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					TAKAFUL INTERNATIONAL COMPANY BSC

        CONDENSED INTERIM
      FINANCIAL INFORMATION
           30 JUNE 2006
Takaful International Company BSC

CONDENSED INTERIM FINANCIAL INFORMATION for the six months ended 30 June 2006



CONTENTS                                                                   Page

General information                                                        1
Accountants‟ review report                                                 2

Condensed Interim Financial Information

Balance sheet                                                              3
Statement of participant‟s revenues and expenses                           4-5
Statement of income                                                        6
Statement of changes in participants‟ funds                                7
Statement of changes in shareholders‟ equity                               8
Statement of cash flows                                                    9
Notes to the condensed interim financial information                       10-14
                                       GENERAL INFORMATION

Board of Directors
Adel Abdulla Al-Mannai                  - Chairman
Hasan Ebrahim Kamal                     - Vice Chairman
Isa Abdulla Al-Mannai                   - Managing Director
Yousif Saleh Khalaf                     - Director
Bara‟a Abdulaziz Al-Qenaei              - Director
____________________________________________________________________________________________________
Executive Management
Younis A. Jamal                         - General Manager
Abdulaziz Al-Othman                     - Assistant General Manager
Mohammed Al-Khashab                     - Senior Manager – Internal Audit & Legal Affairs
Jehad B. Rahima                         - Senior Manager – Family Takaful & Health
Ahmed A. Qudoos                         - Senior Manager – Expansion Research & Development
Atef Ahmed                              - Senior Manager – Technical & Reinsurance
Tareq Al-Maqatish                       - Manager – Finance
Haider Shehabi                          - Senior Manager – Motor
Ahmed Swailem                           - Manager – Sales & Customer Services
Jyoti Bhardwaj                          - Manager – Information system

Abdul Majeed Nawab                      - Consultant


____________________________________________________________________________________________________
Registered office                                        Auditors and registrars to the Company
P.O. Box 3230, Manama,                                   KPMG, P.O.Box 710, Bahrain
KINGDOM OF BAHRAIN
Telephone: 17 298298
Fax: 17 293344                                           Bankers to the Company
e-mail: takaful@takafulweb.com                           National Bank of Bahrain
website: www.takafulweb.com                              Bank of Bahrain and Kuwait
                                                         Shamil Bank
Listing                                                  Bahrain Islamic Bank
Bahrain Stock Exchange                                   AL Baraka Islamic Bank




                                                       1
ACCOUNTANTS' REVIEW REPORT
on the 30 June 2006 condensed interim financial information


To


The Directors
Takaful International Company BSC
Manama
Kingdom of Bahrain
                                                                                                    15 August 2006


We have reviewed the accompanying balance sheet of Takaful International Company BSC (the „Company‟) as
of 30 June 2006, and the related statements of income, participants‟ revenue and expenses, changes in equity,
cash flows and changes in participants funds for the six month period then ended (the condensed interim
financial information). This condensed interim financial information set out on pages 3 to 14 is the responsibility
of the directors of the Company. Our responsibility is to issue a report on this condensed interim financial
information based on our review.

We conducted our review in accordance with the International Standard on Review Engagements 2400. A review
is limited primarily to enquiries of the Company‟s personnel and analytical procedures applied to financial data
and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not
express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that the accompanying
condensed interim financial information is not prepared, in all material respects, in accordance with IAS 34,
Interim Financial Reporting.




                                                              2
Takaful International Company B.S.C.

BALANCE SHEET
as at 30 June 2006                                                                         Bahraini dinars

                                                                       30 June            31 December
                                                                         2006                 2005
                                                                       (reviewed)            (audited)
                                                                                            (restated)

ASSETS
Cash and investments:
   Statutory deposits                                                       125,000              125,000
   Deposits and cash                                                      3,830,010            3,317,042
   Available for sale investments                                         2,940,440            2,988,033

                                                                          6,895,450            6,430,075

Retakaful and takaful balances receivable                                 2,150,346            2,152,989
Due from retakaful companies in connections with outstanding
claims                                                                      997,049              673,084
Property and equipment                                                    1,902,999            1,803,303
Other receivables and prepayments                                           185,495              162,607
Due from a related party (note 7)                                           192,432              901,309

