Board of Directors. His Royal Highness Prince Mohammed Al-Faisal Aal-Saoud. Chairman. Sheikh/ Ibrahim Bin Khalifa Aal-Khalifa

Transcription

1 Board of Directors His Royal Highness Prince Mohammed Al-Faisal Aal-Saoud Chairman Sheikh/ Ibrahim Bin Khalifa Aal-Khalifa (Representative of Faisal Islamic Bank, Jersey) Dr. Ibrahim Gamil Badran ** (Representative of the Egyptian Company for Investments) Dr. Hatem Abdelgalil Al-Karnshawy (Representative of the Gulf Company for Financial Investments) Mr. Khalid Abdullah Janahi (Representative of the Islamic Investment Company of the Gulf, Al-Sharja) Mr. Abdel Hamid Mohammed Aboumoussa (Bank s Governor) Eng. Dr. Ali Fouad Ahmed El Faramawy (Representative of Egyptian Endowments Authority) Mr. Omar Abdi Ali His Royal Highness Prince Amr Mohammed Al-Faisal Aal-Saoud Mr. Maged Ghaleb Mohammed Ghaleb (Representative of Egyptian Company for Business and Trade) Mr. Mohammed Mohsen Mohammed Mahgoub Mr. Mustafa Abu Bakr Mohammed Azzam Mr. Yusuf Bin Abbas Bin Hassan Ashaari (Representative of DMI for Limited Management Services) Governor Mr. Abdel Hamid Mohammed Aboumoussa * Board members are arranged in Arabic alphabetical order. ** He passed away on 17 December

2 Board of Directors' Committees (1) Executive Committee - His Royal Highness Prince/ Amr Mohammed Al-Faisal Chairman - Mr. Abdel Hamid Aboumoussa (Bank s Governor) Member - Mr. Khalid Abdullah Janahi Member - Eng. Dr. Ali Fouad Ahmed El Faramawy Member - Mr. Yusuf Bin Abbas Bin Hassan Ashaari Member - Mr. Raafat Mokbel Hussein (Executive Chairman Assistant) Member Members of the Executive Committee will jointly have financial authorities within the limits of EGP 10 million. (2) Audit Committee - Mr. Omar Abdi Ali Chairman - Mr. Mustafa Abu Bakr Mohammed Azzam Member - Mr.Mohammed Mohsen Mohammed Mahgoub Member (3) Risk Policies Committee - Mr. Omar Abdi Ali Chairman - Mr. Abdel Hamid Aboumoussa (Bank s Governor) Member - Mr. Mustafa Abu Bakr Azzam Member - Mr.Mohammed Mohsen Mohammed Mahgoub Member (4) Governance and Nominations Committee - Dr. Ibrahim Gamil Badran * Chairman - Dr. Hatem Abdelgalil Al-Karnshawy Member - Mr. Maged Ghaleb Mohammed Ghaleb Member (5) Salaries and remunerations Committee - Dr. Ibrahim Gamil Badran * Chairman - Mr. Omar Abdi Ali Member - Mr. Maged Ghaleb Mohammed Ghaleb Member * He passed away on 17 December

3 Religious Supervisory Board Dr. Nasr Farid Mohammed Wassel Dr. Ali Gomaa Mohammed Abdulwahab Dr. Mohammed Raafat Othman Counselor. Abdulaaty Mahmoud Al-Shafey Dr. Mohammed Al-Shahhat Al-Gendy Chairman Deputy chairman Member Member Member Auditors Mr. Mohammed Salah El Din Isa Aboutabl Mr. Sherif Mohammed Fathy Al-Kelany 3

4 Chairman s Note Dear Shareholders of Faisal Islamic Bank of Egypt Peace, mercy and blessings of Allah be upon you. I'm pleased to meet you today to review the annual report of the Board of Directors for the fiscal year 2015, which includes the developments and results clarifying the prominent achievements and reflecting the efforts exerted by the Bank's management and staff. In spite of hardships and unfavorable circumstances witnessed during the reporting year on the local, regional and international levels, the Bank experienced positive performance indicators during the reporting year. These indicators exceeded the targets contained in the Bank's five-year strategy ( ), contributing to boost its market share in the Egyptian Banking Sector, maintain its position regionally and internationally and keep its leading position in Islamic Banking Industry. At the international level, the crisis of declining oil and primary commodities prices has continued and negatively affected the Arab region and the countries exporting oil and primary commodities. The year under review has witnessed some aspects of financial, monetary and economic instability, slowdown in economic growth has increased in many parts of the world, and several countries have suffered from heavy government debt burden. In Egypt, the rates of unemployment, inflation, general budget deficit and total public debt have remained at high levels despite its growth slowdown. In addition, there was a decrease in the revenues of tourism and Suez Canal and the remittances of Egyptians working abroad. Despite the above-mentioned discouraging and unfavorable developments, all main indicators of the Bank's activities and business results have recorded remarkable growth rates in the light of adhering to regulatory rules issued by the Central Bank of Egypt and Basel Committee. These rules are represented in hedging policy tools, including standards related to capital adequacy and financial leverage, accumulation of forward-looking provisions, liquidity ratios and banking credit regulations, in addition to tools that are related to financial, real estate markets and foreign exchange exposure risks. In accordance with the unconsolidated financial statements of the Bank, total volume of business - represented in total assets and contra accounts - has increased to EGP (55.79) billion with an annual increase amounting to EGP (5.2) billion at a rate of (10.28%) at the end of As total current and investment accounts and saving certificates represent the main and the 4

