stores include an integrated package of items that were carefully selected to meet the needs of our clients and achieve their satisfaction.

During 2019, 13 new branches were added so that the total number of branches by the end of 2019 reached 80 branches, after excluding 2 branches that were operated by third parties. The change of client basket reached 6.6%, rising from SR 21 to 22.4 in 2019.

SASCO Franchise “SASCO Franchise” company specializes in granting concession to others for fuel stations through the name and brand of SASCO, after the company launched the commercial franchising program for the two brands “SASCO stations” and “Palm Stores” which aims to create new investment opportunities for the company and increase its revenues and profitability by granting operating franchises to brands to other operators, which creates real opportunities for citizens to participate in pilot projects in line with the kingdom’s vision.

In March 2019, the company participated in the franchise exhibition held in Jeddah under the slogan “Apply now and get the franchise application - the opportunity for your excellence”, where this participation aims to educate young businessmen about the franchise program provided by the company.

the past years have been affected by the political events experienced by some neighboring countries, in addition to the acquisition by parallel clubs (which do not have a license from the International Automobile Federation that operates in the Kingdom) of a market share of sales of customs transit books and international licenses.

However, during the year 2019, the Saudi Automobile & Touring Association (SATA) issued more than (15) thousand customs passbooks for travelers, in addition to more than (50) thousand international driving licenses.

Within the framework of the international road transport agreement signed by the Saudi Automobile & Touring Association (SATA) with the Saudi Customs Authority with the aim of activating the role of SATA and the transformation from a representative member of the International Road Transport Association to an active member representing the Kingdom of Saudi Arabia and a source of TIR books, the Saudi Automobile & Touring Association (SATA) started in late 2019 issuing TIR books and making experimental trips in coordination with the General Authority of Saudi Customs.

The role of SATA was also activated and the transformation from a representative member of the International Road Transport Union to an effective member representing the Kingdom of Saudi Arabia and a source of TIR books

SASCO Waha Co. SASCO Waha Co. manages all the company’s motels distributed in its various locations through the kingdom, as the company’s strategy is to develop such motels to hold its brand “Waha Motel”.

In 2019, one motel was opened. It is located on Riyadh / Taif Road, at Dhalam area. Other 3 motels were developed, located on Ola/Tabuk road, Taif/Riyadh road and another motel on Qasseem / Riyadh road.

So, the total number of SASCO Waha brand carries (9) motels.

SASCO Waha Company also obtained a license to operate and classify the accommodation facilities issued by the General Authority for Tourism and National Heritage, for the company’s motel in Al-Adeid area on Salwa / Al Batha International Road.

In addition to the Super 8 hotel achieving success in the quality test applied by Windham, it achieved a score of 88.75%, which is the highest score achieved in the Kingdom.

Social Responsibility In conformity with the kingdom’s trend to activate the awareness programs in society, SASCO participated in many awareness-raising campaigns, including:

Ostool Al-Naqil Co. Ostool Al-Naqil Co. provides transport services of fuel, water and sewage to all SASCO sites, in addition to providing transport, fuel, goods services to other companies with the expansion that includes dry transport using multi-purpose vehicle carriers.

By the end of 2019, the fleet number reached 127 trucks compared to 116 trucks by the end of 2018, and 143 trailers by the end of 2019 compared to 132 by the end of 2018.

In conclusion, we ask Allah, the Almighty, to bless these efforts and grant us success in continuously achieving SASCO plans and goals and the aspirations of shareholders as well as improving performance and strengthening efficiency. I extend thanks and appreciation to all shareholders and board members for their continued support, keenness and distinguished ideas. I also thank all brothers in the Executive Management and all SASCO employees for their great efforts, which contributed to achieving SASCO vision and goals and strengthening its pioneering position in the market.

Saudi Automobile & Touring Association (SATA) Saudi Automobile & Touring Association (SATA) has a license from the International Automobile Federation to issue customs transit books and works through various sales depots through the regions of the kingdom, in addition to a network of agents and distributors inside the Kingdom of Saudi Arabia that work under the international conditions, specifications and standards.

The sales of the Saudi Automobile & Touring Association (SATA) over

ffContinuous cooperation with handicapped Child Association. ffProviding a lecture to the company’s female employees on the importance of early detection of breast cancer in cooperation with the Zahra Breast Cancer Association. ffParticipation in International Women’s Day. ffContinue to participate in the awareness campaign to celebrate the global month of Alzheimer’s disease, which aims to introduce the primary symptoms of the disease, the necessity of diagnosis and early intervention, and educate the community about the symptoms of the disease and its prevention.

May Allah Grant Us All Success, Vice-Chairman Managing Director Sultan bin Mohammed Al-Hudaithi

Annual Report 2019

13

Total Revenues by the end of 2019

SR 2,482,842,898

Total profit by the end of 2018

SR 2,056,081,002

Chief Executive Officer’s Statement Mr. Riyadh bin Saleh Al Malik

Messrs. / Shareholders of the Saudi Automotive Services Company (SASCO), the highly regarded

With an increase, of

20.76%

to 121,810,982 at the end of 2019 versus SR 35,451,309 at the end of 2018 i.e. 243,60% higher, resulting in higher stock profitability compared to the previous year from SR 0.59 to SR 2.03.

A Year of growth and excellence!

Continuing realization of the Board of Directors’ strategy, stressing previous years’ accomplishments in all corporate activities and affiliate companies, and achieving plans and objectives of all sectors, by God’s Grace, the Board’s directives, and my colleagues’ efforts, SASCO managed to achieve several financial and operational accomplishments in 2019, mainly:

Financial Performance 2019 revenues amounted to SR 2,482,842,898 versus 2,056,081,002 in 2018 i.e. increasing by 20.76%. the change in fuels selling profit margin has had the positive impact of reducing revenue cost, subsequently increasing the year’s total and net profits from the core operations and net corporate profit.

At the end of 2019, gross profit reached to SR 156,597,737 versus SR 81,981,605 at the end of 2018 i.e. an increase of 91.02%.

The annual profit from core operations at the end of 2019 was raised at 170.64% higher than the previous year to be SR 101,987,313 versus SR 37,683,502 in 2018. The corporate net profit amounted

14

Operational Performance During the year 2019, the company opened (35) new sites according to its expansion plan and its strategy to acquire sites in various cities and regions of the Kingdom, bringing the number of operating sector sites operating at the end of 2019 to (201) sites compared to (166) sites by the end of 2018. To manage this sector in a way that facilitates monitoring and raising the quality of the provided service, it has been divided into (6) administrative regions in each of the central region, the eastern region, the western region, the Qassim region, the northern region and the southern region.

There are also many sites in different regions that have not entered service yet, as they are still in the development stage or construction stage and are expected to enter within the operating sites during the next year, God willing.

In addition, the company is continuing to develop many existing sites inside and outside the cities according to the company’s brand, where (12) sites were developed with the company’s brand and work is underway to develop the rest of the sites according to the established development plan.

As for the field of automating its operations, the company continued to activate the project for automating fuel pumps and tanks, using smart cards, RFID system, and control program, in addition to developing the payment methods.

and SATA’s role has been activated with the transformation from a member represented in the International Road Transport Union to an active member to represent the Kingdom of Saudi Arabia and issuer of TIR books.

The company has continued to sign strategic partnerships with food companies to provide their services through the company’s various sites in order to continue to be the first company in terms of quality and integrity of the service provided and to maintain its position in providing a package of integrated and distinguished services for vehicle drivers and travelers to satisfy its customers and to emphasize the company’s added value.

During the year 2019, (1) motel was established located on the Riyadh / Taif road in the Dhalam region, and a number (3) of motels located on the Al-Ula / Tabuk road, the Taif / Riyadh road and another was located on the Qassim / Riyadh road were developed, to bring the number of motels that bear the brand “Waha Motel”, (9) motels.

Super 8 Hotel was honored by the Technical and Vocational Training Corporation (TVTC) and the General Sports Authority within the events of the National Heritage and Culture Festival (Al Janadriyah Festival 33).

In the context of expanding the grocery sites inside and outside the cities, by the end of 2019, the SASCO Palm branches reached (80) branches throughout the Kingdom through which an integrated basket of items is provided to fulfill the needs of our customers, whether traveling on the roads between cities or drivers and passengers within the cities. During 2019 , the company introduced many new items that led to a 6.6% increase in the customer basket, to increase from 21 Riyals in 2018 to 22.4 Riyals in 2019, in line with the expansion of cooperation with major retail goods suppliers, in order to raise the level of items provided to our customers to meet all requirements of visitors to the company sites of various categories.

During 2019. the company has activated the commercial franchising program for the two brands, “ SASCO Stations” and “ SASCO Palm Stores”, with the aim of creating new investment opportunities for the company and creating real opportunities for citizens to participate in pioneering projects in line with the Kingdom’s vision.

In continuation of the development of the transportation sector, Ostool Al-Naqil Co., Ltd expanded during the year 2019, especially in the field of dry transport and refrigerated transport, and it contracted with many customers and companies, along with its continuity in transporting fuel and water to all the company’s sites as well as to others, and to achieve this expansion its fleet was supported by a number of (12) new trucks, and (10) fuel and water tanks, in addition to (3) refrigerators, to reach the fleet size at the end of 2019 to (127) tankers and (143) trailers designated for all purposes through which the company provides transportation services to operation sector of SASCO to enable it to acquire additional market share In order to continue contracting with new customers.

The First Palm Contracting Company continued to devote its efforts to establish and develop many different sites of the company, where (12) sites were developed with a SASCO brand in addition to (19) sites affiliated to SASCO Palm supplies, and work has already begun in establishing the headquarters of SASCO in Riyadh located in King Abdullah quarter on Khurais Road.

To this end, SASCO continued to attract qualified human cadres and create new job opportunities in favor of Saudis to support the Ministry of Labour’s programs to Saudize jobs, in addition to developing various administrative and operational programs, automation of operations and link the company’s sites.

Many other achievements and plans, detailed in the Board’s 2019 Annual Report were implemented with the attempt to achieve SASCO goals and cope up with the developments witnessed by the Kingdom in its efforts to achieve Vision 2030.

In conclusion, I extend thanks and appreciation to all shareholders of the Saudi Automotive Services Company (SASCO) for their trust in SASCO management. I also extend thanks and appreciation to SASCO Board of Directors for their continued support to the Executive Management. I also thank all SASCO employees for their great efforts contributing to achieving SASCO goals. We hope more success and progress to all.

May Allah Grant Us All Success,

Saudi Automobile & Touring Association, SATA, was largely affected by the events recently experienced by the Arab Region and accession of new parallel clubs unauthorized by Federation Internationale de l’Automobile, which acquired a market share of international driving licenses and customs transit (Trip-Tik).

Chief Executive Officer Riyadh bin Saleh Al Malik

Based on the International Road Transport Agreement concluded in 2012 by Saudi Automobile & Touring Association, SATA, with the International Road Transport Union (IRU), the Saudi Automobile & Touring Association, SATA, started by the end of 2019 to issue TIR books and make trial trips in coordination with Saudi Customs,

Annual Report 2019

15

Vision / Mission

Vision To become the premier company, in terms of service quality and integration, and an example in the field of automotive service, rest house and motel management, on the highways of 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.

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Annual Report 2019

17

Sasco Overview

18

SASCO Overview

(TIR), establishment, management, maintenance and operation

Formation

and motorbikes sports, participating in racing and events for cars

The Saudi Automotive Services Co. (SASCO) is a Saudi public shareholding company established under Ministerial Decision No.

of motorsports and motorcycles, holding races and events for Cars and motorcycles sport, and participating in races and events. ffImporting and selling foodstuff, beverage, refreshments,

563 dated 23/12/1402 AH corresponding to 12/10/1982.

equipment, coffee, hot drinks, sandwiches, bakeries, vegetables,

Activities

household utensils, tools, electronics, mobile accessories, mobile

ffEstablishing and operating auto and passenger service centres within cities and on the main and intercity roads, retail sales of fuel for vehicles and motorcycles and direct delivery to the customer location. ffEstablishing workshops to repair cars and heavy equipment, auto services stations and travellers on the main roads between the cities of the Kingdom to provide fuel, oil and maintenance for cars and heavy equipment, establishing restrooms, motels and restaurants, providing food, beverages and refreshments for travellers, washing and lubricating cars and equipment, importing and selling equipment and tools, establishing roads and bridges. ff Transporting and selling fuel, transporting petroleum products and their derivatives, kerosene, gasoline, diesel, gas, lubricants, liquid and dry chemical materials, sand, gravel, asphalt, and building materials, in addition to transporting cars and people at cost, opening branches for renting cars and public fare, and transporting supplies and goods at cost on land roads in the Kingdom and abroad, transporting water and sanitation, leasing trucks and trailers to others, and provide advertising services on tankers and vehicles. ffImport and export of various kinds of cars for the company’s business and trade after obtaining the approval of the competent authorities. ffManufacturing, re-manufacturing and renewing auto parts, equipment and auto batteries after getting the necessary licenses from the competent authorities. ffManufacture of light and heavy trailers, refrigerated and nonrefrigerated vehicle containers and all types of tanks after getting the necessary licenses from the competent authorities. ffImporting, selling and distributing spare parts and scrap of cars and equipment as well as parts, accessories and materials needed to provide the best maintenance and repair services of cars and equipment for the purpose of providing maintenance needs

fresh fruits and non-fireworks toys, travel supplies, clothes, devices, perfumes, cosmetics, auto accessories, and supplies. ffPurchase, sale, rental, and lease of land and real estate necessary to serve the company’s purposes and management of the property of others. ffMarketing services for third parties and granting the franchise to others with regard to the company’s trademarks. ffEstablish, manage, maintain, operate and clean residential and commercial buildings and fuel stations owned by the company and others. ffGeneral

contracting

demolition,

of

restoration),

buildings

(establishment,

construction,

repair,

management,

maintenance and operation of residential and commercial buildings and road works. ffProvide first aid means with the latest international means, including the use of helicopters, with the approval of the competent authorities.

Capital SASCO’s capital is SR 600,000,000 (fully paid) divided into SR 60,000,000 shares, each with a value of SAR 10.

The Fiscal Year SASCO fiscal year ends on December 31st of each calendar year.

Auditor for the year 2019 Allied Accountants Office - Chartered Accountants and Auditors Investment Restrictions There are no restrictions on SASCO listed shares as stated in the Rules for Qualified Foreign Financial Institutions Investment in Listed Shares and instructions regulating foreign strategic investors equity in listed companies, according to the company’s bylaws and the instructions issued by the supervisory and control authorities to which the company is subject.

inside the workshops and service stations for the purpose of selling them directly to the public. ffCarrying out tenders for contracts of car and equipment maintenance for individuals, companies and institutions. ffInspection of cars to issue traffic validity certificates after obtaining the approval of the Ministry of Interior. ffParticipation in local and international auto and motorcycle clubs, associations and local and international bodies interested in auto and motorcycles affairs, issuance of customs transit books (Trip-Tec), international driving licenses and truck transit books

Annual Report 2019

19

Main Business Sectors

20

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 Waha Company It manages of all SASCO motels spread nationwide in addition to super 8 hotels.

It provides supply services through managing all Sasco Palm Stores spread nationwide with the aim to meet all needs of motorists and travellers inside and outside the cities.

Saudi Automobile & Touring Association It possesses licenses from Fédération Internationale de l’automobile (FIA) to issue Customs Transit Books (Trip-Tik) and international licenses. It 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.

Ostool Al-Naqil Company It provides transport services to Sasco and Zaiti locations (fuel, water, and sewage transport) in addition to provide transport services (fuel and cargo) to third parties.

‫إستثمارات السيارات والمعدات‬

Auto & Equipment Investment Company It was established with the aim to independently manage SASCO investment activities. It possesses 12.79% of the capital of Middle East Battery Company (MEBCO).

‫شركة النخلة األولى للمقاوالت‬ Al Nakhla Al Oula Contracting Company

Al Nakhla Al Oula Contracting Company It was established with the aim to carry out operation, maintenance and cleaning works for SASCO sites in order to improve the quality of services provided to clients. It specializes in public contracting works of 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)

Annual Report 2019

21

Plans and Decisions

22

Plans and Decisions The Strategic Plan During 2019, the company’s board of directors approved five-year strategic business development plans for all sectors of the company and its subsidiaries, including the financial, administrative and operational position, taking into account its priorities in achieving the goals set out in the plan, whether they are qualitative, quantitative, or administrative and organizational goals. The strategic business development plans included a list of those goals, with a mechanism to monitor them and measure the performance achieved periodically.

This plan is an extension of the strategic plans adopted by the Board of Directors since the ninth cycle of the board in 2009, some specialized external parties have conducted reviews of these plans.

Main considerations of SASCO strategy considered were as follows: ffTo identify the items in previous strategies that would remain appropriate and existing for the coming years. ffTo identify the items in the previous strategies that require updating or amendment, which fits with the coming years. ffTo define the way through which SASCO can manage its existing assets effectively. ffTo determine the human resources required to support growth. ffTo work towards providing excellent services in terms of value added and maintaining SASCO competitive position. ffTo identify strengths, weaknesses, opportunities, and threats.

The most important objectives of the developmental plan are as follows: ffConducting a comprehensive market study for all sectors of SASCO and its subsidiaries. ffEnhance the financial efficiency of the company and its subsidiaries. ffReduce costs, improve profitability, and increase operational effectiveness. ffExpansion of the number of sites through the acquisition of distinctive station sites within cities and on highways in the Kingdom. ffContinue to develop the quality of services and the quality in providing them through expanding new alliances with international companies and leading companies operating in the services sectors related to the activity of the company and its subsidiaries. ffGovernment and future sales development. ffUtilize technology to facilitate service delivery and continue automating services. ffActivate self-services. ffProvide the necessary labor to cover the expansion of activities. ffEnhance operational oversight and quality of service. ffExpand the network of stores (SASCO Palm). ffIntroduce new products at the stores (SASCO Palm). ffProvide value-added services and innovative products. ffIncrease the size of the transport fleet to match the growth in

the number of SASCO sites and the transportation market in the Kingdom. ffExpansion in the field of dry and refrigerated transport and cars transport and attract distinguished customers. ffContinue developing stations, rest houses and service centers on highways. ffExpansion of the activities of Al-Nakhla Al-Oula Contracting Company to include business outside the SASCO system, including entering into tenders. ffImprove the level of service for maintenance and projects through Al-Nakhla Al-Oula Co. Contracting Company. ffOversee the development projects undertaken by station owners contracting with SASCO. ffCreate a workshop for maintenance and advertising. ffDevelop the services provided by the Saudi Automobile and Touring Association (SATA), and increase the market share in sales of TripTic and international licenses. ffExpansion of the activity of the Saudi Automobile and Touring Association (SATA) through the introduction of new activities. ffMaintain the competitive position of SATA . ffActivate the TIR system and expand customs clearance activities. ffAttract distinguished experiences and administrative competencies and increase the job-nationalization rate. ffContinue to distribute dividends to shareholders. ffFocus on customer satisfaction. ffFocus on social responsibility.

The most important objectives achieved are as follows: ffContinue to distribute dividends to shareholders. ffAcquisition of many sites. ffExpansion of the stores network (SASCO Palm). ffDevelopment of debit sales. ffContinue to develop existing and acquired sites according to the company’s brand to keep pace with the aspirations of customers. ffContinue to perform general maintenance of all facilities in the company’s facilities. ffContinue to enter into strategic partnerships to raise the level of service provided to enhance customer satisfaction. ffBuild a distinctive brand for the services provided by the company inside its locations. ffBuild a distinguished team. ffSaudization of jobs and maintain the green classification for the company and its subsidiaries as per the classification of the ministry of labor. ffSupport the fleet of Ostool Al Naql Company with trucks and trailers. ffActivate the International Road Transport Agreement for TIR books sales. ffContinue to develop the company’s resource management system (ERP) ffDevelop operational and administrative systems for all business units in the company. ffMotivate employees and build a distinguished work environment.

Annual Report 2019

23

ffSign credit agreements in compliance with Islamic Sharia with local and international banks. ffSocial Partnership.

Executive Plan: In light of SASCO developmental strategic business plan, SASCO management prepares an executive action plan annually through which it divides the basic activities and links them to an implementation timeline on an annual basis under the supervision of the Managing Director. The actual achievements are reviewed monthly to ensure the realization of the objectives set in the strategic plan.

Most Important Future Expectations ffExpand SASCO sites according to well-studied plans with the aim to develop the network in sites of distinct investment income. This includes running the tenders offered by different government bodies in addition to investment opportunities available by non-governmental bodies (individuals, institutions, bodies and corporations). ffEstablish new sites in favor of SASCO Palm Stores inside and outside cities. ffContinue the development of all sites and establish new sites carrying SASCO brand. ffEstablish new strategic partnerships with service provision companies in the sites to continue to provide distinct services to customers. ffContinue to negotiate with local banks in order to conclude facility agreements of distinguished conditions to SASCO. ffExpand the field of transport to third parties (water transport, fuel transport, dry transport) and increasing the number of fleet trucks. ffOpen and develop motels carrying SASCO Waha Co. brand. ffFinding new sale outlets to customs transit books and international driving licenses. ffIncrease TIR book sales. ffGrant commercial franchises to third parties.

24

Annual Report 2019

25

Most Important Achievements in 2019

26

The most important achievements during the year 2019

`` Developing (19) sites of SASCO Palm Stores.

At the Level of Network Expansion and Development

`` Adding (13) SASCO Palm Stores at the company’s various sites.

cultural and tourist destination for camels and their heritage.

`` Continue to develop many existing sites inside and outside the

`` Completion of construction of (1) motel in the company’s

cities according to the company’s brand, where (12) sites were

station in Dhalam region, in addition to the development of (3)

developed with the company’s brand, and work is underway

motels in each of the Sail station in Qassim, Qulaibah station

to develop the rest of the sites according to the established

and Radwan station.

development plan.

`` Expansion of dry transport by contracting with multiple clients

`` Acquisition of many stations, including what was received and

and companies, while continuing to transfer fuel and water to

operated, and some that are in the contracting stage.

others.

`` Adding a number of (35) sites throughout the Kingdom to bring

`` Purchase of (12) new trucks in support of the company’s fleet.

the network of operating stations (201) stations.

`` Purchase of (10) fuel and water tanks, in addition to (3)

`` Entering in many governmental tenders for establishing and

refrigerators.

operating gas stations and service centers.

`` Operating the mobile station for visitors’ services at the annual

The following table shows a summary of the number of sites

King Abdulaziz Camel Festival, which aims to root and enhance

(operating and under construction) depending on the nature of

the heritage of camels in Saudi and Arab culture and provide a

ownership:

Statement

2015

2016

2017

2018

2019

Operating-Owned

35

32

34

33

36

Non-operating-Owned Sites

17

20

18

19

16

Non-Owned Sites

137

145

152

156

234

Total

189

197

204

208

286

The annual growth rate

56.20%

4.23%

3.55 %

1.96 %

37.50%

201

2019 166

2018

10

152

2017

12

140

2016

0 Operating & leased sites

50

12 20

20 24

136

2015

13

100

150

Stopped for Development

16

37

63

6

20 20 13 3

200

250

Under Construction Sites

300 Stopped

Annual Report 2019

27

Operating Site Distribution

21%

Eastern Province

37%

Central Province

6% Southern Province

7%

19%

Qassim Province

Western Province

10% Northern Province

Owned Sites

2019 2018 2017 2016 2015 0 Purchase during year

28

20

36

16

35

17

37

15

37

15

34

16

40

2

60

Owned & Under Construction

Owned & Existing

At Business Development Level ffSASCO received the award (Most Innovative Gas Station Company of 2018) by the International Finance Awards. ffContinue to sign many agreements with international restaurants and coffee shop companies in order to improve the service provided to its customers and achieve a qualitative and quantitative shift to all the company’s sites inside and outside the cities and to achieve the company’s approach to develop the stations and rest houses sector in the Kingdom. ffContinuing to negotiate with a number of financial institutions and investment companies in order to reach offers that are in line with the company’s interest and goals regarding the sale of some

the fiscal year 2019 in accordance with agreed work procedures. ffThe Saudi Automobile & Touring Association, Ltd (SATA) activates the customs agreement for the international carriage of goods according to the international road transport cards (TIR). ffContinue to open new outlets for the Saudi Automobile & Touring Association, Ltd (SATA) ffDevelop the company’s ERP program to achieve the company’s goals. ffContinued development of automating fuel pumps and tanks, using smart cards “Control” and RFID system ffContinue to sign a number of forward supply agreements with agents and marketers of food and non-food supplies.

of the sites owned by the company and re-renting them with long-

ffContinued periodic and basic maintenance of the company’s sites.

term contracts.

ff(Super 8) Hotel honoured by the General Organization for Technical

ffConduct feasibility studies for projects that the company wants to enter in after these studies are finally approved. ffStart implementation of the new headquarters building of the

and Vocational Training and the General Sports Authority within the events of the National Festival for Heritage and Culture (Janadriyah Festival 33).

company after its designs were approved. ffContinue to update the website of the company and its subsidiaries.

At the level of organizational and administrative development

ffUpdate the company’s application on smartphones running (iOS

ffUpdate the company’s articles of association after the shareholders’

/ Android). ffLaunching “My Petrol Service” application in a number of the company’s stations. ffOperating a central warehouse of the SASCO Palm Company in Riyadh. ffSASCO Waha Company obtained a license to operate and classify

general assembly agreed to amend it based on the amendments made to the companies’ law. ffContinue to activate governance systems and increase transparency and disclosure. ffFollow up any new legislations issued by the official authorities to implement them.

the accommodation facilities issued by the General Authority for

ffUpdating the executive committee regulations.

Tourism and National Heritage for the company’s motel in Al Adeid

ffUpdate the bylaws of Nomination and Remuneration Committee

area on Salwa - Al Batha International Road. ffContinue contracting with many companies at the Super 8 Hotel in Riyadh. ffAl Nakhla Al Oula Contracting Company contracted with an international company to supply electric car charging devices to be the first company in the Kingdom to provide this service. ffA team from the Saudi Automobile & Touring Association, Ltd

and approve it by the general assembly. ffUpdate the corporate governance regulations. ffUpdate the working procedures policy document in the Board of Directors. ffUpdate the policy document for actual and potential conflicts of interests for both shareholders, members of the board of directors and executive management.

(SATA) in cooperation with the International Road Transport

ffApproval of bylaws of criteria for competition by a member of

Association (IRU) organized a workshop on TIR system for a number

the Board of Directors for the company’s business or one of its

of employees of the Saudi Customs Authority.

branches of activity, and recommend to submit the bylaws to the

ffAppointing a representative of the Saudi Automobile & Touring Association, Ltd (SATA) within the National Licensing Committee of the General Authority of Saudi Customs and signing a contract with the National Company for Customs Clearance as authorized by (SATA) to clear goods with TIR system.

shareholders’ general assembly for approval at the next meeting. ffPrepare the company’s occupational safety and health policy in addition to the environmental policy. ffContinue to localize jobs and maintain the classification of the company and its subsidiaries within the green domain. ffContinue to attract qualified employees and Saudization to meet

At the Level of Finance and Financial & Operational Control

the company’s requirements for various administrative jobs,

ffApproval of the company’s final accounts and report of the board

especially leadership positions.

of directors. ffContinue to apply the international accounting standards in line with the requirements of the international standards for financial reports approved in the Kingdom of Saudi Arabia. ffEntering into many governmental tenders to supply fuel. ffRenewal of the credit facility agreement signed with some local banks. ffCompleted procedures for distributing dividends for the fiscal year 2018 and depositing them in their accounts.

At the level of social responsibility ffContinuous cooperation with the Children with Disability Association and support for the 2019 Children’s Drawings and Creativity Program. ffParticipation of the Saudi Automobile & Touring Association, Ltd (SATA) in the third Saudi logistics conference as a strategic sponsor. ffSATA organized a workshop entitled (A qualitative shift to facilitate customs operations for transit and trade development from and

ffApprove the budget of 2020.

through the Kingdom) in cooperation with the Saudi Customs

ffCompleted a comprehensive inventory of the company’s sites for

Authority and the International Road Transport Association.

Annual Report 2019

29

ffSASCO Marketing Department gave a lecture to the company’s female employees on the importance of early detection of breast cancer in cooperation with the Zahra Breast Cancer Association. ffParticipation in the International Women’s Day.

ffTips for safe driving during rain. ffEating while driving is a traffic violation and its danger is greater than you expect. ffTips to protect you from drowsiness while traveling.

ffContinue to participate in the awareness campaign to celebrate the global month of Alzheimer’s disease, which aims to introduce the

Constant update of the company’s website (www.sasco.com.sa) and

primary symptoms of the disease and the necessity of diagnosis

its subsidiaries, in addition to other social sites on the following

and early intervention, and educate and familiarize the community

links:

with the symptoms of the disease and its prevention.

ffwww.sataclub.com.sa

ffLaunch the campaign (prepare for winter) for all employees of the

ffhttps://twitter.com/sasco_ksa

company in cooperation with the Ministry of Health with the aim

ffhttps://twitter.com/SATAclub

of vaccination to prevent influenza.

ffhttps://twitter.com/sasco_palm

ffAt the level of social responsibility, the company continues also to provide many services, such as: ?? the mosques in various locations inside and outside cities and on highways. ?? Serving the pilgrims and Umrah performers. ?? Free toilets.

ffhttps://twitter.com/Super8R ffhttps://www.facebook.com/SaudiAutomotiveServicesCo/?fref=ts ff/https://www.facebook.com/Sataksa_ ff/https://www.facebook.com/sasco-palm-613438065491715_ ffhttps://www.facebook.com/Super-8-Hotel-/ Riyadh-1777669312470879

?? Care for health and hygiene.

ffhttp://instagram.com/sasco_ksa_

?? Caring for the environment.

ffhttp://instagram.com/sata_ksa_ ffhttp://instagram.com/sasco_palm_

At the Level of Marketing Activities and Social Media

ffhttp://instagram.com/super8.riyadh_

Continuous update of the website of SASCO and its subsidiaries

ffhttp://cutt.us/dxrT_

(www.sasco.com.sa), in addition to their accounts on social media

ffhttps://plus.google.com/117174656605659302922_

on the following links:

ffwww.youtube.com/sasasco

ffParticipation in the franchise exhibition.

ffwww.flickr.com/photos/sasco

ffThe marketing department launched Ramadan competition for customers. ffImplementing several awareness campaigns: ffThe Campaign of “Initiate it”.

ffhttps://appsto.re/sa/Hg1Ocb.i

ffSabbeh application. ffCampaign for the benefits of continuous inspection of cars.

30

To update SASCO application on (iOS / Android) smart phones. ffhttps://appsto.re/sa/BVIaH.i

Annual Report 2019

31

Board of Director’s and Committees

32

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 No.

Name

Membership Category

Position

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

Annual Report 2019

33

Allowances and Remunerations Paid to Board Members and Senior Executives Remuneration of the Board of Directors The following statement shows the payments to Board members in 2019:

Expenditure Allowance

Grand total

Indemnity

Total

Granted shares

Long-term incentive plans

Short-term incentive plans

Periodic remuneration

Profit ratio

Total

Changing Remuneration Remuneration of Chairman, managing Director or Secretary if he is a Board member

Remuneration of technical, administrative or consulting works

In kind benefits

Total allowance for attending committee meetings

Certain amount

Description

Allowance for attending Board meetings

Fixed Remuneration

-

221,000 230,000 218,000

669,000

-

-

-

-

-

-

-

-

-

221,000 230,000 218,000

669,000

-

-

-

-

-

12,000 39,000

-

9,000

6,000

Total

30,000

18,000

12,000

200,000

12,000

Mr. Majid Bin Nasser Al Sabei’e

600,000

Mr. Fawaz bin Suleiman Al-Rajhi

200,000

Mr. Ali bin Mohammed Aba Al-Khail

200,000

First: Independent Members

227,000 233,000

-

224,000

-

224,00

-

908,000

-

-

-

-

-

-

227,000 233,000 224,000 224,00 908,000

-

-

-

-

-

-

-

-

12,000 60,000

-

15,000 21,000

12,000

Total

48,000

12,000

12,000 12,000

200,000

12,000

Mr. Majed bin Mohammed Al-Othman

800,000

Mr. Suleiman bin Ali Al-Khudair

200,000

Mr. Nasser bin Abdullah Al-Awfi

200,000

Mr. Ibrahim bin Mohammed Al-Hudaithi

200,000

Second: Non-Executive Members

227,000

* 3,654,329

-

-

-

-

-

-

3,881,329

26,797

227,000

-

-

-

-

-

-

-

227,000

76,418

454,000

3,654,329

-

-

-

-

-

-

4,108,329

103,215

-

-

-

-

15,000 30,000

-

12,000

Total

24,000

15,000

200,000

12,000

Mr. Riyadh bin Saleh Al-Malik

400,000

Mr. Sultan bin Mohammed Al-Hudaithi

200,000

Third: Executive Members

* 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

Remunerations Paid to Senior Executives The following statement shows the payments to Top Five Senior Executives who received Allowances and Remunerations, including the CEO and

Grand total 7,402,732

Indemnity 379,800

the Council if any

Total 1,885,732

-

Granted shares -

plans

Long-term incentive

-

plans

Short-term incentive

-

Profits -

Remunerations

Total 5,137,200

Periodic

In kind benefits -

1,885,732

Allowances

Changing Remuneration

1,297,200

Total

3,840,000

Statement

Salaries

Fixed Remuneration

Total reward executives for

CFO during 2019:

Remunerations Paid to Committee Members The following statement shows the payments to committee members in 2019: Statement

Fixed remunerations except meeting attendance allowance

Meeting attendance allowance

Total

Executive Committee Members Mr. Ibrahim bin Mohammed Al-Hudaithi

-

15,000

15,000

Mr. Sultan bin Mohammed Al-Hudaithi

-

15,000

15,000

Mr. Riyadh bin Saleh Al-Malik

-

15,000

15,000

Mr. Majid Bin Nasser Al Sabei’e

-

12,000

12,000

Total

-

57,000

57,000

Audit Committee Members Mr. Nasser bin Abdullah Al-Awfi

50,000

21,000

71,000

Mr. Fawaz bin Sulieman Al Rajhi

50,000

18,000

68,000

Mr. Turki bin Muhamma Al Quraini

80,000

21,000

101,000

180,000

60,000

240,000

Total

Remuneration & Nomination Committee Members Mr. Ali bin Mohammed Aba Al-Khail

-

9,000

9,000

Mr. Suleiman bin Ali Al-Khudair

-

12,000

12,000

Mr. Majed bin Mohammed Al-Othman

-

12,000

12,000

-

33,000

33,000

Total

Annual Report 2019

35

Remuneration Policy 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.

