ANNUAL REPORT 2019 1

The theme of this year’s annual report is based on patterns of genealogy, which mirror financial market charting. At Arcapita, TABLE OF CONTENTS our unique corporate DNA has served as the backbone of our financial endeavors, delivering strong results for our stakeholders. With the publication of our 2019 annual report, Overview Geographic Presence 2 we are pleased to celebrate another year of positive results Our Values 3 within an ever-evolving global economy. Directors’ Report 4 CEO’s Message 5 Financial Highlights 6 Our Business Clients 8 Investment Focus 8 Investment Process 12 Private Equity 13 Real Estate 15 Corporate Governance Corporate Governance 18 Framework Board of Directors 18 Board Committees 18 Management Committees 19 Corporate Policies 20 Compliance 21 Organizational Structure 22 and Business Division Arcapita Group Holdings Limited 25 Arcapita Investment Management B.S.C. (c) 69 This annual report (the “Annual Report”) contains certain “forward-looking” statements, and such statements are based on the beliefs of Arcapita, as well as on assumptions made by, and information currently available to, Arcapita. When used in this Annual Our People Board of Directors 88 Report, the words “anticipate”, “believe”, “estimate”, “expect”, “plan”, “intend”, and words or phrases of similar import, are intended to identify forward-looking statements. Such forward-looking statements may include, without limitation, statements relating to Shari’ah Supervisory Board 90 the following: Arcapita’s plans, strategy, objectives or goals; Arcapita’s future economic performance or prospects; specific country, region and worldwide business environment; potential effect on future performance of certain contingencies; and assumptions Senior Management 90 underlying any such statements. These statements are inherently subject to significant business, economic, competitive, regulatory Management Team 93 and operational uncertainties, contingencies and risks, both specific and general in nature, many of which are beyond the control of Arcapita. Any forward-looking statements are speculative in nature, and it can be expected that one or more of the assumptions underlying such 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 intentions expressed in such forward-looking statements, and such variations may be material. 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.

Note: throughout the Annual Report, $ refers to United States Dollars, unless otherwise specified. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Geographic Our Presence Values

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Arcapita offers investors and shareholders diversified With offices in Bahrain, Atlanta, London and Singapore, We are committed to operating our firm based on the following principles: investment opportunities which adhere to Shari’ah Arcapita’s senior management team has overseen over 80 principles. At the center of one of the fastest growing transactions with a total transaction value in excess of $30 wealth markets in the world, Arcapita’s management team billion and possesses the footprint to invest on a global ORIGINALITY INTEGRITY has been serving an exclusive group of investors in the scale. GCC region and Southeast Asia for more than 20 years. Arcapita aims to provide innovative and proprietary Arcapita aims to attract and retain people with the alternative investment opportunities fortitude to do the right thing at all times

SELECTED OFFICES COUNTRIES WHERE MANAGEMENT PRUDENT RISK MANAGEMENT ALIGNMENT OF INTERESTS HAS OVERSEEN INVESTMENTS Arcapita strives to achieve sustainable growth through Arcapita aims to align its interests with investors and maintaining a robust capital base and sound risk shareholders through retaining a sizeable equity stake in management processes all transactions offered to stakeholders London, UK Singapore TRANSPARENCY PROFESSIONALISM

Arcapita is committed to accurate and timely disclosure of Arcapita is committed to recruiting and retaining the best information to its stakeholders talent in the field

ETHICAL INVESTMENT POLICY

Arcapita aims to invest in morally and ethically sound companies and products, and does not invest in non Shari’ah-compliant activities

Atlanta, US

Manama, Bahrain ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Directors’ Report CEO’s Message Fiscal Year 2019 Fiscal Year 2019

ABDULAZIZ H. ALJOMAIH ATIF A. ABDULMALIK, Chairman Chief Executive Officer

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We are pleased to report that Fiscal Year (“FY”) 2019 With the rollout of major government-sponsored growth Since inception, we have built a global investment platform In the US, a growing college enrollment and supportive has been another successful year for Arcapita, with initiatives across the GCC, we anticipate that attractive with the capability to access investment opportunities demographics are increasing our appetite for student revenues of $54.6 million and net income of $21.9 million, investment opportunities will materialize in certain across the core markets of the globe. Arcapita has a housing transactions; in addition the demand for mission- representing 44% and 76% growth over the previous pockets of the regional economy. Accordingly, our MENA diversified business model and a veteran management critical business services by nationwide blue-chip clients is fiscal year, respectively. This positive performance was investments team is currently developing a pipeline of team that brings experience and expertise across different driving our desire to expand in this sector further. driven by strong income from our investment portfolio acquisition targets in sectors where we have identified investment areas. We aim to deliver sustainable returns With a strong deal pipeline in the GCC and US, we have set and full placement of transactions that were completed compelling pricing dynamics and supportive fundamentals. to our shareholders and investors using our sectoral ambitious goals for FY 2020 and are targeting to bolster during the year. FY 2019 saw the continuation of the In the US, our team is currently focused on sourcing and geographic insights and a risk-adjusted approach to our performance in the upcoming fiscal year. We remain firm’s accelerating growth momentum, robust investment transactions in the industrial and business services sectors, investing. confident that we have built the key attributes to support a performance, and healthy investment activity across the in addition to student housing facilities across select sub- Over the years, we have played a major part in providing diversified, flexible and sustainable business model, which US and GCC. markets. access to alternative investments for Shari’ah-aligned will help us deliver sustainable returns to our shareholders As we grew our co-investment portfolio and continued to We have set ambitious targets for the upcoming fiscal year investors and have completed transactions valued at and investors using our sectoral and geographic insights build our assets under management, the firm’s recurring and are targeting to accelerate our investment activity and approximately $30 billion. We believe in the importance and a risk-adjusted approach to investing. revenues witnessed substantial growth. This is in line with expand our fundraising efforts outside the GCC to further and value of long-term relationships with our shareholders, our target of doubling the firm’s income from recurring diversify our offerings and clientele. Arcapita is well our investors and our investment partners, and our model revenue streams over the next five years. positioned to continue providing innovative investment stresses the importance of aligned interests. We use these opportunities and is committed to delivering strong returns partnerships to bring a wide range of different skills and The GCC’s investment landscape was impacted by a for its stakeholders. experiences to our investments, enhancing transaction challenging macroeconomic environment that carried access and execution for the benefit of all stakeholders. through from 2018. As a result, we were primarily With the support of our shareholders, we firmly believe focused on sourcing US transactions during the past fiscal that we can maintain our positive momentum and deliver FY 2019 was a successful year for Arcapita, driven Atif A. Abdulmalik year. Overall, our investment team sourced three US on our growth targets for FY 2020. by strong investment income from our private equity CEO transactions and one transaction in the GCC, for a total portfolio, which continues to outperform our underwriting transaction value of over $250 million. These included two projections. Our deal pipeline is focused on the industrial, industrial real estate portfolios in the US, an industrial real logistics, student housing, and business services sectors, estate portfolio in the UAE, and a bolt-on private equity which are poised to experience significant growth over investment in the US. the medium to long term. In the US and MENA, increased supply chain sophistication and penetration of e-commerce To support the firm’s growth and deliver on our business are driving significant demand for industrial and logistics plan targets, we have added depth to the investor services, a sector where we are exploring several private relationship management team, and recruited additional equity and real estate opportunities. investment professionals for our real estate and private Abdulaziz H. Aljomaih equity teams to manage our growing investment portfolio. Chairman We have also bolstered our middle office and investor support functions to meet the growing needs of our clients. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Financial Highlights

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TOTAL INCOME NET INCOME ARCAPITA’S CORE BUSINESS $54.6 million $21.9 million MODEL WILL CONTINUE TO 60 54.6 25 21.9 50 20 REVOLVE AROUND OFFERING

36.2 37.9 40 35.5 33.5 15 12.2 ITS INVESTORS PRIVATE 11.4 12.4 8.1 30 10 EQUITY AND REAL ESTATE 20 5 INVESTMENTS ACROSS SECTORS 0 0 FY FY FY FY FY FY FY FY FY FY 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 AND GEOGRAPHIES WHERE ITS INVESTMENT TEAM HAS TOTAL EQUITY DIVIDEND (as a percentage of paid-up capital) DEMONSTRATED A STRONG $237.9 million 7.6%

7.6% TRACK RECORD. 250 237.9 8% 7% 7% 7.1% 219.7 7% 200 6% 132.3 150 130.2 4% 100 86.1

2% 50

0 0% FY FY FY FY FY FY FY FY FY FY 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

Figures in US$ million unless FY FY FY FY FY otherwise noted 2015 2016 2017 2018 2019 Total Income 35.5 36.2 33.5 37.9 54.6 Net Income 11.4 12.2 8.1 12.4 21.9 Net Income Margin (%) 32% 34% 24% 33% 40% Total Equity 86.1 130.2 132.3 219.7 237.9 Dividend as a Percentage 7.0% 7.0% 7.0% 7.1% 7.6% of Paid-up Capital (%) ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Our Business

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Arcapita’s core business is offering its clients private equity and real estate transactions on a deal-by-deal basis. After BUSINESS MODEL AND STRATEGY a transaction is completed, Arcapita syndicates a portion of the underwritten equity with its investor base while Leverage the Strength of Arcapita’s Current Client Base Deal-by-Deal Product Offering maintaining a sizable equity position in each transaction, thus aligning its interests with investors. Arcapita sources capital from its investors and deploys it Arcapita acts as a principal and arranger in alternative across the world. This exclusive and extensive network of investments, offering clients investment opportunities CLIENTS investors typically exhibits loyalty towards Arcapita and its on a deal-by-deal basis. Under the deal-by-deal product investment products. Arcapita enjoys strong relationships offering, Arcapita underwrites investments prior to placing Arcapita maintains a network of over 1,300 valuable Consumer and Business Services with the GCC region’s top individuals and institutions. A a majority of the equity invested with its investor base. investors from across the GCC region and Southeast Asia. Fueled by increasing brand awareness and an expanding significant number of these investors have had a long and Arcapita typically maintains an equity position in each Arcapita’s investor base is primarily composed of investors middle class in emerging markets, Arcapita is focusing established relationship with Arcapita as repeat investors transaction, thus aligning its interests with its investors. from the following four categories: its private equity efforts on sectors that are consumer and shareholders. In a typical transaction, Arcapita utilizes its balance sheet • High Net Worth Individuals (“HNWI”): individuals driven. These include food & beverage, branded retail to acquire a controlling interest in a single company or a Arcapita is focused on refining its business model to: with investable assets in excess of $1 million; and technology, as well as sectors that capitalize on the portfolio of assets; after acquisition, Arcapita syndicates increasing amount of discretionary spending within the • Continue to serve its core investor base with high-quality the equity of the company or assets to its investors. • Family Offices: professional entities set up to manage global Muslim population. In addition, a growing trend investment products and services the investments, business affairs and philanthropic of outsourcing non-core services by corporates has led The deal-by-deal product offering, which has historically interests of high net worth families; to sustained growth in the business services segment. • Diversify its investor base to include more investors been favored by Arcapita’s core investor-base (HNWIs and Arcapita is focused on acquiring businesses that provide outside of the GCC region, and more institutional family offices in the GCC region), provides its clients with • Institutions: large, sophisticated investment groups that mission-critical services, outsourced business processes, investors the ability to select from a range of unique investment include pension funds, university endowments, asset and technology-enabled services. offerings diversified by asset class and region. Additionally, managers and insurance companies; and • Diversify its product and service offering (e.g. funds it provides investors with a clear understanding of Healthcare and Wellness and managed accounts services) to increase recurring • Sovereign Wealth Funds (“SWFs”): state-owned the underlying assets and uses of capital in any given revenues, reduce income volatility and reduce balance investment funds that invest in real and financial assets In addition to the significant growth in the global investment, without the uncertainty of placing money sheet usage on a global scale. senior population, the 65 and over age demographic is in a “blind pool” fund. Finally, the deal-by-deal product also increasingly wealthy. In the US, the baby boomer • Ultimately, Arcapita aims to develop products and offering allows investors to customize their portfolio of population is estimated to control 70% of the population’s INVESTMENT FOCUS services that leverage the strengths of the firm’s client investments based on their specific asset allocation risk disposable income and, by 2022, this demographic is base and meet the demands of its investor pool appetite. Furthermore, the deal-by-deal product offering Arcapita’s core business model will continue to revolve projected to inherit approximately $15 trillion from parents affords Shari’ah-compliant investors the opportunity to around offering its investors private equity and real and spouses. Capitalizing on these demographic tailwinds, participate in alternative investments which would not estate investments across sectors and geographies where Arcapita’s core management team has an established track normally be available to them. its investment team has demonstrated a strong track record in the senior living real estate sector with eight record. As Arcapita continues to accelerate its deal-by- transactions completed, worth a total transaction value deal business and introduces new products, the firm’s of approximately $1.8 billion. Senior living remains a key DEAL-BY-DEAL PRODUCT OFFERING investments are expected to focus on the following focus area for the firm, and management is continuing industries. to monitor opportunities in the healthcare and consumer services sectors that cater to this age demographic. Deal Sourcing Industrial and Logistics Real Estate and Private Growth in e-commerce and increased sophistication of In the GCC and other emerging economies, increased Equity Investments supply chains is creating significant demand for more internet penetration and health consciousness are creating efficient logistics and warehousing services. As a result, significant demand for products and services that promote companies are increasingly outsourcing complex supply fitness and physical well-being. This trend is expected to Arcapita retains percentage of Arcapita typically chain activities to specialized operators. Given senior continue over the long term and is further supported by government-backed healthcare initiatives such as KSA the equity on its own balance retains voting rights / proxy management’s track record in this sector and the positive sheet to align interests to manage the investments investor returns generated by investments such as PODS Vision 2030. and 3PD, the team will continue to seek opportunities in the freight-forwarding, last-mile delivery and contract Placement logistics subsectors. Investors from the GCC region ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Our Business

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BUSINESS MODEL AND STRATEGY (continued) Funds & Managed Accounts Product Offering Wealth Market Outlook Wealth Trends in the GCC Region Investor Demand for Shari’ah-Compliant Products As part of Arcapita’s long-term growth plan, the firm is Arcapita was established to meet the demand from Middle The GCC continues to be an attractive market for Arcapita believes that there is significant demand from expanding its product offering. In addition to Arcapita’s East investors for quality alternative investment products investment activity, which is supported by favorable GCC-based investors for quality, global alternative deal-by-deal product offering, the firm’s offerings will that are structured according to Shari’ah principles. wealth dynamics in the region that far exceed global investment products that are structured according to expand to include Funds and Managed Account services This premise has remained intact with the demand for averages. According to the latest estimates, the total wealth Shari’ah principles. A recent survey by Emirates Investment thus facilitating the diversification of the firm’s investor alternative investments continually growing despite a in the GCC has approached $2.4 trillion, with Saudi Arabia Bank found that 73% of GCC HNWIs feel it important that base. These products will primarily target institutional relatively low interest rate environment and volatility in oil accounting for nearly 40% of regional wealth. Additionally, their investments are Shari’ah compliant, with 51% finding investors compared to the deal-by-deal product offering prices. on a per capita basis, GDP figures for all GCC economies are it extremely important. In addition, Islamic investors which primarily caters to HNWIs and family offices. well above the global average of $11,370. The majority of have historically been restricted to a narrow choice of The Shari’ah-compliant finance industry now has total Arcapita expects that these new offerings will produce the GCC’s wealth is concentrated in Saudi Arabia, UAE and investment opportunities. In contrast, conventional assets in excess of $2 trillion, with growth expected to predictable, recurring revenue streams to balance the Kuwait, which control 81% of the total wealth in the region. investors have a wide and growing range of products and continue in the coming years supported by the increased transaction-based revenues from the firm’s deal-by-deal Due to their market size, growth prospects and wealth services to diversify their risk and improve returns. This demand for Shari’ah-compliant products such as Sukuk business line. market dynamics, Arcapita intends to focus on growing imbalance of opportunity, as well as general demand for and Islamic mortgages, and the double-digit growth of the its HNW investor network within these markets over the Shari’ah-compliant products and services, is fueling growth Arcapita believes that it has a strong foundation to Takaful industry. medium-term. in the Islamic financial services industry. To date, however, introduce its funds and managed accounts services. This Arcapita believes that the demand for its Shari’ah- Islamic financial services firms have been slow to meet the foundation is supported by Arcapita’s close relationships Investor Demand for Alternative Investments compliant products and services will accelerate as the demands of investors for alternative investments which are with its institutional investors and SWFs, deal-sourcing HNWI investor base continues to regain confidence in the Macroeconomic indicators highlight the significant liquidity Shari’ah compliant. capabilities, and portfolio management expertise. The firm real estate and private equity markets. GCC investors have in regional markets and the growing need for alternative believes that these products will enable it to access large Investor Demand for Arcapita Products and Services demonstrated appetite for Arcapita’s unique investment investment opportunities. The investment environment pools of institutional capital in the GCC region and beyond. opportunities in both international and local markets. in the GCC, while challenged by low oil prices, has slightly In summary, management believes that the GCC market Increase Recurring Revenues HNWI investors remain interested in yielding transactions improved recently with the global economy showing signs offers extensive opportunities for Shari’ah-compliant of recovery. While GCC HNWIs are cautiously optimistic alternative investment managers like Arcapita due to: The strategic goal behind these new offerings is to limit that offer attractive dividends in today’s relatively about near-term economic prospects given recent political Arcapita’s exposure to the cyclical nature of the M&A low interest rate environment as well as private equity • the rapid growth in the GCC region’s wealth; events and austerity measures, over 78% are optimistic market, reduce the use of the firm’s balance sheet and investments in middle-market companies with promising about the global economy over the next five years and • the improvement of the global macroeconomic climate increase its recurring revenues. All the aforementioned growth prospects. On the other hand, institutional expect significant growth due to the positive trend in which is increasing GCC investor interest in alternative factors should result in reducing the company’s earnings investors continue to invest in accordance with their macroeconomic fundamentals and policy reforms in investments; volatility. long-term mandates and are less impacted by short-term established markets. volatility and market conditions. Given the growth of • among some investors, the considerable preference for Islamic finance and Arcapita’s introduction of products that Given the improvement in global economic conditions and Shari’ah-compliant products that are on par (quality/ are attractive to institutional investors (such as funds and investor sentiment, GCC HNWIs are becoming increasingly risk/return) with conventional offerings; and managed accounts), the firm expects to increase its access risk tolerant and are more willing to accept the higher • the fragmentation of the Shari’ah-compliant alternative to institutional capital in the GCC region. risks associated with alternative investments to generate investment market, with the majority of GCC-based higher returns. Arcapita believes that today’s relatively investment firms lacking a comprehensive product range low interest rate environment, coupled with a growing and/or sophistication. risk appetite from GCC HNWIs, will drive demand for alternative investments in the coming years. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Our Business

