Takaful Ikhlas Sdn. Bhd

593075-U

Takaful Ikhlas Sdn. Bhd.

(Incorporated in Malaysia)

Contents Page

Directors' report 1 - 9

Statement by directors 10

Statutory declaration 10

Independent auditors' report 11 - 12

Report of the shariah committee 13

Statement of comprehensive income 14 - 15

Statement of financial position 16 - 17

Statement of changes in equity 18

General takaful fund statement of comprehensive income 19 - 20

General takaful fund statement of financial position 21

Family takaful fund statement of comprehensive income 22 - 23

Family takaful fund statement of financial position 24

Cash flows statement 25 - 26

Notes to the financial statements 27 - 148

593075-U



Directors' report

Principal activities

Results

RM'000

Net profit for the year 8,941

Dividends

Reserves and provisions

Provision for outstanding claims

Before the statement of comprehensive income and statement of financial position were made

out, the directors took reasonable steps to ascertain that there was adequate provision for claims

reported, claims incurred but not enough reserved ("IBNER"), claims incurred but not reported

(“IBNR”) and the actuarial valuation of family takaful liabilities.

The directors have pleasure in submitting their report together with the audited financial

statements of the Company for the financial year ended 31 March 2011.

The Company is engaged principally in the managing of general, family and investment-linked

takaful businesses.

There have been no significant changes in the nature of these activities during the financial year.

No dividend has been paid or declared by the Company since the end of the previous financial

year. The directors do not recommend the payment of any final dividend in respect of the current

financial year.

There were no material transfers to or from reserves or provisions during the financial year other

than those disclosed in the financial statements.

In the opinion of the directors, the results of the operations of the Company during the financialThere were no material transfers to or from reserves or provisions during the financial year.

1

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Bad and doubtful debts

Current assets

Valuation methods

Contingent and other liabilities

At the date of this report, there did not exist:

(a)

(b)


out, the directors took reasonable steps to ascertain that action had been taken in relation to the

writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves

that there were no known bad debts and that adequate allowance had been made for doubtful

debts.

At the date of this report, the directors were not aware of any circumstances which would render

the amount of allowance for doubtful debts in the financial statements of the Company

inadequate to any substantial extent.


out, the directors took reasonable steps to ensure that any current assets which were unlikely to

realise their values as shown in the accounting records of the Company in the ordinary course of

business had been written down to an amount which they might be expected so to realise.

At the date of this report, the directors were not aware of any circumstances which would render

the values attributed to current assets in the financial statements of the Company misleading.

At the date of this report, the directors were not aware of any circumstances which had arisen

which would render adherence to the existing method of valuation of assets or liabilities of the

Company misleading or inappropriate.

any charge on the assets of the Company which had arisen since the end of the financial

year which secures the liabilities of any other person; or

any contingent liability of the Company which had arisen since the end of the financial year

other than those arising in the ordinary course of business of the Company.

No contingent or other liability had become enforceable or is likely to become enforceable within

the period of twelve months after the end of the financial year which, in the opinion of the

directors, will or may substantially affect the ability of the Company to meet its obligations as and

when they fall due.

For the purpose of this paragraph, contingent or other liabilities do not include liabilities arising

from contracts of takaful effected/underwritten in the ordinary course of business of the

Company.

2

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Change of circumstances

Items of an unusual nature

Corporate governance

The Company had complied with all the prescriptive requirements of, and adopts management

practices that are consistent with the principles prescribed under BNM/RH/GL/003-1: Minimum

Standards for Prudential Management of Insurers (Consolidated) and BNM/RH/GL/003-2

Prudential Framework of Corporate Governance for Insurers issued by Bank Negara Malaysia,

and the principles of Shariah.

The Board of Directors ("the Board") is committed in ensuring the highest standards of corporate

governance is practised by the Company. This is a fundamental part in discharging their

responsibilities to protect and enhance stakeholders' value and the financial performance of the

Company.

At the date of this report, the directors were not aware of any circumstances not otherwise dealt

with in this report or the financial statements of the Company which would render any amount

stated in the financial statements misleading.

The results of the operations of the Company during the financial year were not, in the opinion of

the directors, substantially affected by any item, transaction or event of a material and unusual

nature, other than those arising from the adoption of FRS 4 : Insurance Contracts as disclosed in

Note 2.27 of the financial statements.

There had not arisen in the interval between the end of the financial year and the date of this

report any item, transaction or event of a material and unusual nature likely, in the opinion of the

directors, to affect substantially the results of the operations of the Company for the financial

year in which this report was made.

3

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Corporate governance (cont'd.)

Directors

The directors who served since the date of the last report and at the date of this report are:

Encik Sharkawi bin Alis - Chairman

Y. Bhg. Dato' Haji Syed Moheeb bin Syed Kamarulzaman - President/CEO

Y. Bhg. Dato' Haji Othman bin Hashim

Tuan Haji Halim bin Haji Din

Encik Paisol bin Ahmad

Encik Yahaya bin Besah

Dr Syed Musa Syed bin Syed Jaafar Alhabshi

Tuan Haji Anuar bin Mohd. Hassan (retired on 31 March 2011)

Tuan Haji Yusoff bin Yaacob (resigned on 30 December 2010)

Directors’ benefits

Directors’ interests

1 April 31 March

2010 Acquired Sold 2011

Direct Interest:

Tuan Haji Anuar bin Mohd.

Hassan 300,000 - - 300,000

Number of ordinary shares of RM1.00 each

During and at the end of the financial year, no arrangement subsisted to which the Company is a

party with the object of enabling directors of the Company to acquire benefits by means of the

acquisition of shares in or debentures of the Company or any other corporate body.

Since the end of the previous financial year, no director has received or become entitled to

receive a benefit (other than benefits included in the aggregate amount of emoluments received

or due and receivable by the directors, or the fixed salary and benefits receivable as a full time

employee of the Company as disclosed in Notes 11, 12 and 34 to the financial statements as well

as the fixed salary and benefits receivable as a full-time employee of the Company) by reason of

a contract made by the Company or a related corporation with any director or with a firm of which

he is a member, or with a company in which he has a substantial financial interest.

According to the register of directors' shareholdings, the interest of a director in office at the end

of the financial year in shares in the holding company during the financial year were as follows:

In accordance with Article 96A of the Articles of Association of the Company, Encik Paisol bin

Ahmad and Tuan Haji Halim Haji Din retire by rotation and, being eligible, offer themselves for re-

election.

Other than as stated above, none of the other directors in office at the end of the financial year

had any interest in shares in the Company or its related corporations during the financial year.

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Board of directors

Directors Attendance

Encik Sharkawi bin Alis - Chairman 8/8

Non-independent, non-executive director

Y. Bhg. Dato' Haji Syed Moheeb bin Syed Kamarulzaman 8/8

Non-independent, executive director

Encik Paisol bin Ahmad 8/8

Non-independent non-executive director

Y. Bhg. Dato' Haji Othman bin Hashim 8/8

Independent non-executive director

Tuan Haji Halim bin Haji Din 8/8


Encik Yahaya bin Besah 7/8


Dr Syed Musa Syed bin Syed Jaafar Alhabshi 7/8


Tuan Haji Anuar bin Mohd. Hassan (retired on 31 March 2011) 8/8

Non-independent, non-executive director

Tuan Haji Yusoff bin Yaacob (resigned on 30 December 2010) 6/6


The Board presently has 7 members, comprising 4 independent non-executive directors, 2 non-

independent non-executive directors and a non-independent executive director. Together the

directors bring a wide range of business, financial and management experience relevant in

charting the strategic direction of the Company.

During the financial year, 8 Board meetings were held. Details of the Directors' attendance at the

Board meetings during the financial year are disclosed hereunder:

The Board has delegated specific responsibilities to the Audit, Nomination, Remuneration,

Investment and Risk Management Committees of the Board.

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Audit Committee


Tuan Haji Halim bin Haji Din - Chairman 6/6



Encik Yahaya bin Besah 6/6



Nomination Committee

During the financial year, 6 meetings were held. Details of the members of the Committee's

attendance at the meetings held during the financial year are disclosed hereunder:

The Nomination Committee comprises 3 independent non-executive directors and 1 non-

independent non-executive directors.

The primary objective of this Committee is to establish a documented, formal and transparent

procedure for the appointment of directors, principal officer and key senior officers and to assess

the effectiveness of directors, the Board as a whole and the various committees of the Board, the

principal officer and key senior officers.

The Audit Committee comprises 4 independent non-executive directors and 1 non-independent

non-executive director whereby 2 members of the Committee are qualified accountants and

members of the Malaysian Institute of Accountants.

The terms of reference of the Audit Committee include the review of and deliberation of the

Company's financial statements, findings of the External and Internal Auditors, any related party

transactions and any conflict of interest situation within the Company as well as making

recommendation to the Board on appointment/reappointment of External Auditors.

The Committee's primary duties are as spelt out in BNM/RH/GL/003-22 : Guidelines on Audit

Committee and Internal Audit Department (Part A) and BNM/RH/GL 013-4 : Guidelines on

Internal Audit Function of Licensed Institutions issued by BNM.

The Board comprises 6 non-executive directors to enable a balanced and objectiveWhilst the Board is responsible for creating the framework and policies within which theAll material related party transactions have been disclosed in Note XX to the financialThe Board exercises overall responsibility for the Company internal controls and itsThe Board takes responsibility in establishing the Risk Management Committee ("RMC"). TheThe proposed risk management framework for the Company would comprise three mainThe Board also takes responsibility in establishing the Nomination and RemunerationThe Remuneration Committee, on the other hand, is responsible to provide a formal andAs custodian of public funds, the Company’s dealings with the public are always conductedThe Board takes responsibility for presenting a balanced and comprehensive assessment of the

6

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Nomination Committee (cont'd.)


Dr Syed Musa Syed bin Syed Jaafar Alhabshi - Chairman (appointed

on 17 January 2011) N/A*



Encik Sharkawi bin Alis 4/4


Tuan Haji Yusoff bin Yaacob - Chairman (resigned on 30 December 2010) 3/3

* There has been no further meetings held since the date of appointment.

Remuneration Committee


Encik Yahaya Besah - Chairman 3/3



En Paisol bin Ahmad 3/3




The Remuneration Committee comprises 3 independent non-executive directors and 1 non-


The primary objective of the Committee is to provide a formal and transparent procedure for

developing a remuneration policy for directors, principal officer and key senior officers and

ensuring that their compensation is competitive and consistent with the Company's culture,

objectives and strategy.



Chairman:This Committee considers and evaluates the appointment of new Directors of the Company andThe Remuneration Committee comprises two independent, non-executive directors and three

7

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Investment Committee


Encik Paisol bin Ahmad - Chairman (appointed on 25th May 2011) 4/4

Y. Bhg. Dato' Haji Syed Moheeb bin Syed Kamarulzaman 4/4


Tuan Haji Anuar bin Mohd. Hassan - Chairman (retired on 31 March 2011) 4/4


Risk Management Committee


Y. Bhg. Dato' Haji Othman bin Hashim - Chairman 6/6


En Yahaya bin Besah 6/6






The Investment Committee comprises 1 independent non-executive directors, 1 non-independent

non-executive directors and 1 non-independent executive director.

This Committee oversees, guides and monitors the investment operations of the Company as

well as approves recommended investment related transactions. The Committee is also

responsible to note and approve specific transactions of a nature that require, by regulation,

awareness of and sanctioning by the Board of Directors.

The Risk Management Committee comprises 3 independent non-executive directors and a non-


The Risk Management Committee reviews and recommends risk management strategies,

policies and risk tolerance limits for the Board’s approval. The Committee reviews the progress

and assesses the effectiveness and adequacy of the risk management policies and framework

adopted by the Company for identifying, measuring, monitoring and controlling risks within the

Company. The Committee also reviews the adequacy and effectiveness of the infrastructure,

resources and systems in place to ensure effective and timely reporting of risk management

activities.



8

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Holding and ultimate holding company

Auditors

Signed on behalf of the Board in accordance with a resolution of the directors.

Sharkawi bin Alis Halim bin Haji Din

Kuala Lumpur, Malaysia

25 May 2011

The directors regard MNRB Holdings Berhad, a company incorporated in Malaysia, as the

Company's holding and ultimate holding company.

The auditors, Ernst & Young, retire and have expressed their willingness to accept re-

appointment.

Before the balance sheet and income statement of the Company were made out, the directorsto ensure that any current assets which were unlikely to realise their value as shown inany charge on the assets of the Company which has arisen since the end of the financialany contingent liability in respect of the Company which has arisen since the end of theno item, transaction or event of a material and unusual nature has arisen in the intervalrequire any amount to be written off as bad debts or render the amount of the provisionAt the date of this report, the directors are not aware of any circumstances which would:render the values attributed to the current assets in the financial statements of theto ascertain that proper action had been taken in relation to the writing off of bad debtsno contingent liability or other liability has become enforceable or is likely to becomeAt the date of this report, the directors are not aware of any circumstances not otherwise dealtAt the date of this report, the directors are not aware of any circumstances which have arisen

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Statement of comprehensive income

For the year ended 31 March 2011

Note 2011 2010

RM'000 RM'000

(Restated)

Operating revenue 3 211,910 190,190

Investment income 5 5,375 4,091

Realised gains and losses 6 464 4,337

Fair value gains and losses 7 (309) (1,899)

Fee income 8 213,289 194,926

Other operating revenue 9 346 620

Other revenue 219,165 202,075

Commission expenses 8 (115,676) (100,519)

Management expenses 11 (89,983) (86,629)

Change in expenses liability 13 605 5,739

Other expenses (205,054) (181,409)

Profit before taxation 14,111 20,666

Zakat (400) (385)

Taxation 14 (4,770) (6,509)

Net profit for the year 8,941 13,772

Earnings per share (sen)

Basic 28 4.6 7.1

14

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Statement of comprehensive income

For the year ended 31 March 2011 (cont'd.)

Note 2011 2010

RM'000 RM'000

(Restated)

Net profit for the year (cont'd.) 8,941 13,772

Other comprehensive income:

Available-for-sale fair value reserves

Net gains on fair value changes 802 5,298

Deferred tax on fair value changes 102 (240)

Realised gain transferred to statement of

comprehensive income (1,065) (4,337)

Total comprehensive income for the year 8,780 14,493

The accompanying notes form an integral part of the financial statements.

15

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Statement of financial position as at 31 March 2011

Note 2011 2010 1.4.2009

RM'000 RM'000 RM'000

(Restated) (Restated)

Assets

Property, plant and equipment 15 14,237 13,663 5,675

Intangible assets 16 4,583 4,573 3,479

Financial instruments:

Financial assets at fair value

through profit and loss 18(a) 712 1,364 380

Held-to-maturity investments 18(b) 40,450 24,448 26,051

Available-for-sale

financial assets 18(c) 60,888 35,873 20,205

Loans and receivables 18(d) 119,083 155,508 156,506

Deferred tax assets 21 5,170 6,241 7,038

Tax recoverable 2,128 617 227

Cash and bank balances 7,630 1,453 269

Total shareholder's fund assets 254,881 243,740 219,830

Total general takaful fund

assets 338,155 272,976 185,380

Total family takaful fund

assets (page 24) 1,300,836 950,777 735,034

Total assets 1,893,872 1,467,493 1,140,244

Liabilities

Expenses liabilities 22 15,146 15,750 21,489

Due to agents, retakaful operators

and brokers 13,498 15,873 11,997

Due to related companies 20 22 1,132 349

Zakat payable 573 370 93

Other payables 25 25,125 14,547 13,071

Provisions 26 6,344 10,675 1,930

Total shareholder's fund liabilities 60,708 58,347 48,929

Total general takaful fund

liabilities and participants'

fund 338,155 272,976 185,380

Total family takaful fund

liabilities (page 24) 1,300,836 950,777 735,034

Total liabilities 1,699,699 1,282,100 969,343

16

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Statement of financial position as at 31 March 2011 (cont'd.)

Note 2011 2010 1.4.2009

RM'000 RM'000 RM'000


Equity

Share capital 27 195,000 195,000 195,000

Accumulated losses (1,535) (10,476) (24,247)

Available-for-sale reserves 708 869 148

Total shareholder's equity 194,173 185,393 170,901

Total liabilities, shareholder's equity

and participants' funds 1,893,872 1,467,493 1,140,244


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Statement of changes in equity


Non (Accumulated

distributable losses)/

Share Available-for distributable

Note capital sale reserves retained profits Total

RM'000 RM'000 RM'000 RM'000

At 1 April 2009, previously stated 195,000 148 (8,130) 187,018

Effects of adopting FRS 4 2.27(a) - - (16,117) (16,117)

At 1 April 2009, restated 195,000 148 (24,247) 170,901

Total comprehensive income for the year - - 14,493 14,493 At 31 March 2010, restated 195,000 148 (9,754) 185,394

At 31 March 2010, previously stated 195,000 869 1,336 197,205

Effects of adopting FRS 4 2.27(a) - - (11,812) (11,812)

At 31 March 2010, restated 195,000 869 (10,476) 185,393

Total comprehensive income for the year - (161) 8,941 8,780 At 31 March 2011 195,000 708 (1,535) 194,173


18

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General takaful statement of comprehensive income


Note 2011 2010

RM'000 RM'000

(Restated)


Gross earned contribution 4(a) 210,526 216,319

Earned contribution ceded

to retakaful operators 4(b) (32,549) (25,247)

Net earned contribution 177,977 191,072


Realised gains and losses 6 2,706 308

Fair value gains and losses 7 3,035 (1,005)

Fee and commission income 8 3,938 4,505


Gross claims paid (104,436) (87,591)

Claims ceded to retakaful operators 6,995 9,360

Gross change to certificate liabilities (48,224) (40,625)

Change in certificate liabilities ceded

to retakaful operators 13,248 (3,605)

Net claims (132,417) (122,461)

Fee expenses 8 (56,157) (64,026)

Other operating expenses 9 (1,770) (1,376)

Other expenses (57,927) (65,402)

Surplus before taxation 5,872 12,781

Taxation 14 (1,427) (2,511)

Net surplus for the year 4,445 10,270

19

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General Takaful Statement of comprehensive income


Note 2011 2010

RM'000 RM'000

(Restated)

Net surplus for the year (cont'd.) 4,445 10,270



Net gains on fair value changes 2,287 2,152



comprehensive income (2,467) (230)



20

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General takaful statement of financial position

As at 31 March 2011

Note 2011 2010 1.4.2009

RM'000 RM'000 RM'000


Assets



through profit and loss 18(a) 1,105 1,529 329


Available-for-sale



Retakaful certificates assets 23 34,351 29,669 30,842

Takaful certificates receivables 19 32,798 36,156 17,319

Deferred tax assets 21 1,571 2,342 3,316

Cash and bank balances 47,511 226 4,698 Total general takaful assets 350,198 285,019 203,423

Liabilities

Takaful certificates liabilities 23 291,733 228,254 184,563

Takaful certificates payables 24 7,932 5,641 4,786

Tax payable 566 2,017 9

Other payables 25 39,475 42,915 12,143

Total general takaful liabilities 339,706 278,827 201,501

Participants' Fund

General takaful fund 29 10,492 6,192 1,922

Total general takaful liabilities

and participants' fund 350,198 285,019 203,423


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Family takaful statement of comprehensive income


Note 2011 2010

RM'000 RM'000

(Restated)


Gross contribution 486,530 357,610

Contribution ceded to retakaful operators (44,244) 8,807

Net contribution 442,286 366,417


Realised gains and losses 6 8,073 2,024

Fair value gains and losses 7 (8,065) 27,302

Fee and commission income 8 - 63


Gross benefits paid 10 (117,700) (92,780)

Benefits ceded to retakaful operators 25,303 14,049



to retakaful operators 16,540 3,246

Net claims (79,512) (87,092)

Fee expenses 8 (149,726) (125,339)

Other operating expenses 9 (2,829) (4,774)

Other expenses (152,555) (130,113)


Taxation 14 (2,983) (2,622)

Net surplus for the year 238,365 196,199

Surplus/(deficit) from investment-linked business 32 (448) (2,212)

22

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Family Takaful Statement of comprehensive income


Note 2011 2010

RM'000 RM'000

(Restated)

Net surplus for the year (cont'd.) 238,365 196,199




Deferred tax on fair value changes (175) (272)





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Family takaful statement of financial position

As at 31 March 2011

Note 2011 2010 1.4.2009

RM'000 RM'000 RM'000


Assets

Investment properties 17 103,518 110,000 69,966



through profit and loss 18(a) 1,832 17,923 17,090


Available-for-sale



Retakaful certificates assets 23 137,383 105,811 133,313

Takaful certificates receivables 19 83,818 38,761 30,467

Cash and bank balances 62,916 2,832 8,559

Investment-linked business assets 32 93,092 43,391 6,663 Total family takaful assets 1,300,836 950,777 735,034

Liabilities

Takaful certificates liabilities 23 1,104,189 846,087 665,983

Takaful certificates payables 24 34,406 19,464 13,104

Tax payable 1,260 1,046 205

Deferred tax liabilities 21 2,135 2,304 -

Other payables 25 65,754 38,485 49,079

Investment-linked business liabilities 32 2,865 684 399

Investment-linked business

participants' fund 90,227 42,707 6,264

Total family takaful liabilities 1,300,836 950,777 735,034


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Cash flows statement


Note 2011 2010

RM'000 RM'000

Operating Activities

Profit before zakat and taxation 14,111 20,666

Adjustments for:

Depreciation for property, plant and equipment 4,101 2,250

Amortisation of intangible assets 1,169 781

Property, plant and equipment written off - 7

Net accretion of discounts (1,297) (1,265)

Profit on investment accounts (43,759) (28,810)

Fair value adjustments of financial assets at FVTPL (56) (5,028)

Impairment of AFS financial assets 323 371

Impairment of HTM financial asset - 962

Gain on disposal of investments (12,077) (6,669)

Gain on disposal of property, plant and equipment 834 -

Gain on fair value adjustment of investment properties 7,490 (22,535)

Impairment of takaful receivables (2,418) 1,832

Increase in contribution liabilities 23,821 633

Increase in expenses liabilities (605) (5,739)

Results of general takaful fund 4,301 10,270

Results of family takaful fund 238,365 196,199

Operating profit before working capital changes 234,303 163,925

Purchase of financial assets/investments (199,146) (219,040)

Decrease/(Increase) in islamic investment accounts 47,210 (48,862)

Increase in loans receivable (3) (850)

Increase in trade receivables (39,281) (28,964)

Increase in other receivables (53,472) (6,545)

Increase in outstanding claims 53,464 52,592

Increase in trade payables 14,858 11,092

Increase in other payables 32,492 45,283

Net change in balance with holding company (5,994) 784

Net cash generated/(used in) from operating

activities 84,431 (30,585)

Investment income received 44,106 33,890

Hibah to participants 29 (1) (80)

Income tax paid (7,097) (6,342)

Zakat paid (197) (123)

Net cash flows from operating activities 30 121,242 (3,240)

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Cash flows statement


Note 2011 2010

RM'000 RM'000

Investing Activities

Proceeds from disposal of property and equipment 21 23,847

Purchase of property and equipment (6,709) (10,246)

Purchase of intangibles - (1,876)

Purchase of investment properties (1,008) (17,499)

Net cash flows from investing activities 30 (7,696) (5,774)

Net increase in cash and cash equivalents 113,546 (9,014)

Cash and cash equivalents at beginning of year 4,511 13,525

Cash and cash equivalents at end of year 118,057 4,511

Cash and bank balances of:

Shareholder's fund 7,630 1,453

General takaful fund 47,511 226

Family takaful fund 62,916 2,832

Cash and bank balances 118,057 4,511


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Notes to the financial statements - 31 March 2011

1. Corporate information

2. Significant accounting policies

2.1 Basis of preparation

The Company has prepared the financial statements in accordance with item 10.3 of

BNM's Guideline on Financial Reporting for Takaful Operators which was issued on 23

December 2010. The guideline requires takaful operators to present the statements of

financial position, statement of comprehensive income and related explanatory notes by

funds, i.e. the Company's statement of financial position, the Company's statement of

comprehensive income, family takaful statement of financial position, family takaful

statement of comprehensive income, general takaful statement of financial position

and general takaful statement of comprehensive income. This is a modification to FRS

101 : Presentation of Financial Statements which is approved by BNM under Section 41

of the Takaful Act 1984.

