Corporate Governance Code

Corporate Governance Code

Corporate Governance Code

The purpose of this code is to set out Almarai’s approach to corporate governance. Almarai is committed to maintaining high standards of corporate governance and sees good corporate governance as an essential tool in maximizing long term shareholder value and as being entirely consistent with its commitment to quality in all of its processes and products. The rules set out in the Company’s Corporate Governance guidelines are mandatory for all Directors and staff of Almarai, and can only be amended by a resolution of the Board of Directors.

Corporate Governance is defined as ‘the system by which business corporations are directed and controlled’. The corporate governance structure specifies the distribution of authority and responsibilities among different participants in the corporation, such as, the Board, managers, shareholders and others, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set and the means of attaining those objectives and monitoring performance. The Board of Directors is responsible for Almarai’s Corporate Governance Code.

The shareholders’ role in governance is to appoint the directors and auditors and to satisfy themselves that an appropriate governance structure is in place. The responsibilities of the Board include setting the company’s strategic aims, providing the leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship. The Board’s actions are subject to laws, regulations and the shareholders in general assembly meeting. Almarai’s Corporate Governance Code has therefore been prepared in the light of international principles of sound corporate governance, and should be viewed as setting the framework for corporate governance within the Company. It should not be seen as a substitute for sound judgment and honourable arms-length dealings by directors and officers of the company and should be viewed within the context of the broader legislative framework in Saudi Arabia. In particular, the stipulations of the following, the requirements of which have not all been incorporated in this code, need to be borne in mind when considering corporate governance issues:

  • The requirements of the Capital Markets Authority (CMA) of Saudi Arabia and of Tadawul.
  • The Companies’ Law of Saudi Arabia and associated ministerial directives of the Ministry of Commerce & Industry (MOCI).
  • Almarai’s own bye-laws.

The Board of Directors will approve amendments to this Corporate Governance framework from time to time to comply with changing legal and business requirements, consistent with ensuring sound management and governance practices.

Almarai’s governance code incorporates the entire corporate governance code issued by the CMA, except paragraph‘ d’ (of Article 6) which stipulates that, ‘Investors who are judicial persons and who act on behalf of others – e.g. investment funds – shall disclose in their annual reports their voting policies, actual voting and ways of dealing with any material conflict of interests that may affect the practice of the fundamental rights in relation to their investments.’ The reason for not including this clause in the Company’s governance policy is because Almarai does not have the legal identity to bind investors or persons with legal status who are acting on behalf of others – such as investment funds – to disclose their voting policy.

Rights of Shareholders and the General Assembly

Almarai Articles of Association and Corporate Governance ensure that Shareholders enjoy all rights related to shares; in particular the right of receiving a share of approved dividends payments, the right to receive a share of the Company’s assets upon liquidation, the right to attend Shareholders General Assemblies and participate in their deliberations and voting on their decisions, the right of shares disposal, the right to oversee the work of the Board of Directors and file responsibility litigation against Board Members, and the right to inquire and request information so long as it does not compromise the interests of the Company and does not conflict with the Terms and Executive Regulations of the Capital Market Authority. Almarai manages to allow the greatest participation of its Shareholders in the General Assembly meetings and is very keen to ensure that the choice of time and venue enables full participation. Further, Almarai adopts the electronic voting system to make it easier for its Shareholders to exercise their right of voting if they are unable to attend in person. Almarai Articles of Association and Corporate Governance also provide Provisions related to the Shareholders General Assembly, which includes procedures and precautions necessary to ensure that all Shareholders are exercising their regular rights. The Shareholders General Assembly is the highest power in the Company with sole authorities including the appointment and termination of Board Members, approval of the Consolidated Financial Statements, appointment of the External Auditor and determination of his fees, approval of dividends distribution as recommended by the Board of Directors, increase or decrease of the capital of the Company and the amendment of the Articles of Association of the Company. Almarai provides sufficient access to its Shareholders to read the minutes of the General Assembly meeting, and provides the Capital Market Authority with a copy of the minutes within (ten) days from the date of the meeting.

Board of Directors Formation & Functions

Almarai General Assembly is appointing nine members for the Board of Directors by the way of cumulative voting for a term not exceeding three years. The General Assembly’s rules regarding the appointment, resignation, term of office, powers, remuneration and the principal requirements are summarised herein. The Board of Directors is the supreme management body in the company and is appointed by the shareholders in General Assembly in order to represent and protect the company’s interests. The Board is responsible to lead and control the company and discharges this responsibility by approving the implementation of company strategies and objectives and empowering the management of the company to run the business within defined parameters and by closely monitoring the performance of the company. While the Board delegates authority to the company’s management, under the direction of the Chief Executive Officer (CEO), to attend to the routine running of the company’s business, the Board retains the ultimate fiduciary responsibility to shareholders to ensure the proper operations of the company. The Board is appointed by Shareholders and has the primary responsibility of operating the company in the long term best interests of shareholders. The Board also has a vital responsibility to provide clear directions and boundaries in which the company’s Executive Management must operate. This involves setting out a clear vision and strategy for the company and defining the delegations that will be allowed to management and the policies and boundaries in which they are permitted to operate. And that is by:

  • Approving the strategic plans and main objectives of the company and supervising their implementation; this includes:

