Prospectus Dallah Healthcare Holding Company

Transcription

1 This prospectus is for the purpose of submission to institutional investors in a book-building exercise and does not contain the offering price. The Publication of the final prospectus will include the offering price after the completion of the book-building exercise and the offering price has been determined. Prospectus Dallah Healthcare Holding Company Offering of 14,200,000 new ordinary shares at SAR [ ] per Share representing 30.1% of the post-offering share capital of Dallah Healthcare Holding Company A Saudi joint stock company with Commercial Registration No dated 13/4/1415H (corresponding to 19/09/1994G) and Ministerial Resolution No. 341/J dated 19/10/1429 H (19/10/2008G) Offering period: from 5/01/1434H (corresponding to 19/11/2012G) to 11/01/1434H (corresponding to 25/11/2012G) ( Offering Period ) Dallah Healthcare Holding Company was established as a Saudi joint stock company with commercial registration no dated 13/4/1415H (hereinafter referred to as DHHC or the Company ). The Company was established in Jeddah on 30/09/1414H (corresponding to 13/03/1994G) as a limited liability company with commercial registration no on 30/09/1414 H. The Company was established with cash capital of SAR 395,000,000 divided into 395,000 shares with a par value of SAR 1,000 per share. At the time of its establishment, Dallah Group owned 99% of its capital while the remaining 1% of the Company's capital was owned by Mr. Saleh Abdullah Kamel. Dallah Hospital ( The Hospital ) was established in 1987G as a sole proprietorship by Mr. Saleh Abdullah Kamel. The Hospital's assets and investments were sold to the Company at their net book value of SAR 295,000,000. For more information on the sale, please see section 4.1 and Table 18 of the Prospectus. On 12/11/1414H (corresponding to 23/04/1994G), a resolution was issued by the Company s shareholders to move DHHC s headquarters to Riyadh. Accordingly, the Company was assigned a new commercial registration no on 13/04/1415H (the Commercial Registration ). On 17/03/1415H (corresponding to 24/08/1994G), the shareholders decided to reduce the capital from SAR 395,000,000 to SAR 295,000,000 because it was deemed to be in excess of the Company s requirements by reducing the number of shares from 395,000 to 295,000 with the par value of SAR 1,000 each. On 20/08/1419H (corresponding to 09/12/1998G), the Company's capital was reduced from two SAR 295,000,000 to SAR 123,000,000 by transferring ownership of the Hospital's land, valued at SAR 172,000,000, from the Company to Mr. Saleh Abdullah Kamel in order to allow Mr. Saleh Abdullah Kamel to pledge it as collateral in order to obtain bank facilities for Dallah Group. In return, shareholding of Dallah Group and Mr. Saleh Abdullah Kamel was reduced in the Company. On 07/09/1426H (corresponding to 10/10/2005G), the shareholders decided to increase the capital from SAR 123,000,000 to SAR 148,000,000 through capitalization of retained earnings of SAR 25,000,000 and reduce par value of shares to SAR 50. Dallah Group also granted some of its shares in the Company to Mr. Abdullah Saleh Kamel, Aseer Company for Trade, Tourism, Industry, Agriculture, Real Estate and Contracting ( Aseer ), Eng. Tarek Othman Alqasabi and Dr. Mohammad Rashed Alfaqih. On 14/05/1429H (corresponding to 20/05/2008G), the shareholders decided to convert the Company from a limited liability company into a closed joint stock company and change its name to Dallah Healthcare Holding Company. Approval was granted to convert the Company into a closed joint stock company as per Ministerial Resolution No. 341/J on 19/10/1429 H (corresponding to 19/10/2008G). On 11/03/1432H (corresponding to 14/02/2011G), the Company s shareholders decided to increase its capital from SAR 148,000,000 to SAR 330,000,000 through two transactions. First one involved issuance of shares worth SAR 120,000,000 to Mr. Saleh Abdullah Kamel representing difference in the value of non-operational lands transferred from DHHC to Mr. Saleh Abdullah Kamel and operational lands transferred from Mr. Saleh Abdullah Kamel to DHHC. This difference was SAR 117,853,600, or the equivalent of 11,785,360 shares valued at SAR 10 per share. In addition, 214,640 shares with a nominal value of SAR 10.0 each (equivalent to SAR 2,146,400) were awarded to shareholders upon shareholders agreement so the total capital of the company would become a whole number in order to avoid issuance of fractional shares in the future. Second transaction involved increasing capital of the Company by issuing one share for every 2.39 shares through capitalization of SAR 30,385,058 from statutory reserves and SAR 31,614,942 from retained earnings in order to increase the capital from SAR 268,000,000 to SAR 330,000,000. For more information, please refer to Section 4.10 of the Prospectus. The shareholders also agreed on 17/3/1432H (corresponding to 20/2/2011G) that Mr. Saleh Abdullah Kamel would grant some of his shares to other shareholders in order to keep shareholding same as that before 11/03/1432H (corresponding to 14/42011G). The Company has completed all necessary procedures in relation to the transfer of lands as per the shareholders resolution dated S11/03/1432H (corresponding to 11/02/2011G) and agreement dated 17/03/1432H (corresponding to 20/02/2011G). More information on changes in capital are available in Table 18 and Section 4.1 of the Prospectus. On 31 December 2011G, the Company received SAR 8.7 million as compensation from current shareholders for the use of the Company s property in Shatee District of Jeddah and SAR 2.2 million for shares granted to Mr. Saleh Abdullah Kamel at the time of the capital increase on 11/03/1432H (corresponding to 14/02/2011G). These actions were approved by general assembly on 25/06/1433H (corresponding to 16/05/2012G). It was agreed to increase the capital from SAR 330,000,000 SAR 472,000,000 during the extraordinary general assembly meeting held on 25/06/1433H (16/05/2012), by issuing 14,200,000 new shares through initial public offering representing 30.1% of the post-offering share capital of the Company with the current shareholders waiving their priority rights in this regard. The public offering of the Company s shares ( the Offering ) consists of issuing 14,200,000 ordinary shares ( Offer Shares ), with each ( Offer Price ) nominally valued at SAR 10 per share. The subscription price will be SAR [] per share. The Offer Shares would represent 30.1% of Company s capital after the increase. The Offering is directed at and may be accepted by: ehcnart (A): Institutional Investors: including a number of institutions that were approached by the Lead Manager after consulting with the Company and its current shareholders and based on certain criteria set forth by the Capital Market Authority ( CMA ). Institutional Investors are initially allocated 14,200,000 shares representing 100% of the Offer Shares for the public. The Lead Manager has the right to reduce the allocated shares to 7,100,000 shares representing 50% of the Offer Shares for the public in the event there is sufficient demand by Individuals (as defined in Tranche (B) below) subject to CMA s consent. Tranche (B): Individual Investors: including Saudi nationals. A Saudi woman who is divorced or widowed and has children from a non-saudi husband may subscribe for Offer Shares in the name(s) of her children who are minors provided they submit the proof that they are divorced or widowed and the proof of maternity of their minor children. Should an individual subscribe on behalf of his divorcee, his application shall be void and legal action may be taken against such a person. Individuals are allocated a maximum of 7,100,000 shares representing 50% of the Offer Shares for the public. In the case where the subscription by individuals is less than the maximum allocated shares, the Lead Manager has the right to reduce the number of Offer Shares allocated to individuals to match the number of shares subscribed for, after obtaining CMA s consent. 14,200, 000 Offer Shares will be issued representing 30.1% of the Company s capital after the increase as per shareholders resolution issued during the extraordinary general assembly meeting held on * + H (* +G). Upon completion of the Offering, the Company will have a total of 47,200,000 issued shares. The current shareholders will collectively own 69.9% of the Company's shares (or 33,000,000 shares) after the Offering and will consequently retain a controlling interest in the Company. Net proceeds from the Offering will be used to finance the Company s planned expansion. The current shareholders will not receive any proceeds from the Offering (please refer to Section 10, Use of Proceeds ). The Offering is fully underwritten (please refer to Underwriting section). The Offering will commence on 5/01/1434H (corresponding to 19/11/2012G) and will remain open for a period of 7 days up to and including 11/01/1434H (corresponding to 25/11/2012G) (the Offering Period ). Subscription to the Offer Shares can be made through branches of each of the selling agents (the Selling Agents ) during the Offering Period. Institutional Investors may also subscribe during the Offering Period. Each individual subscriber to the Offer Shares (the Subscriber and collectively referred to as the Subscribers ) must apply for a minimum of 10 Offer Shares. Each Subscriber may not apply for more than 250,000 Offer Shares. The minimum allocation per Subscriber is 10 Offer Shares, and the balance of the Offer Shares (if available) will be allocated on a pro-rata basis. In the event that the number of Subscribers exceeds 710,000, the Company will not guarantee the minimum allocation of 10 Offer Shares per Subscriber, and the Offer Shares will be allocated equally between all Subscribers. If the number of Subscribers exceeds 7,100,000, the allocation will be determined at the discretion of the Capital Market Authority ( CMA ). Excess of subscription monies, if any, will be refunded to Subscribers without any charge or withholding by the Lead Manager or Selling Agents. Notification of the final allotment and refund of subscription monies, if any, will be made by 18/01/1434H (corresponding to02/12/2012g) (see Subscription Terms and Conditions Allocation and Refund ) The Company has a single class of shares and no shareholder has preferential rights over other shareholders. Each Share entitles the holder to one vote and each shareholder (the Shareholder ) with at least 20 Shares has the right to attend and vote at the general assembly meeting (the General Assembly Meeting ). The Offer Shares will be entitled to receive dividends declared by the Company after the Offering Period and for subsequent fiscal years (see Dividend Policy section). Prior to the Offering, there has been no public market for the Shares in Saudi Arabia or elsewhere. An application has been made to the CMA for the admission of the Shares to the Official List and all relevant approvals pertaining to this Prospectus and all other supporting documents requested by the CMA have been granted. Trading in the Shares is expected to commence on the Exchange soon after the final allocation of the Shares (See Key Dates for Subscribers section). Subsequent to Shares commencing trading, Saudi and Gulf Cooperation Council ( GCC ) nationals, foreigners who are permanent residents in the Kingdom, companies, banks and Saudi and Gulf funds will be permitted to trade in the Shares. The Important Notice and Risk Factors sections in this Prospectus should be considered carefully prior to making an investment decision in the Offer Shares hereby. Financial Advisor, Bookrunner, Lead Manager and Sole Underwriter Selling Agents This Prospectus includes details given in compliance with the Listing Rules of the Capital Market Authority of Saudi Arabia ( CMA or the "Authority"). The directors, whose names appear on page iii; collectively and individually accept full responsibility for the accuracy of the information contained in this Prospectus and confirm, having made all reasonable enquiries that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading. The Authority and the Saudi Arabian Stock Exchange take no responsibility for the contents of this document, make no representations as to its accuracy or completeness, and expressly disclaim any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this document. This Prospectus was issued on * + H (corresponding to * +) English Translation of the Official Arabic Language Prospectus

2 IMPORTANT NOTICE This Prospectus provides full details of information relating to Dallah Healthcare Holding Company and the Offer Shares being offered. In applying for Offer Shares, Subscribers will be treated as applying only on the basis of the information contained in the Prospectus, copies of which are available for collection from the Company or the Selling Agents, or from the Company s website ( or the CMA s website ( or the Financial Advisor s website ( The Company has appointed Samba Capital & Investment Management Company as financial advisor ( Samba Capital or the Financial Advisor ), sole underwriter (the Sole Underwriter ) and lead manager ( Lead Manager ), solely for the purpose of the Offering described herein. This Prospectus includes details given in compliance with the Listing Rules set forth by the CMA. The directors of the Company (the Directors ), whose names appear on page iii, collectively and individually accept full responsibility for the accuracy of the information contained in this Prospectus and confirm, having made all reasonable inquiries, that, to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading. The CMA and the Saudi Arabian Stock Exchange take no responsibility for the contents of this document, make no representations as to its accuracy or completeness, and expressly disclaim any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this document. While the Company has made all reasonable inquiries as to the accuracy of the information contained in this Prospectus as at the date hereof, substantial portions of the market and industry information herein are derived from external sources, and while neither the Company, nor the Directors, nor any of the Advisors has any reason to believe that any of the market and industry information is materially inaccurate, such information has not been independently verified and no representation is made with respect to the accuracy or completeness of any of this information. The information contained in this Prospectus as of the date hereof is subject to change. In particular, the actual financial state of the Company and the value of the Offer Shares may be adversely affected by future developments in inflation, interest rates, taxation, or other factors, including, but not limited to, economic and political events and other factors over which the Company has no control. Neither the delivery of this Prospectus nor any oral, written or printed information in relation to the Offer Shares is intended to be, or should be construed as or relied upon in any way as, a promise or representation as to future earnings, results or events. The Prospectus is not to be regarded as a recommendation on the part of the Company, the Directors, the Pre-Offering Shareholders, Samba Capital, or any of the Selling Agents or persons connected thereto to participate in the Offering. Moreover, information provided in this Prospectus is of a general nature and has been prepared without taking into account an individual's investment objectives, financial situation or particular investment needs. Prior to making an investment decision, each recipient of this Prospectus is responsible for obtaining independent professional advice in relation to the Offering and for considering the appropriateness of the information herein with regard to individual objectives, financial situations and needs. The Offering is being made to, and is only capable of acceptance by, natural persons who are nationals of Saudi Arabia and institutional investors. A divorced or widowed Saudi female with children from a non-saudi husband can also subscribe on behalf of her children who are minor to the benefit of her account, provided that she presents sufficient supporting documents proving her marital status and her custody of their children. The distribution of this Prospectus and the sale of the Offer Shares to any other persons or in any other jurisdiction is expressly prohibited. All recipients of this Prospectus are required to inform themselves about the subscription process and to observe all such restrictions. I

3 INDUSTRY AND MARKET DATA The source of the industry and market information contained in this Prospectus is the report prepared by Roland Berger Middle East. The Market Consultant is an independent consulting firm that was established in Munich in 1967 as international marketing and consultantancy services provider. The Market Consultant does not itself, nor do any of its affiliates, shareholders, directors or their relatives, hold any shareholding or interest of any kind in the Company. The Market Consultant has given and not withdrawn its written consent to the publication of its information and statements included in the form and context as they appear in the Prospectus. It is believed that such information, sources and estimates are authentic and the Company exerted reasonable efforts to verify such sources. FINANCIAL INFORMATION The pro-forma financial statements as at and for the financial years ended 31 December 2009, 2008 and 2007 and notes thereto as prepared by Ernst & Young and the Company s audited financial statements for the financial years ended 31 December 2010, 2011 and for the 6-month periods ended June 2011 and 2012 and notes thereto as prepared by PricewaterhouseCoopers and included in this Prospectus have been prepared in conformity with the Saudi Organization for Certified Public Accountants ( SOCPA ) Generally Accepted Accounting Principles. The Company publishes its financial statements in Saudi Arabian Riyals. FORECASTS AND FORWARD LOOKING STATEMENTS Forecasts set forth in this Prospectus have been prepared on the basis of certain stated assumptions. Future operating conditions may differ from the assumptions used and consequently no representation or warranty is made with respect to the accuracy or completeness of any of these forecasts. Certain statements in this Prospectus constitute forward-looking-statements. Such statements can generally be identified by their use of forward-looking words such as plans, estimates, believes, expects, anticipates, may, will, should, expected, would be or the negative or other variation of such terms or comparable terminology. These forward-looking statements reflect the current views of the Company with respect to future events, and are not a guarantee of future performance. Many factors could cause the actual results, performance or achievements of the Company to be significantly different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. Some of the risks and factors that could have such an effect are described in more detail in other sections of this Prospectus (see Risk Factors section). Should any one or more of the risks or uncertainties materialize or any underlying assumptions prove to be inaccurate or incorrect, actual results may vary materially from those described in this Prospectus as anticipated, believed, estimated, planned or expected. Subject to the requirements of the Listing Rules, the Company must submit a supplementary Prospectus to the CMA if at any time after the Prospectus has been approved by the CMA and before admission to the Official List, the Company becomes aware that (1) there has been a significant change in material information contained in the Prospectus or any document required by the Listing Rules, or (2) additional significant matters have become known which would have been required to be included in the Prospectus. Except in the aforementioned circumstances, the Company does not intend to update or otherwise revise any industry or market information in this Prospectus, whether as a result of new information, future events or otherwise. As a result of these and other risks, uncertainties and assumptions, the forward looking events and circumstances discussed in this Prospectus might not occur in the way the Company expects, or at all. Prospective investors should consider all forward-looking statements in light of these explanations and should not place undue reliance on forward looking statements. II

4 Corporate Directory Members of the Board of Directors Name Title Status 1. Eng. Tarek Othman Alkasabi Chairman Not Independent Non-Executive 2. Dr. Mohammed Rashid Alfaqih Member Not Independent Executive 3. Mr. Ammar Hasan Kamel Member Not Independent Non-Executive 4. Mr. Mohiuddin Saleh Kamel Member Not Independent Non-Executive 5. Eng. Fahad Siraj Malaika Member Not Independent Non-Executive 6. Dr. Ahmad Saleh Babaeer Member / Chief Executive Officer Not Independent Executive 7. Mr. Fahad Abdullah Algassem Member Independent and Non-Executive 8. Dr. Abdulrahman Abdulaziz Alsuwailem Member Independent and Non-Executive 9. Mr. Fares Ibrahim Alhumaid Member Independent and Non-Executive Address of the Company Dallah Healthcare Holding Company P.O. Box Riyadh Kingdom of Saudi Arabia Tel (966) Fax (966) [email protected] Company s website: Company Representative at the CMA Eng. Tarek Othman Alkasabi Dr. Ahmad Saleh Babaeer Dallah Healthcare Holding Company P.O. Box Riyadh Kingdom of Saudi Arabia Tel (966) Fax (966) Board of Directors Secretary Anas D. Al-Assafi Dallah Healthcare Holding Company P.O. Box Riyadh Kingdom of Saudi Arabia Tel (966) Fax (966) [email protected] [email protected] [email protected] III

5 Share Registrar Company s Key Commercial Banks The Saudi Stock Exchange Company (Tadawul) Abraj Atta awuneya King Fahad Road P.O. Box Riyadh, Kingdom of Saudi Arabia Tel: (966) Fax: (966) E mail: [email protected] Website: Bank Al Jazira Khalid bin Alwalid Street P.O. Box 6277 Jeddah, Kingdom of Saudi Arabia Tel: (966) Fax: (966) Website: Advisors Al Rajhi Bank Olayya Road P.O.Box 28 Riyadh Kingdom of Saudi Arabia Tel: (966) Fax: (966) Website: Financial Advisor, Bookrunner and Lead Manager Legal Advisor to the Issuer Samba Capital & Investment Management Co. Kingdom Center 14th floor P.O. Box Riyadh Kingdom of Saudi Arabia Tel: (966) Fax: (966) Website: Law Office of Abdulaziz H. Al-Fahad Jarir Plaza, 4 th floor, Olaya Street P.O. Box Riyadh Kingdom of Saudi Arabia Tel: (966) Fax: (966) IV

6 Website: Saudi Legal Advisor to the Financial Advisor, Bookrunner, Lead Manager and Underwriter Al-Jadaan & Partners Law Firm PO Box 3515 Riyadh Kingdom of Saudi Arabia Tel: (966) Fax: (966) Website: International Legal Advisor to the Financial Advisor, Bookrunner, Lead Manager and Underwriter Clifford Chance LLP The Gate Precinct Building 6, Level 2 Dubai International Financial Centre PO Box 9380 Dubai, United Arab Emirates Tel: (971) Fax: (971) Website: Financial Due Diligence Advisor KPMG Al Fozan & Al Sadhan. Almoayyed Tower, 21 st Floor P.O.Box Riyadh, Kingdom of Saudi Arabia Tel Fax Website: Market Research Consultant Roland Berger Middle East W.L.L. Almoayyed Tower, 12 th Floor P.O. Box Manama Kingdom of Bahrain Tel: (973) Fax: (973) Website: Registered Auditors V

7 PricewaterhouseCoopers Al Juraid Jameel Square Al Tahliah Street Jeddah Saudi Arabia Tel: (966) Fax: (966) Website: Ernst & Young Al Faisaliah Office Tower P.O. Box 2732 King Fahad Road, Olaya Riyadh Saudi Arabia Phone: (966) Fax: (966) Website: NOTE: All above advisors have given and not withdrawn their written consent to the publication of their names and their statements in the Prospectus; and do not themselves, their employees or any of their relatives have any shareholding or interest of any kind in the Company or any of its affiliates at the date of this Prospectus. Sole Underwriter Samba Capital & Investment Management Co. Kingdom Center 14th floor P.O. Box Riyadh Kingdom of Saudi Arabia Tel: (966) Fax: (966) Website: Selling Agents Samba Financial Group King Abdulaziz Road P.O. Box 833 Riyadh Kingdom of Saudi Arabia Tel: Fax: Website: VI

8 Aljazira Capital Al Madina Road, Al Musadia Commercial Center P.O. Box 6277 Jeddah Kingdom of Saudi Arabia Tel: Website: Riyad Bank King Abdulaziz Road P.O. Box Riyadh Kingdom of Saudi Arabia Tel: Fax: Website: National Commercial Bank (NCB) P.O. Box 3555 Jeddah Kingdom of Saudi Arabia Tel: Fax: Website: Al Rajhi Bank Olaya Road P.O. Box 28 Riyadh Kingdom of Saudi Arabia Tel: Fax: Website: VII

9 Summary of the Terms of Offering Subscription The Company The Company s Activities Total share capital of the Company before the Offering Total share capital of the Company post- Offering Offer Price Offering of 14,200,000 ordinary shares, which represent 30.1% of the share capital of Dallah Healthcare Holding Company post-offering, through initial public offering at SAR [ ] per Offer Share Dallah Healthcare Holding Company is a Saudi joint stock company with commercial registration number , dated 13/04/1415H (corresponding to 19/09/1994G). Operations of DHHC are organized under four business divisions. These are: i) Dallah Hospital; ii) Dallah Pharma; iii) Operations & Management; and iv) Investments. Dallah Hospital provides in-patient and out-patient medical services. Dallah Pharma s activities include wholesale distribution of pharmaceutical, herbal and cosmetic products and Operations & Management division is involved in management and operations of hospitals owned by third-parties. In addition, the Company has several investments within the healthcare industry in Middle East region. SAR 330,000,000 SAR 472,000,000 SAR [ ] per Offer Share Nominal value per Share SAR 10 Number of issued Shares Number of Offer Shares Percentage represented by Offer Shares Total value of Offer Shares Number of Offer Shares to be Underwritten Minimum number of Offer Shares to be Subscribed for by Institutional Investors Minimum number of Offer Shares to be Subscribed for by Individual Investors Nominal value of minimum subscription amount by Institutional Investors Nominal value of minimum subscription amount by Individual Investors Maximum number of Offer Shares to be [ ] Shares 14,200,000 Shares The Offer Shares will represent 30.1% of the Company's issued share capital post- Offering. SAR [ ] 14,200,000 Offer Shares 100,000 Offer Shares 10 Offer Shares SAR [ ] SAR [ ] 2,359,999 Offer Shares. VIII

10 subscribed for by Institutional Investors Maximum number of Offer Shares to be subscribed for by Individual Investors Nominal value of maximum subscription amount by Institutional Investors Nominal value of maximum subscription amount by Individual Investors Use of proceeds Allocation of Offer Shares [ ] Offer Shares. SAR [ ] SAR [ ]. After deducting the Offering expenses of approximately [ ], an amount of SAR [ ] of the net proceeds from the Offering will be used for the development of West Riyadh Hospital. Any excess will be used for general corporate purposes. For further information refer to Section 10 (USE OF PROCEEDS) The Offering will be for 14,200,00 new shares with a nominal value of SAR 10 per share, representing 30.1% of the Company s share capital post-capital increase, at a share price of SAR * + per share. The offering is directed at and may be accepted by the following two investor categories: Tranche (A) Institutional Investors: A group of institutions approached by the Bookrunner after consulting the Company and the Pre-Offering Shareholders with regard to specific special standards set previously by the CMA. Subscribing institutions are allocated 14,200,000 Offer Shares, representing 100% of the Offer Shares. In the event Individual Investors (as defined below under Tranche B) subscribe to Offer Shares, the Bookrunner may reduce the number of shares allocated to Institutional Investor by 50% to 7,100,000 after obtaining the approval of the CMA. Tranche (B) Individual Investors: consisting of Saudi nationals, including a Saudi woman who is divorced or widowed and who has children who are minors from a non- Saudi husband may subscribe for Offer Shares in the name(s) of her children for her benefit given she provides proof that she is widowed or divorced and proof of her motherhood (each a Individual Investor and collectively referred to as the Individual Investors ). The subscription by a person in the name of his divorcee shall be deemed invalid in such cases and the relevant regulations shall be enforced against that person. Subscribing individuals are allocated 7,100,000 Shares representing 50% of the Offer Shares. In the event Individual Investors do not subscribe in the entire amount of allocated shares, the Bookrunner may reduce the number of shares allocated to Individual Investors to match the number of shares that have been subscribed to by Individual Investors, after obtaining the approval of the CMA Excess subscription monies Offering Period Excess subscription monies, if any, will be refunded to Subscribers without any charge or withholding by the Lead Manager or the Selling Agents. Notification of the final allocation and refund of subscription monies, if any, will be made no later than 18/1/1434H (corresponding to 2/12/2012G) (See Section 14, Subscription Terms and conditions ). The Offering will commence on Monday 5/1/1434H (corresponding to 19/11/2012G) and will remain open for a period of 7 days, up to and including 11/1/2012H IX

11 (corresponding to 25/11/2012G) Dividends Voting rights Share restrictions Listing and Registration of Shares Risk factors The Offer Shares will be entitled to receive dividends declared by the Company during 2012 (See Section 8: Dividend Record and Policy). The Company has only one class of Shares and no Shareholder will have any preferential voting rights. Each Share entitles the holder to one vote and each Shareholder holding at least 20 Shares has the right to attend and vote at the General Assembly. The Pre-Offering Shareholders may not dispose of any Shares during the period of six months from the date on which trading of the Offer Shares commences on the Exchange. After the six month restriction period elapses, the Pre-Offering Shareholders may dispose of their Shares only after obtaining CMA approval Prior to the Offering, there has been no public market for the Shares in the Saudi Arabia or elsewhere. An application has been made to the CMA for the admission of the Shares to the Official List, and all relevant approvals pertaining to this Prospectus and all other supporting documents requested by the CMA in addition to all relevant regulatory approvals required to conduct the Offering have been granted. Trading is expected to commence on the Exchange soon after the final allocation of the Shares (See Key Dates for Subscribers on page * ] and Section 14 1, Subscription Terms and conditions ). There are certain risks relating to an investment in the Offer Shares. These risks can broadly be categorized as (a) risks relating to the healthcare industry in Saudi Arabia, (b) risks relating to the Company's operations, and (c) risks relating to the Shares. All Subscribers should carefully review and consider all the information mentioned in Section 2 Expenses Risk Factors prior to making an investment decision in respect of the Offer Shares. The Company shall bear 100% of the costs related to the Offering, which are estimated to amount to approximately SAR [ ], and include the fees for the Financial Advisor, Underwriter, Legal Advisor, Market Consultant and Financial Due Diligence Consultant, in addition to the fees for the Selling Agents, costs of marketing, printing, distribution and other relevant expenses. Shareholders Shareholder Pre-Offering Post-Offering Shares % Capital (SR) Shares % Capital (SR) Dallah Group 24,420, ,200,000 24,420, ,200,000 Tarek Osman Alkasabi 2,475, ,750,000 2,475, ,750,000 Mohammed Rashid Alfagih 2,475, ,750,000 2,475, ,750,000 Abdullah Saleh Kamel 1,650, ,500,000 1,650, ,500,000 Aseer 1,650, ,500,000 1,650, ,500,000 Saleh Abdullah Kamel 330, ,300, , ,300,000 Public ,200, ,200,000 Total 33,000, % 330,000,000 47,200, % 472,000,000 X

12 Key Dates for Subscribers Expected Offering Timetable Offer Period Deadline for submitting applications and payment of subscription monies Notification of final allocation and returning of excess funds (if any) Start date of trading of Offer Shares on Exchange From Monday 5/1/1434H (corresponding to 19/11/2012G) To Sunday 11/1/2012H (corresponding to 25/11/2012G) inclusive Sunday 11/1/2012H (corresponding to 25/11/2012G) 18/1/1434H (corresponding to 2/12/2012G) Upon completion of all relevant procedures. Note: The above timetable and dates therein are indicative. Actual dates will be announced through local press announcements band on Tadawul s website ( How to Apply for Subscription Tranche (A) Individual Investors Subscription of Individual Investors in the Offer Shares is limited to Saudi Arabian natural including a Saudi woman who is divorced or widowed and who has children who are minors from a non-saudi husband may subscribe for Offer Shares in the name(s) of her children for her benefit given she provides proof that she is widowed or divorced and proof of her motherhood (each referred to as "Individual Investor" and collectively as "Individual Investors") Subscription application forms will be available during the Offering Period at the branches of the Selling Agents or through their respective websites. Subscription may also be made through the Internet, banking phone or ATM machines at any of the Selling Agents that provide such service for the subscribers who have participated in recent initial public offerings of shares, provided that: The subscriber must have a bank account at a Selling Agent which offers such services; and There should have been no changes in the personal information of subscriber since her/his subscription in a recent offering. The Subscription Application forms must be completed in accordance with the instructions described in the Subscription Terms and conditions Section of this Prospectus. Applicant must agree to all items contained in relevant application form. The Company and the Pre-Offering Shareholders reserve the right to reject any subscription application, partly or wholly, if it does not satisfy any of the subscription terms and instructions. The subscription application shall not be amended or withdrawn after submittal. Upon submittal, the subscription application shall be considered a binding agreement between the applicant and the Company. Please refer to Section 14 Subscription Terms and conditions of this Prospectus. Tranche (B) Institutional Investors Subscription of Institutional Investors in the Offer Shares is limited to a number of institutions that have been contacted by the Lead Manager after discussions with the Company and the Pre-Offering Shareholder s and based on certain predefined criteria set forth by the Capital Market Authority ( CMA or the Authority ). Such Individual Investors may obtain the subscription application forms from the Lead Manager. XI

13 Summary of Key Information This summary of key information is intended to give an overview of the information contained in this Prospectus. However, it does not contain all the information that may be important to prospective investors. Therefore, this summary should be read as an introduction to the Prospectus, and the recipients of this Prospectus are advised to read the entire Prospectus, and the prospective investors must take all information contained in this Prospectus into consideration when making a decision to invest in the Offer Shares. The Company The Company s operations date back to 1987G (1407H) when Dallah Hospital (the Hospital ) was established in Riyadh by Mr. Saleh Abdullah Kamel as a sole proprietorship with a share capital of SAR 100,000,000. Dallah Healthcare Holding Company ( DHHC or the Company ) is Saudi joint stock company with commercial registration number dated 13/4/1415H (corresponding to 19/9/1994G). The Company was established in Jeddah as a limited liability company with commercial registration number dated 30/9/1414H (corresponding to 13/3/1994G). The Company was established with a paid-up capital of SAR 395,000,000 divided into 395,000 shares, with a value of SAR 1,000 per share. For further information refer to Table 1: Change in Share Capital. Upon establishment, Dallah Group owned 99% of the Company s share capital, with the remaining 1% owned by Mr. Saleh Abdullah Kamel. After the establishment of the Company, the Hospital s assets, liabilities and investments were sold to the Company for a value of SAR 295,000,000. For further information regarding this sale refer to section 4.1 and Table 18 of this Prospectus. On 12/11/1414H (corresponding to 23/4/1944G), the Company s shareholders issued a resolution to move to the Company s headquarters to Riyadh. Consequently, commercial registration number dated 23/4/1415H (corresponding to 19/9/1994G) was issued (the Commercial Registration ). On 17/3/1415H (corresponding to 24/8/1994G), the shareholders issued a resolution to reduce the Company s share capital from 395,00,000 to 295,000,000, due to it being deemed in excess of the Company s requirements, by reducing the number of shares from 395,000 to 295,000 with par value of SAR 1,000 per share. On 20/8/1419H (corresponding to 9/12/1998G), the Company's share capital was reduced from SAR 295,000,000 to SAR 123,000,000 by transferring ownership of the Hospital's land, valued at SAR 172,000,000, from the Company to Mr. Saleh Abdullah Kamel. The shareholders transferred the land in order to pledge it as collateral to obtain bank facilities for Dallah Group. In return, shareholding of Dallah Group and Mr. Saleh Abdullah Kamel was reduced in the Company. On 07/09/1426H (corresponding to 10/10/2005G), the shareholders decided to increase the Company s share capital from SAR 123,000,000 to SAR 148,000,000 through the capitalization of retained earnings of SAR 25,000,000 and reduce par value of shares to SAR 50. Dallah Group also awarded some of its shares in the Company to Mr. Abdullah Saleh Kamel, Aseer, Mr. Tarek Othman Alkasabi and Dr. Mohammed Rashed Alfaqih. On 14/5/1429H (corresponding to 20/5/2008G), the shareholders decided to change the Company from a limited liability company into a closed joint stock company and alter its name to Dallah Healthcare Holding Company. Approval was granted to change the Company into a closed joint stock company as per Ministerial Resolution No. 341/J on 19/10/1429 H (corresponding to 19/10/2008G). On 11/3/1432H (corresponding to 14/2/2011G), the Company s shareholders decided to increase its capital from SAR 148,000,000 to SAR 330,000,000 through two transactions. First one involved issuance of shares worth SAR 120,000,000 to Mr. Saleh Abdullah Kamel representing difference in the value of non-operational lands transferred from DHHC to Mr. Saleh Abdullah Kamel and operational lands transferred from Mr. Saleh Abdullah Kamel to DHHC. This difference was SAR 117,853,600, or the equivalent of 11,785,360 shares valued at SAR 10 per share. In addition, 214,640 shares with a nominal value of SAR 10 each (equivalent to SAR 2,146,400) were awarded to shareholders upon shareholders agreement. The reason for this was to increase the capital of the Company to a whole number in order to avoid issuance of fractional shares in the future. As a result, share capital of the Company increased to SAR 268 million. Second transaction involved increasing capital of the Company by issuing one share for every 2.39 shares through capitalization of SAR 30,385,058 from statutory reserves and SAR 31,614,942 from retained earnings in order to increase the capital from SAR 268,000,000 to SAR 330,000,000. For further information refer to section 4.10 of the Prospectus. The shareholders also agreed on 17/3/1432H (corresponding to 20/2/2011G) that Mr. Saleh Abdullah Kamel would grant some of his shares to other shareholders in order to keep shareholding same as that before 11/03/1432H (corresponding to 14/42011G). On 31 December 2011G, the Company received SAR 8.7 million as compensation from current shareholders for the use of the Company s property in Shatee District of Jeddah and SAR 2.2 million for shares granted to Mr. Saleh Abdullah Kamel at the time of the capital increase on on 11/03/1432H (corresponding to 14/02/2011G). These actions were approved by general assembly on 25/06/1433H XII

14 (corresponding to 16/05/2012G). It was agreed to increase the capital from SAR 330,000,000 SAR 472,000,000 during the extraordinary general assembly meeting held on 25/06/1433H (16/05/2012), by issuing 14,200,000 new shares representing 30.1% of the Company s post-offering share capital through an initial public offering with the current shareholders waiving their priority rights in this regard. The company completed all necessary procedures in relation to the transfer of lands as part of the capital increase as per the shareholders resolution dated 11/03/1432H (corresponding to 11/02/2011G) and the agreement dated 17/03/1432H (corresponding to 20/02/2011G) Table 1: Change in Share Capital Date Share Capital before Change Share Capital after Change Method Reason for Change in Capital Approved by 13/3/1994G SAR 395,000,000 SAR 395,000,000 Cash 24/8/1994G SAR 395,000,000 SAR 295,000,000 Not Available 9/12/1998G SAR 295,000,000 SAR 123,000,000 Not Available 10/10/2005G SAR 123,000,000 SAR 148,000,000 14/2/2011G SAR 148,000,000 SAR 330,000,000 Capitalization of SAR 25,000,000 of retained earnings Capitalization of SAR 30,400,000 of statutory reserves in addition to SAR 31,600,000 of retained earnings ***Issuance of 12,000,000 new shares at a value of SAR 10 per share representing the increase in capital of SAR XIII Establishment of the Company *Share capital was deemed to be in excess of requirements of the Company after revaluation of the Hospital s assets, liabilities and investments from SAR 395 million to SAR 295 million Ownership of the Hospital s land and buildings was transferred to Mr. Saleh Abdullah Kamel who at the time owned 99% of the Company s share capital to allow him to pledge those assets as collateral in order to obtain bank facilities **Awarded 6,150, 6,150, 9,225 and 9,225 shares to Mr. Abdullah Saleh Kamel, Aseer, Eng. Tarek Othman Alkasabi and Dr. Mohammed Rashed Alfagih respectively Transfer of the legal ownership of the Hospital s land to the Company and increasing share capital of the Company to a whole number in order to avoid issuance of fractional shares in the future Ministry of Commerce & Industry, General Assembly Ministry of Commerce & Industry Ministry of Commerce & Industry Ministry of Commerce & Industry Ministry of Commerce & Industry

15 117.9 million (which reflected difference in the value of lands transferred to and from DHHC) and issuance of 214,640 new shares at SAR 10 per share *Hospital assets and investments were sold to DHHC. For more information, please see Table 18 of this Prospectus. ** No payment was made in exchange for the granting these shares *** This amount was SAR 117,853,600 or the equivalent of 11,785,360 shares valued at SAR 10 each. Additionally, 214,640 shares worth SAR 2,146,400 were issued valued at SAR 10 each Source: DHHC Details relating to the change in the Company s share capital Change in share capital dated 24/8/1944G On 17/3/1419H (corresponding to 24/8/1994G), the Company s shareholders decided to decrease the Company s share capital from SAR 395,000,000 to SAR 295,000,000 by decreasing the number of shares from 39,500 to 29,500 shares at a value of SAR 1,000 per share as the capital was deemed to be in excess of the Company s requirements. The shareholders had established the Company with a share capital of SAR 395,000,000 based on the book value of the Hospital s assets and investments. Subsequently, the shareholders had decided to acquire the Hospital s assets and investments, net of accumulated losses incurred between 1987G and 1994G, for a value of SAR 295,000,000. For further information regarding the acquired assets refer to Table 19 of this Prospectus Change in share capital dated 9/12/1998G On 20/8/1491H (corresponding to 9/12/1998G), the Company s share capital was reduced from SAR 295 million to SAR 123 million after transferring the Hospital s land s legal ownership to Mr. Saleh Abdullah Kamel at a value of SAR 172 million. The reason for the transfer was to allow Mr. Saleh Abdullah Kamel to pledge those assets as collateral in order to obtain bank facilities for Dallah Group. As a result, Dallah Group and Mr. Saleh Abdullah Kamel s shareholding in the Company was reduced. Change in share capital dated 10/10/2005G On 7/9/1426H (corresponding to 10/10/2005G), the shareholders decided to increase the Company s share capital from SAR 123 million to SAR 148 million by capitalizing retained earnings of SAR 25 million. As per the shareholders resolution, the share s par value was reduced to SAR 50. Additionally, 6,150, 6,150, 9,225 and 9,225 shares were awarded to Mr. Abdullah Saleh Kamel, Aseer, Eng. Tarek Othman Alkasabi and Dr. Mohammed Rashid Alfagih respectively. No amount was paid in exchange for these shares. The following table presents the ownership structure in the Company before the above mentioned shareholders resolutions: Shareholder Ownership % Number of Shares Value of Shares Dallah Group 99% 121, ,770,000 Saleh Abuddlah Kamel 1% 1,230 1,230,000 Total 100% 123, ,000,000 The following table presents the ownership structure in the Company following the above mentioned shareholders resolutions: Shareholder Ownership % Number of Shares Value of Shares Dallah Group 74% 2,190, ,520,000 Saleh Abuddlah Kamel 1.0% 29,600 1,480,000 Abdullah Saleh Kamel 5.0% 148,000 7,400,000 XIV

16 Eng. Tarek Osman Alkasabi 7.5% 222,000 11,100,000 Dr. Mohammed Rashid Alfagih 7.5% 222,000 11,100,000 Aseer 5.0% 148,000 7,400,000 Total 100% 2,960, ,000,000 Change in share capital dated 14/2/2011G On 11/3/1432H (14/2/2011G) the Company s shareholders decided to increase the Company s share capital from SAR 148 million to SAR 330 million by issuing shares worth SAR 120 million to Mr. Saleh Abdullah Kamel, representing difference in the value of nonoperational lands transferred from DHHC to Mr. Saleh Abdullah Kamel and operational lands transferred from Mr. Saleh Abdullah Kamel to DHHC. This difference was SAR 117,853,600, or 11,785,360 shares with a par value of SAR 10 each. Additionally, 214,640 shares with par value of SAR 10 each worth SAR 2,146,400 were issued to increase the capital of the Company to a whole number in order to avoid issuance of fractional shares in the future. This increased the share capital of the Company to SAR 268 million. For further information, please refer to section 4.10 of this Prospectus. The following table presents the ownership structure in the Company as a result of the above mentioned shareholders resolutions: Shareholder Ownership % Number of Shares Value of Shares Dallah Group 47.09% 15,540, ,400,000 Saleh Abuddlah Kamel 37% 12,210, ,100,000 Abdullah Saleh Kamel 3.18% 1,050,000 10,050,000 Eng. Tarek Osman Alkasabi 4.77% 1,575,000 15,750,000 Dr. Mohammed Rashid Alfagih 4.77% 1,575,000 15,750,000 Aseer 3.18% 1,050,000 10,050,000 Total 011% 33,000, ,000,000 On 17/3/1432H (corresponding to 20/2/2011G), Mr. Saleh Abdullah Kamel decided to grant shares at their par value as per the following table: Shareholder Number of shares Value of Shares Dallah Group 8,880,000 88,800,000 Abdullah Saleh Kamel 600,000 6,000,000 Eng. Tarek Osman Alkasabi 900,000 9,000,000 Dr. Mohammed Rashid Alfagih 600,000 9,000,000 Aseer 600,000 6,000,000 Total 11,880, ,800,000 The following table shows the ownership in the Company after the above mentioned transfer of shares: Shareholder Ownership % Number of Shares Value of Shares Dallah Group 74% 24,420, ,200,000 Saleh Abuddlah Kamel 1% 330,000 3,300,000 Abdullah Saleh Kamel 5% 1,650,000 16,500,000 Eng. Tarek Osman Alkasabi 7.5% 2,475,000 24,750,000 Dr. Mohammed Rashid Alfagih 7.5% 2,475,000 24,750,000 Aseer Company 5% 1,650,000 16,500,000 Total 100% 33,000, ,000,000 XV

17 The following table presents details of the assets transferred from Mr. Saleh Abdullah Kamel to the Company: Asset Area (square meters) Total Valuation (SAR) Dallah Hospital Land Riyadh 40,600 93,380,000 Land Block 43 Riyadh 6,250 15,625,000 Land Block 34 - Riyadh 9,250 21,737,500 Land Block 7 - Riyadh 9,900 24,750,000 Dallah Hospital Building (built on Hospital Land) 42,367 83,023,900 Nurses Housing Building (built on Hospital land) 5,247 4,282,000 Families Housing units (built on Land Block 34) 5,138 4,310,400 Administration Building (built on Hospital land) ,800 Health Club (built on Hospital s land) 1,485 1,273,000 Total - 249,253,600 Source: DHHC, Radma Report The following table presents details of the assets transferred from the Company to Mr. Saleh Abdullah Kamel: Asset Area Total Valuation (SAR) (square meters) Land block 32 Riyadh 6,300 97,650,000 Jeddah Land 14,000 33,750,000* Total - 131,400,000 *Valued based on agreement between the shareholders and Saleh Abdullah Kamel Source: The Company, Radma Report The following table shows the difference between the value of the assets transferred to and from DHHC: Assets Valuation (SAR) Assets transferred from the Company to Saleh Abdullah Kamel 249,253,600 Assets transferred from Saleh Abdullah Kamel to the Company 131,400,000 Difference 117,853,600 Source: The Company, Radma Report In addition to the above mentioned capital increase, The Company has also increased the capital by issuing one share for every 2.39 existing shares. The increase was done by transferring SAR 30,385,058 from statutory reserves and SAR 31,614,942 from retained earnings, resulting in the Company s share capital increasing from SAR 268,000,000 to SAR 330,000,000. Additionally, the shareholders agreed on 17/3/1432H (corresponding to 14/2/2011G) that Mr. Saleh Abdullah Kamel would grant some of his shares in the Company to other shareholders in order to maintain the same shareholding structure as that before 11/3/1432H (corresponding to 14/2/2011G). Company s Operations Operations of DHHC are organized under four business divisions. These are: Dallah Hospital Dallah Pharma Operations & Management Investments Dallah Hospital provides in-patient and out-patient medical services. Dallah Pharma s activities include wholesale distribution of pharmaceutical, herbal and cosmetic products and Operations & Management division is involved in management and operations of hospitals owned by third-parties. In addition, the Company has several investments within the healthcare industry in Middle East XVI

18 region. Dallah Hospital constitutes the single largest contributor the Company s revenues, accounting for over 90% of the Company s total revenue in 2008, 2009, 2010 and Dallah Hospital The Company commenced its operations with the establishment of Dallah Hospital by Mr. Saleh Abdullah Kamel in 1987G as a sole proprietorship, with a capacity of 237 beds. Dallah Hospital provides advanced care in many areas of specialized medicine through the following medical departments: Cardiology Obstetrics & Gynecology Ophthalmology Nephrology Plastic Surgery Rheumatology Emergency Care Orthopedics Pediatrics Dermatology Urology General Surgery Fertility Pediatric Surgery Dental Ear, Nose & Throat Diabetes Neurology Pulmonology Internal Medicine Nutrition Psychiatric Therapy Open Specialist Clinics The Hospital currently has a capacity to accommodate 728,390 patient visits per year through its outpatient clinics. The number of outpatient visits within Dallah Hospital amounted to 609,911 visits during 2011G, representing a capacity utilization of 84%. The number of beds within the ward was 352 during 2011G, with a capacity utilization of 58.4%. For information on capacity by medical departments refer to table Table 62 Established in 1987, the Hospital is one of the leading and largest private hospitals in Riyadh as evidenced by the following: First private hospital in Saudi Arabia to offer laparoscopic surgery One of the first hospitals in the world to provide fertility treatment through in-virto fertilization which is one of the most advanced ART procedures. Dallah Hospital s fertility unit is considered to be one of the first centers in the world using electro-ejaculation / ICSI with pregnancy outcomes, deliveries and home-taking babies. First hospital in Saudi Arabia to deliver a baby through sperm extraction First private hospital in Saudi Arabia to receive license to provide medical treatment using radioactive materials from King Abdulaziz City for Science and Technology First hospital in Riyadh to open catheterization laboratory practices that allows Dallah Hospital to treat heart related illnesses without the need to carry out open heart or bypass surgeries. Dallah Hospital began providing such services in 1995G, constituting 2.55% of the Hospital s operations in 2010 Dallah Pharma Established in 1994G, Dallah Pharma is the wholesale distributor of pharmaceutical, herbal and cosmetic products. Dallah Pharma distributes these products to retail pharmacies, health and beauty stores, hospitals and government agencies. Dallah Pharma has exclusive distribution rights in Saudi Arabia for 45 pharmaceutical products, 12 herbal products and 8 cosmetic products. The Company has also applied for registration of additional 12 pharmaceutical and one herbal product with Saudi Food and Drug Authority. As at April 1 st 2012, the Company had successfully registered 9 new pharmaceutical products for distribution, with the remaining products currently in the process of registration. The Company expects to complete registration of all products by the first quarter of XVII

19 Operations and Management In 2006, leveraging the brand equity generated by Dallah Hospital over the years, the Company decided to enter into contracts to manage and operate hospitals owned by third-parties. DHHC does not take an ownership interest in these hospitals. Instead it provides operational expertise in exchange for a fixed annual fee and / or a variable fee based on the earnings of the hospitals being managed. There a currently two ongoing contracts that the Company has entered into; the first for the management and operation of a hospital and the other solely for management. For further information refer to section 4.7 Operations and Management Investments This includes investments in Aseer, Makkah Medical Center, Al-Ahsa Medical Services Company and Jordanian Pharmaceutical Manufacturing Company. Table 2: Investments Investment Date Value of Investment (SAR) Permanent Decline in Helf for Sale Investments Unrealized Gains/losses (SAR) Dividends Distributed during 2011G** (SAR) Aseer 2004G 10,000,000 3,000,000 *(3,746,834) 300,633 Makkah Medical center 1990G 12,6000, Al-Ahsa Medical Services Company 1994G 1,300, Jordanian Pharmaceutical 2004G 839,570 - (177,978) - Manufacturing Company *Estimated using cost of investment **Distributed on 21/5/2011G Competitive Strengths of the Company Management believes the following to be the key competitive strengths of the Company: Dallah Hospital is widely recognized by both healthcare professionals and patients for the quality in provision of its medical services; Dallah Hospital s surgeons and physicians have established reputations for clinical excellence and have an average of 18 years of experience in their chosen areas of specialty; Dallah Hospital has received ISO-9001 certification in 1998G, which has been successfully renewed every 3 years ever since Dallah Hospital was accredited by JCI in 2009G; which was successfully renewed in 2012G Dallah Hospital offers comprehensive healthcare services through numerous therapy areas. In addition, the Hospital also provides access to physicians specialized in their area of medicine with no prior appointments through its open specialized clinics; The Company has looked to strategically position itself to benefit from expected growth in some of the key therapy areas which include obstetrics and gynecology, pediatrics, orthopedics, cardiology and diabetes; DHHC uses an advanced Oracle based enterprise resource planning system to facilitate information flow and support management in making decisions through timely provision of statistical data; The Company enters into joint cooperation agreements with major international medical centers from time to time that have helped it to improve the quality of services provided at Dallah Hospital to match those of its leading international counterparts. The Company has previously entered into such agreement with New England Deaconess Hospital and Loma Linda University and does not currently have any ongoing cooperation agreements; Dallah Hospital enjoys a diverse client base; XVIII

20 DHHC has a stable financial position as evidenced by the CAGR in revenue of 16.2% from 2007 to 2011 and CAGR in earnings of 36.1% during the same period; The Company has exclusive distribution arrangements for 45 pharmaceutical products, 12 health supplements and 8 cosmetic products across Saudi Arabia; and DHHC enjoys a strong relationship with leading insurance companies in the Kingdom. Vision of the Company Vision of DHHC is to be a leading healthcare company in the Kingdom of Saudi Arabia and the Middle East. Mission of the Company Mission of DHHC is to seek excellence in provision of healthcare services and to provide them in a professional and efficient way, consistent with the Company s values, and the expectations of its patients, partners and community. Company Values Care and respect for our patients and their needs Commitment to professional ethics Commitment to provision of excellent healthcare services Respect and service of our community Value of Staff XIX

21 Summary Market Overview The source for the information contained in this Section Summary Market Overview is a report prepared by Roland Berger Middle East ( Roland Berger ) exclusively for the use of the Company. The most recent actual data presented herein which relate to 2010 is extracted from several sources including Roland Berger. Over the last 5 years, Saudi Arabia has experienced considerable growth in economic activity with 5.1% annual growth in GDP from 2006 to In spite of the recent retrenchment due to the impact of global financial crisis, strong underlying fundamentals were underpinned by rising oil prices and an increase in government spending over the period. As with the broader economy, Saudi Arabian healthcare industry has also experienced significant growth since 2006 with healthcare expenditure estimated to have increased by 10.9% per annum from SAR 45.4 billion in 2006 to SAR 68.6 billion in This increase in spending was fueled by the growth in population, strong government support for healthcare industry and rising income levels. Following are some of the key drivers for growth in the KSA healthcare sector: Growing and Aging Population Government support Increase in healthcare expenditure Increase in lifestyle related diseases Increasing Medical expertise After the Ministry of Health started promoting development of the private health insurance market in Saudi Arabia, the total number of privately insured individuals in the Kingdom has increased to an estimated 7 million in Given this new source of healthcare coverage, pricing levels at hospitals have become a secondary selection criteria for patients. In fact, doctors' reputation as well as the quality and qualification of nurses have become more important criterion in the selection of hospitals. Increased focus of healthcare providers on technology and degree of specialization also highlights the emphasis placed by patients on the quality of healthcare facilities. Given this shift in preferences, the growth in patient visits was mostly directed towards private rather than the public hospitals. From 2006 to 2008, out-patient visits to Ministry of Health facilities increased at 2.1% per annum as opposed to an increase of 11.5% per annum at private hospitals. Similarly, in-patient admissions at Ministry of Health facilities over the same period increased at 6% per annum as opposed to an increase of 13% per annum at private hospitals. Despite this increase in patient traffic, however, overall capacity increased at a slower pace over the same period, straining existing facilities. Total number of hospitals in the Kingdom increased from 374 hospitals in 2006 to 406 hospitals in In terms of value, Saudi Arabian pharmaceutical industry grew at a CAGR of 9.0% from SAR 8.0 billion in 2006 to SAR 11.3 billion in This growth was driven primarily by a growing and aging population, an increase in healthcare coverage as well as price controls set by the Government. Such price controls have also resulted in growth in demand of generic drugs. XX

22 Summary Financial Information The financial statements presented below should be read in conjunction with the pro-forma financial statements as of 31 December 2007G, 2008G and 2009G and the audited financial statements as of 31 December 2010G and 2011G, and the audited financial statements for the six-month period ending June 2011G and 2012G, including in each case, the notes thereto. All Figures are in SR 000 CAGR June 2012 June (07-11) Operational Performance Total Sales 305, , , , , , ,582 16% Cost of Sales (190,068) (168,760) (339,325) (302,686) (305,176) (260,876) (204,783) 13% Gross Profit 165, , , , , ,422 84,799 22% Sales, marketing, general and admin exp (36,223) (33,245) (29,039) 63,555 70,562 52,576 52,895 7% Other Income, net 3,054 8,664 20,476 3,400 4,784 3,436 3,559 Financial Charges (1,356) (534) (2,192) (763) (1,041) (1,302) (248) Net Income 75,050 26, ,401 94,465 56,600 57,627 33,098 Financial Condition Current Assets 350, , , , , , ,168 Total Assets 737, , , , , , ,373 Current Liabilities 149, , ,323 94,220 98,066 94,832 95,078 Total Debt 52,039-77,051-1,971 13,945 45,507 Total Liabilities 193, , , , , , ,529 Shareholders Equity 543, , , , , , ,844 Cash Flows Cash flow from operating activities 60,091 43, , ,388 72,942 71,712 63,363 Cash flow from investing activities (24,023) (33,740) (75,508) (36,052) (23,005) (33,810) (69,856) Cash flow from financing activities (35,769) (41,871) (48,570) (48,580) (39,511) (31,988) (24,983) Cash at end of period 85,273 34,368 84,973 66,796 21,041 10,615 4,702 Key Indicators Gross profit margin (%) 39.8% 37.3% 35.7% 35.9% 29.9% 29.9% 29.3% Net profit margin (%) 23.8% 23.2% 21.5% 20.0% 13.0% 15.5% 11.4% Total debt to shareholders' equity 0.1x 0.0x 0.2x 0.0x 0.0x 0.1x 0.2x (times) Return on shareholders' equity (%) 13.8% 15.0% 24.2% 26.6% 18.7% 20.5% 14.0% Return on assets (%) 10.8% 9.9% 16.2% 19.2% 13.0% 14.2% 9.0% Source: DHHC XXI

23 Contents 1 Definitions and Abbreviations Risk Factors Risks Relating to the Company s Operations and Activities Limited Room for Growth in Current Operations Loss of Contractual Relationship with Major Customers Dependence on Physicians, Nurses, and other Healthcare Professionals Dependence on Management Personnel Governmental Regulations Licenses and Permits Licenses and Permits for Pharmaceutical and Herbal Products Exclusive and Non-Exclusive Rights to Market Pharmaceuticals and Health Products Reputation Company s Name and Trademarks Insurance Capital Required to Expand and Grow Business Effective Information Systems and Disaster Recovery System Risks Associated with the Use of IPO Proceeds Litigation by Patients, Customers, Suppliers, Contractors and Employees Risks Relating to the Industry Competition Industry Consolidation Advancements in Medical Technology Exchange Rate Risk Saudization Risks Related to the Shares Effective Control by Pre-Offering Shareholders Absence of a Prior Market for Shares Share Price Volatility Future Sales and Offerings Dividends Risks Related to the Economy Market Overview Introduction XXII

