King Salman bin Abdulaziz · the Two Holy Mosques, King Salman bin Abdulaziz and His Royal Highness Prince Mohammad Bin Salman, Crown Prince, Deputy Prime Minister and Minister of

Since announcement of our good government, headed by Custodian of

the Two Holy Mosques, King Salman bin Abdulaziz and His Royal

Highness Prince Mohammad Bin Salman, Crown Prince, Deputy Prime

Minister and Minister of Defense, of its attitudes about the National

Transformation Program 2020 and Saudi Vision 2030, Sipchem works

very hard and in an accelerated pace to keep up with the Kingdom

progress towards economic development, promoting it and finding

sustainable economic resources that are in the interest of the homeland, citizens and future generations through

diversity of its investments and excellence of its products, backed by studies of its Scientific Research Centre.

Custodian of the Two Holy Mosques

King Salman bin Abdulaziz His Royal Highness

Prince Mohammad Bin Salman Crown Prince, Deputy Prime Minister and

Minister of defence

4

An Overview of Sipchem...................................................................................................................... 4

Board Chairman Message ................................................................................................................... 5

Company Integration Status ............................................................................................................... 6

I: Sipchem and its subsidiaries ........................................................................................................... 7

II: Significant Events in 2018 ............................................................................................................ 21

III: Sipchem's Strategy ..................................................................................................................... 24

IV: Sipchem Technology & Innovation Center .............................................................................. 25

V: Sustainability ................................................................................................................................ 26

VI: Risk Management ....................................................................................................................... 27

VII: Company Governance .............................................................................................................. 34

VIII: Company Financial Results .................................................................................................... 69

IX: Internal Audit and Annual Audit Results of Domestic Audit Procedures Effectiveness.......80

X: Investrors relations ...................................................................................................................... 81

XI: Governance and Commitment ................................................................................................... 82

XII: Human Resources ...................................................................................................................... 88

XIII: Sipchem and the Community ................................................................................................. 90

XIV: Board of Directors' Recommendations .................................................................................. 92

XV: Conclusion .................................................................................................................................. 92

Page Contents

An Overview of Sipchem

An Overview of the Company

Sipchem is one of the largest companies in the Petrochemical industry in the Kingdom of Saudi Arabia. It is distinguished by an advanced and developed technology along with its commitment to environmental preservation. Since its establishment in 1999, Sipchem now stands as an international petrochemical company with a variety of products and more than 1,662 employees from all over the world.

Who We Are:

Sipchem’s plants occupy one million seven hundred sixty six thousand nine hundred and fifty nine square meters in the basic industries area in Jubail Industrial City. The company’s strategy, planned to be implemented in gradual stages, aims at achieving integration of the current and future chemical products to create a chain of value products. Such strategy will participate in increasing the domestic production and support the industrial development within the frame of the comprehensive development plans implemented by the kingdom, which at the end help maximizing the shareholders’ profitability.

Sipchem conforms to Environment, Health, and Safety (EHS) Standards in all its processes as well as it gives a great attention to the social responsibility. Given that Sipchem succeeded in passing previous challenges, it is certain that it is capable of overcoming any future challenges thanks to Allah and through the Saudi human resources that contribute to the economic and social development of the homeland.

6

Chairman Message Dear Shareholders of Sahara International Petrochmical Company

May Peace, Mercy and Blessings of Allah be upon you,

on behalf of my fellow Board members, I am pleased to report to you on the performance of Sahara

International Petrochemical Company and its affiliates and business results for the year ended December

31, 2019.

Sahara International Petrochemical Company (Sipchem) is one of the leading companies in the

petrochemical sector; the company enjoys a reputation among chemical and petrochemical companies

locally and internationally, as well as having total assets of SAR 991.23 billion.

Unquestionably, one of our proudest achievements in 2019 for Sipchem is the completion of an equal merger

between Sahara Petrochemical Company and Saudi International Petrochemical Company. The transaction

was concluded in May 2019 and we have made tremendous progress over the past months in achieving our

goals of building a unified and flexible company capable of generating significant benefits. All this would

not have been possible without the dedication of the company's employees and their continued efforts to

achieve further successes.

Sipchem will continue to be a reliable local and global supplier of petrochemicals, and will continue to work

towards the goals of Kingdom Vision 2030 and provide the best service to clients. By enhancing operational

efficiency, increasing economic returns, improving performance and empowering human resources,

Sipchem contributes to stimulating growth, progress and prosperity in the Kingdom. We will continue to

work to achieve a sustainable balance between our clients' current and future petrochemical demands

through close cooperation with our local and international partners and the adoption of a practical and

reliable operating strategy.

Since its foundation in 1999, as a leading technology company, Sipchem has been keen to place

environmental responsibility at the heart of its business, resulting in becoming the first petrochemical

company in the Kingdom to hold a "responsible care" certificate. Sipchem was also awarded the "Best Work

Environment" award in the Kingdom in 2010. In 2006, Sipchem became a public listed company, generating

revenues exceeding SAR 5 billion in 2019 with more than 1,662 employees from around the world. Another

unprecedented achievement of Sipchem is its inclusion in the MSCI Emerging Markets Index in 2019, which

in turn has increased the number of qualified foreign investors by more than 8%.

Sipchem's success and development depends heavily on the efforts and dedication of its employees, and we

will continue to develop our human capital to remain an active contributor to the growth of the national

economy for the coming decades.

In conclusion, I would like to take this opportunity to express on my own behalf and on behalf of the Board

of Directors our deepest thanks and gratitude to all shareholders for their trust and support for the company's

activities. We also would like to extend our thanks to all the company's employees, contractors and suppliers

for their commitment to support the company's efforts to grow despite all the challenges. We ask Almighty

God to help us realize more achievements under the unlimited support of the government of the Custodian

of the Two Holy Mosques and His Royal Highness his Crown Prince, May God bless them, in the coming

years, God willing.

Khalid A. Al-Zamil

Chairman

The Company's Merger Transaction

In 2019, the Board of Directors recognized the importance of implementing the equal merger between Sipchem and Sahara considering the benefits that this merger will bring to each party; the merger will contribute to creating additional value for shareholders in the long term through the possibility of integrating the expertise and skills of the two companies to achieve many gains, enhancing the competitiveness of the petrochemical sector at the regional and global levels, as well as taking advantage of promising investment opportunities and local and international partnerships for both Sipchem and Sahara. Sipchem will continue to play an important role as a key partner in achieving the kingdom's ambitious aspirations for the future of economic development by offering a more diversified product portfolio to achieve future expansion, enhancing the performance of the petrochemical sector by increasing the size and flexibility of the sector, as well as achieving many commercial, operational and functional benefits. In addition, Sipchem will support efficiency, productivity, growth and prosperity within the Kingdom and abroad, drawing on its extensive customer base and taking advantage of Sipchem's international presence in marketing the product portfolio.

The transaction effectively represented a merger with the main objective scoring a strong and diversified company capable of achieving global leadership in the petrochemical sector. This merger comes in line with the objectives of the Kingdom’s Vision 2030 to establish a strong economic entity resulting from the merger of two Saudi companies to ensure the strengthening of the Kingdom's position as a key player in the global petrochemical industry, and the merger will further strengthen our efforts to focus on the core strengths of the two companies, providing new opportunities for growth and enhancing our ability to meet the needs of our current and future clients, both inside and outside the Kingdom, to meet the expectations of all of us.

The first ever petrochemical deal between two petrochemical companies in Saudi Arabia, Saudi International Petrochemical Company (Sipchem) and Sahara Petrochemical Company (Sahara) on May 16, 2019, is a historic deal; the merged group is expected to create significant value for its shareholders in cost and revenue, as it is consistent with the aspirations of KSA Vision 2030, in terms of the private sector's prosperity in Saudi Arabia.

8

First: Sipchem and its Affiliates:

DESCRIPTION OF SIPCHEM ACTIVITIES:

1999 Establishment Date:

Joint Stock Company Company Type

Riyadh – Saudi Arabia Headquarters

SAR 7,333,333,320 Capital

Petrochemical & Chemical Industries, Basic

and Intermediate Company Activity

733,333,32 Number of shares

Sahara International Petrochemical Company (Sipchem) is one of the Saudi public shareholding companies listed on the Tadawul (Saudi Capital Market). Sipchem is actively investing in basic and intermediary petrochemical and chemical materials that can be utilized as feedstock for manufacturing of a vast array of products that provide prosperity and welfare for humans. Sipchem is committed to implementing its activities in compliance with the highest quality standards whether in its products or maintaining the integrity of the surrounding environment or the safety of its employees generally. Sipchem selected Jubail Industrial City, located in the Eastern Province of Saudi Arabia, to establish its industrial complex for the production of various petrochemical and chemical materials because of the availability of all required basic infrastructure, the abundance of raw materials and necessary petrochemical products in the Eastern Province and the ease of export operations via King Fahd Industrial Port. In 2019, the company’s manufacturing existing facilities produced 4.4. Net income amounted at SAR 299.5 Million compared with SAR 583 Million in 2018 with a decrease of 48.6 which is attributed to decrease of sales revenues during this year comparing with the previous year as a result of the low sales prices of most of the company’s products despite the increase of sold volumes of methanol during this period after completing the plant’s turnaround project and the decrease of average prices of some feedstock. In addition to this, Sahara contributed to 7-month profits after the merger deal. It is worth mentioning that Sipchem’s plants occupy one million seven hundred sixty six thousand nine hundred and fifty nine square meters in the basic industries area in Jubail Industrial City. The company’s strategy, planned to be implemented in gradual stages, aims at achieving integration of the current and future chemical products to create a chain of value products. Such strategy will participate in increasing the domestic production and support the industrial development within the frame of the comprehensive development plans implemented by the kingdom, which at the end help maximizing the shareholders’ profitability.

%

%

Other Investors Zamil Holding Company

Second: DESCRIPTION OF SIPCHEM’S AFFILIATES: (Cont’d):

International Methanol Company (IMC)International Diol Company (IDC)

2002Establishment Date:2002Establishment Date:

Limited Liability CompanyCompany TypeLimited Liability CompanyCompany Type

Jubail Industrial City – Saudi ArabiaHeadquartersJubail Industrial City – Saudi ArabiaHeadquarters

SAR 360,970,000CapitalSAR 431,250,000Capital

Production of MethanolCompany ActivityProduction of Butanediol (BDO) Maleic

Anhydride (MAn) Tetrahydrofuran

(THF) Butanediol (BDO)Company Activity

970 thousand mtpaCapacity

%

%

Sipchem Arabian Methanol Company

%

%

%

%

%

%

%

Sipchem Public Pension Agency

GOSI Abdullatif AlBabtin & Partners

Astra Huntsman

Davi Process Technology

10

DESCRIPTION OF SIPCHEM’S AFFILIATES: (Cont’d):

International Vinyl Acetate Company (IVC)Sahara Petrochemical Company

2006Establishment Date:Establishment Date:

Limited Liability CompanyCompany TypeCompany Type

Jubail Industrial City – Saudi ArabiaHeadquartersHeadquarters

SAR 676,000,000CapitalCapital

Production of Vinyl Acetate MonomerCompany Activity

Company Activity

330 thousand mtpaCapacity

%

%

%

Sipchem Helm of Germany Supreme Endowments Council

%

Sahara International Petrochemical Company - Sipchem


Al WAHA Petrochemical Company – AL

WAHA

International Acetyl Company (IAC)

2006Establishment Date:Establishment Date:

Limited Liability CompanyCompany TypeLimited Liability CompanyCompany Type

Jubail Industrial City – Saudi ArabiaHeadquartersJubail Industrial CityHeadquarters

SAR 1,660,000,000CapitalCapital

Production of Propylene and

PolypropyleneCompany Activity

Production of Acetic Acid (AA) and

Acetic Anhydride (AAn)

Company Activity

Capacity Capacity

%

%

Sahara Petrochemical Company

Basell Arabie Investissements S.A.S

%

%

%

Sipchem Helm of Germany Supreme Endowments Council

12

DESCRIPTION OF SIPCHEM’S AFFILIATES: (Cont’d): Tasnee & Sahara Olefins Company (TSOC)International Gases Company (IGC)

Sahara Petrochemical Company owns indirectly 24.41 of Tasnee & Sahara

Olefins Company (TSOC)>

32.55%60.45 %

7%

Shara Petrochemical Company - Sahara

National Industrialisation Company - Tasnee

GOSI

%

%

Sipchem Supreme Endowments Council


Saudi Ethylene and Polyethylene Company

(SEPC)Sipchem Marketing Company

%

%

Tasnee & Sahara Olefins Company - TSOCBasellMoyen Orient Investissements SAS

%

Sipchem

14


Saudi Monomer Acrylic Company (SAMCO)

Saudi Acrylic Acid Company (SAAC)

Hanwa of S outh Korea

%65

%

13%

TSOCSahara Petrochmical CompanyNational Industrilisation Company (Tasnee)



International Polymers Company (IPC) International Utilities Company (IUC)

Hanwa of S outh Korea

%

20%

20%

20%

20%

IMC IDC IAC IVC IGC

16

Based on Sahara Petrochemical Company’s ownership

percentage in TSOC which is 43.16 %, Sahara holds

indirectly additional ownership percentage of 32.37%,

in SAAC

Based on Sahara Petrochemical Company’s ownership

percentage in TSOC which is 32.55 %, Sahara holds

indirectly additional ownership percentage of 21.16,

thus is reflected in Sahara’s total equity to be 43.16%.

Sahara & Ma'aden Petrochemical Company

(SAMAPCO)Sipchem Chemical Company (SMC)

%

%

Sahara Petrochmical Company

Saudi Arabian Mining Company - Ma'aden

%

5%

Sipchem Sipchem Marketing Company


Sipchem Europe Cooperative UA and its

Subsidiaries CompanyPromising Business Company

%

%

Sipchem Sipchem Chemical Company - SMC

%100


18


Saudi Acrylic Polymer Company (SAPCO)Gulf Advanced Cable Insulation Company (GACI)

%75

%

Saudi Acrylic Acid Company (SAAC)Evonik of Germany

%%

Sipchem Hanwa Chemical of Korea

By virtue of Sahara’s aggregate 43.16% equity

stake in SAAC, Sahara owns an indirect equity

stake of 32.37% in SAPCO.


Saudi Specialized Products Company

(Wahj)

Sipchem Asia Pte Ltd

%

%

Sipchem Hanwa Chemical Co. of Korea

%

Sipchem

20


Saudi Butanol Company (SABUCO)Khair Inorganic Chemical Industries

33.3%

33.3%

33.3%

Sadara Chemical Company Saudi Acrylic Acid Company

Saudi Kayan Company

30%

70%

Sahara Petrochemical Company Other Investors


Sahara Marketing Company (SMC)Saudi Advanced Technologies Company

%


%

Sipchem

By virtue of Sahara’s aggregate 43.16% equity

stake in SAAC, Sahara owns an indirect equity

stake of 14.38% in the Company.

22

Second: Major Events during 2019:

January

- Sipchem announces starting the commercial operation of the ethylene vinyl acetate plant.

- Sipchem announces the date and mechanism to distribute dividends to its shareholders for the second

half of 2018.

- Sipchem announces starting the scheduled periodic maintenance of the International Diol Company

(IDC) plant.

February

- Sipchem announces starting the scheduled maintenance of the polybutylene terephthalate (PBT)

plant.

- Sipchem announces the annual financial results for the period ended 31 December 2018.

- Sipchem announces organizing teleconference with the financial analysts and investors to discuss the

annual financial results for the period ended 31 December 2019.

March

- Addendum announcement from Sipchem regarding the operation of the polybutylene terephthalate

(PBT) plant.

- Addendum announcement from Sipchem regarding the operation of the International Diol

Company’s plant.

- Addendum announcement from Sipchem regarding the equal merger with Sahara Petrochemical

Company (Sahara).

- Sipchem announces the resignation of the deputy chairman and the managing director.

- Sipchem announces the resignation of the CEO and assigning an acting CEO.

- Sipchem announces inviting its shareholders to attend the ordinary general assembly meeting (First

Meeting).

April

- Sipchem announces the appointment of a board of directors member.

- Sipchem announces the appointment of the CEO and the managing director.

- Sipchem announces the completion of the equal merger with Sahara Petrochemical Company

(Sahara).

- Sipchem announces inviting its shareholders to attend the ordinary general assembly meeting First

Meeting – Reminder Announcement.

- Sipchem announces the results of the ordinary general assembly meeting (First Meeting)

- Sipchem announces the interim financial results for the period ended 31 March 2019 (Three

Months).

- Sipchem announces inviting its shareholders to attend the 12th extra-ordinary general assembly

meeting (First Meeting).

- An announcement from Sipchem regarding publishing the offer document related to the submitted

offer to purchase all shares issued by Sahara Petrochemical Company in return for new shares in

Sipchem.

- Sipchem announces the publishment of the shareholder’s circular related to the increase of its capital

to acquire all shares of Sahara Petrochemical Company (Sahara) (the Transaction).

May


financial results of first quarter 2019.

- Sipchem announces the starting of e-voting on Agenda items of the Extra-Ordinary General

Assembly Meeting (First Meeting).

- Sipchem announces of the completion of the merger transaction with Sahara Petrochemical

Company and changing the company name.

- Sipchem announces the resignation and appointment of the members of the board of directors, the

head of the auditing committee and the head of the remunerations and nominations committee.

- Sipchem announces the appointment of the deputy chairman.

- Sipchem announces the appointment of the CEO and the President of Operations.

June

- Sahara International Petrochemical Co. Announces Sipchem announces signing primary Hydrogen

Supply Agreement with SASREF.

- Sipchem announces scheduled shutdown of the acetic acid and mono vinyl acetate plants.

- Sipchem announces signing of one of its affiliates (SAMAPCO) financing agreements with a number

of local banks to substitute the current loan.

