Saudi International Petrochemical Company (Sipchem) (Saudi Joint Stock Company)

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Martha McKenzie
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1 Saudi International Petrochemical Company (Sipchem) (Saudi Joint Stock Company) Minutes of the Meeting of the 18 th Ordinary General Assembly Meeting Tuesday 11/06/1436 H. 31/03/2015 G. As per the Invitation of the board to the shareholders of Saudi International Petrochemical Company (Sipchem) for attending the meeting of the eighteenth meeting of the ordinary general assembly meeting that was published in Tadawul website on 24/02/2015 G. and in Al- Youm Newspaper, Issue # (15230) on 25/02/2015, the assembly meeting was held at seven PM on Tuesday 11 Jummada II, 1436 H, corresponding to 31 March, 2015 G. in the meeting room in Ritz Carlton hotel in Riyadh city under the presidency of HE Eng. Abdulaziz A. Al-Zamil, Chairman of the Board of Directors, and with the attendance of a number of the shareholders, in addition to the attendance of the following members of the board of directors: Dr. Abdulaziz A. Al-Gwaiz MR. Fahd S. Al-Rajhi Eng. Reyadh S. Ahmed Mr. Abdulaziz A. Al-Khamis Mr. Abdulrahman A. Al Turki Eng. Ahmad A. Al-Ohali Dr. Sami M. H. Zaidan Mr. Mohammed A. Al-Ghurair The representatives of the Ministry of Commerce and Industry (MOCI), Mr. Abdullah B. Aseeri, Mr. Ali A. Al Qareen and the representative of the Capital Market Authority (CMA), Mr. Adel A. Al Malki attended the meeting. H.E. Eng. Abdulaziz A. Al-Zamil, Chairman, opened the meeting with a welcome note speech addressed to Sipchem's shareholders, representatives of MOCI and CMA. He declared the shareholders' attendance quorum statistics as follows: Total company shares count: 366,666,666 Statement Shares Percentage Shares by e-voting (Tadawulati) 138,294,138 37,7 % Shares attending the meeting by shareholders 57,933,333 15,8 % Shares attending the meeting by representation 44,672,528 12,2 % Total shares (by shareholders or representation) in 102,605,861 28,0 % the meeting Total shares attending the meeting 240,899,999 65,7 % Then, the chair of the meeting announced the number of shares, by shareholders or representation; total attending shares counted (240,899,999) whereas total company's capital shares count (366,666,666) shares, so attendance percentage reached (65,7%), namely not less than half of the capital; so, holding the assembly meeting was legitimate as per Article (91) of the Companies' Act and Article (31) of the Articles of Association of the company. After that, the chair of the meeting nominated Mr. Rashid M. Al Dossari, General Manager of Public Relations and Corporate Affairs, as a Secretary of the Meeting, Mr. Dhafer Al Omari (Shareholder), Dr. Mohammed Al Matar (Shareholder) and Mr. Faisal Al-Modlij from the company management, as members forming the votes collecting and sorting committee. The chair of the meeting requested from those who wish to stand as a candidate for being in the 1

2 committee of collecting and sorting votes to go ahead, but nobody did that; so the attendants agreed on the above mentioned candidates. The chair of the meeting informed the attending shareholders that the company enabled its shareholders who were not able to attend the meeting of the assembly personally to vote on all the items of the agenda by voting online through Tadawulati website that from 17/03/2013 till 31/03/2015, indicating that the voting percentage through Tadawulati website is 37.7 % of the total shares of the company. After that, the chair of the meeting requested the secretary to inform the attending shareholders about the method of using the electronic voting devices as the secretary of the meeting explained the mechanism and method of using the voting devices to the shareholders. Then, the chair of the meeting stated the items of the meeting agenda as follows: The first item: Approving the Board of Directors' report for the fiscal year 2014 The chair of the meeting said that the Board of Directors' report of for the fiscal year 2014 has been published in the local newspapers on 24 th February 2015 and that the report is attached in the meeting file. Then, he requested from the Chief Executive Officer (CEO) Eng. Ahmed Abdulaziz Al-Ohali to present the work progress in Sipchem's current projects and the projects under construction and the most important developments and accomplishments during the last period. Then, the Chief Executive Officer said to the shareholders that Sipchem was able to achieve good financial results in spite of the shutdowns and periodical maintenance of some plants during the year. The financial results of 2014, God Willing, showed net profits of SR 606 million compared with SR 620 million in Based on these results, the board decided to pay SR 0.60 per share as cash earnings to the shareholders for the first half of the fiscal year 2014 for and they were distributed on 17/07/2014. In addition, the board recommended distributing SR 0.65 per share as cash earnings to the shareholders for the second half of the fiscal year This recommendation shall be discussed in this OGM meeting; so, the total dividends paid in the fiscal year 2014 shall be SR 1.25 per share, namely 12.5 % of the nominal value of the share. Eng. Al-Ohali mentioned that all Sipchem's current plants are performing very well, safe and with the required planned productivity. The total production of these plants in 2014 reached 2.1million metric ton. Currently, Sipchem shall execute many projects with investments amounting to five billion Saudi Riyals and during the last year, the initial start-up of the following plants (Sipchem's affiliates) started: 1. Gulf Advanced Cable Insulation Company's Plant of Cable Insulation Polymers in March Polymers International Company's Plant of Ethylene Vinyl Acetate and LDPE in July Saudi Specialized Products Company's Plant of Specialized metal moulds in September