TOTAL ASSETS                                                            12,323,771            12,123,367

EQUITY, PARTICIPANTS’ FUNDS AND LIABILITIES


EQUITY
Share capital                                                             5,000,000            5,000,000
Statutory reserve                                                           368,781              368,781
General reserve                                                             200,000              130,000
Retained earnings                                                           379,765              969,349
Investment fair value reserve                                             (246,370)            (237,868)
                                                                          5,702,176            6,230,262

DEFICIENCY IN PARTICIPANTS‟ FUNDS                                         (263,333)            (436,598)

Takaful funds:
   Unearned contributions – General takaful                               1,122,540            1,021,959
   Gross outstanding claims – General takaful & Family takaful            2,082,943            1,764,716
   Family takaful technical reserves                                        264,897              376,095
                                                                          3,470,380            3,162,770

Retakaful and takaful balances payable                                    1,406,598            1,389,195
Other liabilities and provisions                                          1,144,010              835,238
Ijara Muntahia bitamleek                                                    863,940              942,500

TOTAL LIABILITIES                                                         3,414,548            3,166,933

TOTAL EQUITY, PARTICIPANTS’ FUNDS AND LIABILITIES                       12,323,771            12,123,367

____________________________                                            ___________________________
Adel Abdulla Al-Mannai                                                  Hasan Ebrahim Kamal
Chairman                                                                Vice Chairman
The Board of Directors approved the condensed interim financial information consisting of pages 3 to 14 on
15 August 2006
                                                      3
Takaful International Company B.S.C.

STATEMENT OF PARTICIPANTS’ REVENUES AND EXPENSES – GENERAL TAKAFUL
for the six months ended 30 June 2006                                                               Bahraini dinars



                                                      3 months to 3 months to         6 months to  6 months to
                                                     30 June 2006 30 June 2005       30 June 2006 30 June 2005
                                                       (reviewed)  (reviewed)          (reviewed)  (reviewed)


Gross contributions                                      1,084,192         875,485      2,244,671       1,832,950
Retakaful share                                          (340,413)       (233,148)      (788,103)       (649,059)

Retained contributions                                     743,779        642,337       1,456,568       1,183,891
Movement in unearned contributions                         (40,320)       (39,146)      (109,258)         (34,170)



Net retained contributions                                 703,459        603,191       1,347,310       1,149,721
Retakaful commission and other takaful income              129,905         98,284         243,422         210,603

TOTAL TAKAFUL REVENUES                                     833,364        701,475       1,590,732       1,360,324

Claims settled                                             749,205         636,029      1,463,831       1,232,334
Recovered from retakaful and other parties               (366,791)       (289,323)      (757,456)       (547,722)

Net claims settled                                         382,414        346,706        706,375         684,612
Movement in outstanding claims                             (47,533)       (11,192)        (9,976)         16,856

Net claims incurred                                        334,881        335,514        696,399         701,468
Commission and other takaful expenses                       83,946         77,810        154,533         140,655
Wakala fee                                                 306,903        224,998        577,078         445,215

TOTAL TAKAFUL EXPENSES                                     725,730        638,322       1,428,010       1,287,338

SURPLUS FROM TAKAFUL OPERATIONS                            107,634         63,153        162,722          72,986
Investment income                                             7,188         2,759         15,702            7,303
Mudarib share                                               (1,798)         (689)         (3,926)         (1,825)

Net investment income                                        5,390          2,070         11,776            5,478
SURPLUS FOR THE PERIOD TRANSFERRED
TO PARTICIPANT’S FUNDS
                                                           113,024         65,223        174,498           78,464




The condensed interim financial information consists of pages 3 to 14.
                                                             4
Takaful International Company B.S.C.

