1 ARCAPITA ANNUAL REPORT 2017

ANNUAL REPORT 2017 ARCAPITA ANNUAL REPORT 2017 3 ARCAPITA ANNUAL REPORT 2017

Table of Contents

Overview Geographic Presence 5 Arcapita Values 6 Directors’ Report 7 CEO’S Message 8

Our Business Business Model 11 Clients 11 Lines of Business 11 Investment Process 14 Current and Exited Portfolio 15 Corporate Governance Overview 16 Board Committees 17 Management 17 Organizational Structure 19 Financial Highlights 21

Arcapita Group Shari’ah Supervisory Board’s Report to the Shareholders - AGHL 24 Holdings Limited Independent Auditors’ Report to the Shareholders 25 Consolidated Statement of Financial Position 26 Consolidated Statement of Income 28 Consolidated Statement of Comprehensive Income 29 Consolidated Statement of Cash Flows 30 Consolidated Statement of Changes in Equity 31 Notes to the Consolidated Financial Statements 33

Arcapita Investment Shari’ah Supervisory Board’s Report to the Shareholders - AIM 62 Management B.S.C. (c) Report of the Board of Directors 63 This Annual Report contains certain “forward-looking” statements, and such information is based on the beliefs of Arcapita, as well as on assumptions made by, and information currently available Independent Auditors’ Report to the Shareholders 64 to, Arcapita. When used in this Annual Report, the words “anticipate”, “believe”, “estimate”, Statement of Financial Position 65 “expect”, “plan”, “intend”, and words or phrases of similar import, are intended to identify forward- Statement of Income and Other Comprehensive Income 66 looking statements. Such forward-looking statements may include, without limitation, statements Statement of Cash Flows 67 relating to the following: Arcapita’s plans, strategy, objectives or goals; Arcapita’s future economic performance or prospects; specific country, region and worldwide business environment; potential Statement of Changes in Equity 68 effect on future performance of certain contingencies; and assumptions underlying any such Notes to the Financial Statements 69 statements. These statements are inherently subject to significant business, economic, competitive, regulatory and operational uncertainties, contingencies and risks, both specific and general in Our People Board of Directors 78 nature, many of which are beyond the control of Arcapita. Any forward-looking statements are Shari’ah Supervisory Board 79 speculative in nature, and it can be expected that one or more of the assumptions underlying such Senior Management 80 statements will prove not to be accurate, and unanticipated events and circumstances may occur. Actual results and events will likely vary from the plans, objectives, expectations, estimates and Management Team 82 intentions expressed in such forward-looking statements, and such variations may be material. Contact Information 84 Consequently, this Annual Report should not be regarded as a representation by Arcapita that the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements will be achieved and should not be relied on. Arcapita does not intend to update these forward-looking statements. ARCAPITA ANNUAL REPORT 2017 4 5 ARCAPITA ANNUAL REPORT 2017

Geographic Presence

SELECTED COUNTRIES Arcapita currently operates out of the following offices: WHERE MANAGEMENT HAS Overview OVERSEEN INVESTMENTS • Manama, Bahrain: Covering the MENA / GCC region and South Asia; ARCAPITA OFFICES • Atlanta, US: Covering the United States; • London, UK: Arcapita offers investors and shareholders diversified Covering the United Kingdom and broader Europe; and • Singapore: Shari’ah-compliant investments. At the center of one Covering Southeast Asia, China, Japan and Australia. of the fastest growing wealth markets in the world, Arcapita’s core management team has been serving an exclusive group of investors in the GCC region for 20 years. The global management team has extensive experience gained in a variety of market conditions and is a group of professionals with deep expertise LONDON in their respective fields. Arcapita maintains offices in Bahrain, Atlanta, London and Singapore. ATLANTA BAHRAIN

SINGAPORE ARCAPITA ANNUAL REPORT 2017 6 7 ARCAPITA ANNUAL REPORT 2017

Our Values We are committed to operating our firm based on the following principles: Directors’ Report Originality Fiscal year 2017 Arcapita aims to provide innovative and distinctive alternative investment opportunities

Integrity ABDULAZIZ ALJOMAIH We are pleased to report that Fiscal Year Arcapita’s management team has two decades CHAIRMAN (“FY”) 2017 (the twelve-month period to 30, of experience in managing Shari’ah-compliant Arcapita attracts and retains people with the courage to do the right thing at all times and June 2017) was a successful year for Arcapita alternative investments across the globe, and in all circumstances with revenues of USD 33.5 million and a net we are excited about accelerating our new income of USD 8.1 million for the period. investment activity in the geographies and Arcapita’s balance sheet remains robust sectors we know best. To support our growth, Transparency with total equity of USD 124.5 million as of we have recruited talented investment June 30, 2017, including USD 96.6 million in professionals for our deal teams in the US paid-up capital, USD 20.6 million in retained and the GCC and added additional depth Arcapita is committed to full, accurate and timely disclosure of information to its stakeholders earnings, and USD 7.3 million in proposed to our investor relationship management dividends. team, which maintains deep relationships with investors across the Gulf. We have Despite a challenging market environment Professionalism also continued to strengthen each of our resulting from lower oil prices and business groups, including risk management, geopolitical uncertainty, we completed Arcapita is committed to recruiting and retaining the best people with a diverse range of information technology, financial investments worth a total transaction value expertise and experience management, and financial control, and will of USD 320 million across the US and the ensure that these key functions grow in line GCC. These included the acquisition of a with the needs of the overall business. USD 110 million portfolio of senior living Prudent Risk Management communities in Georgia and Virginia, US; We have set ambitious targets for FY 2018 a USD 150 million investment in Dubai and have a robust new deal pipeline, which Arcapita strives to achieve sustainable growth by maintaining a solid capital base and to Investment Parks in Dubai, UAE, and we plan to execute over the coming months. effectively manage the risk inherent in the business the USD 60 million acquisition of NAS As always, our goal is to provide innovative United Healthcare Services, a leading alternative investment opportunities for our provider of outsourced health insurance investors and deliver superior returns to all Alignment of Interests processing services, based in Abu Dhabi. Our our stakeholders. We continue to rely on the investments were carefully selected in sub- support of our shareholders, the Government Arcapita aims to align the interest of investors and shareholders by encouraging employees to sectors with sound economic fundamentals of the Kingdom of Bahrain and the Central take a direct stake in the firm’s investments and compelling demographics. Our global Bank of Bahrain, and we look forward to presence, lean investment teams, and deep sharing another successful year ahead. industry relationships position us well to take advantage of the changing global economic Ethical Investment Policy landscape, and we are confident in our ability to continue to provide our investors with Arcapita aims to invest in morally and ethically sound companies and products, and does not distinctive investment opportunities. invest in non-Shari’ah compliant activities ARCAPITA ANNUAL REPORT 2017 8 9 ARCAPITA ANNUAL REPORT 2017

CEO’s Message

ATIF A. ABDULMALIK With over 20 years of experience, Arcapita markets, which is where we hope to leverage CHIEF EXECUTIVE OFFICER has built a global alternative investment our experience and expertise for our We believe in the importance and value of long-term platform with the capability to source investors. investments in its core markets of the relationships with our shareholders, our investors We believe in the importance and value US, MENA, Europe and Asia. We have a of long-term relationships with our diversified business model and a management and our investment partners, and our model stresses shareholders, our investors and our team that brings experience and expertise investment partners, and our model stresses across our different investment areas. the importance of aligned interests. We use these the importance of aligned interests. We Through numerous innovations, we are use these partnerships to bring a range of partnerships to bring a range of different dimensions proud to have played a major part in bringing different dimensions to our services and sophisticated alternative investments to investments, resulting in access to higher to our services and investments, resulting in access Shari’ah-conscious investors and we have quality transactions, efficient execution and completed over 70 transactions with a total timely exit for the benefit of all stakeholders. to higher quality transactions, efficient execution transaction value of over USD30 billion. We have been in business long enough to We are focused on a number of thematically have experienced a wide range of market and timely exit for the benefit of all stakeholders. driven sectors that we believe will underpin conditions. We faced some demanding global economic growth in the near to challenges in the aftermath of the financial medium term. For example, a rapidly crisis, but largely as a result of the deep aging population in the US and Europe is relationships that we enjoy with our currently sustaining our interest in the stakeholders, we have been successful in senior living sector, where we have a strong creating an organization that we believe and established track record. Growth in is well positioned to grow over the coming global trade and the increased penetration of years. We will continue to build closer e-commerce is driving significant incremental relationships with the investment and demand for industrial logistics/warehousing operational partners who can add value to services, in which we believe there are our business. Overall, our goal is to deliver compelling investment opportunities in both sustainable returns to our shareholders and the real estate and private equity sectors investors using our sectoral and geographic at this time. In addition, we are optimistic insights and a risk-adjusted approach to about the prospects of a global consumer- investing. led recovery and believe that the retail and consumer services sectors will benefit from a growing middle class and higher consumer spending in both developed and developing ARCAPITA ANNUAL REPORT 2017 10 11 ARCAPITA ANNUAL REPORT 2017

Business Model Lines of Business Arcapita was formed to: REAL ESTATE • Provide investors with opportunities Overview in alternative investment products Arcapita’s real estate team acts as a principal, in a Shari’ah-compliant manner and arranger and manager of real estate investment management services in investments. Its experienced real estate connection with such products; professionals analyze opportunities across • Co-invest with its investors in Arcapita- a broad spectrum of transaction structures, sponsored investment products to geographies and return profiles in an effort generate a return on such investments; to provide a diverse mix of attractive real and estate investment opportunities to investors. Our Business To date, Arcapita’s core management has • Provide investment management and completed real estate investments in the administration services. industrial and logistics warehousing, self- storage, senior living, residential, mixed-use, business parks and retail sectors. The team Arcapita provides investors with alternative has completed investments across the world; Clients from North America, through Europe, the investments and financial services that are Shari’ah The firm serves a broad network of over Middle East and Asia. 1,300 valuable investors relationship from In support of Arcapita’s overall business across the GCC and South East Asia. compliant. Arcapita capitalizes on the GCC region’s strategy, and to provide more diverse Arcapita’s investor base is composed investment opportunities for investors, status as a net exporter of capital to provide clients primarily of investors from the following four the real estate team at Arcapita extended segments: its focus to develop initiatives that include with investments that target long-term returns the establishment and management of real • HNWI: High net worth individuals with estate investment funds. In addition to real exceeding those offered by conventional public investable assets in excess of USD 1 estate funds, the team is also focused on million; providing more real estate financial services equity markets. Arcapita comprises Arcapita Group • Family Offices: Professional entities set and solutions by leveraging its experience in up to manage the investments, business specific real estate sectors. To date, Arcapita’s Holdings Limited (“AGHL”), an exempted company affairs and philanthropic interests of high core management has overseen over 40 net worth families; investments with a total transaction value of organized under the laws of the Cayman Islands approximately USD 15 billion. • Institutions: Large, sophisticated AGHL’s direct and indirect subsidiaries, and Arcapita investment groups that include pension Arcapita’s investment model has been funds, university endowments, asset developed and refined over an extended Investment Management B.S.C.(c) (“Arcapita managers and insurance companies; and period of time as a result of underwriting a large number of investments and structures. Bahrain”), a company organized under the laws • Sovereign Wealth Funds: State-owned The process begins with Arcapita sourcing investments funds. projects, from direct approaches made to of the Kingdom of Bahrain, and their respective partners and sellers, and by working with specialist intermediaries within the real subsidiaries. Arcapita maintains offices in Bahrain, estate industry. Arcapita then performs project analysis and due diligence on the sourced projects. A full investment process Atlanta, London and Singapore. typically lasts between two to six months. The real estate team also carefully assesses potential risks associated with the project, from broad macroeconomic trends to more narrowly defined issues specific to the project at hand. Arcapita consults closely with its co- investment partners, and conducts extensive analysis of the post-acquisition execution and exit strategies required to realize value over the investment term. ARCAPITA ANNUAL REPORT 2017 12 13 ARCAPITA ANNUAL REPORT 2017

Portfolio Management PRIVATE EQUIT Y Once an acquisition is completed, and the During the ownership period, Arcapita Arcapita’s portfolio management approach target company becomes part of the private executives serve as members of each is structured to allow its investments to Overview equity portfolio, Arcapita’s executives company’s Board of Directors, seeking to realize their full potential and maximize Arcapita acts as a principal and arranger in work closely with each portfolio company increase the value of the investment by: returns. After closing the transaction, the the acquisition of established middle-market management team in establishing a clearly (i) assisting management in defining asset managers, corporate management companies, with an emphasis on the United defined business plan for creating equity and continuously updating the optimal teams or joint venture partners are directly States, Europe, the Middle East and Asia. value, while designing a tailored capital three to five year action-based strategy, responsible for the execution of the business The firm targets growth-oriented corporate structure and management equity incentives (ii) identifying and driving initiatives in plan. Arcapita works closely with these acquisitions with a total transaction size to promote growth and profitability. Arcapita the company’s annual operating plans partners to monitor and evaluate the progress between USD 25 million and USD 300 million aims to nurture and grow the investments that improve the near-term operating of each real estate investment. per transaction. Arcapita focuses on sectors through the holding period with strategic and performance of the business and support where its management team has established financial support when necessary. To date, Early in the ownership period, the deal achievement of financial objectives, and (iii) industry knowledge and a successful Arcapita’s management team has overseen team works with its partners to identify the improving the company’s human resource track record. Arcapita currently focuses over 30 investments with total transaction primary operating statistics to be monitored management and succession planning. The on investments in the health & wellness, value of approximately USD 15 billion. through regular meetings and reports. In firm also regularly identifies opportunities transportation & logistics and industrial this fashion, the deal team seeks to maintain Portfolio Management where its functional capabilities (both in- sectors. continuous oversight over each investment. Arcapita’s portfolio management approach house and with selected third-party advisors) On a bi-monthly or quarterly basis, the Target companies will have innovative is designed to ensure the highest possible can be leveraged in support of marketing, deal team receives an asset performance products or services; growing market performance of each of its portfolio sales, and growth-related initiatives, as well report which includes a comprehensive set positions and strong management teams, companies - bringing critical insights, as cost reduction, working capital reduction, of marketing and financial updates for the either in place or identified; exhibit the strategic capabilities and best practices in process improvement, and supply chain investment and, on an annual basis, the capability of building shareholder value; a delivering superior investor returns. initiatives and (iv) by playing a critical role deal team also receives and reviews audited clear business strategy with multiple avenues in evaluating, selecting, and developing Arcapita’s portfolio management approach financial statements for every investment. for growth and market share gains; industry CEO candidates, and will offer assistance to is applied throughout asset ownership - growth drivers that are fundamental and the CEO in the recruitment and selection of The deal team conducts on-site operations including pre-acquisition and due diligence, compelling; and exit potential through a senior management team members. reviews on a monthly or quarterly basis. during ownership and the process leading to financial or strategic sale or an IPO. At these sessions, the team conducts a exit. Prior to the acquisition of a company, Exit deeper assessment of the investment’s Furthermore, Arcapita targets companies the firm conducts market and operational due In most instances, Arcapita will aim to exit performance, working with the operating where it has a unique angle to secure the diligence, along with an assessment of the an investment within three to seven years. partner to understand the underlying factors acquisition or to create value thereafter. In management team. The relevant investment team will formulate influencing current and future performance. practice, this has arisen from transactions its strategy to maximize equity value in the During the critical early ownership period This approach allows the deal team to being offered to Arcapita on a proprietary period prior to exit. Given the flexibility of Arcapita introduces process disciplines in recognize any performance concerns in the basis, the opportunity to install a new the holding period, Arcapita may extend the areas of strategy, operations, and people early stages of the process, and to determine expert management team, a special situation the holding period to avoid exiting at an management, as well as board governance appropriate course corrections, if necessary. or industry knowledge that leads to inopportune time, and, equally it may and audit protocols. Early on, the company More extensive involvement is undertaken identification of an opportunity, or situations opt for an earlier exit if an attractive exit works with senior management to identify as needed. where Arcapita is able to leverage its opportunity presents itself. Exit may be by the key industry and company-specific extensive network of business relationships way of trade sale, initial public offering or Exit operating and financial measures that to the advantage of the target company, sale to financial buyer, depending on which The real estate team sets a target date for best reflect the true performance of the especially within the Middle East. route offers the most attractive return. the exit which typically ranges from three business. The firm structures incentive plans to seven years after the investment date, to encourage and motivate the company’s depending on the type of investment and management team to meet agreed-upon the market. A partial or full exit may occur metrics. Through a disciplined program of through a public listing, sale to financial / monthly performance reviews and quarterly strategic investor or strata sale. board meetings, Arcapita’s team works with the company’s management team to evaluate the company’s performance, ensure early recognition of any deviations from expected performance and determine appropriate course corrections. More extensive involvement is undertaken as needed. ARCAPITA ANNUAL REPORT 2017 14 15 ARCAPITA ANNUAL REPORT 2017

