SUSTAINABILITY & PROSPERITY - Sipchem

1 SUSTAINABILITY & PROSPERITY . Annual Report 2016. Contents 4 Company Profile 59 Tenth: Internal Audit 5 Our Identity 59 Eleventh: Board of Directors 7 Our Principles 66 Twelfth: Board Committees 8 Financial Highlights 70 Thirteenth: Board of Directors' Declarations 9 Operational Highlights 70 Fourteenth: Shareholders' General Assembly 10 Chairman's Message 72 Fifteenth: Dividends Distribution Policy 12 Board of Directors 72 Sixteenth: Penalties 14 CEO's Message 73 Seventeenth: Human Resources 16 First: Description of Sipchem 's Affiliates 74 Eighteenth: Employees' Incentive Programs 18 Second: Description of Sipchem 's Affiliates 75 Nineteenth: Employees' Benefits Allocations 37 Third: Sipchem Technology And Innovation Center 75 Twentieth: Investor Relations 38 Forth: Sipchem 's Strategies 76 Twenty First: Corporate Governance 41 Fifth.

2 Sipchem Plans And Business Expectations 77 Twenty Second: Corporate Social Responsibility 43 Sixth: Risks related to Sipchem and affiliates business 79 Twenty Third: Board of Directors' Recommendations 46 Seventh: SUSTAINABILITY 79 Conclusion 48 Eighth: Financial Highlights 80 Social Responsibility, Activities and Events 58 Ninth: Description of any transactions between Sipchem 90 Consolidated Financial Statements with Independent and interested related parties Auditors' Report Main Office Box 130, Al-Khobar 31952. Kingdom of saudi arabia Tel: +966 13 801 9222. B. Custodian of the Two Holy Mosques King Salman Bin Abdulaziz Al-Saud Sipchem is Committed to the vision of the Kingdom 2030. Since the announcement of our wise government, under the leadership of the Custodian of the Two Holy Mosques, King Salman bin Abdulaziz and His Highness the Crown Prince HRH Prince Mohammed bin Naif the His Royal Highness His Royal Highness Crown Prince HRH Prince Mohammad bin Salman, of the National Transition Program 2020 and the vision of the Kingdom of saudi arabia 2030.

3 Sipchem has been working in a fast pace to keep abreast of the Kingdom's Prince Mohammed Bin Prince Mohammed Bin economic development and its direction of promoting sustainable economic resources in the interests of the Salman Bin Abdulaziz Al-Saud Naif Bin Abdulaziz Al-Saud nation, which resulted in diversification of its investments and the excellence of its products supported by the Deputy Crown Prince, Second Deputy Crown Prince, Deputy Prime studies of its scientific research centre Prime Minister and Minister of Defense Minister and Minister of Interior saudi International Petrochemical Company ( Sipchem ) Annual Report 2016 saudi International Petrochemical Company ( Sipchem ) Annual Report 2016. Company Profile Our Identity Sipchem is one of the largest companies in WHO WE ARE Sipchem 's Brand Excellence Everywhere Vision the petrochemical sector in the Kingdom is based on three main concepts that are in of saudi arabia and is characterized by its Sipchem 's plants occupy one million square meters in the basic industries harmony with its growth strategy.

4 Sipchem 's At Sipchem , we believe in challenging assumptions progress and technological development with area in Jubail Industrial City. The company's strategy, planned to be its commitment to preserve the environment in implemented in gradual stages, aims at achieving integration of the current brand is being activated through highlighting its success stories through three channels: every day to discover and develop responsible solutions, essence. Sipchem was recognized as the best and future chemical products to create a chain of value products. Such SUSTAINABILITY , growth, and building capabilities. enhancing the quality of life for generations to come. business environment in the Kingdom in 2010. strategy will precipitate in increasing the domestic production and support the Since its modest roots began in 1999, Sipchem is now a globally recognized chemical company industrial development within the frame of the comprehensive development Mission with more than 1,000 employees from around plans implemented by the Kingdom, which at the end will help maximizing the shareholders' profitability.