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 ) for board meeting attendance.

Remuneration after obtaining the Board’s recommendation.

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

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 each fiscal year, being not less than SR 1000,000).

Deviation from Remuneration Policy

ffPaying a meeting attendance allowance of SR (3) thousand (per each member/per one meeting) to committee members.

There is no deviation between the granted remunerations, whether 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.

Committee member. ffPaying an annual remuneration of SR 50,000 to a board Audit Committee member.

Board Meetings 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.

mechanism that pays attention to quantitative and qualitative

The Board was keen on scheduling its meetings and preparing the

performance in accordance with his employment contract. Such

meetings in advance making sure that all board members attend the

mechanism shall be approved by the Remuneration Committee by

meetings and discuss all items of the proposed agenda.

a recommendation from the Managing Director.

The following table shows the attendance record of Board meetings

ffSenior Executives’ remuneration is paid according to the Staff

in 2019:

No. of meetings (4) No.

Member Name Meeting No. (2) 29/04/2019

Meeting No. (3) 28/10/2019

Meeting No. (4) 22/12/2019

By phone

By phone

By phone

By phone

1

Mr. Ibrahim bin Mohammed Al-Hudaithi

2

Mr. Sultan bin Mohammed Al-Hudaithi

100%

3

Mr. Nasser bin Abdullah Al-Awfi

100%

4

Mr. Suleiman Ali Al-Khudair

100%

5

Mr. Majed bin Mohammed Al-Othman

100%

6

Mr. Riyadh bin Saleh Al-Malik

100%

7

Mr. Ali bin Mohammed Aba Al-Khail

100%

8

Mr. Fawaz Suleiman Al-Rajhi

100%

9

Mr. Majid Bin Nasser Al Sabei’e

Attendance in person

36

Meeting No. (1) 19/03/2019

Attendance Ratio

Apologized

100%

50%

× Authorizing one of the Board members

??

The date of last meeting of the shareholders’ general assembly is 22/4/2019

??

No board member has submitted a written request to hold a board meeting in 2019 and no member has objected to the Board’s agenda and resolutions.

Number of SASCO requests for Shareholders Register The following table shows the number of SASCO requests for Shareholders Register as well as the dates and reasons for such requests: No.

Request Date

Request Reasons

1

1 8 / 3/ 2019

Following up the change in Shareholders Register

2

28 / 3/ 2019

13th Extraordinary meeting of the general assembly

3

25/ 4/ 2019

Entitled for dividends for 2018

4

9/ 7 / 2019

Following up the change in Shareholders Register

5

28 / 8 / 2019

Following up the change in Shareholders Register

6

29/ 9/ 2019

Following up the change in Shareholders Register

7

10/ 10/ 201 9

Following up the change in Shareholders Register

8

31/ 1 2/ 2019

Following up the change in Shareholders Register

Board Declarations

Procedures taken by the Board to familiarize its members

ffAccount records were properly prepared.

(non-executive in particular) with the shareholders’

ffThe Internal Control System was established on sound foundations

proposals and remarks about SASCO performance.

and implemented effectively. ffThere is no doubt in SASCO ability to continue its activities.

ffSASCO Investor Relation Department independently receives and 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

remuneration under any arrangements or assignment agreement.

been discussed in the shareholders general meetings and included

No shareholder waived any rights to profit under any arrangements

in the minutes of meetings.

or assignment agreement. ffThere is no description of classes and numbers of transferable debt instruments, contractual securities, rights memorandum, or

ffIn case of any proposals or remarks on SASCO performance, such proposals and remarks shall be discussed as part of the periodic board meetings agenda.

similar rights issued or granted by SASCO during the current fiscal year. There is no compensation gained by SASCO in return for this. ffThere is no description of any transfer or underwriting rights

The means used by the board to evaluate its performance and the performance of its committees and members :

under transferable debt instruments, contractual securities, rights

During 2019, the board adopted the required method to evaluate its

memorandum, or similar rights issued or granted by SASCO.

performance and the performance of its committees and members,

ffSASCO did not recover, purchase, or cancel any recoverable debt instruments. ffSASCO did not establish any investments or reserves in the interest

based on the recommendation of remuneration and nomination committee. Performance shall be evaluated according to such method periodically as from the next year.

of its employees. ffSASCO did not receive from shareholders possessing 5% or more

This method includes external evaluation of the board, so that the

of its capital or account auditor any request for holding a general

board takes the required arrangements to obtain the evaluation by

meeting or for adding an item to the agenda of the meeting in the

a professional external agency every three years or when necessary.

current fiscal year.

Annual Report 2019

37

Transactions and Contracts in which Board Members and Executive Directors have an Interest There are interest-related transactions and contracts for some Board members as follows:

Agency

Contracts/Business

Nahaz Investment Co.

A site lease from Nahaz Investment Co. to use as headquarters and labour accommodation for Ostool Al-Naqil Co. (subsidiary)

DAKKIN Advertising and Design Consultancy

Mr. Ibrahim bin Mohammed Al-Hudaithi (possessing 33.34% of capital) Providing services in Mr. Majed bin Mohammed Al-Othman the field of promotion (possessing 33.33% of capital) and advertising Mr. Sultan bin Mohammed Al-Hudaithi (possessing 33.33% of capital)

Mr. Ibrahim bin Mohammed Al-Hudaithi (Board member possessing 0.02% of capital).

Mr. Sultan bin Mohammed Al-Hudaithi (Board member possessing 0.02% of capital).

Mulkia Investment Co.

Managing an investment portfolio in Ahli Capital

Mr. Ibrahim bin Mohammed Al-Hudaithi (Board member possessing 17.67% of capital).

Mr. Suleiman Ali Al-Khudair (possessing 0.67% of capital).

Mr. Majid bin Mohammed Al-Othman (possessing 0.67% of capital).

Mr. Sultan bin Mohammed Al-Hudaithi (Board member possessing 21.45% of capital).

Nahaz Investment Co.

Zaiti Petroleum Services Company rents stations No. 1 and 2 from Nahaz Investment Co.

Mr. Ibrahim bin Mohammed Al-Hudaithi Board member of Nahaz Investment Co. (possessing 0.02% of capital) Mr. Sultan bin Mohammed Al-Hudaithi Board member of Nahaz Investment Co. (possessing 0.02% of capital)

Zaiti Petroleum Services Company rents station No. 8 from Madaen Star Real Estate

Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman of Madaen Star Real Estate (possessing a direct and indirect share of 97.75% of capital) Mr. Majed bin Mohammed Al-Othman Board member of Madaen Star Real Estate Mr. Sultan bin Mohammed Al-Hudaithi Board member of Madaen Star Real Estate

Madaen Star Real Estate

38

Related Parties

Statement

Contract Value is SAR 576,000 annually

Publicity and advertising of SAR 71,200

A contract to manage a portfolio of SAR 50,000,000

Contract value is SR 1.1 million

Contract value is SR 300,000 on an annual basis

Contract Duration

One year

One year

To be terminated by a 30-day written notice No transactions during 2019

For five renewable years as of 1/1/2018

One year

Reporting to Board

Reporting to General Meeting

Statement

Contract Duration

Zaiti Petroleum Services Company rents station No. 9 from Madaen Star Real Estate

Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman of Zawaya Real Estate Co. (possessing a direct and indirect share 42.96% of capital).

Mr. Majid bin Mohammed Al-Othman Board member of Zawaya Real Estate Co. (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).

Contract value is SR 350,000

TThe contract term has been changed to be 3 months automatically renewable against 300,000 SR 25/6/2019

Zaiti Petroleum Services Company rents station No. 10 from Madaen Star Real Estate

Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman of Madaen Star Real Estate (possessing a direct and indirect share of 97.75% of capital).

Mr. Majid bin Mohammed Al-Othman Board member of Madaen Star Real Estate.

Mr. Sultan bin Mohammed Al-Hudaithi Board member of Madaen Star Real Estate.

Contract value is SR 800,000

Five renewable years from 29 April 2015

Madaen Star Real Estate

Zaiti Petroleum Services Company rents station No. 11 from Madaen Star Real Estate

Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman of Madaen Star Real Estate (possessing a direct and indirect share of 97.75% of capital) Mr. Majed bin Mohammed Al-Othman Board member of Madaen Star Real Estate Mr. Sultan bin Mohammed Al-Hudaithi Board member of Madaen Star Real Estate

Contract value is SR 250,000 on an annual basis

One year

Nahaz Investment Co.

Nahaz Investment Co. purchases fuel from Zaiti Petroleum Services Company

Mr. Ibrahim bin Mohammed Al-Hudaithi Board member of Nahaz Investment Co. (possessing 0.02% of capital) Mr. Sultan bin Mohammed Al-Hudaithi Board member of Nahaz Investment Co. (possessing 0.02% of capital)

The value of 2019 fuel purchases was SR 56.700

One year

Agency

Zawaya Real Estate Co

Madaen Star Real Estate

Contracts/Business

Related Parties

Reporting to Board

Reporting to General Meeting

Annual Report 2019

39

Agency

Contracts/Business

Related Parties

Statement

Contract Duration

Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman of Madaen Star Real Estate (possessing a direct and indirect share of 97.75% of capital) Mr. Majed bin Mohammed Al-Othman Managing Director of Madaen Star Real Estate Mr. Sultan bin Mohammed Al-Hudaithi Board member of Madaen Star Real Estate

The value of 2019 fuel purchases was SR 154,200

One year

One Year

Madaen Star Real Estate

Madaen Star Real Estate purchases fuel from Zaiti Petroleum Services Company

Mr. Majed AlOthman

Mr. Majid Al-Othman purchases fuel from Zaiti Petroleum Services Company

Mr. Majid bin Mohammed Al-Othman

The value of 2019 fuel purchases was SR 10,000

Zawaya Real Estate Co. purchases fuel from Zaiti Petroleum Services Company

Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman of Zawaya Real Estate Co. (possessing a direct and indirect share 42.96% of capital).

Mr. Majid bin Mohammed Al-Othman Board member of Zawaya Real Estate Co. (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).

The value of 2019 fuel purchases was SR 8,483

One Year

Zawaya Real Estate Co. rents advertising boards at station No. (9)

Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman of Zawaya Real Estate Co. (possessing a direct and indirect share 42.96% of capital).

Mr. Majid bin Mohammed Al-Othman Board member of Zawaya Real Estate Co. (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).

2019 value was SR 12,500

One Year (evacuated on 25/6/2019)

Fun Gate Co. rents 10 residential rooms at station No. 2.

Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman of Fun Gate Co. (possessing a direct and indirect share of 97.75% of capital).

Mr. Majid bin Mohammed Al-Othman Managing Director of Fun Gate Co. Mr. Sultan bin Mohammed Al-Hudaithi Board member of Madaen Star Real Estate.

2018 value was SR 50,000

One Year

Zawaya Real Estate Co.

Zawaya Real Estate Co.

Fun Gate Co.

Reporting to Board

Reporting to General Meeting

Reported. ?? All above business and contracts were approved for a coming year in the 13th extraordinary general meeting held on 22 April 2019. The renewal of the same shall be approved by the next shareholders’ general meeting. ?? These business and contracts have no preferential terms. ?? Except as stated above, no other transactions effected between the company and a related party.

40

Annual Report 2019

41

Executive Committee It comprises: Mr. Ibrahim bin Mohammed Al-Hudaithi Chairman | Head of Executive Committee Qualifications & Experiences: A businessman, holding the Secondary school certificate with more than thirty eight years in corporate management. He occupied various positions including the deputy Chairperson of the Saudi Chambers of Commerce.

He also participated in the boards of CMA-listed and unlisted shareholding companies such as Al-Madaen Star Group, Akwan Real Estate Co., Ibrahim bin Mohammed Al-Hudaithi Investment Co., Zawaya Real Estate Co., Nahaz Investment Co. and other companies working in the fields of real estate, services, investment and financial services inside and outside the Kingdom of Saudi Arabia.

Present Occupations: ff Chairman of Al-Madaen Star Group. ff Chairman of Mulkia Investment Co. ff Board member of Nahaz Investment Co. ff Chairman of Zawaya Real Estate Co. ff Chairman of Balda Specialized Malls Co. ff Chairman of Akwan Real Estate Co. Previous Occupations: ff Vice Chairman of the Saudi Chambers of Commerce. ff Chairman of Al Kharj Industrial Chambers of Commerce. ff Member of Al Kharj Governorate Local Council. ff Board member of Solidarity Company.

Mr. Sultan bin Mohammed Al-Hudaithi Vice Chairman | Managing Director | Member of Executive Committee Qualifications & Experiences: He holds the Bachelor’s Degree in Accounting with honour degree from King Saud University and Masters of Business Administration (MBA) from London Business School. He held leading positions in many public and private companies in Saudi Arabia. He enjoys experience in corporate restructuring, strategic planning and investment management in securities, private equity and real estate investment. He was a member of boards and committees in public and private companies including Saudi Chemical, Nahaz Investment Co., Zawaya Real Estate Co., Al-Madaen Star Group, Middle East Battery Company (MEBCO), Mulkia Investment Co. and United Wire Factories Company (ASLAK).

Present Occupations: ff SASCO Managing Director. ff Board member of Madaen Star Group. ff Vice chairman of Zaway Real Estate Co. ff Board member of Mulkia Investment Co. ff Board member of Nahaz Investment Co. Previous Occupations: ff Chief Executive Director of Ibrahim Al-Hudaithi Investment Co. ff Chief Executive Director of Zaiti Petroleum Services Company. ff Deputy Director General of Financial and Administrative Affairs, Al-Madaen Star Group. ff Board member of Saudi Chemical. ff Board member of United Wire Factories Company (ASLAK)

Mr. Riyadh bin Saleh Al-Malik Board Member | Member of Executive Committee | Chief Executive Officer Qualifications & Experiences: He holds the Bachelor’s Degree in Business Administration from King Abdulaziz University. He enjoys a vast experience in corporate management, particularly fuel station companies. He served as the General Director of Al Tas’helat Marketing Company Ltd., Deputy General Director of Riyadh Development Company and board member of the board of directors of many companies.

ff Member of the National Committee of Fuel

Present Occupations: ff SASCO Chief Executive Officer. ff Member of Customs Council of Federation Internationale de l’Automobile.

Mr. Majid Bin Nasser Al Sabei’e Board Member | Member of Executive Committee Qualifications & Experiences: He holds Bachelor’s Degree in Economical Sciences from King Saud University and enjoys more than sixteen years in corporate governance. He held many leading positions such as the director of real estate projects at Nasser Bin Mohammed Alsubeaei & Sons Investment Company, financial analyst and managing director of Morgan Stanley & Co. He is currently the Chief Executive Officer of Nasser Bin Mohammed Alsubeaei & Sons Investment Company.

42

Station Companies in the Council of Saudi Chambers.

Previous Occupations: ff General Director of Al Tas’helat Marketing Company Ltd. ff Deputy General Director of Riyadh Development Company. ff Director of Marketing Department of Saudi Real Estate Company (Al Akaria). ff Sales Director of Saudi Hotels & Resorts Company. ff Head of Customs Council of Federation Internationale de l’Automobile. ff Head of the National Committee of Fuel Station Companies in the Council of Saudi Chambers.

Present Occupations: ff Chief Executive Officer of Nasser Bin Mohammed Alsubeaei & Sons Investment Company Previous Occupations: ff Manager of real estate projects at Nasser Bin Mohammed Alsubeaei & Sons Investment Company. ff Financial Analyst of Morgan Stanley & Co. ff Managing Director of Morgan Stanley & Co.

Competencies and Duties

ffTo consider SASCO strategic and operational plans and budgets to submit them to the Board. ffTo review feasibility studies for new economic projects and raise recommendations ffTo consider and present initial approvals to high importance issues that require Board decisions. ffTo make decisions on issues authorized to the Committee by the Board outside the competency of SASCO Managing Director and CEO. These issues may include topics related to investments, human resources (HR), remuneration, information technology (IT), capital expenses (CAPEX), procurements, and other issues authorized to the Committee. ffTo identify SASCO investment objectives and policies, including: ❖❖Assets subject to investment according to the adopted regulatory restrictions. ❖❖Asset types. ❖❖Investment-related long-term policies and objectives, risk appetite, asset diversification, investment currencies, and internal or external investments. ❖❖Nature of investment management arrangements and related controls. ❖❖Appointment of investment portfolio managers and trustees, and evaluating their performance periodically. ❖❖Method and frequency of performance analysis. ❖❖Approval of different investment processes as per the established investment policy. The Executive Committee can authorize their powers of approval within certain financial limits to the General Manager/FCO either jointly or severally according to the conditions of the authorization granted. ❖❖Reviewing and examining SASCO investment policies based on performance evaluation. ❖❖Evaluating investment outcomes to identify the success of implemented investment strategies, reporting investment outcomes to the Board as well as ensuring the adherence to the investment policy and key guidelines. ffTo enter into short and long term investment agreements, facilities and loans agreements within the limits of their powers. ffTo follow up the implementation and development of SASCO organizational structures and decisions that ensure the quick implementation and development thereof. ffTo review the administrative regulations with SASCO management and make decisions that enable the management to put them in place. ffTo contact senior officers at governmental and national bodies to facilitate the obstacles facing SASCO business and explain SASCO programs to them. ffTo assess technical designs and specifications and present proper recommendations thereon. ffTo make appropriate decisions on issues authorized by the Board to the Committee to discuss, address, and make appropriate decisions thereon.

ffTo perform all acts that would drive business and achieve SASCO objectives within the regulations, rules, and decisions issued by the Board. ffTo conduct purchases and acquisitions of existing stations or lands for constructing stations thereon within the limits of SASCO competencies. ffStudy the proposals submitted by the company management related to achieving the purposes of the company, admin, financial and operational activities and take the decision that enables the executive management to implement or refer to the board for matters deemed necessary by the committee. ffTo perform the activities referred by the Board or the Chairperson for consideration or execution.

Most Important Achievements

ffAmend the executive committee’s bylaws and get the board’s approval on the amendments. ffFollow up the company’s lands and sites with the concerned authorities. ffFollow up the acquisition process of new company websites. ffApprove the estimated budget of the company and its subsidiaries and submitting recommendations to the Board of Directors for approval. ffFollow up the financial and operational performance of the company and its subsidiaries. ffEvaluate the company’s investments and liquidity and submitting recommendations thereon to the Board of Directors. ffFollow up the project of selling some of the company’s sites and re-renting them. ffFollow up company’s lawsuits. ffFollow up the goals and recommendations of the company’s strategic plan. ffFollow up the operating and financial performance of the subsidiary companies. ffFollow up the implementation of the company’s projects. ffFollow up the implementation of the new headquarters of the company. ffFollow-up phases of communication with the concerned authorities to amend the fuel profit margin. ffStudy the operating sites and work to extend and reduce their rental contracts. ffSubmit recommendation on banking facility agreements. ffStudy the investment opportunities available to the company. ffApproving the committee’s plan for 2020 from the board of directors.

Meetings

The following table shows the meeting attendance record of the Executive Committee during the year 2019 as follows:

No. of meetings (5)

Attendance Ratio

No.

Member Name

1

Mr. Ibrahim bin Mohammed Al-Hudaithi Committee Head

2

Mr. Sultan bin Mohammed Al-Hudaithi Committee Member

100%

3

Mr. Riyadh bin Saleh Al-Malik Committee Member

100%

4

Mr. Majid Bin Nasser Al Sabei’e Committee Member

Meeting No. (1) 18/03/2019

Meeting No. (2) 28/04/2019

Meeting No. (3) 09/07/2019

Meeting No. (4) 28/10/2019

Meeting No. (5) 22/12/1209

By video phone

By video phone

By video phone

By video phone

By video phone

Apologized

100%

80%

Personal attendance Annual Report 2019

43

Audit Committee It comprises:

44

Mr. Nasser bin Abdullah Al-Awfi Board Member | Head of Audit Committee Qualifications & Experiences: He holds the Master’s Degree in Accounting, and Master’s Degree in Business Administration from Southern New Hampshire University in the USA and the Bachelor’s Degree in Accounting from King Saud University. He enjoys more than thirty two years of experience in the management of joint stock companies as well as financial, administrative and strategic consultation. He also participated in the many boards of shareholding companies and board committees (Audit Committee) such as Al Jouf Agricultural Development Company (JADCO), Taiba Holding Company and United Cement Industrial Company.

Present Occupations: ff Board member and Head of Audit Committee of United Cement Industrial Company. ff Board member, Audit committee head, Takaful Alrajhi Co. ff Head of Saudi Ceramics Audit Committee.

Previous Occupations: ff Head of Al Jouf Agricultural Development Company Audit Committee. ff Member of Taiba Holding Company Audit Committee. ff Director of Financial, Administrative and Investment Department of Saudi Pharmaceutical Industries & Medical Appliances Corporation (SPIMACO). ff Deputy General Director for Financial and Administrative Affairs of Saudi Livestock Trading Company. ff Director for Financial and Administrative Affairs of Taiba Investment and Real Estate Development Company.

Mr. Fawaz bin Suleiman Al-Rajhi Board Member | Member of Audit Committee Qualifications & Experiences: He holds the Bachelor’s Degree in Accounting and Information Systems Management from King Fahd University of Petroleum and Minerals (KFUPM) and also holds the Master’s Degree in Business Management from Stanford University, USA. He is the Chairperson of AlRajhi United Investment Holding Company; it is a company investing in capital markets and private transactions on the local, regional and international levels. He has been leading and directing the Company’s efforts since its inception based on the strategy of diversifying the investment portfolio through a deliberate choice of markets and industries in selected geographical locations, with focus being placed on emerging technology and income-generating real estates. He is also a board member and member of audit committees in a number of joint-stock companies. He spent more than a decade in banking. He held many positions in Corporate Financing Division of Rajhi Bank. He took part in establishing the department of corporate loans and financing subscription of large corporations. He was the person in charge of establishing the Share and Subscription Department of Al Rajhi Capital Company.

Present Occupations: ff Chairman of AlRajhi United Investment Holding Company. ff Board member, Raas Alkhaimah Ceramic Co. ff Chairman, Raj Real Estate Co. ff Chief Executive Officer of AlRajhi United Investment Holding Company.

Previous Occupations: ff Head of Private Placement Operations in Al Rajhi Capital Company. ff Director of Sales and Distribution in Al Rajhi Capital Company. ff Head of Corporate Banking Services Team in Rajhi Bank. ff Senior credit analyst in Rajhi Bank. ff System Analyst of Procter & Gamble Co.

Mr. Turki bin Muhamma Al Quraini Non-Board Member Qualifications & Experiences: He holds the bachelor of accounting from King Saud University, M.A in financial management from Sydney University of Technology, Australia, and the Certificate of Capital Market Exam (CME-1). He enjoys experience in corporate governance, measurement of corporate compliance levels, development of corporate governance systems, organizational structures, organizational regulations of the government sector as well as listed and unlisted shareholding companies. He also has experience in internal audit and risk management.

Present Occupations: ff Governance and compliance counsellor and specialist in shareholding companies listed in the Saudi Capital Market (Tadawul).

Previous Occupations: ff Director of Compliance with Corporate Governance Rules – Capital Market Authority. ff Director of Corporate Governance Standards Capital Market Authority. ff General Director of Governance and Board Secretary - Jabal Omar Development Co. ff General Director of Governance and Risks - National Housing Company.

Competencies and Duties ffTo review the preliminary and annual financial statements before submitting them to the Board and present opinions and make recommendations thereon to ensure integrity, accuracy and transparency. ffTo present technical opinions – upon request from the Board – whether the Board’s report and financial statements are fair, balanced and understood and contain the information that allows shareholders and investors to evaluate SASCO financial position, performance, business model and strategy. ffTo review any important or unfamiliar issue contained in the financial reports. ffTo accurately consider any issues raised by Chief Financial Officer, the persons assuming his duties, compliance officer or external auditor. ffTo verify accounting estimations in major issues of financial reports. ffTo review SASCO accounting policies and present opinions and make recommendations thereon to the Board. ffTo study and review systems of financial internal systems and risk management. ffTo consider internal audit reports and follow-up the implementation of corrective procedures regarding the remarks so raised. ffTo submit recommendation to the Board of the need to hire an internal auditor. ffTo submit recommendation to the Board concerning the appointment and remuneration of Internal Audit Department director or the internal auditor. ffTo monitor and supervise the internal auditor and Internal Audit Department’s performance and activities to verify their efficiency in undertaking their duties and responsibilities and the availability of the required resources. ffTo recommend to the Board the appointment of external auditors, dismiss them, set their fees, assess their performance, make sure of independence and review their scope of work and employment conditions. ffTo ensure that the external auditors is independent, just, fair and efficient, taking into account relevant rules and standards. ffTo review the account auditor’s plan and activities and make sure

he does not perform any works beyond the limits of audit tasks commissioned to him and present opinions in this regard. ffTo Respond to the auditor’s questions. ffStudy the auditor’s report and remarks on the financial statements and follow up the procedures taken in this regard. ffTo review the results of supervisory reports and ensure SASCO takes the required procedures. ffTo verify SASCO complies with the relevant laws, regulations and policies. ffReview contracts and transactions to be concluded by SASCO with related parties and present recommendations thereon to the Board. ffSubmit to the Board the issues and matters for which necessary actions should be taken and recommend proper procedures.

Most Important Achievements ffPrepare the annual audit committee report and submit it to the company’s shareholders general assembly. ffStudy the annual and quarterly financial statements and submit recommendations thereon. ffEnsuring the independence of the company’s external auditor. ffRecommend choosing the company’s external auditor accountants. ffReview the structure of the Internal Audit Department and make recommendations on it. ffFollow up the company’s internal audit work plan. ffReview the various internal audit reports and make recommendations on them. ffFollow up on risk assessment reports and give recommendations on them. ffGive recommendation on the application of International Accounting Standard No. (16) for lease contracts. ffGive recommendation regarding the appointment of director of the Internal Audit Department after the job holder resigns. ffApproving the committee’s plan for 2020 from the board of directors.

Meetings The following table shows the attendance record of Audit Committee meetings during 2019 as follows:

No. of meetings (7) No.

1

2

3

Member Name

Meeting No. (1) 19/03/2019

Meeting No. (2) 25/03/2019

Meeting No. (3) 29/04/2019

Meeting No. (4) 05/05/2019

Meeting No. (5) 24/7/2019

Meeting No. (6) 24/10/2019

Meeting No. (7) 01/12/2019

Mr. Nasser bin Abdullah Al-Awfi

100%

Committee Head

Mr. Fawaz bin Suleiman Al-Rajhi Committee member

Mr. Turki bin Mohammed Al Quraini Non-Board member

Attendance Ratio

By video phone

By video phone

Apologized

85.71%

100%

Personal attendance Annual Report 2019

45

Nomination and Remuneration Committee It comprises:

Mr. Ali bin Mohammed bin Ali Aba Al-Khail Board Member | Head of Nomination and Remuneration Committee Qualifications & Experiences: He holds Bachelor’s Degree in Political Sciences from the Faculty of Administrative Sciences, King Saud University and the Master’s Degree in Government Management from Harvard University, United Sates of America. He is the secretary of the Head of the Royal Diwan, the Deputy Director of the Political Affairs Department of the Royal Diwan and secretary of Office of Presidency of Prime Minister. He was appointed in the Office of the Second Deputy of Prime Minister, Minister of Defence and Aviation and Inspector General. He also worked as an administrative counsellor in the High Commission for Administrative Organization and Deputy Chairperson of the Board of Directors of Sanad Investment Company.

Present Occupations: ff Vice Chairman of the Board of Directors of Sanad Investment Company.

Previous Occupations: ff Deputy Director of the Political Affairs Department of the Royal Diwan. ff Administrative counsellor in the High Commission for Administrative Organization.

Mr. Suleiman bin Ali Al-Khudair Board Member | Member of Nomination and Remuneration Committee Qualifications & Experiences: He holds a university degree in sciences from the USA. He held many administrative positions, as he worked as a computer engineer in the Ministry of Defence. Then, he moved to the private sector where he worked as a technical director, a sales director and deputy general director in Nahil Computers and now he is its General Director.

Present Occupations: ff General Director of Nahil Computers.

Previous Occupations: ff Technical Director of Nahil Computers. ff Sales Director of Nahil Computers. ff Deputy General Director of Nahil Computers.

He participated in boards of many joint stock companies.

Mr. Majid bin Mohammed Al-Othman Board Member | Member of Nomination and Remuneration Committee Qualifications & Experiences: He is a businessman, holding the Secondary school certificate and enjoying more than thirty one years’ experience in real estate, contracting and automobile services. He is the Managing Director of Al-Madaen Star Group and board member of Ibrahim bin Mohammed Al-Hudaithi Investment Co., Bilda Specialized Commercial Centers Co. and Zawaya Real Estate Co.

46

Present Occupations: ff Managing Director of Al-Madaen Star Group. ff Board member, Zawaya real estate co. ff Board member, Balda Trading Centers Co. ff Board member, Ibrahim Al Hudaithi Investment Co. ff Chairman of Al-Madaen Star Group. ff Chairman of Fun Gate Company. ff Managing Director of Al-Madaen Star Group.

Previous Occupations: ff General Director of Al-Madaen Star Group for Contracting. ff General Director of Al-Madaen Star Group for Automobile Services.

Competencies and Duties ffTo develop clear policies for remunerations and rewards of Board members, board committees and senior executives and present

management in SASCO, as well as make recommendations regarding changes that can be made.

such policies to the Board for consideration and approval by the

ffTo ensure the independence of the independent members and the

General Meeting. Performance-related criteria when setting those

absence of any conflict of interest if the Board member is a member

policies should be employed.

of another company’s board on a regular basis.

ffTo define the relation between paid remunerations and the applicable remuneration policy and clarify any major deviation. ffTo conduct periodic review of the remuneration policy and assess to what extent it is efficient in achieving the desired outcomes. ffTo recommend to Board the remunerations and rewards of Board members, board committees and senior executives according to the approved policy.

ffTo develop a description of executive and non-executive members, independent members and senior executives. ffDevelop procedures for the case where one position of a board member or of a senior executive falls vacant. ffTo identify weaknesses and strengths in the Board and propose solutions in line with SASCO best interests. ff

ffTo propose clear membership policies and criteria in Board and

Most Important Achievements ffEnsure the independence of the Board of Directors members.

Executive Management. ffTo recommend nominations to Board membership in accordance with the approved policies and standards, considering not to nominate any person who has previously been convicted with a

ffPeriodic review of the structure of the Board of Directors. ffRecommendation regarding the payment of remuneration to the members of the Board of Directors. ffRecommendation to amend the regulations of the Remuneration

crime involving moral turpitude and dishonesty. ffTo prepare a description of capabilities and qualifications required for Board membership and occupying administrative management

Committee and the Nominations Committee. ffRecommendation regarding the appointment of some of the company’s leadership positions.

positions. ffTo set the time a member should devote to board works. ffTo conduct an annual review of the required needs in terms of adequate Board membership skills and executive management

ffApproval of the company’s rewards and incentives for the year 2018 AD. ffAmendments to the Employees’ Incentives, Rewards and Commissions Policy Manual.

functions. ffTo review the structure of the Board and senior executive

ffApproving the committee’s plan for 2020 by the board of directors.

Meetings The following table shows the attendance record of the Nomination and Remuneration Committee meetings in 2019:

No. of meetings (4)

No.

1

2

3

Member Name

Mr. Ali bin Mohammed bin Ali Aba Al-Khail Committee Head Mr. Suleiman bin Ali Al-Khudair Committee member Mr. Majed bin Mohammed Al-Othman Committee member

Meeting No. (1)

Meeting No. (2)

Meeting No. (3)

Meeting No. (4)

17/03/2019

05/05/2019

05/11/2019

15/12/2019

Apologized

Attendance Ratio

75%

100% .‫حضور أصالة‬

100%

Personal attendance

Annual Report 2019

47

Ownership of Substantial Shares The following table shows the entities holding substantial shares in SASCO and the changes made during 2019:

Ownership Percentage No.