The financial statements of the Company comply with the provisions of the Companies

Act, 1965 and Financial Reporting Standards ("FRS") in Malaysia, as modified by Bank

Negara Malaysia ("BNM"). The financial statements of the Company also comply with

the Takaful Act, 1984, the Guidelines and Circulars issued by BNM and where

applicable are modified to comply with the principles of Shariah.

The Company is engaged principally in the managing of general, family and investment-

linked takaful businesses. There were no significant changes in the principal activities of the

Company during the financial year.

At the beginning of the current financial year, the Company had adopted new and

revised FRSs which are mandatory for the financial periods beginning on or after 1 April

2010 as described fully in Note 2.27.

The financial statements were authorised for issue by the Board of Directors in accordance

with a resolution of the directors on 25 May 2011.

The number of employees in the Company at the end of the financial year was 470 (2010:

443).

The Company is a private limited liability company, incorporated and domiciled in Malaysia.

The registered office of the Company is located at 9th Floor, IKHLAS Point, Tower 11A,

Avenue 5, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur, Malaysia.

The holding and ultimate holding company is MNRB Holdings Berhad, a company

incorporated and domiciled in Malaysia and listed on the Main Market of Bursa Malaysia

Securities Berhad.

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2. Significant accounting policies (cont'd.)

2.1 Basis of preparation (cont'd.)

2.2 Property, plant and equipment and depreciation

(i) Recognition and measurement

(ii) Subsequent costs

The financial statements are presented in Ringgit Malaysia (RM) and all values are

rounded to the nearest thousand (RM'000) except when otherwise indicated.

Only assets costing above RM300 will be capitalised. Assets costing RM300 and

below are charged to the statement of comprehensive income in the year of

purchase.

On disposal of property, plant and equipment, the difference between net proceeds

and the carrying amount is recognised in the statement of comprehensive income.

The cost of replacing part of an item of property, plant and equipment is recognised

in the carrying amount of the item if it is probable that the future economic benefits

embodied within the part will flow to the Company and its cost can be measured

reliably. The costs of the day-to-day servicing of property, plant and equipment are

recognised in the statement of comprehensive income as incurred.

Financial assets and financial liabilities are offset and the net amount reported in the

statement of financial position only when there is a legally enforceable right to offset the

recognised amounts and there is an intention to settle on a net basis, or to realise the

assets and settle the liability simultaneously. Income and expense will not be offset in

the statement of comprehensive income unless required or permitted by any accounting

standard or interpretation, as specifically disclosed in the accounting policies of the

Company.

The financial statements of the Company have also been prepared on a historical cost

basis, except for those financial instruments that have been measured at their fair

values.

All items of property, plant and equipment are initially recorded at cost. Subsequent

to recognition, property, plant and equipment are stated at cost less accumulated

depreciation and any accumulated impairment losses.

Assets costing more than RM300 up to a maximum of RM1,000 are written down to

RM1 in the year of purchase. The write down is charged to the statement of

comprehensive income as depreciation.

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2.2 Property, plant and equipment and depreciation (cont'd.)

(iii) Depreciation

Computer equipment 33 1/3%

Furniture, fittings and office equipment 15%

Motor vehicles 20%

2.3 Investment properties

Fair value is arrived at by reference to market evidence of transaction prices for similar

properties and is performed by registered independent valuers having an appropriate

recognised professional qualification and recent experience in the location and category

of the properties being valued.

Gains or losses arising from changes in fair value of investment properties are

recognised in the statement of comprehensive income in the year in which they arise.

Investment properties are derecognised when either they have been disposed of or

when the investment property is permanently withdrawn from use and no future

economic benefit is expected from its disposal. Any gains or losses on the retirement or

disposal of an investment property are recognised in the statement of comprehensive

income in the year in which they arise.

Depreciation of property, plant and equipment is provided for on a straight-line

basis to write off the cost of each asset to its residual value over its estimated

useful life, at the following annual rates:

The residual values, useful life and depreciation method are reviewed at each

financial year-end to ensure that the amount, method and period of depreciation

are consistent with previous estimates and the expected pattern of consumption of

the future economic benefits embodied in the items of property, plant and

equipment.

Investment properties are properties which are owned or held under a leasehold

interest to earn rental income or for capital appreciation or for both.

Such properties are measured initially at cost, including transaction costs. Subsequent

to initial recognition, investment properties are stated at fair value.

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2.4 Intangible assets

Amortisation is charged to the statement of comprehensive income.

Software development in progress

Computer software and licences

The useful lives of intangible assets are assessed to be either finite or indefinite.

Intangible assets with finite lives are amortised on a straight lines basis over the

estimated economic useful lives and assessed for impairment whenever there is an

indication that the intangible asset may be impaired. The amortisation period and the

amortisation method for an intangible asset with a finite useful life are reviewed at least

at each financial year end.

Software development in progress are tested for impairment annually and represent

development expenditure on software. Following the initial recognition of the

development expenditure, the cost model is applied requiring the asset to be carried at

cost less any accumulated impairment losses. Amortisation of the asset begins when

development is complete and the asset is available for use. It is amortised over the

period of expected future use. During the period of which the assets is not yet in use it

is tested for impairment annually.

The useful lives of computer software and licenses are considered to be finite because

computer software and licenses are susceptible to technological obsolescence.

The acquired computer software and licenses are amortised using the straight line

method over their estimated useful lives not exceeding 6 years. Impairment is assessed

whenever there is indication of impairment and the amortisation period and method are

also reviewed at least at each financial year end.

Intangible assets with indefinite useful lives are not amortised but tested for impairment

annually or more frequently if the events or changes in circumstances indicate that the

carrying value may be impaired either individually or at the cash-generating unit level.

The useful life of an intangible asset with an indefinite life is also reviewed annually to

determine whether the useful life assessment continues to be supportable.

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2.5 Impairment of Non-Financial Assets

2.6 Investments and financial assets

The significant accounting policies by the categories above are as follows :

The classification depends on the purpose for which the investments were acquired or

originated. Management determines the classification of its investments at initial

recognition and re-evaluates this at every financial year end.

An impairment loss for an asset is reversed if, and only if, there has been a change in

the estimates used to determine the asset’s recoverable amount since the last

impairment loss was recognised. The carrying amount of an asset is increased to its

revised recoverable amount, provided that this amount does not exceed the carrying

amount that would have been determined (net of amortisation or depreciation) had no

impairment loss been recognised for the asset in prior years. A reversal of impairment

loss for an asset other than goodwill is recognised in statement of comprehensive

income.

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit

("CGU") fair value less costs to sell and its value in use. In assessing value in use, the

estimated future cash flows are discounted to their present value using a pre-tax

discount rate that reflects current market assessments of the time value of money and

the risks specific to the asset. Where the carrying amount of an asset exceeds its

recoverable amount, the asset is considered impaired and is written down to its

recoverable amount. Impairment losses recognised in respect of a CGU is allocated

first to reduce the carrying amount of any goodwill allocated to those units or groups of

units and then, to reduce the carrying amount of the other assets in the unit on a pro-

rata basis.

The carrying amounts of assets other than deferred tax asset and investment properties

are reviewed at each financial year end to determine whether there is any indication of

impairment. If any such indication exists, the asset's recoverable amount is estimated to

determine the amount of loss.

An impairment loss is recognised in statement of comprehensive income in the period

in which it arises.

The Company classifies its investments into financial assets at fair value through profit

and loss ("FVTPL"), held-to-maturity ("HTM"), loans and other receivables ("LAR") and

available-for-sale-financial assets ("AFS").

Investment properties are properties which are held either to earn rental income or for Investment properties are derecognised when either they have been disposed of or

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2.6 Investments and other financial assets (cont'd.)

-

-

HTM

Investments held under the investment-linked funds are designated as FVTPL at

inception as they are managed and evaluated on a fair value basis in accordance with

the respective investment strategies and mandates.

Financial assets classified as FVTPL include shariah approved quoted shares and

warrants.

FVTPL

Financial assets classified as HTM include unquoted Islamic government guaranteed

and unsecured private debt securities and government investment issues.

the designation eliminates or significantly reduces the inconsistent treatment that

would otherwise arise from measuring the assets or liabilities or recognising gains

or losses on a different basis, or

Financial assets at FVTPL include financial assets held for trading and those

designated at fair value through profit and loss at inception. Investments typically

bought with the intention to sell in the near future are classified as held-for-trading. For

investments designated as at fair value through profit and loss, the following must be

met:

the assets and liabilities are part of a group of financial assets, financial liabilities or

both which are managed and their performance evaluated on a fair value basis, in

accordance with a documented risk management or investment strategy.

These investments are initially recorded at fair value. Subsequent to initial recognition

these investments are measured at the fair value. Fair value adjustments and realised

gains and losses are recognised in statement of comprehensive income.

Non-derivative financial assets with fixed or determinable payments and fixed maturities

are classified as HTM when the Company has the positive intention and ability to hold

until maturity. These investments are initially recognised at cost, being the fair value of

the consideration paid for the acquisition of the investment. After initial measurement,

HTM financial assets are measured at amortised cost, using the effective yield method,

less provision for impairment. Gains and losses are recognised in statement of

comprehensive income when the investments are derecognised or impaired, as well as

through the amortisation process.

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2.6 Investments and other financial assets (cont'd.)

LAR

AFS

2.7 Fair value of financial instruments

For investments in investment linked units, unit and real estate investment trusts, if any,

fair value is determined by reference to published bid values.

On derecognition or impairment, the cumulative fair value gains and losses previously

reported in equity is transferred to statement of comprehensive income.

LAR are non-derivative financial assets with fixed or determinable payments that are

not quoted in an active market. These investments are initially recognised at cost, being

the fair value of the consideration paid for the acquisition of the investment.All

transaction costs directly attributable to the acquisition are also included in the cost of

the investment. After initial measurement, loans and receivables are measured at

amortised cost, using the effective yield method, less provision for impairment. Gains

and losses are recognised in statement of comprehensive income when the

investments are derecognised or impaired, as well as through the amortisation process.

AFS are non-derivative financial assets that are designated as available-for-sale or are

not classified in any of the three preceding categories. These investments are initially

recorded at fair value. After initial measurement, AFS are measured at fair value.

The fair value of financial assets that are actively traded in organised financial markets

is determined by reference to quoted market bid prices for assets and offer prices for

liabilities, at the close of business on the reporting date.

Financial assets classified as LAR include Islamic investment accounts with licensed

banks and building society, Islamic repo placements, institutional trust fund, secured

staff loans and benevolent loan provided by shareholder's fund to the general takaful

fund.

Financial assets classified as AFS are unquoted unsecured Islamic private debt

securities, shariah approved quoted equities and unit trust funds.

Any gains or losses from changes in fair value of the financial assets are recognised in

the other comprehensive income or takaful certificate liabilities, except for impairment

losses and profits calculated using the effective profit method which are recognised in

the statement of comprehensive income accordingly. The cumulative gain or loss

previously recognised in other comprehensive income is recognised in the statement of

comprehensive income when the financial asset is derecognised.

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2.7 Fair value of financial instruments (cont'd.)

2.8 Impairment of Financial Assets

(i) Financial assets carried at amortised cost

For financial instruments on debt securities and government investment issues, these

are measured using valuation techniques. The indicative fair values are determined

based on quotations obtained from brokers in three financial institutions.

The Company assesses at each financial year end whether there is any objective

evidence that a financial asset or a group of financial assets is impaired.

The Company first assesses whether objective evidence of impairment exists

individually for financial assets that are individually significant, and individually or

collectively for financial assets that are not individually significant. If it is determined

that no objective evidence of impairment exists for an individually assessed

financial asset, whether significant or not, the asset is included in a group of

financial assets with similar credit risk characteristics and that group of financial

assets is collectively assessed for impairment. Assets that are individually

assessed for impairment and for which an impairment loss is or continues to be

recognised are not included in a collective assessment of impairment. The

impairment assessment is performed at each reporting date.

If the fair value of a financial asset cannot be measured reliably, for example LAR, the

asset is measured at cost, being the fair value of the consideration paid for the

acquisition of the investment or the amount received on issuing the financial asset. All

transaction costs directly attributable to the acquisition are also included in the cost of

the financial asset. After initial measurement, LAR are measured at amortised cost

using effective yield method, less allowance for impairment.

Objective evidence that a financial asset is impaired includes observable data about

loss events like significant financial difficulty of the issuer or obligor; significant adverse

changes in the business environment in which the issuer or obligor operates and the

disappearance of an active market for that financial asset because of financial

difficulties which indicate that there is a measurable decrease in the estimated future

cash flows. However it might not be possible to identify a single, discreet event that

caused the impairment. Rather, the combined effect of several events are considered in

determining whether an asset is impaired.

The fair value of floating rate and over-night deposits with financial institutions is their

carrying value. The carrying value is the cost of the deposit/placement and accrued

profit. The fair value of fixed yield-bearing deposits is estimated using discounted cash

flow techniques. Expected cash flows are discounted at current market rates for similar

instruments at the end of the financial year.

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2.8 Impairment of Financial Assets (cont'd.)

(ii) AFS financial assets

If an AFS financial asset is impaired, an amount comprising the difference between

its cost (net of any principal payment and amortisation) and its current fair value,

less any impairment loss previously recognised in statement of comprehensive

income, is transferred from other comprehensive income to statement of

comprehensive income.

Significant or prolonged decline in fair value below cost, significant financial

difficulties of the issuer or obligor, and the disappearance of an active trading

market are considerations to determine whether there is objective evidence that

investment securities classified as AFS financial assets are impaired.

If, in a subsequent period, the amount of the impairment loss decreases and the

decrease can be related objectively to an event occurring after the impairment was

recognised, the previously recognised impairment loss is reversed. Any subsequent

reversal of an impairment loss is recognised in statement of comprehensive

income, to the extent that the carrying value of the asset does not exceed its

amortised cost at the reversal date.

If there is objective evidence that an impairment loss on assets carried at amortised

cost has been incurred, the amount of the impairment loss is measured as the

difference between the asset’s carrying amount and the present value of estimated

future cash flows (excluding future expected credit losses that have not been

incurred) discounted at the financial asset’s original effective yield. The carrying

amount of the asset is reduced and the loss is recorded in statement of


Impairment losses on AFS equity investments are not reversed in statement of

comprehensive income in the subsequent periods. Increase in fair value, if any,

subsequent to impairment loss is recognised directly in other comprehensive

income/takaful certificate liabilities. For AFS debt investments, impairment losses

are subsequently reversed in statement of comprehensive income if an increase in

the fair value of the investment can be objectively related to an event occurring

after the recognition of the impairment loss in statement of comprehensive income.

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(iii) Loans and receivables

2.9 Derecognition of Financial Assets

2.10 Measurement and impairment of Qard

Any deficits arising in the Takaful Funds are made good via a benevolvent loan, or

Qard, granted by the Shareholder's Fund to the Takaful Funds. The Qard is stated at

cost less any impairment losses in the Shareholder's Fund. In the Takaful Funds, the

Qard is stated at cost. The Qard shall be repaid from future surpluses of the Takaful

Funds.

The Company first assesses whether there is objective evidence that an

impairment loss on the loans and receivables has been incurred. The Company

considers factors such as the probability of insolvency or significant financial

difficulties of the borrower and default or significant delay in principal or yield

payments. Loans that are assessed not to be impaired individually are

subsequently assessed for impairment on a collective basis based on similar risk

characteristics. The amount of impairment loss is measured as the difference

between the carrying amount and the present value of estimated future cash flows,

discounted at the loan's original effective profit rate. The impairment loss is

recognised in statement of comprehensive income.

The carrying amount of the loan is reduced by the impairment loss directly for all

loans, where the carrying amount is reduced through the use of an allowance

account.

If in a subsequent period, the amount of the impairment loss decreases and the

decrease can be related objectively to an event occurring after the impairment was

recognised, the previously recognised as impairment loss is reversed to the extent

that the carrying amount does not exceed its amortised costs at the reversal date.

The amount of reversal is recognised in statement of comprehensive income.

Financial assets are derecognised when the rights to receive cash flows from them

have expired or when they have been transferred and the Company has also

transferred substantially all risks and rewards of ownership.

The Qard is tested for impairment on an annual basis via an assessment of the

estimated surpluses or cashflows from the Takaful Funds to determine whether there is

objective evidence of impairment. If the Qard is impaired, an amount comprising the

difference between its cost and its recoverable amount, less any impairment loss

previously recognised in statement of comprehensive income, is recognised in the

statement of comprehensive income.

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2.10 Measurement and impairment of Qard (cont'd.)

2.11 Equity Instruments

Ordinary Share Capital

Dividend on Ordinary Share Capital

2.12 Product Classification

The Company has issued ordinary shares that are classified as equity. Incremental

external costs that are directly attributable to the issue of these shares are recognised

in equity, net of tax.

Dividends on ordinary shares are recognised as a liability and deducted from equity

when they are approved by the Company's shareholders. Interim dividends are

deducted from equity when they are paid.

Impairment losses are subsequently reversed in the statement of comprehensive

income if objective evidence exists that the Qard is no longer impaired.

The Company as the operator of the participants' fund issues certificates that contains

takaful risk or financial risk or both.

Financial risk is the risk of a possible future change in one or more of a specified profit

rate, financial instrument price, commodity price, foreign exchange rate, index of price

or rate, credit rating or credit index or other variable, provided in the case of a non-

financial variable that the variable is not specific to a party to the contract. Underwriting

risk is the risk other than financial risk.

Takaful certificates are those certificates that contain significant underwriting risk. A

takaful certificate is a certificate under which the participants' fund has accepted

significant risk from the participants by agreeing to compensate the participants if a

specified uncertain future event adversely affects the participants. As a general

guideline, the Company determines whether it has significant underwriting risk, by

comparing claims paid with claims payable if the event did not occur.

Investment contracts are those contracts that do not transfer significant takaful risk.

Once a certificate has been classified as a takaful certificate, it remains a takaful

certificate for the remainder of its life-time, even if the underwriting risk reduces

significantly during this period, unless all rights and obligations are extinguished or

expire. Investment contracts can, however, be reclassified as takaful certificates after

inception if takaful risk becomes significant.

Dividends for the year that are approved after the financial year end are dealt with as an

event after the financial year end.

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2.12 Product Classification (cont'd.)

2.13 Retakaful

When takaful certificates contain both a financial risk component and a significant

underwriting risk component and the cash flows from the two components are distinct

and can be measured reliably, the underlying amounts are unbundled. Any

contributions relating to the underwriting risk component are accounted for on the same

basis as takaful certificates and the remaining element is accounted for as a deposit

through the statement of financial position similar to investment contracts.

Retakaful certificates liabilities represent balances due to retakaful operators. Amounts

payable are estimated in a manner consistent with the related retakaful certificates.

Retakaful certificates assets or liabilities are derognised when the contractual rights are

extinguished or expire when the contract is transferred to another party.

Ceded retakaful arrangements do not relieve the Company from the obligations to

participants. Contributions and claims are presented on a gross basis.

The Company as the operator of the participants' fund cedes underwriting risk in the

normal course of business for all its business. Retakaful certificates assets represent

balances due from retakaful operators. Amounts recoverable from retakaful operators

are estimated in a manner consistent with the outstanding the outstanding claims

provisions or settled claims associated with the retakaful operator's policies and are in

accordance with the related retakaful certificates.

Based on the company's product classification review, all products fall under the

classification of takaful certificates.

Retakaful certificates that do not transfer significant underwriting risk are accounted for

directly through the statement of financial position. These are deposit assets or financial

liabilities that are recognised based on the consideration paid or received less any

explicit identified contributions or fees to be retained by the retakaful operators.

Investment income on these contracts are accounted for using the effective yield

method when accrued.

Retakaful certificates assets are reviewed for impairment at each financial year end or

more frequently when an indication of impairment arises during the reporting period.

Impairments occurs when there is objective evidence as a results of an event that

occurred after initial recognition of the retakaful certificates assets that the Company

may not receive all outstanding amounts due under the terms of the contract and the

event has a reliable measurable impact on the amounts that the Company will receive

from the retakaful operator. The impairment loss is recorded in statement of


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2.14 General takaful fund

(i) Contribution income

(ii) Contribution Liabilities

Prior to 1 April 2010, contribution liabilities comprised of unearned contribution

reserves (“UCR”) for all lines of business.

The general takaful fund is maintained in accordance with the Takaful Act, 1984 and

consists of unearned contribution reserves and any surplus/deficit arising during the

year. Underwriting deficit will be made good by the shareholder's fund via a benevolent

loan or Qard.

Surplus is distributable to the shareholder and participants in accordance with the terms

and conditions prescribed by the Shariah Committee of the Company. The general

takaful fund surplus or deficit is determined after deducting retakaful, net claims

incurred, wakalah fees, other operating expenses, taxation and surplus administration

charges transferred to the shareholder's fund, and adjusting for contribution liabilities

and impairment of trade receivables.

General takaful revenue consists of gross contributions and investment income.

Revenue is accounted for on an accrual basis as approved by the Company's Shariah

Committee. Unrealised income is deferred and receipts in advance are treated as

liabilities in the statement of financial position.

Contribution from direct and facultative inwards are recognised as soon as the

amount of contribution can be reliably measured in accordance with the principles

of Shariah. Contributions are recognised in a financial period in respect of risks

assumed during that particular financial period. Inward treaty retakaful contributions

are recognised on the basis of periodic advices received from ceding takaful

operators.

The contribution liabilities represents contributions received for risks that have not

yet expired. Generally, the reserve is released over the term of the certificates.

Effective 1 April 2010, contribution liabilities are reported at the higher of the

aggregate of the UCR for all lines of business and the best estimate value of the

Company’s unexpired risk reserves (“URR”) as at the end of the financial year and

a provision of risk margin for adverse deviation ("PRAD") calculated at 70%

confidence level at the overall Company level.

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2.14 General takaful fund (cont'd.)

(ii) Contribution Liabilities (cont'd.)

(a) Unearned Contribution Reserves

-

- 25% method for Marine and Aviation Cargo;

-

(b) Unexpired Risks Reserves

Time apportionment method for all classes of general takaful business within

Malaysia except Marine and Aviation cargo;

Non-annual certificates are time apportioned over the period of the takaful

certificates.

The Unearned Contribution Reserves ("UCR") represent the portion of net

contribution income of takaful certificates written that relate to the unexpired

periods of certificates at the end of the financial year. The UCR is calculated on

net contribution income with a further deduction for Wakalah fee expenses to

reflect the Wakalah business principle. In determining the UCR at the end of

the financial year, the method that most accurately reflects the actual unearned

contribution is used as follows:

URR is a prospective estimate of the expected future payments arising from

future events expected to be incurred as at the end of the financial year and

also includes cost of retakaful, expected to be incurred during the unexpired

period in adminestering these certificates and settling the relevant claims, and

expected future return contributions.

In estimating the Best Estimate URR, the resulting Loss Ratio based on Best

Estimate claims incurred but not reported (“IBNR”) is applied to the

corresponding UCR as the prospective assessment of the amount that needs

to be set aside in order to provide for claims and allocated claim costs that will

result out of unexpired future periods of cover. In order to arrive at 70% level of

confidence of the URR, the resulting Loss Ratio based on the IBNR plus PRAD

at 70% level of confidence is applied to the corresponding UCR for each line of

business.

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2.14 General takaful fund (cont'd.)

(ii) Contribution Liabilities (cont'd.)

