VISION

“WE WILL LEAD THE WAY THROUGH QUALITY OF SERVICE AND DEDICATION

OF OUR STAFF. WE WILL SERVE ALL OUR COMMUNITIES TO THE BEST OF OUR

ABILITY, STRIVE ALWAYS TO LISTEN TO YOUR NEEDS AND SO BUILD TOTAL

CUSTOMER CONFIDENCE AND SATISFACTION”

BaNk Of MaldIVeS – NatION’S BaNk

MISSION

TO BE THE LEADER IN THE FINANCIAL INDUSTRY IN MALDIVES, SPREADING ITS

PRESENCE IN ALL KEY ECONOMIC GEOGRAPHIES IN MALDIVES.

TO BE THE LEADER IN THE FINANCIAL INDUSTRY IN MALDIVES, INCULCATING

A LONG TERM SAVING CULTURE IN THE NATION AND PROMOTING A CASHLESS

SOCIETY.

TO BE ONE OF THE MOST EFFICIENT, PROFITABLE AND RESPECTED FINANCIAL

INSTITUTION IN MALDIVES.

•

•

•

UNItY IN dIVeRSItY

SeRVING tHe NatION

REPUBLIC OF MALDIVES

INDIA

SRI LANKA

NDHIDHOO BRANCH(Haa Alifu Atoll)

FUNADHOO BRANCH(Shaviyani Atoll)

MANADHOO BRANCH(Noonu Atoll)

NAIFARU BRANCH(Lhaviyani Atoll)

MALE' ATOLL(Kaafu Atoll)

MULI BRANCH(Meemu Atoll)

FONADHOO BRANCH(Laamu Atoll)

VILINGILI BRANCH(Gaafu Alifu Atoll)

FUVAHMULAKU BRANCH(Gnaviyani Atoll)

THINADHOO BRANCH(Gaafu Dhaalu Atoll)

HITHADHOO BRANCH(Seenu Atoll)

KULHUDHUFFUSHI BRANCH(Haa Dhaalu Atoll)

UNGOOFAARU BRANCH(Raa Atoll)

EYDHAFUSHI BRANCH(Baa Atoll)

MAHIBADHOO BRANCH( Alifu Dhaalu Atoll)

KUDAHUVADHOO BRANCH(Dhaalu Atoll)

HEAD OFFICEMAJEEDHEEMAGU BRANCHBAAZAR BRANCHMAIN BRANCHAIRPORT BRANCHVILIMALE’ BRANCHHULHUMALE’ BRANCH

RASDHOO BRANCH(Alif Alifu Atoll)

HULHUMEEDHOO BRANCH(Seenu Atoll)

GAN BRANCH(Seenu Atoll)

SHaPING tHe fUtURe

MaIN StReNGtHS

• 25 years of pioneering banking services in Maldives

• Over 170,000 loyal deposit account holders

• Over 50,000 lending relationships

• Over 500 dedicated employees

• Largestfinancialnetworkof24Branchesand11ATMsinMaldives

• LeaderinElectronicBankingincardissuancewithawidenetworkofPOSterminals

• Interbranchfundstransferfacilitybetween24branchesinkeycitiesandtownsacrossMaldives

• Appropriateliquidityprofile

• Strong customer relationships

• Government stake and support

• Long term funding lines from International funding agencies

• GrowingCorrespondentBankingrelationships

• Only public listed bank in Maldives

• The commitment to create lasting value for the people of Maldives

• Availability of infrastructure to enhance the life standard of local community.

• SOARING PROFITABILITY

• HIGHROAOf4.8%

• STROnGCAPITALRATIOOvER15%

• LOwESTnPAOf2.6%

• HIGHESTPROvISIOnCOvEROf115%

CONteNtS

1. Financial Highlights 9

2. Chairman’sReview 11

3. BoardofDirectors 14

4. Director’sReviewandCorporateGovernance 16

5. Operating highlights 20

6. CEO’sReview 21

7. SeniorManagement 24

8. HeadsofDepartment 26

9. Branch & Department Managers 27

10. Management Discussion & Analysis 29

11. Human Resources 36

12. RiskManagement 38

13. CorporateSocialResponsibility 41

financial Reports

14. Directors’Report 43

15. Auditors’Report 45

16. IncomeStatement 46

17. BalanceSheet 47

18. StatementofChangesinEquity 48

19. CashflowStatement 49

20. SummaryofSignificantAccountingPolicies 49

21. notestothefinancialStatements 49

Supplementary information

22. SharePerformance 74

23. Profile 75

24. Branchnetwork&Contacts 77

�

2006

Rf. 000’s

2005

Rf. 000’s % change

Results for the year

Gross Income 600,683 359,024 67%

ProfitbeforeTaxation 314,302 125,920 150%

ProvisionforTaxation 78,576 31,480 150%

Gross Dividend 18,258 12,172 50%

at the year end

Shareholders Funds 644,759 421,204 53%

Deposits from Customers 4,393,901 3,539,668 24%

Loans & Advances to Customers 4,150,360 2,827,517 47%

Total Assets 5,765,841 4,122,085 40%

Information per Ordinary Share

Earnings (Basic) (Rf.) 1,937 776 150%

Net Assets Value per Ordinary Share (Rf.) 5,297 3,460 53%

Market Value at the year end (Rf.) 1,600 1,550 3%

Ratio

ReturnonAverageShareholder’sfunds(%) 44.2% 24.9% 78%

ReturnonAverageAssets(%) 4.8% 2.6% 87%

YearonYearGrowthinEarnings(%) 70.0% 18.8% 272%

YearonYearGrowthinDividendsonOrdinaryShares(%) 50.0% 5.3% 850%

Dividend Cover on Ordinary Shares (Times) 12.9 7.8 66%

CapitalAdequacy-TierI(%)-MinimumRequired4% 9.1 9.9 -8%

CapitalAdequacy-TierI&II(%)-MinimumRequired8% 15.1 12.4 22.4%

non-PerformingAssets(%) 2.6% 6.1% -58%

Provision Cover (Times) 1.15 0.7 55%

FINANCIAL HIGHLIGHTS

10

2002 2003 2004 2005 2006

500

1,000

1,500

2,000

2,500

2002 2003 2004 2005 2006

Economic Value Added

YearlyCumulative

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

190 207

630

776

1937

2002 2003 2004 2005 2006

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Profit Before & After Taxation

BeforeAfter

Rf(

00

0’s

)

Years

Rf

Years

Rf(

00

0’s

)

Years

2002 2003 2004 2005 2006

Shareholder’s Equity Growth

MRF (000’s)Value per Share

100,000

200,000

300,000

400,000

500,000

600,000

700,000

1,000

2,000

3,000

4,000

5,000

6,000

2,0322,240

2,780

3,460

5,297

Rf(

00

0’s

)

Years

Va

lue

pe

rS

ha

re

2002 2003 2004 2005 2006

Return on Average Equity

5%

10%

15%

20%

25%

30%

35%

40%

15%

50%

0%

10% 10%

25% 25%

44%

Years

Pe

rce

nta

ge

Earnings per Share

11CHAIRMAN’S REVIEW

With the blessing of Almighty Allah and on behalf of the

Board of Directors, it gives me a great pleasure once again

to present you the Annual Report of our Bank for the year

ended 31 December 2006. The Bank strives to ensure a

sustainablegrowthbyprovidinghighqualityandinnovative

financialservicesandmaintainingitspositionasastrong

Bank in Maldives. By achieving these goals, the Bank aims

to retain the trust of its customers, and thereby achieve

itsmissionofbeingamajorinfluenceindevelopingthe

economyofthecountry.ItistheviewoftheBoardand

the Management that the Bank should capitalize the

emergingopportunitiesoutoftheGovernment’sfirm

commitment to the economic development activities in the

country.

Global economy

Theworldeconomicgrowthratefor2006wasestimated

at5.1%.Thenegativeeffectstothisforecastwould

arise from risks in high dependence on US consumption,

withadverseconsequencestotheglobaleconomy.The

unexpectedhikeinoilpricescausedmoreproblemsto

developingeconomieswithadverseeffectsonbalance

ofpayments,inflationandexchangerates.However,the

oilproducingcountrieswiththeirincreasedwealthare

extensivelyinvestingtogiveaboosttotheworldeconomy

in 2007.

a Sustainable Growth in Maldives’ economy

The GDP is estimated to have recorded an impressive

growthof18.2%inrealtermsandthebudgetdeficitwas

containedat7.3%ofGDPin2006.

Thetourismsector,whichsufferedacripplingblowafter

theDecember2004tsunami,isseentobebouncingback

withstronggrowthinbothtouristarrivalsandbednights

due to vigorous marketing and promotional campaigns

organized by the industry stakeholders to boost arrivals

from key source markets.

The Government’s emphasis on infrastructure

development,includingairports,harbours,powerand

regionaleconomichubs,augurswell.Accordingto

the budget for 2007, the proposed increase in public

investments from Rf 1.9 billion in 2006 to Rf 5.5 billion in

2007willboostlong-termgrowthpotential.

Meanwhile,theconstructionsectoractivitieswerevery

buoyant during the year due to reconstruction activities

bothininhabitedislandsandintouristresortswhichwere

damagedbythetsunami.Robustgrowthinthetourism,

fisheriesandconstructionsectorsduringthesecondhalf

of the year has driven distributional activities in the coun--

try tremendously.

Post tsunami reconstruction and rehabilitation activities

continuedthroughouttheyear2006benefitingfromfinan--

cialaidflowstotheGovernment,debtreliefandhealthy

internationaleconomicdevelopments.Theimprovedfish--

eries sector has satisfactorily contributed to the economy.

Arising from recent economic developments, the overall

balanceofpaymentshasturnedtoUSD45.1million.

Mr. Abdul Hameed MohamedChairman &

Managing Director

12

Prospectsfor2007arepromising,witheconomicgrowth

estimatedtoreach7percentinthemediumterm,inflation

keptatthepresentmoderatelevelswiththeimplementa--

tionoftherequiredmonetaryandfiscalpolicymeasures

and the balance of payments continuing to improve. The

financialsystemwillstrengthenfurther,whileproviding

the necessary services for the development of real sectors

oftheeconomy,suchasfisheries,agriculture,industry

and services.

Major innovation of the telecommunication industry

reached our shore during the later part of 2006. Both

telecommunicationserviceproviderslinkedMaldiveswith

therestoftheworldwiththeirownsubmarinecables.The

customershavealreadyfeltthebenefitsofthis,bothin

terms of competitive prices and better quality services.

excellent Performance

TheBankofMaldivesPlc(BML)recordedapre-taxprofit

ofRf314millionfor2006comparedtoRf126millionin

2005,whichreflectsagrowthofRf188millionor150per--

cent despite severe competition in the Banking industry.

fortheyear2006,BankproposetopayasumofRf18.3

millionasdividendtotheshareholdersandRf77.8million

astaxtotheGovernmentofRepublicofMaldives.

The bank plans to carry out a bonus issue and a capital

infusion in 2007 in order to strengthen the bank’s capital

base. A dividend of Rf 150 per share in respect of 2006

has been recommended by the Directors for your ap--

proval, as against a dividend of Rf 100 declared in respect

of 2005.

Branch expansion

Thebranchnetworkincreasedbyanother5duringthe

yearbringingthetotalto23branches.The5newatoll

branches opened during 2006 are in Eydhafushi, Manad--

hoo, Rasdhoo, Mahibadhoo and Kudahuvadhoo. The Bank

willfocusonmakingitselfmoreaccessibletoitscustomers

in terms of delivery channels, products, technology and

overall convenience. Delivery channels include 10 ATMs,

1,200POSterminals,66,664CreditandCashCardsissued

andthelaunchofinternetbankingisexpectedinJuly

2007. Our goal is to provide a broad array of options

andmakebankingandfinancialservicestrulycustomer

friendly.

Human Resource development

BMLhastakensignificantstridestoimprovehuman

resourcemanagementbyrevampingthewholeHR

structure. With the focus on establishing a stable HR

framework,anexternalHRconsultantwasselected.

Primarilytheconsultancywillreview,revise,anddesign

HR policies & procedures, develop effective perform--

ance measurement and career path for graduates and

managers.

Threeexpatriates;ChiefCreditOfficer,Chieffinancial

OfficerandChiefInternalAuditor/ChiefComplianceOf--

ficerwererecruitedduring2006whoplayavitalrolein

riskmanagement,MIS,financialcontrolsandinternal

auditandcompliance.Totalof6graduateswerealso

recruitedtocreditandtreasuryareaswhoaregaining

exposureincreditanalysis,financialcontrolsandrisk

managementtechniquesundertheexpatriates.During

theyearstaffstrengthhasreachedfrom418in2005

to504bytheendof2006.Inaddition,toretainand

attract the most suitable candidates to the bank, staff

compensationwasrevisedin2006inlinewiththemar--

ket and based on the recommendation of the consultant

engaged to carryout this assignment.

Toenhancetherequiredknowledgeandskills,several

in-houseandinternationaltrainingprogramswerepro--

vided. Staffs from various departments have attended

severalshort-terminternationaltraining,workshop/

conferences.Year2007continuedwith7morefully

sponsored scholarships for staff, adding to the 1 scholar--

shipawardedin2004/2005.

developments in Corporate Governance

Thebankisendeavouredtoputinplaceitsowncodeof

corporate governance as a part of the bank’s commit--

menttowardsthebestpracticesincorporategovern--

anceinlinewiththeCodepublishedbytheCapital

Market Development Authority of Maldives, the regulator

13

of Maldives Stock Market.

To this end, the board of directors has engaged Rajah &

Tanwithinternationalexpertiseincorporategovernance

aspects.Theassignmentwillincludeanassessmentof

thegapsinthecurrentpracticeswithbestinternational

practices, developing a suitable code for best governance

practice, recommendations for implementation.

TheMemorandumandArticlesofAssociationwasreviewed

bythebankinconsultationwithalegalcounselfor

amendmentsandupdatesinlinewithmarketdevelop--

ments, corporate governance practices and in concurrent

withnewlegislativeenvironment.Majorpolicyframeworks

wereformulatedduring2006,includesintheareasof

Credit Risk Management, Treasury Risk Management,

Capital Maintenance and Internal Controls. Further a com--

prehensivemediumtermBusinessPlanwasformulated

during the year after analyzing the economic environment

and the competitor environment.

looking ahead

withnewopportunities,agriculture&fisheries,smalland

mediumenterprises,emergingwiththeimplementation

oftheneweconomicpolicyoftheGovernment,theBank

ispoisedtotakeoffwithoptimismandwouldstrivehard

forasignificantgrowthintermsofprofitabilityandmarket

share.Therewillbegreaterfocusonpromptattentionto

customersatisfactionandweaimtoattractmoredeposi--

tors in various sectors via special programs.

Althoughweexpectthebusinessenvironmenttoremain

challenging,wedoexpecttohaveasuccessfulyearwith

substantial accomplishments in developing risk manage--

ment,compliance,andhumanresourceframeworkof

thebank.finally,wearecommittedtoleadershipand

teamworkwithinourorganizationthatwilldriveimproved

performanceintermsofbothprofitabilityandmarket

share thereby enhancing shareholder value.

appreciation

Our staff, under the guidance of the CEO and the Man--

agementteam,playedapivotalroleinthismagnificent

performance.Iwouldliketoacknowledgetheirroleand

appraise their efforts.

I also thank the customers and other stakeholders for

their dedication, loyalty, and support in making the year a

recordbreakingoneinprofits,marketshareandorgani--

zationalframeworkdevelopment.Mythanksalsogotomy

colleagues on the Board for the inspiration and the guid--

ance they have provided to the Bank.

I do appreciate the guidance and cooperation given by the

Hon. Minister of Finance and Treasury, Mr. Qasim Ibrahim

andhisofficials.

OnbehalfoftheBoardofDirectors,Iwishtoextendour

sinceregratitudetoHisExcellencyPresidentMaumoonAb--

dulGayoomforhisnewvisioninnationbuildingespecially

infinancialsectorreformandalsofortheencouragement

toextendbanksservicestoalltheatollsinMaldives.

May Almighty Allah bless our Bank and guide the Bank in

its future endeavours.

Abdul Hameed Mohamed

Chairman

Board of Directors

10th May 2007

14 BOARD OF DIRECTORS

MR. ABDUL HAMEED MOHAMED

Chairman

MS. SERENE HO OI KHUEN

ChiefExecutiveOfficer(CEO)

MR. IMAD SALIH

MR. MOHAMED HUSSAIN MANIKU

MS. FATHIMATH NUZUHAMR. MOHAMED ABDUL SATTAR

MR. MOHAMED AHMED DIDI

MRS. FATHIMATH SHEEREEN

UZ. AHMED HAMZA

MR. AZAM FARISH MR. AHMED IMAD MOHAMED

15

Mr. abdul Hameed Mohamed – Chairman

Mr.AbdulHameedMohamedisanExecutiveDirectorofMinistryofHome

Affairs,andwasappointedastheChairmanoftheBankofMaldivesPlcby

the Government on 11thSeptember2005andreappointedon24thJune

2006. Mr Hameed holds a Master of Science in Economics from Kiev Institute

of National Economy, a Master of Arts in Development Studies degree from

University of Leeds, United Kingdom. Mr Hameed holds 50 shares in BML.

Ms. Serene Ho Oi Khuen – Chief Executive Officer (CEO) and Ex-Of--

ficio Director

Ms. Serene Ho Oi Khuen, a senior international banker, is a Singaporean,

joinedthebankinJanuary2004.SheisafellowoftheInstituteofCertified

Public Accountants of Singapore (FCPA), holder of Masters in Applied Finance

from the Macquarie University, Australia, Bachelor of Accountancy from

National University of Singapore and a Associate member of the Chartered

Institute of Bankers, UK.

Shestartedherbankingcareerin1977withtheUOBgroup.Shewasan

investmentofficerwithaninternationalinvestmentandMerchantBank,the

EldersPICAgroupfor5yearsfrom1980withpostingsinTokyo,Seoul,Kuala

LumpurandTaipei.Overa15yearcareerwithArabBankingCorporation,

B.S.CSingaporeregionalofficeshebecametheGeneralManagercovering

theAsiaPacificRegion.ShewasalsothevicePresident,Structuredfinance

Group of Enron Corporation from 2000 to 2001.

Mr. Mohamed Hussain Maniku – director

Mr Mohamed Hussain Maniku is the Managing Director (CEO) of State Trad--

ingOrganizationPlc,wasappointedasDirectoroftheBanksBoardbythe

Government in October 1993 and subsequently reappointed annually, the last

reappointmentbeingon24thJune2006.MrManikuholdsaBachelorofBusi--

ness Administration degree from American University of Beirut Lebanon. Mr

Maniku holds 50 shares in BML.

Mr. Mohamed ahmed didi – director

Mr. Mohamed Ahmed Didi is the General Manager (CEO) of Male’ Water and

SewerageCompanyPvtLtd,wasappointedasDirectorofBanksBoardby

theGovernmenttotheBank’sBoardon18thOctober2001andreappointed

annually,thelastofwhichwason24thJune2006.MrDidiholdsaBachelorof

Business Administration from American University in Cairo, Egypt. Mr Didi has

no shares in BML.

Uz. ahmed Hamza– director

Uz.AhmedHamzaisaDirectorinthevAgroup,waselectedtotheBoard

of Directors on 29thJune2005andwasre-electedon24thJune2006bythe

general shareholders. Uz. Hamza graduated from the International Islamic

University of Malaysia obtaining his LLB in 1995 and completed Masters at

theInternationalMaritimeLawInstitute,Maltain1997.Uz.Hamzaisan

HonorableMemberofParliamentelectedforfaafuAtoll.Uz.Hamzaowns2

shares in BML.

Mr. Mohamed abdul Sattar– director

Mr.MohamedAbdulSattaristheGeneralManager,Male’OfficeofMeeru

IslandResortandvakarufalhiIslandResort,wasappointedbytheGovern--

ment to the Bank’s Board on 30thOctober2005andreappointedon24th

June2006.MrSattarholdsaMasterofBusinessAdministrationdegreefrom

Universityofwales,UK.MrSattaristheproprietorofHoba(wholesalerof

food)andKillaa,(retaileroffood).MrSattarowns50sharesinBML.

Ms. fathimath Nuzuha– director

Ms. Fathimath Nuzuha is an Assistant Director, Economic Affairs & Policy Plan--

ningSectionofMinistryoffinanceandTreasury,wasappointedtotheBank’s

Board by the Government on 29thJune2005andreappointedon24thJune

2006. Ms Nuzuha holds a Bachelor of Business (Banking and Finance) degree

from Monash University, Australia and a Master of Business Administration

degree from Queensland University of Technology, Australia. Ms Nuzuha has

no shares in BML.

Mr. Imad Salih– director

Mr.ImadSalihistheDirector-HRD,MinistryofEducationwasappointedto

the Bank’s Board by the Government on 30th October 2005 and reappointed

on24thJune2006.MrSalihholdsaBachelorofScience(Chemistry,Physics,

Mathematics) from Christ College, Bangalore University, India. Mr Salih has

no shares in BML.