    • Laying down a comprehensive strategy for the company the main work plans and the policy related to risk management, reviewing and updating of such policy.
    • Determining the most appropriate capital structure of the company, its strategies and financial objectives and approving its annual budgets.
    • Supervising the main capital expenses of the company and acquisition / disposal of assets.
    • Deciding the performance objectives to be achieved and supervising the implementation thereof and the overall performance of the company.
    • Reviewing and approving the organizational and functional structures of the company on a periodical basis.
  • Laying down rules for internal control systems and supervising them; this includes:

    • Developing a written policy that would regulate conflict of interest and remedy any possible cases of conflict by members of the Board of Directors, executive management and shareholders. This includes misuse of the company’s assets and facilities and the arbitrary disposition resulting from dealings with the related parties.
    • Ensuring the integrity of the financial and accounting procedures including procedures related to the preparation of the financial reports.
    • Ensuring the implementation of control procedures appropriate for risk management by forecasting the risks that the company could encounter and disclosing them with transparency.
    • Reviewing annually the effectiveness of the internal control systems.
  • Drafting a Corporate Governance Code for the company that does not contradict the provisions of this regulation, supervising and monitoring in general the effectiveness of the code and amending it whenever necessary.
  • Laying down specific and explicit policies, standards and procedures, for the membership of the Board of Directors and implementing them after they have been approved by the General Assembly.
  • Outlining a written policy that regulates the relationship with stakeholders with a view to protecting their respective rights; in particular, such a policy must cover the following:

    • Mechanisms for indemnifying the stakeholders in the event that their rights are contravened under the law and their respective contracts.
    • Mechanisms for settlement of complaints or disputes that might arise between the company and the stakeholders.
    • Suitable mechanisms for maintaining good relationships with customers and suppliers and protecting the confidentiality of information related to them.
    • A code of conduct for the Company’s executives and employees compatible with the proper professional and ethical standards and regulating their relationship with the stakeholders. The Board of Directors lays down procedures for supervising this code and ensuring its compliance.
    • The Company’s social contributions.
  • Deciding policies and procedures to ensure the company’s compliance with the laws and regulations and the company’s obligation to disclose material information to shareholders, creditors and other stakeholders.

Members of the Board of Directors

Almarai’s Corporate Governance guidelines stipulate that the Board should include a minimum of 1/3 of independent directors. Any executive may also be a Director upon satisfaction of the relevant legal requirements.

The Extraordinary General Assembly held on April 2nd 2013 has re-elected the existing Board of Directors via accumulated voting for three years effective August 7th 2013. The following tables illustrate Director’s names, Position and Membership status for the current session:

Member Name Position Membership status
HH Prince Sultan bin Mohammed bin Saud AlKabeer Chairman Non-Executive
HH Prince Naif bin Sultan bin Mohammed bin Saud Al Kabeer Board Member Non-Executive
Mr. Abdulrahman bin Abdulaziz Al Muhanna Board Member Non-Executive
Mr. Suliman Abdulqader Al Muhaideb Board Member Non-Executive
Engr. Abdullah Bin Mohammed Noor Rihaimi Board Member Non-Executive
Mr. Ibrahim Mohammed Al Issa Board Member Non-Executive
Engr. Nasser Mohammed Al Muttawa Board Member Independent
Engr. Mosa Omran Mohammed Al Omran Board Member Independent
Dr. Ibrahim Hassan Al Madhon Board Member Independent

Board of Directors Committees

The Board may at any time establish by formal resolution other subcommittees and specify the authority, objectives and reporting lines of such committees. On an annual basis the Board will review and either ratify or modify the authorities of all subcommittees, to ensure that their delegations remain appropriate.

Executive Committee

Almarai’s bye-laws (Article 26) allow the Board the option to establish an Executive Committee, if it so chooses. Article 26 states: ‘The Board of Directors may appoint from among its members an Executive Committee. The Board of Directors shall appoint a Chairman from among the members of the Committee and shall specify the number of members of the Committee and the required quorum for its meetings. In accordance with the directions and guidelines prescribed by the Board from time to time, the Committee may exercise all of the powers Authorized by the Board. The Executive Committee may not revoke or alter any of the resolutions adopted, or rules laid down, by the Board of Directors’.

The Executive Committee can be subjected to article 13 of Corporate Governance Regulations which necessitate that the composition of the Board Committees is based on the Company’s needs and circumstances and to allow the Board of Directors to perform its duties effectively. The committees are formed in accordance with general procedures established by the Board of Directors including: defining the task of the Commission, the duration of its work, the prerogatives given, with the obligation of the Board to follow up the work of these committees periodically to check on the progress of the work entrusted to it. The company’s Administration Council decided upon the composition of the Executive Committee and its tasks and responsibilities, which include the following:

  • Participate in the development of new strategic plans and evaluate proposals from executive management for such plans, including possible mergers or acquisitions and make recommendations to the Board.
  • Review company performance at each Executive Committee meeting and assess performance against targets, analyse and make enquiries about the underlying factors, trends and major developments and advise management accordingly.
  • Review company performance on a monthly basis against agreed objectives and budgets, based on an agreed set of reports to be supplied monthly by company management and alert management and other Executive Committee members of any significant developments observed. If necessary, request the Company’s management to convene an additional committee meeting.
  • Review, evaluate and make recommendations to the Board on the approval of annual budgets.
  • Review and evaluate new Project Capex Proposals, approving those within the delegation of the committee, initially set as approval of Project Capex up to SAR 20 million and capped at a maximum approval of SAR 150 million in any one financial year after approval of the annual (Operational and Capex) budget. In the case of all Project Capex outside this delegation, the committee will review and evaluate the Capex and make a recommendation to the Board on acceptability.
  • Review post–implementation analyses supplied by management for all major Capex (greater than SAR 2 million) and advise the Board on the outcome and any learning points to emerge.
  • Provide advice to the Board on the setting of dividends, taking into account any recommendations made by the Audit & Risk Committee in regard to dividends.
  • Review policies and procedures developed by Executive management but not approve anything requiring Board approval.
  • Approve the appointment of persons reporting directly to the CEO, based on the recommendations of the CEO, providing that he should not take office until approved by this committee.
  • Make recommendations to the Board on any changes to sponsors or Agency structures.
  • Review and approve request for corporate guarantees, up to the Committee’s Limit of Authority.
  • Periodically review the company’s Corporate Governance policies and Code of Conduct, and make recommendations to the Board for any modifications considered desirable.
  • Carry out specific requests from the Board of Directors.
  • Review the implementation of decisions taken by the Board as well as by the Executive Committee itself.
  • Review matters or intended actions which might have a significant impact on the Company’s public image.

The following tables illustrate Executive Committee member names and position for the current session:

Member Name Position
Mr. Abdulrahman bin Abdulaziz Al Muhanna Chairman
HH Prince Naif bin Sultan bin Mohammed bin Saud Al Kabeer Member
HH Prince Saud bin Sultan bin Mohammed bin Saud Al Kabeer Member
Engr. Mosa Omran Mohammed Al Omran Member
Engr. Abdullah Bin Mohammed Noor Rihaimi Member
Dr. Ibrahim Hassan Al Madhon Member
Mr. Georges Schorderet Member
Mr. Christopher Ledwidge Member

Audit & Risk Committee

The Board of Almarai has initiated the composition of the Audit and Risk Committee, which is a legal requirement as detailed in Article (14) of the Corporate Governance Regulations issued by the Capital Market Authority (CMA). The Extraordinary General Meeting of the Shareholders approved and issued rules to select the members of the Audit and Risk committee and the duration of their membership. Shareholders initially approved the working style of the Commission on 27 March 2007, which was based on a proposal from the Almarai Board. Amendments were made to these guidelines at the Extraordinary General Assembly held in April 2013.

The Audit & Risk Committee will undertake the full role of an audit committee as well as oversight of the management of risk within the company. The Audit & Risk committee does not make direct decisions but makes recommendations to the Board, who would ordinarily be expected to make decisions and take actions based on the advice of the Audit & Risk Committee. The Audit & Risk Committee’s main role is to review and monitor the integrity of financial statements, the company’s internal control system, risk management systems and the appointment, role and effectiveness of external and internal auditors. The specific terms of reference of the committee will be determined by the committee from time to time, then agreed by the Board of Directors and approved by the General Assembly of Shareholders. In particular the committee’s role includes:

  • Review Almarai’s interim and annual financial statements and advise the Board on the acceptability thereof.
  • Consider and review the scope of work, reports and activities of the external auditor, and comment on his report where appropriate.
  • Establish policies as appropriate in regards to independence of the external auditor and on the basis of information received from the external auditors and management, form a judgment as to the independence of the external auditors.
  • Consider the appointment and proposed fees of the external auditor and if appropriate conduct a tender of the audit. Any subsequent recommendation following the tender for the appointment of an external auditor will be put to the Board and then if a change is approved it will be put forward to shareholders for their approval.
  • Consider internal control and compliance structures.
  • Consider the work plans of internal audit, review summary reports of their audits and monitor management’s responses.
  • Receive from management information as to their processes for the identification, monitoring and management of significant business risks.
  • Investigate any activity within its terms of reference or any matters specifically requested by the Board.
  • Ensure that management uses adequate risk management techniques to mitigate serious risks to the company.
  • Ensure that the company has adequate systems of internal control in place to safeguard the company against major losses.
  • Periodically review the Company’s delegation of authority matrix and recommend any enhancements necessary.
  • To supervise the activities of the external auditors and approve any activity beyond the scope of the audit work assigned to them during the performance of their duties.
  • To review the external auditors’ comments on the financial statements and follow up the actions taken about them.
  • To review the accounting policies in force and advise the Board of Directors of any recommendation regarding them.

In general, the Committee has authority to investigate any activity within its terms of reference or any matters specifically requested by the Board. The Committee has unrestricted access to all records and staff of Almarai (including internal audit) and the external auditors. The Committee is authorized by the Board to obtain outside legal or other independent professional advice as necessary to assist the Committee. The Committee shall consider at each meeting whether any failures of risk management, internal control or compliance matters (that are brought to the Committee’s attention) are significant and should be immediately reported to the Board. Any suspected serious frauds and irregularities shall be immediately reported by the Management to the Head of Internal Audit or the Audit & Risk Committee depending upon their severity.

To ensure the independence of the work of the Audit and Risk Committee, each of the Directors involved in the Internal Audit process and interacting with the auditor communicates directly with the Committee, without any intermediary. The Committee is formed according to the following rules:

  • The Members of the Audit & Risk Committee shall be appointed by a resolution of the Board of Directors and may be removed or replaced by the Board of Directors at any time.
  • The committee will comprise a minimum of three members including the Chairman, who will be appointed by the members during the first meeting.
  • The Chairman of the Board is not eligible to be a member of the Committee.
  • Committee members should be selected to ensure a range of different backgrounds, skills and experiences and a sound understanding of the industry in which Almarai operates. At least one member should have sound accounting or finance experience.
  • Members are appointed for a term determined by the Board, up to a maximum of three years and are eligible for re-appointment subject to the composition requirements for the Committee.

