BML Annual Report 2011 - English

2011
ANNUAL REPORT
Corporate Profile
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Corporate Profile
ank of Maldives is proud to be the only local bank, serving the entire nation through the largest banking network reaching virtually every citizen in the country. Today, the Bank takes pride in serving over 235,000 valued customers via its numerous branches, ATMs and POS terminals. We understand that we play a pivotal role as an engine of growth and a partner for success for thousands of individuals, families and businesses of every size.
We are the only bank in the country providing a full range of modern banking products to meet the nancial needs for individuals, businesses and institutional investors. We built this company to attract the best employees to serve our customers and clients, to support local communities and to create long-term value for our shareholders. We, at Bank of Maldives, are embarking on a journey to transform the business and to become a truly customer-focused organisation.
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Our 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 condence and satisfaction.
Our Mission
To be the leader in the nancial services industry in Maldives, spreading its presence in all key economic geographies in Maldives To be the leader in the nancial services industry in Maldives, inculcating a long term saving culture in the nation and promoting a cashless society To be one of the most efcient, protable and respected nancial institutions in Maldives
Core Values
Integrity Innovation Respect Communication Service
Our Business Strengths
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Strong Financial Platform
Deposit base of over MVR 7.5 billion Strong growth in operating profit Gross income over MVR 1 billion Regulatory capital requirements met 78% provision cover
Strong Customer Base

Over 235,000 customers Over 38,000 lending relationships
Market Leadership in Innovation

First to launch Internet Banking in Maldives First to launch Mobile Banking in Maldives First to launch ATM services in Maldives First to launch POS services in Maldives First to launch AMEX and VISA Credit and Debit cards
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Leadership in Service Delivery

Largest financial network of branches and ATMs in the Maldives Interbank funds transfer facility between branches in key islands and atolls across the Maldives Largest and most popular POS network in the country Market leader in self-service banking with the largest customer base of internet, mobile and ATM users Exclusive acquirer and issuer for American Express cards in the Maldives Only principal member in the Maldives for Visa and MasterCard of foreign Worldwide network correspondent banking relationships
Experienced and Dedicated Team

99.5% of the workforce are locals 87% of the top leadership team are experienced local professionals Largest employer in the banking sector with over 790 dedicated employees The only local Bank The only locally owned bank in the Maldives The only publicly listed bank in the Maldives
Our Branch Network
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Our Branch Network
Key Highlights & Achievements
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Key Highlights and Achievements in 2011

Products and Services
Below are some of the products and services introduced and expanded by Bank of Maldives during the year. Additional 2 ATMs were installed at Addu City 5 ATMs were installed in Male Maldives Mobile Banking experience was improved through development and implementation of an in-house solution Credit Cardholders received extension of insurance cover against Travel Accident Insurance and Travel Inconvenience Insurance one of the most sought after benefits by Credit Cardholders Expanded the acquiring portfolio by commencing to acquire Diners Club International, Pulse & Discover network cards An agreement was signed with Maldives Post Limited to expand banking services through the Post network in selected islands 496 new POS machines were installed in stores and other location across the country
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Sponsorship and CSR

The following are some of the initiatives taken by the Bank to show our commitment to help the community. Signed MoU with the Ministry of Education to develop three computer laboratories in schools Sponsored the development of a computer lab for an NGO (SWAD), to conduct computer training courses targeting youth recovering from drug abuse Sponsored Fishermens Day celebrations & AIDS Day function Sponsored SAARC Twenty20 Cup held at Fuvahmulah Contributed to the Maldivian edition of Whos Who publication Purchased the book Underwater Kingdom, a special edition on Maldives underwater beauty to be donated to various school libraries, across the country
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Customer Experience
Below are some of the steps taken by Bank of Maldives to improve our customer service. Provided extensive customer service training to Call Centre staff Call Centre team expanded and relocated to Addu City resulting in significant improvements to customer service experience Key Account Management function was introduced under Corporate Banking arm, to provide personalised banking services to corporate customers
Financial Performance
72% Growth in Operating Profit (Increased from MVR 302m to MVR 519m) 74% Growth in Non-Interest Income (Increased from MVR 248m to MVR 432m) 17.5% Growth in Net Interest Income (Increased from MVR 406m to MVR 477m) Gross Revenue exceeded MVR 1 billion for the first time (Increased from MVR 830m to MVR 1.1bn)
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Human Resource Development

The organisational design was reviewed and significant organisational restructuring was implemented to streamline the operations, increase business focus and to deliver a better customer experience. The Executive Committee was re-constituted to drive the business and regular EXCO meetings were held during the year. Performance Management was implemented with the aim of improving productivity and performance throughout the business. During the past year, staff at all levels underwent performance management training conducted by HR specialists.
Community Banking
Over 2000 visits were made by our teams in 2011, covering every inhabited island in the country to provide banking services and to deliver pension income to the elderly customers across the nation. Ventures such as the 2011 agreement with the Post Office will further enhance our role in the community.
Financial Highlights
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2011 2010 830,194,571 406,212,686 301,752,629 50,986,231 Change 29.5% 17.5% 71.9% -
RESULTS FOR THE YEAR Gross Income Net Interest Income Operating Prot (before provision and taxes) Net Prot After Tax RESULTS AT THE END OF THE YEAR Shareholders Equity Deposits from Customers Customer Advances (Net) Total Assets INFORMATION PER ORDINARY SHARE Earnings - Basic (MVR) Net Asset Value (MVR) Market Value at year end (MVR) RATIOS Return on Average Shareholders Equity Return on Average Assets Price Earning Ratio (times) NPA (Net) % STATUTORY RATIOS Capital Adequacy (Statutory Requirement 12%)
1,074,778,558 477,378,139 518,756,150 -
766,880,005 7,518,761,713 5,059,735,829 9,564,012,183
766,880,005 7,012,578,842 5,202,417,233 9,351,327,851
0.0% 7.2% -2.7% 2.3%
142.49 73.00
9.47 142.49 143.00
0.0% -49.0%
6.2%
4.9% 0.5% 15.1 4.8%
30.5%
13.2%
13.3%
-0.5%
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Gross Income
1,200,000,000
500,000,000 480,000,000 460,000,000 440,000,000
Net Interest Income
1,000,000,000
800,000,000
600,000,000
420,000,000
400,000,000
400,000,000
200,000,000
380,000,000 360,000,000
2007
2008
2009
2010
2011
2007
2008
2009
2010
2011
Operating Prot (Before Provision and Tax)

600,000,000
Total Assets
12,000,000,000
500,000,000
10,000,000,000
400,000,000
8,000,000,000
300,000,000
6,000,000,000
200,000,000
4,000,000,000
100,000,000
2,000,000,000
2007
2008
2009
2010
2011
2007
2008
2009
2010
2011
Customer Advances
9,000,000,000 8,000,000,000 7,000,000,000 6,000,000,000 5,000,000,000 4,000,000,000 3,000,000,000 2,000,000,000 1,000,000,000 -
Customer Deposits
9,000,000,000 8,000,000,000 7,000,000,000 6,000,000,000 5,000,000,000 4,000,000,000 3,000,000,000 2,000,000,000 1,000,000,000 -
2007
2008
2009
2010
2011
2007
2008
2009
2010
2011
Shareholders Equity
1,600,000,000 1,400,000,000 1,200,000,000 1,000,000,000 800,000,000 600,000,000 400,000,000 200,000,000 -
2007
2008
2009
2010
2011
Annual Review
Contents
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Contents
03 04 04 04 05 08 12 Corporate Prole Our Vision Our Mission Core Values Our Business Strengths Key Highlights and Achievements in 2011 Financial Highlights
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45 51 54
CORPORATE GOVERNANCE
Directors Report Audit & Risk Management Committee Report Appointment, Nomination & Remuneration Committee Report
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16 18 21 24
ANNUAL REVIEW
Chairmans Statement Chief Executives Review Prole of Board of Directors Executive Team
57 105 108
FINANCIAL REPORTS INVESTOR INFORMATION OUR CONTACTS
27
28 30 33 36 38 40 42
OPERATIONS REVIEW
Achieving New Levels of Financial Milestones Building a Professional, Customer-Focused Team Promoting Enriching Programs for Our Community Setting High Standards for Retail Banking Working in Close Partnership with Our Corporate Clients Effectively Managing Risk for the Success of Our Organisation Raising the Bar on Quality Products and Services
Chairman's Statement
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we have the right strategy, the right culture and the right geographical footprint to deliver consistent growth and long term value for our shareholders. Our performance in 2011 once again demonstrates the commitment of the Board and all staff to turnaround the company for long term success. Income increased by 29% to MVR 1.075bn Our cost Income Ratio fell from 47% to 35% Operating prots increased by 72% Total provisions for non-performing loans were MVR 1.390bn representing a very conservative 78% cover ratio As a result of these great achievements, we are a much stronger company today than we were a year ago.
Dr. Abdullah Shiham Hassan, Chairman of the Board of Directors
Chairmans Statement
Dear Shareholders, In the name of Allah the most merciful the compassionate. On behalf of the Board of Directors, I take pleasure in presenting you the Annual Report of Bank of Maldives for the nancial year ending 31st December 2011. 2011 was a year of major nancial signicance for the Bank. For the rst time ever, our gross income earnings have exceeded MVR 1 billion; we achieved record operating prot (an increase of 72% over 2010) and most importantly we raised our provision cover on non-performing loans to 78%. This demonstrates that
Human Resources
We rmly believe that our staff is the most valuable asset for the organisation and our success rests on our employees hard work and superior skills. Last year we recruited a record number of graduates and continued investments in staff development by providing long term training opportunities and soft skills training. The excellent operational prot we achieved in 2011 demonstrates staff commitment and determination in going the extra mile to improve our bottom line.
Sustainability
While performance often tends to focus on nancial results, over the long term it is a reection of how effectively we are serving our customers and contributing to the community we operate.
Chairman's Statement
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As in 2010, the Board of Directors continuously upheld adherence to the Corporate Governance Code of Capital Market Development Authority and that of Bank of Maldives. Furthermore, numerous changes were introduced at the Board and Senior Management level to strengthen the Banks performance. Bank of Maldives, in keeping with its promise as a socially responsible bank contributed to education, environment, sports and other social causes through sponsorships and donations.
management system to make staff more accountable while improving their productivity and engagement.
Conclusion
Historically, the main obstacle to our financial performance has rested upon delays in recovering existing non-performing loans. In 2011 we have provided the maximum possible to address this issue and we are confident that the combination of current recovery efforts and profits in the early part of 2012 will allow us to address fully the regulatory requirements. In this context, I urge all shareholders to take note that higher provisioning, the continued profit generation of the business and recovery efforts all create a platform for shareholder rewards in the near future in terms of increased share value and shareholder returns. I strongly believe that Bank of Maldives has a very bright future and we will continue to formulate strategies on innovation, performance management and customer focus whilst paying due attention to managing risks and good governance. Our challenge and opportunity is to take advantage of what we have built and make it work even better for customers, clients, shareholders and communities. I would like to assure all shareholders that the Bank is on the right track for success and we now have a strong platform for sustainable growth. May Almighty Allah bless us all and our institution and guide us in our quest to greater heights and bestow us with a brighter future.
Acknowledgements
I am thankful for the support and understanding of our shareholders and stakeholders and thank them for their unrelenting loyalty. I would also like to convey my heartfelt appreciation to all staff of the Bank for achieving commendable results. I wish to thank my fellow Board Members and my predecessor for their invaluable contribution in steering the Banks strategic direction and in providing concentrated focus in achieving our challenging goals. I also convey my appreciation to the Government of Maldives, especially the Minister of Finance and Treasury and his office for the guidance and support extended. I further extend my gratitude to the Governor of Maldives Monetary Authority, Dr. Fazeel Najeeb and his team for the accommodative approach and insightful guidance provided throughout the year.
Building for the future

In February 2011, Peter Horton, a career Banker with extensive experience in retail and corporate banking joined the Bank as the new CEO. Under his leadership the Banks transformation programme was launched and a new Executive Committee was formed to align the Banks operations to the changing needs of customers. The key focus of the transformation programme is to put customer at the heart of everything we do and create a much stronger foundation for long term success. Under the transformation programme significant inroads were made in implementing a more effective performance
Dr. Abdullah Shiham Hassan Chairman of the Board of Directors
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Mr. Peter Horton, Managing Director and Chief Executive Officer
Chief Executives Review

Firstly I would like to begin by thanking our patient shareholders, loyal customers and dedicated staff. It is a great honour to be presenting the Annual Report and Accounts for 2011. I would like to begin by immediately addressing the long-standing Non Performing Net Assets (NPNA) issue which has blighted us for too many years. If the Bank is to be restored to a place where we can deliver on our promises to our customers, shareholders and employees; we have to be single-minded in our efforts to nally close that difcult chapter in the Banks history. Accordingly, the 2011 statements show a very aggressive approach to the problem, comprising of a number of elements: Prior year adjustment the change to MMAs prudential regulation and growth in NPNA occurred in the period 2008/9, it is important that we correctly allocate regulatory requirements to the relevant period rather than continue to impair future earnings Aggressive allocation of the 2011 prots towards provisions A fresh focus on new and future NPNAs ensuring that we learn from our prior experiences and that we apply a professional approach and attitude to recoveries The result of the above is that within these 2011 accounts we present the strongest Bank of Maldives in recent years.
Financial Performance
Whilst we are not retaining any prots during 2011 as part of the NPNA regulatory compliance strategy, there are a number of very strong positives to take from the 2011 performance. Our operating prots have recovered signicantly during the year from MVR 302 million to MVR 519 million driven by a number of key factors:
Chief Executive's Review
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A stronger focus on our cost of funds has allowed Net Interest Income to move from MVR 406 million to MVR 477 million Non-Interest Income is an area that we are especially focused on as we try to reduce the heavy reliance on lending activity, Non-Interest Income has grown from MVR 248 million to MVR 432 million and in the last 4 years has grown as a percent of Gross Income from 29.9% to 40.2% Cost control is a very important area of focus and during the year we worked hard to manage costs, focusing on eliminating bad costs but not seeking to starve the business and taking a pragmatic view around good costs. Cost Income Ratio is a very useful international measure of productivity and we closed the year with a figure of 35% against a 2010 level of 47%, in international terms a really outstanding performance The Balance Sheet strength, which really serves to underpin the comfort that all stakeholders should seek in the Bank, remains strong. Looking at a strong capital position of 13.2% which is above MMA minimum requirements and a consolidated liquidity position of 27.8%. We believe the foundation for future success and growth, underpinned by strong operating profits is clearly established
Employees Have the best people and optimise their contribution to the business to foster high performance and innovation our people are our greatest asset. Therefore, we must focus on developing our staff to achieve our business goals Financial Strength Build a strong financial base this will be the platform on which we will drive our business forward Risk and Operations Instil a dynamic and strong risk and operations culture to support the business effective risk management and also re-organisation of business processes to enhance the execution of our strategies under the balanced scorecard framework (i.e. customer, people, financial and risk/ operations)
Fundamental to achieving our strategic objectives has been the re-alignment of the business during 2011 with us strengthening and refocusing the Banks leadership team. Our new structure brings specific focus on our Customer Segments, Risk Management (including Internal Audit and Compliance), Human Resources, Finance, Marketing and our Operations. I am delighted that the new team brings a strong mix of experience, commitment, skills and vision to ensure we will be successful.
Community
As the only wholly-owned Maldivian bank and the only bank that serves such a wide range of the population and the country, we have never forgotten our place in the community. We consider ourselves to be a community member and remain committed to working hard to play an increasingly active role. During 2011 we have been involved in a number of initiatives, including our exclusive Dhoni Banking services, where during the year we made over 2,000 trips to communities across the country. We have signed an MoU with Maldives Post Ltd, which enables us to provide banking access to those islands where we have no presence.
Strategic Focus
During 2011, we have implemented a new strategic focus in the business which focuses on four key pillars:
Customers Establish a great customer experience focus will be on creating a customercentred environment that provides exceptional service. To achieve this goal, we will need to improve our businesses and reduce turnaround time
Chief Executive's Review
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The Bank has sponsored computer labs at three schools, as we believe education is the foundation of the youth and contributes considerably in moulding their future. In addition, the Bank also contributed to establish a computer lab to upgrade the IT skills of drug recovering addicts and high risk youth (street kids) as a means of providing opportunities for their career development. As we move forward into 2012 we will be renewing our commitment and focus on community and expanding our activities significantly.
Looking forward to 2012

During 2011 we have been laying the foundations for a successful transformation of the Bank which will allow us to continue to build around our strategic objectives. Through continued focus and investment, we expect to see significant improvements to the Banks service, offering sustainable improvement in profits, a more efficient and productive business and an enhanced community position. During 2012, Bank of Maldives will be celebrating its 30th anniversary and our commitment to shareholders, customers and employees is that we are totally dedicated to making their bank something that they can all take pride in for another 30 years. Thank you
Peter Horton Managing Director and Chief Executive Officer
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Seated left to right: Ms. Nuha Mohamed Riza, Mr. Peter Horton, Dr. Abdulla Shiham Hassan and Ms. Aishath Noordeen. Standing left to right: Mr. Hussain Shaheem, Mr. Ibrahim Mohamed, Mr. Mohamed Abdul Sattar, Mr. Hassan Muzni Mohamed, Mr. Mohamed Jaish Ibrahim and Mr. Adam Azim.
Profile of Board of Directors

Dr. Abdullah Shiham Hassan (Independent, Non-Executive Director)
Dr. Abdullah Shiham Hassan is the Head of the Department and Senior Lecturer of Maldives National Universitys Faculty of Shariah and Law. He is also a member of the Ministry of Islamic Affairs Figh Academy of Maldives. Dr. Shiham acted as the advisor to the MMA from 2008 to 2010 to introduce Islamic Finance to the Maldives. He established Institute of Islamic Finance Maldives (I.I.F.M) in 2009 and serves as the Managing Director and a Lecturer. Dr. Shiham gained his Doctor of Philosophy in Law from the International Islamic University, Malaysia, specialising in Islamic Banking Regulation and Supervision. He also gained his Master of Comparative Laws degree from this university specialising in Islamic Insurance (Takaful). He undertook his Bachelor of Laws from the University of Tasmania, Australia. From 1975 onwards, Dr. Shiham has been serving in the Civil Service, Diplomatic Service, Education and Legislatives. He was appointed to the Banks Board on 10th August 2011. He holds no shares in the Bank.
Mr. Peter Horton, Managing Director and CEO (Non-Independent, Executive Director)
Mr. Peter Horton joined the Bank on 24th February 2011. He has a BSc. Honours in Financial Services (First Class) and is an Associate of Chartered Institute of Bankers (London). He started his banking career with Barclays in 1984 and has been working in the international arena since 1999. During this tenure he gained signicant exposure and experience in all aspects of banking including Retail and Corporate Credit. He has also successfully led teams in the Risk, Distressed Debt and Corporate arenas and has been involved at a strategic level in formulating bank wide credit policies as well as implementing business transformations and restructuring initiatives. Prior to joining Bank of Maldives, Mr. Peter Horton worked as the Corporate Director of First Caribbean International Bank in Bahamas and Turks and Caicos Islands.
Profile of the Board
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Ms. Aishath Noordeen (Non-Independent, Executive Director)

Ms. Aishath Noordeen is the Deputy CEO and she has been serving the Board as a government appointed Director since 13th June 2008. Prior to joining Bank of Maldives in the year 1982, she served at the State Bank of India, Male Branch. Over a career expanding 30 years in the banking industry, she has gained vast exposure in Trade Finance and International Banking Operations and has been involved in establishing and maintaining numerous correspondent banking relationships and inter-bank lines. She has represented the Bank in several local and international forums and led the Bank on numerous occasions. She served as the Acting Managing Director and Chief Executive Officer of the Bank from 29th August 2010 till 04th April 2011, consequent to the resignation of the former Managing Director and CEO. Ms. Aishath Noordeen holds no shares in the Bank.
Mr. Adam Azim (Non-Independent, Non-Executive Director)

Mr. Adam Azim is the General Manager of Sales and Marketing Department of State Trading Organization PLC. After joining Maldives Water and Sewerage Company (MWSC) in 2000 he served for 10 years and gained vast experience in the financial sector. He last filled the post of Finance Manager in MWSC. Mr. Azim holds an Honours degree in Accounting and Finance from the University of East London and a Master of Business Administration from Nottingham University specialising in Finance. Mr. Azim was appointed to the Board on 06th April 2011 and was re-appointed on 10th August 2011. He holds 100 shares in the Bank.
Mr. Hassan Muzni Mohamed (Independent, Non-Executive Director)

Mr. Hassan Muzni Mohamed is the Assistant General Manager and Head of Human Resources Department at Maldives Ports Limited. He holds a Bachelor of Sciences Honours degree in Computing and a Post Graduate Diploma in Technology Management from Staffordshire University, UK. Mr. Muzni was appointed to the Banks Board on 30th October 2010 and re-appointed on 10th August 2011. He holds no shares in the Bank.
Mr. Mohamed Jaish Ibrahim (Non-Independent, Non-Executive Director)

