ARABIAN PIPES Co.

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ARABIAN PIPES Co.

The Board of Directors’ report to the “thirtieth” Ordinary General Assembly of the shareholders of ARABIAN PIPES Co. on the results of its activities for the year

ending on December 31, 2021

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Board of Directors report for the year2021

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In the name of Allah the most merciful and compassionate

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Contents of the report

Introduction 5

Chairman's statement 6

First: the company's activity 7

Second: Achievements, strategic plans and future expectations 8

Third: The vision and important events 9

Fourth: international standards 10

Fifth: Manpower and localization 10

Sixth: the risks 11

Seventh: The company's business results for the last five years 13 Eighth: Shares and Debt Instruments Activities and Conflicts of Interest 17

Ninth: The company's policy in distributing profits 17

Tenth: Loans 18

Eleventh: Meetings of Board Members and Affiliate Committees 19 Twelfth: Contracts of those with relations with the company by the end of 2020 28 Thirteenth: A statement of the dates of the general assemblies of shareholders held during the year 2020 and the names of the members of the Board of Directors attending these assemblies

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Fourteenth: The number of the company's requests to the shareholders' register and the dates and reasons for the requests

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Fifteenth: Governance and its related applications 29

Sixteenth: Legal Zakat and regular payments 29

Seventeen: Fines, penalties and precautionary restrictions 29

Eighteenth: Adoption of internal controls 30

Nineteenth: Results of the Annual Review of the Effectiveness of Internal Control Procedures

30 Twentieth: Board of Directors' proposals to the General Assembly 30

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Gentlemen/ Shareholders of Arabian Pipes Company (Respected) Peace, mercy and blessings of Allah be upon you:

The Board of Directors of Arabian Pipes Company is pleased to present to you its annual report on the company’s business and results for the financial year ending on 31 December, 2021, which was prepared in accordance with the requirements of the Companies Law, the Corporate Governance Regulations and the instructions issued by the Board of the Capital Market Authority, accompanied by the audited financial statements, which includes the statement of the company's financial position as on 31 December 2021, as well as the statements of income, cash flows, changes in shareholders' equity and the necessary notes for the year ending on that date. It also reflects the performance and work of Arabian Pipes Company, which contributes to strengthening the Saudi industry and the national economy, especially in the oil and gas sector. The chairman and members of the company's board of directors also extend their sincere thanks and appreciation to the valued shareholders for their precious support and trust, and all the company's employees for their efforts and keenness on the company's progress and prosperity.

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Speech of Chairman:

Dear shareholders of Arabian Pipes Company, may Allah protect them, Peace, mercy and blessings of Allah be upon you:

After that, I am pleased to present to provide you the annual report on the results of the financial year 2021, which was full of challenges and risks as a result of the continuation of the consequences and effects of Covid-19 pandemic, which was a major cause of the turmoil of world and movement between countries, which had the greatest impact on the business of companies and supply chains, the increase in production costs and the postponement of the launch of many projects in the oil and gas sector, which was a reason for the continued decline in the company’s sales despite the small increase in the company’s sales for the year 2021 to reach 395 million riyals compared to 369 million riyals last year. The company, thankfully, completed the production and supply of pipes for many of the projects contracted to Saudi Aramco, local customers and export customers during the year. It also continued to work for the second year in a row in implementing long-term agreements for Saudi Aramco to supply Longitudinal submerged arc-welded pipes to line wells and pipes of the production lines.

Despite the intense competition between local factories, the company obtained projects for the supply of pipelines and lining to be supplied directly after manufacturing or immediately upon request to Saudi Aramco. These contracts are estimated at sums of up to 650 million riyals.

The company has also implemented the enterprise resource management program ERP - SAP, which is in the final stages, which will contribute to enhancing the company's capabilities in the optimal use of resources and enhance internal control, as work will begin in the second quarter of 2022.

The company continued to work on strengthening the internal audit department and the company’s internal governance, and the company formed an independent committee for governance in the company’s new term.

The company is keen on training and development to train and qualify students to work in the company's factories, raise the percentage of Saudization and expand the employment of women.

The chairman and members of the company’s board of directors extend their sincere thanks and appreciation to the valued shareholders for their precious support and trust and all the company’s employees for their efforts and keenness to advance the company and achieve the goals and we ask Allah Almighty to preserve our dear country and its leader, the Custodian of the Two Holy Mosques and his faithful Crown Prince.

Allah is the grantor of success.

Chairman of Board of Directors YOUSSEF BIN SALEH ABA AL KHAIL

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First: the Company’s activity:

ARABIAN PIPES Co. - a Saudi joint stock company under the decision of His Excellency the Minister of Commerce No. 922 dated 18/11/1411 AH corresponding to 01/06/1991 AD and under the industrial license No. (434/R) dated 12/11/1405 AH, as well as the industrial license No. (1109/S) ) and the date of 11/12/1419 AH, as well as the industrial license No.

(479/R) and the date of 26/02/1436 AH and the amendments made to them and registered in the commercial registry of the city of Riyadh under No. For the company’s factory in JUBAIL and registered in the Commercial Register No. 2055007048 and dated 21/04/1426 AH, the company’s authorized and paid-in capital is only one hundred million SAR, one hundred million SAR, divided into (10,000,000) shares of equal value, and the nominal value of each is 10 SAR. All of them are ordinary cash shares.

The following is a description of the main types of activity of the company:- 1- Manufacture of pipes, hoses, plastic tubes, fittings and fittings.

2- Manufacture of pipes, tubes and hollow shapes of iron and steel.

3- Production and marketing of longitudinally welded and coated steel pipes for pipelines, construction and commercial purposes

4- Establishment of metal industries.

5- Bend, shape and dent the pipes.

6- Pipe wrapping from the outside and the inside.

7- Carrying out commercial business from buying and selling pipes, their accessories.

8- Execution of pipeline laying works.

9- Purchasing lands to construct buildings on them and investing them by selling or renting for the benefit of the company.