Investment Process Current and Exited Portfolio PODS E ONOIN To date, Arcapita Management have completed over 70 investments with a total Profine GmbH transaction value of approximately USD 30 Roxar AS billion. Smart Document Solutions, LLC Current Private Equity Investment Under South Staffordshire Plc Management Southland Log Homes, Inc. PA (2-6 MONTHS} Arcapita GCC Utilities Development I (3-5 YEARS) The Tensar Corporation, LLC Arcapita Ventures I Limited TLC Health Care Services, Inc. Meridian Surgical Partners, LLC Transportation Safety Technologies, Inc. NAS United Healthcare Services Varel International Energy Services, Inc. Current Real Estate Investments Under Viridian Group C Management (3-6 MONTHS) Watermark, Inc. U ARC UAE Logistics II Yakima Products, Inc. ARC UAE Logistics Park Zephyr Investments Limited Arcapita India Business Park Development I Deal Closing / Investment Exited Real Estate Investments Deal Sourcing Due Diligence Underwriting Placement Post-Acquisition Exit Arcapita International Luxury Residential Development I ARC Real Estate Income Fund • Referrals from • Market sounding • Finalize legal PRE-MARKETING • Portfolio • Partial or full Arcapita US Residential Development I Arcapita Asian Industrial Yielding I specialist • Extensive analysis documentation • First contact with management realization intermediaries • Form investment investors is handled by • Deal team’s Arcapita US Senior Living V Arcapita CEE Residential Development I • Consult external the Portfolio • Direct approach to experts & advisors structure • Book building starts responsibility Arcapita US Senior Living VI Arcapita European Industrial Development I partners / sellers Management Group • Identify risks & • Equity and • Investors’ meetings • Approvals Bahrain Bay Development B.S.C.(c) Arcapita European Industrial Yielding I • Dialogue with financing funded • Asset management mitigants • Distributions Arcapita European Self-Storage Development I investment banks & MARKETING for real estate & Bahrain Bay Development II B.S.C.(c) • Arrange senior • Finalize pricing infrastructure to investors & other relationships • Release PPM Saadiyat Beach Apartments, Limited Arcapita European Self-Storage Development II financing & investment for transactions is Arcapita • Follow-on investors • Process client handled in-house • Allocation of Exited Private Equity Investments Arcapita India Business Park Development II transactions within • Documentation • Set placement price orders or outsourced to performance fees Arcapita Japan Residential Yielding I the portfolio • Investment American Pad & Paper LLC • Prepare closing • Investors’ queries partners approvals B.R. Lee Industries, Inc. Arcapita Qatar Real Estate Investment memo response • Ongoing • Risk management Arcapita UK Senior Living Yielding I • Prepare post- • Commitments oversight by Risk Bijoux Terner, LLC acquisition strategy through SPA Management Group Caribou Coffee Company, Inc. Arcapita US Residential Development II • Value optimization • Funding & Church Street Health Management Arcapita US Residential Development III reduction of to maximize returns Arcapita US Retail Yielding I Arcapita’s position Church’s Chicken Cirrus Design Corporation Arcapita US Senior Living Yielding I Compagnie Européenne de Prestations Arcapita US Senior Living Yielding II Logistiques (CEPL) Arcapita US Senior Living Yielding III Computer Generation Incorporated Arcapita US Senior Living Yielding IV Cypress Communications Multifamily I DVT Corporation Multifamily II Falcon Gas Storage Company, Inc. Prologis I Freightliner Group Limited Prologis II Honiton Energy Caymans Ltd Prologis III Jill Acquisition, LLC Riffa Views B.S.C.(c) Loehmann’s Holdings, Inc. Victory Heights Golf Residential and Medifax-EDI, Inc. Development Company LLC ARCAPITA ANNUAL REPORT 2017 16 17 ARCAPITA ANNUAL REPORT 2017

Corporate Governance Overview Board Committees Management The system of procedures and principles governing Arcapita’s management and Arcapita’s Board of Directors is assisted in Arcapita has assembled a management operations are fundamental to the firm’s success. Arcapita’s Board of Directors its monitoring and oversight responsibilities team with deep experience in building and and senior management are committed to an efficient, entrepreneurial decision- by the Executive Investment Committee, managing investment platforms globally. making structure that is fair, transparent and accountable while maintaining the the Executive Administration and Corporate Drawing upon management’s collective agility required for a transaction. The illustration below describes Arcapita’s current Governance Committee and the Audit and experience and track record, Arcapita enjoys governance framework: Risk Committee. a seasoned management team that has lived through multiple investment cycles. Arcapita Executive Investment Committee utilizes cross-functional management The Executive Investment Committee’s C committees to operate its business: primary duties and responsibilities include to: Executive Committee • Establish operating guidelines for The Executive Committee oversees the L investment activities; strategic planning for Arcapita and the • Approve new investments; decision making for all new investments. E For example, prior to making a commitment E A • Approve divestitures of current A R to sign definitive agreements relating to I C C investments; C L C investments (equity and financing), each C • Monitor investment performance across new investment will need to be reviewed the portfolio; and by the Executive Committee. The Executive Committee’s duties and responsibilities • Approve firm-level financing and issuing R include to: C L E C of securities. C • Set global strategy for Arcapita; Executive Administrative and Corporate Governance Committee • Review and recommend new investments; The Executive Administrative and Corporate • Review and approve business plans, Governance Committee’s primary duties and budgets and control systems; and responsibilities include to: I I E C • Manage human capital, including T L • Recommend and approve corporate and determining compensation and benefits administrative policies; plans and overseeing human resource Arcapita has assembled a distinguished Board of Directors comprising eminent • Review and recommend approval of the development. annual budget; business personalities from across the GCC region. Drawing on deep experience in Risk Management Committee management, industry and investments, the Board of Directors is well positioned • Recommend and revise corporate The Risk Management Committee’s duty is to represent the best interests of investors while assisting management with expert governance policies and procedures; and to establish and maintain a risk management advice and counsel. framework throughout the firm to best • Oversee and monitor the governance Arcapita’s Board of Directors takes responsibility for the strategy of Arcapita and for manage Arcapita’s shareholder and client framework. the supervision and oversight of its senior management, who have been entrusted interests. Its mandate is to identify, assess with implementing day-to-day management policies. Arcapita’s Board of Directors Audit & Risk Committee and measure risks arising from the firm’s consists of eight members, including seven non-executive members and Mr. Atif A. The Audit & Risk Committee’s primary duties activities, and to define the appropriate Abdulmalik, the firm’s CEO, representing management. The Board of Directors meet as and responsibilities include to: course of action to mitigate or manage them. often as business requires, and a minimum of four times a year. The roles of Chairman The Risk Committee’s role and responsibilities • Approve and recommend for further and CEO are held by two different individuals, to ensure an appropriate balance include to: approval by the Board of Directors the and separation of authority. Arcapita’s management works closely with the Board of annual financial statements and budgets; • Establish and maintain a risk management Directors, both directly and through its various committees. Management regularly framework throughout the firm by provides investment and financial updates and strategic forecasts to the Board of • Monitor financial reporting, risk, working with the Board Audit and Risk Directors, and discusses all investment decisions under consideration, as well as any compliance and internal control; and Committee; and other major decisions or issues facing Arcapita. • Review and appraise activities of external • Oversee risk functions. and internal auditors. ARCAPITA ANNUAL REPORT 2017 18 19 ARCAPITA ANNUAL REPORT 2017

Market Sounding Group • Serve as go-to liaison for new deal Organizational Structure and The Market Sounding Group is intended to activities for specific sectors and evaluate the marketability of investment geographies; Business Divisions products identified by the deal teams. The • Manage the firm’s operating rhythm Group comprises the Investors Relationship related to investments (e.g., quarterly Management team, members of the Financial reviews, valuation updates, dividend Management Group and Shari’ah. The Market distributions, investor reporting, etc.); Sounding Group is responsible for the initial assessment of investor and market reaction to • Provide periodic portfolio summary input C Ee Offi the following: for Arcapita’s overall financial reports; and • Additional funding for an existing legacy • Provide portfolio exit projections and transaction; and future investment plans as input for C O C I Arcapita’s 3-5 year plan. C • Potential new transactions. Offi Offi

Investment Executive Committee I R R E C R The Investment Executive Committee oversees the management of the existing investment portfolio, screens future new C A L C P E P I deal activity before Marketing Sounding A Group, Executive Committee and other I A approvals are sought, and provides inputs C R for Arcapita’s annual business planning. The A Investment Executive Committee’s role and C responsibilities include to: R C I • Oversee all deal teams and investment assets; T O • Vet all deal team requests that will ultimately require Executive Committee approval; Investors Relationship Management Legal and Compliance • Serve as first point of contact for Investors Relationship Management is Arcapita’s legal department has responsibility individual deal teams; responsible for developing and maintaining for Arcapita’s compliance with all applicable relationships within Arcapita’s network of laws and regulations in its business activities • Provide Board-level engagement with investors and potential investors. The team and advises with respect to all legal matters. individual deals; members are the primary liaisons with Its activities include advising investment clients, delivering portfolio updates and teams on investments and divestments, and presenting new investment opportunities. advising senior management and the Board of This group is also the first point of contact Directors on corporate governance, financing for investment opportunities which may arrangements and strategic planning. be sourced from potential clients. The team Arcapita’s legal department also assists operates out of Bahrain. Arcapita operates with the administration of Cayman Islands, a sophisticated marketing system to plan, European, Middle Eastern and Asian offshore execute and monitor investment syndication, corporate structures in various investments. providing investors with a personalized The Legal Department is also responsible for and efficient service. The Investor Services the Anti-Money Laundering Function and Group within the Investors Relationship ensures that Arcapita is compliant with Anti- Management department is responsible Money Laundering requirements of relevant for providing the team with the support jurisdictions. The legal department operates necessary to respond to queries and requests out of Bahrain and London. in a timely and efficient manner. ARCAPITA ANNUAL REPORT 2017 20 21 ARCAPITA ANNUAL REPORT 2017

Corporate Management of Board of Directors packages, and risk Corporate Management provides support assessment of prospective investments. The services to all of Arcapita’s departments. team operates out of Bahrain. The Corporate Management department Shari’ah comprises multiple disciplines, including The Shari’ah Department is responsible for Administration, Information Technology ensuring that there is an ongoing process and Public Relations for our global offices. of reviewing and auditing for Shari’ah Corporate Management operates out of compliance in accordance with AAOIFI Bahrain. standards for existing and new investments, Human Resources combined with regular portfolio company Arcapita’s Human Resources Department visits. The Shari’ah Board ensures that all is responsible for the administration and investments undertaken by the lines of Financial Highlights management of the firm’s most valued business are structured in a manner that assets – its employees, the administration complies strictly with Shari’ah principles. and management of the global compensation Risk Management & benefits programs, and the design and The Risk Management Department is administration of the firm’s long-term independent of the business units and incentive plans. The primary goal of our FY 2014 FY 2015 FY 2016 FY 2017 functions under the supervision of the Human Resources Department is to help Risk Management Committee (“RMC”) and Total Revenue (US$ M) 29.3 35.5 36.2 33.5 the organization meet its strategic goals by the Audit and Risk Committee (“ARC”). attracting and retaining employees and also One of the primary objectives of the Risk Net Income (US$ M) 10.1 11.4 12.2 8.1 managing them effectively through several Management Department (in conjunction processes. Most of these processes are Net Income Margin (%) 35% 32% 34% 24% with the RMC and the ARC) is to implement, performed by the HR Department in Bahrain. maintain, and enhance a risk management Total Assets (US$ M) 59.1 144.5 144.5 198.7 Some of the HR processes for Arcapita offices framework that is aligned to Arcapita’s outside Bahrain are outsourced to third- Return on Assets (%) 26% 11% 8% 5% overall risk profile and is driven by Board party service providers whose service levels approved risk appetite and policy documents. Total Equity (US$ M) 50.5 86.1 130.2 132.3 are monitored and managed from Bahrain. When all of these processes are effectively Financial Control Return on Equity (%) 29% 17% 11% 6% integrated, they provide significant economic Financial Control is responsible for preparing Dividend as a Percentage of Paid-up Capital (%) 5% 7% 7% 7% benefits to the firm. and maintaining accounts records, including; subsidiary accounting, internal and external Treasury Operations financial reporting, regulatory reporting Treasury Operations comprises multiple of financial figures and the related internal units, including: Treasury, responsible for controls of the foregoing, and internal and banking relationships and implementation external reporting of Arcapita’s financial Total Revenue of treasury products; Investors Information information to the respective stakeholders. 40 Management, responsible for opening and 35.5 36.2 managing investor accounts; and Operations, Corporate Communications $33.5 35 33.5 responsible for fund transfers and receipts, The Corporate Communications Department 30 29.3 treasury bank office processes, deal funding, is tasked with maintaining and improving the million 25 and reporting processes. Treasury Operations public profile of the firm. The Department is 20 operates out of Bahrain. focused on positioning and raising awareness 15 of the Arcapita brand to ensure it is in Investments: Real Estate and Private alignment with Arcapita’s business lines and 10 Equity offerings. The Corporate Communications 5 Arcapita employs investment teams and team have organized numerous events independent consultants that are active 0 and private functions this year and the FY 2014 FY 2015 FY 2016 FY 2017 globally, and their activities are coordinated Department have been active in terms of under a Chief Investment Officer. Through media exposure having made appearances in the investment teams, Arcapita originates, both regional and international newspapers, manages and exits investments. magazines, and websites. The Corporate Corporate Finance Communications Department operates out of The Corporate Finance Department Bahrain. is responsible for the coordination of information across the firm, corporate level strategic/financial planning, preparation ARCAPITA ANNUAL REPORT 2017 22 23 ARCAPITA ANNUAL REPORT 2017

Net Income

14.0 12.2 12.0 11.4 $8.1 10.1 10.0 8.1 million 8.0 ARCAPITA GROUP 6.0 HOLDINGS LIMITED

4.0 Shari’ah Supervisory Board’s Report 2.0 Independent Auditors’ Report and 0 FY 2014 FY 2015 FY 2016 FY 2017 Consolidated Financial Statements For the year ended 30 June 2017 Total Assets