Liability Adequacy Test

(iii) Claims Liabilities

The liability is calculated by a qualified actuary at the financial year end using a

range of standard actuarial claim projection techniques based on empirical data

and current assumptions that may include a margin for adverse deviation. The

liability is not discounted for the time value of money. No provision for equalisation

or catastrophe reserves is recognised. The liabilities are derecognised when the

certificates expires, is discharged or is cancelled.

Prior to 1 April 2010, claims liabilities are valued at the best estimate which include

provision for claims reported, claims incurred but not enough reserved ("IBNER")

and claims incurred but not reported (“IBNR”) together with related claims handling

costs and reduction for the expected value of salvage and other recoveries. For the

financial period beginning 1 April 2010, PRAD at 60% confidence level calculated

at the overall Company level were included in claim liabilities.

Effective 1 April 2010, the PRAD level is increased to 70% confidence level

calculated at the overall Company level.

Claims and settlement costs that are incurred during the financial year are

recognised when a claimable event occurs and/or the Company is notified. The

amount of outstanding claims is the best estimate of the expenditure required

together with related expenses less recoveries to settle the obligation at the end of

the financial year.

At each financial year end, the Company reviews its unexpired risks and a liability

adequacy test is performed to determine whether there is any overall excess of

expected claims over unearned contributions. This calculation uses current

estimates of future contractual cash flows (taking into consideration current loss

ratios) after taking account of the investment return expected to arise on assets

relating to the relevant general takaful technical provisions. If these estimates show

that the carrying amount of the unearned contributions is inadequate, the

deficiency is recognised in statement of comprehensive income by setting up a

provision for contributions deficiency.

Delays can be experienced in the notification and settlement of certain types of

claims, therefore, the ultimate cost of these claims cannot be known with certainty

at the end of the financial year.

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(iv) Commission earned

2.15 Family takaful fund

(i) Contribution income

(ii) Provision for outstanding claims

Commission earned net off expense paid from retakaful in the course of

ceding/accepting contributions to/from retakaful operators are recognised in the

general takaful statement of comprehensive income, as incurred and properly

allocated to the periods in which it is probable they give rise to income. This is in

accordance with the principles of Wakalah as approved by the Shariah Committee

and as agreed between the participants and the Company.

The family takaful fund is maintained in accordance with the requirements of the

Takaful Act, 1984 and includes the amount attributable to participants.

The family takaful fund surplus or deficit is determined by an annual actuarial valuation

of the family takaful fund. Any actuarial deficit in the family takaful fund will be made

good by the shareholder's fund via a benevolent loan or Qard. Surplus distributable to

the participants is determined after deducting benefits paid and payable, retakaful,

provisions, reserves, wakalah fees, taxation and surplus administration charge

transferred to the shareholder's fund. The surplus may be distributed to the shareholder

and participants in accordance with the terms and conditions prescribed by the Shariah

Committee of the Company.

Family takaful revenue consists of gross contributions and investment income. Revenue

is accounted for on accrual basis and as approved by the Company’s Shariah

Committee. Unrealised income is deferred and receipts in advance are treated as

liabilities on the statement of financial position.

Contribution is recognised as soon as the amount of contribution can be reliably

measured in accordance with the principles of Shariah. First contribution is

recognised on assumption of risks and subsequent contributions are recognised on

due dates. Contributions outstanding at financial year end is recognised as income

for the period provided they are within the grace period allowed for payment and

there are sufficient funds available in the participants' accounts to cover such

contributions due.

Claims and settlement costs that are incurred during the financial year are

recognised when a claimable event occurs and/or the Company is notified.

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2.15 Family takaful fund (cont'd.)

(ii) Provision for outstanding claims (cont'd.)

(a)

(b)

(iii) Creation / cancellation of units

(iv) Investments of the Investment-Linked Funds

(v) Family Takaful Certificates Liabilities

Claims and provisions for claims arising on family takaful certificates, including

settlement costs, are accounted for using the case basis method, and for this

purpose, the benefits payable under a takaful certificates are recognised as

follows:

maturity or other certificate benefit payments due on specified dates are

treated as claims payable on due dates.

death, surrender and other benefits without due dates are treated as claims

payable on receipt of intimation of death of the certificate holder or occurrence

of contingency covered.

Amounts received for units created represent contributions paid by

policyholders/unitholders as payment for new contracts or subsequent payments to

increase the amount of the contracts.

Creation/cancellation of units are recognised in the financial statements at the next

valuation date, after the request to purchase/sell units are received from the

unitholders.

These liabilities, with the exception of Mortgage Term Takaful and Group Credit

certificates, are measured using the unexpired reserve of the gross monthly

tabarru' (risk charges). For Mortgage Term Takaful and Group Credit certificates,

the liability is determined by the Net Contribution Valuation method using the

statutory mortality table adjusted for retakaful arrangements and discounted at the

appropriate risk discount rate.

Family takaful certificates liabilities are recognised when certificates are in-forced

and contributions are charged.

All investments of the investment-linked funds are stated at closing market prices

or indicative market prices as at financial year end.

Any increase or decrease in value of investments is taken into the investment-

linked funds statement of comprehensive income.

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2.15 Family takaful fund (cont'd.)

(v) Family Takaful Certificates Liabilities (cont'd.)

2.16 Shareholder's Fund

(i) Commission expenses/acquisition cost

The family takaful certificates liabilities are derecognised when the contract expires,

is discharged or is cancelled. At each reporting date, an assessment is made of

whether the recognised family takaful certificates liabilities are adequate by using

an existing liability adequacy test.

In the case of a 1-year family takaful certificates covering contingencies other than

death or survival, such as the group health & surgical certificates, the liability for

such family takaful contracts comprises the provision for unearned contributions

and expired risks, as well as for claims outstanding, which includes an estimate of

the incurred claims that have not yet been reported to the Company ("IBNR").

Commission expenses, which are costs directly incurred in securing contributions

on takaful certificates, are recognised as incurred and properly allocated to the

periods in which it is probable they give rise to income. Commission expenses are

borne by the shareholder's fund in the shareholder's fund statement of

comprehensive income at an agreed percentage for each certificate underwritten.

This is in accordance with the principles of Wakalah as approved by the Shariah

Committee and as agreed between the participants and the Company.

Surplus arising from the difference between the value of the family fund and the

liabilities, if any, will be distributed in equal proportion to the participants and the

contingency (special) fund after deducting the applicable Company's surplus

administration charge.

If the difference between the value of the family fund and the liabilities results in a

deficit, the Company will arrange a Qard (benevolent loan) which will be repaid

when the fund returns to a surplus position. An impairment test may be conducted

to a Qard which has not been repaid within a specific period of time.

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2.16 Shareholder's Fund (cont'd.)

(ii) Expenses liability

(a) Expenses liability of General Takaful Fund

Unearned wakalah fee

In carrying out the fiduciary duty, the Company must put in place sufficient

measures to ensure sustainability of general and family takaful funds to meet

takaful benefits and shareholders’ fund to support the takaful certificates for the full

term. These measures include setting up of appropriate provisions for liabilities in

shareholder's fund and on behalf of participants in general and family takaful funds,

to ensure that adequate funds would be available to meet all contractual obligations

and commitments as they fall due, with a reasonable level of certainty.

The expenses liability of shareholder's fund consists of expenses liability of general

takaful fund and family takaful fund which are computed separately by an Actuary

approved by BNM.

The contract underlying takaful operations defines a unique relationship between

takaful operator and participants of a takaful scheme. While takaful fund is

responsible to meet contractual benefits accorded to participants on the basis of

mutual assistance amongst participants, the Company is expected to duly observe

fundamental obligations toward participants, particularly in term of adhering to

Shariah principles and undertaking fiduciary duties to prudently manage the takaful

funds as well as meet costs involved in managing the takaful business.

The UWF Reserves represent the portion of wakalah fee income allocated for

management expenses of general takaful certificates that relate to the

unexpired periods of certificates at the end of the financial year. The method

used in computing UWF is consistent with the calculation of UCR under Note

2.14(ii)(a). In determining the UWF at the end of the financial year,70% of the

wakalah fee income is recognised in the financial year in which the certificates

are issued. The remaining 30% of the wakalah fee income is transferred to the

UWF reserves and is recognised in the following financial year.

The expenses liability is reported at the higher of the aggregate of Unearned

Wakalah Fee ("UWF") and the best estimate value of Unexpired expense risk

("UER") as at the end of the financial year.

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2.16 Shareholder's Fund (cont'd.)

(a) Expenses liability of General Takaful Fund (cont'd.)

Unexpired expense reserve

Liability Adequacy Test

(b) Expenses liability of Family Takaful Fund

2.17 Cash and cash equivalents

2.18 Takaful Certificates Receivables

The UER is determined based on the expected future expenses payable from

shareholder's fund in managing the general takaful fund for the full contractual

obligation of the takaful certificate as at the end of the financial year, less

expected shareholders’ fund income calculated at 70% confidence level at the

overall Company level. The method used to value the UER is consistent with

the method used to value the URR under note 2.14(ii)(b).

The expenses liability is determined based on the expected future expenses

payable from shareholder's fund in managing the family takaful fund for the full

contractual obligation of the takaful certificate as at the end of the financial

year, less expected shareholders’ fund income. The method used to value

expense liabilities shall be consistent with the method used to value takaful

liabilities of the corresponding family takaful certificate under note 2.15(v).

Takaful certificates receivables are recognised when due and measured on initial

recognition at the fair value of the consideration received or receivable. Subsequent to

initial recognition, takaful certificates receivables are measured at cost, which

approximate the fair value.

Cash and cash equivalents include cash in hand and at banks, excluding fixed and call

deposits with licensed financial institutions, which have an insignificant risk of changes

in value. The cash flows statement has been prepared using the indirect method.

At each financial year end, the Company reviews its unexpired expense risks

and a liability adequacy test is performed to determine whether there is any

overall excess of expected expenses over unearned wakalah fee. If these

estimates show that the carrying amount of the unearned wakalah fee is

inadequate, the deficiency is recognised in statement of comprehensive

income by setting up a provision for expenses deficiency.

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2.18 Takaful Certificates Receivables (cont'd.)

2.19 Balances with related companies

2.20 Taxation

Balances with related companies are stated at the amounts which are due and

expected to be settled.

If there is objective evidence that the takaful certificates receivables is impaired, the

Company reduces the carrying amount of the takaful certificates receivables

accordingly and recognises that impairment loss in statement of comprehensive

income. The Company gathers the objective evidence that a takaful certificates

receivables is impaired using the same process adopted for financial assets carried at

amortised cost. The impairment loss is calculated under the same method used for

these financial assets. These processes are described in Note 2.8 (i).

Takaful certificates receivabless are derecognised when the derecognition criteria for

financial assets, as described in Note 2.9, have been met.

Deferred tax is provided for, using the liability method, on temporary differences at the

end of the financial year between the tax bases of assets and liabilities and their

carrying amounts in the financial statements. In principle, deferred tax liabilities are

recognised for all taxable temporary differences and deferred tax assets are recognised

for all deductible temporary differences, unused tax losses and unused tax credits to

the extent that it is probable that taxable profit will be available against which the

deductible temporary differences, unused tax losses and unused tax credits can be

utilised.

Income tax on the statement of comprehensive income for the year comprises current

and deferred tax. Current tax is the expected amount of income taxes payable in

respect of the taxable profit for the year and is computed using the tax rates that have

been enacted at the reporting year.

Deferred tax is computed at the tax rates that are expected to apply in the period when

the asset is realised or the liability is settled, based on tax rates that have been enacted

or substantively enacted at the reporting date. Deferred tax is recognised in the

statement of comprehensive income, except when it arises from a transaction which is

recognised directly in equity/participants' fund, in which case the deferred tax is also

charged or credited directly in equity/participants' fund.

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2.21 Financial liabilities

(a) Financial liabilities at FVTPL

(b) Other financial liabilities

The Company's other financial liabilities include trade payables and other payables.

Financial liabilities are classified according to the substance of the contractual

arrangements entered into and the definitions of a financial liability.

Financial liabilities, within the scope of FRS 139, are recognised in the statement of

financial position when, and only when, the Company becomes a party to the

contractual provisions of the financial instrument. Financial liabilities are classified as

either financial liabilities at FVTPL or other financial liabilities.

Financial liabilities held for trading include derivatives entered into by the Company

that do not meet the hedge accounting criteria. Derivative liabilities are initially

measured at fair value and subsequently stated at fair value, with any resultant

gains or losses recognised in statement of comprehensive income. Net gains or

losses on derivatives include exchange differences.

The Company has not designated any financial liabilities as at FVTPL.

Trade and other payables are recognised initially at fair value plus directly

attributable transaction costs and subsequently measured at amortised cost using

the effective profit method.

Financial liabilities at FVTPL include financial liabilities held for trading and financial

liabilities designated upon initial recognition as at FVTPL.

For other financial liabilities, gains and losses are recognised in statement of

comprehensive income when the liabilities are derecognised, and through the

amortisation process.

A financial liability is derecognised when the obligation under the liability is

extinguished. When an existing financial liability is replaced by another from the same

lender on substantially different terms, or the terms of an existing liability are

substantially modified, such an exchange or modification is treated as a derecognition

of the original liability and the recognition of a new liability, and the difference in the

respective carrying amounts is recognised in statement of comprehensive income.

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2.22 Provisions for liabilities

2.23 Employee benefits

(i) Short-term benefits

(ii) Defined contribution plan

2.24 Foreign currencies

Wages, salaries, bonuses and social security contributions are recognised as an

expense in the year in which the associated services are rendered by employees of

the Company. Short-term accumulating compensated absences such as paid

annual leave are recognised when services are rendered by employees that

increase their entitlement to future compensated balances. Short-term non-

accumulating compensated absences such as sick leave are recognised when the

absences occur.

Transactions in foreign currencies are converted into Ringgit Malaysia at rates of

exchange ruling at the transaction dates. Monetary assets and liabilities in foreign

currencies at the end of the financial year are translated into Ringgit Malaysia at rates

of exchange ruling at that date. All exchange differences are taken to the statement of

comprehensive income and/or revenue accounts. The principal exchange rate for every

unit of United States Dollar ruling at financial year end used is RM3.0259 (2010:

RM3.2730).

Provisions for liabilities are recognised when the Company has a present obligation as

a result of a past event and it is probable that an outflow of resources embodying

economic benefits will be required to settle the obligation, and a reliable estimate of the

amount can be made. Provisions are reviewed at each financial year end and adjusted

to reflect the current best estimate. Where the effect of the time value of money is

material, the amount of provision is the present value of the expenditure expected to be

required to settle the obligation.

As required by law, the Company makes contributions to the national pension

scheme, the Employees Provident Fund ("EPF"). The Company also makes

additional contributions to the EPF for eligible employees by reference to their

length of service and earnings. Such contributions are recognised as an expense in

the statement of comprehensive income as incurred.

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2.25 Other Revenue recognition

(i) Profit and investment income

(ii) Dividend income

Dividend income is recognised when the right to receive payment is established.

(iii) Wakalah fees

(iv) Rental income

2.26 Zakat

2.27

Profit and investment income on Shariah compliant investments are recognised on

an accrual basis using the effective yield of the asset.

This represents an obligatory amount payable by the Company to comply with the

principles of Shariah. Zakat is computed using the “net-asset” method as approved by

the Shariah Committee. Only the zakat that is attributable to the individual Muslim

shareholders of the holding company was provided for in the financial statements. The

zakat computation is reviewed by the Shariah Committee. The Board has the discretion

to pay additional zakat above the obligatory amount payable.

Wakalah fees are recognized as soon as the amount of contribution can be reliably

measured in accordance with the principles of Shariah.

The significant accounting policies adopted are consistent with those applied in the

annual audited financial statements for the financial year ended 31 March 2010, except

for the adoption of the following new/revised FRSs, amendments to FRSs and

Interpretations of the Issues Committee ("IC") issued by the Malaysian Accounting

Standards Board ("MASB") that are mandatory for the financial period beginning 1

January 2010.

Rental income receivable under tenancy agreements is recognised on a straight-

line basis over the term of the tenancy.

Changes in Accounting Policies and Effects Arising from Adoption of New and

Revised FRSs and Issues Committee Interpretations ("IC Interpretations")

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2.27

Standard/Interpretation

FRS 4: Insurance Contracts

FRS 7: Financial Instruments: Disclosures

FRS 8: Operating Segments

FRS 101: Presentation of Financial Statements (Revised 2009)

FRS 123: Borrowing Costs

Amendments to FRS 1: First-time Adoption of Financial Reporting Standards and

FRS 127: Consolidated and Separate Financial Statements: Cost of an Investment

in a Subsidiary, Jointly Controlled Entity or Associate

Amendments to FRS 2: Share-based Payment - Vesting Conditions and

Cancellations

Amendments to FRS 132: Financial Instruments: Presentation

Amendments to FRS 139: Financial Instruments: Recognition and Measurement,

FRS 7: Financial Instruments: Disclosures

Amendments to FRSs contained in the documents entitled 'Improvements to

FRSs (2009)'

IC Interpretation 9: Reassessment of Embedded Derivatives

IC Interpretation 10: Interim Financial Reporting and Impairment

IC Interpretation 11: FRS 2 - Group and Treasury Share Transactions

IC Interpretation 13: Customer Loyalty Programmes

IC Interpretation 14: FRS 119 - The Limit on a Defined Benefit Asset, Minimum

Funding Requirements and their Interaction

TR i - 3: Presentation of Financial Statements of Islamic Financial Institutions

FRS 4 : Insurance Contracts

On adoption of FRS 4, expanded disclosures are required and reclassification of certain

items in the statement of financial position (including comparatives) previously reported

on net basis to gross basis is required.

Unless otherwise described below, the directors expect that the adoption of the

pronouncements above will have no material impact on the financial statements of the

Company in the period of their initial application:



(cont'd.)

FRS 123, Amendments to FRS 1, IC Interpretation 9 and 13 are not applicable to the

Company.

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2.27

FRS 4 : Insurance Contracts (cont'd.)



(cont'd.)

FRS 4 requires a test for the adequacy of recognised takaful certificates liabilities at

each financial year end using current estimates of future cash flows under its takaful

certificates. For the purpose of complying with the requirements of a liability adequacy

test under FRS 4 : Insurance Contracts, takaful operators are deemed to comply if the

valuation methods used are in accordance with BNM/RH/GL 004-20 Guideline on

Valuation Basis for Liabilities of Family Takaful Business and BNM/RH/GL 004-21

Guideline on Valuation Basis for Liabilities of General Takaful Business.

FRS 4 requires impairment tests to be performed for takaful and retakaful certificates

assets and receivables and to reduce its carrying amount accordingly and recognise

that impairment in the statement of comprehensive income. BNM has in December

2010 issued Guidelines on Financial Reporting for Takaful Operators in order to bring

financial reporting for takaful operators in line with the requirements of FRSs issued by

MASB. For the purpose of complying with paragraph 58 of FRS 139 and paragraph

20(a) of FRS 4, objective evidence of impairment is deemed exist where the principal or

profit or both for receivables that are individually assessed for impairment, is past due

for more than 90 days or 3 months. Previously, the requirement by BNM was for takaful

operators to make full provision for outstanding contribution including agents, brokers

and retakaful operators balances in arrears for more than 30 days for motor class and 6

months for other classes of takaful certificates from the date on which they become

receivable.

Upon the adoption of FRS 139 and FRS 4, an impairment loss is recognised in respect

of retakaful certificate assets and takaful certificate receivables when there is objective

evidence that an impairment loss has been incurred in accordance with the policies

described in Notes 2.18. The amount of the loss is measured as the difference

between the carrying amount of the receivables and the present value of the estimated

future cashflows discounted at the receivable's original effective profit rate.

The adoption of FRS 4 also requires the identification of takaful certificates which do

not contain significant takaful risks to be reclassified as investment contracts. The

Company defines takaful risk to be significant when the ratio of amount payable upon

insurable event over amount payable upon non-insurable event (“the Significant Takaful

Risk Ratio”) must be at a specified level in order to be considered to have significant

takaful risk.

Accordingly, all products are classified as takaful certificates as at the date of this

statement of financial position.

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2.27


(a) Effects of changes on opening reserves

Restated

As at Increase / As at

1 April 2009 (decrease) 1 April 2009

RM '000 RM '000 RM '000

Shareholder's fund

Retained profits: (8,130) (16,117) (24,247)

- Expenses Liabilities of General

Takaful Fund

- Unearned wakalah fees reserve (3,877)

- Provision for expenses deficiency (734)

- Expenses Liabilities of Family

Takaful Fund (16,878)

- Deferred tax 5,372

General takaful fund

Accumulated deficits: 3,981 (2,059) 1,922

- Impairment of Takaful certificates

receivables (2,746)

- Deferred tax 687

Family takaful fund

Unallocated surplus: 20,036 1,638 21,674


receivables 1,638

FRS 4 does not contain a transitional provision similar to FRS 139, and as such the

accounting policy change will have to be accounted retrospectively in the opening

balance of retained profits and accumulated deficits of the general takaful fund in

accordance with FRS 108: Accounting Policies, Changes in Accounting Estimates and

Error. The effects arising as a result of adopting the above are detailed as follows:



(cont'd.)

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2.27


(a) Effects of changes on opening reserves (cont'd.)

Restated

As at Increase / As at

1 April 2010 (decrease) 1 April 2010

Shareholder's fund RM '000 RM '000 RM '000

Retained profits: 1,336 (11,812) (10,476)

- Expenses Liabilities of General

Takaful Fund

- Unearned wakalah fees reserve (4,014)

- Provision for expenses deficiency (1,943)

- Expenses Liabilities of Family

Takaful Fund (9,793)

- Deferred tax 3,938


General takaful fund: 8,794 (2,602) 6,192


receivables (3,470)

- Deferred tax 868

Family takaful fund

Unallocated surplus: 35,579 1,495 37,074


receivables 1,495

(b) Reclassification of comparatives

The effects of the adoption of FRS 4 on the comparative statement of financial

position as at 31 March 2010 are summarised as follows:



(cont'd.)

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2.27


As

previously Re- As

Shareholder's fund reported classification restated

RM '000 RM '000 RM '000

Assets

Deferred tax assets 2,303 3,938 6,241

Liabilities

Expenses liabilities - 15,750 15,750

Equity

Retained profits/

(accumulated losses) 1,336 (11,812) (10,476)


Assets

Takaful certificates receivables 39,626 (3,470) 36,156

Deferred tax assets 1,474 868 2,342

Participants' Fund

General takaful fund 8,794 (2,602) 6,192

Family takaful fund

Assets

Takaful certificates receivables 37,266 1,495 38,761

Liabilities

Takaful certificates liabilities

- Unallocated surplus 35,579 1,495 37,074

(c) Current year effects

The following tables provide estimates of the extent to which each of the line items

in the statement of financial position and statement of financial position for the

financial year ended 31 March 2011 are higher or lower than it would have been

had the previous policies been applied in the current year.



(cont'd.)

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2.27


Increase/

(c) Current year effects (cont'd.) (decrease)

2011

(i) Effects on statement of financial position: RM'000

Shareholder's fund

Assets

Deferred tax assets 3,787

Liabilities

Expenses liabilities (15,146)

Equity

Retained profits/(accumulated losses) 11,359


Assets

Takaful certificates receivables (322)

Deferred tax assets 80

Participants' Fund

General takaful fund 4,740

Family takaful fund

Assets

Takaful certificates receivables 113

Liabilities

Takaful certificates liabilities

- Unallocated surplus (1,609)



(cont'd.)

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2.27


Increase/

(c) Current year effects (cont'd.) (decrease)

2011

(ii) Effects on statement of comprehensive income: RM'000

Shareholder's fund

Change in expenses liability (605)


Fair value gains and losses:

Allowance/(writeback) for impairment

of takaful receivables (3,792)

Taxation 948

Family takaful fund

Fair value gains and losses:


of takaful receivables 1,609

FRS 7 : Financial Instruments: Disclosures

The Company has applied the FRS 7 prospectively in accordance with the transitional

provision. Hence, the new disclosures are included throughout the Company's financial

statements for the year ended 31 March 2011.

