3.1.

CORPORATE INFORMATION OF AL-RAJHI BANK

Al Rajhi Banking and Investment Corporation, rebranded as Al Rajhi Bank in 1997 and
referred to as the Bank in this publication, is a Saudi joint stock company that was formed and
licensed pursuant to Royal Decree No. M/59 and in accordance with Article 6 of the Council of
Ministers Resolution No. 245, both of June 1987. The Bank, headquartered in Riyadh, Kingdom
of Saudi Arabia, operates under Commercial Registration No. 1010000096 and is listed on the
Saudi Stock Exchange (Tadawul) with the Ticker No. RJHI. In 1957, Saleh Rajhi establishes the
first exchange with his brothers Sulaiman, Abdullah and Mohammed, to serve pilgrims travelling
to Saudi Arabia. In 1978, all separate exchange houses established up by the family are merged
together under Al Rajhi Exchange and Trade Company. In 1987, the entity is converted into a
joint-stock company and granted a banking license by the Saudi Arabia Monetary Agency
(SAMA). The new bank strictly followed Islamic Sharia rules. In 2006 its rebranding known as
Al Rajhi Bank. Prior 2008, Al Rajhi Capital is established as a subsidiary for investment
banking, brokerage and asset management, operating under the Capital Markets Authority
(CMA) rules. Step in 2015, Al Rajhi Bank is the largest Islamic bank in the world by total assets,
and is the leader in Saudi Arabia in terms of customer base and branch network. Deeply rooted in
Islamic banking principles, the Sharia-compliant Al Rajhi Bank has seven subsidiary
companies, which together with the Bank are referred to as the Group. The Group continues to
be instrumental in bridging the gap between modern financial demands and intrinsic Islamic
values, whilst spearheading new product development and numerous industry standards.

Al-Rajhi Group Subsidiaries

The Bank provides a comprehensive suite of products and services, encompassing retail banking,
corporate banking, SME banking and Treasury products and services. They are summarized
divided as Retail banking like accounts, personal finance, car finance, home finance, credit cards
etc. Corporate banking like trade finance, cash management, corporate products (Akar, Bai Al
Ajel, Eirad, Istisnaa, Murabaha and Musharaka) etc. SME banking is the small and medium
enterprise (SME) sector receives banking products and services through a dedicated team.
Treasury like Murabaha (deferred sales), direct investment, foreign exchange, banknotes etc. The
Bank has a significant presence in the KSA, and a growing footprint overseas through a
subsidiary in Malaysia and branches in Kuwait and Jordan. At Group level, other products and
services in the areas of real estate, construction, securities brokerage, insurance (Takaful) and
management services are provided through the subsidiaries noted above. Our services are
delivered through a variety of channels such as branches, ATMs, POS, online banking and
mobile banking. Company as vision, mission and values as below:
Vision - To be a trusted leader delivering innovative financial solutions to enhance the quality of
life of people everywhere.
Mission - To be most successful bank admired for its innovative service, people, technology and
Shari a compliant products, both locally and internationally.
Value - Everything we do is built around our core values, which puts the customer at the heart of
all our activities.

3.2 CAPITAL STRUCTURE

Value creation leads to capital formation. As a store of value, capital takes on a broader
meaning in integrated reporting and constitutes the resources and relationships used and affected
by the Bank. We classify capital that is owned by the Bank as being 'internal' capital, while
capital that is not owned as 'external' capital. Ownership is irrelevant here, as the Bank has
access to and uses all forms of its capital to create sustainable value for itself and its
stakeholders. The Banks internal capital comprises financial capital and institutional capital. The
former is what gets reported in the Financial Statements, while the latter are intangibles such as
integrity, trust, specialized knowledge and brand equity. The Banks external forms of capital
center on key stakeholders and comprise investor capital, customer capital, employee capital and
social & environmental capital. Value creation is a dynamic process, with flows taking place
between the various forms of capital all the time, driven by objectives, strategies, performance
and outcomes. The diagram below is a dynamic view that integrates the key elements of our
business model. Capital structure has divide 6 element structure can describe as below.