Name Beginning of period

1

Mr. Ibrahim bin Mohammed Al-Hudaithi

2

Nahaz Investment Co.

11.56% (6,939,280 shares) 7.25% (4,350,000 shares)

Change*

-

December 31st, 2019

11.56% (6,939,280 shares) 7.25% (4,350,000 shares)

Change Ratio*

-

* Declaration: with respect to notices related to ownership of large shares and their change during the year, SASCO confirms that it did not receive any notice from shareholders of any change to their ownership during the year. In stocktaking of information, SASCO relies on the information provided by Saudi Stock Exchange (Tadawul).

48

Statement of Board Members’ Participations on other Boards The following table shows the names of the Board members on Boards of other companies:

Mr. Sultan bin Mohammed Al-Hudaithi

Mr. Ibrahim bin Mohammed Al-Hudaithi

Name

Companies in which Board member is on their current boards or of their directors

Name of Company

Inside/outside the Kingdom

Legal entity Listed/unlisted joint stock/limited liability company

Al-Madaen Star Group

Inside KSA

Unlisted shareholding company

Akwan Real Estate

Inside KSA

Unlisted shareholding company

Ibrahim bin Mohammed AlHudaithi Investment Co.

Inside KSA

Unlisted shareholding company

Zawaya Real Estate Co.

Inside KSA

Unlisted shareholding company

Nahaz Investment

Inside KSA

Unlisted shareholding company

Bilda Specialized Commercial Centers Co.

Inside KSA

Unlisted shareholding company

Mulkia Investment Co.

Inside KSA

Unlisted shareholding company

DAKKIN Advertising and Design Consultancy

Inside KSA

Limited liability company

Saudi Finance Company

Inside KSA

Limited liability company

Al-Madaen Star Group

Inside KSA

Zawaya Real Estate Co. Nahaz Investment Co.

Companies in which Board member was on their previous boards or of their directors

Name of Company

Inside/ outside the Kingdom

Legal entity Listed/unlisted joint stock/limited liability company

Solidarity Company

Inside KSA

Listed shareholding company

Unlisted shareholding company

Saudi Chemical Company

Inside KSA

Listed shareholding company

Inside KSA

Unlisted shareholding company

Projects Star Co.

Inside KSA

Limited liability company

Inside KSA

Unlisted shareholding company

National Real Estate Group

Inside KSA

Limited liability company

Mulkia Investment

Inside KSA

Unlisted shareholding company

Ibrahim bin Mohammed AlHudaithi Investment Co.

Inside KSA

Unlisted shareholding company

DAKKIN Advertising and Design Consultancy

Inside KSA

Limited liability company

United Wires Co.

Inside KSA

Listed shareholding co.

Mulkia Trading Co.

Inside KSA

Limited liability company

Ma’areb Company for Investment and Real Estate Development

Inside KSA

Limited liability company

Middle East Battery Company (MEBCO)

Inside KSA

Limited liability company

Annual Report 2019

49

Mr. Nasser bin Abdullah Al-Awfi

Mr. Sultan bin Mohammed Al-Hudaithi

Name

Companies in which Board member is on their current boards or of their directors

50

Name of Company

Inside/outside the Kingdom

Legal entity Listed/unlisted joint stock/limited liability company

Mulkia Real Estate Investment Co.

Inside KSA

Limited liability company

Mulkia Gulf Real Estate REIT Fund

Inside KSA

Limited liability company

Mulkia Investment Co.

Inside KSA

Limited liability company

Mulkia Gulf Real Estate REIT Fund

Inside KSA

Limited liability company

Knowledge & Childhood Company for Investment

Inside KSA

Limited liability company

Tamadon Al Ola for Real Estate

Inside KSA

Limited liability company

ARZAQ AGRICULTURAL Company

Inside KSA

Limited liability company

Tamadon Al Hadeetha for Real Estate

Inside KSA

Limited liability company

Dur Al Kuttab Limited

Inside KSA

Limited liability company

Tamdeen Real Estate Company

Inside KSA

Limited liability company

Auto & Equipment Investment co., LTD

Inside KSA

Limited liability company

Ostool Al-Naqil Co.

Inside KSA

Limited liability company

SASCO Palm Co.

Inside KSA

Limited liability company

Al-Nakhla Al-Oula Co.

Inside KSA

Limited liability company

Saudi Automobile & Touring Association

Inside KSA

Limited liability company

Zaiti Petroleum Services Company

Inside KSA

Limited liability company

SASCO Waha Co.

Inside KSA

Limited liability company

SASCO Franchise Co.

Inside KSA

Limited liability company

United Cement Industrial Co. Takaful Al Rajhi Co.

Inside KSA

Inside KSA

Unlisted shareholding company

Companies in which Board member was on their previous boards or of their directors

Name of Company

Al Jouf Agricultural Development Company (JADCO)

Inside/ outside the Kingdom

Legal entity Listed/unlisted joint stock/limited liability company

Inside

Listed shareholding

KSA

company

Listed shareholding

Food Products

Inside

Listed shareholding

company

Company

KSA

company

Mr. Suleiman bin Ali Al-Khudair

Name

Companies in which Board member is on their current boards or of their directors

Name of Company

Inside/outside the Kingdom

Nahil Computers

Inside KSA

Mr. Majed bin Mohammed Al-Othman

Al-Madaen Star Group

Zawaya Real Estate Co.

Bilda Specialized Commercial Centers Co. Ibrahim bin Mohammed Al-Hudaithi Investment DAKKIN Advertising and Design Consultancy

Inside KSA

Inside KSA

Inside KSA

Inside KSA

Madaen Star Group

Inside KSA

FUNGATE Company

Inside KSA

Foroseya for Trading &

Name of Company

Inside/ outside the Kingdom

Unlisted shareholding

Zaiti Petroleum

Inside

company

Services Company

KSA

Unlisted shareholding

Al-Madaen Star Group

Inside

Limited Liability

company

for Automotive

KSA

company

Inside

Limited liability company

company

company Limited Liability company Limited Liability company Limited Liability company

Sahl Transportation

Inside

Company

KSA

Ostool Al-Naqil Co.

Inside KSA

Limited liability company

Sara Communications

Inside

Company.

KSA

SASCO Palm Co.

Inside KSA

Limited liability company

Al-Nakhla Al-Oula Co.

Inside KSA

Limited liability company

Inside KSA

Limited liability company

Zaiti Petroleum Services

Inside KSA

Limited liability company

SASCO Waha Co.

Inside KSA

Limited liability company

SASCO Waha Co.

Inside KSA

Limited liability company

Touring Association

company

Unlisted shareholding

Limited liability company

Saudi Automobile &

shareholding

company

Inside KSA

Investment Co.

Unlisted

Unlisted shareholding

Limited liability company

Auto & Equipment

Legal entity Listed/unlisted joint stock/limited liability company

Limited Liability

Inside KSA

Services Ltd.

Mr. Riyadh bin Saleh Al-Malik*

Inside KSA

Legal entity Listed/unlisted joint stock/limited liability company

Companies in which Board member was on their previous boards or of their directors

Al Tas’helat Marketing

KSA

Limited liability company Limited liability company

Annual Report 2019

51

Mr. Majid bin Nasser AlSubeaei

Mr. Fawaz bin Suleiman Al-Rajhi

Mr. Ali bin Mohammed Aba Al-Khail

Name

Companies in which Board member is on their current boards or of their directors

Companies in which Board member was on their previous boards or of their directors

Name of Company

Inside/outside the Kingdom

Legal entity Listed/unlisted joint stock/limited liability company

Sanad Investment Company

Inside KSA

Limited liability

Inside KSA

Unlisted shareholding company

Inside KSA

Unlisted shareholding company

Rak Ceramics

Outside KSA

Listed shareholding company

Al Rajhi Alpha Investments

Inside KSA

Limited liability

RAJ Real Estate

Inside KSA

Limited liability

Inside KSA

Unlisted shareholding company

Inside KSA

Listed shareholding company

Eskan Investment Company Al Rajhi United Investment Holding Co

Nasser Bin Mohammed Alsubeaei & Sons Investment Company

Riyadh Development Company

Name of Company

Inside/ outside the Kingdom

Legal entity Listed/unlisted joint stock/limited liability company

* A member shall not be given remunerations, benefits or profits when he is a board member in any of SASCO subsidiaries.

Board Members’ and Senior Executives’ Ownership of Shares The following table shows the Board members’ and senior executives’ ownership of SASCO shares (including that of their wives and minor children): Ownership No.

52

Name

*

December 31st, 2019

Change

-

6,939,280 shares

-

123,218 shares

273,843 shares

397,061 shares

222.24%

1,333 shares

-

1,333 shares

-

Beginning of Period

Change

6,939,280 shares

Ratio

*

1

Mr. Ibrahim bin Mohammed Al-Hudaithi

2

Mr. Sultan bin Mohammed Al-Hudaithi

3

Mr. Nasser bin Abdullah Al-Awfi

4

Mr. Suleiman Ali Al-Khudair

220,731 shares

-

220,731 shares

-

5

Mr. Majed bin Mohammed Al-Othman

74,721 shares

52,024 shares

126,745 shares

69.62%

6

Mr. Riyadh bin Saleh Al-Malik

123,242 shares

176,758 shares

300,000 shares

143.42%

7

Mr. Ali bin Mohammed Aba Al-Khail

1,333 shares

-

1,333 shares

-

8

Mr. Fawaz Suleiman Al-Rajhi

1,111 shares

-

1,111 shares

-

9

Mr. Majid bin Nasser AlSubeaei

395,791 shares

(62,030 shares)

333,761 shares

(15.67%)

10

Mr. Muhammad bin Abdullah Al Motlaq

-

-

-

-

11

Mr. David Whales

-

-

-

-

12

Mr. Islam Mohammed Khairi Ahmad

-

-

-

-

13

Mr. Saud bin Suleiman Al Otaiby

-

-

-

-

Annual Report 2019

53

Shareholders’ Meetings in 2019

54

Shareholders’ Meetings in 2019 Thirteenth Extraordinary General Meeting First meeting and second meeting (after an hour) on 22 April 2019.

ff

Names of Attending Board Members

No.

Member Name

Capacity

1

Mr. Sultan bin Mohammed Al-Hudaithi

Vice Chairman – Managing Director, Member of the executive committee

2

Mr. Suleiman bin Ali Al-Khudair

Board Member, member of nomination and remuneration committee

3

Mr. Majed bin Mohammed Al-Othman

Board Member, member of nomination and remuneration committee

4

Mr. Riyadh bin Saleh Al-Malik

Board Member – CEO, Member of the executive committee

5

Mr. Ali bin Mohammed Aba Alkhail

Board Member, Head of nomination and remuneration committee

* The following persons apologized for not attending : No.

Member Name

Capacity

1

Mr. Ibrahim bin Mohammed Al-Hudaithi

Chairman – Member of the executive committee

2

Mr. Nasser bin Abdullah Al Oufi

Board Member, Head of Audit committee

3

Mr. Fawaz bin Suliman Al Rajhi

Board Member, member of audit committee

4

Mr. Majed bin Nasser Al Subaie

Board Member – Member of the executive committee

ff

All agenda items were approved as follows:

1.

Approve the Board’s report for fiscal year ending on 31 Dec. 2018.

Approve Auditor’s report for fiscal year ending on 31 Dec. 2018.

Approve SASCO consolidated financial statements for fiscal year ending on 31 Dec. 2018.

Approve the appointment of the company’s auditor from among the candidates based on the recommendation of the audit committee, to examine, review and audit the financial statements for the second, third, fourth and annual quarter of the fiscal year 2019 and the first quarter of 2020, and determine its fees.

Approve Board members’ discharge for fiscal year ending on 31 Dec. 2018.

Approve the Board’s recommendation to distribute cash profits

2.

3.

4.

5.

6.

7.

8.

to shareholders for the fiscal year ending on 31 Dec. 2018 at SR 0,5 per each share equivalent to 5% of SASCO capital in a total amount of SR 30 million. The entitlement would be for shareholders registered with the Securities Depository Center Company (Idaa) by the end of the second trading day following the date on which the Extraordinary General Assembly convened. The date and method of distribution shall be announced later.

Approve the payment of a remuneration to the Board members at a total amount of SR 1,8 million, with each member to receive SR 200,000 for the fiscal year of 2018.

Approve authorizing the Board of Directors to distribute interim dividends to shareholders on a semi-annual or quarterly basis for the fiscal year 2019, and to determine the due and distribution date in accordance with the regulatory controls and procedures issued in implementation of

Annual Report 2019

55

9.

10.

11.

12.

13.

14.

56

the corporate system in a manner commensurate with the financial position of the company and its cash flows and expansion and investment plans.

Approve the amendment of Article (twenty-three) of the company’s articles of association regarding the duties and obligations of the Board of Directors.

Approving the amendment of Article (fifty-five) of the company’s articles of association regarding the liability claim.

Approve the works and contracts that will be concluded between SASCO and NAHAZ Investment Company, in which some members of the Board have a direct interest in them, namely Mr. Ibrahim bin Mohammed Al-Hudaithi (nonexecutive member) and Mr. Sultan bin Mohammed AlHudaithi (executive member), where each of them holds a stake amounting to (0.02%) of its capital, and these transactions are for Ostool Al-Naqel company (a subsidiary company) renting a site from NAHAZ Investment Company against an amount of (368,000 SAR annually) for the purpose of using it as the headquarters of Ostool Al-Naqel company and housing for employees, and there are no Preferential conditions in this business and contracts.

Approve the works and contracts that will be concluded between SASCO and DAKKIN Advertising, in which some members of the Board of Directors have a direct interest, where Mr. Ibrahim bin Mohammed Al-Hudaithi (a non-executive member) owns a share of (33.34%) of its capital and Mr./ Majid bin Mohammed Al Othman (non-executive member) has a share of (33.33%) of its capital and Mr. Sultan bin Mohammed Al-Hudaithi (executive member) owns a share of (33.33%) of its capital, and these transactions represent services and business in the field of advertising, noting that the amount of transactions during 2018 amounted to 139.65 thousand riyals, and there are no preferential conditions in these transactions and contracts.

Approval of the works and contracts that will be concluded between SASCO and Mulkeya Investment Company, in which some members of the Board of Directors have a direct interest, namely Mr. Ibrahim bin Mohammed Al-Hudaithi (non-executive member) who owns a share of (17.67%) of its capital and Mr. Sultan bin Mohammed Al-Hudaithi (Executive member) owns a share of (21.45%) of its capital, while Mr. Sulaiman bin Ali Al Khudhair (non-executive member) owns a share of (0.67%) of its capital, and Mr. Majid bin Mohammed Al Othman (non-executive member) owns A share of (0.67%) of its capital. These transactions represent an investment portfolio management agreement with AlAhli Capital, at a value of ( 50 million riyals), and there are no preferential terms in these transactions and contracts.

Approval of the works and contracts that will be concluded between the Zaiti Petroleum Services Company (a subsidiary company) and the NAHAZ Investment Company, in which some members of the Board have a direct interest, namely Mr. Ibrahim bin Mohammed Al-Hudaithi (non-executive member) and Mr. Sultan bin Mohammed Al-Hudaithi (executive member). Each of them owns a share of (0.02%) of its capital, and these transactions represent a lease contract by Zaiti Petroleum Services company for two stations No. (1 and 2) from

15.

16.

17.

18.

NAHAZ Investment Company with an amount of (1.1 million riyals annually), and there are no preferential terms in these transactions and contracts Approval of the works and contracts that will be concluded between the Zaiti Petroleum Services Company (a subsidiary company) and Al-Madaen Stars Real Estate Company, in which some members of the Board have a direct interest, namely Mr. Ibrahim bin Mohammed Al-Hudaithi (a non-executive member) who owns a share of (97.75%) of the capital of Al Madaen Star Star Real Estate Company and is the Chairman of its Board of Directors, and Mr. Majid bin Mohammed Al Othman (non-executive member), a member of the Board of Directors of Al Madaen Star Star Real Estate Company, and Mr. / Sultan bin Mohammed Al Hudaithi (Executive Member) member of the Board of Directors of Al-Madaen Stars Group. These transactions represent a lease contract for the Zaiti Petroleum Services Co. for station No. (8) from Al-Madaen Star Real Estate Company, at an amount of (300,000 riyals annually), and there are no preferential terms in these transactions and contracts.

Approve the works and contracts that will be concluded between Zaiti Petroleum Services Company (a subsidiary company) and Zawaya Real Estate Company, in which some members of the Board have a direct interest, namely Mr. Ibrahim bin Mohammed Al-Hudaithi (a non-executive member) who owns a share of (42.96%) of the capital of Zawaya Real Estate Company and Chairman of its Board of Directors, and Mr. Majid bin Mohammed Al Othman (nonexecutive member) owns a share of (0.29%) of the capital of Zawaya Real Estate Company and is a member of its board of directors, and Mr. Sultan bin Mohammed Al-Hudaithi (executive member) owns a share of (1.8) % (Of the capital of Zawaya Real Estate Company and a member of its board of directors. These transactions represent a lease contract by Zaiti Petroleum Services Company for Station No. (9) from Al Madaen Star Star Real Estate Company at an amount of (400 thousand riyals annually), and there are no preferential conditions in these transactions and contracts.

Approve the works and contracts that will be concluded between the Zaiti Petroleum Services Company (a subsidiary company) and Al-Madaen Star Real Estate Company, in which some members of the Board have a direct interest, namely Mr. Ibrahim bin Mohammed Al-Hudaithi (a non-executive member) who owns a share of (97.75%) of the capital of Al Madaen Star Star Real Estate Company and is the Chairman of its Board of Directors, and Mr. Majid bin Mohammed Al Othman (non-executive member), a member of the Board of Directors of Al Madaen Star Star Real Estate Company, Mr. / Sultan bin Mohammed Al Hudaithi (Executive Member) member of the Board of Directors of Al-Madaen Star Group.

These transactions represent a lease contract by Zaiti Petroleum Services Company for station No. (10) from AlMadaen Star Real Estate Company, at an amount of (800,000 riyals annually), and there are no preferential terms in these transactions and contracts.

Approval of the works and contracts that will be concluded between the Zaiti Petroleum Services Company (a subsidiary company) and Al-Madaen Star Real Estate Company, in which

some members of the Board have a direct interest, namely Mr. Ibrahim bin Mohammed Al-Hudaithi (a non-executive member) who owns a share of (97.75%) of The capital of Al Madaen Star Real Estate Company and is the Chairman of its Board of Directors, and Mr. Majid bin Mohammed Al Othman (non-executive member) member of the Board of Directors of Al Madaen Star Real Estate Company, and Mr. Sultan bin Mohammed Al Hudaithi (executive member) member of the Board of Directors of the Al Madaen Star Group Company.

These transactions are a contract for the Zaiti Petroleum Services Company of station No. (11) from Al-Madaen Star Real Estate Company, at an amount of (250,000) riyals annually), and there are no preferential terms in these transactions and contracts.

19. Approval of the works and contracts that will be concluded between Zaiti Petroleum Services Company (a subsidiary company) and the NAHAZ Investment Company, in which some members of the Board have a direct interest , namely Mr. Ibrahim bin Mohammed Al-Hudaithi (non-executive member) and Mr. / Sultan bin Mohammed Al-Hudaithi (executive member) as each of them holds a share of (0.02%) of its capital, and these transactions represent fuel purchases from Zaiti Petroleum Services Co. by NAHAZ Investment Company, knowing that the amount of the deal during 2018 amounted to 78.7 thousand riyals, and there are no preferential conditions in these business and contracts.

20. Approve the works and contracts that will be concluded between Zaiti Petroleum Services Company (a subsidiary company) and Al-Madaen Star Group Company, in which some members of the Board have a direct interest, namely Mr. Ibrahim bin Mohammed Al-Hudaithi, a non-executive member (Chairman of the Board of Directors of the Al-Madaen Star Group Company), holds a direct and indirect share of 97.75% of its capital) and Mr. Majid bin Mohammed Al Othman (a non-executive member) the managing director of Al Madaen Star Group Company and Mr. Sultan bin Mohammed Al Hudaithi (an executive member) a member of the board of directors of the Al Madaen Star Group Company, and these transactions represent fuel purchases from Zaiti Petroleum Services Company by Al Madaen Star Group company, noting that the transaction amount during 2018 amounted to 188.06 thousand riyals, and there are no preferential terms in these transactions and contracts.

21. Approve the works and contracts that will be concluded between Zaiti Petroleum Services Company (a subsidiary company) and Mr. Majid bin Mohammed Al-Othman (a non-executive member). These transactions represent fuel purchases from the Zaiti Petroleum Services Company by Mr. Majid Bin Mohammed Al-Othman (non-executive member), knowing that the amount of transactions during 2018 amounted to 15.9 thousand riyals, and there are no preferential conditions in these transactions and contracts.

22. Approve the works and contracts that will be concluded between Zaiti Petroleum Services Company (a subsidiary company) and the Zaway Real Estate Company, in which some members of the Board of Directors have a direct interest, namely Mr. Ibrahim bin Mohammed Al-Hudaithi (A non-

executive member) owns a share of (42.96%) of the capital of Zawaya Real Estate Company and the Chairman of its Board of Directors, and Mr. Majid bin Mohammed Al Othman (a nonexecutive member) who owns a share of (0.29%) of the capital of Zawaya Real Estate Company and is a member of the Board Its Directors, and Mr. Sultan bin Mohammed Al-Hudaithi (executive member) owns a share of (1.8%) of the capital of Zawaya Real Estate Company and a member of its board of directors, and this deal represents purchases of fuel from Zaiti Petroleum Services Company by the Zawaya real estate company, noting that the transaction amount during 2018 amounted to 10.7 thousand riyals, and there are no preferential terms in these transactions and contracts.

23. Approve the works and contracts that will be concluded between the Zaiti Petroleum Services Company (a subsidiary company) and Zawaya Real Estate, in which some members of the Board have a direct interest, namely Mr. Ibrahim bin Mohammed Al-Hudaithi (a non-executive member) who owns a share of (42.96%) of the capital of Zawaya Real Estate Company and is the Chairman of its Board of Directors, and Mr. Majid bin Mohammed Al Othman (non-executive member) owns a share of (0.29%) of the capital of Zawaya Real Estate Company and is a member of its Board of Directors, and Mr. Sultan Bin Mohammed Al-Hudaithi (executive member) owns a share of (1.8%) of the capital of Zawaya Real Estate Company and a member of its board of directors. These transactions represent lease of Zawaya real estate company of signboards at station No. 9, that is owned by Zaiti Petroleum Services under a contract for an amount of SR 25 thousand per year and there are no preferential terms in this business and contracts.

24. Approval of the works and contracts that will be concluded between Zaiti Petroleum Services Company (a subsidiary company) and Fun Gate Company, in which some members of the Board have a direct interest, namely Mr. Ibrahim bin Mohammed Al-Hudaithi, a non-executive member (Chairman of Fun Gate Company) who owns a direct and indirect share of 97.75% of its capital, and Mr. Majid bin Mohammed Al Othman a non-executive member, Managing Director of Fun Gate Company, and Mr. Sultan bin Mohammed Al-Hudaithi, Executive Member, a member of the Board of Directors of Fun Gate Company, and these transactions represent lease

by Fun portal for residential rooms in Station No. (2) of Zaiti petroleum services company, noting that the transaction amount during 2018 amounted to SR 50 thousand, and there are no preferential terms in this business and contracts.

25. Approve the amendment of the audit committee’s bylaws, the controls and procedures of the committee’s work procedures, tasks, rules for selecting its members, term of their membership and remunerations.

26. Approve the amendment of the Nominations Committee’s bylaws, controls and procedures for the work of the Committee, its tasks, rules for selecting its members, term of their membership and remunerations.

27. Approve the amendment of the remuneration committee’s bylaws, controls and procedures for the committee’s work and tasks, rules for selecting its members, their membership term and remuneration.

Annual Report 2019

57

Recommendation Regarding the Auditor The Board or the Audit Committee has no observations or reservations regarding the current auditor, “Allied Accountants – Chartered Accountants and Auditors,” noting that 2019 was the fifth year for this auditor to deal with SASCO. The auditor’s activities include auditing SASCO financial statements for the fiscal year 2019 and the first quarter of the fiscal year 2020.

The audit committee’s recommendation will be submitted to the upcoming shareholders ’general assembly to choose the company’s auditor from among the candidates to examine, review and audit the financial statements for the second, third fourth quarters and annual of the fiscal year 2020 and the first quarter of 2021, and determine its fees.

58

Executive Directors They are as follows:

Mr. Mohammed bin Abdullah Al-Mutlaq Assistant CEO Qualifications & Experiences: He holds Bachelor’s Degree in Business Management from King Saud University. He held many administrative positions in the private sector. He is a member of the National Committee of Fuel Stations Companies in the Council of Saudi Chambers of Commerce and a member of Audit Committee of

Present Occupations: ff Assistant CEO the Saudi Automotive Services Company (SASCO).

Previous Occupations: ff General Director of Zaiti Petroleum Services Company.

Tabuk Fisheries Company (closed joint stock company).

Mr. Islam Muhammed Khairi Ahmad Finance Manager Qualifications & Experiences: He holds Bachelor’s Degree in Accounting from Ain Shams University, Egypt. He is a finance director for more than ten years, enjoying a wide experience in leading and developing successful financing teams in several finance and accounting activities, including the development of annual budgets and controlling major accounts. He is able to address functions and

lead working teams.

Present Occupations: ff Director of Finance Management of the Saudi Automotive Services Company (SASCO).

Previous Occupations: ff Head of Accounts Department in Al-Madaen Star Group. ff Chief Financial Officer of Zaiti Petroleum Services Company.

Mr. David Whales General Manager of SASCO Palm Co. Qualifications & Experiences: He holds the International General Certificate for Secondary Education (IGCSE). He worked for many British retailers and held many supplies jobs, including Director of Supplies Sector and Operations Manager at many British corporations. He acted as Deputy General Director of Operations at City Center Hypermarket.

Present Occupations: ff General Director of SASCO Palm Stores (subsidiary).

Previous Occupations: ff Director of Supplies Sector at many British corporations. ff Regional Director of Operations at British corporations. ff Deputy General Director of Operations at City Center Hypermarket.

Mr. Saud Sulieman Al Otaiby Director of Operations Sector Qualifications & Experiences: He holds Bachelor’s Degree of Public Administration from King Abdulaziz University in Jeddah. He enjoys more than 15 years of experience in the field of fuel station companies. He held many administrative positions in the private sector.

Present Occupations: ff Director of Operations Sector of the Saudi Automotive Services Company (SASCO).

Previous Occupations: ff Head of Western Province Operations, Al Tas’helat Marketing Company Ltd. ff General Director of Distributors in Kia Motors Saudi Arabia. ff Director of Western and Northern Provinces in the Saudi Automotive Services Company (SASCO).

Transactions and Contracts in which the Executive Directors have an Interest __ � There are no transactions or contracts in which the CEO, Chief Financial Officer, any executive director or

relevant person has interest.

Annual Report 2019

59

Financial Statements at SASCO Level

60

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

Statement

2015

2016

2017

2018

2019

335,453,233

310,503,345

336,983,801

358,187,696

389,100,152

Non-current assets

946,464,664

1,182,055,527

1,169,679,455

1,242,554,192

2,071,807,256

Total Assets

1,301,917.897

1,492,558,872

1,506,663,256

1,600,741,888

2,460,907,408

Current Liabilities

233,134,630

364,594,629

415,126,524

458,879,874

522,735,370

Non-Current Liabilities

336,454,575

345,519,020

362,426,221

389,999,100

1,086,726,178

Total Liabilities

569,589,205

710,113,649

777,552,745

848,878,974

1,609,461,548

Current assets

Total assets and liabilities 2,500,000,000 2,000,000,000 1,500,000,000 1,000,000,000 500,000,000 0 2015

2016

Total Assets

2017

2018

2019

Total Liabilities

Annual Report 2019

61

Assets

2,500,000,000 2,000,000,000 1,500,000,000 1,000,000,000 500,000,000 0 2015 Long term assets

Total assets

2016 Inventory

2017

2018

Commercial Receivables

2019 Cash and cash equivalents

Change in Net Fixed Assets 2,500,000,000 2,000ŮŤ000ŮŤ000 Growth rate in total assets 89.02%

1,500,000,000 1,000,000,000 500,000,000 0 2015 Net fixed assets

62

2016

2017

2018 Total assets

2019

Liabilities and Shareholders’ Equity

1,800,000,000 1٫600,000,000

Growth rate in shareholders’ equity 16.27%

1٫400,000,000 1٫200,000,000 1٫000,000,000 800,000,000 600,000,000 400,000,000 200,000,000 0 2015 Total Liabilities

2016 Capital

2017

2018

2019

Total Shareholders’ Equity

Income Statement The following table summarizes the data of the income statement for the past five years: Statement Sales

2015

2016

2017 “Amended”

2018

2019

665,048,902

1,094,122,754

1,212,329,807

2,056,081,002

2,482,842,898

(613,340,424)

(1,036,023,378)

(1,132,838,480)

(1,974,099,397)

(2,326,245,161)

51,708,478

58,099,376

79,491,327

81,981,605

156,597,737

General & Administrative Expenses

(35,285,668)

(38,686,162)

(47,575,585)

(44,298,103)

(54,610,424)

Other Revenue (Expenses)

5,584,757

10,222,617

(135,609)

542,811

23,070,875

(3,391,000)

(3,655,000)

(3,795,000)

(2,775,004)

(3,247,206)

18,616,567

25,980,831

27,985,133

35,451,309

121,810,982

Direct Costs Income Margin

Zakat Net Income

Annual Report 2019

63

2,500,000,000 2,000,000,000 1,500,000,000 1,000,000,000 500,000,000 0 2015

2016

Sales

Direct Costs

2017

2018

Income Margin

2019 Net Income

60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 0 )10,000,000(

2016

2015

General & Administrative Expenses

2017

2019

2018

Other Revenue (Expenses)

Zakat

SASCO Geographic Revenues

Western Province

20.55%

Central Province

3.42%

Southern Province

64

Northern Province

21.81 %

Eastern Province

43.93 %

3.90% Qassim Province

6.39%

Analysis of Material Differences in Results The following table shows the most important differences in the financial results compared to the previous fiscal year:

Statement

2019

2018

Change + (-)

% of Change

Revenue

2,482,842,898

2,056,081,002

426,761,896

20.76%

Direct Costs

(2,326,245,161)

(1,974,099,397)

352,145,764

17.84%

Income Margin

156,597,737

81,981,605

74,616,132

91.02%

Sales and marketing expenses

(3,806,855)

(2,189,061)

1,617,794

73.90%

General & Administrative Expenses

(49,569,545)

(40,020,290)

9,549,255

23.86%

Structured Allowances

(1,234,024)

(2,088,752)

(854,728)

(40.92%)

Net Operating Income

101,987,313

37,683,502

64,303,811

170.64%

Investment Revenue (Loss)

22,070,826

6,745,277

15,325,549

227.20%

Financial Burdens

(33,242,357)

(8,070,599)

25,171,758

311.89%

Misc. Revenue

34,242,406

1,868,133

32,374,273

1732.97%

Net Income Before Zakat

125,058,188

38,226,313

86,831,875

227.15%

Zakat

(3,247,206)

(2,775,004)

472,202

17.02%

Net Income After Zakat

121,810,982

35,451,309

86,359,673

243.60%

The following is a description of the main justifications for substantial changes in SASCO business results: ff Increase of net income in the current period compared to the same period of last year is attributed to: ?? Increase of sales at 20.76%, and change in fuel profit margin, which in turn affected the rise in overall profit and operating profit, in addition to the increase in investment and other revenues, despite the increase in general and administrative expenses due to employment costs and the rise in financing expenses for the application of International Standard No. (16) related to the lease contracts as well as increase in Zakat expenses.

