SEDCO Holding Annual Report 2012

Operational Highlights of 2012GrowthOver the last three years oftransformation, SEDCO’s portfolioof operating companies, realestate, and financial investmentshas recorded three-fold growth.PerformanceAuto World was ranked ‘BestPerforming Company’ withinthe SEDCO group, increasing netprofit by more than 28 percentin 2012. SEDCO Development’srevenue increased by 40 percentand the total value of projectsby 155 percent. Nahdi MedicalCompany continued to outperformthe market, recording compoundannual growth of 15.3 percent,compared to 8.6 percent for thepharmaceutical market.StrategyCorporate restructuring isbeginning to yield its full rangeof benefits. SEDCO’s role as anactive investor provides tangibleadvantages, and the integrationof management practices andcommon policies across thegroup has reinforced the cultureof disciplined innovation.DiversificationSEDCO’s main focus is now onexpanding and diversifying theoperating companies’ activities,while maintaining its strongposition in the real estate sector.Continued organic growth inexisting companies will becomplemented by the creationand acquisition of new ventures.InnovationThe launch of SEDCO CapitalGlobal Funds created the largestShariah-compliant specialinvestment fund (SIF) platform inLuxembourg, and SEDCO CapitalGlobal Market Sentiment Fund isthe first Shariah-compliant fundfollowing a rules-based assetallocation approach to direct thebalance between riskier assets(public equities) and safer assets.Human capitalMore than 75,000 training hoursin key competencies weredelivered, addressing individualleadership, communication, andteamwork. Employment of Saudinationals has reached silver level.Social responsibilityLaunch of the nationwide Riyalifinancial literacy program willaddress the crucial need forfinancial education among Saudiyouth, enabling them to bettermanage their monetary affairsand personal budgeting.RecognitionSEDCO Capital was named ‘BestFund Manager’ at the 2012 AsianFinancial Forum’s Global IslamicFinance Awards, while SheikhAbdelelah Bin Mahfouz, the firm’sChairman, was recognized for‘Most Outstanding IndividualContribution to Islamic Finance’.Elaf Group won two categories inthe Saudi Excellence in TourismAwards: Best Four-star Hotel(Elaf Taiba Al-Madinah) and BestTourism Sales Professional ofthe Year, and also received theMakkah Excellence Award. Tarfeehreceived the award for the highestannual sales growth amongApplebee’s global franchisees.2 Annual Review 2012 3

Chairman’s StatementAlhamdulillah, praise to almighty Allah forhis many blessings. I am delighted to presentSEDCO Holding’s annual review for 2012.Overall, this was a year of significant progress,not only in our continuing transition from afamily business to a holding company, but inthe results achieved across all our activities.I acknowledge the very creditableperformance of all our group companiesduring 2012. On behalf of the Boardof Directors, I congratulate each of themanagement teams and their employeeson the excellent results achieved.In this respect, I also pay tribute to therole of Dr Adnan Soufi as Chief ExecutiveOfficer of SEDCO Holding over the pastthree years. He has contributedsignificantly to the advances we havemade, especially in the areas ofrestructuring and governance.Our succession management hasproceeded smoothly, and it is mypleasure to welcome Anees Mouminaas our new CEO. He brings a wealth ofexperience in the banking industry andthe private sector, and his skills andleadership abilities will be invaluableas we embark on the next phase ofgrowth. We do so with confidence,knowing that we have a world-classteam that can add value to the companyand take us to new levels of success.Nevertheless, we must always beconscious of the uncertainties of thebusiness world and adhere to thevalues that have served us so well inthe past – being alert to and aware ofrisks, and managing those prudentlyand with diligence as we go forward.I believe the corporate restructuringthat we have undertaken – and arestill refining – is only just beginningto yield its full range of benefits. Ourgovernance role as an active investorin subsidiaries gives us a tangibleadvantage, and the integration ofmanagement practices and commonpolicies is reinforcing our cultureof disciplined innovation.Looking ahead, SEDCO’s main focuswill be on expanding and diversifyingour operating companies’ scope ofactivities, while maintaining our strongposition in the real estate sector. Welook forward to continued organicgrowth in our existing companies, andto creating and acquiring new ventures.We are always very aware that thesuccess of SEDCO is not measuredonly in terms of return to shareholders.We also have a responsibility to theeconomic wellbeing of the Kingdomand we are committed to supportingthe welfare and development ofcommunities across Saudi Arabia.SEDCO invests in a range of corporatesocial responsibility activities,especially promoting and supportingeducation and enabling. In 2012 welaunched the new Riyali financialliteracy program, which aims to reach50,000 students over the next five years.With the success of this program, wecan help our friends, brothers, andchildren in the Kingdom to deal withtheir resources and money wisely.The Board of Directors expresses itssincere appreciation to the Custodianof the Two Holy Mosques; the CrownPrince, Deputy Premier and Minister ofDefense; the Second Deputy Premier,Advisor and Special Envoy of theCustodian of the Two Holy Mosques;and all government ministers for theirwise leadership and guidance of thenational economy.It is also my pleasant duty to thankthe SEDCO Holding Board of Directors,as well as the boards of our portfoliocompanies, for their commitment andoutstanding effort and performanceduring the year.Saleh Salem Bin MahfouzChairman4 Annual Review 2012 5

Board of DirectorsSaleh Salem Bin MahfouzChairmanChairman of the Investment CommitteeIn addition to chairing SEDCO Holding’s Board,Mr Saleh Bin Mahfouz is Chairman of SEDCODevelopment, Nahdi Medical Company, EwaanGlobal Residential Company, Al Mahmal RealEstate Development Company, Al MahmalTrading Company, and Red Sea MarketsCompany. He also serves on the boards ofAl-Balad Al Ameen for Development andUrban Recreation, Alnumu Real Estate,and Yanbu Cement.Mr Saleh graduated with a Bachelor’s degreein Civil Engineering from King Fahd Universityof Petroleum and Minerals in Dhahran.Abdelelah Salem Bin MahfouzDirectorMr Abdelelah Bin Mahfouz was ManagingDirector of SEDCO Financial Investments Groupfrom 1997 to 2006. In addition to serving on theBoard of SEDCO Holding, he has been Chairmanof SEDCO Capital since its formation in 2010.He began his business career in 1975 withthe National Commercial Bank and in 1980-90was the bank’s Deputy General Manager andRiyadh Regional Manager.Mr Abdelelah has a Bachelor’s degree in BusinessAdministration from Ohio State University.Ahmed Salem Bin MahfouzDirectorMr Ahmed Bin Mahfouz began his careerwith SEDCO in 1983, serving as ManagingDirector of the Direct Investments Groupbetween 1997 and 2004.He holds a degree in Industrial Engineeringfrom King Abdulaziz University in Jeddahand is also a graduate of the Owner/PresidentManagement Program at HarvardBusiness School.Saleh Al-TurkiDirectorMr Al-Turki has been a Non-ExecutiveDirector of SEDCO since 2000. He is Presidentand Chairman of Nesma Holding Company,a privately owned Saudi conglomerate witha diverse business portfolio. In addition tochairing a number of Nesma subsidiaries, heis Chairman of Jeddah Holding Company anda Director of Arab Poultry Breeders Company,Al-Bilad Newspaper & Publishing, and DarAl-Hekma College. Previous roles includeChairman of the Jeddah Chamber of Commerceand Industry and the Council of Saudi Chambers.Honoring his efforts in the social field,the University of Mindanao awarded him anhonorary Doctorate in Humanities and SocialSciences in 2008. In 2010, he was appointedHonorary Consul of the Republic of Austria.Mr Al-Turki has a BA in Public Administrationfrom the American University of Beirut andan MA in Administration from CaliforniaState University.Dr Hani FindaklyDirectorChairman of the Audit andRisk CommitteeDr Findakly has been a Non-Executive Directorof SEDCO since 2003. He is President ofPotomac Capital and has served in various seniorcapacities on Wall Street including Director andChairman of Dillon Read Capital Managementand Vice-Chairman of the Clinton Group, bothNew York-based investment management firms.From 1990 to 1999 he was President and CEOof Potomac Bobson, a global investmentmanagement firm.Between 1975 and 1986, Dr Findakly workedat the World Bank where he was Director of theInvestment Department and Chief InvestmentOfficer. He was previously on the faculty ofMIT’s School of Engineering and the Centerfor Policy Alternatives.Dr Findakly holds Doctor of Science andMaster of Science degrees from MIT.Shuaib AhmedDirectorChairman of the Compensation, HumanDevelopment and Nomination CommitteeMr Ahmed has been a Director of SEDCOsince 2000 and chairs the Board’sCompensation, Management Development,and Nomination Committee.Between 2004 and 2007, Mr Ahmed was thefirst non-family CEO of SEDCO. Before joiningSEDCO, he was at Citibank for 38 years in varioussenior positions in risk management. From 1985to 2000 he was a member of Citibank’s GlobalCredit Policy Committee and, from 2001 to 2003,was a Managing Director of Citigroup’s GlobalRisk Management.He holds an MBA from the Institute of BusinessAdministration, Karachi, and a Master’s degreein Management Science from MIT, Boston.He is also a Sloan Fellow of MIT’s Sloan Schoolof Management.Savio TungDirectorMr Tung has been a Non-Executive Directorof SEDCO since 2009. He is one of the foundingpartners of Investcorp, where he is currentlyCEO, North America.Before joining Investcorp in 1984, he wasa senior banker with Chase Manhattan. Hehas served on the boards of many Investcorpportfolio companies, including Circle K, SaksFifth Avenue, Simmons Mattresses, StarMarket, and Stratus Computer.Mr Tung holds a BSc in Chemical Engineeringfrom Columbia University, of which he is aTrustee Emeritus.Ahmed Suleiman BanajaDirectorBoard CommitteesCompensation, HumanDevelopment and NominationCommitteeResponsible for compensation,oversight of human development,and screening and nomination ofdirectors of SEDCO Holding andits subsidiaries.Chairman: Shuaib AhmedMembers: Ahmed Banaja, Dr HaniFindakly, and Sameer BaarmaInvestment CommitteeResponsible for investmentpolicy and processes,performance of asset managers,new investments and exits, andvaluation and asset allocation.Chairman: Saleh Bin MahfouzMembers: Ahmed Banaja, SaidBaarma, Dr Adnan Soufi andIssam HamidAudit and Risk CommitteeAssists the Board to fulfill itsoversight responsibilities in theareas of: the integrity of financialstatements and the financialreporting system; effectivenessof internal controls for financialreporting; surveillance ofadministration and financialpractices; SEDCO Group’scompliance with group policiesand procedures, legal andregulatory requirements; ensuringthe independence and monitoringthe performance of externalauditors, the internal auditfunction; and risk management.Chairman: Dr Hani FindaklyMembers: AbdulrahmanBasaddiq and Hashim Al MihdarMr Banaja joined the Board in 2008 and wasCEO of SEDCO from 2008 to 2010. He is alsoa Director of SEDCO Capital and was the firm’sfirst CEO, overseeing its formation in 2010.He began his career with Citibank in 1971and then held senior positions at the NationalCommercial Bank for 12 years.He is currently a Director of Jeddah UrbanDevelopment and Regeneration Companyand Al Faisaliah Group. He also serves onthe Economic Advisory Team to the SupremeEconomic Council.Mr Banaja has a BSc in Mathematics andEconomics from the University of Kent.6 Annual Review 2012 7

