PAINTING FUTURE VENTURES
ANNUAL REPORT 2018-2019 VENTURE CAPITAL BANK BSC(c) Venture Cap tal Ban Bu l n Bu l n 2 Roa 1 0 Blo 1 plo at Area
P Bo 11 ana a K n o o Ba ra n Tel 9 1 1 8888 a 9 1 1 8880 www.vc-bank.com
L en e a an I la ole ale Ban t e Central Ban o Ba ra n
VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 CONTENTS CORPORATE
OVERVIEW Overview Corporate
B usiness Review CORPORATE PROFILE VISION
CORPORATE OVERVIEW Venture Capital Bank (VCBank) is Our vision is to be the leading regional Islamic venture capital-based investment the first Islamic investment bank bank, helping to drive business growth, and supporting the social and economic
in the GCC and MENA region to development of the GCC and MENA regions. We aim to maximise shareholders’ 05 Corporate Profile specialise in small-to-medium value and clients’ wealth, and add a new dimension to the Islamic banking
enterprises (SMEs) and venture industry. F 06 Chairman’s Statement inancial Statements capital investment opportunities. 08 Board Of Directors 10 Shari’ah Supervisory Board MISSION Commencing operations in the 12 Chief Executive Officer’s Kingdom of Bahrain in October Our mission is to create a pioneering business model and take a leadership role Statement 2005, VCBank operates under an in institutionalising investment in the regional venture capital market. By forging 14 Executive Management Islamic wholesale banking licence enduring strategic partnerships, we aim to provide support and encouragement for from the Central Bank of Bahrain. the growth and development of the underserved SME sector in the GCC and MENA With an authorised capital of USD regions, which lacks the necessary resources for growth and expansion. 500 million and paid up capital of USD190 million, the Bank benefits from the financial backing and BUSINESS REVIEW support of a prominent group VALUES of regional shareholders; an experienced team of industry The values of performance, innovation, client focus, teamwork, and compliance with the rules and principles of Islamic Shari’ah, guide us in our personal and 16 Investment Review & professionals; and a close-knit network of strategic partners, professional behaviour. Post-acquisition business associates and allies. 24 Corporate Function Our adoption of international standards and global best practice governs the way 25 Corporate Governance Review VCBank offers clients a broad array we manage the operations of the Bank across all areas of activity 42 Governance & of superior services and unique Organisation Structure investment opportunities across a number of promising asset classes in the GCC, MENA, Turkey, UK and USA. The Bank focuses primarily on revenue-generating real estate investments, greenfield business opportunities, and very selective FINANCIAL STATEMENTS private equity transactions.
45 Shari’ah Supervisory Board Report 46 Report of the Auditors 48 Consolidated Statement of Financial Position 49 Consolidated Statement of Income 50 Consolidated Statement of Cash Flows 51 Consolidated Statement of Changes In Equity 52 Consolidated Statement of Changes in Off-Balance Sheet Equity of Investment Account Holders 53 Notes to the Consolidated Financial Statements 96 Additional Public Disclosures
4 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 5 CHAIRMAN’S
STATEMENT Overview Corporate
legacy investment portfolio, the Board Following favourable initial discussions and appreciation to His Majesty the decided to minimise the potential with the CBB, we appointed a specialist King of Bahrain, His Royal Highness the B of future impairments and fair advisory firm to conduct an impact Prime Minister, and His Royal Highness usiness Review value losses in order to protect the assessment analysis. Based on their the Crown Prince and First Deputy balance sheet and provide a faithful report, the Board will make appropriate Prime Minister, for their wise leadership presentation of the Bank’s financial recommendations concerning the future and reform programme, and their position going forward. Accordingly, direction of the Bank to shareholders for encouragement for the Islamic banking
we booked impairment provisions and their consideration and approval. sector. fair value losses totalling USD 35.07 million during the year, which resulted During the year, there were some Grateful acknowledgements are also F
in the Bank reporting a loss of USD changes to the composition of the Board due to the Central Bank of Bahrain, inancial Statements 58.18 million for fiscal year 2019. of Directors. I would like to welcome Mr. the Ministry of Industry, Commerce Adel Mohammed Abu Nayyan, who & Tourism, and other Government The Board fully recognises the was elected as an independent and institutions, for their continued need to continue improving our non-executive Director in October 2018. professional advice and support during cost management, and analysing His extensive experience in business the period. the effects of a stricter regulatory and investments will greatly benefit regime under Basel IV. These are the Board. In turn, I would to thank the I would also like to express my gratitude ABDULFATAH MOHAMMED RAFIE MARAFIE critical success factors in meeting three outgoing Directors – Mr. Yasir to our shareholders, clients and Chairman State of Kuwait our objective to return the Bank to Mohammed Al Jarullah, Mr. Mohammed business partners for their enduring The Board and profitability and enhance returns to Saleh Al Athel and Mr. Sulaiman loyalty and confidence; and to our shareholders, while protecting the Abdulrahman Al Rashid – for their Shari’ah Supervisory Board for its Management consider interests of all stakeholders. respective contributions over the past ongoing guidance and supervision. I In the Name of Allah, the Most Beneficent, the Most Merciful, Prayers and Peace be years which are highly appreciated, and also pay special tribute to the Bank’s that conversion from upon our Prophet Mohammed, His Companions and Relatives. With the regional investment wish them well in their future endeavours. management and staff for their highly- banking industry undergoing another valued dedication and professionalism a wholesale banking On behalf of the Board of Directors, it is my privilege to present paradigm shift – probably the most Looking ahead, next year looks set to be in yet another challenging year. the annual report and consolidated financial statements of Venture significant since the financial crisis another highly-testing and unpredictable to an investment Capital Bank (VCBank) for the fiscal year ended 30 June 2019. As a decade ago – the Board and period, with a continuation of the same May Allah guide us on the proper path, business licence could anticipated, this proved to be another highly challenging period for Management studied how other issues that characterised fiscal 2019. and lead us to the realisation of our the regional investment banking industry. Bahrain-domiciled investment banks However, our decision to book very goals for the future success of the Bank. be more appropriate are transforming their operating conservative provisions and post a loss The year witnessed elevated economic and market uncertainty; further oil price models and changing their regulatory for this year, will enable the Bank to start for VCBank’s business volatility; and heightened geopolitical tensions, especially at a regional level. There licensing status, to determine if such fiscal 2020 in a much stronger position, was also growing concern over the escalating global trade war, and the lack of measures are relevant for VCBank. supported by a cleaner balance sheet, model. Accordingly, we a Brexit deal. These constitute some of the main factors that continued to impact healthier portfolio, adequate liquidity, negatively on investor sentiment. In this respect, it should be noted and a promising pipeline of potential will make appropriate that VCBank is primarily an new investments and targeted exits. In light of this challenging environment, the Board and Executive Management held alternative asset manager focused Nevertheless, as the Bank continues to recommendations its annual strategic workshop to review and realign the Bank’s investment strategy. on revenue-generating real estate find exits for its legacy portfolio in order concerning the Bank’s Portfolio companies were subjected to investment stress testing and analysis to investments, greenfield business to generate funds for new investments, ensure the most realistic valuations in current market conditions; while further opportunities, and very selective there is the potential for further losses ABDULFATAH MOHAMMED RAFIE MARAFIE future direction to steps were taken to speed up the exit from several legacy projects that have been private equity transactions. We do to be realised, as well as possible Chairman of the Board affected by financial, economic, market or geopolitical issues, and which involve not take deposits or make loans, nor recoveries, as market conditions evolve. shareholders for their considerable administrative time and effort by Management, and the Investment do we engage in capital market- and Post-Acquisition teams. Despite the muted investment environment during related activities. Consequently, the With full confidence in the ability of consideration and the year, it is encouraging to note that VCBank successfully completed its fourth Board and Management consider Management to maintain our realigned acquisition and first exit in the resilient US multifamily property sector. that conversion from a wholesale strategic focus and continue to enhance approval. banking to an investment business organisational effectiveness and In the best interests of shareholders and investors, the Board and the management license could be more appropriate for efficiency, the Board remains cautiously decided to cancel the Mado acquisition in Turkey, due to the continuing political VCBank’s business model; especially optimistic about the Bank’s prospects in uncertainty and currency volatility that were adversely affecting the operations given the growing administrative FY 2020, despite the many challenges and investment prospects of the company. Accordingly, the Bank has reversed burden and associated costs of a and uncertainties that lie ahead. the USD 16.4 million gain previously recognised related to the acquisition. Further, more stringent regulatory regime in light of continuing challenges with respect to current market conditions, and covering areas such as liquidity, risk In conclusion, on behalf of the Board of to pave the way for the Bank to return to growth with less issues relating to the management and capital adequacy. Directors, I extend my sincere thanks
6 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 7 BOARD OF
DIRECTORS Overview Corporate
B usiness Review
F inancial Statements
ABDULFATAH MOHAMMED RAFIE MARAFIE ADWAN MOHAMMAD ALADWANI MOHAMMED ABDULRAZZAQ ALKANDARI Chairman Board Member Board Member State of Kuwait State of Kuwait State of Kuwait
MOHAMMED ABDULAZIZ ALSARHAN ABDULLATIF MOHAMED JANAHI DR. MOHAMMED AHMED JUMAAN ADEL MOHAMMED ABU NAYYAN Deputy Chairman Board Member & Chief Executive Officer Board Member Board Member Kingdom of Saudi Arabia Kingdom of Bahrain Kingdom of Bahrain Kingdom of Saudi Arabia
MARWAN AHMAD AL GHURAIR SALEH MOHAMMED AL SHANFARI Board Member Board Member United Arab Emirates Sultanate of Oman
8 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 9 SHARI’AH
SUPERVISORY BOARD Overview Corporate
B usiness Review
COMPOSED OF EMINENT
SHARI’AH SCHOLARS, THE F inancial Statements BANK’S SHARI’AH SUPERVISORY
BOARD IS ENTRUSTED WITH SHAIKH DR. NIDHAM MOHAMMED SHAIKH DR. ABDUL SATTAR ABDUL SHAIKH DR. ESSA ZAKI ESSA SALEH YAQOOBY KAREEM ABU GHUDDAH THE DUTY OF DIRECTING, Chairman Member Member REVIEWING AND SUPERVISING
THE ACTIVITIES OF VCBANK IN Shaikh Dr. Yaqooby holds a Doctorate Shaikh Dr. Abu Ghuddah holds a PhD Shaikh Dr. Essa holds a PhD in in Islamic Studies and a BA degree in Shari‘ah from the Al-Azhar University, Comparative Fiqh from the Islamic ORDER TO ENSURE THAT THEY in Economics & Comparative Religion Cairo, Egypt. He is a Member of the University, from McGill University, Canada. He Islamic Fiqh Academy, which evolved ARE IN COMPLIANCE WITH THE has been guided in Traditional Islamic from the Organisation of Islamic Al Madina Al Munawarah, Kingdom RULES AND PRINCIPLES OF Studies by eminent Islamic scholars from Conference in Jeddah, Kingdom of of Saudi Arabia. He is an Assistant Saudi Arabia, Bahrain, Egypt, Morocco Saudi Arabia. He previously held the Professor at the College of Basic ISLAMIC SHARI’AH. and India. During the 1990s, he was a positions of Expert and Reporter for Education, Public Authority for Applied Khatib in the Kingdom of Bahrain, and the Islamic Fiqh Encyclopedia, Ministry Education & Training, State of Kuwait. since 1976 has taught a range of Islamic of Awqaf & Islamic Affairs, State of Dr. Essa is a Member of several Fatwa topics. Shaikh Yaqooby is a Member Kuwait. He is a Member of the Shari’ah and Shari’ah Boards and Committees. of the Shari’ah Supervisory Board of Supervisory Board of several Islamic He is the author of several books several Islamic banks, and is a Member financial institutions, and a Member and publications on different Islamic of the following institutions: Shari’ah of the Standards Board and Shari’ah subjects, and a regular speaker at Council of the Accounting & Auditing Council of the Accounting & Auditing Islamic conferences and forums. Organisation for Islamic Financial Organisation for Islamic Financial Institutions (AAOIFI), Shari’ah Council Institutions (AAOIFI). Dr. Abu Ghuddah is of the Islamic Rating Agency, Shari’ah the author of several specialist books in Board of the Central Bank of Bahrain, Fiqh & Fatwa of modern Muamalat and and the Dow Jones Islamic Index. He publications on different Islamic subjects, is also a regular speaker at Islamic and a regular speaker at Islamic conferences and forums. conferences and forums.