10- Contracting maintenance, cleaning, operation and catering.

11- Production of metal and non-metallic pipes.

Riyadh Factory:

For the production of longitudinally welded (ERW) steel pipes, sizes from 6 inches to 20 inches, with an average production capacity of 160,000 tons annually. The factory is located in the Industrial City in Riyadh and the ownership percentage is 100%

Jubail Factory:

For the production of longitudinally welded steel pipes (SAW) sizes from 16 to 48 inches, with an average production capacity of 300,000 tons per year. The factory is located in Jubail Industrial City and the ownership percentage is 100%

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coating line:

This factory is used to coat the pipes from outside (FBE, 3LPE, 3LPP) pipe sizes from 6 to 24 inches with an average production capacity of 2.4 million square meters per year. The factory is located in the Industrial City in Riyadh and the ownership percentage is 100%.

Slitting line:

This line is used to slit the iron rolls needed for production with high capabilities in terms of roll width up to (1600 mm) and thicknesses that can be sliced up to (12.7 mm). This line is located in the company's factory located in the Industrial City in Riyadh and the ownership percentage is 100%.

Threading line:

This line is used to thread pipes that are used in the field of drilling and lining wells (CASINGS-OCTG) according to international specifications and required by local and international oil companies. This line is located in the company's factory located in the Industrial City in Riyadh and the ownership percentage is 100%.

The following table shows the business volume of the company's activities:-

(Amounts in thousands of SAR) Main activity name Business volume Total Profit / (Loss) 1 Pipe production and coating activity 394,981 18,641

Total 394,981 18,641

Clause (1) (7) (8) of Article 43 - Registration and Listing Rules

Second: Achieved Achievements, Strategic Plans and Future Expectations:

Despite the challenges that the industry faced during the last period due to the continuation of the consequences and effects of Covid-19 pandemic, the company was able to achieve many achievements during the past year 2021, including:-

1- Completing the supply of contracted projects and obtaining projects for supplying SOUR pipelines from the Jubail factory in favor of Aramco, despite the intense competition among local factories.

2- Selling good quantities of slow-moving iron plates or leftovers from previous projects in the Jubail factory, and benefiting from the improvement in international iron prices.

3- The company's sales increased from stock pipes and the rest of the projects that were previously supplied from the Riyadh factory.

4- Manufacture and supply well lining pipes to be supplied upon request in accordance with the agreement signed with Saudi Aramco in this regard, and to obtain new contracts for their manufacture and supply next year.

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5- Continuation of work for the second year in a long-term agreement in favor of Saudi Aramco to supply Longitudinal submerged arc welded (LSAW) pipes from the Jubail factory, which has a term of up to five years.

6- Continuation of work for the second year in a long-term agreement in favor of Saudi Aramco to supply Electric Resistance Welded (ERW) pipes from the Riyadh factory, which has a term of up to five years.

7- Continuation of work for the second year with the existing long-term agreement to supply well lining pipes for Saudi Aramco, and its duration is five years, subject to extension.

8- Work continuously to achieve the goals of the IKTVA sufficiency program to increase the use, development and raise the efficiency of products and diversify the outputs of national factories.

9- Participation in Abu Dhabi Petroleum Exhibition and Conference in November, which is the most important forum in the region for oil and gas companies and local and international factories.

10- Signing memoranda of understanding agreements with a number of international companies to supply iron.

11- Training and development, signing agreements to train and qualify students to work in the company’s factories, raise the Saudization rate and expand women’s employment.

12- Working with Hyundai to supply iron, and the first project was successfully implemented and supplied to Aramco.

13- Developing the main forming machine in the Jubail factory with the help of a specialized German company, which increases the life of the factory and improves its performance.

14- Developing a pipe cutting machine on the production line in the Riyadh factory, which increases the life of the machine and improves its performance.

15- Signing agreements and purchase contracts with a number of local and international companies to supply steel for projects that the company won.

16- Work with local suppliers to localize the supply of spare parts to the Jubail and Riyadh factory.

17- Working with international companies to explore investment opportunities in Saudi Arabia.

18- Several policies and regulations of the committees of the Board were reviewed and the company's articles of association were reviewed and amended to keep pace with the requirements of the corporate governance system and the corporate system.

19- The loans of the Ministry of Finance and the Industrial Development Fund have been rescheduled.

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Third: The vision and important and fundamental events.

Regarding the strategic plans and future expectations during the coming period, the company is working on implementing the following:

1- Work on developing a pipe-expander machine in Jubail Factory.

2- Providing a new product in the teething line, which is short pipe joints - pup joints to meet the demands of Aramco and customers.

3- Studying the possibility of producing well lining pipes with a diameter of 8/3 13 inch and 8/5 9 inch to meet the needs of Aramco and oil companies of these sizes.

4- Developing the packaging line in Riyadh to keep pace with market requirements.

5- Developing a water treatment plant inside the factory to keep pace with the requirements of the environment.

6- Work on developing Riyadh and Jubail factory to keep pace with the future requirements of the market.

7- Cooperating with local and regional pipe insulation, packaging and lining factories to meet the needs of their contracted projects and expand the company’s share in these projects and markets.

8- Work to increase the company's shares in the export markets in which it is located and open new markets

9- Complete the implementation of the comprehensive ERP system in the company.

10- Updating the work policies and procedures in the company's departments in line with the system's automation.

11- Strengthening and developing internal control procedures.

Third: The vision and important and fundamental events:

Our vision:

To be the leader in the pipe industry and services in the Middle East and North Africa and to participate with our clients in the development of their business.

Our message:

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Arabian Pipes Company applies the highest quality systems and seeks to localize the latest technologies and solutions for the pipe industry through the development of human resources.

Important and material events:

• Strengthening the control environment:

- Policies and Regulations:

The company has implemented a set of policies in accordance with the regulations of the Capital Market Authority and international standards. To this end, the company's articles of association were updated, as well as reviewing of many policies and regulations of the board's committees during the past year.