250.0 198.7 $198.7 200.0

144.5 million 150.0 144.5

100.0 59.1 50.0

0 FY 2014 FY 2015 FY 2016 FY 2017

Total Equity

140.0 130.2 132.3 $123.3 120.0 100.0

million 80.0 86.1

60.0

40.0 50.5

20.0

0 FY 2014 FY 2015 FY 2016 FY 2017

Dividend as a Percentage of Paid-up Capital (%)

8% 7% 7% 7% 7% 6% 7% 5% 5% 4% 3% 2% 1% 0% FY 2014 FY 2015 FY 2016 FY 2017 ARCAPITA ANNUAL REPORT 2017 24 25 ARCAPITA ANNUAL REPORT 2017

Shari’ah Supervisory Board’s Independent Auditors’ Report to the Shareholders Report to Shareholders of Arcapita Group Holdings Limited

Assalam Alaikum Wa Rahmat Allah Wa Barakatuh, Report on the audit of the consolidated financial statements

In compliance with the letter of appointment and article 110 of the Articles of Association of Arcapita Group Holdings Limited, we are Opinion required to submit the following report: We have audited the accompanying consolidated financial statements of Arcapita Group Holdings Limited (“the Company”) and its subsidiaries (together “the Group”), which comprise the consolidated statement of financial position as at 30 June 2017, and the We have reviewed the contracts relating to the transactions and applications introduced by Arcapita Group Holdings Limited and its consolidated statements of profit or loss, comprehensive income, cash flows and changes in equity for the year then ended, and notes subsidiaries (“the Group”) during the year ended 30 June 2017. We have also conducted our review to form an opinion as to whether to the consolidated financial statements, including a summary of significant accounting policies. the Group has complied with Shari’ah rules and principles and also with the specific fatwas, rulings and guidelines issued by us. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial The Group’s management is responsible for ensuring that it conducts its business in accordance with Islamic Shari’ah rules and position of the Group as at 30 June 2017, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs). principles. It is our responsibility to form an independent opinion, based on our review of the operations of the Group and to report to you. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are We planned and performed our review so as to obtain all the information and explanations which we considered necessary in order to further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We are provide us with sufficient evidence to give assurance that the Group has not violated the rules and principles of Islamic Shari’ah. The independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Shari’ah Supervisory Board will conduct site visits and audits to ensure Shari’ah compliance. Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. In our opinion: a) The contracts entered by the Group during the year are in compliance with Islamic Shari’ah rules and principles. Other information Other information consists of the Supplementary information, that was obtained at the date of this auditor’s report. The Board of b) The Group is managing an investment portfolio on behalf of its clients and this investment portfolio was acquired by its clients Directors is responsible for the other information. Our opinion on the financial statements does not cover the other information and prior to establishing the Group and the investment portfolio was structured and approved by the client’s previous Shari’ah board. we do not express any form of assurance conclusion thereon. c) The investments undertaken by the Group during the year have been reviewed by us and are in accordance with Islamic Shari’ah In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider principles. whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material d) The allocation of profit and charging of losses conform to the basis that had been approved by us in accordance with Islamic misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Shari’ah rules and principles. Responsibilities of the Board of Directors for the consolidated financial statements We beg Allah the Almighty to grant us all success and straightforwardness. The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated Shari’ah Supervisory Board: financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the consolidated financial statements Sh. Muhammad Taqi Usmani Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material Chairman misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could Sheikh Esam Mohamed Ishaq Sheikh Mohammed Isa Al Jamea reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. Member Member

10 July 2017 ARCAPITA ANNUAL REPORT 2017 26 27 ARCAPITA ANNUAL REPORT 2017

Independent Auditors’ Report to the Shareholders Arcapita Group Holdings Limited of Arcapita Group Holdings Limited (continued) Consolidated Statement of Financial Position As at 30 June 2017

Report on the audit of the consolidated financial statements (continued) 2017 2016 Note USD ‘000 USD ‘000 Auditor’s responsibilities for the audit of the consolidated financial statements (continued) As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: ASSETS Cash and cash equivalents 7 47,052 61,394 • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to Receivables 8 65,678 29,722 provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one Investments 9 75,712 43,858 resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal Other assets 10 1,464 1,149 control. TOTAL ASSETS 189,906 136,123 • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. EQUITY AND LIABILITIES • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures LIABILITIES made by the Board of Directors. Payable on acquisition of investment 11 32,634 - • Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit Murabaha financing 12 21,114 - evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention Accrued expenses and other liabilities 13 11,649 13,448 in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, TOTAL LIABILITIES 65,397 13,448 to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. EQUITY • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and Share capital and premium 15 96,610 95,583 whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Reserves 20,557 19,828 Proposed dividends 16 7,342 7,264 • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and TOTAL EQUITY 124,509 122,675 performance of the Group audit. We remain solely responsible for our audit opinion. TOTAL EQUITY AND LIABILITIES 189,906 136,123 We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Partner’s registration no. 121 Abdulaziz Hamad Aljomaih Atif A. Abdulmalik 23 July 2017 Chairman of the Board of Directors Chief Executive Officer and Director Manama, Kingdom of Bahrain.

The attached explanatory notes 1 to 26 form part of these consolidated financial statements. ARCAPITA ANNUAL REPORT 2017 28 29 ARCAPITA ANNUAL REPORT 2017

Arcapita Group Holdings Limited Arcapita Group Holdings Limited Consolidated Statement of Income Consolidated Statement of Comprehensive Income For the year ended 30 June 2017 For the year ended 30 June 2017

2017 2016 2017 2016 Note USD ‘000 USD ‘000 USD ‘000 USD ‘000

OPERATING INCOME NET PROFIT FOR THE YEAR 8,078 12,230 Fee and other income 17 33,492 36,141 Total operating income 33,492 36,141 Other comprehensive income to be reclassified to profit or loss in subsequent periods: Exchange differences on translation of foreign operations (7) 83 OPERATING EXPENSES TOTAL COMPREHENSIVE INCOME FOR THE YEAR 8,071 12,313 Staff compensation and benefits (12,707) (12,933) General and administration expenses (6,489) (5,853) Professional and consultancy fees (3,907) (2,809) Financing cost (553) - AEIP expense 18 (1,361) (1,602) Total operating expenses (25,017) (23,197) Net operating income 8,475 12,944

Foreign exchange loss (397) (714) NET PROFIT FOR THE YEAR 8,078 12,230

Abdulaziz Hamad Aljomaih Atif A. Abdulmalik Chairman of the Board of Directors Chief Executive Officer and Director

The attached explanatory notes 1 to 26 form part of these consolidated financial statements. The attached explanatory notes 1 to 26 form part of these consolidated financial statements. ARCAPITA ANNUAL REPORT 2017 30 31 ARCAPITA ANNUAL REPORT 2017

Arcapita Group Holdings Limited Arcapita Group Holdings Limited Consolidated Statement of Cash Flows Consolidated Statement of Changes in Equity For the year ended 30 June 2017 For the year ended 30 June 2017

2017 2016 Share capital and premium Reserves Note USD ‘000 USD ‘000 Un- Total Foreign allocated Share Currency OPERATING ACTIVITIES Share Share AEIP Capital and Retained Translation Total Proposed Total Net profit for the year 8,078 12,230 Capital Premium Shares Premium Earnings Reserve Reserves Dividend Equity USD ‘000 USD ‘000 USD ‘000 USD ‘000 USD ‘000 USD ‘000 USD ‘000 USD ‘000 USD ‘000 Adjustment for non cash items: Arcapita equity incentive plan expense 18 1,027 1,602 As at 1 July 2016 10 102,768 (7,195) 95,583 19,872 (44) 19,828 7,264 122,675 Financing cost 553 - Net profit for the year - - - - 8,078 - 8,078 - 8,078 Operating income before changes in operating assets and liabilities 9,658 13,832 Exchange differences arising from translation Changes in operating assets and liabilities: of foreign operations - - - - - (7) (7) - (7) Investments (31,854) 6,580 Total comprehensive Receivables (35,956) (21,796) income for the year - - - - 8,078 (7) 8,071 - 8,071 Other assets (315) 108 Shares granted to employees under AEIP - - 1,027 1,027 - - - - 1,027 Accrued expenses and other liabilities (1,806) 3,618 Payable on acquisition of investment 32,634 (45,438) Dividends paid ------(7,264) (7,264) Cash used in operations (27,639) (43,096) Dividends proposed (note 16) - - - - (7,342) - (7,342) 7,342 - Financing cost paid (439) - Balance as at Net cash flows used in operating activities (28,078) (43,096) 30 June 2017 10 102,768 (6,168) 96,610 20,608 (51) 20,557 7,342 124,509

FINANCING ACTIVITIES Proceeds from issuance of Murabaha financing 21,000 - Proceeds from issuance of share capital 15 - 30,833 Dividends paid (7,264) (4,667) Net cash flows from financing activities 13,736 26,166

NET DECREASE IN CASH AND CASH EQUIVALENTS (14,342) (16,930) Cash and cash equivalents at the beginning of the year 61,394 78,324 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 7 47,052 61,394

The attached explanatory notes 1 to 26 form part of these consolidated financial statements. The attached explanatory notes 1 to 26 form part of these consolidated financial statements. ARCAPITA ANNUAL REPORT 2017 32 33 ARCAPITA ANNUAL REPORT 2017

Arcapita Group Holdings Limited Arcapita Group Holdings Limited Consolidated Statement of Changes in Equity (continued) Notes to the Consolidated Financial Statements For the year ended 30 June 2017 30 June 2017

Share capital and premium Reserves 1 ORGANISATION AND ACTIVITIES Un- Total Foreign Arcapita Group Holdings Limited (“the Company”) was incorporated in the Cayman Islands on 30 December 2013 as an exempt allocated Share Currency limited liability company. The registered office of the Company is at P.O. Box 1111, George Town, Grand Cayman, British West Share AEIP Capital and Retained Translation Total Proposed Total Indies. The Company and its subsidiaries (together the ‘Group’) provide alternative Islamic financial products. Share Capital Premium Shares Premium Earnings Reserve Reserves Dividend Equity These consolidated financial statements were authorized for issue by the Board of Directors on 23 July 2017. USD ‘000 USD ‘000 USD ‘000 USD ‘000 USD ‘000 USD ‘000 USD ‘000 USD ‘000 USD ‘000 2 BASIS OF PREPARATION As at 1 July 2015 6 61,661 - 61,667 14,906 (127) 14,779 4,667 81,113 The consolidated financial statements have been prepared under the historical cost basis, except for investments that have been Net profit for the year - - - - 12,230 - 12,230 - 12,230 measured at fair value. The consolidated financial statements have been presented in US Dollars being the functional currency of Exchange differences the Group and all values are rounded to the nearest USD thousand (USD ‘000), except when otherwise indicated. arising from translation The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards of foreign operations - - - - - 83 83 - 83 (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Total comprehensive income for the year - - - - 12,230 83 12,313 - 12,313 3 BASIS OF CONSOLIDATION Issue of share capital 4 41,107 (10,278) 30,833 - - - - 30,833 The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 30 June 2017. Shares granted to Control is achieved when the Group is exposed, or has rights, to, variable return from its involvement with the investee and has employees under AEIP - - 3,083 3,083 - - - - 3,083 the ability to affect those return through its power over the investee. Specifically the Group controls the investee if, and only if, the Group has: Dividends paid ------(4,667) (4,667) Dividends proposed - - - - (7,264) - (7,264) 7,264 - - Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee; Balance as at - Exposure, or rights, to variable returns from its involvement with the investee; and 30 June 2016 10 102,768 (7,195) 95,583 19,872 (44) 19,828 7,264 122,675 - The ability to use its power over the investee to affect its returns. When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: - The contractual arrangement with the other vote holders of the investee; - Rights arising from other contractual arrangements; and - The Group’s voting rights and potential voting rights. The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to non-controlling interest (NCI), even if this results in NCI having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

The attached explanatory notes 1 to 26 form part of these consolidated financial statements. ARCAPITA ANNUAL REPORT 2017 34 35 ARCAPITA ANNUAL REPORT 2017

Arcapita Group Holdings Limited Notes to the Consolidated Financial Statements (continued) 30 June 2017

3 BASIS OF CONSOLIDATION (continued) 3 BASIS OF CONSOLIDATION (continued) A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group Subsidiary companies (continued) loses control over a subsidiary, it: - Derecognises the assets (including goodwill) and liabilities of the subsidiary; Year of Country of Subsidiary Ownership Incorporation Incorporation - Derecognises the carrying amount of any non-controlling interests; - Derecognises the cumulative translation differences recorded in equity; Arcapita Investment Management US Inc. 100% 2013 United States of - Recognises the fair value of the consideration received; The primary activity of Arcapita Investment Management US Inc. is to provide America - Recognises the fair value of any investment retained; advisory services with respect to investment opportunities in the United States of America. - Recognises any surplus or deficit in the statement of profit or loss; and Arcapita Investment Management Singapore Pte Limited 100% 2013 Singapore - Reclassifies the parent’s share of components previously recognised in OCI to profit or loss or retained earnings, as appropriate, The primary activity of Arcapita Investment Management Singapore Pte as would be required if the Group had directly disposed of the related assets or liabilities. Limited is to source investment opportunities in Asia and to provide financial advisory services to its related companies. Subsidiary companies The Group’s ownership in the aforementioned subsidiaries has not changed from the previous year ended 30 June 2016. The following are the principal subsidiaries of the Company and are consolidated in these financial statements. Investment entity Year of Country of Subsidiary Ownership Incorporation Incorporation Entities that meet the definition of an investment entity within IFRS 10 are required to measure their subsidiaries held for sale under the ordinary course of business at fair value through profit or loss rather than consolidate them. The criteria which define an investment entity are, as follows: AIM Group Limited 100% 2013 Cayman Islands The primary activity of AIM Group Limited is to provide asset management and - An entity that obtains funds from one or more investors for the purpose of providing those investors with investment administrative services. services; Arcapita Investment Limited 100% 2015 Cayman Islands - An entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, The primary activity of Arcapita Investment Limited is to hold the investments investment income or both; and of the Group. - An entity that measures and evaluates the performance of substantially all of its investments on a fair value basis. Arcapita Management Limited 100% 2015 Cayman Islands The primary activity of Arcapita Management Limited is to administer or The Group raises commitment from a number of investors in order to raise capital to invest in private equity investment or to place manage the Group’s investment structure companies. its acquired investment to investors. Arcapita Investment Partners Limited 100% 2015 Cayman Islands The Group provides investment management services to investors which include investment in Islamic compliant equities, fixed The primary activities of Arcapita Investment Partners Limited is to structure income securities, private equity and property investments for the purpose of returns in the form of capital appreciation and Islamically compliant investment products and act as placement agent. investment income. Arcapita Cayman SPE Limited 100% 2014 Cayman Islands The Group reports to management via internal management reports and to its investors via investment reports on a fair value The primary activity of Arcapita Cayman SPE Limited is to act as a deposit basis. All such investments are reported at fair value to the extent allowed under IFRS in the Group’s consolidated financial agent to the investors of the Group. statements. The Group does not intend to hold such investments indefinitely and has an exit strategy for all such investments. Arcapita Investment Advisors UK Limited 100% 2013 United Kingdom The Group’s management has concluded that the Group meets the additional characteristics of an investment entity in that it has The primary activities of Arcapita Investment Advisors UK Limited are to more than one investor; more than one investment; and the investments are predominantly in the form of equities and similar source investment opportunities in Europe and provide investment advisory securities. services. The Group concluded that it meets the definition of an investment entity. ARCAPITA ANNUAL REPORT 2017 36 37 ARCAPITA ANNUAL REPORT 2017

Arcapita Group Holdings Limited Notes to the Consolidated Financial Statements (continued) 30 June 2017

3 BASIS OF CONSOLIDATION (continued) 4 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (continued)

Subsidiary companies (continued) Fair value of financial instruments (continued)

Country of The Group engages third party qualified valuation experts to perform the valuation of certain investments. Where the Group does Unconsolidated subsidiaries Effective ownership incorporation not engage external valuers, the Group determines the valuation of investments internally as of the reporting date. The third party valuers and the internal valuation team use methods such as sales comparison or the capitalisation of future cash streams of the underlying asset by using the prevailing capitalisation rate for similar properties or similar geographies. The Group and SBA Holdings Limited 100% Cayman Islands valuation experts apply their judgement in determining the appropriate valuation techniques and considerations of unobservable valuation inputs used in valuation models which includes capitalisation rates and comparable assets. The input to these models Senior Living Holdings Limited 100% Cayman Islands is derived from observable markets where available, but where this is not feasible, degree of judgment is required in determining UAE Logistics Holdings Limited 100% Cayman Islands assumptions used in these models. Changes in assumptions used in the models could affect the reported fair value of financial Senior Living VI Holdings Limited 100% Cayman Islands assets and liabilities.

