first energy bank b.s.c. (c) 30 june 2021 condensed

Commercial registration : 69089-1 (registered with Central Bank of Bahrain as a wholesale Islamic bank) Registered Office : Bahrain Financial Harbour, West Tower, 20th Floor P.O. Box 209, Manama, Kingdom of Bahrain Telephone +973 17170000 Directors : Zayed A. R. Al-Amin, Chairman Salah Mohammed Amin Abdulla, Vice-Chairman Matar Mohamed Al Blooshi Dr. Ali Mahmoud Hassen Mohammed Adel A. Aziz Al Jabr Abdulla Ahmed Al Suwaidi Dr. Jacob Barend Kalkman Saif Abugulal Dr. Abdalnasr Mohamed Omar Abouzkeh Chief Executive Officer : Mohamed Shukri Ghanem Auditors : KPMG Fakhro, Bahrain

FIRST ENERGY BANK B.S.C. (c)

30 JUNE 2021 CONDENSED CONSOLIDATED INTERIM

FINANCIAL INFORMATION

First Energy Bank B.S.C. (c)

CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION For the six months ended 30 June 2021 CONTENTS Page Independent auditors’ report on review of condensed consolidated interim financial information 1 Condensed consolidated interim financial information Condensed consolidated statement of financial position 2 Condensed consolidated income statement 3 Condensed consolidated statement of changes in equity 4 - 5 Condensed consolidated statement of cash flows 6 Condensed consolidated statement of sources and uses of zakah and charity fund 7 Notes to the condensed consolidated interim financial information 8 - 32 Additional information Un-reviewed supplementary financial information - Impact on COVID-19 33 - 34

FIRST ENERGY BANK B.S.C. (c) 3

CONDENSED CONSOLIDATED INCOME STATEMENT For the six months ended 30 June 2021 USD 000’s

Note Six months ended Three months ended 30 June

2021 30 June

2020 30 June

2021 30 June

2020

(reviewed) (reviewed) (reviewed) (unreviewed)

INCOME Income from investment securities 16 7,263 6,457 3,345 1,675 Income from financing and placementswith financial institutions

191 468

89

207 Fees and commission income - 194 - 194 Share of results of equity accounted investees 12 1,055 1,242

69 807

Net income from Ijarah assets (987) 1,626 (894) 876 Other income 108 492 8 492 Total income 7,630 10,479 2,617 4,251 Less: Finance cost (698) (2,920) (304) (1,544) Net operating income 6,932 7,559 2,313 2,707

EXPENSES Staff cost 3,590 4,852 1,723 2,378 Depreciation and amortization 468 463 245 25 Other operating expenses 2,336 3,538 1,121 1,797

Total expenses

6,394 8,853

3,089

4,200 Profit / (loss) before impairment allowance

538 (1,294)

(776)

(1,493) Net impairment allowance 17 (2,465) (111,319) (2,943) (2,192)

LOSS FOR THE PERIOD (1,927) (112,613) (3,719) (3,685)

Attributable to: Shareholders of the parent (1,912) (109,903) (3,705) (3,702) Non-controlling interests (15) (2,710) (14) 17 (1,927) (112,613) (3,719) (3,685)

The accompanying notes 1 to 22 form an integral part of this condensed consolidated interim financial information.


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30 June 2021 USD 000’s

Equity attributable to shareholders of the parent

30 June 2021 (reviewed) Share Treasury Statutory Investments

fair value

Foreign exchange translation Accumulated

Non-controlling Total

capital shares reserve reserve reserve losses Total interests equity

Balance at 1 January 2021 600,000 (4,356) 14,678 2,686 (15,445) (223,596) 373,967 279 374,246 Impact on adoption of FAS 32 (note 4 A(i)) -

- - - - (4) (4) - (4)

Balance as restated 600,000 (4,356) 14,678 2,686 (15,445) (223,600) 373,963 279 374,242 Changes in fair value of investments at fair value through equity -

- - 192 - - 192 - 192 Effect of exchange rate difference on equity accounted investee -

- - - (5,730) - (5,730) - (5,730) Loss for the period - - - - - (1,912) (1,912) (15) (1,927) Total recognised income and expense for the period -

- - 192 (5,730) (1,912) (7,450) (15) (7,465) Transfer to zakah and charity fund -

-

-

-

- (200) (200) - (200)

Balance at 30 June 2021 600,000 (4,356) 14,678 2,878 (21,175) (225,712) 366,313 264 366,577 The accompanying notes 1 to 22 form an integral part of this condensed consolidated interim financial information.


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30 June 2021 (continued) USD 000’s

Equity attributable to shareholders of the parent

30 June 2020 (reviewed) Share Treasury Statutory Investments

fair value

Foreign exchange translation Accumulated

Non-controlling Total

capital shares reserve reserve reserve losses Total interests equity

Balance at 1 January 2020 600,000

(4,356) 14,678 - (6,843) (50,232) 553,247 43,928 597,175 Effect of exchange rate difference on equity accounted investee -

- - - (5,633) - (5,633) - (5,633) Loss for the period - - - - - (109,903) (109,903) (2,710) (112,613) Total recognised income and expense for the period -

- - - (5,633) (109,903) (115,536) (2,710) (118,246) Transfer to zakah and charity fund -

-

-

-

- (250) (250) - (250)

Distribution from subsidiary - - - - - - - (1,642) (1,642) Balance at 30 June 2020 600,000

(4,356) 14,678 - (12,476) (160,385) 437,461 39,576 477,037 The accompanying notes 1 to 22 form an integral part of this condensed consolidated interim financial information.


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the six months ended 30 June 2021 USD 000's


Note 30 June 2021 30 June 2020 (reviewed) (reviewed) OPERATING ACTIVITIES Net loss for the period

(1,927) (112,613)

Adjustments for:

Depreciation on Ijarah assets 10 1,140 1,800 Depreciation and amortization

468 463

Amortization of premium / (discount) on Sukuk

87 (90)

Net impairment charge 17 2,465 111,319

Share of results of equity accounted investees 12 (1,055) (1,242)

Gain on disposal of investment in Sukuk 16 (3,162) 480

Operating (loss) / profit before changes in operating assets and liabilities

(1,984) 117

Net changes in operating assets and liabilities:

Financing assets

- 728

Other assets

(162) (2,635)

Due to shareholder

27 309

Other liabilities

(3,022) (11,402)

Payment to charities

(35) (16)

Net cash used in operating activities (5,176) (12,899) INVESTING ACTIVITIES Purchase of investment securities

(115,170) (47,797)

Purchase of property and equipment and intangible assets

(9,945) (7,360) Proceeds from disposal of equity accounted investee - 26,805 Proceeds from capital redemption 1,544 - Proceeds from disposal / maturity of investment securities