The following tables illustrate Audit & Risk Committee member names and position for the current session:

Member Name Position
Dr. Abdulrahman AlTuraigi Chairman
Dr. Muhammad A. H. Ikhwan Member
Dr. Ibrahim Hassan Al Madhon Member
Mr. Farraj Abo Thenian Member
Mr. Sulaiman N. Alhatlan Member

Nomination & Remuneration Committee

There has been the formation of a Nomination and Remuneration Committee upon the recommendation of the Board of Directors Association ordinary general meeting on 24 March 2008 for the purpose of making recommendations to the Board of Directors nominations to the Board, and to develop clear policies for the remuneration of the Board of Directors and senior executives of the company and its subsidiaries, review the structure of the Board of Directors, identify weaknesses and strengths of the members of the Board, ensure the independence of the independent members (annually) and the absence of a conflict of interest if the member is a member of the Board of Directors of another company. In general, the Commission’s role includes the following tasks:

  • Review the composition, tenure, performance and membership of the Almarai Board of Directors and of Board Sub-committees.
  • Make recommendations on new appointments to the Board in order to ensure that the Board comprises individuals best able to discharge the responsibilities of Directors having regard to the law and the highest standards of governance.
  • Review and make recommendations to the Board on the remuneration of Directors, inclusive of Directors fees, salaries, benefits, incentive payments, pensions, severance entitlements and all other forms of compensation.
  • Review and recommend to the Board for approval the overall direction of Almarai’s strategies and policies in respect of remuneration and benefits, recognition of executive employment performance, succession planning and executive development.
  • Review and make recommendations to the Board on the compensation packages of senior management comprising the CEO of Almarai and of executives reporting directly to the CEO.
  • Assess the necessary and desirable competencies of Board members and evaluate the Board’s performance. This should include a review, on an annual basis, of the current composition of the Board taking into consideration the independence, age, skill, experience and availability of service to the Company of its members and of anticipated needs. The Committee will identify and review with the Board the appropriate skills and characteristics required of the directors.
  • Specifically ensure that all nominees for appointment as a director are free of any prior conviction for fraudulent or criminal acts.
  • Review and make recommendations to the Board on the appointment and removal of Directors, taking regard of the Company’s Director nomination procedures and the remuneration of Directors.
  • Ensure adequate orientation and training for new Directors about the affairs and business of the company to allow them to properly discharge their duties.
  • Review and make recommendations to the Board on the remuneration including short and long term incentives, for the CEO and associated performance targets for the CEO.
  • Review and approve recommendation from the CEO on the remuneration of senior executives reporting to the CEO.
  • Review performance targets for senior executives reporting to the CEO.
  • Review human resource and remuneration policies and practices for the Company, as brought forward by the CEO and where appropriate recommend adoption by the Board.
  • Review management succession planning for the company in general but specifically with regard to the Board, CEO and senior executives reporting to the CEO.
  • Review and approve recommendations from the CEO on the appointments and terminations of senior executive positions reporting to the CEO with the exception of the CFO and Company Secretary whose appointment or termination must be approved by the Board, and the Head of Internal Audit whose termination must be approved by the Audit and Risk Committee.
  • Annually confirm the continuing independence of independent members of the Board.
  • Annually confirm that Directors do not have a conflict of interest by virtue of directorships that they hold in other companies.
  • Review the structure of the Board of Directors and recommend changes.
  • Determine the points of strength and weakness in the Board of Directors and recommend remedies that are compatible with the company’s interest.
  • Draw clear policies regarding the indemnities and remunerations of the Board members and senior executives; in laying down such policies, the standards related to performance shall be followed.

The following tables illustrate Nomination & Remuneration Committee member names and position for the current session:

Member Name Position
HH Prince Sultan bin Mohammed bin Saud Al Kabeer Chairman
Mr. Abdulrahman bin Abdulaziz Al Muhanna Member
Engr. Mosa Omran Mohammed Al Omran Member
Mr. Georges Schorderet Member

By-Law

AGM Minutes

Standards of the membership of Board of Directors

Standards of the membership of Board of Directors

Introduction:

These policies aim at setting up clear standards and procedures for the membership of Al-Marie Board of Directors (“the company”) in implementation of the provisions of paragraph (d) of article 10 of Companies Governance regulation of the Kingdom of Saudi Arabia rendered by the Board of Capital Market Authority (CMA) by the decision No. 1-212-2006 dated 12/11/2006 and implementations thereof. Article 10 mentioned above states that the most important basic tasks of the Board of Directors include (d) setting up clear and specific policies, standards and procedures for the membership of the Board of Directors and placing them into effect after approval by the general assembly”.

It is worth mentioning that these policies were adopted by the extraordinary meeting of the company general assembly held on 02/04/2013.

These policies, standards and procedures of the membership of the company Board of Directors are based on the Law of Companies, the circulars rendered by the Ministry of Commerce and Industry, by CMA and by the company bylaw.