Ms. fathimath Sheereen abdulla– director

Ms. Fathimath Sheereen Abdulla is the Deputy Minister of Atolls Development

waselectedtotheBoardon29thJune2005andwasre-electedon24thJune

2006bythegeneralshareholders.MsSheereenowns50sharesinBML.

Mr. azam farish– director

Mr.AzamfarishwaselectedtotheBoardofDirectorson29thJune2005and

re-electedon24thJune2006.MrfarishcompletedhisA’Levelsin2005.Mr

farishowns4sharesinBML.

Mr. Ahmed Imad Mohamed- Director

Mr.AhmedImadMohamedistheDeputyCommissionerofElection,was

appointed to the Bank’s Board by the Government on 30th October 2005 and

reappointedon24thJune2006.MrImadcompletedO’levelinBritishCouncil,

Cairo. Mr Imad has no shares in BML. Mr. Imad Mohamed resigned from the

Banks Board in February 2007.

16

Remarkable Performance

The Bank concluded yet another remarkable year in 2006.

Our performance is even more creditable given the tough

externalenvironmentinthefinancialsector.Profitbefore

taxamountedtoRf314millionagrowthofRf188million

or150%.

Shareholders’fundshaveincreasedtoRf645million

reflectinganimpressivegrowthof53%comparedto

financialyear2005.Thereturnonaverageshareholders’

fundsboostedto44%from25%forthelasttwoyears.By

theendofthefinancialyear2006,thenetbookvalueor

the net asset value of each of the 121,720 ordinary shares

of face value Rf 300 issued by the Bank rose to Rf 5,297

fromRf3,460previousyear.Earningspershareincreased

to Rf 1,937 from Rf 776 last year.

The bank plans to carry out a bonus issue and a capital

infusion in 2007 in order to strengthen the bank’s capital

base. A dividend of Rf 150 for 2006 has been recom--

mended by the Directors for your approval, as against a

dividend of Rf 100 paid for 2005.

CORPORate GOVeRNaNCe

Giving the due emphasis to the importance of corporate

governancepracticesworldwideandintandemwiththe

Code on Corporate Governance issued by the Capital

Market Development Authority of Maldives, the Bank has

taken initiatives to adopt a corporate governance frame--

workaspartoftheBank’scommitmenttogoodcorporate

governancepracticeswiththefundamentalpremiseofin--

creasing transparency and soundness of its management.

The Board of Directors sets the strategic direction and

guides the corporate values based on inputs and recom--

mendationbytheCEOandEx-OfficioDirector.TheBoard

of Directors deliberates on the Business Plan and the

Annual Budget at special Board Meetings. On a quar--

terlybasis,theBoardofDirectorsreviewthebusiness

andfinancialperformanceofthebankmeasuredagainst

the Business Plan and the Annual Budget. The Board of

Directorsmeetsregularlytoreviewandapprovemajor

DIRECTORS’ REVIEW

corporateloanexposureandconductsportfolioreviewof

the retail banking portfolio. This process helps the Board

to focus on strategic direction on all areas of the bank cov--

ering products, risk management, compliance and human

resource development.

Creating value for shareholders in the day to day man--

agement is the responsibility of the CEO and the Senior

ManagementTeam.Eachfunction/profitcentreisheaded

by a member of the Senior Management. Performance of

each division and branch as per the business plan and the

annualbudgetarereviewedmonthly.

In addition the Bank has cross functional management

committees as detailed in the Risk Management section.

Thesecommitteesmeetweeklyormonthlytoreviewthe

performance.

following information highlights the manner and the

extent to which the Bank adheres to good corporate

governance practices;

Composition

Boardcomprisesof11Directorsofwhom,7arenomi--

nated by the Government, 3 are elected by the general

publicandtheEx-OfficioDirector,whoistheChiefExecu--

tiveOfficer.Theyencompassarangeoftalents,skillsand

expertiserequiredtoprovidesoundandprudentguidance

withrespecttotheoperationsandinterestsofthebank.

Board Balance

Outoftheelevendirectors,tenarenon-executivedirec--

tors.Thenon-executivedirectorsincludingtheChairman,

is elected or selected from a cross section of civil service,

state-ownedenterprisesandprivatesectorbusinessman

in Tourism and Trading sector. The Board believes that the

combinedknowledgeandexperienceoftheBoardmatches

the strategic demands of the Bank.

financial acumen

Thedirectorscarryvariousqualificationandexperience

indifferentfieldswhichincludesMastersinScience,

Masters in Business Administration and Masters in Applied

Finances.

17

frequency of Meetings

Regular Board meetings are held at least once a month,

whilespecialBoardmeetingsareconvenedwhenever

necessary.

The directors’ attendance for board meetings in year 2006

isasfollows;

directors No. of Meetings held Meetings attended

Mr.AbdulHameedMohamed(Chairman) 37 34

Mr.MohamedHussainManiku 37 28

Mr. Mohamed Ahmed Didi 37 27

Mr. Mohamed Abdul Sattar 37 31

Ms. Fathimath Nuzuha 37 20

Mr. Ahmed Imad Mohamed 37 15

Mr. Imad Salih 37 21

Ms.Fathimath Sheereen Abdulla 37 23

Uz. Ahmed Hamza 37 25

Mr. Azam Farish 37 20

Ms.SereneHoOiKhuen(CEO,Ex-OfficioDirector) 37 37

Main Responsibilities

TheBoard’smainresponsibilitiesinclude;

• Ensuring satisfactory performance and increase

in shareholder value as representatives of the

shareholders

• Formulation of policies and strategies and monitoring

successful implementation thereof

• Approval of the budget and the business plan

• Ensuring that a proper risk management systems are

in place

• Ensuring the implementation of an effective

internal control system

• Ensuringcompliancewithhighestethicaland

legal standards

• Approval of credit facilities and capital and operating

expenditurebeyondthedelegatedauthoritylevelof

the Management

• Decidingonmajorcapitalinvestmentsandexpansions

• Adoption of Audited Annual Accounts

Independent advice

The Board obtains independent professional advice from

externalconsultants,lawyersandaccountantswhenever

the Board deems it necessary.

Independent Judgment

Directors are committed to add value and bring indepen--

dent judgments to bear on the decision making process

of the Bank, and to carry out their duties free from any

undueinfluenceorcontrolofotherparties.

Separation of Chairman and CeO

Positions of the Chairman and the CEO are separated to

ensureanappropriatebalanceofpowerandincreased

accountability. Chairmanisanon-ExecutiveDirectorwhile

theCEOistheexecutivemanagingdirectorresponsiblefor

the day to day management of the bank.

Chairman conducts Board meetings ensuring effective par--

ticipation of all the Directors, observing their concerns and

18

maintainingthebalanceofpower.TheBoardisaccount--

able to all shareholders for all affairs of the bank. The CEO

isentrustedwithexecutiveresponsibilitiesofleadingthe

senior management team in

• Institutionalisation of management and process,

• Setting organizational vision and mission statement,

• Developing of human resources and training plan,

• Establishingriskmanagementframeworkincredit,

liquidity and fund management, capital policies, inter-

nal controls and compliance,

• Development and implementation of business plan and

annual budget.

Company Secretary

SecretarytotheBoardisaCertifiedPublicAccountant.

SheensuresthatproperBoardproceduresarefollowed

and that applicable rules and regulations are adhered to.

She minutes all the proceedings at the Board meetings un--

derthesupervisionoftheChairmanwhosignstheminutes

at the subsequent meeting.

Information

Accurate and relevant information relating to matters

referredtotheBoardaremadeavailabletothemwellin

advance. whenever,theBoardfindsthattheinformation

madeavailabletothemforadecisionisinsufficient,they

call for additional information and the Chairman ensures

that all Directors are properly briefed on the matters delib--

erated at the meetings.

Managementreportsfinancialandoperationalreviewona

quarterly basis to the Board.

appointments

The Bank currently does not have a separate Nomination

Committee for making recommendations on appointments

to the Board. The Chairman, CEO and 6 other directors are

nominated by the Government of Republic of Maldives in

terms of the Articles of Association. Other 3 Directors are

elected at the AGM and such Directors retire by rotation

atthefirstopportunityafterhisappointmentandoffer

himself for re-election.

directors’ Remuneration

The directors’ remuneration is set by the board of directors

inlinewithothergovernmentbodiesandisnotbench--

marked to performance.

aCCOUNtaBIlItY aNd CONtROlS

financial Reporting

Bankpublishestheannualresultswithcomprehensivede--

tailsfarinexcessofthestatutoryrequirements,enabling

bothexisting and prospective shareholders to make a

timely and fair assessment of the Bank’s performance and

prospects. Mediums of publication include printed materi--

als,newspapersandthewebsiteoftheBank.Thefinancial

statementsarepreparedinaccordancewiththeInterna--

tional Financial Reporting Standards.

Internal Controls and Risk Management

The Directors and Management have put in place effec--

tive internal controls, risk management and compliance

systems to ensure that no legal, banking, company, listing

rules and other regulations are violated, even though the

bank does not have a separate Audit Committee at pres--

ent.

As a part of bank’s sound commitment to risk manage--

ment,thedirectorshaveengagedanexpatriateCEOwith

expertiseininternationalbankingsinceJanuary2004.In

order to further strengthen the risk management in the

areasofcredit,finance,treasuryandcapitalmanagement

andininternalauditandcompliance,threeexpatriaterisk

officerswithinternationalbankingexperiencewererecruit--

edasChiefCreditOfficer,ChieffinancialOfficerandChief

InternalAuditor&ChiefComplianceOfficerduring2006.

The effectiveness of the internal control systems is

periodicallyreviewedbytheInternalAuditDepartment

and major observations are reported to the Board on a

quarterlybasis.TheBoardreviewsthereportsarisingfrom

theinternalandexternalauditsandmonitorstheprogress

of the Bank by evaluating the actual results against the

budget and the industry performance.

DIRECTORS’ REVIEW

1�

BankmaintainsappropriaterelationshipswiththeExternal

Auditors,M/sPricewaterhouseCoopers.

Theboardwillendeavourtosetupanindependentaudit

committee at board level during this year to look into

above areas and update the board.

Relationships with Shareholders

A summary of the procedures governing voting at the

generalmeetingsisgivenintheProxyform,14daysin

advance to the shareholders.TheBankalwayswelcomes

active participation of the shareholders at the General

Meetingsandsolicitstheirviewsatalltimes.

employee

Employees are given unrestricted access to the Manage--

mentaswellastotheBoardtovoicetheirconcernsabout

any illegal orunethicalpracticeswithoutcompromising

theirrightsinanyway.

Employee performance-enhancing mechanisms currently

in place, such as performance appraisal and training staff

locallyaswellasoverseas,aredisclosedintheHuman

Resource Management section of this annual report.

Corporate Social Responsibility

As `Nation’s Bank’ and responsible corporate citizens in

thecommunitiesweliveandworkin,BMLwiththesup--

port of the majority government shareholder as the devel--

opment partner of multi-lateral agencies like ADB, IFAD,

IDB,OPEC,AfDandothernGO’sworkonimprovingthe

livelihoodoffishermen,fishprocessors,agricultureand

horticulture small holders, small traders and craftsman

throughanefficientdevelopmentbankingdivisionreach--

ingoutthroughitsnetworkof24branches.

BMLalsoengagesinmicrofinancingofRf15,000luiloans

to meet medical and other livelihood needs of the salaried

workers.BMLisalsoworkingwithIfADandMinistryof

Fisheries, Agriculture and Marine Resources in developing

the supply chain, branding, franchising and technology of

fisheriesandagricultureindustryasagrowthcatalyst.

DiningreceptionheldforthelaunchingoftheAmericanExpressSelectsSM in the Maldives.

20 DIRECTORS’ REVIEW

Operational Highlights

2002 2003 2004 2005 2006

Return on Average Assets

Years

Pe

rce

nta

ge

2.0%

3.0%

4.0%

5.0%

6.0%

1.0%

0.0%

1.2% 1.1%

2.7% 2.6%

4.8%

2002 2003 2004 2005 2006

Customer Deposits

Years

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

500

5,000

Customer Advances

2002 2003 2004 2005 2006

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

500

Years

2002 2003 2004 2005 2006

Total Assets

2,000

3,000

4,000

5,000

6,000

7,000

1,000

Years

Rf.

(Mill

ion

s)

2002 2003 2004 2005 2006

Shareholder Funds

200

300

400

500

600

700

100

Years

Rf.

(Mill

ion

s)

Rf.

(Mill

ion

s)

Rf

(00

0’s

)

21CEO’S REVIEW

an excellent Performance

Year2006provedtobearemarkableyearforBMLwith

strongperformanceingrowthandprofits.Solidper--

formance in most areas of business helped the Bank

report a record level of earnings in 2006. Strong organic

growthwasseeninalmostallmajoractivities.Despite

the customer base and the volumes of business recording

substantial increases, the Bank managed to maintain a

consistentriskprofileandinfactreportedimprovements

in credit quality in terms of non-performing assets ratio

and level of provisioning for possible loan losses.

TheBankmadeapre-taxprofitofRf314millionforthe

year ended 31st December 2006 against Rf 126 million for

2005.Returnonaverageassetsincreasedto4.8%asat

31stDecember2006from2.6%asat31st December 2005

mainly as a result of increase in net interest margins and

increased fee based activities.

Maincontributiontoprofitscamefromnetinterestmar--

ginsonfacilitiesextendedtocorporatecustomerseven

under severe competition from international banks based

locallyaswellasfromoffshoreinternationalbanksthat

extendedcreditaggressivelytoMaldiveseconomyin2006.

Major contributor to fee income is from retail banking

activities mainly from electronic banking and card opera--

tions.Anothersignificantfeeincomecontributionisfrom

LC commission and remittance income.

Costsremainedfirmlyundercontrolandgrowthinearn--

ingswellexceededgrowthincostsinspiteofsubstantial

increase of staff salaries to be market competitive in order

toretaintalentandrewardperformance.Duringtheyear,

theBankwasabletoreducetheprovisionforloanlosses

toRf37million,adecreaseof33%comparedtoRf55

million made in 2005.

asset Growth

TheexpansionineconomicactivitiesinMaldivescontinued

andisexpectedtostrengthenfurtherin2007;building

on tourism sectorrecoveryreflectingbetterperformance

acrossallsub-sectorsincludingabuoyantfishingand

trade sector.

Thebank’sloanbookincreasedinlinewiththecredit

expansionintheMaldives’economymainlyinthearea

ofprojectfinanceofnewresortsintandemwithGovern--

ment’sawardofnewopenandrentcontrolledislandsfor

resort development.

LoansandadvancesrosefromRf2.8billionasat31st

December2005toRf4.2billionasat31stDecember2006,

agrowthofRf1.3billionor47%.Bank’stotalassets

grewfromRf4.1billiontoRf5.8billionasatendof2006

representingagrowthof40%.

funding

The deposits rose from Rf 3.5 billion as at 31st December

2005toRf4.4billionasat31stDecember2006,which

represented agrowthof24%.Inordertosupplementthe

depositsmobilizationefforts,BankwasabletoraiseUSD

60 million term loans from EIB for tsunami affected resorts

Ms. Serene Ho Oi KhuenChiefExecutiveOfficer(CEO)

22

throughonlendingagreementwithGovernmentofMal--

divesandUSD23millionthroughmediumtermfinancing

from the international markets in 2006.

furthermoreweweresuccessfulinestablishingnumber

ofnewtradelinesandmoneymarketlineswhilebuilding

morerelationshipswithexistingandnewcorrespondent

banks.

Major Recoveries

BankwasabletorecoveroverRf81millionoutofma--

jor long outstanding non performing accounts through

expediting realization of the underlying securities under

mortgage during 2006. These recovery efforts together

withstringentpostsanctionmonitoringeffortscrystallized

inbringingdownthenetnon-performingassetsratioto

2.6%asatendof2006from6.1%asatendof2005.

The total provision cover on non-performing assets stood

at115%asat31stDecember2006against74%asat31st

December 2005 highlighting the prudence and strengths

onourprovisioningpolicies.wecontinueda1%general

provision on total standard general loan portfolio.

Capital adequacy

Capital Adequacy Ratios remained robust but continues

tobeunderpressurewiththegrowthinloanassets.The

capital adequacyratioisatahealthy15.1%.Thisismore

thantheminimumrequirementof8%oftotalrisk-weight--

ed capital ratio as per the Maldives Monetary Authority.

TheBank’scorecapitalratiostandsatover9.1%whichis

more than double the Maldives Monetary Authority’s mini--

mumrequirementof4%ofcorecapitalratio.

Growing Retail Presence

Thelocalbranchnetworkstrategicallylocatedacross

far-flungatollcapitalsofthe1,200islandnation,in--

creased by an additional 5 during the year, bringing total

branchesofferingefficientbankingservicesto23.The5

newatollbranchesopenedduring2006areinEydhafushi,

Manadhoo, Rasdhoo, Mahibadhoo and Kudahuvadhoo. The

Bankwillfocusonmakingitselfmoreaccessibletoitscus--

tomers in terms of delivery channels, products, technol--

ogy and overall convenience. Delivery channels include 11

ATMs,1,200POSterminals,66,664CreditandCashCards

issuedandthelaunchofinternetbankinginJuly2007.

Our goal is to provide a broad array of options and make

bankingandfinancialservicestrulycustomerfriendly.

Risk Management

TheBankremainsfirmlycommittedtoensuringsound

risk control and reporting systems. The Bank recognizes

that different types of risks are interlinked and uses an

integrated approach in overall risk management through

specificrisktypesthatarestudiedseparately.

PolicieswereformulatedandadoptedonCreditRiskMan--

agement, Treasury Risk Management, Internal Controls

and Maintenance of Capital during the year and the imple--

mentationsarewellinprogress.

The Assets and Liabilities Committee and the Credit Com--

mitteemeetregularlytoreviewthemarketandcredit

related factors and recommend and implement suitable

measures to counter associated risks.

Bankisintheprocessofreviewingitsmanagement

information system for an upgrade in a risk management

perspective.RiskBasedInternalAuditingwasintroduced

asopposedtothecyclicmodeofauditing,wherehighrisk

weightedprocessesaregivenpriorityinschedulingassign--

ments. Appropriate internal control measures and contin--

gency plans are in place to address operational risks.

CreditstaffinHeadOfficeandbranchesareacquiring

practicalknowledgeincreditanalysisandcreditduedili--

gence through centralization of credit function under the

CCO.Acentralizedcashmanagementunitwassetupto

coordinate inter branch cash requirement and to minimize

excesscashholdings.

AntiMoneyLaunderingpolicywasreviewedforupdatesin

linewithnewinternationalregulationsandcomprehensive

awarenesstrainingforthestaffwasconducted.System

UserProfileswerereviewedforanoverhaulrevampingto

23

assignspecificfunctionalparametersforusers,inorder

to minimize the unauthorised access to the system and

information.

towards Best Practices in Governance

TheMemorandumandArticlesofAssociationwasreviewed

bythebankinconsultationwithalegalcounselfor

amendments andupdatesinlinewithmarketdevelop--

ments, corporate governance practices and in concurrent

withnewlegislativeenvironment.

AsstatedintheDirector’sreview,thebankhastaken

initiativestoputinplaceitsowncodeofcorporate

governanceasapartofthebank’scommitmenttowards

thebestpracticesincorporategovernanceinlinewith

the Code published by the Capital Market Development

Authority of Maldives, the regulator of Maldives Stock

Market.

To this end, the board of directors has engaged Ms. Kala

Anandarajah,partnerfromRajah&Tanwithinternational

expertiseincorporategovernanceaspects.Theassign--

mentwillincludeanassessmentofthegapsinthecurrent

practiceswithbestinternationalpracticesanddeveloping

a suitable code for best governance practice, recommen--

dations for implementation.

Nurturing Human Capital

The bank’s goal is to align human resource manage--

mentwithbank’sbusinessplan.Tostrengthenthehuman

resource policyframework,aHRconsultant,X-Pertise,

afullyownedsubsidiaryofCommercialBankofCeylon,

headedbyitsDGM,HumanResources,wasengagedto

review,reviseanddesignHRpoliciesandprocedures,

design a performance management system, and to ana--

lyze training needs and career paths for managers and

graduates.Theconsultanthasdonetheinitialreviewsand

gap analysis and is currently in the process of drafting the

appropriateframeworkforBML.

To achieve an updated MIS on human resource manage--

ment,aconsultantwasengagedtoinstallHRsoftwareand

to develop a comprehensive HR database.

Asapartofbank’scommitmentinrewardingtalentedand

committed staff, the bank engaged Ernst & Young to carry

out a market survey on Maldives bank employee remu--

neration and make appropriate recommendations. Based

ontheserecommendations,newstaffcadreswerecreated

withappropriatesalaryscalesandallstaffswereplaced

onthosenewsalarystructures.Startingfrom2004,the

bankstartedsponsoringScholarshipsandStudyawards

for diplomas, degrees.