ARC Logistics Portfolio II Holdings Limited 100% Cayman Islands 5 NEW AND AMENDED STANDARDS AND INTERPRETATIONS HealthServ Holdings Limited 100% Cayman Islands The accounting policies adopted are consistent with those of the previous financial year relating to the following new and amended IFRS and the IFRS Interpretations Committee (the “IFRIC”) interpretations which became effective for accounting 4 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES periods beginning on or after 1 January 2016: The preparation of these consolidated financial statements requires management to make judgements, estimates and assumptions Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation that affect the reported amounts in the consolidated financial statements. However, uncertainty about these assumptions and The amendments clarify the principle in IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets that revenue reflects estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in a pattern of economic benefits that are generated from operating a business (of which the asset is a part) rather than the economic future periods. Significant judgements applied in the preparation of the consolidated financial statements are given below: benefits that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible assets. The amendments are Going concern applied prospectively and do not have any impact on the Group, given that it has not used a revenue-based method to depreciate The Group’s Board of Directors has made an assessment of the Group’s ability to continue as a going concern and is satisfied that its non-current assets. the Group has the resources to continue in business for the foreseeable future. Furthermore, the Board of Directors is not aware Amendments to IAS 27: Equity Method in Separate Financial Statements of any material uncertainties that may cast significant doubt about the Group’s ability to continue as a going concern. Therefore, The amendments allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates the consolidated financial statements are prepared on a going concern basis. in their separate financial statements. Entities already applying IFRS and electing to change to the equity method in their separate financial statements have to apply that change retrospectively. These amendments do not have any impact on the Group’s financial Impairment of financial assets statements. The management of the Group reviews its individually significant financial assets at each statement of financial position date to Annual Improvements 2012-2014 Cycle assess whether an impairment loss should be recorded in the statement of profit or loss. In particular, judgement by management These improvements include: is required in the estimation of the amount and timing of future cash flows when determining the impairment loss. IFRS 7 Financial Instruments: Disclosures Assets that have been assessed individually and found not to be impaired and all individually insignificant assets are then assessed collectively, in groups of assets with similar risk characteristics, to determine whether impairment should be made due (i) Servicing contracts to incurred loss events for which there is objective evidence but whose effects are not yet evident. The amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a financial asset. An entity must assess the nature of the fee and the arrangement against the guidance for continuing involvement Fair value of financial instruments in IFRS 7 in order to assess whether the disclosures are required. The assessment of which servicing contracts constitute continuing involvement must be done retrospectively. However, the required disclosures need not be provided for any period Fair value is the price that would be received upon the sale of an asset or that would be paid to transfer a liability in an orderly beginning before the annual period in which the entity first applies the amendments. transaction between market participants at the measurement date. (ii) Applicability of the amendments to IFRS 7 to condensed interim financial statements The Group’s entire investment portfolio falls under level 3 of the fair value hierarchy. The Group uses various valuation techniques The amendment clarifies that the offsetting disclosure requirements do not apply to condensed interim financial statements, which are based on unobservable market inputs to determine the fair value of such investments. unless such disclosures provide a significant update to the information reported in the most recent annual report. This amendment is applied retrospectively. ARCAPITA ANNUAL REPORT 2017 38 39 ARCAPITA ANNUAL REPORT 2017

Arcapita Group Holdings Limited Notes to the Consolidated Financial Statements (continued) 30 June 2017

5 NEW AND AMENDED STANDARDS AND INTERPRETATIONS (continued) 6 SIGNIFICANT ACCOUNTING POLICIES (continued) IAS 19 Employee Benefits a) Financial instruments (continued) The amendment clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the (i) Financial assets (continued) obligation is denominated, rather than the country where the obligation is located. When there is no deep market for high quality corporate bonds in that currency, government bond rates must be used. This amendment is applied prospectively. Financial assets at fair value through profit or loss Financial assets designated at fair value through profit or loss upon inception are those that are not held for trading but Amendments to IAS 1 Disclosure Initiative are managed and their performance evaluated on a fair value basis in accordance with the Group’s objectives. The Group’s The amendments to IAS 1 clarify, rather than significantly change, existing IAS 1 requirements. The amendments clarify: objectives require the Board of Directors to evaluate information about these assets on a fair value basis together with • The materiality requirements in IAS 1; other related financial information. Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value are recognised in the consolidated statement • That specific line items in the statement(s) of profit or loss and OCI and the statement of financial position may be disaggregated; of profit or loss. • That entities have flexibility as to the order in which they present the notes to financial statements; and Financial assets at amortised cost • That the share of OCI of associates and joint ventures accounted for using the equity method must be presented in aggregate These are non-derivative financial assets that are not quoted in an active market and are stated at fair value plus transaction as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss. costs, if any. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method (EIR), less impairment, if any. The effective interest rate is the rate that exactly discounts the estimated Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception future cash payments or receipts through the expected life of the financial asset or liability to the carrying amount of the The amendments address issues that have arisen in applying the investment entities exception under IFRS 10 Financial Statements. financial asset or liability. The amendments to IFRS 10 clarify that the exemption from presenting financial statements applies to a parent entity that is a subsidiary of an investment entity, when the investment entity measures all of its subsidiaries at fair value. An allowance for doubtful receivables is made when collection of the full amount is no longer probable. Receivables are written off when there is no possibility of recovery. Furthermore, the amendments to IFRS 10 clarify that only a subsidiary of an investment entity that is not an investment entity itself and that provides support services to the investment entity is consolidated. All other subsidiaries of an investment entity Derecognition are measured at fair value. The amendments to IAS 28 Investments in Associates and Joint Ventures allow the investor, when A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised applying the equity method, to retain the fair value measurement applied by the investment entity associate or joint venture to when: its interests in subsidiaries. (i) the right to receive cash flows from the asset have expired; or These amendments do not have any impact on the Group as the Group is already applying investment entity exception. (ii) the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group 6 SIGNIFICANT ACCOUNTING POLICIES has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained The significant accounting policies adopted in the preparation of the consolidated financial statements are set out below: substantially all the risks and rewards of the asset, but has transferred control of the asset. a) Financial instruments When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues of another entity. to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an (i) Financial assets associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. Financial assets comprise of cash and cash equivalents, receivables, investments and other assets. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original Initial recognition carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. The Group classifies its financial assets into two categories: at fair value through profit or loss and amortised cost. The classification depends on the purpose for which the financial assets were acquired or transferred to the Group. Financial assets are initially recognised at fair value plus transaction costs that are directly attributable to its acquisition or issue except in the case of financial assets recorded at fair value through profit or loss. Subsequent measurement ARCAPITA ANNUAL REPORT 2017 40 41 ARCAPITA ANNUAL REPORT 2017

Arcapita Group Holdings Limited Notes to the Consolidated Financial Statements (continued) 30 June 2017

6 SIGNIFICANT ACCOUNTING POLICIES (continued) 6 SIGNIFICANT ACCOUNTING POLICIES (continued) a) Financial instruments (continued) d) Revenue recognition (i) Financial assets (continued) Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Impairment of financial assets The Group assesses, at each reporting date, whether there is any objective evidence that a financial asset or a group of Fee income financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is The fee income represents income the Group earns for investment placement, investment structuring and arranging, asset objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset management and administrative services rendered in accordance to the contractual terms agreed between the parties. Fees are (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the recognised as the services are preformed. group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtor is Placement and arrangement fee experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that The Group earns arrangement and placement fees for rendering services during the acquisition and placement of investments. they will enter bankruptcy or other financial reorganization and where observable data indicate that there is a measurable These fees are recognised when earned based on the signed share purchase agreements by the Group. decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Dividend income (ii) Financial liabilities Dividends from investments in equity securities are recognised when the right to receive the payment is established. Initial recognition and measurement e) Foreign currencies Financial liabilities are classified, at initial recognition, as loans and borrowings and payables. All financial liabilities are recognised initially at fair value, net of directly attributable transaction costs. Transactions in foreign currencies are initially recorded in the functional currency at the rate of exchange prevailing at the date of the transaction. The Group’s financial liabilities include payable on acquisition of investment, murabaha financing, accrued expenses and other liabilities. Monetary assets and liabilities in foreign currencies are translated into USD at exchange rates prevailing at the consolidated statement of financial position date. Any gains or losses are recognised in the consolidated statement of profit or loss. Subsequent measurement After initial recognition, financial liabilities are subsequently measured at amortised cost using the effective interest rate Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as method. Gains and losses are recognised in the consolidated statement of profit or loss, when the liabilities are derecognised, at the dates of the initial recognition. Non-monetary items measured at fair value in a foreign currency are translated using the as well as through the EIR amortisation process. exchange rates at the date when the fair value is determined. Exchange gains and losses on non-monetary items classified as “fair value through profit or loss” are taken to the consolidated statement of profit or loss and for items classified as “fair value through Derecognition OCI” such differences are taken to the consolidated statement of comprehensive income. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. f) Share based payments When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the Employees of the Group receive remuneration in the form of share-based payments, whereby employees render services as original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in consideration for equity instruments. The cost of equity-settled transactions is determined by the fair value at the date when the consolidated statement of profit or loss. the grant is made using an appropriate valuation model. That cost is recognised as employee benefits expense in the consolidated statement of profit or loss, together with a corresponding increase in equity. b) Offsetting financial instruments g) Operating lease commitments Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if and only if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a The Group has entered into property leases which are classified as operating leases. The Group has determined, based on an net basis or to realise the assets and settle the liabilities simultaneously. evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the property and the present value of the minimum lease payments not amounting to substantially all of the fair value of c) Payables, accruals and provisions the property, that it therefore does not retain all the significant risks and rewards of ownership of these properties and accounts Provisions are made when the Group has a present obligation as a result of a past event, and it is probable that an outflow of for the contracts as operating leases. resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. ARCAPITA ANNUAL REPORT 2017 42 43 ARCAPITA ANNUAL REPORT 2017

Arcapita Group Holdings Limited Notes to the Consolidated Financial Statements (continued) 30 June 2017

6 SIGNIFICANT ACCOUNTING POLICIES (continued) 6 SIGNIFICANT ACCOUNTING POLICIES (continued) h) Standards issued but not yet effective h) Standards issued but not yet effective (continued) Standards issued but not yet effective up to the date of issuance of the Group’s consolidated financial statements are listed below. IFRS 2 Classification and Measurement of Share-based Payment Transactions — Amendments to IFRS 2 This listing is of standards and interpretations issued, which the Group reasonably expects to be applicable at a future date. The The IASB issued amendments to IFRS 2 Share-based Payment that address three main areas: the effects of vesting conditions Group intends to adopt these standards when they become effective. on the measurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and accounting where a modification to the terms and conditions of IFRS 9 Financial Instruments a share-based payment transaction changes its classification from cash settled to equity settled. In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is financial instruments project: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual permitted if elected for all three amendments and other criteria are met. The amendments are effective for annual periods periods beginning on or after 1 January 2018, with early application permitted. Except for hedge accounting, retrospective beginning on or after 1 January 2018, with early application permitted. These amendments are not expected to have any impact application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are on the Group. generally applied prospectively, with some limited exceptions. IFRS 16 – Leases The Group is planning to carryout a detailed impact assessment with respect to the classification and impairment assessment of The IASB issued the new standard for accounting for leases - IFRS 16 Leases in January 2016. The new standard does not its financial instruments and plans to adopt the new standard on the required effective date. Further, the Group does not apply significantly change the accounting for leases for lessors. However, it does require lessees to recognise most leases on their any hedge accounting with respect to its financial instruments, therefore the change will not have any impact on the Group. balance sheets as lease liabilities, with the corresponding right-of-use assets. Lessees must apply a single model for all recognised leases, but will have the option not to recognise ‘short-term’ leases and leases of ‘low-value’ assets. Generally, the profit or IFRS 15 - Revenue from Contracts with Customers loss recognition pattern for recognised leases will be similar to today’s finance lease accounting, with interest and depreciation In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers, effective for periods beginning on 1 January expense recognised separately in the consolidated statement of profit or loss. 2018 with early adoption permitted. IFRS 15 defines principles for recognising revenue and will be applicable to all contracts with customers. However, interest and fee income integral to financial instruments and leases will continue to fall outside the scope of IFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early application is permitted provided the new IFRS 15 and will be regulated by the other applicable standards (e.g., IFRS 9, and IFRS 16 Leases). revenue standard, IFRS 15, is applied on the same date. Lessees must adopt IFRS 16 using either a full retrospective or a modified retrospective approach. Revenue under IFRS 15 will need to be recognised as goods and services are transferred, to the extent that the transferor anticipates entitlement to goods and services. The standard will also specify a comprehensive set of disclosure requirements The Group does not anticipate early adopting IFRS 16 and is currently evaluating its impact. regarding the nature, extent and timing as well as any uncertainty of revenue and corresponding cash flows with customers. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. The Group does not anticipate early adopting IFRS 15 and is currently evaluating its impact. Management is considering the implications of these standards and amendments, their impact on the Group’s financial position and results and the timing of their adoption by the Group. IAS 7 Disclosure Initiative – Amendments to IAS 7 The amendments to IAS 7 Statement of Cash Flows are part of the IASB’s Disclosure Initiative and require an entity to provide 7 CASH AND CASH EQUIVALENTS disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. On initial application of the amendment, entities are not required to 30 June 30 June provide comparative information for preceding periods. These amendments are effective for annual periods beginning on or after 2017 2016 1 January 2017, with early application permitted. Application of amendments will result in additional disclosure provided by the USD ‘000 USD ‘000 Group. IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses - Amendment to IAS 12 Murabaha with a financial institution (note ‘a’) 38,016 30,018 In January 2016, through issuing amendments to IAS 12, the IASB clarified the accounting treatment of deferred tax assets of Cash and balances with banks 9,035 31,375 debt instruments measured at fair value for accounting, but measured at cost for tax purposes. The amendment is effective from 1 January 2017. The Group is currently evaluating the impact, but does not anticipate that adopting the amendments would have Cash in hand 1 1 a material impact on its consolidated financial statements. 47,052 61,394 a) This represents short term murabaha placement with a bank, rated ‘A’ by Standard & Poors. The profit rate on this ranges from 1.25% to 1.3% (2016: 0.75%) per annum with maturities up to 1 month. ARCAPITA ANNUAL REPORT 2017 44 45 ARCAPITA ANNUAL REPORT 2017

Arcapita Group Holdings Limited Notes to the Consolidated Financial Statements (continued) 30 June 2017

8 RECEIVABLES 11 PAYABLE ON ACQUISITION OF INVESTMENT 30 June 30 June This is relating to acquisition of a regional private equity investment acquired by the Group during 2017. 2017 2016 USD ‘000 USD ‘000 12 MURABAHA FINANCING During the year, the Group entered into a Murabaha financing facility (the “Facility”) with Strategic Investors Facility Limited Deal subscription receivable 56,900 23,520 (“SIF”), a Cayman Islands limited liability company owned by a group of shareholders and investors. Under this facility, AGHL Investment yield / dividend receivable 2,804 920 can avail financing up to US$ 75 million. As of 30 June 2017, US$ 21 million have been claimed and financed under the facility. The Facility will mature on 1 March 2022 unless SIF exercises an option at any time prior 1 December 2019 to require a reduced Receivable from AEIP 2,406 416 maturity date of 1 March 2020 for all or a part of the Facility. The Facility is unsecured. Arcapita Investment Limited has provided Advances to investment companies 2,357 1,931 a guarantee with respect to the entire facility amount outstanding. Fee receivable 1,030 1,813 13 ACCRUED EXPENSES AND OTHER LIABILITIES Other receivables 181 1,122 65,678 29,722 30 June 30 June 2017 2016 9 INVESTMENTS Note USD ‘000 USD ‘000 30 June 30 June 2017 2016 Due to investment companies 8,460 6,744 Note USD ‘000 USD ‘000 Employee related payables 14.3 2,099 5,016 Payable to board members 577 800 Investments classified at fair value through profit or loss 9.1 75,712 43,858 Accrued expenses and supplier payables 227 242 75,712 43,858 Payable to an affiliate 73 108 Fee received in advance - 316 9.1 Investments classified at fair value through profit or loss Other Liabilities 213 222 The Group has invested through its structured entities in real estate portfolios in United Arab Emirates and in the United States 11,649 13,448 of America and in a regional Private Equity Investment. 14 RELATED PARTY TRANSACTIONS 10 OTHER ASSETS Related parties represent associated companies, major shareholders, directors and key management personnel of the Group, 30 June 30 June the Group’s Shari’ah Supervisory Board and entities controlled, jointly controlled or significantly influenced by such parties. 2017 2016 Transactions with related parties arise from the ordinary course of business. Pricing policies and terms of these transactions are USD ‘000 USD ‘000 approved by the Group’s management.