24 3.2 Demand Drivers Growing and Aging Population Government Support Increasing Healthcare Expenditure Increase in Lifestyle Diseases Growing Medical Expertise Saudi Arabian Healthcare Industry Riyadh Healthcare Industry Saudi Arabian Pharmaceutical Industry Competition and Market Share Competitive Position Market Share Herbal Products The Company Introduction Brief History of Dallah Hospital Shareholding Structure Profile of Corporate Shareholders Dallah Al-Barakah Holding Company Aseer Trading, Tourism and Manufacturing Company Dallah Healthcare Holding Company Dallah Hospital Key Milestons Key Medical Services Operational and Support Functions Major Clients Current Expansions Projects at Dallah Hospital Dallah Pharma Products Key Departments Operations and Management Healthcare Investments Makkah Medical Center Jordanian Pharmaceutical Manufacturing Company Al-Ahsa Medical Services Company Arabian Malaysian Takaful Company XXIII

25 4.8.5 Omega Critical Care Company Ltd Employees Details of Capital Increase on 14/02/2011 and Valuation of Properties used in Capital Increase Background Appraisal Approvals Organization and Management The Board of Directors Executive Management Declaration in Respect of Directors and Key Officers Remuneration of Directors and Senior Management Service Contracts Chairman of the Board Directors Chief Executive Officer Chief Financial Officer Corporate Governance Competitive Advantages, Future Plans and Prospects Competitive Advantages Strong Reputation A Pioneer Healthcare Institution of Saudi Arabia Qualified Medical Staff Strict Focus on Quality Complete Healthcare Services Provider Positioned to Benefit from Growth in Key Therapy Areas Information Systems Alliances with International Institutions Diversified Client Base Stable Financial Position Exclusive Distribution Arrangements Strong Relationship with insurance companies Future Plans and Prospects Expand in New Cities Improve Profitability and Increase Occupancy Rates Increase Out-Patient Income by Focusing on Day Care Products and Surgeries Develop Parking Area for Convenience of Patients and their Relatives XXIV

26 6.2.5 Expand Pediatrics Capacity Develop Operations and Management Business Develop Pharmaceutical Business Management s Discussion and Analysis of Financial Condition and Results of Operations of the Company Directors Declaration for Financial Information Principal Accounting Policies Business Overview Results of Operation s Revenue Cost of Revenue Sales and Marketing Expenses General and Administrative Expenses Other Income Finance Charges Permanent Decline in Available for Sale Investments Reversal of Accrued Expenses and Other Liabilities Zakat and Income Tax Balance Sheet Current Assets Non-Current Assets Current Liabilities Non-Current Liabilities Shareholders' Equity Financial Condition, Liquidity and Other Items Cash Flow from Operating Activities Cash Flow from Investing Activities Cash Flow from Financing Activities Contingent Liabilities Statement of liquidity and management's responsibility for financial information Dividend Record and Policy Capitalization Use of Proceeds Use of Proceeds and Expenses New Hospital in West of Riyadh (100% of IPO Proceeds) Services Offered Operational Details XXV

27 Ownership Structure Project Timeline Status of Regulatory Approvals Cost of Project Funding Structure Conditions Related to Lending from Ministry of Finance for Healthcare Projects Summary of Bylaws Company name Company headquarters Company Term Company purposes Company capital Issuing shares Transferring the share ownership: Increasing and decreasing the capital: Board of Directors Board of directors authorities Board of directors meetings and decisions Shareholders general assembly The ordinary general assembly The extraordinary general assembly Voting power Fiscal year Dividends distribution Company dissolution and liquidation Governing Law Legal information Commercial registration certifications Licenses Dallah hospital certificates and licenses issued by Ministry of Health Certificates and licenses of Dallah Hospital, issued by the Saudi for Food and Drug Authority Certificates and licenses issued by King Abdulaziz City for Science and Technology Licenses for pharmaceutical products Trademarks Properties owned by the company Major and important Agreements XXVI

28 Agreements of providing health services to staff of government and private sectors Agreements with insurance companies to provide health services Works of the hospital and management agreements Agreements with the company as being a sole agent Agreements where the company is considered a key partner, supplier or distributor Credit arrangements with retail distributors of Dallah Pharma Company Cooperation agreements for provision of medical service Lease Agreements Insurance Policies and Contracts Financing Facilities Transactions with related parties Affiliates Litigation Underwriting the IPO The underwriter of the IPO Samba Capital (underwriter of the IPO) agreed to fully underwrite the offering of 14,200,000 shares Summary of the underwriting agreement Fees and expenses Subscription Terms and conditions Subscription in the Offer Shares Allocating shares and returning surplus Declarations Miscellaneous provisions Saudi Stock Market (Tadawul) Entry orders Trading the company s shares in the Saudi Stock Market Documents Available for Inspection Table 1: Change in Share Capital... XIII Table 2: Investments... XVIII Table 3: Saudization scale for healthcare companies... 9 Table 4: Population Growth in Saudi Arabia Table 5: Number of hospitals in Saudi Arabia Table 6: Number of Beds in Saudi Arabia Table 7: Number of clinics in Saudi Arabia Table 8: Number of hospitals in Riyadh Table 9: Number of beds in Riyadh Table 10: Number of clinics in Riyadh XXVII

29 Table 11: Breakdown of outpatient visits in Riyadh Table 12: Breakdown of number of inpatients in Riyadh Table 13: Size of Saudi Arabian pharmaceutical industry Table 14: Number of Hospital Beds in Riyadh Area (2010) Table 15: Market share of Dallah Hospital in Saudi Arabia Table 16: Market share of Dallah Hospital in Riyadh Table 17: Dallah Hospital's share of bed capacity compared to private hospital competitors (2010) Table 18: Details Relating to the Change in the Company s Share Capital Table 19: Hospital Assets and Investments Sold to the Company in Table 20: Operations and Management Contracts Table 21: Ownership Structure of Dallah Healthcare Holding Company Table 22: Direct and Indirect Ownership Table 23: Ownership Structure of Dallah Group Table 24: Direct and Indirect Ownership by Dallah Group s shareholders of DHHC Table 25: Ownership Structure of Aseer Table 26: Patient Traffic at Dallah Hospital Table 27: Number of Beds and Clinics Table 28: Payment Schedule for the Construction of Pediatrics Building Table 29: Pediatrics Building Funding Plan Table 30: Operations and Management Contracts Table 31: Ownership of Jordanian Pharmaceutical Manufacturing Company Table 32: Ownership of Al Ahsa Medical Services Company Table 33: Liquidation of Arabian Malaysian Takaful Company Table 34: Breakdown of employees at DHHC Table 35: Appraisal of Buildings Owned by Mr. Saleh Abdullah Kamel Used in the Capital Increase Table 36: Lands Owned by DHHC Used in the Capital Increase Table 37: Difference in the Valuation of Assets Transferred to and from DHHC Table 38: Appraisal of Lands for Capital Increase Table 39: Appraisal of Buildings for Capital Increase Table 40: Land Details Table 41: Building Details Table 42: Land Appraisal Process after Capital Increase Table 43: Buildings Assessment after the Process of Capital Increase Table 44: Board of Directors of Dallah Healthcare Table 45: Senior Management of Dallah Healthcare Table 46: Remuneration of Directors Table 47: Members of Audit Committee Table 48: Members of Nominations and Remuneration Committee Table 49: Members of Investment Committee Table 50: Medical Boards Representation within Dallah Hospital Table 51: Financing of Pediatric Clinics Capacity Expansion Project Table 52: Revenue, net income and cash flows from operations Table 53: Revenue, net income and cash flows from operations for six months ended 30 June Table 54: Income statement ( ) Table 55: Income statement (June 2010 June 2012) Table 56: Breakdown of Revenue Table 57: Breakdown of Revenue for the Six Months Period Ended June Table 58: Breakdown of Dallah Hospital Revenue by Type of Service XXVIII

30 Table 59: Bed Utilization Rate Table 60: Dallah Hospital Revenue by Type of Service Table 61: Breakdown of Dallah Hospital Revenue by Department Table 62: Outpatients Capacity Utilizations Table 63: Breakdown of Dallah Hospital Revenue by Department for the Six Months Period Ended June Table 64: Revenue by Customer Category Table 65: Revenue by Customer Category for the Six Months Period Ended June Table 66: Dallah Pharma Revenue by Category Table 67: Registration Date of Pharmaceutical Products Table 68: Revenue from Herbal & Cosmetic Products Table 69: Date of Registration of Herbal Products Table 70: Dallah Pharma Revenue by Category or the Six Month Period Ended June Table 71: Cost of Revenue Table 72: Cost of Revenue for the Six Months Ended June Table 73: Selling and Marketing Expenses Table 74: Selling and Marketing Expenses for the Six Months Period Ended June Table 75: General and Administrative Expenses Table 76: General and Administrative Expenses for the Six Months Period Ended June Table 77: Other Income Table 78: Other Income for the Six Months Period Ended June Table 79: Summary Statement of Financial Position Table 80: Summary Statement of Financial Position as at June Table 81: Breakdown of Current Assets Table 82: Breakdown of Current Assets as at June Table 83: Breakdown of Non-Current Assets Table 84: Statement of Investment in Arabian Malaysian Takaful Company Table 85: Available for Sale Investments Table 86: Breakdown of Property and Equipment Table 87: Valuation of Land and Buildings Owned by Mr. Saleh Abdullah Kamel Table 88: Valuation of Lands Owned by Dallah Healthcare Holding Company Table 89: Breakdown of Non-Current Assets as at June Table 90: Statement of Investment in Arabian Malaysian Takaful Company Table 91: Investment in Securities Held for Sale Table 92: Property and Equipment Table 93: Breakdown of Current Liabilities Table 94: Accrued Expenses and Other Liabilities Table 95: Related Party Transactions Table 96: Breakdown of Current Liabilities as at June Table 97: Accrued Expenses and Other Liabilities as at June Table 98: Related Party Transaction as at June Table 99: Breakdown of Non-Current Liabilities Table 100: Breakdown of Non-Current Liabilities as at June Table 101: Shareholders Equity Table 102: Shareholders' Equity as at June Table 103: Financial Condition, Liquidity and Other Items Table 104: Financial Condition, Liquidity and Other Items as at June Table 105: Cash Flow from Operating Activities Table 106: Cash Flow from Operating Activities for the Six Months Ended June XXIX

31 Table 107: Cash Flow from Investing Activities Table 108: Cash Flow from Investing Activities for the Six Months Ended June Table 109: Cash Flow from Financing Activities Table 110: Cash Flow from Financing Activities for the Six Months Ended June Table 111: Historical Dividends Table 112: Capitalization Table 113: Use of Proceeds Table 114: Cost Analysis of the New Hospital in West of Riyadh Table 115: Cost Analysis of Establishing the New West of Riyadh hospital Table 116: The Expected Hospital Building Schedule Table 117: Financing the New West of Riyadh Hospital Table 118: West of Riyadh Hospital Funding Plan Table 119: Quarter Annual Project Cost Plan Table 120: The Project Quarterly Financing Plan Table 121: Licenses for Pharmaceutical Products from Ministry of Health Table 122: The Licenses of Pharmaceutical Products Issued by the Saudi Food and Drug Authority in the Kingdom of Saudi Arabia. 155 Table 123: Licenses for Health Products Table 124: Authorised Representative Licenses Figure 1: Organization structure of DHHC Figure 2: Organization structure of Dallah Healthcare XXX

32 1 Definitions and Abbreviations Advisors Board or The Board of Directors CEO CFO Chairman CMA or the Authority Company or DHHC Companies Regulations Corporate Governance Regulations CAGR CR Dallah Al-Barakah Holding Company or Dallah Group Dallah Hospital or the Hospital Dallah Pharma Directors Exchange GDP The advisors to the Company concerning this Offering, the identities of which are listed on page [] of this Prospectus. The Company s board of directors as appointed from time to time. Chief Executive Officer of the Company, as appointed from time to time. Chief Financial Officer of the Company, as appointed from time to time. Chairman of the Board of the Company, as appointed from time to time. The Capital Market Authority, including where the context permits any committee, subcommittee, employee or agent to whom any function of the Authority may be delegated. Dallah Healthcare Holding Company The Regulations for Companies of the Kingdom of Saudi Arabia, promulgated by Royal Decree No. M/6 of 22/3/1385H (corresponding to 20/07/1965G), as amended and supplemented from time to time. Corporate Governance Regulations in the Kingdom of Saudi Arabia, issued by the Board of Capital Market Authority pursuant to Resolution No. 1/212/2006, dated 21/10/1427H (corresponding to 12/11/2006G), and amended pursuant to the decision of the Board of the Capital Market Authority No dated 8/1/1430H (corresponding to 5/1/2009G). Cumulative Average Growth Rate The Company's Commercial Registration Certificate. The Dallah Al-Barakah Holding Company, with commercial registration number , as further described in Section The Company s Dallah Hospital business division that provides in-patient and out-patient medical services. The Company s Dallah Pharma business division that is engaged in wholesale distribution of pharmaceutical, herbal and cosmetic products. The directors of the Company s Board of Directors, as appointed from time to time. The Saudi Arabian Stock Exchange, including where the context permits any committee, subcommittee, employee, officer, servant or agent to whom any function of the Exchange may for the time being be delegated, and on the Exchange means any activity taking place through or by the facilities provided by the Exchange. Gross Domestic Product 1

33 General Assembly GCC Government IVF JCI Kingdom or Saudi Arabia Lead Manager Listing Rules OECD Offering Offering Period Offer Price Offer Shares Official List Official Gazette Person Pharmaceutical Prospectus Pre-Offering Shareholders Shares Shareholder SAR Subscriber The general assembly of the Company, from time to time. The Gulf Cooperation Council. The Government of the Kingdom of Saudi Arabia. In-virto fertilization assisted reproductive technology procedure Joint Commission International The Kingdom of Saudi Arabia. Samba Capital & Investment Management Company The Listing Rules issued by the CMA pursuant to Article 6 of the Capital Market Regulations promulgated under Royal Decree No M/30 dated 02/06/1424H (corresponding to 31/07/2003G). Organization for Economic Co-operation and Development The initial public offering of up to [number] Shares, representing [percentage]% of the issued share capital of the Company. From 5/01/1434H (corresponding to 19/11/2012G) up to and including 11/01/1434H (corresponding to 25/11/2012G) SAR [amount] per Offer Share. 14,200,000 Shares representing 30.1% of the post-offering share capital of the Company. The list of securities maintained by the CMA in accordance with the Listing Rules. Um AlQura, the official Gazette of the Government. A natural person or legal person (juristic entity). Pharmaceutical drugs which are subject to licensing regulations before they may be offered for sale in Kingdom, the GCC, or another jurisdiction. This document prepared by the Company in relation to the Offering. The Pre-Offering Shareholders are the following individuals and companies: (i) Dallah Al- Barakah Holding Company; (ii) Mr. Saleh Abdullah Kamel; (iii) Mr. Abdullah Saleh Kamel; (iv) Eng. Tarek Othman Alqasabi; (v) Dr. Mohammed Rashed Alfaqih; and (vi) Aseer Trading, Tourism and Manufacturing Company. The ordinary shares of the Company with a nominal value of SR 10 each. A holder of the Shares in the Company at any particular time. The Saudi Arabian Riyal. A person having Saudi nationality subscribing for the Offer Shares, including a Saudi woman who is divorced or widowed and who has children from a non-saudi husband, who subscribes 2

34 for the Offer Shares in the name(s) of her children who are minors. Subscription Application Form Tadawul The subscription application form as set out in Section [ ], Subscription Terms and Conditions. The automated system for trading of Saudi companies shares on the Exchange. 3

35 2 Risk Factors In addition to all the information contained in this Prospectus, prospective investors should carefully read and consider all the risk factors described below. These risk factors are by no means inclusive of all risks the Company may encounter, as other risks may exist that are currently unknown to or considered immaterial by the Company which may serve to preclude its operations. The Company s business, prospects, financial condition, results of operations and cash flows could be adversely and materially affected if any of the following risks, which the Company s management (the Management ) currently believes to be material, or any other risks that the Management has not identified and/or that it currently considers not to be material, actually occur or indeed become material risks. The trading price of the Company s Offer Shares could decrease due to any of these risks, and investors may lose all or part of their investment. 2.1 Risks Relating to the Company s Operations and Activities Limited Room for Growth in Current Operations Dallah Hospital is presently located at a single location and, as such, the ability to increase the Hospital s outpatient capacity (utilization rate in 2011 was 83.7%) and inpatient capacity (utilization rate in 2011 was 58.4%) within that location is subject to the physical space available. Therefore, in order to expand its capacity the Hospital may need to set up new facilities at different locations and manage operations simultaneously in multiple locations of which Dallah Healthcare has limited experience. The Company recently built a parking facility next to its existing hospital building and is presently in the process of constructing a pediatrics building as well, construction for which commenced in August DHHC also plans to build a new hospital with 300 beds and 80 clinics in west of Riyadh. That hospital is expected to be opened for patients within 48 months of the start of construction. For more information on the Company s plans, please refer to Section ( Current Expansions Projects at Dallah Hospital ) and Section 10 ( Use of Proceeds ) Loss of Contractual Relationship with Major Customers A significant portion of the Company s revenue comes from a limited number of customers. Failure by the Company to meet its obligations with these customers and/or inability to renew these contracts at terms that are favorable to the Company may have a material adverse effect on the Company s business, prospects, results of operations and financial condition and/or its share price. In 2011, top 5 customers accounted for 54.4% of Dallah Hospital s revenue and 49.4% of DHHC s revenue while insurance companies accounted for 41.3% of Dallah Hospital s revenue and 37.5% of DHHC s revenue Dependence on Physicians, Nurses, and other Healthcare Professionals The abilities, qualifications, and experience of the Company s employees, physicians, and medical staff affect Dallah Hospital s operations in a significant manner. The effort to recruit and retain qualified physicians and healthcare professionals sees the Company competing against other healthcare providers both within Saudi Arabia and the greater Middle East region. Recruitment and retention of physicians and nurses is affected by their shortage in certain areas of specialties within which the Company s operates. Physicians and nurses consider the following factors prior to deciding whether or not to continue in or take a certain position: the level of compensation, the reputation of the hospital, the quality of the facilities, research opportunities and community relations, amongst others. The Company may not be able to compare favorably with other healthcare providers on all these factors. The inability to recruit and retain qualified physicians, nurses, and other healthcare professionals may have a materially adverse effect on the overall business and financial position of the Company. DHHC relies on a certain number of full-time and part-time doctors to generate a significant portion of its revenue. Should any of these doctors leave, there could be a material impact on the Company s revenue. In 2011, 26.4% of the Hospital s revenue was 4

36 generated through its visiting doctors while 31.9% of the Hospital s revenue was generated through 15 doctors. These 15 doctors represented 8% of the total number of doctors at the Hospital. Percentage of the Hospital s revenues from top 15 doctors was 35.0% in 2007, 40.3% in 2008, 36.2% in 2009 and 31.9% in The Company believes that the compensation packages designed for its doctors mitigate the risks associated with them leaving the Hospital. DHHC ensures that all visiting doctors who work at the Hospital have the requisite approvals to work at Dallah Hospital Dependence on Management Personnel The Company s success has been largely owed to the expertise and industry insight of the Management. Although the Company provides competitive compensation packages and organizes training programs geared towards its employees career development in order to foster loyalty to the organization, loss of key management personnel or failure to retain qualified employees in the future could have a material adverse effect on the Company s results, operations, and financial position Governmental Regulations The activities of the Company are subject to governmental regulations for the healthcare sector. Regulation affecting the healthcare industry may be amended in the future and therefore requires the Company to alter its operations accordingly. In general, the healthcare industry, and hence the Company, is subject to government regulations relating, among other subjects, to (i) professional ethics and conduct of operations, (ii) addition of facilities and services, (iii) adequacy of medical care provided, (iv) quality of medical equipment and services, (v) qualifications of medical and support personnel, (vi) confidentiality, maintenance, and security issues associated with medical and patient records, and (vii) screening, stabilization, and transfer of patients with emergency conditions. As of the date of this Prospectus, the Company is in compliance with all applicable laws and regulations and is licensed by the government of Saudi Arabia to: i) operate, manage and maintain medical buildings and centers; and ii) trade, wholesale and retail, in medical and surgical machinery and devices, prosthetic limbs, handicap devices and hospital equipments. The government may, at any time, pass and enforce more stringent laws, rules, and/or regulations on the Company s business due to political, economic, technical, and/or environmental factors, which may in turn increase operating costs and/or capital expenditure bourn by the Company or prevent the Company from commencing and/or progressing with any particular business endeavor. In addition, amendments to existing laws, rules, and or regulations could significantly impact the Company s operations by restricting the development of the Company or its customers, restricting sales and distribution of the Company s products or increasing the opportunity for additional competition. The Company s earnings and cash flow may be adversely affected by any new laws, rules, and/or regulations as this may prompt the Company to alter its services and/or operations in order to abide accordingly. If the Company is found to be in violation of such new laws, rules, and or regulations, the Company s business, financial position, results of operations or cash flows could be adversely affected Licenses and Permits The Company is in possession of a number of licenses required to carry out its services (for more information, please refer to Section 12.2 of this Prospectus). A breach of the terms and conditions that such licenses carry as a condition of their issuance by the relevant government authority may lead to revocation, termination, or suspension of such licenses. The Company may also be subject to financial penalties imposed by the government or relevant regulator. The Company is subject to regulations issued by the Ministry of Health and the Saudi Food and Drug Authority. In order for DHHC to continue providing its services, it must obtain a number of official permits and approvals from relevant government and regulatory authorities. Although the Company continually renews its permits and approvals immediately upon their expiration, there is no guarantee that the Company will be able to renew them in the future. Therefore, if the Company is unable to obtain or renew any permit of this nature, it could have a significant negative affect on its ability to continue practising its activities. In addition, failure to obtain or renew required licenses may negatively impact the Company s ability to provide its services, its future business prospects, and its financial condition. DHHC is currently in the process of renewing some of its expired licenses. 5

37 While the Company does not see any reason for them not being renewed, it cannot guarantee their successful renewal which could negatively affect its operations connected to those licenses Licenses and Permits for Pharmaceutical and Herbal Products The Company is in possession of a number of licenses required to carry out its services (for more information, please refer to Section 12.2 of this Prospectus. A breach of the terms and conditions that such licenses carry as a condition of their issuance by the relevant government authority may lead to revocation, termination, or suspension of such licenses. The Company may also be subject to financial penalties imposed by the government or relevant regulator. These licenses include those needed to distribute pharmaceutical products (for more details, please refer to Section 12.2 of the Prospectus). As of the date of this Prospectus, licenses pertaining to 17 of its pharmaceutical products have expired. The Company is currently in the process of renewing those licenses. While the authorities have continued to allow DHHC to distribute those products, there cannot be any guarantee that their distribution would not result in any fines. The Company also cannot guarantee that concerned authorities will not prohibit the Company from importing and distributing those products in the future. Therefore, failure of the Company to renew those licenses could negatively impact the Company's business, financial position and cash flows Exclusive and Non-Exclusive Rights to Market Pharmaceuticals and Health Products Dallah Pharma s rights to sell pharmaceutical and health products in which it trades are subject to contractual agreements which are valid as of the date of this Prospectus. Sections ( Agreements with the company as being a sole agent ) and ( Agreements where the company is considered a key partner, supplier or distributor. ) include the list of manufacturers with whom the Company has entered into distribution agreements. At the expiration of each respective contractual agreement, the manufacturer may choose not to renew the agreement or renew it on terms less favorable to the Company, which may have an adverse effect on the Company s financial condition and results of operations Reputation Although the Company s policy is to employ qualified physicians and healthcare professionals, the Company is unable to prevent its physicians and staff from committing human error during their treatment of patients. Such lapses of judgement on part of the Company s medical staff may cause the Company s reputation to suffer, which in turn may have an adverse effect on the Company s financial condition and results of operations Company s Name and Trademarks The name and trademarks of the Company support its business. Management believes that the identity that the Company has developed along with its commercial name has contributed towards the success of its business. Marketing activities of the Company that are carried out to promote DHHC s products and services and to strengthen its position within the industry are designed to retain this identity and the Company s financial condition may be affected if this was not successfully carried out in the future. The Company is currently in the process of registering its trademarks Dallah Health, Dallah Hospital, and Dallah Pharma in Saudi Arabia. Success of the Company depends on a number of factors including its ability to not only being able to use these trademarks but also prevent their illegal use. For more information, please refer to Section 12.3 of the Prospectus. Operations of the Company can be affected if the Company is unable to register these trademarks because even though the trademarks are new, DHHC will be required to redesign them and have them registered once again Insurance Legal actions brought by claimants against hospitals and other healthcare providers may involve claims of significant amounts, which in turn can cause defendants to incur significant legal costs. Although the Company maintains professional and general liability insurance coverage to cover such claims, some claims could exceed the scope of insurance coverage or coverage for particular types 6

38 of claims may be denied. The Company cannot ensure that all future claims which may be brought against it will be fully covered by its relevant insurance policies. Furthermore, the Company may not be able to obtain sufficient insurance coverage due to increasing premiums or unavailability of insurance policies which could, in turn, cause the doctors to limit their practice. Such an event may lead to reduction in the number of services provided at the Hospital. Insurance in this case refers to insurance against medical errors and all other forms of insurance in general Capital Required to Expand and Grow Business The Company s ability to expand its business is reliant upon, amongst other factors, its ability to raise funds through internal and external sources. If the Company is not able to obtain sufficient funds at favorable terms and in a timely fashion, the Company may be forced to limit its growth which would have a material adverse effect on the Company s business, financial condition, and results of operations Effective Information Systems and Disaster Recovery System The Company s operates in a data intensive environment and information technology plays an important role in contributing to the success of the Hospital and the Company. DHHC requires an efficient information systems network in order to report its operational results and develop an effective business strategy. The Company stores and retrieves data through data storage disks that are kept in a fire resistant vault. It also transmits a copy of the stored data to another storage site every month. If the Company fails to formulate, implement, and maintain an effective network of information and disaster recovery systems, its ability to provide services in a cost effective and efficient manner will be hindered Risks Associated with the Use of IPO Proceeds DHHC plans to finance the construction of a new hospital in west of Riyadh with a total cost of SAR [XX] million through IPO proceeds (SAR [XX] million), loans from the Ministry of Finance (SAR million) and cash from the Company operations (SAR 48.3 million). For more information, please refer to Section 10 ( USE OF PROCEEDS ) of this Prospectus. The Company is presently in the process of seeking initial approvals from Ministry of Health and Municipality of Riyadh to construct this hospital. It has also paid SAR 2.0 million as down payment towards the purchase of land while the remaining amount will be paid from the IPO proceeds. For more information, please refer to Section ( Expand in New Cities ) of the Prospectus. There are, however, no guarantees that the Company will be able to obtain approvals from Ministry of Health and Municipality of Riyadh or obtain the required loans from Ministry of Finance, which could lead to delays in the construction of the hospital, changing its location or cancelling of the project altogether. This could have a material adverse effect on the Company s business, financial condition, share price and results of operations. It could also have a significant negative affect on the expected returns to shareholders and may lead to loss of their entire investment in the Company Litigation by Patients, Customers, Suppliers, Contractors and Employees The Company cannot accurately account for the cost of litigation or legal proceedings initiated by or against it nor predict the final outcome of those proceedings, their resulting compensations or sanctions. Therefore, any negative consequences of such cases could adversely affect DHHC. Cases and proceedings may include but are not limited to actions concerning intellectual property, those that might be brought against the Company in respect of medical complaints, tax issues, labor disputes and other disputes/cases that arise out of negligence or fraud by persons or institutions that are not under the Company's control. As of the date of this Prospectus, management believes that none of the cases filed by or against the Company would significantly affect the Company's financial situation. For a list of all current cases, please refer to Section ( Litigation ) of this Prospectus. 7

39 2.2 Risks Relating to the Industry Competition The Company operates in a competitive healthcare market, competing with government-sponsored healthcare providers and numerous private healthcare providers offering similar services. Competitors may seek to expand their market share by attempting to attract the Company s customers through the offering of new services and treatments not available at the Company. Should the Company s competitors succeed in doing so, the loss of the Company s customers may have an adverse effect on the Company s financial position. Furthermore, due to the introduction of compulsory healthcare insurance, the Company, along with other healthcare providers may face eroding profit margins due to potential increase in bargaining power of insurance companies. There can be no assurance that the Company will be able to compete effectively against current and future competitors and changes in the competitive environment may result in price reduction, reduced margins or loss of market share, any of which could materially adversely affect the Company s profit margins. The Company has enjoyed long-standing relationships with several insurance companies including some that date back more than ten years. To date, the Company has not faced any material issues in collecting its dues from these insurance companies Industry Consolidation It is possible that there will be significant consolidation in the healthcare industry; competitors may develop alliances, through mergers and acquisitions, and these alliances may rapidly acquire significant market share, which could improve their competitive strengths and market share vis-à-vis the Company. On the other hand, DHHC may also develop alliances through mergers and acquisitions, but problems may arise related to the integration of their operations with that of the Company. Examples in this regard include integration of employees, information technology systems, accounting methods and operations of the two companies. Such integration issues may lead to lack of materialization of expected synergies and impact the quality of services provided which, in turn, could have a negative impact on the financial condition of the Company Advancements in Medical Technology The Company utilizes various types of medical equipment to carry out its operations. The healthcare industry is characterized by frequent product improvements and evolving technology which could at times lead to earlier than planned obsolescence or redundancy of the Company s medical equipment. Should the obsolete equipment not be replaced imminently or the replacement of such equipment may involve the Company incurring significant cost, it would have an adverse effect on the Company s financial condition and results of operations Exchange Rate Risk The Company purchases supplies, materials, and products from overseas sources. A decrease in the value of the Saudi Riyal relative to the currency of the source countries may result in increased costs for the Company Saudization The Company is subject to the Saudi Arabian Government s Saudization program which requires that companies personnel contain a minimum percentage of Saudi nationals, that a higher percentage target be set, and that companies enact a plan to meet the higher target. The Company s compliance with Saudization requirements is subject to government review and certification every six months. The operations of the Company, its ability to meet its commitments and apply for government loans, its financial performance and its ability to recruit additional foreign nationals may be adversely affected if it fails in the future to comply with any new, more 8

40 stringent Saudization policies or if new policies are issued by the Ministry of Labor. According to Ministry of Labor, Saudization rate at DHHC stood at 20.4% in August 2012 placing the Company within Green band on the scale formulated by Ministry of Labor for healthcare companies. For more information, please refer to Section 4.9 (Employees) of the Prospectus. Table 3: Saudization scale for healthcare companies Scale Excellent Required Saudization Rate 35% and above Green From 20% to 34% Yellow From 19% to 10% Red From 0% to 9% Source: Ministry of Labour The Company could be subject to the following sanctions if it were placed within the Yellow band in future: i) rejection of the Company s applications for new work visas; ii) one work visa to be granted following the permanent departure of two expatriate employees; iii) inability to change the registered professions of expatriates; iv) inability to recruit expatriates or transfer their sponsorship; v) ability to renew employment permits for employees, provided the existing permit is valid for at least 3 months; vi) ability to renew employment permits for employees, provided an employee s total residency period in KSA is less than 6 years; and vii) expatriate employees will be able to leave without objection to work for green or premium companies. 2.3 Risks Related to the Shares Effective Control by Pre-Offering Shareholders Following this Offering, the Pre-Offering Shareholders will own no less than 69.9% of the Company s issued Shares. As a result, the Pre-Offering Shareholders, acting together, may be able to influence all matters requiring shareholders approval, and may exercise this ability in a manner that could have a significant impact on the Company s business, financial condition, and results of operations including the election of directors, significant corporate transactions, and capital adjustments Absence of a Prior Market for Shares Currently, there is no public market for the Shares, and there can be no assurance that an active trading market for the Shares will develop or be sustained after this Offering. If no active trading for the Shares will develop, the stock s liquidity will be affected, and this may negatively affect stock price. Subscribers may be unable to exit their investment at a desirable price. The Offer Price has been determined based upon several factors, including the history of and prospects for the Company s business, the industry in which it competes, and an assessment of the Company s management, operational, and financial results. Various factors, including the Company s financial results, general conditions in the industry, health of the overall economy, the regulatory environment within which the Company operates, and other pertinent factors beyond the Company s control could cause significant fluctuations in the price and trading liquidity of the Company s Shares Share Price Volatility Subscribers to the Offering may not be able to sell their Offer Shares at or above the Offer Price due to a number of factors, as the market price of the Company s Offer Shares after the Offering may be significantly affected by factors such as variations in the 9

41 Company s results of operations, market conditions, new competitors, or changes in government regulations. Market fluctuations, as well as economic conditions, may adversely affect the market price of the Shares Future Sales and Offerings Sales of substantial amounts of the Shares in the public market following the completion of the Offering, or the perception that these sales will occur, could adversely affect the market price of the Shares. Upon the successful completion of the Offering, the Pre-Offering Shareholders will be subject to a restriction period of 6 months during which they may not dispose of any Shares. The sale of a substantial number of Shares by any of the Pre-Offering Shareholders following the 6-month share restriction period could have an adverse effect on the market for the Shares and may result in a lower market price of the Shares. The Company does not currently intend to issue additional shares immediately following the Offering. If and when the Company decides to raise additional capital by issuing new shares, the newly issued shares would dilute and could potentially reduce the value of the Shares Dividends Payment of dividends in the future will be dependent on, amongst other things, the Company s ability to make profits, its financial position, capital requirements, legal reserves requirements, available credit, general economic conditions, and other factors relating to board of directors sole discretion to declare dividends as they deem appropriate Risks Related to the Economy Any oil price fluctuations will have a direct impact on Saudi Arabia s economy and would subsequently be felt at all microlevels, including by the Company where its market value could be adversely affected. The contribution of the oil sector to Saudi Arabia s GDP continues to be substantial despite the Government s successful and continuous diversification policies. However, such experience does not guarantee that the Company will not be adversely affected by variable economic, market, and political conditions in the future. 10

42 3 Market Overview The source for the information contained in this Section Market Overview is a report prepared by Roland Berger Middle East ( Roland Berger ) covering the healthcare industry in Saudi Arabia. The report was prepared exclusively for the use of the Company. Roland Berger is an independent consulting firm that was established in Munich in 1967 as an international marketing and consultantancy services provider. Roland Berger currently has 2,000 employees in 45 offices located in 33 countries and is owned by more than 200 partners. For more information, please visit the Roland Berger s website ( Neither Roland Berger nor its employees or any of their relatives or affiliates has any shareholding or interest of any kind in the Company. Roland Berger has given and not withdrawn its written consent to the publication in this Prospectus of its name and information presented in its market study reports as of the date of this Prospectus. The Company believes that the information and data provided in this Prospectus from external sources including that by Roland Berger is credible. This information, however, was not independently verified by the Company, its Board Members, its shareholders or consultants so there is no guarantee of the accuracy or completeness of this information. The latest actual information in this section is related to the year 2010 and has been derived from third-party reports including that of Roland Berger. All projections in this section which relate to the year 2011 have been projected by Roland Berger and derived from the Roland Berger Report. 3.1 Introduction Over the last 5 years, Saudi Arabia has experienced considerable growth in economic activity with 5.1% annual growth in GDP from 2006 to In spite of the recent retrenchment due to the impact of global financial crisis, strong underlying fundamentals were underpinned by rising oil prices and an increase in government spending over the period. As with the broader economy, Saudi Arabian healthcare industry has also experienced significant growth since 2006 with healthcare expenditure estimated to have increased by 10.9% per annum from SAR 45.4 billion in 2006 to SAR 68.6 billion in This increase in spending was fueled by the growth in population, strong government support for healthcare industry and rising income levels. 3.2 Demand Drivers Some of these key drivers are briefly discussed below: Growing and Aging Population From a demographic perspective, Saudi population increased at a CAGR of 2.3% from 23.2 million in 2005 to 26.2 million in 2010 as per the report prepared by Samba Financial Group. In addition to the growth, the population has become more aged as well because of the continued increase in life expectancy and as the population becomes aged, the average healthcare cost per person also increases. Table 4: Population Growth in Saudi Arabia Year Population (in millions)

43 Source: Samba Financial Group, Government Support Saudi government's support for healthcare industry has grown beyond direct spending. Since 2006, Ministry of Health has facilitated involvement of private sector in developing Saudi Arabia healthcare industry. Furthermore, to mitigate capacity shortages in provision of healthcare services, Ministry of Health has also relaxed certain Saudization policies for hospitals in rural areas where the Chief of Medical Staff no longer needs to be a Saudi national, and has allowed foreign investors to directly own and operate hospitals in rural areas where, at present, the healthcare infrastructure is not well developed. In parallel, Council of Cooperative Health Insurance has also made it mandatory for all employers that have more than 500 employees to provide health insurance coverage to their expatriate employees and is presently in the process of extending that policy to Saudi citizens working in the private sector as well Increasing Healthcare Expenditure Ministry of Economy and Planning has also allocated SAR 242 billion to healthcare expenditure in its 9th Saudi Arabian Development Plan that runs until 2014, an increase of 82% compared to the previous Development Plan. As a result, the average number of beds per 1,000 population will need to increase from 2.1 in 2010 to 3.5 in This target requires an increase of 43,000 beds, 13,000 physicians and 30,000 nurses in the Kingdom by Part of Saudi government s expenditure in the sector will be in the form guarantees provided to banks for loans taken by privately owned healthcare companies. DHHC, being a private owned healthcare company itself, also stands to benefit from this initiative Increase in Lifestyle Diseases Increasingly sedentary and unhealthy lifestyle in Saudi Arabia is another major factor for increased demand for healthcare services. Unhealthy lifestyle has led to an increase in obesity and chronic diseases. In fact, 66% of the Saudi population above the age of 15 was classified as overweight or obese in 2009, according to the Body Mass Index metric. Of those, 29% were classified as obese individuals. Obesity is shown to increase the probability of contracting diabetes by up to 20 times that of a healthy person contracting the disease. In addition to obesity, Saudi Arabia has a very high prevalence of smokers in its adult population, estimated at 28% of the total population above the age of 15 in Growing Medical Expertise Saudi hospitals are able to conduct more sophisticated procedures now. For example, the number of heart and valve transplants conducted in the Kingdom increased at CAGR of 10% from 2004 to 2009, the number of liver transplants increased at a CAGR of 16% from 1999 to 2009, the number of kidney transplants increased at a CAGR of 11% from 1998 to 2009 and number of cornea transplants increased at a CAGR of 12% from 1998 to This trend is expected to lead affluent Saudis to become more satisfied with the availability and quality of medical care provided in Saudi Arabia, thereby avoiding the need to travel abroad to seek treatment. 12

44 3.3 Saudi Arabian Healthcare Industry After the Ministry of Health started promoting development of the private health insurance market in Saudi Arabia, the total number of privately insured individuals in the Kingdom has increased to an estimated 7 million in Given this new source of healthcare coverage, pricing levels at hospitals have become a secondary selection criteria for patients. In fact, doctors' reputation as well as the quality and qualification of nurses have become more important criterion in the selection of hospitals. Increased focus of healthcare providers on technology and degree of specialization also highlights the emphasis placed by patients on the quality of healthcare facilities. Given this shift in preferences, the growth in patient visits was mostly directed towards private rather than the public hospitals. From 2006 to 2010, out-patient visits to Ministry of Health facilities increased at 2% per annum as opposed to an increase of 7% per annum at private hospitals. Similarly, in-patient admissions at Ministry of Health facilities over the same period increased at 7% per annum as opposed to an increase of 10% per annum at private hospitals. Despite this increase in patient traffic, however, overall capacity increased at a slower pace over the same period, straining existing facilities. Total number of hospitals in the Kingdom increased from 374 hospitals in 2006 to 406 hospitals in The number of hospitals in the Kingdom is projected to increase to 431 in Table 5: Number of hospitals in Saudi Arabia Number of Hospitals Forecast 6100 Ministry of Health Hospitals Other Government Hospitals Private Hospitals Total Percentage of Total Ministry of Health Hospitals 58% 60% 60% 61% 61% 61% Other Government Hospitals 8% 8% 8% 7% 7% 8% Private Hospitals 34% 33% 32% 31% 31% 31% Total 100% 100% 100% 100% 100% 100% Annual Growth Rate Ministry of Health Hospitals - 3% 3% 6% 2% 5% Other Government Hospitals - 0% 3% 0% 0% 13% Private Hospitals - )% 3( 0% 2% 2% 7% Total - 1% 2% 4% 2% 6% Source: Roland Berger In terms of bed capacity, the number of beds increased at a CAGR of 2.1% from 53,464 in 2006 to 58,126 in 2010 and are further projected to increase to 63,936 beds in Given that private hospital expansions where mainly smaller in size and more focused on out-patient services, most of the growth in bed capacity came from public sector contributing close to 90% of the increase in number of beds over the period. Table 6: Number of Beds in Saudi Arabia Number of Beds Forecast 6100 Ministry of Health Hospitals 30,617 31,420 31,720 33,277 34,370 37,912 Other Government Hospitals 10,257 10,828 10,806 10,822 10,939 12,126 Private Hospitals 12,590 11,271 11,362 11,833 12,817 13,898 Total 53,464 53,519 53,888 55,932 58,126 63,936 Percentage of Total Ministry of Health Hospitals 57% 59% 59% 59% 59% 59% Other Government Hospitals 19% 20% 20% % 20 20% 20% Private Hospitals 24% 21% 21% 21% 22% 22%

45 Total 100% 100% 100% 100% 100% 100% Annual Growth Rate Ministry of Health Hospitals - 3% 1% 5% 3% 10% Other Government Hospitals - 6% 0% 0.1% 1% 11% Private Hospitals - (10%) 1% 4% 1% 8% Total - 0% 1% 4% 4% 10% Source: Roland Berger Number of clinics decreased at a CAGR of 0.2% from 2,559 in 2006 to 2,542 in 2010 because most of their patient traffic got diverted towards private hospitals during this period as a result of the increase in number of insured patients. The number clinics is projected to increase to 2,696 in As a result of this diversion in patient traffic, total number of private clinics also reduced from 416 in 2006 to 199 in 2010, though they are projected to increase to 215 in Table 7: Number of clinics in Saudi Arabia Number of Clinics Forecast 6100 Government 2,143 2,150 2,217 2,281 2,343 2,481 Private Total 2,559 2,378 2,434 2,498 2,542 2,696 Percentage of Total Government 84% 90% 91% 91% 92% 92% Private 16% 10% 9% 9% 8% 8% Total 100% 100% 100% 100% 100% Annual Growth Rate Government - 0.3% 3% 3% 3% 6% Private - (45%) (5%) 0% (8%) 8% Total - (7%) 2% 3% 2% 6% Source: Roland Berger Despite the significant growth in investment and capacity in recent years, Saudi healthcare expenditure still lags western standards. The Kingdom spent 5% of its GDP on healthcare in 2009 compared to an average of 12% in OECD countries. This lower level of investment translates into lower levels of coverage with only an average of 22 beds and 21 physicians per 10,000 inhabitants in Saudi Arabia compared to an average of 53 beds and 32 physicians per 10,000 inhabitants in OECD countries. OECD was founded in 1961 and its headquarters are located in Paris. It aims to strengthen policies contributing towards the improvement of social and economic conditions in all parts of the world. Member Countries of OECD Australia Austria Belgium Canada Chile Czech Republic Denmark Estonia Finland France Germany Greece Hungary Iceland Ireland Israel Italy Japan 14

46 South Korea Luxembourg Mexico Netherlands New Zealand Norway Poland Portugal Slovakia Slovenia Spain Sweden Switzerland Turkey United Kingdom United States of America Source: OECD website, 29 September Riyadh Healthcare Industry In line with developments at the national level, the total number of hospitals in Riyadh increased from 75 hospitals in 2006 to 81 hospitals in 2010 and are projected to increase to 87 in Number of public hospitals under the Ministry of Health also increased over this period from 40 hospitals in 2006 to 44 hospitals in 2010 and are projected to increase to 47 hospitals in Table 8: Number of hospitals in Riyadh Number of Hospitals Forecast 6100 Ministry of Health Hospitals Other Government Hospitals Private Hospitals Total Percentage of Total Ministry of Health Hospitals 53% 56% 56% 56% 54% 54% Other Government Hospitals 9% 10% 9% 9% 9% 9% Private Hospitals 37% 34% 35% 35% 37% 38% Total 100% 100% 100% 100% 100% 100% Annual Growth Rate Ministry of Health Hospitals - 0% 5% 5% 0% 7% Other Government Hospitals - 0% 0% 0% 0% 14% Private Hospitals - )% 14( 8% 4% 11% 10% Total - )% 5( 6% 4% 4% 7% Source: Roland Berger In terms of bed capacity, Riyadh experienced a growth of 2.8% in the number of beds from 12,680 in 2006 to 14,144 in Number of beds are further projected to increase to 15,303 in All of the increase in bed capacity in Riyadh came from the private and government owned hospitals. Table 9: Number of beds in Riyadh Number of Beds Forecast 6100 Ministry of Health Hospitals 5,594 5,974 6,074 6,981 7,171 7,917 Other Government Hospitals 3,194 3,530 3,289 3,285 3,328 3,689 Private Hospitals 3,892 2,912 2,848 2,878 3,645 3,953 Total 12,680 12,416 12,211 13,144 14,144 15,559 Percentage of Total Ministry of Health Hospitals 44% 48% 50% 53% 51% 51% 15

47 Other Government Hospitals 25% 28% 27% 25% 27% 24% Private Hospitals 31% 23% 23% 22% 23% 25% Total 100% 100% 100% 100% 100% 100% Annual Growth Rate Ministry of Health Hospitals - 7% 2% 15% 3% 10% Other Government Hospitals - 11% )% 7( (0.1%) 1% 19% Private Hospitals - (25%) )% 2( 1% 27% 8% Total - (2%) (2%) 8% 8% 10% Source: Roland Berger As was the case at the national level, private hospitals have taken a significant amount of out-patient traffic away from private clinics in Riyadh as a result of the increase in the number of insured patients. Insurance companies enter into agreements with private hospitals for the provision of healthcare services to their customers. Table 10: Number of clinics in Riyadh Number of Clinics Forecast 6100 Government Private Total Percentage of Total Government 67% 88% 88% 90% 91% 90% Private 33% 12% 12% 10% 9% 10% Total 100% 100% 100% 100% 100% 100% Annual Growth Rate Government - 0% 1% 4% 5% 6% Private - )% 72( 4% )% 16( )% 4.2( 9% Total - )% 24( 1% 2% 4% 6% Source: Roland Berger In terms of the type of the patient traffic, out-patient visits increased at a CAGR of 6.4% from 17.9 million in 2006 to 22.9 million in 2010 with the key growth areas being orthopedics and dental. Out-patient visits are further projected to increase to 24.2 million in According to Roland Berger, dental and emergency care operations are projected to record the highest number of visits at 3.3 million and 2.8 million respectively in Out-patient clinics are operated by one or more physicians to treat patients. They can either be part of the hospital or operated as independent clinics and at minimum contain a bed for examination, medical equipment and medical consumables. Table 11: Breakdown of outpatient visits in Riyadh Outpatient Clinic Visits Projections 2011 Dentistry 1,719,306 3,269,955 3,138,362 3,237,013 3,079,587 3,251,311 Emergency Rooms 2,402,998 2,460,234 2,517,470 2,592,994 2,670,784 2,750,907 Diabetes 181,,8,9, 2,805,637 2,159,370 2,273,675 1,972,065 2,158,761 Orthopaedics 1,244, ,227 1,913,143 1,952,028 1,516,828 1,653,138 Internal Medicine 1,623,538 2,336,053 2,110,362 2,101,525 1,862,370 1,918,241 Gynecology and Neonatal Care 1,415,156 2,200,812 1,798,835 1,826,153 1,976,103 2,077,341 Pediatrics 1,297,538 1,879,871 1,453,548 1,628,703 1,684,564 1,870,905 Ear, Nose and Throat 1,244,255 2,054,320 1,579,886 1,459,107 1,432,137 1,491,069 Dermatology 663, , , ,254 1,025,294 1,065,419 Ophthalmology 667,453 1,184, ,215 1,086, , ,561 Nephrology 431, , , , , ,130 Rheumatology 311, , , , ,272 Surgery 374, , , ,850 1,000,713 1,030,735 Neurology 141, , , , , ,891 Nutrition 325, , , , , ,712 Psychiatric Care 349, , , , , ,892

48 Pulmonology 263, , , , , ,687 Urology 239, , , , , ,832 Cardiology 232, , , , ,111 Cosmetic surgery 117, , , , , ,128 Open Consultation Clinics 55,421 54,288 85,321 93, , ,808 Fertility 6,199 6,346 6,494 6,650 6,816 7,099 Others 771,071 1,211,309 1,038,468 1,064,469 1,004,873 1,029,401 Total 17,886,045 26,747,057 23,378,640 23,982,765 22,884,092 24,187,352 Source: Roland Berger In-patient traffic in Riyadh also increased at a CAGR of 9.2% from 440,943 patients in 2006 to 626,925 patients in 2010 and is projected to increase further to 668,734 patients in 2011 with key growth areas being diabetes, ophthalmology and neurology while obstetrics and gynecology and pediatrics are expected to account for 41.2% of the total inpatient traffic in Table 12: Breakdown of number of inpatients in Riyadh Number of Patients Forecast 2011 Pediatrics 106, , , , , ,684 Obstetrics and gynecology 83,486 97, , , , ,565 Orthopaedics 38,017 49,189 60,796 62,124 66,722 72,718 Ear, Nose and Throat 37,165 47,108 52,881 47,718 51,966 54,105 Diabetes 24,025 36,031 43,386 36,326 38,381 42,015 Surgery 43,956 38,334 40,043 50,518 51,109 52,642 Cosmetic surgery 23,035 30,944 37,525 33,990 37,865 39,437 Ophthalmology 10,639 9,394 36,168 28,962 14,297 14,825 Internal Medicine 21,016 29,655 33,600 26,470 26,316 27,105 Urology 16,892 15,707 16,238 14,459 16,432 16,826 Dentistry 7,337 8,029 9,512 13,253 8,800 9,291 Pulmonology 5,119 7,470 8,692 7,311 7,910 8,559 Cardiology 4,820 6,554 6,863 6,037 7,280 7,707 Nephrology 2,988 4,289 4,943 3,961 4,005 4,196 Neurology 2,032 3,009 4,115 3,828 7,860 8,429 Open Consultation Clinics Others 13,719 11,890 17,666 21,539 34,408 35,248 Total 440, , , , , ,734 Source: Roland Berger 3.5 Saudi Arabian Pharmaceutical Industry In terms of value, Saudi Arabian pharmaceutical industry grew at a CAGR of 9.0% from SAR 8.0 billion in 2006 to SAR 11.3 billion in Roland Berger has projected it to grow further to SAR 12.0 billion in This growth was driven primarily by a growing and aging population, an increase in healthcare coverage as well as price controls set by the Government. Such price controls have also resulted in growth in demand of generic drugs. Table 13: Size of Saudi Arabian pharmaceutical industry Forecast Pharmaceutical Industry (SAR billion) 2011 Patented Drugs Over The Counter Drugs Generic Drugs Total Source: Roland Berger 17

49 3.6 Competition and Market Share Competitive Position As per Roland Berger s estimates, Ministry of Health hospitals accounted 51% of the 15,303 beds in Riyadh in Private hospitals accounted for 23.4%, or 3,487 beds, of total capacity while other governmental hospitals provided the rest. Riyadh's bed supply is fairly concentrated, with top 15 hospitals accounting for 58% of the total beds. Within the private hospitals in Riyadh, concentration of supply is even more noticeable, with the top 10 hospitals accounting for 68% of the total capacity. Given their large size, most of these hospitals are considered to be generalists, covering a wide spectrum of therapy areas. These private operators differentiate themselves along degrees of specialization, level of out-patient focus and pricequality. Table 14: Number of Hospital Beds in Riyadh Area (2010) Hospital Name Number of Beds Percent of Total King Fahad Medical City 1, % King Faisal Specialist Hospital and Research Centre % King Abdulaziz University Hospital % King Khalid University Hospital % Sulaiman Al Habib Hospital % Prince Sultan Bin Abdulaziz Humanitarian City % Dallah Hospital % Al Hamady Hospital % Specialized Medical Centre Hospital % Riyadh Care Hospital % Mouwasat Hospitals and Centres % Kingdom Hospital and Consultation Clinics % National Hospital % Dr. Abdul Rahman Al Mishari Hospital % Saudi German Hospital % Total % Other Riyadh area hospitals 4, % Total Government and Private Hospitals % Source: Roland Berger Price-Quality: Prices at private hospitals are generally in line with the hospital s ranking on key patient choice drivers: doctors, nurses, location, availability of parking, technology, level of crowdedness and cleanliness, interior design and front desk service. Dallah Hospital is considered a premium facility by insurance providers who have used the pricing levels at all the hospitals to group them as premium, medium and affordable facilities. Degree of Specialization: Some private hospitals are moving towards a deeper coverage of their existing therapy areas in order to cope with rising demand and provide a single point of care for patients while others are electing to trim their therapy areas coverage to a select few, in which they can develop higher level of expertise and become renowned for within the medical community. There is also a group of private hospitals that do not anticipate any change to their degree or depth of specialization. Dallah Hospital falls in the last category because it is already well diversified across difference therapy areas and is not considering any major shift in its coverage. Level of Out-Patient Focus: Wide discrepancies exist between private hospitals' out-patient to in-patient ratios. Some hospitals remain focused on out-patient services for day-cases and walk-in specialist clinics while others have migrated towards a comprehensive hospital model with complete in-patient capabilities. Dallah Hospital is currently among the largest private hospitals in terms of out-patient traffic compared to Dr. Sulieman Al-Habib Hospital, Al-Hammadi Hospital, Kingdom Hospital, Riyadh Care Hospital and Saudi German Hospital. Dallah Hospital has also achieved a referral rate for in-patient services that is above the average of top 10 private hospitals in Riyadh. 18

50 3.6.2 Market Share Healthcare Industry In terms of bed capacity in private hospitals, Dallah Hospital s market share in Saudi Arabia was estimated at 2.6% in 2010, up from 1.9% in Within Riyadh, Dallah Hospital's market share was estimated at 10.6% in 2010, up from 6.2% in 2005 because average number of beds at Dallah Hospital increased from 289 beds in 2007 to 361 beds in Dallah Hospital was attributed a market share of 14% in a survey conducted by Synovate in 2009 where patients were asked about the last private hospital they had visited. Mouwasat Hospital had a market share of 7%, Al-Hammadi Hospital had a market share of 12%, Riyadh Care Hospital had a market share of 10%, Dr. Sulieman Al-Habib Hospital had a market share of 18%, Saudi German Hospital had a market share of 8% and Specialized Medical Center Hospital had a market share of 10%. In terms of the number of in-patients and outpatient visits at private hospitals, Dallah Hospital s market share in 2009 is shown in Table 15 and Table 16 below. Table 15: Market share of Dallah Hospital in Saudi Arabia Market Share as of 2009 Saudi Arabian private hospitals (in-patients) Dallah Hospital 3% Other Private Hospitals 97% Total 100% Saudi Arabian private hospitals (out-patient visits) Dallah Hospital 1% Other Private Hospitals 99% Total 100% Source: Roland Berger Table 16: Market share of Dallah Hospital in Riyadh Market Share as of 2009 Riyadh private hospitals (in-patients) Dallah Hospital 13% Other Private Hospitals 87% Total 100% Riyadh private hospitals (out-patient visits) Dallah Hospital 5% Other Private Hospitals 95% Total 100% Source: Roland Berger Table 17: Dallah Hospital's share of bed capacity compared to private hospital competitors (2010) Hospital Number of Beds Percent of Total Dr. Suleiman Al-Habib Hospital % Dallah Hospital % Al-Hammadi Hospital % Specialized Medical Centre Hospital % Riyadh Care Hospital % Mouwasat Hospital 160 7% Kingdom Hospital and Consulting Clinics 125 5% Riyadh National Hospital 124 5% Dr. Abdul Rahman Al-Mishari Hospital 110 4% Saudi German Hospital 100 4% 19

