Ownership Structure

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 certain 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, 2020, Investcorp is owned by public shareholders, management and strategic shareholders. Public shareholders own approximately 47.1% 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. SIPCO Limited (‘SIPCO’), a Cayman Islands entity that administers the Investcorp Group incentive compensation plans, directly and indirectly owns 18.76% of Investcorp’s ordinary shares.

The 18.76% of Investcorp’s Ordinary Shares owned indirectly by SIPCO represents:

  • Management and other current and former Investcorp Group employees’ (171 current and former employees in the aggregate) ownership of beneficial interests in 9.1% of Investcorp’s Ordinary Shares through Investcorp Employee Share Ownership Plans (each such plan an ‘ISOP’), which includes 1.6% acquired but unvested shares under an ISOP; and
  • Treasury shares, amounting to 9.66% 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.

As at June 30, 2020, 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 1.4% 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 52.9% 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 2020 Corporate Governance Report which is a supplement to the Fiscal Year 2020 Annual Report.

As reported above, an aggregate of 52.9% of Investcorp’s Ordinary Shares are held by SIPCO, OHL and CPHL, each of which is a Cayman Islands company.

 

Corporate Governance

Overview

Investcorp views corporate governance as the manner in which members of the Board of Directors, shareholders, investors, management and employees of Investcorp are organized and how they operate in practice. Good corporate governance involves keeping business practice above reproach and thus retaining the trust and confidence of all the stakeholders who enable Investcorp to operate, thrive and prosper.

Investcorp makes large investments in mostly illiquid asset classes such as corporate and real estate investments. Through its regulated subsidiaries in the various jurisdictions where it operates, it places a large proportion of these investments with clients and retains a portion for its own balance sheet. These investment activities operate with above-average risk levels and have led to the development of a comprehensive risk management infrastructure and strong corporate governance over the past 38 years. Investcorp’s corporate governance practices have been structured around the following three principles:

i. Alignment of interests among shareholders, clients and management combined with protection of lenders’ interests;

ii. Transparency of reporting and actions plus proactive risk control; and

iii. Collective decision-making.

At June 30, 2020, Investcorp’s corporate governance is subject to the Central Bank of Bahrain’s Rulebook Volume 6 High Level Controls Module, (‘Module HC’) and the Bahrain Ministry of Industry, Commerce and Tourism’s Corporate Governance Code (‘Governance Code’). Please see the Fiscal Year 2020 Corporate Governance Report for disclosure regarding Investcorp’s compliance with Module HC and the Governance Code.

i. Alignment of Interests. A central tenet of Investcorp’s philosophy is to ensure that interests among shareholders, clients and management are optimally aligned and that lender interests are well protected.

The alignment of interest is ensured by the following mechanisms:

Co-investments: Clients of the Investcorp Group, shareholders and management all participate in each of Investcorp’s investment products. Investcorp retains a stake in each private equity, real estate strategic capital transaction or fund, placing the balance with clients through its regulated subsidiaries in the various jurisdictions where it operates. Investcorp also invests a portion of its assets in the absolute return investment products of Investcorp-Tages Limited and the products of the credit management business. Hence, through ownership of Investcorp, shareholders indirectly participate in each of the investment products.

In addition, Investcorp’s employees co-invest alongside clients and Investcorp in these investment products. As a result, all three groups are collectively exposed to the same risks and share the same outcomes. This emphasis on co-investment ensures that all stakeholders are motivated to grow Investcorp and enhance its value through the generation of superior risk-adjusted returns in each of Investcorp Group’s products.

Performance-based incentive compensation: In addition, consistent with industry practice, Investcorp’s investment professionals participate in performance-based investment carried interest programs whereby a certain variable portion of exit proceeds due to investors from the realization of their investments is shared with the investment professionals, provided that a certain pre-established minimum client investment performance objective is satisfied on the underlying investment.

