ANNUAL REPORT 2019 · 2020-07-01 · The Company’s proprietary investments include assets in...

ANNUAL REPORT 2019

A member of the KIPCO Group

Contents

Corporate ProfileFinancial HighlightsFinancial SummaryChairman’s StatementBoard Of Directors Chief Executive Officer’s ReportExecutive ManagementBusiness Review Financial ReviewCorporate Governance Control Functions & Shared ServicesFinancial StatementsGroup Directory

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H.M. King Hamad Bin Isa Al KhalifaKing of the Kingdom of Bahrain

H.H. Sheikh Sabah Al-Ahmad Al-Jaber Al-SabahAmir of the State of Kuwait

5UGHAnnual Report 2019

CORPORATE PROFILE

United Gulf Holding Company (UGH, Company)

A subsidiary of the KIPCO Group, UGH conducts merchant banking activities through its regional network of subsidiaries and associates. The Company’s proprietary investments include assets in commercial banking, real estate, private equity, and quoted securities. As at 31 December 2019, assets under management held through its wholly owned subsidiary, United Gulf Bank BSC (c) (UGB, the Bank), totaled US$ 13.6 billion (2018: US$ 12.6 billion). The Company’s core subsidiaries and associates include: United Gulf Bank, KAMCO Investment Company, FIMBank, Burgan Bank, North Africa Holding Company, United Gulf Financial Services - North Africa, United Capital Transport Company and United Real Estate Company.

Incorporated on 28 June 2017 and licensed as a Holding Company by the Ministry of Industry, Commerce and Tourism, UGH was listed on the Bahrain Bourse on 28 September 2017. The Company’s authorised share capital is US$ 252.7 million with an issued and paid up capital of US$ 206.5 million.

United Gulf Holding Company BSC.

PO Box 5565, Diplomatic AreaUGB Tower, Manama, Kingdom of Bahrain

Tel: (+973) 17 533 233 Fax: (+973) 17 533 137Email: [email protected]

Listed Company on the Bahrain Bourse

United Gulf Holding Company BSC is a member of the KIPCO Group, one of the biggest holding companies in the Middle East and North Africa.

The KIPCO Group

The KIPCO Group is one of the biggest holding companies in the Middle East and North Africa, with consolidated assets of US$ 34 billion as at 31 December 2019. The Group has significant ownership interests in over 60 companies operating across 24 countries. The Group’s main business sectors are financial services, media, real estate and manufacturing. Through its core companies, subsidiaries and affiliates, KIPCO also has interests in the education and medical sectors.

Major Subsidiaries and Affiliates

2019Highlights


FINANCIAL HIGHLIGHTS

. 1 Figures in KD have been converted into US$ at the exchange rate of US$:KD=1:0.30315

. 2 Consolidated.

3,470 millionTotal Assets

13.6 billionAssets Under Management

141.52019

139.42018

28.92017

13.62019

12.62018

10.82017

2019

3,3992018

2017 3,017

3,470

9.702019

18.642018

4.502017

224.42019

208.02018

44.82017

3292019

3642018

4222017

141.52019

139.42018

28.92017

13.62019

12.62018

10.82017

2019

3,3992018

2017 3,017

3,470

9.702019

18.642018

4.502017

224.42019

208.02018

44.82017

3292019

3642018

4222017

Total AssetsUS$ million

RevenueUS$ million

Shareholders' EquityUS$ million

Operating IncomeUS$ million

Assets Under ManagementUS$ Billion

Net income due to shareholdersUS$ million


FINANCIAL SUMMARY

2019 2018 2017*US$ million

Total Income 224.4 208.0 44.8 Investment income 47.7 42.5 12.0 Operating income 141.5 139.4 28.9 Shareholders' Equity 328.6 364.0 422.2 Total Assets 3,470.2 3,398.6 3,017.0 Net Income due to shareholders 9.7 18.6 4.5

%

Return on Average Equity 2.80% 4.74% 1.06%Return on Average Assets 0.28% 0.58% 0.15%Operating Expense/ Operating Income 79.7% 63.7% 61.5%Average Equity to Average Assets 10.1% 11.1% 14.0%

US$

Book Value per share 0.80 0.88 1.02

Earning (& Loss) per share (0.011) 0.024 0.021

Comparatives Averages balances (based on quarterly averages)

Assets 3,376.6 3,238.3 3,017.0 Liabilities 2,847.0 2,696.7 2,475.4 Minority Interest 152.6 120.4 86.4 Perpetual Tier1 Capital 33.0 33.0 33.0 Shareholders' Equity 344.0 388.2 422.2

3,376.6 3,238.3 3,017.0

Guarantees and commercial LC 30.4 92.8 117.5 Commitments 172.2 218.8 242.1 Assets under management (US$ billion) 13.4 11.2 10.8

* As UGH started its operations in the fourth quarter of 2017, amounts for the income statement items reflect the income and expenses for the 4th quarter of 2017 only, whereas the statement of financial position items show assets, liabilities and equity as of 31 December 2017.


CHAIRMAN’S STATEMENT

On behalf of the Board of Directors, I have the privilege to present the annual report and consolidated financial statements of United Gulf Holding Company BSC (UGH) for the year ended 31 December 2019. I am pleased to report that the Company continued to post a resilient performance in its second year of operations.


Economic Background

Lower oil prices, increased market volatility, trade policy uncertainty and heightened geopolitical tensions, combined to affect global economic growth in 2019. Accordingly, the IMF has revised downward its forecast for global GDP growth to 2.9 per cent, compared with 3.6 per cent in the previous year.

In the face of continued global headwinds, the MENA region witnessed sluggish economic growth in 2019. The World Bank has revised down its forecast for GDP growth in the region to 0.6 per cent compared with 1.2 per cent in 2018. It cited conservative crude production outputs and weak global demand for oil; and rising civil strife and social unrest in certain parts of the region, for its revised outlook.

Financial Results

UGH reported total income before interest and other expenses of US$ 224.4 million for 2019, higher by 8 per cent from US$ 208.0 million the previous year. Total expenses rose by 27 per cent from US$ 88.8 million in 2018 to US$ 112.8 million, which was attributable to the increase in general and administrative expenses, and interest expenses, relating to the acquisition of Global Investment House. Net profit attributable to shareholders of the parent reduced by 48 per cent to US$ 9.7 million compared with US$ 18.6 million a year earlier; with basic earnings per share declining from US 2.35 cents to a loss of US 1.11 cents per share. The decrease in profitability for 2019 results from lower profits reported by FIMBank and Burgan Bank, and a loss incurred by United Real Estate Company..

At the end of the year, total assets stood at US$ 3.5 billion compared with US$ 3.4 billion at the end of 2018; with total equity of US$ 503.6 million versus US$ 548.5 million at the end of the prior year. Total assets under management held through its primary subsidiary, United Gulf Bank increased by 8 per cent to US$ 13.6 billion, as a result of the successful merger between UGB’s subsidiary KAMCO Investment Company and Global Investment House. During the year, UGH successfully refinanced existing medium-term funding facilities of US$ 75 million.

Rating

In August 2019, Capital Intelligence affirmed UGH’s long- and short-term corporate ratings of ‘BBB-’ and ‘A3’, respectively, with a Stable Outlook. We view this affirmation as an important independent validation of the Company’s solid financial position and diversified asset base in terms of its investments and geographic footprint.

Strategy

UGH continued to implement its strategic objectives of strengthening the Group’s core assets and diversifying its sources of revenue. A notable achievement was completion of all regulatory and legal formalities for the merger between KAMCO Investment Company and Global Investment House. This cements KAMCO’s standing as the premier asset management and investment banking firm in Kuwait, and also as one of the largest in the MENA region.

UGH has also developed plans to capitalise on FinTech solutions that are most appropriate to its business activities. In this respect, the Group’s subsidiary United Gulf Bank will embark upon development of a digital trade finance platform, enabling investors to buy and sell trade finance assets through a convenient, fully automated direct trading portal.

Governance

As a listed company, UGH is committed to adopting high standards of corporate governance in line with global best practice. During 2019, the Company strengthened its compliance and risk management frameworks in order to address the latest changes in the external regulatory environment; and to better withstand the impact of ongoing economic and market volatility.

Future Outlook

Earlier positive forecasts for global growth in 2020 have been revised downwards due to the continued spread of COVID-19, which has affected oil prices, stock markets, global trade and manufacturing, supply chain, tourism, and investor sentiment. The outlook remains highly uncertain and unpredictable, with recovery dependent on successfully curbing any further escalation of the Coronavirus.

Given this macroeconomic scenario, we have a cautiously optimistic outlook for UGH next year. However, we remain confident in Management’s ability to rise to these challenges and manage risks in order to protect shareholder value.

Acknowledgements

On behalf of the Board of Directors, I express my sincere gratitude to the Ministry of Industry, Commerce & Tourism, the Central Bank of Bahrain and the Bahrain Bourse for their highly appreciated support and guidance. I also take this opportunity to thank all our shareholders, including our parent company KIPCO, for their continued trust, confidence and financial support.