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INVESTMENT PROCESS Arcapita’s investment process comprises three stages: Once a transaction has been approved and completed, INVESTMENT PROCESS FLOW INTERNAL INVESTMENT SCREENING FRAMEWORK deal sourcing, portfolio management, and exit. When it passes into the portfolio, where its performance is sourcing investments, Arcapita receives numerous Deal Sourcing monitored against the investment thesis. The portfolio Investment Team investment referrals from its deal sourcing network. management team function plays an important role in These sources include proprietary relationships, direct Finding, evaluating and closing ensuring that investments achieve their full potential. Investment teams originate investments via: approach from partners and sellers, referrals from specialist • Analyze industry structure, competitive A cross-functional team of portfolio management and • Investment banks and advisors intermediaries, dialogue with investment banks and follow- position, and value proposition investment professionals works with management of the • Direct approach to partners and sellers on transactions within the portfolio. • Assess competitive landscape company to plan business strategy and how to implement it. • Personal relationships • Evaluate management team • Public information After the initial screening to determine which During the holding period, the portfolio management • Based on investment criteria opportunities meet the firm’s investment criteria, the Portfolio Management function helps the portfolio companies with identifying investment teams conduct in-depth due diligence on and enhancing strategic and operational matters such as Investment teams study prospective investment: promising opportunities. During the due diligence stage, Early ownership 100-Day Plan recruitment of senior management, developing the supply • Analyze and pursue promising investment the team conducts research on multiple aspects of the • Define and review initial strategy and action plans chain and technology infrastructure as well as introducing opportunities potential investment, including the market opportunity, • Conduct workshops to assimilate company into additional financial and reporting disciplines. • Conduct preliminary due diligence partner’s background and capabilities, and investment Arcapita and gain consensus around goals and The portfolio management team monitors a range of fundamentals. This process draws on expertise from expectations MSG Investor Readiness Test • Develop and refine business plan and strategy monthly key performance indicators (“KPIs”) against Arcapita’s internal investment teams, senior management the deal’s original investment thesis and assesses the and a network of third-party advisors. Market Sounding Group: Primary value creation period management’s performance. The team maintains close • For investments that match Arcapita’s strategy, In the early stage of the investment process, each new • Review performance against targeted financial contact with company management teams through monthly the MSG will provide insight on investor appetite investment proposition is presented to the Market and operating metric video conferences, quarterly board meetings and site visits. • If MSG approves, the investment team starts Sounding Group (“MSG”). The MSG takes an active role • Build capabilities within companies to improve The firm aims to exit most investments within three to engaging advisors for due diligence during the investment sourcing process to facilitate key processes seven years. However, if an attractive opportunity for exit • Structure management objectives and convergence between Arcapita’s investment products and occurs, Arcapita will support an earlier exit. Investment Team Full Due Diligence compensation plans prevailing investor sentiment. • Implement best-in-class industry practices Due diligence: During the MSG review, the relevant investment team PRIVATE EQUIT Y • Due diligence is conducted in partnership with: discusses the opportunity with Arcapita’s Investors Investment Exit Overview - Financial advisors Relationship Management (“IRM”) team, together with - Legal firms Arcapita acts as a principal and arranger in the acquisition members of senior management, thus allowing Arcapita to • Optimize earnings and overall financial - Consultants of established middle-market companies, with an emphasis formulate a preliminary understanding on how a potential performance • Detailed report produced for management approval • Identify exit options and and facilitate the on the United States, Europe, the Middle East and Asia. The investment product would be perceived by Arcapita’s exit process firm targets growth-oriented corporate acquisitions with investor base. If the proposed investment gains MSG IExCo, ExCo and EIC Investment Decision a transaction size between $50 million and $300 million. approval, the investment team continues to pursue the Arcapita focuses on sectors where its management team Approval process: opportunity before presenting it to Arcapita’s Investment has established industry knowledge and a successful track • IExCo and ExCo evaluate the merits and risks of Executive Committee (“IExCo”), Executive Committee record. the investment, as well as the overall fit within (“ExCo”), and Board of Directors’ Executive Investment Arcapita’s portfolio Committee (“EIC”) for approval. Arcapita aims to acquire companies that excel in a number • EIC, a subcommittee of the Board of Directors, of key aspects. These companies typically have innovative reviews investments that have been approved by products or services; growing market positions and strong IExCo and ExCo management teams, in place or identified; be capable of building shareholder value through market strength in product line, technology, distribution, manufacturing or brand; a clear business strategy with multiple avenues for growth and market share gains; and industry growth drivers that are fundamental and compelling. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Our Business

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PRIVATE EQUITY (continued) Private Equity Portfolio Management Once an acquisition is completed, and the target company Arcapita aims to nurture and grow the investments through Arcapita’s portfolio management approach is designed to To date, Arcapita’s senior management has completed becomes part of the private equity portfolio, Arcapita’s the holding period with strategic and financial support ensure the highest possible performance for its portfolio real estate investments in the industrial and logistics executives work closely with the portfolio company when necessary. To date, Arcapita’s core management has companies through implementing best-in-class practices warehousing, self-storage, residential, senior living, mixed- management team in establishing a clearly defined business overseen over 30 investments with a total transaction value and strategic growth initiatives. Arcapita’s portfolio use, business park and retail sectors. plan to grow the company’s value, while designing of approximately $15 billion. management approach will be applied in each of the critical The team has completed investments across the globe; a tailored capital structure and management equity stages of an asset ownership process - including pre- from North America, to Europe, the Middle East and incentives to foster growth and profitability. acquisition and due diligence, early ownership, the core Asia. In support of Arcapita’s overall business strategy, ownership period and the process leading to exit. Prior to and to provide more diverse investment opportunities for the acquisition of a company, the firm conducts market and investors, the real estate team at Arcapita has extended its operational due diligence, along with an assessment of the focus to develop initiatives that include the establishment management team. and management of real estate investment funds. In RECENT PRIVATE EQUITY INVESTMENTS* During the early ownership period, Arcapita introduces addition, the team is also focused on providing real estate disciplines in the areas of strategy, operations, and people financial services and solutions by leveraging its experience Company Description Transaction Size Transaction Date management. The company works with senior management in specific real estate sectors. To date, Arcapita’s core to identify the key industry and company-specific management has overseen over 40 investments with a total NuYu NuYu is a leading chain of women-only boutique gyms in US$ 51 Million 2018 operating and financial measures that best reflect the true transaction value of approximately $15 billion. Saudi Arabia. NuYu offers internationally certified trainers, performance levers for a particular business. The firm Real Estate Portfolio Management state-of the- art equipment, and high-quality fitness structures incentive plans to encourage and motivate the classes in a premium environment. The company is at the target’s management teams to meet agreed-upon metrics. After closing the transaction, the asset managers, corporate forefront of a global shift in tastes and preferences within management teams and joint venture partners are directly the fitness industry, which is driving heightened interest Arcapita executives serve as members of each company’s responsible for the execution of the business plan. Arcapita in boutique concepts, and away from traditional “big box” board of directors, seeking to increase the value of works closely with these partners to monitor and evaluate gyms. the investment in three primary ways: (i) assisting the progress of each real estate investment. Early in the management in defining and continuously updating the ownership period, the investment team works with its MC Group MC Group is the sole nationwide provider of sign US$ 143 Million 2017 optimal three to five year action-based strategy, (ii) partners to identify the primary operating statistics to be management, lighting, and service solutions in the US. identifying and driving initiatives in the company’s annual monitored through regular meetings and reports. In this MC Group has a diverse network of over 275 customers operating plans that improve the near-term operating fashion, the investment team seeks to maintain continuous comprising nationally recognized blue-chip companies in performance of the business and support achievement of oversight over each investment. the retail, banking, hospitality, quick service restaurant financial objectives, and (iii) improving the company’s human capital and succession planning. On a monthly basis, the investment team receives an asset and C-store segments. Through its headquarters in performance report which includes a comprehensive set of Cleveland, Ohio, MC Group processes over 40,000 work marketing and financial updates for the investment and, orders per year through over 5,000 field service partners. REAL ESTATE on a quarterly or annual basis, the investment team also Overview receives and reviews audited financial statements for every NAS United NAS United Healthcare Services LCC is a leading GCC US$ 66 Million 2017 Arcapita’s real estate team acts as a principal, arranger investment. Healthcare provider of outsourced health insurance processing and manager of real estate investments, operating out of The investment team conducts on-site operational reviews Services LLC services. Established in 2002 in Abu Dhabi, NAS its offices in Bahrain, Atlanta, London and Singapore. The is a regional leader in the provision of third-party on a quarterly basis. At these sessions, the team conducts real estate team analyzes opportunities across a broad a deeper assessment of the investment’s performance, administrator services to health insurance and takaful spectrum of transaction structures, geographies and return companies in the GCC region. working with the operating partner to understand profiles to provide a diverse mix of real estate investment the underlying factors influencing current and future opportunities to investors. performance. * Transaction size is based on each deal’s private placement memorandum (PPM). ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Our Business

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REAL ESTATE (continued) THE SYSTEM OF

RECENT REAL ESTATE TRANSACTIONS* PROCEDURES AND Company Description Transaction Size Transaction Date PRINCIPLES GOVERNING ARC US Industrial A portfolio of nine highly functional industrial real US$ 80 Million 2019 Portfolio V estate assets totalling 1.5 million square feet located in ARCAPITA’S MANAGEMENT Indianapolis, Indiana – a top 25 US industrial market. AND OPERATIONS ARE ARC US Industrial A portfolio comprising three clusters including seven US$ 50 Million 2018 Portfolio IV assets with a built-up area of 655,000 square feet and FUNDAMENTAL TO THE is occupied by 17 tenants operating in the logistics, technology and distribution space. FIRM’S SUCCESS. ARC US Senior A portfolio of two premium continuing care retirement US$ 148 Million 2018 Living VII communities in Chicago, United States, with approximately 1,100 units. The communities are located within master-planned commercial areas and enjoy a variety of amenities.

ARC UAE Logistics A portfolio of high-quality warehousing facilities located US$ 62 Million 2018 III primarily in Dubai Investments Park, Dubai, UAE.

ARC UAE Logistics II A portfolio of income-generating logistics assets in US$ 150 Million 2017 Dubai, UAE. The portfolio comprises 11 warehousing facilities occupying a total built-up area in excess of 1.2 million square feet, primarily in Dubai Investments Park.

ARC US Senior Three high quality, recently upgraded and stabilized US$ 110 Million 2016 Living VI senior living communities in the suburbs of Atlanta, Georgia, and Washington, D.C.

ARC UAE Logistics A logistics park in Dubai, UAE. The investment US$ 100 million 2016 Park comprises nine freehold plots of land to be developed into ten warehousing facilities that will be under a long- term master lease with a reputable UAE conglomerate.

ARC US Senior A privately-held portfolio of senior living communities US$ 87 million 2016 Living V in Colorado, United States, in a joint venture with Morningstar Senior Living, an experienced operating partner specializing in this sector.

ARC Saadiyat Beach Three premium low-rise residential buildings located US$ 188 million 2015 Apartments/The in Saadiyat Island, Abu Dhabi. In 2018, the assets were Residential REIT contributed to a residential REIT in exchange for REIT units.

* Transaction size is based on each deal’s private placement memorandum (PPM). ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Corporate Governance Framework

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The system of procedures and principles governing Arcapita’s management and operations are fundamental to the firm’s success. Arcapita’s Board of Directors and senior management are committed to an efficient, entrepreneurial BOARD & MANAGEMENT CORPORATE GOVERNANCE FRAMEWORK decision-making structure that is fair, transparent and accountable while maintaining the agility required to execute transactions effectively. Board of Directors Level Board of Directors BOARD OF DIRECTORS BOARD COMMITTEES Executive Executive Audit & Arcapita has assembled a distinguished Board of Directors Arcapita’s Board of Directors is assisted in its monitoring Board Committees Executive Administrative and Investment Risk Management comprising eminent business personalities from across the and oversight responsibilities by the Executive Investment Level Corporate Governance Committee Committee Committee GCC region. Drawing on deep experience in management, Committee (“EIC”), the Executive Administrative and Shari’ah industry and investments, the Board of Directors is well Corporate Governance Committee (“EAC”) and the Supervisory positioned to represent the best interests of investors while Executive Audit and Risk Management Committee (“ARC”). Board Risk assisting management with expert advice and counsel. Management Executive Investment Committee (EIC) Executive Committee Management Committees Level Arcapita’s Board of Directors takes responsibility for the EIC’s primary duties and responsibilities are to: Committee strategy of Arcapita and for the supervision and oversight of its senior management, who have been entrusted with • Establish operating guidelines for investment activities implementing day-to-day management policies. Arcapita’s • Approve new investments and exits Senior Management Group Market Sounding Group Board of Directors consists of eight members, including • Monitor investment performance seven non-executive members and Mr. Atif A. Abdulmalik, • Approve financing and issuing of securities the firm’s CEO, representing management. Executive Administrative and Corporate Governance Investment Committee (EAC) Investment Committee The Board of Directors meet as often as business requires, Teams Level and a minimum of four times a year. The roles of Chairman EAC’s primary duties and responsibilities are to: and CEO are held by two different individuals, to ensure an • Approve and recommend corporate and administrative appropriate balance and separation of authority. policies and procedures MANAGEMENT COMMITTEES Arcapita’s management works closely with the Board • Review and recommend approval of the annual budget Arcapita has assembled a management team with extensive Senior Management Group (“SMG”) of Directors, both directly and through its various • Recommend and revise corporate governance policies experience in building and managing investment platforms SMG is responsible for spearheading new firm-wide committees. Management regularly provides investment and procedures globally. Drawing upon its collective experience and track strategic initiatives and ensuring that Arcapita delivers and financial updates and strategic forecasts to the Board • Oversee and monitor the governance framework record, Arcapita enjoys a seasoned management team with on its longer-term growth initiatives. The committee is experience spanning multiple economic cycles. responsible for developing new products, new business of Directors, and discusses all investment decisions under Executive Audit and Risk Management Committee opportunities and for developing Arcapita’s business plans. consideration, as well as any other major decisions or issues (ARC) Executive Committee (ExCo) facing Arcapita. The ARC’s primary duties and responsibilities are to: ExCo oversees the strategic planning for Arcapita and the Risk Management Committee (RMC) decision making for all new investments. For example, prior RMC’s duty is to establish and maintain a risk management • Approve and recommend for further approval by the to making a commitment to sign definitive agreements framework throughout the firm to best manage Arcapita’s Board of Directors: relating to investments (equity and financing), each shareholder and client interests. Its mandate is to identify, - Annual financial statements and budgets new investment will need to be reviewed by ExCo. The assess and measure risks arising from the firm’s activities, - Auditors and consultants committee’s duties and responsibilities include: and to define the appropriate course of action to mitigate or • Monitor financial reporting, risk, compliance and internal manage them. RMC’s role and responsibilities include: control • Setting global strategy for Arcapita • Review and appraise activities of external and internal • Reviewing and recommending new investments • Establishing and maintaining a risk management auditors framework throughout the firm by working with the • Reviewing and approving business plans, budgets and Board Executive Audit and Risk Management Committee control systems • Overseeing risk functions • Managing human capital, including determining compensation and benefits plans and overseeing human resource development ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Corporate Governance Framework

