T 5 AL REPOR 01 ANNU 2 d g n g a ndin engthenin r t xpa S E

ANNUAL REPORT 2015

ANNUAL REPORT 2015

Expanding and Strengthening

STO MALDIVES HOTELS & RESORTS SINGAPORE Attention This report comprises the annual report of state trading organization plc prepared in accordance with the companies act of the republic of maldives (10/96), listing rules of maldives stock exchange, the securities act of the republic of maldives (2/2006), securities continuing disclosure obligations of issuers regulation 2010 of capital market development authority and corporate governance code of capital market development authority requirements. Unless otherwise stated in this annual report, the terms ‘STO’, the ‘group’, ‘we’, ‘us’ and ‘our’ refer to state trading organization plc and its subsidiaries, associates and joint ventures collectively. The term ‘company’ refers to STO and/or its subsidiaries. STO prepares its financial statements in accordance with international financial reporting standards (IFRS). References to a year in this report are, unless otherwise indicated, references to the Company’s financial year ending 31st december 2015. In this report, financial and statistical information is, unless otherwise indicated, stated on the basis of the Company’s financial year. Information has been updated to the most practical date. This annual report contains forward looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward looking statements often use words such as ‘anticipate’, ‘target’, ‘expect’, ‘estimate’, ‘intend’, ‘plan’, ‘goal’, ‘believe’, ‘will’, ‘may’, ‘should’, ‘would’, ‘could’ or other words of similar meaning. Undue reliance should not be placed on any such statements because, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and STO plans and objectives, to differ materially from those expressed or implied in the forward looking statements. There are several factors which could cause actual results to differ materially from those expressed or implied in forward looking statements. Among the factors are changes in the global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates, changes in tax rates and future business combinations or dispositions. STO cannot guarantee future results, levels of activity, performance or achievements. CONTENTS

EVOLVING WITH YOU 1

STO GROUP IN 2015 2

LETTER TO SHAREHOLDERS 3

MD’S MESSAGE 5

BUSINESS ENVIRONMENT 9

OUR BUSINESSES 29

SHARE PERFORMANCE 31

CORPORATE GOVERNANCE REPORT 33 CORPORATE GOVERNANCE & COMPLIANCE 39 COMMITTEE REPORT

NOMINATION & REMUNERATION 41 COMMITTEE REPORT

REMUNERATION REPORT 43

AUDIT & RISK COMMITTEE 45

RISK REPORT 46

SUSTAINABILITY 49

5 YEAR GROUP FINANCIAL REVIEW 55

GENERAL INFORMATION 67

STO DIRECTORY 71 INDEPENDENT AUDITOR’S REPORT AND ATTACHED FINANCIAL STATEMENTS

VISION

Enriching lives through expansion and accessibility

VALUES

Caring

Accessible

Respectful

Innovative

Progressive MISSION

Lead through expansion of existing businesses, diversification, exploring new possibilities and entering into new ventures.

Explore beyond our borders, expand our markets and establish ourselves as an international player, respected by the international business community.

Ensure accessibility with our presence nationwide; offer peace of mind and assurance to the public of uninterrupted provision and affordability of essential goods and services and those that contribute to a fulfilling modern lifestyle.

Build a skilled workforce by investing in human development; build our competencies, to achieve sustainable and unhindered growth and fulfill our vision. EVOLVING WITH YOU

STO is a diversified trading company whose central purpose is to provide products and services essential for economic development and better life. The business operations, trading and marketing activities expand across the Country and South East Asia. The business is conducted based on the Group’s founding principle of providing the country with its basic needs to sustain and prosper including staple foods, medicines, fuel and gas. It allowed the Group to ensure the focus and priority that need to be directed towards fulfilling most basic needs.

Operational Excellence Sustainable Growth

During the year, STO showed operational excellence The Group’s long-term strategy has created stability in many business segments, benefitting from higher in earnings development. Product-mix improvements sales volumes, structural growth, improvement in and increased efficiency contributed to the stable costs and productivity. earnings development. The Group contributed MVR STO’s success is built on strong values that 435 million in profit for the year. The earnings and offers its employees a diverse workplace with safe working capital changes contributed to the strong working environments, training and skill development operating cash flow. The trend demonstrates that the programs, opportunities for career development and Group has good control over working capital and the balance between their professional and private life. resources, to continue increasing investments for The Group believes that competent and dedicated structural growth. employees play a crucial role in creating more value for customers.

Commitment and Competence

The Group’s core competency is in the fields of fuel, gas, insurance and medical services. The business 54 concept is to deliver high quality products with DISTRIBUTION CENTRES affordable prices, in order to meet the customer’s long term demand, and create value for shareholders. The Group has redefined existing businesses by focusing on expansion in all business segments and on its competitive advantage by carefully positioning 187 and investing in resources that promotes growth and PHARMACIES sustainable business. The ability to consistently cater basic needs of society has been strengthened over the course of a number of years, measured in terms PRESENCE IN ALL of presence, availability and service delivery. 19 ATOLLS

OVER 2500 EMPLOYEES

1 STO GROUPIN2015 Share ofRevenue bySegments Trading 28.4% 7,313 PROFIT FOR OPERATING THE YEAR REVENUE MILLION (MVR) MILLION (MVR) MILLION (MVR) 435 678 PROFIT Insurance 2.6% 2.4% Gas CASH FLOW OPERATING PER SHARE PROPOSED (MVR) PERSHARE EARNINGS DIVIDEND MILLION (MVR) 381 382 lubricants Fuel and 57 66.4% (MVR)

services Other 0.2%

2 STO ANNUAL REPORT 2015 LETTER TO SHAREHOLDERS

Dear Shareholders, It is my pleasure to present the annual report for 2015. It has been a successful year for STO where our revenues have shown a steady increase and the focus on our core businesses and customer services have shown good progress for the Company. STO has evolved in the past half century from a traditional business, importing products to meet the primary necessities of the country into a pioneer of industries, a company competing on multiple fronts and contributing to the long term development of the Country. The current business environment is fierce, where the markets in which we operate are volatile. We are however committed to being the preferred business partner to all our customers, and to do so, we are wholeheartedly committed to constantly improve our processes, products and services we provide to our markets.

3 the valueforour Shareholders. competitive edgeanddriveour capacitytoincrease more effectivelyinourmarkets, sustainingour will enableaccountabilityofoperations, competing the waywedobusiness.Good governancestandards continues andwillremainanintegral componentof coming year. mitigation initiativewhichwillberealizedinthe managing ourrisksbyworkingtowardsarisk higher standards.In2015,wehaveworked on codes oftheCountryandhavesetsightoneven building trust.We strivetomeetthegovernance strengthen therelationswithourstakeholders by allows transparencyinourprocesses,whichhelps long termsuccessoftheCompany. Governance belief isthatthiscommitmentcriticaltothe benchmarks forpubliclistedcompanies.Our unparalleled intheCountryandcontinuestoset STO’s commitmenttocorporategovernance is Guided byGovernance our longtermplans. of assetsandoperationsthatnolongercontributeto refining ofouroperationalactivitiesanddivestments management tonewerareasoffocus.Thishasmeant the businessesinwhichweoperateandguided The Boardhasmadestrategicdecisionstosafeguard knowledge requiredtoguideourCompanyforward. yet therightsetofskills,industryexperienceand currently haveastrongBoardcomprisedofdiverse, into markets previouslyastrongholdofSTO. We perform itsduties. has equippedtheBoardwithmuchneededskillsto importance. ThefocusonBoardtrainingin2015 the Board’s proficiencyhasbeenofevenhigher advantage isdeterminedonlybyminutefactors, small feat.Inaglobalizedworldwherecompetitive Being inexistencefor51yearsisbynomeansa Commitment fromtheTeam I amproudtostatethatcorporategovernance Past decisionshaveallowedcompetitiontoenter contributions forabrighterfuture. the managementandemployeesfortheirvalued into thefutureofpossibilities.Finallythankyouto shareholders forentrustinguswithtakingSTO to bepositionedforsuccessfulgrowthinthefuture. enhancing ourcustomerexperiencewillallallowSTO giving backtothecommunitiesandcommitment involvement invitalsectorswhichthepublicrelyon, future. Ournationwidepresence, unrivaled products, for growth.We areoptimisticandexcited aboutthe team movingustowardtheexistingopportunities a highlyexperienced,knowledgeableanddynamic and managementbehindit.We arefortunatetohave such astheconstructionindustry. vital supporttoindustriesthataredrasticallygrowing be reliedupon.Working onnewermarkets, enabling provides uswithgreateropportunitytostepupand As provenintheproudhistoryofourCompany, this to itscitizensandinvestorsalike. economy lookingtoprovideawealthofopportunities in theleastdevelopedcountries,intoadynamic Maldives isevolving.Fromasmallislandnationlisted Future ofPossibilities On behalfoftheBoard,thankyouto The companycanonlybestrongastheBoard Ahmed Niyaz Chairman

4 STO ANNUAL REPORT 2015 MD’S MESSAGE EXPANDING AND STRENGTHENING

2015 was a rewarding year for STO in terms of revenue and milestones achieved. Completion of the ambitious ‘all island pharmacy project’ was undeniably among the top highlights of the year. With this and other large- scale efforts in the healthcare sector, STO has expanded its involvement in this area. Being a resourceful national business leader, our involvement goes a long way in ensuring the reach of quality medicine and Aasandha coverage to every citizen of this geographically scattered nation. Expansion of Supermart was completed in June. Structure of the new Umar Shopping Arcade building was completed this year and is on schedule to open in the 2nd Quarter of 2016. Our project to supply ready-mix concrete progressed well in preparation for launch early in 2016. I remain confident that with the contributions of our management team and our valuable employees we are on path to achieve what we have planned for 2016 and beyond.

5 storage, foodrepacking, andrealestate. big investments inareassuchasfueltransportation and these effortswillbegintomaterialize. We haveplanned for ourplannednewventuresas well.2016istheyear strategies forgrowthofourcurrent businesses.Itiscrucial development. Itisanimportantstep insupportingour In 2015wedevelopedplansfor infrastructure Infrastructure across thenation. significant stepforthetransformationofhealthcare and pharmaceuticalstotheentirepopulationasa for thesupplyofmedicalequipment,consumables started aspecialprojecttobuildanefficientnetwork embarked toadvanceinassociationwithIGMH.We at IGMH.Parental NutritionisanotherareaSTO first Magnetic Resonance Imaging(MRI)machine imported andcompletedinstallationofthevery the MinistryofHealthforuseinatolls.We also a projecttosupply50paramedicambulances the qualityofhealthcareinatolls,STO started and trainedover400newpharmacists. project hascreatedmorethan500newjobsintheatolls of the177pharmaciesplannedunderproject.This the deadlinebyweeks.InOctober, weopenedthelast able toexecute thisprojectwithefficiencyandbeat cost andcomplexityoftheproject.However, wewere many shareholdersraisedconcernoverthepotential When weembarked onthe‘allislandpharmacyproject’ Healthcare in additiontomarketing opportunity. sponsorship proposalsroutinelyweighstheCSRaspect in differentareasofsocialwork.Ourevaluation deserving effortsfromnumerousNGOsthatspecialize needs. We havecontinuedtoprovidedonations areas relatedtoimprovingthelivesofpeoplewithspecial sponsoring trainedspecialiststhatworkinveryspecific This includes,forexample, providingofficespaceand as helpingthelessfortunateandpeoplewithdisability. do exceptional workincommunityempowermentaswell remarkable inthisregard. wider yetmoreorganizedyeartoand2015was Holy MonthofRamadan. Ouroperation hasbecome market pricestabilizationoffooditemsduringthe sectors. Oneofourmorewell-knownCSReffortsis more organizedandbalancedacrossregions previous year, ourCSReffortsin2015hadbeen With thenewCSRpolicythatcameintoeffect developed strongCSRinitiativesovertheyears. been andwillremainatoppriorityforSTO. We have Corporate SocialResponsibility (CSR)hasalways Social Responsibility Seeing thepotentialtomake ahugeimpactto We areproudtopartnerlong-termwithNGOsthat beyond itsnationalboundaries. two decadeswillseetheorganizationgrowfar organization intheCountry. Idonot doubtthenext arguably themostsuccessfulandtrustedbusiness several majormilestonesduringitslifespananditis been agreathonor. Theorganizationhasachieved remarkable historyforthepasttwodecadeshas Being partofthisprestigiousorganizationwithits We celebratedour51stanniversaryin2015. Next Two Decades spun offsubsidiariesorformedpartnerships. actually madehugesuccessinthepastandeven of selectedproducts.Thisisanareawherewehave studies andresearchintorepackingdistribution pressing needofthegeneralpublic. significant socialimpactasitisdirectlyrelatedtoa area. Housingisalsoaspacewherewecanmake a due tolandscarcityespeciallyinthegreaterMalé real estate. Thisisanareawithimmensepotential public. In2015wemadestridesinourplantoenter a differencethatwillbenefitstakeholders andthe areas ofbusinesswhereweseeourselvesmaking core businesses,wearebusyworkingtoenternew While wemaintainongoingeffortstostrengthenour New Businesses benefits realizedbyourstakeholders. and streamliningoperationsinordertomaximizethe to make utmosteffortwithourbusinessstrategies all ourstakeholders interestsatheartandcontinue important aspectofwhatwedo. However, wekeep Making essentialgoodsandservicesaccessibleisan the bottomline. Ourcorevisionistoservethepublic. As apubliccompanywecannotbefocusedsolelyon Key Message Additionally, wehavebeenworkingonfeasibility Managing Director Ahmed Shaheer

6 STO ANNUAL REPORT 2015 7 8 STO ANNUAL REPORT 2015 BUSINESS ENVIRONMENT

The Economy Focus on core business

According to International Monetory Fund (IMF), the We monitor opportunities and challenges in each global GDP increased by 3.1% in 2015, compared business segment and respond decisively to with 3.5% in 2014. The economic activity remained strengthen our position for long-term success. subdued. In the emerging economies, average Sales of fuel and lubricants is the core business growth rates are likely to remain depressed for the of STO group, contributing approximately 66% of fifth consecutive year, while a modest recovery revenue. During the year, revenue growth was continued in advanced economies. negatively impacted by the sharp fall in oil prices, In 2015, the political and economic situation but improvement in sales volume and cost efficacy of Maldives was observed to be relatively stable, helped to maintain operating margin. compared with recent years. A number of positive With changes in economic conditions and trends have developed and have had a significant government policies, we are focusing to expand our bearing on the economic performance and prospects markets in both local and international markets, while of the country, that play a major role in creating strengthening our operational and infrastructural conducive business environment. capabilities to raise sales volumes as demand grows. The real GDP growth for 2015 is expected to decrease to 4.8% from 6.5% in 2014, according to National Bureau of Statistics. Tourism sector experienced a further marked slowdown in 2015, with growth of only 1.3% compared with 11.5% in 2014, despite upbeat tourist arrivals globally and in Asia. While growth is expected to pick up modestly in the Europe and Japan, may help offset the effects of Chinese arrival slowdown in recent years. The economy is expected to strengthen in 2016, with real GDP growth picking up to around 6.4%, mainly driven by continued construction sector growth stemming from large infrastructure projects now underway. Average inflation in Male’, the capital, remained low at less than 2%, aided by the continued decline in global food and oil prices and low domestic fish prices during the year. Global oil prices have declined markedly since the third quarter of 2015, reflecting sustained increase in production by the members of the Organization of the Petroleum Exporting Countries (OPEC).