CEO’s MessageAfter three stimulating years as Chief Executive Officer, my term of officeexpired at the end of 2012. Looking back over my tenure, I draw a large degreeof satisfaction from the way that SEDCO has succeeded in transforming itselffrom a traditional family business to a world-class corporate institution.In the past year, SEDCO Holding’sprofit more than doubled. Over thelast three years of transformation,the performance of our portfolio ofoperating companies, real estate, andfinancial investments has recordedthree- to four-fold growth.Our strategy of focusing on the crucialareas of people, processes, products,and performance has worked veryeffectively, and we are now wellpositionedto deliver further on ourobjective of creating value and qualityfor customers, while generatingsustained returns for shareholders.I would single out three specificcontributors to this achievement:strengthening our capabilities,structure, and governance; takingand executing decisions on difficultissues; and sharper overall direction.Strengthening our capabilities,structure, and governance contributedthrough our direct involvement in theoperating company boards, inductionof world-class talent, and the creationof stronger organizational andgovernance infrastructure byestablishing the holding company andmanaging the operating and investeecompanies more strategically.In addition, by clearly allocatingresponsibilities and restructuringkey functions, we have been able tointegrate the values that underpinSEDCO’s corporate culture.By taking decisive action on difficultissues, we saved significant costs,protected liquidity, and mitigated riskexposure for our shareholders.Sharper overall direction in areassuch as local real estate strategy andthe direct investment plan led to fasterdecision-making and improved supportfor the subsidiaries. This was evident,for example, with Tarfeeh in newfranchise acquisition; with Eimar Arabiain business strategy and execution;and with Nahdi in sustaining its majorexpansion program.At the same time, by realigning ourfinancial targets we were cognizantof the new global economic and politicalrealities – accordingly seeking additionalcash generation, risk mitigation, andperformance management. As aresult, we were better able to addressshareholder priorities such as liquidityand dividend generation.I wish Anees Moumina, the new ChiefExecutive Officer of SEDCO Holding,every success as he takes the helm.I am confident that, with his extensiveexperience of more than 25 years in thebanking and private sectors, he is trulythe right man in the right place. Underhis leadership, SEDCO’s transition andexpansion will continue, building on thefoundations that have been established.This is a company that adheres to thevalues of team commitment, loyalty,and focus on performance throughstrong governance. It has been an honorto serve and my privilege to enjoy thesupport of the Board of Directors and theoutstanding cooperation of a great teamof colleagues, all of whom I thank deeply.Dr Adnan A. SoufiChief Executive OfficerDr Adnan A. SoufiChief Executive Officer(Upto January 2013)Anees MouminaChief Executive Officer(From February 2013)8 Annual Review 2012 9

Executive ManagementAnees Ahmed MouminaChief Executive OfficerMr Moumina became CEO of SEDCOHolding in January 2013 after morethan 25 years’ experience in theprivate sector and financial servicesindustry. He previously worked withSamba Financial Group, latterly asGeneral Manager and Senior CreditOfficer. Throughout his banking careerhe gained experience in a variety ofbusiness sectors including contracting,trading, manufacturing, investments,real estate, transportation, leasing,the public sector and Islamic banking.He also worked with Proctor & Gamble.He is currently a Board Member ofseveral business, community andeducational establishments.Mr Moumina holds a Master of Sciencein Engineering Administration withhonors and a Bachelor of Science inCivil Engineering with honors, bothfrom George Washington University inUSA. He has completed a number ofextended executive programs includingthe Global Leadership Program atHarvard University and the SeniorExecutive Management Program atColumbia University.Issam HamidDirector of Corporate Strategyand DevelopmentMr Hamid joined SEDCO Holdingin 2010, responsible for investmentstrategy, capital allocation,proprietary direct investments,and asset investments. He isa member of SEDCO Holding’sInvestment Committee and sitson the boards of several subsidiaryand investee companies. Hepreviously worked at McKinsey andCompany’s London and Jakartaoffices where he led senior clientrelationships with multinationals,family businesses, and privateequity firms. Before this, at ShellInternational, he managed severalbusinesses and led the company’sglobal portfolio, strategy, andreorganization initiatives.Mr Hamid has an MBA fromWarwick University and a BSc(Hons) in Economics from theLondon School of Economics.In both cases he was awardedprestigious scholarships by theUK government. He is now amember of Warwick BusinessSchool’s alumni board.Atif RazaChief Financial OfficerA UK qualified charteredaccountant, Mr Raza has close to30 years’ experience in financialservices, commercial banking, andIslamic finance in the Middle Eastand the UK. Before joining SEDCOin 2011, he held CFO positions withSamba Financial Group and a majorCitigroup franchise in the UK.Mr Raza has had leadership rolesas CFO or COO of start-up Islamicinvestment banks in Bahrain andthe UK and, while at the EuropeanIslamic Investment Bank, wasactively involved with thedevelopment of a nascent Islamicfinance industry in London.Amro KandilVice-President, HumanResourcesMr Kandil has been with SEDCOHolding since 2010, having previouslyworked at Procter & Gamble, mostrecently as Senior HR Manager. Hegraduated with a Bachelor’s Degreein Systems Engineering from KingSaud University in 1990.At Procter & Gamble, Mr Kandilgained experience in engineeringand manufacturing before moving toHR, where he developed expertise inmultiple practices and oversaw areassuch as organizational excellence,training, recruitment, compensation,and employee services.Mamdouh KhawajiVice-President, InformationTechnologyMr Khawaji joined SEDCO Holdingin 2007 and has extensive experiencein information technology andleadership. Before this he spentseven years at IBM Toronto Labin Ontario where he was a softwarearchitect working with a globalteam that delivered WebSphereCommerce. Previously, he was aprincipal consultant at Oracle inCanada, having begun his careerwith Saudi Aramco as databasedesigner and administrator.Mr Khawaji graduated from KingFahd University of Petroleum andMinerals with a Bachelor’s degreein Computer Science.Nicholas PolleyVice-President, Legal AffairsMr Polley joined SEDCO in 2013.He brings 13 years’ professionalexperience, most recently as apartner of Charles Russell Law Firmin Bahrain where he led the MENAInternational Finance practice, actingfor regional corporate clients ontransactions and dispute relatedmatters. At SEDCO he has overallresponsibility for drafting, reviewing,and advising on all types of legalagreements. He also superviseslocal and international legal mattersfor the Board of Directors, ExecutiveCommittee, and ExecutiveManagement Committee.Mr Polley holds a BSc inDevelopmental Economics andInternational Politics with honors(including law) from the Universityof Bristol, UK. He qualified in 2000as an English solicitor and is amember of the Chartered Instituteof Arbitration (CIArb).Abdullah Al-HaiqiVice-President, Internal AuditMr Al-Haiqi joined SEDCO Holdingin 2005. He oversees the internalcontrol environment and reportson internal audit activities andcompliance to the Audit andCompliance Committee and CEO.He has over 17 years’ experiencein accounting, auditing, Saudi tax,and Zakat, and previously workedwith PricewaterhouseCoopers inSaudi Arabia in assurance, Zakat,and tax services.Mr Al-Haiqi holds a Master’sin Professional Accounting fromKing Abdulaziz University andis an associate member of theSaudi Organization for CertifiedPublic Accountants, the Instituteof Information Architecture, andthe Fraud Examiners Association.He is also a licensed Zakat andincome tax consultant.Amr BanajaVice-President, CorporateCommunications and MarketingMr Banaja leads the company’smarketing, public relations and CSRprograms. He joined SEDCO Holdingin 2011, having been VP Marketing& Communication at SEDCODevelopment from 2010.Beforejoining SEDCO, Mr Banaja partneredwith Seventh Art Group, the NewYork based real estate serviceprovider, to launch its Middle Eastoffice in Dubai, successfully leadinga number of projects includingTrump Dubai (Nakheel Harbour andTower) and Dubai Infinity Holdings’Isla Moda on the World. His earlierexperience includes senior positionsacross the GCC region at SamaDubai, the National CommercialBank (Investment Services Division),Unilever, and Gillette.Mr Banaja is a BA graduate fromBoston College, USA, majoringin Economics with a minorin Mathematics.From left:Atif Raza, Abdullah Al-Haiqi,Amro Kandil, Anees Moumina,Mamdouh Khawaji, Amr Banaja,Issam Hamid, Nicholas Polley10 Annual Review 2012 11

