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TAKAFUL IKHLAS SDN. BHD.

(593075-U) (Incorporated in Malaysia) Directors' Report and Audited Financial Statements 31 March 2012

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) Contents Page

Directors' report Statement by directors Statutory declaration Independent auditors' report Report of the Shariah Committee Statement of comprehensive income Statement of financial position Statement of changes in equity General takaful fund statement of comprehensive income General takaful fund statement of financial position Family takaful fund statement of comprehensive income Family takaful fund statement of financial position Statement of cash flows Notes to the financial statements

1-8 9 9 10 - 11 12 13 14 15 16 17 18 19 20 - 21 22 - 141

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) Directors' report The directors have pleasure in presenting their report together with the audited financial statements of the Company for the financial year ended 31 March 2012. Principal activities 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. Results Net profit for the year Dividends At the forthcoming Annual General Meeting, a final single tier dividend in respect of the current financial year ended 31 March 2012 of 1.7% based on the issued and paid-up share capital of 295,000,000 ordinary shares at the date of this report, amounting to a total dividend of RM5,000,000, will be proposed for shareholder's approval. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend, if approved by the shareholder, will be accounted for in the shareholder's equity as an appropriation of retained profits in the next financial year ending 31 March 2013. Reserves and provisions There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the financial statements. Provision for outstanding claims Before the statement of comprehensive income and statement of financial position of the Company 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. Bad and doubtful debts Before the statement of comprehensive income and statement of financial position of the Company were made out, the directors took reasonable steps to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all bad debts had been written off and that adequate provision had been made for doubtful debts. At the date of this report, the directors are not aware of any circumstances which would require any debts to be written off as bad or render the amount of provision for doubtful debts in the financial statements of the Company inadequate to any substantial extent. RM '000 8,509

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) Current assets Before the statement of comprehensive income and statement of financial position of the Company were made 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 are not aware of any circumstances which would render the values attributed to current assets in the financial statements of the Company misleading. Valuation methods At the date of this report, the directors are not aware of any circumstances which has arisen which would render adherence to the existing method of valuation of assets or liabilities of the Company misleading or inappropriate. Contingent and other liabilities At the date of this report, there does not exist: (a) any charge on the assets of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or (b) any contingent liability of the Company which has arisen since the end of the financial year other than those arising in the ordinary course of business of the Company. In the opinion of the directors, 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 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. Change of circumstances At the date of this report, the directors are 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. Items of an unusual nature In the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Company for the financial year in which this report is made.

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) Issue of shares During the financial year, the Company increased its issued and paid-up ordinary share capital from RM195,000,000 to RM295,000,000 by way of issuance of 100,000,000 ordinary shares of RM1 each at par for cash to the holding company on 7 April 2011 for additional working capital purposes. The new ordinary shares issued during the financial year rank pari passu in all respects with the existing ordinary shares of the Company. Corporate governance The Company has 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 are practised in the Company. This is a fundamental part in discharging their responsibilities to protect and enhance stakeholders' values and the financial performance of the Company. 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 bin Syed Jaafar Alhabshi Encik Mohd Din bin Merican (appointed to the Board on 2 March 2012) Tuan Haji Megat Dziauddin bin Megat Mahmud (appointed to the Board on 17 April 2012) In accordance with Article 96A of the Articles of Association of the Company, Encik Sharkawi bin Alis and Y. Bhg. Dato' Haji Othman bin Hashim retire by rotation and, being eligible, offer themselves for re-election. In accordance with Article 79 of the Articles of Association of the Company, Encik Mohd Din bin Merican and Tuan Haji Megat Dziauddin bin Megat Mahmud retire by rotation and, being eligible, offer themselves for re-election. Directors benefits Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) Directors benefits (cont'd.) 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 33 to the financial statements) 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. Directors interests According to the register of directors' shareholdings, 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. Board of directors The Board presently has 9 members, comprising 5 independent non-executive directors, 3 nonindependent non-executive directors and 1 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, 9 Board meetings were held. Details of the Directors' attendance at the Board meetings during the financial year are disclosed hereunder: Directors Encik Sharkawi bin Alis - Chairman Non-independent non-executive director Y. Bhg. Dato' Haji Syed Moheeb bin Syed Kamarulzaman Non-independent executive director Encik Paisol bin Ahmad Non-independent non-executive director Y. Bhg. Dato' Haji Othman bin Hashim Independent non-executive director Tuan Haji Halim bin Haji Din Independent non-executive director Encik Yahaya bin Besah Independent non-executive director Attendance 9/9 9/9 9/9 7/9 9/9 9/9

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) Board of directors (cont'd.) Directors Dr Syed Musa bin Syed Jaafar Alhabshi Independent non-executive director Encik Mohd Din bin Merican (appointed to the Board on 2 March 2012) Non-independent non-executive director Tuan Haji Megat Dziauddin bin Megat Mahmud (appointed to the Board on 17 April 2012) Independent non-executive director Attendance 9/9

1/1

0/0

The Board has delegated specific responsibilities to the Audit, Nomination, Remuneration, Investment and Risk Management Committees of the Board. Audit Committee The Audit Committee comprises 5 independent non-executive directors and 1 non-independent non-executive director. 3 members of the Committee are qualified Accountants and members of the Malaysian Institute of Accountants. The Audit Committees terms of reference include the review of and deliberation of the Companys 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 Committees primary are as spelt out in BNM/RH/GL/003-22: Guidelines on Audit Whilst All As custodian material Board Remuneration proposed Board the Board takes also exercises comprises related of risk public responsibility takes isCommittee, management responsible party overall funds, responsibility 6 duties non-executive transactions the responsibility for in on for framework Companys establishing presenting the creating in other have establishing directors for hand, dealings the been for a the balanced the framework the Risk disclosed is to Company with responsible Company the enable Management and the Nomination and in comprehensive public would aNote policies internal to balanced provide Committee are comprise XX and always within controls toand Remuneration assessment a the formal three conducted which ("RMC"). objective financial and main and the its of Committee and Internal Audit Department (Part A) and BNM/RH/GL 013-4: Guidelines on Internal Audit Function of Licensed Institutions issued by Bank Negara Malaysia. 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: Directors Attendance

Tuan Haji Halim bin Haji Din - Chairman Y. Bhg. Dato' Haji Othman bin Hashim Encik Paisol bin Ahmad Encik Yahaya bin Besah Dr Syed Musa bin Syed Jaafar Alhabshi Tuan Haji Megat Dziauddin bin Megat Mahmud (appointed to the Committee on 30 May 2012)

6/6 5/6 6/6 6/6 6/6 0/0

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) Nomination Committee The Nomination Committee comprises 3 independent non-executive directors and 1 nonindependent non-executive director. The primary objective of the Committee is to establish a documented, formal and transparent procedure for the appointment of directors, the principal officer and key senior officers. The Committee also responsible 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. During the financial year, 3 meetings were held. Details of the members of the Committee's attendance at the meetings held during the financial year are disclosed hereunder: Directors Dr Syed Musa bin Syed Jaafar Alhabshi - Chairman Tuan Haji Halim bin Haji Din Y. Bhg. Dato' Haji Othman bin Hashim Encik Sharkawi bin Alis Remuneration Committee Attendance 3/3 3/3 3/3 3/3

This Remuneration The Committee considers Committee and comprises evaluates the twoappointment independent, ofnon-executive new Directors directors of the Company and threeand Chairman:

The Remuneration Committee comprises 4 independent non-executive directors and 1 nonindependent non-executive director. The primary objective of the Committee is to provide a formal and transparent procedure for developing a remuneration policy for directors, the principal officer and key senior officers and ensuring that their compensation is competitive and consistent with the Company's culture, objectives and strategy. During the financial year, 2 meetings were held. Details of the members of the Committee's attendance at the meetings held during the financial year are disclosed hereunder: Directors Encik Yahaya bin Besah - Chairman Y. Bhg. Dato' Haji Othman bin Hashim Tuan Haji Halim bin Haji Din Encik Paisol bin Ahmad Tuan Haji Megat Dziauddin bin Megat Mahmud (appointed to the Committee on 30 May 2012) Attendance 2/2 2/2 2/2 2/2 0/0

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) Investment Committee The Investment Committee comprises 3 independent non-executive directors, 1 nonindependent non-executive director 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, by regulation, that require awareness of and sanctioning by the Board of Directors. During the financial year, 4 meetings were held. Details of the members of the Committee's attendance at the meetings held during the financial year are disclosed hereunder: Directors Encik Paisol bin Ahmad - Chairman (appointed on 25 May 2011) Y. Bhg. Dato' Haji Syed Moheeb bin Syed Kamarulzaman Dr Syed Musa bin Syed Jaafar Alhabshi Tuan Haji Halim bin Haji Din (appointed to the Committee on 25 May 2011) Tuan Haji Megat Dziauddin bin Megat Mahmud (appointed to the Committee on 30 May 2012) Risk Management Committee The Risk Management Committee comprises 3 independent non-executive directors and 1 nonindependent non-executive director. The Risk Management Committee reviews and recommends risk management strategies, policies and risk tolerance limits for the Boards 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. During the financial year, 7 meetings were held. Details of the members of the Committee's attendance at the meetings held during the financial year are disclosed hereunder: Directors Y. Bhg. Dato' Haji Othman bin Hashim - Chairman Encik Paisol bin Ahmad Encik Yahaya bin Besah Dr Syed Musa bin Syed Jaafar Alhabshi Attendance 7/7 7/7 7/7 7/7 Attendance 4/4 4/4 4/4 3/3 0/0

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) Holding and ultimate holding company The directors regard MNRB Holdings Berhad, a company incorporated in Malaysia, as the Company's holding and ultimate holding company. Auditors The auditors, Ernst & Young, retire and have expressed their willingness to continue in office.

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

Sharkawi bin Alis Kuala Lumpur, Malaysia 28 June 2012

Halim bin Haji Din

Before At the the any require render no todate the date ascertain ensure item, contingent charge contingent balance of the any of this transaction that this on values amount that report, report, the sheet any liability report, proper assets current attributed to and the the or be the in action directors or income of directors event written respect assets directors the other to had Company of statement the which off are of are liability a been are the material as current not not bad were not taken Company aware which aware of has debts aware the assets unlikely and in of become of has Company relation or any which any unusual of arisen in render to any circumstances circumstances the enforceable realise to has since circumstances were the financial nature the arisen amount writing their the made has since end which value or statements which out, arisen off of of is the not the the of as would: likely have end otherwise bad provision shown in directors financial of arisen the of debts tothe in

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) Statement by directors Pursuant to Section 169(15) of the Companies Act, 1965 We, Sharkawi bin Alis and Halim bin Haji Din, being two of the directors of Takaful Ikhlas Sdn. Bhd., do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 13 to 141 are properly drawn up in accordance with Financial Reporting Standards, as modified by Bank Negara Malaysia and in compliance with the Shari'ah requirements and the provisions of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Company as at 31 March 2012 and of the results and the cash flows of the Company for the year then ended.

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

Sharkawi bin Alis

Halim bin Haji Din

Kuala Lumpur, Malaysia 28 June 2012

Statutory declaration Pursuant to Section 169(16) of the Companies Act, 1965 I, Syed Moheeb bin Syed Kamarulzaman, being the director primarily responsible for the financial management of Takaful Ikhlas Sdn. Bhd., do solemnly and sincerely declare that the accompanying financial statements set out on pages 13 to 141 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960. Subscribed and solemnly declared by the abovenamed Syed Moheeb bin Syed Kamarulzaman at Kuala Lumpur in Wilayah Persekutuan on 28 June 2012 Before me,

Syed Moheeb bin Syed Kamarulzaman

We have audited the accounts set out on pages 4 to 12 in accordance with the approved auditing

Commissioner for Oaths 9

593075-U Independent auditors' report to the member of Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) Report on the financial statements
We have audited the financial statements of Takaful Ikhlas Sdn Bhd., which comprise the statement of financial position as at 31 March 2012 and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 13 to 141.

#NAME?

amended as per GG

Directors' responsibility for the financial statements The directors of the Company are responsible for the preparation of these financial statements that give a true and fair view in accordance with Financial Reporting Standards, as modified by Bank Negara Malaysia and the Companies Act, 1965 in Malaysia, and for such internal control as the directors' determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Companys preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

10

593075-U Independent auditors' report to the member of Takaful Ikhlas Sdn. Bhd. (cont'd.) (Incorporated in Malaysia) Opinion In our opinion, the financial statements have been properly drawn up accordance with Financial Reporting Standards, as modified by Bank Negara Malaysia and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Company as at 31 March 2012 and of its financial performance and cash flows for the year then ended. Report on other legal and regulatory requirements In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report that in our opinion, the accounting and other records and the registers required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act. Other matters
This report is made solely to the member of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

Ernst & Young AF: 0039 Chartered Accountants Kuala Lumpur, Malaysia 28 June 2012

Gloria Goh Ewe Gim No. 1685/04/13(J) Chartered Accountant #NAME?

11

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) Report of the Shariah Committee The members of the Shariah Committee who served since the date of the last report and the date of this report are: Y. Bhg. Dato' Haji Mohd Mokhtar bin Shafii - Chairman Y. Bhg. Datuk Haji Nik Moustpha bin Nik Hassan Professor Dr. Ahmad Hidayat bin Buang Associate Professor Dr. Shamsiah binti Mohamad Dr. Muhammad Naim bin Omar The Committee met 6 times during the financial year. The attendance of members at the Shariah Committee meetings is as follows: Attendance of members at Shariah Committee meetings held during the financial year: Attendance at Shariah Committee Meetings 6/6 5/6 5/6 5/6 6/6

Members Y. Bhg. Dato' Haji Mohd Mokhtar bin Shafii Y. Bhg. Datuk Haji Nik Moustpha bin Nik Hassan Professor Dr. Ahmad Hidayat bin Buang Associate Professor Dr. Shamsiah binti Mohamad Dr. Muhammad Naim bin Omar Statement by Shariah Committee Members

We, Mohd Mokhtar bin Shafii and Shamsiah binti Mohamad, being two of the members of the Shariah Committee of Takaful Ikhlas Sdn. Bhd., do hereby confirm on behalf of the members of the Committee that in our opinion, the operations of the Companys business for the financial year ended 31 March 2012 have been conducted in conformity with the Shariah requirements. Signed on behalf of the Shariah Committee.

Mohd Mokhtar bin Shafii Kuala Lumpur, Malaysia 28 June 2012

Shamsiah binti Mohamad

12

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) Statement of comprehensive income For the year ended 31 March 2012 Note 2012 RM '000 2011 RM '000

Operating revenue Investment income Realised gains/(losses) Fair value gains/(losses) Fee income Other operating revenue Other revenue Commission expenses Management expenses Change in expenses liability Other expenses Profit before taxation Zakat Taxation Net profit for the year Other comprehensive income: Available-for-sale fair value reserves: Net gains on fair value changes Deferred tax on fair value changes Realised gain transferred to statement of comprehensive income Total comprehensive income for the year Earnings per share (sen) Basic

3 5 6 7 8 9

194,060 10,034 1,554 (430) 199,002 1,764 211,924 (101,481) (94,974) (2,004) (198,459) 13,465 (400) (4,556) 8,509

211,910 5,375 464 (309) 213,289 1,869 220,688 (115,676) (91,506) 605 (206,577) 14,111 (400) (4,770) 8,941

8 11 13

14

21 6

2,872 (367) (1,403) 9,611

802 102 (1,065) 8,780

29

2.9

4.6

The accompanying notes form an integral part of the financial statements. 13

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) Statement of financial position as at 31 March 2012 Note 2012 RM '000 2011 RM '000

Assets Property, plant and equipment Intangible assets Financial instruments: Financial assets at fair value through profit or loss Held-to-maturity investments Available-for-sale financial assets Loans and receivables Deferred tax assets Tax recoverable Cash and bank balances Total shareholder's fund assets Total general takaful fund assets Total family takaful fund assets Total assets Liabilities Expense liabilities Due to agents, retakaful operators and brokers Due to related companies Zakat payable Other payables Total shareholder's fund liabilities Total general takaful fund liabilities and participants' fund Total family takaful fund liabilities Total liabilities Equity Share capital Retained profit/(accumulated losses) Available-for-sale reserves Total shareholder's equity Total liabilities, shareholder's equity and participants' funds

15 16

13,275 6,101

14,237 4,583

18(a) 18(b) 18(c) 18(d) 21

988 41,327 106,140 180,738 5,842 3,739 1,373 359,523 345,285 1,606,924 2,311,732

712 40,450 60,888 119,083 5,170 2,128 7,630 254,881 338,155 1,301,690 1,894,726

23 20 25

17,150 15,578 414 390 22,207 55,739 345,285 1,606,924 2,007,948

15,146 13,498 22 573 31,469 60,708 338,155 1,301,690 1,700,553

26

295,000 6,974 1,810 303,784

195,000 (1,535) 708 194,173

2,311,732

1,894,726

The accompanying notes form an integral part of the financial statements. 14

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) Statement of changes in equity For the year ended 31 March 2012 Non distributable Available-for sale reserves RM '000 869 (161) 708 1,102 1,810

Note

Share capital RM '000 195,000 195,000

Distributable retained profits/ (losses) RM '000 (10,476) 8,941 (1,535) 8,509 6,974

Total RM '000 185,393 8,780 194,173 100,000 9,611 303,784

At 1 April 2010 Total comprehensive income for the year At 31 March 2011 Share capital issued during the year Total comprehensive income for the year At 31 March 2012 26

