AmFAMILY TAKAFUL BERHAD 931074-V - AmMetLife TAKAFUL BERHAD 931074-V (Incorporated in Malaysia)...

AmFAMILY TAKAFUL BERHAD

931074-V

(Incorporated in Malaysia)

Directors' Report and Audited Financial Statements

31 March 2013

931074-V

AmFamily Takaful Berhad


Contents Page

Directors' report 1 - 13

Statement by directors 14

Statutory declaration 14

Independent auditors' report 15 - 16

Report of the Shariah Committee 17 - 19

Statements of comprehensive income 20 - 22

Statements of financial position 23 - 24

Statements of changes in equity 25

Statements of cash flows 26 - 27

Notes to the financial statements 28 - 117

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Directors' report

Principal activity

Results

RM

Net loss for the financial year (8,782,681)

Dividend

Issue of shares and debentures

The Company has not issued any new shares or debentures during the financial year.

Share options

In the opinion of the directors, the results of the operations of the Company during the financial

year were not substantially affected by any item, transaction or event of a material and unusual

nature.

No dividend has been paid or declared by the Company during the year. The directors do not

recommend any dividend payment in respect of the current financial year.

There were no options granted during the financial year by the Company to any parties to take up

unissued shares of the Company.

The directors hereby present their report together with the audited financial statements of the

Company for the financial year ended 31 March 2013.

No shares have been issued during the financial year by virtue of the exercise of any option to

take up unissued shares of the Company. As at the end of the financial year, there were no

unissued shares of the Company under options.

The Company is principally engaged in managing family takaful business including group takaful

and investment-linked business. There has been no significant change in the nature of these

principal activities during the financial year.

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

than those disclosed in the financial statements.

1

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Directors

Tan Sri Azman Hashim (Chairman)

(Non-independent, non-executive director)

Datuk Lakshmanan Meyyappan

(Independent, non-executive director)

Datuk Wira (Dr.) Ameer Ali Bin Mydin


Mr Cho Horng Fatt


Datuk Mohamed Azmi Bin Mahmood


Mr John Van Der Wielen


Mr Tan Lai Hing (appointed on 01.08.2012)


Mr Loh Chen Peng (appointed on 28.08.2012)


Mr Cheah Tek Kuang (resigned on 01.04.2013)


Mr Richard Patrick George Duxbury (resigned on 24.05.2012)


Directors' benefits

No director of the Company 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 as shown in Notes 10 and 25 to the financial statements) by reason of a contract made

by the Company or a related corporation with any director or with a firm in which he is a member

or with a company in which he has a substantial financial interest, except for the related party

transactions as shown in Note 25 to the financial statements.

The names of the directors of the Company in office since the date of the last report and at the

date of this report are:

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,

other than those arising from the scheme shares and options granted pursuant to the Executives‟

Share Scheme of AMMB Holdings Berhad, the ultimate holding Company.

2

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Directors' interests

Direct interest:

In the ultimate holding company, AMMB Holdings Berhad (“AMMB”)

Shares Bought/

As at vested/ As at

01.04.2012 exercised Sold 31.03.2013

Cheah Tek Kuang 136,000 564,800 572,000 128,800

Datuk Mohamed Azmi Bin

Mahmood 200,000 344,000 144,000 400,000

As at As at

Scheme shares* 01.04.2012 Granted Vested 31.03.2013

Cheah Tek Kuang 492,400 223,400 283,500 8,300 424,000


Mahmood 237,400 109,900 134,000 4,400 208,900

As at As at

Shares under options* 01.04.2012 Granted Vested 31.03.2013

Cheah Tek Kuang 558,200 - 281,300 49,600 227,300


Mahmood 312,900 - 150,100 26,400 136,400

Number of shares pursuant to AMMB Executives'


Forfeited^

According to the Register of Directors' Shareholdings, the interests of the directors in office at the

end of the financial year in shares and options in the ultimate holding company during the

financial year are as follows:

Number of ordinary shares of RM1.00 each ("shares")

Forfeited^

Share Scheme

Share Scheme

3

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Directors' interests (cont'd.)

In the ultimate holding company, AMMB (cont'd.)

Options* As at As at

(vested account) 01.04.2012 Vested 31.03.2013

Cheah Tek Kuang - 281,300 281,300 -


Mahmood 160,200 150,100 210,000 100,300

Notes:

*

^

As at As at

Shares 01.04.2012 Bought Sold 31.03.2013

Tan Sri Azman Amcorp 1,839,701 13,500,000

Hashim Group Berhad

Share Scheme

494,120,255

By virtue of Tan Sri Azman Hashim‟s shareholding in the ultimate holding company, AMMB,

through his interest in the corporate shareholder, Amcorp Group Berhad, he is deemed to have

interests in the shares of the Company and its related corporations, to the extent the ultimate

holding company has an interest.

505,780,554

Number of shares

The vesting of the Scheme Shares and/or the entitlement to exercise the Options are

conditional upon the satisfaction of the service condition and performance targets of AMMB

Group, and all other conditions as set out in the By-Laws of AMMB Executives' Share

Scheme.


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

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

Exercised

Forfeited due to non-vesting of Long Term Incentive award pursuant to the By-Laws of AMBB

Executives' Share Scheme.

4

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Corporate governance

The Board currently comprises eight (8) directors with wide-ranging skills and experience. The

Board is represented by four (4) non-independent, non-executive directors and four (4)

independent, non-executive directors of calibre, and with necessary skills and diverse corporate

experience to ensure that strategies proposed by the management are fully discussed and

examined, as well as to take into account the long term interests of various stakeholders. During

the year, the Board has met nine (9) times.

The Board of Directors (“the Board”) remains fully committed in ensuring that the principles and

best practices in corporate governance are observed in the Company. The Board supervises the

management of the Company in business policies and affairs with the goal of enhancing

shareholders‟ value.

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

practices that are consistent with the principles prescribed under BNM's Guidelines,

BNM/RH/GL/004-1 Guidelines on Directorship for Takaful Operators and BNM/RH/GL/003-2

Prudential Framework of Corporate Governance for Insurers.

Board responsibilities

Board activities

All directors review Board reports prior to the Board meetings. The reports are issued with

sufficient time to enable the directors to obtain further explanations, where necessary, before the

meetings.

The Board will meet regularly to carry out its duties and responsibilities, with additional Board

meetings being convened, whenever required.

The Board addresses key matters concerning strategy, finance, organisation structure, business

development, human resource and establishes guidelines for overall business, risk and control

policies, capital allocation as well as approves all key business developments.

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Corporate governance (cont'd.)

Membership and Board Meetings for the financial year ended 31 March 2013

Members

Tan Sri Azman Hashim (Chairman) 9 / 9

Datuk Lakshmanan Meyyappan 8 / 9

Datuk Wira (Dr.) Ameer Ali Bin Mydin 9 / 9

Mr Cho Horng Fatt 9 / 9

Datuk Mohamed Azmi Bin Mahmood 7 / 9

Mr John Van Der Wielen 7 / 9

Mr Tan Lai Hing (appointed on 01.08.2012) 4 / 5

Mr Loh Chen Peng (appointed on 28.08.2012) 5 / 5

Mr Cheah Tek Kuang (resigned on 01.04.2013) 7 / 9

Mr Richard Patrick George Duxbury (resigned on 24.05.2012) 1 / 1

Board Committees

(1) Nomination Committee

(2) Remuneration Committee

(3) Risk Management Committee

(4) Audit & Examination Committee

(5) Investment Committee

The Board has also adopted a policy for induction and education of directors. The program is to

provide essential and comprehensive information to a new director in order for him to be familiar

with relevant takaful industry regulatory requirements and the Company‟s nature of business. The

directors may also request independent professional advice, at the Company‟s expense. The

Company Secretary, to whom the directors have independent access, assists the Board and

keeps it appraised of relevant laws and regulations.

The Board delegates certain responsibilities to the Board Committees. The Committees which

were set up to assist the Board in certain areas of deliberation are as follows:

Number of Meetings (Attended/Held)

Board activities (cont'd.)

In addition, the Board decides on matters reserved specifically for its decision, including the

approval of corporate plans and budgets, acquisitions and disposals of assets that are material to

the Company, major investments, changes to the management and control structure of the

Company, including key policies, procedures and authority limits.

6

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Board Committees (cont'd.)

Nomination Committee

The functions of the Committee are to:

(a)

(b)

(c)

(d)

Membership and Meetings of the Nomination Committee for the financial

year ended 31 March 2013

Members

Datuk Lakshmanan Meyyappan (Chairman) 6 / 6




Mr Cheah Tek Kuang (ceased as member w.e.f 01.04.2013) 5 / 6


review the composition of the Board and Committees of the Board during the financial year

and ensure that the recommendations have been implemented by the Board during the

financial year.

recommend and assess the nominees for new appointments of directors, the various Board

Committees‟ membership as well as the nominees for the Chief Executive Officer ("CEO")

position including assessing the directors and CEO proposed for reappointment, before an

application for approval is submitted to BNM;

The Nomination Committee comprises three (3) independent, non-executive directors and one (1)

non-independent, non-executive director of the Board with mixed skills, experience and

competencies for the effectiveness of the Committee.

establish minimum requirements for the Board and the CEO to perform their responsibilities

effectively and review the overall composition of the Board in terms of appropriate size,

structure, mix of skills and experience and other qualities and competencies, besides the

balance between executive, non-executive and independent directors;


establish a mechanism for formal assessment of the effectiveness of the Board, the

contribution of the Board‟s various Committees and the performance of the CEO; and

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Remuneration Committee


(a)

(i)

(ii)

(iii)

(iv)

(b)

(i) are based on an objective consideration and approval by the full Board;

(ii)

(iii)

(iv) are competitive and consistent with the Company‟s culture, objective and strategies.

The Remuneration Committee comprises three (3) independent, non-executive directors and one

(1) non-independent, non-executive director.

determine and recommend to the Board the framework or broad policy for the remuneration

of the directors, CEO, senior management and other members of the staff. The remuneration

policy:

is documented and approved by the full Board and any changes thereto are subjected to

the endorsement of the full Board;

are not decided by the exercise of sole discretion of any individual or restricted group of

individuals; and

is balanced against the need to ensure that the funds of the Company are not used to

subsidise excessive remuneration packages.

take due consideration of the assessments of the Nomination Committee of the

effectiveness and contribution of the directors and CEO;

recommend specific remuneration packages for directors, CEO and senior management.

The remuneration packages:

reflects the experience and level of responsibility borne by individual directors, the CEO

and senior management;

is sufficient to attract and retain directors, CEO and senior management of calibre

needed to manage the Company successfully; and

8

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Remuneration Committee (cont'd.)

(c)

Membership and Meetings of the Remuneration Committee for the financial


Members

Datuk Wira (Dr.) Ameer Ali Bin Mydin (Chairman) 4 / 4




Mr Cheah Tek Kuang (ceased as member w.e.f 01.04.2013) 3 / 4


Risk Management Committee


(a)

(b)

(c)

(d)

reviewing and recommending Risk Management strategies, policies and risk tolerance for the

board‟s approval;


reviewing and assessing the adequacy of Risk Management policies and framework for

identifying, measuring, monitoring and controlling risks as well as the extent to which these

are operating effectively;

The Committee currently comprises three (3) independent, non-executive directors and two (2)

non-independent, non-executive directors. The primary objective of the Risk Management

Committee is to oversee senior management‟s activities in managing the key risk areas of the

Company and to determine that the risk management process is in place and functioning

effectively.

ensure the remuneration packages for directors are linked to their levels of responsibilities

undertaken and contributions to the effective functioning of the Board.

ensuring that adequate infrastructure, resources and systems are in place for an effective

Risk Management i.e. ensuring that the staff responsible for implementing Risk Management

systems perform those duties independently of the takaful operator‟s risk taking activities;

and

reviewing the investment portfolio‟s risk exposure and risk management activities and revise

the investment policy and guidelines to ensure investment management activities conform to

current risk appetite.

9

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Risk Management Committee (cont'd.)

Membership and Meetings of the Risk Management Committee for the financial


Members

Mr Cho Horng Fatt (Chairman) 9 / 9



Datuk Mohamed Azmi Bin Mahmood 8 / 9



Audit and Examination Committee

(i)

(ii)

fulfilling the statutory and fiduciary responsibilities of the Board; and

The AEC also determines that the Company has adequate established policies, procedures and

guidelines as well as operating and internal controls, and that they are being complied with and

are operating effectively in promoting efficiency and proper conduct including protection of the

assets of the Company.

The Board has appointed the Audit and Examination Committee (“AEC”) to assist in discharging

its duties of maintaining a sound system of internal control to safeguard the Company‟s assets

and shareholders‟ investments. The Committee currently comprises four (4) independent, non-

executive directors and one (1) non-independent, non-executive director.


The primary objective of the AEC is to provide assistance to and review and report to the Board in

relation to:

monitoring of the accounting and financial reporting practices of the Company.

10

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Audit and Examination Committee (cont'd.)

Membership and Meetings of the Audit and Examination Committee for the financial


Members

Mr Loh Chen Peng (Chairman) (appointed on 28.08.2012) 2 / 2




Mr. Tan Lai Hing (appointed on 01.08.2012) 2 / 2


Investment Committee

The functions of the Committee are:

(a)

(b)

(c)

(d)

Membership and Meetings of the Investment Committee for the financial


Members

Datuk Mohamed Azmi Bin Mahmood (Chairman) 7 / 7




reviewing the investment performances of the investment portfolio by the internal investment

department and external fund managers;

The Committee currently comprises one (1) independent, non-executive director and two (2) non-

independent, non-executive directors. The primary objective of the Investment Committee is to

oversee Investment Management‟s activities in managing the investment funds of the takaful

operator and that the risk management and compliance process are effective.

presenting the investment outlook and strategies with regards to the various asset classes of

all funds under management; and

reviewing the risk management activities and the portfolio risk exposures.



reviewing and recommending investment strategies within approved risk levels for the

Committee‟s approval;

11

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Issuance of shares

Other statutory information

(a)

(i)

(ii)

(b)

(i)

(ii)

(c)

(d)

(e) At the date of this report, there does not exist:

(i)

(ii)

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

render:

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

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

Company were made out, the directors took reasonable steps:

it necessary to write off any bad debts or to make any provision for doubtful debts; and

to ensure that any current assets which were unlikely to realise their values as shown in

the accounting records in the ordinary course of business had been written down to an

amount which they might be expected so to realise.

There were no debentures issued during the financial year.

There were no changes in the authorised, issued and paid-up capital of the Company during the

financial year.

At the date of this report, the directors are not aware of any circumstances which have arisen

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

Company misleading or inappropriate.

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.

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 there were

no known bad debts and that no provision for doubtful debts was required; and

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

misleading.

any contingent liability in respect of the Company which has arisen since the end of the

financial year.

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Other statutory information (cont'd.)

(f) In the opinion of the directors:

(i)

(ii)

(g)

Significant event

Auditors

The auditors, Ernst & Young, have expressed their willingness to continue in office.

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

Tan Sri Azman Hashim Datuk Mohamed Azmi Bin Mahmood

Kuala Lumpur, Malaysia

Date: 30 May 2013

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

Company were made out, the directors took reasonable steps to ascertain that there was

adequate provision made for its takaful contract liabilities in accordance with the Guidelines

issued by Bank Negara Malaysia.

no contingent liability or other liability has 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 affect the ability of the Company to meet its obligations as and when they fall

due; and

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.

For the purpose of paragraphs (e)(ii) and (f)(i), contingent or other liabilities do not include

liabilities arising from contracts of takaful underwritten in the ordinary course of business of

the Company.

Details of the significant event during the financial year is disclosed in Note 31 to the financial

statements.

13

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Statement by directors

Pursuant to Section 169(15) of the Companies Act, 1965

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

Tan Sri Azman Hashim Datuk Mohamed Azmi Bin Mahmood


Date: 30 May 2013

Statutory declaration

Pursuant to Section 169(16) of the Companies Act, 1965

Subscribed and solemnly declared by the )

abovenamed Wan Zamri Wan Zain )

at Kuala Lumpur in Wilayah Persekutuan )

on 30 May 2013 ) Wan Zamri Wan Zain

Before me,

We, Tan Sri Azman Hashim and Datuk Mohamed Azmi Bin Mahmood, being two of the

directors of AmFamily Takaful Berhad, do hereby state that, in the opinion of the directors, the

accompanying financial statements set out on pages 20 to 117 are properly drawn up in

accordance with Malaysian Financial Reporting Standards, International Financial Reporting

Standards and the requirements of the Companies Act, 1965 in Malaysia and in compliance with

Shariah requirements so as to give a true and fair view of the financial position of the Company

as at 31 March 2013 and of its financial performance and the cash flows for the financial year

ended 31 March 2013.

