arabtec holding pjsc

(.ع م.)ش أرابــــتــــك الــقـــابـــــضـــــة

Arabtec Holding PJSC

1

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي

563332 :التجارية الرخصة رقم

+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس

www.arabtecholding.com

ARABTEC HOLDING PJSC

(Public Joint Stock Company)

CORPORATE GOVERNANCE REPORT

2016



2

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


Arabtec Holding PJSC (the “Company”)

Corporate Governance Report for FY 2016

1. Statement of taken actions to complete the corporate governance system during 2016 and method of application

(a) Appointment of Independent Board Members and Executive Management

The composition of the board of the Company (“Board” and each member of the Board a “Board Member”) was strengthened

during FY 2016 with the appointment of three new independent Board members bringing further experience and expertise to the

Board. The size of the Board was increased from five Board Members to seven by an amendment to the Company’s memorandum

and articles of association approved by the Annual General Assembly on 20 April 2016. The new appointments were:

(i) Mr. Ghannam Al Mazrouei, Independent Board Member (appointed 1 June 2016) and Chairman of the Audit

Committee (appointed 8 September 2016);

(ii) Mr. Tariq Al Mehairbi, Independent Board Member (appointed 1 June 2016); and

(iii) Mr. Jamal Alnuaimi, Independent Board Member (appointed 13 June 2016).

The Board approved the appointment on 28 November 2016 of Mr. Hamish Tyrwhitt as Group Chief Executive Officer (“Group CEO”)

to replace the Acting CEO, a role that had been fulfilled by board members since mid-2014.

(b) Changes to the Organisational Structure for the Company and the Group

In December 2016, the Board approved a new organisational structure (“Organisational Structure”) for the Company and the

establishment of the Company as a strategic management company and the realignment of its subsidiaries (each a “Group

Subsidiary” and together, “Group”) into three core operating entities and investments, providing a clear structure and role for the

Group going forward. The Organisational Structure will be finalised and implemented across the Group during FY 2017.



3

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


(c) Group-wide Risk Management Plan

In order to strengthen the Group’s risk management processes, on 24 July 2016 the Company appointed a new Director of Risk & Compliance, Mr. Frederic Desitter, reporting directly to the Group CEO. Since his appointment, Mr. Desitter has progressed the development of an Enterprise Risk Management (“ERM”) framework across the Group. The role of the Director of Risk & Compliance is to:

(i) lead risk management activities for the Group as process owner;

(ii) build a risk awareness and culture across all Group entities and drive change, embedding risk management into the operational and strategic processes of the Group;

(iii) establish an integrated ERM framework for all aspects of risk management across the Group in order to identify, manage and control risks; and

(iv) contribute to the optimisation of the Group risk portfolio providing proactive risk advice to enhance operational performance and to secure the Group’s objectives.

With the assistance of an external consultant, an assessment of the maturity of the Group’s risk management processes was conducted. Results were translated into an ERM road map describing the actions and mitigation plans that will be rolled out in FY 2017 to enhance risk management processes and practices at each and every level of the Group. The objectives of the ERM framework are to:

(i) support securing strategic and operational objectives, at each level, from projects to Group level, by the early identification of risks and the implementation of pro-active mitigation actions;

(ii) provide an effective management support tool to facilitate informed and objective decision making by management based on risk factors;

(iii) define the Group’s risk appetite and associated tolerance levels, to ensure that risks taken are understood and acceptable; and

(iv) encourage cooperation among entities to manage the organisation’s full range of risks with an enterprise perspective, as an interrelated risk portfolio rather than as individual “silos”.



4

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


(d) New Compliance Policies Rolled Out

In April 2016, the Company implemented a whistleblowing policy applicable to all stakeholders confirming that the Company is

committed to conducting its business with honesty and integrity. The policy facilitates and encourages employees and other

stakeholders to report instances of misuse, abuse of authority and other wrongdoings within the Group with reports recorded and

investigated and an appropriate course of action determined by the Company’s senior management (“Senior Management”) in each

case.

A conflict of interest (“COI”) declaration was sought from all Group employees and a new COI Committee was established comprising

of Senior Management to review and monitor any conflicts declared and recommend further action where appropriate.

(e) Taqdeer Award

Improvements in the corporate governance system during FY 2016 saw major Group Subsidiary, Arabtec Construction LLC, win the

prestigious Taqdeer Award awarded by the Government of Dubai following the successful audit and inspection of Arabtec

Construction LLC’s processes, systems and initiatives to promote labour relations and employee welfare.

2. Statement of conducted transactions by the board members, their spouses and children with the Company’s securities during

2016 as per the following schedule:

No. Name Title/ kinship Shareholding as at 29/12/16

Total sale process

Total purchase process

1. Mr. Tariq Ahmed Mohamed Al Masaood Al Mehairbi

Board Member 298,000 0 298,000

2. Mr. Ghannam Butti Khaleefa Khalaf Al Mazrouei

Board Member 30,000 0 30,000

Save as disclosed above, there were no other transactions in the Company’s securities by the Board Members, their spouses and

children during FY 2016.