10 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 11 CHIEF EXECUTIVE
OFFICER’S STATEMENT Overview Corporate
loss for this year, will enable VCBank to identifying further properties in major Directors. I also gratefully acknowledge start fiscal 2020 in a stronger position US metropolitan areas that display the enduring trust and confidence of our B to support our objective of returning to robust economic growth and attractive highly-supportive investors, who play usiness Review profitability. potential for investment. a critical role in the ongoing business success of VCBank. Special thanks are In line with our refocused investment In Turkey, the Bank’s acquisition of once again due to our management strategy, we capitalised on the MADO has been cancelled on the and staff for their commitment and
considerable knowledge and expertise basis of legal issues relating to certain hard work, and their positive attitude we have developed in the US multifamily conditions precedent not being met towards embracing change and rising
sector since 2015, by completing by the seller. However, the continuing to new challenges. We are blessed to F inancial Statements our fourth property acquisition. In political uncertainty and currency have such a dedicated and professional collaboration with our long-standing US volatility have significantly affected the team. partner, who has extensive experience in prospects for the investment and we did the management and operation of multi- not feel it was prudent to continue with May Allah guide us on the proper path, family residential assets, we purchased the transaction. VCBank’s investments and lead us to the realisation of our Glenbridge Manors in Cincinnati, Ohio. in Turkey now comprise Goknur, Turkey goals for the future success of the Bank. ABDULLATIF MOHAMED JANAHI Home to eight Fortune 500 companies, Farmland and OBA Makarna, all of this city has the fastest-growing which are performing well. Board Member & Chief Executive Officer economy in the state, with a high Kingdom of Bahrain rate of employment growth in diverse Looking ahead, the next twelve months sectors such as healthcare, education, should see the Bank realising the In line with VCBank’s In the name of Allah, the Most Beneficent, the Most Merciful, Prayers and Peace be government, financial services, benefits of the remedial measures upon our Prophet Mohammed, His Companions and Relatives. manufacturing, retail and transportation. taken over the past year. VCBank is now refocused investment a leaner, more efficient and focused Judging by the events of the past twelve months, it is evident that we are now Glenbridge Manors is a ‘garden and institution, backed by strengthened strategy, we capitalised operating in a significantly more challenging environment. Key issues and concerns townhouse-style’ community comprising underlying financial fundamentals and on the considerable include increasing economic volatility, shifting market dynamics, disruptive 274 spacious apartments, set amid a promising pipeline of new investment technologies, and greater regulatory control. scenic landscaping and supported by deals and exits. As such, we are well Abdullatif Mohamed Janahi knowledge and extensive amenities. Situated in one placed to take advantage of emerging Board Member & Chief Executive Officer In light of this evolving scenario, the Board of Directors and the Management Team of the most desirable residential areas business opportunities, which will expertise we have exhaustively reviewed the Bank’s strategy and business model, and identified key in the Midwest region of the USA, the support the sustained profitability developed in the US areas that needed addressing. These entail refocusing our investment activities, property is rated as a grade ‘A-’ high- and continued development of the optimising the balance sheet, and reducing the cost base; and restructuring the quality asset with an ‘A-’ grade superior Bank for the ongoing benefit of all our multifamily sector since organisation to improve efficiency and maximise synergies. location. Glenbridge Manors is expected stakeholders. to provide investors with quarterly 2015, by completing In line with this strategic realignment, we took a number of remedial steps. These dividend equating to an annual cash-on- We are in no doubt that fiscal 2020 our fourth property included reviewing our investment portfolio by asset class, sector and geography, cash return of 8.5 per cent, similar to that looks set to be another testing and and associated risks; and revaluing certain assets in line with current market achieved to date by the Bank’s existing challenging period for the MENA acquisition and conditions. We also fine-tuned our investment strategy with a greater focus on multifamily properties in Atlanta. region, with the issues and concerns income-generating real estate assets in the USA and Europe; while private equity that highlighted this year continuing finalising our first exit transactions will be put on hold for the foreseeable future. We also finalised our first exit from unabated. Nevertheless, the IMF and from this sector. this sector, with the sale of our initial World Bank have forecast continued At an operational level, we took the difficult decision to reduce the headcount by US multifamily residential assets at modest GDP growth for the region a third, as well as a substantial salary cut for all management level positions and Bridgewater & Preston Creek in Atlanta, in 2018 and 2019, and we therefore above; carrying out this exercise in a most considerate and caring manner. We also Georgia. Comprising a total of 866 units, maintain our cautiously optimistic took concerted steps to eliminate all unnecessary operating costs. these fully-leased properties underwent outlook for the future prospects of the a major renovation programme Bank. The actions that we have taken in fiscal 2019 will result in VCBank becoming a following their acquisition in 2015. This leaner, more efficient and focused institution, backed by stronger underlying exit generated a return on investment In conclusion, I express my sincere financial fundamentals. This will enable us to continue to protect the interests of of 49 per cent for investors, reinforcing gratitude for the unwavering support all stakeholders, and focus on advancing our realigned strategic objectives and the strong fundamentals and resilience and encour-agement that we continue to business goals. The decision to book very conservative provisions, and post a of this sector. The Bank is currently receive from our Chairman and Board of
12 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 13 EXECUTIVE
MANAGEMENT Overview Corporate
B usiness Review
THE CHIEF EXECUTIVE OFFICER (CEO)
IS DELEGATED BY THE BOARD OF
Abdullatif Mohamed Janahi DIRECTORS WITH RESPONSIBILITY FOR Board Member & Chief Executive Officer Chairman of the Executive Management Committee THE DAY-TO-DAY MANAGEMENT OF F inancial Statements THE BANK. THE CEO IS SUPPORTED BY
A WELL-QUALIFIED AND EXPERIENCED
EXECUTIVE MANAGEMENT TEAM.
PROFILES OF EXECUTIVE MANAGERS
ARE LISTED IN THE CORPORATE Faisal A. Aziz Al Abbasi Robert C. Wages Chief Investment Officer Senior Executive Director - Head GOVERNANCE REVIEW. of Investments & Post-Acquisition
Mahmood Mohammed Zainal Ahmed Hassan Alabbasi Director – Investments Director – Investments
Asya Hasan Mohamed Khalid Ateeq Huda Faisal Janahi Head of Internal Audit Head of Compliance & MLRO Head of Risk Management
Jehad Hasan Qamber Sahar Jaafar Khunji Head of Human Resources & Support Head of Investor Relations
14 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 15 INVESTMENT
REVIEW Overview Corporate
NEW INVESTMENT provided investors with an internal rate the 250-bed hospital (extendable to MATURE INVESTMENTS of return (IRR) of 13 per cent over the 400 beds), will concentrate on three B
EARMARKED FOR EXIT usiness Review GLENBRIDGE MANORS, four-year holding period. centres of excellence – women’s health, CINCINNATI, OHIO,USA children’s health and day surgery – GOKNUR AL KHOBAR SPECIALIST which are in high demand and generate VCBank has acquired a 90 per cent HOSPITAL high margins. In addition, specialised Established in 1993, Goknur Foods clinics will cover diabetes, dermatology, stake in this ‘garden and townhouse- Import Export Trading & Distribution style’ gated community, which VCBank has exited from its investment plastic surgery, eye care, cardiology, Company (Goknur) is the largest comprises 274 apartments set amid in this specialist hospital, which is being ENT and orthopaedics. fruit juice concentrate and fruit puree F scenic landscaping and extensive developed by Saudi-based Al Othman producer and exporter in Turkey, in inancial Statements amenities. Located in one of Cincinnati’s Holding Company at Al Khobar in the which VCBank and its investors hold most desirable residential areas, Glen- Kingdom of Saudi Arabia. Covering a stake of 83.5 per cent. To meet the bridge Manors is rated as a grade ‘A-‘ a total area of 40,000 square metres, ongoing challenges of economic high-quality asset with an ‘A-‘ grade turmoil and currency volatility, the superior location. Cincinnati was chosen Company has identified several as the location for this latest multifamily mitigating strategies and updated its sector investment by VCBank and business plan. Goknur has successfully its long-standing US partner due to implemented strategic growth its strong underlying economic and initiatives aimed at expanding its Goknur business fundamentals. Home to eight geographic footprint. These include Fortune 500 companies, the city enjoys registering an office in the tax-free the fastest-growing economy in Ohio, zone of Lianyungang in Eastern China, with a high rate of employment growth and leasing a warehouse to assess in diverse sectors such as healthcare, the market before constructing its education, government, financial own logistics complex. A number of services, manufacturing, retail and prospective buyers have registered transportation. Glenbridge Manors their interest in purchasing the is expected to provide investors with Company. quarterly dividends equating to an annual cash-on-cash return of 8.5 per JAFCCO cent, similar to that achieved to date by the Bank’s existing multifamily Jordan Al Abyad Fertilizers & properties in Atlanta, Georgia. Chemicals Company (JAFCCO) specialises in manufacturing INVESTMENT EXITS chemical fertilizers and a range of CONCLUDED industrial chemicals. Operations have successfully resumed in line with the restructuring plan and the injection of BRIDGEWATER & PRESTON fresh capital; with seven SOP reactors CREEK, ATLANTA, GEORGIA, now operating at over 90 percent USA utilisation, and the DCP plant having commenced production. The Company VCBank executed its first exit from the is in discussions with several potential US multifamily sector with the sale of the strategic investors with the objective of Bridgewater & Preston Creek properties Bridgewater, Atlanta generating a partial or full exit. in Atlanta, Georgia. Comprising a total of 866 units, these fully-leased properties underwent a major renovation programme following their acquisition in 2015. With a gross sale value of US 104 million, this exit generated a return on investment (ROI) of 49 per cent; and
16 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 17 INVESTMENT
REVIEW (CONTINUED) Overview Corporate
ITWORX PRIVATE EQUITY since 1995 and 2007, respectively. There are currently 6 Fuddruckers and 22 B ITWorx is one of the largest software OBA MAKARNA Caribou Coffee outlets across Bahrain. usiness Review outsourcing firms in Egypt, with offices in Following the acquisition, several older properties have been renovated, while Saudi Arabia, UAE, Qatar, Europe and Venture Capital Bank, in partnership several new outlets are planned to be the USA. To mitigate falling revenues A key pillar of with First Energy Bank, has signed a opened in the near future. in 2018 due to market challenges in sales and purchase agreement (SPA)
