SUMMARY OF RISK FACTORS
D- Risks Related to the Offer Shares
1. DEFINITIONS AND ABBREVIATIONS
Term Definition Financial Advisor SNB Capital Company.
Financial Institutions Banks and financial services companies.
Foreign Financial Institutions Foreign financial institutions qualified to trade in shares of Saudi companies in accordance with the rules regulating the investment of qualified foreign financial institutions in listed securities as issued by the CMA.
Financial Statements or
Audited Financial Statements Audited consolidated financial statements for FY18G, FY19G and FY20G prepared in accordance with IFRS-KSA as adopted by SOCPA.
Foreign Investors Non-GCC individuals living outside the Kingdom and non-GCC institutions registered outside the Kingdom who have the right to invest indirectly to acquire an economic benefit in the Offer Shares by entering into Swap Agreements with Capital Market Institutions.
Foreign Strategic Investor
A foreign legal entity aiming to acquire a strategic interest in listed companies in accordance with the FSI Instructions. “Strategic interest” means the direct ownership percentage in the listed company’s shares, through which the owner aims to contribute to enhancing the financial or operating performance of the listed company.
FY18G The period commencing 01/01/2018G and ended 31/12/2018G.
FY19G The period commencing 01/01/2019G and ended 31/12/2019G.
FY20G The period commencing 01/01/2020G and ended 31/12/2020G.
G Gregorian
GAC The General Authority for Competition of Saudi Arabia, the Kingdom’s regulator of the Competition Law and its implementing regulations in the Kingdom.
GCC Gulf Cooperation Council.
GCC Corporate Investor
Any company in which the majority of its share capital is owned by nationals of GCC countries or governments having the nationality of a GCC country in accordance with the definition contained in the Resolution of the Supreme Council of the Gulf Cooperation Council issued at its fifteenth session and approved by Council of Ministers Resolution No. 16 dated 20/01/1418H, as well as GCC funds established in one of the GCC countries whose units are offered in a public offering to investors from those countries in which the majority of the fund’s capital is owned by citizens of the GCC countries or their governments.
GDP The most comprehensive quantitative measure of total economic activity in a country, representing the monetary value of all goods and services produced within the country’s geographical borders over a certain period of time.
Generally Accepted Accounting Standards in the Kingdom
The generally accepted accounting standards in the Kingdom and the standards and statements approved by SOCPA.
General Assembly An Extraordinary General Assembly and/or an Ordinary General Assembly. “General Assembly”
shall mean any Company general assembly.
GOSI The Saudi General Organization for Social Insurance.
Government, Saudi
Government Government of Saudi Arabia, with “Governmental” interpreted accordingly.
Group The Company and its Subsidiaries.
H Hijri
Head Office The office housing the Company’s executive management and management staff, located in Retal Tower, 8800 King Faisal Street, Al Rawabi District, Al-Khobar 31952, P.O. Box 1448.
IFRS The International Financial Reporting Standards issued by the International Accounting Standards Board.
IFRS-KSA
IFRS, as endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements that are endorsed by SOCPA, comprising IFRS with additional requirements and disclosures added by SOCPA and other standards and pronouncements that are endorsed by SOCPA, which include
Term Definition
Individual Investors
Saudi natural persons, including Saudi female divorcees or widows with minor children from a marriage to a non-Saudi person who can subscribe for her own benefit or in the names of her minor children, any non-Saudi natural person who is resident in the Kingdom and any GCC national, in each case who has a bank account with a Capital Market Institution and are entitled to open investment accounts therewith.
Instructions for Foreign Strategic Investors
Instructions regulating foreign strategic investor ownership of strategic stakes in listed companies as issued by the Board of Directors of the Capital Market pursuant to Resolution No. 3-65-2019 dated 14/10/1440H (corresponding to 17/06/2019G), as amended.
ISO International Organization of Standardization.