In addition, the overall compensation paid to members of senior management and other Investcorp executives is highly correlated with Investcorp’s net income. Investcorp’s net income is driven by its ability to acquire, place, manage and realize investments and realize gains from investments on its balance sheet (franchise value). The franchise value, in turn, depends on management’s ability to provide long-term value to the Investcorp Group clients and shareholders and protection for its creditors.

Furthermore, all of Investcorp’s employees at the level of Principal and Managing Director who are above designated levels of remuneration are required to defer a percentage of their variable (incentive) remuneration and utilize a portion of that deferred remuneration to purchase beneficial interests in Investcorp’s Ordinary Shares through the ISOPs. These beneficial interests are subject to vesting requirements.

In this manner, Investcorp’s executive compensation programs play a critical role in aligning management’s interests with the interests of shareholders, clients and lenders.

The aggregate amount of compensation paid to senior management in respect of Fiscal Year 2020, including variable remuneration that is required to be deferred and utilized to purchase beneficial interests in Investcorp’s Ordinary Shares that are subject to vesting requirements, is disclosed in Note 29 of the consolidated financial statements of Investcorp.

The names of the members of senior management and information regarding their roles within Investcorp and their professional backgrounds is included in the Managing Directors, Principals and Professional Staff section of the Fiscal Year 2020 Annual Report.

Further information regarding the Investcorp Group’s remuneration policies and practices is provided in the Fiscal Year 2020 Corporate Governance Report.

ii. Transparency and risk control. Transparency at Investcorp involves the open and proactive discussion of issues and problems with all stakeholders. The role and nature of the Board of Directors and its standing committees and Investcorp’s management structure are vital elements of an Investcorp Group-wide framework for mitigating risks, allocating resources and making decisions with full accountability based on all relevant information.

Board of Directors

Under the Articles of Association of Investcorp at June 30, 2020, the Board of Directors consists of not less than five and not more than 15 Directors, and the number of Directors is determined by shareholder resolution.

At the September 2019 Ordinary General Meeting (“September 2019 OGM”), out of the 12 then current Directors of Investcorp, 3 were re-appointed for a three year term expiring at the September 2022 Ordinary General Meeting (the “September 2022 OGM”), and 12 Directors were elected for a three year term expiring at the September 2022 OGM, a total of 15. Of the 12 directors elected at the September 2019 OGM, 6 Directors were current members of the Board of Directors and 6 Directors were elected for the first time.

At the meeting of the Board of Directors held on September 23, 2019, Dr. Yousef Hamad Al-Ebraheem was re-appointed as the Chairman of the Board of Directors and Mr. Khalid Rashid Al Zayani was re-appointed as the Vice-Chairman of the Board of Directors, each appointment effective that same day.

In March 2020, Sir Gerry Grimstone who was elected to the Board of Directors for the first time at the September 2019 OGM informed the Board of Directors that following his appointment to the United Kingdom’s House of Lords as the British Minister for UK Investment, he was obligated to resign from all commercial interests. His resignation was accepted and as at June 30, 2020 the total number of Directors appointed to Investcorp’s Board of Directors was 14.

There is no cumulative voting in Director elections.

Each Director has signed a formal written appointment letter agreement which addresses a number of matters, including the Director’s duties and responsibilities in serving on the Board of Directors, the fact that annual remuneration for service as a Director is subject to the approval of the shareholders of Investcorp, his entitlement to expense reimbursement and access to independent professional advice when needed. There are no arrangements in effect relating to the termination of any Director.

The Board of Directors that was appointed or elected at the September 2019 OGM received a formal induction as part of Investcorp’s formal induction program for new Directors. This induction included briefings on (i) the duties and responsibilities of Directors; and (ii) Investcorp’s investing lines of business.