July

- Addendum announcement from Sipchem regarding scheduled periodic maintenance turnaround for

the mono vinyl acetate plant.


the mono carbon dioxide plant.

- Sahara International Petrochemical Co. announces its concise consolidated primary financial

statements for three months and the six months Period Ending on 30 June 2019.

- Sahara International Petrochemical Co. announces its primary consolidated Financial Results for

three months and the six months Period ending on 30 June 2019.

August


selected production units.


interim financial results for the period ended 30 June 2019

- Sahara International Petrochemical Company (Sipchem) announces a curtailment of supplies of

some feedstock for some of its subsidiaries.

24

September

- Sipchem announces the opening of nominations for Board of Directors membership new term.

- Sahara International Petrochemical Company (Sipchem) announces a curtailment of supplies of

some feedstock for some of its subsidiaries.

- Addendum Announcement from Sipchem regarding curtailment of feedstock supplies for some of its

subsidiaries.

- Sipchem announces Board Approval for dividend distribution for first half period of 2019.

- Sahara International Petrochemical Company (Sipchem) announces resume of supplies of some

feedstock for some of its subsidiaries to its normal levels.

October

- Sahara International Petrochemical Company (Sipchem) announces the death of its Chairman, Eng.

Abdulaziz bin Abdullah Al-Zamil, May God Bless him.

- Addendum Announcement from Sipchem regarding the Date and Mechanism for Dividends

Distribution to Shareholders for First Half of 2019.

- Sahara International Petrochemical Company (Sipchem) announces board member appointment.

- Sahara International Petrochemical Company (Sipchem) announces the Consolidated Interim

Financial Results for the Period Ended on 30 September 2019 (Three Months and Nine Months).

- Sahara International Petrochemical Company (Sipchem) announces Chairman appointment.

November


interim financial results for the period ended 30 September 2019

- Sipchem announces inviting its Shareholders to Attend the (First Meeting) Ordinary General

Assembly Meeting.

December

- Sipchem announces the starting of e-voting on Agenda items of the Ordinary General Assembly

Meeting (First Meeting).

- Sahara International Petrochemical Company (Sipchem) and Linde announced on signing initial

terms to establish a strategic partnership.

- Sahara International Petrochemical Co. Announces the Results of the Ordinary General Assembly

Meeting, ( First Meeting )

- Sahara International Petrochemical Company (SIPCHEM) announces its plan to purchase its shares.

- Sipchem Announces the Appointment of The Chairman of The Board, Vice Chairman and Formation

of The Board’s Committees for the New Term.

- Sipchem announces that one of the companies it owns 30% of its shares through its fully owned

subsidiary (Sahara Petrochemical Company) has obtained Shariah compliant Credit Facility from Al-

Inma Bank and Al Bilad bank.

https://www.sipchem.com/en/News-Media-Releases/Media-Releases/Media-Release-Detail/Id/1139

https://www.sipchem.com/en/News-Media-Releases/Media-Releases/Media-Release-Detail/Id/1139

Third: Sipchem’s Strategy After the equal merger, Sipchem worked on the continuation of construction with what has been

accomplished in the two combined companies, which are Saudi International Petrochemical

Company and Sahara Petrochemical Company and benefit from their expertise, to start again in

terms of what we ended up with to higher and broader horizons. Therefore, Sipchem has been keen

on setting its plans for short and long term future goals and objectives

In the short-term plans, Sipchem was keen to focus on the success of equal integration and the

continuity of production operations at the highest levels with the highest standards of safety,

security and the environment. Therefore, it is very important to focus in the first stage after the

integration on its success so that the new Sipchem launches on a solid and firm basis with fixed

steps.

According to this strategic plan, Sipchem has developed initiatives, programs and goals for the

success of this merger at all levels and in all the company's sites, and work is still ongoing until

achieving all the goals of this merger, God willing

Parallel to that and in the long-term perspective, Sipchem has started working on building a

comprehensive strategic plan for the next stage, as it has set a framework for doing so. According

to this strategic framework, Sipchem set in late 2019 what the company aspires to be in the future

(the company's vision), namely:

"To be a leader in achieving growth, excellence and building partnerships in the chemical industry."

It also specified its purpose and the purpose for its existence, which is:

"Achieving a positive and continuous impact by providing sustainable, innovative and high quality

products through our advanced capabilities and the enthusiasm of our employees."

This long-term strategic plan is based on three main themes:

1. Institutional capital, which includes enthusiastic and motivated human capital with high

capacity and constantly growing, is the real capital, the president and the information capital

that forms the backbone of the company.

2. High internal efficiency in terms of internal processes, continuing to improve its

sustainability, adapting to customer requirements and market variables, and creating an

environment that stimulates innovation and excellence.

3. A strong, stable and growing financial environment that, along with other axes, supports

Sipchem's relentless pursuit of growth at the local, regional and global levels.

Plans and future prospects for the company's business

Growth and development is one of the main pillars of Sipchem's vision and mission after

the equal merger.

The company continues to explore various investment opportunities by taking advantage of

the synergies created by the merger by increasing the capacity of existing plants, reducing

costs and developing new projects that include acquisitions and mergers in and out of KSA,

26

increasing the company's various products, enhancing profitability and creating new

sustainable hob opportunities.

Fourth: Sipchem Technology and Innovation Center (MANAR):

The center was opened in 2015 with the main purpose of focusing on product development activities and applications that support the Sipchem’s approach and create added value to the polymer products and its clients. In 2019 the center was expanded with the addition of a new department that focused on the development of chemical processes, evaluation of catalysts, and enhanced reliability in processes to achieve operational excellence.

With the merger, The Sipchem Technology and Innovation Center (Manar) has also been instrumental in expanding its services and development research to include all subsidiaries of the company; the researches enhance the global competitiveness of Sipchem and its affiliates by developing chemical processes aimed at increasing profits and reducing the company's operational costs.

In addition, in 2019, the MANAR began research cooperation with research entities and centers inside and outside KSA and this openness will contribute to increasing research outputs, expanding the research infrastructure, improving the environment of innovation and knowledge exchange.

• King Abdulaziz City for Science and Technology.

• King Fahd University of Petroleum and Minerals.

• Global Chemical Catalyst Experiments Company.

MANAR has also strengthened its visibility locally, regionally and internationally by participating in a number of sustainable forums.

In July 2019, the Center hosted an IP workshop and in November 2019 the Center hosted a technical seminar for the plastics industry aimed at enhancing cooperation and technical services. In 2019, the Center held the Sipchem Technology and Innovation Forum in its third session successfully under the theme "Preserving Innovation", with a focus on promoting innovation, technical achievements and intellectual property development.

Fifth: Sustainability

Sustainability is firmly rooted in our strategy, so we strive to continue our efforts to continuously improve our performance. We share our commitments and performances on economic, social and environmental sustainability with our shareholders and customers in a transparent manner.

Following the merger and to ensure our commitment to sustainable development, achieving our goals and applying best practices, a "Responsible Care and Sustainability" committee was formed in 2019, bringing together internal stakeholders from various departments led by the CEO to monitor and review sustainability and safety matters.

We believe that community service is an individual and collective responsibility to promote communities, and we seek to develop relationships based on the principle of sustainability between the company and society by creating and promoting a culture of social responsibility in all of the company's business. The Community Service Committee in Sipchem is responsible for achieving our social goals and is keen to spread our work in all regions of the Kingdom. Our social initiatives focus on health and environmental care, education and cultural programs, social and sports care, as well as entrepreneurship and volunteering. To achieve our social goals, we allocate 1% of our net profit to the implementation of social initiatives. Our programs covered more than 75% of Saudi Arabia and reached more than 1 million beneficiaries. In 2019, Sipchem contributed more than SAR 6 million to serve the community, with Sipchem being awarded the King Khalid Award for Sustainability and Social Responsibility, which honors and supports private sector enterprises that embrace sustainable development and social responsibility practices and initiatives and place them at the heart of their business strategies and competitiveness.

We seek to improve our operations across the supply chain, and we are creating opportunities to make these processes time-efficient and cost-effective for us and our stakeholders. In 2019, Sipchem launched a new initiative that has brought many chemicals to Jubail through collaboration with local chemical companies. The initiative integrated chemical companies' containers with Sipchem’s containers, through joint shipping contracts, resulting in faster shipping of materials and reduced the price of shipping to everyone. In addition, the integration of cargo reduced the number of ships arriving in Jubail, thus avoiding carbon emissions if each party chartered a private vessel for its materials. The initiative has gone beyond monetary benefit and has had a positive impact on the environment and efficiency of the import process.

As for the environmental aspect, and in accordance with environmental laws and regulations, we have succeeded in achieving one of our environmental objectives, namely, that there is no undue environmental violation. We have also implemented several environmental initiatives, including waste management and

28

recycling initiatives such as the use of plastic platforms manufactured from recycled materials, environmental compliance study, and our work with the Royal Commission for the dissemination of environmental awareness among the younger generation.

Finally, Sipchem is committed to continuing to strengthen its entrepreneurial position and day-to-day business so that we can achieve better results in all aspects of economic, social and environmental sustainability in the years to come.

Sixth: Risk Management RISKS RELATED TO SIPCHEM AND ITS AFFILIATES BUSINESS:

Enterprise Risk Management (“ERM”) is a strategic business discipline that supports the

achievement of an organization’s objectives by addressing the full spectrum of its risks and

managing the combined impact of those risks as an interrelated risk portfolio.

ERM represents a significant evolution beyond previous approaches to risk management in that

it:

1. Encompasses all areas of organizational exposure to risk (financial, operational, reporting,

compliance, governance, strategic, reputational, etc.);

2. Prioritizes and manages those exposures as an interrelated risk portfolio rather than as

individual “silos”;

3. Evaluates the risk portfolio in the context of all significant internal and external

environments, systems, circumstances, and stakeholders;

4. Provides a structured process for the management of all risks, whether those risks are

primarily quantitative or qualitative in nature;

5. Views the effective management of risk as a competitive advantage; and

6. Seeks to embed risk management as a component in all critical decisions throughout the

organization.

Development and Implementation of Enterprise Risk Management:

The main objective of Enterprise Risk Management is risk reduction and avoidance in addition to

identification of risks faced by the business and optimization of risk management strategies. The

Company has also adopted COSO, a well-defined Risk Management framework. The Company has

constituted a Risk Management Committee which will assists the Board in developing,

implementing, monitoring and reviewing the Risk Management Plan.

Sipchem Enterprise Risk Management Process:

Enterprise risk management is a continuous process that is accomplished throughout the life cycle

of a system. It is an organized methodology for continuously identifying and measuring the

unknowns; developing mitigation options; selecting, planning, and implementing appropriate risk

mitigations; and tracking the implementation to ensure successful risk reduction. Effective risk

management depends on risk management planning; early identification and analyses of risks;

early implementation of corrective actions; continuous monitoring and reassessment; and

communication, documentation, and coordination.

The Enterprise Risk Management Process Model

The risk management process model (see below) includes the following key activities, performed on a

continuous basis:

Sipchem Risk

Management Model

Risk Tracking

Risk Identification

Risk Analysis

Risk Mitigation Planning

Risk Mitigation Plan

Implementation

30

RISKS RELATED TO SIPCHEM AND ITS AFFILIATES BUSINESS:

1. Risks of Manpower

Due to the large petrochemical projects in Saudi Arabia and GCC, Sipchem or its affiliates may not be able to retain key employees or may not continue to attract key personnel with skills and experience, which could result in a shortage of skilled labour or constitutes an obstacle to the company's ability to maintain the necessary human resources.

2. Products Prices Risks Sipchem works in international products markets in which it sells or intends to sell its products, and the prices of these products move mainly by global supply and demand factors. They are affected by fluctuations in world prices for oil and gas. Therefore, any significant change in the market conditions and oil and gas prices might affect the company's future prospects. The oil and gas markets are historically volatile, is currently less than historic levels.

3. Funding Risks Sipchem relies essentially on its ability to secure loans from commercial banks and non-commercial bodies to finance current and future projects that require large capital investments or to contribute to the financing of its projects. But if the company or its affiliates in the future fails to get funding or unable to meet the current funding obligations (including compliance with commitments and the ratios), the financial performance of the company or its ability to expand their business may be affected negatively

4. Feedstock Supply Risks

Sipchem got from Saudi Aramco commitments for supply and delivery of natural gas and some other raw materials to its affiliates on the procedures applicable to the Saudi Aramco for the purchasing companies for those products in the Kingdom. There are limits of Saudi Aramco's commitment to control the supply of natural gas and other raw materials. If either Sipchem’s affiliate does not receive the agreed quantity of natural gas or other raw materials, by Saudi Aramco or other parties or the parties raise the price value of raw materials, it is likely to affect negatively in a substantial company. If the parties have been unable to provide the raw materials required to fulfill their obligations, Sipchem’s affiliate will not be able to produce planned quantities of petrochemical products and cannot fulfill their obligations relating to sales, which would adversely affect the performance of Sipchem.

5. Technology Risks Petrochemical industry technologies and processes are evolving continuously worldwide. Hence, any substantial technical development may make the techniques and processes currently used by any of Sipchem’s affiliate non-competitive and may negatively affect Sipchem’s competitiveness position. The company has worked to try to reduce this risk through proven techniques from leading global companies in the petrochemical industry.

6. Operational Risks

The Plants’ operation without interruption depends largely on the performance of the validity and reliability of machinery and equipment used in manufacturing products. Therefore, any interruption or malfunction of sudden or unexpected in such machinery, equipment or work inefficiently, or disrupt or halt any part of the production process may lead to a reduced level of efficiency of the plant and delayed production. Sipchem’s affiliates implement the periodic maintenance programs and training courses for their employees, in addition to the appropriate insurance coverage to reduce these risks and their consequences.

7. Projects Integrity Risks

Due to the implementation of the strategy products integration, this may result in interdependence and complementarity between the performances of affiliates. Current and future projects, that are interrelated, are at risk of shortages in the supply of raw materials in the event that any of the affiliates fails to fulfill the obligations of other affiliates, which in turn could adversely and substantially on the operational performance of the concerned affiliate company or on the company's performance.

8. Construction & Completion Risks

When developing new projects the company hires contractors and vendors that believes they are known and have a high reputation for building plants and manufacturing facilities, but the danger of skipping the estimated cost and delay in completion due to the reliance on third parties to create and accomplish projects could negatively affect the company's operations and financial position.

32

9. Off-take Agreements Risks

Sipchem’s affiliates concluded a number of agreements on long-term off-take agreements with various parties regarding the sale of their products. Accordingly, as long as the affiliated companies meet their obligations under these contracts, the affiliates remain vulnerable to the risk of long-term supply agreements. In addition, in the event of default the purchaser or failure to fulfill its obligations, the financial performance of the company may be affected negatively as a result.

10. Off-Insurance Risks

Sipchem and its affiliates maintains what it believes is sufficient to cover the various stages of the projects being implemented as well as its operations. However, there is no confirmation that the insurance cover would be sufficient in all cases. For example, future events may not have sufficient insurance coverage, or may not be covered by insurance, thus affecting the company and its affiliates.

11. Exchange Rate Risks

Any negative change of any of the USD Dollar, Euro or other currencies shall have detrimental effect on the company’s results. As the payment of the products value or the EPC contracts with foreign suppliers is in US Dollar or Euro, any exchange rate fluctuation of these currencies versus the Saudi Riyal could have a material adverse effect on the company’s. Accordingly, Sipchem adopted some preventative procedure to reduce the impact of exchange rate fluctuation rate risks.

12. Environmental Risks: The company and its affiliates are subject to environmental protection laws and regulations applicable in Saudi Arabia including general law of environment and its implementing regulations, and the environment regulations of the Royal Commission for Jubail and Yanbu. Regulations require general law environment report on the environmental effects of projects under the requirements of licensing and approval procedures by the General Presidency of meteorology and environment protection, Ministry of Commerce and Industry.

General law regulations also allow for fines and penalties due to the emission of dangerous or toxic materials and impose a fine and damages arising from any wrongdoing. Sipchem and its affiliates’

projects were designed, built, and operated in accordance with the regulations of the general system of environment and the Royal Commission for Jubail and Yanbu regulations. Sipchem obtained required approvals and applying appropriate waste treatment systems and prevention of accidents procedures. However, the discovery of environmental conditions previously unknown, or the issuance of stricter environmental standards than the General Presidency of meteorology and environment protection or the Royal Commission for Jubail and Yanbu or impose new regulations or changes in the interpretation of laws and regulations could lead to the company decision to apply additional actions, which may lead to increased costs and obligations of the company.

13. Competition Risks

The markets in which Sipchem sells its products are highly competitive in general and subject to the forces of supply and demand on a global level. As these markets are characterized by a high degree of volatility, added that many new companies entered the market competition with other companies undertook significant expansions in production capacities in order to benefit from the opportunities of quantitative economy and cost savings through the intensification of production, such as raising levels of supply and competition in the market. Therefore, the higher levels of competition and volatility may lead to excess global production capacity, which the company may accumulate stocks substantially lower sales prices or in some case.

14. Laws and Regulations Risks

Sipchem works in an organized environment, which is subject to specific regulations. So far, in principle, these regulations include the requirement to obtain a license to operate and therefore, in the event of any change in these systems (including issuance and imposing new regulations), the company may be adversely affected and may have to incur significant capital expenditures to comply with these statutory changes.

15. Production and Transportation of Hazardous Materials

Sipchem’s production processes include the processing of natural gas and other gases, raw materials (including chemical raw materials) to produce petrochemicals. Petrochemicals production processes

34

make gases and waste materials resulting from the inherently hazardous materials highly inflammable. The nature of production processes of Sipchem exposed to high risks of incidents involving explosions and fires. Also, the company's operations are vulnerable to operational risks which are common in the petrochemical sector, including interruption of feed voltage, or technical malfunctions or other accidents.