Investment Funds Regulations
The Investment Funds Regulations issued by the CMA Board pursuant to Resolution No. 1-219- 2006 dated 03/12/1427H (corresponding to 24/12/2006G) based on the Capital Market Law issued by Royal Decree No. M/30 dated 02/06/1424H, as amended by CMA Board Resolution No. 2-22- 2021 dated 12/07/1442H (corresponding to 24/02/2021G).
Investors Participating Parties and Retail Subscribers.
Issuer Retal Urban Development Company.
KSA, the Kingdom, Saudi
Arabia or Saudi The Kingdom of Saudi Arabia.
Labor Law The Saudi Labor Law issued under Royal Decree No. M/51 dated 23/08/1426H (corresponding to 27/09/2005G), as amended.
Lead Manager SNB Capital Company.
Listing Listing of all the Shares on the Saudi Stock Exchange in accordance with the Listing Rules.
Listing Rules
The Listing Rules of Tadawul issued by the board of the CMA pursuant to resolution No. 3-123-2017 dated 09/04/1439H (corresponding to 27/12/2017G) as amended pursuant to resolution number 1-104-2019 dated 1/2/1441H (corresponding 30/09/2019G), as amended pursuant to resolution number 1-22-2021 dated 12/07/1442H (corresponding to 24/02/2021G).
Lock-up Period
The six-month period during which the Substantial Shareholder listed on page “x” hereof may not dispose of any of their Shares for a period of six months starting from the commencement of trading of the Shares on the Exchange. Following the Lock-up Period, Substantial Shareholders are free to dispose of their Shares without Obtaining the CMA’s prior approval. The Company is also prohibited from listing shares of the same class as the listed Shares for a period of six months from the date of the start of trading in the Shares.
Management The executive directors and Senior Executives of the Company.
Market Study Market study prepared by the Market Research Consultant regarding the real estate sector in the Kingdom in June 2021G.
Market Research Consultant Knight Frank.
MHRSD The Ministry of Human Resources and Social Development in Saudi Arabia.
MoC The Ministry of Commerce in Saudi Arabia.
MOMRAH The Ministry of Municipal, Rural Affairs and Housing.
National Transformation
Program Program developed to help achieve the goals of Saudi Arabia’s “Vision 2030” and identify the challenges faced by government agencies in the economic and development sectors.
Nomination and
Remuneration Committee The nomination and remuneration committee of the Board of Directors.
Offering The initial public offering of twelve million (12,000,000) ordinary shares with a nominal value of ten (SAR 10) Saudi Riyals per share, paid in full, representing 30% of the Company’s capital, at an Offer Price of [SAR 120] Saudi Riyals per share.
Offer Shares Twelve million (12,000,000) ordinary Shares representing 30% of the Company’s capital.
Offering Period Starting from Sunday 06/11/1443H (corresponding to 05/06/2022G) and ending on Monday 07/11/1443H (corresponding to 06/06/2022G).
Offer Price SAR 120 per Share.
Term Definition Offering Proceeds Total value of subscribed shares.
Official Gazette Um Al Qura, the official gazette of the Government of Saudi Arabia.
Ordinary General Assembly An ordinary general assembly of the Shareholders convened in accordance with the Bylaws.
OSCOs The Rules on the Offer of Securities and Continuing Obligations issued by the CMA board pursuant to its resolution number 3-123-2017 dated 9/4/1439H (corresponding to 27/12/2017G), as amended by resolution number 1-7-2021 dated 01/06/1442H (corresponding to 14/01/2021G).
Participating Classes Parties participating in the book-building process.
Participating Classes Application Form
Application form used by the Participating Classes to apply for the Offer Shares during the Book- Building period. This term includes (as the case may be) the supplementary application form when the price range is changed.