Equipment’s 794 532 Prepayments and other assets 670 617 1,464 1,149 ARCAPITA ANNUAL REPORT 2017 46 47 ARCAPITA ANNUAL REPORT 2017

Arcapita Group Holdings Limited Notes to the Consolidated Financial Statements (continued) 30 June 2017

14 RELATED PARTY TRANSACTIONS (continued) 14 RELATED PARTY TRANSACTIONS (continued) Income and expenses on transaction with related parties included in the consolidated statement of profit or loss: 14.1 Reimbursement of expenses 30 June 30 June The Group and Arcapita Investment Management B.S.C.(c) (“AIM BSC”) are under the common control of the same shareholders 2017 2016 and governed by the same Board of Directors. As a result AIM BSC is a related party to the Group. The Group reimburses the Note USD ‘000 USD ‘000 expenditures incurred by AIM BSC in providing services to the Group. In the consolidated statement of profit or loss for the year ended 30 June 2017, the reimbursement is included within general and administration expenses, legal and professional expenses, Income staff compensation and benefit expenses and AEIP expenses. Placement income 11,895 2,151 14.2 Profit rate Yield and dividend income from investment companies 6,083 3,615 Management fee from investment companies 1,602 796 This carries a fixed profit rate of 6.5% per annum up to 1 March 2020 and 7.5% per annum thereafter. Arrangement fee from investment companies 1,000 726 14.3 Accrued expenses and other liabilities Included in accrued expenses and other liabilities are amounts recovered by the Group from an affiliate, under a fiduciary Expenses capacity, on behalf of certain employees and consultants of the Group. The Group collects such amounts on behalf of such Reimbursement of expenses 14.1 13,264 12,357 employees and consultants as per agreed terms. This amount will not revert to the Group at any point in time. Share based compensation to key personnel 18 1,361 1,602 15 SHARE CAPITAL & PREMIUM Key management personnel costs 1,276 2,512 Financing cost 553 - Share capital Fees to the Board of Directors 400 804 30 June 30 June 2017 2016 Balances with related parties as of the consolidated statement of financial position date are: USD ‘000 USD ‘000

Assets Authorised capital Deal subscription receivable 32,500 - 50,000,000 ordinary shares with a par value of Investment yield / dividend receivable from investment companies 2,804 920 USD 0.001 per share 50,000 50,000 Advances to investment companies 2,357 1,931 Management fee receivable from investment companies 1,030 1,813 Issued and paid up capital As at 1 July

Liabilities (2017: 10,277,778 shares, 2016: 6,166,667 shares) 10,278 6,167 Murabaha financing 14.2 21,114 - Payable to investment companies 8,460 6,744 Issued during the year Payable to board members 577 800 (2017: Nil shares, 2016: 4,111,111 shares) - 4,111 Payable to key personnel 545 2,793 Payable to an affiliate 14.1 73 108 As at 30 June (2017: 10,277,778 shares, 2016: 10,277,778 shares) 10,278 10,278 ARCAPITA ANNUAL REPORT 2017 48 49 ARCAPITA ANNUAL REPORT 2017

15 SHARE CAPITAL & PREMIUM (continued) 18 ARCAPITA EQUITY INCENTIVE PLAN (continued) The fair value of the shares is estimated at the grant date based on the valuation of last capital call and raise. Share premium Amounts collected in excess of the par value of the issued share capital during any issue of shares are treated as share premium. Movement during the year 2017 2016 Unallocated AEIP shares USD ‘000 USD ‘000 As detailed in Note 18, the Group has an employee share incentive program by the name of Arcapita Equity Incentive Plan (“AEIP”). Under this program shares have been issued to the plan for allocation to plan participants. Any shares that have not been allocated to plan participants are presented as a deduction from equity. Shares brought forward 719,444 - Shares issued to AEIP - 1,027,778 16 PROPOSED DIVIDENDS Shares granted to employees during the year (102,778) (308,334) Proposed dividends are disclosed as appropriations within equity until the time they are approved by the shareholders. On Number of un-allocated shares outstanding at 30 June 616,666 719,444 approval by shareholders, these are transferred to liabilities. As at 30 June 2017, the Board of Directors of the Group have proposed dividend of USD 0.76 ( 30 June 2016: USD 0.76) per share amounting to USD 7.342 million (30 June 2016 : USD 7.261 19 COMMITMENTS AND CONTINGENCIES million). Unallocated shares held by AEIP are not entitled to receive any dividends. 2017 2016 17 FEE AND OTHER INCOME USD ‘000 USD ‘000 30 June 30 June 2017 2016 Operating lease commitments relating to rented premises USD ‘000 USD ‘000 within one year 429 1,424 within two to five years 1,197 1,446 Placement fees 20,859 7,368 more than five years 433 754 Investment yield / dividend income 6,083 3,615 2,059 3,624 Management and performance fees 5,347 24,257 Arrangement fees 1,000 726 20 INVESTOR FUNDS Others 203 175 From time to time the Group receives funds from or due to its investors. These funds are placed in a segregated client account 33,492 36,141 with established reputed international bank based in New York and are held pursuant to investment account agreements with investors and portfolio investment companies in which these investors have invested. The agreements restrict the Group’s access 18 ARCAPITA EQUITY INCENTIVE PLAN to these funds and requires the consent and instructions of the investors or portfolio companies to transact. As a result the Group does not have legal authority to solely control the funds nor an obligation to the investor and as such these funds are not reflected AEIP is an employee share incentive program through which employees may earn shares in the Company. Investment units in the Group’s consolidated financial statements. comprising shares of the Company equal to 10 percent of the issued and outstanding equity, on a fully diluted basis, were allocated to the program upon its inception. Based on the Group’s performance, up to 20 percent of the plan allocation becomes eligible to be granted to employees each year. Shares granted to employees are fully vested on the date of grant and expensed (i.e. AEIP expense) to the consolidated statement of profit or loss. ARCAPITA ANNUAL REPORT 2017 50 51 ARCAPITA ANNUAL REPORT 2017

Arcapita Group Holdings Limited Notes to the Consolidated Financial Statements (continued) 30 June 2017

21 RISK MANAGEMENT 21 RISK MANAGEMENT (continued)

21.1 Introduction 21.3 Liquidity risk (Continued) The Group adopts an enterprise-wide approach to risk management, with proactive identification and mitigation of the risks A maturity profile of assets and liabilities, based on expected maturities, is provided below. embedded in the Group’s balance sheet and business activities. One of the primary objectives of risk management is to optimize shareholder and investor returns while maintaining the Group’s risk exposure within self-imposed parameters defined within the As at 30 June 2017 Group’s Board approved risk strategy, appetite and policy documents. > 3 months Sub-Total > 1 year The overall responsibility for the implementation of a sound risk management framework lies with the Group’s senior management Up to 3 up to up to up to Non-cash and the Board of Director. The Group has established an independent Risk Management Department (RMD) that works in co- months 1 year 1 year 5 years items Total ordination with the Risk Management Committee (RMC), which is a management-level committee with the objective of providing a platform for senior management input, review and approval of key aspects relating to risk management. The RMD and RMC ASSETS work under the supervision of the Audit and Risk Committee (ARC), which is a board level committee delegated with certain responsibilities of risk oversight on behalf of the Board of Directors and supports the Board of Directors in the execution of its Financial assets responsibilities pertaining to risk management. Cash and cash equivalents 47,052 - 47,052 - - 47,052 Receivables 63,321 2,357 65,678 - - 65,678 21.2 Credit risk Investments - 9,056 9,056 66,656 - 75,712 Credit risk is the risk that one party to a financial transaction will fail to discharge an obligation and cause the other party to Other assets - - - 285 - 285 incur a financial loss. Total financial assets 110,373 11,413 121,786 66,941 - 188,727 The Group’s exposure to credit risk is limited due to minimal lending / placement activity and the fact that there are no investments in financial securities. The Group is exposed to credit risk on its bank balances and receivables. This risk is considered minimal as the bank balances are maintained in current accounts with reputable international banks with good credit standings. Non-financial assets The receivable balances primarily represents receivable from deal subscriptions, investee companies, staff and prepayments to Prepayments - - - - 385 385 vendors. Equipments - - - - 794 794 Total assets 110,373 11,413 121,786 66,941 1,179 189,906 21.3 Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may also arise from an inability to realise a financial asset quickly at an amount close to its fair value. LIABILITIES Financial liabilities The Group has established a liquidity risk management framework having defined minimum liquid asset requirements, liquidity monitoring and reporting responsibilities and limits on the extent of leverage and investment underwriting on the Group’s Payable on acquisition of investment 32,634 - 32,634 - - 32,634 consolidate statement of financial position. RMD and the Treasury function closely monitor the Group’s actual liquidity position Murabaha financing 114 - 114 21,000 - 21,114 which is matched against the forecasted position to ensure that the RMC is frequently updated on the Group’s exposure to Accrued expenses and other liabilities 11,649 - 11,649 - - 11,649 liquidity risk. As part of the Group’s risk appetite framework, the ARC is updated on a regular basis on aspects relating to liquidity risk defined within the risk appetite statement. Total financial liabilities 44,397 - 44,397 21,000 - 65,397 The Group’s exposure to funding liquidity risk is low given that the Group maintains minimal balance sheet leverage. The Group has sufficient cash and bank balances available as of 30 June 2017 in order to discharge its financial liabilities when they fall due. Net gap 65,976 11,413 77,389 45,941 1,179 124,509

ARCAPITA ANNUAL REPORT 2017 52 53 ARCAPITA ANNUAL REPORT 2017

Arcapita Group Holdings Limited Notes to the Consolidated Financial Statements (continued) 30 June 2017

21 RISK MANAGEMENT (continued) 21 RISK MANAGEMENT (continued) 21.3 Liquidity risk (continued) 21.4 Investment risk As at 30 June 2016 This category relates to risks arising from the Group’s real estate and private equity investment portfolio, and entails market / > 3 months Sub-Total > 1 year systematic risks (losses on investments due to changes in market fundamentals) and non-systematic / investment specific risks. Up to 3 up to up to up to Non-cash The Group’s objective is to manage and control risk exposures within acceptable parameters, while optimizing returns. months 1 year 1 year 5 years items Total RMD monitors the Group’s investment risk exposures in light of the Group’s risk appetite limits and reports to RMC and ARC on a regular basis. Additionally, RMD works closely with the business units to conduct investment risk analysis at the individual deal ASSETS and portfolio level throughout the investment cycle. The analysis focuses on the risk profile of each individual investment and the overall investment portfolio in light of the Group’s risk strategy, appetite, policies and the risk limits and guidelines defined Financial assets therein. Cash and cash equivalents 61,394 - 61,394 - - 61,394 At the pre-acquisition stage, RMD works with business units to undertake pre-acquisition risk analysis based on the characteristics Receivables 29,722 - 29,722 - - 29,722 of proposed investments. The objective of this analysis is to filter investments at an initial stage and to complement the extensive Investments - 27,807 27,807 16,051 - 43,858 due diligence undertaken by business units. Other assets - - - 400 - 400 Following the acquisition of any investment, business units and RMD periodically perform post-acquisition risk analysis to Total financial assets 91,116 27,807 118,923 16,451 - 135,374 ascertain how the risks of the portfolio change over time and assess the impact in line with the Group’s risk strategy, appetite, policies and the risk limits and guidelines defined therein. Results of risk analysis are reported to RMC on a regular basis highlighting portfolio level investment risk exposure, economic capital requirements for investment risk, utilization of investment Non-financial assets risk limits and any significant issues in light of the Group’s investment risk profile. As part of the Group’s risk appetite framework, Prepayments - - - - 217 217 ARC is updated regularly on aspects relating to investment risk defined within the risk appetite statement. Equipments - - - - 532 532 At the time of exiting an investment, RMD and business units (in conjunction with any other departments / functions relevant Total assets 91,116 27,807 118,923 16,451 749 136,123 to the exit process) will use appropriate strategies to mitigate risks associated with the exit process and to protect the expected realization proceeds from downside risks (assessed on a case-by-case basis).

LIABILITIES 21.5 Market Risk Financial liabilities The Group defines market risk as the risk of losses due to adverse movements in market fundamentals such as profit rates, foreign Accrued expenses and other liabilities 13,132 - 13,132 - - 13,132 currency exchange rates, equity markets / prices and commodity prices on the Group’s investment securities (other than the real Total financial liabilities 13,132 - 13,132 - - 13,132 estate and private equity investment portfolio). The Group does not maintain a significant portfolio of investment securities (such as investment in Sukuk, listed equity Non-financial liabilities 114 - 114 21,000 - 21,114 investments) other than the real estate and private equity investment portfolio, and maintains a minimal component of liabilities on its balance sheet. Fees received in advance - - - - 316 316 Total liabilities 13,132 - 13,132 - 316 13,448 As of 30 June 2017, the Group had no significant foreign currency exposure. In 2016, the largest significant net foreign currency position was in GBP equivalent of USD 5 million.