He holds a First Class Honours degree in Interior Architecture from the University of Nottingham Trent, England. Mr. Mohamed Jaish Ibrahim was appointed to the Banks Board on 07th August 2009 and was re-appointed on 30th October 2010 and again on 10th August 2011. He holds no shares in the bank.
Ms. Nuha Mohamed Riza (Independent, Non-Executive Director)

Ms. Nuha Mohamed Riza is the Head of Economic Policy and Business Facilitation Section of Ministry of Economic Development. She holds a Bachelors degree in Economics from Trinity College, University of Cambridge, UK and a Masters degree in International Accounting and Finance from Cass Business School, City University, London. Ms. Nuha was appointed to the Board on 30th October 2010 and re-appointed on 10th August 2011. She holds no shares in the Bank.
Mr. Hussain Shaheem (Independent, Non-Executive Director)

Mr. Hussain Shaheem is the Managing Director of Sirius Financial Services Pvt. Ltd., Sirius Enterprises Pvt. Ltd. and Year Around Pvt. Ltd. He has over 25 years of experience in Automobile Engineering. Mr. Hussain was appointed to the Board on 10th August 2011. He holds no shares in the Bank.
Profile of the Board
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Mr. Mohamed Abdul Sattar (Independent, Non-Executive Director)

Mr. Mohamed Abdul Sattar is the Managing Director of Coco Huts Pvt. Ltd. and holds a Master of Business Administration from University of Wales, UK. He was elected to the Board of Directors of the Bank by the public shareholders from 08th September 2004 to 29th June 2005. On 30th October 2005, he was appointed to the Board by the Government and was last re-appointed on 13th June 2008. Since 07th August 2009, he has been elected to the Board by the public shareholders. He holds 2,300 shares in the Bank.
FORMER DIRECTORS
Mr. Adam Ibrahim (Former Chairman of the Board of Directors)
Mr. Adam Ibrahim resigned on 19th April 2011. He is the sole proprietor of Asrafee Bookshop and has been managing his business for the past 34 years. In addition, he has over 23 years experience in the field of Education. He holds a Master of Arts in Education, Bachelor of Sciences degree in Mathematics, and a Diploma in Professional Educational Practices from Macquarie University of Australia. Mr. Adam Ibrahim was appointed by the Government as a Director and the Chairman of the Bank on 7th August 2009 and was re-appointed on 30th October 2010. He holds no shares in the Bank.
Mr. Ibrahim Mohamed (Independent, Non-Executive Director)

Mr. Ibrahim Mohamed is the Managing Director of Tropical Island Holidays Pvt. Ltd. and the Executive Director of Gasveli Islands Pvt. Ltd. Mr. Ibrahim Mohamed holds a Master of Sciences degree in Tourism from University of Strathclyde, UK and a Higher National Diploma in Business and Finance (Tourism) from South Glamorgan Institute of Higher Education, University of Wales, UK. He was elected by the public shareholders to the Board on 07th August 2009, 30th October 2010 and re-elected again on 10th August 2011. He holds 960 shares in the Bank.
Mr. Asad Ali (Non-Independent, Non-Executive Director)

Mr. Asad Ali ceased to be a Director effective 10th August 2011. He is the Managing Director of Novelty Printers and Publishers Pvt. Ltd. and the Managing Director of Driftwood Maldives Pvt. Ltd. He holds a Bachelors degree in Business Administration from University of Ottawa of Canada. Mr. Asad Ali was appointed to the Banks Board on 07th August 2009 and was re-appointed on 30th October 2010. He holds 100 shares in the Bank.
Mr. Ahmed Mohamed (Independent, Non-Executive Director)

Mr. Ahmed Mohamed holds a First Class Honours Bachelors degree in Engineering Sciences and a Masters degree in Economics (Public Policy) from the University of Hull, UK. He has served as an appointed member of the Board since 13th June 2008 and was subsequently elected to the Banks Board by the public shareholders on 07th August 2009, 30th October 2010 and again on 10th August 2011. Mr. Ahmed holds 30 shares in the Bank.
*Mr. Ahmed Mohamed resigned from the Board during February 2012, with his appointment as the Minister of Economic Development.
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Seated left to right: Ms. Aishath Nasheeda, Ms. Fathimath Manike, Ms. Aishath Noordeen, Mr. Peter Horton, Ms. Ibthishama Ahmed Saeed and Mr. Lassantha Thennakoon. Standing left to right: Mr. Allan McFarlane, Mr. Mohamed Shareef, Ms. Aminath Shaheen, Mr. Lucian Jayakody and Mr. Rifath Mohamed.
Executive Team
Mr. Peter Horton Managing Director and Chief Executive Ofcer
Mr. Peter Horton joined the Bank in February 2011. He started his banking career in 1984 and has held key positions at various global and regional banks including Barclays and First Caribbean International Bank. He holds a Bachelor of Science in Financial Services (First Class Honours) and is an Associate of the Chartered Institute of Bankers (London). 29th August 2010 till 04th April 2011, consequent to the resignation of the former Managing Director and CEO.
Mr. Lasantha Thennakoon Chief Financial Ofcer

Mr. Lasantha Thennakoon joined the Bank in June 2010. He is a member of the Institute of Chartered Accountants of Sri Lanka (ACA), the Institute of Certied Management Accountants of Sri Lanka (ACMA), CPA Australia (CPA) and a certied Project Management Professional (PMP) of Project Management Institute, USA. He has over 14 years of experience in nancial management, both locally and overseas. He holds a Master of Business Administration (MBA) and a Bachelor of Science in Accounting and Financial Management (First Class Honours).
Ms. Aishath Noordeen Deputy Chief Executive Ofcer

Ms. Aishath Noordeen joined the Bank in the year 1982 and has been serving the Board as a governmentappointed Director since 13th June 2008. She has a career spanning over 30 years in the banking industry and has served the Bank as the Acting Managing Director and Chief Executive Ofcer from
Executive Team
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Mr. Lucian Jayakody Chief Internal Auditor

Mr. Lucian Jayakody joined the Bank in October 2006. He holds a Master of Business Administration (MBA) and is a Certified Internal Auditor (CIA) USA as well as a Certified Information Systems Auditor (CISA) USA. He is also an Associate of Charted Institute of Bankers London (ACIB) and holds an International Certificate in Banking Risk and Regulation (ICBRR) GARP-USA. His experience in senior management positions in the financial sector extends to over 25 years.
Ms. Fathimath Manike Islamic Banking Director

Ms. Fathimath Manike joined the Bank in 1982. She has extensive knowledge and experience in the banking industry, gained through a career spanning over 30 years. She has previously served the Bank as an Assistant General Manager and oversaw departments such as Development Banking, Human Resources and Operations.
Ms. Aminath Shaheen Risk Director

Ms. Aminath Shaheen joined the Bank in February 2002. She has held key positions at the Bank and gained invaluable experience in her 10 year career in roles such as Manager of Credit Department as well as Manager of Card Centre Operations. She holds a Master of International Business from the University of Auckland, New Zealand and a Bachelors degree in Marketing and Organisational Studies from the University of Lancaster, UK.
Mr. Allan McFarlane Retail Banking Director

Mr. Allan McFarlane joined the Bank in February 2012. He is an Associate Member of the Chartered Institute of Bankers (ACIB) and a Member of the Life Insurance Association (MLIA). He has over 28 years of experience in the banking industry and has served in key positions at various prestigious banks including Barclays and Santander/Bradford and Bingly.
Mr. Mohamed Shareef Operations Director

Mr. Mohamed Shareef joined the Bank in August 1995. Mr. Shareef has over 16 years of experience in banking and prior to his appointment to the position of Operations Director, he served the Bank as the Head of Card Centre. He is currently reading for his Master of Business Administration (MBA) in Finance via distance learning from the University of Manchester, UK.
Mr. Rifath Mohamed Marketing Director

Mr. Rifath Mohamed joined the Bank in August 2011. He is a Chartered Marketer and a Member of the Chartered Institute of Marketing (UK). He has 15 years of experience in field of marketing and holds a Post Graduate Diploma in Marketing from the Chartered Institute of Marketing (UK).
Executive Team
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Ms. Aishath Nasheeda Human Resources Director

Ms. Aishath Nasheeda joined the Bank in February 2009. She has substantial experience in management and project implementation and has a Master of Business Administration (MBA) from Charles Sturt University, Australia and a Bachelors degree from Edith Cowan University, Australia.
Ms. Ibthishama Ahmed Saeed Corporate Banking Director

Ms. Ibthishama Ahmed Saeed joined the Bank in July 2003. She has nine years of experience in the banking industry and holds a Master of Arts in Marketing Communication from University of Westminster, UK and a Bachelor of Commerce from Kerala University, India.
Operations Review
Achieving New Levels of Financial Milestones
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Income
During the year, the Bank made a signicant achievement in Gross Income totaling MVR 1,074.8 million record income. This is a 29.5% growth compared to the year 2010. Interest income, being the major component of the gross income, stood at MVR 643.0 million recording a 10.5% growth against the previous year while fee and commission income also indicated another signicant milestone recording an income of MVR 286.3 million with 34.1% growth. Foreign exchange income and other operating income also indicated signicant achievements, recording an increase of MVR 31.6 million and MVR 78.9 million respectively. Though there was a signicant increase in customer deposits, due to prudent liability management, the Bank was able to reduce its interest expenses by 5.7% during the year. The signicant increase in interest income and reduction in interest expenses resulted in increasing the Banks Net Interest Income to MVR 477.4 million, recording a 17.5% growth against the year 2010.
Expenses
Operating expenses (other than loan loss provisions) for the year stood at MVR 277.9 million recording a marginal increase of 4.9% against 2010. Staff cost increased by MVR 9.8 million while other operating expenses indicated an increase of MVR 4.3 million. Premises, equipment and establishment expenses however indicated a reduction of MVR 1.0 million against 2010. Though the national ination of the country stood at 12.8% for the year, due to the prudent cost management strategies, overall the Bank was able to maintain its operating expenses within an acceptable level of increase.
Loan Loss Provision

The year 2011 reiterated the Banks continuous commitment to address the historical asset quality issues. In this regard, a signicant portion of operating income, totaling MVR 508.3 million was allocated as provisions against the impaired loans. With this allocation, specic provision at the year-end stands at MVR 1,391.0 million with a specic provision cover of 78%.
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Assets and Liabilities

Total assets for the year end stood at MVR 9,564 million reflecting a marginal increase of 2.3%. While the net loan balances indicated a decrease of MVR 136.3 million mainly due to higher loan loss provisions, recoveries and write off, a significant increase was recorded in cash, short term funds and balances with MMA with an increase of MVR 551.7 million. At the end of the year total liabilities accounted for MVR 8,797.1 million, reflecting an increase of 2.5%. Deposits from customers reflected an increase of MVR 506.2 million. Prudent liquidity and forex management strategies resulted in borrowings for the year to decrease by 23.9% against 2010.
Shareholders Funds
Shareholders funds indicated no change in 2011 compared to the restated equity position of 2010. The general reserve in 2011 and 2010, however, indicated a significant reduction of MVR 565.6 million against the year 2009 due to the prior year adjustment made to correctly reflect the loan loss provisions for the period prior to 2010. It is to be noted that this is not a reduction in share capital but utilising previous years accumulated profits to meet the loan loss provisions of impaired loans occurred prior to the year 2009. Banks capital adequacy ratio, after utilising the general reserves, remains at 13.2% which is higher than the regulatory minimum requirement of 12%.
Future Outlook
The implications to the Maldivian economy particularly to the banking and finance sector due to local and global economic factors remains as a major challenge. Bank, however, expect to strengthen its operating and financial performance with the aim of maintaining a long term sustainability though the journey ahead remains challenging.
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Ms. Aishath Nasheeda, HR Director (center-front) with our dedicated staff
Building a Professional, Customer-Focused Team
ne of the key priorities of the Bank is to maintain a team of highly-skilled, motivated and inspired individuals who support the Bank to become the leading nancial institution in the Maldives. The continuous retention of leadership positions and the progress made in 2011 demonstrate staff commitment, determination and ability to improve our bottom line. Effective recruitment, development of staff and retention of talent is seen as integral part of the Human Resources Strategy.
Workforce Distribution & Recruitment

With 792 staff at the end of nancial year 2011, the Bank continues to be an employer of choice in the Maldives. More than 50% of the total staff population are employed in the branch network of which 29% are employed in Atoll based Branches. Today, the Bank is proud to have a workforce which represents both genders almost equally; 51% and 49% of male and female employees respectively.
their duties as graduates after completing scholarship and study leave opportunities provided by the Bank. During the year 2011, training and development targeted at all levels of employees were conducted; such as the induction training programmes for new employees. Several employees attended overseas and local seminars and conferences to improve their understanding of the banking sector and obtain necessary technical information; while refresher programmes on Core Banking System and associated applications were also conducted. In addition, a high priority was placed on the development of the Executive Management Team, whose members attended Performance Management and Leadership development refresher programs.
Staff Development & Building a Highly-Skilled Team

Training and Development continues to be a key priority of the Bank. A number of staff have resumed
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Mr. Peter Horton, the newly appointed CEO conducted seminars for employees on his vision and the transformation programme. In this regard, he personally delivered brieng sessions to all Malebased staff and visited over 90% of the atoll based branches. A Managers Conference was also held in Male to brief the team on the business objectives, current trends and on the basis of the transformation program.
Improving Productivity through Performance Management

During the year, work on implementing Performance Management was initiated to align individual staff objectives to our corporate objectives. Staff at all levels underwent training on Performance Management conducted by Hunter Roberts, a consultancy rm based in UK. The rst phase of implementation of the new Performance Management System will be completed by the end of 2012.
Fostering Employee Synergy

In-order to foster team work and to boost morale and staff productivity, inter-departmental sporting events were held which included football, volley ball and netball tournaments. The Bank also participated in inter-organisation tournaments such as the Club Maldives Cup 2011. Participation in Youth Challenge 2011 provided an interactive and friendly environment for staff members to meet potential future employees.
Our futsal team
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T ransformation Programme
In early 2011, the Bank initiated a complete HR transformation program in consultation with the Banks HR Consultants. The organisational design was reviewed and several new departments and functions were introduced to streamline the business as a customer-centric organisation. The Executive Committee was re-constituted to drive the commercial performance of the Bank with refocus on the business towards customer segmentation and excellent customer service.
The diagram below depicts the key focus areas of the Banks HR strategy.
Future
The Banks HR transformation programme was launched with the objective of improving employee performance, engagement and ultimately the strength of the Bank. Employees are the Banks most valuable asset and the Bank will continue to invest heavily in their personal and professional development.
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MD and CEO inaugurates a computer lab developed with the Banks support
Promoting Enriching Programs for Our Community
orporate Social Responsibility (CSR) has been a vital part of the Banks success and for many years; CSR initiatives have been integrated into the core activities of the Bank. As part of our on-going commitment to being a good corporate citizen, numerous initiatives were implemented in 2011, highlights of which are given below.
Computer Education
Bank of Maldives is committed to its emphasis on education development; recognising its signicance in the social developmental goals and the consequent future benets to the economy. Where possible, the Bank supports educational initiatives which are not only benecial to students, but also to the society as a whole. Under this commitment, the Bank sponsored to set up new computer laboratories in three schools.
Community Well-being
Bank of Maldivess CSR initiatives are not only restricted to the educational and community causes; we have extended this effort towards addressing social issues as well. In this regard, the Bank contributed to the establishment of a computer lab for the Society for Women Against Drugs (SWAD), an NGO working for the prevention, intervention, aftercare and advocacy on the issue of abuse of illegal drugs among women in the country.
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Dhoni Banking
Unique to the Maldives, Dhoni Banking is a distribution channel strategy adopted by Bank of Maldives to provide access to banking services to the masses of the entire nation. Through this service, the Bank staff visit each and every inhabited island every month to provide the full range of banking services. During the past year, over 2000 such trips were made by our staff and this has been well received by the Banks customers.
Environmental Awareness
In providing awareness on the pressing environmental issues being faced the world over, we believe that todays younger generation deserves to be well educated and informed on the unique nature of our environment and the implications of global warming. Towards the end of 2011, the Bank purchased the book Underwater Kingdom, a special edition on Maldives underwater beauty to be donated to various school libraries, across the country.
Pension Distribution
Distribution of old age pensions to the elderly people in the islands across the country is amongst the key services provided by the Bank, helping us to establish our position and title in the nancial service industry. Our team not only visit these islands, but goes the extra mile by visiting people who are unable to leave their houses and deliver pension allowances at the comfort, convenience and security of their homes.
Contributing to the Community

The Bank always take pride in participating in key events that take place in the country and make contributions to Government and NGO initiated programs. In 2011, Bank utilized several sponsorship opportunities such as the Cambridge Advance Level High Achievers Awards organised by Ministry of Education, acted as the main sponsor for the AIDS Day awareness event held by Society for Health Education (SHE) and sponsored the SAARC Twenty20 Cup.
Our staff visiting an elderly to handover his pension allowance
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The Bank also sponsored Fishermen and Farmers Day ofcial celebrations held at Noonu Atoll Kendhikulhudhoo. In addition to the above, the Bank also contributed to the publication of Discover Addu Atoll booklet, which was distributed among the local and international delegates attending the 17th SAARC Summit held in Addu City. Furthermore, in the wake of the disaster that hit Japan, Bank of Maldives actively participated in national-level activities to aid Japan and played a key role in facilitating donations to Japan Aa Eku Dhivehin Fund.
The Bank is here to help businesses succeed and grow by providing the nancing and related services they require and will play an active role in making our communities stronger, healthier and more sustainable. In future, the Bank will also place more emphasis on employee involvement in the local community and their dedication to corporate social responsibility.
Commitment to the Future

We believe that helping communities, improving the workplace and providing products and services that meet the needs of our customers is an integral part of our commitment to remain as a good corporate citizen.
One among the 2,000 visits we made to all the inhabited islands of the nation
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Mr. Allan Mcfarlane, Retail Banking Director
Setting High Standards for Retail Banking
ur retail banking encompasses 25 branches, Development Banking and our unique Dhoni Banking Service.
2011 was another successful year for our retail business both in terms of customers served and growth in revenue. Segmented revenue grew, with prot showing a signicant increase year on year and was driven by a growing deposit customer base and a signicant contribution from the Banks popular debit and credit cards business. Last year, our teams made over 2000 visits covering all inhabited islands in Maldives to provide banking services to our customers across the nation. Customers in islands without Bank of Maldives
presence are also served via Internet Banking and Mobile Banking. The Banks ATM network has been increased to 42 and we have the largest merchantbase in the country. We hope to enhance our offerings to the atolls further through greater use of technology. Under the current transformation program, the Banks retail business will be realigned bringing together all branches of the Bank under one Retail Division. To serve our customers better, retail customers would be further segmented and this will result in the launch of a Premier Banking Service to our High Net Worth Customers followed by enhanced products and services.
Setting High Standards for Retail Banking
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The branches remain the backbone of the Banks retail business. We will continue to invest in our premises to ensure a great environment for our staff to work in and customers to bank in. The Bank is also committed to the development of new and innovative products and services for our valued customers. Delivering superior customer experience remains our utmost priority and special training will be provided to our team to equip them with service skills and give them condence to excel in service delivery.
Hithadhoo Branch - One of the 25 branches across the nation
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Ms. Ibthishama Ahmed Saeed, Corporate Banking Director
Working in Close Par tnership with Our Corporate Clients
he Banks Corporate Banking team targets larger businesses in the country including those who are borrowing and non-borrowing. Operating out of central ofces in Male, our team is working with businesses across the whole nation. In 2011, the nancial performance of Corporate Banking was depressed by the continued efforts to address the Non Performing Net Asset (NPNA) issue, with a large part of the historic NPNA portfolio sitting within the corporate portfolio. We are now very positive that the NPNA issue is signicantly addressed and are encouraged by some strong positives in the underlying business unit performance during the year: The Bank has successfully funded two major Resorts through to operations in 2011. We have extended nance through our established relationships with International Financial Institutions by way of syndication, consultation and agency services
Focus has also been given to increase NonFee Based Income by way of emphasis on enhancing management and related service offerings to corporate clients. During the year we provided management services relating to the IPO of Dhiraagu In 2011, the Bank established a new Corporate Banking Team to give specic focus to becoming a bank of choice for corporate clients in the Maldives. The Corporate Banking Division targets and manages corporate clients, exclusively with a view to enhance service levels with customer satisfaction as the common drivers of protability. Our experienced team now provides a single point of contact for clients embracing the key areas of: Financial support for businesses our Corporate Team act as syndicate lead on a large number of loans to Maldivian businesses. In addition we work with
Working in Close Par tnership with Our Corporate Clients
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clients to provide tailored trade finance together with medium term and short term finance solutions to their needs, working independently or with financing partners including EXIM Bank. Transactional banking solutions - focus is centered on online and electronic banking to Corporate clients including Card acquiring and POS terminals, Corporate Credit Cards, Internet Banking, Payment Gateway, Mobile Banking, Bill Pay, Direct Debit and Direct credit Cash management products through standard and tailored products in conjunction with our Treasury Team we are in a position to offer dynamic and competitive deposit and credit balance solutions Advisory work the team have experience in supporting business customers in a wide range of areas including IPOs, Mergers and Acquisitions. We will continue to grow the team and the range of products available during 2012. We see our excellent relationships with corporate clients, through quality relationship based service, competitive solutions and our widespread branch network as key contributors to our success, providing value to shareholders and benefit to all stakeholders.
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Ms. Aminath Shaheen, Risk Director (top right) and her dedicated team leaders.
Effectively Managing Risk for the Success of Our Organisation
isk management is instilled in our corporate culture and is crucial for achieving our goal of becoming a truly customer centric organisation. Managing risk is a fundamental activity performed at all levels of the organisation, which are governed by policies approved by the Board.
of all credit risks, the Banks credit risk management function was restructured whereby all lending approvals are overseen centrally and managed within delegated approval authority levels. In order to ensure timely and consistent recovery actions on credit default cases, the loan recovery function was restructured and centralised. Consequently, separate specialised teams focus on various stages of recovery, starting from early stage delinquency management, through to full callback and collections on NPNA accounts. Legal action for enforcement and sale of collateral are also incorporated within the loan recovery function.
Credit Risk Management