- Automation of all company activities:

 The company has completed work on implementing the ERP system project with SAP, which will enhance the company’s internal control and raise operational efficiency. Work on this system will start in the second quarter of 2022, Allah willing.

 The company worked with an independent accountant's office to review and lift the

reservations contained in the financial statements for the year 2020, which was completed, praise be to Allah.

 Al Sunaidi Legal Consultants office completed the review of the company’s report for the consulting Protiviti Company and the issued financial statements of the company and to verify that there are no violations of the laws and regulations in force in order to preserve the rights of the company and shareholders, as it did the following:

 Reviewing financial statements, internal audit reports, reports of external auditors, minutes of the Board of Directors and the Audit Committee, reports of the Board of Directors, policies and procedures from 2004, and conducting some interviews with the Board of Directors and a number of current and former employees of the

company.

The results of the report were as follows:

 After examination and verification, it has not been established that there are criminal cases that require the criminal aspect.

 The company's accounting policies and system (EMIS) for the purpose of calculating the inventory in terms of value suffer from some weaknesses and cannot be relied upon to give correct results.

 The company calculates inventory in terms of quantity and has an accurate pipe tracking system.

 As for what was mentioned in the report of Protiviti Company that there is an inflation in the value of the stock and that the reasons that led to the inflation of the stock are manual adjustment restrictions, we see that it is a result of the existence

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of gaps in the accounting system for calculating the stock and that the system gaps are corrected through these adjustment restrictions.

A reservation about the company’s external auditors, from 2012 until 2019, to adequately exercise the duty of care imposed on the company, as the external auditors of the company from 2012 until 2019 had to do more checks on the inventory item.

• The recommendations of Al Sunaidi office were as follows:

1- The speed of updating the stock policy and creating a system capable of calculating the stock correctly and according to precisely defined powers.

2- Strengthening the internal audit department and the internal governance of the company.

3- In order to implement what was mentioned in Recommendation No. (1) above, we recommend making a complete inventory of the stock in terms of quantity and value by specialized persons at the end of each Gregorian year, and making a sudden inventory during the year.

4- Assessing the damages incurred by the company as a result of differences in stock assessment and examining the possibility of starting legal procedures against the company’s external auditors from 2012 to 2019 to claim compensation for

damages.

The Council stressed the importance of implementing the following measures:

continuing to enhance the level of internal control of the company.

Update and develop the company's policies and procedures.

completing the implementation of the internal resources system project and starting it at the beginning of the second quarter of 2022.

The Board also affirmed the company's commitment to preserving the rights of the company and its shareholders.

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Fourth: International Standards:

The company has committed to following the International Standards (IFRS) when issuing financial reports, which are followed in the Kingdom of Saudi Arabia.

The financial statements for the financial year ending on December 31, 2020 have been prepared in accordance with the International Financial Reporting Standards approved in the Kingdom of Saudi Arabia and other issuances issued by the Saudi Organization for Certified Public Accountants. The company started applying these standards as of 01/01/2017 in accordance with the decision of the Board of Directors of the Saudi Organization for Certified Public Accountants.

The company is following up on new standards and issuances issued by the Saudi Organization for Certified Public Accountants, and during this fiscal year no standards or issuances with a material impact on the financial statements were issued.

Fifth: Manpower and localization:

ARABIAN PIPES Co. is keen to attract qualified and new Saudi cadres in the labor market, believing in the role of the private sector in contributing to building society.

Where the company continued its policy of the training program ending with employment by signing a number of agreements related to training ending with employment with Jubail Technical Institute, the National Institute of Technology and the Institute of Plastics Inspection and Quality Assurance in order to train and qualify a number of Saudi cadres for a period of two years before they engage in technical work within the company.

Work training:

Convinced of the company’s management of the role of training and its importance in raising the efficiency of its employees, which has a positive impact in achieving the company’s goals, the company continued its policy of contracting with trainers and specialized companies to implement training programs inside and outside the company in most of the administrative and technical fields related to the company’s business. More than 31,000 training hours during the fiscal year 2020. And the use of remote training during the COVID- 19 pandemic.

Cooperative Training

The company sought to serve cooperative training programs, as it was agreed with several different educational institutions in support of the sons of the country in increasing their knowledge of their field of study in practice before graduating to the labor market.

Work environment :

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The company is committed to the continuous improvement of the work environment, so it employs scientific methods to assess the level of job satisfaction among its employees and to identify areas where the work environment can be improved within the company in order to increase job stability and make it more appealing to job seekers.

Career progression:

ARABIAN PIPES Co. is keen to appreciate qualified Saudi talents, so it proceeded to adopt a career progression program for some carefully selected jobs, with the aim of preparing Saudi cadres to occupy technical and administrative leadership positions within the company.

Sixth: Risks:

1- Risks related to the company’s operations:- A- Dependence on one main sector:

In its sales, the company relies on the oil and gas sector as a main customer, which in turn is affected by the global economy and its variables. During the last period, the company has worked to increase export sales of its products, the local market, contractors, and expand the work of Threading and packaging.

B- Risks related to the availability of funding and liquidity:

Banks are used to support the company's operational and expansion operations, which exposes it to financial market volatility and excessive financing expenses. The company's management works to ensure that it has enough cash to satisfy its obligations, assess the need for additional facilities, and take advantage of government initiatives to boost the economy.

C- Foreign currency risk:

Currency risk arises from changes and fluctuations in the value of financial instruments as a result of changes in

Foreign exchange rates The company signs banking facilities agreements with banks through which exchange rates are fixed to avoid these fluctuations in prices.

D- Risks related to the change in the prices of raw materials

As the pipe industry depends mainly on iron, which makes any sudden change in the price of iron directly affects the profit rate in the projects implemented by the company, and the company works on fixing the prices of raw materials with suppliers before starting the project in order to reduce the risks of price changes.