9 Trading customers bothindomesticandinternationalmarket. provide cleanandreliablepetroleumproductstoits marketing ofpetroleumproducts.Theaimisto This segmentcomprisesselling,distributionand Fuel andLubricants services. construction materials,regionalsalesandmedical include foodandbeverages,homeimprovement, its offeringunderdifferentproductgroups.These Trading isthelargestbusinesssegmentintermsof growth infuelandlubricantswasnegativelyimpactedbythefall oilprices. the businesssegments,netrevenueimprovedsignificantlyinallsegments except forfuelandlubricants.Sales In 2015,STO Groupcontinuedtogrowinallbusinesssegments.Althoughmarket conditionsvariedbetween Segment Performance OUR BUSINESSES MILLION (MVR) MILLION (MVR) 4,855 2,080 Net revenue Net revenue Share ofrevenue Share ofrevenue 66.4% 28.4% multiple sectors,includingresortsandrestaurants. leader ingassupplyanddistributionsolutionsacross healthcare industry. MaldivesGasistheindustry households andmedicalgassolution,essentialto This segmentprovidesitscustomerswithLPGfor Gas travel, accidentandthirdpartymotorinsurance. and generalinsuranceplansalongwithhealth,diving, challenges ofeachmarket. Thisincludeslifeinsurance insurance coverage, speciallydesignedtomeetthe Allied InsuranceCompanyprovidesawiderangeof Insurance MILLION (MVR) MILLION (MVR) Net revenue Net revenue 188 176

Share ofrevenue Share ofrevenue 2.4% 2.6% 10 STO ANNUAL REPORT 2015 TRADING

For many years, STO’s development strategy has Continuing to Strengthen Growth been founded on creating long-term value. This long- term performance is based on constant growth of its In order to reach sales targets, the Group continues to businesses, a solid economic model and sustainable strengthen its position in the trading segment, expand strategy of development. in its high margin product categories, develop service, We expand our businesses, with its central and increase the offering of quality products. purpose to provide the necessary products and services The total revenue for trading segment increased required by our nation. We are providing critically by 30% to approximately MVR 2.1 billion, with important services for our nation by catering to the significant improvement in medical services. Revenue growing demands of the population. for medical services rose to 90%, mainly driven by Trading is the largest business segment in terms greater presence in each island and high value of its offering under different product groups. These equipment sales to medical sector in 2015. include food and beverage, home improvement, construction materials, regional sales and medical services.

Net revenue (MVR), millions

2011 1,290

2012 1,403

2013 1,373 28.4%

2014 1,604

2015 2,080 Share of revenue

11 thereby reducingworkingcapitalrequirement. reduction ofinventory, handlingandtransfercosts will continuein2016withastrongfocusonfurther The costsavingandemployeeproductivityprogram volume, costsavings,efficiencyandcustomerservice. significant improvementsinareasincludingsales at homeimprovementandsupermarket hasledto across allbusinessunits.Theefficiencyprogram extensive cost-reductionprogramwasimplemented on creatingcustomervalueandreducecosts.An income andoperationalreliability. significant improvementsintermsofsalesvolume, and Homeimprovement.Allbusinessunitsachieved across allthebusinessunitsespeciallyinSupermarket customer servicesandstreamlinebusinessprocessin Measures wereimplementedtoacceleratethe Cost Savings During theyear, strongemphasiswasmade Share ofTrading Revenue Medical services,35.2% Food andbeverages,24.7% Home improvement,14% Construction materials,9.1% Regional sales,17% 12 STO ANNUAL REPORT 2015 CONSTRUCTION MATERIALS

Through its construction business, STO designs and develops solution for construction industry. Its supply of quality materials, roofing sheets and cement solution enables customers to optimize the use of their resources. 189 We have chosen to concentrate on high-growth regions and products MILLION (MVR) where the Group has the best conditions for achieving growth and profitability. We are continuously striving for leading positions throughout the Net revenue country. The construction materials segment revenue amounted to MVR 189 million in 2015. The year was characterized by highly completive sales activities, where the Group market position was strengthened. In addition, new and potential areas to generate sales were identified, including resort 9.1% development and government infra-structure development projects. The Group has maintained strong operational focus and work intensively to structure and develop existing operations and to ensure the efficiency in the organization. Share of revenue

Powermix Concrete Roofing Materials

In December 2015, a whole new concrete mixing Roofing materials produced by Maldives Structural solution was launched under the brand ‘Powermix’ Products has a great reputation for manufacturing concrete. Introduction of specially designed mixing quality, durability among consumers, especially with vehicles enables to deliver ready mix concrete to premium products such as Colorbond and Zincalume. customer’s site. Concrete pumps, testing mechanism The new strategic direction was set to reach out to and chemicals required are also provided as a part of potential clients and consumers, giving priority to solution to mixing operation. customer specific solution. The enhanced operation The operation is designed to have positive and marketing aspect upgraded the Kuladek material impact on environment by reducing exposure to to BlueScope materials and quality thickness from hazardous dust and fumes generated, since there is 0.38mm to 0.40mm and rebranded it as Duradek. no requirement to handle cement and raw material at customer site. The initiative to introduce solutions and expansion in market segments will contribute to positive sales growth in the coming years and ahead.

13 14 STO ANNUAL REPORT 2015 HOME IMPROVEMENT

STO is a one of the leading providers of home and electronic appliances, holds a strong position in Maldives, and offers a range of products for households, professional and business users. 292 The Group continued to increase sales by launching new, innovative MILLION (MVR) products in several price segments and under well-known brands. In addition to this the Group interacted with and developed close relationships with Net revenue customers and business partners. This enabled to generate a revenue of MVR 292 million which accounted to 14 % of trading revenue. During the year, the Group has supplied and supported several government and corporate projects, including installation of VRF air-condition system in Dharubaruge and Hanimaadhoo International Airport. 14%

Share of revenue

Brand and Product Launches Operational Excellence

With growing middle class income group, leads to Home Improvement is constantly seeking to improve increasing demand for products with innovative its operations by connecting business to customers, design and performance. The focus is on the high shortening waiting time at stores and speeding volume product categories and introduction of global up delivery while making it more reliable. The brands in order to improve our long-term competitive long-standing focus on efficiency and cost control business model. benefited to achieve financial performance. During the year, Samsung brand was launched, A more strategic approach to marketing has with market leading smart TV’s and mobile phones. been in place, thus improving sales and achieving STO now commands a strong position throughout the sustainable competitive advantage. The range of country, particularly for our well-established brands Hitachi air-conditioners showed its highest market of Hitachi, Philips, Nippon and Makita. The objective share in recent years with 70 % sales growth, while is to consistently deliver high-quality products and Nippon paint was the second best-selling with 53% service that increase our customers’ productivity and growth in sales. The commitment to customers and competitiveness. keeping promises help always strive to exceed high expectation and growth. The service and maintenance performed by skilled technicians is an integral part of the offer. Service centers located both in Male’ and South region has the responsibility to service products, and provide technical support as well as service delivery and follow-up. In 2015, we have introduced customer feedback mechanism at Home Improvement and Service Centre. Customers are often engaged in discussions about their feedback in order to solve problems and to improve products and services. A number of key performance indicators have been established and are continuously followed up to ensure that customer satisfaction improves. We believe customer satisfaction and contribute to strengthening customer relations, the brand, as well as financial performance.

15 16 STO ANNUAL REPORT 2015 MEDICAL SERVICES

As recognized leader in supplying essential drugs, healthcare equipment’s, STO provides best products and services to the pharmacies and hospitals in the Maldives. In 2015, through strong performance and strategic actions, we 731 aimed to help improve people’s lives, through better healthcare. MILLION (MVR) Beyond producing results, the Group engage more on constant optimization of operations. Through well-established pharmacies and stores Net revenue in the country, the objective is to constantly deliver essential drugs and other specialty products to customers. This is ensured through efficient and enhanced process integration, leading to continuous improvement of our service offer. 35%

Share of revenue

Solid Growth and Improved Services Offering New Products and Services

For the year 2015, medical services business unit During the year, the Group started to offer a broad revenue grew by 90% in 2015 to exceed MVR 731 range of innovative diagnostic instrument systems million, as expected, mainly driven by increased and solutions for hospitals, laboratories and clinics. number of pharmacy stores and high value equipment It managed to supply a total of 54 ambulances to the sales to healthcare sector under different projects. health sector, under an MoU signed between STO The organizational structure was strengthened and Ministry of Health. Supply and installation of by creating a separate business unit to focus and MRI machine in IGM Hospital was another milestone facilitate regional pharmacies operation and drive achieved for the development of healthcare sector. efficiency and productivity. It is believed that structural This enabled public access to contemporary service, changes are important to create solid founder for completely covered under national insurance future growth. ‘Aasandha’. In addition during the year, the Group took a STO offers a broad range of pharmaceutical strong step in a new direction, adding a major new products under different brands and is the strong dimension to our competitive capability. It is an market player. To further increase market share, the achievement that, our services has been certified Group improved its offering by exclusive distributer under ISO 9001:2008, which is an assurance and agreements with leading pharmaceutical companies confidence to customer on improved quality services. including Dr. Reddy’s Laboratories, Merck, Galderma and IPCA.

Expanding its presence

During the year, The Group took several actions in established pharmaceuticals business by building its geographic presence, strengthening its product portfolio, and increasing its focus on availability of products. ‘All Island Pharmacy’ project started in June 2014 has been completed successfully by October 2015, well ahead of its target date. With 177 additional pharmacies, the Group expects this segment to whiteness extra ordinary services, through the establishment of pharmacy in all islands and provide opportunities to better healthcare for all.

17 18 STO ANNUAL REPORT 2015 FOOD AND BEVERAGE

STO Supermart is determined to maximize its sales by retaining customers and providing wide varieties of products, at an affordable price in a favorable working environment for a healthy business in terms of customer services. 514 The Group focus on serving customers by understanding and reaching MILLION (MVR) out and helping to deliver best value. We provide varieties of high quality merchandise ranging from toiletries, canned foods, frozen foods, household Net revenue items and a number of other essential items and consumer goods. In the year 2015, we have provided good quality and internationally recognized brands for our customers. Supermarket sales including staple foods for 2015 amounted to MVR 514 million. This reflects the opening of modern and spacious supermarket giving 24.7% customer a whole new shopping experience. Innovations that create value for people and the environment while remaining cost efficient are key factors when it comes to differentiating our offering, creating growth and improving profitability. Share of revenue

Strengthening the Products Mix Customer Surveys as a Tool for Improvement Through introduction of new brands, and with effective marketing campaigns, STO is well positioned Customer feedback is important to be able to offer to leverage the growth potential existing in mature better products and solutions and STO Supermart and emergent markets. The Group’s aim is to grow has methods to investigate customer satisfaction. A and strengthen its positions in both markets by, feedback survey conducted in 2015 shows that, store for example, broadening its offering of product attributes, convenience, merchandise assortments, categories, product ranges and services. During employee behavior are most important factors in the year, the Group introduced well-known brands, determining choice along with price. It concludes that, including Quickbury, Ariya, El-Sabah, B&W and Thai the emergence of supermarket segment, changes Choice, which helps to penetrate and capture new consumer behavior of Maldivians. markets. Furthermore, marketing strategies were based on market research focusing on achieving reasonable profit and sustaining in the market. The marketing campaigns were focused mostly on peak seasons like Ramadan and year-end which provides opportunity to maximize sales growth. The Group’s operations interact with numerous different customers, markets and needs. We monitor the market opportunities and challenges in each product to determine how best to position the company to long-term success.