100,000 295,000

The accompanying notes form an integral part of the financial statements. 15

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) General takaful statement of comprehensive income For the year ended 31 March 2012 Note 2012 RM '000 204,516 209,314 (23,451) 185,863 10,782 2,580 1,404 7,278 22,044 (122,249) 10,205 (17,557) (8,874) (138,475) 8 9 (54,486) (2,003) (56,489) 12,943 14 (2,270) 10,673 2011 RM '000 232,756 210,526 (32,549) 177,977 8,560 2,706 3,035 3,938 18,239 (104,436) 6,995 (49,809) 14,833 (132,417) (56,157) (1,770) (57,927) 5,872 (1,427) 4,445

Operating revenue Gross earned contribution Earned contribution ceded to retakaful operators Net earned contribution Investment income Realised gains/(losses) Fair value gains/(losses) Fee and commission income Other revenue Gross claims paid Claims ceded to retakaful operators Gross change to certificate liabilities Change in certificate liabilities ceded to retakaful operators Net claims Fee expenses Other operating expenses Other expenses Surplus before taxation Taxation Net surplus for the year Other comprehensive income: Available-for-sale fair value reserves Net gains on fair value changes Deferred tax on fair value changes Realised gain transferred to statement of comprehensive income Total comprehensive income for the year

3 4(a) 4(b) 5 6 7 8

21 6

2,442 9 (2,477) 10,647

2,236 36 (2,416) 4,301

The accompanying notes form an integral part of the financial statements. 16

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) General takaful statement of financial position As at 31 March 2012 Note 2012 RM '000 2011 RM '000

Assets Financial instruments: Financial assets at fair value through profit or loss Held-to-maturity investments Available-for-sale financial assets Loans and receivables Retakaful certificates assets Takaful certificates receivables Deferred tax assets Cash and bank balances Total general takaful assets Liabilities Takaful certificates liabilities Takaful certificates payables Tax payable Other payables Total general takaful liabilities Participants' Fund General takaful fund Total general takaful liabilities and participants' fund

18(a) 18(b) 18(c) 18(d) 22 19 21

1,049 70,311 112,306 70,418 42,156 25,463 1,370 22,212 345,285

1,105 67,268 105,145 60,449 34,351 32,798 1,571 47,511 350,198

22 24 25

293,710 13,827 2,577 26,075 336,189

291,733 7,932 564 39,477 339,706

27

9,096 345,285

10,492 350,198

The accompanying notes form an integral part of the financial statements. 17

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) Family takaful statement of comprehensive income For the year ended 31 March 2012 Note 2012 RM '000 507,522 465,617 (48,302) 417,315 5 6 7 8 41,198 9,124 (1,267) 70 49,125 (131,688) 82,374 (2,772) (13,555) (65,641) 8 9 (144,516) (3,667) (148,183) 252,616 14 (4,038) 248,578 2011 RM '000 525,850 494,213 (44,403) 449,810 31,121 8,073 (8,065) 21 31,150 (117,867) 25,303 (3,655) 16,540 (79,679) (157,132) (2,864) (159,996) 241,285 (2,983) 238,302

Operating revenue Gross contribution Contribution ceded to retakaful operators Net contribution Investment income Realised gains/(losses) Fair value gains/(losses) Fee and commission income Other revenue Gross benefits paid Benefits ceded to retakaful operators Gross change to certificate liabilities Change in certificate liabilities ceded to retakaful operators Net benefits Fee expenses Other operating expenses Other expenses Surplus before taxation Taxation Net surplus for the year Other comprehensive income: Available-for-sale fair value reserves Net gains on fair value changes Deferred tax on fair value changes Realised gain transferred to statement of comprehensive income Total comprehensive income for the year

10

21 6

13,090 (328) (8,902) 252,438

9,480 (175) (7,456) 240,151

The accompanying notes form an integral part of the financial statements. 18

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) Family takaful statement of financial position As at 31 March 2012 Note 2012 RM '000 2011 RM '000

Assets Investment properties Financial instruments: Financial assets at fair value through profit or loss Held-to-maturity investments Available-for-sale financial assets Loans and receivables Retakaful certificates assets Takaful certificates receivables Cash and bank balances Investment-linked business assets Total family takaful assets Liabilities Takaful certificates liabilities Takaful certificates payables Tax payable Deferred tax liabilities Other payables Investment-linked business liabilities Investment-linked business participants' fund Total family takaful liabilities

17

103,828

103,518

18(a) 18(b) 18(c) 18(d) 22 19 31

2,355 239,257 441,066 402,167 115,684 130,382 53,008 119,177 1,606,924

1,832 212,387 303,601 303,142 137,383 83,906 64,512 91,409 1,301,690

22 24 21 25 31

1,352,027 69,774 4,411 2,355 59,180 2,722 116,455 1,606,924

1,104,961 34,406 1,260 2,135 67,519 1,954 89,455 1,301,690

The accompanying notes form an integral part of the financial statements. 19

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) Statement of cash flows For the year ended 31 March 2012 Note 2012 RM '000 2011 RM '000

Operating Activities Profit before zakat and taxation Adjustments for: Depreciation for property, plant and equipment Amortisation of intangible assets Net accretion of discounts Profit on investment accounts Gross dividend income Fair value adjustments of financial assets at FVTPL Impairment of AFS financial assets Writeback for impairment of HTM financial asset Gain on disposal of investments (Gain)/loss on disposal of property, plant and equipment Loss on fair value adjustment of investment properties Writeback for impairment of takaful receivables (Decrease)/increase in contribution liabilities Increase/(decrease) in expense liabilities Results of general takaful fund Results of family takaful fund Operating profit before working capital changes Purchase of financial assets/investments Proceeds from disposal of of financial assets/investments (Increase)/decrease in Islamic investment accounts Decrease/(increase) in loans receivable Increase in trade receivables Decrease/(increase) in other receivables Increase in claims liabilities Increase in trade payables Decrease/(Increase) in other payables Net change in balance with holding company Net cash (used in)/generated from operating activities Investment income received Dividend income received Hibah to participants Income tax paid Zakat paid Net cash flows from operating activities

13,465 3,647 1,112 (434) (54,437) (4,542) 430 688 (266) (13,189) (69) (559) (32,259) 2,004 10,673 248,578 174,842 (393,348) 189,137 (198,607) 400 (38,582) 38,562 42,758 43,343 (42,573) (621) (184,689) 50,486 4,535 (7,206) (583) (137,457)

14,111 4,101 1,169 (1,297) (37,641) (3,974) (56) 323 (12,077) 834 7,490 (2,418) 23,821 (605) 4,445 238,302 236,528 (411,440) 220,233 47,210 (3) (39,369) (17,273) 22,091 14,858 17,480 (946) 89,369 34,841 3,984 (1) (5,158) (197) 122,838

27

30

20

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) Statement of cash flows For the year ended 31 March 2012 (cont'd.) Note 2012 RM '000 2011 RM '000

Investing Activities Proceeds from disposal of property and equipment Purchase of property and equipment Purchase of intangibles Purchase of investment properties Net cash flows from investing activities Financing Activity Proceeds from issuance of share capital to holding company representing net cash generated from financing activity Net cash flows from financing activity Net (decrease)/ increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Cash and bank balances of: Shareholder's fund General takaful fund Family takaful fund Cash and bank balances

30

157 (2,820) (2,630) (310) (5,603)

21 (5,530) (1,179) (1,008) (7,696)

30

100,000 100,000 (43,060) 119,653 76,593

115,142 4,511 119,653

1,373 22,212 53,008 76,593

7,630 47,511 64,512 119,653

The accompanying notes form an integral part of the financial statements. 21

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) Notes to the financial statements - 31 March 2012 1. Corporate information The Company is engaged principally in the managing of general, family and investmentlinked takaful businesses. There were no significant changes in the principal activities of the Company during the financial year. 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. The number of employees in the Company at the end of the financial year was 461 (2011: 470). The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 28 June 2012. 2. Significant accounting policies 2.1 Basis of preparation The financial statements of the Company comply with the provisions of the Companies Act, 1965 and Financial Reporting Standards ("FRSs"), as modified by Bank Negara Malaysia ("BNM"). The financial statements of the Company 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 has prepared the financial statements in accordance with BNM's Guideline on Financial Reporting for Takaful Operators which requires the Company 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, general takaful statement of financial position, general takaful statement of comprehensive income, family takaful statement of financial position and family takaful statement of comprehensive income. This is a modification to FRS 101 : Presentation of Financial Statements which is required by BNM under Section 41 of the Takaful Act 1984. In addition, under this Guideline, the Company is also required to ensure that aggregated total assets and total liabilities as presented in the Company's statement of financial position are net of Qard and the related Islamic investment accounts in order to avoid double counting of assets and liabilities. This requirement has been reflected in the current period's financial statements.

22

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.1 Basis of preparation (cont'd.) 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. 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 are presented in Ringgit Malaysia (RM) and all values are rounded to the nearest thousand (RM '000) except when otherwise indicated. 2.2 Property, plant and equipment and depreciation (i) Recognition and measurement 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. 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. 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. On disposal of property, plant and equipment, the difference between net proceeds and the carrying amount is recognised in the statement of comprehensive income. (ii) Subsequent costs 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.

23

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.2 Property, plant and equipment and depreciation (cont'd.) (iii) Depreciation 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: Computer equipment Furniture, fittings and office equipment Motor vehicles 33 1/3% 15% 20%

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. 2.3 Investment properties 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. 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.

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593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.4 Intangible assets 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. Amortisation is charged to the statement of comprehensive income. 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. Software development in progress 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. Computer software and licences The useful lives of computer software and licences are considered to be finite because computer software and licences are susceptible to technological obsolescence. The acquired computer software and licences 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.

25

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.5 Impairment of non-financial assets 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 assets recoverable amount is the higher of an assets 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 prorata basis. An impairment loss is recognised in statement of comprehensive income in the period in which it arises. An impairment loss for an asset is reversed if, and only if, there has been a change in the estimates used to determine the assets 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 the statement of comprehensive income. 2.6 Investments and other financial assets The Company classifies investments into financial assets at fair value through profit Investment properties areits derecognised properties which when are either held either they have to earn been rental disposed income ofor orfor or loss ("FVTPL"), held-to-maturity ("HTM"), loans and other receivables ("LAR") and available-for-sale-financial assets ("AFS"). 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.

26

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.6 Investments and other financial assets (cont'd.) The significant accounting policies by the categories above are as follows: FVTPL 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 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 - 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. 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. HTM 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. Financial assets classified as HTM include unquoted Islamic government guaranteed and unsecured private debt securities and government investment issues.

27

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.6 Investments and other financial assets (cont'd.) LAR 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. 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. AFS 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. Financial assets classified as AFS are unquoted Islamic government guaranteed and unsecured private debt securities, shariah approved quoted equities and warrants, unit trust funds and golf club memberships. On derecognition or impairment, the cumulative fair value gains and losses previously reported in equity is transferred to statement of comprehensive income. 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. 2.7 Fair values of financial assets and liabilities (i) Cash and cash equivalents and other receivables/payables The carrying amounts approximate fair values due to the relatively short-term maturity of these financial instruments.

28

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.7 Fair values of financial assets and liabilities (cont'd.) (ii) Loans and receivables Loans and receivables are granted at profit rates which are comparable with the rates offered on similar instruments in the market and to counter parties with similar credit profiles. Accordingly, the carrying amount of the financing receivables approximate their fair values as the impact of discounting is not material. (iii) Takaful receivables and payables The carrying amounts are measured at amortised cost in accordance with the accounting policies as disclosed in Note 2.18 and 2.21(b). The carrying amounts approximate fair values due to the relatively short-term maturity of these financial instruments. (iv) Investments Investments as at 31 March 2012 have been accounted for in accordance with the accounting policies as disclosed in Note 2.6. The carrying amounts and fair values of investments are disclosed in Note 18 of the financial statements. Description of overall fair value framework The Company has an established framework and policies which provide guidance concerning the practical considerations, principles and analytical approaches for the establishment of prudent valuations for financial instruments. The valuations of financial instruments are performed either based on quoted prices in active markets at which an arms length transaction would be likely to occur or using valuation techniques. Fair values of financial instruments can be assessed using observable inputs or unobservable inputs where one or more significant inputs are unobservable. Management judgment is exercised in the selection and application of appropriate parameters, assumptions and modeling techniques where some or all of the parameter inputs are not observable in deriving fair value. Valuation adjustment is an integral part of valuation process. Valuation adjustment reflects the uncertainty in valuations for products that are less standardised, less frequently traded and more complex in nature. In making valuation adjustments, the Company follows methodologies that consider factors such as liquidity, bid-offer spread, unobservable prices/inputs in the market and uncertainties in the assumptions/parameters. In addition, the Company continuously enhances its design and validation methodologies and processes used to produce valuations and periodic reviews are performed to ensure the model remains suitable for its intended use.

29

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.7 Fair values of financial assets and liabilities (cont'd.) (iv) Investments (cont'd.) Description of overall definition of the fair value hierarchy The levels of the fair value hierarchy as defined by the accounting standards are an indication of the observability of prices or valuation input. It can be classified into the following hierarchies/levels: Level 1 : Active Market quoted price Refers to financial instruments which are regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arms length basis. Such financial instruments include actively traded government securities, listed derivatives and cash products traded on exchange. Level 2 : No Active Market Valuation techniques using observable input Refers to inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from prices). Examples of level 2 financial instruments include overthecounter ("OTC") derivatives, corporate and other government bonds and less liquid equities. Level 3 : No Active Market Valuation techniques using unobservable input Refers to financial instruments where fair values are measured using unobservable market inputs. The valuation technique is consistent with level 2. The chosen valuation technique incorporates management's assumptions and data. Examples of level 3 instruments include corporate bonds in illiquid markets, private equity investments and highly structured OTC derivatives. 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. For investments in investment linked units, unit and real estate investment trusts, if any, fair value is determined by reference to published bid values.

30

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.8 Impairment of financial assets 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. 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. (i) Financial assets carried at amortised cost 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 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 assets 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 assets original effective yield. The carrying amount of the asset is reduced and the loss is recorded in the statement of comprehensive income. 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.

31

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.8 Impairment of financial assets (cont'd.) (ii) AFS financial assets 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 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 the statement of comprehensive income. 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 the statement of comprehensive income. (iii) Loans and receivables 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 the 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. 32

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.9 Derecognition of financial assets 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. 2.10 Measurement and impairment of Qard Any deficits arising in the Takaful Funds are made good via a benevolent 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 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. Impairment losses are subsequently reversed in the statement of comprehensive income if objective evidence exists that the Qard is no longer impaired. 2.11 Equity instruments Ordinary share capital 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. Dividend on ordinary share capital 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. Dividends for the year that are approved after the financial year end are dealt with as an event after the financial year end. 2.12 Product classification The Company as the operator of the participants' fund issues certificates that contains takaful risk or financial risk or both.

33

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.12 Product classification (cont'd.) 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 nonfinancial 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. If the ratio of the former exceeds the latter by 5% or more, the takaful risk accepted is deemed to be significant. 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. 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. Based on the Company's product classification review, all products fall under the classification of takaful certificate. 2.13 Retakaful 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 claims provisions or settled claims associated with the retakaful operator's policies and are in accordance with the related retakaful certificates. Ceded retakaful arrangements do not relieve the Company from the obligations to participants. Contributions and claims are presented on a gross basis. 34

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.13 Retakaful (cont'd.) 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 the statement of comprehensive income. 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. 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. 2.14 General takaful fund 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.

35

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.14 General takaful fund (cont'd.) (i) Contribution income 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. (ii) Contribution liabilities The contribution liabilities represents contributions received for risks that have not yet expired. Generally, the reserve is released over the term of the certificates. Prior to 1 April 2011, contribution liabilities are reported at the higher of the aggregate of the Unearned Contribution Reserves ("UCR") for all lines of business and the best estimate value of the Companys 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. Effective 1 April 2011, the PRAD level is increased to 75% confidence level calculated at the overall Company level. (a) Unearned Contribution Reserves ("UCR") The 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: Time apportionment method for all classes of general takaful business within Malaysia except Marine and Aviation cargo; 25% method for Marine and Aviation Cargo; Non-annual certificates are time apportioned over the period of the takaful certificates.

36

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.14 General takaful fund (cont'd.) (ii) Contribution liabilities (cont'd.) (b) Unexpired Risks Reserves ("URR") 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 75% level of confidence of the URR, the resulting Loss Ratio based on the IBNR plus PRAD at 75% level of confidence is applied to the corresponding UCR for each line of business. Liability adequacy test 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. (iii) Claim liabilities 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. Prior to 1 April 2011, claim liabilities are valued at the best estimate which include provision for claims reported, claims incurred but not enough reserved ("IBNER") and IBNR together with related claims handling costs and reduction for the expected value of salvage and other recoveries. PRAD is calculated at 70% confidence level calculated at the overall Company level were included in claim liabilities. 37

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.14 General takaful fund (cont'd.) (iii) Claim liabilities (cont'd.) Effective 1 April 2011, the PRAD level is increased to 75% confidence level calculated at the overall Company level. 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. 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 certificate expires, is discharged or is cancelled. (iv) Commission earned Commission earned net of 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. 2.15 Family takaful fund 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 Companys Shariah Committee. Unrealised income is deferred and receipts in advance are treated as liabilities on the statement of financial position. 38

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.15 Family takaful fund (cont'd.) (i) Contribution income 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. (ii) Provision for outstanding claims Claims and settlement costs that are incurred during the financial year are recognised when a claimable event occurs and/or the Company is notified. 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: (a) maturity or other certificate benefit payments due on specified dates are treated as claims payable on due dates. (b) 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. (iii) Creation / cancellation of units 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. (iv) Investments of the investment-linked funds All investments of the investment-linked funds are stated at closing bid prices or indicative market prices as at financial year end. Any increase or decrease in value of investments is taken into the investmentlinked funds statement of comprehensive income. 39

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.15 Family takaful fund (cont'd.) (v) Family takaful certificates liabilities Family takaful certificates liabilities are recognised when certificates are in-force and contributions are charged. 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. 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"). 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. Surplus arising from the difference between the value of the family fund and the liabilities, including retained surplus, will be distributed to the participants 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. 2.16 Shareholder's fund (i) Commission expenses/acquisition cost 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. 40

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.16 Shareholder's fund (cont'd.) (ii) Expense liabilities 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. 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 expense liabilities of shareholder's fund consists of expense liabilities of general takaful fund and family takaful fund which are computed by an Internal Actuary approved by BNM. (a) Expense liabilities of general takaful fund The expense liabilities 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. Unearned wakalah fee 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, 50% of the wakalah fee income is recognised in the financial year in which the certificates are issued. The remaining 50% of the wakalah fee income is transferred to the UWF reserves and is recognised in the following financial year.