Business Review 2012 / Key Group FunctionsSEDCO’s transition to an institutionalizedmanagement structure has created anew and streamlined approach to theapplication of Group functions. We givea brief overview of how the changes arebenefiting the organization as whole,highlighting the achievements of thevarious departments during 2012.Corporate DevelopmentDuring the year Corporate Developmentfocused on investment performance bydelivering in five key areas: developingand implementing the right investmentstrategy and policies; effectivelycollaborating with asset managers;providing strong support to the SEDCOoperating companies; carefully managingspecial situations; and efficientlycontrolling costs.The development, approval andimplementation of a Board InvestmentCommittee, Investment PolicyStatement, asset allocation, riskbudgeting, and real estate strategystrengthened our investment decisionmakingand risk management.Fast and effective collaboration withour asset managers enabled timelycompletion of six key real estatedeals, initiated two promising newdevelopment projects, negotiated a25 percent increase in lease income,launched two new financial investmentproducts, and delivered investment intwo new high-performing managers.Active support was provided to theoperating companies on key priorities,including for Elaf Group, SEDCODevelopment, Tarfeeh, Ewaan, RedSea Mall, Eimar, Al-Nahdi, and others.A good deal pipeline was created byre-establishing relationships withmajor investment banks, private equityhouses, Saudi family offices, as wellas with Fortune 100 companies.Over 40 potential new investmentswere reviewed, with five advancingto the negotiation stage.A number of special assignmentswere successfully concluded. Theseincluded difficult negotiations onseveral previous real estate projects,and accelerating progress on theGalleria development.Corporate Development costs werekept within budget and were about25 percent below comparablebenchmarks.Group FinanceFor Group Finance, teamwork anddedication were main themes in 2012.The Treasury and Finance functionswere remodeled to create smaller,client oriented clusters. Careerdevelopment plans are now in place,and language training is under wayfor team members being secondedto international operating companies.In managing data quality andprocesses, the culture has evolvedtowards actively challenging and addingvalue when managing activities. Thefocus is intensely on client serviceand producing timely and accuratereporting. A merit-based performanceculture is taking root, following betterwork methods to ensure that dataplatforms are accurate for the future.The coming year will see theimplementation of new organizationwork flows and method, engagingclosely with operating company financefunctions, and ensuring that the mixof capabilities continues to embed astrong performance-based culture.Human ResourcesLaunch of the Injaz comprehensiveperformance management systemhas transformed SEDCO’s developmentof human capital. The system usesperformance indicators and regularevaluations to benchmark progresstowards agreed goals for skillsacquisition and career planning.In 2012, more than 75,000 traininghours in key competencies weredelivered, addressing individualleadership, communication, andteamwork. In the next year, a furtherfour competencies will be added:innovation, coaching, delegation,and customer service.Working with local and internationaltraining firms, functional developmentwas completed for close to 20 percentof SEDCO organizations. Humanresource policies and procedures wereupdated, along with 100 percent of jobdescriptions for SEDCO Capital and75 percent for SEDCO Holding.The Human Resources departmentcontinues to monitor market trendsto ensure SEDCO remains competitive.Saudization has reached silver level.Information TechnologyDuring 2012, service level targetsfor all SEDCO operating companieswere achieved and 11 businesssponsoredprojects were completed.These included HR process automationfor Elaf Group, Tarfeeh, and SEDCODevelopment, business processautomation for Masalik Al-Khair,document management systemsfor SEDCO Capital and SEDCODevelopment, Oracle financials forthree new Elaf Hotels, and IT supportfor Eimar Arabia’s new Riyadh office.12 Annual Review 2012 13

Business Review 2012 / Key Group Functions continuedBusiness continuity planning (includingdisaster recovery) was initiated for theGroup, along with a development ofa dedicated IT disaster recovery plan.The division also reviewed the securityof data, strengthening the network byrunning vulnerability tests and closingdown threats and weak points.LegalLegal Division continues to developa specialist team to meet and supportthe growth of the SEDCO Group’sbusinesses and their requirements.The team advises on transactionaland dispute-related matters aswell as company secretarial andrelated administrative requirements,advising SEDCO’s operations aroundthe world. This includes the structuring,documenting, and negotiating of mattersrelevant to Shari’ah compliance.The division has also provided trainingon banking and finance to members ofthe SEDCO Group as well as to studentsat educational institutions, includingKing Abdulaziz University’s Facultyof Economics and Administration.Members of the team have beenrecognized by professional publicationsand have been commended for theirdiligence and broad outlook, and inparticular for being ‘very client-focused’.AuditInternal Audit completed 12 audits withinthe Group in all major focus areas, aswell as eight advisory assignments fordeveloping matrices, operational policies,financial policies, and compliance withregulation. A follow-up approach wasimplemented and adhered to for allissued audit reports.Self-assessment of controls in 2012indicated progress of 80 percent towardsachieving adherence to the Institute ofInternal Auditing Standards and bestprofessional practice.Successfully implementation of theEWP module of the ‘TeamMate’ auditmanagement software is contributingto efficient audit and resourcemanagement, issue monitoring andfollow-up, scheduling, and reporting.Internal Audit has also been recognizedas a talent provider for the SEDCOGroup, with two audit professionalsjoining SEDCO Capital.Marketing and CommunicationsIn line with SEDCO’s evolution as astrong and professionally governedinstitution, Marketing and CorporateCommunications department hasconcentrated on building a moreoutward and externally focused brandthrough enhancing its public exposure.The strategy is based on three pillars:forging links between SEDCO and itsoperating companies; showcasinghow a culture of impeccable corporategovernance pervades the entireorganization; and demonstrating howSEDCO’s long-term commitment tothe community upholds its values andembodies best global practice in CSR.In line with the international trendto digital media as a communicationsasset, SEDCO took a leadership rolein 2012 by launching a redesigned andmore interactive website, embracingsocial media, and converting itsnewsletters to digital format.SEDCO Capital and SEDCODevelopment have initiated awarenesscampaigns, defining key messages andcommunications objectives, and usinga comprehensive matrix of traditionaland digital media to convey a powerfulbranding impact. In their second fullyear of operation, the two companiesare now building on the foundationsof their formative phase.SEDCO Development and Elaf Groupare cooperating closely to create adynamic brand identity for the Galleriadevelopment, encompassing the retailcomplex and five-star hotel that are keycomponents. The undertaking will notonly position Galleria as the ‘must see’destination in Jeddah but will reinforcethe SEDCO Group’s status as a potenteconomic force in the Kingdom.14 Annual Review 2012 15

96%SEDCO CapitalWealth and asset management forprivate and institutional clients100%SEDCO DevelopmentReal estate development,management and advisory services100%Elaf GroupHotel management, travel andtourism services100%Auto WorldAutomobile leasing, limousinesand corporate car rentals100%Eimar ArabiaReal estate professional servicesand property management100%TarfeehCasual dining franchises:Applebee’s and China Gate79.3%Al Mahmal TradingOperation and maintenance,janitorial, security andengineering services79.3%Al Mahmal Real EstateAl Mahmal Real Estate wasestablished to manage theAl Mahmal Center in JeddahBusiness Review 2012DirectInvestments50%Nahdi Medical CompanyRetail and wholesalepharmaceutical, medical andcosmetic products22%Arabian FarmTable eggs and fertilizerby-products30%Universal Industrial ShelvesShelving and storage equipment21.8%CNA GroupBuilding automation &system integration34%Bonnon CoffeeCoffee shops and relatedmerchandise20%EwaanResidential real estatedevelopment6.3%GreenpacketTelecommunicationssolutions & services30%EjadaInformation technologyservices & solutions26%Dar Al Fouad HospitalTertiary healthcare16 Annual Review 2012 17

Business Review 2012 / Direct InvestmentsSEDCO CapitalIn early 2010 SEDCO Capital waslaunched as a standalone investmentfirm. Since then it has leveraged theexperience gained from operating thebuy side of an active private familyoffice to offer tailored, asset-basedportfolios that satisfy client needs.The firm offers a comprehensive rangeof services – including asset allocationand management, advisory, arranging,underwriting, and custody – to clientssuch as high net worth individuals,family offices, and institutions whileadhering to Shariah principles.Key among SEDCO Capital’sachievements to date is the seamlessprogress from family-focused firm tofully-regulated active asset and wealthmanagement – building the technicalinfrastructure and processes essentialto attract external investors.The firm’s management team hasworked hard to put all necessarycomponents in place. It now has astrong operational base, the rightstructure, and top performers.The concept of partnership – distilledin the firm’s slogan ‘our interestsaligned’ – defines the essence ofSEDCO Capital and differentiates it fromthe mainstream. Having substantialinterests in all investment activitiesconducted by the firm provides theultimate sense of security for clients.SEDCO Capital’s strategy comprisesthree facets:• Adaptive Investment Approach– pursuing a more dynamic, flexibleand thematic approach, striving for abalance between shorter-term, dynamicinvestment decision-taking, as well aslonger-term investment opportunitiesthrough a combination of top-downand bottom-up selection decisions.• Diversification Approach – throughportfolio construction and manageddiversification across asset classes,geographies, risk factors, andinvestment themes.• Tactical Approach – based on investorand market sentiment by initiatingtactical trades when markets aremeasured to be either excessivelyoptimistic or pessimistic.The launch of SEDCO Capital GlobalFunds in Luxembourg in 2012 createdthe largest Shariah-compliant specialinvestment fund (SIF) platform inLuxembourg. It is also domiciled onshorein a major financial jurisdiction.The SEDCO Capital Global MarketSentiment Fund, also launched in 2012,is the first Shariah-compliant fundfollowing a rules-based asset allocationapproach to direct the balance betweenriskier assets (public equities) andsafer assets (Murabaha and Sukuk)in accordance with output froma proprietary allocation model.In 2012 the firm participated in the HopeFinancial Dignity Summit that discussed‘Free Enterprise, Capitalism, andEmerging Markets’, joining speakers thatincluded Ben Bernanke, the Chairmanof the US Federal Reserve, and sharinga panel with top industry experts.SEDCO Capital also participated inhigh-profile events around the worldsuch as:• S&P Leaders’ Forum 2012 ‘TowardsDeveloping Economies and SustainableInvestments’ in Abu Dhabi.• MIMF 2012 ‘The Emerging MarketsSummit’ in Doha, Qatar.• Hope Financial Dignity Summit 2012in Atlanta, USA.• Asia Finance Forum 2012, KualaLumpur, Malaysia.SEDCO Capital was named ‘Best FundManager’ at the 2012 Asian FinancialForum’s Global Islamic Finance Awards,while Sheikh Abdelelah Bin Mahfouz,the firm’s Chairman, was recognizedfor ‘Most Outstanding IndividualContribution to Islamic Finance’.SEDCO Capital has emerged as apowerful force in asset management.Today, it is one of only a few firmsglobally offering a full range ofsophisticated services in assetmanagement, real estate, privateequity, public equity, and commoditiesthat conform to Shariah.‘Best Fund Manager’ at the 2012Asian Financial Forum’s GlobalIslamic Finance Awards18 Annual Review 2012 19