19 supermarket itemsintheregions. was giventouninterruptedsupplyofmuchneededstaplefoodstock and growth markets ofconstructionandhomeimprovement.Aspecial importance was abletodelivergoodsandservicesatcompetitiveprices,particularly high business, inordertoimprovesalesandprofitability. Inaddition,theGroup possible way. Focuswasoncontainingcostsandstrengtheningour regional information andconductmarketing campaigns. million. Salestripsconductedtoislandshelpedintroducenewproducts, give strategies settofocusoneachatollratherthanindividualislands. regional salesdepartment.In2015,wedriveourbusiness forwardby customers inatolls.At present,thereare13storeswhichoperatesunder Regional salesbusinessunitaimstodistributeproductsandservices tothe REGIONAL SALES This segmentisorganizedtoserveregionalmarket needsinthebest Despite thechallengesandsetbacks,thissectorrevenuetotaled MVR 354 Share ofrevenue MILLION (MVR) Net revenue 354 17% 20 STO ANNUAL REPORT 2015 21 22 STO ANNUAL REPORT 2015 The fuel and lubricants comprises selling, distribution FUEL AND and marketing of petroleum products. The focus is to provide clean and reliable petroleum products to customers. The Group continued to cater growing LUBRICANTS demand of domestic and international market. Over the years, the Group has developed distinctive capabilities in fully-integrated fuel and lubricants business and have built a strong reputation as a trusted partner and reliable supplier. The Group has earned loyalty of many strategic business customers including, State Electric Company and Maldives Airports Company, whom we have been serving for several years successfully.

Performance

Fuel and lubricants reported a 33% decrease in revenue for 2015, driven by decrease in fuel price. Global fuel prices have been on the lowest in four years and December saw fuel prices dip to its lowest. The current market trend is expected to continue as some oil majors continue to pump more into the supply stream. In November 2015, the average production of OPEC had increased to 31.70 million barrels per day while global economic growth remains still.

Distribution Network Infrastructure With the initiative to improve Development operational safety and mitigate Fuel Supplies Maldives (FSM) is the risks, designing a whole new fire Group’s marketing and distribution Despite challenging market protection system for the terminal arm for petroleum products. situation, we continue to strive incorporating the latest industry The company’s strategy for fuel for growth, primarily by way of standards and technology is a distribution was reconsidered investments to achieve effective priority. The ambition is to become to enable large volume local market positioning and continuous the safest terminal in the region. distributors to engage in further improvement to offering services. Completion of Thilafushi Boat expanding the network. The aim is K. Funadhoo oil terminal expansion Yard Slipway project by FSM was a to expand the network to reach the project started during the year remarkable achievement in 2015. smaller volume consumers through would expand the storage capacity This will not only contribute to local distributers. In addition, the by 28,000 tons. The project is maintain thevessels and fleets in retail business drives the sales of designed to improve ancillary good condition, but it is a major total fuel segment of the Group, infrastructure to accommodate step towards providing full-fledged providing easy fill convenience bigger tankers. Additionally, the commercial boat yard services. that delivers exceptional customer Group is in the process of acquiring experience at FSM stations. a new oil tanker, which is expected to be available for service by the time, expansion project is complete in 2017. Net revenue (MVR), millions

2011 7,897

2012 7,614 66.4%

2013 9,481

2014 7,246

2015 4,855 Share of revenue

23 return toshareholders. competitiveness andoptimize that drivesoperatingperformance, formulates strategicbusinessplan and brandidentity. The Group building thecorporateimage in improvingthemarket share, segment concentrateditseffort business confidencegrowing,the conditions improvingand activities increasedwitheconomic previous year. Whilethemarketing an 6%increasecomparedto revenue ofMVR176million, segment. TheGroupreported effective, efficientyearforGas Year 2015,hasbeenacost- Performance GAS Net revenue(MVR),millions 2015 2014 2013 2012 2011 92 134 household withnodisputes. ensure constantsupplytoevery established duringtheyearwasto of thecompany. soon bethebusinessfrontoffice a four-storeybuildingwhichwill market, theGrouphasconstructed cater thegrowingcorporate to everycustomer. Inorderto unit ensuresthedoorstepdelivery facility foroxygen. Thedistribution functions asthemanufacturing across theMaldivesandalso facility andmaingasprovider K. Thilafushiterminalisthefilling terminals locatedinMale’ region. operates total4distribution The Groupcurrentlyownsand Distribution K. Villimale’ distribution unit, K. Villimale’ distributionunit, 152 166 176 sophisticated gascylinder. named ‘Luifulhi’, -anon-explosive, lightweightedand the market, supplyingLPGcylindersofvarioussizes products andservices,broughtnewadditionto introduce innovationandtechnologicaladvancesin Nitrous Oxide. Oxygen, Acetylene, Argon,Helium,Carbondioxide and gases suppliedacrosstheMaldives,areIndustrial covers morethan95%ofhospitalsinthecountry. Other commitment tomovingforward.Thedistributionnetwork close relationshipandmutualtrustreflectedthroughits The Groupdeliverscustomersatisfactionbasedon multiple sectors,includingresortsandrestaurants. leader ingassupplyanddistributionsolutionsacross term. reliability anduninterruptedsupplyofgasoverthelong all theislandsandguaranteecustomersmaximum country enabletheGrouptosupplygasesalmost distribution unitsandauthorizedagentsthroughoutthe and energyefficiency. Itsunmatchednetworksof to healthcareindustrythatdeliverperformance for householdsandmedicalgassolutionessential The GassegmentprovidesitscustomerswithLPG To delivercustomerexpectations,theGroup Maldives Gashasemergedasanindustry looked afterbyMaldivesGas. functioning oftheseplantswillbe Hospital. Thepreservationand in IGMHospitalandK.Hulhumale’ started installationofoxygen plants 1500 MTcapacity. Southern atollswithadditionto storage expansionprojectto has initiatedastudytomobilize risk managementplan,theGroup position. To developaneffective in gasrevenueandmarket and competitivenessforgrowth improving operationalefficiency strategy. TheGroupbelieve in improvement isvitaltogrowth Focus andcontinuous Development Growth and During theyear, theGroup Share ofrevenue 2.4% 24 STO ANNUAL REPORT 2015 25 26 STO ANNUAL REPORT 2015 The strength and success of insurance segment is the INSURANCE result of experience, innovative products and excellent service. The target customer range is diverse and well spread across the country, from small fishing boats to multinational resort operators. Over the years, the Group has offered several innovative products and superior services to cater diverse and dynamic markets in the Maldives. The Group provides a wide range of insurance coverage, specially designed to meet the challenges of each market that varies into many categories, mainly life insurance and general insurance plans including health, diving, travel, accident and third party motor insurance. Allied Insurance Company is among the largest financial institutions and the best insurance brand in the country with a 100% local management. The insurance industry of the Maldives is an oligopoly, where few large firms dominate the market and owns almost 60% of the total market share.

Performance Meeting Challenges

The Group insurance revenue The external environment of assistance to government, increased by 31.5% to MVR the year 2015 was appeared to regulatory and law enforcement 188 million in 2015. Aggressive be quite challenging, reflecting authorities. marketing and selling techniques specific political, regulatory and Prospective opportunities in used during the year made economic conditions. Difficult the vicinity along with respective positive contribution to the market conditions and global laws mandating insurance of revenue trend. In 2015, the economic growth slowdown may risks such as fire, natural perils, Group successfully entered into materially and adversely affect theft, and burglary are related to several business contracts and earnings, and financial conditions. buildings and marine vessels. activities including new resorts. Improved profitability for insurance The Group will continue The Group signed an MoU with sector is somewhat subdued initiatives to modernize technology Maldives Immigration to exclusively as many challenges remain, for and infrastructure, implement best provide expatriate insurance to example low investment returns practices to improve speed and all expatriates working in the and weak regulatory environment. quality of services. Maldives. The Group carefully engage challenges and create opportunities by providing awareness on insurance products, differentiate markets, reaching people in the atolls and providing

Net revenue (MVR), millions

2011 136 2012 124 2.6% 2013 166

2014 143

2015 188 Share of revenue

27 28 STO ANNUAL REPORT 2015 GROUP FINANCIAL REVIEW

Revenue Profit for the Year and Earnings Per Share Revenue for the Group declined by 20.3% in 2015 amounted to MVR 7,313 million, as against MVR 9,171 Profit for the year amounted to MVR 435 million (2014: million in the previous year. Revenue were adversely MVR 480 million), corresponding to MVR 382 (2014: impacted by lower fuel prices, while improved MVR 424) in earnings per share. revenue from trading, insurance and gas had a positive impact. Fuel and lubricants as the Group’s main business Group Key figures continued to show a decline in revenue due to a fall in fuel prices. Fuel revenue declined by 33%, trading MVR, million 2015 2014 in wholesales and retails improved by 30%, insurance improved by 31.5% and gas improved by 6%. The Revenue 7,313 9,171 improvement was mainly a result of new products, Gross profit 1,505 1,390 and intense marketing and promotion activities. Operating profit 678 761 Gross Profit and Operating Profit Profit before tax 520 573 Profit for the year 435 480 Gross profit for 2015 increased to MVR 1,505 million (2014: MVR 1,390 million), corresponding to 21% of Earnings per share, MVR 382 424 revenue. Improved sourcing, lower purchase cost for products and cost efficiency measures contributed to Net asset per share, MVR 2,693 2,009 the improvement in gross profit. Net cash flow from operating activities 381 19 Operating profit amounted to MVR 678 million (MVR 761 million), decrease was as expected due to Return on equity, % 21.4 29.2 increase in employee cost attributable to medical segment expansion and decrease in other operating Net debt/equity ratio 1.3 1.6 income as compared to 2014. Dividend per share, MVR 57 76 Profit before tax for fuel & lubricants, Insurance and gas contributed strongly to the Group results Interest cover ratio 3.6 3.4 for 2015, while trading segment reported a positive development.

12000 600 450

400 10000 500 350

8000 400 300

250 6000 300 200

4000 200 150

100 2000 100 50

2011 2012 2013 2014 2015 2011 2012 2013 2014 2015

Revenue in million (MVR) Profit for the year in million (MVR) Earnings per share (MVR)

29 relation tonetrevenue. Trade payablesandinventoriesdevelopedsteadilyin changes, mainlydrivenbyimproveddebtrecovery. generated wasduetoimprovementinworkingcapital million (2014:MVR19million).Thestrongcashflow 2015 increasedbyMVR362millionto381 Net cashgeneratedinoperatingactivities Cash Flow regulations. and feesthatarerequiredbystatutorylaws other taxes andlevies,suchasroyalties,leaserent part oftaxrelatedexpenses.TheGroupalsopaid addition, theGrouppaidGST andwithholdingtaxas to aneffectivetaxrateof16.3%(2014:16.2%).In 84.6 million(2014:MVR92.6million),corresponding Total incometaxexpensefor2015amountedtoMVR Taxes year. by theGroupandreductioninexchange lossforthe restructure ofbankoverdraftfacilitiesandloansheld mainly duetolowerinterestrateonborrowingand million (2014:MVR196million).Theimprovementis Net financecostfor2015decreasedtoMVR167 Net FinanceCost -100 -50 0 50 100 150 200 250 300 350 400 in million(MVR) Net operatingcashflow 2011 2012 2013 2014 2015 bearing borrowingswas7.93%(2014:8.21%). the averageinterestrateforgroup’s totalinterest- carrying interestof5.25%perannum.At year-end, MVR 539.7millionwithamaturityperiodof8years, with MVR1,256million.Thebondissuedamountedto borrowings includingcorporatebondwereraised and borrowingswererepaidnewloans of profitgeneratedinthecurrentyear. resulted primarilyduetoincreaseinequitybyvirtue 61.2%). ThedecreasinggearingratiooftheGroup 2,931 million),representinggearingof55.9%(2014: Net debtamountedtoMVR2,804million(2014: Return onequitywas21.4%(2014:29.2%) Earnings Per ShareofMVR382(2014:424). (2014: MVR1,860million),whichcorrespondsto In 2015,groupequityincreasedtoMVR2,211million, Financial Position decreased toMVR169million(2014:179million) building. Cashgeneratedfromfinancingactivities and constructionofformerUmarShoppingArcade due toongoingRadisson hotelconstruction project for additionstoproperty, plantandequipment,mainly 281 million(2014:MVR-77million).Thiswasprimarily Cash usedininvestingactivitiesincreasedtoMVR During theyear, MVR1,063millioninloans 1500 2000 2500 500 1000 Return onequity (%) Equity inmillion(MVR) 2011 2012 2013 2014

2015 20 35 25 30 5 10 15 30 STO ANNUAL REPORT 2015 SHARE PERFORMANCE

Ownership structure

The share capital structure of the Company remained unchanged. The majority of the share capital as of December 2015 is owned by Government of Maldives amounting to 81.6%. The remaining 18.4% share is owned by the general public. No single party other than the Government directly or indirectly, owned more than 5% of the shares of the Company. The nominal value of the share is MVR 50 and each share entitles the holder to one vote at the Annual General Meeting. All shares entitle holders to an equal dividend.

Dividend Trading Volume

During the year, MVR 85.6 million The reasonable level of The STO share is listed on was paid as dividend for the dividend reflects, the Board’s Maldives Stock Exchange (MSE). year 2014, where dividend per confidence in the Groups During 2015, a total 547 shares share was MVR 76.00 (2013: business and is consistent with were traded compared to 292 24 per share, MVR 27 million), the objective to have disciplined during 2014. The highest price and the same was approved by balance between availability of quoted was MVR 980.00 while the shareholders in the Annual capital to invest and return to the lowest was MVR 400.00, and General Meeting held on 29th May shareholders. the weighted average of MVR 2015. The Annual General Meeting 472.00. The market capitalization The Board of Directors for 2015 will be held on 04th June at year-end 2015 was MVR 563.5 proposes a divided of MVR 57 per 2016 at Kurumba Maldives. million. share for 2015. This is equivalent to a total dividend payment of ownership structure MVR 64.2 million.