VCBank’s investment Qatar and Saudi Arabia, the Company to acquire a 50 per cent stake in OBA has refocused its business activities on strategy is the Makarnacılık San. ve Tic. A.Ş. (OBA DELTA North America and the UAE in order identification of Makarna). The Company’s OBA pasta F to capitalise on the strong demand for brand is ranked number one in Turkey VCBank holds a 45 per cent inancial Statements business process automation, digital attractive greenfield and second in the world in terms of shareholding in Delta Company engagement and intelligent customer business opportunities capacity, equating to 1,500 tons of Limited, one of the leading contractors service. This has resulted in ITWorx wheat crushing per day and 1,000 tons in Saudi Arabia specialising in the winning its first end-to-end digital with promising of pasta production daily. OBA offers 40 fields of electrical power, transmission experience deal with the Department potential. different products which are exported to and distribution. In response to current of Transportation in Dubai. In terms of ITWorx 85 countries, including the UK, Germany, market dynamics and changes in the the planned exit process, discussions Africa, China, South Korea, India and Kingdom’s construction sector, the are in final stages with an interested the Middle East. Company has revised its strategy and party based in the UAE to purchase the fine-tuned its organisational structure. Education division. The transaction is FUDDRUCKERS & CARIBOU Delta has maintained profitability, and expected to be completed by year end. VCBank is currently in discussions with THE WORLD recently won a SAR 76.3 million power contract from the Government, while several parties who have expressed VCBank has acquired a 60 per cent currently bidding for three additional QCON interest in acquiring the Hospital. VCBank owns a plot of land in The direct equity stake in the Fuddruckers contracts. World, an iconic residential and leisure Restaurant and Caribou Coffee Established in 1975, Qatar Engineering GREAT HARBOUR community located off the coast of franchises in the Kingdom of Bahrain, & Construction Company (QCon) is a Dubai, UAE. The land is free of any which constitute a growing cash-rich leading maintenance and engineering, Great Harbour is a unique seafront plot commitments and obligations, and has business. Fuddruckers and Caribou procurement and construction (EPC) measuring over 35,000 square metres substantial built-in value comprising have been operating in the Kingdom contracting company. The severing of in Hidd, Bahrain. In line with the chosen project studies, detailed designs and relations with Qatar by Saudi Arabia, exit route, the land is being subdivided regulatory approvals. An interested the UAE, Bahrain and Egypt in June into 14 plots and VCBank has provided group of investors placed a deposit 2017, has seriously impacted QCon’s the investors in Great Harbour with a for the proposed purchase of the land business in Abu Dhabi, Saudi Arabia choice of three exit options. in 2018. However, due to the planned and Qatar. Given the current political completion date not being met, the deal situation, VCBank is exploring ways to may enter litigation. either restructure its holding or exit to other shareholders, to minimise any damage to the Company and maximise investor value.
GERMAN ORTHOPAEDIC HOSPITAL
Since opening in 2010, this specialist hospital has earned a reputation for world-class orthopaedic treatment and surgery for patients in Bahrain and the wider GCC market, especially the Eastern Province of Saudi Arabia and Kuwait. A number of performance improvement initiatives have been introduced to further enhance the Hospital’s profitability and liquidity. German Orthopaedic Hospital Caribou Coffee
18 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 19 INVESTMENT
REVIEW (CONTINUED) Overview Corporate
TURKEY FARMLAND VENTURE CAPITAL & THE LOUNGE GLOREI
BUSINESS DEVELOPMENT B As at December 2018, the Company’s Since commencing operations in 2008 The Global Omani Development usiness Review total land bank had grown to 11.7 VCBANK LIQUIDITY on the sixth floor of the Venture Capital & Investment Company (GLOREI) million square metres, comprising a Bank Building in Bahrain’s Diplomatic provides VCBank with an investment total planted area of 7.9 million square PROGRAMMES 1, 2 & 3 Area, this specialist serviced offices platform for opportunities in Oman. The metres with more than one million trees. Company has made excellent progress Company has successfully executed The 2018 harvest was severely affected The Bank offers three innovative in terms of consistent revenues, tenant deals in the hospitality and logistics by hail and frost, but the target for 2019 Shari’ah-compliant short-term liquidity retention and high occupancy levels. To sectors, as well as certain sub-sectors of entails planting around one million new programmes with trust certificates meet the growing demand for high- real estate, and has secured a number F trees and increasing the harvest to and shares backed by prime income- quality managed office space, The of promising new projects. inancial Statements 13.5 million kilograms; with harvested yielding real estate assets in Bahrain Lounge rented an additional floor during fruits being sold to the fresh market. and Dubai. The offering of each 2018 and plans to occupy another floor Turkey Farmland continues to implement programme is for a maximum period in 2019. initiatives aimed at increasing efficiency of one year. The profit rate ranges and profitability, and further diversifying between six per cent for investments BAYAN REAL ESTATE held for twelve months and four per its business activities. These include DEVELOPMENT COMPANY construction of a new production plant cent for one month, with profits being and cold storage units for fresh fruit distributed on a quarterly basis. The first Phase one of the Company’s debut processing; raising and breeding 1,000 programme was launched in 2010 and affordable residential project – sheep; and acquiring an extra 1.5 million is backed by the Venture Capital Bank Gardinia Aziziyah – comprises square metres of land over the next Building located in the Diplomatic Area 156 housing units of duplexes and three years. of Manama, Bahrain, which comprises a unique combination of office space, detached villas located in the Al- retail outlets, and private and public Aziziyah area of Al Khobar, close LEMISSOLER MARITIME Turkey Farmland car parking. The second and third to Half Moon Beach and Prince COMPANY programmes, introduced in 2015 and Mohammed bin Fahd University. The 2016, are backed by the first two and process of subdividing the land into The Company operates a fleet of four third buildings respectively, of the Jebel smaller plots with separate title deeds, specialised commercial vessels and Ali Labour Accommodation Complex in which is required for the sale process to containerships (one owned directly MENA SME FUND The Company is also focusing on Dubai. start, remains subject to the completion and three partially-owned through an compiling its financial information of necessary legal procedures. investment in MENA SHIPCO). The Established in 2006, the Fund’s portfolio and bringing it up to date to allow it vessels have been chartered at rates to assess the most suitable actions to higher than their daily operational costs. companies are JAFCCO, ITWorx and maximize shareholders’ value. Due to the company’s liabilities coming QCon (which are covered under due and market circumstances, a sales ‘Mature Investments Earmarked for Exit’ process for the vessels has commenced. at the beginning of this Review) and SVCIC The sales of all four vessels is expected Challenger Limited, which is reported to be completed by December 2019. below. Saudi Venture Capital Investment Company (SVCIC) is an investment MENA SHIPCO CHALLENGER company primarily focused on investing in promising small and medium MENA SHIPCO owns three modern The Company is an international enterprises in the Kingdom of Saudi 57,000 tons deadweight (DWT) provider of contract oil and gas Arabia. Due to continued challenging Supramax bulk carrier vessels, which land drilling and workover services, market conditions, the Company is are currently deployed on short-time headquartered in Egypt and operating implementing a capital reduction plan in charters with reputable companies mainly in Libya through onshore drilling two tranches to achieve a total reduction across various global shipping routes. rigs. The situation in Libya remains of SAR 300 million or 80 per cent over The vessels have been profitable and uncertain, with political tensions the next two years. The plan aims to are chartered at rates higher than their unresolved, although Eastern Libya preserve value to equity investors daily operational costs. Due to the appears to be stabilising. Challenger and return the majority of capital to company’s liabilities coming due and has resumed operations in Libya with shareholders. market circumstances, a sales process five active rigs, and is preparing six for the vessels has commenced. The additional rigs to be available for new Vcbank Liquidity Programmes sale of all three vessels is expected to contracts as market activity improves. be completed by December 2019.
20 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 21 INVESTMENT
REVIEW (CONTINUED) Overview Corporate
REAL ESTATE REGENT’S CRESCENT, UK 24 BUCKINGHAM GATE, UK POST-ACQUISITION The Post-Acquisition team is also closely involved in the selection of B WESTHAVEN AT VININGS, VCBank has invested in the acquisition Situated in the heart of Westminster, 24 In line with its strategic realignment, new investment opportunities. It works usiness Review A primary focus of with the Investment division and other USA and development of an iconic Buckingham Gate comprises nine luxury VCBank adopts a qualitative-based residential development in one of apartments, each occupying one whole the Bank’s investment approach towards the post-acquisition relevant departments to carefully London’s most prestigious residential floor; together with a luxury, two-storey management of its portfolio companies. assess the suitability and strategic VCBank and its investors own a 90 per fit of candidates, to ensure that they cent interest in the WestHaven at Vinings areas. The building was originally penthouse. The redevelopment works philosophy is the This entails a thorough analysis of designed as one of the main gateways have been completed, and marketing the companies and their operating have appropriate and achievable exit property in Atlanta, Georgia, USA. paths before the acquisition process The property is a 610-unit garden and to Regent’s Park by the famous architect and sales activities are underway. acquisition and markets, with a focus on identifying John Nash in the early 19th century. Six out of the nine apartments have problem assets requiring attention and commences. town home-style apartment community F The project involves demolishing the been sold and the remaining three management of prime the most eligible candidates for exit in inancial Statements located in a prime residential area of During FY 2019, portfolio companies Atlanta. It consists of a family-friendly existing commercial-use sections, and apartments are currently under offer. the short to medium term. redeveloping it into a fully superprime revenue-generating continued to be subjected to thorough mix of spacious one-, two- and three- investment stress testing and analysis to bedroom units built to an “A” standard, residential scheme offering 76 high- DIFAAF, BAHRAIN real estate properties. The main objective of the Post-Acquisition specification units, while retaining function is to maximise the value of the determine the most realistic valuations. with an amenity package that sets it At the same time, appropriate remedial the details of the magnificent Nash This architecturally-distinguished real Bank’s investment portfolio assets. This above other properties in the market. A action was taken to revive legacy frontage. Sales and marketing estate development is strategically entails thoroughly understanding each comprehensive renovation programme projects affected by financial, economic, activities commenced in mid-2019 and located on the prestigious residential asset by evaluating them on a more is nearing completion, which will further market or geopolitical issues; and also construction is on schedule to achieve development of Reef Island, Manama, systematic basis with the assistance enhance its competitive edge. Due to to earmark mature investments for exit. practical completion during the first half Bahrain. The project consists of two of external experts who possess its excellent performance to date, the Key developments during the year are of 2020. high-rise residential towers comprising the appropriate market and sector property has been providing investors covered by the Investment Review. with quarterly dividend distributions 534 residential units, and supporting knowledge. Significantly, it involves the equating to an annual cash-on-cash amenities such as a swimming pool and utilisation of sophisticated analytical return of 8.5 per cent. gymnasium. Construction commenced techniques and international best in October 2018. The requisite licensing practices that are new to the region. approvals from the Real Estate Regulatory Authority (RERA) was obtained and sales to the open market have commenced. .