113,016 124,172

Net cash (used in) / from investing activities (10,555) 95,820

FINANCING ACTIVITIES Return of capital to non-controlling interests - (1,642) Repayment of bank financing

(133,273) (65,761)

Principal portion of lease liability (314) - Proceeds from bank financing 144,605 15,962

Net cash from / (used in) financing activities 11,018 (51,441) Net (decrease) / increase in cash and cash equivalents (4,713) 31,480 Cash and cash equivalents at beginning of the period 101,662 61,144 Effect of net impairment losses on placements with financial institutions (2)

(2)

Cash and cash equivalents at end of the period 96,947

92,622

Cash and bank balances 13,231 7,799 Placements with financial institutions with original maturity of 90 days or less 83,716

84,823

96,947 92,622


CONDENSED CONSOLIDATED STATEMENT OF SOURCES AND USES OF ZAKAH AND CHARITY FUND For the six months ended 30 June 2021 USD 000’s

Six months ended

30 June 2021 (reviewed)

Six months ended


Sources of zakah and charity funds Undistributed charity and zakah funds at the beginning of the period 136 44 Contributions by the Bank 200 250 Total sources of zakah and charity funds during the period

336

294

Uses of zakah and charity fund Contributions for charitable purposes (35) (16) Total uses of funds during the period

(35)

(16)

Undistributed zakah and charity fund at end of the period

301

278


FIRST ENERGY BANK B.S.C. (c) 8 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION For the six months ended 30 June 2021 USD 000’s

1 REPORTING ENTITY

First Energy Bank BSC (c) (the "Bank") is a closed shareholding company incorporated in the Kingdom of Bahrain on 23 June 2008, under Commercial Registration No. 69089-1. The Bank operates under an Islamic wholesale banking license issued by the Central Bank of Bahrain (the "CBB"). The Bank's registered office is at Building 1459, Road 4626, Block 346, Manama, Kingdom of Bahrain.

The principal activities of the Bank and its subsidiaries (the "Group") are mainly Shari'a compliant investment advisory services, participation in project development, joint ventures, mergers and acquisitions and the purchase of assets and asset portfolios. The Bank’s activities are regulated by the CBB and supervised by a Shari'a Supervisory Board to ensure adherence to Shari'a rules and principles in its transactions and activities. As per Extra Ordinary General Assembly Meeting held on 27 August 2020, 80.02% of the shareholders approved the restructuring of the Bank by changing its license into a commercial entity subject to approval by the Ministry of Industry, Commerce and Tourism (MOICT) and CBB which was pending as of 30 June 2021. CBB in its letter dated 13 July 2021, granted no objection to the Bank for surrendering of its Banking license. Accordingly, the Bank has started the administrative process by publishing a notice for its intention to cease to provide any regulated banking services on 28 July 2021. The Bank will continue its commercial activities as a Company regulated by MOICT.

2 BASIS OF PREPARATION AND PRESENTATION

The condensed consolidated interim financial information of the Group has been prepared in accordance with applicable rules and regulations issued by the Central Bank of Bahrain (“CBB”) including the recently issued CBB circulars on regulatory concessionary measures in response to Coronavirus (COVID-19). These rules and regulations require the adoption of all Financial Accounting Standards (FAS) issued by the Accounting and Auditing Organisation of Islamic Financial Institutions (AAOIFI), except for: (a) recognition of modification losses on financial assets arising from payment holidays provided to

customers impacted by COVID-19 without charging additional profits, in equity instead of the profit or loss account as required by FAS issued by AAOIFI. Any other modification gain or loss on financial assets are recognised in accordance with the requirements of applicable FAS. Please refer to note (3) for further details; and

(b) recognition of financial assistance received from the government and/ or regulators in response to its COVID-19 support measures that meets the government grant requirement, in equity, instead of the profit or loss account as required by the statement on “Accounting implications of the impact of COVID-19 pandemic” issued by AAOIFI. This will only be to the extent of any modification loss recorded in equity as a result of (a) above, and the balance amount to be recognized in the profit or loss account. Any other financial assistance is recognised in accordance with the requirements of FAS. Please refer to note (3) for further details.

The above framework for basis of preparation of the interim financial statements is hereinafter referred to as ‘Financial Accounting Standards as modified by CBB’.


2 BASIS OF PREPARATION AND PRESENTATION (continued) In line with the requirements of AAOIFI and the CBB rule book, for matters not covered under AAOIFI standards the group uses guidance from the relevant International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”). Accordingly, the condensed consolidated interim financial information of the Group has been presented in condensed form in accordance with the guidance provided by International Accounting Standard 34 – ‘Interim Financial Reporting’, using ‘Financial Accounting Standards as modified by CBB’. The condensed consolidated interim financial information of the Group does not contain all information and disclosures required for the annual consolidated financial statements and should be read in conjunction with the Group’s annual consolidated financial statements for the year ended 31 December 2020. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group’s financial position and performance since the last annual consolidated financial statements as at and for the year ended 31 December 2020. Corresponding figures Due to the outbreak of the novel coronavirus (COVID-19) in early 2020, the Central Bank of Bahrain had exempted all public shareholding companies and locally incorporated banks from preparation and publication of their interim financial information for the three-month period ended 31 March 2020. Accordingly, the 30 June 2020 condensed consolidated interim financial information was the first interim period for 2020 and only included results for the cumulative six-month period ended 30 June 2020. In the current period interim financial information, the comparatives for the:

a) the condensed consolidated statement of financial position have been extracted from the audited

consolidated financial statements for the year ended 31 December 2020;

b) the condensed consolidated statements of profit or loss and other comprehensive income, changes in equity, cash flows, for the six-month period ended have been extracted from the reviewed condensed consolidated interim financial information of the Group for the six month period ended 30 June 2020; and

c) the condensed consolidated statements of profit or loss and other comprehensive income for the three-month period ended 30 June 2020 have been extracted from the management accounts of the Group that was used to prepare the reviewed condensed consolidated interim financial information of the Group for the six-month period ended 30 June 2020. However, this information was not published separately in the prior interim period.

The comparative figures have been regrouped, where necessary, in order to conform to the current period’s presentation. Such regrouping did not affect the previously reported profit, comprehensive income for the period or total equity.