Business Review 2012 / Direct Investments continuedSEDCO DevelopmentSEDCO Development is a leadingreal estate developer in Saudi Arabia’sWestern Region, renowned for initiatingand implementing a range of mixeduse,retail, hotel, office and residentialproperties. A wholly owned subsidiaryof SEDCO Holding, it is committed todelivering innovative projects that addtangible value to communities andexceed the expectations of stakeholdersin terms of quality, timely deliveryand profitability.The company’s track record includesmany notable projects such as Red SeaMall, the Al Massarah and Seven Gardenssubdivision, Al Nawras Tower, and the AlNakheel Center, all situated in Jeddah,the Elaf Al Sud hotel in Makkah, andthe Elaf Taibah hotel in Madinah.SEDCO Development maintains anintense focus on delivering projectsefficiently and effectively, achievingworld-class management andoperating practices, building a win-winrelationship with strategic partners,and enhancing cost optimization,budgeting, systems and processes.In 2012 SEDCO Development’s totalrevenue increased by some 40 percent,and the total value of projects by about155 percent.The company currently has threedevelopments nearing completion.The largest of these – the SR 750 millionGalleria complex on Jeddah’s PrinceMohammed Bin Abdulaziz (Tahlia) Street– is scheduled to open in late 2014. Withits stunning Italian-inspired design,Galleria is set to become a newlandmark in the city, focusing on theluxury leisure and business sector. It willoccupy 80,000 m² of built area, includinga five-star Elaf hotel with 365 rooms,4,000 m² of premium retail space,hospitality outlets, spa and gymnasium,ballroom, and meeting rooms.Galleria won the Best ArchitecturalProject award at the 2011 Saudi ArabianBuilding & Infrastructure Summit.Two other high-profile projects arealso progressing well. Constructionof the 810-room Elaf Bakkah Hotel inMakkah was completed. Fitting-out andfurnishing is expected to be finished inmid-2013. The superbly designed EimarMosque also completed constructionin 2012 and is now being handed overto the Ministry of Islamic Affairs,Endowments Da’wah, and Guidance.The company’s five-year strategicplan covers projects that will contributeto the growth and prosperity of SaudiArabia. The immediate focus is to buildcapabilities, followed by developingprojects for subsidiaries, introductionof third-party investor funding for theseprojects, and third-party involvementin the development of non-subsidiaryproperties. In the long-term (2016onward) the goal is to createindependent investment capacity.For the next two to three years themain focus will be on projects in theWestern Province, but the companywill also assess opportunities in theother regions and major cities of theKingdom. New regional offices willbe opened as business volumes growto justify the investment.Feasibility studies are under wayfor three new projects in Jeddah –a residential compound, hospital,and theme park – and developmentagreements are at the final stagefor further developments in Jeddah,Makkah, and Riyadh.In Jeddah, site design is due to beginfor the Bin Mahfouz Palace land.Consultants have identified the170,000 m² site as viable for midincomehousing, a market segmentwhere there is considerable demand.The first phase of development is alsodue to begin at the 1,500,000 m² OmAljood site, located north-west ofMakkah in Al Fayhaa District. The2,000,000 m² Al-Gadisiya site in Riyadhhas been recommended for subdivisionfor residential villas by the consultant.Operationally, 2012 was markedby various initiatives to enhancecommunication and create team spirit,such as workshops and brainstormingsessions on the Kingdom’s real estatesector, especially in Jeddah and Makkah.The new training programs, introduced ayear earlier, yielded significant benefits,and the target Saudization percentagewas achieved. Implementation of anelectronic HR system now provides astrategic tool for all business and staffrequirements, backed by a continuitysystem to follow up on daily progresson projects – including directcommunication from sites to SEDCODevelopment offices.20 Annual Review 2012 21

Business Review 2012 / Direct Investments continuedElaf GroupElaf is a wholly-owned SEDCO subsidiaryand a Saudi Arabian leader in tourism,travel, and hotels, focused particularlyon meeting the needs of pilgrims tothe Kingdom’s holy cities. Since itsfoundation in 1981, Elaf has grown in thedomestic market as a leading hospitalitygroup, and expanded internationallyacross Asia and North Africa, WesternEurope, and North America throughits Hajj & Umrah Division.The company is a general sales agent(GSA) for major airlines and operatesa renowned chain of three-, four-, andfive-star hotels. It offers inbound andoutbound tour packages, as well aspartnerships with a number of Hajj andUmrah operators around the world.Growth has stemmed from establishingnew business relationships and openingits own offices, while Elaf’s HotelsDivision has increased the numberof properties and rooms in its regionalportfolio. A total of 12 Elaf Hotels nowoperate in the cities of Makkah,Al-Madinah, and Jeddah.International expansion has beenaccelerated by entry into the Turkish,Indonesian, Malaysian, UK, and Frenchmarkets by the Hajj & Umrah Division.The global program is based on anumber of competitive advantages:financial strength, unwavering loyalty andconfidence of staff, the trust of clients,competitive services, and regulatorysupport from the Saudi government.In 2012, two new 3-star hotels wereopened in Al-Madinah, namely the ElafAl Bustan and the Elaf Al Nakheel. The1,506-room Elaf Al Multaqa Hotel nearthe Holy Haram in Makkah was alsoopened and secured a five-star rating,and an agreement was finalized tooperate the new 810-room Elaf BakkahHotel in Makkah. Plans to renovatethe Elaf Taiba Hotel in Al-Madinahwere finalized, and new recruitment,orientation, and performancemanagement policies prepared.The Hajj & Umrah Division securedallotments in all major three- tofive-star hotels in the Makkah region,further expanding its services tovirtually every country in the worldwith a Muslim population.International exhibitions and roadshows – including Turkey, Egypt,Morocco, Algeria, Malaysia, andIndonesia – brought Elaf products andservices to new and existing customers,and the Hajj & Umrah and Hoteldivisions distributed performanceawards to their major foreign agentsat some of these locations.Elaf continued to receive industryawards, winning a series of distinctionsin 2012:• Saudi Excellence in Tourism Awards:Best Four-star Hotel – Elaf TaibaAl-Madinah• Saudi Excellence in Tourism Awards:Best Tourism Sales Professional ofthe Year• Saudi Excellence in Tourism Awards:Silver Sponsor Award• Makkah Excellence Award 2012• Jakarta International Hajj & UmrahExhibition – Gold Sponsor Award• Destination of the World – Top 5Producer Award• Turkish Airlines – Top 5 Producer Award• Etihad Airline – Excellence Award• Singapore Airlines – Top Agent AwardElaf is dedicated to building a worldclasscorporate culture, developingleadership teams and creating HRsystems that improve and maintain thecompetitive advantages of perseverance,creativity, innovation, and hard work.Key objectives in 2013 are to maintainthe increased momentum of revenueand profit growth, while implementingimproved policies, procedures, andsystems. The Elaf Bakkah Hotel inMakkah is scheduled to open, and newmarkets will continue to be developedfor Hajj and Umrah business. In doingso, an upgraded website will be launched,along with a customer loyalty programfor city properties. Elaf continues toseek opportunities for more hotelsthroughout Saudi Arabia and is lookingto double the volume of business fromthe Riyadh region alone.Elaf hotels network (number of hotels)2012201120101020099Elaf hotels occupancy (percent)201220112010200952%47%Makkah Excellence Award 2012121265.4%62%22 Annual Review 2012 23

Business Review 2012 / Direct Investments continuedEimar ArabiaWhen SEDCO identified a gap in thereal estate market in 1997, it establishedEimar Arabia to provide an integratedand comprehensive range of professionalservices for financial institutions,developers, parastatal organizations,and high net worth individuals andbusinesses. In a market categorizedby a lack of regulation, process, andprofessional rigor, the company tookresponsibility for the real estate interestsof clients seeking expert professionalguidance and the benefits of precisemarket intelligence.With experts in every area of realestate, Eimar offered marketingand brokerage, project management,facility management, and valuation– becoming the first Saudi Arabiancompany to provide a full suite ofcomplementary services.Today, Eimar Arabia is an acknowledgedleader in Saudi real estate, and amember of the International Federationof Surveyors.It has helped raise standards in anindustry that in the past relied tooheavily on instinct rather than analysis.It is the only consultancy providingcomprehensive and performancedrivenservices – supported by ateam of qualified and experiencedprofessionals focused on providinglong-term value and expert real estateasset and wealth management.In addition, the company acts asdevelopment manager for megaprojects, such as Red Sea Mall, anda range of office, residential, andland/subdivision schemes. Its marketstrategy focuses on diversification bybalancing growth in established marketswith expansion into new areas.Eimar Arabia exceeded its 2012 revenuetarget by 20 percent. More than 3,000consulting and valuation assignmentswere conducted by the Consulting andValuation Department – coveringproperties worth more than SR 15billion across the Kingdom – and theBrokerage Department achieved salesof SR 380 million and leasing dealsworth more than SR 465 million.Responding to macro-economic trendsand market demand, a new office inRiyadh was opened during the year anda strategy workshop was conductedgiving an overview of the company’sbusiness and future direction.The Consulting and ValuationDepartment has developed soundrelationships with more than 80 clients,notably local and international financialinstitutions, companies, and investors.In 2012 a report on Jeddah’s residentialsector was provided to clients.A similar report for Makkah will bedistributed in the first quarter of 2013and others will follow, covering varioustopics of interest across the Kingdom.The department also conducted variouseducational courses for governmentalagencies in Makkah and a large numberof stakeholders, including some on realestate valuation. With about 400 traineescompleting these courses during theyear, this was a remarkable scope ofcorporate social and educational activitythat made a positive impact on the realestate sector.Ongoing work to develop the company’sorganizational structure continued,especially the new brand identity whichis expected to be finalized by mid-2013.Eimar Arabia now has more than250 staff, with many others indirectlyemployed by contract partners.The company continues to seek andemploy the highest caliber staff tooptimize workload handling for improvedturnaround performance. It also continuesto meet and exceed all workplaceregulations, including Saudization.For the future, Eimar Arabia aspires to bethe premier real estate services companyin the Kingdom, working to a five-yearstrategic plan that began in 2012.26 Annual Review 2012 27