ONE BAHRAIN
This iconic 50-storey waterfront tower occupies a prime location on Reef Island, Manama, Bahrain. The property features 160 apartments for sale to end-users, and 180 professionally- managed serviced apartments for sale to individual and corporate real estate investors. Recent developments include the start of piling works.
WAVES DEVELOPMENT COMPANY, BAHRAIN
The Company is developing a prime waterfront plot in Budaiya, one of the most popular and well-established family residential districts of Bahrain. The project will feature a range of villas and apartments in the mid-range price bracket. The design for 53 villas and 84 apartments was completed during the Westhaven at Vinings, USA year, and construction is pending the Difaaf, Bahrain final subdivision approval.
22 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 23 CORPORATE CORPORATE
FUNCTION GOVERNANCE REVIEW Overview Corporate
WEALTH MANAGEMENT INVESTOR RELATIONS VCBank is committed to upholding 2. A comprehensive set of Policy and BOARD OF DIRECTORS the highest standards of corporate Procedures Manuals which navigate B usiness Review The Wealth Management function The Investor Relations department is governance in full compliance with the governance culture of the Bank. The Board of Directors constitutes the is responsible for developing and responsible for providing up-to-date relevant governing laws, regulations central leadership of VCBank, and is maintaining relationships with VCBank’s information about the Bank’s operations and international best practice. 3. Effective and independent Board responsible for the stewardship of the broad network of institutional investors and delivering regular portfolio update The Bank has put in place a robust oversight through the formation of Bank’s business and affairs on behalf and high-net-worth individuals across reports, in order to help clients and and comprehensive Corporate four independent Board Committees, of its shareholders. The Board is also the GCC. The Bank has also established shareholders make the most informed Governance Framework (the and through the Bank’s Control responsible for articulating the Bank’s a number of strategic relationships with investment decisions. This standalone Framework) aimed at ensuring the Functions, with clear, direct and objectives, strategies and risk appetite The CRM system is adoption of the highest standards independent reporting lines. with a view to enhancing long-term
certain institutions interested in particular function, which reports directly to the F constantly updated types of investment offerings. The Wealth Chief Executive Officer, works closely of ethical conduct, transparent and shareholder value; while taking into inancial Statements Management team consists of highly- with Investments, Post-Acquisition, prudent disclosures, and operational 4. A reputable and independent account the interests of all relevant to keep pace with qualified and experienced professionals Wealth Management, Financial Control, effectiveness; while protecting Shari’ah Supervisory Board. stakeholders, and maintaining the who have consistently demonstrated their Risk Management and Compliance, the rights and interests of all highest standards of transparency and the latest regulatory technical ability to place a wide range of to provide the highest levels of client stakeholders. 5. A comprehensive annual self- accountability. The Board ensures that products across different sectors. Acting service in accordance with investor- assessment and evaluation of the high ethical standards are established changes in order to as the main point of contact for investors, related regulatory requirements of the The Framework has been designed Board and its Committees. across the Bank, and regularly reviews team members deliver regular portfolio Central Bank of Bahrain (CBB). The in accordance with the Eleven and monitors the Bank’s compliance provide the highest updates, introduce new investment semi-annual Investment Portfolio reports Principles of the Kingdom of 6. An effective set of Policies and with the regulations of the Central levels of support for opportunities, offer insight into local and were enhanced during the year with the Bahrain’s Corporate Governance Procedures to govern the activities Bank of Bahrain (CBB). Based on regional markets, and provide financial addition of Fair Values to provide clients Code, which was issued by the of the Bank’s Business Units and VCBank’s Memorandum and Articles of shareholders and advisory to their clients. with a clearer picture of the true worth of Ministry of Industry, Commerce Support Functions. Association, the Board will comprise a their investments. and Tourism and embraced by the maximum of 13 members, representing investors. Fiscal 2019 proved to be another Central Bank of Bahrain (CBB). 7. An up-to-date and adequate formal a mix of high-level professional skills challenging year, with investors VCBank is fully compliant with the The adoption and implementation succession plan for the Bank’s key and expertise, and with the majority continuing to adopt a more cautious regulatory requirements of the of such regulations, along with positions. being Independent Non-Executive and highly-selective approach to new Common Reporting Standard (CRS). the continuous review and Directors. The appointment of Directors investment opportunities. Against this This is an information standard for the adherence to the Bank’s Corporate KEY DEVELOPMENTS is subject to the prior approval of Governance Framework, is the backdrop, the team maintained its close automatic exchange of tax and financial DURING THE YEAR the CBB and the shareholders, with client relationships through regular visits information on a global level to combat direct responsibility of the Board of classification of Directors in line with Directors. the definition stipulated in the CBB across the region, keeping existing and tax evasion, similar to the US Foreign • Mr. Yasir Mohammed Al Jarullah, Mr. Rulebook. Board Members’ profiles are new clients informed of the status of Account Tax Compliance Act (FATCA). Mohammed Saleh Al Athel and Mr. listed at the end of this Review. the Bank’s existing investment portfolio, The Bank’s enhanced client relationship KEY ASPECTS OF VCBANK’S Sulaiman Abdulrahman Al Rashid and also its pipeline of potential new management (CRM) system enabled CORPORATE GOVERNANCE resigned from the Board in October investment offerings and exits. early submission of the mandatory CRS FRAMEWORK 2018. & FATCA report to the CBB in May 2019. The CRM system is constantly updated 1. A comprehensive set of Charters • Mr. Adel Mohammed Abu Nayyan to keep pace with the latest regulatory and Job Descriptions that clearly was elected as an independent and changes in order to provide the highest articulate the roles, responsibilities non-executive Director in October levels of support for shareholders and and mandate of the Board of 2018. investors. Directors, Board Committees, the Executive Management and the • The Board of Directors comprised Control Functions, as well as all other nine Members at the end of the fiscal key functions within the Bank. year.
• The Exit Committee was disbanded in December 2018.
24 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 25 CORPORATE
GOVERNANCE REVIEW Overview Corporate (CONTINUED)
SYSTEM FOR ELECTION AND TERMINATION OF DIRECTORS DIRECTORS’ ATTENDANCE AT BOARD & COMMITTEE MEETINGS: JULY 2018 TO JUNE 2019 B The system for the election and termination of Directors is governed by the Bahrain Commercial Companies Law and VCBank’s The Board of Directors and its Committees met regularly during the year towards fulfilling their responsibilities. Directors’ usiness Review Articles of Association (Articles 23 & 32). attendance for FY 2019 is listed below:
BOARD COMMITTEES AND MEMBERSHIP Nomination, Remuneration Real Board of Audit Risk Exit Names of Directors & Corporate Estate BOARD COMMITTEE MEMBER’S NAME MEMBER’S POSITION Directors Committee Committee Committee Governance Committee
Nomination, Remuneration & Corporate Mohammed AlSarhan Chairman F
Committee inancial Statements Governance Committee Abdulfatah Marafie Deputy Chairman Abdulfatah Marafie 8 of 8 2 of 2 4 of 4 Saleh Al Shanfari Member Mohammed Al Sarhan 8 of 8 2 of 2 1 of 1 Audit Committee Marwan Al Ghurair Chairman Saleh Mohammed Al Shanfari 8 of 8 4 of 4 2 of 2 Mohammed Jumaan Deputy Chairman Abdullatif Mohamed Janahi 8 of 8 2 of 2 Adwan Aladwani Member Marwan Ahmad Al Ghurair 8 of 8 4 of 4 1 of 1 Risk Committee Saleh Al Shanfari Chairman Adwan Al Adwani 4 of 8 4 of 4 2 of 2*** 1 of 1 Sulaiman Al Rashid* 0 of 4 0 of 2 1 of 2 Adel Abu Nayyan Deputy Chairman Mohammed Al Athel* 3 of 4 1 of 2 0 of 1 Mohammed Al Kandari Member Mohammed Al Kandari 7 of 8 2 of 2*** 1 of 1 BOARD AD-HOC COMMITTEES AND MEMBERSHIP Mohammed Jumaan 8 of 8 4 of 4 4 of 4 Yaser Aljarallah* 3 of 4 2 or 2 2 of 2 BOARD COMMITTEE MEMBER’S NAME MEMBER’S POSITION Adel Mohammed Abu Nayyan** 3 of 4 1 of 2*** 1 of 2 Real Estate Committee Abdulfatah Marafie Chairman *Resigned from the Board in October 2018 Mohammed Jumaan Deputy Chairman ** Elected as an independent and non-executive Director in October 2018 Adwan Al Adwani Member ***Elected as a member of the committee in December 2018 Adel Abu Nayyan Member BOARD AND BOARD BOARD EVALUATION principles of Islamic Shari’ah. Members NOMINATION, time in the Bank’s corporate governance RISK COMMITTEE COMMITTEES of the Supervisory Board and their policy framework, oversight of the The Bank has in place a comprehensive profiles are listed on page 10 of this REMUNERATION & DEVELOPMENT Annual Report. Bank’s compliance with regulatory The mandate of the Risk Committee is Board Evaluation Programme, which is CORPORATE GOVERNANCE requirements, as well as liaising with the designed to help Directors identify areas COMMITTEE to maintain oversight of the Bank’s risk BOARD DEVELOPMENT Shari’ah Supervisory Board. management framework, including its for improvement and reinforce their MANAGEMENT Basel III framework, covering all risks responsibilities. The NRCG Committee The mandate of the Nomination, The annual awareness plan for Board AUDIT COMMITTEE faced by the Bank as well as its control annually conducts a self-evaluation of The Chief Executive Officer (CEO) is Remuneration & Corporate Governance members enables them to carry out environment. the performance of the Board as well as delegated by the Board of Directors Committee is to assist the Board of their responsibilities in line with recent its Committees. The mandate of the Audit Committee with responsibility for the day-to-day Directors in establishing a fair and regulatory developments and market is to provide oversight on financial management of the Bank. The CEO transparent nominations process for conditions in an informative and reporting, internal control and risk SHARI’AH SUPERVISORY is supported by a well-qualified and the appointment and remuneration effective way. Normally, the awareness management, internal and external experienced Executive Management of Directors, Board Committee plan includes important topics such as BOARD audit, and adherence to Islamic Shari’ah team. Executive Managers and their members and the Chief Executive corporate governance, compliance and rules and principles. It is also responsible profiles are listed at the end of this Officer, and remuneration of the risk management. During the year, the Composed of eminent Shari’ah scholars, for recommending the appointment Review. Executive Management team; and Bank conducted a strategy workshop VCBank’s Shari’ah Supervisory Board of the external auditors, determining to assist the Board of Directors in for Board Members to revisit the Bank’s is entrusted with the duty of directing, the audit fees and compensation, fulfilling its responsibilities of corporate strategic plan and objectives, and reviewing and supervising the activities overseeing the auditors’ work, and governance, developing and revise the strategy in line with market of the Bank in order to ensure that they reviewing the Bank’s compliance with recommending changes from time to conditions. are in compliance with the rules and legal requirements.
