Esterad Investment BSC : Annual Corporate Governance Report 2022 - English

Corporate Governance

GOVERNANCE

CORPORATE

Esterad 2022 Annual Report

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Corporate Governance

Corporate Governance

Our Corporate Governance ensures every level of the organisation is rigorously maintained to standard.

OVERVIEW

Corporate Governance is a system of rules, policies and practices that govern the way an organization is operated, and dictates the company's responsibilities to its stakeholders by promoting sound business ethics, fairness and transparency. Esterad Investment Company (Esterad or Company) strictly abides by its Board of Directors' Charter. The Charter wholly recognizes such responsibilities and provides a framework of professional conduct for the Board of Directors and Management to follow in pursuit of governance, management and control of the Company.

The Corporate Governance principles followed by Esterad are in line with the requirements of the Corporate Governance Code of the Kingdom of Bahrain, issued by the Ministry of Industry, Commerce (MOIC) and the Central Bank of Bahrain (CBB) Rulebook applicable to listed entities.

OUR COMMITMENT

Here at Esterad, our ethos is simple; openness, integrity, diversity, respect, sincerity and stakeholder focus. These values upon which Esterad is founded on, enable our corporate governance to meet international standards and best practices.

The Board is relentlessly committed to upholding such high standards of corporate governance. In line with the regulatory requirements, the Board regularly reviews and updates our policies such as Esterad's Corporate Governance Framework and the Board's Code of Ethics. With the aim of protecting the rights of both shareholders and stakeholders, we firmly believe that an effective corporate governance is not only the foundation of a respectable business, but rather, empowers Esterad to operate like a well-oiled machine.

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CORPORATE GOVERNANCE VISION

Esterad shall continue to enhance shareholders' value, protect their interests, and defend their rights by practising the pursuit of excellence in corporate life. The Company shall not only comply with all statutory requirements - including the High-Level Controls module of the CBB Rulebook - but also formulate and adhere to strong corporate governance practices. This through continuously striving to best serve the interests of all other stakeholders, including clients, employees, regulators and the public at large.

The adoption and implementation of corporate governance is the direct responsibility of the Board of Directors, and this endeavour is in line with the policies of regulatory authorities and statutory requirements in the Kingdom of Bahrain.

GOVERNANCE

Governance includes the processes through which a company's objectives are set and pursued in the context of the social, regulatory and market environment. It is concerned with practices and procedures for trying to make sure that a company is run in such a way that it achieves its objectives while ensuring that stakeholders can have confidence that their trust in that company is well placed.

Governance aims to provide the infrastructure to improve the quality of decision-making. That said, the Board is central in establishing a robust organizational structure that ensures Esterad has appropriate decision-making processes and controls in place so that the interests of all stakeholders are balanced. This is achieved by the Board as well as its sub-Committees, namely the Executive Committee, the Audit & Risk Committee and the Nomination & Remuneration Committee, in conjunction with the external and internal auditors, the Company's officers and employees. The harmony of all these parties guarantees absolute compliance with various legal and regulatory requirements, Esterad's Memorandum and Articles of Association and its fiduciary duties to shareholders.

OWNERSHIP STRUCTURE

Esterad Investment Company shares are listed on the Bahrain Bourse. The Company has issued 140,000,000 ordinary shares, each with a nominal value of 0.100 fils. All shares are fully paid.

Description of the shareholders who hold 5% or more of the Company's share capital

				Name of the natural person,
	Name	No of shares held	Shareholding %	the final beneficiary
1	Manarat Investment Holding, Cayman Islands	29,682,057	21.20%	Manarat Investment Holding
2	Lewan Investment Holding, Cayman Islands	421,570	0.30%	Mr. Hesham Al Rayes
3	National Bank of Bahrain BSC	16,331,219	11.67%	National Bank of Bahrain BSC

Note:

Nos. 1 & 2, Manarat Investment Holding & Lewan Investment Holding, Cayman Islands entities are construed as "acting in concert".

Description of Shareholder classification

				Shareholding %
Shareholder classification				Government
		Individuals	Corporate	or Organizations	Total
1	Local	53.55%	21.71%	0.86%	76.12%
2	Arab	1.51%	0.77%	0.00%	2.28%
3	Foreign	0.10%	21.50%	0.00%	21.60%
Total	54.88%	44.26%	0.86%	100.00%
Description of how Shareholders are distributed according to their respective shareholding
Shareholding (share)	No of shareholders	Number of shares held	Shareholding %
1	<50,000	4,032	25,801,104	18.43%
2	50,000 to 500,000	215	30,862,465	22.04%
3	500,000 to 5,000,000	35	37,323,119	26.66%
4	>5,000,000	2	46,013,276	32.87%
Total		4,284	140,000,000	100.00%

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COMPANY STRUCTURE

Board Nomination

and Remuneration,

Committee

Board Secretary &

Corporate Governance

Executive Director-

Investments

Investment

Board of Directors

Board Audit,

Risk & Compliance

Board Executive

Committee

Committee

Chief Executive Officer

Director- placement

Head of Treasury

Chief Financial Officer

Compliance

Operations, HR & Admin

Accounting, Finance &

Risk Management

External Audit

Internal Audit (Outsourced)

IT (Outsourced)