Share trading data:

Government 81.6% MVR 2015 2014 2013 2012 2011 Public 18.4 %

Highest 980 550 510 450 450

80 20 Lowest 400 400 360 350 300 70 18 16 60 14 Weighted average 472 451 411 387 390 50 12 40 10 30 8 No. of trades 58 9 41 17 14 6 20 4 10 2 No. of shares traded 547 292 520 346 192 2011 2012 2013 2014 2015

Last trading price 500 400 380 400 450 Dividend per share (MVR) Dividend yield (%) No of shares issued 1126910 1126910 1126910 1126910 1126910

Market capitalization (million) 563.5 450.8 428.2 450.8 507.1

31 32 STO ANNUAL REPORT 2015 CORPORATE GOVERNANCE REPORT

State Trading Organization Plc. and its subsidiaries are committed to maintaining a high standard in complying with the Corporate Governance Code of Capital Market Development Authority (CMDA). STO as a group has complied with most of principles and guidelines set out in the Corporate Governance Code. Where there have been exceptions, it has been explained further in this report. Throughout the year the Board focused on instilling the governance principles not only in the parent company, but also a high emphasis was given to instill the good governance principles across the Group. Hence, this report describes the corporate governance practices that were in place throughout the financial year ended 31st December 2015.

The Board Board Composition and Board Committees Guidance The primary function of the Board As suggested by the Nomination of Directors is to provide effective The Board comprises of seven and Remuneration Committee and leadership and direction to enhance directors as of 31st December by mutual consent of the Board, the long-term value of the Group to its 2015. Excluding the Managing a new committee was formed shareholders and other stakeholders. Director and Mr. Ibrahim Ziyath, under the name of Risk Committee. Throughout the year 2015, the all directors are non-executive Risk committee was formed with Board oversaw the business affairs members. This also includes the the prime purpose of assisting of the Group. This included the Chairman of the Board. All the Non- the Board in its oversight and overall responsibility of reviewing Executive Directors are believed management of key risks as well the strategic plans and performance to fit the independent directors as establishing the frameworks, objectives, financial plans and annual requirements described in the guidelines, policies and process budget, key operational initiatives, CMDA CG code where neither a for identifying, monitoring and major fundings, investment proposals, Director nor his/her immediate mitigating risks. Though risk financial performance reviews, and family members during the past management was addressed governance practices. year has held a key position in earlier by the Audit Committee, the All the Non-Executive Directors the Company and none of their Board decided to create a separate on the Board are considered by immediate family members have risk committee in order to give the Nomination and Remuneration had any substantial finance more importance to this area of Committee of the Board, to be dealings with the Company. governance. independent directors. No director Each year, the Nomination and The Board has 4 board has held directorship in more than Remuneration Committee reviews committees with the newly three public listed companies over the the size and composition of the formed Risk Committee. The year. This ensured that all directors Board and committees, and the other committees include Audit devoted sufficient time and efforts to skills and core competencies of its Committee, Nomination and their duties. members to ensure an appropriate Remuneration Committee and None of the directors have balance of skills, experience Corporate Governance and served on the Board for a period and gender exists. The Board Compliance Committee. The exceeding six years from the date considers that its directors possess membership, responsibilities of their appointment. However the the necessary competencies and and activities of each of these Board also recognizes that most of knowledge to lead and govern committees are further described the current Board of Directors have the Group effectively. The Board in this report. Since Risk Committee worked together in previous terms. also believes that the current is a newly formed committee, a This meant that the directors had size provides sufficient diversity separate report for risk committee developed a significant insight into for efficient decision making. is not included in this report. the Group’s business and operations, The directors’ academic and The remuneration report of the thus providing significant contribution professional qualifications are Nomination and Remuneration to the Board as a whole. presented in pages 61 to 62 of the Committee is available on page 43. annual report.

33 of theCompany. of powerandauthorityatthetop Director, whichensuresabalance Chairman andtheManaging responsibilities betweenthe Executive Director. Director, Mr. AhmedShaheerisan Director, whiletheManaging is anindependentNon-Executive The Chairman,Mr. AhmedNiyaz, assumed bydifferentindividuals. Director rolesintheCompanyare The ChairmanandtheManaging Managing Director Chairman and Management, duringtheyear. made bytheDirectorsor or materialthirdpartytransactions there werenoknownsubstantial information provided.Assuch, of Companiestoconfirmthe and talliedbytheRegistrar This informationisreviewed hold asignificantinterest. immediate familymembers where he/sheandhis/her association orotheraffiliation must discloseanycompany, of thisprocess,theDirectors Policy fortheDirectors.Aspart approved ConflictofInterest The CompanyhasaBoard Procedure Conflict ofInterest members. by theBoardandsigned in theformofcharters,approved committee hasasetofguidelines are reviewedannually. Each performance ofthesecommittees both committees.Membershipand entrusted withthefunctionsof majority ofsamedirectorsare purpose ofexpediency, since Committee iscombinedforthe The NominationandRemuneration There isacleardivisionof The Chairman: other shareholdermeetings. management atAGMs and shareholders, theBoardand constructive dialoguebetween Plays apivotalroleinfostering Director andmanagement. leadership totheManaging guidance, adviceand Provides closeoversight, Board andmanagement. of informationflowbetweenthe quality, quantityandtimeliness Exercises controloverthe effectively. to speakfreelyandcontribute Executive Directorsareable for debatesandensuresNon- Promotes anopenenvironment items. thorough discussionofagenda sufficient allocationoftimefor Board meetingandensures Approves theagendafor management. company secretaryand the fullsupportofdirectors, of corporategovernancewith and maintainahighstandard Company’s drivetoachieve Takes aleadingrole in the individual directors. Board, boardcommitteesand overall effectivenessofthe creating theconditionsfor of theBoardandispivotalin Is responsibleforleadership Director isresponsiblefor: of theGroup. TheManaging highest rankingexecutive officer The ManagingDirectoristhe businesses. the performanceofitsexisting of itsbusinessandreviewing and opportunitiesforthegrowth identifying andassessingrisks Group’s futurestrategyincluding Leading thedevelopmentof events anddevelopments. Group andofanyimportant manner, ofissuesfacedbythe is kept appraisedinatimely Ensuring thattheChairman succession of suitableindividualsfor the traininganddevelopment Group withtheaimofassisting senior managementwithinthe Leading thedevelopmentof management team. of theexecutive andsenior Day-to-day management set bytheBoard. and strategyacrosstheGroupas Ensuring implementationofpolicies to himbytheBoard. within theauthoritiesdelegated business oftheCompany, Running theday-to-day 34 STO ANNUAL REPORT 2015 Role of the Non- Both the majority shareholder Executive Directors (the Government) and the minority shareholders are given 21/21 07/07 The Board and management fully 21 days of notice to submit their appreciate an effective and robust candidates. board, whose members engage in open and constructive debate The nominees for public Ahmed Adam and challenge management on share representatives are Niyaz Azim its assumptions and proposals, is then evaluated according fundamental to good corporate to the Directors Evaluation governance. Policy. The prime purpose of For this to happen, the this evaluation is to identify 21/21 21/21 Board and Non-Executive the skills, knowledge and Directors in particular, must experience of the candidates be kept well informed of the and to see how it would Group’s businesses and be strengthen the existing Board. Ahmed Amir knowledgeable about the Shaheer Mansoor industries the Group operates in. Nomination and Remuneration To ensure that Non-Executive Committee also meets with Directors are well supported the shortlisted candidates to 19/21 19/21 by accurate, complete and assess and to further evaluate timely information, they have the candidate. sufficient access to management Abdul Hadi information. The Board has also Nomination and Remuneration Aishath Hussain Fulhu adopted processes to ensure that Committee recommends the Rafiyya Non-Executive Directors have candidates who meets the sufficient time and resources to required criteria to the Board. perform their functions effectively. 21/21 11/13 In 2015, 5 candidates from the Process of Re-election public shareholders submitted and Appointment of their name for directorship. Mohamed Ibrahim New Directors Out of which Nomination and Remuneration Committee Farshath Ziyath The Board, in particular the shortlisted 4 candidates who met Nomination and Remuneration the required criteria. As such Committee has put in place a these names were announced The Board is confident that formal process for the selection during the AGM and voting took the directors made adequate of new directors to increase the place to elect the member for the time available to give sufficient transparency of the nomination seat of public shareholder. attention to the board discussions. process in identifying and Attendance is expressed as the evaluating nominees for directors. number of meetings attended out The process is summarized as Board Meetings of the number eligible to attend. below: The Board of Directors held 21 meetings during the year 2015. In addition, the committees altogether held 23 committee meetings. The chart indicates director’s attendance to the meetings:

35 findings from such audits. findings fromsuchaudits. plans, fraudriskassessmentsand These reportsinclude, annualaudit to theBoard,withauditreports. Committee, andwherenecessary Auditor alsoprovidestheAudit management accounts. financial reportsandmonthly budgets, forecasts,quarterly the Board.Thesereportsinclude shares managementreportswith performance, managementalso abreast ontheGroup’s and recommendations. expected outcomes,conclusions impact, regulatoryimplications, and mitigationstrategies,financial resources needed,riskanalysis information suchasfacts, background andexplanatory the Boardforapprovalprovide directors arepromptlyfurnished. or informationrequestedbythe addresses. Anyadditionalmaterial email todirector’s companyemail in advanceofthemeetingvia are distributedtodirectorswell and boardcommitteepapers prepare forthemeetings,allBoard Executive Directors. management andtheNon- its boardcommitteesandbetween information flowswithintheBoard, the Chairmaninensuringgood Company Secretariatalsoassists is passedtothedirectors.The ensuring thatthisinformation takes theresponsibilityin responsibilities. and dischargetheirduties to make informeddecisions an ongoingbasis,toenablethem information totheDirectorson of complete, adequateandtimely importance ofensuringtheflow Management recognizesthe Access toInformation In addition, the Chief Internal In addition,theChiefInternal In ordertokeep directors Management’s proposalsto Toto allowsufficienttime The CompanySecretariat endorsed bytheBoard. and theresultsarediscussed such, everydirectorisevaluated individual director’s evaluation.As a highemphasisisalsogivento suggested recommendations. set onmeetingtherestof deadlines havealreadybeen recommendations suggested, has adheredtomany the Boardandmanagement firm basedinMalaysia).While Governance (anindependent conducted byColumbusCircle the corporategovernanceaudit the recommendationsgivenin steps beingtaken toimplement Committee alsodiscussedonthe 2015, CorporateGovernance of theBoard.Duringyear when improvingtheperformance such benchmarkwhichisreferred Governance guidelineisone level. TheCMDA Corporate measure itsperformance evaluation resultstoseeand looks atvariousreportsand Board. director totheeffectivenessof contribution byeachindividual whole, itscommitteesandthe effectiveness oftheBoardasa evaluation forassessingthe The Boardcarriesoutanannual Board Performance secure environment. secure environment. share andaccessinformationina facilitate aneasymechanismto used amongthedirectorsto recently beendevelopedtobe As suchawebbasedportalhas information flowtotheDirectors. puts anefforttoimprovethe The managementcontinuously On topofsuchgroupaudits, The Boardcontinuously leadership andcorporatefinance. continuity, strategicplanning, corporate governance, business as corporateriskmanagement, trainings focusedonareassuch programs wereattended.These a totalof26differenttraining continuing educationfordirectors, them. AspartoftheCompany’s and independentaccessto facilitating boardinteractions senior management,thereby director togetacquaintedwith The programalsoallowsthenew to assimilateintotheirnewroles. Group’s businesstoenablethem directors anunderstandingofthe The orientationprogramgives business andgovernancepolicies. to familiarizethemwiththe for newlyappointeddirectors orientation programdesigned Company hasacomprehensive appointed inthepastyear, the Though nonewdirectorwas Board Development page 43forthisinformation. Remuneration Committee. Refer to report ofNominationand is providedintheremuneration Details ondirectorremuneration Director Remuneration December 2015isasfollows: Director’s shareholdingasat31st securities ofthesubsidiaries. have therighttosubscribefor Company. However, theydo not subscribe forsecuritiesinthe The Directorshavetherightto Directors Shareholding 36 STO ANNUAL REPORT 2015 Direct Accountability, Financial and Audit Ahmed Niyaz 1 Approved to open an electronics showroom in the The Group recognizes the Ahmed Shaheer 50 new building coming up at importance of providing the former Umar Shopping Arcade Ibrahim Ziyath 0 Board with accurate and relevant site information on a timely basis. Amir Mansoor 0 Hence, Board members receive Approved the expansion timely financial and business Mohamed Farshath 50 project for fuel operation reports from management. Abdul Hadi Hussain Such reports keep the Board 60 Fulhu members informed on the Group’s Governance and Risk performance, position and consist Aishath Rafiyya 0 of the consolidated profit and Approved company’s monthly, loss accounts, analysis of sales, quarterly and annual results operating profit, pre-tax profit and Indirect budget variances. The Board reviews and Ahmed Niyaz 0 Approved the budget for the year 2015 approves both the quarterly reports Ahmed Shaheer 125 and annual results before it is Proposed and approved the released to the public. In presenting Ibrahim Ziyath 0 dividend for the year 2014 these results, the Board aims Amir Mansoor 0 to provide shareholders with a Reviewed and approved balanced and clear assessment of Mohamed Farshath 0 structural changes to both the Group’s position and prospects. management and the Board The Board also ensures timely and Abdul Hadi Hussain 220 composition full disclosure of these reports. Fulhu The Board also reviews A Board Risk Committee was legislations and regulatory Aishath Rafiyya 0 formed compliance reports from management to ensure that Formed a Code of Conduct the Group complies with the Board Activities on Governance for the Group relevant regulatory requirements. companies This includes CMDA Corporate During the year, key activities and Governance Code, Listing Rules, decisions made by the Board of Securities Act, CDOI Regulation and Directors include: the Company’s Act. Performance Monitoring For the financial year under review, the Managing Director and Strategic Board performance results were discussed and endorsed the Chief Financial Officer have by the Board provided assurance to the Board Discussed the Board Directive on the integrity of the financial Action Plan statements for the Company and A Group companies meeting the Group. The Board, to the best was held to brainstorm Discussed on the directives of its knowledge, confirms that the and discuss on the ways to provided by His Excellency financial statements for the period strengthen business as a group President Abdulla Yameen from 1st January to 31st December Abdul Gayyoom at the 2015 has been prepared in Decided to evaluate the Company’s 50th Anniversary accordance with applicable performance of subsidiary function accounting standards and gives boards a true and fair view of the Group and the Company’s consolidated Approved to establish STO Reviewed compliance on the Bio-medical Service Center and separate assets, liabilities, Code of Conduct for Group financial position and results of companies operations. Approved “Power Mix Concrete” batching project