First: policies and standards of the membership of the company Board of Directors:

  1. The nominee shall be a natural person of at least 25 years of age.
  1. The nominee shall not be previously convicted of dishonor or dishonesty crime, decided as bankrupt, has made arrangements or conciliation with his creditors or unfit for the Board membership in accordance with any law or instructions applied in the Kingdom.
  1. The nominee shall not be a board member of more than 5 other joint stock companies simultaneously.
  1. The nominee shall not be a government employee.
  1. The nominee shall have effective ability of communication and strategic thinking.
  1. Taking variety of academic qualifications and practical experience into consideration and giving priority of nomination to the required needs of persons having appropriate skills for the board of directors.
  1. The number of independent members shall not be less than one third of the board of directors.
  1. In the case of independent member, the independent member shall not have any case contradicting to independency.
  1. The board member shall hold shares of at least SR. 10000 value within thirty days from the date being appointed as a board member. These shares shall be used to ensure the liability of the board members and they shall be non-tradable till the elapse of the period fixed for hearing the case of liability indicted in article 76 of the Law of Companies.
  1. The board member shall represent all shareholders and shall abide by what realizes the interests of the company in general and not what realizes the interests of the group he represents or the group that voted in favor of his appointment as a board member.
  1. The membership of the board member terminates by his resignation, death or by termination by a general assembly decision rendered by 51% votes of the shares represented in the meeting or if the board member is previously convicted of dishonor or dishonesty crime, decided as bankrupt, has made arrangements or conciliation with his creditors or unfit for the Board membership in accordance with any law or instructions applied in the Kingdom.
  1. The board member must resign before the end of his board membership period if he loses capacity for work as a board member, if he is unable to practice his works or if he is unable to allocate the necessary time or effort to perform his tasks in the board. In case of conflict of interests, the board member shall choose either to obtain a permit from the general assembly to be renewed annually or to resign.

Second: procedures of the company board membership:

  1. The Committee of Nominations and Rewards shall coordinate with the executive administration of the company to announce opening nomination for the company board membership in accordance with the Law of Companies, the Circulars of the Ministry of Commerce and Industry and Companies Governance regulation.
  1. The Committee of Nominations and Rewards shall submit its recommendation to the board of directors on nomination for the board membership in accordance with the aforementioned policies and standards.
  1. Anyone who is interested in nomination to the company board shall declare his wish by notifying the company administration in accordance with the applicable laws, regulations, instructions and decisions. This notice shall include an introduction of the nominee with respect to his curriculum vitae, his qualifications and his work experience.
  1. Any nominee who is a previous board member of a shareholding company shall state the number and date of the boards of the companies in which he was a member.
  1. Any nominee who is a previous company board member shall enclose with the nomination notice a statement from the company administration on the last session in which he was a board member including the flowing information:
  • The number of the board meetings held in each year of the session years
  • The number of the meetings which the member attended personally and the percentage of his attendance in all meetings.
  • The standing committees in which the member participated, the number of the meetings held by each committee within one year of the session period, the number of the meetings he attended and the percentage of his attendance to the total meetings.
  1. Membership type shall be clarified, i.e. if the member is an executive member or a non-executive member or an independent member.
  1. The membership nature shall be clarifies, i.e. if the member is a nominee for himself or if he represents a legal person.
  1. The Committee of Nominations and Rewards shall coordinate with the executive administration of the company by sending copies of nominations notices, their attachments and a list of the names of the nominees to the General Department of Companies Ministry of Commerce and Industry.
  1. The Committee of Nominations and Rewards shall in coordination with the executive administration of the company provide CMA with the CVs of the board membership nominees in accordance with the form of “the CV form of the nominees of a joint stock company board membership registered with CMA (Tadawul)”.
  1. The Committee of Nominations and Rewards shall carry out any observations provided by the competent authorities on any nominee.
  1. Voting in the general assembly on those who are personally nominated in accordance with aforementioned policies, standards and procedures.

Dividend Policy

Dividend Policy

As per Article (44) of Almarai bye-laws, after deducting all general expenses and other costs the Company’s annual net profits shall be allocated as follows:

  • 10% of the annual net profits shall be allocated to form a statutory reserve. Such allocation may be discontinued by the Ordinary General Assembly when this reserve totals 50% of the Company capital.
  • Specified percentage of preferred shares shall be distributed to the shareholders owning such shares.
  • The Ordinary General Assembly may, upon a recommendation of the Board of Directors, allocate an equal percentage of the net profits to formulate other reserves.
  • Out of the balance of the net profits, if any, an initial payment of not less than 5% of the paid up capital shall be distributed to the shareholders.
  • Not more than 5% of the remaining balance, if any, shall be allocated as remuneration to the Board of Directors Members.
  • The remaining balance shall be distributed to the shareholders as an additional share of the profits.

The Company, after complying with the regulations laid down by the competent authorities, may distribute semi-annual and quarterly dividends. As per Article (45) of Almarai bye-laws profits distributed to the shareholders shall be paid at the locations and time as determined by the Board of Directors in compliance with the Ministry of Commerce & Industry instructions.