Additionally,toaddressthequalifiedprofessionaland

graduateempowermentneededfortheBusinessPlan,

the bank sponsored 7 graduate scholarships in 2006. This

bringsatotalof8Scholarshipsand2studyawardsgiven

tostafffrom2004to2006.

In2006,Bankstartedthefirsttrainingcourse,AntiMoney

Laundering conducted by the Head of Training and Head

of International Banking of Hatton National Bank (HNB)

where40selectedstaffwastrainedinMale’.Oursincere

appreciationtoCEOofHnB,whorespondedtoourcallfor

assistance in tapping their School of Banking and Train--

ingandtheirlearningcourses.wewouldbesendingBML

TrainingManagertoHnBtofamiliarisewiththeire-learn--

ing course and to organise future training.

Ilookforwardtoanotherrewardingandremarkableyear.

Serene Ho Oi khuen

ChiefExecutiveOfficer(CEO)

24 SENIOR MANAGEMENT

Ms. Serene Ho Oi khuen–Ex-OfficioDirector/Chief

ExecutiveOfficer/CompanySecretary

Mrs. fathimath Manike - Assistant General Manager

Ms. Fathimath Manike is in charge of Development Bank--

ing, Operations & Human Resource Management. She

joinedthebankin1982.

In1978,shestartedhercareerattheStateBankofIndia,

Male’branch&joinedtheBankofMaldivesPlcin1982.

She has undergone training in banking & management in

Malaysia & India.

Ms. Fathimath Manike is one of the pioneers of develop--

ment banking in the country since its inception in 1990 &

has been in charge of all development banking activities

ofthebanksince1992.Shehasgainedvastexperience

inattendingtraining&workshopsrelatedtodevelopment

banking & poverty alleviation in Sri Lanka, India, Pakistan,

Indonesia, Thailand, Malaysia, Tonga & Vietnam.

Ms. aishath Noordeen – Assistant General Manager

Ms. Aishath Noordeen is in charge of the International

Banking and Correspondent Banking Division, Electronic

Banking and Card Operations and Information Technology.

ShejoinedtheBankin1982.

Starting her career at State Bank of India, Male’ Branch in

1979,shejoinedtheBankofMaldivesPlc,in1982.She

countsalotofexposureinTradefinanceandInternational

Banking Operations and has been involved in establishing

and maintaining several corresponding banking relation--

shipsandinter-banklines.Shewasalsoinvolvedinsetting

up the Card Centre. She participated in many trade con--

ferences,trainingandworkshopsrelatedtotradefinance

and credit card seminars conducted by Visa, Master Card

andAmericanExpress.

From left: Mr. AjithAkmeemana,Mrs.fathimathManike,Ms.Aishathnoordeen,Ms.SereneHoOiKhuen,Mr.LucianJayakody,Mr.LuaTooSwee,Ms.nadiyaHassan

25

Ms. Nadiya Hassan – Assistant General Manager

Ms. Nadiya Hassan is in charge of Corporate Banking and

LoanSyndications.ShejoinedtheBankin1985.

BeforejoiningBMLin1985,sheservedattheMaldives

MonitoryAuthorityfor4years.Shehasextensiveexperi--

enceinrelationshipmanagementwithwideexposureto

tourism and related industries in Maldives. She has partici--

patedinmanytrainingandworkshopsrelatedtolending

activities.

Mr. lua too Swee-ChiefCreditOfficer

Mr.LuaTooSweewhoisaSingaporean,joinedthebankin

February 2006.

He brings to the Bank more than 20 years of international

bankingexperience,primarilyintheareasofcreditrisk

evaluationandcreditriskmanagement.MrLua’sextensive

creditexperienceincludes10yearsasHeadofCreditin

Singapore for Germany’s WestLB Ag, covering the Asia-

Pacificcountries.HismostrecentpositionwastheHeadof

Credit and Risk Management for RZB-Austria, Singapore

Branch. Mr Lua holds a BA (major Economics) from the

University of Singapore and a Master of Accountancy from

Charles Sturt University, Australia.

Mr. ajith akmeemana-ChieffinancialOfficer

Mr.AkmeemanaisaSriLankan,joinedtheBankinJanu--

ary 2006. He is a Member of the Institute of Chartered

Accountants of Sri Lanka and a Member of the Institute of

Bankers of Sri Lanka.

Starting his career at Standard Chartered Bank, his 17

yearexposuretofinanceandTreasuryriskmanagement

includes, 3 years as the Head of Finance for Public Bank

Berhad in Sri Lanka and involvement in setting up of the

Finance and Treasury operations of the ICICI Bank in Co--

lombo.AtErnst&Young,hewasmainlyinvolvedinLoan

andInvestmentportfolioreviewsofcommercial,devel--

opment and investment banks, venture capital and fund

managers. Also, he engaged in Due Diligence Investiga--

tions on mergers, acquisitions and valuation of shares in

respect of banks.

Mr. lucian Jayakody - Chief Internal Auditor and Chief

ComplianceOfficer

MrLucianJayakodyisaSriLankan,joinedthebankin

October 2006.

He holds a Master of Business Administration (MBA), As--

sociate of Charted Institute of Bankers London (ACIB),

Member of The Institute of Internal Auditors USA (IIA) and

a Member of Information Systems Audit and Control Asso--

ciation USA (ISACA). He also holds diplomas in Computer

Systems Design and Business Administration from NIBM.

Hisexperienceinseniormanagementpositionsinthe

financialSectorextendsformorethantwentyyears.He

wastheHeadofInternalAuditinMERCbankSriLanka,

AGM Operations, Administrations and Information Re--

source Management in Pan Asia Banking Corporation Sri

Lanka, Senior Manager in Operations and Systems Audit in

Hatton National Bank Sri Lanka. He is a specialist in pro--

ductivityandsystemre-engineeringandhashadexten--

sivetraininginthisfieldinAsianProductivityOrganisation

(APO)Japan.

26 HEADS OF DEPARTMENT

ADLY AHMED DIDI

Head of Information Technology

HASSAN RASHEED

Head of Corporate Affairs

AHMED RASHEED

Head of Human Resources

HASSAN SHAAM

Head of Public Relations &

Administration

MOHAMED AHMED

Head of Internal Audit

MOHAMED HALEEM

Head of Development Banking

MOHAMED SHAREEF

Head of Card Centre

NASRULLAH ABDULWAHID

Head of Finance

YAMIN ADAM

Head of International Banking

27BRANCH & DEPARTMENT MANAGERS

ABDUL AZEEZ RIFAU

Thinadhoo Branch

ABDULLA SHAMEEM

Male’ International Airport Branch

ABDULLA SOBAH

Dhidhoo Branch

ABDULLASUJAU

Ungoofaaru Branch

AHMED FIKURY

Manadhoo Branch

AHMED NIYAZ

Bazaar Branch

ALI ADAM

Enterprise Banking Department

ALI RASHEED

Muli Branch

FATHMATH RASHEEDHA

Majeedhee Magu Branch

FATHMATH NIHAN

Gan Branch

AMINATH RASHEEDA

Hithadhoo Branch

AMINATH AZEEMA

Hulhumale’ Branch

28

SHARMEELA MOHAMED

Vilimale’ Branch

FIRAQ AHMED

Naifaru Branch

HASSAN ABDULLA

Fuvahmulaku Branch

HIDHAYA AHMED

Main Branch

IBRAHIM ALI

Fund Development

MOHAMED NIYAZ

Kudahuvadhoo Branch

MOHAMED MUEEN

Fonadhoo Branch

MOHAMED IBRAHIM

Eydhafushi Branch

MARIYAM SHAZLEEN

Hulhumeedhoo Branch

MOHAMED SHAREEF

Vilingili Branch

MOHAMED USHAM

Mahibadhoo Branch

MUNEERA ALI

Kulhudhuffushi Branch

SHAHEEM MOHAMED

Rasdhoo Branch

2�

financial Review

BankofMaldivescontinuedtobethemostprofitableand

financiallystrongbankinMaldives,asevidentfromthe

level of profit,financialratiosandthelocalandinterna--

tional recognition it has received.

The business volumes of the Bank recorded an impressive

growthduringtheyear.Depositsgrewby24%whilead--

vancesgrewby47%.Inordertosupplementthedeposits

mobilizationefforts,BankwasabletoraiseUSD60million

through EIB long-term on-lending lines and USD 23 million

throughmediumtermfinancingfromtheinternational

marketsin2006.TotalassetsoftheBankgrewby40%

andstoodatRf5.8billionasat31st December 2006.

Thepre-taxprofitoftheBankreachedRf314millionfor

the year ended December 31, 2006 as against Rf 126

millionin2005,agrowthof150%.Theincreasewasfacili--

tatedbya70%growthinnetinterestincome.netcom--

missionandotherincomerecordedagrowthofRf81mil--

liontoreachRf183million,upby80%comparedtothe

previousyear.BankwasabletoreverseRf81millionto

profitsascapitalandinterestrecoveryagainstrecoveryof

several long outstanding bad debts during the year. Total

operatingexpensesincreasedby11%forwhichthemain

contributoryfactorwastheincreaseinstaffexpensesin

linewithincreaseinbranchnetworkandoperationalac--

tivitiestogetherwithincrementsgiveninlinewithmarket

survey.Post-taxprofitofRf236millionin2006reflecteda

growthof150%comparedtoRf94millionin2005.

In2006,theBankwasabletoreducethenonperforming

assetsinabsolutetermstherebybringingdowntheGross

non-PerformingAssetsratioto4.8%from9.2%in2005

and net non performing assets ratio after deducting the

interestinsuspenseto2.6%from6.1%.Thissignifiesa

remarkable improvement in post sanction monitoring and

recoveryefforts.Over95%ofthetotalnumberofloans

isinthestandardcategorywhiletheremaining5%are

categorised under the various stages of non-performing

assets as per Maldives Monetary Authority regulations.

Thespecificprovisionforpossibleloanlossesamountedto

Rf85millionasatend2006,comparedtoRf106million

asatend2005.TheSpecificProvisionCoverimprovedto

77%asat31stDecember2006against57%asatprevious

yearend.Totalprovisioncover,aftertakingthe1%gen--

eralprovisionintoaccount,increasedto115%from74%

lastyear.Thiscoverisevenwithoutdeductingtherealiz--

ablevalueofthesecuritiespledgedfromtotalexposureof

thecustomerwhenmakingtheprovisions.

Tourism remained the major sector during the year ended

31stDecember2006representingapproximately45%of

thetotalloanandadvancescomparedto48%attheyear

ended 31st December 2005.

Fisheries sector increased in absolute amounts by about Rf

148millioncomparedtotheendoflastyear.Howeverthe

amountasapercentageoftotalloansandadvanceswas

11%forbothyears.

MANAGEMENT DISCUSSION & ANALYSIS

BML Finances- Fish Processing Factory

17.2%

44.9%

14.6%

9.2%

2.5%

11.2%

0.4%

Tourism

Agriculture

Commerce

Fisheries

Construction

Other Activities

Manufacturing

SECTORIAL POSITIONS OF ADVANCES AS AT 31.12.2006

30

deposits

85%ofthetotalnumberofaccountsisinsavingsdepositswhilstcontributing42%tothetotaldepositfunds.Male’based

branchesaccountfor65%ofthetotaldepositbaseasatyearend.

Mix Number % amount %

Current 26,579 15% 1,742,482,433 40%

Savings 149,140 85% 1,850,244,087 42%

fixed 111 0% 801,174,208 18%

175,830 100% 4,393,900,728 100%

Geographical distribution

Number % amount %

Male’Based 122,172 69% 2,877,850,014 65%

SADBP 22,175 13% 244,265,997 6%

ACDBP 31,483 18% 1,271,784,717 29%

175,830 100% 4,393,900,728 100%

Capital Maintenance

CapitalAdequacysymbolisesthefinancialstrengthand

stabilityofabank.Itlimitstheextentuptowhichbanks

canexpandtheirbusinessintermsofriskweightedas--

sets.

TheTierICapitalRatiostoodat9.1%andTotalCapital

Ratiostoodat15.1%againsttheregulatoryratioof4%

and8%respectively.TheBankkeepsacarefulcheckon

its Capital Adequacy Ratios.

whiletheBankisfullycompliedwithBaselIrequirement,

theobjectiveofwhichismainlydirectedtowardsassessing

capital in relation to credit risk (the risk of counterparty

failure). Other risks, notably operational and market risks

asguidedbytheBaselIICapitalframeworkwillbetaken

into consideration by the Management gradually in assess--

ingoverallcapitaladequacyinparallelwithanyparticular

regulations introduced by Maldives Monetary Authority

(MMA) from time to time.

Thebankisconfidentthatithasadequateadditionalcapi--

tal buffer to absorb any increase in capital requirements

based on Basel II taking into consideration the current

capitalratiowhichiswellabovetheregulatoryratioof

8%,theplannedcapitalinfusionin2007,increasedprofit

growthandasaresultofprudentdividenddistributions.

Source and distribution of Income Percentage %

Source 2006 2005

Interest Income 64% 66%

foreignexchangeIncome 3% 4%

Commission Income 24% 27%

Other Income 10% 3%

100% 100%

distribution

ToDepositors/LendersasInterest 14% 18%

To Employees as Emoluments 10% 11%

To Providers of Supplies & Services 14% 17%

ToGovernmentsasTaxation 13% 9%

To Shareholders as Dividends 3% 3%

Provision set a side for Depreciation 3% 4%

Provision set a side for Loan Losses 6% 15%

Reserved for future Investments 37% 23%

100% 100%

31

economic Value added

EconomicvalueAdded(EvA)isameasureofprofitabilitywhichtakesintoconsiderationthecostoftotalinvestedequity.

economic Value added

2002 2003 2004 2005 2006

Rf 000’s Rf 000’s Rf 000’s Rf 000’s Rf 000’s

Invested equity

Shareholders’ Funds 247,385 272,599 338,327 421,204 644,759

Add: Cumulative Loan Loss Provision 40,127 56,403 87,704 137,011 127,075

287,512 329,002 426,031 558,215 771,834

earnings

Profitaftertaxation 23,183 25,214 76,683 94,440 235,727

Add: Loan Losses and Provision 16,276 32,881 31,301 49,307 (9,936)

Less: Loan Losses Written Off - - - (86) -

39,459 58,095 107,984 143,661 225,791

Cost of equity based on the 12 month

Average28daysTreasuryBillsrateplus2%forRiskPremium 9.833% 9.167% 6.333% 6.000% 7.000%

Cost of Average Equity 27,428 28,257 23,909 29,527 46,552

economic Value added 12,031 29,838 84,074 114,134 179,239

Bank of Maldives is conscious of delivering value to all our

stakeholders consistently. In EVA terms, bank has created

Rf179millionduringtheyear2006andoverRf419mil--

lion over the past 5 years.

dividend payments

ThedividendpolicyoftheBankhasalwaysbeentopaya

decentdividendtoitsshareholderswhileploughingback

sufficientprofitstofundgrowthandcapitaladequacyre--

quirements. As a result of this prudent dividend policy, the

Bank has been able to build up its shareholder fund base

to satisfactory levels.

Considering the performance of the Bank over the past

year,theBoardhasrecommendedadividendofRf150/-

perfullypaidupshareofRf300/-fortheyear2006,

whichisanincreaseofRf50/-fromRf100/-pershare

paidfor2005.ThiswouldamounttoRf18,258,000/-for

the proposed dividend, and the remaining

Rf217,468,544/-istobetransferredtoGeneralReserves

oftheBank.Thisisinlinewiththepolicytopreserveand

build the equity of the Bank through retained earnings.

TheBank’sshareshavebeentradedinthestockexchange

sinceitwascreatedbytheMaldivesMonetaryAuthority.

During 2006, the shares of the Bank traded in the market

isbetweenRf1,500andRf2,000andtheaveragemarket

pricewasRf1,731andvolumeofturnoverwasRf349.

ThelasttradeofBank’ssharesinDecember2006wasata

price of Rf 1, 600.

ThechallengesthattheBankwillhavetofacetomain--

tainitsgrowthhavebeenidentified,someofwhichare

increasing competition and resulting erosion of interest

margins,infusionofnewcapitaltofacilitateexpansion

plans,raisingofcapitalunderTierIand/orTierIIfor

Capital Adequacy purposes.

4.0

6.0

8.0

10.0

12.0

2002 2003 2004 2005 2006

Dividend Cover

2.0

Years

Tim

es

0.0

2.2 2.3

6.67.8

12.914.0

32

Maintaining liquidity

TheliquiditypolicyoftheBankhasalwaysbeentomain--

tain an adequate liquidity buffer on a consistent basis. Our

liquidity remained at optimum levels during the year. The

LiquidAssetsratiostoodat9.4%inDecember2006.The

Assets and Liabilities Committee (ALCO) of the Bank moni--

tors the situation and maintains a satisfactory trade-off

betweenliquidityandprofitability.

Maturity gap analysis

negativegapinthefirsttimebasketismainlyduetosav--

ings deposits coming under less than 1 month basket, but

historicallysavingswithdrawalsareinsignificantanddoes

not affect to the overall liquidity. Of the current and time

deposits,majorityarenonvolatilecoredepositswhichare

keptonarolloverbasis.Thisincludesa24%fromGovern--

ment and related entities. Further the standby money

marketlinesthatwehaveestablishedwithbothlocal

and international banks give adequate insurance for any

unpredicted liquidity requirements.

Corporate Banking

2006wasayearfilledwithchallengesinalmostall

spheres of activity under the umbrella of Corporate

Banking. The CorporateBankingDivision(CBD)withits

expertiseinCorporatefinance,Projectfinancing,working

Capital Financing, Trade Finance and Remittance Services

caters mainly to the banking needs of the large to medium

sized domestic corporate customers and multinational

corporate clients comprising of resort hotels, trading com--

panies,telecomcompanies,stateownedenterprises

engagedintrading,construction,fisheries,shippingand

utility services.

The Bank’s strategy in lending to major corporate custom--

ers is total relationship management in meeting all their

banking requirements including ancillary services such as

electronic banking, credit and debit card services, trade

and remittance services, and salary handling.

In the year 2006 the Bank substantially increased its

lendingtomajorcorporateborrowersandthemiddletier

market, making it the major contributor to the banks

income. Loans and advances granted in the CBD recorded

ahealthygrowthandcontributedto47%ofthetotalgross

income for the year 2006.

In addition to providing conventional banking services,

wehavenowprogressedtoarrangingloansyndications,

infrastructureandprojectfinancing.Bankwasactivelyin--

volved in raising funds for re-development, reconstruction

andrefurbishmentofresorthotels,safariboatsandfishing

projects. Besides acting as on-lending agent for USD 60

million, EIB tsunami affected resorts, Bank in 2006, suc--

cessfullyconcludedaUSD6.5millionsyndicatedloanwith

participants from offshore banks for redevelopment of

Olhuveli resort.

Despite a heavily competitive environment and continu--

ouspressureonmargins,goodprogresswasmadein

diversifying and strengthening the credit portfolio of the

division.Over45%oftheBank’stotaladvancesaretothe

tourismsectorfollowedby17%toothersactivities.Other

activities consist of Electricity, Gas, Water and Sanitary

MANAGEMENT DISCUSSION & ANALYSIS

BML Finances - Commercial Activity

BML Finances - Hospitality & Tourism

33

Services(0.2%),Transport,StorageCommunications

(45%),Services(16%),andEmployees,andactivitiesnot

adequatelydescribed(39%).

Strongrelationshipmanagement,theconceptonwhich

wechosetodriveourcorporatebusinesswasfurther

strengthened by starting and building a full time relation--

ship managers team to supplement the branch managers

efforts. Besides appointing senior relationship managers at

AGM level to cater to the important large resort and trad--

ing groups, a business development manager for Enter--

prise Banking, catering to relationship management of the

SMEtradingsectorwasappointed.

The Trade Service division continued to add value to our

clients, structuring and enhancing international trade

transactions, thus improving the contribution to the Bank’s

fee based income. We improved our establishments in this

areabyforgingclosertiesandbetterinteractionwithour

correspondentnetwork.Bankincreaseditsfeeincome

whileaddingvaluetoourclientswiththesupportofsev--

eral fee structures based on volumes.

Majorimportsduringtheyearwereconstructionmateri--

als for rebuilding of the infrastructure of resorts. Bank

establishednewtradelinestofacilitatestructuredtrade

financingandhandlinglargevalueLettersofCreditmainly

forimportoffuel.MajorfuelimportswerefromSingapore

andtheMiddleEastmarketwhilemajorexportswereto

SriLanka,Thailand,UnitedKingdomandTaiwan.

electronic Banking, Retail Banking and Card Services

TheextensivenetworkofdeliverychannelsoftheBank,

whichcomprisesof24branches,11ATMs,1,200POS

machines, 5 dhonis for mobile banking, caters mainly to

the banking needs of retail customers and small & medium

enterprises.fivenewbrancheswereopenedduring2006

wideningthenetworkandmakingBMLatrulynational

BankwhileplayingavitalroleintheeconomyofMaldives.

The Priority Banking Centre is located at the 3rdfloorof

the Main branch for convenience of the customers and the

Bazaar branch offers evening banking in order to facilitate

extendedbankinghoursfortraders.