5 most important source of funds under management for the Bank, and whereas the Bank seeks to provide different kinds of Sharia-compliant saving pools in local and foreign currencies that suit all levels and have competitive advantages and returns, total balances of saving pools and certificates (funds under management) reached EGP (49.24) billion at the end of the reporting year, recording an increase amounting to EGP (4.47) billion at a rate of (9.98%). Deposit balances are distributed among (1.1) million accounts managed by the Bank for its customers. Funds under management and available resources were invested in Sharia-compliant fields complying with the sound investment methods and Sharia principles that concurrently satisfy the different needs of customers in the private business sectors, corporations, Small and Medium Enterprises (SMEs). The Bank has become a key player in the field of syndicated finance, which requires ongoing cooperation and coordination with local and foreign banks to consider and finance major projects that would contribute to the creation and promotion of value added to the economy and provide more job opportunities for the youth and to speed up development. Additionally, the Bank is keen to distribute its investment portfolio, enhance expansion, reduce concentration risks, minimize risks, and ensure sufficiency of collaterals and provisions in accordance with applicable regulatory rules. Net finance and investment balances (after deducting the provision) increased by an amount of EGP (5.64) billion, at a rate of (12.5%) to reach EGP (50.75) billion compared to EGP (45.11) billion at the same date of the previous year. It is worth noting that net finance and investment balances represents (91.42%) of total liabilities and shareholders equity. On the other hand, the Bank has succeeded in increasing the capital base represented by the shareholders equity item, to become EGP (4.29) billion on 31/12/2015, recording an annual growth rate of (15.32%). So shareholders equity represents now (7.69%) of total volume of business (assets + contra accounts) compared to (7.35%) at the end of the previous year. Good developments of the Bank's main activities were reflected on FY 2015 business results, as the Bank realized total revenues amounting to EGP ( ) million compared to EGP ( ) million during the previous fiscal year, with an increase of EGP (712.23) million at a rate of (18.9%), of which EGP ( ) million were distributed as returns to holders of investment accounts and saving certificates [against EGP ( ) million during 2014]. Total profit of the reporting year amounted to EGP ( ) million against EGP ( ) million in 2014, recording an increase of EGP (427.37) million at a rate of (28.28%) compared to the previous year. This total profit includes retained earnings of EGP ( ) million, total banking risk reserve and amounts transferred to capital reserve amounting to EGP (2.18) million. The residual amount of EGP (751.67) million represents the net distributable profit for FY 2015 against EGP (606.71) million, recording an increase of EGP (144.96) million at a rate of (23.89%) compared to the previous year. 5

6 As for the retail banking activities, the reporting year has witnessed the development of the Bank's Call Center by providing it with the state-of-the-art technologies and necessary technical support services and qualified staff in order to be operated at full capacity through which it will be able to effectively and continuously respond to all customers' requests and inquiries 24/7. In a related development, the Card Center has succeeded in converting all issued electronic payment cards to smart "Visa Electron" cards, so as to be difficult for hackers to copy and illegally use their data. At the end of 2015, the number of issued cards has increased to (305) thousand cards. In addition, the number of ATM machines has also increased to (221) machines located outside the Bank's branches, malls and public places and squares across the country. In the light of the Central Bank of Egypt's initiative to revitalize the real estate financing activity, aiming to provide affordable housing that meets the needs of citizens, especially the low and middle-income people, the Bank has established a specialized department in this field; supported it with the required skills and capabilities and developed a detailed business system for this department together with a method for evaluating the creditworthiness, that suits the segment and nature of the customers in this activity In addition to simplifying and facilitating the procedures without prejudice to the credit regulations, as several transactions have been actually studied and implemented. In light of the great attention paid by the State to small and medium enterprises sector and based on the CBE's instructions issued in December 2015 to activate this trend, the Bank began preparing and mobilizing the technological, regulatory and technical environment, so that the Bank can play an effective role in financing this vital sector, supported by practical considerable expertise of the Bank in this field and by a good customer base. Also with regard to retail banking, the Bank has completed the studies and procedures required for issuing a new saving pool under the name of (Variable Monthly Return Certificates "Izdhar"). This new Certificate is a nominal Sharia-compliant certificate. The term of the certificate is 5 years as of the day following the date on which such certificate is purchased. The certificate shall be issued in a denomination of EGP 1,000 and the multiples thereof. Its returns shall be monthly distributed (under settlement), as final adjustment shall be made at the end of each quarter based on actual results. The certificate has a wide range of in-kind benefits, the most important of which is the eligibility to take part in draws on Umrah and Hajj awards and to carry out investment transactions, using such certificate as collateral. This new certificate will be immediately offered to customers upon CBE's approval on its regulation. In completion of retail banking, I previously referred in the past year's report, to the establishment of "Faisal Financial Securities" as an Egyptian joint stock company working in the field of securities brokerage, aiming to provide its services to the Bank and its customers. The year 2015 has witnessed the completion of the entire information technology infrastructure. It is scheduled that such company will immediately start doing business after receiving the final license from Egyptian Financial Supervisory Authority (EFSA) no later than the middle of Regarding the geographical expansion plan of Bank's units and branches re-engineering and facilitation of work procedures therein for enhancing the level of services provided to 6