With lending as the major business activity of the Bank, continuous efforts were made to reduce high levels of Non-Performing Net Assets (NPNA). In this regard, aggressive provisioning since 2009 has enabled the Bank to achieve full compliance with regulatory requirements on provisioning for NPNA by the end of year 2011. To ensure a healthy and balanced loan portfolio, the Credit Department of the Bank assesses new lending within strict guidelines adhering to the Banks credit policy and regulatory requirements. Furthermore, to achieve uniform and comprehensive management
Effectively Managing Risk for the Success of Our Organisation
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Operational Risk Management

The main objective of this function is to develop risk frameworks and policies required for monitoring and managing risk across all the business units of the Bank. It ensures that key operational risks are measured and managed in a timely and effective manner through enhanced operational risk awareness, segregation of duties, dual checks, and improved early warning signals. The Operational Risk function acts as the second line of defence and is further strengthened by Internal Audit, which independently reviews all functional areas of the Bank and report directly to the Audit and Risk Management Committee of the Board.
Market Risk and Liquidity Risk Management

The Bank has three strong controls in place to manage its market and liquidity risk, namely in-house Treasury Operation, Liquidity Management Policy and the Assets and Liabilities Committee (ALCO). Both Rufiyaa and US Dollar positions are managed very closely on a daily basis, under the guidance and supervision of the Finance Director. Any adverse changes in the level and volatility of market factors such as foreign exchange rates, interest rates, lease residual values, commodity and equity prices are constantly monitored.
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Mr. Mohamed Shareef, Operations Director (far right) and his committed team leaders
Raising the Bar on Quality Products and Services
he Bank continues to dominate the nancial industry as the market leader with its commitment to providing improved and quality services to customers. In this regard, a number of transformations and improvements in operations were implemented in the year 2011. The Bank further strengthened its leadership position in the international arena with the acquisition of American Express, VISA, MasterCard and China UnionPay. Additionally, we commenced the use of Diners Club International, Pulse & Discover network cards at our ATMs. A number of measures were undertaken to improve customer experience through means of improved communication channels for customers, wider access to banking services, better amenities and technological advancements. In this regard, the following transformations took place during the year:
The relocation of Call Centre to Addu City after providing extensive training to our call centre staff leading to high service standard and reducing the average on hold waiting time from ve minutes to two minutes. Initiation of SMS service enabling customers to communicate with us at their convenience. On average 5,000 to 8,000 requests are attended every month. Installation of ve additional ATMs in Male (four at Velaanaage and one at Post Ofce) Expansion of our POS network to over 3000 POS terminals Construction of a new Bank premise at Dhidhdhoo to offer better service in a customer-friendly ambience
Raising the Bar on Quality Products and Services
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Virtualisation of our servers to increase capacity and ensure high availability. Implementation of Business Intelligence and Reporting System for Card to improve service quality and better analysis of services and customers Initiated basic banking transactions via ATMs and POS terminals to the unbanked population in the islands by collaborating with Maldives Community Banking (MCB), and in partnership with Maldives Post Limited. We remain steadfast in our commitment to providing our customers with new and innovative products. The Bank maintains vigilant observation on the financial industry and ensures that the products and services offered are in line with the emerging banking trends. During 2011, The Maldives Supplier Payment project targeted for businesses was undertaken to enable online business-to-business transactions. At the end of the year, the project had come to a near completion and is expected to be available to customers in the near future.
Corporate Governance
Directors' Repor t
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Directors Repor t
Board Composition
In accordance with Article 47 of the Articles of Association of the Bank, out of the total 11 directors of the Boards composition, 08 directors are nominated by the Government and elected by the shareholders, while the remaining 03 directors are elected by the General Public Shareholders. Furthermore, pursuant to Articles 79 and 80, the Chairman and the Managing Director is also appointed by the Board of Directors from among the elected Directors nominated by the Government. This composition falls in line with the Maldives Banking Act (24/2010), which came into force on 12th December 2010. In compliance with Corporate Governance Code of Capital Market Development Authority (CMDA), the Board of Directors of the Bank is composed to exemplify a mix of Executive, Non-Executive and Independent Directors so that the Board of Directors of the Bank is able to provide equitable, competent and effective guidance for the Bank and uphold an environment of good governance. The Board of Directors encompass a range of talents, skills and expertise required to provide sound and prudent guidance with respect to the operations and interests of the Bank.
The year 2011 began with the following members in the Board of Directors of the Bank
1. Mr. Adam Ibrahim Chairman 2. Ms. Aishath Noordeen Deputy CEO 3. Mr. Mohamed Jaish Ibrahim 4. Mr. Hassan Muzni Mohamed 5. Ms. Nuha Mohamed Riza 6. Mr. Asad Ali 7. Mr. Mohamed Abdul Sattar 8. Mr. Ahmed Mohamed 9. Mr. Ibrahim Mohamed
Government Nominee, Independent & Non-Executive Government Nominee, Non-Independent & Executive Government Nominee, Non-Independent & Non-Executive Government Nominee, Independent & Non-Executive Government Nominee, Independent & Non-Executive Government Nominee, Non-Independent & Non-Executive Elected by Public Shareholders, Independent & Non-Executive Elected by Public Shareholders, Independent & Non-Executive Elected by Public Shareholders, Independent & Non-Executive
Directors' Repor t
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At the Extra Ordinary General Meeting of the shareholders held on 06th April 2011, Mr. Peter Horton and Mr. Adam Azim were appointed as Directors of the Bank. With this change, the Board was re-constituted with the following 11 Directors for the year 2010/2011.
1. 2. 3. 4. 5. 6. 7. 8. 9. Mr. Adam Ibrahim Chairman Mr. Peter Horton Managing Director & CEO Ms. Aishath Noordeen Deputy CEO Mr. Mohamed Jaish Ibrahim Mr. Hassan Muzni Mohamed Ms. Nuha Mohamed Riza Mr. Asad Ali Mr. Adam Azim
Government Nominee, Independent & Non-Executive Government Nominee, Non-Independent & Executive Government Nominee, Non-Independent & Executive Government Nominee, Non-Independent & Non-Executive Government Nominee, Independent & Non-Executive Government Nominee, Independent & Non-Executive Government Nominee, Non-Independent & Non-Executive Government Nominee, Non-Independent & Non-Executive Independent & Non-Executive
In the 28th Annual General meeting held on 10th August 2011, the Board was re-constituted with the following Directors:1. 2. 3. 4. 5. 6. 7. 8. 9. Dr. Abdullah Shiham Hassan Chairman Mr. Peter Horton Managing Director & CEO Ms. Aishath Noordeen Deputy CEO Mr. Mohamed Jaish Ibrahim Mr. Hassan Muzni Mohamed Ms. Nuha Mohamed Riza Mr. Adam Azim Mr. Hussain Shaheem
Government Nominee, Independent & Non-Executive Government Nominee, Non-Independent & Executive Government Nominee, Non-Independent & Executive Government Nominee, Non-Independent & Non-Executive Government Nominee, Independent & Non-Executive Government Nominee, Independent & Non-Executive Government Nominee, Non-Independent & Non-Executive Government Nominee, Independent & Non-Executive Independent & Non-Executive
Mr. Mohamed Abdul Sattar Elected by Public Shareholders,

Elected by Public Shareholders, Independent & Non-Executive Elected by Public Shareholders, Independent & Non-Executive
10. Mr. Ahmed Mohamed 11. Mr. Ibrahim Mohamed
Mr. Mohamed Abdul Sattar Elected by Public Shareholders,

Elected by Public Shareholders, Independent & Non-Executive Elected by Public Shareholders, Independent & Non-Executive
10. Mr. Ahmed Mohamed 11. Mr. Ibrahim Mohamed
Mr. Adam Ibrahim, Chairman of the Board resigned during April 2011. With this change the Boards strength reduced to 10. As the Board of Directors of the Bank is to comprise 11 members, the quorum required for the Board meetings as stipulated in Section 15(g) of the Maldives Banking Act (24/2010) is 09 members, which is three fourth () of the entire Board. The Board of Directors under its discretionary powers as provided for in Article 65 and 66 of the Articles of Association of the Bank formed an Executive Committee of the Board comprising of all members during the year 2011 and delegated certain powers of the Board to the Executive Committee to ensure continuity in business.
Directors' Repor t
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Frequency of Meetings
Regular Board meetings were held at least once a month, while exceptional Board meetings are convened whenever necessary. The Board of Directors held 22 meetings from 01st January to 31st December 2011 and attendance is depicted below;
No. of meetings to attend attended
06 08 17 22 22 22 22 14 17 08 22 22 22 06 07 17 21 18 21 19 14 13 08 19 22 22
The Executive Committee of the Board held 08 meetings during the year 2011 and attendance is as follows;
No. of meetings Directors to attend attended 03 03 Mr. Adam Ibrahim 02 02 Dr. Abdullah Shiham Hassan 05 05 Mr. Peter Horton 08 06 Ms. Aishath Noordeen 08 03 Mr. Mohamed Jaish Ibrahim 08 05 Mr. Hassan Muzni Mohamed 08 07 Ms. Nuha Mohamed Riza 06 05 Mr. Asad Ali 05 02 Mr. Adam Azim 02 02 Mr. Hussain Shaheem 08 04 Mr. Mohamed Abdul Sattar 08 06 Mr. Ahmed Mohamed 08 08 Mr. Ibrahim Mohamed
%
100% 100% 100% 75% 38% 63% 88% 83% 40 % 100% 50% 75% 100%
Directors Mr. Adam Ibrahim Dr. Abdullah Shiham Hassan Mr. Peter Horton Ms. Aishath Noordeen Mr. Mohamed Jaish Ibrahim Mr. Hassan Muzni Mohamed Ms. Nuha Mohamed Riza Mr. Asad Ali Mr. Adam Azim Mr. Hussain Shaheem Mr. Mohamed Abdul Sattar Mr. Ahmed Mohamed Mr. Ibrahim Mohamed
%
100% 95% 100% 95% 82% 95% 86% 100% 76% 100% 86% 100% 100%
*Mr. Ahmed Mohamed resigned from the Board during February 2012, with his appointment as Minister of Economic Development. *Mr. Adam Ibrahim resigned from the Board during April 2011.
Directors' Repor t
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Relationship With Shareholders & Customers

Important developments including quarterly financials of the Bank, announcements and notices are displayed in the Banks website for information of the shareholders and general public. Additionally, a brief summary governing voting procedures at the General Meeting is given in the proxy form, which is made available to shareholders 21 days in advance to the General Meeting. The Corporate Affairs Department handles all matters of the shareholders. The Board of Directors and the Management of the Bank always welcomes active participation from the shareholders at the General Meetings and seek their views at all times. The Minutes of the 28th Annual General Meeting held on 10th August 2011 was also published on the Banks website on 29th February 2012 for shareholders comments. During the year, the Board of Directors individually met those shareholders who had raised concerns during the General Meeting. This activity further helped to improve the Banks relationship with its shareholders.
Employees
As employees are the backbone of any organisation, the Management and the Board of Directors give priority in maintaining staff motivation and productivity. During the year Performance Management System was introduced, where every employee was given individual targets, which will further help in achieving overall business objectives. The Bank attempts to provide its employees with attractive remuneration packages and a secure working environment. The Banks employees are given unrestricted access to raise their concerns or grievances regarding any illegal or unethical practice within the Bank through the Whistle Blowing System established in the year 2009. The Audit and Risk Management Committee of the Board of Directors attended the issues raised through the system.
Financial Reporting
The Bank publishes the Annual Accounts prepared in accordance with Maldives Monetary Authority (MMA) Regulations and International Financial Reporting Standards (IFRS) with comprehensive disclosures, enabling both existing and prospective shareholders to make a timely and fair assessment of the Banks performance and prospects. The Bank, on quarterly basis, has been disclosing its financials in the website. Mediums of publication include printed materials, newspapers and the website of the Bank.
Directors' Repor t
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Corporate Governance
Compliance with Corporate Governance Code of Capital Market Development Authority (CG Code); The audited accounts prepared in accordance with the International Accounting Standards were made available to shareholders and other stakeholders To ensure firm adherence to good Corporate Governance practices as stated in the CG Code, the Bank abides by Corporate Governance Code of Bank of Maldives approved during March 2008 Audit and Risk Management Committee and Appointment, Nomination and Remuneration Committee was re-constituted in the 479th meeting of the Board held on 18th August 2011 Performance Assessment of individual Directors and of the Board as a whole are conducted on an annual basis Since the commencement of publication of quarterly accounts, the Bank has given importance to publish its quarterly accounts Bank published Annual Report 2010 within the extended period given by CMDA. However Maldives Stock Exchange charged a fee of MVR 39,500/- under the Listing Rules for delayed publishing of Banks Annual Report and delay in holding the Annual General Meeting To ensure compliance with best practice, 02 members of the Banks Senior Management were appointed as Executive Directors of the Banks Board
Overall Duties of the Board

The overall duties of the Board are: Providing control and direction to the Bank, including providing apex level leadership and setting strategic targets/objectives for the Bank in conjunction with the Management; Deliberating on the Business Plan and the Annual Budget for the Bank; Reviewing the business and financial performance of the Bank measured against the Business Plan and the Annual Budget on a quarterly basis; Ensuring the establishment of effective internal controls within the Bank which will enable risks to be assessed and managed, and monitor and assess the effectiveness of such internal controls established; Ensuring that the Bank has adequate human resources to meet the objectives of the Bank; Ensuring that obligations to shareholders and other stakeholders are understood and met; Ensuring that the Bank complies with all relevant laws and regulations, including the Corporate Governance Code and other codes of best practices; In order to fulfil the aforementioned duties or any other function that the Board is obliged to adhere to, the Board may responsibly delegate its authorities to the most suitable subcommittee(s) of the Board, Corporate Management, external professional(s), consultant(s) or to any such party or parties that the Board deems fit to be for the best interests of the Bank.
Directors' Repor t
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Responsibility Statement
The Board of Directors hereby certify that; i. The relevant accounting standards were considered and followed all through the preparation of Banks Annual Accounts with proper explanations relating to material departures; ii. The Board selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a fair and true view of the state of affairs; iii. It has taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of Companies Act of the Republic of Maldives (Law No. 10/96), Maldives Securities Act (Law No. 02/2006), Maldives Banking Act (Law No. 24/2010), Prudential Regulations issued by the Maldives Monetary Authority and the Listing Rules and Securities (Continuing Disclosure Obligations of Issuers) Regulations 2010 issued by the Capital Market Development Authority; iv. It has followed the Corporate Governance Code issued by the Capital Market Development Authority and; v. All statements and accounts were prepared on a going- concern basis. vi. There were no unexpired service contracts within one year without payment of compensation of any director proposed for election. vii. The borrowings of the Bank as at the end of the accounting period is represented as follows:
(in 000 MVR ) 149,018,918 125,989,991 128,524,991 555,906,936
viii. The Banks Total Liabilities for the comparative years is: (in 000 MVR ) 8,797,132 2011 8,584,447 2010 ix. The Board of Directors affirms that there are no other interests of the Directors of the Bank except those disclosed in this report and the accompanying financial statements. Please refer notes to the financials, page no. 104 for details on related party transactions. x. The Board of Directors further affirms that no major events have occurred since the Balance Sheet date, which would require adjustments to, or disclosure in the financial statements.
Not later than 1 year Between 1 to 2 years Between 2 to 3 years Over 3 years
Audit & Risk Management Repor t
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Audit & Risk Management Committee Repor t
n compliance with Article 69 of the Articles of Association of the Bank of Maldives and Section 1.8 of the Corporate Governance Code issued by the Capital Market Development Authority (CMDA), the initial Audit Committee consisting of 03 non-executive members of the Board was formulated on 23rd March 2008. Following the review of the Organisation Chart during the year 2009, it was decided to combine the Audit Committee with the newly established Risk Management Committee. In this regard the scope of the Committee was widened with the members increased to 05 Directors and was renamed as Audit and Risk Management (ARM) Committee.
Objectives of the Committee

The purpose of the Audit and Risk Management Committee is to assist the Board in fullling its overall responsibility relating to: (a) The integrity of the Banks nancial statements and nancial reporting process and the Banks systems of internal accounting and nancial controls; (b) The adequacy of the internal audit function, including reviewing the scope and results of audits carried out in respect of the operations of the Bank; (c) The annual independent audit of the Banks nancial statements; (d) The engagement of the external auditors and the evaluation of the external auditors qualications, independence, objectivity, and performance; and (e) The compliance by the Bank with legal and regulatory requirements, including the Banks disclosure controls and procedures.
Composition and Frequency of Meetings

The year 2011 commenced with the following members in the Audit and Risk Management Committee and their attendance from 01st January 2011 to 10th August 2011 is as follows;
25 25 25 25 25 25 13 18 17 24
Directors Mr. Ibrahim Mohamed

(Chairperson of the Committee) Non-Executive & Independent
Mr. Ahmed Mohamed

Non-Executive & Independent
Mr. Mohamed Abdul Sattar

Ms. Nuha Mohamed Riza

Mr. Asad Ali

Non-Executive & NonIndependent
Following the 28th Annual General Meeting, the Audit and Risk Management Committee was re-constituted in the 479th meeting of the Board held on 18th August 2011. Mr. Ibrahim Mohamed was re-appointed as the Chairperson of the Committee in the 76th meeting held on 21st August 2011.
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The members of the Committee and their attendance from 11th August 2011 to 31st December 2011 are as follows;
9 9 9 9 9 9 9 6 6 6
Budget for the year 2011 with a view to minimise expenses especially the capital expenditure of the Bank given the global and local economic situation Approved the Internal Audit Plan for the year 2012 Procurement process of the Bank Quarterly Financial Reports Quarterly Internal Audit Reports Approved the following: Audited Financials of the Bank for the year 2010 Auditors Management Letter 2010 Budget for the year 2012
Directors Mr. Ibrahim Mohamed

