Illustrative socpa financial statements template limited liability co english

XYZ COMPANY(A Limited Liability Company)

ILLUSTRATIVE FINANCIAL STATEMENTS

December 31, 2008with

INDEPENDENT AUDITORS’ REPORT

INDEPENDENT AUDITORS’ REPORT

To: The PartnersXYZ Company_____, Kingdom of Saudi Arabia

We have audited the accompanying financial statements of XYZ Company (“the Company”) which comprise the balance sheet as at ______________ and the related statements of income, cash flows and changes in partners’ equity for the year then ended and the attached notes (1) through (30) which form an integral part of the financial statements.

Management is responsible for the preparation and fair presentation of these financial statements in accordance with generally accepted accounting standards in the Kingdom of Saudi Arabia and in compliance with Article 175 of the Regulations for Companies and the Company’s Articles of Association. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Management has provided us with all the information and explanations that we require relating to our audit of these financial statements.

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in Saudi Arabia. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

1

In our opinion, the financial statements taken as a whole:

1) present fairly, in all material respects, the financial position of the Company as at _____________, and of its results of operations and its cash flows for the year then ended in accordance with generally accepted accounting standards in the Kingdom of Saudi Arabia appropriate to the circumstances of the Company; and

2) comply with the requirements of the Regulations for Companies and the Company’s Articles of Association with respect to the preparation and presentation of the financial statements.

For KPMG Al Fozan & Al Sadhan

Signature:Name:License No.:

Date: Corresponding to:

2


ILLUSTRATIVE BALANCE SHEETAs at December 31, 2008Expressed in thousands of Saudi Arabian Riyal

Note 2008 2007ASSETSCurrent assets: Cash and cash equivalents 4 Trade receivables 5 Inventories 6 Current investments 9 Prepayments and other current assets 7 Total current assets Non-current assets: Investments in equity accounted investees 8 Other investments 9 Deferred tax assets 26 Intangible assets 10 Leased assets 11 Property, plant and equipment 12 Total non-current assets Total assets

============= =============LIABILITIES AND PARTNERS’ EQUITYCurrent liabilities: Short-term bank debts 13 Current portion of finance lease obligation 11 Current portion of long-term bank debts 13 Current portion of SIDF loan 14 Trade payables 15 Accrued Zakat and income-tax 26

Provisions 16 Accrued expenses and other current liabilities 17 Total current liabilitiesNon-current liabilities: Deferred tax liabilities 26 Finance lease obligation 11 Long-term bank debts 13 SIDF loan 14 Employees’ end of service benefitsTotal non-current liabilities Total liabilities PARTNERS’ EQUITY Share capital 18 Statutory reserve 19 Other reserve (specify) 20 Unrealized gain (loss) on investments Retained earningsTotal partners’ equity

Total liabilities and partners’ equity============== ==============

The accompanying notes 1 through 30 form an integral part of these illustrative financial statements.

3


ILLUSTRATIVE STATEMENT OF INCOMEFor the year ended December 31, 2008Expressed in thousands of Saudi Arabian Riyal

Note 2008 2007Revenue / Sales Cost of sales Gross profit

Selling and marketing expenses 21 General and administrative expenses 22 Impairment loss 23 Realized gain (loss) on sale of investments – net Unrealized gain / loss from valuation of trade securities Income from held-to-maturity investments Share of profit of equity accounted investees Rental income – net 24 Other income 25

Operating incomeFinance incomeFinance expenses Net finance expenses

Income (loss) before Zakat Zakat (applicable for 100% Saudi owned company) 26

Net income (loss)============= =============


4

XYZ COMPANY(A Limited Liability Company)ILLUSTRATIVE STATEMENT OF CASH FLOWSFor the year ended December 31, 2008Expressed in thousands of Saudi Arabian Riyal

Note 2008 2007Cash flows from operating activities:

Net income (loss) for the yearAdjustments to reconcile net income to net cash

provided by operating activities:Depreciation Amortization of intangible assets Impairment loss Loss/gain on sale of property, plant and equipment

Impairment lossRealized gain (loss) on sale of investments – net Unrealized gain / loss from valuation of trade securitiesIncome from held-to-maturity investmentsShare of profit of equity accounted investeesZakat charge for the yearFinance expenses for the year

Changes in operating assets and liabilities:Decrease (increase) in trade receivablesDecrease (increase) in inventories

