us$ 73.37 million

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Annual Report 2013 BUSINESS REVIEWDIRECT EQUITY INVESTMENTS

DIRECT EQUITY INVESTMENTS

Despite market conditions continuing to be challenging in 2013, with many MENA countries still in recovery mode, APICORP was successful in growing its portfolio of available-for-sale direct equity investments (see table). The diversified portfolio comprises seven petrochemical companies, three oil and gas service companies, one gas products company, and one petroleum products storage company, which are located in five Arab countries.

The Corporation acquired a 5.86% stake in the Saudi-based Industrialization & Energy Services Company (TAQA), a holding company with subsidiaries and affiliates engaged in drilling, geophysical surveying, specialized oil field services, offshore platform fabrication, seamless pipe manufacturing, and industrial gas production. APICORP also increased its holding in the Egyptian Methanex Methanol Company (EMethanex) from 7% to 17%. EMethanex is a major producer of methanol, with a nameplate capacity of 1.3 million tons per year.

In addition, the APICORP Petroleum Shipping Fund, which was launched in 2012, was fully invested during the first quarter of 2013; and produced revenue flows and paid dividends during the course of the year, in line with the Fund’s business model. The objective of this first-of-its-kind US$ 150 million Sharia-compliant fund, which is co-managed by Tufton Oceanic, is to leverage growth opportunities in the petroleum tanker charter market. The fund is aimed at helping oil and gas companies grow their business while also generating regular yield and returns for the equity investors. In this scenario, the fund helps companies meet their requirements for petroleum products transportation without burdening their balance sheets.

In 2013, APICORP revalued certain investments (including Ibn Zhar and EMethanex) using internationally-accepted industry valuation models. Accordingly, the total book value increased to US$ 823 million from US$ 318. Dividend income generated by the direct equity investment portfolio was US$ 73.37 million in 2013 compared with US$ 74.47 million the previous year.

US$ 73.37 millionDividend income generated by the direct equity investment portfolio in 2013

Direct Equity Portfolio by Company Category

PetrochemicalsOil and gas servicesGas productsPetroleum products storage

APICORP 19

BUSINESS REVIEW DIRECT EQUITY INVESTMENTS continued

SUMMARY OF APICORP’S DIRECT EQUITY INVESTMENTS AS AT 31 DECEMBER 2013:

Company Paid-upCapital

APICORPShare

Other Major Shareholders Main Activities/ Overview of 2013 Operations

Arab Drilling and Workover Company (ADWOC), Libyawww.adwoc.com

LD 60million

20% • Arab Petroleum Services Co. (APSCO), Libya

• First Energy Bank (FEB), Bahrain

Main Activities: Drilling and related operations in the Arab world. Owns a fleet of 10 drilling and 7 work over rigs.

Overview of 2013 operations:Company is recovering rapidly post the Libyan crisis. Most of the rigs came back in operation and operated with a high utilization rate.

Arab Company for Detergent Chemicals (ARADET), Iraqwww.aradetco.com

ID 36million

32% • Government of the Republic of Iraq

• Government of the Kingdom of Saudi Arabia

• Government of the State of Kuwait

• Arab Mining Company, Amman, Jordan

• The Arab Investment Co., Saudi Arabia

Main Activities: Production and marketing of linear alkyl benzene (LAB) and byproducts. Current effective capacity: 42,000 tons of LAB (and 2,000 tons of Toluene)

Overview of 2013 operations:Due to the crisis in Syria - the major market of LAB for ARADET - the company focused on marketing of the intermediary products (BTX) in the local market.

Tankage Mediterranee (TANKMED), Tunisiawww.tankmed.com

TD 30 million

20% • Tunisian Petro Enterprise (ETAP) • National Oil Dist. Co. (SNDP)• Bank of Tunisia/Saudi (Stusid) • Bank of Tunisia/Kuwait (BTKD)

Main Activities: Storage and handling of petroleum products at La Skhira terminal. Total capacity: 535,000 CBM

Overview of 2013 operations:The expansion project was completed. During 2013, operations remained normal.

Arab Geophysical Exploration Services Company (AGESCO), Libyawww.agesco-ly.com

LD 35million

16.67% • Arab Petroleum Services Co. (APSC), Libya

• National Oil Company (NOC), Libya

Main Activities: Providing seismic services for the oil and gas industry in the Arab world, mainly Libya. Company owns two fully equipped 3-D seismic crews.