Chairperson of the Committee Non-Executive & Independent
Mr. Ahmed Mohamed


Ms. Nuha Mohamed Riza

Mr. Adam Azim

*Mr. Ahmed Mohamed resigned from the Board with his appointment as Minister of Economic Development during February 2012. Consequently, Mr. Hassan Muzni Mohamed was appointed to the Committee during March 2012.
Internal Controls
To further reinforce the internal control mechanism of the Bank, the Committee with the assistance of the Chief Internal Auditor and the Internal Audit Department, reviewed the effectiveness of the Banks internal controls, which includes financial, operational, and compliance controls, and procedures for identification, assessment and reporting of risks. In this regard the Committee had discussions with the Management and appropriate guidelines were drawn up. The Internal Audit Department headed by the Chief Internal Auditor (CIA), Mr. Lucian Jayakody, reports directly to the Audit and Risk Management Committee. As per the approved Audit Plan, the Chief Internal Auditor reported to the Committee on a quarterly basis. Action points were highlighted and conveyed to the Management for strategising implementation which enabled a more risk-free environment.
During the reporting year 2011, the Committee reviewed and followed up on issues raised through the Whistle Blowing System, which strengthened the internal controls of the Bank. The Committee further undertook the following tasks during the year: Met the shareholders who raised their concerns during the 27th Annual General Meeting Met with the external auditors to assess the progress and assist wherever necessary in the Annual Audit Reviewed the following: Minutes of 27th and 28th Annual General Meeting of the Bank Minutes of Extra Ordinary General Meeting held during April 2011
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External Audit
It was resolved in the 28th Annual General Meeting to appoint PricewaterhouseCoopers as the external auditors of the Bank. Prior to initiation of the audit, the Committee met with the External Auditors to discuss the Audit Plan for the year 2011 and the concerns emphasised in the previous years Management Letter. Throughout the period of audit the Committee had discussions with External Auditors to address issues related to the audit. On behalf of the Audit and Risk Management Committee
Ibrahim Mohamed Chairperson Audit and Risk Management Committee
Appointment, Nomination & Remuneration
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Appointment, Nomination & Remuneration Committee Repor t
he Appointment, Nomination and Remuneration Committee (ANR Committee) is a standing Committee of the Board of Directors established under Article 54 and Article 63 of Articles of Association of the Bank and in accordance with section 1.8 of the Corporate Governance Code issued by Capital Market Development Authority (CMDA). The Committee performs the functions of both a Nominating Committee and a Remuneration Committee. The purpose of the ANR Committee is to establish and recommend to the Board a framework of remuneration packages of Directors and the Executive Management. With respect to appointment and nomination issues, the Committee identies and make recommendations on Board appointments and conducts annual review of the Boards performance and needs. The Committee also undertakes tasks which affect the staff across the business including and not limited to review of employees service rules, salaries and benets. Major roles and responsibilities of the Committee stipulated under Article 54 of the Articles of Association of the Bank are: (a) Identify and shortlist suitable candidates to be nominated by the Government as Independent Directors; (b) Identify suitable candidates who meet the requirements of Article 53 to be nominated by the Government for Board appointment or reappointment to ensure a suitable mix of Executive and non-Executive members on the Board of Directors; in this regard, a minimum of 14 names must be recommended to the Government for consideration; (c) Review the qualications and experience of candidates nominated to the Board prior to the General Meeting to ensure that the information provided to the shareholders are accurate; and (d) Identify suitable candidates with sufcient banking qualication and experience to be nominated for appointment as the Managing Director of the Company by the Board of Directors pursuant to Article 80.
Composition and Frequency of Meetings

The year 2011 commenced with the following 05 members in the 04th Appointment, Nomination and Remuneration Committee. Attendance of members from 01st January 2011 to 10th August 2011 is as follows:
No. of meetings To attend Attended
11 11 11 11 11 11 11 10 10 5
Directors Mr. Ahmed Mohamed

Chairperson of the Committee Non-Executive & Independent
Mr. Ibrahim Mohamed


Mr. Hassan Muzni Mohamed

Mr. Mohamed Jaish Ibrahim

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After the 28th Annual General Meeting held on 10th August 2011 the committee was re-constituted. The members of the 05th ANR Committee and their attendance for the period 11th August 2011 to 31st December 2011 is as follows:
No. of meetings To attend Attended
9 9 9 9 9 9 7 9 9 3
The following table depicts the breakdown of remuneration paid from 01st January 2011 to 31st December 2011 for the Board of Directors and the Key Management Personnel.
Amount (MVR) 1,311,640/5,460,738/-
Directors Mr. Ahmed Mohamed

Chairperson of the Committee Non-Executive and Independent
Remuneration Details Board of Directors (including sub-committee meetings) Key Management
Mr. Ibrahim Mohamed

Board Evaluation
Fostering good governance has been and continues to be a high priority of the Bank. An evaluation of individual Directors and an evaluation of the Board as a whole was conducted during the 03rd quarter of 2011 as mandated under the Corporate Governance Code of the Bank. The results of the evaluations were discussed by the Board members.
Mr. Hussain Shaheem

Mr. Hassan Muzni Mohamed

Mr. Mohamed Jaish Ibrahim

*Mr. Ahmed Mohamed resigned from the Board with his appointment as Minister of Economic Development during February 2012. Consequently, Mr. Mohamed Abdul Sattar was appointed to the Committee during March 2012. Furthermore, he was also appointed as the Chairperson of the Committee.
Recruitments
During the period, the ANR Committee undertook the task of recruitment of a CEO for the Bank upon resignation of former Managing Director Mr. Ganesan Subramanyam from office on 16th August 2010. On 24th February 2011, Mr. Peter Horton was appointed as the Chief Executive Officer of the Bank and in streamlining remuneration with performance; a bonus incentive component based on performance indicators was factored into his remuneration package. The Committee also undertook the task of recruitment of a Retail Banking Director Mr. Allan McFarlane, appointed to the post on 27th February 2012.
Remuneration
Directors were remunerated as per Article 63 of the Articles of Association of the Bank. Each Director was paid a fixed monthly remuneration of MVR 7,000/- and an additional MVR 3,000/- was paid to the Chairman of the Board as Chairmans Special Allowance. Directors in Board sub-committees were paid an additional allowance of MVR 2,000/per sitting.
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Other Activities
The Committee further undertook the following tasks during the year: Appointed Hunter Roberts, a consultancy rm based in UK, as the HR consultants of the Bank to restructure and overhaul the HR business line, to assist in direct transformation of HR function, to conduct a skills audit, to develop and deliver training to support the transformation and to develop and deliver a new learning and development culture Recruitment of new Executive Committee (EXCO) members Re-alignment of organisation design On behalf of the Appointment, Nomination and Remuneration Committee.
Mohamed Abdul Sattar Chairperson Appointment, Nomination & Remuneration Committee
Financial Reports
Independent Auditor's Repor t
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Independent Auditors Repor t

To the Shareholders and Board of Directors of Bank of Maldives Plc
1. We have audited the accompanying nancial statements of Bank of Maldives Plc which comprise the balance sheet as of 31 December 2011 and the income statement, statement of changes in equity and cash ow statement for the year then ended, and a summary of signicant accounting policies and other explanatory notes.
Managements Responsibility for the Financial Statements

2. Management is responsible for the preparation and fair presentation of these nancial statements in accordance with International Financials Reporting Standards (IFRS), which have been modied in relation to the requirements of IAS 39 Financial Instruments. Recognition and Measurements in respect of loan loss providing IFRS 7 Financial Instruments: Disclosures in respect of credit risk grading, as described in Note 2.1 to the nancial statements, and with the requirements of the Companies Act, No. 10/96 of the Republic of Maldives. This responsibility includes designing implementing and maintaining internal control relevant to the preparation and fair presentation of nancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors Responsibility
3. Our responsibility is to express an opinion on these nancial statements based on our audit, we conducted our audit in accordance with International Standards on Auditing. The standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the nancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the nancial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the nancial statements. We believe that the audit evidence we have obtained is sufcient and appropriate to provide a basis for our audit opinion.
Independent Auditor's Repor t
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Opinion
4. In forming our opinion we have considered the adequacy of the disclosure made in Note 2.1 to the nancial statements, in relation to the modications made on the requirements of IAS 39 Financial Instruments: Recognition and Measurement in respect of loan loss provisioning and IFRS 7 Financial Instruments: Disclosures in respect of credit risk grading, in preparing the accompanying nancial statements. In our opinion, the accompanying nancial statements give true and fair view of the nancial position of Bank of Maldives Plc as of 31 December 2011 and of its nancial performance and its cash ows for the year then ended in accordance with. (a) International Financial Reporting Standards (IFRS), with modications for the requirements of: IAS 39 Financial Instruments: Recognition and Measurement in respect of loan loss provisioning which is expected to be in line with the Maldives Monetary Authority Prudential Regulation No. 05-2009, Assets, Classication, Provisioning and Suspension of Interest until 31 December 2012 due to temporary relief granted; and IFRS 7 Financial Instruments Disclosure in respect of credit risk grading which is in accordance with circular No. CN-CBSS/2009/05 Credit Risk Grading and Provisioning Requirements issued by Maldivian Monetary Authority. (b) The requirements of the Companies Act No. 10/96 of the Republic of Maldives.
Report on Other Regulatory Requirements

5. In accordance with Maldives Monetary Authority Prudential Regulation No. 02-2009. Single Borrower and Large Exposure Limits, the total exposures, funded and unfunded, outstanding at any time to corporate group shall no exceed 40% of the Banks capital base. Further, the Bank may lend up to 30% of its capital base to a single borrower on the security of immovable property provided that the net realizable value of the immovable property is at all times at least 150% of the exposures secured thereby. Although, at the reporting date, total exposures of ve corporate groups and four single borrowers exceeded the limit set by the MMA by MVR 810,621,225 and MVR 335,985,333 respectively.
Emphasis of Matter
6. Following an on-site examination into the affairs of the Bank as at 30 June 2011, the Maldives Monetary Authority (MMA) required the reclassication of certain loans and advances. Accordingly, standard loans and advances of MVR 564,325,849, MVR 863,808,477 and MVR 46,434,977 were respectively required to be reclassied into Special Mention. Substandard and Doubtful while Special Mention loans and advances of MVR 93,258,099 required to be reclassied into Substandard as at 31 December 2011. Due to the required reclassication not being carried out, the provision on non-performing loans and advances is short by MVR 180,800,211 as at the year-end. However based on the relief granted by MMA until 31 December 2012, the Bank has not provided for the shortfall.
MALE
CHARTERED ACCOUNTANTS
Financial Statements
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Income Statement
Year ended 31 December (All amounts in Maldivian Ruyaa) Notes Gross income Interest income and similar income Interest expense and similar charges Net interest income Fees and commission income Fees and commission expenses Net fees and commission income Dividend income Net foreign exchange income Other operating income Operating income Less : Operating expenses Staff costs Premises, equipment and establishment expenses Provision for bad and doubtful debts Other operating expenses Net prot before tax Bank prot tax expense Net prot for the year Earnings per share - basic 17 6 7 7 7 8 8 9 10
2011 1,074,778,558 643,091,489 (165,713,350) 477,378,139 286,345,131 (112,350,425) 173,994,706 121,262 40,859,263 104,361,413 796,714,783 (156,564,947) (63,733,175) (511,458,567) (57,660,511) 7,297,583 (7,297,583) 2010 830,194,571 581,951,055 (175,738,369) 406,212,686 213,479,325 (87,853,573) 125,625,752 54,914 9,265,839 25,443,438 566,602,629 (146,744,765) (64,708,958) (214,478,921) (53,396,277) 87,273,708 (36,287,477) 50,986,231 9
11 12 13 14 15
The notes on pages 64 to 104 are an integral part of these nancial statements.
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Balance Sheet
Year ended 31 December (All amounts in Maldivian Ruyaa) Notes ASSETS Cash and short term funds Balances with Maldives Monetary Authority Bills of exchange Loans and advances Financial assets held to maturity Investment -Available for sale Assets pledged as collateral Property, plant and equipment Intangible assets Deferred tax asset Other assets Total assets LIABILITIES Deposits from non-bank customers Custodian account of Maldives Retirement Pension Scheme Borrowings Bills, acceptances and other documentary credits Other liabilities Current tax Dividends payable Total liabilities SHAREHOLDERS EQUITY Share capital Share premium Statutory and assigned capital reserves General reserves Total shareholders equity Total equity and liabilities Commitments and contingencies 40 & 41 18 19 22 23 26 27 28 29 30 35 31
2011 1,553,702,352 2,055,257,149 11,244,625 5,048,491,204 403,264,985 319,246 84,440,819 25,251,837 251,343,102 130,696,864 9,564,012,183 7,518,761,713 59,294,021 959,440,840 11,022,403 245,543,457 3,069,744 8,797,132,178 269,096,000 93,000,000 156,000,000 248,784,005 766,880,005 9,564,012,183 895,838,101 2010 1,355,760,749 1,701,520,810 17,577,667 5,184,839,566 430,705,731 5,079,115 199,095,018 89,079,926 31,929,075 258,615,311 77,124,883 9,351,327,851 7,012,578,842 19,767,111 1,260,367,977 18,831,478 193,033,795 76,472,106 3,396,537 8,584,447,846 269,096,000 93,000,000 156,000,000 248,784,005 766,880,005 9,351,327,851 798,525,011
32 33 34 36
37 37 39 39
These nancial statements were approved by the Board on 23rd May 2012 and signed on their behalf by:
Lasantha Thennakoon Chief Financial Ofcer
Peter Horton Chief Executive Ofcer
Abdullah Shiham Hassan Chairman
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Cash Flow Statement

Year ended 31 December (All amounts in Maldivian Ruyaa) Notes Cash ows from operating activities Interest receipts Fees and commission receipts Dividend income Net foreign exchange income Other operating income Interest payments Cash paid to employees and other expenses Cash ows from operating prots before changes in operating assets and liabilities Changes in operating assets and liabilities (Increase) / decrease in reserve deposits with MMA (Increase) / decrease in loans and advances to customers Increase in other assets Increase / (decrease) in amounts due to customers Increase in Custodian account of Maldives Retirement Pension Scheme Increase / (decrease) in other liabilities Net cash generated from operating activities before bank prot tax Bank prot tax paid Net cash generated from operating activities Cash ows from investing activities Purchase of property, plant and equipment Purchase of intangible assets Proceeds from sale of property, plant and equipment Investment in treasury bills with original maturity more than three months Net cash generated from / (used in) investing activities Cash ows from nancing activities Proceeds from borrowed funds Repayments of borrowed funds Dividends paid Net cash used in nancing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year
2011 627,797,277 173,994,706 121,262 40,859,263 20,097,954 (165,713,350) (246,964,081)
2010 577,330,075 125,625,752 54,914 9,265,839 18,257,372 (189,077,181) (166,308,991) 375,147,780 533,000,527 327,967,191 (15,517,900) (813,605,959) 19,767,111 (3,687,437) 423,071,313 (28,382,335) 394,688,978 (57,057,662) (5,297,128) 80,588 (629,800,749) (692,074,951) 64,000,000 (358,818,782) (1,461,958) (296,280,740) (593,666,713) 1,949,427,462 1,355,760,749
42
450,193,031 (353,736,339) (269,219,672) (53,447,671) 506,182,871 39,526,910 46,342,539 365,841,669 (76,497,480) 289,344,189 (13,942,097) (2,745,843) 3,520 226,535,764 209,851,344 36,827,599 (337,754,736) (326,793) (301,253,930) 197,941,603 1,355,760,749
20
1,553,702,352
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Statement of Changes in Equity