We have made a lot of contribution to the tourism sector

inretailbankingthroughourbranchnetworkandon-line

POS machines at resorts and merchant outlets. Many

NGOs that entered Maldives to dispense humanitarian

relief, entrusted their banking requirements to Bank of

Maldives.TheBankwasabletoleveragethereputationit

hasbuiltupovertheyearstoattractthesenGOswhich

arelookingforabankwithawidenetworkofbranches

and the supporting technological capabilities.

Bank of Maldives has become the frontrunner in electronic

banking.All24branchesofthebankareconnectedonline,

enablingcustomerstoconductbusinesswitheaseand

convenience from any location in the Maldives. The bank

has invested in state-of-the-art technology as part of its

commitment to offer electronic banking and debit and

credit card services for all the sectors of the economy.

After the initial commencement of acquiring major Credit

Cards(visa,MasterCardandexclusivitywithAmericanEx--

press)andtheissuanceofAmericanExpressCardsinthe

year2004,theBankofMaldivesCardCentrehasmade

profound progress in the year 2005 and 2006.

SincethelaunchofthefirstproprietarycashcardinMal--

dives in 2001, the Bank has been instrumental in making

it one of the most popular modes of payment transac--

tions.ItwasnosurprisethatthevisaDebitCardon

launchwasanimmediatesuccessasacardwhichcouldbe

usedsimilarlywiththebonusofusingitoverseas.Ithas

becomeoneofthefastestgrowingproductsoftheBank

BML Finances - Dredging & Reclamation

34

ofMaldives.withthousandsofcustomerswaitingforthe

availabilityofthisproductthedemandforbothcardswere

far greater than anticipated.

Bank has also undertaken to issue the popular MasterCard

productswithin2007.MasterCardisamongthemost

widelyacceptedCreditCardsaroundtheglobeandissu--

anceofthiscardbytheBankwillenrichtheCreditCard

portfolio of the Bank of Maldives Card Centre.

withthegrowinglocalcardholderbase,BankofMaldives

Card Centre has focused on enabling more acceptances

of these cards at establishments. As such during the year

2006hundredsofnewmerchantshavesignedupforac--

cepting both credit and debit cards. In addition to this

the Bank of Maldives has installed Point of Sales (POS)

terminals in nearly all resorts.

As part of the provision of enhanced services to its cli--

ents, Bank of Maldives Card Centre introduced an entire

newservicetoitscustomers–ATMBillPayservice.The

BankhassignedcontractswithDhiraaguandwataniya

(telecommunication service providers) to create an op--

portunity for customers to pay their telephone bills at their

convenience.

ATMBillPayallowscustomerstheeaseofpayingtheirbills

usingtheircashregardlessofwhichevertimetheychoose.

Customers no longer need to queue up at counters to pay

their bills. The Bank aims to provide this service to other

utility companies in the Maldives in the near future.

TheBankofMaldivesCardCentreisworkingtobuildan

Internet Banking Platform to facilitate our cardholders

andaccountholderswitheasierbankingoptions.withthe

growinguseoftheinternetaroundtheworldtheBank

aims to start Internet Banking as soon as possible. The

CardCentreexpectsInternetBankingtoreceiveover--

whelmingsupportasthiswouldenabletransactionstobe

made from the comfort of home.

To sustain the pre-eminent position in the industry and

fortheenhancementofthecustomerserviceefficiency,

implementation of a Business Process Re-engineering

Program, and an introduction of several deposit mobiliza--

tion programs are planned this year. In implementing this

weendeavourtoenhanceourcustomerservicelevelsand

create a more conducive customer friendly environment

withinourbranches,bothinternallyandexternally.fur--

ther,wehaveplannedtorelocateandexpandthebranch

operations during year.

Bankconsidersthisnetworktobeagreatassetthat

provides immense potential and opportunities for future

growthoftheBankaswellastotheeconomybycontrib--

utingimmenselyinreducingcashincirculation,which

takes Maldives to a cashless society.

development Banking

from1990,BML,asthenationalbankofthecountry,with

the sponsorship of the Government of Maldives, initiated

a longterm program to build up the bank as a develop--

mentfinancinginstitutiontowidenitsgeographiccoverage

toprovidefinancialservicestothepopulationinouter

atolls. The main objective is to reduce income disparities

betweentheouteratollsandMale’byincreasingtheem--

ploymentopportunities&incomelevels,withaparticular

focusonthelowerincomegroups.

Thereare18branchesservingthepopulationintheatolls

area. In addition 5 mobile banking units (dhonis) are be--

ing used for the purpose of mobile banking operations to

covertheentirecountry.Outofthetotalbankstaffof504

asattheendoftheyear,64%wereemployedinthearea

of Development Banking. Development Banking accounted

for14%ofgrossincomeandstoodatRf86.2million.The

MANAGEMENT DISCUSSION & ANALYSIS

Developing Cashless Environment

35

5newatollbranchesopenedduringtheyearinBaa,Alifu

Alifu,AlifuDhaalu,DhaaluandnoonuAtoll,willenhance

microanddevelopmentfinanceinthefishing,fishprocess--

ing and SME sector.

The Bank through its development banking activities, is

the implementing agency of the Atolls Credit and Develop--

mentBankingProject(ACDBP)whichcoversthenorthern

and central atolls from Haa Alifu to Laamu Atoll, Kaafu,

Alifu Alifu, Alifu Dhaal, Dhaalu and Noonu Atolls and the

SouthernAtollsDevelopmentProject(SADP)coversthe4

southern most Atolls, namely, Gaafu Dhaalu, Gaafu Alifu,

GnaviyaniandSeenuAtolls.Thefirstprojectwasfinanced

bylong-termborrowingsfromtheInternationalfundfor

Agricultural Development (IFAD) and the second by IFAD

and the OPEC Fund for International Development (OPEC).

The development projects being implemented by the

DevelopmentBankingCellhasextendedneedbasedcredit

to the rural population and this has helped them to attain

incomesecurity,ownershipofproductiveassetsandentre--

preneurshipskills.withthesavinghabitsofthebenefi--

ciaries, the projects have laid the foundation for banking

culture among them. The projects have emphasized on

womenanditnotonlycreatedtremendousawareness

amongstwomenbutalsomadethemrealizeapartoftheir

potential. The main focus during the year 2006 continued

to be on smaller loans for the projects’ target group.

As in the past years, in 2007 too, Development Banking

Cellwillbeproactiveintappingintothesesourcesofde--

velopmentfinancingforatollsreconstructionandrecovery.

Development Banking Cell (DBC) has also been appoint--

ed by the Ministry of Finance and Treasury to administer

the Island Livelihood Revitalization and Development

Program (ILRDP), coordinated by National Disaster

Management Centre, Loan Scheme of the Fisheries

Development Program (LSFDP) and Loan Scheme of the

Agricultural Development Program (LSADP) coordinated

by the Ministry of Fisheries Agriculture and Marine

Resources.

In addition DBC administer the Loan Scheme of the

LivelihoodRevitalizationProgram(LSLRP)whichisa

joint initiative funded equally by Bank of Maldives,

Maldives National Chamber for Commerce and Indus--

tries (MNCCI) and Maldives Association of Tourism

Industry(MATI).Attheendoftheyear,therewere261

outstanding loans given under Funds Under Administra--

tion,whichtotaledtoMrf10.3million.

Opening of Mahibadhoo Branch

36 HUMAN RESOURCES

The Management and Development of Human Resource is

a building block for success of any organization. Bank of

Maldives focuses on strengthening HR to attract, retain,

and develop employees in meeting organizational goals.

We believe our employees have a major impact in the suc--

cess of our organization.

BMLhastakensignificantstridestoimprovehumanre--

sourcemanagementbyrevampingthewholeHRstructure.

withthefocusonestablishingastableHRframework,

anexternalHRconsultantwasselected.Primarilythe

consultancywillreview,reviseanddesignHRpolicies&

procedures, develop effective performance measurement

and career path for graduates and managers.

Another major development includes the implementation

ofHRsoftware.withtheaimofmonitoringtheeffective--

ness of human resource practices and streamline adminis--

trativefunctionshandledmanuallybystaff,thissoftware

enables automation of human resource functions.

Recruitment

Bank’s recruitment practices look for dynamic young

individualswithexcellentacademicresults,whowillbe

groomed to become future leaders. With the recent devel--

opments and enhancements the staff strength has reached

from418in2005to504(274femaleand230male)by

the end of 2006.

Threeexpatriateswererecruitedduring2006astheChief

CreditOfficer,ChieffinancialOfficerandChiefInternal

Auditor/ChiefComplianceOfficerwhoplayavitalrolein

riskmanagement,MIS,financialcontrolsandinternal

auditandcompliancewiththeobjectiveofprogressing

fromBaselIcompliancetoBaselIIframeworkoftotalrisk

management by banks.

Totalof6graduateswerealsorecruitedtocreditand

treasuryareaswhoaregainingexposureincreditanalysis,

financialcontrolsandriskmanagementtechniquesunder

theexpatriates.numberofnewrecruitsintheAssistant

category,weredeployedtostrengthenourbranchnetwork

anddifferentdepartmentsinHeadOffice.

training and development

As the number of staffs increased by the year, HR empha--

sis on broadening and developing the training arena in

bringing a pool of talented driven employees to maintain

high standard required in this dynamic environment.

newrecruitsandnewpromotesweregiveninduction

trainingwhiletheyaretogothroughon-the-jobtraining

for a considerable period of time.

Ourvalueadditiontoclientbusinesswasfurtherstrength--

ened through focused and vigorous on the job training

benefitingcustomerservicestaff.Continuoustargeted

training courses have been conducted to uplift the techni--

calskillsandknowledgelevelsoftheteamthroughoutthe

year.

Toenhancetherequiredknowledgeandskills,severalin-

houseandinternationaltrainingprogramswereprovided.

Staffs from various departments have attended several

short-terminternationaltraining,workshop/conferences.

In2006,westartedthefirsttrainingcourse,AntiMoney

Laundering conducted by the Head of Training and Head

of International Banking of Hatton National Bank (HNB),

where40selectedstaffwastrainedinMale’.Oursincere

appreciationtoCEOofHnB,whorespondedtoourcall

for assistance in tapping their School of Banking and

Trainingandtheirlearningcourses.wewouldbesending

BMLTrainingManagertoHnBtofamiliarisewiththeire-

learning course and to organise future training courses in

branch management, call centre, sales and marketing,

Staff Training

37

retailbankingforBMLstaff.2007continuedwith7morefullysponsoredscholarshipsforstaff,addingtothe1scholarship

awardedin2004/2005.Thebankhasapolicyoffullysponsoringpart-timediplomacoursesinbanking,finance,business

management and human resources. Many staff are continuously sponsored under this scheme based on their years of service

andworkperformance.

Someofthetrainingsprovidedintheyear2006areinthefollowingareas:-

No International training Program Country attended

1 The Asia 2006 Human Resource Development & Management Conference Singapore

2 SWIFT - Customer Credit Transfers & Cash Management

Collections & Documentary Credits Bombay, India

3 Workshop on Banking & Finance in Small States: Issues & Policies Valleta, Malta

4 ATMsinAsiaII,visapinsecurityworkshop KualaLumpurMalaysia

5 IBM system I strategic planning conference Bangkok, Thailand

6 RegulationandSupervisionofIslamicBanks Jakarta,Indonesia

7 Visa Resolve On-line Srilanka & Maldives member training Colombo, Sri Lanka

8 AsiaPacificChiefAuditorSeminar2006 Malaysia

9 SCOUnIXwARETrainingProgram KualaLumpur,Malaysia

10 Correspondent Banking training Germany, Frankfurt

11 Program on Development of Rural Financing Institutions and Cooperatives Kathamandu, Nepal

12 Modern Financial Markets: Concepts, Practices & Developments Mumbai, India

13 GNS Fraud Trainee Conference Singapore

Staff Relations

Toprovideanopportunityforallstafftointeractwithmanagementandtocreateapositiverelationshipbetweencolleagues

varioussocialeventswereorganizedsuchasAnnualTriptoKudaBandos,UnityDinner,“maahefun”and“tharaavees”,during

thecourseoftheyear.Inadditiontotheseevents,formalgatheringssuchasAnnualManagersMeetingwasheldinMay2006

whichprovidedaplatformtodiscussissues,resolvedifferences,andidentifiedsolutionstomeetbusinessplantargets.

100

200

300

400

500

600

Number of Employees at 31 Dec each YearFemaleMale

No

of

Em

plo

ye

es

Total No of Employees

2002 2003 2004 2005 2006

Years

244315 336

418

504

200

400

600

800

1,000

1,200

Employee ProductivityIncome per EmployeeProfit brfore tax per Employee

Rf

(00

0’s

)

Asset per Employee

1,400

2002 2003 2004 2005 2006

Years

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Rf

(00

0’s

)

38

StRateGIC aPPROaCH

The main aim of risk management practice is to protect

the bank against losses that could arise from taking risks

beyond the bank’s risk appetite. Thus strong risk man--

agementcapabilitiesarecriticaltothefinancialsound--

ness of the bank. The key components of risk manage--

mentare:strongriskgovernance;robustprocessesto

identify, measure, monitor and report risks and internal

controlreviews.BMLhasstrengthenedandwillcontinue

to strengthen the Bank’s risk management capabilities,

processes and procedures across all major operations so

as to ensure that the businesses undertaken by the bank

is prudent relative to the bank’s risk capital.

CRedIt RISk MaNaGeMeNt

Creditriskissimplydefinedasthepotentialthatabor--

rowerorcounterpartywillfailtomeetitsobligations

in accordance withagreedtermsandconditions.This

includesnon-repaymentofcapitaland/orinterestwithin

the agreed time frame, at the agreed rate of interest and

intheagreedcurrency.Exposurestocreditarisemainly

from lending activities. The Bank does not trade in money

market,foreignexchangeandothertreasuryproductsas

at present there is no active money and treasury markets

in the Maldives.

CreditpolicieswereformulatedcoveringallBankcredit

activities and establishment of individual limits of authority

forinitiating,reviewingandapprovingcredit.Inorderto

efficientlymanagethecreditrisk,aCreditRiskManage--

mentUnitwassetupundertheChiefCreditOfficer(CCO),

whichisindependentfromtheAccountRelationship

Managers. The risk organization is structured such that

thereissegregationofdutiesbetweenrisktakingandrisk

controlling units.

A credit Committee comprising three AGMs and the CCO,

chaired by CCO, meets regularly to discuss credit propos--

alsinlinewithcreditpolicies.ThecreditCommitteealso

reviewssectorallendingposition,non-performingassets,

documentation and other credit related issues.

In Credit evaluation

The analysis supporting the credit approval decision

takesintoaccountbothfinancialandnon-financialfactors

that affect the goingconcernoftheborrowersandalso

incorporate an evaluation of the collateral offered. This

evaluationensuresthat;

• Alendinghasidentifiablesourceofrepayment.

• Establishingsuitableexposurelimitsforborrow-

ersbasedonfinancialstrength.

• Avoidexcessivesingleindustry/groupexposures.

Credit Risks Review

Thepostcreditreviewormonitoringalsoinvolvesa

reviewofconditionoffacilitiesonanindividualbasisfor

large groups and on a portfolio basis for small facilities on

pre-determined frequencies enabling the Bank to identify

weaknessesofborrowersintheiroperationsatanearly

stage and to implement suitable corrective actions.

The system takes control of slippage of facilities into non--

performing loans and classifying them appropriately in line

withtheregulatoryguidelinesandadditionallythebank

maintainsawatchlistofaccountsseparately,toclosely

monitoranyinfectionsorilleffectsofsuchborrowers

before they move into non performing category.

Credit Concentration

TheBankseekstospreaditsriskexposuresamongst

thegrowingeconomicsectors.Limitsaresetonspecific

customer Groups in order to avoid over concentration of

credit risks. Industry limits are established in relation to

the importance of the industry to the country’s economy

and taking into consideration the bank’s capital.

lIqUIdItY RISk MaNaGeMeNt

webelievethatthedefinitionofLiquidityRiskisbeing

unable to meet liquidity commitments at increased cost

or ultimately, the inability of the Bank to meet obligations

that become due, because of an incapability to liquidate

assets or obtain adequate funding.

RISK MANAGEMENT

3�

Assets and Liability Management Committee (ALCO),

whichiscomprisedoftheseniormanagementteam,

chairedbytheCEO,isentrustedwithmanagingthis

mismatchinmaturitiestoensuresufficientavailablecash

flowstomeetpossiblewithdrawalofdeposits,othercom--

mitmentsorchallengesassociatedwithsuddenchangesin

marketconditions,whilstenablingtheBanktomaximize

returns.

ALCO meets at least once a month and matters discussed

includesfollowing:

• Playing an active role in setting policies, procedures

and monitoring compliance.

• Analysis and discussion of short term and medium

termcashflowsanfundingpositions.

• Restraingrowthintheoverallloanbookinorderto

maintain a prudent liquidity ratio.

• Ensure that strong access to money markets and

credit lines through good reputation, strong earnings,

financialstrengthandbackingofmajorshareholders.

• Develop a liquidity contingency plan enabling the

Banktorespondspeedilytounexpectedevents.

Additionally the Financial Control Division monitors and

ensuresthat;

• AdequateLiquidAssetsaremaintainedwithacontin-

gency buffer.

• Daily monitoring of Advances to Deposits movements

• Carrying out maturity gap analysis of assets and

liabilities.

MaRket RISk MaNaGeMeNt

Market risk is the risk of loss resulting from changes in

marketdrivenfactorssuchasforeigncurrencyexchange

rates, interest rates and equity prices.

All the transactions in BML, other than the transactions

inlocalcurrency,MaldivianRufiya(MRf),arecarriedout

mainlyinUnitedStatesDollars(USD)forwhichexchange

rateisfixed.Thereforethebankisnotsusceptibletoany

majorcurrencyfluctuationrisk.nevertheless,generally,

the bank does not engage in large scale transactions on

speculativebasisonitsownotherthantocoveranunder--

lying customer transaction or to cover a currency funding

gap.

However,theexposuretotheriskassociatedwithchanges

onforeignexchangeratesasaresultofholdingopenposi--

tionscausedbyagapbetweentheassetsandliabilities

in a particular currency or combination of currencies, is

controlledthroughacombinationofforeignexchange

positionlimitsandtransactionslimits.Theseexposures

are monitored on a daily basis and reported to ALCO.

Further, timely recognition of market losses through mark

tomarketandexchangerevaluationmechanismsarealso

in place by the system.

Theextentoftheinterestrateriskdependsonthevalue

andperiodofthematuritymismatchbetweeninterest

bearing assets and liabilities and the ability and speed of

theBankinre-pricingthem.ALCOregularlyreviewsthese

gapstoensurethattheyarewithinacceptablenorms.The

bank regularly monitors the market behavior and products

areappropriatelyre-pricedwhennecessary.

The bank does not carry a trading portfolio or the bank

does not generally invest in stocks or shares other than

GovernmenttreasurybillsorMMACDs,forwhichinvest--

ments are generally less than 3 months and held to matu--

rityThereforethebankisnotopentoanypricefluctuation

risks.

OPeRatIONal RISk MaNaGeMeNt

Operational risk is the risk of economic loss arising

through fraud, unauthorized activities, error, omission,

inefficiency,systemsfailureorduetoexternalevents.Itis

inherenttoeverybusinessorganizationandcoversawide

spectrum of issues.

The Bank manages this risk through a control based envi--

ronmentinwhichprocessesaredocumented,authoriza--

tion is independent and transactions are reconciled and

monitored. Responsibility for operational risk management

lieswiththemembersofSeniorManagementandHeads

ofDepartmentandBranchManagerstowhomthatbusi--

ness or function reports.

40

In each area of business, the line management is held

responsibleforestablishinganeffectiveandefficientoper--

ational control environment to ensure that the Bank’s as--

setsareadequatelyprotectedandwherebytheoperational

riskshavebeenidentifiedandadequateriskmanagement

procedures maintained to control those risks.

Evaluation of these controls, are supported by an indepen--

dentprogramofperiodicreviewsundertakenbyinternal

audit under the guidance of the Chief Internal Auditor

andChiefComplianceOfficer.Introductionofmodernrisk

based auditing system in the bank is imperative to main--

tain the appropriate levels of supervision.

Other initiatives in this respect include:

• ReviewofSystemUserProfilesforanoverhaulre

vampingtoassignspecificfunctionalparametersfor

users in order to minimize the unauthorise access to

the system and information.

• Setting up of suitable Delegated Authority levels for

credit, treasury and operational areas.

• Regularupgradingofhardwareandsoftwaretokeep

it ‘state-of-the-art’.

• Preventive maintenance of equipment through main-

tenancecontractswiththevendors,insurance.

• Disaster recovery plans for IT related areas. Back-up

copiesofimportantdataaremadedailywithregard

to all the important business units.

• Insurance covers are arranged to mitigate potential

lossesassociatedwithcertainoperationalriskevents.

• Promotion of customer loyalty.