Prior to 1 January 2010, information about financial instruments was disclosed in

accordance with the requirements of FRS 132 Financial Instruments: Disclosure and

Presentation. FRS 7 introduces new disclosures to improve the information about

financial instruments. It requires the disclosure of qualitative and quantitative

information about exposure to risks arising from financial instruments, including

specified minimum disclosures about credit risk, liquidity risk and market risk, including

sensitivity analysis to market risk.



(cont'd.)

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2.27

FRS 101 : Presentation of Financial Statements

The revised FRS 101 was adopted retrospectively by the Company.

Standards issued but not yet effective

Effective for financial periods beginning on or after 1 March 2010

Amendments to FRS 132: Financial Instruments: Presentation – Classification of

Rights Issues

The revised FRS 101 also prescribes one-reporting entity model, i.e. singular financial

statement presentation for all funds on a combined/consolidated basis. However

BNM/RH/GL 004-6 Guidelines on Financial Reporting for Takaful Operators requires

the Company to prepare the financial statements separately for Shareholder's Fund,

General Takaful Fund and Family Takaful Fund.

The revised FRS 101 also requires the Company to make new disclosures to enable

users of the financial statements to evaluate the Company's objectives, policies and

processes for managing capital risk.

In addition, a statement of financial position is required at the beginning of the earliest

comparative period following a change in accounting policy, the correction of an error or

the classification of items in the financial statements. The Company's statement of

financial position at the beginning of the earliest comparative period, i.e. 1 April 2009

has been included following the change in the comparative figures for 31 March 2010 to

conform with current year's presentation.

The revised FRS 101 introduces changes in the presentation and disclosures of

financial statements. The revised Standard separates owner and non-owner changes in

equity. The statement of changes in equity includes only details of transactions with

owners, with all non-owner changes presented as a single line. The Standard also

introduces the statement of comprehensive income, with all items of income and

expense recognised in statement of comprehensive income, together with all other

items of recognised income and expense recognised directly in equity, either in one

single statement, or in two linked statements. The Company have elected to present

this statement in one single statement.

As at the date of authorisation of these financial statements, the following FRSs,

Amendments to FRSs and Interpretations of the Issues Committee ("IC Interpretations")

have been issued by the Malaysian Accounting Standards Board ("MASB") but are not

yet effective and have not been adopted by the Company.



(cont'd.)

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2.27

Effective for financial periods beginning on or after 1 July 2010

FRS 1: First-time Adoption of Financial Reporting Standards (revised)

FRS 3: Business Combinations (revised)

Amendments to FRS 2: Share-based Payment

Amendments to FRS 5: Non-current Assets Held for Sale and Discontinued Operations

Amendments to FRS 127: Consolidated and Separate Financial Statements

(revised 2010)

Amendments to FRS 138: Intangible Assets

Amendments to IC Interpretation 9: Reassessment of Embedded Derivatives

IC Interpretation 12: Service Concession Arrangements

IC Interpretation 15: Agreements for the Construction of Real Estate

IC Interpretation 16: Hedges of a Net Investment in a Foreign Operation

IC Interpretation 17: Distribution of Non-cash Assets to Owners

Effective for financial periods beginning on or after 1 January 2011

Amendments to FRS 1: Limited Exemption from Comparative FRS 7 Disclosures for

first- time Adopters

Amendments to FRS 1: Additional Amendments for First-time adopters

Amendments to FRS 2: Group Cash-settled Share-based Payments Transactions

Amendments to FRS 7: Improving Disclosures about Financial Instruments

IC Interpretation 4: Determining whether an Arrangement contains a lease

IC Interpretation 18: Transfer of Assets from Customers

TR 3: Guidance on Transition to IFRSs

Tri-4: Shariah Compliant Sale Contracts.

Effective for financial periods beginning on or after 1 July 2011

Amendments to IC Interpretation 14, Prepayments of a Minimum Funding Requirements

IC Interpretation 19, Extinguishing Financial Liabilities with equity instruments

Effective for financial periods beginning on or after 1 January 2012

FRS 124: Related Party Disclosures (revised)

IC Interpretation 15: Agreements for the Construction of Real Estate



(cont'd.)

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2.28 Significant accounting estimates and judgments

(a) Critical judgements made in applying accounting policies

(i)

(ii) Impairment of AFS financial assets

The preparation of the Company's financial statements requires management to make

judgements, estimates and assumptions that affect the reported amount of revenues,

expenses, assets and liabilities at the financial year end. However, uncertainty about

these assumptions and estimates could result in outcomes that could require a material

adjustment to the carrying amount of the asset or liability affected in the future.

The following are the judgements made by management in the process of applying

the Company's accounting policies that have the most significant effect on the

amount recognised in the financial statements. Judgements are continually

evaluated and are based on historical experiences and other factors, including

expectations of future events that are believed to be reasonable under the

circumstances.

Classification between investment properties and property, plant and

equipment

The Company has developed certain criteria based on FRS 140 in making

judgement whether a property qualifies as an investment property. Investment

property is a property held to earn rentals or for capital appreciation or both.

Some properties comprise a portion that is held to earn rentals or for capital

appreciation and another portion that is held for use in the production or supply

of goods or services or for administrative purposes. If these portions could be

sold separately (or leased out separately under a finance lease), the Company

would account for the portions separately. If the portions could not be sold

separately, the property is an investment property only if an insignificant portion

is held for use in the production or supply of goods or services or for

administrative purposes. Judgement is made on an individual property basis to

determine whether ancillary services are so significant that a property does not

qualify as investment property.

Significant judgement is required to assess impairment for available-for-sale

investments. The Company evaluates the duration and extent to which the fair

value of an investment is less than its cost; the financial health and near term

business outlook for the investee, including but not limited to factors such as

industry and sector performance, changes in technology and operational and

financial cash flow.

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2.28 Significant Accounting Estimates and Judgments (cont'd.)

(a) Critical judgements made in applying accounting policies (cont'd.)

(iii) Impairment of takaful and retakaful certificates receivables

(b) Key sources of estimation uncertainty

(i) Depreciation and amortisation

The key assumptions concerning the future and other key sources of estimation

uncertainty at the reporting date that have a significant risk of causing a material

adjustment to the carrying amounts of assets and liabilities within the next financial

year are discussed below.

Depreciation and amortisation is based on management’s estimates of the

future estimated average useful lives and residual values of property, plant and

equipment and intangible assets. Estimates may change due to technological

developments, expected level of usage, competition, market conditions and

other factors, and could impact the estimated average useful lives and the

residual values of these assets.

This may result in future changes in the estimated useful lives and in the

depreciation or amortisation expenses. It is currently estimated that the

property, plant and equipment and intangible assets of the Company will not

have any residual values.

Collective assessment is performed by grouping receivables with similar credit

risk characteristics and the future cash flows are estimated based on historical

loss experience for receivables with similar credit risk characteristics.

The Company performs individual assessment for takaful and retakaful

certificates receivables that are individually significant, or collectively for

financial assets that are not individually significant by calculating the present

value of future cash flows against the carrying amount of receivables. The

future cash flows are determined based on credit assessment on each

impaired receivable.

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(b) Key sources of estimation uncertainty (cont'd.)

(ii)

The principal uncertainty in the general takaful certificate liabilities arises from

the technical provisions which include the contribution liabilities and claims

liabilities.

The estimates of contribution liabilities and claims liabilities are therefore

sensitive to various factors and uncertainties. The establishment of technical

provisions is an inherently uncertain process and, as a consequence of this

uncertainty, the eventual settlement of contribution and claim liabilities may

vary from the initial estimates. At each financial year end, the estimates of

financial year end are re-assessed for adequacy by an appointed actuary and

changes will be reflected as adjustments to these liabilities. The appointment of

the actuary is approved by BNM.

Uncertainty in accounting estimates for general takaful certificate

liabilities

The estimation bases for contribution liabilities for general takaful certificate

liabilities is explained in Note 2.14 (ii) of the Summary of Significant Accounting

Policies.

Generally, claims liabilities on reported claims or case reserves are estimated

based upon historical claims experience, existing knowledge of events, the

terms and conditions of the relevant policies and interpretation of

circumstances. Particularly relevant is past experience of similar cases,

historical claims development trends, legislative changes, judicial decisions and

economic conditions. It is certain that final claim liabilities may vary from

current projection. The uncertainty is also inherent in the projected contribution

liabilities as it is correlated to the projected claims liabilities.

There may be reporting lag between the occurrence of an insured event and

the time it is actually recorded. For these cases, the IBNR reserves are

estimated. Even for liabilities which have been recorded, there are potential

uncertainties as to the magnitude of the final claims compared to initial reserve

provisions. For these cases, IBNER reserve provision are estimated. There are

various factors affecting the level of uncertainty such as inflation, judicial

interpretations, legislative changes and claims handling procedures.

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(ii)

(iii)

Bank Negara Malaysia has issued new Guidelines on Valuation Basis for

Liabilities of General Takaful Business which shall take effect beginning on and

after 1 July 2011. The guidelines sets out prudential requirements that should

be observed by takaful operators in valuing liabilities of their general takaful

business, with the aim of providing for those liabilities at a specified level of

adequacy with explicit prudential margins. The Guidelines is intended to reflect

the takaful operator’s fiduciary duty to manage the takaful funds prudently,

treat participants fairly as well as to ensure that the shareholders’ fund can

adequately support the takaful business. Currently, the Company has adopted

a level of provision of risk margin for adverse deviation ("PRAD") calculated at

70% confidence level. This is a progressive measure taken by the Company

towards meeting the PRAD at 75% confidence level as required by the

guidelines by financial year ending 31 March 2013.

Uncertainty in accounting estimates for general takaful certificate

liabilities (cont'd.)

The estimation of the ultimate liability arising from claims made under family

takaful certificates is a critical accounting estimate. There are several sources

of uncertainty that need to be considered in estimation of the liabilities that the

family takaful fund will ultimately be required to pay as claims.

For those certificates that cover risks related to disability, estimates are made

based on recent past experience and emerging trends. However epidemics, as

well as wide ranging changes to lifestyle, could result in significant changes to

the expected future exposures.

For family takaful certificates, estimates are made for future deaths, disabilities,

maturities, investment returns, voluntary terminations and expenses in

accordance with contractual and regulatory requirements. The family takaful

fund bases the estimate of expected number of deaths on statutory mortality

tables, adjusted where appropriate to reflect the fund's unique risk exposures.

The estimated number of deaths determines the value of possible future

benefits to be paid out, which will be factored into ensuring sufficient cover by

reserves, which in return is monitored against current and future contributions.

Uncertainty in accounting estimates for family takaful certificate liabilities

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(iii)

(iv)

Bank Negara Malaysia has issued new Guidelines on Valuation Basis for

Liabilities of Family Takaful Business which shall take effect beginning on and

after 1 July 2011. The guidelines sets out prudential requirements that should

be observed by takaful operators in valuing liabilities of their family takaful

business, with the aim of providing for those liabilities at a specified level of

adequacy with explicit prudential margins. The Guidelines is intended to reflect

the takaful operator’s fiduciary duty to manage the takaful funds prudently,

treat participants fairly as well as to ensure that the shareholders’ fund can

adequately support the takaful business. The Company had not adopted the

guidelines earlier in its financial statement for the year ended 31 March 2011.

The principal uncertainty in the shareholder's fund takaful certificate liabilities

arises from the technical provisions which includes the unearned wakalah fees

reserve and expenses liabilities of general and family takaful fund.

The estimation bases for unearned wakalah fees for general takaful certificate

liabilities is explained in Note 2.16 (i) (a) of the Summary of Significant

Accounting Policies.

All of these will give rise to estimation uncertainties of projected ultimate liability

of the family takaful fund.

At each financial year end, these estimates are reassessed for adequacy and

changes will be reflected as adjustments to the liability.

The best estimate for unexpired expense reserve for general takaful business

on a going concern basis is derived from the estimation for expected certificate

management expenses required to maintain existing certificates and the costs

of claims handling expenses to administer and settle open claim files.

Uncertainty in accounting estimates for family takaful certificate liabilities

(cont'd.)

Uncertainty in accounting estimates for shareholder's fund expenses

liabilities

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(iv)

(iv)

(v) Pipeline contributions

The unexpired expense reserve is the present value of future maintenance

expenses on the current in-force family takaful contracts and is further reduced

by the present value of future shareholders income realisable with reasonable

certainty relating to those in-force family takaful contracts.

The present value of the future shareholders income relates to future renewal

wakalah fees as well as investment performance fee of the PA and the non-

medical risk fund's surplus administration charge.

The general takaful fund has recognised pipeline contribution amounting to

approximately RM6,093,143 (2010: RM7,400,000) at the end of the current

financial year. Estimations made by management are based on expected and

actual risks underwritten and is as advised by the relevant agents or

underwriters. Other factors taken into consideration include average monthly

trends for turnaround time of certificate issuance.

The unexpired expense reserve is calculated using adjusted parameters to

provide sufficiency at the appropriate percentile of statistical variation that is

higher than the best estimate values.


liabilities (cont'd.)

The unexpired expense reserve for family business is estimated assuming that

the block of in-force contracts are to be maintained on a 'going concern' basis.

Under a 'going concern' scenario, the contracts so valued are taken as a

particular sub-block of contracts and the maintenance expenses for which are

valued to the point the last certificate goes off the books.

The maintenance expenses related to such contracts include the cost of

functions that would normally associated with operation of the business on a

'going concern' basis.


liabilities

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(vi) Impairment of takaful receivables

(vii) Deferred tax assets

The amount of deferred tax assets recognised at 31 March 2011 was

approximately RM 5,169,860 (2010: RM 2,303,390) for the shareholder's fund

and RM 1,570,313 (2010: RM 1,473,794) for the general takaful fund; also the

amount of deferred tax liabilities for the family takaful fund is approximately

RM 2,133,882 (2010: RM 2,303,549) as disclosed in Note 21.

Deferred tax assets are recognised for all unused tax losses to the extent that it

is probable that taxable profit will be available against which the losses can be

utilised. Significant management judgement is required to determine the

amount of deferred tax assets that can be recognised, based on the likely

timing and level of future taxable profits together with future tax planning

strategies.

Assumptions about generation of future taxable profits depend on

management’s estimates of future cash flows. These depends on estimates of

future production and sales volume, operating costs, capital expenditure,

dividends and other capital management transactions. Judgement is also

required about application of income tax legislation. These judgements and

assumptions are subject to risks and uncertainty, hence there is a possibility

that changes in circumstances will alter expectations, which may impact the

amount of deferred tax assets recognised in the statement of financial position

and the amount of unrecognised tax losses and unrecognised temporary

differences.

The Company reviews its takaful receivables on a regular basis to assess

whether an allowance for impairment should be recorded in the statement of

comprehensive income/revenue account. In particular, judgement by

management is required in the estimation of the amount and timing of future

cash flows when determining the level of impairment required. Such estimates

are necessarily based on assumptions about the probability of default and

probable losses in the event of default, the value of the underlying security, and

realisation costs.

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3. Operating revenue

2011 2010

Shareholder's fund RM '000RM '000 RM '000

Wakalah fees:

General takaful fund 56,157 55,931


206,535 181,631

Investment income:

Profit on investment accounts 5,188 8,421

Net accretion of discounts on investments 187 138

5,375 8,559

211,910 190,190



Investment income:


Net accretion of discounts on investments 16 109

8,560 6,153

232,756 223,383

Family takaful fund


Investment income:


Net accretion of discounts on investments 1,094 1,048

32,843 22,167

Investment income of Investment-linked fund (Note 33(a)) 516 227

519,889 380,004

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4. Net earned contributions

2011 2010

General takaful fund RM '000RM '000 RM '000

(a) Gross earned contribution


Change in unearned contribution provision (13,670) (911)

210,526 216,319

(b) Earned contribution ceded to retakaful operators

Contribution ceded to retakaful operators (22,398) (25,525)

Change in unearned contribution provision (10,151) 278

(32,549) (25,247)

Net Earned Contribution 177,977 191,072

5. Investment income

Shareholder's General Family

fund takaful fund takaful fund

RM '000 RM '000 RM '000

31 March 2011

Financial assets at FVTPL:

Dividend income

- quoted shares in Malaysia 16 16 380

HTM investments:

Profit income 1,082 97 6,643

AFS financial assets:

Profit income 1,494 2,559 11,856

Dividend income

- quoted shares in Malaysia 340 858 1,149

Loans and receivables:

Profit income 1,938 5,014 6,958

Dividend income

- institutional trusts 318 - 897

Rental income from investment properties - - 3,866

Net accretion of discounts on investments 187 16 1,094

Investment expenses - - (1,722)

5,375 8,560 31,121

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5. Investment income (cont'd.)



31 March 2010 RM '000 RM '000 RM '000


Dividend income

- quoted shares in Malaysia 13 14 1,026

HTM investments:

Profit income 997 1,436 5,308


Profit income 1,018 1,592 8,508

Dividend income

- quoted shares in Malaysia 171 382 -


Profit income 1,514 2,231 3,615

Dividend income

- institutional trusts 240 - 668

Rental income from investment properties 600

Net accretion of discounts on investments 138 109 1,018

Investment expenses - - (523)

4,091 5,764 20,220

6. Realised gains and losses



31 March 2011 RM '000 RM '000 RM '000

Property, plant and equipment

Realised losses (834) - -


Realised gains:

Quoted shares in Malaysia:

Shariah approved equities 233 239 615


Realised gains:

Unquoted Islamic private debt securities:

Unsecured - - 3,044


Shariah approved equities 1,065 2,467 3,483

Shariah approved unit trust funds - - 931

1,065 2,467 7,458

464 2,706 8,073

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6. Realised gains and losses (cont'd.)



RM '000 RM '000 RM '000

31 March 2010


Realised gains:


Shariah approved equities - 78 1,501


Realised gains:


Shariah approved equities 4,337 230 51

Shariah approved unit trust funds - - 472

4,337 230 523

4,337 308 2,024

7. Fair value gains and losses



31 March 2011 RM '000 RM '000 RM '000

Investment properties - - (7,490)

Financial assets at FVTPL 14 (19) 61

Impairment of AFS financial assets (323) - -


of takaful receivables - 3,054 (636)

(309) 3,035 (8,065)

31 March 2010

Investment properties - - 22,535

Financial assets at FVTPL 170 199 4,659

Impairment of AFS financial assets (1,107) 389 347

Impairment of HTM financial assets (962) - -


of takaful receivables - (1,593) (239)

(1,899) (1,005) 27,302

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8. Fee and commission income

2011 2010

RM '000RM '000 RM '000

Shareholder's fund

Fee income

Wakalah fees:

General takaful fund 56,157 55,931


Surplus administrative charges :

General takaful fund - 8,095

Family takaful fund 4,378 732

Investment performance fee from family takaful fund 2,376 4,468

213,289 194,926

Commission expense

Commissions paid to agents (115,676) (100,519)


Fee and commission income

Retakaful Commission Income 3,938 4,505

Fee expense

Wakalah fees (56,157) (55,931)

Surplus administrative charges - (8,095)

(56,157) (64,026)

Family takaful fund

Fee and commission income

Retakaful Commission Income - 63

Fee expense

Wakalah fees (143,009) (120,139)

Surplus administrative charges (4,341) (732)

Investment performance fee (2,376) (4,468)

(149,726) (125,339)

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9. Other operating income/(expenses)

2011 2010

RM '000RM '000 RM '000

Shareholder's fund

Miscellaneous income 346 620

346 620


Miscellaneous income/(expenses) 50 (1)

Bank charges (1,818) (1,382)

Stamp duty (2) 7

(1,770) (1,376)

Family takaful fund

Miscellaneous expenses (419) (2,771)

Bank charges (1,461) (1,137)

Participants' medical fees (461) (352)

Stamp duty (488) (514)

(2,829) (4,774)

10. Net benefits 2011 2010

RM '000RM '000 RM '000

Family takaful fund

Gross benefits and claims paid :

Death (39,070) (29,585)

Surrender (41,367) (19,700)

Medical (32,821) (27,724)

Others (4,442) (15,771)

(117,700) (92,780)

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11. Management expenses

2011 2010

RM '000 RM '000

Shareholder's fund

Staff costs:

Non-executive directors' remuneration (Note 12 (a)) 845 805

Executive director's remuneration (Note 12 (b)) 1,404 1,417

Salaries, bonus, and other related costs 34,617 41,291

Pension costs - EPF 7,872 5,051

Short-term accumulating compensated absences 174 95

44,912 48,659

Auditors’ remuneration

- statutory audit 131 87

- other services 21 23

Office rental 5,296 3,284

Amortisation of software development costs 1,169 781

Depreciation of property, plant and equipment 4,101 2,250

Property, plant and equipment written off - 7

Management fees paid to holding company 3,914 2,252

Share of acquisition costs on quota share retakaful 4,367 4,152

Marketing and communication 6,150 5,249

Electronic data processing 3,420 3,445

Agency expenses 5,962 4,613

Contribution to Perbadanan Insurans Deposit

Malaysia ("PIDM") 1,282 -

Other expenses 9,258 11,827

89,983 86,629

12. Directors' remuneration

(a) Non-executive directors' remuneration:

Fees 672 626

Allowances and other emoluments 173 179

845 805

(b) Executive director's remuneration:

Salary and bonus 1,200 1,172

Pension costs - EPF 204 155

Retirement benefits - 90

Benefits-in-kind 96 121

1,500 1,538

Total CEO's remuneration excluding benefits-in-kind 1,404 1,417

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12. Directors' remuneration (cont'd.)

2011 2010

Executive director:

RM1,300,001 - RM1,800,000 1 1

Non-executive directors:

RM100,001 - RM500,000 6 4

RM50,001 - RM100,000 2 2

13. Change in expenses liability

2011 2010

Shareholder's fund RM '000 RM '000

Expense liability of general takaful fund

Increase in unearned wakalah fees reserve 236 137

Increase in provision for expenses deficiency 1,630 1,209

Expense liability of family takaful fund

Decrease in unexpired expense reserve (2,471) (7,085)

(605) (5,739)

Number of directors

The number of directors of the Company whose total remuneration during the financial year

fell within the following bands is analysed below:

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14. Taxation

2011 2010

RM '000RM '000 RM '000

Shareholder's fund

Current year's provision 3,944 6,848

Overprovision of tax expense in prior years (347) (896)

Deferred tax relating to origination and

reversal of temporary differences (Note 21) 1,173 557

Tax expense for the year 4,770 6,509

2011 2010

RM '000RM '000 RM '000

Profit before taxation 14,111 14,926

Taxation at Malaysian statutory tax rate 3,527 3,732

Income not subject to tax (73) -

Expenses not deductible for tax purposes 1,593 996

Underprovision of deferred tax liabilities in prior years 70 2,678

Overprovision of tax expense in prior years (347) (896) Tax expense for the year 4,770 6,510

Domestic income tax for shareholder's fund is calculated at the Malaysian statutory tax rate

of 25% (2009: 25%) of the estimated assessable profit for the year.

A reconciliation of income tax expenses applicable to profit before taxation at the statutory

income tax rate to income tax expense at the effective income tax rate of the shareholder's

fund is as follows:

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14. Taxation (cont'd.)

2011 2010

RM '000RM '000 RM '000


Current year's provision 474 2,004

Underprovision of tax expense in prior years 146 -


reversal of temporary differences (Note 21) 807 507


2011 2010

RM '000RM '000 RM '000


Taxation at Malaysian statutory tax rate 1,468 3,376

Income not subject to tax (182) -

Expenses not deductible for tax purposes 216 1

Utilisation of capital allowances allocated

from the Shareholder's fund (279) (1,514)

Underprovision of deferred tax in prior year 58 648

Underprovision of tax expense in prior years 146 - Tax expense for the year 1,427 2,511

A reconciliation of income tax expenses applicable to profit before taxation at the statutory

income tax rate to income tax expense at the effective income tax rate of the general takaful

fund is as follows:

Domestic income tax for general takaful fund is calculated at the Malaysian statutory tax rate

of 25% (2009: 25%) of the estimated assessable profit for the year.