Year ended 31 December (All amounts in Maldivian Ruyaa)
Notes Share capital Share Statutory capital reserves Balance at 1 January 2010 -As previously reported Restatement of accumulated losses upto 2009 arising out of provision for impairment on loans and advances and recognition of deferred tax asset -As restated Net prot for the year - restated to correct the understated provision for impairment of loans and advances netoff recognition of deferred tax asset Transfer from general reserve to retained earnings Balance at 31 December 2010 -As previously reported Correction of impairment of loans and advances and deferred tax asset -As restated Net prot for the year Balance at 31 December 2011 39
269,096,000 93,000,000 156,000,000 814,424,456 1,332,520,456
General reserves
Retained earnings
Total
premium and assigned
38
269,096,000
93,000,000
156,000,000 814,424,456
(616,626,682) (616,626,682)
(616,626,682) 715,893,774
50,986,231
50,986,231
(565,640,451)
565,640,451
269,096,000
93,000,000
156,000,000
248,784,005
766,880,005
Balance at 1 January 2011
269,096,000
93,000,000
156,000,000
814,424,456 (565,640,451) 248,784,005 248,784,005
49,572,269 (49,572,269) -
1,382,092,725 (615,212,720) 766,880,005 766,880,005
38
269,096,000 269,096,000
93,000,000 93,000,000
156,000,000 156,000,000
Notes to the Financial Statements
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1 GENERAL INFORMATION
Bank of Maldives Plc (the Bank) is engaged in the business of commercial banking and other nancial services including trade nancing, custodial services and development nancing. The registered ofce is situated at 11, Boduthakurufaanu Magu, Male, 20094, Republic of Maldives. The Bank is a limited liability Company and is incorporated and domiciled in the Republic of Maldives. The Bank is listed in Maldives Stock Exchange.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of these nancial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 2.1 BASIS OF PREPARATION The nancial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), with the modication of the requirements of IAS 39 - Financial Instrument Recognition and Measurement in respect of loan loss provisioning by prudential regulation: No.05 - 2009 on Asset classication, provisioning and suspension of interest issued by Maldives Monetary Authority (MMA). The nancial statements have been prepared under the historical cost convention whereby the transactions are recorded at the values prevailing on the dates when the assets were acquired, the liabilities were incurred or the capital obtained. 2.2 NEW ACCOUNTING STANDARDS ISSUED BUT NOT EFFECTIVE AS AT THE BALANCE SHEET DATE The International Accounting Standards Board has issued the new standards given below, which become effective for annual periods beginning on or after 1 January 2012. Accordingly these standards have not been applied in preparing these nancial statements as they are not effective for the year ended 31 December 2011. - IAS 1 (Amendment), Presentation of Financial Statements (effective from 1 July 2012) - IAS 12 (Amendment), Income Taxes (effective from 1 January 2012) - IAS 19 (Amendment), Employee Benets (effective from 1 January 2013) - IAS 32 (Amendment), Financial Instruments: Presentation (effective from 1 January 2014) - IFRS 7 (Amendment), Financial Instruments: Disclosures (effective from 1 January 2013) - IFRS 9, Financial Instruments (effective from 1 January 2013) - IFRS 10, Consolidated Financial Statements (effective from 1 January 2013) - IFRS 11, Joint Arrangements (effective from 1 January 2013) - IFRS 12, Disclosure of Interests in Other Entities (effective from 1 January 2013) - IFRS 13, Fair Value Measurement (effective from 1 January 2013)
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2.3 Foreign currency translation (a) Functional and presentation currency Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (the functional currency). These financial statements are presented in Maldivian Rufiyaa, which is the Banks functional and presentation currency. (b) Transactions and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in other comprehensive income as qualifying cash flow and qualifying net investment hedges. 2.4 Financial assets The Bank classies its financial assets in the following categories: loans and receivables; held-to-maturity investments; and available-for-sale financial assets. Management determines the classication of its investments at initial recognition. (a) Loans and receivables Loans and receivables are non-derivative financial assets with xed or determinable payments that are not quoted in an active market, other than: (i) those that the Bank intends to sell immediately or in the short term, which are classied as held for trading, (ii) those that the Bank upon initial recognition designates as available for sale; or (iii) those for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration. Loans and receivables are initially recognised at fair value which is the cash consideration to originate the loan including any transaction costs and carried subsequently with accrued interest. Loans and receivables are reported in the Balance Sheet as loans and advances to customers. Interest on loans is included in the income statement and is reported as Interest and similar income. In the case of an impairment, the impairment loss is reported as a deduction from the carrying value of the loan and recognised in the income statement as Provision for bad and doubtful debts. (b) Held-to-maturity financial assets Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Banks management has the positive intention and ability to hold to maturity, other than: (i) those that the Bank upon initial recognition designates as at fair value through profit or loss; (ii) those that the Bank designates as available for sale; and (iii) those that meet the definition of loans and receivables. These are initially recognised at fair value including direct and incremental transaction costs and measured subsequently at amortised cost, using the effective interest method. Interest on held-to-maturity investments is included in the income statement and reported as Interest and similar income. In the case of an impairment, the impairment loss is reported as a deduction from the carrying value of the investment and recognised in the income statement as Net gains/(losses) on investment securities. Held-to-maturity investments only include treasury bills.
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(c) Available-for-sale financial assets Available-for-sale investments are financial assets that are intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices or that are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. The Bank uses trade date accounting for regular way contracts when recording financial asset transactions. Financial assets that are transferred to a third party but do not qualify for derecognition are presented in the Balance Sheet as Assets pledged as collateral, if the transferee has the right to sell or repledge them. Available-for-sale financial assets initially recognised at fair value, which is the cash consideration including any transaction costs, and measured subsequently at fair value with gains and losses being directly recognised in the equity, except for impairment losses and foreign exchange gains and losses, until the financial asset is derecognised. If an available-for-sale financial asset is determined to be impaired, the cumulative gain or loss previously recognised in the equity is recognised in the income statement. Dividends on available-for-sale equity instruments are recognised in the income statement in Dividend income when the Banks right to receive payment is established. The fair values of quoted investments in active markets are based on current bid prices. In case of investments in unquoted equity shares, they are stated at cost less allowance for falling value of investment, since the fair value of those cannot be measured reliably. 2.5 Financial liabilities Deposits from customers and borrowings Financial liabilities of the Bank include deposits from customers, long term debts and other liabilities. Savings deposits are carried with accrued interest. Long term borrowings are carried after deduction of principals repayment from initial borrowings. Interest accrued on fixed deposits and long term debts are included under other liabilities. Financial liabilities are derecognised when extinguished. 2.6 Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the Balance Sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. This is not the case with the assets and liabilities presented gross in the Balance Sheet. 2.7 Interest income and expenses Interest income and expense for all interest-bearing financial instruments, except for those classified as held for trading, are recognised within interest income and interest expense in the income statement on accrual basis by applying the agreed interest rate. However, interest income is suspended when loans become doubtful of collection, such as when overdue by more than 90 days. Such income is excluded from interest income until received. 2.8 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.
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Income on the endorsement of bills of exchange is recognised only when the bill is received and either issued or endorsed, and the payment under the particular instrument has been effected. 2.9 Dividend income Dividends are recognised in the income statement when the entitys right to receive payment is established. 2.10 Impairment of financial assets (a) Loans and advances All loans and advances are recognised when the cash is advanced to borrowers. A specific credit risk provision for loan impairment is established to provide for managements estimate of credit losses as soon as the recovery of an exposure is identified as doubtful. Provisions for loan impairment are made on the basis of continuous review of all advances to customers, in accordance with the prudential regulation No.05 - 2009 on Asset classification, provisioning and suspension of interest issued by MMA based on aged classification of advances as follows: Period outstanding 0 - 59 days 60 - 89 days More than 90 days and upto 179 days More than 180 days and upto 359 days More than 360 days Classification Pass Especially mentioned Substandard Doubtful Loss Provision made 1% 5% 25% 50% 100%
Provisions above are calculated against the gross loan balance (less interest in suspense) without any allowance for collateral value. Provisions for impairment on credit card receivables are made on the basis of continuous review of outstanding from card holders, in accordance with the credit policy of the Bank based on aged classification of the receivables as follows: Period outstanding More than 60 days and upto 160 days More than 160 days Classification Non-performing Non-performing Provision made 50% 100%
When a loan is uncollectible, it is written off against the related provision for loan impairment. Such loans are written 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 objectively to an event occuring after the impairment was recognised (such as the debtor regularising loan repayment), the previously recognised impairment loss is reversed by adjusting the allowance account. Amounts recovered from fully impaired loans and advances are recognised as income on a cash basis.
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(b) Assets classied as available for sale The Bank assesses at each Balance Sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classied as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in prot or loss is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. If, in a subsequent period, the fair value of a debt instrument classied as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in prot or loss, the impairment loss is reversed through the income statement. (c) Renegotiated loans A renegotiated loan includes sanction of any new loan to repay or replace any loan(s) that is overdue, rescheduled, rolled-over, or otherwise modified because of deterioration in the borrowers financial condition or an inability to repay the loan according to the original terms. The Bank documents the basis for restructuring a loan including, at a minimum: (i) current financial condition and cash flow information; (ii) changes to borrowers operations; and (iii) additional security obtained. If a loan is renegotiated and all overdue interest is paid by the borrower in cash at the time of renegotiation, the renegotiated loan is classified as Sub-standard. If a loan is renegotiated but all overdue interest is not paid by the borrower in cash at the time of renegotiation, the loan is classified according to paragraph 3 of Part III in prudential regulation No.05 - 2009 on Asset classification, provisioning and suspension of interest issued by MMA. A renegotiated loan is upgraded to performing category only after the payments made according to the restructured loan terms for a period of at least six months and satisfactory performance of the loan during such period. If any portion of principal or interest of a renegotiated loan subsequently becomes past due 90 days or more, the entire loan is placed in non-accrual and remain so until all overdue principal and interest is brought current by payment in cash. 2.11 Property, plant and equipment All property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the assets carrying amount or are recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Bank and the cost of the item can be measured reliably. All other repairs and maintenance are charged to other operating expenses during the financial period in which they are incurred. Depreciation is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:
Bank premises Computer hardware and software Furniture and equipment Motor vehicles/vessels
20 years 3 - 5 years 3 - 5 years 5 years
Leasehold buildings are amortised over the unexpired period of the lease.
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The charge for the depreciation commences from the date on which the asset is put to use. The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each Balance Sheet date. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An assets carrying amount is written down immediately to its recoverable amount, if the assets carrying amount is greater than its estimated recoverable amount. The recoverable amount is the higher of the assets fair value less costs to sell and value in use. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in other operating income or other operating expenses, as the case may be, in the income statement. 2.12 Intangible assets Intangible assets comprise separately identifiable intangible items. Computer software licences and other intangible assets are considered as intangible assets, are recognised at cost. Intangible assets with a definite useful life are amortized using the straight-line method over their estimated useful economic life. Intangible assets with an indefinite useful life are not amortised. Generally, the identified intangible assets of the Bank have a definite useful life. At each date of the Balance Sheet , intangible assets are reviewed for indications of impairment or changes in estimated future economic benefits. If such indications exist, the intangible assets are analysed to assess whether their carrying amount is fully recoverable. An impairment loss is recognised if the carrying amount exceeds the recoverable amount. 2.13 Operating leases Leases of assets under which all the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the equipment and establishment expenses in the income statement on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place. 2.14 Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than three months maturity from the date of acquisition, including cash, amounts due from other banks, certificate of deposits and treasury bills. 2.15 Provisions Provisions are recognised when the Bank has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. 2.16 Financial guarantee contracts Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are given to banks, financial institutions and other bodies on behalf of customers to secure loans, overdrafts and other banking facilities.
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Financial guarantees are initially recognised in the financial statements at the amount guaranteed on the date the guarantee was given. Subsequent to initial recognition, the banks liabilities under such guarantees are measured at the initial measurement, less the best estimate of the expenditure required to settle any financial obligation arising at the Balance Sheet date. Any increase in the liability relating to guarantees is taken to the income statement under other operating expenses. 2.17 Employee benefits (a) Staff Provident Fund The Bank operates a Staff Provident Fund. All the local employees of the Bank who have subscribed to the Fund are the members of this Fund to which the Bank contributes 10% of those employees monthly basic salary upto 2010 and 3 % with effect from 2011. This contribution is recognised as employee benefit expense when they are due. (b) Retirement Pension Scheme The Bank is liable to enroll the employees in the Retirement Pension Scheme with effect from 1 May 2011 based on the Regulation on Maldives Retirement Pension Scheme published by Government of Maldives and shall make contributions at a rate of 7% from the employees pensionable wages on behalf of the employees of age between 16 and 65 years to the pension office. The Bank contribution to retirement pension scheme is at the rate of 7% on pensionable wages. Obligations for contributions to retirement pension scheme is recognised as an employee benefit expense in the income statement. 2.18 Deferred income taxes Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Currently enacted tax rates are used in the determination of deferred income tax. The principal temperory differences arise from depreciation of property, plant and equipment and provision on impairment of loans. 2.19 Acceptances Acceptances comprise undertakings by the Bank to pay the bills of exchange drawn on customers. The Bank expects most acceptances to be settled simultaneously with reimbursement from the customers. Acceptances are accounted for as off Balance Sheet transactions and are disclosed as contingent liabilities and commitments. 2.20 Share capital Dividends on ordinary shares Dividends on ordinary shares are recognised in equity in the period in which they are approved by the Companys shareholders. 2.21 Fiduciary activities The Bank commonly acts as a trustee and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions. These assets and income arising thereon are excluded from these financial statements, as they are not assets of the Bank.
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Custodian account of Maldives Retirement Pension Scheme Pursuant to the agreement entered with Maldives Pension Administration Office (MPAO) the administrator of Maldives Retirement Pension Scheme, the Bank performs custodial and other services relating to the establishment and maintenance of Contribution Collection and Contribution Holding Accounts of Maldives Retirement Pension Scheme, in which the Bank keeps the funds and, at the direction of MPAO or a person authorised by MPAO, invests the funds in the designated financial instruments, in consideration for which MPAO pays a fee to the Bank. The movement in contribution holding account held by the Bank on behalf of MPAO has been separately disclosed in Note 33. 2.22 Comparatives Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.
Financial risk management

The Banks activities expose it to a variety of financial risks and those activities involve the analysis, evaluation, acceptance and management of some degree of risk or combination of risks. Taking risk is core to the financial business, and the operational risks are an inevitable consequence of being in business. The Banks aim is therefore to achieve an appropriate balance between risk and return and minimise potential adverse effects on the Banks financial performance. The Banks risk management policies are designed to identify and analyse these risks, to set appropriate risk limits and controls, and to monitor the risks and adherence to limits by means of reliable and up-to-date information systems. The Bank regularly reviews its risk management policies and systems to reect changes in markets, products and emerging best practice. Risk management is carried out by the Bank under policies approved by the Board of Directors. The Bank identies and evaluates financial risks in close co-operation with the Banks operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as credit risk and liquidity risk. In addition, internal audit is responsible for the independent review of risk management and the control environment. The most important types of risk are credit risk, liquidity risk, market risk and other operational risk. Market risk includes currency risks, interest rate and other price risks. 3.1 Credit risk The Bank takes on exposure to credit risk, which is the risk that a counterparty will cause a financial loss for the Bank by failing to discharge an obligation. Credit risk is the most important risk for the Banks business; the management therefore carefully manages its exposure to credit risk. Credit exposures arise principally in lending activities that lead to loans and advances. There is also credit risk in off-Balance Sheet financial instruments, such as loan commitments. Exposure to credit risks arises from lending, sales and trading. Lending exposures are typically represented by the principal amount of on-Balance Sheet financial instruments. Financial guarantees and standby letters of credit, which represent undertakings that the Bank will make payments in the event that a customer cannot meet its obligations to third parties, carry the same credit risk as loans even though they are of contingent nature. Documentary and commercial letters of credit, which are undertakings by the Group on behalf of a customer, are usually collateralised by the underlying shipments of goods to which they relate and therefore exhibit different risk characteristics from direct borrowing. Commitments to extend credit include unused portions of loan commitments, guarantees or letters of credit. The majority of unused commitments are contingent upon customers observing or meeting certain credit terms and conditions.
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Credit policies were formulated covering all the Bank credit activities and establishment of individual limits of authority for initiating, reviewing and approving credit. The risk organisation is structured such that there is segregation of duties between risk taking and risk controlling units. A Credit Committee comprising of five members and chaired by the Chief Credit Officer (CCO), meets regularly to discuss credit proposals in line with credit policies. The Credit Committee also reviews sectoral lending position, non-performing assets, documentation and other credit-related issues. 3.1.1 Credit risk measurement The Bank has not introduced the system of internal rating, probablity of default and consequential probability of losses. The credit risk management of the exposures is conducted through credit granting process which includes the assessment of the creditworthiness and the establishment of appropriate credit limits. Credit approvers have the responsibility to ensure that credits are properly assessed and classified. Individual Bank staff also assume the responsibility to ensure all crucial information is included in the application for the purpose of analysis and approval. The analysis supporting the credit approval decision takes into account both financial and non-financial factors that affect the going concern of the borrowers and also incorporate an evaluation of the collateral offered. This evaluation ensures that; A lending has identifiable source of repayment Establishing suitable exposure limits for borrowers based on financial strength Avoid excessive single industry/group exposures 3.1.2 Risk limit control and mitigation policies The Bank manages, limits and controls concentrations of credit risk wherever they are identified in particular, to individual counter parties and groups, and to industries. The Bank structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower, or groups of borrowers, and to geographical and industry segments. Such risks are monitored on a revolving basis and subject to an annual or more frequent review, when considered necessary. Limits on the level of credit risk by product, industry sector are approved annually by the Board of Directors The exposure to any one borrower is further restricted by sub-limits covering on- and off-Balance Sheet exposures. Actual exposures against limits are monitored daily. Exposure to credit risk is also managed through regular analysis of the ability of borrowers and potential borrowers to meet interest and capital repayment obligations and by changing these lending limits where appropriate. Some other specific control and mitigation measures are outlined below. (a) Collateral The Bank employs a range of policies and practices to mitigate credit risk. The most traditional of these is the taking of security for funds advances, which is common practice. The Bank implements guidelines on the acceptability of specific classes of collateral or credit risk mitigation. The principal collateral types for loans and advances are: Mortgages over leasehold rights of resort islands and residential properties Charges over business assets such as premises, office equipments, inventory and accounts receivable Charges over vehicles, boats, dhonies and related equipments Corporate and personal guarantees Medium term loans, overdrafts and revolving trade credit facilities are generally secured. In addition, in order to minimise the credit loss the Bank will, as far as practicable, seek additional collateral from the counterparty as soon as impairment indicators are noticed for the relevant individual loans and advances.
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(b) Credit-related commitments The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees and standby letters of credit carry the same credit risk as loans. Documentary and commercial letters of credit which are written undertakings by the Bank on behalf of a customer authorising a third party to draw drafts on the Bank upto a stipulated amount under specific terms and conditions are collateralised by the underlying shipments of goods to which they relate and therefore carry less risk than a direct loan. Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans, guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Bank is potentially exposed to loss in an amount equal to the total unused commitments. However, the likely amount of loss is less than the total unused commitments, as most commitments to extend credit are contingent upon customers maintaining specific credit standards and since generally these exposures are secured against adequate collateral. The Bank monitors the term to maturity of credit commitments because longer-term commitments generally have a greater degree of credit risk than shorter-term commitments. 3.1.3 Impairment and provisioning policies Impairment provisions are recognised for financial reporting purposes only for losses that have been incurred at the Balance Sheet date based on objective evidence of impairment (see Note 2.10). The impairment provision shown in the Balance Sheet at year-end is derived from each of the five groups described in note 2.10. The table below shows the percentage of the Banks on Balance Sheet items relating to loans and advances and the associated impairment provision for each of the Group: 2011 Loans & Impairment advances provision % % 62.4% 1% 2.8% 5% 1.9% 25% 9.9% 50% 23.0% 100% 100% 2010 Loans & Impairment advances provision % % 54.2% 1% 13.4% 5% 2.8% 25% 5.6% 50% 23.9% 100% 100%
Group Pass Especially mentioned Substandard Doubtful Loss
The Banks policy requires the review of individual financial assets that are above materiality thresholds at least annually or more regularly when individual circumstances require. However, the current regulations entail upon the Bank to undertake quarterly review of all accounts. Impairment allowances on individually assessed accounts are determined by an evaluation of the incurred loss at balance-sheet date on a case-by-case basis, and are applied to all individually significant accounts.
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3.1.4 Maximum exposure to credit risk before collateral held or other credit enhancements The maximum exposure to credit risk is limited to the amounts on the Balance Sheet as well as commitments to extend credit, without taking into acount the fair value of any collateral. The table below shows the maximum exposure to credit risk for the components of the Balance Sheet: (Amount in MVR 000) 2011 2010 77,720 45,017 121,806 84,581 11,245 17,578 5,048,492 5,184,840 199,096 5,259,263 5,332,016 895,838 798,525 6,155,101 6,130,541
Balances with other banks Money at call and short notice Bills of exchange Loans and advances to customers Assets pledged as collateral Total on the Balance Sheet Contingent liabilities and commitments Total credit exposure as 31 December
82% of the total maximum exposure is derived from loans and advances to customers (2010: 85%). Management is condent in its ability to continue to control and sustain minimal exposure of credit risk to the Bank resulting from both its loan and advances portfolio and based on the following: Mortgage loans, which represents the biggest group in the portfolio, are backed by collateral; 63% of the loans and advances portfolio are considered to be neither past due nor impaired (2010: 53%); The Bank has introduced a more stringent selection process upon granting loans and advances. 3.1.5 Loans and advances Loans and advances are summarised as follows: (Amount in MVR 000) 2011 2010 3,207,605 2,766,447 1,504,418 2,205,669 2,517,364 2,374,626 7,229,387 7,346,742 (1,446,616) (1,515,098) (723,036) (629,228) 5,059,735 5,202,416
Neither past due nor impaired Past due but not impaired Impaired Gross Less: allowance for impairment Less : Interest in suspense Net
Further information of the impairment allowance for loans and advances to customers is provided in Notes 21.
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Loans and advances neither past due nor impaired Analysed by industry Agriculture Commerce Construction Fishing Manufacturing Personal Services Tourism (a) Loans neither past due nor impaired
(Amount in MVR 000) 2011 2010

10,431 354,028 544,499 188,113 145,675 300,618 150,828 1,513,413 3,207,605 10,954 269,033 555,003 170,976 145,044 248,602 41,706 1,325,129 2,766,447
Currently, the Bank does not maintain an internal credit rating system except for exposures which are classified as nonperforming. However, the Bank does an in-depth credit risk assessment on qualitative and quantitative basis before granting a facility. Exposure to each borrower or group of related borrowers are again reviewed on a scheduled basis. (i) in evaluating credit risks the Bank considers qualitative criteria pertinent to the borrower, including management depth and reputation, the borrowers past track record, its business risks, the industry, operating environment and conditions that the borrower operates in. The Bank looks for quality, stability and sustainability of performance. In quantitative assessment, the Bank analyses the borrowers historical and projected financial statements, where pertinent. In this respect, the Bank focuses on the profitability of the business, the efficiency in the employment of its assets, and its financial leverage to assess its liquidity and cash-flow positions and hence its ability to meet its financial commitments. (ii) to manage and mitigate risk of loss in the event of default, the Bank looks first at the protection accorded by the borrowers net assets to the Banks exposure to the company. Where appropriate, the Bank will examine the quality, liquidity and hence the realisable value of its principal operating assets such as account receivables, inventory and capital assets. In establishing financial protection for the Banks exposure, the Bank may take a security interest in such assets by way of mortgages, pledges, assignments and the like. In addition the Bank may also take additional collaterals offered by the companys principals or other third party to ensure adequate protection with a margin. Taking collateral is a prevalent practice in the local lending environment as additional practical and prudential measures of mitigating against potential loss at default. Main reasons for doing so are due to (a) the general lack of confidence in the reliability of financial statements provided, particularly unaudited and/or stale ones, and (b) ensure that assets are not secured to other creditors to the Banks detriment.
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(b) Loans and advances past due but not impaired Loans and advances less than 90 days past due are not considered impaired, unless other information is available to indicate the contrary. Gross amount of loans and advances by class to customers that were past due but not impaired were as follows: (Amount in MVR 000) Individual (retail customers) Term loans Mortgages Development Total banking
36,211 15,051 7,219 58,481 135,679 32,430 26,103 194,212 174,956 72,442 54,036 301,434 391,629 120,889 125,438 637,956
31 December 2011
Overdrafts
40,643 2 37,921 78,566
Credit cards
4,140 964 159 5,263
Past due upto 30 days Past due 30-60 days Past due 60-90 days Total
31 December 2011 Past due up to 30 days Past due 30-60 days Past due 60-90 days Total
Corporate entities Total 790,485 75,976 866,461
Credit cards past due in the range of 60 - 90 days of MVR 5,263,147 as at 31 December 2011 are considered as impaired in accordance with the credit policy of the Bank. (Amount in MVR 000) Individual (retail customers) Term loans Mortgages Development Total banking
216,648 94,719 619,334 930,701 117,421 71,606 52,305 241,332 166,627 69,234 63,176 299,037 510,924 238,551 780,812 1,530,287
31 December 2010
Overdrafts
Credit cards
10,228 2,992 13,220
Past due upto 30 days Past due 30-60 days Past due 60-90 days Total
45,997 45,997
31 December 2010 Past due upto 30 days Past due 30-60 days Past due 60-90 days Total
Corporate entities Total 468,776 206,606 675,382
Credit cards past due in the range of 60 - 90 days of MVR 347,000 as at 31 December 2010 are considered as impaired in accordance with the credit policy of the Bank.
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(c) Loans and advances individually impaired The individually impaired loans and advances to customers before taking into consideration the cashflows from collateral held is MVR 2,517,363,569 (2010: MVR 2,374,626,340). The breakdown of the gross amount of individually impaired loans and advances by class are as follows: (Amount in MVR 000)
31 December 2011 Individual (retail customers) Overdrafts Credit cards Term loans Large Mortgages Development banking Individually impaired loans Total corporate customers Total
319,489 319,489
7,722 7,722
71,896 71,896
108,886 108,886
314,510 314,510
1,694,861 1,694,861
2,517,364 2,517,364
31 December 2010
Individual (retail customers) Overdrafts Credit cards Term loans
Large Mortgages Development banking corporate customers Total
Individually impaired loans Total
170,539 170,539
18,733 18,733
207,963 207,963
100,631 100,631
341,206 341,206
1,535,554 1,535,554
2,374,626 2,374,626
Non-performing assets by past due period Substandard Doubtful Loss (d) Loans and advances renegotiated
(Amount in MVR 000) 2011 2010