Annual Report 2019

65

Cash Flow Statement The following table summarizes the data of the cash flow statement for the past five years:

2015

2016

2017 “Amended”

2018

2019

Flows from Operating Activities

50,095,250

61,539,044

31,299,799

45,308,582

45,421,134

Flows from Investment Activities

(198,513,124)

(168,464,284)

(116,986,699)

(78,101,689)

(102,280,009)

141,373,640

66,933,168

65,280,554

9,752,789

47,642,319

Statement

Flows from Financial Activities

150,000,000 100,000,000 50,000,000 0 )50,000,000( )100,000,000( )150,000,000( )200,000,000( 2016

2019

Flows from Financial Activities

50,000,000

78٫868٫420

100,000,000

2018

100٫479٫758

150,000,000

137٫316٫422

200,000,000

Flows from Investment Activities

117٫203٫850

Flows from Operating Activities

2017

193٫415٫355

2015

0 2015

2016

2017

Capital Expenditure Volume

66

2018

2019

Earnings per Share The following table summarizes earnings per share for the past five years:

Statement

2015

2016

2017 “Amended�

2018

2019

Earnings per Share

0.34

0.48

0.47

0.59

2.03

2.50 02.00

2.03

1.50 1.00 0.50

0.34

0.48

0.59

0.47

0 2016

2015

2017

2018

2019

Earnings Per Share

Share Performance The following graph summarizes share performance for the past five years:

30.00 25.00 20.00 15.00 10.00 5.00 0

2016

2015

2018

2017

2019

Share Value in SAR

Share Book Value

The following graph shows the share book value (not including dividends):

20.00 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0

Share book value (not including dividends)

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Annual Report 2019

67

Key Financial Indicators The following tables show the key financial indicators for the past five years:

Growth Indicators Statement

2015

2016

2017 “Amended”

2018

2019

Sales Growth

46.69%

64.52%

10.80%

69.60%

20.76%

Net Income Growth

(77.31%)

39.56%

7.71%

26.68%

243.60%

Asset Growth

15.04%

14.64%

0.94%

6.24%

53.74%

Equity Growth

(0.36%)

6.84%

(6.82%)

3.12%

13.24%

2015

2016

2017 “Amended”

2018

2019

Return on Sales

2.80%

2.37%

2.31%

1.72%

4.91%

Return on Capital

3.45%

4.81%

5.18%

5.91%

20.30%

Return on Investment

2.00%

2.20%

2.39%

2.85%

5.88%

Return on Total Assets

1.43%

1.74%

1.86%

2.21%

4.95%

Return on Equity

2.54%

3.32%

3.84%

4.72%

14.31%

Profit Indicators Statement

Profit Indicators

20.30%

25.00%

14.31%

20.00%

15.00%

4.95%

5.88%

4.91%

4.72%

2.21%

5.91%

2.85%

1.72%

3.84%

1.86%

5.18% 2.39%

2.31%

3.32%

1.74%

4.81%

2.20%

2.37%

2.54%

1.43%

3.45%

2.00%

5.00%

2.80%

10.00%

0.00% 2015 Return on Total Assets

68

2016 Return on Sales

2017 Return on Capital

2018 Return on Investment

2019 Return on Equity

Efficiency Indicators Statement

2015

2016

2017 “Amended”

2018

2019

Debtors Turnover

18.15

13.97

13.06

14.74

24.24

Inventory Turnover

22.15

37.92

31.18

38.56

47.02

Asset Turnover

0.51

0.73

0.80

1.28

1.01

Efficiency Indicators

38.56

37.92

40.00

47.02

50,00

18.31

35.00

15.00

14.74

13.06

13.97

18.15

20.00

22.15

25.00

24.24

30.00

2015 Debtors Turnover

2016

2017

2018

Inventory Turnover

1.01

1.28

0.80

0.00

0.73

5.00

0.51

10.00

2019

Asset Turnover

Liquidity & Indebtedness Indicators Statement

2015

2016

2017 “Amended”

2018

2019

Liquidity Ratio

1.52

0.85

0.81

0.78

0.74

Quick Liquidity Ratio

1.41

0.78

0.72

0.67

0.65

Ratio of Indebtedness to Equity

57.56%

65.74%

76.19%

78.88%

68.26%

Ratio of Indebtedness to Total Assets

32.38%

34.46%

36.87%

37.05%

23.62%

Annual Report 2019

69

Items of Income Statement as a Percentage of Revenue Statement

2015

2016

2017 “Amended�

2018

2019

100%

100%

100%

100%

100%

92.22%

94.69%

93.44%

96.01%

93.69%

Income Margin

7.78%

5.31%

6.56%

3.99%

6.31%

General & Administrative Expenses

5.31%

3.54%

3.92%

2.15%

2.20%

Other Revenue (Expenses)

0.84%

0.93%

(0.01%)

0.03%

0.93%

Zakat

0.51%

0.33%

0.31%

0.13%

0.13%

Net Income

2.80%

2.37%

2.31%

1.72%

4.91%

Revenue Direct Costs

93.69%

96.01%

93.44%

92.22%

100.00%

94.69%

Items of Income Statement as a Percentage of Revenue

80.00% 60.00%

2015

70

Income Margin

2016 General & Administrative Expenses

2017

2019

2018 Other Revenue (Expenses)

Zakat

Net Income

4.91%

0.13%

0.93%

6.31%

2.20%

1.72%

0.13%

2.15%

0.03%

3.99%

2.31%

-0.01%

-20.00%

Direct Costs

0.31%

3.92%

6.56%

2.37%

0.33%

3.54%

0.93%

5.31%

2.80%

5.31%

0.51%

0.00%

0.84%

20.00%

7.78%

40.00%

Zakat and Regulatory Payments Zakat is calculated in accordance with the Zakat and Income Tax System applicable in the Kingdom of Saudi Arabia. The due Zakat is applied to the income statement and the amendments to the final Zakat assessment, if any, are recorded in the assessment period.

During the year ending on December 31st, 2019, SASCO established an allowance for regulatory Zakat dues of (SAR 3,247,206).

SASCO also paid (SAR 1,852,480) from the Zakat allowance until 2019.

SASCO follows up with the Department of Zakat and Income through a consulting office specialized in Zakat and tax services to settle all issues concerning Zakat assessments for the period from 2009 to 2018.

The following table summarizes regulatory payments:

2019 Statement

Brief Description

Description of Reasons

822,158

Amount of Zakat paid during the year

Due for 2019

6,771,494

811,058

Paid amount of value added tax

The due amount belongs to December and is paid in January 2020

19,082

2,526

Paid amount of withholding tax

The due amount belongs to December and is paid in January 2020

General Organization for Social Insurance

4,754,629

459,748

Year dues

The due amount belongs to December and is paid in January 2020

Costs of visas, passports and labor office

9,675,285

Fees for visa, renewal of residence permit, exit and return

147,261

Customs fees of SASCO and Saudi Automobile & Touring Association

Paid

Due until end of annual financial period but not paid

Zakat

1,852,480

Value added tax

Withholding tax

Customs Fees

Total

23,220,231

2,095,490

ďż˝ These payments are within SASCO activity.

Penalties The following statement shows the punishments, sanctions, violations, precautionary measures or precautionary attachments, if any, imposed on SASCO during the year: Punishment / sanction / precautionary measure / precautionary attachment

Reasons for violation

Imposing body

How to address and avoid the same in the future

Fine

Operating some sites without license

Province Eamana - Ministry of Municipal and Rural Affairs (MoMRA)

Completing the requirements for issuing and renewing licenses for the operation of sites

Fine

Shortage of some civil defense requirements

General Directorate of Saudi Civil Defense

Completing and regularly verifying the civil defense requirements

Fine

Lack of license to operate Motel Al Adeed

Saudi Commission for Tourism and National Heritage (SCTH)

Efforts are exerted to issue it in coordination with the SCTH

Annual Report 2019

71

Loans Article (22) of SASCO Articles of Association defines the powers of the Board of Directors. Paragraph (8) of the same article state as follows: “The Board of Directors may contract loans with financing funds and institutions with whatever periods. It may also contract commercial loans, obtain loans and other credit facilities from government institutions, commercial banks, financial institutions and any other credit companies, issue guarantee letters in favor of any party if it sees it in SASCO interest, issue promissory notes and other tradable documents and enter into all types of agreements and banking transactions for any period of time not exceeding the expiry of SASCO duration. Loans of maximum three years shall meet the following conditions: a. The Board of Directors shall determine, in its resolution, ways of use of loans and method of repayment. b. Loan conditions and provided guarantees shall not prejudice SASCO, shareholders and general guarantees of creditors.�

During 2012, SASCO signed a Sharia-compliant facilities agreement with Banque Saudi Fransi (BSF) of SAR (255,000,000) as a general credit ceiling. This included letters 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 short-term finance of up to SAR (20,000,000), and multi-purpose short-term import facilities of SAR (20,000,000). SASCO amended the agreement amount on April 28th, 2015, to be SAR (550,940,648). This included renewal of existing facilities of SAR (245,833,332) of which SAR (110,000,000) represent various credit facilities and SAR (135,833,332) represent medium-term finance facilities guaranteed by a promissory note and/or securities or a deposit and pledge of title deeds. This was in addition to new facilities of SAR (305,107,316), of which SAR (55,107,316) for various credit facilities and SAR (250,000,000) for long-term finance facilities guaranteed by a promissory note. The agreement aims to finance the purchase of new lands, building new stations, and improving and developing the existing stations.

SASCO again amended the agreement amount on Feb. 17th, 2016, to be SAR (502,500,000). This included renewal of existing facilities of SAR (237,500,000) of which SAR (150,000,000) represent various credit facilities and SAR (87, 500,000) represent medium and long-term finance facilities guaranteed by a promissory note and/or securities or a deposit and pledge of title deeds. This was in addition to new 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 guaranteed by a promissory note. The agreement aims to finance the purchase of new lands and building new stations. SASCO amended the agreement amount on April 16th, 2017, to be SAR (439,273,664).

This included renewal of existing facilities of which SAR (169,107,000) represent various credit facilities and SAR (270,166,664) represent medium and long-term finance facilities guaranteed by a promissory note and/or securities or a deposit and pledge of title deeds. SASCO was given an additional grace period of one year and payment will be effective as of 1 June 2018. The agreement aims to finance the purchase and building of new stations. SASCO again amended the agreement amount on May 22nd, 2018, to be SAR (391,107,316). This included the renewal of existing facilities of which SAR (140,107,316) represent various credit facilities and SAR (251,000,000) represent short, medium and long-term finance facilities guaranteed by a promissory note. The agreement aims to finance the purchase and building of new stations. The company also renewed and amended the agreement on November 28, 2019 to become for an amount of (523,200,000 SAR), and this agreement includes the renewal of existing facilities including (145,000,000 SAR) various credit facilities and (178,200,000 SAR) long and short term financing facilities, in 72

addition to the new long-term financing of (200,000,000 Saudi riyals), agaomst promissory note guarantee, and this agreement aims to finance the purchase and construction of stations in addition to supporting the needs of working capital.

During 2013, SASCO signed a Shariah-compliant credit facilities agreement with the National Commercial Bank (NCB) of SAR (90,000,000) in the form of a long-term commercial loan to expand construction or acquisition of fuel stations. The agreement was renewed on May 1st, 2014 and its value became SAR (91,125,000) as a general credit ceiling, including long-term loan facilities of SAR (90,000,000) and profit margin swap of SAR (1,125,000) according to the needs of ordinary course of business.

On August 25th, 2015, SASCO signed a new Shariah-compliant facilities agreement with NCB of SAR (151,825,000), including long-term loans of SAR (101,125,000), 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 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 value became SAR (201,325,000), including long-term loan facilities of SAR (150,625,000) and bank letters of guarantee of SAR (25,000,000) and short-term loans of SAR (25,700,000). The agreement aims to expand SASCO projects, support its core activities, and purchase new sites to build fuel stations. The agreement was amended on April 30st, 2017 and its value became SAR (200,700,000), including long-term loans of SAR (150,700,000) and bank letters 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 (25,000,000) in the form of short-term commercial facility guaranteed by a promissory note. The agreement aims to support the needs of working capital. On September 3, 2019, the company terminated the old agreement and signed a new agreement with a total value of (166,250,000 SAR) which is a long and short-term trade facilitation of (155,000,000 SAR) in addition to a hedge of (11,250,000 SAR) against promissory note guarantee for a value of 110% of the total value of the agreement, this agreement aims to finance the purchase and construction of stations in addition to support the working capital needs.

On May 25th, 2015, SASCO signed a new Shariah-compliant facilities agreement with the Saudi-British Bank (SABB) of SAR (150,000,000) effective from the date of signing thereof, provided the use thereof before January 31st, 2016, and guaranteed by a promissory note.

This agreement includes a long-term loan of SAR (100,000,000) and bank letters of guarantee of SAR (50,000,000). The agreement aims to partially finance capital expenses, purchase land, and build new fuel stations. The agreement was amended on Dec. 7th, 2017 and its value became SAR (177,967,726), guaranteed by a promissory note, including a long-term loan of SAR (47,967,726) in addition to SAR (80,000,000) as bank letters of guarantee and short-term loans of SAR (50,000,000). The agreement aims to partially finance capital expenses, purchase of land, and build new fuel stations as well as to finance the working capital. This agreement will expire on January, 31th, 2019. The agreement was amended on Dec. 10th, 2018 and its value became SAR (400,000,000), guaranteed by a promissory note, including a long-term loan of SAR (150,000,000) in addition to SAR (200,000,000) as 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, 2020. Signature procedures are being completed for renewing and amending the agreement to be worth (557,638,482 SAR) against a promissory note guarantee, this agreement includes the amount of (159,138,482 SAR) long-term loan in addition to (287,500,000 SAR) bank guarantee letters In addition to (111,000,000 Saudi riyals) short-term loans, this agreement aims to partially finance capital expenditures, purchase of land and build new stations in addition to working capital financing, and this agreement also includes the remaining part of SASCO’s agreement with AlAwal Bank On December 13th, 2015, SASCO signed a (Shariah-compliant) Murabaha facilities agreement with the Gulf International Bank (GIB) (a Bahraini joint-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 period of five (5) years (2-year grace period), provided the repayment of loan shall be at equal quarterly instalments. This is in addition to issuing letters of guarantee of SAR (100,000,000). The agreement aims to expand SASCO projects, support its core activities, purchase new sites to build fuel stations as well as to finance the working capital.

The agreement was renewed and amended on Sep. 6th, 2018 and its value became SAR (48,000,000) in the form of payment guarantees in favor of Aramco, guaranteed by a promissory note.

On December 21st, 2015, SASCO signed a (Shariah-compliant) facilities agreement with the Riyad Bank (a Saudi joint-stock company). 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 months (18-month grace period), provided the repayment of loan at equal semi-annual successive instalments.

This is in addition to letters of guarantee of SAR (50,000,000).

The agreement aims to expand SASCO projects, support its core activities, purchase new sites to build fuel stations as well as to finance the working capital. On 24 October 2016, the guarantees clause was amended and the value of total guarantees was SAR (40,000,000) in addition to documentary credits of SAR (10,000,000).

The agreement was renewed on Dec. 28st, 2017 and its total value became SAR (98,528,114) and the value of total guarantees became SAR (50,000,000) including medium-term loans of SAR (48,528,114).

On 31 October 2018, the agreement was renewed and amended and the value of total guarantees became SAR (104,574,298) and the value of total guarantees became SAR (750,000,000) including mediumterm loans of SAR (29,574,298), guaranteed by a promissory note.

On December 21st, 2015, SASCO signed a (Shariah-compliant) facilities agreement with Riyadh Bank (a Saudi joint-stock company). The agreement includes bank letters of guarantee of SAR (50,000,000), aiming at expanding SASCO projects and supporting its core activities.

The agreement was amended on March 8th, 2018 through adding SR 320,000,000 in the form of long-term finance of 235,000,000, shortterm finance of SR 20,000,000, documentary credits of SR 20,000,000 and a hedge to set interest rates at SR 45,000,000 in addition to bank guarantees of SR 50,000,000 with the final value of the agreement to be 370,000,000, guaranteed by a promissory note in addition to pledging real estate deeds.

On December 12, 2019, the company renewed and amended the agreement with a total value (569,943,000 Saudi riyals) representing (long-term financing of 334,643,000 Saudi riyals, short-term financing of 120,000,000 Saudi riyals, documentary credits of 20,000,000 riyals, and hedging for fixed Interest rates amounting to 15.300,000 Saudi riyals (in addition to 80 million riyals of existing bank guarantees with a bond guarantee for an order in addition to mortgaging real estate deeds.

On January 29, 2019, the company entered into a Sharia’h compliant Murabaha facility agreement with Bank Al Jazira in the amount of (150,000,000 Saudi riyals) against a promissory not guarantee, and this agreement includes a long-term loan of (100,000,000 SAR), and a Short-term loan of (SAR 5,000,000) in addition to issuing bank guarantee letters of (SAR 45,000,000). This agreement aims to expand SASCO projects, support its main activities, buy new sites to build petrol stations, and finance working capital against promissory note guarantee.

On December 3, 2019, the company entered into a Sharia compliant Murabaha facility agreement with SABB Bank in the amount of (190,000,000 Saudi riyals) in order to finance 90% of the company’s entry into Aramco subscription under the condition that the amount of the financing is determined based on shares that will be allocated to the company after subscription and it has already been determined with a value of (26,951,587 SAR) against a promissory note guarantee in addition to pledging the stock portfolio.

150,000,000

155,600,000

200,000,000

172,717,382

250,000,000

237,851,539

Balance of loans at the end of year

15,000,000

100,000,000 50,000,000 0 BSF

National Commercial Bank (NCB)

Saudi British

Riyadh Bank

Bank (SABB) Annual Report 2019

73

Loan Statement

74

Bank

Loan Date

Balance at the end of 2019

Balance at the end of 2018

BSF

31/05/2013

10,924,000

56,124,000

BSF

30/06/2016

39,735,709

39.735.709

BSF

29/08/2016

24,654,233

24,654,233

BSF

13/12/2016

23,274,737

23,274,737

BSF

28/12/2016

12,305,262

12,305,262

BSF

28/12/2016

6,252,169

6,252,169

BSF

12/01/2017

3,966,562

3,966,562

BSF

29/03/2017

13,235,873

13,235,873

BSF

24/08/2017

1,251,455

1,251,455

BSF

02/10/2019

20,000,000

20,000,000

NCB

08/12/2019

15,000,000

25,000,000

Riyad Bank

18/03/2018

153,214,287

181,071,429

Riyad Bank

08/05/2018

31,428,573

37,142,857

Riyad Bank

21/03/2019

20,000,000

20,000,000

Riyad Bank

12/03/2019

11,989,200

-

Riyad Bank

28/05/2019

2,369,463

-

Riyad Bank

28/05/2019

7,650,016

-

Riyad Bank

24/06/2019

7,200,000

-

Riyad Bank

22/07/2019

4,000,000

-

Alawwal Bank

31/12/2015

-

16,666,667

Alawwal Bank

13/12/2016

-

2,264,022

Alawwal Bank

20/12/2016

-

1,166,702

SABB

10/11/2018

-

50,000,000

SABB

30/12/2019

10,000,000

-

SABB

24/12/2019

10,000,000

-

SABB

01/12/2019

10,000,000

-

SABB

26/11/2019

20,000,000

-

SABB

12/08/2019

26,951,587

-

SABB

19/12/2018

56,000,918

58,962,882

SABB

24/12/2019

1,406,108

-

SABB

18/12/2019

2,808,974

-

SABB

15/12/2019

34,406,220

-

SABB

29/12/2019

1,143,575

-

Total

581,168,921

593,074,559

Loan Maturity 2019

2018

Less than 1 Year

193,267,282

215,688,892

1 Year to 2 Years

105,414,776

86,700,386

2 Years to 5 Years

237,006,382

222,935,643

More than 5 Years

45,480,481

67,749,638

Statement

Loan Movement Term

Period in Months

Paid during year

Due Date

101,324,000

Long-term

72

56,124,000

45,200,000

31/12/2022

30/06/2016

39,735,709

Long-term

78

39,735,709

-

31/12/2022

BSF

29/08/2016

24,654,233

Long-term

76

24,654,233

-

31/12/2022

BSF

19/08/2018

20,000,000

Short-term

12

20,000,000

20,000,000

19/08/2019

BSF

02/10/2019

20,000,000

Short-term

12

-

-

24/09/2020

BSF

13/12/2016

23,274,737

Long-term

72

23,274,737

-

31/12/2022

BSF

28/12/2016

18,557,431

Long-term

72

18,557,431

-

31/12/2022

BSF

12/01/2017

3,966,562

Long-term

72

18,453,890

-

31/12/2022

NCB

10/12/2018

25,000,000

Short-term

4

25,000,000

25,000,000

11/04/2019

NCB

29/04/2019

10,000,000

Short -term

4

-

10,000,000

30/08/2019

NCB

07/08/2019

15,000,000

Short -term

2

-

15,000,000

07/10/2019

NCB

08/10/2019

15,000,000

Short -term

2

-

15,000,000

08/12/2019

NCB

08/12/2019

15,000,000

Short -term

2

-

-

06/02/2020

SABB

10/11/2018

50,000,000

Short -term

4

50,000,000

50,000,000

10/02/2019

SABB

23/03/2019

15,433,431

Short -term

3

-

15,433,431

17/06/2019

SABB

21/03/2019

10,000,000

Short -term

1

-

10,000,000

21/04/2019

SABB

15/04/2019

10,455,882

Short -term

3

-

10,455,882

14/07/2019

SABB

28/04/2019

24,015,306

Short -term

3

-

24,015,306

14/07/2019

SABB

17/06/2019

15,000,000

Short -term

1

-

15,000,000

14/07/2019

SABB

27/06/2019

527,709

Short -term

1

-

527,709

14/07/2019

SABB

05/08/2019

20,000,000

Short -term

2

-

20,000,000

08/10/2019

SABB

28/07/2019

30,000,000

Short-term

4

-

30,000,000

25/11/2019

SABB

26/11/2019

20,000,000

Short -term

4

-

-

25/03/2020

SABB

01/12/2019

10,000,000

Short -term

4

-

-

30/03/2020

SABB

24/12/2019

10,000,000

Short -term

4

-

-

22/04/2020

SABB

30/12/2019

10,000,000

Short -term

4

-

-

28/04/2020

SABB

08/12/2019

26,951,587

Long-term

60

-

-

08/12/2024

SABB

19/12/2018

58,962,882

Long-term

84

58,962,882

2,961,964

31/08/2025

SABB

24/12/2019

1,406,108

Long-term

84

-

-

31/08/2025

Bank

Date of Issue

BSF

31/05/2015‫م‬

BSF

Loan Value

Balance at year beginning

Annual Report 2019

75

Loan Movement (Continued) Term

Period in Months

Paid during year

Due Date

2,808,974

Long-term

84

-

-

31/08/2025

15/12/2019

34,406,221

Long -term

84

-

-

31/08/2025

SABB-Al Awal

29/12/2019

1,143,575

Long-term

6

-

-

29/12/2020

Riyadh Bank

12/03/2019

11,989,200

Long-term

84

-

-

12/03/2026

Riyadh Bank

28/05/2019

2,369,463

Long-term

84

-

-

28/05/2026

Riyadh Bank

28/05/2019

7,650,019

Long-term

84

-

-

28/05/2026

Riyadh Bank

24/06/2019

7,200,000

Long-term

84

-

-

24/06/2026

Riyadh Bank

22/07/2019

4,000,000

Long -term

84

-

-

22/07/2026

Riyadh Bank

18/03/2018

195,000,000

Long -term

84

181,071,429

27,857,142

18/03/2025

Riyadh Bank

08/05/2018

40,000,000

Long -term

84

37,142,857

5,714,284

08/05/2025

Riyadh Bank

04/06/2018

20,000,000

Short -term

9

20,000,000

20,000,000

21/03/2019

Riyadh Bank

21/03/2019

20,000,000

Short -term

11

-

-

16/03/2019

Alawal Bank

31/12/2015

50,000,000

Medium -term

48

16,666,666

16,666,666

31/12/2019

Alawal Bank

13/12/2016

4,528,044

Medium -term

42

2,264,022

2,264,022

28/06/2020

Alawal Bank

20/12/2016

2,333,403

Medium -term

42

1,166,703

1,166,703

28/06/2020

593,074,559

382,263,109

Bank

Date of Issue

SABB

18/12/2019

SABB

Total

Loan Value

1,047,694,476

Debt Instruments

Pledged Assets Site

Entity

Guarantee

Periodical Inspection Station in Riyadh

Riyadh Bank

Pledge

Jubail Station in Dammam

Riyadh Bank

Pledge

Takhassusi Station in Riyadh

Riyadh Bank

Pledge

Jubail Station 2 in Dammam

Riyadh Bank

Pledge

Uthman Bin Affan Station in Riyadh

Riyadh Bank

Pledge

76

SASCO and its subsidiaries did not issue debt instruments.

Profit Distributions Pursuant to Article 50 (Profit Distribution) of SASCO Articles of Association, SASCO annual net profits shall be distributed as follows: ffTen (10%) of net profit shall be retained to form a statutory reserve.

The Ordinary General Assembly may stop retention when the said reserve reaches 30% of the capital. ffThe Ordinary General Assembly may, by proposal from the Board of Directors, retain a certain ratio of profits to form a consensual reserve to be allocated to supporting SASCO financial position.

Other Guarantees Bank

Balance at year beginning

ffThe Ordinary General Assembly may decide to form other reserves Guarantee

BSF

A promissory note of SAR 523,200,000

NCB

A promissory note of SAR 182,875,000

SAAB

A promissory note of SAR 400,000,000

GIB

A promissory note of SAR 48,000,000

Aljazira Bank

A promissory note of SAR 165,000,000

Riyadh Bank

A promissory note of SAR 235,300,000

Riyadh Bank

A promissory note of SAR 389,274,000

to the extent that achieves SASCO interests or ensures the distribution of fixed profits to shareholders as much as possible.

The Assembly may also deduct some amounts of net profits to establish social institutions in favor of SASCO workers or to assist the existing social institutions. ffThe rest is then distributed to shareholders at no less than (3%) of the paid capital. ffIn accordance with the provisions of Article (28) of SASCO Articles of Association, after that, no more than (10%) of the rest is allocated to Board remuneration. The entitlement would be determined proportionately by the number of sessions attended by a member.

According to Article (51) of SASCO Articles of Association (Interim Profits): ffThe Board of Directors shall have the authority to approve interim profit disbursement to shareholders on a quarterly or biannual basis if SASCO financial position so permits and liquidity is available according to the rules and procedures developed by competent authorities.

According to Article (52) of SASCO Articles of Association (Profit Entitlement): ffA shareholder shall be entitled to receive his share of profits

Deviations from Applying Accounting Standards

Accounting Standards applicable in the Kingdom of Saudi Arabia SASCO applies the accounting standards issued by the Saudi Organization for Certified Public Accountants, and there is no deviation from the application of those standards.

decision shall set the dates of entitlement and distribution.

International Financial Reporting Standards (IFRS)

Entitlement to profits shall be for shareholders registered with the

With reference to the CMA letter No. S/1/12231/15 dated 27/10/1436 AH,

shareholders’ records at the end of day established for entitlement.

corresponding to 12/8/2018, regarding the CMA Circular No. 4/2978

According to Article (53) of SASCO Articles of Association (Profit

dated 25/3/2014, concerning the application of the International

Distribution to Preferred shares):

Financial Reporting Standards (IFRS) to the financial statements of

ffIn case the profits of any fiscal year are not distributed, the profits of

listed companies as of 1/1/2017 in accordance with the international

next years may be distributed only after disbursing the percentage

standards adopted by the Saudi Organization for Certified Public

stated in Article (10) of SASCO Articles of Association to preferred

Accountants, SASCO issued all its preliminary and annual financial

shareholders for that year.

statements during 2017 and 2018 according to the IFRS.

according to the General Meeting’s decision in this regard. The

ffIn case SASCO fails to pay such percentage of profits for three successive years, the Special Meeting of Preferred Shareholders may decide to attend the General Meetings and vote or appoint representatives in the Board pro rata with their value of shares of capital. This shall apply until SASCO can pay all profits allocated to those shareholders for previous years. ffSASCO Articles of Association and Policy of Share Profit Distribution are available on this link: www.sasco.com.sa ffThe following table shows the profits distributed to shareholders since 2010:

Treasury Stocks There are no treasury stocks retained by SASCO.

Auditor’s Report The auditor issued its report on SASCO financial statements for the period ending on December 31st, 2019, he indicated in the report an attention as follows: As shown in Note No. (29) of the notes attached to the consolidated financial statements, we would like to draw attention to the fact that on October 01, 2019, the Ministry of Energy approved the increase in the profit margin for gas stations and service centers of companies qualified by the Ministry of Municipal and Rural Affairs so that the

Cash Disbursements

new profit margin to become (15 halalas for gasoline instead of 9 Year

(SR/Share)

2010

0.50

2011

0.50

2012

0.50

2013

0.75

2014

1.50

2015

0.50

2017

0.50

2018

0.50

halalas per liter and 5 halalas per diesel instead of 3.5 halalas per liter), confirming that retail selling prices at stations shall not affect the final consumer, and then notification of the start of the date for applying the new margin that will be from August 23, 2018, and according to the best estimate, the Group management reduced the sales costs for the fiscal year ended December 31, 2019 by SAR 75,163,532 in addition to recognizing SAR 24,191,073 as other income for the compensation period for the profit margin difference for the previous periods (August 23, 2018 until December 31, 2018) according to the International Financial Reporting Standards approved in the Kingdom of Saudi Arabia and other standards and publications approved by the Saudi Organization for Certified Public Accountants.

Up to the date of issuance of the financial statements ending on December 31, 2019 the company is still awaiting approval and the right compensation amount by the Saudi Arabian Oil Company (Saudi Aramco) due to not completing the audit work of the

ffUp to the date of this report, the board of directors did not recommend any dividends for 2019.

documents submitted to them by the group about the due amount of compensation. Therefore, the management used these assumptions through the data available to it objectively and accurately, and our opinion was not modified according to this matter.

Annual Report 2019

77

Operation Sector

78

Operation Sector It is one of SASCO key sectors. All SASCO sites have been merged with

or under construction, (19) sites under pre-construction procedures,

Zaiti Company sites in this sector. It contains SASCO basic products

as well as (6) sites stopped because the roads deviated away from

offered to clients through (242) sites, divided into (198) operating

them or for lack of economic feasibility from operating them at the

stations and rest houses operated by SASCO and (3) sites operated by

present.

third parties. This is in addition to (16) sites stopped for development

Covering more than 4,500 km

More than 126 mosques

Mosques with a total capacity of more than 12,000 Salat performers

In 2019, Operation Sector offered its services to about 25 million vehicles, with an increase of 20.29% over the previous year, and 129 million customers, with an increase of 18,01% over the previous year.

Statistics of Company Site Visitors

100,000

40,000 20,000

Growth Ratio 20.29 % 17,777

60,000

21,040

80,000

25,309

We cover more than 129 million customers

92,465

129,039

120,000

109,344

Growth Ratio 18.01 %

140,000

0 Number of Vehicles

We serve more than 25 million vehicles

2017

2018

Number of Customers

2019

The Operation Sector manages all fuel stations and provides the following services:

Fuel Services

Diesel

Gasoline

91

Gasoline

95

Annual Report 2019

79

According to the pricing approved by the Ministry of Commerce for

Aramco, fares of transport from the nearest reservoir supposed to

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/

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,

provinces and other centres where there are no reservoirs of Saudi

provided that this is done by competent local committees.

Fuel prices during the year in the kingdom in Riyals

2.05 0.47

0.47

1.50

2.05 1.50

2.18 0.47

0.47

1.53

1.44 0.47

1.37

1.00

2.10

2.02

2.00

0 Start of Year

14 April 2019

91

14 July 2019

95

20 Oct. 2019

End of Year

Diesel

On October 01, 2019, the company announced that it had received

in the Kingdom and to stimulate the fuel stations companies and

a notification from the National Committee for Gas Stations

service centers to raise the level of the quality of services provided in

Companies (one of the committees of the Council of Saudi Chambers)

this sector and to confirm the role of the National Committee for fuel

that the Ministry of Energy agreed to increase the profit margin for

stations companies in the Council of Saudi Chambers in raising the

gas stations and service centers of companies holding a qualification

level of service and commitment to the highest quality standards in

certificate from the Ministry of Municipal and Rural Affairs to make

services provided at gas stations and service centers.

the new profit margin (15 halalas for petrol instead of 9 halalas per

The profit margin includes many of the expenses and costs borne by

liter, and 5 halalas for diesel instead of 3.5 halalas per liter) stressing

the company, including:

that retail prices in the stations shall not affect the final consumer.

This notification did not specify the beginning of the date of applying

ffTransportation cost related directly to increasing diesel prices.

the new margin , where the Ministry of Energy made clear in its

ffOperating costs of the stations as a result of the continued increase

letter to the Council of Chambers Saudi Arabia stated that Aramco

in the value of energy prices for services such as electricity and the

will implement the new profit margin for gas stations and service

ffWater cost.

the Ministry of Municipal and Rural Affairs, and that the ministry will

ffCosts of developing and improving the level of services in

coordinate with the Ministry of Municipal and Rural Affairs regarding

accordance with the requirements of the Ministry of Municipal and

any amendment or addition to the list of eligible companies issued

Rural Affairs for companies qualified to manage gas stations.

by the Ministry of Municipal and Rural Affairs, as the companies that

ffIncreased labor cost.

qualify in the future will be granted the new profit margin starting

ffCost of evaporation during transportation from Aramco to the

from the Gregorian month following their obtaining a qualification

plant’s discharge site.

certificate from the Ministry of Municipal and Rural Affairs, and the

ffThe cost of evaporation losses in the fuel tank of the plant.

new margin for the companies whose qualification was withdrawn

ffThe costs of bank guarantees issued to Aramco.

will be suspended by the Ministry of Municipal and Rural Affairs.

This amendment in the profit margin assures the keenness of the Ministry of Energy to continue developing the fuel stations sector

80

related logistical, maintenance and labor related services.

centers that comply with the qualification requirements issued by

Number of sold litres - SASCO

0

Gasoline 95

Gasoline 91

2019

355,976,099

463,365,798

258,443,751

93,266,803

Change % of 11.08% 82,936,866

500,000,000

Change % of 10.39%

663,324,664

1,000,000,000

997,971,241

1,236,252,811

Change % of 23.88%

419,735,635

1,500,000,000

Diesel

2018

2017

0

Gasoline 95

Gasoline 91

2019

2018

29,664,675

34,977,970

38,613,817

7,772,234

6,911,406

50,000,000

21,536,979

100,000,000

55,277,055

150,000,000

83,164,270

103,021,068

Average sales Liter / Month

Diesel

2017

Fuel sales in Liters 200,000,000 150,000,000 100,000,000 50,000,000 0 Jan

Feb

Mar

Apr

May

Jun

2018

July

Aug

Sep

Oct

Nov

Dec

2019

Annual Report 2019

81

Rental Sector

Dining

Through competent departments in all areas, Retail Sector leases

According to the priorities of SASCO strategy to attract companies

some facilities that SASCO authorizes third parties to manage, such

specialized in restaurant management and reduce the number of

as restaurants, car maintenance workshops, oil and tire services, as

restaurants SASCO operates to improve service, provide a unique

well as other shops serving clients and passengers.

experience, achieve a quantum shift, enhance customer satisfaction, assume leadership in this field, and advance the Stations and Rest Houses Sector in the Kingdom, SASCO continued to sign several

Rental

agreements with global and local restaurant companies, which have already begun providing services in many SASCO sites inside and outside cities and at border crossing posts, through restaurants that provide suitable services to the company’s customers of different tastes.