Business Review 2012 / Direct Investments continuedTarfeeh (Arabian Entertainment Company)Arabian Entertainment Company –branded Tarfeeh – is a wholly ownedSEDCO subsidiary dedicated todeveloping and operating world-classrestaurant chains. Since Tarfeeh wasestablished in 1996 it has embarkedon an aggressive expansion planacross all regions of the Kingdom.With 600 employees, Tarfeeh is a leaderin Saudi Arabia’s casual dining market,operating the largest Applebee’sfranchise in the Middle East with 14restaurants, as well as the two outletsof its self-developed China Gate brand– a casual dining concept offering buffetstyle inter-continental cuisines.In 2012 Tarfeeh signed a franchisedevelopment agreement with anotherworld-class brand – Romano MacaroniGrill. This will be added to the portfolioin 2013, providing another strong growthchannel for the next five years. Furtheropportunities are being sought withinternational brands in segments thatmatch Tarfeeh’s strategy and values.Two new Applebee’s were opened in2012 – in Riyadh and Qaseem – andtwo more will follow in 2013 – Jizanand Jeddah – reinforcing the company’sstatus as the largest Applebee’sfranchise outside the USA. Applebee’shosted more than 1.5 million guests in2012 and 20 percent growth is projectedfor 2013. For this reason, total seatingcapacity will be increased toaccommodate more than 3,000 dinersat the same time. The launch of homedelivery in selected locations of theEastern, Western, and Central provincesadded a new revenue channel that willbe expanded to other markets in thecoming months.Older Applebee’s restaurants arenow being remodeled and revitalized,using the latest designs developed inthe US. In 2013, two restaurants will beremodeled, followed by all restaurantsin the chain over the next few years.A feasibility study is under way toevaluate and assess the potentialfor upgrading the China Gate concept –enabling developments in mallsand non-traditional locations suchas university campuses and highdensityareas.Tarfeeh’s new loyalty program hasprovided the opportunity for directcommunications and exclusivemarketing channels. It will also beused to offer customers flexibility inredeeming points with other businesspartners. In 2012, a mega campaign waslaunched in partnership with Pepsi toreward loyal guests with the opportunityto win three new cars and many othervaluable prizes. Ongoing success withcustomer relationship managementhas expanded the customer database– currently the biggest of any Applebee’sfranchise in the Middle East.Operationally, a sound platform hasbeen reinforced by establishing businessprocesses for all-important activitiesand adopting corporate governancepractices that rank among the bestin the industry.In 2012, employees and managementwere provided with specific trainingprograms and leadership developmentworkshops relevant to their jobrequirements and core competencyenhancements. All field employees weregiven an extensive training programrelated to customer service andsatisfaction through a new ‘e-university’where restaurant employees completean on-line training course for differentskill sets. Tarfeeh achieved one of thehighest scores on guest satisfactionin the region and among the top fivepercent globally.Tarfeeh strongly believes in supportingCSR activities and undertook severalsuch initiatives in 2012, including thestudent programs at CBA College andDar Al Hekma, Civil Defense Day, andthe ‘Dine to Donate’ during Ramadanwhich partners with guests insupporting local organizationsand social activities.At Applebee’s 2012 Global franchiseConference in Los Angeles, Tarfeehreceived the award for highest annualsales growth and was recognized asbeing among the best operators forthe brand’s ‘operations excellence’.Applebees staff (number of employees)20122011505201050520094962008480Applebees customers (thousands)201220112010200920089329218941,209The award for highest annual salesgrowth at Applebee’s 2012 Globalfranchise Conference in Los Angeles6001,50028 Annual Review 2012 29

Business Review 2012 / Direct Investments continuedNahdi Medical CompanyNahdi Medical Company was foundedin 1986 and has grown to become thelargest pharmacy chain in the MENAregion, serving more than 55 millioncustomers annually. SEDCO acquired a50 percent stake in 2004 and has been adriving force in the company’s expansion.Nahdi operates a network of 665pharmacies in more than seventy citiesand villages across Saudi Arabia, 200 ofwhich provide round-the-clock service.In addition, the company is a majorwholesaler of medicines, cosmetics,baby care, and medical equipment.Nahdi’s retail network is so extensivethat close to 60 percent of the Saudipopulation are within five minutes of aNahdi pharmacy – planned expansionaims to raise that figure to 90 percentby 2016.A world-class supply chain links 500suppliers across the globe to 75,000 m²of storage facilities and a fleet of 40refrigerated trucks, ensuring thathigh-quality products are properlystored and efficiently distributed.Nahdi has always outperformed themarket, recording compound annualgrowth of 15.3 percent compared to8.6 percent for the pharmaceuticalmarket as a whole. The company’saverage historical growth for maturepharmacies is estimated at 15 percent,whereas the average percentagefigures for new operations are 50.3in the first year, 13.3 in the second,and 18.5 percent in the third.In future, the company’s growth willbe accompanied by a strategic focuson becoming an integral and innovativeplayer in Saudi Arabia’s healthcaresystem, helping to provide accessible,reliable, and affordable healthcare tocommunities. Nahdi will start to offerbasic healthcare services such asscreening, education, and diagnosisat the point of sale.Among the first initiatives are chronicdisease management services toaddress conditions such as diabetesand high cholesterol.The company’s five-year strategicplan – called ‘New Reality’ – placesthe community at the center of attention.This new focus represents a completetransformation whereby Nahdi’s function,services, and image will evolve to thehighest standards. This will reinforcethe strategic imperative to become anintegral and innovative player in theKingdom’s healthcare system, in linewith the corporate mission to providethe community with accessible, reliable,and affordable healthcare.In the coming year, NMC is consideringa number of initiatives to supportthe expected growth in pharma andnon-pharma business. This is basedon continued refining and differentiationof the merchandise range, not onlyat product level but in the way it isallocated and presented in pharmacies.Better space-planning and visualmerchandizing techniques will providea more exciting shopping experience,supported by additional staff andthe introduction of relationshipmanagement and loyalty programsto attract and retain customers.Launch of a new brand identity willbe supported by intensive advertisingcampaigns, with all initiatives integratedto achieve an increase in revenuesand gross margin.Continued growth in gross margin willbe further supported by focusing ondifferentiated market segments andhigh-margin products. An example isDermo Skincare which differentiatesNahdi while delivering substantialmargin premiums over mass FMCGproducts. Increased contribution is alsoexpected from private label products.Merchandising excellence will focuson the complete redesign of 300stores, improving space allocationand product displays.And additional manpower will enablepharmacists to deliver specializedservices by segregating the cashierand pharmacist functions andintroducing pharma-technicians andassistants, as well as beauty advisors.By focusing on customers andrelationship management, extensivedata capture will enable propersegmentation, supported by the launchof a loyalty program that is expectedto help address customer needs andimprove the value proposition, basedon feedback received.Paramount in the new approachis the people factor. Nahdi’s aim isalways to be an employer of choiceand this is maintained through awell-defined human resource planthat seeks to attract the best localtalent. This was very evident in 2012when the company’s Saudizationtargets were comfortably met.Nahdi pharmacies network (number of stores)20126652011595201020095264772008421Nahdi pharmacies customers (millions)201255.0201150.42010200944.642.2200836.430 Annual Review 2012 31

Business Review 2012 / Direct Investments continuedRed Sea MarketsRed Sea Markets Company is the ownerof Red Sea Mall. The company wasestablished in 2004 and is 49.5 percentowned by SEDCO Holding, with theremaining shares held by a group ofSaudi businessmen.Red Sea Mall leases 10 categoriesof retail space in Red Sea Mall, fromshops of different sizes to restaurants,food court, kiosks, and storage spacefor the mall’s tenants. Total built areaof the mall is 248,000 m² with a grosslettable area of 210,000 sqm2 andaround 484 tenants including afive-star hotel.Female apparel and unisex apparelbrands are the largest tenant category,occupying roughly 24 percent of theretail area. The company aims toincrease these segments as the brandsattract a large number of visitors frommultiple consumer groups.Red Sea Mall’s popularity is reflectedin the footfall, averaging about 344,000visitors a week. By shifting the tenantmix more up-market, and attractingteenagers and young adults throughextended entertainment areas, itachieved increases in customer traffic.Red Sea Mall is the only mall in theWestern region with a 5-star hotel anda premium office tower (SEDCO Tower)as part of the facility. The hotel isleased to Elaf, a SEDCO subsidiary,until 2029.The mall’s achievements in 2012were recognized by two prestigiousinternational awards. Chief ExecutiveMohammad Alawi received the AsianRetail Leadership Award from the AsianConfederation of Businesses and theAsian Retail Congress, and the mallwon the Golden Award for the bestmarketing campaign in the Middle Eastand North Africa at the InternationalShopping Centers Conference.Red Sea Markets leases advertisingspace, for static and digital signageinside the mall and in the parking area,primarily to media companies. Thebulk of advertising activity is limitedto leasing available space to SaudiSigns Media, one of the leadingadvertising signage makers in theMiddle East. Saudi Signs Media usesthe space as part of its network ofindoor advertising media to displayclients’ promotional media.Red Sea Markets revenues increased17 percent in 2012, driven by thechange in tenant mix towards relativelyhigh profit categories, an increasein gross lettable area and occupancyrates, higher advertising revenues,and the introduction of social eventsand entertainments.Maintaining its appeal to shoppers,new major brands such as Samsungand Juicy Couture have recently beenintroduced to Red Sea Mall. And lookingforward, two outstanding new tenantsopening in 2013 are Debenhams andToys R Us.2012 Retail Leadership Award from theAsian Confederation of Businesses andthe Asian Retail Congress2012 The Golden Award for the bestmarketing campaign in the Middle Eastand North Africa at the InternationalShopping Centers Conference32 Annual Review 2012 33