(Increase) decrease in prepayments and other current assets

Increase (decrease) in trade payablesIncrease (decrease) in accrued expenses and other liabilitiesNet increase (decrease) in employees’ end of service benefits

Finance expenses paidZakat paid Total adjustments Net cash provided by (used in) operating activities Cash flows from investing activities:

Additions to intangible assets Additions to property, plant and equipment Proceeds from sale of property, plant and equipmentPurchase of investmentsInvestment income receivedProceeds from sale of investments

Net cash provided by (used in) investing activities Cash flows from financing activities:

Dividend paid*Zakat and income tax paid on behalf of the partners*Zakat and income tax reimbursed by the partnersNet movement in short-term bank debtsNet movement in long term bank debts Net movement in finance lease obligation Net movement in SIDF loan

Net cash provided by (used in) financing activities Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year

================ ================Non-cash items (described if applicable)*Applicable to mixed company


5


ILLUSTRATIVE STATEMENT OF CHANGES IN PARTNERS’ EQUITYFor the year ended December 31, 2008Expressed in thousands of Saudi Arabian Riyal

Unrealized Share Statutory Other reserve gain/(loss) on Retained Capital reserve (specify) investments earnings Total

Balance at December 31, 2006Net income (loss) for the year 2007Transfer to statutory reserveZakat and income tax (applicable to a mixed company): Charge for the year Reimbursed/reimbursable by the partnersNet effect of adjustments in unrealized gain/(loss) on investmentsOther movement (specify)Dividend paid Balance at December 31, 2007

Net income for the year 2008Transfer to statutory reserveZakat and income tax (applicable to a mixed company): Charge for the year Reimbursed/reimbursable by the partnersDividend paidOther movement (specify)Net effect of adjustments in unrealized gain (loss) on investments

Balance at December 31, 2008========== ========== ========== ========== ========== ==========

The accompanying notes 1 through 30 forman integral part of these financial statements.

6


NOTES TO ILLUSTRATIVE FINANCIAL STATEMENTSDecember 31, 2008Expressed in thousands of Saudi Arabian Riyal

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

XYZ Company (the Company) is a limited liability company formed under the Regulation for

Companies in the Kingdom under Commercial Registration No. ____________ dated

____________, corresponding to ____________.

[Describe activities such as]

The principal activities of the Company are to manufacture and sell ____________in the local,

Middle East and other export markets.

The Company’s registered office is located at the following address:

_________________

_________________

_________________

_________________

2. BASIS OF PREPARATION

(a) Statement of compliance

The accompanying financial statements have been prepared in accordance with the

generally accepted accounting standards in Saudi Arabia issued by the Saudi Organization

for Certified Public Accountants (SOCPA).

The financial statements were authorized for issue by the Board of Directors / management

(specify) on (date)

(b) Basis of measurement

The financial statements have been prepared on historical cost basis (except for available-

for-sale investments which are stated at their fair values), using the accrual basis of

accounting and the going concern concept.

7



2. BASIS OF PRESENTATION (continued)

(c) Functional and presentation currency

These financial statements are presented in Saudi Arabian Riyals (SR) which is the

functional currency. All financial information presented in SR has been rounded to the

nearest thousand.

(d) Use of estimates and judgements

The preparation of financial statements requires management to make judgment, estimates

and assumptions that affect the application of policies and reported amounts of assets,

liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to

accounting estimates are recognized in the period in which the estimates are revised and in

future periods affected.

Information about significant areas of estimation uncertainty and critical judgements in

applying accounting policies that have the most significant effect on the amounts

recognized in the financial statements is included in the following notes:

[Specify note with reference of balance sheet item, if applicable.]

3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in

the financial statements. Certain comparative amounts have been reclassified to conform with

the current year’s presentation (give reference of note where reclassification was done).

(a) Trade receivables

Trade receivables are stated at original invoice amount less provisions made for amounts

which in the opinion of the management may not be received. Bad debts are written off

when identified.

8



3. SIGNIFICANT ACCOUNTING POLICIES (continued)

(b) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of

inventories is principally based on the weighted average principle, and includes

expenditure incurred in acquiring the inventories, production or conversion costs and other

costs incurred in bringing them to their existing location and condition. In the case of

manufactured inventories and work in progress, cost includes an appropriate share of

production overheads based on normal operating capacity.