Participating Parties
Means:
a- public and private funds that invest in securities listed on the Exchange, if permissible according to the terms and conditions of such funds, in compliance with the provisions and restrictions set forth in the Investment Fund Regulations and the Book-Building Instructions;
b- persons authorized by the CMA to deal in securities as principals, in compliance with the provisions set forth in the Prudential Rules;
c- clients of a person authorized by the CMA to conduct management services in accordance with the provisions and restrictions set forth in the Book-Building Instructions;
d- legal persons allowed to open an investment account in the Kingdom and an account with the Depository Center with the exception of non-resident foreign investors, other than Qualified Foreign Investors as per the Rules for Qualified Foreign Financial Institutions Investment in Listed Securities, in compliance with the CMA Circular No. 6/05158, dated 11/08/1435H (corresponding to 09/06/2014G), issued pursuant to the CMA Board Resolution No. 9-28-2014, dated 20/7/1435H (corresponding to 19/05/2014G), as amended;
e- Government entities and any supranational authority recognized by the CMA, the Exchange or any other exchange recognized by the CMA or the Depository Center;
f- companies owned by the Government, directly or through a portfolio manager; and g- GCC companies and GCC funds if the terms and conditions of the fund permit it.
Period ended 30 September
2021G Period commencing on 01/01/2021G and ending on 30/09/2021G.
Prospectus This document prepared by the Company in relation to the Offering.
Prudential Rules The Prudential Rules issued pursuant to the CMA Board Resolution No. 1-40-2012, dated 17/2/1434H (corresponding to 20/12/2012G), as amended.
Public
Persons other than the following:
a- affiliates of the Issuer;
b- Substantial Shareholders of the Issuer;
c- Directors and Senior Executives of the Issuer;
d- Directors and Senior Executives of the affiliates of the Issuer;
e- Directors and Senior Executives of the Substantial Shareholders of the Issuer;
f- any relative of persons described at (a), (b), (c), (d) or (e) above;
g- any company controlled by any persons described at (a), (b), (c), (d), (e) or (f) above; and h- persons acting in concert and, collectively, holding 5% or more of the class of shares to be
listed.
QFI or Qualified Foreign Investor
A foreign investor that has been qualified in accordance with the Rules for Qualified Foreign Financial Institution Investment in Listed Securities to invest in listed securities. Qualification Application shall be submitted to a Capital Market Institution to evaluate and approve the application in accordance with the Rules for Qualified Foreign Financial Institution Investment in Listed Securities.
Term Definition
Real Estate Transaction Tax
Fee imposed on the disposition of real estate, which includes any legal transfer of ownership or possession of real estate for the purpose of gaining usufruct rights thereto, including without limitation, usufruct right transfer contracts and long-term lease contracts, including: sale, netting, donations, bequeaths, barter, lease, financial lease, transfer of stakes in real estate companies, or granting usufruct rights for more than 50 years. Royal Order No. A/84 dated 24/02/1442H exempts real estate transfers of ownership or disposition thereof by owners from value added tax, with the imposition of a Real Estate Transaction Tax on sales and similar transactions equal to 5% of the property value. The tax came into effect on 17/02/1442H (corresponding to 04/10/2020G).
Relatives
A “relative” includes the husband, wife and minor children. For purposes of the Corporate Governance Regulations a “relative” includes any of the following:
a- fathers, mothers, grandfathers, grandmothers and ancestors thereof;
b- children, grandchildren and descendants thereof;
c- brothers, sisters and half-siblings; and d- husbands and wives.
Receiving Agents The Receiving Agents whose names are stated on Page viii.
Related Party Transactions Transactions entered into between the Company and its Related Parties as set out in Section 12.8 (“Transactions and Contracts with Related Parties”).
Rules for Qualified Foreign Financial Institutions Investment in Listed Securities
The Rules for Qualified Foreign Financial Institutions Investment in Listed Securities issued by the CMA’s Board pursuant to Resolution No. 1-42-2015 dated 15/07/1437H (corresponding to 04/05/2015G) as amended by CMA Board Resolution No. 13-65-2019 dated 14/10/1440H (corresponding to 17/06/2019G).