Overview of 2013 operations:Company returning to profitability post Libyan crisis. Its crews operated at high utilization levels during 2013.

Saudi European Petrochemical Company (IBN ZAHR), Saudi Arabiawww.sabic.com

SR 1,025 million

10% • Saudi Basic Industries Corp. (SABIC), Saudi Arabia

• Ecofuel, Italy

Main Activities: Production and marketing of MTBE and PolyPropylene (PP). Current capacity: MTBE - 1.3 million tons; PP- 1.14 million tons.

Overview of 2013 operations:IBN Zahr achieved record production of PP during 2013. The overall capacity utilization also remained very high.

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Annual Report 2013 BUSINESS REVIEW DIRECT EQUITY INVESTMENTS continued


APICORPShare


The Arabian Industrial Fibers Company (IBN RUSHD), Saudi Arabiawww.sabic.com

SR 8,510 million

3.45% • Saudi Basic Industries Corp. (SABIC), Saudi Arabia

• Public Investments Fund, Saudi Arabia

• Other institutions

Main Activities: Production and marketing of aromatics, PTA and polyester fibers. Current capacity: PET - 330,000 tons; PTA - 350,000 tons

Overview of 2013 operations:Ibn Rushd is working on a major expansion project to double the PTA capacity and add another 400,000 tons of PET resin capacity.

Alexandria Fiber Company(AFCO), Egyptwww.adityabirla.com

US$ 48.3 million

10% • Birla Group Companies • Sidi Kerir Petrochemical • Saudi Egyptian Industrial

Investment Company

Main Activities: Production and marketing of acrylic fibers. Current capacity 36,000 tons

Overview of 2013 operations:No improvement in performance and continued losses due to weak business model. APICORP has taken full provision on this investment.

Yanbu National Petrochemical Company (YANSAB), Saudi Arabiawww.yansab.com.sa

SR 5,625 million

1.32% • Saudi Basic Industries Corp. (SABIC), Saudi Arabia

• Saudi Public• Other institutions and individuals

Main Activities: Production and marketing of poly ethylene, ethylene glycol, poly propylene and other by-products. Current Capacities of final products: PP: 400,000 tonsEthylene Glycol : 700,000 tonsHigh Poly-Ethylenes : 900,000 tons

Overview of 2013 operations:Strong operational and financial performance. Company paid its first dividend of SR 1/share interim dividend and announced SR 2/share final dividend.

Egyptian Methanex Methanol Company (EMethanex), Egyptwww.methanex.com

US$ 215million

17% • Methanex Corporation, Canada• Egyptian Petrochemicals Holding

Company (Echem), Egypt• Egyptian Natural Gas Holding

Company (Egas), Egypt• Egyptian Natural Gas Company

(GASCO), Egypt

Main Activities: Production and marketing of methanol, with current design capacity of 1.3 million tons of methanol per year

Overview of 2013 operations:EMethanex achieved a strong operational performance during the year despite difficult macro-economic environment.

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BUSINESS REVIEW DIRECT EQUITY INVESTMENTS continued


APICORPShare


Misr Oil Processing Company (MOPCO), Egypt www.mopco-eg.com

LE 1,992million

3.03% • Egyptian Petrochemicals Holding Company (Echem), Egypt

• Agrium, Canada• National Investments Bank,

Egypt• Egyptian Natural Gas Holding

Company (Egas), Egypt• Egyptian Natural Gas Company

(GASCO), Egypt• Other institutions and individuals

Main Activities: Production and marketing of ammonia and urea. Current capacity: 635,000 tons (Line 3 operational since July 2008)

Overview of 2013 operations:Line 3 operated normally, however, the expansion project (i.e. Line 1 and 2) - which is about 85% complete remains suspended. After expansion, the total capacity is expected to reach 2 million tons.

The Egyptian Bahraini Gas Derivative Company (EBGDCO), Egypt www.danagas.com

US$ 25 million

20% • Egyptian Natural Gas Holding Company (Egas), Egypt

• Danagas, Bahrain

Main Activities: Recovery and marketing of propane and butane. Current capacity: 126,200 tons of Propane (and 16,200 tons of Butane)

Overview of 2013 operations:Continued to operate during the year in difficult macro environment at below budgeted levels.