Anti-Money Laundering Efforts

Pending the enactment of a comprehensive legislation for

the detection and control of money laundering and terror--

istfinancinginthecountry,theBank,in2004,voluntarily

formulated and adopted a policy and procedure for Anti

MoneyLaundering,KnowYourCustomerandCounterfor

financingTerrorisminlinewiththerequirementsofthe

correspondent banks and funding agencies, to prevent

the use of its system, products and services for illegal and

unlawfulpurposes.

Introductoryprogramswereconductedduringtheyear

2005 and 2006 for most of the branch managers in order

tocreateandraiseawarenessonthesubjectofmoney

laundering, its impending legal implications, associated

risks, international and domestic objectives and the rele--

vant anti-money laundering steps. Adequate literature has

alsobeenprovidedtotheManagersandtheyareexpected

tocreateawarenessonthesubjectamongeachandevery

member of the staff.

TheBankisintheprocessofreviewingthecurrentpoli--

ciesandprocedurestowidenthescopeofitsanti-money

laundering efforts as a measure of response to interna--

tionalstandardsandincompliancewithdomesticstatutory

requirements.

Skills development

In this regard, the Bank has recognized the fact that de--

velopmentofnecessaryskillsandexpertiseamongtherel--

evant staff to handle these risks professionally is the most

effectivestrategyand,sufficientresourcesareallocated

for developing such skills. Further they are getting on the

jobskillsundertheguidanceofexpatriateinternational

senior bankers employed by the Bank.

RISK MANAGEMENT

Manager’s Meeting - Forum for Issues & Queries

41CORPORATE SOCIAL RESPONSIBILITY

BankofMaldivesistheonlyfinancialinstitutioninMaldiveswhocatersfinancialservicestotheeconomicdevelopmentinthe

ruralatolls.OurassistancetopeopleintheSMEandMicrofinancesectorsthroughfinanceloanschemesprovesthebank’s

commitmenttothisend,whichmeasureshavealsocontributedtowardsalleviatingpovertyandcreatingsustainableemploy--

ment and thus contributed to the National development.

followingisasummaryofsuchprojectscarriedoutintheseareasunderdifferentfundingsupports;

Project Name Purpose

Loan Scheme for Livelihood

Revitalization Program

Revitalizing the livelihood of the tsunami affected population

focusing on tsunami affected small & medium businesses.

Fisheries Development Program Smallloansfordevelopmentoffishingcommunities.

Loan Scheme for Livelihood

Revitalization Program

ILRDP

Revitalizing the livelihood of the tsunami affected population.

Loan Scheme for Livelihood

Revitalization Program (WORLD BANK)

ILRDP

Revitalizing the livelihood of the tsunami affected population.

Fisheries Development Program-

RSW Scheme

Topromote&facilitateRefrigeratedSeawatersystems&

otherpostharvestchillingsystemsonboardMaldivianfishing

vesselstoimprovethepostharvestqualityassuranceoffish.

Loan Scheme of the Agriculture

Development Program

To promote & facilitate agriculture development in agrarian

communities

MicrofinanceProjecttoBML(IDB) Poverty alleviation program to promote employment and

income generating activities.

Reduceincomedisparitywithinandbetweenouteratolls&Male’

Agriculture & Fisheries Tsunami Rehabilitation Fund (ADB) Agriculture and Fisheries Tsunami Rehabilitation Fund

for the tsunami affected farmers & Fish forks. cooperatives

workingcapitalpopulation.

Loan Scheme of the Island Livelihood Revitalization and

Development Program 2 (FDP)

Promoteandfacilitatefisheriesdevelopmentinthetsunami

affectedislands&fishforks.cooperativesworkingcapital.

Development Banking Program (ADF) Long term fund for development of individuals, businesses

(small&mediumenterprises)thatwerehitbytsunami.

ToRefinanceloansgrantedbybank.

BML Finances - Income generating micro projects.

42

Thebranchnetworkandbankinitiativeshaveimproved

thesavingscultureoftheatollcommunitieswhichincludes

salary handling and remittances to remote atolls. Our

valuablebranchnetworkplaysavitalroleincollection

of application and money as agent for other develop--

mentfinancialinstitutionsandinsurancecompaniesinthe

country.

As a part of bank’s commitment to support the Capital

MarketDevelopmentactivitiesinMaldives,weextendeda

settlementclearingfacilitytotheMaldivesStockExchange

allowingtheopportunitytouseBMLbranchnetworkfor

collection of money and applications from investors from

all over the country.

The graduate scholarships, sponsorships and training

programsextendedtothestaffdemonstratetheefforts

the bank is taking in nurturing the staff resources. We

havealsocontributedRf2.4milliontoMaldivesMonetary

Authority HR Development Fund during the year 2006.

BML Finances - Aviation Industry

43DIRECTORS’ REPORT

Board of directors and the executive Committee of

the Board

The responsibility and authority for management and

conductofthebusinessaffairsoftheBankarevestedwith

theBoardofDirectorsunderArticles64and65ofthe

Articles of Association of the Bank. Under Article 65 of the

Articles of Association of the Bank, the Board of Directors

isempoweredtodelegatetheirpowersandauthorityand

also to make rules thereof.

DelegationofpowersandauthoritytotheGeneralMan--

agerandChiefExecutiveOfficeroftheBankforsmooth

daytodayoperationremainsvestedwiththeBoard.

TheBoardofDirectorsoftheBankisattheapexofman--

aging the company. The Government appoints 7 directors

and the general public shareholders elect 3 directors.

TheGeneralManagerandChiefExecutiveOfficeristhe

Ex-OfficioDirectorinthe11memberBoard.Allexceptthe

Ex-OfficioDirectorareappointedorelectedannuallyinthe

Annual General Meeting.

The Board sets directions, approves budgets, business

plansandpolicies.TheChiefExecutiveOfficerimplements

the Board approved policies and reports to the Board,

submits quarterly performance reports and heads the

management team.

Theyear2006beganwiththefollowingmembersinthe

11 member Board of Directors of the Bank.

1. Mr. Abdul Hameed Mohamed (Chairman)

(Government appointed)

2. Mr. Mohamed Hussain Maniku

(Government appointed)

3. Mr. Mohamed Ahmed Didi

(Government appointed)

4. Ms.fathimathnuzuha

(Government appointed)

5. Mr. Imad Salih

(Government appointed)

6. Mr. Ahmed Imad Mohamed

(Government appointed)

7. Mr. Mohamed Abdul Sattar

(Government appointed)

8. Ms.fathimathSheereenAbdulla

(Elected by public shareholders)

9. Uz. Ahmed Hamza

(Elected by public shareholders)

10. Mr. Azam Farish

(Elected by public shareholders)

11.Ms.SereneHoOiKhuen(GM/CEO)

(Ex-OfficioDirector)

InaccordancewithArticle41-01oftheArticlesofAssocia--

tion of the Bank, the Government nominated the same fol--

lowing7GovernmentDirectorsfor2006/2007atthedawn

of the 23rdAnnualGeneralMeetingheldon24thJune2006.

1. Mr. Abdul Hameed Mohamed, Chairman

(ExecutiveDirector/MinistryofHomeAffairs)

2. Mr. Mohamed Hussain Maniku

(ManagingDirector/StateTradingOrganizationPlc)

3. Mr. Mohamed Ahmed Didi

(GeneralManager/Male’waterandSewerageCom

pany Private Limited)

4. Mr.ImadSalih

(Director/MinistryofEducation)

5. Ms. Fathimath Nuzuha

(AssistantDirector/MinistryoffinanceandTreasury)

6. Mr. Ahmed Imad Mohamed

(Imad Agency)

7. Mr. Mohamed Abdul Sattar

(Ma.Tulip Villa)

Asperthepractice,thefollowing3Directorselectedby

general public shareholders in the 22nd Annual General

Meeting in 2005 retired during the 23rd Annual General

Meetingheldon24thJune2006.Aretiringdirector,how--

ever, is eligible for re-election.

Ms. Fathimath Sheereen Abdulla

Uz. Ahmed Hamza

Mr. Azam Farish

InaccordancewithArticle41-02oftheArticlesofAssocia--

tionoftheBankandaspertheproceduresfollowedbythe

Bank,thegeneralpublicshareholderselectedthefollowing

44

3 Directors to the Board.

Ms. Fathimath Sheereen

Uz. Ahmed Hamza

Mr. Azam Farish

TheBoardofDirectorsunderitspowersasprovidedforin

Article 65 of the Articles of Association of the Bank have

delegatedcertainpowersoftheBoardoftheBanktoan

ExecutiveCommitteecomprisingof5Boardmembersin--

cludingtheChiefExecutiveOfficer.AstheBoardcomposi--

tionchanges,theExecutiveCommitteeisreconstituted.

TheExecutiveCommitteeoftheBoardofDirectorscom--

prisedthefollowingmembersatthebeginningof2006.

Mr. Mohamed Hussain Maniku

Government Director (Chairman of EC)

Mr. Mohamed Abdul Sattar

Government Director

Ms. Fathimath Nuzuha

Government Director

Uz. Ahmed Hamza

Elected Director

Ms.SereneHoOiKhuen(GM/CEO)

Ex-OfficioDirector

As the Board members remained same throughout 2006,

even after the 23rdAnnualGeneralMeeting,therewasno

changeinthecompositionoftheExecutiveCommitteeof

the Board of Directors.

The Board of Directors held 37 meetings during the year

2006.TheExecutiveCommitteeheldnomeetingduring

the year 2006.

TheBankpaideachBoardmemberaBoardallowanceof

Rf5,000/-permonth.

Responsibility Statement

The Board of Directors hereby states:

i. That in the preparation of annual accounts, the appli-

cableaccountingstandardshavebeenfollowedalong

withproperexplanationrelatingtomaterialdepar-

tures;

ii. That it has selected such accounting policies and

applied them consistently and made judgements and

estimates that are reasonable and prudent so as to

giveatrueandfairviewofthestateofaffairsofthe

Bank as at 31stDecember2006,andoftheprofitor

lossoftheBankfortheyearendedonthatdate;

iii. Thatithastakenproperandsufficientcarefor

the maintenance of adequate accounting records in

accordancewiththeprovisionsoftheCompanies

ActoftheRepublicofMaldives(Lawno:10/96),

Regulations for Banks and Financial Institutions

(1988)issuedbytheMaldivesMonetaryAuthorityfor

safeguarding the assets of the Bank and preventing

and detecting frauds and other irregularities,

MaldivesSecuritiesAct(Lawno:02/2006)andthe

Listing rules of the Capital Market Development

Authority;

iv. ThatithasvoluntarilyfollowedtheCorporateGov-

ernance Code issued by the Capital Market Develop-

mentAuthority;and

v. That it has prepared the accounts on a going concern

basis.

TheBoardofDirectorsaffirmsthattherearenootherin--

terestsoftheDirectorsoftheBankexceptthosedisclosed

inthisreportandtheaccompanyingfinancialstatements.

TheBoardofDirectorsfurtheraffirmsthatnoevents

haveoccurredsincethebalancesheetdate,whichwould

requireadjustmentsto,ordisclosurein,thefinancial

statements.

45INDEPENDENT AUDITOR’S REPORT

to the Shareholders and Board of directors of Bank of Maldives Plc

wehaveauditedtheaccompanyingfinancialstatementsofBankofMaldivesPlc,whichcomprisethebalancesheetasof31st

December2006andtheincomestatement,statementofchangesinequityandcashflowstatementfortheyearthenendedanda

summaryofsignificantaccountingpoliciesandotherexplanatorynotes.

Management’s Responsibility for the financial Statements

ManagementisresponsibleforthepreparationandfairpresentationofthesefinancialstatementsinaccordancewithInterna--

tionalfinancialReportingStandardsandwiththerequirementsoftheCompaniesActno.10/96,oftheRepublicofMaldives.

This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair

presentationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror;selectingandap--

plyingappropriateaccountingpolicies;andmakingaccountingestimatesthatarereasonableinthecircumstances.

auditor’s Responsibility

Ourresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudit.weconductedourauditinac--

cordancewithInternationalStandardsonAuditing.ThoseStandardsrequirethatwecomplywithethicalrequirementsand

planandperformtheaudittoobtainreasonableassurancewhetherthefinancialstatementsarefreeofmaterialmisstate--

ment.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstate--

ments. The procedures selected depend on the auditor’ s judgment, including the assessment of the risks of material mis--

statementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,theauditorconsiders

internalcontrolrelevanttotheentity’spreparationandfairpresentationofthefinancialstatementsinordertodesignaudit

proceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectiveness

of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the

reasonablenessofaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancial

statements.

webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.

Opinion

Inouropinion,theaccompanyingfinancialstatementsgiveatrueandfairviewofthefinancialpositionofBankofMaldives

Plc as of 31stDecember2006andofitsfinancialperformanceanditscashflowsfortheyearthenendedinaccordancewith

InternationalfinancialReportingStandardsandwiththerequirementsoftheCompaniesActno.10/96,oftheRepublicof

Maldives.

PriceWaterHouseCoopers 11th April 2007

Chartered Accountants

Male’

46

Year ended 31 december

(allamountsinMaldivianRufiyaa) Notes 2006 2005

Gross income 5 600,682,957 359,024,372

Interestincome 6 383,533,758 238,574,737

Interestexpense 6 (85,296,526) (63,515,271)

Net interest income 298,237,232 175,059,466

feeandcommissionincome 7 142,851,764 95,367,628

feesandcommissionexpenses 7 (33,925,939) (18,756,239)

Net fees and commission income 108,925,825 76,611,389

Dividendincome 8 796,318 250,000

netforeignexchangeincome 16,915,799 13,639,896

Otheroperatingincome 9 56,585,318 11,192,111

Operating income 481,460,492 276,752,862

less : Operating expenses

Staff costs 1 (61,455,326) (40,453,697)

Premises,equipmentandestablishmentexpenses 11 (30,726,130) (23,883,349)

Provisionforbadanddoubtfuldebts 12 (37,141,458) (54,659,319)

Otheroperatingexpenses 13 (37,835,519) (31,835,951)

Profit before tax 314,302,059 125,920,546

Incometaxexpense 14 (78,575,515) (31,480,137)

Net profit for the year 235,726,544 94,440,409

Earningspershare-basic 16 1,936.63 775.88

BaNk Of MaldIVeS PlC

Financial statements - 31 December 2006

INCOMe StateMeNt

47

31 december

(allamountsinMaldivianRufiyaa) Note 2006 2005

aSSetS

Cashandshorttermfunds 17 483,838,148 220,596,516

BalanceswithMaldives

MonetaryAuthority 18 982,806,281 891,215,073

Billsofexchange 20 22,098,868 61,601,044

Loansandadvances 21 4,150,359,619 2,827,517,439

Investment

-Availableforsale 6,425,000 6,425,000

-Heldtomaturity 24 - 10,000,000

Property,plantandequipment 25 84,680,501 75,184,469

Otherassets 26 35,632,786 29,545,240

total assets 5,765,841,203 4,122,084,781

lIaBIlItIeS

Depositsfromnon-bankcustomers 27 4,393,900,728 3,539,667,602

Borrowings 28 462,263,189 71,098,000

Bills,acceptancesandotherdocumentarycredits 60,448,438 2,180,851

Otherliabilities 30 120,438,825 52,107,681

Currenttax 77,806,64 30,514,598

Deferredtaxliabilities 29 5,439,447 4,670,574

Dividendspayable 785,140 641,225

total liabilities 5,121,082,409 3,700,880,531

SHaReHOldeRS’ eqUItY

Share capital 31 36,516,000 36,516,000

Sharepremium 31 11,270,040 11,270,040

Reserves 32 596,972,754 373,418,210

total shareholder’s equity 644,758,794 421,204,250

total equity and liabilities 5,765,841,203 4,122,084,781

Commitmentsandcontingencies 33 668,435,834 682,703,654

ThesefinancialstatementswereapprovedbytheBoardon11th April 2007 and signed on their behalf by:

Abdul Hameed Mohamed Fathimath Sheereen Abdulla Serene Ho Oi Khuen

Chairman & Managing Director Director General Manager & CEO

Thenotesonpage48to72areanintegralpartofthesefinancialstatements

BaNk Of MaldIVeS PlC

Financial statements - 31 December 2006

BalaNCe SHeet

48

(allamountsinMaldivianRufiyaa)

Notes Share capital Share premium Reserves total

Balanceat1January2005 36,516,000 11,270,040 290,541,201 338,327,241

netprofit - - 94,440,409 94,440,409

Dividendsfor2004 15 - - (11,563,400) (11,563,400)

Balance at 31 December 2005 36,516,000 11,270,040 373,418,210 421,204,250

Balanceat1January2006 36,516,000 11,270,040 373,418,210 421,204,250

netprofit - - 235,726,544 235,726,544

Dividends for 2005 15 - - (12,172,000) (12,172,000)

Balance at 31 December 2006 36,516,000 11,270,040 596,972,754 644,758,794

CaSH flOw StateMeNt

Year ended 31 december

(allamountsinMaldivianRufiyaa) Notes 2006 2005

Cash flows from operating activities

Interestreceipts 383,533,758 238,574,737

feesandcommissionreceipts 108,925,825 76,611,389

Dividendincome 796,318 250,000

netforeignexchangeincome 16,915,799 13,639,896

Otheroperatingincome 56,585,318 11,192,111

Interestpayments (85,296,526) (63,515,271)

Cashpaidtoemployeesandotherexpenses (105,728,278) (80,733,836)

Cashflowsfromoperatingprofitsbefore

changesinoperatingassetsandliabilities 35 375,732,214 196,019,026

Changes in operating assets and liabilities:

IncreaseinreservedepositwithMMA (91,591,208) (100,980,624)

Increaseinloansandadvancestocustomers (1,320,481,462) (1,089,847,702)

Increaseinotherassets (6,863,153) (6,914,703)

Increaseinamountsduetocustomers 854,233,126 763,477,515

Increaseinotherliabilities 121,345,621 9,174,117

netcashfromoperatingactivitiesbeforeincometax (67,624,862) (229,072,371)

Incometaxpaid (30,514,598) (25,014,493)

netcashusedinoperatingactivities (98,139,460) (254,086,864)

BaNk Of MaldIVeS PlC

Financial statements - 31 December 2006

StateMeNt Of CHaNGeS IN eqUItY

4�

CASH FLOw StAtEMENt (CONtINUED)

Notes 2006 2005

Cash flows from investing activities

Purchaseofproperty,plantandequipment 25 (27,818,692) (13,728,556)

Proceedsfromsaleofproperty,plantandequipment 62,680 137,867

Investment in bonds - (5,000,000)

Disposal of bonds 10,000,000 -

netcashusedininvestingactivities (17,756,012) (18,590,689)

Cash flows from financing activities

Proceedsfromborrowedfunds 403,200,000 -

Repaymentsofborrowedfunds (12,034,811) (17,989,943)

Dividendspaid (12,028,085) (11,488,695)

netcash(usedin)/fromfinancingactivities 379,137,104 (29,478,638)

Net increase/(decrease) in cash and cash equivalents 263,241,632 (302,156,191)

Cash and cash equivalents at beginning of year 220,596,516 522,752,707

Cash and cash equivalents at end of year 19 483,838,148 220,596,516

NOteS tO tHe fINaNCIal StateMeNtS

1 GeNeRal INfORMatION BankofMaldivesPlc(theBank)isengagedinthebusinessofcommercialbankingandotherfinancialservices

includingtradefinancing,custodialservicesanddevelopmentfinancing.Theregisteredofficeissituatedat11,Bod

uthakurufaanuMagu,Male’,20094,RepublicofMaldives.

The Bank is a limited liability Company and is incorporated and domiciled in the Republic of Maldives. The Bank is

listedinMaldivesstockexchange.

2 SUMMaRY Of SIGNIfICaNt aCCOUNtING POlICIeS

Theprincipalaccountingpoliciesadoptedinthepreparationofthesefinancialstatementsaresetoutbelow.These

policieshavebeenconsistentlyappliedtoalltheyearspresented,unlessotherwisestated.

2.1 Basis of preparation

ThefinancialstatementshavebeenpreparedinaccordancewithInternationalfinancialReportingStandards(IfRS).

Thefinancialstatementshavebeenpreparedunderthehistoricalcostconventionwherebythetransactionsare

recordedatthevaluesprevailingonthedateswhentheassetswereacquired,theliabilitieswereincurredorthe

capital obtained.

Certainnewaccountingstandards,amendmentstoandinterpretationsofexistingstandardshavebeenpublished

that are mandatory for the Company’s accounting periods beginning on or after 1stJanuary2007orlaterperiods

are,asfollows:

50

– IFRS 7, Financial Instruments: Disclosures, and a complementary amendment to IAS 1, Presentation of Fi

nancial Statements – Capital Disclosures(effectivefrom1January2007).IfRS7introducesnewdisclosuresto

improvetheinformationaboutfinancialinstruments.Itrequiresthedisclosureofqualitativeandquantitative

informationaboutexposuretorisksarisingfromfinancialinstruments,includingspecifiedminimumdisclosures

about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk. It replaces IAS 30,

Disclosures in the Financial Statements of Banks and Similar Financial Institutions, and disclosure requirements in

IAS 32, Financial Instruments: Disclosure and Presentation. It is applicable to all entities that report under IFRS.