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14. Taxation (cont'd.)

2011 2010

RM '000RM '000 RM '000

Family takaful fund

Current year's provision 2,830 843



reversal of temporary differences (Note 21) (344) 1,779


2011 2010

RM '000RM '000 RM '000

Surplus for the year 241,348 198,821

Surplus administration charges transferred to

shareholders' fund - 732


Taxation at preferential tax rate of 8% 19,308 15,964

Income not subject to tax (16,628) (12,682)

Expenses not deductible for tax purposes (132) 8

Utilisation of capital allowances allocated

from the Shareholder's fund (193) (283)

Under/(Over)provision of deferred tax in prior years 131 (385)



A reconciliation of income tax expenses applicable to surplus before taxation at the statutory

income tax rate to income tax expense at the preferential income tax rate of the family

takaful fund is as follows:

Family takaful business is taxed at the preferential tax rate of 8% (2010: 8%) of taxable

investment income for the year.

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15. Property, plant and equipment

Furniture,

Fittings and

Computer Office Motor

2011 equipment Equipment Vehicles Total

RM'000 RM'000 RM'000 RM'000

Shareholder's fund

Cost

At 1 April 2010 4,955 18,581 430 23,966

Additions 340 4,710 480 5,530

Write offs (514) (3,700) - (4,214)

Reclassifications 1,042 (1,042) -

At 31 March 2011 5,823 18,549 910 25,282

Accumulated Depreciation

At 1 April 2010 4,224 5,810 269 10,303

Charge for the year 840 3,176 85 4,101

Write offs (512) (2,847) - (3,359)

Reclassifications 54 (54) - -

At 31 March 2011 4,606 6,085 354 11,045

Net Book Value

At 31 March 2011 1,217 12,464 556 14,237

2010

Cost

At 1 April 2009 4,558 8,806 430 13,794

Additions 448 9,798 - 10,246

Write offs (51) (23) - (74)

At 31 March 2010 4,955 18,581 430 23,966

Accumulated Depreciation

At 1 April 2009 3,737 4,282 100 8,119

Charge for the year 537 1,545 169 2,251

Write offs (50) (17) - (67)

At 31 March 2010 4,224 5,810 269 10,303

Net Book Value

At 31 March 2010 731 12,771 161 13,663

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16. Intangible assets

Software

Development Computer

Cost in Software and

Progress Licenses Total

RM'000 RM'000 RM'000

Shareholder's fund

Cost

At 1 April 2010 1,564 9,427 10,991

Additions 78 1,101 1,179

Reclassifications (392) 392 -

At 31 March 2011 1,250 10,920 12,170

Accumulated Amortisation

At 1 April 2010 - 6,418 6,418

Charge for the year 1,169 1,169

At 31 March 2011 - 7,587 7,587

Net Carrying Amount

At 31 March 2011 1,250 3,333 4,583

At 31 March 2010 1,564 3,009 4,573

17. Investment properties

2011 2010

RM'000 RM'000

Family takaful fund

At fair value:

At 1 April 110,000 69,966

Additions 1,008 17,499

Fair value adjustments (7,490) 22,535

At 31 March 103,518 110,000

These are leasehold properties acquired from a third party vendor on 19 and 22 November

2008. These properties are carried at fair value at 31 March 2011 in accordance with the

accounting policy disclosed in Note 2.3.

The components and movements of deferred tax liabilities during the balance sheet date is asThe component and movement of deferred tax liability during the financial year are asDeferred tax assets and liabilities are offset when there is a legally Amortisation

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18. Financial instruments

Shareholder's General Family Total Shareholder's General Family Total

fund takaful fund takaful fund fund takaful fund takaful fund

RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000


Government guaranteed 15,026 14,324 24,103 53,453 - - 8,933 8,933

Unsecured 57,140 92,609 304,071 453,820 27,910 44,765 212,552 285,227

Government investment issues 24,041 50,940 163,241 238,222 24,063 38,719 173,836 236,618


Shariah approved equities 5,650 9,742 17,820 33,212 9,535 11,543 29,610 50,688

Shariah approved unit trust funds - 5,888 8,585 14,473 - - 3,850 3,850

Warrants 15 15 - 30 117 118 - 235

Golf club memberships 178 - - 178 60 - - 60

Islamic investment accounts with licensed:

Islamic banks 13,755 32,249 90,006 136,010 23,395 35,100 63,150 121,645

Investment banks - - 1,507 1,507 13,039 7,960 72,425 93,424

Development bank 13,472 18,577 59,356 91,405 4,631 4,926 6,037 15,594

Building society 8,269 - - 8,269 19,324 20,738 - 40,062

Islamic repo placements 12,668 5,814 113,967 132,449 37,689 51,202 57,234 146,125

Institutional trust fund 6,592 - 18,592 25,184 6,287 - 17,732 24,019

Units held in investment-linked fund 10,000 - - 10,000 5,000 - - 5,000

Secured staff loans:

Receivable within 12 months 1,289 - - 1,289 1,184 - - 1,184

Receivable after 12 months 2,723 - - 2,723 2,825 - - 2,825

Qard to general takaful fund(i)

12,043 - - 12,043 12,043 - - 12,043

Due from: - - - - - - - -

General takaful fund 2,739 - 12,967 15,706 11,594 - 522 12,116

Family takaful fund 28,935 - - 28,935 13,400 - - 13,400

Investment-linked fund 174 - 3 177 69 - - 69

Amount due from holding company - - 5,247 5,247 - - 363 363

Income due and accrued 1,022 2,160 199 3,381 763 1,152 3,724 5,639

Other receivables, deposits and prepayments 5,402 1,649 445 7,496 4,265 403 14 4,682

221,133 233,967 820,109 1,275,209 217,193 216,626 649,982 1,083,801

The Company's financial instruments are

summarised by categories as follows:

Financial assets at FVTPL (Note 18(a)) 712 1,105 1,832 3,649 1,364 1,529 17,923 20,816

HTM investments (Note 18(b)) 40,450 67,268 212,387 320,105 24,448 40,725 205,796 270,969

AFS financial assets (Note 18(c)) 60,888 105,145 303,601 469,634 35,873 52,891 205,062 293,826

Loans and receivables (Note 18(d)) 119,083 60,449 302,289 481,821 155,508 121,481 221,201 498,190

221,133 233,967 820,109 1,275,209 217,193 216,626 649,982 1,083,801

31 March 2011 31 March 2010

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18. Financial instruments (cont'd.)



(a) Financial assets at FVTPL RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000

At cost:


Shariah approved equities 875 1,303 2,073 4,251 1,442 1,607 18,225 21,274

Warrants 7 7 - 14 106 107 - 213

882 1,310 2,073 4,265 1,548 1,714 18,225 21,487

At fair value:


Shariah approved equities 697 1,090 1,832 3,619 1,247 1,411 17,923 20,581

Warrants 15 15 - 30 117 118 - 235

712 1,105 1,832 3,649 1,364 1,529 17,923 20,816

(b) HTM investments

At amortised cost:



Unsecured 1,383 2,004 25,043 28,430 385 2,006 23,027 25,418


40,450 67,268 212,387 320,105 24,448 40,725 205,796 270,969

At fair value:



Unsecured 1,495 2,036 25,542 29,073 385 2,032 23,490 25,907


40,924 67,940 213,818 322,682 24,775 40,936 206,533 272,244

31 March 2011 31 March 2010

The fair values of the financial investments are their quoted prices on the stock exchanges or broker/dealer price quotations. Where the information is not available, fair value has been estimated

using quoted market prices for securities with a similar credit, maturity and yield characteristic.

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(c) AFS financial assets RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000

At amortised cost/cost:


Unsecured 54,789 88,994 270,399 414,182 27,134 41,979 185,240 254,353





59,944 103,471 294,854 458,269 34,715 53,747 203,627 292,089

At fair value:


Unsecured 55,757 90,605 279,028 425,390 27,525 42,759 189,525 259,809





60,888 105,145 303,601 469,634 35,873 52,891 205,062 293,826

(d) Loans and receivables


At cost: fund takaful fund takaful fund fund takaful fund takaful fund

RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000

Islamic investment accounts with licensed:(i)

Islamic banks 13,755 32,249 90,006 136,010 23,395 35,100 63,150 121,645



Building society 8,269 - - 8,269 19,324 20,738 0 40,062


Institutional trust fund 6,592 18,592 25,184 6,287 17,732 24,019





Qard to general takaful fund(ii)

12,043 - - 12,043 12,043 - - 12,043

The fair values of the financial investments are their quoted prices on the stock exchanges or broker/dealer price quotations. Where the information is not available, fair value has been estimated

using quoted market prices for securities with a similar credit, maturity and yield characteristic.

31 March 2011 31 March 2010

31 March 2011 31 March 2010

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(d) Loans and receivables (cont'd.) RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000

At cost (cont'd.):

Due from:


Family takaful fund 28,935 - - 28,935 13,400 - 13,400

Investment-linked fund 174 - 3 177 69 - 69




119,083 60,449 302,289 481,821 155,508 121,481 221,201 498,190

At fair value:

Islamic investment accounts with licensed:(i)

Islamic banks 13,755 32,249 90,006 136,010 23,395 35,100 63,150 121,645



Building society 8,269 - - 8,269 19,324 20,738 - 40,062


Institutional trust fund 6,592 - 18,592 25,184 6,287 - 17,732 24,019





Qard to general takaful fund(ii)

12,043 - - 12,043 12,043 - - 12,043

Due from:


Family takaful fund 28,935 - - 28,935 13,400 - - 13,400

Investment-linked fund 174 - 3 177 69 - - 69




119,083 60,449 302,289 481,821 155,508 121,481 221,201 498,190

31 March 2011 31 March 2010

The fair values of the LAR have been established by comparing current profit rates for similar financial instruments to the rates offered when the LAR were first recognized together with

appropriate market credit adjustments.

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The following tables show financial investments recorded at fair value analysed by the different basis of fair values as follows:

Financial AFS Financial AFS

assets at financial assets at financial

FVTPL assets Total FVTPL assets Total

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Shareholder's fund

Quoted market price 712 4,953 5,665 1,364 8,288 9,652

Valuation techniques - market observable inputs - 55,757 55,757 - 27,525 27,525

At cost less impairment - 178 178 - 60 60

712 60,888 61,600 1,364 35,873 37,237


Quoted market price 1,105 14,540 15,645 1,529 10,132 11,661


1,105 105,145 106,250 1,529 52,891 54,420

Family takaful fund

Quoted market price 1,832 24,573 26,405 17,923 15,537 33,460


1,832 303,601 305,433 17,923 205,062 222,985

(i)

(ii)

31 March 2010

Qard represents a benevolent loan provided to the general takaful fund. It is provided in order to make good the underwriting deficit experienced by the general takaful fund during a financial

period. The amount is unsecured, not subject to any profit elements and has no fixed terms of repayment.

The Islamic investment accounts of general takaful fund of RM 56,640,000 (2010 : RM 119,926,000) above has been off-set against qard of RM 12,043,000 (2010 : 12,043,000) in arriving at

the total general takaful fund assets and liabilities and participants' fund of RM 338,155,000 (2010 : RM272,976,000) on the Company's statement of financial position at page 16.

31 March 2011

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19. Takaful certificates receivables

2011 2010

RM'000 RM'000


Contributions receivable 33,525 45,388

Due from agents, retakaful operators and brokers 7,328 1,877

40,853 47,265

Allowance for impairment (8,055) (11,109)

32,798 36,156

Family takaful fund

Contributions receivable 84,700 39,007

Allowance for impairment (882) (246)

83,818 38,761

20. Due from/(to) related companies

2011 2010

Shareholder's Fund RM'000 RM'000

Due to:

Holding company (22) (1,037)

Fellow subsidiaries - (95)

(22) (1,132)

21. Deferred tax assets/(liabilities)

2011 2010

RM'000 RM'000

Shareholder's fund

At beginning of year

- As previously stated 2,303 1,666

- Effect of adopting FRS 4 (Note 2.27) 3,938 5,372

At beginning of year (as restated) 6,241 7,038

Recognised in AFS reserve 102 (240)

Recognised in statement of comprehensive income (1,173)

- As previously stated 877

- Effect of adopting FRS 4 (Note 2.27) - (1,434)

At end of year 5,170 6,241

The amounts due from/(to) related companies are non-trade in nature, unsecured, not subject

to any profit elements and repayable upon demand.

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21. Deferred tax assets/(liabilities) (cont'd.)

2011 2010

RM RM



- As previously stated 1,474 2,629

- Effect of adopting FRS 4 (Note 2.27) 868 687

At beginning of year (as restated) 2,342 3,316

Recognised in AFS reserve 36 (467)

Recognised in statement of comprehensive income (807)

- As previously stated (688)

- Effect of adopting FRS 4 (Note 2.27) 181


Family takaful fund

At beginning of year (2,304) (253)

Recognised in AFS reserve (175) (272)

Recognised in statement of comprehensive income 344 (1,779)

At end of year (2,135) (2,304)

Shareholder's fund

Property,

Financial plant and

Assets Receivables equipment Total

RM'000 RM'000 RM'000 RM'000

2011

At 1 April 2010

- As previously stated 2,009 294 - 2,303

- Effect of adopting FRS 4 - 3,938 - 3,938

At 1 April 2010 (as restated) 2,009 4,232 - 6,241

Recognised in AFS reserve 102 - - 102

Recognised in statement of

comprehensive income (4) (1,169) - (1,173)

At 31 March 2011 2,107 3,063 - 5,170

The components and movements of deferred tax assets/(liabilities) during the financial year

are as follows:

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Shareholder's fund (cont'd.)

Property,

Financial plant and


2010 RM'000 RM'000 RM'000 RM'000

At 1 April 2009

- As previously stated 1,774 732 (840) 1,666

- Effect of adopting FRS 4 - 5,372 - 5,372

At 1 April 2009 (as restated) 1,774 6,104 (840) 7,038

Recognised in AFS reserve (240) - - (240)


comprehensive income

- As previously stated 475 (438) 840 877

- Effect of adopting FRS 4 - (1,434) - (1,434)

At 31 March 2010 (restated) 2,009 4,232 - 6,241


2011

At 1 April 2010

- As previously stated 395 1,079 - 1,474

- Effect of adopting FRS 4 868 868

At 1 April 2010 (as restated) 395 1,947 - 2,342

Recognised in AFS reserve 36 - - 36


comprehensive income 5 (812) - (807)

At 31 March 2011 436 1,135 - 1,571

2010

At 1 April 2009

- As previously stated 913 1,716 - 2,629

- Effect of adopting FRS 4 - 687 - 687

At 1 April 2009 (as restated) 913 2,403 - 3,316



comprehensive income

- As previously stated (39) (636) - (675)

- Effect of adopting FRS 4 - 181 - 181

At 31 March 2010 394 1,948 - 2,342

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Family takaful fund Property,

Financial plant and


2011 RM'000 RM'000 RM'000 RM'000

At 1 April 2010 (501) (1,803) - (2,304)

Recognised in AFS reserve (175) (175)


comprehensive income (255) 599 344

At 31 March 2011 (931) (1,204) - (2,135)

2010

At 1 April 2009 (253) - - (253)



comprehensive income 24 (1,803) - (1,779)

At 31 March 2010 (501) (1,803) - (2,304)

22. Expenses liabilities

2011 2010 1.4.2009

Shareholder's fund RM'000 RM'000 RM'000

Expense liabilities for general takaful fund:

Unearned wakalah fees reserve 4,251 4,014 3,877

Provision for expenses deficiency 3,573 1,943 734

7,824 5,957 4,611

Expense liabilities for family takaful fund :

Unexpired expense reserve 7,322 9,793 16,878

15,146 15,750 21,489

2011 2010

Gross / net Gross / net

RM'000 RM'000

At beginning of the year, previously stated - -

Effect of adoption of FRS 4 15,750 21,489

At beginning of the year, restated 15,750 21,489

- Wakalah fee received during the year 56,157 55,931

- Wakalah fee earned during the year (55,920) (55,794)

- Movement in provision for expenses deficiency 1,630 1,209

- Movement in provision for UER (2,471) (7,085)

At end of the year 15,146 15,750

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23. Takaful certificates liabilities

Gross Retakaful Net Gross Retakaful Net Gross Retakaful Net

General takaful fund RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Provision for claims reported

by certificateholders 116,482 (23,418) 93,064 82,766 (10,170) 72,596 66,888 (13,775) 53,113

Provision for incurred but not

reported claims ("IBNR") 66,597 (7,789) 58,808 46,852 (5,954) 40,898 33,635 (5,253) 28,382

Provision for risk margin for

adverse deviations ("PRAD") 10,033 (1,203) 8,830 13,685 (1,453) 12,232 - - -

Claim Liabilities (i)

193,112 (32,410) 160,702 143,303 (17,577) 125,726 100,523 (19,028) 81,495

Contribution liabilities (ii)

98,621 (1,941) 96,680 84,951 (12,092) 72,859 84,040 (11,814) 72,226

291,733 (34,351) 257,382 228,254 (29,669) 198,585 184,563 (30,842) 153,721

Gross Retakaful Net Gross Retakaful Net Gross Retakaful Net

Family takaful fund(iii)

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Provision for claims reported

by certificateholders 33,668 (24,395) 9,273 30,013 (7,855) 22,158 18,406 (4,609) 13,797

Participants Account ("PA") 916,304 (91,770) 824,534 683,746 (60,015) 623,731 609,830 (128,704) 481,126

Participants' Special Account ("PSA") 51,868 (21,218) 30,650 89,141 (37,941) 51,200 13,092 - 13,092

Available-for-sale reserves 7,962 - 7,962 6,113 - 6,113 2,981 - 2,981

Unallocated surplus 94,387 - 94,387 37,074 - 37,074 21,674 - 21,674

1,104,189 (137,383) 966,806 846,087 (105,811) 740,276 665,983 (133,313) 532,670

2011 2010 2009

20092011 2010

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23. Takaful certificates liabilities (cont'd.)

The movement of claim liabilities of general takaful fund, contribution liabilities of general takaful fund and family takaful fund liabities are presented as follows:

Gross Retakaful Net Gross Retakaful Net

(i) Claim liabilities of general takaful fund RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

At beginning of year 143,303 (17,577) 125,726 100,523 (19,028) 81,495

Claims incurred in the current accident year 172,075 (23,637) 148,438 137,296 (12,492) 124,804

Adjustment to claims incurred in prior accident years due to changes

in assumptions:

Change in PRAD (3,655) 250 (3,405) 13,685 (1,453) 12,232

Change in Expected Ultimate Loss Ratio (17,330) 741 (16,589) (20,606) 5,289 (15,317)

Movements in claims incurred in prior accident years 3,155 818 3,973 (4) 747 743

Claims paid during the year (104,436) 6,995 (97,441) (87,591) 9,360 (78,231)

At end of year 193,112 (32,410) 160,702 143,303 (17,577) 125,726

(ii) Contribution liabilities of general takaful fund


Contribution written in the year 224,196 (22,398) 201,798 217,230 (25,525) 191,705

Contribution earned during the year (210,526) 32,549 (177,977) (216,319) 25,247 (191,072)

At end of year 98,621 (1,941) 96,680 84,951 (12,092) 72,859

(iii)Family takaful fund


Effect of adopting FRS 4 (Note 2.27) - - - 1,495 - 1,495

At beginning of year, as restated 846,087 (105,811) 740,276 667,478 (133,313) 534,165

Increase in PA reserve 232,558 (31,755) 200,803 73,916 68,689 142,605

Increase/(decrease) in participants' risk fund (194,025) 64,622 (129,403) (49,450) (60,797) (110,247)

Contributions received 486,530 (44,244) 442,286 357,610 8,807 366,417

Liabilities paid for death,maturities, surrenders, benefits and claims (Note 10) (117,700) (3,655) (121,355) (92,780) 14,049 (78,731)

Benefits and claims experience variation 3,655 (16,540) (12,885) 11,607 (3,246) 8,361

Fees deducted (149,726) - (149,726) (124,607) - (124,607)

Transfer to special fund (698) - (698) (87) - (87)

Available-for-sale net gains on fair value changes 9,482 - 9,482 3,927 - 3,927

Available-for-sale deferred tax effect on fair value changes (175) - (175) (272) - (272)

Available-for-sale Realised gain transferred to statement of comprehensive income (7,458) - (7,458) (523) - (523)

Transfer to shareholder's fund (4,341) - (4,341) (732) - (732)

At end of year 1,104,189 (137,383) 966,806 846,087 (105,811) 740,276

2011 2010

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23. Takaful certificates liabilities (cont'd.)

24. Takaful certificates payables

2011 2010

General takaful fund RM'000 RM'000

Due to agents, retakaful operators and brokers (7,932) (5,641)

Family takaful fund

Due to agents, retakaful operators and brokers (34,406) (19,464)

25. Other payables

2011 2010

Shareholder's fund RM'000 RM'000 RM'000

Outstanding commissions 15,457 6,031

Deferred wakalah fee 2,720 4,243

Other accruals and payables 6,948 4,273

25,125 14,547


Deposit contributions - 11,181

Advance contributions - 2,844

Amount due to shareholders' fund* 2,739 11,594

Amount due to family takaful fund* 12,970 522


39,475 42,915

Included in the family takaful fund's takaful certificate liabilities is an amount of RM

7,962,141 (2010 : 6,113,338) being the AFS reserves of the family takaful fund. In

accordance to FRS 139, the AFS reserves of the family takaful fund should be accounted

for as equity of the Company (or Participants' Fund of the Family takaful fund).

In accordance with the requirements of the Guidelines on Financial Reporting for Takaful

Operators issued by BNM, the Company has continued to classify the AFS reserves of the

family takaful fund as takaful certificates liabilities. These are the modifications to the FRS

which had been approved by BNM under Section 41 of the Takaful Act 1984. Had the

Company applied the requirements of the Standards and the FRS Framework, the takaful

certificates liabilities of family takaful fund would be lowered by RM 7,962,141 (2010 :

RM6,113,338).

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25. Other payables (cont'd.)

2011 2010

Family takaful fund RM'000 RM'000 RM'000

Deposit contributions 30,232 20,881

Amount due to shareholders' fund* 28,932 13,400

Amount due to investment-linked fund* 3 118


65,754 38,485

*

26. Provisions

2011 2010

RM'000 RM'000 RM'000

Shareholder's fund

Short-term accumulating compensated absences 466 292

Provision for bonus 5,878 10,383

6,344 10,675

27. Share capital

Amount

2011 2010 2011 2010

RM'000 RM'000

Authorised: 500,000 500,000 500,000 500,000

Issued and fully paid:

At beginning of year 195,000 195,000 195,000 195,000

Issued during the year - - - -

At end of year 195,000 195,000 195,000 195,000

Number of ordinary shares

of RM1.00 each

The amounts due to shareholders' fund, general takaful fund and family takaful fund are

non-trade in nature, unsecured, not subject to any profit elements and has no fixed

terms of repayment.

On 1 April 2011, the paid-up capital of the Company had been increased to RM

295,000,000 by way of issuance of 100,000,000 new ordinary shares of RM 1.00 each to

MNRB Holdings Berhad for cash.

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28. Earnings per share

2011 2010

Net profit for the year (RM'000) 8,941 13,772

Number/weighted average number of ordinary

ordinary shares in issue ('000) 195,000 195,000

Basic earnings per share (sen) 4.6 7.1

29. General takaful fund

2011 2010

RM'000 RM'000

Accumulated deficit


- As previously stated (4,731) (14,102)

- Effect of adopting FRS 4 (Note 2.27) (2,602) (2,059)

At beginning of year (restated) (7,333) (16,161)

Underwriting surplus/(deficit) transferred from

General takaful statement of comprehensive income 4,445

- as previously stated 10,812

- Effect of adopting FRS 4 (Note 2.27) - (543)

Transfer from special fund - (1,361)

Hibah (profit) paid to participants during the year (1) (80)

At end of year (2,889) (7,333)

Qard *

At beginning of the year 12,043 12,043

Increase in Qard - -

At end of the year 12,043 12,043

Available-for-sale reserves

At beginning of year 1,482 40






The basic earnings per share (EPS) is calculated by dividing the net profit for the year by

the number (2010: weighted average number) of ordinary shares in issue during the year

as follows:

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29. General takaful fund (cont'd.)