51 Total % Source: Roland Berger Pharmaceutical Industry Dallah Healthcare s sales of pharmaceutical and herbal products accounted for 0.27% of the total market in 2007 and 0.31% of the estimated total market in The company sells its products throughout the Kingdom and also exports them as well. Jamjoom Pharma, Tamr Group and Batarjee Commercial Establishment are considered as the main competitors of Dallah Pharma. 3.7 Herbal Products Information presented in this sub-section was extracted from a market study report prepared by Euromonitor International ( Euromonitor ), unless otherwise specified. The study included information about the market taken from external sources, including publications issued by third parties. The Company did not independently verify this information and no guarantee can be given on its accuracy or completeness. Furthermore, the Company does not bear any responsibility for it as well. Investors should note that social, economic and political events can have a material affect on the information presented in this sub-section which could lead to different results than those forecasted by Euromonitor. Neither the Company nor its consultants have any reason to believe that the information provided in this sub-section is inaccurate. Euromonitor has given and not withdrawn its written consent to the publication in this Prospectus of its market study report as of the date of this Prospectus. Neither Euromonitor nor its employees or any of their relatives or affiliates has any shareholding or interest of any kind in the Company or its subsidiaries. Euromonitor is a market research and consultancy company founded in It has offices in United States, United Kingdom, Singapore, China, Lithuania, United Arab Emirates, Chile, and South Africa. Investments in Herbal Industry Consumer interest has increased in herbal products in recent years because consumers are attracted by these products safe, natural and gentle image. Awareness of herbal products has also increased as a result of new products development and widening distribution. In addition, consumers are also increasingly scrutinizing the side effects associated with standard pharmaceutical products. Forecast All figures in thousands of Saudi riyals (SAR) 2011 Herbal/Traditional Pain Relievers ,464 2,459 4,063 6,256 Herbal/Traditional Sedative and Sleep Aid Products ,195 1,602 1,970 2,394 2,758 Herbal/Traditional Treatments for Cough, Cold and Allergy (Hay Fever) 52,166 62,078 69,155 92, , ,647 Herbal/Traditional Treatments for Digestive Problems 5,211 5,346 5,453 7,215 8,910 10,741 12,164 Herbal/Traditional Skin Care Products Traditional Herbal Medicinal Tea Herbal/Traditional Smoking Cessation Aids Herbal/Traditional Nutrition Supplements for Children Herbal/Traditional Nutrition Supplements 34,282 37,589 41,728 46,614 51,020 55,732 57,952 Herbal/Traditional Tonics and Bottled Nutritious Beverages 3,130 3,350 3,570 3,940 4,370 4,861 5,178 Total Herbal/Traditional Products 95, , , , , , ,567 Source: Euromonitor 20

52 Key Growth Drivers Increasingly proactive approach to consumer health Consumers have become more sophisticated in their understanding of symptoms, their causes and treatments and are thus increasingly willing to self-medicate with over-the-counter products. This trend was further encouraged by strong satellite TV advertising for many products. Effective advertising is able to reassure consumers of a product s safety and efficacy and thus encourages self-medication. Focus shifts from illness to wellness Media coverage of Saudi Arabia s high levels of obesity and life style diseases such as diabetes has resulted in many consumers trying to improve their health rather than simply trying to relieve the symptoms of ailments. Distribution continues to broaden While pharmacies have been the main distribution channel for herbal products, they lost market share to other channels in 2010 with health food shops notably gaining share. Strong economic growth Total annual disposable income increased by 43% from 2005 to 2010 while per capita disposable income levels increased by 9% in 2010 in real terms despite a GDP growth of just 3%. This in turn fuelled growth in per capita consumer expenditure by 6% in the year. Rising disposable income levels also encouraged consumers to invest in their health. Rather than simply buying consumer health products in response to troublesome symptoms, consumers increasingly bought these products in the hope of improving their health or safeguarding against potential future ailments. Growing population Saudi Arabia has a growing consumer base. From 1990 to 2010 population increased at a CAGR of 2.4% exceeding 26 million by Fertility also remained high at about three births per woman in 2010 with high birth rate encouraged by government policies. A high birth rate is partly linked to the young average age of the Saudi population, with a large number of women being of childbearing age as a result. Almost two-thirds of the indigenous population is believed to be below 20-years-old while 70% is believed to be below 30-years old. By 2015, however, the number of elderly consumers in Saudi Arabia is also expected to increase by 25% because of improved healthcare facilities in the Kingdom. This trend is expected to drive sales growth because doctors and pharmacists are increasingly encouraging older consumers to invest in vitamins and dietary supplements in order to ensure optimum health. Increased occurrence of lifestyle diseases According to the Saudi Diabetes and Endocrine Association, over 70% of the Saudi population was overweight in This was caused by increasingly sedentary lifestyles and a growing preference for fatty snacks, fast food and soft drinks. Saudi Arabia also has the highest percentage of diabetics in the world, with estimates ranging from 25-28% of the population. Blood pressure, heart and circulation problems are also common. In response to the nation s weight problems and the high burden this places on the Saudi healthcare system, the Ministry of Health launched a campaign in 2009 that has helped increase consumer awareness of weight problems. Increased number of health and beauty retailers Pharmacies have expanded rapidly over the last few years with the development of new residential areas. Furthermore, new pharmacies that being opened are expected to be larger in size to include a wider range of beauty and personal care products along with vitamins and dietary supplements. There is also expected to be an increase in the number of health food shops in the Kingdom over the next few years. 21

53 4 The Company 4.1 Introduction The Company s operations date back to 1987G (1407H) when Dallah Hospital (the Hospital ) was established in Riyadh by Mr. Saleh Abdullah Kamel as a sole proprietorship with a share capital of SAR 100,000,000. The Hospital was established with 237 beds and immediately became one of the largest private hospitals in Saudi Arabia as measured by bed capacity. DHHC was established in Jeddah as a limited liability company with commercial registration number dated 30/9/1414H (corresponding to 13/3/1994G). The Company was established with a paid-up capital of SAR 395,000,000 paid divided into 395,000 shares, with a value of SAR 1,000 per share. For further information refer to Table 18: Details Relating to the Change in the Company s Share Capital. Upon establishment, Dallah Group owned 99% of the Company s share capital, with the remaining 1% owned by Mr. Saleh Abdullah Kamel. After the establishment of the Company, the Hospital s assets, liabilities and investments were sold to the Company for a value of SAR 295,000,000. For more information regarding this sale, please refer to table Table 19 of this Prospectus. On 12/11/1414H (corresponding to 23/4/1994G), the Company s shareholders issued a resolution to change to the Company s headquarters to Riyadh. Consequently, commercial registration number dated 23/4/1415H (corresponding to 19/9/1994G) was issued (the Commercial Registration ). Change in share capital dated 24/8/1994G On 17/3/1419H (corresponding to 24/8/1994G), the Company s shareholders decided to decrease the Company s share capital from SAR 395,000,000 to SAR 295,000,000 by decreasing the number of shares from 39,500 to 29,500 shares at a value of SAR 1,000 per share as the capital was deemed to be in excess of the Company s requirements. The shareholders had established the company with a share capital of SAR 395,000,000 based on the book value of the Hospital s assets and investments. Subsequently, the shareholders had decided to acquire the Hospital s assets and investments, net of accumulated losses incurred between 1987G and 1994G, for a value of SAR 295,000,000. Change in share capital dated 9/12/1998G On 20/8/1491H (corresponding to 9/12/1998G), the Company s share capital was reduced from SAR 295 million to SAR 123 million after transferring the Hospital s land s legal ownership to Mr. Saleh Abdullah Kamel at a value of SAR 172 million. The reason for the transfer was to allow Mr. Saleh Abdullah Kamel to pledge those assets as collateral in order to obtain bank facilities for Dallah Group. As a result, Dallah Group and Mr. Saleh Abdullah Kamel s shareholding in the Company was reduced. Change in share capital dated 10/10/2005G On 7/9/1426H (corresponding to 10/10/2005G), the shareholders decided to increase the Company s share capital from SAR 123 million to SAR 148 million by capitalizing retained earnings of SAR 25 million. As per the shareholders resolution, the share s par value was reduced to SAR 50. Additionally, 6,150, 6,150, 9,225 and 9,225 shares were awarded to Mr. Abdullah Saleh Kamel, Aseer, Eng. Tarek Othman Alkasabi and Dr. Mohammed Rashid Alfagih respectively. No amount was paid in exchange for these shares. The following table presents the ownership structure in the Company before the above mentioned shareholders resolutions: Shareholder Ownership % Number of Shares Value of Shares Dallah Group 99% 121, ,770,000 Saleh Abuddlah Kamel 1% 1,230 1,230,000 Total 100% 123, ,000,000 22

54 The following table presents the ownership structure in the Company following the above mentioned shareholders resolutions: Shareholder Ownership % Number of Shares Value of Shares Dallah Group 74% 2,190, ,520,000 Saleh Abuddlah Kamel 1.0% 29,600 1,480,000 Abdullah Saleh Kamel 5.0% 148,000 7,400,000 Eng. Tarek Osman Alkasabi 7.5% 222,000 11,100,000 Dr. Mohammed Rashid Alfagih 7.5% 222,000 11,100,000 Aseer 5.0% 148,000 7,400,000 Total 100% 2,960, ,000,000 Change of Company s legal status On 14/5/1429H (corresponding to 20/5/2008G), the shareholders decided to change the Company from a limited liability company into a closed joint stock company and change its name to Dallah Healthcare Holding Company. The Company was converted into a closed joint stock company as per Ministerial Resolution No. 341/J on 19/10/1429H (corresponding to 19/10/2008G). Change in share capital dated 14/2/2011G On 11/3/1432H (corresponding to 14/2/2011G), the Company s shareholders decided to increase its capital from SAR 148,000,000 to SAR 330,000,000 through two transactions, First Transaction First transaction involved issuance of shares worth SAR 120,000,000 to Mr. Saleh Abdullah Kamel representing difference in the value of non-operational lands transferred from DHHC to Mr. Saleh Abdullah Kamel and operational lands transferred from Mr. Saleh Abdullah Kamel to DHHC. This difference was SAR 117,853,600, or the equivalent of 11,785,360 shares valued at SAR 10 per share. Additionally, 214,640 shares valued at SAR 10 per share were offered, totalling SAR 2,146,400 as per the shareholders agreement, raising the Company s share capital to SAR 268,000,000. The reason for this was to increase the capital of the Company to a whole number in order to avoid issuance of fractional shares in the future. The following table shows details of the assets transferred from Mr. Saleh Abdullah Kamel to the Company: Asset Area (square meters) Total Valuation (SAR) Dallah Hospital Land Riyadh 40,600 93,380,000 Land Block 43 Riyadh 6,250 15,625,000 Land Block 34 - Riyadh 9,250 21,737,500 Land Block 7 - Riyadh 9,900 24,750,000 Dallah Hospital Building (built on Hospital Land) 42,367 83,023,900 Nurses Housing Building (built on Hospital land) 5,247 4,282,000 Families Housing units (built on Land Block 34) 5,138 4,310,400 Administration Building (built on Hospital land) ,800 Health Club (built on Hospital s land) 1,485 1,273,000 23

55 Total - 249,253,600 Source: DHHC, Radma Report The following table shows details of the assets transferred from the Company to Mr. Saleh Abdullah Kamel: Asset Area Total Valuation (SAR) (square meters) Land block 32 Riyadh 6,300 97,650,000 Jeddah Land 14,000 33,750,000* Total - 131,400,000 *Valued based on agreement between the shareholders and Saleh Abdullah Kamel Source: The Company, Radma Report The following table shows difference between the value of the assets transferred to and from DHHC: Assets Valuation (SAR) Assets transferred from DHHC to Mr. Saleh Abdullah Kamel 249,253,600 Assets transferred from Mr. Saleh Abdullah Kamel to DHHC 131,400,000 Difference 117,853,600 Source: The Company, Radma Report The company completed all necessary procedures in relation to the transfer of lands as part of the capital increase as per the shareholders resolution dated 11/03/1432H (corresponding to 11/02/2011G) and the agreement dated 17/03/1432H (corresponding to 20/02/2011G). The shareholders also agreed on 17/3/1432H (corresponding to 20/2/2011G) that Mr. Saleh Abdullah Kamel would grant a portion of his shares to other shareholders in order to keep the shareholding in the Company same as that before 11/03/1432H (corresponding to 14/42011G). The following table shows the ownership structure in the Company as a result of the above mentioned shareholders resolutions: Shareholder Ownership % Number of Shares Value of Shares Dallah Group 47.09% 15,540, ,400,000 Saleh Abuddlah Kamel 37% 12,210, ,100,000 Abdullah Saleh Kamel 3.18% 1,050,000 10,050,000 Eng. Tarek Osman Alkasabi 4.77% 1,575,000 15,750,000 Dr. Mohammed Rashid Alfagih 4.77% 1,575,000 15,750,000 Aseer 3.18% 1,050,000 10,050,000 Total 011% 33,000, ,000,000 On 17/3/1432H (corresponding to 20/2/2011G), Mr. Saleh Abdullah Kamel decided to grant shares at their par value as per the following table: Shareholder Number of shares Value of Shares Dallah Group 8,880,000 88,800,000 Abdullah Saleh Kamel 600,000 6,000,000 Eng. Tarek Osman Alkasabi 900,000 9,000,000 Dr. Mohammed Rashid Alfagih 600,000 9,000,000 24

56 Aseer 600,000 6,000,000 Total 11,880, ,800,000 The following table shows shareholding structure of the Company after the above mentioned transfer of shares: Shareholder Ownership % Number of Shares Value of Shares Dallah Group 74% 24,420, ,200,000 Saleh Abuddlah Kamel 1% 330,000 3,300,000 Abdullah Saleh Kamel 5% 1,650,000 16,500,000 Eng. Tarek Osman Alkasabi 7.5% 2,475,000 24,750,000 Dr. Mohammed Rashid Alfagih 7.5% 2,475,000 24,750,000 Aseer 5% 1,650,000 16,500,000 Total 100% 33,000, ,000,000 Second Transaction Second transaction involved increasing capital of the Company by issuing one share for every 2.39 shares through capitalization of SAR 30,385,058 from statutory reserves and SAR 31,614,942 from retained earnings in order to increase the capital from SAR 268,000,000 to SAR 330,000,000. For further information refer to section 4.10 of the Prospectus. Reimbursement by the shareholders On 31 December 2011G, the Company received SAR 8.7 million as compensation from current shareholders for the use of the Company s property in Shatee District of Jeddah and SAR 2.2 million for shares granted to Mr. Saleh Abdullah Kamel at the time of the capital increase on 11/03/1432H (corresponding to 14/02/2011G). These actions were approved by general assembly on 25/06/1433H (corresponding to 16/05/2012G). Change in share capital dated 25/06/2012G It was agreed to increase the capital from SAR 330,000,000 SAR 472,000,000 during the extraordinary general assembly meeting held on 25/06/1433H (16/05/2012), by issuing 14,200,000 new shares representing 30.1% of the Company s share capital through an initial public offering with the current shareholders waiving their priority rights in this regard. Table 18: Details Relating to the Change in the Company s Share Capital Company Capital Prior to Capital After Date Amount Paid Organization Change Change Limited Liability 13/03/ million SAR 395 million SAR Cash Company 24/08/ /12/1998 Limited Liability Company Limited Liability Company 395 million SAR 295 million SAR None 295 million SAR 123 million SAR None 25 Reason for Change Establishment of the Company Share capital was deemed to be in excess of requirements of the Company s after revaluation of the Hospital s assets, liabilities and investments from SAR 395 million to SAR 295 million Ownership of the Hospital s land and buildings was transferred to Mr. Saleh Abdullah Kamel who at the time owned 99% of the Company s share capital to allow him to pledge those

57 10/10/ /10/ /02/2011 Limited Liability Company Closed Joint stock Closed Joint stock 123 million SAR 148 million SAR 148 million SAR 148 million SAR None 148 million SAR 330 million SAR Capitalization of SAR 25.0 million of retained earnings Capitalization of SAR 30,400,000 of statutory reserves in addition to SAR 31,600,000 of retained earnings ***Issuance of 12,000,000 new shares at a value of SAR 10 per share representing the increase in capital of SAR million (which reflected difference in the value of lands transferred to and from DHHC) and issuance of 214,640 new shares at SAR 10 per share assets as collateral in order to obtain bank facilities **Awarded 6,150, 6,150, 9,225 and 9,225 shares to Mr. Abdullah Saleh Kamel, Aseer, Eng. Tarek Othman Alkasabi and Dr. Mohammed Rashed Alfagih respectively Change of Company s legal status Transfer of the legal ownership of the Hospital s land to the Company and increasing share capital of the Company to a whole number in order to avoid issuance of fractional shares in the future *Hospital assets and investments were sold to DHHC. For more information, please see Table 18 of this Prospectus. ** No payment was made in exchange for the granting these shares *** This amount was SAR 117,853,600 or the equivalent of 11,785,360 shares valued at SAR 10 each. Additionally, 214,640 shares worth SAR 2,146,400 were issued valued at SAR 10 each Source: DHHC Brief History of Dallah Hospital Dallah Hospital was established in 1987 as sole proprietorship owned by Saleh Abdullah Kamel with 237 beds and immediately became one of the largest private hospitals in Saudi Arabia as measured by bed capacity. In 1990 Dallah Hospital became the first private hospital in Saudi Arabia to offer laparoscopic surgery, also known as minimally invasive surgery; a procedure in which surgical operations are performed through a small incision in the patient s skin, usually measuring less than 1.5 centimeters. As opposed to traditional surgeries which require large cavity incisions, laparoscopic surgery induces less trauma on the patient and allows for quicker recovery time. Dallah Hospital continues to be a leader in laparoscopic surgery in the Kingdom. Assets of the Hospital were transferred to DHHC following the Company s incorporation in For more information on assets that were sold, please refer to Table 19 of the Prospectus. Table 19: Hospital Assets and Investments Sold to the Company in 1994 Assets Value (SAR) Hospital Property 34,774,221 Net Assets of the Hospital 211,442,779 Albaraka Medical Clinic 2,565,000 Land in North Riyadh 36,960,000 26

58 Shares in Mecca Medical Centre Company Stake in Al Hadidi Medical Company 10,600,000 (212,000 shares valued at 50 SAR per share) 400,000 (40 shares valued at 10,000 SAR per share) Total Assets and Investments 296,742,000 Balance owed to Saleh Abdullah Kamel (1,742,000) Net Assets and Investments 295,000,000 Source: DHHC A year later, Dallah Hospital opened an in-vitro fertilization center and soon thereafter established a fertility center and diabetes clinic as well, allowing it to significantly expand its customer base. This was followed by Dallah Hospital becoming the first private hospital in Riyadh to perform cardiac surgery in Since then Dallah Hospital has continued to broaden its service offerings in cardiac care, a significant source of revenue for the Hospital. In 1998, Dallah Hospital s fertility unit became one of the first centers in Saudi Arabia to deliver a baby through testicular sperm extraction, helping a couple conceive after suffering twenty years of infertility. During the same year, the Hospital was awarded ISO Quality Management certification that allowed it to broaden its corporate customer base. In 2002, as a measure of Dallah Hospital s growing brand equity, the Company was awarded a contract to manage the operations of a hospital owned by a third-party followed by another contract in Subsequent to that, two new contracts were signed in 2010 which led the Company to spin-off this business activity into a separate division. For more information, please refer to Section 4.7 of the Prospectus. Table 20: Operations and Management Contracts Hospital Name City Contract Date Astoon Hospital Dammam From 2002 to 2005 Al Hayat Al Ahli Hospital Khamise Musheet From 2005 to 2007 Muhayl Aseer Hospital Muhayl Aseer From 2010 to 2015 Al Khafji Joint Operations Hospital Al Khafji From 2011 to 2016 Source: DHHC In 2007, Dallah Hospital expanded its obstetrics and gynecology capacity by constructing a new five-storey building besides the Hospital s main building. This new wing included an in-vitro fertilization center, delivery room, nursery and neonatal and pediatric intensive care units. The following year, Dallah Hospital increased its capacity of emergency care operations from 23 beds to 54 beds and also opened a coronary care unit and an intensive care unit designed for cardiac patients before being awarded the prestigious JCI accreditation in The Hospital was re-accredited by JCI in As of 30 September 2012, Dallah Hospital employed 220 physicians and 1,553 support staff. The Hospital also carried out 10,561 surgeries, admitted 27,345 in-patients, achieved an annual occupancy rate of 58.4% and oversaw 609,911 out-patient visits during the 12 month period ending 31 December

59 4.2 Shareholding Structure Share capital of DHHC is SAR 330 million divided into 33 million shares with a par value of SAR 10 each. After the IPO, the Company s share capital will be SAR 472 million divided into 47.2 million shares with par value of SAR 10 each. The shareholding structure of the Company before and after the Offering is provided in Table 21. Table 21: Ownership Structure of Dallah Healthcare Holding Company Shareholders Pre-IPO Post-IPO Number of Shares % Capital (In SAR) Number of Shares % Capital (In SAR) Dallah Group 24,420, ,200,000 24,420, ,200,000 Tareq Othman Al Qasbi 2,475,000 7,.5 24,750,000 2,475, ,750,000 Muhammad Rashed Al Faqih 2,475,000 7,.5 24,750,000 2,475, ,750,000 Abdullah Saleh Kamel 1,650, ,500,000 1,650, ,500,000 Aseer Company for Trade, Tourism and Industry 1,650, ,500,000 1,650, ,500,000 Saleh Abdullah Kamel 330, ,300, , ,300,000 Public ,200, ,000,000 Total 33,000, % 330,000,000 47,200, % 472,000,000 Source: DHHC Table 22: Direct and Indirect Ownership Pre- IPO Post- IPO Indirect Shareholding through Shareholders Direct Indirect Direct Indirect % Ownership Ownership Ownership Ownership % Saleh Abdullah Kamel 330,000 24,838, ,000 24,838, Dallah Group, Aseer and DHHC Eng. Tarek Osman Alqasabi 2,475, ,475, Aseer and DHHC Dr. Mohammed Rashid Alfagih 2,475, ,475, DHHC Abdullah Saleh Kamel 1,650, , ,650, , Dallah Group, Aseer and DHHC Mohiedien Saleh Kamel - 264, , Dallah Group Source: Dallah Healthcare Holding Company 4.3 Profile of Corporate Shareholders Dallah Al-Barakah Holding Company Dallah Al-Barakah Holding Company ( Dallah Group ) is a Saudi Arabian limited liability company with commercial registration number Dallah Group owns 74.0% of the Company s shares. The ownership structure of Dallah Group is set out in Table XX. Dallah Group also owns 49.9%, and is the major shareholder, of Aseer Trading, Tourism and Manufacturing Company ( Aseer ), which itself owns 5.0% of the Company s shares. Prior to the Offering Dallah Group s direct and indirect ownership in the Company s shares was 74.0% and 2.5% respectively. 28

60 Dallah Group traces its origins to a cleaning and maintenance services company established in In 1975, Dallah Avco Transarabia Company was formed to specialize in the construction, operations and maintenance of airport based projects. Its continued success in winning several contracts with the Saudi Ministry of Defense and Aviation, catapulted the group to grow and diversify extensively. Dallah Group s activities now include media (Arab Radio and Television Network), construction, islamic banking and finance, insurance, real estate, tourism, etc. Dallah Group is considered to be one of the largest companies in Saudi Arabia. Table 23: Ownership Structure of Dallah Group Shareholder Shares Ownership Saleh Abdullah Kamel 490, % Abdullah Saleh Kamel 5, % Moheedin Saleh Abdullah Kamel 5, % Total 500, % Source: DHHC Table 24: Direct and Indirect Ownership by Dallah Group s shareholders of DHHC Pre-IPO Shareholders Saleh Abdullah Kamel Abdullah Saleh Kamel Mohie Kamel Saleh Direct Ownership 330,000 1,650,000 - Source: Dallah Healthcare Holding Company Indirect Ownership % 24,838, , , Direct Ownership 330, ,000 - Post-IPO Indirect Ownership % 24,838, , , Aseer Trading, Tourism and Manufacturing Company Aseer was established as a Saudi Arabian joint stock company in accordance with the laws of the Kingdom under the Royal Decree No. M / 78 dated 11/07/1395H (corresponding to 11/11/1975G) with commercial registration number Aseer s paid-up capital as of 31/12/2010 was SAR 1,264 million. Aseer has a diversified investment portfolio which includes investments in food processing, petrochemicals, energy services, real estate development, financial services and building material industries. Ownership structure of Aseer is shown below: Table 25: Ownership Structure of Aseer Shareholder Shares Ownership Dallah Group 63,068, % Saleh Abdullah Kamel 2,803, % Abdullah Saleh Kamel 678, % Tarek Osman Al-Qasabi 3, % Public 62,638, % Total 126,388, % Source: DHHC 4.4 Dallah Healthcare Holding Company Operations of Dallah Healthcare are organized under four business divisions. These are: 29

61 Dallah Hospital (including the main hospital building, obstetrics and gynecology building and pediatrics building) Dallah Pharma Operations & Management Investments Dallah Hospital provides in-patient and out-patient medical services. Dallah Pharma s activities include wholesale distribution of pharmaceutical, herbal and cosmetic products and Operations & Management division is involved in management and operations of hospitals owned by third-parties. In addition, the Company has several investments within the healthcare industry in Middle East region. Dallah Hospital accounted for over 90% of the Company s revenue in 2008, 2009, 2010 and The Company does not currently conduct research and development, and has not done so in the last three years prior to the date of this Prospectus. The Company does not own any assets outside Saudi Arabia other than those mentioned in Section 4.8 of the Prospectus. Figure 1: Organization structure of DHHC CHHD Callah Pharma Dallah Hospital Operations and Management svneinsevni elianciri gnillivg (nvlec rsvincnrnisv) dinenciri avl yverslsgy gnillivg aiv HsIHinal gnillivg Source: DHHC 4.5 Dallah Hospital Dallah Hospital is one of the largest private hospitals in Riyadh based on the number of hospital beds. It provides advanced care in many areas of specialized medicine through the following medical departments: Cardiology Nephrology Psychiatry Laboratory 30

62 Orthopedics Obstetrics & Gynaecology Neurology Physiotherapy Dental Ophthalmology Pulmonology Radiology Diabetes Pediatrics Rheumatology General Surgery Dermatology Urology Plastic Surgery Fertility Ear, Nose & Throat Nutrition Emergency Care Dallah Hospital accounts for over 90% of the Company s revenue. The Hospital has experienced strong growth in revenues in recent years, fueled by the growing healthcare needs of the residents of Saudi Arabia and development of the Kingdom s health insurance industry. Capacity utilization for therapy areas is available in table xx Dallah Hospital is committed to delivering quality healthcare services to its patients in modern facilities using advanced technology and a team of qualified and experienced healthcare professionals who follow strict ethical standards of medical practice. It is a multispeciality hospital with expertise in advanced medical and surgical interventions provided through a comprehensive mix of in-patient and out-patient services. Quality of care provided at Dallah Hospital along with the Hospital s strict focus on ethical medical practice has led to a consistent growth in the number patients treated. Table 26: Patient Traffic at Dallah Hospital Number of Patients (Thousands) Inpatient Number of Beds Outpatients Outpatient Clinic Capacity Not Available 40.6 Not Available Not Available 63.1 Not Available Not Available 96.1 Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available Not Available CAGR 9.2% 13.8% Source: DHHC Since its establishment in 1987, the Hospital has evolved into one of the leading private hospitals in Saudi Arabia as is evidenced by the following: Dallah Hospital was awarded Joint Commission International ( JCI ) accreditation in During the accreditation process the Hospital was awarded a high score, which highlights the Hospital s strong commitment towards quality and safety standards. Dallah Hospital was awarded ISO-9001 accreditation as well. These certificates are renewed every three years; 31

63 Dallah Hospital introduced the concept of Open Specialist Clinics whereby patients can see a specialist physician without any appointment instead of a general practitioner as is the case with most other hospitals. This concept proved to be very successful and the Hospital now has 23 clinics at present from 4 clinics in 1994; It was the first hospital in Riyadh to establish a dedicated pediatrics wing as part of its emergency care operations in 1987; The Hospital handles approximately 500 deliveries of newborn babies per month and, in order to cater for the growing demand of its services, had to increase the number of delivery rooms from 3 to 15 in 2007; Apart from general intensive care unit that was recently expanded from 9 to 15 beds, Dallah Hospital has dedicated intensive care units for cardiac patients, new born babies and pediatric patients. The Hospital s nursery and natal intensive care units contain a total of 70 and 25 beds respectively while they started with 25 and 4 beds respectively in 1995; Dallah Hospital s laboratories were certified by College of American Pathologists in These certifications are renewed annually. Dallah Hospital was one of the first hospitals in the Kingdom to provide fertility treatment through in-virto fertilization. Dallah Hospital s fertility unit is considered to be one of the first centers in the world using electro-ejaculation / intra-cytoplasmic sperm injection techniques since 1998, sperm extraction techniques since 1995, and in-vitro fertilization techniques since The Hospital was able to achieve a high success rate of 35%. Table 27: Number of Beds and Clinics Year Number of Beds Number of Clinics Source: DHHC Key Milestons 1987: Dallah Hospital is founded by Mr. Saleh Abdullah Kamel 1990: Dallah Hospital becomes the first private hospital in Saudi Arabia to offer laparoscopic surgery 1994: Establishment of DHHC and purchase of Dallah Hospital s assets 1995: Dallah Hospital opens in-vitro fertilization center and thereafter a fertility clinic 1996: Dallah Hospital opens diabetes center 1996: Dallah Hospital becomes the first private hospital in Riyadh to perform cardiac surgery 1998: Dallah Hospital delivers a baby through testicular sperm extraction 1998: Dallah Hospital is awarded the ISO 9001 Quality Management Certification 2002: Dallah Hospital is awarded a license to provide medical treatment using radioactive materials 32

64 2002: Dallah Hospital starts managing operations of third-party owned hospitals 2008: Dallah Hospital opens a new obstetrics and gynaecology wing 2008: Dallah Hospital expands its emergency care operations 2009: Dallah Hospital is awarded JCI accreditation Key Medical Services Dallah Hospital offers a comprehensive range of medical services to its patients which include 24-hour emergency, out-patient department, complete diagnostics, catheterization laboratory, dialysis center, cardiac ambulances for transportation of patients, fertility and diabetes clinics, 24-hour pharmacy and preventive healthcare checks etc. Since 2009, more than 900 surgeries are being performed at Dallah Hospital every month from open heart, cosmetic, laparoscopic and neurosurgeries to surgeries of chest, bones, teeth, eyes, mouth and face. Following is the brief description of some of the medical services offered at Dallah Hospital: Neurology and Neuro Surgeries At neurology department, the Hospital treats disorders of the brain, spinal cord, nerves and muscles. The Hospital has state-of-theart equipment for conducting magnetic resonance imaging, computed tomography, angiography and interventional neuroradiology. There is also a complete range of spinal instrumentation for stabilizing the spine using metal implants. These are used in case of spinal instability from spinal injuries and tumors. Dallah Hospital s critical care units are equipped to deal with neurological emergency round the clock. The Hospital deploys modern technology and equipment to cover a range of neurological diseases. Major neurosurgical operations are carried out regularly which include excision of large spinal tumors and brain tumors and other minimally invasive surgeries of the brain and spinal cord. Cardiac Care Dallah Hospital offers comprehensive cardiac care services to its patients. In non-invasive cardiology, the Hospital provides services of pulmonary function test and echoes on a regular basis. Open heart surgery where the chest is opened and surgery is performed on the heart including that on the valves, arteries and other cardiac structures is also done regularly. Other services include coronary artery bypass graft surgery (which involves using a healthy blood vessel form one part of the body to construct a detour around the blocked coronary artery); coronary angiography where a thin plastic tube known as catheter is guided through an artery in the arm or leg to the coronary arteries. A liquid dye is injected through the catheter that is visible in X-rays to record the course of the dye as it flows through the arteries. This identifies the blocked areas in the coronary arteries and aids decision that needs to be taken to determine the best course of action. This procedure is conducted in catheterization laboratory rather than an operating theater); and coronary angioplasty (which involves guiding a catheter with a small balloon on its tip to the blocked areas of arteries through another catheter and then inflating the balloon, which compresses the plaque build-up, widening the artery for blood flow). There are various other procedures like valvoplasty, pace maker implant to treat various cardiac disorders. Since its inception, the cardiology department has performed more than 2,200 cardiac catheterization procedures and more than a hundred open-heart surgeries. Orthopedics Services provided by Dallah Hospital include joint replacement and arthroscopy, pediatric orthopedics, orthopedic trauma and treatment of knee, hip, shoulder and hand disorders. Knee replacement surgery replaces the cartilage on the ends of the bones of the knee through implants that include a metal alloy on the bottom of the thighbone and polyethylene on the top of the tibia and underneath the kneecap. This is designed to create a new, 33

65 smoother functioning joint that prevents painful bone-to-bone contact. Hip replacement surgery removes the arthritic ball of the upper femur (thigh bone) as well as the damaged cartilage from the hip socket and replaces it with a metal or ceramic ball that is solidly fixed to a stem inserted into the femur. The socket is replaced with a metal cup which is fixed to the acetabulum or socket. Similar surgeries are also performed for the hip which is replaced owning to age-related wear and tear and also at times due to accidental injuries. The joint replacement surgeries are of particular benefit to people of old age and patients who have become immobile due to injury. Nephrology Nephrology department is equipped with computerized dialysis machines and reverse osmosis water plant to provide pure and trace free water supply. Staff in nephrology department provides round-the-clock service to critically ill patients in intensive care units. Some of the procedures performed include hemodialysis where the human body is cleaned through the blood, insertion of catheters into the blood vessels, kidney biopsies and permanent urinary catheter insertion and removal. Urology Procedures performed include partial resection and correction of the bladder in case of bladder tumors, prostatectomy or removal of the prostate gland and laparoscopic (minimal access) surgeries for prostate gland removal and bladder cancers. Minimally Invasive Surgeries Surgeries performed using minimal invasive techniques are characterized by faster recovery times for patients, minimal blood loss, fewer post-surgical complications and minimal surgical trauma and risk of infection. The patient s hospital stay and recovery time is typically significantly shorter than a conventional surgery for the same condition. The use of minimally invasive surgical techniques frees up hospital beds for other patients and reduces the average length of stay at the Hospital. Pulmonology Major procedures include lobectomy or removal of a portion of a lung which is irreversibly affected by disease, decortication, or removal of the outer covering of the lung, and needle biopsy of the lung. Minor procedures include bronchoscopy, a diagnostic and therapeutic procedure on respiratory tree using a bronchoscope, and intercostals and pericardial drainage where abnormal fluid is drained out of the area around the lungs and the heart respectively. Obstetrics and Gynecology Gynecology procedures carried out by Dallah Hospital include hysterectomy (which is a surgical removal of the uterus), abdominal cervicopexy (which corrects prolapse of the uterus) and ovarian cystectomy (which corrects cyst formation in the ovaries). Obstetrics procedures include antenatal care, normal deliveries, caesarian section deliveries, painless labor and management of high-risk pregnancies. Neonatology procedures and services include incubation of newborn premature babies, phototherapy of newborns suffering from jaundice and intensive care for critically ill newborns. Dermatology Procedures performed at dermatology department include treatment of: i) warts and skin tumors; ii) vitiligo and psoriasis; iii) removal of skin pigments, freckles and acne scars; and iv) skin care. Plastic Surgery Within plastic surgery, procedures offered at Dallah Hospital include: I. Rhinoplasty surgery, which is used to improve the external appearance of or to manipulate the nose bone. It is also used to: i) correct nasal septum and dilate the air passage for improved breathing; ii) partially remove cartilage from nose; and iii) repair any deformity of the nose, either congenital or that due to fractures. 34

66 II. Liposuction surgery, which is used to remove excess fat from various parts of the body. While most of the surgeries can be done within a day, some surgeries may require admission for 1 or 2 days. Apart from plastic surgery, over 900 other surgeries are performed at Dallah Hospital in any given month from open heart and neurosurgeries to cosmetic, endoscopy, vascular, chest, orthopedic, dental, eye, oral and maxillofacial surgeries, to name a few. Dallah Hospital was the first private hospital in Saudi Arabia to offer laparoscopic surgery, introducing the technique in Dallah Hospital continues to lead the market not just in advanced surgical techniques, but also in providing out-patient surgery. Fertility Dallah Hospital was the first hospital in Saudi Arabia to open and operate a fertility clinic. Procedures performed at Dallah Hospital include ovulation induction (administrating medications to simulate ovulation); intrauterine insemination (facilitating unimpeded travel of viable eggs through fallopian tubes); in-vitro fertilization (using medications to simulate development, growth and maturation of eggs that are fertilized in laboratory); intra-cytoplasmic sperm injection (treating moderate to severe forms of male infertility); egg retrieval (nourishing embryos in an incubator that result from combining retrieved eggs with sperms before being placed into the uterus); embryo transfer (dilatation of cervical canal at the time of transferring eggs into the uterus to facilitate the procedure); embryo cryopreservation (fertilizing pre-embryos by slowly freezing them using a cryoprotectant and then transferring them either during a natural cycle or in a programmed cycle); assisted hatching (placing a small opening in the membrane that surrounds the human embryo before transferring them to the uterus); blastocyst transfer (developing the embryo to blastocyst stage the stage at which the embryo naturally arrives to the uterine cavity and gets implanted); male infertility treatments; and rectal electroejaculation (simulating the seminal vesicles). Opthamology Opthamology department provides diagnostic and therapeutic services to patients who suffer for eye-related diseases. Some of the procedures performed at Dallah Hospital include surgically extracting and replacing unclean lens from the eye with a new lens; refractive surgeries to correct myopia, farsightedness, astigmatism, esotropia and exotropia; and canuloplasty (first and only microcatherter-based procedure to treat glaucoma). Dental The department provides a wide range of dental services including, routine checkups and procedures, orthodontic treatment, prosthodontic procedures and oral and maxillofacial surgeries. The Dental Department collaborates with the Pediatrics Department to provide specialized dental care for children. Diabetes The Diabetes center was established in 1996 through collaboration with Deaconess Hospital, a major teaching affiliate of Harvard Medical School. The center was the first integrated establishment for diabetes treatment in Saudi Arabia. The center focuses primarily on providing treatment to acute diabetic patients. Critical Care Critical care at Dallah Hospital exists to provide acute care for those patients who are generally unstable, critically ill and those in urgent need of advanced monitoring and intensive treatments. These tasks are carried out with precision, synchronization and coordination of a multidisciplinary team in intensive care unit. Dallah Hospital s critical care team is skilled and specialized in diverse specialties of medicine and anesthesia and provides full spectrum of medical, cardiac, surgery and trauma-related critical care services. Nursing staff is trained to meet the clinical, psychological, physical and emotional needs of the patient. The critical care facility has modern monitoring and life support equipment supplied by renowned manufacturers within the industry. 35

67 Diagnostics Diagnostics department has high end imaging facilities for computerized tomography and magnetic resonance imaging. Routine X- rays and ultrasound investigations are also carried out. Pathology laboratory offers blood, urine, stool etc. testing that is carried out on fully and semi-automatic calibrated machines and rechecked by the Hospital s pathologists to rule out errors in reporting. Emergency Care Emergency wing is open 24 hours a day, 365 days a year. Apart from having a dedicated emergency wing for obstetrics and gynecology patients, Dallah Hospital is also the only hospital in Riyadh to have a dedicated emergency wing for pediatric patients. The department has facilities for providing ambulances which are equipped with life support systems including monitors and ventilators to transport critically ill patients. All ambulances have mobile phone communication system with emergency department to communicate information on patient s condition to the doctors. Nurses and paramedical staff in emergency department also have basic life support training. Preventive Healthcare Growing health consciousness within the Saudi population has provided Dallah Hospital with an opportunity to offer preventive healthcare services. Target population for preventive healthcare check-ups is also increasing day by day Operational and Support Functions Dallah Hospital has developed an efficient operational and support structure with 12 departments that manage the Hospital s operations and provide support to the medical departments. These are: Pharmacy; Laboratory; Radiology and Medical Imaging; Support Services; Procurement; Finance; Information Technology; Statistics; Business Center; Human Resources and Administration; Internal Audit; and Sales and Marketing. Pharmacy Pharmacy department looks after the pharmaceutical needs of the Hospital. It provides up-to-date information on all drugs to Dallah Hospital s doctors through the Hospital s online information systems network and has instituted an electronic medication error reporting process to facilitate collaboration of information on drugs. The department has also formed several committees to ensure that drugs administered to patients are safe and appropriate for treating each type of illness. I. Pharmacy and Therapeutics Committee: Comprising of the Hospital s medical staff, this committee is responsible for ensuring that medications and therapeutic agents used at Dallah Hospital are of the required standards. 36

68 Position Committee Chairman Member Member Member Member Member Member Name Doctor Zuhair Tahir Doctor Saher Safrini Doctor Bakheet Abdul Rahim Francesca Villamille Doctor Ilham Al Idrisi Doctor Isam Saeed Doctor Feda' Fou'ad Source: DHHC II. Medications Evaluation Committee: This committee monitors and evaluates the prescription and use of drugs and adverse drug reactions. Their findings are then reported to the Pharmacy and Therapeutics Committee. Position Committee Chairman Member Member Member Member Member Member Name Doctor Zuhair Tahir Doctor Saher Safrini Doctor Bakheet Abdul Rahim Francesca Villamille Doctor Ilham Al Idrisi Doctor Isam Saeed Doctor Feda' Fou'ad Source: DHHC III. Antimicrobial Advisory Committee: This committee is tasked with the role to promote safe and cost effective use of antimicrobials at Dallah Hospital. With increasing concerns on the effectiveness of antibiotics, role of this committee is critical in ensuring that the therapy provided is effective and does not contribute to the increasing number of resistant bacteria. Position Committee Chairman Coordinator Member Member Member Member Member Member Name Doctor Muqbil Al Hadithi Doctor Feda' Abu Yunis Doctor Ilhamy Rizq Doctor Isam Saeed Doctor Hazem Hamdoun Doctor Hamza Abdul Rahim Doctor Muwaffiq Diyab Doctor Nidal Hameed 37

69 Member Leonora Escalante Source: Dallah Healthcare Holding Company IV. Pharmacy and Nursing Committee: This committee is responsible for effective coordination between pharmacy and nursing departments. Laboratory Role of the laboratory is to provide patients and physicians with accurate and efficiently conducted laboratory tests through: Development, implementation and evaluation of quality control methods; Phlebotomy procedures to assess the patient s physical and emotional status before initiating a procedure or selecting an equipment to be used to administer that procedure; Continuous evaluation and revision of current laboratory procedures; Introduction of new and improved procedures; Continuing education programs for the staff at laboratory; and Encouraging staff to seek professional qualifications. Radiology and Medical Imaging Department of radiology and medical imaging provides patients with a wide range of diagnostic imaging and therapeutic services and procedures. These include general X-rays through digital and portable equipment, Sonography (ultrasound), Computed Tomography (CT Scan), Magnetic Resonance Imaging (MRI), administration of nuclear medicine, bone mineral densitometry for osteoporosis, digital fluoroscopy and angiography, mammography and dental imaging. Support Services This includes the following four units: I. Restaurant The Hospital s restaurant prepares food for patients, their companions and staff with the objective of providing best nutritional care to them. Restaurant is also tasked with the responsibility to plan menus and continuously improve the patient s nutritional care process in a cost effective manner. II. Laundry Laundry is tasked with the responsibility of cleaning the Hospital s linens, staff s uniforms, laboratory coats, and providing tailoring service to meet the needs of patients and staff. It is also responsible for segregating contaminated linen from non-contaminated linen and disinfecting them. III. Housekeeping Responsibilities of the housekeeping unit include making sure that the Hospital premises are always clean, manufacturers cleaning instructions are followed, high-touch surfaces (e.g. doorknobs, bedrails, light switches, surfaces in and around toilets in patient room) are cleaned and disinfected on a regular basis, airborne transmission is eliminated from operating and delivery rooms and ambulance cars are cleaned from inside and outside as per the standard guidelines. IV. Maintanance Maintenance unit is responsible for operation and maintenance of lighting, plumbing, electrical distribution, air conditioning and heating systems of all of the Hospital s buildings. 38

70 Procurement Procurement department has streamlined the process by which each department orders its supplies to ensure provision of uninterrupted care to patients. Once the items are received from technically qualified vendors, they are uploaded on the Hospital s computerized inventory control system and are stored within their prescribed temperature and humidity levels. A process has also been instituted to allow each department to monitor the expiry date of its supplies. The Hospital looks to leverage its longstanding relationship with its vendors to source quality supplies while keeping the costs down. Finance Finance department is responsible for the overall financial management of the Hospital to ensure that it operates efficiently and effectively with the financial resources available. Its role includes provision of accurate financial information to senior management and Board of Directors. Responsibilities of finance department include provision of financial and management information to the Board of Directors, negotiating funding with providers of capital, payment of salaries, management of receivables and payables, development of costing systems, maintenance of financial controls and liaising with the Internal Audit department, participation in the strategic planning process and operating the Hospital s departmental budgeting system. Information Technology Dallah Hospital has focused on developing its information technology infrastructure in order to create a stable platform on which to build its enterprise applications. The Hospital s IT infrastructure covers the following areas: Server and Storage LAN and WAN Networks Operating Systems Backup and security Disaster Recovery Responsibilities of the Hospital s information technology team can be divided into the following three areas: Operations: Information technology department is responsible for network infrastructure of the Hospital including servers, routers, switches, firewalls, , internet access, wireless access, overall network security and implementation and enforcement of the IT policy. Applications Support: Information technology department operates a helpdesk system that users throughout the hospital can use if they have any issues with PC s, printers and software applications and to liaise with external support companies to ensure the resolution of problems that arise from specific Healthcare related software solutions. Project Management: Information technology department is also responsible for implementing and maintaining new and current information technology projects within the Hospital in coordination with third parties where ever required. This includes scheduling upgrades and adding new interfaces to the Hospital s systems whilst making sure new systems are compatible with current/future IT strategy. Statistics Statistics department provides management with vital insight into the performance of the Hospital s various departments providing reports on key performance indicators on a daily, monthly, quarterly, annual basis. Some of the matrices that the statistics department tracks include: patient visits in each department, number of deliveries and surgeries, patients per doctor and doctors utilization levels. Statistics department also undertakes non-routine studies to identify and analyze trends in patient traffic and disease occurrences which, in turn, allow the management to better position the Hospital to meet the shifting healthcare needs of its patients. It also conducts studies and analysis at the request of other departments within the Hospital. Business Center Responsibilities of the Business Center include negotiating, executing, and implementing the Hospital s medical services contracts with its corporate customers, insurance companies and governmental agencies. Before engaging with any insurance company the 39

71 Business Center ensures that they are licensed by the Saudi Arabian Monetary Authority and the Council of Cooprative Health Insurance. Once Dallah Hospital enters into a contract, Business Center is responsible for ensuring the Hospital maintains the standards of care and conduct required as part of that contract. Human Resources and Administration The Human Resources and Administration department provides a strategic and coherent approach to support and develop of the Hospital s most important assets it s staff and management. Human Resource department is responsible for their recruitment, training and professional development. Apart from recruitment, it is also responsible for public relations, housing, security, transportation and payroll administration as well. The department is committed to ensuring that the working culture of the Hospital and the quality and commitment of its staff, contribute to continuously improving patient care. Training activities are also organized both within the Hospital and in partnership with Saudi Chambers of Commerce. Following is the summary of its main responsibilities: Employing qualified, well-trained, and experienced medical, nursing, paramedical, and administrative staff; Developing job descriptions for all categories which are reviewed periodically; Conducting orientation programs for newly hired staff; Conducting periodic performance evaluations; Ensuring that the nursing staff are properly licensed to practice its duties; Ensuring compliance with Saudization requirements as stipulated by respective governmental bodies; and Maintaining confidentiality of the employees personal data. Internal Audit Internal Audit department follows an independent internal audit practice. The department functions autonomously and reports directly to the Audit Committee. Main responsibilities of the department include the following: I. Ensuring that the Company s policies and procedures have been put in place with main focus on transactions having financial and administrative implications; II. Participating in the process of modifying any policies and procedures; III. Auditing daily accounting functions; IV. Liaising with external auditors at corporate level for completion of audit. Sales and Marketing This department is responsible for implementing the Hospital s marketing initiatives, including external and internal communication, patient satisfaction monitoring, advertising and community education and awareness. It serves the clients and patients of the Hospital by using their feedback to develop products that address their needs and fill gaps within the range of services offered in the local market. Some of the responsibilities of the department are listed below: Analyze the local healthcare industry to identify new segments to achieve growth and diversify customer base; Arrange seminars and conferences to educate public on different means of disease prevention; Setting up meetings with corporate clients to encourage communication and receive their feedback; Developing promotional material of the Hospital; Developing advertisements and signage that delivers information to a wider audience; Manage the website of the Hospital Major Clients Dallah Hospital s clients primarily fall under three categories: 40

72 Cash customers: This includes patients who pay for their treatment themselves and they represent 20% of out-patients and 38% of in-patients as of December 2011; Insured customers: This includes patients whose cost of treatment is borne by the insurance companies and they represent 62% of out-patients and 54% of in-patients as of December 2011; and Company-sponsored customers: This includes patients whose cost of treatment is borne by their employers and they represent 18% of out-patients and 9% of in-patients as of December Percentage of insurance customers within the overall mix of customers continues to increase as a result of the new regulation that made it mandatory for all companies to provide health insurance to their employees. Presently, the Hospital has 23 reimbursement contracts with major insurance companies in the Kingdom and the contract with NCCI represented 16.5% of the Hospital revenue in Dallah Hospital also places significant focus on securing and maintaining contracts with key corporate customers. Some of the companies with whom the Hospital has contract with include Saudi Electricity Company, Saudi Aramco, King Fahad Causeway Authority and Saudi Arabian Basic Industries Corporation. All the contracts are renewable every year Current Expansions Projects at Dallah Hospital Pediatrics Building Pediatrics building is being constructed on an area of 3,585 square metres northwest of Dallah Hospital. Built up area will be 13,284 square metres. There will also be an underground parking facility while support services including internal pharmacy will be located in the second basement. Ground floor will have a reception area, first floor will have outpatient clinics and second and third floors will have inpatient rooms. The building will accomodate 60 beds and 20 outpatient clinics and will be connected to the main hospital building at four different points. Hashem Contracting and Trading Company Limited began construction on 13 December 2011 and expects the project to be completed within 20 months from the start of construction i.e., May of Total value of the contract is SAR 80.4 million. It was recently revised upwards from SAR 59.4 million after management decided to change design of the building and some of the materials used in construction. Out of the total contract value of SAR 80.4 million, SAR 40.5 million has already been paid. The estimated remaining cost of the project as of the end of September 2012 was SAR 32.1 million. Cost incurred so far relates to excavation and site preparation expenses and payment of the portion of down payment. 80% of the cost is paid at the time of completion of construction of each portion of the building. Project is being financed through cash flow from operations and loans from bank and Ministry of Finance. For more information, please refer to Section 12.9 (Financial Facilities) of the Prospectus. As of 30 September 2012, 72% of the project had been completed. Table 28: Payment Schedule for the Construction of Pediatrics Building All figures in thousand SAR Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter Total Construction Works 21,100 9,575 9,575 9,575 9, ,400 Facilities and Equipment - 2,745 2,745 2,745 2, ,980 Reserves ,000 5, ,000 Total 21,100 9,575 12,230 12,230 17,320 7, ,380 Actual Costs Construction 10,928 4,937 8,247 16, ,490 41

73 Works Facilities and Equipment Reserves Total 10,928 4,937 8,247 16, ,490 Source: DHHC Table 29: Pediatrics Building Funding Plan All figures in thousand SAR Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter Total Government Loan - Ministry - 15,338 6,160 6,160 8,660 3, ,190 of Finance Bank Loans 2,680-6,160 11, ,000 Company Operations* 21,100 6,895 (3,018) - - (915) (3,873) ,190 Total 21,100 9,575 12,320 12,320 17,320 7, ,380 Actual Financing Government Loan - Ministry of Finance Bank Loans 25, ,000 Company Operations 928 4,937 8,247 16, ,490 Total 25,928 4,937 8,247 16, ,490 * The negative amounts represent amounts to be collected from government loans which will be paid in advance from Company operations. Source: DHHC Cost of SAR 40.5 million incurred by the Company so far was financed through bank debt of SAR 25.0 million and cash flow from operations of SAR 30.5 million. The remaining balanced will be financed through cash flows from operations, bank debt and government loans Parking Facility Parking facility has been constructed on an area of 5,500 square metres north of Dallah Hospital. Built up area is 29,531 square metres. 528 cars can be parked there at any point in time. The facility was opened in February At the start of the project, cost was estimated to be SAR 28.1 million but some modifications made to the structure of the building which resulted in an increase in cost by SAR 3.5 million to SAR 31.6 million. The project was financed by cash flow from operations and financing from a local bank. For more details, please refer to Section 12.9 (Financial Facilities) of the Prospectus. 4.6 Dallah Pharma Dallah Pharma is the wholesale distributor of pharmaceutical, herbal and cosmetic products. Dallah Pharma distributes these products to retail pharmacies, health and beauty stores, hospitals and government agencies. 42

74 4.6.1 Products Dallah Pharma has exclusive distribution rights in Saudi Arabia for 45 pharmaceutical products, 12 herbal products and 8 cosmetic products. The Company has also applied for registration of an additional 12 pharmaceutical and 2 herbal products with Saudi Food and Drug Authority. While there is no set period within which registration process can be completed, management expects the process to take from 3 months to 2 years and in some cases even more than 2 years. Dallah Pharma does not manufacture any products but instead focuses on marketing and distributing products manufactured by other companies, some of which are sold under the label of Dallah Pharma. New products are also added to the Company s product portfolio once the management ascertains demand for those products in the local market, negotiates appropriate margins for Dallah Pharma and meets the requirements of Saudi Food and Drug Authority. Dallah Pharma also enters into tenders placed by GCC governments to procure pharmaceutical products for their hospitals. Tenders are offered by GCC governments, Ministry of Defense and Aviation, King Fahad Medical City, Medical Affairs Department at National Guard Hospital and NUPCO to buy medicines for their hospitals. Dallah Pharma participates in these tenders through Jordanian Pharmaceutical Manufacturing Company, though in the future the Company may bid jointly with other manufacturing companies as well for some of the products. While GCC governments launch their tenders on a yearly basis, frequency with which the other tenders are launched can vary from anywhere between once a year to once every three years. Tenders represented 5.1% of Dallah Pharma s revenue during the six month period ended 30 June In 2011, DHHC applied for tenders offered by GCC countries, NUPCO, King Fahd Medical City and Medical Affairs Department at National Guard Hospital. The value of these tenders was SAR 4.5 million, SAR 6.1 million, SAR 0.2 million and SAR 3.4 million respectively. During the current year, up until 30 September 2012, the Company participated in bidding for tenders from Ministry of Health and NUPCO Key Departments Dallah Pharma s operations are structured along four key departments. They are: Sales and Marketing: Responsibilities of the sales and marketing department include: I. Visiting customers to strengthen the Company s relationship with them and seek new business opportunities; II. Attend healthcare product exhibitions; III. Participate in joint marketing campaigns with product manufacturers; and IV. Collection of payments from customers. Registration: This department is responsible for registration of the Company s products with Saudi Food and Drug Authority and other GCC government bodies. In this regard, it also coordinates with manufacturers to arrange inspection of their plants by concerned authorities. Tenders: This department is responsible for sourcing new tenders, submitting the Company s bids and, should the contract be awarded to the Company, ensuring adherence to the terms and conditions of the contract. Exports: This department is tasked with the responsibility to increase the Company s sales outside Saudi Arabia. DHHC has exported its herbal products to UAE, Bahrain, Qatar, France and Azerbaijan. Exports currently represent 2% of Dallah Pharma s sales. 4.7 Operations and Management In 2002, leveraging the brand equity generated by Dallah Hospital over the years, the Company decided to enter into contracts to manage and operate hospitals owned by third-parties. Dallah Healthcare does not take an ownership interest in these hospitals. Instead it provides operational expertise in exchange for a fixed annual fee and / or a variable fee based on the earnings of the hospitals being managed. 43

75 Table 30: Operations and Management Contracts Hospital Name City Contract Date Astoon Hospital* Dammam From 2002 to 2005 Al Hayat Al Ahli Hospital** Khamise Musheet From 2005 to 2007 Muhayl Aseer Hospital Muhayl Aseer From 2010 to 2015 Al Khafji Joint Operations Hospital Al Khafji From 2011 to 2016 * Contract was not renewed due to Company's sale of its stake ** Owner decided against renewing the contract Source: DHHC At present, the Company has two contracts: Al-Khafji Joint Operations Hospital: The Company started this contract in April This hospital is owned by Aramco Gulf Operations Company and Kuwait Gulf Oil Company. It caters for the medical needs of around 3,000 employees of these two companies and their dependents. The hospital has a total of 100 beds, 13 out-patient clinics and 2 operating rooms. DHHC has signed the contract to manage its operations for the period of 5 years. Currently the hospital has 362 employees and 55 doctors. The value of this contract is SAR 88.9 million over five years and the contract is split over several payments related to mobalization and demobilization charges, personnel charges, accommodation charges, charges for consumed medical supplies, tools, spare parts and other instruments, charges for maintenance and repair of medical and non-medical equipment and facilities, charges for catering services and charges for transportation, training, site office and profit. Main obligations of DHHC include, but are not limited to, the following: I. Providing medical and non-medical staff, equipment, tools, materials, catering services and technical and professional support to carry out operations; II. III. IV. Procure all the medical and non-medical supplies; Operate and maintain the hospital's information systems infrastructure; and Provide medical services in accordance with the quality standards adopted by the owner and the external bodies. DHHC cannot appoint, transfer or subcontract its duties and obligations without prior written consent of Aramco Gulf Operations Company Limited. Mahail Hospital: It is a private hospital located in Aseer. The Company started this contract in November It is a general hospital with 100 beds, 25 out-patient clinics and 2 operating rooms. DHHC has signed the contract to manage its operations for the period of 5 years. The contract is valued at SAR 4.5 million over five years in addition to 10% of Mahail Hospital s income. Main responsibility of the Company under this contract is to provide management expertise. The hospital has 194 employees and 28 physicians. The five-year contract period is automatically renewable for five more years unless one of the parties informs the other that they do not wish to renew it within one year of expiry of the agreement. The agreement gives the Company the right to purchase 10% of Mahail Aseer Hospital Company s shares at book value prior to its IPO in the event it decides to go public. 44