Masaud M. J. HayatChairman of the Board


Masaud J. Hayat – Executive Director

Chairman of the Board of Directors since 2017

Chairman of the Executive Committee

Degree in Economics, Kuwait University Diploma in Banking Studies, Institute of Banking Studies, Kuwait

Over 43 years’ experience in the financial sector

Other Positions Held:

• Vice Chairman & Group Chief Executive Officer, Burgan Bank - Kuwait

• Chairman, United Gulf Bank BSC (c) - Bahrain• Chairman, Tunis International Bank - Tunisia• Vice Chairman, Gulf Bank Algeria - Algeria• Vice Chairman, Bank of Bagdad - Iraq• Vice Chairman, United Gulf Financial Services NA - Tunisia• Vice Chairman, FIMBank plc - Malta• Board Member, Jordan Kuwait Bank - Jordan• Board Member, KAMCO Investment Company KSC (Public)

- Kuwait• Board Member, North Africa Holding Company - Kuwait• Board Member, Mashare’a Al Khair Est. - Kuwait

Faisal Al Ayyar – Executive Director

Vice Chairman of the Board of Directors since 2017

Member of the Executive Committee

Member of the Board Audit Committee

Graduated as a fighter pilot with the Kuwait Air Force in the USA



• Vice Chairman (Executive), Kuwait Projects Co. (Holding) - Kuwait (KIPCO)

• Chairman, Panther Media Group (OSN) - UAE • Vice Chairman, Gulf Insurance Group - Kuwait• Vice Chairman, Jordan Kuwait Bank - Jordan• Vice Chairman, United Gulf Bank BSC (c) - Bahrain • Vice Chairman, Saudia Dairy & Foodstuff Co. (Sadafco) -

Saudi Arabia • Board Member, Gulf Egypt for Hotels & Tourism Co. - Egypt • Vice Chairman, Mashare’a Al Khair Est. - Kuwait • Trustee, American University of Kuwait - Kuwait• Honorary Chairman, Kuwait Association of Learning Difference

- Kuwait

Mazen Hawwa – Executive Director

Member of the Board of Directors since 2017


EMBA, HEC Paris, FranceGraduate of Lebanese American University, LebanonChartered Global Management Accountant, Certified Public Accountant, and Certified Management Accountant - USA


Other Positions Held:• Chairman, Mena Homes Real Estate Company - Kuwait• Vice Chairman, Takaud Savings & Pensions - Bahrain • Vice Chairman, United Networks Company - Kuwait• Vice Chairman, United Real Estate Company - Kuwait • Board Member, North Africa Holding Company - Kuwait • Executive Director, Assoufid - Netherlands• Executive Director, SSH International Group - Kuwait• Board Member, Fajr Al Gulf Insurance Company - Lebanon

Sadoun Ali – Executive Director



BSc, Management of Financial & Accounting Services, Ashland University, USADiploma, Commercial Science for Banks, Public Authority for Applied Education & Training, Kuwait



• Board Member, Burgan Bank - Kuwait• Board Member, Bank of Baghdad - Iraq • Vice Chairman & CEO, Qurain Petrochemical Industries Company

- Kuwait• Vice Chairman, Jassim Transport & Stevedoring Co. (JTC) - Kuwait• Board Member United Industries Company - Kuwait• Chairman, Insha’a Holding - Kuwait• Board Member, Advanced Technology Company - Kuwait• Chairman, United Oil Projects Company - Kuwait • Chairman, KAMCO Real Estate Investment Company - Bahrain

BOARD OF DIRECTORS


BOARD OF DIRECTORS

Tariq Abdul Salam – Executive Director



BSc, Accounting, Kuwait University

Over 31 years’ experience in finance and investments


• Chief Executive Officer - Investments, Kuwait Projects Company (Holding) - Kuwait

• Board Member, United Real Estate Company - Kuwait • Vice Chairman, Kuwait Clearing Company - Kuwait• Board Member, KAMCO Investment Company KSC (Public) -

Kuwait• Board Member, Jordan Kuwait Bank - Jordan• Board Member, Qurain Petrochemical Industries Company

(QPIC) - Kuwait

Mubarak Al Maskati – Independent Director


Chairman of the Nominating & Remuneration Committee

Member of the Board Audit Committee

BSc, Political Studies and Economics, Pennsylvania State University, USA



• Director, Royal Aviation - Kuwait• Consultant, Amiri Diwan / Amiri Fleet Manager - Kuwait • Independent Director, United Gulf Bank BSC (c) – Bahrain

Bader Al Awadhi – Independent Director,


Member of the Nominating & Remuneration Committee

BSc, Industrial Engineering, University of Miami, USAGeneral Manager Program, Harvard Business School, USAProgram for Management Development, Harvard Business School, USA



• Director, Member of the Board Corporate Governance Committee and Member of the Board Audit Committee. Tunis International Bank - Tunisia

• Independent Director, Assoufid BV - Netherlands• Board Member, Manar Interholdings SL - Spain• Independent Director at United Gulf Bank BSC (c) – Bahrain

Mohamed Haroon – Independent Director,


Chairman of the Board Audit Committee

Member of the Nominating & Remuneration CommitteeBSc (Hons), Peshawar University, PakistanDiploma in Banking, Pakistan



• Chairman & CEO, Haroon Holding Company WLL - Bahrain• Independent Director, United Gulf Bank BSC (c) - Bahrain


CHIEF EXECUTIVE OFFICER’S REPORT

Dear ShareholdersI am pleased to report that 2019 was a productive year for United Gulf Holding Company, marked by a number of significant business developments and operational initiatives.


Business Developments

The legal execution of the merger between KAMCO Investment Company and Global Investment House was completed during 2019, through the conclusion of a share swap between the two entities. The merger aims to maximise business synergy, provide a greater range of products and services, and improve operational efficiency. Importantly, it also positions KAMCO as the largest private asset management and investment banking firm in Kuwait, as well as being ranked as one of the leaders in the MENA region.

In terms of new business activities, the Group is planning to enter the FinTech space, with UGB embarking upon the development of a digital trade finance platform. A convenient, fully automated direct trading portal will create a marketplace for trade finance products, bringing buyers, sellers and service providers together in a seamless manner. This development illustrates the potential for maximising synergies and cross selling opportunities between KIPCO group entities and providing enhanced business solutions and customer service.

Operational Initiatives

In order to support the Group’s growth and development, we continued to enhance our institutional capability in 2019 in the critical areas of information technology, human capital, corporate governance and risk management.

Information technology initiatives included finalising a major upgrade of the core banking system featuring the latest version of the Mysis/Fusion platform. This will streamline operational processes, enhance data capturing and reporting capabilities across the Bank, and provide a platform for future digitalization initiatives.

Supporting the professional development and career prospects of our people is a key strategic priority. In 2019, we placed particular focus on enhancing leadership, technical, soft and role-specific skills. The Bank also continued to encourage and support staff to obtain relevant professional qualifications and certifications. Attracting, nurturing and retaining top talent is a crucial strategic advantage in today’s increasingly competitive marketplace.

We also strengthened our corporate governance and risk management frameworks during the year. This will ensure ongoing compliance amid a stricter regulatory regime, and support the Bank in withstanding increasingly volatile economic and market conditions.

Looking Ahead

We expect 2020 to be another highly challenging year, with greater uncertainty arising from the COVID-19 pandemic, which has resulted in GDP growth for the MENA region being revised downwards.

Nevertheless, UGH benefits from a diversified investment portfolio, a growing regional presence, and an expanding commercial banking network. In the coming year, we will continue to enhance our key strengths and sound underlying fundamentals, and strive to deliver improved sustainable profitability and superior returns to our shareholders.

Hussain A. Lalani

Chief Executive Officer


EXECUTIVE MANAGEMENT

Hussain A. Lalani FCA CISA

Chief Executive Officer

Deepa Chandrasekhar APRM CAMS FICA CFE Chartered MCSI

Senior Vice President,Chief Compliance Officer & MLRO

Mohammed Alqumaish CIA CISA

Assistant General Manager,

Chief Audit Executive & Corporate Secretary

Syed Rehan Ashraf, FCA MBA

Chief Financial Officer

Mr. Lalani joined UGB in 2002 and was appointed as the Acting CEO in September 2015, and subsequently CEO in April 2019. His career extends over 23 years. He has worked extensively with the Board of Directors on advisory transactions in his previous capacity as the Bank’s Chief Financial Officer, and partnered with business divisions to support growth and business plans. Mr. Lalani was previously employed by Ernst & Young, Bahrain and PriceWaterhouse Coopers, Pakistan. He is a Board Member of Takaud Savings & Pensions BS.C (c), Bahrain; United Gulf Financial Services - North Africa, Tunisia; FIMBank plc. – Malta; Assoufid B.V. - Netherlands; and London Forfaiting Company - UK. A Chartered Accountant and a Certified Information Systems Auditor, Mr. Lalani holds a Bachelor of Commerce degree from the University of Karachi, Pakistan.

Mrs. Chandrasekhar joined UGB in 2008. She has over 31 years’ experience in the areas of compliance, risk management, treasury, operations and internal audit. She holds an MBA degree from the University of Alberta, Canada; as well as several professional certifications. Mrs. Chandrasekhar is a member of the Steering Committee of the Professional Risk Managers International Association (PRMIA), Bahrain Chapter; and the Advisory Council of the Chartered Institute of Securities and Investment (CISI), Bahrain Chapter. She also serves as an International Moderator in the field of compliance and corporate governance for the Finance Accreditation Agency, Malaysia. Mrs. Chandrasekhar is a frequent speaker at professional forums, and has published several financial articles.

Mr. Alqumaish joined UGB in September 2001. He has more than 23 years’ regional, commercial and investment banking experience in internal auditing, risk assessment, compliance, corporate governance and quality assurance services. He previously worked with Ahli United Bank and Shamil Bank in Bahrain. Mr. Alqumaish is a Director, Board Audit Committee member and Board Nominating & Remuneration Committee member of Tunis International Bank - Tunisia; Director, Board Audit Committee member and Board Nominating & Remuneration Committee member of Syria Gulf Bank - Syria; and a Director of Al Ameen Real Estate Investment Company - Iraq. He also serves as an external Board Committee member of Gulf Bank Algeria – Algeria , and Bank of Baghdad - Iraq. A Certified Internal Auditor (CIA) and Certified Information Systems Auditor (CISA), Mr. Alqumaish holds an MBA from the University of Strathclyde Business School, UK.

Mr. Ashraf joined UGB in 2005. He was appointed CFO in October 2015 after serving as Head of Credit and Risk Management since October 2007. He has more than 22 years’ experience in the areas of credit, risk management, advisory, compliance and assurance services – with Islamic and conventional banks – and the big four audit firms. He previously worked with Shamil Bank - Bahrain; Deloitte & Touche - Pakistan; Faysal Bank - Pakistan; and PriceWaterhouse Coopers - Pakistan. A Fellow Chartered Accountant (FCA) from the Institute of Chartered Accountants of Pakistan, Mr. Ashraf holds an MBA from DePaul University of Chicago, USA.


EXECUTIVE MANAGEMENT

Adel Al-Arab, CRA

Senior Vice President,

Head of Operations

Mr. Al Arab joined UGB in 1994. He has over 23 years, experience in the field of operations, credit and risk management. He holds a Bachelor of Science degree in Business Administration from the University of Bahrain. Mr. Al-Arab is a Chartered Risk Analyst (CRA) from the Global Academy of Finance and Management, USA; and was awarded the Certificate of ISMA Foundation Program from the International Securities Market Association, Zurich. He has attended several professional courses in banking, finance, and risk management.