3 4. Saudi Specialized Products Company's Plant of Ethylene Vinyl Acetate films in December 2014 Furthermore, he confirmed that Sipchem is exerting its best efforts within 2015 to operate its following industrial projects: 1. Sipchem announced the commercial operation of Ethylene Vinyl Acetate and LDPE plant that shall start on 01/04/2015, one of the most important new projects of Sipchem's. 2. Sipchem inaugurated its R&D Centre, known as Product & Application Development Centre (PADC) on March 18, 2015 in Dhahran Techno Valley, King Fahd University of Petroleum & Minerals (KFUPM). Sipchem invested SR 300 million to establish this center which shall be executed, managed and operated by the company. The center shall include 40 laboratories cover all fields of research, technical services, products development, Products Applications, Analysis and Testing. 3. Sipchem Chemicals Company's (SCC) Project of Polybutylene terephthalate (PBT) during the second quarter He added that Sipchem Marketing Company managed to market and sell, within 2014, 568 thousand metric ton of the company products. The Sipchem's developing plan concentrates mainly on exploring new markets in Europe, Asia and Middle East though Sipchem Marketing Company and its offices in Europe and Asia. Regarding the company strategies, Sipchem is considering the available investment opportunities to increase its profits and to develop its shareholders' equities. These goals are based on its strategic plans adopted by the Board of Directors despite the oil prices fluctuation during this period as Sipchem's strategy is based on the following pillars: 1. Increasing the production capacity and enhancing operational efficiency of the affiliates' plants. 2. Developing a long-term relationship with the company's suppliers and clients to reduce operation costs. 3. Continuous developing in the products quality through research, development and applying the best international practices standards. 4. Decreasing the costs to enhance the competitive capacity of the company. 5. Long-term investment in the Saudi manpower and this shall reflect positively on the performance of the company. 6. Expanding and diversification in the products of the company by investing in the downstream projects and other relevant projects. This shall be accomplished by establishing new projects or acquisition of whole or partial shares in established projects. 3

4 7. Exploring the suitable Merge & Acquisition opportunities according to the strategic objectives of the company. Human resources: During the last few years, Sipchem witnessed accelerating progress in regards with the optimal use of its human resources. From the start of the company, the training and developing programs were conducted intensively according to specialty and administrative degrees to ensure work efficiency based on the latest training and development management systems. Sipchem's manpower, as of the end of 2014, counted 1,076 employees, 74% of this number are Saudi. Corporate Social Responsibility (CSR) At last, Sipchem is performing its responsibility towards its society very actively through supporting its social activities; as the Board of Directors approved to allocate 1% of the total net annual profits for supporting the Social Responsibility Program in its surrounding environment. The chair of the meeting announced opening the discussion with the shareholders and that they could pose questions and enquiries in regards with the Board of Directors report. The chair of the meeting and the Chief Executive Officer (CEO) gave answers to all the shareholders' questions: One of the shareholders asked: The Chief Executive Officer (CEO) answered: One of the shareholders asked: The Chief Executive Officer (CEO) answered: What are your expectations about the effect of the acute decline of oil prices on the petrochemical sector? It is natural and expected that the petrochemical sector is affected during 2015 because of the decrease in the petrol prices that shall decrease the prices of the international petrochemical prices because of the low demand on them with our expectations of improving relatively in the second quarter of this year. Shall the start of the commercial operations of the companies projects within 2015 affect the dividends during 2015? The commercial operations of Ethylene Vinyl Acetate (EVA) and LDPE plant shall commence on 01/04/2015 as announced lately in Tadawul website on 30/03/2015. As for Cable Insulation Polymers Plant that announced its initial start-up on 03/03/2014, its commercial operations shall commence within the next two months and this shall be announced on a later stage. He said that these projects shall enhance the cash flow of the company and so the ability to continue in the in distributing the profits to its shareholders. Then, the chair of the meeting requested the shareholders to vote on the first item. 4