16. Investments Related Factors:

As the economic and legal environment in Saudi Arabia remains subject to constant change, investors faced uncertainty with regard to ensuring their investments. The company's operations are exposed to common risks, including supervisory control development, inflation, changes in disposable income or GDP, changes in commission rates, and levels of economic growth, and other similar factors. Many of these factors are beyond the control of the issuer. Many social or economic developments in the Kingdom or neighboring countries or other countries in the region may lead to a substantial negative impact on business, financial position, results of operations and cash flows.

Seventh: Corporate Governance

1. Board of Director

A. Composition of the Board of Directors:

Sipchem has the privilege of having a highly experienced Board of Directors with full relevant knowledge to explore the appropriate opportunities that help develop the company’s core business activities. The Board is composed of eleven members elected by the General Assembly Meeting on 08/12/2019.

The board members are devotedly and sincerely performing their duties for the company and its shareholders’ interest not for the benefit of a specific group. The boards of directors’ main duties are as follows:

• Develop the company’s main policies, strategies and objectives and supervise their implementation and reviewing periodically and ensure the adequate availability of human and financing resources necessary to achieve them, including:

❖ Lay the company’s comprehensive strategy, work procedures, and risk management policy

in addition to its review and direction. ❖ Determine the capital structure most appropriate for the company’s strategy and financial

objectives, and approving annual budgets. ❖ Supervise the capital expenditures of the company and manage assets ownership. ❖ Lay the performance objectives and monitor their implementation and the company’s total

performance. ❖ Conduct periodic review of the organizational and functional structures of the company

and approve them. ❖ Ensure the adequate availability of human and financing resources necessary to achieve

the company’s main plans.

• Develop internal supervision systems and controls, including: ❖ Written policy to address actual and potential conflicts of interest of the members of the

Board of ❖ Directors, the Executive Management and the shareholders, including misuse of the

Company assets and facilities, and misconduct resulting from transactions with related parties.

❖ Ensure the integrity of financial and accounting systems, including relevant financial reporting systems.

36

❖ Ensure that appropriate risk management and risk management systems are in place by providing a general overview of the risks that the company may face and establishing a risk management environment at the company level and transparently communicating with stakeholders and stakeholders.

❖ Annual review of the effectiveness of internal control procedures in the company.

• Establish clear and specific policies, criteria and procedures for membership in the Board of Directors not to contradict the mandatory provisions of these Regulations - and to put them into effect after the approval of the General Assembly.

• Develop a written policy governing the relationship with stakeholders according to the provisions of these regulations.

• Develop policies and procedures to ensure that the Company complies with the rules and regulations and its obligation to disclose the material information of shareholders and stakeholders and to verify compliance by the executive management.

• Supervising the management of the company finances, cash flows, and financial and credit relations with others.

• The proposal of the Extraordinary General Assembly regarding what it considers to: ❖ Increase or decrease the company capital ❖ Dissolution of the Company before the term specified in the Company Articles of

Association or its or deciding its continuity. • The proposal of the Ordinary General Assembly as to the following:

❖ The use of the company contractual reserve in case it is formed by the extraordinary general assembly and not allocated for a specific purpose.

❖ Formation of additional reserves or financial allocations to the Company. ❖ Method of distributing the net profits of the company • Preparing and approving the annual and annual financial statements of the company

prior to its publication. • Prepare and approve the report of the Board of Directors prior to its publication • Ensure the accuracy and integrity of data and information to be disclosed in accordance

with applicable disclosure and transparency policies and procedures. • Establish effective channels of communication that will allow shareholders and investors

to have continuous and periodic access to the various aspects of the company activities and any significant development.

• The composition of specialized committees emanating from him shall be determined by decisions specifying the duration, powers and responsibilities of the committee and how the board shall supervise them. The formation decision shall include naming the members and determining their duties, rights and duties, and evaluating the performance and work of these committees and their members.

• To determine the types of bonuses granted to the employees of the company, such as fixed bonuses, performance-related bonuses and bonuses in the form of shares, so as not to interfere with the regulatory controls and procedures issued to implement the system of companies of listed companies.

• Setting the values and standards governing the work in the company.

B. Classification of Directors:

Members are classified according to the definitions in Article 2 of the Corporate Governance Regulations issued by the Capital Market Authority of the Kingdom of Saudi Arabia.

Membership StatusCommissionNameS

Non-executiveChairmanEng. Khalid A. Al-Zamil (Representative of Zamil

Group Holding Company)1

Non-executiveVice ChairmanMr. Fahad S. Al-Rajhi2

Non-executiveMemberDr. Abdulrahman A. Al-Zamil3

Non-executiveMember

Eng. Reyadh S. Ahmed (Representative of Ikarus

Petrochemical Holding Company)4

Non-executiveMemberEng. Saeed A. Basamah5

IndependentMember

Mr. Saeed O. Al-Esayi6

IndependentMemberEng. Yousef A. Al-Zamil7

Independent MemberMr. Ayidh M. Al-Qarni (Representative of the Public

Pension Agency)8

Independent MemberMr. Ziad A. Al-Turki9

Independent MemberMr. Bandr A. Masoudi (Representative of GOSI)10

Independent MemberMr. Abdulaziz A. bin Dayel11

38

C. Experiences of Directors and Board Committees in Current and Previous Companies:

The following pages show the experiences of directors and Board Committees members in Current and Previous Companies:

Eng. Khalid A. Al-Zamil

(Representative of Zamil Group Holding Company)

Membership

Status Commission EducationalQualification Date ofBirth Nationality

Non-ExecutiveChairman

Board of DirectorsBachelor of Engineering1948Saudi

Place Legal Entity Field Experiences Current BoardMemberships

Inside KSAClosed Joint Stock CompanyServices – Trade –

Industry – Investment Chairman – Zamil Group Holding Co.

Inside KSAPublicly List Joint Stock

CompanyIndustryChairman – Zamil Industrial Investment Co.

Inside KSALimited Liability CompanyIndustryChairman – Middle East Batteries Co.

Inside KSALimited Liability CompanyIndustryLuberef Company

Place Legal Entity Field Experiences PreviousBoardMembership

- - - -

Mr. Fahad S. Al-Rajhi

Membership


Non-ExecutiveVice ChairmanBachelor of Industrial Management28/02/1960Saudi



CompanyIndustry Vice Chairman – Yanbu Cement Co.

Inside KSAClosed Joint Stock CompanyTradeChairman – Alrajhi Ekhwan Co.

Inside KSAClosed Joint Stock CompanyIndustryVice Chairman – National Industrialization

Co..

Inside KSAClosed Joint Stock CompanyFinancial ServicesBoard Member – Musharka Capital Co.

Inside KSA Limited Liability Company Industry Board Member - Saudi German Company for

Non-woven Products (SGN)

Inside KSA Limited Liability Company Petrochemicals Board Member – International Methanol Co.

Inside KSA Closed Joint Stock Co. Trade Board Member – Watania Poultry Co.

Inside KSA Limited Liability Company Industry Chairman - Bischof + Klein Middle East

Company

Inside KSA Closed Joint Stock Co. Food Board Member - National Aquaculture

Company

Inside KSA Publicly Listed Joint Stock Co Petrochemicals Member of the Executive Committee -

Sipchem

Inside KSA Publicly Listed Joint Stock Co. Petrochemicals Member of Nominations & Remunerations

Committee - Sipchem


Inside KSA Publicly Listed Joint Stock Co. IndustryBoard Member – Yanbu Cement Company

40

Eng. Reyadh S. Ahmed

(Representative of Ikarus Petrochemical Holding

Company)

Membership

Status Commission EducationalQualification

Date of

Birth Nationality

Non-ExecutiveBoard MemberBachelor of Chemical Engineering

Master Degree – Mechanical Engineering1971Kuwaiti


Outside KSAPublicly List Joint Stock

CompanyFinancial ServicesChairman – Meezan Bank


Company

Financial ServicesChairman - Privatization Holding Company


Company

Financial ServicesBoard Member – Noor Financial Investment

Co. (NOOR)

Outside KSAClosed Joint Stock CompanyOil & Gas

Chairman - Ikarus Petrochemical Holding

Company

Outside KSA Closed Joint Stock Company Manufacturing

Chairman - Middle East for Engineering,

Electronic & Heavy Industries Co.

Outside KSA Closed Joint Stock Company Information

Technology Chairman – IT Partners Co.

Outside KSA Publicly List Joint Stock

Company Electricity limitedBoard member - K Electric

Inside KSA Publicly List Joint Stock

Company Petrochemicals

Member of the Executive Committee -

Sipchem


Outside KSA Publicly Listed Joint Stock Co. Electricity

Board Member – Karachi Electric Supply

Corp.

Outside KSA Closed Joint Stock Co. Oil & Gas

Vice Chairman – Oil & Gas Filed Solutions

Co.

Outside KSA Closed Joint Stock Co. Oil & Gas

Board Member - Saja'a Gas Private Ltd,

(SajGas)

Outside KSA Limited Liability Company Oil & Gas Board member – United Gas Supply Company

Outside KSA Closed Joint Stock Co. Stones Board member – Kuwaiti Stones Company

Outside KSA Closed Joint Stock Co. Oil Services

Board member - Eastern United Petroleum

Services (EUPS)

Eng. Yusef A. Al-Zamil

Membership


IndependentBoard MemberBachelor of Chemical Engineering1953Saudi



CompanyPetrochemicals

Board Member – Sahara International

Petrochemical Co. (Sipchem)

Inside KSALimited Liability CompanyInvestmentBoard Member – Alinma Consultancy Firm

Inside KSALimited Liability CompanyInvestmentChairman of Nomination & Remuneration

Committee – Akinma Consultancy Firm


Company

Petrochemicals &

Fertilizers

Board Member – Saudi Arabian Fertilizers

Company (Safco).


Company

Petrochemicals Chairman of the Executive Committee –

Sahara International Petrochemical Co.

(Sahara)


Outside KSA Limited Liability Company Petrochemicals &

Fertilizers

Vice Chairman – Gulf Petrochemical

Industries Co.

Inside KSA Limited Liability Company Petrochemicals

Chairman - Saudi Petrochemicals Company

(SADAF)

42

Mr. Saeed A. Basamah

Membership


Non-ExecutiveBoard MemberBachelor of Business

Administration1968Saudi


Inside KSAClosed Joint Stock CompanyHealthcareBoard Member – International Medical

Center

Inside KSAClosed Joint Stock CompanyHealthcare

Executive Committee Member – International

Medical Center

Inside KSAClosed Joint Stock CompanyChemical IndustriesBoard Member – Khair Inorganic Chemical

Industries

Inside KSAClosed Joint Stock CompanyChemical IndustriesAudit Committee Member - – Khair Inorganic

Chemical Industries


Company

Food Production Board Member – Saudi Dairy Products & Food

Company (Sadafco)


Company

Petrochemicals Nomination & Remuneration Committee

Member – Sahara International Company

(Sahara)

Inside KSA Closed Joint Stock Company Real Estate Investment Board Member – Jeddah Urban Development

Company


Dr. Abdulrahman A. Al-Zamil

(Representative of Zamil Group Holding Company)

Membership


Non-ExecutiveBoard MemberBachelor of Law

PhD – International Relations1943Saudi


Inside KSALimited Liability CompanyIndustryChairman – Saudi Advanced Technologies

Company


Inside KSA Unlisted Joint Stock Company Trade Chairman – Zamil Group Holding Co.

Inside KSA Listed Joint Stock Company Industry

Chairman – Zamil Industrial Investment

Co.

Inside KSA Listed Joint Stock Company Petrochemicals

Board member – Sahara International

Petrochemical Co.

Inside KSA Closed Joint Stock Company EnergyChairman – National Power Company

Inside KSA Unlisted Joint Stock Company Transportation

Chairman – National Marine

Transportation Co.

44

Mr. Ayidh M. Al-Qarni

(Representative of the Public Pension Agency)

Membership


IndependentBoard Member

Bachelor of Accounting

Master Degree – Business

Administration

1979Saudi


Inside KSAPublicly Listed Joint Stock Liability

CompanyPetrochemicals

Auditing Committee Member – Sahara

International Petrochemical Company

Inside KSA Publicly Listed Joint Stock Liability


Executive Committee Member – Sahara



Mr. Saeed O. Al-Esayi

Membership


IndependentBoard MemberBachelor of Industrial

Management1956Saudi


Inside KSAListed Joint Stock Liability

CompanyCement ManufacturingBoard Member - Yanbu Cement Company

Inside KSA Unlisted Joint Stock Liability

Company Trade

Chairman – Omar Qasim Al-Esayi Group

& Partners

Inside KSA Publicly Listed Joint Stock Liability


Executive Committee Member - Sahara



Inside KSAListed Joint Stock CompanyPetrochemicals

Board Member – Sahara Petrochemical

Company

46

Mr. Ziad A. Al-Turki

Membership


IndependentBoard MemberDiploma of Social Sciences1965Saudi


Inside KSALimited Liability CompanyTrade & ContractingChairman – Sons of A. A. Turki Co.

Inside KSA Limited Liability Company

Trade & Contracting Chairman - A. A. Turki Group of

Companies

Inside KSA Limited Liability Company Soil booting

contracting Chairman - Keller Turki Ltd


Industrial Services Vice Chairman - Redland Arab Industrial

Services Co., Ltd


Construction Chairman - The Finance Company For

Construction Ltd

Inside KSA Limited Liability Company Control Systems Vice Chairman of Honeywell Turki Arabia

Outside KSA Limited Liability Company Marine Services Chairman - Atco Marine Services

Inside KSA Limited Liability Company Real Estate &

Investment

Chairman, Tamam Intergraded Trading

Ltd.


Exhibitions Board Member – Dhahran International

Exhibitions Company

Inside KSA Publicly Listed Joint Stock


Nomination & Remuneration Committee

Chairman – Sahara International

Petrochemical Co.


Inside KSALimited Liability CompanyContracting

Vice Chairman - Chairman - A. A. Turki

Group of Companies

Inside KSA Limited Liability Company Marine ServicesBoard member – ATCO Marine Services

Inside KSA Limited Liability Company Environmental

Services

Board member – Ramky Risal

Environment Services

Outside KSA Limited Liability Company InvestmentBoard Member – Samba Capital

Inside KSA Limited Liability Company Construction

Chairman – Saudi United Construction

Company

Mr. Bandr A. Masoudi

Membership


Non-ExecutiveBoard Member

B.A. Science & Statistics

B.A. Computer Science

M.D. Computer Science

1979Saudi





Member – Sahara International

Petrochemical Co.


48

Mr. Abdulaziz A. bin Dayel

Membership


IndependentBoard MemberB.A. Business Administration1976Saudi



Company Agriculture

Board Member – Tabuk Agricultural

Company


Company Agriculture


Member - Tabuk Agricultural Company




Chairman – Sahara International

Petrochemical Co.


JeddahPublicly Listed Joint Stock

Company

Public Relations &

Marketing

Board Member – Tihama Advertising, PR

& Marketing Co.

RiyadhClosed Joint Stock Co.Public Relations &

MarketingBoard Member – Adart Media Co.

JeddahClosed Joint Stock Co.Public Relations &

MarketingBoard Member - Ogel V

JeddahClosed Joint Stock Co.Public Relations &

MarketingBoard Member - Intermarkets

RiyadhN/APublic Relations &

Marketing

Member – Advertising/Information

Committee, Riyadh Chamber of

Commerce

RiyadhClosed Joint Stock Co.FoodBoard Member – Resources Food

Company

A. Attendance Record of Board Meetings: The Board of Directors of Sahara

International Petrochemical Company held six meetings during 2019. During these

meetings, there were discussions about the most significant and prominent activities and projects related to the company. The table below shows the

attendance record for each Board member, noting that members who did not attend any Board meeting appointed other members to attend on their behalf.

The table of Sahara International Petrochemical Company’s Board

Meetings for 2019

s/n Name

21

/4

/2

01

9

16

/5

/2

01

9

28

/5

/2

01

9

25

/9

/2

01

9

8/

12

/2

01

9

12

/1

2/

20

19

Total attendance

1 H.E. Eng. Abdulaziz A. Al-Zamil (God

bless his soul) 1

2 Eng. Khalid A. Al-Zamil - - - - 2

3 Mr. Fahad S. Al-Rajhi 6

4 Dr. Abdulrahman A. Al-Zamil 6

5 Mr. Bander A. Masoudi 6

6 Mr. Ayedh M. Al-Qarni 6

7 Mr. Ziad A. Al-Turki 5

8 Eng. Reyadh S. Ahmed 5

9 Mr. Saeed Omer El-Esayi 3

10 Eng. Yousef A. Al-Zamil 1

11 Mr. Saeed A. Basamah 1

12 Mr. Abdulaziz A. bin Dayel 1

13 Dr. Ahmed F. Aldhayan 3

14 Mr. Rashid S. Al-Ghurair 2

15 Mr. Khaled A. Al-shwuier 3

16 Mr. Ibrahim H. Al Mazyad 2

17 HE Dr. Abdulrahman A. Al-Jafary 2

18 Dr. Sami M. H. Zaidan 2

19 Eng. Abdullah S. Al-Saadoon 1

Total attendance percentage 89%

Attendance Absent - Non-member

50

d. A description of any interests held by the Board members,

their wives and their adolescent children in the shares or debt

instruments of the Issuer:

s/n Name

Shares on

1 JAN 2019

Shares on

31 Dec. 2019

Net

ch

an

ge

% o

f

ch

an

ge

Ow

nersh

ip o

f

first-

deg

ree

rela

tives a

nd

its c

han

ge

Number Ownership

% Number

Ownership

%

1 Eng. Khalid A.

Al-Zamil

0 0% 334,240 0.04558% 334,240.0 334239%

-

2 Dr. A. A. Al-

Zamil* 83,892 0.023 1,036,852 0.14139%

952,960.0

1136% -

3 Eng. Yousef

A. Al-Zamil 30,684 0.008% 42,973 0.00586%

12,289.0

40%

4 Mr. Fahad S.

Al-Rajhi* 6,200,000 1,69% 6,500,000 0.8864%

300,000.0

5% -

5 Mr. Saeed O.

El-Esayi * 889,602 0.243% 7,269,212 0.9913

6,379,610.0 717% -

6 Eng. Reyadh

S. Ahmed 0 0% 0 0%

-

-

7 Mr. Abdulaziz

A. bin Dayel 0 0% 0 0%

-

-

8

Mr. Saeed

Ahmed

Basamh

0 0% 0 0%

-

-

9 Mr. Ziad A. Al-

Turki 1,000 0% 0 0%

1,000.0 -100% -

10 Mr. Ayidh M.

Al-Qarni 0 0% 0 0%

-

-

11 Mr. Bander A.

Masoudi 0 0% 0 0%

-

-

12 Dr. Ahmed F.

Aldhayan * 0 0% 23,365 0.0032

23,365.0 23365%

13

Mr. Rashid

Saif Al-

Ghurair

0 0% 0 0%

-

14 Mr. Khaled A.

Al-Shwuier 0 0% 1 0%

1.0

15 Mr. Ibrahim

H. Al Mazyad 48 0% 48 0%

0 0

16

HE Dr.

