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TAKAFUL PAKISTAN LIMITED

ANNUAL REPORT 2015

2

CONTENTS

Corporate Information 03

Vision, Mission and Ambition 05

Management Team 06

Branches 06

Director’s Report 07

Six years Glance 11

Pattern of Shareholding 12

Review Report to the Members on Compliance with Code of Corporate Governance 13

Statement of Compliance with the Code of Corporate Government 15

Auditor’s Report to the Members 18

Financial Statements 20

3

CORPORATE INFORMATION

Chairman of Board of Directors Mr. Tahir Naz Siddique

Directors Syed Tariq Husain

Syed Abdul Razzaq

Mr. Ahmad Shuja Kidwai

Mr. Haseeb Ahmed

Dr. Mumtaz A. Hashmi

Mr. Aadil Saleh

Chief Executive Officer Dr. Syed Arif Hussain

Chief Finance Officer and

Company Secretary

Jamil Ahmed

Shariah Advisor Mufti Imtaiz Alam

Auditor M.Yousuf Adil Saleem & Co.

Chartered Accountants

Legal Advisors Surridge & Beecheno

Advocates, Consultants, Attorneys

Mohsin Tayebaly & Co.

Corporate Legal Consultants, Barristers &

Advocates High Courts & Supreme Court

Head office 6th floor, Business Centre,

Plot No 19-1-A, Block -6, P.E.C.H.S.,

Shahrah-e-Faisal, Karachi-75400, Pakistan.

UAN : (021) 111-875-111

Tel : (+92-21) 34373171-80

(10 Lines)

Fax : (+92-21) 34373195-6

E-mail : [email protected]

Website : www.takaful.com.pk

4

Bankers Meezan Bank Limited

Bank Islami Pakistan Limited

Dubai Islamic Bank Limited

Burj Bank Limited

Al Baraka Bank (Pakistan) Limited

Habib Bank Limited (Islamic Banking Division)

Faysal Bank Limited (Islamic Banking Division)

Askari Bank Limited ( Islamic Banking Division)

Bank AlFalah Limited (Islamic Banking Division)

Habib Metropolitan Bank (Islamic Banking Division)

National Bank of Pakistan (Islamic Banking Division)

Bank of Khyber (Islamic Banking Division)

UBL (Islamic Banking Division)

BOARD COMMITTEES

Audit Committee

Syed Tariq Husain (Chairman) Dr. Mumtaz A. Hashmi Syed Abdul Razzaq

Risk Management Committee Tahir Naz Siddique (Chairman) Syed Tariq Hussain Dr. Mumtaz A. Hashmi

Human Resource Committee Syed Tariq Hussain (Chairman) Ahmed Shuja Kidwai Dr. Mumtaz A. Hashmi

5

OUR VISION

To spread Takaful benefits beyond borders, beyond Time!

OUR MISSION

To deliver Takaful as a viable alternative to conventional insurance.

To become the ‘top-of-the-mind’ Takaful brand for our Participants in terms of competitiveness,

service standards and business ethics

To give value for money to our shareholders and make Takaful Pakistan their prized asset.

To become an ideal organization for our employees that encourages them to achieve self-actualization

and growth.

To contribute positively and proactively for the welfare of our society at large as well as for the

preservation of our environment.

OUR AMBITION

To be a role model for the contemporary insurance industry and eventually bring it in conformity with

the Shariah compliant Takaful mode of insurance.

6

MANAGEMENT TEAM Dr. Syed Arif Hussain Chief Executive Officer

Jamil Ahmed General Manager, Chief Financial Officer and Company Secretary

Kashif Masood Deputy General Manager and Head of Operations

Dr. Muhammad Saadat Senior Manager and Head of Marketing

Muhammad Adnan Sharif Deputy General Manager (Marketing)

Moeen ud Din Assistant General Manager (Marketing)

Jawwad Bin Yousuf Senior Manager & Head of Accident Underwriting

Abdul Haseeb Fakih Senior Manager & Head of Risk Management

Muhammad Irfan Senior Manager Finance

Muhammad Saeed Senior Manager & Head of Information Technology

Shaikh Azeemuddin Senior Manager & Head of Human Resources & Administration

BRANCHES / OFFICES

Branch Branch Address

Karachi 6th floor, Business Centre,

Plot No 19-1-A, Block -6, P.E.C.H.S.,

Shahrah-e-Faisal, Karachi.

UAN: (021) 111-875-111

Fax: (021) 34373195-6

Lahore 130-E/1, Main Boulevard

Gulberg-III, Lahore.

UAN: (042) 111-875-111

Fax: (042) 35716790

Peshawar 6th Floor, State Life Building,

34-The Mall, Peshawar Cantt,

Peshawar.

UAN: (091) 111-875-111

Fax: (091) 5260107

Faisalabad Office # 3, 2nd floor, Wahab

Centre, Main Susan Road,

Faislabad.

UAN: (041) 111-875-111

Fax: (041) 8720063

7

Abbottabad Al-Fateh Plaza

Opposite Radio Station, Jhangi

Abbottabad.

099-2343112

Multan 95D Shah Ruknay Alam Colony

Multan

Hyderabad Plot No. A/2616, Ward –A

Noor Muhammad High School

Hyderabad

022-2636962-4


Plot No 19-1-A, 6th Floor, Business Centre,

Block-6, P.E.C.H.S., Shahrah-e-Faisal,

Karachi- 75400 (Pakistan)

UAN: (+92-21) 111-875-111

Fax: (+92-21) 34373195-6

www.takaful.com.pk


DIRECTOR’S REPORT TO THE MEMBERS

The Directors are pleased to present the Annual Report for the Year ended December 31, 2015.

PERFORMANCE

PARTICIPANT’S TAKAFUL FUND “PTF”

During the year 2015, your Company has achieved a business growth of 22%. The gross

contribution during the year stands increased from Rs. 274 million to Rs. 334 million. Net

Contribution Revenue increased from Rs. 169 million to Rs. 264 million. Net Investment and

Other Income of the Fund increased from Rs. 12 million to Rs. 18 million. Net Claims increased

from Rs. 94 million to Rs. 134 million. As such net the Fund ended up with the net deficit of Rs.

9 million as against Rs. 16 million during the previous year.

SHAREHOLDER’S FUND “SHF”

Wakala Fee earned during the year stands increased from Rs. 94 million to Rs. 131 million,

recording a growth of 39% over the corresponding year. Commission expense increased from

Rs. 17 million to Rs. 18 million while Management and Administration expenses increased from

Rs. 75 million to Rs. 90 million (excluding the amount of penalty paid to SECP amounting to Rs.

5 million). Resultantly, operational profit increased from Rs. 2 million to Rs. 19 million.

Investment and Other Income increased from Rs. 9 million to Rs. 15 million. Consequently Profit

before tax increased from Rs. 11 million to Rs. 34 million while Profit after tax increased from

Rs. 9 million to Rs. 30 million.

Earnings per Share increased from 0.29 per share to Rs. 1.01 per share.

7





UAN: (+92-21) 111-875-111

Fax: (+92-21) 34373195-6

www.takaful.com.pk

BOARD MEETINGS

In 2015 the Board of Directors held eight (8) meetings, at least one meeting was held in each

quarter. The attendance record of the Directors is as follows:

Name of Director Attendance

Mr. Tahir Naz Siddiqui 8

Syed Tariq Husain 5

Mr. Ahmed Shuja Kidwai 7

Dr. Mumtaz A Hashmi 7

Mr. Haseeb Ahmed 1

Mr. Nadeem Rafi 4

Mr. Abdul Razzaq 7

During the year, Mr. Shafqaat Ahmed resigned from the Board and Mr. Abdul Razzaq was

appointed in his place. The Board recorded its appreciation of the services rendered by Mr.

Shafqaat Ahmed and welcomed Mr. Abdul Razzaq and looks forward to his valuable

contribution and guidance. Leave of absences were granted to those directors who could not

attend the meetings.

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

In compliance with the Corporate and Financial Reporting Framework under the Code of

Corporate Governance, the Directors confirm the following:

a. The Financial Statements prepared by the Company, fairly present its state of affairs,

the results of its operations, cash flows and changes in equity;

b. Proper books of accounts have been maintained by the Company;

c. Appropriate accounting policies have been applied consistently in preparation of the

Financial Statements except as disclosed in the audited accounts, if any, and accounting

estimates are based on reasonable and prudent judgment;

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UAN: (+92-21) 111-875-111

Fax: (+92-21) 34373195-6

www.takaful.com.pk

d. International Accounting Standards, as applicable in Pakistan, have been followed in

preparation of Financial Statements and departure, if any, there from has been

adequately disclosed;

e. The system of internal control is sound in design and has been effectively implemented

and monitored;

f. There are no significant doubts on the ability of the Company to continue as a going

concern;

g. There is no material departure from the best practices of corporate governance.

h. The key operational and financial data for the last six years is annexed.

i. The value of investments in Employees Provident Fund and Employees Gratuity Fund

maintained for employees at the close of the year were as follows:

2015 2014

Employees Provident Fund Rs. 13,105,718 Rs. 8,700,000

Employees Gratuity Fund Rs. 5,161,391 Rs. 2,800,000

j. The statement of pattern of Shareholding in the Company is annexed.

MATERIAL CHANGES DURING THE YEAR AFFECTING FINANCIAL POSITION OF THE COMPANY

1. Securities and Exchange Commission of Pakistan (SECP) reduced the fine of Rs. 10 million

imposed by it in May 2010 to Rs. 5 million and the same was duly paid by the Company.

2. Legal cases lodged against the Company by various parties amounting to Rs. 86 million

have been decided in favor of the Company.

PROPOSED SUBSEQUENT EVENT

The Board of Directors has approved a step wise plan for capital enhancement of the Company to comply with the minimum requirement set by the Securities and Exchange Commission of Pakistan. The Board has approved that a total of Rs. 100,000,000/- (Pak Rupees One Hundred Million) shall be raised as ordinary share capital over a period expiring 31st December 2016 based on the following schedule:

9





UAN: (+92-21) 111-875-111

Fax: (+92-21) 34373195-6

www.takaful.com.pk

Issue Amount Deadline for Completion

1st Tranche Rs. 50,000,000/- 30th June 2016 2nd Tranche Rs. 50,000,000/- 31st December 2016

The issue price for each tranche would be determined based on the Book Value per share of the

latest available audited accounts at the time of approval of the issue by the shareholders. Price

of 1st tranche of right issue based on the audited Financial Statements is determined at Rs.

5.74/- per share (i.e., at a discount of Rs. 4.26/- per share).

AUDITORS;

In compliance with the circular # 24 of 2005 issued by Securities and Exchange Commission of

Pakistan, the Board on the suggestion of the Audit Committee recommends appointment of

M/s Riaz Ahmed and Company Chartered Accountants for the audit of the Company for the

year 2016.

ACKNOWLEDGEMENT

We thank our valued customers and re-takaful operators for their continued patronage and

support and we are also thankful to Insurance Association of Pakistan and to our regulator

Securities and Exchange Commission of Pakistan for their guidance and assistance.

It is a matter of deep gratification for your Directors to place on record their appreciation of the

efforts made by the officers, field force and staff who had contributed to the growth of the

Company and the continued success of its operations.

For and on behalf of Board of Directors

Dr. Syed Arif Hussain

Chief Executive Officer

10

(Rupees in thousands)

2 0 1 5 2 0 1 4 2 0 1 3 2 0 1 2 2 0 1 1 2 0 1 0

BALANCE SHEET

Paid up capital 300,000 300,000 300,000 300,000 300,000 300,000

Accumulated Profit/(Loss) (107,391) (136,878) (142,971) (158,799) (166,216) (169,459)

Qard-e-hasna (20,239) (11,211) - - - -

Shareholders’ Equity 172,370 151,911 157,029 141,201 133,784 130,541

Participants’ Takaful Fund - - 5,015 33,773 43,094 8,545

Cash and Bank Balances PTF 148,869 182,212 184,737 176,768 176,658 138,547

Cash and Bank Balances SHF 178,885 105,068 97,282 73,884 62,537 92,891

Investments PTF 47,196 10,008 4,316 4,671 9,881 -

Investments SHF 20,773 25,517 34,671 35,499 47,890 49,071

Total Assets PTF 334,416 355,537 304,313 302,929 304,486 245,315

Total Assets SHF 243,026 221,639 209,328 195,170 179,416 218,534

Total Liabilities PTF 334,416 355,536 304,810 270,781 257,333 236,770

Total Liabilities SHF 70,657 69,728 52,299 53,969 44,968 87,993

REVENUE

Gross Contribution Revenue 333,568 274,350 220,515 212,218 165,283 232,815

Net Contribution Revenue 262,210 169,408 160,723 151,066 148,768 168,480

Net Claims 134,056 93,986 101,788 78,292 73,584 102,391

Gross Wakala Fee 133,427 109,740 88,206 84,887 66,113 93,126

Earned Wakala Fee 131,099 93,529 89,222 77,295 72,074 74,140

Underwriting Result PTF (27,162) (27,769) (38,910) (22,268) (6,112) (40,209)

Investment Income PTF (Net) 9,970 11,549 10,009 13,001 10,516 8,392

Investment Income SHF 10,450 4,766 9,947 6,521 12,619 11,266

Surplus/(Deficit) PTF (9,028) (16,226) (28,758) (9,322) 4,321 12,052

Profit/(loss) Before Tax 33,704 10,970 17,758 9,529 6,003 (33,377)

Profit/(loss) After Tax 30,426 8,632 15,527 8,448 3,907 (35,441)

Total Comprehensive income / (loss) 29,486 6,093 15,828 7,417 3,243 (35,441)

Earnings Per Share 1.01 0.29 0.52 0.15 0.13 (1.18)

Dividend % 0% 0% 0% 0% 0% 0%

Bonus % 0% 0% 0% 0% 0% 0%

Key Financial Data

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From To

1 100 -

101 500 4,500

501 600000 504,500

600001 2100000 2,044,500

2100001 2600000 2,550,000

2600001 3000000 5,999,500

3000001 6000000 10,197,500

6000001 9000000 8,699,500

0

1

2

2

1

8

1

1

Shares Held

Pattern of Shareholding

As at 31 December 2015

Number of

shareholders

Shareholdings

Categories of shareholders Shareholders Shares held Percentage

%

Associated Companies, Undertakings and Related Parties

House Building Finance Company Limited 8,699,500

Al Baraka Bank Pakistan Limited 5,098,500

Sitara Chemical Industries Limited 2,999,500

Emirates Investment Group 2,044,500

4 18,842,000 62.81

Directors

Dr. Mumtaz Ahmed Hashmi 500

Haseeb Ahmed 500

Ahmed Shuja Kidwai 500

Syed Abdul Razzaq 500

Syed Tariq Husain 500

5 2,500 0.01

Joint Stock Company 2 3,504,500 11.68

Foreign Investors 2 7,649,000 25.50

Individuals/Others 4 2,000 0.01

Total 17 30,000,000 100

Shareholder holding 5% or more voting interest

House Building Finance Company Limited 8,699,500

Al Baraka Bank Pakistan Limited 5,098,500

Al-Buhaira National Insurance Company Limited 5,099,000

Arif Habib Corporation Limited 3,000,000

Sitara Chemical Industries Limited 2,999,500

Mal-Alkhaleej Investments 2,550,000

Emirates Investment Group 2,044,500

29,491,000

12


Plot No 19-1-A, 6th Floor, Business Centre, Block-6, P.E.C.H.S., Shahrah-e-Faisal,

Karachi- 75400 (Pakistan) UAN: (+92-21) 111-875-111

Fax: (+92-21) 34373195-6 www.takaful.com.pk


STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF

THE CODE OF CORPORATE GOVERNANCE

FOR THE YEAR ENDED 31 DECEMBER 2015

This statement is being presented to comply with the Code of Corporate Governance (the Code) applicable on unlisted insurance companies prescribed under Section B of S.R.O 68(1) /2003 dated January 21, 2003 for the purpose of establishing a framework of good governance, whereby Insurance Company/Takaful Operator is managed in compliance with the best practices of corporate governance.