7 customers, the Bank has opened a new branch in Ismailia city during At the end of the reporting year, total number of operating branches reached (32) branches covering most governorates of Egypt. Dokki branch development and restoration works have been completed and it has been opened on 30/8/2015. It is worth noting that the Bank is about to fully develop and equip the new office of Heliopolis branch to be opened in the first half of Moreover, the Bank plans to open four new branches during the current year. These branches are "Port Said branch", "Maadi branch", "Tenth of Ramadan branch" and "Madinaty branch". The Bank is about to execute a contract to buy a new plot of land to expand "Zagazig Branch" and then the building development works will begin. Due to the social responsibility of the Bank and its ongoing commitment towards the society, the Bank has made donations to support the Egyptian economy and social solidarity services, as well as public constructions in a number of governorates. Total donations provided by the Bank amounted to EGP (17) million during the reporting year, Furthermore, resources of the Bank's Zakat Fund reached EGP (260) million until 31/12/2015, of which EGP (159) million has been directed, as cash and in-kind zakat, to the beneficiaries of needy people, while the share of medical services and health care provided to needy patients was EGP (32) million in addition to EGP (15) million to support eligible students in the Egyptian universities, as well as more than EGP (6) million to support the Bank's orphanage. This is in addition to the share of needy debtors' item from the Fund's resources. As for the development and activation of the Bank's internal control systems, the management has implemented all the procedures relating to quantitative impact studies (QIS) of regulations that have significant impacts on activities, including the examination and discussion of the content of these studies and methods that are used to calculate their standards and to provide the Central Bank of Egypt with feedback and inquiries concerning these standards before being finally approved and imposed by the CBE. This included internal control rules, liquidity risks and internal evaluation of the capital (ICAAP). In addition, The Bank strictly adheres to guidelines, banking standards and ratios issued by supervisory bodies and regulatory rules. As "Capital Adequacy Ratios" represent the most important regulatory indicators that have a big effect on the Bank's activities and business results, it is worth noting that the actual average of the risk-based Capital Adequacy Ratio (CAR) has recorded (16.69%) during 2015 exceeding CBE regulatory minimum (10%) at a percentage of (6.69%), while the average of Non-risk Capital Adequacy Ratio (LR) reached (4.65%) during the year against a minimum limit of (3%), recording a surplus of (1.65%). Eventually, I will refer to the last point that relates to a desire expressed by many of you and complies with the vision of the Board of Directors and executive management of the Bank, which is splitting the Bank's share into five shares to be (one US dollar) for nominal value of the share, where the split has been made after taking and completing all the necessary procedures. So total number of issued and traded shares became (297) million shares. Hence, the new share trading in the Egyptian Stock Exchange began on 4/1/2016. There is no doubt that this measure is primarily designed to increase stock turnover in the stock market along with revitalization of the trading movement and attract more dealers to those shares. All of these measures aim at increasing share liquidity ratio. 7

8 Dear shareholders these are the most important developments and achievements of your Bank during a difficult year at all levels, but the figures and indicators - by virtue of Allah - clarified that the targets of the management were achieved regarding continuous excellence levels in results and performance year after year. Finally, I would like to extend my sincere gratitude and appreciation to you and all the Bank's customers and correspondents for their confidence and cooperation, and I also appreciate sincere efforts exerted by the Bank's management and employees, as well as appreciation to officials of the Central Bank of Egypt and the Religious Supervisory Board of our Bank for their mutual understanding and fruitful coordination. Peace, mercy and blessings of Allah be upon you. Chairman of the Board of Directors Mohammed Al-Faisal Aal Saud 8