5 Sipchem strives to achieve To make this vision a reality, we are actively growing our the world. Sipchem has the highest standards of safety and environmental protection in Excellence Everywhere' capability and reach by constantly pushing the boundaries all its operations and pays great attention to social responsibility. Scientists believe that Logic lies behind results. To achieve progressive results, there should be that inspire, enhance, and sustain excellence. As Sipchem has faced previous challenges, the foreseeable future confirms some kind of logic challenging. From this point, that it is capable of overcoming any challenges, thanks to God and then thanks Sipchem launched its new internal brand along to saudi human resources. These human resources are our future, which will with its associated values, namely passion, contribute to the economic and social development of the country.

6 Courage, higher efficiency, and momentum. Sipchem 's commitment to its employees, shareholders and the communities Thus, Sipchem adopted its new brand promise, Sipchem 's Brand Excellence Everywhere aimed at improving in which it operates is our constant motivation to operate its capabilities and geographical spread, Sipchem launched its brand Excellence Everywhere . especially as its products are used in more than 100 countries and contribute to the to enhance its capabilities and geographical existence;. Sipchem 's commitment to its employees, creation of new value chains. especially its products are used in more than 100. shareholders and the communities in which it countries and participate in the creation of new value operates is our constant motivation to operate. chains. 4 5. saudi International Petrochemical Company ( Sipchem ) Annual Report 2016 saudi International Petrochemical Company ( Sipchem ) Annual Report 2016.

7 We take excellence in our work and emphasize on our commitment to develop our capabilities and achieving maximum efficiency Our Principles Sipchem 's Principles Our Values Adhering to highest ethical Passion: What we do effects the world in thousands of standards, embracing integrity, trust, and taking responsibility for positive ways, making every day enormous. This focuses Sipchem 's actions. our curiosity to contribute. Striving for operation excellence in delivering products and services. Courage: Standing up to be counted makes us feel alive as it brings us closer to new dimensions in logic and new Embracing innovation and adapting to changing conditions. parameters of possibility. Caring for the well-being of Higher Efficiencies: We value assets by applying them Sipchem 's employees, community and environment.

8 Resourcefully: our energy, our finances, our acquired knowledge and the wisdom we generate together. Momentum: Our size and strength enables reinvestments in our capabilities, in our learning and by constantly growing our goals we see originality emerge. 6 7. saudi International Petrochemical Company ( Sipchem ) Annual Report 2016 saudi International Petrochemical Company ( Sipchem ) Annual Report 2016. Financial Highlights Operational Highlights Net profit Income from operations During the year 2016, the 2016 was a difficult year for Sipchem in particular and for the The company successively completed the Sipchem launched its first SUSTAINABILITY report second Sukuk issuance amounting to SR during 2016. It included separate reports on company achieved profits of petrochemical industry in general. billion which reflects its solid financial position the company's performance in many fields, 70 417.

9 However, the strategic investments SR 70 million. The decline in we have achieved throughout the and explains the confidence of its shareholders, including operations, environment and safety, year proves that Sipchem has the banks, governmental authorities or private in addition to its efforts on the social level profits is mainly due to the sharp right fundamentals to stand up to entities. and its management to its human resources. decline in average selling prices all circumstances and continue to focus on implementing its Sipchem completed all the legal procedures The company exerts its efforts to develop the for all of the company's products. strategic initiatives and building a with the governmental authorities and the SUSTAINABILITY field and achieve the highest rate sustainable growth platform. related parties to finalize the acquisition of of disclosure and commitment.

10 Ikarus' equity in the International Vinyl Acetate Sipchem announced the official operation of Million saudi Riyal Million saudi Riyal Company (IVC), (11%). Accordingly, Sipchem 's Technology and Innovation Center (Manar). equity in the International Vinyl Acetate which will be a benchmark in the search and Company (IVC) has increased from 76% to 87%. development of the applications of the products. Gross profit Earnings per share During the year, Sipchem focused on Sipchem continued effectively to fulfill enhancing the efficiency of its operational and its obligations towards the community by 690 0,19. administrative performance; reduce the costs; allocating 1% of its total annual profits along increase the production to standard levels; with its subsidiaries to support various social raise the reliability of the plants in order to responsibility programs in this beloved country.