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MANAGEMENT COMMITTEES (continued) CORPORATE POLICIES COMPLIANCE Market Sounding Group (MSG) Code of Conduct Policy Anti-Money Laundering Policy Arcapita adopts a comprehensive Compliance framework MSG’s role is to evaluate the marketability of investment The Board of Directors has adopted a Code of Conduct The Board of Directors has adopted a comprehensive to ensure full compliance with applicable regulations in the products identified by the investment teams. The group Policy that outlines principles that the Board of Directors, Anti-Money Laundering Policy to prohibit and actively jurisdictions where Arcapita conducts its activities. In this comprises the Investors Relationship Management team, senior management, and all employees (collectively, the prevent money laundering and any activity that facilitates regard, the Board of Directors has adopted a Compliance members of the Financial Management Group and Shari’ah “Arcapita Employees”) shall adhere to. The Code of Conduct money laundering or the financing of terrorist or criminal Charter which outlines the fundamental principles, roles, department. The Market Sounding Group is responsible for Policy was adopted to promote honest and ethical business activities. Arcapita Group will not establish a relationship and responsibilities of the Compliance function as well the initial assessment of investor and market sentiment to conduct at Arcapita. Arcapita Employees are required to with, or conduct a transaction for, a customer a) whose as its relationship with the Board of Directors, Board potential new transactions. have full loyalty to Arcapita and its operations and should funds appear to be the proceeds of or involved with Committees, senior management, and business and conduct themselves with integrity, honesty, leadership, and illegal activity b) whose identity or legitimacy cannot operational functions. The Compliance Charter has been Investment Executive Committee (IExCo) professionalism in fulfilling their fiduciary responsibilities be satisfactorily established and c) who fails to provide developed to provide an informative written reference for IExCo oversees the management of the existing investment to Arcapita and its stakeholders, and to maintain full information which is necessary to comply with the policy. the Compliance function. portfolio, and screens future new deal activity before the confidentiality with respect to any Arcapita confidential All Arcapita Employees who handle customer transactions, The Compliance function is overseen by the head of Marketing Sounding Group, Executive Committee and other information. In addition, Arcapita Employees are required or who are managerially responsible for such transactions, Compliance who reports to the Executive Audit and Risk approvals are sought, and provides inputs for Arcapita’s to avoid actual or potential conflicts of interest with participate in Anti-Money Laundering training on an Management Committee. annual business planning. IExCo’s role and responsibilities Arcapita and to properly disclose and be transparent in any annual basis. include: transactions involving Arcapita. The responsibilities of the head of Compliance include: Hiring of Relatives Policy • Overseeing all investment teams and investment assets Insider Trading Policy • Overseeing Arcapita’s Compliance activities and Arcapita has a board-approved policy in place with • Vetting all investment team requests that will ultimately The Board of Directors has adopted an Insider Trading monitoring the implementation of the Compliance review respect to hiring of relatives. In accordance with this require ExCo approval Policy that applies to all Arcapita Employees and all plan policy, Arcapita avoids, as much as possible, the hiring of Arcapita Employees are required to certify in writing that • Serving as first point of contact for individual investment relatives of employees into positions where the possibility • Reporting annually to the Executive Audit and Risk they have read and understand such policy and agree to teams of favoritism or conflicts of interest might exist. The Chief Management Committee, senior management, and the abide by its terms. The policy provides that, except with Executive Officer or Deputy Chief Executive Officer may Board of Directors on Arcapita’s Compliance activities • Providing Board-level engagement with individual deals the prior written consent of the Chief Executive Officer, no authorize an exception to the provisions of the policy if: and status Arcapita Employee who while acting for Arcapita Group • Serving as go-to liaison for new deal activities for specific obtains material non-public information which relates to • The position to be filled requires a person with • Coordinating internal Compliance reviews sectors and geographies any public company that Arcapita Group has invested in or specialized training and experience not generally • Ensuring that the Compliance function is appropriately • Managing the firm’s operating rhythm relating to is considering investing in (“Public Company”), may buy or available in the employment market; staffed with competent individuals investments (e.g., quarterly reviews, valuation updates, sell or otherwise deal in securities of such Public Company • There is a vital corporate need to fill the position; dividend distributions, investor reporting, etc.) or otherwise misuse or disclose such information to any • Providing portfolio exit projections and future person within or outside Arcapita Group, other than those • Substantial bona fide efforts have been made to locate investment plans as input for Arcapita’s business year • Providing periodic portfolio summary input for persons who need to know such information on a case-by- and employ such a person who is not a relative of an plan Arcapita’s overall financial reports case basis. employee; and Whistleblower Policy • The relative and the applicant are not in a supervisory/ The Board of Directors has adopted a Whistleblower Policy reporting relationship with one another. that applies to all Arcapita Employees to encourage and provide a process for Arcapita Employees to raise any serious concerns regarding any wrongdoing or improper conduct at Arcapita and a reassurance that they will be protected from possible recriminations if they have made a good faith disclosure in connection with such concerns. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Corporate Governance Framework

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ORGANIZATION ORGANIZATIONAL STRUCTURE AND BUSINESS DIVISIONS FRAMEWORK BOARD OF DIRECTORS Investors Relationship Management (“IRM”) Technology IRM is responsible for developing and maintaining The Technology department is responsible for business relationships within Arcapita’s network of investors and process automation, information management, and potential investors. The team members are the main point implementation of business solutions. Arcapita has CHIEF EXECUTIVE of contact for clients, delivering portfolio updates and always acknowledged the vital role of technology and OFFICER presenting new investment opportunities. This group is innovation, and their ability to enhance the firm’s also the first point of contact for investment opportunities competitive advantage in the marketplace. Furthermore, which may be sourced from clients or potential clients. the Technology department is responsible for connecting Arcapita operates a sophisticated marketing system to plan, and enhancing communication between all departments, execute and monitor investment syndication, providing streamlining services, and boosting performance through investors with a personalized and efficient service. state-of-the-art technology adaptation. Deputy Chief Chief Chief Financial Executive Officer Investment Officer Officer Corporate Management Treasury Operations Corporate Management provides support to all of Treasury Operations comprises multiple business units, Arcapita’s departments across the firm’s office network in including: Treasury, which is responsible for banking Bahrain, Atlanta, London, and Singapore. The department relationships and implementation of treasury products; Investors Relationship Business Corporate Finance comprises multiple business units, including Corporate Investors Information Management, which is responsible Management Development Communications and Administration. for opening and managing investor accounts; and Operations, which is responsible for fund transfers and Legal Corporate receipts, treasury bank office processes, deal funding, and Private Equity Corporate Accounts Arcapita’s legal department has responsibility for Arcapita’s Management reporting processes. compliance with all applicable laws and regulations in its business activities and advises with respect to all legal Investments: Business Development, Private Equity, Investment matters. Its activities include advising investment teams and Real Estate Legal Real Estate Administration on investments and divestments, and advising senior The Business Development department is responsible for management and the Board of Directors on corporate expanding Arcapita’s global footprint and product lines governance, financing arrangements and strategic as well as creating and developing strategic partnerships. Human Capital Risk Management planning. Arcapita’s legal department also assists with Arcapita employs investment teams and independent the administration of Cayman Islands, European, Middle consultants that are active globally, and their activities Eastern and Mauritius offshore corporate structures in are coordinated under the Chief Investment Officer. The Technology Shari’ah various investments. investment teams originate, negotiate, structure, and manage Arcapita’s investments, and eventually facilitate Human Capital the investment exit process. Arcapita’s investment teams Arcapita’s Human Capital department is responsible for the Treasury operate out of Bahrain, Atlanta, and Singapore. Financial Reporting administration and management of the firm’s most valued Operations assets – its employees, the administration and management Financial Management Group (“FMG”) of the global compensation & benefits, and the design and FMG, headed by the Chief Financial Officer, comprises administration of the firm’s long-term incentive programs. multiple business units, including Corporate Finance, The primary goal of our Human Capital department is to Corporate Accounts, Investment Administration, Risk help the organization meet its strategic goals by attracting Management, Shari’ah, and Financial Reporting. The group and maintaining high-caliber employees. is responsible for client reporting, corporate level strategic/ financial planning, preparation of Board of Directors packages, risk assessment of prospective investments, Shari’ah compliance, preparing and maintaining accounting records, subsidiary accounting, and internal/external reporting of Arcapita’s financial information. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

25

ARCAPITA GROUP HOLDINGS LIMITED

Shari’ah Supervisory Board’s Report Independent Auditors’ Report and Consolidated Financial Statements For the year ended 30 June 2019 ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

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

26 27

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 Opinion Limited, we are 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 We, through and in coordination with the Shari’ah Department, have reviewed the contracts relating to the transaction 2019, and the consolidated statements of profit or loss, comprehensive income, cash flows and changes in equity for the undertaken by Arcapita Group Holdings Limited and its subsidiaries (“the Group”) during the year ended 30 June 2019. We year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. have also conducted our review to form an opinion as to whether the Group has complied with Shari’ah rules and principles In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated and also with the specific fatwas, rulings and guidelines issued by us. financial position of the Group as at 30 June 2019, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs). The Group’s management is responsible for ensuring that it conducts its business in accordance with Islamic Shari’ah rules and principles. It is our responsibility to form an independent opinion, based on our review of the operations of the Group Basis for opinion and to report to you. We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit of the consolidated financial statements’ We planned and performed our review so as to obtain all the information and explanations which we considered necessary section of our report. We are independent of the Group in accordance with the International Code of Ethics for Professional in order to provide us with sufficient evidence to give assurance that the Group has not violated the rules and principles of Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical Islamic Shari’ah. The Shari’ah Supervisory Board will conduct site visits and audits to ensure Shari’ah compliance. 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 into by the Group during the year are in compliance with Islamic Shari’ah rules and principles. Other information b) The investments undertaken by the Group during the year have been reviewed by us and are in accordance with Islamic Other information consists of the ‘Supplementary information’, set out on pages 34 to 36, other than the consolidated Shari’ah principles. financial statements and our auditor’s report thereon. c) The allocation of profit and charging of losses conform to the basis that had been approved by us in accordance with The Board of Directors is responsible for the other information. Our opinion on the consolidated financial statements does Islamic Shari’ah rules and principles. not cover the other information and we do not express any form of assurance conclusion thereon. d) All earnings (if any) that may have been realized from sources or by means prohibited by Shari’ah rules and principles In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, have not been recognized as income but have been set aside to be disposed of to charitable causes. in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements e) The calculation of Zakah is in compliance with Shari’ah rules and principles. or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have We beg Allah the Almighty to grant us all success and straightforwardness. performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Shari’ah Supervisory Board: Responsibilities of the Board of Directors for the consolidated financial statements 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 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 Sh. Muhammad Taqi Usmani Sheikh Esam Mohamed Ishaq continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis Chairman Member 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 Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Sh. Dr. Yousuf Abdullah Al Shubaily Sheikh Mohammed Isa Al Jamea Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs Member Member 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 reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. 7 August 2019 ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Arcapita Group Holdings Limited Independent Auditors’ Report to the Shareholders of Consolidated Statement of Financial Position Arcapita Group Holdings Limited (continued) As at 30 June 2019

28 29

Report on the audit of the consolidated financial statements (continued) 2019 2018 Note USD ‘000 USD ‘000 Responsibilities of the Board of Directors for 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 25,373 26,429 • 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 Receivables 8 18,409 101,005 and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from Investments 9 245,547 211,017 fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, Other assets 10 1,801 1,900 misrepresentations, or the override of internal control. TOTAL ASSETS 291,130 340,351 • 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 LIABILITIES • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors. Murabaha financing 11 37,299 14,076 Accrued expenses and other liabilities 12 28,929 32,771 • Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant Payable on acquisition of investments 13 - 86,656 doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are TOTAL LIABILITIES 66,228 133,503 required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, 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 EQUITY going concern. Share capital and premium 15 183,344 173,867 • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the Reserves 41,558 32,981 disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a TOTAL EQUITY 224,902 206,848 manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities TOTAL EQUITY AND LIABILITIES 291,130 340,351 within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. 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.

Abdulaziz Hamad Aljomaih Atif A. Abdulmalik Partner’s Registration No. 45 Chairman of the Board of Directors Chief Executive Officer and Director 2 September 2019 Manama, Kingdom of Bahrain

The attached explanatory notes 1 to 26 form part of these consolidated financial statements. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Arcapita Group Holdings Limited Arcapita Group Holdings Limited Consolidated Statement of Profit or Loss Consolidated Statement of Comprehensive Income For the year ended 30 June 2019 For the year ended 30 June 2019

30 31

2019 2018 2019 2018 Note USD ‘000 USD ‘000 USD ‘000 USD ‘000

OPERATING INCOME NET PROFIT FOR THE YEAR 21,902 12,422 Income from investments 17 45,041 18,990 Fee and other income 18 9,050 18,721 Other comprehensive income to be reclassified to profit or loss in subsequent periods: Total operating income 54,091 37,711 Exchange differences arising from translation of foreign operations (23) 2 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 21,879 12,424 OPERATING EXPENSES Staff compensation and benefits (15,936) (13,613) General and administration expenses (8,950) (7,0 03) Professional and consultancy fees (5,574) (3,391) Financing cost (1,734) (1,279) Total operating expenses (32,194) (25,286) Net operating income 21,897 12,425

Foreign exchange loss 5 (3) NET PROFIT FOR THE YEAR 21,902 12,422

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. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

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 2019 For the year ended 30 June 2019

32 33

Share capital and premium Reserves Total 2019 2018 Un- share Foreign Note USD ‘000 USD ‘000 allocated capital currency Share Share AEIP and Retained translation Total Total capital premium shares premium earnings reserve reserves equity OPERATING ACTIVITIES USD ‘000 USD ‘000 USD ‘000 USD ‘000 USD ‘000 USD ‘000 USD ‘000 USD ‘000 Net profit for the year 21,902 12,422 Adjustment for non-cash items: As at 1 July 2018 16 180,019 (6,168) 173,867 33,030 (49) 32,981 206,848 Fair value gain on investments at FVTPL (37,165) (14,320) Net profit for the year - - - - 21,902 - 21,902 21,902 Financing cost 1,734 1,279 Exchange differences arising Operating loss before changes in operating assets and liabilities (13,529) (619) from translation of foreign operations - - - - - (23) (23) (23) Changes in operating assets and liabilities: Total comprehensive income for the year - - - - 21,902 (23) 21,879 21,879 Investments (8,365) (127,985) Issue of share capital - 2,826 - 2,826 - - - 2,826 Receivables 82,596 (35,327) Issue of bonus shares 1 6,650 - 6,651 (6,651) - (6,651) - Other assets 99 (436) Dividends paid - - - - (6,651) - (6,651) (6,651) Accrued expenses and other liabilities (3,865) 21,124 Balance as at 30 June 2019 17 189,495 (6,168) 183,344 41,630 (72) 41,558 224,902 Payable on acquisition of investments 13 (86,656) 54,022 Cash used in operations (29,720) (89,221) Share capital and premium Reserves Financing cost paid (1,643) (1,317) Total Net cash flows used in operating activities (31,363) (90,538) Un- share Foreign allocated capital currency Share Share AEIP and Retained translation Total Total FINANCING ACTIVITIES capital premium shares premium earnings reserve reserves equity Proceeds from Murabaha financing 34,132 - USD ‘000 USD ‘000 USD ‘000 USD ‘000 USD ‘000 USD ‘000 USD ‘000 USD ‘000 Proceeds from issuance of share capital 15 2,826 77,257 Dividends paid (6,651) (7,342) As at 1 July 2017 10 102,768 (6,168) 96,610 27,950 (51) 27,899 124,509 Net cash flows from financing activities 30,307 69,915 Net profit for the year - - - - 12,422 - 12,422 12,422 Exchange differences arising NET DECREASE IN CASH AND CASH EQUIVALENTS (1,056) (20,623) from translation of foreign Cash and cash equivalents at the beginning of the year 26,429 47,052 operations - - - - - 2 2 2 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 7 25,373 26,429 Total comprehensive income for the year - - - - 12,422 2 12,424 12,424 Non - cash transactions Issue of share capital 6 77,251 - 77,257 - - - 77,257 During the year ended 30 June 2019, USD 11,000 thousand (2018: USD 7,000 thousand) of the Murabaha financing Dividends paid - - - - (7,342) - (7,342) (7,342) facility was settled through the assignment of investments from the Group’s investment portfolio. As these are non- cash transactions they are not reflected in this consolidated cash flow statement. Balance as at 30 June 2018 16 180,019 (6,168) 173,867 33,030 (49) 32,981 206,848

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. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Arcapita Group Holdings Limited Notes to the Consolidated Financial Statements 30 June 2019

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1 ORGANISATION AND ACTIVITIES 3 BASIS OF CONSOLIDATION (continued) Arcapita Group Holdings Limited (the “Company”) was incorporated in the Cayman Islands on 30 December 2013 as an Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the exempt limited liability company. The registered office of the Company is at P.O. Box 1111, Century Yard, Cricket Square, parent of the Group and to non-controlling interest (NCI), even if this results in NCI having a deficit balance. When Grand Cayman, Cayman Islands. The Company and its subsidiaries (together the “Group”) provide alternative Islamic necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with financial products. 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. These consolidated financial statements were approved and authorised for issue by the Board of Directors on 2 September 2019. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it: 2 BASIS OF PREPARATION - Derecognises the assets (including goodwill) and liabilities of the subsidiary; The consolidated financial statements have been prepared under the historical cost basis, except for investments that - Derecognises the carrying amount of any non-controlling interests; have been measured at fair value. The consolidated financial statements have been presented in US Dollars being the functional currency of the Group and all values are rounded to the nearest USD thousand (USD ‘000), except when - Derecognises the cumulative translation differences recorded in equity; otherwise indicated. - Recognises the fair value of the consideration received; The consolidated financial statements have been prepared in accordance with International Financial Reporting - Recognises the fair value of any investment retained; Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). - Recognises any surplus or deficit in the statement of profit or loss; and 3 BASIS OF CONSOLIDATION - Reclassifies the parent’s share of components previously recognised in OCI to profit or loss or retained earnings, as The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 30 appropriate, as would be required if the Group had directly disposed of the related assets or liabilities. June 2019. Subsidiary companies The financial statements of subsidiaries are prepared using consistent accounting policies. The Group has utilised the “investment entity” exemption for investment in subsidiaries held for sale in the normal course of business. The The following are the principal subsidiaries of the Company and are consolidated in these financial statements. investments are carried at fair value through profit or loss (FVTPL). Year of Country of Control is achieved when the Group is exposed, or has rights, to, variable returns from its involvement with the investee Subsidiary Ownership Incorporation Incorporation and has the ability to affect those returns through its power over the investee. Specifically the Group controls the investee if, and only if, the Group has: - Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the AIM Group Limited 100% 2013 Cayman Islands investee); The primary activity of AIM Group Limited is to provide asset management and administrative services. - Exposure, or rights, to variable returns from its involvement with the investee; and Arcapita Investment Limited 100% 2015 Cayman Islands - The ability to use its power over the investee to affect its returns. The primary activity of Arcapita Investment Limited is to hold the investments of the Group. Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant Arcapita Management Limited 100% 2015 Cayman Islands facts and circumstances in assessing whether it has power over an investee, including: The primary activity of Arcapita Management Limited is to administer or manage the Group’s investment structure companies. - The contractual arrangement with the other vote holders of the investee; Arcapita Investment Partners Limited 100% 2015 Cayman Islands - Rights arising from other contractual arrangements; and The primary activities of Arcapita Investment Partners Limited is - The Group’s voting rights and potential voting rights. to structure Islamically compliant investment products and act as placement agent. 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 Arcapita Cayman SPE Limited 100% 2014 Cayman Islands over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses The primary activity of Arcapita Cayman SPE Limited is to act as a of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the deposit agent to the investors of the Group. date the Group gains control until the date the Group ceases to control the subsidiary. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Arcapita Group Holdings Limited Notes to the Consolidated Financial Statements (continued) 30 June 2019

