SAUDI GROUND SERVICES COMPANY LIMITED CONSOLIDATED FINANCIAL STATEMENTS

Transcription

1 G t SAUDI GROUND SERVIES OMPANY IMITED ONSOIDATED FINANIA STATEMENTS Deember 31, 2011 I with INDEPENDENT AUDITORS' REPORT

2 .rf u The Shareholders Saudi Ground Servies ompany imited Jeddah, Kingdom of Saudi Arabia KPMG AI Fozan & AI Sadhan AI Dainy Plaza AI Madinah Road P. O. Box Jeddah Kingdom of Saudi Arabia INDEPENDENT AUDITORS' REPORT Telephone Fax Internet iense No. 46/11/323 issued 11/3/1992 We have audited the aompanying onsolidated finanial statements of Saudi Ground Servies ompany imited ("the ompany") and its subsidiary (olletively referred as "the Group") whih omprise the onsolidated balane sheet as at Deember 31, 2011 and the related statements of inome, ash flows and hanges in equity for the year then ended and the attahed notes 1 through 22 whih form an integral part of the finanial statements. Management's responsibility for the finanial statements Management is responsible for the preparation and fair presentation of these finanial statements in aordane with generally aepted aounting standards in the Kingdom of Saudi Arabia I and in ompliane with Artile 175 of the Regulations for ompanies and the ompany's Artiles of Assoiation and for suh internal ontrol as management determines is neessary to enable the preparation of onsolidated finanial statements that are free from material misstatement, whether due to fraud or error. Management has provided us with all the information and explanations that we require relating to our audit of these finanial statements. Auditors' responsibility G Our responsibility is to express an opmlon on these finanial statements based on our audit. We onduted our audit in aordane with generally aepted auditing standards in the Kingdom of Saudi Arabia. Those standards require that we omply with relevant ethial requirements and plan and perform the audit to obtain reasonable assurane whether the finanial statements are free of material misstatement. An audit involves performing proedures to obtain audit evidene about the amounts and dislosures in the finanial statements. The proedures seleted depend on our judgment, inluding the assessment of the risks of material misstatement of the finanial statements, whether due to fraud or error. In making those risk assessments, we onsider internal ontrols relevant to the entity's preparation and fair presentation of the finanial statements in order to design audit proedures that are appropriate in the irumstanes, but not for the purpose of expressing an opinion on the effetiveness of the entity's internal ontrols. An audit also inludes evaluating the appropriateness of aounting poliies used and the reasonableness of aounting estimates made by management, as well as evaluating the overall presentation of the finanial statements. We believe that the audit evidene we have obtained is suffiient and appropriate our opinion. KPMG AI Fazan & AI Sadhan, a partnership registered in Saudi Arabia and a member firm of the KPMG network of independent member firms affiliated with KPMG International ooperative 'KPMG International"), a Swiss entity. to provide a basis for

3 u u. o ( t:' tj U D D U G o Opinion In our opinion, the onsolidated finanial statements taken as a whole: 1. present fairly, in all material respets, the finanial position of the Group as at Deember 31, 2011, and the results of its operations and its ash flows for the year then ended in aordane with generally aepted aounting standards in the Kingdom of Saudi Arabia appropriate to the irumstanes of the Group; and 2. omply with the requirements of the Regulations for ompanies and the ompany's Artiles of Assoiation with respet to the preparation and presentation of finanial statements. For KPMG AI Fozan & AI Sadhan: ~\ Ebrahim Oboud Baeshen iense No. 382 Rabi Al Thani 7, 1434H orresponding to February 17, 2013

4 - ' SAUDI GROUND SERVIES OMPANY (A imited iability ompany) ONSOIDATED BAANE SHEET As at Deember 31,2011 Notes ASSETS urrent assets G ash and ash equivalents 6 208,503, ,000 Trade reeivables 7 654,353,912 Inventories 8 5,441,804 Prepayments and other urrent assets 9 51,421,257. Total urrent assets 919,720, ,000 Non-urrent assets Property and equipment ,189,151 Intangible assets 11 1,148,865,443 Total non-urrent assets 1,520,054,594 Total assets 2,439,775, ,000 IABIITIES ~ND SHAREHODERS' urrent liabilities EQUITY Trade payables 12 92,568,379 urrent portion of long-term debt 14 6,113,358 urrent portion of obligation under finane lease 14 1,327,261 Arued Zakat 18 18,283,533 Arued expenses and other urrent liabilities ,840,870 60,000 Total urrent liabilities 297,133,401 60,000 Non-urrent liabilities ong-term debt 14 19,367,923 Employees' end of servie benefits 5 111,387,875 Total non-urrent liabilities 130,755,798 Total liabilities 427,889,199 60,000 SHAREHODERS' EQUITY Share apital 4&15 886,869, ,000 Imputed additional equity 4&15 1,122,282,800 Exess onsideration transferred 4&15 (535,046,368) Statutory reserve 16 53,784,067 Retained earnings 483,996,606 (60,000) Total shareholders' equity 2,011,886, ,000 G Total liabilities and equity 2,439,775, ,000 The attahed notes 1 to 22 form an integral part of these finanial statements.