Net gap 77,984 27,807 105,791 16,451 433 122,675 The Group’s exposure, not including the real estate and private equity investment portfolio, to market risk as defined above is therefore not significant. Systematic and non-systematic risks arising from the real estate and private equity investment portfolio are categorized under “Investment risk” that is outlined under note “21.4 Investment risk” in these consolidated financial statements. ARCAPITA ANNUAL REPORT 2017 54 55 ARCAPITA ANNUAL REPORT 2017

Arcapita Group Holdings Limited Notes to the Consolidated Financial Statements (continued) 30 June 2017

21 RISK MANAGEMENT (continued) 23 FAIR VALUE OF FINANCIAL INSTRUMENTS (continued) At fair value 21.6 Operational risk through At cost/ Operational risk is the risk of loss arising from systems failure, human error, fraud or external events. When controls fail to statement of amortised perform, operational risks can cause damage to reputation, have legal or regulatory implications or lead to financial loss. The profit or loss cost Total Group minimizes the operational risk by maintaining a strong internal control environment and continuous oversight by the 30 June 2016 USD ‘000 USD ‘000 USD ‘000 Board of Directors. ASSETS 22 CAPITAL MANAGEMENT Cash and balances with banks - 31,375 31,375 The primary objective of the Group’s capital management is to ensure that it maintains healthy capital ratios in order to support Murabaha with financial institution - 30,018 30,018 its business and maximize shareholder value. The Group manages its capital structure and makes adjustments to it in line with the changes in operating conditions and the risk characteristics of its activities. Investments 43,858 - 43,858 Receivables - 29,722 29,722 23 FAIR VALUE OF FINANCIAL INSTRUMENTS Other assets - 400 400 Fair value is the price that would be received upon the sale of an asset or that would be paid to transfer a liability in an orderly 43,858 91,515 135,373 transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: LIABILITIES a) In the principal market for the asset or liability, or b) In the absence of a principal market, in the most advantageous market for the asset or liability. Accrued expenses and other liabilities - 13,132 13,132 - 13,132 13,132 The principal or most advantageous market must be accessible by the Group. The Group’s financial instruments have been classified in accordance with their measurement basis as follows: Fair value hierarchy The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to At fair value measure fair value, maximizing the use of relevant observable inputs. through At cost/ statement of amortised All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized profit or loss cost Total within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value 30 June 2017 USD ‘000 USD ‘000 USD ‘000 measurement as a whole: Determination of fair value and fair value hierarchy ASSETS The Group uses the following hierarchy for determining and disclosing fair value of financial assets and liabilities: Murabaha with a financial institution (note ‘a’) - 38,016 38,016 Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities; Cash and balances with banks - 9,035 9,035 Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either Investments 75,712 - 75,712 directly or indirectly; and Receivables - 65,678 65,678 Level 3: Techniques which use inputs which have significant effect on the recorded fair value that are not based on observable Other assets - 285 285 market data. 75,712 113,014 188,726 The investments carried at ‘fair value through profit or loss’ has been classified as level 3 assets.

LIABILITIES Payable on acquisition of investment - 32,634 32,634 Murabaha financing - 21,114 21,114 Accrued expenses and other liabilities - 11,649 11,649 - 65,397 65,397 ARCAPITA ANNUAL REPORT 2017 56 57 ARCAPITA ANNUAL REPORT 2017

Arcapita Group Holdings Limited Notes to the Consolidated Financial Statements (continued) 30 June 2017

23 FAIR VALUE OF FINANCIAL INSTRUMENTS (continued) 24 SEGMENTAL INFORMATION Movements in level 3 financial instruments measured at fair value The sole business of the Group is to provide and manage alternative Islamic investment products and as a result it does not have The following table shows a reconciliation of the opening and closing amount of level 3 financial assets which are recorded at fair any other reportable segments for this financial period. value: 25 EARNINGS PROHIBITED BY SHARI’AH 30 June 30 June 2017 2016 “The Group receives interest from incidental deposits. These earnings are prohibited by Shari’ah, hence set aside as a liability to USD ‘000 USD ‘000 be used exclusively for charitable purposes and amount to USD 69 thousand (30 June 2016: USD 9 thousand)“.

26 COMPARITIVE FIGURES Opening balance 43,858 50,438 Acquisition of investments 173,626 78,343 Certain of the prior years figures have been reclassified to conform to the presentation adopted in the current period. Such reclassification does not impact previously reported net profit, total equity, total assets and total liabilities of the Group. Placement of investments (141,772) (84,923) 75,712 43,858

Valuation process of the Group Balances with banks represent cash and cash equivalents and are due on demand. The carrying value of these balances represents their fair value. The recoverability of receivables were determined by the management as part of impairment testing. The carrying amounts approximate the fair value of these receivables. For investment in real estate sector, fair value is determined by reference to valuations by an independent real estate valuation expert. The determination of the fair value of such assets is based on local market conditions. Other liabilities and payable to a related party are current in nature and the carrying value of these financial instruments represents their fair value. The effect of unobservable inputs on fair valuation The significant unobservable inputs used in the fair value measurements categorised within Level 3 of the fair value hierarchy, together with a quantitative sensitivity analysis as at 30 June 2017 are as shown below: As at 30 June 2017 Impact on profit or loss Favorable Unfavorable Unobservable inputs Input Change USD ‘000 USD ‘000

Price per square feet USD 490 +/- 10% 7,329 (7,329) Capitalization rates 6.0% to 8.2% +/- 10% 1,659 (1,357)

As at 30 June 2016 Impact on profit or loss Favorable Unfavorable Unobservable inputs Input Change USD ‘000 USD ‘000

Price per square feet USD 857 +/- 10% 3,988 (3,988) Capitalization rates 6.5% to 8.5% +/- 10% 7,238 (5,922) ARCAPITA ANNUAL REPORT 2017 58 59 ARCAPITA ANNUAL REPORT 2017

Arcapita Group Holdings Limited Supplementary Information

Arcapita Group consists of Arcapita Group Holdings Limited (“AGHL”), AGHL’s direct and indirect subsidiaries and Arcapita Investment Arcapita group pro-forma statement of financial position (continued) Management B.S.C (c) (“Arcapita Bahrain”). As at 30 June 2016 AGHL and Arcapita Bahrain currently are owned by the same shareholders in the same shareholding ratios. This is as a result of contractual arrangements which requires the shareholders of each entity to be identical. The shareholders have to hold their interests AGHL Arcapita Consolidation Arcapita in Arcapita Group in the same ratio of AGHL shares to Arcapita Bahrain shares and to appoint identical members to Board of Directors Group Bahrain adjustments Group in both entities, now and in the future. However, under the requirements of IFRS, in order to consolidate the financial position and USD ‘000 USD ‘000 USD’000 USD ’000 results of Arcapita Bahrain with AGHL certain conditions have to be met. These conditions have not been fulfilled at this time and Arcapita Bahrain results cannot be consolidated with AGHL. ASSETS Therefore, in order to provide supplementary information to the shareholders we provide below a summarized pro-forma consolidated Cash and cash equivalents 61,394 7,398 - 68,792 statement of income and financial position. Receivables 29,722 727 (108) 30,341 Arcapita group pro-forma statement of financial position Investments 43,858 - - 43,858 As at 30 June 2017 Other assets 1,149 357 - 1,506 TOTAL ASSETS 136,123 8,482 (108) 144,497 AGHL Arcapita Consolidation Arcapita Group Bahrain adjustments Group USD ‘000 USD ‘000 USD’000 USD ’000 LIABILITIES Accrued expenses and other liabilities 13,448 982 (108) 14,322 ASSETS TOTAL LIABILITIES 13,448 982 (108) 14,322 Cash and cash equivalents 47,052 7,848 - 54,900 Receivables 65,678 243 (73) 65,848 EQUITY Investments 75,712 - - 75,712 Share capital and premium 95,583 7,50 0 - 103,083 Other assets 1,464 776 - 2,240 Reserves 19,828 - - 19,828 TOTAL ASSETS 189,906 8,867 (73) 198,700 Proposed dividends 7,264 - - 7,264 TOTAL EQUITY 122,675 7,50 0 - 130,175 LIABILITIES Payable on acquisition of investment 32,634 - - 32,634 TOTAL EQUITY AND LIABILITIES 136,123 8,482 (108) 144,497 Murabaha financing 21,114 - - 21,114 Accrued expenses and other liabilities 11,649 1,034 (73) 12,610 TOTAL LIABILITIES 65,397 1,034 (73) 66,358

EQUITY Share capital and premium 96,610 7,833 - 104,443 Reserves 20,557 - - 20,557 Proposed dividends 7,342 - - 7,342 TOTAL EQUITY 124,509 7,833 - 132,342

TOTAL EQUITY AND LIABILITIES 189,906 8,867 (73) 198,700 ARCAPITA ANNUAL REPORT 2017 60 61 ARCAPITA ANNUAL REPORT 2017

Arcapita Group Holdings Limited Supplementary Information (continuation)

ARCAPITA INVESTMENT MANAGEMENT B.S.C. (C)

Shari’ah Supervisory Board’s Report Arcapita group pro-forma statement of profit or loss Independent Auditors’ Report and 30 June 2017 Consolidated Financial Statements AGHL Arcapita Consolidation Arcapita For the year ended 30 June 2017 Group Bahrain adjustments Group USD ‘000 USD ‘000 USD’000 USD ’000

INCOME Fee and other income 33,492 13,305 (13,264) 33,533 Total operating income 33,492 13,305 (13,264) 33,533

EXPENSES Staff compensation and benefits (12,707) (9,314) 9,314 (12,707) General and administration expenses (6,489) (3,131) 2,807 (6,813) Professional and consultancy fees (3,907) (1,143) 1,143 (3,907) Financing cost (553) - - (553) Arcapita equity incentive plan expenses (1,361) - - (1,361) Total operating expenses (25,017) (13,588) 13,264 (25,341) Foreign exchange (loss) / gain (397) 283 - (114) NET PROFIT 8,078 - - 8,078

30 June 2017 AGHL Arcapita Consolidation Arcapita Group Bahrain adjustments Group USD ‘000 USD ‘000 USD’000 USD ’000

INCOME Fee Income and other 36,141 12,381 (12,357) 36,165 Total operating income 36,141 12,381 (12,357) 36,165

EXPENSES Staff compensation and benefits (12,933) (8,757) 8,757 (12,933) General and administration expenses (5,853) (2,763) 2,479 (6,137) Professional and consultancy fees (2,809) (1,232) 1,232 (2,809) AEIP expense (1,602) 111 (111) (1,602) Total operating expenses (23,197) (12,641) 12,357 (23,481) Foreign exchange gain / (loss) (714) 260 - (454) NET PROFIT 12,230 - - 12,230 ARCAPITA ANNUAL REPORT 2017 62 63 ARCAPITA ANNUAL REPORT 2017

Shari’ah Supervisory Board’s Report of the Board of Directors Report to Shareholders

Assalam Alaikum Wa Rahmat Allah Wa Barakatuh, The Directors have pleasure in submitting their report and the audited financial statements of Arcapita Investment Management B.S.C.(c) (the “Company”) for the year ended 30 June 2017. In compliance with the letter of appointment and article 54(e) of the Articles of Association of Arcapita Investment Management B.S.C.(c) (“the Company”), we are required to submit the following report: Principal activities and review of business developments The Company operates under an Investment Firm license - Category I (Islamic Principles) issued by the Central Bank of Bahrain We have reviewed the contracts relating to the transactions undertaken by the Company during the year ended 30 June 2017. We have (“CBB”), to operate under Islamic Shari’ah principles, and is supervised and regulated by the CBB. The Company’s principal activities also conducted a review of the Operations of the Company to form an opinion as to whether the Company has complied with Shari’ah are in dealing in financial instruments as an agent, and arranging, managing, safeguarding and advising on financial instruments. rules and principles and also with the specific fatwas, ruling and guidelines issued by us. Financial Highlights The Company’s management is responsible for ensuring that the Company conducts its business in accordance with Islamic Shari’ah Year ended Year ended rules and principles. It is our responsibility to form an independent opinion, based on our review of the operations of the Company 30 June 2017 30 June 2016 USD ‘000 USD ‘000 and to report to you.

We planned and performed our review so as to obtain all the information and explanations which we considered necessary in order to OPERATING INCOME provide us with sufficient evidence to give assurance that the Company has not violated the rules and principles of Islamic Shari’ah. Fee and other income 13,305 12,381 In our opinion: Foreign exchange gain 283 260 The services agreement entered into by the Company with AIM Group Limited, and the transactions and dealings resulting from such Total operating income 13,588 12,641 agreement during the year ended 30 June 2017 are in compliance with the Islamic Shari’ah rules and principles.

We beg Allah the Almighty to grant us all success and straightforwardness. OPERATING EXPENSES

Shari’ah Supervisory Board: Staff compensation and benefits (9,314) (8,646) General and administration expenses (3,131) (2,763) Professional and consulting fees (1,143) (1,232) Total operating expenses (13,588) (12,641)

Auditors Sh. Muhammad Taqi Usmani EY have expressed their willingness to continue in office and a resolution proposing their appointment as auditors of the Company, for Chairman the year ending 30 June 2018, will be submitted at the Annual General Meeting.

Sheikh Esam Mohamed Ishaq Sheikh Mohammed Isa Al Jamea Member Member

10 July 2017

Abdulaziz Hamad Aljomaih Chairman of the Board of Directors 23rd July 2017 ARCAPITA ANNUAL REPORT 2017 64 65 ARCAPITA ANNUAL REPORT 2017

Independent Auditors’ Report to the Shareholders Arcapita Investment Management B.S.C. (c) of Arcapita Investment Management B.S.C.(c) Statement of Financial Position As at 30 June 2017

Report on the financial statements 2017 2016 We have audited the accompanying statement of financial position of Arcapita Investment Management B.S.C. (c) (the “Company”), Note USD ‘000 USD ‘000 as at 30 June 2017, and the related statements of income and other comprehensive income, cash flows and changes in equity for the year then ended. These financial statements and the Company’s undertaking to operate in accordance with Islamic Shari’ah Rules and ASSETS Principles are the responsibility of the Company’s Board of Directors. Our responsibility is to express an opinion on these financial statements based on our audit. Cash and cash equivalents 5 7,848 7,398 Receivables and other assets 6 946 976 We conducted our audit in accordance with Auditing Standards for Islamic Financial Institutions issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (“AAOIFI”). Those standards require that we plan and perform the audit to Due from a related party 7 73 108 obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, TOTAL ASSETS 8,867 8,482 on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. LIABILITIES AND EQUITY LIABILITIES Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of 30 June 2017, Accrued expenses and other liabilities 1,034 982 the results of its operations, its cash flows and changes in equity for the year then ended in accordance with the Financial Accounting TOTAL LIABILITIES 1,034 982 Standards issued by AAOIFI.

Report on other regulatory requirements EQUITY As required by the Bahrain Commercial Companies Law and the Central Bank of Bahrain (“CBB”) Rule Book (Volume 4), we report Share capital 8 7,833 7,50 0 that: TOTAL EQUITY 7,833 7,50 0 a) the Company has maintained proper accounting records and the financial statements are in agreement therewith; and b) the financial information contained in the Report of the Board of Directors is consistent with the financial statements. TOTAL LIABILITIES AND EQUITY 8,867 8,482 We are not aware of any violations of the Bahrain Commercial Companies Law, the Central Bank of Bahrain and Financial Institutions Law, the CBB Rule Book (Volume 4 and applicable provisions of Volume 6) and CBB directives, regulation and rules or the terms of the Company’s memorandum and articles of association have occurred during the year ended 30 June 2017 that might have had a material adverse effect on the business of the Company or on its financial position. Satisfactory explanations and information have been provided to us by Board of Directors in response to all our requests. The Company has also complied with the Islamic Shari’ah Rules and Principles as determined by the Shari’ah Supervisory Board of the Company.