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3 BASIS OF CONSOLIDATION (continued) 3 BASIS OF CONSOLIDATION (continued) Investment entity (continued) Subsidiary Companies (continued) The Group’s management has concluded that the Group meets the additional characteristics of an investment entity in Year of Country of that it has more than one investor; more than one investment; and the investments are predominantly in the form of Subsidiary Ownership Incorporation Incorporation equities and similar securities. The Group concluded that it meets the definition of an investment entity and has therefore recorded its investment in Arcapita Investment Advisors UK Limited 100% 2013 United Kingdom subsidiaries held for sale at FVTPL. Following is the list of unconsolidated subsidiaries. The primary activities of Arcapita Investment Advisors UK Limited are to source investment opportunities in Europe and provide Effective ownership investment advisory services. of Arcapita & Country of Unconsolidated subsidiaries Co-investors incorporation Arcapita Investment Management US Inc. 100% 2013 United States of The primary activity of Arcapita Investment Management US Inc. is America to provide advisory services with respect to investment opportunities Senior Living VI Operator Holdings LLC 100% USA in the United States of America. ALP III Logistics SPC 100% UAE Arcapita Investment Management Singapore Pte Limited 100% 2013 Singapore Weston Ind II Operator Holdings LLC 95% USA The primary activity of Arcapita Investment Management Singapore Pte Limited is to source investment opportunities in Asia and to Weston Ind I Operator Holdings LLC 95% USA provide financial advisory services to its related companies. Senior Living Investment Holdings LLC 95% USA The Group’s ownership in the aforementioned subsidiaries has not changed from the previous year ended 30 June 2018. Senior Living VII Holding Company LLC 89% USA MC Sign LLC 87% USA Investment entity NuYu For Sports L.L.C 80% UAE Entities that meet the definition of an investment entity within IFRS 10 Consolidated financial statements (IFRS 10) are required to measure their subsidiaries held for sale under the ordinary course of business at FVTPL rather than AULP Investment L.L.C. 75% UAE consolidate them. The criteria which define an investment entity are, as follows: ALP Investment L.L.C 65% UAE - An entity that obtains funds from one or more investors for the purpose of providing those investors with NAS United Healthcare Services LLC 61% UAE investment services; 4 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES - An entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and The preparation of these consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the consolidated financial statements. However, uncertainty about - An entity that measures and evaluates the performance of substantially all of its investments on a fair value basis. these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount The Group raises commitment from a number of investors in order to raise capital to invest in private equity investment of the asset or liability affected in future periods. Significant judgements applied in the preparation of the consolidated or to place its acquired investment to investors. financial statements are given below: The Group provides investment management services to investors which include investment in Islamic compliant Going concern equities, fixed income securities, private equity and real estate investments for the purpose of returns in the form of capital appreciation and investment income. 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 the Group has the resources to continue in business for the foreseeable future. Furthermore, the Board of The Group reports to management via internal management reports and to its investors via investment reports on a fair Directors is not aware of any material uncertainties that may cast significant doubt about the Group’s ability to continue value basis as agreed under the private placement memorandum. All such investments are reported at fair value to the as a going concern. Therefore, the consolidated financial statements are prepared on a going concern basis. extent allowed under IFRS in the Group’s consolidated financial statements. The Group does not intend to hold such investments indefinitely and has an exit strategy for all such investments. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

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4 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (continued) 5 NEW AND AMENDED STANDARDS AND INTERPRETATIONS (continued) IFRS 9 Financial instruments (IFRS 9) Fair value of financial instruments Classification and measurement 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 Having implemented IFRS 9, the Group has concluded that all assets except for the Group’s private equity and real estate orderly transaction between market participants at the measurement date. investments are measured at amortised cost under IFRS 9. All private equity and real estate investment continue to be The Group’s entire investment portfolio falls under level 3 of the fair value hierarchy. The Group uses various valuation carried at FVTPL. techniques which are based on unobservable market inputs to determine the fair value of such investments. For an explanation of how the Group classifies financial assets and liabilities under IFRS 9, refer respective sections in The Group engages internal valuation experts to perform the valuation of certain investments. The third party valuers note 6. and the internal valuation team use methods such as sales comparison or the capitalisation of future cash streams of Impairment of financial assets the underlying asset by using the prevailing capitalisation rate for similar properties or similar geographies. The Group and valuation experts apply their judgement in determining the appropriate valuation techniques and considerations Overview of unobservable valuation inputs used in valuation models which includes capitalisation rates, discount rates, multiples The standard replaced IAS 39’s incurred loss approach with a forward-looking expected credit loss (ECL) approach for and comparable assets sale transactions. The input to these models is derived from observable markets where available, non-impaired exposures. The Group is required to record an allowance for expected losses for all financial assets subject but where this is not feasible, degree of judgement is required in determining assumptions used in these models. Changes to credit risk not held at FVTPL. The allowance is based on the ECL associated with the probability of default in the next in assumptions used in the models could affect the reported fair value of financial assets and liabilities. twelve months unless there has been a significant increase in credit risk since origination, in which case, the allowance is based on the probability of default over the life of the asset. 5 NEW AND AMENDED STANDARDS AND INTERPRETATIONS Under IFRS 9, credit losses are recognised earlier than under IAS 39. For an explanation of how the Group applies the The accounting policies adopted are consistent with those of the previous financial year, except for the following impairment requirements of IFRS 9, see respective section in note 6. IASB’s new and amended standards and interpretations which are effective as of 1 July 2018. The adoption of these There were no adjustments to opening retained earnings on adoption of IFRS 9. standards and interpretations did not have any material effect on the Group’s financial position, financial performance or disclosures. IFRS 7(revised) Financial instruments: Disclosures (IFRS 7R) To reflect the differences between IFRS 9 and IAS 39, IFRS 7 Financial instruments: Disclosures was updated and the IFRS 9 Financial instruments (IFRS 9) Group has adopted it, together with IFRS 9, for the year beginning 1 January 2018. Introduction IFRS 15 Revenue from Contracts with Customers (IFRS 15) In July 2014, the IASB issued IFRS 9, the standard that replaces IAS 39 Financial instruments: recognition and The Group adopted IFRS 15 resulting in a change in the revenue recognition policy of the Group in relation to its measurement (IAS 39) for annual periods beginning on or after 1 January 2018. The Group has implemented IFRS 9 contracts with customers. effective from 1 July 2018 and detailed below is the impact on the Group with respect to classification and measurement and impairment elements of IFRS 9. Since the Group does not enter into derivative contracts, hedge accounting aspect IFRS 15 outlines a single comprehensive model of accounting for revenue arising from contracts with customers and had no impact. supersedes current revenue guidance, which is found currently across several standards and interpretations within IFRS. It established a new five-step model that are applied to revenue arising from contracts with customers. Under Classification and measurement IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in From a classification and measurement perspective, the new standard requires all financial assets, except equity exchange for transferring goods or services to a customer. instruments and derivatives, to be assessed based on a combination of the entity’s business model for managing the assets and the instruments’ contractual cash flow characteristics. The IAS 39 measurement categories are replaced by: The Group has opted for the modified retrospective application permitted by IFRS 15 upon adoption of the new standard. fair value through profit or loss (FVTPL), fair value through other comprehensive income (FVOCI), and amortised cost. Modified retrospective application also requires the recognition of the cumulative impact of adoption of IFRS 15 on IFRS 9 also allows entities to continue to irrevocably designate instruments that qualify for amortised cost or FVOCI as all contracts as at 1 July 2018 in equity. There were no adjustments to opening retained earnings and other account FVTPL, if doing so eliminates or significantly reduces a measurement or recognition inconsistency. balances on the adoption of IFRS 15. The accounting for financial liabilities largely remains the same as the requirements of IAS 39, except for the treatment IFRIC Interpretation 22 Foreign currency transactions and advance considerations of gains or losses arising from an entity’s own credit risk relating to liabilities designated at FVTPL. Such movements are The Interpretation clarifies that, in determining the spot exchange rate to use on initial recognition of the related presented in OCI with no subsequent reclassification to the statement of profit or loss, unless an accounting mismatch in asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating profit or loss would arise. to advance consideration, the date of the transaction is the date on which an entity initially recognises the non- monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine the date of the transactions for each payment or receipt of advance consideration. This Interpretation does not have any impact on the Group’s consolidated financial statements. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

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6 SIGNIFICANT ACCOUNTING POLICIES 6 SIGNIFICANT ACCOUNTING POLICIES (continued)

6.1 Cash and cash equivalents 6.6 Financial instruments (continued) Cash and cash equivalents comprise of cash, nostro balances and a murabaha placement with a financial institution Financial instruments - initial recognition (continued) with maturity of 3 months or less. Cash and cash equivalents are initially measured at their fair value and subsequently Financial liabilities are classified, at initial recognition, as financial liabilities at FVTPL or payables as appropriate. remeasured at amortised cost. Financial liabilities of the Group comprise of murabaha financing, accrued expenses and other liabilities and payable on acquisition of investments. 6.2 Receivables Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable Receivables are recognised when the obligation is established. These are carried at cost less ECLs, if any. to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on 6.3 Premises and equipment initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at Premises and equipment are stated at cost, less accumulated depreciation and provision for impairment in value, if any. FVTPL are recognised immediately in the consolidated statement of profit or loss. Purchases or sales of financial assets or liabilities that require delivery of assets within a time frame established by 6.4 Income regulation or convention in the marketplace (regular way trades) are recognised on the trade date, i.e., the date that the Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue Group commits to purchase or sell the asset or liability. can be reliably measured. Financial assets - subsequent measurement Fee income All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, The fee income represents management and performance fee the Group earns for investment placement, investment depending on the classification of the financial assets. structuring and arranging, asset management and administrative services rendered in accordance to the contractual i) Debt type instruments terms agreed between the parties. Fees are recognised as the services are performed. The Group classifies all of its debt type instruments that meet the following conditions under amortised cost Placement and arrangement fee category. The Group earns arrangement and placement fees for rendering services during the acquisition and placement of - the asset is held within a business model whose objective is to hold assets in order to collect contractual cash investments. These fees are recognised when earned based on the binding signed share purchase agreements between flows; and the Group and the investors. - the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of Dividend income principal and profit on the principal amount outstanding. Dividends from investments in equity securities are recognised when the right to receive the payment is established. These are remeasured at amortised cost less ECLs. Amortised cost is calculated based on effective interest rate (EIR) 6.5 Expenses method as explained below. Expenses are recognised as the services are received. Amortised cost and EIR method The EIR method is a method of calculating the amortised cost of a debt instrument and of allocating interest income 6.6 Financial instruments over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the EIR, transaction costs and other A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, instrument of another entity. Financial assets and financial liabilities are recognised when a group entity becomes a to the net carrying amount on initial recognition. party to the contractual provisions of the instrument. Interest income is recognised using EIR method for debt instruments measured subsequently at amortised cost. Financial instruments - initial recognition Interest income is recognised in the consolidated statement of profit or loss. Financial assets are classified, at initial recognition, as financial assets at FVTPL, amortised cost and FVOCI as appropriate. Financial assets of the Group comprise of investments at FVTPL, receivables and cash and cash equivalents and other assets. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

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6 SIGNIFICANT ACCOUNTING POLICIES (continued) 6 SIGNIFICANT ACCOUNTING POLICIES (continued)

6.6 Financial instruments (continued) 6.6 Financial instruments (continued) ii) Equity instruments ii) Equity instruments Equity instruments are instruments that meet the definition of equity from the issuer’s perspective, i.e. instruments Derecognition (continued) do not contain a contractual obligation to pay and that evidence a residual interest in the issuer’s net assets. (i) Financial assets (continued) Examples of equity instruments include basic ordinary shares. On derecognition of a financial asset that is classified as FVOCI, the cumulative gain or loss previously The Group measures all equity instruments at FVTPL, except where the Group’s management has elected, at initial accumulated in the cumulative changes in fair values of financial assets at FVOCI is not reclassified to recognition, to irrevocably designate an equity investment at FVOCI. The Group has not designated any of its consolidated statement of profit or loss, but is reclassified to retained earnings. investments at FVOCI. On derecognition of a financial asset measured at FVTPL, the difference between the asset’s carrying amount The investments classified as FVTPL represent the Group’s co-investments in private equity investment and real and the sum of the consideration received and receivable is recognised in consolidated statement of profit or estate investment. These investments are initially recorded at acquisition cost (being the initial fair value) and are loss. re-measured to fair value at each reporting date, with resulting unrealised gains or losses being recorded as fair (ii) Financial liabilities value changes in the consolidated statement of profit or loss. The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, Financial liabilities subsequently measured at amortised cost cancelled or they expire. The difference between the carrying amount of the financial liability derecognised Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortised cost and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently recognised in the consolidated statement of profit or loss. measured at amortised cost are determined based on the EIR method. Interest expense is included in the ‘financing cost’ line item in the consolidated statement of profit or loss. 6.7 Impairment Derecognition The Group recognises loss allowances or ECL on financial assets subject to credit risk excluding investments classified as FVTPL. These are recorded in the consolidated statement of profit or loss. (i) Financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is The Group recognises loss allowances for ECL on financial instruments that are not measured at FVTPL. For cash and derecognised when: cash equivalents, the Group calculates ECL through general approach, in which it would recognise loss allowances for ECL equal to 12-months ECL, except for financial instruments on which credit risk has increased significantly since their - the rights to receive cash flows from the asset have expired; or initial recognition and are not determined to have low credit risk at the reporting date, in which case the Group would - the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation recognise lifetime ECL. to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ 12-month ECLs are the portion of ECL that result from default events on a financial instrument that are possible within arrangement; and either: the 12 months after the reporting date. The key inputs into the measurement of ECL are the term structure of the - the Group has transferred substantially all the risks and rewards of the asset, or following variables: i) probability of default (PD), ii) loss given default (LGD), and iii) exposure at default (EAD). - the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has The Group has calculated the ECL allowance on its financial assets as of 1 July 2018 and 30 June 2019 and is considered transferred control of the asset. as immaterial, accordingly, it has not been reflected in these consolidated financial statements separately. When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass- 6.8 Provisions through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a In that case, the Group also recognises an associated liability. The transferred asset and the associated liability reliable estimate can be made of the amount of the obligation. The expense relating to any provision is presented in the are measured on a basis that reflects the rights and obligations that the Group has retained. consolidated statement of profit or loss net of any reimbursement. On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in consolidated statement of profit or loss. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

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6 SIGNIFICANT ACCOUNTING POLICIES (continued) 6 SIGNIFICANT ACCOUNTING POLICIES (continued)

6.9 Foreign currencies 6.14 Significant accounting judgements, estimates and assumptions Transactions in foreign currencies are initially recorded in the functional currency at the rate of exchange prevailing The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates at the date of the transaction. and assumptions that affect the reported amount of revenues, expenses, assets and liabilities, and the accompanying disclosures, as well as the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could Monetary assets and liabilities in foreign currencies are translated into USD at exchange rates prevailing at the result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future consolidated statement of financial position date. Any gains or losses are recognised in the consolidated statement of periods. In the process of applying the Group’s accounting policies, management has made the following judgements profit or loss. and assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next exchange rates as at the dates of the initial recognition. Non-monetary items measured at fair value in a foreign financial year. Existing circumstances and assumptions about future developments may change due to circumstances currency are translated using the exchange rates at the date when the fair value is determined. Exchange gains and beyond the Group’s control and are reflected in the assumptions if and when they occur. Items with the most significant losses on non-monetary items classified as “fair value through profit or loss” are taken to the consolidated statement effect on the amounts recognised in the consolidated financial statements with substantial management judgement of profit or loss and for items classified as “fair value through OCI” such differences are taken to the consolidated and/or estimates are collated below with respect to judgements/estimates involved. statement of comprehensive income. Going concern The Group’s management has made an assessment of the Group’s ability to continue as a going concern and is satisfied 6.10 Offsetting that the Group has the resources to continue in business for the foreseeable future. Furthermore, the management is Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of not aware of any material uncertainties that may cast significant doubt upon the Group’s ability to continue as a going financial position if and only if there is a currently enforceable legal right to offset the recognised amounts and there concern. Therefore, the consolidated financial statements continue to be prepared on the going concern basis. is an intention to settle on a net basis or to realise the assets and settle the liabilities simultaneously. Fair value of financial instruments Where the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot 6.11 Payables, accruals and provisions be derived from active markets, they are determined using a variety of valuation techniques that include the use of Provisions are made when the Group has a present obligation as a result of a past event, and it is probable that an mathematical models. The inputs to these models are derived from observable market data where possible, but if this is outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can not available, judgement is required to establish fair values. Refer to note 23 for further detailed disclosures. be made of the amount of the obligation. 6.15 Policies applicable prior to 1 July 2018 (Prior to adoption of IFRS 9) 6.12 Share based payments 6.15.1 Financial instruments Employees of the Group receive remuneration in the form of share-based payments, whereby employees render A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or services as consideration for equity instruments. The cost of equity-settled transactions is determined by the fair value equity instrument of another entity. at the date when the grant is made using an appropriate valuation model. That cost is recognised as employee benefits 6.15.1.1 Financial assets expense in the consolidated statement of profit or loss, together with a corresponding increase in equity. Financial assets comprise of cash and cash equivalents, receivables, investments and other assets.