The Industrialization and Energy Services Company (TAQA), Saudi Arabiawww.taqa.com

SR 2 billion 5.86% • Public Investments Fund, Saudi Arabia

• Others

Main Activities: A holding company having investments in various subsidiaries and affiliates in the energy and related sectors (drilling, geophysical, oil field services, seamless pipe manufacturing, industrial gases, etc.)

Overview of 2013 operations:Strong performance during the year. Company seeking a capital increase from SR 2 billion to SR 5 billion in 2014.

APICORP Petroleum Shipping Fund (APSF), Cayman Island

US$ 35.8 million

94% • Tufton Oceanic Middle East (TOME), as (Investment Manager)

Main Activities: Owning and leasing MR product tankers.

Overview of 2013 operations:Became fully operational by acquiring and chartering five MR product tankers for a period of 5 years.

APICORP22

Annual Report 2013 BUSINESS REVIEW PROJECT AND TRADE FINANCE

PROJECT AND TRADE FINANCE

Despite persistent unfavorable market conditions during 2013, APICORP continued to demonstrate its ability to increase profitability and preserve the high quality of its loan portfolio. Total income generated by project and trade finance activities grew to an historical high of US$ 66.7 million compared with US$ 63.6 million the previous year. At the end of 2013, net loan assets increased to US$ 2.92 billion from US$ 2.89 billion at the end of 2012.

Lending ActivityAPICORP played a pivotal role in several major transactions conducted during 2013 in project finance as well as in structured commodity trade finance (see table). Project finance activity in the GCC maintained some momentum during the year, while in the rest of the Arab region, no project finance transactions were launched. In contrast, trade finance activity remained very dynamic, both on a funded and non-funded basis, providing opportunities to APICORP to enhance visibility and secure high-quality short-term assets at attractive yields with prominent energy traders.

New Products and ServicesThe back office documentary credit processing arrangement, which was signed with JP Morgan in 2012, enabled APICORP to boost its trade finance activities during 2013. The Corporation now offers a complete suite of trade finance products and services, comprising letters of credit (LCs) and letters of guarantee; and the handling of export LCs, including advising, negotiation and confirmation. APICORP has also broadened its range of structured trade finance products to include transactional and inventory financings, borrowing base facilities, and prepayment facilities, in addition to arranging pre-export financings. Also during the year, the Corporation introduced residual value guarantees in relation to the APICORP Petroleum Shipping Fund.

In addition, APICORP entered into two agreements for insurance cover of risks regarding the issuance and confirmation of letters of credit. One master agreement was signed with the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), a member of the Islamic Development Bank (IDB) Group; while another was signed with the Arab Investment & Export Credit Guarantee Corporation (Dhaman). These master agreements will contribute to the growth of APICORP’s trade finance business.

Financial AdvisoryFinancial advisory opportunities remained scarce in 2013, due to the continued cautiousness of sponsors and developers. However, in addition to the financial advisory services extended to APICORP ventures, the Corporation secured a financial advisory mandate from the Arab Shipbuilding & Repair Yard (ASRY), which is owned by several OAPEC member states.

Total income generated by project and trade finance activities 2013

US$ 66.7 million

Net loan assets at end-2013

US$ 2.92 billion

APICORP 23

BUSINESS REVIEW continued

APICORP’S MAIN PROJECT & TRADE FINANCE TRANSACTIONS IN 2013

Client Main Sponsors Amount and Type of Facility

Date of signing

APICORP Role

APICORP Petroleum Shipping Fund

• APICORP• Tufton

US$ 50 million Residual Value Guarantee

Jan 2013 Structuring Bank

Gulf Refining Company (GRC)

• Al Ain Capital LLC• Mazrui International LLC• Puma Energy ME BV

US$ 98 million Term Loan Facility

Mar 2013 Arranger and Offshore Security Agent

SAMREF • Saudi Aramco• Mobil Yanbu Refining Company

US$ 1,000 million Term Murabaha Islamic Facility

May 2013 Mandated Lead Arranger

Sadara Chemical Company

• Saudi Aramco• The Dow Chemical Company

US$ 1,100 millionDollar Commercial FacilitySAR 1,630 million SAR Commercial Letter of Credit Facility