26 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 27 CORPORATE
GOVERNANCE REVIEW Overview Corporate (CONTINUED)
EXECUTIVE MANAGEMENT CODE OF CONDUCT INVESTOR COMPLAINTS GOVERNANCE CONTROL The Bank’s Compliance department The Bank’s AML Manual has been acts as a central point for all regulatory developed in line with Central Bank of B
COMMITTEE FUNCTIONS usiness Review The Bank has developed a Code The Bank treats investors’ feedback, compliance, as well as compliance Bahrain guidance, and the requirements with the Bank’s internal policies stipulated in the Financial Crime Module The Executive Management Committee of Conduct which contains rules on concerns and complaints with a great As well as undertaking their specific and procedures. The department of the CBB Rulebook Volume 2 – Islamic comprises the members of the Executive professional conduct and ethical deal of due care and attention. Their responsibilities, the Compliance, is independent from other business Banks; international best practices Management team. The Committee behaviour that are applicable to the inputs constitute a key element towards Risk Management, Internal Audit, activities, and performs its compliance- promoted by the Financial Action Task is responsible for assisting the CEO in Directors and employees of the Bank. improving the Bank’s standards, and Shari’ah Coordination & Review specific responsibilities along with other Force (FATF), with 40 recommendations overseeing day-to-day operations of The Code is designed to guide all policies, products and services. While departments work closely together limited activities as defined by the CBB, on combating money laundering the Bank; monitoring the performance Directors and employees in fulfilling their keen to provide a first-class service to its in assisting the Board and Executive responsibilities and obligations towards clients, the Bank understands that there such as Anti-Money Laundering. and the financing of terrorism and of business lines and departments in Management of the Bank to uphold F proliferation; and Basel Committee inancial Statements relation to strategy, policies, targets the Bank’s stakeholders, in compliance could be a few incidences where a the highest standards of corporate The Compliance department reports guidance on Customer Due Diligence. and limits; and conducting investment with all applicable laws and regulations. client might not be fully satisfied with the governance. functionally to the Nomination, decisions as delegated by the Board Bank’s products, services or responses. Remuneration & Corporate Governance The manual provides a comprehensive of Directors under the Discretionary SHAREHOLDER / INVESTOR Therefore, investors are encouraged to COMPLIANCE Committee and administratively to set of AML policies and procedures that Authority Limits (DAL), in addition to immediately contact the Bank if at any COMMUNICATION & the CEO, to ensure that the Bank’s set out detailed requirements relating asset and liability management. stage they feel that its service levels are AWARENESS not up to their expectation. The Bank At VCBank, compliance is recognised compliance objectives are achieved to customer identification, customer as the personal responsibility of to the highest professional and ethical due diligence, ongoing due diligence STRATEGY STATEMENT adopts a strict hierarchy and time frame The Board is committed to towards resolving investors’ complaints all staff, not just the Compliance standards. The department performs and monitoring, suspicious transaction communicating with its shareholders swiftly and promptly. A dedicated function. Compliance with regulatory its activities under a well-established reporting (STR), combating the financing VCBank is the first Islamic investment and investors in a professional, section on complaint handling requirements and internal policies and Compliance Framework which is of terrorism, recordkeeping, and staff bank in the MENA region to specialise transparent, accurate and timely procedures is available on the Bank’s procedures is an ongoing process, and articulated by a comprehensive AML education and training. in small-to-medium enterprise (SMEs) manner, and adopts a number of website at: considered as an integral part of the Compliance Manual approved by the capital investment opportunities. different ways through which to http://www.vc-bank.com/en/complaint- Bank’s culture. Bank’s Board. The Bank’s compliance with the Anti- Offering clients a broad range of promote greater understanding and handling-procedure.html. Money Laundering regulations is superior products and services across dialogue with all stakeholders. These VCBank is committed to complying fully ANTI-MONEY LAUNDERING monitored by its Money Laundering a number of promising asset classes in include the annual general meeting, with the rules and regulations of the Reporting Officer (MLRO) and Deputy the region, the Bank focuses on revenue- annual reports and quarterly financial WHISTLE-BLOWING POLICY Central Bank of Bahrain; the Ministry of VCBank’s Anti-Money Laundering MLRO; and independently assessed, generating real estate investments, reports, corporate website, and regular Industry, Commerce & Tourism; and other both internally and externally, by The Bank has formulated a whistle- measures are based on three main greenfield business development announcements in the local media. applicable laws and regulations, and Internal Audit and the Bank’s external blowing policy designed to enable pillars: opportunities and very selective private international best practices. The Bank auditors on an annual basis. the airing of genuine concerns equity transactions. The Bank’s strategy A detailed and dedicated section on continuously strives to improve the level regarding suspected malpractice within 1. The Ethical pillar, by actively taking and business model is reviewed Corporate Governance is available of compliance in conducting its business VCBank, enhancing transparency, annually. on the Bank’s website at: http://www. by actively educating staff to increase part in the fight against financial and safeguarding the Bank’s integrity. vc-bank.com/en/about-us/corporate- awareness of compliance issues and crime. The whistle-blowing procedure is governance.html. principles. embedded in the Human Resources 2. The Professional pillar, by preventing Manual. Malpractice includes, but is not the Bank and its products to be used limited to: conduct likely to prejudice as a channel for money laundering the reputation of VCBank; breaches of and terrorist financing by recycling applicable regulations; breaches of the proceeds of crime. internal rules and limitation; criminal offences or endangerment of the health 3. The Legal pillar, by complying with and safety of any person; environmental the Kingdom of Bahrain’s legislation damage; and the deliberate and regulations pertaining to Anti- concealment of any malpractice. The Money Laundering (AML) and recommended rule of thumb is “If in doubt – raise it”. Combating Terrorist Financing (CTF).
28 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 29 CORPORATE GOVERNANCE REVIEW (CONTINUED)
RISK MANAGEMENT continuously enhance the quality of all Executive Management and external STATUS OF COMPLIANCE GUIDANCE HC- 9.2.4B: activities undertaken by the functional Auditors. Regular reports on Internal WITH CBB’S CORPORATE VCBank adopts an enterprise-wide teams. The internal capital adequacy Audit activities are presented to the The Corporate Governance Committee assessment plan (ICAAP) incorporates Audit Committee. The Internal Audit GOVERNANCE GUIDELINES approach to manage risk, whereby (HIGH-LEVEL CONTROLS shall consist of at least three members, it is embedded in the organisational a proprietary capital allocation process department also provides Management one of whom should be from the culture, with all employees being to ensure that the Bank manages its and staff with preventive advice and MODULE) Shari’ah Supervisory Board (SSB). individual owners of risks. Risk capital in accordance with international guidance. management plays a critical role in the best practices, and meets the standards The department adopts As required by the CBB, VCBank VCBANK’S EXPLANATION: Bank’s decision-making process. The prescribed by the Central Bank of SHARI’AH COORDINATION regularly reviews its compliance with the Bahrain. The Bank uses this model to a unique continuous governance requirements stipulated in ultimate responsibility for oversight of VCBank established a dedicated determine if it has sufficient capital to & REVIEW the CBB’s High Level Control Module of risk management at the Bank resides Nomination, Remuneration & Corporate cover the combination of all balance review methodology its Rulebook Volume 2 – Islamic Banks. with the Board of Directors, which Governance Committee (NRCGC), as sheet risks; while maintaining sufficient The Shari’ah Coordination & Review The Bank’s effort has yielded a high delegates its responsibility to the Board part of its commitment to promote good flexibility to facilitate future growth department reports directly to the rather than an level of compliance with the Eleven Risk Committee. The Risk Management governance. While the NRCGC does plans, and protect against periods Bank’s Shari’ah Supervisory Board, Principles of the Corporate Governance department, which is an independent annual retrospective not include a member from the Shari’ah of prolonged and extreme stress in and administratively to the CEO. The Code of the Kingdom of Bahrain, function, reports directly to the Board Supervisory Board (SSB), the Bank the Bank’s operating environment, department adopts a unique continuous along with its Rules and Guidance. Risk Committee, to which it has direct Shari’ah audit, with all believes that spirit of the CBB’s guidance execution or performance. review methodology rather than an The CBB has embraced the ‘Comply or access. The department is responsible can be achieved through an alternative annual retrospective Shari’ah audit, transactions and deals Explain’ methodology with regard to for ensuring that the risks inherent in all internal arrangement. This entails with all transactions and deals being its guidance. VCBank is fully compliant banking activities are managed in line INTERNAL AUDIT providing the SSB with an agenda in reviewed, even if there are precedents. being reviewed, even if with the requirements of the CBB’s with the Board-approved risk appetite of advance of NRCGC meetings. Based The department is proactively High Level Control Module except for VCBank. The department independently The Internal Audit department reports on that, the SSB and the Bank’s Shari’ah involved in the development of new there are precedents. the following guidance listed below. identifies measures, and monitors and directly to the Audit Committee of the Reviewer have the full right to attend products and investments; follows up However, it should be noted that in order communicates different dimensions Board, and administratively to the Chief the Committee meetings. In addition, on investment project activities such to comply with CBB objectives, VCBank of risk, which aim to protect the asset Executive Officer. The department is minutes of meetings will be shared with as sub-transactions; and monitors implemented alternative internal values and income stream, and optimise responsible for evaluating and providing the SSB for greater transparency. cash management transactions and arrangements as explained below. shareholders’ return. assurance to the Board of Directors operations payments on a daily basis. and Executive Management on the The department plays an important FINANCIAL PENALTIES As part of the Bank’s operational risk effectiveness of the Bank’s control, role in communicating all investment GUIDANCE HC- 1.3.4: framework, all functional teams are risk management and governance activities, structures and documentation During FY 2018, the Central Bank of required to participate in an annual risk processes. This involves reviewing Individual Board members’ attendance of every business plan to the Shari’ah Bahrain (CBB) imposed one financial and control self-assessment (RCSA) in the effectiveness and efficiency of all of at least 75% of all Board meetings Supervisory Board, in order to ensure penalty on the Bank in accordance with which they map business processes, and business processes and their compliance in a given financial year (i.e. 2 Board that the Bank’s activities are in full Section EN-6.2A of the CBB Rulebook - report risks, controls and assessments with the Bank’s policies, standards and Members were not able to attend compliance with the rules and principles Volume 2 for the amount of BD 50,001 of risk likelihood and impact, to the procedures, and all applicable laws and 75% of the Board meetings during the of Islamic Shari’ah. for non-timely reporting in the 30th Risk Management department. The regulations. In addition, the department financial year). September 2018 Quarterly Financials of overall objective of the RCSA is to audits the activities of some portfolio a $5.7mm Trade Finance Placement. companies for which the Bank has a VCBANK’S EXPLANATION: fiduciary responsibility. The department conducts its audits in accordance with The inability of two Board members the audit plan approved by the Audit to attend at least 75% of all Board Committee. This plan is developed meetings was due to pre-arranged using a risk-based methodology which business commitments and unexpected also considers any risks identified by business travel arrangements. Board the Risk Management function, the Members who have not attended the minimum attendance requirements have been alerted to correct their participation in the future.