5 , ', ' '. ('. SAUDI GROUND SERVIES (A imited iability ompany) OMPANY ONSOIDATED STATEMENT OF INOME For the year ended Deember 31, Notes Revenue 1,790,601,372 Operating osts (1,056,126,235) Gross profit 734,475,137 General and administration expenses 17 (179,468,226) (20,000) Operating inome 555,006,911 (20,000) Other inome - net 3,064,493 Finane harges - net (2,656,585) Inome before Zakat 555,414,819 (20,000) Zakat i 18 ; (17,574,146) Net inome 537,840,673 (20,000) The attahed notes 1 to 22 form an integral part of these finanial statements. 2

6 ( ( ' t SAUDI GROUND SERVIES OMPANY (A imited iability ompany) ONSOIDATED STATEMENT OF ASH FOWS For the year ended Deember 31, 2011 OPERATING ATIVITIES Inome for the year before zakat Adjustments for: Depreiation Amortization of intangible asset Provision for employees' end of servie benefits (Gain)/ loss on disposal of equipment hanges in operating assets and liabilities: Inrease in trade reeivables Inrease in inventory Inrease in prepayments and other urrent assets Derease in trade payables Inrease in arued expenses and liabilities ash from operations Employees' end of servie benefits paid Zakat paid Net ash from operating ativities INVESTING ATIVITIES Purhase of property and equipment Proeeds from disposal of property and equipment Business ombination of GS, NHS and Attar Net ash used in investing ativities FINANING ATIVITIES Repayment of loan during the year Repayment of obligations under finane leases ash used in finaning ativities INREASE IN ASH AND ASH EQUIVAENTS ash and ash equivalents at the beginning of the year ASH AND ASH EQUIVAENTS OF THE YEAR AT THE END The attahed notes 1 to 22 form an integral part of these finanial statements ,414,819 63,276,639 55,604,216 37,642,823 (133,101) 711,805,396 (510,220,042) (2,581,297) (45,176,924) (49,954,867) 87,344, ,216,664 (3,354,801) (3,262,134) 184,599,729 (98,306,056) 136, ,480,378 31,311,154 (3,375,443) (4,531,603) (7,907,046) 208,003, , ,503,837 (20,000) (20,000) 20, , ,000

7 G ~ t i ( SAUDI GROUND SERVIES OMPANY (A imited iability ompany) ONSOIDATED STATEMENT OF HANGES IN SHAREHODERS' EQUITY For the year ended Deember 31, 2011 Balane at January 1 and Deember 31, 2009 Net inome for the year Balane at Deember 31,2010 Additional share apital issued (notes 4 &15) Net inome for the year Transfer to statutory reserve Balane at Deember 31, , ,000 Imputed additional equity Exess onsideration paid 886,369,100 1,122,282,800 (535,046,368) 886,869,100 1,122,282,800 (535,046,368) Statutory reserve Retained earnings (40,000) (20,000) (60,000) 537,840,673 53,784,067 (53,784,067) The attahed notes 1 to 22 form an integral part of these finanial statements ,000 (20,000) 440,000 1,473,605,532 I 537,840, ,784, ,996,606 2,011,886,205

8 i. r~. ~II t SAUDI GROUND SERVIES OMPANY (A imited iability ompany) NOTES TO THE ONSOIDATED FINANIA STATEMENTS For the year ended Deember 31, ORGANIZATION AND PRINIPE ATIVITIES Saudi Ground Servies ompany ("the ompany") is a limited liability ompany registered in the Kingdom of Saudi Arabia under ommerial Registration number dated 11 Rajab 1429H, (orresponding to July 14, 2008). The ompany was formed by Saudi Arabian Airlines orporation ("Saudia") in 2008 to onsolidate the Ground Support Servies division of Saudia (GSS) in the Kingdom of Saudi Arabia by aquiring ground handling businesses of Saudi Arabian Airlines, National Handling Servies ("NHS") and Attar Ground Handling / Attar Travel (olletively referred as "Attar"). The legal name "Saudi Airlines Ground Servies ompany" was hanged to "Saudi Ground Servies ompany" under the same Registration number on 20 Safar 1432H, (orresponding to January 24, 2011). The ompany is engaged in providing airraft leaning, passenger handling, baggage and ground handling servies to Saudia airlines, other loal and foreign airlines at various airports in the Kingdom of Saudi Arabia. On February 7, 2010, Saudia signed a Shareholders' Agreement (the "Agreement" or the "Shareholders' Agreement") with Attar and the shareholders of NHS to aquire ground handling businesses, as stated above. As a result of this agreement, the ompany aquired the Ground Supporting Servies Division of Saudia, ground handling business of Attar and the 100% issued apital of NHS (Note 4). The amended Artiles of Assoiation refleting the above hanges were approved by the Ministry of ommere of Industry on Safar 20, 1432H (January 24, 2011). The effetive date of the above-mentioned aquisition and transfer is agreed between the shareholders as January 1,2011. The ompany's Saudi Ground Servies ompany Khalidiyah Distrit, Saudia ity P. O. Box Jeddah Kingdom of Saudi Arabia 2. BASIS OF PREPARATION registered offie is loated at the following address: (a) Statement of ompliane The finanial statements omprise the onsolidated finanial statements of the ompany and NHS, its subsidiary as mentioned in Note 1, olletively referred as the Group. The aompanying onsolidated finanial statements have been prepared in aordane with the generally aepted aounting standards in the Kingdom of Saudi Arabia issued by the Saudi Organization for ertified Publi Aountants (SOPA). 5