3 COVID-19 IMPACT

On 11 March 2020, the COVID-19 outbreak was declared, a pandemic by the World Health Organization (WHO) and has rapidly evolved globally. This has resulted in a global economic slowdown with uncertainties in the economic environment. Global equity and commodity markets, and in particular oil prices, have also experienced great volatility. The estimation uncertainty is associated with the extent and duration of the expected economic downturn and forecasts for key economic factors including GDP, employment, oil prices etc. Invention of vaccination for COVID-19, has resulted in positive sentiments across the world, however the Pandemic continues to spread and hence the Government continues to impose restrictions from time to time. The economy continues to be supported by the Governments assistance through its various concessionary measures hence it is difficult to assess the complete impact of the Pandemic on each sector. The pandemic as well as the resulting measures and policies have had some impact on the Group. The Group is actively monitoring the COVID-19 situation, and in response to this outbreak, has activated its business continuity plan and various other risk management practices to manage the potential business disruption on its operations and financial performance. The management and the Board of Directors (BOD) has been closely monitoring the potential impact of the COVID-19 developments on the Group’s operations and financial position; including possible loss of revenue, impact on asset valuations, impairment, review of onerous contracts and debt covenants, outsourcing arrangements etc. The Group has also put in place contingency measures, which include but are not limited to enhancing and testing of business continuity plans including its liquidity requirements. In preparing the condensed consolidated interim financial information, judgements made by management in applying the Group’s accounting policies and sources of estimation are subject to uncertainty regarding the potential impacts of the current economic volatility and these are considered to represent management's best assessment based on available or observable information. Modification of financial assets The Group had no impacted customers to whom it was required to provide payment holidays on financing exposures (refer note 2 (a)). Recognition of financial assistance The Group has not received any financial assistance from Government during the period (refer note 2 (b)).

4 SIGNIFICANT ACCOUNTING POLICIES

The accounting policies and methods of computation applied by the Group in the preparation of the condensed consolidated interim financial information are the same as those used in the preparation of the Group’s last audited consolidated financial statements as at and for the year ended 31 December 2020, except for those arising from adoption of the following standards and amendments to standards effective from 1 January 2021. A) New standards, amendments, and interpretations issued and effective for annual periods

beginning on or after 1 January 2021. (i) FAS 32 Ijarah

AAOIFI issued FAS 32 “Ijarah” in 2020, this standard is effective for financial periods beginning on or after 1 January 2021. The standard supersedes the existing FAS 8 “Ijarah and Ijarah Muntahia Bittamleek”.


4 SIGNIFICANT ACCOUNTING POLICIES (continued) A New standards, amendments, and interpretations issued and effective for annual periods beginning on or after 1 January 2021 (continued) FAS 32 sets out principles for the classification, recognition, measurement, presentation and disclosure of Ijarah (Ijarah asset, including different forms of Ijarah Muntahia Bittamleek) transactions entered into by the Islamic financial institutions as a lessor and lessee. The Group has applied FAS 32 “Ijarah” from 1 January 2021. The impact of adoption of this standard is disclosed in (b) below. (a) Change in accounting policy

Identifying an Ijarah At inception of a contract, the Group assesses whether the contract is Ijarah, or contains an Ijarah. A contract is Ijarah, or contains an Ijarah if the contract transfers the usufruct (but not control) of an identified asset for a period of time in exchange for an agreed consideration. For Ijarah contracts with multiple components, the Group accounts for each Ijarah component within a contract separately from non-Ijarah components of the contract (e.g. service fee, maintenance charges, toll manufacturing charges etc.).

As per the transitional provisions of FAS 31, the entity may choose not to apply this standard on existing transactions executed before 1 January 2021 and have an original contractual maturity before 31 December 2021. Measurement For a contract that contains an Ijarah component and one or more additional Ijarah or non-Ijarah components, the Group allocates the consideration in the contract to each Ijarah component on the basis of relative stand-alone price of the Ijarah component and the aggregate estimated stand-alone price of the non-Ijarah components, that may be charged by the lessor, or a similar supplier, to the lessee. At the commencement date, a lessee shall recognise a right-of-use (usufruct) asset and a net ijarah liability. (i) Right-of-use (usufruct) asset On initial recognition, the lessee measures the right-of-use asset at cost. The cost of the right-of-use asset comprises of: ‐ the prime cost of the right-of-use asset; ‐ initial direct costs incurred by the lessee; and ‐ dismantling or decommissioning costs. The prime cost is reduced by the expected terminal value of the underlying asset. If the prime cost of the right-of-use asset is not determinable based on the underlying cost method (particularly in the case of an operating Ijarah), the prime cost at commencement date may be estimated based on the fair value of the total consideration paid/ payable (i.e. total Ijarah rentals) against the right-of-use assets, under a similar transaction. As per the group's assessment, at the time of implementation the fair value of right-of-use assets are equal to the net Ijarah liability. After the commencement date, the lessee measures the right-of-use asset at cost less accumulated amortisation and impairment losses, adjusted for the effect of any Ijarah modification or reassessment.


4 SIGNIFICANT ACCOUNTING POLICIES (continued) A New standards, amendments, and interpretations issued and effective for annual periods beginning on or after 1 January 2021 (continued) The Group amortises the right-of-use asset from the commencement date to the end of the useful economic life of the right-of-use asset, according to a systematic basis that is reflective of the pattern of utilization of benefits from the right-of-use asset. The amortizable amount comprises of the right-of-use asset less residual value, if any. The Group determines the Ijarah term, including the contractually binding period, as well as reasonably certain optional periods, including: extension periods if it is reasonably certain that the Bank will exercise that option; and/ or termination options if it is reasonably certain that the Bank will not exercise that option. Advance rentals paid are netted-off with the gross Ijarah liability. The Group carries out impairment assessment in line with the requirements of FAS 30 “Impairment, Credit Losses and Onerous Commitments” to determine whether the right-of-use asset is impaired and to account for any impairment losses. The impairment assessment takes into consideration the salvage value, if any. Any related commitments, including promises to purchase the underlying asset, are also considered in line with FAS 30 “Impairment, Credit Losses and Onerous Commitments”. (ii) Net ijarah liability The net ijarah liability comprises of the gross Ijarah liability, plus deferred Ijarah cost (shown as a contra-liability). The gross Ijarah liability is initially recognised as the gross amount of total Ijarah rental payables for the Ijarah term. The rentals payable comprise of the following payments for the right to use the underlying asset during the Ijarah term: fixed Ijarah rentals less any incentives receivable; variable Ijarah rentals including supplementary rentals; and payment of additional rentals, if any, for terminating the Ijarah (if the Ijarah term reflects the

lessee exercising the termination option). Variable Ijarah rentals are Ijarah rentals that depend on an index or rate, such as payments linked to a consumer price index, financial markets, regulatory benchmark rates, or changes in market rental rates. Supplementary rentals are rentals contingent on certain items, such as additional rental charge after provision of additional services or incurring major repair or maintenance. As of 30 June 2021, the Group did not have any contracts with variable or supplementary rentals. After the commencement date, the Group measures the net Ijarah liability by: increasing the net carrying amount to reflect return on the Ijarah liability (amortisation of deferred

Ijarah cost) reducing the carrying amount of the gross Ijarah liability to reflect the Ijarah rentals paid re-measuring the carrying amount in the event of reassessment or modifications to Ijarah

contract, or to reflect revised Ijarah rentals. The deferred Ijarah cost is amortised to income over the Ijarah terms on a time proportionate basis, using the effective rate of return method. After the commencement date, the Group recognises the following in the income statement: amortisation of deferred Ijarah cost; and Variable Ijarah rentals (not already included in the measurement of Ijarah liability) as and when

the triggering events/ conditions occur.