Business Review 2012 / Direct Investments continuedEwaanBonnon CoffeeUniversal ShelvesSEDCO Holding has a 20 percentinterest in Ewaan Global ResidentialCompany, a Saudi developer ofaffordable housing. The companyis a partnership with the IslamicCorporation for Private SectorDevelopment (affiliated to the IslamicDevelopment Bank), the Public PensionAgency, and International InvestmentBank (IIB). SEDCO Chairman Saleh BinMahfouz is also Chairman of Ewaan.Ewaan is developing the SR 1.2 billionAlfareeda residential project in Jeddah,which will comprise more than 1,700residential units on a 100-hectare siteto the north of the city. Alfareeda isthe largest project of its kind in Jeddahand will have educational and medicalfacilities, mosques, a shopping center,and a sports club, all surrounded bylandscaped gardens and green areas.Almayaar is Ewaan’s second projectin Jeddah – a 33-hectare site in DahbanVillage, close to Alfareeda. The overallconcept is to create a fully integratedlandmark community, with affordablehousing for mid-income Saudis.Ewaan’s development philosophy ofcreating ‘life style communities’ that aresupported by the best of modern facilitiesmanagement practices has been centralto the Alfareeda and Almayaar conceptsand is now being applied at the newLimas project in Jubail.The sale of all Alfareeda Zone 1 villasduring 2012 reflects the trust andconfidence that buyers are showingin the developer and the project.Infrastructure work for the wholeproject is scheduled for completion bymid-2013 and, by the end of the year,320 villas will be completed. Another902 will follow in 2014 and 586 in 2015.The pre-development phase isprogressing at Almayaar, withthe master plan and municipalityapprovals being finalized.Pre-development for the 43,500 m²Limas project began in 2012. Thisis Ewaan’s first development inEastern region – a gated residentialcompound of 130 units as well asrecreational facilities.Bonnon is a homegrown Saudialternative to global coffee shop chainsand is 34 percent owned by SEDCO.Established in 2006, Bonnon hasevolved as a serious competitor to theinternational chains, capitalizing onhigh standards of product quality andcommitment to customer care.The company’s success and popularitywas recently reflected in being rankedthe third fastest growing among 100small companies in the Kingdom.With eight coffee shops, primarilyin Jeddah and the surrounding areas,Bonnon is seeking new locationsboth within the city and beyond.Customers served increased by 17percent in 2012, passing the half millionmark, while sales grew by 20 percent.Customer care and satisfaction is atop priority, so extensive staff traininghas been conducted during the past12 months, beside completing the ISO22000 training program and enrollingfor the implementation stage of ISOcertification, to ensure compliancewith international food safetystandards and quality control.Detailed design has been completedfor the new indoor-kiosk model,providing operational solutions fordifferent business environments. Bonnonis delivering an elegant message of thebrand name, through enhancement ofits image and services.The new model will be launched withthe renovation of the Aziz Mall branch,and renovation work for the Red SeaMall and GNP Hospital branches isplanned in early 2013. At the same time,a new food and desserts menu is beingdeveloped providing gourmet tastychoices, introducing new hot and coldbeverages for different seasons.SEDCO holds a 30 percent interestin Universal Industrial Shelves. TheCompany’s factory is located in theIndustrial City in Jeddah and producesbolt-free shelving, multi-tier shelving,additional mezzanine levels, long-spansystems, carton live systems, platformmezzanine systems, pallet racking,mobile shelving, lateral mobileshelving, trolleys, and steel lockers.Its marketing arm, Arcoma, sells thefactory’s products mainly to domesticcustomers, with 15 percent exported toEgypt, Jordan, and some Gulf states.34 Annual Review 2012 35

Business Review 2012 / Direct Investments continuedEjadaAl Mahmal TradingAl Mahmal Real EstateEjada, which is 30 percent ownedby SEDCO Holding, is one of SaudiArabia’s largest regional softwareand information technology servicescompanies. Headquartered in Riyadh,it was formed in 2005, the resultof a merger between three of theKingdom’s leading IT specialists.The company has since built on eachentity’s network of alliance partnersand now has six offices and fourchannel partners across eight countriesin the MENA region, specializing inIT, enterprise solutions, and systemintegration for the technology, media,and telecommunications industries.With strategic partners such as IBM,Oracle, Microsoft, SAP, RSA, Lawson,and HP, Ejada provides a wide range ofindustry-specific products and servicescovering customer management andbusiness infrastructure. Clients includefinancial institutions, telecomscompanies, the oil and gas industry,military and defense establishments,and the government, education, andhealthcare sectors.During 2012 Ejada maintained itshigh level of Saudization as it securedsignificant new contracts thatdiversified its client base in banking,government, and telecommunications– three of its most important sectors.These contracts, and a growing pipelineof new business, are largely attributableto intensified marketing efforts during2012, leading to improved awarenessand perception of the company’sresources and capabilities. Geographicexpansion is also taking place, havingset up a joint venture in Abu Dhabi tobid for new projects.With competition becomingincreasingly aggressive, managementis committed to maintaining theheightened focus on marketingand new business development.SEDCO Holding owns an 79.3 percentstake in Al Mahmal Trading, a facilitiesmanagement specialist. Formed in1988, the company takes responsibilityfor client properties such as shoppingmalls, bank headquarters, hospitals,office towers, and residential buildings.Services include operation andmaintenance, janitorial andhousekeeping, security and safety,and project engineering and support.The company has been ISO certifiedsince 1999 and operates the latestfacilities management software.Professionalism is fundamental toAl Mahmal’s record of achievement,transferring skills and competencethrough intensive on-the-job training,while continuously monitoring andevaluating its systems to complywith the latest trends and industrybest practice.During 2012, the company receivedISO 9001:2008 certification and renewaland upgrading of its Ranking Certificatethat qualifies it to participate inGovernment sector bidding processesto a value limit of SR 30 millionper project.Negotiations are under way for jointventures with Korean and UK specialistsin facilities management, and expansionin Riyadh is a continuing priority.The company believes that itscompetitiveness can be increasedand, to this end, on-the-job training isbeing stepped up across all operationsdepartments to develop cost-effectiveand multi-trade manpower to meetpresent and future requirements.Research and development effortsare focusing on finding new ways toimprove capabilities and profitability.Training and employment of Saudinationals in all departments is anotherpriority, and in 2012 the company receivedits compliance certificate for Nitaqat,the Government’s Saudization program.Looking ahead, Al Mahmal Tradingplans to be among the top five servicecompanies in Saudi Arabia withinthe next five years, increasing annualprofit by securing more projects inthe Government, quasi-Government,and private sectors and doublingshareholders’ equity.Al Mahmal Real Estate was establishedin 2004 to manage the Al MahmalCenter in Jeddah, which is 79.3 percentowned by SEDCO Holding.Al Mahmal Center’s superior design,formidable operations, and excellentretail mix have made it one of the mostsought after shopping destinations inthe city, providing a one-stop venuefor fashion, lifestyle, and food.With 12,000 m² of leasable area,the seven-story commercial centercomprises 90 shops, 27 kiosks, 21stands, and a food court with 23 outlets.Occupancy has been running at closeto 100 percent for the past five years,with an extensive waiting list of tenants.A 550-bay parking block is connectedto each floor of the center, generatingincome through hourly parking fees forvisitors as well as long-term rentals toemployees in neighboring companies.A three-year business plan preparedin 2012 focuses on reduction of operatingcosts and increasing revenue bycontrolling expenditure and developingunused space for leasing and advertising.Al Mahmal Centre website provides itsvisitors with detailed information on thecenter’s story, location, tenant mix andfloor plans. A detailed marketing planhas been devised to sustain the growthof the company and to maintain theprominent market position of the center.The company has achieved itsSaudization percentage in 2012 andhas allocated a budget for ongoingtraining and manpower developmentin specialized fields.36 Annual Review 2012 37