Net realisable value is the estimated selling price in the ordinary course of business, less

the estimated costs of completion and selling expenses.

(c) Investments

(i) Investment in trade securities

Investment in trade securities which are purchased for trading purposes are initially

recorded at cost and then re-measured and stated in the balance sheet at market value

and included under current assets. Realized gain or loss on sale of trade securities and

changes in market value at balance sheet date are credited or charged to income

statement.

(ii) Held to maturity investments

Investment in securities held to maturity is measured at annualized cost using the

effective interest method, less any impairment loss.

9




(iii) Investments in associates and jointly controlled entities (equity accounted investees)

Associates are those entities in which the Company has significant influence, but not

control, over the financial and operating policies. Significant influence is presumed

to exist when the Company holds between 20 and 50 percent of the voting power of

another entity. Jointly controlled entities are those entities over whose activities the

Company has joint control, established by contractual agreement and requiring

unanimous consent for strategic financial and operating decision. Associates and

jointly controlled entities are accounted for using the equity method (equity

accounted investee) and are initially recognized at cost. The Company’s investment

includes goodwill identified on acquisition, net of any accumulated impairment

losses. The financial statements include the Company’s share of income and

expenses and equity movement of the equity accounted investees from the date that

significant influence commences until the date that significant influence ceases.

When the Company’s share of losses exceeds its interest in an associate, the

Company’s carrying amount is reduced to nil and recognition of further losses is

discontinued except to the extent that the Company has incurred legal or constructive

obligations or made payments on behalf of an associate. The Company's share of

profits or losses of the investee companies is credited or charged to the income

currently.

(iv) Available-for-sale investments

The Company has less than 20% equity investments in locally listed companies and

various companies which are not for trading purposes and where the Company does

not have any significant influence or control and, accordingly, these are classified as

investments available for sale and subsequent to initial recognition, they are measured

at fair value and changes therein other than impairment losses (see Note __) are

recognized in equity. Fair value is determined by reference to the market value in the

open market if exists. In the absence of an open market, the cost is considered to be

the fair value for these investments.

10




Permanent diminution in value of the above mentioned investments, if any, is charged to

the statement of income.

(d) Intangible assets

i) Pre-operating costs

Pre-operating costs includes all costs and expenses incurred during the pre-operating

stage and have the future economic benefits. Such costs are amortized using the

straight-line method over the related economic benefit periods not exceeding _______

years.

ii) Research and development costs

Expenditure on research activities, undertaken with the prospect of gaining new

scientific or technical knowledge and understanding, is recognized in profit or loss

when incurred.

Development activities involve a plan or design for the production of new or

substantially improved products, services and processes. Development expenditure is

capitalized only if development costs can be measured reliably, the product, service or

process is technically and commercially feasible, future economic benefits are

probable, and the Company intends to and has sufficient resources to complete

development and to use or sell the asset. The expenditure capitalized includes the

cost of materials, direct labour and overhead costs that are directly attributable to

preparing the asset for its intended use. Borrowing costs related to the development

of qualifying assets are recognized in profit or loss as incurred. Other development

expenditure is recognized in profit or loss as incurred.

Capitalized development expenditure is measured at cost less accumulated

amortization and accumulated impairment losses. Capitalized development cost is

amortized using the straight-line method over the related benefit periods not

exceeding __ years.

11




iii) Other intangible assets

(Specify nature and amortization policy)

(e) Leased assets

The Company accounts for tangible assets obtained under finance lease by recording the

asset and the related liability. The amounts are determined on the basis of lower of fair

value of assets and discounted value of minimum lease payments. Finance charges are

allocated to accounting period in a manner so as to provide a constant periodic rate of

charge on the outstanding liability. Leased assets are depreciated over the shorter of the

lease term and their useful lives unless it is reasonably certain that the Company will

obtain ownership by the end of the lease term. Land is not depreciated. Depreciation is

charged applying the straight-line method using the following annual depreciation rates:

Assets category Year

-- --

-- --

-- --

(f) Property, plant and equipment

Property, plant and equipment are measured at cost, less accumulated depreciation and

accumulated impairment loss. Cost includes expenditure that is directly attributable to the

acquisition of the asset. Finance costs on borrowings to finance the construction of the

assets are capitalized during the period of time that is required to complete and prepare the

asset for its intended use.