3.2.1. Financial Capital

Group net income increased by 4.3% during the year to SAR 7,130 million (2014: SAR 6,836
million), thus reversing a decline seen in 2014 and 2013. This was achieved by a marginal 0.6%
YoY increase in total operating income and a 3.1% YoY decrease in total operating expenses. Net
financing and investment income, which accounts for 72% of total operating income, grew by
1.4% to SAR 9,959 million during the year (2014: SAR 9,817 million). However, slight declines
in fees from banking services and other operating income resulted in total operating income
growing by only 0.6% to SAR 13,746 million (2014: SAR 13,667 million).

3.2.2. Institutional Capital

Institutional capital covers a broad range of non-financial components that are, like financial
capital, internal to the Bank and the Group. They comprise intangibles such as corporate values,
business ethics and integrity, organizational knowledge, systems, processes, intellectual property,
brand equity and so on. The core values of the Bank, described, are at the center of everything
we do, be it in dealing with colleagues, customers or the communities and environment in which
we operate. These values are internalized through induction, training, performance management
and other human resources-related activities. The Bank maintains an active corporate social
responsibility programmed. It is structured and transparent, and targets education, healthcare and
housing. The main activities undertaken during the year and the results are discussed in the
section on Social and Environmental Capital commencing.

3.2.3. Investor Capital

The Banks investors are persons, both institutional and individual, who provide financial capital
with the expectation of a return. The capital provided is primarily equity, with the expected
return typically covering a mix of short, medium and long term. The market value of the Banks
ordinary share on 31 December 2015 was SAR 52.09, compared to SAR 51.45 on 31 December
2014. During the 12-month period of 2015, the highest price of SAR 68.20 was recorded on 17
June 2015, while the lowest price of SAR 47.21 was recorded on 13 December 2015.

3.2.4. Customer Capital

The Bank accounted for 93.5% of net income and 99.2% of total assets of the Group. Our
discussion in this section will thus focus on the Bank and its three overseas banking
subsidiaries/branches which constitute the core banking business of the Group. The financial
aspects of these businesses were discussed previously in the section on Financial Capital. The
Banks portfolio, and hence customers are segmented by Retail banking, Corporate banking
(including SME banking), Treasury, International banking business subsidiary in Malaysia;
branches in Kuwait and Jordan. The above services within the Kingdom are delivered through

our headquarters in Riyadh and regional departments, namely, Western, Central, Eastern,
Qassim, Hail, Al Madina, Northern and Southern. Our international business operations are
through subsidiaries/branches in Malaysia, Kuwait and Jordan.

3.2.5. Employee Capital

The Banks comprehensive Human Resource Transformation Journey that commenced in 2014
saw many achievements during the year under review. They served to align our human resource
(HR) strategy with the Banks Roadmap, underpinned by our goal of becoming an employer of
choice while reinforcing the importance of living our values in all our business activities. The
Group employed a total of 12,374 persons as at 31 December 2015 (2014: 11,761 persons),
which represents an increase of 5.2% YoY. The figure includes all official employees,
permanent and temporary contracted employees and service providers. We worked closely with
the respective business units in reviewing and revamping organizational structures to better align
them with the Banks business strategy and goals. This also entailed developing job descriptions
and job evaluations. In addition, we carried out a workforce planning exercise across the Bank as
part of the annual business planning process, utilizing comprehensive manpower and capacity
assessment tools and methodologies. These led to several organizational restructuring initiatives
within the Bank, some going from end to end. Due care was exercised in ensuring effective
employee engagement and communications as part of the whole change management process.