76 4.8 Healthcare Investments The Company has following equity investments: Investment Date of Investment Cost of Investment (SAR) Unrealized Profits (Losses) (SAR) Dividends (SAR) Mecca Medical Centre ,600, Al Ahsa Medical Services ,300, Jordanian Pharmaceutical Manufacturing Company ,570 (177,978) - Source: DHHC, as of 31 December Makkah Medical Center Makkah Medical Center is a Saudi joint stock company with commercial registration number , dated 14/08/1410H (corresponding to 11/03/1990G). It is located in Makkah and has a share capital of SAR million divided into 3.0 million shares with a par value of SAR 50 each. The Company owns 8.0% of the share capital. The Company made this investment in 1990 (corresponding to 1410 H). There is no annual income from this investment Jordanian Pharmaceutical Manufacturing Company Jordanian Pharmaceutical Manufacturing Company is a Jordanian public joint stock company with commercial registration number , dated 27/01/2004G, located in Amman, Jordan. It has a total share capital of 20.0 million Jordanian Dinars, divided into 20.0 million shares with a par value of 1 Jordanian Dinar each. Dallah Healthcare owns 0.5% of the share capital. The company manufactures pharmaceutical products, cosmetics and medical appliances. Its products are also sold by Dallah Pharma. Table 31: Ownership of Jordanian Pharmaceutical Manufacturing Company Name Percentage of Ownership Islamic Corporation for the Development of the Private Sector 28.3% Jordanian Islamic Bank 28.1% Abdulmuniem Bin Rashed Bin Abdulrahman Al Rashed Mr. Ahmad Hassan Hussein Shaheen 5.0% Al Tawffeek House for Development Holding Company 4.4% Rashed Abdulrahman Al Rashed and Sonscompany 4.1% Sofian Ibrahim Yassine Al Sartawi 1.6% 45

77 4.8.3 Al-Ahsa Medical Services Company Al-Ahsa Medical Services Company is a Saudi Arabian limited liability company with commercial registration number , dated 07/08/1418H (corresponding to 07/12/1997G). It is located in Al-Ahsa and has a capacity of 120 beds. It has a total share capital of SAR million divided into 150,000 shares with a par value of SAR 1,000 each. DHHC owns 0.83% of the share capital. List of all the shareholders is provided below: Table 32: Ownership of Al Ahsa Medical Services Company Name (SAR) Percentage of Ownership Al Ahsa Development Company 45,158, % The heirs of Mr. Nasser Hamad Al Zira'ah 38,509, % Public Authority for Social Insurance 30,000,000 20% The Arab Investment Company 18,750, % Rashed Abdul Rahman Al Rashed and Sons Company 5,645, % Saad Abdul Aziz Abdul Rahman Al Hussein 4,678,500 3% Rashed Saad Abdul Rahman Al Rashed 3,000,000 2% Ibrahim Abdullah Saleh Al Afaleq 3,000,000 2% Dallah Healthcare Services Company 1,250, % Source: DHHC Arabian Malaysian Takaful Company Arabian Malaysian Takaful Company was a Bahraini exempt joint stock company, incorporated in the Kingdom of Bahrain, with commercial registration number 46222, dated 15 November 2000G. It was licensed to carry out takaful and re-takaful activities in accordance with the teachings of Islamic Shariah and had a total share capital of 962,500 Bahraini Dinars, divided into 1,000 shares with a par value of 500 Bahraini Dinars each. Dallah Healthcare owned 99.5% of the share capital and the remaining 0.5% was owned by Eng. Tarik Al-Qassabi, chairman of DHHC. In an Extraordinary General Assembly Meeting of the company s shareholders on 24 December 2009, the shareholders resolved to voluntary liquidate the operations of the company subject to the approval of Central Bank of Bahrain and Bahrain s Ministry of Industry and Commerce. The company also sent a letter to the Saudi Arabian Monetary Agency on 26 September 2010 to confirm that it had ceased its operations in Saudia Arabia. The registration of this company was cancelled as per the certificate No issued by the Bahraini Ministry of Industry and Trade, dated 22/09/2011. The Company decided to liquidate Arabian Malaysian Takaful Company in order to focus on DHHC s existing operations. Cost of liquidation was SAR 321,000 of which SAR 45,000 represented legal fees. Remaining balance of around SAR 276,000 related to the cost of final year of operations and other liquidation expenses. At the end of the liquidation process, SAR 659,200 was collected by DHHC. For more information, please refer to Table 30 (Liquidation of the Arabian Malaysian Takaful Company) of the Prospectus. 46

78 Table 33: Liquidation of Arabian Malaysian Takaful Company All figures in thousand SAR 1 January ,471 Investment Proceeds Exclusion of investment and closure of amounts for relevant parties 31 December 2011 (659.2) (5,811) - Source: 1022audited financial statements, DHHC Omega Critical Care Company Ltd. DHHC owned 75% of Omega Critical Care Limited, a company registered in Scotland. Value of the investment was SAR 16.6 million. Shareholding of the Company in Omega Critical Care Limited was transferred at book value to Al-Yusra International Investment Company because Omega is involved in research and development of new medical products and, as such, is expected to incur losses in foreseeable future. Shareholding of Al Yasra International Investment Company, a Saudi limited liability company, is the same as that of DHHC. Indirect ownership of Omega Critical Care Limited by current Company shareholders Shareholders Indirect Ownership (%) Dallah Albaraka Holding Company 55.5 Tareq Othman Al Qasbi 5.6 Muhammad Rashed Al Faqih 5.6 Abdullah Saleh Kamel 3.8 Aseer Company for Trade, Tourism and Industry 3.8 Saleh Abdullah Kamel 0.8 Source: DHHC 4.9 Employees Management believes that success of DHHC depends significantly on the Company s ability to attract, develop and retain skilled doctors, nurses and non-medical staff. As of 30 September 2012, the Company had a total of 2,171 employees of which 17.5% were Saudis. As shown in the table below, 81.7% of the employees were employed at Dallah Hospital of which 47.8% were doctors and nurses. As per Ministry of Labor, saudization rate at DHHC on 26 August 2012 was 20.4%. This figure was based on 380 Saudi employees out of a total of 1,911,placing the Company within the Green band. This saudization ratio includes employees of hospital that the Company operates (Khafgi Hospital). Minimum saudization ratio required by Ministry of Labour to place healthcare companies within the Green band is 20.0%. Following are the reasons for differences in the number of DHHC s employees as per the records of Ministry of Labor and the Company: 47

79 As of 30 September 2011, the Company employed 192 expatriate employees who were under the sponsorship of the Dallah Al-Barakah Group. The reason for this is that employees of both companies were combined together in Ministry of Labor s records. Records of the two companies at Ministry of Labor were separated after DHHC became a joint stock company but sponsorship of some of those employees has still not been transferred. It is expected that the cost of transferring their sponsorships will be SAR 1.0 million and this process is expected to be completed by Q The Company's current saudization ratio does not include these employees. The Company began operating Khafji Hospital in Q and, since then, has recruited a number of employees to work at that hospital. As of December 2011, 189 employees had been recruited and/or their sponsorships transferred to DHHC. However, sponsorship of 31 employees still needs to be transferred. This process is expected to be completed by Q Table 34: Breakdown of employees at DHHC As of 31 December 2009 As of 31 December 2010 As of 31 December 2011 As of 30 September 2012 Saudi Non-Saudi Total Saudi Non-Saudi Total Saudi Non-Saudi Total Saudi Non-Saudi Total Dallah Hospital Doctors Nurses Others * Total Dallah Pharma Sales and Marketing Others Total Main Management Administrati on Total Operations and Management Al Khafji Joint Operations Hospital Total Total number of employees Saudization Rate 275 1,461 1, ,520 1, ,678 2, ,791 2, % 14.4% 17.9% 17.5% * Others includes management, technicians, maintenance and cleaning and catering staff. Source: DHHC 48

80 4.10 Details of Capital Increase on 14/02/2011 and Valuation of Properties used in Capital Increase On 11/03/1432H (corresponding to 14/02/2011), the Company s shareholders decided to increase its capital from SAR 148 million SAR 330 million by issuing shares worth SAR 120 million to Mr. Saleh Abdullah Kamel, representing the difference in the fair value of the non-operational lands transferred from DHHC to Mr. Saleh Abdullah Kamel and the Hospital s land transferred from Mr. Saleh Abdullah Kamel to DHHC which was SAR 117,853,600 or the equivalent of 11,785,360 shares at with a nominal value of SAR 10.0 each. In addition, 214,640 shares with a nominal value of SAR 10.0 each (equivalent of SAR 2,146,400) were awarded to shareholders upon shareholders agreement so the total capital of the company would become a whole number in order to avoid issuance of fractional shares in the future. DHHC has completed the process relating to the transfer of properties. Furthermore, one share was awarded for every 2.39 shares owned through capitalization of SAR 30.4 million from statutory reserves and SAR 31.6 million from retained earnings. On 17/03/1432H (corresponding to 20/02/2011G), it was agreed between shareholders that Mr. Saleh Abdullah Kamel would grant 11,880,000 shares of DHHC to other shareholders in order to keep the shareholding structure same as that before 14/02/2011. On 31 December 2011, DHHC received SAR 10.9 million as compensation from current shareholders. This included: i) SAR 8.7 million as compensation for use of the land located in Shatee District in Jeddah; and ii) SAR 2.2 million representing the value of shares granted to Mr. Saleh Abdullah Kamel during the capital increase on 11/03/1432H (corresponding to 14/02/2011G). These decisions were approved during the general assembly meeting on 25/06/1433H (corresponding to 16/05/2012G) Background Mr. Saleh Abdullah Kamel used to own Dallah Hospital s land and buildings. The Company decided to acquire these properties before the IPO because they were used to conduct operations of Dallah Hospital. In exchange, two non-operational lands were transferred to Mr. Saleh Abdullah Kamel: i) a plot of land located on King Fahd Road in Riyadh; and ii) a plot of land located in Jeddah that was leased to Red Sea Mall for an annual rent of SAR 1.9 million. Both parties agreed to value this land on the basis of cost plus the value of lease agreement. For more details, please refer to Section of the Prospectus Appraisal Issuance of 12 million new shares worth SAR 120 million was approved by the general assembly. This amount represented the difference in the value of lands of SAR 117,853,600 and the value of 214,640 shares (SAR 2,146,400) that were awarded to shareholders. For more details on properties owned by the Company, please refer to Section 12.4 of the Prospectus. Table 35: Appraisal of Buildings Owned by Mr. Saleh Abdullah Kamel Used in the Capital Increase SAR million Book Value Market Value Appraiser Properties 34,774, ,492,500 Radma Real Estate Investment Buildings 51,462,963 93,761,100 Radma Real Estate Investment Total Value 86,237, ,263,600 * For more information, please refer to Table xx ** For more information, please refer to Table xx Source: DHHC, Radma Real Estate Investment 49

81 Table 36: Lands Owned by DHHC Used in the Capital Increase SAR million Book Value Market Value Appraiser King Fahad Road Land 29,400,000 97,650,000 Radma Real Estate Investment Jeddah Land 25,000,000 33,750,000 Assessment of land value was not done by a third party. Agreement was reached between the two parties for the sale to be carried out at a price that reflected the book value of the land along with unpaid rent on that land Total Value 54,500, ,400,000 Source: DHHC, Radma Real Estate Investment Table 37: Difference in the Valuation of Assets Transferred to and from DHHC Total Valuation Assets (SAR) Assets Transferred from Mr. Saleh Abdullah Kamel to DHHC 249,253,600 Assets transferred from DHHC to Mr. Saleh Abdullah Kamel 131,400,000 Difference 117,853,600 Source: DHHC, Radma Real Estate Investment Table 38: Appraisal of Lands for Capital Increase Land Dallah Hospital Land Plot No. 43 Plot No. 34 Plot No. 7 Plot No. 32 Jeddah Property District Nakheel East Nakheel East Nakheel East Nakheel East Nakheel East Shate' District Owner at Time of Appraisal Saleh Abdullah Kamel Saleh Abdullah Kamel Saleh Abdullah Kamel Saleh Abdullah Kamel Dallah Healthcare Holding Company Dallah Healthcare Holding Company Current Owner Dallah Healthcare Holding Company Dallah Healthcare Holding Company Dallah Healthcare Holding Company Dallah Healthcare Holding Company Saleh Abdullah Kamel Saleh Abdullah Kamel Area (square metres) Value per Square Meter (SAR) Total Valuation (SAR) 40,600 2,300 93,380,000 6,250 2,500 15,625,000 9,250 2,350 21,737,500 9,900 2,500 24,750,000 6,300 15,500 97,650,000 14,000 2,411 33,750,000* Total ,892,500 * Based on agreement between both parties Source: Radma for Real Estate Investment, DHHC 50

82 DHHC and Mr. Saleh Abdullah Kamel decided not to have the land in Jeddah valued by an independent appraiser. Instead, it was valued on the basis of the book value of the land which was SAR 25 million plus SAR 8.7 million that represents the rent for the use of that land. On top of that, DHHC was also paid SAR 8.7 million as compensation for using that land. As of 31 December 2011, this amount had been paid to DHHC as mentioned in Section 4.11 (Recent Developments) and Section (Income from Other Sources) of the Prospectus. It should be noted that subsequent to the increase in capital, when Jeddah land was valued by an independent appraiser, its value was calculated to be higher than that used for the purposes of capital increase. For more information, please refer to Table 40. Plot No. 32 located over an area of 6,300 square metres in Nakheel district of Riyadh consisted of 6 individual plots of land, two of which were bought from Mr. Saleh Abdullah Kamel in October They had an area of 2,100 square metres and were valued at SAR 3,570,000 (price per square meter was SAR 1,700 because that area was zoned for residential use). These two plots were combined with four other plots of land owned by DHHC to become a parcel of six plots of land zoned for commercial use. These two plots of land were, therefore, valued at SAR 32,550,000 (price per square meter was SAR 15,500 because the area was zoned for commercial use). Table 39: Appraisal of Buildings for Capital Increase Building Dallah Hospital Nurse Housing Family Housing Administration Health Club District Nakheel East Nakheel East Nakheel East Nakheel East Nakheel East Owner at Time of Appraisal Saleh Abdullah Kamel Saleh Abdullah Kamel Saleh Abdullah Kamel Saleh Abdullah Kamel Saleh Abdullah Kamel Current Owner Dallah Healthcare Holding Company Dallah Healthcare Holding Company Dallah Healthcare Holding Company Dallah Healthcare Holding Company Dallah Healthcare Holding Company Number of floors Area (square metres) Evaluation per square meter (SAR) Estimated value of services (SAR) Total Valuation (SAR) 6 42,367 1,700 11,000 83,023, , ,200 4,282, , ,000 4,310, , , , ,000 1,273,000 Total ,761,100 Source: Radma Real Estate Investment Table 40: Land Details Land District Previous Owner Current Owner Dallah Hospital Land Nakheel East - Riyadh Saleh Abdullah Kamel 51 Dallah Healthcare Holding Company Area (square metres) 39,620 Current Use The main hospital building, residential buildings, Institute of Training Building, and the administration

83 Plot No. 43 Nakheel East - Riyadh Plot No. 34 Nakheel East - Riyadh Plot No.7 Nakheel East - Riyadh Plot No. 32 Nakheel East - Riyadh Jeddah Property Shate' District - Jeddah Source: DHHC, Radma Real Estate Investment Saleh Abdullah Kamel Saleh Abdullah Kamel Saleh Abdullah Kamel Dallah Healthcare Holding Company Dallah Healthcare Holding Company Dallah Healthcare Holding Company Dallah Healthcare Holding Company Dallah Healthcare Holding Company 6,450 building Raw land and support services building 10,500 Residential buildings 9,900 Residential and parking buildings Saleh Abdullah Kamel 6,300 Raw land Saleh Abdullah Kamel 14,000 Rent at an annual rate of 1.9 million SAR Table 41: Building Details Building District Previous Owner Current Owner Dallah Hospital Nurse Housing Family Housing Bachelors housing Administration Health Club Obstetrics and Gynaecology Hospital Building Nakheel East Nakheel East Nakheel East Nakheel East Nakheel East Nakheel East Nakheel East Source: Radma, Century 21 and Basma Saleh Abdullah Kamel Saleh Abdullah Kamel Saleh Abdullah Kamel Saleh Abdullah Kamel Saleh Abdullah Kamel Saleh Abdullah Kamel Saleh Abdullah Kamel Dallah Healthcare Holding Company Dallah Healthcare Holding Company Dallah Healthcare Holding Company Dallah Healthcare Holding Company Dallah Healthcare Holding Company Dallah Healthcare Holding Company Dallah Healthcare Holding Company Number of floors Area (square metres) 6 34, , , , , , Year of construction work completion Land valuations conducted post the capital increase Radma Real Estate Investment, Century 21 and Basma for Property Management were appointed as independent appraisers to value the properties based on the price of the neighbouring lands after adjusting the value for size and shape of the lands in question. Furthermore, obstetrics and gynecology was also valued on the basis of the lease period of 14 years as per the lease agreement that was in place. Table 42: Land Appraisal Process after Capital Increase Radma Real Estate Investments Century 21 Saudi Basma for Property Management. Property Area (square metres) Value per Square Meter (SAR) As of February 2010 As in the first quarter of 2011 As in the first quarter of 2011 Total Valuation (SAR) Value per Square Meter (SAR) 52 Total Valuation (SAR) Value per Square Meter (SAR) Total Valuation (SAR) Dallah Hospital 39,620 2,300 91,126,000 2,345 92,908,900 6, ,720,000 Property Plot No. 43 6,450 2,500 16,125,000 2,295 14,802,750 3,150 20,317,500 Plot No ,500 2,250 23,625,000 2,565 26,932,500 3,000 31,500,000

84 Plot No.7 9,900 2,500 24,750,000 2,848 28,195,200 2,848 28,195,200 Plot No. 32 6,300 15,500 97,650,000 15,612 98,355,600 18, ,715,000 Jeddah Property 14,000 4,000 56,000,000 4,158 58,212,000 4,000 56,000,000 Total ,276, ,406, ,447,700 Order Lowest Rating Highest Rating Source: Radma, Century 21 and Basma Land in Jeddah was valued on the basis of the book value of the land which was SAR 25 million. Furthermore, DHHC was also paid SAR 8.7 million as compensation for using that land. Radma Real Estate Investment, Century 21 and Basma for Property Management valued that land on the basis of the prices of lands in the neighbourhood after adjusting the value for its shape and size. Table 43: Buildings Assessment after the Process of Capital Increase Rdma Real Estate Investments As in the first quarter of Building The main building of Dallah Hospital Residential Buildings - land of Dallah Hospital Residential buildings Plot 34 Residential buildings Plot 7 Administration Building Area (square metres) Value per Square Meter (SAR) Total Valuation (SAR) Century 21 Saudi As in the first quarter of 2011 Value per Square Meter (SAR) Total Valuation (SAR) Busma for Property Management. As in the first quarter of 2011 Value per Square Meter (SAR) Total Valuation (SAR) 34,476 2,019 69,609,000 3, ,298,000 2,080 71,710,080 5, ,282, ,934, ,636,752 5, ,310, ,835, ,206,112 1, ,683, ,442, , ,800 - Health Club 1, ,273,000 - Building of Obstetrics and Gynecology Hospital** Included in the valuation of the main hospital building Included in the valuation of the main hospital building , ,640 12,841 2,880 36,982,080 4,320 55,473,120 2,880 36,982,080 Total ,011, ,983, ,963,984 Order Highest Rating Lowest Rating ** Valued on the basis of the lease period of 14 years as per the lease agreement that was in place at the time. The agreement was then cancelled and the land was purchased Source: Radma Real Estate Investment, Century 21, and Basma for Property Management 53

85 Approvals RTat tsn is tnahtc T acotica se irt ns ocnn is ced330 taatsn was approved at the Extraordinary General Assembly meeting on 11/3/1432H (corresponding to 14/2/2011G). A request was submitted to Ministry of Commerce and Industry ( MoCI ) on 25/2/1432H (corresponding to 29/1/2011G) for the meeting to be held on 11/3/1432H (corresponding to 14/2/2011G). On 3/3/1432H (corresponding to 6/2/2011G), the MoCI issued a letter No. 222/2146 approving the request to hold the meeting on the above mentioned date. MoCI also approved agenda of the meeting including items which required voting. On 11/3/1432H (corresponding to 14/2/2011G), the meeting was held at the Company s headquarters in Riyadh. Chairman presided over the meeting. Meeting was attended by shareholders representing (13,912,000) shares of the Company (94% of the share capital). The meeting was also attended by representatives of MoCI. ehe participants unanimously decided to approve the following resolutions: 1-Approval to increase the Company's capital from SAR 148 million to SAR 330 million representing an increase of SAR 182 million with a nominal value of SAR 10 per share, according to the following: A- Land plots described in deed no. (5783/5), deed no. (5500/12) and deed no. (1026/4) which are the plots of land on which Dallah Hospital building and its residential buildings are built, valued at SAR 120 million provided that the increase is credited to Mr. Saleh Abdullah Kamel. After the transfer of land in Jeddah as described in deed number (1006), parcel of land in Riyadh as described in deed number (21236/10) and deed number (59390/3), balance owed by the Company to Mr. Saleh Abdullah Kamel was SAR 120 million. Increase in capital was approved by Dallah Al Baraka Holding Company, Aseer, Tarek Othman Al-Kasabi, and Dr. Mohammed Rashid Al Faqih. B - Approval of awarding one share for every 2.39 shares held by the registered shareholders of the Company on the day of the Assembly by the way of transferring the amount of SAR (62,000,000) as follows: Amount of SAR 30,385,058 from the statutory reserve. Amount of SAR 31,614,942 from retained earnings as indicated in the financial statements dated 31/12/2010G. 7,534 fractional shares resulting from this transaction were not sold to shareholders but instead distributed to them. 2 The existing shareholders relinquished the shares proposed in paragraph (a) to Mr. Saleh Abdullah Kamel. 3 Approval of the amendment of Article (7) of the Bylaws related to the Company capital to become: (The text before amendment) The company's capital is (248,000,000) one hundred and forty-eight million SAR, divided into (14,800,000) fourteen million eight hundred thousand shares, and the nominal value per share is (10) ten SAR. All the shares of the company are cash and in kind. (The text after amendment) The company's capital is (330,000,000) three hundred and thirty million SAR, divided into (33,000,000) thirty-three million shares, and the nominal value per share is (20) ten SAR, and all the shares of the company are cash and in kind. 4 Approval of the amendment of Article (8) of the Bylaws related to subscribing to the company capital: (The text before amendment) 54

86 The founders subscribed in all the company shares which are (24,800,000) fourteen million eight hundred thousand shares, and paid their full value of (148,000,000) one hundred and forty-eight million SAR at the establishment. (The text after amendment) The Founders subscribed in all company shares which are (33,000,000) thirty-three million shares, and paid their full value of (33,000,000) three hundred and thirty million SAR at the establishment. 5 Approval of the amendment of Article (17) of the Bylaws related to the members of the board of directors, by increasing the number of members of the Board of Directors from (5) to (9) members. 6 Approval of the election of four members to fill the positions, three of whom were independent members. 7 Approval of the amendment of Article (24) related to the meetings quorum and the decisions of the Board by increasing of the meetings quorum from four (4) members to five (5) members. To become according to the following: (The text before amendment) "The meeting of the board can only be valid if attended by at least half the board members, and the number of the members should not be less than four members in all cases. " (The text after amendment) "The meeting of the board can only be valid if attended by at least half the board members, and the number of the members should not be less than five members in all cases. " 8 Approval of the rules for selecting Nominations and Remunerations Committee members, tenure of their membership and the committee s responsibilities. 9 Approval of the rules for selecting Audit Committee members, tenure of their membership and the committee s responsibilities. On 27/3/1432H (corresponding to 2/3/2011G), a letter was sent from General Manager of Corporations Directorate commissioned by MoCI to approve the publication of Extraordinary General Assembly's resolutions. After the publication of the decisions, the company s statute was amended in accordance with resolutions adopted in the Extraordinary General Assembly meeting. MoCI then stamped the statute and issued the amended commercial registration certificate. Based on the decisions issued, the company's ownership structure became as following: Shareholder Percentage of Ownership Number of Shares Value of shares Dallah Albaraka Holding Company 47.09% 15,540, ,400,000 Saleh Abdullah Kamel 37% 12,210, ,100,000 Abdallah Saleh Kamel 3.18% 1,050,000 10,050,000 Engineer Tareq Othman Al Kasabi 4.77% 1,575,000 15,750,000 55

87 Dr. Muhammad Rashed Al Faqih 4.77% 1,575,000 15,750,000 Aseer Company 3.18% 1,050,000 10,050,000 Total 100% 33,000, ,000,000 On 17/3/1432 H (corresponding to 20/2/2011 G), shareholders met at the company and the shareholder Saleh Abdallah Kamel decided to grant his shares mentioned below at their nominal values, as follows: Shareholder Number of Shares Value of shares Dallah Albaraka Holding Company Saudi Arabia 8,880,000 share s 88,800,000 Abdallah Saleh Kamel 600,000 shares 6,000,000 Engineer Tareq Othman Al Qasbi 900,000 share s 9,000,000 Doctor Muhammad Rashed Al Faqih 900,000 share s 9,000,000 Aseer Company 600,000 share s 6,000,000 Total 11,880,000 Shares 118,800,000 Shares After that ownership structure became as follows: Shareholder Percentage of Ownership Number of Shares Value of shares Dallah Albaraka Holding Company Saudi Arabia 74% 24,420, ,200,000 Saleh Abdullah Kamel 1% 330,000 3,300,000 Abdallah Saleh Kamel 5% 1,650,000 16,500,000 Engineer Tareq Othman Al Qasbi 7.5% 2,475,000 24,750,000 Doctor Muhammad Rashed Al Faqih 7.5% 2,475,000 24,750,000 Aseer Company 5% 1,650,000 16,500,000 Total 100% 33,000, ,000,000 56

88 5 Organization and Management 5.1 The Board of Directors Pursuant to its by-laws, the Company s Board of Directors comprises of 9 directors including 3 independent directors. The Board of Directors has established three sub-committees, an Audit Committee, Nominations and Remuneration Committee and Investment Committee. These committees extend the role of the Board of Directors in reviewing the Company s activities and providing guidance to management. The committees meet more regularly than the entire Board of Directors and report back to the Board of Directors. Table 44: Board of Directors of Dallah Healthcare Board Member Position Independence Eng. Tarek Othman Al- Kasabi Dr. Muhammad Rashed Al-Faqih Executive or Non-executive Shareholding Direct Indirect Chairman of the Board Not independent Non-executive 7.5% % Board Member Not independent Executive 7.5% - Ammar Hasan Kamel Board Member Not independent Non-executive - - Mohiuddin Saleh Kamel Board Member Not independent Non-executive - 0.8% Fahad Siraj Malaikah Board Member Not independent Non-executive - - Dr. Abdulrahman Abdulaziz Al-Suwailem Dr. Ahmad Saleh Babaeer Fahad Abdullah Al- Gassem Board Member Independent Non-executive - - Member of the Board / Chief Executive Officer Not independent Executive - - Board Member Independent Non-executive - - Faris Ibrahim Al-Humaid Board Member Independent Non-executive - - Source: DHHC Mr. Anas Alassafi (Age: 28; Nationality: Saudi) is the secretary of the Board of Directors and is not the shareholder of the Company. 57

89 Members of the Board Brief resumes of the members of the Board of Directors are given below: Name Eng. Tarek Othman Al-Kasabi Age 60 Nationality Position Saudi Chairman of the Board of Directors Education Bachelors degree in Civil Engineering from King Saud University in Saudi Arabia in Experience Mr. Al-Qasabi began his career at Kara Establishment in Makkah where he worked as Project Engineer from 1976 to 1977, as Project Manager from 1978 to 1981 and as Vice President from 1981 to He was then appointed General Manager of Makkah Construction and Development Company and served in that capacity from 1988 to1990. In 1990, he joined Dallah Hospital as the Company s Chief Executive Officer and served in that capacity until From 1994 to 1995 he served as Managing Director of DHHC and from 1995 onwards as Chairman of the Company. He also served as Chief Executive Officer of Aseer Trading, Tourism and Manufacturing Company from 1992 to Other Positions Member of the Board of Directors of 6th October Cardiac Center at Dar Al-Fouad Hospital in Egypt ( Present) Member of the Board of Directors of Al-Jazeera Bank ( Present) Member of the Board of Directors of Disabled Childrens Association ( ) Chairman of Omega Medical Technology Company in Scotland ( Present) Chairman of Al-Rowad Schools ( Present) Deputy President of Riyadh Municipality Council ( Present) Deputy Chairman of Aseer Trading, Tourism and Manufacturing Company ( Present) Chairman of Al-Jazeera Capital ( Present) Superintendent of Prince Fahad Bin Salman Charity Association s Project for Care of Patients with Renal Failure ( Present) Member of the Board of Directors of Tasnee National Company ( ) 58

90 Name Dr. Mohammed Rashed Al-Fagih Age 62 Nationality Position Education Experience Saudi Member of the Board of Directors Bachelor of Medicine and Bachelor of Surgery degree from Baghdad University in Iraq in 1971 and Fellowship from Royal College of Surgeons in United Kingdom in 1977 Dr. Al-Fagih served as Chief of Medical Staff at the Armed Forces Hospital in Riyadh from 1979 to During this period, he was also appointed as the chairman of the hospital s cardiac department in 1983, a position that he held until From 1992 to 1998, he served as Director of Medical Administration and Chief of Medical Staff at Prince Sultan Cardiac Center within the Armed Forces Hospital. In 1997, Dr. Al-Fagih joined King Saud University as professor of Surgery and continues to serve in that capacity till today. Since 2005, Dr. Al-Fagih has also served DHHC as Medical Superintendent. Other Positions Medical Director of Respiratory Therapy Programme at the Riyadh Campus of Loma Linda University in USA ( Present) Adjunct Professor of Cardiopulmonary Sciences at Loma Linda University in California, USA (1990- Present) Chairman of Kingdom University in Bahrain ( Present) Member of the Board of Directors of Advance Techno Soft Company in Riyadh ( Present) Chairman of Omega Critical Care Ltd. in UK ( Present) Chairman of Al-Osra Hospital in Riyadh ( Present) Member of the Board of Directors at King Faisal Specialist Hospital and Research Center in Riyadh ( Present) Member of the Board of Directors of Omega Health Company in Montreal, Canada ( Present) Name Ammar Hasan Kamel Age 45 Nationality Position Education Experience Saudi Member of the Board of Directors Bachelor of Science degree in Systems Engineering from King Fahad University of Petroleum and Minerals in Saudi Arabia in 1991 Mr. Kamel worked as Process Control Engineer at Saudi Arabian Oil Company (Aramco) from 1992 to In 1994, he joined Halawani Brothers Company as Brand Manager before being promoted to Assistant General Manger in 1995 and then General Manager in 1997, a position he held until Mr. Kamel then joined Dallah Al-Barakah Holding Company and served initially as General Manager from 1999 to 2001 and then as Assistant to the President from 2001 to From 2003 to 2004, he served as General Manager of Mouwad Jewlery Company and then as Director of Power Projects at Dallah Al-Barakah Holding Company from 2004 to 59

91 2007. Since 2007, Mr. Kamel has served as Executive Director of Dallah Trans Arabia Company and Assistant to the President of Dallah Al-Barakah Holding Company. Other Positions Name No current positions Mohiuddin Saleh Kamel Age 30 Nationality Position Education Experience Saudi Member of the Board of Directors Bachelors degree in Economics from University of San Francisco in USA in 2002 with a major in Marketing. Mr. Kamel served as General Supervisor of Arab Radio and Television Network s Sports Channels from 2003 to 2005 before being appointed as Managing Director of International Sports Events Company in 2005, a position that he continues to hold till today. Since 2009 and 2011, Mr. Kamel has also served as Deputy Chief Executive Officer of Media at Arab Media Corporation and Deputy Chief Executive Officer of Projects and Maintenance at Dallah Al- Barakah Holding Company respectively. Other Positions Chairman of Dallah Media Production Company ( Present) Member of the Board of Directors of Jordan Media City in Amman, Jordan ( Present) Member of the Board of Directors of Dallah Real Estate Investment Company ( Present) Member of the Board of Directors of Al-Maza Real Estate Development Company ( Present) Member of the Board of Directors of Arabian Tourism and Real Estate Development Company ( Present) Member of the Board of Directors of Arab Radio and Television Network ( Present) Member of the Board of Directors of Arab Digital Distribution Company ( Present) Member of the Board of Directors of Arab Media Company (2005 -Present) Member of the Board of Directors of Arab Advertising Distribution Company ( Present) Chairman of Al-Rabie Saudi Food Company ( Present) Member of the Board of Directors of Jabal Omar Company ( Present) Member of the Board of Directors of Halwani Brothers Company ( Present) Member of the Board of Directors of Al-Barakah Banking Group in the Bahrain ( Present) Member of the Board of Directors of Al-Khuzami Management Company ( Present) Name Fahad Siraj Malaikah 60

92 Age 39 Nationality Position Saudi Member of the Board of Directors Education Bachelors degree in Computer Engineering from King Saud University in Saudi Arabia in 1996 and Master of Business Administration degree from Oxford University in 2006 Experience Mr. Malaika served at Saudi Arabian Monetary Agency form 1996 to 2003 where he worked as Software Developer within the Banking Technology Group from 1996 to 1997, Project Manager from 1997 to 1998, Team Leader from 1998 to 1999 and Head of Information Technology from 2000 to From 2003 to 2005, he served as General Manager of Attar Group. In 2005, Mr. Malaika joined Al-Khabeer Financial Advisors as Vice President of Banking Products and served in that capacity until 2006 before being appointed Executive Partner and Acting Managing Director of Investment Banking, a position that he held until From 2007 to 2009, he served as Head of Capital Markets at Swicorp in Saudi Arabia before joining Dallah Al-Barakah Holding Company as Deputy General Manager in Investment Management Department. Other Positions Member of the Board of Directors of Foras International for Investing ( Present) Member of the Board of Directors of Tawfiq for Development and Investment ( Present) Name Dr. Ahmad Saleh Babaeer Age 55 Nationality Position Education Experience Name Saudi Member of the Board of Directors and Chief Executive Officer Bachelor of Science degree in Agricultural Sciences from King Saud University in Saudi Arabia in 1977, Master of Science degree in Agricultural Engineering from Iowa State University in USA in 1982 and Doctorate in Agricultural Engineering from Iowa State University in USA in Before joining DHHC as Chief Executive Officer in 2008, Dr. Babaeer worked as a member of faculty at King Saud University from 1984 to During this period, he served as Vice Dean of the College of Agriculture from 1987 to 1991 and Chairman of the Agricultural Engineering Department at the College of Agriculture from 1993 to Dr. Babaeer also served as General Manager of Jizan Agricultural Development Company from 1994 to 1999, General Manager of Al-Jouf Agricultural Development Company from 2000 to 2005, Business Development Consultant at Amjad Holding Company in Riyadh from 2005 to 2008 and Chief Executive Officer at Al-Madina Company for Real Estate Development, a subsidiary of Amjad Holding Company, from 2006 to Fahad Abdullah Al-Gassem Age 45 Nationality Saudi 61

93 Position Education Member of the Board of Directors Bachelors degree in Administrative Sciences with a major in Accounting from King Saud University in Saudi Arabia in Experience Mr. Algassem worked as an auditor at Al-Rashed Accountants and Auditors from 1987 to 1989 and at Delloite and Touche from 1989 to In 1990, Mr. Algassem established his own accounting firm under the name of Al-Gassem Accountants and Advisors and served as its Managing Partner until From 1991 to 1995, he served as Assistant Hospital Manager at Dallah Hospital before joining KPMG as its Managing Partner, a position that he held until Mr. Algassem also served as General Manager of Al-Othaim Group from 2000 to 2001 and as Chief Executive Officer of Al-Gassem Accountants and Advisors from 2001 to Since 2006, he has served as Chief Executive Officer of Amwal Financial Advisory Company. Name Fahad Abdullah Al-Gassem Age 45 Nationality Position Education Saudi Member of the Board of Directors Bachelors degree in Administrative Sciences with a major in Accounting from King Saud University in Saudi Arabia in Experience Mr. Algassem worked as an auditor at Al-Rashed Accountants and Auditors from 1987 to 1989 and at Delloite and Touche from 1989 to In 1990, Mr. Algassem established his own accounting firm under the name of Al-Gassem Accountants and Advisors and served as its Managing Partner until From 1991 to 1995, he served as Assistant Hospital Manager at Dallah Hospital before joining KPMG as its Managing Partner, a position that he held until Mr. Algassem also served as General Manager of Al-Othaim Group from 2000 to 2001 and as Chief Executive Officer of Al-Gassem Accountants and Advisors from 2001 to Since 2006, he has served as Chief Executive Officer of Amwal Financial Advisory Company. Name Fares Ibrahim Al-Humaid Age 40 Nationality Position Saudi Member of the Board of Directors Education Bachelors degree in Computer Science from King Saud University in Saudi Arabia in 1994 Experience Other Positions Mr. Al-Humaid served as a Lecturer at Technical College in Buraidah from 1994 to 1996, Manger at Future Kids Center in Riyadh from 1996 to 2000 and General Manager at Al-Dawalij Technology Company from 2000 to During this period, he also served as General Manager at Hitech Technology Company from 2003 to Mr. Al-Humaid then joined Riyadh Steel Company as General Manger in 2006 and served in that capacity until 2007 before being appointed President of Nal Investment Company in Member of the Board of Directors of Ibrahim Rashed Al-Humaid Sons Company (

94 Present) Member of the Board of Directors of Gassem Cement Company ( Present) Member of the Board of Directors of Cementex Readymix Company ( Present) 5.2 Executive Management Dallah Healthcare s senior management comprises of qualified and experienced managers with the requisite skills and expertise needed to run the Company s business. Chief Executive Officer has the primary responsibility for running the Company s business and is directly responsible to the Board of Directors for ensuring that the performance of the Company is in line with the objectives and directions of the directors and shareholders. 63

95 Figure 2: Organization structure of Dallah Healthcare DHHC Board of Directors Audit Committee Investment Committee Medical Superintendent (Mohammed Al-Fagih) Nominations and Remuneration Committee Chief Executive Officer (Ahmed Babaeer) Internal Audit (Mustafa Nooh) Chief Financial Officer (Khalid Saudi) GM, Human Resources (Vacant) GM, Dallah Hospital (Ahmed Babaeer) Advisor on Medical Affairs (Salah Al-Fagih) GM, Operations & Management (Tawfiq Abdulmughni) GM, Dallah Pharma (Ibrahim Bahri) Nursing Director (Franseca Villamal) Medical Director (Khaled Al-Hassan) EDP Manager (Mahmoud Mansi) Patient Services Manager (Saud Al-Raqraq) Human Resources Manager (Vacant) Chief Pharmacist (Essam Saeed) Assistant Executive Manager for Admin Affairs Business Center Manager (Hazem Suwaidan) Purchasing Manager (Khalid Al-Shaer) Finance Manager (Osman Osman) Support Services Manger (Bassem Al-Dahi) Marketing Manager (Mohanned Al-Saab) Source: DHHC 64

96 Table 45: Senior Management of Dallah Healthcare Name Title Nationality Shares Dr. Mohammed Rashed Al- Fagih Direct Ownership Medical Superintendent Saudi 2,475, % Indirect Ownership - Chief Executive Officer and GM, Dr. Ahmad Saleh Babaeer Saudi Dallah Hospital Dr. Salah Rashed Al-Fagih Advisor on Medical Affairs Saudi Khalid Saudi Chief Financial Officer Egyptian Dr. Khalid Abd-Rezzak Hassan Al-Hassan Medical Director, Dallah Hospital Saudi Vacant GM, Human Resouces and HR Manager, Dallah Hospital Eng. Tawfiq Ibrahim Alabdulmughni GM, Operations and Management Saudi Ibrahim Ahmad Ali Bahri GM, Dallah Pharma Saudi Mostafa Mahmoud Nooh Internal Audit Manager, Dallah Hospital Egyptian Osman Khalil Osman Finance Manager, Dallah Hospital Sudan Mohanned Al-Saab Marketing Manager, Dallah Hospital British Mahmoud Mohammed Mansi Electronic Data Processing Manager, Dallah Hospital Jordanian Khalid Rezk Al-Shaer Purchasing and Store Manger, Dallah Hospital Palastinian Dr. Essam Saeed Saleh Chief Pharmacist, Dallah Hospital Sudan Francisca Villamil Nursing Director, Dallah Hospital Philipines Bassem Mahmoud Al-Dahi Support Services Manager, Dallah Hospital Saudi Saud Mohammed Al-Raqraq Patient Services Manager, Dallah Hospital Saudi Hazem Abdullatif Al-Suweidan Business Center Manager, Dallah Hospital Saudi Source: DHHC Brief resumes of the members of senior management are given below: 65

97 Name Position Profile Dr. Mohammed Rashed Al-Fagih Medical Superintendent See Section 5.1: Board of Directors Name Position Profile Dr. Ahmad Saleh Babaeer Chief Executive Officer and GM, Dallah Hospital See Section 5.1: Board of Directors Name Dr. Salah Rashed Al-Fagih Age 60 Nationality Position Education Experience Saudi Advisor on Medical Affairs Bachelor of Medicine and Bachelor of Surgery degree from Baghdad University in Iraq in 1974 and Fellowship from Royal College of Surgeons in United Kingdom in 1980 Dr. Al-Fagih served at Riyadh Central Hospital for Accident and Emergency in Riyadh from 1974 to During that period, he worked as Senior House Officer in Department of Surgery from 1974 to 1976 and as Registrar in Department of Surgery from 1976 to From 1978 to 1981, Dr. Alfaqih worked at several hospitals in United Kingdom. There he served as Registrar in Urology department at Stokemandeville Hospital in Aylesbury from 1978 to 1980, as Senior Registrar in Urology department at Royal Liverpool Hospital in Liverpool in 1980, as Senior Registrar in Urology department Royal Marsden Hospital in London from 1980 to 1981 and as Senior Registrar in Urology department at Bristol Royal Infirmary in Bristol in From 1981 to 1983, Dr. Al-Fagih served as Consultant Urological Surgeon at Riyadh Central Hospital before being appointed as Assistant Professor and Consultant Urological Surgeon at King Khalid University Hospital in 1983, a position that he continues to hold till today. During this period, he also served as Head of Department of Urology from 1983 to 2006 and Chairman of the Department of Surgery from 1992 to Name Khalid Saudi Age 42 Nationality Position Egyptian Chief Financial Officer 66

98 Education Experience Bachelors degree in Administrative Sciences with major in Accounting from King Saud University in Mr. Saudi is also a Certified Public Accountant. Mr. Saudi joined Dallah Healthcare as Chief Financial Officer in Prior to that, he worked as accountant at Messila Trading and Contracting Company in Saudi Arabia from 1991 to 1995, as accountant at Ernst and Young in Saudi Arabia from 1995 to 1997, as Senior Financial Advisor at MAKS International in Canada from 1997 to 1998, as Chief Financial Officer at Azizia Investments Company in Saudi Arabia from 1998 to 2006, as Chief Financial Officer at Tanami Holding Company in Saudi Arabia from 2007 to 2008 and Senior Counselor at the Bank of Montreal in Canada from 2008 to Name Dr. Khalid Abd-Rezzak Hassan Al-Hassan Age 66 Nationality Position Education Experience Saudi Medical Director, Dallah Hospital Bachelor of Medicine and Bachelor of Surgery degree from Baghdad University in Iraq in 1966 and Diploma in Anesthesia from Royal College of Surgeons in United Kingdom in Dr. Al-Hassan worked at Ministry of Health in Iraq from 1966 to During that period, he served as Physician and Specialist in Anesthesia at several hospitals operated by the ministry. These included Baghdad Medical City (formally known as Al-Jomhory Hospital) from 1966 to 1969, Karam Hospital from 1969 to 1972 and Al-Mina Hospital from 1972 to Dr. Al-Hassan then served as Senior House Officer in Anesthesia at Lister General Hospital in United Kingdom from 1977 to 1980 and Stroke Mandeville General Hospital in United Kingdom from 1980 to 1982 before his appointment as Registrar in Anesthesia at Burton General Hospital in United Kingdom in 1982, a position that he held until From 1985 to 1991, he served as Specialist in Anesthesia at Al-Jarrah and Al-Bayya Private Hospitals in Baghdad and as Specialist in Anesthesia at Al-Ahliy Typical Hospital in Yemen from 1991 to From 1999 to 2004, Mr. Al-Hassan worked as Registrar in Anesthesia at King Khalid University Hospital before joining Dallah Hospital as Specialist in Anesthesia in He served in that capacity until his promotion as Medical Director in Name Eng. Tawfiq Ibrahim Alabdulmughni Age 61 Nationality Position Saudi GM, Operations and Management Education Bachelor of Science degree in Petroleum Engineering from Cairo University in 1973 Experience Eng. Alabdulmughni joined Dallah Healthcare in Prior to that, he worked at Kuwait National Petroleum Company as Operations Shift Supervisor (1973 to 1977), Shift 67

99 Controller (1978 to 1984), Head of Operations (1979 to 1984), General Superintendent of Manpower and Career Development (1984), Superintendent of Operations at Eastern Area (1984 to 1987), Loss Prevention Manager (1987 to 1988) and Operations Manager (1988 to 1994). Name Ibrahim Ahmad Ali Bahri Age 34 Nationality Position Education Experience Saudi GM, Dallah Pharma Bachelor of Pharmacy from King Saud University in 2002 and Master of Business Administration from International University of America in United Kingdom in 2007 Before joining Dallah Healthcare in 2011, Mr. Bahri served at Batterjee National Company as Registration and Department Manager from 2002 to 2004 and as Administration Manger for Riyadh and Khobar branches from 2004 to He also served as Scientific Office Manager at LEO Pharma from 2007 to Name Mostafa Mahmoud Nooh Age 41 Nationality Position Egyptian Internal Audit Manager, Dallah Hospital Education Bachelor of Commerce degree from University of Ain Shams in Egypt in 1991 Experience Mr. Nooh joined Dallah Hospital as Internal Audit Manager in Prior to that, he served as auditor at Advisory Group in Egypt from 1991 to 1993 and at Grant Thornton Mohamed Helal in Egypt from 1993 to From 1995 to 2000, he worked as Auditing Manager at KPMG Hazem Hassan in Egypt and later as Financial Controller and IT Manager at Al-Moosa General Hospital in Saudi Arabia from 2000 to Name Osman Khalil Osman Age 42 Nationality Position Education Sudanese Finance Manager, Dallah Hospital Bachelor of Science Degree in Cost and Management Accounting from Sudan University of Science and Technology in Sudan in Mr. Osman is also a Certified Public Accountant. 68

100 Experience Mr. Osman joined Dallah Hospital in Prior to that, he served as accountant in investment and financing department at Al-Shamal Islamic Bank in Sudan from 1993 to 1995, as Senior Accountant at SOTISCO Trading in Sudan from 1995 to 1996, as Senior Accountant and Financial Analyst at Al-Rajhi Real Estate Company in Saudi Arabia from 1996 to 1999, as Senior Accountant at PricewaterhouseCoopers in Saudi Arabia from 1999 to 2000, as Professional Accountant at Saudi Telecom Company from 2000 to 2007 and as Unit Manager, General Accounting at Bank Al-Bilad from 2007 to Name Mohanned Al-Saab Age 25 Nationality Position Education Experience British Marketing Manager, Dallah Hospital Bachelor of Science degree in Applied Business Management from Imperial College in United Kingdom in 2008 Mr. Al-Saab was appointed as Marketing Specialist in 2009 before assuming the role of Marketing Manager in 2010 Name Mahmoud Mohammed Mansi Age 34 Nationality Position Education Experience Jordanian Electronic Data Processing Manager, Dallah Hospital Bachelor of Science degree in Computer Science from University of Jordan in Jordan in Before joining Dallah Hospital in 2009, Mr. Mansi worked as Software Developer at Adaptive TechSoft in Jordan from 1998 to 2001 and as Healthcare Products Manager from 2001 to Name Khalid Rezk Al-Shaer Age 40 Nationality Position Palestinian Purchasing Manager, Dallah Hospital Education Bachelor of Science degree in Computer Science from Bangalore University in India in 1992 and Master of Business Administration degree from Bangalore University in India in

101 Experience Prior to his appointment as Purchasing Manager at Dallah Hospital, Mr. Al-Shaer worked as Computer Programmer in support services department from 1993 to 1994, as Purchasing Supervisor from 1994 to 1995 and as General Store Supervisor from 1995 to Name Dr. Essam Saeed Saleh Age 56 Nationality Position Sudanese Chief Pharmacist, Dallah Hospital Education Bachelor of Pharmacy degree from University of Khartoum in Sudan in Experience Before joining Dallah Hospital in 1990, Mr. Saleh worked as Pharmacist with Ministry of Health in Sudan from 1978 to 1986, as Chief Pharmacist at Khartoum North Hospital from 1986 to 1988 and as Pharmacist at Al-Eman Al-Ahlia Pharmacy in Saudi Arabia from 1988 to At Dallah Hospital, Mr. Saleh served as Pharmacist from 1990 to 1993 and as Supervisor of Outpatients Pharmacy from 1993 to 2010 before assuming his current position as Chief Pharmacist in the same year. Name Francisca Villamil Age 53 Nationality Position Education Experience Philippines Nursing Director, Dallah Hospital Bachelor of Science degree in Nursing from University of Perpetual Help in Philippines in 1981 Mrs. Villamil joined Dallah Hospital in 1987 as Staff Nurse. Before assuming her current position as Nursing Director in 2005, she served as Charge Nurse from 1990 to 1997 and as Head Nurse from 1997 to Previously she had worked as a Staff Nurse at Escolastica Romero District Hospital in Philippines from 1982 to 1987 Name Bassem Mahmoud Al-Dahi Age 34 Nationality Position Saudi Support Services Manager, Dallah Hospital Education Bachelor of Law degree from King Saud University in Saudi Arabia in

102 Experience Mr. Al-Dahi joined Dallah Hospital in 2009 as a Human Resource Manager before being appointed to his current position in Prior to that, he served as Personnel Manager at Al-Mutlaq Furniture Company from 2001 to Following that, he joined Samama Group as Assistant Human Resource Manager and served in that capacity from 2002 to 2003 and later as Human Resource Manager from 2003 to During this period, he also served as Human Resource Manager at Sahoub Company, a subsdiary of Samama Group. From 2004 to 2007, Mr. Al-Dahi served as Head of Personnel Department at the Royal Commission for Jubail Hospital in Jubail and later as Administrative Manager at King Abdulaziz Foundation from 2008 to Name Saud Mohammed Al-Raqraq Age 33 Nationality Position Education Saudi Patient Services Manager and Assistant Executive Manager for Administrative Affairs, Dallah Hospital / Acting GM, Human Resources Bachelors degree in Applied Medical Sciences from King Saud University in Saudi Arabia in 1999 and Masters degree in Health and Hospital Administration from King Saud University in Mr. Al-Raqraq is also a Certified Professional in Health and Hospital Administration from American Institute for Healthcare Quality in Riyadh. Experience Before being appointed as Assistant Executive Manager for Administrative Affairs in 2011, Mr. Al-Raqraq served as Receptionist at Dallah Hospital from 1997 to 2001, as Outpatients Department Manager from 2001 to 2004, as Marketing Manager from 2004 to 2005 and as Public Relations and Marketing Manager from 2005 to Name Mr. Hazem Abdullatif Al-Suweidan Age 51 Nationality Position Saudi Business Center Manger, Dallah Hospital Education Diploma in Computing from Institute of General Administration in Saudi Arabia in 1984 Experience Before joining Dallah Hospital in his current role in 2005, Mr. Al-Suweidan worked at General Organization of Social Insurance from 1984 to 2002 where he served as Assistant Programmer (1984 to 1992), Programmer (1992 to 1996), Analyst (1996 to 2000) and Quality Controller (2001 to 2002). From 2003 to 2004, he served as Business Center Manger at Dallah Hospital and from 2004 to 2005 he served as Public Relations and Marketing Manger at Riyadh Care Hospital. 71

103 5.3 Declaration in Respect of Directors and Key Officers The Directors, Chief Executive Officer, Chief Financial Officer, executive management and board secretary declare that they: Have not at any time been declared bankrupt or been subject to bankruptcy proceedings; Do not themselves, nor do any relatives or affiliates, have any material interest whether direct or indirect in any shares, or debt instruments of the Company; Excluding contracts and dealings mentioned in section (Related Party Contracts). Do not themselves nor do any relatives or affiliates, have any material interest whether direct or indirect in any written or verbal contract in effect or contemplated, which is significant to the business of the company as of the date of this Prospectus; The Company will not give cash loans of any kind to the board of directors or the Chief Executive Officer or guarantee any loans taken by any of them for another party as per article (71) of the company s law; The financial information presented in the Prospectus has been extracted without material changes from the audited financial statements and such statements have been prepared in accordance with the accounting standard generally accepted in the Kingdom of Saudi Arabia. The members of the Board of Directors confirm that they disclosed all the information fairly and did not delete any information that may affect the results of the analysis. Also they acknowledge that there are no mortgages, rights or liabilities on the property of the Company as of the date of this Prospectus; There is no intention or direction to make any fundamental change in the nature of the company s business ; Directors or Chief Executive Officer may not vote on the recommendations for bonuses granted to them; Directors or executive management may not obtain loans from the Company; and Directors or Chief Executive Officer may not vote on any contract on which he has vested interest. The Board of Directors and executive management confirm that the Company has not paid or given any commissions, discounts, brokerages, or granted other non-cash compensation within the two years immediately preceding the application for listing in connection with the issue or sale of any securities by the Company. Board of Directors confirm that there is no intention to make any material change to the nature of the Company s business and that the Company will not stop its business in a way that may affect, or have a significant affect on its financial position during the next twelve months. Board of Directors confirm that there has been no material change in the financial position or business of the Company during the two years prior to the listing year and during the period from the date of the end of the period covered in the auditor's report to the legal date of adoption and approval of the Prospectus. Each of the Directors confirm their compliance with articles 69 and 70 of the Companies Regulations which stipulate that a director may not have any interest, whether directly or indirectly, in the transactions or contracts made for the account of the Company excluding contracts mentioned in Section of this Prospectus, nor participate in any business competitive with that of the Company, except with an authorization from the General Assembly. 5.4 Remuneration of Directors and Senior Management The Company paid compensation to the Board of Directors for the years ending 31 December 2008,2009, 2010 and 2011 of SAR 1.15 million, SAR 1.15 million, SAR 1.19 million and SAR 1.21 million respectively. Total remuneration of the Company s executive management for the years ending 31 December 2008, 2009, 2010 and 2011 amounted to SAR 6.59 million, SAR 6.86 million, SAR 7.16 million and SAR 7.77 million respectively. 72