The Board of Directors is ultimately accountable and responsible for the strategy and business performance of Investcorp and its subsidiaries. The specific responsibilities of the Board of Directors are as follows:

  • ensuring that financial statements are prepared which accurately disclose Investcorp’s financial position;
  • monitoring management performance
  • convening and preparing the agenda for shareholders meetings;
  • setting up a mechanism to regulate transactions with related parties in order to minimize conflicts of interest and preventing abusive related party transactions;
  • selecting, monitoring and, when necessary, replacing key executives and overseeing succession planning;
  • aligning key executive and Directors’ remuneration with the longer-term interests of Investcorp and its Shareholders;
  • ensuring a formal Directors nomination and election process;
  • ensuring the integrity of Investcorp’s accounting and financial reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for risk management, financial and operational control, and compliance with the law and relevant standards;
  • assuring equitable treatment of shareholders, including minority shareholders;
  • the ongoing obligations in respect of the listing requirements, including but not limited to issues relating to disclosure, dissemination of price sensitive information and other communication, and the prevention of market abuse and insider trading;
  • compliance with Investcorp’s founding documentation, including but not limited to its Memorandum and Articles of Association and other relevant by-laws and resolutions; ensuring that any loans provided by Investcorp are approved by the Directors in accordance with their authority for such items, including the respective limits and other relevant terms;
  • adopting the commercial and financial policies associated with Investcorp’s business performance and achievement of its objectives;
  • drawing, overseeing and periodically reviewing Investcorp’s plans, policies, strategies and key objectives;
  • setting and generally supervising the regulations and systems of Investcorp’s internal control systems;
  • determining Investcorp’s optimal capital structure, strategies and financial objectives and approving annual budgets;
  • monitoring the Investcorp’s major capital expenditures, and possessing and disposing of assets;
  • approving Investcorp’s semi-annual and annual financial statements and presenting them to the annual OGM; and
  • forming specialized committees of the Board of Directors as required by the nature of Investcorp’s activity and as provided in the regulatory requirements.

The Directors’ names, years of service on the Board of Directors, other directorships held by them, attendance of Board of Directors meetings held during Fiscal Year 2020 and the aggregate remuneration proposed to be paid to the Directors in respect of Fiscal Year 2020 are reported in the Fiscal Year 2020 Corporate Governance Report.

The approval of the Board of Directors is required for material matters, including the business plan and budget for each fiscal year, capital markets and other financing transactions, Investcorp Group-wide risk limits and employee remuneration plans.

During Fiscal Year 2020, all of the Directors of Investcorp other than H.E. Mohammed Bin Mahfoodh Bin Saad Alardhi, the Executive Chairman of Investcorp, were non-executive Directors. The current Board of Directors has only been in place since the September 2019 OGM, and therefore, a full year has not yet passed since their appointment or election. The Board of Directors have deferred the determination of the independence of its members to the September 2020 meeting of the Board of Directors to ensure a full 12 month period of activities of Investcorp and the new Board of Directors itself.

The Board of Directors has established three Standing Committees as follows: the Audit and Risk Committee, the Corporate Governance Committee and the Nomination and Remuneration Committee. Each Standing Committee is described below:

The Audit and Risk Committee is responsible for the oversight of Investcorp’s internal audit, external audit, risk management and compliance functions. Investcorp’s external auditor and the head of the Internal Audit department, the General Counsel, in his capacity as the person overseeing the global compliance function and the head of the Risk Management department report to the Audit and Risk Committee.

The members of the Audit and Risk Committee are appointed by the Board of Directors, and at June 30, 2020, the Committee had four members. Consistent with Module HC, none of the members of the Audit and Risk Committee has any other Board responsibilities that could conflict with his obligations as a member of the Audit and Risk Committee. The Audit and Risk Committee is required to meet at least four times each fiscal year.