37 and informationtechnologyrisks. financial, operational,compliance business environment,including the materialrisksinitscurrent and effectiveinaddressing within theGroupisadequate and internalcontrolsinplace the systemofriskmanagement Audit Committee. other relatedinformation,tothe reported ontheFinancialsand the ChiefFinancialOfficeralso Furthermore, and personnel. documents, records,properties unfettered accesstoalltheGroup’s ensures thatinternalauditorshave with themanagement,always The Audit Committeetogether internal auditfindingstotheBoard. Chief InternalAuditor presentsthe the Audit Committeewherethe meetings wereconductedby throughout theyear. Quarterly surprise auditswereconducted process audits,specialauditsand Audit Committee. Anumberof reviewed andapprovedbythe As such,2015auditplanwas information technologyrisks. operational, complianceand by focusingonkey financial, the riskmanagementframework audit approachisalignedwith processes. TheCompany’s internal controls andgovernance effectiveness ofriskmanagement, evaluation oftheadequacyand an independentandobjective operational objectivesbyproviding to meetthestrategicand Board andseniormanagement audit functionistoassistthe Director. administratively totheManaging directly totheAudit Committeeand (Chief InternalAuditor) reports Group. TheHeadofInternalAudit independent functionwithinthe function. Theinternalauditisan established in-houseaudit The companyhasawell- Internal Controls The Boardisconfidentthat The primaryroleofinternal on 29thMay2015atHotelJen. request forapollvote. shareholders oftheCompany show ofhands,unless10%the the meetingwillbethrough Company’s website. published inadvanceandonthe a proxy toathirdparty–are date andtheprocedureforgranting for attendance–includingtheevent to theagendaandprocedure notice. TheAGM agenda,thenotes of memberstotheBoard. as thedischargeandappointment and thedividendproposal,aswell adoption ofthefinancialstatements annual reportanddecidesonthe shareholders (AGM) reviewsthe The AnnualGeneralMeetingof Meeting (AGM) Annual General by thestaff. concerns andgrievancesraised Committee thatlooksinto Sexual HarassmentPrevention Grievance Committeeanda implemented aDisciplinaryand addition, theCompanyhasalso through thewebsite. In facility forotherstakeholders and a‘Raise yourconcern’ employees throughtheintranet a whistleblowerfacilityforthe The Companyhasestablished Policy andWhistleblowerPolicy. implemented aFraudResponse or totheCompany. STO has or othermisdemeanorwithin of anynon-complianceorfraud confidential basisorotherwise, any concerns,whetherona other stakeholders toraise employees, managementor are inplacetoenable Appropriate mechanisms Concern System forRaising The AGM for2014was held All resolutionspassedat The AGM isconvenedbypublic Meeting heldintheyear2015. approved intheAnnualGeneral share for2014andthesamewas The BoarddeclaredMVR76per Dividend pointed outintheauditor’s report. and strivetoimprovethefindings appointed independentauditor and recommendationsofthe welcomes theimpartialopinion letter. TheBoardofDirectors the resultsofmanagement Committee advisestheBoardon the Audit Committee. TheAudit auditor isreviewedeveryyearby The appointmentoftheexternal AGM onproposaloftheBoard. by theshareholders,during The externalauditorisappointed Independent Audit On behalfoftheBoardDirectors: Company. pursue thelongtermvisionof the Boardwillcontinuetostrive company. Thereisno doubt that future holdsforthisvaluable is highlyoptimisticonwhatthe of theGroup. HencetheBoard strategic andbusinessobjectives management toimplementthe the necessarysupportto has therightmixtoprovide The Boardisconfidentthatit Future Outlook Managing Director Ahmed Shaheer Ahmed Niyaz Chairman 38 STO ANNUAL REPORT 2015 CORPORATE GOVERNANCE & COMPLIANCE COMMITTEE REPORT

The Corporate Governance Committee consisted of 3 Non-Executive members and was chaired by Mr. Mohamed Farshath. On 17th November 2015 board committees were restructured, and Mr. Abdul Hadi Hussain Fulhu was appointed as a 4th member to the committee. All the members of the committee are deemed to be independent. The committee held 4 meetings in 2015. The attendance record of the members is shown below.

04/04 04/04 04/04 01/01

Mohamed Amir Mansoor Aishath Rafiyya Abdul Hadi Farshath Hussain Fulhu

The Committee has the authority to take independent Develop and implement an orientation and professional advice on matters covered by its educational program for new directors to the terms of reference at the Company’s expense. The Board Committee charter is annually reviewed by and signed by the Directors. The Committee Chairman reports the outcomes of the meeting to the Board, Develop a process for assessing the effectiveness regularly. The Committee’s effectiveness is reviewed of the Company, Board, individual Directors and its on an annual basis as part of the Board’s performance committees and ensure that the Board conducts evaluation process. these evaluations annually

Key Duties Ensure that Board and its committees review its charters annually

Develop and monitor the Company’s overall Develop and ensure implementation of a conflict approach to corporate governance issues, of interest disclosure policy for the Directors and implement, administer, and continue to develop employees of the Company a system of corporate governance within the Company

Ensure that an appropriate business code of ethics Undertake an annual review of corporate is established and reviewed necessarily for the governance issues and practices for the Company Company and make recommendations for improvements where necessary Ensure that appropriate methods are being established for the stakeholders to submit their Advise the Board or any of its committees on recommendations and inquiries to the necessary corporate governance issues regulatory bodies in the Company

39 Main Activitiesof2015 subsidiary boardsanditsmembers. Discussed ontheformdraftedforevaluationof STO Board Companies CodeofConductenforcedonthemby compliance bysubsidiaryboardsontheGroup Discussed ontheformdraftedtoevaluate Governance andInternalAudit Governance Audit conductedbyColumbusCircle the recommendationsgiveninCorporate Discussed onthestepsbeingtaken toimplement Committee Diversity andrecommendationsweregiventoNR Evaluation Policy –toincludeasectiononBoard Discussions weremadeontheDirectorship Director Training Policy wasrevised Audit Report Discussed theoutcomeofCorporateGovernance Discussed theCMDA CGcomplianceform the Codeofconduct Attended thequeriessubmittedbyGroupon guideline forthefirsttimeinCompany’s history. Developed aGroupCorporateGovernance recommendations. the yearandtookactionstoadoptsuggested outcomes byboththeauditsconductedthroughout companies aswell.TheCommittee also discussed the practices oftheparentcompanytoitssubsidiary was giventopassdownthesamegoodgovernance the Group. Unlike previousyearsahighimportance further strengtheningthegovernanceaspectsof The CorporateGovernanceCommitteefocusedon Conclusion Compliance Committee: On behalfoftheCorporateGovernanceand out duringtheyear. The Committeeissatisfiedwiththeactivitiescarried Mohamed Farshath Chairman 40 STO ANNUAL REPORT 2015 NOMINATION & REMUNERATION COMMITTEE REPORT

The Nomination and Remuneration Committee consisted of 4 non-executive members and was chaired by Mr. Amir Mansoor. On 17th November 2015, with the changes to the board committees, Ms. Aishath Rafiyya was appointed as the Chairperson. All the members of the committee are deemed to be independent. The committee held 9 meetings in 2015. The attendance record of the members of the committee is shown below.

09/09 08/09 07/09 09/09

Amir Mansoor Aishath Rafiyya Mohamed Abdul Hadi Farshath Hussain Fulhu

*Mr. Mohamed Farshath neither participated in the two (2) meetings held to interview the directorship candidates nor did he participate in any of its discussions

Key Duties

The Committee has the authority to take independent Develop a policy on employee remuneration professional advice on matters covered by its and fixing the structure and the amount of terms of reference at the Company’s expense. The remuneration packages of individual directors Committee charter is annually reviewed by and and general employees of the Company. When signed by the Directors. The Committee Chairman setting this policy and structure, no director or reports the outcomes of the meeting to the Board, manager is involved in any decisions as to their regularly. The Committee’s effectiveness is reviewed own remuneration. In determining such policy, on an annual basis as part of the Board’s performance the committee shall take into account all factors evaluation process. which it deems necessary including relevant legal and regulatory requirement, the provisions and recommendations of the CMDA CG Code and associated guidelines

Review the ongoing appropriateness and relevance of the remuneration policy

41 from timeto Review theBoard performanceevaluationprocesses with theCompany interests thatmayresultinaconflictofinterest Ensure thatalldirectorsdiscloseanybusiness approval oftheBoardasandwhentheyarise fill boardvacanciesandnominatethemforthe Be responsibleforidentifyingcandidatesto in thefuture expertise neededfortheBoardandmanagement opportunities facingtheCompany, theskills and of itswork,takingintoaccountthechallengesand directors andotherseniorexecutives inthecourse Give fullconsiderationtosuccessionplanningfor regulators withregardtoanychanges recommendations totheBoardandrelevant experience anddiversity)oftheBoardmake composition (includingtheskills,knowledge, Regularly reviewthestructure, sizeand structures throughouttheCompany Oversee anymajorchangesinemployeebenefit individuals andtheCompany and anyofsuchpaymentsmadearefairtothe Ensure thatcontractualtermsoftermination arrangements fortheCompanyasrequiredbylaw Determine thepolicyfor, andscopeof, pension payments madeundersuchschemes by theCompanyandapprovetotalannual any performancerelatedpayschemesoperated Approve thedesignofanddeterminetargetsfor, Major Activitiesof2015 Committee: On behalfoftheNomination&Remuneration carried outduringtheyear. The Committeeissatisfiedwiththeactivities Conclusion Diversity inthePolicy Evaluation Policy toincludeasectiononBoard Review discussionswhereheldontheDirectorship Remuneration Policy Review discussionswereheldonthe management werediscussedandapproved Changes totheExecutive structureandthe candidates totheBoard recommendations onpublicdirectorship Evaluated, interviewedandmade Discussed onchangestoTravel policy presentation Discussed andapprovedHRpolicyforBoard Aishath Rafiyya Chairperson 42 STO ANNUAL REPORT 2015 REMUNERATION REPORT

Pursuant to applicable regulations, this report which is approved by the Board of Directors at the proposal of the Nomination and Remuneration Committee, defines and illustrates: Policy adopted by the organization for the remuneration of Directors, indicating the guidelines of the Remuneration Policy

The remuneration paid in 2015 for the Board of Directors

The Company’s Remuneration Policy is established in line with the most recent edition of the Governance Code for listed companies. The remuneration of the Executive Directors is set in accordance with the salary structure inspected by the Nomination and Remuneration Committee and approved by the Board of Directors. The Committee had further last made its recommendations to the salary structure of the Managing Director in 2013. No changes to the package has been brought since then. The remuneration of the Directors is set by the shareholders at the Annual General Meeting, based on the recommendation of the Board.

Remuneration Policy The Company’s remuneration Service contracts – there are policy is formulated to attract no specific service contracts The remuneration policy contains and retain high caliber agreed between the Company the following Guidelines: executives and to motivate and the Executive Directors them to develop and implement other than the employment At least half the Board should the Company’s business contract for the job comprise of Non-Executive strategy in order to optimize Directors with majority of such long term shareholder value Other benefits – are provided directors being independent creation as per the benefits list approved by the Board. Non-Executive Directors shall All employee remuneration This include transportation, be remunerated by way of fees comprises of 2 basic principles, insurance and discount benefits paid, including fees paid in i.e. fixed and performance from the Company recognition of their membership based components on the Board and its sub- Annual bonus – all Executive committees The Company has a systematic Directors are eligible for an evaluation methodology to annual bonus. The overall The Executive Directors should evaluate each employees company bonus was based on be paid the same fee as that performance annually, which the equal disbursement of a received by the Non-Executive assesses the degree to which specific percentage of the net Directors, for their board each employee is satisfying the profit among all employees. As membership requirement of their role and such, the Executive Directors Executive Directors shall performance objectives received their bonus in also receive variable salaries accordance with the bonus in addition to the Board policy of the Company membership fees. This salary A - Executive Directors Deferred bonus – no deferred must be a market median of Salary - no changes were bonus was provided to the companies comparable in brought to the salary structure Directors market segment, business of the Executive Directors. complexity and international The amount of salary and Share / stock options – no scope. The Executive’s other payments are decided share options were provided to personal performance is also on the basis of educational the Directors considered where performance qualifications and experience. is related to the fulfillment of Apart from this, the Executive Pension – the Executive various improvement targets Directors are also provided with Directors receive pension as and attainment of certain the same remuneration as the per the Company policies financial objective Non-Executive Directors for their work on the Board