41

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.16 Shareholder's fund (cont'd.) (a) Expense liabilities of general takaful fund (cont'd.) Unexpired expense reserve Prior to 1 April 2011, 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 PRAD of 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). Effective 1 April 2011, the PRAD level is increased to 75% confidence level calculated at the overall Company level. Liability adequacy test 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 expense deficiency. (b) Expenses liabilities of family takaful fund The expenses liabilities 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 is consistent with the method used to value takaful liabilities of the corresponding family takaful certificate under note 2.15(v). 2.17 Cash and cash equivalents 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. 2.18 Takaful certificates receivables 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. 42

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.18 Takaful certificates receivables (cont'd.) 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. 2.19 Balances with related companies Balances with related companies are stated at the amounts which are due and expected to be settled. 2.20 Taxation 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 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. 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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593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.21 Financial liabilities 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. (a) Financial liabilities at FVTPL Financial liabilities at FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as at FVTPL. 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. (b) Other financial liabilities The Company's other financial liabilities include trade payables and other payables. 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. 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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593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.22 Provisions for liabilities 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. 2.23 Employee benefits (i) Short-term benefits 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 nonaccumulating compensated absences such as sick leave are recognised when the absences occur. (ii) Defined contribution plan 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. 2.24 Foreign currencies 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. The principal exchange rate for every unit of United States Dollar ruling at financial year end used is RM3.068 (2011: RM3.026).

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593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.25 Other Revenue recognition (i) Profit and investment income Profit and investment income on Shariah compliant investments are recognised on an accrual basis using the effective yield of the asset. (ii) Dividend income Dividend income is recognised when the right to receive payment is established. (iii) Wakalah fees Wakalah fees are recognized as soon as the amount of contribution can be reliably measured in accordance with the principles of Shariah. (iv) Rental income Rental income receivable under tenancy agreements is recognised on a straightline basis over the term of the tenancy. 2.26 Zakat 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. Zakat is computed at 2.5% of the net assets of the Company. 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. 2.27 Changes in Accounting Policies and Effects Arising from Adoption of New and Revised FRSs and Issues Committee Interpretations ("IC Interpretations") The significant accounting policies adopted are consistent with those applied in the annual audited financial statements for the financial year ended 31 March 2011, except for the adoption of the following new/revised FRSs, amendments to MFRSs and Interpretations of the Issues Committee (''IC'') issued by the Malaysian Accounting Standards Board (''MASB''):

46

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.27 Changes in Accounting Policies and Effects Arising from Adoption of New and Revised FRSs and Issues Committee Interpretations ("IC Interpretations") (cont'd.) Standard/Interpretation Amendments to FRS 1 Limited Exemption from Comparative FRS 7 Disclosures for First-time Adopters and Additional Exemptions for First-time Adopters Amendments to FRS 2 Group Cash-settled Share-based Payment Transactions Amendments to FRS 5 Non-current Assets Held for Sale and Discontinued Operations Amendments to FRS 7 Improving Disclosures about Financial Instruments IC Interpretation 4 Determining whether an Arrangement contains a Lease IC Interpretation 18 Transfers of Assets from Customers IC Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments Amendments to IC Interpretation 14 Prepayments of a minimum Funding Requirement TR i -4 Shariah Compliant Sale Contracts Amendments to FRSs contained in the document entitled 'Improvements to FRSs (2010)' The adoption of the above FRSs, Amendments to FRS, IC Interpretations, Amendments to IC Interpretations and Technical Releases did not have any significant effect on the financial performance or position of the Company except for those discussed below: (a) Amendments to FRS 7 Improving Disclosures about Financial Instruments Disclosures on fair value and liquidity have been enhanced upon the adoption of this amendment. In particular, financial instruments measured at fair value are disclosed by class in a three-level fair value measurement hierarchy with specific disclosures related to transfers between levels in the hierarchy and detailed disclosures on level three of the fair value hierarchy. Certain disclosures on liquidity are also modified. The adoption of this amendment resulted in additional disclosures relating to fair value of financial instruments of the Company. It did not result in any financial impact to the Company. (b) Amendments to FRSs contained in the document entitled "Improvements to FRSs (2010)" The amendments mainly provide guidance, clarify wordings and remove inconsistencies in existing FRSs. The adoption of these amendments did not have any financial impact to the Company.

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593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.27 Changes in Accounting Policies and Effects Arising from Adoption of New and Revised FRSs and Issues Committee Interpretations ("IC Interpretations") (cont'd.) (c) Adoption of BNM Guidelines On 22 December 2010, BNM issued several new Guidelines which are mandatory for all takaful operators licensed under the Takaful Act 1984 and are effective for financial periods beginning on or after 1 July 2011. The guidelines are as follows: (i) Guidelines on financial reporting for takaful operators This Guideline primarily prescribes the minimum disclosure requirements for financial statements of takaful operators including the requirement to present statements of financial position, statements of comprehensive income and related explanatory notes by funds. In addition, the Guideline also requires that takaful operators ensure that the aggregated total assets and total liabilities presented in the Company's statement of financial position are net of Qard. The primary disclosure requirements of this Guideline had already been considered and effected since the previous financial year ended 31 March 2011. There are no significant impacts on the financial statements upon full adoption of this Guideline in the current period. (ii) Guidelines on valuation basis of liabilities of general takaful business This Guideline requires all takaful operators to measure its claim liabilities at a 75% level of sufficiency at the total fund level. In addition, it specifies that the contribution liabilities of a takaful operator should be the higher of the aggregate of its unearned contribution reserves ("UCR") or its unexpired risk reserves ("URR") and a PRAD at 75% confidence level, calculated at the total fund level. In line with the adoption of FRS 4, the prescriptions of this Guideline with respect to the PRAD at 75% confidence level had been adopted and complied with in the current financial year. The Guideline also dictates the measurement of the expense liabilities of the Company which is required to be measured at the higher of the aggregate of its provision for unearned wakalah fees ("UWF") or its unexpired expense reserves ("UER") and a PRAD at 75% confidence level, calculated at the total fund level. The prescriptions of this Guideline with respect to the determination of PRAD at 75% confidence level had been adopted and complied with in the current financial year.

48

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.27 Changes in Accounting Policies and Effects Arising from Adoption of New and Revised FRSs and Issues Committee Interpretations ("IC Interpretations") (cont'd.) (c) Adoption of BNM Guidelines (cont'd.) (iii) Guidelines on valuation basis of liabilities of family takaful business This Guideline stipulates the valuation bases for liabilities of family takaful business. Amongst its requirements is the need for the valuation of the family takaful contract liabilities based on the gross contribution valuation method. This Guideline will be effective for the Company for the next financial year. (d) Changes in Accounting Framework On 19 November 2011, the Malaysian Accounting Standards Board ("MASB") issued a new MASB approved accounting framework, the Malaysian Financial Reporting Standards ("MFRS Framework"). The Company will be required to prepare financial statements using the MFRS Framework in its first MFRS financial statements for the financial year ending 31 March 2013. In presenting its first MFRS financial statements, the Company may be required to restate the comparative financial statements to amounts reflecting the application of the MFRS Framework. The majority of the adjustments (if any) required on transition will be made, retrospectively, against opening retained profits. Nevertheless, the adoption of the MFRS Framework is not expected to have any significant impact on the financial statements of the Company. 2.28 Significant accounting estimates and judgments 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. (a) Critical judgements made in applying accounting policies 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. 49

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.28 Significant Accounting Estimates and Judgments (cont'd.) (a) Critical judgements made in applying accounting policies (cont'd.) (i) Classification between investment properties and property, plant and equipment The Company has developed certain criteria based on MFRS 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. (ii) Impairment of AFS financial assets 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. (iii) Impairment of takaful and retakaful certificates receivables 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. 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.

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593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.28 Significant Accounting Estimates and Judgments (cont'd.) (b) Key sources of estimation uncertainty 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. (i) Depreciation and amortisation Depreciation and amortisation is based on managements 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. (ii) Uncertainty in accounting estimates for general takaful certificate liabilities The principal uncertainty in the general takaful certificate liabilities arises from the technical provisions which include the contribution liabilities and claim 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, claim 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 claim liabilities.

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593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.28 Significant Accounting Estimates and Judgments (cont'd.) (b) Key sources of estimation uncertainty (cont'd.) (ii) Uncertainty in accounting estimates for general takaful certificate liabilities (cont'd.) The estimates of contribution liabilities and claim 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. 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. Bank Negara Malaysia issued new Guidelines on Valuation Basis for Liabilities of General Takaful Business which shall take effect from financial year beginning on and after 1 July 2011. The company had adopted the guidelines earlier in its financial statement for the year ended 31 March 2012. 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 operators 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. Prior to 1 April 2011, the Company has adopted a level of provision of risk margin for adverse deviation ("PRAD") calculated at 70% confidence level. Effective 1 April 2011, the PRAD level is increased to 75% confidence level calculated at the overall Company level as required by the guidelines.

52

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.28 Significant Accounting Estimates and Judgments (cont'd.) (b) Key sources of estimation uncertainty (cont'd.) (iii) Uncertainty in accounting estimates for family takaful certificate liabilities 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 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. 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. 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. Bank Negara Malaysia issued new Guidelines on Valuation Basis for Liabilities of Family Takaful Business which shall take effect from financial year 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 operators 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 2012.

53

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.28 Significant Accounting Estimates and Judgments (cont'd.) (b) Key sources of estimation uncertainty (cont'd.) (iv) Uncertainty in accounting estimates for shareholder's fund expense liabilities The principal uncertainty in the shareholder's fund takaful certificate liabilities arises from the technical provisions which includes the expense liabilities of general and family takaful fund as explained in Note 2.16 (ii). (a) Expenses liabilities of general takaful fund The estimation bases for unearned wakalah fees for general takaful certificate liabilities is explained in Note 2.16 (ii) (a) of the Summary of Significant Accounting Policies. The best estimate for unexpired expense reserve ("UER") 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. Prior to 1 April 2011, the UER is calculated at 70% confidence level. Effective 1 April 2011, the PRAD level is increased to 75% confidence level calculated at the overall Company level as required by the Guidelines on Valuation Basis for Liabilities of General Takaful Business. (b) Expenses liabilities of family takaful fund 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. 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.

54

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.28 Significant Accounting Estimates and Judgments (cont'd.) (b) Key sources of estimation uncertainty (cont'd.) (iv) Uncertainty in accounting estimates for shareholder's fund expense liabilities (cont'd.) (b) Expenses liabilities of family takaful fund (cont'd.) 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. (v) Pipeline contributions The general takaful fund has recognised pipeline contribution amounting to approximately RM 7,141,015 (2011: RM 6,093,143) 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. (vi) Impairment of takaful receivables 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.

55

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 2. Significant accounting policies (cont'd.) 2.28 Significant Accounting Estimates and Judgments (cont'd.) (b) Key sources of estimation uncertainty (cont'd.) (vii) Deferred tax assets 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 managements 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 amount of deferred tax assets recognised at 31 March 2012 was approximately RM5,842,000 (2011: RM5,170,000) for the shareholder's fund and RM1,370,000 (2011: RM1,571,000) for the general takaful fund; also the amount of deferred tax liabilities for the family takaful fund is approximately RM2,355,000 (2011: RM2,135,000) as disclosed in Note 21.

56

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 3. Operating revenue 2012 RM RM '000 '000 Shareholder's fund Wakalah fees: General takaful fund Family takaful fund 2011 RM '000

48,398 135,628 184,026 10,034 194,060

56,157 150,378 206,535 5,375 211,910

Investment income (Note 5)

General takaful fund Gross contribution Investment income (Note 5) 193,734 10,782 204,516 224,196 8,560 232,756

Family takaful fund Gross contribution Investment income (Note 5) Investment income of Investment-linked fund (Note 31(a)) 465,617 41,198 707 507,522 494,213 31,121 516 525,850

4.

Net earned contributions 2012 RM RM '000 '000 2011 RM '000

General takaful fund (a) Gross earned contribution Gross contribution Decrease/(increase) in unearned contribution reserves

193,734 15,580 209,314

224,196 (13,670) 210,526

(b) Earned contribution ceded to retakaful operators Contribution ceded to retakaful operators Decrease/(increase) in unearned contribution reserves (40,130) 16,679 (23,451) 185,863 (22,398) (10,151) (32,549) 177,977

Net Earned Contribution

57

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 5. Investment income Shareholder's fund 31 March 2012 Financial assets at FVTPL: Dividend income - quoted shares in Malaysia HTM investments: Profit income AFS financial assets: Profit income Dividend income - quoted shares in Malaysia - unit trusts in Malaysia Loans and receivables: Profit income Dividend income - institutional trusts Rental income from investment properties Net accretion of discounts/(amortisation of premiums) on investments Investment expenses General takaful fund Family takaful fund

20 1,617 3,791 328 3,931 334 13 10,034 Shareholder's fund RM '000

32 2,835 4,539 647 244 2,605 (120) 10,782 General takaful fund RM '000

94 9,247 14,312 1,536 366 11,560 941 4,631 541 (2,030) 41,198 Family takaful fund RM '000

31 March 2011 Financial assets at FVTPL: Dividend income - quoted shares in Malaysia HTM investments: Profit income AFS financial assets: Profit income Dividend income - quoted shares in Malaysia - unit trusts in Malaysia Loans and receivables: Profit income Dividend income - institutional trusts Rental income from investment properties Net accretion of discounts on investments Investment expenses

16 1,082 1,494 340 1,938 318 187 5,375 58

21 1,928 2,559 853 3,183 16 8,560

74 7,996 10,503 1,455 263 6,958 634 3,866 1,094 (1,722) 31,121

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 6. Realised gains/(losses) Shareholder's fund RM '000 General takaful fund RM '000 Family takaful fund RM '000

31 March 2012 Property, plant and equipment Realised gains Financial assets at FVTPL: Realised gains: Quoted shares in Malaysia: Shariah approved equities AFS financial assets: Realised gains/(losses): Unquoted Islamic private debt securities: Unsecured Quoted shares in Malaysia: Shariah approved equities Shariah approved unit trust funds

69

82

103

222

382 1,021 1,403 1,554 Shareholder's fund RM '000

823 1,796 (142) 2,477 2,580 General takaful fund RM '000

4,393 4,722 (213) 8,902 9,124 Family takaful fund RM '000

31 March 2011 Property, plant and equipment Realised losses Financial assets at FVTPL: Realised gains: Quoted shares in Malaysia: Shariah approved equities AFS financial assets: Realised gains: Unquoted Islamic private debt securities: Unsecured Quoted shares in Malaysia: Shariah approved equities Shariah approved unit trust funds

(834)

233

290

617

1,065 1,065 464 59

2,416 2,416 2,706

3,044 3,481 931 7,456 8,073

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 7. Fair value gains/(losses) Shareholder's fund RM '000 (115) (581) 266 (430) General takaful fund RM '000 (133) 1,537 1,404 Family takaful fund RM '000 (182) (107) (978) (1,267)

31 March 2012

Investment properties Fair value losses for financial assets at FVTPL Allowance for impairment of AFS financial assets Writeback for impairment of HTM financial assets Writeback/(allowance) for impairment of takaful receivables

31 March 2011 Fair value loss for investment properties Fair value gains/(losses) for financial assets at FVTPL Allowance for impairment of AFS financial assets Writeback/(allowance) for impairment of takaful receivables 14 (323) (309) (19) 3,054 3,035 (7,490) 61 (636) (8,065)

8.

Fee and commission income 2012 RM RM '000 '000 Shareholder's fund Wakalah fees: General takaful fund Family takaful fund 2011 RM '000

48,398 135,628 184,026

56,157 150,378 206,535

Surplus administrative charges : General takaful fund Family takaful fund

6,088 4,575 10,663 4,313 199,002

4,378 4,378 2,376 213,289

Investment performance fee from family takaful fund

Commission expense Commissions paid to agents 60 (101,481) (115,676)

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 8. Fee and commission income (cont'd.) 2012 RM RM '000 '000 General takaful fund Fee and commission income Retakaful Commission Income Fee expense Wakalah fees Surplus administrative charges Family takaful fund Fee and commission income Retakaful Commission Income Fee expense Wakalah fees Surplus administrative charges Investment performance fee (135,628) (4,575) (4,313) (144,516) (150,378) (4,378) (2,376) (157,132) 70 21 (48,398) (6,088) (54,486) (56,157) (56,157) 7,278 3,938 2011 RM '000

9.