Abdulrahman

A. Al-Jafary *

31,900.00 0.0001 130,000 0.0177

98,100.0 308%

17 Dr. Sami M. H.

Zaidan 500 0% 500 0

- 0%

18 Eng. Abdullah

S. Al-Saadoon 0 0% 40,000 0.0055

40,000.0 40000%

https://www.tadawul.com.sa/wps/portal/tadawul/market-participants/issuers/issuers-directory/company-details/!ut/p/z1/lZJdb4IwFIZ_yy64tYciirvDisKQOlSc9saUjSEJUIMo8d9b2WI2o8z1runzfpyTIoaWiOX8kMS8TETOU3lfsc6a2mNig4HdkTXXwOwMPDKlDgYA9FYDGBND7bVhPHJoF0zftBfDhUShjdgjerhzTHhMf8mHcVeVwAgc32tr4Gv_1F_1N_DfelYjTRuogaYRmx30b-DSAmw8kC0s1x0QHUNfv3a4sYXGCDnmSu6h-yNiTocSWExI37PcAGM0O3uYlE4CSizPovM1Dby-NUUrvdNTVfSCWJyK8OvPbMpy-6yAAiX_4NU-VeSQPM8JL9FSvQe8i2zL8-PsmIVCumBNhTNq5qFmxIgV0WdUREVrX8jHs35XG1RV1YqFiNOoJQ2Um5KN2Mng3ySa8QJtsyAIlpA4yWuWrb1SD49aeoifTg4xCVA!/

https://www.tadawul.com.sa/wps/portal/tadawul/market-participants/issuers/issuers-directory/company-details/!ut/p/z1/lZJdb4IwFIZ_yy64tYciirvDisKQOlSc9saUjSEJUIMo8d9b2WI2o8z1runzfpyTIoaWiOX8kMS8TETOU3lfsc6a2mNig4HdkTXXwOwMPDKlDgYA9FYDGBND7bVhPHJoF0zftBfDhUShjdgjerhzTHhMf8mHcVeVwAgc32tr4Gv_1F_1N_DfelYjTRuogaYRmx30b-DSAmw8kC0s1x0QHUNfv3a4sYXGCDnmSu6h-yNiTocSWExI37PcAGM0O3uYlE4CSizPovM1Dby-NUUrvdNTVfSCWJyK8OvPbMpy-6yAAiX_4NU-VeSQPM8JL9FSvQe8i2zL8-PsmIVCumBNhTNq5qFmxIgV0WdUREVrX8jHs35XG1RV1YqFiNOoJQ2Um5KN2Mng3ySa8QJtsyAIlpA4yWuWrb1SD49aeoifTg4xCVA!/

19

H.E. Eng.

Abdulaziz A.

Al-Zamil (God

bless his

soul)

186,600 0.0005 0 0%

186,600.0 -100%

* Percentage of change in the ownership of shares yields to the acquisition deal dated 16 May

2019.

e. A description of any interests held by the Senior Executives, their

wives and adolescent children in the shares or debt instruments of the

Issuer:

s/n Name

Shares on

1 JAN 2019

Shares on

31 Dec. 2019

Net

ch

an

ge

% o

f

ch

an

ge

Ow

nersh

ip o

f

first-

deg

ree

rela

tives a

nd

its

ch

an

ge

Number Ownership

% Number

Ownership

%

1 Eng. Saleh M.

Bahamdan * 0 0% 67,273.00 0.0092% 67,273.00 67273% -

2 Eng. Abdullah S. Al-

Saadoon * 0 0% 40,000 0.0055 40,000 40000% -

3 Mr. Rushdi K. Al-Dulijan 0 0% 0 0% - - -

f. A description of any interest held by principal owners in the equity

class:

s/n Name

Shares on

1 JAN 2019

Shares on

31 Dec. 2019

Net

ch

an

ge

% o

f ch

an

ge

Number Ownership

% Number

Ownership

%

1 Al-Zamil Group Holding

Company * 35,549,375 9,70 64,560,572 8,8037 29,011,197 82%

* Percentage of change in the ownership of shares yields to the acquisition process dated 16 May

2019.

g. A description of any interest in the class of shares belonging to persons who have notified the company of these rights:

No person has notified the Company of any interest in the category of voting shares belonging to persons (other than directors and senior executives and their spouses and minor children) during 2019.

52

h. Controls of Membership Rewards in the Board and the Committees

The Nomination and Remuneration Committee shall recommend to the Board of Directors the remuneration of the members of the Council and the members of the committees, as follows:

❖ The company takes into consideration the harmony of the rewards with the company strategy and objectives.

❖ Taking into account the practices of other companies and what is prevalent in the labor market in determining the rewards, while avoiding the resulting unjustified rise of rewards and compensations and within the limits stipulated by the Companies Law and its Implementing Regulations

❖ The remuneration shall be reasonably sufficient to attract the members of the Board of Directors with the appropriate competence and experience.

❖ The remuneration should be fair and commensurate with the terms of reference of the member and the duties and responsibilities of the members of the Board of Directors or committees, in addition to the objectives set by the Board of Directors to be achieved during the fiscal year.

❖ Remuneration of directors may vary in size to reflect the proportion of responsibilities assigned to the member and other considerations.

❖ Members of the Board of Directors may not vote on the remuneration of directors at the General Assembly meeting of shareholders.

❖ The Company shall disclose the remuneration of Board members, committees and senior executives in the annual report of the Board of Directors in accordance with the relevant regulations. The report of the Board of Directors shall include in the General Assembly a comprehensive statement of all remuneration, allowances and other benefits received by the members of the Board during the fiscal year. As well as to indicate what members of the Board have been held as employees, administrators or whatever they have received for technical, administrative or consulting work. It shall also include a statement of the number of meetings of the Council and the number of meetings attended by each member from the date of the last meeting of the General Assembly.

i. Mechanism of remuneration of members of the Board of Directors

and members of committees

❖ The Articles of Association of the Board of Directors shall determine the remuneration of the

❖ members of the annual board of directors. The regulations of the committees shall determine the remuneration and allowances of their members to suit the nature of the company business.

❖ The bonus must be on the recommendation of the Nomination and Remuneration Committee of the Company.

❖ Board members and committees are rewarded based on their participation in the meetings and the number of meetings they attend.

❖ The attendance allowance and other benefits related to the meetings of the Council and the relevant committees shall be paid immediately after each meeting. The annual remuneration of the Council shall be paid in full after its approval by the General Assembly.

j. Details of the remuneration of members of the Board of Directors and members of the subsidiary committees

❖ Directors Remuneration

- The Board of Directors shall determine, based on the recommendation of the Nomination and Remuneration Committee, the remuneration of the annual Board of Directors and its committees.

- The members of the Board of Directors shall be entitled to a certain amount or attendance allowance for meetings, benefits in kind or a certain percentage of net profits. Financial or in kind amount of 500 thousand Saudi Riyals in accordance with the provisions of the Companies Law and its regulations and in accordance with the regulations set by the competent authorities. If the remuneration of directors is a percentage of profits, this percentage shall not exceed 10%.

- Board members who reside outside the Company headquarters, whether inside or outside the Kingdom, are entitled to compensation for travel costs to attend board meetings.

54

- These costs include a round trip ticket from the place of residence to the venue of the meeting as well as the costs associated with accommodation, transportation and attendance allowance.

- Upon the recommendation of the Nomination and Remuneration Committee and after the approval of the Board of Directors, the Board of Directors shall be entitled to an annual remuneration of not more than SR300 thousand in return for its membership in the Board in accordance with the eligibility mechanism set forth in Article 4 of this Policy.

- Upon the recommendation of the Nomination and Remuneration Committee and after the approval of the Board of Directors, the member of the Board of Directors participating in the committees emanating from the Board shall be entitled to an annual remuneration not exceeding SR 100,000 in return for his membership in the committees of the Board whether the member is a participant in one or more committees, including the Audit Committee membership remuneration in accordance with the eligibility mechanism set forth in Article IV of this Policy.

- On the recommendation of the Nomination and Remuneration Committee, the Chairman of the Board shall determine the remuneration of membership in the committees in which the member is appointed from outside the Board of Directors, not exceeding SR 100,000.

- The Board may, at the recommendation of the Nomination and Remuneration Committee, review the annual remuneration of the member of the Board of Directors referred to above from time to time in the light of the variables related to the performance, provided that the remuneration of the board member shall not exceed the amount of SR 500,000 In accordance with the provisions of the Companies Law and its regulations and in accordance with the regulations set by the competent authorities.

❖ Article 6: Remuneration of Senior Executives (Executive Management)

- The Board of Directors shall determine the types of bonuses awarded to senior executives of the Company on the recommendation of the Nominations and Remuneration Committee, such as fixed bonuses, performance-related bonuses and incentive bonuses, consistent with the regulatory regulations and regulations issued by the joint stock companies.

- The Nomination and Remuneration Committee reviews the incentive plans for senior executives on a continuous basis and submits the recommendation to the Board for approval.

- Rewards aim to provide the competitive edge required to attract and retain competent and qualified employees and maintain the high level of skills needed by the company.

k. Remuneration the Board Members

Fixed remunerations Variable remunerations

Certa

in a

mo

un

t

Att

en

dan

ce

all

ow

an

ce f

or

meeti

ng

s

Su

m o

f

att

en

dan

ce

all

ow

an

ce f

or

co

mm

itte

es’

meeti

ng

s

In

-kin

d b

en

efi

ts

Rem

un

erati

on

s

for t

ech

nic

al,

ad

min

istr

ati

ve

an

d c

on

su

ltin

g

wo

rks

Rem

un

erati

on

s

of

the C

hair

man

,

Man

ag

ing

Dir

ecto

r o

r

secreta

ry if

a

bo

ard

mem

ber.

To

tal

Percen

tag

e o

f

pro

fits

Perio

dic

al

aw

ard

s

Sh

ort

-term

incen

tive p

lan

s

Lo

ng

-term

incen

tive p

lan

s

Gran

ted

sh

ares

To

tal

En

d-o

f- s

ervic

e

gratu

ity

Gro

ss t

ota

l

Exp

en

ses

all

ow

an

ces

(tr

an

sp

ort

ati

on

,

acco

mm

od

ati

on

)

Khalid A. Al-Zamil 6,000 6,000 6,000 3,558

Abdulrahman A. Al-Zamil 18,000 18,000 300,000 300,000 318,000

Yousef A. Al-Zamil 3,000 3,000 3,000

Fahad S. Al-Rajhi 18,000 27000 45,000 400,000 400,000 445,000

Saeed O. Al-Esayi 9,000 9,000 9,000 11,260

Reyadh S. Ahmed 15,000 9000 24,000 300,000 300,000 324,000 22,552

Abdulaziz A. bin Dayel 3,000 3,000 3,000 1,100

Saeed A. Basmah 3,000 3,000 3,000

Ziad A. Al-Turki 15,000 15000 30,000 350,000 350,000 380,000 10,296

Ayidh M. Al-Qarni 18,000 9000 27,000 400,000 400,000 427,000 3,615

Bander A. Masoudi 18,000 18000 36,000 400,000 400,000 436,000 3,615

* Ahmed F. Al-Dhayan 9,000 9,000 9,000 7,116

* Rashid S. Al-Ghurair 6,000 6,000 6,000 25,450

* Khaled A. Al-Showier 9,000 9,000 9,000 10,674

* Ibrahim H. Al Mazyad 6,000 6,000 400,000 400,000 406,000

Abdulrahman A. Al-Jafary* 6,000 18000 24,000 400,000 400,000 424,000 7,160

* Sami M. H. Zaidan 6,000 18000 24,000 400,000 400,000 424,000 10,160

* Abdullah S. Al-Saadoon 3,000 6000 9,000 9,000 * Abdulaziz A. Al-Zamil (God bless his soul)

3,000 3000 6,000 250,000 250,000 256,000

* Ahmad A. Al-Ohali 3000 3000 400,000 400,000

Total 174,000 126,000 300,000 4,000,000 4,000,000 4,300,000 116,556

- Board members do not receive any in-kind benefits or remunerations for any technical, administrative or consulting works. - Each member in the Auditing Committee shall receive an amount of SR 100,000. This is not included in the maximum amount of the remuneration of 500,000

according to the provisions of the Companies Law. * His membership was ended during 2019.

I. Remunerations of Senior Executives - Five of Senior Executives who have received the highest remunerations from the company, including CEO and CFO.

Fixed remunerations Variable remunerations

En

d-o

f- s

ervic

e g

ratu

ity

To

tal

rem

un

erati

on

s o

f

Bo

ard

Execu

tives,

if a

ny

Gro

ss t

ota

l

Sala

rie

s

All

ow

an

ces

In

-kin

d b

en

efi

ts

To

tal

Perio

dic

al aw

ard

s

Pro

fits

Sh

ort

-term

in

cen

tive p

lan

s

Lo

ng

-term

in

cen

tive p

lan

s

Gran

ted

sto

cks (

In

sert

the

valu

e)

To

tal

Remunerations of Senior

Executives 8,018,296.99 3,082,578.78 11,100,875.77 1,405,876.00 1,893,625.35 106,200 3,405,701.35 3,653,748.00 18,160,325.12

Total 8,018,296.99 3,082,578.78 11,100,875.77 1,405,876.00 1,893,625.35 106,200 3,405,701.35 3,653,748.00 18,160,325.12

J. Rewards of Committee Members

TotalFixed Rewards

(Attendance

Allowance)

Attendance Allowance Periodic

Rewards

Audit Committee

Members

9,000 9,000 Ayidh Al-Qarni

118,000 18,000 100,000 Mohammed Al-Nader

3,000 Mohammed Al-Zahrani

115,000 15,000

100,000 *Mr. Ibrahim H. Al-Mazyad

115,000 15,000

100,000 *Mr. Abdulsalam N. Abaoud

360,000 60,000300,000Total

Executive Committee

Members

0 0 0 **Yousef Al-Zamil

109,000 9000 100,000 Fahad Al-Rajhi

109,000 9000 100,000 Ayidh Al-Qarni

9000 9000 0 Riyadh A. Salem

0 0 0 ** Saeed Al-Esayi

6000 6000 0 *Abdullah Al-Sadoon

103,000 3000 100,000 Ahmed Al-Ohali *

3000 3000 0 *Abdulaziz Al-Zamil

339,000 39000 300,000 Total

Nomination &

Remuneration

Committee

65,000 15000 50,000 Ziyad Al-Turki

18,000 18000 0 Fahd Al-Rajhi

118,000 18000 100,000 Bandar Masoudi

0 0 0 Saeed Basmah

0 0 0 Abdulaziz bin Dayel

118,000 18000 100,000 *Abdulrahman Al-Jafary

118,000 18000 100,000 *Sami Zaidan

437,000 87000 350,000 Total *Not A Member

** New Member

K. The Actions taken by the Board of Directors to inform its members, especially non-

executives, of the shareholders’ proposals and their remarks about the company and its

performance

Except for the queries in the extraordinary General Assembly, dated April 2019, no further

inquiries or observations regarding the Company and its performance have been received by

the Company. The Investor Relations Department meets with shareholders and investors

throughout the year to review the latest developments of the company. The CEO and Chairman

of the Board of Directors shall inform the Board of Directors of the proposals, observations

and opinions of shareholders and investors through periodic Board meetings without the

presence of any Executive Member if necessary. Article 37 of the Articles of Association of

the Company provides procedures to ensure that all shareholders have the right to discuss

matters, request information and ask questions to the members of the Board of Directors and

Auditors. The Chairman and members of the Board of Directors shall respond to all inquiries

concerning the Company business.

2. Board of Directors Committees

A. Audit Committee

The Committee is composed of three members, one of whom is an independent member of the

Board of Directors. The other two members are nominated from outside the Board of Directors

with the expertise that qualifies them to participate actively in the work of the Audit Committee.

❖ Terms of reference, powers and responsibilities of the Committee:

The Audit Committee shall be responsible for monitoring the Company business and verifying

the integrity and integrity of its financial statements and internal control systems. The Committee

shall have the right to access the Company records and documents and request any clarification

or statement from the members of the Board of Directors and the executive management. It shall

have the right to request the board of directors to call for the general assembly meeting. Its

functions include the following:

First: Financial Reports:

- Review the financial statements and statements of the company and its declarations

regarding their financial performance before submitting them to the Board of Directors, to

ensure their fairness, and transparency.

- Provide the technical opinion, at the request of the Board of Directors, whether the Board’s

report and the financial statements of the Company are fair, balanced and understandable

and include information that allows shareholders and investors to evaluate the position or

financial position of the company and its performance, model and strategy.

- Examine any important or unusual issues including the financial reports and accounts.