43 evaluation. subject totheresultsofboard of theBoard.Changeisfurther NR committeeandbyapproval approved onlyafterdiscussionin Any changestothesebenefitsare MVR 300.00fromFSM MVR 5000.00andsittingfeeof receives amonthlysalaryof Maldives (FSM)PvtLtd. He on theBoardofFuelSupplies Director Mr. IbrahimZiyathsits Hotels &Resorts. Executive any remunerationfromSTO from AIA.Hedoesnotreceive and sittingfeeofMVR300.00 remuneration ofMVR5000.00 received amonthlyboard MNOC combined.Healso STO Maldives(Singapore)and fee ofMVR300.00fromboth of MVR2,500.00andasitting monthly boardremuneration (AIA) PvtLtd. Hereceiveda Addu InternationalAirport Hotels &Resorts PvtLtd and Company (MNOC)Ltd, STO Pte Ltd, MaldivesNationalOil STO Maldives(Singapore) Shaheer sitsintheBoardof Managing DirectorMr. Ahmed fees entitledto- Subsidiary directorshipsand existing Directors periods wereprovidedtoany Notice periods–Nonotice from officeon9thMarch2015 Adam Azimuponhisremoval former ManagingDirectorMr. remuneration waspaidto fee ofthreemonths Severance fee-aseverance B -Non–Executive Directors the Directors share optionswereprovidedto Share /stockoptions–no Directors bonus wasprovidedtothe Deferred bonus–nodeferred receive annualbonus Directors arenotentitledto Annual bonus–Non–Executive from theCompany insurance anddiscountbenefits This includetransportation, approved bytheBoard. as perthebenefitslist Other benefits–areprovided Association, atanygiventime appointees asperArticlesof holds therighttochangeits However, theGovernment General Meetingtothenext. appointed fromoneAnnual indicates thattheBoardis the DirectorCharterwhich Executive Directorsotherthan the CompanyandNon- contracts agreedbetween are nospecificservice Service contracts–there authority inoffice Chairman andthehighest responsibilities forbeingthe to Chairmanforhis MVR10,000.00 isprovided A furtherremunerationof MVR500.00 permeeting. and asittingfeeof of MVR10,000.00 monthly boardremuneration the Directorsreceivea of theCompany. Assuch, the ArticlesofAssociation Meeting, inaccordancewith at theAnnualGeneral fee hasbeenapproved The remunerationandsitting Directors duringtheyear. structure ofNon-Executive brought tothesalary Salary –nochangeswere management, duringtheyear. given toanyothermemberoftop severance feesorstockoptions service contracts,noticeperiods, top management.Therewereno remuneration andpackageof not todisclosetheindividual Board ofDirectorshaschosen current employmentmarket, the Due tosalarydisparitiesinthe as basicsalaryandallowance. was paidtothetopmanagement while atotalofMVR10,311,400 paid toDirectorsasremuneration 2015, atotalofMVR1,058,367was Directors fortheyear2015.In remuneration paidtoBoardof The followingtableshows Group companyboards Directors donotsitinany fees entitledto–Non-Executive Subsidiary directorshipsand existing Directors periods wereprovidedtoany Notice periods–nonotice existing Directors fee wasprovidedtoany Severance fee–noseverance service receive anypensionontheir Pension –theDirectorsdonot Director Director Director Director Director MD Former MD Chairman Ahmed Niyaz Ibrahim Ziyath Mohamed Farshath Aishath Rafiyya Hussain Fulhu Abdul Hadi Amir Mansoor Ahmed Shaheer Adam Azim

262,500 140,000 130,500 142,000 134,000 141,500 85,367 25,081 44 STO ANNUAL REPORT 2015 AUDIT & RISK COMMITTEE

The Audit and Risk Committee consisted of 3 Non-Executive Directors and was chaired by Mr. Abdul Hadi Hussain Fulhu. On 17th November 2015, the Board committees were restructured to form a separate Risk Committee and hence the audit and risk duties were segregated accordingly. All the members of the committee are deemed to be independent. The committee held 10 meetings in 2015. The attendance record of the members of the committee is shown below.

10/10 09/10 10/10 Major Activities of 2015 Quarterly financial reports were Abdul Hadi Amir Mansoor Mohamed approved Hussain Fulhu Farshath Audit report on governance was discussed and approved The Audit & Risk Committee assists Discussed on the proposals the Board in overseeing the quality Reviewing and monitoring the received by Audit firms for the and integrity of the accounting, effectiveness of the Company’s conduct of 2015 external audit reporting, risk management and internal control to ensure that adequate measures are taken internal control practices of the Discussions were made on Risk to safeguard company’s assets Company. The Committee also Committee Charter ensures the Company’s compliance Discussed on a Fraud Risk with legal and regulatory Overseeing the Company’s Assessment requirements, the qualifications, relations with the external auditors performance and independence Internal Audit Plans were of the external auditor and the Making recommendations to approved performance of the Internal Audit the Board on the appointment, function. Different Audit reports retention and removal of the The Committee has the were discussed and external auditors authority to take independent recommendations were professional advice on matters Ensure the independence and suggested covered by its terms of reference credentials of independent Management Letters of at the Company’s expense. The auditors Committee charter is annually Subsidiary companies were reviewed by and signed by the Review performance of the discussed by the Committee. Directors. The Committee Chairman internal audit function and reports the outcomes of the independent auditors meeting to the Board, regularly. Conclusion Approving the terms of The Committees effectiveness is reference and plans of the reviewed on an annual basis as The Committee is satisfied with internal audit function part of the Board’s performance the activities carried out during the evaluation process. year. Approving the internal audit plan and reviewing regular On behalf of the Audit & Risk Key Duties reports from the head of Committee internal audit on effectiveness Monitoring the integrity of the of the internal control system annual and interim financial statements, accompanying Ensuring compliance to reports to shareholders statutory requirements and and corporate governance ethical standards Abdul Hadi Hussain Fulhu statements Chairman

45 RISK REPORT Management FocalStaff appointed. level oftheGroup. As such, thereare22Risk education andcrossfertilizationofideasatevery dissemination ofriskmanagementinformation, conjunction withtheRMD, willensurethecontinued the Group. Theseareseniorstaffmemberswhoin and trainingofRiskManagementfocalstaffwithin international bestpractices. efforts toelevateriskmanagementintheGroup strengthen itsriskgovernancestructureinongoing a dedicatedriskmanagementdepartmentinorderto processes towardsinternationalstandards. in ordertodrivetheGroup’s riskmanagement a dedicatedRiskManagementDepartment(RMD), the Boardandalsoapprovedestablishmentof established aRiskManagementCommittee(RMC)of Board placesontheneedforriskmanagement,STO In 2015,asareflectionoftheimportancethat Committee Establishment ofRiskManagement Leading inRiskGovernance- Board. for implementation,throughaformalRiskManagementPolicy ofthe risk managementiscommunicatedtotheManagementofGroup properly preparedfor, asfarpractical.OverallBoardpolicyfor also asameanofensuringthatfuturerisksanduncertaintiesare policies andprocedurestoprotecttheGroupfromexistingrisks these diverserisks. from theserisks,andisfullycommittedtobeingproactiveinmanaging promoting goodriskmanagementasameanofprotectingtheGroup and goodwill.TheBoardrecognizesthatithasaresponsibilityfor objectives, createvalue, preserveassets,businessreputation STO Groupfacesvariedriskswhichcouldaffectitsabilitytomeet The RMChasrecentlyinitiatedtheidentification STO isthefirstcompanyinMaldivestoestablish Risk managementisviewedbytheBoardasbothasetofvital management risks. and foreigncurrencies,creditriskcapital monitor itsexposuretoliquidityriskinbothRufiyaa policies andprocessesinplacetomanage and annualoperations.TheCompanyalsohave management reportingforbothcapitalexpenditure our comprehensivesystemofbudgetingand Core toourmanagementoffinancialrisks,is Financial Risks the Board. investments andtheassociatedrisksareassessedby a certainvalueofinternalreviewthresholds,the a neworchangedstrategy. Management andbytheBoardbeforeembarkingon risks areevaluatedbytheExecutive Committeeof achieved. Forthisreason,allsignificantstrategic which couldpreventthebenefitsofstrategybeing each businessstrategyhasauniquesetofrisks year. However, theBoardisverymuchawarethat strategic decisionsandadjustmentsthroughoutthe Group operates,theBoardmustmake appropriate In linewiththefastmovingindustriesinwhichSTO Strategic andInvestmentRisks Focus onMajorRisks Where investmentsarestrategicorabove 46 STO ANNUAL REPORT 2015 Operational Risks and Management systems Physical Security In the normal course of business, the Group is subject In common with all other establishments, the business to many diverse risks relating to its activities such as is open to physical calamities such as natural the products it deals in, counter-party relationships, disasters, fire, storm and accidents. It is also at risk and possible shortcomings or failures in the systems from hostile acts such as terrorism or piracy which or employees. could harm our people, disrupt our operations and These operational risks that the Group is exposed destroy our assets. Hence, the Company monitors for to are managed through a number of management emerging threats and vulnerabilities to manage its frameworks and processes, within the Group. physical security. The Company’s management systems, structures, Physical security threats tend to vary processes, standards and codes of conduct together, geographically and by type of business. The form a system of internal control that governs how Emergency, Health and Safety Committee together it conduct the business and manages associated with regional sales team of STO provides guidance risks. These processes and controls are contained and support to conduct assurance with respect to the in standard operating procedures and wherever management of security risks affecting the people possible, appropriate risk management techniques and operations. The Company also maintains disaster are embedded into internal control systems and recovery, crisis and business continuity management standard operating procedures. plans in the subsidiaries.

Market and Supply Risks Cyber Security

As a diverse company with a base in trading, STO The threats to the security of the Company’s digital Group are subject to the international availability and infrastructure continue to evolve and, like many other price volatilities related to commodities and products global organizations, its reliance on computers and that it deals in such as fuel, and also the related risks network technology is increasing. A cyber security such as interest rates, currency rates, insurance costs breach could have a significant impact on business and freight rates. operations. The Company minimizes these risks by STO seeks to manage this risk through monitoring fluctuations and where appropriate by adhering to cyber security’s best standards, ongoing entering into long term supply arrangements. The monitoring of threats, close co-operation with ownership of an own fuel tanker, provides a partial authorities and awareness initiatives throughout the cushion against increases in fuel freight costs. The Group. The Company also maintains ICT disaster Company continually evaluates its supplier base, recovery management plans. logistics and supply chain while implementing improvements on an on-going basis. Compliance and Control Risks

Political Challenges Ethical misconduct and legal or regulatory non- compliance, or breaches of applicable laws or The diverse locations of Group operations around regulations could damage the reputation, adversely the Country and the international nature of its supply affect operational results and shareholder value. chain exposes STO Group to a wide range of political Compliance is assured by an effective team of legal developments and consequent changes to the and compliance in the Company. economic and operating environment. The Company keeps abreast of new regulations The Group seek to manage this risk actively and legislation and plans adequate responses to through the development and maintenance of them. Employees are further provided with a range relationships with stakeholders in each region. of compliance training and monitoring programmes. STO Group is open to feedback and listens to its employees, contractors and other stakeholders, closely.

47 48 STO ANNUAL REPORT 2015 SUSTAINABILITY Nation. People. Environment. Society

STO as a group continues to strengthen its businesses by creating more value for its stakeholders through its social responsibility to the nation, people and environment. In addition, the business practices across the network have embraced good governance, protection of environment, timely risk management and comprehensive strategic planning. The Group of Companies inspire economic development while improving the quality of life of its employees, as well as the local community and society at large. This report focuses on steps and actions taken to meet its sustainability objectives.

Nation People Environment Society

STO businesses has STO provides all The Groups STO Group believes always been catered employees a quality environment that the trust and to serve the best work environment belief advocates good will carried interest of the Nation. and the opportunity promotion of eco- along with core to develop their friendly technology, business of the career path. utilization of company can only resources more be strengthened by efficiently, its commitment to minimizing wastage social responsibility. and promoting cleanliness.

49 Services Improving Productsand aspect. highlights theactivitiesonthis of theNation.Thefollowing catered toservethebestinterest STO’s businesseshasalwaysbeen Nation Contribution tothe the vehicle. information onthelocationof enabling provisionofrealtime vehicles intheMaléregion, were alsoinstalledondelivery customers, trackingdevices of LPGcylindertothe To speedupdeliveryprocess payment processes. timely serviceandfaster respond queriesfaster, ensure that enabletheCompanyto database forregularcustomers Maldives Gasstarteda dioxide (CO2)tothemarket. industrial NitrogenandCarbon Maldive Gasintroduced customer. and speedyservicestothe service thusenablingeasier Online CargoInsurance Allied Insuranceintroduced the journeyofHajjorUmrah. losses thatcouldarisewhileon medical expensesandfinancial Corporation whichcoversthe partnership withMaldivesHajj “Hajj andUmrahTakaful” in window -Ayady Takaful, Allied introducedIslamic construction sector. regain market shareinthe improve performanceand C-Purlin wasintroducedto products, Thaichoice, Ariya,etc introduction ofSamsung continued withsuccessful customers. In2015,thetrend efficient productsforits quality, reliableandresource for offeringawiderangeof From dayone, STO isreputed Medical SectorDevelopments services. durability andsustainabilityof brand “Power Mix”toimprove mixing solutionunderthe Introduced newconcrete part oftheCSRprogram. international conferencesas doctors intheyear2015for STO sponsored12 local training medicalprofessionals To supportand take initiative in Kotra Pharma. Merck Ltd &MerckSeronoand Galderma, Kalbe Pharma, as Dr. Reddy’s Laboratories, with leadingbrandssuch distributorship agreements products underexclusive Introduced newpharmaceutical Health. collaboration withMinistryof machine atIGMHospitalin Supplied andinstalledMRI of Health. nation asagreedwithMinistry various islandsacrossthe Delivered 54ambulancesto medical insurancescheme. with Aasandha–national of sale system is fully integrated developed internally. Thepoint a newintegratedsoftwarewas manage itsoperationcentrally, To connectallpharmaciesand pharmacies acrossthecountry. October 2015,afteropening177 was completedsuccessfullyby which startedonJune2014 “All islandpharmacyproject” services. customers onimprovedquality assurance andconfidenceto quality certificationwhichisan obtained ISO9001:2008 STO MedicalServices Infrastructure Developments other interestedparties. shopping outletsforSTO and provide spaceforofficesand of 2016.Thisbuildingwould is tobecompletedbymid Umar ShoppingArcadesite, storey buildingattheformer Ongoing constructionofa10 services. engineering andboatyard stores, warehouses,vessels, strengthening theexisting purchase ofnewvesselsand infrastructure including upgrading organizational invested onre-buildingand Considerable resourceswere double thecapacity. existing berthfacilitieswith is believedtostrengthenthe South Asiaregion.Thisproject exporting andbunkering inthe products andfacilitatere- market demandofpetroleum facilities tocaterthegrowing its oilstorageanddistribution ground workforexpansionof In 2015,STO completed 50 STO ANNUAL REPORT 2015 Contribution to the Promoting Healthy Living People STO cares for the well-being of STO provides all employees a the society including that of staff quality work environment and and believes that awareness and the opportunity to develop their STORC promotion of healthy living is career path. Staff development significant in shaping a healthier priority is to continuously invest Unity.Leadership.Discipline. community. in building a strong and diverse This is what State Trading STO Group is always a workforce capable of making Organizations Recreation Club catalyst in developing the informed decisions and deliver (STORC) represents and what it community through its generous best services to the customers. strives to achieve. STO believes contributions. STO recognizes that sports and recreation plays investment in the development Staff Excellence an important role in improving the of the society as its responsibility relationship between staff along towards the people. As such STO staff successfully rolled- with promoting a healthy life style. considerable assistance in terms out SAP ERP system to Fuel As such, some of the major of financial, sponsors, donations Supplies Maldives. This enables activities carried out throughout and materials were provided to real time integration to the the year include; the Community, in different means. parent company under one Opening a fully equipped, platform. Some of the major contributions modern and exclusive staff gym include;