Other operating income/(expenses) 2012 RM RM '000 '000 Shareholder's fund Miscellaneous income General takaful fund Miscellaneous (expenses)/income Bank charges Stamp duty (714) (1,286) (3) (2,003) 50 (1,818) (2) (1,770) 1,764 1,869 2011 RM '000

Family takaful fund Miscellaneous expenses Bank charges Participants' medical fees Stamp duty (1,688) (1,322) (318) (339) (3,667) 61 (449) (1,461) (461) (493) (2,864)

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 10. Net benefits 2012 RM RM '000 '000 Family takaful fund Gross benefits paid : Death Surrender Medical Others 2011 RM '000

(40,154) (44,086) (43,448) (4,000) (131,688)

(39,237) (41,367) (32,821) (4,442) (117,867)

11. Management expenses 2012 RM '000 Shareholder's fund Staff costs: Salaries, bonus, and other related costs Directors' remuneration Pension costs - Employees Provident Fund ("EPF") Social security costs Retirement benefits Short-term accumulating compensated absences Auditors remuneration - statutory audit - other services Office rental Amortisation of intangible assets Depreciation of property, plant and equipment Management fees paid to holding company Professional and legal fees Share of acquisition costs on quota share retakaful Marketing and promotional costs Electronic data processing costs Agency expenses Contribution to Perbadanan Insurans Deposit Malaysia ("PIDM") Other expenses 2011 RM '000

38,198 1,915 4,845 250 105 (287) 45,026 165 35 5,238 1,112 3,647 5,512 1,565 2,877 8,175 4,104 5,539 992 10,987 94,974

35,869 2,249 6,259 246 115 174 44,912 120 29 5,295 1,169 4,101 3,914 1,149 4,367 6,150 3,420 5,962 1,282 9,636 91,506

62

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 12. Directors' remuneration 2012 RM '000 (a) Non-executive directors' remuneration: Fees Allowances and other emoluments Executive director's remuneration: Salary and bonus Pension costs - EPF Benefits-in-kind Total CEO's remuneration excluding benefits-in-kind 534 139 673 1,092 150 97 1,339 1,242 2011 RM '000 672 173 845 1,200 204 96 1,500 1,404

(b)

The number of directors of the Company whose total remuneration during the financial year fell within the following bands is analysed below: Number of directors 2012 2011 Executive director: RM1,300,001 - RM1,500,000 Non-executive directors: RM100,001 - RM500,000 RM50,001 - RM100,000 Below RM50,000 1 1

5 1 1

6 2 -

Tuan Haji Megat Dziauddin bin Megat Mahmud was appointed to the Board after the financial year end and is not included above.

13. Change in expense liability 2012 RM '000 Shareholder's fund Expense liability of general takaful fund Increase in unearned wakalah fees reserve Increase in provision for expense deficiency Expense liability of family takaful fund Increase/(decrease) in unexpired expense reserve 2011 RM '000

1,297 108 1,405 599 2,004

236 1,630 1,866 (2,471) (605)

63

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 14. Taxation 2012 RM RM '000 '000 Shareholder's fund Current year's provision Under/(over)provision of tax expense in prior years Deferred tax relating to origination and reversal of temporary differences (Note 21) Tax expense for the year 5,488 107 (1,039) 4,556 3,944 (347) 1,173 4,770 2011 RM '000

Domestic income tax for shareholder's fund is calculated at the Malaysian statutory tax rate of 25% (2011 : 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: 2012 RM RM '000 '000 Profit before taxation Taxation at Malaysian statutory tax rate Income not subject to tax Expenses not deductible for tax purposes (Over)/underprovision of deferred tax in prior year Under/(over)provision of income tax expense in prior years Tax expense for the year 13,465 3,366 (81) 1,495 (331) 107 4,556 2011 RM '000 14,111 3,527 (73) 1,593 70 (347) 4,770

64

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 14. Taxation (cont'd.) 2012 RM RM '000 '000 General takaful fund Current year's provision (Over)/underprovision of tax expense in prior years Deferred tax relating to origination and reversal of temporary differences (Note 21) Tax expense for the year 2,477 (417) 210 2,270 474 146 807 1,427 2011 RM '000

Domestic income tax for general takaful fund is calculated at the Malaysian statutory tax rate of 25% (2011 : 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 general takaful fund is as follows: 2012 RM RM '000 '000 Surplus before taxation Taxation at Malaysian statutory tax rate Income not subject to tax Expenses not deductible for tax purposes Utilisation of capital allowances allocated from the Shareholder's fund (Over)/underprovision of deferred tax in prior year (Over)/underprovision of income tax expense in prior years Tax expense for the year 12,943 3,236 (223) (319) (7) (417) 2,270 2011 RM '000 5,872 1,468 (182) 216 (279) 58 146 1,427

65

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 14. Taxation (cont'd.) 2012 RM RM '000 '000 Family takaful fund Current year's provision Underprovision of tax expense in prior years Deferred tax relating to origination and reversal of temporary differences (Note 21) Tax expense for the year 4,146 (108) 4,038 2,830 497 (344) 2,983 2011 RM '000

Family takaful business is taxed at the preferential tax rate of 8% (2011 : 8%) of taxable investment income for the year. 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: 2012 RM RM '000 '000 Surplus before taxation Taxation at preferential tax rate of 8% Income not subject to tax Expenses not deductible for tax purposes Utilisation of capital allowances allocated from the Shareholder's fund Underprovision of deferred tax in prior years Underprovision of tax expense in prior years Tax expense for the year 252,616 20,209 (16,075) 40 (136) 4,038 2011 RM '000 241,285 19,303 (16,755) (193) 131 497 2,983

66

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 15. Property, plant and equipment Furniture, 2012 Fittings and Computer Office Shareholder's fund equipment Equipment RM '000 RM '000 Cost At 1 April 2011 Additions Disposals Reclassifications Adjustments At 31 March 2012 5,823 458 (3) 6,278 18,429 1,964 120 (47) 20,466 Work in Progress RM '000

Motor Vehicles RM '000

Total RM '000

910 (345) 565

120 398 (120) 398

25,282 2,820 (348) (47) 27,707

Accumulated Depreciation At 1 April 2011 Charge for the year Disposals At 31 March 2012 Net Book Value At 31 March 2012 2011 Cost At 1 April 2010 Additions Disposals Reclassifications At 31 March 2011 4,955 340 (514) 1,042 5,823 18,461 4,710 (3,700) (1,042) 18,429 430 480 910 120 120 23,966 5,530 (4,214) 25,282 836 11,674 367 398 13,275 4,606 837 (1) 5,442 6,084 2,708 8,792 355 102 (259) 198 11,045 3,647 (260) 14,432

Accumulated Depreciation At 1 April 2010 Charge for the year Disposals Reclassifications At 31 March 2011 Net Book Value At 31 March 2011 1,217 12,345 555 120 14,237 4,224 840 (512) 54 4,606 5,810 3,175 (2,847) (54) 6,084 269 86 355 10,303 4,101 (3,359) 11,045

67

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 16. Intangible assets Software Development Cost in Progress RM '000 Shareholder's fund Cost At 1 April 2011 Additions Reclassifications At 31 March 2012 Accumulated Amortisation At 1 April 2011 Charge for the year At 31 March 2012 Net Carrying Amount At 31 March 2012 At 31 March 2011 3,438 1,250 2,663 3,333 6,101 4,583 7,587 1,112 8,699 7,587 1,112 8,699 1,250 2,195 (7) 3,438 10,920 435 7 11,362 12,170 2,630 14,800

Computer Software and Licenses RM '000

Total RM '000

Deferred The components component tax assets and and movement movements liabilities are of of deferred offset deferred when tax liabilities liability there is during a during legally the the financial balance sheet year Amortisation date are as is

17. Investment properties 2012 RM '000 Family takaful fund At fair value: At beginning of year Additions Fair value adjustments At end of year 2011 RM '000

103,518 310 103,828

110,000 1,008 (7,490) 103,518

These properties are carried at fair value at 31 March 2012 in accordance with the accounting policy disclosed in Note 2.3.

68

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 18. Financial instruments Shareholder's fund RM '000 Unquoted Islamic private debt securities: Government guaranteed Unsecured Government investment issues Quoted shares in Malaysia: Shariah approved equities Warrants Shariah approved unit trust funds Golf club memberships Islamic investment accounts with licensed:(i) Islamic banks Investment banks Development bank Building society Islamic repo placements Institutional trust fund Units held in investment-linked fund Secured staff loans: Receivable within 12 months Receivable after 12 months Qard to general takaful fund(ii) Due from: General takaful fund Family takaful fund Investment-linked fund Amount due from holding company Income due and accrued Other receivables, deposits and prepayments 19,023 104,291 20,030 4,918 15 178 76,625 10,412 36,099 5,831 2,000 6,911 10,000 1,183 2,429 7,806 13,413 405 1,873 5,751 329,193 69 31 March 2012 31 March 2011 General Family Shareholder's General Family takaful fund takaful fund fund takaful fund takaful fund RM '000 RM '000 RM '000 RM '000 RM '000 18,322 102,562 48,990 5,804 20 7,968 36,835 2,384 25,874 963 2,324 2,038 254,084 93,587 346,960 185,970 44,142 67 11,952 246,456 27,631 91,451 6,649 19,493 1,033 1,212 8,190 52 1,084,845 15,026 57,140 24,041 5,650 15 178 13,755 13,472 8,269 12,668 6,592 10,000 1,289 2,723 12,043 2,739 29,109 1,022 5,402 221,133 14,324 92,609 50,940 9,742 15 5,888 32,249 18,577 5,814 2,160 1,649 233,967 45,209 282,965 163,241 17,805 15 8,585 90,006 1,507 59,356 113,967 18,592 12,971 852 199 5,247 445 820,962

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 18. Financial instruments (cont'd.) (i) The Islamic investment accounts of general takaful fund of RM 50,826,000 on 31 March 2011 above has been off-set against qard of RM 12,043,000 in arriving at the total general takaful fund assets and liabilities and participants' fund of RM 338,155,000 on the Company's statement of financial position at page 14.

(ii) 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 Company's financial instruments are summarised by categories as follows: 31 March 2012 31 March 2011 Shareholder's General Family Shareholder's General Family fund takaful fund takaful fund fund takaful fund takaful fund RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 Financial assets at FVTPL (Note 18(a)) HTM investments (Note 18(b)) AFS financial assets (Note 18(c)) Loans and receivables (Note 18(d)) (a) Financial assets at FVTPL At fair value: Quoted shares in Malaysia: Shariah approved equities Warrants 979 9 988 1,040 9 1,049 2,346 9 2,355 697 15 712 1,090 15 1,105 1,817 15 1,832 988 41,327 106,140 180,738 329,193 1,049 70,311 112,306 70,418 254,084 2,355 239,257 441,066 402,167 1,084,845 712 40,450 60,888 119,083 221,133 1,105 67,268 105,145 60,449 233,967 1,832 212,387 303,601 303,142 820,962

An analysis of the different fair value measurement bases used in the determination of the fair value of financial assets at FVTPL are further disclosed in Note

70

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 18. Financial instruments (cont'd.) 31 March 2012 31 March 2011 Shareholder's General Family Shareholder's General Family fund takaful fund takaful fund fund takaful fund takaful fund RM '000 RM '000 RM '000 RM '000 RM '000 RM '000

(b) HTM investments At amortised cost: Unquoted Islamic private debt securities: Government guaranteed Unsecured Government investment issues

19,023 2,274 20,030 41,327

18,322 2,999 48,990 70,311

36,249 17,038 185,970 239,257

15,026 1,383 24,041 40,450

14,324 2,004 50,940 67,268

24,103 25,043 163,241 212,387

At fair value: Unquoted Islamic private debt securities: Government guaranteed Unsecured Government investment issues

19,356 2,428 20,397 42,181

18,643 3,022 50,442 72,107

36,803 17,489 189,001 243,293

15,087 1,495 24,342 40,924

14,383 2,036 51,521 67,940

24,164 25,542 164,112 213,818

An analysis of the different fair value measurement bases used in the determination of the fair value of HTM investments are further disclosed in Note 18(e) of the financial statements.

71

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 18. Financial instruments (cont'd.) (c) AFS financial assets 31 March 2012 31 March 2011 Shareholder's General Family Shareholder's General Family fund takaful fund takaful fund fund takaful fund takaful fund RM '000 RM '000 RM '000 RM '000 RM '000 RM '000

At fair value: Unquoted Islamic private debt securities: Government guaranteed Unsecured Quoted shares in Malaysia: Shariah approved equities Warrants Shariah approved unit trust funds Golf club memberships

102,017 3,939 6 178 106,140

99,563 4,764 11 7,968 112,306

57,338 329,922 41,796 58 11,952 441,066

55,757 4,953 178 60,888

90,605 8,652 5,888 105,145

21,106 257,922 15,988 8,585 303,601

An analysis of the different fair value measurement bases used in the determination of the fair value of AFS financial assets are further disclosed in Note 18(e) of the financial statements.

72

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 18. Financial instruments (cont'd.) (d) Loans and receivables At amortised cost/fair value Islamic investment accounts with licensed: Islamic banks Investment banks Development bank Building society Islamic repo placements Institutional trust fund Units held in investment-linked fund Secured staff loans: Receivable within 12 months Receivable after 12 months Qard to general takaful fund Due from: General takaful fund Family takaful fund Investment-linked fund Amount due from holding company Income due and accrued Other receivables, deposits and prepayments 31 March 2012 31 March 2011 Shareholder's General Family Shareholder's General Family fund takaful fund takaful fund fund takaful fund takaful fund RM '000 RM '000 RM '000 RM '000 RM '000 RM '000 76,625 10,412 36,099 5,831 2,000 6,911 10,000 1,183 2,429 7,806 13,413 405 1,873 5,751 180,738 36,835 2,384 25,874 963 2,324 2,038 70,418 246,456 27,631 91,451 6,649 19,493 1,033 1,212 8,190 52 402,167 13,755 13,472 8,269 12,668 6,592 10,000 1,289 2,723 12,043 2,739 29,109 1,022 5,402 119,083 32,249 18,577 5,814 2,160 1,649 60,449 90,006 1,507 59,356 113,967 18,592 12,971 852 199 5,247 445 303,142

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.

73

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 18. Financial instruments (cont'd.) (e) Fair value disclosures based on 3-level hierarchy The following tables show financial assets recorded at fair value analysed by the different bases of fair values as disclosed in Note 2.7(iv) of the financial statements: Valuation technique using: Level 1 Level 2 Level 3 Using Quoted Using significant market observable unobservable prices inputs inputs RM '000 RM '000 RM '000

Shareholder's fund 2012 Financial instruments: Financial assets at FVTPL: Quoted shares in Malaysia: Shariah approved equities Warrants HTM investments: Unquoted Islamic private debt securities: Government guaranteed Unsecured Government investment issues AFS financial assets Unquoted Islamic private debt securities: Unsecured Quoted shares in Malaysia: Shariah approved equities Warrants Golf club memberships

Total RM '000

979 9

979 9

19,356 2,428 20,397

19,356 2,428 20,397

3,939 6 4,933

102,017 144,198

178 178

102,017 3,939 6 178 149,309

74

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 18. Financial instruments (cont'd.) (e) Fair value disclosures based on 3-level hierarchy (cont'd.) General takaful fund 2012 Financial instruments: Financial assets at FVTPL: Quoted shares in Malaysia: Shariah approved equities Warrants HTM investments: Unquoted Islamic private debt securities: Government guaranteed Unsecured Government investment issues AFS financial assets Unquoted Islamic private debt securities: Unsecured Quoted shares in Malaysia: Shariah approved equities Warrants Shariah approved unit trust funds Valuation technique using: Level 1 Level 2 Level 3 Using Quoted Using significant market observable unobservable prices inputs inputs RM '000 RM '000 RM '000

Total RM '000

1,040 9

1,040 9

18,643 3,022 50,442

18,643 3,022 50,442

4,764 11 7,968 13,792

99,563 171,670

99,563 4,764 11 7,968 185,462

75

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 18. Financial instruments (cont'd.) (e) Fair value disclosures based on 3-level hierarchy (cont'd.) Family takaful fund 2012 Financial instruments: Financial assets at FVTPL: Quoted shares in Malaysia: Shariah approved equities Warrants HTM investments: Unquoted Islamic private debt securities: Government guaranteed Unsecured Government investment issues AFS financial assets Unquoted Islamic private debt securities: Government guaranteed Unsecured Quoted shares in Malaysia: Shariah approved equities Warrants Shariah approved unit trust funds Valuation technique using: Level 1 Level 2 Level 3 Using Quoted Using significant market observable unobservable prices inputs inputs RM '000 RM '000 RM '000

Total RM '000

2,346 9

2,346 9

36,803 17,489 189,001

36,803 17,489 189,001

41,796 58 11,952 56,161

57,338 329,922 630,553

57,338 329,922 41,796 58 11,952 686,714

76

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 19. Takaful certificates receivables 2012 RM '000 General takaful fund Contributions receivable Due from agents, retakaful operators and brokers Allowance for impairment 26,860 5,121 31,981 (6,518) 25,463 33,525 7,328 40,853 (8,055) 32,798 2011 RM '000

Family takaful fund Contributions receivable Allowance for impairment 132,242 (1,860) 130,382 84,788 (882) 83,906