STATEMENT OF PARTICIPANTS’ REVENUES AND EXPENSES – FAMILY TAKAFUL
for the six months ended 30 June 2006                                                                Bahraini dinars



                                                        3 months to 3 months to        6 months to  6 months to
                                                       30 June 2006 30 June 2005      30 June 2006 30 June 2005
                                                         (reviewed)  (reviewed)         (reviewed)  (reviewed)
                                                                      (restated)                     (restated)

Gross contributions                                             180,470     397,613        397,159         646,419
Retakaful share                                               (155,819)   (333,287)      (325,655)       (524,831)

Retained contributions                                          24,651      64,326         71,504         121,588
Movement in unearned contributions                               7,243      (7,074)         8,677          (7,686)
Prior period adjustment                                              -            -             -          27,036

Net retained contributions                                      31,894      57,252         80,181         140,938
Retakaful commission and other takaful income                   72,959     107,688        116,044         176,121

TOTAL TAKAFUL REVENUES                                         104,853     164,940        196,225         317,059

Claims settled                                                  255,497     367,864        671,028         655,065
Recovered from retakaful and other parties                    (207,817)   (327,353)      (569,884)       (584,662)

Net claims settled                                              47,680      40,511        101,144          70,403
Movement in outstanding claims                                     671         120          4,238           2,808

Net claims incurred                                             48,351      40,631        105,382          73,211
Commission and other takaful expenses                            9,547      57,250         25,461          94,247
Transfer to family takaful technical reserves                   10,000           -         25,000                -
Wakala fee                                                      28,210      73,303         59,574         129,284

TOTAL TAKAFUL EXPENSES                                          96,108     171,184        215,417         296,742

(DEFICIT) SURPLUS FROM TAKAFUL                                   8,745      (6,244)       (19,192)         20,317
OPERATIONS
Investment income                                               10,580        6,693        19,170          12,522
Mudarib share                                                    (899)      (1,674)        (1,211)         (3,131)

Net investment income                                            9,681       5,019         17,959            9,391
(DEFICIT) SURPLUS FOR THE PERIOD
TRANSFERRED TO PARTICIPANT’S FUNDS
                                                                18,426      (1,225)        (1,233)         29,708




The condensed interim financial information consists of pages 3 to 14.
                                                          5
Takaful International Company B.S.C.

STATEMENT OF INCOME
For the six months ended 30 June 2006                                                          Bahraini dinars




                                                3 months to  3 months to         6 months to       6 months to
                                               30 June 2006 30 June 2005        30 June 2006      30 June 2005
                                                 (reviewed)  (reviewed)           (reviewed)        (reviewed)


Investment income                                    39,144          24,781           69,958            75,416
Wakala fees                                         335,113         298,300          636,652           574,499
Mudarib share                                         2,695           2,363            5,136             4,956
Other income                                            583           7,271              895             9,490

                                                    377,535         332,715          712,641           664,361
OTHER EXPENSES
Staff costs                                       (207,677)        (186,711)       (396,089)          (380,428)
Depreciation                                       (19,476)          (8,373)        (39,113)           (16,645)
Other management expenses                         (135,039)        (118,749)       (258,023)          (205,818)

NET PROFIT FOR THE PERIOD                            15,343          18,882           19,416            61,470


EARNINGS PER SHARE (fils) (note 4)                      0.31             0.38           0.39               1.23




The condensed interim financial information consists of pages 3 to 14.

                                                        6
Takaful International Company B.S.C.

STATEMENT OF CHANGES IN PARTICIPANTS’ FUNDS
for the six months ended 30 June 2006                                                   Bahraini dinars

                                                            General       Family            Total
                                                            Takaful       Takaful

Balance at 31 December 2005                                   (440,333)      (23,301)        (463,634)
Prior period adjustment (note 5)                                      -        27,036           27,036
Balance as at 31 December 2005 (restated)                     (440,333)         3,735        (436,598)
Surplus for the period                                          174,498       (1,233)          173,265

Balance at 30 June 2006                                       (265,835)        2,502         (263,333)

Balance at 31 December 2004                                   (730,747)      (50,119)        (780,866)
Prior period adjustment (note 5)                                      -        27,036           27,036
Surplus for the period                                           78,464         2,672           81,136

Balance at 30 June 2005                                       (652,283)      (20411)         (672,694)




The condensed interim financial information consists of pages 3 to 14.