Abdulaziz Hamad Aljomaih Atif A. Abdulmalik Chairman of the Board of Directors Chief Executive Officer and Director

Partner’s registration no. 121 23 July 2017 Manama, Kingdom of Bahrain.

The attached explanatory notes 1 to 13 form part of these financial statements. ARCAPITA ANNUAL REPORT 2017 66 67 ARCAPITA ANNUAL REPORT 2017

Arcapita Investment Management B.S.C. (c) Arcapita Investment Management B.S.C. (c) Statement of Income and Other Comprehensive Income Statement of Cash Flows For the year ended 30 June 2017 For the year ended 30 June 2017

Year ended Year ended Year ended Year ended 30 June 2017 30 June 2016 30 June 2017 30 June 2016 Note USD ‘000 USD ‘000 Note USD ‘000 USD ‘000

OPERATING INCOME CASH FLOWS FROM OPERATING ACTIVITIES Fee and other income 7.1 13,305 12,381 Net income for the year - - Total operating income 13,305 12,381 Changes in operating assets and liabilities: OPERATING EXPENSES Due from a related party 35 (108) Staff compensation and benefits (9,314) (8,646) Receivables and other assets 30 198 General and administration expenses (3,131) (2,763) Accrued expenses and other liabilities 52 (1,535) Professional and consulting fees (1,143) (1,232) Net cash from / (used in) operating activities 117 (1,445) Total operating expenses (13,588) (12,641) CASH FLOWS FROM FINANCING ACTIVITY Foreign exchange gain 283 260 Proceeds from the issuance of share capital 8 333 2,500 NET INCOME AND TOTAL COMPREHENSIVE INCOME FOR THE YEAR - - Net cash from financing activity 333 2,500

NET INCREASE IN CASH AND CASH EQUIVALENTS 450 1,055

Cash and cash equivalents at the beginning of the year 7,398 6,343 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 5 7,848 7,398

Abdulaziz Hamad Aljomaih Atif A. Abdulmalik Chairman of the Board of Directors Chief Executive Officer and Director

The attached explanatory notes 1 to 13 form part of these financial statements. The attached explanatory notes 1 to 13 form part of these financial statements. ARCAPITA ANNUAL REPORT 2017 68 69 ARCAPITA ANNUAL REPORT 2017

Arcapita Investment Management B.S.C. (c) Arcapita Investment Management B.S.C. (c) Statement of Changes in Equity Notes to the Financial Statements For the year ended 30 June 2017 30 June 2017

Shares Share pending Retained Total 1 ORGANISATION AND ACTIVITIES capital allotment earnings equity Arcapita Investment Management B.S.C. (c) («the Company») is a closed joint stock company registered with the Ministry of USD ‘000 USD ‘000 USD ‘000 USD ‘000 Industry and Commerce in the Kingdom of Bahrain and operates under the commercial registration number 87184 obtained on 10 October 2013, which is the date the Company commenced its commercial operations. The address of the Company’s registered office is P.O.Box 1357, Arcapita Building, 5th floor, Bahrain Bay, Manama, Kingdom of Bahrain. As at 1 July 2016 7,500 - - 7,500 The Company operates under an Investment Firm license - Category I (Islamic Principles) issued by the Central Bank of Bahrain Net income for the year - - - - («CBB»), to operate under Islamic Shari’ah principles, and is supervised and regulated by the CBB. The Company’s strategy and principal activities are in dealing in financial instruments as an agent, and arranging, managing, safeguarding and advising on Issuance of share capital 333 - - 333 financial instruments. As at 30 June 2017 7,833 - - 7,833 As at 30 June 2017, the Company has nil assets under management (30 June 2016: nil).

As at 1 July 2015 2,645 2,355 - 5,000 These financial statements have been prepared for the year ended 30 June 2017 and were authorized for issue by the Board of Directors on 23 July 2017. Net income for the year - - - - Issuance of share capital 4,855 (2,355) - 2,500 2 BASIS OF PREPARATION As at 30 June 2016 7,50 0 - - 7,50 0 2.1 Statement of compliance The financial statements are prepared in accordance with the Financial Accounting Standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions («AAOIFI»), the Shari’ah Rules and Principles as determined by the Shari’ah Supervisory Board of the Company, the Bahrain Commercial Companies Law, Financial Institutions Law, the CBB Rulebooks, directives, regulations and associated resolutions and the terms of the Company’s memorandum and articles of association. In accordance with the requirements of AAOIFI, for matters for which no AAOIFI standard exists, the Company uses the relevant International Financial Reporting Standard («IFRS») issued by International Accounting Standards Board («IASB»). 2.2 Accounting convention The financial statements have been prepared under the historical cost basis and presented in the United States Dollar («USD») rounded to the nearst USD thousand, unless otherwise indicated, which is the functional currency of the Company.

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies adopted in the preparation of these financial statements are: a. Cash and cash equivalents Cash and cash equivalents include cash in hand, amounts due from banks on demand or with an original maturity of 90 days or less and balances held with deposit agents. b. Receivables and other assets Receivables and other assets are carried at amortised cost. An estimate is made for impaired receivables based on a review of all outstanding amounts at the year end.

The attached explanatory notes 1 to 13 form part of these financial statements. ARCAPITA ANNUAL REPORT 2017 70 71 ARCAPITA ANNUAL REPORT 2017

Arcapita Investment Management B.S.C. (c) Notes to the Financial Statements (continued) 30 June 2017

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) c. Financial instruments h. Shari’ah supervisory board Recognition, measurement and de-recognition The Company’s business activities are subject to the supervision of a Shari’ah supervisory board consisting of at least three Financial instruments comprise financial assets and financial liabilities. members appointed by the general assembly. All financial assets and financial liabilities are initially recognised at fair value on the trade date, i.e. the date that the i. Earnings prohibited by Shari’ah Company becomes a party to the contractual provisions of the instrument. The Company is committed to avoid recognizing any income generated from non-Islamic sources. Accordingly all non-Islamic All financial assets and financial liabilities are subsequently measure at amortized cost. income is credited to a charity account where the Company uses these funds for various social welfare activities. A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized j. Foreign currencies where: Transactions in foreign currencies are initially recorded at the exchange rate prevailing on the date of the transaction. - the right to receive cash flows from the asset has expired; or Monetary assets and liabilities in foreign currencies are translated into United States Dollars at exchange rates prevailing at the statement of financial position date. Any gains or losses are recognised in the statement of profit or loss. - the Company retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; or Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial recognition. Non-monetary items measured at fair value in a foreign currency are translated - the Company has transferred its right to receive cash flows from the asset and either: (a) has transferred substantially all using the exchange rates at the date when the fair value is determined. the risks and rewards of the assets, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. k. Employees’ end of service benefits Bahraini employees are covered by the Social Insurance Organization scheme which comprises a defined contribution scheme When the Company has transferred its rights to receive cash flows from an asset and has neither transferred nor retained to which the Company contributes a monthly sum based on a fixed percentage of the salary. The contribution is recognised substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent as an expense in the statement of income. of the Company’s continuing involvement in the asset. The Company provides end of service benefits to its non-Bahraini employees. Entitlement to these benefits is usually based The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired. upon the employees’ length of service and the completion of a minimum service period. The expected costs of these benefits d. Accrued expenses and other liabilities which comprise a defined benefit scheme are accrued over the period of employment based on the notional amount payable Accrued expenses and other liabilities are recognized for amounts to be paid in the future for goods or services received, if all employees had left at the statement of financial position date. whether billed by the supplier or not. l. Impairment of financial assets e. Amortized cost measurement An assessment is made at each financial position date to determine whether there is objective evidence that a specific financial Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as such when the asset or a group of financial assets may be impaired. If such evidence exists, the estimated recoverable amount of that asset Company has the positive intention and ability to hold them to maturity. After initial measurement, these investments are is determined and any impairment loss, based on the assessment by the Company of the estimated cash equivalent value, measured at amortised cost using the effective profit rate (EPR), less impairment. Amortised cost is calculated by taking into is recognised in the statement of income. Specific provisions are created to reduce all impaired financial contracts to their account any discount or premium on acquisition and fees or costs that are an integral part of the EPR. The EPR amortisation realizable cash equivalent value. Financial assets are written off only in circumstances where effectively all possible means is included in the statement of profit or loss. The losses arising from impairment are recognised in the statement of profit or of recovery have been exhausted. loss under ‘provisions’. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an f. Offsetting event occurring after the impairment value was recognised, the previously recognised impairment loss is reversed. Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and m. Events after the statement of financial position date only if, there is a legally enforceable or religious right to set off the recognized amounts and the Company intends to either The financial statements are adjusted to reflect events that occurred between the statement of financial position date and settle on a net basis, or to realize the asset and settle the liability simultaneously. the date the financial statements are authorized for issue, provided they give evidence of conditions that existed as of the g. Revenue recognition statement of financial position date. Events that are indicative of conditions that arose after the statement of financial Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue position date are disclosed, but do not result in an adjustment to the financial statements. can be reliably measured. Fee income The fee income represents income the Company earns for asset management and administrative services rendered in accordance to the contractual terms agreed between the parties. ARCAPITA ANNUAL REPORT 2017 72 73 ARCAPITA ANNUAL REPORT 2017

Arcapita Investment Management B.S.C. (c) Notes to the Financial Statements (continued) 30 June 2017

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 6 RECEIVABLES AND OTHER ASSETS o. Operating lease commitments As at As at The Company has entered into property leases which are classified as operating leases. The Company has determined, based 30 June 2017 30 June 2016 on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of USD ‘000 USD ‘000 the economic life of the property and the present value of the minimum lease payments not amounting to substantially all of the fair value of the property, that it therefore does not retain all the significant risks and rewards of ownership of these Equipments 390 533 properties and accounts for the contracts as operating leases. Prepayments 276 347 p. Zakah Individual shareholders are responsible for payment of Zakah. Receivables 170 86 Other assets 110 10 4 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS 946 976 The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities, and the accompanying disclosures as well as the disclosure of 7 RELATED PARTY TRANSACTIONS AND BALANCES contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that could require a material Related parties represent associated companies, major shareholders, directors and key management personnel of the Company, adjustment to the carrying amount of assets or liabilities affected in future periods. the Company’s Shari’ah Supervisory Board and entities controlled, jointly controlled or significantly influenced by such parties. Judgements Transactions with related parties arise from the ordinary course of business. Pricing policies and terms of these transactions are In the process of applying the Company’s accounting policies, management has made the following judgements, which have the approved by the Company’s management. Outstanding balances at year end if any, are unsecured. most significant effect on the amounts recognised in the financial statements. Income and expenses incurred with related parties is as follows: (i) Estimates and assumptions 30 June 2017 30 June 2016 The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Note USD ‘000 USD ‘000 Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances beyond the control of the Company. Such changes are reflected in the assumptions when they occur. Income (ii) Going concern The Company’s management has made an assessment of its ability to continue as a going concern and is satisfied that it has Fee income 7.1 13,264 12,357 the resources to continue in business for the foreseeable future. Furthermore, the management is not aware of any material uncertainties that may cast significant doubt upon the Company’s ability to continue as a going concern. Therefore, the Expenses financial statements are prepared on the going concern basis. Key management personnel costs 5,456 4,978 5 CASH AND CASH EQUIVALENTS Shari’ah supervisory board remuneration 72 45

As at As at 30 June 2017 30 June 2016 30 June 2017 30 June 2016 USD ‘000 USD ‘000 USD ‘000 USD ‘000

Balances with related parties Cash and balances with banks 7,840 7,390 Assets Cash in hand 8 8 Due from a related party 73 108 7,848 7,398 7.1 Fee income AIM Group Limited (AGL) an affiliate company, and the Company are under the common control of the same shareholders and governed by the same Board of Directors. In accordance with the terms of a ‘Service Agreement’, the Company provides advisory and administrative services to AGL (and its affiliates). AGL reimburses the expenditures incurred by the Company in respect of the services rendered. ARCAPITA ANNUAL REPORT 2017 74 75 ARCAPITA ANNUAL REPORT 2017

Arcapita Investment Management B.S.C. (c) Notes to the Financial Statements (continued) 30 June 2017

8 SHARE CAPITAL 10 FAIR VALUE OF FINANCIAL INSTRUMENTS (continued) As at As at Determination of fair value and fair value hierarchy 30 June 2017 30 June 2016 The Company uses the following hierarchy for determining and disclosing fair value of financial assets and financial liabilities: USD ‘000 USD ‘000 - Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities; - Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either Authorized capital directly or indirectly; and 26,455,030 ordinary shares with a par value of USD 1 per share 26,455,030 26,455,030 - Level 3: Techniques which use inputs which have significant effect on the recorded fair value that are not based on observable Issued and paid up capital market data. As at 1 July 2016 / 2015 As at 30 June 2017 and 2016, the fair values of the Company’s financial instruments approximated their carrying values. (2017: 7,500,000 shares, 2016: 2,645,503 shares ) 7,500,000 2,645,503 Issued during the year Balances with banks represent cash and cash equivalents and are due on demand. The carrying value of these balances represents their fair value. (2017: 333,334 shares, 2016: 4,854,497 shares ) 333,334 4,854,497 As at 30 June 2017 / 2016 The recoverability of receivable were determined by the management as part of impairment testing by calculating the net present (2017: 7,833,334 shares, 2016:7,500,000 shares ) 7,833,334 7,500,000 values of the expected cash flows. The carrying amounts therefore approximate the fair value of these receivables. Other liabilities are current in nature and the carrying value of these financial instruments represents their fair value. 9 SEGMENTAL INFORMATION The Company’s sole business is the provision of advisory and administrative services. Therefore the Company does not have any 11 CAPITAL MANAGEMENT other reportable segments for this financial year. The objective of capital management is to ensure the Company’s ability to operate as a going concern by maintaining an appropriate capital base in line with regulatory requirements. 10 FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value is the price that would be received upon the sale of an asset or that would be paid to transfer a liability in an orderly 12 RISK MANAGEMENT transaction between market participants at the measurement date. The fair value measurement is based on the presumption that 12.1 Introduction the transaction to sell the asset or transfer the liability takes place either: The Company adopts an enterprise-wide approach to risk management, with proactive identification and mitigation of the risks a) In the principal market for the asset or liability, or embedded in the Company’s balance sheet and business activities. One of the primary objectives of risk management is to b) In the absence of a principal market, in the most advantageous market for the asset or liability. optimize shareholder and investor returns while maintaining the Company’s risk exposure within self-imposed parameters The Company’s financial instruments are carried at amortized cost as follows: defined within the Company’s Board approved risk policy documents. The overall responsibility for the implementation of a sound risk management framework lies with the Company’s senior 30 June 2017 30 June 2016 management and the Board of Directors. The Company has established an independent Risk Management Department (RMD) At cost/ At cost/ that works in co-ordination with the Risk Management Committee (RMC), which is a management level committee with the amortised cost amortised cost objective of providing a platform for senior management input, review and approval of key aspects relating to risk management. USD ‘000 USD ‘000 The RMD and RMC work under the supervision of the Audit and Risk Committee (ARC), which is a board level committee delegated with certain responsibilities of risk oversight on behalf of the Board and supports the Board in the execution of its ASSETS responsibilities pertaining to risk management. Cash and balances with banks 7,840 7,390 12.2 Credit risk Receivables and other assets 280 96 Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur Due from a related party 73 108 a financial loss. The Company’s exposure to credit risk is limited due to minimal lending / placement activity and the fact that 8,193 7,594 there are no investments in financial securities. The Company is exposed to credit risk on its bank balance and receivables. This LIABILITIES risk is considered minimal as the bank balances are maintained in current accounts with reputable international banks having Accrued expenses and other liabilities 1,034 982 good credit standings. The receivable balances primarily represent prepayments to vendors and other receivables. 1,034 982 ARCAPITA ANNUAL REPORT 2017 76 77 ARCAPITA ANNUAL REPORT 2017

Arcapita Investment Management B.S.C. (c) Notes to the Financial Statements (continued) 30 June 2017

12 RISK MANAGEMENT (continued) 12.3 Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may also arise from an inability to realize a financial asset quickly at an amount close to its fair value. The Company’s exposure to liquidity risk is low given that the Company does not hold any investments on its balance sheet and maintains minimal balance sheet leverage. The Company has enough cash and bank balances available as of 30 June 2017 in order to discharge its financial liabilities when they fall due. All of the assets and liabilities as presented in the statement of financial position of the Company are of current nature with the exception of equipment. 12.4 Market risk Market risk is the risk of losses due to adverse movements in market fundamentals such as profit rates, foreign currency exchange rates, equity markets / prices and commodity prices. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the risk adjusted return on capital. The Company’s exposure to market risk is low given that the Company does not hold any investments on its balance sheet, maintains minimal profit rate sensitive assets / liabilities and foreign currency net open positions (of non USD currencies that are not pegged to the USD) are also minimal. As of 30 June 2017, the Company has no significant foreign currency exposure. Last year the largest significant net foreign currency exposure was in GBP amounting to approximately USD 3.1 million. 12.5 Operational risk Operational risk is the risk of loss arising from systems failure, human error, fraud or external events. When controls fail to perform, operational risks can cause damage to reputation, have legal or regulatory implications or lead to financial loss. The Company minimizes the operational risk by maintaining a strong internal control environment and oversight by the Board of Directors.