TheamendmenttoIAS1introducesdisclosuresaboutthelevelofentity’scapitalandhowitmanagescapital.

The Company assessed the impact of IFRS 7 and the amended to IAS 1 and concluded that the main

additionaldisclosureswillbesensitivityanalysistomarketriskandcapitaldisclosuresrequiredbytheamend

mentofIAS1.TheCompanywillapplyIfRS7andtheamendmenttoIAS1fromannualperiodsbeginning1

January2007.

2.2 foreign currency translation (a) Functional and presentation currency

Itemsincludedinthefinancialstatemementsaremeasuredusingthecurrencyoftheprimaryeconomicenviron

mentinwhichtheentityoperates(thefunctionalcurrency).Thesefinancialstatementsarepresented

inMaldivianRufiyaa,whichistheBank’sfunctionalandpresentationcurrency.

(b) Transactions and balances

foreigncurrencytransactionsaretranslatedintofunctionalcurrencyusingtheexchangeratesprevailingatthe

dateofthetransactions.foreignexchangegainsandlossesresultingfromthesettlementofsuchtransactions

andfromthetranslationatyear-endexchangeratesofmonetaryassetsandliabilitiesdenominatedinforeign

currencies are recognised in the income statement. The foreign currency balances are translated at year-end mid

exchangeratesunlesshedgedbyforwardforeignexchangecontracts,inwhichcasetheratesspecifiedinsuch

forwardcontractsareused.

2.3 financial assets TheBankclassifiesitsfinancialassetsinthefollowingcategories:loansandreceivables;held-to-maturityinvest

ments;andavailable-for-salefinancialassets.Managementdeterminestheclassificationofitsinvestmentsat

initial recognition.

(a) Loans and receivables

Loansandreceivablesarenon-derivativefinancialassetswithfixedordeterminablepaymentsthatarenot

quotedinanactivemarket.TheyarisewhentheBankprovidesmoney,goodsorservicesdirectlytoadebtorwith

no intention of trading the receivable.

(b) Held-to-maturity financial assets

Held-to-maturityinvestmentsarenon-derivativefinancialassetswithfixedordeterminablepaymentsandfixed

maturitiesthattheBank’smanagementhasthepositiveintentionandabilitytoholdtomaturity.IftheBankwere

tosellotherthananinsignificantamountofheld-to-maturityassets,theentirecategorywouldbereclassifiedas

available for sale.

51

c) Available-for-sale financial assets

Available-for-saleinvestmentsarethoseintendedtobeheldforanindefiniteperiodoftime,whichmaybesoldin

responsetoneedsforliquidityorchangesininterestrates,exchangeratesorequityprices.

Purchasesandsalesoffinancialassetsofheldtomaturityandavailableforsalearerecognisedontrade-date

–thedateonwhichtheBankcommitstopurchaseorselltheasset.Loansarerecognisedwhencashis

advancedtotheborrowers.financialassetsareinitiallyrecognisedatcostplustransactioncostsforallfinancial

assetsnotcarriedatfairvaluethroughprofitorloss.financialassetsarederecognisedwhenthe

rightstoreceivecashflowsfromthefinancialassetshaveexpiredorwheretheBankhastransferred

substantiallyallrisksandrewardsofownership.financialliabilitiesarederecognisedwhentheyareextinguished-

thatis,whentheobligationisdischarged,cancelledorexpires.

Available-for-salefinancialassetsaresubsequentlycarriedatfairvalue.Gainsandlossesarisingfromchangesin

thefairvalueofavailable-for-salefinancialassetsarerecogniseddirectlyinequity,untilthefinancialassetis

derecognisedorimpairedatwhichtimethecumulativegainorlosspreviouslyrecognisedinequityshouldberec

ognisedinprofitorloss.Dividendsonavailable-for-saleequityinstrumentsarerecognisedintheincomestate

mentwhentheentity’srighttoreceivepaymentisestablished.

Thefairvalueofinvestmentsarebasedonquotedbidpricesoramountsderivedfromcashflowmodels.fairval

uesforunlistedequitysecuritiesareestimatedusingapplicableprice/earningsorprice/cashflowratiosrefined

toreflectthespecificcircumstancesoftheissuer.Equitysecuritiesforwhichfairvaluescannotbemeasured

reliablyarerecognisedatcostlessimpairment.whensecuritiesclassifiedasavailable-for-salearesold

or impaired, the accumulated fair value adjustments are included in the income statement as gains and

losses from investment securities.

2.4 Offsetting financial instruments financialassetsandliabilitiesareoffsetandthenetamountreportedinthebalancesheetwhenthereisalegally

enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or realise the

asset and settle the liability simultaneously.

2.5 Interest income and expenses Interestincomeandexpenseforallinterest-bearingfinancialinstruments,exceptforthoseclassifiedasheldfor

trading,arerecognisedwithin“interestincome”and“interestexpense”intheincomestatementusingeffective

interestmethod.However,interestincomeissuspendedwhenloansbecomedoubtfulofcollection,suchaswhen

overduebymorethan90days.Suchincomeisexcludedfrominterestincomeuntilreceived.

Theeffectiveinterestmethodisamethodofcalculatingtheamortisedcostofafinancialassetorafinancialli

abilityandofallocatingtheinterestincomeorinterestexpenseovertherelevantperiod.Theeffectiveinterest

rateistheratethatexactlydiscountsestimatedfuturecashpaymentsorreceiptsthroughtheexpectedlifeofthe

financialinstrumentor,whenappropriate,ashorterperiodtothenetcarryingamountofthefinancialassetor

financialliability.whencalculatingtheeffectiveinterestrate,theBankestimatescashflowsconsidering

allcontractualtermsofthefinancialinstrument(forexample,prepaymentoptions)butdoesnotconsider

futurecreditlosses.Thecalculationincludesallfeesandpointspaidorreceivedbetweenpartiestothecontract

that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.

NOTES TO THE FINANCIAL STATEMENTS

52

2.6 fee and commission income The income mainly comprise fees receivable from customers for guarantees and other services provided by the

Bank, and fees for foreign and domestic payment tariff. Such income is recognised as revenue as the services are

provided.

Incomeontheendorsementofbillsofexchangeisrecognisedonlywhenthebillisreceivedandeitherissuedor

endorsed, and the payment under the particular instrument has been effected.

2.7 dividend income Dividendsarerecognisedintheincomestatementwhentheentity’srighttoreceivepaymentisestablished.

2.8 Impairment of financial assets (a) Loans and advances

Allloansandadvancesarerecognisedwhenthecashisadvancedtoborrowers.

Aspecificcreditriskprovisionforloanimpairmentisestablishedtoprovideformanagement’sestimateofcredit

lossesassoonastherecoveryofanexposureisidentifiedasdoubtful.

Provisionforloanimpairmentaremadeonthebasisofcontinuousreviewofalladvancestocustomers,inaccord

ancewiththerequirementsspecifiedbytheMaldivesMonetaryAuthoritybasedonagedclassificationofadvances

asfollows:

Period outstanding Classification Provision made

3 - 6 months Especially mentioned 5%

More than 6 months and upto 12 months Substandard 10%-20%

Morethan12monthsandupto24months Doubtful 35%-50%

Morethan24months Loss 100%

A general provision for loan impairment is established to conservatively cover losses in the lending portfolio at the

balancesheetdate,butwhichhavenotbeenspecificallyidentifiedassuch.

whenaloanisuncollectible,itiswrittenoffagainsttherelatedprovisionforloanimpairment.Suchloansarewrit

ten off after all the necessary procedures have been completed and the amount of the loss has been determined.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objec

tivelytoaneventoccuringaftertheimpairmentwasrecognised(suchasthedebtorregularisingloanrepayment),

thepreviouslyrecognisedimpairmentlossisreversedbyadjustingtheallowanceaccount.Amountsrecoveredfrom

fully impaired loans and advances are recognised as income on a cash basis.

53

(b) Available for sale financial assets

TheBankassessesateachbalancesheetdatewhetherthereisobjectiveevidencethatafinancialassetoragroup

offinancialassetsisimpaired.Inthecaseofequityinvestmentsclassifiedasavailableforsale,asignificantor

prolongeddeclineinthefairvalueofthesecuritybelowitscostisconsideredindeterminingwhetherassetsareim

paired.Ifanysuchevidenceexistsforavailable-for-salefinancialassets,thecumulativeloss-measuredasthe

differencebetweentheacquisitioncostandthecurrentfairvalue,lessanyimpairmentlosson

thatfinancialassetprevioulsyrecognisedinprofitorloss-isremovedfromequityandrecognisedinthe

income statement. Impairment losses recognised in the income statement on equity instruments are not reversed

throughtheincomestatement.If,inasubsequentperiod,thefairvalueofadebtinstrumentclassifiedasavailable-

for-saleincreasesandtheincreasecanbeobjectivelyrelatedtoaneventoccuringaftertheimpairmentlosswas

recognisedinprofitandloss,theimpairmentlossisreversedthroughtheincomestatement.

2.9 Property, plant and equipment Allproperty,plantandequipmentisstatedathistoricalcostlessdepreciation.Historicalcostincludesexpenditure

that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or are recognised as a separate asset, as appropri

ate,onlywhenitisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtotheBankandthe

costoftheitemcanbemeasuredreliably.Allotherrepairsandmaintenancearechargedtootheroperatingex

pensesduringthefinancialperiodinwhichtheyareincurred.

Depreciation is calculated using the straight-line method to allocate their cost to their residual values over their

estimatedusefullives,asfollows:

Bank premises - 20 years

Computerhardwareandsoftware - 3-5years

Furniture and equipment - 3 - 5 years

Motorvehicles/vessels - 5years

Leaseholdbuildingsareamortisedovertheunexpiredperiodofthelease.

Thechargeforthedepreciationcommencesfromthedateonwhichtheassetisputtouse.

Theassetsresidualvaluesandusefullivesarereviewed,andadjustedifappropriate,ateachbalancesheetdate.

Assetsthataresubjecttoamortisationarereviewedforimpairmentwhenevereventsorchangesincircumstances

indicatethatthecarryingamountmaynotberecoverable.Anasset’scarryingamountiswrittendownimmediately

to its recoverable amount, if the asset’s carrying amount is greater than its estimated recoverable amount. The

recoverable amount is the higher of the asset’s fair value less costs to sell and value in use.

Gainsandlossesondisposalsaredeterminedbycomparingproceedswithcarryingamount.Theseareincludedin

otheroperatingincomeorotheroperatingexpenses,asthecasemaybe,intheincomestatement.

NOTES TO THE FINANCIAL STATEMENTS

54

2.10 Operating leases Leasesofassetsunderwhichalltherisksandbenefitsofownershipareeffectivelyretainedbythelessorareclas

sifiedasoperatingleases.Paymentsmadeunderoperatingleasesarechargedtotheequipmentandestablishment

expensesintheincomestatementonastraight-linebasisovertheperiodofthelease.

whenanoperatingleaseisterminatedbeforetheleaseperiodhasexpired,anypaymentrequiredtobemadeto

thelessorbywayofpenaltyisrecognisedasanexpenseintheperiodinwhichterminationtakesplace.

2.11 Cash and cash equivalents forthepurposesofthecashflowstatement,cashandcashequivalentscomprisebalanceswithlessthanthree

monthsmaturityfromthedateofacquisition,includingcash,amountsduefromotherbanks,certificateofdeposits

and treasury bills.

2.12 Provisions ProvisionsarerecognisedwhentheBankhasapresentlegalorconstructiveobligationasaresultofpastevents,it

isprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligation,anda

reliable estimate of the amount of the obligation can be made.

2.13 financial guarantee contracts financialguaranteecontractsarecontractsthatrequiretheissuertomakespecifiedpaymentstoreimbursethe

holderforalossitincursbecauseaspecifieddebtorfailstomakepaymentswhendue,inaccordancewiththe

termsofadebtinstrument.Suchfinancialguaranteesaregiventobanks,financialinstitutionsandotherbodieson

behalf of customers to secure loans, overdrafts and other banking facilities.

financialguaranteesareinitiallyrecognisedinthefinancialstatementsattheamountguaranteedonthedatethe

guaranteewasgiven.Subsequenttoinitialrecognition,thebank’sliabilitiesundersuchguaranteesaremeasured

attheinitialmeasurement,lessthebestestimateoftheexpenditurerequiredtosettleanyfinancialobligationaris

ing at the balance sheet date.

Any increase in the liability relating to guarantees is taken to the income statement under other operating

expenses.

2.14 Employee benefits TheBankoperatesaStaffProvidentfund.AlltheemployeesoftheBankarethemembersofthisfundtowhichthe

Bankcontributes10%ofemployeesmonthlybasicsalary.Thiscontributionisrecognisedasemployee

benefitexpensewhentheyaredue.

2.15 deferred income taxes Deferredincometaxisprovidedinfull,usingtheliabilitymethod,ontemporarydifferencesarisingbetweenthetax

basesofassetsandliabilitiesandtheircarryingamountsinthefinancialstatements.Currentlyenactedtaxrates

areusedinthedeterminationofdeferredincometax.

55

The principal temperory differences arise from depreciation of property, plant and equipment and provision on im

pairment of loans.

2.16 acceptances AcceptancescompriseundertakingbytheBanktopaythebillsofexchangedrawnoncustomers.TheBankexpects

mostacceptancestobesettledsimultaneouslywithreimbursementfromthecustomers.Acceptancesareaccounted

for as off balance sheet transactions and are disclosed as contingent liabilities and commitments.

2.17 Share capital Dividends on ordinary shares

DividendsonordinarysharesarerecognisedinequityintheperiodinwhichtheyareapprovedbytheCompany’s

shareholders.

2.18 fiduciary activities TheBankcommonlyactsastrusteesandinotherfiduciarycapacitiesthatresultintheholdingorplacingofassets

onbehalfofindividuals,trusts,retirementbenefitplansandotherinstitutions.Theseassetsandincomearising

thereonareexcludedfromthesefinancialstatements,astheyarenotassetsoftheBank.

2.19 Comparative wherenecessary,comparativefigureshavebeenadjustedtoconformwithchangesinpresentationinthecurrent

year.

3 fINaNCIal RISk MaNaGeMeNt

3.1 A strategy in using financial instruments Byitsnature,theBank’sactivitiesareprincipallyrelatedtotheuseoffinancialinstruments.TheBankaccepts

depositsfromcustomersatfixedratesandforvariousperiodsandseekstoearnaboveaverageinterestmarginsby

investing these funds in high quality assets. The Bank seeks to increase these margins by consolidating short-term

fundsandlendingforlongerperiodsathigherrateswhilstmaintainingsufficientliquiditytomeetallclaimsthat

might fall due.

The Bank also seeks to raise its interest margins by obtaining above average margins, net of provisions, through

lendingtocommercialandretailborrowerswitharangeofcreditstanding.Suchexposuresinvolvenotjuston-

balance sheet loans and advances but the Bank also enters into guarantees and other commitments such as letters

of credit and performance.

3.2 Capital adequacy To monitor the adequacy of its capital, the Bank uses ratios established by the Maldives Monetary Authority (MMA).

Theseratiosmeasurecapitaladequacy(minimum8%asrequiredbyMMA)bycomparingtheBank’seligiblecapital

withitsbalancesheetassets,offbalancesheetcommitmentsandmarketandotherriskpositionsatweighted

amountstoreflecttheirrelativerisk.

NOTES TO THE FINANCIAL STATEMENTS

56

TheBank’scapitaladequacylevelwasasfollows: (amounts in Maldivian Rufiyaa ‘000)

Balance sheet notional amount

Risk weighted amount

2006 2005 2006 2005

Balance sheet assets (net of provisions)

Cash 96,571 79,974 - -

BalancewithMMA 982,807 891,215 - -

Treasurybills/MMACDs 249,162 - - -

Due from other banks 138,105 140,622 27,621 28,124

Loans and advances to customers 4,214,318 2,889,118 4,013,359 2,889,118

Investments - 10,000 - 10,000

fixedassets 84,681 75,184 84,681 75,184

Other assets 35,632 35,970 35,632 35,970

5,801,276 4,122,083 4,161,293 3,038,396

Off-balance sheet positions

Direct credit substitutes 328,482 138,791 267,174 138,791

Transaction related contingencies - 398,787 - 199,394

Short term self - liquidating and trade related contingencies 339,953 145,126 63,154 29,025

668,435 682,704 330,328 367,210

total risk weighted assets 4,491,621 3,405,606

Capital ratios

Bank % MMA %(minimum)

2006 2005 2006 2005 2006 2005

Tier 1 capital 409,032 338,327 9.11 9.93 4% 4%

Tier 1+ Tier 2 capital 680,193 421,204 15.14 12.37 8% 8%

3.3 Credit risk Thebanktakesonexposuretocreditriskwhichistheriskthatacounterpartywillbeunabletopayamountsinfull

whendue.

Exposuretocreditriskismanagedthroughregularanalysisoftheabilityofborrowersandpotentialborrowersto

meetinterestandcapitalrepaymentobligationsandbychangingtheselendinglimitswhereappropriate.Exposure

to credit risk is also managed in part by obtaining collateral and corporate and personal guarantees.

3.4 Interest rate risk TheBanktakesonexposuretotheeffectsoffluctuationsintheprevailinglevelsofmarketinterestratesonits

financialpositionandcashflows.Interestmarginsmayincreaseasaresultofsuchchangesbutmayreduceorcre

atelossesintheeventthatunexpectedmovementsarise.

The Management monitors the mismatch of interest rate and take corrective action on a regular basis.

57

3.5 liquidity risk TheBankisexposedtodailycallsonitsavailablecashresourcesfromovernightdeposits,currentaccounts,matur

ingdeposits,loandrawdowns,guaranteesandfrommarginandothercallsoncashsettledderivatives.TheBank

doesnotmaintaincashresourcestomeetalloftheseneedsasexperienceshowsthataminimumlevelofreinvest

mentofmaturingfundscanbepredictedwithahighlevelofcertainty.

The Management monitors on the minimum proportion of maturing funds available to meet such calls and on the

minimumlevelofinterbankandotherborrowingfacilitiesthatshouldbeinplacetocoverwithdrawalsatunexpect

ed levels of demand.

Demandandsavingsdepositshavebeencategorisedasupto3monthsmaturitygroup.Howeveramajorpartof

thesedepositsrepresentacoreretaildepositbasewithlongertermmaturity.Billsofexchangeandloans

andadvancesareshownnetofinterestinsuspenseandprovisionforbadanddoubtfuldebts.

The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental

to the management of the Bank. It is unusual for Banks ever to be completely matched since business transacted

isoftenofuncertaintermandofdifferenttypes.Anunmatchedpositionpotentiallyenhancesprofitability,butalso

increases the risk of losses.

The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest bearing liabilities

astheymature,areimportantfactorsinassessingtheliquidityoftheBankanditsexposuretochangesininterest

ratesandexchangerates.

Liquidity requirements to support calls under guarantees and standby letters of credit are considerably less than the

amountofthecommitmentbecausetheBankdoesnotgenerallyexpectthethirdpartytodrawfundsunderthe

agreement.Thetotaloutstandingcontractualamountofcommitmentstoextendcreditdoesnotnecessarilyrepre

sentfuturecashrequirements,sincemanyofthesecommitmentswillexpireorterminatewithoutbeingfunded.