- Look closely at any matters raised by the Company’s CFO, or who perform his duties or the

Compliance Officer of the Company or the Auditor.

- Check accounting estimates on material issues in the financial reports.

- Study the accounting policies adopted by the company and provide an opinion and

recommendation to the Board of Directors in this regard.

Second: Internal Audit:

- To study and review the internal control, financial and risk management systems of the

Company.

- Study the internal audit reports and follow up the implementation of the corrective

actions of the observations contained therein.

- Supervise and monitor the performance and activities of the internal auditor and the

internal audit department of the company, if any, to verify the availability of the

necessary resources and their effectiveness in the performance of the tasks and tasks

entrusted to them.

- Make a recommendation to the Board on the need for the appointment of the head of

internal audit, and propose his remunerations.

Third: Auditor:

- Recommending to the Board of Directors to appoint auditors, isolate them, determine their

fees and evaluate their performance, after ascertaining their independence, reviewing the

scope of their work and the terms of their contract.

- Verification of the auditor’s independence and position, and the effectiveness of audit work,

taking into account relevant rules and standards.

- Review the audit plan of the company and its business, and verify that it does not submit

technical or administrative works that are outside the scope of the audit work.

- Answer the inquiries of the company auditors.

- Studying the auditor’s reports and observations on the financial statements and following

up on what has been taken.

Fourth: Ensuring Commitment:

- Review the results of the reports of the regulatory bodies and verify that the company takes

the necessary procedures.

- Check the company compliance with relevant instructions or remove, regulations and

policies.

- Review the contracts and transactions proposed by the company with the related parties and

submit what they see to the Board of Directors.

- To submit to the Board of Directors the issues it deems necessary to take actions and to

make recommendations on the steps that are required to be taken.

Fifth: Audit Committee Powers:

To enable the committee perform its functions, it shall have the rights to:

- Unrestricted access to members of the administration and employees and related

information it considers necessary for the performance of its duties.

- Unrestricted access to records, data and reports.

- Communicate and obtain information from external parties.

- Discuss relevant matters with the external auditor and other external parties.

- Request the presence of persons from the senior management in the meetings of the internal

audit committee.

- Request and receive any explanatory information it deems necessary to carry out its

responsibilities. Sipchem’s management and staff must cooperate with the requests of the

Internal Audit Committee.

- Seek the assistance of an independent advisory committee and / or other consultants as the

committee deems necessary for the performance of its duties, as well as the right to obtain

the legal or professional advice necessary to fulfill its responsibilities.

- Ask the board of directors to call the general assembly of the company to convene if the

board of directors hindered its work or the company was exposed to severe damage or losses.

Sixth: Audit Committee Meetings:

- The internal audit committee meets at least four times during the fiscal year and a special

meeting is held to review the annual financial statements and the observations and proposals

of the company's external auditor.

- The chairman of the internal audit committee decides the need for additional meetings, and

committee members may submit requests to the chairman of the internal audit committee to

hold additional meetings according to their vision.

- The internal auditor and auditor may request meeting with the committee whenever the need

arises.

- The majority of its committee must attend to make its meeting valid, and its decisions are

issued by the majority of the attendees' votes.

- The committee member may not delegate another to attend the committee’s meetings, and

the committee member can attend the meetings in person, by phone, or by video, as required.

- The group's internal audit head is invited to attend all committee meetings, and the internal

audit committee may request the company’s financial manager, or whoever carries out his

duties, or any of the company’s managers to participate in some agenda items as well as the

external auditor.

- The committee may request members of the department, employees, external consultants,

external auditor, head of the group's internal audit, or others whose opinion and advice are

related to issues considered by the committee to attend any meetings and provide the

relevant information that they may request from them.

Seventh: Audit Committee conflicts with the Board of Directors:

- In cases of conflict of interest (if any), the member of the internal audit committee must

disclose any conflict (possible or actual) in the interests at the beginning of the meeting or

before discussing any related item or topic in the agenda. Details of the conflict of interest

status are recorded in the minutes the meeting.

- In the event of a conflict of interest cases (actual or potential), it is appropriate to exempt

the committee member from the committee’s deliberations regarding the situation in which

there may be a conflict of interest and the final ruling for making such decision is for the

chairman of the audit committee.

- If there is a contradiction between the recommendations of the audit committee and the

decisions of the board of directors, or if the board refuses to take the recommendation of the

committee regarding appointing and dismissing the company's auditor and determining his

fees and assessing his performance or appointing the internal auditor, the report of the board

of directors must include the committee’s recommendation and justifications, and the reason

for not taking it.

- There were no recommendations of the audit committee that conflict with the decisions of

the board of directors regarding appointing and dismissing the company's auditors,

determining its fees, assessing its performance or appointing the internal auditor.

❖ Members of the Audit Committee:

Position Name S

Committee ChairmanMr. Ibrahim H. Al-Mazyad 1

Committee MemberMr. Abdulsalam N. Abaoud 2

Committee MemberMr. Mohammad Farhan Al–Nader 3

Committee Member Mr. Ayidh M. Al-Qarni 4

Committee Member Dr. Mohammed F. Al-Zahrani 5

* Mr. Ibrahim Al-Mazyad's tenure as the committee chairman ended on 21/05/2019 and his membership ended on 08/12/2019. * * Mr. Abdulsalam Nasser Abaoud's membership ended on 08/12/2019. *** Mr. Ayidh M. Al-Qarni's membership started on 21/05/2019 **** Dr. Mohammed F. Al-Zahrani's membership started on 08/12/2019.

❖ Attendance of Audit Committee Meetings:

Total

Attendance

th6 th5 th4 rd3 nd2 st1 S 8/12/2019 22/10/21019 24/7/2019 21/4/2019 28/2/2019 21/1/2019

5 X Membership

expired Mr. Ibrahim H. Al-Mazyad 1

5 X Membership

expired Mr. Abdulsalam N. Abaoud 2

6 Mr. Mohammad F. Al–Nader 3

3

membership

started

Mr. Ayidh M. Al-Qarni 4

1

Membership

Started

Dr. Mohammed F. Al-Zahrani 5

❖ Functions of Audit Committee Members in Current and Previous Companies:

Professional Experience Qualification Previous Position Current PositionName S

Investment sector and banks

Master of

Business

Administration -

Bachelor of

Economics

Executive Vice

President for

Finance and

Management of

Arab Investment

Company

CEO of Arab

Investment Company

Mr. Ibrahim H. Al

Mazyad

1

Financial sector and financial

institutions

Bachelor of

Science in

Mathematics

Master of

Actuarial

Sciences

Chairman of the

Permanent

Privatization

Committee - Public

Pension Corporation

Assistant Director of

Actuarial Affairs

Allianz

Mr. Abdulsalam N.

Abaoud

2

Executive Partner of United Accountants Company Member of

RSM International Group

Bachelor of

Accounting

Chief Financial

Officer - Sulaiman Al

Rajhi Holding

Company

Executive Partner of

United Accountants

Company

Member of RSM

International Group

Mr. Mohammad F.

Al–Nader

3

Financial Sector and Financial

Institutions

Master of

Business

Administration

Bachelor of

Business

Administration

Financial

Investment

Department – Public

Pension Agency

Internal Audit

Department – Public

Pension Agency

Mr. Ayidh M.Al-

Qarni

4

- Supervisor of Investment –

Educational Program Fund

– KFPUM

Dean, Faculty of Industrial

Management – KFPUM

- Head of Financial

Department and Economics

– KFPUM

- Teaching Staff Member -

Financial Department and

Economics – KFPUM

- Board Member – Dhahran

Valley Technology – Saudi

Real Estate Refinancing Co.

– Investment Capital –

Saudi Fransi Bank –

Sipchem – National Sukuk

co.- Al-Ahli Takaful –

Lijam Sports Co. –

Agricultural Development

Fund – Waha Business Co.

Bachelor of

Financial

Management –

KFPUM

Master Degree,

Financial

Management –

Oklahoma –

USA

Chartered

Financial

Analyst

Dean, Faculty of

Industrial

Management –

KFPUM

General Supervisor

of Investment –

Educational

Program Fund -

KFPUM

Chairman – Dhahran

Valley Business

Services

Dr. Mohammed F.

Al-Zahrani

5

B. Nominations & Remunerations Committee

The Nomination and Remuneration Committee shall consist of five members of the Board of

Directors of the Company.

❖ Rules for selecting members of the Nomination and Remuneration Committee:

- The committee shall be formed by a decision of the company’s board of directors. Membership

begins with the beginning of the company's board of directors’ tenure and ends with the end of

the board of directors’ tenure.

- The number of its members is from three to five and should not be executive board members,

whether from shareholders or others, provided that at least one of them is an independent

member, and that the committee is chaired by an independent board member.

- The members of the committee choose from among them a chairman, provided that he is an

independent board member.

- Members of the committee must have appropriate experience and qualifications related to the

committee’s duties, responsibilities and nature of its work.

- If the position of one of the members of the committee becomes vacant, the board of directors

shall appoint a member of the vacant position, provided that he has experience and efficiency.

The Capital Market Authority (CMA) must be notified within the regular period from the date

of appointment.

- The company shall notify the CMA of the names of the members of the committee and the type

of their membership upon their appointment and any changes that may occur to their

membership within five working days from the date of the changes.

❖ The terms of reference, powers and responsibilities of the Committee

First: With regard to Rewards:

- Preparation of a clear policy for the remuneration of members of the Board of Directors

and the committees emanating from the Board and the executive management to enhance

the motivation of management of the administrative staff and maintain the distinguished

key-staff and present them to the Board of Directors for consideration in preparation for

adoption by the General Assembly, taking into account the policy to follow the criteria

related to performance, and its implementation.

- Clarify the relationship between the bonuses awarded and the applicable remuneration

policy and indicate any material deviation from this policy.

- Periodic review of remuneration policy, and evaluation of its effectiveness in achieving

its objectives.

- Recommending to the Board of Directors the remuneration of the members of the Board

of Directors, its committees and senior executives in accordance with the approved policy.

Second: With regard to Nominations:

- Propose clear policies and criteria for membership in the Board of Directors and Executive

Management.

- Recommending to the Board of Directors the nomination and re-nomination of members

in accordance with the approved policies and standards, taking into account the non-

nomination of any person who has already been convicted of breach of trust.

- Prepare a description of the capabilities and qualifications required for membership of the

Board of Directors and occupy the functions of executive management.

- Determining the time a member should allocate to the work of the Board of Directors.

- Annual review of the required skills or experience requirements for Board membership

and executive management functions.

- Review the structure of the Board of Directors, the Executive Committees and the

Executive Directorate and make recommendations on possible changes.

- To verify annually the independence of independent members and to verify that there is no

conflict of interest if the member is on the board of another company.

- Develop a functional description of executive members, non-executive members,

independent members and senior executives.

- The establishment of special procedures in the event of a vacancy in the membership of

the Board of Directors or senior executives.

- Identify weaknesses and strengths in the board of directors, and propose solutions to

address them in line with the company interests.

- The committee shall study the subjects that are assigned to it or referred to it by the Board

of Directors and submit its recommendations to the Board for decision.

❖ Meetings of the Nominations and Remuneration Committee:

- The committee meets periodically every six months at least, upon the invitation of the

committee chairman or two of its members.

- The committee meeting must be attended by the majority of its members to be valid, and its

decisions are issued by the majority of the attendees 'votes.

- The secretary of the committee prepares the meeting agenda, which is included in the

invitation in coordination with the committee chairman before the meeting.

- The Secretary of the Committee directs the invitation to attend the meeting before a

sufficient period of time for the session, and he sends a file and the necessary documents

well before the meeting with a sufficient period.

- No member of the board of directors or executive management, except for the committee's

secretary and members of the committee, has the right to attend its meetings unless the

committee requests to listen to his opinion or obtain his advice.

- The minutes of the committee's meetings are sent to the company’s board of directors.

- The committee chairman or his representative must attend the general assembly meetings to

answer the questions of the company's shareholders.

❖ Terms of reference, powers and responsibilities of the Committee's Chairman and Secretary:

First: The Committee Chairman:

- Inviting the committee to convene after coordinating with the committee members.

- Representing the committee before the board of directors.

- Review the agenda, taking into account the topics that a committee member wishes to add.

- Follow up and implement the committee’s decisions.

- Providing the correct information to the committee members to enable them to perform their

duties.

- Periodic evaluation of the performance of the committee

- Submit the committee's recommendations to the Board of Directors.

Second: The Committee Secretary

❖ Coordination with the chairman of the committee and a propose the agenda items.

- Providing committee members with an agenda and meeting file.

- Preparing the minutes of the committee meeting and documenting the meetings.

- Keeping documents and records issued by the committee.

❖ Allowances &Rewards:

According to the remuneration and compensation policy of the board of directors and the board

committees approved by the general assembly of the company.

❖ Members of the Nomination and Remuneration Committee:

Position Name S

Committee Chairman*Dr. Abdulrahman A. Al-Jafary 1

Committee MemberMr. Fahad S. Al-Rajhi 2

Committee Member*Dr. Sami M. Zaidan 3

Committee Chairman** Mr. Ziad A. Al-Turki 4

Committee Member Mr. Bander A. Masoudi 5

Committee Member*** Mr. Abdulaziz bin Ahmed bin Dayel 6

Committee Member*** Eng. Saeed Ahmed Basmah 7

❖ Attendance of the Nomination and Remuneration Committee Meetings:

Total

Attendance

th6 th5 th4 rd3 nd2 st1 S 8/12/2019 13/10/21019 19/9/2019 21/4/2019 24/3/2019 28/1/2019

6 Dr. Abdulrahman A. Al-

Jafary 1


6 Dr. Sami M. Zaidan 3



- ------Mr. Abdulaziz A bin

Dayel 6

- ------Eng. Saeed A. Basmah 7

X Didn't attend Attended - Not a member

Dr. Abdulrahman A. Al-Jafary's and Dr. Sami M. Zaida's membership ended on 21/05/2019 * * Mr. Ziad A. Al-Turki's membership as the committee chairman began on 21/05/2019. *** Membership of Mr. Abdulaziz A. bin Dayel and Saeed Ahmed Basmah began on 12/12/2019.

C. The Executive Committee

❖ Terms of reference, functions and responsibilities of the Committee:

- Study the issues referred to the committee by the board of directors and take appropriate

decisions regarding them according to the mandate of the board.

- The committee exercises the powers of the board based on the schedule of powers included

in the regulations and with regard to managing and directing the activities and work affairs

of the company, except for those matters that stipulate its delegation to other committees of

the board and matters that cannot be delegated by the board in accordance with the provisions

of the laws and applied regulations or under the provisions of the bylaws and a the articles

of associations.

- Preparing recommendations related to new projects and company investments and

submitting them to the Board of Directors.

- Preparing recommendations for strategic decisions related to the company's operational

priorities and submitting them to the Board of Directors.

- Acting on behalf of the Board of Directors and exercising all the powers of the board in

taking appropriate decisions that cannot be postponed to the scheduled session of the Board

meetings or difficult to take through the approved mechanism.

- Providing the Board of Directors with the minutes of the meeting containing a description of

all the decisions and recommendations taken by the committee.

- The committee periodically reviews and reassesses the suitability of these regulations, makes

the proposed amendments and submits them to the board.

❖ Members of the Executive Committee:

Position Name S

Committee Chairman***Eng. Yousef Abdulrahman Al-Zamil 1

Committee MemberMr. Fahad S. Al-Rajhi 2

Committee MemberEng. Reyadh S. Ahmed 3

Committee Member Mr. Ayidh M. Al-Qarni 4

Committee Member *** Eng. Saeed Omar Al-Esayi 5

Committee Member Eng. Abdullah Saif Al-Sadoon 6

Committee Member* Eng. Ahmed Abdulaziz Al-Ohali 7

Committee Chairman* H.E. Eng. Abdulaziz A. Al-Zamil (May All bestow His Mercy on him) 8

* Attendance of the Executive Committee Meetings:

Total

Attendance

rd3 nd2 st1 Name S

21/4/2019 24/3/2019 28/1/2019

Chairman Eng. Yousef Abdulrahman Al-Zamil 1



3 Mr. Ayidh M. Al-Qarni 4

- Eng. Saeed Omar Al-Esayi 5

2 End of

Membership

Start of

Membership Eng. Abdullah Saif Al-Sadoon 6

1

End of

Membership

Eng. Ahmed Abdulaziz Al-Ohali

7

1 End of

Membership

H.E. Eng. Abdulaziz A. Al-Zamil (May All

bestow His Mercy on him) 8

Member - Not a member

* H.E. Eng. Abdulaziz A. Al-Zamil (May All bestow His Mercy on him) membership ended on 06/10/2019 * * Eng. Ahmed Abdulaziz Al-Ohali's membership ended on 24/03/2019. *** Eng. Yousef Abdulrahman Al-Zamil's and Eng. Saeed Omar Al-Esayi's membership began on 2/12/2019.

3. Board of Directors Declarations

The board of directors is keen to ensure the professional performance of Sahara International

Petrochemical Company (Sipchem) during the year 2019. Accordingly, the board of directors

confirms the following:

1. That the accounting records had been prepared correctly.

2. That the internal control system has been properly prepared and implemented effectively.

3. That there is little doubt in the company ability to continue its activity.

4. The consolidated financial statements have been prepared in accordance with the accounting

standards and regulations issued by the Saudi Organization for Certified Public Accountants

and in accordance with the relevant requirements of the Companies Regulations and the

Company Articles of Association regarding the preparation and publication of financial

statements.

5. There is no contract to which the Company is a party and where there is or is in the

fundamental interest of a member of the Board of Directors, CEO or CFO or any person related

to any of them.

6. There is no arrangement or agreement whereby a board member or a senior executive waives

any salary or compensation..

7. There is no arrangement or agreement whereby a shareholder of the Company waives any

rights in profits.