A new point of sale programme Continuously contributed to the Inter-department and inter- was developed by STO ICT construction of futsal pitches company futsal tournaments staff to integrate with the across the country central ERP System, especially for the “all island pharmacy Certified diving courses Coca-Cola Long Run 2015 project”. – was sponsored by Allied Insurance Company Inter-office badminton tournament Training and Development Maldive Gas donated to the Participation in the Club development of a children’s Short term trainings: Maldives Cup 2015 and with park at Maldives Centre for Staff were provided much hard work and unity, Social Education (MCSE). opportunities of trainings STO won the trophy of Club in team building, service Maldives Futsal Cup, for the STO and its Group of enhancement, inventory and second consecutive year. Companies took initiatives in finance, leadership, demand & strengthening its commitment forecast and pharmaceutical to safety standards in the work specified trainings. Inter-department volleyball place and the surrounding tournament environment. Long term scholarships: Staff were sponsored for long Allied Insurance held Rakkaa term development courses both Road Safety awareness event locally and abroad in areas in Addu City, in collaboration such as business management, with Maldives Police Service. psychology, technical and vocational trainings. Allied Insurance Company organized fire awareness evening in the name of “GiniFest 2015” in partnership with MNDF Fire and Rescue Services to promote and create awareness on the significance of safety measures that has for be taken to prevention of fire.

51 towards environmentinclude: some significantcontributions promoting cleanliness. minimizing wastageand of resourcesmoreefficiently, friendly technology, utilization advocates promotionofeco- STO Group’s environmentbelief Environment Contribution tothe relief forthelocalcommunity. mixing vehicles,whichisahuge compact sizeofthespecialized road blockingduetothe site. Meanwhile, italsoprevents hazardous pollutioninthework which consequentresultsin on orneartheconstructionsite, stacking concreterawmaterials it lessenstherequirementfor to beaneco-friendlymethodas “Power MixConcrete” proved Hulhumale’. Environment andEnergyin organized byMinistryof in theTree PlantingEvent STO hasactivelyparticipated environment. to agreenandsustainable to defineitscommitment event (NorthofLocal Market) have conductedareefcleaning STO inassociationwith4NGOs reefs inMaldives. safe keeping ofbeachesand importance ofcleanlinessand to promoteawarenessonthe Coral Revival” -Aneventheld the eventcalled“One Nation were themainsponsorsof STO andAlliedInsurance ozone freeproducts. technology, leadfreeand products, particularlyinvertor Import andmarket eco-friendly concept butanobligation. stakeholders isnotjustabusiness the communityandvarious responsibility. Connectingwith by itscommitmenttosocial can onlybestrengthened core businessoftheCompany and goodwillcarriedalongwith STO Groupbelievesthatthetrust Commitment toSociety people withspecialneeds. Donation toK.Guraidhoo down syndromeassociation. therapist inBeautifulEyes Sponsor ofsalaryforaspeech coral revivalprogram. Main sponsorofonenation educational gifts. syndrome associationwith Visit toBeautifulEyes–down salary sponsor. “Kudakudhinge Hiya” staff publication fund. Donation tomus’haf maldheefi conducted achildren’s evening. Organization (CANDO) Advocacy NetworkofDisability STO inassociationwithChild Local Market). reef cleaningevent(Northof Save theBeach,conducteda Maldives, DamageControland Nine Star Diving,DiveClub STO togetherwith4NGOs; Energy. by MinistryofEnvironmentand event atHulhumale’ organized Participated intreeplanting award 2014. Main sponsoroftopachievers’ prevention program. Actively participatedindengue Float Parade. Participated in“Minivan50” Corruption Day2015event. Main sponsorofNationalAnti- 52 STO ANNUAL REPORT 2015 53 54 STO ANNUAL REPORT 2015 5 YEAR GROUP FINANCIAL REVIEW

55 MVR, million Revenue Earnings Gross profit Operating profit Profit beforetax Profit fortheyear Price pershare, atyearend,MVR Share Data Earnings pershare, MVR Dividend pershare, MVR* Equity pershare, MVR Net assetspershare, MVR No. ofshares Return onequity, % Key Ratios Return oncapitalemployed(ROCE) Return onnetassets,% Equity/asset ratio, % Net debt/equityratio Interest coverageratio Dividend yield,atyearend,% Total assets Financial Position andCashflow Net assets Equity Non-current liabilities Trade andother receivables Inventories Trade andother payables Net debt Capital Employed Net Operatingcashflow 1126910 7,313 1,505 1,962 2,693 11.40 5,712 3,035 2,211 1,587 2,804 5,015 2015 21.4 13.5 25.6 38.7 1.27 678 520 435 500 382 825 567 706 381 3.6 57 1126910 9,171 1,390 1,651 2,009 19.00 5,461 2,264 1,860 1,633 2,930 4,790 2014 29.2 15.9 38.9 34.1 1.58 761 573 480 400 424 404 589 706 3.4 76 19 1126910 11,130 1,292 1,267 1,466 5,430 1,652 1,428 2,461 3,475 4,902 2013 11.9 14.0 44.2 26.3 2.43 6.32 686 178 165 380 144 224 687 794 -61 1.3 24 1126910 9,293 1,182 1,203 1,290 18.75 5,724 1,454 1,356 2,766 3,499 4,855 2012 18.5 12.8 44.4 23.7 2.58 620 266 239 400 211 806 595 100 1.5 75 98 1126910 9,465 1,086 1,189 16.00 5,490 1,340 1,224 1,802 2,522 3,322 4,546 2011 16.4 24.7 22.3 2.71 828 304 208 192 450 171 140 785 259 6.7 2.2 72 56 STO ANNUAL REPORT 2015 BOARD OF DIRECTORS

57 majority shareholder(Government). of theCompanyon09thMarch2015by cember 2013andastheManagingDirector Shaheer wasappointedtotheBoardinDe- Managing Director Ahmed Shaheer (Government). December 2013bythemajorityshareholder in May2012andastheChairmanon19th Niyaz wasinitiallyappointedtotheBoard Non-Executive, IndependentDirector Chairman Ahmed Niyaz by themajorityshareholder(Government). Amir wasappointedtotheBoardinMay2012 Non-Executive, IndependentDirector Amir Mansoor 58 STO ANNUAL REPORT 2015 Aishath Rafiyya

Non-Executive, Independent Director

Rafiyya was appointed to the Board in August 2014 by the majority shareholder (Government).

Abdul Hadi Hussain Fulhu

Non-Executive, Independent Director

Hadi was appointed to the Board in May 2012 by the majority shareholder (Government), and served the Board till 28th March 2016.

Mohamed Farshath

Non-Executive, Independent Director

Farshath was initially appointed to the Board at the 2012 Annual General Meeting by the Public Shareholders and has held this position for the past 4 years.

59 March 2016. (Government), andservedtheBoardtill28th April 2014bythemajorityshareholder Ziyath wasappointedtotheBoardin Executive Director Ibrahim Ziyath (Government), March 2016bythemajorityshareholder Rayaheen wasappointedtotheBoardin Non-Executive, IndependentDirector Aishath Rayaheen Shareef (Government). March 2016bythemajorityshareholder Mihad wasappointedtotheBoardin Executive Director Mohamed Mihad 60 STO ANNUAL REPORT 2015 Ahmed Niyaz served as a Board Director in Lafarge Maldives Pvt. Ltd. and as the Chairman of Maldives Structural Ahmed Niyaz was initially appointed to the Board Products Pvt. Ltd. Ziyath holds a Master’s Degree in as the Chairman by the majority shareholder Business Administration from the University of Ballart, (Government) on 19th December 2013. Australia and a Bachelor’s Degree of Business (Major Niyaz is a well-known business figure in the in Management and Marketing) from Edith Cowan Maldivian industry who is currently also serving in University, Australia. the Maldives Tourism Development Corporation (MTDC), as the Acting Managing Director and as an Executive Director of the Board, where he provides Abdul Hadi Hussain Fulhu expertise on strategic planning, project management, financial analysis, policy implementation, governance Abdul Hadi Hussain Fulhu was appointed as an and operations. With an educational background in Independent, Non-Executive Director by the majority economics, sociology and political science, Niyaz shareholder (Government), in May 2012 and served in has also served as a Headmaster in various regional Board till 28th March 2016. schools. He spent the earlier part of his career serving Niyaz holds a Master of Business Administration STO for more than a decade. He rose through the from the Cardiff Metropolitan University, UK and ranks of STO and was a Director when he was a Bachelor of Arts in Economics, Sociology and released to Fuel Supplies Maldives Pvt. Ltd. in 2003. Political Science from the University of Mysore, India. Hadi has a wealth of knowledge in the financial sector He also holds an Executive Diploma in Directorship and served as the Head of Accounts Department at from Singapore Management University, Singapore STO. In addition, during his time at FSM he served as and has gained further knowledge in fields such the Head of Department of Administration, Human as corporate governance, business continuity and Resources and Legal. effective leadership through trainings, over the year. Hadi had also represented STO as a Board Member at Maldives Industrial Fisheries Company Pvt. Ltd. Hadi holds a Bachelor in Commerce while Ahmed Shaheer Majoring in Accounting. Hadi holds an Executive Diploma in Directorship from Singapore Management Ahmed Shaheer was appointed to the Board on 25th University, Singapore. December 2013. He was appointed as the Managing Director of the Company on 09th March 2015. Shaheer was initially appointed as a Manager Amir Mansoor in the Assets Department of the Company and has since risen through the ranks to be designated as the Amir Mansoor was appointed to the Board as an Managing Director. With over 20 years of experience Independent, Non-Executive Director in May 2012 by in the Company, Shaheer currently also serves as the majority shareholder (Government). the Chairman of the Board of Maldives National Oil Amir is a well-known business figure who has Company Ltd. (MNOC), STO Maldives (Singapore) Pte. founded and performed in various large companies. Ltd. and STO Hotel & Resorts Pvt. Ltd. He is currently the Chairman of Carpediem Maldives Shaheer holds a Master’s Degree of Business Pvt. Ltd., the Managing Director of Lily International Administration (International Trade) from the Pvt. Ltd. and also the Managing Director (owner) of University of Adelaide, Australia and a Bachelors’ Grape Expectation Pvt. Ltd. Degree in Business Administration (Marketing and He has been in various business industries for Management) from the University of Charles Stuart, over 25 years and is well versed with the past and Australia. present business norms. He is particularly interested in the Enterprise Risk Management and is completing an international training to become a Qualified Ibrahim Ziyath Risk Director. He too holds an Executive Diploma in Directorship from Singapore Management University, Ibrahim Ziyath joined STO in the year of 1997 and Singapore. has gained over 16 years of experience in STO and its subsidiary Fuel Supplies Maldives Pvt. Ltd. He is currently the Head of Department of Home Aishath Rafiyya Improvement and the Chairman of Fuel Supplies Maldives Pvt. Ltd. He served in the STO Board as Aishath Rafiyya was appointed to the Board of Directors an Executive Director from 20th April 2015 till 28th as an Independent, Non-Executive Director by the March 2016. Ziyath has also served as the Deputy majority shareholder (Government), in August 2014. Managing Director and acting Managing Director Rafiyya started her career at the Bank of the of Fuel Supplies Maldives Pvt. Ltd. He had also Maldives, served at the Ministry of Foreign Affairs and