Nirmal Parik CFA MBA

Vice President, Head of Asset Management & Investment Banking

Mr. Parik joined UGB in 2007. He was appointed Head of Asset Management & Investment Banking in October 2015. He has more than 17 years of experience in the financial services industry in investment banking, asset management and corporate banking. Prior to joining UGB, Mr. Parik worked in various capacities with multinational firms including ING Investment Management (I) Pvt. Ltd., the asset management arm of ING Group NV, Netherlands. He currently serves as a Board Member of India Factoring And Finance Solutions Private Limited, India. Mr. Parik is a Chartered Financial Analyst (CFA), and holds an MBA degree with specialisation in Finance.

Hamid M. Al Hashimi

Vice President, Head of Treasury

Mr. Al Hashimi joined UGB in March 2017. He has over 17 years’ experience within Treasury, across all asset classes including structuring, sales and trading; as well as a syndication team leader for a number of regional capital market fixed income issuances. Mr. Al Hashimi has held several positions within Treasury at various international and regional financial institutions, both conventional and Islamic. He holds a Bachelor’s Degree with Honours in Business Administration from the University of Bradford, UK.

Abbas Al Tooq, APRM, MBA

Assistant Vice President,

Head of Credit & Risk Management

Mr. Al Tooq joined UGB in 1999. He assumed the role of Head of Credit and Risk Management in October 2015. He has more than 23 years’ experience in the areas of credit, risk management, operations and audit. He previously worked with Jawad Habib Coopers & Lybrand, Daiwa Middle East Bank, and The Arab Investment Company. Mr. Al Tooq holds an MBA degree from DePaul University, Chicago, USA; and is an Associate Professional Risk Manager (APRM) from the Professional Risk Managers International Association.


STRATEGY AND BUSINESS OVERVIEW

The strategic objective of United Gulf Holding Company (UGH) is to create the MENA region’s premier asset management, merchant banking and investment banking group. UGH seeks to be the preferred gateway to the region for its clients and global partners through the delivery of both conventional and Shari’ah-compliant services, backed by world-class standards of support, infrastructure and processes. The Group works with its strategic partners to create opportunities that will position UGH as a leading financial institution for the region.

UGH engages primarily in asset and fund management, investment banking, private equity and corporate banking. Other business activities include commercial banking, proprietary investments, savings and pensions, brokerage and treasury.

ASSET MANAGEMENT AND INVESTMENT BANKING

Asset Management

Asset and fund management activities – covering local, regional and international markets – comprise discretionary and non-discretionary portfolio management; securities trading; portfolio structuring and asset allocation advice; mutual funds; investments and structuring; and alternative and structured investments.

Investment Banking

Conventional and Islamic investment banking activities cover equity and debt underwriting, private placements, capital restructuring, and merger and acquisitions.

Private Equity

Private equity activity focuses on investments in key growth or demand sectors such as telecommunications, media, technology, and energy.

Corporate Banking

Corporate banking advisory services include IPO and private placement advisory and execution; business valuation and financial feasibility studies; project finance; and due diligence.

Commercial Banking and Trade Finance

Along with its commercial banking subsidiary, FIMBank, UGH works closely with its associate Burgan Bank, which manages commercial banking assets in various countries. Through FIMBank, UGH also provides trade commodity finance, forfaiting, and factoring products and services.

Savings and Pensions

UGH’s associate, Takaud Savings and Pensions, is the first financial institution in the MENA region to provide a range of personal pensions and savings products.

BUSINESS REVIEW

Through its subsidiaries and associate companies, UGH engages primarily in asset and fund management, investment banking, real estate, private equity and corporate banking. Other business activities include commercial banking, proprietary investments, savings and pensions, brokerage and treasury.

KEY BUSINESS DEVELOPMENTS AND INITIATIVES IN 2019

• Assets under management through the Group’s subsidiary, United Gulf Bank, stood at US$ 13.6 billion at the end of 2019 compared with US$ 12.6 billion at the end of the previous year.

• Revenue from associated companies in 2019 totaled US$ 40.7 million compared with US$ 30.9 million in 2018.

• UGH divested its entire shareholding in Advanced Technology Company during the year.


UGH Subsidiaries and Associates

United Gulf Holding CompanyUGHUGHشـــركة الخليـــج المتحـد القابضــة ش.م.ب. 100%

Commercial Banking Savings & Pensions Asset Management & Investment Banking Other Core Assets

15% 36% 60% 10%

Burgan Bank S.A.K., Kuwait Takaud Savings and Pensions B.S.C. (c)

KAMCO Investment Company K.S.C.

(Public)United Real Estate Company

S.A.K.

Commercial Bank, Kuwait Pensions Company, Bahrain Asset Management, Kuwait Real Estate, Kuwait

79% 84% 40%

FIMBank plc Malta

United Gulf Financial Services-North Africa Assoufid BV

Commercial Bank, Malta Investment Company, Kuwait Real Estate, Morocco

31% 44% 100%

Syria Gulf Bank S.A. Syria

North Africa Holding Company K.S.C. (c)

United Gulf Realty International, Ltd.

Commercial Bank, Syria Investment Company, Kuwait Real Estate, BVI

40%

United Capital Transport Company

Transport Company, Kuwait

UGH Consolidated holdings, as at 31 December 2019Note: Post corporate realignment, United Gulf Bank is 100% owned by UGH. All other entitles are held directly or indirectly by UGH.

BUSINESS REVIEW


ASSET MANAGEMENT & INVESTMENT BANKING

United Gulf Bank B.S.C. (c) (UGB)

UGH Consolidated Subsidiary based in Bahrain

Established in 1980 and operating under a conventional wholesale banking license from the Central Bank of Bahrain, UGB is a leading asset management and investment group, with operations spanning the MENA region. Through its network of subsidiaries and affiliates, the Bank engages primarily in asset and fund management, investment banking, private equity and corporate finance. Other financial business activities include proprietary investments, treasury and brokerage. At the end of 2019, assets under management totaled US$ 13.6 billion (2018: US$ 12.6 billion). UGH owns 100 per cent of UGB, whose shares are not listed.

KAMCO Investment Company K.S.C.P. (KAMCO)

UGH Consolidated Subsidiary based in KuwaitEstablished in 1998, KAMCO is a leading asset management and financial institution, with one of the largest private sector assets under management (AUM) in the MENA region. Its three principal business lines are asset management, financial services, and investment advisory research services, which are offered to a diverse local, regional and international client base. In 2019, KAMCO completed the legal execution of its acquisition of Global Investment House through the conclusion of an agreed share swap between the two entities. As a result, total AUM now exceed US$ 13 billion. UGH has a consolidated interest of 60 per cent of KAMCO, which is listed on the Kuwait Stock Exchange.

United Gulf Financial Services Company North Africa

(UGFS-NA)

UGH Consolidated Subsidiary based in Tunisia

Commencing operations in 2009, UGFS-NA is an asset management company regulated by the Tunisian Capital Market Authority – Conseil du Marché Financier. The Company is primarily involved in three main activities: fund services, portfolio management services, and corporate finance services. UGH has a total consolidated interest of 84 per cent in UGFS-NA, whose shares are unlisted.

North Africa Holding Company K.S.C. (c) (NorAH)

UGH Associate Company based in Kuwait

North Africa Holding Company (NorAH) was established in 2006 with the aim of capitalising on the significant investment opportunities arising within North African economies by building genuine partnerships with local businesses that have demonstrated the ability, or have the potential, to deliver real value. The Company’s target market spans Morocco, Algeria, Tunisia, Libya and Egypt, which together account for a sizeable proportion of the MENA population, and offer considerable untapped investment potential. Key growth sectors include real estate, industrial, logistics, healthcare, education and agribusiness. UGH has a total consolidated interest of 44 per cent in NorAH, whose shares are not listed.

COMMERCIAL BANKING

Burgan Bank K.P.S.C. (Burgan)


Established in 1975, Burgan Bank is a subsidiary of KIPCO. The Bank is Kuwait’s second-largest lender in terms of assets, and over the years has acquired a leading role in the commercial banking sector in the MENA region, with operations spanning Kuwait, Turkey, Algeria, Tunisia, Iraq, Lebanon and the UAE. UGH has an equity stake of 15 per cent in Burgan Bank, which is listed on the Kuwait Stock Exchange.

FIMBank plc. (FIMBank)

UGH Consolidated Subsidiary based in Malta

Established in 1994, FIMBank is an international trade finance specialist. The Bank’s main business lines comprise trade commodity finance, forfaiting, factoring and treasury. FIMBank has branches in Dubai and Athens, and a representative office in London; and owns the UK-registered London Forfaiting Company, which is represented across four continents. Factoring subsidiaries and joint ventures have been established in the UAE, Egypt, India, and Brazil. UGH owns a 79 per cent stake in FIMBank, whose shares are listed on the Malta Stock Exchange.

BUSINESS REVIEW


SAVINGS AND PENSIONS

Takaud Savings & Pensions B.S.C. (c) (TAKAUD)

UGH Associate Company based in Bahrain

TAKAUD is a joint venture between KIPCO Group and UGH. The first entity of its kind in the region, the Company specialises in offering savings and private pension products engineered and conceived primarily for customers in the MENA region. The Company’s growth strategy involves establishing specialised companies in different countries within the MENA region, or entering into strategic distribution agreements. The Bahrain head office provides market analysis, product engineering, distribution management, asset management and funds management. UGH owns a 36% stake in Takaud whose shares are not listed.

NON-FINANCIAL ASSOCIATES

United Real Estate Company S.A.K.P. (URC)

UGH Associate Company based in KuwaitEstablished in 1973, United Real Estate Company (URC) is involved in real estate activities that include the purchase, sale, lease and rental of land and buildings. URC handles the construction of private and public buildings and projects, and manages third party properties in Kuwait, Egypt, Lebanon, Oman, Morocco and Jordan. The Company’s real estate portfolio includes commercial complexes, hotels and resorts, residential buildings, high-rise office buildings, and mixed-use developments. UGH owns a 10 per cent stake in URC, which is listed on the Kuwait Stock Exchange.

United Capital Transport Company (UNICAP)


United Capital Transport Company (UNICAP) was established in 2011 as a joint venture between UGB’s subsidiary KAMCO and ANHAM, a leading contracting firm active throughout the MENA region, Central Asia and Europe. The Company is a leasing solutions provider to governments, international oil companies, and businesses involved in various construction, mining and industrial services. Customised leasing, transportation and financing solutions are provided to vendors and customers to meet their specific needs within geographically diverse and strategically challenging markets. UGH owns 40 per cent of UNICAP on a consolidated basis. The Company’s shares are not listed.