4. Board of Directors' Performance Assessment

The Nomination and Remuneration Committee is working currently on developing some

mechanisms to assess the performance of the board of directors, its committees and the

executive management to be applied during the next years.

5. Sanctions and Penalties

The company received a violation from the Capital Market Authority on June 27, 2019

regarding the company's failure to provide CMA with a number of information at the end of the

calendar year, and all necessary measures have been taken to avoid such violations in the future.

The company shall be supervised by any supervisory, regulatory or judicial authority.

6. Applied and Not-applied corporate governance regulations provisions

In implementation of the Corporate Governance Regulations issued by the Saudi Capital Market

Authority, Sahara International Petrochemical Company "Sipchem" has adopted all regulations,

policies and procedures that fall within the powers of the Board of Directors and the General

Assembly, as follows:

Regulation / Policy S

Audit Committee Regulation (General Assembly) 1

Company's main plans, policies, strategies and goals (Board of Directors)2

Regulations for the Nomination and Remuneration Committee (General Assembly) 3

Policies and standards for membership procedures in the Board of Directors (General Assembly) 4

Remuneration policy for members of the board of directors, committees emanating from the board

and executive management (General Assembly)5

Corporate Governance Rules (Board of Directors)6

Dividend Distribution Policy (General Assembly) 7

Risk Management Policies and Procedures (Board of Directors) 8

Conflict of Interest Management Policy for the members of the Board of Directors, executive

management and the stakeholders (Board of Directors) 9

Policy of organizing the relationship with stakeholders (Board of Directors) 10

The company's administrative and financial policies and powers delegated to the executive

management (Board of Directors) 11

Investments and Financing Policies and Mechanisms (Board of Directors) 12

Employee Remuneration Policy (Board of Directors)13

Work Procedures Policies in the Board of Directors (Board of Directors) 14

Professional Conduct Policy and Ethical Values (Board of Directors) 15

Policies and procedures to ensure that the company abides by the rules, regulations and disclosure

to shareholders and stakeholders (Board of Directors) 16

The company applies all the provisions mentioned in the Corporate Governance Regulations issued by the

Capital Market Authority (CMA) except for the provisions listed below

Clarifications Article TextArticle No.

The company implements programs aimed at sustaining social responsibility,

which have been focused in areas of concern to society. The company is

running its social activities based on a specific strategy in social responsibility

Social Responsibility (Guiding Article) 87

The Nomination and Remuneration Committee is currently working on

several mechanisms to evaluate the performance of the Board of Directors, its

committees and the executive management and their implementation in the

coming years

Assessments of Board Members ,

committees and the executive

management n(Guiding Article)

41

In 2017, the Board of Directors requested the Executive Committee to form

an internal committee to define the risks facing the company, study all issues

related to managing the company’s risks, and take appropriate decisions in

this regard. The Executive Committee is currently working on forming the

committee and the required policies and procedures

Risk management is an integral part of Sipchem's strategy, and the company's

management continuously reviews the company's policies related to risk

management to ensure the implementation of the approved policies and

programs in order to reduce the risks that the company can face and ensure

that the risk management processes and systems in use operate efficiently at

all levels of the company.

Risk Management Committee Formation

(Guiding Article) 70

Functions of the Risk Management

Committee (Guiding Article) 71

Meetings of the Risk Management

Committee (Guiding Article)72

The Compliance and Corporate Affairs Department develops and reviews

corporate governance rules, monitors their implementation, checks their

effectiveness, and modifies them when needed

Corporate Governance Committee

Formation (Guiding Article)95

During the year 2019, the Board was not notified of any competition actions,

and regarding the competition criteria, they will be presented to the General

Assembly for approval.

Corporate Competitiveness Controls 46 , paragraph 3

7. Executive Management

The executive management is responsible for monitoring, implementing and reviewing the administrative and

financial policies, powers and powers of the company and providing the board of directors with any updates if

any.

The following pages present a brief about the executive management members and their current and previous

experiences:

Eng. Saleh M. Bahamdan Chief Executive Officer

Nationality Date of birth Educational Qualifications Position Status of

membership

Saudi 1952 م Bachelor of Engineering

Master of Electrical Engineering

Chief Executive

Officer

Executive

Management

Current Position Area of expertise Legal entity Location

Vice Chairman- Sahara Petrochemical Company Petrochemicals Unlisted, joint stock

co.

Inside Kingdom

Board Member- Al Waha Petrochemical Company Petrochemicals Limited liability Inside Kingdom

Board Member- Saudi Ethylene and Polyethylene

Company

Petrochemicals Limited liability Inside Kingdom

Board Member- Tasnee & Sahara Olefins Company Petrochemicals Unlisted joint stock

co.

Inside Kingdom

Board Member- Saudi Acrylic Acid Company Petrochemicals Limited liability Inside Kingdom

Board Member- Khair Inorganic Chemical Industries

Co

Chemicals Unlisted, joint stock

co.

Inside Kingdom

Chairman of the Executive Committee of Al Waha

Petrochemical Co.


Previous positions Area of expertise Legal entity Location

Leading positions in Saudi Basic Industries

Corporation (SABIC)

Petrochemicals Listed joint stock co. Inside Kingdom

Board Member- Saudi Acrylic Acid Company Petrochemicals Limited liability Inside Kingdom

Board Member- Saudi Mono-acrylic Company Petrochemicals Limited liability Inside Kingdom

Board Member- Sahara & Maaden Petrochemicals

Co.


Eng. Abdullah S. Al Saadoon Chief Executive Officer for Operations


membership

Saudi 1957 Bachelor of Chemical Engineering Chief Executive Officer for

Operations Executive

Management

Current Position Area of

expertise Legal entity Location

Chairman of International Polymers Co Petrochemicals Limited liability Inside Kingdom

Chairman of Sipchem Chemicals Co Petrochemicals Limited liability Inside Kingdom

Chairman of Sipchem Marketing Co Marketing Limited liability Inside Kingdom

Chairman of Gulf Advanced Cable Insulation Company (GACI) Petrochemicals Limited liability Inside Kingdom

Chairman of Sipchem Europe SA Marketing Limited liability Outside the Kingdom

Chairman of International Methanol Company (IMC) Petrochemicals Limited liability Inside Kingdom

Chairman of International Acetyl Company (IAC) Petrochemicals Limited liability Inside Kingdom

Chairman of International Vinyl Acetate Co (IVC) Petrochemicals Limited liability Inside Kingdom

Board Member- Sahara Petrochemical Co. Petrochemicals Unlisted, joint stock co.

Inside Kingdom

Previous positions Area of


Board Member- Sahara Petrochemical Co. Petrochemicals Listed joint stock co. Inside Kingdom

Chairman of International Gases Co Petrochemicals Limited liability Inside Kingdom

Chairman of International Utilities Company (IUC) Petrochemicals Limited liability Inside Kingdom

Board Member- Saudi Advanced Technology Company Manufacturing Limited liability Inside Kingdom

Board Member- Saudi Specialized Products Company (SSPC) Manufacturing Limited liability Inside Kingdom

Member in the Executive Committee of Sipchem Petrochemicals Listed joint stock co. Inside Kingdom

Technical positions in Saudi Basic Industries Corporation (SABIC)

Petrochemicals Listed joint stock co. Inside Kingdom

Technical positions in Saline Water Conversion Cooperation Energy and water desalination

Public Sector Inside Kingdom

Mr. Rushdi K. Al-Dulijan Vice Executive Officer for financial affairs


membership

Saudi 1970 Bachelor of Accounting Vice Executive Officer for

financial affairs Executive

Management

Current Position Area of


Board Member- Sahara & Maaden Petrochemicals Co. Petrochemicals Limited liability Inside

Kingdom

Board Member- Saudi Ethylene and Polyethylene Company Petrochemicals Limited liability Inside

Kingdom

Board Member- Tasnee & Sahara Olefins Company Petrochemicals Unlisted, joint stock

co.

Inside

Kingdom

Board Member- Saudi Acrylic Acid Company Petrochemicals Limited liability Inside

Kingdom

Board Member- Tasnee & Sahara Olefins Company Petrochemicals Unlisted, joint stock

co. Inside

Kingdom

Member in the Board of Directors and Audit Committee - Khair Inorganic Chemical Industries Co

Chemicals Unlisted, joint venture

Inside Kingdom

Previous positions Area of


Director of the Financial Regulations Department, Saudi Electricity Company

Energy listed, joint stock co. Inside Kingdom

Eighth: Financial Results

The key financial indicators for the year 2019 compared to the previous year are as follows:

• Revenues reached SR 5,439.7 million during the year 2019 compared to SR 5,035.8 for the

previous year with an increase of 8%.

• Revenues reached SR 1,635.2 million during the year 2019 compared to SR 1,634.8 for the

previous year, an increase of 8%.

• Profit from operations amounted to SR 906.3 million during the year 2019 compared to SR

1,095.8 million for the previous year , an increase of 17.3% .

• Net profit reached SR 299.5 million during the year 2019 compared to SR 582.9 for the

previous year, an increase of 48.6 %.

• Profit per share reached SR 0.52 million during the year 2019 compared to SR 1.59 for the

previous year.

1. Assets, liabilities and operating results for the last five financial

years Consolidated statement of financial

position (Millions of Riyals)

2019 2018 2017 2016 2015

Non-current Assets: 19,863 12,380 12,342 12,494 13,484

Current Assets: 4,128 3,000 3,638 3,309 3,575

Total assets 23,991 15,380 15,980 15,803 17,059

Equity and non-controlling interests 14,338 7,125 7,211 6,685 7,705

Non-current liabilities 7,722 6,330 6,928 7,023 7,564

Current liabilities 1,931 1,925 1,841 2,095 1,790

Total liabilities and equity 23,991 15,380 15,980 15,803 17,059

• The statement of financial position for this fiscal year ended on 31 December 2019

includes the assets and liabilities of Sahara Petrochemical Co. after the merger as of 1 July 2019.

Financial Results (Continued)

Consolidated statement of profit and/or loss (Million of Riyals)

2019 2018 2017 2016 2015

Income 5,440 5,036 4,459 3,515 3,515

Sales cost 3,805 (3,401) (3,033) (2,645) (2,682)

Total profit 1,635 1,635 1,426 861 833

Selling and distribution costs (315) (197) (200) (205) (69)

General and administrative expenses (414) (342) (291) (219) (191)

Operating profit 906 1,096 935 437 573

Finance income 60 28 22 38 10

Finance costs (370) (263) (298) (288) (174)

Other (Expenses)/ income, net (179) 6 12 (22) (40)

Dividend in joint ventures and associate

companies (27) - - - -

Profit before Zakat and income tax 390 867 671 165 369

Cost of Zakat and income tax (145) (116) (84) (73) (66)

Profit for the year 245 751 587 92 303

Profit yields to:

Shareholders 300 583 437 43 288

Non- controlling interests (55) 168 150 49 15

Earning of share from net profit yields to

shareholders 0.52 1.59 1.19 0.12 0.79

2. Evolution of sales, operating profit and net profit for the last five

years (Million Riyals)

• Profit for this year of Sahara International Petrochemical Co. includes

contribution of profit for seven months from Sahara Petrochemical Co. after

merger.

5,440 5,036

4,459

3,515 3,515

906 1,096 935 437 573 300583 437

43 288

20192018201720162015

Sales Operating profit Net profit


3. Significant differences in operating results from previous year

results:

Description 2019 2018 Change

+/- % of

change

Sales/ Revenue 5,440 5,036 404 8%

Total profit 1,635 1,635 0 0%

Operating profit 906 1,096 (190) (18)

Net profit yields to shareholders 300 583 (283) (49)

The company achieved a net profit of SR 299.5 million during 2019 compared to SR

582.9 million in 2018. The main reason for the decline in net profit is the decline in

sales revenues during this year compared to the previous year as a result of lower sales

prices for most of the company’s products in addition to the decrease in production in

the Polybutylene Terephthalate Plant, Mono Vinyl Acetate Plant and Carbon Monoxide

Plant due to scheduled maintenance as previously announced in Tadawul.

The reason for the decrease is also due to recording provision for asset reduction

amounting to SR 454 million during the year 2019 for the International Daiol Company’s

plant, the Polybutylene Terephthalate Plant and the Tool Manufacturing Factory (TMF).

Despite the increase in methanol sales in this period as a result of the project of

increasing energy efficiency and improving the performance of the Methanol Plant as

well as the decline in the average prices of some feedstock materials. In addition, there

was a contribution to profits for a period of seven months by Sahara Petrochemical

Company after the merger.

4. A description of the impact of each activity on the size of the

company

business and its contribution to the results:

A. Sectorial Analysis

The Company operations are in the following sectors::

• Basic petrochemicals: They include Methanol, Butane products and Carbon Monoxide.

• Intermediate chemicals: They include Acetyl Acid, Vinyl Acetate Monomers, Ethyl

Acetate, Butyl Acetate and related materials.

• Polymers: These include low density Polyethylene, Polyvinyl acetate, Polyvinyl Alcohol,

and Polybutylene Terephthalate, electrical wire products plant including polypropylene

sector.

• Marketing: It includes Sipchem Marketing Co. and its foreign affiliates as shown in figure

No. 1 It also includes the sales of petrochemical products, mainly polypropylene, of Sahara

Petrochemical Company.

• Companies and others This include Sipchem, Ethylene Vinyl Acetate Plant and Tool

Manufacturing Plant. This sector also constitutes empowerment and support activities

departments in Sahara.


(Million

Riyals) Basic

petrochemicals:

Intermediate

chemicals: Polymers: Marketing

Companies

and others

Exclusion

upon

merger

Total

For the year ended 31 Dec. 2019

Revenues 1,840 2,326 2,586 2,905 144 (4,361) 5,440

Total profit 789 78 629 121 (18) 36 1,635

Operating

profit 506 (52) 397 70 (80) 66 906

Dividend in

joint

ventures and

associate

companies

- - - - (27) - (27)

Profit before

Zakat and

income tax

189 (244) 188 70 191 (4) 390

Total assets 3,976 5,557 7,408 935 25,565 (19,450) 23,991

Total

liabilities 1,951 2,417 3,363 578 5,130 (3,787) 9,653

Capital

expenses 302 266 32 0.5 72 - 673

For the year ended 31 Dec. 2019

Revenues 1,789 2,814 1,355 2,968 145 (4,035) 5,036

Total profit 781 319 435 105 (4) (1) 1,635

Operating

profit 558 160 343 57 (40) 18 1,096

Profit before

Zakat and

income tax

518 61 302 60 (67) (6) 867

Total assets 4,482 5,897 3,886 825 9,689 (9,399) 15,380

Total

liabilities 2,007 2,536 2,159 467 3,584 (2,498) 8,255

Capital

expenses 586 231 31 3 26 - 877

B. Geographical Analysis of the Company Sales

The company products are marketed and sold in all local markets, Middle East markets

and international markets. The following chart shows the geographical distribution of

the company sales during 2019:


C. Disclosure of details of Treasury shares held by the Company and

details of the uses of these shares:

Number of treasury shares held

by the Company

Value (SR per

share) Date of retention Use details

206,242 10 - Pertaining to Employee

Incentive Program

D. Total indebtedness of the Company and its subsidiaries

(Million Riyals)

Sahara International Petrochemical Company

Loan lender Loan

Term

Principal

amount

of loan

Beginning

of the

year

balance

Reclassification

Withdrawals

made

during the

year

Payments

made

during

the year

End of

the year

balance

Islamic Sukuk 5 1,000 1,000 - - - 1,000

Long-term loans 7-5 5,050 1,828 - 1,400 (1,093) 2,635

(Million Riyals)

International Methanol Company

Loan lender Loan

Period

Principal

amount

of loan

Beginning

of the

year

balance

Reclassification

Withdrawals

made

during the

year

Payments

made

during

the year

End of

the year

balance

Islamic facilities 10 525 418 - - (145) 273

(Million Riyals)

International Diol Company

Loan lender Loan

Period

Principal

amount

of loan

Beginning

of the

year

balance

Reclassification

Withdrawals

made

during the

year

Payments

made

during

the year

End of

the year

balance

Islamic facilities 12 1,008 740 (740) - - -

Short-term loans from

partners

1 10 10 (10) - - -

Long-term loans from

partners

unspecified 64 64 750 238 - 1,052

(Million Riyals)

International Acetyl Company Limited

Loan lender Loan

Period

Principal

amount

of loan

Beginning

of the

year

balance

Reclassification

Withdrawals

made

during the

year

Payments

made

during

the year

End of

the year

balance

Commercial banks 10 618 513 - 140 (63) 590

Saudi Industrial

Development Fund

10 400 100 - - (100)

-

Public Investment Fund 11 769 115 - - (77) 38


partners

unspecified 260 260 129 - (10) 250


(Million Riyals)

International Vinyl Acetate Company:

Loan lender Loan

Period

Principal

amount

of loan

Beginning

of the

year

balance

Reclassification

Withdrawals

made

during the

year

Payments

made

during

the year

End of

the year

balance

Commercial banks 12 356 292 - 140 (52) 380

Saudi Industrial

Development Fund

10 400 140 - - (140) -



partners

unspecified 88 88 - - (6) 82

(Million Riyals)

International Gases Company

Loan lender Loan

Period

Principal

amount

of loan

Beginning

of the

year

balance

Reclassification

Withdrawals

made

during the

year

Payments

made

during

the year

End of

the year

balance

Commercial banks 8 61 36 - - (36) -

Public Investment Fund 11 142 21 - - (21) -


partners

unspecified 48 48 - - (48) -

(Million Riyals)

International Polymers Company

Loan lender Loan

Period

Principal

amount

of loan

Beginning

of the

year

balance

Reclassification

Withdrawals

made

during the

year

Payments

made

during

the year

End of

the year

balance

Commercial banks 15 704 605 - - ( 5 2 ) 453

Saudi Industrial

Development Fund

10 600 360 - - (100)