I, Wan Zamri Wan Zain, being the officer primarily responsible for the financial management of

AmFamily Takaful Berhad, do solemnly and sincerely declare that the accompanying financial

statements set out on pages 20 to 117 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.

14

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Independent auditors' report to the member of



Report on the financial statements We have audited the financial statements of AmFamily Takaful Berhad, which comprise the statement of financial position as at 31 March 2013 of the Company, and the statement of comprehensive income, statement of changes in equity and statement of cash flows of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 20 to 117. Directors’ responsibility for the financial statements The directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine is 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 about 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 judgment, 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 Company’s 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 Company’s 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.

15

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Independent auditors' report to the member of

AmFamily Takaful Berhad (cont'd.)


Ernst & Young Brandon Bruce Sta Maria

AF: 0039 No. 2937/09/13 (J)

Chartered Accountants Chartered Accountant


Date: 30 May 2013

Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Company as at 31 March 2013 and of its financial performance and cash flows for year ended 31 March 2013 in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. 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.

16

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Report of the Shariah Committee

Shariah committee

Assoc. Prof. Dr. Azman Mohd Noor

Assoc. Prof. Dr. Amir Husin Mohd Nor

Assoc. Prof. Datin Dr. Noor Naemah Abd Rahman

Assoc. Prof. Dr. Nurdianawati Irwani Abdullah

Dr. Adnan Yusoff

The main duties and responsibilities of the Shariah Committee are to:

(a) advise the Board on Shariah matters;

(b)

(c)

(d) ensure that the products of the Company comply with Shariah principles;

(e)

(f)

(g)

(h)

Name

Assoc. Prof. Dr. Azman Mohd Noor (Chairman) 9 / 9

Assoc. Prof. Dr. Amir Husin Mohd Nor 8 / 9

Assoc. Prof. Datin Dr. Noor Naemah Abd Rahman 9 / 9

Assoc. Prof. Dr. Nurdianawati Irwani Abdullah 9 / 9

Dr. Adnan Yusoff 6 / 9

act as focal point/contact of reference in relation to any Shariah issues referred to the Shariah

Advisory Council of Bank Negara Malaysia.

provide necessary assistance to the related parties in the Company on Shariah matters; and

The Company is advised by a Shariah Committee, whose composition since the date of

incorporation and at the date of this report are as follows:


The Shariah Committee will meet at minimum six (6) times a year. The Shariah Committee met

nine (9) times during the financial year. The attendance of members at the Shariah Committee

meetings is as follows:

provide input to the Company on Shariah matters in order for the Company to comply with

Shariah principles at all times;

endorse Shariah policies and procedures prepared by the Company and to ensure that the

contents do not contain any elements which are not in line with Shariah;

assess the work carried out by Shariah review and Shariah audit in order to ensure

compliance with Shariah matters;

provide assessment of Shariah compliance and assurance information in the annual report;

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Report of the Shariah Committee (cont'd.)

Statement by the Shariah Committee

In the name of Allah, the most Beneficent, the most Merciful.

Assalamualaikum Wa Rahmatullahi Wabarakatuh.

In our opinion:

(a)

(b)

Wassalamualaikum Wa Rahmatullahi Wabarakatuh.

We pray to Allah the Almighty to grant us success and the path of straight-forwardness.

Praise to Allah, the Lord of the Worlds and peace and blessings be upon our Prophet Muhammad,

and on his family members and companions.

In compliance with the Shariah Committee Terms of Reference of AmFamily Takaful Berhad we

are required to submit the following report:

We have reviewed the policies, products and contracts relating to the transactions and

applications executed by AmFamily Takaful Berhad during the financial year ended 31 March

2013. We have also conducted our review to form an opinion as to whether AmFamily Takaful

Berhad has complied with Shariah rules and principles and also with the Shariah resolutions

issued by us.

AmFamily Takaful Berhad‟s Management is responsible for ensuring that AmFamily Takaful

Berhad conducts its business in accordance with Shariah rules and principles. It is our

responsibility to form our independent opinion, based on our review of the operations of AmFamily

Takaful Berhad and to report to you.

We conducted our review which included examining, on a test basis, each type of transaction, the

relevant documents and procedures adopted by AmFamily Takaful Berhad.

We planned and performed our view so as to obtain all the information and explanations which we

consider necessary in order to provide us with sufficient evidence to give reasonable assurance

that AmFamily Takaful Berhad has not violated the Shariah rules and principles.

the contracts, transactions and dealings entered into by AmFamily Takaful Berhad during the

financial year ended 31 March 2013 that we have reviewed are in compliance with Shariah

rules and principles; and

the allocation of fees or amount relating to investment fund and risk fund accounts conform to

the bases that have been approved by us in accordance with Shariah rules and principles.

This opinion is rendered based on what has been presented to us by the Management of

AmFamily Takaful Berhad and its Shariah Department.

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Report of the Shariah Committee (cont'd.)

Statement by the Shariah Committee (cont'd.)

Signed by the Shariah Committee,

Assoc. Prof. Dr. Azman Mohd Noor

Chairman

Assoc. Prof. Datin Dr. Noor Naemah Abdul Rahman

Member

Assoc. Prof. Dr. Amir Husin Mohd Nor

Member

Assoc. Prof. Dr. Nurdianawati Irwani Abdullah

Member

Dr. Adnan Yusoff

Member


Date: 30 May 2013

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Statement of comprehensive income for the year ended 31 March 2013

Family Family

Note Takaful takaful Takaful takaful

operator fund Company operator fund Company

RM RM RM RM RM RM

Operating revenue 4 14,904,889 41,159,626 44,302,477 937,809 10,301,974 1,153,217

Gross contributions - 38,461,257 38,461,257 - 288,502 288,502

Net creation of units - 1,996,928 1,996,928 - 10,000,000 -

Contributions ceded to retakaful

operator - (780,450) (780,450) - (1,206) (1,206)

Net contributions 5 - 39,677,735 39,677,735 - 10,287,296 287,296

Investment income 6 3,142,851 701,441 3,844,292 851,243 13,472 864,715

Realised gains 7 157,436 215,661 373,097 - - -

Fair value gain/(loss) on

financial assets at FVTPL - 325,426 248,603 - (88,772) (11,949)

Fee and commission income 8 11,762,038 - - 86,566 - -

Other operating income 9 160,886 - 35,494 - - -

Other revenue 15,223,211 1,242,528 4,501,486 937,809 (75,300) 852,766

Gross benefits and claims paid - (468,042) (468,042) - - -

Claims ceded to retakaful - 202,360 202,360 - - -

Gross change to certificate liabilities - (28,974,280) (28,897,457) - (10,141,426) (218,249)

Change in certificate liabilities

ceded to retakaful operator - 147,486 147,486 - 1,206 1,206

Net benefits and claims - (29,092,476) (29,015,653) - (10,140,220) (217,043)

26.01.2011 to 31.03.201201.04.2012 to 31.03.2013

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Statement of comprehensive income for the year ended 31 March 2013 (cont'd.)

Family Family



RM RM RM RM RM RM

Fee and commission expenses 8 (4,029,243) (11,762,038) (4,029,243) (28,860) (86,566) (28,860)

Management expenses 10 (16,115,090) - (16,115,090) (11,274,092) - (11,274,092)

Change in expense liabilities 18 (3,725,000) - (3,725,000) (675,000) - (675,000)

Other operating expenses 9 (84,522) (153,576) (112,706) - (1,718) (1,718)

Other expenses (23,953,855) (11,915,614) (23,982,039) (11,977,952) (88,284) (11,979,670)

Operating loss (8,730,644) (87,827) (8,818,471) (11,040,143) (16,508) (11,056,651)

Transfer of surplus to participants fund 17 - (246,825) (246,825) - - -

Loss before taxation (8,730,644) (334,652) (9,065,296) (11,040,143) (16,508) (11,056,651)

Taxation 11 361,381 (78,766) 282,615 - (1,077) (1,077)

Net loss for the year / period (8,369,263) (413,418) (8,782,681) (11,040,143) (17,585) (11,057,728)

Loss per share (sen) - Basic 23 (0.09) (44.96)

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

01.04.2012 to 31.03.2013 26.01.2011 to 31.03.2012

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Statement of comprehensive income for the year ended 31 March 2013 (cont'd.)

Family Family



RM RM RM RM RM RM

Net loss for the year / period (cont'd.) (8,369,263) (413,418) (8,782,681) (11,040,143) (17,585) (11,057,728)

Other comprehensive income:

Available-for-sale fair value reserve:

Gain/(loss) on fair value changes 1,896,716 - 1,364,939 (293,756) - (370,579)

Realised gain transferred to income

statement (157,436) - (157,436) - - -

Deferred tax relating to components

of other comprehensive income 19 (361,381) - (361,381) - - -

Other comprehensive income for the

year/period, net of tax 1,377,899 - 846,122 (293,756) - (370,579)

Total comprehensive loss for the

year/period (6,991,364) (413,418) (7,936,559) (11,333,899) (17,585) (11,428,307)


01.04.2012 to 31.03.2013 26.01.2011 to 31.03.2012

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Statement of financial position as at 31 March 2013

Family Family



RM RM RM RM RM RM

Assets

Motor vehicle and equipment 12 318,784 - 318,784 30,149 - 30,149

Investments 13 89,028,738 38,640,435 117,060,573 91,622,183 9,893,714 91,515,897

Takaful receivables 14 - 1,654 1,654 - - -

Retakaful assets 15 - 351,052 351,052 - 1,206 1,206

Other receivables 16 1,375,918 1,475,980 1,952,865 2,509,775 28,661 2,490,295

Cash and cash equivalents 43,000 2,897,677 2,940,677 29,139 275,050 304,189

Total assets 90,766,440 43,366,798 122,625,605 94,191,246 10,198,631 94,341,736

Liabilities and equity

Liabilities

Participants' fund 17 - 248,806 248,806 - - -

Takaful certificate liabilities 15 - 39,391,918 29,391,918 - 10,141,426 218,249

Expense liabilities 18 4,400,000 - 4,400,000 675,000 - 675,000

Deferred tax liabilities 19 - 19,125 19,125 - - -

Takaful payables 20 41,427 2,803,447 2,844,874 - 25,338 25,338

Other payables 21 4,650,276 843,690 5,025,936 4,850,145 30,790 4,850,379

Provision for taxation - 59,812 59,812 - 1,077 1,077

Total liabilities 9,091,703 43,366,798 41,990,471 5,525,145 10,198,631 5,770,043

As at 31.03.2013 As at 31.03.2012

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Statements of financial position as at 31 March 2013 (cont'd.)

Family Family



RM RM RM RM RM RM

Equity

Share capital 22 100,000,000 - 100,000,000 100,000,000 - 100,000,000

Available-for-sale fair value

reserves 1,084,143 - 475,543 (293,756) - (370,579)

Accumulated losses (19,409,406) - (19,840,409) (11,040,143) - (11,057,728)

Total equity attributable to

owners of the Company 81,674,737 - 80,635,134 88,666,101 - 88,571,693

Total liabilities and equity 90,766,440 43,366,798 122,625,605 94,191,246 10,198,631 94,341,736


As at 31.03.2013 As at 31.03.2012

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Statement of changes in equity for the year ended 31 March 2013

Available-

for-sale

Share fair value Accumulated

capital reserves losses Total equity

RM RM RM RM

At date of incorporation 10 - - 10

on 26 January 2011

Increase during the 99,999,990 - - 99,999,990

period (Note 22)

Total comprehensive loss

for the period - (370,579) (11,057,728) (11,428,307)

At 31 March 2012 100,000,000 (370,579) (11,057,728) 88,571,693

At 1 April 2012 100,000,000 (370,579) (11,057,728) 88,571,693

Total comprehensive loss

for the year - 846,122 (8,782,681) (7,936,559)

At 31 March 2013 100,000,000 475,543 (19,840,409) 80,635,134


Non-distributable

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Statement of cash flows for the year ended 31 March 2013

01.04.2012 26.01.2011

to 31.12.2013 to 31.03.2012

RM RM

Cash flows from operating activities

Loss before taxation (9,065,296) (11,056,651)

Adjustments for:

Depreciation of motor vehicle and equipment 101,488 5,673

Impairment of motor vehicle 75,787 -

Net amortisation of premiums on investments 41,244 704

Profit on investment accounts (3,773,431) (865,419)

Gross dividend income (112,105)

Gains on disposal of AFS financial assets (157,436) -

Gain on disposal of financial assets at FVTPL (215,661) -

Fair value (gain)/loss on financial assets at FVTPL (248,603) 11,949

Increase in expense liabilities 3,725,000 675,000

Operating loss before working capital changes (9,629,013) (11,228,744)

Decrease/(increase) in placements and deposits 16,302,806 (66,891,277)

Proceeds from disposal of investments 369,445 -

Purchase of other investments (40,428,970) (25,007,852)

Increase in takaful receivables (1,654) -

Decrease/(increase) in other receivables 889,909 (2,287,129)

Increase in takaful payables 2,819,536 25,338

Increase in other payables 175,557 4,850,379

Increase in participants' fund 248,982 -

Increase in takaful certificate liabilities 28,823,823 217,043

(429,579) (100,322,242)

Profit income received 3,420,949 662,253

Gross dividend income received 112,105 -

Taxation paid (1,077) -

Net cash flow generated from/(used in)

operating activities 3,102,398 (99,659,989)

Cash flows from investing activity

Purchase of motor vehicle and equipment, representing net

cash flow used in investing activity (465,910) (35,822)

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Statement of cash flows for the year ended 31 March 2013 (cont'd.)

01.04.2012 26.01.2011

to 31.12.2013 to 31.03.2012

RM RM

Cash flows from financing activity

Issuance of ordinary shares, representing net cash flow

generated from financing activity - 99,999,990

Net increase in cash and cash equivalents 2,636,488 304,179

Cash and cash equivalents at beginning of the year/

date of incorporation 304,189 10

2,940,677 304,189

Cash and cash equivalents comprise:

Cash and bank balances of:

Takaful operator 43,000 29,139

Family takaful fund 2,897,677 275,050

2,940,677 304,189


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Notes to the financial statements - 31 March 2013

1. Corporate information

2. Significant accounting policies

2.1 Basis of preparation

The Company is principally engaged in the activity of managing family takaful business

including group takaful and investment-linked business.

There has been no significant change in the nature of this principal activity during the financial

year.

The Company is a public limited liability company, incorporated on 26 January 2011 under the

Companies Act 1965 and Takaful Act 1984 and domiciled in Malaysia. The registered office

and principal place of business of the Company are located at 22nd Floor, Bangunan

AmBank Group, No. 55 Jalan Raja Chulan, 50200 Kuala Lumpur and 12th Floor, Bangunan

AmAssurance, No. 1 Jalan Lumut, 50400 Kuala Lumpur respectively.

The immediate holding company is AMAB Holdings Sdn. Bhd, a company incorporated in

Malaysia. The ultimate holding company is AMMB Holdings Berhad ("AMMB") a public listed

company incorporated in Malaysia and listed on Main Market of Bursa Malaysia.

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

with a resolution of the directors on 30 May 2013.

The financial statements of the Company have been prepared in accordance with

Malaysian Financial Reporting Standards ("MFRS"), International Financial Reporting

Standards ("IFRS") and the requirements of the Companies Act, 1965 in Malaysia. In

the previous financial period, the financial statements of the Company were prepared in

accordance with Financial Reporting Standards ("FRS") in Malaysia as modified by

Bank Negara Malaysia ("BNM") Guidelines. These are the Company first annual

financial statements prepared in accordance with MFRS.

The financial statements of the Company have been prepared under the historical cost

convention, unless otherwise stated in the accounting policies. The financial statements

are presented in Ringgit Malaysia ("RM"), which is the Company's functional currency,

and all values are rounded to the nearest Ringgit Malaysia (RM).

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2. Significant accounting policies (cont'd.)

2.1 Basis of preparation (cont'd.)

Takaful operators and its funds

In preparing the Company-level financial statements, the balances and transactions of

the takaful operator fund are amalgamated and combined with those of the family

takaful fund. Interfund balances, transactions and unrealised gains and losses are

eliminated in full during amalgamation. The accounting policies adopted for the takaful

operator and family takaful fund are uniform for like transactions and events in similar

circumstances.

The family takaful fund is consolidated and amalgamated from the date of control and

continue to be consolidated until the date such control ceases which will occur when the

Company's license to manage takaful business is withdrawn or surrendered.

Under the concept of takaful, individuals make contributions to a pool which is managed

by a third party with the overall aim of using the monies to aid fellow participants in

times of need. Accordingly, as a takaful operator, the Company manages the family

takaful fund in line with the principles of Wakalah (agency), which is the business model

used by the Company. Under the Wakalah model, the takaful operator is not a

participant in the fund but manages the fund (including the relevant assets and

liabilities) towards the purpose outlined above.