9 Domestic Economic Developments Egypt's economy still faces many challenges resulting from high domestic debt and export weakness, exchange rate fluctuations and imbalance between foreign currency resources and the country's needs, as well as the falling oil prices and its effect on Arab investment flows and Egyptian labor's conditions in these regions. Nevertheless, the financial and structural reforms undertaken since the beginning of the fiscal year (2015/2016) have a positive impact on a number of economic indicators. Recent developments of available indicators are as follows: The indictaors recently released by the Ministry of Planning showed that GDP growth rate has increased during the fiscal year (2014/2015) to reach (4.2%) compared to (2.2%) during the previous fiscal year. The International Monetary Fund (IMF) expected the growth rate to be held steady at (4.2%) during FY (2015/2016) and is projected to rise to (4.3%) during FY (2016/2017). The average annual inflation rate (urban) increased to (11%) during FY (2014 / 2015), compared to (10.1%) during the previous fiscal year, while the average annual inflation rate decreased to (8.8%) during the period (July / October 2015), compared to (11.4%) during the same period of Total domestic public debt increased by (16.5%) to reach EGP (2116.3) billion (88% of GDP) at the end of FY (2014/2015), compared to EGP (1816.6) billion (90.9% of GDP) at the end the previous fiscal year. Similarly, the external debt increased by (4.3%) to reach $ (48.062) billion (15% of GDP) at the end of FY (2014/2015), compared to $ (46.076) billion (16.4% of GDP) at the end of FY (2013/2014). $ reach The International Reserves have increased by $ (1.09) billion at the end of November 2015 to (16.423) billion, compared to $ (15.333) billion at the end of December In this regard, the CBE Governor has recently announced that the balance of International Reserves remained steady at $ (16.4) billion during December Egypt's international transactions resulted in an overall BOP surplus of $ (3.7) billion during FY (2014/2015), compared to a surplus of $ (1.5) billion a year earlier. While BOP has recorded an overall deficit of $ (3.7) billion during the period (July - September 2015), compared to a surplus of $ (014) million during the same period of

10 The final outcomes of the State General budget for FY (2014 / 2015) showed that the overall budget deficit recorded EGP (279.4) billion at a rate of (11.5% of GDP) compared to a deficit of EGP (255.4) billion at a rate of (12.5% of GDP) during FY (2013 /2014). Meanwhile, actual data for the period (July / September 2015) showed that the budget deficit increased at a rate of (2.8%) of GDP with a balance of EGP (78.3) billion, compared to a deficit of (2.7%) with a balance of EGP (65.8) billion during the same period of $ reach Tourism revenues have fallen during the first nine months of 2015 at a percentage of (3.8%) to (5.084) billion, compared to $ (5.287) billion at the same period of It is worth noting that those revenues have increased during FY (2014/2015) by (45.3%) to reach $ (7.370) billion compared to $ (5.073) billion during FY (2013/2014). 2015) Remittances of Egyptians working abroad have declined during the period (January / September by (4.8 %) to be limited to $ (14.136) billion compared to $ (14.847) billion at the same period of It is worth noting that these remittances have witnessed an increase of (4.4%) to reach $ (19.330) billion during FY (2014/2015) compared to $ (18.519) billion during FY (2013/2014). The Suez Canal transit tolls have fallen during the period (January / September 2015) by (5.9%) to be limited to $ (3.871) billion compared to $ (4.113) billion at the same period of Similarly, these tolls have slightly decreased by (0.1%) during FY (2014/2015) to reach $ (5.362) billion compared to $ (5.369) billion during FY (2013/2014). With regard to monetary and banking developments, in its meeting held on January 15 th, 2015, the CBE s Monetary Policy Committee (MPC) decided to cut the key CBE Rates by (50) basis points and then kept these rates unchanged until 24/12/2015, when it decided to raise these rates by (50) basis points. As for the exchange rates, Egyptian Pound fell by 9.3% or (66.75) piaster against the US dollar at banks during 2015 to reach (781.06) piaster from (714.31) piaster, but it increased by 1.9% or (16.64) piaster against the Euro to reach (854.87) piaster on 31/12/2015. Regarding developments of the Egyptian Stock Exchange (EGX) Indices during 2015, these indices have declined sharply, as the main index (EGX30) fell by (21.8%), EGX70 fell by (33%), and the broader index (EGX100) dropped by (27.6%). 11

11 Valuation of the Bank performance during the reporting year The efforts of the Bank and the financial policies adopted during the FY 2015 have led to achieving a number of results, the most important of which is that total balance sheet increased by EGP million, and total revenues reached the equivalent of EGP million at a growth rate of 18.9%.These revenues have supported the Bank's ability to distribute returns to the saving pools' customers at an average annual rate of 6% for Investment Accounts held in local currency, 9.07% for the three-year saving certificates, 10.50% for "Nam'a" seven-year saving certificates, 0.56% for investment accounts held in foreign currencies, and 0.53% for Investment Accounts in Euro currency. This is in addition to meeting the different liabilities represented in accumulating provisions to address investment risks and cover current expenses (General and Administrative expenses, Depreciation, Zakat legitimately due on the Bank's funds, and Income taxes). After fulfilling the above-mentioned obligations, a residual surplus of EGP million represents net Profit; of which EGP 0.9 million was transferred to capital reserve according to the law, and EGP 1.2 million was transferred to banking risk reserve; thus resulting in Net Distributable Profit of EGP million. It is worth noting that the financial statements of the Bank at the end of the FY ending on 31/12/2015 were prepared according to the instructions of the Central Bank of Egypt dated 16 December 2008; amending the rules of preparation and presentation of financial statements and foundations of recognition and measurement, and also foreign currency exchange rates at the date of preparation (USD = EGP compared with EGP at the end of the fiscal year 2014). 1- Business results: Net profit of the year amounted to the equivalent of EGP million; this profit resulted from revenues and expenses, as stated in the income statement as follows: 1 1 Revenues: Total revenues during the reporting year amounted to EGP million, which was generated from different banking activities according to the following: * Revenues from investment activities with an amount of EGP million. * Revenues from different banking services amounted to EGP million. 1 2 Expenses: Return on saving pools: Total returns distributed to owners of saving pools amounted to EGP million. 11