2- Risks related to the decline in capital spending:- A- Economic conditions in the Middle East:

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The success of the company's business can be influenced by general economic circumstances in the Middle East, so any stagnation or slowdown in the area might damage demand for the company's products, and the company's management is seeking to diversify its clients, particularly in export markets.

B- Customs and Sovereign Duties:

Because customs exemptions in all Gulf Cooperation Council countries and some Arab countries provide a significant competitive advantage for the company's products, any future change in those fees, or any other sovereign fees, may affect the company's share of those markets, and the company is analyzing the costs associated with those risks and identifying appropriate alternatives.

3- The risks of the outbreak of the emerging coronavirus (Covid-19):

The Company is unable to estimate the expected impact on the business and financial prospects because to the ongoing uncertainty about the scope and length of (Covid-19) and its impact on the energy industry and other associated businesses.

These risks are monitored and monitored by the Board of Directors and its affiliated committees, by evaluating each type of these risks and preparing special studies to reduce those risks while clarifying alternative opportunities.

Clause (2) of Article 43 - Registration and Listing Rules Seventh: The company's business results for the last five years:

The following table shows the company's sales during the past five years:

(Amounts in thousands SAR)

559,604.00 698,311.00 741,085.00 369,289.00 394,981.00

2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 2 0 2 1

SALES

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Income statement: (amounts in thousands of SAR)

Item 2021 2020 2019 2018 2017

Sales 394,981 369,289 741,085 698,311 559,604

Sales cost (376,340) (500,589) )644,512( )748,567( )507,209( Total profit/loss 18,641 (131,300) 96,473 )50,256( 52,395 Administrative and marketing

expenses (60,168) )38,867( )33,818( )32,072( )26,462( Provision for slow moving and

obsolete merchandise - - 2,080 )663( 8,366

amortization of deferred

expenses -- )3,979( - )8,716( --

financing expenses (18,257) )24,156( )30,794( )28,309( )27,601(

Other income (expenses) 11 3,864 801 1,699 4,864

Profit from an investment

available for sale - - - -- --

Zakat provision (343) )902( )4,494( )4,383( )6,268( net profit (loss) (60,116) )195,340( 30,248 )122,699( 5,294

Actuarial reserve (415) )1,325( )1,228( )94( -

Total (loss/profit) comprehensive

(60,531) )196,665( 29,020 )122,793( 5,294

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Net profit during the last five years: (amounts in million SAR)

The company’s sales increased for the year 2021 AD by an estimated rate of about 7%, at an amount of 394,981 million riyals, compared to SR 369.289 MM for the year 2020, and that is due to the improve in the economic activities during the year which improve delivery schedules compared to the last year which was unprecedented widespread of the emerging Coronavirus pandemic (Covid-19 ). Also, Decrease in COGS for the year 2021 by about 24% compared to 2020 AD to reach SR (376.3) MM compared to SR (500.6) for the year 2020, which led to achieving gross profit about SR 18.6 MM in 2021 compared to loss amounting to SR (131.3) MM

It is worth noting that the company does not invest in any securities, speculation in company shares, or any bank deposits.

5,294.00

(122,699.00)

30,248.00

(195,340.00)

(60,116.00)

2017 2018 2019 2020 2021

net profit (loss)

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Statement of financial position: (amounts in thousands of SAR)

Item 2021 م2020 م2019 م2018 م2017

Current assets 194,907 537,641 614,594 629,306 894,707

Fixed assets and projects in progress

365,713 376,794 396,253 373,394 392,861

investments -- -- -- -- --

deferred expenses -- -- -- -- --

total assets 560,620 914,435 1,010,847 1,002,700 1,287,568 Current liabilities 417,075 711,864 568,109 617,065 630,308 Medium and long term

loans

18,654 18,252 25,110 -- 24,000

Provision for employees' end of service

19,191 18,088 14,622 11,649 11,548

Total Liabilities 454,920 748,204 607,841 628,714 665,856

capital 400,000 400,000 400,000 400,000 400,000

regular reserve 120,000 120,000 120,000 159,427 159,427

general reserve -- -- -- 31,438 31,438

Retained earnings (411,238) (351,122) )115,672( )216,785( 30,847 actuarial reserve (3,062) )2,647( )1,322( )94( -- Total Shareholders'

Equity 105,700 166,231 403,006 373,986 621,712

Total Liabilities and

Shareholders' Equity 566,324 942,095 1,010,847 1,002,700 1,287,568 The company’s financial statements for the year 2020 have been prepared in accordance with international auditing and accounting standards recognized in the Kingdom of Saudi Arabia, and there are no differences from the international accounting standards issued by the Saudi Organization for Certified Public Accountants, However, there is qualification from the external auditor which is :

Qualified Opinion

We have audited the financial statements of Arabian Pipes Company ("the Company") which comprise the statement of financial position as at December 31, 2021, and the statement of profit or loss, statement of comprehensive loss, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, except for the possible effects of the matters described in the "Basis for Qualified Opinion" section of our report, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31,

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2021, and its financial performance and its cash flows for the year then ended, in accordance with International Financial Reporting Standards ("IFRS") that are endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements endorsed by Saudi Organization for Chartered and Professional Accountants ("SOCPA").

Basis for Qualified Opinion

1- As disclosed within Note 33 of the accompanying financial statements, during 2021, the Company's management has performed a reconciliation of prepayments and other receivables has identified certain discrepancies. As a result, the management restated its prepayment and other receivable by SR 40.110 million and recognized a corresponding liability under notes and other payables amounting to SR 12.450 million.

The cumulative impact amounting to Saudi Riyal (SR) 40.110 million was recognized in the opening accumulated losses of the year ended December 31, 2020.

As of the date of approval of these financial statements, due to the unavailability of supporting documentation, we are unable to verify if the individual and cummulative adjustments amounting to SR 40.110 million pertains to the opening accumulated losses as of December 31, 2020, or to the subsequent year(s). Accordingly, we are unable to determine whether any impact is required to be recognized within the statement of profit or loss for the years ended December 31, 2020, and 2021 with respective to the said adjustment.