Assoufid B.V.

UGH Associate Company based in the Netherlands

Assoufid is a Morocco-based real estate development company. Its prime property is the Assoufid high-end mixed-use development in Marrakech. The first phase is the award-winning Assoufid Golf Club, which has been completed. Infrastructure works have commenced for the second phase, which includes a 5-star hotel, luxury golf villas and other facilities. UGH holds a 40 per cent stake in this unlisted Company.

United Gulf Realty International, Ltd. (UGRIL)

Consolidated Subsidiary based in the British Virgin Islands

UGRIL was incorporated in 2012. Through its wholly owned subsidiary, Federal Street 176 Holdings, Inc., the Company has a 100 per cent ownership in a prime commercial real estate property located in the financial district of Boston, USA. Originally constructed in 1901, the building underwent a significant renovation in 1986. UGH has a total consolidated interest of 100 per cent in UGRIL, whose shares are unlisted.

BUSINESS REVIEW


The notes to UGH’s Consolidated Financial Statements provide additional relevant details, with some of these notes being cross referenced here. Figures contained in the Financial Performance Summary are subject to rounding adjustments and in certain instances, the sum of the numbers in a column or row may not conform exactly to the total figure given for that column or row.

INCORPORATION AND ACTIVITIES

UGH is a public joint stock company incorporated in the Kingdom of Bahrain on 28 June 2017 and is listed on the Bahrain Bourse. As at 31 December 2019, KIPCO is the Company’s and ultimate parent company, owning directly and indirectly 98% of UGH’s outstanding shares on a consolidated basis.

KAMCO MERGER WITH GLOBAL INVESTMENT HOUSE (“GIH”)

On 21 July 2018, subsequent to acquisition of GIH, KAMCO obtained approval of the Kuwait Capital Market Authority (CMA) to merge GIH’s operations by amalgamation with KAMCO, whereby the shareholders of GIH would receive shares of KAMCO in exchange. KAMCO would become legal successor of GIH’s all rights and obligations on the effective date of the merger.

The Extraordinary General Meeting (EGM) of GIH, held on 18 September 2019 approved the merger between GIH and KAMCO by way of amalgamation, as well as the dissolution of GIH. Pursuant to which KAMCO became the merging company and GIH became the merged company. The EGM also approved the proposed share swap ratio as noted below.

On 29 September 2019, merger resolution was announced and published in Kuwait Gazette that granted the creditors of GIH the right to object the merger within a period of 30 days from the announcement by serving an official notification to GIH through the court.

No creditor objected the merger, therefore on 30 October 2019, a general public notice of the merger was issued by Ministry of Commerce and Industry, Kuwait (“MOCI”) which included the dissolution of GIH. On 21 November 2019, the Capital Market Authority, Kuwait, approved execution of the merger between KAMCO and GIH.

On 12 December 2019, the share swap was executed, and this resulted in cancelling of GIH’s shareholders’ register with Kuwait Clearing Company on the same date. The minority shareholders of GIH received 0.75522821 shares of KAMCO for every share of GIH.

FINANCIAL REVIEW

This review provides a detailed description of the financial performance of United Gulf Holding Company B.S.C. for the year ended 31 December 2019.

Comparative Information

REVENUES

UGH’s total revenues in 2019 were US$ 224.4 million (2018: US$ 208.0 million) as indicated below:

Total Revenues 2019 2018(US$ million)Interest Income 59.4 61.5Credit related fees and commission 28.9 50.9Financial Services 45.5 43.6Gain on bargain purchase of a subsidiary - 23.9Management fees from fiduciary activities 40.8 15.0Dividend 8.2 9.9Advisory fees 5.7 6.6Foreign currency translation (losses) gains - net 1.1 0.7Realised (loss)/gain on non - trading investments - 0.1Gain on sale due to reclassification of investment 0.7 -Other income 16.4 5.4Gain on sale of an associates and subsidiaries - (0.5)Trading gain/ (loss) 11.2 (1.3)Other Associates (0.9) (1.7)Real Estate 7.4 (6.1)

Total 224.4 208.0

Revenues for the period mainly comprise interest income and credit related fees and commissions from FIMBank and KAMCO, share of profits from the Group’s associates, management and advisory fees from KAMCO, and investment related income from UGB and KAMCO. Management fees from fiduciary activities were recorded at US$ 40.8 million in 2019 (2018: US$ 15.0 million), mainly arising from FIMBank’s loans and advances portfolio, and GIH.


Interest Income

The main source of interest income for UGH was derived from interest on loans and advances at FIMBank, and interest on interbank placements at UGB, KAMCO and FIMBank . Interest income for the period by portfolio was as follows:

Interest income 2019 2018(US$ million)Loans and receivables 50.0 54.2Investments 0.9 1.6Placements with banks 7.2 4.7Demand and call deposits with banks 1.3 1.0Total 59.4 61.5

Financial Services

Financial services

UGH’s financial services related revenues were derived from its investment in associates involved in asset management, investment banking and brokerage. Details of these entities are included in the Review of Operations section in this Annual Report.

Results from financial associates recorded a profit of US$ 45.5 million (2018: US$ 43.6 million). The table below indicates the performance of the Group’s financial associates:

Revenue - Financial Associates 2019 2018(US$ million)Burgan Bank 41.9 46.3Kamco Investment Fund 6.4 1.7Manafae Investment Company (0.4) (0.4)Takaud Saving & Pensions Company (2.4) (4.2)Latam Factors S.A. - 0.2Total 45.5 43.6

Management Fees from Fiduciary Activities

Management fees were recorded at US$ 40.8 million in 2019 (2018: US$ 15.0 million), which were derived mainly from asset management mandates at the KAMCO level.

Dividend Income

Dividend income for 2019 and 2018 mainly comprises dividends of FIMBank’s investments in trade finance funds, and from KAMCO’s holding of quoted and unquoted equity investments.

Advisory Fees

Advisory fee income of US$ 5.7 million was recorded in 2019 (2018: US$ 6.6 million), mainly from mandates received by KAMCO.

Other Associates

Results from other associates of UGH recorded a net loss of US$ 0.9 million for 2019 (2018: US$ 1.7 million loss).

Revenues - Non-Financial Associates 2019 2018(US$ million)Kuwait Education Fund - 0.2United Capital Transport Company (0.9) (1.9)Total (0.9) (1.7)

Real Estate

UGH’s real estate revenues were derived mainly from fair valuation of the Group’s investment properties, share of results of associates involved in development and sale of real estate properties, and rental income from real estate properties in Kuwait and the USA.

Revenues - Real Estate 2019 2018(US$ million)United Real Estate Company (2.3) (2.5)Assoufid B.V. - (6.2)North Africa Holding Company (1.1) (2.0)N.S. 88 (0.2) (0.4)KAMCO Real Estate Yield Fund (0.3) -Rental income 4.0 3.9Loss on investment properties 7.3 1.1Total 7.4 (6.1)

EXPENSES

Interest Expense

Interest expenses of US$ 82.9 million were recorded in 2019 (2018: US$ 68.6 million). The details are as follows:

Interest expense 2019 2018(US$ million)Loans payable 53.6 42.9Due to banks and other financial institutions 10.7 8.5

Long term bonds 7.7 3.4Deposits from customers 10.9 13.8Total 82.9 68.6

Operating Expenses

Operating expenses were US$ 112.8 million in 2019 (2018: US$ 88.8 million) arising mainly from FIMBank (US$ 37.0 million), KAMCO (US$ 65.0 million) and UGB (US$ 8.2 million). KAMCO acquired GIH effective 1 September 2019. Therefore, only 4 months of expenses were consolidated in the Group’s 2018 results, whereas full 12 months’ expenses were consolidated in 2019.

Operating expenses 2019 2018(US$ million)Salaries and benefits 68.5 53.9General and administrative expenses 44.3 34.9Total 112.8 88.8

FINANCIAL REVIEW


TAXATION

A net income tax expense of US$ 4.9 million was recorded in 2019 (2018: US$ 2.6 million), arising mainly from UGRIL and FIMBank (and its subsidiaries).

Provisions

During 2019, provisions of US$ 8.3 million were booked mainly against loans and advances (2018: US$ 24.0 million).

Provisions for impairment 2019 2018(US$ million)Reversal of impairment (impairment loss) on investments 0.1 (9.0)Provision for losses against unfunded participation - (0.8)Expected credit losses (8.4) (14.2)

Total (8.3) (24.0)

Provisions against loans and advances comprised specific provisions of US$ 9.0 million against past due loans, whereas expected credit losses on performing loans were reversed by US$ 0.3 million.

Net Income Attributable to Parent

Net income for the period attributable to parent was recorded at US$ 9.7 million for the year ended 31 December 2019 (31 December 2018: US$ 18.6 million), translating into loss per share of US 1.11 cents (2018: earnings per share of US 2.35 cents).

CONSOLIDATED BALANCE SHEET

Consolidated Assets

UGH’s consolidated assets stood at US$ 3.5 billion at the end of 2019 (2018: US$ 3.4 billion). A breakdown is provided below:

Assets 2019 2018(US$ million)Demand and call deposits with banks 479.4 522.4Placements with banks 250.9 169.7Investments at fair value through profit and loss 683.4 602.6Investments at fair value through other comprehensive Income 219.3 289.7Investments carried at amortised cost 10.1 10.3Loans and receivables 657.2 664.5Other assets 147.9 122.8Investments in associates 741.9 749.7Investment properties 119.9 124.9Property, equipment and right of use assets 85.6 70.5Goodwill and other intangible assets 70.4 71.5Assets held for sale 4.2 -

Total 3,470.2 3,398.6

Demand call and placements with banks were US$ 479.4 million in 2019 (2018: US$ 522.4 million), mainly comprising liquid funds at the FIMBank and KAMCO level. Total liquid assets comprising cash, deposits and liquid securities represented 23.5% of the balance sheet as at 31 December 2019 (2018: 24.3%).

Investments carried at fair value through the statement of income (FVTPL)

Investments carried at fair value through the statement of income were US$ 683.4 million in 2019 (2018: US$ 602.6 million).

Investments carried at fair value through the other comprehensive income (FVOCI)

Investments carried at FVOCI were US$ 219.3 million in 2019 (2018: US$ 289.7 million). The total portfolio mainly comprises unlisted equities of US$ 106.4 million, quoted debt securities of US$ 79.4 million, listed equities of US$ 32.6 million and managed funds of US$ 1.0 million.