104 Neither the Company nor the executive management has any powers enabling them to vote on remuneration to themselves. The Directors and executive management of the Company do not have any powers to borrow from the Company. Table 46: Remuneration of Directors SAR Eng. Tarek Othman Al-Kasabi 1,149,570 1,150,367 1,144,796 1,152,796 Dr. Mohammed Rashed Al-Fagih 8,000 6,000 2,000 - Ammar Hasan Kamel 3,915 7,830 3,340 - Mohiuddin Saleh Kamel 15,660 13,745 3,340 - Fahad Siraj Malaikah ** 14, Dr. Abdulrahman Al-Suwailem ** 4, Dr. Ahmad Saleh Babaeer ** 8, Fahad Abdullah Al-Gassem ** 4, Faris Ibrahim Al-Humaid ** 4, Adel Dahlawi * - 9,830 3,340 - * Former board member, he left the position on 04/06/2011 ** Appointed on 04/06/2011 Source: DHHC 5.5 Service Contracts Members of Dallah Healthcare Board of Directors are appointed by the General Assembly. Responsibilities of the Board members are governed by the Company s bylaws and the Board charter. Following is a summary of service contracts, duties, and responsibilities of the Board members, Chief Executive Officer and Chief Financial Officer Chairman of the Board Duties and Responsibilities include: 1. Ensuring clarity of the Board s functions, framework of duties, and the basis for the division of responsibilities; 2. Ensuring clarity and precision of the Board s business plan and priority of topics brought before the Board; 3. Ensuring that the Board s responsibilities adhere to and fulfill the vision and strategy of the Company; 4. Leading the Board in selecting executive officers who will be responsible for the administration of the Company; 5. Voting on the appointment of senior management and executive officers; and 6. Assessing the performance of the Board members. Remuneration The Chairman of the Board receives remuneration in the form of an annual lump sum payment. Furthermore, the Chariman is paid an allowance of SAR 2,000 per Board meeting along with reimbursement of out-of-pocket expenses. Duration Directors The Chairman s duration of service is determined in accordance with the Company s bylaws, which is 3 years. The current Board of Directors will have duration of 5 years as per article (62) of the companies law which allows a Joint Stock Company s first chairman be appointed for a period of no longer than five years. Duties and Responsibilities include: 1. Reviewing, approving and monitoring the long term strategic objectives and business plans of management; 2. Ensuring effective implementation of policies and objectives of the Company; 3. Reviewing and approving major corporate transactions; 4. Selecting and recommending candidate board members for election by shareholders; 5. Selecting and evaluating executive officers and overseeing their succession plan; and 73

105 6. Establishing the Company s vision and mission statements. Remuneration Directors are eligible for a meeting allowance of SR 2,000 per Board meeting. Duration The Directors duration of service is determined in accordance with the Company s bylaws, which is 3 years. As an exception, the current Board of Directors will have duration of 5 years from the date of the IPO Chief Executive Officer Duties and Responsibilities include: 1. Developing the Company s strategic direction for review and approval of the Board; 2. Developing an annual operating plan and financial budget for review and approval of the Board; 3. Coordinating and planning with divisions to meet their budget targets; 4. Appraising the Board of issues and trends that may impact the Company s goals; 5. Creating a work environment that attracts and retains competent and talented people; 6. Staffing, training and developing employees to meet the Company s short and long term objectives; 7. Monitoring the Company s activities and providing administrative and technical support to senior management; and 8. Supporting quality control activities and fostering a quality oriented culture. Remuneration The Chief Executive Officer is paid a monthly salary, housing allowance, travel allowance and communication allowance. Duration The Chief Executive Officer s duration of service is determined by a renewable annual employment contract for one full Gregorian year that expires on 28/03/2012 and is automatically renewable by the Company Chief Financial Officer Duties and Responsibilities include: 1. Developing and implementing the Company s short term and long term financial strategy; 2. Assisting the Company s Chief Executive Officer to develop a strategic plan for each of the divisions; 3. Overseeing preparation of all financial statements and reports, including income statement, balance sheet and reports to shareholders and government agencies; 4. Reviewing reports to analyze actual revenue, expenses and profit against projected figures and develop operational plans; 5. Overseeing preparation of budget and audit; 6. Estimating requirements for capital, land, equipment and developing an optimal funding plan; 7. Participating in developing new business opportunities; and 8. Ensuring adequate cash flow to meet the Company s needs. Remuneration The Chief Financial Officer is paid a monthly salary with no allowances. Duration The Chief Financial Officer s duration of service is determined by a annual employment contract for one full Gregorian year that takes effect once the Chief Financial Officer assumes the position and expires once the contract reaches its determined length. If both parties abide by contract after its expiry then the contract is automatically renewable for an unspecified period. 74

106 5.5.5 Corporate Governance DHHC is committed to high standards of corporate governance, and sees this as an essential factor in its success to date. The Company has undertaken a full corporate governance review with a view to ensuring that its corporate governance framework is effective, transparent and in line with guidelines issued by the Capital Market Authority ( CMA ). Management of the Company has confirmed that DHHC complies with CMA s Corporate Governance Regulations. DHHC has a clear division of responsibilities between the Board of Directors and management and, in keeping with best international practices, 7 out of 9 of its directors are non-executive. The Company s senior management, under the direction of the Chief Executive Officer, is a highly experienced and skilled team that is given sufficient executive authority to effectively manage the Company within the guidelines laid down by the Board of Directors. The Company s external auditors provide annual reporting to the Company together with an annual management letter and do not provide other incompatible services. With respect to DHHC s commitment towards Corporate Governance Regulations, it should be noted that mandatory articles of these regulations include Article 9, Article 10(b), Article 12 (c, e), Article 14 and Article 15. The Company is committed to Article 12 (c) which requires the majority of the members of the Board of Directors to be non-executive. Furthermore, number of independent board members at DHHC are also more than those required as per Article 12(e) (see Table 43 on page 74 of the Prospectus). The Company is also committed to Articles 14 and 15 which relate to the composition of Audit Committee and Nominations and Remuneration Committee. All four members of the Audit Committee and all three members of the Nominations and Remuneration Committee are non-executive. DHHC has also developed a corporate governance manual for its internal use which stipulates the responsibilities of these committees, criteria for the selection of their members and their tenures. It was approved by the General Assembly on 25/6/1433H (corresponding to 16/5/2012). In addition to the above, the company is in compliance with most of the non-mandatory articles of the Corporate Governance Regulations. As of the date of this Prospectus, the Company was not in compliance with Article 9 and Article 10(b) of the Corporate Governance Regulations. The Company, however, undertakes to abide by those articles immediately after the listing of its shares. Following is a summary of Dallah Healthcare s corporate governance framework: Shareholders General Assembly: Shareholders shall be kept informed of all major developments within the Company through interaction with them, provision of periodic financial performance reports, and promoting the participation of non-institutional Shareholders in the Company s Annual General Assembly. Board of Directors: The Board of Directors is ultimately responsible for running the Company, to provide effective leadership and maintain a sound system of internal controls to safeguard the interests of the shareholders of the Company. Independent / Non-Executive Directors: To further improve DHHC s governance structure, 3 independent non-executive directors were appointed. The goal is to provide objectivity and balance to the Board of Directors decision making process. Independent director means a member of the Board of Directors who is fully independent. Situations in conflict with independency include, but are not limited to, the following: Having a controlling interest in the company or any of its affiliates or subsidiaries; Having been in the last two years a senior executive in the company or any of its affiliates or subsidiaries; Having a first degree relative as a director of the company or any of its affiliates or subsidiaries; Having a first degree relative as a senior executive of the company or any of its affiliates or subsidiaries; Being a board director at any company within the group of the same company at which he is proposed to become a board member; and 75

107 Having been an employee in the last two years of any of the company s related parties or any company of the same group, such as the company s auditors or a major supplier, or having a controlling interest at any of such related parties in the last two years. A Non-Executive Director is a member of the Board of Directors who is not fully dedicated to the management of the Company or does not receive a monthly or annual salary from the Company. Chairman and Chief Executive Officer: Clear guidelines are in place with respect to the responsibilities of the Chairman of the Board of Directors and Chief Executive Officer of the Company, in order to ensure a balanced power-sharing and authority. Presentation of Financial and Other Information: The Board of Directors is responsible for presenting to the Shareholders a true and fair picture of the Company s financial performance. Additionally, there is a mechanism in place to ensure that the Board of Directors receives the relevant information in a timely fashion, to enable it to effectively fulfill its obligations. DHHC has three corporate governance committees: Audit Committee, Nominations and Remuneration Committee and Investment Committee which are in place to review the Company s operations within their particular areas of expertise and present reports on their findings and suggestions to the Board of Directors. Responsibilities of these committees and rules governing selection of their members and their tenure will be presented to the Company s General Assembly for approval after completion of the Offering. Audit Committee The audit committee comprises of four members: Fahad Abdullah Al-Gassem, Fahad Siraj Malaikah, Faris Ibrahim Al-Humaid and Mohammed Hamad Al-Faris. Mr. Fahad Abdullah Al-Gassem has expertise in accounting and financial matters. The audit committee oversees financial, risk management and internal controls aspects of the Company s operations. Its responsibilities include review of the Company s interim and annual financial statements and effectiveness of the Company s internal controls and accounting information systems. The audit committee s charter will be reviewed annually by the Board of Directors following a recommendation by the audit committee. The audit committee is responsible, among other things, for: Supervising the company s internal audit department in order to ascertain effectiveness of performance of the functions and tasks assigned to it by the board of directors; Studying the internal audit system and preparing a written report including its opinion and recommendations on the same; Studying the internal audit reports and determining corrective actions in respect of the remarks contained therein; Submitting recommendations to the Board of Directors in respect of the appointment and removal of auditors and determining their fees. Independency of auditors should be ensured before appointment; Following up the auditors activities and approving any non-audit work that may be assigned to them while doing auditing works; Studying the audit review plan with the external auditor and giving remarks on the same; Studying the remarks of the external auditor on the financial statements and following up the actions taken in respect thereof; Studying the interim and annual financial statements before submission to the board and giving opinion and recommendations in respect of the same; Studying the accounting policies used and giving opinion and recommendations to the board of directors in respect of the same. 76

108 Table 47: Members of Audit Committee Name 1- Fahad Abdullah Al-Gassem 2- Fahad Siraj Malaikah 3- Faris Ibrahim Al-Humaid 4- Mohammed Hamad Al-Faris Source: DHHC Brief resumes of the members of Audit Committee are given below: Name Profile Fahad Abdullah Al-Gassem See Section 5.1 (Board of Directors) Name Profile Fahad Siraj Malaikah See Section 5.1 (Board of Directors) Name Profile Faris Ibrahim Al-Humaid See Section 5.1 (Board of Directors) Name Mohammed Hamad Al-Faris Age 33 Nationality Position Qualifications Experience Other Positions Saudi Member of Audit Committee Bachelors degree in Electrical Engineering from King Fahad University of Petroleum and Minerals in Saudi Arabia in 2000 and Masters degree in Business Administration from the American University in Washington DC, USA in 2003 Mr. Al-Faris worked at Saudi Electricity Company as Telecommunication Engineer from 2000 to From 2003 to 2008, he worked as Accounting Director in Corporate Department at National Commercial Bank before moving to Islamic Finance Department of the same bank in Since 2008, Mr. Al-Faris has served as Senior Manager in Islamic Finance Department at Saudi British Bank. No current positions Nominations and Remuneration Committee The nominations and remuneration committee comprises of three members: Dr. Abdulrahman Abdulaziz Al-Suwailem, Fahad Abdullah Al-Gassem and Tarek Othman Al-Kasabi. 77

109 The committee consists mainly of independent non-executive directors and operates in accordance with the charter approved by the Board of Directors, which will be reviewed annually by the Board of Directors following a recommendation by the committee. The committee will decide on how the Board of Director s performance is to be evaluated and propose objective performance criteria, subject to the approval of the Board of Directors, which address how the Board of Directors can look to enhance the Company s long-term shareholders value. The nominations and remuneration committee is responsible, among other things, for: Monitoring and recommending the level and structure of all direct and indirect remuneration of the Company s directors and senior management; Monitoring and recommending awards under any deferred compensation plans and any incentive share plans implemented by the Company; Developing a formal and transparent policy for fixing the remuneration packages of directors; and Approving and evaluating the compensation plans, policies, and programs of the Company. Table 48: Members of Nominations and Remuneration Committee Name 1- Dr. Abdulrahman Abdulaziz Al-Suwailem 2- Fahad Abdullah Al-Gassem 3- Eng. Tarek Othman Al-Kasabi Source: DHHC Brief resumes of the members of Nominations and Remuneration Committee are given below: Name Profile Dr. Abdulrahman Abdulaziz Al-Suwailem See Section 5.1 (Board of Directors) Name Profile Fahad Abdullah Al-Gassem See Section 5.1 (Board of Directors) Name Profile Eng. Tarek Othman Al-Kasabi See Section 5.1 (Board of Directors) Investment Committee The Investment committee comprises of four members: Eng. Tarek Othman Al-Kasabi, Dr. Mohammed Rashed Al-Fagih, Fahad Siraj Malaikah and Mohiuddin Saleh Kamel. The investment committee is responsible, among other things, for: Developing investment strategy appropriate for the Company; Analyzing investment portfolio; 78

110 Conducting risk analysis needed to achieve investment return objectives; Formulating investment time horizon; Preparing and maintaining investment policy statement; Studying investment recommendations from executive management; Implementing investment strategy; and Identifying optimal mechanism to liquidate investments with the view of maximizing shareholders value. Table 49: Members of Investment Committee Name 1- Eng. Tarek Othman Al-Kasabi 2- Dr. Mohammed Rashed Al-Fagih 3- Fahad Siraj Malaikah 4- Mohiuddin Saleh Kamel Source: DHHC Brief resumes of the members of Investment Committee are given below: Name Profile Eng. Tarek Othman Al-Kasabi See Section 5.1 (Board of Directors) Name Profile Dr. Mohammed Rashed Al-Fagih See Section 5.1 (Board of Directors) Name Profile Fahad Siraj Malaikah See Section 5.1 (Board of Directors) Name Profile Mohiuddin Saleh Kamel See Section 5.1 (Board of Directors) DHHC s Commitments after Listing After the listing of DHHC s shares, the Company intends to: Seek approval of the General Assembly to adopt accumulative voting approach in relation to the appointment of the Board of Directors. This mechanism allows each shareholder to vote according to the number of shares held. The 79

111 shareholder can choose to either give all votes to a single candidate or divide votes between candidates without any duplication of those votes. This mechanism increases representation of minority shareholders in the Board of Directors through accumulation of votes for a single candidate. The Company intends to adopt the accumulative voting system before the first General Assembly after listing ; The Board of Directors shall adopt, within the first 6 months after listing, rules for electing its members, tenure of their membership and responsibilities of the Nominations and Remuneration Committee. These should then be approved by the first General Assembly after listing. Respond to questions mentioned in Annex 8 of the Listing Rules issued by the Authority specifying reasons for noncompliance with corporate governance regulations, if applicable. Comply with Article 9 and Article 10(b) of the Corporate Governance Regulations as soon as the Authority approves the admission of the Company s shares on the official list. Provide CMA with a timeline to implement those articles of Corporate Governance Regulations which had not been adopted by the Company at the time of the listing. Seek approval from General Assembly within 12 months from the date of listing to adopt Corporate Governance Regulations issued by the Authority in order to ensure adherence to Articles 8 and 10 of the Corporate Governance Regulations. Provide the Authority with date of the first General Assembly after the listing so arrangements can be made for the attendance of a representative from the Authority. 80

112 6 Competitive Advantages, Future Plans and Prospects 6.1 Competitive Advantages Management believes that the following competitive strengths distinguish Dallah Healthcare from its peers and provide the Company with significant opportunities to grow its business: Strong Reputation Dallah Hospital is widely recognized by both healthcare professionals and patients for the quality in provision of its medical services. Management believes that the brand equity that the Company has developed over the last 24 years will help Dallah Hospital expand in other regions of the Kingdom as well. Dallah Hospital has built this reputation by focusing its efforts on hiring and retaining reputable and qualified physicians and nurses, abiding by strict ethical standards of medical practice and keeping itself abreast of latest developments in medical technology and treatments provided to patients. In a survey conducted by Synovate in 2009, awareness about Dallah Hospital was highest amongst all private hospitals in Riyadh at 89%. The survey also included Mouwasat Hospital (35%), Kingdom Hospital (29%), Al-Hammadi Hospital (63%), Dr. Abdulrahman Al-Mishari Hospital (19%), Riyadh Care Hospital (42%), Saudi German Hospital (44%), Specialized Medical Center Hospital (32%) and Dr. Suleiman Al-Habib Hospital (69%) A Pioneer Healthcare Institution of Saudi Arabia Dallah Hospital is one of the leading providers of private healthcare in Saudi Arabia as evidenced by the following. First private hospital in Saudi Arabia to offer laparoscopic surgery; First private hospital in Riyadh to perform cardiac surgery; One of the first hospitals in Saudi Arabia to open in-virto fertilization unit and fertility clinic; First hospital in Saudi Arabia to deliver a baby through sperm extraction; First private hospital in Saudi Arabia to receive license to provide medical treatment using radioactive materials; First private hospital in Riyadh to open catheterization laboratory practices that allows Dallah Hospital to treat heart related illnesses without the need to carry out open heart or bypass surgeries; and Consistently achieved patient satisfaction levels of more than 95% according to internal surveys conducted by the Hospital Qualified Medical Staff The Company considers the skill level of its doctors as the key to its success. Management believes that hiring surgeons and physicians who have established reputations for clinical excellence is essential in successful implementation of the Company s vision. Department heads at Dallah Hospital have an average of 18 years of experience in their chosen areas of specialty. The Hospital also offers competitive compensation to its doctors and has instituted various income sharing mechanisms that have helped the Company recruit and retain key physicians. Furthermore, all the doctors at Dallah Hospital are certified by one of the: i) American and Canadian Board; ii) European Board; and iii) Arab Board. They are further assisted by renowned visiting consultants and surgeons from various countries. Table 50: Medical Boards Representation within Dallah Hospital Board Number of Doctors 81

113 Egypt 66 United Kingdom 38 Sudan 26 Pakistan 16 Yemen 13 Syria 12 Canada 9 Iraq 8 Jordan 7 France 6 Saudi Arabia 6 United States of Arabia 5 Australia 2 Arab Board 2 Italy 1 Russia 1 Romania 1 India 1 Source: DHHC Some of the Company doctors are also involved in clinical research and have published numerous studies on topics in cardiology, cardiac surgery, diabetes, infectious diseases, oncology, nephrology and neuro-surgery. A number of the Company s doctors also have a history of pioneering innovative techniques for patient treatment in Saudi Arabia Strict Focus on Quality Dallah Hospital was accredited by JCI in JCI is an affiliate of the Joint Commission on Accreditation of Healthcare Organizations, which is an independent non-profit organization and is the predominant standard-setting and accrediting body within the healthcare industry in United States. During the accreditation process, Dallah Hospital obtained superior results which highlights the Hospital s commitment towards quality and safety standards. Dallah Hospital also received ISO-9001 certification in 2009 and Saudi Commission for Health Specialties accredited Dallah Hospital to provide specialized training in gynecology recognizing the Company s expertise in that area Complete Healthcare Services Provider The Company offers comprehensive healthcare services through numerous therapy areas including but not limited to the ones listed below. In addition, the Company also provides access to physicians specialized in their area of medicine with no prior appointments through its open specialized clinics. This is a unique concept that was developed by the Company. Cardiology Obstetrics & Gynecology Ophthalmology Nephrology Plastic Surgery Rheumatology Emergency Care Orthopedics Pediatrics Dermatology Urology General Surgery Fertility Pediatric Surgery Dental Ear, Nose & Throat Diabetes Neurology Pulmonology Internal Medicine Nutrition Psychiatric Therapy Open Specialist Clinics 82

114 6.1.6 Positioned to Benefit from Growth in Key Therapy Areas The Company has looked to strategically position itself to benefit from expected growth in some of the key therapy areas which include obstetrics and gynecology, pediatrics, orthopedics, cardiology and diabetes. Having significantly expanded its in-patient and out-patient capacity in obstetrics and gynecology in 2008, the Company is presently in the process of expanding its capacity in pediatrics. It was also one of the first private hospitals in Saudi Arabia to open a fertility clinic and catheterization laboratory for heart patients having operated its diabetes clinic since Information Systems Dallah Healthcare uses an advanced Oracle based enterprise resource planning system to facilitate information flow and support management in making decisions through timely provision of statistical data. Furthermore, in order to facilitate its patients, the Company has developed a knowledge based interactive website ( that allows patients to create accounts, schedule appointments and ask medical questions. The website is also focused on educating patients on various illnesses and symptoms Alliances with International Institutions The Company enters into joint cooperation agreements with major international medical centers from time to time that have helped it to improve the quality of services provided at Dallah Hospital to match those of its leading international counterparts. In 1996, Dallah Heathcare entered into a scientific and technical cooperation agreement with University of Nottingham to support the development of its intra cytoplasmic sperm injection treatments. Similarly, diabetes and cardiac centers were established in direct cooperation with Deaconess Hospital affiliated with Harvard Medical School. Cooperative agreements have also been made with other notable institutions including Loma Linda University in California Diversified Client Base Saudi Aramco and SABIC group of companies have been Dallah Hospital s client since 1995 and 1998 respectively. The client list of Dallah Healthcare also includes General Organization of Social Insurance, Saudi Electricity Company and a number of major insurance companies operating in Saudi Arabia. For more information on the Company s contractual agreements with key clients, please refer to Sections and Section of this Prospectus Stable Financial Position DHHC s revenue increased at a CAGR of 16.2% from 2007 to 2011 and earnings at a CAGR of 36.1% during the same period as a result of the increase in the number of patients and successful implementation of the Company s cost reduction strategy. Given the steady growth and profitability of the Company and its stable financial position, together with its strategic plan based on accurate understanding and analysis of the market, the Company has started to manage operations of other hospitals and plans to open hospitals in other cities as well in order to consolidate its position within the healthcare industry. For more information on the Company s revenue, please refer to Section of the Prospectus Exclusive Distribution Arrangements The Company has exclusive distribution arrangements for 45 pharmaceutical products, 12 health supplements and 8 cosmetic products across Saudi Arabia which has helped support growth in its income. For more information on the Company s licensed products, please refer to Section (Pharmaceutical Products Licenses) of the Prospectus. 83

115 Strong Relationship with insurance companies DHHC enjoys strong relationship with leading insurance companies in the Kingdom that allows the Company to accommodate the requests of its patients in a timely manner. DHHC also has a team within the Hospital to manage the insurance claims and receivables collection period. Historically, the percentage of rejected claims from insurance companies has not exceeded 7%. For more information on agreements with insurance companies, please refer to Section of the Prospectus. 6.2 Future Plans and Prospects The Company continuously strives to improve the quality of healthcare services provided by the Hospital, while at the same time improving its financial results. Below are the key strategies employed to achieve these goals: Expand in New Cities Management believes that growing affluence, sophistication and awareness of healthcare services will lead to greater demand for healthcare services in Saudi Arabia. The Company intends to grow by acquiring and/or establishing an integrated network of polyclinics and hospitals in the Kingdom. Management s evaluation criteria for new opportunities include demographics and revenue potential of the local population, the competitive landscape, location and cost of facilities. In the case of existing hospitals, the skill, specialty and reputation of doctors and medical staff, work culture of the institution and quality of the infrastructure. In fact, the Company has already planned to construct a new hospital in Riyadh. Key highlight related to this project are as follows: A new hospital in West Riyadh with a total capacity of 300 beds and 80 outpatient clinics upon completion of the project. Construction of this hospital is expected to be completed in late This hospital will have a total area of around 45,000 square meters. The Company has already identified a plot of land on which the hospital will be built and has entered into a binding agreement to acquire the land from its current owner. In this regard, the Company has made a down payment of SAR 2 million and plans to pay the remaining balance from the proceeds of the IPO Following is the status of the regulatory approvals with regards to the project: Approvals needed Commercial Registration Ministry of Health license Municipality West Riyadh Not required as it will be owned directly by DHHC Preliminary approval awarded Awarded preliminary approval The land s previous owner has obtained the required preliminary approvals and has agreed to transfer these approvals to the benefit of the Company upon completion of the transfer of the land s ownership, subject to receiving the necessary consents from the concerned government agencies. Upon transfer of the land s ownership, the Company will seek the required licenses and approvals from Riyadh Municipality for the development of a hospital. Once obtained, the Company will seek to obtain the building permit for the hospital. Finally, and after having completed all consulting, design and engineering work, the Company will approach the Ministry of Health to obtain the final approvals for the development of the hospital Improve Profitability and Increase Occupancy Rates 84

116 Management intends to improve profitability by increasing average income per bed and decreasing average length of stay. Management intends to focus on case mix and increase the ratio of surgical to medical procedures as well as improve the utilization rates in order to increase average income per bed. In addition, management plans to expand its practice with minimally invasive surgical techniques which eliminate the need to make large incisions into the human body, thereby reducing surgical trauma, pain and blood loss. Patient recovery time is also shorter in minimal invasive surgeries, freeing up beds for other patients and reducing the average length of stay Increase Out-Patient Income by Focusing on Day Care Products and Surgeries Over the years, Dallah Hospital has added a diverse portfolio of out-patient offerings including health check-up programs, diagnostics, physiotherapy and rehabilitation and various forms of laboratory testing. Such offerings have led to an increase in outpatient admissions (both referrals and walk-in patients) at the Hospital. Management has also recognized the opportunities in day care surgeries due to technological developments which previously required the patients to stay at the Hospital for a number of days. Such surgeries can be carried out within a day whereby a patient gets admitted in the morning and gets discharged in the evening. They reduce the average length of stay for patients and free up beds for tertiary care cases. Going forward, Dallah Hospital intends to focus on such procedures and expect this initiative to be a significant contributor to out-patient income Develop Parking Area for Convenience of Patients and their Relatives In keeping with the Company s stated objective to provide quality care and service to its patients, Dallah Healthcare has recently started construction of a multi-story car parking area. The parking area, constructed over 5,500 square meters will be located besides the main hospital building and will be able to accommodate 528 cars at any one point in time. Construction work in relation to this project began in 2010 and completion is expected during first half of The value of the awarded contract for the construction of the car parking area was SAR 30.6 million Expand Pediatrics Capacity Management has identified pediatrics as one of the key growth segments of Saudi healthcare industry. The Hospital plans to capitalize on its expertise within this area by constructing a new pediatric building just besides the main building of the Hospital. Dallah Hospital is already ahead of its competitors in pediatric care by being the first hospital in Riyadh to have dedicated emergency care operations for its pediatric patients and the construction of this new 2,200 square meters facility will allow it to further consolidate its position within this segment of the industry. The new building will accommodate 20 new clinics for out-patients and 60 new beds for in-patients. Construction works began in August of 2011 and operations of the new pediatric wing are expected to commence during the first quarter of As at 30 September 2012, 72% of construction work had been completed. Table 51: Financing of Pediatric Clinics Capacity Expansion Project Total Cost Total Disbursements as at 30 September 2012 SAR million SAR million Sources of Financing: ab Government Loans Ministry of Finance Loans from Commercial Banks Cash from Operations Source: DHHC SAR million SAR million SAR million For more information on Ministry of Finance loans, please refer to Section 10.4 of the Prospectus. Financing through cash flow from operations represents cash flows available for the financing of the project after deducting cash required for finance charges and capital expenditure. For more information on financing through loans from commercial banks, please refer to Section 13.9 of the Prospectus. 85

117 6.2.6 Develop Operations and Management Business DHHC plans to leverage its extensive knowledge of the local healthcare industry and expertise in management of hospital operations by continuing to enter into new contracts to manage facilities owned by third parties Develop Pharmaceutical Business DHHC plans to seek opportunities to grow its product portfolio by entering into new contracts with manufacturers of pharmaceutical and herbal products. The Company also plans to seek inorganic opportunities to grow by acquiring other pharmaceutical companies. The company is presently in the process of registering 10 new pharmaceutical products and 6 manufacturers with Saudi Food and Drug Authority. 86

118 7 Management s Discussion and Analysis of Financial Condition and Results of Operations of the Company The management discussion and analysis of financial condition and results of operations section provides an analytical review of DHHC s performance and financial condition during the financial years ended in 31 December 2007, 2008, 2009, 2010 and 2011 and six month period ended 30 June 2010, 2011 and It should be read in conjunction with the Company s pro-forma financial statements as at and for the financial years ended 31 December 2007, 2008 and 2009 and notes thereto as prepared by Ernst & Young and the Company s audited financial statements as at and for the financial years ended 31 December 2010 and 2011 as well as for the six month period ended 30 June 2011 and 2012 and notes thereto as prepared by PricewaterhouseCoopers and included in this Prospectus. Prospective investors should also read the entire Prospectus and not rely solely on the information set out in this section. Ernst & Young and PricewaterhouseCoopers do not themselves, nor do any of their relatives or affiliates have any shareholding or interest of any kind in the Company. They have furnished and not withdrawn their written consent to the reference in the Prospectus of their role as auditors of the Company for the financial years ended 31 December 2007, 2008, 2009, 2010 and 2011 and six month period ended 30 June 2011 and This section contains certain forward looking statements that involve risks and uncertainties. Actual results of the Company could differ materially from those expressed or implied in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in the Prospectus, particularly under the Risk Factors section of this Prospectus. 7.1 Directors Declaration for Financial Information The directors declare that the financial information presented in Prospectus was extracted without material change from the proforma and audited financial statements and that the pro-forma and audited financial statements were prepared in accordance with the Saudi Organization of Certified Public Accountants accounting standards. The directors declare that there has been no material adverse change in the financial or trading position of DHHC from 30 June 2012 up to and including the date of this Prospectus. The directors declare that DHHC will have sufficient funds to meet the working capital requirements for 12 months effective from the date of this initial public offering. The directors further declare that there are no other mortgages, rights, and charges on the Company s properties as of the date of this Prospectus. 7.2 Principal Accounting Policies The Company s significant accounting policies are set out in the notes to Dallah s audited and pro-forma financial statements given in Section 16 of this Prospectus. 7.3 Business Overview Operations of DHHC are organized under four business divisions. These are: Dallah Hospital Dallah Pharma Operations and management 87

119 Investments Dallah Hospital provides in-patient and out-patient medical services. Dallah Pharma s activities include wholesale distribution of pharmaceutical, herbal and cosmetic products and Operations & Maintenance division is involved in management and operations of hospitals owned by third-parties. In addition, the Company has several investments within the healthcare industry in Middle East region. Dallah Hospital accounted for over 90% of the Company s revenue for the full years ended 31 December 2008, 2009, 2010, 2011 and six month period ended 30 June Provision for Bad Debts Provisions made for bad debts were re-classified as a separate item on the income statement from 2010 onwards. The Company's policy with regards to recording the provisions for bad debts is as follows: Insurance companies: 7% of monthly claims Government: 30% of receivables due for more than 360 days High net worth individuals: 30% of receivables due for more than 360 days Individuals: 50% of receivables due for more than 180 days and 100% of receivables due for more than 360 days Companies: 20% of receivables due for more than 180 days, 50% of receivables due for more than 360 days and 100% of receivables due for more than 720 days Clinics and Hospitals: 20% of receivables due for more than 180 days, 50% of receivables due for more than 360 days and 100% of receivables due for more than 720 days Table 52: Revenue, net income and cash flows from operations All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma CAGR (07-11) Revenue 527, , , , , % EBITDA 123, ,418 77,373 74,284 42, % Net Income 113,401 94,465 56,600 57,627 33, % Cash flow from operations 128, ,388 72,942 71,712 63, % Source: DHHC Table 53: Revenue, net income and cash flows from operations for six months ended 30 June All figures in thousands of Saudi riyals (SAR) June 2012 Audited June 2011 Audited June 2010 Unaudited Revenue 315, , ,641 EBITDA 89,905 68,499 63,038 Net Income 75,050 62,384 52,321 Cash flow from operations 60,091 43,083 47,191 Source: DHHC 7.4 Results of Operation s Years ended 31 December 2007, 2008, 2009, 2010 and

120 Table 54: Income statement ( ) Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma CAGR (07-11) Revenue 527, , , , , % Cost of Revenue (339,325) (302,686) (305,176) (260,875) (204,783) 13.5% Gross Profit 188, , , ,422 84, % Sales & Marketing Expenses (8,475) (6,926) (13,944) (11,429) (12,299) (8.9%) General & Administrative Expenses (60,564) (56,629) (56,617) (41,147) (40,597) 10.5% Provisions for Doubtful Receivables (17,400) (16,936) Writen off Debts - (490) Write-off of Obsolete Inventory (3,383) Provisions for Obsolete Inventory (275) Operating Profit 97,920 88,849 59,337 58,845 31, % Other Income, Net 20,472 3,400 4,784 3,436 3, % Finance Charges (2,192) (763) (1,041) (1,302) (248) 72.4% Reversal of Accrued Expenses and Other Liabilities 962 7, Reversal of Provisions for Doubtful Debt Impairment in Value of Investments Available for Sale - - (3,000) Net Income before Zakat 117,162 98,885 60,080 60,980 35, % Zakat (3,761) (4,420) (3,480) (3,353) (2,117) 15.5% Net Income 113,401 94,465 56,600 57,627 33, % Source: Audited and pro-forma financial statements Revenue of DHHC increased at a CAGR rate of 16.2% from SR million in 2007 to SR million in The Company recorded provisions against doubtful receivables as per the policy described in Section 7.3 of the Prospectus. Over the same period, gross margin improved from 29.3% in 2007 to 35.7% in This increase was partially due to the reclassification of provisions against doubtful debt as a separate line item on income statement. The item was reclassified by the new auditors of the Company. EBITDA margin improved from 14.8% in 2007 to 23.4% in 2011 and net margin improved from 11.4% in 2007 to 21.5% in Six months ended 30 June 2010, 2011 and 2012 Table 55: Income statement (June 2010 June 2012) Six Months Ended 30 June All figures in thousands of Saudi riyals (SAR) 2012 Audited 2011 Audited 2010 Unaudited CAGR (June 10-11) Revenue 315, , , % Cost of Revenue (190,068) (168,759) (154,685) 10.8% Gross Profit 125, ,552 92, % Sales & Marketing Expenses (4,034) (3,823) (3,380) 9.2% General & Administrative Expenses (32,189) (29,423) (26,257) 10.8% Provisions for Doubtful Receivables and (12,856) (10,612) (10,055) 13.1% 89

121 Obsolete Inventory Operating Profit 76,019 56,693 53, % Other Income, Net 3,054 8,224 2, % Finance Charges (1,356) (534) (545) 57.7% Foreign Currency Losses - - (1,698) - Reversal of Provisions for Doubtful Debt Impairment in Value of Investments Available for Sale Net Income before Zakat 77,717 64,383 53, % Zakat (2,667) (1,999) (1,156) 51.9% Net Income 75,050 62,384 52, % Source: Audited and unaudited financial statements Revenue of DHHC increased at a CAGR rate of 12.8% from SAR million during the first six months of 2010 to SAR million during the first six months of Gross margin increased from 37.5% during the first six months of June 2010 to 39.7% during the first six months of June EBITDA margin increased from 25.5% during the first six months of June 2010 to 28.5% during the first six months of June 2012 and net margin also increased from 21.1% during the first six months of June 2010 to 23.8% during the first six months of June Revenue Years ended 31 December 2007, 2008, 2009, 2010 and 2011 Table 56: Breakdown of Revenue Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma CAGR (07-11) Dallah Hospital 478, , , , , % Dallah Pharma 32,361 27,236 32,330 23,753 26, % Operations & Management 16, * 250* 500* 141.2% Total 527, , , , , % % of Total Dallah Hospital 90.8% 94.1% 92.6% 93.6% 90.8% Dallah Pharma 6.0% 5.7% 7.4% 6.4% 9.2% Operations & Management 3.2% 0.01%* 0.01%* 0.01%* 0.02%* Total 100.0% 100.0% 100.0% 100.0% 100.0% *Included in other income in pro-forma financials statements Source: DHHC Dallah Hospital s contribution towards total revenue was 90.8% in 2011, 94.1% in 2010, 92.6% in 2009, 93.6% in 2008 and 90.8% in Six months ended 30 June 2010, 2011 and

122 Table 57: Breakdown of Revenue for the Six Months Period Ended June 30 Six Months Ended 30 June All figures in thousands of Saudi riyals (SAR) 2012 Audited 2011 Audited 2010 Unaudited CAGR (June 10-11) Dallah Hospital 278, , , % Dallah Pharma 24,903 18,302 17, % Operations & Management 11,537 5, Total 315, , , % % of Total Dallah Hospital 88.5% 91.3% 92.7% Dallah Pharma 7.9% 6.8% 7.0% Operations & Management 3.6% 1.9% 0.0% Total 100.0% 100.0% 100.0% Source: DHHC Dallah Hospital s contribution towards total revenue was 88.5% in June 2012, 91.3% in June 2011 and 92.7% in June It reduced gradually from 92.7% in June 2010 to 88.5% in June 2012 primarily because of the increase in operations and management revenue Dallah Hospital Revenue by Type of Service Years ended 31 December 2007, 2008, 2009, 2010 and 2011 Table 58: Breakdown of Dallah Hospital Revenue by Type of Service Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma CAGR (07-11) Inpatient Revenue (SAR 000) 264, , , , , % Number of Inpatients 27,346 28,199 27,774 29,213 22, % Outpatient Revenue (SAR 000) 303, , , , , % Number of Outpatient Visits 609, , , , , % Less: Discounts (89,825) (80,158) (68,558) (67,718) (50,791) - Total 478,766* 444,840* 402,745** 348,544** 257,161* 16.8% Source: DHHC *Other revenue and earned discounts were deducted from sales **Other revenue was deducted from sales Inpatient Revenue Inpatient revenue increased at a CAGR of 12.1% from SAR million in 2007 to SAR million in 2011 primarily because of the increase in obstetrics and gynecology capacity as a result of the construction of a new building adjacent to the building of Dallah Hospital with 75 additional beds. The number of inpatients reduced from 29,213 in 2008 to 27,774 in 2009 because of the Hospital s 91

123 increased focus on providing day-care surgeries wherever possible in order to free up beds for tertiary care cases. As a result, the revenue per patient increased from SR 7,758.2 in 2008 to SR 8,561.8 in The increase in revenue from SAR million in 2009 to SAR million in 2010 was due to the: i) increase in number of patients from 27,774 in 2009 to 28,199 in 2010; and ii) the increase in revenue per patient SR 8,561.8 in 2009 in SR 9,371.7 in While the number of inpatients reduced from 28,199 in 2010 to 27,346 in 2011 as a result of the resignation of one of the doctors in orthopedics department, revenue in 2011 remained at almost the same levels as that in 2010 (SR million in 2011 compared to SR million in 2010). Table 59: Bed Utilization Rate Year Beds Utilization Rate % % % Source: DHHC Outpatient Revenue Outpatient revenue increased at a CAGR of 21.3% from SAR million in 2007 to SAR million in 2011 due to the: i) increase in number of patient visits from 380,382 in 2007 to 609,911 in 2011; and ii) the increase in average revenue per patient from SAR in 2007 in SAR in The increase in number of patients was mainly due to the change in the regulatory framework in Saudi Arabia that made it mandatory for companies to provide health insurance coverage to their employees and an increase in number of physicians at Dallah Hospital. stnsocsid This includes discounts offered to customers (mainly insurance companies) on medical packages because in some cases the cost of provision of all the services grouped under medical packages is more than the amount charged to the customers. Six months ended 30 June 2010, 2011 and 2012 Table 60: Dallah Hospital Revenue by Type of Service Six Months Ended 30 June All figures in thousands of Saudi riyals (SAR) 2012 Audited 2011 Audited 2010 Unaudited CAGR (June 10-11) Inpatient Revenue (SAR 000) 148, , , % Number of Inpatients 14,489 13,959 14,619 (0.4%) Outpatient Revenue (SAR 000) 183, , , % Number of Outpatient Visits 341, , , % Less: Discounts (53,213) (46,690) (43,142) - Total 278, , , % Source: DHHC Inpatient Revenue During the six month period ended 30 June 2011, inpatient revenue reduced slightly from SAR million in June 2010 to SAR million in June 2011 because of the departure of one of the doctors in Orthopedics department. This also resulted in a 92

124 reduction in the number of inpatients from 14,619 in June 2010 to 13,959 in June Inpatient revenue increased from SAR million in June 2011 to SAR million in June 2012 because of the increase in number of inpatients from 13,959 during the first six months of 2011 to 14,489 during the first six months of 2012 along side increase in the revenue per inpatient from SAR 9,869.0 during the first six months of 2011 to SAR 10,264.9 during the first six months of Outpatient Revenue Outpatient revenue increased at a CAGR of 16.4% from SAR million during the first six months of 2010 to SAR million during the first six months of 2012 due to the: i) increase in number of patient visits from 290,952 in June 2010 to 341,765 in June 2012; and ii) the increase in average revenue per patient from SAR in June 2010 to SAR in June ocsidstns This includes discounts offered to customers (mainly insurance companies) on medical packages because in some cases the cost of provision of all the services grouped under medical packages is more than the amount charged to the customers. Revenues by Department Years ended 31 December 2007, 2008, 2009, 2010 and 2011 Table 61: Breakdown of Dallah Hospital Revenue by Department Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma CAGR (07-11) Pharmacy 84,871 77,883 70,581 56,205 46, % Operating Rooms 74,250 73,514 67,649 65,718 57, % Laboratory 75,035 65,279 57,028 48,452 39, % Obstetrics & Gynecology 49,041 46,962 46,868 43,961 14, % Wards 34,243 35,917 35,193 34,242 35,377 (0.8%) Radiology 35,424 32,518 27,843 24,269 19, % Emergency Care 23,992 22,013 18,872 14,500 14, % Pediatrics 20,773 18,730 15,993 15,548 16, % Physiotherapy 14,084 12,591 10,830 7,079 5, % Open Specialized Clinics ,904 9,586 7,513 4, % Dental ,710 8,765 8,455 7, % Intensive Care Unit 11,177 8,552 6,879 7,306 6, % Cardiology ,337 7, ,534 (0.4%) Orthopedics ,134 4,148 4,039 3, % Internal Medicine 6,433 4,349 4,564 4,950 6, % Cafeteria 4,357 4,227 4,095 3,885 2, % General Surgery 2,107 2,324 2,102 2,319 1, % Opthalmology ,508 1,971 1,396 1, % Diabetes 3,164 2,437 1,971 1, % Ear, Nose and Throat ,043 1,885 1,800 1, % Dermatology 1,808 1,037 1, , % Urology % Pediatric Surgery % Phychiatrics % 93

125 Less: Other Revenue and Adjustments (11,482) (5,966) (4,795) (13,931) (39,588) - Total 478, , , , , % Source: DHHC Pharmacy Dallah Hospital has one inpatient, two outpatients and one obstetrics & gynecology pharmacy. Revenue increased at a CAGR of 16.3% from SAR 46.3 million in 2007 to SAR 84.9 million in 2011 because of the overall increase in the number of patients and the expansion of the Hospital s obstetrics and gynecology capacity. Revenue increased by 9.0% from SAR 77.9 million in 2010 to SAR 84.9 million in 2011 primarily because of the increase in the number of outpatient visits from 562,663 in 2010 to 609,911 in Operating Rooms Operating rooms revenue increased at a CAGR of 6.7% from SAR 57.2 million in 2007 to SAR 74.3 million in 2011 as a result of the increase in the number of surgeries performed at Dallah Hospital from 8,541 in 2007 to 10,561 in Since 2009, more than 900 surgeries have been performed at Dallah Hospital in any given month from open heart and neurosurgeries to cosmetic, endoscopy, vascular, chest, orthopedic, dental, eye, oral and maxillofacial surgeries, to name a few. Revenue increased from SAR 73.5 million in 2010 to SAR 74.3 million in 2011 primarily because of the increase in fees charged to customers for some of the surgeries in spite of the reduction in the number of surgeries carried out from 10,856 in 2010 to 10,561 in 2011 as a result of the resignation of one of the doctors in orthopaedics department. Laboratory Laboratory revenue increased at a CAGR of 17.8% from SAR 39.0 million in 2007 to SAR 75.0 million in 2011 because of the increase in the prices of some of the key tests and procedures by around 20% over this period. Average prices increased from SAR 85.0 in 2007 to SAR in Furthermore, the number of tests conducted at the laboratory also increased from 459,051 in 2007 to 728,393 in 2011 as a result of the increase in the number of patients. Obstetrics & Gynecology Revenue increased at a CAGR of 46.5% from SAR 14.9 million in 2007 to SAR 47.0 million in 2010 because of the increase in capacity as a result of the addition of 75 news beds and the increase in revenue per inpatient from SAR in 2007 to SAR 4,895.5 in The increase in revenue per patient was mainly due to the fact that in 2007 revenue per patient was not calculated solely for the obstetrics and gynecology patients. Increase in obstetrics and gynecology revenue from SAR 47.0 million in 2010 to SAR 49.0 million in 2011 was due to the increase in number of outpatient visits from 66,159 in 2010 to 69,058 in 2011 along with a slight increase in average revenue per patient visit from SAR in 2010 to SAR in Wards While the wards revenue increased slightly at a CAGR of 0.5% from SAR 35.4 million in 2007 to SAR 35.9 million in 2010 because while the number of beds increased from 289 in 2007 to 361 in 2010, most of this increase in bed capacity was in obstetrics and gynecology department. Revenue decreased from SAR 35.9 million in 2010 to SAR 34.2 million in 2011 as a result of the reduction in the number of inpatients following the resignation of one of the doctors in orthopedics department. Radiology Radiology revenue increased at a CAGR of 16.5% from SAR 19.2 million in 2007 to SAR 35.4 million in While there was a slight increase in the number of radiology tests conducted per patient from 0.14 in 2007 to 0.16 in 2011 and revenue per patient also increased slightly from SAR in 2007 to SAR in Main driver for the growth in revenue was the overall increase in the number of patients which resulted in the number of radiology tests conducted at the Hospital. Emergency Care 94

126 Dallah Hospital expanded its emergency care operations in 2009 from 23 to 54 beds along with having separate wings for obstetrics and gynecology, pediatric and adult patients. This resulted in an increase in revenue at a CAGR of 15.3% from SAR 14.4 million in 2007 to SAR 22.0 million in Revenue increased further from SAR 22.0 million in 2010 to SAR 24.0 million in 2011 because of the increase in the number of patients from 185,210 in 2010 to 191,887 in Pediatrics Pediatrics revenues increased at a CAGR of 3.6% from SAR 16.9 million in 2007 to SAR 18.7 million in 2010 because expansion in the Hospital s obstetrics and gynecology capacity resulted in an increase in the number of deliveries of newborn babies in the Hospital which, in turn, led to an increase in the traffic of pediatric patients. Furthermore, the Hospital also opened a new pediatrics intensive care unit at the end of Revenue increased from SAR 18.7 million in 2010 to SAR 20.8 million in 2011 as a result of the addition of four new doctors to the staff of the department. Physiotherapy Dallah Hospital provides physiotherapy treatment to both male and female patients. The Hospital experienced yearly growth of 21.6% in the number of physiotherapy sessions conducted there from 35,575 in 2007 to 63,979 in 2010, which coupled with the increase in average revenue per patient from SAR in 2007 to SAR in 2010, resulted in a CAGR of 33.4% in physiotherapy department s revenue from SAR 5.3 million in 2007 to SAR 12.6 million in While the number of physiotherapy sessions reduced from 63,979 in 2010 to 56,594 in 2011 as a result of the resignation of one of the doctors in orthopaedics department, average revenue per patient increased from SAR in 2010 to SAR in 2011 which lead to an increase in department s revenue from SAR 12.6 million in 2010 to SAR 14.1 million in Open Specialized Clinics Dallah Hospital introduced the concept of open specialist clinics whereby patients can see a specialist physician without any appointment instead of a general practitioner as is the case with most other hospitals. This concept has proven to be very successful and has resulted in a CAGR of 29.2% in revenue from SAR 4.8 million in 2007 to SAR 13.4 million in Continued increase in revenue in 2011 from SAR 11.9 million in 2010 to SAR 13.4 million in 2011 was driven by increase in the number of patients from 105,845 in 2010 to 119,430 in Number of patients at open specialist clinics continued to increase because these clinics are open for 18 hours per day and patients who visit the Hospital without appointment during those hours prefer to see a specialist at open specialist clinics rather than visit the emergency department. Dental Revenue of dental department increased at a CAGR of 12.1% from SAR 7.6 million in 2007 to SAR 10.7 million in 2010 due to the increase in the number of root canals, fillings, cleaning and scaling procedures at the Hospital. Revenue increased further from SAR 10.7 million in 2010 to SAR 13.3 million in 2011 because of an addition of one new doctor to the staff of the department leading to an increase in the number of patients from 16,147 in 2010 to 19,867 in Intensive Care Unit Increase in revenue at a CAGR of 14.5% from SAR 6.5 million in 2007 to SAR 11.2 million in 2011 was the result of the increase in the number of beds from 9 in 2007 to 13 in addition to the increase in occupancy rate from 67.4% in 2007 to 88.9% in Cardiology The decrease in cardiology department s revenue from SAR 8.5 million in 2007 to SAR 8.3 million in 2010 was mainly due to the reduction in the department s outpatient revenue from SAR 4.7 million in 2007 to SAR 4.1 million in Outpatient revenue reduced because of the: i) growth in the number of cardiology patients who registered with the Hospital through open specialist clinics; and ii) increase in competition. Inpatient revenue, on the other hand, increased from SAR 4.0 million in 2007 to SAR

127 million in 2010 which highlights Dallah Hospital s competitive position within the industry as it is one of the few private hospitals in Riyadh where open heart surgeries are performed and is also the only private hospital in Saudi Arabia to offer electrophysiology services. Revenue remained almost constant from SAR 8.3 million in 2010 to SAR 8.4 million in 2011 because of the resignation of one of the doctors in the department during that period. Orthopaedics Orthopaedics revenue increased at a CAGR of 18.2% from SAR 3.1 million in 2007 to SAR 5.1 million in 2010 as a result of the increase in the number of patient visits from 16,037 in 2007 to 27,264 in 2010 and increase in average consultation fee from SAR in 2007 to SAR in Revenue decreased from SAR 5.1 million in 2010 to SAR 4.8 million in 2011 because of the resignation of one of the doctors in the department during that period. Internal Medicine Internal Medicine revenue increased at a CAGR of 0.4% from SAR 6.3 million in 2007 to SAR 6.4 million in Revenue decreased from SAR 6.3 million in 2007 to SAR 4.3 million in 2010 primarily because of the reduction in inpatient revenue from SAR 2.4 million in 2007 to zero in 2010 as a result of the reclassification of one of the procedures. Increase in revenue from SAR 4.3 million in 2010 to SAR 6.4 million in 2011 was due to the addition of two new doctors to the staff of the department which lead to an increase in the number of patient visits from 35,934 in 2010 to 39,317 in General Surgery Increase in general surgery revenue from SAR 1.7 million in 2007 to SAR 2.3 million in 2010 was mainly attributable to the increase in number of patient visits from 11,137 in 2007 to 13,678 in Revenue reduced from SAR 2.3 million in 2010 to SAR 2.1 million in 2011 because of the drop in the number of surgeries performed at Dallah Hospital from 2,252 in 2010 to 1,592 in 2011 following the resignation of one of the doctors in orthopedics department. Ophthalmology Ophthalmology revenue increased from SAR 2.0 million in 2009 to SAR 2.5 million in 2010 because of the increase in patient traffic from 9,650 visits in 2009 to 12,099 visits in 2010 as a result of the new laser treatment machine installed during that year. Revenue increased further in 2011 to SAR 3.9 million because the Hospital was able to deploy the mew laser treatment machine for a full year. Diabetes Increase in diabetes center s revenue at a CAGR of 39.4% from SAR 0.9 million in 2007 to SAR 2.4 million in 2010 was mainly the result of the increase in the Hospital s capacity to treat more patients because of the addition of two new doctors to the staff during that period. Revenue increased from SAR 2.4 million in 2010 to SAR 3.2 million in 2011 primarily because of the addition of a female doctor to department s staff which resulted in an increase in the number of female patients. Ear, Nose and Throat Revenue increased at a CAGR of 10.9% from SAR 1.7 million in 2007 to SAR 2.5 million in 2011 mainly because of the increase in average consultation fee per patient from SAR in 2007 to SAR in Main reason for the slight increase in revenue from SAR 2.0 million in 2010 to SAR 2.5 million in 2011 was the addition of one parttime doctor to the staff of the department in mid Revenue of 2011, therefore, reflected his full year of service resulting in an increase in the number of outpatient visits from 11,710 in 2010 to 13,492 in 2011 and the number of inpatients from 1,204 in 2010 to 1,382 in

128 Dermatology Decrease in revenue from SAR 1.1 million in 2007 to SAR 1.0 million in 2010 is due to the drop in number of patient visits from 12,248 in 2007 to 9,732 in 2010 because one of the doctors resigned during that period. Subsequent increase in revenue from SAR 1.0 million in 2010 to SAR 1.8 million in 2011 is due to the addition of one new doctor to the staff of the department. Urology Revenue increased slightly from SAR 0.9 million in 2010 to SAR 1.8 million in 2011 because of the addition of two new doctors to the staff of the department. Paediatric Surgery Increase in pediatric surgery revenue from SAR 0.3 million in 2007 to SAR 0.7 million in 2011 was directly the result of growth in the Hospital s obstetrics and gynecology and pediatrics operations. Other Revenue and Adjustments This item includes revenue that is not related to the departments listed in Table 58 (Breakdown of Dallah Hospital s revenue by department ( )) and the discounts and promotions offered on that revenue. Table 62: Outpatients Capacity Utilizations Year Cardiology 96.4% 102.8% 100.1% Orthopedics 115.1% 141.3% 138.7% Dental 107.3% 100.0% 85.8% Diabetes 97.4% 83.1% 71.9% Dermatology 85.9% 88.9% 59.1% Ear, Nose and Throat 83.2% 76.9% 80.9% Emergency Care 92.9% 89.7% 91.6% Obstetrics & Gynecology 97.3% 101.9% 93.8% Opthalmology 95.0% 89.7% 81.9% Pediatrics 118.3% 107.5% 107.4% Pediatric Surgery 86.3% 73.1% 68.5% Urology 100.5% 101.9% 103.5% Psychiatrics 89.2% 99.4% 92.0% General Surgery 71.3% 66.4% 61.9% Internal Medicine 88.3% 77.1% 84.2% Open Specialist Clinics 77.0% 76.6% 67.3% Source: DHHC Utilization of capacity at outpatient clinics can exceed 100% if the number of patient visits in a year exceed the number of visits budgeted for each doctor. Six months ended 30 June 2010, 2011 and

129 Table 63: Breakdown of Dallah Hospital Revenue by Department tisj d tfp otp P sht of is ht of30 Six Months Ended 30 June All figures in thousands of Saudi riyals (SAR) 2012 Audited 2011 Audited 2010 Unaudited CAGR (June 10-11) Pharmacy 47,225 43,342 39, % Operating Rooms 45,549 36,697 38, % Laboratory 45,007 37,703 34, % Obstetrics & Gynecology 27,980 23,638 24, % Wards 19,457 19,027 19,708 (0.6%) Radiology 22,175 19,002 16, % Emergency Care 13,046 11,342 10, % Pediatrics 11,342 10,233 9, % Physiotherapy 8,715 7,691 7, % Open Specialized Clinics 7,519 7,276 6, % Dental 7,660 7,171 5, % Intensive Care Unit 4,795 6,207 4, % Cardiology 4,775 4,210 4, % Orthopedics 3,097 2,369 2, % Internal Medicine 5,564 2,861 2, % Cafeteria 3,776 2,284 2, % General Surgery 1,316 1,129 1, % Opthalmology 2,202 1,976 1, % Diabetes 2,344 1,474 1, % Ear, Nose and Throat 1,667 1,288 1, % Dermatology (0.3%) Urology % Pediatric Surgery % Phychiatrics % Less: Other Revenue and Adjustments (8,554) (3,065) (4,652) (35.6%) Total 278, , , % Source: DHHC Pharmacy Revenue increased at a CAGR of 8.7% from SAR 39.9 million during the first six months of 2010 to SAR 47.2 million during the first months of 2012 primarily because of the increase in the number of outpatient visits from 287,615 during the first six months of 2010 to 341,734 during the first six months of Operating Rooms For the six month period ended 30 June 2011, revenue was SAR 36.7 million compared to SAR 38.7 million during the same period last year because of the reduction in the number of orthopedic surgeries performed at the Hospital as a result of the resignation of one of the doctors. Revenue subsequently increased from SAR 36.7 million during the first six months of 2011 to SAR 45.5 million during the first six months of 2012 because of increase in the number of surgeries performed at Dallah Hospital. Laboratory Laboratory revenue increased at a CAGR of 15.0% from SAR 34.0 million during the first six months of 2010 to SAR 45.0 million during the first six months of 2012 as a result of the increase in the number of patients which, in turn, resulted in a CAGR of 5.3% in 98