                                                        7
Takaful International Company B.S.C.



STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
for the six months ended 30 June 2006                                                                                                        Bahraini dinars

2006 Reviewed                                                            Share capital   Statutory   General     Retained      Investment         Total
                                                                                          reserve    reserve     earnings       fair value
                                                                                                                                 reserve

Balance at 31 December 2005                                                 5,000,000      368,781     130,000      969,349      (237,868)       6,230,262
Net profit for the period                                                           -            -           -       19,416              -           19,416
Dividends paid (2005)                                                               -            -           -    (500,000)              -       (500,000)
Directors‟ remuneration (2005)                                                      -            -           -     (32,000)              -         (32,000)
Charity (2005)                                                                      -            -           -       (7,000)             -          (7,000)
Transfer to general reserve                                                         -            -      70,000     (70,000)              -                -
Net movement in cumulative change in fair values                                    -            -           -             -       (8,502)          (8,502)

Balance at 30 June 2006                                                     5,000,000      368,781     200,000     379,765       (246,370)       5,702,176


2005 Reviewed                                                            Share capital   Statutory   General     Retained      Investment         Total
                                                                                          reserve    reserve     earnings       fair value
                                                                                                                                 reserve

Balance at 31 December 2004                                                 5,000,000      299,869     130,000     349,139         68,891        5,847,899
Net profit for the period                                                           -            -           -      61,470              -           61,470
Dividends paid                                                                      -            -           -           -              -                -
Directors‟ remuneration                                                             -            -           -           -              -                -
Net movement in cumulative change in fair values                                    -            -           -           -        224,215          224,215

Balance at 30 June 2005                                                     5,000,000      299,869     130,000     410,609        293,106        6,133,584




The condensed interim financial information consists of pages 3 to 14.



                                                                                 8
Takaful International Company B.S.C.

STATEMENT OF CASH FLOWS
for the six months ended 30 June 2006                                                     Bahraini dinars

                                                                           30 June 2006    30 June 2005
                                                                            (reviewed)      (reviewed)
                                                                                             (restated)
 OPERATING ACTIVITIES
 Net profit for the period                                                      19,416            61,470
 Surplus from participants‟ operations                                         155,128           108,172



                                                                               174,544           169,642
 Adjustments for:
 Movement in unearned contributions                                              99,733           14,821
 Investment income                                                             (69,958)         (95,242)
 Depreciation                                                                    39,113           16,645

 Operating profit before changes in operating assets and liabilities           243,432           105,866

 Retakaful and takaful balances receivable                                       21,628         (62,812)
 Due from retakaful companies in connection with outstanding claims           (323,965)         (48,378)
 Other receivables and prepayments                                             (22,888)        (141,473)
 Gross outstanding claims                                                       318,227           68,042
 Retakaful and takaful balances payable                                          17,403          200,483
 Transfer to family takaful technical reserve                                 (111,198)                -
 Other liabilities and provisions                                                54,556         (97,944)

 NET CASH FLOW FROM OPERATING ACTIVITIES                                       197,195            23,784

 INVESTING ACTIVITIES
 Investment income                                                               69,958           95,242
 Purchases of property and equipment                                          (138,809)         (14,749)
 Sale of investments                                                          1,010,547          521,700
 Purchase of investments                                                      (262,579)      (1,273,554)
 Net movement on demand deposits with maturity in excess of three months    (1,242,936)          362,163

 NET FLOW (CASH USED) IN INVESTING ACTIVITIES                                 (563,819)        (309,198)

 FINANCING ACTIVITIES
 Dividends paid                                                               (252,785)                 -
 Directors remuneration                                                        (32,000)                 -
 Ijara re-payment                                                              (78,560)                 -



 NET CASH FLOW (USED IN) FINANCING ACTIVITIES                                 (363,345)                 -

 (DECREASE) IN CASH AND CASH EQUIVALENTS                                      (729,969)        (285,414)
 Cash and cash equivalents at 1 January                                       2,661,393        1,775,785

 CASH AND CASH EQUIVALENTS AT 30 JUNE (Note 6)                                1,931,424        1,490,371



The condensed interim financial information consists of pages 3 to 14.
                                                         9
Takaful International Company B.S.C.

NOTES to the 2006 condensed interim financial information                                           Bahraini dinars

1   ACTIVITIES

Takaful International Company B.S.C. (“the Company”) is a Bahraini joint stock company incorporated in the
Kingdom of Bahrain in 1989 and registered with the Ministry of Industry and Commerce under commercial
registration (CR) number 21100.