12 1 2 2 Current Expenditures: Total current expenditures (General and Administrative expenses, Depreciation, Zakat legitimately due on the Bank's funds) amounted to EGP million Provisions: Total impairment losses of finance and investment transactions amounted to the equivalent of EGP 26.5 million, which supports the Bank's ability to tackle the potential risks Income Tax expenses: The income taxes paid amounted to EGP million. 2- Volume of Business and Main Activities: 2-1 Business Volume: Total balance sheet at the end of December 2015 amounted to the equivalent of EGP 55.5 billion with an increase of EGP 5.4 billion at a growth rate of 10.8%. Off-balance contingent liabilities and commitments amounted to the equivalent of EGP million with a decrease of EGP million at a rate of (43.8%). 2-2 Saving pools: Total current and investment accounts and saving certificates have increased by the equivalent of EGP million during the year to reach the equivalent of EGP million at a growth rate of 10%. 2-3 Finance and Investment Balances: Finance and investment balances (after deducting provision) amounted to the equivalent of EGP million at the end of December 2015, recording an increase of EGP million at a growth rate of 12.5%. These balances represent 91.4% of total balance sheet. The Bank is keen to finance various production and service sectors in accordance with the objectives of the Socio-Economic plan of the country. 2-4 The Bank Companies: The Bank invests a part of its investments to establish subsidiary companies operated in accordance with the Islamic Sharia principles, or to participate in the capital of similar companies with others; in a manner covering all sectors of economic activity. The Bank also finances their activities by Islamic instruments. These companies contribute towards moving the Egyptian economy forward and provide thousands of job opportunities. Total issued capital of these companies amounted to EGP million, of which EGP million is paid. The Bank's share in these companies amounted to EGP 1658 million, with a cost amounted to EGP 2255 million and book value of EGP 2090 million at the end of

13 3- Banking Criteria and Ratios: Our bank has an appropriate position according to the acceptable banking criteria. It also adheres to all instructions issued by the Central Bank of Egypt. 4- Personnel, Training and Branches: 4-1 Personnel and Training: Improving and developing the Bank's performance is closely related to the human resources. Hence, due care and attention is given to personnel so as to improve their capabilities, increase their expertise and provide them with continued training, as being the effective factor in fulfilling the Bank's objectives and strategy. In this regard, Bank's personnel reached 1794 employees at end of 2015 against 1805 during the previous fiscal year. Tailored training programs are provided internally and externally to enhance the personnel efficiency. Training activity during the period under review includes about (1526) trainees for a number of (116) training programs covering all job levels, and preparing 208 trainees for leading and supervisory positions. In addition, the effective role of the Bank in serving the community by providing summer training courses for students of commerce colleges and commercial institutes. As a result, (405) training opportunities have been provided for students during July and August Branches: Number of Bank's operating branches reached (32) branches across the country. Arrangements are being taken to open extra new branches during 2016, God willing. 5- Budget plan for the fiscal Year 2016: The budget plan for the fiscal year 2016 has been prepared to reflect the Bank's objectives and policies as well as business plans for the said year. The budget estimates were based on actual historical data of the Bank's activities and results during the past years, in addition to the prevailing and expected circumstances that may affect the economic and banking environment. The budget plan draft shows the following features: 5 1 Saving pools: An increase of 8.8% in saving pools. 5 2 Finance and investments transactions: An increase of 9% in different investment transactions. 5 3 Shareholders' Dividends: A net of 10% after zakat deduction. Under the provisions of Article "56-Bis" of the Decree-Law No. 53 of 2014, the dividends of Associations of Capital are subject to a tax at a percentage of 10%, and the Bank shall withhold this tax in order to be paid to the Tax Authority. 13

14 The Unconsolidated Balance Sheet As at 31 December 2015 corresponding to 20 Rabie Al Awal 1437 H. Note No. 31 December December 2014 Assets Cash and balances at the Central Bank of )15( Egypt Due from banks ) 19( Governmental securities ) 1. ( Financial assets held for trading ) 16( Musharaka, Murabaha, and Mudaraba with )19( customers Financial investments Available for sale (20/A) Held to maturity (20/B) Investments in subsidiaries and associates (20/C) Intangible assets ) 21( Other assets ) 22( Fixed assets ) 23( Total assets Liabilities and Shareholders Equity Liabilities Balances due to banks ) 24( Saving pools and saving certificates ) 25( Other liabilities ) 29( Other provisions ) 2. ( Total Liabilities Shareholders Equity Paid-up Capital ) 26( Reserves ) 29( Net profit of the year and retained profit (29/D) Total Shareholders Equity Total Liabilities and Shareholders Equity Auditors Governor Chairman of the board Sherif Fathy Al-Kelany Abdel Hamid Mohammed Mohammed Al-Faisal Aal-Saoud Mohammed Salah El Din Isa Aboutabl Aboumoussa - The accompanying notes from (1) to (34) are integral part of the financial statements. - Auditors report is attached. 14