9 ", SAUDI GROUND SERVIES (A imited iability ompany) OMPANY NOTES TO THE ONSOIDATED FINANIA STATEMENTS For the year ended Deember 31, BASIS OF PREPARATION (ontinued) (b) Basis of measurement The onsolidated finanial statements have been prepared on historial ost basis, using the arual basis of aounting and the going onern onept. () Funtional and presentation urreny (d) These onsolidated finanial statements are presented in Saudi Arabian Riyals (SR) whih is the funtional urreny of the ompany. Basis of onsolidation These onsolidated finanial statements inlude the finanial statements of the ompany and its subsidiary set forth in Note 1 above. (i) Subsidiary Subsidiary is an entity ontrolled by the Group. ontrol exists when the Group has the power to govern the finanial and operating poliies of an entity so as to obtain benefits from its ativities. In assessing ontrol, potential voting rights that presently are exerisable are taken into aount. The finanial statements of subsidiary are inluded in the onsolidated finanial statements from the date that ontrol ommenes until the date ontrol eases. The finanial statements of the subsidiary are prepared for the same reporting year as that of the Group, using onsistent aounting poliies. (e) ritial aounting judgements and estimates The preparation of onsolidated finanial statements requires the use of ertain ritial aounting estimates and assumptions that affet the reported amounts of assets and liabilities. It also requires management to exerise its judgement in the proess of applying the Group's aounting poliies. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to aounting estimates are reognized in the period in whih the estimates are revised and in any future period affeted. Signifiant areas where management has used estimates, assumptions or exerised judgements are as follows: 6

10 t ( t G 'J ' SAUDI GROUND SERVIES OMPANY (A imited iability ompany) NOTES TO THE ONSOIDATED FINANIA STATEMENTS For the year ended Deember 31, BASIS OF PREPARATION (ontinued) i) Impairment of non-finanial assets: The Group assesses, at eah reporting date or more frequently if events or hanges in irumstanes indiate,. whether there is an indiation that an asset may be impaired. If any indiation exists, or when annual impairment testing for an asset is required, the Group estimates the asset's reoverable amount. An asset's reoverable amount is the higher of an assets or ash-generating units (GU) fair value less ost to sell, and its value in use, and is determined for the individual asset, unless the asset does not generate ash inflows whih are largely independent to those from other assets or groups. Where the arrying amount of an asset or GU exeeds its reoverable amount, the asset is onsidered impaired and is written down to its reoverable amount. In assessing value in use, the estimated future ash flows are disounted to their present value using a pre-tax disount rate that reflets urrent market assessments of the time value of money and the risks speifi to the asset. Indeterrnining the fair value less osts to sell, an appropriate soure is used, suh as observable market pries or, if no observable market pries exist, estimated pries for similar assets or if no estimated pries for similar assets prevail, or it is based on disounted future ash flow alulations. Impairment for goodwill is determined by assessing the reoverable amount of eah ashgenerating unit (or group of ash generating units) to whih the goodwill relates. Where the reoverable amount of the ash-generating unit is less than their arrying amount an impairment loss is reognized. Impairment losses relating to goodwill annot be reversed in future periods for subsequent inreases in its reoverable amount in future periods. ii) Provision for doubtful debts A provision for impairment of trade reeivables is established when there is objetive evidene that the Group will not be able to ollet all amounts due aording to the original terms of the reeivables. Signifiant finanial diffiulties of the debtor, probability that the debtor will enter bankrupty or finanial reorganization, and default or delinqueny in payments are onsidered indiators that the trade reeivable is impaired. For signifiant individual amounts, assessment is made on an individual basis. Amounts whih are not individually signifiant, but are overdue, are assessed olletively and a provision is reognized onsidering the length of time onsidering past reovery rates. iii) Provision for slow moving inventory items The Group makes a provision for slow moving inventory items. Estimates of net realizable value of inventories are based on the most reliable evidene at the time the estimates are made. These estimates take into onsideration flutuations of prie or ost diretly related to events ourring subsequent to the balane sheet date to the extent that suh events onfirm onditions existing at the end of year. 7