260


(Million Riyals)

Sipchem Chemical Company

Loan lender Loan

Period

Principal

amount

of loan

Beginning

of the

year

balance

Reclassification

Withdrawals

made

during the

year

Payments

made

during

the year

End of

the year

balance

Saudi Industrial

Development Fund

8-9 396 263 - - (70)

193


partners

unspecified 263 406 - 100 (4)

502

(Million Riyals)

Gulf Advanced Cable Insulators Company:

Loan lender Loan

Period

Principal

amount

of loan

Beginning

of the Reclassification

Withdrawals

made

Payments

made

End of

the year

balance

year

balance

during the

year

during

the year

Saudi Industrial

Development Fund 6 99 55 - -

(17) 38


partners unspecified 103 109 3 3 - 112

(Million Riyals)

Saudi Specialized Products Company

Loan lender Loan

Period

Principal

amount

of loan

Beginning

of the

year

balance

Reclassification

Withdrawals

made

during the

year

Payments

made

during

the year

End of

the year

balance

Saudi Industrial

Development Fund 10 65 65 - - - 65

Short-term loans from

partners 1 91 -

91 - - -


partners

unspecified 211 211 (91) - (50) 105

(Million Riyals)


Loan lender Loan

Period

Principal

amount

of loan

Beginning

of the

year

balance

Reclassification

Withdrawals

made

during the

year

Payments

made

during

the year

End of

the year

balance

Commercial banks 13 500 291 - - (40) 253

(Million Riyals)

SAMAPCO Petrochemical Plant

Loan lender Loan

Period

Principal

amount

of loan

Beginning

of the

year

balance

Reclassification

Withdrawals

made

during the

year

Payments

made

during

the year

End of

the year

balance

Commercial banks 12 2,250 2,250 - 2,250 (20) 2,230

(Million Riyals)

Al Waha Petrochemical Plant

Loan lender Loan

Period

Principal

amount

of loan

Beginning

of the

year

balance

Reclassification

Withdrawals

made

during the

year

Payments

made

during

the year

End of

the year

balance

Commercial banks 12 1,964 1,473 - - (157) 1,316

E. Description of debt instruments activities There are no debt instruments convertible into shares or any subscription notes or

similar rights issued or granted by the Company during 2019. There are also no rights

of transfer or subscription under debt instruments convertible into shares, option

rights, warrants or similar rights issued or granted by the Company during the year

2019. There is also no purchase or cancellation by the Company for any redeemable

debt instruments

F. Regulatory due payments

(Million Riyals)

Description

Payments made

during the year

2019

Due to the end of fiscal year and

unpaid

Brief

Description Reasons

GAZT 45 193.9 Zakat Obligatory

GAZT 14 28.1 Tax Obligatory

General Organization for

Social Insurance

41.6 4.4 Subscriptions Obligatory

labor office fees 2.3 - Fees Obligatory


G. Recent developments in the application of international accounting

standards:

In line with the requirements of the Saudi Organization for Certified Public Accountants

(IASC) for the transition to International Accounting Standards (IFRS) in the

preparation of the Company

financial statements approved by the Capital Market Authority (CMA) as of 1 January

2019, the Company shifted to the International Accounting Standards (IFRS) during

the year by adopting the following International Financial reporting Standards:

• International Financial reporting Standard No. 16 (Leases)

As a result, the accounting transaction for some operating leases has

changed, and the assets that can be used and the corresponding lease obligations are recognized in the group's consolidated statement of financial

position, so the effect on the group's net profit is not material.

H. Description of any transaction between Sipchem and related parties

Transactions with the related parties represent transactions with the

shareholders , the sister companies, subsidiaries, partners, the

Board of Directors and the entities wholly or jointly controlled or materially

influenced by the related parties. The group conducted the following

transactions with the related parties during 2019:

Name Nature of the

transaction

Relationship

Japan- Arabia Methanol Company Limited Sales Partner in an affiliate

company

Helm - Arabic GMH & Cookie G (Helm Arabia) Sales Partner in an affiliate

company

Hanwa Chemical Malaysia SDNBH Sales Partner in an affiliate

company

SAMAPCO Sales A joint-venture of an affiliate

LyondellBasell Industries NV Sales Shareholder in a joint

operations of an affiliate

Saudi Acrylic Acid Company Limited (SAAC) Sales Associate Company

Saudi Ethylene & Polyethylene Company (SEPC) Sales Associate Company

Non-controlling shareholders , which are the foreign shareholders of the

Company, marketed part of the Group's products. The total sales made by these

foreign shareholders amounted to SR 1,982.4 million (2018): SAR 1,714.1

million).

The company and non-controlling shareholders have provided loans to the

Group's companies to support their operations and comply with debt

requirements. Long-term loans carry financing charges at market rates and

have specific maturity dates according to agreed payment schedules.

The prices and terms of the above transactions are approved by the Group's

Board of Directors. The above transactions resulted in the following balances

with the related parties as at December 31:

• Trade receivables (Million Riyals)

Name 2019 2018

Japan- Arabia Methanol Company Limited 10 19

Helm - Arabic GMH & Cookie G (Helm Arabia) 80 133

Hanwa Chemical Malaysia SDNBH 85 100

LyondellBasell Industries NV 178 -

Total 353 252


• Prepayments and other current assets (Million Riyals)

Name 2019 2018

SAMAPCO 25 -


Total 31 -

• Trade and other payables (Million Riyals)

Name 2019 2018


Saudi Ethylene & Polyethylene Company (SEPC) 5 -

SAMAPCO 4 -

Total 39 -

• Accrued expenses and other liabilities (Million Riyals)

Name 2019 2018

SAMAPCO 21 -


Total 28 -

• Transactions Pricing On January 31, 2019, corresponding to 25 Jumada I 1440 AH, the General

Authority of Zakat and Income in the Kingdom of Saudi Arabia issued Transfer Pricing Regulations (The Regulations). These regulations were enacted on February 15, 2019, as part of the tax law and became binding on taxpayers for

the periods that end on or after December 31, 2018. The Group provided the documents necessary to comply with the relevant tax law during the statutory

period.

• Terms and conditions of transactions with related partners Sales and purchases transactions with the related parties shall be conducted

according to the same terms of transactions between independent parties.

Outstanding balances at the end of the year are neither collateralized, nor bearing

any interest, and shall be paid in cash. No guarantees provided or received for

any receivables or payables to related parties. For the year ended December 31,

2018, the Group evaluated and recorded a decrease in value related to the

amounts due from a related party. This evaluation is carried out every fiscal year

by examining the financial position of the related party and the market in which

the related party operates.


I. A description of the affiliates’ activities and its impact on the size of the company’s business and its contribution to the results for 2019

(Million Riyals)

Activity Revenues Percentage

International Methanol Company 759.5 14.0%

International Diol Company 163.9 3.0%

International Acetyl Company Limited 153.9 2.8%

International Vinyl Acetate Company: 881.5 16.2%

International Gases Company 105.3 1.9%

Sipchem Chemical Company 402.8 7.4%

International Polymers Company 1,037.0 19.1%

Sipchem Chemical Company 509.6 9.4%

Gulf Advanced Cable Insulators Company: 102.1 1.9%

Saudi Specialized Products Company 34.0 0.6%

Sahara International Petrochemical

Company

378.6 7.0%

Sahara Marketing Company 292.5 5.4%

Al Waha Petrochemical Company 618.9 11.4%

Total 5,439.7 100.0%

• Contribution of Sahara Marketing Company and Al Waha Petrochemical

Company for seven months to the size of the company’s business and Sahara Petrochemical Company’s contribution after the merger.

Ninth: Internal Audit and Results of Annual Review of Internal Audit Procedures

1. Internal Audit:

The internal audit of the company provides assurance and consulting services independently

and objectively in order to add value and improve operations and achieve the strategic goals

of the company

The internal audit assists the company in achieving its goals through evaluating and improving

the effectiveness of the internal control system, risk management and governance processes

The internal audit department of Sipchem follows the risk based audit methodology, through

which the audit work is directed towards the most risky and important activities and works of

the company. In accordance with the best professional practices, Sipchem annual audit plan is

prepared on the basis of risks

The scope of work of the Internal Audit Department in Sipchem includes the review of

activities, operations, risk management procedures, internal control systems, information

systems, governance processes, and assistance in protecting against fraud, fraud, and

embezzlement and fraud. All activities, functions, departments and branches of the company

and subsidiaries fall within the scope of the internal audit department .

The internal audit during 2019 carried out several periodic and special audits according to the

annual audit plan approved by the audit committee with the aim of giving the necessary

assurances regarding the effectiveness and efficiency of internal control and risk management

in the company, with a focus on activities and functions with high risks

The internal audit also provides consulting services for the purpose of contributing with the

executive management to improving the efficiency and effectiveness of the company's various

operations, in addition to contributing to the review of the preliminary and annual financial

statements

2. Results of Annual Review of Internal Audit Procedures: The internal audit activities and processes referred to above did not show the existence of

substantial observations during 2019, and the internal audit activities and processes demonstrated

the adequacy and effectiveness of the internal control system, the existence of good risk

management and the efficiency of governance processes.

Tenth: Investor Relations

Since our wise government, led by the Custodian of the Two Holy Mosques and his Crown Prince, May Allah Bless them, announced the Kingdom's Vision 2030 which aimed at diversifying the economy, opening up the financial market to foreign investors and promoting best practices in conjunction with the inclusion of Saudi Arabia's financial markets in financial market indicators, the Department of Investor Relations is working diligently and at an accelerated pace to cope with the Kingdom's economic development drive.

Continuing to keep pace with the Kingdom's march and achieve the objectives of the vision, coinciding with the CMA's recent initiatives and reforms in an effort to make the financial market environment more stable, Sipchem has adopted several channels of communication with its current and prospective investors, as well as holding several telephone meetings with financial analysts and investors to discuss financial results, in addition to

participating in several meetings and conferences at the local, regional and regional levels, as well as holding several visits to the company and its subsidiary factories during 2019 .

These practices stem from the company's belief in its duties towards the investment community, and in conjunction with the leading role that the Kingdom plays to improve the investment sector of the Saudi markets and is complementary to all efforts made in this context by the stakeholders ,

Investors Relations has a deep strategy aimed at promoting the application of best practices of investors relations, by raising awareness of the importance of investor relations in the Kingdom, opening several channels of communication and building effective relationships with all stakeholders and the financial community.

Sipchem always ensures that excellence, commitment and the application of best practices are its constant motto, and that the principle of justice is achieved for all in providing all appropriate information through the company's website.

Eleventh: Governance and Commitment

1. Number of requests for the shareholders’ record, dates

and justifications s/n Request Date Request Justification

1 3 JAN 2019 Profit profile

2 28 JAN 209 Company’s procedures

3 February 28, 2019 Company’s procedures

4 31 March 2019 Company’s procedures

5 11 April 2019 Company’s procedures

6 15 April 2019 Company’s procedures

7 6 May 2019 Company’s procedures

8 23 June 2019 Company’s procedures

9 31 July 2019 Company’s procedures

10 4 August 2019 Company’s procedures

11 4 September 2019 Company’s procedures

12 6 OCT 2019 Profit profile

13 (4 November 2019) Company’s procedures

14 (27 November 2019) Company’s procedures

15 3 DECEMBER 2019 Company’s procedures

The company uses the records in the preparation of detailed monthly reports which are

submitted to the Executive Management to follow up and communicate with its

shareholders through interviews or meetings. The company also explore the latest

developments of its business and reply to the shareholders’ suggestions and inquiries.

2. Shareholders’ Assemblies

Decisions taken

Ordinary General

Assembly

21 April 2019

1. Voting on the Board of Director’s report for the fiscal year 2018

2. Voting on the financial statements for the fiscal year ended

31/12/2018.

3. Voting on the Auditor’s report for the fiscal year ending on

31/12/2018.

4. Approving the discharge of the Board members for the past

year 2018.

5. Voting on the Board of Directors’ decision concerning the

dividends distributed for the first and second half of the year

2018 with a total amount of SR (421,666,666), or a total of

SR (1.15) per share for the two halves, representing (5,11%)

of the share capital

6. Voting on the disbursement of (SR 4,200,000) four million two

hundred thousand riyals as a remuneration for members of the

Board of Directors and committees for the fiscal year 2018.

7. Voting on the appointment of the company’s Auditor(s) from

among the candidates, based on the recommendation of the

Audit Committee, and determining its fees. The Auditor shall

examine, review and audit the financial statements for the

second, third, fourth quarter of the fiscal year 2019 and the

first quarter of the fiscal year 2020.

22,76 In person and by

proxy

26,10 Remote voting

48,86 Total attendance

8. Voting on the dividend distribution policy and authorizing the

Board of Directors to make any future amendments thereto.

9. Voting on the formation of a general reserve for the company

and authorizing the Board of Directors to adopt the relevant

policy.

10. Voting on authorizing the Board of Directors to distribute

preliminary (quarter / semi) annual profits for the fiscal year

2019, and determining the due and disbursement date in

accordance with the regulatory controls and procedures issued

in implementation of the Companies Law, in a manner

appropriate with the company’s financial position, cash flows

and expansion and investment plans.

11. Voting on the business and contracts that will take place

between the Company and the National Energy Company (a

Saudi company of which Zamil Group owns 50%) in exchange

for buying a 25% stake in the International Gas Company in

which the members of the Board of directors have an interest;

namely, Eng. Abdulaziz Abdullah Al-Zamil and Dr.

Abdulrahman Abdullah Zamil, knowing that the amount of the

deal is SR 262.5 million and there are no special or

preferential conditions associated with this deal.

(attachment)

Attendance record of Shareholders’ Assembly

s/n Name 21 April 2019 Total

attendance











bless his soul) -

Decisions taken

Extraordinary

General

Assembly

16 May 2019

1. Voting on increasing the capital of Sipchem for the purpose of

acquiring all shares of Sahara Petrochemical Company (a Saudi

listed joint stock company registered in the Commercial

Register under No. 1010199710 dated 05/05 / 1425

(corresponding to 07/07/2004 AD) with registered capital of

SR 4,387,950,000 SAR) ( "Sahara Company") pursuant to a

securities exchange offer. This includes agreeing on the

following:

A. Increasing Sipchem’s capital from SR 3,666,666,660 to

SR 7,333,333,320 (“Capital increase”) through the

issuance of 366,666,666 new ordinary shares, with a par

value of SR 10 per share (“New Sipchem shares”) for the

purpose of acquiring all the shares of Sahara, as per Article

Fifty Eight of the Regulations, which amount to

438,795,000 shares, in exchange for the new shares of

Sipchem (“The Deal”), in accordance with Article Twenty-

Six of the Merger and Acquisition Regulations and the

completion of the deal.

Through this deal, the number of Sipchem’ shares will

increase after the issuance of the new shares from

366,666,666 shares to 733,333,332 shares, meaning

100% increase. The new shares of Sipchem will be

deposited in the portfolios of Sahara’s concerned

shareholders within a period from the third to the sixth

trading day following the approval date of the Extraordinary

General Assembly of both Sipchem and Sahara.

B. The implementation agreement concluded between

Sipchem and Sahara Company on 6 December 2019

concerning the deal, which was amended in accordance

with the agreement to amend the implementation

agreement concluded on April 3, 2019 (“Implementation

Agreement”).

C. Approving the proposed amendments to Sipchem’s Articles

of Association in accordance with the form set forth in

(Attachment 1) of this invitation, provided that these

amendments shall take effect upon the execution of the

deal.

D. Authorizing Sipchem’s Board of Directors and CEO and the

delegated persons to take all the actions necessary to

implement and complete the Extraordinary General

Assembly decisions issued at this meeting and to make

necessary signatures in this regard.



proxy

43,43 Remote voting


s/n Name 16 May 2019 Total

attendance









9 Eng. Abdullah S. Al-Saadoon -

10 Mr. Ziad A. Al-Turki -


bless his soul) -

Decisions taken

Ordinary General

Assembly

8 Dec. 2019

1. Voting on the election of the Board members from among the

candidates for the coming tenure which will extend for three

years from 10/12/2019 to 9/12/2022 (C.Vs are enclosed).

2. Voting on the formation of the Audit Committe for the new

session which will commence on 10/12/2019 and end on

9/12/2022, its tasks, controls of its works and remuneration

of its members. Below is the names of the candidates (C.Vs

are enclosed)

1) Mr. Ayidh M. Al-Qarni

2) Mr. Mohmed Farhan Alnader

3) Mr. Mohamed Faraj Alkanani

3. Voting on the Board’s recommendation for the appointment of

Mr. Ayidh M. Al-Qarni (Independent Member) as a member in

the Audit Committee from the date of his appointment on

16/5/2019

4. Voting on the Board’s recommendation for the appointment of

Eng. Khaled Abdullah Al Zamil (Non-Executive Member) in the

vacant position from 19/10/2019 till the end of the current

tenure on 9/12/2019. (Attachment)

5. Voting on increasing the fees of the company’s Auditor(KPMG)

for examining, reviewing and auditing the financial statements

for the annual and the second, third, fourth quarter of the fiscal

year 2019 and the first quarter of the fiscal year 2020.

6. Voting on updating the regulation of the Audit Committee

(Attachment)


proxy

26,18 Remote voting



s/n Name 8 Dec. 2019 Total

attendance

1 Eng. Khalid A. Al-Zamil 1


3 Mr. Saeed O. El-Esayi 1




7 Mr. Khaled F. Al-Showair 1

8 Dr. Ahmed F. Al-Dhayan * 1

9 Dr. Abdulrahman A. Al-Zamil -

10 Eng. Reyadh S. Ahmed -

11 Mr. Rashid S. Al-Ghurair -

❖ The Company Chartered Accountant

No recommendation was made by the Board of Directors to change the KPMG from the date

of approval of the Extraordinary General Assembly held on 21 April 2019.