15 The Unconsolidated Income Statement For the financial year ended 31 December 2015 corresponding to 20 Rabie Al Awal 1437 H. Note No. 31 December December 2014 Return on Musharaka, Murabaha, and Mudaraba and similar revenues ) 9( Cost of saving pools and similar costs ) 9( ( ) ) ( Net income from return ) 9( Fees and commissions revenues ).( Dividends ) 6( Net trading income ) 9( (loss) from financial investments (20/D) ) ( ) ( Impairment (loss) from finance and investment transactions ) 10( ) ( )3.119( Administrative expenses ) 11( ( ) ) ( Zakat legitimately due ) ( )4.656( Other operational revenues (expenses) ) 12( )13.302( Profit before income tax Income tax (expenses) ) 13( ) ( ) ( Net profit of the year Earnings per share (EGP) )14( Governor Abdel Hamid Mohammed Aboumoussa Chairman of the Board Mohammed Al-Faisal Aal Saoud - The accompanying notes from (1) to (34) are integral part of the financial statements. 15

16 The Unconsolidated Statement of Changes in Shareholders Equity For the financial year ended 31 December 2015 corresponding to 20 Rabie Al Awal 1437 H. Note No. Paid-up Capital EGP Thousand Reserves EGP Thousand Retained profit EGP Thousand Net profit of the year EGP Thousand Total EGP Thousand Balances as at 1st January 2015 as previously issued Net change in financial investments available for sale Net income directly recognized in Shareholders Equity Dividends ) ( ) ( Transferred to legal reserve (general) ) ( - Transferred to other reserves ) ( - Transferred to retained profit ) ( - Transferred to banking risk reserve for Assets transferred to the Bank Net profit of the year Balances on 31 December 2015 before amendment to banking risk reserve Transferred to general banking risk reserve ) 1.250( - Balances on 31 December Balances on 1 January Net change in financial investments available for sale Net income directly recognized in Shareholders Equity Dividends ) ( ) ( Transferred to legal reserve (general) ) ( - Transferred to retained profit ) ( - Net profit of the year Balances on 31 December 2014 before amendment to banking risk reserve Transferred to general banking risk reserve ) 69( - Balances on 31 December 2014 ) 29(,)26( The accompanying notes from (1) to (34) are integral part of the financial statements. 16

17 The Unconsolidated Cash Flows Statement For the financial year ended 31 December 2015 corresponding to 20 Rabie Al Awal 1437 H. Note No. 31 December December 2014 Cash flows from operating activities Net Profit before Taxes Adjustments to reconcile net profit with cash flows from operating activities Depreciation and Amortization ) 21,23( Impairment of assets ) 19,20( Revaluation differences for other provisions in foreign )2.( currencies. 1 Charge of other provisions ) 2. ( )51.239( (Profit) loss from financial investments (20/D) ) 463( )12.456( Profits from sale of fixed assets ) 12( ) 467( )19.464( Dividends earned during the year ) 6( ).14.73( ).3.956( Income tax paid ) 13( ) ( ) ( Operating income before changes in assets and liabilities from operating activities Net change in assets and liabilities Balances at the Central Bank of Egypt as mandatory reserve )15( ratio ) ( Governmental securities with maturity exceeding three months ) 1. ( ) ( Financial assets held for trading ) 16( Musharaka, Murabaha, and Mudaraba with customers. * ) 19,22( ) ( ) ( Other assets ) 22( ) ( ) ( Balances due to banks ) 24( Saving pools and saving certificates ) 25( Other liabilities ) 29( Net cash flows resulting from operating activities Cash flows from investment activities (Payments) to purchase fixed assets and branch equipment ) 23( ) ( )3..043( (Payments) to purchase intangible assets ) 21( ).4.31( )10.294( Proceeds from fixed assets ) 12( Dividends earned during the year ) 6( Financial Investments available for sale * (20/A, 20/D, 29/C) ) ( ) ( Investments in subsidiaries and associates (20/C) ) ( ) ( Financial investments held to maturity (20/B) ) ( - Net cash flows (used in) investment activities ) ( ) ( Cash flows from financing activities Dividends paid * ) ( ) ( Net cash flows (used in) financing activities ) ( ) ( Net increase in cash and cash equivalent during the year ) ( ) ( Cash and cash equivalent balance - at the beginning of the year Cash and cash equivalent balance - at the end of the year Cash and cash equivalent are represented in: ) 30( Cash and balances at the Central Bank of Egypt Due from banks Other Governmental securities deductible at the Central Bank of Egypt Balances at the Central Bank of Egypt as reserve ratio ) ( ) ( Governmental Securities with maturity (exceeding three months) ) ( ) ( Cash and cash equivalent * Cash Flow Statement didn't include non-cash transactions that are represented in: - Change in "Murabaha and Musharaka with customers" item didn't include Assets transferred to the Bank in lieu of debts which was classified as "other assets" with amount of EGP thousand. In addition to written off debts with amount of EGP thousand for customers, banks and other provisions. - Change in "Financial Investments available for sale" item didn't include evaluation differences which was listed in "Impairment loss of financial investments" and "fair value reserve" items with amount of EGP (40.900) thousand, and EGP 925 thousand that represents profit from sale of Financial Investments available for sale has been added during the year. - Dividends paid didn't include Shareholder dividends, creditors in "other credit balances" item with amount of EGP thousand. - The accompanying notes from (1) to (34) are integral part of the financial statements