The Company has applied the principles contained in the Code in the following manner:

1. The directors have confirmed that none of them is serving as a director in ten

or more listed companies.

2. All the directors of the Company are registered as tax payers and none of

them has defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a member of stock exchange, has been declared as a defaulter by a stock exchange.

3. During the year, Mr. Shafqaat Ahmed resigned from the Board and Mr. Abdul

Razzaq was appointed in his place.

4. The Company has prepared a ‘Statement of Ethics and Business Practices’

which has been signed by all the directors and employees of the Company.

5. The Board has developed a vision/mission statement, overall corporate

strategy and significant policies of the Company. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained.

6. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the CEO and other executive directors, have been taken by the Board.

7. The meetings of the Board were presided over the Chairman and the Board

met at least once in every quarter. Written notices of the Board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated.

15





8. The Board has established a system of sound internal control, which is effectively implemented at all levels within the company. The company includes all the necessary aspects of internal control given in the code.

9. No orientation course was conducted for directors during the year. However directors are well conversant with the legal requirements and operational imperatives of the Company and as such fully aware of their duties and responsibilities. Regular update on corporate requirements is taken care of.

10. There was no fresh appointment of Chief Financial Officer, Company Secretary and Head of Internal Audit during the year.

11. The directors’ report for this year has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed.

12. The financial statements of the Company were duly endorsed by CEO and

CFO before approval of the Board.

13. The directors, CEO and executives do not hold any interest in the shares of the Company other than that disclosed in the pattern of shareholding.

14. The Company has complied with all the corporate and financial reporting requirements of the Code.

15. Although Underwriting Committee, Claim Settlement Committee, Retakaful and Co-Takaful Committee were not in place during the year as required by clause xxvii, xxviii and xxix of Section B of the Code, however, the Board has formed a Risk Management Committee to look after Underwriting, Claim Settlement, Retakaful & Co-takaful and other matters of the Company.

16. The Board has formed an audit committee. It comprises three members all of whom are non-executive directors including the chairman of the committee.

17. The meetings of the committees were held at least once every quarter prior to

approval of interim and final results of the Company and as required by the Code. The terms of reference of the audit committee have been formed and advised to the audit committee for compliance.

18. The Board has outsourced the internal audit function to a firm of Chartered Accountants who are considered suitably qualified and experienced for the purpose and are conversant with the policies and procedures of the Company and they (or their representatives) are involved in the internal audit

16





function on a full time basis.

19. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the Quality Control Review program of the Institute of Chartered Accountants of Pakistan, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by Institute of Chartered Accountants of Pakistan.

20. The statutory auditors or the persons associated with them have not been

appointed to provide other services and the auditors have confirmed that they have observed IFAC guidelines in this regard.

21. The actuary appointed by the company has confirmed that he or his spouse and minor children do not hold shares of the company.

22. The Board ensures that the appointed actuary complied with the

requirements set out for him in the code.

23. We confirm that all other material principles contained in the Code have been

complied.

On behalf of the Board of Directors

_____________________ Dr.Syed Arif Hussain Chief Executive Officer Date: 29th March, 2016

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BALANCE SHEET

AS AT DECEMBER 31, 2015

2014

Shareholders' Participants' Aggregate Aggregate

Fund Takaful Fund

Note

SHARE CAPITAL AND RESERVES

Authorised share capital

50,000,000 (2015: 50,000,000)

ordinary shares of Rs. 10 each 500,000,000 - 500,000,000 500,000,000

Issued, subscribed and paid-up

30,000,000 ordinary shares of Rs. 10 each

fully paid in cash 5 300,000,000 - 300,000,000 300,000,000

Accumulated loss (107,391,175) - (107,391,175) (136,877,696)

Qard-e-hasna to Waqf (20,238,961) - (20,238,961) (11,211,134)

172,369,864 - 172,369,864 151,911,170

PARTICIPANTS' TAKAFUL FUND (PTF)

WAQF / PARTICIPANTS' TAKAFUL FUND

Cede money - 500,000 500,000 500,000

Accumulated deficit - (20,738,961) (20,738,961) (11,711,134)

Qard-e-hasna from Shareholders' Fund - 20,238,961 20,238,961 11,211,134

- - - -

UNDERWRITING PROVISIONS

Provision for outstanding claims (including IBNR) - 96,859,677 96,859,677 99,377,655

Provision for unearned contribution - 143,138,661 143,138,661 137,318,047

Contribution deficiency reserve - 4,684,834 4,684,834 3,000,000

Unearned retakaful rebate - 3,212,086 3,212,086 5,644,186

Total underwriting provisions - 247,895,258 247,895,258 245,339,888

CREDITORS AND ACCRUALS

Contribution received in advance - 509,893 509,893 2,203,314

Amounts due to takaful / re-takaful companies - 59,684,818 59,684,818 37,418,436

Unearned wakala fees 57,255,465 - 57,255,465 54,927,216

Wakala fees payable and other account balances - 10,137,095 10,137,095 54,310,030

Mudarib fees payable - 2,051,097 2,051,097 1,841,660

Accrued expenses 1,352,615 - 1,352,615 1,575,777

Other creditors and accruals 6 12,048,707 14,137,862 26,186,569 27,648,303

70,656,787 86,520,765 157,177,552 179,924,736

70,656,787 334,416,023 405,072,810 425,264,624

TOTAL EQUITY AND LIABILITIES 243,026,651 334,416,023 577,442,674 577,175,794

CONTINGENCIES AND COMMITMENTS 7

The annexed notes 1 to 32 form an integral part of these financial statements.

Chairman Chief Executive Officer Director Director

2015

-------------------------------------------------------------(Rupees)-------------------------------------------------------------


BALANCE SHEET

AS AT DECEMBER 31, 2015

2014


Fund Takaful Fund

Note

CASH AND BANK DEPOSITS 8

Cash and other equivalents 91,891 99,255 191,146 404,910

Current and other accounts 7,893,428 14,059,884 21,953,312 35,375,349

Deposits maturing within 12 months 170,900,000 134,710,000 305,610,000 251,500,000

178,885,319 148,869,139 327,754,458 287,280,259

LONG TERM DEPOSITS 9 1,523,034 - 1,523,034 1,523,034

INVESTMENTS 10 20,773,075 47,196,326 67,969,401 35,525,121

CURRENT ASSETS - OTHERS

Contributions due but unpaid 11 - 28,104,385 28,104,385 37,698,199

Amounts due from other takaful / re-takaful companies 12 - 3,121,043 3,121,043 2,326,333

Salvage recoveries accrued - 250,000 250,000 500,000

Taxation - payment less provision 8,695,445 - 8,695,445 9,013,031

Accrued investment income 13 2,779,293 2,613,517 5,392,810 11,409,556

Re-takaful recoveries against outstanding claims - 19,214,059 19,214,059 27,002,169

Wakala fees receivable and other account balances 14 10,137,095 - 10,137,095 49,799,258

Mudarib fees receivable 2,051,094 - 2,051,094 1,841,660

Deferred Wakala fees - 57,255,465 57,255,465 54,927,216

Deferred commission expense 5,833,341 5,833,341 7,900,924

Prepayments 15 1,675,715 27,358,206 29,033,921 35,494,437

Sundry receivables 16 439,272 433,884 873,156 1,251,613

31,611,255 138,350,559 169,961,814 239,164,396

FIXED ASSETS

Tangibles and Intangibles 17

Leasehold improvements 1,564,094 - 1,564,094 1,979,708

Furniture and fixtures 3,323,553 - 3,323,553 4,291,043

Office equipment 2,415,088 - 2,415,088 2,930,139

Computers 1,167,553 - 1,167,553 1,941,770

Vehicles 1,763,680 - 1,763,680 2,540,324

10,233,968 - 10,233,968 13,682,984

TOTAL ASSETS 243,026,651 334,416,024 577,442,675 577,175,794



2015

----------------------------------------------(Rupees)-------------------------------------------------------------------


PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED DECEMBER 31, 2015

2014

Fire and Marine, Motor Health Miscellaneous Aggregate Aggregate

property aviation and

damage transport

Note

PARTICIPANTS' TAKAFUL FUND (PTF)

- Net contribution revenue 8,133,020 6,912,351 187,890,035 59,199,307 75,167 262,209,880 169,408,132

Net claims 407,722 158,552 (83,237,009) (51,779,592) 394,427 (134,055,900) (93,986,199)

Wakala fee (15,009,359) (8,441,697) (83,481,121) (23,679,722) (487,030) (131,098,929) (93,529,417)

Direct expenses 18 (103,027) (235,126) (32,917,764) (1,762,033) (394) (35,018,344) (21,600,737)

Retakaful rebate 7,854,079 4,405,642 19,317 - 206,525 12,485,563 13,973,222

Contribution deficiency reversal/(charge) - - - (1,684,834) - (1,684,834) (2,034,200)

Net underwriting results before

participants' investment income 1,282,435 2,799,722 (11,726,542) (19,706,874) 188,695 (27,162,564) (27,769,199)

Investment income 13,293,752 15,398,180

Modarib's share (3,323,438) (3,849,545)

Net investment income 9,970,314 11,548,635

Other income 19 8,196,986 42,832

Bank charges (32,563) (48,217)

Deficit before taxation (9,027,827) (16,225,949)

Provision for taxation - -

Total deficit transferred to balance of

Waqf / Participants' Takaful Fund (9,027,827) (16,225,949)

SHAREHOLDERS' FUND (SHF)

Wakala fee 131,098,929 93,529,417

Commission expense (17,545,784) (17,310,291)

Management expenses 20 (56,207,945) (45,860,566)

57,345,200 30,358,560

Modarib's share of PTF investment income 3,323,438 3,849,545


Other income 21 932,570 708,221

(Loss)/gain on sale of fixed assets (5,390) (2,892)

General and administration expenses 22 (38,341,971) (28,708,697)

Profit before taxation 33,703,959 10,970,252

Provision for taxation 23 (3,277,473) (2,338,235)

Net profit after tax 30,426,486 8,632,017

Earnings per share - Basic and diluted 24 1.01 0.29



2015

------------------------------------------------------------------- (Rupees) -------------------------------------------------------------------


STATEMENT OF COMPREHENSIVE INCOME


2015 2014

Rupees Rupees

SHAREHOLDERS' FUND (SHF)

Net profit after tax 30,426,486 8,632,017

Other comprehensive income

Items that will not be reclassified to profit or loss

Actuarial loss on defined benefit plan for the year (939,964) (2,538,888)

Total comprehensive income for the year 29,486,522 6,093,129




STATEMENT OF CHANGES IN EQUITY / FUND


Issued,

subscribed and

paid-up

capital

Balance as at January 01, 2014 300,000,000 (142,970,825) - 157,029,175

Total comprehensive income for the year ended December 31, 2014

Profit for the year - 8,632,017 - 8,632,017

Other comprehensive income - recognition of actuarial loss for the year - (2,538,888) - (2,538,888)

- 6,093,129 - 6,093,129

Transaction with owners

Qard-e-hasna contributed to Waqf * - - (11,211,134) (11,211,134)

Balance as at December 31, 2014 300,000,000 (136,877,696) (11,211,134) 151,911,170

Total comprehensive income for the year ended December 31, 2015

Profit for the year - 30,426,486 - 30,426,486

Other comprehensive income - recognition of actuarial loss for the year - (939,964) - (939,964)

- 29,486,522 - 29,486,522

Transaction with owners

Qard-e-hasna contributed to Waqf * - - (9,027,827) (9,027,827)

Balance as at December 31, 2015 300,000,000 (107,391,175) (20,238,961) 172,369,864

--------------------------------------(Rupees)--------------------------------------

Balance as at January 01, 2014 500,000 4,514,815 - 5,014,815

Deficit for the year ended December 31, 2014 - (16,225,949) - (16,225,949)

Qard-e-hasna contributed by Shareholders' fund * - - 11,211,134 11,211,134

Balance as at December 31, 2014 500,000 (11,711,134) 11,211,134 -

Deficit for the year ended December 31, 2015 - (9,027,827) - (9,027,827)

Qard-e-hasna contributed by Shareholders' fund * - - 9,027,827 9,027,827

Balance as at December 31, 2015 500,000 (20,738,961) 20,238,961 -

* In compliance of Rule 20 of Takaful Rules, 2012



Cede

money

Accumulated

(deficit) /

surplus

Qard-e-

hasna Total

SHAREHOLDERS' FUND

Accumulated

loss

Qard-e-

hasna Total

--------------------------------------(Rupees)--------------------------------------

WAQF / PARTICIPANTS' TAKAFUL FUND


STATEMENT OF CASH FLOWS


2015 2014

Rupees Rupees

Operating activities

(a) Takaful activities

Contributions received 342,926,484 263,929,287

Net re-takaful paid (1,245,547) (12,285,089)

Claims paid (165,879,957) (158,041,782)

Commissions paid (16,321,817) (17,828,136)

Other takaful payments (23,132,878) (10,213,332)

Net cash generated from underwriting activities 136,346,285 65,560,948

(b) Other operating activities

Income tax paid (2,959,887) (2,359,526)

Payment of retirement benefits (2,390,718) (1,500,000)

General administrative and management expenses paid (86,705,049) (70,748,073)

Other operating receipts 600,712 1,378,184

Advances to employees and agents - net (248,948) (224,452)

Net cash used in other operating activities (91,703,890) (73,453,867)

Total cash generated/(used) in all operating activities 44,642,396 (7,892,919)

Investment activities

Profit / return received 28,418,339 22,483,575

Dividend received 388,448 -

Investments made (58,800,000) (6,000,000)

Proceeds from disposal of investments 27,630,320 2,038,554

Maturity of term deposits 3,400,000 85,000,000

Fixed capital expenditure (646,605) (4,203,285)

Proceeds from disposal of fixed assets 96,560 90,189

Net cash generated from investing activities 487,062 99,409,033

Financing activities

Ijarah rentals paid (1,255,260) (1,255,260)

Total cash used in financing activities (1,255,260) (1,255,260)

Net cash generated from all activities 43,874,198 90,260,854

Cash and cash equivalents at beginning of the year 242,280,259 152,019,405

Cash and cash equivalents at end of the year 286,154,458 242,280,259

2015 2014

(Rupees) (Rupees)

Reconciliation to profit and loss account

Operating cash flows 44,642,396 (7,892,919)

Depreciation (3,993,671) (3,426,903)

Amortisation of intangibles - (38,994)

Loss on disposal of fixed assets (5,390) (2,892)

Impairment of Ijara Sukuks 1,000,000 -

Ijarah rentals (1,255,260) (1,255,260)

Provision for taxation (3,277,473) (2,338,235)

Provision for staff retirement benefits (1,877,894) (1,027,945)


Decrease in assets other than cash (63,336,028) (56,437,056)

Increase in liabilities other than running finance 26,287,145 (62,250,519)

Cash generated from investing activities 487,062 99,409,033

Loss after taxation 21,398,661 (7,593,932)

Breakup of profit / (loss) after tax

Participant's Takaful Fund (9,027,827) (16,225,949)

Shareholders' Fund 30,426,486 8,632,017

21,398,659 (7,593,932)

Definition of cash and cash equivalents

Cash and other equivalents 191,146 404,910

Current and other accounts 21,953,312 35,375,349

Deposits maturing within 3 months 264,010,000 206,500,000

286,154,458 242,280,259



Cash and cash equivalents for the purposes of Statement of Cash Flows consist of cash and stamps in hand, balances with

banks, short term deposits with maturities of three months or less from balance sheet date and highly liquid short-term

investments that are convertible to known amount of cash and are subject to insignificant risk of change in value.