In accordance with the Takaful Act 1984, the assets and liabilities of the family takaful

fund are segregated from those of the takaful operator: a concept known as

segregation of funds. Accordingly, in prior year, the financial statements of the takaful

operator presented separate statements of financial position, income statements and

statements of comprehensive income for the family takaful fund to clearly segregate the

assets, liabilities, income and expenses of the takaful operator from those of the family

takaful fund which it manages but does not own. This was a modification to Financial

Reporting Standards by Bank Negara Malaysia as permitted uder Section 41 of the

Takaful Act 1984 in Malaysia.

Effective this year, in full compliance with MFRS 127 Consolidated and Separate

Financial Statements , the assets, liabilities, income and expenses of the family takaful

fund are consolidated with those of the takaful operator to represent the control

possessed by the operator over the financial and operating policies of the fund. Upon

consolidation, the related interfund balances and transactions are eliminated in full.

The inclusion of separate financial information of the family takaful fund and the takaful

operator together with the consolidated financial information of the Company in the

statement of financial position and the statement of comprehensive income as well as

certain relevant notes to the financial statements represents additional supplementary

information required for purposes of complying with Bank Negara Malaysia reporting

requirements.

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2.2 Motor vehicle, equipment and depreciation

(a) Recognition and measurement

(b) Subsequent costs

(c) Depreciation

Motor vehicle 20%

Office equipment 20%

All items are initially recorded at cost. The cost of an item is recognised as an

asset if, and only if, it is probable that future economic benefits associated with the

item will flow to the Company and the cost of the item can be measured reliably.

Only assets costing above RM500 per unit will be capitalised. Assets costing

RM500 and below per unit are charged to the income statement in the year of

purchase.

On disposal, the difference between net proceeds and the carrying amount is

recognised in the income statement.

Subsequent to initial recognition, assets are measured at cost less accumulated

depreciation and accumulated impairment losses. When significant parts of assets

are required to be replaced in intervals, the Company recognises such parts as

individual assets with specific useful lives and depreciation, respectively. All other

repairs and maintenance are recognised in the income statement as incurred.

Depreciation 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 rate:

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

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

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

future economic benefits embodied in the assets.

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2.3 Leases

(a) Classification

(b) Operating leases - company as lessee

2.4 Financial assets

(a) Initial recognition

(b) Classification and subsequent measurement

(i) Financial assets held at fair value through profit or loss ("FVTPL")

A lease is recognised as a finance lease if it transfers substantially to the Company

all the risks and rewards incidental to ownership. All leases that do not transfer

substantially all the risks and rewards are classified as operating leases.

Operating lease payments are recognised as an expense in the income statement

on a straight-line basis over the term of the relevant lease. The aggregate benefit

of incentives provided by the lessor is recognised as a reduction of rental expense

over the lease term on a straight-line basis.

Financial assets are recognised in the financial statements when, and only when,

the Company and the family takaful fund become a party to the contractual

provisions of the financial instrument.

A financial asset is recognised initially, at its fair value plus, in the case of a

financial asset not at fair value through profit or loss, transaction costs that are

directly attributable to the acquisition of the financial asset.

The Company determines the classification of its financial assets at initial

recognition and this depends on the purpose for which the financial assets were

acquired or originated.

The Company classifies its financial assets into the following measurement

categories:

This category comprises two sub-categories: financial assets held for trading

and those designated by Management as at fair value through profit or loss on

inception.

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2.4 Financial assets (cont'd.)

(b) Classification and subsequent measurement (cont'd.)

(i)

(1) Financial assets held for trading ("HFT")

(2) Financial assets designated at fair value through profit or loss

•

•

•

Financial assets held at fair value through profit or loss ("FVTPL")

(cont'd.)

A financial asset is classified as held for trading if it is acquired principally

for the purpose of selling it in the near term.

Financial assets may be designated at fair value through profit or loss

when the following criteria are met, and designation is determined on an

instrument by instrument basis:

the application of the fair value option eliminates or significantly

reduces a measurement or recognition inconsistency that would

otherwise arise from measuring assets on a different basis; or

the financial assets are part of a portfolio of financial instruments

which is managed and its performance evaluated on a fair value

basis; or

the assets include embedded derivatives and such derivatives are

required to be recognised separately.

Financial assets held at fair value through profit or loss are subsequently

carried at fair value, with gains and losses arising from changes in fair

value recognised in profit or loss. Net gains or net losses on financial

assets at fair value through profit or loss do not include exchange

differences, profit and dividend income. Exchange differences, profit and

dividend income on financial assets at fair value through profit or loss are

recognised separately in the income statement as part of other losses or

other income.

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(b) Classification and subsequent measurement (cont'd.)

(ii) Held-to-maturity investments ("HTM")

(iii) Loans and receivables ("LAR")

(iv) Available-for-sale financial assets ("AFS")

Financial assets with fixed or determinable payments and fixed maturity

are classified as HTM when the Company has the positive intention and

ability to hold the investment to maturity.

Subsequent to initial recognition, HTM investments are measured at

amortised cost using the effective profit method. Gains and losses are

recognised in the income statement when the HTM investments are

derecognised or impaired, and through the amortisation process.

Financial assets with fixed or determinable payments that are not quoted

in an active market are classified as loans and receivables.

Subsequent to initial recognition, loans and receivables are measured at

amortised cost using the effective profit method. Gains and losses are

recognised in the income statement when the loans and receivables are

derecognised or impaired, and through the amortisation process.

AFS financial assets are financial assets that are designated as available

for sale or are not classified in any of the three preceding categories.

After initial recognition, AFS financial assets are measured at fair value.

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

recognised in other comprehensive income, except that impairment

losses, foreign exchange gains and losses on monetary instruments and

profit calculated using the effective profit method are recognised in the

income statement. The cumulative gain or loss previously recognised in

other comprehensive income are reclassified to the income statement as

a reclassification adjustment when the financial asset is derecognised.

Profit calculated using the effective profit method is recognised in the

income statement.

Investments in equity instruments whose fair value cannot be reliably

measured are measured at cost less impairment loss.

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(c) Derecognition

2.5 Fair value of financial instruments

A financial asset is derecognised when the contractual right to receive cash flows

from the asset has expired or when the Company has transferred substantially all

risks and rewards of ownership. If substantially all the risks and rewards have been

neither retained nor transferred and the Company has retained control, the asset

continues to be recognised to the extent of the Company‟s continuing involvement.

On derecognition of a financial asset in its entirety, the difference between the

carrying amount and the sum of the consideration received and any cumulative

gain or loss that had been recognised in other comprehensive income and

accumulated in equity is recognised in the income statement.

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 at the end of each reporting year.

For investments in quoted unit trusts, fair value is determined by reference to published

net assets value.

The fair value of unquoted corporate bonds are derived by reference to prices provided

by Bondweb Pricing Agency Malaysia.

If the fair value of a financial asset cannot be measured reliably, the asset is measured

at cost, being the fair value of the consideration paid for the acquisition of the asset. All

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

the financial asset.

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2.6 Impairment of assets

(a) Financial assets

(i) Financial assets carried at amortised cost

The Company assesses at the end of each reporting date whether there is any

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

A financial asset or a group of financial assets is impaired and impairment losses

are incurred if, and only if, there is objective evidence of impairment as a result of

one or more events that occurred after the initial recognition of the asset (a loss

event), and that loss event (or events) has an impact on the estimated future cash

flows of the financial asset or group of financial assets that can be reliably

estimated.

Evidence of impairment may include indications that the debtor or a group of

debtors is experiencing significant financial difficulty, the probability that they will

enter bankruptcy or other financial reorganisation, default or delinquency in interest

or principal payments and where observable data indicates that there is a

measurable decrease in the estimated future cash flows, such as changes in

arrears or economic conditions that correlate with defaults.

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 to be performed at the end of

each reporting date.

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2.6 Impairment of assets (cont'd.)

(a) Financial assets (cont'd.)

(i) Financial assets carried at amortised cost (cont'd.)

(ii) AFS financial assets

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

amortised cost has been incurred, the amount of the impairment loss is

measured as the difference between the asset‟s carrying amount and the

present value of estimated future cash flows (excluding future expected credit

losses that have not been incurred) discounted at the financial asset‟s original

effective profit rate / yield. The carrying amount of the asset is reduced and the

loss is recorded in the income statement.

If, in a subsequent year, 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 the income

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

its amortised cost at the reversal date.

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 the

income statement, is transferred from equity or the family takaful fund to the

income statement.

Impairment losses on AFS equity investments are not reversed in the income

statement in the subsequent years. Increase in fair value, if any, subsequent to

impairment loss is recognised in other comprehensive income. For AFS debt

investments, impairment losses are subsequently reversed in the income

statement 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

income statement.

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2.6 Impairment of assets (cont'd.)

(b) Non-financial assets

The carrying amounts of non-financial assets are reviewed at the end of each

reporting date to determine whether there is any indication of impairment. If any

such indication exists, then the asset‟s recoverable amount is estimated. For the

purpose of impairment testing, assets are grouped together into the smallest group

of assets that generates cash inflows from continuing use that are largely

independent of the cash inflows of other assets or groups of assets (the “cash-

generating unit”).

The recoverable amount of an asset or cash-generating unit is the greater of its

value in use and its fair value less costs to sell. 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. An impairment loss is recognised if the carrying

amount of an asset or its cash-generating unit exceeds its recoverable amount.

Impairment losses are recognised in the income statement. Impairment losses

recognised in respect of cash generating units are allocated first to reduce the

carrying amount of other assets in the unit (groups of units) on a pro rata basis.

Impairment losses recognised in prior years are assessed at the end of each

reporting date for any indications that the loss has decreased or no longer exists.

An impairment loss is reversed if there has been a change in the estimates used to

determine the recoverable amount since the last impairment loss was recognised.

An impairment loss is reversed only to the extent that the asset‟s carrying amount

does not exceed the carrying amount that would have been determined, net of

depreciation or amortisation, if no impairment loss had been recognised. Reversals

of impairment losses are credited to the income statement in the year in which the

reversals are recognised.

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2.7 Measurement and impairment of Qard

The Qard shall be repaid from future surpluses of the family takaful fund.

2.8 Share capital and dividend expenses

2.9 Cash and cash equivalents

Any deficit in the family takaful fund is made good via a loan, or Qard, granted by the

takaful operator fund to the family takaful fund. The Qard is stated at cost less any

impairment losses in the takaful operator fund. In the family takaful fund, the Qard is

stated at cost.

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

estimated surpluses or cashflows from the family takaful fund 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 the income statement, is recognised in the

income statement.

Impairment losses are subsequently reversed in the income statement if objective

evidence exists that the Qard is no longer impaired.

An equity instrument is any contract that evidences a residual interest in the assets of

the Company after deducting all of its liabilities.

Ordinary shares are recorded at the proceeds received, net of directly attributable

incremental transaction costs. Ordinary shares are classified as equity. Dividends on

ordinary shares are recognised in equity in the year in which they are declared.

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 statement of cash flow has been prepared using the indirect method.

38

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2.10 Product classification

2.11 Retakaful

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

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

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

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

a risk other than financial risk.

A takaful contract is a contract under which the Company ("the takaful operator") has

accepted significant takaful risk from another party ("the participant") by agreeing to

compensate the participants if a specified uncertain future event ("the covered event")

adversely affects the participants. As a general guideline, the Company determines

whether significant takaful risk has been accepted by comparing benefits paid with

benefits payable if the covered event had not occurred.

Conversely, investment contracts are those contracts that transfer financial risk with no

significant takaful risk. Based on this definition, all certificates issued by the Company

have been assessed to be takaful contracts as at the reporting date.

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

for the remainder of its life-time, even if the takaful risk reduces significantly during the

year, unless all rights and obligations are extinguished or expire.

The Company cedes takaful risk in the normal course of business for all its business.

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

participants. For both ceded and assumed retakaful, contributions and claims are

presented on a gross basis.

Retakaful arrangements entered into by the Company that meet the classification

requirements of takaful contracts as described in Note 2.10. Arrangements that do not

meet these classification requirements are accounted for as financial assets. As at the

reporting date, all retakaful arrangements entered into by the Company during the year

met the classification requirements of takaful contracts.

Retakaful assets represent amounts recoverable from retakaful operators for takaful

contract liabilities which have yet to be settled at the reporting date. Amounts

recoverable from retakaful operators are measured consistently with the amounts

associated with the underlying takaful contract and the terms of the relevant retakaful

arrangement.

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2.12 Takaful receivables

2.13 Balances with related companies

2.14 Financial liabilities

(a) Financial liabilities at FVTPL

Takaful receivables are amounts receivable under the contractual terms of a takaful

contract. On initial recognition, takaful receivables are measured at fair value based on

the consideration received or receivable. Subsequent to initial recognition, takaful

receivables are measured at amortised cost, using the effective yield method.

Takaful receivables are assessed at each reporting date for objective evidence of

impairment. If any such evidence exists, the amount of impairment loss is measured as

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

future cash flows discounted at the takaful receivable's original effective interest rate.

The impairment loss is recognised in the income statement. The basis for recognition of

such impairment loss is as described in Note 2.6.

Takaful receivables 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.

Balances with related companies are stated at the amounts which these balances are

due and expected to be settled.

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 MFRS 139, are recognised in the statement of

financial position when, and only when, the Company and the family takaful fund

become a party to the contractual provisions of the financial instrument. Financial

liabilities are classified as either financial liabilities at FVTPL or other financial liabilities.

Financial liabilities 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

or the family takaful fund 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 the income statement. Net gains or

losses on derivatives include exchange differences.

The Company and the family takaful fund had not designated any financial liabilities

as at FVTPL nor were there any financial liabilities held for trading.

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2.14 Financial liabilities (cont'd.)

(b) Other financial liabilities

2.15 Provisions for liabilities

The Company's and family takaful fund's other financial liabilities include other

payables.

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 the income

statement 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 the income statement.

Provisions for liabilities are recognised when the Company or the family takaful fund

have 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 reporting

date 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.

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2.16 Income tax

2.17 Employee benefits

(a) Short-term benefits

(b) Defined contribution plan

Income tax on the profit or loss 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 end of the

financial year.

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

balance sheet date 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 measured at the tax rates that are expected to apply in the year when

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

or substantively enacted at the end of the financial year. Deferred tax is recognised in

the income statement, except when it arises from a transaction which is recognised

directly in other comprehensive income, in which case the deferred tax is also charged

or credited directly in other comprehensive income.

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

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

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

annual leave are recognised when services are rendered by employees that

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

accumulating compensated absences such as sick leave are recognised when the

absences occur.

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 income statement as incurred.

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2.17 Employee benefits (cont'd.)

(c) Share-based compensation

2.18 Foreign currencies transactions

The ultimate holding company, AMMB operates an equity-settled share-based

compensation scheme wherein shares or options to subscribe for shares of AMMB

are granted to eligible directors and employees of the AMMB group of companies

(“Group”) based on the financial and performance criteria and such conditions as it

may deem fit.

Where the Group pays for services of its employees using share options or via

grant of shares, the fair value of the transaction is recognised as an expense in the

income statement over the vesting years of the grants, with a corresponding

increase in equity. The total amount to be recognised as compensation expense is

determined by reference to the fair value of the share options or shares granted at

the date of the grant and the number of share options or shares granted to be

vested by the vesting date, taking into account, if any, the market vesting

conditions upon which the options or shares were granted but excluding the impact

of any non-market vesting conditions. At the balance sheet date, the Group revises

its estimate of the number of share options or shares granted that are expected to

vest by the vesting date. Any revision of this estimate is included in the income

statement and a corresponding adjustment is made to equity over the remaining

vesting year.

The financial statements are presented in Ringgit Malaysia which is also the functional

currency of the Company.

Transactions in foreign currencies are initially recorded at the functional currency rate

prevailing at the date of the transaction. Monetary assets and liabilities denominated in

foreign currencies are re-translated at the functional currency rate of exchange ruling at

the reporting date. All differences are taken to the income statement. Non-monetary

items that are measured in terms of historical cost in foreign currency are not

subsequently restated.

Non-monetary items measured at fair value in a foreign currency are translated using

the exchange rates at the date when the fair value was determined. All foreign

exchange differences are taken to the income statement, except for differences relating

to items where gains or losses are recognised directly in equity, in which case, the gain

or loss is recognised net of the exchange component in equity.

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2.19 Revenue recognition

(a) Contribution income

(b) Profit income

Profit income is recognised using the effective yield method.

(c) Dividend income

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

(d) Wakalah fees

2.20 Zakat

Revenue is recognised to the extent that it is probable that the economic benefits will

flow to the Company and the revenue can be reliably measured. Revenue is measured

at the fair value of consideration received or receivable.