138,215 716,229 1,662,920 2,517,364 206,931 409,399 1,758,296 2,374,626
Renegotiated loans that would otherwise be past due or impaired totalled MVR 561,332,199 (2010: MVR 454,980,779) at December 2011. (Amount in MVR 000) 2011 2010 Renegotiated loans and advances to customers individuals: Continuing to be impaired after restructuring Loans to individuals: Nonimpaired after restructuring would otherwise have been impaired Nonimpaired after restructuring would otherwise not have been impaired
62,989 7,357 11,956 82,302
2,638 8,946 18,622 30,206
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3.1.6 Concentration of risks of financial assets with credit risk exposure (a) Geographical sectors Currently, the Banks lending activities are limited to Republic of Maldives. (b) Industry sectors The following table lists the Banks main credit exposure at their carrying amounts, as categorised by the industry sectors of our counterparties. (Amount in MVR 000) 2011 2010 Agriculture Commerce Construction Fishing Manufacturing Personal Services Tourism Grand total 3.2 Market risk The Bank takes on exposure to market risks, which is the risk that the fair value or future cash ows of a financial instrument will uctuate because of changes in market prices. Market risks arise from open positions in interest rate, currency and equity products, all of which are exposed to general and specific market movements and changes in the level of volatility of market rates or prices such as interest rates, credit spreads, foreign exchange rates and equity prices. The Bank does not have a trading portfolio and quoted equity investments. Therefore the Bank is not open to any equity price risk. Non-trading portfolios primarily arise from the interest rate management of the entitys retail and commercial banking assets and liabilities. The market risks arising from non-trading activities are discussed in the Banks Assets and Liabilities Management Committee (ALCO). Regular reports are submitted to the Board of Directors and to ALCO members. 3.2.1 Foreign exchange risk All the transactions in BML, other than the transactions in local currency, Maldivian Rufiyaa (MVR), are carried out mainly in United States Dollars (USD). Upto April 2011, the exchange rate was fixed and from April 2011, the exchange rate has been maintained within 20% cap and floor of the base rate. Therefore, the Bank is not susceptible to any major currency fluctuation risk. Nevertheless, generally, the Bank does not engage in large scale transactions on speculative basis on its own other than to cover an underlying customer transaction or to cover a currency funding gap. However, the exposure to the risk associated with changes on foreign exchange rates as a result of holding open positions caused by a gap between the assets and liabilities in a particular currency or combination of currencies, is controlled through a combination of foreign exchange position limits and transaction limits. These exposures are monitored on a daily basis and reported to ALCO. Further, timely recognition of market losses through mark to market and exchange revaluation mechanisms are also in place by the system.
25,043 462,715 961,996 499,091 297,752 361,565 290,999 4,330,225 7,229,386 27,751 422,807 995,004 526,247 338,887 329,741 281,918 4,424,387 7,346,742
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(Amount in MVR 000)

As at 31 December 2011 Assets Cash and Balances with Banks Treasury Bills Loans and Advances Investment securities Other Assets Total Assets Liabilities Deposits Borrowings Other Liabilities Total Liabilities Net on-Balance Sheet financial position Commitments MVR USD GBP 2,225 9 2,234 JPY 1,657 1,657 SGD 2,746 293 3,039 EUR 59,639 231,761 88 291,488 OTHERS 1,775 1,257 14 3,046 Total 2,696,523 1,315,702 5,059,736 319 491,733 9,564,013
1,756,461 872,020 1,315,702 2,761,296 2,065,422 319 405,937 85,392 6,239,396 3,023,153
4,822,519 2,727,090 42,410 657,907 213,914 43,316 5,078,843 3,428,313 1,160,553 543,737 (405,160) 330,622
224 224 2,010 -
657 657 1,000 6,769
3 3 3,036 -
27,790 259,124 2,179 289,093 2,395 14,710
- 7,578,056 959,441 259,636 - 8,797,133 3,046 766,880 895,838
As at 31 December 2010 Assets Cash and Balances with Banks Treasury Bills Loans and Advances Investment securities Other Assets Total Assets Liabilities Deposits Borrowings Other Liabilities Total Liabilities Net on-Balance Sheet financial position Commitments
MVR
USD
GBP 3,225 1,597 28 4,850
JPY 2,315 2,315
SGD 1,526 220 4 1,750
EUR
(Amount in MVR 000)

OTHERS Total
1,303,576 821,195 1,523,435 2,798,705 2,173,299 4,811 269 388,329 68,335 6,018,856 3,063,098
30,392 228,596 53 259,041
1,418 1,418
2,163,647 1,523,435 5,202,417 5,080 456,749 9,351,328
4,540,766 2,466,056 28,286 954,242 269,546 19,078 4,838,598 3,439,376 1,180,258 (376,278)
381 381 4,469
235 235 2,080
497 497 1,253
24,190 277,840 2,710 304,740 (45,699)
602 7,032,346 - 1,260,368 19 291,734 621 8,584,448 797 766,880
476,704
293,993
2,377
437
23,977
1,037
798,525
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3.2.2 Interest rate risk Cash ow interest rate risk is the risk that the future cash ows of a financial instrument will uctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will uctuate because of changes in market interest rates. The Bank takes on exposure to the effects of uctuations in the prevailing levels of market interest rates on cash ow risks. Interest margins may increase as a result of such changes but may reduce losses in the event that unexpected movements arise. The extent of the interest rate risk depends on the value and period of the maturity mismatch between interest bearing assets and liabilities and the ability and speed of the Bank in re-pricing them. The ALCO regularly reviews these gaps to ensure that they are within acceptable norms. The Bank regularly monitors the market behaviour and products are appropriately re-priced when necessary. The Bank does not carry a trading portfolio nor generally invest in stocks or shares other than Government treasury bills, for which investments are generally less than six months and held to maturity. Therefore, the Bank is not open to any price fluctuation risks. MMA regulations on minimum reserve require the commercial banks to maintain a reserve of 25% of demand and time liabilities (excluding interbank liabilities) and margin deposits for Male based branches, and 15% for other branches. For the purpose of foreign curency minimum reserve requirment, the Bank is required to maintain 3% of the reserve requirement in local currency. These deposits are not available for the Banks day-to-day operation. Reserve deposits carry interests at rate of 1% and 0.05% per annum on the Rufiyaa and Dollar deposits respectively till September 2011. From October 2011, Dollar reserve deposits carry interest of 0.01% per annum. The table below summarises the Banks exposure to interest rate risks. It includes the Banks financial instruments at carrying amounts, categorised by the earlier of contractual repricing or maturity dates.
As at 31 December 2011 Up to 1 Month Assets Cash and Balances with Banks Treasury Bills Loans and Advances Other Assets Total Financial Assets 1-3 Months 3-12 Months 1-5 Years Over 5 Years
(Amount in MVR 000)

Non- Interest Bearing Total
1,892,492 436,091 1,036,105 3,364,688
476,346 161,065 637,411
403,265 664,665 1,067,930
2,408,747 2,408,747
385,806 385,806
804,031 403,347 492,052 1,699,430
2,696,523 1,315,702 5,059,735 492,052 9,564,012
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As at 31 December 2011 Up to 1 Month Liabilities Deposits from customers Borrowings Other Liabilities Total Financial Liabilities Total interest repricing gap 1-3 Months 3-12 Months 1-5 Years Over 5 Years
(Amount in MVR 000)

3,823,271 587,626 4,410,897 (1,046,209)
221,203 25,502 246,705 390,706
228,649 207,574 436,223 631,707
2,362 50,700 53,062 2,355,685
309 88,040 88,932 177,281 208,525
3,302,262 170,704 3,472,966 (1,773,535)
7,578,056 959,441 259,636 8,797,132 766,879
As at 31 December 2010 Up to 1 Month Assets Cash and Balances with Banks Treasury Bills Loans and Advances Other Assets Total Financial Assets 1-3 Months 3-12 Months 1-5 Years Over 5 Years
(Amount in MVR 000)

567,813 674,516 831,881 2,074,210
651,667 86,912 738,579
197,252 950,868 1,148,120
2,637,428 2,637,428
395,247 395,247
1,595,835 300,081 461,828 2,357,744
2,163,648 1,523,435 5,202,417 461,828 9,351,328
(Amount in MVR 000)

As at 31 December 2010 Liabilities Deposits from customers Borrowings Other Liabilities Total Financial Liabilities Total interest repricing gap Up to 1 Month 1-3 Months 3-12 Months 1-5 Years Over 5 Years Non- Interest Bearing Total
3,524,920 732,432 4,257,352 (2,183,142)
294,934 214,653 509,587 228,992
192,310 212,464 404,774 743,346
30,701 53,333 84,034 2,553,394
74 47,486 81,865 129,425 265,822
2,989,407 209,869 3,199,276 (841,532)
7,032,346 1,260,368 291,734 8,584,448 766,880
Additionally, the Bank is confident that it has sufficient interest margins to absorb any adverse impacts due to interest fluctuations on unmatched positions. Further, the Bank retains the option to revise the interest rates on all Rufiyaa loans per terms of sanction. For foreign currency loans, wherever the interest rate is set with a mark up over the floating bench mark LIBOR, the Bank has set floor rates to mitigate its interest rate risk.
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3.3 Liquidity risk Liquidity risk is the risk that the Bank is unable to meet its payment obligations associated with its financial liabilities when they fall due and to replace funds when they are withdrawn. The consequence may be the failure to meet obligations to repay depositors and full commitments to lend. 3.3.1 Liquidity risk management process The Banks liquidity management process, as carried out within the Bank and monitored by a separate team in Bank Treasury, includes: Day-to-day funding, managed by monitoring future cash ows to ensure that requirements can be met. This includes replenishment of funds as they mature or are borrowed by customers. The Bank maintains an active presence in global money markets to enable this to happen; Maintaining a portfolio of highly marketable assets that can easily be liquidated as protection against any unforeseen interruption to cash ow; Monitoring Balance Sheet liquidity ratios against internal requirements; and Managing the concentration and prole of debt maturities. Monitoring and reporting take the form of cash ow measurement and projections for the week and month respectively, as these are key periods for liquidity management. The starting point for those projections is an analysis of the contractual maturity of the financial liabilities and the expected collection date of the financial assets. The Bank also monitors unmatched medium-term assets, the level and type of undrawn lending commitments, the usage of overdraft facilities and the impact of contingent liabilities such as standby letters of credit and guarantees. The Bank maintains a statutory redeposit with the MMA equal to 25% of the customer deposits from Male based branches and 15% of the customer deposits from other Atoll based branches. Further, the Bank maintains a ratio of net liquid assets to liabilities to reflect the market conditions. 3.3.2 Funding approach Sources of liquidity are regularly reviewed by the ALCO to maintain a wide diversication by currency, geography, provider, product and term. 3.3.3 Non-derivative cash flows The table below presents the cash ows payable by the Bank under non-derivative financial liabilities by remaining contractual maturities at the Balance Sheet date. The amounts disclosed in the table are the contractual undiscounted cash ows, whereas the Bank manages the inherent liquidity risk based on expected undiscounted cash inows. As at 31 December 2011 Liabilities Deposits Borrowings Other Liabilities Total Liabilities Total Assets Net Up to 1 Month
7,126,360 55,617 75,087 7,257,064 4,135,704 (3,121,360)
1-3 Months
222,919 3,103 226,022 671,973 445,951
3-12 Months
233,537 109,259 342,796 1,276,625 933,829
1-5 Years
2,580 551,366 553,946 2,832,846 2,278,900
(Amount in MVR 000) Over Total 5 Years

466 315,763 184,549 500,778 1,037,127 536,349 7,585,862 1,035,107 259,636 8,880,606 9,954,275 1,073,669
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As at 31 December 2011 Liabilities Deposits Borrowings Other Liabilities Total Liabilities Total Assets Net
Up to 1 Month
6,518,267 125,539 53,064 6,696,870 2,696,459 (4,000,411)
1-3 Months
302,530 195,736 498,266 1,085,647 587,381
3-12 Months
198,469 184,264 76,472 459,205 1,399,943 940,738
1-5 Years
33,715 496,513 530,228 3,497,610 2,967,382
(Amount in MVR 000) Over Total 5 Years

98 350,319 162,198 512,615 1,454,825 942,210 7,053,079 1,352,371 291,734 8,697,184 10,134,484 1,437,300
Demand and savings deposits have been categorised as upto 1 month maturity group. However, a major part of these deposits represent a core retail deposit base with longer term maturity. Bills of exchange and loans and advances are shown net of interest in suspense and provision for bad and doubtful debts. Assets available to meet all of the liabilities and to cover outstanding loan commitments include cash, money market placements with banks, central bank balances, items in the course of collection and treasury and other eligible bills; and loans and advances to customers. Subject to credit approvals, a proportion of customer loans contractually repayable within one year will be extended. The Bank would also be able to meet unexpected net cash outows by discounting treasury bills and accessing additional funding sources such as asset backed markets. 3.3.4 Off-Balance Sheet items Loan commitments, financial guarantees which are based on the earliest contractual maturity date and other financial facilities, all fall within next 1 year. (a) Loan commitments The dates of the contractual amounts of the Banks off-Balance Sheet financial instruments that commit it to extend credit to customers and other facilities (Note 40), are summarised in the table below. (b) Financial guarantees and other financial facilities Financial guarantees (Note 40), are also included below based on the earliest contractual maturity date. (c) Operating lease commitments Where the Bank is the lessee, the future minimum lease payments under non-cancellable operating leases, as disclosed in Note 41, are summarised in the table below.
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(d) Capital commitments Capital commitments for the acquisition of buildings and equipment (Note 41) are summarised in the table below. No later than 1 year At 31 December 2011 Loan commitments Guarantees, acceptances and other financial facilities Operating lease commitments Capital commitments Total At 31 December 2010 Loan commitments Guarantees, acceptances and other financial facilities Operating lease commitments Captial commitments Total 3.4 Fair value of financial assets and liabilities There is no material difference between the carrying amounts and fair values of the financial assets and liabilities presented on the Banks Balance Sheet due to following reasons; (i) Due from other banks Due from other banks represents working balances and overnight inter-bank money market placements which are at carrying amount. (ii) Loans and advances to customers Based on managements review, there is no difference between current interest rates charged to the Banks performing customers and current interest rates prevailing in the market, taking the customers risk profile (i.e; business risk, project risk, gearing, collateral offered, tenor, grace period, etc.) into consideration. Non performing loans and advances are stated at net of provisions for impairment. (iii) Due to customers and borrowings The estimated fair value of deposits with no stated maturity, which includes non-interest-bearing deposits, are the amount repayable on demand. The Banks xed interest-bearing deposits and borrowings bear the current market interest rates based on similar maturities. 3.5 Capital management The Banks objectives when managing capital, which is a broader concept than the equity on the face of Balance Sheets, are: To comply with the capital requirements set by the regulators of the banking markets where the entities within the Bank operate;
554,669 292,394 10,183 857,246 431,904 300,013 7,453 739,370
1-5 years
30,458 30,458 24,158 23,082 47,240
(Amount in MVR 000) Over Total 5 years

8,134 8,134 11,915 11,915 554,669 292,394 48,775 895,838 431,904 324,171 42,450 798,525
P85
To safeguard the Banks ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders; and To maintain a strong capital base to support the development of its business. Capital adequacy and the use of regulatory capital are monitored daily by the Banks management, employing techniques based on the guidelines developed by the Basel I Committee, as implemented by the Maldives Monetary Authority (the Authority), for supervisory purposes. The required information is led with the Authority on a monthly basis. The Authority requires each bank or banking group to: (a) hold the minimum level of the regulatory capital of MVR 150 million , and (b) maintain a ratio of total regulatory capital to the risk-weighted asset (the Basel ratio) at or above the internationally agreed minimum of 12%. The Banks regulatory capital as managed by its management is divided into two tiers: Tier 1 capital: share capital, retained earnings and reserves created by appropriations of retained earnings.; and Tier 2 capital: Current year earnings, general provision and qualifying subordinated loan capital. The risk-weighted assets are measured by means of a hierarchy of ve risk weights classied according to the nature of and reecting an estimate of credit, market and other risks associated with each asset and counterparty, taking into account any eligible collateral or guarantees. A similar treatment is adopted for off-Balance Sheet exposure, with some adjustments to reect the more contingent nature of the potential losses. The table below summarises the composition of regulatory capital and the ratios of the Bank for the years ended 31 December. During those two years, the Bank complied with all of the externally imposed capital requirements to which they are subject to; (Amount in MVR 000) Restated 2011 2010 Tier 1 Capital Share capital Assigned capital reserve Share premium General reserve Statutory reserves Total qualifying Tier 1 Capital Tier 2 Capital Current earnings General provision Total qualifying Tier 2 Capital Total regulatory capital Risk-weighted Assets On-Balance Sheet Off-Balance Sheet Total risk-weighted assets Basel ratio
269,096 6,000 93,000 248,785 150,000 766,881 55,635 55,635 822,516 5,508,700 717,056 6,225,756 13.21% 269,096 6,000 93,000 197,799 150,000 715,895 50,986 79,735 130,721 846,616 5,673,790 704,942 6,378,732 13.27%
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Critical accounting estimates and judgments

The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgments are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Impairment losses on loans and advances The Bank reviews its loan portfolios to assess impairment at least on a yearly basis. In determining whether an impairment loss should be recorded in the income statement, the Bank makes judgments as to whether there is any observable data indicating that there is an impairment of loans and advances. This evidence may include observable data indicating that there has been an adverse change in the payment status of borrowers in a bank. Management uses fixed percentage prescribed by Maldives Monetary Authority to make provision for impaired loans and advances.
Segment analysis
(a) By business segment The Bank is divided into three main business segments: Retail and electronic banking incorporating private banking services, private customer current accounts, savings, deposits, credit and debit cards, consumer loans and mortgages, fee based on POS, ATM, internet banking and salary handling services. Corporate banking incorporating direct debit facilities, current accounts, deposits, overdrafts, loan and other credit facilities, foreign currency, project financing for resorts and ship finance of corporate customers. Development banking banking activities in atoll areas and micro credits. Transactions between the business segments are on normal commercial terms and conditions. Funds are ordinarily allocated between segments, resulting in funding cost transfers disclosed in operating income. Interest charged for these funds is based on the money market interest. There are no other material items of income or expense between the business segments. Segment assets and liabilities comprise operating assets and liabilities, being the majority of the Balance Sheet. Internal charges and transfer pricing adjustments have been reected in the performance of each business.
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(Amount in MVR 000) Segment Reporting as at 31 December 2011 Corporate Banking External revenues Revenue from other segments Total Segment result Bank profit tax expense Profit for the year Segment assets Total assets Segment liabilities Capital Total liabilities Other segment items: Capital expenditure Depreciation
293,508 (160,525) 132,983 (335,513) (335,513) 3,324,522 3,324,522 1,409,438 1,409,438 2,460 (4,128)
Retail and Development electronic Banking Banking 548,841 138,763 122,853 6,468 671,694 145,231 324,441 36,274
324,441 2,756,934 2,756,934 4,631,342 4,631,342 8,084 (13,565) 36,274 1,758,104 1,758,104 1,831,586 1,831,586 3,197 (5,365)
Treasury
TOTAL
93,666 31,205 124,871 (17,904) (17,904) 1,724,452 1,724,452 924,766 766,880 1,691,646 2,946 (4,944)
1,074,779 1,074,779 7,298 (7,298) 9,564,012 9,564,012 8,797,132 766,880 9,564,012 16,688 (28,001)
(Amount in MVR 000) Segment Reporting as at 31 December 2010 Corporate Banking External revenues Revenues from other segments Total Segment result Bank profit tax expense Profit for the year Segment assets Segment liabilities Capital Total liabilities Other segment items: Capital expenditure Depreciation
175,901 (28,981) 146,920 (92,349) (92,349) 2,464,199 2,507,433 2,507,433 16,708 (9,336)
Retail and Development electronic Banking Banking 429,546 127,312 116,149 16,716 545,695 144,028 174,492 13,194 174,492 13,194
3,434,739 2,886,864 2,886,864 19,236 (10,748) 1,718,832 1,453,226 1,453,226 9,683 (5,411)
Treasury
Group
97,436 (103,884) (6,448) (8,063) (8,063) 1,733,558 1,736,925 766,880 2,503,805 16,658 (9,308)
830,195 830,195 87,274 (36,287) 50,987 9,351,328 8,584,448 766,880 9,351,328 62,285 (34,803)
Capital expenditure comprises additions to property and equipment and intangible assets (Note 29 & 30)
P88
(All amounts in Maldivian Rufiyaa unless otherwise stated) (b) By geographical segment The Bank operates only in Republic of Maldives.
Gross income
2011 2010 581,951,055 213,479,325 54,914 9,265,839 25,443,438 830,194,571 2010 482,042,185 85,898,323 4,089,264 9,921,283 581,951,055 145,959,881 29,760,321 18,167 175,738,369 406,212,686 2010 37,413,681 3,161,226 3,213,438 2,713,248 155,186,248 11,791,484 213,479,325 (87,853,573) 125,625,752
Interest income Fee and commission income Dividend income Net foreign exchange income Other operating income
643,091,489 286,345,131 121,262 40,859,263 104,361,413 1,074,778,558
Net interest income

2011
Interest income Customer advances Treasury bills / deposits with MMA Short term finance Assigned capital and reserve deposits
538,981,020 85,504,054 7,899,753 10,706,662 643,091,489
Interest expense Customers deposits Borrowed funds Others
141,194,315 24,519,035 165,713,350
Net interest income
477,378,139 2011
Fee and commission income