Business Review 2012 / Direct Investments continuedArabian FarmsDar Al Fouad HospitalCNA GroupGreen PacketSEDCO Holding owns 22 percent ofArabian Farms, which produces tableeggs from sites in Saudi Arabia andthe United Arab Emirates. The Al Kharjfarm, about 30 km south of Riyadh,covers 40 hectares of fully-owned land.The UAE branch, at Lehbab on theHattat-Oman road, is a long-leaseproperty of 7.2 hectares.The company is currently exploringpotential for expansion to other UAEcities and possibly going into broilerchicken production.Dar Al Fouad Hospital is a tertiaryhealthcare specialist concentrated oncardiology, cardio-thoracic surgery, andorgan transplants. It is headquarteredin Cairo, where it operates a 142-bedhospital, and also has a series ofoutpatient clinics in Kuwait.SEDCO is a lead investor in Dar AlFouad Hospital with a 26.5 percentstake, along with the World Bank’sInternational Finance Corporation,Kuwait Investment Authority, NationalBank of Egypt, Bank of Cairo, andEgyptian National Insurance Company.Dar Al Fouad Hospital was the firsthealthcare provider in Egypt to beaccredited by Joint CommissionInternational, the global ‘gold standard’of healthcare quality, a status thatit has now maintained for threesuccessive years.A second facility is planned in Cairothat will have 158 beds. The first phaseof construction began in May 2012 andthe entire project is due for completionby December 2014.It consists of three basement levels,ground floor, and eight upper storeys– accommodating a five-star hospitalwith five operating theatres anda medical tower containing 220physician clinics.Construction of an Oncology Centreat the main Cairo hospital has beenapproved, with completion scheduledfor January 2014. The new buildingwill be annexed to the existing mainbuilding and will have a working areaof 3,500 m², spread over four floors andaccommodating 31 beds and 17 clinics.The Cairo hospital exceeded budgetsignificantly during 2012 and operatedat more than 90 percent of capacitythroughout the year. Revenue andearnings showed double-digit growthand the total number of employees(including doctors, nurses andadministrators) increased from1,300 to 1,400.CNA is a Singapore based mastersystems integrator for building andfacilities management, and is also amechanical engineering specialist.SEDCO holds a 14.8 percent stake inCNA and has one seat on the Board. Thecompany was listed on SESDAQ in 2005and upgraded to the main board in 2007.The company serves clients acrossAsia and has direct presence in China,Vietnam and the Middle East, extendingits international reach independently orin collaboration with strategic partners.In 2012, the economic slowdownin most territories arising from theongoing problems in the Eurozone andthe American economies continued toaffect CNA’s regional business activities,resulting in a 21.7 percent drop inrevenue. However, the group believesit is well placed to capitalize onopportunities in the aviation andindustrial segment, as well as in thetransport and water infrastructuresegments where it has niche expertise.Apart from continuing to grow itskey markets in Singapore, Thailand,Vietnam, China, and the Middle East,CNA has established a presence inIndonesia and Philippines, and expectsthem to contribute in the second halfof 2013 and beyond.Green Packet is an informationtechnology and communicationscompany headquartered and stockexchange listed in Malaysia, withoperations in North and South America,the Far East, the Middle East, andEurope. The company is a leading playerin next-generation mobile broadbandand networking. SEDCO holds a 5.1percent share in Green Packet and isrepresented with a seat on its Board.In 2012, Green Packet recorded itshighest earnings since being establishedand posted its fifth successive growthquarter. Subscribers passed the 500,000target for the year, growing by 33 percentto 517,000. Average revenue per useralso grew significantly. The company iscontinuing to invest in network expansion,launching 4G broadband in suburbanareas and entering the East Malaysianmarket where it is aiming to reachat least 70 percent of households.Green Packet’s solutions business isalso expanding steadily, with devicesand software deployed in more than 65countries and operator trials for LTE+WiMAX now under way throughout LatinAmerica, North America, South EastAsia, Europe, and the Middle East.CNA Group, revenue by geography2%17%1%56%24%SingaporeChinaMiddle EastVietnamOther countriesGreen Packet, revenue MYR ‘000201220112010393,9682009 217,8152008 87,495588,600538,52638 Annual Review 2012 39

Saudi ArabiaAn extensive portfolio comprisescommercial, residential, andindustrial properties as well asa substantial land bank.AmericaHoldings in the USA range fromspecialized office space to ahospital and residential units.EuropePrime buildings in severalEuropean capitals form the coreof a portfolio that extends to morethan a dozen countries.Far East and IndiaFrom tower apartments Malaysiato a technology park in India,assets are highly diversified byterritory and usage.MENA RegionDeveloped buildings and vacantland are held across the region,from Morocco and Lebanon, toBahrain and the UAE.Business Review 2012Real Estate40 Annual Review 2012 41

Business Review 2012 / Real Estate – Saudi ArabiaSEDCO owns a large and diversifiedportfolio of real estate in Saudi Arabia– shopping malls, hotels, apartmentblocks, office buildings, industrialunits, and significant areas of primedevelopment land across the Kingdom.Mixed-use and RetailRed Sea Mall, JeddahRed Sea Mall is one of the largestmixed-use retail developments in SaudiArabia with a built area of 242,200 m². Thislandmark property comprises a majorshopping mall, a five-star Elaf hotel,and SEDCO’s headquarters office tower.The mall is strategically situated in anaffluent area of north Jeddah, close tothe city’s beautiful corniche, internationalairport, and many of its commercial,leisure, and hospitality venues. Red SeaMall is 49.5 percent owned by SEDCOHolding and managed by Eimar Arabia,a wholly-owned SEDCO subsidiary.SEDCO conceptualized, planned anddeveloped Red Sea Mall and its grandopening took place in March 2008. Itquickly became the premier lifestyledestination in Jeddah and, today, it isalso the city’s entertainment hub, withmany family-oriented attractions –from rides, games, and thrills forchildren, to bazaars featuring craftshops and specialty dining.Galleria, JeddahCurrently under construction in Jeddah’sPrince Mohammed Bin Abdulaziz Street(commonly known as Tahlia Street),Galleria combines an upscale retail malland a five-star hotel, totaling 79,329 m²of built area on a site of 8,740 m².The development consists of eight stories,three basement levels, a 365 roomfive-star hotel, retail units, restaurants,and assembly rooms. The award-winningarchitectural design features a classicalfacade that encloses a contemporary core.SEDCO is a co-investor in this project,which is being developed by SEDCODevelopment. Another group company,Elaf Group, will manage the hotel.Al Nakheel Center, JeddahLocated at the corner of MadinahRoad and Falasteen Street in Jeddah’sAl-Mosaedyah district, Al Nakheel Centercomprises two office buildings supportedby a retail complex fully-owned bySEDCO. Total built area extends to25,417 m² on a site of 15,437 m².Al Mahmal Center, JeddahSEDCO developed the Al Mahmal Centerin central Jeddah and is co-investor inthe shopping complex that pioneerednew concepts in organized retailingwhen it opened in 1985.With more than 35,000 m² of built area,Al Mahmal Center has a good mix ofretailers – from luxury goods to massconsumer products, casual dining, andfast-food outlets. The seven-storystructure is connected to the adjoiningoffice tower by an elevated walkway.Al Khaimah Commercial Center(Tent Souk), JeddahSEDCO is a co-investor in Al KhaimahCommercial Center, with 50 percentownership of the mixed-retail complexthat occupies a 49,602 m² site onKing Khaled Road in Jeddah’s AlHandawia district.Al Sabeel Retail, JeddahThe Al Sabeel shopping center iswholly-owned by SEDCO and located ona site of 2,483 m² close to Makkah Roadin Jeddah’s Al Sabeel district.Al Sabeel, JeddahThis mixed-use development comprisesa petrol station, warehouse, and officesand is located on a 5,100 m² site on thecorner of Old Makkah Road and KingFahad Road.HospitalityElaf Kinda, MakkahLocated close to the Holy Haram, thisfive-star hotel property is wholly-ownedby SEDCO and operated by the group’stourism, travel, and hotels subsidiary,Elaf Group.A range of single and double rooms anddeluxe suites are elegantly decorated andfurnished in a modern contemporarystyle, having recently been renovated.The hotel also offers four restaurantsand a range of other facilities to enhancevisitors’ experience as they visit theKingdom’s holy sites.Elaf Al Sud, MakkahOnly five minutes’ walk from the HolyHaram, the four-star Elaf Al Sud has204 rooms and suites, providingaccommodation types to meet allrequirements, including VIP suites.SEDCO is a co-investor in the property.The hotel is linked to the Holy Haramby an underground passage and alsoprovides a 24-hour shuttle bus servicefor pilgrims.An extensive range of restaurantsand coffee shops can cater for formalfunctions or serve as casual meetingspots. The main facilities canaccommodate more than 150 peopleand offer a variety of oriental andinternational cuisine. Smaller venuesserve groups or individuals according totheir particular needs. A fully-equippedmultifunction conference room seatsup to 100 guests, with exclusivecatering facilities.Elaf Bakkah, MakkahCurrently under construction in theMahbas Al-Jin district of Makkah, nearthe Mena Road, this 15-story hotel willhave 810 keys, a prayer area, retailoutlets, and two floors of parking.Guest facilities include a mezzaninelevelcoffee shop, and a full-servicerestaurant on the first floor.The development is wholly owned bySEDCO and will be managed by Elaf.Total built area will extend to 60,000 m²on a site of 3,651 m².ResidentialAl Mojama Building, JeddahFully-owned by SEDCO and comprisingserviced apartments and strip retail,Al Mojama occupies a site of 2,508 m²at the corner of King Abddulaziz Roadand Salahuddin Road in the Al Baladarea of Jeddah.Al Bairoti Building, JeddahA mix of residential units with a smallretail component, Al Bairoti has builtarea of 13,793 m² on a 2,755 m² siteon Jeddah’s Old Makkah Road. Theproperty is wholly-owned by SEDCO.Al Soror Building, JeddahAl Soror is located close to Al Bairotiin downtown Jeddah and has a similarmix of residential and retail tenants.Built area amounts to 15,800 m² ona site of 3,744 m².42 Annual Review 2012 43

