| |

Doha Insurance Company Q.S.C.

FINANCIAL STATEMENTS

31 December 2006

AUDITORS' REPORT TO THE SHAREHOLDERS OF

DOHA INSURANCE COMPANY Q.S.C.

We have audited the accompanying financial statements of Doha Insurance Company Q.S.C. (the “Company”) which comprise the balance sheet as at 31 December 2006 and the income statement, cash flow statement and statement of changes in equity for the year then ended, and a summary of significant accounting policies and other explanatory notes. The financial statements of the Company as at 31 December 2005 were audited by another auditor, whose report dated 6 February 2006, expressed an unqualified opinion.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate for the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of 31 December 2006 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Report on legal and other requirements

Furthermore, in our opinion proper financial records have been kept by the company and the contents of the directors’ report which relate to the financial statements are in agreement with the company’s financial records, and the financial statements comply with the Qatar Commercial Companies' Law No. 5 of 2002 and the company’s Articles of Association. We have obtained all the information and explanations we required for the purpose of our audit and are not aware of any violations of the above mentioned law or the Articles of Association having occurred during the year which might have had a material effect on the business of the company or on its financial position.

Firas Qoussous

Ernst & Young

Registration Auditor No. 236

Date : 31 January 2007

Doha

		2006		2005
	Notes	QR		QR
REVENUE
Net insurance revenue	4	26,571,589	18,001,336
Income from sale of investments		7,573,237	27,222,200
Interest income		3,666,396	3,353,675
Dividend income		5,265,164	3,849,645
Income from investment properties		3,268,800	3,268,800
Gain on disposal of properties		69,397	-
Other income		494,252	316,642
		46,908,835	56,012,298
EXPENSES
Salaries and other staff costs		8,869,002	7,240,510
General and administrative expenses	5	2,569,696	3,754,819
Impairment of investment		4,188,389	-
Maintenance of investment properties		120,794	138,346
Depreciation of investment properties		1,046,428	1,046,428
Depreciation of property and equipment		1,162,280	1,411,816
Finance cost		210,977	216,188
		18,167,566	13,808,107
PROFIT FOR THE YEAR BEFORE ALLOCATION TO TAKAFUL BRANCH POLICYHOLDERS		28,741,269	42,204,191
Net deficit attributable to Doha Solidarity policyholders		141,807	-
PROFIT ATTRIBUTABLE TO SHAREHOLDERS		28,883,076	42,204,191
Basic Earnings Per Share	19	2.27	3.32
Diluted Earnings Per Share	19	2.27	3.32

		2006	2005
	Notes	QR	QR
ASSETS
Cash and bank balances	6	61,082,091	34,913,011
Financial investments	7	207,711,349	250,702,208
Reinsurance contract assets	8	85,131,520	49,293,357
Insurance and other receivables	9	34,247,348	50,467,865
Investment properties	10	27,228,059	28,274,487
Property and equipment	11	16,593,640	7,088,840
TOTAL ASSETS		431,994,007	420,739,768
SHAREHOLDERS’ EQUITY AND LIABILITIES
SHAREHOLDERS’ EQUITY
Share capital	12	127,240,000	127,240,000
Legal reserve	13	13,024,369	10,136,061
Cumulative changes in fair value		70,697,796	116,763,283
Retained earnings		20,302,033	28,042,265
Proposed cash dividend	14	31,810,000	25,448,000
Total shareholders’ equity		263,074,198	307,629,609
LIABILITIES
Bank term loan	15	2,856,575	4,422,555
Insurance contract liabilities	8	128,530,997	77,233,047
Provisions, insurance and other payables	16	36,289,490	30,624,579
Employees’ end of service benefits	17	1,242,747	829,978
Total liabilities		168,919,809	113,110,159
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES		431,994,007	420,739,768

The financial statements were authorised for issue in accordance with a resolution of the directors on 31 January 2007.