The Company carries out takaful and retakaful activities in the Kingdom of Bahrain in accordance with the
teachings of Islamic Sharia‟a. The Company‟s registered office is at 6 Gudaibiya Road, Manama, Kingdom of
Bahrain.



2   ACCOUNTING POLICIES

The condensed interim financial information have been prepared in accordance with International Accounting
Standard 34 - Interim Financial Reporting which allows the condensed interim financial information to be in
summarised form.

These condensed interim financial information have been prepared using the same accounting policies and
computation methods adopted in the 2005 annual financial statements.

The interim results may not represent a proportionate share of the annual profits due to cyclical variability in
contributions and investment income and uncertainty of claims occurrences.

Actuarial estimation of Family Takaful, for future benefit obligations is conducted annually at the end of the year.



3   SURPLUS (DEFICIT) FROM GENERAL TAKAFUL OPERATIONS

For management purposes, the Company is organised into three business segments, motor and general
accident, fire and marine. These segments are the basis on which the Company reports its primary
segment information, Family takaful being disclosed separately. An analysis of the gross participants‟
contribution, net retained contributions and the net results for its main classes of general business is
disclosed on page 11:




                                                         10
Takaful International Company B.S.C.



NOTES to the 2006 condensed interim financial information                                                                                         Bahraini dinars

3          SURPLUS (DEFICIT) FROM GENERAL TAKAFUL OPERATIONS (CONTINUED)



    2006                                               Motor and general                   Fire                       Marine                      Total
                                                           accident
                                                     6 months     3 months     6 months           3 months     6 months     3 months      6 months    3 months

    Gross contributions                               1,761,975      866,528          396,174        170,560       86,522        47,104   2,244,671       1,084,192
    Retakaful share                                   (350,058)    (146,972)        (367,268)      (156,699)     (70,777)      (36,742)   (788,103)       (340,413)

    Retained contributions                            1,411,917     719,556           28,906         13,861       15,745        10,362    1,456,568        743,779
    Movement in unearned contributions                (107,475)     (39,154)          (1,285)            53        (498)        (1,219)   (109,258)        (40,320)

    Net retained contributions                        1,304,442      680,402          27,621         13,914       15,247         9,143    1,347,310        703,459
    Retakaful commissions and other takaful income      104,791       57,971         115,209         58,206       23,422        13,728      243,422         129,905
    Commissions and other takaful expenses            (135,664)     (73,056)         (15,437)        (8,326)      (3,432)       (2,564)   (154,533)        (83,946)
    Net claims incurred                               (682,957)    (325,613)          (4,349)        (2,691)      (9,093)       (6,577)   (696,399)       (334,881)
                                                        590,612      339,704         123,044         61,103       26,144        13,730      739,800         414,537

    Wakala fees                                       (466,923)    (257,971)         (91,120)       (39,003)     (19,035)       (9,929)   (577,078)       (306,903)

                                                       123,689       81,733           31,924         22,100        7,109         3,801     162,722         107,634




                                                                               11
Takaful International Company B.S.C.



NOTES to the 2006 condensed interim financial information                                                                                                   Bahraini dinars



3          SURPLUS (DEFICIT) FROM GENERAL TAKAFUL OPERATIONS (CONTINUED)

    2005                                               Motor and general                        Fire                       Marine                          Total
                                                            accident
                                                     6 months     3 months          6 months           3 months     6 months     3 months       6 months       3 months

    Gross Contributions                             1,416,296        704,747             317,349        130,181       99,305         40,557 1,832,950            875,485
    Retakaful share                                  (273,065)        (83,070)          (291,656)      (116,187)     (84,338)       (33,891) (649,059)          (233,148)

    Retained contributions                           1,143,231       621,677             25,693          13,994       14,967         6,666 1,183,891               642,337
    Movement in unearned contributions                 (34,607)       (40,894)            2,412           2,727        (1,975)        (979)  (34,170)              (39,146)