11 t ( _ SAUDI GROUND SERVIES (A imited iability ompany) OMPANY NOTES TO THE ONSOIDATED FINANIA STATEMENTS For the year ended Deember 31, BASIS OF PREPARATION (ontinued) (0 Useful lives of property and equipment The management determines the estimated useful lives of property and equipment for alulating depreiation. This estimate is determined after onsidering expeted usage of the assets or physial wear and tear. Management reviews the residual value and useful lives annually and future depreiation harges are adjusted where management believes the useful lives differ from previous estimates. 3. SIGNIFIANT AOUNTING POIIES The signifiant aounting poliies adopted and onsistently applied by the management are as follows: (a) (b) () ash and ash equivalent ash and ash equivalent omprise ash on hand, ash with banks and other short-term bank deposits with an original maturity of three months or less. Trade reeivables Trade reeivables are arried at original invoie amount less provision made for doubtful aount. A provision for doubtful aounts is established when there is a signifiant doubt that the Group will be able to ollet all amounts due aording to the original terms of agreement. Bad debts are written off as inurred. Inventories Inventories are valued at lower of ost (determined prinipally by the weighted average method) and net realisable value. Stores and spares are valued at ost, less any provision for slow-moving items. (d) Property and equipment Property and equipment are stated at ost less aumulated depreiation and aumulated impairment loss. ost inludes expenditure that is diretly attributable to the aquisition of asset. Finane ost on borrowings to finane the onstrution of the asset is apitalized during the period of time that is required to omplete and prepare the asset for its intended use. 8

12 '6'"' SAUDI GROUND SERVIES OMPANY (A imited iability ompany) NOTES TO THE ONSOIDATED FINANIA STATEMENTS For the year ended Deember 31, SIGNIFIANT AOUNTING POIIES (ontinued) d) Property and equipment (ontinued) Subsequent expenditure is apitalized only when it inreases the future eonomi benefits embodied in the item of property and equipment. Expenditures for maintenane and repairs that do not materially extend the asset's life are inluded in expenses. Depreiation is harged to the onsolidated statement of inome on a straight-line basis over the estimated useful lives of individual item of property and equipment as follows: easehold improvements Airport equipment Motor vehiles Furniture, fixtures and equipment omputer equipment and appliations e) Business ombination Business ombinations (exept for entities under ommon ontrol) are aounted for using the purhase method. The ost of an aquisition is measured as the fair value of the assets given, equity instrument issued and liabilities inurred or assumed at the date of exhange, and inludes osts diretly attributable to the aquisition. Identifiable assets aquired and liabilities and ontingent liabilities assumed in a business ombination are measured initially at fair values at the date of aquisition. The exess of the ost of the business ombination over the ompany's share in the net fair value of the aquiree's identifiable assets, liabilities and ontingent liabilities is lassified as goodwill. If the ost of the aquired investment is less than its fair value as of the aquisition date, suh differene is adjusted by reduing the fair values of the non-urrent assets of the aquired investee in proportion to their book values. o Business ombination under ommon ontrol Business ombinations inluding entities or business under ommon ontrol are aounted for using book value aounting and measured at book value. The assets and liabilities aquired are reognised at the arrying amounts as transferred from the parent ompany's books of aounts. The omponents of equity of the aquired entities are added to the same omponents within the Group equity and any gain / (loss) arsing is reognised diretly in equity.

13 i 8 SAUDI GROUND SERVIES (A imited iability ompany) OMPANY NOTES TO THE ONSOIDATED FINANIA STATEMENTS For the year ended Deember 31, SIGNIFIANT AOUNTING POIIES (ontinued) g) Intangible assets i) Goodwill Goodwill represents the exess ost of investments over the fair value of the net assets aquired in a business ombination. Goodwill is tested annually for impairment and is arried at ost net of aumulated impairment losses. Gains or losses on the disposal of an entity inlude the arrying amount of goodwill relating to the entity sold. For the purpose of impairment testing, goodwill aquired in a business ombination is, from the aquisition date, alloated to eah of the Group's ash generating units that are expeted to benefit from the synergies of the ombination, irrespetive of whether other assets or liabilities of the aquiree are assigned to these units. ii) Other intangible assets Other intangible assets represents the ustomer ontrats and ustomer relationships. ustomer ontrat are amortized using the straight-line method over the related estimated eonomi lives not exeeding five years. ustomer relationships are amortized using the straight-line method over the related estimated eonomi lives not exeeding twenty years. h) Zakat Zakat is provided for in aordane with Saudi Arabian fisal regulations. The provision is harged to the onsolidated statement of inome. i) Provisions Provisions are reognised when the Group has an obligation (legal or onstrutive) arising from a past event, and the osts to settle the obligation are both probable and able to be measured reliably. j) eases ease arrangements that transfer to the Group substantially all the risks and benefits inidental to the ownership of the leased item are reognised as finane lease. eases where the lessor retains substantially all the risks and benefits of ownership are lassified as operating leases. 10