…………………………………….……….……… ……………………………………

Sheikh Nawaf Bin Nasser Bin Khaled Al-Thani Bassam Hussein

Chairman General Manager

		2006	2005
	Notes	QR	QR
OPERATING ACTIVITIES
Profit attributable to shareholders		28,741,269	42,204,191
Adjustments for:
Depreciation of property and equipment	11	1,162,280	1,411,816
Depreciation of investment properties	10	1,046,428	1,046,428
Provision for employee’s terminal benefits	17	417,234	252,721
Interest expense		210,977	216,188
Operating profit before changes in operating assets and liabilities		31,578,188	45,131,344
Insurance and other receivables		16,437,698	(20,019,211)
Increase in insurance reserves - net		15,459,787	10,057,455
Increase in provisions, insurance and other payables	16	1,087,674	2,091,366
Margin against letters of guarantee		(120,825)	(75,375)
Cash generated from operations		64,442,522	37,185,579
Employee’s terminal benefits paid	17	(4,465)	(9,333)
Net cash from operating activities		64,438,057	37,176,246
INVESTING ACTIVITIES
Purchase of land under development		(9,821,185)	-
Net cash movement in investments		(3,074,628)	(39,131,529)
Purchase of property and equipment	11	(845,996)	(721,484)
Proceed from sale of property and equipment		101	-
Net cash used in investing activities		(13,741,708)	(39,853,013)
FINANCING ACTIVITIES
Repayments of bank term loan		(1,565,980)	(1,566,060)
Dividends paid		(22,795,763)	(15,268,800)
Interest paid		(210,977)	(216,188)
Net cash used in financing activities		(24,572,720)	(17,051,048)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		26,123,629	(19,727,815)
Cash and cash equivalents at 1 January		34,837,637	54,565,452
CASH AND CASH EQUIVALENTS AT 31 DECEMBER	6	60,961,266	34,837,637

STATEMENT OF CHANGES IN EQUITY

Year ended 31 December 2006

Share capital	Legal reserve	Cumulative changes in fair values	Cash dividends	Retained earnings	Total
QR	QR	QR	QR	QR	QR

Balance at 1 January 2006	127,240,000	10,136,061		116,763,283	25,448,000	28,042,265	307,629,609
Recognised gains and losses on available-for- sale investments during the year	-	-		(11,913,200)	-	-	(11,913,200)
Transfer to income statement on impairment of available-for-sale investments during the year	-	-		4,188,389	-	-	4,188,389
Net movement in fair value of available-for- sale investments during the year	-	-	(38,340,676)	(38,340,676)	-	-	(38,340,676)
Director’s remuneration (Note 18)	-	-		-	-	(1,925,000)	(1,925,000)
Total income and expense for the year recognised directly in equity	-	-	(38,340,676)	(46,065,487)	-	(1,925,000)	(47,990,487)
Profit for the year	-	-		-	-	28,883,076	28,883,076
Total income and expense for the year	-	-		(46,065,487)	-	26,958,076	(19,107,411)
Cash dividends declared	-	-		-	(25,448,000)	-	(25,448,000)
Transfer to legal reserve (Note 13)	-	2,888,308		-	-	(2,888,308)	-
Proposed cash dividends (Note 14)	-	-		-	31,810,000	(31,810,000)	-
Balance at 31 December 2006	127,240,000	13,024,369		70,697,796	31,810,000	20,302,033	263,074,198

STATEMENT OF CHANGES IN EQUITY (continued)

Year ended 31 December 2006

Share Capital	Legal reserve	Cumulative changes in fair values	Cash dividends	Retained earnings	Total
QR	QR	QR	QR	QR	QR

Balance at 1 January 2005	127,240,000	5,915,642	29,867,806	15,268,800	17,706,493	195,998,741
Net movement in fair value of available-for- sale investments during the year *	-	-	86,895,477	-	-	86,895,477
Director’s remuneration (Note 18)	-	-	-	-	(2,200,000)	(2,200,000)
Total income and expense for the year recognised directly in equity	-	-	86,895,477	-	(2,200,000)	84,695,477
Profit for the year as restated	-	-	-	-	42,204,191	42,204,191
Total income and expense for the year	-	-	86,895,477	-	40,004,191	126,899,668
Cash dividends declared				(15,268,800)		(15,268,800)
Transfer to legal reserve (Note 13)	-	4,220,419	-	-	(4,220,419)	-
Proposed cash dividends (Note 14)		-	-	25,448,000	(25,448,000)	-
Balance at 31 December 2005	127,240,000	10,136,061	116,763,283	25,448,000	28,042,265	307,629,609

* This item is net of reserve released on disposal of investments, which is included under income from sale of investments.