STATEMENT OF CONTRIBUTIONS


Business underwritten inside Pakistan

2014

Gross Contribution Re-takaful Re-takaful Net Net

Class written Opening Closing earned ceded expense contribution contribution

contribution Opening Closing revenue revenue

A B C D=A+B-C E F G H=E+F-G I=D-H

Direct and Facultative

Fire and property damage 27,845,965 21,772,442 12,095,010 37,523,397 20,901,641 15,997,225 7,508,489 29,390,377 8,133,020 10,422,632

Marine, aviation and transport 22,545,934 2,758,861 4,200,552 21,104,243 14,708,888 1,976,678 2,493,674 14,191,892 6,912,351 5,081,133

Motor 229,562,542 88,851,644 109,711,381 208,702,805 20,858,492 - 45,722 20,812,770 187,890,035 109,134,722

Health 52,806,644 23,084,037 16,691,374 59,199,307 - - - - 59,199,307 44,568,945

Miscellaneous 806,858 851,063 440,344 1,217,577 921,632 446,085 225,307 1,142,410 75,167 200,700

Total 333,567,943 137,318,047 143,138,661 327,747,329 57,390,653 18,419,988 10,273,192 65,537,449 262,209,880 169,408,132

Treaty

Proportional / non proportional - - - - - - - - - -

Grand total 333,567,943 137,318,047 143,138,661 327,747,329 57,390,653 18,419,988 10,273,192 65,537,449 262,209,880 169,408,132



2015

Unearned contribution Prepaid re-takaful

contribution ceded

----------------------------------------------------------------------------------------------------------------------- (Rupees) --------------------------------------------------------------------------------------------------------------


STATEMENT OF CLAIMS



2014

Class Claims Claims Re-takaful Re-takaful Net claims Net claims

paid Opening Closing expense and other and other expense expense

recoveries recoveries

received Opening Closing revenue

A B C D=A-B+C E F G H=E-F+G I=D-H


Fire and property damage 7,535,412 20,273,170 13,659,414 921,656 5,294,403 15,918,626 11,953,601 1,329,378 (407,722) 5,862,675

Marine, aviation and transport 125,861 5,333,589 4,331,157 (876,571) 84,010 2,281,244 1,479,215 (718,019) (158,552) 209,243

Motor 83,225,108 55,844,209 69,672,226 97,053,125 15,782,116 7,762,750 5,796,750 13,816,116 83,237,009 43,932,886

Health 58,526,289 15,082,591 8,335,894 51,779,592 - - - - 51,779,592 43,988,061

Miscellaneous 575,253 2,844,096 860,986 (1,407,857) 291,626 1,539,549 234,493 (1,013,430) (394,427) (6,666)

Total 149,987,923 99,377,655 96,859,677 147,469,945 21,452,155 27,502,169 19,464,059 13,414,045 134,055,900 93,986,199

Treaty .

Proportional / non proportional - - - - - - - - - -

Grand total 149,987,923 99,377,655 96,859,677 147,469,945 21,452,155 27,502,169 19,464,059 13,414,045 134,055,900 93,986,199



------------------------------------------------------------------------------------------------------------(Rupees)-------------------------------------------------------------------------------------------------------

2015

Outstanding claims Re-takaful and other

recoveries in respect of

outstanding claims


STATEMENT OF EXPENSES - PARTICIPANTS' TAKAFUL FUND



2014

Rebate from Net Net

Class Gross Wakala fee Other direct retakaful operators underwriting underwriting

wakala fee Opening Closing expired expenses earned * expenses expenses

A B C D=A+B-C E F G=D+E-F


Fire and property damage 11,138,386 8,708,977 4,838,004 15,009,359 103,027 7,854,079 7,258,307 8,362,073

Marine, aviation and transport 9,018,374 1,103,544 1,680,221 8,441,697 235,126 4,405,642 4,271,181 3,406,781

Motor 91,825,017 35,540,656 43,884,552 83,481,121 32,917,764 19,317 116,379,568 71,289,337

Health 21,122,658 9,233,614 6,676,550 23,679,722 1,762,033 - 25,441,755 17,827,578

Miscellaneous 322,743 340,425 176,138 487,030 394 206,525 280,899 271,163

Total 133,427,178 54,927,216 57,255,465 131,098,929 35,018,344 12,485,563 153,631,710 101,156,932

Treaty

Proportional / non proportional - - - - - - - -

Grand total 133,427,178 54,927,216 57,255,465 131,098,929 35,018,344 12,485,563 153,631,710 101,156,932

* Rebate from retakaful operators is arrived at taking impact of opening and closing unearned rebate.



2015

Deferred wakala fee

--------------------------------------------------------------------------(Rupees)--------------------------------------------------------------------------


STATEMENT OF EXPENSES - SHAREHOLDERS' FUND



2014

Commission Net Other Net Net

Class paid or commission management SHF SHF

payable Opening Closing expense expenses expenses expenses

A B C D=A+B-C E F=D+E


Fire and property damage 3,173,957 3,291,843 1,482,660 4,983,140 4,692,190 9,675,330 13,726,330

Marine, aviation and transport 3,171,197 380,254 587,206 2,964,245 3,799,108 6,763,353 6,119,948

Motor 7,041,134 3,183,008 3,093,593 7,130,549 38,682,494 45,813,043 32,025,758

Health 2,014,792 964,656 627,142 2,352,306 8,898,194 11,250,500 10,967,344

Miscellaneous 77,122 81,163 42,740 115,544 135,959 251,504 331,477

Total 15,478,202 7,900,924 5,833,341 17,545,784 56,207,945 73,753,730 63,170,857

Treaty

Proportional / non proportional - - - - - - -

Grand total 15,478,202 7,900,924 5,833,341 17,545,784 56,207,945 73,753,730 63,170,857



2015

Deferred commission

-------------------------------------------------------------------------------- (Rupees) --------------------------------------------------------------------------------


STATEMENT OF INVESTMENT INCOME


2015 2014

Rupees Rupees

Income from non-trading investments

Participants' Takaful Fund (PTF)

Profit on bank deposits and placements 10,881,214 15,322,424

Dividend Income 388,448 -

Available-for-sale

Gain on redemption of Islamic Fund units 2,024,090 75,756

13,293,752 15,398,180

Modarib's fee (3,323,438) (3,849,545)


Shareholders' Fund (SHF)

Profit on bank deposits and placements 9,992,612 9,429,182

Held to maturity

Return on government securities 737,486 1,002,288

Return on other securities 728,013 1,838,108

Provision for impairment of sukuk (1,000,000) (7,499,063)

465,499 (4,658,667)

Investment related expenses (8,000) (5,000)





NOTES TO THE FINANCIAL STATEMENTS


1. STATUS AND NATURE OF BUSINESS

1.1

1.2

1.3

By December 31st, 2017

2. BASIS OF PREPARATION

2.1 Statement of compliance

400 million

By June 30th

, 2017 450 million

500 million

Takaful Pakistan Limited ("the Company / Takaful operator") is an unlisted public limited company incorporated in

Pakistan on June 2, 2006 under the Companies Ordinance, 1984. The Company is established with the objective to

carry out General Takaful Business as specified under the Insurance Ordinance, 2000, Insurance Rules, 2002 and

Takaful Rules, 2012.The registered office of the Company is at 6th Floor, Business Centre, 19-1-A, Block-6,

P.E.C.H.S., Shahrah-e-Faisal, Karachi, in the province of Sindh. The Company operates with 5 (December 31, 2014:

2) branches in Pakistan.

For the purpose of carrying on the takaful business, the Company has formed a Waqf for Participants' equity. The

Waqf, namely Takaful Pakistan Waqf (hereinafter referred to as the Participants' Takaful Fund or PTF) was formed

on January 22, 2007 under the Trust deed executed by the Company with a ceded money of Rs. 500,000. The cede

money is required to be invested in Shariah compliant investments and profit thereon is utilized to pay benefits to

participants or defray PTF expenses. The accounts of the Waqf are maintained by the Company in a manner that the

assets and liabilities of the Waqf remain separately identifiable. These financial statements have been prepared such

that the financial position and results of operations of the Waqf and the Company are shown separately. Waqf deed

also governs the relationship of shareholders and participants for management of takaful operations, investment of

participants' funds and investment of shareholders' funds approved by the Shariah Board established by the Company.

These financial statements have been prepared in line with the format of financial statements issued by Securities and

Exchange Commission of Pakistan (SECP) through Securities and Commission (Insurance) Rules, 2002 [SEC

(Insurance) Rules, 2002], vide S.R.O. 938 dated December 12, 2002, with appropriate modifications based on the

advice of the Shariah Board of the Company.

These financial statements have been prepared in accordance with approved accounting standards as applicable in

Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued

by International Accounting Standards Board (IASB) and Islamic Financial Accounting Standards (IFAS) issued by

the Institute of Chartered Accountants of Pakistan (ICAP), as are notified under the Companies Ordinance, 1984,

the requirements of Companies Ordinance, 1984, the Insurance Ordinance, 2000, the SEC (Insurance) Rules,

2002.

Securities and Exchange Commission of Pakistan (SECP) vide its SRO dated 18th August 2015 increased the

Minimum Paid up Capital Requirement for Non-Life Insurance/Takaful Companies from Rs. 300 million to Rs. 500

million as per the following schedule:

Rupees

By June 30th

, 2016

The Board of directors in meeting held on March 29, 2016 have decided to meet the increased Paid up Capital

Requirement through issue of right shares at discount after obtaining the approval of shareholders and SECP. Further,

the sponsors support will continue to be available to the Company to meet any eventuality from pending litigations

(refer note 7.1).

350 million

By December 31st, 2016

2.2 Basis of measurement

These financial statements have been prepared under the historical cost convention.

2.3 Functional and presentation currency

2.4 Use of estimates and judgements

- Provision against doubtful receivables (note 4.2)

- Re-takaful recoveries against outstanding claims (note 4.3)

- Provision for outstanding claims including IBNR (note 4.4)

- Contribution deficiency reserve (note 4.6)

- Staff retirement benefits - defined benefit plan (note 4.10)

- Classification and valuation of investments (note 4.14)

- Taxation (note 4.15)

- Useful lives of assets and methods of depreciation and amortisation (note 4.16)

- Impairment of other assets (note 4.17)

3.

3.1

IFRS 10 – Consolidated Financial Statements January 1, 2015

The estimates and judgments that have a significant effect on the financial statements are in respect of the following:

ADOPTION OF NEW AND AMENDED INTERNATIONAL FINANCIAL REPORTING STANDARDS AND

IFRS INTERPRETATIONS

Takaful Rules, 2012 and directives issued by the SECP. Wherever the requirements of Companies Ordinance, 1984,

the Insurance Ordinance, 2000, the SEC (Insurance) Rules, 2002, Takaful Rules, 2012 and directives issued by the

SECP differ with the requirement of IFRS/IFAS, the requirements of Companies Ordinance, 1984, the Insurance

Ordinance, 2000, the SEC (Insurance) Rules, 2002, Takaful Rules, 2012 or said directives shall prevail.

These financial statements are presented in Pak Rupees which is the Company's functional and presentation currency.

The following standards, amendments and interpretations are effective for the year ended December 31, 2015. These

standards, interpretations and the amendments are either not relevant to the Company's operations or are not expected

to have significant impact on the Company's financial statements other than certain additional disclosures.

Effective from accounting

period beginning on or after

The SECP has allowed the insurance / takaful companies to defer the application of International Accounting

Standard (IAS-39) "Financial Instruments: Recognition and Measurement" in respect of valuation of investments

classified as available for sale. Accordingly, the requirements of IAS-39 to the extent allowed by the SECP as

aforesaid have not been considered in the preparation of these financial statements.

The preparation of financial statements in conformity with approved accounting standards as applicable in Pakistan

requires management to make judgments, estimates and assumptions that affect the application of policies and

reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based

on historical experience and various other factors that are believed to be reasonable under the circumstances, the

result of which form the basis of making the judgments about carrying values of assets and liabilities that are not

readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying

assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognized in the period in

which the estimate is revised if the revision affects only that period, or in the period of the revision and future

periods if the revision affects both current and future periods.

3.2 Standards and amendments to the published standards that are not yet effective

January 1, 2015

January 1, 2015

IFRS 13 – Fair Value Measurement January 01, 2016

Certain annual improvements have also been made to a number of IFRSs, which do not have effect on the financial

reporting of the company.

Amendments to IFRS 10 and IAS 28 Sale or contribution of assets January 01, 2016

Amendments to IFRS 10, IFRS 12 and IAS 28 Investment January 01, 2016

IFRS 12 – Disclosure of Interests in Other Entities January 01, 2016

Amendments to IAS 16 and IAS 38 Clarification of acceptable January 01, 2016

Amendments to IAS 16 and IAS 41 Agriculture: Bearer plants January 01, 2016

Amendments to IAS 27 - Equity method in separate financial statements January 01, 2016

The following standards and amendments are only effective for accounting periods, beginning on or after the date

mentioned against each of them. These standards and the amendments are either not relevant to the Company's

operations or are not expected to have significant impact on the Company's financial statements other than certain

additional disclosures.



Amendments to IFRS 11 - Accounting for acquisitions of interests

in joint operations

January 01, 2016

Amendments to IAS 1 - Disclosure initiative January 01, 2016

The above amendments and interpretations do not have any impact on the Company's financial statements and

therefore have not been discussed in detail.

January 1, 2015

Amendments to IAS 19 Employee Benefits: Employee

contributions

IAS 27 (Revised 2011) – Separate Financial Statements

IAS 28 (Revised 2011) – Investments in Associates and Joint

Ventures

July 1, 2014

IFRS 13 – Fair Value Measurement

January 1, 2015IFRS 11 – Joint Arrangements



IFRS 12 – Disclosure of Interests in Other Entities January 1, 2015

- IFRS 1 – First Time Adoption of International Financial Reporting Standards

- IFRS 9 – Financial Instruments

- IFRS 14 – Regulatory Deferral Accounts

- IFRS 15 – Revenue from Contracts with Customers

- IFRS 16 – Leases

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

4.1 Takaful contracts

The terms of the takaful contracts are in accordance with the generally accepted principles and norms of insurance

business suitably modified with guidance by the Shariah Board of the Takaful operator.

Contracts under which the Participant Takaful Fund (PTF) accepts significant takaful risk from another party (the

policy holder) by agreeing to compensate the policyholder if a specified uncertain future event (the takaful event)

adversely affects the policy holder, are classified as takaful contracts. Takaful risk is significant if a takaful event

could cause the PTF to pay significant benefits due to the happening of the takaful event compared to its non-

happening. Once a contract has been classified as a takaful contract, it remains a takaful contract for the remainder of

its lifetime even if the takaful risk reduces significantly during this period, unless all rights and obligations are

extinguished or expire.

The PTF underwrites non-life takaful contracts that can be categorised into Fire, Property and Damage, Marine,

Aviation and Transport, Motor, Health and Miscellaneous contracts. Contracts may be concluded for a fixed term of

one year, less than one year and in some cases for more than one year. However, most of the contracts are for twelve

months duration. Takaful contracts entered into by the PTF under which the contract holder is another takaful

operator / insurer (inward retakaful / reinsurance) of a facultative nature are included within the individual category of

takaful contracts, other than those which fall under the Treaty.

Fire takaful provides coverage against damages caused by fire, riot and strike, explosion, earthquake, atmospheric

damage, flood, electric fluctuation and other related perils.

Marine, aviation and transport takaful provides coverage against cargo risk, terminals, damages occurred in between

the points of origin and final destination and other related perils.

Motor takaful provides comprehensive car coverage, indemnity against third party loss and other related covers.

Health takaful provides basic hospital care and major medical care including maternity care and outpatient care.

Miscellaneous takaful provides cover against burglary, loss of cash in safe and cash in transit, money, engineering

losses, travel and other coverage.

Other than the aforesaid standards, interpretations and amendments, the International Accounting Standards Board

(IASB) has also issued the following standards which have not been adopted locally by the Securities and Exchange

Commission of Pakistan:

The principal accounting policies applied in the preparation of these financial statements are stated below. These are

consistent with those of the previous financial year.

The takaful contracts are based on the principles of Wakala. The takaful contracts so agreed usually inspire concept of

tabarru (to donate for benefit of others) and mutual sharing of losses with the overall objective of eliminating the

element of uncertainty.