The major investments classified under the non-trading investments portfolio as at 31 December 2019 were:

Advanced Technologies Company: UGH holds a consolidated 5.13% stake in ATC, which is a leading medical equipment and turnkey solution provider. It was established in Kuwait in 1981 and listed on the Kuwait Stock Exchange in 2007. It offers over 1,000 products to customers in the public and private sectors, focusing on medical, pharmaceutical, dental and laboratory equipment. ATC provides its products and services to over 500 health care facilities, and has approximately 45% share of the Kuwait medical sector.

Global Banking Corporation (GBCORP): This is an Islamic wholesale bank incorporated in Bahrain, with an issued and paid-up capital of US$ 200 million. GBCORP’s business lines include private equity and venture capital, real estate and infrastructure development, asset management, advisory services in corporate finance and capital markets, and portfolio management services. The yearend value represents an equity stake of 12.5% (2018: 12.5%).

FINANCIAL REVIEW


Loans and Advances

Loans and advances in 2018 amounted to US$ 657.2 million (2018: US$ 664.5 million). Details of the loan book are as follows:

Loans and Advances 2019 2018(US$ million)Factoring assets 391.2 368.0Loans to customers 275.2 285.2Loans to banks 28.7 41.0Syndication loans 23.3 28.2Staff loans 4.9 4.0Gross loans and advances 723.3 726.4Less: Expected credit losses (66.1) (61.9)Total 657.2 664.5

Past due and impaired loans amounted to US$ 148.2 million (2018: US$ 116.4 million) against which specific provisions of US$ 56.6 million (2018: US$ 52.7 million) and collective provisions of US$ 9.5 million (2018: US$ 9.3 million) were recorded.

Investments in Associate Companies

Investments in the Group’s associate companies were US$ 741.9 million in 2019 (2018: US$ 749.7 million). The Group’s associated companies contributed a total income of US$ 40.7 million for the year (2018: US$ 30.9 million), with key contributors being Burgan Bank and KAMCO Investment Fund. Details of the income/(loss) booked are as follows:

Investments in Associate Companies 2019 2018(US$ million)Burgan Bank 41.9 46.3Kamco Investment Fund 6.4 1.7United Real Estate Company (2.3) (2.4)Assoufid B.V. - (6.2)Kuwait Education Fund - 0.2Latam Factors S.A. - 0.2N.S. 88 (0.2) (0.4)KAMCO Real Estate Yield Fund (0.3) -Manafae Investment Company (0.4) (0.4)United Capital Transport Company (0.9) (1.9)North Africa Holding Company (1.1) (2.0)Takaud Saving & Pensions Company (2.4) (4.2)Total 40.7 30.9

Investment Properties

The Group’s investment properties mainly comprise real estate properties in Kuwait, United States of America and the Kingdom of Bahrain. Rental income on these investments amounted to US$ 4.0 million for the year (2018: US$ 3.9 million).

FINANCIAL REVIEW

Consolidated Liabilities

The Group’s consolidated liabilities were US$ 2.97 billion at the end of 2019 (2018: US$ 2.85 billion).

Liabilities 2019 2018(US$ million)Due to banks and other financial institutions 633.0 505.1Deposits from customers 1,072.2 1,041.9Loans payable 1,006.6 1,035.0Long term bonds 131.9 131.7Other liabilities 122.9 136.4Total 2,966.6 2,850.1

Total Equity

EQUITY 2019 2018

(US$ million)

Share capital 206.5 206.5Share premium 214.5 214.5Treasury shares (0.3) (0.1)Treasury share reserve (1.5) -Statutory reserve 3.3 2.3Fair value reserve (76.2) (54.2)Foreign currency translation reserve (3.1) (2.3)Accumulated deficit (14.6) (2.7)CAPITAL AND RESERVES ATTRIBUTABLE TO THE SHAREHOLDERS OF THE PARENT 328.6 364.0Perpetual Tier 1 capital 33.0 33.0Non-controlling interests in equity 142.0 151.5TOTAL EQUITY 503.6 548.5

OFF-BALANCE SHEET COMMITMENTS

The Group’s off-balance sheet commitments comprise guarantees, letters of credit, credit commitments, undrawn investment commitments, and bankers’ acceptances; financial instruments to cover foreign exchange risks, forward purchase and sales contracts, and interest rate and currency swaps. The Group’s investments and credit-related commitments aggregated to US$ 181.7 million as at 31 December 2019 (2018: US$ 198.8 million). Further details regarding off-balance sheet commitments are provided in Note 32 to the Consolidated Financial Statements as of 31 December 2019.


1. Description of the actions taken to complete the Corporate Governance Code during 2019

United Gulf Holding Company (UGH) was incorporated in the Kingdom of Bahrain on 28 June 2017. It is registered with the Ministry of Industry, Commerce and Tourism as a holding company under CR 114160-1. Through its owned subsidiaries, United Gulf Bank B.S.C. (closed), and FIMBank plc, the Company engages primarily in asset and fund management, investment banking, private equity and corporate banking. Other business activities include commercial banking, proprietary investments, savings and pensions, brokerage and treasuryThe Board of Directors (BOD) of United Gulf Holding Company B.S.C. recognize the importance of good governance in promoting and strengthening the trust of their shareholders and the public. It is their firm belief that this enhances shareholder value. Members of UGH’s Board of Directors, affirm their conduct in accordance with the laws of the Kingdom of Bahrain, the Code of Corporate Governance (Code) issued by the Kingdom of Bahrain’s Ministry of Industry, Commerce and Tourism (MOICT), the rules of the Capital Markets Supervision Directorate (CMSD) of the Central Bank of Bahrain (CBB) and the Bahrain Bourse (BHB).

The Board of Directors’ primary responsibility encompasses overseeing the conduct of the Company’s financial and corporate governance affairs and protecting the rights of the Company’s stakeholders including that of minority shareholders. The ethical vision that governs their role within the Company’s Corporate Governance Framework, is outlined in a series of Corporate Governance Policies and Procedures (PPMs). These were updated during 2019 to incorporate the amendments of the Code and were approved by UGH’s Board of Directors in February 2019. In accordance with the requirements of the amended Code, the Chief Compliance Officer of the Company was appointed as the Corporate Governance Officer and registered with the Ministry.

In Q3 2019, the MOICT commenced the process of assessing and measuring the governance of each company through the “Sijilat” portal of their website. Corporate Governance Officers were asked to login to the portal using their ID and disclose their level of compliance by selecting “Complied” or “Not-complied” in the compliance field and explain the reason for non-compliance in the box provided for explanation. This exercise was completed successfully.

2. Description of the transactions of the directors, their spouses and sons on the Company’s shares:

Name Position/kinship Shares held Dec 2018

Total sales Total purchases

Shares held Dec 2019

Masaud J. Hayat Chairman - - - -Faisal Al Ayyar Vice Chairman - - - -Sadoun Ali Director - - -Tariq M.Y. Abdulsalam Director - - - -Mazen Hawwa Director - - - -Mubarak Mohamed Al Maskati Independent Director - - - -Bader Al Awadhi Independent Director - - - -Mohammed Haroon Independent Director 5,000 - - 5,000

Aggregate 5,000 5,000

CORPORATE GOVERNANCE


3. Composition and Details of the Board and its Directors:

As per the amended tenets of the Corporate Governance Code, a non-executive director is defined as a ‘member of the Board of Directors who is not fully involved in the management of the company (i.e. not an employee therein) or does not receive a monthly or annual salary, except for the remuneration for the directorship on the board of directors and committees.’

The list of the Board of Directors and their respective profiles are also available in the Annual Report of the Company and the website https://www.ughbh.com/board-of-directors/

Each term of the Board of Directors consists of three years. The first term of the Directors is from 2 August 2017 (date of Constituent General Assembly) to the AGM scheduled for 25 March 2020. The five Executive Directors have conveyed their inclination to stand for re-election to the Nomination & Remuneration Committee. With respect to independent Directors, a notice has been posted by UGH on their website and the Bahrain Bourse’s website, inviting members of the public who are interested to serve as independent Directors to submit their nomination papers. These were evaluated by the NRC during their meeting held in March 2020 using the criteria specified in the Questionnaire for Independent Directors Policy & Procedures. The entire list of the Board of Directors was also reviewed based on the ‘Criteria for the Election / Re-election of Directors’ PPM. This policy contains the questionnaire for evaluating the criteria for a person to be considered as appropriate for serving on the Board.

The Board has approved a separate policy called ‘Ordinary / Extraordinary General Assembly Meetings Procedures.’ In accordance with the Commercial Companies Law, voting will take place on a cumulative basis. A cumulative vote implies that each shareholder shall have a number of votes equal to the number of shares he holds and shall have the right to vote for one candidate or to distribute them to his chosen candidates if the resolution concerns the election or dismissal of a member of the Board of Directors or filing an action against him, or when the Chairman of the Board or a number of shareholders representing at least one tenth of the number of votes present at the Meeting, request voting.

The Chairman of the Board is required to confirm to shareholders when proposing a re-election of a director that, following a formal performance evaluation, the person’s performance continues to be effective and continues to demonstrate commitment to the role.

UGH’s Board of Directors approved the Directors’ Induction Policy that requires each new Director to receive a formal and tailored induction with respect to the Company’s vision, strategic direction, and core values including ethics, corporate governance practices, financial matters and business operations. The familiarisation is aimed at ensuring that the new Director meets with Senior Management of the Company, and that he/she is provided with the necessary documents, brochures, reports and internal policies. It is also in line with the Code’s requirement that the Board of Directors should be effective and informed. The Charter of the Nominating & Remuneration Committee states that the Nominating & Remuneration Committee is responsible for the preparation of induction materials and orientation sessions for new Directors, in consultation with senior management and with the Board Secretary.

UGH’s Board of Directors have also approved a separate Code of Conduct that encompasses the criteria and determinants of professional conduct and ethical values. The Board, its Committees and individual directors are evaluated for their effectiveness and contributions on an annual basis. This is in accordance with the Evaluation Methodology that has been approved by the Board of Directors. The evaluations were reviewed by the NRC in March 2020. No abstentions or declarations of Conflicts of Interest, were received by the Chairman or the Corporate Secretary during the year ended 2019.



