Governance

During Fiscal Year 2019, Investcorp Holdings B.S.C. (“Investcorp”) commenced procedures to re-align its operational structure, and in February 2019, the Shareholders of Investcorp approved (1) the transfer of Investcorp CBB-regulated activities to Investcorp Financial Services B.S.C.(c), its wholly-owned subsidiary; and (2) the voluntary surrender of its wholesale banking license and its conversion into a holding company. The process of re-alignment, surrender and conversion was ongoing at June 30, 2019 and was completed in September 2019.

The information that follows is accurate as at June 30, 2019.

 

OWNERSHIP STRUCTURE

At June 30, 2019, Investcorp is domiciled in Bahrain as a wholesale bank, under the regulatory oversight of the Central Bank of Bahrain (‘CBB’), with shares listed on the Bahrain Bourse. Within the Investcorp group of companies, Investcorp is the principal parent entity and owns a 100% economic interest in Investcorp Holdings Limited (‘IHL’), its Cayman Islands-based subsidiary. In turn, IHL owns a 100% economic interest in Investcorp S.A. (‘ISA’), domiciled in the Cayman Islands as a holding company. The significant subsidiaries of Investcorp are discussed in Note 1 (iv) to the consolidated financial statements of Investcorp.

Overview

Investcorp’s ownership and subsidiary structure is designed to ensure that:

  • the interests of Investcorp’s strategic shareholder group, comprised of Investcorp directors, prominent Gulf individuals and institutional shareholders, together with public shareholders, are closely aligned with those of management; and
  • Investcorp effectively operates as a management-controlled entity.

Substantially all of the Investcorp Group’s assets and operations are owned and controlled by ISA. As a result, substantially all of the Investcorp Group’s commercial risks are held outside of the Middle East.

Shareholding structure

The shareholding structure of Investcorp is outlined in Note 1 (iii) to the consolidated financial statements of Investcorp. At June 30, 2019, Investcorp is owned by public shareholders, management and strategic shareholders. Public shareholders own approximately 47.3% of the Ordinary Shares of Investcorp which are tradable on the Bahrain Bourse and are held predominantly by Gulf-based nationals and institutions, including a stake of 10% held by Konoz Securities Company SPC and a stake of 20% held indirectly by Mubadala Investment Company PJSC. International shareholders hold 0.03% of the Ordinary Shares, represented by unlisted Global Depositary Receipts. SIPCO Limited (‘SIPCO’), a Cayman Islands entity that administers the Investcorp Group incentive compensation plans, directly and indirectly owns 18% of Investcorp’s ordinary shares.

The 18% of Investcorp’s Ordinary Shares owned indirectly by SIPCO represents:

  • management and other current and former Investcorp Group employees’ (166 current and former employees in the aggregate) ownership of beneficial interests in 11% of Investcorp’s Ordinary Shares through Investcorp Employee Share Ownership Plans (each such plan an ‘ISOP’), which includes 1.5% acquired but unvested shares under an ISOP; and
  • treasury shares, amounting to 7% of Investcorp’s Ordinary Shares that are held for potential acquisition by employees pursuant to an ISOP.

The ownership of beneficial interests in Investcorp by management and other employees is implemented through the ISOPs. The ISOPs are deferred remuneration programs pursuant to which management and other employees buy their allocated beneficial interests in Investcorp utilizing variable (incentive) remuneration. These plans are intended to promote stakeholder alignment, encouraging management to focus on long-term value creation and prudent control of balance sheet risks. Investcorp has approval from the CBB to hold up to 40% of Investcorp’s Ordinary Shares for the ISOPs.

As at June 30, 2019, Ownership Holdings Limited (‘OHL’), a Cayman Islands company, has control of 51.4% of Investcorp’s Ordinary Shares directly and through CP Holdings Limited (‘CPHL’), a Cayman Islands company. CPHL is controlled by OHL which, in turn, has SIPCO as its largest shareholder. Strategic shareholders own the balance of CPHL and OHL. SIPCO also holds 1.3% of Investcorp’s Ordinary Shares directly.

As a result of the Investcorp ownership structure, the directors of SIPCO, comprised of certain Investcorp Directors and senior executive officers who are also the directors of OHL’s sole director, which is a Cayman Islands corporation, have the ability to control the voting of 52.7% of the Ordinary Shares of Investcorp.

Investcorp’s senior management (Investcorp’s Managing Directors) hold beneficial interests in Investcorp’s Ordinary Shares through the ISOPs. No current member of senior management of Investcorp directly holds Investcorp Ordinary Shares. Certain members of senior management hold Investcorp Preference Shares.

Information regarding the ownership and trading of Investcorp’s Ordinary Shares and Preference Shares by Investcorp’s Directors and the ownership and trading of Investcorp Preference Shares by certain members of senior management is provided in the Investcorp Fiscal Year 2019 Corporate Governance Report (‘Fiscal Year 2019 Corporate Governance Report’) which is a supplement to the 2019 Annual Report.

As reported above, an aggregate of 52.7%1 of Investcorp’s Ordinary Shares are held by SIPCO, OHL and CPHL, each of which is a Cayman Islands company.

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1 | Numbers may not add up due to rounding.

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