Almarai has achieved a 39.2% pay-out ratio for the last five years. Despite the fact that Almarai expects, as per its current distribution practice, to distribute annual cash dividends, there are no guarantees for the distribution of dividends on an ongoing basis. There are no guarantees to the value and percentage of dividends each year. Cash dividends are approved or recommended according to many aspects including profits achieved, cash flows, new capital investments, and future prospects of outgoing funds, taking into account the importance of maintaining a strong financial policy to meet any events of emergency. The Almarai Board of Directors strives to maintain consistency of cash flow each year by reducing the impact of any change in free cash flow which may be attributed to the achievement of profits or losses in specific financial years, while maintaining medium term target distribution rate of dividend ratio. Almarai has distributed to its Shareholders around SAR 9,150.0 million since it was listed in the Saudi Stock Market in the form of cash dividends and bonus shares. The cash dividends amounted to SAR 4,050.0 million approximately representing 44.3%, whereas the bonus shares for capital increase from SAR 750.0 million upon listing to SAR 6,000 million currently representing 55.7% of the total dividends and bonus shares (after excluding the capital increase through the acquisition of both Western Bakeries and the International Bakeries Services companies at a nominal value of SAR 90.0 million and the 100% acquisition of Hail Agricultural Development Company “HADCO” at a nominal value of SAR 60.0 million). The table below defines these dividends:

Dividends paid compared to Net Income (SAR Million)

Dividends paid compared to Net Income ( SAR Million )
Year Net Income Dividend Percentage Capital Amount
( Shares Million ) ( SAR )
2005م 365 750
2006م 464.7 200 43.00% 100 2.00
2007م 667.1 273 40.90% 109 2.50
2008م 910.3 382 42.00% 109 3.50
2009م 1,096.70 460 41.90% 115 4.00
2010م 1,285.40 517.5 40.30% 230 2.25
2011م 1,139.50 517.5 45.40% 230 2.25
2012م 1,440.60 500 34.70% 400 1.25
2013م 1,502.20 600 39.90% 600 1.00
2014م 1,674.30 600 35.80% 600 1.00
Total 4,050

Dividends dates

Announced Date Due Date Distribution Date Distribution Way Amount
2014/12/28 2015/04/05 2015/04/12 Account Transfer 1
2013/12/29 2014/04/02 2014/04/09 Account Transfer 1
2013/01/19 2013/04/02 2013/04/10 Account Transfer 1.25
2011/12/07 2012/04/02 2012/04/11 Account Transfer 2.25
2010/12/06 2011/04/03 2011/04/11 Account Transfer 2.25
2010/01/20 2010/04/11 2010/04/26 Account Transfer 4.00
2009/01/19 2009/03/23 2009/04/07 Account Transfer 3.50
2008/01/21 2008/03/24 2008/04/07 Account Transfer 2.50
2007/01/21 2007/03/27 2007/04/10 Account Transfer 2.00

Distribution in the form of granting bonus shares (SAR Million)

Year Share Capital Bonus Share Capital After The Bonus Percentage Note
2005 750 250 1,000 33.3% Bonus share for every 3 out-standing shares
2010 1,150 1,150 2,300 100.0% Bonus share for every 1 out-standing shares
2012 2,300 1,700 4,000 73.9% Bonus shares for every 1.352941 standing shares
2013 4,000 2,000 6,000 50.0% Bonus share for every 2 out-standing shares
Total   5,100.0

Bonus Shares dates

Announced Date Issue Type Due Date New Capital Previous Capital
2013-05-29 Bonus Shares 2013-09-09 6,000,000,000 4,000,000,000
2011-12-07 Bonus Shares 2012-04-02 4,000,000,000 2,300,000,000
2010-10-05 Bonus Shares 2010-12-05 2,300,000,000 1,150,000,000
2009-05-09 Other Corporate Action 2009-10-07 1,150,000,000 1,090,000,000
2007-02-19 Other Corporate Action 2007-03-27 1,090,000,000 1,000,000,000
2005-10-18 Bonus Shares 2005-12-25 1,000,000,000 750,000,000

Related Party Transactions

Related Party Transactions

The written policy for conflict of interest within Almarai’s Corporate Governance Code governs conflicts of interest and addresses possible conflict situations for Directors, Executives, and Shareholders. The General Assembly shall be notified of any conflict of interest where requests for approval shall be raised.

During the normal course of its operations, Almarai had the following significant transactions with related parties on an ‘arm’s length basis’ on an annual basis:

2014
Member Nature of Dealing Amount SAR Million Period Conditions Notes
Approved in the General Assembly meeting by the company’s shareholders on 5th April 2015
Chairman / HH Prince Sultan bin Mohammed Bin Saud Al Kabeer and Engr. Nasser Mohammed Al Muttawa
Al Kabeer Farms – Forage Management Contract 1 One Year Commercial condition prevailing in the market
Al Kabeer Farms – Forage Procurement Feed 35 One Year Commercial condition prevailing in the market
Rental Thodhia farm – Dairy Lease Contract 3 One Year Commercial condition prevailing in the market
Yamama Cement Company Invest in Instruments 50 2013 : 2018 Commercial condition prevailing in the market
Yamama Cement Company Payment of Sukuk Finance Charges 1 2013 : 2018 Commercial condition prevailing in the market
Chairman / HH Prince Sultan bin Mohammed Bin Saud Al Kabeer and Engr. Nasser Mohammed Al Muttawa
Arabian Shield Cooperative Insurance Co. Insurance 66 2014 Commercial condition prevailing in the market
Arabian Shield Cooperative Insurance Co. Insurance 84 2015 Commercial condition prevailing in the market
Arabian Shield Cooperative Insurance Co. Invest in Instruments 3 2012 : 2019 Commercial condition prevailing in the market
Arabian Shield Cooperative Insurance Co. Payment of Sukuk Finance Charges 0.1 2012 : 2019 Commercial condition prevailing in the market
Mr. Abdul Aziz Ibrahim Al Muhanna
Rent of Land For Distribution Centre in Sharjah Lease Contract 0.2 2001 : 2021 Commercial condition prevailing in the market
Savola Group
Azizia Panda United Product Sales 422 One Year Commercial condition prevailing in the market
Savola Packaging Systems Co. Ltd. Packaging Purchasing 167 One Year Commercial condition prevailing in the market
United Sugar Co. Sugar Purchasing 105 One Year Commercial condition prevailing in the market
Afia International Company Soya Bean Oil Purchasing 4 One Year Commercial condition prevailing in the market