6.13 Operating lease commitments Initial recognition The Group classifies its financial assets into two categories: at fair value through profit or loss and The Group has entered into property leases which are classified as operating leases. The Group has determined, based amortised cost. The classification depends on the purpose for which the financial assets were acquired on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major or transferred to the Group. 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 the property, that it therefore does not retain all the significant risks and rewards Financial assets are initially recognised at fair value plus transaction costs that are directly attributable of ownership of these properties and accounts for the contracts as operating leases. to its acquisition or issue except in the case of financial assets recorded at fair value through profit or loss. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

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6 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 6 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

6.15 Policies applicable prior to 1 July 2018 (Before adoption of IFRS 9) (continued) 6.15 Policies applicable prior to 1 July 2018 (Before adoption of IFRS 9) (continued) 6.15.1 Financial instruments (continued) 6.15.1 Financial instruments (continued) 6.15.1.1 Financial assets (continued) 6.15.1.1 Financial assets (continued) Subsequent measurement Impairment of financial assets The Group assesses, at each reporting date, whether there is any objective evidence that a financial Financial assets at FVTPL asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed Financial assets designated at FVTPL upon inception are those that are not held for trading but to be impaired if, and only if, there is objective evidence of impairment as a result of one or more are managed and their performance evaluated on a fair value basis in accordance with the Group’s events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss objectives. The Group’s objectives require the Board of Directors to evaluate information about these event has an impact on the estimated future cash flows of the financial asset or the group of financial assets on a fair value basis together with other related financial information. Subsequent to initial assets that can be reliably estimated. Evidence of impairment may include indications that the debtor recognition, financial assets at FVTPL are measured at fair value. Gains and losses arising from changes is experiencing significant financial difficulty, default or delinquency in interest or principal payments, in the fair value are recognised in the consolidated statement of profit or loss. the probability that they will enter bankruptcy or other financial reorganisation and where observable Financial assets at amortised cost data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in These are non-derivative financial assets that are not quoted in an active market and are stated at fair arrears or economic conditions that correlate with defaults. value plus transaction costs, if any. After initial measurement, such financial assets are subsequently 6.15.1.2 Financial liabilities 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 future cash payments or receipts Initial recognition and measurement through the expected life of the financial asset or liability to the carrying amount of the financial asset Financial liabilities are classified, at initial recognition, as loans and borrowings and payables. All or liability. financial liabilities are recognised initially at fair value, net of directly attributable transaction costs. An allowance for doubtful receivables is made when collection of the full amount is no longer probable. The Group’s financial liabilities include payable on acquisition of investments, murabaha financing, Receivables are written off when there is no possibility of recovery. accrued expenses and other liabilities. Derecognition Subsequent measurement After initial recognition, financial liabilities are subsequently measured at amortised cost using the A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial effective interest rate method. Gains and losses are recognised in the consolidated statement of profit assets) is derecognised when: or loss, when the liabilities are derecognised, as well as through the effective interest rate amortisation (i) the right to receive cash flows from the asset have expired; or process. (ii) the Group has transferred its rights to receive cash flows from the asset or has assumed an Derecognition obligation to pay the received cash flows in full without material delay to a third party under a A financial liability is derecognised when the obligation under the liability is discharged or cancelled or ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks expires. and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the When an existing financial liability is replaced by another from the same lender on substantially risks and rewards of the asset, but has transferred control of the asset. different terms, or the terms of an existing liability are substantially modified, such an exchange or When the Group has transferred its rights to receive cash flows from an asset or has entered into a modification is treated as a derecognition of the original liability and the recognition of a new liability, pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of and the difference in the respective carrying amounts is recognised in the consolidated statement of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of profit or loss. the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an 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. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

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6 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 6 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

6.16 Standards issued but not yet effective 6.16 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 Annual improvements 2015-2017 cycle (issued in December 2017) are listed below. This listing is of standards and interpretations issued, which the Group reasonably expects to be These improvements include: applicable at a future date. The Group intends to adopt these standards when they become effective. IFRS 3 Business combinations IFRS 16 Leases (IFRS 16) The amendments clarify that, when an entity obtains control of a business that is a joint operation, it applies the The IASB issued the new standard for accounting for leases - IFRS 16 Leases in January 2016. The new standard does requirements for a business combination achieved in stages, including remeasuring previously held interests in the not significantly change the accounting for leases for lessors. However, it does require lessees to recognise most leases assets and liabilities of the joint operation at fair value. In doing so, the acquirer remeasures its entire previously held on their balance sheets as lease liabilities, with the corresponding right-of-use assets. Lessees must apply a single model interest in the joint operation. for all recognised leases, but will have the option not to recognise ‘short-term’ leases and leases of ‘low-value’ assets. An entity applies those amendments to business combinations for which the acquisition date is on or after the beginning Generally, the profit or loss recognition pattern for recognised leases will be similar to today’s finance lease accounting, of the first annual reporting period beginning on or after 1 January 2019, with early application permitted. These with interest and depreciation expense recognised separately in the statement of profit or loss. amendments will apply on future business combinations of the Group. IFRS 16, which is effective for annual periods beginning on or after 1 January 2019, requires lessees and lessors to IAS 12 Income taxes make more extensive disclosures than under IAS 17 Leases. The amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or The Group plans to apply IFRS 16 on 1 July 2019, using a modified retrospective approach. Therefore, the cumulative events that generated distributable profits than to distributions to owners. Therefore, an entity recognises the income effect of adopting IFRS 16 will be recognised as an adjustment to the opening balance of retained earnings at 1 January tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity 2019, with no restatement of comparative information. The Group plans to apply the practical expedient to grandfather originally recognised those past transactions or events. the definition of a lease on transition which means that it will apply IFRS 16 to all contracts entered into before 1 July An entity applies those amendments for annual reporting periods beginning on or after 1 January 2019, with early 2019. application is permitted. When an entity first applies those amendments, it applies them to the income tax consequences The Group has performed an impact assessment of IFRS 16 and it expects that on adoption its assets and liabilities will of dividends recognised on or after the beginning of the earliest comparative period. Since the Group’s current practice increase by USD 1,793 thousand. is in line with these amendments, the Group does not expect any effect on its consolidated financial statements. IFRIC Interpretation 23 Uncertainty over Income Tax Treatment IAS 23 Borrowing costs The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects The amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop the application of IAS 12 and does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are include requirements relating to interest and penalties associated with uncertain tax treatments. The Interpretation complete. specifically addresses the following: An entity applies those amendments to borrowing costs incurred on or after the beginning of the annual reporting • Whether an entity considers uncertain tax treatments separately; period in which the entity first applies those amendments. An entity applies those amendments for annual reporting periods beginning on or after 1 January 2019, with early application permitted. Since the Group’s current practice is in The assumptions an entity makes about the examination of tax treatments by taxation authorities; • line with these amendments, the Group does not expect any effect on its consolidated financial statements. • How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates; and

• How an entity considers changes in facts and circumstances. An entity must determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty should be followed. The interpretation is effective for annual reporting periods beginning on or after 1 January 2019, but certain transition reliefs are available. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

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7 CASH AND CASH EQUIVALENTS 9 INVESTMENTS 30 June 30 June 30 June 30 June 2019 2018 2019 2018 Note USD ‘000 USD ‘000 USD ‘000 USD ‘000

Cash and balances with banks 25,373 5,416 Private equity 165,810 117,791 Murabaha with a financial institution 7.1 - 21,012 Real estate 79,737 93,226 Cash in hand - 1 245,547 211,017 25,373 26,429 9.1 The investments are classified at FVTPL. The Group has invested through its structured entities in real estate portfolios 7.1 This represented a short term murabaha placement with a bank, rated ‘A’ by Standard & Poor’s. This murabaha carried and private equity investments in the Middle East and in the United States of America. a profit rate of 2.0% per annum and matured in July 2018. 10 OTHER ASSETS 8 RECEIVABLES 30 June 30 June 30 June 30 June 2019 2018 2019 2018 USD ‘000 USD ‘000 Note USD ‘000 USD ‘000 Equipments 1,216 1,267 Advances to investment companies 8.1 9,051 2,324 Prepayments 281 320 Investment yield / dividend receivable 8.2 2,531 2,069 Others 304 313 Receivable from employee incentive programs 8.3 2,285 3,535 1,801 1,900 Fee receivable 2,563 1,919 11 MURABAHA FINANCING Other receivables 1,979 158 Deal subscription receivable 8.4 - 91,000 During 2017, the Group entered into a Murabaha Financing Facility (the “Facility”) with Strategic Investors Facility Limited (“SIF”), a Cayman Islands limited liability company owned by a group of shareholders and investors. Under this 18,409 101,005 facility, AGHL can utilise financing of up to USD 75 million. As of 30 June 2019, USD 37 million (2018: USD 14 million) is outstanding under the Facility. The Facility will mature on 1 March 2022 unless SIF exercises an option at any time 8.1 This represents interest free advances to investment structure entities and will be recovered from distributions or exit prior to 1 December 2019 to require a reduced maturity date of 1 March 2020 for all or a part of the Facility. The Facility proceeds. is unsecured and Arcapita Investment Limited, a wholly owned subsidiary of the Group, which holds the investments of the Group, has provided a guarantee with respect to the entire facility amount outstanding. 8.2 This represents dividend income that the Group is entitled to receive from its structured entities. These are expected to be received over the short term.

8.3 This largely represents amounts advanced to the Arcapita Investment Participation Program on an interest free basis for an allocation in the Group’s investment products. Employees have been provided an opportunity to acquire investment products in cash from this allocation. Unutilised allocations will be returned to the Group and the receivable will be reversed. These are collected over the short term.

8.4 Deal subscription receivable represent amounts due from investors for participation in the Group’s investment products. These arise in the normal course of the Group’s placement activities and are recorded along with placement fee when the investor signs a binding agreement confirming their participation in an investment product. These are collected over the short term. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Arcapita Group Holdings Limited Notes to the Consolidated Financial Statements (continued) 30 June 2019

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12 ACCRUED EXPENSES AND OTHER LIABILITIES 14 RELATED PARTY TRANSACTIONS (continued) 30 June 30 June Balances with related parties as of the date of the consolidated statement of financial position are: 2019 2018 30 June 30 June Note USD ‘000 USD ‘000 2019 2018 Note USD ‘000 USD ‘000 Due to investment companies 24,912 29,715 Employee related payables 14.3 1,815 1,628 Assets Payable to an affiliate 474 731 Advances to investment companies 9,051 2,324 Payable to board members 500 400 Investment yield / dividend receivable from investment companies 2,531 2,069 Payable for charitable activities 455 - Management fee receivable from investment companies 1,879 965 Accrued expenses and supplier payables 286 212 Deal subscription receivable - 37,000 Other liabilities 487 85 28,929 32,771 Liabilities 13 PAYABLE ON ACQUISITION OF INVESTMENTS Murabaha financing 14.2 37,299 14,076 This represented obligations of the Group with respect to three investments acquired in June 2018 and settled during Payable to investment companies 24,912 29,715 the year ended 30 June 2019. Payable to board members 500 400 Payable to key personnel 14.3 39 193 14 RELATED PARTY TRANSACTIONS Payable to an affiliate 14.1 474 731 Related parties represent associated companies, major shareholders, directors and key management personnel of the Group, the Group’s Shari’ah Supervisory Board and entities controlled, jointly controlled or significantly influenced by 14.1 Reimbursement of expenses such parties. Transactions with related parties arise from the ordinary course of business. Pricing policies and terms of these transactions are approved by the Group’s management. The Group and Arcapita Investment Management B.S.C. (c) (“AIM BSC”) are under the common control of the same shareholders and governed by the same Board of Directors. As a result AIM BSC is a related party to the Group. The Group Income and expenses on transactions with related parties included in the consolidated statement of profit or loss: reimburses the expenditures incurred by AIM BSC in providing services to the Group. In the consolidated statement 30 June 30 June of profit or loss for the year ended 30 June 2019, the reimbursement is included within general and administration 2019 2018 expenses, legal and professional expenses, staff compensation and benefit expenses and AEIP expenses. Note USD ‘000 USD ‘000 14.2 Profit rate Income This carries a fixed profit rate of 6.5% per annum up to 1 March 2020 and 7.5% per annum thereafter. Placement income 2,504 6,663 14.3 Payable to key personnel Reversal of placement income (3,601) (6,439) Yield and dividend income from investment companies 7,876 4,670 This represents amounts recovered by the Group from an affiliate, under a fiduciary capacity, on behalf of certain employees and consultants of the Group. The Group collects such amounts on behalf of such employees and consultants Management fee from investment companies 6,054 3,412 as per agreed terms. This amount will not revert to the Group at any point in time. Arrangement fee from investment companies - 1,335

Expenses Reimbursement of expenses with an affiliate 14.1 16,979 14,382 Key management personnel costs 2,056 1,734 Financing cost 14.2 1,734 1,279 Fees to the Board of Directors 500 400 ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

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15 SHARE CAPITAL AND PREMIUM 17 INCOME FROM INVESTMENTS 15.1 Share capital 30 June 30 June 2019 2018 30 June 30 June USD ‘000 USD ‘000 2019 2018 USD ‘000 USD ‘000 Fair value gain on investments at FVTPL 37,165 14,320 Authorised capital Investment yield / dividend income 7,876 4,670 50,000,000 (2018: 50,000,000) ordinary shares with a par value of USD 0.001 per 45,041 18,990 50,000 50,000 share 18 FEE AND OTHER INCOME Issued and paid up capital 30 June 30 June As at 1 July 2019 2018 USD ‘000 USD ‘000 (2019: 16,453,459 shares, 2018: 10,277,778 shares) 16,454 10,278

Management and performance fees 6,264 6,666 Bonus shares issued during the year Placement fees 2,716 10,369 (2019: 509,300 shares, 2018: Nil shares) 509 - Others 70 351 Arrangement fees - 1,335 Shares issued during the year 9,050 18,721 (2019: 232,931 shares, 2018: 6,175,681 shares) 233 6,176 19 ARCAPITA EQUITY INCENTIVE PLAN As at 30 June Arcapita Equity Incentive Plan (AEIP) is an employee share incentive program through which employees may earn (2019: 17,195,690 shares, 2018: 16,453,459 shares) 17,196 16,454 shares in the Company. Investment units comprising of 1,027,778 shares of the Company 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 15.2 Share premium 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. Amounts collected in excess of the par value of the issued share capital during any issue of shares are treated as share premium. This also includes excess of price over the par value in case of bonus shares distributed by the Group. No shares were granted for the year ended 30 June 2019 (2018: nil). Movement during the year 15.3 Unallocated AEIP shares 2019 2018 As detailed in note 19, the Group has an employee share incentive program by the name of Arcapita Equity Incentive in ‘000 in ‘000 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. Number of un-allocated shares outstanding at 30 June 616,666 616,666 16 PROPOSED DIVIDENDS The performance period for the plan expired on 30 June 2018. The Group is in the process of evaluating the program. For the year ended 30 June 2019, the Board of Directors of the Group have proposed a cash dividend of USD 0.45 (2018: Accordingly, the unallocated shares will be held till the time a new performance period is approved by the Board of USD 0.42) per share amounting to USD 7.461 million (2018: USD 6.651 million) and bonus shares of 549,783 shares Directors. (2018: 509,300 shares) for approval by the shareholders at the next annual general meeting. The Board of Directors have priced the bonus shares at USD 13.57 per share (2018: USD 13.06 per share) and authorised a debit to retained earnings of USD 7.461 million (2018: USD 6.651 million) pending approval by shareholders. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Arcapita Group Holdings Limited Notes to the Consolidated Financial Statements (continued) 30 June 2019

56 57

20 COMMITMENTS AND CONTINGENCIES 22 RISK MANAGEMENT (continued) 20.1 Operating lease commitments 22.2 Credit risk 2019 2018 Credit risk is the risk that one party to a financial transaction will fail to discharge an obligation and cause the other USD ‘000 USD ‘000 party to incur a financial loss. The Group’s exposure to credit risk is limited due to minimal lending / placement activity and the fact that there are Operating lease commitments relating to rented premises no investments in financial securities. The Group is exposed to credit risk on its bank balances and receivables. This within one year 518 524 risk is considered minimal as the bank balances are maintained in current accounts with reputable international banks within two to five years 1,592 2,017 with good credit standings. The receivable balances primarily represents receivable from deal subscriptions, investee companies, staff and prepayments to vendors. more than five years - 143 2,110 2,684 22.3 Liquidity risk