5

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


3. Formation of the board of directors:

(a) Statement of the formation of the board of directors as per the following schedule:

No. Name Category: (executive, non-executive, independent )

Expertise Qualifications Term of office as a member of the board of the Company as from the date of first election

Directorships and posts in other public stock companies.

Other significant supervisory, government or commercial posts

1. H.E. Mohamed Thani Murshed Ghannam Al Rumaithi

Independent Chairman, Thani Murshed Unilever

Bachelor of Business Administration

1 year and 11 months (appointed 30/04/15)

Chairman, National Marine Dredging Co.

Chairman, Federation of UAE Chambers of Commerce & Industry Chairman, Abu Dhabi Chamber of Commerce & Industry Vice-President, UAE Football Association Vice-President, The US-UAE Business Council President, Pro League Committee in the UAE Board Member, Al Etihad Credit Bureau Board Member, Abu Dhabi Council for Economic Development Member, UAE-UK Business Council

2. Mr. Mohamed Hamad Ghanem Hamad Al Mehairi

Independent CEO & Board Member, Aabar Investments PJS (2009 to date) Division Manager, IPIC (2007-2009)

Bachelor of Science & Business Administration - Finance,

4 years and 11 months, (appointed 30/04/12)

Board Member, Al Hilal Bank Board Member, Al Hilal Takaful

Chairman, Qatar Abu Dhabi Investment Company (QADIC) Vice Chairman, Pak-Arab Refinery Ltd. (PARCO)



6

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس






Investment Manager, IPIC (2006-2007) Sales Coordinator, ADNOC (2000-2006) Market Analyst, ADNOC (1999-2000)

Suffolk University, USA

Board Member, UniCredit SpA

3. Mr. Khalifa Abdulla Khamis Al Romaithi

Independent Director of Downstream & Diversified Investments, IPIC Deputy Director of the Investment Department, IPIC Head of Portfolio Management, IPIC Head of Diversified Investments, IPIC

Bachelor of Business Administration –Finance, University of Portland, USA

1 year and 11 months, (appointed 30/04/15)

Board Member, Depa Ltd Board Member, Gulf Energy Maritime Board Member, Abu Dhabi National Takaful Co.

Vice Chairman, Nova Chemicals Corporation (Canada) Director, Cosmo Energy Holdings Company, Limited (Japan) Board Member, Aabar Investments PJS Director, Falah Growth Fund (GP) Limited (Kazakhstan) Board Member, Qatar and Abu Dhabi Investment Company PQSC (QADIC)

4. Mr. Saeed Mohamed Saeed Faraj Al Mehairbi

Non-Executive Operational Projects Head, IPIC (July 2012 to date) Director, Project Dept., IPIC

Master Of Science Quality Management, Wollongong

1 year and 11 months (appointed 30/04/2015)

Board Member, Depa Ltd

Director, Real Estate, Aabar Properties Director of the Projects Directorate at IPIC Board Member, CEPSA (Compañía Española de Petróleos, S.A.U.)



7

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس






(August 2007 to July 2012) Senior Project Coordinator, ADNOC (Nov 1997 to July 2007)

University, 2006 Bachelor Degree Engineering Management, Higher College of Technology – Abu Dhabi

Board Member, Emirates LNG Board Member, Duqm Refinery Board Member, SUMED Egypt

5. Mr. Jamal Saeed Saleh Mohammed Alnuaimi

Independent General Manager, Etisalat (May 2008 to date) Operations Supervisor, Operations Security Officer, Operations Officer, Amiri Flight (Feb 1994 to April 2008)

Master of Business Administration ( Global leadership) – UAE 2005 Bachelor of Aviation Management Metropolitan State Collage – USA 1993

9 months (appointed 13/06/16 )

None Board Member, Abu Dhabi Chamber of Commerce & Industry

6. Mr. Ghannam Butti Khaleefa Khalaf Al Mazrouei

Independent Chief Financial Officer, ADCO (2013 to 2015) Manager, Group Financing Dept., ADNOC (2012 to 2013)

Master of Science in Financial Economics, Boston University USA (2000)

11 months (appointed 01/06/16)

Abu Dhabi Securities Exchange (ADX)

Board Member, National Qualification Authority



8

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس






Head of CSD Registry service - ADX (2011-May 2012) Head of Market Surveillance - ADX (2000- April 2011)

Bachelor of Science in Business Administration / Finance Suffolk University USA - 1998

7. Mr. Tariq Ahmed Mohamed Al Masaood Al Mehairbi

Independent Partner & Director Al Masaood Group, General Trading Managing Director & Partner Al Masaood Automobiles, Automotive

Bachelor of Business Administration, Higher College of Technology

11 months (appointed 01/06/16)

Director and Partner of Al Maha Holdings Board Member, Al Jazeera Football Club Partner at Osbourne Engineering, UK and Turbo Power Services, UK

(b) Statement of women representation percentage on the board for 2016 (in case of lack of representation kindly state the same).

There are no Board Members who are women.

(c) Statement of reasons for not having any women nominees for the board membership.

The Board election process was advertised in Arabic and English national newspapers prior to the General Assembly meeting held on 1

June 2016. The Company did not receive any applications from women nominees for election to the Board.