Clause (6) of Article 43 - Registration and Listing Rules Clause (25) of Article 43 – Governance

And based on the results of 2020, the Board of Directors took a decision to recommend to the extraordinary general assembly a 75% reduction in the company’s capital. after the capital reduction process is completed, the company is working on increasing the company's capital by offering rights issue shares at a value of 300 million SAR, so the capital will become 400 million SAR after the increase. The recommendation to reduce and increase the company’s capital is subject to the approval of the relevant regulatory authorities and the extraordinary general assembly.

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A comparative chart for five years for each of the company's assets and liabilities:

(amounts in thousands of SAR)

Clause (3) (5) (6) (25) of Article 43 - Rules of Registration, Listing and Governance Through our geographical analysis of the company’s revenues, it becomes clear that:

Year Item KSA Gulf Middle

East Other Total

2021

Pipes sales 330,168 13,425 7,505

-- 351,098

Coating sales 827 -- -- -- 827

Raw materials and scrap

14,000 29,055

-- -- 43,055

Total 344,995 42,480 7,505 394,981

20 20

Pipes sales 343,851 2,672 5,713 -- 352,236

Coating sales 9,570 -- -- -- 9,570

Raw materials and scrap

7,483 -- -- -- 7,483

Total 360,904 2,672 5,713 369,289

Eighth: Shares and Debt Instruments Activities and Conflicts of Interest:

- During the year 2020, there are no debt instruments issued by the company.

- There is no interest in the class of voting shares belonging to persons (other than members of the Board of Directors, senior executives and their relatives) who have informed the company of these rights.

- There is no private interest, special contractual securities, special option rights, or special subscription rights belonging to the members of the Board of Directors, senior

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executives, their spouses and their minor children in the shares or debt instruments of the company or any of its subsidiaries.

- There are also no transfer or subscription rights under convertible debt instruments, contractual securities, subscription right memoranda, or similar rights issued or granted by the company during the year 2021 AD.

- There is also no refund, purchase or cancellation by the Company of any redeemable debt instruments.

- There are also no arrangements or agreements whereby a member of the company's board of directors or a senior executive has waived any salary or compensation.

- Also, there are no arrangements or agreements under which any of the shareholders has waived any rights to profits.

- There are also no contracts or deals to which the exporter is a party.

- Also, there is no material interest in any contracts or deals entered into by the company that belong to a member of the board of directors, the CEO, the financial manager or any person related to any of them.

- Clause (8) (10) (11) (13) (14) (15) (17) (18) (19) (20) of Article 43 - Registration and Listing Rules – Governance

Ninth: The company's policy in distributing profits:

The company's annual net profits shall be distributed after deducting all general expenses and other costs as follows:-

1- 10% of the net profits shall be set aside to form a statutory reserve, and the Ordinary General Assembly may discontinue this deduction when the said reserve reaches 30%

of the paid-up capital.

2- The company may set aside 30% (thirty percent) of the net profits to form a consensual reserve to be allocated to support the company’s financial position. It may also stop or use it.

3- From the rest, a down payment to shareholders equivalent to 5% (five percent) of the paid-up capital shall be distributed.

4- After submitting a percentage not exceeding five percent (5%) (five percent) of the remainder, it shall be allocated to remunerate the members of the Board of Directors, with a maximum of no more than five hundred thousand SAR for each member, provided that the entitlement to this remuneration is proportional to the number of sessions attended by the member.

5- The remainder is then distributed to the shareholders as an additional share of the profits.

Clause (9) of Article 43 – Governance Tenth: Loans:

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As the main element of the company’s financing elements are loans. The volume of loans at the end of 2020 amounted to 501.8 million SAR, compared to 394.5 million SAR at the end of 2019. The following is a statement of short-term loans:

Balances of short-term loans at the end of the year (amounts in thousands of SAR)

Grantor Purpose 2021 2020

business loans ( Riyadh Bank )

Working Capital

Financing 70,000 70,000

legitimate loans Ministry of Finance - (

Riyadh Bank )

Working Capital

Financing 120,000 120,000

legitimate loans Al Rajhi Bank ( )

Working Capital

Financing 165,382 165,382

legitimate loans Alawwal Bank - SABB( )

Working Capital

Financing 146,459 146,459

GS Global Corp Working Capital

Financing 519 -

Total 207,322 501,841

The mentioned loans are for the purpose of financing working capital and against promissory notes signed in favor of the banks, which are a number of short-term loans that are due to be repaid during the year. Clause (12) of Article 43 - Governance

Long, medium and short term loans and the current portion of long-term debt of the Saudi Industrial Development Fund:

# Period Purpose 2021 2020

1 Short term Jubail Factory Project Financing 78,978 77,717 2 Long term Financing the development of the

Riyadh factory and the Jubail factory - -

Total 78,978 77,717

The Company obtained loan from the SIDF amounting to SR 113.4 million for the construction of the Jubail Pipe Production Plant. The loan is secured by mortgaging the buildings, machinery, and equipment of the Company's factories .On 9 March 2015, SIDF agreed to reschedule the remaining balance as of that date, amounting to SR 83 million in ten semi-annual instalments. On 9 December 2019, the Company obtained an additional loan amounting to SR 7.165 million for a period of 5 years. On 4 April 2021, the Company obtained an additional loan amounting to SR 1,733 million for a period of 5 year As of the year ended 31 December 2021, the management successfully rescheduled the loan of the and the repayment of the current balance outstanding amounting to SR 78,759 million in 8 instalments.

(23)

23

Clause (12) of Article 43 - Registration and Listing Rules - Governance Eleventh: Meetings of Board Members and Affiliate Committees:

Board of Directors :

The number of Board meetings during the year 2021 reached 9, and the following is a statement of the names of the members of the Board of Directors, the description and classification of their membership, the number of times they attend meetings, and their membership in the Board of Directors of other joint-stock companies:

م Member of the Board of Directors

Meetin g No.