30 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 31 CORPORATE
GOVERNANCE REVIEW Overview Corporate (CONTINUED)
BOARD AND EXECUTIVE Employee compensation comprises Executive Management compensation The remuneration policy takes into The Bank is committed to full compliance a fixed portion representing salaries comprises a mix of fixed and variable consideration all key risks that the with the CBB’s rules which underpins the B
MANAGEMENT usiness Review and benefits, plus a variable portion remuneration in line with the CBB’s Bank is exposed to in determining the remuneration policy and requires that REMUNERATION based on corporate and individual requirements on sound remuneration. quantum and distribution of incentives to compensation is commensurate with risk performance as adjusted for risk. A Fixed compensation comprises In line with best ensure that remuneration is adjusted for outcomes and that the compensation The Nomination, Remuneration & substantial portion of the variable salaries and benefits in line with risk taken and aligned with realisation of staff in control functions such as Corporate Governance Committee portion for senior management is market and industry norms for the practice, the Bank uses of income. In this regard the NRCGC Internal Audit, Risk, Compliance and
(NRCGC) assists the Board in deferred over three years and equity levels of expertise and experience, considers the overall performance for Financial Control is weighted in favour determining the remuneration and appropriate corporate linked, and accordingly subject to seniority and knowledge concerned. the year by reviewing the performance of fixed, with a greater weightage compensation of the Board and claw-backs for subsequent changes in
Variable remuneration comprises and individual of the Bank’s investment offerings versus given to variable compensation for F Executive Management, including financial performance. inancial Statements executive incentives and any share- annual incentives based on the Bank’s target returns, and of the Bank’s actual staff categorised as material risk takers. performance and profitability, plus scorecard measures net income achieved versus budgeted, Additionally, the incentive of staff in based or other entitlements. The Board compensation comprises sitting individual performance and contribution among other factors, to arrive at a control functions is independent of the members of the NRCGC and their fees for attendances plus a discretionary of employees concerned. Due regard of returns and risks, in corporate performance scorecard. No performance of business units, subject attendances during the year are annual Board remuneration based on disclosed in the Annual Report. is made to align variable remuneration incentive is payable unless a minimum to an overriding criteria of minimum the recommendation of the NRCGC determining the amount with risk to ensure convergence of 70% corporate performance score (or corporate scorecard achievement. The and subject to approval by the AGM. The Bank is committed to full compliance employees’ interests with shareholders’ such other minimum as set by the Board) revised remuneration policy takes into Board remuneration for the year ended and distribution of with the CBB’s requirements covering interests and the long-term profitability is achieved. consideration all these aspects and 30 June 2019 is disclosed in the table on sound remuneration which are fully of the Bank. In line with best practice, variable remuneration requirements while relating it to the page 34. The members of the NRCGC reflected in the revised policy and the Bank uses appropriate corporate Additionally, the individual performance specific circumstances and activities received sitting fees of USD 14,000 procedures which have been put into and individual scorecard measures of to employees of each employee based on of the Bank. The remuneration policy during the year ended 30 June 2019 effect. The NRCGC reviews VCBank’s returns and risks, in determining the performance appraisals is taken is subject to annual review to ensure (2018: USD 16,000). remuneration policy and procedures on amount and distribution of variable into consideration in determining it properly reflects the Bank’s business an annual basis. remuneration to employees. the distribution of the incentive pool, and risk profile from time to time, so that Shari’ah Supervisory Board (SSB) thus ensuring that both corporate the objective of ensuring that staff are compensation comprises a fixed annual The remuneration policy is designed to: In compliance with the regulations, the and individual performance aspects rewarded in line with performance with fee plus travel and related costs for their CEO and his key deputies, including are appropriately considered in the due regard for risk taken is achieved. services. SSB remuneration for the year • Attract, motivate and retain key senior Investment team members determination and distribution of ended 30 June 2019 is disclosed in the employees are rewarded based on the Bank’s performance rewards. table on page 34. performance with due regard to • Ensure reward is linked to risks and risk taking and exposures and risk The following metrics are used in this aligned with long-term performance outcomes. A significant portion of the regard: actual net income vs. target; exit goals variable remuneration is deferred over income vs. target; weighted average IRR a period of three years. The deferred achieved on investment projects during • Encourage employees to continue to portion is 60% for the CEO and his key period vs. target; capital adequacy perform and be cost effective deputies, and 50% for all other material ratio; plus individual performance risk takers or controlled persons whose scorecards reflecting their individual aggregate annual compensation performance achievements. exceeds BHD 100,000 as required by the CBB. All deferred variable remuneration is awarded in the form of phantom share units linked to the net book value of the Bank’s ordinary shares, and accordingly subject to adjustments for subsequent changes in financial performance.
32 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 33 CORPORATE
GOVERNANCE REVIEW Overview Corporate (CONTINUED)
SUMMARY OF COMPENSATION FOR FISCAL YEAR ENDED 30 JUNE 2019 SUMMARY OF COMPENSATION FOR THE FISCAL YEAR ENDED 30 JUNE 2018 B usiness Review Fixed Variable* Total Fixed Variable* Total Particulars No. Particulars No. Upfront Upfront Deferred $’000 Upfront Upfront Deferred $’000
Members of the Board 9 355 - - 355 Members of the Board 12 386 - - 386
Members of Shari’ah Supervisory Board 3 85 - - 85 Members of Shari’ah Supervisory Board 3 94 - - 94 F
Approved persons in business lines 3 2,882 - - 2,882 Approved persons in business lines 4 1,774 - - 1,774 inancial Statements
Approved persons in control & support 8 1,396 - - 1,396 Approved persons in control & support 6 762 - - 762
Other staff 39 2,365 - - 2,365 Other staff 45 2,834 - - 2,834
Total 7,083 7,083 Total 5,850 5,850
* There was no variable remuneration for the year ended 30 June 2019. All upfront amounts applicable are in cash. *There was no variable remuneration for the year ended 30 June 2018. All upfront amounts applicable are in cash. * Deferred amounts are converted to phantom units at current book value and paid in cash over 3-year deferral period based *Deferred amounts are converted to phantom units at current book value and paid in cash over 3-year deferral period based on applicable net book value each year. on applicable net book value each year.
SUMMARY OF DEFERRED COMPENSATION AS AT 30 JUNE 2019 SUMMARY OF DEFERRED COMPENSATION AS AT 30 JUNE 2018
Deferred Awards No. Of Units ‘000 Nav $ Value $’000 Deferred awards No. of units ‘000 NAV $ Value $’000
Opening balance 487 0.87 424 Awarded during year - - -
Awarded during year - - - Paid during year (306) 0.90 (274)
Paid during year (310) 0.87 (270) Changes in value during year - (0.03) (13)
Changes in value during year - (0.33) (59) Closing balance 487 0.87 424
Closing balance 177 0.54 96 There were no guaranteed bonuses awarded during the year or prior year. There were no sign-on awards paid during the year or prior year. There were no guaranteed bonuses awarded during the year or prior year. There were no severance payments made during the year or prior year. There were no sign-on awards paid during the year or prior year. Board remuneration is disclosed in the notes to the financial statements There were no severance payments made during the year or prior year. Board remuneration is disclosed in the notes to the financial statements.
34 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 35 CORPORATE
GOVERNANCE REVIEW Overview Corporate (CONTINUED)
BOARD MEMBERS’ MOHAMMED ABDULAZIZ ABDULLATIF MOHAMED MARWAN AHMAD SALEH MOHAMMED ADWAN MOHAMMAD
ALSARHAN B
PROFILES JANAHI AL GHURAIR AL SHANFARI ALADWANI usiness Review
ABDULFATAH MOHAMMED Deputy Chairman Board Member Board Member Board Member Board Member RAFIE MARAFIE Kingdom of Saudi Arabia Kingdom of Bahrain United Arab Emirates Sultanate of Oman State of Kuwait Independent and Non-Executive Chief Executive Officer Independent and Non-Executive Independent and Non-Executive Non-Independent and Non-Executive
Chairman Director Elected 6 October 2005 Director Director Director State of Kuwait Elected 25 April 2012 36 years’ experience Elected 6 October 2005 Elected 6 October 2005 Elected 8 December 2015 Independent & Non-Executive Director 42 years’ experience 29 years’ experience 31 years’ experience 44 years’ experience F
Elected 6 October 2016 Chairman: Jordan Al Abyad Fertilizers inancial Statements (Deputy Chairman from 6/10/2005 – VCBank Committees: Chairman of and Chemicals Company (JAFCCO); VCBank Committees: Chairman VCBank Committees: Chairman of VCBank Committees: Member 5/10/2016) Nomination, Remuneration & Corporate Difaaf, Bahrain; German Orthopaedic of Audit Committee; Member of Risk Committee; Member of Nomination of Audit Committee; Member of Exit 39 years’ experience Governance Committee. Hospital, Bahrain; Lemissoler Maritime Nomination, Remuneration & Corporate & Remuneration & Corporate Committee. Company; Great Harbour, Bahrain; Gulf Governance Committee. Governance Committee. VCBank Committees: Chairman Chairman: Al Safi Danone, Saudi Projects Company, Bahrain. Chairman & Chief Executive of Real Estate Committee; Deputy Arabia; IKEA in Saudi Arabia and Chairman: Fanan Investments, Dubai; Chairman: Anaama Poultry, Oman; Officer: Al Salmiya Group for Chairman of Nomination & Remuneration Bahrain; Flow Logistics Company, Saudi Deputy Chairman: Challenger Oil Semakan Holdings, Dubai; Dubai Global Computer Services Company, Enterprise Development Company, & Corporate Governance Committee. Arabia. Drilling Company; Goknur Foods Import National School. Oman. Kuwait. Export Trading & Production Company, Chairman & General Manager: Vice Chairman: National Shipping Turkey; TOPSU TARIM HAYVANCILIK Board Member: Jordan Al Abyad Vice-Chairman: Albashayer Meat Chairman: Kuwait Resorts Company, Mozon Investment Holding Company, Company of Saudi Arabia. GIDA SANAYİ VE TİCARET ANONİM Fertilizers and Chemicals Company Company, Oman. Kuwait; Morocco. ŞİRKETİ (Turkey Farmland). (JAFCCO). Board Member and Senior Chairman of the Executive Vice Chairman: The Commercial Real Chairman & Chief Executive Advisor: Al Faisaliah Group Holding, Board Member: Qatar Engineering & Committee: Mazoon Dairy, Oman. Estate Company, Kuwait; Bayan Realty Officer: Mutajara Real Estate Saudi Arabia. Construction Company (QCON); Bayan Company, KSA; The Commercial Real Company, Kuwait. Realty Company, Saudi Arabia; Regent’s CEO: Oman Food Investment Holding Estate Development Company, Bahrain. Board Member: Saudi Fresh Dairy Crescent, London; Bahrain Association Company. Chairman: The Commercial Board; Qatar Engineering & Construction of Banks (BAB). Board Member: TOPSU TARIM Real Estate Company, Kuwait; The Company (QCON). Board Member: Global Omani HAYVANCILIK GIDA SANAYİ VE TİCARET Commercial Real Estate Development Investment Company; Global Mining ANONİM ŞİRKETİ (Turkey Farmland); Member of Board of Trustees: Company, Bahrain; TOPSU TARIM Company, Oman; Global Gypsum Mozon Investment Holding Company, Alyamama University, Riyadh, Saudi HAYVANCILIK GIDA SANAYİ VE TİCARET Company, Oman; Global Gypsum Morocco; Vacation Club Venture BV, Arabia. ANONİM ŞİRKETİ (Turkey Farmland). Board Company, Oman; Global Omani Dubai – UAE. Real Estate Development Company Vice Chairman: Mohammed Rafie (GLOREI); Goknur Foods Import Export Husain Foundation, Kuwait. Trading & Production Company, Turkey; Siraj Real Estate, Oman; KMC (Oman) Board Member: Amar Finance and Contracting Company. Leasing Company, Kuwait; Hajar Tower Real Estate Company, Kuwait; Al-Jahra Other Memberships: Chairman: Touristic Company, Kuwait; Bayan Realty Food Security Committee at Oman Company, KSA; Goknur Foods Import Chamber of Commerce; Member Export Trading & Production Company, of Advisory Committee, College of Turkey. Agriculture and Marine Sciences, Sultan Qaboos University, Oman; Oman Economic Society; Oman Environment Society.