NOTES TO THE FINANCIAL STATEMENTS

58

3.5 Liquidity risk (Continued)

Maturity analysis

An analysis of the interest bearing assets and liabilities based on the remaining period at the balance sheet date to

the respective contractual maturity dates:

Upto 3 months Rf

3-12 months Rf

1 - 3 years Rf

3-5 years Rf

More than 5 years Rf

total

Rf

assets

Cash & Money at call and short notice 234,675,997 - - - - 234,675,997

Treasury Bills 249,162,151 - - - - 249,162,151

BalanceswithMMA 967,806,281 - - - 15,000,000 982,806,281

Billsofexchange 10,765,193 - - - 11,333,675 22,098,868

Loans and advances 1,185,682,163 103,956,215 1,030,910,473 1,094,549,777 735,260,991 4,150,359,619

Other assets 35,632,786 - - - 91,105,501 126,738,287

Total assets 2,683,724,571 103,956,215 1,030,910,473 1,094,549,777 852,700,167 5,765,841,203

liabilities

Deposits 4,073,767,693 311,042,603 9,060,432 - 30,000 4,393,900,728

Borrowings 51,200,000 23,562,269 70,428,377 56,818,333 260,254,211 462,263,190

Other liabilities 231,986,144 - 5,464,055 - 27,468,293 264,918,492

Total liabilities 4,356,953,837 334,604,872 84,952,864 56,818,333 287,752,504 5,121,082,410

Net liquidity gap (1,673,229,266) (230,648,657) 945,957,609 1,037,731,444 564,947,663 644,758,793

5�

4 Segment analysis

By business segment

The bank is divided into four main business segments:

• Corporate banking

• Personal banking

• Development banking

• Treasury

At 31 December 2006 Corporate

bankingPersonal banking

development banking

treasury total

ExternalRevenues 304,068,396 161,360,143 84,755,178 50,499,240 600,682,957

Revenues from other segments (22,918,792) 57,629,753 1,450,457 (36,161,418) -

total 281,149,604 218,989,896 86,205,635 14,337,822 600,682,957

Segment result 171,078,178 94,439,705 43,013,262 5,770,914 314,302,059

Incometaxexpense (78,575,515)

Profit for the year 235,726,544

Segment assets 2,642,683,698 799,992,335 819,946,771 1,503,218,399 5,765,841,203

total assets 2,642,683,698 799,992,335 819,946,771 1,503,218,399 5,765,841,203

Segment liabilites 2,184,307,862 1,952,587,399 848,955,919 135,231,229 5,121,082,409

Capital 644,758,794

total liabilities 2,184,307,862 1,952,587,399 848,955,919 135,231,229 5,765,841,203

Other segment items

CapitalExpenditure 11,962,038 9,180,168 4,172,804 2,503,682 27,818,692

Depreciation 7,849,636 6,024,139 2,738,245 1,642,948 18,254,968

5 Gross Income

2006 2005

Interestincome 383,533,758 238,574,737

feeandcommissionincome 142,851,764 95,367,628

Dividendincome 796,318 250,000

netforeignexchangeincome 16,915,799 13,639,896

Otheroperatingincome 56,585,318 11,192,111

600,682,957 359,024,372

NOTES TO THE FINANCIAL STATEMENTS

60

6 Net Interest Income

2006 2005

Interest income

Customeradvances 347,613,540 215,614,867

Investmentsecurities 132,192 451,370

TreasuryBills/MMAcertificateofdeposits 16,904,335 6,605,547

Shorttermfinance 11,079,243 8,271,276

Assignedcapitalandreservedeposits 7,804,448 7,631,677

383,533,758238,574,737

Interest expense

Customersdeposits 77,495,275 59,324,022

Borrowedfunds 7,797,427 4,154,503

Others 3,824 36,746

85,296,526 63,515,271

Net interest income 298,237,232 175,059,466

7 fee and Commission Income

2006 2005

Commissionsonpayorders 26,283,573 20,071,297

Commissionsonguarantees 14,928,267 7,344,114

Commissionsondocumentarycredits 5,936,548 4,269,696

Commissionsondiscountingofbills 7,248,142 5,372,970

Commissionsoncardoperations 75,081,829 47,807,877

Others 13,373,405 10,501,674

142,851,764 95,367,628

fee and commission expenses

Creditcardexpenses (33,925,939) (18,756,239)

netfeesandcommission 108,925,825 76,611,389

8 dividend Income

2006 2005

Available-for-salesecurities 796,318 250,000

61

9 Other Operating Income

2006 2005

Telexandfaxchargesrecoveries 5,072,585 4,165,563

Recoveryofnon-performingadvances 44,478,853 5,352,638

Recoveryofbaddebtspreviouslywrittenoff 3,386,364 4,547

Profitondisposalofproperty,

plantandequipment - 68,931

Others 3,647,516 1,600,432

56,585,318 11,192,111

10 Staff Costs

2006 2005

Staffcosts 61,455,326 40,453,697

Staffcostwhollyrepresentssalaries,bonus,allowancesandtrainingcost.

TheaveragenumberofpersonsemployedbytheBankduringtheyearwas504(2005:418).

11 Premises, equipment and establishment expenses

2006 2005

Depreciation(note25) 18,254,968 14,458,575

Operating lease rentals

-property 3,197,488 2,155,245

Loss on sale of assets 5,012 -

Others 9,268,662 7,269,529

30,726,130 23,883,349

12 Provision for bad and doubtful debts

2006 2005

Specificprovisionforloansandadvances 26,407,297 34,001,968

Generalprovisionforloansandadvances 10,734,161 20,657,351

37,141,458 54,659,319

13 Other operating expenses

2006 2005

Directors’ fees 669,500 200,000

Auditors’remuneration 218,880 163,840

Donations 29,700 -

Softwarelicensefees 5,503,131 5,381,812

Bad-debtswrittenoff - 86,196

Others 31,414,308 26,004,103

37,835,519 31,835,951

NOTES TO THE FINANCIAL STATEMENTS

62

14 Income tax expense

2006 2005

Currenttax 77,806,642 30,514,598

Deferredtax(note29) 768,873 965,539

78,575,515 31,480,137

ThetaxonBank’sprofitbeforetaxdiffersfromthetheoreticalamountthatwouldariseusingthebasic

taxrateasfollows:

2006 2005

Profitbeforetax 314,302,059 125,920,546

Taxcalculatedatataxrateof25% 78,575,515 31,480,137

furtherinformationaboutdeferredincometaxispresentedinnote29.

15 dividends

DividendspayablearenotaccountedforuntiltheyhavebeenratifiedattheAnnualGeneralMeeting.Atthe

meeting of Board of Directors held on 11 April 2007, a dividend in respect of 2006 of Rf 150 per share (2005 - Rf

100pershare)amountingtoatotalofRf18,258,000(2005-Rf12,172,000)wasproposed.Thesefinancialstate

mentsdonotreflectthisdividendpayable,whichwillbeaccountedforundershareholdersequityasanappropria

tion of retained earnings for the year ending 31 December 2007.

16 earnings per share

Basicearningspershareiscalculatedbydividingthenetprofitattributabletoshareholdersbythe

weightedaveragenumberofordinarysharesinissueduringtheyear.

2006 2005

netprofitattributabletoshareholders 235,726,544 94,440,409

Weighted average number of ordinary shares in issue 121,720 121,720

Basicearningspershare 1,936.63 775.88

17 Cash and short term funds

2006 2005

Cashinhand 96,571,494 79,974,074

Balanceswithotherbanks 29,304,503 42,062,442

Moneyatcallandshortnotice 108,800,000 98,560,000

TreasuryBills 249,162,151 -

483,838,148 220,596,516

63

18 Balances with Maldives Monetary Authority (MMA)

2006 2005

Assigned capital deposit 15,000,000 15,000,000

Reservedeposit 967,806,281 876,215,073

982,806,281 891,215,073

Current 967,806,281 876,215,073

Non-current 15,000,000 15,000,000

(a) Assigned capital deposit :

AspertheregulationsofMaldivesMonetaryAuthority(MMA)theBankisrequiredtomaintainareserveof50%of

the minimum required capital, as assigned capital deposit.

(b) Reserve Deposit :

MMAregulationsrequirethecommercialbankstomaintainareserveof25%ofdemandandtimeliabilities,exclud

inginterbankliabilitiesandmargindepositsforMale’basedbranches,anditis15%forotherbranches.

19 Cash and Cash equivalents

forthepurposesofcashflowstatement,cashandcashequivalentscomprisethefollowingbalanceswithlessthan

90 days maturity:

2006 2005

Cashandbankbalancesfunds(note17) 234,675,997 220,596,516

Treasurybills 249,162,151 -

483,838,148 220,596,516

20 Bills of exchange

2006 2005

Exportbills 2,464,856 30,527,168

Importbills 42,005,753 39,619,933

Less:Provisionforimpairment[note21(a)] (22,371,741) (8,546,057)

netbillsofexchange 22,098,868 61,601,044

Current 10,765,193 40,734,642

non-current 11,333,675 20,866,402

NOTES TO THE FINANCIAL STATEMENTS

64

21 loans and advances

2006 2005

Overdrafts 1,097,043,990 803,307,153

Targetgrouploans 336,098,905 330,806,045

LoansunderEIBrefinanceschemefor

restoration of resorts affected by tsunami 256,000,000 -

Othernontargetgrouploans 2,491,627,561 1,843,700,581

Trustreceipts 77,994,778 20,474,667

Creditcardbalances 82,235,394 50,768,595

Staffloans 13,305,661 9,928,540

4,354,306,289 3,058,985,581

Less:Provisionforimpairment[note21(a)] (104,703,177) (128,464,593)

Less:Interestinsuspense(note22) (99,243,493) (103,003,549)

netloansandadvances 4,150,359,619 2,827,517,439

Current 1,289,638,378 924,752,665

non-current 2,860,721,241 1,902,764,774

(a) Movement in Provision for impairment are as follows:

2006 2005

(i) Specific provision

Balanceat1January 105,915,552 77,266,222

Amountrecoveredduringtheyear (44,478,853) (5,352,638)

Provisionmadeduringtheyear 26,407,297 34,001,968

Loanswrittenoffduringtheyearasuncollectible (2,628,220) -

Balanceat31December 85,215,776 105,915,552

(ii) General provision

Balanceat1January 31,095,098 10,437,747

Provisionmadeduringtheyear 10,734,161 20,657,351

Exchangedifferences 29,883 -

Balanceat31December 41,859,142 31,095,098

total 127,074,918 137,010,650

Represented by:

Loansandadvances 104,703,177 128,464,593

Billsofexchange 22,371,741 8,546,057

127,074,918 137,010,650

65

22 Movement in Interest in Suspense

2006 2005

Balanceat1January 103,003,549 62,860,069

Amountsuspendedduringtheyear 34,199,414 42,479,919

Amountreversedduetorecoveryandreschedulement (35,144,413) (2,336,439)

Loanswrittenoffduringtheyear (2,815,057) -

Balanceat31December 99,243,493 103,003,549

23 assets quality

nonperformingassetsincludedasadvancesandbillsofexchangeonwhichinterestisnotbeing

accruedareasfollows:

2006 2005

Loansandadvances 175,808,496 258,172,134

Billsofexchange 33,705,416 29,412,459

209,513,912 287,584,593

24 Investment

Available-for-sale Held -to-maturity total 2006 total 2005

At the beginning of the year 6,425,000 10,000,000 16,425,000 11,425,000

Additions - - - 5,000,000

Disposals - (10,000,000) (10,000,000) -

At the end of the year 6,425,000 - 6,425,000 16,425,000

Current - 10,000,000

Non-current 6,425,000 6,425,000

Available-for-sale investments consist of investment in equity shares of MFLC, are stated at cost, since the fair

value of these unlisted shares and bonds cannot be measured reliably.

NOTES TO THE FINANCIAL STATEMENTS

66

25 Property, Plant and equipment

Bank premises

leasehold buildings

Computer equipment

furniture and equipment

Motor vehicles and vessels

total 2006

total 2005

Cost of property, plant and equipment

Balance at beginning of the year 64,189,677 3,232,216 70,414,181 10,089,836 6,823,433 154,749,343 141,737,252

Additions during the year 280,842 2,319,948 20,339,439 3,697,890 1,180,573 27,818,692 13,728,556

Disposals during the year - - (1,035,271) (392,807) (10,771) (1,438,849) (716,465)

Balance at end of the year

64,470,519 5,552,164 89,718,349 13,394,919 7,993,235 181,129,186 154,749,343

Accumulated depreciation

Balance at beginning of the year

22,460,616 1,789,137 42,577,955 7,120,981 5,616,185 79,564,874 65,753,828

Depreciation for the year (Note 11) 3,211,615 631,433 12,261,461 1,688,785 461,674 18,254,968 14,458,575

Depreciation on disposals - - (1,032,543) (329,414) (9,200) (1,371,157) (647,529)

Balance at end of the year

25,672,231 2,420,570 53,806,873 8,480,352 6,068,659 96,448,685 79,564,874

Net book value at end of the year 38,798,288 3,131,594 35,911,476 4,914,567 1,924,576 84,680,501 75,184,469

(a)Someofthebranchofficesoperatefrompremisesleasedfromthirdparties,forwhichanaggregatesumof

Rf3,197,488(2005-Rf2,155,245)werepaidasoperatingleaserentals.

(b) The cost of fully depreciated assets at the balance sheet date amounted to

Rf45,181,853(2005-Rf21,246,604)

26 Other assets

2006 2005

Deposits and prepayments 20,750,725 21,526,332

Otherdebtors 14,882,061 8,018,908

35,632,786 29,545,240

Current 35,632,786 29,545,240

Non-current - -

67

27 Deposits from Non-Bank Customers

2006 2005

Currentaccountdeposits 1,656,988,317 1,360,205,118

Savingdeposits 1,850,244,087 1,516,111,086

Termdeposits 801,174,208 575,094,976

Marginsonlettersofcredit 22,895,849 33,079,047

Marginsonbankguarantee 62,598,267 55,177,375

4,393,900,728 3,539,667,602

Current 4,384,810,296 3,531,387,899

non-current 9,090,432 8,279,703

IncludedincustomeraccountsaredepositsofRf85,494,116(2005-Rf88,256,422)heldascollateral

for irrevocable commitments under import letters of credit and bank guarantees.

Alldepositshavefixedinterestrates.

28 Borrowings

2006 2005

GovernmentofMaldivesloansunder:IfADcreditline 35,442,291 38,325,834

OPECcreditline 6,857,752 7,477,775

AFD credit line 32,000,000 -

EIB credit line 256,000,000 -

Otherforeignbankborrowings 131,963,146 25,294,391

462,263,189 71,098,000

Current 74,762,269 13,616,155

non-current 387,500,920 57,481,845

acronyms:

IFAD -International Fund for Agricultural Development

OPEC -OrganizationofPetroleumExportingCountries

AFD -Agence Francaise de Development Bank

EIB -European Investment Bank

Maturity of borrowings

2006 2005

notlaterthan1year 74,762,268 13,616,155

Laterthan1yearandnotlaterthan5years 127,246,710 36,252,002

Over5years 260,254,211 21,229,843

462,263,189 71,098,000

Borrowingsatfloatingrateswithafixedspread 387,963,146 25,294,391

Borrowingsatfixedrates 74,300,043 45,803,609

462,263,189 71,098,000

NOTES TO THE FINANCIAL STATEMENTS

68

29 deferred Income taxes

Deferredincometaxesarecalculatedonalltemporarydifferencesundertheliabilitymethodusingan

effectivetaxrateof25%.

Themovementonthedeferredtaxaccountisasfollows:

2006 2005

Atthebeginningoftheyear 4,670,574 3,705,035

Acceleratedtaxdepreciation 768,873 965,539

Atendoftheyear 5,439,447 4,670,574

Thedeferredtaxchargeintheincomestatementrepresentthefollowingtemporarydifference:

2006 2005

Acceleratedtaxdepreciation 768,873 965,539

30 Other liabilities

2006 2005

Accruedexpenses 14,152,744 9,323,414

Employeesprovidentfund 27,468,29321,419,269

Provisionforotherlosses 544,580 120,800

Sundrycreditors 20,992,529 14,549,505

Developmentfunds 57,280,679 6,694,693

120,438,825 52,107,681

Current 92,970,532 30,688,412

non-current 27,468,293 21,419,269

TheBankmanagesandadministersseveralloanschemesunderwhichthebank,asacustodianreceivesfundsfrom

variousdonorsanddisbursesuchfundstobeneficiaries.Themovementinthesedevelopmentfundsgivenbelow:

development funds 2006 2005

Openingbalance 12,952,743 -

Amountreceived 54,361,772 12,912,349

Add:Interestaccruedonloansduringtheyear 504,553 153,039

Less:Interestonloangiventofund (105,178) -

Less:Administrationfees - (112,645)

67,713,890 12,952,743

Less:Loansandadvancesattheyear-end (10,433,211) (6,258,050)

57,280,679 6,694,693

6�

31 Ordinary Shares and Share Premium

Number Ordinary shares total

At 31 December 2005 121,720 36,516,000 11,270,040 47,786,040

At 31 December 2006 121,720 36,516,000 11,270,040 47,786,040

Thetotalauthorisednumberofordinarysharesis1,000,000shares(2005-1,000,000shares)withaparvalueof

Rf 300 (2005 - Rf 300) per share. All issued shares are fully paid.

32 Reserves

2006 2005

Statutory reserve 30,000,000 30,000,000

Assigned capital reserve 6,000,000 6,000,000

Generalreserve 560,972,754 337,418,210

Totalreservesatendofyear 596,972,754 373,418,210

Movementinreserveswereasfollows:

Statutory reserve

At beginning of year 30,000,000 30,000,000

Transfer to general reserve - -

At end of year 30,000,000 30,000,000

assigned capital reserve

At beginning of year 6,000,000 6,000,000

At end of year 6,000,000 6,000,000

AsperthesubsidiaryloanagreementbetweentheBankandtheGovernmentoftheRepublicofMaldives,onAtolls

credit and development banking project, the bank reserved Rf 6.0 Million as Assigned capital reserve.

2006 2005

General reserve

Atbeginningofyear 337,418,210 254,541,201

netprofitforyear 235,726,544 94,440,409

Dividends (12,172,000) (11,563,400)

Atendofyear 560,972,754 337,418,210

total reserves

Atbeginningofyear 373,418,210 290,541,201

netprofitforyear 235,726,544 94,440,409

Dividends (12,172,000) (11,563,400)

Atendofyear 596,972,754 373,418,210

NOTES TO THE FINANCIAL STATEMENTS

70

33 Contingencies

(a) Contingent Liabilities

In the normal course of business, the Bank makes various commitments and incurs certain contingent liabilities

withlegalrecoursetoitscustomers.nomateriallossesareanticipatedasaresultofthesetransactions.Thecom

mitmentsarequantifiedbelow:

2006 2005

Acceptances 93,050,873 138,790,098

Lettersofcredit 240,290,832 145,126,480

Guarantees 335,094,129 398,787,076

668,435,834 682,703,654

(b) Unutilised irrevocable commitments

The unutilised value of irrevocable commitments relating to letters of credit, acceptances and permanent overdrafts

whichcannotbewithdrawnatthediscretionoftheBank,withoutriskofincurringsignificantpenaltiesorexpenses

approximatestoRf793,315,983(2005:Rf214,656,380)asatthebalancesheetdate.

(c) Investment

The Board of Directors of Bank of Maldives Plc has subscribed and paid at par value for a shareholding up to 10

(ten) percent in the total equity share capital of MFLC at an aggregate amount equal to US$ 500,000

(Rf6,425,000).TheBankisrequiredtoenterintoaPutOptionagreementwithInternationalfinanceCorporation

(IfC)andunderthesaidPutOption,IfCshallhavetherighttosellitssharesinMfLCasspecifiedinthePutOption

to, inter alia, the Bank, and the Bank is obliged to purchase from IFC the shares thus offered to the Bank. The

Bank’ssaidobligationsunderthePutOptionmaybecontinuedasanunquantifiablecontingentliabilityandthe

Government has agreed to indemnify the Bank against such contingent liability.

(d) Contingent Assets

Therewerenomaterialcontingentassetsrecognisedatthebalancesheetdate.

34 Commitments

(a) Capital Commitments

Therewerenomaterialcapitalcommitmentsoutstandingasatthebalancesheetdate.

(b) Operating lease commitments

Thefutureminimumleasepaymentsundernon-cancellableoperatingleasesareasfollows:

2006 2005

notlaterthan1year 3,113,871 2,148,671

Laterthan1yearandnotlaterthan5years 4,924,120 5,266,995

Laterthan5years 2,496,008 2,795,000

10,533,999 10,210,666

71

35 Cash generated from operations

Reconciliationofnetprofittocashgeneratedfromoperations:

2006 2005

Profitbeforetax 314,302,059 125,920,546

Adjustments for :

Depreciation(note11) 18,254,968 14,458,575

Profitonsaleofproperty,plantandequipment(note9) - (68,931)

Loss on sale of property, plant and equipment (Note 11) 5,012 -

Increase/(decrease)inprovisionforotherlosses 423,780 (134,299)

Provisionforbadanddoubtfuldebts(note12) 37,141,458 54,659,319

Increase/(decrease)inaccruedexpenses 4,829,330 (2,949,121)

Increaseinprepaymentsandadvances 775,607 4,132,937

Cashgeneratedfromoperations 375,732,214 196,019,026

36 Related party transactions

TheBankiscontrolledbyGovernmentofMaldiveswhichownsa51%oftheordinaryshares.Theremaining49%of

thesharesarewidelyheld.

AnumberofbankingtransactionsareenteredintowithStatecontrolledentitiesinthenormalcourseofbusiness.