21 INVESTOR FUNDS 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 From time to time the Group receives funds from or due to its investors. These funds are placed in a segregated close to its fair value. client account 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 The Group has established a liquidity risk management framework having defined minimum liquid asset requirements, agreements restrict the Group’s access to these funds and requires the consent and instructions of the investors or liquidity monitoring and reporting responsibilities and limits on the extent of leverage and investment underwriting on portfolio companies to transact. As a result the Group does not have legal authority to solely control the funds nor an the Group’s consolidate statement of financial position. The Group’s Asset and Liability Committee (ALCO), supported obligation to the investor and as such these funds are not reflected in the Group’s consolidated financial statements. by the RMD and the Treasury function closely monitor the Group’s actual and forecasted liquidity position and ensures Investor funds as at 30 June 2019 amounted to USD 19.9 million (2018: USD 41.7 million). that the RMC is frequently updated on the Group’s exposure to 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 22 RISK MANAGEMENT statement. The Group’s exposure to funding liquidity risk is low given that the Group maintains minimal balance sheet leverage. 22.1 Introduction The Group has sufficient cash and bank balances available as of 30 June 2019 in order to discharge its financial liabilities The Group adopts an enterprise-wide approach to risk management, with proactive identification and mitigation of the when they fall due. risks 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 Group’s Board approved risk strategy, appetite and policy documents. The overall responsibility for the implementation of a sound risk management framework lies with the Group’s senior management and the Board of Directors. The Group has established an independent Risk Management Department (RMD) that works in co-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 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 responsibilities pertaining to risk management. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Arcapita Group Holdings Limited Notes to the Consolidated Financial Statements (continued) 30 June 2019

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22 RISK MANAGEMENT (continued) 22 RISK MANAGEMENT (continued)

22.3 Liquidity risk (continued) 22.3 Liquidity risk (continued) A maturity profile of assets and liabilities, based on expected maturities, is provided below. As at 30 June 2018 As at 30 June 2019 > 3 months Sub-Total > 1 year > 3 months Sub-Total > 1 year Up to 3 up to up to up to Non-cash Up to 3 up to up to up to Non-cash months 1 year 1 year 5 years items Total months 1 year 1 year 5 years items Total

ASSETS ASSETS Financial assets Financial assets Cash and cash equivalents 26,429 - 26,429 - - 26,429 Cash and cash equivalents 25,373 - 25,373 - - 25,373 Receivables 96,761 2,159 98,920 2,085 - 101,005 Receivables 516 4,756 5,272 13,137 - 18,409 Investments - 100,536 100,536 110,481 - 211,017 Investments 200 36,930 37,130 208,417 - 245,547 Other assets - refundable deposits Other assets - refundable deposits - - - 313 - 313 - - - 304 - 304 with vendors with vendors Total financial assets 123,190 102,695 225,885 112,879 - 338,764 Total financial assets 26,089 41,686 67,775 221,858 - 289,633

Non-financial assets Non-financial assets Prepayments - - - - 320 320 Prepayments - - - - 281 281 Equipments - - - - 1,267 1,267 Equipments - - - - 1,216 1,216 Total assets 123,190 102,695 225,885 112,879 1,587 340,351 Total assets 26,089 41,686 67,775 221,858 1,497 291,130

LIABILITIES LIABILITIES Financial liabilities Financial liabilities Payable on acquisition of investment 46,615 40,041 86,656 - - 86,656 Murabaha financing 167 - 167 37,132 - 37,299 Murabaha financing 76 - 76 14,000 - 14,076 Accrued expenses and other liabilities 5,510 23,116 28,626 303 - 28,929 Accrued expenses and other liabilities 32,771 - 32,771 - - 32,771 Total financial liabilities 5,677 23,116 28,793 37,435 - 66,228 Total financial liabilities 79,462 40,041 119,503 14,000 - 133,503

Net gap 20,412 18,570 38,982 184,423 1,497 224,902 Net gap 43,728 62,654 106,382 98,879 1,587 206,848 ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Arcapita Group Holdings Limited Notes to the Consolidated Financial Statements (continued) 30 June 2019

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22 RISK MANAGEMENT (continued) 22 RISK MANAGEMENT (continued)

22.4 Investment risk 22.6 Operational risk This category relates to risks arising from the Group’s real estate and private equity investment portfolio, and entails Operational risk is the risk of loss arising from systems failure, human error, fraud or external events. When controls market / systematic risks (losses on investments due to changes in market fundamentals) and non-systematic / fail to perform, operational risks can cause damage to reputation, have legal or regulatory implications or lead to investment specific risks. The Group’s objective is to manage and control risk exposures within acceptable parameters, financial loss. The Group minimizes the operational risk by maintaining a strong internal control environment and while optimizing returns. continuous oversight by the Board of Directors. RMD monitors the Group’s investment risk exposures in light of the Group’s risk appetite limits and reports to RMC and 23 CAPITAL MANAGEMENT ARC on a regular basis. Additionally, RMD works closely with the business units to conduct investment risk analysis The primary objective of the Group’s capital management is to ensure that it maintains healthy capital ratios in order to at the individual deal and portfolio level throughout the investment cycle. The analysis focuses on the risk profile of support its business and maximize shareholder value. The Group manages its capital structure and makes adjustments each individual investment and the overall investment portfolio in light of the Group’s risk strategy, appetite, policies to it in line with the changes in operating conditions and the risk characteristics of its activities. and the risk limits and guidelines defined therein. At the pre-acquisition stage, RMD works with business units to undertake pre-acquisition risk analysis based on the 24 FAIR VALUE OF FINANCIAL INSTRUMENTS characteristics of proposed investments. The objective of this analysis is to filter investments at an initial stage and to 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 complement the extensive due diligence undertaken by business units. orderly transaction between market participants at the measurement date. The fair value measurement is based on the Following the acquisition of any investment, business units and RMD periodically perform post-acquisition risk presumption that the transaction to sell the asset or transfer the liability takes place either: analysis to ascertain how the risks of the portfolio change over time and assess the impact in line with the Group’s a) In the principal market for the asset or liability, or risk strategy, appetite, policies and the risk limits and guidelines defined therein. Results of risk analysis are reported b) In the absence of a principal market, in the most advantageous market for the asset or liability. to RMC on a regular basis highlighting portfolio level investment risk exposure, economic capital requirements for investment risk, utilization of investment risk limits and any significant issues in light of the Group’s investment risk The principal or most advantageous market must be accessible by the Group. profile. As part of the Group’s risk appetite framework, ARC is updated regularly on aspects relating to investment risk defined within the risk appetite statement. The Group’s financial instruments have been classified in accordance with their measurement basis as follows: At the time of exiting an investment, RMD and business units (in conjunction with any other departments / functions At cost/ relevant to the exit process) will use appropriate strategies to mitigate risks associated with the exit process and to amortised protect the expected realization proceeds from downside risks (assessed on a case-by-case basis). At FVTPL cost Total 30 June 2019 USD ‘000 USD ‘000 USD ‘000 22.5 Market Risk The Group defines market risk as the risk of losses due to adverse movements in market fundamentals such as profit ASSETS rates, foreign currency exchange rates, equity markets / prices and commodity prices on the Group’s investment Cash and balances with banks - 25,373 25,373 securities (other than the real estate and private equity investment portfolio). Receivables - 18,409 18,409 The Group does not maintain a significant portfolio of investment securities (such as investment in Sukuk, listed equity Investments 245,547 - 245,547 investments) other than the real estate and private equity investment portfolio, and maintains a minimal component of Other assets - refundable deposits with vendors - 304 304 liabilities on its balance sheet. 245,547 44,086 289,633 As of 30 June 2019 and 30 June 2018, the Group had no significant foreign currency exposure.

The Group’s exposure, not including the real estate and private equity investment portfolio, to market risk as defined LIABILITIES above is therefore not significant. Murabaha financing - 37,299 37,299 Systematic and non-systematic risks arising from the real estate and private equity investment portfolio are categorized Accrued expenses and other liabilities - 28,929 28,929 under “Investment risk” that is outlined under note “22.4 Investment risk” in these consolidated financial statements. - 66,228 66,228 ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

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24 FAIR VALUE OF FINANCIAL INSTRUMENTS (continued) 24 FAIR VALUE OF FINANCIAL INSTRUMENTS (continued) At cost/ Movements in level 3 financial instruments measured at fair value amortised The following table shows a reconciliation of the opening and closing amount of level 3 financial assets which are At FVTPL cost Total recorded at fair value: 30 June 2018 USD ‘000 USD ‘000 USD ‘000 30 June 30 June 2019 2018 ASSETS USD ‘000 USD ‘000 Cash and balances with banks - 5,416 5,416 Murabaha with financial institution - 21,012 21,012 Opening balance 211,017 75,712 Receivables - 101,005 101,005 Acquisition of investments 45,188 250,243 Investments 211,017 - 211,017 Fair value adjustments 37,165 14,320 Other assets - refundable deposits with vendors - 285 285 Placement of investments (47,823) (129,258) 211,017 127,718 338,735 245,547 211,017

LIABILITIES Valuation process of the Group Balances with banks represent cash and cash equivalents and are due on demand. The carrying value of these balances Murabaha financing - 21,114 21,114 represents their fair value. Accrued expenses and other liabilities - 32,771 32,771 The recoverability of receivables were determined by the management as part of calculation of ECL. The carrying Payable on acquisition of investment - 86,656 86,656 amounts approximate the fair value of these receivables. - 140,541 140,541 For investments, fair value is determined by reference to valuations by an internal valuation expert. The determination Fair value hierarchy of the fair value of such assets is based on local market conditions. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available Other liabilities and payable to a related party are current in nature and the carrying value of these financial instruments to measure fair value, maximizing the use of relevant observable inputs. represents their fair value. All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to The effect of unobservable inputs on fair valuation the fair value measurement as a whole: 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 2019 are as shown below: Determination of fair value and fair value hierarchy As at 30 June 2019 The Group uses the following hierarchy for determining and disclosing fair value of financial assets and liabilities: Impact on profit or loss Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities; Favorable Unfavorable Unobservable inputs Input Change USD ‘000 USD ‘000 Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and Discount rates 7.50% to 23.83% +/- 10% 14,910 (13,781) Level 3: Techniques which use inputs which have significant effect on the recorded fair value that are not based on observable market data. TV/EV EBITDA multiples 8.5x to 9.5x +/- 10% 13,890 (13,890) EV/EBITDA multiples 11.0x +/- 10% 3,319 (3,319) The investments carried at ‘fair value through profit or loss’ has been classified as level 3 assets. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Arcapita Group Holdings Limited Notes to the Consolidated Financial Statements (continued) Arcapita Group Holdings Limited 30 June 2019 Supplementary Information

64 65

24 FAIR VALUE OF FINANCIAL INSTRUMENTS (continued) Arcapita Group consists of Arcapita Group Holdings Limited (“AGHL”), AGHL’s direct and indirect subsidiaries and Arcapita Investment Management B.S.C. (c) (“Arcapita Bahrain”). The effect of unobservable inputs on fair valuation (continued) AGHL and Arcapita Bahrain currently are owned by the same shareholders in the same shareholding ratios. This is as a As at 30 June 2018 result of contractual arrangements which requires the shareholders of each entity to be identical. The shareholders have to Impact on profit or loss hold their interests in Arcapita Group in the same ratio of AGHL shares to Arcapita Bahrain shares and to appoint identical Favorable Unfavorable members to the Board of Directors in both entities, now and in the future. However, under the requirements of IFRS, in order Unobservable inputs Input Change USD ‘000 USD ‘000 to consolidate the financial position and 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. EV/EBITDA multiples 9.1x to 10.5x +/- 10% 10,393 (10,393) Therefore, in order to provide supplementary information to the shareholders we provide below a summarised pro-forma Discount rates 7.25% to 8.40% +/- 10% 3,037 (2,977) consolidated statement of financial position and profit or loss. Arcapita group pro-forma statement of financial position 25 SEGMENTAL INFORMATION The sole business of the Group is to provide and manage alternative Islamic investment products and as a result it does As at 30 June 2019 not have any other reportable segments for this financial period. AGHL Arcapita Consolidation Arcapita Group Bahrain adjustments Group 26 EARNINGS PROHIBITED BY SHARI’AH USD ‘000 USD ‘000 USD’000 USD ’000 The Group receives interest from incidental deposits. These earnings are prohibited by Shari’ah, hence set aside as a liability to be used exclusively for charitable purposes and amount to USD 124 thousand (30 June 2018: USD 88 ASSETS thousand) for the year. Cash and cash equivalents 25,373 13,154 - 38,527 Receivables 18,409 1,138 (474) 19,073 Investments 245,547 - - 245,547 Other assets 1,801 935 - 2,736 TOTAL ASSETS 291,130 15,227 (474) 305,883

LIABILITIES Murabaha financing 37,299 - - 37,299 Payable on acquisition of investments - - - - Accrued expenses and other liabilities 28,929 2,203 (474) 30,658 TOTAL LIABILITIES 66,228 2,203 (474) 67,957

EQUITY Share capital and premium 183,344 13,024 - 196,368 Reserves 41,558 - - 41,558 TOTAL EQUITY 224,902 13,024 - 237,926

TOTAL EQUITY AND LIABILITIES 291,130 15,227 (474) 305,883 ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Arcapita Group Holdings Limited Supplementary Information (continuation)

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Arcapita Group pro-forma statement of financial position (continued) Arcapita Group pro-forma statement of profit or loss

As at 30 June 2018 Year ended 30 June 2019 AGHL Arcapita Consolidation Arcapita AGHL Arcapita Consolidation Arcapita Group Bahrain adjustments Group Group Bahrain adjustments Group USD ‘000 USD ‘000 USD’000 USD ’000 USD ‘000 USD ‘000 USD’000 USD ’000

ASSETS INCOME Cash and cash equivalents 26,429 12,418 - 38,847 Fee and other income 9,050 17,456 (16,979) 9,527 Receivables 101,005 1,034 (731) 101,308 Income from investments 45,041 - - 45,041 Investments 211,017 - - 211,017 Total operating income 54,091 17,456 (16,979) 54,568 Other assets 1,900 1,076 - 2,976 TOTAL ASSETS 340,351 14,528 (731) 354,148 EXPENSES Staff compensation and benefits (15,936) (11,293) 11,293 (15,936) LIABILITIES General and administration expenses (8,950) (5,197) 4,780 (9,367) Payable on acquisition of investment 86,656 - - 86,656 Professional and consultancy fees (5,574) (906) 906 (5,574) Murabaha financing 14,076 - - 14,076 Financing cost (1,734) - - (1,734) Accrued expenses and other liabilities 32,771 1,688 (731) 33,728 Total operating expenses (32,194) (17,396) 16,979 (32,611) TOTAL LIABILITIES 133,503 1,688 (731) 134,460 Foreign exchange loss 5 (60) - (55) EQUITY NET PROFIT 21,902 - - 21,902 Share capital and premium 173,867 12,840 - 186,707 Reserves 32,981 - - 32,981 TOTAL EQUITY 206,848 12,840 - 219,688

TOTAL EQUITY AND LIABILITIES 340,351 14,528 (731) 354,148 ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Arcapita Group Holdings Limited Supplementary Information (continuation)

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Arcapita Group pro-forma statement of profit or loss (continued) ARCAPITA INVESTMENT Year ended 30 June 2018 MANAGEMENT B.S.C.(c) AGHL Arcapita Consolidation Arcapita Group Bahrain adjustments Group Shari’ah Supervisory Board Report, USD ‘000 USD ‘000 USD’000 USD ’000 Report of The Board of Directors, Independent Auditors’ Report and INCOME Financial Statements Fee and other income 18,721 14,575 (14,382) 18,914 For the year ended 30 June 2019 Income from investments 18,990 - - 18,990 Total operating income 37,711 14,575 (14,382) 37,904

EXPENSES Staff compensation and benefits (13,613) (10,050) 10,050 (13,613) General and administration expenses (7,0 03) (3,473) 3,336 (7,140) Professional and consultancy fees (3,391) (996) 996 (3,391) Financing cost (1,279) - - (1,279) Total operating expenses (25,286) (14,519) 14,382 (25,423)

Foreign exchange loss (3) (56) - (59) NET PROFIT 12,422 - - 12,422 ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Arcapita Investment Management B.S.C.(c) Report of the Board of Directors Shari’ah Supervisory Board’s Report to Shareholders

70 71

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 2019. 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 We have reviewed the contracts relating to the transactions undertaken by the Company during the year ended 30 June Bahrain (“CBB”), to operate under Islamic Shari’ah principles, and is supervised and regulated by the CBB. The Company’s 2019. We have also conducted a review of the operations of the Company to form an opinion as to whether the Company has principal activities are dealing in financial instruments as an agent, and arranging, managing, safeguarding and advising on complied with Shari’ah rules and principles and the specific fatwas, ruling and guidelines issued by us. financial instruments.