3.2.6. Social and Environmental Capital

Contributing to a better tomorrow through a caring and sharing philosophy, the Bank is ever
mindful of the impact it makes on the local communities and the environment in which it
operates. It is a win-win approach that recognizes the truism that the ability of the Bank to create
sustainable value for itself is equally dependent on the value it creates for its stakeholders. As
one of the oldest Islamic banks in the world, our products have been adopted as models by other
banks locally, regionally and internationally. Each of our products is fully Sharia compliant,
carefully studied and approved, by our Sharia Committee a group of the Kingdoms most

prominent and esteemed Islamic scholars. Our financing activities are based on responsible
investment and take account of environmental and social risks in the projects and companies the
Bank finances. The Bank operates within approved policies regarding employment, procurement
of goods and services, project management and internal maintenance, through which we uphold
the highest standards of professionalism and social responsibility. Given the nature of our
business, our activities do not have significant direct environmental impacts. Nevertheless, we
are mindful of our indirect environmental impacts, particularly in the context of energy usage,
paper consumption and disposal of waste. We approach these with a reduce, reuse and recycle
mindset.

3.3 STAKEHOLDER STRUCTURE

Our stakeholders are entities (including individuals) who can be significantly affected by
the Banks activities, products, and services; and whose actions can significantly affect the ability
of the Bank to successfully implement its strategies and achieve its objectives. In this context,
the Banks primary stakeholders are investors, customers, employees, society and environment in
which we operate. Other important stakeholders include our business partners, regulators and
Government authorities. We make every effort in understanding our key stakeholders, take into
account their legitimate needs and interests and respond accordingly. Summarized below are
insights on how we engage with them and build lasting relationships for mutual benefit.

3.4 RISK MANAGEMENT STRUCTURE

Taking risk is an inevitable aspect of the banking business. The aim is therefore to
achieve an appropriate balance between risk and return and to manage any potential adverse
effects on goal achievement and performance. The most important types of financial risks
identified by the Group are credit risk, liquidity risk and market risk. Market risk includes
currency risk, profit rate risk, operational risk and price risk.

3.4.1 Credit Risk

Credit risk is considered to be the most significant and pervasive risk for the Bank and the
Group. It is the risk that the counterparty to a financial transaction will fail to discharge an
obligation causing the Group to incur a financial loss. Credit risk arises principally from
financing (credit facilities provided to customers) and from cash and deposits held with other
banks. Further, there is credit risk in certain off-balance sheet financial instruments, including
guarantees relating to purchase and sale of foreign currencies, letters of credit, acceptances and
commitments to extend credit. Credit risk monitoring and control is performed by the Credit and
Risk Management Group which sets parameters and thresholds for the Groups financing
activities. Several business units are involved in the risk limit control and mitigation process as
to the Consolidated Financial Statements.
3.4.2 Credit Risk
Liquidity risk is about the Group being unable to meet its payment obligations associated with its
financial liabilities when they fall due and to replace funds when they are withdrawn. The
consequence may be the failure to meet obligations to repay deposits and financing parties and
fulfill financing commitments. Liquidity risk can be caused by market disruptions or by credit
downgrades, which may cause certain sources of funding to become unavailable immediately.
Diverse funding sources available to the Group help mitigate this risk. Assets are managed with
liquidity in mind, maintaining a conservative balance of cash and cash equivalents. The Groups
liquidity risk management process is monitored by the Groups Asset and Liabilities Committee
(ALCO). Additional details on the role of ALCO, the maturity profile of the Groups assets and
liabilities are found in Consolidated Financial Statements.

3.4.3 Market Risk

Market risk arises when the fair value or future cash flows of a financial instrument fluctuates
due to changes in market prices. It arises on profit rate products, foreign currency and mutual
fund products, all of which are exposed to general and specific market movements and changes
in the level of volatility of market rates or prices such as profit rates, foreign exchange rates and
quoted market prices. Market risk exposures are monitored by the Banks Treasury and the
Credit and Risk Management Group and reported to ALCO on a monthly basis. ALCO
deliberates on the risks taken to ensure that they are appropriate. The Group, being Sharia
compliant, is not exposed to market risks from speculative operations such as hedging, options,
forward contracts and derivatives. However, its exposure to market risks arising from banking
operations are analyzed and mitigated under the following risk types: profit rate risk, foreign
currency risk, price risk and operational risk, Consolidated Financial Statements.