Jun 2013 Mandated Lead Arranger

KEMYA • SABIC• Exxon Chemical Arabia

US$ 1,000 million + SAR 750 million Term Loan Facility

Jul 2013 Mandated Lead Arranger, Local Murabaha Facility Investment Agent

Gunvor • Gunvor Group Limited US$ 400 million borrowing base revolving facility

Jul 2013 Mandated Lead Arranger

KUFPEC • Kuwait Petroleum Corporation


Jul 2013 Mandated Lead Arranger

Emirates Aluminium (EMAL)

• Mubadala Development Company• Dubai Aluminium

US$ 450 million Revolving Credit Working Capital Facility

Nov. 2013 Mandated Lead Arranger

Mercuria • Mercuria Energy Group Limited

US$ 1,000 million Revolving Credit Facility


Nghi Son Refinery and Petrochemical Company (NSRP)

• Kuwait Petroleum Europe (KPE)• Idemitsu Kosan Co. (Idemitsu)• Vietnam Oil and Gas Group (PetroVietnam)• Mitsui Chemicals Inc. (Mitsui)



Gunvor • Gunvor Group Limited US$ 1,515 million Revolving Credit Facility

Dec. 2013 Lead Arranger

Trafigura • Trafigura Beheer B.V. US$ 380 million Senior Secured and Committed Facility

Dec. 2013 Mandated Lead Arranger

Vitol • Vitol Holding B.V. US$ 135 million Uncommitted Trade Finance Credit

Dec. 2013 Structuring Bank

APICORP24

Annual Report 2013 BUSINESS REVIEW TREASURY & CAPITAL MARKETS

TREASURY & CAPITAL MARKETS

The global economy exhibited a stable but slower growth trajectory in 2013, with most developed countries appearing to have overcome their most pressing fiscal problems.

The Eurozone managed to contain its sovereign debt issue and reverse the recession; and the US succeeded in navigating through another fiscal crisis, while the Federal Reserve decided to begin the reduction of its quantitative easing program during the latter part of the year. Despite the improving economic backdrop and rising asset prices, acute risks still remain and could return to trouble the financial markets. Concerns regarding the easing of the Fed’s tapering program and its impact on global emerging markets and currencies, political turmoil in the Middle East and Eastern Europe, and slower Chinese growth and problems in its money markets, still persist, and have the potential to increase volatilities in the fragile global banking system.

During 2013, the Corporation’s treasury and capital markets business achieved a higher gross income growth than the previous year, with total income increasing to US$ 37.9 million from US$ 31.5 million in 2012. At the end of the year, total assets stood at US$ 1,754 million compared to US$ 1,762 million at the end of 2012. APICORP’s liquidity, measured by cash, placements including reverse repos, amounted to US$ 571 million against US$ 809 million in 2012. The total market value of investments in the fixed income securities portfolio at the end of 2013 increased to US$ 1,146 million from US$ 922 million at the end of the previous year, and continues to be focused on strong credits with an average portfolio rating of ‘A’. As at 31 December 2013, the Corporation’s medium-term borrowings, including outstanding bonds of US$ 532.5 million maturing in 2015, stood at US$ 1.53 billion.

APICORP’s foreign banking branch in Bahrain continued to complement all the treasury and capital markets activities of the Corporation’s head office during 2013. APICORP continues to place emphasis on further expanding and diversifying its funding base, which is vital for financing core activities and maintaining sufficient liquidity levels.

US$ 37.9 millionTotal income generated by treasury and capital markets activities 2013

US$ 571 millionLiquidity measured by cash, placements and investments in securities at end-2013

During 2013, APICORP enhanced its thought leadership profile with the successful hosting of the second annual APICORP Energy Symposium, and the continued dissemination of its highly regarded economic research and policy-oriented analysis. We also continued to uphold our commitment to corporate social responsibility.

APICORP 25

APICORP26

Annual Report 2013 ECONOMIC RESEARCH AND POLICY ANALYSIS

As part of its mission, APICORP aspires to be recognized as the leading source of research on the Arab hydrocarbon and energy industries. The Economics & Research Department is dedicated to the study of economic and policy issues relevant to the Corporation’s growth and diversification strategy. To address and discuss these issues, the department continued to focus on three separate but interdependent areas in 2013:

1. The scanning of the Corporation’s business environment and trends in the context of the lingering aftermath of the global and European financial crises, highlighting their impacts on economic growth, money and credit markets, as well as oil and natural gas markets.