4.2 Contribution

i) For direct business, evenly over the period of the policy.

ii) For proportional re-takaful business, evenly over the period of the underlying takaful policies.

4.3 Re-takaful

Amount due from other takaful / re-takaful companies are carried at cost less provision for impairment, if any. Cost

represents the fair value of consideration to be received in the future.

The unearned portion of contribution written net of wakala is set aside as a reserve and is recognized as a liability.

Such reserve is calculated according to the ratio of the unexpired period of the policy and the total period, both

measured to the nearest day. The Unearned portion of Health Takaful is calculated in accordance with the advice of

Actuary.

The Company cedes retakaful in the normal course of business for the purpose of limiting its net loss potential

through the diversification of its risks. Assets, liabilities, income and expense arising from ceded retakaful contracts

are presented separately from the assets, liabilities, income and expense from the related takaful contracts because the

retakaful arrangements do not relieve the PTF from its direct obligations to its policyholders. These retakaful

contracts include both facultative and treaty arrangements contracts and are classified in same categories of takaful

contracts for the purpose of these financial statements.

Re-takaful contribution is recognised evenly as expense after taking into account the proportion of deferred

contribution expense which is calculated using 1/365 method other than marine business in which it is calculated

using 1/120 method. The deferred portion of contribution expense is recognised as a prepayment.

Claim recoveries receivable from the re-takaful are recognised as an asset at the same time as the claims which give

rise to the right of recoveries are recognised as a liability and are measured at the amount expected to be received,

after considering impairment relating thereto.

Amount due to takaful / re-takaful companies represent the balance due to re-takaful companies. Amounts due to /

from retakaful operators are carried at cost less provision for impairment, if any. Cost represents the fair value of the

consideration to be received / paid in the future for services rendered.

Revenue from contribution is recognised after taking into account the unearned portion of contribution which is

calculated using the 1/365 method for all classes except for marine class where marine class earned contribution is

calculated using 1/120 method. The unearned portion of contribution income is recognised as a liability.

Administrative surcharge recovered from insurer is recognised as part of contribution in the case of co-takaful

policies (Leader Follower case) on proportionate basis.

Contribution due but unpaid represents the amount due from participants on account of takaful contracts. These are

recognised at cost, which is the fair value of the consideration to be received less provision for impairment, if any.

If there is an objective evidence that any contribution due but unpaid is impaired, the Company reduces the carrying

amount of that contribution receivable and recognizes the loss in profit and loss account.

Provision for impairment in contribution receivables is estimated on a systematic basis after analyzing the receivables

as per their ageing.

Contributions including administrative surcharge received / receivable (if any) under a takaful policy are recognised

as written at the time of issuance of policy. Contributions are stated gross of commission payable to intermediaries

and exclusive of taxes and duties levied on contributions.

Contribution income under a policy is recognised over the period of takaful from the date of inception of the policy to

which it relates to its expiry as follows:

4.4 Claims

4.5 Commission

4.6 Contribution deficiency reserve

4.7 Takaful surplus

4.8 Wakala and Mudarib fees

The Company is required as per Takaful Rules, 2012 to maintain a provision in respect of contribution deficiency for

the class of business where the unearned contribution reserve is not adequate to meet the expected future liability,

after re-takaful from claims, and other supplementary expenses expected to be incurred after the reporting date in

respect of the unexpired policies in that class of business at the reporting date. The movement in the contribution

deficiency reserve is recorded as an expense in the profit and loss account.

The Company determines adequacy of liability of contribution deficiency by carrying out analysis of its loss ratio of

expired periods. For this purpose average loss ratio of last few years inclusive of claim settlement cost but excluding

major exceptional claims are taken into consideration to determine ultimate loss ratio to be applied on unearned

contribution. The liability of contribution deficiency in relation to Health takaful is calculated in accordance with the

advice of the actuary.

Takaful surplus attributable to the participants is calculated after charging all direct costs and setting aside various

reserves and charity. Allocation to participants, if applicable, is made after deducting the claims paid to them during

the year.

The Takaful Operator manages the general takaful operations for the participant and charges 40% of gross

contribution as wakala fee to meet the general and administrative expenses of the Company.

The Takaful Operator also manages the participants' investment as Mudarib and charges 25% of the general takaful

investment income as Modarib's share earned by the Participants' Takaful Fund.

Re-takaful assets or liabilities are derecognised when the contractual rights are extinguished or expired.

Rebate income from retakaful is spread and recognised as revenue in accordance with the pattern of recognition of

retakaful contribution to which it relates.

Claims expense include all claims occurring during the year, whether reported or not, related internal and external

claim handling costs that are directly related to the processing and settlement of claims, a reduction for the value of

salvage and other recoveries, and any adjustments to claims outstanding from previous years.

Outstanding claims comprise the estimated cost of claims incurred but not settled at the reporting date, whether

reported or not. Provisions for reported claims not paid as at the balance sheet date are made on the basis of

individual case estimates. In addition, a provision based on management’s judgment and the Company’s prior

experience is maintained for the cost of settling claims incurred but not reported (IBNR) at the reporting date, by

taking into account the claims intimated in the month following the reporting date.

Any difference between the provisions at the reporting date and settlements in the following year is included in the

financial statement of that year.

Commission incurred in obtaining and recording policies is deferred and recognised as an asset. These costs are

charged to profit and loss account based on the pattern of recognition of contribution revenue.

4.9 Qard-e-Hasna

4.10 Staff retirement benefits

4.10.1 Defined contribution plan

4.10.2 Defined benefit plan

4.10.3 Employees' compensated absences

4.11 Provisions

4.12 Appropriations

Appropriations of profit, if any, are recognised in the period in which these are approved.

4.13 Cash and cash equivalents

4.14 Investments

Investments are recognised and classified as follows:

All investments are initially recognised at cost being the fair value of the consideration given and include transaction

costs, except for held for trading investments in which case transaction costs are charged to profit and loss account.

All purchase and sale of investments that require delivery within the required time frame established by regulations or

market convention are accounted for at the trade date. Trade date is the date when the Company commits to purchase

or sell the investment.

All investments are de-recognised when the rights to receive cash flows from the investments have expired or have

been transferred and the Company has transferred substantially all risks and rewards of ownership.

When the PTF including reserves are insufficient to meet their current payments less receipts, the deficit is funded by

way of interest free loan (Qard-e-Hasna) from the Shareholders' fund.

The Company maintains an approved contributory provident fund scheme for all its permanent employees.

Contributions are made by both the Company and the employees to the fund at the rate of 10 percent per annum of

basic salary. Contributions made by the Company are recognised as an expense.

The Company operates an approved defined gratuity scheme for all its permanent employees who attain the minimum

qualification period for entitlement to gratuity. Contributions to the scheme are made in accordance with actuarial

valuation using Projected Unit Credit Actuarial Cost Method.

The Company accounts for the liability in respect of employees' compensated absences in the period in which these

are earned.

Provisions are recognised when the Company has a legal or constructive obligation as a result of past events, it is

probable that an outflow of resources 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 are adjusted to reflect the current best estimate.

For the purpose of statement of cash flows, cash and cash equivalents consist of cash and stamps in hand, balances

with banks, short term deposits with maturities of three months or less from balance sheet date and highly liquid short-

term investments that are convertible to known amount of cash and are subject to insignificant risk of change in

value.

Wakala fee and Mudarib fee is recognised on the same basis on which related revenue is recognised. Unexpired

portion of wakala fee is disclosed as a liability of Shareholders' Fund (SHF) and an asset of Participants' Takaful

Fund (PTF).

4.14.1 Held to maturity (HTM)

Profit on held to maturity investment is recognized on a time proportion basis.

4.14.2 Available-for-sale (AFS)

Quoted

Unquoted

4.14.3 Fair values

4.15 Taxation

4.15.1 Current

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the profit and loss

account, except to the extent that it relates to items recognised directly in other comprehensive income or equity, in

which case it is recognised in other comprehensive income or equity respectively.

Provision for current taxation is based on the taxable income for the year determined in accordance with the

prevailing law for taxation on income using prevailing tax rates after taking into account available tax credits and

rebates, if any. The charge for current tax includes adjustments to charge for prior years, if any.

These are reviewed for impairment and any losses arising from impairment in values are charged to the profit and loss

account.

Investments which are intended to be held for an undefined period of time but may be sold in response to the need for

liquidity, changes in interest rates, equity prices or exchange rates are classified as available-for-sale. Any permanent

decline recognized in profit and loss account is not reversed through profit and loss account.

Subsequent to initial recognition at cost, quoted investments are stated at the lower of cost or market value (market

value on an individual investment basis being taken as lower if the fall is other than temporary) in accordance with

the requirements of the SEC (Insurance) Rules, 2002. The Company uses Mutual Funds Association of Pakistan

(MUFAP) quotations at the reporting date to determine the market value.

A fall in market value of a security is treated as “other than temporary (i.e. impaired)”, if there is a significant or

prolonged decline in fair value of security below its cost. Reversals due to subsequent increase in the market value of

these securities upto its original cost is recognised as income in the profit and loss account.

Unquoted investments are stated at cost less accumulated impairment (if any), in the value of such investments.

The fair value of financial assets at fair value through profit or loss, held to maturity investments and available-for-

sale financial assets is determined by reference to their quoted closing bid price at the reporting date.

Investments with fixed maturity, where management has both the intent and the ability to hold to maturity, are

classified as held to maturity.

Investments classified as held to maturity are recognized initially at fair value being the cost, plus attributable

transaction costs.

Subsequently, these are measured at amortized cost less impairment loss, if any. Any premium paid or discount

availed on acquisition of held to maturity investment is deferred and amortized over the term of investment using the

effective yield.

4.15.2 Deferred

4.16 Fixed assets

Tangibles

Annual rates

of depreciation

(%)

Leasehold improvements 10

Furniture and fixtures 10

Office equipments 10

Computers 33.33

Vehicles 20

Intangibles

Capital work-in-progress

Normal repairs and maintenance are charged to income as and when incurred. Subsequent costs are included in the

asset's carrying amount or recognised as a separate asset, as appropriate, only when it is possible that the future

economic benefits associated with the item will flow to the Company and the cost of the item can be measured

reliably.

The assets residual values and useful lives are reviewed, at each reporting date.

An item of fixed assets is derecognised upon disposal or when no future economic benefits are expected from its use

or disposal.

Gain or loss on disposal of the assets is recognised in the profit and loss account in the period of disposal.

The assets residual values and useful lives are reviewed, at each reporting date.

Capital work-in-progress is stated at cost less any impairment in value. It includes advances made to suppliers in

respect of tangible and intangible assets.

Intangible assets comprise software licenses, and are stated at cost less accumulated amortisation and impairment in

value, if any. Amortisation is charged over the useful life of the asset on a systematic basis to profit and loss account

by applying the straight line method.

Deferred tax is recognised using the balance sheet method, providing for all temporary differences between the

carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying

amount of assets and liabilities, using the rate enacted or substantively enacted at the reporting date.

The Company recognises a deferred tax asset to the extent that it is probable that taxable profits in the foreseeable

future will be available against which the related tax losses and deductible temporary differences can be utilised.

Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Tangible fixed assets are stated at cost less accumulated depreciation and impairment in value, if any. Depreciation is

calculated on a straight line basis, whereby the depreciable amount of an operating asset is written off over its

estimated useful life, using the following rates:

Depreciation on acquisitions during the year is charged from the date on which the assets is available for use whereas

on disposals, depreciation is charged upto the date of disposal.

4.17 Impairment

4.18 Ijarah

Ijarah rentals are recognised as an expense on accrual basis as and when the rentals become due.

4.19 Financial instruments

4.20 Creditors, accruals and provisions

4.21 Off setting the financial assets and liabilities

4.22 Earnings / (loss) per share

4.23 Business segment

The fire and engineering takaful segment provides takaful covers against damages caused by fire, riot and strike,

explosion, earthquake, atmospheric damage, flood, engineering losses, electric fluctuation and impact.

Marine takaful segment provides coverage against cargo risk, war risk and damages occurring in inland transit and

other related perils.

Financial assets and financial liabilities other than those arising out of takaful contracts are recognized at the time

when the Company becomes a party to the contractual provisions of the instrument. At the time of initial recognition,

financial assets and liabilities are measured at fair values which is the cost of consideration given or received for it.

Financial assets are derecognized when the contractual right to receive future cash flows from the asset expires or is

transferred along with the risk and reward of the asset. Financial liabilities are derecognized when obligation

specified in the contract is discharged, cancelled or expired. Any gains or losses on derecognition of the financial

assets and liabilities are recognized in the profit and loss account of the current period.

Liabilities for creditors and other amounts payable are carried at cost which is fair value of the consideration to be

paid in future for goods and / or services received, whether or not billed to the Company.

Financial assets and liabilities other than those relating to takaful contracts are only off-set and the net amount is

reported in the balance sheet when the Company has a legally enforceable right to set-off the recognized amounts and

it intends either to settle on net basis, or to realise the asset and settle the liability simultaneously.

Earnings/ (loss) per share is calculated by dividing the profit / (loss) after tax attributable to ordinary shareholders for

the year by the weighted average number of shares outstanding during the year.

A business segment is a group of assets and operations engaged in providing products or services that are subject to

risks and returns that are different from those of other business segments. The Company accounts for segment

reporting using the classes or sub classes of business (Takaful Business Statutory Funds) as specified under the

Insurance Ordinance, 2000 and SEC (Insurance) Rules, 2002 as the primary reporting format.

The Company has five primary business segments for reporting purposes namely fire, marine, motor, health and

miscellaneous.

The assets residual values and useful lives are to be reviewed, at each reporting date.

The carrying amount of assets (other than deferred tax asset) are reviewed at each reporting date to determine whether

there is any indication of impairment in carrying amount of any asset or group of assets. If such indication exists, the

recoverable amount of the asset is estimated in order to determine the extent of impairment loss, if any. An

impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment

losses are recognised in profit and loss account. An impairment loss is reversed if the reversal can be objectively

related to an event occurring after the impairment loss was recognised.

4.24 Revenue recognition

PTF

i)

SHF

i)

ii)

PTF / SHF

i) Profit on Islamic investment products is recognised on accrual basis.

ii) Dividend income is recognised when the right to receive dividend is established.

iii) Gain or loss on sale of investments is included in the profit and loss account in the period of disposal.

iv)

4.25 Expenses

4.26 Foreign currency translations

Contribution income under a policy is recognised over the period of takaful. Administrative surcharge recovered

from insurer is recognised as part of contribution in the case of co-takaful policies (Leader Follower case) on

proportionate basis.

The Takaful Operator manages the general takaful operations for the participants and charges 40% of the gross

contribution written net of administrative surcharge on co-takaful inward as wakala fee against the services. It is

recognized upfront on the issue of takaful policy.

The Takaful Operator also manages the participants' investment as Modarib and charges 25% of the investment

income earned by the participants' fund as Modarib's fee. It is recognized on the same basis on which related

revenue is recognised.

Motor takaful provides comprehensive vehicle coverage and indemnity against third party loss and other related

covers.

Health takaful provides basic hospital care and major medical care including maternity care and outpatient care.

Miscellaneous takaful provides cover against burglary, loss of cash in safe and cash in transit, personal accident,

money, travel and other coverages.

Assets and liabilities are allocated to particular segments on the basis of contribution earned. Those assets and

liabilities which cannot be allocated to a particular segment on a reasonable basis are reported as unallocated corporate

assets and liabilities.

Income on held to maturity investments is recognised on time proportionate basis using effective interest method.

Expenses allocated to the takaful business represent only directly attributable expenses. Expenses not directly

allocable to takaful business are charged to Shareholders' Fund. All indirect and common expenses are allocated

between management expense and general and administrative expenses in the ratio of 70% and 30% respectively.