Party or Related Party(ies)
In this Prospectus and pursuant to the Glossary of defined terms used in the regulations and rules of the CMA issued pursuant to the CMA Board Resolution No. 4-11-2004, dated 20/8/1425H (corresponding to 4/10/2004G), as amended pursuant to the CMA Board Resolution No. 2-22-2021, dated 12/7/1442H (corresponding to 24/2/2021G), a “Related Party” includes any of the following:
a- affiliates of the Issuer;
b- Substantial Shareholders of the Issuer;
c- Directors and Senior Executives of the Issuer;
d- Directors and senior executives of an affiliate of the Company;
e- Directors and Senior Executives of Substantial Shareholders of the Issuer;
f- any relatives of persons described at (1), (2), (3), (4) or 5 above;
g- any company controlled by any person described at (1), (2), (3), (4), (5) or 6 above.
In (g), “control” means the ability to influence the actions or decisions of another person through, whether directly or indirectly, alone or with a relative or affiliate: (i) holding 30% or more of the voting rights in a company; or (ii) having the right to appoint 30% of more of the members of the governing body, and a “controller” shall be construed accordingly.
Retail Subscription Form The retail subscription application form to be completed by Individual Investors in order to subscribe for the Offer Shares during the Retail Offering Period.
Saudization Saudization requirements applicable in the Kingdom in relation to the labor market.
Saudization Rate
The percentage of employees within any workforce who are deemed to count towards the level of Saudization within the workforce of any company, including Saudi nationals and persons married to Saudi nationals, with certain categories of persons, such as disabled Saudi national employees, given greater weighting when counted towards the Saudization level.
Saudi Riyal(s) or SAR Saudi Arabian Riyal(s), the official and legal currency of Saudi Arabia.
Secretary The secretary of the Board of Directors.
Selling Shareholders Shareholders whose names and shareholding percentages are shown in Table 5-1 (“Direct Ownership in the Company pre and post Offering”) and who will sell some of their shares in the Offering.
Senior Executives or Senior
Management Members of the Company’s senior management whose names are set out in Table 5-6 (“Senior Management Details”).
Shares Any fully paid ordinary share of the Company with a nominal value of SAR 10 per share in the capital of the Company as issued thereby from time to time.
Shareholder(s) Any holder of shares in the Company.
Term Definition SOCPA Saudi Organization for Certified Public Accountants.
Subscriber(s) Any Participating Party and Individual Investor.
Subscription Form The Subscription Form that Individual Investors and Participating Parties (as the case may be) use to apply for Offer Shares.
Subscription Form for Participating Parties
The form used by Participating Parties to subscribe for the Offer Shares during the Book-Building period. This term includes, when applicable, the supplementary bid form when the price range is changed.
Subsidiaries
The Company’s subsidiaries, which are as follows:
Tadbeir Limited Company
Tadbeir Real Estate Company.
Nesaj Urban Development Company.
Building Construction Limited Company.
Remal AlKhobar Real Estate Company.
Etlalat AlSharq Real Estate Company.
Substantial Shareholder(s) Any person holding 5% or more of the Issuer’s shares.
Tadawul, Saudi Exchange or
Exchange The Saudi Exchange.
SWAP Agreements
Type of agreement through which foreign investors, individual non-Saudis residing outside the Kingdom and registered institutions outside the Kingdom, agree to invest indirectly to acquire the economic benefits of shares by entering into swap agreements with a Capital Market Institution licensed by the CMA.
Underwriter SNB Capital Company.
Underwriting Agreement The underwriting agreement entered into between the Company, the Selling Shareholders and the Underwriter in connection with the Offering.
VAT
Value Added Tax, also known as Goods and Services Tax, which came into force on 01/01/2018G in accordance with the Unified Agreement on Value Added Tax for the Cooperation Council for the Arab States of the Gulf. The Ministry of Finance has also announced an additional increase in value- added tax to 15% as of July 2020G.
Vision 2030 The National Strategic Economic Program, which aims to reduce dependence on the oil and petrochemical industry, diversify the Saudi economy and develop public services, as announced by the Saudi government in 2016G.
Zakat Certificate Zakat certificates issued by the Zakat, Tax and Customs Authority.
ZATCA The Zakat, Tax and Customs Authority, formerly known as the General Authority of Zakat and Tax.