Rental areas of more than exceeding 138,000 m2

Pilgrims’ Services SASCO provides these services through its rest houses and stations

SASCO also continued to sign strategic partnership agreements with

at the Saudi border crossing posts, in addition to SASCO site network

several international and local competent companies specialized

spreading on all highways, especially those linking the holy lands

in operating restaurants, cafes, and car maintenance workshops to

(Mecca and Medina).

manage some of SASCO site facilities. This has had a positive impact in

ff

Al-Hijra Road (Mecca/Medina)

providing integrated and high-quality service, leading to an increase

ff

Mecca/Jeddah Highway.

in number of customers in SASCO sites throughout the Kingdom.

ff

Mecca/Taif Road (Al Hoda/Al Sail)

Café

ff

Riyadh/Taif highway

Palm Café offers all types of coffee and hot drinks, in addition to a

ff

Riyadh/Dammam Road

range of snacks and pastries. Palm Café had (10) branches by the end

ff

Halat Amar/Tabuk/Medina Road

of 2019.

During 2019, SASCO served more than 10.8 million Pilgrims and

To offer a better service in this field, SASCO contracted with major

visitors whether from inside or outside the kingdom.

international café companies to provide their services through SASCO sites spread throughout the Kingdom.

Pilgrims 15,000

8,300

1,000

1,100

1,270

5,000

9,900

10,850

10,000

0 Numbers of Vehicles

Numbers of Persons

2018

2019

2017

The following table shows the key financial results at the Retail Sector level as well as the contribution ratio in income margin compared to the previous fiscal year:

Direct Revenue

82

Contribution Ratio (in revenue)

Direct Costs

Total Income

Contribution Ratio (Income Margin)

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

2,275,470,751

1,851,348,389

91.65%

90.05%

(2,148,009,320)

(1,798,497,107)

127,461,431

52,851,282

81.39%

64.47%

500٫000٫000

52,851,282

1,000,000٫000

127,461,431

1,500,000٫000

1,851,348,389

2,275,470,751

2,000,000٫000

2,148,009,320

2٫500٫000٫0000

1,798,497,107

‫قطاع العمليات‬

0 Operating revenues

Operating costs

2019

Total Income

2018

The following table shows revenue analysis of Retail Sector for the past five years: 2015

2016

2017

2018

2019

645.234.638

939.405.052

1.034.959.662

1.851.348.389

2.275.470.751

Revenue Growth of Retail Sector

2٫500٫000٫000

Annual Compound Growth rate 28.67%

2٫000٫000٫000 1٫500,000,000 1٫000,000,000 500,000,000 -

2016

2015

2018

2017

2019

Total Sector Revenue

Geographical Revenue of Retail Sector

The following table shows province-level revenue analysis: Sector

2019

%

2018

%

Central Province

918,547,868

40.37%

813,495,006

43.93%

Northern Province

138,992,048

6.11%

118,231,379

6.39%

Eastern Province

492,918,188

21.66%

403,712,322

21.81%

Western Province

557,195,629

24.49%

380,384,808

20.55%

Southern Province

77,634,545

3.41%

63,344,155

3.42%

3.96%

Qassim Province

90,182,473

3.96%

72,180,719

3.90%

Total

2,275,470,751

100%

1,851,348,389

100%

Qassim Province

Western Province

24.49%

6.11%

Northern Province

21.66%

Eastern Province

40.37% Central Province

3.41%

Southern Province Annual Report 2019

83

SASCO Palm Co.

84

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 (13) branches during 2019, bringing the total number of (SASCO Palm Stores) branches to (80) in various regions of the Kingdom at the end of the year after excluding two branches in 2019.

Number of SASCO Palm Stores Branches

80

90

67

69

60 30 0 2019

2018

2017

Revenue of SASCO Palm Stores square meters in 2019 rose to SR 47.60 for all sites. Client basket change was 6,56% rising from SR 21.04 in 2018 to SR 22.42 in 2019.

Geographical Distribution of Branches Northern Province

7

Western Province

17

43

12

Central Province

Eastern Province

1

Southern Province

(SASCO Palm Stores) contains an integrated basket of carefully

ff

Instruments, tools, and accessories.

selected products to meet the needs of our customers, whether

ff

Trip supplies.

travellers on intercity roads, vehicle drivers, and passengers inside

ff

Prepaid communication cards.

cities. The following are the classifications of these items:

ff

Electronics.

ff

Food supplies.

ff

Mobile phone accessories.

ff

Non-food supplies.

ff

Perfumes and cosmetics.

ff

Dairy products and cold drinks.

Annual Report 2019

85

The following table shows the key financial results at SASCO Palm Stores level as well as the percentage of contribution and income margin compared to previous fiscal year: % of Contribution (in revenues)

Direct Revenue

Direct Costs

% of Contribution (Income Margin)

Total Income

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

213,774,890

201,456,232

8.61%

9.80%

(200,395,749)

(190,488,260)

13,379,141

10,967,972

8.54%

13.38%

13,379,141

100,000,000

10,967,972

150,000,000

190,488,260

200,000,000

200,395,749

250,000,000

201,456,232

213,774,890

Sasco Palm Company

50,000,000 0 Operating revenue

Total income

Operating costs

2019

2018

Growth of SASCO Palm Stores Revenue

250,000,000 Annual Compound Growth rate 9.03%

200,000,000 150,000,000 100,000,000 50,000,000 0

2015

2016

2017

2018

Total Sector Revenue

86

2019

The following table shows province-level revenue analysis: Sector

2019

%

2018

%

Central Province

131,978,891

61.73%

126,231,352

62.66%

Northern Province

10,872,620

5.09%

10,794,365

5.36%

Eastern Province

28,851,653

13.50%

28,988,690

14.39%

Western Province

41,208,753

19.28%

35,441,825

17.59%

Southern Province

862,973

0.40%

-

-

Total

213,774,890

100%

201.456.232

100%

SASCO Palm Stores Geographical Revenue Northern Province

5.09%

Western Province

19.28%

61.73% Central Province

13.50%

Eastern Province

0.40%

Southern Province

Annual Report 2019

87

SASCO Waha Co.

88

SASCO Waha Co. SASCO Waha Co. is a limited liability company with a capital of SAR 5000,000, divided into 50,000 equal cash shares, each of SAR 100.

SASCO holds 99% of its capital while Auto & Equipment Investment Co., Ltd holds the remaining 1%. SASCO Waha Co. was established to manage this activity independently to achieve the best returns from it.

SASCO Waha Co. manages all SASCO motels spread all over the Kingdom. SASCO integrated in its strategy the development of these motels to carry its own brand “Waha Motel”.

During 2019, one motel was opened on Riyadh / Taif Road at Dhalam area, and 3 motels were developed on Al-Ola / Tabuk road, Taif / Riyadh road and on Qassim / Riyadh road, bringing the number of motels carrying the brand of “Waha Motel” to 9.

SASCO Waha Co. also obtained a license to operate and classify the accommodation facilities issued by the General Authority for Tourism and National Heritage, for the company’s motel in Al- Adid area on Salwa Al Batha International Road.

“Super 8” Hotel achieved success in the quality test applied by Windham Company, and obtained 88.75% which is the highest score achieved around the Kingdom.

Annual Report 2019

89

Number of Motels

10

9

5

5

3 1

1

1

0 SASCO Waha Co.

Super 8

2019

2018

2017

Super 8 Hotel, located on Thumamah road, Riyadh city, includes high standard rooms, a restaurant, conference room, in addition to a sports hall.

The following table shows the most important financial results at SASCO Waha Co. level as well as the percentage of contribution to revenues and income margin compared to previous fiscal year:

Direct Revenue

% of Contribution (in revenues)

Direct Costs

% of Contribution (Income Margin)

Total Income

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

5,459,311

3,911,567

0.22%

0.19%

(4,908,776)

(3,760,683)

550,535

150,884

0.35%

0.18%

550,535

2,000,000 1,000,000

150,884

3,000,000

3,760,683

4,000,000

4,908,776

5,000,000

3,911,567

6,000,000

5,459,311

SASCO Waha Co.

0 Operating revenue

Operating costs

2019

90

2018

Total income

The following table shows revenue analysis at the region level : Sector

2019

%

2018

%

Central Province

3,438,613

62,99%

2,493,474

63.75%

Northern Province

455,180

8,34%

311,929

7.97%

Eastern Province

1,286,350

23,56%

1,106,164

28.28%

Western Province

162,826

2,98%

-

-

Southern Province

116,342

2,13%

-

-

Total

5,459,311

100%

3,911,567

100%

SASCO Al-Waha Co Geographical Revenue Northern Province

8.34%

2.98% Western Province

62.99% Central Province

23.56% Eastern Province

2.13%

Southern Province

Annual Report 2019

91

Ostool Al-Naqil Co.

92

Ostool Al-Naqil Co. Ostool Al-Naqil Co. is a limited liability company with a capital of SAR

compared to (132) trailers in 2018.

5,000,000 , divided into 50,000 equal cash shares each of SAR 100.

The company provides transportation service to SASCO’s operations

SASCO holds 99% while Auto & Equipment Investment Co., Ltd holds

sector sites (fuel transportation, water transport, sanitation) in

the remaining 1%. Moreover, both the National Water Company and

addition to providing transportation services (fuel, goods) to a

the Saudi Electricity Company have qualified Ostool Al-Naqil Co..

number of major retail and distribution companies, in addition to

An integrated headquarters was prepared for Ostool Al-Naqil Co.

expanding its activity to include dry transport through refrigerators

in Riyadh, including fleet management buildings and integrated

and flat trailers allocated to all purposes.

workshop for tankers maintenance, in addition to two branches, one

The total mileage of the tankers of Ostool Al-Naqil Co. during the

in the Eastern Province and the other is in the Western Province, that

current year in order to provide service to its customers reached

are considered the launch point of the company’s trucks.

more than 15 million km compared to 14 million km in 2018, with an

At the end of 2019, the fleet size reached (127) tankers, compared to

increase of 7.14%.

(116) tankers at the end of 2018, and (143) trailers at the end of 2019,

Fleet Size 150

143 132

100 89

91

95

101

109

121

116

127

50

0 2015

2016 Number of trailers

To offer service to our clients, we went a long drive of more than 15 million km.

2017

2018

2019

Number of tankers

More than 56 thousand trips through our fleet.

Annual Report 2019

93

The following table shows the key financial results at Ostool Al-Naqil Co. level as well as the percentage of contribution and income margin compared to previous fiscal year: % of Contribution (in revenues)

Direct Revenue

Direct Costs

% of Contribution (Income Margin)

Total Income

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

29,156,246

26,359,082

1.17%

1.28%

(21,384,722)

(18,011,444)

7,771,524

8,347,638

4.96%

10.18%

Ostool Al-Naqil Co.

5,000,000

8,347,638

10,000,000

7,771,524

15,000,000

18,011,444

20,000,000

21,384,722

29,156,246

25,000,000

26,359,082

30,000,000

Operating revenue

Total income

Operating costs

2019

2018

1,400,000,000

800,000,000 600,000,000

932,274,000

1,000,000,000

1,116,003,000

1,200,000,000

1,516,967,000

1,377,300,000

1,600,000,000

1,488,539,000

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

108

116

127

-

2016

2017

2018

2019

88

200,000,000

95

400,000,000

2015

Number of trucks

94

Liters transported

Revenue Growth of Ostool Al-Naqil Co. 35,000,000 30,000,000 25,000,000

Annual Compound Growth rate 13.72%

20,000,000 15,000,000 10,000,000 5,000,000 2015

2016

2017

2018

2019

Total revenue of Ostool Al-Naqil Co.

� Ostool Al-Naqil Co. revenues are geographically interrelated with the Retail Sector.

Annual Report 2019

95

Saudi Automobile & Touring Association - SATA

96

Saudi Automobile & Touring Association - SATA Saudi Automobile & Touring Association SATA was established as a limited liability company with a capital of SR 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%.

Through this Convention, SASCO aims to activate SATA role to change from a member represented in the International Road Transport Union to an active member to represent the Kingdom of Saudi Arabia and issue TIR books.

Saudi Automobile & Touring Association has a license from the Fédération Internationale de l’automobile (FIA) to issue Trip-Tik customs books and works through many sale outlets widespread throughout all regions of the Kingdom, in addition to a network of agents and distributors in the Kingdom. All of them adopt world-class terms, specifications, and performance standards.

The Saudi Automobile & Touring Association, SATA began in late 2019 to issue TIR books and make trial trips in coordination with the Saudi Customs Authority.

The role of SATA has also been activated, and transformation from a representative member of the International Road Transport Association to an active member representing the Kingdom of Saudi Arabia and issuer of the TIR books.

The most important services offered by Saudi Automobile & Touring Association include the following: ff Issuing Trip-Tik customs books. ff Issuing international driving licenses. ff Issuing TIR books. ff Organizing sport activities for cars and motorcycles as well as holding, operating, and managing various categories of motorracing tracks The number of passengers benefitting from customs transit books during 2019 was more than 15.8 thousand, and more than 50,000 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.

SATA launched a campaign to support the sales of international license sales during 2019 in coordination with the company’s marketing department.

As part of Saudi Automobile & Touring Association’s agreement of 2012 with the International Road Transport Union (IRU), “an 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 long waiting times on borders, simplifying customs procedures, harmonizing border control, applying information systems and common border and ensuring integrity”, the Saudi Automobile & Touring Association, SATA, signed on October 3, 2018 with the Saudi Customs an agreement to activate the Customs Convention on the International Transport of Goods under international carriage of goods by rail (TIR); a simplified system making trade easier and cheaper, being the only international transit and guarantee system. Under the Convention, the Saudi Automobile & Touring Association, SATA, is considered the issuer of TIR books and the guarantor of trucks exporting under the TIR system in Saudi Arabia.

The Saudi Automobile & Touring Association, SATA participated in the third Saudi logistical conference as a strategic sponsor during the month of October 2019, which was inaugurated by His Excellency the Minister of Transport in the presence of His Excellency the Chairman of the SATA Board of Directors and His Excellency the President of the club, where SATA held its exhibition accompanying the conference and organized a workshop entitled “A quantum shift to facilitate customs operations for transit and trade development from and through the Kingdom” in cooperation with the Saudi Customs Authority and the International Federation of Road Transport with the aim of contributing to raising the level of knowledge through access to the latest developments in all parts of the world and seeking to integrate this development in operations that are designed to simplify the movement of products and information in the supply chain and logistics services and to identify the mechanisms that aim to reduce costs and improve efficiency through the integration of the supply chain and logistics management.

In order to enhance its role in international federations, the Saudi Automobile & Touring Association, SATA participated in the General Assembly of Land Transport in Geneva, during which the SATA efforts were praised for committing to applying best practices as a guarantor association, and SATA also participated in The Arab Council of Automobile and Tourism Clubs (ACTAC) meeting in Cairo. During the meeting, the latest updates on electronic transformation ( e-CPD application) were discussed, in addition to participating in the meetings of the General Assembly of the Fédération Internationale de l’automobile (FIA) in Paris . SATA seeks through the management of sports activities related to motor sports and motorcycles, and in coordination with the relevant authorities, to obtain a license for sports activities to practice this sport professionally

Annual Report 2019

97

15.8

More than thousand passengers traveling via Trip-Tik books.

50

More than Thousand passengers issued international licenses.

The following table shows the most important financial results at the level of Saudi Automobile & Touring Association - SATA as well as the percentage of contribution to revenues and income margin compared to previous fiscal year:

% of Contribution (in revenues)

Direct Revenue

Direct Costs

% of Contribution (Income Margin)

Total Income

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

14,252,082

12,012,231

0.57

0.58%

(8,167,116)

(2,348,402)

6,084,966

9,663,829

3.89%

11.79%

Saudi Automobile & Touring Association

Operating revenue

Operating costs

2019

9,663,829

6,084,966

-

2,348,402

50,000,000

8,167,116

100,000,000

12,012,231

14,252,082

150,000,000

Total income

2018

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

Statement

2015

2016

2017

2018

2019

Sales

20,292,812

20,471,234

22,723,350

12,012,231

14,252,082

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

98

SATA Revenues 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 2015

2016

2017

2018

2019

SATA sales per site

Association Sales Per Type

0.11 % Trip-Tik Yemen

43.88% 37.94%

Trip-Tik Sudan

Trip-Tik International

18.07% International licenses

TIR book is the solution for transporting goods and moving better around the world

Annual Report 2019

99

Auto & Equipment Investment Co.

100

‫إستثمارات السيارات والمعدات‬

Auto & Equipment Investment Co. Auto & Equipment Investment Co. was established with a capital

ff

of SAR 500,000, fully owned by SASCO, divided into 50,000 cash

Build car and heavy equipment maintenance workshops as well as car and passenger service centres.

shares each of SAR 10. The company was established to provide

ff

Build rest houses, motels, and restaurants.

infrastructure, human resources, and expertise required to manage

ff

Import and sell equipment and tools and construct roads and

SASCO investments independently and impartially and, thus,

bridges.

increase SASCO diversity of income sources and enable it to manage

SASCO operates most of its investments in its subsidiaries through

its operational and investment processes efficiently and effectively.

Auto & Equipment Investment Co., since the latter holds 1% of the

The most important activities of Auto & Equipment Investment Co.

capital of Ostool Al-Naqil Co., 1% of the capital of Saudi Automobile

include:

& Touring Association, 1% of the capital of SASCO Palm Stores Co., 1 %

ff

Manufacturing industries.

of the capital of SASCO Waha Co., 1% of the capital of SASCO Franchise

ff

Construction.

Co., and 1% of the capital of SASCO Al-Nakhla Al-Oula Co.

ff

Trade.

ff

Finance, business and other services.

SASCO holds equity in other companies, and the following table

ff

Possess land and real estate and erect buildings thereon for

shows the details of these investments:

operation, sale, or lease.

No.

Company Name

1

Middle East Battery Company (MEBCO)*

2

National Company of Tourism (Syahya)

3

United Racing Company

No. of Shares

Value of Nominal Share

Total

Ownership Ratio

1,279

5,750

7,354,250

12.79%

3

500,000

1,500,000

0.36%

125

1,000

125,000

25%

Total

8,979,250

ďż˝ 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

16.71%

National Company of Tourism (Syahya)

81.90% Middle East Battery Company (MEBCO)

1.39%

United Racing Company

Annual Report 2019

101

Dividends Received from Investments 25,000,000 21,712,472 20,000,000 15,000,000 10,000,000 5,710,088

500,000,00

0,000,000

0,000,000 Investments in companies

2019

1,287,190

Investments in securities

2018

Investment Portfolios according to Investment Regulations issued by CMA There is an investment portfolio management agreement with a Mulkia Investment Company, and all shares in this portfolio were liquidated during 2019.

Entity

Investment Amount

Amount invested as of 31/12/2019

Accounting Treatment

Mulkia Investment Co.

-

-

Securities for trading

Investment Portfolios On December 03, 2019, an investment portfolio was opened with HSBC Saudi Arabia for the purpose of subscription in Saudi Aramco shares and management thereof. This portfolio is accounted for as available-for-sale securities and the financial impact of it is addressed at the end of each financial period in the shareholders ’equity at the financial statement and the differences between periods on the statement of comprehensive income when evaluating the portfolio.

102

Entity

Investment Amount

Amount invested as of 31/12/2019

Accounting Treatment

HSBC Saudi Arabia

SAR 29,946,208

SAR 29,946,208

Securities held for sale

Annual Report 2019

103

Al-NakhlaAl-Oula Co.

104

‫شركة النخلة األولى للمقاوالت‬ Al Nakhla Al Oula Contracting Company

Al-Nakhla Al-Oula Co. A limited liability company, established to carry out the operation, maintenance, and cleaning of SASCO sites to improve the quality of service provided to customers, 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%.

Al-Nakhla Al-Oula is specialized in: ff

General contracting (construction, repair, demolition, and restoration).

ff

Construction, management, maintenance, and operation of residential and commercial buildings.

ff

Road works.

The company also supervises the establishment and development of some stations that are created or developed by the owners.

The table below shows the key financial results at the level of Al-Nakhla Al-Oula Contracting Company and the percentage of its contribution to the revenue and income margin compared to the previous fiscal year as follows: Direct Revenues

Shareholding Percentage (in revenues)

Direct Costs

Shareholding Percentage (income margin)

Total Income

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

4,420,373

-

0.18%

-

(3,070,233)

-

1,350,140

-

0.86%

-

Annual Report 2019

105

SASCO Franchise Co.

106

SASCO Franchise Co. After a specialized company completed the project of granting

Program aims to create new investment opportunities for SASCO and

franchise to operate “SASCO fuel stations” and “Palm Stores”, the

increase its revenues and profitability through granting the franchise

establishment of “SASCO Franchise Co.” was completed with a capital

of operating commercial brands to other operators, resulting in

of SAR 500,000 divided into 50,000 equal cash shares each of SAR

creating real opportunities for citizens to participate in pioneering

10. SASCO possesses 99% while Auto & Equipment Investment Co.,

projects in line with the Kingdom’s vision.

Ltd possesses the remaining 1%. “SASCO Franchise Co.” grants third

In March 2019, the company participated in the commercial

parties a franchise to operate “SASCO fuel stations” and “Palm Stores”.

franchise exhibition held in Jeddah under the slogan “Apply now and get the franchise application - an opportunity for excellence),

SASCO launched the Commercial Franchise Granting Program to

as this participation aims to educate young businessmen about the

operate the brands of “ SASCO Stations” and “Palm Stores”. The

commercial franchise program offered by the company.

Annual Report 2019

107

Other Administrative & Operational Information

108

Other Administrative and Operational Information Lawsuits

United Racing Company Lawsuit

of the ruling in the interest of the company in its capacity as the competent authority to implement the rulings issued against government agencies.

The partners of the United Racing Company filed lawsuit before

On 23/03/1441H, the Ministry of Housing filed a lawsuit requesting

the Administrative Judicature Court in Jeddah versus SASCO.

an explanation of the court ruling issued in favor of the company and

They demanded the liquidation of their company. After the Panel

determining whether it was for the equivalent fee of the market value

considering the case ordered compulsory liquidation. it appointed

of the site where the lawsuit was postponed to 29/04/1441H.

Osama Abdullah Al-Khuraiji & Partner - Chartered Accountants and

On 17/11/2019, the company filed a lawsuit before the Administrative

Business Consultants, to carry out the liquidation procedures, and

Court in Riyadh in which it requests the Ministry of Housing to pay

execution is still underway with the chartered accountant’s office.

the value of the area taken and the case is still in study before the

As per the latest report of SASCO Law Firm, liquidation is subject to

competent department.

the following:

ffThe case filed by SASCO against the Industrial Cities Authority and

I. Completing the requirements for opening United Racing

the Tabuk City Municipality before the Public Court in Tabuk, which

Company Zakat file at the Department of Zakat.

was transferred to the Public Court in Riyadh, regarding interference

II. Approval of debt balances.

with the land of the company owned by it in the industrial area of

III. SASCO Law Firm’s obtaining of the details and documents of

Tabuk City and demanding compensation for the value of the land

lawsuits filed by or against SASCO.

if it is not possible to receive it. After several sessions, the case is

The Administrative Judicature Court in Jeddah passed a judgement

still with the Public Court in Riyadh for consideration.

binding the United Racing Company to pay to one of the creditors an

ffThe case filed by the company against Al-Khaldi Establishment,

amount of SR 2 million. For lack of liquidity in United Racing Company

the tenant of the company’s site on Dammam-Riyadh road at km

balances, the liquidator requested partners to proportionately (each

205 for not delivering the station after the expiry of the contract

as per his shares of capital) pay the amount. A lawsuit was filed by

in 2014, and after a verdict was issued by Al-Khobar Court obliging

the liquidator before Jeddah Commercial Court this regard. As the

the defendant to vacate the property, the defendant filed on

liquidator’s law firm was absent, the lawsuit was cancelled. Then, the

09/03/1441H an appeal against the ruling and awaiting the appeal

case was brought again to the court and an appointment was fixed

outcomes.

on December 4, 2019, and due to the absence of the liquidator’s office,

ffThe case filed by the company against the governorate of Jubba,

the case was cancelled again. SASCO Law Firm still follows up the case.

for cancelling contracts and releasing letters of guarantee and

Other Miscellaneous Lawsuits

compensation for damages incurred due to the company not

SASCO filed some suits related to amounts due to it from some

receiving the sites. The company on 03/08/1432H contracted with

tenants and debtors to collect its dues for previous years. There are

the municipality of Jubbah to rent sites on the international road

some other financial and labour lawsuits versus SASCO and its Legal

Hail - Al-Jouf, and the company did not finally receive any of the

Department follows up these financial rights and collection thereof,

aforementioned sites because these sites did not fit the purpose

either by amicable or judicial means.

for which they were contracted. A ruling was issued in favor of

Following are some of the key lawsuits:

SASCO obligating the municipality of Jubbah to pay an amount of

ffOne important case is the one SASCO filed before the Board of

(1,027,750 Riyals) to the company, and it was approved by issuing

Grievances versus both the Ministry of Municipal and Rural Affairs

a support order by the Municipality of Hail to the municipality of

and the Ministry of Housing. SASCO possesses land in Hafr Al-

Jubbah to pay the amount, and the company is still following to

Batin area and the Ministry of Housing, through Hafr Al-Batin

receive the amount with the relevant authorities

Municipality, took part of this land. The lawsuit was referred to

ffThe case filed by the company against the Municipality of Jeddah,

Riyadh Public Court and, then, to the Review Board, which in turn

where the company rented a plot of land from the Municipality

referred it to Hafr Al-Batin Municipality to check the site and

of Jeddah in the Al-Hijrah quarter with an area of (20164.66 m2)

determine the overlap between the two plots. Consequently, Hafr

and paid the rent for the first year, and since the Municipality was

Al-Batin Municipality issued its letter stating that the Ministry of

unable to hand over the site due to the Ministry of Transport’s

Housing had infringed upon 41,713 m2 of SASCO plot. Therefore,

refusal to allow an entrance and exit for the station and the failure

the assessment was referred to an authorized assessor. Based on

of the municipality to return the amounts paid by the company,

its assessment, a judgment was passed in favor of SASCO, and a

the company filed a lawsuit against the Municipality of Jeddah

reasonable compensation for the usurped land was determined.

Governorate before the Administrative Court in Jeddah registered

The judgment was challenged by the Ministry of Housing. On

with No. 203 for 1439H in order to compel the municipality to pay

February 25, 2019, the company received a final court ruling from

the amounts it received. In the Session dated 22/12/1439H, a ruling

the Department No. (41) of the Public Court in Riyadh, which

was made in favor of the company in the amount of (831,000 riyals),

stipulates that the Ministry of Housing (the defendant) is required

and the municipality appealed before the Administrative Court in

to pay an amount of 8,217,461 Riyals as equivalent fee, in exchange

Jeddah, but the court issued a decision to support the judgment

for encroaching on the company’s land located on Hafer Al-Batin

and we received the amount and deposited it to the Company

/ Riyadh road, and accordingly, the company sent a letter to the

account.

municipality of Riyadh region requesting the implementation

Annual Report 2019

109

Human Resources The following table shows human resources analysis of SASCO and its subsidiaries:

No.

Category

2019

2018

1.

Senior Management

1

1

2.

Middle & Executive Management

339

264

3.

Workers and Technicians

1741

1457

2081

1722

Total

110

Subsidiaries The following table shows the summary of (limited liability) subsidiaries and their status of incorporation.

Core Business

Headquarters Foundation Country

Auto & Equipment Investment Co., Ltd (SAR 500,000)

Build car and equipment repair workshops – car services stations and travellers on the main roads between the cities of the Kingdom to provide fuel, oils and maintenance for cars and heavy equipment, establish holiday buildings, motels and restaurants, provide meals, drinks and refreshments for travellers, wash and lubricate cars and equipment, and import Selling equipment and tools, and constructing roads and bridges

Kingdom of Saudi Arabia Riyadh

100 % SASCO

Incorporated in 2010

Ostool Al-Naqil Co., Ltd (SAR 5,000,000)

Transporting and distributing water, land transportation of goods, transporting refrigerated and frozen goods, transporting goods and heavy equipment (heavy transport), transporting liquids or liquid gases, transporting cars.

Kingdom of Saudi Arabia Riyadh

100 % SASCO

Incorporated in 2010

3

Saudi Automobile & Touring Association, Ltd SATA (SAR 500,000)

Subscribe in local and international car and motorcycle clubs as well as local and international societies and bodies interested in car and motorcycle affairs, issue Trip-Tik customs books and international driving licenses, build, manage, maintain and operate car & motorcycles sports tracks, hold races and car & motorcycle sport events - participate in races and motorsport events.

Kingdom of Saudi Arabia Riyadh

100 % SASCO

Incorporated in 2012

4

Al-Nakhla Al-Oula Co. (SAR 500,000)

General contracting for buildings, establish, maintain and operate residential and commercial buildings and road works.

Kingdom of Saudi Arabia Riyadh

100 % SASCO

Incorporated in 2012

5

SASCO Palm Co. (SAR 500,000)

Importing and selling foodstuffs, drinks, refreshments, equipment, coffee, hot drinks, sandwiches, baked vegetables, fresh fruits, toys of all kinds, non-fireworks, travel supplies, clothes, household items, tools, electronics, mobile accessories, mobile devices, perfumes, cosmetics, accessories, and auto supplies.

Kingdom of Saudi Arabia Riyadh

100 % SASCO

Incorporated in 2014

6

SASCO Al Waha Co. (SAR 5,000,000)

Provide accommodation services (Hotels).

Kingdom of Saudi Arabia Riyadh

100 % SASCO

Incorporated in 2014

7

SASCO Franchise Co. (SAR 500,000)

Marketing services for third party Grant franchise to operate “SASCO fuel stations” and “ SASCO Palm Stores”.

Kingdom of Saudi Arabia Riyadh

100 % SASCO

Incorporated in 2015

8

Zaiti Petroleum Services Company (SAR 37,500,000)

Retail sales of fuel for vehicles and motorbikes ( fuels stations ), retail sales of oils and lubricants.

Kingdom of Saudi Arabia Riyadh

100 % SASCO

Incorporated in 2007 and acquired in 2015

No.

1

2

Subsidiary Name

% of Direct & Indirect Ownership

Remarks

Annual Report 2019

111

Risks Management

112

Risks Management SASCO Risk Management Concept Risk management is the process of measuring and assessing possible

business.

risks as well as developing strategies to manage them to ensure

ffIdentify specific treatment for each type of risk at all levels.

addressing mitigation and redressing thereof. It also means early

ffPrevent and minimize losses through immediate control or by

detection of actual problems to reduce their negative impacts on SASCO. In the ideal risk management scenario, SASCO adopts prioritization, i.e. to address more likely and profoundly serious risks/ loss first.

transferring them to external parties. ffIdentify actions and procedures to be taken in terms of certain risks to control incidents and monitor losses. ffPrepare studies before and after losses to prevent or minimize likely losses, identify which risks are to be controlled, and use tools

Risk management should integrate with SASCO culture as well as

that help prevent recurrence of such risks.

senior management effective policies and programs. SASCO risk

ffProvide shareholders, creditors, and customers with confidence to

management translates its strategy to measurable objectives,

protect the ability to generate profit despite any occasional losses

and SASCO determines policies and responsibilities towards risk

that may lead to minimize profit or non-achievement thereof.

management as part of job description of its entire staff.