9

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


(d) Statement of the following:

(i) Total paid remunerations to the board members for 2016.

The total remuneration paid to Board Members during FY 2016 was nil.

(ii) Total proposed remunerations to the board members for 2017 to be presented to the general assembly meeting for ratification.

The total proposed remuneration to be paid to Board Members during FY 2017 is nil.

(iii) Statement of consideration for attending board committees’ meetings which were paid to the board members for the financial

year 2016 in accordance with the following schedule:

The total remuneration paid to Board Members for attending Board Committee meetings during FY 2016 was nil.



10

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


(e) Number and dates of board meetings held during the financial year 2016, number of personal attendance for all the board members and statement of attendees through proxies.

Board Member

BOD No. 1/2016

18/02/16

BOD No. 2/2016

23/03/16

BOD No. 3/2016

27/03/16

AGM

20/04/16

BOD No. 4/2016

28/04/16

BOD No. 5/2016

04/05/16

BOD No. 6/2016

12/05/16

BOD No. 7/2016

13/06/16

BOD No. 8/2016

13/08/16

BOD No. 9/2016

05/10/16

BOD No. 10/2016

13/11/16

BOD No. 11/2016

28/12/16

H.E. Mohammad Thani Al Rumaithi

Excused, did not attend

By

circulation Attended by phone


Mr. Mohamed Al Mehairi


By

circulation

Attended by phone

Mr. Khalifa Al Romaithi

By

circulation

Attended by phone


Mr. Saeed Al Mehairbi

By

circulation

Mr. Mohamed Al Fahim




By circulation


Resigned 13/06/16,

did not attend

Mr. Ghannam Al Mazrouei

Appointed 01/06/16

Mr. Tariq Al Masaood Al

Mehairbi

Appointed 01/06/16


Mr. Jamal Alnuaimi

Appointed 13/06/16



11

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


(f) Statement of duties and competencies of the board of directors which were delegated to the executive management pursuant

to a delegation from the board with statement of the term and validity of such delegation.

(i) Company

In relation to the delegation of authority by the Board at the Company level in FY 2016, the Board has issued two powers of attorney (“PoAs” and each a “PoA”). The first PoA in favour of any two Board Members to act on behalf of the Company. The second PoA in favour of the Acting CEO to act on behalf of the Company subject to an appropriate financial limit. Both PoAs are for a term of three years.

(ii) Group Subsidiaries

In relation to the delegation of authority by the Board at the Group Subsidiary level, the CEO or General Manager of each

of the main operating subsidiaries has been issued with a power of attorney to carry out the day-to-day management of

the relevant Group Subsidiary in accordance with a delegation of authority matrix and bank signing authority matrix, in

each case, approved by the Board. Certain material decisions are reserved for the Board. The powers of attorney are for a

term of either one year or two years.

(g) Particulars of conducted transactions with related parties (stakeholders) with clarification of the nature of the relationship and

type of transactions.

(i) The Group entered into a variety of transactions with companies and entities that fall within the definition of related

parties as contained in International Accounting Standard No. 24: Related Party Disclosures. Related parties comprise the

Group's shareholders who control or exercise significant influence, directors and entities related to them, companies

under common ownership and/or common management and control, their partners and key management personnel.

Joint operations partners and non-controlling interests are considered by the Group as related parties. Management

decides on the terms and conditions of the transactions and services received/rendered from/to related parties as well as

on other charges.



12

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


(ii) On 13 July 2016, the Group entered into a loan note agreement with Aabar investments PJS (a shareholder) for a term

loan facility of AED 400 million, to support the projects’ execution. As at 31 December 2016, the draw-down balance of the

loan amounted to AED 177,724 thousand. The loan is repayable in full on 30 June 2018 and carries interest at a mutually

agreed rate.

(iii) A loan of AED 1.8 million (2015: AED 1.8 million) is receivable from a minority shareholder in Group Subsidiary House of

Equipment Co. LLC. Interest on the loan is charged at 6% per annum (2015: 6% per annum).

(iv) The nature of significant related party transactions and the amounts involved were as follows:

2016 2015 AED’000 AED’000

Joint operations Manpower and other charges to joint operations* 28,134 19,155

Shareholders 88,504 104,649

Other related parties Contract and other revenue 20,504 392,699

Subcontracting costs 123,459 16,846

Equipment hire 553 997

Wages and salaries 851 2,695



13

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


i. Due from related parties 2016 2015 AED’000 AED’000

Joint operations Amounts due from joint operations’ partners 453,963 392,200

Shareholders 26,811 858,413 Other related parties Entities with common ownership and management Al Waab City W.L.L., Doha, Qatar 2,552 2,792 Others 1,905 7,429

31,267 10,221

485,231 1,260,834



14

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


ii. Due to related parties 2016 2015 AED’000 AED’000

Joint operations Amounts due to joint operations’ partners 438,535 354,496

Associate Depa Interiors LLC, Dubai, UAE 55,757 22,960

Other related parties Entities with common ownership and management Nasser Bin Khaled Al-Thani and Sons Group and its related

parties, Qatar 36,242 37,573 Others 15,235 18,084

51,477 55,657

545,769 433,113

Included in amounts due from customers for contract work is an amount of AED 21 million (2015: AED 1,050 million) due from

related parties.