Theseincludeloans,deposits,tradefinanceandforeigncurrencytransactions.Thevolumeofrelatedpartytransac

tionsandoutstandingbalancesattheyearendareasfollows:

directors and related entities Government and related entities

2006 2005 2006 2005

loans

Loansoutstandingat1January 68,032 352,717 245,320,472 138,529,436

Loans issued during the year 93,742,613 - 164,654,218 154,880,000

Loan repayments during the year (301,098) (284,685) (35,384,357) (48,088,964)

Loans outstanding at 31 December 93,509,547 68,032 374,590,333 245,320,472

directors and related entities Government and related entities

2006 2005 2006 2005

deposits

Depositsat1January 2,121,495 1,270,626 823,995,158 347,640,309

Net increase in deposits during the year 2,064,110 850,869 216,072,981 476,354,849

Deposits at 31 December 4,185,605 2,121,495 1,040,068,139 823,995,158

NOTES TO THE FINANCIAL STATEMENTS

72

furtherdetailsonloanstodirectorsandrelatedentitiesareasfollows:

Party/ies V.A Pvt. Ltd

Name of directors / Relationship Uz. Ahmed Hamza (Director-V.A Pvt. Ltd)

aggregate amount of accommodation

Limit US$ 500,000

Outstanding as at 31.12.06 US$ 16,150

Nature oftransaction Letter of Credit cum Overdraft

Security i-Mortgageofhousenamed“willows”,villingili,Male’

bearingregistryno.A-4120within130.05sq.mof

privatelandownedbyMr.AliYoosuf(Guarantor),

insuredinthenameoftheBorrowerforUS$450,000.

ii - Mortgage of shop situated at No. 75 Majeed

heemagu,Male’bearingregistryno.AB/f.51within393

sq.ftofgovernmentlandownedbyMr.Mohamed

Latheef(GuarantorandDirectoroftheBorrower)

insuredinthenameoftheBorrowerforRf4,000,000

iii-Mortgage,hupothecate,depositwithandpledgeto

the Bank and also pledges, mortgages, hypothecates

andcreatefixedandfloatingchargetotheBank,by

wayoffirstchargeoverthestockintradeatallshops

andgodownsownedbytheBorrower,insuredinthe

nameoftheownerforRf17,500,00.

iv-PersonalGuaranteeofthefollowingDirectorsofthe

Borrower:

a) Ms.Shamsul Muna, Alanaasige, S. Maradhoo Feydhoo

b) Mr Mohamed Latheef, Alanaasige, S.Maradhoo Feydhoo

c) Mr. Ali Shiyaam, Alanaasige, S. Maradhoo Feydhoo

d)Mr. Ahmed Hamza, Alanaasige, S. Maradhoo Feydhoo

e)IbrahimJihad,M.ThreeAvilla,Male’

f) Ms. Shamoona Abdulla, M. Three A Villa, Male’

Party/ies Dholhiyadhoo Investments Pvt Ltd

Name of directors / Relationship Uz. Ahmed Hamza

(Director- Dholhiyadhoo Investments Pvt Ltd)

73

aggregate amount of accommodation

Limit US$ 5,000,000

Outstandingasat31.12.06 US$2,015,342

Nature of transaction Term Loan

Security i) Mortgage of leasehold rights over the “Island” and the

“Resort” at ‘Medhufushi Island Resort”.

Party/ies Medhufushi Investments Pvt Ltd

Name of directors / Relationship Uz. Ahmed Hamza

(Director- Dholhiyadhoo Investments Pvt Ltd)

aggregate amount of accommodation

Limit US$ 15,000,000

Outstanding as at 31.12.06 US$ 5,000,000

Nature of transaction Demand Loan

Security i)Building, structures and other property of the pro

posed resort.

ii)Corporate guarantee of V.A Pvt Ltd

iii)Personal guarantee of Mr Abdulla Ali

Party/ies Focus Infocom Pvt Ltd

Name of directors / Relationship Mr Mohamed Ahmed Didi

(Director – Focus Infocom Pvt Ltd)

aggregate amount of accommodation

Limit Rf4,000,000

Outstandingasat31.12.06 Rf3,506,449

Nature of transaction Overdraft

Security i)CorporateGuaranteeofM/SfocusComputersPvtLtd,

Male’.

ii)Personal Guarantee of Mr Mohamed Salih, M Shuaz,

Male’.

In2006,thetotalremunerationofthedirectorswasRf2,341,805(2005:Rf1,624,927).

37 Post balance sheet events

noeventshaveoccuredsincethebalancesheetdate,whichwouldrequireadjustmentsto,ordisclosurein,the

financialstatements.

NOTES TO THE FINANCIAL STATEMENTS

74

2002 2003 2004 2005 2006

Highest price 750.00 1,200.00 1,350.00 1,800.00 2,000.00

lowest price 585.00 585.00 750.00 975.00 1,500.00

Closing price 650.00 1,000.00 1,175.00 1,550.00 1,600.00

weighted average trading Price 656.17 718.97 980.00 1,417.00 1,731.00

Market Capitalisation 79,118,000 121,720,000 143,021,000 188,666,000 194,752,000

Capital Structure

TheauthorisedandpaidupsharecapitaloftheBankduringfinancialyear2006remainedunchangedashasbeensince1998.

TheexistinglevelofpaidupcapitalandreservesisinexcessoftheminimumrequiredbytheMaldivesMonetaryAuthor--

ity,whichisalsoinlinewiththatprescribedinternationallybytheBasleCapitalAccord.Inlinewiththeincreaseinthelevel

oflendingandexpansionoftheBank,theBankhasplansforadditionalshareissue.TheauthorisedcapitalremainedatRf

300,000,000/-andtheissued,subscribedandpaidupcapitaloftheBankasat31st December 2006 remained at

Rf36,516,000/-.

Major shareholders

as at 31.12.2006 Number of Shares

Amount (Rufiyaa) % Share

Ministry of Finance & Treasury 62,077 18,623,100 51

State Trading Organisation Plc (STO) 6,086 1,825,800 5

Maldives Transport & Contracting Company Plc (MTCC) 6,086 1,825,800 5

Government Employee’s Provident Fund 10,955 3,286,500 9

Account of Rayyathun* 6,086 1,825,800 5

General Public 30,430 9,129,000 25

TOTAL 121,720 36,516,000 100

SHARE PERFORMANCE

51%

25%

5%

9%

5%5%

Ministry of Finance & Treasury

State Trading Organisation Plc (STO)

Maldives Transport & Contracting Company Plc (MTCC)

Government Employees’ Provident Fund

Account of Rayyathun*

General Public

*Held by Island/Atoll communities through the Ministry of Atolls Development

SHAREHOLDERS AS AT 31.12.2006

75

BankofMaldivesPlcwasinauguratedonnovember11,

1982bythePresidentHisExcellencyMaumoonAbdul

Gayoom. It started commercial operation as a joint ven--

turebankwith60%sharesheldbytheGovernmentofthe

Maldives (including its Agencies and Maldivian Companies)

and40%sharesownedbyInternationalfinanceInvest--

ment Company Limited (later IFIC Bank Limited), Dhaka,

Bangladesh, respectively. From the inception of the Bank,

until 31st December 1992, under a Management Contract

withIfICBankLtd,theBankwasmanagedbyIfICBank

Limited.UnderthiscontractIfICwastobringinprofes--

sionals to run the Bank and lay a sound foundation for the

Bank,andtheywerepaid10%oftheBank’sprofit.

During the tenth year of the Bank, the Government of

MaldivesdecidednottorenewtheManagementCon--

tractwithIfICBankLtdandtore-structuretheBankof

Maldives and hence requested the IFIC Bank Ltd to reduce

the share holding and also the number of representation in

the Board. Consequently IFIC Bank Ltd decided to dispose

off its entire shares in the Bank of Maldives and terminate

itsrelationswiththeBankwiththeexpiryoftheManage--

mentContractonDecember31,1992.On14november

1992,GovernmentofMaldivespurchased40%sharesheld

byIfICBankLtd.Asaresult,80%ofthesharecapitalof

theBankofMaldiveswasownedbytheGovernmentwhile

theremaining20%ofthesharecapitalwassoldequallyto

the State Trading Organization and Maldives Transport and

Contracting Company respectively.

In December 1992, the Government decided, to sell

Bank’ssharestothegeneralpublic,withaviewtoexpand

the Bank’s capital.

fromJanuary1,1993,BankofMaldivesPlchasbecome,

andsincethenremained,abankfullyownedbythe

people and the Government of the Maldives.

TheBankofMaldivesPlcissuedsharesduring1993,1994,

1995,1996,1997and1998.Asaresultoftheseshare

issues, the paid up capital has risen from Rf 5 million in

1992toRf36.516millionin1998.Asnoshareswere

issuedsince1998,thepaidupcapitaloftheBankbythe

end of 2005 remained at Rf 36.516 million.

The main business of the Bank is retail banking. In ad--

dition to handling development banking activities in all

theatollsoftheRepublic,BankofMaldivesPlcextendsa

variety of modern banking services on line, in a fully com--

puterized environment and is proud to serve the nation as

the leading bank in the Maldives.

Presently the Bank of Maldives Plc has 19 branches. Three

out of nineteen branches are in Male’ the capital, one in

Male’

International Airport (Hulhule’ Island), one is in Villingili

ward,thefifthwardofMale’andonebranchinHulhum--

ale’. The other thirteen branches are distributed amongst

theatollsofthecountry,eachwithadesignatedcommand

area. Hence, the Bank of Maldives Plc is able to serve

thewholenation.ThesequenceofopeningtheBankof

MaldivesPlcofficesshowsthegrowthofthehorizontal

expansionoftheBank.

23May1982

RegisteredasacompanywithMinistryofHomeAffairs

10november1982

Licensed to operate as a banking business from Maldives

Monetary Authority

11november1982

MainBranchandHeadOffice,Male’

01December1983

Gan Branch (Seenu Atoll)

29December1984

Majeedhee Magu Branch, Male’

29December1987

Bazaar Branch, Male’

26June1990

Naifaru Branch (Lhaviyani Atoll)

29 December 1991

Kulhudhuffushi Branch (Haa Dhaalu Atoll)

PROFILE

76

16January1993

Fonadhoo Branch (Laamu Atoll)

17January1994

Hithadhoo Branch (Seenu Atoll)

10October1994

Muli Branch (Meemu Atoll)

30October1994

Thinadhoo Branch (Gaafu Dhaalu Atoll)

23 November 1995

Fuvahmulaku Branch (Gnaviyani Atoll)

30 November 1997

Villingilli Branch (Gaafu Alifu Atoll)

20August1998

Male’ International Airport Branch (Hulhule)

11 March 2001

Dhidhdhoo Branch (Haa Alifu Atoll)

09 October 2003

Villimale’ Branch, Villingili, Male’

12 October 2003

Hulhumeedhoo Branch (Seenu Atoll)

15 October 2003

Ungoofaaru Branch (Raa Atoll)

03 April 2005

Hulhumale’ Branch (Hulhumale’)

11 May 2006

Eydhafushi Branch (Baa Atoll)

04September2006

Rasdhoo Branch (Alifu Alifu Atoll)

04September2006

Mahibadhoo Branch (Alifu Dhaalu Atoll)

07 September 2006

Kudahuvadhoo Branch (Dhaalu Atoll)

09 September 2006

Manadhoo Branch (Noonu Atoll)

26 April 2007

Funadhoo Branch (Shaviyani Atoll)

On 29th December 1997, H.E. President Maumoon Abdul

Gayoomlaidthefoundationstoneofthe8-storeyBank

of Maldives Building on Boduthakurufaanu Magu, and it

wasdeclaredopenbythePresidenton27thJanuary2000.

Thesameday,HisExcellencythePresidentinaugurated

theBank’sAutomatedTellerMachineservice,thefirstof

its kind in the country. Bank of Maldives Plc through its

Development Banking activity is the implementing agency

of the Atolls Credit and development Banking.

Project(ACDBP),whichcoversthenorthernandCentral

Atolls from Haa Alifu to Laamu Atoll and the Southern

Atolls

DevelopmentProject(SADP)whichcoversthefour

southernmost atolls namely Gaafu Alifu, Gaafu Dhaalu,

GnaviyaniandSeenuAtolls.Thefirstprojectwasfinanced

bylong-termborrowingsfromtheInternationalfundfor

Agricultural Development (IFAD) and the second project

wasfinancedbylong-termborrowingsfromtheInterna--

tional Fund for Agricultural Development (IFAD) and Opec

Fund for International Development (OPEC) through the

Government of Maldives.

77

Head OffICe

Bank of Maldives Plc11,BoduthakurufaanuMagu,Male’,20094,Republic of Maldives

CompanyRegistryno.C-22/1982

Tel:+9603322948fax:+9603328233Swift:MALBMvMvwebsite:www.bankofmaldives.com.mve-mail: info@bml.com.mv

HEAD OFFICE DEPARTMENTS

CARD CENTRE

Bank of Maldives Plc5th Floor, Bank of Maldives Building11, Boduthakurufaanu MaguMale’20094Republic of MaldivesTel: +(960) 333 0200fax:+(960)3338041e-mail: cardcentre@bml.com.mv

CORPORATE AFFAIRS DEPARTMENT

Bank of Maldives Plc6th Floor, Bank of Maldives Building11, Boduthakurufaanu MaguMale’20094Republic of MaldivesTel:+(960)3330188fax:+(960)3330185e-mail: corporateaffairs@bml.com.mv

CREDIT DEPARTMENT

Bank of Maldives Plc6th Floor, Bank of Maldives Building11, Boduthakurufaanu MaguMale’20094Republic of MaldivesTel: +(960) 333 0152fax:+(960)3330185e-mail: credit@bml.com.mv

DEVELOPMENT BANKING CELL

Bank of Maldives Plc2nd Floor, Bank of Maldives Building11, Boduthakurufaanu MaguMale’20094Republic of MaldivesTel: +(960) 333 0162fax:+(960)3330186e-mail: dbc@bml.com.mv

ENTERPRISE BANKING DEPARTMENT

Bank of Maldives Plc2nd Floor, Bank of Maldives Building11, Boduthakurufaanu MaguMale’20094Republic of MaldivesTel:+(960)3330298fax:+(960)3330186e-mail: enterprisebanking@bml.com.mv

FINANCE DEPARTMENT

Bank of Maldives PlcH. OrchidmaageLotus GoalhiMale’ 20095Republic of MaldivesTel: +(960) 333 0132fax:+(960)3330249e-mail:finance@bml.com.mv

INTERNATIONAL BANKING DEPARTMENT Bank of Maldives Plc5th Floor, Bank of Maldives Building11, Boduthakurufaanu MaguMale’20094 Republic of Maldives Tel: +(960) 333 0156 fax:+(960)3330184 e-mail: foreign@bml.com.mv

HUMAN RESOURCES DEPARTMENT

Bank of Maldives Plc2nd Floor, Bank of Maldives Building11, Boduthakurufaanu MaguMale’20094Republic of MaldivesTel: +(960) 333 0122fax:+(960)3330263e-mail: human_resources@bml.com.mv

INFORMATION TECHNOLOGY DEPARTMENT

Bank of Maldives Plc4thfloor,BankofMaldivesBuilding11, Boduthakurufaanu MaguMale’20094Republic of MaldivesTel: +(960) 333 0110fax:+(960)3330115e-mail: it@bml.com.mv

INTERNAL AUDIT DEPARTMENT

Bank of Maldives PlcH. OrchidmaageLotus GoalhiMale’ 20095Republic of MaldivesTel:+(960)3330181fax:+(960)3330249e-mail: inspection@bml.com.mv

LEGAL AFFAIRS & DOCUMENTATIONDEPARTMENT

Bank of Maldives Plc6th Floor, Bank of Maldives Building11, Boduthakurufaanu Magu,Male’20094,RepublicofMaldivesTel:+(960)3330154fax:+(960)3330185e-mail: legalaffairs@bml.com.mv

PUBLIC RELATIONS AND ADMINISTRATION DEPARTMENT

Bank of Maldives Plc4thfloor,BankofMaldivesBuild--ing11, Boduthakurufaanu Magu,Male’20094,RepublicofMaldivesTel: +(960) 333 0133fax:+(960)3330115e-mail: admin@bml.com.mv

BRANCH NETWORK & CONTACTS

78

BRANCHES

BAZAR BRANCH

Bank of Maldives PlcOrchid Magu,Male’,20188Republic of MaldivesTel: +(960) 333 0222fax:+(960)3330220e-mail: bazar@bml.com.mv

DHIDHDHOO BRANCH

Bank of Maldives PlcNiloafaru MaguHaa Alifu Dhidhdhoo, 01100Republic of MaldivesTel: +(960) 650 0066fax:+(960)6500066email: dhidhdhoo@bml.com.mv

EYDHAFUSHI BRANCH

Bank of Maldives PlcMaalhosmadulu Dhekunuburi Atholhu No. 2Baa. EydhafushiRepublic of MaldivesTel:+(960)6608428fax:+(960)6608431email: eydhafushi@bml.com.mv

FONADHOO BRANCH

Bank of Maldives PlcAndhaleebu MaguLaamufonadhoo,15080Republic of MaldivesTel:+(960)6800729fax:+(960)6800729email: fonadhoo@bml.com.mv

FUNADHOO BRANCH

Bank of Maldives PlcMinivan HingunSh. FunadhooRepublic of MaldivesTel:+(960)6540596fax:+(960)6540597email: Funadhoo@bml.com.mv

FUVAHMULAKU BRANCH

Bank of Maldives PlcBahaaru MaguGnaviyanifuvahmulah,18014Republic of MaldivesTel:+(960)6865003fax:+(960)6860665email: fuvahmulaku@bml.com.mv

GAN BRANCH

Bank of Maldives PlcBlock No.502Seenu Gan, 19070Republic of MaldivesTel:+(960)6898014fax:+(960)6898087e-mail: gan@bml.com.mv

HITHADHOO BRANCH

Bank of Maldives PlcGhaazee Magu, MedhuvaluSeenu Hithadhoo, 19020Republic of MaldivesTel:+(960)6885011fax:+(960)6885013email: hithadhoo@bml.com.mv

HULHUMEEDHOO BRANCH

Bank of Maldives PlcBahaaudhdheen MaguSeenu Hulhudhoo, 19060Republic of MaldivesTel:+(960)6895700fax:+(960)6894029email: hulhumeedhoo@bml.com.mv

HULHUMALE’ BRANCH

Bank of Maldives PlcUnit (C-G-05), Bageechaa HigunHulhumale’, 23000Republic of MaldivesTel: +(960) 335 0067fax:+(960)3350526email: hulhumale@bml.com.mv

KUDAHUVADHOO BRANCH

Bank of Maldives PlcBeach HeavenDh. KudahuvadhooRepublic of MaldivesTel: +(960) 676 0616fax:+(960)6760615email: Kudahuvadhoo@bml.com.mv

KULHUDHUFFUSHI BRANCH

Bank of Maldives PlcHaa Dhaalu Kulhudhuffushi, 02110Republic of MaldivesTel:+(960)6528813fax:+(960)6527611email: kuldhuffushi@bml.com.mv

MAHIBADHOO BRANCH

Bank of Maldives PlcAtholhu Vehi Ad. MahibadhooRepublic of MaldivesTel:+(960)6680850fax:+(960)6680849email: mahibadhoo@bml.com.mv

MAIN BRANCH

Bank of Maldives Plc1st Floor, Bank of Maldives Building11, Boduthakurufaanu MaguMale’,20094Republic of MaldivesTel:+(960)3330144fax:+(960)3330180e-mail: main@bml.com.mv

MAJEEDHEEMAGUBRAnCH

Bank of Maldives PlcMajeedhee Magu,Male’,20138Republic of MaldivesTel: +(960) 333 0202fax:+(960)3330210e-mail: majeedheemagu@bml.com.mv

MALE’ INTERNATIONAL AIRPORT BRANCH

Bank of Maldives PlcHulhule, 22000Republic of MaldivesTel: +(960) 331 5211fax:+(960)3322550e-mail: airport@bml.com.mv

7�

MANADHOO BRANCH

Bank of Maldives PlcAtholhu Rayyithunge Ijthimaaee Maru--kazuN. ManadhooRepublic of MaldivesTel:+(960)6560583fax:+(960)6560582email: manadhoo@bml.com.mv

MULI BRANCH

Bank of Maldives PlcRankokaa MaguMeemu Muli, 11050Republic of MaldivesTel: +(960) 672 0001fax:+(960)6720001email: muli@bml.com.mv

NAIFARU BRANCH

Bank of Maldives PlcMarine DriveLhaviyani Naifaru, 07020Republic of MaldivesTel: +(960) 662 0319fax:+(960)6620319email: naifaru@bml.com.mv

RASDHOO BRANCH

Bank of Maldives PlcAtholhu Vehi AA. RasdhooRepublic of MaldivesTel:+(960)6660849fax:+(960)6660848email: rasdhoo@bml.com.mv

THINADHOO BRANCH

Bank of Maldives PlcVaruhagu MaguGaafu Dhaalu Thinadhoo, 17100Republic of MaldivesTel:+(960)6841002fax:+(960)6841984email: thinadhoo@bml.com.mv

UNGOOFAARU BRANCH

Bank of Maldives PlcMiskiy MaguRaa Ungoofaaru 05060Republic of MaldivesTel:+(960)6580272fax:+(960)6580272email: ungoofaaru@bml.com.mv

VILLINGILI BRANCH

Bank of Maldives PlcAmeenee MaguGaafu Alifu Villingili, 16020Republic of MaldivesTel:+(960)6820005fax:+(960)6820005email: villingili@bml.com.mv

VILLIMALE’ BRANCH

Bank of Maldives PlcBlock No. 31Villingili,Male’ , 21017Republic of MaldivesTel: +(960) 339 1650fax:+(960)3391651email: villimale@bml.com.mv