SASCO Techniques to Address Risks SASCO adopts a risk management policy that defines and clarifies the

?? Assessment:

strategic goals and practical procedures that are applied to achieve

An assessor focuses on the method the management adopts to

the goals, and establish a clear framework and approach in applying

set objectives, analyse risks, and manage change, including their

the mechanisms and processes that are followed to define and assess

relevance and adequacy to SASCO activities

the risks inherent in all operations within the company and its

SASCO-Wise Objectives:

monitoring mechanism and take the necessary precautions to put in

ffHow far SASCO objectives provide profound data and guidance in

place a mechanism to analyze it and determine the type of reports to

terms of SASCO aims while sufficiently specific to be directly linked

be submitted to senior management to take the appropriate decision at the right time.

to SASCO. ffEffectiveness of communicating objectives to staff and the Board. ffLinks between strategies and their consistency with SASCO

The policy aims to establish a comprehensive and clear risk management framework based on best practices basis (COSO ERM FRAMEWORK), explore and develop a common understanding of

objectives. ffConsistency of business plans and budgets with SASCO objectives, strategic plans, and current conditions.

risks, evaluate the exposure of different departments to risks and the

Activity-Wise Objectives:

mechanism to take appropriate action to mitigate them and assist

ffLink between activity objectives, SASCO objectives, and strategic

those departments within the company in improving controls and

plans.

control procedures for them to reduce and / or contain potential

ffConsistency of the activity objectives.

risks that may affect negatively or lead to financial losses. The

ffAdequacy of activity objectives with all important operations.

company’s board of directors oversees the mechanism of applying

ffIdiosyncrasy of the activity objectives at SASCO level.

a comprehensive risk management framework within the process

Sufficiency of Objective-Related Resources:

of enhancing and strengthening the company’s internal controls,

ffIdentifying important objectives (important success factors) to

through policies and procedures aimed at identifying, treating and monitoring the operational and non-operational risks in all the company’s activities. Among the most important tools that are

achieve SASCO objectives. ffInvolvement of all management levels in setting objectives and the extent of their interest in achieving these objectives.

used in identifying and measuring risks are the Self-Risk Assessment (RCSA) and the Key Risk Indicators (KRIs) and collecting and analyzing

?? Risk:

the nature of losses (quantity or quality) resulting from these

ffSufficiency of mechanisms to identify risks originating from

risks, establishing higher and lower ratios within the Risk Appetite

external sources.

Statement and monitoring it.

ffSufficiency of mechanisms to identify risks originating from

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

internal sources

Annual Report 2019

113

method of risk analysis since many risks are difficult to quantify.

1. Requiring the development of accurate studies for every site that

Analysis includes:

include fixed standards to ensure the investment feasibility of these

1.

Asses risk significance.

sites.

2.

Asses the possibility of risk occurrence (recurrence).

2. Conducting a comprehensive developmental program for the

3.

Impact of risk.

existing sites to ensure quality service and availability of all services

4.

Consider how to manage risks and evaluate steps to be

the customer needs. This is in addition to approval of increase in

taken.

market share inside cities and focus on acquiring relatively important sites, whether in terms of population density or traffic.

SASCO addresses risks within four key groups:

3. Setting financial goals and enforcing monthly control thereon to

1. Avoidance of Risks:

address or benefit from deviations.

This means to attempt to avoid activities that lead to certain risks,

4. Setting operational goals and enforcing the oversight role by

such as not purchasing a property or not engaging in a certain work.

supervisors in stations, provinces, and sectors, as well as by paying

2. Minimization of Risks:

surprise periodical visits and monitoring customer complaints to

By reducing investments facing a certain risk, which an investor

address them through allocating a toll-free phone number to raise

does not like to take, or by involving others in risks.

specific quality of services.

3. Transfer of Risks: This consists of means that help another party accept risk, usually

?? SASCO Palm Company ( Subsidiary )

through contracts or financial hedging. Insurance is an example of

A subsidiary company specialized in providing supply services through

risk transfer through contracts.

managing all branches of the SASCO Palm located throughout the

4. Acceptance:

Kingdom to meet the needs of customers, including travellers and

This means to accept losses when they happen. This method is

drivers of vehicles inside and outside the cities.

an acceptable strategy in case of small risks in which the cost of

Among the key risks that the company faces are the company not

insurance against risk by time is higher than total losses (accepted

obtaining the licenses, permits and certificates necessary for its

should be all risks that are not preventable or transferrable).

activity or the failure to renew these documents as well as the

Based on the Board belief in the importance of risk management

possibility of fraud, thefts, and the risks of poor storage of goods

being one of management foundations to protect shareholders’

and accumulation in a way that leads to high damage, as well as the

investments and related parties’ rights, the Board continually

inability to provide items in the various branches of the company, as

develops risk management, policies, and procedures consistent with

the geographical expansion in addition to the new requirements in

governance and internal control policies through setting a general

the commercial markets (supply Stores) and changes in the prices of

strategic plan for SASCO to face these risks and ensure expeditious

some products, whether due to high costs or special legislation (the

treatment thereof and providing necessary solutions in a manner

added and selected tax).

that reduces their impacts.

To manage the risks related to SASCO, internal controls were

The most important risks SASCO may face and their mitigations are

established through:

classified as follows:

ffCovering the operating goals of the retail sector.

Most Important Risks SASCO may Face and their Mitigations Operational Risks

?? Retail Sector: Retail Sector is one of the sectors characterized by easy entry by new competitors or expansion of existing ones, increasing the total

ffContinue adherence to safety and security laws and procedures as well as the instructions of the official authorities, and recommend correcting violations. ffEnsure quality assurance procedures and adhere to quality standards. ffEnsure the integrity and fairness of selling prices and achieving the company’s goals.

competition therein, in addition to price fluctuations that affect

114

land price, property lease, construction costs, or supply. Moreover,

?? Ostool Al-Naqil Co. (Subsidiary)

this sector mainly depends on providing petroleum services. Since

Ostool Al-Naqil Co. started its business as a SASCO sector in 2009.

the sector is linked to supplies received from the Arab Oil Company

Following restructuring this sector, its name changed to “Ostool Al-

“Saudi Aramco”, any change in contract provisions negatively affects

Naqil Co.”. SASCO increases its operational capacity continually in line

SASCO activity.

with providing human cadres to manage and supervise the fleet in a

To manage competition risks in the Retail Sector, parameters for

manner that ensures maximum benefit from transportation services

internal control were set as follows:

to SASCO sites, lowers the internal transport costs, and provides other

customers with transport services. Ostool Al-Naqil Co. offers the

4. Conducting periodic monitoring of customs claims and trying to

following services:

reduce them.

ffTransportation services of all types of fuel. ffWater and sewerage transport services.

Information Risks

ffDry transport services.

With the increasing reliance on electronic systems and applications

The most prominent risks faced by Ostool Al-Naqil Co. is the renewal

by SASCO and business enterprises and thanks to the rise of risks

of its license periodically from the Ministry of Transport. Although it

and threats against such systems and applications, it has become

does not encounter any difficulties in renewing the license, it does

necessary to manage the electronic security accidents when they

not guarantee to renew it in the future, which would affect its ability

are endangered by any risks that may affect their sustainability and

to continue operation in this field. In addition, any change in systems

efficiency.

and regulations related to company business in terms of loading,

The repeated stoppage of such systems and applications along

transporting, unloading, and storing petroleum products as well as

with the long period of their recovery make vulnerable to many

environment protection requirements shall increase its costs and

consequences.

financial burdens.

ERP-Related Risks To manage risks related to Ostool Al-Naqil Co., parameters have been

All departments of SASCO and its subsidiaries depend mainly on

developed for internal control through:

the use of Enterprise Resource Planning (ERP) system in all their

ffCovering operational objectives of transportation sector and

operational and financial processes. The ERP system may serve more

helping officers improve, develop, and schedule supply. ffFollowing up adherence to security and safety laws and procedures and recommending rectifications to violations. ffChecking quality assurance procedures and complying with specific quality standards.

than one department. SASCO departments use (scimanyD XA PRE) systems: As SASCO is keen to avoid any expected problems, it monitors the updating of department systems periodically through a specialized office. Moreover, SASCO concluded a contract with a company specialized in storing information to create a backup copy of SASCO

?? Saudi Automobile & Touring Association (Subsidiary)

data.

Business of Saudi Automobile & Touring Association, which works under the umbrella of UN- controlled international bodies, is an

Risks of Issuing New Regulations on Fuel Stations and Service

essential cornerstone of SASCO operational business. Profit from its

Centres

business, arising from sales of international driving licenses and Trip-

The new Regulations on Fuel Stations and Service Centers, issued

Tik customs books, represents a material share of SASCO operating

by the Ministry of Municipal and Rural Affairs, includes stringent

revenue. This activity depends on holding an international license

standards for the geographical distribution of fuel stations and

from the FIA to issue those documents for several years now in return

service centres so that they would not cause any disturbance,

for international financial obligations and burdens that greatly add

traffic jams, or damage to nearby facilities. It also sets the area of

to the cost of selling the document.

stations inside cities, design standards, and safety and environment

Political events in some neighbouring countries, activities of

preservation conditions.

some local competitors (parallel clubs) and the emergence of new

SASCO business may be affected in the future if it fails to obtain

organizations affect the financial performance of Saudi Automobile

the necessary construction and operation licenses, whether for the

& Touring Association.

existing or new stations.

To minimize competition risks and increase its market share, Saudi

Legislative Environment Risks

Automobile & Touring Association is in the process of developing an

SASCO operates in a dynamic legislative environment, and changes

expansion plan to increase its branches and products, enhance its

to systems and laws applicable in the Kingdom of Saudi Arabia may

integration, and deal with strategic dealers. Parameters have been

affect SASCO business positively or negatively. To reduce the negative

developed for the internal control through:

effect of these changes, if any, SASCO always gets timely access to

1. Holding periodical meetings with strategic dealers to increase

amendments to regulations and studies their impact on its business.

coordination in terms of market shares.

Accordingly, SASCO takes the necessary steps to minimize the impact

2. Developing a plan to increase points of sale to market some

of these amendments or attempt to exploit them to serve its business.

products and follow up on them monthly.

3. Setting financial objectives and following them up monthly.

The most prominent existing risks include the fact that SASCO should

Annual Report 2019

115

obtain/renew the license to practice its business from the Ministry

contractors’ non-abidance by the set completion schedule leads to

of Municipal and Rural Affairs and Civil Defence periodically; this is

delay in operating sites according to the operational plan. SASCO

connected with the property insurance policy. SASCO business may

concerned departments continually follows up the contractors’ works

be affected in the future if it fails to obtain or renew such licenses.

and implementation procedures.

Legal Risks

?? Competitive Environment Risks:

In addition, SASCO faces legal risks in relation to financial claims due

Station and rest house sector witnesses fierce competition to provide

for it from some tenants and debtors, namely collecting amounts due

best services. SASCO growth and profit levels depends on its ability to

for it for previous years. Moreover, there are some labour lawsuits filed

compete successfully and maintain a leading position among other

versus SASCO, and its Legal Department follows up these financial

companies.

rights to collect them, either by amicable or judicial means.

HR-Related Risks

?? Risks Related to Highway Network Development

Legislations in the Kingdom require a Saudization ratio of total staff

(Transport Alternatives)

in companies through Nitaqat Program. SASCO has achieved the

The State develops highway networks continuously, which may

required Saudization ratio and continually seeks to Saudize various

change routes on which SASCO rest houses and stations are located.

administrative functions in line with its expansion plan that requires

This is in addition to starting the execution of public transport

many workers in its different sites.

projects, subway network, and railway lines to link the Kingdom regions with each other, which can adversely affect SASCO level of

SASCO signed an agreement with the Human Resources Fund to

operational profit.

support the Saudization plan in accordance with the regulations

In this regard, SASCO develops control in this regard through:

and laws issued in this respect. Although SASCO believes in the

ffStudying new road and railway line projects and the road network

importance of Saudization as a national development requirement,

expansion plans in the Kingdom periodically to strategically plan

it faces difficulties and challenges because of the nature of its

SASCO sites, examine options and solutions for existing sites, and

business, inadequacy of its works to national jobseekers, and its

check whether they are vulnerable due to the development of road

main dependence on expatriate workforce. Therefore, it is difficult

networks.

to achieve the Saudization ratio. Accordingly, risks in this regard continue, particularly the higher cost of labour and recruitment.

?? Risks Related to Issuance of Auto and Motorcycle Club Act

Parameters have been developed for internal control through:

The Act includes some points that would affect the business of

1. Continuous follow up of updates and requirements of Labour Office

Saudi Automobile & Touring Association. SASCO studies the Act and

in relation to Saudization and Nitaqat Program.

identifies the expected impact on the Association works to take the

2. Making sure that the staff get sufficient training to perform their

necessary measures towards addressing the Act requirements.

duties effectively.

3. Ensuring the periodical monitoring and assessment of performance.

?? Risks Related to Customs Claims of the Association

4. Following up Saudization of supervisory functions in all sectors to

covered by the FIA Insurance Policy

increase Saudization ratio.

There are customs claims not covered by the FIA insurance policy since some countries are not included in the insurance coverage. Saudi

Market-Related Risks

Automobile & Touring Association checks all supporting documents

They comprise:

when issuing Trip-Tik customs books, and forms a provision in the

?? Growth and Expansion-Related Risks:

form of a percentage of monthly sales of books to cover this claim.

Since SASCO growth depends to opening and adding new sites, SASCO, to realize its expansion policies, selects sties and review them

116

?? Risks Related to Granting Land and Land Handed over

comprehensively to make proper decisions of purchase or rent.

by State

SASCO ability to continue its growth relies on the availability of

On 18/5/1401 AH, Royal Decree No. 11499 was issued to hand over to

human resources, such as administrative competencies, operational

SASCO the necessary lands while keeping its ownership to the State.

expertise, and labour on time. SASCO exerts necessary efforts to

Moreover, Royal Decree No. 214/M was issued on 8/2/1405 AH to grant

provide these resources.

SASCO (34) sites handed over to it. Therefore, SASCO requested the

Delay in construction and development projects because of

receipt of the sites to build rest houses thereon.

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

or will be handed over to it in the future at an adequate fare while

cash surplus, SASCO invests it by entering into new investment

emphasizing utilization of sites for the purpose for which they are

portfolios or real estate investment funds or depositing it as a short-

allocated. Currently, SASCO is working with government agencies to

term bank deposit.

receive and determine the rent value of land. SASCO may be adversely affected in case of delayed handover of these sites by relevant

SASCO also possesses several investment portfolios in securities in the

government authorities, or because of higher rent value. SASCO

Saudi market managed by specialized companies. These investments

assesses the site and rent value initially before deciding whether to

are vulnerable to fluctuations in stock prices according to the

invest in the site.

prevailing market variables.

?? Insurance-Related Risks

To reduce the impact of these risks, SASCO:

Insurance policies cover all employees and properties of SASCO and its

ffExamines the financial position of the investee companies and

subsidiaries. SASCO financial results or subsidiaries may be affected by any future losses not covered under the insurance policies.

assesses their performance quarterly and annually. ffWorks to dissociate from some investments to focus on its SASCO core business whenever the opportunity comes.

?? Credit-related Risks The credit-related risks comprise of the inability of one party to fulfil

?? Risks Related to Increased Energy Prices

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

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.

paid customers are subject to credit due diligence and their ability to

The issuance of a ministerial decision to increase tariffs in the future

meet the obligations.

may lead to low income margin.

?? Financing Risks

In this context, SASCO always gets timely access to amendments and

SASCO obtained financing from several banks to expand its projects,

resolutions and studies their impact on its business. Accordingly,

support its core activities, purchase new sites to build fuel stations,

SASCO takes the necessary steps to minimize the impact of these

and finance the working capital and, thus, make profits and maximize

resolutions.

shareholders’ equity in the future.

?? Strategic Risks In this respect, SASCO developed controls by setting financial and

These are unknown and non-systematic risks which cannot be

operational objectives and activating controls on them on a monthly

absorbed or assessed within a clear approach or model. In case SASCO

basis to address deviations or take advantage of them, including but

falls vulnerable to such strategically affecting events or risks, it may

not limited to:

not only suffer a slight decline in profits, but such danger may also

ffMonitoring the achievement of expansion targets - numerically.

destroy it fully through bankruptcy and lay-offs.

ffMonitoring the achievement of financial performance targets. ffConducting, analysing, and comparing budgets with the actual results and reasons for deviations. ffReviewing and improving cash flows continually. ffScheduling expansions.

Annual Report 2019

117

Internal Control

118

Internal Control

the integrity of the financial and accounting procedures and that they

SASCO Internal Control Concept

are consistent with the widely accepted professional standards and

Internal control is one of the basic pillars of the oversight system

the related laws governing financial and accounting practices and

of any organization to assist it to evaluate management risks. It is

reporting.

considered an objective and independent business of a consultative nature designed to increase the value of an organization, enhance

Internal Audit

its operations, and achieve its goals. External parties can provide

SASCO management contracted a specialized office to carry out the

internal control services to ensure high quality of this service.

internal audit based on risk assessment. SASCO works with the Internal

Internal control is a series of procedures and processes conducted

Audit Department to develop a risk-based plan in coordination with

by the Board, management, and employees to provide a reasonable

the Audit Committee, SASCO management, and department officials.

confirmation with regard to achieving the following objectives:

Based on this plan, an action internal audit plan was developed. The

ffEffectiveness and efficiency of operations.

plan aims to describe how to deal with these risks and determine how

ffReliability of financial reports.

and when their consequences will be avoided or reduced.

ffCompliance with the related laws and instructions.

The internal (risk-based) audit plan included the following objectives:

SASCO Roles and Responsibilities ffEveryone in SASCO is responsible for part of internal control.

ffEvaluate the effectiveness and efficiency of the internal control system and processes.

However, the Board is the body responsible for SASCO internal

ffUnderstand policies and procedures.

control system. The CEO is the person finally responsible for the

ffEnsure compliance with laws and regulations as well as SASCO

oversight system. ffA number of parties provides internal control, each of whom has important responsibilities. The Board (either directly or through its committees), management, internal auditors, and other staff all submit important contributions to an effective internal control system.

contracts and policies. ffEnsure the preservation of SASCO assets. ffEnsure the reliability and integrity of financial and operational information. ffCompare the current SASCO practices with the best practices followed. ffIdentify the opportunities available to enhance the internal control

Most Important Tools and Methods used in Annual Audit of Internal Control Effectiveness

of activities and operations.

Departments’ Monthly Report includes Key Performance Indicators (KPIs)

All (field and periodic) audit reports filed to the Board, senior

1. An analysis to compare budget with the actual results and reasons

weaknesses of internal control procedures in the audited departments

for deviations.

or operations along with their potential impact on the integrity of

2. Ratio of sites achieving the budget.

SASCO business processes and transactions with a focus on high-

3. Fuel interruptions.

value activities because of the increasing volume of risks. The reports

4. Service-related customer complaints.

also focused on the effectiveness of internal control system, since a

5. Surprise field visits.

weak control system increases the prospects of loss and the volume of

6. Operation licenses.

risk, while an effective control system reduces the probability of such

7. Daily deposits.

risks. In addition, every report included all recommendations on how

8. Staff training.

to deal with these observations to raise the level of internal control

9. Correct the views of products.

procedures.

management, and various departments included observations and

10. Supplies interruptions.

11. Develop supply plan.

The most important focus points in internal audit reports included

12. Design and implement periodic maintenance program.

the following:

13. Achieve expansion targets -numerically.

ffEnsure that the department plans are consistent with the overall

14. Achieve financial performance targets.

SASCO objectives.

15. Develop a marketing plan.

ffVerify that fixed assets represent actual values owned by SASCO.

16. New products and alliances

ffEnsure the provision of the necessary and adequate resources and

17. Attraction and appointment.

18. Security and safety.

19. Inventory and property monitor.

skills to support business. ffEnsure that the IT facilities and services both support SASCO strategic objectives and preserve its competitive features. ffFollow up inventory mechanism and the failure of current

Periodic Audit of Financial and Accounting Procedures and Financial Reporting In coordination with the external auditor, SASCO periodically ensures

automated software. ffEnsure scheduling of operations to guarantee sufficient quantities of stock.

Annual Report 2019

119

ffEnsure that the available cash covers the continuity of planned operations.

3. Review the risk assessment and the three-year internal audit management plan of work prepared by the designated external

ffAnnounce SASCO bylaws, instructions, and policies conspicuously.

consultant.

ffCheck the training of current employees to perform multiple tasks.

4. The Committee reviewed the report of the existing legal cases for

ffCreate

the year 2018 and their impact, and the Committee recommends

periodic/preventative

maintenance

programs

for

equipment and vehicles.

to the Executive Management the need to follow up finalizing the

ffFollow up expiry dates of operational licenses periodically.

existing cases, especially the old cases.

ffCheck security and safety procedures.

5. The Committee recommends that the company management

ffEnsure the availability of financial analysis of the cash flow

should have a governance department.

statement to make adequate financial and administrative

6. The Committee recommends the independence of the Risk

decisions.

Committee in accordance with best practices.

ffAvoid supply stoppage to the minimum.

7. Stress the independence of the external auditor of the company

ffEnsure the existence of registered contracts for all tenants

and that it is registered in accordance with the rules for registering a

compatible with the conditions and objectives of SASCO plan.

review of the facilities subject to the supervision of the Capital Market Authority as recommended by the committee that the company’s

Procedures undertaken by the Audit Committee

management verify that there is no relationship, contractual

In the light of the internal audit risk assessment and the

relationship or ownership of the shares in the company by the auditor

recommendations raised by the Audit Committee regarding the

or one of his staff in the company or its subsidiary companies and

development of SASCO internal control system and given the contents

notify the committee accordingly.

of chartered auditor’s letter to the management, SASCO is going to

8. The committee recommended that a provision be made during the

develop its internal control systems and risk management. Based

year to reward the members of the board, as well as the company’s

on the reports received, the Committee did not note any important

management to develop solutions to reduce operational costs, find

observations affecting the effectiveness of SASCO internal control

a solution for the losing stations, and study the possibility of exiting

system.

them.

Following are the most important recommendations raised by the

9. Assure the external auditor that his report be sent to the members

Audit Committee:

of the audit committee within sufficient time before the future

1. Review the management response to the administrative notes of

meeting of the committee for review.

the external auditor for the report of the year ended December 31,

10. Follow-up and supervise the mechanism for the application of

2018.

Standard 16 and the opinion that the average interest rate of the

2. Emphasize the importance of the internal audit department and

company be calculated and the ratio is subsequently applied to the

the necessity to adhere to the approved work mechanism as well

standard applications and the auditor’s decided to commence as of

as the observations that fall within the scope of internal review

the second quarter of 2019.

and continuous follow-up of all the comments of departments and

11. The Committee is of the opinion that the legal department should

subsidiaries and submit them to the committee after taking the

review the regulations before they are approved or referred to the

responses of these departments.

audit committee.

12. Work to collect the amounts due for the company.

13. Follow up with the finance department to implement international accounting standards and seek the assistance of a consultant in case of need.

14. The need to provide job competencies to keep pace with the development witnessed by the company.

15. The necessity for the company to keep abreast of technological development and use technology and all its applications.

In turn, the company shall endeavor to terminate all the recommendations of the audit committee in a timely manner.

Conflict with Audit Committee’s Recommendations There are no Audit Committee recommendations in conflict with the Board’s Resolutions on the appointment of an auditor for the company, dismiss him, fix his fees and evaluate his performance or evaluate the internal auditor. The external auditor will be nominated from among the candidates by the audit committee to audit the company’s financial statements for 2020, and the quarterly financial statements and fix his fees according to the law.

120

Annual Report 2019

121

Corporate Governance

122

Corporate Governance Regulation and Adopted Procedures During the fiscal year 2009, SASCO developed “Corporate Governance

2017 pursuant to Companies Law passed by Royal Decree No. M/3 dated

Regulation”, which includes the rules, standards, and controls of managing

18/01/1437H.

SASCO to enhance and ensure the application of the best governance

In 2019, the Board of Directors approved the updated version No. (4) based

practices towards the protection of shareholders and stakeholders’ rights.

on the amendments made to the Corporate Governance Regulations

In 2013, SASCO developed the said Regulation in accordance with the

issued by the Capital Market Authority Board on May 20, 2019

Corporate Governance Regulations issued by the CMA. In 2017, SASCO developed the said Regulation in accordance with the Corporate Governance Regulations issued by the CMA under Decision No. 8-16-2017 dated 16/05/1438 AH, corresponding to February 13th,

No.

1

2

3

4

Regulation Article No.

Forty-six

Fifty-four

Seventy

Seventy-four

Compliance of Governance Regulation SASCO applies all articles of the Corporate Governance Regulations issued by the CMA Board except the following:

Paragraph

Article/Paragraph Text

Reasons of Non-Application

3

The Chairman of the Board of Directors to inform the ordinary general assembly when it is held of the competing activities practiced by the board member, after the board of directors verifies the competition of the board member for the company’s activities or competing it in one of the branches of the activity that it engages in according to criteria issued by the general assembly of the company - based on the proposal of the board of directors - and to be published on the company’s website, provided that the business is verified annually.

The board of directors proposed the competition criteria and will be offered to the next general assembly for voting on them.

B Guiding

Guiding Article: The Chairperson of the Audit Committee in the current session ending on 29 June 2021 has passed 9 years in SASCO. This is not consistent with The Chairman of the Audit Committee shall independence and SASCO will address 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.

Guiding

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 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, b

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 auditing. b) The Company may utilize external entities to perform the duties and competencies of the units or departments of risk assessments and management and internal control without prejudice to the Company’s responsibility for those duties and competencies.

The Internal Audit Department is already existing. It has been assigned with carrying out risk management in consistency with the Company’s contracting with an external office to conduct the same.

Annual Report 2019

123

No.

5

6

7

8

124

Regulation Article No.

Eighty-five

Eighty-seven

Eighty-eight

Ninety-five

Paragraph

Article/Paragraph Text

Reasons of Non-Application

2 and 3 Guiding

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: 2) Establishing a scheme for granting Guiding Article: it shall be subsequently Company shares or a percentage of the considered.

Company profits and pension programs for employees, and setting up an independent fund for such programs; and 3) Establishing social organizations for the benefit of the Company’s employees.

Guiding

The Ordinary General Assembly, based on the Board’s recommendation, shall establish a policy that guarantees a balance between Guiding Article: it shall be subsequently its objectives and those of the community considered. for the purposes of developing the social and economic conditions of the community.

1, 2, 3 and 4 Guiding

The Board shall establish programs and determine the necessary methods for proposing social work initiatives by the Company, which include: 1) Establish measurement indicators that link the Company’s performance with its social initiatives and comparing it with other companies that engage in similar business; 2) Disclose the objectives of the Company’s Guiding Article: it shall be subsequently social responsibility to its employees and considered. raising their awareness and knowledge of social responsibility; 3) Disclose plans for achieving social responsibility in the periodical reports on the activities of the Company; and 4) Develop awareness programs to the community to familiarize them with the Company’s social responsibility.

Guiding

If the Board forms a corporate governance committee, it shall assign to it the competences stipulated in Article (94) of these Regulations (Corporate Governance Guiding Article: the formation of the Regulations). Such committee shall oversee committee shall be subsequently any matters relating to the implementation considered. of governance and shall provide the Board with its reports and recommendations at least annually.

Note With reference to paragraph 9 of Article (22) of the Corporate Governance Regulations issued by the CMA, which stipulates “Among the main functions and competencies of the Board are the following: preparing the Company’s interim and annual financial statements and approving them before publishing them; and whereas paragraph (a/1) of Article (55) of the Corporate Governance Regulations states “the duties of the Audit Committee shall particularly include the following: analyzing the Company’s interim and annual financial statements before presenting them to the 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 Audit Committee has the mandate to authorize interim financial statements and approve publication thereof on Tadawul website, provided these interim financial statements be approved and signed by the Managing Director. After this approval, they shall be sent to the Board members to review in the meeting following the announced interim financial period.

Conclusion In conclusion, the Chairperson, Board members and the executive management extend their thanks and appreciation to the shareholders of the Saudi Automotive Services Company (SASCO), its employees and all those who contributed to achieving its objectives for this year.

They also extend heartfelt thanks and appreciation to the Custodian of the Two Holy Mosques, King Salman bin Abdul Aziz, may Allah protect him, His Royal Highness the Crown Prince, Prince Mohammed bin Salman bin Abdul Aziz, Vice President of the Council of Ministers, Minister of Defence and Chairperson of the Council of Economic and Development Affairs, may Allah protect him, for all their great efforts and unlimited assistance to develop this country, support its economy, and stimulate the business environment in achievement of the Kingdom 2030 Vision. The Board of Directors is looking forward to the participation of its shareholders in the General Assembly, and welcomes any suggestions and views enhancing the Company’s business performance.

May Allah Grant Us All Success, Board of Directors

Annual Report 2019

125

Financial Statements The report of the independent auditors for the year ended December 31, 2019

126

Consolidated Accountants RSM

Dr. Abdelgadir Bannaga & Partners Company Orouba Road Olaya District, Building No. 3193, 1st Floor Tax Number: 300003 34 30001034 P.O. Box Riyadh 12333 – 8235 Tel: 0164169361 Fax: 0184169349 Kingdom of Saudi Arabia www.rsmksa.com

Independent Auditors’ Report Messrs. / Shareholders of the Saudi Automotive Services Company (SASCO), the highly regarded Saudi Joint Stock Company, Riyadh – Kingdom of Saudi Arabia Opinion We have audited the consolidated financial statements of the Saudi Automotive Services Company (SASCO) “a Saudi joint-stock company” (the “Company”) and its subsidiaries, together referred to as (the “Group”). They include the consolidated financial position statement as at 31 December 2019, statement of profit or loss and other consolidated comprehensive income, changes in consolidated shareholders’ equity, consolidated cash flows for the year ending on that date, notes attached to consolidated financial statements and brief of key accounting policies.

In our opinion, the attached consolidated financial statements fairly demonstrate, from all major aspects, the consolidated financial position of Saudi Automotive Services Company (SASCO) “Group” as at 31 December 2019, its financial performance and its consolidated cash flows for the year ending on that date according to the International Financial Reporting Standards (IFRS) approved in the Kingdom of Saudi Arabia and other standards issued by Saudi Organization for Certified Public Accountants.

Grounds of Opinion Our audit was conducted according to the International Financial Reporting Standards (IFRS) approved in the Kingdom of Saudi Arabia.

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 relevant to our audit of these consolidated financial statements. We also met the requirements of other professional ethics. We believe that audit grounds we obtained are sufficient to constitute a basis for our opinion about the audit.

Attention: As shown in Note No. (29) of the notes attached to the consolidated financial statements, we would like to draw attention to the fact that on October 01, 2019 P.M., the Ministry of Energy approved the increase in the profit margin for gas stations and service centers of companies qualified by the Ministry of Municipal and Rural Affairs so that the new profit margin to become (15 halalas for gasoline instead of 9 halalas per liter and 5 halalas per diesel instead of 3.5 halalas per liter), confirming that retail selling prices at stations shall not affect the final consumer, and then notification of the start of the date for applying the new margin that will be from August 23, 2018, and according to the best estimate, the Group management reduced the sales costs for the fiscal year ended December 31, 2019 by SAR 75,163,532 in addition to recognizing SAR 24,191,073 as other income for the compensation period for the profit margin difference for the previous periods (August 23, 2018 until December 31, 2018) according to the International Financial Reporting Standards approved in the Kingdom of Saudi Arabia and other standards and publications approved by the Saudi Organization for Certified Public Accountants. Up to the date of issuance of the financial statements ending on December 31, 2019 the company is still awaiting approval and the right compensation amount by the Saudi Arabian Oil Company (Saudi Aramco) due to not completing the audit work of the documents submitted to them by the group about the due amount of compensation. Therefore, the management used these assumptions through the data available to it objectively and accurately, and our opinion was not modified according to this matter.

Annual Report 2019

127

Consolidated Accountants RSM

Dr. Abdelgadir Bannaga & Partners Company

Core Audit Issues As per our professional assessment, core audit issues refer to such matters that had utmost importance in our audit of financial statements of the current year.

Such matters have been addressed in the context of our audit of financial statements as a whole and in developing our opinion. We do not present a separate opinion about such matters. Following is a description of each separate core audit issue and how it is addressed:

Core Audit Issue

How it is addressed in auditing

Adoption of the International Financial Reporting Standard No. (16) «Lease Contracts» The Group applied the International Financial Reporting Standard No. (16) “Lease Contracts” as from January 1, 2019. This new standard replaces the requirements of the International Accounting Standard No. (17) “Lease Contracts”.

With respect to adopting the International Financial Reporting Standard No. (16) «Lease Contracts», we took the following steps: • Inspected the management’s assessment of the influence of the International Financial Reporting Standard No. (16), in terms of classification and assessing the right to use the assets and lease liabilities and understand the approach adopted in implementation.

• Assess the accuracy of lease contracts details through testing, based on sample, the lease contracts details obtained by the management through inspecting the lease contracts documents.

• Testing the lease contracts tables, on sample basis, by recalculating the amounts related to the right to use the assets and lease liabilities, based on lease contracts conditions. We tested also the accounting accuracy of the single lease tables and how they are collected to obtain totals of the amendment adopted in the financial statements as of January 1, 2019.

• We have consulted our subjective accounting professionals to assess the suitability of deduction rations used in calculating the lease liabilities.

The management conducted a detailed analysis of each lease contract to identify the differences between the requirements of both standards and identify the changes to be conducted on the present accounting policies and identify the amendments for transformation and changes resulting from the processes and required controls, particularly in terms of determining whether a specific arrangement meets the identification of lease contract.

The International Financial Reporting Standard No. (16) mainly amends the accounting treatment for operational lease contracts at their inception with recognizing the right to use the leased assets and corresponding liabilities of the discounted amount from rental payments along the lease contract period.

The group has chosen to apply the International Financial Reporting Standard No. (16) “Lease Contracts” retrospectively with recognition of the cumulative effect of the primary application at the date of application, i.e. January 1, 2019.

Hence, this resulted in recognizing the right to use assets of an amount SAR 611,6 million as of January 1, 2019 and lease liabilities of SAR 624,7 million as of the said date.