Foreign currency transactions are translated into Pak Rupees (functional currency) using the exchange rates prevailing

at the date of transaction. Monetary assets and liabilities in foreign currencies are translated into Pak Rupees using the

exchange rate at the reporting date. Foreign exchange gains and losses resulting from the settlement of such

transactions and from translation at the year end exchange rates of monetary assets and liabilities denominated in

foreign currencies are recognized in the profit and loss account.

5. ISSUED, SUBSCRIBED AND PAID UP CAPITAL

2015 2014 2015 2014

30,000,000 30,000,000 300,000,000 300,000,000

5.1 Shareholders of the Company are:

Holding Holding

% %

House Building Finance Company Limited 8,700,000 29 8,700,000 29

Al-Bhuaira National Insurance Company 5,100,000 17 5,100,000 17

Al Baraka Bank (Pakistan) Limited 5,100,000 17 5,100,000 17

Sitara Chemical Industries Limited 3,000,000 10 3,000,000 10

Arif Habib Corporation Limited 3,000,000 10 3,000,000 10

Mal Al Khaleej Investment LLC 2,550,000 8.5 2,550,000 8.5

Emirates Investment Group LLC 2,045,500 6.8 2,045,500 6.8

Trust Securities and Brokerage Limited 504,500 1.7 504,500 1.7

30,000,000 30,000,000

6. OTHER CREDITORS AND ACCRUALS

2014

Note Shareholders' Participants' Aggregate Aggregate

Fund Takaful Fund

Commission payable to agents 7,322,111 - 7,322,111 8,165,726

Federal excise duty - 2,254,058 2,254,058 3,377,497

Federal insurance fee - 212,952 212,952 267,177

Withholding tax - 211,233 211,233 295,625

Contribution due to other co-takaful /

insurance companies - 4,588,189 4,588,189 2,335,331

Payable to staff gratuity fund 6.1 2,817,858 - 2,817,858 2,390,718

Provision for compensated absences 256,054 - 256,054 256,054

Security deposit 539,325 - 539,325 1,352,039

Tracker installation fee payable - 4,670,490 4,670,490 6,348,015

Other payables 1,113,359 2,200,940 3,314,299 2,860,121

12,048,707 14,137,862 26,186,569 27,648,303

6.1 Staff gratuity fund

The following significant assumptions were used for valuation of this scheme:

2015 2014

Discount rate 11% 11.75%

Expected rate of increase in salary of employees 10% 10%

Expected rate of return on plan assets 11% 11.75%

Normal retirement age 60 years 60 years

The Company operates an approved funded gratuity scheme for all permanent employees. Latest actuarial valuation was carried out as at

December 31, 2015.

Rate per annum

2015 2014

Number of shares Number of

shares

2015

--------------------------------------------(Rupees)-----------------------------------------

(Number of shares) Issued subscribed and paid up (Rupees)

Ordinary shares of Rs. 10 each fully paid in cash

6.1.1

Salary increase risk

Discount rate risk

Mortality / withdrawal risk

This is the risk that the actual mortality/withdrawal experience is different than that assumed by the Company.

Investment risk

This is the risk that the assets are underperforming and are not sufficient to meet the liabilities.

6.1.2 Number of employees under the scheme

The number of employees covered under the scheme is 62 (2014: 57).

6.1.3

2015 2014

Rupees Rupees

Liability recognised in the balance sheet

Present value of defined benefit obligation 8,189,605 5,376,516

Fair value of plan assets (5,371,747) (2,985,798)

Liability recognised in the balance sheet 2,817,858 2,390,718

6.1.4 Movement in liability during the year

Opening balance 2,390,718 323,885

Charge for the year 427,140 2,066,833

Closing balance 2,817,858 2,390,718

6.1.5 Reconciliation of present value of defined benefit obligation

Opening balance of defined benefit obligation 5,376,516 3,696,348

Current service cost 1,551,995 916,866

Interest cost 764,855 584,868

Actuarial loss on defined benefit obligation 724,821 2,121,945

Benefits paid during the year (228,582) (1,943,511)

Closing balance of defined benefit obligation 8,189,605 5,376,516

6.1.6 Reconciliation of fair value of plan assets

Opening balance of fair value of plan assets 2,985,798 3,372,463

Expected return on plan assets 438,956 473,789

Contribution received 2,390,718 1,500,000

Benefits paid (228,582) (1,943,511)

Actuarial loss on plan assets (215,143) (416,943)

Closing balance of fair value of plan assets 5,371,747 2,985,798

The scheme typically exposes the Company to actuarial risks such as: salary increase risk, discount rate risk, mortality/withdrawal risk and

investment risk defined as follow:

This is the risk that the salary at the time of cessation of service is higher than that assumed. This is a risk to the Company because the

benefits are based on the final salary; if the final salary is higher than what we have assumed, the benefits will also be higher.

The discount rate is based on the yield on government bonds. If the market yield of bonds varies, the discount rate would vary in the same

manner and would affect the present value of obligation and fair value of assets.

The fair value of the scheme's assets and liabilities for past services of the employees at the latest valuation date are as follows:

2015 2014

Note Rupees Rupees

6.1.7 Charge for the year

Recognised through profit and loss account

Current service cost 1,551,995 916,866

Interest on obligation 764,855 584,868

Expected return on plan assets (438,956) (473,789)

1,877,894 1,027,945

Recognised through other comprehensive income

Actuarial loss for the year 939,964 2,538,888

Total gratuity expense for the year 2,817,858 3,566,833

6.1.8 Gratuity cost allocation

Management expenses 20.1 1,314,526 719,562

General and administrative expenses 22.1 563,367 308,383

1,877,893 1,027,945

6.1.9 Composition of fair value of plan assets

Fair Value Percentage Fair Value Percentage

(Rupees) (%) (Rupees) (%)

Unitised Fund 5,161,391 96.1 - -

Term Deposit Certificates - - 2,812,967 94.2

Cash 210,356 3.9 172,831 5.8

5,371,747 2,985,798

6.1.10 Sensitivity analysis

(Rupees)

Base 8,189,605

Discount rate Increase by 0.5% 7,610,646 -7.07%

Decrease by 0.5% 8,827,125 7.78%

Salary growth rate Increase by 0.5% 8,826,838 7.78%

Decrease by 0.5% 7,606,154 -7.12%

Mortality rate 50% of base assumption 8,184,362 -0.06%

150% of base assumption 8,195,135 0.07%

Withdrawal rate 50% of base assumption 8,157,891 -0.39%

150% of base assumption 8,219,036 0.36%

6.1.11 The estimated gratuity cost for the year ending December 31, 2016 before allowing for the impact of net actuarial loss or gain is Rs.

2,229,205.

2015 2014

Significant actuarial assumptions for the determination of the defined obligation are discount rate, and expected rate of salary increase. The

sensitivity analysis below have been determined based on reasonably possible changes of the respective assumptions occurring at the end

of the reporting period, while holding all other assumptions constant:

Present value of

obligation

% change from

base

7. CONTINGENCIES AND COMMITMENTS

CONTINGENCIES

7.1

7.2

COMMITMENTS

7.3 Commitments under Ijarah arrangements and the period in which these payments will become due are:

2015 2014

Rupees Rupees

Not later than one year 1,255,260 1,255,260

Later than one year but not later than five years 2,301,840 3,557,100

3,557,100 4,812,360

8. CASH AND BANK DEPOSITS

2014


Fund Takaful Fund

Note

Cash and other equivalents

Cash 91,891 - 91,891 49,010

Policy stamps and bond papers in hand - 99,255 99,255 355,900

91,891 99,255 191,146 404,910

Current and other accounts

Current accounts 3,105 191,307 194,412 1,628,567

PLS savings accounts 8.1 7,890,323 13,868,577 21,758,900 33,746,782

7,893,428 14,059,884 21,953,312 35,375,349

Deposits maturing within 12 months

Term deposits 8.2 170,900,000 134,710,000 305,610,000 251,500,000

178,885,319 148,869,139 327,754,458 287,280,259

Travel Agents Association of Pakistan (TAAP) raised a demand for distribution of surplus in Amaan Travel Participation

Takaful Fund (PTF) and the profit thereon aggregating to Rs. 120,000,000. TAAP filed a case on October 10, 2012 in the

Insurance Tribunal of Sindh for recovery of Rs. 546,534,125 inclusive of compensation/ damages for premature

termination of the agreement of Rs. 386,534,125 in respect of Amaan Travel and Health Takaful Package. A commission

was appointed for recording evidences of the parties which is yet to issue its report to Tribunal along-with evidence based

on which the case shall be disposed off by the Tribunal. The management, based on the advice of its legal counsel, is

confident that the Company has good defence in the case and as such no loss is likely to arise from this litigation and

accordingly, no provision has been made in these financial statements.

There are few cases filed by policy holders against the Company before Insurance Tribunals at Lahore for the recovery of

claims, contribution amounts and liquidated damages aggregating Rs. 14,986,318 (2014: Rs 101,039,546) . These claims

are not acknowledged by the Company as the management, based on the advice of its legal advisors, is confident that the

Company has good defence in these cases and as such no loss is likely to arise from these litigations and accordingly, no

provision has been made in these financial statements.

2015

--------------------------------------- (Rupees) ---------------------------------------

8.1

8.2

2015 2014

Note Rupees Rupees

9. LONG TERM DEPOSITS

Deposits against

Ijarah 517,900 517,900

Rent 73,590 73,590

Others 9.1 931,544 931,544

1,523,034 1,523,034

9.1

10. INVESTMENTS

2014


Fund Takaful Fund

Note

Held to maturity

GoP Ijarah sukuk - - - 10,000,000

Other sukuk 10.1 19,963,645 - 19,963,645 30,515,368

19,963,645 - 19,963,645 40,515,368

Less: Provision for impairment (15,998,125) - (15,998,125) (14,998,125)

3,965,520 - 3,965,520 25,517,243

Available-for-sale

Quoted - units of Islamic Fund 10.2 16,807,555 47,196,326 64,003,881 10,007,878

20,773,075 47,196,326 67,969,401 35,525,121

These represent term deposits maintained with Islamic commercial banks under profit and loss sharing basis having

maturity upto 1 year and carry expected profit at rates ranging from 5.0% to 10.78% (2014: 8% to 9.97%) per annum.

These include term deposits amounting to Rs. 30,000,000 maintained with Dubai Islamic Bank (Pakistan) Limited on

which lien is marked in favour of State Bank of Pakistan in compliance of section 29 of Insurance Ordinance, 2000 and

Takaful Rules, 2012.

This include deposits amounting to Rs. 875,000 (2014: Rs. 875,000) in respect of enlistment of hospitals and other medical

institutes on panel.

2015

------------------------------------------ (Rupees) ----------------------------------------------

These represent balances maintained with Islamic commercial banks under profit and loss sharing basis carrying expected

profit rates ranging from 2.60% to 7.3% (2014: 3.51% to 6.92%) per annum.

10.1 Other Sukuk Certificates

Number of Credit Effective yield Profit Face value Net carrying Market Maturity

Certificates Rating % payment (Rupees) Value Value date

Agritech Limited - Sukuk Certificate (note 10.1.1) 3,000 NPA* 6 months Semi-annually 15,000,000 - NPA* August 06,

KIBOR + 2% 2019

Quetta Textile Mills Limited - Sukuk Certificates (note 10.1.2) 2,000 NPA* 6 months Quarterly 10,000,000 3,965,520 NPA* March 26,

KIBOR + 1.75% 2020

10.1.1

10.1.2

* Non performing assets

10.2 Units of Islamic Fund - Available for sale

Sector / name of investee scheme As at Purchased Bonus Redeemed As at Cost Market Cost Market

January 1, during the during the December 31, value value

2015 year year 2015

------------------------------------(Rupees)-------------------------------------

Participants' Takaful Fund

United Composite Islamic Fund - - - - - - Alfalah GHP Islamic Fund - - - - - - Nafa Islamic Multi Assets Fund - - - - - -

ABL Islamic Principal Preservation Fund II 601,391 - 20,927 (622,318) - - - 6,000,000 6,496,111

Meezan Sovereign Fund 99,986 - - (99,986) - - - 4,007,878 5,178,287

Meezan Cash Fund - 103,654 - - 103,654 5,193,043 5,313,281 - -

NAFA Riba Free Saving Funds - 6,225,957 - (3,229,437) 2,996,520 30,602,197 31,313,930 - -

NAFA Islamic Stock Fund - 1,965,902 7,665 (957,694) 1,015,873 11,401,086 11,198,181 - -

47,196,326 47,825,392 10,007,878 11,674,398

Shareholders' Fund

ABL Islamic Financial Planning Fund - 67,925 - - 67,925 6,800,000 6,799,694 - -

Meezan Capital Preservation Plan II - 201,450 151 - 201,601 10,007,555 10,269,556 - -

16,807,555 17,069,250 - -

-

This represents investment aggregating to Rs. 15,000,000 (2014: 15,000,000) in sukuks issued by Agritech Limited (the investee company) against which the investee company had not made payments at the contractual dates i.e.

August 06, 2010 and February 06, 2011. In 2011, a restructuring agreement was signed between the investee company and the Investment Agent of the sukuk certificates, whereby, certain terms included in the original trust deed

dated July 22, 2008 were amended, including the repayment period which was extended from August 06, 2015 to August 06, 2019. Further, in lieu of accrued overdue profit, zero coupon Term Finance Certificates (TFCs) were issued

by Agritech Limited on October 17, 2011 which were to be repaid by the investee company within three and a half years from the date of issuance of such TFCs. However, the investee company defaulted on the instalment due based

on the restructuring agreement as well as in making payments in respect of zero coupon term finance certificates. Therefore, the management has neither recorded TFCs in the books of accounts nor accrued any profit on outstanding

principal amount and is fully provided, on prudence basis.

An agreement for restructuring of these sukuks was executed between the Investment Agent of these sukuks and Quetta Textile Mills Limited on June 24, 2013. According to the restructuring terms, repayment of principal of Rs. 8

million will be made to the Company over a period of 7 years till March 26, 2020 in twenty nine quarterly instalments whereas the profit shall be received by the Company at the rate of 6 monthly KIBOR and a spread of 1.75% with

effect from March 26, 2013. During the year, four instalments became due out of which three instalments of Principal and two instalments of Profit are still outstanding as at December 31, 2015.

Number of units 2015 2014

2015 2014

Note Rupees Rupees

11. CONTRIBUTION DUE BUT UNPAID

Unsecured

Considered good 28,104,385 37,698,199

Considered doubtful 1,580,780 8,431,428

29,685,165 46,129,627

Provision against contribution due but unpaid 11.1 (1,580,780) (8,431,428)

28,104,385 37,698,199

11.1 Movement of provision against contribution due but unpaid

Opening balance 8,431,428 8,431,428

Charge for the year 764,362 -

Bad debts written off (7,615,010) -


12.