THE GROUP STRUCTURE OF ESTERAD INVESTMENT COMPANY BSC, AND ITS SUBSIDIARIES

Name/Entity	Nationality	Legal Status	Percentage	Invested Capital
Esterad Real Invest 1 W.L.L.	Bahraini	WLL	100.00%	BHD 3,300,000/-
Esterad Hospitality 1 W.L.L.*	Bahraini	WLL	100.00%	BHD 1,000/-
Esterad Bahrain Invest II W.L.L. **	Bahraini	WLL	98.14%	BHD 2,225,900/-
Esterad Amwaj Co., WLL ***	Bahraini	WLL	100.00%	BHD 17,000,000/-
Esterad Amwaj Partnership Co.,	Cayman	Ltd	100.00%	USD 8,500/-
Esterad Share Invest I WLL	Bahraini	WLL	100.00%	BHD 1,000/-
Esterad Ventures W.L.L	Bahraini	WLL	100.00%	BHD 1,000/-
Esterad Education 1 W.L.L	Bahraini	Ltd	100.00%	BHD 1,000/-
Nurture Ventures B.S.C Closed ****	Bahraini	Ltd	51.00%	BHD 249,135/-

• The legal formalities for establishment was undertaken in 2021, but officially registered in January 2022
  ** Currently under liquidation
  *** Owned 100% via Esterad Amwaj Partnership Co., Cayman Islands
  **** 49% owned by Esterad and 2% owned by Mr. Abdulrahman Jamsheer as nominees' shares.

BOARD MEMBERS AND MANAGEMENT

In line with the rules and regulations of the Ministry of Industry, Commerce & Tourism as well as Esterad's Articles of Association, the Board shall always consist of executive, non-executive and independent Directors. The Board of Directors is elected by the shareholders in order to represent the shareholders. The Board is responsible for protecting shareholders' interests, establishing policies for management and overseeing the Company.

BOARD CHARTERS

Esterad's Board of Directors Charter was initially constituted in 2012 in line with the Corporate Governance Code of the Ministry of Industry and Commerce (MOIC) and Volume 6 of the Central Bank of Bahrain's Rulebook on Capital Markets to ensure compliance and completeness of the governance framework and, it is periodically reviewed and updated thereafter. It states that the Board's key purpose is to manage the Company in the best interest of the shareholders. Directors have a fiduciary duty to prosper the Company by collectively directing the Company's affairs, while meeting the appropriate interests of its shareholders and relevant stakeholders.

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CHAIRMAN DUTIES AND RESPONSIBILITIES

The Company Shall be Headed by an Effective, Qualified and Expert Board. In addition, in the Corporate Governance Code 2018, the Chairman of the Board responsibilities include but not limited to:

• Representing Esterad before others;
• Ensuring that the directors have access to complete and accurate info in a timely manner;
• Ensuring that the Board discussed all info as stated in the agendas for each meeting;
• Encouraging effective communication between shareholders and BoD; and
• Encouraging all directors to effectively exercise their roles in the best interest of the Company;

BOARD RESPONSIBILITIES

The primary role of the board is to provide entrepreneurial leadership to achieve the Company's goals through the implementation of strategic initiatives and ultimately maximizing the value of shareholders. Essentially it is the role of the Board of Directors to hire the Chief Executive Officer (CEO) of the Company and assess the overall direction and strategy of the Company. The CEO is responsible for hiring all of the other employees and overseeing the day-to-day operations of the business. That said, the Board has the authority to set forth all matters relating to the directions, policies, practices, management and operations of the Company, and as such, is wholly accountable to the Shareholders as well as the Stakeholders of the Company.

The four points below outline the major responsibilities of the Board of Directors:

• The Board has a strategic function in providing the vision, mission and goals of the organization;
• The Board has the responsibility of developing a governance system for the Company. The Articles of Association provide a framework but the Board develops a series of policies that guide their own actions as well as the actions of senior management;
• The Board must develop a Corporate Governance system that involves how the Board interacts with the CEO and senior management; and
• The Board has a fiduciary responsibility to represent and protect shareholders' interests.

In addition, in line with the Corporate Governance Code 2018, the board's role and responsibilities shall include but are not limited to:

• The overall business performance and strategy for the company;
• Causing financial statements to be prepared which accurately disclose the company's financial position;
• Monitoring management performance;
• Convening and preparing the agenda for shareholder meetings;
• Monitoring conflicts of interest and preventing abusive related party transactions; and
• Assuring equitable treatment of shareholders including minority shareholders.

The directors are responsible both individually and collectively for performing these responsibilities. The Board shall not delegate its ultimate responsibility to ensure that an adequate, effective, comprehensive and transparent corporate governance framework is in place.

INDEPENDENCE OF DIRECTORS

An independent director is a member of the Board of Directors who does not have a material relationship with the Company that can interfere with their judgement, and is not involved with the day-to-day operations of the Company. In line with the obligations of the CBB's HC Module and the MOIC's Corporate Governance Code, Esterad has adopted comprehensive procedures to review and determine the independence of Directors on an annual basis.

The Board of Directors comprises of eight members which includes, six whom are Non-Executive Independent Directors, one Non- Executive Non-Independent Directors and, one Executive Non-Independent Directors as below:

• The Audit & Risk Committee comprises of three Independent members and one Non-Independent Executive member.
• The Nomination & Remuneration Committee comprises of three Independent members.
• The Executive Committee comprises of three Independent members and one Non-Independent, Non- Executive member.
• Board Term: The Board was elected/ re-appointed by the shareholders at the Ordinary General Meeting held on 27th September 2020 for a three-year term. In addition, a second OGM was held on 5th November 2020 to increase the Board of Directors Membership from seven (7) to eight (8) members.
• Director's Appointment Letters: In accordance with the CBB Module and in line with the Corporate Governance Code, each Director has signed a Director's appointment letter which includes his duties and terms and conditions.

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