(15/9) March

31, 2021

Mee ting

No.

(16/

9) May

03, 202 1

Mee ting

No.

(17/

9) May

21, 202 1

Meeti ng No.

(1/10) May

25, 2021

(2/10) June

08, 2021

Mee ting

No.

(3/1 0) Aug

ust 02, 202 1

Mee ting

No.

(4/1 0) Oct obe r 18, 202 1

(5/10) Dece mber

01, 2021

(6/10) Dece mber

28, 2021

To tal %

1 YOUSSEF SALEH ABA AL-KHAIL

Attend ed

Atte nde d

Atten ded

Atte nde d

Atten ded

Atten

ded 9 100

3 KHALED ABDULLAH ABUNAYAN

Attend ed

Atte nde d

Did not atten

d

Did not atten d

Did not atte nd

Atte nde d

Atten ded

Atten

ded 6 67

2 SAAD IBRAHIM AL MOJIL(1)

Attend ed

Atte nde d

- - - 3 33

4 AZZAM SAUD AL- MUDAIHIM

Attend ed

Atte nde d

Atten ded

Atte nde d

Atten ded

Atten

ded 9 100 5 HAITHAM TAWFIQ

AL-FRAIH(1)

Attend ed

Atte nde d

- - - 3 33

6 SAAD FALAH AL- QAHTANI

Attend ed

Atte nde d

Atten ded

Atte nde d

Atten ded

Atten

ded 9 100

(24)

24

(1) Former members of the ninth session.

(2) New members in the tenth session.

Also, there are no deals between the company (the exporter) and any related party.

Clause (13) (16) of Article 43 - Governance

Actions taken by the Board of Directors to inform its members, especially non-executives - taking note of the shareholders’ proposals and observations about the company and its performance

 According to the company's articles of association and the company's approved corporate governance regulations, shareholders have the right to actively participate and discuss with members of the board in the meetings of the general assembly.

7 AHMED BIN ALI AL- LUHAIDAN

Attend ed

Atte nde d

Atten ded

Atte nde d

Atten ded

Atten

ded 9 100 8

MUSA BIN ABDULLAH AL-

RUWAILI(2)

- - - Atten

ded

Atten ded

Atte nde d

Atten ded

Atten

ded 6 67 9

FAISAL BIN MOHAMMED AL-

HARBI(2)

- - - Atten

ded

Atten ded

Atte nde d

Atten ded

Atten

ded 6 67 1

0

ABDULLAH BIN MOHAMMED AL-

HARBI(2)

- - - Atten

ded

Atten ded

Atte nde d

Atten ded

Atten

ded 6 67

(25)

25

 The Chairman and Chief Executive Officer shall inform all members of the Board of Directors, especially non-executives among them, of the shareholders' proposals and their observations regarding the company and its performance at the nearest meeting of the Board, if any.

The Board of Directors also evaluates its performance and the performance of its committees and members without setting performance indicators and no third party assistance has been sought.

(26)

26

A statement of the current and previous positions, qualifications and experience of the members of the Board of Directors:

Name Current Position

Previous

position Qualifications Experience

YOUSSEF SALEH ABA

AL-KHAIL

Chairman of Board of Directors

Bachelor of Computer

Science.

Master of Science in Information

Systems Management.

Worked for (15) years in various sectors in the

field of computers.

Worked in various sectors in the field of industry and insurance,

including:

For (9) years as Chairman and Member

of the Board of Directors of Glass.

For a period of (9) years as Chairman and

Board Member of EXA Insurance.

For (6) years as a member of Qassim

Cement Council.

KHALED ABDULLAH ABU NYAN

Chairman of the Board of Directors of Abunayyan

Holding Company

Chairman of the Board of Directors of Abunayyan

Holding Company

Bachelor of Administrative

Sciences and Computer

Science.

Worked for (7) years as CEO of Abdullah Abunayyan Trading

Company.

Worked for (10) years as CEO in Abunayyan

Holding Company.

Worked currently the Chairman of the Board

of Directors of Abunayyan Holding Company from 2018 to

date.

AZZAM SAUD AL- MUDAIHIM

CEO of Abunayyan

Holding Company

CEO of Al Hassan Ghazi

Ibrahim Shaker Company

Bachelor's degree in Mechanical Engineering.

He worked for (12) years in the Advanced

Electronics Company as a Manufacturing

Engineer.

He worked for (5) years in Al Muhaidib Food

Company as a

(27)

27

Regional Sales Manager.

He worked for (4) years in Masdar Trading Materials Company as a Purchasing Manager

and Warehouse Manager.

He worked for (10) years in Masdar Trading Materials Company as a general

manager.

He worked as CEO of Al Hassan Ghazi

Ibrahim Shaker Company from November 2017 until

November 2020.

He has been serving as CEO of Abunayyan Holding Company from

December 2020 to date.

SAAD IBRAHIM AL

MOJIL

Member of the Board of

Directors

Bachelor's degree in Chemical Engineering.

Master's degree in Chemical Engineering.

He worked for (41) years in the management of Al Mojil

Trading and Contracting Company.

SAAD FALAH AL-

QAHTANI

Executive Vice President of Finance and Investment at Thakher Real Estate Development

Company

Chief Financial Officer at Knowledge

Economic City

Bachelor of Accounting.

Master's degree in Finance and

Investment.

He worked for (13) years in SABIC - Financial Company.

He worked for (3) years in Ma'aden - Financial

Company.

He worked for two (2) years in Al-Rajhi Financial Group.

(28)

28

He worked for one year in Zahran Financial

Group.

He worked for two years in the Knowledge

Economic City Company.

He has been working for Thakher Real Estate Development Company from July 2019 to date.

HAITHAM TAWFIQ AL-

FRAIH

Directors

Bachelor's degree in Architectural Engineering.