14 t ~ ( t. SAUDI GROUND SERVIES (A imited iability ompany) OMPANY NOTES TO THE ONSOIDATED FINANIA STATEMENTS For the year ended Deember 31, SIGNIFIANT AOUNTING POIIES (ontinued) (j) (k) (I) (m) (n) eases (ontinued) Assets purhased under finane lease are reorded at the lower of their fair value and the present value of the minimum lease payments at the ineption of the lease and are depreiated over their expeted useful lives on the same basis as owned assets. Finane osts are harged to the onsolidated statement of inome using the effetive interest method. The liability at the balane sheet date is stated net of future finane harges. Operating lease payments are reognised as an expense in the onsolidated statement of inome on a straight line basis over the lease term. Employees' end of servie benefits Employees' end of servie benefits, alulated in aordane with labour regulations of the Kingdom of Saudi Arabia, are arued and harged to onsolidated statement of inome. Revenue reognition Revenue from airport operations is reognised when the servies are provided. Inome from bank deposits Inome from bank deposits is reognised on an arual basis. Foreign urrenies Transations denominated in foreign urrenies are translated to the funtional urrenies of the Group at the exhange rates ruling at the date of the transation. Monetary assets and liabilities denominated in foreign urrenies at the balane sheet date are translated to the funtional urrenies of the Group at the foreign exhange rate ruling at that date. Exhange differenes arising on translation are reognized in the onsolidated statement of inome. (0) Expenses Due to the nature of the ompany's business all indiret expenses inurred are onsidered to be general and administration expenses and are lassified as suh. 11

15 " SAUDI GROUND SERVIES OMPANY (A imited iability ompany) NOTES TO THE ONSOIDATED FINANIA STATEMENTS For the year ended Deember 31, BUSINESS OMBINATIONS a) As stated in Note 1, the ompany had following aquisitions during the year: i) Ground Support Servies Division of Saudia ("GSS") On February 7, 2010, Saudia and the ompany have entered into a Sale and Purhase Agreement (SPA) for the GSS business unit (SBU) of Saudia (a 100% Government owned entity). The assets and liabilities transferred by Saudia, as presented in an independent study and shares issued as onsideration are summarized as follows: Assets ash and ash equivalents Property and equipment Reeivables and other assets iabilities Payables and other liabilities Net tangible assets Purhase onsideration in the form of ompany's shares issued Exess onsideration transferred (SAR '000) professional 93, ,712 70,927 (202,853) 130, ,152 (535,046) As the GSS division was previously 100% owned by Saudia and the ompany is also 75% owned by Saudia, therefore Saudia owned and ontrolled the GSS division before this transation and will ontinue to ontrol the ompany after this transation. The aounting for business ombinations involving ommon ontrol and where the ontrol is not transitory, are exluded from the sope of "Aounting Standard on Business ombinations" issued by SOPA. In the absene of any available guidane under SOPA for suh transations, the management has followed the requirements of International Finanial Reporting Standards (IFRS). The management has lassified this transation as business ombination under ommon ontrol in aordane with the requirements of IFRS 3: Business ombinations. Under IFRS 3, if a new entity (suh as the ompany) is formed to issue equity interests to effet a business ombination, one of the ombining entities that existed before the business ombination shall be identified as the aquirer. Sine Saudia is the largest shareholder in terms of size and business value and the transation involved eonomi substane from the perspetive of the reporting entity, the management has identified Saudia as the aquirer in this transation and adopted "book value aounting". Aordingly, the net assets transferred from Saudia are reorded by the ompany at their book values and no separate goodwill and intangibles are reognized by the ompany as part of this transation. onsequently, exess onsideration transferred is presented within equity. 12

16 Ie i t SAUDI GROUND SERVIES OMPANY (A imited iability ompany) NOTES TO THE ONSOIDATED FINANIA STATEMENTS For the year ended Deember 31, BUSINESS OMBINATIONS (ontinued) ii) National Handling Servies ompany imited ("NHS") On February 7, 2010, the ompany has entered into Sale and Purhase Agreement (SPA) for the 100% aquisition of apital of NHS in onsideration of the ompany's shares. As the prinipal shareholder of the NHS and pursuant to the Transfer of Operations Agreement ("the Agreement"), the ompany resolved to transfer the ommerial ativities of NHS to the ompany. onsequently the assets and liabilities of the NHS were transferred to the ompany as of January 1,2011 along with the business operations. ash and ash equivalents Property and equipment Reeivable and other assets Payables and other liabilities Net tangible assets Goodwill Intangible assets Total assets Equity: Share apital Imputed equity Total equity iii) Attar Ground Handling / Attar Travel (olletively referred "Attar") January 1,2011 (SAR '000) 15,000 94,570 84,809 (83,983) 110, , ,441 1,175, , ,758 1,175,001 On 7 February 2010 the ompany has entered into Sale and Purhase Agreement (SPA) for the aquisition of ground handling business of Attar in onsideration of the ompany's shares. 13