(h) Organisational structure of the company to include as minimum the first and second levels provided that the same has to

include the general manager and/or the CEO, deputy general manager and company’s executives such as the CFO.

Please see Appendix 1 to this report for a copy of the organisational structure of the Company during FY 2016. A new

organisational structure to be implemented in FY 2017 was approved by the Board in December 2016 and is being finalised by the

Company.



15

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


(i) Detailed particulars of top executives at the first and second levels in accordance with the organizational structure of the

company, their posts, dates of appointment, with total salaries and bonuses paid to them in accordance with the following

schedule:

Name Post Date of appointment

Total paid salaries and allowances for FY 2016 (AED)

Total paid bonuses for FY 2016 (AED)

Any other cash/ in kind bonuses payable for FY 2016 or in the future (AED)

Mr. Saeed Al Mehairbi

Acting CEO 30 April 2015 nil nil nil

Mr. Hamish Tyrwhitt

Group CEO 28 Nov 2016 385,000 nil nil

Mr. Ravi Murthy

Acting CFO 21 Sep 1996 961,500 nil nil

Mr. Alex Ghazi Group General Counsel & Board Secretary

7 Jul 2013 1,442,702 nil nil

Mr. Mitresh Singh

Chief Internal Audit 1 Jun 2015 1,425,450 nil nil

Mr. Rashed Al Hameli

Group HR Director 7 Dec 2015 888,816 nil nil

Mr. Frederic Desitter Director of Risk & Compliance

24 Jul 2016 369,565 nil nil

Mr. Steven Salo Strategy & Investor Relations Director

5 Aug 2015 934,876 nil nil

Mr. Adel Al Fahim Marketing & Corporate Communications Director

1 June 2014 466,588 nil nil



16

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


4. External Auditor:

(a) Provide a brief to the shareholders on the Company’s auditor

PricewaterhouseCoopers (“PwC”) is one of the ‘big four’ audit and business advisory services firms. Having offices in 157 countries

and employing more than 223,000 people, PwC are among the leading professional services networks in the world. In FY 2016, PwC

firms provided services to 422 companies in the Fortune Global 500. For the year ending 30 June 2016, PwC’s global gross revenues

were US$35.9 billion. PwC has advised businesses in the United Arab Emirates for more than 25 years and specialises in Audit,

Assurance, Business Advisory services and Taxation through its Abu Dhabi, Dubai and Sharjah offices. The UAE firm has experience

in number of industries including Banking and Capital markets, Construction, Real Estate & Infrastructure, Energy and Oil & Gas,

Logistics, Education, Hospitality and Public Sector. To know more about services provided by PwC, please refer to

http://www.pwc.com/gx/en/services.html

(b) Statement of fees or costs related to auditing or provided services by the external auditor. The same must include details and

nature of such services and payable fees, with statement of other services provided by an external auditor other than the

Company’s Auditor during 2016, in addition to statement of number of years elapsed in the capacity as the Company’s external

auditor in accordance with the following schedule:

On 20 April 2016, General Assembly of shareholders of Arabtec Holding, approved the appointment of PricewaterhouseCoopers

(“PwC”) as the external auditors of the Company for the year 2016 and approved their annual remuneration. Arabtec did not assign

any technical, administrative or consultation services or works to PwC which would influence their independence, objectivity and

integrity in discharging their duties as the statutory auditors.

Name of the audit firm:

PricewaterhouseCoopers

Number of years elapsed as the Company’s external auditor:

One



17

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


Total fees for auditing the financial statements for the Group for 2016 including the fees of AED 350,000 for the auditing of the Company’s financial statements:

AED 2,500,000

Fees and costs of other services other than for auditing financial statements for 2016 (AED), if any, and in the event of non-existence of any other fees, mention the same expressly:

No fees and costs other than external audit fees were obtained from PwC during FY 2016

Details and nature of the other provided services (if any), in case there is no other services, mention the same expressly:

No services other than external audit services were obtained from PwC during FY 2016

Statement of other services provided by an external auditor other than the Company’s auditor during 2016 (if any), in case there is no other external auditor, mention the same expressly:

No services were provided by an external auditor other than PwC (the Company’s auditor) during FY 2016

5. Audit Committee

(a) Names of members of the audit committee with statement of the assigned competencies and duties to it.

The Audit Committee members as at 31 December 2016 were:

Committee Member Position Category

Mr. Ghannam Al Mazrouei Chairman Independent

Mr. Khalifa Al Romaithi Member Independent

Mr. Muhammed Tashlim Baureck Member External



18

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


The Audit Committee charter sets forth the duties of the Audit Committee including:

(i) establishing and implementing a policy for entering into a contract with the external auditor;

(ii) following up and controlling the independence of the external auditor and the extent of its objectivity;

(iii) controlling the integrity of the Company’s financial statements and reports (yearly, half-yearly and quarterly) and

reviewing the same during the year;

(iv) considering any important and unusual items recognised or to be recognised in these reports and accounts;

(v) reviewing financial and internal control and risk management systems in the Company;