Master of Business Administration.

He worked for (12) years in Amwal Al Khaleej Company -

Business Administration.

He worked for a year as a financial advisory analyst at Al Muhaidib

Group.

AHMED ALI AL- LUHAIDAN

Chief Executive

Officer

Chief Executive

Officer

Bachelor's degree in Mechanical Engineering.

Higher Diploma in

Design, Production

and Management

He worked for (29) years as Director of Project Studies and Consultations at the

Saudi Industrial Development Fund

MUSA BIN ABDULLAH AL-RUWAILI

Founding Partner and Chairman of the Board of

Directors

Founding Partner and Chairman of the Board of

Directors

Bachelor of Education

Founding partner and Chairman of the Board

of Directors of Hessa Capital from 2020 AD

to date.

Founding partner and managing director of

Bait Al Value Investment Company

from 2018 to 2020 FAISAL BIN

MOHAMMED AL-HARBI

Managing Director

Master of Business Administration

He has been working in a packaging materials

manufacturing

(29)

29

Bachelor of Marketing

company since 2019 to date.

He has been working in Faya Saudi Arabia as a general manager since

2008 to date.

He has been working in Savannah International Trading Company as a general manager from

2008 to date.

He worked as the Chairman of the Board

of Directors in a packaging materials

manufacturing company from 2016 to

2018.

ABDULLAH BIN MOHAMMED

AL-HARBI

Director of Risk Management

and Chairman of

the Governance

Committee

Director of Risk Management and Chairman

of the Governance

Committee

Master of Business Administration

Bachelor of Marketing

He has been working in a packaging materials

manufacturing company since 2016 to

date.

Members from outside the board Name Current

Position

Previous

position Qualifications Experience

Saleh Al- Fadl (a member

from outside the council) (1)

Chief Financial Officer at Herfy Food

Services

Senior Vice Director of

Financial Affairs at Al Rajhi Capital

Bachelor of Business Administration

Master of Science in

Finance Master of Science in Accounting

Worked as an investment analyst at the Saudi Arabian Monetary Agency

from April 2006 until August 2013.

He worked as Senior Manager for Private Equity

at Al Rajhi Investments from March 2013 until July

2014.

He worked as Senior Vice Director for Financial Affairs at Al Rajhi Capital

(30)

30

from August 2014 until October 2015.

He has been the Chief Financial Officer of Herfy Food Services Company from November 2015 to

date.

Khalid bin Saleh Al-

Tarifi (a member

Chief Financial

Officer Quality of life program

Chief Financial

Officer Saudi ceramics

Bachelor of Accounting at

King Saud University

Worked in the Quality of Life Program (one of the programs of the Kingdom’s

Vision 2030) - Executive Director of Finance so far Worked in Saudi Ceramics

- Chief Financial Officer from 11/2017 to 07/2019 Worked at Bank Albilad -

financial advisor from 09/2014 to 09/2017

He worked in the Communications and Information Technology Commission as Director of Planning and Budget from

09/2003 to 09/2014.

Worked at Al-Rajhi Bank - Director of Financial Supervision from 12/2000

to 09/2003.

Worked in the Saudi Industrial Development

Fund - supervisor, first revision 09/1993 to

12/2000 Saleh bin

Abdullah Al-Yahya (a member

Partner Al-Laheed

and Al- Yahya Chartered Accountants

Partner Ernst &

Young

Bachelor of Accounting at

King Saud University

Accountant - Al Ariel Contracting Company 2002

- 2006

Assistant Audit Manager - Ernst & Young 2006 - 2011

Senior Audit Manager - Ernst & Young US 2011 -

2014

Partner - Ernst & Young 2014 - 2016

(31)

31

Partner - Al-Laheed and Al- Yahya Chartered Accountants 2016 - to date

(1) Former members of the ninth session.

(2) New members in the tenth session.

(32)

32

A statement of the current and previous positions, qualifications and experience of the executive management:

Name Current Position

Previous

position Qualifications Experience AMR

MOHAMED AL- HATTAB

Vice President of

Operations

Company plant manager

Bachelor of Mechanical Engineering

More than 20 years of experience in the manufacture and installation of pipes

FAWZI IBRAHIM

AL HUSSEIN

Executive Vice President of Supply Chain

logistics manager

MSc Project Management.

Bachelor of Information Systems.

18 years of experience (external and

internal procurement -

supplier development -

shipping - warehousing - computer systems development (SAP)

HAMOUD ALI AL- HAMZA

Chief Financial

Officer

Financial Director

He holds a Master's degree in

Business Administration (specializing in

financial management) in 2015 from Barry University - Miami -

United States of America.

He holds a Bachelor's degree in Finance in 2007 from Prince Sultan University - Riyadh - Saudi Arabia -

2007

Relationship Manager in the

Corporate Department (Arab

National Bank).

Senior Relationship Manager in the

Corporate Department (Al

Rajhi Bank).

Financial Manager (Arabian Pipe

Company).

Experience of more than 11 years.

MOHAMED DAKDUK

Vice President of Commercial

Affairs

Vice President of Commercial

Affairs

Bachelor's degree in Business Administration,

Department of Commerce

Over 27 years of industry experience

in strategic and tactical business leadership in the

industry.

(33)

33

DAKHIL NAQI AL- MUTAIRI

HR and Administration

Manager

Head of human resources and payroll department

Bachelor of Business Administration Higher Diploma in

Accounting Entrepreneurship

Diploma Diploma in Human

Resources

14 years' experience (administrative affairs - salaries -

recruitment and training - human

resources - occupational safety)

(34)

34

Name Position Membership

rating

Membership of the boards of directors of other joint stock

companies

YOUSSEF SALEH ABA AL-KHAIL

Non- executive

Chairman of the Board of Directors of AXA Cooperative

Insurance

Chairman of the Board of Directors of the Saudi Ceramic

Company

Arabian Cement Company

KHALED ABDULLAH ABU

NYAN

Deputy Chairman of the Board

Non- executive

Lavana company Abunayyan Holding Company Toray Membrane Middle East

Company

Water and Environment Technology Co. Ltd. (WETCO)

Vision Investment Company (formerly Aqua Holding)

KSB Arabia Ltd.