18 The Proposed Profit Distribution Statement For the financial year ended 31 December 2015 corresponding to 20 Rabie Al Awal 1437 H. 31 December December 2014 Net profit of the year (from the income statement) less: Profit from sale of fixed assets credited to the capital reserve by Law ) 467( )19.464( General banking risk reserve ) 14631( )69( Net profit of the year available for distribution * Add: Retained profit at the beginning of the year Total Distributed as follows: Legal reserve (general) Shareholders Dividends** Employees profit share Board of director s Remuneration Retained profit at the end of the year Total * Distributed according to the provisions of Article 59 of the Bank s statute. Distribution process is based on CBE's decision in accordance with the provisions of Article 84 of CBE's Banking and Monetary System Law No. 88 of ** 1- Dividends per share amounted to $ 0.10 equivalent to EGP 0,773 (after deducting Zakat) at a rate of 10% of nominal value at the end of 2015; which is the same rate recorded at the end of Under the provisions of Article "56-Bis" of Law No. 53 of 2014, the dividends of Capital Associations are subject to a tax at a percentage of 10%, and the Bank shall withhold this tax in order to be paid to the Tax Authority. Consequently, net dividends per share will be US$ 0.09 equivalent to EGP

19 Complementary Explanations for the Unconsolidated Financial Statements for the financial year ended 31 December 2015 corresponding to 20 Rabie Al Awal 1437 H. 1- Background Faisal Islamic Bank provides all retail and corporate banking services and investment activities in the Arab Republic of Egypt and abroad, through 32 branches, and its head office located at 3, 26 th July St., Cairo. Faisal Islamic Bank of Egypt (Egyptian Joint stock company) was established under the law No. 48 of 1977, amended by the law No. 142 of 1981 and its Executive Regulation in the Arab Republic of Egypt, the Bank is listed in the Egyptian Stock Exchange. In its meeting held on January 14 th, 2016, the Bank's Audit Committee approved the Bank's Financial Statements and the Board of Directors approved them on 28 January Summary of accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. A- Basis of preparation The unconsolidated financial statements are prepared in accordance with the Egyptian accounting standards issued in 2006 and its amendments, and in accordance with the instructions of the Central Bank of Egypt approved by its Board of Directors on 16 December 2008 complying with the mentioned principles. The unconsolidated financial statements are prepared under the historical cost basis, as modified by revaluation of the trading financial assets and liabilities, available for sale investments, and all financial derivatives contracts in addition to the compliance with the related applicable Egyptian laws. These Unconsolidated Financial Statements are prepared according to the provisions of the related applicable Egyptian laws, and the Bank will also prepare Consolidated Financial Statements of the Bank and its subsidiaries in accordance with the Egyptian Accounting Standards. The affiliated companies are entirely included in the consolidated financial statements and these companies are the companies that the Bank which - directly or indirectly - has more than half of the voting rights or has the ability to control the financial and operating policies regardless the type of activity. The Consolidated Financial Statements can be obtained from the Bank s Management. The investments in subsidiaries and associated companies are disclosed in the unconsolidated financial statements of the Bank and its accounting treatment is at cost deducting impairment losses. The unconsolidated financial statements of the Bank should be read along with its consolidated financial statements (being prepared) for the year ended 31 December 2015, to help better understanding and getting complete information on the Bank s financial position as well as its financial performance, its cash flows, and changes in shareholder's Equity for the year then ended

20 B- Subsidiaries and associates: B/1 Subsidiaries Are the companies in which the Bank owns -directly or indirectly- the power to govern financial and operating policies, and generally the Bank owns more than a half of the voting rights. B/2 Associates Are the companies in which the Bank - directly or indirectly- has the ability to influence but not control their financial and operating policies, and generally owns 20% - 50% of the voting rights. Purchase method is used by the Bank to account for acquisition of companies. The acquisition cost is measured by the fair value of assets, or the equivalent assets presented by the Bank in return, and/or issued equities and/or liabilities incurred by the Bank and/or liabilities accepted by the Bank on behalf of the acquired company in the offset date adding any costs directly related to the acquisition process. Net identifiable acquired assets including potential liabilities are measured at fair value on the date of acquisition irrespective of minority interest. The excess of acquisition cost over the Bank s share of fair value in the net assets acquired is recorded as goodwill. If the acquisition cost is less than the stated fair value of the net assets, the difference is recognized directly in the income statement under Other operational revenue/expenses item. Investments in subsidiaries and associates in the unconsolidated financial statements are accounted for at cost; investments are recorded at the acquisition cost including any goodwill and net of any impairment losses. Dividends are recorded in the income statement when dividends are approved, and affirming the Bank s right in its collection. C- Segment reports A business segment is a group of assets and operations related to providing products or services subjected to risks and returns that differ from those of other business sectors. The geographical sector is engaged in providing products or services in a particular economic environment subjected to risks and returns that differ from those of other geographical sectors operating in a different economic environment. D- Transactions and Balances in foreign currencies The Bank maintains its accounts in Egyptian Pound and transactions in foreign currencies conducted during the period are recorded at the foreign exchange rates prevailing at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are revaluated at the foreign exchange rate prevailing at the balance sheet date (USD= EGP at the end of 2015 USD= EGP at the end of 2014) Foreign exchange profits or losses resulting from settlement of these transactions and evaluation differences are recorded in the income statement in the following items: - Net trading income (for assets and liabilities held for trading). - Other operating revenues (expenses) (for other items)