(vi) discussing the internal control system with management and ensuring it fulfills its purpose of establishing an

effective internal control system;

(vii) examining the main investigations’ results with respect to internal control matters;

(viii) ensuring coordination between the internal auditor and external auditor and the availability of required resources

for the internal control system;

(ix) reviewing financial and accounting policies and procedures in the Company;

(x) reviewing the external auditor’s mission and action plan;

(xi) ensuring the timely response by the Board to substantive clarifications and issues raised in the external auditor’s

report;

(xii) establishing the controls which enable the Company’s employees to report any suspected irregularity in financial or

internal control reports, or such other matters, in a confidential manner, as well as the steps to investigate such

irregularities independently and fairly;

(xiii) controlling the extent of the Company’s compliance with the code of business conduct;

(xiv) ensuring the implementation of business rules related to the Committee’s duties and the powers vested therein by

the Board; and

(xv) submitting a report to the Board on the above-mentioned matters.



19

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


During FY 2016, the Audit Committee held eight meetings as follows:


(Chairman until Meeting 7)


Mr. Muhammed Tashlim

Baureck

Meeting 1 11/01/16

In attendance Excused, did not attend In attendance

Meeting 2 07/02/16

In attendance In attendance In attendance

Meeting 3 13/03/16


Meeting 4 24/04/16


Meeting 5 22/05/16


Mr. Ghannam Al Mazrouei replaced Mr. Mohamed Al Mehairi as an Audit Committee member on 10 August 2016 and Mr. Khalifa

Al Romaithi as Chairman of the Audit Committee on 8 September 2016.



20

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


Mr. Ghannam Al Mazrouei

(Appointed Chairman at Meeting 7)


Mr. Muhammed Tashlim

Baureck

Meeting 6 10/08/16

Excused, did not attend In attendance In attendance

Meeting 7 08/09/16


Meeting 8 07/11/16

In attendance In attendance Excused, did not attend

6. Nomination and Remuneration Committee

(a) Names of members of the Nomination and Remuneration committee with statement of the assigned competencies and duties to

it.

The members of the Nomination and Remuneration Committee are:

Committee Member Position Category

Mr. Mohamed Hamad Al Mehairi Chairman Independent

Mr. Jamal Alnuaimi Member Independent

Mr. Tariq Al Masood Member Independent



21

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


The Nomination and Remuneration Committee charter sets forth the duties of the Nomination and Remuneration Committee

including:

(i) verification of continuous independence of Board members;

(ii) formulation and annual review of the policy on granting remunerations, benefits, incentives and salaries to Board

Members and employees of the Company and the Committee shall verify that remunerations and benefits granted

to the senior executive management of the Company are reasonable and in line with the Company’s performance;

(iii) determination of the Company’s needs for qualified staff at the level of the senior executive management and

employees and the basis of their selection;

(iv) formulation, supervision of application and annual review of the Company’s human resources and training policy;

and

(v) organisation and follow-up of procedures of nomination to the membership of the Board in line with applicable laws

and regulations as well as the Committee charter.



22

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


(b) Number and dates of meetings held by the Nomination and Remuneration Committee during the financial year with number of

personal attendance of meetings by the members of the Committee.


Chairman

Mr. Mohamed Al Fahim

Mr. Khalifa Al

Romaithi

Meeting 1 18/01/16


Meeting 2 07/02/16


Meeting 3 13/03/16


Meeting 4 24/04/16


Meeting 5 22/05/16


Mr. Jamal Alnuaimi replaced Mr. Mohamed Al Fahim as a Nomination and Remuneration Committee member on 13 June 2016. Mr.

Tariq Al Masood replaced Mr. Khalifa Al Romaithi as a Nomination and Remuneration Member on 13 June 2016.



23

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس



Mr. Jamal Alnuaimi

Mr. Tariq Al Masood

Meeting 6 23/06/16


Meeting 7 04/09/16

In attendance In attendance

In attendance

Meeting 8 02/11/16

In attendance In attendance

In attendance

Meeting 9 28/12/16


7. The Committee for follow up and supervision over transactions conducted by individuals with access to information

(a) Names of members of the Committee for follow up and supervision over transactions conducted by individuals with access to

information with statement of the assigned competencies and duties to it.

The Company maintains a list of individuals with access to inside information. There is currently no formal committee established

for follow up and supervision over transactions conducted by individuals with access to information.

(b) Brief report on the Committee’s work during 2016 (in case such committee hasn’t been formed kindly illustrate the reasons).

Steps will be taken during FY 2017 to establish a committee to consider and implement the most effective way to monitor

transactions conducted by individuals with access to information.



24

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


8. Internal Control System

(a) Declaration by the board of its responsibility for the internal control system in the Company, review of its work mechanism and

functionality.

The Board has ultimate responsibility for the internal control system within the Company, review of its work mechanism and

functionality. An overview of the Company’s internal control system is set out in paragraph (d) below.

(b) Name of the head of the department, his qualifications and date of appointment.

The Company’s internal control system is the combination of various frameworks, structures and processes established by the Board

and Senior Management to enhance operational performance and to secure the Group’s objectives. In July 2016, the Company

appointed a new Director of Risk & Compliance, Mr. Frederic Desitter to progress the development of an ERM framework across the

Group.