20. Due from/(to) related companies The amounts due from/(to) related companies are non-trade in nature, unsecured, not subject to any profit elements and repayable upon demand. 2012 RM '000 2011 RM '000

Shareholder's Fund Due to: Holding company Fellow subsidiaries

(345) (69) (414)

(22) (22)

21. Deferred tax assets/(liabilities) 2012 RM '000 Shareholder's fund At beginning of year Recognised in AFS reserve Recognised in statement of comprehensive income (Note 14) At end of year General takaful fund At beginning of year Recognised in AFS reserve Recognised in statement of comprehensive income (Note 14) At end of year 77 1,571 9 (210) 1,370 2,342 36 (807) 1,571 5,170 (367) 1,039 5,842 6,241 102 (1,173) 5,170 2011 RM '000

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 21. Deferred tax assets/(liabilities) (cont'd.) Family takaful fund At beginning of year Recognised in AFS reserve Recognised in statement of comprehensive income (Note 14) At end of year 2012 RM '000 (2,135) (328) 108 (2,355) 2011 RM '000 (2,304) (175) 344 (2,135)

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The net deferred tax assets/(liabilities) shown in the statement of financial position has been determined after appropriate offsetting as follows: 2012 RM '000 5,842 5,842 2011 RM '000 5,477 (307) 5,170

Shareholder's fund Deferred tax assets Deferred tax liabilities General takaful fund Deferred tax assets Deferred tax liabilities Family takaful fund Deferred tax assets Deferred tax liabilities

1,669 (299) 1,370

1,571 1,571

(2,355) (2,355)

(2,135) (2,135)

The components and movements of deferred tax assets/(liabilities) during the financial year are as follows: Shareholder's fund Financial Assets RM '000 2012 At 1 April 2011 Recognised in AFS reserve Recognised in statement of comprehensive income At 31 March 2012 (307) (367) 885 211 5,477 154 5,631 5,170 (367) 1,039 5,842 Receivables RM '000 Total RM '000

78

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 21. Deferred tax assets/(liabilities) (cont'd.) Shareholder's fund (cont'd.) 2011 At 1 April 2010 Recognised in AFS reserve Recognised in statement of comprehensive income At 31 March 2011 General takaful fund 2012 At 1 April 2011 Recognised in AFS reserve Recognised in statement of comprehensive income At 31 March 2012 2011 At 1 April 2010 Recognised in AFS reserve Recognised in statement of comprehensive income At 31 March 2011 Family takaful fund 2012 At 1 April 2011 Recognised in AFS reserve Recognised in statement of comprehensive income At 31 March 2012 2011 At 1 April 2010 Recognised in AFS reserve Recognised in statement of comprehensive income At 31 March 2011 79 (501) (175) (255) (931) (1,803) 599 (1,204) (2,304) (175) 344 (2,135) 395 36 5 436 Financial Assets RM '000 (931) (328) 108 (1,151) 1,947 (812) 1,135 Investment Properties RM '000 (1,204) (1,204) 2,342 36 (807) 1,571 Financial Assets RM '000 (292) 102 (117) (307) Financial Assets RM '000 436 9 (744) (299)

Receivables RM '000 6,533 (1,056) 5,477

Total RM '000 6,241 102 (1,173) 5,170

Receivables RM '000 1,135 534 1,669

Total RM '000 1,571 9 (210) 1,370

Total RM '000 (2,135) (328) 108 (2,355)

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 22. Takaful certificates liabilities Gross RM '000 2012 Retakaful RM '000 Net RM '000 Gross RM '000 2011 Retakaful RM '000 Net RM '000

General takaful fund Provision for claims reported by certificate holders Provision for incurred but not reported claims ("IBNR") Provision for risk margin for adverse deviations ("PRAD") Claim Liabilities (i) Contribution liabilities (ii)

126,489 72,573 11,607 210,669 83,041 293,710

(14,627) (7,945) (964) (23,536) (18,620) (42,156) 2012 Retakaful RM '000

111,862 64,628 10,643 187,133 64,421 251,554

116,482 66,597 10,033 193,112 98,621 291,733

(23,418) (7,789) (1,203) (32,410) (1,941) (34,351) 2011 Retakaful RM '000

93,064 58,808 8,830 160,702 96,680 257,382

Family takaful fund

(iii)

Gross RM '000

Net RM '000

Gross RM '000

Net RM '000

Provision for claims reported by certificate holders Participants' Account ("PA") Participants' Special Account ("PSA") Available-for-sale reserves Unallocated surplus

36,440 1,122,399 62,494 11,822 118,872 1,352,027

(10,840) (90,988) (13,856) (115,684)

25,600 1,031,411 48,638 11,822 118,872 1,236,343

33,668 916,867 52,077 7,962 94,387 1,104,961

(24,395) (91,770) (21,218) (137,383)

9,273 825,097 30,859 7,962 94,387 967,578

80

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 22. 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: 2012 Retakaful RM '000 (32,410) (12,465) 2011 Retakaful RM '000 (17,577) (23,637)

(i)

Claim liabilities of general takaful fund At beginning of year Claims incurred in the current accident year Adjustment to claims incurred in prior accident years due to changes in assumptions: Increase/(decrease) in PRAD Decrease in Expected Ultimate Loss Ratio Movements in claims incurred in prior accident years Claims paid during the year At end of year

Gross RM '000 193,112 170,127

Net RM '000 160,702 157,662

Gross RM '000 143,303 172,075

Net RM '000 125,726 148,438

1,576 (38,690) 6,793 (122,249) 210,669

240 3,837 7,057 10,205 (23,536)

1,816 (34,853) 13,850 (112,044) 187,133

(3,655) (17,330) 3,155 (104,436) 193,112

250 741 818 6,995 (32,410)

(3,405) (16,589) 3,973 (97,441) 160,702

(ii) Contribution liabilities of general takaful fund At beginning of year Contribution written in the year Contribution earned during the year At end of year 98,621 193,734 (209,314) 83,041 (1,941) (40,130) 23,451 (18,620) 96,680 153,604 (185,863) 64,421 84,951 224,196 (210,526) 98,621 (12,092) (22,398) 32,549 (1,941) 72,859 201,798 (177,977) 96,680

81

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 22. Takaful certificates liabilities (cont'd.) Gross RM '000 1,104,961 205,532 (149,936) 465,617 (131,688) 2,772 (144,516) 13,090 (328) (8,902) (4,575) 1,352,027 2012 Retakaful RM '000 (137,383) 782 58,436 (48,302) (2,772) 13,555 (115,684) Net RM '000 967,578 206,314 (91,500) 417,315 (134,460) 16,327 (144,516) 13,090 (328) (8,902) (4,575) 1,236,343 Gross RM '000 846,087 233,121 (193,889) 494,213 (117,867) 3,655 (157,132) (698) 9,480 (175) (7,456) (4,378) 1,104,961 2011 Retakaful RM '000 (105,811) (31,755) 64,781 (44,403) (3,655) (16,540) (137,383) Net RM '000 740,276 201,366 (129,108) 449,810 (121,522) (12,885) (157,132) (698) 9,480 (175) (7,456) (4,378) 967,578

(iii) Family takaful fund At beginning of year Increase in PA reserve Increase/(decrease) in participants' risk fund Contributions received Liabilities paid for death,maturities, surrenders, benefits and claims Benefits and claims experience variation Fees deducted Transfer to special fund Available-for-sale net gains on fair value changes Available-for-sale deferred tax effect on fair value changes Available-for-sale realised gain transferred to statement of comprehensive income Transfer to shareholder's fund At end of year

Included in the family takaful fund's takaful certificate liabilities is an amount of RM11,822,000 (2011 : RM7,962,000) 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 RM11,822,000 (2011 : RM7,962,000). 82

596075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 23. Expense liabilities Shareholder's fund Expense liabilities for general takaful fund: Unearned wakalah fees reserve Provision for expense deficiency Expense liabilities for family takaful fund : Unexpired expense reserve ("UER") 2012 RM '000 5,548 3,681 9,229 7,921 17,150 The movement of expense liabilities are presented as follows: General takaful fund RM '000 7,824 48,398 (47,101) 108 9,229 Family takaful fund RM '000 7,322 599 7,921 2011 RM '000 4,251 3,573 7,824 7,322 15,146

31 March 2012 At beginning of the year - Wakalah fee received during the year (Note 8) - Wakalah fee earned during the year - Movement in provision for expense deficiency - Movement in provision for UER At end of the year 31 March 2011 At beginning of the year - Wakalah fee received during the year (Note 8) - Wakalah fee earned during the year - Movement in provision for expense deficiency - Movement in provision for UER At end of the year 24. Takaful certificates payables General takaful fund Due to agents, retakaful operators and brokers Family takaful fund Due to agents, retakaful operators and brokers 83

Total RM '000 15,146 48,398 (47,101) 108 599 17,150

5,957 56,157 (55,920) 1,630 7,824

9,793 (2,471) 7,322

15,750 56,157 (55,920) 1,630 (2,471) 15,146

2012 RM '000 (13,827)

2011 RM '000 (7,932)

(69,774)

(34,406)

596075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 25. Other payables Shareholder's fund Outstanding commissions Deferred wakalah fee Provisions Other accruals and payables 2012 RM RM'000 '000 6,888 2,006 10,749 2,564 22,207 2011 RM '000 15,457 2,720 10,522 2,770 31,469

General takaful fund Advance contributions Amount due to shareholders' fund* Amount due to family takaful fund* Other accruals and payables 2,593 7,806 15,676 26,075 4,871 2,739 12,971 18,896 39,477

Family takaful fund Deposit contributions Amount due to shareholders' fund* Amount due to general takaful fund* Other accruals and payables 33,452 13,413 963 11,352 59,180 30,572 29,109 7,838 67,519

The amounts due to shareholder's fund, general takaful fund, family takaful fund and investment-linked fund are non-trade in nature, unsecured, not subject to any profit elements and has no fixed terms of repayment.

26. Share capital Number of ordinary shares of RM1.00 each 2012 2011 '000 '000 Authorised: Issued and fully paid: At beginning of year Issued during the year At end of year 500,000 195,000 100,000 295,000 500,000 195,000 195,000 Amount 2012 2011 RM '000 RM '000 500,000 195,000 100,000 295,000 500,000 195,000 195,000

During the year, the Company increased its issued and paid up capital from RM 195,000,000 to RM 295,000,000 by way of issuance of 100,000,000 ordinary shares of RM1 each at par for cash to the holding company on 7 April 2011 for additional working capital purposes. The new ordinary shares issued during the financial year rank pari passu in all respects with the existing ordinary shares of the Company. 84

596075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 27. General takaful fund Accumulated surplus/(deficit) At beginning of year Underwriting surplus transferred from general takaful statement of comprehensive income Hibah (profit) paid to participants during the year At end of year Qard * At beginning of the year Decrease in Qard At end of the year Available-for-sale reserves At beginning of year Net gains on fair value changes Deferred tax on fair value changes Realised gain transferred to statement of comprehensive income At end of year General takaful fund at end of the year Accumulated surplus/(deficit) Qard AFS reserves 1,338 2,442 9 (2,477) 1,312 7,784 1,312 9,096 1,482 2,236 36 (2,416) 1,338 (2,889) 12,043 1,338 10,492 2012 RM '000 (2,889) 10,673 7,784 2011 RM '000 (7,333) 4,445 (1) (2,889)

12,043 (12,043) -

12,043 12,043

The qard of RM12,043,000 in 2011 above has been of-set against Islamic investment accounts of RM56,640,000 in arriving at the total general takaful fund assets and liabilities and participants' fund of RM338,155,000 on the Company's statement of financial position at page 14.

28. Operating lease commitments As at the reporting date, the Company lease office premises under lease agreements that are not cancellable within a year. The leases contain renewable options. Future minimum lease payments for leases with initial or remaining terms of one year or more are as follows: Shareholder's fund Within 1 year After 1 year but not more than 5 years 85 2012 RM '000 958 834 1,792 2011 RM '000 576 528 1,104

596075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 29. Earnings per share The basic earnings per share (EPS) is calculated by dividing the net profit for the year by the weighted average number of ordinary shares in issue during the year as follows: 2012 Net profit for the year (RM '000) Weighted average number of ordinary ordinary shares in issue ('000) Basic earnings per share (sen) 8,509 2011 8,941

293,361 2.9

195,000 4.6

30. Segmental information on cash flow Shareholder's fund RM '000 General takaful fund RM '000 Family takaful fund RM '000

31 March 2012 Net cash flow (used in)/ generated from: Operating activities Investing activities Financing activities

Total RM '000

(100,964) (5,293) 100,000 (6,257)

(25,299) (25,299)

(11,194) (310) (11,504)

(137,457) (5,603) 100,000 (43,060)

Net decrease in cash and cash equivalents: At 1 April 2011 At 31 March 2012 31 March 2011 Net cash flow generated from/ (used in): Operating activities Investing activities

(6,257) 7,630 1,373

(25,299) 47,511 22,212

(11,504) 64,512 53,008

(43,060) 119,653 76,593

12,865 (6,688) 6,177

47,285 47,285

62,688 (1,008) 61,680

122,838 (7,696) 115,142

Net increase in cash and cash equivalents: At 1 April 2010 At 31 March 2011

6,177 1,453 7,630

47,285 226 47,511

61,680 2,832 64,512

115,142 4,511 119,653

86

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 31. Investment-linked fund (a) Statement of comprehensive income For the year ended 31 March 2012 2012 RM '000 INCOME Investment income (Note (c)) Realised gains and losses (Note (d)) Financial assets at FVTPL's fair value gains OUTGO Other operating expenses 707 336 1,461 2,504 (1,214) (1,214) 1,290 (460) 830 2011 RM '000 516 4,660 3,342 8,518 (931) (931) 7,587 (614) 6,973

Excess of income over outgo before tax Taxation (Note (e)) Excess of income over outgo after tax (b) Statement of financial position For the year ended 31 March 2012

2012 RM '000 Assets Financial instruments (Note (f)): Financial assets at fair value through profit and loss Loans and receivables Deferred tax assets (Note (g)) Cash and bank balances Total Investment-linked business assets Liabilities Tax payable Deferred tax liabilities (Note (g)) Other payables (Note (h)) Total Investment-linked business liabilities Net Assets Value ("NAV") of Funds Unitholders' fund (Note (i))

2011 RM '000

116,068 528 8 2,573 119,177

86,950 3,213 2 1,244 91,409

438 488 1,796 2,722 116,455 116,455

508 365 1,081 1,954 89,455 89,455

87

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 31. Investment-linked fund (cont'd.) (c) Investment income Financial assets at FVTPL: Profit income Dividend income - quoted shares in Malaysia Loans and receivables: Profit income Investment expenses (d) Realised gains and losses Financial assets at FVTPL: Realised gains/(losses): Unquoted Islamic private debt securities: Unsecured Quoted shares in Malaysia Shariah approved unit trust funds 2012 RM '000 2011 RM '000 2012 RM '000 149 173 386 (1) 707 2011 RM '000 217 175 124 516

55 (727) 1,008 336 2012 RM '000 343 117 460

44 227 4,389 4,660 2011 RM '000 346 268 614

(e) Taxation

Current year's provision Deferred tax relating to origination and reversal of temporary differences (Note (g)) Tax expense for the year

Investment-linked business is taxed at the preferential tax rate of 8% (2011 : 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: 2012 2011 RM '000 RM '000 Surplus before taxation Taxation at Malaysian statutory tax rate of 8% Expenses not deductible for tax purposes Tax expense for the year 1,290 103 357 460 7,587 607 7 614

88

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 31. Investment-linked fund (cont'd.) (f) Financial assets/investments (i) Financial assets at FVTPL At fair value: Unquoted Islamic private debt securities: Government guaranteed Unsecured Government investment issues Quoted shares in Malaysia: Shariah approved equities Shariah approved unit trust funds 2012 RM '000 2011 RM '000

116,068 116,068 2012 RM '000

251 4,236 698 8,751 73,014 86,950 2011 RM '000

(ii) Loans and receivables At amortised cost/fair value: Islamic repo placements Income due and accrued

456 72 528

3,237 (24) 3,213

(iii) Fair Value Disclosures Based on 3-Level Hierarchy The following tables show financial assets recorded at fair value analysed by the different bases of fair values as disclosed in Note 2.7(iv) of the financial statements: Valuation technique using: Level 1 Level 2 Level 3 Using Quoted Using significant market observable unobservable prices inputs inputs RM '000 RM '000 RM '000

2012 Financial instruments:

Financial assets at FVTPL: Shariah approved unit trust funds

116,068 116,068

89

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 31. Investment-linked fund (cont'd.) (g) Deferred Taxation 2012 RM '000 (363) 2011 RM '000 (95)

At beginning of year Deferred tax liability arising on unrealised capital gains on investments, recognised in the statements of comprehensive income (Note (e)) Overprovision of deferred tax in prior year

(117) (480)

(268) (363)

The net deferred tax liabilities shown in the statement of financial position has been determined after appropriate offsetting as follows: 2012 2011 RM '000 RM '000 Deferred tax assets Deferred tax liabilities 8 (488) (480) 2012 RM '000 405 1,033 358 1,796 2 (365) (363) 2011 RM '000 852 229 1,081

(h) Other payables

Amount due to shareholders' fund* Amount due to family takaful fund* Other accruals and payables

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. 2012 RM '000 89,455 36,019 (9,849) 830 116,455 2011 RM '000 41,871 46,699 (6,088) 6,973 89,455

(i) Unitholders' fund

At beginning of year Net creation of units Net cancellation of units Excess of income over outgo after tax At end of year

90

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 32. Capital commitments 2012 RM '000 Shareholder's fund Authorised and contracted for: - Intangible assets - computer software (payable within 12 months) Authorised but not contracted for: - Intangible assets - computer software - Renovation work 2011 RM '000

1,094

4,110

9,735 9,735 1,094 9,735 10,829

8,245 466 8,711 466 8,245 8,711

Payable within 12 months Payable after 12 months Family takaful fund Authorised and contracted for: - Outstanding payments on investment properties in progress (payable within 12 months) 33. Related party disclosures

233

543

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.