130 the number of tests performed at the Hospital from 376,682 during the first six months of 2010 to 417,795 during the first six months of Obstetrics & Gynecology Number of deliveries performed at Dallah Hospital reduced from 3,240 during the first six months of 2010 to 3,053 during the first six months of 2011 which resulted in a slight decrease in obstetrics and gynecology revenue from SAR 24.4 million during the first six months of 2010 to SAR 23.6 million during the first six months of Revenue increased from SAR 23.6 million during the first six months of 2011 to SAR 28.0 million during the first six months of 2012 as a result of the increase in the number of inpatients from 3,913 during the first six months of 2011 to 4,494 during the first six months of 2012 which lead to an increase in the number of deliveries from 3,053 during the first six months of 2011 to 3,366 during the first six months of Radiology Radiology revenue increased at a CAGR of 14.5% from SAR 16.9 million during the first six months of 2010 to SAR 22.2 million during the first six months of 2012 as a result of the: i) increase in the number of patients which, in turn, resulted in a CAGR of 2.9% in the number of tests performed at the Hospital from 56,491 during the first six months of 2010 to 59,817 during the first six months of 2012; and ii) increase in average revenue per test from SAR during the first six months of 2010 to SAR during the first six months of Emergency Care Revenue increased from SAR 10.4 million during the first six months of 2010 to SAR 13.0 million during the first six months of 2012 because of the increase in the number of patient visits from 51,075 during the first six months of 2010 to 87,907 during the first six months of Pediatrics Pediatrics revenue increased at a CAGR of 10.5% from SAR 9.3 million during the first six months of 2010 to SAR 11.3 million during the first six months of 2012 mainly because of the increase in the number of out-patient visits from 19,553 during the first six months of 2010 to 26,345 during the first six months of Physiotherapy While the number of physiotherapy sessions conducted at Dallah Hospital reduced from 36,612 during the first six months of 2010 to 30,935 during the first six months of 2011 because of the reduction in the number of orthopaedics patients, average revenue per patient increased from SAR during the first six months of 2010 to SAR during the first six months of 2011 which resulted in an increase in the department s revenue from SAR 7.1 million during the first six months of 2010 to SAR 7.7 million during the first six months of Revenue increased from SAR 7.7 million during the first six months of 2011 to SAR 8.7 million during the first six months of 2012 because of increase in the number of physiotherapy sessions conducted at Dallah Hospital from 30,935 in during the first six months of 2011 to 36,464 during the first six months of Wards Slight drop in wards revenue during the first six months of 2011 compared to the same period last year from SAR 19.7 million in June 2010 to SAR 19.0 million in June 2011 corresponded with the drop in inpatient revenue. Revenue increased slightly from SAR 19.0 million during the first six months of 2011 to SAR 19.5 million during the first six months of 2012 in line with the slight increase in the average number of beds from 352 in June 2011 to 355 in June Open Specialist Clinics Revenue increased at a CAGR of 10.3% from SAR 6.2 million during the first six months of 2010 to SAR 7.5 million during the first six months of 2012 as a result of the increase in the number of doctors in the department from 23 in June 2010 to 26 in June 2012 which lead to an increase in the number of patient visits from 55,562 during the first six months of 2010 to 66,139 during the first six 99

131 months of As mentioned previously, open specialist clinics are open 18 hours per day so patients who visit the hospital during those hours prefer to see a specialist at open specialist clinics rather than visit the emergency department. Dental Revenue of dental department increased at a CAGR of 14.2% from SAR 5.9 million during the first six months of 2010 to SAR 7.7 million during the first six months of 2012 due to increase in the number of patient visits from 8,757 during the first months of 2010 to 11,313 during the first six months of 2012 a a result of the addition of one new doctor to the staff of the department. Intensive Care Unit Revenue was higher during the first six months of 2011 (SAR 6.2 million) compared to that during the first six months of 2010 and 2012 (SAR 4.4 million and SAR 4.8 million respectively) because some of the patients were discharged from the Hospital during the first half of 2011 after long stays. Cardiology While the number of patient visits increased slightly from 6,821 during the first six months of 2010 to 6,992 during the first six months of 2011, there was minimal change in revenue during this period from SAR 4.3 million during the first six months of 2010 to SAR 4.2 million during the first six months of Patient traffic decreased during the first six months of 2012 compared to the same period in 2011 but revenue increased from SAR 4.2 million during the first six months of 2011 to SAR 4.8 million during the first six months of 2012 primarily because of the increase in average revenue per inpatient from SAR 5,550.1 during the first six months of 2011 to SAR 6,644.5 during the first six months of Orthopaedics Orthopaedics revenue decreased from SAR 2.7 million during the first six months of 2010 to SAR 2.4 million during the first six months of 2011 because of the resignation of one of the doctors. Revenue increased subsequently from SAR 2.4 million during the first six months of 2011 to SAR 3.1 million during the first six months of 2012 because of the increase in number of patient visits from 12,136 during the first six months of 2011 to 13,697 during the first six months of 2012 as a result of the increase in the number of doctors in the department. Internal Medicine Internal Medicine revenue increased from SAR 2.2 million during the first six months of 2010 to SAR 5.6 million during the first six months of 2012 primarily because of the increase in average revenue per patient visit from SAR during the first six months of 2010 to SAR during the first six months of General Surgery Slight decrease in revenue during the first six months of 2011 compared to the same period last year from SAR 1.3 million in June 2010 to SAR 1.1 million in June 2011 was mainly attributable to the decrease in number of orthopaedic surgeries. Revenue increased slightly from SAR 1.1 million during the first six months of 2011 to SAR 1.3 million during the first six months of 2012 because of the increase in the number of surgeries performed at Dallah Hospital from 5,882 during the first six months of 2011 to 5,979 during the first six months of Ophthalmology Ophthalmology revenue increased from SAR 1.2 million during the first six months of 2010 to SAR 2.2 million during the first six months of 2012 as a result of the increase in the number of patient visits from 5,961 during the first six months of 2010 to 8,308 during the first six months of Diabetes Two new doctors were added to the staff at Diabetes department during 2010 as a result of which the number of patient visits increased from 9,141 during the first six months of 2010 to 10,168 during the first six months of 2011 leading to an increase in revenue from SAR 1.3 million during the first six months of 2010 to SAR 1.5 million during the first six months of Subsequent 100

132 increase in revenue from SAR 1.5 million during the first six months of 2011 to SAR 2.3 million during the first six months of 2012 was because of the addition of a female doctor to department s staff which resulted in an increase in the number of female patients. Ear, Nose and Throat Increase in revenue from SAR 1.1 million during the first six months of 2010 to SAR 1.7 million during the first six months of 2012 was mainly due to the growth in the number of patient visits from 6,437 during the first six months of 2010 to 8,059 during the first six months of 2012 and increase in average revenue per patient visit from SAR during the first six months of 2010 to SAR during the first six months of Dermatology Dermatology revenue increased from SAR 0.5 million during the first six months of 2010 to SAR 0.9 million during the first six months of 2011 because of the increase in the number of patient visits from 4,684 during the first six months of 2010 to 6,765 during the first six months of Subsequent to that, number of patient visits continued to increase to 7,231 during the first six months of 2012 but revenue decreased from SAR 0.9 million during the first six months of 2011 to SAR 0.5 million during the first six months of 2012 because of the reduction in average revenue per patient visit from SAR during the first six months of 2011 to SAR 83.9 during the first six months of Pediatric Surgery Gradual increase in pediatric surgery revenue from SAR 0.3 million during the first six months of 2010 to SAR 0.4 million during the first six months of 2011 and SAR 0.5 million during the first six months of 2012 was directly the result of growth in Hospital s obstetrics and gynecology and pediatrics operations. Other Revenue and Adjustments This item includes revenue that is not related to the departments listed in Table 60 (Breakdown of Dallah Hospital s revenue by department (June )) and the discounts and promotions offered on that revenue. Revenue by Customer Category Years ended 31 December 2007, 2008, 2009, 2010 and 2011 The following table summarizes revenues by category of Dallah Hospital customers for the years 2011, 2010, 2009, 2008, and Table 64: Revenue by Customer Category Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma CAGR (07-11) Insurance Companies 197, , , ,897 78, % Cash Customers 143, , , ,473 96, % Direct Companies 113, ,621 95,669 84,299 69, % Government 19,701 15,974 9,211 7,725 7, % Others 4,534 3,612 3,136 7,150 5,026 (2.5%) Total 478, , , , , % % of Total Insurance Companies 41.3% 39.7% 43.6% 39.0% 30.5% 101

133 Cash Customers 29.9% 31.1% 29.6% 32.6% 37.6% Direct Companies 23.8% 24.9% 23.8% 24.2% 26.9% Government 4.1% 3.6% 2.3% 2.2% 3.0% Others 0.9% 0.8% 0.8% 2.1% 1.9% Total 100.0% 100.0% 100.0% 100.0% 100.0% Source: DHHC Insurance Companies Revenue from insurance companies increased at a CAGR of 25.9% from SAR 78.6 million in 2007 to SAR million in 2011 because of the overall increase in the number of medical insurance policy holders in the Kingdom as a result of the Saudi Arabian government s initiative that makes it mandatory for companies to provide health insurance coverage to their employees. Revenue from insurance companies increased substantially from SAR million in 2008 to SAR million in 2009 due to the outbreak of H1N1 epidemic. The Company for Cooperative Insuance (Tawuniya), Mediterranean & Gulf Cooperative Insurance and Reinsurance Company (MedGulf) and Bupa Arabia for Cooperative Insurance (BUPA) are the main customers in this category and accounted for 39.9%, 22.9% and 17.8% respectively of the total revenue from insurance companies in Cash Customers Cash customers are the second largest contributors to total revenue. Their contribution, however, decreased from 37.6% in 2007 to 29.9% in 2011 because of the increase in medical insurance policy holders in the Kingdom. Direct Companies This includes companies that have direct contract with Dallah Hospital to provide medical services to their employees. Their contribution towards revenue decreased from 26.9% in 2007 to 23.8% in 2011 as some companies opted for insurance plans for their employees during this period. Saudi Arabian Oil Company (Saudi Aramco) is the major customer within this category. Government Saudi Arabian Airlines accounted for 72.3% and 28.3% of the revenue in this category in 2007 and 2008 respectively. Saudi Arabian Airlines later opted to purchase insurance plans for its employees and, as such, no revenue was recorded from Saudi Arabian Airlines in 2009, 2010 and Revenue increased from SAR 16.0 million in 2010 to SAR 19.7 million in 2011 because of the increase in revenue from the Ministry of Health which accounted for 83.7% of the revenue in this category. Others This category includes revenue from members of royal family in addition to clinics and other hospitals Six months ended 30 June 2010, 2011 and 2012 Table 65: Revenue by Customer Category for the Six Months Period Ended June 30 Six Months Ended 30 June All figures in thousands of Saudi riyals (SAR) 2012 Audited 2011 Audited 2010 Unaudited CAGR (June 10-11) Insurance Companies 128, , , % Cash Customers 84,013 73,980 79, % Direct Companies 56,118 52,011 40, % Government 8,847 11,351 7, % Others 1,370 1,943 2,200 (21.1%) 102

134 Total 278, , , % % of Total Insurance Companies 46.1% 43.6% 43.4% Cash Customers 30.1% 34.5% 30.1% Direct Companies 20.1% 17.6% 21.1% Government 3.2% 3.4% 4.6% Others 0.5% 0.9% 0.8% Total 100.0% 100.0% 100.0% Source: DHHC Insurance Companies Revenue from insurance companies increased at a CAGR of 13.2% from SAR million during the first six months of 2010 to SAR million during the first six months of 2012 because of the continued increase in the number of medical insurance policy holders in the Kingdom. The Company for Cooperative Insuance (Tawuniya), Mediterranean & Gulf Cooperative Insurance and Reinsurance Company (MedGulf) and Bupa Arabia for Cooperative Insurance (BUPA) are the main customers in this category and accounted for 39.7%, 21.8% and 13.4% respectively of the total revenue from insurance companies during the first six months of Cash Customers Cash customers are the second largest contributors to total revenue. Their contribution, however, decreased from 34.5% in June 2010 to 30.1% in June 2012 because of the increase in medical insurance policy holders in the Kingdom. Direct Companies Direct companies revenue increased at a CAGR of 17.6% from SAR 40.6 million during the first six months of 2010 to SAR 56.1 million during the first six months of Saudi Arabian Oil Company (Saudi Aramco) is the major customers within this category accounting for 71.4% of direct companies revenue during the first six months of Government Revenue decreased from SAR 11.4 million during the first six months of 2011 to SAR 8.8 million during the first six months of 2012 primarily because SABIC opted to purchase insurance plans for its employees. Others This category includes revenue from members of royal family in addition to clinics and other hospitals Dallah Pharma Years ended 31 December 2007, 2008, 2009, 2010 and 2011 The following table summarizes sales by category of Dallah Pharma products that were sold for the ended years in December 31, 2011 and 2010 and 2009 and 2008 and Table 66: Dallah Pharma Revenue by Category Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma CAGR (07-11) 103

135 Pharmaceutical 21,211 17,726 17,020 13,111 13, % Herbal 8,453 5,416 8,828 9,038 9,677 (3.3%) Tenders 2,698 4,094 6,482 1,604 3,517 (6.4%) Total 32,362 27,237 32,330 23,753 26, % % of Total Pharmaceutical 65.5% 65.1% 52.6% 50.7% 50.7% Herbal 26.1% 19.9% 27.3% 36.1% 36.1% Tenders 8.3% 15.0% 20.0% 13.1% 13.1% Total 100.0% 100.0% 100.0% 100.0% 100.0% Source: DHHC Pharmaceutical Revenue from the sales of pharmaceutical products represented 65.5% of total Dallah Pharma sales in Pharmaceutical products sold by Dallah Pharma are manufactured by Jordanian Pharmaceutical Manufacturing Company and Dallah Pharma acts as its agent in Saudi Arabia. Sales of pharmaceutical products increased at a CAGR of 11.8% from SAR 13.6 million in 2007 to SAR 21.2 million in 2011 primarily because of the addition of new products including Torvacol within Dallah Pharma s product portfolio. Slight increase in revenue from SAR 17.0 million in 2009 to SAR 17.7 million in 2010 was due to the delay in registration of new products in Subsequent increase in revenue from SAR 17.7 million in 2010 to SAR 21.2 million in 2011 was due to the launch of a new product Jeltra Japanit and increase in the sales of Cobal, Oximal and Tervacol during the year. Prices at which pharmaceutical products are sold in Saudi Arabia are fixed by Saudi Food and Drug Authority. Table 67: Registration Date of Pharmaceutical Products Product Registration Date Ranidine 300 mg 1998 Ranidine 150 mg 1997 Bevacol 135 mg Tab 2004 Fenadex 60 mg Tab 2006 Tefanyl Syrup 2002 Tefanyl Tab 2003 Talin Syrup 2000 Eracid 250 mg Tab 2004 Fenadex 120 mg Tab 2006 Lowrac 5 mg Cap 2006 Angiotec 20 mg Tab 2000 Angiotec 10 mg Tab 2000 Angiotec 5 mg Tab 2000 Dopanore 250 mg Tab 1985 Noractone 250 mg Tab 1985 Monozide 25 mg Tab 2000 Monozide 12.5 mg Tab 2000 Noracine 400 mg Tab 1999 Noracine 400 mg Tab 1985 Setral 100 mg Tab 2006 Setral 50 mg Tab 10s & 30s 2006 Bactal 500 mg Tab

136 Bactal 250 mg Tab 2004 Mezacol 400 E.C. Tab 20s & 50s 2004 Razone 40 mg Tab 2002 Tenox 20 mg Cap 1998 Torvacol 10 mg Tab 2007 Torvacol 20 mg Tab 2007 Torvacol 40 mg 2007 Oximal 15 mg 2007 Oximal 7.5 mg 2007 Lacine 50 mg Tab 2007 Gabanet 400 mg Cap 2010 Gabanet 300 mg Cap 2010 Glitra 1 mg Tab 2010 Glitra 2 mg Tab 2010 Glitra 3 mg Tab 2010 Glitra 4 mg Tab 2010 Eracid 500 mg Tab 2010 Doloraz Susp 2010 Fenadex Drolate 70 mg Tab 2010 Razone 20 mg Tab 2010 Funzol 150 mg CAO 2007 Oxetine 20 mg Tab 2007 Cobal 500 mg Tab 2009 Romac 150 mg Tab 2008 Romac 300 mg Tab 2008 Adcal 500 mg Tab 2008 Saxid 2 mg Tab 2011 Saxid 4 mg Tab 2011 Source: DHHC Herbal Sales of herbal products decreased from SAR 9.7 million in 2007 to SAR 5.4 million in 2010 because Herbal products had to be reregistered with Saudi Food and Drug Authority. As such, the Company could not purchase any new inventory during that period and was allowed to sell only the inventory it had purchased before the re-registration process began. This re-registration process has now been completed which resulted in the growth in sales from SAR 5.4 million in 2010 to SAR 8.4 million in 2011 driven mainly by the sales of hair care products. Table 68: Revenue from Herbal & Cosmetic Products Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma Herbal Products 8,453 5,416 8,439 8,899 9,301 Cosmetic Products

137 Total 8,453 5,416 8,828 9,038 9,677 Source: DHHC Table 69: Date of Registration of Herbal Products Product Registration Date Super Gain Chocolate 2002 Super Gain Banana 2002 Super Kids Chocolate 2002 Super Kids Vanilla 2002 Muscle Maker Chocolate 2002 Weight Reduction Chocolate 2002 Weight Reduction Vanilla 2002 Afrodi Dal 2008 Hair Dal 2008 PropMaxLozenges 2002 Source: DHHC Tenders Tender sales fluctuate from one year to another depending on the number of tenders won by the Company. Tenders are offered by GCC governments, Ministry of Defense and Aviation, King Fahad Medical City, Medical Affairs Department at National Guard Hospital and NUPCO to buy medicines for their hospitals. Dallah Pharma participates in these tenders through Jordanian Pharmaceutical Manufacturing Company, though in the future the Company may bid jointly with other manufacturing companies as well for some of the products. While GCC governments launch their tenders on a yearly basis, frequency with which the other tenders are launched can vary from anywhere between once a year to once every three years. Six months ended 30 June 2010, 2011 and 2012 Table 70: Dallah Pharma Revenue by Category or the Six Month Period Ended June 30 Six Months Ended 30 June All figures in thousands of Saudi riyals (SAR) 2012 Audited 2011 Audited 2010 Unaudited CAGR (June 10-11) Pharmaceutical 13,033 12,190 10, % Herbal 10,609 4,410 3, % Tenders 1,261 1,702 3,491 (39.9)% Total 24,903 18,302 17, % % of Total Pharmaceutical 52.3% 66.6% 61.0% Herbal 42.6% 24.1% 18.9% Tenders 5.1% 9.3% 20.1% Total 100.0% 100.0% 100.0% Source: DHHC Pharmaceutical 106

138 Sales of pharmaceutical products as a percentage of Dallah Pharma revenue reduced from 66.6% of revenue in June 2011 to 52.3% of revenue in June 2012 because of the increase in the sales of herbal products. Sales of pharmaceutical products increased at a CAGR of 10.7% from SAR 10.6 million during the first six months of 2010 to SAR 13.0 million during the first six months of 2012 as a result of the increase in sales of Ranidine and Torvacol along with introduction of new products (Gabanet, Drolate, Cardioprol and Secnezole). Herbal Sales of herbal products increased from SAR 3.3 million during the first six months of 2010 to SAR 10.6 million during the first six months of 2012 because of the completion of re-registration process with Saudi Food and Drug Authority and increase in the sales of hair care and weight gain products. Tenders Tender sales fluctuate from one year to another depending on the number of tenders won by the Company. Tenders are offered by GCC governments, Ministry of Defense and Aviation, King Fahad Medical City, Medical Affairs Department at National Guard Hospital and NUPCO to buy medicines for their hospitals. Dallah Pharma participates in these tenders through Jordanian Pharmaceutical Manufacturing Company, though in the future the Company may bid jointly with other manufacturing companies as well for some of the products. While GCC governments launch their tenders on a yearly basis, frequency with which the other tenders are launched can vary from anywhere between once a year to once every three years Cost of Revenue Years ended 31 December 2007, 2008, 2009, 2010 and 2011 Table 71: Cost of Revenue Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma Staff 139, , , ,790 86,463 Visiting Doctors Service 19,246 18,019 14,766 11,530 8,029 Maintenance, Cleaning and Catering Supplies 13,320 13,206 13,371 11,248 7,143 Medicines and Drugs 69,783 64,767 60,313 47,904 38,553 Medical Disposals 26,672 26,126 26,926 22,963 16,301 Hospital Building Rent - 5,218 5,218 5,218 5,218 Accomodation Rent - 1,196 1,196 1,196 1,196 Land Rent Cardiology Disposals 3,585 3,151 2,776 2,438 2,276 Maintenance Services 2,507 2,581 1,946 1, Uniforms Electricity 3,361 3,897 3,728 4,925 2,373 Stationery 1,200 1,121 1,128 1, Training Miscelleanous Expenses 718 3, Storing Discrepencies (152) (173) (30) Accepted Rejection Provisions ,347 13,539 6,

139 Depreciation 24,365 18,496 17,912 15,278 10,783 Dallah Pharma 20,073 18,469 21,151 14,169 18,085 Operations & Management 14, Inter-Company Transactions (717) (172) Total 339, , , , ,783 Source: DHHC Staff Increase in staff cost from SAR 86.5 million in 2007 to SAR million in 2010 was driven by the following: i) increase in revenue because staff cost includes the commission paid to doctors on the basis of the revenue generated by those doctors. Dallah Hospital enters into separate agreements with each doctor in this regard; ii) increase in number of doctors and nurses at Dallah Hospital; and iii) increments awarded to the staff during that period. Number of doctors at Dallah Hospital increased from 179 in 2007 to 201 in 2010 while the number of nurses increased from 476 in 2007 to 534 in Staff costs increased from SAR million in 2010 to SAR million in 2011 as a result of paying two extra salaries during the year (SAR 3.0 million) in addition to the re-classification of the cost of medical insurance of employees under this item (SAR 4.1 million) and increments awarded of around 4.0% during the year (SAR 4.9 million) along with increase in commissions paid to doctors. Visiting Doctors Services This includes cost of work contracted outside the Hospital and services performed by visiting doctors. Cost of outside services increased in line with the increase in the number of visiting doctors at the Hospital. Medicines and Drugs Cost of medicines and drugs increased from SAR 38.6 million in 2007 to SAR 69.8 million in This increase was in line with the overall growth in the operations of the Hospital. Medical Disposals Cost of medical disposals increased from SAR 16.3 million in 2007 to SAR 26.1 million in 2010 because of the overall growth in the operations of the Hospital. The cost increased slightly from SAR 26.1 million in 2010 to SAR 26.7 million in 2011 due to the increase in the use of chemicals. Maintenance, Cleaning, and Catering Supplies As a percentage of sales of Dallah Hospital, maintenance, cleaning and catering supplies were 2.8% of sales in 2011, the same level as that in These expenses, however, had increased to 2.9% of sales in 2010 and the slight reduction in 2011 was due to the lower amount of catering supplies purchased during that year as a result of the reduction in the number of inpatients. Cardiology Disposals Cost of cardiology disposals reduced slightly from 0.9% of Dallah Hospital s sales in 2007 to 0.8% of Dallah Hospital s sales in Slight increase in absolutle expenses from SAR 3.1 million in 2010 to SAR 3.6 million in 2011 was due to the increased consumption of heart medicines and cathertization supplies. Hospital Building and Land Rent Dallah Healthcare used to pay the rent of SAR 5.2 million every year to one of the shareholders (Mr. Saleh Abdullah Kamel) for the use of the land and Hospital buildings that were constructed on it. Both land and the buildings were acquired by the Company during the first quarter of 2011 which is why only SAR 495,000 was paid as rent in 2011 representing the amount due for one and a half months. Accomodation Rent 108

140 The Company paid only the rent due for the month and a half in 2011 because along with Dallah Hospital s land and building, it also acquired the associated buildings used as accommodation for staff of the Hospital. This expense, however, was re-classified by auditors as a general and administrative expense in Accepted Rejection Provisions This includes claims rejected by the insurance companies subsequent to approvals taken by the Hospital s management or procedures that were performed at the Hospital which were not part of the patients insurance coverage. Auditors chose to classify these provisions as a separate item on the income statement from 2010 onwards. The Company has to bear these expenses. Depreciation Depreciation expense increased from SAR 10.8 million in 2007 to SAR 18.5 million in 2010 because of the increase in fixed assets which include equipment, buildings and buildings under construction. Depreciation expense increased from SAR 18.5 million in 2010 to SAR 24.4 million in 2011 due to the increase in fixed assets and the acquisition of Dallah Hospital s buildings during the year. Dallah Pharma Cost of revenue at Dallah Pharma as a percentage of Dallah Pharma s sales was 67.5% in 2007, 59.7% in 2008, 65.4% in 2009, 67.8% in 2010 and 62.0% in The cost of revenue decreased as a percentage of sales from 67.8% in 2010 to 62.0% in 2011 because of the increase in sales of hair care products. Operations and Management These expenses are incurred by DHHC and are later reimbursed by Khafgi Hospital. DHHC entered into a contract to manage operations of Khafgi Hospital in April The total value of this contract is approximately SAR 35.6 million over the five-year period until Miscellaneous Expenses Increase in miscellaneous expenses in 2010 relate to the provision made for unpaid invoices up until that year amounting to SAR 3.0 million. Subsequent to that, the Company started recording such provisions on a monthly basis. Out of the total miscelleanous expenses of SAR 718,026 in 2011, SAR 581,813 were for unpaid invoices. Maintenance Services Cost of maintenance services decreased from 0.6% of Dallah Hospital s revenue in 2010 to 0.5% of Dallah Hospital s revenue in These costs relate to the expenditure on maintenance of medical equipment and information technology infrastructure. Uniforms Cost of uniforms varies from one year to the another because they are purchased in bulk. Electricity Cost of electricity decreased from SAR 3.9 million in 2010 to SAR 3.4 million in 2011 as a result of reduction in the number of hours during which high-voltage lights were turned on and management s decision to install energy-saving bulbs. Training Training costs increased in 2011 as a result of mandatory training course attended by the new staff in cardiology, orthopedics and radiology departments. Six months ended 30 June 2010, 2011 and

141 Table 72: Cost of Revenue for the Six Months Ended June 30 Six Months Ended 30 June All figures in thousands of Saudi riyals (SAR) 2012 Audited 2011 Audited 2010 Unaudited Staff 77,566 67,481 61,018 Visiting Doctors Service 13,088 9,977 9,238 Maintenance, Cleaning and Catering Supplies 7,473 6,982 6,600 Medicines and Drugs 39,294 35,343 33,259 Medical Disposals 14,005 14,270 14,248 Hospital Building Rent ,609 Accomodation Rent Land Rent Cardiology Disposals 2,089 2,017 1,396 Maintenance Services 1,507 1, Uniforms Electricity 1,455 1,430 1,955 Stationery Training Miscelleanous Expenses Storing Discrepencies Accepted Rejection Provisions Depreciation 13,178 11,761 9,736 Dallah Pharma 12,237 11,263 12,089 Operations & Management 7,196 4,891 - Inter-Company Transactions (164) (373) - Total 190, , ,685 Source: DHHC Staff Increase in staff cost from SAR 61.0 million during the first six months of 2010 to SAR 77.6 during the first six months of 2012 was driven by the following: i) increase in revenue because staff cost includes the commission paid to doctors on the basis of the revenue generated by those doctors. Dallah Hospital enters into separate agreements with each doctor in this regard; ii) increments awarded to retain staff; and iii) increase in number of doctors at Dallah Hospital. Number of doctors at Dallah Hospital increased from 190 in June 2010 to 214 in June Visiting Doctors Services Cost of outside services increased from SAR 9.2 million during the first six months of 2010 to SAR 13.1 million during the first six months of 2012 in line with the increase in the number of visiting doctors at the Hospital and changes in the compensation structure of certain key doctors to increase the variable component of their compensation. Medicines and Drugs Cost of medicines and drugs increased from SAR 33.3 million during the first six months of 2010 to SAR 39.3 million during the first six months of 2012 in line with the overall growth in the operations of the Hospital. Medical Disposals Cost of medical disposals decreased from 6.2% of sales during the first six months of 2010 to 5.0% of sales during the first six months of 2012 because medical disposals are mainly used to treat inpatients and the composition of inpatient revenue has reduced as a percentage of total Dallah Hospital s revenue. 110

142 Maintenance, Cleaning, and Catering Supplies Cost of maintenance, cleaning and catering supplies increased from SAR 6.6 million during the first six months of 2010 to SAR 7.5 million during the first six months of 2012 in line with the overall growth in the operations of the Hospital. Cardiology Disposals Cost of cardiology disposals increased from 0.6% of sales during the first six months of 2010 to 0.8% of sales during the first six months of 2011 because of increased consumption of heart medicines and cathertization supplies. It decreased slightly from 0.8% of sales during the first six months of 2011 to 0.7% of sales during the first six months of 2012 because of reduction in the number of cardiac surgeries performed at the Hospital as a result of reduction in the number of inpatients from 486 during the first six months of 2011 to 449 during the first six months of Hospital Building and Land Rent Given that Dallah Hospital s building was acquired by the Company during the first quarter of 2011, no hospital building rent was paid during the first six months of Accomodation Rent Given that buildings used as accommodation for staff of Dallah Hospital were also acquired at the same time as Hospital s building in 2011, no rent was paid during the first six months of Accepted Rejection Provisions This includes claims rejected by the insurance companies subsequent to approvals taken by the Hospital s management or procedures that are performed at the Hospital which are not part of the patients insurance coverage. Auditors chose to classify these provisions as a separate item on the income statement from 2010 onwards. The Company has to bear these expenses. Depreciation Depreciation expense increased from SAR 9.7 million during the first six months of 2010 to SAR 13.2 million during the first six months of 2012 due to the increase in fixed assets and the acquisition of Dallah Hospital s buildings by the Company. Dallah Pharma Cost of revenue at Dallah Pharma as a percentage of Dallah Pharma s sales was 69.4% during the first six months of 2010, 61.5% during the first six months of 2011and 49.3% during the first six months of The cost of revenue decreased as a percentage of sales from 69.4% during the first six months of 2010 to 49.3% during the first six months of 2012 primarily because of the continued increase in sales of hair care products. Operations and Management These expenses are incurred by DHHC and are later reimbursed by Khafgi Hospital. DHHC entered into a contract to manage operations of Khafgi Hospital in April The total value of this contract is approximately SAR 35.6 million over the five-year period until Miscellaneous Expenses Miscellaneous expenses of SAR 747,565 during the first six months of 2011 included SAR 686,268 related to provisions made for unpaid invoices. No such provisions were recorded during the first six months of Maintenance Services These costs relate to the expenditure on maintenance of medical equipment and information technology infrastructure. Cost of maintenance services was 0.4% of Dallah Hospital s revenue during the first six months of 2010 to 0.5% of Dallah Hospital s revenue during the first six months of 2011 and

143 Uniforms Cost of uniforms varies from one period to another because they are purchased in bulk. Electricity Cost of electricity decreased from 0.8% of Dallah Hospital s sales during the first six months of 2010 to 0.5% of Dallah Hospital s sales during the first six months of 2012 because of management s decision to reduce the number of hours during which high-voltage lights were turned on at Dallah Hospital and installation of energy-saving bulbs. Training Training costs had increased from SAR 73,004 during the first six months of 2010 to SAR 146,629 during the first six months of 2011 because of the mandatory training course that had to be attended by the new staff in cardiology, orthopedics and radiology departments. Training expenses reduced from SAR 146,629 during the first six months of 2011 to SAR 93,673 during the first six months of 2012 because of reduction in the number of overseas courses attended by staff during this period Sales and Marketing Expenses Years ended 31 December 2007, 2008, 2009, 2010 and 2011 Table 73: Selling and Marketing Expenses Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma Advertising 7,075 5,377 6,155 6,147 4,564 Provision for Doubtful Debts - - 5,534 3,657 6,042 Salaries and Related Expenses 946 1,125 1,696 1,335 1,004 Others Source: Audited and pro-forma financial statements Advertising Advertising and promotional expenses accounted for 83.5% of the total selling and marketing expenses in Majority of these advertising expenses related to the promotion of Dallah Hospital and its services. They increased to SAR 6.1 million in 2008 and 2009 because of the extensive advertising campaign launched by the Hospital to promote its new obstetrics and gynecology building. Subsequent reduction in these expenses to SAR 5.4 million in 2010 related to management s decision to reduce the promotional campaign for the Hospital s fertility unit. Increase in advertising expenses from SAR 5.4 million in 2010 to SAR 7.1 million in 2011 was related to the promotional campaigns carried out for: i) obstetrics and gynaecology wing; ii) diabetes center; iii) emergency operations at the Hospital; and iv) hair care products of Dallah Pharma. The Hospital promoted these services through advertisements on television, radio, local newspapers, short messaging service on mobile phones and billboards inside the Hospital. Salaries and Related Expenses Salaries and related costs decreased marginally from SAR 1.0 million in 2007 to SAR 0.9 million in 2011 because of the reclassification of expenses related to the staff at Dallah Pharma within the advertising and promotional expenses and reclassification of expenses related to staff at Patient Relations department outside the sales and marketing expenses. Others 112

144 This includes expenses related to entertainment, gifts and donations. Six months ended 30 June 2010, 2011 and 2012 Table 74: Selling and Marketing Expenses for the Six Months Period Ended June 30 Six Months Ended 30 June All figures in thousands of Saudi riyals (SAR) 2012 Audited 2011 Audited 2010 Unaudited Advertising 2,963 2,210 2,256 Provisions for Doubtful Debts Salaries and Related Expenses Others Source: Audited and unaudited financial statements Advertising Advertising and promotional expenses during the first six months of 2011 were SAR 2.2 million which was the same level as that in the first six months of 2010 even though a lot more advertising was carried out during 2011 compared to 2010 because most of the invoices were settled at the end of the year. Advertising expenditure increased from SAR 2.2 million during the first six months of 2011 to SAR 3.0 million during the first six months of 2012 because of the promotional campaigns carried out for Dallah Hospital s paediatrics, orthopaedics and ear, nose and throat departments on radio and local newspapers. Salaries and Related Expenses Salaries and related costs decreased from SAR 833,634 during the first six months of 2011 to SAR 340,849 during the first six months of 2012 because of re-classification of expenses related to staff at Patient Relations department outside the sales and marketing expenses. Others This includes expenses related to entertainment, gifts and donations General and Administrative Expenses Years ended 31 December 2007, 2008, 2009, 2010 and 2011 Table 75: General and Administrative Expenses Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma Salaries and Related Expenses 40,427 28,713 28,487 23,125 23,019 Insurance 370 6,308 6,223 4,276 3,257 Materials and Supplies 9,699 8,374 5,642 4,501 5,064 Consulting Fees 1,167 1,538 3,073 1, Maintenance Expenses - - 2,644 1,844 1,

145 Additional Provisions for Doubtful Debt* - 3, General Services 2,289 1,853 1,871 1,857 1,207 Travel 1,371 1,127 1,740 1,248 1,134 Postage and Courier 1,592 1,416 1,399 1, Rent , Licenses and Permits Others 2,671 2,697 4,227 1,045 3,038 *Refers to additional provisions accounted for doubtful debt representing the difference in the calculations of management and auditors. The amount was incorrectly referred to as maintenance expense in 1020 audited financial statements Source: Audited and pro-forma financial statements Salaries and Related Expenses Salaries and related expenses increased from SAR 23.0 million in 2007 to SAR 28.7 million in 2010 as a result of the increase in the number of employees. As a percentage of sales, however, these expenses reduced from 7.9% of sales in 2007 to 6.1% of sales in Salaries and related expenses increased from SAR 28.7 million in 2010 to SAR 40.4 million in 2011 because: i) employees were awarded a special bonus of two salaries during the year; ii) cost relating to the provision medical insurance to employees was reclassified as an employee related expense; and iii) average annual increment of 4% was awarded to employees. Insurance Increase in insurance expenses from SAR 3.2 million in 2007 to SAR 6.3 million in 2010 was related to the fact that the Company had to provide health insurance coverage to all of its employees. The Company entered into a contract with an insurance company in this regard. Insurance expenses decreased from SAR 6.3 million in 2010 to SAR 0.4 million in 2011 because the cost was reclassified as an employee related expense by the auditors. Materials and Supplies Cost of materials and supplies increased from SAR 5.6 million in 2009 to SAR 8.4 million in 2010 because of the increased expenditure on maintenance of medical equipment used to perform orthopedic surgeries, spinal surgeries and cardiology and obstetrics and gyecology procedures. Cost of materials and supplies increased further from SAR 8.4 million in 2010 to SAR 9.7 million in 2011 because of the maintenance of electrical generator at a cost of around SAR 1.0 million. This maintenance is carried out after every two or three years. Consulting Fees Consulting fees increased from SAR 1.0 million in 2008 to SAR 3.1 million in 2009 because of the fees paid to a management consultant to carry out a strategic analysis of Dallah Hospital s position within the industry. Most of the consulting fees paid in 2010 related to audit and staff training. Travel Travel expenses increased in 2009 because of the travel expenses related to the registration of herbal products of Dallah Pharma. Such travel included visits to the factories of the companies from where the drugs were imported. Travel expenses increased from SAR 1.1 million in 2010 to SAR 1.4 million in 2011 because some employees were sent abroad for training courses. Rent Rent increased from SAR 951,077 in 2010 to SAR 977,809 in 2011 because Dallah Pharma rented a warehouse in Eastern Region Others Other expenses include the expenses related to recruitment, head office, training, remuneration of the Board of Directors and IPO related costs. 114

146 Other expenses increased in 2009 because of the costs incurred as part of Joint Commission International s (JCI) accreditation requirements and a financial penalty imposed by Saudi Arabian Customs. This penalty related to one of shipments that contained medical equipment as well as furniture. However, the shipping agent mistakenly declared that only medical equipment was included in the shipment. The case has not yet been resolved. For more information, please refer to section ( Litigation ). Six months ended 30 June 2010, 2011 and 2012 Table 76: General and Administrative Expenses for the Six Months Period Ended June 30 Six Months Ended 30 June All figures in thousands of Saudi riyals (SAR) 2012 Audited 2011 Audited 2010 Unaudited Salaries and Related Expenses 21,830 13,549 11,986 Insurance 176 4,341 5,475 Materials and Supplies 2,727 3,659 2,448 Consulting Fees Maintenance Expenses 2,383 1,537 1,306 General Services 857 1, Travel Rent Others 3,161 3,502 2,970 Source: Audited and unaudited financial statements Salaries and Related Expenses Salaries and related expenses increased from SAR 12.0 million during the first six months of 2010 to SAR 16.5 million during the first six months of 2012 because of the increase in the number of administrative staff during this period and increments awarded to employees. Insurance Insurance expenses decreased from SAR 4.3 million during the first six months of 2011 to SAR 0.2 million during the first six months of 2012 because the cost was reclassified as an employee related expense by the auditors. Materials and Supplies Cost of materials and supplies increased from SAR 2.4 million during the first six months of 2010 to SAR 3.7 million during the first six months of 2011 and then subsequently reduced to SAR 2.7 million during the first six months of 2012 because of the expenses related to the maintenance of electrical generator which was carried out during Consulting Fees Consulting fees primarily include the cost of audit. Travel Travel expenses increased to SAR 751,801 during the first six months of 2011 because some employees were sent abroad for training during Rent Rent increased from SAR 354,000 during the first six months of 2010 to SAR 534,654 during the first six months of 2011 because Dallah Pharma rented a warehouse in Eastern Region. 115

147 Others Other expenses include the expenses related to recruitment, head office, training, remuneration of the Board of Directors and IPO related costs Other Income Years ended 31 December 2007, 2008, 2009, 2010 and 2011 Table 77: Other Income Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma Rent 1, ,430 1,125 1,382 Compensation from Shareholders 10, Cafeteria 1, Donations 1, Dividends Sale of Distribution Rights 4, (Loss) Gain on Sale of Property (28) Others 1,928 1,250 2,106 1,059 1,052 Source: DHHC Rent Rental income includes income received from rental of space for automated teller machines and coffee shops. Compensation from Shareholders This item includes SAR 8.7 million received as compensation for use of land located in Shate'e district of Jeddah by one of the shareholders and SAR 2.2 million received by the Company which represented the difference in the value of Dallah Hospital s land and buildings acquired from Mr. Saleh Abdullah Kamel and value of the non-operational lands transferred to Mr. Saleh Abdullah Kamel in exchange. Cafeteria Income from cafeteria increased from SAR 0.9 million in 2010 to SAR 1.5 million in 2011 because Dallah Hospital started selling the meals to its nursing staff rather than providing them for free. Donations Amount donated to Dallah Hospital varies from one year to another. Others This includes commissions received from Jordanian Pharmaceutical Manufacturing Company for selling its products and jointly bidding for tenders. Six months ended 30 June 2010, 2011 and 2012 Table 78: Other Income for the Six Months Period Ended June Six Months Ended 30 June

148 All figures in thousands of Saudi riyals (SAR) 2012 Audited 2011 Audited 2010 Unaudited Rent Cafeteria 1, Donations Sale of Distribution Rights - 4,000 - (Loss) Gain on Sale of Property (13) 7 - Others 896 1,820 1,195 Source: DHHC Rent Rental income includes income received from rental of space for automated teller machines and coffee shops. Cafeteria Income from cafeteria increased from SAR 0.5 million during the first six months of 2010 to SAR 0.7 million during the first six months of 2011 because Dallah Hospital started selling the meals to its nursing staff rather than providing them for free. Income increased from SAR 0.7 million during the first six months of 2011 to SAR 1.1 million during the first six months of 2012 because the Hospital increased the cost of meals provided to inpatients. Donations Amount donated to Dallah Hospital varies from one year to another. Others This includes commission received from Jordanian Pharmaceutical Manufacturing Company for selling its products and jointly bidding for the tenders Finance Charges Finance charges mainly represent interest paid to banks on loans and finance charges on islamic capital lease agreements for equipment and motor vehicles. A loan of SAR 41.2 million was obtained from Banque Saudi Fransi for construction of staff accommodation and obstetrics and gynecology building. The loan was fully settled during The Company obtained a short term Murabaha facility in 2011 to meet the temporary shortfall in funding for the construction of the new pediatrics building at Dallah Hospital Permanent Decline in Available for Sale Investments Permanent decline in available for sale investments represents a decline that was classified as other than temporary by the auditors in Dallah Healthcare s investment in Aseer Reversal of Accrued Expenses and Other Liabilities This relates to reversal of provisions for unpaid invoices Zakat and Income Tax The Company is subject to the Regulations of the Department of Zakat and Income Tax. Dallah Healthcare was awarded temporary Zakat certificates for the years 2006, 2007, 2008, 2009, 2010 and

149 7.5 Balance Sheet Table 79: Summary Statement of Financial Position Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma Current Assets 300, , , , ,168 Fixed Assets , , , ,205 Total Assets 698, , , , ,373 Current Liabilities 189,323 94,220 98,066 94,832 95,078 Non-Current Liabilities 40,230 42,409 34,325 30,741 35,451 Shareholders Equity 468, , , ,844 Total Liabilities and Equity 698, , , , ,373 Source: Audited and pro-forma financial statements Table 80: Summary Statement of Financial Position JJ Ji sht 30 Six Months Ended 30 June All figures in thousands of Saudi riyals (SAR) 2012 Audited 2011 Audited 2010 Unaudited Current Assets 335, , ,942 Fixed Assets 401, , ,892 Total Assets 737, , ,834 Current Liabilities 149, ,050 99,526 Non-Current Liabilities 43,578 48,498 53,480 Shareholders Equity 543, , ,828 Total Liabilities and Equity 737, , ,834 Source: Audited and unaudited financial statements Current Assets Years ended 31 December 2007, 2008, 2009, 2010 and 2011 Table 81: Breakdown of Current Assets Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma 118

150 Cash and Bank Balances 84,973 66,796 21,041 10,615 4,702 Account Receivables 124, , , ,261 92,004 Inventory 30,450 35,718 43,425 34,047 23,266 Assets Arranged for Sale 7, Prepayments and Other Assets 50,102 25,904 25,849 22,069 19,196 Due from Related Parties 2,479 13, Total Current Assets 300, , , , ,168 Source: Audited and pro-forma financial statements Cash and Bank Balances Cash and bank balances comprise of cash in hand and bank balances as at the date of the balance sheet. Main reason for the increase in cash balance is the increase in the Company s income from operations. Account Receivables Account receivables increased from SAR 92.0 million in 2007 to SAR million in 2011 in line with the increase in revenue of Dallah Healthcare. Out of the total receivables of SAR million as of 31 December 2011, SAR 14.0 million were from Khafgi Hospital. Receivable days at Dallah Hospital decreased from days in 2007 to days in 2011 because management wroteoff receivables related to one of the customers, collected the amount due from Saudi Arabian Airlines and improved the collection of receivables. Receivable days at Dallah Pharma reduced from days in 2010 to days in 2011 because of improved collections as a result of organizational restructuring and some collections carried out at a discount. Inventory In 2011, 66.7% of the inventory at Dallah Hospital comprised of medicines while 26.7% of the inventory comprised of medical supplies and consumables. Inventory days at Dallah Hospital reduced from 82.3 days in 2007 to 61.0 days in 2011 in line with the management s objective to maintain stock for no more than 60 days in the warehouses. In 2011, pharmaceutical products accounted for 78.8% of the inventory at Dallah Pharma. Inventory days for pharmaceutical products increased from days in 2007 to days in 2010 because it took time for one of the products (Torvacol) to gain customer acceptance. Inventory days for pharmaceutical products reduced from days in 2010 to days in 2011 due to SAR 3.4 million worth of inventory being written-off during Inventory days for herbal products increased from days in 2007 to 1,070.5 days in 2009 because Dallah Pharma stocked its warehouses with inventory of products that had to be re-registered with Saudi Food and Drug Authority. Inventory days for herbal products improved to days in 2011 because obsolete inventory was written-off. Prepayments and Other Assets Prepayments and other assets primarily include prepaid expenses, advances to suppliers and employees receivables. As of 31 December 2011, SAR 15.2 million of retention receivables were included within this item out of which SAR 14.7 million was collected from Saudi Aramco during the first quarter of Advances to suppliers increased from 6.0 million in 2010 to SAR 14.5 million in 2011 as a result of the payments made to contractor for the construction of the new pediatrics building of the Hospital. Prepayments increased from SAR 6.7 million in 2010 to SAR 9.4 million in 2011 mainly due to the prepayments related to the Khafji project. The Company also paid SAR 2.0 million as first payment to purchase the land for construction of hospital in west Riyadh. Six months ended 30 June 2010, 2011 and

151 Table 82: Breakdown of Current Assets as at June 30 Six Months Ended 30 June All figures in thousands of Saudi riyals (SAR) 2012 Audited 2011 Audited 2010 Unaudited Cash and Bank Balances 85,273 34,268 26,202 Account Receivables 149, , ,495 Inventory 34,323 33,862 42,523 Prepayments and Other Assets 47,623 40,282 27,083 Assets Arranged for Sale 7,934 7,934 - Deferred Expenses 8,048 4,411 - Due from Related Parties 2,869 18,691 12,639 Total Current Assets 335, , ,942 Source: Audited and unaudited financial statements Cash and Bank Balances Cash and bank balances comprise of cash in hand and bank balances as at the date of the balance sheet. Main reason for the increase in cash balance is the increase in the Company s income from operations. Account Receivables Account receivables increased from SAR million in June 2010 to SAR million in June 2011 in line with the increase in revenue of DHHC. Out of the total receivables of SAR million as of 31 December 2011, SAR 12.5 million related to Khafgi Hospital. Receivable days at Dallah Hospital decreased from days in June 2010 to 87.1 days in June 2011 because of the settlement of receivables from Aramco and increased from 87.1 days in June 2011 to days in June 2012 because of delays in payments from Aramco and increase in receivables related to Ministry of Health. Receivable days at Dallah Pharma decreased from days in June 2010 to days in June 2012 because of improved collections as a result of organizational restructuring and some collections carried out at a discount. Inventory In June 2012, 67.3% of the inventory at Dallah Hospital comprised of medicines while 27.0% of the inventory comprised of medical supplies and consumables. Inventory days at Dallah Hospital increased slightly from 62.3 days in June 2010 to 69.4 days in June In June 2012, pharmaceutical products accounted for 81.6% of the inventory at Dallah Pharma. Inventory days for pharmaceutical products decreased from days in June 2010 to days in June 2012 because of some inventory being written-off during Inventory days for herbal products decreased from 1,100.8 days in June 2010 to days in June 2012 because obsolete inventory was written-off during this period. Prepayments and Other Assets Prepayments and other assets primarily include prepaid expenses, advances to suppliers and employees receivables. Prepayments and other assets increased from SAR 27.1 million in June 2010 to SAR 47.6 million in June 2012 because of the increase in advances to suppliers from SAR 6.3 million in June 2010 to SAR 16.7 million in June 2012 as a result of the payments made to contractor for the construction of the new pediatrics building of the Hospital. The Company also paid SAR 2.0 million as first payment to purchase the land for construction of hospital in west Riyadh. Increase in prepayments and other assets from SAR 27.1 million in June 2010 to SAR 40.3 million in June 2011 was primarily driven by the increase in retention receivables due from Saudi Aramco that were subsequently collected by the Company and increase in pre-paid expenses related to Khafgi project. 120

152 Assets Arranged for Sale This relates to a building in Jeddah that was sold by DHHC and is presently in the process of being transferred to its new owners Non-Current Assets Years ended 31 December 2007, 2008, 2009, 2010 and 2011 Table 83: Breakdown of Non-Current Assets Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma Amount due from Shareholders ,062 6,780 Due from Related Parties ,212 10,112 11,919 Investment in a Company under Liquidation - 6, Available for Sale Investments 11,663 10,898 11,534 9,410 22,558 Property and Equipment 380, , , , ,948 Deferred Charges 6,204 2, Total Non-Current Assets 398, , , , ,205 Source: Audited and pro-forma financial statements Amount Due from Related Parties Amounts due from related parties represent medical services provided, purchases made from and rents paid to DHHC s affiliates. Investment in a Company under Liquidation As of 31 December 2010, DHHC owned 75.0% of Omega Critical Care Company Limited registered in Scotland. Shareholders decided to liquidate this investment and as of the date of this Prospectus, the Company s shares had been transferred to Al-Yusra International Investment Company owned by the existing shareholders of Dallah Healthcare. During 2008, shareholders also decided to liquidate Arabian Malaysian Takaful Company based in Bahrain. Its liquidation was completed in 2011 and the Company collected SAR 659,174 as a result of this liquidation. The remaining amount was settled against dues to related parties shown in table 62 of the Prospectus. Table 84: Statement of Investment in Arabian Malaysian Takaful Company SAR January ,470,620 6,470,620 Proceeds from Liquidation (659,174) - Settlement Against Dues to Related Parties (5,811,446) - 31 December ,470,620 Source: DHHC Investment in Securities Available for Sale The following table provides details on investments in securities available for sale during 2011, 2010, 2009, 2008, and

153 Table 85: Available for Sale Investments Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma Makkah Medical Center 3,448 3,448 3,937 3,937 3,937 Aseer 6,253 5,431 8,606 11,606 11,606 Ahsa Medical Center 1,300 1,300 1,300 1,300 1,300 Jordanian Pharmaceutical Manufacturing Company Valuation - - (3,300) (8,424) 4,724 Total 11,663 10,897 11,534 9,410 22,558 Source: Audited and pro-forma financial statements The Company s available for sale investments are stated at fair value. Changes in fair value are recorded as valuation adjustment and any decline in value considered to be other than temporary is charged to the income statement. Fair value is determined by reference to the market value if an open market existed, or based on other alternative methods. Otherwise, cost is considered to be the fair value. Property and Equipment Property and equipment comprises of land, buildings, medical equipment, construction in progress and leasehold improvements. Table 86: Breakdown of Property and Equipment Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma Land 136,863 54,400 54,400 54,400 54,400 Buildings 113,807 78,582 81,837 85,092 15,336 Leasehold Improvements 12,013 12,839 10,862 4,407 4,693 Machinery and Tools Medical Equipment 63,722 56,829 43,559 39,096 31,321 Furniture and Fixtures 5,085 2,295 2,232 1,940 1,684 Vehicles 1, ,152 1,612 Construction Work in Progress 47,392 15,591 16,227 19,149 77,756 Total 380, , , , ,948 Source: Audited and pro-forma financial statements Land and buildings of Dallah Hospital used to be owned by Mr. Saleh Abdullah Kamel. The Company acquired these land and buildings during 2011 by issuing 12,000,000 shares worth SAR 120,000,000 in favour of Mr. Saleh Abdullah Kamel which represented the difference in the fair value of the non-operational lands transferred from DHHC to Mr. Saleh Abdullah Kamel and Dallah Hospital s land and buildings transferred from Mr. Saleh Abdullah Kamel to DHHC of SAR 117,853,600 or the equivalent of 11,785,360 shares valued at SAR 10 each. Upon shareholders agreement, 214,640 shares valued at SAR 10 each an equivalent of SAR 2,146,400 were granted to shareholders. This was done to make the total capital of the Company a whole number and to avoid issuance of fractional shares in the future if the Company decided to raise its capital. For more details, please refer to Section 4.10 of the Prospectus. 122

154 Increase in building assets from SAR 15.3 million in 2007 to SAR 85.1 million in 2008 related to the construction of the new obstetrics and gynecology building. Building assets increased further to SAR million in 2011 compared to SAR 78.5 million in 2010 because the Company acquired Dallah Hospital s building from Mr. Saleh Abdullah Kamel. Leasehold improvements comprise mainly of rooms renovations, redecorations and modifications. Leasehold improvements increased by SAR 6.5 million in 2009 mainly because of the improvements carried out to the operating rooms. Medical equipment comprise mainly of exam and treatment equipment, electrical machinery, computers and software. Additions made to medical equipment mainly relate to the purchase of intensive care unit equipment, x-ray equipment, ophthalmology laser machine and medical furniture and fixtures. Increase in work in progress from SAR 15.6 million in 2010 to SAR 47.4 million in 2011 relates to the construction of new pediatrics wing and parking facility for patients and visitors. Table 87: Valuation of Land and Buildings Owned by Mr. Saleh Abdullah Kamel SAR million Book Value Market Value Appraiser Properties 34,774, ,492,500 Radma Real Estate Investment Buildings 51,462,963 93,761,100 Radma Real Estate Investment Total Value 86,237, ,263,600 Source: DHHC Table 88: Valuation of Lands Owned by Dallah Healthcare Holding Company SAR million Book Value Market Value Appraiser King Fahad Road Land 29,400,000 97,650,000 Radma Real Estate Investment Jeddah Land 25,000,000 33,750,000 Assessment of land value was not done by a third party. Agreement was reached between the two parties for the sale to be carried out at a price that reflected the book value of the land along with unpaid rent on that land Total Value 54,500, ,400,000 Source: DHHC Six months ended 30 June 2010, 2011 and 2012 Table 89: Breakdown of Non-Current Assets as at June 30 As at June 30 All figures in thousands of Saudi riyals (SAR) 2012 Audited 2011 Audited 2010 Unaudited Investment in a Company under Liquidation - 6,471 6,471 Available for Sale Investments 11,530 10,820 10,731 Property and Equipment 390, , ,691 Total Non-Current Assets 401, , ,893 Source: Audited and unaudited financial statements Investment in a Company under Liquidation 123

155 During 2011, liquidation of Arabian Malaysian Takaful Company was completed. The Company collected SAR 659,174 as a result of this liquidation and the remaining amount was settled against dues to related parties shown in table 62 of the Prospectus. Table 90: Statement of Investment in Arabian Malaysian Takaful Company SAR January ,470,620 6,470,620 Proceeds from Liquidation (659,174) - Settlement Against Dues to Related Parties (5,811,446) - 31 December ,470,620 Source: DHHC Investment in Securities Available for Sale The following table provides details on investments in securities available for sale as of 30 June 2012, 2011 and Table 91: Investment in Securities Held for Sale As at June 30 All figures in thousands of Saudi riyals (SAR) 2012 Audited 2011 Audited 2010 Unaudited Makkah Medical Center 3,448 3,448 3,448 Aseer 6,193 5,391 5,211 Ahsa Medical Center 1,300 1,300 1,300 Jordanian Pharmaceutical Manufacturing Company Valuation Adjustment Total 11,530 10,820 10,731 Source: Audited and unaudited financial statements The Company s available for sale investments are stated at fair value. Changes in fair value are recorded as valuation adjustment and any decline in value considered to be other than temporary is charged to the income statement. Fair value is determined by reference to the market value if an open market existed, or based on other alternative methods. Otherwise, cost is considered to be the fair value. Property and Equipment Property and equipment comprises of land, buildings, medical equipment, construction in progress and leasehold improvements. Table 92: Property and Equipment As at June 30 All figures in thousands of Saudi riyals (SAR) 2012 Audited Audited 2010 Unaudited Land 136, ,863 54,400 Buildings 109, ,839 80,209 Leasehold Improvements 10,823 11,451 9,155

