IIG Prospectus - London Stock Exchange

IIG also has a backup system that runs automatically on a daily basis and is currently working on afull contingency plan for disaster recovery.LitigationIIG currently has a number of related claims outstanding against it in relation to a fund forwhich it acted as manager in the late 1990s. In 1999, the fund suffered a fraud perpetrated by athird party. Claims were successfully brought against the perpetrators and appropriate insuranceclaims were made and accepted. Full compensation was not, however, received as certain of theinsurance companies went into bankruptcy before the payments were made. As a result, fourseparate claims have been brought in Kuwait by investors alleging that IIG, as manager of the fund,should compensate them for losses suffered as a result of the fraud.These cases are currently at different stages of the appeal process. In all cases, the initialjudgments have been made against IIG for the principal amount invested and, in certain cases, theinitial judgments also required the payment of interest too. The total amount of principal andinterest claimed is approximately KD6.8 million and this amount has been fully provided for by IIGand, in respect of KD6.7 million, cash has been paid by IIG into a third party bank account pendingfinalisation of the claims as required by the Kuwaiti courts, see ‘‘IIG Financial Review – Results ofOperations – Expenses – Provisions’’ and ‘‘IIG – Financial Review – Off Balance Sheet Arrangements’’.Accordingly, IIG does not believe that the outcome of these cases will have a significant affect onits business.IIG is also the plaintiff in relation to a KD2.5 million claim against a real estate company forunpaid professional fees in respect of financial advice provided by IIG. IIG expects to be successfulin this claim in due course.RegulationThe Central Bank is the main regulator of banks and financial institutions in Kuwait.Accordingly each of IIG, Osoul and Ajal Finance are regulated by the Central Bank. The CentralBank’s supervisory and regulatory rules cover capital adequacy, liquidity, credit policy, theclassification of credit facilities and the calculation of provisions, credit concentrations, theorganisation of investment policy, internal control systems, risk measurement and managementsystems, required experience of board members and executive officers of banks, money laundering,suspicious operations and the financing of terrorism.Each financial institution is required to submit periodic reports to the Central Bank in formatsprescribed by it. These key reports include:On an annual basis* audited financial statements together with a detailed breakdown of assets, liabilities,income and expenditureOn a monthly basis* balance sheet and statement of income;* foreign currency distribution of both assets and liabilities;* borrowings, claims on financial institutions and negotiable bills by residual maturity ofboth assets and liabilities;* credit granted in KD to residents and non-residents during the month; and* productive and secured credit granted in KD to residents and non-residents during themonth.On a quarterly basis (in addition to the monthly reports)* reviewed interim financial statements;* distribution of KD borrowings and trust funds according to interest-rate;* distribution of KD claims on financial institutions and KD credit facilities according tointerest-rate;* distribution of KD loans to non-banking financial institutions and KD credit facilitiesaccording to size;93