    Net retained contributions                      1,108,624        580,783             28,105          16,721       12,992         5,687     1,149,721           603,191
    Retakaful commissions and other takaful
    income                                               79,952         32,899          103,973          53,506       26,678        11,879       210,603          98,284
    Commissions and other takaful expenses              (97,809)       (56,609)          (37,590)       (17,676)       (5,256)       (3,525)    (140,655)        (77,810)
    Net claims incurred                               (691,005)      (328,783)             (5,678)        (2,748)      (4,785)       (3,983)    (701,468)       (335,514)
                                                       399,762        228,290             88,810         49,803       29,629        10,058       518,201         288,151

    Wakala fees                                       (348,551)      (184,895)           (73,625)       (30,576)     (23,039)        (9,527)    (445,215)       (224,998)

                                                        51,211        43,395             15,185          19,227        6,590           531       72,986             63,153


As the Company‟s activities are performed on an integrated basis, a segmental analysis of assets and liabilities between these segments would not be meaningful.




                                                                                   12
Takaful International Company B.S.C.


NOTES to the 2006 condensed interim financial information                                     Bahraini dinars

4     EARNINGS PER SHARE

Earnings per share are calculated by dividing the net profit for the period by the weighted average number of
shares outstanding during the period as follows:

                                                                               30 June 2006     30 June 2005
                                                                                (reviewed)       (reviewed)


    Net profit for the period (BD)                                                   19,416           61,472
    Weighted average number of shares outstanding during the period (in 000)         50,000           50,000
    Earnings per share attributable to shareholders – fils                             0.39             1.23

No figure for diluted earnings per share has been presented as the Company has issued no financial instruments
which may have a dilutive effect.

5     PRIOR PERIOD ADJUSTMENT

In 2005, the Company had not accounted for the reversal of unearned contribution – family takaful. The amount
of unearned contribution remaining to be reversed amounting to BD 27,036 has been rectified by reducing the
unearned contribution and increasing retained contribution of participants‟ revenue and expenses for the 6
months period ended 30 June 2005, being the earliest reported period and by restating the related balance sheet
items and equity in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.

6     CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash in hand and at bank and deposits that have an original maturity
of three months or less.

                                                                                  30 June      31 December
                                                                                   2006            2005
                                                                                (reviewed)       (audited)


Cash in hand and at bank                                                         1,126,812          417,827
Deposits with maturities of less than three months                                 804,612        2,243,566

Cash and cash equivalents                                                        1,931,424        2,661,393
Deposits with maturities in excess of three months                               1,898,586          655,649

                                                                                 3,830,010        3,317,042




                                                        13
Takaful International Company B.S.C.


NOTES to the 2006 condensed interim financial information                                     Bahraini dinars

7   RELATED PARTY TRANSACTIONS

Related party transactions represent transactions with shareholders, directors and senior management of
the Company and companies if which they are the principal owners. Pricing policies and terms of these
transactions are approved by the Company‟s management and the Executive Committee of the Company‟s
Board of Directors.

Transactions with related parties included in the balance sheet, statement of participants‟ revenues and
expenses and statement of income are as follows:

                                                                             30 June 2006       31 December
                                                                              (reviewed)            2005
                                                                                                  (audited)

Demand deposits                                                                 1,628,276          2,327,318
Available for sale investments                                                    373,388            451,500
Gross contributions                                                               187,704            246,737
Investment income                                                                  44,388            811,642
Other expenses of management                                                       56,083            110,548
Consultancy income from a shareholder                                             129,000            129,000
Sale of investment to a shareholder                                                48,538            772,309
Due from related party                                                            192,432            901,309
Ijara Muntahia bitamleek                                                          863,940            942,500

8   COMMITMENTS AND CONTINGENT LIABILITIES

Commitments comprise the following:

                                                                             30 June 2006      31 December
                                                                              (reviewed)           2005
                                                                                                 (audited)

Purchase of computers and software                                                84,955                    -
Capital commitments                                                               84,703                    -

                                                                                 169,658                    -

9   COMPARATIVE FIGURES

The comparative figures for the previous period have been reclassified, where necessary, in order to
conform to the current period‟s presentation. Such reclassifications do not affect the previously reported
net profit, net assets or equity. Certain figures have been restated as a result of the prior period adjustment
stated in note 5.




                                                      14

				
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