4 SIGNIFICANT ACCOUNTING POLICIES (continued) A New standards, amendments, and interpretations issued and effective for annual periods beginning on or after 1 January 2021 (continued) Ijarah contract modifications After the commencement date, the Group accounts for Ijarah contract modifications as follows: change in the Ijarah term: re-calculation and adjustment of the right-of-use asset, the Ijarah

liability, and the deferred Ijarah cost; or change in future Ijarah rentals only: re-calculation of the Ijarah liability and the deferred Ijarah

cost only, without impacting the right-of-use asset. An Ijarah modification is considered as a new Ijarah component to be accounted for as a separate Ijarah for the lessee, if the modification both additionally transfers the right to use of an identifiable underlying asset and the Ijarah rentals are increased corresponding to the additional right-of-use asset. For modifications not meeting any of the conditions stated above, the Group considers the Ijarah as a modified Ijarah as of the effective date and recognises a new Ijarah transaction. The Group recalculates the Ijarah liability, deferred Ijarah cost, and right-of-use asset, and de-recognise the existing Ijarah transaction and balances. Expenses relating to underlying asset Operational expenses relating to the underlying asset, including any expenses contractually agreed to be borne by the Bank, are recognised by the Bank in income statement in the period incurred. Major repair and maintenance, takaful, and other expenses incidental to ownership of underlying assets (if incurred by lessee as agent) are recorded as receivable from lessor. Recognition exemptions and simplified accounting for the lessee The Group has elected not to apply the requirements of Ijarah recognition and measurement of recognizing right-of-use asset and lease liability for the following: short-term Ijarah; and Ijarah for which the underlying asset is of low value. Short-term Ijarah exemption can be applied on a whole class of underlying assets if they have similar characteristics and operational utility. However, low-value Ijarah exemption can only be applied on an individual asset/ Ijarah transaction, and not on group/ combination basis. Impact as lessor on accounting for Ijara Muntahia Bittamleek contracts The management does not expect any impact on its Ijarah Muntahia Bittamleek portfolio upon adoption of this standard. (b) Impact on adoption of FAS 32 The impact of adoption of FAS 32 as at 1 January 2021 has resulted in an increase in right-of-use asset by USD 830 thousand and an increase in Ijarah liability by USD 834 thousand with net impact in retained earnings by USD 4 thousand. The lease contracts comprise office premises which is included as part of property and equipment.


4 SIGNIFICANT ACCOUNTING POLICIES (continued) A New standards, amendments, and interpretations issued and effective for annual periods beginning on or after 1 January 2021 (continued)

Total Assets Total

Liabilities

Equity Closing balance (31 December 2020)

577,950 203,704

374,246

Impact on adoption: Right-of-use asset 830 - - Ijarah liability - 834 - Impact in equity - - (4) 830 834 (4) Opening balance under FAS 32 on date of initial application of 1 January 2021

578,780 204,538

374,242 Right-of-use Asset

30 June 2021

(reviewed) Recognition of right-of-use assets on initial application of FAS 32 830 Amortisation charge for the period (300) Balance as at 30 June 530

Net Ijarah Liability 30 June 2021

(reviewed) Maturity analysis Gross Ijarah

liability Deferred

Ijarah Net Ijarah

liability Less than one year 532 (8) 524 One to five years - - - Total 532 (8) 524

(ii) FAS 31 Investment Agency (Al-Wakala Bi Al-lstithmar)

FAS 31 as issued by AAOIFI is effective 1 January 2021. Wakala structure is used to raise funds from interbank market, such balances are reported under placements from financial institutions (together called “Wakala pool”). The Wakala pool funds are comingled with the Bank’s own funds based on an underlying mudaraba agreement. This comingled pool of funds is invested in a common pool of assets in the manner which the Group deems appropriate without laying down restrictions as to where, how and what purpose the funds should be invested. As per FAS 31, Wakala pool is reported as part of equity of investment account holders (not liabilities) and the profit paid on these contracts is reported in return on equity of investment account holders. As of 31 December 2020 and during the period, the Bank did not raise funds using Wakala placements.


4 SIGNIFICANT ACCOUNTING POLICIES (continued) A New standards, amendments, and interpretations issued and effective for annual periods beginning on or after 1 January 2021 (continued)

(iii) FAS 33 Investment in Sukuks, shares and similar instruments

FAS 33 as issued by AAOIFI is effective 1 January 2021. The standard is applicable on a retrospective basis. However, the cumulative effect, if any, attributable to owners’ equity, equity of investment account holders relating to previous periods, shall be adjusted with investments fair value pertaining to assets funded by the relevant class of stakeholders. The adoption of FAS 33 will result in changes in accounting policies for recognition, classification and measurement of investment in Sukuks, shares and other similar instruments Set out below are the details of the specific FAS 33 accounting policies applied in the current period. Categorization and classification FAS 33 contains classification and measurement approach for investments in Sukuk, shares and similar instruments that reflects the business model in which such investments are managed and the underlying cash flow characteristics. Under the standard, each investment is to be categorized as investment in: (a) equity-type instruments; (b) debt-type instruments, including:

(i) monetary debt-type instruments; and (ii) non-monetary debt-type instruments; and

(c) other investment instruments Unless irrevocable initial recognition choices provided in para 10 of the standard are exercised, an institution shall classify investments as subsequently measured at either of (i) amortised cost, (ii) fair value through equity or (iii) fair value through income statement, on the basis of both: I. the Bank’s business model for managing the investments; and II. the expected cash flow characteristics of the investment in line with the nature of the underlying

Islamic finance contracts. The adoption of this standard had no significant impact on the condensed consolidated interim financial information.

B) New standards, amendments and interpretations issued but not yet effective

(i) FAS 38 Wa’ad, Khiyar and Tahawwut AAOIFI has issued FAS 38 Wa’ad, Khiyar and Tahawwut in 2020. The objective of this standard is to prescribe the accounting and reporting principles for recognition, measurement and disclosures in relation to shariah compliant Wa’ad (promise), Khiyar (option) and Tahawwut (hedging) arrangements for Islamic financial institutions. This standard is effective for the financial reporting periods beginning on or after 1 January 2022.

Further, the standard prescribes accounting for constructive obligations and constructive rights arising from the stand-alone Wa’ad and Khiyar products.

The Group is currently evaluating the impact of adopting this standard.