(c) Name of the compliance officer, his qualifications and date of appointment.

Mr. Alex Ghazi, Group General Counsel and Board Secretary, has been the compliance officer for the Company since 15 August 2015.

Alex holds a Diplôme d’Etude Supérieur Spécialisé (DESS) (equivalent to a Masters Degree) in International Trade Law, from the

Université de Nanterre, France.

(d) The method by which the internal control department tackles major issues in the Company or issues which have been disclosed

in the annual reports and accounts (in case there wasn’t any major issues kindly state that the Company didn’t encounter any

issues).

The Company’s internal control system is based on the model of three lines of activity control:

(i) first line of control - exercised by every employee and their line manager, in the course of their daily activities;



25

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


(ii) second line of control - exercised by Senior Management at the Company and Group Subsidiary level, by the

functional divisions in their jurisdictions and by the Risk Management Department and the compliance function;

and

(iii) third line of control - exercised by the Internal Audit Department, which periodically assesses the systems for risk

management and internal control across the Group, and their effectiveness.

The internal control system is designed to follow this multi-tiered approach and is implemented at various governance levels

throughout the Group. The internal control system relies on autonomy, delegation and collaboration within the various teams,

encouraging the alignment of goals, resources and the mechanisms deployed. It is based on the clear identification of goals and

responsibilities, a human resources policy ensuring that resources and skill levels are sufficient, and that information systems and

tools are adapted to each team and/or Group Subsidiary. Each Group Subsidiary is responsible for implementing the relevant

internal control strategies to achieve these objectives although the overall monitoring of the internal control system and risk

management is centralised at the Company level.

Board of Directors The Board defines the strategic direction and objectives of the Group and approves matters of key financial and reputational importance including the policies governing the Company’s business activities. The Board’s role includes overseeing, counselling and directing Senior Management, the Board Committees and approving appropriate delegations of authority to ensure that the interests of the Company and its shareholders are being served. The Board has access to all documents and reports required to discharge its fiduciary duties and to act in good faith with due diligence and care in the best interests of the Company and its shareholders.



26

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


The Board is also responsible for ensuring that Senior Management maintains a system of internal control to increase the

likelihood that established objectives and goals will be achieved, namely:

(i) reliability and integrity of financial and operational information;

(ii) effectiveness and efficiency of operations and programmes;

(iii) safeguarding of assets; and

(iv) compliance with laws, regulations, policies, procedures, and contracts.

Board Committees The Board delegates authority and oversight of key areas of responsibility to its Committees who report to the Board with their analyses including recommendations with respect to managing risk:

(i) Audit Committee

The Audit Committee is responsible for all matters related to audit, compliance and risk management. It reviews financial statements, oversees key risks and guides the work of the Internal Audit Department and the Risk Management Department.

(ii) Nomination and Remuneration Committee

The Nomination and Remuneration Committee is responsible for ensuring the Board contains an appropriate balance of skills, knowledge and experience and making recommendations and decisions in respect of senior management appointments, terminations, remuneration and reviewing and approving human resources policies.



27

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


Group CEO The Group CEO is responsible for implementing the Company’s strategy and policies approved by the Board. The Group CEO is also responsible for establishing the procedures and mechanisms approved by the Board to ensure both the functioning and monitoring of the internal control system. He is expected to meet the objectives, KPIs, budget and operating targets approved by the Board and report performance to the Board. He is supported in the achievement of his role through a professional and experienced team of Senior Management including the CEO/GM of each Group Subsidiary.

Group CFO and the Finance Teams The finance consolidation team led by the Group CFO at the Company level holds primary responsibility for meeting the Group’s financial reporting requirements in accordance with its obligations to the DFM. It ensures integrity and adequacy of the Group’s financial reporting processes, procedures and systems receiving key financial information from the finance function within each Group Subsidiary on a monthly basis. The finance consolidation team carries out appropriate checks and balances and prepares consolidated financial statements for the Company together with management information for Board and Board Committee reviews. Senior Management – Holding Company Level The role of Senior Management is to determine key project, accounting, finance, legal, regulatory, tax, treasury, IT, HSEQ and human resources policies, and support the Group Subsidiaries with their implementation. Regular site visits are made to the Group Subsidiaries in order to carry out inspections, audits and training and to make recommendations so as to ensure that their internal control system is adequate and robust.



28

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


CEOs/GMs – Group Subsidiary Level Each Group Subsidiary has its own management team responsible for implementing a business plan and ensuring implementation of the internal control system at Group Subsidiary level so that objectives, KPIs, budget and operating targets are achieved. The business plan is proposed by and the responsibility of management of each Group Subsidiary in consultation with Senior Management at the Company level.

Roles and responsibilities are defined by the organisation structure charts. In order to enable the management teams to achieve

their goals, temporary and permanent operational and banking authorisations are granted. These are reviewed by Senior

Management and the Board Committees and updated as appropriate to reflect any changes in roles and responsibilities. Each

Group Subsidiary has internal control procedures including delegation of authority, bank signing authority, verification of day-to-

day transaction procedures, segregation of duties and this information is analysed at the Company level to identify and assess

differences between the budget/objectives and actual performance. Group Subsidiary CEOs/GMs are responsible for the reporting

of costs, revenue, margins, claims, variations, impairments and provisions for the relevant construction projects as well as for non-

construction related activities.