Subsequent expenditure is capitalized only when it increases the future economic benefits

embodied in the item of property, plant and equipment. All other expenditure is

recognized in the income statement when incurred.

12




Depreciation is charged to the income statement on a straight-line basis over the estimated

useful lives of individual item of property, plant and equipment.

The estimated useful lives of assets for current and comparative periods are as follow:

Years

Buildings

Leasehold improvements

Plant and equipment

Furniture and office equipment

Motor vehicles

(g) Impairment of assets

Financial assets, property, plant and equipment and other non-current assets are reviewed

for impairment losses whenever events or changes in circumstances indicate that the

carrying amount may not be recoverable. An impairment loss, if any, is recognized for the

amount by which the carrying amount of the asset exceeds its recoverable amount. The

recoverable amount is the higher of an asset's fair value less costs to sell and value in use.

For the purpose of assessing impairment, assets are grouped at the lowest levels for which

there are separately identifiable cash flows.

(h) Provisions (Applicable to the warranties, restructuring, onerous contracts, etc. and not

for accrual)

A provision is recognized if, as a result of past events, the Company has a present legal or

constructive obligation that can be estimated reliably, and it is probably that an outflow of

economic benefit, will be required to settle the obligation.

13




i) Warranties

A provision for warranties is required when the underlying products and services

are sold. The provision is based on historical working data and a weighing of all

possible outcomes against their associated probabilities.

ii) Other (specify)

(i) Employees’ end of service benefits

Employees’ end of service benefits, calculated in accordance with Saudi Arabian labour

regulations, are accrued and charged to statement of income. The liability is calculated at

the current value of the vested benefits to which the employee is entitled, should his

services are terminated at the balance sheet date.

(j) Revenue recognition

Revenue from sales is recognized upon delivery or shipment of products to customers, and

is recorded net of returns, trade discounts and volume rebates.

Revenue from services is recognized when services are performed.

Rental income is recognized in the statement of income on a straight-line basis over the

term of the lease.

(k) Operating leases

Payments under operating leases are recognized in the statement of income on a straight-

line basis over the term of the term of the lease. Lease incentives received are recognized

as an integral part of the total lease expense over the term of the lease.

14




(l) Expenses

Selling and marketing expenses are those arising from the Company’s efforts underlying

the marketing, selling and distribution functions. All other expenses, excluding direct

costs and financial charges, are classified as general and administrative expenses.

Allocations of common expenses between cost of sales and selling, marketing, general and

administrative expenses, when required, are made on a consistent basis.

(m) Zakat and income-tax

[For 100% Saudi owned companies]

Zakat, computed in accordance with Saudi Arabia Tax and Zakat regulations, is accrued

and charged to statement of income currently.

[For mixed companies]

Zakat and income tax, computed in accordance with the Saudi Arabian fiscal regulations,

are accrued and charged to retained earnings. Since the partners have agreed to reimburse

Zakat and income tax from the proceeds of the future dividend, such amount receivable

from the partners are credited to retained earnings; [OR if applicable]

Zakat and income tax, computed in accordance with Saudi Arabian fiscal regulations, are

accrued and charged to retained earnings. Zakat and income tax, when reimbursed by the

partners, are credited to retained earnings.

Deferred tax liabilities and assets are recognized for all temporary differences at current

rates of taxation. The carrying amount of deferred tax assets is reviewed at each balance

sheet date and reduced to the extent that it is no longer probable that sufficient taxable

profit will be available in the near future to allow all or part of the deferred tax asset to be

utilized.

15




(n) Foreign currency translation

Transactions denominated in foreign currencies are translated to the functional currency of

the Company at the exchange rates ruling at the date of the transaction. Monetary assets

and liabilities denominated in foreign currency at the balance sheet date are translated to

the functional currency of the Company at the foreign exchange rate ruling at that date.

Exchange differences arising on translation are recognized in the statement of income

currently.

(o) Dividends

Interim dividends are recorded as liability in the period in which they are approved by the

Board of Directors. Final dividends are recorded in the period in which they are approved

by the shareholders.

(p) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, cash with banks and other short-term

highly liquid investments, if any, with original maturities of three months or less, which

are available to the Company without any restrictions.