The responsibilities of the Audit and Risk Committee include:

External Audits and Financial Statements

  • meeting with the external auditors twice a year;
  • selecting, appointing, remunerating or, where appropriate, terminating the external auditor, subject to ratification by the Board and the Shareholders;
  • reviewing the independence of the external auditor, on an annual basis;
  • reviewing and discussing the audit scope and results with the external auditor, and clarifying any difficulties and obstacles that have prevented it from accessing required information or documents, as well as any disputes or disagreements with management;
  • reviewing and discussing the Investcorp’s annual and interim financial statements;
  • coordinating the activities of the external auditor and the internal auditor, if any such activities are required;
  • reviewing the Executive Chairman’s and the Chief Financial Officer’s certifications of the financial statements on an annual and interim basis, ensuring that such annual and interim financial statements as prepared present a true and fair view, in all material respects of Investcorp’s financial condition and results of operations in accordance with applicable accounting standards;
  • recommending any additional or specific audit required in respect of the financial statements; and
  • discussing any management letter provided by the external auditor.

Accounting and Internal Controls and Systems

  • examining and reviewing the internal control system and submit a written report on its opinion and recommendations on an annual basis;
  • reviewing Investcorp’s accounting and financial practices, and the integrity of the financial control, internal control and financial statements; and
  • reviewing and discussing possible improprieties in financial reporting or other matters, and ensure arrangements are in place for independent investigation and follow-up regarding such matters.

Internal Audits

  • reviewing internal audit reports and following up on the implementation of the corrective measures related to the comments contained therein;
  • using the audit findings as an independent check on the information received from management about Investcorp’s operations and performance and the effectiveness of the internal controls;
  • reviewing, discussing and making recommendations on the selection, appointment and termination of the Head of the Internal Audit Department, and the budget allocated to the Internal Audit Department, and monitoring the responsiveness of management to the recommendations of the Committee and its findings;
  • reviewing and discussing the adequacy and efficiency of the Internal Audit staff, internal control procedures and any changes therein;
  • reviewing and approving the internal audit policies;
  • approving the risk-based internal audit plan and any deviation thereto; and
  • reviewing annually with the Head of Internal Audit, and other members of management as appropriate, the independence of internal auditing and any unwarranted restrictions on internal audit scope, communications, access, and resources, including personnel and externally contracted resources.

Compliance

  • reviewing the budget allocated to the Compliance Department;
  • reviewing the Compliance control procedures and any changes therein; and
  • monitoring Investcorp’s compliance with legal and regulatory requirements.

Risk Management

  • reviewing the risk management plan and following up on its implementation, ensuring that the plan addresses the:
    • main risks that Investcorp may face and the probability of these risks occurring;
    • mechanisms to identify, measure and follow up on these risks;
    • mechanisms to periodically detect and report risks, including new risks; and
    • ways to mitigate, and if possible to avoid, the effects of the risks.
  • reviewing Investcorp’s risk management policies periodically;
  • developing an executive program for Investcorp’s risk management; and
  • periodically receiving analytical reports on the risk status of Investcorp.

Other Duties

  • reviewing and approve changes to the relevant policies and procedures manuals that fall under the scope of the Audit and Risk Committee;
  • conducting any special investigations it deems necessary to meet its responsibilities, including any investigation required to be conducted by the Whistleblowing Procedures; and
  • reviewing and supervising the implementation of, enforcement of and adherence to The Investcorp Group Code of Conduct.

The Corporate Governance Committee is responsible for overseeing Investcorp’s corporate governance. The members of the Corporate Governance Committee are appointed by the Board of Directors, and at June 30, 2020, the Committee had three members. The Corporate Governance Committee is required to meet at least twice each fiscal year.

The Corporate Governance Committee’s responsibilities include:

  • developing and recommending to the Board changes from time to time in Investcorp’s written corporate governance guidelines, which shall constitute Investcorp’s corporate governance policy framework and shall include or refer to the principles and numbered directives of the Governance Code;
  • reviewing and evaluating the adequacy of its Terms of Reference annually and recommend to the Board any changes it deems appropriate;
  • overseeing Investcorp’s implementation of the Governance Code;
  • overseeing the development of a formal and tailored induction programme for newly appointed Directors, to which current Directors must be invited;
  • overseeing Director’s Corporate Governance educational activities; and
  • performing any other activities consistent with its Terms of Reference and Investcorp’s By-laws, as it or the Board deems appropriate.