Contribution income is recognised in accordance with the policy stated in Note

2.21(a).

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

computed.

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

principles of Shariah.

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2.21 Family takaful fund

(a) Contribution income

(b) Investments of investment-linked business

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

Takaful Act 1984 and consists of Qard from the takaful operator, accumulated deficit in

the family takaful fund and AFS reserve of the family takaful fund.

The family takaful fund surplus or deficit is determined by the Company's appointed

actuary by an annual actuarial valuation of the family takaful fund. Any deficit in the

family takaful fund will be made good by the takaful operator fund via a loan or Qard.

Surplus distributable to the participants is determined after deducting benefits paid and

payable, retakaful, provisions, reserves and wakalah fees. The surplus may be

distributed to the takaful operator and participants in accordance with the terms and

conditions of the respective contracts.

Revenue of the family takaful fund consists of gross takaful contributions and

investment income. Unrealised income is deferred and receipts in advance are treated

as liabilities on the statement of financial position.

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

reliably measured. First year contribution is recognised from inception date and

subsequent contribution is recognised when it is due.

At the end of the financial year, all due contributions are accounted for to the extent

that they can be reliably measured. Contributions not received on due date are

recognised as revenue in the profit or loss and reported as outstanding

contributions in the balance sheet.

Investments of investment-linked business are stated at fair values. Any increase

or decrease in value of these investments is taken into the statement of

comprehensive income.

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

or indicative market prices as at end of each year.

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2.21 Family takaful fund (cont'd.)

(c) Creation or cancellation of units

(d) Provision for outstanding claims

-

-

(e) Actuarial liabilities

Amounts received for units created represent contributions paid by unit holders as

payments for new contracts or subsequent payments to increase the amount of

contracts.

Creation or cancellation of units is recognised in the financial statements at the

next valuation date, after the request to purchase or sell units is received from the

unit holders.

A liability for outstanding claims is recognised when a claimable event occurs

and/or the Company is notified.

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

settlement costs less retakaful recoveries, are accounted for using the case basis

method and for this purpose, the benefits payable under family takaful certificates

are recognised as follows:

Maturity or other certificate benefit payments due on specified dates are

treated as claims payable on the due dates;

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

payable on the date of receipt of intimation of death of the participant or

occurrence of contingency covered;

The actuarial liability is calculated using the discounted cash flow method.This is to

ensure that any future negative cash flow resulting from insufficient tabarru'

charges to meet expected benefit outgo are eliminated. Family takaful liabilities are

recognised when contracts are entered into and contribution is charged.

The liabilities are based on best estimate assumptions as determined by the

Appointed Actuary. An appropriate allowance for provision of risk margin for

adverse deviation from expected experience is made in the valuation of liabilities.

In the case of a family certificate where a part of, or the whole of the contributions

are accumulated in a fund, the accumulated amount, as declared to the

participants, are set as liabilities. Zerorisation is applied at certificate level and no

certificate is treated as an asset under the valuation method adopted.

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2.21 Family takaful fund (cont'd.)

(e) Actuarial liabilities (cont'd.)

2.22 Takaful operator fund

(a) Wakalah fees, commission expenses and management expenses

Adjustments to the liabilities at each reporting date are recorded in the statement of

comprehensive income. Profits originating from margins of adverse deviations on

run-off contracts, are recognised in profit or loss over the life of the contract,

whereas losses are fully recognised in profit or loss during the first year of run-off.

The liability is de-recognised when the contract expires, is discharged or is

cancelled. At each reporting date, an assessment is made of whether the

recognised family takaful liabilities are adequate by using a liability adequacy test.

Any inadequacy is recorded in profit or loss by establishing technical reserves for

the loss. In subsequent years, the liability for a block of business that has failed the

adequacy test is based on the assumptions that are established at the time of loss

recognition. Losses arising from liability adequacy testing can be reversed in future

years if the liability no longer exists/required.

In accordance with the principles of wakalah, as approved by the Shariah

Committee of the Company and agreed between the participants and the

Company, an agreed percentage of the gross contribution will be charged by the

takaful operator fund on an upfront basis to the family takaful funds as wakalah

fees.

The wakalah fees charged by the takaful operator to the participants are used to

pay all management expenses and commission expenses in the takaful operator

fund, which are incurred on behalf of the family takaful fund. All management

expenses are recognised in the takaful operator fund as incurred.

Commission expenses, which are costs directly incurred in securing contributions

on takaful certificates are recognised in the takaful operator fund as incurred and

properly allocated to the years in which it is probable they give rise to income.

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2.22 Takaful operator fund (cont'd.)

(b) Expense liabilities

(i) Expense liabilities of takaful operator fund

(ii) Liability adequacy test

2.23 Transition to Malaysian Financial Reporting Standards Framework

The expense liabilities of the takaful operator fund is required to match relevant

projected costs of maintaining and servicing in force contracts and associated

overhead expenses for the full contractual obligation of the takaful certificates. The

movement in expense liabilities is released over the term of the takaful contracts

and recognised in the income statement.

The valuation of expense liabilities in relation to contracts of the family takaful

fund is conducted separately by the Appointed Actuary in the takaful operator

fund. The method used to value expense liabilities is consistent with the

method used to value takaful liabilities of the corresponding family takaful

contracts. In valuing the expense liabilities, the present value of expected

future expenses payable by the takaful operator fund in managing the takaful

fund for the full contractual obligation of the takaful contracts less any

expected cash flows from future wakalah fee income, and any other income

due to the takaful operator fund that can be determined with reasonable

certainty, are taken into consideration.

At each financial year end, the Company reviews the expense liabilities of the

takaful operator fund to ensure that the carrying amount is sufficient or

adequate to cover the obligations of the takaful operator fund for all managed

takaful certificates.

In performing this review, the Company considers all contractual cashflows

and compares this against the carrying value of expense liabilities. Any

deficiency is recognised in profit or loss.

These are the Company's first annual financial statements prepared in accordance with

MFRS. In the previous financial period, the financial statements of the Company were

prepared in accordance with FRS in Malaysia as modified by BNM Guidelines.

The accounting policies set out in Note 2.1 to Note 2.22 have been applied in preparing

the financial statements of the Company for the financial year ended 31 March 2013

and the comparative information presented in these financial statements for the

financial period ended 31 March 2012. The optional exemptions available under MFRS

1 were not applied by the Company and hence, did not result in any financial impact to

the Company.

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2.24 Standards issued but not yet effective

Effective for financial periods beginning on or after 1 July 2012

● Amendments to MFRS 101 Presentation of Items of Other Comprehensive Income

Effective for financial periods beginning on or after 1 January 2013

● Amendments to MFRS 1 Government Loans

●

●

● MFRS 10 Consolidated Financial Statements

● MFRS 11 Joint Arrangements

● MFRS 12 Disclosure of Interests in Other Entities

● MFRS 13 Fair Value Measurement

● MFRS 119 Employee Benefits

●

●

●

●

● IC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine

● Annual Improvements 2009-2011 Cycle:

- Amendment to MFRS 101 Presentation of Financial Statements

- Amendment to MFRS 116 Property, Plant and Equipment

- Amendment to MFRS 132 Financial Instruments: Presentation

- Amendment to MFRS 134 Interim Financial Reporting

As at the date of authorisation of these financial statements, the following Standards,

Amendments to Standards and IC Interpretations have been issued by the Malaysian

Accounting Standards Board ("MASB") but are not yet effective and have not been

adopted by the Company.

Amendments to MFRS 7 Disclosures - Offsetting Financial Assets and Financial

Liabilities

MFRS 3 Business Combinations (IFRS 3 Business Combinations issued by IASB

in March 2004)

Amendments to MFRS 10, MFRS 11 and MFRS 12 Consolidated Financial

Statements, Joint Arrangements and Disclosure of Interests in Other Entities:

Transition Guidance

MFRS 127 Separate Financial Statements

MFRS 127 Consolidated and Separate Financial Statements

MFRS 128 Investments in Associates and Joint Ventures

- Amendment to MFRS 1 First-time Adoption of Malaysian Financial Reporting

Standards

- Amendment to IC 2 Members' Shares in Co-operatives Entities

and Similar Instruments

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2.24 Standards issued but not yet effective (cont'd)


● Amendments to MFRS 132 Offsetting Financial Assets and Financial Liabilities

● Amendments to MFRS 10, MFRS 12 and MFRS 127 : Investment Entities


● MFRS 9 Financial Instruments

MFRS 9 Financial Instruments

MFRS 13 Fair Value Measurement

MFRS 101 Presentation of Items of Other Comprehensive Income

The Company plans to adopt the above pronouncements when they become effective

in the respective financial periods. The directors expect that the adoption of the

standards and interpretations above will have no material impact on the financial

statements of the Company in the period of initial application, except as described

below:

MFRS 9, as issued, reflects the first phase of the IASB‟s work though the adoption date

is subject to the recently issued Exposure Draft on the replacement of MFRS 139 and

applies to classification and measurement of financial assets and liabilities as defined in

MFRS 139. The standard was initially effective for annual periods beginning on or after

1 January 2013, but Amendments to MFRS 9 Mandatory Effective Date of MFRS 9 and

Transition Disclosures, issued in December 2011, moved the mandatory effective date

to 1 January 2015. In subsequent phases, the IASB will address impairment and hedge

accounting.

The Company will quantify the effect in conjunction with the other phases when the final

standard including all phases is issued.

The amendments change the grouping of items presented in Other Comprehensive

Income. Items that could be reclassified (or "recycled") to profit of loss at a future point

in time (for example, upon derecognition or settlement) would be presented separately

from items that will never be reclassified. The amendment affects presentation only and

has no impact on the Company's financial position or performance.

MFRS 13 sets out a framework for measuring fair value and the disclosure

requirements about fair value to address the inconsistencies in the requirements for

measuring fair value across different accounting standards. MFRS 13 defines fair value

as a market-based measurement, not an entity specific measurement. Adoption of the

standard is not expected to have a material impact on the financial position or

performance of the Company.

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3. Significant accounting estimates and judgements

3.1 Critical judgments made in application of accounting policies

(a) Impairment of AFS financial assets

(b) Depreciation

(c) Impairment of takaful receivables

The Company exercises due care in making estimates, judgments and assumptions that

have an effect on the amount reported for revenues, expenses, assets and liabilities at the

end of the financial year. However, there are some uncertainties that could result in outcomes

that could require a material adjustment to the carrying amount of the asset or liability

affected in the future.

The following judgments are made by the management in the process of applying the

Company's accounting policies that have the most significant impact on the financial

statements. These judgments are continuously evaluated and are based on historical

experiences and other factors, including expectations of future events that are

reasonable and relevant under the circumstances.

Significant judgment is required to assess impairment for AFS financial assets. The

Company takes into consideration 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.

Depreciation is based on the management's estimates of the future estimated

average useful lives and residual values of the asset. Estimates may change due

to expected level of usage 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 expenses. It is currently estimated that the motor vehicle and the

equipment of the Company will not have any residual values.

The Company reviews its takaful receivables on a regular basis to assess whether

an allowance for impairment should be recorded in profit or loss. In particular,

judgment 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 based on assumptions about the probability of default and probable

losses in the event of default, the value of the underlying security, and realisation

costs.

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3. Significant accounting estimates and judgements (cont'd.)

3.1 Critical judgments made in application of accounting policies (cont'd.)

(d) Deferred tax assets

3.2 Key sources of estimation uncertainty

(a)

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 judgment is required to determine the amount of

deferred tax assets that can be recognised, based on the likely timing and level of

future taxable profits together with future tax planning strategies.

Assumptions about generation of future taxable profits depend on management's

estimates of future cash flows. These depend on estimates of future production

and sales volume, operating costs, capital expenditure, dividends and other capital

management transactions. Judgment is also required about application of income

tax legislation. These judgments and assumptions are subject to risks and

uncertainties 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 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 as follows:

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 death determines the value of possible future benefits paid out, which

will be factored into ensuring sufficient cover by reserves, which in return is

monitored against current and future contributions.

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3. Significant accounting estimates and judgements. (cont'd.)

3.2 Key sources of estimation uncertainty (cont'd.)

(a)

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.

Uncertainty in accounting estimates for family takaful certificate liabilities

(cont'd.)

The principal uncertainty in the takaful operator fund takaful certificate liabilities

arises from the technical provisions, which comprise the expense liabilities of the

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 are normally associated with the operations of a business on a 'going concern'

basis.

The unexpired expense reserve is calculated using adjusted parameters to provide

sufficient reserves at the appropriate percentile of statistical variation that is higher

than the best estimate values. It 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 that can be realised with

reasonable certainty relating to those in-force family takaful contracts.

All of these will give rise to estimation uncertainties of projected expense liability of

the takaful operator fund. At each financial year end, these estimates are

reassessed for adequacy and changes will be reflected as adjustments to the

liability.

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.

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4. Operating revenue

Family

Takaful takaful

operator fund Company

RM RM RM

01.04.2012 to 31.03.2013

Gross contribution - 38,461,257 38,461,257

Net creation of units - 1,996,928 1,996,928

Investment income (Note 6) 3,142,851 701,441 3,844,292

Fee and commission income (Note 8) 11,762,038 - - 14,904,889 41,159,626 44,302,477

26.01.2011 to 31.03.2012

Gross contribution - 288,502 288,502

Net creation of units - 10,000,000 -

Investment income (Note 6) 851,243 13,472 864,715

Fee and commission income (Note 8) 86,566 - - 937,809 10,301,974 1,153,217

5. Net contributions

Family

takaful

fund Company

RM RM

01.04.2012 to 31.03.2013

Gross contribution - takaful contracts 38,461,257 38,461,257

Net creation of units 1,996,928 1,996,928

Contributions ceded - takaful contracts (780,450) (780,450) 39,677,735 39,677,735

26.01.2011 to 31.03.2012

Gross contribution - takaful contracts 288,502 288,502

Net creation of units 10,000,000 -

Contributions ceded - takaful contracts (1,206) (1,206) 10,287,296 287,296

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6. Investment income

Family

Takaful takaful


RM RM RM

01.04.2012 to 31.03.2013

Financial assets at FVTPL :

Dividend income - 112,105 112,105

Profit income - 175,847 175,847

AFS financial assets :

Profit income 2,357,829 18,954 2,376,783

Net amortisation of premiums

on investments (41,226) (18) (41,244)

LAR :

Profit income 826,248 394,553 1,220,801 3,142,851 701,441 3,844,292

26.01.2011 to 31.03.2012

Financial assets at FVTPL :

Dividend income - - -

Profit income - 4,854 4,854

AFS financial assets :

Profit income - - -

Net amortisation of premiums

on investments (704) - (704)

LAR :

Profit income 851,947 8,618 860,565 851,243 13,472 864,715

7. Realised gains

Family

Takaful takaful

operator fund Total

RM RM RM

01.04.2012 to 31.03.2013

Gain on disposal of:

AFS financial assets 157,436 - 157,436

Financial assets at FVTPL - 215,661 215,661 157,436 215,661 373,097

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8. Fee and commission income/(expenses)

Family

Takaful takaful


RM RM RM

01.04.2012 to 31.03.2013

Fee and commission incomeWakalah fee income (Note 4) 11,762,038 - -

Fee and commission expenses

Wakalah fee expense - (11,762,038) -

Commission expense (4,029,243) - (4,029,243) (4,029,243) (11,762,038) (4,029,243)

26.01.2011 to 31.03.2012

Fee and commission incomeWakalah fee income (Note 4) 86,566 - -

Fee and commission expenses

Wakalah fee expense - (86,566) -

Commission expense (28,860) - (28,860) (28,860) (86,566) (28,860)

All fee and commission income and expenses are related to takaful contracts issued by the

family takaful fund.