4 SIGNIFICANT ACCOUNTING POLICIES (continued)

4.1 Basis of consolidation

The condensed consolidated interim financial information includes the results of the Bank and its subsidiaries after elimination of inter group transactions and balances. The following are the Group's significant subsidiaries as at 30 June 2021:

Name of subsidiary Equity interest Nature of business 2021 2020 North Africa Investment Company, Kingdom of Bahrain

100% 100% To hold the Group's 40% associate

stake in Arab Drilling and WorkoverCompany, Libya.

First Energy Oman, Cayman Islands

- 100% To hold 15% stake in Al Izz Islamic Bank

in Oman.*

FEB-Novus Aircraft Holding Company, Bahamas

98.50% 98.50%

To purchase and lease one A330-300aircraft to Malaysia Airlines.

FEB Aqar W.L.L., Kingdom of Bahrain

100% 100% Real estate activities to own or leaseproperty.

FEB Capital Limited, United Arab Emirates

100% 100% Financial institution

* In second quarter of 2020, the Group has sold its investment in Al Izz Islamic Bank. First Energy Oman has been dissolved effective 3 May 2021.

5 FINANCIAL RISK MANAGEMENT The Group’s financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements for the year ended 31 December 2020.

6 JUDGMENT AND ESTIMATES

Preparation of the condensed consolidated interim financial information requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. The areas of significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 31 December 2020. However, the process of making the required estimates and assumptions involved further challenges due to the prevailing uncertainties arising from COVID-19 and required use of management judgements.

7 SEASONALITY

Due to nature of the Bank’s business, the six months’ results reported in this condensed consolidated interim financial information may not represent a proportionate share of the overall annual results.


8 PLACEMENTS WITH FINANCIAL INSTITUTIONS

30 June 2021

(reviewed)

31 December

2020 (audited)

Wakala contracts 82,438 86,206 Commodity murabaha contracts - 7,310 Mudarabah contracts 1,284 1,272 Total gross murabaha and wakala contracts

83,722

94,788 Less: Deferred profits on murabaha contracts - (1)

83,722 94,787

Less: Net expected credit loss allowance * (6) (4) 83,716 94,783

The original maturity of commodity murabaha and wakala contracts are 90 days or less. * For stage wise exposure and allowance for impairment refer note 19.

9 FINANCING ASSETS

30 June 2021

(reviewed)

31 December 2020

(audited) Gross commodity murabaha 170,641 167,211

Less: Deferred profits (1,449) (2,407) Less: Profit in suspense (13,708) (9,320) Expected credit loss allowance * (117,124) (117,124) 38,360 38,360

Ijarah financing 48,780 48,780 Expected credit loss allowance * (24,390) (24,390) 62,750 62,750

* For stage wise exposure and allowance for impairment refer note 19.


10 IJARAH ASSETS

Aircraft

Cost:

At 1 January 2021 100,000

At 30 June 2021

100,000

Depreciation:

At 1 January 2021 31,491 Charge for the period 1,140

At 30 June 2021 32,631

Provision for impairment:

At 1 January 2021 Charge for the period (note 17)

21,837 -

At 30 June 2021 21,837 Net book value:

As at 30 June 2021 (reviewed) 45,532

As at 31 December 2020 (audited) 46,672

The Aircraft is mortgaged against term financing (refer note 15).

11 INVESTMENT SECURITIES

30 June

2021 (reviewed)

31 December 2020

(audited)

11.1 Investment in Sukuk At amortised cost Quoted Sukuk (i) 209,838 204,609 Less: Net impairment allowance (ii) (3,671) (1,207)

206,167 203,402 11.2 Investment in equity instruments Equity type instruments - At fair value through equity - Quoted equity securities (at fair value) (iii) 28,201 28,009 28,201 28,009

Total investment securities 234,368 231,411

(i) Quoted Sukuk with carrying amount of USD 142 million (31 December 2020: USD 167 million) are

pledged against general bank financing of USD 105 million (31 December 2020: USD 92 million) (refer note 15).


11 INVESTMENT SECURITIES (continued) (ii) For stage wise exposure and allowance for impairment refer note 19.

(iii) During the period, no impairment allowance has been recognised by the Bank (2020: USD 10,419 thousand) on quoted equity securities carried at fair value through equity.

(iv) Unquoted equity securities are net of impairment allowance of USD Nil thousand

(31 December 2020: USD 5,962 thousand). During the period, no impairment allowance has been recognised by the Bank (2020: USD 5,962 thousand).

In 2020, the Group had lost its control from Al Dur Energy Investment Company and classified the investment as assets held-for-sale, refer note 14.

12 EQUITY ACCOUNTED INVESTEES

Movement on the equity accounted investees during the period:

30 June 2021

31 December 2020

(reviewed) (audited)

At beginning of the period 38,215 71,149 Share of results of equity accounted investees, net 1,055 1,895 Foreign exchange translation differences (5,730) (8,602) Reclassified from investment securities during the period(iii) - 6,783 Acquisition during the period - 1,749 Dividend received from equity accounted investee - (536) Disposal during the period - (34,223) Balance at the end of the period 33,540 38,215

Equity accounted investees comprise the following:

Name

Country of

incorporation

% holding Nature of business

2021

2020

Associates:

Oba Makarna (i)

Turkey 20%

20% Pasta production

Arab Drilling and Workover Company (ii)

Libya

40%

40% Lease of oil drilling rigs

Heartbeat Investment Company LLC (iii)

United Arab Emirates

-

- Pharmaceutical

(i) The results of Oba Makarna used for equity accounting is based on management accounts for the period from 1 October 2020 to 31 March 2021. (ii) Due to the political situation in Libya, the investment has been fully provided for.


12 EQUITY ACCOUNTED INVESTEES (continued) (iii) In 2020, included herein is Bank’s investment in ADCAN Pharma LLC and Medisal for Pharmaceuticals Industry, 100% owned by Heartbeat Investment Company LLC (Heartbeat) which is 41.08% owned by the Group. In the prior year, a share subscription agreement was signed by Heartbeat with a new shareholder that diluted the interest of the Group to below 20% and hence this investment was classified at investments at fair value through equity. The previous structure did not materialise with the new shareholder and the Group entered with another sale transaction for fully exiting its equity and debt position. During second quarter of 2020, the investment was reclassified from unquoted equity securities to equity accounted investees as assets held-for-sale until before completion of sale with the new buyer. During the fourth quarter of 2020, the sale was completed, accordingly the Group exited its investment in Heartbeat and recognized loss of USD 138 thousand.

13 OTHER ASSETS

30 June 2021

(reviewed)

31 December

2020 (audited)

Fees and commission receivable 7,909 7,909 Receivable from investee * 6,434 6,434 Receivable from investee upon redemption - 1,544 Prepayments and advances 1,368 1,165 Intangible assets 127 85 Others 3,262 3,303

19,100 20,440

Less: Net impairment allowance ** (8,018) (8,019)

11,082 12,421

* Receivable from investee represents an amount advanced to Al Dur Power and Water Company, an investee of the Group, to meet liability reserve account (LRA) funding requirement under a common term agreement, whereby the shareholders are required to fund such account for the purpose of meeting the repayment of senior debt obligations of the investee. In 2020, the Group has lost its control from Al Dur Energy Investment Company and classified the investment as assets held-for-sale, refer note 14. ** For stage wise exposure and allowance for impairment refer note 19.