2011 2010

RM'000 RM'000

General takaful fund at end of the year

Accumulated deficits (2,889) (7,333)

Qard 12,043 12,043

AFS reserves 1,338 1,482

10,492 6,192

*

30. Segmental information on cash flow

General Family

Shareholder's takaful takaful

fund fund fund Total

2011 RM RM RM'000 RM'000

Net cash flow generated from/

(used in):

Operating activities 12,865 47,285 61,092 121,242

Investing activities (6,688) - (1,008) (7,696)

Financing activities - - - -

6,177 47,285 60,084 113,546

Net increase in

cash and cash equivalents: 6,177 47,285 60,084 113,546

At 1 April 2010 1,453 226 2,832 4,511

At 31 March 2011 7,630 47,511 62,916 118,057

2010

Net cash flow generated/(used in)

from:

Operating activities 7,243 (7,236) (3,247) (3,240)

Investing activities (6,058) 2,764 (2,480) (5,774)

1,185 (4,472) (5,727) (9,014)

Net increase/(decrease) in

cash and cash equivalents: 1,185 (4,472) (5,727) (9,014)

At 1 April 2009 268 4,698 8,559 13,525

At 31 March 2010 1,453 226 2,832 4,511

The qard of RM 12,043,000 (2010 : 12,043,000) above has been off-set against Islamic

investment accounts of RM 56,640,000 (2010 : RM 119,926,000) in arriving at the total

general takaful fund assets and liabilities and participants' fund of RM 338,155,000

(2010 : RM272,976,000) on the Company's statement of financial position at page 16.

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31. Segmental information on general takaful fund

(a) General takaful fund revenue account for the year ended 31 March 2011

2011 2010 2011 2010 2011 2010 2011 2010 2011 2010

RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000

Gross contribution 224,196 217,230 23,172 30,674 177,564 159,004 872 2,517 22,588 25,035

Change in unearned

contribution provision (13,670) (911) (3,106) (5,712) (7,651) (1,171) 30 (295) (2,943) 6,267

Gross earned contribution 210,526 216,319 20,066 24,962 169,913 157,833 902 2,222 19,645 31,302

Contribution ceded to

retakaful operators (22,398) (25,525) (10,360) (10,525) (3,988) (3,241) (443) (1,502) (7,607) (10,257)

Change in unearned

contribution provision (10,151) 278 (3,753) (73) (2,308) 1,031 (549) (661) (3,541) (19)

Earned contribution ceded to

retakaful operators (32,549) (25,247) (14,113) (10,598) (6,296) (2,210) (992) (2,163) (11,148) (10,276)

Net earned contribution 177,977 191,072 5,953 14,364 163,617 155,623 (90) 59 8,497 21,026

Gross claims paid (104,436) (87,591) (3,755) (6,571) (92,607) (72,489) (1,054) (738) (7,020) (7,793)

Claims ceded to

retakaful operators 6,995 9,360 1,218 5,108 3,104 470 430 127 2,243 3,655

Gross change to certificate

liabilities (48,224) (40,625) 1,802 1,577 (34,231) (39,374) (942) (1,591) (14,853) (1,237)

Change in certificate liabilities

ceded to retakaful operators 13,248 (3,605) 662 (4,427) 300 (88) (1,616) 1,773 13,902 (863)

Net claims incurred (132,417) (122,461) (73) (4,313) (123,434) (111,481) (3,182) (429) (5,728) (6,238)

Net commission earned 3,938 4,505 2,325 2,171 95 201 66 235 1,452 1,898

Underwriting surplus

before wakalah fees 49,498 73,116 8,205 12,222 40,278 44,343 (3,206) (135) 4,221 16,686

Marine, Aviation

MiscellaneousTotal & TransitFire Motor

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31. Segmental information on general takaful fund (cont'd.)

(b) Contribution liabilities

31 March 2011

Gross Retakaful Gross Retakaful Gross Retakaful Gross Retakaful Gross Retakaful

RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000

At beginning of year 84,951 (12,092) 21,337 (5,110) 59,618 (1,604) 223 (612) 3,773 (4,766)

Contribution written in the year 224,196 RM '000'000 (22,398) RM '000'000 23,172 RM '000'000 (10,360) RM '000'000 177,564 RM '000'000 (3,988) RM '000'000 872 RM '000'000 (443) RM '000'000 22,588 RM '000'000 (7,607)

Contribution earned during

the year (210,526) 32,549 (20,066) 14,113 (169,913) 6,296 (902) 992 (19,645) 11,148

At end of year 98,621 (1,941) 24,443 (1,357) 67,269 704 193 (63) 6,716 (1,225)

31 March 2010

At beginning of year 84,040 (11,814) 15,431 (5,183) 58,446 (573) (58) (1,273) 10,221 (4,785)

Contribution written in the year 217,230 (25,525) 30,674 (10,525) 159,004 (3,241) 2,517 (1,502) 25,035 (10,257)

Contribution earned during

the year (216,319) 25,247 (24,768) 10,598 (157,832) 2,210 (2,236) 2,163 (31,483) 10,276

At end of year 84,951 (12,092) 21,337 (5,110) 59,618 (1,604) 223 (612) 3,773 (4,766)

Marine, Aviation

Total Fire Motor & Transit Miscellaneous

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31. Segmental information on general takaful fund (cont'd.)

(c) Claims liabilities

Gross Retakaful Gross Retakaful Gross Retakaful Gross Retakaful Gross Retakaful

31 March 2011 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000

At beginning of year 143,303 (17,577) 9,695 (5,035) 113,330 (429) 5,071 (4,328) 15,207 (7,785)

Claims incurred in the current

accident year 172,075 (23,637) 6,111 (3,375) 139,390 (989) 652 (298) 25,922 (18,975)

Adjustment to claims incurred

in prior accident years due to

changes in assumptions:

Change in PRAD (3,655) 250 (167) 153 (3,509) (1,835) 409 1,352 (388) 580

Change in Expected Ultimate

Loss Ratio (17,330) 741 (4,286) 2,193 (14,249) (676) 1,148 (363) 57 (413)

Movements in claims incurred

in prior accident years 3,155 818 (1,314) 760 7,774 (2,473) (1,202) 1,485 (2,103) 1,046

Claims paid during the year (104,436) 6,995 (3,755) 1,218 (92,607) 3,104 (1,054) 430 (7,020) 2,243

At end of year 193,112 (32,410) 6,284 (4,086) 150,129 (3,298) 5,024 (1,722) 31,675 (23,304)

31 March 2010

At beginning of year 100,523 (19,028) 11,685 (9,875) 75,101 (1,663) 1,935 (1,011) 11,802 (6,479)

Claims incurred in the current

accident year 137,296 (12,492) 5,830 (1,876) 114,867 (577) 2,783 (2,099) 13,816 (7,940)

Adjustment to claims incurred

in prior accident years due to

changes in assumptions:

Change in PRAD 13,685 (1,453) 541 (198) 10,089 1,046 1,657 (1,600) 1,398 (701)

Change in Expected Ultimate

Loss Ratio (20,606) 5,289 (1,936) 1,445 (14,465) 670 (632) 486 (3,573) 2,688

Movements in claims incurred

in prior accident years (4) 747 146 361 227 (375) 66 (231) (443) 992

Claims paid during the year (87,591) 9,360 (6,571) 5,108 (72,489) 470 (738) 127 (7,793) 3,655

At end of year 143,303 (17,577) 9,695 (5,035) 113,330 (429) 5,071 (4,328) 15,207 (7,785)

Marine, Aviation

Total Fire Motor & Transit Miscellaneous

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32. Investment-linked fund

(a) Statement of comprehensive income


2011 2010

RM '000 RM '000

INCOME

Investment income (Note (c)) 516 227

Realised gains and losses (Note (d)) 4,660 2,471

Financial assets at FVTPL's

fair value gains and losses 3,342 1,067

Retakaful commission income 21 -

8,539 3,765

OUTGO

Fee expenses (Note (e)) (7,407) (5,561)

Other operating expenses (966) (255)

(8,373) (5,816)

Deficit of income over outgo before tax 166 (2,051)

Taxation (Note (h)) (614) (161)

Deficit of income over outgo after tax (448) (2,212)

(b) Statement of financial position


2011 2010

RM '000 RM '000

Assets

Financial instruments (Note (f)):


through statement of comprehensive income 86,949 33,648

Loans and receivables 3,216 6,474

Takaful certificates receivables 87 64

Cash and bank balances 2,840 3,205

Total Investment-linked business assets 93,092 43,391

Liabilities

Tax payable 505 175

Deferred tax liabilities 362 95

Other payables (Note (g)) 1,998 414

Total Investment-linked business liabilities 2,865 684

Participants' fund (Note (i)) 90,227 42,707

Total liabilities and participants' fund 93,092 43,391

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32. Investment-linked fund (cont'd.)

(c) Investment income 2011 2010

RM '000 RM '000


Profit income 217 109

Dividend income

- quoted shares in Malaysia 175 89


Profit income 124 29

516 227

(d) Realised gains and losses



Unsecured 44 4

Quoted shares in Malaysia 227 168

Shariah approved unit trust funds 4,389 2,299

4,660 2,471

(e) Fee expense

Wakalah fees (7,370) (5,561)

Surplus administrative charges (37) -

(7,407) (5,561)

(f) Financial assets/investments 2011 2010

RM '000 RM '000

(i) Financial assets at FVTPL

At amortised cost/cost:


Government guaranteed 259 -

Unsecured 4,229 3,881

Government investment issues 701 -


Shariah approved equities 8,423 2,923


82,389 29,643

At fair value:


Government guaranteed 251 -

Unsecured 4,236 1,855

Government investment issues 698 -


Shariah approved equities 8,751 4,396


86,949 33,648

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(ii) Loans and receivables 2011 2010

RM '000 RM '000

At cost:

Islamic repo placements 3,237 1,694

Due from:

General takaful fund 4 2

Family takaful fund - 118

Income due and accrued (25) 4,660

3,216 6,474

At fair value:

Islamic repo placements 3,237 1,694

Due from:

General takaful fund 4 2

Family takaful fund - 118

Income due and accrued (25) 4,660

3,216 6,474

2011 2010

(g) Other payables RM '000 RM '000

Deposit contributions 340 296

Amount due to shareholders' fund* 174 69

Amount due to family takaful fund* 3 -

Other accruals and payables 1,481 49

1,998 414

* The amounts due to shareholders' fund and family takaful fund are non-trade in nature,

unsecured, not subject to any profit elements and has no fixed terms of repayment.

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2011 2010

RM '000 RM '000

(h) Taxation

Current year's provision 347 161


reversal of temporary differences 267 -

Tax expense for the year 614 161

2011 2010

RM '000 RM '000

Surplus before taxation 166 (2,051)

Taxation at Malaysian statutory tax rate of 8% 13 (164)

Income not subject to tax (3,331) (2,866)

Expenses not deductible for tax purposes 487 99

Overprovision of prior year deferred tax 7 -

Tax expense for the year (2,824) (2,931)

2011 2010

(i) Participants' fund RM '000 RM '000

Risk fund 772 836

Unitholders' capital 86,928 40,229

Undistributed surplus 2,527 1,642

90,227 42,707

At beginning of year 42,707 6,264

Net creation of units 49,381 39,831

Net cancellation of units (6,255) (1,112)

Net asset value attributable to unitholders 4,394 (2,276)

At end of year 90,227 42,707

Investment-linked business is taxed at the preferential tax rate of 8% of taxable

investment income for the period.

A reconciliation of income tax expense applicable to surplus before taxation at the

statutory income tax rate to income tax expense at the effective income tax rate of the

fund is as follows:

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33. Capital commitments

2011 2010

RM'000 RM'000

Shareholder's fund

Authorised and contracted for:

- Intangible assets - computer software (payable

within 12 months) 4,110 4,865

Authorised but not contracted for:

- Intangible assets - computer software 8,245 617

- Renovation work 466 -

8,711 617

Payable within 12 months 466 617

Payable after 12 months 8,245 -

8,711 617

Family takaful fund

Authorised and contracted for:

- Outstanding payments on investment properties

in progress (payable within 12 months) 543 2,015

34. Related party disclosures

For the purposes of these financial statements, parties are considered to be related to the

Company if the Company has the ability, directly or indirectly, to control the party or exercise

significant influence over the party in making financial and operating decisions, or vice versa,

or where the Company and the party are subject to common control or common significant

influence. Related parties may be individuals or other entities.

Key management personnel are defined as those persons having authority and responsibility

for planning, directing and controlling the activities of the Company either directly or indirectly.

The key management personnel include all the Directors of the Company and certain

members of senior management of the Company.

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34. Related party disclosures (cont'd.)

(a) The significant related party transactions and balances during the year are as follows:

General Family


fund fund fund

2011 RM'000 RM'000 RM'000

Income/(expenses) :

Transactions with MNRB Holdings

Berhad ("MNRB"):

Gross contributions - 429 47

Management fees (4,441) - -

Transactions with Malaysian Reinsurance

Berhad ("MRB"), a fellow subsidiary:


Retakaful outward contributions - (1,271) -

Retakaful commissions - 225 -

Management fees (144) - -

Rental Expenses (425) - -

Transactions with MNRB Retakaful Berhad,

a fellow subsidiary:


Retakaful outward contributions - (3,003) (834)


Transactions with Labuan Re,

in which MNRB is a substantial

shareholder:

Gross contributions - 11 -

Retakaful outward contributions - (941) -


Transactions with MIDF Amanah Investment

Bank Berhad, in which a director,

Encik Sharkawi Bin Alis is also

a director

Investment income - 40 22

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General Family


fund fund fund

2011 (cont'd.) RM'000 RM'000 RM'000

Transactions with Alliance Bank Berhad,

in which a director of the holding company,

Hj Megat Dziauddin Bin Megat Mahmud

is also a director

Bank charges - - -

Commissions (57) - -

Investment income 75 2 53

Transactions with Malayan Banking Bhd,

in which Permodalan Nasional

Bhd, a substantial shareholder is also a

substantial shareholder:

Bank charges (147) - (2,516)

Commissions - - -


Transactions with Etiqa Takaful Bhd,

in which Permodalan Nasional

Bhd, a substantial shareholder is also a

substantial shareholder:

Inwards contributions - 375 -

Commission expenses - (125) -


Retakaful commissions 251 -

Transactions with Bank Kerjasama Rakyat

(M) Berhad, in which a director of

the holding company,

Datuk Hj Mohd Khalil Bin Dato' Hj Mohd

Noor is also a director :

Gross contributions - 1,636 -

Commissions (20,692) - -

Investment income 323 92 2,068

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General Family


fund fund fund

2010 RM'000 RM'000 RM'000

Income/(expenses) :

Transactions with MNRB Holdings

Berhad ("MNRB"):


Management fees (2,252) - -

Transactions with Malaysian Reinsurance

Berhad ("MRB"), a fellow subsidiary:



Rental Expenses (1,510) - -

Transactions with MNRB Retakaful Berhad,



Retakaful outward contributions - (5,888) -

Transactions with Malaysian Re Dubai,


Gross contributions - - 5

Transactions with MIDF Amanah Investment

Bank Berhad, in which a director,

Encik Sharkawi Bin Alis is also

a director

Investment income 8 39 -

Transactions with Alliance Bank Berhad,

in which a director of the holding company,

Hj Megat Dziauddin Bin Megat Mahmud

is also a director

Bank charges - - -

Commissions - (14) -


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General Family


fund fund fund

2010 (cont'd.) RM'000 RM'000 RM'000

Transactions with Bank Kerjasama Rakyat

(M) Berhad, in which a director of

the holding company,

Datuk Hj Mohd Khalil Bin Dato' Hj Mohd

Noor is also a director :


Commissions (1,725) - -

Investment income 200 493 1,051

Transactions with Permodalan Nasional

Bhd, which is a substantial shareholder

of MNRB Holdings Bhd:

Investment income - - 2,015

Outstanding balances arising from the transactions above as at 31 March have been

disclosed in Notes 18 and 19.

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(b) Compensation of key management personnel

2011 2010

RM'000 RM'000

Non-executive director's remuneration (Note 12(a)):

Fees 672 626

Allowances and other emoluments 173 179

Executive director's remuneration (Note 12(b)):

Salaries and bonus 1,200 1,172


Short-term accumulating compensated

absences - -

Retirement benefits - 90


1,500 1,538

Other key management personnel's remuneration:

Salaries and bonus 3,067 2,922



Total 3,819 3,567

(c) Transactions related to key management personnel

2011 2010

RM'000 RM'000

Contributions paid for takaful certificates issued

by the takaful funds 75 61

In addition, the Company had the following transactions with directors and other key

management during the financial year:

The remuneration of directors and other members of key management during the year

was as follows:

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35. Risk management Framework

(a) Risk governance framework

The key objectives of the risk management framework are to:

- provide information on risk governance and accountabilities;

- provide guidance to a standard approach to managing risks;

- create a risk awareness culture; and

- enhance professionalism, increase profitability and value for shareholders.

The Risk Management Governance structure are as follows:

-

-

- Risk Management Department: Assist the RMCB and ORMC in developing and

maintaining the Risk Management Framework in consultation with stakeholders;

The Company's Risk Management Framework is designed to determine the level of risk

acceptable to the Company relating to its core operations by setting the appropriate

Board approved limits for adherence by management after taking into account the risk

parameters, the nature, the size, mix and complexity of business and operations. An

enterprise risk management process is adopted to identify and evaluate key business

risks that may affect the organization and to establish and implement an appropriate

system of internal controls to manage these risks while ensuring full and effective control

over significant strategic, financial, organizational and compliance matters.

The Risk Management Framework aims to serve as a guide for the effective

management of risk throughout the Company. The Framework is intended to provide

guidance to the Company in performing its risk management roles and responsibilities in

activities for which it is responsible, and ultimately aims to support the achievement of the

Company's strategic & financial objectives.

In pursuit of the above objectives, it is the Company's policy to implement good

governance, risk management and compliance principles and best practices, and to

uphold high standards of business practices in all the activities undertaken by the

Company.

Operational Risk Management Committee ("ORMC") which comprises the President

/ Chief Executive Officer and Senior Management assists the RMCB in identifying,

measuring, monitoring and controlling risks within the Company to ensure adequacy

and effectiveness of the infrastructure, resources and systems are in place;

Board of Directors & Board Risk Management Committee ("RMCB"): The Board is

ultimately responsible for the management of risks. The RMCB reviews and assess

the adequacy of risk management policies and framework for identifying, measuring,

monitoring and controlling risks, ensure adequate infrastructure, resources and

systems for an effective management of risk are in place and it is also responsible to

review and recommend to the Board on risk management strategies, policies and risk

tolerance;

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35. Risk management Framework (cont'd.)

(a) Risk governance framework (cont'd.)

-

-

1.

2.

3.

(b) Capital Management Objectives, Policies and Approach

Investment Policy – the investment policy and strategy of the Company is to invest

mainly in low risks assets such as government Islamic papers, fixed and call deposits

with licensed financial institutions, Islamic debt securities and marketable securities.

In this respect, the Company mitigates its credit risk of its debt securities portfolio by

investing mainly in Islamic debt securities with good ratings obtained from reputable

rating agencies.

The Company has an Investment Committee to further manage risks in investment and

asset allocation.

The Company has put in place the following policies to ensure the proper risk

management:

Underwriting Policy – the underwriting policy and strategy of the Company is to have

a balanced mix and spread of business and by observing underwriting guidelines and

limits, having conservative estimations made for claims provisions, and applying

prudent standards in terms of the assessment of security of its key retakaful

operators. In this respect, the Company complies with the guidelines imposed by

BNM in conducting the underwriting business.

Claim Reserving Policy – claims liabilities are determined based upon previous

claims experience, existing knowledge of events, the terms and conditions of the

relevant policies and interpretation of circumstances. Particularly relevant is past

experience with similar cases, historical claims development trends, legislative

changes, judicial decisions and economic conditions, and

Departments: Implement the risk management policies, that are consistent with Risk

Management Framework, to address specific Departmental requirements and

ensuring that they are in compliance with the day-to-day operations; and

The Capital Management Plan (“CMP”) presents descriptions of triggers and action plans

in place for the Company to monitor its Solvency Margin Ratio ("SMR") and to carry out

corrective measures when necessary to maintain the financial health of the Company. It

is intended that capital will be utilized more efficiently in a controlled manner so that

Company will be able to manage its capital position above its internal target. BNM has

issued a concept paper on Risk Based Capital Framework for Takaful Operators.

Line Managers: Responsible for using the various components of the Risk

Management Framework as an integral part of their normal processes and

procedures.

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(b) Capital Management Objectives, Policies and Approach (cont'd.)

Capital Management Objectives

Capital Management Policies

-

-

Approach to capital management

(c) Regulatory framework

BNM/RH/CIR/004-13 Minimum Paid-up Capital Requirement for Takaful Operators

(effective from 31 December 2004) requires a minimum paid-up capital requirement of

RM100 million for existing takaful operators.

Ensure the Company has adequate capital, expressed as SMR within a range that

supports stakeholders' objectives.

The main objective of the capital management is to monitor and maintain at all times an

appropriate level of capital which commensurate with its risk profile. The key objective of

the capital management plan ("CMP") is to trigger appropriate action plans to be taken by

the Board and management of the Company in the event of internal solvency margin ratio

("SMR") falling below the internal target requirement. The CMP will require Board and the

management of the Company to undertake remedial actions so as to improve the

Company's capital position.

The Company conduct stress test in compliance with the Guidelines of Stress Testing for

Takaful Operators (BNM/RH/GL 004-16). The impact of the adverse scenarios on the

capital position of the Company on the SMR is assessed quarterly focusing on short to

medium term views.

The Company has to comply with the Takaful Act 1984 and Regulations which is

administered by BNM. BNM is primarily interested in protecting the rights of participants

and monitors the Takaful Operators closely to ensure prudent management of its

business operation. At the same time, BNM is also interested in ensuring that the

Company maintains an appropriate solvency position to meet unforeseen liabilities arising

from economic cycle or natural disasters.

Establish responsibility of the Company’s management and Board in developing an

internal capital adequacy assessment process and setting capital targets that

commensurate with its risk profile and control environment.

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(d) Asset-Liability Management (“ALM”) Framework

36. Underwriting risk


(a) Nature of risk

The Company principally issues the following types of general takaful certificates: motor,

household and commercial fire, business interruption, personal accident, and other

miscellaneous commercial contracts. Risks under these certificates usually cover a twelve

month duration other than long term fire which may be extended up to thirty years or

more. For general takaful certificates, the most significant risk arise from accident

frequency and severity of the accident. These risks do vary significantly in relation to

location of risk, type of risk covered and industry.

The above risks are mitigated by diversification across a large portfolio of business. The

variability of risks is designed to improve the portfolio experience by implementation of

underwriting strategies and claim management policies which attempt to minimise losses.

The Company also manages its loss exposure by the use of retakaful arrangements. The

retakaful treaty arrangements are reviewed annually by RMCB and approved by the

Board.

The main risk that the Company faces due to the nature of its investment and liabilities is

mismatch of asset to the liability profile (investment risks). The Company manages these

positions within ALM framework that is currently being developed to achieve long-term

investment returns in excess of its obligations under the takaful contracts. The principal

technique identified is to match assets to the liabilities arising from takaful contracts by

reference to the type of benefits payable to participants. Amongst the mechanism to

manage the ALM framework is the assessment and monitoring of the portfolio duration as

well as duration for specific products. An ALCO has been established to manage and

monitor asset-liability mismatched risks. The ALCO ultimately reports to the Board

through the Investment Committee.