91

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 33. Related party disclosures (cont'd.) (a) The significant related party transactions and balances during the year are as follows: General takaful fund RM '000 Family takaful fund RM '000

2012 Income/(expenses) : Transactions with MNRB Holdings Berhad ("MNRB"): Gross contributions Management fees

Shareholder's fund RM '000

(5,512)

356 -

181 (713)

Transactions with Malaysian Reinsurance Berhad ("MRB"), a fellow subsidiary: Gross contributions Retakaful outward contributions Retakaful commissions Transactions with MNRB Retakaful Berhad, a fellow subsidiary: Gross contributions Retakaful outward contributions Retakaful commissions Management fees Transactions with Labuan Re, in which MNRB is a substantial shareholder: Gross contributions Retakaful outward contributions Retakaful commissions

130 37 5

1,030 -

35

11 (8,678) 2,073 -

1 (560) -

15 (3,361) 580

92

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 33. Related party disclosures (cont'd.) (a) The significant related party transactions and balances during the year are as follows: (cont'd.) General takaful fund RM '000 Family takaful fund RM '000

2012 (cont'd.) Income/(expenses) :

Shareholder's fund RM '000

Transactions with MIDF Amanah Investment Bank Berhad, in which a director, Encik Sharkawi Bin Alis is also a director Investment income 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 Investment income Transactions with Malayan Banking Bhd, in which Permodalan Nasional Bhd, a substantial shareholder is also a substantial shareholder: Bank charges Investment income Transactions with Etiqa Takaful Bhd, in which Permodalan Nasional Bhd, a substantial shareholder is also a substantial shareholder: Inwards contributions Commission expenses Retakaful outward contributions Retakaful commissions Transactions with Etiqa Insurance Bhd, in which Permodalan Nasional Bhd, a substantial shareholder is also a substantial shareholder: Inwards contributions 93

61

19

433

(45) 100

159

354

(586) 124

604

(2,814) 529

144 (27) (110) 36

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 33. Related party disclosures (cont'd.) (a) The significant related party transactions and balances during the year are as follows: (cont'd.) General takaful fund RM '000 Family takaful fund RM '000

2011 Income/(expenses) : Transactions with MNRB Holdings Berhad ("MNRB"): Gross contributions Management fees

Shareholder's fund RM '000

(4,441)

429 -

47 -

Transactions with Malaysian Reinsurance Berhad ("MRB"), a fellow subsidiary: Gross contributions Retakaful outward contributions Retakaful commissions Management fees Rental Expenses Transactions with MNRB Retakaful Berhad, a fellow subsidiary: Gross contributions Retakaful outward contributions Retakaful commissions Transactions with Labuan Re, in which MNRB is a substantial shareholder: Gross contributions Retakaful outward contributions Retakaful commissions Transactions with MIDF Amanah Investment Bank Berhad, in which a director, Encik Sharkawi Bin Alis is also a director Investment income

(144) (425)

64 (1,271) 225 -

91 -

15 (3,003) 638

19 (834) -

11 (941) 269

40

22

94

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 33. Related party disclosures (cont'd.) (a) The significant related party transactions and balances during the year are as follows: (cont'd.) General takaful fund RM '000 Family takaful fund RM '000

2011 (cont'd.) Income/(expenses) :

Shareholder's fund 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 Commissions Investment income Transactions with Malayan Banking Bhd, in which Permodalan Nasional Bhd, a substantial shareholder is also a substantial shareholder: Bank charges Investment income Transactions with Etiqa Takaful Bhd, in which Permodalan Nasional Bhd, a substantial shareholder is also a substantial shareholder: Inwards contributions Commission expenses Retakaful outward contributions Retakaful commissions

(57) 75

53

(147) 23

373

(2,516) 45

375 (125) (204) 251

Outstanding balances arising from the transactions above as at 31 March have been disclosed in Notes 18 and 19.

95

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 33. Related party disclosures (cont'd.) (b) Compensation of key management personnel The remuneration of directors and other members of key management during the year was as follows: 2012 RM '000 Non-executive director's remuneration (Note 12(a)): Fees Allowances and other emoluments Executive director's remuneration (Note 12(b)): Salaries and bonus Pension costs - EPF Benefits-in-kind 2011 RM '000

534 139

672 173

1,092 150 97 1,339

1,200 204 96 1,500

Other key management personnel's remuneration: Salaries and bonus Pension costs - EPF Benefits-in-kind Total 2,896 510 237 3,643 3,067 537 215 3,819

96

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 34. Risk management Framework (a) Risk governance framework 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 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 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 and 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. The Risk Management Governance structure are as follows: - 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. RMCB is also responsible to review and recommend to the Board on risk management strategies, policies and risk tolerance; - 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; - Risk Management Department: Assist the RMCB and ORMC in developing and maintaining the Risk Management Framework in consultation with stakeholders;

97

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 34. Risk management Framework (cont'd.) (a) Risk governance framework (cont'd.) - 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 - Line Managers: Responsible for using the various components of the Risk Management Framework as an integral part of their normal processes and procedures. 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: 1. 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. 2. Claim Reserving Policy claim 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 3. 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. (b) Capital Management Objectives, Policies and Approach 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.

98

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 34. Risk management Framework (cont'd.) (b) Capital Management Objectives, Policies and Approach (cont'd.) Capital Management 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. Capital Management Policies - Ensure the Company has adequate capital, expressed as SMR within a range that supports stakeholders' objectives. - Establish responsibility of the Companys management and Board in developing an internal capital adequacy assessment process and setting capital targets that commensurate with its risk profile and control environment. Approach to capital management 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. (c) Regulatory framework 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. 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.

99

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 34. Risk management Framework (cont'd.) (d) Asset-Liability Management (ALM) Framework 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.

35. Underwriting risk General takaful fund (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 and careful selection of risks. 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. Stress Testing (ST) is performed twice a year. The purpose of the ST is to test the solvency of the general takaful fund under the various scenarios according to regulatory guidelines, simulating drastic changes in major parameters such as new business volume and investment environment.

100

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 35. 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 RM '000 35,638 213,980 1,531 42,561 293,710
Retakaful

31 March 2012 Fire Motor Marine, Aviation & Transit Miscellaneous 31 March 2011 Fire Motor Marine, Aviation & Transit Miscellaneous

RM '000 (3,396) (20,429) (606) (17,725) (42,156)

Net RM '000 32,242 193,551 925 24,836 251,554

30,727 217,398 5,217 38,391 291,733

(5,443) (2,594) (1,785) (24,529) (34,351)

25,284 214,804 3,432 13,862 257,382

(c) Impact on liabilities, profit and equity Key Assumptions 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. 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.

101

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 35. Underwriting risk (cont'd.) General takaful fund (cont'd.) (c) Impact on liabilities, profit and equity (Contd.) Sensitivities 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. 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 claim 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 has been applied to the motor classes only which are Motor Act and Motor Others by considering the ultimate loss ratio with an extra charge for the provision in adverse deviation. Change in assumption of Ultimate Impact Claims on Gross Ratio Liabilities RM '000 31 March 2012 Motor Act Average Severity Motor Others Expected Loss Ratio 31 March 2011 Motor Act Average Severity Motor Others Expected Loss Ratio Impact on Surplus before Tax RM '000

Impact on Net Liabilities RM '000

Impact on Partici -pants' Fund* RM '000

+10% +10%

12,330 20,535

15,766 24,130

(15,766) (24,130)

(11,825) (18,098)

+5% +10%

85,673 21,424

69,312 21,095

(69,312) (21,095)

(51,984) (15,821)

* The impact on participants' fund reflects the after tax impact . The method used for deriving sensitivity information and significant assumption did not change from the previous period.

102

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 35. Underwriting risk (cont'd.) General takaful fund (cont'd.) (d) Claims Development table 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.

103

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 35. Underwriting risk (cont'd.) General takaful fund (cont'd.) (d) Claims Development table (cont'd.) Gross General Takaful Certificate Liabilities for 2012: Accident year At the end of accident year One year later Two year later Three year later Four year later Five year later Six year later Seven year later Current estimate of cumulative claims incurred At the end of accident year One year later Two year later Three year later Four year later Five year later Six year later Seven year later Cumulative payments to-date Gross general takaful certificates liabilities per Statement of Financial Position: Best Estimate of Claims Liabilities (incl. Allocated Loss Adjustment Expenses "ALAE") Fund PRAD at 75% Total Note 2005 RM '000 11,728 10,898 9,936 9,683 8,396 7,951 7,900 7,861 7,861 3,957 6,632 7,123 7,436 7,728 7,807 7,826 7,851 7,851 2006 RM '000 29,337 27,311 26,773 26,178 25,494 24,949 24,732 24,732 8,984 18,976 20,128 21,967 23,560 24,474 24,522 24,522 2007 RM '000 36,388 36,179 35,120 33,672 33,695 32,743 32,743 13,366 25,083 27,784 30,245 31,292 31,975 31,975 2008 RM '000 50,997 51,290 51,483 51,708 50,301 50,301 17,599 34,059 39,159 44,893 47,722 47,722 2009 RM '000 100,090 93,740 89,887 86,452 86,452 29,070 64,212 72,939 77,825 77,825 2010 RM '000 125,472 142,627 134,623 134,623 43,215 83,077 100,539 100,539 2011 RM '000 144,938 146,833 146,833 48,128 95,317 95,317 2012 RM '000 150,395 150,395 49,127 49,127 Total RM '000

22

10

210

768

2,579

8,627

34,084

51,516

101,268

199,062 11,607 210,669

104

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 35. Underwriting risk (cont'd.) General takaful fund (cont'd.) (d) Claims Development table (cont'd.) Net General Takaful Certificate Liabilities for 2012: Accident year At the end of accident year One year later Two year later Three year later Four year later Five year later Six year later Seven year later Current estimate of cumulative claims incurred At the end of accident year One year later Two year later Three year later Four year later Five year later Six year later Seven year later Cumulative payments to-date Net general takaful certificates liabilities per Statement of Financial Position: Best Estimate of claim liabilities (incl. ALAE) Fund PRAD at 75% Total Note 2005 RM '000 9,974 9,613 8,675 8,488 7,398 6,978 6,903 7,482 7,482 3,724 6,253 6,745 7,057 7,349 7,428 7,448 7,473 7,473 2006 RM '000 27,944 26,062 25,794 24,073 23,420 23,128 22,817 22,817 8,449 18,433 19,585 21,143 22,760 22,866 22,913 22,913 2007 RM '000 33,895 34,140 33,195 31,470 31,341 30,328 30,328 11,984 23,420 26,016 28,197 29,089 29,631 29,631 2008 RM '000 47,452 47,361 47,903 47,484 45,894 45,894 16,968 32,665 37,569 41,845 43,721 43,721 2009 RM '000 83,588 81,492 78,446 76,773 76,773 27,670 56,446 64,216 69,165 69,165 2010 RM '000 114,632 119,456 124,071 124,071 40,682 79,471 94,614 94,614 2011 RM '000 134,955 131,893 131,893 44,669 88,779 88,779 2012 RM '000 138,880 138,880 45,352 45,352 Total RM '000

22 9 (96) 697 2,173 7,608 29,457 43,114 93,528 176,490 10,643 187,133

105

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 35. Underwriting risk (cont'd.) General takaful fund (cont'd.) (d) Claims Development table (cont'd.) Gross General Takaful Certificate Liabilities for 2011: Accident year At the end of accident year One year later Two year later Three year later Four year later Five year later Six year later Seven year later Current estimate of cumulative claims incurred At the end of accident year One year later Two year later Three year later Four year later Five year later Six year later Seven year later Cumulative payments to-date Gross general takaful certificates liabilities per Statement of Financial Position: Best Estimate of claim liabilities (incl. ALAE) Fund PRAD at 70% Total Note 2004 RM '000 1,027 875 855 806 790 787 735 740 740 203 610 614 687 714 730 730 734 734 2005 RM '000 11,728 10,898 9,936 9,683 8,396 7,951 7,900 7,900 3,957 6,632 7,123 7,436 7,728 7,807 7,826 7,826 2006 RM '000 29,337 27,311 26,773 26,178 25,494 24,949 24,949 8,984 18,976 20,128 21,967 23,560 24,474 24,474 2007 RM '000 36,388 36,179 35,120 33,672 33,695 33,695 13,366 25,083 27,784 30,245 31,292 31,292 2008 RM '000 50,997 51,290 51,483 51,708 51,708 17,599 34,059 39,159 44,893 44,893 2009 RM '000 100,090 93,740 89,887 89,887 29,070 64,212 72,939 72,939 2010 RM '000 125,472 142,627 142,627 43,215 83,077 83,077 2011 RM '000 144,938 144,938 48,128 48,128 Total RM '000

22 6 74 475 2,403 6,815 16,948 59,550 96,810 183,081 10,031 193,112

106

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 35. Underwriting risk (cont'd.) General takaful fund (cont'd.) (d) Claims Development table (cont'd.) Net General Takaful Certificate Liabilities for 2011: Accident year At the end of accident year One year later Two year later Three year later Four year later Five year later Six year later Seven year later Current estimate of cumulative claims incurred At the end of accident year One year later Two year later Three year later Four year later Five year later Six year later Seven year later Cumulative payments to-date Net general takaful certificates liabilities per Statement of Financial Position: Best Estimate of claim liabilities (incl. ALAE) Fund PRAD at 70% Total Note 2004 RM '000 923 791 786 736 737 721 671 674 674 203 544 548 621 648 665 665 668 668 2005 RM '000 9,974 9,613 8,675 8,488 7,398 6,978 6,903 6,903 3,121 5,636 6,128 6,440 6,732 6,811 6,831 6,831 2006 RM '000 27,944 26,062 25,794 24,073 23,420 23,128 23,128 8,406 18,391 19,542 21,101 22,694 22,968 22,968 2007 RM '000 33,895 34,140 33,195 31,470 31,341 31,341 11,984 23,422 26,017 28,199 29,091 29,091 2008 RM '000 47,452 47,361 47,903 47,484 47,484 16,995 32,713 37,616 42,202 42,202 2009 RM '000 83,588 81,492 78,446 78,446 27,613 56,404 64,559 64,559 2010 RM '000 114,632 119,456 119,456 40,682 79,479 79,479 2011 RM '000 134,955 134,955 44,714 44,714 Total RM '000

22 6 72 160 2,250 5,282 13,887 39,977 90,241 151,875 8,827 160,702

107

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 35. Underwriting risk (cont'd.) The related parties and their relationship with the Company as of 31 March 2009 are as stated 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 utilizes retakaful to manage the mortality and morbidity risks. The Companys 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 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.

108

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 35. Underwriting risk (cont'd.) Family takaful fund (cont'd.) (b) Concentration of by type of certificates The Table below shows the concentration of family takaful certificates liabilities : Gross RM '000 31 March 2012 Family takaful plans Investment-linked takaful plans Mortgage takaful plans Group credit takaful plans Risk Fund Special Fund Others 378,245 1,010 425,344 168,145 62,351 86,860 62,938 1,184,893 Retakaful RM '000 (75,351) (8,416) (13,856) (7,221) (104,844) Net RM '000 378,245 1,010 349,993 159,729 48,495 86,860 55,717 1,080,049

31 March 2011 Family takaful plans Investment-linked takaful plans Mortgage takaful plans Group credit takaful plans Risk Fund Special Fund Others

255,843 772 368,534 126,764 78,272 68,192 70,567 968,944

(68,936) (8,986) (21,218) (13,848) (112,988)

255,843 772 299,598 117,778 57,054 68,192 56,719 855,956

As all of the business are derived from Malaysia, the entire family takaful certificates liabilities are in Malaysia. (c) Key Assumptions 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. The key assumptions to which the estimation of liabilities is particularly sensitive are as follows:

109

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 35. Underwriting risk (cont'd.) Family takaful fund (cont'd.) (c) Key Assumptions (cont'd.) i) Mortality and Morbidity rates 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. ii) 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. 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: Mortality and Morbidity Discount rates rates %

31 March 2012 / 31 March 2011 Type of Business Credit related (MRTT and GCT)

Base mortality 1 and adjusted for retakaful rates 2 Base mortality 1

3%

Others

3%

110

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 35. Underwriting risk (cont'd.) Family takaful fund (cont'd.) (c) Key Assumptions (cont'd.) (1) Various industry mortality and morbidity experience tables that were used to determine the contribution rates (2) Retakaful rates obtained through retakaful arrangements with respect to the MRTT and GCT business (d) Sensitivity analysis 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 claim 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. Sensitivity analysis Impact on Gross Liabilities RM '000 Impact on Net liabilities RM '000 Impact on Profit Before Tax RM '000

Change in Assumptions % Family Takaful Certificates 31 March 2012 Mortality / morbidity Discount rates 31 March 2011 Mortality / morbidity Discount rates + 10% + 1% + 10% + 1%

Impact on Equity RM '000

1,957 (1,247)

1,957 (1,247)

(1,957) 1,247

(1,957) 1,247

9,548 (1,378)

9,548 (1,378)

(9,548) 1,378

(9,548) 1,378

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.