AZZAM SAUD AL- MUDAIHIM

Member of the Board of Directors

Non- executive

Al Hassan Ghazi Ibrahim Shaker Company Communication solutions

company

Modern Vision Company in Jordan

Emirates Energy Services Management Company SAAD IBRAHIM AL

MOJIL(1)

Non- executive

Al Yamama Steel Industries Company

Al Yamama Iron and Armament Company

Ceramic Pipe Company HAITHAM TAWFIQ

AL-FRAIH(1)

Member of the

Board of Directors Independent

Al-Amanah Insurance Company Al Hoshan Company Gulf insulation group

Aqua Power

Al Latifia Contracting Company SAAD FALAH AL-

QAHTANI

Member of the

Bloom Fund Al Noor Real Estate Scheme Inmaa Real Estate Development Company AHMED ALI AL-

LUHAIDAN

Board

member/CEO Executive Southern Cement Company

(35)

35

MUSA BIN ABDULLAH AL-

RUWAILI(2)

Member of the

Middle East Specialized Cables Company

Hessa Financial Company Al Murshid Health Training

Company

digital medicine company FAISAL BIN

MOHAMMED AL- HARBI(2)

Non- executive

Packaging materials manufacturing company FPC Industrial Company Touristic Enterprises Company

(Shams) ABDULLAH BIN

MOHAMMED AL- HARBI(2)

Member of the

Board of Directors Independent Packaging materials manufacturing company

A statement of the composition of the current board of directors for the period from 22/05/2018 to 21/05/2021 and the period from 22/05/2021 to 21/05/2024 and the names of other joint stock companies whose board membership he holds:

(36)

36

Name Position Membership

rating

Membership of the boards of directors of other joint stock

companies

Saleh Al Fadl (1) A member from outside the board

A member from outside

the board

AXA Cooperative Insurance Company.

Abdullatif Al-Issa Group.

Saudi Ground Services Company.

Astra Industrial Group.

Theeb rent a car company.

Alpha Financial Corporation.

The Saudi Company for Aircraft Adjustment and Maintenance.

Arabian Oud.

National Finance Services Company.

Khaled Al Tarifi (2) A member from outside the board

the board

AXA Cooperative Insurance

Saleh Al Yahya (2) A member from outside the board

the board

Andalusia Real Estate Company Tadawul Real Estate Company

The four mills companies Al Yusr Finance

Al Afdal Car Rental Company Awqaf Al-Issa

Selah for sports

Clause (b) (c) of Article Nine - Governance System

(37)

37

The following is a statement of the company's committees:- Review Committee:

The Audit Committee consists of three members, and 6 meetings were held during the year 2021. The following is a statement of the Audit Committee’s meetings:

Audit Comm ittee

Mem bers hip Statu

s

Meet ing#

12/9, Marc

h 30,2

021

Mee ting

# 13/9

, Apri l 07,

202 1

Meet ing#

14/9, May 02 ,202

1

Meet ing#

15/9, May 10 ,202

1

Meet ing#

10/1, June 05,2

021

Meet ing#

10/2, June 08, 2021

Meet ing#

10/3, June 30, 2021

Mee ting

# 10/4

, Aug

ust 18, 202 1

Mee ting

# 20/5

, Nov

09, 202 1

Atten dance

Rate

Haitham Al- Fraih(1)

Chair man Audit Comm ittee

Atten ded

Atte nde d

Atten ded

Atten

ded ^- ^- ^- ^- ^- ^45%

Azzam Al- Mudaihi

m

Audit Comm ittee Memb

er

Atten ded

Atte nde d

Atten ded

Atten

ded ^- ^- ^- ^- ^- ^45%

Saleh Al- Fadl(1)

er

Atten ded

Atte nde d

Atten ded

Atten

ded ^- ^- ^- ^- ^- ^45%

Saad Al- Qahtani(

2)

Chair man Audit Comm ittee

- - - - Atten

ded

Atten ded

Atte nde d

55%

Abdulla h Al- Harbi(2

er

- - - - Attend

ed

Attend ed

Atten ded

Atten

ded 55%

(38)

38

Khaled Al- Tarifi(2

er (Outsi

de)

- - - - Attend

ed

Attend ed

Atten ded

Atten

ded 55%

Saleh Al Yahya(2

er (Outsi

de)

- - - - Attend

ed

Attend ed

Atten ded

Atten

ded 55%

Duties of the audit committee:

1- Supervising the company’s internal audit department in order to verify its effectiveness in carrying out the work and tasks assigned to it by the board of directors.

2- Studying the internal control system and preparing a written report on its opinion and recommendations in this regard.

3- Studying the internal audit reports and following up on the implementation of the corrective actions for the notes contained therein.

4- Recommending the Board of Directors to appoint chartered accountants, dismissing them and determining their fees. When recommending the appointment, it is taken into account to ensure their independence, provided that the company estimates the cost of auditing on its part before requesting audit proposals, and that the one who is closest to the estimate and the efficiency of the work is chosen.

5- Follow up the work of certified accountants and approve any work outside the scope of the audit work they are assigned to do while they are performing the audit work.

6- Studying the audit plan with the chartered accountant and expressing its comments thereon.

7- Studying the chartered accountant's notes on the financial statements and following up on what has been done in this regard.

8- Studying the annual preliminary financial statements before presenting them to the Board of Directors, ensuring the integrity of the financial and non-financial reports, and expressing an opinion and recommendation in this regard.

9- Studying the accounting policies used and expressing an opinion and recommendation to the Board of Directors in their regard.

The committee is supervised by the board of directors through periodic reports submitted to the board