1 ACTIVITIES

Doha Insurance Company Q.S.C. (the “Company”) is a Qatari shareholding company registered and incorporated in the State of Qatar under Emiri Decree No. 30 issued on 2 October 1999 and is engaged in the business of insurance and reinsurance.

During the year, the Company established an Islamic Takaful branch under the brand name Doha Solidarity (the “Branch”) to carry out insurance and reinsurance activities in accordance with Islamic Sharia principles on a non-usury basis in all areas of insurance.

The financial statements for the year ended 31 December 2006 include the results of the Branch.

The financial statements of Doha Insurance Company Q.S.C. for the year ended 31 December 2006 were authorised for issue in accordance with a resolution of the directors on 31 January 2007.

2 SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS).

The financial statements have been presented in Qatar Riyals which is functional currency of the Company.

The financial statements are prepared under the historical cost convention modified to include the measurement at fair value of available-for-sale investments.

The accounting policies adopted are consistent with those of the previous financial year.

IASB Standards and Interpretations issued but not adopted

Amendments to IAS 1 – Capital Disclosures

Amendments to IAS 1 Presentation of Financial Statements were issued by the IASB as Capital Disclosures in August 2005. They are required to be applied for periods beginning on or after 1 January 2007. When effective, these amendments will require disclosure of information enabling evaluation of the Company’s objectives, policies and processes for managing capital.

IFRS 7 Financial Instruments: Disclosures

IFRS 7 Financial Instruments: Disclosures was issued by the IASB in August 2005, becoming effective for periods beginning on or after 1 January 2007. The new standard will require additional disclosure of the significance of financial instruments for the Company’s financial position and performance and information about exposure to risks arising from financial instruments.

IFRS 8 Operating Segments

IFRS 8 Operating Segments was issued by the IASB in November 2006, becoming effective for periods commencing on or after 1 January 2009. The new standard may require changes in the way the Company discloses information about its operating segments.

IFRIC Interpretations

During 2006 IFRIC issued the following interpretations:

• IFRIC Interpretation 8 Scope of IFRS 2
• IFRIC Interpretation 9 Reassessment of Embedded Derivatives
• IFRIC Interpretation 11 IFRS 2 – Group and Treasury Share Transactions

Management do not expect these interpretations to have a significant impact on the Company’s financial statements when implemented in 2007.

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

Premiums earned

Premiums are taken into income over the terms of the polices to which they relate. Unearned premiums represent the portion of net premiums written relating to the unexpired period of coverage calculated at 40% of the net premium for all insurance classes except for marine cargo insurance which is calculated at 25%.

Commissions earned and paid

Commissions received and paid are taken into income over the terms of the policies to which they relate similar to premiums.

Claims

Claims consist of amounts payable to contract holders and third parties and related loss adjustment expenses, net of salvage and other recoveries and are charged to income as incurred.

Gross outstanding claims comprise the gross estimated cost of claims incurred but not settled at the balance sheet 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 the Company’s prior experience is maintained for the cost of settling claims incurred but not reported at the balance sheet date.

Any difference between the provisions at the balance sheet date and settlements and provisions in the following year is included in the underwriting account for that year.

The company does not discount its liability for unpaid claims as substantially all claims are expected to be paid within 12 months of the balance sheet date.

Liabilities adequacy test

At each balance sheet date the Company assesses whether its recognized insurance liabilities are adequate using current estimates of future cash flows under its insurance contracts. If that assessment shows that the carrying amount of its insurance liabilities is inadequate in the light of estimated future claims flows, the entire deficiency is immediately recognized in income statement There is no deficiency charged to the current year.