4. CASH AND CASH EQUIVALENTS

Cash and cash equivalents at December 31 comprise the following:

2008 2007

Cash in hand

Cash at bank on current accounts

Short term bank depositsOther (specify)

============ ============

16



5. TRADE RECEIVABLES

Trade receivables at December 31 comprise the following:

2008 2007

Related parties

Other customers

Total

Provision for doubtful accounts

============ ============

6. INVENTORIES

Inventories at December 31 comprise the following:

2008 2007

Raw and packing materials

Work-in-process

Finished goods

Spare parts and consumables

In-transit inventories

Total

Provision for slow moving items

============ ============

17



6. INVENTORIES (inventories)

1. Disclose inventory included in the financial statements that is pledged as security for

liabilities of the Company.

2. Disclose the difference between the value of cost of goods sold and similarly for ending

inventory computed according to the method applied by the Company and the weighted

average methods in case the Company used LIFO or FIFO.

7. PREPAYMENTS AND OTHER CURRENT ASSETS

Prepayments and other current assets at December 31 comprise the following:

2008 2007

Prepayments

Margin deposits with banks

Supplier advances

Employee housing and other advances

Zakat and income tax reimbursable by the partners

Other

============ ============

18



8. INVESTMENTS IN EQUITY ACCOUNTED INVESTEES

Investments in associates and jointly controlled entities described as equity accounted investees

at December 31 comprise the following:

Name

Effective ownership

interest (%) 2008 2008

---------------------- Total

Less: Impairment loss

(Disclose reason for not using equity method on investments (with name) where investment is 20

– 50% of interest.)

19



9. OTHER INVESTMENTS

a) Other investments at December 31 comprise of the following:

2008 2007

Investments in trade securities

Held-to-maturity investments

Available for sale (AFS) investments

Miscellaneous (specify)

Total

Less: Investments classified under current assets:

Investments in trade securities

Current portion of held-to-maturity investments

Current investments

Non-current investments============ ============

b) Investments in trade securities at December 31, comprise the following:

2008 2007

Cost

Unrealized gain (loss)

Fair value============ ============

c) Held-to-maturity at December 31, comprise the following:

2008 2007

Cost

Impairment loss

Revised cost

Amortization or premium / discount

Fair value============ ============

20



9. OTHER INVESTMENTS (continued)

d) Investments available for sale at December 31, comprise the following:

2008 2007

Cost

Impairment loss

Revised cost

Unrealized gain (loss)

Fair value============ ============

e) Miscellaneous

[Specify and give details.]

10. INTANGIBLE ASSETS

a) Intangible assets at December 31 comprise the following:

2008 2007

Pre-operating expenses

Product development or other

intangible assets (specify)

============ ============

b) Pre-operating expenses

The movement in pre-operating expenses for the year ended December 31 is as follows:

2008 2007Total Total

Cost

Balance at beginning of the year

Additions during the year

Cost fully amortized

Balance at end of the year

21



10. INTANGIBLE ASSETS (continued)

Accumulated amortization and impairment


Amortization charge for the year

Cost fully amortized

Impairment loss adjustments


Net balance at December 31============ ============

[Disclose any significant movement during the year.]

c) Product development or Other intangible assets (specify)

The movement in other intangible assets (specify) for the year ended December 31 is as

follows:2008 2007Total Total

Cost


Additions during the year

Cost fully amortized during the year


Accumulated amortization and impairment


Amortization charge for the year

Cost fully amortized during the year

Impairment loss adjustments


Net balance at December 31============ ============

[Disclose any significant movement during the year.]

22



11. LEASED ASSETS

a) Leased assets at December 31 acquired under finance lease terms and detailed as under:

2008 2007CostBalance at beginning of the yearAddition during the yearDisposal during the year


Accumulated depreciation:


Charge for the year

Relating to disposal


Net leased assets============ ============

b) The lease assets have been acquired under a finance lease agreement for a total lease value

of SR __________ payable SR __________in advance and balance SR

__________payable in __ equal monthly instalments effective [date]. The aggregate

fair value of the leased assets was estimated to be SR __________which has been

capitalized as part of leased assets cost.