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9. Other operating income/(expenses)

Family

Takaful takaful


RM RM RM

01.04.2012 to 31.03.2013

Other operating income

Fund management fee 125,392 - -

Certificate charges 35,494 - 35,494 160,886 - 35,494

Other operating expenses

Fund management fee - (125,392) -

Other charges (84,522) (28,184) (112,706) (84,522) (153,576) (112,706)

26.01.2011 to 31.03.2012

Other operating expenses

Fund management fee - - -

Other charges - (1,718) (1,718) - (1,718) (1,718)

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10. Management expenses

01.04.2012 26.01.2011

to to

31.03.2013 31.03.2012

RM RM

Takaful operator/Company

Personnel Expenses:

Salaries, bonus and other related costs 6,286,944 4,988,702

Non-executive directors' remuneration (Note 10(a)) 707,159 814,332

Pension costs - EPF 905,047 697,419

Social security costs 21,795 14,447

7,920,945 6,514,900

Auditors' remuneration:

- Audit fee

Current year provision 100,000 82,640

Overprovision in prior year (36,640) -

- Regulatory related services fee 10,000 10,000

Shariah Committee fees 136,784 152,419

Shariah Committee allowances 26,250 14,000 Shared service costs to related company 2,179,495 141,974 Shared service costs to fellow subsidiary 1,697,382 1,684,224

Office rental to fellow subsidiary 339,012 339,012

Depreciation of motor vehicle and equipment 101,488 5,673

Impairment of motor vehicle 75,787 -

Computerisation costs 279,341 34,304

Travelling expenses 32,569 75,690

Advertisement and promotion 343,328 110,870

Professional and legal fees 160,091 1,500,011

Marketing expenses 1,784,482 80,351

Licence fees and levies ** 297,774 282,850

Other expenses 667,002 245,174 16,115,090 11,274,092

**

(a) Directors' remuneration

The details of remuneration of non-executive directors during the year were as follows:

01.04.2012 26.01.2011

to to

31.03.2013 31.03.2012

RM RM

Fees 560,263 617,000

Allowances 146,896 197,332 707,159 814,332

Included in licence fees and levies is Perbadanan Insurans Deposit Malaysia's ("PIDM")

premium incurred for the financial year of RM187,500 (2012 : RM62,500)

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10. Management expenses (cont'd.)

(a) Directors' remuneration (cont'd.)

Number of directors

01.04.2012 26.01.2011

to to

31.03.2013 31.03.2012

Non-executive directors:

Below RM50,000 4 -

RM50,001 - RM100,000 6 5 RM100,001 - RM150,000 - 3

(b) Chief Executive Officer's ("CEO") remuneration

01.04.2012 26.01.2011

to to

31.03.2013 31.03.2012

RM RM

Salaries and bonus 1,214,188 615,194

Contributions to defined contribution plan - EPF 194,271 98,431

Benefits-in-kind 119,061 28,841 1,527,520 742,466

11. Taxation

01.04.2012 26.01.2011

to to

31.03.2013 31.03.2012

RM RM

Takaful operator

Tax expense for the year - -

Deferred taxation in relation to origination of

deductible temporary difference (Note 19) (361,381) - (361,381) -

The number of directors of the Company whose total remuneration during the financial

year fell within the following bands is analysed below:

Domestic income tax for the takaful operator is calculated at the Malaysian statutory tax rate

of 25% of the estimated assessable profit for the year.

The details of remuneration received by the CEO included in personnel expenses during

the year was as follows:

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11. Taxation (cont'd.)

01.04.2012 26.01.2011

to to

31.03.2013 31.03.2012

RM RM


Taxation at Malaysian statutory tax rate of 25% (2,182,661) (2,760,036)

Expenses not deductible for tax purposes 138,510 1,936,421

Deferred tax assets not recognised 1,682,770 823,615

Tax expense for the year/period (361,381) -

Family takaful fund

Tax expense for the year/period 59,813 1,077


taxable temporary difference (Note 19) 18,953 - 78,766 1,077

01.04.2012 26.01.2011

to to

31.03.2013 31.03.2012

RM RM

Deficit before taxation (334,652) (16,508)

Taxation at Malaysian statutory tax rate of 8% (26,772) (1,321)

Income not subject to tax (4,954) -

Expenses not deductible for tax purposes 110,492 2,398 Tax expense for the year/period 78,766 1,077

Company

Tax expense for the year 59,813 1,077


deductible temporary difference (Note 19) (342,428) -

(282,615) 1,077

A reconciliation of income tax expense applicable to loss before taxation at the statutory

income tax rate to income tax expense at the effective income tax rate of the takaful operator

is as follows:

Family takaful business is taxed at the preferential tax rate of 8% of taxable investment

income for the year.

A reconciliation of income tax expense applicable to deficit 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:

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11. Taxation (cont'd.)

01.04.2012 26.01.2011

to to

31.03.2013 31.03.2012

RM RM


Taxation at Malaysian statutory tax rate of 25% (2,182,661) (2,760,036)

Taxation at Malaysian statutory tax rate of 8% (26,772) (1,321)

Income not subject to tax (4,954) -

Expenses not deductible for tax purposes 249,002 1,938,819

Deferred tax assets not recognised 1,682,770 823,615

Tax expense for the year/period (282,615) 1,077

12. Motor vehicle and equipment

Motor Office

vehicle equipment Total

RM RM RM

Takaful operator/Company

Cost

At 26 January 2011 (date of incorporation) - - -

Additions for the year 35,822 35,822

At 31 March 2012 - 35,822 35,822

Additions for the year 454,720 11,190 465,910

At 31 March 2013 454,720 47,012 501,732

Accumulated depreciation and impairment

At 26 January 2011 (date of incorporation) - - -

Depreciation charge for the year - 5,673 5,673

At 31 March 2012 - 5,673 5,673

Depreciation charge for the year 90,944 10,544 101,488

Impairment for the year 75,787 - 75,787

At 31 March 2013 166,731 16,217 182,948

Net carrying amount

At 31 March 2012 - 30,149 30,149

At 31 March 2013 287,989 30,795 318,784

A reconciliation of income tax expense applicable to loss before taxation at the statutory

income tax rate to income tax expense at the effective income tax rate of the Company is as

follows:

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13. Investments

Family

Takaful takaful


RM RM RM

As at 31 March 2013

Government investment issues 15,019,500 1,782,314 16,801,814

Debt securities 42,363,710 3,591,268 45,954,978

Quoted shariah approved equities in

Malaysia - 3,715,310 3,715,310

Islamic investment accounts 21,036,928 29,551,543 50,588,471

Units held in investment-linked funds 10,608,600 - - 89,028,738 38,640,435 117,060,573

The funds' and Company's investments are summarised by categories as follows:

Family

Takaful takaful


RM RM RM

Financial assets at FVTPL - 7,306,578 7,306,578

AFS financial assets 67,991,810 1,782,314 59,165,524

LAR 21,036,928 29,551,543 50,588,471 89,028,738 38,640,435 117,060,573

As at 31 March 2012

Debt securities 19,827,900 3,051,600 22,879,500

Quoted shariah approved equities in

Malaysia - 1,745,120 1,745,120

Islamic investment accounts 61,794,283 5,096,994 66,891,277

Units held in investment-linked funds 10,000,000 - - 91,622,183 9,893,714 91,515,897

The funds' and Company's investments are summarised by categories as follows:

Family

Takaful takaful


RM RM RM

Financial assets at FVTPL - 4,796,720 4,796,720

AFS financial assets 29,827,900 - 19,827,900

LAR 61,794,283 5,096,994 66,891,277 91,622,183 9,893,714 91,515,897

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13. Investments (cont'd)

(a) Financial assets at FVTPL

Family

takaful

fund

RM

As at 31 March 2013

At fair value:

Quoted shariah approved equities in Malaysia 3,715,310

Unquoted Islamic corporate debt securities in Malaysia

- Secured 2,205,630

- Unsecured 1,385,638 7,306,578

As at 31 March 2012

At fair value:

Quoted shariah approved equities in Malaysia 1,745,120

Unquoted Islamic corporate debt securities in Malaysia

- Secured 2,540,500

- Unsecured 511,100 4,796,720

(b) AFS financial assets

Family

Takaful takaful


RM RM RM

As at 31 March 2013

At fair value:

Unquoted Islamic corporate debt

securities in Malaysia

- Secured 34,134,750 - 34,134,750

- Unsecured 8,228,960 - 8,228,960

Units held in investment-linked funds 10,608,600 - -

Government investment issues 15,019,500 1,782,314 16,801,814 67,991,810 1,782,314 59,165,524

As at 31 March 2012

At fair value:

Unquoted Islamic corporate debt

securities in Malaysia

- Secured 17,783,500 - 17,783,500

- Unsecured 2,044,400 - 2,044,400

Units held in investment-linked funds 10,000,000 - - 29,827,900 - 19,827,900

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13. Investments (cont'd.)

(c) LAR

Family

Takaful takaful


RM RM RM

As at 31 March 2013

At amortised cost / cost / fair value:

Islamic investment accounts with licensed Islamic banks 21,036,928 29,551,543 50,588,471

As at 31 March 2012

At amortised cost / cost / fair value:

Islamic investment accounts with licensed Islamic bank 61,794,283 5,096,994 66,891,277

Family

Takaful takaful


RM RM RM

As at 31 March 2013

Islamic investment accounts with licensed Islamic banks 2.80% 2.80% 2.80%

As at 31 March 2012

Islamic investment accounts with licensed Islamic bank 2.80% 2.80% 2.80%

14. Takaful receivables

Family takaful fund/Company

RM

As at 31 March 2013Due contributions including agents/brokers and co-takaful balances 1,654

As at 31 March 2012Due contributions including agents/brokers and co-takaful balances -

The weighted average effective profit rate of Islamic investment accounts as at the end of

the financial year is as follows:

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15. Takaful certificates liabilities

Gross Retakaful Net

Family takaful fund RM RM RM

As at 31 March 2013

Participants' investment fund 37,115,704 - 37,115,704

Participants' risk fund 2,276,214 (351,052) 1,925,162 39,391,918 (351,052) 39,040,866

As at 31 March 2012


Participants' risk fund 23,326 (1,206) 22,120 10,141,426 (1,206) 10,140,220

The movement of the takaful certificate liabilities of the family takaful fund is further analysed as follows:

NAV Provision

Actuarial attributable to for outstanding Gross

liability unitholders claims liabilities Retakaful Net

RM RM RM RM RM RM

At 26 January 2011

(date of incorporation) - - - - - -

Net earned contribution - 9,923,177 - 9,923,177 - 9,923,177

Increase in certificate reserves 218,249 - - 218,249 (1,206) 217,043

At 1 April 2012 218,249 9,923,177 - 10,141,426 (1,206) 10,140,220


Claims intimated during

the year (744,254) - 744,254 - (202,360) (202,360)

Claims paid during the -

year - - (468,042) (468,042) - (468,042)

Increase in certificate reserves 27,003,544 - - 27,003,544 (147,486) 26,856,058 At 31 March 2013 26,477,539 12,638,167 276,212 39,391,918 (351,052) 39,040,866

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15. Takaful certificates liabilities (cont'd.)

Gross Retakaful Net

Company RM RM RM

As at 31 March 2013


Participants' risk fund 2,276,214 (351,052) 1,925,162 29,391,918 (351,052) 29,040,866

As at 31 March 2012

Participants' investment fund 194,923 - 194,923

Participants' risk fund 23,326 (1,206) 22,120 218,249 (1,206) 217,043

The movement of the takaful certificate liabilities of the Company is further analysed as follows:

NAV Provision

Actuarial attributable to for outstanding Gross

liability unitholders claims liabilities Retakaful Net

RM RM RM RM RM RM

At 26 January 2011

(date of incorporation) - - - - - -

Increase in certificate reserves 218,249 - - 218,249 (1,206) 217,043

At 1 April 2012 218,249 - - 218,249 (1,206) 217,043


Claims intimated during

the year (744,254) - 744,254 - (202,360) (202,360)

Claims paid during the

year - - (468,042) (468,042) - (468,042)

Increase in certificate reserves 27,003,544 - - 27,003,544 (147,486) 26,856,058 At 31 March 2013 26,477,539 2,638,167 276,212 29,391,918 (351,052) 29,040,866

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16. Other receivables

Family

Takaful Takaful


RM RM RM

As at 31 March 2013

Qard to family takaful fund* 431,003 - -

Prepayments 277,935 - 277,935

Income due and accrued 495,260 60,388 555,648

Sundry debtors 170,248 - 170,248

Amount due from related company** - 935,018 935,018

Amount due from takaful operator

(Note 21)** - 468,030 -

Tax recoverable 1,472 12,544 14,016 1,375,918 1,475,980 1,952,865

As at 31 March 2012

Qard to family takaful fund* 17,585 - -

Prepayments 191,626 - 191,626

Income due and accrued 174,505 28,661 203,166

Sundry debtors 218,697 - 218,697

Amount due from holding company** 1,876,806 - 1,876,806

Amount due from family takaful fund

(Note 21)** 30,556 - - 2,509,775 28,661 2,490,295

*

**

Qard represents a loan to the family takaful fund to make good any underwriting deficit

experienced during a financial year. The amount is unsecured, not subject to any profit

elements and recoverable from future surpluses of the family takaful fund.

These amounts are non-trade in nature, are unsecured, not subject to any profit elements

and are repayable on demand.

The carrying amounts of the financial assets disclosed above approximate fair values due to

the relatively short-term maturity of these balances. The impact of discounting on Qard is not

significant.

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17. Participants' fund

Family takaful fund/Company

01.04.2012 26.01.2011

to to

31.03.2013 31.03.2012

RM RM

Accumulated deficit

At beginning of the year/period (17,585) -

Net deficit of the Ordinary participants' risk fund (413,418) (17,585)

Net surplus of the investment-linked participants' risk fund 246,825 - At end of the year/period (184,178) (17,585)

Qard

At beginning of the year/period 17,585 -

Increase in Qard 413,418 17,585 At end of the year/period 431,003 17,585

AFS Reserve

At beginning of the year/period - -

Gain on fair value changes 2,153 -

Deferred tax relating to AFS reserve of the

Participants' fund (172) - At end of the year/period 1,981 -

Participants' fund at end of the year/period

Accumulated deficit (184,178) (17,585)

Qard 431,003 17,585

AFS reserve 1,981 - 248,806 -

Qard is a loan provided by the takaful operator to make good the current year underwriting

deficit experienced by the family takaful fund. It does not have any profit elements, is

unsecured and is repayable out of future surpluses of the fund.

The AFS reserve of the Family takaful fund is retained within the Participants' Fund as it held

in respect of financial assets of the Fund to meet the long term liabilities due to the

participants.

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18. Expense liabilities

Takaful operator / Company

31.03.2013 31.03.2012

RM RM

Expense liabilities for takaful operator:

Unexpired expense reserve 3,469,692 36,431

Provision for expense deficiency 930,308 638,569 4,400,000 675,000

At beginning of the year/period 675,000 -

Change in expense liabilities

Wakalah fee received during the year/period 11,762,038 86,566

Wakalah fee earned during the year/period (8,328,777) (50,135)

Movement in provision for expense deficiency 291,739 638,569

Change in expense liabilities 3,725,000 675,000

At end of the year/period 4,400,000 675,000

19. Deferred tax liabilities

Family

Takaful Takaful


RM RM RM

As at 31 March 2013

Deferred tax assets 361,381 - 361,381

Deferred tax liabilities (361,381) (19,125) (380,506) - (19,125) (19,125)

As at 31 March 2012

Deferred tax assets - - -

Deferred tax liabilities - - - - - -

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19. Deferred tax liabilities (cont'd.)

Unutilised

AFS business

reserves losses Total

RM RM RM

Takaful operator

As at 31 March 2013

At beginning of the year - - -

Recognised in:

- Income statement (Note 11) - 361,381 361,381

- Other comprehensive income (361,381) - (361,381) At end of the year (361,381) 361,381 -

As at 31 March 2012

At beginning of the period - - -

Recognised in:

- Income statement - - -

- Other comprehensive income - - - At end of the period - - -

Family takaful fund

As at 31 March 2013

At beginning of the year - - -

Recognised in:

- Income statement (Note 11) - (18,953) (18,953)

- Participants' fund (172) - (172) At end of the year (172) (18,953) (19,125)

As at 31 March 2012

At beginning of the period - - -

Recognised in:

- Income statement - - - At end of the period - - -

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 components and movements of deferred tax (liabilities)/assets

during the financial year/period prior to offsetting are as follows:

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19. Deferred tax liabilities (cont'd.)

Unutilised

AFS business Fair value

reserves losses adjustment Total

RM RM RM RM

Company

As at 31 March 2013

At beginning of the year - - - -

Recognised in:

- Income statement

(Note 11) - 361,381 (18,953) 342,428

- Other comprehensive

income (361,381) - - (361,381)

- Participants' fund (172) - - (172) At end of the year (361,553) 361,381 (18,953) (19,125)

As at 31 March 2012

At beginning of the period - - - -

Recognised in:

- Income statement - - - - At end of the period - - - -

Deferred tax assets have not been recognised in respect of the following items:

31.03.2013 31.03.2012

Takaful operator / Company RM RM

Unutilised business losses 2,847,614 909,000

Other temporary differences:

- provisions 2,483,466 1,416,000

- expense liabilities 4,400,000 675,000

9,731,080 3,000,000

AFS reserve - 294,460 9,731,080 3,294,460

The temporary differences above do not expire under current tax legislation. Deferred tax

assets have not been recognised in respect of these items because it is not probable that

future taxable profits will be available against which the Company can utilise the benefits.