 

2013
Member Nature of Dealing Amount SAR Million Period Conditions Notes
Approved in the General Assembly meeting by the company’s shareholders on 2nd April 2014
Chairman Prince Sultan bin Mohhamed bin Saud Al Kabeer
Al Kabeer Farms – Forage Contract Management and Procurement Feed 45 One Year Commercial condition prevailing in the market
Rental Thodhia Farm – Dairy Lease Contract 1 One Year Commercial condition prevailing in the market
Arabian Shield Insurance Co. Insurance 54 One Year Commercial condition prevailing in the market
Mr. Abdul Aziz Ibrahim Al Muhanna
Rent of Land For Distribution Centre in Sharjah Lease Contract 0.2 2001 : 2021 Commercial condition prevailing in the market
Savola Group
Savola Group Product Sales 422 One Year Commercial condition prevailing in the market
Savola Packaging Systems Co. Ltd. Packaging Purchasing 167 One Year Commercial condition prevailing in the market
United Sugar Co. Sugar Purchasing 105 One Year Commercial condition prevailing in the market
Afia International Company Soya Bean Oil Purchasing 4 One Year Commercial condition prevailing in the market

 

2012
Member Nature of Dealing Amount SAR Million Period Conditions Notes
Approved in the General Assembly meeting by the company’s shareholders on 5th April 2013
Chairman Prince Sultan bin Mohhamed bin Saud Al Kabeer
Al Kabeer Farms – Forage Contract Management and Procurement Feed 50 One Year Commercial condition prevailing in the market
Rental Thodhia Farm – Dairy Lease Contract 1 One Year Commercial condition prevailing in the market
Arabian Shield Insurance Co. Insurance 46 One Year Commercial condition prevailing in the market
Mr. Abdul Aziz Ibrahim Al Muhanna
Rent of Land For Distribution Centre in Sharjah Lease Contract 0.2 2001 : 2021 Commercial condition prevailing in the market
Savola Group
Savola Group Product Sales 376 One Year Commercial condition prevailing in the market
Savola Packaging Systems Co. Ltd. Packaging Purchasing 105 One Year Commercial condition prevailing in the market
United Sugar Co. Sugar Purchasing 120 One Year Commercial condition prevailing in the market
Afia International Company Soya Bean Oil Purchasing 10 One Year Commercial condition prevailing in the market

 

2011
Member Nature of Dealing Amount SAR Million Period Conditions Notes
Approved in the General Assembly meeting by the company’s shareholders on 2nd April 2012
Chairman Prince Sultan bin Mohhamed bin Saud Al Kabeer
Al Kabeer Farms – Forage Contract Management and Procurement Feed 50 One Year Commercial condition prevailing in the market
Thodhia Farm for feed Procurement Feed 3 One Year Commercial condition prevailing in the market
Rental Thodhia Farm – Dairy Lease Contract 1 One Year Commercial condition prevailing in the market
Arabian Shield Insurance Co. Insurance 46 One Year Commercial condition prevailing in the market
Mr. Abdul Aziz Ibrahim Al Muhanna
Rent of Land For Distribution Centre in Sharjah Lease Contract 0.2 2001 : 2021 Commercial condition prevailing in the market
Savola Group
Savola Group Product Sales 350 One Year Commercial condition prevailing in the market
Savola Packaging Systems Co. Ltd. Packaging Purchasing 55 One Year Commercial condition prevailing in the market
United Sugar Co. Sugar Purchasing 117 One Year Commercial condition prevailing in the market

 

2010
Nature of Transaction Nature of Dealing Amount SAR Million Period Conditions Notes
Approved in the General Assembly meeting by the company’s shareholders on 3rd April 2011
Major Shareholder Sales 375 One Year Commercial condition prevailing in the market
Major Shareholder Procurement 194 One Year Commercial condition prevailing in the market

 

2009
Nature of Transaction Nature of Dealing Amount SAR Million Period Conditions Notes
Major Shareholder Sales 257 One Year Commercial condition prevailing in the market
Major Shareholder Procurement 191 One Year Commercial condition prevailing in the market

 

2008
Nature of Transaction Nature of Dealing Amount SAR Million Period Conditions Notes
Major Shareholder Sales (155) One Year Commercial condition prevailing in the market
Major Shareholder Procurement 186 One Year Commercial condition prevailing in the market

 

2007
Nature of Transaction Nature of Dealing Amount SAR Million Period Conditions Notes
Major Shareholder Sales 106 One Year Commercial condition prevailing in the market
Major Shareholder Procurement 174 One Year Commercial condition prevailing in the market

 

2006

During the year Sales to related parties amounted to SAR 80.4 million, while Purchases amounted to SAR 158.4 million.

2005

During the year Sales to related parties amounted to SAR 60.5 million, while Purchases amounted to SAR 146.7 million.