14 ASSETS HELD-FOR-SALE

In 2020, the Group had lost its control from Al Dur Energy Investment Company and had classified the investment as assets held-for-sale. The subsidiary was de-consolidated with effect from 30 June 2020. The Board of Al Dur Energy Investment Company decided to sell its Investment in ADPWC held through Al Dur Holding Company Limited (“ADHC”). On 7 July 2020, a memorandum of understanding (“MOU”) has been executed with the prospective buyer and the management is carrying out necessary steps to sell this investment. Accordingly, the investment was reclassified to assets held-for-sale. As of 30 June 2021, the assets held-for-sale is net of impairment allowance of USD 6,664.


15 BANK FINANCING

30 June 2021

(reviewed)

31 December

2020 (audited)

Term financing * 48,709 48,698 General financing ** 105,062 93,741

153,771 142,439

* Term financing is secured by a mortgage over an aircraft (note 10). Term financing has been availed by FEB-Novus Fin One Ltd Bahamas, a 100% subsidiary of FEB-Novus Aircraft Holding Company, Bahamas which is a 98.5% subsidiary of the Bank. The term financing has been restructured effective 21 April 2021 and was divided into two tranches, tranche A amounting to USD 27.5 million at a fixed rate while tranche B amounting to USD 1.8 million is at a floating rate based on Libor, both maturing on 23 December 2024.

Since 23 January 2020, due to COVID-19, FEB-Novus Fin One Ltd Bahamas is in breach of the Loan-to-value (“LTV”) threshold level as stipulated in the term financing agreement with Nord LB. Accordingly, the lease rentals are restricted for use by the Group. This also includes financing obtained by FEB Aqar W.L.L., a 100% subsidiary of the Bank, for a development project in Bahrain Financial Harbour. The financing is collateralized with the project land and the right of receipts from sale/rental of office space and residential units on completion have been assigned to the lender.

** This represent financing for general purpose secured by Sukuk of USD 142 million (note 11).

16 INCOME FROM INVESTMENT SECURITIES

30 June

2021 (reviewed)

30 June

2020 (reviewed)

Profit on Sukuk 4,101 4,997 Gain / (loss) on disposal of Sukuk 3,162 (480) Dividend income - 1,476 Fair value gain on investment in structured products - 464

7,263 6,457


17 NET IMPAIRMENT ALLOWANCE

30 June

2021 (reviewed)

30 June

2020 (reviewed)

Investment in Sukuk (note 19) 2,464 2,376 Other assets (note 19) (1) 21,281 Placements with financial institutions (note 19) 2 2 Financing assets (note 19) - 51,655 Ijarah assets (note 10) - 18,474 Quoted equity securities (note 11) - 11,569 Unquoted equity securities (note 11) - 5,962

2,465 111,319

18 RELATED PARTY BALANCES AND TRANSACTIONS

Related parties comprise major shareholders, directors, Shari'a supervisory board, external auditors and executive management of the Group and/or entities over which they exercise control and/or significant influence.

The significant balances with related parties were as follows:

30 June 2021 (reviewed) Associates

Key management personnel/

Shari'a board members/ external auditors

Significant shareholders/

board members/ entities in

which directors are

interested Total Assets Cash and bank balances - - 5,216 5,216 Placements with financial institutions - - 954 954 Investment securities - - 28,201 28,201 Equity accounted investees 33,540 - - 33,540 Other assets 6,457 - - 6,457 Assets held-for-sale 41,469 - - 41,469 Liabilities Due to shareholder - - 37,355 37,355 Other liabilities - 1,500 9,588 11,088


18 RELATED PARTY BALANCES AND TRANSACTIONS (continued)

31 December 2020 (audited) Associates

Key management

personnel/ Shari'a board

members/ external auditors



which directors are

interested Total Assets Cash and bank balances - - 3,002 3,002 Placements with financial institutions - - 65,201 65,201 Investment in equity instruments - - 28,009 28,009 Equity accounted investees 38,215 - - 38,215 Other assets 8,002 - - 8,002 Assets held-for-sale 41,469 - - 41,469 Liabilities Due to shareholder - - 37,328 37,328 Other liabilities - 1,552 11,686 13,238

The transactions with related parties included in the condensed consolidated income statement were as follows:

30 June 2021 (reviewed) Associates

Key management





which directors are

interested Total

Income Income from financing and placements with financial institutions - - 61 61 Share of results of equity accounted investees 1,055 - - 1,055

Expenses

Staff cost - 1,089 - 1,089 Finance cost on placements from financial institutions - - 28 28

Other operating expenses - 481 - 481

Net impairment losses - - (2) (2)


18 RELATED PARTY BALANCES AND TRANSACTIONS (continued)

30 June 2020 (unreviewed) Associates

Key management





which directors are

interested Total

Income Income from investment securities - - 1,476 1,476 Income from financing and placements with financial institutions - - 147 147 Share of results of equity accounted investees 1,242 - - 1,242

Expenses

Staff cost - 1,419 - 1,419 Finance cost on placements from financial institutions - - 309 309

Other operating expenses - 988 - 988

Net impairment losses - - 10,898 10,898


19 EXPECTED CREDIT LOSSES The following table shows reconciliation from the opening to the closing balances of the carrying amounts of financial assets at amortized cost and the loss allowance:

Stage 1 Stage 2 Stage 3 Total

USD’000 USD’000 USD’000 USD’000

Gross exposure subject to ECL at 30 June 2021 - Financing assets - - 204,264 204,264 ‐ Investment in Sukuk 189,861 4,016 15,961 209,838

- Placements with financial institutions 83,722 - - 83,722 - Other assets 8,960 - 7,909 16,869

282,543 4,016 228,134 514,693 Opening Balance ECL - as at 1 January 2021 - Financing assets - - 141,514 141,514 ‐ Investment in Sukuk 34 1,173 - 1,207

- Placements with financial institutions 4 - - 4 - Other assets 110 - 7,909 8,019

148 1,173 149,423 150,744

Net transfer between stages - Financing assets - - - - ‐ Investment in Sukuk - (7) 7 -

- Placements with financial institutions - - - - - Other assets - - - -

- (7) 7 - Charge for the period (net) - Financing assets - - - - ‐ Investment in Sukuk 376 - 3,185 3,561

- Placements with financial institutions 2 - - 2 - Other assets (1) - - (1)

377 - 3,185 3,562

Other movement ‐ Investment in Sukuk - (1,097) - (1,097)

- (1,097) - (1,097)