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36. Underwriting risk (cont'd.)

General takaful fund (cont'd.)

(b) Concentration of by type of certificates

The table below sets out the concentration on takaful certificates liabilities by class :

Gross Retakaful Net

RM'000 RM'000 RM'000

Fire 30,727 (5,443) 25,284

Motor 217,398 (2,594) 214,804

Marine, Aviation & Transit 5,217 (1,785) 3,432

Miscellaneous 38,391 (24,529) 13,863

291,733 (34,351) 257,382

(c) Impact on liabilities, profit and equity

Key Assumptions

Sensitivities

The analysis below is performed for reasonably possible movements in key assumptions

with all other assumptions held constant, showing the impact on Gross and Net liabilities,

profit before Tax and Equity. The correlation of assumptions will have a significant effect

in determining the ultimate claims liabilities, but to demonstrate the impact due to

changes in assumptions, assumptions had to be changed on an individual basis. It should

be noted that movements in these assumptions are non-linear.

Additional qualitative judgments are used to assess the extent to which past trends may

not apply in the future, for example, isolated occurrence, changes in market factors such

as public attitude to claiming, economic conditions, as well as internal factors such as

portfolio mix, policy conditions and claims handling procedures. Judgment is further used

to assess the extent to which external factors, such as judicial decisions and government

legislation affect the estimates.

Other key circumstances affecting the reliability of assumptions include variation in profit

rates and delays in settlement.

The general takaful claim liabilities are sensitive to the key assumptions shown below. It

has not been possible to quantify the sensitivity of certain assumptions, such as,

legislative changes or uncertainty in the estimation process.

31 March 2011

The principal assumptions underlying the estimation of liabilities is that the Company's

future claims development will follow a similar pattern to past claims development

experience.

The related parties and their relationship with the Company as of 31 March 2009 are as112

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(c) Impact on liabilities, profit and equity (Contd.)

Sensitivities (cont'd.)

RM'000 RM'000 RM'000 RM'000

Motor Act Average

Severity +5% 85,673 69,312 (64,867) (58,820)

Motor Others Expected

Loss Ratio +10% 21,424 21,095 (16,650) (10,603)

* The impact on participants' fund reflects the after tax impact .

(d) Claims Development table

Sensitivity has been applied to the major classes only which are Motor Act, Motor Others,

Fire and Personal Accident by considering the ultimate loss ratio with an extra charge for

the provision in adverse deviation.

31 March 2011

The method used for deriving sensitivity information and significant assumption did not

change from the previous period.

The following tables show the estimate of cumulative incurred claims, including both

claims notified and IBNR for each successive accident year at each financial year end,

together with cumulative payments to-date.

In setting provisions for claims, the Company gives consideration to the probability and

magnitude of future experience being more adverse than assumed and exercises a

degree of caution in setting reserves when there is considerable uncertainty. In general,

the uncertainty associated with the ultimate claims experience in an accident year is

greatest when the accident year is at an early stage of development and the margin

necessary confidence in adequacy of provision is relatively at its highest. As claims

develop and the ultimate cost of claims becomes more certain, the relative level of margin

maintained should decrease.

Change in

assumption

of Ultimate

Claims

Ratio

Impact

on

Surplus

before

Tax

Impact

on Net

Liabilities

Impact

on Gross

Liabilities

Impact

on Partici-

pants'

Fund*

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(d) Claims Development table (Contd.)

Gross General Takaful Certificate Liabilities for 2011:

Accident year Note 2004 2005 2006 2007 2008 2009 2010 2011 Total

RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000

At the end of accident year 1,027 11,728 29,337 36,388 50,997 100,090 125,472 144,938

One year later 875 10,898 27,311 36,179 51,290 93,740 142,627 -

Two year later 855 9,936 26,773 35,120 51,483 89,887 - -

Three year later 806 9,683 26,178 33,672 51,708 - - -

Four year later 790 8,396 25,494 33,695 - - - -

Five year later 787 7,951 24,949 - - - - -

Six year later 735 7,900 - - - - - -

Seven year later 740 - - - - - - -

Current estimate of

cumulative claims incurred* 740 7,900 24,949 33,695 51,708 89,887 142,627 144,938

At the end of accident year 203 3,957 8,984 13,366 17,599 29,070 43,215 48,128

One year later 610 6,632 18,976 25,083 34,059 64,212 83,077 -

Two year later 614 7,123 20,128 27,784 39,159 72,939 - -

Three year later 687 7,436 21,967 30,245 44,893 - - -

Four year later 714 7,728 23,560 31,292 - - - -

Five year later 730 7,807 24,474 - - - - -

Six year later 730 7,826 - - - - - -


Cumulative payments to-date 734 7,826 24,474 31,292 44,893 72,939 83,077 48,128

certificates liabilities per

Statement of Financial

Position: 23

Best Estimate of Claims

Liabilities (incl. Allocated Loss Adjustment

Expenses "ALAE") 6 74 475 2,403 6,815 16,948 59,550 96,810 183,081

Fund PRAD at 70% 10,031

Total 193,112

Gross general takaful

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(d) Claims Development table (Contd.)

Accident year Note 2004 2005 2006 2007 2008 2009 2010 2011 Total

RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000


One year later 791 9,613 26,062 34,140 47,361 81,492 119,456 -

Two year later 786 8,675 25,794 33,195 47,903 78,446 - -

Three year later 736 8,488 24,073 31,470 47,484 - - -

Four year later 737 7,398 23,420 31,341 - - - -

Five year later 721 6,978 23,128 - - - - -

Six year later 671 6,903 - - - - - -


Current estimate of

cumulative claims incurred* 674 6,903 23,128 31,341 47,484 78,446 119,456 134,955


One year later 544 5,636 18,391 23,422 32,713 56,404 79,479 -

Two year later 548 6,128 19,542 26,017 37,616 64,559 - -

Three year later 621 6,440 21,101 28,199 42,202 - - -

Four year later 648 6,732 22,694 29,091 - - - -

Five year later 665 6,811 22,968 - - - - -

Six year later 665 6,831 - - - - - -


Cumulative payments to-date 668 6,831 22,968 29,091 42,202 64,559 79,479 44,714

certificates liabilities per

Statement of Financial

Position: 23

Best Estimate of Claims Liabilities (incl. ALAE) 6 72 160 2,250 5,282 13,887 39,977 90,241 151,875

Fund PRAD at 70% 8,827

Total 160,702

Net General Takaful Certificate Liabilities for 2011:

Net general takaful

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Family takaful fund

(a) Nature of risk

The Company principally issues the following types of family takaful certificates: Family

Takaful Plans, Mortgage Takaful Plans, Group Takaful Plans and Investment-linked

Takaful Plans.

Family takaful underwriting risk exist from the pricing and the pool of risk in the

participants' risk fund arising from family takaful certificates. The risks arise when actual

claims experience is different from the assumptions used in setting the prices for products

and establishing the technical provisions and liabilities for claims. Sources of risk include

certificate lapses and certificate claims such as mortality, morbidity and expenses.

The Company reviews the actual experience of mortality, morbidity, lapses and

surrenders, as well as expenses to ensure that appropriate policies, guidelines and limits

put in place to manage these risks remain adequate and appropriate.

The Family Takaful funds are participating in nature. In the event of volatile investment

climate and/or unusual claims experience, the investment profit and surplus distribution to

the participants may be reduced.

For investment-linked funds, the risk exposure for the participant's risk fund is limited only

to the underwriting aspect as all investment risks are borne by the participant.

Stress Testing (“ST”) is performed twice a year. The purpose of the ST is to test the

solvency of the family takaful fund under the various scenarios according to regulatory

guidelines, simulating drastic changes in major parameters such as new business

volume, investment environment, mortality/morbidity patterns and lapse rates.

The Company utilizes retakaful to manage the mortality and morbidity risks. The

Company’s retakaful management strategy and policy are reviewed by the Asset-Liability

Committee ("ALCO") and RMCB, and approved by the Board. Retakaful structures are

set based on the type of risk.

The related parties and their relationship with the Company as of 31 March 2009 are as

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Family takaful fund (cont'd.)

(b) Concentration of by type of certificates

The Table below shows the concentration of family takaful certificates liabilities :

Gross Retakaful Net

RM'000 RM'000 RM'000

Family takaful plans 255,843 - 255,843

Investment-linked takaful plans 563 - 563

Mortgage takaful plans 368,534 (68,936) 299,598

Group credit takaful plans 126,764 (8,986) 117,778

Risk Fund 78,272 (21,218) 57,054

Special Fund 68,192 - 68,192

Others 173,125 (13,848) 159,277

1,071,293 (112,988) 958,305

(c) Key Assumptions

i) Mortality and Morbidity rates

Material judgement is required in determining the liabilities and in the choice of

assumptions. Assumptions used are based on past experience, current internal data,

external market indices and benchmarks which reflect current observable market prices

and other published information. Assumptions and prudent estimates are determined at

the date of valuation and no credit is taken for possible beneficial effects of voluntary

withdrawals. Assumptions are further evaluated on a continuous basis in order to ensure

realistic and reasonable valuations.

31 March 2011

As all of the business are derived from Malaysia, the entire family takaful certificates

liabilities are in Malaysia.

Assumptions are based on the mortality rates as set out in the Actuarial Certificate

submitted to Bank Negara Malaysia. They reflect the historical local experience and

are adjusted, when appropriate, to reflect the Participants' own experience.

Assumptions are differentiated by gender, occupational class and product group.

An increase in rates will lead to a larger number of claims (as claims could occur

sooner than anticipated), which will reduce surplus from the Risk Fund and

subsequently reduce profits for the shareholders in terms of reduction of income

arising from the surplus administration charge.

The key assumptions to which the estimation of liabilities is particularly sensitive are as

follows:

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(c) Key Assumptions (cont'd.)

ii) Discount rates

31 March 2011 %

Type of Business

3%

Others 3%

(1)

(2)

Base mortality 1

Various industry mortality and morbidity experience tables that were used to

determine the contribution rates

Retakaful rates obtained through retakaful arrangements with respect to the MRTT

and GCT business

A decrease in the discount rate will increase the value of the family takaful liability and

therefore reduce profits for the shareholders in terms of reduction of income arising

from the surplus administration charge.

The assumptions that have the great effect on the Statement of Financial Position and

statement of comprehensive income of the Company are listed below by portfolio

assumptions impacting net liabilities:

Base mortality1

and

adjusted for retakaful

rates 2

Credit related (MRTT and GCT)

Mortality and Morbidity

rates

Discount

rates

Family takaful liabilities of credit-related products (Mortgage Reducing Term Takaful

("MRTT") and Group Credit Takaful ("GCT")) are determined as the sum of the

discounted value of the expected benefits less the discounted value of the expected

tabarru' (risk charge) that would be required to meet these future cash outflows.

Discount rates are based on the Family Fund's historical investment performance and

adjusted downwards for conservatism.Discount rates are based on the Family Fund's

historical investment performance and adjusted downwards for conservatism.

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(d) Sensitivity analysis

Sensitivity analysis

% % % % %

Family Takaful Certificates

31 March 2011

Mortality / morbidity + 10% 9,548 9,548 (915) (668)

Discount rates + 1% (1,378) (1,378) 93 68

Impact on Equity reflects adjustments for tax, where applicable.

The method used and significant assumptions made for deriving sensitivity information did not change from the previous period.

Impact on Profit

Before Tax

Impact on Equity

The analysis below is performed for reasonably possible movements in key assumptions with all other assumptions held constant, showing the impact on gross

and net liabilities, profit before tax and equity. The correlations of assumptions will have a significant effect in determining the ultimate claims liabilities, but to

demonstrate the impact due to changes in assumptions, assumptions had to be changed on an individual basis. It should be noted that movements in these

assumptions are non-linear. Sensitivity information will also vary according to the current economic assumptions.

Change in

Assumptions

Impact on Gross

Liabilities

Impact on Net

liabilities

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37. Financial Risk

(a) Credit Risk

-

-

- Contribution credit risks - financial loss arising from non-payment of contribution.

-

-

-

The Company is exposed to investment credit risk on its investment portfolio, primarily

from investments in corporate bonds. Creditworthiness assessment for new and existing

investments is undertaken by the Company in accordance with the Investment Policy as

approved by the Investment Committee. In addition the credit ratings of bond portfolio are

regularly monitored and any downgrade in credit rating will be evaluated to determine

actions required. The Company's bond portfolio is highly rated, with no material exposure

below investment grade.

The Company is exposed to retakaful counterparty risk of three different types:

from retakaful contributions payments made to the retakaful operator in advance; and

Transactions in financial instruments may result in the Company assuming financial risks.

These include credit risk, liquidity risk and market risk. This note presents information about

the Company’s exposure to each of the above risks, the Company’s objectives, policies and

processes for measuring and managing such risks. Comparative figures or analysis have not

been presented for 31 March 2010.

Credit risk in respect of customer balances incurred on non-payment of general takaful

contribution will only persist during the contribution warranty period specified in the

certificate or until expiry, when the certificate expired or terminated.

Credit risk includes the following elements:

Retakaful counterparty risk – financial loss arising from a retakaful operator’s default,

or the deterioration of the retakaful operator’s solvency position;

as a result of reserves held by the retakaful operator which would have to be met by

the Company in the event of default.

Investment credit risk – financial loss arising from a change in the value of an

investment due to a rating downgrade, default or widening of credit spreads. Changes

in credit spreads are also affected by the liquidity of the stock, but since the liquidity is

usually closely related to credit risk, the risk is managed as credit risk;

as a result of debts arising from claims made by the Company but not yet paid by the

retakaful operator;

Credit risk represents the loss that would be recognized if counterparties to retakaful and

investment transactions failed to meet their contractual obligations.

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37. Financial Risk (cont'd.)

(a) Credit Risk (cont'd.)

-

- counterparty limits are set for investments and cash deposits.

-

-

-

The table below shows the maximum exposure to credit risk for the components of the

statement of financial position and items such as future commitments. The maximum

exposure is shown gross, before the effect of mitigation through the use of master netting

or collateral agreements.

investment policies will have a prescribed minimum credit rating of bonds that may be

held. Investing in a diverse portfolio reduces the impact from individual companies

defaulting.

To mitigate credit risk:

To mitigate retakaful counterparty risk, the Company will give due consideration to the

credit quality of a retakaful operator before incepting a retakaful treaty. To facilitate

this process, a list of acceptable retakaful operators is maintained within the

Company.

the Company's investment portfolio is managed following standards of diversification.

It focuses on investing in high quality investment grade fixed income securities.

for the financial year ended 31 March 2011, the average credit quality of the

Company's investment portfolio was AAA by Rating Agency Malaysia ("RAM") or

Malaysian Rating Corporation Berhad ("MARC").

The related parties and their relationship with the Company as of 31The related parties and their relationship with the Company as of 31 March121

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Objectives in managing credit risk

Credit Exposure

Note Shareholder's General Family Investment-

fund takaful fund takaful fund linked fund Total

31 March 2011 RM'000 RM'000 RM'000 RM'000 RM'000

Financial investments at FVTPL 18(a)


Government guaranteed - - - 251

Unsecured - - - 4,236 4,236

Government investment issues 698

Shariah approved unit trust funds - 5,888 8,585 73,013 87,486

HTM financial investments 18(b)


Government guaranteed 15,026 14,324 24,103 - 53,453

Unsecured 1,383 2,004 25,043 - 28,430

Government investment issues 24,041 50,940 163,241 - 238,222

AFS financial investments 18(c)


Unsecured 55,757 90,605 279,028 - 425,390


Shariah approved equities 4,953 8,652 15,988 - 29,593

Shariah approved unit trust funds - 5,888 8,585 - 14,473

Golf club memberships 178 - - - 178

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Credit Exposure (cont'd.) Note Shareholder's General Family Investment-

fund takaful fund takaful fund linked fund Total

31 March 2011 RM'000 RM'000 RM'000 RM'000 RM'000

LAR 18(d)


Islamic banks 13,755 32,249 90,006 - 136,010

Investment banks - - 1,507 - 1,507

Development bank 13,472 18,577 59,356 - 91,405

Building society 8,269 - - - 8,269

Islamic repo placements 12,668 5,814 113,967 3,237 135,686

Institutional trust fund 6,592 - 18,592 - 25,184

Units held in investment-linked fund 10,000 - - - 10,000


Receivable within 12 months 1,289 - - - 1,289

Receivable after 12 months 2,723 - - - 2,723

Qard to general takaful fund* 12,043 - - - 12,043

Due from:

General takaful fund 2,739 - 12,967 4 15,710

Family takaful fund 28,935 - - - 28,935

Investment-linked fund 174 - 3 - 177

Amount due from holding company - - 5,247 - 5,247

Income due and accrued 1,022 2,160 199 (25) 3,356

Other receivables, deposits and prepayments 5,402 1,649 445 - 7,496

Retakaful certificates assets - 34,351 137,383 - 171,734

Takaful certificates receivables 19 - 32,798 83,818 87 116,703

Cash and bank balances 7,630 47,511 62,916 2,840 120,897

228,051 353,410 1,110,979 84,341 1,775,832

* The qard from shareholders' fund are non-trade in nature, unsecured, not subject to any profit elements and has no fixed terms of repayment.

Credit Exposure - non investment instruments

In the case of contributions obligations by cedant or brokers , the Company has sound Credit Control policies in place to ensure that contributions are duly

collected from the cedants and brokers.

The related parties and their relationship with the Company as of 31 MarchThe related parties and their relationship with the Company as of 31 March

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Credit exposure by credit rating

The table below provides information regarding the credit risk exposures of the Company by classifying assets according to the Company's credit ratings of counterparties :

Shareholder's fund

AAA/P1 AA A BBB (C to BB) Not Rated Total

31 March 2011 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000

Financial investments at FVTPL


Shariah approved equities - - - - - - - 697 697

Warrants - - - - - - - 15 15

HTM financial investments


Government guaranteed 15,026 - - - - - - - 15,026

Unsecured - 998 - - 385 - - - 1,383

Government investment issues 24,041 - - - - - - - 24,041

AFS financial investments


Unsecured - 35,296 20,461 - - - - - 55,757


Shariah approved equities - - - - - - - 4,953 4,953

Golf club memberships - - - - - - - 178 178

LAR


Islamic banks - 1,600 1,004 2,599 - - 8,552 - 13,755

Development bank - - 5,199 - - - 8,273 - 13,472

Building society - - - - - - 8,269 - 8,269

Islamic repo placements - - - 5,000 - - 7,668 - 12,668

Institutional trust fund - - - - - - 6,592 - 6,592

Units held in investment-linked fund - - - - - - 10,000 - 10,000


Receivable within 12 months - - - - - - 1,289 - 1,289

Receivable after 12 months - - - - - - 2,723 - 2,723

Qard to general takaful fund - - - - - - 12,043 - 12,043

Non-

investment

grade *Government

guaranteed

Not subject

to credit

risk

Neither pass-due nor impaired

Investment grade *

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Credit exposure by credit rating (cont'd.)

Shareholder's fund (cont'd.)


31 March 2011 (cont'd.) RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 RM '000

LAR (cont'd.)

Due from:

General takaful fund - - - - - - - 2,739 2,739

Family takaful fund - - - - - - - 28,935 28,935

Investment-linked fund - - - - - - - 174 174

Income due and accrued - - - - - - - 1,022 1,022

Other receivables, deposits and prepayments - - - - - - - 5,402 5,402

Cash and bank balances - 5,886 1,066 663 - - - 15 7,630

39,067 43,780 27,730 8,262 385 - 65,409 44,130 228,763


31 March 2011




Warrants - - - - - - - 15 15




Unsecured - - - - - - 2,004 - 2,004




Unsecured - 38,509 - - - - 52,096 - 90,605



Shariah approved unit trust funds - - - - - - - 5,888 5,888


Non-

investment

grade *

Not subject

to credit

risk

Investment grade *

Government

guaranteed

125

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LAR


Islamic banks - 4,085 - - - - 28,164 - 32,249

Development bank - - - - - - 18,577 - 18,577

Islamic repo placements - 4,978 - - - - 836 - 5,814

Income due and accrued - - - - - - - 2,160 2,160

Other receivables, deposits and prepayments - - - - - - - 1,649 1,649

Retakaful certificates assets - - - - - - - 34,351 34,351

Takaful certificates receivables - 2,161 5,366 2,477 466 - 22,328 - 32,798

Cash and bank balances - 45,891 441 1,105 - - 74 - 47,511

65,264 95,624 5,807 3,582 466 - 124,079 53,805 348,627

Family takaful fund

31 March 2011







Unsecured - 17,027 8,016 - 25,043




Unsecured - 170,766 108,262 - 279,028



Shariah approved unit trust funds - - - - - - 8,585 - 8,585


Non-

investment

grade *

Not subject

to credit

risk

Investment grade *

Government

guaranteed

126

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LAR


Islamic banks - 7,345 22,798 38,421 - - 21,442 - 90,006

Investment banks - - - 1,507 - - - - 1,507

Development bank - - 40,496 - - - 18,860 - 59,356

Islamic repo placements - 32,286 44,892 23,081 - - 13,708 - 113,967

Institutional trust fund - - - - - - 18,592 - 18,592

Due from:

General takaful fund - - - - - - - 12,967 12,967

Investment-linked fund 3 3

Amount due from holding company - - - - - - - 5,247 5,247

Income due and accrued - - - - - - - 199 199

Other receivables, deposits and prepayments - - - - - - - 445 445

Retakaful certificates assets - - - - - - 137,383 - 137,383

Takaful certificates receivables - - 2,602 37 9 - 81,170 - 83,818

Cash and bank balances - 60,488 613 1,062 - - 754 - 62,917

187,344 287,912 227,679 64,108 9 - 300,497 36,678 1,104,227

Investment-linked fund

31 March 2011



Government guaranteed 251 - - - - - - - 251

Unsecured - 2,725 1,511 - - - - - 4,236

Government investment issues 698 - - - - - - - 698



Shariah approved unit trust funds - - - - - - - 73,013 73,013

LAR

Islamic repo placements - - 550 2,687 - - - - 3,237

Due from:

General takaful fund - - - - - - - 4 4

Income due and accrued - - - - - - - (25) (25)

Takaful certificates receivables - - - - - - 87 - 87

Cash and bank balances - 340 2,495 - - - 5 - 2,840

949 3,065 4,556 2,687 - - 92 81,743 93,092

* Based on public ratings assigned by external rating agencies including Rating Agency Malaysia ("RAM") and Malaysian Rating Corporation ("MARC")

Government

guaranteed


Non-

investment

grade *

Not subject

to credit

risk

Investment grade *

127

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Age Analysis of Financial Assets Past-Due But Not impaired


Total

RM' 000 RM' 000 RM' 000 RM' 000

Takaful certificates receivables 21,300 3,868 7,630 32,798

Family takaful fund

Total

RM' 000 RM' 000 RM' 000 RM' 000

Takaful certificates receivables 66,775 10,026 7,017 83,818

Impaired Financial Assets

For assets to be classified as 'past due and impaired' , please refer to Note 2.18.

The movement of allowance for impairment on trade receivables are as follows:

General Family

takaful fund takaful fund

2011 2011

RM'000 RM'000

At beginning of year 11,109 246

Additional allowance during the year (3,054) -

Writeback of allowance during the year - 636

At end of year 8,055 882

Specific provisions are made for any outstanding contributions including brokers, agent or

retakaful balances which remaining outstanding as per Note 2.18.

31 March 2011

Receivables are carried out at anticipated realizable value. Bad debts are written off once

identified. An estimate is made for doubtful debts based on a review of all outstanding

amounts as at financial year end.