156 Machinery and Tools Medical Equipment 64,182 65,713 46,670 Furniture and Fixtures 5,076 2,307 2,258 Vehicles 1, Construction Work in Progress 61,881 20,607 17,957 Total 390, , ,691 Source: Audited and unaudited financial statements Land and buildings of Dallah Hospital used to be owned by Mr. Saleh Abdullah Kamel. The Company acquired these land and buildings during 2011 by issuing 12,000,000 shares worth SAR 120,000,000 in favour of Mr. Saleh Abdullah Kamel which represented the difference in the fair value of the non-operational lands transferred from DHHC to Mr. Saleh Abdullah Kamel and Dallah Hospital s land and buildings transferred from Mr. Saleh Abdullah Kamel to DHHC of SAR 117,853,600 or the equivalent of 11,785,360 shares valued at SAR 10 each. Upon shareholders agreement, 214,640 shares valued at SAR 10 each an equivalent of SAR 2,146,400 were granted to shareholders. This was done to make the total capital of the Company a whole number and to avoid issuance of fractional shares in the future if the Company decided to raise its capital. For more details, please refer to section 4.10 of the Prospectus. Building assets increased from SAR 80.2 million in June 2010 to SAR million in June 2011 because the Company acquired Dallah Hospital s building from Mr. Saleh Abdullah Kamel. Additions made to medical equipment mainly relate to the purchase of: i) equipment for radiology, cardiology and internal medicine departments and operating theatres; and ii) medical furniture and fixtures. Increase in work in progress from SAR 18.0 million in June 2010 to SAR 61.9 million in June 2012 relates to the construction of new pediatrics wing at Dallah Hospital Current Liabilities Years ended 31 December 2007, 2008, 2009, 2010 and 2011 Table 93: Breakdown of Current Liabilities Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma Accounts Payable 50,434 48,204 64,176 57,212 40,299 Accrued Expenses and Other Liabilities 42,195 25,791 27,045 21,162 18,615 Due to Related Parties 1,030 6, Dividends Payable 6, Lease Obligations 4,113 4, Short-term Murabaha 77, Current Portion of Long Term Loans - - 1,847 12,106 32,564 Zakat Payable 8,022 8,704 4, , 3,600 Total Current Liabilities 189,323 94,220 98,066 94,832 95,078 Source: Audited and pro-forma financial statements Accounts Payable Trade payables represented 42.4%, 60.3%, 65.4%, 51.2% and 26.6% of total current liabilities in 2007, 2008, 2009, 2010 and Payable days reduced from days in 2007 to days in 2011 primarily because of the Company s policy of maintaining a maximum of 60 days of stock which limited the procurements from key suppliers. Account payables balance in 2010 included SAR 9.0 million related to the lease agreements for equipment and motor vehicles of which SAR 4.9 was due in

157 Payable days at Dallah Pharma decreased from days in 2010 to days in 2011 because of the increase in sales of herbal products where amounts due from customers were settled at the time of delivery. Payable days at Dallah Hospital increased slightly from days in 2010 to days in 2011 because of the delays in making payments as a result of delays in collection of receivables from Saudi Aramco. Accrued Expenses and Other Liabilities This item primarily contains the dues from employees and payments from customers in addition to due expenses as shown in the following table: Table 94: Accrued Expenses and Other Liabilities Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma Employees Related Accruals 14,692 11,118 14,239 15,098 11,117 Advances from Customers 14,356 7,640 7, ,082 Accrued Expenses 12,528 5,985 3,388 4,421 3,306 Unearned Revenue Others ,611 1,079 2,089 Total 42,195 25,791 27,045 21,162 18,615 Source: Audited and pro-forma financial statements Employee related accruals increased from SAR 11.1 million in 2010 to SAR 14.7 million in 2011 because: i) higher compensation was awarded to nurses at the time of renewal of their employment constracts which led to an increase in the liabilities related to vacation allowances; and ii) number of employees also increased. Advances from customers increased from SAR 7.6 million in 2010 to SAR 14.4 million in 2011 primarily because of SAR 5.0 million received from the sale of building in Jeddah. Accrued expenses increased from SAR 6.0 million in 2010 to SAR 12.5 million in 2011 because of the provisions of SAR 1.9 million related to fines raised by owner of Khafgi Hospital for vacant managerial positions at Khafgi Hospital. Due to Related Parties Key related party transactions are shown in the table below: Table 95: Related Party Transactions Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) Nature of Transaction 2011 Audited 2010 Unaudited Kamel Social Fund Subscription Dareen Company for Travel and Tourism Travelling tickets Arabian Malaysian Takaful Company Providing guarantee letter - 6,541 Patients Friends Society General services Dallah Commercial Company Maintenance of air conditioners Dallah German Company General services Total 1,030 6,652 Source: Audited and pro-forma financial statements These transactions were carried out in the normal course of the business. 126

158 Dividends Payable The Company announced dividends of SAR million in 2011 out of which SAR million had been paid as of 31 December Six months ended 30 June 2010, 2011 and 2012 Table 96: Breakdown of Current Liabilities as at June 30 As at June 30 All figures in thousands of Saudi riyals (SAR) 2012 Audited 2011 Audited 2010 Unaudited Accounts Payable 52,916 54,414 61,261 Accrued Expenses and Other Liabilities 35,402 23,633 25,634 Due to Related Parties 975 6,260 6,686 Dividends Payable - 60,000 - Lease Obligations 1,678 14, Short-term Murabaha 52, Zakat Payable 6,877 6,309 5,439 Total Current Liabilities 149, ,050 99,526 Source: Audited and unaudited financial statements Accounts Payable Trade payables represented 61.6%, 33.0% and 34.2% of total current liabilities as of 30 June 2010, 2011 and Payable days reduced from days in June 2010 to days in June 2012 primarily because of the Company s policy of maintaining a maximum of 60 days of stock which limited the procurements from key suppliers and increase in sales of herbal products where amounts due from customers are settled at the time of delivery. Accrued Expenses and Other Liabilities This item primarily contains the dues from employees and payments from customers in addition to due expenses as shown in the following table: Table 97: Accrued Expenses and Other Liabilities as at June 30 As at June 30 All figures in thousands of Saudi riyals (SAR) 2012 Audited 2011 Audited 2010 Unaudited Employees Related Accruals 11,565 8,488 9,799 Advances from Customers 10,644 4,845 7,936 Accrued Expenses 8,332 9,920 4,580 Unearned Revenue Others 4, ,951 Total 35,402 23,633 25,634 Source: Audited and unaudited financial statements Employee related accruals increased from SAR 8.5 million in June 2011 to SAR 11.6 million in June 2012 because: i) higher compensation was awarded to nurses at the time of renewal of their employment constracts which led to an increase in the liabilities related to vacation allowances; and ii) number of employees also increased. 127

159 Advances from customers increased from SAR 4.8 million in June 2011 to SAR 10.6 million in June 2012 primarily because of the advances related to Khafgi Hospital. Accrued expenses increased from SAR 4.6 million in June 2010 to SAR 9.9 million in June 2011 because of the increase in accruals related to the construction of the new pediatrics building at Dallah Hospital. Other liabilities of SAR 3.0 million in June 2012 included amounts received on behalf of related parties and amounts to be paid on behalf of shareholders which were settled against the dividends payable to them. Due to Related Parties Key related party transactions are shown in the table below: Table 98: Related Party Transaction as at June 30 Six Months Ended 30 June All figures in thousands of Saudi riyals (SAR) Nature of Transaction 2012 Audited 2011 Audited 2010 Unaudited Kamel Social Fund Subscription Dareen Company for Travel and Tourism Travelling tickets Arabian Malaysian Takaful Company Providing guarantee letter - 5,913 6,636 Patients Friends Society General services Dallah Commercial Company Maintenance of air conditioners Barakah Medical Clinic Financial Dallah German Company General Services Total 975 6,260 6,686 Source: Audited and unaudited financial statements These transactions were carried out in the normal course of the business. Dividends Payable The Company announced dividends of SAR million in 2011 which had been paid in full as of 30 June Short-Term Murabaha The Company obtained a short term Murabaha facility to meet the temporary shortfall in funding for the construction of the new pediatrics building at Dallah Hospital Non-Current Liabilities Years ended 31 December 2007, 2008, 2009, 2010 and 2011 Table 99: Breakdown of Non-Current Liabilities Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma Term Loan ,839 12,943 Due to Related Parties - - 1,779 3,699 1,051 Shareholders Current Account - 2,824 2, Lease Obligations

160 Employees Terminal Benefits 40,230 35,473 30,001 25,203 21,457 Total Non-Current Liabilities 40,230 42,410 34,325 30,741 35,451 Source: Audited and pro-forma financial statements The Company provided for employees terminal benefits in compliance with Saudi Arabian Labour provisions. Shareholders current account was closed during the year ended 31 December Six months ended 30 June 2010, 2011 and 2012 Table 100: Breakdown of Non-Current Liabilities as at June 30 Six Months Ended 30 June All figures in thousands of Saudi riyals (SAR) 2012 Audited 2011 Audited 2010 Unaudited Shareholders Current Account - 6,818 19,453 Lease Obligations - 4,113 1,646 Employees Terminal Benefits 43,578 37,568 32,380 Total Non-Current Liabilities 43,578 48,498 53,480 Source: Audited and unaudited financial statements The Company provided for employees terminal benefits in compliance with Saudi Arabian Labour provisions. Shareholders current account was closed during the year ended 31 December Shareholders' Equity Years ended 31 December 2007, 2008, 2009, 2010 and 2011 Table 101: Shareholders Equity Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma Share Capital 330, , , , ,000 Statutory Reserves 13,773 32,818 23,114 17,454 11,691 Unrealized (Losses) Gains from Available for Sale Investments (3,171) (3,936) (3,300) (8,424) 4,724 Retained Earnings 128, , , ,293 72,429 Total Shareholders Equity 468, , , , ,844 Source: Audited and pro-forma financial statements Share Capital As at 31 December 2011, the share capital of the Company was SAR million consisting of 33.0 million ordinary shares of nominal value of SAR 10.0 each. On 11/03/1432H (corresponding to 14/02/2011) share capital of DHHC was increased from SAR million to SAR million through capitalization of SAR 30.4 million from statutory reserves and SAR 31.6 million from retained earnings. Furthermore, shares worth SAR 120 million were issued in favor of Mr. Saleh Abdullah Kamel. This amount was arrived at by accounting for the difference in the fair value of the non-operational lands transferred from DHHC to Mr. Saleh Abdullah Kamel and the Hospital s land transferred from Mr. Saleh Abdullah Kamel to DHHC which was SAR 117,853,600 or the equivalent of 11,785,360 shares at with a nominal value of SAR 10.0 each. In addition, 214,640 shares with a nominal value of SAR 129

161 10.0 each (equivalent of SAR 2,146,400) were awarded to shareholders upon shareholders agreement so the total capital of the company would become a whole number in order to avoid issuance of fractional shares in the future. For more information, please refer to Section 4.10 of the Prospectus. Statutory Reserves In accordance with Article 125 of the Companies Act in Saudi Arabia, 10.0% of the net annual income is required to be transferred to statutory reserves. The Company may resolve to discontinue such transfers when the reserve totals 50.0% of the share capital. The reserve is not available for distribution. Unrealized (Losses) Gains from Available for Sale Investments This represents gains or losses in the value of investments held for sale. Six months ended 30 June 2010, 2011 and 2012 Table 102: Shareholders' Equity as at June 30 Six Months Ended 30 June All figures in thousands of Saudi riyals (SAR) 2012 Audited 2011 Audited 2010 Unaudited Share Capital 330, , ,000 Statutory Reserves 21,278 8,671 28,603 Unrealized (Losses) Gains from Available for Sale Investments (3,304) (4,014) (4,103) Retained Earnings 195,729 82, ,327 Total Shareholders Equity 543, , ,828 Source: Audited and unaudited financial statements Share Capital As at 30 June 2012, the share capital of the Company was SAR million consisting of 33.0 million ordinary shares of nominal value of SAR 10.0 each. On 11/03/1432H (corresponding to 14/02/2011) share capital of DHHC was increased from SAR million to SAR million through capitalization of SAR 30.4 million from statutory reserves and SAR 31.6 million from retained earnings. Furthermore, shares worth SAR 120 million were issued in favor of Mr. Saleh Abdullah Kamel. This amount was arrived at by accounting for the difference in the fair value of the non-operational lands transferred from DHHC to Mr. Saleh Abdullah Kamel and the Hospital s land transferred from Mr. Saleh Abdullah Kamel to DHHC which was SAR 117,853,600 or the equivalent of 11,785,360 shares at with a nominal value of SAR 10.0 each. In addition, 214,640 shares with a nominal value of SAR 10.0 each (equivalent of SAR 2,146,400) were awarded to shareholders upon shareholders agreement so the total capital of the company would become a whole number in order to avoid issuance of fractional shares in the future. For more information, please refer to Section 4.10 of the Prospectus. Statutory Reserves In accordance with Article 125 of the Companies Act in Saudi Arabia, 10.0% of the net annual income is required to be transferred to statutory reserves. The Company may resolve to discontinue such transfers when the reserve totals 50.0% of the share capital. The reserve is not available for distribution. Unrealized (Losses) Gains from Available for Sale Investments This represents gains or losses in the value of investments held for sale. 130

162 7.6 Financial Condition, Liquidity and Other Items Years ended 31 December 2007, 2008, 2009, 2010 and 2011 Table 103: Financial Condition, Liquidity and Other Items Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma Net Cash from Operating Activities 128, ,388 72,942 71,712 63,363 Net Cash Used in Investing Activities ) 75,508( ) 32,052( (23,005) (33,810) (69,856) Net Cash Used in Financing Activities (34,355) (48,581) (39,511) (31,988) (24,983) Net Change in Cash and Cash Equivalents 18,177 45,755 10,426 5,914 (31,476) Cash and Cash Equivalents at Beginning of Period 66,796 21,041 10,615 4,702 36,178 Cash and Cash Equivalents at End of Period 84,973 66,796 21,041 10,615 4,702 Source: Audited and pro-forma financial statements Six months ended 30 June 2010, 2011 and 2012 Table 104: Financial Condition, Liquidity and Other Items as at June 30 Six Months Ended 30 June All figures in thousands of Saudi riyals (SAR) 2012 Audited 2011 Audited 2010 Unaudited Net Cash from Operating Activities 60,091 43,083 47,191 Net Cash Used in Investing Activities (24,023) (33,740) (11,167) Net Cash Used in Financing Activities (35,769) (41,871) (30,862) Net Change in Cash and Cash Equivalents 300 (32,528) 5,161 Cash and Cash Equivalents at Beginning of Period 84,973 66,796 21,041 Cash and Cash Equivalents at End of Period 85,273 34,268 26,202 Source: Audited and unaudited financial statements Cash Flow from Operating Activities Years ended 31 December 2007, 2008, 2009, 2010 and 2011 Table 105: Cash Flow from Operating Activities Financial Year Ended 31 December All figures in thousands of Saudi riyals

163 (SAR) Audited Audited Pro-forma Pro-forma Pro-forma Net Income before Zakat 117,162 98,886 60,080 60,980 35,215 Adjustments for Non-Cash Items: Depreciation 25,507 18,570 18,036 15,438 10,980 Impairment in Value of Available for Sale Investments - - 3, Foreign Currency Losses Provisions for Obsolete Inventory Writen-off Inventory 3, Reversal of Accrued Expenses (962) (7,148) Reversal of Prepaid Assets - (252) Provisions for Doubtful Debt 17,400 16,936 5,534 3,657 6,042 Written-off Debts Provisions for Employees Terminal Benefits 4,757 5,471 4,798 3,746 2,923 Gains (Losses) on Sale of Property 28 (5) (5) (1) (436) Zakat Paid (4,442) (2,430) (2,835) (2,601) (3,639) Changes in Working Capital (35,067) ) 4,130( (15,666) (9,507) 12,278 Net Cash from Operating Activities 128, ,388 72,942 71,712 63,363 Source: Audited and pro-forma financial statements The Company generated positive cash flow from operating activities of SAR million in 2011, SAR million in 2010, SAR 72.9 million in 2009, SAR 71.7 million in 2008 and SAR 63.4 million in 2007, contributed mainly by net income from the Company s operations after adjusting for non-cash and other items. Six months ended 30 June 2010, 2011 and 2012 Table 106: Cash Flow from Operating Activities for the Six Months Ended June 30 Six Months Ended 30 June All figures in thousands of Saudi riyals (SAR) 2012 Audited Audited 2010 Unaudited Net Income before Zakat 75,050 62,384 52,321 Adjustments for Non-Cash Items: Depreciation 13,932 11,806 9,774 Impairment in Value of Available for Sale Investments Foreign Currency Losses Provisions for Obsolete Inventory - 1,519 - Writen-off Inventory Reversal of Accrued Expenses Reversal of Prepaid Assets Provisions for Doubtful Debt 12,856 9,093 10,055 Written-off Debts Provisions for Employees Terminal Benefits 3,348 2,095 2,379 Gains (Losses) on Sale of Property 13 7 (3) Zakat Paid 2,667 1,999 1,156 Changes in Working Capital (47,775) (45,820) (29,492) Net Cash from Operating Activities 60,091 43,083 47,191 Source: Audited and unaudited financial statements

164 The Company generated positive cash flow from operating activities of SAR 60.1 million, SAR 43.1 million and SAR 47.2 million during the six months periods ended 30 June 2012, 2011 and 2010 respectively contributed mainly by net income from the Company s operations after adjusting for non-cash and other items Cash Flow seit vnirfgont segoiogorf Years ended 31 December 2007, 2008, 2009, 2010 and 2011 Table 107: Cash Flow from Investing Activities Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma Purchase of Property and Equipment (72,180) (29,884) (23,035) (37,027) (76,936) Proceeds from Investments in Affiliate Company under Liquidation Proceeds from Sale of Fixed Assets ,080 Deferred Expenses ) 3,991( (2,213) Net Cash Used in Investing Activities (75,508) ) 32,052( (23,005) (33,810) (69,856) Source: Audited and pro-forma financial statements Capital expenditure of SAR 76.9 million in 2007 mainly related to the construction of new obstetrics and gynecology building. Subsequent capital expenditure of SAR 37.0 million in 2008, SAR 23.0 million in 2009 and SAR 29.9 million in 2010 related to the addition and replacement of medical equipment at the Hospital. Most of the capital expenditure of SAR 72.2 million in 2011 related to the construction of new pediatrics building and parking facility for patients and visitors as well as the replacement of gastroenterology and imaging equipment, cooling systems and medical equipment in three operating rooms. Six months ended 30 June 2010, 2011 and 2012 Table 108: Cash Flow from Investing Activities for the Six Months Ended June 30 Six Months Ended 30 June All figures in thousands of Saudi riyals (SAR) 2012 Audited 2011 Audited 2010 Unaudited Purchase of Property and Equipment (24,153) (33,745) (11,207) Proceeds from Investments in Affiliate Company under Liquidation Proceeds from Sale of Fixed Assets Net Cash Used in Investing Activities (24,023) (38,151) (11,167) Source: Audited and unaudited financial statements Capital expenditure of SAR 11.2 million during the first six months of 2010 mainly related to the addition and replacement of medical equipment at the Hospital. Most of the capital expenditure of SAR 33.7 million during the first six months of 2011 related to the construction of new pediatrics building and parking facility for patients and visitors as well as the replacement of gastroenterology and imaging equipment, cooling systems and medical equipment in three operating rooms while the capital expenditure of SAR

165 million during the first six months of 2012 mainly related to the purchase of furniture and fixtures for staff accommodation and equipment for cardiology department Cash Flow seit voncneont segoiogorf Years ended 31 December 2007, 2008, 2009, 2010 and 2011 Table 109: Cash Flow from Financing Activities Financial Year Ended 31 December All figures in thousands of Saudi riyals (SAR) 2011 Audited 2010 Audited 2009 Pro-forma 2008 Pro-forma 2007 Pro-forma Net Movement in Amount Due from Related Parties - - (5,020) (4,455) (10,918) (Repayment of) Proceeds from Term Loan (4,869) (1,972) (11,974) (31,561) 24,937 Short Term Murabaha 77, Dividends (105,114) Net Movement in Shareholders Current Account (1,423) (46,609) (22,517) (4,882) (39,002) Net Cash Used in Financing Activities (34,355) (48,581) (39,511) (31,988) (24,983) Source: Audited and pro-forma financial statements The Company obtained a term loan in 2007 and used the proceeds to purchase property and equipment for the new obstetrics and gynecology building. The Company recorded negative cash flows from financing activities during the years 2007 to 2010 because of the movement in shareholders current account on account of dividend payments to the shareholders and repayment of the term loan. The Company recorded negative cash flows from financing activities during 2011 due to distribution of SAR million in dividends in accordance with the Board of Directors resolution dated 26/12/2010 approving distribution of SAR million in dividends during Six months ended 30 June 2010, 2011 and 2012 Table 110: Cash Flow from Financing Activities for the Six Months Ended June 30 Six Months Ended 30 June All figures in thousands of Saudi riyals (SAR) 2012 Audited Audited 2010 Unaudited Net Movement in Amount Due from Related Parties (Repayment of) Proceeds from Term Loan (2,434) 18,547 (2,742) Short Term Murabaha (25,012) Dividends (6,479) (60,000) (30,000) Deferred Expenses (1,843) (4,411) - Net Movement in Shareholders Current Account - 3,993 1,698

166 Net Cash Used in Financing Activities (35,769) (41,871) (30,862) Source: Audited and unaudited financial statements The Company obtained a short term Murabaha facility to meet the temporary shortfall in funding for the construction of the new pediatrics wing at Dallah Hospital. Payment of SAR 60.0 million in dividends during the first six months of 2011 relates to the Board of Directors resolution dated 26/12/2010 approving distribution of SAR million in dividends during that year. 7.7 Contingent Liabilities As of 31 December 2011, Bank Al-Jazira had issued letters of credit and bank guarantees worth SAR 10.9 million. The Company was also liable to pay SAR 83.0 representing the outstanding balance to be paid to the owner of the land where it plans to construct the West Riyadh hospital. 7.8 Statement of liquidity and management's responsibility for financial information The Management s Discussion and Analysis of Financial Condition and Results of Operations section has been drafted by the management of the Company and approved by the Board of Directors. Except as set forth in this Prospectus, management to the best of their knowledge and belief states that there has been no material adverse change in the financial information from the audited or reviewed financial statements, position or prospects of the Company as of the date of this Prospectus and accepts full responsibility for the authenticity and accuracy of the information and analysis of financial results and confirm, after making all reasonable inquiries, that full and fair disclosure has been made and there is no other information or documents the omission of which make any information or statements therein misleading. 135

167 8 Dividend Record and Policy Pursuant to the Company s Bylaws, any decision on the distribution of cash dividends to shareholders shall be declared by the Ordinary General Assembly based on the recommendation of the Board of Directors, after taking into consideration the different factors at the time. Such factors include the Company s financial situation, undertakings and obligations restricting dividends distribution in accordance with agreements concluded between Company, subsidiaries and other parties, in addition to the Company s current and expected results from operations, cash requirements and plans for expansion. The Company intends to distribute dividends to its shareholders with the aim of raising the value of their investments in the Company in a way which is consistent with its capital expenditure and investment requirements. This is done based on the Company s financial condition, the state of the market, the general economic climate in addition to other factors, including the need to reinvest the said profits, the Company s capital requirements, in addition to future expectations of economic activity and other legal and regulatory considerations. Profits shall be distributed in Saudi Riyals. Additionally, investors seeking to subscribe in the Offering must be aware that the policy for distributing dividends may change from time to time. Despite the fact that the Company has decided to distribute dividends to shareholders on an annual basis, the Company shall give no assurance that it will pay the said dividends, that is to say, no assurance on the value of the profits intended for distribution in any particular year. The operation of distributing profits is subject to certain restrictions pursuant to the Company s Bylaws, as stated by Article 45 of the Bylaws which specifies that the Company s annual net profits shall be distributed after deducting all expenses and other costs in the following manner: Set aside 10 % of net profits for the statutory reserve. The Ordinary General Assembly may suspend this allocation when the said reserve reaches 50% of capital. The Ordinary General Assembly may, based on the Board of Directors suggestion, set aside 20% of the net profits to establish other reserves for other specified purposes. Subsequently, a first payment shall be distributed to the shareholders amounting to 5 % of the paid up capital. A proportion not exceeding 10 % of the balance shall be allocated to remunerate members of the Board of Directors. However such remuneration shall be in compliance with the applicable laws and instructions issued by the Ministry of Trade and Industry. The General Assembly may deduct a further 10 % of the net profits to establish social facilities for Company employees or use the amount to issue bonus shares to employees. The balance shall be distributed to the shareholders as an additional share in profits. Following is the summary of the dividends paid to shareholders in recent years: Table 111: Historical Dividends SAR million Dividends Announced Dividends Paid 120.0** 40.0* * 40.0* *Dividends were settled against shareholders current account ** SAR 8.4 million of dividends were settled against the amount due to related parties Source: DHHC Board of Directors issued a resolution no. 4/2010 on 26/12/2010G to distribute SAR 120 million in dividends from retained earnings as of 31 December The Company had distributed this amount as of the date of this Prospectus. DHHC did not distribute any dividends during 2011 because the Company needed to finance its expansions. This decision was approved by the General Assembly on 16/05/2012G. 136

168 9 Capitalization The following table summarizes the Company s capitalization according to the audited financial statements as at 31 December 2010, 2011 and for the six-month period ended 30 June The following table must be read in conjunction with the audited financial statements as well as the accompanying notes. Table 112: Capitalization (SAR 111) 30 June December December 6101 Liabilities Current Liabilities 149, ,323 98,333 Non-current Liabilities 43,578 40,230 38,297 Total 193, Shareholders' Equity Capital 330, , ,000 Statutory Reserves 21,278 13,773 32,817 Unrealized Gains (Losses) from Available for Sale Investments (3,304) ) 3,171( ) 3,936( Retained Earnings 195, , ,737 Total 543, Total Capitalization 737, Source: DHHC The Directors confirm that neither the Company s capital nor the capital of any affiliates is under option. The Directors also confirm that the Company does not have any debt instruments as of the date of the Prospectus except as noted in Section 7 ( Management Discussion and Analysis ). The Directors confirm that there is no intention to materially change the nature of the Company s business and that the Company s operations have not been interrupted in a way that would materially affect the financial position of the Company during the last 12 months. The Directors further confirm that there has been no material change in the financial position or business of the Company during the two years prior to the listing year and during the period from the date of the end of the period covered in the legal due diligence report to the date of adoption and approval of this Prospectus. 137

169 10 Use of Proceeds 10.1 Use of Proceeds and Expenses The total proceeds from the Offering are estimated at SAR [ ] of which SAR [ ] will be applied towards the Offering expenses which include the fees of Financial Advisor, Legal Advisor, Financial Due Diligence Consultant, Market Consultant and underwriting fees, Selling Agents fees, marketing, printing and distribution fees as well as other fees related to the Offering. No commissions, discounts, brokerages or other non-cash compensation have been granted by the Company to any Director or any senior officer in the two years immediately preceding the date of the Prospectus. The net proceeds of SAR * +, after deducting the Offering expenses of SAR * +, will be used to fund the Company s expansion plans which are detailed below. Net proceeds of SAR [ ] will be used to fund the Company s expansion projects indicated below. Any excess proceeds will be used for general corporate purposes. The Company will provide quarterly reports to CMA regarding the progress of projects for which IPO proceeds will be used. These reports will also be disseminated to public on a quarterly basis. Table 113: Use of Proceeds Project Cost % of IPO Proceeds Start of Construction Completion Date Loan Breakeven West Riyadh Hospital SAR million 100% Q Q SAR million 2016 Source: DHHC 10.2 New Hospital in West of Riyadh (100% of IPO Proceeds) It will be a general hospital with total capacity of 300 beds and 80 outpatient clinics. The Company has entered into an agreement to purchase land for this project for SAR 87.6 million of which SAR 2.0 million has already been paid. The remaining balance will be paid once the land is transferred to DHHC in accordance with the agreement entered into with the present owner of the land on 05/07/1432H. This agreement has no expiry date. The Company is also in the process of completing all the steps needed for the licenses to be issued from Ministry of Health and for the title deed of the land to be transferred to DHHC, both of which had not been transferred as of the date of the Prospectus. Feasibility study for the project was prepared by KPMG. The building will have five floors above ground and one below. The site is located in west of Riyadh near the suspended bridge. The total build up area of the hospital is estimated to be 45,000 square meters. A multi-storey car park will also be constructed adjacent to the main building of the hospital that will be able to accommodate 1,400 cars at any point in time Services Offered Medical Services Management plans to offer the following services at the hospital: i) outpatient clinics; ii) emergency care; iii) radiology; iv) laboratory; v) physiotherapy; vi) operating rooms; vii) obstretrics and gynecology; viii) intensive care units; ix) cardiology and coronary care unit; x) cathertertization laboratory; xi) nephrology; and xii) dialysis. 138

170 Outpatient Clinics Outpatient clinics will provide services within the following therapy areas: i) Obstetrics and Gynaecology; ii) Cardiology; iii) Ear, Nose and Throat; iv) Heart Surgery; v) Paediatrics; vi) Dentistry and dental surgery; vii) Dermatology; viii) Psychiatry ; ix) Nephrology; x) Internal Medicine; xi) General Surgery; xii) Ophthalmology; xiii) Neurology; xiv) Orthopaedics; xv) Endocrinology and Diabetes ; xvi) Urology; and xvii) Neurosurgery. There will be 80 outpatient clinics. Open Specialized Clinics The hospital will have 50 open specialist clinics where patients would be able to consult specialist doctors without prior appointments. Emergency Emergency care unit will consist of 50 beds in addition to operating rooms and ICU unit. Physiotherapy Physiotherapy department will consist of 30 rooms equipped with requisite equipment including that needed for hydrotherapy. Dialysis Dialysis unit will be established with 20 devices that may later be increased to 40. Operating Rooms The hospital will initially have 6 operating rooms that may later be increased to 10. The rooms will have all the necessary equipment needed to perform general surgeries. Delivery Rooms The hospital will initially have 8 delivery rooms that may later be increased to 16. Laboratory Laboratory will be equipped to conduct all types of basic medical tests except those for hormonology, serology, microbiology and histopathology. Patients who may need such tests to be performed will be referred to Dallah Hospital. Collaboration with Dallah Hospital Patients will be referred to Dallah Hospital and vice versa as and when needed Operational Details Human resources The Company plans to recruit a Human Resource Manager at early stages of the recruitment process. Human Resource department will be responsible for recruiting staff for the hospital. Recruitment will start 6 months before the start of operations in order to give management time to seek qualified physicians and apply for work visas for foreign employees. The department will also arrange training for staff during this 6-month period. Procurement Procurement will be centralized in order to benefit from economies of scale. Staff at West Riyadh Hospital will identify their procurement needs and convey them to the Company s management. Finance The Company plans to recuit a Finance Manager at early stages of the recruitment process. The hospital will have it own finance department. 139

171 Information Technology The company plans to recruit an IT manager who will be responsible for replicating IT infrastructure in place at Dallah Hospital at West Riyadh Hospital. He will also be responsible for recruiting other staff members for the department. Existing IT service provider of Dallah Hospital ATS Company will be asked to supply the requisite equipment during fourth quarter of 2013 which will installed at the hospital in early Internal Audit Internal audit department will be established at West Riyadh Hospital. Medical and Nursing Departments The Company will recruit Medical and Nursing Directors at early stages of the recruitment process so that they can supervise the recruitment of their respective staff. During the initial stages of operation, only basic medical tests will be performed at West Riyadh Hospital s laboratory and patients will be referred to Dallah Hospital for all other tests. This will be done till West Riyadh Hospital is equipped with all the necessary equipment. Public Relations Public relations activities will be centralized in order to benefit from economies of scale. The Company plans to launch promotional campaigns before the start of operations. Quality Assurance Quality assurance function will be centralized in order to benefit from the Company s expertise in this area. Patients Services Patient Relations Manager will be appointed before the start of operations. Statistics Statistics Manager will be appointed at least two months before the start of operations so the hospital could be equipped with statistical software program. Operational Plan to Open Outpatient Clinics in 2014 Preliminary design of the West Riyadh Hospital includes two separate buildings for inpatient and outpatient departments. The buildings will be connected through a common ground floor where emergency department will be located. Departments that provide supporting services will be locted in the basement. The Company aims to finish construction of outpatient clinics building during the first half of 2014 so that clinics can be opened for patients by mid Rest of the hospital will be constructed in a way that does not affect the operations of outpatient clinics. Construction of the entire hospital is expected to be completed by Following systems will be installed in the basement: Medical gas stations Water treatment stations Water tanks and distribution network Fire-fighting systems These systems will be designed to accommodate needs of the entire hospital but they will be used partially during the first phase of operations when only outpatient clinics will be opened for patients. Temporary arrangements will be made for electricity, water and sanitation services if local municipality and Saudi Electricity Company are not able to provide these services in time for the start of first phase of operations. Electricity generators and water tanks will be installed as part of the temporary arrangements. Electricity generators will then be used as reserve source of energy. Dallah Hospital will provide technical support during the initial stages of operations until the hospital established its own technical support team. 140

172 Ownership Structure The hospital will be wholly owned by DHHC Project Timeline Construction will start in 2013 and is expected to be completed in 48 months. Operational plan includes opening the hospital for outpatients in Preliminary design of the West Riyadh Hospital includes two separate buildings for inpatient and outpatient departments. The buildings will be connected through a common ground floor where emergency department will be located. Departments that provide supporting services will be locted in the basement. The Company aims to finish construction of outpatient clinics building during the first half of 2014 so that clinics can be opened for patients by mid Rest of the hospital will be constructed in a way that does not affect the operations of outpatient clinics. Construction of the entire hospital is expected to be completed by The Company is currently studying a number of designs and the final design will be determined after appointing a contractor for the project. Contractor is expected to be appointed in Q Status of Regulatory Approvals Initial approval issued by Ministry of Health to previous owner of the land is currently in the process of being transferred to DHHC. It is considered to be the main approval needed to construct the hospital Cost of Project The following table shows the total expected cost of the project as of 11/06/2011 : Table 114: Cost Analysis of the New Hospital in West of Riyadh SAR Cost Land 87,637,500 Design and supervision 22,000,000 Construction 225,000,000 Equipment and furniture 70,000,000 ishtn ach o-itaitarking 54,000,000 Contingency 37,100,000 Pre-operating expenses 5,386,262 Initial working capital 7,049,108 Total expected cost 508,199,870 Source: Feasibility study prepared by KPMG 141

173 The following table provides breakdown of construction cost: Table 115: Cost Analysis of Establishing the New West of Riyadh hospital SAR ( 000) Cost Concrete works 43,290 Block building 1,170 Steel works 1,148 Wood, plastic, windows and doors works 31,050 Transportation system 10,769 Mechanical works 37,442 Electrical works 33,002 Sanitary works 19,487 Finishing 39,960 Subtotal 217,650 Site work 3,900 Thermal protection and anti-moisture protection 3,450 Total construction costs 225,000 Source: Eng. Khalid Al-Faqih Architecture office Table 116: The Expected Hospital Building Schedule Floor Cost / floor (SAR) Construction work % completed The first year (SAR) Construction work % completed The second year (SAR) Construction work % completed The third year (SAR) Basement 35,243,000 55% 19,383,650 45% 15,859, Ground 35,243,000 45% 15,859,350 55% 19,383, First 29,868,000 45% 13,440,600 55% 16,427, Second 29,868,000 7% 2,196,400 43% 12,843,240 50% 14,828,360 Third 29,868, % 14,934,000 50% 14,934,000 hsthir 29,868, % 14,934,000 50% 14,934,000 hteir 29,868, % 8,288,860 72% 21,583,140 eso 5,170, % - 100% 5,170,

174 Total 225,000,000 50,880, ,670,500 71,449,500 Source: DHHC Funding Structure Total cost of the project is SAR million of which SAR 100 million will be financed through loan from Ministry of Finance, SAR [ ] million will be financed through IPO proceeds and SAR 48.5 million through cash from operations. For more information on conditions relating to the loan from Ministry of Finance, please refer to Section 10.3 of the Prospectus. As of the date of this Prospectus, the Company had not filed an application with Ministry of Finance for this loan. Table 117: Financing the New West of Riyadh Hospital All figures in thousand SAR Total Capital expenditure 193, , , ,200 Funded by: Equity 155, , , ,200 RTei 38,123 28,838 33, ,000 Source: DHHC Table 118: West of Riyadh Hospital Funding Plan All figures in thousand SAR Total [*]% of the net proceeds from the IPO 193, ,552 34, ,850 Company Operations ,350 46,350 Loans from the Ministry of Health - 15,000 85, ,000 Source: DHHC Table 119: Quarter Annual Project Cost Plan All figures in million SAR First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter Total Land Design and

175 supervision Site preparation and isolation works Construction Parking lots Reserves Equipment and devices Preoperating expenses Working capital Total Total Annual *506.2 * SAR 2.0 million has already been paid towards the purchase of land Source: RHHn Table 120: The Project Quarterly Financing Plan All figures in million SAR First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter Total Govern ment loans - Ministry of Finance Company Operations Proceeds from the IPO Total Total Annual Source: Dallah Healthcare Services Funding from DHHC s operations represents cash available to the Company after accounting for its capital expenditure requirements and repayment of debt obligations. 144

176 10.3 Conditions Related to Lending from Ministry of Finance for Healthcare Projects The following rules have been extracted from the Ministry of Finance website as of 1 May First: Scope of Lending The following health projects are funded: Hospitals General medical complexes Specialized medical complexes One day surgery centres Second: Lending controls Natural and legal Saudi entities are eligible to borrow upon the following conditions: Obtain a valid license from the Ministry of Health. All the terms, general and specific conditions set by the competent authorities should be available for the proposed project in addition to the availability of all the public services on site. If the project is to be built on a land owned by the investor, the land and buildings of the project shall be mortgaged or a bank guarantee equal to the value of the loan is to be presented, provided that the bank guarantee shall be valid until the payment of the loan and the value shall be reduced according to what is paid. If the project is to be established on a land that is not owned by the investor, the mortgage shall be placed on another property of a value more than the loan's value, otherwise a bank surety shall be provided for an amount equal to the valid loan, until the loan is paid, and the value shall be reduced upon what has been paid. If the project is to be established in a leased building, then financing shall be limited to equipping the project with medical equipment and furniture, provided that a bank guarantee has to be presented for the loan in effect until the loan is paid and its value is decreased according to what is paid thereof. Third: Information and documents required to be submitted to the Ministry: Filling in the loan request forms. Copy of the national identity card of the investor(s), if the applicant is a legal person, then a commercial register extract shall be attached along with a proxy by the official responsible for the loan, bearing his name, in addition to a copy of the incorporation contract which is valid for a period not less than the loan repayment period and grace time. Documents proving the investor s suitability and ability to complete the project works and operate the latter. The project economic feasibility study prepared and approved by a licensed office. Copy of the deed for the land of the project, or a leasing contract, if it was leased, provided that if the project land is leased, the term of the lease contract shall not be less than the loan repayment period and grace time. Copy of the Project establishment license issued by Ministry of Health. Copy of the project establishment license from Municipality or Secretariat. Approved engineering plans of the project from a licensed engineering office, which should be certified by the Secretariat (municipality) and by the Ministry of Health, with 1/100 drawing scale. Technical specifications in Arabic approved by the engineering office that designed the project. Lists of quantities in Arabic language with prices specified and approved by the engineering designing office of the project. List of tools, medical equipment and furniture expected for the project with a summarized description for each item while providing the Ministry with a copy of its price quotes. A certificate from the labour office regarding adhering to the percentage of Saudization. Certificate from the competent Insurance office proving that the investor s facility is registered with the social insurance general organization and he has fulfilled all his obligations towards the latter, or if the facility is exempted from the provisions of the social insurance system and regulations. 145

177 11 Summary of Bylaws 11.1 Company name The Company name is Dallah Healthcare Holding Company, a Saudi joint-stock company Company headquarters The Company headquarters is located in the city of Riyadh, and the Board of Directors may establish other branches, offices or agencies within the Kingdom of Saudi Arabia or abroad Company Term The necs sf nhe Company is 99 years starting from the date on which the Minister of Commerce and Industry issued the resolution announcing the conversion of the Company into a joint-stock company. The Company term may always be extended by a decision issued by the extraordinary general assembly at least one year before the expiry of the agreed term Company purposes The Company purpose includes the following activities and tasks: Operating, managing and maintaining buildings and medical centres. Retail and wholesale trade of medicines, medical and surgical machines and equipment, special needs equipment, artificial limbs, hospital equipment and safety equipment and devices. Purchasing lands for the purpose of establishing buildings and investing on behalf of the Company through buying, selling or renting such lands. Conducting medical training programs. Maintaining and operating electrical, mechanical and electronic medical devices and equipment. Import and export on behalf of third parties. Establishing commercial agencies Company capital The Company s capital was set at four hundred seventy two million Saudi Riyals (SAR 472,000,000), divided into forty seven million and two hundred thousand (47,200,000) shares, each of them having a nominal value of ten (10) Saudi Riyals where all shares are common cash stocks Issuing shares The Company shares are nominal and cannot be issued with less than its nominal value. However, it can be issued with a higher value than the nominal value and in the latter case, the difference in value is to be added to the statutory reserve even if it reached its maximum. The share is indivisible. If a share is owned by more than a single person, the concerned shareholders would have to choose one person to represent those shares in utilizing the related rights associated with that share, while the concerned shareholders all are jointly liable for the obligations associated with owning that share. 146

178 11.7 Transferring the share ownership: All the Company s shares can be traded after issuing the respective share certificates. The above rule is valid upon all shares that the partners subscribe to in case of a capital increase before the expiration of the restriction period. Those bonds are marked by type, company transfer date and the period of the respective trade ban. In spite of the latter, during the restriction period, share ownership can be transferred according to the sale rights rules from one partner to another or to a board member or to a partner s heirs in the case of death Increasing and decreasing the capital: The extraordinary general assembly can, after validating the economic feasibility and the competent authorities approval, decide to increase the Company s capital once or multiple times by issuing new shares with the same nominal value of the original shares on the condition that the main capital has been completely paid out and taking into consideration the Companies' Act. Such a decision should specify the capital increase method, while the initial shareholders have the priority to subscribe to the new cash shares where they are notified of their right of priority through the publishing in a daily newspaper or by registered mail of the capital increase decision and the related subscription terms. Each shareholder would express his willingness to utilize his right of priority within fifteen (15) days of the publishing date or the notification date. The extraordinary general assembly can decide based on reasonable justifications, and after the competent authorities approval, to decrease the Company s capital in case it is more than required or in case the Company has been incurring losses. If the reduction is due to the capital being beyond the Company's needs, creditors have to be invited to express their objections within sixty (60) days from the publishing of the reduction decision in a daily newspaper that is distributed in the city where the Company s headquarters is located. If any of them objected and presented his supporting documents to the Company on the mentioned date, the Company has to pay him his debt if it is due, or present him with a fulfilment guarantee if it is due at a later stage Board of Directors The Company is managed through a board composed of nine (9) directors appointed by the ordinary general assembly for a period of not more than three (3) years. As an exception, the partners have appointed the first five (5) board members for five (5) years. The first five board members begin their term from the date of the ministerial resolution announcing the transformation of the Company into a joint stock company. Board members have to own shares with nominal value of not less than ten thousand (10,000) Saudi Riyals where those shares are deposited within thirty (30) days of the appointment date into one of the banks appointed by the Minister of Commerce and Industry for such a purpose. Those shares are assigned for ensuring the board members liability and remain not tradable until the end of the specified period for hearing the liability suit stipulated in Article (76) of the Companies' Act, or until a decision is reached regarding the mentioned suit. If the board of directors member is a legal entity, it has to provide the insurance shares on behalf of its representatives. If the board of directors member or the shareholder representing him did not provide the insurance shares on time, his membership becomes null Board of directors authorities Taking into consideration the general assembly authority, the board of directors has the most powers and authorities in managing the Company and supervising its business and finances and handling its affairs inside and outside the Kingdom. The Board of directors may, but is not limited in such scope, represent the Company in its relations with others, government and private entities, and before all the courts and tribunals. The board of directors has the right to demand, defend and advocate on behalf of the Company, appoint and dismiss attorneys and agents before courts inside and outside the Kingdom, including, but not limited to, the Board of Grievances, the work and labor office, the primary higher committees, and commercial paper committees, as well as all the other judicial committees, arbitration, civil rights institutions, police departments, chamber of commerce and industry, private 147

179 institutions, companies, banks, commercial banks, Investment houses, all government funds and organizations with their different names, specializations, and all organizations. The board has the right to contract, commit and associate under the Company name or on its behalf, entering tenders, taking all actions, works and signing all the contracts and documents including, but not limited to, the articles of association of companies that the Company is a partner to and all amendments to them, appendixes and modifications decisions in addition to signing the agreements and documents before the notary and the other official entities in addition to the loans, guarantees and bail agreements, as well as issuing powers of attorneys on the Company's behalf, selling, buying, conveying and accepting the same, besides receiving, delivering, renting, leasing, paying, collecting cash, opening accounts, credits, withdraw and deposit at banks, issuing guarantees for banks, funds and governmental funding organizations, signing all paper and bonds, cheques and all the commercial paper, documents and all banking transactions. The Board of directors can buy, sell and mortgage Company real estate, movables and properties. The board can also hire employees and workers, terminating their services, request the issuance of work permits, specify employees and workers salaries and wages, and enter into loan agreements which duration does not exceed three (3) years after specifying the purpose of the loan, its use and its payment method. The board can, within its competencies, delegate its authorities to one or more of its members or third parties to perform certain tasks on the Company s behalf. The board appoints its chairman from among its members and it can appoint a deputy chairman and a managing director among its members, where the chairman, deputy chairman and the managing director have authorities and powers similar to those of the board. The board also appoints a board secretary and specifies his salary and rewards Board of directors meetings and decisions. A Board meeting is not valid unless at least five (5) members attend it, in person or by proxy. In case a board member deputizes another member to attend the board meeting on his behalf, the deputation has to be performed in accordance with the following regulations: A board member cannot attend the same meeting on behalf of more than one other board member. The deputation has to be provided in written form. The deputy cannot vote on decisions which the Company bylaws restrict the deputized person from voting thereon. The Board of directors decisions are issued by absolute majority of the attending or represented board members in the meeting and if the votes are equal, the chairman of the board s vote is weighted Shareholders general assembly Each shareholder that has at least twenty (20) shares has the right to attend the general assembly or to appoint by a written document another shareholder to attend the general assembly on his behalf, but this deputy should not be one of the board members or a Company employee. The conversion general assembly: The conversion general assembly deals with the following issues: Verifying the full subscription of the company s capital.. Approving the Company bylaws. Hiring the financial auditor for fiscal year following the conversion. Approving the Company conversion expenses. 148

180 For its correct conclusion, at least shareholders that hold half the Company s capital have to attend. Decisions are issued in the transformation general assembly by absolute majority of the shares represented therein The ordinary general assembly Except for issues related to the extraordinary general assembly, the ordinary general assembly takes care of all the Company related issues and this meeting is held at least once per year during the six months following the end of the Company fiscal year. Other general assemblies can be called whenever there is a need. The ordinary general assembly meeting is not valid unless attended by at least shareholders that hold half the Company s capital. If this quorum is not available, an invitation is sent for another meeting during the next thirty (30) days following the previous meeting, and this second meeting is considered valid regardless of the shares represented therein. The ordinary general assembly decisions are issued by absolute majority of the shares represented in the meeting The extraordinary general assembly The extraordinary general assembly is held to modify the Company bylaws, except as to provisions that are restricted by relevant regulation from being modified. The extraordinary general assembly meeting is not valid unless attended by at least shareholders that hold half the Company s capital. If this quorum is not available, an invitation is sent for another meeting, while the second meeting is considered valid if attended by shareholders representing a quarter of the capital. The decisions are issued in the extraordinary general assembly by at least two thirds majority of the shares represented in the meeting, unless the decision is related to capital increase or decrease, extending the Company s duration or dissolving it, merging with or incorporating the Company with another company or organization. In such cases, the decision is only valid if issued by at least three quarters majority of the shares represented in the meeting Voting power Each shareholder has a vote for each share he represents in the transformation general assembly, while the votes in the ordinary and extraordinary general assemblies are calculated based on a single vote for each share represented in the meeting. Board members cannot vote in the shareholders assemblies' decisions related to their displacement from their responsibilities for their period of service in the board Fiscal year The Company fiscal year starts on January the 1st and ends on December the 31st of every Georgian year. However the Company s first fiscal year has to cover the period starting from the issuing date of the ministerial decision that declares the conversion of the Company until December the 31st of the next year Dividends distribution The Company s annual net profits are distributed after deducting all the general expenses and other costs as follows: Ten percent (10%) of net profits is to be set aside in order to form a statutory reserve. The ordinary general assembly may stop this process when the reserve reaches half of the capital amount. The ordinary general assembly can, based on the board of directors suggestion, spare 20% of the net profits for forming 149

181 other reserves for other purpose(s). From the rest, a first payment equivalent to (5%) of the paid-up capital is to be distributed to the shareholders. 10% of the remaining net profits are allocated as rewards for the board of directors on condition that the total of these rewards does not exceed the maximum limit allowable as stated by the applicable rules and regulations. The remaining amount is then distributed to the shareholders as an additional share in profits Company dissolution and liquidation Upon the Company s termination or in case of its dissolution before the set date, the extraordinary general assembly decides based on the board of directors suggestion the dissolution method and appoints one or more liquidator(s) and would specify his authorities and fees, while the board of directors authorities will cease to exist upon liquidation. However, the board of directors will keep managing the company until the appointment of a liquidator Governing Law The Companies Act is applied on any issue not mentioned in the company statute. 150

182 12 Legal information 12.1 Commercial registration certifications The following table shows data relating to the Company s commercial registration certificates, as well as related data for each of its branches. Commercial registration number Issuance date Expiration date Location Permitted Activities /4/1415 H. (19/9/1994 G) 12/4/1435 H. (12/2/2014 G) Riyadh Operating, managing and maintaining buildings and medical centres. Retail and wholesale trade of medical and surgical machines and equipment, artificial limbs, special needs equipment and hospitals equipment /4/1415 H. (3/10/1994 G) 26/4/1435 H. (26/2/2014 G) Riyadh Medicines wholesale and retail trading (drugs warehouse) according to license number 292/D/44 issued on 13/1/1415 H. by Ministry of Health /8/1415 H. (15/1/1995 G) 12/8/1435 H. (10/6/2014 G) Riyadh Owning, managing, maintaining and operating the buildings and medical facilities /9/1423 H. (13/11/2002 G) 7/9/1434 A.H. (15/7/2013 G) Jeddah The big medical supplies warehouse according to the license number issued on 6/11/1415 H. by the Ministry of Health /8/1431 H. (28/7/2010 G) 15/8/1437 H. (22/5/2016 G) Dammam Importing and distributing medicines according to Ministry of Health issued license number /6/1432 H. (15/5/2011 G) 10/6/1437 H. (19/3/2016 G) Al Khafji Operating, managing and maintaining buildings and medical centres. Retail and wholesale trade of medical and surgical machines and equipment, artificial limbs, special needs equipment and hospitals equipment. 151

183 12.2 Licenses The Company has obtained the governmental licenses which enable it to carry out its activities and purposes as specified in the Company bylaws. These licenses include those issued by the Ministry of Health and Saudi Food and Drug Authority. The licenses related to medicines and medical and diagnostics equipment used were previously issued by Ministry of Health. After the founding of the Saudi Food and Drug Administration in accordance with cabinet decision No. (1) dated 7/1/1424H, the task of issuing such licenses and its procedural, execution and related control tasks have been moved to the Saudi Food and Drug Authority. Work is carried out based on the Ministry of Health issued licenses, until these licenses expiry, whereby renewal requests for these licenses are then submitted to Saudi Food and Drug Authority Dallah hospital certificates and licenses issued by Ministry of Health License number Issuance date Expiration date Description The Ministry's approval for opening the heart diseases center 8/3/1417 H. (24/7/1996) None 44 /d/1607 The Ministry's approval to establish a Department of Radiology (MRI) 7/2/1419 H (2/6/1998) None 44 /d /1477 The Ministry's approval on the opening of a Center for diabetics 25/2/1416 H (23/07/1995) None 44 /d/895 The Ministry's approval to establish a center for infertility treatment 1/8/1416 H (23/12/1995) None 44 /d/ Certificates and licenses of Dallah Hospital, issued by the Saudi for Food and Drug Authority License number Issuance date Expiration date Description Warehouse License for human medicine and herbal products. 6/11/1430 H (25/10/2009) 5/11/1435 H (31/8/2014) Warehouse License for human medicine and herbal products. 12/1/1432 H (18/12/2010) 9/6/1436 H (30/3/2015) Medical Equipment Establishment License 24/08/1433H (14/07/2012) 23/08/1343H (02/07/2013)

184 Certificates and licenses issued by King Abdulaziz City for Science and Technology License number Issuance date Expiration date Description T N /8/1431 H (17/07/2010) 18/9/1433 AH (6/8/2012) License for practicing nuclear medicine Licenses for pharmaceutical products Noting that the certificates issued by the Ministry of Health and the Saudi Food and Drug Authority, with respect to products listed below, state that the registration period of each pharmaceutical or herbal product is five years, subject to renewal, for a fee of one thousand Saudi Riyals for each concentricity, medical formula, or bottle. The following is a list of licenses for pharmaceutical products: Table 121: Licenses for Pharmaceutical Products from Ministry of Health License Number Issuance date Expiry date Trade name of the drug Registration number The Factory 356 / /12/1427 H (13/1/2007) 23/12/1432 H (19/11/2011) SETRAL 100MG F.C. Pills Jordanian Company for Pharmaceutical Industries (JPM) 354 / /12/1427 H (13/1/2007) 23/12/1432 H (19/11/2011) SETRAL 50MG F.C. Pills Jordanian Company for Pharmaceutical Industries (JPM) 355 / /12/1427 H (13/1/2007) 23/12/1432 H (19/11/2011) SETRAL 50MG F.C. Pills Jordanian Company for Pharmaceutical Industries (JPM) 21 / /1/1429 H (26/1/2008) 17/01/1434 H (01/12/2012) ROMAC 150MG F.C Pills Jordanian Company for Pharmaceutical Industries (JPM) 30 / /2/1428H (17/3/2007) 27/02/1433 H (21/01/2012) LACINE 50MG F.C Pills Jordanian Company for Pharmaceutical Industries (JPM) 2006 /193 18/05/1427 H (15/6/2006) 18/05/1427 H (22/04/2011) LOWRAC 5MG Capsules Jordanian Company for Pharmaceutical Industries (JPM) 2007 /55 19/03/1428 H (7/4/2007) 19/03/1433 H (11/02/2012) FUNZOL 150MG Capsules Jordanian Company for Pharmaceutical Industries (JPM) 2007 /91 23/05/1428 H 23/05/1433 H OXETINE 20MG F.C. Pills Jordanian Company for 153

185 (09/6/2007) (15/04/2012) Pharmaceutical Industries (JPM) 2007 /167 04/09/1428 H (16/9/2007) 04/09/1433 H (23/07/2012) OXIMAL 15MG Pills Jordanian Company for Pharmaceutical Industries (JPM) 2007 /166 04/09/1428 H (16/9/2007) 04/09/1433 H (23/07/2012) OXIMAL 7.5MG Pills Jordanian Company for Pharmaceutical Industries (JPM) 2007 /165 04/09/1428 H (16/9/2007) 04/09/1433 H (23/07/2012) OXIMAL 7.5MG Pills Jordanian Company for Pharmaceutical Industries (JPM) 2007 /168 04/09/1428 H (16/9/2007) 04/09/1433 H (23/07/2012) OXIMAL 15MG Pills Jordanian Company for Pharmaceutical Industries (JPM) 2007 /151 27/08/1428 H (9/9/2007) 27/08/1433 H (17/06/2012) TORVACOL 20MG F.C. Pills Jordanian Company for Pharmaceutical Industries (JPM) 2007 /150 27/08/1428 H (9/9/2007) 27/08/1433 H (17/06/2012) TORVACOL 10MG F.C. Pills Jordanian Company for Pharmaceutical Industries (JPM) 2007 /152 27/08/1428 H (9/9/2007) 27/08/1433 H (17/06/2012) TORVACOL 40MG F.C. Pills Jordanian Company for Pharmaceutical Industries (JPM) 2006 /367 23/12/1427 H (13/1/2007) 23/12/1432 H (19/11/2011) FENADEX 120MG F.C Pills Jordanian Company for Pharmaceutical Industries (JPM) 2006 /368 23/12/1427 H (13/1/2007) 23/12/1432 H (19/11/2011) FENADEX 60MG F.C Pills Jordanian Company for Pharmaceutical Industries (JPM) 2008 /72 18/10/1429 H (18/10/2008) 18/10/1434 H (25/08/2013) RAZONE 40MG E.C Pills Jordanian Company for Pharmaceutical Industries (JPM) 2009 /65 27/03/1430 H (24/3/2009) 27/03/1435 H (28/01/2014) FENADEX 180 MG F.C. Pills Jordanian Company for Pharmaceutical Industries (JPM) 2006 /356 23/12/1427 H (13/1/2007) 23/12/1432 H (19/11/2011) SETRAL 100 MG F.C Pills Jordanian Company for Pharmaceutical Industries (JPM) 154