Closing Balance ECL - as at 30 June 2021 - Financing assets - - 141,514 141,514 ‐ Investment in Sukuk 410 69 3,192 3,671


525 69 152,615 153,209

Net exposure at 30 June 2021 - Financing assets - - 62,750 62,750 ‐ Investment in Sukuk 189,451 3,947 12,769 206,167

- Placements with financial institutions 83,716 - - 83,716 - Other assets 8,851 - - 8,851

282,018 3,947 75,519 361,484


19 EXPECTED CREDIT LOSSES (continued)

Stage 1 Stage 2 Stage 3 Total

USD’000 USD’000 USD’000 USD’000 Gross exposure subject to ECL at 31 December 2020 - Financing assets - - 204,264 204,264 ‐ Investment in Sukuk 114,397 90,212 - 204,609

- Placements with financial institutions 94,787 - - 94,787 - Other assets 8,978 - 7,909 16,887

218,162 90,212 212,173 520,547 Opening Balance ECL - as at 1 January 2020 - Financing assets - 3,163 28,055 31,218 ‐ Investment in Sukuk 42 795 - 837

- Placements with financial institutions 10 - - 10 - Other assets 164 59 - 223

216 4,017 28,055 32,288

Net transfer between stages - Financing assets - (1,874) 1,874 - ‐ Investment in Sukuk (6) 6 - -

- Placements with financial institutions - - - - - Other assets (54) (59) 113 -

(60) (1,927) 1,987 - Charge for the year (net) - Financing assets - - 117,701 117,701 ‐ Investment in Sukuk (2) 372 - 370

- Placements with financial institutions (6) - - (6) - Other assets - - 3,289 3,289

(8) 372 120,990 121,354

Other movement - Financing assets - (1,289) (6,116) (7,405) - Other assets - - 4,507 4,507

- (1,289) (1,609) (2,898)

Closing Balance ECL - as at 31 December 2020 - Financing assets - - 141,514 141,514 ‐ Investment in Sukuk 34 1,173 - 1,207


148 1,173 149,423 150,744

Net exposure at 31 December 2020 - Financing assets - - 62,750 62,750 ‐ Investment in Sukuk 114,363 89,039 - 203,402

- Placements with financial institutions 94,783 - - 94,783 - Other assets 8,868 - - 8,868

218,014 89,039 62,750 369,803

Cash and bank balances did not have a significant ECL as of 30 June 2021 and 31 December 2020.


20 COMMITMENTS

30 June 2021

(reviewed)

31 December

2020 (audited)

Operating lease commitments - 237

- 237

21 FINANCIAL INSTRUMENTS I. Financial instruments at fair value:

Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable and willing parties in an arm’s length transaction. The COVID-19 pandemic has resulted in a global economic slowdown with uncertainties in the economic environment. The global capital and commodity markets have also experienced great volatility. The Group’s fair valuation exercise primarily relies on quoted prices from active markets for each financial instrument (i.e. Level 1 input) or using observable or derived prices for similar instruments from active markets (i.e. Level 2 input) and has reflected the volatility evidenced during the period and as at the end of the reporting date in its measurement of its financial assets and liabilities carried at fair value. Fair values of quoted securities / Sukuk are derived from quoted market prices in active markets, if available. For unquoted securities / Sukuk, fair value is estimated using appropriate valuation techniques. Such techniques may include using recent arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis or other valuation models. The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities; Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. Fair value of investment in structured products is derived from inputs other than quoted prices included within Level 1 that are observable for the asset, either directly (i.e.as prices) or indirectly (i.e. derived from prices).


21 FINANCIAL INSTRUMENTS (continued)

The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy:

30 June 2021 (reviewed) Level 1 Level 2 Level 3 Total

Fair value through equity Quoted equity securities 28,201 - - 28,201

31 December 2020 (audited) Level 1 Level 2 Level 3 Total

Fair value through equity Quoted equity securities 28,009 - - 28,009

II. Financial instruments not at fair value:

Set out below is an overview of Group’s financial instruments, other than cash & cash equivalents:


Carrying amount

Fair value

Financial assets: Financing assets 62,750 62,750 Investment securities 206,167 202,739

Total 268,917 265,489

Financial liabilities: Bank financing 153,771 153,771 Total 153,771 153,771

31 December 2020 (audited)

Carrying amount

Fair value

Financial assets: Financing assets 62,750 62,750 Investment securities 203,402 204,679 Total 266,152 267,429

Financial liabilities: Bank financing 142,439 142,439 Total 142,439 142,439

The fair values of the Group’s other financial instruments on the reporting date are not significantly different from their carrying values.


22 REGULATORY RATIOS

As of 30 June 2021, the Bank is compliant with the required Capital Adequacy Ratio (CAR), Net Stable Funding Ratio (NSFR) and Liquidity Coverage Ratios (LCR). As at 30 June 2021, the Group’s CAR stood at 65.4% (31 December 2020: 67.1%) and its NSFR and LCR was 107.2% (31 December 2020: 104.3%) and 247.5% (31 December 2020: 156.0%) respectively.

a. Net Stable Funding Ratio (NSFR)

The NSFR is calculated in accordance with the Liquidity Risk Management Module guidelines, issued by the CBB and is effective from 2019. As per recent CBB circular OG/106/2020 dated 17 March 2020, the limit is reduced to 80% for a period of nine months, to contain the financial repercussions of the COVID-19. The Group’s consolidated NSFR ratio as of 30 June 2021 is 107.2% (31 December 2020: 104.3%).

The NSFR (as a percentage) as at 30 June 2021 is calculated as follows:


22 REGULATORY RATIOS (continued)

Unweighted Values (i.e. before relevant applying

factors)

No. Item No

specified maturity

Less than 6

months

More than 6 months and less than one

year

Over one year

Total weighted

value

Available Stable Funding (ASF): 1 Capital: 2 Regulatory capital 366,313 - - - 366,313 3 Other capital instruments - - - - -

4 Retail deposits and deposits from small business customers: - - - - -

5 Stable deposits - - - - - 6 Less stable deposits - - - - - 7 Wholesale funding: - - - - - 8 Operational deposits - - - - - 9 Other wholesale funding - 104,761 47,245 - 23,623

10 Other liabilities: - - - - -

11 NSFR Shari’a-compliant hedging contract liabilities - - - - -

12 All other liabilities not included in the above categories - 9,615 - - -

13 Total ASF 366,313 114,376 47,245 - 389,936

Required Stable Funding (RSF):

14 Total NSFR high-quality liquid assets (HQLA) 67,589 - - - 14,855

15 Deposits held at other financial institutions for operational purposes - 92,861 - - 13,929

16 Performing financing and sukuk / securities:

17 Performing financing to financial institutions secured by Level 1 HQLA - - 38,761 - 19,381

18

Performing financing to financial institutions secured by non-level 1 HQLA and unsecured performing financing to financial institutions - - - - -