0-180 Days 181-365 Days > 365 Days

31 March 2011

0-180 Days 181-365 Days > 365 Days

The related parties and their relationship with the Company as of 31The related parties and their relationship with the Company as of 31 March

128

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Loan

(b) Liquidity Risk

-

-

-

-

-

-

-

Liquidity risk is concerned with the risk that a company will not have available sufficient

cash resources to meet its payment obligations without incurring material additional costs.

the ability to meet the company’s payment obligations under normal and stressed

operating environments without suffering any loss;

efficient management of additions/withdrawals from the company’s investment funds;

and

As part of its liquidity management strategy is to put in place the necessary framework

capable of measuring and reporting on:

The fair values of loans receivable are determined by discounting the cash flows using the

prevailing profit rates for similar instruments at financial year end.

The company will meet shareholder's liquidity needs arising in a number of key areas :

have the appropriate measures in place to respond to liquidity risk.

The table below summarizes the maturity profile of the financial assets and liabilities of

the Company based on remaining undiscounted contractual obligations, including profit

payable and receivable.

For takaful certificates liabilities and retakaful certificate assets, maturity profiles are

determined based on estimated timing of net cash outflows from the recognised takaful

certificates liabilities.

daily cash flows;

minimum liquidity holdings;

the holding of liquid assets in the respective Takaful Funds.

Maturity Profiles

the composition and market values of company’s investment portfolios, including liquid

holdings; and

For managing the liquidity of the takaful funds, it is appropriate to maintain a certain

proportion of the Takaful Funds in liquid assets which is derived from investment mandate

of each funds. Each fund specifies a percentage of minimum holding but there is no limit

in deposits.

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Maturity profiles (cont'd.)

Shareholder's Fund

31 March 2011 RM' 000 RM' 000 RM' 000 RM' 000 RM' 000 RM' 000 RM' 000



Shariah approved equities 697 - - - - 697 697

Warrants 15 - - - - 15 15



Government guaranteed 15,026 - 612 3,054 15,550 - 19,216

Unsecured 1,383 1,000 - - 383 - 1,383

Government investment issues 24,041 4,053 837 18,055 4,185 - 27,130



Unsecured 55,757 - 7,507 33,212 27,856 - 68,575


Shariah approved equities 4,953 - - - - 4,953 4,953

Golf club memberships 178 - - - - 178 178

LAR


Islamic banks 13,755 6,261 7,494 - - - 13,755

Development bank 13,472 9,766 3,706 - - - 13,472

Building society 8,269 1,710 6,559 - - - 8,269

Islamic repo placements 12,668 12,668 - - - - 12,668

Institutional trust fund 6,592 - - - - 6,592 6,592

Units held in investment-linked fund 10,000 - - - - 10,000 10,000


Receivable within 12 months 1,289 664 625 - - - 1,289

Receivable after 12 months 2,723 - - 2,723 - - 2,723

Qard to general takaful fund 12,043 - - - - 12,043 12,043

No

maturity Total

0-6

months

6-12

months

Over 1-5

years

Over 5

years

Carrying

value

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Shareholder's Fund (cont'd.)

31 March 2011 (cont'd.) RM' 000 RM' 000 RM' 000 RM' 000 RM' 000 RM' 000 RM' 000

LAR (cont'd.)

Due from:

General takaful fund 2,739 - - - - 2,739 2,739

Family takaful fund 28,935 - - - - 28,935 28,935

Investment-linked fund 174 - - - - 174 174

Income due and accrued 1,022 - - - - 1,022 1,022

Other receivables, deposits and prepayments 5,402 - - - - 5,402 5,402

Cash and bank balances 7,630 - - - - 7,630 7,630

Total Assets 228,763 36,122 27,340 57,044 47,974 80,380 248,860

Expenses liabilities 15,146 - - - - 15,146 15,146

Due to agents, retakaful operators

and brokers 13,498 - - - - 13,498 13,498

Due to related companies 22 - - - - 22 22

Zakat payable 573 - - - - 573 573

Other payables 25,125 - - - - 25,125 25,125

Provisions 6,344 - - - - 6,344 6,344

Total Liabilities 60,708 - - - - 60,708 60,708

0-6

months

6-12

months

Over 1-5

years

Over 5

years

No

maturity Total

Carrying

value

131

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Warrants 15 - - - - 15 15




Unsecured 2,004 - 97 2,106 - 2,203

Government investment issues 50,940 1,974 2,016 20,669 41,146 - 65,805



Unsecured 90,605 2,000 4,156 78,557 23,756 - 108,469



Shariah approved unit trust funds 5,888 - - - - 5,888 5,888

LAR


Islamic banks 32,249 29,843 2,406 - - - 32,249

Development bank 18,577 14,036 4,541 - - - 18,577


Units held in investment-linked fund - - - - - - -

Income due and accrued 2,160 - - - - 2,160 2,160

Other receivables, deposits and prepayments 1,649 - - - - 1,649 1,649

Retakaful certificates assets 34,351 410 1,300 111 120 32,410 34,351

Takaful certificates receivables 32,798 19,135 2,165 3,868 7,630 - 32,798


Total Assets 348,627 73,212 17,265 108,223 87,477 99,375 385,552

Takaful certificates liabilities 291,733 23,880 54,725 1,610 18,406 193,112 291,733

Takaful certificates payables 7,932 - - - - 7,932 7,932

Other payables 39,475 - - - - 39,475 39,475

Total Liabilities 339,140 23,880 54,725 1,610 18,406 240,519 339,140

No

maturity Total

0-6

months

6-12

months

Over 1-5

years

Over 5

years

Carrying

value

132

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Family takaful fund








Unsecured 25,043 12,165 649 9,721 5,387 - 27,922

Government investment issues 163,241 18,884 26,547 63,357 88,323 - 197,111



Unsecured 279,028 - 12,917 162,630 194,998 - 370,545




LAR


Islamic banks 90,006 74,258 12,200 3,548 - - 90,006

Investment banks 1,507 1,507 - - - - 1,507

Development bank 59,356 48,844 10,238 274 - - 59,356


Institutional trust fund 18,592 - - - - 18,592 18,592

Due from:

General takaful fund 12,967 - - - - 12,967 12,967

Investment-linked fund 3 - - - - 3 3

Amount due from holding company 5,247 - - - - 5,247 5,247

Income due and accrued 199 - - - - 199 199

Other receivables, deposits and prepayments 445 - - - - 445 445

Retakaful certificates assets 137,383 - - - 563 136,820 137,383

Takaful certificates receivables 83,818 66,775 10,026 7,017 - - 83,818


Total Assets 1,104,227 336,400 73,382 259,977 304,821 263,595 1,238,175

0-6

months

6-12

months

Over 1-5

years

Over 5

years

No

maturity Total

Carrying

value

133

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31 March 2011 (cont'd.) RM' 000 RM' 000 RM' 000 RM' 000 RM' 000 RM' 000 RM' 000

Takaful certificates liabilities 1,104,189 2,291 2,143 21,617 806,445 271,693 1,104,189

Takaful certificates payables 34,406 - - - - 34,406 34,406

Other payables 65,754 - - - - 65,754 65,754

Total Liabilities 1,204,349 2,291 2,143 21,617 806,445 371,853 1,204,349


31 March 2011



Government guaranteed 251 5 5 270 - - 280

Unsecured 4,236 104 104 2,141 3,079 - 5,428

Government investment issues 698 14 14 108 768 - 904




LAR


Due from:

General takaful fund 4 - - - - 4 4

Income due and accrued (25) - - - - (25) (25)

Other receivables, deposits and prepayments - - - - - - -

Retakaful certificates assets - - - - - - -

Takaful certificates receivables 87 - - - - 87 87


Total Assets 93,092 3,360 123 2,519 3,847 84,670 94,519

Participants' fund 90,227 - - - - 90,227 90,227

Other payables 1,998 - - - - 1,998 1,998

Total Liabilities 92,225 - - - - 92,225 92,225

Over 5

years

No

maturity Total

0-6

months

6-12

months

Over 1-5

years

Carrying

value

134

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(c) Market Risk

-

-

-

Profit rate risk

Profit rate risk – the risk of fluctuations in fair value or future cash flows of a financial

instrument arising from variability in profit rates; and

Market risk is the risk of loss arising from a change in the values of, or the income from, assets

or in profit. A risk of loss also arises from volatility in asset prices or profit rates. Market risk

includes the following three elements:

Equity risk – the risk of fluctuations in fair value or future cash flows of a financial

instrument arising from stock market dynamic impacting the equity prices;

Property risk – the risk of fluctuations in fair value or future cash flows of a financial

instrument arising from decline in real estate values or income.

The Company is exposed to fair value profit rate risk where changes to profit rates result in

changes to fair values rather than cash flows, for example fixed profit rate loans and assets.

Conversely, floating rate loans expose the Company to cash flow profit rate risk.

The earnings of the Company are affected by changes in market profit rates due to the impact

such changes have on profit income from cash and cash equivalents, including investments in

fixed deposits.

The nature of the Company's exposure to profit rate risk and its objectives, policies and

processes for managing profit rate risk have not changed significantly from the previous

financial year.

The Company manages its profit rate risk by matching, where possible, the duration and profile

of assets and liabilities to minimize the impact of mismatches between the value of assets and

liabilities from profit rate movements.

The related parties and their relationship with the Company as of 31The related parties and their relationship with the Company as of 31The related parties and their relationship with the Company as of 31The related parties and their relationship with the Company as of 31

135

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(c) Market Risk (Contd.)

Profit rate risk (cont'd.)

Shareholder's Fund

31 March 2011 RM'000 RM'000 RM'000


Government guaranteed 612 3,054 15,550

Unsecured 8,507 33,212 28,239

Government investment issues 4,890 18,055 4,185


Islamic banks 13,755 - -

Development bank 13,472 - -

Building society 8,269 - -

Islamic repo placements 12,668 - -


Receivable within 12 months 1,289 - -

Receivable after 12 months - 2,723 -

63,462 57,044 47,974


31 March 2011



Unsecured 6,253 80,663 23,756



Islamic banks 32,249 - -

Development bank 18,577 - -


67,467 104,244 79,727

The following tables set out the carrying amount, by maturity, of the Company’s financial

instruments that are exposed to profit rate risk.

Within 1 year 1 to 5 years More than 5

years

136

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Family takaful fund

31 March 2011 RM'000 RM'000 RM'000



Unsecured 25,731 172,351 200,385



Islamic banks 86,458 3,548 -

Investment banks 1,507 - -

Development bank 59,082 274 -


332,981 252,960 304,258


31 March 2011


Government guaranteed 10 270 -

Unsecured 208 2,141 3,079

Government investment issues 28 108 768


3,483 2,519 3,847

Sensitivity Analysis

Shareholder's Fund

Changes in

basis point

Impact on

asset

Impact on

AFS reserve

Impact on

Profit before

tax

RM' 000 RM' 000 RM' 000

Debt Securities + 25 (625) 625 -

- 25 638 (638) -

Within 1 year More than 5

years

A change of 25 basis points ("bp") in profit rates at the reporting date would have increased /

(decreased) the value of investment instruments by the amounts shown below:

1 to 5 years

31 March 2011

137

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Sensitivity Analysis (cont'd.)

Changes in

basis point

Impact on

asset

Impact on

AFS reserve

Impact on

Surplus

before tax

General takaful fund RM' 000 RM' 000 RM' 000

Debt Securities + 25 (912) 912 -

- 25 928 (928) -

Family takaful fund

Debt Securities + 25 (4,049) 4,049 -

- 25 4,146 (4,146) -


Debt Securities + 25 59 - 59

- 25 (59) - (59)

Government Investment Issues + 25 (132) - (132)

- 25 137 - 137

Equity risk

Equity price risk is the risk that the fair value of future cash flows of a financial instrument will

fluctuate because of changes in market prices (other than those arising from profit yield risk or

currency risk) whether those changes are caused by factors specific to the individual financial

instruments or its issuer or factors affecting all similar financial instruments traded in the

market.

The Company's price risk policy requires it to manage such risks by setting and monitoring

objectives and constraints on investments, diversification plans, limits on investments in each

country, sector, market and issuer, having regards also to such limits stipulated by BNM. The

Company complies with BNM stipulated limits during the financial year and has no significant

concentration of price risk.

31 March 2011

The Company's equity price risk exposures relates to financial assets and financial liabilities

whose values will fluctuate as a result of changes in market prices.

138

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Equity risk (cont'd.)

Shareholder's Fund

Changes in

variable

Impact on

asset

Impact on

AFS reserve

Impact on

Profit before

tax

RM' 000 RM' 000 RM' 000

Market Indices

Bursa Malaysia + 5% 36 - 36

Bursa Malaysia - 5% (36) - (36)

Changes in

variable

Impact on

asset

Impact on

AFS reserve

Impact on

Surplus

before tax

RM' 000 RM' 000 RM' 000


Market Indices


Bursa Malaysia - 5% (55) - (55)

Family takaful fund

Market Indices


Bursa Malaysia - 5% (132) - (132)


Market Indices

Bursa Malaysia + 5% 4,112 - 4,112

Bursa Malaysia - 5% (4,112) - (4,112)

31 March 2011

31 March 2011

The analysis below is performed for reasonably possible movements in share prices with all

other variables held constant, showing the impact on equity in respect of quoted investment.

The correlation of variables will have significant effect in determining the ultimate impact on

price risk, but to demonstrate the impact due to changes in variables, variables had to be

changed on an individual basis. It should be noted that movements in these variables are non-

linear.

139

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Property Risk

38. Operational Risk

39. Shariah Non-compliance Risk

The financial risk of the declining tenants are managed through careful selection of properties,

having quality tenants with long term tenancies and continuously maintaining and upgrading

facilities.

The Company has no significant exposure of property risk.

Shariah Non-Compliance risk refers to possible failure to meet the obligation of Shariah principles.

When controls fail to perform, Shariah non-compliance risk can cause reputational and operational

damage, have regulatory implications or can even lead to financial loss and finally, impediment

from Allah’s barakah or blessing. The Company expect to mitigate such risk by initiating,

monitoring and responding to robust Shariah control framework. Controls include effective

oversight of the Shariah Committee, supported by internal Shariah Compliance Department in all

aspects of the Company's operations. Other relevant controls include staff awareness training and

internal operating guidelines, including the use of internal and external Shariah audit.

Property risk is the risk associated with the Company's investment in property or real estates

for own occupancy, investment or rental purpose. The Operational risk of the Company's

property is controlled by having detailed operation manual. The manual describes the

responsibilities in relation to management of the properties to maintain quality and satisfied

tenants.

Operational Risk is the risk of loss arising from system failure, human error, fraud or external

events. When controls fail to perform, operational risks can cause damage to reputation, have

legal or regulatory implications or can lead to financial loss. The Company cannot expect to

eliminate all operational risks, but by initiating a rigorous control framework and by monitoring and

responding to potential risks, the Company is able to manage risks. Controls, amongst others,

include effective segregation of duties, access controls, authorization and reconciliation

procedures, staff education and assessment processes, including the use of internal audit.

Business risks such as changes in technology and the industry are monitored through the

Company's strategic planning and budgeting process.

140

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40. Compliance Risk

41. Comparatives

As Adjustments/

previously Re- As

reported classification restated

Shareholder's fund RM '000 RM '000 RM '000

Statement of comprehensive income:

Wakalah fees 181,632 (181,632) -

Surplus administration charges transferred from:

General takaful fund 8,095 (8,095) -

Family takaful fund 732 (732) -

Investment income 8,558 (4,467) 4,091

- Investment performance fee from

family takaful fund (4,467)

199,017 (194,926) 4,091

Fee income - 194,926 194,926

- Wakalah fees 181,632

- Surplus administration charges 8,827

- Investment performance fee 4,467

Net other operating income/(expenses) 3,058 (3,058) -

Realised gains and losses - 4,337 4,337

Fair value gains and losses - (1,899) (1,899)

Other operating revenue - 620 620

- 3,058 3,058

Compliance risk is the risk arising from violations of, or non-conformance with business principles,

internal policies and procedures, related laws, rules and regulations governing the Company's

products, services and activities.

The Company has established a Compliance Management Department to look into all compliance

aspects in observing the regulatory requirements. In this respect, it has developed internal policies

and procedures to ensure compliance with all applicable laws and guidelines issued by the

regulatory authorities.

Certain comparative figures in the Statement of Financial Position and Statement of

comprehensive income as at 31 March 2010 have been reclassified to conform with current year's

presentation.

Consequently, the exposure to this risk can damage the Company's reputation, lead to legal or

regulatory sanctions and/or financial loss.

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41. Comparatives (cont'd.)

As Adjustments/

previously Re- As


Shareholder's fund (cont'd.) RM '000 RM '000 RM '000

Statement of comprehensive income (cont'd.):

Change in expenses liability - 5,739 5,739

- Effect of adopting FRS 4 (Note 2.27) 5,739

Taxation (5,075) (1,434) (6,509)

- Effect of adopting FRS 4 (Note 2.27) (1,434)

Statement of Financial Position :

Assets

Deferred tax assets 2,303 3,938 6,241


Liabilities

Expenses liabilities - 15,750 15,750


Other payables 26,354 (11,807) 14,547

Due to related companies - 1,132 1,132

Provisions - 10,675 10,675

- 11,807 11,807

Equity

Retained profits/(accumulated losses) 1,336 (11,812) (10,476)




Gross contribution 217,230 (217,230) -

Less: Retakaful (25,525) 25,525 -

(Increase)/decrease

in unearned contribution reserves (633) 633 -

Earned contribution 191,072 (191,072) -

Gross earned contribution - 216,319 216,319

Earned contribution ceded

to retakaful operators - (25,247) (25,247)

Net earned contribution - 191,072 191,072

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As Adjustments/

previously Re- As


General takaful fund (cont'd.) RM '000 RM '000 RM '000


Net claims incurred (122,462) 122,462 -

Gross claims paid - (87,591) (87,591)

Claims ceded to retakaful operators - 9,360 9,360

Gross change to certificate liabilities - (40,625) (40,625)


to retakaful operators - (3,605) (3,605)

Net claims - (122,461) (122,461)

Net commission earned 4,505 (4,505) -

Fee and commission income - 4,505 4,505

Net other operating expenses (869) 869 -

- Miscellaneous expenses 1,376

- Gain on disposal of AFS and FVTPL

financial assets (308)

- Fair value adjustments of financial assets

at FVTPL (199)

Investment income 6,153 (389) 5,764

- Impairment of AFS financial assets (389)

Provision for doubtful debts (869) 869 -

Realised gains and losses - 308 308

- Gain on disposal of AFS and FVTPL

financial assets 308

Fair value gains and losses - (1,005) (1,005)

- Impairment of AFS financial assets 389

- Fair value adjustments of financial assets

at FVTPL 199

- Provision for doubtful debts (869)

- Effect of adopting FRS 4 (Note 2.27) (724)

Other operating expenses - (1,376) (1,376)

- Miscellaneous expenses (1,376)

Wakalah fees (55,931) 55,931 -

Surplus administration charges transferred

to shareholder's fund (8,095) 8,095 -

(64,026) 64,026 -

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As Adjustments/

previously Re- As

General takaful fund (cont'd.) reported classification restated

RM '000 RM '000 RM '000


Fee expenses - (64,026) (64,026)

Taxation (2,692) 181 (2,511)



Assets

Trade receivables 39,626 (39,626) -

Takaful certificates receivables - 36,156 36,156

- As reclassed from Trade receivables 39,626


Retakaful certificates assets - 29,669 29,669

- Claim liabilities ceded to retakaful operators 17,577

- Contribution liabilities ceded to retakaful operators 12,092

Deferred tax assets 1,474 868 2,342


Liabilities

Provision for outstanding claims 125,726 (125,726) -

- Gross outstanding claims (143,303)

- Outstanding claims ceded to retakaful operators 17,577

Trade payables 5,641 (5,641) -

Takaful certificates payables - 5,641 5,641

Takaful certificates liabilities - 228,254 228,254

- Gross claim liabilities 143,303

- Gross contribution liabilities 84,951

Other payables 31,321 11,594 42,915

- Due to shareholder's fund 11,594

Due to shareholder's fund 11,594 (11,594) -

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As Adjustments/

previously Re- As

General takaful fund (cont'd.) reported classification restated

RM '000 RM '000 RM '000

Statement of Financial Position (cont'd.) :

Participants' Fund

General takaful fund 8,794 (2,602) 6,192


Unearned contribution reserves 72,859 (72,859) -

- Gross unearned contribution reserves (84,951)

- Unearned contribution reserves

ceded to retakaful operators 12,092

Family takaful fund


Benefits paid and payable (87,092) 87,092 -

Gross benefits paid - (92,780) (92,780)

Benefits ceded to retakaful operators 14,049 14,049



to retakaful operators 3,246 3,246

Net claims - (87,092) (87,092)

Investment income 18,401 1,819 20,220

- Investment performance fee 4,468

- Gain on disposal of FVTPL financial assets (1,501)

- Gain on disposal of AFS financial assets (472)

- Fair value adjustments of financial assets at FVTPL (329)

- Impairment of AFS financial assets (347)

Realised gains and losses - 2,024 2,024

- Gain on disposal of FVTPL financial assets 1,501

- Gain on disposal of AFS financial assets 523

Fair value gains and losses - 27,302 27,302

- Fair value adjustments of financial assets at FVTPL 4,659

- Impairment of AFS financial assets 347

- Gain on fair value adjustment on investment properties 22,535

- Impairment of takaful certificate receivables (96)

- Effect of adopting FRS 4 (Note 2.27) (143)

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As Adjustments/

previously Re- As

Family takaful fund (cont'd.) reported classification restated

RM '000 RM '000 RM '000


Net commission earned 63 (63) -

Fee and commission income - 63 63

Wakalah fees (120,139) 120,139 -

Surplus administration charges

transferred to shareholder's fund (732) 732 -

Fee expenses - (125,339) (125,339)

- Wakalah fees (120,139)

- Surplus administration charges

transferred to shareholder's fund (732)

- Investment performance fee (4,468)

Net other operating income/(expenses) 22,142 (22,142) -

- Fair value adjustments of financial

assets at FVTPL (4,330)

- Gain on disposal of AFS financial assets (51)

- Gain on fair value adjustment on

investment properties (22,535)

- Miscellaneous expenses 2,771

- Bank charges 1,137

- Participants' medical fees 352

- Stamp duty 514

Allowance for doubtful debts (96) 96 -

Other operating expenses - (4,774) (4,774)

- Miscellaneous expenses (2,771)

- Bank charges (1,137)

- Participants' medical fees (352)

- Stamp duty (514)


Assets

Retakaful certificates assets - 105,811 105,811


- PA 60,015

- PSA 37,941

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As Adjustments/

previously Re- As


Family takaful fund (cont'd.) RM '000 RM '000 RM '000


Assets (cont'd.)

Takaful certificates receivables 37,266 1,495 38,761


Investment-linked business assets 43,991 (600) 43,391

- Investment-linked business liabilities (600)

Liabilities

Provision for outstanding claims 22,158 (22,158) -

- Gross claim liabilities (30,013)


Takaful certificates liabilities - 846,087 846,087

- Gross Claim liabilities 30,013

- PA 683,746

- PSA 120,382

- Available-For-Sale Reserve 6,113

- Unallocated surplus

- As previously reported 4,338


Trade payables 19,464 (19,464) -

Takaful certificates payables - 19,464 19,464

Other payables 25,085 13,400 38,485

- Due to shareholder's fund 13,400

Due to shareholder's fund 13,400 (13,400) -

Investment-linked business liabilities 1,284 42,107 43,391

- Participants' Fund 42,707

- Investment-linked business assets (600)

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As Adjustments/

previously Re- As


Family takaful fund (cont'd.) RM '000 RM '000 RM '000


Participants' Fund

Family takaful fund 716,623 (716,623) -

- PA

- Gross (683,746)

- Retakaful 60,015

- PSA

- Gross (120,382)

- Retakaful 37,941

- AFS Reserve (6,113)

- Unallocated surplus (4,338)

Investment-linked fund 42,707 (42,707) -

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Takaful Ikhlas Sdn. Bhd

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