Unsecured

Considered good 3,121,043 2,326,333

Considered doubtful 4,686,950 4,667,878

7,807,993 6,994,211

Provision against amount due from other takaful companies 12.1 (4,686,950) (4,667,878)

3,121,043 2,326,333

12.1 Movement of provision against amounts due from other takaful companies


Charge for the year 19,072 -


13. ACCRUED INVESTMENT INCOME

2015 2014


Fund Takaful Fund

Return on term deposits 2,779,293 2,613,517 5,392,810 10,350,226

Return on Sukuk certificates - - - 1,059,330

2,779,293 2,613,517 5,392,810 11,409,556

AMOUNTS DUE FROM OTHER TAKAFUL COMPANIES / RETAKAFUL COMPANIES

------------------------------------- (Rupees) -------------------------------------

2015 2014

Note Rupees Rupees

14. WAKALA FEE RECEIVABLE AND OTHER ACCOUNT BALANCES

Considered good 14,647,867 49,799,258

Considered doubtful - 4,510,772

14,647,867 54,310,030

Provision for doubtful balances 14.1 (4,510,772) (4,510,772)

10,137,095 49,799,258

14.1 Movement of provision for doubtful balances


Reversal during the year - -


15. PREPAYMENTS

2015 2014


Fund Takaful Fund

Prepaid re-takaful ceded - 10,273,192 10,273,192 18,419,988

Prepaid expenses 1,675,715 17,085,014 18,760,729 17,074,449

1,675,715 27,358,206 29,033,921 35,494,437

16. SUNDRY RECEIVABLES

2015 2014


Fund Takaful Fund

Return on bank balances and deposits 8,844 61,417 70,261 140,529

Advances to employees and agents 171,344 - 171,344 420,292

Others 259,084 372,467 631,551 690,792

439,272 433,884 873,156 1,251,613

----------------------------------(Rupees)--------------------------------------

----------------------------------(Rupees)--------------------------------------

17. FIXED ASSETS

17.1 Tangibles Assets

Written Depreciation

At the Additions/ At the end At the For the At the end down value rate

beginning (disposals) of the year beginning year / of the year December 31

of the year of the year (disposals) (%)

Leasehold improvements 4,156,141 - 4,156,141 2,176,433 415,614 2,592,047 1,564,094 10

Furniture and fixtures 12,465,495 306,155 12,771,650 8,174,452 1,273,645 9,448,097 3,323,553 10

Office equipment 5,952,119 112,850 5,990,449 3,021,980 580,652 3,575,361 2,415,088 10

(74,520) (27,271)

Computers 17,527,982 227,600 17,641,074 15,586,212 947,116 16,473,521 1,167,553 33.33

(114,508) (59,807)

Vehicles 4,134,278 - 4,134,278 1,593,954 776,644 2,370,598 1,763,680 20

44,236,015 646,605 44,693,592 30,553,031 3,993,671 34,459,624 10,233,968

(189,028) (87,078)

17.1.1 It includes fully depreciated assets having cost of Rs 15,570,733 (2014: 14,932,670).

17.1.2 Tangibles Assets (for comparative period)

Written Depreciation

At the Additions/ At the end At the For the At the end down value at rate

beginning (disposals) of the year beginning year / of the year December 31

of the year of the year (disposals) (%)

Leasehold improvements 4,156,141 - 4,156,141 1,761,955 414,478 2,176,433 1,979,708 10

Furniture and fixtures 12,364,595 100,900 12,465,495 6,933,654 1,240,798 8,174,452 4,291,043 10

Office equipments 5,578,869 485,900 5,952,119 2,515,804 576,136 3,021,980 2,930,139 10

(112,650) (69,960)

Computers 15,828,279 1,802,485 17,527,982 15,004,246 634,357 15,586,212 1,941,770 33.33

(102,782) (52,391)

Vehicles 2,320,278 1,814,000 4,134,278 1,032,820 561,134 1,593,954 2,540,324 20

40,248,162 4,203,285 44,236,015 27,248,479 3,426,903 30,553,031 13,682,984

(215,432) (122,351)

-------------------------------------------------------------- (Rupees) --------------------------------------------------------------

2015

Cost Accumulated depreciation

-------------------------------------------------------------- (Rupees) --------------------------------------------------------------

2014

Cost Accumulated depreciation

2015 2014

Note Rupees Rupees

18. DIRECT EXPENSES - PTF

Tracker fees 33,918,488 21,179,028

Inspection fees 44,000 109,900

Doubtful debts 783,434 -

Others 272,422 311,809

35,018,344 21,600,737

19. OTHER INCOME - PTF

Liabilities no longer payable written back 3,686,214 42,832

Wakala fee no longer payable written back 4,510,772 -

8,196,986 42,832

20. MANAGEMENT EXPENSES - SHF

Salaries, wages and benefits 20.1 42,198,385 32,748,676

Rent, rates and taxes 4,430,497 3,859,481

Utilities 1,185,026 1,181,042

Communications 1,187,615 885,762

Printing and stationery 1,133,937 1,190,097

Travelling and entertainment 1,226,467 828,901

Repairs and maintenance 1,035,862 879,032

Vehicles running and maintenance 941,485 1,023,039

Advertisement and promotions 342,671 647,925

Ijarah rentals 878,682 878,682

Fees and subscription 723,238 1,233,401

Other expenses 924,080 504,528

56,207,945 45,860,565

20.1

2015 2014

Note

21. OTHER INCOME - SHF

Income from non - financial assets 929,195 708,221

Other income 3,375 -

932,570 708,221

These include Rs. 1,750,118 (2014: Rs.1,395,316) in respect of employees provident fund and Rs. 1,314,526 (2014:

Rs. 719,562) in respect of staff retirement gratuity.

(Rupees)

2015 2014

Note Rupees Rupees

22. GENERAL AND ADMINISTRATION EXPENSES - SHF

Salaries, wages and benefits 22.1 18,085,022 14,035,147

Depreciation 17.1 3,993,671 3,426,903

Amortization of intangibles - 38,994

Shariah board honorarium 1,511,270 2,115,768

Legal and professional 2,486,417 2,371,802

Rent, rates and taxes 1,898,785 1,654,063

Utilities 507,868 506,161

Communications 508,978 379,612

Printing and stationery 485,973 510,041

Travelling and entertainment 525,629 355,243

Repairs and maintenance 443,941 376,728

Vehicles running and maintenance 403,494 438,446

Advertisement and promotions 146,859 277,682

Ijarah rentals 376,578 376,578

Fees and subscription 309,959 528,601

Takaful expense 472,455 437,718

Auditors' remuneration 22.2 709,176 655,192

Bank charges 9,862 7,792

Donation 70,000 -

Penalty 22.3 5,000,000 -

Other expenses 396,034 216,226

38,341,971 28,708,697

22.1

2015 2014

22.2 Auditors' remuneration

Audit fee 306,000 280,000

Half yearly review fee 144,000 120,000

Other certification 150,000 100,000

Out of pocket expenses 109,176 155,192

709,176 655,192

22.3

(Rupees)

These include Rs. 750,050 (2014: Rs. 597,993) in respect of employee provident fund and Rs. 563,367 (2014: Rs.

308,383) in respect of retirement gratuity.

This represents penalty imposed by the Securities and Exchange Commission of Pakistan on default of Insurance

Ordinance, 2000 in respect of its Amaan Travel & Health Takaful Package, a takaful scheme for travellers in operation

prior to year 2009.

2015 2014

Note Rupees Rupees

23. TAXATION

Current - for the year 23.1 3,277,473 2,338,235

23.1

23.2

24. EARNINGS PER SHARE - Basic and diluted

2015 2014

Rupees Rupees

Profit for the year

after taxation 30,426,486 8,632,017

(Number of shares)

Weighted average number of shares outstanding during the year 30,000,000 30,000,000

Earnings per share 1.01 0.29

The relationship between tax expense and accounting profit has not been presented in these financial statements as the

income of the Company is subject to tax under section 113 and section 149 of Income Tax Ordinance, 2001.

As a matter of prudence the Company has not recognised deferred tax asset amounting to Rs. 35,154,231 as at

December 31, 2015 on net deductible temporary differences aggregating to Rs. 109,856,971 as at December 31, 2015

which include unused tax losses and tax depreciation/amortization amounting to Rs. 32,830,741 and Rs. 50,153,950

respectively.

Earning per share is calculated by dividing the Earning / loss for the year by the weighted average number of shares

outstanding during the year:

25. REMUNERATION OF DIRECTORS, CHIEF EXECUTIVE OFFICER AND OTHER EXECUTIVES

Chief

Executive

Officer

Directors Executives Total

Managerial remuneration 2,438,710 - 12,387,086 14,825,796

Directors' fee for attending meetings - 1,100,000 - 1,100,000

Retirement benefits 447,097 - 2,315,403 2,762,500

Utilities 243,871 - 1,238,709 1,482,580

Medical expenses 102,000 - 593,900 695,900

Others 252,000 - 5,037,668 5,289,668

4,581,098 1,100,000 27,146,956 32,828,053

Number of persons 1 7 13 21

Chief

Executive

Officer

Directors Executives Total

Managerial remuneration 2,322,577 - 10,137,627 12,460,204

Directors' fee for attending meetings - 490,000 - 490,000

Retirement benefits 425,808 - 1,922,632 2,348,440

House rent 1,045,164 - 4,561,921 5,607,085

Utilities 232,260 - 1,013,764 1,246,024

Medical expenses 102,000 - 421,217 523,217

Leave passage / assistance - - - -

Others 252,000 - 4,348,814 4,600,814

4,379,809 490,000 22,405,975 27,275,784

Number of persons 1 6 14 21

25.1

2015

--------------------------------------------------------------------(Rupees)--------------------------------------------------------------------

2014

--------------------------------------------------------------------(Rupees)--------------------------------------------------------------------

The Chief Executive Officer and some other executives are provided with free use of Company maintained cars in

accordance with their entitlements.

26. SEGMENT REPORTING

Marine, aviation and transport

2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014

SEGMENT ASSETS

Segment assets 30,852,695 57,426,107 15,307,745 13,315,025 80,252,338 103,595,149 21,932,293 31,934,008 624,410 2,871,594 148,969,480 209,141,883

Unallocated corporate assets 428,473,195 368,033,911

Consolidated total assets 577,442,675 577,175,794

SEGMENT LIABILITIES

Segment liabilities 69,885,444 86,271,094 30,790,850 34,009,348 270,470,014 214,563,860 36,965,872 65,645,361 4,071,461 5,353,412 412,183,641 405,843,075

Unallocated corporate liabilities (7,110,831) 19,421,549

Consolidated total liabilities 405,072,810 425,264,624

-------------------------------------------------------------------------------------------------------------------------------------------(Rupees)-------------------------------------------------------------------------------------------------------------------------------------------

Class of business wise revenue and results have been disclosed in the profit and loss account prepared in accordance with the requirement of Insurance Ordinance, 2000, SEC (Insurance) Rules, 2002 and Takaful Rules 2012.

The following table presents information regarding segment assets and liabilities as at December 31, 2014 and December 31, 2013:

Fire and property damage Motor Health Miscellaneous Total

27. RELATED PARTIES TRANSACTIONS AND BALANCES

Transactions with related parties during the year and comparatives are as follows:

December December

31, 2015 31, 2014

Status

Contribution written Associate 15,003,072 14,764,600

Contribution written Director 52,275 -

Contribution received Associate 15,516,476 15,158,137

Claims incurred / (Reversed) Associate (2,849,839) 2,675,745

Claims paid Associate 17,680 869,138

Profit on bank deposit Associate 140,566 3,138,369

Contribution to provident fund Associate 2,500,168 1,993,309

Contribution to Gratuity fund Associate 2,390,718 1,500,000

December December

31, 2015 31, 2014

Status

Balances with related parties as at 31 Decmber are as follows:

Contribution receivable Associate 2,849,166 1,749,516

Contribution receivable Director 52,275 -

Claims outstanding Associate 2,903,022 5,770,541

Payabele to Gratuity fund Associate (2,817,858) (2,390,718)

Bank deposits Associate 272,764 984,056

----------(Rupees)----------

----------(Rupees)----------

28. MANAGEMENT OF TAKAFUL AND FINANCIAL RISK

28.1 Takaful risk management

Takaful risk

(a) Frequency and severity of claims

-

-

The underwriting strategy attempts to ensure that the underwritten risks are well diversified in terms of type

and amount of risk, industry and geography. The Company has the right to re-price the risk on renewal. It also

has the ability to impose deductibles and reject fraudulent claims. Takaful contracts also entitle the Company

to pursue third parties for payment of some or all costs (for example, subrogation). The claims payments are

limited to the extent of sum covered on occurrence of the covered event.

The company has entered into re-takaful cover / arrangements, with local and foreign re-takaful operators

having good credit rating by reputable rating agencies, to reduce its exposure to risks and resulting claims.

Keeping in view the maximum exposure in respect of key zone aggregates, a number of proportional and non-

proportional facultative re-takaful arrangements are in place to protect the net account in case of a major

catastrophe. The effect of such re-takaful arrangements is that the Company recovers the share of claims from

re-takaful companies thereby reducing its exposure to risk. Apart from the adequate event limit which is a

multiple of the treaty capacity or the primary recovery from the proportional re-takaful arrangements, any

loss over and above the said limit would be recovered under non-proportional treaty which is very much in line

with the risk management philosophy of the Company.

The risk under any one takaful contract is the possibility that the covered event occurs and the uncertainty of the

amount of the resulting claim. By the very nature of a takaful contract, this risk is random and therefore unpredictable.

The principal risk that the Company faces under its takaful contracts is that the actual claims exceed the carrying

amount of the takaful liabilities. This could occur because the frequency or severity of claims is greater than estimated

takaful events are random, and the actual number and amount of claims will vary from year to year from the level

established.

Experience shows that the larger the portfolio of similar takaful contracts, the smaller the relative variability about the

expected outcome will be. In addition, a more diversified portfolio is less likely to be affected by a change in any

subset of the portfolio. The Company has developed its takaful underwriting strategy to diversify the type of takaful

risks accepted and within each of these categories to achieve a sufficiently large population of risks to reduce the

variability of the expected outcome.

Factors that aggravate takaful risk include lack of risk diversification in terms of type and amount of risk, geographical

location and type of industry covered.

Political, environmental, economical and climatic changes give rise to more frequent and severe extreme events

(for example, fire, theft, steal, riot and strike, explosion, earthquake, atmospheric damage, hurricanes, typhoons,

river flooding, electric fluctuation, terrorism, war risk, damages occurring in inland transit, burglary, loss of cash in

safe and cash in transit, travel and personal accident, money losses, engineering losses and other events) and their

consequences (for example, subsidence claims). For certain contracts, the Company has also limited the number of

claims that can be paid in any policy year or introduced a maximum amount payable for claims in any policy year.

Takaful contracts which is divided into direct and facultative arrangements are further subdivided into five

segments: fire, marine, motor, health and miscellaneous. The takaful risk arising from these contracts is

concentrated in the territories in which the Company operates, and there is a balance between commercial and

personal properties / assets in the overall portfolio of covered properties / assets. The Company underwrites takaful

contracts in Pakistan.

The Company manages these risks through its underwriting strategy, adequate re-takaful arrangements and

proactive claims handling.

-

(b) Sources of uncertainty in the estimation of future claim payments

Assumed net

loss ratio

Assumed net

loss ratio

Class 2015 2014

% %

Fire and property damage 5.01 60.89

Marine, aviation and transport 2.29 3.03

Motor (44.30) 40.26

Health (87.47) 98.70

Miscellaneous 524.73 (8.87)

(c) Process used to decide on assumptions

Liability in respect of outstanding claims is based on the best estimate of the claims intimated or assessed. In

calculating the estimated cost of unpaid claims (both reported and not), the Company estimation techniques are a

combination of loss-ratio-based estimates (where the loss ratio is defined as the ratio between the ultimate cost of

takaful claims and takaful contribution earned in prior financial years in relation to such claims) and an estimate

based upon actual claims experience using predetermined basis where greater weight is given to actual claims

experience as time passes.

In estimating the liability for the cost of reported claims not yet paid, the Company considers any information

available from surveyor's assessment and information on the cost of settling claims with similar characteristics in

previous periods. Claims are assessed on a case-by-case basis separately.

The principal assumption underlying the liability estimation of IBNR and Contribution Deficiency Reserves is that

the company's future claim development will follow similar historical pattern for occurrence and reporting. The

management uses qualitative judgement to assess the extent to which past occurrence and reporting pattern will not

apply in future. The judgement includes external factors e.g. treatment of one-off occurrence claims, changes in

market factors, economic conditions etc. The internal factors such as portfolio mix, policy conditions, and claims

handling procedures are further used in this regard.

The assumed net of retakaful loss ratios for each class of business is as follows:

The risks associated with takaful contracts are complex and subject to a number of variables that complicate

quantitative sensitivity analysis. This exposure is geographically concentrated in Pakistan only.

In compliance of the regulatory requirement, the re-takaful agreements are duly submitted with Securities and

Exchange Commission of Pakistan (SECP) on an annual basis.