Reinsurance contracts held

In order to minimize financial exposure from large claims the Company enters into agreements with other parties for reinsurance purposes. Claims receivable from reinsurers are estimated in a manner consistent with claim liability and in accordance with the reinsurance contract. These amounts are shown as “reinsurance contract asset” in the balance sheet until the claim is paid by the Company. Once the claim is paid the amount due from reinsurer under “reinsurance contract asset” in connection with the paid claim is transferred to “insurance and other receivables”.

Premiums on reinsurance assumed are recognized as revenue in the same manner as they would be if the reinsurance were considered direct business.

At each reporting date, the company assesses whether there is any indication that a reinsurance asset may be impaired. Where an indicator of impairment exists, the Company makes a formal estimate of recoverable amount. Where the carrying amount of a reinsurance asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount.

Interest revenue

Interest revenue is recognised as the interest accrues using the effective interest method, under which the rate used exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

Rental revenue

Rental income is recognised on a straight line basis based on the term of the contract.

Dividend revenue

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

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

Cash and cash equivalents

For the purpose of the Statement of Cash Flows, cash and cash equivalents consists of cash on hand, bank balances and short-term deposits with an original maturity of three months or less, net of margins.

Financial investments

All investments are initially recognised at cost, being the fair value of the consideration given and including incremental acquisition charges. Premiums and discounts are amortised using the effective interest rate method and taken to interest income.

Available-for-sale investments are recognised and derecognised, on a trade date basis, when the company becomes, or ceases to be, a party to the contractual provisions of the instrument.

After initial recognition, investments which are classified as “available for sale” and are measured at fair value unless fair value cannot be reliably measured, with unrealised gains or losses reported as a separate component of equity until the investment is derecognised or the investment is determined to be impaired. On derecognition or impairment the cumulative gain or loss previously reported in equity is included in the income statement for the period.

Held to maturity investments are measured at amortised cost, less provision for impairment. In cases where objective evidence exists that a specific investment is impaired, the recoverable amount of that investment is determined and any impairment loss is recognized in the statement of income as a provision for impairment of investments.

Investment properties

Land and building are considered as investment properties only when they are being held to earn rentals or capital appreciation or both.

Investment properties are carried at cost less accumulated depreciation calculated on a straight line basis over a period of 20 years. Land held under investment properties is not depreciated.

Property and equipment

Property and equipment is initially recorded at cost less accumulated depreciation and any impairment in value. Freehold land is not depreciated.

Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows:

Building - 10 years

Furniture and fixtures - 5 years

Computers - 5 years

Vehicles - 5 years

Other assets - 5 years

Building owned and used by the Company is depreciated over a period of 10 years as it was acquired with around 10 years of actual usage.

The carrying amounts are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount, being the higher of their fair value less costs to sell and their value in use.

Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately is capitalised and the carrying amount of the component that is replaced is written off. Other subsequent expenditure is capitalised only when it increases future economic benefits of the related item of property, plant and equipment. All other expenditure is recognised in the income statement as the expense is incurred.

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

Impairment and uncollectibility of financial assets

An assessment is made at each balance sheet date to determine whether there is objective evidence that a specific financial asset may be impaired. If such evidence exists, any impairment loss is recognised in the income statement. Impairment is determined as follows:

(a) For assets carried at fair value, impairment is the difference between cost and fair value, less any impairment loss previously recognised in the income statement;

(b) For assets carried at cost, impairment is the difference between carrying value and the present value of future cash flows discounted at the current market rate of return for a similar financial asset;

(c) For assets carried at amortised cost, impairment is the difference between carrying amount and the present value of future cash flows discounted at the original effective interest rate.

Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) arising from a past event and the costs to settle the obligation are both probable and able to be reliably measured.

Employees’ end of service benefits

End of service gratuity plans

Under the Law No. 14 of 2004, the Company provides end of service benefits to its employees. The entitlement to these benefits is based upon the employees’ final salary and length of service, subject to the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment.

Pension plan

Under Law No. 24 of 2002 on Retirement and Pension, the Company is required to make contributions to a Government fund scheme for Qatari employees calculated as a percentage of the Qatari