17 ,. SAUDI GROUND SERVIES OMPANY (A imited iability ompany) NOTES TO THE ONSOIDATED FINANIA STATEMENTS For the year ended Deember 31, BUSINESS OMBINATIONS (ontinued) The assets, liabilities, intangible assets and goodwill reorded in the books of aount of the ompany; inluding purhase onsideration is as follows: ash and ash equivalent Property and equipment Reeivables and other assets Payables and other liabilities Net tangible assets Goodwill Intangible assets Total assets Equity: Share apital Imputed equity Total equity 5. SEONDMENT AGREEMENTS 14 January 1,2011 (SAR '000) 3,500 72,882 22,604 (69,851) 29,135 63,652 76, ,000 35, , ,000 An independent Purhase Prie Alloation Study was onduted by an independent professional firm and the fair value of equity issued by the ompany to NHS and Attar is onsidered equivalent to the fair value of ground handling business aquired from NHS and Attar. As a result of the above study, the differenes between the par value of share apital issued by the ompany as onsideration transferred and the fair value of net assets aquired on aquisition of 100% apital of NHS and aquisition of ground handling business of Attar, is reognized as "Imputed additional equity" amounting to SAR 1,123 million under equity aption in the balane sheet. Aording to the Sale Purhase Agreement signed between Saudia and the ompany, the Saudia employees (SV Employees) have been seonded by Saudia to the ompany with effet from January 1, 2011 until the issuane of the Transfer Resolution (the Seondment Period). During the Seondment Period the ompany is responsible for all liabilities and obligations of Saudia in respet of the SV Employees pursuant to their terms of employment with Saudia (inluding, without limitation, salary, benefits, and any bonus payment or payments due as a result of a hange of the terms of employment of suh an employee during the Seondment Period).

18 ~ ' SAUDI GROUND SERVIES OMPANY (A imited iability ompany) NOTES TO THE ONSOIDATED FINANIA STATEMENTS For the year ended Deember 31, SEONDMENT AGREEMENTS (ontinued) The ompany agreed that it will enter into an employment ontrat with eah of the SV Employee who elets to transfer to the ompany at the end of the Seondment Period. SV Employees may at any time inluding the Effetive Time elet not to be transferred to the ompany pursuant to this Agreement. Saudia will indemnify the ompany in respet of eah loss, liability and ost whih it may sustain arising under or in onnetion with the ontrat of employment or appointment resolution of a SV Employee who elets not to transfer to the ompany and/or, following suh eletion, the termination of his or her employment, whether relating to an at or omission that ourred before or after January 1, 2011 inluding without limitation in respet of any arrears of salary, any arued benefits, any payments in lieu of notie, holiday pay, redundany payments, ompensation for wrongful or unfair dismissal or disrimination or any other order for damages or ompensation for any failure by Saudia to perform any duty imposed under any suh SV Employee's ontrat of employment (inluding, without limitation, eah loss, liability and ost inurred as a resultof defending or settling a laim alleging suh liability) or under appliable law. Saudia shall reimburse to the ompany all osts assoiated with eah SV Employee who is forty-five years of age or older as at the Effetive Time whih exeed SR 10,000 per employee per Gregorian alendar month. 6. ASH AND ASH EQUIVAENTS ash and ash equivalents at Deember 31 omprise the following: ash in hand ash at bank Short -term bank deposits At 31 Deember 2011, bank balanes amounting to SR million (2010: nil) are held in the name of related parties of the ompany, on behalf of the ompany. 7. TRADE REEIVABES Trade reeivables at Deember 31 omprise the following: Trade reeivables Related party (note 19) Total ess: Provision for doubtful debts , ,997,975 3,090, ,503, ,758, ,681, ,440,596 (32,086,684) 654,353, , ,000

19 SAUDI GROUND SERVIES (A imited iability ompany) 8. INVENTORIES OMPANY NOTES TO THE ONSOIDATED FINANIA STATEMENTS For the year ended Deember 31, 2011 Inventories at Deember 31 omprise the following: Spare parts Uniforms Others.3,779,705 2,043, ,415 Total ess: Provision for slow-moving items 9. PREP A YMENTS AND OTHER URRENT ASSETS Prepayments 6,592,900 (1,151,096) 5,441,804 and other urrent assets at Deember 31 omprise the following: Related Party reeivable (Note 19b) Deposits Advane to suppliers Prepayments Advane to staff Advane to others Others 16 17,721,087 13,013,531 6,189,839.5,610,731 4,439,487 3,307,510 1,139,072 51,421,257

20 r: J rj r1. r-: r'). r-j r1 r: -: r: -1r-i n rl.. e--; rl r1r: r-r fl, SAUDI GROUND SERVIES OMPANY (A imited iability ompany) NOTES TO THE ONSOIDATED FINANIA STATEMENTS For the year ended Deember 31, 2011 b) At 31 Deember 2011, airport equipment inludes assets aquired under finane leases with a ost of SR 74.3 million. As per the lease agreement, the title to leased equipment will be transferred to the ompany at the expiry of the lease term, on payment of the final instalment. ) apital work progress related to the progress payments made towards purhase of airport equipment ommitted and ordered. d) Assets held by the ompany and registered in the name ofrelated parties are in the amount of SR 8,518,