186 Table 122: The Licenses of Pharmaceutical Products Issued by the Saudi Food and Drug Authority in the Kingdom of Saudi Arabia License Number Issuance date Expiry date Trade name of the drug Registration number The Factory 2003 /563 12/11/1430 H 31/10/ /11/1435 H (07/09/2014) COBAL 500CG Pills Jordanian Company for Pharmaceutical Industries 2010 /31 15/03/2010 (29/03/1431 H) 29/03/1436 (20/01/2015) GLITRA 3MG Pills Jordanian Company for Pharmaceutical Industries 2010 /32 15/03/2010 (29/03/1431 H) 29/03/1436 H 20/01/2015 GLITRA 4MG Pills Jordanian Company for Pharmaceutical Industries 2010 /131 24/04/2010 (9/5/1431 H) 09/05/1436 H 28/02/2015 DOLORAZ 100MG/5ML solution Jordanian Company for Pharmaceutical Industries 2010 /101 24/04/2010 (9/5/1431 H) 09/05/1436 H 28/02/2015 ERACID 500MG F. C. Pills Jordanian Company for Pharmaceutical Industries 2010 /29 15/03/2010 (29/03/1431 H) 29/03/1436 H 20/01/2015 GLITRA 1MG Pills Jordanian Company for Pharmaceutical Industries 2010 /88 15/03/2010 (29/03/1431 H) 29/03/1436 H 20/01/2015 GLITRA 2MG Pills Jordanian Company for Pharmaceutical Industries 2012/141 26/07/1433 H (16/06/2012) 26/07/1438 H (23/04/2017) PropMax Throat Lozenges Dr.Soldan Germany Table 123: Licenses for Health Products License Number Issuance date Expiry date Trade name of the drug Registration number The Factory 2008 /114 13/10/1429 H (13/10/2008) 13/10/1434 H (20/08/2013) AFRODIDAL ARNET PHARMACEUTICAL United States of America 2008 /113 13/10/1429 H (13/10/2008) 13/10/1434 H (20/08/2013) HAIRDAL ARNET PHARMACEUTICAL United States of America 2007 /31 12/05/1428 H 12/05/1433 H ADCAL FILM COATED Pills ARNET PHARMACEUTICAL United States of America 155

187 (29/05/2007) (04/04/2012) Table 124: Authorised Representative Licenses License Number Issuance date Expiry date Description /09/1433 H (31/08/2012) 23/09/1434 H (31/07/2013) Acting on behalf of Sasmar SPRL factory in KSA 12.3 Trademarks The Company shall reserve the trademarks described below. The Company is currently completing the procedures for the registration of these trademarks with the Ministry of Commerce and Industry. Registering these trademarks in the Ministry of Trade and Industry is expected to be completed within six months from the date of this Prospectus. On 29/09/1433H (17/08/2012G) the Company successfully completed the publication of the trademarks in Um Al Quraa newspaper (issue no 4433), which declares the Company's registration of the trademarks below. The competitive position of the Dallah Health Service Holding Company, among other factors, depends on its ability to protect and use its intangible assets. Thus, the inability to protect these assets, or in some cases, the need to take legal action necessary to protect them, may lead to a negative impact on the trademarks of the Company, and conducting business may be more expensive, thus it shall impact negatively on the results of the Company's business. Trademark Sample Registration number Registration date Dallah Healthcare Services Company 92/1383 1/12/1433 H (17/10/2012) Dallah Hospital 93/1383 1/12/1433 H (17/10/2012) Dallah Pharma Under Registration Under Registration 12.4 Properties owned by the company 156

188 Title Deed No. Date Location Name of the owner Obligations and restrictions /7/1432 H (3/6/2011) Riyadh - Al-Nakheel neighborhood - plots from 1421 to 1428 of the scheme 1578 / b. The Company An adjacent land belongs to the Hospital /7/1432 H (3/6/2011) Riyadh - Al-Nakheel neighborhood - plots from 1325 to 1342 of the scheme 1578 / B The Company The land where the hospital is located on /7/1432 H (3/6/2011) Riyadh - Al-Nakheel neighborhood - plots from 1417 to 1420 of the scheme 1578 / B The Company An adjacent land belongs to the Hospital /7/1432 H (3/6/2011) Riyadh - Al-Nakheel neighborhood - plots from 975 to 988 of the scheme 1578 / B The Company An adjacent land belongs to the Hospital /11/1432 H (12/10/2011) Riyadh - Al-Nakheel neighborhood - plots from 1300 to 1319 of the scheme 1578 / B The Company An adjacent land belongs to the Hospital In addition to the lands listed in the table above, the Company has a land registered in its name in the Khalidiya area in Jeddah, under title deed number (76) dated 25/3/1395H. On 27/10/1431H, corresponding to 06/10/2010G, the Company entered into a contract with Jamal Abdul Rahim Juma and Saleh Bin Fahd Al Abdulwahid, under which the Company sold this land to the two persons mentioned above for a total value of 8,747,500 SAR, where an amount of 3,400,000 SAR was paid on the date of the signing of the contract and the remaining amount of 5,347,500 SAR will be paid in three equal annual instalments, the value of each instalment being 1,782,500 SAR, the last payment is due in the year As of the date of this Prospectus, the transfer of ownership of this land to the two persons mentioned above has been not completed as of yet as it will be transferred to them by the Company after all the instalments owed to the Company are paid by the two respective persons. The Company will then transfer the ownership of land to the respective persons. The contractis legally binding, as the sale for the benefit of the two persons mentioned above is effective, unless in the case of a party breaching the terms of the relevant contract. The decision to sell the land by way of instalments is a decision taken by the Company for the public interest, as the land is used exclusively for medical clinics and the purchasers are doctors, and the purchasers do not have the ability to pay the full amount. Therefore, the Company decided to sell the land in instalments and benefit from the proceeds of the sale rather than keeping the land from being sold. Please note that the buyers are not related parties. The Company entered into a legally binding contract for the purchase of a land plot in the west of Riyadh, holding title deed number dated 03/02/1428H, with the owner of the latter land on 05/07/1432H in order to purchase this land for the establishment of the new hospital. The purchase value of this land is 85,925,790 SAR. The Company has paid an amount of 2,000,000 SAR, and the remaining amount will be paid upon the conveyance of the title deed before the Notary under the name of 157

189 the Company. As of the date of this Prospectus, the title deed has not been conveyed yet and the remaining amounts have not been settled Major and important Agreements Agreements of providing health services to staff of government and private sectors The Company entered into agreements with several government and private organizations, as the Company shall, based on those agreements, receive and provide treatment for the staff of such government and private organizations and their families. The agreements vary in terms of its provisions, duration, conditions and/or costs involved to provide related services. The following table shows the most important agreements concluded with government and private organizations. Name Date of agreement Duration of agreement Notes Saudi Aramco Shell Refinery 01/06/2011 Ends on 31/05/2016 This Agreement shall remain in force as of the date of issuing this Prospectus. The invoices are issued by the Company based on the pricing of services detailed in the agreement, provided that Aramco Company pays the invoices within 30 days from the date of issuance. General Organization of King Fahd Bridge 27/02/2008 (19/02/1429 H) One year, to be renewed automatically unless one of the parties notify the other of his desire not to renew the agreement at least one month before the date of expiration of the agreement This Agreement shall remain in force as of the date of issuing this Prospectus. The invoices are issued by the Company at the end of each calendar month based on the pricing of services detailed in the agreement, provided that the Organization pays the invoices within 30 days from the date of issuance. The agreement includes provisions regarding discounts offered by the Company for the Organization. Saudi Electricity Company 13/04/2010 ( 28/04/1431 H) One renewable year upon mutual agreement. The agreement remains in effect as of the date of issuing this Prospectus. This Agreement shall remain in force as of the date of issuing this Prospectus. The invoices are issued by the Company at the end of each calendar month based on the pricing of services detailed in the agreement Agreements with insurance companies to provide health services The Company entered into several agreements with insurance providers, based on those agreements, the Company shall receive and provide treatment to the beneficiaries or people insured by these companies. The agreements vary in terms of the provisions, conditions, duration and the costs involved to provide related services The following table shows the most important agreements concluded with these companies. 158

190 Name Date of agreement Duration of agreement Notes BUPA Middle East Company 06/06/2007 (20/5/1428H) One year, renewable automatically unless one of the parties notifies the other with its desire not to renew the same at least ninety days before the date of expiration of the agreement. This Agreement shall remain in force as of the date of issuing this Prospectus. The invoices are issued by the Company, based on the pricing of services detailed in the agreement, provided that BUPA Company pays 85% of the invoices within 10 days from the date of issuance. The agreement includes provisions regarding discounts offered by the Company to BUPA Company. Bab Al-Re'aya Company for Medical Needs 10/03/2010 ( 24/3/1431H) One year, to be renewed automatically unless one of the parties notify the other with his desire not to renew the agreement at least one month before the date of expiration of the agreement This Agreement shall remain in force as of the date of issuing this Prospectus. The invoices are issued by the Company based on the pricing of services detailed in the agreement, provided that Al-Re'aya Company pays 85% of the amount of invoices within 30 days from the date of issuance. The agreement includes provisions regarding discounts offered by the Company to Bab Al-Re'aya. Cooperative Insurance Company 11/01/2010 ( 25/1/1431H) Two years, to be renewed automatically unless one of the parties notifies the other with its desire not to renew at least two months before the date of expiration of the agreement. This Agreement shall remain in force as of the date of issuing this Prospectus. The invoices to be issued by the Company based on the pricing of services detailed in the agreement, provided that the cooperative company pays invoices within 60 days from the date of issuance. The agreement includes provisions regarding discounts offered by the Company to the cooperative company. MEDGULF Insurance Company 01/07/2007 (15/06/1428H) One year, to be renewed automatically unless one of the parties notify the other with his desire not to renew the agreement at least one month before the date of expiration of the agreement This Agreement shall remain in force as of the date of issuing this Prospectus. The invoices are issued by the Company based on the pricing of services detailed in the agreement. The agreement includes provisions regarding discounts offered by the Company to the MEDGULF Company. AXA Cooperative Insurance Company 01/03/2007 ( 11/2/1428H) One year, to be renewed automatically unless one of the parties notify the other with his desire not to renew the agreement at least one month before This Agreement shall remain in force as of the date of issuing this Prospectus. The invoices are issued by the Company based on the pricing of services detailed in the agreement, provided that the AXA Company pays 85% of the invoices within 159

191 the date of expiration of the agreement 30 days from the date of issuance. The agreement includes provisions regarding discounts offered by the Company to AXA Company. Gulf Union Cooperative Insurance Company 01/03/2007 ( 11/2/1428H) One year, to be renewed automatically unless one of the parties notify the other with his desire not to renew the agreement at least one month before the date of expiration of the agreement This Agreement shall remain in force as of the date of issuing this Prospectus. The invoices are issued by the Company based on the pricing of services detailed in the agreement, provided that the Gulf Union Company pays 85% of the invoices within 30 days from the date of issuance. The agreement includes provisions regarding discounts offered by the Company to Gulf Union Company. Al-Sakr Cooperative Insurance Company 01/12/2007 ( 21/11/1428H) One year, to be renewed automatically unless one of the parties notify the other with his desire not to renew the agreement at least one month before the date of expiration of the agreement This Agreement shall remain in force as of the date of issuing this Prospectus. The invoices are issued by the Company based on the pricing of services detailed in the agreement, provided that Al-Sakr Company pays 85% of the invoices within 30 days from the date of issuance. The agreement includes provisions regarding discounts offered by the Company to Al-Sakr Company. Al Rajhi Cooperative Insurance Company 21/05/2008 (15/5/1429H) One year, to be renewed automatically unless one of the parties notify the other with his desire not to renew the agreement at least one month before the date of expiration of the agreement This Agreement shall remain in force as of the date of issuing this Prospectus. The invoices are issued by the Company based on the pricing of services detailed in the agreement, provided that Al Rajhi Company pays 85% of the invoices within 30 days from the date of issuance. The agreement includes provisions regarding discounts offered by the Company to Al-Rajhi Company. Saudi Arabian Cooperative Insurance Company 01/12/2006 (10/11/1427H) One year, to be renewed automatically unless one of the parties notify the other with his desire not to renew the agreement at least one month before the date of expiration of the agreement This Agreement shall remain in force as of the date of issuing this Prospectus. The invoices are issued by the Company based on the pricing of services detailed in the agreement, provided that the Saudi Arabian Company pays 85% of invoices within 30 days from the date of issuance. The agreement includes provisions regarding discounts offered by the Company to the Saudi Arabian Company. Gulf's Amana Cooperative 01/06/2006 One year, to be renewed This Agreement shall remain in force as of 160

192 Insurance Company (04/5/1427H) automatically unless one of the parties notify the other with his desire not to renew the agreement at least one month before the date of expiration of the agreement the date of issuing this Prospectus. The invoices are issued by the Company based on the pricing of services detailed in the agreement, provided that the Gulf's Amana Company pays 80% of the invoices within 30 days from the date of issuance. The agreement includes provisions regarding discounts offered by the Company to Amana Company. Malath Insurance and Cooperative Reinsurance Company 19/08/2008 (17/8/1429H) One year, to be renewed automatically unless one of the parties notify the other with his desire not to renew the agreement at least one month before the date of expiration of the agreement This Agreement shall remain in force as of the date of issuing this Prospectus. The invoices are issued by the Company based on the pricing of services detailed in the agreement, provided that Malath Company pays 85% of invoices within 30 days from the date of issuance. The agreement includes provisions regarding discounts offered by the Company to the Malath Company. Gulf Cooperative Insurance Company 02/02/2010 (17/2/1431H) One year, to be renewed automatically unless one of the parties notify the other with his desire not to renew the agreement at least one month before the date of expiration of the agreement This Agreement shall remain in force as of the date of issuing this Prospectus. Invoices are issued by the Company based on the pricing of services detailed in the Agreement, provided that the Gulf Insurance Company pays 85% of the invoices within 30 days from the date of issuance. The agreement includes provisions regarding discounts offered by the Company to the Gulf Company. Trade Union Cooperative Insurance Company 21/08/2008 (19/8/1429H) One year, to be renewed automatically unless one of the parties notify the other with his desire not to renew the agreement at least one month before the date of expiration of the agreement This Agreement shall remain in force as of the date of issuing this Prospectus. Invoices are issued by the Company based on the pricing of services detailed in the agreement, provided that the Trade Union Company pays 85% of the invoices within 30 days from the date of issuance. The agreement includes provisions regarding discounts offered by the Company to the Union Company. Arabian Shield Cooperative Insurance Company 08/07/2006 (12/06/1427H) One year, to be renewed automatically unless one of the parties notify the other with his desire not to renew the agreement at least one month before the date of expiration of This Agreement shall remain in force as of the date of issuing this Prospectus. Invoices are issued by the Company based on the pricing of services detailed in the agreement, provided that the Arabian Shield Company pays 85% of the invoices within 30 days from the date of issuance. 161

193 the agreement The agreement includes provisions regarding discounts offered by the Company to the Shield Company. Sanad Insurance and Cooperative Reinsurance Company. 04/11/2008 (6/11/1429H) One year, to be renewed automatically unless one of the parties notify the other with his desire not to renew the agreement at least one month before the date of expiration of the agreement This Agreement shall remain in force as of the date of issuing this Prospectus. Invoices are issued by the Company based on the pricing of services detailed in the agreement, provided that Sanad Company pays 85% of the invoices within 30 days from the date of issuance. The agreement includes provisions regarding discounts offered by the Company to the Sanad Company. Al-Ahliya Cooperative Insurance Company 14/12/2008 (16/12/1429H) One year, to be renewed automatically unless one of the parties notify the other with his desire not to renew the agreement at least one month before the date of expiration of the agreement This Agreement shall remain in force as of the date of issuing this Prospectus. Invoices are issued by the Company based on the pricing of services detailed in the agreement, provided that Al-Ahliya Company pays 85% of the invoices within 30 days from the date of issuance. The agreement includes provisions regarding discounts offered by the Company to Al- Ahliya Company. Arab Cooperative Insurance Company 09/03/2009 (12/03/1430H) One year, to be renewed automatically unless one of the parties notify the other with his desire not to renew the agreement at least one month before the date of expiration of the agreement This Agreement shall remain in force as of the date of issuing this Prospectus. Invoices are issued by the Company based on the pricing of services detailed in the agreement, provided that the Arab company pays 85% of the invoices within 30 days from the date of issuance. The agreement includes provisions regarding discounts offered by the Company to the Arab Company. Saudi Indian Cooperative Insurance Company 08/06/2009 (14/6/1430H) One year, to be renewed automatically unless one of the parties notify the other with his desire not to renew the agreement at least one month before the date of expiration of the agreement This Agreement shall remain in force as of the date of issuing this Prospectus. Invoices are issued by the Company based on the pricing of services detailed in the agreement, provided that the Saudi Indian Company pays 85% of the invoices within 30 days from the date of issuance. The agreement includes provisions regarding discounts offered by the Company to Saudi Indian Company. 162

194 Works of the hospital and management agreements The Company entered into two agreements for the management of hospitals owned by other unrelated parties. The Company signed an agreement on 2/12/1432H, corresponding to 9/10/2010G, with Aramco Gulf Operations Company and Kuwait Gulf Oil Company, whereby the Company manages the joint operations hospital in Al-Khafji, which provides medical services to the staff of the two companies and their dependants, on the site of joint operations which is located in the area between Kingdom of Saudi Arabia and Kuwait, that was formerly known as the neutral zone. The contract began in April 2011, and its term is for 5 years. The total value of this contract as of the date of this Prospectus is 88,896,001 million SAR. The Company signed an agreement on 11/11/1431H, corresponding to 19/10/2010G, with the Mahail Private Hospital, whereby the Company manages the Mahail Asir Hospital in Saudi Arabia. The agreement is for five years and is renewable automatically unless one of the parties notifies the other with its desire not to renew the agreement within one year. The agreement states that the Company has the right to buy 10% of the stocks of Mahail Hospital's Company, with the book value before offering for public shareholding, which is in case the hospital's Company decided to convert to a Public Joint Stock Company Agreements with the company as being a sole agent The Company entered into agreements with the suppliers listed below, whereby the Company has become the exclusive distributor for a number of pharmaceutical or health products for these suppliers in Saudi Arabia and the Gulf Cooperation Council (or within a group of GCC countries), or in other areas in the Middle East. The agreement has been registered in the Ministry of Commerce and Industry, and the Company has been included as a registered exclusive agent. Name Date of agreement Duration of agreement Notes Ethnopharm Km. Lab Canada 22/02/2000 (16/11/1420H) Five years, renewable automatically unless one of the parties notify the other with its desire not to renew the Agreement at least three months before the date of expiration of the Agreement This Agreement shall remain in force as of the date of issuing this Prospectus. The Company is the sole agent in the Middle East for the distribution of the company's products: Ethnopharm Australian Al M Nashiwralz 01/09/2008 (01/09/1429H) Three years, renewable automatically unless one of the parties notifies the other with its desire not to renew the agreement at least three months before the date of expiration of the This Agreement shall remain in force as of the date of issuing this Prospectus. The Company is the sole agent in Saudi Arabia for the distribution of the company's products: Al M Nachurz. 163

195 agreement. Boiron Societe Ononam 26/11/1996 (14/7/1417H) This agreement was renewed on November 27, 2011 for five years. It is renewable automatically unless one of the parties notifies the other with its desire not to renew the agreement at least three months before the date of expiration of the agreement. This Agreement shall remain in force as of the date of issuing this Prospectus. The Company is the sole agent in Saudi Arabia for the distribution of Boiron Societe Ononam Company's products. Barmatoka, France 01/03/2007 ( 11/2/1428H) Five years, renewable automatically unless one of the parties notify the other with its desire not to renew the Agreement at least three months before the date of expiration of the Agreement This Agreement shall remain in force as of the date of issuing this Prospectus. The Company is the sole agent in Saudi Arabia for the distribution of Barmatoka Company's products. Dallah Pharma (Florida) 18/11/2001 (2/9/1422H) Five years, renewable automatically unless one of the parties notify the other with its desire not to renew the Agreement at least three months before the date of expiration of the Agreement This Agreement shall remain in force as of the date of issuing this Prospectus. The Company is the sole agent in the Middle East for the distribution of Dallah Pharma Company's products. Mustafa Nevrat company for Turkish pharmaceutical products 01/08/2008 (29/7/1429H) Three years, renewable automatically unless one of the parties notifies the other with its desire not to renew the agreement at least one month before the date of expiration of the agreement. This Agreement shall remain in force as of the date of issuing this Prospectus. The Company is the sole agent in Saudi Arabia for the distribution of Mustafa Nevrat Company's products. BT Indonesian Sanba Pharma Company 01/08/2008 (29/7/1429H) Five years, renewable automatically unless one of the parties notify the other with its desire not to renew the Agreement at least three months before the date of expiration of the Agreement This Agreement shall remain in force as of the date of issuing this Prospectus. The Company is the sole agent in Saudi Arabia for the distribution of BT Sanba Pharma Company's products. 164

196 Bio Saydos SA, Argentina 22/11/2001 (06/09/1422H) Five years, renewable automatically unless one of the parties notify the other with its desire not to renew the Agreement at least three months before the date of expiration of the Agreement This Agreement shall remain in force as of the date of issuing this Prospectus. The Company is the sole agent in Saudi Arabia, Oman, Yemen, United Arab Emirates and Kuwait for the distribution of Bio Saydos SA Company's products. Borner Gmbh Company, Germany 15/08/1995 (18/3/1416H) The agreement remains in effect until one of the parties notifies the other with its desire to end the agreement six months before the proposed date This Agreement shall remain in force as of the date of issuing this Prospectus. The Company is the sole agent in the Middle East area -except for the Arab Republic of Egyptfor the distribution of Borner Gmbh Company's products. Square Pharmaceuticals Limited Company, Bangladesh 01/04/2004 (11/2/1425H) Five years, renewable automatically unless one of the parties notify the other with its desire not to renew the Agreement at least three months before the date of expiration of the Agreement This Agreement shall remain in force as of the date of issuing this Prospectus. The Company is the sole agent in Saudi Arabia for the distribution of Square Pharmaceuticals Limited Company's products. Bright Smile Company (California) 05/08/2003 (06/06/1424H) A Memorandum of Understanding has been signed and it is valid until 04/08/2004G. Despite the continuous contractual relationship between the parties, a formal agreement has not been signed since then. The Company will enter soon into an agreement with Bright Smile Company, in order to determine the detailed terms of the contractual relationship This Agreement shall remain in force as of the date of issuing this Prospectus. The Company is the sole agent in Saudi Arabia, Bahrain and Oman for the distribution of the products of Bright Smile Company (California) Agreements where the company is considered a key partner, supplier or distributor. The Company entered into agreements with the distributors listed below, where the distributors approved under those agreements to purchase medical, cosmetics and pharmaceutical products from the Company, in order to distribute these products inside and outside the Kingdom: 165

197 Name Date of agreement Duration of agreement Notes Yanbu cosmetics business Institution 14/08/2008 (12/8/1429H) Two years, renewable automatically unless one of the parties notifies the other with its desire not to renew the agreement at least one month before the date of expiration of the Agreement This Agreement shall remain in force as of the date of issuing this Prospectus. The distribution is in the Kingdom of Saudi Arabia. BCC Planeta 12/11/2007 (2/11/1428H) One year, renewable automatically unless one of the parties notifies the other with its desire not to renew the agreement at least one month before the date of expiration of the agreement. This Agreement shall remain in force as of the date of issuing this Prospectus. The distribution is in Azerbaijan. Al- Razi Pharmacy 16/07/2005 (9/6/1426H) One year, renewable automatically unless one of the parties notifies the other with its desire not to renew the agreement at least one month before the date of expiration of the agreement. This Agreement shall remain in force as of the date of issuing this Prospectus. The distribution is in Bahrain. Sanaa Group 01/07/2003 (01/5/1424H) One year, renewable automatically unless one of the parties notifies the other with its desire not to renew the agreement at least one month before the date of expiration of the agreement. This Agreement shall remain in force as of the date of issuing this Prospectus. The distribution is in France and Belgium. Kamali Group Company 27/09/2001 (9/7/1422H) Three years, renewable automatically unless one of the parties notifies the other with its desire not to renew the agreement at least one month before the date of expiration of the agreement This Agreement shall remain in force as of the date of issuing this Prospectus. The distribution is in the United Arab Emirates. Al-Mashriq International Trading Company April 2011 (Rabi Al Thani 1432H) Three years, renewable automatically unless one of the parties notifies the other with its desire not to renew the agreement at least one month before the date of expiration of the agreement This Agreement shall remain in force as of the date of issuing this Prospectus. The distribution is in the State of Qatar. 166

198 Nahdi Medical Company 01/01/2011 (26/01/1432H) One year, renewable automatically unless one of the parties notifies the other with its desire not to renew the agreement at least one month before the date of expiration of the agreement. This Agreement shall remain in force as of the date of issuing this Prospectus. The distribution is in the Kingdom of Saudi Arabia Credit arrangements with retail distributors of Dallah Pharma Company The Company introduced limited credit facilities for more than 3,000 pharmacies in the Kingdom of Saudi Arabia. Applications are submitted under the same from pharmacies and retail stores to buy pharmaceutical and health products, and the Company issues invoices, while payments are usually due within sixty days from the invoice date. In case the client pays the invoice within thirty days from the date of issuance, he will then earn a discount rate of 5% on pharmaceutical products and 3% on natural products Cooperation agreements for provision of medical service The Company entered into medical cooperation agreements with the hospitals and medical centers listed below, under which these institutions may use and benefit from the advanced medical capabilities of the Company in various forms, so as to treat patients referred from these institutions. These agreements allow other institutions to refer their patients to a Dallah Hospital for medical treatment not available in their locations. Accordingly, these institutions shall prepare referral letters, whereby the referred patients are accepted in Dallah Hospital, after consultation with the company's hospital. The letter shall contain the implacable estimated cost of the required treatment for the patient, describing the medical procedure to be conducted, including therapeutic interventions, duration of the patient's stay in hospital and the expected cost of utilities, if any, or if it is required. The agreements may allow in certain circumstances, for physicians of other institutions to perform the operations to their patients or treat them in Dallah Hospital by using its medical facilities. It is stated in the agreements that if the doctors of these institutions and medical centers conducted operations at Dallah Hospital, it shall calculate a rate of 50% of the operations' cost, which is mentioned in the list of Dallah Hospital prices with determining the minimum amounts to be paid to the company in relation to some surgical procedures that are conducted in Dallah Hospital. Dallah Hospital charges those institutions directly. Based on the terms of these agreements; those institutions that referred their patients to Dallah Hospital shall bear all costs that the patient refuses to pay or can not afford to pay. Dallah Hospital shall charge those institutions for using its facilities, depending on the nature and duration of the conducted operations, the provided treatment, and the price list set out in the Dallah Hospital. The Cooperation agreements shall grant these institutions and hospitals specific discounts. In addition to the above, the agreements stipulated the obligation of those institutions and medical centers to pay invoices within fifteen days from the date that they are sent by Dallah Hospital. In case of failure to meet the period of payment specified above, the company has the right to cancel all privileges granted to those institutions and medical centers and to stop the agreement until the settlement of all dues. Name Date of agreement Duration of agreement Notes Riyadh Care Hospital 25/01/1426H (06/03/2005) For one calendar year, renewable automatically unless one of the parties notifies the other with its desire not to renew the agreement at least one month before the date of expiration of the This agreement shall remain in effect as of the date of issuing this Prospectus. 167

199 agreement. Bait Al-Hikma Medical Center 03/05/1430H (28/04/2009) For one calendar year, renewable automatically unless one of the parties notifies the other with its desire not to renew the agreement at least one month before the date of expiration of the agreement. This agreement shall remain in effect as of the date of issuing this Prospectus. Hospital Medical Center 23/05/1428H (09/06/2009) For one calendar year, renewable automatically unless one of the parties notifies the other with its desire not to renew the agreement at least one month before the date of expiration of the agreement. This agreement shall remain in effect as of the date of issuing this Prospectus. Ajmal Center for Medical Clinics 12/06/1431H (26/05/2010) For one calendar year, renewable automatically unless one of the parties notifies the other with its desire not to renew the agreement at least one month before the date of expiration of the agreement. This agreement shall remain in effect as of the date of issuing this Prospectus. Avenue Medical Center 01/03/1429H (1/03/2008) For one calendar year, renewable automatically unless one of the parties notifies the other with its desire not to renew the agreement at least one month before the date of expiration of the agreement. This agreement shall remain in effect as of the date of issuing this Prospectus Lease Agreements The Company entered into five (5) lease agreements, whereby the premises are to be used as offices and warehouses in Dammam, Riyadh and Jeddah. The following table shows the sites leased by the Company and highlights the important terms contained in the respective lease agreements. Lessor Location and Space Date and duration of Agreement Value Dallah Company for Real Estate and Tourism Development 155 sq meter in the Khalidiya complex in Dammam From 1/8/2010 to 31/7/2011, and is renewable annually unless one of the parties notifies the other with its desire to end the contract 60 days before the date of expiration of the contract. 40,000 Riyals annually Ahmed Backerman Abdullah 330 sq meter in the Trade Building located in Al-olya From 4/11/2010 to 4/11/2011. The contract is renewable annually for a similar period 231,000 Riyals annually 168

200 district in Riyadh unless one of the parties notifies the other with its desire to end the contract two months before the date of expiration of the contract. Al Abdullah and Ibrahim Abnaa' Abdulaziz Al Mousa Warehouse No. 8 in the city of Riyadh For one year from 7/12/2010, renewable annually unless one of the parties notify the other with his desire to end the Contact one month before the date of expiration of the Contract 65,000 Riyals annually Amin Ali Bukhari Apartment No. 202 in the Tahlia Plaza Building in Riyadh From 20/6/1424H until 19/6/1425H, renewable annually unless one of the parties notifies the other with its desire to end the contact one month before the date of expiration of the contract 55,000 Riyals annually Walid Abdul Al-ziz Al- Sahli Warehouse area of 600 meters, in the Mostawdaat street in Jeddah For one year from 1/7/1424H, and is renewable annually unless one of the parties notifies the other with its desire to end the contact one month before the date of expiration of the contract. 60,000 Riyals annually 12.8 Insurance Policies and Contracts The Company has insurance contracts with Trade Union Cooperative Insurance and Reinsurance Company, covering all aspects of its work in the Kingdom of Saudi Arabia. The Company has obtained insurance policies to protect it against loss, damage to real estate and property, injuries to public persons, damage to property, damage to vehicles, loss of funds, theft and distrust. The Company also obtained personal insurance policies to protect it against the liability of medical errors for each doctor it employs. The insurance contracts correspond with the normal practices of similar activities, all of which are fully in force and valid until 30/06/2013. The Company did not receive any notice of termination for those contracts Financing Facilities The Company has a financial leasing agreement with Saudi Orix. Through this agreement, the Company purchased equipment, advanced medical equipment and supplies for the hospital. The current balance of these facilities is SR 2,489,800. The Company purchases the equipment, devices and medical supplies through the funding from Saudi Orix, which will be repaid over a period of 36 months. The table below shows the amounts paid by Saudi Orix and the outstanding balance (the remaining amount to be paid from Saudi Orix) as of the date of this Prospectus. Also, the table below shows the fixed date for the final payment of each amount. Details of the agreement with Saudi Orix, Saudi Arabia Description Contract Date Value of the contract Outstanding balance Completion date of payment Laser inspection system 13/03/2010 (27/03/1431H) 2,693, , /10/

201 Digital Angiography System CT Scan System Scan 64 Slices Lightspeed 14/04/2010 (29/04/1431H) 17/04/2010 (02/05/1431H) 6,455,160 1,443, /12/ 31 5,458, , /08/ 05 Total The Company has entered into a credit facility agreement with Bank Al Jazira, whereby it obtained revolving credit facilities (a loan of cash compatible with the provisions of Islamic Sharia), and letters of guarantee up to 14,000,000 SAR, and letters of credit up to 10,000,000 SAR, as long as the total used amount shall not exceed 50,000,000 SAR in any period of time. The Company entered on 15/4/1432H, corresponding to 20/3/2011G, into a Murabaha financing agreement with the Islamic Banking Division at Samba Financial Group in order to obtain funding of 40,000,000 SAR. Under the agreement, the Company sends a request to the second party for the purchase of certain commodities such as copper, zinc and lead to be sold to Samba Financial Group, in accordance with the terms of the deferred payment, while considering the conditions contained in the agreement and the Islamic principles for the financing of Murabaha. The Company can use these facilities until 30/4/2013G. Noting that the loans from Bank of Al-Jazira and Samba Financial Group are guaranteed by a promissory note from one of the shareholders. In addition to the above, the Company entered on 5/6/1432H, corresponding to 8/05/2011G, into a facilitating agreement with Saudi Arabian British Bank ("SABB") in order to get facilities up to 75,000,000 SAR. The facilities include Murabaha / Metals Tawarruq financing, guarantees for shipment, facility for payment of commercial instruments, along with a variety of guarantees. The Company can use these facilities until 31/10/2012G Transactions with related parties The members of the Company's Board of Directors ensures that except for the transactions listed in this section (12.10 transactions with related parties) of this Prospectus, the Company is not a party as of the date of this Prospectus to any agreements or contractual relationships directly or indirectly with related parties. Key Due to Related Parties Transactions as of June 2012: 111 SAR NJih fo T JJJcitft of is Jt -mftisj p tfp tp P 30 sht 2012 (AhPti P) Kamel Social Fund SndIrciHnisvI 17 Dareen Company for Travel and Tourism Travel Kits 425 Arabian Malaysian Takaful Company Providing guarantee letter - Patient's Friends Society General services

202 Dallah Trade Company Maintenance of air conditioners 321 Albaraka Medical Clinic Financial Transactions 181 Dallah German Company General services - Total 975 Source: Dallah Healthcare Holding Company Key Due from Related Parties Transactions as of June 2012: 111 SAR NJih fo T JJJcitft of is Jt -mftisj p tfp tp P 30 sht 2012 (AhPti P) Albaraka Medical Clinic Financial Transactions 2,435 WJ CenelsHsevn avl svneinsevn DssHavy Financial Transactions 123 Dallah Albaraka Holding Company Treatment Services 40 Abdullah Saleh Kamel Treatment Services 103 Dallah Institute for Health Services Treatment Services 152 Dallah dental clinic in Jeddah Revenue 15 Moheedin Saleh Abdullah Kamel Treatment Services 1 Total 2,869 In addition to what has been disclosed in the Tables above in respect to transactions with related parties, the Company entered into agreements with related parties, as shown below. Agreements of Information Technology and Software The Company entered on 01/03/2010G and on 01/07/2010G into two agreements that are related to information technology aimed at providing technical support and maintenance services related to certain equipment used for the purposes of medical treatment and the Company's database. The Company entered such agreements with Adaptive Techsoft Company, which is owned by the Chairman of the Board Directors, Tarek Osman Al-Kasabi. The two agreements shall take effect for one year, renewable annually, unless one of the parties notifies the other with his desire to terminate it, three months from the date of expiration of any of the agreements. This contract was approved at the Assembly's General Meeting dated 25/06/1433H (corresponding to 16/05/2012G). Lease Agreements with related parties The Company entered into a lease agreement with Dallah Real Estate and Tourism Company for the rental of the locations in the Khalidiya complex in the city of Dammam, with an area of 155 Sq meter, to be used for office purposes, distribution, marketing of the Company's products in the Eastern Region and provide support services for the Company and its subsidiaries. Please note that 171

203 the leased company is a subsidiary of Dallah Albaraka Group, which is at the same time a related party. The agreement period is for one (1) year, starting on 1/8/2010G and ending on 31/7/2011G, and it is renewable annually unless one of the parties notifies other with his desire not to renew the contract two months before the date of expiration. The value of the lease is SR 40,000 per year avl the contract remains in effect as of the date of this Prospectus. This contract was approved at the Assembly's General Meeting dated 25/06/1433H (corresponding to 16/05/2012G). Engineering Consultancy Agreements On the date of 01/01/2009G, the Company entered into a contract with the Office of Engineer Khaled al-faqih for Architecture (the Office ) to provide engineering consulting. The Office, under the contract, provides consultancy in various project management tasks associated with the Company and related support, including maintenance programs, room service, safety, internal modifications of the hospital's buildings related to the company, negotiate with and qualify companies, consulting firms, contractors, and participate in the preparation of projects. Based on this contract, the Company pays a lump sum of 540,000 SAR annually, payable in monthly instalments at the end of each calendar month. The contract is for one calendar year begins on the signing date of the contract, and it is automatically renewed unless one of the parties notify the other with his desire not to renew at least one month before the expiration of this period. This contract is still valid as of the date of this Prospectus. leaie vsne that Engineer. Khalid Al-Faqih is the brother of the partner, and the member of the board Dr. Mohammad al-faqih. This contract was approved at the Assembly's General Meeting dated 25/06/1433H (corresponding to 16/05/2012G). The Members of the board confirm that the Dallah Pharma (Florida) is not a related party Affiliates The Company confirms that it does not have any subsidiary companies, both within or outside the Kingdom. Please note that the Company has investments as shown in Table 2 (Investments) and section 4.8 (Investments in health care) of this Prospectus Litigation With the exception of the cases contained in the table below, the members of the Board of Directors of the Company confirm that the Company is not a party as of the date of this Prospectus in any cases, arbitration, or administrative procedures that would individually or collectively impact negatively and significantly on the financial position of the Company and the results of its work. Counter Party Individual (Plaintiff) Individual (Plaintiff) Individual (Plaintiff) Individual (Plaintiff) Amount in Controversy Brief Description of Nature of Dispute Current Status SAR 68,500 Monetary Dispute A judgment was issued in favor of the Company, however the plaintiff appealed the decision. The case is currently under review at the Court of Appeal and the Company are awaiting a date for the hearing to be set. SAR 101,000 Monetary Dispute The response memo has been submitted awaiting hearing date. SAR 71, Medical Complaint /Medical Compensation A decision was rendered in favor of the Plaintiff and THE Company has appealed the decision. SAR 50,000 Medical Complaint /Medical Compensation The BoG ruled in favor of the Company and decided to send the case back to the Medical Committee for review. 172

204 Individual (Defendant) Mediterranean Sea Insurance Company (Defendant) Individual (Plaintiff) Individual (Defendant) Individual (Plaintiff) Individual (Plaintiff) Ministry of Health- Licenses Dept. (Defendant) Ministry of Health- Licenses Dept. (Defendant) Ministry of Health- Violations Committee (Defendant) Arabian Navigation Establishment Jeddah (Defendant) Individual (Defendant) Individual (Plaintiff) SAR 256,653 Monetary Dispute The Claim has been submitted to the Medical Insurance Committee, awaiting hearing date. SAR 879,750 Monetary Dispute Case still under review the General Court Not Specified Medical Complaint /Medical Compensation Court of Appeal ruled in favor of the Company and decided to send the case back to the Medical Committee. SAR 91,484 Monetary Dispute In the process of enforcing judgment in favor of the Company. Not specified Monetary Dispute First instances Committee ruled against the Company. Company appealed decision and awaiting hearing date to be set. SAR 50,000 Medical Complaint /Medical Compensation The Case has been sent back to the Medical Committee for review. SAR 10,000 Objecting Licenses Dept decision The case is still under review at the Administrative Court. SAR 30,000 Objecting Licenses Dept decision The case is still under review at the Administrative Court. SAR 50,000 Objecting the Ministry s decision to fine the Company The case is still under review at the Administrative Court. SAR 3,797,949 A claim raised by the Company against the defendant for compensation for fees and damages resulted from their negligence. Next Hearing date 07/01/1434H SAR 189,828 Monetary Dispute Under review at General Court. Not Specified Medical Complaint /Medical Compensation Under review at medical Committee. 173

205 13 Underwriting the IPO 13.1 The underwriter of the IPO Samba Capital (underwriter of the IPO) agreed to fully underwrite the offering of 14,200,000 shares Summary of the underwriting agreement According to the terms and provisions of the IPO underwriting agreement signed between the Company and the underwriter of the IPO: a) The Company pledges that on the closing date (as specified in the IPO underwriting agreement) it will sell and allocate all the IPO shares to the buyers or to the underwriter itself. b) The underwriter of the IPO pledges to the Company that it will buy on the closing date, at the offering price, all the IPO shares that were not subscribed to, if any, in accordance with the terms and provisions of the IPO underwriting agreement Fees and expenses The Company agreed on paying the IPO underwriter fees based on the number of the offered shares that the underwriter approved to underwrite. The Company also agreed on paying the underwriter specific fees, costs and expenses regarding the offering process, as the Company bears full fees and expenses. 174

206 14 Subscription Terms and conditions All shareholders should read the terms and conditions of the IPO carefully before completing the IPO application form. Signing the IPO form and delivering the same to the receiving party is considered as a declaration of acceptance and approval on the mentioned terms and conditions of the IPO Subscription in the Offer Shares The offering process consists of 14,200,000 shares with a fully paid nominal value of SR 10 per share, and a premium amounting to SAR [ ] per share, representing 30.1% of the issuing Company capital after the completion of the IPO process. The initial public offering is limited to two tranches of investors, namely: Group (a): Investing institutions, which includes a number of institutions ( Investing Institutions ) that were addressed by the lead IPO manager after agreement with the Company and the current shareholders of the IPO, based on a predetermined criteria from the Capital Market Authority (the Authority ) in the Kingdom of Saudi Arabia. The number of the IPO shares that will be allocated to the subscribing institutions are 14,200,000 shares that represent 100% of the number of shares in the IPO. In case of subscription in the IPO shares by the specified persons in group (b), the lead IPO manager has the right, after acquiring approval from the Capital Market Authority, to reduce the number of shares allocated to the Investing Institutions to 7,100,000 shares, representing 50% of the total number of shares in the IPO. Group (b): Investors comprising natural Saudi individuals. The divorced or widowed Saudi woman who has minor children from a non-saudi husband, has the right to subscribe in the IPO in their names for herself, (hereinafter referred to collectively as the Individual Subscribers and separately as the Individual Subscriber ). It is considered void for the person to subscribe in the name of his divorced wife, and if such violation takes place, the penalties set forth will be taken against that violating person. A maximum of 7,100,000 share of the IPO shares will be allocated to the Individual Subscribers which equals 50% of shares in the IPO. If they do not subscribe with the whole number of shares allocated to them, the lead IPO manager should, after the approval of the Capital Market Authority, reduce the number of shares allocated to the Individuals Subscribers in accordance with the number of shares they subscribed in. Orders record and subscribers of institutions Subscribing institutions must submit an irrevocable subscription order, as they cannot withdraw the subscription order in the offered shares, accompanied by a financial commitment prior to the process of setting the offering price, which will occur before the start of the launch period. Every investor from the institutions must specify the number of offered shares which they wish to subscribe to, provided that they are not less than 100,000 shares and the price which will be placed for the offered shares. The IPO process for the investing institutions must start during the IPO period that includes also the individuals subscribers. The subscription process must be in accordance with the detailed terms and conditions of the IPO in the subscription application forms submitted to the institutions subscribing to the IPO. Subscription by individuals subscribers Subscription application forms will be provided for the Individual Subscribers only during the IPO period at the branches of the Selling Agents. The subscription will be available online, phone banking and ATMs at the receiving banks that offer some of these channels or all of them. Those services will be available for the Individual Subscribers who have previously participated in recent subscriptions IPOs, and who (1) have a bank account in one of the Selling Agents that offers this service, and (2) their information and data have not changed since the last IPO they participated in recently. Any signed subscription form submitted by the subscriber to any of the lead IPO manager branches or Selling Agents, is considered as a binding agreement between the current shareholders of the IPO and the subscriber. The number of offered shares for the 175

207 Individuals Subscribers is 7,100,000 shares representing (15.0%) of the main Company s capital. Potential investors must obtain the main Prospectus or the summarized Prospectus and IPO forms from the following banks: Samba Financial Group King Abdulaziz Road P.O. Box 833 Riyadh Kingdom of Saudi Arabia Tel: Fax: Website: Aljazira Capital Al Madina Road, Al Musadia Commercial Center P.O. Box 6277 Jeddah Kingdom of Saudi Arabia Tel: Website: Riyad Bank King Abdulaziz Road P.O. Box Riyadh Kingdom of Saudi Arabia Tel: Fax: Website: National Commercial Bank (NCB) P.O. Box 3555 Jeddah Kingdom of Saudi Arabia Tel: Fax: Website: Al Rajhi Bank Olaya Road P.O. Box 28 Riyadh Kingdom of Saudi Arabia Tel: Fax: Website: 176

208 The Selling Agents will start receiving subscription application forms for 7 days in their branches in all regions of the Kingdom of Saudi Arabia starting on Monday 05/01/1434H (corresponding to 19/11/2012G] and ending on Sunday 11/01/1434H (corresponding to 25/11/2012G). After signature and submission of the subscription application form, the receiving party stamps the form and submits a copy of the filled application form to the applicant. In case of incomplete or incorrect information provided in the application form, or if it was not stamped by the receiving bank, the application form is considered void. The subscriber must specify the number of shares he is applying for in the subscription application form, so that the total subscription amount is the number of shares required for subscription multiplied by the share price amounting SR [.] per share. A subscription with a number of shares less than 10 shares or fractions of shares will not be accepted, provided that the maximum subscription is 100,000 shares of the IPO shares for each subscriber. The subscription form and the total subscription amount must be submitted during the IPO period attached with the following documents: The original and a copy of the ID card (for the individual subscriber), The original and a copy of the family book (for the family members), The original and a copy of power of attorney, guardianship or support deed. The original and a copy of guardianship deed (for orphans), The original and a copy of the divorce deed (for the children of a divorced Saudi woman), The original and a copy of the death certificate (in case of submitting a form on behalf of a child of a widowed Saudi woman), The original and a copy of a birth certificate (for the children of a widowed or divorced Saudi woman), In case of submitting an application form on behalf of an applicant (parents and children only), a testimony must be attached with the form stating that the person who signed the application form is authorized to act on behalf of the subscriber, provided that it is accompanied with a copy of a valid power of attorney that proves this person s authorization to sign on behalf of the applicant. The power of attorney must be issued by a notary public for the Individuals Subscribers residing in the Kingdom of Saudi Arabia. However, for the Individuals Subscribers residing outside the Kingdom of Saudi Arabia, the power of attorney must be legalized by the Saudi embassy or consulate in the concerned country. The Selling Agents have to match copies against the originals then return the latter to the subscriber. It is enough to fill one subscription form for the main subscriber and the family members listed in the family book, if the family members will subscribe with the same number of shares requested by the main individual subscriber, this entails the following: (1) registering all shares allocated to the main subscriber and the dependent subscribers in the name of the main subscriber, (2) returning the surplus amounts of the shares not allocated to the main subscriber, which was paid by him or for dependent subscribers, and (3) The main individual subscriber gets the whole dividends distributed for the shares allocated to the main subscriber and the dependent subscribers. A separate subscription form shall be used in case of: (1) If the subscriber wishes to register the shares allocated in a name different than the name of the main subscriber, (2) If the shares amount subscribed by the dependent differs from the main individual subscriber shares, and 177

209 (3) If the wife wishes to subscribe in her name and register the allocated shares to her account, however she has to submit an independent IPO form as a main subscriber, in this case, any IPO application form submitted by her husband on her behalf must be cancelled and the receiving party shall proceed with the wife s independent form. Each applicant of a subscription form agrees to subscribe to the shares specified in the application form submitted, and buying these shares with an amount equal to the number of shares requested multiplied by the offering price of SR [**] per share. Each subscriber is considered the owner of the shares allocated to him when the following conditions are met: (1) Submitting the subscription application form to any of the Selling Agents by the applicant, (2) Paying the full value of the subscribed shares to the receiving party, and (3) Providing an allocation letter from the receiving bank to the subscriber, which specifies the number of shares allocated to the latter, The full value of the subscribed shares must be paid to the receiving party branch through authorizing deduction from the main subscriber account at the receiving party where the form was submitted. The subscriber must open an account at the receiving party in order to be able to submit his application to the same. If any submitted application form does not comply with the IPO terms and conditions, the Company has the right to refuse this application fully or partially. The applicant acknowledges agreement to any number of shares that will be allocated to him Allocating shares and returning surplus The lead IPO manager and the Selling Agents shall open an escrow account named IPO for Dallah Healthcare Holding Company and each receiving party must deposit the amounts collected from the individuals subscribers in the above mentioned trust fund. The final allocation of the IPO shares will be performed in the following way: Allocating shares for the individuals subscribers Allocating shares for the Individuals Subscribers will be performed in the following way: A minimum of 10 shares will be allocated for each individual subscriber. The remaining number of shares will be allocated in proportion with the number of shares subscribed by each subscriber. If the number of Individuals Subscribers exceeds [.], the Company does not guarantee the allocation of the minimum 10 shares for each subscriber, and if the number of shares submitted by Individuals Subscribers for IPO increased, the Company does guarantee the allocation of a minimum of [.] share for each subscriber. If the number of subscribers exceeds [.], the allocation of IPO shares will be done in accordance with the decision of the Capital Market Authority. The IPO surplus, if any, will be returned to the subscribers without any fees or deduction by the lead IPO manager or the Selling Agents. Allocating shares to the subscribed institutions Upon the completion of allocating shares to the Individual Subscribers, the shares of the Subscribed Institutions will be allocated upon the Company s own free discretion, in consultation with the lead IPO manager, provided that the number of shares allocated for this category are not less, in any way, than [**] share representing 50% of the total shares of the IPO. It is expected to announce the final number allocated shares for each subscriber and returning the IPO surplus to those subscribers without deducting any expenses or cuts, at the latest on Monday 19/01/1434H (corresponding to 03/12/2012G). The Company will notify the subscribers by advertising in the local newspaper and will ask the Selling Agents to start returning the surplus. 178

210 Each party of the Selling Agents will send letters of confirmation/notification to subscribers, notifying them of the final number of shares allocated to each of them and the surplus amounts which will be returned to them, if any. The Selling Agents will return to subscribers the amounts that had no shares allocated in return of them, as stated in the confirmation/notification letters sent to them. The surplus funds will be returned to them without any fees or cuts, and will be deposited in the recipients accounts at the Selling Agents. For more information, subscribers have to call the lead IPO manager branches or the Selling Agents they subscribed for Declarations By filling and submitting the IPO form, the subscriber: Confirms his subscription in the Company with the number of shares specified in the IPO form, Acknowledges that he has read the Prospectus and all its contents and reviewed the same carefully, Approves the bylaws of the Company and all the IPO terms and conditions provided in the Prospectus, and confirms subscription in shares in accordance with them; Reserves his right to claim against the Company for damages caused directly as a result of the Prospectus containing incorrect or inadequate vital information, or as a result of neglecting vital information that would have affected the subscriber decision of the subscription had they been included in the Prospectus; Declares that neither he nor any of the individuals included in the subscription form have applied for different subscription form in the same shares and agrees that the company has the right to refuse dual subscription forms; Declares the acceptance of the allocated shares as per the subscription form and accepts all subscription terms and conditions provided in the form and the Prospectus; and Pledges not to cancel or modify the form after submitting it to the receiving party or the lead IPO manager Miscellaneous provisions The subscription application and all the related terms, conditions and pledges are binding for the benefit of its' parties of subscription applicants, their successors, assigned parties, will executors, trustees and heirs, provided that except what is specified in this Prospectus, it is prohibited to waive the application or any rights, interests, emerging commitments or authorize it to any of the parties referred to in this Prospectus, without obtaining a prior written approval from the other party Saudi Stock Market (Tadawul) Tadawul system was established in 2001, as an alternative system for electronic securities information system. Electronic shares trading started in the Kingdom in Transactions are executed through a matching mechanism for the orders, and the priority of orders are received and specified according to the price. Generally, market orders are executed firstly (which are the orders containing best prices) followed by fixedprice orders. In case of the entry of several orders at the same price, they are executed according to the entry time. Tadawul system distributes a comprehensive range of information through various channels, most notably is the online Tadawul site and Tadawul information links. The market data is provided immediately to well-known information providers such as Reuters. 179

211 Transactions are settled momentarily through the day, meaning that the transfer of ownership of shares is directly implemented after the transaction is executed. Therefore, the Company should disclose all the decisions and information of interest to investors through Tadawul system. It is the responsibility of Tadawul management to monitor the market in order to insure fair trading and the efficiency of market operations Entry orders The trading process is executed through an integrated electronic system that covers the trading process in an integrated manner, starting from the execution of the transaction ending with the settlement. Trading takes place daily over one shift from 11 am until three and a half (3:30) pm, when the orders are executed. Aside from these times, it is allowed to enter, modify and cancel orders from 10am until 11am. New restrictions and queries can be made starting from 10 am until the opening session (which begins at 11 am) Time changes during Ramadan as declared and announced by Tadawul management. Transactions are executed through a mechanism matching mechanism for the orders, and the priority of orders are received and specified according to the price. Generally, market orders are executed firstly (which are the orders containing best prices) followed by fixed-price orders. In case of the entry of several orders at the same price, they are executed according to the entry time. Tadawul system distributes a comprehensive range of information through various channels, most notably is the online Tadawul site and Tadawul information links. The market data is provided immediately to well-known information providers such as Reuters. Transactions are settled momentarily through the day, meaning that the transfer of ownership of shares is directly implemented after the transaction is executed. Therefore, the Company should disclose all the decisions and information of interest to investors through Tadawul system. It is the responsibility of Tadawul management to monitor the market in order to insure fair trading and the efficiency of market operations Trading the company s shares in the Saudi Stock Market It is expected that the trading of the Company s shares will start after the final allocation of these shares and after the authority declares and announces the date to start trading the Company s shares. The dates and times mentioned in this Prospectus are initial dates mentioned for guidance purposes only, and can be changed or extended with the consent of the Capital Market Authority. The Offered shares can only be traded after confirming the allocation of shares in the subscriber s accounts in Tadawul, the Company's registration in the official list, and listing its shares in the financial market, Tadawul. The trading of shares before the official confirmation is completely prohibited. The subscribers who deal in those prohibited activities bear the full responsibility thereon. The Company will not bear any liability in this case. Additionally, shares can only be traded electronically through Tadawul, and those shares can not be traded manually by using the share certificates which are issued to investors upon their request for proof of ownership of shares only. 180

212 15 Documents Available for Inspection The following documents will be available for inspection at the Company s head office, between the hours of 8:30 am to 3:30 pm one week prior to and during the Offer Period: The Company s commercial registration certificate; The Company s Bylaws; CMA s approval of the Offering; Audited financial statements of the Company for the period ended 31 December 2010 and 2011, for six month period ended June 2011 and 2012 and pro-forma financial statements for the period ending 31 December 2009, 2008 and 2007; Auditor s written consent to the inclusion in the Prospectus of their audit report for the audited financial statements for the period ended 31 December 2010 and 2011,for six month period ended June 2011 and 2012 and their report for the pro-forma financial statements for the period ending 31 December 2009, 2008 and 2007; Written consent from Law Office of Abdulaziz H. Al-Fahad to the reference in the Prospectus of them as legal advisors to the Company; Written consent from Clifford Chance, to the reference in the Prospectus to them as legal advisors to the Sole Underwriter; Written consent from Samba Capital & Investment Management Company to the reference in the Prospectus of them as Sole Underwriter, Financial Advisor, Lead Manager and Bookrunner; Written consent from KPMG to the reference in the Prospectus of them as financial due diligence consultant to the Company; Written consent from Roland Berger to the reference in the Prospectus of them as market consultants to the Company; Market Study prepared by Roland Berger 15/05/2012; Valuation Report prepared by the Financial Advisors. Related Party Agreements KPMG Feasibility Study Brief on Material contracts with clients Real Estate valuation reports prepared by Radma Real Estate Investment, Century 21 Saudi Arabia and Basma Real Estate Management Shareholder resolution dated 11/03/1432H (14/02/2011G) that relates to the change in capital dated 14/02/2011G 181