In addition, as required by Investcorp’s Conflicts of Interest Policies and Procedures for Members of the Board of Directors, Senior Management and Controlled Function Personnel (the ‘Conflicts of Interest Policies and Procedures’), the Corporate Governance Committee is responsible for considering any report of an actual or potential conflict of interest involving any Director, any member of senior management or any less senior executive performing a Controlled Function (collectively, ‘Covered Persons’) and making a recommendation to the Board of Directors regarding such actual or potential conflict of interest.

The Nomination and Remuneration Committee functions as (i) a nominating committee and (ii) a remuneration committee; The members of the Nomination and Remuneration Committee are appointed by the Board of Directors, and at June 30, 2020, the Committee had four members. The Committee is required to meet at least two times a year.

When acting as a nominating committee, its responsibilities include:

  • making recommendations to the Board from time to time as to changes the Committee believes to be desirable to the size and composition of the Board or any committee of the Board;
  • identifying persons qualified to become Executive Chairman, Chief or Co-Chief Executive Officer, Chief Financial Officer, Corporate Secretary and any other officers of Investcorp considered appropriate by the Board, with the exception of the nomination of the Head of Internal Audit, which will be the responsibility of the Audit and Risk Committee;
  • whenever a vacancy arises (including a vacancy resulting from an increase in the size of the Board), identifying persons qualified to become members of the Board and recommend to the Board a person to fill the vacancy either through appointment by the Board or through shareholder election;
  • considering any criteria approved by the Board and such other factors as it deems appropriate. These may include judgment, specific skills, experience with other comparable businesses, the relation of a candidate’s experience with that of other Board members, and other factors;
  • making recommendations to the Board regarding candidates for Board memberships to be included by the Board on the agenda for the next annual shareholders meeting;
  • considering all candidates for Board membership recommended by the shareholders and any candidates proposed by management;
  • identifying Board members qualified to fill vacancies on any committee of the Board and recommend to the Board that such person be appointed to such committee;
  • overseeing succession planning and design a plan for orderly succession and replacement of officers including replacement in the event of an emergency or other unforeseeable vacancy, ensuring appropriate resources are available;
  • making recommendations to the Board from time to time as to changes the Committee believes to be desirable in the structure and job descriptions of Investcorp’s officers including the Executive Chairman and Co-Chief Executive Officers, and prepare terms of reference for each vacancy stating the job responsibilities, qualifications needed and other relevant matters, including integrity, technical and managerial competence, and experience; and
  • recommending persons to fill specific officer vacancies including Executive Chairman and Co-Chief Executive Officers, considering criteria such as those referred to above.
  • When acting as a remuneration committee, its responsibilities include:
  • considering and making specific recommendations to the Board regarding Investcorp’s remuneration policies (which policies should be approved by the shareholders) and individual remuneration packages for each director and specified executive officers or other senior officers;
  • considering, and making recommendations to the Board regarding, remuneration to be paid to Directors based on their attendance of Board meetings and performance, subject to compliance with Article 188 of the Bahrain Commercial Companies Law;
  • considering and approving remuneration packages for certain specified executive officers or other senior officers, as well as the total variable remuneration to be distributed, taking into account all forms of remuneration, including salaries, fees, expenses, bonuses, deferred remuneration and other employee benefits, ensuring that such compensation is consistent with Investcorp’s corporate values and reflects an evaluation of performance in implementing agreed corporate goals, objectives, strategy; provided, however, that the Committee may consider Investcorp’s performance and shareholder return relative to comparable companies, and, in considering and approving remuneration to the Co-Chief Executive Officers and Executive Chairman, the Committee may consider awards to the Executive Chairman and Co-Chief Executive Officers in past years and the value of remuneration awards to chief executive officers at comparable companies;
  • approving individual remuneration packages for other Managing Directors and Principals, taking into account all forms of remuneration referred to above, ensuring that such compensation is consistent with Investcorp’s corporate values and reflects an evaluation of performance in implementing agreed corporate goals, objectives, strategy and business plans;
  • approving, monitoring and reviewing the remuneration system to ensure the system operates as intended; and
  • retaining and overseeing outside consultants or firms for the purpose of determining director or officer remuneration, administering remuneration plans or related matters.