The Company has claim department dealing with the mitigation of risks surrounding claims incurred whether

reported or not. This department investigates and settles all claims based on surveyor's report / assessment. The

unsettled claims are reviewed individually at least semi-annually and adjusted to reflect the latest information

on the underlying facts, contractual terms and conditions, and other factors. The Company actively manages

and pursues early settlements of claims to reduce its exposure to unpredictable developments.

Claims reported and otherwise are analysed separately. The development of large losses / catastrophes is analysed

separately. The shorter settlement period for claims allows the Company to achieve a higher degree of certainty

about the estimated cost of claims including IBNR. However, the longer time needed to assess the emergence of a

subsidence claim makes the estimation process more uncertain for these claims.

The estimated cost of claims includes direct expenses to be incurred in settling claims, net of the expected

subrogation value, re-takaful and other recoveries. The Company takes all reasonable steps to ensure that it has

appropriate information regarding its claims exposures. However, given the uncertainty in establishing claims

provisions, it is likely that the final outcome may be different from the original liability established. The liability

comprises amount in relations to unpaid reported claims, claims incurred but not reported (IBNR), expected claims

settlement costs and a provision for unexpired risks at the end of the reporting period.

(d) Changes in assumptions

(e) Sensitivity analysis

2015 2014 2015 2014

10% increase in deficit

Fire and property damage 40,772 (276,856) 40,772 (276,856)

Marine, aviation and transport 15,855 (231,461) 15,855 (231,461)

Motor (8,323,701) (4,930,776) (8,323,701) (4,930,776)

Health (5,177,959) (4,634,285) (5,177,959) (4,634,285)

Miscellaneous 39,443 (105,400) 39,443 (105,400)

(13,405,590) (10,178,778) (13,405,590) (10,178,778)

10% decrease in deficit

Fire and property damage (40,772) 276,856 (40,772) 276,856

Marine, aviation and transport (15,855) 231,461 (15,855) 231,461

Motor 8,323,701 4,930,776 8,323,701 4,930,776

Health 5,177,959 4,634,285 5,177,959 4,634,285

Miscellaneous (39,443) 105,400 (39,443) 105,400

13,405,590 10,178,778 13,405,590 10,178,778

Concentration of takaful risk

Underwriting results Balance of Waqf

--------------------------------------- (Rupees) ---------------------------------------

A concentration of risk may also arise from a single takaful contract issued to a particular type of participant, within a geographical location or to a particular types

of commercial business. In order to minimise the financial exposure arising from large claims, the Company, in the normal course of business, enters into agreement

with other re-takaful operators, who are dispersed over several geographical regions.

The Company uses assumptions based on a mixture of internal and market data to measure its related claims liabilities. Internal data is derived mostly from

the Company’s monthly claims reports, surveyor's report for particular claim and screening of the actual takaful contracts carried out to derive data for the

contracts held. The Company has reviewed the individual contracts and in particular the industries in which the participant companies operate and the actual

exposure years of claims. This information is used to develop related provision for outstanding claims (both reported and non-reported).

The choice of selected results for each accident year of each class of business depends on an assessment of the technique that has been most appropriate to

observe historical developments. Through this analysis, the Company determines the need for an IBNR or an unexpired risk liability to be held at each

reporting date.

The Company has not changed its assumptions for the takaful contracts as disclosed in above (b) and (c).

The analysis of exposure described in paragraph (c) above is also used to test the sensitivity of the selected assumptions to changes in the key underlying

factors. Assumptions of different levels have been used to assess the relative severity of subsidence claims given past experience. The key material factor in

the Company’s exposure to subsidence claims is the risk of more permanent changes in geographical location in which Company is exposed.

The risks associated with the takaful contracts are complex and subject to a number of variables which complicate quantitative sensitivity analysis. The

Company makes various assumptions and techniques based on past claims development experience. This includes indications such as average claims cost,

ultimate claims numbers and expected loss ratios. The Company considers that the liability for takaful claims recognised in the balance sheet is adequate.

However, actual experience may differ from the expected outcome.

As the Company enters into short term takaful contracts, it does not assume any significant impact of changes in market conditions on unexpired risks. However,

results of sensitivity testing assuming 10% change in the claim incidence net of recoveries showing effect on underwriting results and balance of waqf fund is set

out below:

The maximum class wise risk exposure (in a single policy) is as follows:

2015 2014 2015 2014 2015 2014

Fire and property and damage 630,000,000 700,000,000 628,000,000 698,000,000 2,000,000 2,000,000

Marine, aviation and transport 109,983,000 73,645,000 107,983,000 71,645,000 2,000,000 2,000,000

Motor 14,000,000 7,040,000 13,500,000 6,540,000 500,000 500,000

Health 700,000 700,000 - - 700,000 700,000

Miscellaneous 1,000,000 1,920,000 550,000 1,470,000 450,000 450,000

755,683,000 783,305,000 750,033,000 777,655,000 5,650,000 5,650,000

Claims development table

Analysis on gross basis

Accident year 2011 2012 2013 2014 2015 Total

and before

Estimate of ultimate claims cost:

At the end of accident year 261,990,547 50,824,208 57,227,095 51,476,770 65,199,986 486,718,606

One year later 51,315,093 7,362,069 19,559,603 4,567,165 - 82,803,930

Two years later 26,302,252 5,704,009 14,374,301 - - 46,380,562

Three years later 18,507,805 3,635,249 - - - 22,143,054

Four years later 12,590,002 - - - - 12,590,002

Estimate of cumulative claims 510,054,984 105,397,826 137,603,435 159,558,011 174,536,393 1,087,150,649

Cumulative payments to date (500,972,008) (101,762,577) (123,229,134) (154,990,846) (109,336,407) (990,290,972)

Liability recognised in the balance sheet 9,082,976 3,635,249 14,374,301 4,567,165 65,199,986 96,859,677

------------------------------------------------------(Rupees )--------------------------------------------------------

The following table shows the development of claims over a period of time on gross basis. The disclosure goes back to the period when the earliest material claim

arose for which there is still uncertainty about the amount and timing of the claims payments. For each class of business, the uncertainty about the amount and

timings of claims payment is usually resolved within a year. Further, claims with significant uncertainties are not outstanding as at December 31, 2015.

-------------------------------------------------- (Rupees) -----------------------------------------------------

Gross sum insured Re-takaful Net

28.2 FINANCIAL RISK MANAGEMENT

28.3 Risk management framework

28.4 Credit risk

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure, as specified below:

The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including

currency risk, interest rate risk and price risk). The Company's overall risk management policy focuses on the

unpredictability of financial markets and seeks to minimize potential adverse effects on the Company's financial

performance. In particular, the key financial risk is that in the long-term its investment proceeds are not sufficient to

fund the obligations arising from its takaful and investment contracts.

The Board of Directors has overall responsibility for establishment and oversight of the Company's risk management

framework. The Board is responsible for developing and monitoring the Company’s risk management policies.

The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set

appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and

systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company,

through its training and management standards and procedures, aims to develop a disciplined and constructive control

environment in which all employees understand their roles and obligations.

The audit committee oversees compliance by management with the Company’s risk management policies and

procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.

The Audit Committee is assisted in its oversight role by an outsourced Internal Audit function. Internal Audit

undertakes both regular and adhoc reviews of risk management controls and procedures, the results of which are

reported to the Audit Committee.

Credit risk is the risk, which arises with the possibility that one party to a financial instrument will fail to discharge its

obligation and cause the other party to incur a financial loss. The Company attempts to control credit risk by monitoring

credit exposures by undertaking transactions with a large number of counterparties in various industries and by

continually assessing the creditworthiness of counterparties.

The Company structures the levels of credit risk it accepts by placing limits on its exposure to a single counter party, or

groups of counterparties, and to geographical and industry segments. Such risks are subject to an annual or more

frequent review. Limits on the level of credit risk by category and territory are approved regularly by the Board of

Directors.

Re-takaful is used to manage takaful risk. This does not, however, discharge the Company’s liability as primary takaful

operator. If a Re-takaful operator fails to pay a claim for any reason, the Company remains liable for the payment to the

participant. The creditworthiness of Re-takaful operators is considered on an annual basis by reviewing their financial

strength prior to finalisation of any contract.

Exposures to individual participants and groups of participants are collected within the ongoing monitoring of the

controls associated with regulatory solvency. Where there exists significant exposure to individual participants, or

homogenous groups of participants, a financial analysis equivalent to that conducted for Re-takaful operators is carried

out by the Company's risk department.

2015 2014

Note Rupees Rupees

Financial assets

Held to maturity

GoP Ijarah Sukuks - 10,000,000

Other sukuks 3,965,520 15,517,243

3,965,520 25,517,243

Available-for-sale

Quoted - units of Islamic Fund 64,003,881 10,007,878

Other financial assets at amortised cost

Bank deposits 327,563,312 286,875,349

Long term deposits 1,523,034 1,523,034

Contributions due but unpaid 28,104,385 37,698,199

Amounts due from other takaful / re-takaful companies 3,121,043 2,326,333

Accrued investment income 5,392,810 11,409,556

Re-takaful recoveries against outstanding claims 19,214,059 27,002,169

Wakala fee receivable and other account balances 10,137,095 49,799,258

Mudarib fee receivable 2,051,094 1,841,660

Sundry receivables 873,156 1,251,613

397,979,988 419,727,171

465,949,389 455,252,292

Financial assets

Secured 28.4.1 19,214,059 37,002,169

Unsecured 446,735,330 418,250,123

465,949,389 455,252,292

Not past due 415,509,902 388,225,591

Past due 28.4.1 50,439,487 67,026,701

465,949,389 455,252,292

The age analysis of financial assets is as follows:

Gross value Impairment Carrying value Gross value Carrying value

Not past due 416,509,902 (1,000,000) 415,509,902 388,225,591 - 388,225,591

Past due

Upto 1 year 36,722,513 - 36,722,513 49,260,993 - 49,260,993

1-2 years 12,650,938 (2,231,180) 10,419,758 20,072,949 (7,726,127) 12,346,822

Over 2 years 22,331,890 (19,034,674) 3,297,216 30,300,962 (24,882,076) 5,418,886

Total 488,215,243 (22,265,854) 465,949,389 487,860,495 (32,608,203) 455,252,292

28.4.1 It comprises retakaful recoveries against outstanding claims amounting to Rs. 19,214,059 which are past due but not

impaired and are secured against amount due to re-takaful companies.

Impairment

-----------------------------------------------------------(Rupees)------------------------------------------------------------------

2015 2014

Rating 2015 2014

Short term Long term Agency Rupees Rupees

Al Baraka Bank (Pakistan) Limited A-1 A JCR-VIS 272,765 984,056

Askari Bank Limited ( Islamic Banking) A1+ AA PACRA 5,084 9,184

Bank AlFalah Limited (Islamic Banking) A1+ AA PACRA 241,169 1,427,811

Bank Islami Pakistan Limited A1 A+ PACRA 30,119,865 25,010,416

Burj Bank Pakistan Limited A-2 A- JCR-VIS 50,010,285 69,882

Dubai Islamic Bank Limited A-1 A+ JCR-VIS 136,051,895 106,628,932

Faysal Bank Limited (Islamic Banking) A1+ AA PACRA 12,547 35,079,841

Habib Bank Limited (Islamic Banking) A-1+ AAA JCR-VIS 4,968 55,005,965

Habib Metropolitan Bank (Islamic Banking) A1+ AA+ PACRA 516,056 1,326,180

Meezan Bank Limited A-1+ AA JCR-VIS 109,802,781 60,316,388

National Bank of Pakistan (Islamic Banking) A-1+ AAA JCR-VIS 11,605 11,188

The Bank of Khyber (Islamic Banking) A-1 A JCR-VIS 512,161 924,733

UBL Ameen A-1+ AA+ JCR-VIS 2,131 80,773

327,563,312 286,875,349

28.5 Concentration of credit risk

Industry

(Rupees) % (Rupees) %

Textiles 17,157,256 45.8% 19,974,326 37.6%

Banks 10,565,738 28.2% 17,329,370 32.6%

Automobiles 220,438 0.6% 261,136 0.5%

Cement 5,211 0.0% 243,493 0.4%

Chemical and fertilizer 621,050 1.7% 1,817,111 3.4%

Distribution 162,674 0.4% 688,190 1.3%

Education 928,665 2.5% 1,261,441 2.4%

NGOs 1,040,238 2.8% 2,008,307 3.8%

Petroleum 1,013,188 2.7% 250,128 0.5%

Food and allied 860,091 2.3% 469,814 0.9%

Leather 26,447 0.1% 746,349 1.4%

Engineering 180,746 0.5% 2,160,063 4.1%

Housing 33,035 0.1% 251,178 0.5%

Pharmaceuticals 553,276 1.5% 880,491 1.6%

Takaful 50,970 0.1% 68,980 0.1%

NBFIs 268,879 0.7% 140,888 0.3%

Individual 329,208 0.9% 1,019,357 1.9%

Paper 1,136,116 3.0% 387,602 0.7%

IT Industry 548,074 1.5% 300,420 0.6%

Oil mills 296,705 0.8% 1,198,077 2.3%

Others 1,495,153 4.0% 1,667,117 3.1%

37,493,158 100% 53,123,838 100%

The credit quality of the Company's bank balances and deposits can be assessed with reference to external credit ratings as follows:

Rating

The Company has made investment in other sukuk certificates and units of Islamic fund.

Concentration of credit risk occurs when a number of counterparties have a similar type of business activities. As a result, any change in

economic, political or other conditions would effect their ability to meet contractual obligations in similar manner. Sector-wise analysis

of gross "contribution due but unpaid" and "amount due from other takaful companies" at the reporting date is as follows:

2015 2014

The management monitors exposure to credit risk through regular review of credit exposure, assessing creditworthiness of counterparties

and prudent estimates of provision for doubtful debts.

28.5.1 The age analysis of "contributions due but unpaid" at the reporting date is as follows:

Note Gross Impairment Gross Impairment

Upto 1 year 28.5.2 28,104,386 - 37,698,199 -

1-2 years 1,580,779 1,580,779 711,649 711,649

Over 2 years - - 7,719,779 7,719,779

Total 29,685,165 1,580,779 46,129,627 8,431,428

2015 2014

Rupees Rupees

28.5.2 This includes following amounts due from related patries which are past due but not impaired:

Name Status

House Building Finance Company Limited Associate 30,250 -

Al Baraka Bank (Pakistan) Limited Associate 1,122,788 1,547,471

Sitara Chemical Industries Limited Associate 1,696,128 202,045

Syed Tariq Hussain Director 52,275 -

2,901,441 1,749,516

28.5.3

Gross Impairment Gross Impairment

Upto 1 year 3,121,041 - 2,326,333 -

1-2 years 650,403 650,401 2,503,706 2,503,706

Over 2 years 4,036,549 4,036,549 2,164,172 2,164,172

Total 7,807,993 4,686,950 6,994,211 4,667,878

Amount due from other takaful companies, re-takaful recoveries against outstanding claims

Amount due

from re-

takaful

companies

Re-takaful

recoveries

against

outstanding

claims

Prepaid re-

takaful

contribution

ceded

Total

A or above - 6,148,499 3,287,421 9,435,920

BBB or above - 13,065,560 6,985,771 20,051,331

- 19,214,059 10,273,192 29,487,251

---------------------------------------(Rupees)---------------------------------------

2015 2014

Re-takaful agreement does not relieve the Company from its obligation to participants and as a result the Company remains liable for the

portion of outstanding claims covered by re-takaful to the extent that re-takaful fails to meet the obligation under the re-takaful

agreements.

In common with other takaful companies, in order to minimise the financial exposure arising from large claims, the Company, in the

normal course of business, enters into agreement with re-takaful companies.