2. A thorough update – three years after the onset of the Arab uprisings and the turmoil it has created in parts of the region – of APICORP’s in-house “perceptual mapping” of the energy investment climate in the Arab/MENA world.

3. An extension of the review of the Arab/MENA energy investment outlook to incorporate the major constraints and challenges facing company-investors and policy makers, including rising project costs, scarcity of natural gas for domestic fuel and feedstock, and the difficult access to funding.

During 2013, APICORP continued to ensure that the highest standards of economic research and policy analysis are maintained through the following activities:

1. APICORP’s annual Review of Energy Investments in the Arab/MENA World has established itself as a trusted source of analysis and insight in the field. Repetition of the review year-on-year has made trend studies possible, thus offering a useful tool for policy analysis.

2. The timely and broad dissemination of the Corporation’s research findings through its monthly Economic Commentary (see box), has confidently added value to the region’s economic and energy policy debate.

3. The uptake of APICORP’s research through numerous presentations of findings in international forums (see Corporate Social Responsibility) has contributed to shaping and influencing some of the key policy issues that are relevant to the Corporation’s shareholders.

2013 ISSUES OF APICORP’S ECONOMIC COMMENTARY

• ‘APICORP’s Review of MENA Energy Investment - Supporting the Transition’, January 2013.• ‘AIG Symposium: Thoughts on In Amenas’, February 2013.• ‘Between a Rock and a Hard Place: Egypt’s New Natural Gas Supply Policy’, March 2013.• ‘MENA Power Sector: Catching Up… But Far From There Yet’, April-May 2013.• ‘Saudi Arabia’s Economic Diversification: Progress in the Context of the GCC and Challenges’, SPECIAL

EDITION, June 2013.• ‘Algeria’s Natural Gas Policy: Beware of the Egypt Syndrome!’ July 2013.• ‘Algeria’s Energy Price Subsidies: Policy Conundrum and Political Dilemma’, August 2013. • ‘Modeling OPEC Fiscal Break-even Oil Prices: New Findings and Policy Insights’, September-October 2013.• ‘Investment for Energy: Looking Beyond Conventional Determinants’, November 2013.• ‘MENA Lingering Turmoil and its Effect on Energy Investment Climate: A Reassessment’, December 2013.

APICORP 27

A commitment to corporate social responsibility underpins all activities of APICORP. Whether it is ensuring a high standard of accountability at all levels of the organization, or being sensitive to community and social concerns, sustainable development is important to the Corporation’s business.

Environmental, social and governance issues are important considerations when evaluating new projects. APICORP supports polytechnic institutes in some of the shareholding countries which provide technical and vocational training to meet the needs of the petroleum services industry, and promote the nationalization process in these countries. The Corporation also aims to support empowerment of the new generation through various sponsorship and scholarship vehicles. APICORP supports and takes part in many social, cultural and charitable activities. Achieving business growth while also contributing to the welfare and progress of the communities where the Corporation operates are important corporate priorities.

APICORP aspires to be recognized as the leading source of research on the Arab hydrocarbon and energy industries. In this respect, APICORP makes available its extensive economic research and policy analysis to the public domain totally free of charge. Reports issued in 2013 are listed under the Economic Research and Policy Analysis section of this Business Review.

As part of its commitment to disseminate its research findings, add value to the debate, and contribute to shaping and influencing key policy issues, APICORP research staff actively participate in industry conferences, workshops and symposiums, either as a speaker or moderator (see table). In addition, the Corporation sponsors the annual APICORP Energy Symposium, which provides a forum for delegates from the international and regional energy industry to discuss emerging trends and the outlook for MENA energy markets.

Main speakers at the 2013 symposium included Dr. Roberto Sieber, Chief Economist and Global Head - Market Analysis, at Hess Energy Trading Company; Dr. Basam Fattouh, Director of the Oil & Middle East Programme, Oxford Institute for Energy Studies; and Dr. Hakim Darbouche, Commercial Adviser, OMV Exploration & Production. Moderated by Mr. Ali Aissaoui, the sessions addressed the three critical themes of oil markets and prices; the implications of the US shale oil revolution for Middle East producers; and factors shaping domestic gas pricing policies in MENA.