36 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 37 CORPORATE
GOVERNANCE REVIEW Overview Corporate (CONTINUED)
MOHAMMED DR. MOHAMMED AHMED ADEL MOHAMMED ABU EXECUTIVE MANAGEMENT FAISAL A. AZIZ AL ABBASI ROBERT C. WAGES CFA,
PROFILES B
ABDULRAZZAQ ALKANDARI JUMAAN NAYYAN CAIA, FRM usiness Review Chief Investment Officer Board Member Board Member Board Member ABDULLATIF MOHAMED Member of the Executive Management Head of Investments & Post- State of Kuwait Kingdom of Bahrain Kingdom of Saudi Arabia JANAHI, FCMA Committee Acquisition Non-Independent and Non-Executive Independent and Non-Executive Independent and Non-Executive Joined VCBank in 2005 Member of Executive Management
Director Director Director Board Member & Chief Executive 20 years’ experience Committee Elected 25 April 2012 Elected 24 January 2016 Elected 24 October 2018 Officer Faisal Al Abbasi has specialised Joined VCBank in 2017 19 years’ experience 37 years’ experience 24 years’ experience Chairman of the Executive Management experience in private equity and 34 years’ experience F inancial Statements Committee investment banking, having worked with Robert Wages has extensive VCBank Committees: Deputy VCBank Committees: Deputy VCBank Committees: Member of Joined VCBank in 2005 several leading financial institutions in experience in sourcing, executing Chairman of Exit Committee, Member of Chairman of Audit Committee; Member Risk Committee, Member of Real Estate 36 years’ experience the Middle East. Prior to joining VCBank, and managing institutional direct Real Estate Committee. of Real Estate Committee. Committee. he was a senior member of the Middle Abdullatif Janahi is one of the private equity investments across East Private Equity team at Bank Al multiple industry sectors spanning the Executive Vice President - Board Member: Royal University for Board Member: Mohammad Rashed originators and key founders of Khair. Previously, he worked in the Direct US, Europe, MENA and Asia. Prior to Investment: Securities Group, Kuwait. Women, Bahrain; TIG Software, Bahrain; Abu Nayyan Trading & Investment Co. VCBank, where he has been a Board Investment Group at Kuwait Finance joining VCBank, he was Managing Mena Aerospace Enterprises, Bahrain; Ltd, General Director & Chairman of the Member and Chief Executive Officer House-Bahrain; and the Investment Director of US-based Gazelle Capital Deputy Chairman: Gulf Energy Pan Arabian Gourmet; The Malls Real Real Estate and Investment Committee since inception. Previously, he was Division of BBK, a pioneering retail bank Investors, a consulting firm advising Holdings, Kuwait; Kuwait Saudi Estate Development Company, Bahrain. of the company; Delta Company one of the key founders and a Director in the Kingdom of Bahrain. Faisal holds family investment offices. Before this, Pharmaceutical Industries, Kuwait. Limited. of the Incorporating Committee of a BSc degree in Accounting from the Fellow Member: Royal Aeronautical International Investment Bank, a Robert was Head of Private Equity University of Bahrain. Board Member: Ajial Real Estate Society (FRAeS); British Computer Representative of Mohammad Rashed Bahrain-based Shari’ah-compliant with Emirates International Investment & Entertainment Company, Kuwait; Society (FBCS). Senior Member: Institute Abunyyan Trading and Investment wholesale bank. Prior to that, Company, the proprietary investment First Investment Company, Kuwait; of Electrical and Electronics Engineering. Company in:- Abdullatif was a member of the senior arm of National Holding, Abu Dhabi, Technology Industrial Gases Production management of Assurance & Business UAE; and Executive Director, Private Company, Kuwait; EYAS for Higher & Chartered Professional Engineer - Union Salihia Closed Joint Stock Advisory with Arthur Andersen in Equity at the government-owned Abu Technical Education Company, Kuwait. Company. Bahrain. A Fellow of the UK Chartered Dhabi Investment Company (Invest Previous: Member of the Board Institute of Management Accountants, AD). Previously, he spent 17 years Directors of Eskan Bank, Bahrain - Member of the Board of Directors of he holds an MSc in Accounting & with Castle Harlan, a leading New Development Bank, Olive VFM Phoenix Medical Hospitals Group - Finance from Leicester Business York-based middle market buyout Company B.S.C. London. School, De Montfort University, UK; firm, where he rose from an Associate and a BSc in Accounting from the to Managing Director. Robert holds University of Bahrain. a Master’s degree in Computational Finance and Risk Management from the University of Washington, USA; and a Bachelor’s degree in Chemistry from Princeton University, USA. He is a Chartered Financial Analyst, Chartered Alternative Investment Analyst, and Financial Risk Manager.
38 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 39 CORPORATE
GOVERNANCE REVIEW Overview Corporate (CONTINUED)
MAHMOOD MOHAMMED ASYA HASAN, CPA MOHAMED KHALID ATEEQ, HUDA FAISAL JANAHI, JEHAD HASAN QAMBER SAHAR JAAFAR KHUNJI,
ZAINAL B
CAMS, AMLCA, INT. DIP CIPA, APRM ACIPD usiness Review Head of Human Resources & Head of Internal Audit (Comp) Director - Investments Member of the Executive Management Head of Risk Management Support Head of Investor Relations Member of the Executive Management Joined VCBank in 2008 Committee Head of Compliance & MLRO Member of the Executive Management Member of the Executive Management Committee 16 years’ experience Joined VCBank in 2015 Member of the Executive Management Committee Committee Joined VCBank in 2005
21 years’ experience Joined VCBank in 2007 Mahmood Zainal has extensive Committee Joined VCBank in 2007 15 years’ experience 30 years’ experience experience in investment banking across Asya Hasan has extensive experience Joined VCBank in 2018 12 years’ experience the Middle East. His specialist expertise in the field of audit and accounting 14 years’ experience Huda Janahi’s background Jehad Qamber has extensive During her career to date with F encompasses risk management, internal experience in the areas of Human inancial Statements includes deal origination, valuations and professional practices. She has Mohamed Ateeq has specialised VCBank, Sahar Khunji has developed audit, investment placement and Resources, Finance and Investment modelling, post-investment management specialist expertise in attest of experience in compliance, anti- specialist experience in the areas of treasury operations. She initially joined Banking. Before assuming his current and due diligence, with a particular focus sovereign lending, and conducting money laundering and investment investor relations, human resources VCBank as a member of the Wealth position in 2016, he was a Director in the on real estate and private equity. Prior financial safeguard assurance of central administration. Prior to joining VCBank, and corporate communications. Prior Management team before transferring Bank’s Wealth Management Division. to joining VCBank, he spent five years banks borrowing from international to assuming her current position in he was Head of Compliance with to the Internal Audit department in Prior to joining VCBank, he was Director with Kuwait Finance House - Bahrain, financial institutions and monetary funds 2016, she was a Principal in the Bank’s Eazy Financial Services, a leading 2010. Two years later, she moved to the of HR & Finance with the General where he worked in Investments, Retail to finance governments’ fiscal deficits Operations & Support division, with Bahraini fintech company specialising Risk Management department, where Organisation for Youth & Sport (GOYS) Banking and Customer Service; having and support balance of payments. responsibilities covering investor in biometric payment technology she was promoted to Acting Head in of the Kingdom of Bahrain, where he started his career with American Express, Before joining VCBank, she was a senior services and the first to set up fingerprint 2016 and to her current position in 2018. also served as Acting Director of the relations, human resources and Bahrain. Mahmood holds a Bachelor member of the Finance Department at payment ATMs across Bahrain. Before Prior to joining VCBank, she worked in Technical Affairs Directorate. Previously, corporate communications. Sahar is of Commerce degree from the John the Arab Monetary Fund (AMF), where this, he was Group Head of Compliance the Treasury Back Office at Citibank he was Head of Quality Assurance at an Associate of the Chartered Institute Molson School of Business at Concordia she was in charge of lending to member and MLRO at Al Salam Bank - Bahrain, in Bahrain. Huda is a Certified Islamic the Kingdom’s Civil Service Bureau. of Personnel & Development (CIPD), University, Montreal, Canada. He has states of the Fund. Prior to this, Asya having previously joined the bank Public Accountant and an Associate Jehad holds a Master’s degree in UK; and holds a Bachelor’s degree also attended the Leadership Grooming was a staff member of the International as a Senior Analyst in Investment of the Professional Risk Managers’ Business Administration from the in Business (Economics & Finance) Program conducted by the Ivey Business Monetary Fund (IMF), where she was Administration. He started his career International Association, USA. She University of Glamorgan, Wales, UK. from Central Queensland University, School, University of Western Ontario, responsible for conducting financial as an Accountant in the Investment holds a BSc degree in Accounting from Australia. Canada. safeguards assessment of central department of Arcapita Bank, Bahrain. the University of Bahrain. banks of IMF borrowing members. Mohamed is a Certified Anti-Money AHMED HASAN ALABBASI Before joining international financial Laundering Specialist from ACAMS, institutions, she was a Senior Audit Miami, Florida, USA; an Anti-Money Director - Investments Manager with Ahli United Bank, a Laundering Certified Associate from Joined VCBank in 2006 Senior Bank Examiner at the Central Florida University in cooperation with 18 years’ experience Bank of Bahrain, and a Senior Auditor in the Florida Bankers Association, USA; Ahmed Alabbasi is a well-seasoned the Financial Services Industry division and holds an International Diploma investment professional with sound of Ernst & Young. Asya is a Licensed in Compliance from the International experience in private equity, real Certified Public Accountant (CPA) by Compliance Association, University estate and financial advisory. He has the California Board of Accountancy; of Manchester Business School, UK. developed particular expertise in deal and holds an MBA with a concentration He graduated from the University of origination, structuring and engineering; in Finance from DePaul University Bahrain with a Bachelor’s degree in acquisition and turnaround strategy; Business School, Chicago, USA; and a Banking & Finance. and post-acquisition monitoring and BSc degree in Accountancy from the exit planning. Prior to joining VCBank, University of Bahrain. he was Group Head of Strategic and Direct investments at Bahrain National Holding. Ahmed is a Certified Financial Risk Manager (FRM) and a Fellow of the Global Association of Risk Professionals, (GARP), USA. He holds a Master’s degree in Finance & Investments from the University of Exeter, UK; and a Bachelor’s degree in Business Management from the University of Bahrain.