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20. Takaful payable

Family

Takaful Takaful


RM RM RM

As at 31 March 2013

Due to agents 41,427 - 41,427

Due to participants - 2,485,913 2,485,913

Due to retakaful operator - 317,534 317,534 41,427 2,803,447 2,844,874

As at 31 March 2012

Due to agents - - -

Due to participants - 24,132 24,132

Due to retakaful operator - 1,206 1,206 - 25,338 25,338

21. Other payables

Family

Takaful Takaful


RM RM RM

As at 31 March 2013

Sundry payables 134,484 33,553 168,037

Accruals 1,213,955 810,137 2,024,092

Provisions 1,727,729 - 1,727,729

Due to family takaful fund (Note 16)** 468,030 - -

Due to related company** 534,043 - 534,043

Due to fellow subsidiary** 572,035 - 572,035 4,650,276 843,690 5,025,936

As at 31 March 2012

Sundry payables 5,268 234 5,502

Accruals 67,082 - 67,082

Provisions 1,923,820 - 1,923,820

Due to takaful operator (Note 16)** - 30,556 -

Due to related company** 782,228 - 782,228

Due to fellow subsidiary** 2,071,747 - 2,071,747 4,850,145 30,790 4,850,379

**

The carrying amounts approximate fair values due to the relatively short-term maturity of

these balances.

These amounts are unsecured, not subject to any profit elements and are repayable on

demand.

The carrying amounts of financial liabilities disclosed above approximate fair values due to

the relatively short-term maturity of these balances.

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22. Share capital

As at 31 March 2013

No. of Amount

shares RM

Authorised:Ordinary shares of RM1 each 3,000,000,000

Issued and paid-up:

Ordinary shares of RM1 eachAt 1 April 2012/31 March 2013 100,000,000

As at 31 March 2012

Authorised:Ordinary shares of RM1 each 3,000,000,000

Issued and paid-up:

Ordinary shares of RM1 each

At 26 January 2011

(date of incorporation) 10 10

Issued during the period 99,999,990 99,999,990 At 31 March 2012 100,000,000

23. Loss per share

01.04.2012 26.01.2011

to to

31.03.2013 31.03.2012

RM RM

Company

Loss attributable to ordinary equity holder (8,782,681) (11,057,728)

Number/weighted average number of shares in issue during

the year/period 100,000,000 24,593,975 Basic loss per share (sen) (0.09) (44.96)

3,000,000,000

100,000,000

3,000,000,000

100,000,000

On 16 September 2011, the Company increased its issued and fully paid share capital from

RM10 to RM100,000,000 via the issuance of 99,999,990 new ordinary shares of RM1.00

each to the shareholders of the Company for cash. The new ordinary shares issued during

the period rank pari passu with the shares in issue at the date of incorporation.

Loss per share is calculated by dividing the loss for the financial year/period attributable to

ordinary equity holders of the Company by the number (26.01.2011 to 31.03.2012: weighted

average number) of ordinary shares in issue during the financial year/period.

There were no dilutive potential ordinary shares as at the reporting date. There have been no

other transactions involving ordinary shares between the reporting date and the date of

completion of these financial statements.

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24. Operating lease arrangements

The Company as lessee

The Company has entered into a lease agreement for rental of its office premises.

31.03.2013 31.03.2012

RM RM

Not later than 1 year 339,012 339,012

Later than 1 year and not later than 2 years - 339,012 339,012 678,024

25. Significant related party disclosures

Name Relationship

AMAB Holdings Sdn. Bhd. Immediate holding company

AMMB Holdings Berhad Ultimate holding company

AmLife Insurance Berhad Subsidiary of immediate holding company/fellow

subsidiary

AmGeneral Holdings Berhad Subsidiary of immediate holding company/fellow

(formerly known as AmG subsidiary

Insurance Berhad)

The future aggregate minimum lease payments under operating lease contracted for as at the

reporting date but not recognised as liabilities are as follows:

The future aggregate minimum lease payments disclosed above include the lease

arrangement with a fellow subsidiary, AmLife Insurance Berhad which is renewable every

three (3) years. The arrangement was entered into in the previous financial period.

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.

The related parties and their relationships with the Company as of 31 March 2013 are as

follows:

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25. Significant related party disclosures (cont'd.)

Name Relationship

AmBank (M) Berhad Other related company

AmIslamic Bank Berhad Other related company

AmInvestment Bank Berhad Other related company

AMFB Holdings Berhad Other related company

AmInvestment Management Other related company

AmInvestment Services Berhad Other related company

AmSecurities Sdn. Bhd. Other related company

Arab-Malaysian Crediti Berhad Other related company

AmTrustee Berhad Other related company

AmCorp Group Berhad A corporate shareholder of ultimate holding

company

Joint Management Body (formerly known Company in which a director, Tan Sri

as Melawangi Sdn Bhd) Azman Hashim has financial interests

AMDB Berhad Company in which a director, Tan Sri

Azman Hashim has financial interests

Harpers Travel (M) Sdn. Bhd. Company in which a director, Tan Sri


Medan Delima Sdn. Bhd. Company in which a director, Tan Sri


Friends Provident Public Company Past corporate shareholder of the Company

Limited (FP)

Syarikat Kompleks Damai Sdn. Bhd. Company in which a director, Tan Sri


AMDB Property Management Company in which a director, Tan Sri

Company Sdn. Bhd. Azman Hashim has financial interests

AMDB Realty Sdn. Bhd. Company in which a director, Tan Sri


Insurance Australia Group Ltd. Corporate shareholder of AmGeneral Holdings

(IAG Ltd.) Berhad

MCM Consulting Sdn. Bhd. Company in which a director, Tan Sri


MCM Horizon Sdn. Bhd. Company in which a director, Tan Sri


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(a) Related parties' balances

Significant related parties' balances as at end of the financial year are as follows:

01.04.2012 26.01.2011

to to

31.03.2013 31.03.2012

RM RM

Takaful operator

Included in investments (Note 13):

Islamic investment accounts with licensed Islamic bank

- AmIslamic Bank Berhad 18,149,228 61,794,283

Included in other receivables (Note 16):

Prepayments

- AmIslamic Bank Berhad - 4,125

Income due and accrued

- AmIslamic Bank Berhad 4,650 16,055

Amount due from holding company

- AMAB Holdings Sdn. Bhd. - 1,876,806

Cash and cash equivalents:

Bank balances

- AmIslamic Bank Berhad 41,349 29,139

Included in other payables (Note 21):

Amount due to other related company

- AmBank (M) Berhad 534,043 782,228

Amount due to fellow subsidiary

- AmLife Insurance Berhad 572,035 2,071,747

Family takaful fund

Included in investments (Note 13):

Islamic investment accounts with licensed Islamic bank- AmIslamic Bank Berhad 10,359,014 5,096,994

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(a) Related parties' balances (cont'd.)

01.04.2012 26.01.2011

to to

31.03.2013 31.03.2012

RM RM

Family takaful fund (cont'd.)

Included in other receivables (Note 16):

Income due and accrued

- AmIslamic Bank Berhad 3,378 782

Amount due from other related company- AmIslamic Bank Berhad 935,018 -

Cash and cash equivalents:

Bank balances- AmIslamic Bank Berhad 2,871,574 270,673

(b) Related parties' transactions

Significant related parties' transactions during the financial year are as follows:

01.04.2012 26.01.2011

to to

31.03.2013 31.03.2012

RM RM

Takaful operator

Expenses/(income):

Profit income from deposits- AmIslamic Bank Berhad 709,810 850,001

Commission paid- AmBank (M) Berhad 2,943,964 28,845

Rental of premises- AmLife Insurance Berhad 339,012 339,012

Shared services costs

- AmBank (M) Berhad 2,179,495 141,974

- AmLife Insurance Berhad 1,697,382 1,684,224 3,876,877 1,826,198

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(b) Related parties' transactions (cont'd.)

01.04.2012 26.01.2011

to to

31.03.2013 31.03.2012

RM RM

Family takaful fund

Profit income from deposits- AmIslamic Bank Berhad 89,721 8,594

(c) Compensation of Key Management Personnel

Details of the compensation granted to key management personnel are follows:

01.04.2012 26.01.2011

to to

31.03.2013 31.03.2012

Takaful operator RM RM

Non-executive directors' remuneration (Note 10):

Fees 560,263 617,000

Allowances 146,896 197,332

Other key management personnel:

Salaries and bonus 1,214,188 615,194

Pension costs - EPF 194,271 98,431

Benefit-in-kinds 119,061 28,841

2,234,679 1,556,798

Key management personnel are those persons having authority and responsibility for

planning, directing and controlling the activities of the Company directly or indirectly.

The key management personnel of the Company are the directors and the Chief

Executive Officer.

The directors are of the opinion that all the transactions above have been entered into in

the normal course of business and have been established on terms and conditions that

are not materially different from those obtainable in transactions with unrelated parties.

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26. Risk management framework

The key aspects of the Company's risk management framework are as follows:

•

•

•

(a) Governance and takaful operational framework

A robust Shariah compliance function, comprising review functions, supported by risk

management control processes and internal research capacity is also established to

support the implementation of this framework and policy. Any person bearing

responsibilities outlined in this framework is expected to possess the necessary

competency and continuously enhance their knowledge and understanding on Shariah

as well as to keep abreast of the latest developments in the takaful industry.

The Company is exposed to market risk, credit risk and liquidity risk from its use of financial

instruments. Alternatively, through the issuance of takaful contracts, the Company is exposed

to the above risks as well as takaful risk. This note presents information about the Company‟s

exposure to each of the above risks and the Company‟s objectives, policies and processes

for measuring and managing these risks. Further quantitative disclosures are included

throughout these financial statements.

Defines the risk management strategy and policy by setting out the Company‟s risk

vision, appetite and purpose,

Defines the leadership in the overall risk management of the Company as well as

outlines roles and responsibilities of everyone in managing risk, and

Defines risk management processes to allow the business to identify, assess, monitor,

control, report and mitigate its risks.

The Company aims to be a sound, reliable business partner for its customers and

stakeholders and committed to uphold and preserve its reputation and integrity by

complying with all the relevant and applicable laws, rules, regulations, codes of conduct

and standards of good practice in all the markets and jurisdictions in which it operates.

Good compliance standards contribute positively to risk management practices,

consumer fairness and overall quality of business and is an essential ingredient of good

corporate governance.The governance framework implementation is translated into a set

of policies and terms of references ("TORs") that further explains the structure, roles,

responsibilities, accountabilities, minimum standard, scope of duties of the various

functions within the Company and risk appetites that govern a particular area.

The related parties and their relationship with the Company as of 31

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26. Risk management framework (cont'd.)

(a) Governance and takaful operational framework (cont'd.)

The risk management governance structure is as follows:

(i) 1st level - the policy making

•

•

•

•

The Board of Directors ("Board") oversees the establishment of strong

corporate governance supported by an effective risk management framework

and sound risk strategy to enable effective discharge of fiduciary duties to

participants. The Board approves all policies inclusive of Shariah related, risk

appetite statement, risk limits, promoting a healthy risk culture and establishing

the „three lines of defense‟ and ensuring compliance with all relevant and

applicable laws, rules and standards governing the Takaful activities and the

overall effectiveness of the Company.

The Shariah Committee ("SC") shall be responsible and accountable for all its

decisions, views and opinions related to Shariah matters. While the Board

bears the ultimate responsibility and accountability on overall governance, the

Board is expected to rely on the SC on all Shariah decisions, views and

opinions relating to the business.

The Board Risk Management Committee ("BRMC") is a Board committee

responsible for assisting the Board in discharging its responsibilities for

maintaining a sound system of internal control by providing direction and

oversight with regard to the Company's risk framework, governance and

regulatory policies. The primary objective of the BRMC is to oversee the

management activities in managing the key risk areas and to ensure that an

appropriate risk management process is in place and functioning effectively.

The Audit and Examination Committee ("AEC") is a Board committee

responsible for assisting the Board in discharging its responsibilities for the

integrity of the Company's financial statements, assessment of the

effectiveness of the systems of internal controls and monitoring the

effectiveness and objectivity of the internal and external auditors. The AEC,

upon consultation with the SC shall determine the deliverables of the Shariah

audit function. The deliverables shall be consistent with accepted auditing

standards.

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(a) Governance and takaful operational framework (cont'd.)

(i) 1st level - the policy making (cont'd.)

•

(ii) 2nd level - the monitoring and control

•

(iii) 3rd level - the independent unit

•

(b) Risk management and internal control policy

The Risk Management and Compliance Department ("RMC") provides risk

oversight for the major risk categories namely financial risk, family takaful risk

and operational risk. The RMC proposes the risk tolerance level and facilitates

the implementation of an integrated risk management framework. The RMC is

functionally and organisationally independent of business functions and other

risk taking units.

The objective of this policy is to provide the minimum standards for risk management

and internal control for the Company. The policy provides practical direction on how the

business can be safeguarded from excessive operational, financial, takaful and

reputational risk and therefore successfully executing strategy requires putting capital at

risk in a structured and disciplined manner.

The Investment Committee ("IC") proposes on the investment strategy, limits

and other relevant mandates within the prescribed risk appetite. The IC also

reviews the investment policy and guidelines so that it remains appropriate and

relevant, recognizing among other things, changes in business and economic

environment and ensures their compliance. The IC meets regularly to oversee

Investment Management‟s activities in managing the investment funds of the

takaful operator and that the risk management and compliance process is

effective.

The 1st level is supported by the relevant management and working

committees which comprise the Management Committee ("MC"), Product

Management Committee ("PMC"), Outsourcing Committee, Asset Liability

Committee and IT Steering Committee. The Management Committee shall be

responsible to implement the overall operational processes, including

developing and recommending comprehensive policies, procedures and

internal controls, for the SC and BRMC's endorsement prior to Board approval.

The Management Committee also ensures that the business operations are

executed according to the approved policies and procedures, and to constantly

review and update the policies and procedures to reflect current market

practices and developments.

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(b) Risk management and internal control policy (cont'd.)

The risk management and internal control policy:

•

•

•

•

(i)

(ii)

(iii)

controls within the organisation which are identified as the three lines of defense

emphasising co-ordination of activities to achieve efficiency while avoiding

duplication of effort.

controls within the operations to manage material risks, with documented action

plans to improve controls where these are identified as inadequate. Where risks

are not directly controllable by management action, the risk assessment

process must consider an alternative risk response e.g. avoid, accept or

transfer to maintain an acceptable tolerance level.

established risk oversight process to provide adequate challenge to the

completeness and openness of risk assessment which should be reviewed by

the BRMC, MC, IC with regards to investment risk, PMC with regards to takaful

risk and SC with regards to shariah related risk. All committees have their

defined terms of reference and appropriate membership, with proceedings

adequately recorded and actions followed up.

provides practical direction on how the business can be safeguarded from excessive

operational, financial, takaful and reputational risk whilst enabling delivery on its

business strategy;

supports the identification, assessment, monitoring, management and control of the

material risks to achieving the Company‟s business objectives; and

provides the basis for the quantification of risk, supports risk based capital

implementation and provides for transparency on the completeness of risk

management for the Company.

identifies that appropriate controls are in place to ensure the following requirements

are met:

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27. Financial risk

(a) Credit risk

Credit risk is the risk of loss due to the default of a company, individual or country.

Credit risk includes the following six elements:

•

•

•

•

•

Debt risk – financial loss arising from a debtor‟s inability to repay all, or part, of its

debt obligations to the Company or the deterioration of the debtor‟s financial

position; and

Settlement risk – financial loss arising from the failure or substantial delay of an

expected settlement in a transfer system to take place, due to the party other than

the Company defaulting/not delivering on its settlement obligations.

The Company‟s primary exposure to credit risk arises through its investment in fixed

income securities, receivables arising from certificate holders, and obligations of

retakaful company through retakaful contracts. The Company has put in place credit

policies and investment guidelines as a part of its overall credit risk management

framework. The Company manages individual exposures as well as concentration of

credit risks. At the end of the reporting year/period, there were no significant

concentration of credit risks.

The Company is exposed to investment credit risk on its investment portfolio, primarily

from investments in Islamic 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 Islamic

bond portfolio are regularly monitored and any downgrade in credit rating will be

evaluated to determine actions required. The Company‟s Islamic bond portfolio is highly

rated, with no material exposure below investment grade.

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 company‟s

default, or the deterioration of the reinsurer‟s financial position;

Deposit risk – financial loss arising from a deposit institution‟s default, or the

deterioration of the deposit institution‟s financial position;

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27. Financial risk (cont'd.)

(a) Credit risk (cont'd.)

The Company is exposed to retakaful counterparty risk of three different types:

•

•

•

from retakaful contribution payments made to the retakaful company in advance;

and

as a result of reserves held by the retakaful company which would have to be met by

the Company in the event of default.

In order to mitigate retakaful counterparty risk, the Company will give due consideration

to the credit quality of a retakaful company before incepting a retakaful treaty.