Business Review 2012 / Real Estate – International continuedMedia Square, Brussels, BelgiumMedia Square is a multi-tenantedand income-generating office propertyin the Belgian capital that has beenowned by SEDCO since 2005.Panorama Shopping, Parma, ItalyPanorama is a shopping center inthe Italian region of Emilia-Romagna,anchored by a leading supermarketwith the balance of the space occupiedby complementary retailers. SEDCOhas owned the income-generatingproperty since 2004.Germany FundsTwo investment funds in Germany(SEDCO has a majority stake in oneof them) hold diversified portfolios ofincome-generating properties. Theseinclude a concentration of mixed-useassets in the Berlin area.Euro Commercial Property I(NORIBA), GermanyThis fund owns six income-generatingbuildings in Germany, SEDCOinvested in 2004 and fully leasedto Deutsche Telekom.EURX Properties Fund, LuxembourgSEDCO has a strategic stake inthis fund that controls 26 incomegeneratingretail and office propertiesin 11 countries. SEDCO has held thisinvestment since 2006 and now plansan orderly realization of profits overthe next three years.Al-Hareth French Property FundThis is a fund investment by SEDCO,consisting of five income-generatingand multi-tenanted properties nearParis, invested in 2005.Far East and IndiaGrand Central, Dalian, ChinaSEDCO acquired the mixed-use GrandCentral property in 2008 as a capitalgain investment. It comprises a sitearea of more than 21,000 m² and110,000 m² of offices, retail space, andserviced apartments. The investmenthas been restructured and a partialexit completed.Guidance-CBRE China FundSEDCO holds limited partnership rightsin the fund, which is developing multiplemid-market residential propertiesand other real estate investmentopportunities in China. The fund hasperformed well and returned substantialcapital growth from several projects.Limetree Beachfront Land Fund:Thailand, Cambodia, Vietnam, AustraliaSEDCO holds limited partnershiprights in this fund that is acquiringbeachfront sites in the Asia-Pacificregion with potential for hotel, resort,and villa development. Value is addedby improving access, zoning, andmaster planning. The fund manageris currently assessing further sitesin Indonesia and Sri Lanka.Somerset Serviced Apartments,Kuala Lumpur, MalaysiaSEDCO acquired a strategic stake inthis prime residential property in 2006.Located in the Malaysian capital’s busyBukit Bintang shopping district, it offersshort-stay and long-stay accommodationto business and leisure customers.Bearys, Bangalore, IndiaBearys Global Research Triangle isa Platinum LEED-certified informationtechnology and research parkdevelopment acquired by SEDCO asa capital gain investment over 2007-09.This project of more than 100,000 m²is now completed and leased to amultinational tenant. SEDCO expects toexit the investment in the near future.Zonah’s Pearl Valley Project,Hyderabad, IndiaSEDCO holds a strategic stake in the landsub-division development that will offerindependent housing plots. The markethas been hit by the financial crisis andpolitical turmoil in the state of AndhraPradesh. The development is currently onhold and sales will resume when marketconditions improve, although projectedreturns are still very positive.Danat India FundSEDCO holds limited partnershiprights in the fund that is developingan integrated middle-income townshipin Noida, near New Delhi. The Gulfheadquarteredfund managers anddevelopment partner are currentlyproceeding with the first phase ofinfrastructure works.GCC Region and LevantEstral Office Building, Beirut, LebanonSEDCO acquired a strategic stake in thenine-story mixed-use building in 1996.Revaluation of the property is expectedto result in increased market value andSEDCO plans to exit the investment,having achieved very satisfactoryreturns over a 17-year period.Broadway Office Building, Beirut,LebanonSEDCO has held a strategic stake in thismixed-use and multi-tenanted propertysince 1996. The 10-story building in theAl Hamra district of the Lebanese capitalhas ground floor shopping with thebalance residential apartments.Land bank, LebanonSEDCO owns a land bank in theAramon, Ras Beirut, and Bhamdoundistricts with total area of 307,595 m².The land is close to Beirut InternationalAirport overlooking the sea. A salesprogram began in 2011 and willcontinue until full exit is completed.Land bank, United Arab EmiratesSEDCO owns plots in Sharjah’s Al Nahdadistrict. It has also owned land on theRas Al Khaimah corniche since 2006,which forms part of a major governmentdevelopment plan involving resorts,hotels, and residential units.Bahrain Bay, BahrainThis is a fund investment by SEDCOto undertake infrastructure and landreclamation project in 2005. Land saleshave already yielded distributions.MENA Serviced Apartments, GCCSEDCO has invested in a MENAServiced Apartment fund to developand operate serviced apartmentsin the MENA region.Gateway to Morocco, MoroccoIn 2007 SEDCO invested with GulfFinance House (GFH) in the RoyalRanches Marrakech fund to developland of 380 hectares in Marrakech asa mixed-used development. 45 percentof the infrastructure work has beencompleted. However, due to the globaleconomic slowdown, the strategy forthe project is being revised.46 Annual Review 2012 47

Public EquityPublic equity portfolios spanthe globe and are managed usingpassive and active approaches.From developed to emergingmarkets, strategies appropriate toeach region and investment classadhere to guidelines that havebeen fine-tuned by managersand Islamic scholars.Private EquityPrivate equity is globally diversifiedby region, business sector,management style, and investmentclass. Primary funds and directco-investments that are in growthor expansion are the main focus,as well as new opportunities inagriculture and alternative energy.Business Review 2012FinancialInvestments48 Annual Review 2012 49

Business Review 2012 / Financial InvestmentsSEDCO’s growth in financial investment has followed animpressive trajectory in terms of scale and performance –consistently out-performing benchmark indices in the publicequity and private equity segments.SEDCO’s heritage in successfulmanagement of financial investmentsis even older than the company itself,dating back to the business origins ofits founder. The late Sheikh Salem BinMahfouz, who established SEDCO in1976, had already established SaudiArabia’s first domestic bank, theNational Commercial Bank (NCB),23 years earlier.With the formation of SEDCO Capitalin 2010, the launch pad was created forthe next phase of sustainable growth– geographically and by product class.Today, SEDCO Capital is mandated tomanage the financial assets of itsparent company, SEDCO Holding.Public EquitySEDCO was one of the first toinvest in Shariah-compliant equitiesglobally, having refined the guidelinesin common use in collaboration withIslamic scholars and several otherinstitutions. We also collaboratedwith Dow Jones to make availablethe extensive family of Islamic indicesused by the industry to benchmarkShariah-compliant equity managers.Maintaining a tactically overweightposition to the US, in a year duringwhich the DJIM (Dow Jones Islamic)index returned 10.91 percent, helpedthe performance of our overall portfolio.We have in place five selectedstrategies for investing in differentregions, including US, Global, HighDividend Yield, emerging marketsand global REITs.Towards the end of 2012, we addedtwo new names to our list of fundmanagers who will offer new strategiesfor investing in Emerging Marketsand Asia Pacific.Our investment philosophy is foundedon an ability to identify superiormanagers, as well as adding valuethrough global asset allocation. Weremain well placed to maintain thisapproach by leveraging more than 18years’ experience in identifying andmanaging top tier managers. The valueof these relationships to the firm hasbecome more significant than ever andis central to our investment philosophy.Private EquityWe continue to diversify SEDCOCapital’s private equity programglobally and across diverse industries,manager styles, and investmentclasses, investing in primary fundsand direct co-investments at thegrowth or expansion stage.During 2012 we explored newopportunities in agriculture, alternativeenergy, and healthcare, and madeseveral co-investments with leadinginternational private equity managers.We invested in diversified sectors asco-managers of the SEDCO CapitalPartners Group Opportunities Fund,which received the award for ‘BestNew Private Equity Fund’ at the 2011Private Equity World MENA Awardsceremony, held in Dubai.As of 31 December 2012, on an inceptionto date basis, the private equity programhas generated a total multiple of 1.3xand a realized multiple of 2.4x. During2012, the program made several exitsfrom underlying portfolio companiesof both the growth and venture capitalprograms that we manage across theglobe. As of 31 December, the growthprogram, which focuses on the growthand expansion stage of companies,generated a total multiple of 1.6x anda realized multiple of 2.6.Continuing close cooperation witha group of top-decile private equitymanagers in developed and emergingmarkets has helped us identify andmanage private equity investmentsglobally. Our team has evaluated morethan 100 private equity managers torefine the optimum investment strategyagainst the prevailing economic andinvestment conditions. The firm’sdiligent approach to partnering withthe very best managers placesSEDCO in a strong position to meetfuture challenges.50 Annual Review 2012 51

Corporate Social ResponsibilityThe most important program undertaken in 2012 was thedevelopment and launch of the Riyali financial literacy program.Riyali uses a series of interactive workshops that bring about achange in youth behavior in financial planning and responsibility.Ultimately, the goal is to create a difference in their overallspending and saving habits.SEDCO Holding is committed tosupporting the welfare and developmentof individuals and communities acrossSaudi Arabia and invests in a range ofcorporate social responsibility activities,recognizing that business successbrings a responsibility to contributeto the advancing economic and socialdevelopment of communities whereit has a presence.SEDCO’s social responsibility effortsfocus on serving its employees, thesectors it operates in, the environment,and the broader community.Group companies make a very positiveimpact on many aspects of Saudisociety, and internally, SEDCO’scommitment to sustainability takesdiverse forms. Externally, the companyseeks to propagate the values andprinciples adhered to in its ownbusiness dealings. As an Islamicprivate wealth management company,SEDCO is strictly observant of Shariahguidelines in all its transactions, whilefurthering global understanding ofSaudi society’s cultural values.The most important programundertaken in 2012 was thedevelopment and launch of the Riyalifinancial literacy program. Nationwideresearch conducted by SEDCO hashighlighted a significant need forfinancial education. Results show thatonly 11 percent of the Kingdom’s youthkeeps track of their spending and 80percent of income goes on mobilephones and travel.About 46 percent rely on parentsfor funding big purchases. About 45percent do not save any money at all,while only 20 percent save 10 percentof their monthly income.In response, Riyali aims to equipupcoming generations with the skillsto manage their personal income. Overthe next five years, it will reach 50,000people – transferring crucial knowledgeto 15,000 students in the first stagealone. Riyali uses a series of interactiveworkshops that bring about a changein youth behavior in financial planningand responsibility. Ultimately, the goalis to create a difference in their overallspending and saving habits. In 2012,the Riyali program was commencedin four universities in Jeddah, reaching1,000 students.SEDCO volunteers serve as theprogram’s ambassadors to trainstudents through a curriculum focusedon basic savings, budgeting, investing,and borrowing. Sessions are evaluatedimmediately on completion, withstudents tested on how well they haveabsorbed the knowledge shared duringthe course. Results in 2012 showencouraging success in changingfinancial behavior.In developing the program, SEDCOpartnered with Operation Hope, aleading global non-profit organizationfounded in 1992 to expand economicopportunity through financial literacyeducation. To date, Operation Hopehas served more than two millionpeople in the USA, Haiti, South Africa,and Morocco.SEDCO Capital, the Group’s investmentand wealth management company, hasalso contributed to the developmentof Riyali by helping to construct thecurriculum. Its staff will be the mainsource of ambassadors who will giveparticipants the benefit of theirexpertise in the same way that theyadvise companies and corporations,but adapted for financial managementat a personal level.Leading educational institutions,including King Abdulaziz University,Effat University, Dar Al Hekma College,and the University of Business andTechnology, were strategic partners in2012 and there are promising signs forpartnering with other institutions acrossthe Kingdom in the years to come.52 Annual Review 2012 53