40 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 41 CORPORATE
GOVERNANCE REVIEW Overview Corporate (CONTINUED)
GOVERNANCE AND ORGANISATION STRUCTURE B usiness Review
Shareholders
Chairman F Board of inancial Statements & Board Directors Secretary Shari’ah Head of THE BANK’S INDEPENDENT Shari’ah Supervisory Shari’ah Board GOVERNANCE CONTROL
FUNCTION ASSIST THE BOARD
OF DIRECTORS AND EXECUTIVE
MANAGEMENT IN UPHOLDING
Nomination, Chief THE HIGHEST STANDARDS OF Exit Real Estate Remuneration Audit Risk & Corporate Executive Committee Committee Committee Committee Governance O cer REGULATORY COMPLIANCE AND Committee INDUSTRY BEST PRACTICE.
Management Executive Head of Secretary Head of Head of Risk Compliance Internal Audit Management & MLRO
Head of Chief Post Investment Compliance Internal Risk Acquisition O cer & MLRO Audit Management
Post Investments Acquisition
Head of Head of Head of Head of Head of Head of Wealth Investor HR & Information Financial Operations Management Relations Support Technology Control
Cash Wealth Investor Corporate Information Financial Payment HR & Admin Management Management Relations Communications Technology Control Operations - Treasury
42 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 43 CONTENTS Corporate Overview Corporate
B usiness Review
F inancial Statements
FINANCIAL STATEMENTS
45 Shari’ah Supervisory Board Report 46 Report of the Auditors 48 Consolidated Statement of Financial Position 49 Consolidated Statement of Income 50 Consolidated Statement of Cash Flows 51 Consolidated Statement of Changes In Equity 52 Consolidated Statement of Changes in Off-Balance Sheet Equity of Investment Account Holders 53 Notes to the Consolidated Financial Statements 96 Additional Public Disclosures
44 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 45 REPORT OF THE AUDITORS
INDEPENDENT AUDITORS’ REPORT Overview Corporate TO THE SHAREHOLDERS
B usiness Review
F inancial Statements
46 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 47 CONSOLIDATED STATEMENT CONSOLIDATED STATEMENT
OF FINANCIAL POSITION OF INCOME Overview Corporate AS AT 30 JUNE 2019 FOR THE YEAR ENDED 30 JUNE 2019
B usiness Review
F inancial Statements
The attached notes 1 to 38 form part of these consolidated financial statements The attached notes 1 to 38 form part of these consolidated financial statements
48 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 49 CONSOLIDATED STATEMENT CONSOLIDATED STATEMENT
OF CASH FLOWS OF CHANGES IN EQUITY Overview Corporate FOR THE YEAR ENDED 30 JUNE 2019 FOR THE YEAR ENDED 30 JUNE 2019
B usiness Review
F inancial Statements
The attached notes 1 to 38 form part of these consolidated financial statements The attached notes 1 to 38 form part of these consolidated financial statements
50 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 51 CONSOLIDATED STATEMENT OF NOTES TO THE CONSOLIDATED CHANGES IN OFF-BALANCE SHEET EQUITY Corporate Overview Corporate OF INVESTMENT ACCOUNT HOLDERS FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
The attached notes 1 to 38 form part of these consolidated financial statements
52 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 53 NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) FINANCIAL STATEMENTS (continued) Overview Corporate AS AT 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
54 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 55 NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) FINANCIAL STATEMENTS (continued) Overview Corporate AS AT 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
56 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 57 NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) FINANCIAL STATEMENTS (continued) Overview Corporate AS AT 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
58 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 59 NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) FINANCIAL STATEMENTS (continued) Overview Corporate AS AT 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
60 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 61 NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) FINANCIAL STATEMENTS (continued) Overview Corporate AS AT 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
62 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 63 NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) FINANCIAL STATEMENTS (continued) Overview Corporate AS AT 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
64 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 65 NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) FINANCIAL STATEMENTS (continued) Overview Corporate AS AT 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
66 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 67 NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) FINANCIAL STATEMENTS (continued) Overview Corporate AS AT 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
68 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 69 NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) FINANCIAL STATEMENTS (continued) Overview Corporate AS AT 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
70 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 71 NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) FINANCIAL STATEMENTS (continued) Overview Corporate AS AT 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
72 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 73 NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) FINANCIAL STATEMENTS (continued) Overview Corporate AS AT 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
74 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 75 NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) FINANCIAL STATEMENTS (continued) Overview Corporate AS AT 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
76 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 77 NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) FINANCIAL STATEMENTS (continued) Overview Corporate AS AT 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
78 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 79 NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) FINANCIAL STATEMENTS (continued) Overview Corporate AS AT 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
80 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 81 NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) FINANCIAL STATEMENTS (continued) Overview Corporate AS AT 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
82 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 83 NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) FINANCIAL STATEMENTS (continued) Overview Corporate AS AT 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
84 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 85 NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) FINANCIAL STATEMENTS (continued) Overview Corporate AS AT 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
86 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 87 NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) FINANCIAL STATEMENTS (continued) Overview Corporate AS AT 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
88 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 89 NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) FINANCIAL STATEMENTS (continued) Overview Corporate AS AT 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
90 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 91 NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) FINANCIAL STATEMENTS (continued) Overview Corporate AS AT 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
92 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 93 NOTES TO THE CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued) FINANCIAL STATEMENTS (continued) Overview Corporate AS AT 30 JUNE 2019 AS AT 30 JUNE 2019
B usiness Review
F inancial Statements
94 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 95 ADDITIONAL ADDITIONAL
PUBLIC DISCLOSURES PUBLIC DISCLOSURES Overview Corporate CONTENT 30 JUNE 2019
B usiness Review
F inancial Statements FINANCIAL STATEMENTS
97 Introduction 98 Capital Structure 98 Risk Management 110 Impairment Provisions 111 Corporate Governance and Transparency
96 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 97 ADDITIONAL ADDITIONAL
PUBLIC DISCLOSURES (continued) PUBLIC DISCLOSURES (continued) Overview Corporate 30 JUNE 2019 30 JUNE 2019
B usiness Review
F inancial Statements
98 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 99 ADDITIONAL ADDITIONAL
PUBLIC DISCLOSURES (continued) PUBLIC DISCLOSURES (continued) Overview Corporate 30 JUNE 2019 30 JUNE 2019
B usiness Review
F inancial Statements
100 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 101 ADDITIONAL ADDITIONAL
PUBLIC DISCLOSURES (continued) PUBLIC DISCLOSURES (continued) Overview Corporate 30 JUNE 2019 30 JUNE 2019
B usiness Review
F inancial Statements
102 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 103 ADDITIONAL ADDITIONAL
PUBLIC DISCLOSURES (continued) PUBLIC DISCLOSURES (continued) Overview Corporate 30 JUNE 2019 30 JUNE 2019
B usiness Review
F inancial Statements
104 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 105 ADDITIONAL ADDITIONAL
PUBLIC DISCLOSURES (continued) PUBLIC DISCLOSURES (continued) Overview Corporate 30 JUNE 2019 30 JUNE 2019
B usiness Review
F inancial Statements
106 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 107 ADDITIONAL ADDITIONAL
PUBLIC DISCLOSURES (continued) PUBLIC DISCLOSURES (continued) Overview Corporate 30 JUNE 2019 30 JUNE 2019
B usiness Review
F inancial Statements
108 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 109 ADDITIONAL ADDITIONAL
PUBLIC DISCLOSURES (continued) PUBLIC DISCLOSURES (continued) Overview Corporate 30 JUNE 2019 30 JUNE 2019
B usiness Review
F inancial Statements
110 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 111 ADDITIONAL ADDITIONAL
PUBLIC DISCLOSURES (continued) PUBLIC DISCLOSURES (continued) Overview Corporate 30 JUNE 2019 30 JUNE 2019
B usiness Review
F inancial Statements
112 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 113 ADDITIONAL ADDITIONAL
PUBLIC DISCLOSURES (continued) PUBLIC DISCLOSURES (continued) Overview Corporate 30 JUNE 2019 30 JUNE 2019
B usiness Review
F inancial Statements
114 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 115 ADDITIONAL ADDITIONAL
PUBLIC DISCLOSURES (continued) PUBLIC DISCLOSURES (continued) Overview Corporate 30 JUNE 2019 30 JUNE 2019
B usiness Review
F inancial Statements
116 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 117 ADDITIONAL ADDITIONAL
PUBLIC DISCLOSURES (continued) PUBLIC DISCLOSURES (continued) Overview Corporate 30 JUNE 2019 30 JUNE 2019
B usiness Review
F inancial Statements
118 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 119 ADDITIONAL ADDITIONAL
PUBLIC DISCLOSURES (continued) PUBLIC DISCLOSURES (continued) Overview Corporate 30 JUNE 2019 30 JUNE 2019
B usiness Review
F inancial Statements
120 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 121 ADDITIONAL
PUBLIC DISCLOSURES (continued) Overview Corporate 30 JUNE 2019
B usiness Review
F inancial Statements
122 VENTURE CAPITAL BANK Annual Report 2018 - 2019 VENTURE CAPITAL BANK Annual Report 2018 - 2019 123