It should be noted that APICORP intends to establish a Social Responsibility Unit during the first half of 2014 to be able to organize its current and future social responsibility activities.

APICORP PARTICIPATION IN REGIONAL & INTERNATIONAL INDUSTRY CONFERENCES AND EVENTS DURING 2013

• Winter Meeting of the Arab Energy Club - Bahrain• IIF MENA Regional Economic Forum - Dubai• KPMG 3rd GCC Energy Conference - Abu Dhabi• Energy Workshop organized by Chatham House - London• 2nd Brookings Doha Energy Forum - Qatar• 4th AIG Symposium - Algeria• International Energy Forum (IEF) - Saudi Arabia

CORPORATE SOCIAL RESPONSIBILITY

APICORP is committed to establishing and maintaining the highest standards of corporate governance and risk management, in line with regional and international benchmarks and industry best practice. This entails protecting the rights and interests of all stakeholders, enhancing shareholder value, and achieving organizational efficiency.

CORPORATE GOVERNANCE & RISK MANAGEMENT REVIEW

APICORP 28

Annual Report 2013

APICORP 29

CORPORATE GOVERNANCE & RISK MANAGEMENT REVIEW continued

OWNERSHIP

APICORP is wholly owned by the 10 Member States of the Organization of Arab Petroleum Exporting Countries (OAPEC):

• United Arab Emirates 17%• Bahrain 3%• Algeria 5%• Saudi Arabia 17%• Syria 3%• Iraq 10%• Qatar 10%• Kuwait 17%• Libya 15%• Egypt 3%

BOARD OF DIRECTORS

Shareholders’ RepresentativesEach shareholder is represented by a member on the Board of Directors. The shareholders also nominate a representative to attend the General Assembly meeting which usually takes place every year. The Board of Directors works closely with Management on all issues concerning the Corporation. Main communication channels include the annual general assembly, annual report, corporate website, and regular announcements in the appropriate media. To ensure disclosure of relevant information to shareholders on a timely basis, the Corporation publishes its annual report and financial information on its website.

Role and responsibilitiesThe Board of Directors is accountable to the shareholders for the creation and delivery of strong sustainable financial performance and long-term shareholder value. The Board is empowered to resolve all matters specified under Article 23 of APICORP’s Establishing Agreement and Statute.

CompositionThe Board of Directors is composed of 10 Members representing the 10 Member States:• Dr. Aabed Al-Saadoun (Saudi Arabia) - Chairman• Mr. Khaled Amr Al-Qunsul (Libya) - Deputy Chairman• Dr. Matar Al-Neyadi (UAE) - Member• Mr. Mahmood Hashim Al-Kooheji (Bahrain) - Member• Mr. Farid Baka (Algeria) - Member• Engr. Suleiman Al-Abbas (Syria) - Member• Mr. Hilal Ali Ismail (Iraq) - Member• Mr. Mohamed Khalid Al-Ghanem (Qatar) - Member• Sheikh Talal Naser Al-Sabah (Kuwait) - Member• Engr. Sherin Ahmed Mohammed (Egypt) - MemberThe membership of the Board of Directors shall be by nomination of each Member State, and for a term of four years starting from the date of a member’s election by the General Assembly.

The Board of Directors usually meets at least four times a year, with each Board meeting preceded by a meeting of the Audit, Risk and Compensation Committee.

BOARD COMMITTEESAudit Risk and Compensation Committee The Board of Directors is assisted by the Audit, Risk and Compensation Committee, which is responsible for ensuring and maintaining oversight of the Corporation’s financial activities and reporting system; internal controls and risk management framework; audit functions, and legal and compliance requirements. The Committee is also tasked to recommend to the Board of Directors the remuneration and rewards policy of the Corporation, and ensure that Human Resources policies and practices are in line with applicable laws and regulations, and the obligations of the Corporation. The Committee consists of four appointed members of the Board of Directors:

• Sheikh Talal Naser Al-Sabah (Kuwait) - Chairman• Dr. Matar Al-Neyadi (UAE) - Deputy Chairman• Mr. Farid Baka (Algeria) - Member • Mr. Mohammed Khaled Al-Ghanem (Qatar) -

Member

Code of ConductAPICORP requires that management and all employees meet the highest level of ethical standards in all dealings on behalf of the Corporation, and maintain confidentiality of information and documents concerning APICORP and its clients.