21 ie ' SAUDI GROUND SERVIES OMPANY (A imited iability ompany) NOTES TO THE ONSOIDATED FINANIA STATEMENTS. For the year ended Deember 31, INTANGIBE ASSETS a) Intangible assets at Deember 31 omprise the following: Goodwill (note 11 (b)) Other intangible assets (note 11 ()) b) Goodwill at Deember 31, omprise the following: 582,815, ,049,784 1,148,865,443 Goodwill from aquisition of: National Handling Servies (note 4(ii)) Ground handling business of Attar (note 4(iii)) ) Other intangible assets at Deember 31 omprise the following: ustomer ontrats ustomer relationships Total ess: Amortization for the year 519,164,059 63,651, ,815, ,179, ,475, ,654,000 (55,604,216) 566,049,784 i) ustomer ontrats refer to existing ontrats that the ompany has with its ustomers that are ongoing in nature and have expiration dates after the balane sheet date. ii) ustomer relationships represents intangible asset arising from the fat that the ompany has established relationship with various ustomers over the years and that this relationship is the fator in the renewal of ontrats and ustomer retentions. 12. TRADE PAY ABES Trade payables Due to related parties (Note 19) 18 34,766,111 57,802,268, 92,568,379

22 SAUDI GROUND SERVIES OMPANY (A imited iability ompany) NOTES TO THE ONSOIDATED FINANIA STATEMENTS For the year ended Deember 31, ARUED EXPENSES AND OTHER URRENT IABIITIES Arued staff osts Arued vaations Arued rent Other aruals Due to related parties (Note 19) Others 14. ONG-TERM DEBT AND EASE OBIGATION a) ong-term debt ong-term debts at Deember 31 omprise the following: Al Rajhi Bank loan Presented in the balane sheet: urrent portion inluded under urrent liabilities Non-urrent portion inluded under non-urrent liabilities Al Rajhi Bank oan b) ease obligation 19 74,908,486 20,561,755 17,460,987 8,679,007 41,655,758 15,574, ,840,870 25,481, ,113,358 19,367,923 25,481,281 60,000 60,000 The loan was obtained by Attar Ground Handling ompany through its partner Attar Travel ompany from Al Rajhi Bank in The loan bears finanial harges based on the prevailing market rates. The loan is repayable in monthly instalments by 2015 as perthe loan agreement. The loan agreement inludes ertain ovenants, whih among other things require ertain finanial ratios to be maintained. As stated in note 1, the ompany aquired ground handling business of Attar therefore the loan obligation along with all the related ovenants and pledges transfer to the ompany. The legal formalities in respet of transfer of loan to the ompany are in progress. Airport equipments were purhased by National Handling Servie ompany under a finane lease agreement in Obligation under finane leases is payable in monthly instalments over a period up to three years. Instalments due within one year are shown as urrent liability. urrent obligation under finane lease amounted to SR 1,327,261 represents future lease payment due in 2012.

23 SAUDI GROUND SERVIES (A imited iability ompany) 15. SHARE APITA 16. STATUTORY RESERVE OMPANY NOTES TO THE ONSOIDATED FINANIA STATEMENTS For the year ended Deember 31, 2011 At Deember 31, 2011 and 2010, the ompany's share apital of SR 886,869,100 (2010: SR 500,000) is divided into 8,868,691 shares (2010: 500 shares) of SR 100 eah, owned by Saudi Arabian shareholders as follows: No. of shares Value ash In-kind % per share Amount Amount Saudi Arabian Airlines orporation 1,105,000 5,546, ,151, ,000 National Aviation Ground Support 150,000 1,712, ,242,500 Attar Ground Servies ompany 35, , ,474,700 Total 1,290,000 7,578, ,869, ,000 On 23 Muharram 1432H, orresponding to Deember 29, 2010, the shareholders of the ompany through an amendment to the Artiles of Assoiation of the ompany inreased the share apital of the ompany from SR 500,000 to SR 886,869,100 with the approval of the Ministry of ommere and Industry. The apital was inreased by issuing 75% of shares to Sauida, 21 % of shares to National Aviation Ground Support and 4% shares to Attar Ground Servies ompany against inkind assets and ash amount ontributions (refer to note 4). In aordane with the ompany's Artiles of Assoiation and the Regulations for ompanies in the Kingdom of Saudi Arabia, the ompany is required to transfer eah year 10% of its net inome to a statutory reserve until suh reserve equals 50% of its share apital. 17. GENERA AND ADMINISTRATION EXPENSES Employee related expenses Amortization of intangible assets (Note 11) Rent, motor vehile and other offie osts Depreiation 20 80,306,042 55,604,216 40,311,477 3,246, ,468,226 20,000 20,000

24 SAUDI GROUND SERVIES OMPANY (A imited iability ompany) NOTES TO THE ONSOIDATED FINANIA STATEMENTS For the year ended Deember 31, ZAKAT harge for the year harge for the year 17,574,146 The urrent year provision is based on the following: Share apital 886,869,100 Exess onsideration (535,046,368) Imputed additional equity 1,122,282,800 Reserves (60,000) Adjusted net profit 528,089,543 Provisions made during the year 83,778,533 Book value of long term assets (net of related finaning) 26,808,541 Dedution against written down value of property, plant and equipment and inventories (1,409,756,298) Zakat base 702,965, % of zakat base 17,574, The differenes between the finanial and the Zakatable results are due to ertain adjustments aordane with the relevant fisal regulations. Movements in provision during the year The movement in the Zakat provision for the year was as follows: in Transferred on aquisition Provided during the year Payments during the year At the end of the year 3,971,521 17,574,146 (3,262,134) 18,283,533 2]