The Company is exposed to credit risk on the balances deposited with banks in the form

of cash and money market instruments. The deposit risk for cash deposit and money

market instrument is managed by placing only in financial institutions governed by BNM.

Settlement risk is a form of credit risk that arises at the settlement of a transaction, as a

result of a counterparty failing to perform its obligations to the Company. The Company is

exposed to settlement risk in the purchase or sale of investments.

In line with the Investment Policy, the Company has no risk appetite for placement with

financial institutions that carry a rating below A or its equivalent and investment in credit

facilities that carry a rating below AA or its equivalent. Any foreign investments are to be

approved by the Board and meet the minimum sovereign rating of A.

as a result of debts arising from claims made by the Company but not yet paid by

the retakaful company;

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Objectives in managing credit risk

To mitigate credit risk:

•

• counterparty limits are set for investments and cash deposits.

• all over-the-counter derivative transactions, if any, are covered by collateral, with minor exceptions. • the Company regularly reviews the financial security of its retakaful counterparty.

Credit exposure

Family

Takaful takaful

operator fund Company31 March 2013 Note RM RM RMInvestments:

Financial assets at FVTPL:

Unquoted secured Islamic corporate debt securities in Malaysia 13(a) - 2,205,630 2,205,630

Unquoted unsecured Islamic corporate debt securities in Malaysia 13(a) - 1,385,638 1,385,638

AFS financial assets:

Unquoted secured Islamic corporate debt securities in Malaysia 13(b) 34,134,750 - 34,134,750

Unquoted unsecured Islamic corporate debt securities in Malaysia 13(b) 8,228,960 - 8,228,960

Government investment issues 13(b) 15,019,500 1,782,314 16,801,814

LAR:

Islamic investment accounts with licensed Islamic banks 13(c) 21,036,928 29,551,543 50,588,471

Takaful receivables 14 - 1,654 1,654

Retakaful assets 15 - 351,052 351,052

Other receivables 16 1,096,511 1,463,436 1,660,914

Cash and cash equivalents 43,000 2,897,676 2,940,676

79,559,649 39,638,943 118,299,559

investment policy will have a prescribed minimum credit rating of corporate debt securities that may be held. Investing in a diversed

portfolio reduces the impact from individual companies defaulting.

At the reporting date, the Company's maximum exposure to credit risk is represented by the maximum amount of each class of financial

asset subject to credit risk recognised in the statement of financial position as shown in the table below:

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Credit exposure (cont'd.)

Family

Takaful takaful


31 March 2012 Note RM RM RM

Investments:


Unquoted secured Islamic corporate debt securities in Malaysia 13(a) - 2,540,500 2,540,500

Unquoted unsecured Islamic corporate debt securities in Malaysia 13(a) - 511,100 511,100


Unquoted secured Islamic corporate debt securities in Malaysia 13(b) 17,783,500 - 17,783,500

Unquoted unsecured Islamic corporate debt securities in Malaysia 13(b) 2,044,400 - 2,044,400

LAR:

Islamic investment accounts with licensed Islamic bank 13(c) 61,794,283 5,096,994 66,891,277

Retakaful assets 15 - 1,206 1,206

Other receivables 16 2,318,150 28,661 2,298,669

Cash and cash equivalents 29,139 275,050 304,189

83,969,472 8,453,511 92,374,841

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Credit exposure by credit rating

Investment Non-investment

Government grade* grade*

guaranteed (BBB - AAA) (C to BB) Not rated Total

31 March 2013 RM RM RM RM RM

Takaful operator

Investments:


Unquoted secured Islamic corporate debt

securities in Malaysia 34,134,750 - - - 34,134,750

Unquoted unsecured Islamic corporate debt

securities in Malaysia - 8,228,960 - - 8,228,960

Government investment issues 15,019,500 - - - 15,019,500

LAR:

Islamic investment accounts with licensed

Islamic banks - 21,036,928 - - 21,036,928

Other receivables - 7,526 - 1,088,985 1,096,511

Cash and cash equivalents - 43,000 - - 43,000

49,154,250 29,316,414 - 1,088,985 79,559,649

* Based on public ratings assigned by Rating Agency Malaysia (RAM) and Malaysian Rating Corporation Berhad (MARC).

The table below provides information regarding the credit risk exposures of the Company by classifying assets subject to credit risk according

to the Company's credit ratings of counterparties.

Neither past-due nor impaired

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Credit exposure by credit rating (cont'd.)





Family takaful fund

Investments:







Government investment issues 1,782,314 - - - 1,782,314

LAR:


Islamic banks - 29,551,543 - - 29,551,543

Takaful receivables - - - 1,654 1,654

Retakaful assets - 351,052 - - 351,052

Other receivables 9,400 986,006 - 468,030 1,463,436

Cash and cash equivalents - 2,897,676 - - 2,897,676

3,997,344 35,171,915 - 469,684 39,638,943



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Company

Investments:











Government investment issues 16,801,814 16,801,814

LAR:


Islamic banks - 50,588,471 - - 50,588,471

Takaful receivables - - - 1,654 1,654


Other receivables 9,400 993,532 - 657,982 1,660,914

Cash and cash equivalents - 2,940,676 - - 2,940,676

53,151,594 64,488,329 - 659,636 118,299,559



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Takaful operator

Investments:






LAR:


Islamic banks - 61,794,283 - - 61,794,283



17,783,500 63,883,877 - 2,302,095 83,969,472

* Based on public ratings assigned by Rating Agency Malaysia (RAM).


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Family takaful fund

Investments:





securities in Malaysia - 511,100 - - 511,100

LAR:


Islamic banks - 5,096,994 - - 5,096,994


Other receivables - 2,031 - 26,630 28,661


2,540,500 5,886,381 - 26,630 8,453,511



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Company

Investments:





securities in Malaysia - 511,100 - - 511,100






LAR:


Islamic banks - 66,891,277 - - 66,891,277




20,324,000 69,770,258 - 2,280,583 92,374,841



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At the reporting date, all financial assets are neither past-due nor impaired.

(b) Liquidity risk

The Company faces two key types of liquidity risk:

•

• Participant's liquidity risk (liquidity within funds managed for the benefit of participants).

The Company has not provided the credit risk analysis for the financial assets of the unit-linked business where the liability to policyholders is

linked to the performance and value of the assets that back those liabilities. The shareholder does not have direct exposure to any credit risk

in those assets. Other than its investment made in units of the investment-linked funds of RM10,608,600 (2012: RM10,000,000). Such units

are not subject to credit risk as they may be redeemed if necessary at the net asset value of the funds.

Liquidity risk is the risk that an entity, although solvent, either does not have sufficient financial resources available to it in order to meet its

obligations when they fall due, or can secure them only at excessive cost.

Shareholder's liquidity risk (liquidity within funds managed for the benefit of the shareholder, including shareholder's interests in long-term

funds)

It is the Company‟s policy to maintain accurate and consistent risk ratings across its credit portfolio. This enables management to focus on the

applicable risks and the comparison of credit exposures across all lines of business and products. The rating system is supported by a variety

of financial analytics combined with processed market information to provide the main inputs for the measurement of counterparty risk. All

internal risk ratings are tailored to the various categories and are derived in accordance with the Company‟s rating policy. The attributable risk

ratings are assessed and updated regularly.

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(b) Liquidity risk (cont'd.)

The Company will meet shareholder's liquidity needs arising in a number of key areas as described below:

• The ability to support the liquidity requirements arising from new business.

• The capacity to maintain future dividend payments.

• The ability to cope with the liquidity implications of strategic initiatives.

• The capacity to provide financial support across the Company.

• The ability to fund its day-to-day cashflow requirements.

For participants' funds, liquidity needs arise from a number of potential areas, including:

• A short-term mismatch between cashflows of assets and cashflow requirements of liabilities.

• Having to realize assets to meet liabilities during stressed market conditions.

• Investments in illiquid assets such as property and private placement debt.

• Higher than expected level of lapses/surrenders caused by economic shock, adverse reputational issues or other events.

• Higher than expected payments of claims on takaful contracts.

The overall objective of shareholder's liquidity risk is to ensure there are sufficient funds available to meet the cashflow needs of the business.

The overall objective of participant's liquidity risk is to ensure that sufficient liquid funds are available to meet cashflow requirements under all

but the most extreme scenarios.

Exposure to participants' liquidity risk can be split between participants' investment fund and participants' risk fund and between linked and

non-linked funds. As a general rule, the Company is more likely to be significantly impacted by participants' liquidity risk on non-linked funds,

as opposed to linked funds where participants' benefits are expressed directly as units held in an underlying fund.

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Liquidity risk is managed in the following ways:

• Forecasts are prepared regularly to predict required liquidity levels over both the short and medium-term.

• A credit facility with a syndicate of banks exists to enable cash to be raised in a relatively short time-span.

• Assets of a suitable maturity and marketability are held to meet participant liabilities as they fall due.

•

Expected utilisation or settlement of assets

The table below summarises the expected utilisation or settlement of assets:

Current* Non-current Total Current* Non-current Total

Takaful operator

Investments 21,036,928 67,991,810 89,028,738 61,794,283 29,827,900 91,622,183

Other receivables 1,096,511 - 1,096,511 2,318,150 - 2,318,150

Cash and cash equivalents 43,000 - 43,000 29,139 - 29,139

Total assets 22,176,439 67,991,810 90,168,249 64,141,572 29,827,900 93,969,472

* Expected utilisation or settlement within 12 months from the reporting date.

01.04.2012 to 31.03.2013 26.01.2011 to 31.03.2012

Limits and internal asset classes on the level of investment are set by BNM to ensure amongst others, an appropriate level of exposure to

non-liquid assets.

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Expected utilisation or settlement of assets (cont'd.)

Current* Non-current Total Current* Non-current Total

Family takaful fund

Investments 29,551,543 9,088,892 38,640,435 6,842,114 3,051,600 9,893,714

Takaful receivables 1,654 - 1,654 - - -

Retakaful assets 351,052 - 351,052 1,206 - 1,206

Other receivables 1,463,436 - 1,463,436 28,661 - 28,661

Cash and cash equivalents 2,897,677 - 2,897,677 275,050 - 275,050

Total assets 34,265,362 9,088,892 43,354,254 7,147,031 3,051,600 10,198,631

Company

Investments 50,588,471 66,472,102 117,060,573 71,240,461 24,624,620 95,865,081

Takaful receivables 1,654 - 1,654 - - -

Retakaful assets 351,052 - 351,052 1,206 - 1,206

Other receivables 1,660,914 - 1,660,914 2,298,670 - 2,298,670

Cash and cash equivalents 2,940,677 - 2,940,677 304,189 - 304,189

Total assets 55,542,768 66,472,102 122,014,870 73,844,526 24,624,620 98,469,146

* Expected utilisation or settlement within 12 months from the reporting date.

01.04.2012 to 31.03.2013 26.01.2011 to 31.03.2012

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Maturity profiles

Carrying value Up to a year 1 - 5 years 5 - 15 years Over 15 years No maturity date Total

31 March 2013 RM RM RM RM RM RM RM

Takaful operator

Investments:

AFS financial assets 67,991,810 - 15,019,500 - 42,363,710 10,608,600 67,991,810

LAR 21,036,928 21,036,928 - - - - 21,036,928

Other receivables 1,096,511 1,096,511 - - - - 1,096,511

Cash and cash equivalents 43,000 43,000 - - - - 43,000

90,168,249 22,176,439 15,019,500 - 42,363,710 10,608,600 90,168,249

Expense liabilities 4,400,000 1,262,685 1,622,018 2,157,268 16,232 - 5,058,203

Other payables 4,650,276 4,650,276 - - - - 4,650,276

9,050,276 5,912,961 1,622,018 2,157,268 16,232 - 9,708,479

Unit-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.

The tables below summarise the maturity profile of financial assets and liabilities of the Company and the family takaful fund based on

remaining undiscounted contractual obligations, including profit payable and receivable. For expense liabilities, takaful contract liabilities

and retakaful assets, maturity profiles are determined based on estimated timing of net cash outflows from the recognised takaful contract

liabilities.

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Maturity profiles (cont'd.)



Family takaful fund

Investments:

FVTPL 7,306,578 - - - 3,591,268 3,715,310 7,306,578

AFS financial assets 1,782,314 - 1,782,314 - - - 1,782,314

LAR 29,551,543 29,551,543 - - - - 29,551,543

Takaful receivables 1,654 1,654 - - - - 1,654

Retakaful assets 351,052 351,052 - - - - 351,052


Cash and cash equivalents 2,897,676 2,897,676 - - - - 2,897,676

43,366,797 34,277,905 1,782,314 - 3,591,268 3,715,310 43,366,797

Takaful certificate liabilities 39,391,918 37,115,704 - - - 2,276,214 39,391,918

Takaful payables 2,803,447 2,803,447 - - - - 2,803,447

Other payables 843,690 843,690 - - - - 843,690

43,039,055 40,762,842 - - - 2,276,214 43,039,055

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Company

Investments:

FVTPL 7,306,578 - - - 3,591,268 3,715,310 7,306,578

AFS financial assets 69,774,124 - 16,801,814 - 42,363,710 - 59,165,524

LAR 50,588,471 50,588,471 - - - - 50,588,471

Takaful receivables 1,654 1,654 - - - - 1,654



Cash and cash equivalents 2,940,676 2,940,676 - - - - 2,940,676

132,915,421 55,834,719 16,801,814 - 45,954,978 3,715,310 122,306,821

Takaful certificate liabilities 29,391,918 27,115,704 - - - 2,276,214 29,391,918

Takaful payables 2,803,447 2,803,447 - - - - 2,803,447

Expense liabilities 4,400,000 1,262,685 1,622,018 2,157,268 16,232 - 5,058,203

Other payables 5,025,936 5,025,936 - - - - 5,025,936

41,621,301 36,207,772 1,622,018 2,157,268 16,232 2,276,214 42,279,504

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Takaful operator

Investments:

AFS financial assets 29,827,900 - - - 19,827,900 10,000,000 29,827,900

LAR 61,794,283 61,794,283 - - - - 61,794,283



93,969,472 64,141,572 - - 19,827,900 10,000,000 93,969,472

Expense liabilities 675,000 675,000 - - - - 675,000

Other payables 4,850,145 4,850,145 - - - - 4,850,145

5,525,145 5,525,145 - - - - 5,525,145

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Family takaful fund

Investments:

FVTPL 4,796,720 - - - 3,051,600 1,745,120 4,796,720

LAR 5,096,994 5,096,994 - - - - 5,096,994


Other receivables 28,661 28,661 - - - - 28,661


10,198,631 5,401,911 - - 3,051,600 1,745,120 10,198,631

Takaful certificate liabilities 10,141,426 10,141,426 - - - - 10,141,426

Takaful payables 25,338 25,338 - - - - 25,338

Other payables 30,629 30,629 - - - - 30,629

10,197,393 10,197,393 - - - - 10,197,393

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Company

Investments:

AFS financial assets 19,827,900 - - - 19,827,900 - 19,827,900

FVTPL 4,796,720 - - - 3,051,600 1,745,120 4,796,720

LAR 66,891,277 66,891,277 - - - - 66,891,277




94,119,961 69,495,341 - - 22,879,500 1,745,120 94,119,961

Takaful certificate liabilities 218,249 218,249 - - - - 218,249

Takaful payables 25,338 25,338 - - - - 25,338

675,000 675,000 - - - - 675,000

Other payables 4,850,379 4,850,379 - - - - 4,850,379

5,768,966 5,768,966 - - - - 5,768,966

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(c) Market risk

•

•

•

(i) Equity risk

(ii) Foreign exchange risk (currency risk)

The management of shariah compliant equity investments is undertaken by the

Company in consultation with the Shariah Committee. In its decision-making on

equity investments, the Company will assess the extent of equity risk required or

allowed by the respective funds as set out in the individual fund's objectives and

relative to defined performance benchmarks. The methodology followed by the

Company to manage equity risk within each fund is an integral part of the asset

management approach adopted.

There is no significant exposure to foreign exchange risk at the statement of

financial position date.

Market risk is the risk that the fair value or future cash flows of a financial instrument will

fluctuate because of changes in the values of, or the income from, assets or in profit or

exchange rates. Market risk includes the following four elements:

Equity risk – the risk of fluctuations in fair value or future cash flows of a financial

instrument arising from a change of or volatility in equity prices or income

Foreign exchange risk – the risk of fluctuations in fair value or future cash flows of a

financial instrument arising from a change of or volatility in exchange rates

Profit rate risk – the risk of fluctuations in fair value or future cash flows of a financial

instrument arising from a change of or volatility in profit rates

Equity risk, as defined above, are accepted in accordance with agreed risk appetite

in order to achieve the desired level of return from participants' assets.