111

596075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 36. Financial Risk 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 Companys exposure to each of the above risks, the Companys objectives, policies and processes for measuring and managing such risks. (a) Credit Risk Credit risk represents the loss that would be recognized if counterparties to retakaful and investment transactions failed to meet their contractual obligations. Credit risk includes the following elements: 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; Retakaful counterparty risk financial loss arising from a retakaful operators default, or the deterioration of the retakaful operators solvency position; 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: as a result of debts arising from claims made by the Company but not yet paid by the retakaful operator; from retakaful contributions payments made to the retakaful operator in advance; and as a result of reserves held by the retakaful operator which would have to be met by the Company in the event of default.

112

596075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 36. Financial Risk (cont'd.) (a) Credit Risk (cont'd.) 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. To mitigate credit risk: 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. counterparty limits are set for investments and cash deposits. 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 2012, the average credit quality of the Company's investment portfolio was AAA by Rating Agency Malaysia (''RAM'') or Malaysian Rating Corporation Berhad (''MARC''). 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 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.

113 with The related related parties partiesand andtheir their relationship relationship with the the Company Company as of as31 of March 31

596075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia)

36.

Financial Risk (cont'd.) (a) Credit Risk (cont'd.) 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 : Neither pass-due nor impaired Shareholder's fund Government guaranteed RM '000 Investment grade * AAA/P1 RM '000 AA RM '000 A RM '000 BBB RM '000 Noninvestment grade * (C to BB) RM '000 Not subject to credit Not Rated risk RM '000 RM '000

31 March 2012 Financial investments at FVTPL Quoted shares in Malaysia: Shariah approved equities Warrants HTM financial investments Unquoted Islamic private debt securities: Government guaranteed Unsecured Government investment issues AFS financial investments Unquoted Islamic private debt securities: Unsecured Quoted shares in Malaysia: Shariah approved equities Warrants Golf club memberships LAR Islamic investment accounts with licensed: Islamic banks Investment banks Development bank Building society Islamic repo placements Institutional trust fund Units held in investment-linked fund Secured staff loans: Receivable within 12 months Receivable after 12 months

Total RM '000

979 9

979 9

19,023 20,030

1,995 -

279 -

19,023 2,274 20,030

83,507 -

18,510 -

3,939 6 178

102,017 3,939 6 178

600 -

10,507 12,542 2,000 -

21,742 10,412 -

43,776 23,557 5,831 6,911 10,000 1,183 2,429

76,625 10,412 36,099 5,831 2,000 6,911 10,000 1,183 2,429

114

596075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia)

36.

Financial Risk (cont'd.) (a) Credit Risk (cont'd.) Credit exposure by credit rating (cont'd.) Shareholder's fund (cont'd.) Government guaranteed RM '000 Neither pass-due nor impaired Investment grade * AAA/P1 RM '000 AA RM '000 A RM '000 BBB RM '000 Noninvestment grade * (C to BB) RM '000 Not subject to credit Not Rated risk RM '000 RM '000

31 March 2012 (cont'd.) LAR (cont'd.) Due from: General takaful fund Family takaful fund Investment-linked fund Income due and accrued Other receivables, deposits and prepayments Cash and bank balances 31 March 2011 Financial investments at FVTPL Quoted shares in Malaysia: Shariah approved equities Warrants HTM financial investments Unquoted Islamic private debt securities: Government guaranteed Unsecured Government investment issues AFS financial investments Unquoted Islamic private debt securities: Unsecured Quoted shares in Malaysia: Shariah approved equities Golf club memberships LAR Islamic investment accounts with licensed: Islamic banks Development bank Building society Islamic repo placements

Total RM '000

39,053

1,391 87,493

107 43,666

(184) 31,970

279

7,806 13,413 405 1,873 5,751 59 122,994

5,111

7,806 13,413 405 1,873 5,751 1,373 330,566

697 15

697 15

15,026 24,041

998 -

385 -

15,026 1,383 24,041

35,295 -

20,462 -

4,953 178

55,757 4,953 178

1,600 -

1,004 5,199 -

1,634 5,000

9,517 8,273 8,269 7,668

13,755 13,472 8,269 12,668

115

596075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia)

36.

Financial Risk (cont'd.) (a) Credit Risk (cont'd.) Credit exposure by credit rating (cont'd.) Shareholder's fund (cont'd.) Government guaranteed RM '000 Neither pass-due nor impaired Investment grade * AAA/P1 RM '000 AA RM '000 A RM '000 BBB RM '000 Noninvestment grade * (C to BB) RM '000 Not subject to credit Not Rated risk RM '000 RM '000

31 March 2011 (cont'd.) LAR (cont'd.) Institutional trust fund Units held in investment-linked fund Secured staff loans: Receivable within 12 months Receivable after 12 months Qard to general takaful fund Due from: General takaful fund Family takaful fund Income due and accrued Other receivables, deposits and prepayments Cash and bank balances

Total RM '000

39,067

5,886 43,779

1,066 27,731

663 7,297

385

6,592 10,000 1,289 2,723 12,043 2,739 29,109 1,022 5,402 15 104,661

5,843

6,592 10,000 1,289 2,723 12,043 2,739 29,109 1,022 5,402 7,630 228,763

General takaful fund 31 March 2012 Financial investments at FVTPL Quoted shares in Malaysia: Shariah approved equities Warrants HTM financial investments Unquoted Islamic private debt securities: Government guaranteed Unsecured Government investment issues

1,040 9

1,040 9

18,322 48,990

997 -

2,002 -

18,322 2,999 48,990

116

596075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia)

36.

Financial Risk (cont'd.) (a) Credit Risk (cont'd.) Credit exposure by credit rating (cont'd.) General takaful fund (cont'd.) Government guaranteed RM '000 Neither pass-due nor impaired Investment grade * AAA/P1 RM '000 AA RM '000 A RM '000 BBB RM '000 Noninvestment grade * (C to BB) RM '000 Not subject to credit Not Rated risk RM '000 RM '000

31 March 2012 (cont'd.) AFS financial investments Unquoted Islamic private debt securities: Unsecured Quoted shares in Malaysia: Shariah approved equities Warrants Shariah approved unit trust funds LAR Islamic investment accounts with licensed: Islamic banks Investment banks Development bank Due from: Family takaful fund Income due and accrued Other receivables, deposits and prepayments Retakaful certificates assets Takaful certificates receivables Cash and bank balances 31 March 2011 Financial investments at FVTPL Quoted shares in Malaysia: Shariah approved equities Warrants HTM financial investments Unquoted Islamic private debt securities: Government guaranteed Unsecured Government investment issues

Total RM '000

58,330 -

41,233 -

4,764 11 7,968

99,563 4,764 11 7,968

2,906 14,139

9,354 -

24,575 2,384 11,735 963 2,324 2,038 42,156 20,394 562 107,131

36,835 2,384 25,874 963 2,324 2,038 42,156 25,463 22,212 343,915

67,312

1,346 20,021 80,694

3,072 599 63,951

651 1,030 11,035

13,792

1,090 15

1,090 15

14,324 50,940

2,004 -

14,324 2,004 50,940

117

596075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia)

36.

Financial Risk (cont'd.) (a) Credit Risk (cont'd.) Credit exposure by credit rating (cont'd.) General takaful fund (cont'd.) Government guaranteed RM '000 Neither pass-due nor impaired Investment grade * AAA/P1 RM '000 AA RM '000 A RM '000 BBB RM '000 Noninvestment grade * (C to BB) RM '000 Not subject to credit Not Rated risk RM '000 RM '000

31 March 2011 (cont'd.) AFS financial investments Unquoted Islamic private debt securities: Unsecured Quoted shares in Malaysia: Shariah approved equities Shariah approved unit trust funds LAR Islamic investment accounts with licensed: Islamic banks Development bank Islamic repo placements Income due and accrued Other receivables, deposits and prepayments Retakaful certificates assets Takaful certificates receivables Cash and bank balances Family takaful fund 31 March 2012 Financial investments at FVTPL Quoted shares in Malaysia: Shariah approved equities Warrants HTM financial investments Unquoted Islamic private debt securities: Government guaranteed Unsecured Government investment issues

Total RM '000

43,722 -

46,883 -

8,652 5,888

90,605 8,652 5,888

65,264

4,085 4,978 2,161 45,891 100,837

10,222 12,069 836 5,342 441 77,797

7,118 1,345 1,105 9,568

10,824 6,508 2,160 1,649 34,351 23,950 74 79,516

15,645

32,249 18,577 5,814 2,160 1,649 34,351 32,798 47,511 348,627

2,346 9

2,346 9

36,249 185,970

9,030 -

8,008 -

36,249 17,038 185,970

118

596075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia)

36.

Financial Risk (cont'd.) (a) Credit Risk (cont'd.) Credit exposure by credit rating (cont'd.) Family takaful fund (cont'd.) Government guaranteed RM '000 Neither pass-due nor impaired Investment grade * AAA/P1 RM '000 AA RM '000 A RM '000 BBB RM '000 Noninvestment grade * (C to BB) RM '000 Not subject to credit Not Rated risk RM '000 RM '000

31 March 2012 (cont'd.) AFS financial investments Unquoted Islamic private debt securities: Government guaranteed Unsecured Quoted shares in Malaysia: Shariah approved equities Warrants Shariah approved unit trust funds LAR Islamic investment accounts with licensed: Islamic banks Investment banks Development bank Islamic repo placements Institutional trust fund Due from: General takaful fund Investment-linked fund Amount due from holding company Income due and accrued Other receivables, deposits and prepayments Retakaful certificates assets Takaful certificates receivables Cash and bank balances

Total RM '000

57,338 -

209,270 -

120,652 -

41,796 58 11,952

57,338 329,922 41,796 58 11,952

279,557

9,297 45,858 273,455

70,374 53,854 1,000 7,204 3,014 264,106

33,067 21,155 1,999 56,221

133,718 27,631 37,597 5,649 19,493 1,033 1,212 8,190 52 115,684 102,023 2,137 454,419

56,161

246,456 27,631 91,451 6,649 19,493 1,033 1,212 8,190 52 115,684 130,382 53,008 1,383,919

119

596075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia)

36.

Financial Risk (cont'd.) (a) Credit Risk (cont'd.) Credit exposure by credit rating (cont'd.) Family takaful fund (cont'd.) Government guaranteed 31 March 2011 Financial investments at FVTPL Quoted shares in Malaysia: Shariah approved equities Warrants HTM financial investments Unquoted Islamic private debt securities: Government guaranteed Unsecured Government investment issues AFS financial investments Unquoted Islamic private debt securities: Government guaranteed Unsecured Quoted shares in Malaysia: Shariah approved equities Shariah approved unit trust funds LAR Islamic investment accounts with licensed: Islamic banks Investment banks Development bank Islamic repo placements Institutional trust fund Due from: General takaful fund Investment-linked fund Amount due from holding company Income due and accrued Other receivables, deposits and prepayments Retakaful certificates assets Takaful certificates receivables Cash and bank balances RM '000 Neither pass-due nor impaired Investment grade * AAA/P1 RM '000 AA RM '000 A RM '000 BBB RM '000 Noninvestment grade * (C to BB) RM '000 Not subject to credit Not Rated risk RM '000 RM '000

Total RM '000

1,817 15

1,817 15

24,103 163,241

17,027 -

8,016 -

24,103 25,043 163,241

21,106 208,450

160,408 7,345 32,286 60,827 277,893

97,514 22,798 40,496 44,892 2,602 1,867 218,185 120

38,421 1,507 23,081 37 1,062 64,108

9 9

8,585 21,442 18,860 13,708 18,592 12,971 852 199 5,247 445 137,383 81,258 756 320,298

15,988 17,820

21,106 257,922 15,988 8,585 90,006 1,507 59,356 113,967 18,592 12,971 852 199 5,247 445 137,383 83,906 64,512 1,106,763

596075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia)

36.

Financial Risk (cont'd.) (a) Credit Risk (cont'd.) Credit exposure by credit rating (cont'd.) Investment-linked fund Government guaranteed RM '000 Neither pass-due nor impaired Investment grade * AAA/P1 RM '000 AA RM '000 A RM '000 BBB RM '000 Noninvestment grade * (C to BB) RM '000 Not subject to credit Not Rated risk RM '000 RM '000

31 March 2012 Financial investments at FVTPL Shariah approved unit trust funds LAR Islamic repo placements Income due and accrued Cash and bank balances 31 March 2011 Financial investments at FVTPL Unquoted Islamic private debt securities: Government guaranteed Unsecured Government investment issues Quoted shares in Malaysia: Shariah approved equities Shariah approved unit trust funds LAR Islamic repo placements Income due and accrued Cash and bank balances

Total RM '000

1 1

456 2,236 2,692

72 336 408

116,068 116,068

116,068 456 72 2,573 119,169

251 698 949

2,725 1 2,726

1,511 550 1,241 3,302

2,687 2,687

(24) 2 (22)

8,751 73,014 81,765

251 4,236 698 8,751 73,014 3,237 (24) 1,244 91,407

* Based on public ratings assigned by external rating agencies including Rating Agency Malaysia ("RAM") and Malaysian Rating Corporation ("MARC")

121

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 36. Financial (cont'd.) The Risk related related parties partiesand andtheir their relationship relationship with with the the Company Company as of as31 of March 31 (a) Credit Risk (cont'd.) Age analysis of financial assets past-due but not impaired General takaful fund Takaful certificates receivables 31 March 2012 31 March 2011 Family takaful fund Takaful certificates receivables 31 March 2012 31 March 2011 0-180 Days RM' 000 105,059 66,775 0-180 Days RM' 000 16,948 21,300 181-365 Days RM' 000 4,008 3,868 181-365 Days RM' 000 10,875 10,026

> 365 Days RM' 000 4,508 7,630

Total RM' 000 25,463 32,798

> 365 Days RM' 000 14,448 7,017

Total RM' 000 130,382 83,818

Receivables are carried out at anticipated realizable value. Impairments are written off once identified. An estimate is made for impairments based on a review of all outstanding amounts as at financial year end. Specific provisions are made for any outstanding contributions including brokers, agent or retakaful balances which remaining outstanding as per Note 2.18. Impaired Financial Assets For assets to be classified as 'past due and impaired' , please refer to Note 2.8. The movement of allowance for impairment on financial assets are as follows: General takaful fund 2012 RM '000 At beginning of year Writeback of allowance during the year At end of year Family takaful fund At beginning of year Additional allowance during the year At end of year 882 978 1,860 246 636 882 8,055 (1,537) 6,518 2011 RM '000 11,109 (3,054) 8,055

122

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 36. Financial Risk (cont'd.) Loan 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. (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 company will meet shareholder's liquidity needs arising in a number of key areas : - the ability to meet the companys payment obligations under normal and stressed operating environments without suffering any loss; - efficient management of additions/withdrawals from the companys investment funds; and - have the appropriate measures in place to respond to liquidity risk. As part of its liquidity management strategy is to put in place the necessary framework capable of measuring and reporting on: - daily cash flows; - minimum liquidity holdings; - the composition and market values of companys investment portfolios, including liquid holdings; and - the holding of liquid assets in the respective Takaful Funds. 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.

