General Investment Policy


 


General Objective


 To seek investment opportunities that would maximize shareholders return and maintain appropriate/prudent level of risks to protect capital and assets.


 


This objective is to be achieved with appropriate risk diversification by:




  • Asset Type




  • Geography




  • Execution Strategy – Investing through Funds or other vehicles where appropriate




 


 


Terminology


Terms used in this document are defined as follows:


 


Surplus Fund – The Surplus Fund is the excess fund available after deducting all funds required for the core business of the company. Such fund shall be calculated at the start of the relevant financial year as described in the Company’s Audited Consolidated Financial Report and Accounts, or the quarterly financial statements, whichever is more recent. For the avoidance of doubt, Surplus Fund is calculated based on the maximum permissible leverage set by the BOD at the time the investment is made.


 


Shareholders’ Funds – The value of Shareholders’ Funds at the start of the relevant financial year as described in the Company’s Audited Consolidated Financial Report and Accounts, or the quarterly financial statements, whichever is more recent.


 


Board of Directors or BoD – The Company’s Board of Directors, as may be appointed by the Company’s Shareholders from time to time.


 


Board Investment Committee or BIC – An executive committee of the Board of Directors, charged with certain investment decision, monitoring and control duties as detailed herein.


 


Management Investment Committee or MIC – A Management committee charged with certain investment decision, monitoring and control duties as detailed herein.


 


Company – Bahrain Duty Free Company


 


Asset Categorisation


The following listing outlines the general categorization of assets in which the Company may invest. This list sets out the framework for the investment process and methodology and is the basis for establishing a balanced portfolio approach to all the Company’s investment policies.


 


The primary asset distinction is between Direct and Non-Direct investments. The determining factor will be the liquidity of the investment as outlined within the sub-categories given below.


 


Direct Investments include:


Long Term Equity Investments




  • Private Equity and other Unquoted Equity




  • Strategic Quoted Equity – Strategic Stakes (medium to long term holding strategy)




 


Real Estate and Real Estate Products


 


Non-Direct Investments include:


Quoted Equities and Traded Quasi-Equity Instruments


 


Fixed Income




  • Deposits and Money Market Investments




  • Bonds – general




  • High Yield Bonds – sovereign and corporate debt below investment grade, convertibles etc.




  • Long Term and Illiquid Fixed Income Investments – Hold to Maturity Bonds




 


Structured Products – Capital Protected




  • Bond, Equity related




  • Commodities




  • Foreign Exchange etc




 


General Investment Guidelines


 


The Board of Directors will be responsible for determining the investment policy and strategy of the Company. The Board of Directors will have full authority to change the investment guidelines as it sees fit. The General Investment Guidelines are set out as follows:


 


 


 


 


 


 


 


 


a)         The upper limit of each asset category as a percentage of Surplus Fund is as follows:


 


            Direct Investments                                                           60%


·        Private Equity and other Unquoted Equity                 35%


·        Quoted Equity – Strategic Stakes                              25%


·        Real Estate and Real Estate Products                        25%


 


            Non-Direct Investments                                                                        100%


·        Quoted Equities Etc                                                  50%


·        Deposits and Money Market Investments                 100%


·        Bonds – general                                                       75%


·        Hold to Maturity Bonds                                            15%


·        High Yield Bonds – sovereign and corporate             10%


·        Structured Products – Capital Protected                    20%


 


 


 


 


b)      Investment decision making and approvals shall be governed and executed by a body of three authority hierarchy consisting of the Board of Directors, Investment Committee, and Management Team.


 



  • The following functions shall be approved by the authority levels stated:



  •  Function


    Authority


     


    Approval of investment policy and amendments thereto.


     


    Board of Directors.


     


    Approval of specific investment guidelines within the policy framework.


    Investment Committee


    Approval of Investment strategy and fund reallocation plans within the policy framework.


    Board of Directors


     


    Approval of selected fund managers, mutual funds, brokers and custodian firms.


    Investment Committee


    Approval of eligible banks for deposit placements and relationship.


    Board of Directors


     


    Deposit rollover and placements with eligible banks.


    Management Team


    Approval of Investment Procedure, Internal Accounting and Settlement Practices.


    Board of Directors


     


       


     


     


     


     


     


    2.     The following list is approval limits per one investment transaction:


    Limits


    Authority


     


    Unlimited.


    Board of Directors


    Up to BD 500,000, or up to 2.5% of total shareholders equity, which ever is lower, for investment in “Direct Investment”


     


    Investment Committee


    Up to BD 1,000,000, or up to 5% of total shareholders equity, which ever is lower, for investment in “Non Direct Investment”.


     


    Investment Committee


     



  • Listed below are the authority limits for realizing losses per one transaction:



  •  Loss Limits


    Authority


     


    Above BD 150,000


    Board of Directors


     


    Up to BD 150,000


    Investment Committee


     


     


     


    c)         Decisions to dispose of any asset will be made using the same decision process, and   under the same constraints, as the original decision to invest in such asset.


     


    d)         The Company will invest at least 50% of its Direct Investments in the Arab world, but will restrict its investments to only those countries with a convertible currency. The order of preference for investment will be Bahrain, GCC, Arab countries, OECD, Others.


     


    e)         The Company will not invest in assets, or third party vehicles, which may themselves invest in, the State of Israel.


     


    f)          The maximum total equity investment in any particular country other than Bahrain will not exceed 20% of the Surplus Fund, calculated at the time that the investment is made, except by prior approval of the Board of Directors. In the case of Bahrain the maximum limit may be up to 100% of the Surplus Fund, calculated at the time that the investment is made.


     


    g)         The maximum total fixed income investment in any particular country other than Bahrain will not exceed 50% of the Surplus Fund, calculated at the time that the investment is made, except by prior approval of the Board of Directors. In the case of Bahrain the maximum limit will be 100% of the Surplus Fund, calculated at the time that the investment is made.


     


    h)         The Company will not commit more than 15% of Shareholders’ Funds to any single asset (or multiple asset types of any one company) and will not place deposits or enter into any money market investments constituting more than 30% of Shareholders’ Funds with any one financial institution.


               


    i)          The Company may invest in securities and unquoted investments issued in domestic currencies of Arab countries and will therefore assume the foreign exchange risk. The degree of foreign exchange risk will be a significant factor in determining the eligibility and attractiveness of the investment. Such risks will be considered on a case-by-case basis with due regard to overall foreign exchange exposure and the single country and asset limits set out herein.


     


    j)          The Company’s borrowings, excluding non-recourse borrowing for property, will not exceed the figure approved by the Company’s Board of Directors.


     


    k)                  Investments in third party managed vehicles will be subject to appropriate independent custody, audit and administration arrangements.


     


    l)                    The Company may use, for efficient portfolio management and hedging purposes, options, futures, currency swaps, interest rate swaps and other derivative instruments. However, the Company may not use such instruments for leverage or for any purposes other than those described above. As such, the Company may not invest in derivatives for which the underlying asset values in aggregate exceed the maximum limit levels for that asset class.




    Credit:ivythesis.typepad.com


    0 comments:

    Post a Comment

     
    Top