4. Details of Management

UGH signed a Service Level Agreement with its primary subsidiary United Gulf Bank B.S.C. (c) (UGB) on 24 August 2017. Under the terms of the service level agreement, the scope of services provided by UGB to UGH encompasses the Financial Control, Risk Management, Internal Audit, Corporate Governance, Anti Money Laundering, Compliance, Information Technology, Operations, Administration, Treasury, Investment Banking, Personnel and any other services as deemed necessary. The delegation of limits and the Payment Authority Matrix of UGB hence apply to UGH as well.

The Company’s organizational structure as at 31 December 2019 is illustrated in the figure below:

Business GroupControl & Support Services

Board of Directors& Chairman

Treasury Accounts & Finance

Human Resources Operations Information

Technology Administration Compliance / MLRO

Credit & RiskManagement

Internal Audit& Corporate

Secretary

Asset Management& Investment

Banking

ALCO Committee

IT SteeringCommittee

ManagementCommittee

Key PersonsCommittee

InvestmentCommittee

Risk &ComplianceCommittee

ExecutiveCommittee

Chief ExecutiveOfficer

Nominating & Remunerations

Committee

Board Audit Committee

Under the terms of the Service Level Agreement, the employees of UGB undertake and perform the above-mentioned services for UGH on an on-going basis. The Bank provides at its own cost, all staff, facilities, premises, systems, data, information and equipment to facilitate the operations of the Company in lieu of a fee received from the latter. The Board of UGH however has the prerogative to remunerate certain executives of UGB, as agreed between the Bank and the Company.

The list of Senior Management and their respective profiles are available in the Annual Report of the Company and the website https://www.ughbh.com/executive-management/



Details of the movement of UGH shares held by Senior Management as at December 2018 were as follows:

Name Position/kinship Shares held as at Dec

2018

Total sales Total purchases

Shares held as at Dec

2019

Hussain Lalani Chief Executive Officer 67 - 67

Mohammed Al Qumaish Chief Audit Executive & Corporate Secretary

Deepa Chandrasekhar Senior Vice President, Chief Compliance Officer & MLRO

Rehan Ashraf Senior Vice President, Chief Financial Officer

Adel Al Arab Senior Vice President, Head of Operations

Nirmal Parik Vice President, Head of Asset Management & Investment Banking

Abbas Al Tooq Assistant Vice President, Head of Credit & Risk Management

Hamid Al Hashimi Vice President, Head of Treasury

Aggregate 67 67

5. Remuneration Details:

Remuneration of Directors:

Year ended 2018 Year ended 2019*

Aggregate -- -

* No separate remuneration was paid to the Board of Directors of UGH. There were also no sitting fees that were paid separately for the attendance of the Directors EXCO, BAC or NRC meetings conducted during 2019.

Remuneration of Management:

As mentioned earlier, the employees of UGB undertake and perform the above-mentioned services for UGH on an on-going basis under the terms of the Service Level Agreement. The Board of UGH however has the prerogative to remunerate certain senior executives of UGB, as may be agreed between the Bank and the Company. No additional compensation has been paid as of the date of this report to certain UGB executives for the additional responsibility that they discharged on behalf of the company for the year ended 2019. In 2018, this was US$ 250,530.



6. Details of the Responsibilities of the Board, its Committees and its Meetings:

The Board of Directors is the apex body constituted by the shareholders for the overall supervision and governance of the Company. The Board provides and evaluates the strategic direction of the Company, management policies and their effectiveness and that the long-term interests of the shareholder is being served.

The Board’s duties and responsibilities are enumerated in detail in the Corporate Governance guidelines published on the website, and the Charter of the Board of Directors. These include among other matters:

The Board’s role and responsibilities include but are not limited to :

1. Adopting the commercial and financial policies associated with UGH’s business performance and achievement of its objectives. 2. Drawing, overseeing and periodically reviewing UGH’s plans, policies, strategies and key objectives. 3. Setting and generally supervising the regulations and systems of UGH’s internal control. 4. Determining UGH’s optimal capital structure, strategies, financial objectives and approving annual budgets. 5. Monitoring UGH’s major capital expenditures, and possessing and disposing assets. 6. Approving UGH’s quarterly and annual financial statements and presenting them to the general assembly. 7. Monitoring the executive management’s activities, and ensuring that the operations run smoothly to achieve UGH’s objectives.8. Forming specialized committees emerging from the BoD as required by the nature of the company’s activity as provided in the regulatory

requirements, and issuing the regulations of these committees. 9. Determining the types of remuneration for senior executives and directors, subject to the approval of the shareholders’ general assembly,

taking into consideration the provision of Article (188) of the Commercial Companies Law. 10. Setting a mechanism to regulate transactions with related parties in order to minimize conflicts of interest. 11. Setting standards and values governing UGH’s business. 12. Ensuring the application of an appropriate control and risk management systems by setting framework of the risks that the company

might face, creating an environment that is aware of risk management knowledge at the company level, and transparently presenting it to company’s related parties and stakeholders.

13. Assuring equitable treatment of shareholders, including the minority shareholders. 14. Setting internal regulations which determine the Board’s duties and responsibilities, including the obligations and responsibilities of

the directors, which the Board shall not be exempt therefrom even if it forms committees or delegates certain duties to other bodies or individuals. The BoD shall avoid issuance of general authorizations or authorizations with an unlimited duration.

15. Ensuring compliance with the relevant rules and requirements relating to the issuing and offering of securities;16. Complying with the company’s founding documentation, including but not limited to its Memorandum and Articles of Association and

other relevant by-laws and resolutions;17. Ensuring that any loans provided by the company are approved by the board in accordance with their authority for such items, including

the respective limits and other relevant terms.18. Providing approval in respect of the relevant fees, charges, subscriptions, commissions and other business and administrative sanctions,

where relevant.19. Ongoing obligations in respect of the listing requirements, including but not limited to issues relating to disclosure, dissemination of

price sensitive information and other communication, and the prevention of market abuse and insider trading;

The responsibilities assigned to Board members are in line with the spirit of the care and loyalty expected from them vis a vis the Company and its shareholders. The Charter was originally approved in December 2017 and was updated to incorporate changes made by the MOICT to the Corporate Governance Code. The reviewed document and the revised guidelines were approved by the Board of Directors at their meeting held in February 2019.



The Board has approved three standing Committees – namely, the Executive Committee, the Board Audit Committee and the Nominating & Remuneration Committee. Each of these has its own charter that outlines the responsibilities of its members. The Board is authorised to constitute additional functional Committees from time to time, depending on the business needs. The hierarchy of the committees is illustrated below:

Executive Committee Board Audit Committee

Board of Directors

Nominating andRemuneration Committee

(also responsible forCorporate Governance)

UGH’s Board of Directors met for a total of five times during 2019, details of which are given in the table below.

Attendance in 2019 27 Feb 27 Mar 14 May 8 Aug 13 Nov

Masaud J. Hayat, Chairman x x x x xFaisal Al Ayyar, Vice Chairman x x x x xSadoun Ali x x x x xTariq M.Y.Abdulsalam x x x x xMazen Hawwa x x x x xMubarak Al Maskati x x x x xBader Al Awadhi x x x x xMohammed Haroon x x x x x

In addition to these meetings, Board resolutions were passed by written consent on 6 February, 12 February, 27 March, 15 September, 4 December and 9 December respectively.



7. Executive Committee:

Composition: UGH’s Executive Committee was constituted on 28 March 2018 and comprises five Directors as its members. Executive Committee Resolutions are passed through circulation.

Responsibilities: The EC is delegated authority by the Board to take decisions in the interim periods between Board Meetings, and by circulation when a full meeting of the Board is not possible. The EC is also empowered by the Board to act on its behalf, if an immediate decision is required on any matters falling outside the authority of Management. The basic responsibility of the EC is to consider and approve/amend the overall impact of the policy recommended by the CEO in the key areas of strategy planning, risk, investment and asset and liability management.

Resolutions:

During 2019, two resolutions were passed by the EC, details of which are given in the table below.

Attendance in 2019 1 Jan 22 Jan

Masaud J. Hayat x xFaisal Al Ayyar x xSadoun A. H. Ali x xTariq M. Y. Abdulsalam x xMazen Hawwa x x

8. Audit Committee:

Composition: UGH’s Board Audit Committee (BAC) was constituted on 28 March 2018 after the appointment of the independent directors. It comprises one executive director (Mr. Faisal Al Ayyar) and two independent directors (Mr. Mohammed Haroon - Chairman and Mr. Mubarak Al Maskati). The Chairman of the BAC is an independent director. All members are financially literate and have sufficient technical expertise and exposure to the financial industry that enable them to discharge their responsibilities cited below.

Responsibilities : The BAC assists the Board in its responsibility for overseeing the quality and integrity of the accounting, auditing and reporting practices of UGH, supervising the internal and external auditors and the Bank’s compliance with the legal and regulatory requirements. Its main functions as enumerated in its Charter which was last approved by the Board of Directors, encompasses:

1. the quality and integrity of financial reporting and the audit thereof;

2. the recommendation for the appointment, compensation and oversight of the Company’s external auditor;

3. the recommendation for the appointment of the internal auditor;

4. the soundness of internal controls of the Company;

5. the measurement system of risk assessment and relating these to UGH’s capital;

6. the methods for monitoring compliance with laws, regulations and supervisory and internal policies;

7. the business practices and ethical standards of the company including the implementation of a whistleblowing policy

Meetings : During the year 2019, the Board Audit Committee met six times; the attendance on these was as follows:

Attendance in 2019 26 Feb 26 Mar 13 May 7 Aug 12 Nov 25 Nov

Mohammed Haroon, Chairman x x x x x xFaisal Al Ayyar x x x x x xMubarak Al Maskati x x x x x x

Only one BAC meeting that was held with the external auditors – Ernst & Young; this was scheduled on 25 November 2019.



9. Nominating and Remuneration Committee (NRC):

Composition: UGH’s Nominating & Remuneration Committee (NRC) was constituted on 28 March 2018 after the appointment of the independent directors. It comprises three independent directors - (Mr. Mubarak Al Maskati – Chairman, Mr. Bader Al Awadhi and Mr. Mohammed Haroon). The Chairman of the NRC is an independent director.

Responsibilities: The NRC assists the Board in assessing the skill sets of Board members and ensures that there is an appropriate mix of eminent persons having an independent standing in their respective field/profession and who can effectively contribute to UGB’s business and policy decisions Its main functions as enumerated in its Charter which was last approved by the Board of Directors, encompasses:Oversee the Corporate Governance processes of the Company

• Nominate the persons eligible for directorship or chief executive officer, chief financial officer or secretary position, except for the internal auditor who is nominated by the audit committee.