21 The Changes in the fair value of monetary financial instruments held in foreign currency classified as investments available for sale (debt instruments) are analyzed between evaluation differences arising from changes in the amortized cost and differences resulted from change in the prevailing exchange rates, and differences from change in the fair value of the instrument. Evaluation differences resulted from changes in the amortized cost of the instrument are recognized in the income statement under finance returns and similar returns. While differences resulted from change in the prevailing exchange rate are recognized under other operational revenues (expenses). Differences from the change in the fair value (fair value reserve/financial investments available for sale) are recognized in the equity section. Evaluation differences on non-monetary items include profits and losses resulting from change in the fair value such as equity instruments held at fair value through profits and losses. Evaluation differences resulted from equity instruments classified as financial investments available for sale are recorded as fair value reserves in equity section. E- Financial assets Financial assets are classified in the following categories: Financial assets designated at the fair value through profits and losses, finance for customers (Musharaka, Murabaha, and Mudaraba transactions for customers), financial investments held to maturity and financial investments available for sale. The management identifies classification of its investments upon initial recognition. E/1 Financial assets designated at the fair value through profits and losses This category includes financial assets held for trading purpose. The financial assets classified as held for trading if acquired and its value charged mainly for the purpose of short-term selling, or if being a part of a specific financial portfolio with indications that it shall yield good profits on the short term. Derivatives are classified as being for trading purpose unless specified as being hedging instruments. Any financial derivative designated as financial instruments recognized at fair value through profits & losses can t be re-classified during its custody or validity period. No financial instrument shifted from the category of financial instruments recognized at fair value through profits and losses may be reclassified in case this instrument is classified by the Bank at the initial recognition as recognized at fair value through profits and losses. In all cases, the Bank never reclassifies any financial instrument and shift it to the financial instruments recognized at fair value through profits and losses or to the financial assets held for trading purpose. E/2 Musharaka, Murabaha, and Mudaraba with customers Represent non-derivative financial assets with fixed or determinable amount, that are not current in active market, except: - Assets that the Bank intends to sell soon or in the short term, in this case will be classified as assets held for trading purpose. - Assets classified by the Bank as available for sale upon initial recognition. - Assets that the Bank cannot refund its original investment value for reasons other than creditworthiness

22 E/3 Financial Investments held to maturity Financial investments held to maturity are non-derivative assets with fixed or determinable amount and fixed maturity that the Bank management has the ability and the intention to hold it till maturity. The whole group is reclassified as investments available for sale if the Bank sells a substantial amount of the financial assets held to maturity except in the emergency cases. E/4 Financial Investments available for sale Financial investments available for sale represent non-derivative financial assets that are intended to be held for indefinite period and may be sold to cover shortage in liquidity or due to changes in return rates, exchange rates or share prices. For the financial assets, the following has to be applied: Buying and selling operations of financial assets are recognized as usual on the trade date on which the Bank is committed to buy or sell the financial asset, and this applies to the financial investments held maturity as well as financial investments available for sale. Financial assets are derecognized when the contractual rights to receive cash flows from the financial assets have expired, or where the Bank has transferred substantially all risks and rewards of ownership. Liabilities are derecognized when they are discharged by disposal, cancellation, or expiry. Financial investments available for sale and at amortized cost for investments kept to maturity date are subsequently measured at fair value. Profits and losses arising from changes in the fair value of financial investments available for sale are recognized directly in equity, until the financial asset is derecognized or impaired. At that time, the cumulative profits or losses previously recognized in equity should be recognized in the income statement. Return calculated at amortized cost, as well as profits and losses of foreign currencies of monetary assets classified as available for sale are recognized in the income statement. Dividends from available for sale equity instruments are also recognized in income statement when declared. The fair value of quoted investments in active markets is determined based on current Bid Prices. If there is no active market for such financial asset, or no Bid Prices are available, the Bank estimates fair value using one of the valuation techniques. These include the use of recent neutral transactions, discounted cash flow analysis, options pricing methods or other valuation techniques used by other participants. In case of the fair value of the available for sale equity instruments cannot be reliably determined by the Bank, it should be valued at cost after deducting any impairment