123

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 36. Financial Risk (cont'd.) (b) Liquidity Risk (cont'd.) Maturity profiles 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. Expense liabilities, contribution liabilities and the retakaful operators share of contribution liabilities have been excluded from the analysis as there are no contractual obligations to make payments on those liabilities. Investment-linked liabilities are repayable or transferable on demand and are included in the up to a year column. Repayments which are subject to notice are treated as if notice were to be given immediately. Shareholder's Fund 31 March 2012 Financial investments at FVTPL Quoted shares in Malaysia: Shariah approved equities Warrants HTM financial investments Unquoted Islamic private debt securities: Government guaranteed Unsecured Government investment issues AFS financial investments Unquoted Islamic private debt securities: Unsecured Quoted shares in Malaysia: Shariah approved equities Warrants Golf club memberships Carrying value RM '000 Within 1 year RM '000 Over 1-5 years RM '000 Over 5 years RM '000 No maturity date RM '000

Total RM '000

979 9

979 9

979 9

19,023 2,274 20,030

787 1,995 837

3,863 19,307

20,475 279 2,127

25,125 2,274 22,271

102,017 3,939 6 178 124

4,715 -

59,628 -

69,751 -

3,939 6 178

134,094 3,939 6 178

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 36. Financial Risk (cont'd.) (b) Liquidity Risk (cont'd.) Maturity profiles (cont'd.) Shareholder's Fund (cont'd.) 31 March 2012 (cont'd.) LAR Islamic investment accounts with licensed: Islamic banks Investment banks Development bank Building society Islamic repo placements Institutional trust fund Units held in investment-linked fund Secured staff loans: Receivable within 12 months Receivable after 12 months Due from: General takaful fund Family takaful fund Investment-linked fund Income due and accrued Other receivables, deposits and prepayments Cash and bank balances Total Assets Due to agents, retakaful operators and brokers Due to related companies Zakat payable Other payables Total Liabilities Carrying value RM '000 Within 1 year RM '000 Over 1-5 years RM '000 Over 5 years RM '000 No maturity date RM '000 Total RM '000

76,625 10,412 36,099 5,831 2,000 6,911 10,000 1,183 2,429 7,806 13,413 405 1,873 5,751 1,373 330,566 15,578 414 390 22,207 38,589 125

77,654 10,550 37,011 5,975 2,002 347 1,183 7,806 13,413 405 1,873 5,751 1,373 173,677 15,578 414 390 22,207 38,589

7,424 2,279 92,501 -

150 92,782 -

10,000 15,111 -

77,654 10,550 37,011 5,975 2,002 7,771 10,000 1,183 2,429 7,806 13,413 405 1,873 5,751 1,373 374,071 15,578 414 390 22,207 38,589

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 36. Financial Risk (cont'd.) (b) Liquidity Risk (cont'd.) Maturity profiles (cont'd.) Shareholder's Fund (cont'd.) 31 March 2011 Financial investments at FVTPL Quoted shares in Malaysia: Shariah approved equities Warrants HTM financial investments Unquoted Islamic private debt securities: Government guaranteed Unsecured Government investment issues AFS financial investments Unquoted Islamic private debt securities: Unsecured Quoted shares in Malaysia: Shariah approved equities Golf club memberships LAR Islamic investment accounts with licensed: Islamic banks Development bank Building society Islamic repo placements Institutional trust fund Units held in investment-linked fund Carrying value RM '000 Within 1 year RM '000 Over 1-5 years RM '000 Over 5 years RM '000 No maturity date RM '000

Total RM '000

697 15

697 15

697 15

15,026 1,383 24,041

612 997 4,894

3,054 18,068

15,576 385 4,210

19,242 1,382 27,172

55,757 4,953 178

7,419 -

32,456 -

30,854 -

4,953 178

70,729 4,953 178

13,755 13,472 8,269 12,668 6,592 10,000

13,940 13,617 8,404 12,677 330 -

7,411 -

10,000

13,940 13,617 8,404 12,677 7,741 10,000

126

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 36. Financial Risk (cont'd.) (b) Liquidity Risk (cont'd.) Maturity profiles (cont'd.) Shareholder's Fund (cont'd.) 31 March 2011 (cont'd.) LAR (cont'd.) Secured staff loans: Receivable within 12 months Receivable after 12 months Qard to general takaful fund Due from: General takaful fund Family takaful fund Income due and accrued Other receivables, deposits and prepayments Cash and bank balances Total Assets Due to agents, retakaful operators and brokers Due to related companies Zakat payable Other payables Total Liabilities Carrying value RM '000 Within 1 year RM '000 Over 1-5 years RM '000 Over 5 years RM '000 No maturity date RM '000

Total RM '000

1,289 2,723 12,043 2,739 29,109 1,022 5,402 7,630 228,763

1,289 2,739 29,109 1,022 5,402 7,630 110,081

2,723 63,712

51,025

12,043 27,886

1,289 2,723 12,043 2,739 29,109 1,022 5,402 7,630 252,704

13,498 22 573 31,469 45,562

13,498 22 573 31,469 45,562

13,498 22 573 31,469 45,562

127

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 36. Financial Risk (cont'd.) (b) Liquidity Risk (cont'd.) Maturity profiles (cont'd.) General takaful fund 31 March 2012 Financial investments at FVTPL Quoted shares in Malaysia: Shariah approved equities Warrants HTM financial investments Unquoted Islamic private debt securities: Government guaranteed Unsecured Government investment issues AFS financial investments Unquoted Islamic private debt securities: Unsecured Quoted shares in Malaysia: Shariah approved equities Warrants Shariah approved unit trust funds LAR Islamic investment accounts with licensed: Islamic banks Investment banks Development bank Due from: Family takaful fund Income due and accrued Other receivables, deposits and prepayments Carrying value RM '000 Within 1 year RM '000 Over 1-5 years RM '000 Over 5 years RM '000 No maturity date RM '000

Total RM '000

1,040 9

1,040 9

1,040 9

18,322 2,999 48,990

758 1,095 2,016

3,723 2,011 20,163

19,774 39,626

24,255 3,106 61,805

99,563 4,764 11 7,968

9,026 -

76,350 -

33,860 -

4,764 11 7,968

119,236 4,764 11 7,968

36,835 2,384 25,874 963 2,324 2,038

37,353 2,438 26,582 963 2,324 2,038

37,353 2,438 26,582 963 2,324 2,038

128

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 36. Financial Risk (cont'd.) (b) Liquidity Risk (cont'd.) Maturity profiles (cont'd.) General takaful fund (cont'd.) 31 March 2012 (cont'd.) Retakaful certificates assets Takaful certificates receivables Cash and bank balances Total Assets Takaful certificates liabilities Takaful certificates payables Other payables Total Liabilities 31 March 2011 Financial investments at FVTPL Quoted shares in Malaysia: Shariah approved equities Warrants HTM financial investments Unquoted Islamic private debt securities: Government guaranteed Unsecured Government investment issues AFS financial investments Unquoted Islamic private debt securities: Unsecured Quoted shares in Malaysia: Shariah approved equities Shariah approved unit trust funds Carrying value RM '000 23,536 25,463 22,212 325,295 210,669 13,827 26,075 250,571 Within 1 year RM '000 10,381 25,463 22,212 142,649 92,919 13,827 26,075 132,821 Over 1-5 years RM '000 12,975 115,222 116,138 116,138 Over 5 years RM '000 180 93,440 1,612 1,612 No maturity date RM '000 13,792 -

Total RM '000 23,536 25,463 22,212 365,103 210,669 13,827 26,075 250,571

1,090 15

1,090 15

1,090 15

14,324 2,004 50,940

584 97 3,989

2,912 2,110 17,668

14,850 44,137

18,346 2,207 65,794

90,605 8,652 5,888 129

6,151 -

68,169 -

37,253 -

8,652 5,888

111,573 8,652 5,888

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 36. Financial Risk (cont'd.) (b) Liquidity Risk (cont'd.) Maturity profiles (cont'd.) General takaful fund (cont'd.) 31 March 2011 (cont'd.) LAR Islamic investment accounts with licensed: Islamic banks Development bank Islamic repo placements Units held in investment-linked fund Income due and accrued Other receivables, deposits and prepayments Retakaful certificates assets Takaful certificates receivables Cash and bank balances Total Assets claim liabilities Takaful certificates payables Other payables Total Liabilities Carrying value RM '000 Within 1 year RM '000 Over 1-5 years RM '000 Over 5 years RM '000 No maturity date RM '000 Total RM '000

32,249 18,577 5,814 2,160 1,649 32,410 32,798 47,511 346,686 193,112 7,932 39,477 240,521

32,489 18,814 5,820 2,160 1,649 14,260 32,798 47,511 166,322 84,969 7,932 39,477 132,378

16,529 107,388 98,487 98,487

1,621 97,861 9,656 9,656

15,645 -

32,489 18,814 5,820 2,160 1,649 32,410 32,798 47,511 387,216 193,112 7,932 39,477 240,521

130

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 36. Financial Risk (cont'd.) (b) Liquidity Risk (cont'd.) Maturity profiles (cont'd.) Family takaful fund 31 March 2012 Financial investments at FVTPL Quoted shares in Malaysia: Shariah approved equities Warrants HTM financial investments Unquoted Islamic private debt securities: Government guaranteed Unsecured Government investment issues AFS financial investments Unquoted Islamic private debt securities: Government guaranteed Unsecured Quoted shares in Malaysia: Shariah approved equities Warrants Shariah approved unit trust funds LAR Islamic investment accounts with licensed: Islamic banks Investment banks Development bank Islamic repo placements Institutional trust fund Investment-linked fund Carrying value RM '000 Within 1 year RM '000 Over 1-5 years RM '000 Over 5 years RM '000 No maturity date RM '000

Total RM '000

2,346 9

2,346 9

2,346 9

36,249 17,038 185,970

1,329 4,638 22,014

15,013 9,340 78,229

31,380 5,168 126,447

47,722 19,146 226,690

57,338 329,922 41,796 58 11,952

2,690 37,766 -

13,422 156,601 -

100,394 252,263 -

41,796 58 11,952

116,506 446,630 41,796 58 11,952

246,456 27,631 91,451 6,649 19,493 1,033

249,323 28,240 93,529 6,815 975 1,033

20,973 -

249,323 28,240 93,529 6,815 21,948 1,033

131

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 36. Financial Risk (cont'd.) (b) Liquidity Risk (cont'd.) Maturity profiles (cont'd.) Family takaful fund (cont'd.) 31 March 2012 (cont'd.) LAR (cont'd.) Amount due from holding company Income due and accrued Other receivables, deposits and prepayments Retakaful certificates assets Takaful certificates receivables Cash and bank balances Total Assets Takaful certificates liabilities Takaful certificates payables Other payables Total Liabilities 31 March 2011 Financial investments at FVTPL Quoted shares in Malaysia: Shariah approved equities Warrants HTM financial investments Unquoted Islamic private debt securities: Government guaranteed Unsecured Government investment issues Carrying value RM '000 1,212 8,190 52 115,684 130,382 53,008 1,383,919 1,352,027 69,774 59,180 1,480,981 Within 1 year RM '000 1,212 8,190 52 130,382 53,008 641,196 4,397 69,774 59,180 133,351 Over 1-5 years RM '000 293,578 30,039 30,039 Over 5 years RM '000 866 516,518 996,109 996,109 No maturity date RM '000 114,818 170,979 321,482 321,482

Total RM '000 1,212 8,190 52 115,684 130,382 53,008 1,622,271 1,352,027 69,774 59,180 1,480,981

1,817 15

1,817 15

1,817 15

24,103 25,043 163,241 132

805 12,796 23,594

8,430 9,737 80,068

19,653 5,433 93,742

28,888 27,966 197,404

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 36. Financial Risk (cont'd.) (b) Liquidity Risk (cont'd.) Maturity profiles (cont'd.) Family takaful fund (cont'd.) 31 March 2011 (cont'd.) AFS financial investments Unquoted Islamic private debt securities: Government guaranteed Unsecured Quoted shares in Malaysia: Shariah approved equities Shariah approved unit trust funds LAR Islamic investment accounts with licensed: Islamic banks Investment banks Development bank Islamic repo placements Institutional trust fund Due from: General takaful fund Investment-linked fund Amount due from holding company Income due and accrued Other receivables, deposits and prepayments Retakaful certificates assets Takaful certificates receivables Cash and bank balances Total Assets Carrying value RM '000 Within 1 year RM '000 Over 1-5 years RM '000 Over 5 years RM '000 No maturity date RM '000

Total RM '000

21,106 257,922 15,988 8,585

985 11,934 -

4,913 160,188 -

31,471 164,685 -

15,988 8,585

37,369 336,807 15,988 8,585

90,006 1,507 59,356 113,967 18,592 12,971 852 199 5,247 445 137,383 83,906 64,512 1,106,763

87,172 1,517 59,937 114,117 932 12,971 852 199 5,247 445 83,906 64,512 481,921

3,587 20,934 287,857

563 315,547

136,820 163,225

90,759 1,517 59,937 114,117 21,866 12,971 852 199 5,247 445 137,383 83,906 64,512 1,248,550

133

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 36. Financial Risk (cont'd.) (b) Liquidity Risk (cont'd.) Maturity profiles (cont'd.) Family takaful fund (cont'd.) 31 March 2011 (cont'd.) Takaful certificates liabilities Takaful certificates payables Other payables Total Liabilities Investment-linked fund 31 March 2012 Financial investments at FVTPL Unquoted Islamic private debt securities: Shariah approved unit trust funds LAR Islamic repo placements Income due and accrued Cash and bank balances Total Assets Other payables Total Liabilities Carrying value RM '000 1,104,961 34,406 67,519 1,206,886 Within 1 year RM '000 4,434 34,406 67,519 106,359 Over 1-5 years RM '000 21,617 21,617 Over 5 years RM '000 806,445 806,445 No maturity date RM '000 272,465 272,465

Total RM '000 1,104,961 34,406 67,519 1,206,886

116,068 456 72 2,573 119,169 1,796 1,796

456 72 2,573 3,101 3,169 3,169

116,068 116,068 (1,373) (1,373)

116,068 456 72 2,573 119,169 1,796 1,796

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593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 36. Financial Risk (cont'd.) (b) Liquidity Risk (cont'd.) Maturity profiles (cont'd.) Investment-linked fund (cont'd.) 31 March 2011 Financial investments at FVTPL Unquoted Islamic private debt securities: Government guaranteed Unsecured Government investment issues Quoted shares in Malaysia: Shariah approved equities Shariah approved unit trust funds LAR Islamic repo placements Income due and accrued Cash and bank balances Total Assets Other payables Total Liabilities Carrying value RM '000 Within 1 year RM '000 Over 1-5 years RM '000 Over 5 years RM '000 No maturity date RM '000

Total RM '000

251 4,236 698 8,751 73,014 3,237 (24) 1,244 91,407 1,081 1,081

10 208 28 3,237 (24) 1,244 4,703 1,081 1,081

270 2,141 108 2,519 -

3,079 768 3,847 -

8,751 73,014 81,765 -

280 5,428 904 8,751 73,014 3,237 (24) 1,244 92,834 1,081 1,081

135

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 36. Financial Risk (cont'd.) The related related parties parties and andtheir theirrelationship relationship with with the the Company Company asas of of 31 31 (c) Market Risk 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: 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 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.

Profit rate risk 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 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 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.

136

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 36. Financial Risk (cont'd.) (c) Market Risk (Contd.) Profit rate risk (cont'd.) Sensitivity Analysis 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: Impact on Surplus before tax RM' 000

Changes in basis point Shareholder's Fund 31 March 2012 Debt Securities 31 March 2011 Debt Securities + 25 - 25 + 25 - 25

Impact on asset RM' 000

Impact on AFS reserve RM' 000

(1,370) 1,430

1,370 (1,430)

(625) 638

625 (638)

General takaful fund 31 March 2012 Debt Securities 31 March 2011 Debt Securities + 25 - 25 (912) 928 912 (928) + 25 - 25 (938) 929 938 (929) -

Family takaful fund 31 March 2012 Debt Securities 31 March 2011 Debt Securities + 25 - 25 (4,049) 4,146 4,049 (4,146) + 25 - 25 (6,311) 6,541 6,311 (6,541) -

137

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 36. Financial Risk (cont'd.) (c) Market Risk (Contd.) Sensitivity Analysis (cont'd.) Changes in basis point Investment-linked fund 31 March 2012 Debt Securities Government Investment Issues 31 March 2011 Debt Securities Government Investment Issues 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 equity price risk exposures relates to financial assets and financial liabilities whose values will fluctuate as a result of changes in market prices. 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. 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. 138 + 25 - 25 + 25 - 25 59 (59) (132) 137 59 (59) (132) 137 + 25 - 25 + 25 - 25 Impact on asset RM' 000 Impact on AFS reserve RM' 000 Impact on Surplus before tax RM' 000

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 36. Financial Risk (cont'd.) Impact on Profit before tax RM' 000

Changes in variable Shareholder's Fund 31 March 2012 Market Indices Bursa Malaysia Bursa Malaysia 31 March 2011 Market Indices Bursa Malaysia Bursa Malaysia General takaful fund 31 March 2012 Market Indices Bursa Malaysia Bursa Malaysia 31 March 2011 Market Indices Bursa Malaysia Bursa Malaysia Family takaful fund 31 March 2012 Market Indices Bursa Malaysia Bursa Malaysia 31 March 2011 Market Indices Bursa Malaysia Bursa Malaysia

Impact on asset RM' 000

Impact on AFS reserve RM' 000

+ 5% - 5%

247 (247)

197 (152)

49 (45)

+ 5% - 5%

454 (516)

419 (480)

36 (36)

+ 5% - 5%

291 (291)

239 (239)

52 (52)

+ 5% - 5%

854 (854)

799 (799)

55 (55)

+ 5% - 5%

2,211 (2,211)

2,093 (2,076)

118 (135)

+ 5% - 5% 139

1,339 (1,383)

1,262 (1,302)

77 (81)

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 36. Financial Risk (cont'd.) (c) Market Risk (Contd.) Equity risk (cont'd.) Changes in variable Investment-linked fund 31 March 2012 Market Indices Bursa Malaysia Bursa Malaysia 31 March 2011 Market Indices Bursa Malaysia Bursa Malaysia Property Risk 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. 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. Impact on asset RM' 000 Impact on AFS reserve RM' 000 Impact on Profit before tax RM' 000

+ 5% - 5%

300 (300)

300 (300)

+ 5% - 5%

228 (228)

228 (228)

37. Operational Risk 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. The related related parties parties and andtheir theirrelationship relationship with the the Company Company asas of of 31 31 140 with

593075-U Takaful Ikhlas Sdn. Bhd. (Incorporated in Malaysia) 38. Shariah Non-compliance The related related parties parties Risk and andtheir theirrelationship relationship with with the the Company Company asas of of 31 31 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. 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.

39. Compliance Risk 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. Consequently, the exposure to this risk can damage the Company's reputation, lead to legal or regulatory sanctions and/or financial loss. 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.

40. Dividend Proposed but not recognised as a liability as at 31 March: 2012 RM'000 Dividends on ordinary shares, subject to shareholders' approval at the AGM: - Final tax exempt (single-tier) dividend for 2012: 1.70 sen (2011: Nil) per share 2011 RM'000

5,000

At the forthcoming Annual General Meeting, a final single tier dividend in respect of the current financial year ended 31 March 2012 of 1.7% based on the issued and paid-up share capital of 295,000,000 ordinary shares at the date of this report, amounting to a total dividend of RM5,000,000, will be proposed for shareholder's approval. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend, if approved by the shareholder, will be accounted for in the shareholder's equity as an appropriation of retained profits in the next financial year ending 31 March 2013.

141