4. Dividend Distribution Policy Governance and Commitment (Continued)

The Company’s Board of Directors has made its recommendations on 26

September 2019 to distribute interim cash dividends for the first half of the year

2019 to the shareholders as follows:

The announced profits for the first half of 2019

1 Total amount distributed SR 439,999,999

2 Dividend per share SR 0,60

3 Distribution ratio to the nominal value of the share 6

4 Number of shares eligible for dividends 733,333,332 shares

5 Distribution date 16 OCT 2019

Eligibility of the dividends shall be to the shareholders who hold shares at the end of trading on

Wednesday 2/10/219 and are registered in the Company register at the depository center, at the end of

the second trading day following the maturity date.

The Board of Directors recommended the General Assembly of Sahara

International Petrochemical Company, on 9 December 2019, of its intent to

acquire its shares as follows:

Sahara International Petrochemical Company announces that the Board of

Directors issued its recommendation to the Extraordinary General Assembly to

purchase up to 10% of the company’s [ordinary] shares and keep them as

treasury shares.

1

Date of approval by the Board of

Directors 11-4-1441 AH corresponding to 08-12-2019

2 Purchase Purpose Keeping the shares as treasury shares

3 The number of shares

to be acquired 73333333

4

Approvals and

fulfillment of financial solvency

requirements

This recommendation will be presented to the

Company's Extraordinary General Assembly for its approval on the purchase deal. The company will also

be required to fulfill all the requirements of the financial solvency mentioned in the third paragraph, Article 12 of

the regulatory controls and procedures issued in implementation of the Companies Law with regard to

the listed joint stock companies.

A report issued by the company’s chartered accountant

shall be submitted under the provisions of this

paragraph.

5 Voting rights The purchased shares shall not grant voting right in the

Shareholders' Assemblies.

Governance and Commitment (Continued)

5. The Company’s Disclosure in Tadawul website s/n Date Description

1 01 JAN 2019 Sipchem announced the commencement operation of

Ethylene Vinyl Acetate Film Plant's commercial

operation.

2 13 JAN 2019 Sipchem announced the date and mechanism of

disbursing the shareholders’ dividends for the 2nd half

of 2018.

3 15 JAN 2019 Sipchem announced the performance of periodic

scheduled maintenance for the International Diol

Company’s plant.

4

06 February 2019 Sipchem announced the performance of periodic

scheduled maintenance for the Polybutylene

Terephthalate Plant.

5 13 February 2019 Sipchem announced the annual financial results for the

fiscal year ended 31/12/2018

6

26 February 2019 Sipchem announced that it has organized a telephone

call with financial analysts and investors to discuss the

results of the fiscal year ended on 31 December 2018.

7 03 March 2019 Addendum announcement by Sipchem concerning the

operation of Polybutylene Terephthalate Plant

8 06 March 2019 Addendum announcement by Sipchem concerning the

operation of International Diol Company’s plant

9

07 March 2019 Addendum announcement by Sipchem concerning the

equal merger with Sahara Petrochemical Company

(Sahara)

10 24 March 2019 Sipchem announced the resignation of the Vice

Chairman and Managing Director

11 24 March 2019 Sipchem announced the resignation of the CEO and the

appointment of a new one.

12 27 March 2019 Sipchem invited its shareholders to attend the Ordinary

General Assembly Meeting (the 1st Meeting).

13 01 April 2019 Sipchem announced the appointment of a Board

member.

14 01 April 2019 Sipchem announced the appointment of the CEO and

Managing Director.

15

04 April 2019 Sipchem announced the amendment to the Equal

Merger Agreement concluded with Sahara

Petrochemical Company.

16 16 April 2019 Sipchem invited its shareholders to attend the Ordinary

General Assembly Meeting (Reminder).

17 22 April 2019 Sipchem announced the results of its Ordinary General

Assembly Meeting (The 1st First meeting).

18 24 April 2019 Sipchem announced the interim financial results for the

period ending on March 31, 2019 (three months).

19

25 April 2019 Sipchem invited its shareholders to attend the Twelfth

Extraordinary General Assembly Meeting (the 1st

Meeting)

20

25 April 2019 Sipchem announced the publication of the proposal

document related to its offer to purchase all the issued

shares of Sahara Petrochemical Company (“ Sahara

Company”) in exchange for new shares in Sipchem.

21

28 April 2019 Sipchem announces the publication of the shareholders

circular related to increasing its share capital to acquire

all the shares issued in Sahara Petrochemical Company

(“Sahara Company”) (“The Deal”)

22

01 May 2019 Sipchem announced that it has organized a telephone


results of the first quarter of 2019.

23

13 May 2019 Sipchem announced the starting of electronic vote on

the agenda of the Extraordinary General Assembly’s

meeting (the 1st meeting)

24 19 May 2019 Sipchem announced the results of its Extraordinary

General Assembly Meeting (The First meeting)

25

21 May 2019 Sipchem announced completing its commercial merger

with Sahara Petrochemical Company and changing the

name of the company

26

21 May 2019 Sipchem announced the resignation and appointment of

Board members, chairman of the Audit Committee and

Chairman of the Remuneration and Nominations

Committee

27 21 May 2019 Sipchem announced the appointment of a vice chairman

28 21 May 2019 Sipchem announced the appointment of the CEO and

the company's President for Operations.

29 09 June 2019 Sipchem announced signing an preliminary agreement

with Sasref to supply hydrogen gas.

30 23 June 2019 Sipchem announced a scheduled shutdown of both

Acetic Acid and Vinyl Acetate plant

31

25 June 2019 Sipchem announced that one of its affiliates (SAMAPCO)

has signed financing agreements with a number of local

banks to replace the existing loan.

32

17 July 2019 Addendum announcement by Sipchem concerning the

performance of the scheduled periodic maintenance

works for Mono Vinyl Acetate Plant.

33

22 July 2019 Addendum announcement by Sipchem concerning the


works for Carbon Monoxide gas plant.

34

24 July 2019 Sipchem announced the interim consolidated financial

statements for the quarter and semi-annual period

ended 30 June 2019

35

25 July 2019 Addendum announcement by Sipchem on the interim

consolidated financial statements for the quarter and

semi-annual period ended 30 June 2019

36

04 August 2019 Addendum announcement by Sipchem concerning the


works for some production units.

37

04 August 2019 Sipchem announced that it has organized a telephone


results of the fiscal year ended on 30 December 2019.

38

22 August 2019 Sipchem announced the deposit of the sums generated

from the sale of fractional shares resulting from the

increase in the company's capital in the accounts of the

eligible shareholders

39 04 August 2019

40

08 September

2019

Sipchem announced the opening of the nomination for

membership of the Board of Directors for the next

tenure.

41 15 September

2019

Sipchem announces shortages of feedstock supplies for

some of its affiliates.

42 18 September

2019

Addendum announcement by Sipchem concerning

shortages of feedstock supplies for some of its affiliates.

43

26 September

2019

Sipchem announced the Board of Directors' decision to

distribute cash dividends to shareholders for the first

half of the year 2019

44 26 September

2019

Sipchem announced feedstock supplies back to normal

levels for some of its affiliates

45

06 October 2019 Sipchem announces the death of the Board Chairman,

Eng. Abdul Aziz Abdullah Al-Zamil, may God have mercy

on him.

46

07 October 2019 Addendum announcement by Sipchem concerning the

date and mechanism of disbursing the shareholders’

dividends for the 2nd half of 2018.

47 15 October 2019 Sipchem announced the appointment of a Board

member.

48

22 October 2019 Sipchem announced the interim consolidated financial

statements for the quarter and nine-month period

ended 30 September 2019

49 28 October 2019 Sipchem announced the appointment of the chairman.

50

04 November 2019 Sipchem announced that it has organized a telephone


results of the fiscal year ended on 30 September 2019.

51 13 November 2019 Sipchem invited its shareholders to attend the Ordinary

General Assembly Meeting (the 1st meeting)

52

03 Dec. 2019 Sipchem announced the starting of electronic vote on

the agenda of the Ordinary General Assembly’s meeting

(the 1st meeting)

53 04 Dec. 2019 Sipchem announced signing the provisions of the

strategic partnership with the German company Linde

54 09 Dec. 2019 Sipchem announced the results of its Ordinary General

Assembly Meeting (First meeting)

55 09 Dec. 2019 Sahara International Petrochemical Co. announced its

intent to buy back its shares.

56

15 Dec. 2019 Sipchem announced the appointment of a Chairman and

Vice Chairman and the formation of committees for the

new tenure.

57 16 Dec. 2019

Sipchem announced that one of the companies in which

it owns 30% of its shares through its fully owned

subsidiary (Sahara Petrochemical Company) has

obtained Shariah compliant Credit Facility from Al-Inma

Bank and Al Bilad bank.

Twelfth: Human Resources

Sipchem's success is mainly attributed to its distinguished ability and constant endeavors to attract qualified personnel. Sipchem has been successful in creating an environment in which employees are proud to work in; a very professional transparent one, which encourages high performance and effective engagement at all levels of management in all the company’s affiliates. Sipchem’s cares about ensuring its personnel’s job satisfaction to help them achieve their career ambition; the company pays attention to the development

programs, technical and administrative, to ensure progress of work according to the highest standard of efficiency based on the latest training and development management systems.

The table below shows the number and percentage of employees in Sipchem and its affiliates as of the end of 2019 compared to 2018:

20192018 Employees %No.%No.

1258 %75.7 72% 744 Saudi

404 %24.3 28% 285 Non-Saudi

1,662 1,029

1. Employees’ Incentive Programs

A. Home Ownership Program for Saudi Employees (SHOP):

The program aims at giving a chance to the company’s Saudi employees, who meet the program conditions, to own housing units in light of Sipchem policy of assuring comfort and stability for its employees and motivating them to continue their services with the company.

B. Employees Shares Ownership Incentive Program:

Sipchem implemented an Employee Incentive Program aimed at encouraging the company’s and affiliates’ employees to maintain and improve their work performance and put up their utmost efforts to serve the company’s interests and achieve its objectives. The program also contributes in attracting highly qualified personnel in the field of petrochemicals.

The program is currently managed by Al Bilad Securities and Investment Co., through a special portfolio opened for the program in 2010. A total of 410,360 shares have been transferred from the program portfolio to the eligible employees who completed the subscription period during the year 2015. Total number of the program shares reached 206,242 as of December 31, 2019.

C. Savings Program:

Sipchem initiated to put an Islamic Shariah-compliant savings program to motivate its employees and enhance their loyalty to the company hence improving the work performance, and attracting well-qualified Saudi employees and motivating them to continue their services. The program is aimed at helping Saudi employees to accumulate their savings to be utilized upon retirement or end of services.

The company takes a part of the subscribed employee’s salary and may invest these savings according to his desire. The company has the right to manage this investment in the way which it believes to be beneficial for the program subscriber in accordance with the best available Islamic Shariah-compliant investment portfolio. Also, the company has the right to invest the subscriber’s savings in investment activities in cooperation with specialized companies and banks in accordance with the criteria of Islamic investment in a manner that can attain benefits for the subscribers provided that such investments are in low-risk Islamic portfolios.

The saving program was activated in 2011. It is managed by Al-Jazira Bank and it was reviewed and audited by the Sharia Compliance Committee of the bank.

2. EMPLOYEES’ Benefits Allocations

The following table shows the allocations and compensation of Sipchem’s employees for the 2019 compared to the year 2018:

(Million SAR)

2019 2018 Item

525 161 End of Services Rewards

91 20 Saving Program

Thirteenth: Social Corporate Responsibility

Sipchem also continued its focus on supporting entrepreneurial activities and supporting small and micro enterprises by establishing a loan portfolio that provides loans to help young women start their business with various skills and professions, as the number of beneficiaries of this program reached more than 80 beneficiaries of widows, orphans and others with others, as it adopted a unique project, by providing 80 smart specialized and mobile sales kiosks in the markets of the popular eastern region Because of our strong belief that our employees are a major component of society, and to encourage them to adopt our concepts to serve the community and spread this culture, Sipchem’s Charitable Fund continued to contribute to charitable activities; the total of what donated by 400 employees during the previous 3 years amounted to SAR 1.7, all of which were allocated to provide more than 1,800 health insurance policies for 300 orphans and widows who were in urgent need of providing that necessary and urgent service over the past four years

Programs implemented in the field of social responsibility during the year 2019

1. Sipchem organizes a symposium of its “Knowledge Councils” initiatives to encourage youth and spread knowledge and science among them.

2. Sipchem reviews its story on social responsibility and its journey in the transition to sustainability during the Chamber of Commerce in the Eastern Province evening gathering.

3. Jubail governor honors Sipchem for sponsoring the programs and celebrations of the city of Jubail during 2019.

4. Sipchem concludes its sporting activities for the year 2019, which aim to raise the fitness of employees, with the participation of more than 200 employees

5. Sipchem concludes the Bunyan Educational Program, which focuses on raising the scientific level of orphans and increasing their academic achievement.

6. Sipchem hosts a scientific delegation from Imam Abdulrahman bin Faisal University. 7. Sipchem launches the initiative (Prepare for your Profession) to prepare Saudi fresh

university graduates for the job market. 8. Sipchem signs an agreement with "Jana" to support productive families by providing

equipped kiosks and points of sale. 9. Sipchem launches the second season of Sipchem in the Eastern Province. 10. Sipchem honors 35 distinguished students in Jubail and Al-Khobar. 11. “Bena'a” Association honors Sipchem for supporting orphan projects in the Eastern

Province. 12. Sipchem signs a community health agreement to establish a clinic and health center in

Al-Khobar. 13. The Amir of East Province honors Sipchem for its continuous activity in the service of

society. 14. The Ministry of Labor and Social Development honors Sipchem for sponsoring the

rehabilitation of the Orphan Care Center Recreation Club for Girls in the Social Preschool Center.

15. Sipchem participates in Biban Eastern Province Forum to support entrepreneurs and organized by Monsh'at.

16. Sipchem launches an initiative to educate children financially. 17. Sipchem signs an agreement with the Saudi Food Bank (Eta'am) and sponsors the

transportation and distribution project. 18. Sipchem communicates with the community during the Eid period by implementing five

community service programs: 19. 20. Sponsoring the Jubail Eid celebrations in Jubail.

21. Launching the sacrifice delivery initiative with Eta'am. 22. Visiting in-patients at King Faisal Specialist Hospital. 23. Sponsoring the Onaiza Dates Festival. 24. Implementing an orphans' greeting program and distributing Eid gifts. 25. 26. Sipchem sponsors the school bag project for 600 orphans in Jubail 27. The Custodian of the Two Holy Mosques honors Sipchem for winning the King Khalid

Award for Sustainability. 28. HRH Governor of the Eastern Province honors Sipchem for sponsoring the "RAD" Forum

for young businessmen and businesswomen. 29. Sipchem launches the second season of "Prepare for Your Career" initiative to qualify

university graduates for the labor market 30. Sipchem resumes its youth programs and organizes a lecture entitled "The Entrepreneurial

Wave". 31. Sipchem participates in the first Health, Safety and Environment conference in Dammam. 32. The Minister of Labor and Social Development honors Sipchem for supporting sustainable

projects with Jana, which are specialized in supporting productive families 33. Al-Qassim Governor honors Sipchem for sponsoring projects of productive families at the

“Unayzah Dates Festival 40 ” 34. Sipchem sponsors "Saudi OFSAC 2019" conference for security and safety 35. Sipchem communicates with young people and organizes a lecture entitled "Artificial

Intelligence" provided by Dr. Muhammad Qasim. 36. Sipchem establishes an advanced computer lab for girls in a school in Jubail. 37. Sipchem presents to the students an enrichment club at Al Matrefiya Elementary School

in Jubail Industrial City.

Fourteenth: Board of Directors' Recommendations

Sipchem’s Board of Directors submitted recommendations to the Ordinary General Assembly - to be held in 2020, for the following:

1- Approval of the Board’s report for the fiscal year 2019. 2- Approval of the financial statement and profit/losses statements as of 31/12/2019.

3- Approval of auditor’s report for financial year ended 31/12/2019. 4- Discharge of the board members from liability for the previous year 2019. 5- Approval of Board of Directors’ recommendation to distribute cash dividends to shareholders

for the second half of 2019 at a rate of SR 0.6 per each share representing 6% of the share’s nominal value, with a total amount of SR 439,999,999.

6- Approval to pay the amount of SR (4,100,000) four million and one hundred thousand riyals as remuneration for the Board members for the fiscal year 2019.

7- Approval of the appointment of the external auditor as nominated by the Audit Committee to audit the company’s financial statements for the second, third and fourth quarters of 2020 and the annual in addition to the 1st quarter of 2020 and determine his fees.

8- Approval of Board of Directors’ authorization to distribute primary cash dividends (quarterly-half) to shareholders for the year 2020 and determine the eligibility and distribution dates in accordance with the regulations and procures of the companies’ law and in line with the company’s financial position and its expansion and investment plans.

9- Approval of the board of directors’ recommendation to purchase 10% of the company’s ordinary shares and maintain them as treasury shares.

10- Amendment of the company’s bylaws.

Fifteenth: Conclusion:

At the end of our report for the year 2019, the Board members would like to express their thanks to the Custodian of the Two Holy Mosques and HRH Crown Prince, for their sponsorship and support of the company’s activities. Also, the board appreciate the sincere efforts of the governmental bodies for their continuous support. Off course the board extends its appreciations and thanks to the shareholders, executive management and all company personnel for their sincere efforts exerted to develop and enhance the work performance so as to support the company’s efforts to attain its goals.

The board of directors shall save no efforts to make the company participate effectively in the prosperity of our beloved kingdom asking Allah the Al-Mighty to help us attain our objectives.

Board of Directors

Documents

King Salman bin Abdulaziz · the Two Holy Mosques, King Salman bin Abdulaziz and His Royal Highness Prince Mohammad Bin Salman, Crown Prince, Deputy Prime Minister and Minister of