Commissions on pay orders Commissions on guarantees Commissions on documentary credits Commissions on discounting of bills Commissions on card operations Others
47,800,529 3,955,884 3,598,122 4,559,249 212,892,655 13,538,692 286,345,131
Fee and commission expenses Credit card expenses Net fees and commission
(112,350,425) 173,994,706
P89
(All amounts in Maldivian Rufiyaa unless otherwise stated)
Dividend income
Available-for-sale securities
2011 121,262 2010 54,914
10
Other operating income

Telex and fax charges recoveries Recovery of non-performing advances Reversal of general provision [Note 23(a)] Recovery of specific provision [Note 23(a)] Profit on disposal of property, plant and equipment Others
2011 5,910,959 4,483,764 43,393,235 40,870,044 180 9,703,231 104,361,413 2010 5,001,457 4,024,189 7,134,734 51,332 9,231,726 25,443,438
11
Staff costs
2011 2010 146,744,765
Staff costs
156,564,947
Staff cost wholly represents salaries, bonus, allowances and training cost. The average number of persons employed by the Bank during the year was 802 (2010: 779).
12
Premises, equipment and establishment expenses

2011 2010 31,159,851 3,643,229 9,044,572 10,958,695 1,314,379 8,048,081 5,185 534,966 64,708,958 2010 180,912,694 33,566,227 214,478,921
Depreciation (Note 29) Amortisation (Note 30) Operating lease rentals - property Electricity Insurance Repairs and maintenance Loss on sale of assets Others
18,577,864 9,423,081 9,581,649 13,897,733 846,924 10,671,943 733,981 63,733,175
13
Provision for bad and doubtful debts

2011
Specific provision for loans and advances General provision for loans and advances
508,244,221 3,214,346 511,458,567
P90
14
Other operating expenses

2011 2010 1,470,065 1,342,718 493,457 575,419 919,142 9,787,287 588,060 7,162,040 9,949,218 1,614,547 19,494,324 53,396,277 2010 72,913,940 3,558,166 (40,184,629) 36,287,477
Directors fees Legal charges Auditors remuneration Donations Consultancy fees Software license fees Card fraud losses Stationery expenses Communication expenses Allowance for falling value of investment (Note 27) Others
1,311,640 1,505,096 630,239 85,000 867,574 16,072,051 193,045 6,893,408 9,950,643 4,810,453 15,341,362 57,660,511
15
BANk Profit Tax Expenses

2011
Current tax Adjustments in respect of prior year Deferred tax (Note 35)
25,374 7,272,209 7,297,583
The tax on Banks profit before tax differs from the theoretical amount that would arise using the basic tax rate as follows:
2011 2010 87,273,708 21,818,427 3,558,166 10,910,884 36,287,477
Profit before tax Tax calculated at a tax rate of 25% Adjustments in respect of prior year Expenses not deductible for tax
7,297,583 1,824,396 25,374 5,447,813 7,297,583
Further information about deferred income tax is presented in Note 35.
16
Dividends
Dividends payable are not accounted for until they have been ratified at the Annual General Meeting. No dividend was declared during the financial years 2010 and 2011.
P91
17
Earnings per share

Basic earnings per share is calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares in issue during the year.
2011 2010 50,986,231 5,381,920 9.47 2010 332,528,862 45,016,518 84,580,685 893,634,684 1,355,760,749 2010 1,701,520,810 1,701,520,810
Net profit attributable to shareholders Weighted average number of ordinary shares in issue Basic earnings per share
5,381,920 2011
18
Cash and short term funds

Cash in hand Balances with other banks Money at call and short notice Treasury Bills with original maturity less than three months
441,740,330 77,719,708 121,805,046 912,437,268 1,553,702,352
19
Balances with Maldives Monetary Authority (MMA)

2011
Reserve deposit Current Mandatory reserve deposits with MMA :
2,055,257,149 2,055,257,149
MMA regulations on minimum reserve require the commercial banks to maintain a reserve of 25% of demand and time liabilities (excluding interbank liabilities) and margin deposits for Male based branches, and 15% for other branches. For the purpose of foreign curency minimum reserve requirement, the Bank is required to maintain 3% of the reserve requirement in local currency. These deposits are not available for banks day to day operation. Reserve deposits carry interests at rate of 1% and 0.05% per annum on the Rufiyaa and Dollar deposits respectively till Sep 2011. From Oct 2011, Dollar reserve deposits carry interest of 0.01% per annum.
20
Cash and cash equivalents

For the purposes of cash flow statement, cash and cash equivalents comprise the following balances with less than 90 days maturity:
2011 2010 462,126,065 893,634,684 1,355,760,749
Cash and short term funds (Note 18) Treasury Bills with original maturity less than three months
641,265,084 912,437,268 1,553,702,352
P92
21
Loans and advances to customers

2011 2010 7,346,742,017 (1,515,097,050) (629,227,734) 5,202,417,233 17,577,667 5,184,839,566 2010 22,326,231 (2,461,226) (2,287,338) 17,577,667 15,469,232 2,108,435 2010 1,160,761,220 220,723,858 724,498,225 5,011,179,663 7,727,468 136,020,452 63,504,900 7,324,415,786 (1,512,635,824) (626,940,396) 5,184,839,566 1,854,191,768 3,330,647,798
Gross Less : Provision for impairment [Note 23 (a)] Less : Interest in suspense (Note 24) Net total Comprising: Bills of exchange (Note 22) Loans and advances (Note 23)
7,229,386,728 (1,446,615,250) (723,035,649) 5,059,735,829 11,244,625 5,048,491,204 2011
22
Bills of exchange
Import bills Less : Provision for impairment [Note 23 (a)] Less : Interest in suspense [Note 24] Net bills of exchange Current Non-current
14,105,752 (779,903) (2,081,224) 11,244,625 9,255,158 1,989,467 2011
23
Loans and advances

Overdrafts Development banking loans Loans under EIB refinance scheme for restoration of resorts affected by Tsunami Other commercial term loans Trust receipts Credit card balances Staff loans Less : Provision for impairment [Note 23 (a)] Less : Interest in suspense (Note 24) Net loans and advances Current Non-current
1,114,270,293 233,013,293 742,541,217 4,875,167,303 36,811,300 147,068,023 66,409,547 7,215,280,976 (1,445,835,347) (720,954,425) 5,048,491,204 1,852,579,842 3,195,911,362
P93
(All amounts in Maldivian Rufiyaa unless otherwise stated) (a) Movement in provision for impairment are as follows: 2011 (i) Specific provision Balance at 1 January -As previously reported Correction of previously understated provision (Note 38) - As restated Amount recovered during the year Provision made during the year Loans written off during the year as uncollectible Exchange differences Balance at 31 December 2010
546,129,637 879,881,139 1,426,010,776 (40,870,044) 508,244,221 (606,529,154) 104,124,681 1,390,980,480 2011
429,491,792 842,089,510 1,271,581,302 (7,134,734) 180,912,694 (9,379,645) (9,968,841) 1,426,010,776 2010 55,884,570 33,566,227 (364,523) 89,086,274 1,515,097,050 1,512,635,824 2,461,226 1,515,097,050
(ii) General provision Balance at 1 January Provision made during the year Provision reversal Exchange differences Balance at 31 December Total Represented by: Loans and advances Bills of exchange Total
89,086,274 3,214,346 (43,393,235) 6,727,385 55,634,770 1,446,615,250 1,445,835,347 779,903 1,446,615,250
Provision for impairment of loans and advances made during earlier financial years was not adequate to comply with the Prudential Regulation on asset classification and loan loss provision prescribed by MMA. The correction of this error amounting to MVR 879,881,139 has been accounted under prior year adjustment by restating prior year figures and adjusting the opening balance of retained earnings of 2010 (for the errors upto 2009) and 2011 (for the error in 2010 amounting MVR 37,791,629 and cumulative errors upto 2009) by MVR 842,089,509 and MVR 879,881,139 respectively.
24
Movement in interest in suspense

2011 2010
Balance at 1 January Amount suspended during the year Amount reversed due to recovery Exchange differences Loans written off during the year Balance at 31 December Represented by: Loans and advances Bills of exchange
629,227,734 392,153,227 (60,985,075) 104,044,680 (341,404,917) 723,035,649 720,954,425 2,081,224 723,035,649
334,026,327 323,607,261 (14,544,421) (7,884,726) (5,976,707) 629,227,734 626,940,396 2,287,338 629,227,734
P94
25
Assets quality
Non performing assets included as advances and bills of exchange on which interest is not being accrued are as follows: 2011 Loans and advances Bills of exchange
2,512,512,976 4,850,593 2,517,363,569
2010
2,367,925,596 6,700,744 2,374,626,340
26
Financial assets held to maturity

2011 Treasury Bills with original maturity more than three months Current
403,264,985 403,264,985
2010
430,705,731 430,705,731
During the year 2010, treasury bills with face values of MVR 200 million were pledged as securities under facility agreements with State Bank of India, Mauritius in favour of them to guarantee the credit facility. These are separately reclassified as pledged assets on the face of Balance Sheet. The facility agreements matured within 12 months (Note 28).
27
Investment available-for-sale
Available-for-sale At the beginning of the year Additions Exchange differences At the end of the year Less: allowance for falling value of investment Non-current 5,079,115 50,584 5,129,699 (4,810,453) 319,246 319,246 Total 2011 5,079,115 50,584 5,129,699 (4,810,453) 319,246 319,246 Total 2010 6,425,000 268,662 6,693,662 (1,614,547) 5,079,115 6,693,662
Available-for-sale investments consist of investment in equity shares of MFLC, are stated at cost less allowance for falling value of investment, since the fair value of these unlisted shares and bonds cannot be measured reliably.
P95
28
Assets pledged as collateral

Assets are pledged as collateral under the credit facility agreements with other banks. The nature and carrying amounts of the assets pledged as collaterals are as follows: Assets Financial assets held to maturity Related liability Borrowings from State Bank of India, Mauritius
192,000,000
2011
-
2010
199,095,018
During the year 2010, treasury bills with face values of MVR 200 million were pledged as securities under facility agreements with State Bank of India, Mauritius in favour of them to guarantee the credit facility. The facility agreement matured within 12 months.
29 Property, plant and equipment

Bank premises Leasehold buildings Computer equipment Furniture and equipment Motor vehicles and Vessels Capital work- inprogress Total 2011 Total 2010
Cost of property, plant and equipment Balance at beginning of the year Additions during the year Transfer to intangible assets(Note 30) Disposals during the year Balance at end of the year Accumulated depreciation Balance at beginning of the year Transfer to intangible assets (Note 30) Depreciation for the year (Note 12) Depreciation on disposals Balance at end of the year Net book value at end of the year
41,112,441 5,148,795 46,261,236 56,827,390 4,746,243 914,494 5,660,737 1,526,462 93,476,695 9,181,661 (71,100) 102,587,256 20,070,807 20,844,299 3,028,270 (52,612) 23,819,957 3,394,102 8,036,416 304,644 8,341,060 270,592 - 168,216,094 18,577,864 (123,712) 171,348,704 (33,825,964) 31,159,851 (466,497) 168,216,094 89,079,926 102,894,257 194,369 103,088,626 6,947,404 239,795 7,187,199 112,984,896 9,744,267 (71,100) 122,658,063 25,857,811 1,412,200 (55,952) 27,214,059 8,611,652 8,611,652 - 257,296,020 2,351,466 13,942,097 (127,052) 264,909,838 56,988,261 (64,101,140) (500,939) 257,296,020
2,351,466 271,111,065
- 186,670,246 2,351,466 84,440,819
(a) Some of the branch offices operate from premises leased from third parties, for which an aggregate sum of MVR 9,581,649 (2010 - MVR 9,044,572) were paid as operating lease rentals. (b) The cost of fully depreciated assets at the Balance Sheet date amounted to MVR 103,211,843 (2010 - MVR 86,410,550)
P96
30 Intangible assets
Computer softwares and licenses Cost Balance at beginning of the year Additions during the year Balance at end of the year Accumulated amortisation Balance at beginning of the year Amortisation for the year (Note 12) Balance at end of the year Net book value Cost Balance at beginning of the year Transfer from property, plant and equipment (Note 29) Additions during the year Balance at end of the year Accumulated amortisation Balance at beginning of the year Transfer from property, plant and equipment (Note 29) Amortisation for the year (Note 12) Balance at end of the year Net book value
33,825,964 3,643,229 37,469,193 31,929,075 33,825,964 3,643,229 37,469,193 31,929,075 64,101,140 5,297,128 69,398,268 37,469,193 9,423,081 46,892,274 25,251,837 37,469,193 9,423,081 46,892,274 25,251,837 69,398,268 2,745,843 72,144,111
Total 2011
69,398,268 2,745,843 72,144,111
2010
64,101,140 5,297,128 69,398,268
(a) The cost of fully amortised intangible assets at the Balance Sheet date amounted to MVR 25,679,475 (2010 MVR 23,263,955)
P97
31
Other assets
2011 2010 47,200,924 29,923,959 77,124,883 77,124,883
Deposits and prepayments Other debtors
47,325,234 83,371,630 130,696,864
Current
130,696,864
32
Deposits from non-bank customers

2011 2010 2,925,120,441 3,090,547,558 952,391,234 17,235,667 27,283,942 7,012,578,842 2010 7,008,566,678 4,012,164
Current account deposits Saving deposits Term deposits Margins on letters of credit Margins on trust receipt demand loan Margins on bank guarantee
3,180,503,039 3,319,812,782 938,209,444 28,966,885 17,771,923 33,497,640 7,518,761,713 2011
Current Non-current
7,514,488,590 4,273,123
Included in customer accounts are deposits of MVR 77,294,703 ( 2010: MVR 48,807,609) held as collateral for irrevocable commitments under import letters of credit and bank guarantees. All deposits have fixed interest rates.
33
Custodian account of Maldives Retirement Pension Scheme

2011 Opening balance Collection from beneficiaries Disbursement to beneficiaries towards: - payment of pension - their investment in financial instruments Proceed received on maturity of investments
19,767,111 748,286,395 (6,339,039) (1,315,010,007) 612,589,561 59,294,021
2010
200,569,332 (319,941) (197,491,522) 17,009,242 19,767,111
P98
(All amounts in Maldivian Rufiyaa unless otherwise stated) 2011 Current

59,294,021
2010
19,767,111
MPAO paid a fee of MVR 595,595 (2010: MVR 390,540) to the Bank through MPAO operating account for the custodian service. Funds of Maldives Pension Retirement Scheme is invested in following financial assets: Rate/discount -Government securities -Term deposits -Sharia investments -Equity investments 5.35% - 6.97% 2.75% - 5% 4% Duration 3 - 6 months 3 - 6 months 6 months -
34
Borrowings
2011 Government of Maldives loans under: IFAD credit line OPEC credit line EIB credit line ADB credit line Other foreign bank borrowings Local banks
27,128,577 3,757,636 797,672,102 11,523,599 119,358,926 959,440,840
2010
23,908,120 4,377,660 748,613,146 457,869,051 25,600,000 1,260,367,977 485,929,747 774,438,230
Current Non-current Acronyms: IFAD OPEC EIB ADB -International Fund for Agricultural Development -Organization of Petroleum Exporting Countries -European Investment Bank -Asian Development Bank
149,018,918 810,421,922
Maturity of borrowings Not later than 1 year Later than 1 year and not later than 5 years Over 5 years
2011
149,018,918 501,957,684 308,464,238 959,440,840
2010
485,929,747 448,695,265 325,742,965 1,260,367,977 1,133,948,865 126,419,112 1,260,367,977
Borrowings at floating rates with a fixed spread Borrowings at fixed rates
820,701,028 138,739,812 959,440,840
P99
35
Deferred income taxes

Deferred income taxes are calculated on all temporary differences under the liability method using an effective tax rate of 25%. The movement on the deferred tax account is as follows : 2011 At the beginning of the year - As previously reported Correction of previously unrecognised DTA (Note 38) - As restated Provision for impairment of loans and advances Deferred tax asset reversed on write-off/recovery Decelerated tax depreciation At end of the year
(6,053,108) 264,668,419 258,615,311 154,559,167 (161,849,800) 18,424 251,343,102
2010
(7,032,146) 225,462,828 218,430,682 45,826,396 (6,620,805) 979,038 258,615,311
The deferred tax charge in the income statement represent the following temporary difference: Decelerated tax depreciation Provision for impairment of loans and advances Deferred tax asset reversed on loans write-off/recovery 2011 18,424 154,559,167 (161,849,800) (7,272,209) 2010 979,038 45,826,396 (6,620,805) 40,184,629
Further the Bank has not recognised the deferred tax asset arising out of timing difference between the book value of provision for impairment of loans and advances and tax base of provisions for impairment of loans and advances upto the year 2010, which result in creating a deductible temporary difference. The correction of this error amounting to MVR 264,668,419 has been accounted under prior year adjustment by restating prior year figures and adjusting the opening balance of retained earnings of 2010 (for the errors upto 2009) and 2011 (for the error in 2010 amounting MVR 39,205,591 and cumulative errors upto 2009) by MVR 225,462,828 and MVR 264,668,419 respectively.
36
Other liabilities
2011 Accrued expenses Employees provident fund Other liabilities Sundry creditors Development funds (Refer note below) Items in transit
20,043,045 88,931,881 3,925,944 25,430,873 95,617,139 11,594,575 245,543,457
2010
20,497,282 81,864,918 5,113,659 3,953,125 80,333,273 1,271,538 193,033,795
2011 Current Non-current

60,994,437 184,549,020
2010
30,835,604 162,198,191
P100
(All amounts in Maldivian Rufiyaa unless otherwise stated) The Bank manages and administers several loan schemes under which the bank, as a custodian receives funds from various donors and disburses such funds to beneficiaries. The movement in these development funds given below: Development Funds Opening balance Amount received Add: Interest accrued on loans during the year Less: Interest on loan given to fund Less: Administration fees Less: Loans and advances at the year-end
2011 212,389,660 14,535,504 9,343,424 (743,828) (3,000,140) 232,524,620 (136,907,481) 95,617,139 2010 165,756,256 43,761,782 6,877,145 (1,737,449) (2,268,074) 212,389,660 (132,056,387) 80,333,273
37
Ordinary shares and share premium

Number of shares At 31 December 2010 At 31 December 2011
5,381,920 5,381,920
Ordinary shares
269,096,000 269,096,000
Share premium
93,000,000 93,000,000
Total
362,096,000 362,096,000
The total authorised number of ordinary shares at the year end was 16,000,000 (2010: 16,000,000) with a par value of MVR 50 (2010: MVR 50) per share. All issued shares are fully paid.
38
Prior year adjustment

Provision for impairment of loans and advances made during earlier financial years was not adequate to comply with the Prudential Regulation on asset classification and loan loss provision prescribed by MMA. The correction of this error amounting to MVR 879,881,139 has been accounted under prior year adjustment by restating prior year figures and adjusting the opening balance of retained earnings of 2010 (for the errors upto 2009) and 2011 (for the error in 2010 amounting MVR 37,791,629 and cumulative errors upto 2009) by MVR 842,089,509 and MVR 879,881,139 respectively. Further the Bank has not recognised the deferred tax asset arising out of timing difference between the book value of provision for impairment of loans and advances and tax base of provisions for impairment of loans and advances upto the year 2010, which result in creating a deductible temporary difference. The correction of this error amounting to MVR 264,668,419 has been accounted under prior year adjustment by restating prior year figures and adjusting the opening balance of retained earnings of 2010 (for the errors upto 2009) and 2011 (for the error in 2010 amounting MVR 39,205,591 and cumulative errors upto 2009) by MVR 225,462,828 and MVR 264,668,419 respectively.
P101
(All amounts in Maldivian Rufiyaa unless otherwise stated) The total effect on the balance of retained earning is as follows:
In 2010 Upto 2009 37,791,629 842,089,510 879,881,139
Inadequate provision for impairement of loans advances - current year - prior year
879,881,139 879,881,139
Recognition of deferred tax assets - current year - prior year
264,668,419 264,668,419 615,212,720
39,205,591 225,462,828 264,668,419 615,212,720
The treatment relating to the correction of these errors have been accounted as prior year adjustments and this is considered to give a fairer presentation of the result for the year and assets and liabilities at the Balance Sheet date.
39
Reserves
2011 2010 150,000,000 6,000,000 248,784,005 404,784,005
Statutory reserve Assigned capital reserve General reserve Total reserves at end of year Movement in reserves were as follows: Statutory reserve At beginning of year At end of year Assigned capital reserve At beginning of year At end of year
150,000,000 6,000,000 248,784,005 404,784,005
150,000,000 150,000,000 6,000,000 6,000,000
150,000,000 150,000,000 6,000,000 6,000,000
As per the subsidiary loan agreement between the Bank and the Government of the Republic of Maldives, on Atolls credit and development banking project, the bank made a reserve of MVR 6 million as Assigned capital reserve. Total statutory and assigned capital reserves At beginning of year At end of year
156,000,000 156,000,000 156,000,000 156,000,000
P102
(All amounts in Maldivian Rufiyaa unless otherwise stated) General reserve Balance at 1 January - As previously reported Correction of impairment of loans and advances and deferred tax asset - As restated At end of year
2011 814,424,456 (565,640,451) 248,784,005 248,784,005
Restated 2010
814,424,456 (565,640,451) 248,784,005 248,784,005
40
Contingencies
(a) Contingent liabilities and commitments In the normal course of business, the Bank makes various commitments and incurs certain contingent liabilities with legal recourse to its customers. No material losses are anticipated as a result of these transactions. The commitments are quantified below;
2011 2010 431,903,590 37,063,903 116,978,594 170,128,404 756,074,491
Loan commitments Acceptances Letters of credit Guarantees
554,669,174 62,439,530 112,910,851 117,043,218 847,062,773
(b) Unutilised irrevocable commitments The unutilised value of irrevocable commitments relating to letters of credit, acceptances and permanent overdrafts which cannot be withdrawn at the discretion of the Bank, without risk of incurring significant penalties or expenses approximates to MVR 220,907,606 (2010: MVR 265,287,765) as at the Balance Sheet date. (c) Investment The Board of Directors of Bank of Maldives Plc has subscribed and paid at par value for a shareholding upto 10 (ten) percent in the total equity share capital of MFLC at an aggregate amount equal to US$. 500,000 (MVR 6,425,000). The Bank is required to enter into a Put Option agreement with International Finance Corporation (IFC) and under the said Put Option, IFC shall have the right to sell its shares in MFLC as specified in the Put Option to, inter alia, the Bank, and the Bank is obliged to purchase from IFC the shares thus offered to the Bank. The Banks said obligations under the Put Option may be continued as an unquantifiable contingent liability and the Government has agreed to indemnify the Bank against such contingent liability. (d) Contingent assets There were no material contingent assets recognised at the Balance Sheet date.
P103
41
Contingent liabilities and commitments