The names of the members of each of the Standing Committees, their attendance at their relevant Standing Committee meetings during Fiscal Year 2020 and the remuneration proposed to be paid to Directors for their Standing Committee service during Fiscal Year 2020 is reported in the Fiscal Year 2020 Corporate Governance Report.

During Fiscal Year 2020, the Board of Directors evaluated the performance of the Board of Directors as a whole, each Standing Committee and each Director and the Board will continue such evaluations each year going forward. Information regarding the evaluation conducted during Fiscal Year 2020 is presented in the Fiscal Year 2020 Corporate Governance Report.

A report regarding the evaluations conducted each year is also provided at each OGM.

For information regarding related party transactions, please see Note 30 to the consolidated financial statements of Investcorp.

The Board of Directors has adopted the Conflicts of Interest Policies and Procedures that apply to all Covered Persons. A conflict of interest exists when any activity, interest or relationship of a Covered Person interferes with or could reasonably be expected to interfere with the Covered Person’s ability to act in the best interests of Investcorp, including if a Covered Person has a personal interest in a transaction to which Investcorp is or may become a party. The policy provides that a Covered Person’s investment in Investcorp securities, Investcorp transactions and/or Investcorp products on the same terms as are extended to other similarly situated persons, which includes non-Covered Persons, will not be considered to give rise to a conflict of interest.

The Conflicts of Interest Policies and Procedures prohibit Covered Persons from engaging in certain activities, including participating in any discussion or decision-making or vote that involves a subject in which a conflict of interest exists, and requires the disclosure of any existing or potential conflict of interest with respect to any Director to the Executive Chairman’s Office who will in turn report it to the Corporate Governance Committee. The Corporate Governance Committee is required to consider the matter and report to the Board of Directors, which ultimately must determine how to proceed and whether to approve any transaction in which a conflict of interest exists. If a conflict of interest involves a Director, that Director should not participate in any Board of Directors discussion regarding, or vote on, that transaction.

Additionally, each member of senior management and each other Approved Person should report any actual or potential conflict of interest to the Chief Administrative Officer who will in turn report it to the Corporate Governance Committee. The Corporate Governance Committee is required to consider the matter and report to the Board of Directors regarding such actual or potential conflict of interest. Such member of senior management or other Approved Person should not be present at any meeting of the Corporate Governance Committee at which the actual or potential conflict of interest is discussed.

To ensure that any existing or potential conflict of interest is identified, Covered Persons are required to periodically complete a questionnaire. The questionnaire requires disclosure of the companies in which directorships are held and interests held in other entities (whether as a shareholder of 5% or more of the voting shares, a manager or some other form of significant participation).

The Board of Directors has adopted the Investcorp Group Code of Conduct, which applies to the Directors of Investcorp and all Investcorp employees. On an annual basis, all Investcorp Group employees are required to certify in writing their compliance with the Code of Conduct. A copy of the Code of Conduct is printed as an Annex to the Fiscal Year 2020 Corporate Governance Report.

Transparency for other stakeholders

It is the policy of Investcorp to provide to its shareholders, clients, creditors and other stakeholders public disclosure that is fair, transparent, comprehensive and timely, and the Board of Directors has adopted a Public Disclosure Policy and Procedures Statement which includes internal review procedures to ensure that the standards of this policy are satisfied. In accordance with this Policy and Procedures Statement, all information relating to Investcorp that is publicly disclosed is made available on Investcorp’s website promptly after such disclosure is made and Investcorp’s financial statements for at least the last five years are maintained on the Investcorp website at all times. A copy of the Public Disclosure Policy and Procedures also is available on Investcorp’s website.