25 SAUDI GROUND SERVIES (A imited iability ompany) OMPANY NOTES TO THE ONSOIDATED FINANIA STATEMENTS For the year ended Deember 31, REATED PARTY TRANSATIONS AND BAANES Related party transations are undertaken at mutually agreed terms and are approved by the management. (a) Due from related parties - under trade reeivables: Nature of Name Relationship transations Saudi Arabian Airlines Trade / orporation Parent ompany operations Saudi Airlines - argo ompany imited Trade / (SA) Affiliate operations Saudi Aerospae Trade / Engineering Industries Affiliate operations 22 Amount of transations ,114,593,799 23,314,410 2,017,542 (b) Due from related parties - under prepayments and other urrent assets: losing balane ,716,244 20,947,892 2,017, ,681,678 Nature of Name Relationship transations Amount of transations losing balane Saudi Arabian Airlines Parent group Minimum ash orporation entity requirement 16,180,432 16,180,432 oan Attar Affiliate adjustment 1,540,655 1,540,655 () Due to related parties - under trade payables: 17,721,087 Nature of Name Relationship transations Amount of transations losing balane Saudi Arabian Airlines Parent group Trade / 9,980,766 9,926,237 orporation entity operations Saudia atering Parent group Trade / 30,194,186 15,697,363 entity operations Saudia Aerospae Parent group Trade / 48,962,307 31,971,452 Engineering Industries entity operations Saudia Airlines argo Parent group Trade / imited (SA) entity operations 207, ,216 57,802,268

26 ... SAUDI GROUND SERVIES (A imited iability ompany) OMPANY NOTES TO THE ONSOIDATED FINANIA STATEMENTS For the year ended Deember 31, REATED PARTY TRANSATIONS AND BAANES (ontinued) (d) Due to related parties - under arued expenses and other payables: Saudi Arabian Airlines orporation Relationship Parent entity 20. ONTINGENT IABIITY Nature of transations Trade / operations Amount of transations ,522,959 losing balane ,655,758 The ompany's bank has provided, in the normal ourse of business, bank guarantees amounting to SR 13.2 million to the Ministry of Finane and National Eonomy, Saudi Aramo and General Authority for ivil Aviation ("GAA"), in respet of labour visa, fuel supply and Hajj operations, respetively. The ompany's bank has marked bank balanes, amounting to SR 13.2 million, as lien against these guarantees. 21. FINANIA INSTRUMENTS AND RISK MANAGEMENT Finanial instruments arried on the onsolidated balane sheet inlude ash and ash equivalents, aounts reeivable, aounts payable, long-term debts and arued expenses and other liabilities. redit risk is the risk that one party will fail to disharge an obligation to a finanial instrument and will ause the other party to inur a finanial loss. The ompany seeks to limit the redit risk with respet to the ustomers through by monitoring outstanding reeivables. ash and ash equivalents are plaed with national and international banks with sound redit ratings. Aounts reeivable are mainly due from Saudia and other foreign airlines and are stated at their estimated realizable values. Fair value and ash flow interest rate risks are the exposures to various risks assoiated with the effet of flutuations in the prevailing interest rates on the Group's finanial position and ash flows. The Group's interest rate risks arise mainly from short-term bank deposits whih are at floating rates of interest. All deposits are subjet to re-priing on a regular basis. Management monitors the hanges in interest rates and believes that the fair value and ash flow interest rate risks to the Group are not signifiant. iquidity risk is the risk that an enterprise will enounter diffiulty in raising funds to meet ommitments assoiated with finanial instruments. iquidity risk may result from the inability to sell a finanial asset quikly at an amount lose to its fair value. iquidity risk is managed by monitoring on a regular basis that suffiient funds are available to meet the Group's future ommitments. 23

27 SAUDI GROUND SERVIES (A imited iability ompany) OMPANY NOTES TO THE ONSOIDATED FINANIA STATEMENTS For the year ended Deember 31, FINANIA INSTRUMENTS AND RISK MANAGEMENT (ontinued) urreny risk is the risk that the value of a finanial instrument will flutuate due to hanges in foreign exhange rates. The Group's transations are prinipally in Saudi Arabian Riyal and United States Dollars. Other transations in foreign urrenies are not material. Fair value is the amount for whih an asset ould be exhanged, or a liability settled bet\~een knowledgeable willing parties in an arm's length transation. As the aompanying onsolidated finanial statements are prepared under the historial ost method, differenes may arise between the book values and the fair value estimates. Management believes that the fair values of the Group's finanial assets and liabilities are not materially different from their arrying values. 22. BOARD OF DIRETORS' APPROVA The onsolidated finanial statements were authorized for issue by the Board of Diretors on 14 Otober ~ r-.. 24