19

Performing financing to non-financial corporate clients, financing to retail and small business customers, and financing to sovereigns, central banks, PSEs of which: - - - - -

20

- With a risk weight of less than or equal to 35% as per the CBB Capital Adequacy Ratio guidelines - - - - -

21 Performing residential mortgages, of which:

22 - With a risk weight of less than or equal to 35% under the CBB Capital Adequacy Ratio Guidelines - - - - -

23

Securities / sukuk that are not in default and do not qualify as HQLA, including exchange-traded equities - 1,916 - 81,726 70,425

24 Other assets: - - - - -

25 Physical traded commodities, including gold - - - - -

26

Assets posted as initial margin for Shari’a-compliant hedging contracts and contributions to default funds of CCPs - - - - -

27 NSFR Shari’a-compliant hedging assets - - - - -

28 NSFR Shari’a-compliant hedging contract liabilities before deduction of variation margin posted - - - - -

29

All other assets not included in the above categories 203,611 - - - 245,080

30 OBS items - - - - -

31 Total RSF 271,200 94,777 38,761 81,726 363,670

32 NSFR (%) - - - - 107.2%


22 REGULATORY RATIOS (continued) The NSFR (as a percentage) as at 31 December 2020 is calculated as follows:

Unweighted Values (i.e. before relevant applying

factors)

No. Item No

specified maturity

Less than 6 months

More than 6 months and less than one

year

Over one year

Total weighted

value

Available Stable Funding (ASF): 1 Capital: 2 Regulatory capital 373,967 - - - 373,967 3 Other capital instruments - - - - -

4 Retail deposits and deposits from small business customers:

5 Stable deposits - - - - - 6 Less stable deposits - 2,098 - - 1,049 7 Wholesale funding: - - - - - 8 Operational deposits - - - - - 9 Other wholesale funding - 131,068 9,588 130 4,924

10 Other liabilities:

11 NSFR Shari’a-compliant hedging contract liabilities - - - - -

12 All other liabilities not included in the above categories - 10,289 - - -

13 Total ASF 373,967 143,455 9,588 130 379,940

Required Stable Funding (RSF):

14 Total NSFR high-quality liquid assets (HQLA) 47,501 - - - 2,374

15 Deposits held at other financial institutions for operational purposes - 97,466 - - 14,620

16 Performing financing and sukuk / securities: - - - -

17 Performing financing to financial institutions secured by Level 1 HQLA - - - - -

18

Performing financing to financial institutions secured by non-level 1 HQLA and unsecured performing financing to financial institutions - - - -

19

Performing financing to non-financial corporate clients, financing to retail and small business customers, and financing to sovereigns, central banks, PSEs of which: - - - - -

20

- With a risk weight of less than or equal to 35% as per the CBB Capital Adequacy Ratio guidelines - - - -

21 Performing residential mortgages, of which:

22 - With a risk weight of less than or equal to 35% under the CBB Capital Adequacy Ratio Guidelines - - -

23

Securities / sukuk that are not in default and do not qualify as HQLA, including exchange-traded equities - - 30,268 118,784 118,101

24 Other assets:

25 Physical traded commodities, including gold - - - - -

26

Assets posted as initial margin for Shari’a-compliant hedging contracts and contributions to default funds of CCPs - - - - -

27 NSFR Shari’a-compliant hedging assets - - - - -

28 NSFR Shari’a-compliant hedging contract liabilities before deduction of variation margin posted - - - - -

29

All other assets not included in the above categories 229,118 - - - 229,118

30 OBS items - - - - -

31 Total RSF 276,619 97,466 30,268 118,784 364,213

32 NSFR (%) 104.3%


22 REGULATORY RATIOS (continued)

b. Liquidity Coverage Ratio (LCR)

The LCR requirements aim to ensure that the Bank has adequate stock of unencumbered high-quality liquidity assets (HQLA) that consists of assets that can be converted into cash immediately to meet its liquidity needs for a 30-calendar day period under a stressed scenario.

LCR is calculated as a ratio of total stock of HQLA over the net cash outflows.

30 June 2021

(reviewed)

31 December

2020 (audited)

Total stock of HQLA 23,116 22,296 Net cash outflows 9,339 14,289 LCR % 248% 156% Minimum required by CBB 80% 80%

c. Capital Adequacy Ratio (CAR)

The Bank’s regulatory capital position at 30 June is as follows:

30 June 2021

(reviewed)

31 December 2020

(audited)

Total risk weighted assets 561,036 559,536 Tier 1 capital: - CET1 prior to regulatory adjustments 366,313 373,967 - Less: regulatory adjustments - - CET1 after regulatory adjustments 366,313 373,967 AT1 - Tier 2 capital 594 1,321 Total regulatory capital 366,907 375,288 Total regulatory capital expressed as a percentage of total risk weighted assets 65%

67%

Minimum required by CBB 12.5% 12.5% Leverage ratio 69% 71%

FIRST ENERGY BANK B.S.C. (c) 33 UN-REVIEWED SUPPLEMENTARY FINANCIAL INFORMATION - IMPACT OF COVID-19 USD 000’s

(The attached financial information do not form part of the condensed consolidated interim financial information)

FIRST ENERGY BANK B.S.C. (c) 34 UN-REVIEWED SUPPLEMENTARY FINANCIAL INFORMATION - IMPACT OF COVID-19 USD 000’s

On 11 March 2020, the Coronavirus (COVID-19) outbreak was declared, a pandemic by the World Health Organization (WHO) and has rapidly evolved globally. This resulted in a global economic slowdown with uncertainties in the economic environment. This includes disruption to capital markets, deteriorating credit markets and liquidity concerns. Certain restrictions continue to be in effect during 2021 with an aim to contain the spread including implementation of travel restrictions and quarantine measures. Various concessionary measures were introduced by the CBB in 2020 and most of them continue to be in effect in 2021. The pandemic as well as the resulting measures and policies have had some impact on the Group. The Group is actively monitoring the COVID-19 situation, and in response to this outbreak, has activated its business continuity plan and various other risk management practices to manage the potential business disruption on its operations and financial performance.

Following is the summary of the cumulative financial impact of COVID-19 from 2020 is as follows:

Net impact on the Group's consolidated

income statement


financial position


owners' equity

Government grants 520 - 520 Incremental expenses (500) - (500) Provisions and impairment losses (51,435) (51,435) (51,435)

The above supplementary information is provided to comply with the CBB circular number OG/259/2020 (Reporting of Financial Impact of COVID-19), dated 14 July 2020. This information should not be considered as an indication of the results of the entire year or relied upon for any other purposes. This information does not represent a full comprehensive assessment of COVID-19 impact on the Group. This information has not been subject to a formal review by external auditors.

first energy bank b.s.c. (c) 30 june 2021 condensed

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