23



11. LEASED ASSETS (continued)

At December 31 the net present value of the finance lease obligation is presented in the

financial statements as follows:

2008 2007

Current portion shown under current liabilities

Non-current portion shown under non-current liabilities

============ ============

The future minimum lease payments as of December 31, for the future years are analyzed

as follows:

2008 2008

Year

2009201020112012 2013 and thereafter

24



12. PROPERTY, PLANT AND EQUIPMENT

The movement in property, plant and equipment during the year ended December 31, 2008 is analyzed as under: [ modify the class of assets as

appropriate] Furniture

Plant and and office Motor Capital work Land Buildings equipment equipment vehicles in progress Total

Cost:Balance at January 1, 2008AdditionsTransfers from capital work in progressReclassification Disposals Balance at December 31, 2008

Accumulated depreciation and impairment:Balance at January 1, 2008Depreciation charge for the yearImpairment loss adjustmentsReclassification Disposals Balance at December 31, 2008

Net book value:At December 31, 2008

========== ========== ========== ========== ========== ========== ==========At December 31, 2008

========== ========== ========== ========== ========== ========== ==========

25



12. PROPERTY, PLANT AND EQUIPMENT (continued)

a) Additions include SR ___________ in respect of interests capitalized during 2008 (2008:

SR _____________). The rate used to determine the amount of finance costs capitalized

during 2008 was ___% (2008: ___%).

b) Capital work in progress - [Disclose nature of major work]

c) The building is situated on plot of land leased from the Industrial Estate Administration,

[city] for ____ years commencing from _______________ for nominal annual rental. The

lease is renewable for a similar period on the same conditions and such other conditions as

agreed by the parties concerned.

d) See Note 13 with respect to the pledge of certain fixed assets of the Company as collateral

to Saudi Industrial Development Fund.

e) Buildings at December 31, 2008 include properties having cost SR ______________ and

book value SR ______________ leased to third parties under operating lease

arrangements.

f) Depreciation charge for the year ended December 31, has been allocated as follows:

2008 2007

Cost of sales

Selling and marketing expenses

General and administrative expenses

============ ============

26



13. BANK DEBTS

a) Short-term bank debts

Short-term bank debts represent amounts outstanding under bank overdraft and short-term

loan facilities with certain commercial banks to finance the working capital requirement of

the Company.

[Describe security and covenants, etc. for the facilities, if these are specific to short-term

bank debts only]

b) Long-term bank loans

Long-term bank loans at December 31 comprise of the following:

2008 2008

[Name of banks]

__

__

============ ============

Presented in the balance sheet as follows:



============ ============

[Disclosure (modify as necessary)]

27



13. BANK DEBTS (continued)

Short and long-term bank loans, overdrafts, guarantees and other facilities from the banks

are secured by _____________________________________. All bank borrowings bear

commission at agreed commercial rates. The facility agreements with the banks contains

covenants which, among other things, limits distribution of dividends in order to maintain

a minimum net worth and require that certain financial ratios be maintained.

[Describe guarantees, if applicable.]

14. SIDF LOAN

The loan from Saudi Industrial Development Fund (SIDF) was obtained to finance the

acquisition / expansion of the manufacturing facilities. Against the total approved loan facility

of SR __________ at December 31, 2008, a sum of SR __________ was received and the

balance unavailed facility amounted to SR __________. The loan is secured by a mortgage on

the Company’s fixed assets and the personal and corporate (if applicable) guarantees of the

partners in the proportion to their ownership interest in the Company. The loan agreement

contains covenants which, among other things, limits future capital expenditure and requires

certain financial ratios to be maintained.

[Describe any non-compliance of loan covenants and its impact.]

Based on the repayment schedule, the outstanding SIDF loan balance at December 31 is

calculated in the balance sheet as follows:

2008 2007



Total============ ============

28



15. TRADE PAYABLES

Trade payables at December 31 comprise of the following:

2008 2007

Related parties

Other parties

============ ============

16. PROVISIONS

(Provide details of provisions)

17. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities at December 31 comprise of the following:

2008 2007

Accrued expenses

Customers’ advances

Unearned rental income

Other [specify]

============ ============

29



18. SHARE CAPITAL

At December 31, 2008, the share capital of the Company was SR ________ (2007: SR

________) divided into ____ shares (2007: ________ shares) of SR ___ each, which are fully

paid and owned as follows:

No. of shares % Amount

Name of significant partners------

Total ========== ========== ==========

[Describe any change in share capital during the year]

19. STATUTORY RESERVE

In accordance with Company’s Articles of Association and the Regulations for Companies in the

Kingdom of Saudi Arabia, the Company is required to transfer 10% of its net income each year

to a statutory reserve until such reserve equals 50% of its share capital. This reserve is not

available for distributions to the shareholders. [Add the following sentence if statutory reserve

reached to 50% of the capital and no more allocation:]

The statutory reserve requirement has been fulfilled and, accordingly, the Company is not

required to transfer any additional amount towards this reserve.