• Make recommendations to the Directors of the Board from time to time regarding changes that the committee believes are desirable to the size of the Board or any committee of the Board.

• Review the preparation of appropriate nomination documents and notifications of candidates for Directorships. This includes ensuring that appropriate appointment documents, regulatory approvals and notifications are made on new directors.

• Supervise the evaluation process of the Board, the Directors and the Committees.

• Review the independence of Directors Recommend/ review the remuneration of the Board of Directors and certain senior executives, if it decides to compensate them for the additional responsibilities which they undertake on behalf of the company. Senior Management (if applicable).

Meetings : UGH’s Nominating and Remuneration Committee (NRC) was constituted on 28 March 2018 after the three independent Directors were appointed to the Board at the AGM. During 2019, the NRC met twice as follows:

Attendance in 2019 26 Feb 22 Dec

Mubarak Al Maskati Chairman x xBader Al Awadi x xMohammed Haroon x x



10. Governance Committee:

The NRC is responsible for the supervision of corporate governance activities and the adherence to the tenets of the MOICT’s Code of Corporate Governance. During the year ended 2019, the NRC completed the following activities related to the oversight of corporate governance.

• Review of Disclosure of Interest and other Directorships held by the Board of Directors.

• Review of Directors’ annual affirmation of adherence to the Code of Conduct and Independent Directors’ annual affirmation of independence.

• Review of the annual evaluation of the Board, Committees and Individual Directors.

• Review of membership and structure of Board committees.

• Review of Key Persons’ Trading for the year 2019

• Review the implementation status of the MOICT Corporate Governance Code.

• Review of Corporate Governance Policies.

• Review of Directorships representing UGB on the Boards of other companies.

• Review of Directorships representing UGB on the Boards of other companies.

• This Corporate Governance Report – for the year ended 2019.

11. Corporate governance officer’s name, qualifications, date of appointment, and contact details.

In accordance with the requirements of the MOICT’s directives, the Board of Directors of UGH ratified the decision of the Chairman to appoint the Chief Compliance Officer and MLRO of the Company as the Corporate Governance Officer. This was done at their meeting held on 14 May 2018. The Corporate Governance Officer’s details are given below:

Name Deepanjali Chandrasekhar

Nationality Canadian

Qualifications Masters of Business Administration (MBA) – University of Alberta, CanadaFellow of the International Compliance Association – UKCertified Anti-Money Laundering Specialist – Financial Crime (CAMS – FCI and CAMS) – USACertified Fraud Examiner (CFE) – USAChartered Member of the Chartered Institute of Securities and Investment - UK

Date of Appointment 14 May 2018

Contact Details Ph: +973 17 520186Fax: +973 17 533137Email: [email protected]



12. Details of Transactions with related parties (stakeholders):

Related parties represent the parent, associates and joint ventures, directors and key management personnel and entities which are controlled, jointly controlled or significantly influenced by any of the above-mentioned parties.

RELATED PARTY TRANSACTIONS – YEAR ENDED 31 DECEMBER 2019

Related party transactions for the year ended 31 December 2019 Parent Associates

Other related parties Total

US$ 000 US$ 000 US$ 000 US$ 000

Investment income - 11,572 - 11,572

Fees and commissions - net 3,443 2,868 4,500 10,811

Dividend income - - 947 947

Rental income 2,232 43 - 2,275

Interest income 515 2,147 1,081 3,743

Interest expense (170) (25,435) (5,527) (31,132)

General and administrative expenses 933 (1,211) (1,211)

RELATED PARTY BALANCES – AS OF 31 DECEMBER 2019

As of 31 December 2019

Parent Associates

Other related parties Total

Related party balances as of 31 December 2019 US$ 000 US$ 000 US$ 000 US$ 000

Demand and call deposits with banks - 1,592 135 1,727

Placements with banks - 25,270 25,270

Investments carried at fair value through profit and loss - 2,636 448 3,084

Investments carried at fair value through other comprehensive income - 2,913 85,649 88,562

Investments carried at amortised cost 9,894 - - 9,894

Loans and receivables - 7,000 27,483 34,483

Other assets 3,928 36,334 2,169 42,431

Due to banks and other financial institutions - (10,164) (214,648) (224,812)

Deposits from customers (87) (1,220) (28,479) (29,786)

Loans payable - (436,812) (35,321) (472,133)

Other liabilities (8) (409) (3,270) (3,687)

Perpetual Tier 1 Capital - - (10,000) (10,000)

Off statement of financial position items:

Letters of guarantee - - 150 150

Loan related commitments - - 3,195 3,195



RELATED PARTY BALANCES – AS OF 31 DECEMBER 2019 (Continued)

The below represent the major outstanding related party exposures as of 31 December 2019:

Owner Account Name Balance(US$ ‘000)

UGH Burgan Bank 32,603 Orbit Showtime Network 22,183 United Industries Company 2,109 Others (individually below US$ 1 million) 365 57,260 UGB Tunis International Bank 31,534 Orbit Showtime Network 28,000 Advanced Technology Company 27,903 Staff Loans 4,208 Sacem 3,265 KIPCO 2,365 Bank of Baghdad 1,023 Others (individually below US$ 1 million) 2,074 100,372

FIMBank Gulf Dth Fz Llc 20,041 KIPCO 9,965 Brasilfactors S.A. 7,056 Others (individually below US$ 1 million) 18 37,080 KAMCO Burgan Bank 3,649 KAMCO Real Estate Yield Fund 3,070 KIPCO 1,494 Others (individually below US$ 1 million) 2,526 10,739 TOTAL 205,451

All related party exposures are performing and are free of any provision for possible credit losses and are ratified by the BAC on a post facto basis.



13. External Auditors:

The external auditors of UGH are Ernst & Young (EY). EY is a global leader in assurance, tax, transaction and advisory services and is a member firm of Ernst & Young Global Limited, a UK company limited by guarantee (EYG). EYG member firms are grouped into four geographic Areas: Americas; Asia-Pacific; Europe, Middle East, India and Africa (EMEIA); and Japan.

EY Bahrain is a specialised Partnership Company and is part of the Middle East & North Africa (“MENA”) Region. It is the largest professional services firm in the country with an operational experience of more than 8 decades. Since then, it has worked extensively with major industrial segments, including banks and financial institutions, investment companies, broking and insurance clients in Bahrain and the MENA region. The audit firm has over 300 professionals in Bahrain and various specialist teams spread across the regions operating as one seamless firm globally.

Following the decision of the shareholders at the constituent general assembly of UGH held in August 2017, Ernst & Young was appointed as the external auditor. The firm was re-appointed at the AGM held in March 2018 after receiving the Central Bank of Bahrain’s approval for the same.

Fees and charges for the audit or services provided by the external auditor during the year 2019, are provided in the following table.

Name of the audit firm Ernst & Young

Years of service as the Company’s external auditor 2.5 years

Name of the partner in charge of the Company’s audit Kazim Merchant

The partner’s years of service as the partner in charge of the Company’s audit 1.0 yearsTotal audit fees for the financial statements for the year 2019 (US$) US$ 197,559 (BD 74,550)

Other special fees and charges for non-audit services other than auditing the financial statements for the year 2019 (US$) if any. In the absence of such fees, this shall be expressly stated

Nil

14. Details of any irregularities committed during the financial year:

Nil

15. Description of the contributions made by UGH for community development

UGH’s contributions to community development are routed through its primary subsidiary UGB. The Bank has long been active in a wide range of socially responsible activities including corporate philanthropy, employee involvement, and long-term strategic programmes in education. This is in line with its commitment to promote thought leadership within the industry, empower students through education and training, and contribute to the social well-being and economic prosperity of the Kingdom of Bahrain

During 2019, aggregate donations of $ 204,000 were made by its subsidiary United Gulf Bank with special emphasis being on education and career development for young Bahrainis; empowerment of woman and youth, health, sports ; and charitable and community-based activities. Further details are given below:

Recipients Amount US$

Education

Health

Sports & Training

Social Activities - Youth and Women Empowerment

Charitable and Community Welfare Activities

Islamic Institutions

79,500

20,235

14,575

59,625

22,260

7,950

Total 204,145



16. Breakdown of Ownership

a. The breakdown of shareholders’ equity as at 31 December 2019 is indicated below:

# Shareholder classification

Shareholding %

Individuals % Corporate % Government/ Organizations Total %

1. Local 1,118 0.72 15 9.74 0 1,133 10.462. GCC 623 0.78 13 88.74 0 636 89.523. Foreign 5 0.02 1 - 0 6 0.024. Total 1,746 1.52 29 98.48 0 1,775 100

b. Major Shareholders:

# Name Number of shares held

Effective Shareholding %

Name of the natural person, the final beneficiary

1 Kuwait Project Company (Holding) – K.P.S.C. Kuwait 322,800,805 78.29% Al Futooh Investment

2 Overland Real Estate Co. 40,211,026 9.75% KIPCO3 Burgan Bank K.S.C.P 40,884,490 9.92% KIPCOTotal KIPCO Group 403,896,321 97.96%

The following are the names and nationalities of the major shareholders and the number of equity shares held, that exceed 5% of the Company’s capital.On a consolidated basis, the KIPCO Group owns approximately 98.0% of the Company’s outstanding shares. No government or sovereign funds hold any shares of UGH.

c. Ownership Categories:

# Shareholding (share) No of shareholders Number of shares held Shareholding %

1. <50,000 1,748 5,065,154 0.872. 50,000 to 500,000 23 3,263,176 0.793. 500,000 to 5,000,000 1 750,000 0.184. >5,000,000 3 403,890,321 98.16

Aggregate 1,775 412,974,651 100.00

The share registry of UGH is maintained by Bahrain Clear (a subsidiary of the Bahrain Bourse), with whom the company has an electronic registry agreement. They maintain the shareholders’ register that records the names of shareholders, their nationalities, the number of shares that they hold and any transactions that they make. The contact details are as follows:

Bahrain Clear B.S.C. (c)

PO Box 3203, Manama, Kingdom of BahrainTel : +97317108833Fax: +973 [email protected]

d. Description of the significant events that occurred during the year 2019.

Nil.



17. Other Matters:

17.1 Disclosure and Transparency Policy

The Company has a Disclosure Policy that reiterates its commitment to disclose all relevant information to stakeholders on a timely basis and emphasises:

• Adequate documentation and definition of the key components of UGH’s disclosure controls and procedures and the standards to which they are designed and implemented.