The Company’s management is responsible for ensuring that the Company conducts its business in accordance with Islamic Financial Highlights Shari’ah rules and principles. It is our responsibility to form an independent opinion, based on our review of the operations Year ended Year ended 30 June 2019 30 June 2018 of the Company and to report to you. USD ‘000 USD ‘000 We planned and performed our review so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give assurance that the Company has not violated the rules and principles OPERATING INCOME of Islamic Shari’ah. Fee and other income 17,456 14,575 In our opinion: Foreign exchange loss (60) (56) The services agreement entered into by the Company with AIM Group Limited, the transactions and dealings resulting from Total operating income 17,396 14,519 such agreement and Zakah calculation during the year are in compliance with the Islamic Shari’ah rules and principles. All earnings (if any) that may have been realized from sources or by means prohibited by Shari’ah rules and principles have not OPERATING EXPENSES been recognized as income but have been set aside to be disposed of to charitable causes. Staff compensation and benefits (11,293) (10,050) We beg Allah the Almighty to grant us all success and straightforwardness. General and administration expenses (5,197) (3,473) Shari’ah Supervisory Board: Professional and consulting fees (906) (996) Total operating expenses (17,396) (14,519)

Auditors Ernst & Young have expressed their willingness to continue in office and a resolution proposing their appointment as auditors of the Company, for the year ending 30 June 2020, will be submitted at the Annual General Meeting. Signed on behalf of the Board of Directors

Sh. Muhammad Taqi Usmani Sheikh Esam Mohamed Ishaq Chairman Member

Abdulaziz Hamad Aljomaih Sh. Dr. Yousuf Abdullah Al Shubaily Sheikh Mohammed Isa Al Jamea Chairman of the Board of Directors Member Member 15 August 2019 7 August 2019 ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Independent Auditors’ Report to the Shareholders of Arcapita Investment Arcapita Investment Management B.S.C. (c) Management B.S.C.(c) Statement of Financial Position As at 30 June 2019

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Report on the financial statements 2019 2018 Note USD ‘000 USD ‘000 We have audited the accompanying statement of financial position of Arcapita Investment Management B.S.C. (c) (the “Company”) as of 30 June 2019, and the related statements of 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 Balances with banks and cash 6 13,154 12,418 financial statements based on our audit. Receivables and other assets 7 1,599 1,379 We conducted our audit in accordance with Auditing Standards for Islamic Financial Institutions issued by the Accounting Due from a related party 11 474 731 and Auditing Organisation for Islamic Financial Institutions (“AAOIFI”). Those standards require that we plan and perform TOTAL ASSETS 15,227 14,528 the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, 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 LIABILITIES AND EQUITY the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. LIABILITIES Opinion Accrued expenses and other liabilities 2,203 1,688 In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of 30 TOTAL LIABILITIES 2,203 1,688 June 2019, the results of its operations, its cash flows and changes in equity for the year then ended in accordance with the Financial Accounting Standards issued by AAOIFI. EQUITY Report on other regulatory requirements Share capital 8 13,024 7,833 As required by the Bahrain Commercial Companies Law and the Central Bank of Bahrain (“CBB”) Rule Book (Volume 4), we Shares pending allotment 9 - 5,007 report that: TOTAL EQUITY 13,024 12,840 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 15,227 14,528 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 2019 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. 45 15 August 2019 Manama, Kingdom of Bahrain

The attached explanatory notes 1 to 16 form part of these financial statements. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Arcapita Investment Management B.S.C. (c) Arcapita Investment Management B.S.C. (c) Statement of Income Statement of Cash Flows For the year ended 30 June 2019 For the year ended 30 June 2019

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Year ended Year ended Year ended Year ended 2019 2018 30 June 2019 30 June 2018 Note USD ‘000 USD ‘000 Note USD ‘000 USD ‘000

OPERATING INCOME OPERATING ACTIVITIES Fee and other income 10 17,456 14,575 Net income for the year - - Total operating income 17,456 14,575 Changes in operating assets and liabilities: OPERATING EXPENSES Capital raise proceeds held with a deposit agent 6 5,007 (5,007) Staff compensation and benefits (11,293) (10,050) Due from a related party 257 (658) General and administration expenses (5,197) (3,473) Receivables and other assets (220) (433) Professional and consulting fees (906) (996) Accrued expenses and other liabilities 515 654 Total operating expenses (17,396) (14,519) Net cash from (used in) operating activities 5,559 (5,444)

Foreign exchange loss (60) (56) FINANCING ACTIVITY NET INCOME AND TOTAL COMPREHENSIVE INCOME FOR THE YEAR - - Proceeds from issuance of share capital 8 184 5,007 Net cash from financing activity 184 5,007

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,743 (437)

Cash and cash equivalents at the beginning of the year 7,411 7,848 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 6 13,154 7,411

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

The attached explanatory notes 1 to 16 form part of these financial statements. The attached explanatory notes 1 to 16 form part of these financial statements. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

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 2019 At 30 June 2019

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Share 1 ORGANISATION AND ACTIVITIES Shares pending Retained Total Arcapita Investment Management B.S.C. (c) (the “Company”) is a closed joint stock company registered with the capital allotment earnings equity Ministry of Industry, Commerce and Tourism in the Kingdom of Bahrain and operates under the commercial registration Note USD ‘000 USD ‘000 USD ‘000 USD ‘000 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 2018 7,833 5,007 - 12,840 The Company operates under an Investment Firm license - Category I (Islamic Principles) issued by the Central Bank Issuance of share capital 9 5,191 (5,007) - 184 of Bahrain (“CBB”), to operate under Islamic Shari’ah principles, and is supervised and regulated by the CBB. The Company’s strategy and principal activities are dealing in financial instruments as an agent, and arranging, managing, As at 30 June 2019 13,024 - - 13,024 safeguarding and advising on financial instruments. As at 30 June 2019, the Company has nil assets under management (30 June 2018: nil). As at 1 July 2017 7,833 - - 7,833 Issuance of share capital - 5,007 - 5,007 These financial statements have been approved and authorised for issue by the Board of Directors on 15 August 2019. As at 30 June 2018 7,833 5,007 - 12,840 2 BASIS OF PREPARATION 2.1 Statement of compliance The financial statements are prepared in accordance with the Financial Accounting Standards (“FAS”) 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 and in confirmity with FAS, 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. 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, unless restricted for use in operations or for specific purpose.

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 16 form part of these financial statements. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Arcapita Investment Management B.S.C. (c) Notes to the Financial Statements (continued) 30 June 2019

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3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

c. Financial instruments g. Revenue recognition Recognition, measurement and de-recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the Financial instruments comprise financial assets and financial liabilities. revenue can be reliably measured. All financial assets and financial liabilities are initially recognised at fair value on the trade date, i.e. the date that Fee income the Company becomes a party to the contractual provisions of the instrument. 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. All financial assets and financial liabilities are subsequently measure at amortised cost. h. Shari’ah supervisory board A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised where: The Company’s business activities are subject to the supervision of a Shari’ah supervisory board consisting of at least three members appointed by the general assembly. - the right to receive cash flows from the asset has expired; or i. Earnings prohibited by Shari’ah - 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 The Company is committed to avoid recognising any income generated from non-Islamic sources. Accordingly all non-Islamic income is credited to a charity account where the Company uses these funds for various social welfare - the Company has transferred its right to receive cash flows from the asset and either: (a) has transferred activities. substantially all 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. j. Foreign currencies When the Company has transferred its rights to receive cash flows from an asset and has neither transferred Transactions in foreign currencies are initially recorded at the exchange rate prevailing on the date of the nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is transaction. recognised to the extent of the Company’s continuing involvement in the asset. Monetary assets and liabilities in foreign currencies are translated into United States Dollars at exchange rates The Company derecognises a financial liability when its contractual obligations are discharged, cancelled or prevailing at the statement of financial position date. Any gains or losses are recognised in the statement of expires. income. d. Accrued expenses and other liabilities 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 Accrued expenses and other liabilities are recognised for amounts to be paid in the future for goods or services currency are translated using the exchange rates at the date when the fair value is determined. received, whether billed by the supplier or not. k. Employees’ end of service benefits e. Amortised cost measurement Bahraini employees are covered by the Social Insurance Organization scheme which comprises a defined Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as such contribution scheme to which the Company contributes a monthly sum based on a fixed percentage of the salary. when the Company has the positive intention and ability to hold them to maturity. After initial measurement, The contribution is recognised as an expense in the statement of income. these investments are measured at amortised cost using the effective profit rate (EPR), less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an The Company provides end of service benefits to its non-Bahraini employees. Entitlement to these benefits is integral part of the EPR. The EPR amortisation is included in the statement of profit or loss. The losses arising from usually based upon the employees’ length of service and the completion of a minimum service period. The expected impairment are recognised in the statement of profit or loss under ‘provisions’. costs of these benefits which comprise a defined benefit scheme are accrued over the period of employment based on the notional amount payable if all employees had left at the statement of financial position date. f. Offsetting Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a legally enforceable or religious right to set off the recognised amounts and the Company intends to either settle on a net basis, or to realize the asset and settle the liability simultaneously. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Arcapita Investment Management B.S.C. (c) Notes to the Financial Statements (continued) 30 June 2019

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3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 4 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (continued) Judgements (continued) l. Impairment of financial assets (ii) Going concern An assessment is made at each financial position date to determine whether there is objective evidence that a The Company’s management has made an assessment of its ability to continue as a going concern and is satisfied specific financial asset or a group of financial assets may be impaired. If such evidence exists, the estimated that it has the resources to continue in business for the foreseeable future. Furthermore, the management is not recoverable amount of that asset is determined and any impairment loss, based on the assessment by the Company aware of any material uncertainties that may cast significant doubt upon the Company’s ability to continue as a of the estimated cash equivalent value, is recognised in the statement of income. Specific provisions are created going concern. Therefore, the financial statements are prepared on the going concern basis. to reduce all impaired financial contracts to their realizable cash equivalent value. Financial assets are written off only in circumstances where effectively all possible means of recovery have been exhausted. 5 NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively The standards issued but not yet effective, upto the date of issuance of Company’s financial statements are listed below. to an event occurring after the impairment value was recognised, the previously recognised impairment loss is The Company intends to adopt these standards when they become effective. reversed. FAS 28 Murabaha and Other Deferred Payment Sale m. Events after the statement of financial position date This standard is effective from 1 January 2019 and prescribes the accounting and reporting principles and requirements for Murabaha and deferred payment sales transactions and different elements of such transactions, excluding Tawarruq The financial statements are adjusted to reflect events that occurred between the statement of financial position and commodity Murabaha transactions. FAS 28 supersedes the earlier FAS 2 “Murabaha and Murabaha to the Purchase date and the date the financial statements are authorised for issue, provided they give evidence of conditions that Order” and FAS 20 “Deferred Payment Sale”, where it aims at setting out the accounting rules for measurement, existed as of the statement of financial position date. Events that are indicative of conditions that arose after the recognition and disclosure of the transactions of Murabaha and other deferred payment sales that are carried out by statement of financial position date are disclosed, but do not result in an adjustment to the financial statements. Islamic Financial Institutions. Also, this standard shall not apply to investments made in investment instruments e.g. equity instruments or Sukuk, where the underlying asset for such instrument is a Murabaha or deferred payment sale. o. Operating lease commitments The Company’s assessment indicates that the new standard would not likely have a significant impact on the financial The Company has entered into property leases which are classified as operating leases. The Company has statements. determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term FAS 30 Impairment, Credit Losses and Onerous Commitments not constituting a major part of the economic life of the property and the present value of the minimum lease “In November 2017, AAOIFI issued FAS 30 - ““Impairment, credit losses and onerous commitments”” which is effective payments not amounting to substantially all of the fair value of the property, that it therefore does not retain from the financial periods beginning on or after 1 January 2020, with early adoption permitted. This standard all the significant risks and rewards of ownership of these properties and accounts for the contracts as operating supersedes the earlier FAS 11 - ““Provisions and Reserves””. leases. The Company has carried out an assessment and it does not expect a material impact on adoption.” p. Zakah 6 BALANCES WITH BANKS AND CASH Individual shareholders are responsible for payment of Zakah. 30 June 30 June 4 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS 2019 2018 Note USD ‘000 USD ‘000 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 contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes Balances with banks 13,150 7,405 that could require a material adjustment to the carrying amount of assets or liabilities affected in future periods. Cash on hand 4 6 Judgements Cash and cash equivalents 13,154 7,411 In the process of applying the Company’s accounting policies, management has made the following judgements, which Capital raise proceeds held with deposit agent 6.1 - 5,007 have the most significant effect on the amounts recognised in the financial statements. 13,154 12,418 (i) Estimates and assumptions The Company based its assumptions and estimates on parameters available when the financial statements were 6.1 Capital raise proceeds held with deposit agent prepared. Existing circumstances and assumptions about future developments, however, may change due to market As of 30 June 2018, proceeds from the capital raise were held with the deposit agent, Arcapita Cayman SPE Limited, changes or circumstances beyond the control of the Company. Such changes are reflected in the assumptions when through a segregated client account operated by a reputed international bank until allocation and issuance of shares is they occur. completed. These proceeds were transfered to the Company on completion of legal formalities and allocation of shares during the year ended 30 June 2019. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Arcapita Investment Management B.S.C. (c) Notes to the Financial Statements (continued) 30 June 2019

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7 RECEIVABLES AND OTHER ASSETS 10 FEE AND OTHER INCOME 30 June 30 June 30 June 30 June 2019 2018 2019 2018 USD ‘000 USD ‘000 Note USD ‘000 USD ‘000

Receivables 664 303 Intercompany fee income 10.1 16,979 14,382 Equipments 483 663 Management fee 228 141 Prepayments 441 303 Profit from Mudarabah deposits with financial institutions 179 - Other assets 11 110 Other income 70 52 1,599 1,379 17,456 14,575

8 SHARE CAPITAL 10.1 Intercompany fee income 30 June 30 June AIM Group Limited (AGL) an affiliate company, and the Company are under the common control of the same shareholders 2019 2018 and governed by the same Board of Directors. In accordance with the terms of a ‘Service Agreement’, the Company USD ‘000 USD ‘000 provides advisory and administrative services to AGL (and its affiliates). AGL reimburses the expenditures incurred by the Company in respect of the services rendered in the form of fee income. Authorised capital 11 RELATED PARTY TRANSACTIONS AND BALANCES 26,455,030 ordinary shares with a par value of USD 1 per share 26,455,030 26,455,030 Related parties represent associated companies, major shareholders, directors and key management personnel of the Company, the Company’s Shari’ah Supervisory Board and entities controlled, jointly controlled or significantly Issued and paid up capital influenced by such parties. Transactions with related parties arise from the ordinary course of business. Pricing policies As at 1 July 2018 / 2017 and terms of these transactions are approved by the Company’s management. Outstanding balances at year end if any, are unsecured. (2019: 7,833,334 shares, 2018: 7,833,334 shares) 7,833,334 7,833,334 11 RELATED PARTY TRANSACTIONS AND BALANCES Issued during the year Income and expenses incurred with related parties is as follows: (2019: 5,190,283 Shares, 2018: Nil shares) 5,190,283 - 30 June 30 June 2019 2018 As at 30 June 2019 / 2018 Note USD ‘000 USD ‘000 (2019: 13,023,617 shares, 2018:7,833,334 shares) 13,023,617 7,833,334 Income 9 SHARES PENDING ALLOTMENT Fee income 10.1 16,979 14,382 As at 30 June 2018 the Company had received USD 5,007 thousand from its current and new shareholders as part of a capital raise. This amount was categorised as shares pending allotment as the legal formalities necessary to issue shares Expenses had not been completed. These formalities were completed during the year ended 30 June 2019 and all shares were allocated. Key management personnel costs 5,582 4,740 Shari’ah supervisory board remuneration 53 69

Balances with related parties Assets Due from a related party 474 731 ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Arcapita Investment Management B.S.C. (c) Notes to the Financial Statements (continued) 30 June 2019

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12 SEGMENTAL INFORMATION 13 FAIR VALUE OF FINANCIAL INSTRUMENTS (continued) The Company’s sole business is the provision of advisory and administrative services. Therefore the Company does not As at 30 June 2019 and 2018, the fair values of the Company’s financial instruments approximated their carrying have any other reportable segments for the financial year. values. Balances with banks represent cash and cash equivalents and are due on demand. The carrying value of these balances 13 FAIR VALUE OF FINANCIAL INSTRUMENTS represents their fair value. 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 The recoverability of receivables were determined by management as part of impairment testing by calculating the orderly transaction between market participants at the measurement date. The fair value measurement is based on the net present values of the expected cash flows. The carrying amounts therefore approximate the fair value of these presumption that the transaction to sell the asset or transfer the liability takes place either: receivables. a) In the principal market for the asset or liability, or Other liabilities are current in nature and the carrying value of these financial instruments represents their fair value. b) In the absence of a principal market, in the most advantageous market for the asset or liability. 14 CAPITAL MANAGEMENT The Company’s financial instruments are carried at amortised cost as follows: The objective of capital management is to ensure the Company’s ability to operate as a going concern by maintaining 30 June 30 June an appropriate capital base in line with regulatory requirements. 2019 2018 At cost/ At cost/ 15 RISK MANAGEMENT amortised amortised cost cost 15.1 Introduction USD ‘000 USD ‘000 The Company adopts an enterprise-wide approach to risk management, with proactive identification and mitigation of the risks embedded in the Company’s balance sheet and business activities. One of the primary objectives of risk ASSETS management is to optimize shareholder and investor returns while maintaining the Company’s risk exposure within Balances with banks 13,150 7,405 self-imposed parameters defined within the Company’s Board approved risk policy documents. Receivables and other assets 675 413 The overall responsibility for the implementation of a sound risk management framework lies with the Company’s Due from a related party 474 731 senior management and the Board of Directors. The Company has established an independent Risk Management Capital raise proceeds held with deposit agent - 5,007 Department (RMD) that works in co-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 14,299 13,556 aspects relating to risk management. 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 LIABILITIES and supports the Board in the execution of its responsibilities pertaining to risk management. Accrued expenses and other liabilities 2,203 1,688 15.2 Credit risk 2,203 1,688 Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other Determination of fair value and fair value hierarchy party to incur a financial loss. The Company’s exposure to credit risk is limited due to minimal lending / placement The Company uses the following hierarchy for determining and disclosing fair value of financial assets and financial activity and the fact that there are no investments in financial securities. The Company is exposed to credit risk on liabilities: its bank balance and receivables. This risk is considered minimal as the bank balances are maintained in current accounts with a reputable regional bank. The receivable balances primarily represent prepayments to vendors and - Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities; other receivables. - Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and - Level 3: Techniques which use inputs which have significant effect on the recorded fair value that are not based on observable market data. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Arcapita Investment Management B.S.C. (c) Notes to the Financial Statements (continued) 30 June 2019

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15 RISK MANAGEMENT (continued) ARCAPITA IS DEFINED BY 15.3 Liquidity risk THE QUALITY OF ITS PEOPLE: 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 A VETERAN MANAGEMENT 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 TEAM WITH EXTENSIVE bank balances available as of 30 June 2019 in order to discharge its financial liabilities as and 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 EXPERIENCE, AND A the exception of equipment. GROUP OF INVESTMENT 15.4 Market risk Market risk is the risk of losses due to adverse movements in market fundamentals such as profit rates, foreign currency PROFESSIONALS WITH 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. DEEP EXPERTISE IN THEIR 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 RESPECTIVE FIELDS. currencies that are not pegged to the USD) are also minimal. As of 30 June 2019, the Company has no significant foreign currency exposure.