Revenue Realization Revenues are a major and determinant factor of the Group’s performance and profits. Here arises a risk when revenues are recorded higher than their real value to increase profits. Due to the importance of the amount and the risk of recording revenues higher than their real values, we see that realization of revenues are an important aspect of audit as there is a risk that revenues may be false due to the Management’s negligence of controls and that the time and amount of revenues recorded in the financial period may have a substantial impact on the financial performance.

128

With respect to revenues, we took the following steps: • In our audit, we paid attention to what extent the accounting policies are consistent with generating revenues in favor of the Group and assessing to what extent such policies are consistent with the IFRS No. “15”.

• We examined the internal control procedures with respect to revenue realization and studying the procedures taken by the Group for purposes of completing the factors of revenue realization.

• We conducted a substantive analysis on important revenue flows through developing expectations based on sizes and rates. We also got explanations of major differences.

• We examined a sample of recorded revenue transactions and compared them to supporting documents to verify the registered revenues.

Consolidated Accountants RSM

Dr. Abdelgadir Bannaga & Partners Company

Core Audit Issue

How it is addressed in auditing

Fair value investments through consolidated other comprehensive income statement SASCO possesses fair value investments through items of consolidated other comprehensive income statement with a total value of SR 184.8 million as at 31 December 2019.

The fair value of investments, through consolidated other comprehensive income statement, not circulating in an active market, is determined through applying assessment methods which often include practicing discretions by the Management and the use of assumptions and estimates.

The state of uncertainty of investments, not circulating in an active market, is estimated using the techniques of the following internal models: • Important observable assessment inputs (i.e. investments classified as per Level 2).

• Important unobservable assessment inputs (i.e. investments classified as per Level 3).

Investments at fair value are assessed through the items of consolidated other comprehensive income statement at fair value with registering profit or loss compared to difference of fair value within items of consolidated other comprehensive income statement to be added as part of reassessing investments at fair value through consolidated other comprehensive income statement with shareholders’ equity.

Assessment of investments at fair value was considered in 2 and 3 Levels as a core audit issue due to the complexity of assessing these financial instruments and the importance of judgments and estimates conducted by the Management.

With respect to fair value investments through the consolidated other comprehensive income statement, we took the following steps: • Verify the calculation of difference in the fair value and adding it to the items of consolidated other comprehensive income as well as adding it to the net change of fair value investments through consolidated other comprehensive income.

• Assess the sufficiency of the Group’s disclosures towards these investments.

• We assessed the design and application of Management’s control over the investments classified through consolidated other comprehensive income and not traded in an active market.

We also tested the efficiency of major procedures of these transactions.

• We evaluated the methodology and consistency of assessment methods and inputs used in determining the value of fair value investments through consolidated other comprehensive income.

• We tested the samples of operations used in assessing investments through consolidated other comprehensive income not traded in an active market. As part of audit procedures, we assessed major inputs and assumptions used in determining values such as the anticipated cash flows, risk free rates, credit margins through comparing them with external data.

Other Information The Management is responsible for other information, including information stated in the Group’s Annual Report, but not including the consolidated financial statements and our audit report about them. Our opinion does not cover the consolidated financial statements of other information and we have no confirmation about them.

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 statements or our knowledge which we obtained during audit or it appears that it contains significant errors. When we read the annual report and find significant errors in such information, we are required to report these facts to Governance officers.

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 Association. It is also responsible for internal control systems that are deemed necessary for developing consolidated financial statements free 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.

The board of directors of the group is responsible for supervising the development of financial reports.

Annual Report 2019

129

Consolidated Accountants RSM

Dr. Abdelgadir Bannaga & Partners Company

Auditor’s Responsibility for Auditing Consolidated Financial Statements We aim to get a reasonable confirmation whether the consolidated financial statements as a whole are free from significant errors - whether 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 entity.

• 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.

We communicated with governance officers with respect to planned audit scope, timing and important notes, including any internal control system failure identified in our audit.

We also provided them with a statement that we complied with independence-related ethical requirements, made them familiar with all matters that may reasonably affect our independence and present relevant commitment parameters if necessary.

The issues reported to governance officers include such issues that had utmost importance when auditing consolidated financial statements of 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 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.

Allied Accountants Dr. Abdelgadir Bannaga & Partners Company

Mohammed bin Farhan bin Nader License No. 435 Riyadh, Kingdom of Saudi Arabia 7 Shaaban 1441H, corresponding to 31 March 2020

130

Saudi Automotive Services Company (SASCO) (Saudi Joint Stock Company) Consolidated Financial Position Statement As at December 31th, 2019 ________________________________________________________________________________________________________________________________

Note

31 Dec. 2019 (SR)

31 Dec. 2018 (SR)

Assets Non-current assets Net properties and equipment

7

1,096,649,408

1,087,947,299

Net intangible assets

8

9,699,495

11,032,084

Capital works under execution

9

60,722,302

40,011,413

Fair value investments through other comprehensive consolidated income

10

184,809,517

103,563,396

Right to use assets, net

11

719,926,534

-

2,071,807,256

1,242,554,192

Total non-current assets Current assets Net inventory

13

49,475,771

51,193,500

Net receivables, advance payments, and other receivables

12

274,337,333

226,785,816

Fair value investments through profit or loss

14

268,592

5,973,368

Cash in hand and at banks

15

65,018,456

74,235,012

Total current assets

389,100,152

358,187,696

2,460,907,408

1,600,741,888

1

600,000,000

600,000,000

20

55,540,389

44,397,367

69,057,671

31,917,651

Total assets Shareholders› equity and liabilities Shareholders› equity Capital Statutory reserve Retained earnings Cumulative changes at fair value of investments

10

Net Shareholders› equity

126,847,800

75,547,896

851,445,860

751,862,914

377,385,669

Non-current liabilities Financing of Murabaha and long-term loans

16

387,901,634

Lease liabilities – non-current part

11

683,663,542

-

15,161,002

12,613,431

1,086,726,178

389,999,100

Liabilities for staff benefits specified scheme Total non-current liabilities Current liabilities Murabaha Financing and short-term loans

16

105,000,000

115,000,000

Current portion of financing of Murabaha and long-term loans

16

88,267,285

100,688,892

Dividends Payable to shareholders

18

40,881,645

39,715,364

Payables, accrued expenses and other liabilities

17

230,875,052

200,297,924

Lease liabilities – current portion

11

53,1380,968

-

Provision for Zakah

19

Total current liabilities

4,572,420

3,177,694

522,735,370

458,879,874

Total liabilities

1,609,461,548

848,878,974

Total shareholders› equity and liabilities

2,460,907,408

1,600,741,888

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

Annual Report 2019

131

Saudi Automotive Services Company (SASCO) (Saudi Joint Stock Company) Consolidated statement of profit or loss and other comprehensive income For the year ending on December 31th, 2019 ________________________________________________________________________________________________________________________________

Note Revenues

21

2019 (SR)

2018 (SR)

2,482,842,898

2,056,081,002

(2,326,245,161)

(1,974,099,397)

Total profit

156,597,737

81,981,605

Sale and marketing expenses

(3,806,855)

(2,189,061)

(50,803,569)

(42,109,042)

Costs of revenues

General and administrative expenses

22

Net year profit from core operations

101,987,313

37,683,502

Financing costs

(33,242,357)

(8,070,599)

21,712,472

5,635,089

4,324

(582,102)

Profit distributions of fair value investments through other comprehensive income Unrealized losses from fair value investments through profit or loss Realized profit from fair value investments through profit or loss Profit distributions of fair value investments through profit or loss Other revenues, net

23

Net year profit before Zakah Zakah

19

Net annual profit

354,030

330,099

-

1,362,191

34,242,406

1,868,133

125,058,188

38,226,313

(3,247,206)

(2,775,004)

121,810,982

35,451,309

(1,229,523)

-

51,299,904

(16,101,094)

Other comprehensive income Items not to be subsequently reclassified into income statement Actuarial losses from re-measuring liabilities of employee benefits scheme Net change in fair value of fair value investments through other comprehensive income

10

Net year comprehensive income

50,070,381

16,101,094

Total year comprehensive income

171,881,363

51,552,403

Actual dividend per share from core operations

1,70

0,63

Actual year dividend per share

2,03

0,59

Share profitability

27

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

132

11,143,022

600,000,000

Net year profit

Transfer to statutory reserve

Other comprehensive income

Balance on 31 Dec. 2019

69,057,671

(1,229,523)

(11,143,022)

121,810,982

(30,000,000)

(10,380,766)

(42,298,417)

31,917,651

31,917,651

-

(3,545,131)

35,451,309

(1,800,000)

(27,000,000)

(60,000,000)

88,811,473

(45,218,938)

134,030,411

(13,128,000)

147,158,411

Retained profits (SR)

126,847,800

51,299,904

-

-

-

75,547,896

-

75,547,896

75,547,896

16,101,094

-

-

-

-

-

59,446,802

3,960,861

55,485,941

-

55,485,941

Reserve for reassessing fair value investments through other comprehensive income (SR)

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

55,540,389

-

-

-

Dividend distribution

44,397,367

600,000,000

-

44,397,367

44,397,367

-

3,545,131

-

-

40,852,236

Balance on Jan. 1, 2019 Amended

-

3

600,000,000

-

Net year profit

Transfer to statutory reserve

Amendments due to application of International Financial Reporting Standard No. 16

-

Remuneration for Board Directors

Balance on Jan. 1, 2019 as previously disclosed

-

Dividend distributions

-

60,000,000

600,000,000

-

540,000,000

Balance on 1 Jan. 2018 as amended

Transferred for capital increase

Balance on 31 Dec. 2018

-

-

Other comprehensive income

40,852,236

540,000,000

Balance after amendment

Impact of adopting the International Financial Reporting Standard No. 9 -

-

-

40,852,236

540,000,000

Statutory reserve (SR)

Amendments of previous years as per International Financial Reporting Standard No. 8

Capital (SR)

Balance on 1 Jan. 2018 as previously disclosed

Note

851,445,860

50,070,381

-

121,810,982

(30,000,000)

709,564,497

(42,298,417)

751,862,914

751,862,914

16,101,094

-

35,451,309

(1,800,000)

(27,000,000)

-

729,110,511

(41,258,077)

770,368,588

(13,128,000)

783,496,588

Total (SR)

Saudi Automotive Services Company (SASCO) (Saudi Joint Stock Company) List of shareholders’ equity For the year ending on December 31th, 2019 ________________________________________________________________________________________________________________________________

Annual Report 2019

133

Saudi Automotive Services Company (SASCO) (Saudi Joint Stock Company) List of shareholders’ equity For the year ending on December 31th, 2019 ________________________________________________________________________________________________________________________________

31 Dec. 2019 (SR)

31 Dec. 2018 (SR)

Cash flows from operating activities Net annual profit

121,810,982

35,451,309

Consumption of Property, plant and equipment

48,876,157

44,721,127

Asset use right depreciation

66,459,915

-

Amortization of intangible assets

1,364,853

1,731,997

Component of customs claims provision

1,241,894

2,088,752

Component of provision for other receivables

4,967,730

-

Component of provision for expected credit losses

(1,695,870)

1,695,870

Component from non-sold goods stock allocation

536,887

-

Unrealized (profit) losses from fair value investments through profit or loss

(4,324)

582,102

Realized profit from fair value investments through profit or loss

(354,030)

(330,099)

Finance costs

33,212,748

-

Component of commitments for employee benefit plan

2,298,276

3,054,183

Component of Zakah provision

3,247,206

2,775,004

Loss (Profits) of selling properties and equipment

75,503

(47,,429)

282,037,927

91,722,816

Receivables, advance payments, and other assets

(80,089,582)

(58,502,393)

Inventory

1,180,842

(14,856,094)

Right to use assets

(174,692,460)

-

Payables, accrued expenses and other liabilities

28,673,276

32,195,156

Paid finance costs

(8,856,161)

-

Paid part of Zakah provision

(1,852,480

(3,423,780)

Paid part of commitments of employee benefit plan

(980,228)

(1,827,123)

Net cash available from operating activities

45,421,134

45,308,582

Cash paid to purchase fair value investments through profit or loss

-

(190,330,099)

Sums collected from selling fair value investments through profit or loss

6,063,130

215,407,748

Cash paid to purchase fair value investments through other comprehensive income

(29,946,217)

(21,825,000)

Additions to properties and equipment

(32,027,378)

(48,409,500)

Sums collected from sale of properties and equipment

503,762

21,611,979

Additions to capital projects under construction

(46,841,042)

(51,857,336)

Additions to intangible assets

(32,264)

(2,699,481)

Net cash used for investment activities

(102,280,009)

(78,101,689)

Net change in loans and profits for sale

(11,905,642)

37,555,631

Lease liabilities

88,381,680

-

Net change in shareholders› entitlements

(28,833,719)

(26,002,842)

Paid remuneration of board directors

-

(1,800,000)

Net cash available from financing activities

47,642,319

9,752,789

Net deficit in cash and balances with banks

(9,216,556)

(32,040,318)

Cash and balances with banks at the beginning of year

74,235,012

97,275,330

Cash in hand and balances with banks at the end of year

65,018,456

74,253,012

Items changed from projects under execution to properties and equipment

26,130,153

34,817,094

Actuarial losses from re-measuring staff benefits scheme

1,229,523

-

Unrealized profit (loss) from reassessing fair value investments through other comprehensive income

51,299,904

16,101,094

Amendments to settle net annual profit to net cash available from operating activities:

Changes in operating assets and liabilities

Cash flows from investment activities

Cash flows from financing activities

Non-cash transactions

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

134

Saudi Automotive Services Company (SASCO) (Saudi Joint Stock Company) List of shareholders’ equity For the year ending on December 31th, 2019 ________________________________________________________________________________________________________________________________

1- Composition & Business A. Saudi Automotive Services Company (SASCO) is a Saudi shareholding company established by the Ministerial Decree No. 563 dated 231402/12/ H corresponding to 121982/10/. It is headquartered in Riyadh under Commercial Register No. 1010054361 dated 281404/07/ H corresponding to 301984/4/.

B. SASCO mainly provides a variety of services which include car and passenger services through establishing central workshops for the highest level of 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, implements all kinds of contacting with respect to constructing, managing, maintaining and operating residential and commercial buildings, undertakes 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.

C. SASCO’s capital is SR 540,000,000 divided into 54,000,000 shares, each with a value of SAR 10. on May 22, 2018, the 12th Extraordinary General Assembly agreed on the 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 giving one free share to every 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 shares shall be increased from 54,000,000 shares to 60,000,000, with the increase of 6,000,000 shares.

D. The Main Office of the Group is located at the following address: Saudi Automotive Services Company (SASCO) Riyadh – Malaz – Al Ahsa St,. Al Ahsa intersection with Omar bin Abdulaziz Kingdom of Saudi Arabia E. Consolidated financial statements as at 31 Dec. 2019 include the financial statements of the following subsidiaries and branches:

Core Business

% of direct & indirect ownership

Ostool Al-Naqil Co.

Transporting oil products and commodities for payment pursuant to the Ministry of Transport›s License No. 010111046000 and license to expire on 51440/3/H.

100%

Saudi Automobile & Touring Association, Ltd SATA

Subscribing in local and international car and motorcycle clubs and local and international associations and bodies interested in the affairs of cars and motorcycle.

Issuing transit books (Trip Ticket) and international driving licenses Organizing, managing, maintaining and operating car and motorcycle racing tracks Organizing and participating in car and motorcycle racings and events

100%

Auto & Equipment Investment Co., Ltd

Establishing car and heavy equipment repair workshops as well as car and passenger service stations on the main roads between the cities of the Kingdom to offer fuel, oils and maintenance of cars and heavy equipment Establishing rest houses, motels and restaurants and offering food, beverages, soft drinks for passengers.

Washing and lubricating cars and equipment Importing and selling equipment and tools Constructing roads and bridges

100%

Al-Nakhla Al-Oula Co.

Undertaking general contracting (establishing, repairing, demolishing and rebuilding) for building, establishing, maintaining and operating residential and commercial buildings as well as road works.

100%

SASCO Palm Stores Co.

Import and sale of food, beverages, soft drinks and equipment

100%

SASCO Al Waha Co.

Hotels

100%

Establishing, managing and operating fuel stations

100%

Manufacturing industries and their branches as per industrial licenses, business services, other services, trade and information technology.

100%

Name of Subsidiary

Zaiti Petroleum Company SASCO Franchise Co.

Services

Annual Report 2019

135

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

1- Composition & Business (sequel) Attached consolidated financial statements include the assets, liabilities and business results of the following main commercial registration and branches: No.

Commercial Register No.

1

1018000425

SASCO branch

Name of Branch

Riyadh

City

2

2050093628

SASCO branch

Dammam

3

4030254775

SASCO branch

Jeddah

4

1131030559

Zaiti branch

Buraidah

5

5850029530

Zaiti branch

Abha

6

5850064608

Zaiti branch

Abha

7

5850064609

Zaiti branch

Abha

8

1128010283

Zaiti branch

Unaizah

9

1011012857

Zaiti branch

Al Kharj

10

2055025642

SASCO Palm Stores Co. branch

Al Jubail

11

2050112261

SASCO Palm Stores Co. branch

Dammam

2- Grounds on which consolidated financial statements are developed 2-1 Statement of Compliance 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.

According to the Saudi Capital Market Authority (CMA), options of using reassessment model of properties, machinery, equipment and intangible assets in IFRS 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 transformation beginning from 2017 till 2019 for listed companies. During 2019, CMA announced the issuance of a decision from its Board that obligates listed companies to continue using the option of cost model for measuring real estate and real estate investments for the fiscal years commencing before 2022.

2-2 Development of consolidated financial statements The attached consolidated financial statements were developed on the basis of historical costs according to maturity principle with the exception of investments 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, and staff benefits scheme that was estimated by an independent actuarial expert.

Items of consolidated financial statements appear in Saudi Riyal (SR). It is the currency of operation and disclosure.

2-3 Use of estimates and assumptions The development of consolidated financial statements according to IFRS’s approved in Saudi Arabia requires the Management to set judgments, estimates and assumptions that affect the application of accounting policies and disclosed amounts of assets, liabilities, revenues and expenses. These estimates and their related assumptions are based on previous experience and other factors believed to be reasonable in the current circumstances; which results constitute a basis 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.

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:

136

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

2- Grounds on which consolidated financial statements are developed (sequel) 2-3 Use of estimates and assumptions (sequel) a- Impairment in non-financial assets On the date of each financial position statement, the Group assesses the assets to find any evidence that these assets have incurred impairment.

In case such 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 is higher. When 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 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 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. Impairment losses are directly recognized in the consolidated profit or loss statement.

In case the impairment loss is subsequently reflected in value, the asset book value is increased to the amended value of the redeemable value.

However, only to the extent that the book value does not exceed the book value that would have been redeemable should there is no impairment loss of asset book value in the previous years. Reverse of dimpairment losses are directly recognized in the consolidated profit or loss statement. b- Measurement of fair value 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 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: • Through the main market of the asset or obligation; or • Through the most preferred market of the asset or obligation in case the main market is absent.

The main market (most preferred market) must be available for the Company in the measurement date.

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 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 asset to achieve the best interests or selling it to another market party to achieve the best interests.

The Company uses assessment methods appropriate for circumstances. Such methods have sufficient data to measure the fair value; in that proper observable inputs are used instead of non-observable ones.

All assets and liabilities measured by fair value or their value is disclosed in financial statements are classified as per a hierarchy of fair value measurement levels below based on the minimum level of measurement input which is crucial for measuring the fair value as a whole.

Used inputs are classified in fair value measurement methods as per the following hierarchy: Level One: prices declared (non-amended) and tradable in active asset or obligation market similar to the one measured.

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 liability.

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 methods and the reasonability of assessment as a whole. c- Provisions 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, taking into consideration risks and doubts about the liability. When a provision is measured using the cash flows estimated for settling the current obligation, 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, 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.

Annual Report 2019

137

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

2- Grounds on which consolidated financial statements are developed (sequel) 2-3 Use of estimates and assumptions (sequel) d- Estimation of productive lifetime of properties, machinery, equipment and remaining value The Group’s Management determines the estimated productive lifetime of properties, machinery and equipment for the purpose of calculating impairment. This estimation is made after taking into consideration the expected use of asset or actual prescription. The Management periodically checks the estimated prod uctive 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 asset economic benefits. e- Assumptions of end-of-service benefit liabilities End-of-service benefits represent liabilities that will be settled in the future and require the use of assumptions toward the expected liabilities.

International Accounting Standard 19 “Employee Benefits” requires the Management to use more variable-related assumptions such as discount rates, rate of compensation 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. f- Provision of stagnant and slow moving inventory 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 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 impairment of redeemable value less than book value. g- 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 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 final assessments are issued.

3- Changes to key accounting policies 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 previous year for the year ending on 31 December 2018.

As at 1 January 2019, the Company applied the International Financial Reporting Standard No. (16) “Lease Contracts”, as the Group conducted a test to apply this standard as permitted by the transitional rules stated in the standard by using the cumulative effect for primary application of this standard as amendment of the opening balance of retained profits as at January 1, 2019.

138

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

3- Changes to key accounting policies (sequel) The impact of applying this standard to the Group’s applicable accounting policies: 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 is 12 months or less or if the asset is of a little value.

While lessors continue to classify lease contracts as operating or financing lease contracts, the approach of IFRS No. 16 regarding lessor accounting did not significantly change from the previous one, namely IAS No. 17.

Assets and liabilities resulting from the lease contract are primarily measured on the basis of the present value. ?? The right to use the asset is measured at cost that include : 1. The amount of primary measurement of the lease contract commitment.

2. Any lease payments paid on or before the date of contract commence minus any received lease incentives.

3. Any primary direct costs incurred by the lessor. ?? The lease contract commitment is measured at the beginning of the lease contract at the current value for lease payments not paid on that date. The lease payments are deducted by using the implied interest rate in the lease contract.

The finance costs are added to the consolidated profit or loss statement along the lease period, so that a fixed periodic commission ratio is achieved on the remaining balance from the liability per each period. The right of the asset use is depreciated through the productive lifetime of the asset or the lease contract period, whichever is shorter, on the basis of fixed installment.

The following table summarizes the impact of applying IFRS standard 16 “Lease Contracts” on the consolidated financial statements, with summary of items affected as of January 1, 2019:

Right of asset use, net

Balance before amendment as of Jan. 1, 2019 SAR

Impact of application SAR

-

611,693,989

Balance after amendment as of Jan. 1, 2019 611,693,989

Receivables, advances and other assets, net

226,785,816

(29,266,205)

197,519,611

Lease liabilities – current portion

-

33,306,670

33,306,670

Lease liabilities – non-current portion

-

591,419,531

591,419,531

Retained profits (cumulative losses)

31,917,651

(42,298,417)

(10,380,766)

4- New standards and amendments issued and not effective yet: The following are the new standards and amendments to the standards applicable for years commencing on or after Jan. 1, 2020, with allowance of early application, but not applied by the Group when preparing these consolidated financial statements.

4-1 Amendments to IFRS No. 3 – Identification of business activity : This amendment explains identification of the business activity. According to the responses received by the International Accounting Standards Board, application of the present direction is thought to be very complex, and leads to too many transactions leading to business mergers.

4-2 Amendments to international accounting standard No.1 and international accounting standard No. 8 – on Identification of substantial: These amendments to the international accounting standard No.1 “Presentation of Financial Statements”, and the international accounting standard No.8, “Accounting policies, changes in estimations and accounting errors” and further amendments to the other IFRS: 1. Using fixed identification of substantial in all IFRSs and concept framework of the financial report, 2. Explanation of substantial identification 3. Inclusion of some guidelines in the international accounting standard No.1 on the non-substantial information.

Annual Report 2019

139

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

4- New standards and amendments issued and not effective yet (sequel): 4-3 Amendments to the IFRS No. 9 and international accounting standard No.39 and IFRS No. 7 – Rectifying interest rate index These amendments provide some exceptions in terms of standard rectification of interest rate. The exceptions relate to hedging accounting and have impact that rectification of interest rate prevailing among banks should not generally cause termination of the hedging accounting. However, registration of any ineffective hedging should continue in the profit or loss consolidated statement.

5- Basics of Consolidation 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 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 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 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 fair value of obtained assets. The increased cost of acquisition in addition to the fair value of noncontrolling equity in the net assets specified and acquired is registered as goodwill in the consolidated financial position statement. Non-controlling equity is measured by its share of Group’s net-controlled assets at the date of acquisition. The group presents share of profit or loss and net noncontrolled assets as an independent item in the statement of profit or loss and other comprehensive income and within the shareholders’ equity in the statement of profit or loss and other comprehensive income. All unrealized transactions, balances, profits and losses arising from dealings among the Group companies are excluded. Subsidiaries’ accounting policies are amended when necessary to ensure they are consistent with the group’s policies. The Group and its subsidiaries develop their financial statements for the same reporting periods.

6- Summary of the Key Accounting Policies Following is a summary of Group’s key accounting policies: Properties, machinery and equipment Properties, machinery and equipment are recognized at cost after entering accumulated amortizations. They include costs to expenses directly ascribed to acquisition of 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 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 from accounts on the date of selling or exclusion.

Following is the amortization percentage of main items of these assets: Statement

%

Buildings

2-3%

Furniture

10%

Cars and trucks

7-20%

Machinery, equipment, trailers and transport mechanisms

10%

Communication devices and phones

25%

Computer and software

15%

Electrical devices

10%

Advertising signboards

15%

Improvements to buildings

4% or duration of lease contract, whichever is less

Strategic spare parts

5%

Productive life and consumption method are periodically reviewed to make sure that method and period of consumption are consistent with the economic benefits expected from properties and equipment.

During 2017, the Group selected the cost model to register properties, machinery and equipment according to CMA’s Resolution dated 16/01/1438H corresponding to 17 October 2016 binding listed shareholding companies to use the cost model, and the announcement of CMA during 2019 to continue using the cost model option to measure real estate and real estate investments for fiscal years commencing before 2022.

140

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

6- Summary of the Key Accounting Policies (sequel) a- Financial assets On the date of each financial statement, values of financial assets are reviewed to know if there is something to indicate any impairment. Financial assets are like receivables and assets that are individually assessed as impaired. They are assessed for impairment on a collective basis. A substantive proof of impairment 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 of a financial asset is directly reduced by the amount of impairment loss for all financial assets with the exception of trade receivables. A listed value is reduced through creating a provision account. When one of the receivables is considered uncollectable, the amount of receivable and the corresponding amount are deleted in the provision account.

Changes to the value listed in the provision account are recognized in the consolidated statement of profit or loss and other comprehensive income.

When it comes to instruments of shareholders’ equity though other comprehensive income, the previously acknowledged impaired losses are not reflected in the consolidated statement of profit or loss and other comprehensive income. Any increase in fair value coming after a impairment loss is directly recognized in the consolidated statement of change in shareholders’ equity. b- Non-financial assets On the date of each financial statement, the Group reviews the listed values of its assets to find any evidence that these assets have incurred impairment losses. In case such evidence exists, the asset redeemable value is estimated to determine the impairment loss, if any. In case it is not possible to estimate the 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 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.

A redeemable value is the fair value of the asset minus selling cost or value of use, whichever higher.

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. Impairment losses are directly recognized in the consolidated statement of profit or loss and other comprehensive income, unless the asset is reassessed, then the impairment losses are recorded as impairment loss from the reassessment provision.

Cancellation of Recognition The group 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 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 financial asset.

Financial Instruments Financial assets and liabilities are recognized when the Group becomes a party to the contractual provisions of these instruments.

Financial assets and liabilities are initially assessed by fair value. Costs of transaction directly related to purchasing or issuing financial assets and liabilities (other 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 financial assets and liabilities or deducted from the same, when necessary, at initial recognition. Costs of transaction directly related to purchasing financial assets 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.

First: Financial Assets Financial assets are classified into the following categories: financial assets at fair value through consolidated statement of profit or loss and other comprehensive 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 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.

Annual Report 2019

141

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

6- Summary of the Key Accounting Policies (sequel) a- Financial Assets Determined at Fair Value through Profit or Loss Financial assets acquired for trading are classified through the consolidated statement of profit or loss when they are retained for trading purposes or selected to be so classified.

Financial assets retained for trading are classified if they: • Are acquired mainly for being sold in the near future.

• 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 the short term.

• Represent a financial derivative but not classified or active as a hedging instrument.

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: • Such classification cancels or largely reduces any inconsistent measurement or calculation that may result unless classification is done this way.

• 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 the Group’s risk management or documented investment strategy. Information about the set of financial assets or liabilities is internally obtained on this basis.

The financial asset represents a part of a contract that contains a derivative including one or more, and that IAS No. 9 related to financial instruments 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.

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 resulting from reassessing through statement of profit or loss and other comprehensive income is recognized.

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. b- Financial Assets Determined by Fair Value through other comprehensive income statement The Group’s owned listed shares – circulated in an active financial market as financial assets – are classified through other comprehensive income and included at 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 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 impairment losses. Such impairment losses are included in the statement of profit or loss and other comprehensive income in case of excluding investment or there is impairment. Profits or losses resulting from previous assessment and recorded in the reserve for reassessing investments are included in the other comprehensive income statement.

Any revenues from distribution of profits investments through other comprehensive income are recognized when the Group has an emerging right to receive payments for profits of these investments. c- Financial assets measured at distinguished cost Receivables are non-derivative 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 impairment, which is determined in profits or losses.

Interest revenues are identified by applying the actual interest rate, with the exception of short-term receivables when the impact of deduction is not substantial.

142

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

6- Summary of the Key Accounting Policies (sequel) Second: Financial Liabilities Financial liabilities (including loans and receivables) are initially and subsequently measured by amortized cost using actual interest method.

The Group ceases to recognize financial liabilities when an obligation is complied with, canceled or terminated. Difference between book value of excluded financial liabilities and paid amount is recorded in the consolidated statement of profit or loss and other comprehensive income.

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 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 book value at initial recognition.

Cash in hand and at banks Cash in hand and at banks include balances with banks, Murabaha and other high liquidity investments transferrable into known cash amounts and payable within three months or less as of the date of purchase.

Receivables Trade receivables appear in the original amount of the invoice after deducting provisions of expected credit losses. 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 debts are deleted when they are determined against their related provisions. Provisions are allocated to the profit or loss statement. Any subsequent redemptions of amounts of receivables, previously deleted, shall be added to revenues.

Capital Business under Construction Capital business under construction appears at cost. It includes the cost of constructions, equipment and direct expenses. Capital business under construction is 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.

Inventory Inventory is valued at cost or net realizable value, whichever is less. Cost is determined by weighted average method. Provision of stagnant goods is recorded in the 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 ordinary course of business minus estimated costs and estimated necessary costs to complete the selling process.

Goodwill Goodwill represents the increase of investment costs on fair value of acquired assets at business combination. Goodwill is annually assessed to determine impairment and is recorded with costs minus impairment losses. Impairment losses are not reflected after being recorded. Profits or losses of entity exclusion include the book value of goodwill related to the sold entity.

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.

Payables Liabilities are recorded against amounts payable in the future for received services, whether respective invoices are provided by suppliers.

Annual Report 2019

143

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

6- Summary of the Key Accounting Policies (sequel) Revenues 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 as indicated in IFRS No. 15: 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 determines the standards that must be met.

2. Identifying the contract performance obligations: a performance obligation is a promise with the customer to transport a commodity or offer a service.

3. Determining the transaction price: a transaction price is the amount of money a company expects to achieve against transferring commodities or promised services to the customer with the exception of combined amounts on behalf of third parties.

4. Allocating a price for the transaction: contract performance obligations: for a contract containing more than one performance obligation, the company shall allocate the transaction price for each performance obligation at an amount determining the consideration made by the Company and also determining the amount of consideration the company expects to get against fulfilling each obligation.

5. Recognizing the revenues when (as) the entity fulfills the performance obligation.

Lease Contracts Lease contracts are classified as financing leases when risks and ownership benefits are substantially transferred to the lessee under lease contract terms and conditions. Other types of lease contracts are classified as operational lease contracts.

The Group as a tenant: Financing lease contracts that effectively transfer all material benefits and risks on the property ownership to the Group are capitalized at the commencement of the lease at fair value on the acquisition date, or if they are lower, at the present value of the minimum lease payments.

Lease payments are distributed between financial burdens and reduced lease obligations in order to achieve a fixed commission rate on the remaining balance of the obligations. Financial charges are included in the financing costs in the statement of profit or loss and other comprehensive income.

Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable degree of certainty that the group will acquire the property at the end of the lease term, the asset is depreciated over the estimated useful life of the asset or contract period, whichever is less.

An operating lease is a lease that differs from a finance lease. Payments under operating leases are recognized as an operating expense in the statement of profit or loss and other comprehensive income on a straight line basis over the term of the lease.

The Group as lessor: Leases under which the Group does not transfer all the risks and benefits of ownership of material assets are classified as operating leases.

The initial direct costs incurred in negotiating and preparing the operating lease are added to the book value of the leased asset and are recognized over the lease period on the same basis as proving the rental income. Possible rents are recognized as revenue in the year in which they are earned.

Expenses 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 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 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.

Zakat Provision Discretionary Zakat is an obligation on the Group. It is recorded right in the attached consolidated financial statements by allocating it to the consolidated statement 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 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 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.

Differences between provision and final assessment are addressed in the year in which assessment is received.

Long-Term Loans Loans are recorded in the net received value. Commissions on loans are recorded using the actual commission rate. Commissions on longterm loans are recorded during the period in which they are due.