Legal Department

The role of the Legal Department is to safeguard the interests and reputation of the shareholders, directors and the Group as a

whole. It ensures compliance with applicable laws, provides effective Board secretarial duties and provides sound and cost

effective legal advice to the Board, management and operating companies. It is also responsible for maintaining an effective

professional dialogue with the regulator and external legal counsel as well as anticipating, mitigating and managing the legal risks

of the Group.



29

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


Risk Management Department

The Risk Management Department is responsible for designing, implementing and leading a consistent Risk Management process

that will be rolled out in FY 2017, to ensure that risks are identified and managed in a systematic and proactive manner across the

Group, and at every level.

Through its supporting and monitoring role towards all Group Subsidiaries, the Risk Management Department ensures that the

risks taken by the Group are clearly identified and in line with the risk appetite set by Senior Management and by the Board, and

with the objectives and strategy of the Group.

Human Resources Department

HR policy is key to the internal control system and its effectiveness. It is the responsibility of the HR teams at Group Subsidiary

level to implement the policies, whilst ensuring the development of employees’ skills and potential. These teams also ensure

compliance with local labour law regulations and seek to improve collective and individual performance through regular

appraisals, growth plans, appropriate training and compensation and reward schemes.

Information Technology Department

The IT Department procures the information systems required to produce information and ensure that the Group’s transactions

are securely managed. The range of IT software and solutions utilised is varied and includes purchased software as well as tools

developed in-house. The IT Department is aware of its important role in managing the Groups’ data and communications and

ensuring the IT security systems are up to date and fit for purpose. Each Group Subsidiary seeks to continuously improve processes

and documentation, notably through the establishment of internal procedures and uniform local application. These procedures

are made available to the relevant teams through collaborative tools including a document management system, shared folders

and an intranet (under development).



30

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


Internal Audit Department

The Internal Audit Department supports the mitigation of the Group’s material risks and gives assurance on compliance with the

Group’s policies and procedures. Their role encompasses providing assurance on governance, risk and internal controls,

continuous business monitoring over select transactions and conducting investigations and special reviews at the request of the

Board, Board Committees and/or Senior Management.

The Internal Audit Department also conducts continuous business monitoring through ongoing pre-audit of key financial

transactions including payroll, supplier and subcontractor payments, staff final settlements, review of financial instruments for

example letters of credit, etc. This review is risk based with financial parameters and thresholds agreed with management and

communicated to all projects, subsidiaries and geographies.

During 2016, the Internal Audit Department also initiated the work on the development of the risk management framework across

the Group and helped manage the transition from the outsourced 3rd party consultant to the new Director of Risk Management

appointed during 2016.

9. Details of committed violations during the financial year, reasons of the same and manners of treatment and avoiding recurrence

of the same in the future.

A number of minor issues were raised to the Senior Management Leadership Team via the whistleblowing hotline in accordance

with the Company’s whistleblowing policy. Appropriate investigation and action has been taken where necessary.



31

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


10. Statement of cash and in kind contributions made by the Company during 2016 for developing the local community and

preserving the environment (in the event of lack of contributions, please state that the Company didn’t make any contributions).

In the month of Ramadan 2016, the Company’s Human Resources Department initiated a CSR initiative in cooperation with the

Emirates Red Crescent. Donation boxes where distributed in the Company’s offices in Abu Dhabi and Dubai to collect non-monetary

donations such as clothes and children’s toys. Donations from employees were distributed to charities during the Eid period. No

expenses were paid by the Company.

11. General information

(a) Statement of the rate of the Company’s share in the market (closing, highest and lowest rate) at the end of every month during

the financial year 2016.

Month (FY 2016)

Month High

Month Low

Jan 1.34 1.04

Feb 1.44 1.04

Mar 1.87 1.5

Apr 1.81 1.6

May 1.65 1.36

Jun 1.45 1.28

Jul 1.59 1.36

Aug 1.56 1.43

Sep 1.56 1.45

Oct 1.48 1.28

Nov 1.42 1.17

Dec 1.45 1.28



32

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


(b) Statement of comparative performance of the Company’s share to the market’s general index and the index of the sector under

which the Company is listed during 2016.

Month (FY 2016)

ARTC

DFMGI

REAL ESTATE

Jan 1.2 2997.77 5523.91

Feb 1.44 3239.7 6413.48

Mar 1.64 3355.53 6693.19

Apr 1.63 3491.91 7124.03

May 1.37 3313.72 6506.36

Jun 1.36 3311.1 6492.38

Jul 1.45 3484.32 6890.19

Aug 1.46 3504.4 7022.22

Sep 1.47 3474.38 6971.63

Oct 1.33 3332.41 6696.23

Nov 1.3 3360.91 6736.58

Dec 1.31 3530.88 7164.4



33

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس




34

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


(c) Statement of shareholding distribution as at 31 December 2016 (individuals, companies, governments) classified as follows: local,

GCC, Arabic, Foreign.