20. OTHER RESERVE (specify)

[Disclose details of the reserve. How it is created and will be utilized.]

30



21. SELLING AND MARKETING EXPENSES

Selling and marketing expenses for the year ended December 31 comprise the following:

2008 2007

[Disclose major item of expenses such as any amount which is 5-10% of the total expenses.](Modify expense headings as appropriate to the company)

Employee costs

Advertising and sales promotion

Rent

Depreciation

Bad and doubtful debts

Repairs, maintenance and consumables

Other

============ ============

31



22. GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses for the year ended December 31 comprise the following:

2008 2007

[Disclose material expenses such as any amount which is 5-10% of the total expenses.](Modify expense headings as appropriate to the company)

Employee costs

Amortization of intangible assets

Travel

Depreciation

Training

Utilities, telephone and communication

Insurance

Computer-related

Rent

Repairs and maintenance

Other

============ ============

23. IMPAIRMENT LOSS

(Provide detailed note in that respect)

32



24. RENTAL INCOME – NET

Rental income for the year ended December 31 comprises the following:

2008 2008Total rental income

Costs and expenses: Operating costs Depreciation

Total costs and expenses

Rental income, net============ ============

25. OTHER INCOME (EXPENSE) – NET

Other income (expense) – net for the year ended December 31 comprises the following:

[Disclose material amount.]

2008 2007

Profit (loss) on disposal of property, plant and equipment

Scrap sales

Miscellaneous

============ ============

33



26. ZAKAT AND INCOME-TAX

a) Charge for the year

i) Zakat and income-tax charge for the year ended December 31 comprises the

following:

2008 . 2007 .

Zakat Income-tax Total ZakatIncome-

tax Total

For current year

For previous year _________ _________ _________ _________ _________ ________

======== ========

========

========

========

========

ii) The significant components of Zakat base for the current year ended December 31,

2008 are as follow:

[Summarize information from Zakat calculation sheet such as:]

2008 2007

Capital

Adjusted net income

Adjusted equity and provision at beginning of year

Deduction for property, plant and equipment

Deduction for investment

Deduction for intangible assets

Deduction from dividend paid

iii) Income-tax charge for the current year is based on the adjusted taxable income

calculated on the portion of equity owned by the foreign partner.

34



26. ZAKAT AND INCOME-TAX (continued)

iv) Zakat and income-tax for previous years relates to certain amounts disallowed at

the time of final assessment by the Department of Zakat and Income Tax. [Explain

based on information in assessment order.]

b) Accrued Zakat and income tax

The movement in accrued zakat and income-tax during the year ended December 31 is as

follows:

2008 . 2007 .

Zakat Income-tax Total ZakatIncome-

tax Total


Add: Charge for the year

Less: Payments during the year _________ _________ _________ _________ _________ ________


======== ========

========

========

========

========

c) Status of assessments

Zakat assessments have been finalized with the Department of Zakat and Income Tax

(DZIT) and final zakat certificates obtained for the years up to ___.

[Disclose assessment under appeal, etc. and any contingent liability in that respect]

35




d) Deferred tax assets and liabilities

(i) Recognized deferred tax

Recognized deferred tax assets and liabilities at December 31 are attributable to the

following:

2008 2007

Property, plant and equipment

Intangible assets

Investments

Employee termination benefits

Provisions

Other [specify]

Net deferred tax assets (liabilities)============ ============

The movement in recognized deferred tax assets (liabilities) during the year ended

December 31, 2008 is summarized as under:

2008 2007


Provided during the year

Released during the year

Balance at end of the year============ ============

36




(ii) Unrecognized deferred tax

Unrecognized deferred tax liability

Disclose any unrecognized deferred tax liability with reason for non-accrual.

Unrecognized deferred tax assets

Disclose nature, amount and reason for non-accrual OR

No deferred tax asset has been recognized as it is not possible to determine when such

timing difference will reverse.