Annual Report 2013

APICORP30

GOVERNANCE CONTROL FUNCTIONSComplianceAPICORP has in place a Compliance Charter to ensure compliance with all regulations and laws of its Member States, as well as with the Corporation’s Establishing Agreement and Statute.

Anti-Money LaunderingAPICORP has a Policy on Anti-Money Laundering (AML) and Know Your Customer (KYC) to protect the Corporation, and assist it in its AML/KYC activities and combating the financing of terrorism activities (CFT). This Policy follows the AML/KYC/CFT guidelines and rules of the Central Bank of Bahrain, which govern APICORP’s Banking Branch in Bahrain.

Internal AuditAPICORP has engaged KPMG to conduct the internal audit of all activities of the Corporation, and report its findings to the Audit Committee.

External AuditAPICORP has engaged Deloitte &Touche to conduct the external audit of the Financial Statements of the Corporation, and report its findings to the Audit Committee and the Board.

Risk ManagementRisk management is an inherent part of APICORP’s business, and risk management is essential to the Corporation’s success. Risk management is the control function to manage principal business risks by establishing appropriate controls, monitoring and reporting processes.

The Risk Management Committee is responsible for developing and monitoring APICORP’s risk management policies. Risk management policies have been established to identify and analyse the risks faced by the Corporation; set appropriate risk limits and controls; and monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and APICORP’s activities. Through its training and management standards and procedures, the Corporation aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.The Risk Management Department is responsible for ensuring and maintaining effective enterprise wide risk management, as contained in the Risk Charter; together with all risk management policies, risk exposure thresholds, rating models, and related manuals.


Detailed information regarding Risk Management is covered by the Notes to the Consolidated Financial Statements of this Annual Report.

APICORP 31

Capital AdequacyThe Corporation’s policy is to maintain a strong capital base to sustain the future development of the business. As at 31 December 2013, APICORP’s capital adequacy ratio (qualifying capital) was a strong 28.7%, considerably higher than Basel III final requirement of 13%.

Risk ExposureAPICORP is inter-alia exposed to the following prime risks:• Credit Risk• Liquidity Risk• Operational Risk

Credit RiskCredit risk is the risk that a borrower or counterparty will be unable or unwilling to meet a commitment entered into with the Corporation, causing a financial default or loss to APICORP. It arises from the lending, treasury and other activities undertaken by the Corporation. Policies and procedures have been established for the control, monitor and manage all credit risks.

Liquidity RiskLiquidity risk is the risk that APICORP will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk management ensures that funds are available at all times to meet the funding requirements of the Corporation and also to sustain liquidity shocks from future market disruptions.

Operational RiskOperational risk is the risk of unexpected losses resulting from inadequate or failed internal controls or procedures, systems failures, fraud, business interruption, compliance breaches human error, management failure or inadequate staffing. A framework and methodology has been outlined in the risk charter to identify and control the various operational risks.

ManagementThe Board delegates the authority for the day-to-day management of the Corporation to the Chief Executive and General Manager, who is supported by a Deputy Chief Executive & General Manager, and an experienced and well-qualified Executive Management Team.

Management CommitteesAPICORP has established six management committees to assist in its daily business operations. The committees have Board-approved Charters which detail their respective mandates and responsibilities.

• Executive Management Committee• Credit Committee• Investment Committee• Asset & Liability Committee• Risk Management Committee• Tenders & Bids Committee


28.7%Capital Adequacy Ratio

Annual Report 2013

Leveraging growth opportunities in the petroleum tanker charter market

APICORP 33

The landmark US$ 150 million Shariah-compliant APICORP Petroleum Shipping Fund is the Corporation’s first investment fund, and the first in the region targeted at a specific vessel category. The Fund has acquired and chartered five medium-range (MR) petroleum product tankers, which will be employed over five years in the regional and international tanker market.

Aimed at helping oil and gas companies meet their requirements for petroleum products transportation without burdening their balance sheets, this new Fund supports the Corporation’s strategy to diversify its business activities into new midstream sectors, as well as tapping promising new growth avenues in the industry.

APICORP share

94%Medium-range petroleum product tankers

5 MR1stFund of its kind in the region

Capitalization

US$ 150mnBareboat charter structure

5-year

1stInvestment fund by APICORP

us$ 73.37 million

Documents