(a) Legal proceedings The bank, in normal course of business, files cases against the customer to recover long outstanding loans and advances. There were a number of pending legal proceedings filed by the Bank at 31 December 2011. Except for any liabilities that may arise as a result of the ruling against the bank in relation to cases filed, in the opinion of the directors, there are no other legal action against or instituted by the Bank or other matters that will give rise to material contingent liabilities to be recognised or disclosed in the financial statements. (b) Capital commitments There were no material capital commitments outstanding as at the Balance Sheet date. (c) Operating lease commitments The future minimum lease payments under non-cancellable operating leases are as follows:
2011 2010 7,453,440 23,081,760 11,915,320 42,450,520
Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years
10,182,945 30,458,043 8,134,340 48,775,328
42
Cash generated from operations

Reconciliation of net profit to cash generated from operations: Profit before tax Adjustments for : Depreciation (Note 12) Amortisation (Note 12) Profit on sale of property, plant and equipment (Note 10) Loss on sale of property, plant and equipment (Note 12) (Decrease) / increase in provision for other losses Provision for bad and doubtful debts (Note 13) Reversal of general provsion (Note 10) Recovery of specific provision (Note 10) Allowance for falling value of investment (Note 14) Increase in interest receivables Decrease in accrued expenses Decrease / (increase) in prepayments and advances Cash generated from operations
18,577,864 9,423,081 (180) (1,238,299) 511,458,567 (43,393,235) (40,870,044) 4,810,453 (15,294,212) (454,237) (124,310) 450,193,031 31,159,851 3,643,229 (51,332) 5,185 2,639,034 214,478,921 (7,134,734) 1,614,547 (4,620,980) (12,932,138) 59,072,489 375,147,780 2011 7,297,583 2010 87,273,708
P104
43
Related party transactions

The Bank is controlled by Government of Maldives which owns a 51% of the ordinary shares. The remaining 49% of the shares are widely held. A number of banking transactions are entered into with State controlled entities in the normal course of business. These include loans, deposits, trade finance and foreign currency transactions. The volume of related party transactions and outstanding balances at the year end are as follows: Directors and related entities
2011 2010
Government and related entities

2011 706,599,348 182,211,404 (190,637,880) 698,172,872 2010 815,600,271 55,516,607 (164,517,530) 706,599,348
Loans Loans outstanding at 1 January Loans issued during the year Loan repayments during the year Loans outstanding at 31 December
32,583,839 129,898,180 5,382,428 552,650 (5,448,500) (97,866,991) 32,517,767 32,583,839
2011
2010
2011
2010
Deposits Deposits at 1 January Net increase in deposits during the year Deposits at 31 December Other transactions with related parties Guarantees issued by the Bank Key management compensation
13,838,433 11,870,724 13,467,983 1,967,709 27,306,416 13,838,433
1,240,860,078 2,080,880,279 158,740,314 (840,020,202) 1,399,600,392 1,240,860,078
2011 2011 Salaries and other short term benefits Termination benefits 6,772,378 4,710,761
2010 2010 6,713,655 4,189,024
2011 43,499,561 43,499,561
2010 19,309,102 19,309,102
11,483,139 10,902,679 The Bank invests in Treasury Bills issued by the Maldives Monetary Authority (on behalf of Government of Maldives). At the Balance Sheet date value of outstanding Treasury Bills was amounting to MVR 1,315,702,253 (2010: MVR 1,523,435,433). In addition to this, the Bank also utilised other products of MMA such as Open Market Operation (OMO) and Overnight Placement during the year 2011. Empowered by the Article 4(c) of MMA Act, the Financial sector division of the Maldives Monetary Authority carries out the regulatory and supervisory functions of the banks licensed by the Authority. The Bank of Maldives Plc which had been funded by the Government and having a significant influence, falls under the supervision of this division. Please refer Note 19 to the financial statements for outstanding balance with the Authority.
44
Post Balance Sheet events

No events have occurred since the Balance Sheet date, which would require adjustments to, or disclosure in, the financial statements.
Investor Information
P106
Capital Structure
The Authorised and Paid-up Share Capital of the Bank during the nancial year 2011 remained unchanged at MVR 800,000,000/- , whereas the Issued, Subscribed and Paid-up Capital of the Bank as at 31st December 2011 remained at MVR 269,096,000/-.
Shareholding Structure
2011 Share Total Capital Shares (in MVR) 2,733,868 136,693,400 394,380 228,566 19,719,000 11,428,300 2010 Total Share Capital % Shares (in MVR) 50.80% 2,733,868 136,693,400 7.33% 4.25% 394,380 228,566 19,719,000 11,428,300
Shareholders Government (MOFT) Government Employees Provident Fund State Trading Organization PLC (STO) Maldives Transport and Contracting Company PLC (MTCC) Atoll/Island Community Accounts General Public Total
% 50.80% 7.33% 4.25%
219,096
10,954,800
4.07%
219,096
10,954,800
4.07%
219,096 10,954,800 4.07% 219,096 10,954,800 4.07% 1,586,914 79,345,700 29.48% 1,586,914 79,345,700 29.48% 5,381,920 269,096,000 100.00% 5,381,920 269,096,000 100.00%
Shareholding Structure
As per the share register, as of 31st December 2011.
P107
Share Price Movement

The Banks shares were the most traded shares in the Maldives Stock Exchange during the year 2011. A total of 37 trade transactions were conducted in which 9,178 shares of the Bank were traded. The Weighted Average Price over the year was MVR 74.34 and the total value of the shares traded was MVR 682,322.00. At the beginning of the year 2011, the market price per share stood at MVR 143.00. The rst traded price was MVR 120.00 per share while the last traded price at the close of the year was MVR 73.00. The highest quoted price during the year amounted to MVR 120.00 while the lowest amounted to MVR 64.00.
2011 Market Statistics (In MVR) First Traded Price Highest Price Lowest Price Last Traded Price Weighted Average Price Market Capitalization at nancial year end Information on Share Trading Number of Transactions Number of Shares Traded Value of Shares Traded (in MVR) 120.00 120.00 64.00 73.00 74.34 392,880,160 2010 140.00 145.00 90.00 143.00 120.30 769,614,560
37 9,178 682,322
38 3,349 402,885
Our Contacts
Our Contacts
P109
Our Contacts
HEAD OFFICE
Bank of Maldives PLC 11, Boduthakurufaanu Magu Male City, 20094 Republic of Maldives Company Registry No. C-22/1982 Tel: +(960) 333 0102 Fax: +(960) 332 8233 Swift: MALBMVMV Website: www.bankofmaldives.com.mv e-mail: info@bml.com.mv
CALL CENTRE
Bank of Maldives PLC Shamsudeen Bodufadiyaaru Thakurufaanu Magu Seenu Hithadhoo, Addu City, 19020 Republic of Maldives Tel: +(960) 333 0200 Fax: +(960) 333 8041 e-mail: cardcentre@bml.com.mv
BRANCHES
MAIN BRANCH
Bank of Maldives PLC 1st & 3rd Floor, Head Ofce Boduthakurufaanu Magu, Male City, 20094 Republic of Maldives Tel: +(960) 333 0144 Fax: +(960) 333 0180 e-mail: main.branch@bml.com.mv
DHIDHDHOO BRANCH
Bank of Maldives PLC Ghaazee Magu Haa Alifu Dhidhdhoo, 01100 Republic of Maldives Tel: +(960) 650 0066 Fax: +(960) 650 0573 e-mail: dhidhdhoo.branch@bml.com.mv
FUNADHOO BRANCH
Bank of Maldives PLC Mila Uthuru Keesa Shaviyani Funadhoo, 03150 Republic of Maldives Tel: +(960) 654 0596 Fax: +(960) 654 0597 e-mail: funadhoo.branch@bml.com.mv
EYDHAFUSHI BRANCH
Bank of Maldives PLC Maalhosmadulu Dhekunuburee Atholhuge No. 02 Baa Eydhafushi Republic of Maldives Tel: +(960) 660 8428 Fax: +(960) 660 8431 e-mail: eydhafushi.branch@bml.com.mv
FUVAHMULAK BRANCH
Bank of Maldives PLC Valifannu Magu, Maadhadu Gnaviyani Fuvahmulah, 18014 Republic of Maldives Tel: +(960) 686 5003 Fax: +(960) 686 0665 e-mail: fuvahmulaku.branch@bml.com.mv
BAZAR BRANCH
Bank of Maldives PLC Ground,1st & 2nd Floor, Sea Tracs Building Boduthakurufaanu Magu, Male City, 20251 Republic of Maldives Tel: +(960) 333 0222 Fax: +(960) 333 0220 e-mail: bazaar.branch@bml.com.mv
FONADHOO BRANCH
Bank of Maldives PLC 66, Andhaleebu Magu Laamu Fonadhoo, 15080 Republic of Maldives Tel: +(960) 680 0729 Fax: +(960) 680 0781 e-mail: fonadhoo.branch@bml.com.mv
GAN BRANCH
Bank of Maldives PLC Maradhoofeydhoo, 19050, Addu City Republic of Maldives Tel: +(960) 689 8014 Fax: +(960) 689 8087 e-mail: gan.branch@bml.com.mv
Our Contacts
P1 10
HITHADHOO BRANCH
Bank of Maldives PLC Shamsudeen Bodufadiyaaru Thakurufaanu Magu Seenu Hithadhoo, Addu City, 19020 Republic of Maldives Tel: +(960) 688 5011 Fax: +(960) 688 5013 e-mail: hithadhoo.branch@bml.com.mv
MAHIBADHOO BRANCH
Bank of Maldives PLC Atholhu Vehi Alif Dhaal Mahibadhoo Republic of Maldives Tel: +(960) 668 0850 Fax: +(960) 668 0849 e-mail: mahibadhoo.branch@bml.com.mv
MULI BRANCH
Bank of Maldives PLC 22, Rankokaa Magu Meemu Muli, 11050 Republic of Maldives Tel: +(960) 672 0001 Fax: +(960) 672 0594 e-mail: muli.branch@bml.com.mv
MAJEEDHEEMAGU BRANCH
Bank of Maldives PLC Ma. Banff Villa (1st, 2nd & 3rd Floor) Majeedhee Magu, Male City, 20259 Republic of Maldives Tel: +(960) 333 0202 Fax: +(960) 333 0212 e-mail: majeedheemagu. branch@bml.com.mv
NAIFARU BRANCH
Bank of Maldives PLC Marine Drive Lhaviyani Naifaru, 07020 Republic of Maldives Tel: +(960) 662 0393 Fax: +(960) 662 0781 e-mail: naifaru.branch@bml.com.mv
HULHUMALE BRANCH
Bank of Maldives PLC Unit C-G-05, Bageechaa Higun Hulhumale, 23000, Male City Republic of Maldives Tel: +(960) 335 0067 Fax: +(960) 335 0526 e-mail: hulhumale.branch@bml.com.mv
RASDHOO BRANCH
Bank of Maldives PLC Atholhu Vehi AA. Rasdhoo Republic of Maldives Tel: +(960) 666 0849 Fax: +(960) 666 0848 e-mail: rasdhoo.branch@bml.com.mv
HULHUMEEDHOO BRANCH
Bank of Maldives PLC Bahaaudhdheen Magu Hulhumeedhoo, 19060, Addu City Republic of Maldives Tel: +(960) 6894663 Fax: +(960) 6894029 e-mail: hulhumeedhoo.branch@bml.com.mv
MALE INTERNATIONAL AIRPORT BRANCH

Bank of Maldives PLC Hulhule, 22000, Male City Republic of Maldives Tel: +(960) 331 5211 Fax: +(960) 332 2550 e-mail: airport.branch@bml.com.mv
THINADHOO BRANCH
Bank of Maldives PLC Varuhagu Magu Gaafu Dhaalu Thinadhoo, 17100 Republic of Maldives Tel: +(960) 684 1002 Fax: +(960) 684 1984 e-mail: thinadhoo.branch@bml.com.mv
KUDAHUVADHOO BRANCH
Bank of Maldives PLC Beach Heaven Dhaal Kudahuvadhoo Republic of Maldives Tel: +(960) 676 0616 Fax: +(960) 676 0615 e-mail: kudahuvadhoo.branch@bml.com.mv
MANADHOO BRANCH
Bank of Maldives PLC Atolhu Rayyithunge Ijthimaaee Marukazu Noonu Manadhoo Republic of Maldives Tel: +(960) 656 0583 Fax: +(960) 656 0582 e-mail: manadhoo.branch@bml.com.mv
KULHUDHUFFUSHI BRANCH
Bank of Maldives PLC Haa Dhaalu Kulhudhuffushi, 02110 Republic of Maldives Tel: +(960) 652 8813 Fax: +(960) 652 7611 e-mail: kuldhuffushi.branch@bml.com.mv
Our Contacts
P1 1 1
UNGOOFAARU BRANCH
Bank of Maldives PLC Ungoofaaru Rayyithunge Rahvehige Miskiy Magu Raa Ungoofaaru 05060 Republic of Maldives Tel: +(960) 658 0272 Fax: +(960) 658 0384 e-mail: ungoofaaru.branch@bml.com.mv
DIVISIONS
CARD SERVICES & E-BANKING
Bank of Maldives PLC 2nd Floor, Sea Tracs Building Boduthakurufaanu Magu Male City, 20251 Republic of Maldives Tel: +(960) 333 0200 Fax: +(960) 333 8041 e-mail: cardcentre@bml.com.mv
FINANCE DIVISION
Bank of Maldives PLC 2nd Floor, Head Office 11, Boduthakurufaanu Magu, Male City, 20094 Republic of Maldives Tel: +(960) 333 0198 Fax: +(960) 333 0249 e-mail: finance.department@bml.com.mv
VEYMANDOO BRANCH
Bank of Maldives PLC Haveeree Hingun Thaa Veymandoo, 14110 Republic of Maldives Tel: +(960) 678 0610 Fax: +(960) 678 0596 e-mail: veymandoo.branch@bml.com.mv
INTERNAL AUDIT DEPARTMENT

Bank of Maldives PLC 4th Floor, Sea Tracs Building Boduthakurufaanu Magu, Male City, 20251 Republic of Maldives Tel: +(960) 333 0181 Fax: +(960) 333 0513 e-mail: internalaudit. department@bml.com.mv
CORPORATE AFFAIRS DEPARTMENT

Bank of Maldives PLC 7th Floor, Head Office 11, Boduthakurufaanu Magu, Male City, 20094 Republic of Maldives Tel: +(960) 333 0192 Fax: +(960) 332 8233 e-mail: corporateaffairs@bml.com.mv
VILLIMALE BRANCH
Bank of Maldives PLC Sheikh Abdul Rahman Magu Block No. 31 Villingili, Male City, 21017 Republic of Maldives Tel: +(960) 339 1650 Fax: +(960) 339 1651 e-mail: villimale.branch@bml.com.mv
INTERNATIONAL BANKING UNIT

Bank of Maldives PLC 2nd Floor, Sea Tracs Building Boduthakurufaanu Magu, Male City, 20251 Republic of Maldives Tel: +(960) 333 0158 Fax: +(960) 333 2640 e-mail: internationalbanking. department@bml.com.mv
CORPORATE BANKING DIVISION

Bank of Maldives PLC 5th Floor, Head Office 11, Boduthakurufaanu Magu, Male City, 20094 Republic of Maldives Tel: +(960) 333 0500 Fax: +(960) 301 5331 e-mail: corporatebanking@bml.com.mv
VILLIGILLI BRANCH
Bank of Maldives PLC Dhambugas Magu Gaafu Alifu Villingili, 16020 Republic of Maldives Tel: +(960) 682 0116 Fax: +(960) 682 0005 e-mail: villingili.branch@bml.com.mv
LEGAL DEPARTMENT
Bank of Maldives PLC 7th Floor, Head Office 11, Boduthakurufaanu Magu, Male City, 20094 Republic of Maldives Tel: +(960) 301 5334 Fax: +(960) 332 8233 e-mail: legal.department@bml.com.mv
BANK OF MALDIVES PLC

11 Boduthakurufaanu Magu, Male 20094 Republic of Maldives Tel: +960 3322948 Fax: +960 3328233 Email: info@bml.com.mv www.bankofmaldives.com.mv

BML Annual Report 2011 - English

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BML Annual Report 2011 - English

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2011

Our Business Strengths

Our Business Strengths

Strong Customer Base

Market Leadership in Innovation

Our Business Strengths

Leadership in Service Delivery

Experienced and Dedicated Team

Our Branch Network

Our Branch Network

Key Highlights & Achievements

Key Highlights and Achievements in 2011

Key Highlights & Achievements

Sponsorship and CSR

Key Highlights & Achievements

Key Highlights & Achievements

Human Resource Development

1,074,778,558 477,378,139 518,756,150 -

766,880,005 7,518,761,713 5,059,735,829 9,564,012,183

766,880,005 7,012,578,842 5,202,417,233 9,351,327,851

0.0% 7.2% -2.7% 2.3%

9.47 142.49 143.00

4.9% 0.5% 15.1 4.8%

Net Interest Income

Operating Prot (Before Provision and Tax)

FINANCIAL REPORTS INVESTOR INFORMATION OUR CONTACTS

Dr. Abdullah Shiham Hassan, Chairman of the Board of Directors

Building for the future

Dr. Abdullah Shiham Hassan Chairman of the Board of Directors

Mr. Peter Horton, Managing Director and Chief Executive Officer

Chief Executives Review

Chief Executive's Review

Chief Executive's Review

Looking forward to 2012

Peter Horton Managing Director and Chief Executive Officer

Profile of Board of Directors

Profile of the Board

Ms. Aishath Noordeen (Non-Independent, Executive Director)

Mr. Adam Azim (Non-Independent, Non-Executive Director)

Mr. Hassan Muzni Mohamed (Independent, Non-Executive Director)

Mr. Mohamed Jaish Ibrahim (Non-Independent, Non-Executive Director)

Ms. Nuha Mohamed Riza (Independent, Non-Executive Director)

Mr. Hussain Shaheem (Independent, Non-Executive Director)

Profile of the Board

Mr. Mohamed Abdul Sattar (Independent, Non-Executive Director)

Mr. Ibrahim Mohamed (Independent, Non-Executive Director)

Mr. Asad Ali (Non-Independent, Non-Executive Director)

Mr. Ahmed Mohamed (Independent, Non-Executive Director)

Mr. Lasantha Thennakoon Chief Financial Ofcer

Ms. Aishath Noordeen Deputy Chief Executive Ofcer

Mr. Lucian Jayakody Chief Internal Auditor

Ms. Fathimath Manike Islamic Banking Director

Ms. Aminath Shaheen Risk Director

Mr. Allan McFarlane Retail Banking Director

Mr. Mohamed Shareef Operations Director

Mr. Rifath Mohamed Marketing Director

Ms. Aishath Nasheeda Human Resources Director

Ms. Ibthishama Ahmed Saeed Corporate Banking Director

Achieving New Levels of Financial Milestones

Achieving New Levels of Financial Milestones

Loan Loss Provision

Achieving New Levels of Financial Milestones

Assets and Liabilities

Ms. Aishath Nasheeda, HR Director (center-front) with our dedicated staff