The Company enters into re-takaful / co-takaful arrangements with re-takaful and takaful companies having sound credit ratings

accorded by reputed credit rating agencies. The Company is required to comply with the requirements of circular No. 24 / 2010 dated

October 27,2010 issued by SECP which requires a takaful operator to place at least 80% of their outward treaty cessions with re-takaful

companies rated 'A' or above by Standard & Poors or equivalent rating by any other reputed international rating agency, with the

balance (20%) being placed with entities rated at least 'BBB' by Standard & Poors or equivalent rating by any other reputed

international rating agency. An analysis of all re-takaful assets relating to outward treaty cessions recognised by the rating of the entity

from which it is due is as follows:

2015

------------------------------------------------(Rupees )------------------------------------------------

-----------------------------------------(Rupees)-----------------------------------------

The age analysis of "amount due from other takaful companies" at the reporting date is as follows:

2015 2014

Amount due

from re-

takaful

companies

Re-takaful

recoveries

against

outstanding

claims

Prepaid re-

takaful

contribution

ceded

Total

A or above - 6,583,456 6,434,096 13,017,552

BBB or above - 20,418,714 11,949,035 32,367,749

- 27,002,170 18,383,131 45,385,301

Gross Impairment Gross Impairment

Upto 1 year 5,497,086 - 9,236,461 -

1-2 years 10,419,758 - 12,346,822 -

Over 2 years 3,297,216 - 5,418,886 -

Total 19,214,060 - 27,002,169 -

28.6 Liquidity risk

--------------------------------------------(Rupees)--------------------------------------------

In respect of the aforementioned takaful and re-takaful assets, the Company takes into account its track record of

recoveries and financial position of the counterparties while creating provision for impairment. Further, re-takaful

recoveries are made when corresponding liabilities are settled.

Liquidity risk is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall

due. Liquidity risk arises because of the possibility that the Company could be required to pay its liabilities earlier

than expected or difficulty in raising funds to meet commitments associated with financial liabilities as they fall due.

The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient

liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable

losses or risking damage to the Company's reputation. The diversified funding sources and assets of the Company

are managed with liquidity in mind, maintaining a healthy balance of cash and cash equivalents and readily

marketable securities.

2014

------------------------------------------------(Rupees )------------------------------------------------

The age analysis of "re-takaful recoveries against outstanding claims" at the reporting date is as follows:

2015 2014

Carrying

amount

Contractual

cash flows

Less than one

year

1-2 years 2-3 years 3-5 years

Financial liabilities at amortised cost

Provision for outstanding claims 88,471,003 88,471,003 88,471,003 - - -

Amount due to re-takaful companies 59,684,818 59,684,818 59,684,818 - - -

Accrued expenses 1,352,615 1,352,615 1,352,615 - - -

Wakala fee payable and other account balances 10,137,095 10,137,095 10,137,095 - - -

Mudarib fee payable 2,051,097 2,051,097 2,051,097 - - -

Other creditors and accruals 20,434,414 20,434,414 20,434,414 - - -

182,131,042 182,131,042 182,131,042 - - -

Carrying

amount

Contractual

cash flows

Less than one

year

1-2 years 2-3 years 3-5 years

Financial liabilities at amortised cost

Provision for outstanding claims 91,931,551 83,998,771 83,998,771 - - -

Amount due to Re-takaful companies 37,418,436 52,015,920 52,015,920 - - -

Accrued expenses 1,575,777 3,661,376 3,661,376 - - -

Wakala fee payable and other account balances 54,310,030 46,128,623 46,128,623 - - -

Mudarib fee payable 1,841,660 438,616 438,616 - - -

Other creditors and accruals 21,061,232 16,570,393 16,570,393 - - -

208,138,686 202,813,699 202,813,699 - - -

28.7 Market risk

28.8 Currency risk

28.9 Profit rate risk

At the balance sheet date, the profit rate profile of the Company’s significant halal profit-bearing financial instruments is:

2015 2014 2015 2014

Note (Rupees)

Financial assets

Variable rate instruments

- Term deposits 8.2 305,610,000 251,500,000 5.0 - 10.78 8.0 - 9.97

- PLS savings accounts 8.1 21,758,900 33,746,782 2.6 - 7.30 3.51 - 6.92

- GoP Ijarah sukuk certificates - 10,000,000 9.47 - 9.98

- Other sukuk certificates 10.1 19,963,645 30,515,368

Cash flow sensitivity analysis for variable rate instruments

Shareholders' Fund

The table below analyses the Company's financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the

maturity date.

2015

-------------------------------------------------------------------- (Rupees) --------------------------------------------------------------------

2014

-------------------------------------------------------------------- (Rupees) --------------------------------------------------------------------

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company's income or value

of its financial instruments. The objective of market risk management is to manage and control market risk exposures with acceptable parameters, while

optimising the return. The Company is exposed to currency risk, interest rate risk and other price risk.

The Company is exposed to cash flow profit rate risk in respect of its deposits with banks and investment in sukuk certificates. In case of 100 basis points (bp)

increase / decrease in profit rates at year end, assuming that all other variables remain constant, the net income before tax would have been higher / lower by

Rs. 1,434,250 (2014: Rs. 1,328,338).

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency

risk arises mainly where receivables and payables exist due to transactions based on currencies other than Pak Rupees. The Company is not exposed to

currency risk as there are no assets or liabilities recoverable/repayable in foreign currencies.

Profit rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market halal profit rates.

Majority of the profit rate exposure arises from balances held in profit and loss sharing accounts and term deposits with reputable banks.

Gross Carrying amount Effective halal profit rate

(in Percent)

6 months KIBOR+1.5% - 2%

Participant's Takaful Fund

Cash flow sensitivity analysis for fixed rate instruments

28.10 Other price risk

2015 2014

Rupees Rupees

Effect on 5 percent increase / decrease

in market value of mutual fund units

Investment in Islamic Funds 3,244,732 583,720

Investment in Islamic Funds 64,003,881 4,315,504

The sensitivity analysis presented is based upon the portfolio position as at year end. Accordingly, the sensitivity

analysis is not necessarily indicative of the effect on the Company's assets of future movements in the market value of

mutual fund units held by the Company. The carrying values of units that are subject to other price risk are as follows:

The sensitivity change will not have an effect on the Company's reported results and financial position as these

investments are classified as available for sale and carried at lower of cost or market value. Currently, the cost of these

investments is lower by Rs. 890,761 to its market value of Rs. 64,894,642 as at December 31, 2015.

The Company is exposed to cash flow profit rate risk in respect of its deposits with banks. In case 100 basis points (bp)

increase / decrease in profit rates at year end on bank deposits, assuming that all other variables remain constant, the

net deficit and balance of Waqf would have been higher / lower by Rs. 1,470,317 (2014: Rs. 1,821,427).

The Company does not have any fixed rate financial assets and liabilities at fair value through profit or loss, therefore a

change in interest rates at the reporting date would not affect profit or loss.

The sensitivity analysis prepared is not necessarily indicative of the effects on loss for the year and assets / liabilities of

the Company.

Other price risk is the risk of changes in the fair value of securities as the result of changes in the levels of net asset

value of units listed on Pakistan Stock Exchange Limited held by the Company. The equity price risk exposure arises

from the investment in equity securities. This arises from investments held by the Company for which prices in the

future are uncertain.

The Company manages equity price risk by limiting exposure to equity securities to 50% of the equity. The limit set

for exposure to any single investee company is 10% of the equity with overall limit to 25% to a single industrial sector.

The Company also manages price risk by continuously reviewing portfolio allocation and monitoring developments in

market. A summary analysis of equity investments is disclosed in note 10.2 to these financial statements.

The table below summarises the sensitivity of listed mutual fund units held by the Company as at year end. The

analysis is based on the assumption that market price increase / decrease by 5% (2014: 5%) with all other variables

held constant. This represents management's best estimate of a reasonable possible shift in the market value of listed

equity securities held by the Company.

28.11 Mismatch of interest rate sensitive assets and liabilities / yield / interest rate risk

Effective rate %

per annum

Upto one

month

Over one

month to three

months

Over three

months to six

months

Over six months

to one year

Over one year to

five years

Over five years Sub Total Non profit

bearing

Total

Financial assets

Cash and bank deposits 2.6% - 4.58% 175,258,900 110,510,000 21,600,000 20,000,000 - - 327,368,900 385,558 327,754,458

Investments 5.0 % - 10.78% - - - - 3,965,520 - 3,965,520 64,003,881 67,969,401

Contribution due but unpaid - - - - - - - 28,104,385 28,104,385

Amounts due from other

takaful companies - - - - - - - 3,121,043 3,121,043

Accrued investment income - - - - - - - 5,392,810 5,392,810

Re-takaful recoveries against

outstanding claims - - - - - - - 19,214,059 19,214,059

Wakala fee receivable - - - - - - - 10,137,095 10,137,095

Security deposit - - - - - - - 1,523,034 1,523,034

Mudarib fee receivable - - - - - - - 2,051,094 2,051,094

Sundry receivables - - - - - - - 873,156 873,156

175,258,900 110,510,000 21,600,000 20,000,000 3,965,520 - 331,334,420 134,806,115 466,140,535

Financial liabilities

Outstanding claims - - - - - - - 88,471,003 88,471,003

Amounts due to takaful /

re-takaful companies - - - - - - - 59,684,818 59,684,818

Accrued expenses - - - - - - - 1,352,615 1,352,615

Wakala fee payable - - - - - - - 10,137,095 10,137,095

Mudarib fee payable - - - - - - - 2,051,097 2,051,097

Other creditors and accruals - - - - - - - 20,434,414 20,434,414

- - - - - - - (182,131,042) (182,131,042)

Inter risk sensitivity gap 175,258,900 110,510,000 21,600,000 20,000,000 3,965,520 - 331,334,420 (47,324,927) 284,009,493

Cumulative halal profit rate

risk sensitivity gap-2015 175,258,900 285,768,900 307,368,900 327,368,900 331,334,420 331,334,420

Effective rate %

per annum

Upto one

month

Over one

month to three

months

Over three

months to six

months

Over six months

to one year

Over one year to

five years

Over five years Sub Total Non profit

bearing

Total

Financial assets

Cash and bank deposits 3.51% - 6.92% 145,246,782 95,000,000 5,000,000 40,000,000 - - 285,246,782 2,033,477 287,280,259

Investments 9.47 % - 11.92% - 275,862 10,275,862 10,551,724 - 4,413,795 25,517,243 10,007,878 35,525,121

Contribution due but unpaid - - - - - - - 37,698,199 37,698,199

Amounts due from other

takaful companies - - - - - - - 2,326,333 2,326,333

Accrued investment income - - - - - - - 11,409,556 11,409,556

Re-takaful recoveries against

outstanding claims - - - - - - - 27,002,169 27,002,169

Wakala fee receivable - - - - - - - 49,799,258 49,799,258

Security deposit - - - - - - - 1,523,034 1,523,034

Mudarib fee receivable - - - - - - - 1,841,660 1,841,660

Sundry receivables - - - - - - - 1,251,613 1,251,613

145,246,782 95,275,862 15,275,862 50,551,724 - 4,413,795 310,764,025 144,893,177 455,657,202

Financial liabilities

Outstanding claims - - - - - - - 91,931,551 91,931,551

Amounts due to takaful /

re-takaful companies - - - - - - - 37,418,436 37,418,436

Accrued expenses - - - - - - - 1,575,777 1,575,777

Wakala fee payable - - - - - - - 54,310,030 54,310,030

Mudarib fee payable - - - - - - - 1,841,660 1,841,660

Other creditors and accruals - - - - - - - 21,061,232 21,061,232

- - - - - - - (208,138,686) (208,138,686)

Inter risk sensitivity gap 145,246,782 95,275,862 15,275,862 50,551,724 - 4,413,795 310,764,025 (63,245,509) 247,518,516

Cumulative halal profit rate

risk sensitivity gap-2014 145,246,782 240,522,644 255,798,506 306,350,230 306,350,230 310,764,025

----------------------------------------------------------------------------------------------------------(Rupees)----------------------------------------------------------------------------------------------------------

2015

Profit bearing

----------------------------------------------------------------------------------------------------------(Rupees)----------------------------------------------------------------------------------------------------------

2014

Profit bearing

28.12 Fair value of financial instruments

Level 1:

Level 2:

Level 3:

Financial assets Level 1 Level 2 Level 3 Total

Units of Islamic Funds 64,894,642 - - 64,894,642

28.13 Operational risk

-

- requirements for the reconciliation and monitoring of transactions;

- compliance with regulatory and other legal requirements;

Fair value is an amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing

parties in an arm’s length transaction. Consequently, differences may arise between the carrying values and the fair

value estimates.

The fair values of all the financial instruments are estimated to be not significantly different from their carrying values

except units of Islamic Funds, fair value of which have been stated in notes 10.1, 10.2 and 10.3 respectively.

The Company’s accounting policy on fair value measurements of its investments is discussed in note 4.14.3 to these

financial statements.

The Company measures fair values using the following fair value hierarchy that reflects the significance of the inputs

used in making the measurements:

Fair value measurements using inputs other than quoted prices included within Level 1 that are observable

for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Fair value measurements using inputs for the asset or liability that are not based on observable market data

(i.e. unobservable inputs).

Fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities.

requirements for appropriate segregation of duties between various functions, roles and responsibilities;

The table below analyses financial instruments measured at fair value at the end of the reporting period by the level of

the fair value hierarchy into which its fair value measurement is categorised:

----------------------------------------- (Rupees) -----------------------------------------

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the

processes, technology and infrastructure supporting the Company’s operations, either internally within the Company

or externally at the Company’s service providers, and from external factors other than credit, market and liquidity

risks such as those arising from legal and regulatory requirements and generally accepted standards of investment

management behaviour. Operational risks arise from all of the Company’s activities.

The Company’s objective is to manage operational risk so as to balance limiting of financial losses and damage to its

reputation with achieving its objective of generating returns for stakeholders.

The primary responsibility for the development and implementation of controls over operational risk rests with the

board of directors. This responsibility encompasses the controls in the following areas:

- documentation of controls and procedures;

-

- ethical and business standards; and

- risk mitigation, including insurance, where this is effective.

28.14 Capital risk management

29. PROVIDENT FUND

2015 2014

Rupees Rupees

Size of the fund- net assets 12,231,433 9,898,205

Cost of investments made 13,587,692 10,292,613

Percentage of investments made 111.09% 103.98%

Fair value of investments made 13,381,000 10,292,613

Fair Value Percentage Fair Value Percentage

(Rupees) (%) (Rupees) (%)

Bank balances 294,831 2% 1,592,613 15%

Term deposit certificates 7,000,000 52% 8,700,000 85%

Mutual Funads 6,105,718 46% - 0%

requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to

address the risks identified;

Senior management ensures that the Company's staff have adequate training and experience and fosters effective

communication related to operational risk management.

The Company's objective when managing capital is to safeguard the Company's ability to continue as a going concern

so that it can continue to provide returns for shareholders and benefits for other stakeholders; and to maintain a strong

capital base to support the sustained development of its businesses.

The Company manages its capital structure by monitoring return on net assets and makes adjustments to it in the light

of changes in economic conditions. In order to maintain or adjust the capital structure, the Company may adjust the

amount of dividend paid to shareholders or issue new shares. Currently, the Company has paid up capital of Rs. 300

million which is in compliance with the minimum paid up capital requirement set by SECP for insurance companies/

takaful operators for the year ended December 31, 2015.

The Company operates approved funded contributory provident fund (the Fund) for its employees. Detail of net assets

and investments of the fund, based on their audited financial statements as at December 31, 2015, are as follows:

The breakup of fair value of investments, based on audited financial statements of the Fund, is as under:

2015 2014

30. NUMBER OF EMPLOYEES

31. DATE OF AUTHORISATION

32. GENERAL

Figures have been rounded off to nearest Rupee unless otherwise mentioned.


These financial statements have been authorised for issue by the Board of Directors on 29 March, 2016

The investment out of provident funds have been made in accordance with the provision of section 227 of the

Companies Ordinance, 1984 and the rules formulated for the purpose.

The average number of employees for the year ended December 31, 2015 were 73 (2014: 65) and number of employees

as at December 31, 2015 were 75 (2014: 68).

takaful pakistan limitedwebmail.takaful.com.pk/pdfs/annualreport2015.pdfcontribution revenue...

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