Bonuses and compensation of the Board and Senior Executives

Bonuses and compensation of the Board and senior executives

Members of the Board of Directors do not receive any remuneration as a result of managing the Company unless approved by the General Assembly. The maximum annual remuneration for a member of the Board of Directors in the referred joint stock companies, whose regulation provides that the remuneration of the members of the Board of Directors shall be a certain percentage of the profits, shall be (SAR 200,000). This remuneration shall be disbursed out of the profit after distributing a profit of 5% at least of the company’s capital to the shareholders.

Other than that, Members of the Board of Directors receive attendance allowance for Board and Board Committee meetings. Executive Directors receive fixed advantages as a result of their direct duties and responsibilities.
The most Senior Executives including the Chief Executive Officer and the Chief Financial Officer receive the benefits according to employment contracts signed with them.
The following years are the details of the remunerations and compensations paid to Directors and Senior Executives on an annual basis as follows:

2014
SAR ‘000 Executive Board Member Non Executive / Independent Board Member Five Highest Paid Executives Including CEO & CFO
Salaries and Compensation 1,386 8,126
Allowances 516 171.0 1,434
Annual and Periodic Bonuses 1,200 1,600 14,674
Incentive Schemes
Other Annual and Periodic Remuneration 260 1,360 460
Total 3,362 3,131 24,694

 

2013
SAR ‘000 Executive Board Member Non Executive / Independent Board Member Five Highest Paid Executives Including CEO & CFO
Salaries and Compensation 1,386 6,564.000
Allowances 516 285.0 834
Annual and Periodic Bonuses 1,200 1,600 12,889
Incentive Schemes
Other Annual and Periodic Remuneration 260 1,360 460
Total 3,362 3,245 20,747

 

2012
SAR ‘000 Executive Board Member Non Executive / Independent Board Member Five Highest Paid Executives Including CEO & CFO
Salaries and Compensation 1,386 6,655
Allowances 486 357 834
Annual and Periodic Bonuses 1,200 1,600 11,786
Incentive Schemes
Other Annual and Periodic Remuneration 260 1,360 460
Total 3,332 3,317 19,735
2011
SAR ‘000 Executive Board Member Non Executive / Independent Board Member Five Highest Paid Executives Including CEO & CFO
Salaries and Compensation 1,386 6,417
Allowances 546 288 882
Annual and Periodic Bonuses 1,200 1,600 10,689
Incentive Schemes
Other Annual and Periodic Remuneration 260 1,360 490
Total 3,392 3,248 18,478

 

2010
SAR ‘000 Executive Board Member Non Executive / Independent Board Member Five Highest Paid Executives Including CEO & CFO
Salaries and Compensation 1,386 5,943
Allowances 519 384 1,156
Annual and Periodic Bonuses 1,200 1,600 10,616
Incentive Schemes
Other Annual and Periodic Remuneration 200 1,300 431
Total 3,305 3,284 18,145

 

2009

The remuneration of the Chairman, Managing Director and members of the Board in 2009 was SAR 6.3 million. The remuneration paid to the top ten executives in 2009 was SAR 10.2 million.

2008

The remuneration of the Chairman and members of the Board in 2008 was SAR 6.4 million. The remuneration paid to the top executives in 2008 was SAR 10.1 million.

2007

The remuneration paid to the Board of Directors for the year ended 2007 amounted to SAR 2.1 million.

2006

The remuneration paid to the Board of Directors for the year ended 2006 amounted to SAR 2.1 million

2005

The remuneration paid to the Board of Directors for the year ended 2005 amounted to SAR 2.0 million

Major Shareholders

Major shareholders

Ownership of 5% and more of the issued shares
Investor Number of Shares Percentage of ownership
SAVOLA Group Company 219,130,942 36.50%
HH Prince Sultan bin Mohammed bin Saud Al Kabeer 172,173,922 28.70%
Omran Mohamed Al-Omran and Partners Company 34,226,088 5.70%
Total 425,530,952 70.90%

Almarai shareholdings

By the end of 2014 Almarai had 53,736 shareholders. Institutional investors represent 54.3% whilst individual investors represent 45.7% of total shareholders. There are 31 shareholders owning one million shares in Almarai, which represents 87.1% of Almarai issued shares. The following tables give a description of investors in Almarai:

Almarai Investors according to Nature of Investor

Investor Type Number of Investors Number of Shares Percentage of ownership
Corporate 222 325,701,088 54.30%
Individual 53,514 274,298,912 45.70%
Total 53,736 600,000,000 100%

Almarai Investors according to Investor Type

Investor Type Percentage of ownership Number of Investors
SAVOLA Group Company 36.5% 1
HH Prince Sultan bin Mohammed bin Saud AlKabeer 28.7% 1
Al-Omran family 9.3% 5
Mutual Funds 4.5% 76
Swap agreements 2.8% 40
Companies 2.0% 50
Governmental and quasi-governmental institutions 1.3% 11
Banks and financial institutions 1.2% 28
Insurance companies 0.1% 9
Charities 0.1% 6
Others 13.5% 53,509
Grand Total 100% 53,736

Almarai Investors according to the Size of Ownership

Investor Type Percentage of ownership Number of Investors
Million shares and more 87.1% 31
From 500 thousand to less than a million 1.7% 15
From 100 thousand to less than 500 thousand 4.2% 117
From 50 thousand to less than 100 thousand 1.1% 98
From 10 thousand to less than 50 thousand 1.8% 543
From 5 thousand to less than 10 thousand 0.6% 567
From 1 thousand to less than 5 thousand 1.3% 4,147
Less than one thousand shares 2.2% 48,218
Total 100% 53,736