13 COMMITMENTS AND CONTINGENCIES 30 June 2017 30 June 2016 USD ‘000 USD ‘000

Operating lease commitments relating to rented premises within one year 1,150 1,000 within two to five years 288 231 1,438 1,231 ARCAPITA ANNUAL REPORT 2017 78 79 ARCAPITA ANNUAL REPORT 2017

Noorur Rahman Abid Shari’ah Supervisory Mr. Abid is a Fellow Chartered Accountant from the Institute of Chartered Accountants Board in England and Wales. He has more than 35 years’ experience in the profession across Arcapita’s Shari’ah Supervisory Board is Europe, the Middle East and Africa. Mr. fully supported by the internal Shari’ah Abid spent 33 years with Ernst & Young, department and other Arcapita Group joining them in 1979 and rising to become departments. The Shari’ah department is an Office Managing Partner, then the responsible for ensuring that there is an Assurance Leader for the MENA region. Mr. ongoing process of reviewing and auditing Abid previously served as the Chairman of of the business of Arcapita generally, the Auditing Standards Committee, and the including existing and new investments. Our People Deputy Chairman of the Accounting and The Shari’ah Supervisory Board ensures that Auditing Standards Board of Accounting and all investments undertaken by the lines of Auditing Organization for Islamic Financial business are structured in a manner that Institutions. comply strictly with Shari’ah principles and resolve any Islamic investment issues Board of Directors professional with 30 years of experience, Usama Mohammed Al Barwani that may arise. The Shari’ah Supervisory Mr. Al-Muhanna was a member of Arcapita Mr. Al Barwani is a Director of Arcapita Board also approves the audited financial Abdulaziz Hamad Aljomaih - Chairman Bank’s Board of Directors from 2000 to 2013. Group Holdings Limited. He is an Executive statements of Arcapita, confirming adherence Mr. Aljomaih has been the Head of Director of MB Holding, a major Omani to Islamic Shari’ah principles. Mahmood Hashim Al Kooheji International Investments at Aljomaih family conglomerate, and is responsible for Mr. Al Kooheji is a Director of Arcapita The Shari’ah Supervisory Board is composed Holding Co. in Saudi Arabia since 1988. new projects and the investments of the Group Holdings Limited. He is the Chief of the following prominent scholars: His other key positions include: member of MB Group. He is also Managing Director of Executive Officer of Bahrain Mumtalakat the Board of Directors of Ittihad Etisalat United Engineering Services, a major oil and Sheikh Muhammed Taqi Usmani Holding Company. Mr. Al Kooheji sits on (Mobily), Saudi Arabia; Dana Gas, United gas, and defense manufacturing business. Vice President, Darul-Uloom University, the board of Gulf Air. He is also a board Arab Emirates; and Vice Chairman of Pearl He is on the Board of Directors of Ahli Bank Karachi, Pakistan; Member of the Islamic member at McLaren Automotive Limited and Initiative (a UN initiative). A professional SAOG, and Chairman of Ubar Hotels and Fiqh Academy; Ex-Member of the Shari’ah McLaren Group Limited. In addition, he sits with over 26 years of experience, Mr. Resorts both listed on the Muscat Securities Appellate Bench of the Supreme Court, on the boards of Durrat Khaleej Al Bahrain Aljomaih was Vice Chairman of Arcapita Markets, as well as Nautilus Minerals which Karachi, Pakistan; Member of the Shari’ah Company and the Arab Petroleum Investment Bank’s Board of Directors from 1997 to 2013. is listed on the Toronto Stock Exchange. Supervisory Boards of a number of Islamic Corporation (“APICORP”), and serves the role He has obtained a B.Sc. in Petroleum banks and financial institutions. Ghazi Fahad Alnafisi of Governor at the Royal College of Surgeons Engineering from Tulsa University (US) and Mr. Alnafisi is Co-Founder and Chairman of in Ireland, Bahrain. He holds a Bachelors an M.Sc. (Energy, Trade and Finance) from Sheikh Esam Mohamed Ishaq Salhia Real Estate Company K.S.C., Kuwait. Degree in Mechanical Engineering from City University, London. Chairman of the Board, Muslim Educational His other current positions include: Chairman Staffordshire University, and a Masters of Society, Bahrain; Director & Shari’ah of Kuwait Hotel Owners Association, Business Administration from Henley College Atif Ahmed Abdulmalik - CEO Advisor, Discover Islam, Bahrain; Member Kuwait; and Co-Founder and Vice Chairman of Management, Brunel University, UK. Mr. Abdulmalik is the Chief Executive of Board of Trustees, Al Iman Islamic of Independent Petroleum Group s.a.k., Officer and executive member of the Board School, Bahrain; Member, Accounting & Khalid Jassim Bin Kalban Kuwait. A professional with over 40 years of Directors of Arcapita. Previously, Atif was Auditing Organization for Islamic Financial Mr. Kalban is a Director of Arcapita Group of experience, Mr. Alnafisi was a member of at Investcorp where he served in numerous Institutions, Bahrain; Member of the Shari’ah Holdings Limited. He is the Managing Arcapita Bank’s Board of Directors from 1999 management positions. In 2007, he was Supervisory Boards of a number of Islamic Director and Chief Executive Officer of Dubai to 2013. awarded The Proficiency Medal First Class by banks and financial institutions. Investments PJSC. His extensive experience His Majesty King Hamad bin Isa Al Khalifa Abdurrahman Abdulaziz Al-Muhanna covers the industrial, financial, investment in acknowledgement of his outstanding Sheikh Mohammed Isa Al Jamea Mr. Al-Muhanna joined the Almarai and real estate sectors. He currently holds contribution to the Kingdom of Bahrain. Atif Sheikh Mohammed is the Director heading Company in the Kingdom of Saudi Arabia in many important positions including: member obtained his BBA in Accounting, Finance and the Shari’ah department of the firm. 1979 and was appointed Managing Director of the Board of Directors of National General Management from Saint Edward’s University, Previously, he was with the Royal Bahraini and a member of the board in 1997. His Insurance PJSC. Presently he is the Chairman Texas. Air Force. Sheikh Mohammed has a BS in other board memberships include ARASCO; of Union Properties PJSC. Mr. Kalban has a Islamic Shari’ah Law from Imam Mohamed the publishing company Al Jazirah; and degree in Business Management from the Bin Saud University, Saudi Arabia (UAE the National Committee for Biodiversity, as US. and also majored in management at the Branch), and several Shari’ah certificates/ well as various commercial establishments Metropolitan State College, US. licenses in Islamic studies from different in Riyadh, Kingdom of Saudi Arabia. A prominent scholars. He has a BS in Aerospace Engineering from Northrop University in California. ARCAPITA ANNUAL REPORT 2017 80 81 ARCAPITA ANNUAL REPORT 2017

Senior Management he managed a global portfolio in excess Arthur Rogers capital markets, corporate finance as well as of SGD 10 billion and he has extensive Managing Director, General Counsel Shari’ah-compliant alternative investments. Atif Abdulmalik experience in listed and private real estate His expertise covers wide geographic areas Art is a Managing Director and the General Chief Executive Officer & Chairman of the investments. Martin started his career in the including North America and the Middle Counsel responsible for overseeing all legal Executive Committee manufacturing and construction industries, East. Previously, Nael was heading the capital and compliance matters for the firm. Art and obtained his MBA and Bachelor’s degrees markets activity at TAIB Bank as the General Atif is the Chief Executive Officer and has over 25 years of legal and business from Washington State University. Manager of TAIB Securities; prior to that he executive member of the Board of Directors experience in private equity, real estate, headed the fixed income desk and derivatives of Arcapita. Previously, Atif was at Mohammed Chowdhury complex cross-border transactions, mergers desk. He later headed the Corporate Finance Investcorp where he served in numerous Global Head of Financial Management Group and acquisitions, compliance and Islamic at SICO, leading a number of IPOs and M&A management positions. In 2007, he was & Member of the Executive Committee finance. Previously, Art was a Managing transactions. Nael is a CFA Charter holder and awarded The Proficiency Medal First Class by Director at Falconvest and General Counsel Mohammed is responsible for overseeing has an MBA from Edinburgh University. His Majesty King Hamad bin Isa Al Khalifa and Executive Vice President at Gatehouse Corporate Finance, Shari’ah, Risk and in acknowledgement of his outstanding Bank. Prior to that, Art was a Director at Neil Carter Corporate Communications. Previously, contribution to the Kingdom of Bahrain. Atif Arcapita Bank, a corporate attorney with Managing Director, US Private Equity Mohammed spent nine years in the obtained his BBA in Accounting, Finance and Gibson, Dunn & Crutcher in its London and accounting profession working for Ernst & Neil is a Managing Director in the US Private Management from Saint Edward’s University, Washington offices and Testa, Hurwitz & Young in Bahrain and KPMG in London. Equity Group responsible for the origination, Texas. Thibeault in its Boston office. Art holds a Mohammed is a member of the Institute structuring and management of the North BA in history from Hamilton College and a Hisham Al Raee of Chartered Accountants in England and American Private Equity investments. JD, with distinction, from Emory University Chief Operating Officer & Member of the Wales, completing his training contract while Previously, Neil was at Fortress Investment School of Law. He is admitted to the bar in Executive Committee working for KPMG in London. Mohammed Group for over nine years, focusing on Massachusetts and Virginia. is a graduate of the London School of private equity and debt transactions across Hisham is the Chief Operating Officer and Economics and has an MBA from the London Brian Hebb multiple industries. Prior to Fortress, a member of the Executive Committee, Business School. Managing Director, US Real Estate Neil was in the Consumer Retail Group at responsible for the daily operations of the Goldman Sachs & Co focusing on M&A firm. He also serves as the Head of the Ahmed Al Shirawi Brian is a Managing Director in the US transactions. Neil has a BS in Commerce from Investors Relationship Management team Managing Director, Investors Relationship Real Estate Deal Team. Brian has 20 years the University of Virginia McIntire School of with his extensive investor experience Management of Real Estate & Private Equity experience Commerce and an MBA from the University across the GCC region and Asia. Previously, where he began his career in the mid-1990s Ahmed is a Managing Director and of Virginia Darden School of Business. Hisham was the Senior Director of Business in multi-family development. Previously, Deputy Head of the Investors Relationship Development with Reuters Middle East in Brian formed Point Grey Partners to invest Management team at Arcapita. He oversees Saudi Arabia for five years and prior to that privately raised capital in industrial real the firm’s strategic investor relations in the he worked in the finance department at estate. Prior to that, he held various positions GCC region and South East Asia. Previously, Citibank N.A., Bahrain. Hisham received his with Goldman Sachs Group, NYL Investors Ahmed held various positions at Arcapita Master’s degree in Business Administration and Colony NorthStar, while covering including within the Financial Management from the University of Hull, United Kingdom, the industrial, multi-family and student Group, where he was Head of the Corporate and a CSD in Business Administration from housing sectors. Brian holds an MBA from Finance and Investor Reporting teams. the University of Bahrain. Columbia Business School and a BA from the Ahmed obtained his B.Sc. degree in Business University of Western Ontario. Martin Tan Management from King’s College, London. Chief Investment Officer & Member of the Nael Mustafa Executive Committee Managing Director & Head of MENA Investments Martin is the Chief Investment Officer and a member of the firm’s Executive Committee Nael is responsible for the origination, where he is responsible for developing and structuring and management of the overseeing the firm’s investment strategy MENA Investments. His role also involves and capabilities. Prior to joining Arcapita in approaching, developing and maintaining 2007, Martin spent about 15 years in the real investor relationships at institutional estate industry. As the CEO of CapitaLand and HNWIs level as well as creating and Commercial & Integrated Development, developing strategic partnerships. With over 26 years of investment banking experience, Nael has covered the areas of ARCAPITA ANNUAL REPORT 2017 82 83 ARCAPITA ANNUAL REPORT 2017

Management Team Principals Adrian Peck, Real Estate Chief Executive Officer Abdulla Alyaqoob, Investor Services Group Atif Abdulmalik, Chief Executive Officer, Chairman of the Executive Committee Ahmad Roshan, Risk Management Managing Directors Ahmed Salem, Investors Relationship Management Hisham Al Raee, Chief Operating Officer, Member of the Executive Committee Amin Jawad, Treasury Operations Martin Tan, Chief Investment Officer, Amy Doshi, Legal Member of the Executive Committee Basil Ahmed, Corporate Finance Mohammed Chowdhury, Global Head of Financial Management, Member of the Duaij Al Khalifa, Investors Relationship Executive Committee Management Ahmed Al Shirawi, Investors Relationship Ebrahim Al Shroogi, Investors Relationship Management Management Arthur Rogers, General Counsel Farooq Aqeel, Financial Control Brian Hebb, Real Estate Hassan Shujaie, Administration, Corporate Management Nael Mustafa, Head of MENA Investments Joseph Mathai, Financial Control Neil Carter, Private Equity Mishal Al Hellow, Information Technology, Directors Public Relations Anthony Nambiar, Human Resources Mohamed Sharif, Investors Relationship Management Gana Balaratnam, Financial Control Hafedh Al Najem, Financial Control Len Bravo, Real Estate Mohammed Al Jamea, Shari’ah, Member of the Shari’ah Supervisory Board Muhannad Buhindi, Investors Relationship Management Osama Al Tamimi, Financial Control Tariq Hayat, Corporate Management Yousif Al Abdulla, MENA Investments Arcapita Investment Arcapita Investment Arcapita Investment Advisors Arcapita Investment Management B.S.C.(c) Management US Inc. UK Limited Management Singapore P.O. Box 1357 1180 Peachtree St NE 15th Floor, The Shard Pte. Ltd. Manama Suite 3000, Atlanta London, SE1 9SGR 24 Raffles Place Kingdom of Bahrain GA 30309, USA United Kingdom #16-03 Clifford Centre Singapore 048621 Republic of Singapore

Telephone: +973 17 218333 Telephone: +1 (404) 920 9000 Telephone: +44 (0)20 7824 5600 Telephone: +65 6513 0395 www.arcapita.com