In addition to publishing its annual audited financial statements, Investcorp publishes its unaudited financial statements for the first six months of its financial year (July-December) and shareholder updates for the first three (July-September) and nine months of its financial year (July-March). An annual shareholders meeting, in addition to the OGM, provides further information and an opportunity for an exchange of opinions and ideas. The Investors Relationship Management (‘IRM’) team and several senior members of the management team also periodically meet with shareholders in one-to-one meetings. Clients have direct, ongoing access to the IRM team and investment professionals. Clients are provided with a detailed written review of each investment in their portfolio every six months, and they regularly meet with IRM team members to discuss their current portfolio and new investment opportunities. Periodically, clients have the opportunity to meet the management teams of their portfolio companies. Lenders receive semi-annual updates on the health of the business and have direct, ongoing access to the members of the finance team, usually through one-to-one communications.

iii. Investcorp’s management structure and collective decision-making. Investcorp’s senior management team adopts a collective decision-making style, which is reflected by the committees described below.

The Executive Chairman and the two Co-Chief Executive Officers of Investcorp comprise an Executive Committee which meets frequently to discuss Investcorp’s business and performance on a high level basis.

The members of the Executive Committee, together with the Chief Administrative Officer, the Chief Financial Officer, the senior executives in charge of Investcorp’s investing lines of business (the ‘Investing LOBs’), the Head of IPRM, the Head of Risk Management and the General Counsel comprise the Operating Committee. The Operating Committee meets monthly to discuss Investcorp’s business and performance on a more granular level.

Each Investing LOB has an Investment Committee. Each Investment Committee will meet to consider a proposed investment or disposition up to three times in the case of Private Equity and Real Estate.

The Investment Committee for an LOB within Private Equity comprises senior executives within that LOB, a Co-Chief Executive Officer and the head of Risk Management.

The Investment Committee for Real Estate Investments is comprised of senior Real Estate executives, a Co-Chief Executive Officer and the head of Risk Management.

Investcorp Credit Management (‘ICM”), reflecting its operations in both the US and European markets, operates two regional Investment Committees drawing on the experience of senior investors active in each market. ICM also operates a global committee which combines senior ICM management with experienced investors from both regional committees to oversee those particular ICM managed strategies which operate on a global basis across all ICM investment markets.

The role of each Investment Committee is to evaluate each proposed investment and disposition based on its risk- return profile as well as its overall suitability to Investcorp’s franchise and balance sheet and in the context of Private Equity and Real Estate Investments to determine whether to recommend to the Investment Council that it approve the investment or the disposition. Where a decision is being made in the context of a fund or account managed or advised by an Investcorp subsidiary (e.g. ICM) the suitability of that investment or disposal for the fund concerned, having due regard to the fund’s investment strategy, fund documentation and applicable regulatory principles and regulations, will be evaluated by the relevant ICM investment committee.

Potential investments that are proposed to be placed with Investcorp’s clients in the Gulf are reviewed at an early stage by the Placement Committee, which is comprised of senior IRM executives. The role of the Placement Committee is to assess the attractiveness of a potential investment to Investcorp’s Gulf clients, which is relevant to Investcorp’s underwriting risk.

All investments and dispositions are subject to the final approval of the Investment Council, which is comprised of Bahrain-based senior executives including the Executive Chairman, the Co-Chief Executive Officers, the Chief Financial Officer, the Chief Administrative Officer, and the head of Treasury.

The Financial and Risk Management Committee guides and assists with the overall management of Investcorp’s risk profile on an enterprise-wide basis subject to the approval of the Audit and Risk Committee and the Board of Directors. The Committee is comprised of senior management drawn from key areas of Investcorp and includes the Co-Chief Executive Officers, Chief Financial Officer, the head of Treasury, the head of Risk Management, the heads of Investing LOBs and the head of IRM.