27. COMMITMENTS AND CONTINGENCIES

a) At December 31, the Company has the following commitments:

2008 2007

For capital expenditures

For Investments

Other (specify)

b) At December 31, 2008, the Company has a contingent liability of SR __________ (2007:

SR _________) in respect of bank guarantees issued by the Company’s bank in respect of

bid bonds, contracts advance payments and performance bonds.

[Disclose other contingent liabilities.]

37



28. RELATED PARTY TRANSACTIONS AND BALANCES

[Follow guidance of related party definition from SOCPA standards for identification of related

party]

a) Related party transactions mainly represent purchases and sales of goods and services which

are undertaken at mutually agreed terms and approved by management from the following

entities:

Name of entity Relationship

b) Disclose material transactions with individual related party other than purchase and sales if

it is necessary to understand the effort of the related party transaction on the enterprises

financial statements.

Related party transactions for the year ended December 31 and balances arising-there from

are described as under:

Nature of Amount of transaction Closing balanceTransactions with transaction during the year Receivable/(Payable)

2008 2007 2008 2007

[Specify affiliate, Sale of products

partner, other Purchase of goods

related party]

Management fees

Others (specify)

38



29. OPERATING LEASES

[Disclosure as lessee - modify as appropriate]

a) The Company has various operating leases for office space, warehouse, retail outlets,

employees' accommodations [Disclose as appropriate]. The leases are for initial period for

one year to _____ years with options to renew the leases after lease periods. Lease

payments are either fixed or increase annually to reflect market rentals. Rental expenses for

the year ended December 31, 2008 amounted to SR ___ (2008: SR ___).

b) At December 31, the Company’s obligations under non-cancellable operating leases are

payable as follow:2008 2007

Within one year

Between two and five years

More than five years

Total============ ============

[Disclosure as lessor (modify as appropriate)]

a) The Company has rented certain properties to third parties under operating lease

arrangement. [Disclose as appropriate]. The leases are for initial period for one year to

_____ years with options to renew the leases after lease periods. Lease payments are either

fixed or increase annually to reflect market rentals. The cost and book value of the leased

assets at December 31, 2008 amounted to SR __________ (2008: SR ______) and SR

_______ (2008: SR ____________) respectively.

39



29. OPERATING LEASES (continued)

b) At December 31, the minimum lease payments for non-cancellable leases are as follow:

2008 2007

2009

2010

2011

2012

2013 and thereafter

Total============ ============

30. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Financial instruments carried on the balance sheet include cash and cash equivalents, trade and

other accounts receivable, investments, short-term borrowings, accounts payable, other

liabilities, and long-term debt.

Credit risk is the risk that one party will fail to discharge an obligation and will cause the other

party to incur a financial loss. The Company has no significant concentration of credit risks.

Cash and cash equivalents are placed with national and international banks with sound credit

ratings. Trade and other accounts receivable are mainly due from local customers and related

parties and are stated at their estimated realizable values.

Fair value and cash flow interest rate risks are the exposures to various risks associated with

the effect of fluctuations in the prevailing interest rates on the Company's financial position and

cash flows. The Company’s interest rate risk arise mainly from short term bank deposits and

bank debts and long term debts, which are at floating rates of interest. All deposits and debts are

subject to re-pricing on a regular basis. Management monitors the changes in interest rates and

believes that the fair value and cash flow interest rate risks to the Company are not significant.

40



30. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

Liquidity risk is the risk that an enterprise will encounter difficulty in raising funds to meet

commitments associated with financial instruments. Liquidity risk may result from the inability

to sell a financial asset quickly at an amount close to its fair value.

Liquidity risk is managed by monitoring on a regular basis that sufficient funds are available to

meet the Company's future commitments.

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in

foreign exchange rates. The Company's transactions are principally in Saudi riyal and United

States dollar. Other transactions in foreign currencies are not material. Currency risk is managed

on regular basis.

Fair value is the amount for which an asset could be exchanged, or a liability settled between

knowledgeable willing parties in an arm's length transaction. As the accompanying financial

statements are prepared under the historical cost method, except for the revaluation of the

available-for-sale and trade securities at fair value through equity, differences may arise between

the book values and the fair value estimates. Management believes that the fair values of the

Company's financial assets and liabilities are not materially different from their carrying values.

41

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