144

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

6- Summary of the Key Accounting Policies (sequel) Borrowing and Financing Costs Borrowing and financing costs, used directly for acquiring, constructing or producing an asset that is qualified for the conditions of capitalizing the borrowing costs, are 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 as expenses in the consolidated profit or loss statement in the period during which they were incurred by the Group.

Staff Remuneration 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 period. Re-measurement, 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 re-measurement is immediately included in other comprehensive income within retained profits and not re-included in profit or loss.

Retirement Benefits The Group pays retirement subscriptions in favor of its Saudi employees to the General Organization for Social Insurance, representing a certain contribution plan. Payments are considered expenses when incurred.

Short Term Staff Remuneration 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 is provided in the undiscounted amount for benefits expected to be paid in consideration of this service.

Intangible Assets Intangible assets, except goodwill, are measured in costs minus accumulated amortization and impairment losses, if any. Intangible assets were amortized on a straight-line basis throughout the economic lifetime.

Dividend Distribution Dividend distributions of the Group’s shareholders are recognized within other liabilities item in the Group’s consolidated financial statements in the period in which profit distributions are approved by the Group’s shareholders.

Sector Information 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 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.

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 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 the same time.

Foreign currency exchange: 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 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 comprehensive income.

Annual Report 2019

145

146

-

-

-

419,802,172

Additions

Items Converted from capital projects under construction (Note No. 9)

Exclusions

As at 31 December 2019

-

-

-

Additions

Exclusions

As at 31 December 2019

419,802,172

As at 31 December 2018

467,531,998

461,935,607

206,166,540

-

19,483,967

186,727,573

668,102,147

-

13,568,462

274,114

654,259,571

Buildings (Saudi Riyal)

7,404,936

7,809,411

16,485,732

(622,489)

1,334,622

15,773,599

24,295,143

(648,157)

49,742

1,715,023

23,178,535

Furniture (Saudi Riyal)

23,149,811

23,403,387

23,924,195

(664,592)

3,553,379

21,035,408

47,327,582

(874,170)

-

4,017,033

44,185,219

Cars & trucks (Saudi Riyal)

43,258,147

42,725,966

41,099,371

(185,615)

7,427,222

33,857,764

83,825,337

(336,326)

509,633

6,536,119

77,115,911

Machinery, equipment, trailers and transport mechanisms (Saudi Riyal)

150,281

108,510

1,605,519

(16,935)

56,922

1,565,532

1,714,029

(16,944)

-

15,160

1,715,813

Communication devices and phones (Saudi Riyal)

5,881,140

6,603,521

8,314,785

(4,237)

1,738,747

6,580,275

14,918,306

(9,875)

-

2,466,766

12,461,4105

Computer (Saudi Riyal)

17,931,536

17,346,636

19,884,375

(348,366)

2,873,153

17,359,588

37,231,011

(475,416)

800,723

1,614,580

35,291,124

Electrical devices (Saudi Riyal)

11,705,987

11,899,225

15,268,744

(309,830)

2,956,069

12,621,505

27,167,969

(369,941)

-

3,210,418

24,327,192

Advertising boards (Saudi Riyal)

91,131,291

97,031,352

44,353,932

-

9,292,393

35,061,539

141,385,284

-

11,201,593

3,990,861

126,192,830

Improvements to buildings (Saudi Riyal)

-

7,982,621

204,683

-

204,683

-

8,187,304

-

-

8,187,304

-

Strategic Spare Parts (Saudi Riyal)

1,087,947,299

1,096,649,408

377,306,876

(2,152,064)

48,876,157

330,582,783

1,473,956,284

(2,731,329)

26,130,153

32,027,378

1,418,530,082

Total (Saudi Riyal)

The buildings item includes buildings which cost in the accounting registers scored SR 599,372,416 (2018: SR 405,730,469) erected on plots leased under operational lease contracts with a duration of renewable 535- years.

Properties, machinery and equipment include lands and buildings which cost in registers scored SR 101,773,687 (2018: SR 40,896,233). Their title deeds are pledged against facilities granted to the Group from banks to get bank facilities (Note 16).

419,802,172

As at 31 December 2019

Net book value

-

As a 1 January 2019

Accumulated consumptions

419,803,172

As on 1 January 2019

Cost

Lands (Saudi Riyal)

7 - Net Properties & Equipment A- This item consists of the following:

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019

________________________________________________________________________________________________________________________________

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

8- Net intangible assets a- This item consists of : 2019 (Saudi Riyal)

2018 (Saudi Riyal)

Software licenses – b

5,390,502

6,723,091

Goodwill - c

4,308,993

4,308,993

9,699,495

11,032,084

31 Dec. 2019 (Saudi Riyal)

31 Dec. 2018 (Saudi Riyal)

Cost Balance as at 1 January

19,368,614

16,669,133

Additions

32,264

2,699,481

Balance as at 31 December

19,400,878

19,368,614

Balance as at 1 January

(12,645,523)

(10,913,526)

Year amortization

(1,364,853)

(1,731,997)

Balance as of 31 Dec.

(14,010,376)

(12,645,523)

5,390,502

6,723,091

b- Software licenses

Accumulated amortization

Net book value As at 31 Dec.

c- Goodwill Goodwill was obtained thanks to acquiring Zaiti Petroleum Services Company in 2015 . the following are the balances as of 31 December:

Zaiti Petroleum Services Company

2019 (Saudi Riyal)

2018 (Saudi Riyal)

4,308,993

4,308,993

A goodwill test is conducted on an annual basis. Assets are tested to make sure of any impairment through comparing book value with redeemable value, 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 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.

Annual Report 2019

147

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

8- Net intangible assets (sequel) c- Goodwill (sequel) Sensitivity towards assumption changes With respect to estimating the current value, Management believes there are no reasonable possible changes in any of the above core assumptions, that may lead to a major increase in unit book value including goodwill compared to its redeemable value. Following are assumptions originating from changes to key assumptions: Sales growth-related assumptions Sales cost Final value multiplier 9- Capital work under execution This item, which value is SR 60,722,302 , ( 2018 : 40,011,413 ) represents the cost of establishing oil stations in different parts of the Kingdom of Saudi Arabia. It is expected to complete such projects during 2020, with their value being SR 48,5 million.

Following is the movement of capital work under execution for the year ending on 31 December:

Balance at the beginning of year

2019 (Saudi Riyal)

2018 (Saudi Riyal)

40,011,413

25,000,017

Additions during the year

46,841,042

51,857,336

Items converted into properties, machinery and equipment (Note 7)

(26,130,153)

(36,845,940)

Balance at the end of year

60,722,302

40,011,413

2019 (Saudi Riyal)

2018 (Saudi Riyal)

Investments at fair value through other comprehensive income in stocks and shares of non trading companies - b

151,821,889

103,563,396

Investments at fair value through other comprehensive income in stocks and shares of trading companies - c

32,987,628

-

184,809,517

103,563,396

10- Investments at fair value through other comprehensive income a- This item consists of the following:

b- Investments at fair value through other comprehensive income in stocks of non-trading companies The Group possesses stocks and shares in non-trading companies. During 2019, the Group contracted with Nawaf Saleh Mohammed Althunayan Office for Assessment, a company licensed 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 of the companies. The market value of Middle East Battery Company (MEBCO) was SR 1,178,535,000 (2018: SR 798,405,118), while the market value of National Company of Tourism (Syahya) was SR 267,295,000 (2018: SR 687,078,112). 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 its fair value, the best way to determine fair value was the cost.

148

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

10- Investments at fair value through other comprehensive income (sequel) b- Investments at fair value through other comprehensive income in stocks of non-trading companies (sequel) Following is the Group’s shares: As at 31 December 2019: Statement

Group›s share

Value of Assessment (Saudi Riyal)

Group›s share at purchase cost (Saudi Riyal)

Group›s share at fair value (Saudi Riyal)

Reassessment profit / (loss) (Saudi Riyal)

Middle East Battery Company (MEBCO)

12.79%

1,178,535,000

26,390,500

150,734,627

49,769,712

National Company of Tourism (Syahya)

0.36%

267,295,000

1,500,000

962,262

(1,511,219)

United Racing Company

25%

-

125,000

125,000

-

1,445,830,000

28,015,500

151,821,889

48,258,493

As at 31 December 2018: Statement

Group›s share

Value of Assessment (Saudi Riyal)

Group›s share at purchase cost (Saudi Riyal)

Group›s share at fair value (Saudi Riyal)

Reassessment profit / (loss) (Saudi Riyal)

Middle East Battery Company (MEBCO)

12.79%

789,405,810

26,390,500

100,964,915

16,081,229

National Company of Tourism (Syahya)

0.36%

687,078,112

1,500,000

2,473,481

19,865

United Racing Company

25%

-

125,000

125,000

-

1,476,483,922

28,015,500

103,563,396

16,101,094

c- Investments at fair value through other comprehensive income in current shares and companies : This item represents the value of group’s investment in shares and stocks of current companies, as the group, during the last quarter of 2019 invested in purchase of 935,819 shares in Saudi Arabian Oil Company with total cost of 29,946,617 SAR, and the fair value of such investments amounted to SAR 32,987,628 d- Movement on reserve for reassessment of investments at fair value through other comprehensive income as at 31 December as follows:

Balance at the beginning of year

2019 (Saudi Riyal)

2018 (amended) (Saudi Riyal)

75,547,896

59,446,802

Movement at fair value of investments in shares and stocks of non-current companies

48,258,893

16,101,094

Movement at fair value of investments in shares and stocks of current companies

3,041,011

-

Balance at the end of year

126,847,800

75,547,896

Annual Report 2019

149

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

11- Asset use right, net, and lease liabilities : The following table shows the movement during the period on the right to use assets and lease liabilities as at 31 December 2019: Asset use right SAR

Lease liabilities SAR

Balance as of 1 January 2019

611,693,989

624,726,202

Additions during the year

174,692,460

174,692,460

Depreciation of use right

(66,459,915)

-

Discount on liabilities

-

(62,616,152)

Balance as of 31 December 2019

719,926,534

736,802,510

Non-current portion

719,926,534

683,663,542

Current portion

-

53,138,968

Finance costs on recognized lease obligations during the period ended December 31, 2019 amounted to SAR 23,694,629, and the balance has been shown under finance costs in the consolidated statement of profit or loss.

The Group has adopted a policy of charging finance costs to the consolidated statement of profit or loss over the lease period using the effective interest rate. The right to use the asset has been depreciated over the useful life of the asset or the lease term, whichever is shorter, on a straight-line basis.

The expenses related to the short and low value lease contracts during the year ended December 31, 2019 amounted to SAR 19,104,349.

12- Net receivables, advance payments, and other assets a- This item consists of the following: 2019

2018

(Saudi Riyal)

(Saudi Riyal)

Receivables of fuel clients and tenants - b

107,626,042

144,742,110

Minus- provision of expected credit loss – c

(5,214,808)

(5,214,808)

Net

102,411,234

139,527,302

Aramco remunerations – g

99,354,605

-

Advance payments to suppliers

34,588,619

16,860,272

Due remunerations

12,300,745

-

Advance payments

8,795,500

11,904,346

Staff advance payments and loans

6,316,159

8,077,550

Advance leases

6,141,282

40,779,772

Recovered insurance - d

6,101,279

3,311,848

Customs claims

1,722,759

1,817,019

Guarantee letters ( Note 28 )

750,000

5,589,050

Other

5,556,043

5,347,689

284,038,225

233,214,848

(9,700,892)

(6,429,032)

274,337,333

226,785,816

Impairment provision in advance payments and other assets – d

b- The item of fuel clients receivables and tenants includes 23.9% of balances payable by government entities (2018: 49%) c- Following is the movement of expected credit loss provision for the year ending on 31 December: 2019

150

2018

(Saudi Riyal)

(Saudi Riyal)

Balance at the beginning of year

5,214,808

5,214,808

Component during the year

-

-

Balance at the end of year

5,214,808

5,214,808

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

12- Net receivables, advance payments, and other assets d- Lives of fuel and tenant receivables were as of 31 December as follows: 2019 (Saudi Riyal)

2018 (Saudi Riyal)

From 1 day – 90 days

58,209,626

56,105,774

From 91 days – 180 days

16,028,453

31,734,490

From 181 days – 360 days

12,937,084

52,489,411

More than 360 days

20,450,879

7,416,435

107,626,042

144,742,110

e- On October 01, 2019, the company received a notification from the National Committee for Gas Stations Companies (one of the committees of the Council of Saudi Chambers) that the Ministry of Energy agreed to increase the profit margin for gas stations and service centers of companies holding a qualification certificate from the Ministry of Municipal and Rural Affairs to make the new profit margin (15 halalas for petrol instead of 9 halalas per liter, and 5 halalas for diesel instead of 3.5 halalas per liter) stressing that retail prices in the stations shall not affect the final consumer. The company was notified with the start of the date for applying the new margin that will be from August 23, 2018, and according to the best estimate, the Group management reduced the sales costs for the fiscal year ended December 31, 2019 by SAR 75,163,532 in addition to recognizing SAR 24,191,073 as other income for the compensation period for the profit margin difference for the previous periods (August 23, 2018 until December 31, 2018), noting that the company is still awaiting approval and the right compensation amount by the Saudi Arabian Oil Company (Saudi Aramco) due, therefore the management used these assumptions through the data available to it accurately. f- Recovered insurance item includes an amount of SR 3,000,000 (2018 : 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). g- The movement of advance payment provision and other assets for the year ending as of 31 December as follows: 2019 Saudi Riyals

2018 Saudi Riyals

Balance at the year start

6,429,032

4,733,162

Constituent during the year

4,967,730

1,695,870

Used during the year

( 1,695,870)

-

Balance at the year end

9,700,892

6,429,032

2019 (Saudi Riyal)

2018 (Saudi Riyal)

Commodity and petroleum products

41,448,279

38,634,076

Inventory of spare parts

4,590,731

7,476,934

Customs transit books (Trip-Tik) and international driving licenses

1,247,280

1,816,620

Other

2,726,368

3,265,870

Total

50,012,658

51,193,500

Minus: stagnant goods provision

(536,887)

-

49,475,771

51,193,500

13- Net inventory a- This item consists of :

b- Following is a statement of stagnant goods provision for the year ending as of 31 December: 2019 (Saudi Riyal)

2018 (Saudi Riyal)

Balance at the beginning of year

-

-

Component during the year

536,887

-

Balance at the end of year

536,887

-

Annual Report 2019

151

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

14- Fair value investments through profit or loss 2019 (Saudi Riyal)

2018 (Saudi Riyal)

Fair value investments through profit or loss in trading companies (a)

-

5,709,100

Fair value investments through profit or loss in investment funds (b)

268,592

264,268

268,592

5,973,368

a- Movement of fair value investments through profit or loss in stocks of trading companies Fair value investments through profit or loss are represented in stocks of trading companies listed in the Saudi Capital Market Authority. Following is the movement of these investments during the year ending as of 31 December : 2019 (Saudi Riyal)

2018 (Saudi Riyal)

Balance at the beginning of year

5,709,100

30,423,818

Sales during the year

(6,063,130)

(24,127,649)

Realized profits (losses) from reassessing investments

354,030

(587,069)

Balance at the end of year

-

5,709,100

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

152

2019 (Saudi Riyal)

2018 (amended) (Saudi Riyal)

Balance at the beginning of year

264,268

879,202

Purchases during the year

-

190,330,099

Sales during the year

-

(190,950,000)

Change in fair value

4,324

4,967

Balance at the end of year

268,592

264,268

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

15- Cash in hand and at banks 2019 (Saudi Riyal)

2018 (Saudi Riyal)

Cash in hand

9,482,475

7,140,181

Balances with banks*

55,535,981

67,094,831

65,018,456

74,235,012

* There are balances with banks in an amount of SR 40,885,539 (2018 : SAR 39,715,634) representing a cash with banks against liabilities in consideration shareholders’ entitlements.

16- Financing of Murabaha as well as long and short-term loans a- Banque Saudi Fransi (BSF) On 13 August 2012, the Group signed a Murabaha Sharia-compliant agreement with BSF of SAR (255,000,000). The agreement included letters 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 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 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 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 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 developing the existing stations. The Group again on Feb. 17th, 2016, signing the same on 20 June 2016, amended the agreement amount to SAR (502,500,000). 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 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 title deeds. The agreement aims to finance the purchase of new lands, building new stations and improving stations. The Group renewed and amended the 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 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 June 2018. The agreement aims to finance the purchase and building of new stations. On 28 November 2019, the Group renewed the agreement to be SR 523,200,000. It includes renewal of existing facilities, of which SR 145 million for diversified credit facilities and SR 178,200,000 for short, and long-term facilities, in addition to the new long term finance with SR 200,000,000 guaranteed by a promissory note. The agreement aims to finance the purchase and building of new stations to support the operating capital needs.

Annual Report 2019

153

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

16- Financing of Murabaha as well as long and short-term loans (sequel) b- NCB The Group signed a Shariah-compliant credit facilities agreement with NCB of SAR (92,000,000) guaranteed by local share pledge with the aim to expand construction and acquisition of fuel stations. The agreement is valid until 1 June 2019.

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 (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 the group’s projects, support its 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 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 loans of SAR (25,700,000). The agreement is valid until 1 June 2019.

The agreement was amended on April 30st, 2017 and its value became SAR (200,700,000), including long-term loans of SAR (150,700,000) and bank letters of guarantee of SAR (25,000,000) and short-term loans of SAR (25,000,000). The agreement aims to expand the group’s projects, support its core activities, and purchase new sites to build fuel stations. The agreement was amended on 3 September 2019 by terminating the old agreement and signing a new agreement for a total amount of SR 166,250,000 representing long and short term facilities of SR 155,000,000 in addition to hedging with an amount of SR 11,250,000 with a promissory note guarantee of 110% of the total agreement value. The aim of the agreement is to finance purchase and building of fuel stations in addition to support the needs of working capital. c- SABB 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, provided the use thereof before January 31st, 2016, guaranteed by a promissory note. This agreement includes a long-term loan of SAR (100,000,000) and 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 on 31 January 2016 and was extended to be valid until 31 January 2017.

The agreement was amended on Dec. 7th, 2017 and its value became SAR (177,900,000), guaranteed by a promissory note, including a long-term loan of 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.

On December 10th, 2018, the Group renewed and amended the agreement, and its value became SR 400,000,000 guaranteed by a promissory note. This agreement 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 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 January 2020. On December 3, 2019, the group signed a Murabaha facilities agreement (Sharia’h compliant) with SABB for an amount of SR 190,000,000 to finance 90% of the company’s entry into Aramco subscription under the condition that the amount of the financing is determined based on shares that will be allocated to the company after subscription and it has already been determined with a value of (26,951,587 SAR) against a promissory note guarantee in addition to pledging the stock portfolio. d- Gulf International Bank (GIB) On December 13th, 2015, the group signed a (Shariah-compliant) Murabaha facilities agreement with the Gulf International Bank (GIB) (a Bahraini jointstock 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 period of five (5) years (2-year grace period), provided the repayment of loan shall be 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 finance the working capital. The agreement was renewed and amended on Sep. 6th, 2018 and its value became SAR (48,000,000) in the form of payment guarantees in favor of Aramco, guaranteed by a promissory note. On October 29, 2019 the agreement was renewed and amended and its value became SAR (150,000,000) including Murabaha facilities (Sharia’h compliant) at the value of 75,000,000 SR to short term finance of entitlements and deduct the bills and an amount of SR 75,000,000 representing bank guarantees in favor of Aramco, guaranteed by a promissory note.

154

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

16- Financing of Murabaha as well as long and short-term loans (sequel) e- Alawwal Bank On December 21st, 2015, the Group signed a (Shariah-compliant) Murabaha facilities agreement with the Alawwal Bank (a Saudi joint-stock company).

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 months (18-month grace period), provided the repayment of loan at equal semi-annual successive instalments. This is in addition to letters of guarantee 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 new sites to build fuel stations as well as to finance the working capital. The agreement was renewed on Dec. 28st, 2017 and its total value became SAR (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 agreement was renewed and amended and its total value became SAR (104,500,000) and the value of total guarantees became SAR (75,000,000) including medium-term loans of SAR (29,500,000) guaranteed by a promissory note. f- Riyadh Bank On December 21st, 2015, the Group signed a (Shariah-compliant) facilities agreement with Riyadh Bank (a Saudi joint-stock company). The agreement includes bank letters of guarantee of SAR (50,000,000), aiming at expanding the group’s 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 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 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 deed mortgage of SR 100,000,000. On December 12, 2019 the group renewed and amended the agreement with a total value of SR 569,943,000 representing long term finance of 334,643,000 and short term finance of SR 120,000,000 and documentary credits of SR 20,000,000 and hedge to set the interest rate with a value of SR 15,300,000 in addition to SR 80,000,000 as present bank guarantees by a promissory note guarantee in addition to real estate deed mortgage of SR 100,000,000 g- Al-Jazira Bank On January 29, 2019, the Group entered into a Murabaha facility agreement (Sharia’h compliant) with Bank Al-Jazira, with a value of 150,000,000 Saudi Riyals, by a promissory note guarantee, and this agreement includes a long-term loan of 100,000,000 Saudi Riyals and a short-term loan of 5,000,000 Saudi Riyals, in addition to issuing bank guarantee letters of 45,000,000, this agreement aims to expand the company’s projects and support its core activities and the purchase of new sites to build petrol stations as well as support working capital by a promissory note guarantee, h- Following is the loan movement as at 31 December: 2019 (Saudi Riyal)

2018 (Saudi Riyal)

Balance at the beginning of year

593,074,561

555,518,930

Amounts received during the year

370,357,467

513,962,886

Amounts paid during the year

(382,263,109)

(476,407,255)

Balance at the end of the year

581,168,919

593,074,561

Financing of Murabaha and short-term loans

105,000,000

115,000,000

Trading portion from financing of Murabaha and long-term loans

88,267,285

100,688,892

Financing of Murabaha and long-term loans

387,901,634

377,385,669

Annual Report 2019

155

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

17- Payables, due expenses and other liabilities 2019 (Saudi Riyal)

2018 (Saudi Riyal)

Petroleum suppliers

95,997,943

80,909,206

Revenues received in advance

45,320,674

52,460,050

Due expenses

24,769,390

12,358,469

Commodity and service suppliers

18,596,431

19,753,109

Customs claims provision

15,330,646

14,088,752

Performance bond guarantee

12,333,758

9,899,145

Deposits for third parties

10,243,937

1,284,539

Lease claims provision

1,930,008

4,381,009

Due VAT

811,058

1,284,539

Other

5,541,507

5,163,645

230,875,052

200,297,924

2019 (Saudi Riyal)

2018 (Saudi Riyal)

Profit distributions

18,226,352

17,019,249

Shares sold by auction

16,746,073

16,779,795

Subscription surplus – at incorporation

2,251,550

2,258,650

Surplus of capital decrease

2,119,778

2,199,778

Subscription surplus – second installment

1,537,892

1,537,892

40,881,645

39,715,364

2019 (Saudi Riyal)

2018 (Saudi Riyal)

Shareholders› equity

729,634,878

751,862,914

Net amended income

130,364,768

55,621,953

Additions

1,440,362,652

535,435,627

Deductions

(2,118,008,276)

(1,237,736,458)

Total

182,354,022

105,184,036

Zakat base

182,354,022

105,184,036

18- Distributions payable to shareholders

19- Zakat Provision a- This item consists of the following : The main elements of the zakat base are as follows :

b- Following is the movement of Sharia Zakat provision during the year ending on 31 December: 2019 (Saudi Riyal)

2018 (Saudi Riyal)

Balance at the beginning of year

3,177,694

3,826,470

Amounts paid during the year

(1,852,480)

(3,423,780)

Component during the year

3,247,206

2,775,004

Balance at the end of year

4,572,420

3,177,694

c- Zakat status During 2013, the 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.

156

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

19- Zakat Provision (sequel) c- Zakat status (sequel) The Group finalized the zakat status until 2018 and submitted its Zakat declarations to the Zakat Authority for the years 2009 thru 2018 and paid the due amounts under such declarations and obtained the final certificates, but the final assessment has not been done up to date.

20- Statutory Reserve 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 until reserve reaches 30% of capital. The statutory reserve is not distributable as dividends for shareholders.

21- Revenues 2019 (Saudi Riyal)

2018 (Saudi Riyal)

Fuel operation revenues

2,070,669,017

1,647,772,790

Grocery revenues

212,589,920

201,456,232

Lease revenues

130,986,066

125,451,863

Other

68,597,895

81,400,117

2,482,842,898

2,056,081,002

2019 (Saudi Riyal)

2018 (Saudi Riyal)

Staff salaries, wages and benefits

25,324,507

27,668,290

Professional fees and consultation

7,884,484

3,668,987

Impairment provision for advance payments and other assets

4,967,730

-

Bank charges

3,102,550

1,031,904

Equipment and property depreciation

3,001,395

1,547,636

Intangible assets amortization

1,364,853

1,523,908

Customs claims provision (Note 17)

1,234,024

2,088,752

Leases

1,100,000

1,068,769

Maintenance expenses

464,491

200,560

Electricity and water

167,572

200,851

Other receivables provision (Note 12)

-

1,695,870

Other

2,191,963

1,413,515

50,803,569

42,109,042

22- General and administrative expenses

Annual Report 2019

157

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

23- Other revenues , net 2019 (Saudi Riyal)

2018 (Saudi Riyal)

ARAMCO compensations

24,191,073

-

Due compensations

9,762,785

-

Deposit revenues

244,178

426,920

Delay penalties

44,357

1,100,820

Sale (loss) / profits of property, machinery and equipment

(75,503)

47,429

Other

75,516

381,964

34,242,406

1,868,133

* The item represents the value of due remunerations resulting from the company›s proving the difference of fuel profit margin increase so that the new margin becomes (15 Halalas for gasoline instead of 9 Halalas per liter and 5 Halalas per diesel instead of 3.5 Halalas per liter). The amount relates to the period from the date of applying the new margin from August 23, 2018 up to December 31, 2018 (Notes 12 and 29). The company›s management has not reversed the influence of this amount on the previous period in line with the requirements of the International Accounting Standard No. 8 “Accounting policies and changes in accounting estimations and errors”. ** The item includes a balance of SR 8,217,461 representing a final judicial verdict obligating the Ministry of Housing to pay it as fee against seizing the land of SASCO located on Hafer Albatin / Riyadh Road.

The matter relates to a lawsuit filed against the Ministry of Housing dated 29 Rajab 1434H, and the verdict was issued by the public court in 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.

Following are the Group sectors: • 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.

• Franchise Sector: it grants franchise for using the Group’s trademark.

158

1,680,615,126

2,499,125,326

91,189,284

Total liabilities

Net sales

Income from core operations

1,690,668,896

952,185,609

2,090,292,743

28,522,198

Total assets

Total liabilities

Net sales

Income from core operations

31 December 2018

2,293,747,913

Total assets

31 December 2019

Retail and Operation Sector (Saudi Riyal)

(27,640)

-

16,194,591

125,348,759

-

-

-

332,312,294

Investment Sector (Saudi Riyal)

3,116,786

12,012,231

15,708,473

31,516,419

4,281,278

14,252,082

15,916,272

35,746,895

Saudi Automobile & Touring Association Sector (Saudi Riyal)

24- Sector Information (sequel) Following are some financial data of the above sectors for the period ending on 31 December:

6,082,233

26,359,078

16,198,157

42,060,526

6,516,751

29,156,246

5,326,241

37,621,952

Transport Fleet Services Sector (Saudi Riyal)

(10,075)

-

-

447,925

-

-

-

437,926

SASCO Franchise Sector (Saudi Riyal)

-

(72,583,050)

(151,407,856)

(289,300,673)

-

(59,690,756)

(94,879,956)

(238,959,571)

Joint assets and liabilities (Saudi Riyal)

37,683,502

2,056,081,002

848,878,974

1,600,741,888

101,987,313

2,482,842,898

1,606,977,683

2,460,907,408

Total (Saudi Riyal)

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019

________________________________________________________________________________________________________________________________

Annual Report 2019

159

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

25- Financial instruments and risk management Fair value The fair value represents the price that may be received as a result of selling an asset or that may be paid to transfer a liability in a statutory transaction among the participants in the market at the measurement date. The measurement of fair value depends on supposing a transaction between the asset or transfer a liability whether : • In the main market of assets or liabilities , or • In the absence of a main market, in the markets most beneficial to the assets or liabilities 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.

Level One: market prices announced in active markets for the same financial instruments.

Level Two: assessment methods depending on inputs affecting fair value and can be directly or indirectly noticed in the market.

Level Three: assessment methods depending on inputs affecting fair value and cannot be directly or indirectly noticed in the market.

As at 31 December 2019

Level One

Level Two

Level Three

Total

Investments through other comprehensive income

32,987,620

151,696,889

125,000

184,809,509

Investments at fair value through profit or loss

268,592

-

-

268,592

33,256,212

151,696,889

125,000

185,078,101

As at 31 December 2018 (amended)

Level One

Level Two

Level Three

Total

Investments through other comprehensive income

-

103,438,396

125,000

103,563,396

Investments at fair value through profit or loss

5,973,368

-

-

5,973,368

5,973,368

103,438,396

125,000

109,536,764

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 Management sees that the purchase cost is the ideal method to calculate the fair value of these assets, and their value is not impaired.

Capital Risk Management 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 from 2018 did not change.

The structuring of the Group’s capital includes shareholders’ equity which consists of capital, reserves, fair value reserve and retained profits as listed in shareholders’ equity change statement.

Financial Risk Management Group’s business may be substantially affected by financial risks arising out of the following: 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.

Interest rate risk management The financial instruments in the consolidated financial position statement are not subject to interest rates and risks.

160

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

25- Financial instruments and risk management (sequel) • 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 but not trading purposes. In addition, it does not actively trade in such investments.

• Credit risk management 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 losses. The Group is subject to credit risks on its bank balances and receivables as follows: 2019 (Saudi Riyal)

2018 (Saudi Riyal)

Cash and balances with banks

65,018,456

74,235,012

Net receivables

102,411,234

139,527,302

167,429,690

213,762,314

• 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 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.

26- Debt Ratio 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 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 increase in debt ratio through issuing new debt releases in 2019.

Following is the debt ratio at the end of the year: 2019 (Saudi Riyal)

2018 (Saudi Riyal)

Loans

581,168,919

593,074,561

Cash and balances with banks

(65,018,456)

(74,235,012)

Net debts

516,150,463

518,839,549

Shareholders› equity

759,542,850

751,862,914

Net debt / shareholders› equity

67,96%

69,01%

27- Earnings per share 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 taking into consideration with retroactive effect the increase of Group’s number of shares during the second quarter of 2018 (Note 1). Earnings 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, being 60 million shares

Annual Report 2019

161

Saudi Automotive Services Co. (SASCO) (Saudi joint-stock company) Notes to the consolidated financial statements For the year ended 31 December 2019 ________________________________________________________________________________________________________________________________

28- Capital Commitments & Possible Obligations The Group has capital commitments related to establishing assets and properties as at 31 December 2019 at a total amount of SR 13 million (2018: SR 8.5 million).

The Group has possible obligations related to bank guarantees as at 31 December 2019 at an amount of SR 429,1 million (2018: SR 284,16 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.

29- Subsequent and Key Events The company announced on October 01, 2019 that it received a notice from the fuel companies committee (a committee affiliated to the Saudi chambers council) stating that, the Ministry of Energy approved the increase in the profit margin for gas stations and service centers of companies qualified by the Ministry of Municipal and Rural Affairs so that the new profit margin to become (15 halalas for gasoline instead of 9 halalas per liter and 5 halalas per diesel instead of 3.5 halalas per liter), confirming that retail selling prices at stations shall not affect the final consumer, and then notification of the start of the date for applying the new margin that will be from August 23, 2018, and according to the best estimate, the Group management reduced the sales costs for the fiscal year ended December 31, 2019 by SAR 75,163,532 in addition to recognizing SAR 24,191,073 as other income for the compensation period for the profit margin difference for the previous periods of 2019.

Following the date of financial statements, up to the issuance of these financial statements, the COVID-19 epidemic spread during the early 2020 and became widespread in several geographic regions around the world, causing disturbance to economic activities and businesses. The Group believes that this event is one of the events occurring after the period in which the statement of financial position was issued, which does not require amendments. In this early stage of the event, which is witnessing continuous and rapid developments, the group formed a working group to assess the expected impacts on the group’s business inside the Kingdom, and to conduct a preliminary study with a view to reviewing and assessing the potential risks related to the supply chain of raw materials, human resources, current stock levels and ensuring the continued operation of facilities and sites of the group without interruption. At this stage, when it is practically difficult to provide any mathematical estimate of the potential effects, the group does not expect any material effects to occur on its operations in the Kingdom, if matters return to normal within a reasonable time.

The Management and those responsible for governance will continue to monitor the situation in all geographic regions in which the group operates and provide stakeholders with developments as required by the laws and regulations. In the event of any material changes in the current conditions, additional disclosures will be made or amendments will be approved in the Group›s interim consolidated financial statements for subsequent periods during the fiscal year 2020.

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.

30- 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:

162

Nature of dealing

2019 (Saudi Riyal)

2018 (Saudi Riyal)

Non-executive board members

Salaries, allowances and incentives

908,000

893,000

Senior management staff

Salaries, allowances and incentives

7,402,732

7,033,523

Annual Report 2019

163

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