15.5 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.

16 COMMITMENTS AND CONTINGENCIES 30 June 30 June 2019 2018 USD ‘000 USD ‘000

Operating lease commitments relating to rented premises within one year 264 302 more than 1 year and less then five years - - 264 302

ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Our People

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BOARD OF DIRECTORS Abdulaziz Hamad Aljomaih Mahmood Hashim Al Kooheji Khalid Jassim Bin Kalban Mustafa Fouad Ali Reda Chairman of the Board, Chairman of EIC & Member of Board Member & Member of EIC Board Member & Member of EIC Board Member EAC Mr. Al Kooheji has been a Director of Arcapita Group Mr. Kalban has been a Director of Arcapita Group Holdings Mr. Reda has been a Director of Arcapita Group Holdings Mr. Aljomaih has been the Head of International Holdings Limited since 2013. Mr. Al Kooheji is the Limited since 2013 and is the Managing Director and Chief Limited since 2019. Mr. Reda is the General Manager of Investments at Aljomaih Holding Co. in Saudi Arabia since Chief Executive Officer of Bahrain Mumtalakat Holding Executive Officer of Dubai Investments PJSC. His extensive Reda Investment & Development Group, with extensive 1988. A professional with over 26 years of experience, Company. Mr. Al Kooheji sits on the board of Gulf Air and experience covers the industrial, financial, investment and experience across various sectors including real estate, Mr. Aljomaih was Vice Chairman of Arcapita’s Board of is also a board member at McLaren Automotive Limited real estate sectors. He currently holds several prominent financial services, hospitality and tourism. Additionally, Directors from 1997 to 2013, and has taken on the role of and McLaren Group Limited. In addition, he sits on the positions including a membership of the Board of Directors Mr. Reda holds a number of prominent positions across Chairman of the Board since 2013. boards of Durrat Khaleej Al Bahrain Company and the of National General Insurance PJSC and Chairmanship of leading entities such as Member of the Board of Directors Arab Petroleum Investment Corporation (“APICORP”), Union Properties PJSC. Mr. Kalban has a degree in Business at the Mecca Chamber of Commerce & Industry, Member and serves the role of Governor at the Royal College of Management from the Metropolitan State College, US. of the Saudi-Turkish Business Council, and Member of the Ghazi Fahad Alnafisi Surgeons in Ireland, Bahrain. He holds a bachelor’s degree Board of Directors of the Saudi Al Bilad Establishment. Board Member & Member of EAC in Mechanical Engineering from Staffordshire University Usama Mohammed Al Barwani Mr. Alnafisi is Co-Founder and Chairman of Salhia Real and a Masters of Business Administration from Henley Board Member & Member of ARC Atif Ahmed Abdulmalik Estate Company K.S.C., Kuwait. His other current positions College of Management, Brunel University, UK. Chief Executive Officer, Board Member & Chairman of include: Chairman of Kuwait Hotel Owners Association, Mr. Al Barwani has been a Director of Arcapita Group the Executive Committee Kuwait; and Co-Founder and Vice Chairman of Independent Holdings Limited since 2013. Mr. Al Barwani is an Petroleum Group s.a.k., Kuwait. A professional with over Noorur Rahman Abid Executive Director of MB Holding, a major Omani family Atif is a Founding Partner, Chief Executive Officer, Board 40 years of experience, Mr. Alnafisi was a member of Board Member & Chairman of ARC conglomerate, and is responsible for new projects and the Member, and Chairman of the Executive Committee for Arcapita’s Board of Directors from 1999 to 2013. Mr. Abid has been a Director of Arcapita Group Holdings investments of the MB Group. He is also Managing Director Arcapita Group. Having established Arcapita in 1997, Limited since 2013. Mr. Abid is a Fellow Chartered of United Engineering Services, a major oil and gas, and Atif was instrumental in growing the Group’s presence Accountant from the Institute of Chartered Accountants defense manufacturing business. He is on the Board of beyond Bahrain to Atlanta, London and Singapore. Directors of Ahli Bank SAOG, and Chairman of Ubar Hotels Prior to founding Arcapita, Atif held a number of senior Abdulrahman Abdulaziz Al-Muhanna in England and Wales. He has more than 35 years of experience in the profession across Europe, the Middle and Resorts, both listed on the Muscat Securities Markets, management positions with Investcorp. In recognition of Board Member & Chairman of EAC as well as Nautilus Minerals which is listed on the Toronto his outstanding contribution to the Kingdom of Bahrain, in Mr. Al-Muhanna joined the Almarai Company in the East and Africa. Mr. Abid spent over 30 years with Ernst & Young, joining them in 1979 and rising to become an Office Stock Exchange. He has obtained a B.Sc. in Petroleum 2007 Atif was awarded The Proficiency Medal First Class Kingdom of Saudi Arabia in 1979 and was appointed Engineering from Tulsa University, US and an M.Sc. in by His Majesty King Hamad Bin Isa Al Khalifa. Atif holds Managing Director and a member of the board in 1997. Managing Partner, then the Assurance Leader for the MENA region. Mr. Abid previously served as the Chairman Energy, Trade and Finance from City University, London. a BBA in Accounting, Finance and Management from Saint His other board memberships include ARASCO; and Edward’s University, Texas. the publishing company Al Jazirah, as well as various of the Auditing Standards Committee, and the Deputy commercial establishments in Riyadh, Kingdom of Saudi Chairman of the Accounting and Auditing Standards Board Arabia. A professional with 30 years of experience, Mr. Al- of the Accounting and Auditing Organization for Islamic Muhanna was a member of Arcapita’s Board of Directors Financial Institutions (“AAOIFI”). from 2000 to 2013. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Our People

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SHARI’AH SUPERVISORY BOARD SENIOR MANAGEMENT Arcapita’s Shari’ah Supervisory Board is fully supported Sheikh Dr. Yousuf Abdullah Al Shubaily Atif Abdulmalik Martin Tan by the internal Shari’ah department and other Arcapita Shari’ah Supervisory Board Member Chief Executive Officer & Chairman of the Executive Chief Investment Officer & Member of the Executive departments. The Shari’ah department is responsible for Sh. Yousuf is a Member of the Shari’ah Board of the Committee Committee ensuring that there is an ongoing process of reviewing and Accounting and Auditing Organization for Islamic Financial Atif is a Founding Partner, Chief Executive Officer, Board Martin is a Founding Partner, Chief Investment Officer, auditing of the business of Arcapita generally, including Institutions (AAOIFI), and Chairman & member of several Member, and Chairman of the Executive Committee for and a Member of the Executive Committee at Arcapita existing and new investments. The Shari’ah Supervisory Shari’ah Supervisory Boards of Islamic banks and financial Arcapita Group. Having established Arcapita in 1997, Group. He is responsible for developing and overseeing Board ensures that all investments undertaken by the lines institutions. He is a faculty member of the Higher Institute Atif was instrumental in growing the Group’s presence the firm’s investment strategy and capabilities. Martin of business are structured in a manner that comply strictly of Justice, a Member of the Saudi Fiqh Society, and he holds beyond Bahrain to Atlanta, London and Singapore. joined Arcapita in 2007, and has played a leading role with Shari’ah principles and resolve any Islamic investment a Master and Ph.D. in Shari’ah from Imam Mohamed Bin Prior to founding Arcapita, Atif held a number of senior in developing the firm’s private equity and real estate issues that may arise. The Shari’ah Supervisory Board also Saud Islamic University in Saudi Arabia. management positions with Investcorp. In recognition of business. Martin has extensive international experience, approves the audited financial statements of Arcapita, his outstanding contribution to the Kingdom of Bahrain, in having managed listed and private real estate investments confirming adherence to Islamic Shari’ah principles. 2007 Atif was awarded The Proficiency Medal First Class across multiple geographies, including Europe, the Middle The Shari’ah Supervisory Board is composed of the Sheikh Mohammed Isa Al Jamea by His Majesty King Hamad Bin Isa Al Khalifa. Atif holds East, North America and Asia. Prior to joining Arcapita, following prominent scholars: Shari’ah Supervisory Board Member a BBA in Accounting, Finance and Management from Saint Martin was Chief Executive Officer of Capital and Sh. Mohammad is the former Director of the Shari’ah Edward’s University, Texas. Commercial & Integrated Development where he managed Department in Arcapita Group, with extensive experience a global portfolio in excess of $7 billion. Martin started his Sheikh Muhammed Taqi Usmani in Shari’ah Review of investments contracts and structures. career in the manufacturing and construction industries and obtained his MBA and Bachelor’s degrees from Chairman of Shari’ah Supervisory Board He holds a BS in Shari’ah from Imam Mohamed Bin Saud Hisham Al Raee Washington State University. Sh. Taqi is the Chairman of the Shari’ah Board of the Islamic University in Saudi Arabia (UAE Branch), and a Deputy Chief Executive Officer & Member of the Accounting and Auditing Organization for Islamic Financial BS in Aerospace Engineering from Northrop University in Executive Committee Institutions (AAOIFI), the Chairman of the Shari’ah Board California. He was previously with the Royal Bahraini Air Hisham is a Founding Partner, Deputy Chief Executive Mohammed Chowdhury of the State Bank of Pakistan, and Chairman & member Force. Officer, and Member of the Executive Committee, for of several Shari’ah Supervisory Boards of Islamic banks Arcapita Group, responsible for the day-to-day operations Chief Financial Officer & Member of the Executive and financial institutions. He is the Vice President of of the firm including overseeing the firm’s Investors Committee Darul-Uloom University in Karachi, Member of the Islamic Relations, drawing on extensive industry experience Mohammed is a Founding Partner, Chief Financial Fiqh Academy in Jeddah, and Ex-Member of the Shari’ah across the region and Asia. Previously, Hisham served Officer and Member of the Executive Committee for Appellate Bench of the Supreme Court in Karachi. as the Senior Director of Business Development with Arcapita Group. As part of his role, Mohammed is Reuters Middle East in Saudi Arabia for five years. He responsible for overseeing the Corporate Finance, also previously worked with the Finance Department at Shari’ah, Risk Management, Corporate Accounts, Sheikh Esam Mohamed Ishaq Citibank N.A., Bahrain. Hisham received his MBA from the Investment Administration, and Reporting functions at University of Hull, United Kingdom, and a CSD in Business Arcapita. Prior to joining Arcapita in 1998, Mohammed Shari’ah Supervisory Board Member Administration from the University of Bahrain. spent nine years working for Ernst & Young in Bahrain Sh. Esam is the Deputy Chairman of the Governance and and KPMG in London. Mohammed is a Member of the Ethics Board of the Accounting and Auditing Organization Institute of Chartered Accountants in England and Wales, for Islamic Financial Institutions (AAOIFI), Member of completing his training while working for KPMG in the Supreme Council for Islamic Affairs in Bahrain, and London. Mohammed is a graduate of the London School Chairman & member of several Shari’ah Supervisory of Economics and has an MBA from the London Business Boards of Islamic banks and financial institutions. He is School. the Chairman of the Board of Muslim Educational Society, Member of Discover Islam Center Board, and Member of the Board of Trustees of Al Iman School in Bahrain. ANNUAL REPORT 2019 ARCAPITA ANNUAL REPORT 2019

Our People

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SENIOR MANAGEMENT (continued) MANAGEMENT TEAM Ahmed Al Shirawi Muhannad Buhindi Founding Partners / Executive Committee Directors Principals Managing Director & Deputy Head of Investors Managing Director of Investors Relationship Relationship Management Management Atif Abdulmalik Ahmed Salem Abdulla Alyaqoob Ahmed is a Managing Director and Deputy Head of the Muhannad is a Managing Director in the Investors Chief Executive Officer Investors Relationship Investor Services Chairman of the Executive Committee Management Investors Relationship Management team at Arcapita. Relationship Management team. His role involves AbdulRahman Mohammed He oversees the firm’s strategic investor relations in the overseeing key strategic investor relations in various GCC Hisham Al Raee Amy Doshi Investors Relationship GCC region and South East Asia. Previously, Ahmed held countries. Muhannad has over 15 years of relationship Deputy Chief Executive Officer Legal Management various positions at Arcapita including within the Financial management experience. Prior to joining Arcapita, he Member of the Executive Committee Management Group, where he was Head of the Corporate served as a Relationship Manager in the Corporate Banking Anthony Nambiar Amin Jawad Finance and Investor Reporting teams. Ahmed obtained his Divisions of BBK and Al Salam Bank. Muhannad holds Martin Tan Human Capital Treasury Operations B.Sc. degree in Business Management from King’s College, a B.Sc. in Chemical Engineering from the University of Chief Investment Officer Basil Ahmed Duaij Al Khalifa London. Bahrain. Member of the Executive Committee Corporate Finance Investors Relationship Nael Mustafa Mohammed Chowdhury Management Arthur M. Rogers Gana Balaratnam Managing Director & Head of Business Development Chief Financial Officer Managing Director & General Counsel Financial Reporting Farooq Aqeel Nael is the Head of Business Development responsible for Member of the Executive Committee Art is a Managing Director and General Counsel responsible Investment Administration expanding Arcapita’s global footprint and product lines as Hafedh Al Najem for overseeing all legal and compliance roles within Managing Directors the firm. Art has over 24 years of legal and business well as creating and developing strategic partnerships. With Corporate Accounts Halah Faraj experience of over 30 years in investment banking, Nael Ahmed Al Shirawi MENA Private Equity experience in private equity, venture capital, real estate, Mishal Al Hellow infrastructure, banking, M&A, compliance and Islamic has covered the areas of capital markets, corporate finance Investors Relationship Management Technology Hassan Shujaie finance. Prior to rejoining Arcapita, Art was General as well as Shari’ah-compliant alternative investments in Arthur Rogers Administration Counsel and Executive Vice President at Gatehouse North America and the Middle East. Nael has been with Osama Al Tamimi Arcapita since 2003. Nael is a CFA Charter holder and has General Counsel Bank and Director, Legal at Arcapita Bank in Bahrain for Investment Administration Isa Al Khalifa an MBA from Edinburgh University. eight years. Prior to that, Art was a corporate attorney Brian Hebb MENA Real Estate Tariq Hayat at two leading law firms: Gibson, Dunn & Crutcher, and Neil Carter US Real Estate Corporate Management Joseph Mathai Testa, Hurwitz & Thibeault. Art holds a law degree with Managing Director & Head of US Private Equity distinction from Emory University School of Law and a Muhannad Buhindi Technology Neil is the Head of US Private Equity. Neil has over 18 years Yousif Al Abdulla B.A. in History from Hamilton College, New York. Art is Investors Relationship Management of private equity experience, including ten years at Fortress MENA Private Equity Mohamed Sharif admitted to the bar in Massachusetts and Virginia. Investment Group where he was an investment professional Nael Mustafa Investors Relationship Brian Hebb in the Credit Funds. In this role, Neil oversaw origination, Business Development Management Managing Director & Head of US Real Estate underwriting, negotiation, and management of middle Neil Carter Mohammed Al Saie Brian is the Head of US Real Estate. Brian has 20 years of market private equity and private credit transactions US Private Equity Technology real estate and private equity experience where he began across multiple industries. Prior to Fortress, Neil worked his career in the mid-1990’s in multi-family development. at Goldman Sachs focused on M&A in the Consumer Ryan Dunn Previously, Brian formed Point Grey Partners to invest and Retail industries and earned his MBA as well as his US Private Equity privately raised capital in industrial real estate. Prior to Bachelor’s degree in Commerce from the University of Syed Bokhari that, he held various positions with Goldman Sachs Group, Virginia. NYL Investors and Colony NorthStar, while covering the US Real Estate industrial, multi-family and student housing sectors. Brian Waleed Abdulaziz holds an MBA from Columbia Business School and a BA MENA Private Equity from the University of Western Ontario. Arcapita Investment Arcapita Investment Arcapita Investment Advisors Arcapita Investment Management B.S.C.(c) Management US Inc. UK Limited Management Singapore Arcapita Building, 1180 Peachtree St NE 15th Floor, The Shard Pte. Ltd. Bahrain Bay Suite 2280, Atlanta London, SE1 9SGR 24 Raffles Place P.O. Box 1357 GA 30309, USA United Kingdom #16-03 Clifford Centre Manama Singapore 048621 Kingdom of Bahrain Republic of Singapore

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