The related parties and their relationship with the Company as of 31

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(c) Market risk (cont'd.)

(iii) Profit rate risk

Effect on

equity/

Effect on participants'

net loss/deficit fundChanges in (Increase)/ (Decrease)/

basis points Decrease Increase

31 March 2013 % RM RM

Takaful operator

Profit rates + 100 bps - (5,385,290)

Profit rates - 100 bps - 6,462,860

Family takaful fund

Profit rates + 100 bps (360,218) (39,342)

Profit rates - 100 bps 430,865 40,410

Company

Profit rates + 100 bps (360,218) (5,424,632)

Profit rates - 100 bps 430,865 6,503,270

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

financing and assets. Conversely, floating rate financing exposes the Company to

cash flow profit rate risk.

Islamic bond related performance benchmarks within fund mandates are set so that

asset profiles match liability profiles as closely as possible. This mitigates against

profit rate risk.

The Company may also be exposed to profit rate risk on its strategic investments.

As part of any proposal for strategic investment, the profit rate risk to which the

Company is exposed will be given careful consideration as one of the factors

impacting on the final recommendation.

The impact of reasonably possible changes in profit rate on the net loss/deficit and

equity of the takaful operator and participants' fund of the family takaful fund are as

follows:

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(iii) Profit rate risk (cont'd.)

Effect on

equity/

Changes in Effect on participants'

basis points net loss/deficit fund

(Increase)/ (Decrease)/

Decrease Increase


Takaful operator

Profit rates + 100 bps - (2,508,600)

Profit rates - 100 bps - 3,049,250

Family takaful fund

Profit rates + 100 bps (378,150) -

Profit rates - 100 bps 458,000 -

Company

Profit rates + 100 bps (378,150) (2,508,600)

Profit rates - 100 bps 458,000 3,049,250

(iv) Equity price risk

Effect on

Effect on equity/

net loss/deficit participants'

Change in for the year fund

FBMKLCI Decrease/ Increase/

(Increase) (Decrease)


Family takaful fund / Company

Market indices:

FBMKLCI +5% 185,766 185,766 FBMKLCI -5% (185,766) (185,766)

Price risk is the risk of fluctuations in fair value or future cash flows of a financial

instrument arising from a change in market indices.

The following table demonstrates the sensitivity to a reasonably possible change in

market indices on the quoted equity securities of the family takaful fund:

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(iv) Equity price risk (cont'd.)

Effect on

Effect on equity/

net loss/deficit participants'

Change in for the year fund

FBMKLCI Decrease/ Increase/

(Increase) (Decrease)


Family takaful fund / Company

Market indices:

FBMKLCI +5% 87,256 87,256 FBMKLCI -5% (87,256) (87,256)

(d) Capital management

• Projected cash flows and liquidity requirement to meet the operational needs.•

• Investment strategies for family takaful and investment-linked funds and

shareholder's fund.

The objective of the Company's capital management plan is to ensure that the company

maintains capital adequacy level that commensurate with the risk profile of the Takaful

operations. The capital management plan is geared towards compliance to Risk Based

Capital (“RBC”) Framework for Takaful Operators when it becomes mandatory. The

Company will be required to comply with the RBC Framework for Takaful Operators

beginning from 1 January 2014.

The following factors are taken into consideration in formulating the capital management

plan:

Management of capital adequacy ratio (“CAR‟‟) based on RBC Framework for

Takaful Operators.

The capital management plan will be reviewed and presented to the Board on an annual

basis.

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(d) Capital management (cont'd.)

Stress testing

Stress testing has been carried out to assess:

•

•

28. Family takaful risk

The risks that the Company are exposed to are as follows:

•

The actions that will be required to mitigate the threats identified and the level of

strategic assets allocation ("SAA") and tactical assets allocation ("TAA")

recommended to maintain adequate liquidity.

Family takaful contracts offered by the Company during the financial year consist of credit-

related takaful and investment-linked products.

The Company's credit-related products offer protection on the reducing term financing,

surrender value based on the participants' investment fund (PIF) value and surplus sharing

from the participants' risk fund (PRF) (if any). Investment-linked products combine savings

with protection where the cash value of the certificate depends on the value of the underlying

unitised funds.

Mortality and morbidity – the risk that the actual death and total and permanent disability

claims exceeds the expectated claims.

Currently, as at 31 March 2013, the Company maintains a share capital of RM100 million

which is in line with the regulatory requirements set by BNM (BNM/RH/CIR 004-13

Minimum Paid-up Capital requirement for Takaful Operators).

Stress testing is conducted to illustrate the liquidity needs and impact on asset growth

under different plausible extreme scenarios based on the sensitivity analysis approach of

significant decrease in new business from different distribution channel.

The Company has taken the approach to conduct three (3) stress tests that project over

a 5-year financial plan.

The extent by which capital will be eroded by the threats identified and the impact on

the Company‟s solvency margin; and

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28. Family takaful risk (cont'd.)

•

•

•

•

•

•

• Tax - risk arises from tax regimes changing adversely.

Underpinning the Company's management of takaful risk is:

•

•

Persistency - the risk that certificate holders terminate their contracts in greater numbers

or earlier than expected resulting in losses from unrecouped expenses, lost future profits,

reputational risk from possible poor selling practices and customer servicing. Persistency

is a complex area and an important risk both financially and reputationally. Persistency

risk can arise on certain types of business where less business lapses are expected with

adverse consequences on profitability.

Claims management – the risk that claims amounts are greater than expected or should

be, through poor claims handling processes, resulting in claims being paid when they

should be rejected or claims amounts being greater than acceptable.

Concentration - the risk arises when similar risks across a wide range of products, which

individually are not material, aggregate to create a material risk for the business.

Underwriting – the risk arises when poor underwriting practice allows risks to be

accepted at inadequate contribution levels or allows proposals to be accepted which

should actually be declined.

Product cycle – the risk may arise if management does not continually review the

products in light of emerging experience and as a result misses opportunities to review

charges or remove poor products from sale.

controls around the development of products and their pricing including post-launch

assessment as outlined in the Product Management Framework;

It is the nature of these risks that some are more material than others at Company level by

consequence of the products sold.

adherence to underwriting framework as described under the approved Underwriting

Policy that takes into account the level of risk that the Company is prepared to accept.

Expense - the risk arises from inadequate management of acquisition and maintenance

expenses, leading to losses where actual expenses cannot be met from the charges

taken from contributions received.

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•

•

•

•

regular product cycle management including monitoring of experience of key parameters

such as actual mortality, morbidity and lapse experience, mortality charges and expense

charges, claims trends and handling, which feed into the development of products.

Product reviews should also ensure that the product continues to meet customers‟

expectations, as part of the business customer satisfaction and fairness objectives.

implementation of clear unit pricing guidelines in line with regulatory requirements and

ensuring customer fairness.

The Company conducts independent business underwriting reviews and monitors the

underwriting and retakaful policies and strategies. As part of the underwriting strategy, risks in

excess of agreed underwriting limits may be ceded to retakaful companies. The Company‟s

objective is to obtain retakaful in the most cost-effective manner from retakaful companies

whose creditworthiness is deemed appropriate.

The Company utilizes retakaful to manage the mortality and morbidity risks. Retakaful

arrangements are contracted in accordance with the Retakaful Policy and subject to annual

review.

management of persistency risk at all stages in the product cycle, both before the

product is sold through careful product design and throughout the life of the product.

The Company conducts the stress test twice a year which is at the financial year end and six

months after year end. The purpose of the stress test is to test the solvency level of the

Company in an extreme adverse environment. Following BNM‟s Guidelines, the Company

has taken the sensitivity and scenario event-driven approach to conduct three (3) different

stress tests in terms of scenario and risk coverage.

implementation of claims management process that adhere to statutes and regulations

and market practice where relevant.

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Gross Retakaful Net

liabilities liabilities

RM RM RM31 March 2013

Family takaful fund

Term plans - mortgage 1,602,089 (79,951) 1,522,138

Term plans - others 25,126,469 (271,101) 24,855,368

Investment-linked plans 12,663,360 - 12,663,360

39,391,918 (351,052) 39,040,866

Company

Term plans - mortgage 1,602,089 (79,951) 1,522,138

Term plans - others 25,126,469 (271,101) 24,855,368

Investment-linked plans 2,663,360 - 2,663,360

29,391,918 (351,052) 29,040,866

31 March 2012

Family takaful fund

Term plans - mortgage 4,638 (47) 4,591

Term plans - others 213,610 (1,158) 212,452

Investment-linked plans 9,923,178 (1) 9,923,177

10,141,426 (1,206) 10,140,220

Company

Term plans - mortgage 4,638 (47) 4,591

Term plans - others 213,610 (1,158) 212,452

Investment-linked plans 1 (1) -

218,249 (1,206) 217,043

The following table shows the concentration of family takaful certificate liabilities of the

Company and family takaful fund as at the reporting date, net of retakaful:

As all of the business is derived from Malaysia, the entire family takaful contract liabilities are

in Malaysia.

The Company table above excludes family takaful certificate liabilities related to the net asset

value of units held by the Takaful operator amounting to RM 10,000,000 (31.3.2012 :

RM9,923,177)

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Key assumptions

(i) Mortality rates

Types of business

Term plans - mortgage 100% of Munich Re Retakaful ("MRR") Guaranteed Rates

for death and total permanent disability ("TPD")

Term plans - others 100% of MRR Guaranteed Rates for death and TPD

Investment-linked plans 100% of MRR Guaranteed Rates for death and TPD and

100% of MRR Non-Guaranteed Rates for critical illness

(ii) Investment return

Types of business 2013 2012

Term plans - mortgage 4% 4%

Term plans - others 4% 4%Investment-linked plans 5% 4%

An increase in investment return would lead to an increase in participants' investment

fund value, participants' risk fund surplus and profits for the shareholder.

Assumptions are based on the mortality rates recommended by the retakaful operator.

Investment return assumption represents the future expected earnings on the fund,

which will affect the value of participants' investment fund ("PIF"). A decrease in

investment return assumption will reduce the expected future value of the PIF. As such,

the PIF may not be sufficient for tabarru' to be deducted. Shareholders are obligated to

rectify any deficits in the PIF and hence, profits will reduce correspondingly.

An increase in rates will lead to larger number of claims benefit being paid out sooner

than anticipated, which will reduce surplus from the participants risk fund and

subsequently reduce profits for the shareholders in terms of reduction of income arising

from the surplus sharing and the requirement to inject Qard (a loan) into the participants'

risk fund if there is any underwriting deficit.

Material judgement is required in determining the liabilities and in the choice of assumptions.

Assumptions in use are based on expert advice, 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.

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:

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(iii) Expenses

(iv) Sensitivity analysis

Sensitivity information will also vary according to the current economic assumptions.

Impact on Impact on

loss/deficit equity/

Change in for the participants'

assumption year fund(Increase)/ (Decrease)/

Decrease Increase


Takaful operator

3,725,000

Expenses + 10% (517,764) 517,764 Expenses - 10% 512,279 (512,279)

Family takaful fund

Mortality/morbidity + 25% (3,266,918) 3,266,918

Mortality/morbidity - 25% 434,020 (434,020)

Investment return + 1% 423,892 (423,892) Investment return - 1% (608,330) 608,330

The correlation of assumptions will have a significant effect in determining the ultimate

claims liabilities, but to demonstrate the impact due to changes in assumptions,

assumptions have to be changed on an individual basis. It should be noted that

movements in these assumptions are non-linear.

An increase in the level of expenses would result in an increase in expenditure thereby

reducing profits for the shareholder.

The analysis below is performed for reasonably possible movements in key assumptions

with all other assumptions held constant, showing the impact on net loss and net deficit

of the takaful operator, family takaful fund and Company.

Management expenses assumptions reflect the projected costs of maintaining and

servicing in-force contracts and associated overhead expenses. The current level of

expenses are based on the expense analysis conducted yearly under the Company's

Financial Condition Report, and adjusted for expected expense inflation if appropriate.

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Impact on Impact on

loss/deficit equity/

Change in for the participants'

assumption year fund

(Increase)/ (Decrease)/

Decrease Increase

31 March 2013 (cont'd.) % RM RM

Company

Expenses + 10% (517,764) 517,764

Expenses - 10% 512,279 (512,279)

Mortality/morbidity + 25% (3,266,918) 3,266,918



31 March 2012

Takaful operator

675,000

Expenses + 10% (17,641) (17,641) Expenses - 10% 17,638 17,638

Family takaful fund

22,120

Mortality/morbidity + 25% (15,234) 15,234



Company

22,120

Expenses + 10% (17,641) (17,641)

Expenses - 10% 17,638 17,638

Mortality/morbidity + 25% (15,234) 15,234



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29. Operational risk

30. Fair values of financial assets and liabilities

Level 1:

Level 2:

Level 3:

Valuation

technique

using

Quoted Observable Unobservable

market price inputs inputs

(Level 1) (Level 2) (Level 3) Total

31 March 2013 RM RM RM RM

Takaful operator


Unquoted secured

Islamic corporate debt

securities in Malaysia - 34,134,750 - 34,134,750

Unquoted unsecured


securities in Malaysia - 8,228,960 - 8,228,960

Units held in investment-

linked funds 10,608,600 - 10,608,600

Government investment

issues - 15,019,500 - 15,019,500

- 67,991,810 - 67,991,810

Techniques which use inputs which have a significant effect on the recorded fair

value that are not based on observable market data

The Company uses the following hierarchy for determining and disclosing the fair value of

financial instruments by valuation technique:

Other techniques for which all inputs which have a significant effect on the

recorded fair value are observable, either directly or indirectly

Operational risk is the risk of loss arising from system failure, human error, fraud or external

events. The Company aims to maintain an appropriate control environment to keep the

exposure to operational risks in line with the agreed risk appetite, recognising that operational

risks may arise in the normal course of business even when carried out in line with the the

Company‟s policies and BNM‟s regulation.

Quoted (unadjusted) prices in active markets for identical assets or liabilities

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

of the fair value hierarchy:

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30. Fair values of financial assets and liabilities (cont'd.)

Valuation

technique

using




31 March 2013 RM RM RM RM

(cont'd.)

Family takaful fund


Quoted shariah approved

equities in Malaysia 3,715,310 - - 3,715,310

Unquoted Islamic corporate

debt securities in Malaysia

- Secured - 2,205,630 - 2,205,630

- Unsecured - 1,385,638 - 1,385,638



issues - 1,782,314 - 1,782,314

3,715,310 5,373,582 - 9,088,892

Company



equities in Malaysia 3,715,310 34,134,750 - 37,850,060

Unquoted Islamic corporate


- Secured - 2,205,630 - 2,205,630

- Unsecured - 9,614,598 - 9,614,598



issues - 16,801,814 - 16,801,814

3,715,310 62,756,792 - 66,472,102

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30. Fair values of financial assets and liabilities (cont'd.)

Valuation

technique

using




RM RM RM RM

31 March 2012

Takaful operator


Unquoted secured


securities in Malaysia - 17,783,500 - 17,783,500 Unquoted unsecured


securities in Malaysia - 2,044,400 - 2,044,400 Units held in investment-

linked funds - 10,000,000 - 10,000,000

- 29,827,900 - 29,827,900

Family takaful fund



equities in Malaysia 1,745,120 - - 1,745,120 Unquoted Islamic corporate


- Secured - 2,540,500 - 2,540,500 - Unsecured - 511,100 - 511,100

1,745,120 3,051,600 - 4,796,720

Company



equities in Malaysia 1,745,120 - - 1,745,120 Unquoted Islamic corporate


- Secured - 20,324,000 - 20,324,000 - Unsecured - 2,555,500 - 2,555,500

1,745,120 22,879,500 - 24,624,620

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31. Significant event

32. Comparatives

On 7 January 2013, the AMMB annouced that the repurchase from Friends Life was

completed on 4 January 2013.

The comparative figures for the statement of comprehensive income, statement of changes

in equity, statement of cash flows and related notes are prepared from the Company's date

of incorporation on 26 January 2011 to 31 March 2012 and are therefore not comparable to

the current year results, changes in equity and cash flows.

The ultimate holding company, AMMB Holdings Berhad ("AMMB") announced on 16 October

2012 that it has obtained the approval of Bank Negara Malaysia to commence negotiations

with Friends Life FPL Limited ("Friends Life") for the proposed repurchase of the 30% equity

interest held by Friends Life in the Company (the "Proposal").

Subsequently, on 31 December 2012 AMMB announced that it has received the notification

of Bank Negara Malaysia (via letter dated 28 December 2012) that the Minister of Finance

has approved the Proposal. The approval for the repurchase was subject to the AMMB the

ultimate holding company, or AMAB Holdings Sdn Bhd, the holding company completing the

sale of part of its stake in the Company to a new strategic partner within one year of the

completion of the repurchase.

117

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