No.

Shareholder classification

Percentage of shareholding

Individuals (%) Companies (%) Government (%)

Banks (%) Institution (Sole Property) (%)

Total (%)

1. Local 23.5004 46.6995 0.2987 1.1567 0.0249 71.6802

2. GCC 2.4278 2.8363 0.0518 5.3159

3. Arab 8.5803 4.9523 0.1084 13.641

4. Foreign 4.0314 5.0828 0.2450 9.3592

Total 38.540 59.571 0.2987 1.562 0.029 99.9963

(d) Statement of shareholders owning 5% or more of the Company’s capital as at 31/12/2016, in accordance with the following

schedule:

No.

Name Number of owned shares Percentage of shareholding in the Company’s capital

مشركة آبار للاستثمارات البترولية ذ م .1 Aabar petroleum investment Company

LLC

264,883,943 5.7395

شركة تصاميم العقارية ذ م م .2Tasameem Real Estate Co LLC

382,408,132 8.2861

شركة آبار للاستثمارات ش م خ .3Aabar Investments PJS

955,614,399 20.7064



35

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


(e) Statement of the method shareholders’ distribution in accordance with the percentage of shareholding as at 31/12/2016, in

accordance with the following schedule:

No. Shareholding (share) No. of shareholders Number of owned shares

Percentage of shareholding in the Company’s capital

1. Less than 50,000 7,445 122,283,918 2.64

2. From 50,000 to less than 500,000 4,471 667,884,937 14.49

3. From 500,000 to less than 5,000,000

692 872,469,172 18.90

4. More than 5,000,000 65 2,952,426,973 63.97

5. Total 12,673 4,615,065,000 100.01

(f) Statement of taken actions with regards to investor relations disciplines with illustration of the following:

In November FY 2016, the Company’s investor relations officer and other colleagues attended the ‘MENA Conference 2016’ in the

DIFC, Dubai to meet with investors and analysts. A presentation with an overview of the Company’s financial performance and an

update on the Company’s projects was provided to investors and a Q&A session held.

During the course of the year, the Company’s investor relations officer spoke regularly with investors and analysts and a number of

meetings were held with analysts to address questions relating to the Company’s management, performance and outlook.



36

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


- Name of the investor relations officer and his/her contact details.

Mr. Hani Awwad


Investor Relations

+971 (0)2 333 6761

[email protected]

- Link to the investor relations page on the Company’s website.


(g) Statement of the special resolutions presented to the general assembly during 2016 and taken actions regarding the same.

General Assembly Meeting (1 June 2016)

Special Resolutions:

1. Approval to amend the Articles of Association of the Company as follows:

a. Approval to amend the “Related Parties” definition in the Articles of Association in order to become:

“The Chairman and the Directors of the Board of the Company, members of the executive management team of the Company and

its staff, companies in which any of the aforementioned hold at least 30% of its capital, as well as, subsidiaries, sister or allied

companies”.

b. Delete paragraph (g) of clause 5 Article 18 from the Articles of Association.

Annual General Assembly Meeting (20 April 2016)



37

Dubai P.O. Box 3399

C.L. No: 563332

Tel: (+971) 4 340 0700

Fax: (+971) 2 340 4004

3399 :ب.ص دبي


+ 971 4 340 0700 :تلفون

+971 4 340 4004: فاكس


Special Resolutions:

1. Approval to amend the Companies Articles and Memorandum of Association pursuant to the provisions of Federal Law No. 2 of 2015

after securing the approval from the competent authorities to such amendment. At this point, the rapporteur of the meeting indicated

that the amended Articles and Memorandum of Association of the Company have been published on the Company’s website and

Dubai Financial Market’s website as well (copy of the amended Articles and Memorandum of Association of the Company attached

in Annex 3).

2. Approval to amend the objects of the Company so that the Company will assume its activities through its subsidiaries pursuant to

the provisions of Federal Law No. 2 of 2015 regarding holding companies and as provided for in the amended Articles and

Memorandum of Association of the Company (copy of the amended Articles and Memorandum of Association of the Company

attached in Annex 3).

3. After reviewing the submitted requests by number of shareholders holding more than 10% of the capital of the Company, it was

approved, pursuant to the provisions of the law, to increase the number of the existing Directors of the board from 5 to 7 Directors,

and to amend paragraph 1 of Article 18 of the Articles of Association of the Company to reflect such increase. The same will be

conducted after securing the approval from the competent authorities and commencing receiving nomination applications as soon

as practical (copy of the amended Articles and Memorandum of Association of the Company attached in Annex 3).

(h) Statement of fundamental events encountered by the Company during 2016.

The Company’s FY 2016 Preliminary Unaudited Financial Results show that The Group recorded a net loss of AED 3.5 billion for FY

2016, compared to a net loss of AED 2.8 billion in 2015. The Group’s net loss resulted from a combination of impairment charges on

high-risk items, which amounted to AED 2.8 billion in total, as well as recurring, non-recurring and operational expenses.

The Group’s financial performance is a reflection of the adverse market conditions, which are having a negative impact on the

construction industry throughout the GCC.

arabtec holding pjsc

Documents