5 The Second Item: Approving the external auditors report for the fiscal year that ended on 31/12/2014 The chair of the meeting requested the auditor of the company (M/S Bakr Abu Al Kheer & Partners) to read his report for the fiscal year ended on 31/12/2014 and after that the auditor read the report. Then, the chair of the meeting requested the shareholders to ask questions regarding the report; none of the shareholders asked any question regarding the report. Then, he requested the shareholders to vote on the second item. The Third Item: Approving the financial statements and the profits and losses sheet for the fiscal year that ended on 31/12/2014 The chair of the meeting requested the shareholders to ask the auditor of the company (M/S Bakr Abu Al Kheer & Partners) and questions regarding the financial statements, profits and losses of the company; none of the shareholders asked any questions regarding the report. Then he requested the shareholders to vote on the third item. The Fourth Item: Discharging the board from liability for the year ended on 31 December The chair of the meeting requested the shareholders to vote on the fourth item, mentioning that the board is not entitled to vote on this item. The Fifth Item: Approving the recommendation of the board regarding distributing cash earnings to the shareholders of the company for the second half of 2014 for SR 0.65 per share, namely 6.5% of the nominal value of one share with a total amount SR 238,333,333. The approved dividends will be distributed to shareholders appearing in the company registrar of shareholders as at the trading day coinciding with the date of OGM. The chair of the meeting announced that if the shareholders approve the fifth item, the National Commercial Bank (NCB) shall deposit the profits amounts in the bank accounts connected with the portfolio of the shareholders that who are eligible to receive these profits on Thursday 9 th of April The Sixth Item: Approving the distribution of SR 2,200,000 (Only two millions and two hundred thousand Saudi riyals) bonus to the members of the board, SR 200,000 (Only two hundred thousand Saudi riyals) for each member for the fiscal year The chair of the meeting requested the shareholders to vote on the sixth item. The Seventh Item: Appointing M/S KPMG as the company's external auditors for the fiscal year 2015 and the quarterly financial statements and to approve their fees. The chair of the meeting requested the shareholders to vote on the seventh item. The votes collecting and sorting committee with participation of the secretary of the meeting and under the supervision of the representatives of the Ministry of Commerce and Industry reviewed and approved the voting results. Board of Directors members did not participate in voting on that item related to discharging their liability from managing the company during the ended fiscal year as per Article (93) of the Companies Act; the number of shares owned by the 5

6 Board of Directors members is 138,865,933 shares and their number of votes is 138,865,933. Then, the chair of the meeting requested the secretary to say the results of voting as follows: S. Resolution Approving Percentage Disapproving Percentage votes votes 1 To approve the report of the Board of 239,213,699 99,3% 1,686, % Directors for the fiscal year ended 31/12/ To approve on the external auditors 240,177,299 99,7% 722, % report for the fiscal year ended on 31/12/ To approve the financial statements 240,177,299 99,7% 722, % and the profits and losses sheet for the fiscal year ended on 31/12/ To discharge the board from liability 101,932,032 99,9% 102,034 0,1% for the fiscal year ended on 31/12/ To approve the recommendation of 240,839, % 60,531 0% the Board of Directors regarding distributing cash earnings to the shareholders of the company for the second half of 2014, namely SR 0.65 per ordinary share (6.5% of the nominal value). Consequentially the distributed dividends for the second half of the year 2014 amounted to SR 238,333,333. The approved dividends will be distributed to shareholders appearing in the company registrar of shareholders as at the trading day coinciding with the date of OGM. 6 To approve to pay SR 2,200, ,490,999 99,0% 2,409,000 1,0% (Only two millions and two hundred thousand Saudi riyals) bonus to the Board of Directors for the fiscal year that ended on 31 December To approve appointing KPMG as the external auditors for the company for the fiscal year 2015 and the quarterly financial statements for the year 2015, and to approve their fees. 240,418,199 99,8% 481, % The Ordinary General Assembly meeting was adjourned at 8 pm, and the chair of the meeting, on behalf of the Board of Directors, extended his thanks and appreciation, to all the shareholders, representatives of the Ministry of Commerce and Industry and the representative of the Capital Market Authority, for their active and effective participation in that successful meeting. Secretary of the Meeting Mr. Rashid M. Al-Dossari Chairman of the Meeting Eng. Abdulaziz A. Al-Zamil 6

Board of Directors Annual Report for 2014

Board of Directors Annual Report for 2014 0 Board of Directors Annual Report 2014 Contents Page 2 Chairman's Message 4 Sipchem Activity Description 5 Sipchem Affiliate Activities Description 10 Affiliates