Regulation

As at June 30, 2020 the Investcorp Group has 17 regulated entities as follows:

Investcorp Financial Services B.S.C. is licensed and regulated by the Central Bank of Bahrain as a category 1 investment business firm to (i) arrange deals in financial instruments, (ii) manage financial instruments, (iii) advise on financial instruments and (iv) operate collective investment undertakings in Bahrain.

Investcorp Securities Limited (“ISL”) acts as an arranger of corporate finance and real estate transactions and manages collective investment undertakings as a small authorized UK AIFM. ISL is registered with and regulated by the UK Financial Conduct Authority (the ‘FCA’) as an IFPRU 50K limited license firm. In the U.S., ISL is also registered with the US Securities and Exchange Commission (the ‘SEC’) as an Investment Adviser.

Investcorp Credit Management EU Limited (“ICMEU”) provides portfolio management services to Collateralised Loan Obligation issuer vehicles and other funds which invest in senior secured loans. ICMEU is also registered with and regulated by the FCA as an IFPRU 50K limited license firm in the UK. In the US, ICMEU has also been deemed an Exempt Reporting Adviser with the SEC.

N.A. Investcorp LLC is registered with and regulated by the SEC and the US Financial Industry Regulatory Authority (“FINRA”) as a broker-dealer.

Investcorp Credit Management US LLC is registered with and regulated by the SEC as an investment adviser.

Investcorp Investment Advisers LLC is registered with and regulated by the SEC as an investment adviser, and as a commodity pool operator by the US Commodities Futures Trading Commission (‘CFTC’) and the US National Futures Association (‘NFA’).

Investcorp Investment Advisers Limited (“IIAL”) is registered with and regulated by the SEC as an investment adviser, and as a commodity pool operator by the CFTC and the NFA. IIAL is also registered and regulated by the Cayman Islands Monetary Authority (‘CIMA’).

Investcorp Management Services Limited is registered with and regulated by CIMA in connection with the performance of investment-related services.

Investcorp Saudi Arabia Financial Investments Co. is licensed by the Capital Market Authority (‘CMA’) to carry on arranging, advising, managing and providing custody services and to market the Investcorp Group’s investment products in Saudi Arabia.

Investcorp Investments LLC is licensed by the Qatar Financial Centre Regulatory Authority to market the Investcorp Group’s investment products in and from the Qatar Financial Centre.

Investcorp Asia Financial Services Private Limited is a registered fund management company regulated by the Monetary Authority of Singapore to market the Investcorp Group’s investment products and provide asset management services in Singapore.

Investcorp India Asset Managers Private Limited is approved by the Securities and Exchange Board of India (“SEBI”) to act as the investment manager to certain investment funds that are registered with SEBI as Alternative Investment Funds (AIFs).

CM Investment Partners LLC is registered with and regulated by the SEC as an investment advisor.

Mercury Capital Advisors, LLC is registered with and regulated by the SEC and the FINRA as a broker-dealer.

Mercury Capital Advisors, LLP is registered with and regulated by the FCA as an authorised investment manager.

Mercury Capital Access, LLC is registered with and regulated by the SEC as an investment adviser.

Mercury Capital Advisors Asia, LLC is registered with the Japan Financial Services Agency Kanto Local Finance Bureau as a Financial Instruments Business Operator Engaging in a Type II Financial Instruments Business.

As at June 30, 2020, Investcorp has a representative office in Abu Dhabi licensed by the Central Bank of the United Arab Emirates, the license of which will be relinquished as Investcorp is in the process of establishing an alternative presence in the United Arab Emirates. License applications in relation to Investcorp’s subsidiaries in Luxembourg and Switzerland are also in process with completion expected in Fiscal Year 2021.

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