• Information with respect to the steps that UGH will take when it has material information to release to the public.

• Approval of the limited group of authorised spokespersons who are entitled to speak on behalf of the Company when material information may be disclosed.

• Adequate awareness for Directors and officers of UGH for understanding the disclosure practices and policies.

17.2 Means of Communication

Annual and Quarterly Results: In accordance with the CBB’s Disclosure Standards, these are published in an English newspaper and an Arabic Newspaper. These are also displayed on the Company’s website www.ughbh.com. The CEO and CFO certify to the Board of Directors that to the best of their knowledge, the financial statements present a true and fair view in all material respects of UGH’s financial condition and results of operations, in accordance with applicable accounting and financial reporting standards.

News Releases, Presentations, etc. : Official news releases, detailed presentations made to the shareholders etc. are available on the Company’s website www.ughbh.com, after they have been released to the CBB and the Bahrain Bourse. The external auditor’s signature and date, as well as the Board’s approval date, are disclosed either in the financial statements or through press releases.

Website : The Company maintains a website www.ughbh.com which contains information related to its profile. It also has an investor relations section along with financial information.

Copies of the Dispute Resolution Policy and the Whistleblowing Policy, are available on the Company’s website. There is also a whistleblowing form alongside procedures to highlight complaints and wrongdoing.

There is a separate section on the website (under Investor Relations) where the bank posts relevant shareholders’ information e.g. AGM agenda, proxies etc. The bank has an email ([email protected]) which is already in place to allow shareholders to obtain the above information — shareholders who require more such information, can always raise their queries using this email address.



18. Compliance with the provisions of the Corporate Governance Code:

Principle Non-compliant

Partially Compliant

Fully Compliant

Explanation in case of non-compliance

Principle 1:The Company shall be headed by an effective, qualified and expert board.

X The current Chairman - Mr. Masaud J. Hayat, has been associated with UGH’s Parent - KIPCO and with the company’s primary subsidiary - UGB, for the past 30 years. He has a thorough understanding of the Bank, the Company, its history, its functioning style and its operations. He represents the interests of the Company’s main controller - KIPCO.

Principle 2: The directors and executive management shall have full loyalty to the company.

X

Principle 3: The Board shall have rigorous controls for financial audit and reporting, internal control, and compliance with law.

X

Principle 4: The Company shall have effective procedures for appointment, training, and evaluation of the directors

X

Principle 5: The Company shall remunerate directors and senior officers fairly and responsibly.

X

Principle 6: The Board shall establish a clear and efficient management structure for the Company and define the job titles, powers, roles and responsibilities.

x

Principle 7: The Company shall communicate with shareholders, encourage their participation, and respect their rights.

X

Principle 8:The Company shall disclose its corporate governance.

X

Principle 9: Companies which offer Islamic services shall adhere to the principles of Islamic Shari’ah. *

NA NA NA NA

Principle 10: The Board shall ensure the integrity of the financial statements submitted to shareholders through appointment of external auditors.

X The Code requires the BAC to meet with external auditors at least twice a year. During the year ended 2019, the BAC met with the external auditor Ernst & Young only once on 25 November 2019

Principle 11:The Company shall seek through social responsibility to exercise its role as a good citizen.

X

* Applicable only to the companies offering Islamic services.



Any disclosures required by the regulatory authorities. Nil

Name Hussain Lalani Deepa Chandrasekhar

Position Chief Executive Officer Corporate Governance Officer

Date 4 March 2020 4 March 2020



Compliance

As per the SLA between UGH and UGB, the Compliance function of UGB headed by the Chief Compliance Officer (CCO) carries out its responsibilities in line with a risk-based semi-annual compliance plan that is approved by the Board Audit Committee. . The CCO acts as the central coordinator for all matters relating to regulatory reporting and other requirements. A framework of relevant policies and processes covering the areas of adherence to external regulations, are encapsulated in the Compliance Charter and Code of Conduct. These documents help define, clarify, assert and enforce the role of governance within UGB.

A Compliance Report for UGH and its main operating subsidiary FIMBank plc is presented every quarter by the CCO to members of the Board Audit Committee, and the Risk and Compliance Committee. The Compliance function is also responsible for ensuring that all ad hoc requests for information from regulatory authorities are responded to immediately, and that corrective action is taken if required. The RiskNucleus Compliance system is used proactively by all departments as they receive automated e-mail alerts on forthcoming regulatory deadlines.

Risk Management

Risk is inherent in UGH’s activities, and is managed through a process of ongoing identification, measurement and monitoring, subject to the risk limits and other controls. The Company is primarily exposed to concentration, credit, market, liquidity and operational risks. As per the Service Level Agreement (SLA) signed with UGB, it was agreed that UGH would provide staff, facilities, premises, systems and equipment to facilitate the smooth operations of the Company, including managing the Credit and Risk Management department (CRM). One of the main objectives of the CRM is to implement, maintain and enhance the risk management framework that is aligned to UGH’s overall risk profile. This is achieved by following the same risk philosophy as for UGB, which is driven by the policies and procedures that are extensively documented.

Internal Audit & Quality Assurance

As per the SLA between UGH and UGB, the independent Internal Audit function of UGB carries out its responsibilities in line with a risk-based three-year strategic Audit Plan. It examines the adequacy and effectiveness of processes, systems and procedures within the internal controls framework – comprising Compliance, Corporate Governance, Risk Management, IT Security, Financial Control and AML among others – and provides recommendations in order to enhance and strengthen their reliability. Internal Audit also oversees the implementation of sound governance and internal control principles and practices at the level of UGH’s subsidiaries and associate companies; and provides regular support to their respective Board Audit Committees and Internal Audit functions. Internal Audit reports directly to the Board Audit Committee, and administratively to the Chief Executive Officer. Staffed by experienced and qualified professionals, it is governed by a detailed Board-approved Audit Charter. Internal Audit has a close and direct working relationship with UGH’s Executive Management and Committees; in addition to having unrestricted access to information, records, systems and personnel within the Company.

The Quality Assurance function adopts a consultative role in working with head office departments, subsidiaries and associate companies to facilitate continuous process improvements and review new initiatives. These include regular reviews of updates to the Company’s policies and procedures, organisation chart and job descriptions; and assessing the impact of new regulations. Quality Assurance also conducts ad hoc special assignments at the request of the Board and Management.

Treasury

Treasury manages UGH’s liquidity and funding arrangements; and also implements the Company’s hedging strategies in terms of foreign exchange and interest rate exposures. The deals are routed through the Company’s primary subsidiary, United Gulf Bank.

Operations

The main activities of the Operations function include settlement of foreign exchange and money market transactions; handling payments and funding in coordination with Treasury; and facilitating transfers. These are routed through the Company’s primary subsidiary, United Gulf Bank.

CONTROL FUNCTIONS & SHARED SERVICES


The audited financial statements for the year ended 2019 are available under the Annual Report Section on

UGH's website www.ughbh.com.

FINANCIAL STATEMENTS


GROUP DIRECTORY

United Gulf Holding B.S.C.

PO Box 5565, Diplomatic AreaUGB Tower, Manama, Kingdom of BahrainTel: (+973) 17 533 233Fax: (+973) 17 533 137Email: [email protected]: www.ughbh.com

Parent Company

Kuwait Projects Company (Holding) (K.S.C.) (Public)

KIPCO Tower, Khalid Bin Al Waleed Street, Sharq, Kuwait CityP.O. Box 23982, Safat 13100, Kuwait Tel: +965 1805 885Fax: +965 2243 5790Email: [email protected]: www.kipco.com

Asset Management & Investment Banking

United Gulf Bank B.S.C. (c)

P O Box 5964, Diplomatic Area UGB Tower, Manama, Kingdom of BahrainTel: +973 17 533 233Fax: +973 17 533 137Email: [email protected]: www.ugbbh.com

KAMCO Investment Company (KAMCO) K.S.C. (Public)

Al-Shaheed Tower, Khalid Bin Waleed Street, Sharq, KuwaitP O Box 28873, Safat 13149, Kuwait Tel: +965 2233 6600Fax: +965 2244 5918Email: [email protected]: www.kamconline.com

North Africa Holding Company K.S.C. (c)

Sharq, Al Shaheed Tower, 5th Floor Khaled Bin Al Waleed Street,P O Box 1246, Dasman 15463, KuwaitTel: +965 2291 3733Fax: +965 2245 0371Email: [email protected] Website: www.northafricaholding.com United Gulf Financial Services - North Africa

Rue du Lac Biwa-Immeruble Fraj, 1053 Les Berges du Lac, Tunis, TunisiaTel: + 216 71 167 500Fax: +216 71 965 181Email: [email protected] Website: www.ugfsnorthafrica.com.tn

Brokerage

Al Sharq Financial Brokerage Company K.S.C. (c)

P O Box 187, Kuwait Souk Al Dakhelely15252, KuwaitTel: +965 2224 8444Fax: +965 2242 4378Email: [email protected]: www.sharqetrade.com

Commercial Banking

FIMBank plc

Mercury Tower, The Exchange Financial & Business CentreElia Zammit Street, St. Julian’s STJ 3155, MaltaTel: +356 2132 2100Fax: +356 2132 2122Email: [email protected] Website: www.fimbank.com

Burgan Bank K.P.S.C.

Burgan Tower, Al Sharq, Abdullah Al Ahmed St.P O Box 5389, Safat 12170, Kuwait Tel: +965 2298 8000Fax: +965 2241 7926Email: [email protected] Website: www.burgan.com

Syria Gulf Bank SA

P O Box 373, 29 Ayyar Street, Damascus, SyriaTel: +963 (11) 119721Fax: +963 (11) 232 6112Email: [email protected] Website: www.sgbsy.com

Major Non-Financial Operating Companies

United Real Estate CompanyP O Box 2232, Safat 13023, KuwaitTel: +965 2295 3500Fax: +965 2244 1003Email: [email protected]: www.urc.com.kw



Tel: (+973) 17 533 233 Fax: (+973) 17 533 137Email: [email protected]

Listed Company on the Bahrain Bourse

Major Subsidiaries and Affiliates



Tel: (+973) 17 533 233, Fax: (+973) 17 533 137Email: [email protected]

www.ughbh.com

ANNUAL REPORT 2019 · 2020-07-01 · The Company’s proprietary investments include assets in...

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