61 Training Center. Investment ServicesBureauand alsoatformerClique Civil Aviation/Arts andCulture, andformerForeign different Departmentsofformer Ministryof Tourism/ attained experienceinvarious fieldsworkingat Maldives Qualifications Authority. Farshathhasalso and worked asaCertificate Panel Memberfor a memberofCollegeCouncilforClique of severaldivisions. Financial Controller, Director, andtheacting-in-charge his servicestotheCivilServiceCommissionas of MaldivesMediaCouncil.Hehasalsoprovided Farshath currentlyholdsthepostofSecretaryGeneral Independent, Non-Executive DirectorintheCompany. Director electedbythepublicshareholders.Heisan at the2012AnnualGeneralMeeting,asonly Mohamed FarshathwasappointedtotheBoard Mohamed Farshath Malaysia. Women Leadership Award’ attheGoldenGlobeSummit, HRM -VIWA 2016and‘Golden GlobeTigerOutstanding Achievements andSustainedExcellence inthefieldof Award’ forOutstandingContributions,Significant Women Leadership Congress, ‘Young Women Achiever Women Leadership Achievement Award’ attheWorld women leadershipintheMaldives’, ‘Outstanding Singapore forresearchtitled‘Challenges facedby ‘International Award ofDistinction’ fromRoyal Institution Board DirectorTraining InstituteofJapan. Institute ofDirectors-UK,Directors-Indiaand Singapore, andholdsprofessionalmembershipsof Institute ofPublicAdministratorsRoyal Institution fellow andcurrentlytheHonoraryPresidentofRoyal Computer Studies (NCC,UK).SheisthefirstMaldivian Business ManagementandInternationalDiplomain University ofEastLondon, aGraduateDiplomain and BSC(Hons)inBusinessInformationSystems from Women EmpowermentandholdsMBA(MajorinHRM) established intheMaldives. for FosteringYouth (RAFY)–thefirstinternationalNGO also theFounderandPresidentofRegional Alliance of Business&Financesub-committeeWDC.Sheis Development CommitteeofMale’ Cityandchairperson in Maldivianhistory. SheisamemberofWomen first electedfemaleDeputy Leader ofapoliticalparty women’s wingofPeople’s Alliance(PA) andisthe She wasaformercouncilmemberandPresidentof (MDA), thecoalitionpartnerofcurrentgovernment. of thepoliticalpartyMaldivesDevelopmentAlliance leading hospitalitygroupintheMaldives. of SunSiyamGroupCompanies,amultinational& Mission. Rafiyya isalsotheHead ofChairman’s Bureau High CommissionofMaldivesinDhakaasDCM Farshath hasan educationalbackground in He alsoservesMTDCasaBoardDirector, is Rafiyya hasreceivedrecognitions,suchas Rafiyya isaDoctorate Researcher focusedon Rafiyya isaDeputy Leader andafoundingmember year of2013. Institute ofManagementAccountants(ACMA) inthe inducted asacertifiedmemberoftheChartered (CIMA) examinationintheyearof2009andwas the CharteredInstituteofManagementAccountants served asaSeniorAuditor for4years.Mihadcompleted team leadoftheSAP ERPfinancemoduleandhasalso implementation projectoftheCompany, actingasacore Director oftheBoardon28thMarch2016. the Company. Hewas recentlyappointedanExecutive of the designationofpostChiefFinancialOfficer in knowledge inthefieldoffinanceandaudit,resulting accountant continuingontogainingvastexperienceand Mohamed MihadjoinedSTO intheyearof2009asan Mohamed Mihad Education. Applied Statistics, fromMaldivesCollegeofHigher of MalaysiaandhasstudiedAdvanced Diplomain Administration (Honors)fromtheOpenUniversity developing andexpandingconsumerfinanceunit. Consumer Financewheresheispresentlyinvolvedin Leasing CompanyPvtLtd astheAssistantManager– Currently sheservesattheMaldivesFinance Banking CorporationLimited(HSBCMaldives). Monetary Authority andHongKong andShanghai sector. Inthepastshehasworked atMaldives laundering fromher14yearsofserviceinthefinancial economic, researchandanalysisanti-money the fieldssuchascommercialbanking,accounting, shareholder (Government),on28thMarch2016. Independent, Non-Executive Directorbythemajority Aishath Rayaheen Shareefwasappointedasan Aishath Rayaheen Shareef Following Directorswereappointedin2016 University, Singapore. Diploma inDirectorshipfromSingaporeManagement University, Australia; andhascompletedtheExecutive Diploma inInformationTechnology fromWollongong from MiddlesexUniversity, UnitedKingdom;a Business InformationSystems andBusinessStudies) Diploma ofHigherEducation(areastudyon from NorthumbriaUniversity, UnitedKingdom;a a BachelorofArts(Hons)inBusinessAdministration Management fromUniversityofWestminster, London; Administration, andInformationTechnology. Board Directorship, Management,Tourism, Business He also played a key role in the ERP He alsoplayedakey roleintheERP Rayaheen holdsaBachelorsinBusiness Rayaheen hasexperienceandknowledgein He holdsaMasterofArtsinTourism 62 STO ANNUAL REPORT 2015 EXECUTIVE MANAGEMENT

63 Moosa Abdul Wahid Nuzla Mariyam Ashan Fathimath Shaheer Ahmed Maseeh Muslih Murad Mohamed Shifan Ahmed Mihad Mohamed Rasheed Shaffana Aishath Ziyath Ibrahim Riza Ahmed Kurik Sobah Hussain Azmy Musthafa Mahfooz Dr. Ibrahim Shujau Mohamed Aboobakuru Ramzee 64 STO ANNUAL REPORT 2015 Ahmed Shaheer of Allied Insurance Company of UK and a Bachelor of Business (Managing Director) the Maldives Pvt. Ltd and the (Marketing and Management) from (See page 61 for a detailed profile) Managing Director of STO Hotels Edith Cowan University, Australia. and Resorts Pvt. Ltd. Ashan is Mohamed Mihad also the Chairman of Lafarge Musthafa Azmy (Executive Director / Chief Maldives Cement Pvt. Ltd. Ashan (Chief Information Officer – Financial Officer) holds a Master’s in Business Information & Communications (See page 62 for a detailed profile) Administration from University of Technology) Lincoln and a Bachelor of Arts with Musthafa Azmy joined STO in Ibrahim Ziyath Honors (First Class) in Business the year of 1994 and is currently (See page 61 for a detailed profile) and Information Technology from the Chief Information Officer University of Coventry. and the Head of Department for Dr. Ibrahim Mahfooz Information & Communications (Chief Internal Auditor) Ahmed Shifan and Technology. He played a key Dr. Ibrahim Mahfooz joined STO (Senior General Manager – role in the successful migration in 1996 and worked in Accounting Administration and Human from the legacy systems to SAP and Finance until 1999. From Resource) ERP. He also designed and then, he moved to Internal Audit Ahmed Shifan joined STO in the developed a new system to and has been the Chief Internal year of 2003 and is currently integrate the pharmacy project Auditor of the company since July the Head of Administration and with Aasanda recently. Azmy 2010. Dr. Mahfooz is a member of Human Resource Department. also played a key role in the SAP the Association of Certified Fraud Prior to this he has served role out deployment project in Examiners (CFE) USA, a fellow in many key positions of the Fuel Supplies Maldives Pvt. Ltd of the Association of Chartered Company such as the Head of during the year. Azmy served in Certified Accountants (FCCA) UK. Department for Regional Sales, the Board of Directors of Allied From mid-2003 to mid-2004, he Home Improvement, Store Insurance Company Pvt. Ltd and is worked at Ernst and Young where Operations and ICT. He was also currently the Chairman of Maldives he worked at various assignments involved in the key role of the Structural Products Pvt. Ltd. Azmy at different companies in the SAP HCM implementation project holds a Bachelor of Science Maldives and in Sri Lanka. Dr. of the Company, as the Project (Hons) of Computer Science (First Mahfooz obtained his Doctorate in Manager. He currently serves as Class) from London Metropolitan Business Administration from the the Chairman of Maldive Gas Pvt. University and is also a certified University of Newcastle, Australia, Ltd. and is Board of Advisor for the SAP ABAP and HCM Associate Master of Business Administration SAP Asia Pacific Japan Regional Consultant. from the Charles Stuart University, Services Board, since January Australia and Bachelor of Arts 2013. He is also the Chairman of Mariyam Nuzla with Honors in Accounting and the STO Recreation Club (STORC) (General Manager – Corporate & Finance from the Oxford Brookes since 2014. Shifan holds a Master Legal Affairs) University, UK. of Business Administration with Mariyam Nuzla joined STO in the Honors from Auckland University year of 1999 and has since served Fathimath Ashan of Technology, New Zealand and the Company in various positions (Senior General Manager – a Bachelor of Science with Joint including the role of a Personal Regional Sales, Food and Honors (First Class) in Business Assistant to the Managing Beverages) Information Systems and Business Director from 2008 to 2013. She is Fathimath Ashan joined STO in the Studies from Middlesex University, currently the Head of Department year 1994 and has since served UK. for Corporate& Legal Affairs and in many key positions of the is also as a Board Director for Company during her 20 years of Aishath Shaffana Rasheed Maldive Gas Pvt. Ltd. Nuzla holds service. Ashan is now designated (General Manager – Company a Masters in Business from the as the Head of Department Secretariat) Cardiff Metropolitan University, for Regional Sales, Food and Aishath Shaffana Rasheed joined UK and a Bachelor of Business Beverages. She had previously STO in the year of 2004. She (Marketing and Management) from served in many key positions serves as the Company Secretary, Edith Cowan University, Australia. of the Company such as the since 2007. Shaffana is also the Head of Department for Human Head of Department of Company Resources and Administration Secretariat. Shaffana holds a and as the Company Secretary. Masters in Business from the She is currently a Board Director Cardiff Metropolitan University,

65 Hertfordshire, UK. Marketing fromtheUniversityof a BachelorofArts(Hons)in Maldives Pvt.Ltd. Ramzee holds Board DirectorofFuelSupplies Department. Ramzee isalsoa in MedicalandMarketing &Sales previously servedasaManager Construction Materials.He of DepartmentforEnergyand currently servingastheHead STO intheyear2007andis Ramzee Aboobakurujoined Construction Materials) (General Manager–Energyand Ramzee Aboobakuru Cowan University, Australia. and Management)fromtheEdith Degree inBusiness(Marketing Ltd. SobahholdsaBachelor’s Lafarge MaldivesCement Pvt. Director representingSTO at Services. SobahisalsoaBoard Head ofDepartmentforMedical Sobah currentlyservesasthe Island PharmacyProjectin2014. in theyearof2010andAll as thetakeover ofIGMHstock the pharmaceuticalfieldsuch Company’s projectsinvolving since excelled inmanyofthe in theyearof2003andhas Hussain SobahjoinedSTO Services -Male’) (General Manager–Medical Hussain Sobah UK. of Design,NorthumbriaUniversity, Spatial DesignfromtheAcademy BTEC HigherNationalDiplomain Maldives Pvt.Ltd. Muradholdsa Allied InsuranceCompanyofthe serves asaBoardDirectorforthe Services -Regional. Muradalso of DepartmentforMedical He currentlyservesastheHead of experienceintheCompany. knowledge withover15years leadership andoperational and experienceinstrategic acquired substantialknowledge the yearof1999andhashence Mohamed MuradjoinedSTO in Services -Regional) (General Manager–Medical Mohamed Murad London, UK. Class) fromtheUniversityofEast in InternationalBusiness(First and aBachelor’s Degree(Hons) from UniversityofNottingham,UK Master ofBusinessAdministration (Singapore) Pte. Ltd. Muslih holds a Company Ltd. andSTO Maldives Director ofMaldivesNationalOil Coordinator ofSTO andaBoard He isalsothecurrentMedia and operationsmanagement. public sector, tourismindustry gaining experienceinthe Ltd andStern’ Textiles Australia, Development, FaunuTravels Pvt of PlanningandNational previously servedintheMinistry and PublicRelations. Hehad for BusinessDevelopment the currentHeadofDepartment Company intheyear2008andis Muslih Maseehjoinedthe Development &PublicRelations) Coordinator –Business (General Manager/Media Muslih Maseeh Society inSingapore. VERITAS, FrenchClassification System Audit fromtheBureau 9001:2008 QualityManagement as theCertificatetoconductISO maritime relatedcoursessuch He hasalsocompletedvarious Cowan University, Australia. and Marketing) fromtheEdith Degree ofBusiness(Management Ltd. Wahid holdsaBachelor’s for FuelSuppliesMaldivesPvt. He alsoservesasaBoardDirector Head ofDepartmentforTransport. management. Wahid isthecurrent studies, charteringandshipping experience inthefieldofmaritime has avastarrayofknowledgeand Company intheyearof2009.He Abdul Wahid Moosajoinedthe (General Manager–Transport) Abdul Wahid Moosa Trent University, UK. (Networking) fromNottingham Computer Systems Engineering a BachelorofScience(Hons) Staffordshire University, UKand Technology Managementfrom ERP. ShujauholdsaMasterof from thelegacysystemstoSAP role inthesuccessfulmigration since 2005.Healsoplayedakey British ComputerSociety(MBCS) Pvt. Ltd. andamemberofthe Board DirectorofMaldiveGas 18 years.Shujauiscurrentlya Technology Departmentfor Information &Communications had previouslyservedinthe for ProcurementEssentials.He is thecurrentHeadofDepartment Company intheyearof1998and Mohamed Shujaujoinedthe Procurement (Essentials)) (Assistant GeneralManager– Mohamed Shujau UK. in ComputerStudies fromEdexcel, a BTEC HigherNationalDiploma Hotel &Resorts Pvt.Ltd. Kurik has the MaldivesPvt.Ltd. andSTO of AlliedInsuranceCompany Kurik iscurrentlyaBoardDirector and inRegional SalesDepartment. Manager inBusinessDevelopment Company, includingasaSenior various differentpositionsinthe He hadpreviouslyservedin for ProcurementGeneralGoods. is thecurrentHeadofDepartment Company intheyearof2003and Ahmed Kurik Rizajoinedthe (General Goods)) (General Manager–Procurement Ahmed Kurik Riza 66 STO ANNUAL REPORT 2015 GENERAL INFORMATION

67 Aishath Rayaheen Shareef Mohamed Farshath Amir Mansoor(Chairman) Audit Committee Mohamed Farshath Aishath Rayaheen Shareef Aishath Rafiyya Amir Mansoor Mohamed Mihad Ahmed Shaheer, MD Ahmed Niyaz,Chairman Board ofDirectors Exchange. are listedintheMaldivesStock Ordinary sharesoftheCompany Stock Exchange Listing limited company. Organization PLC becameapublic On 14August 2001,State Trading Organization on09June1979. was renamedasState Trading (ATA), on20December1964and Athirimaafannu Trading Account as aGovernmentCompany, limited liability. Incorporated A PublicListedCompanywith Legal Form C186/2001 Number Company Registration State Trading OrganizationPlc. Name oftheCompany Republic ofMaldives Male’ Sosun Magu Mialani, 2ndFloor, Henveiru KPMG, Auditors Amir Mansoor Aishath Rayaheen Shareef Aishath Rafiyya (Chairperson) Committee Remuneration Nomination and Aishath Rafiyya Mohamed Farshath (Chairperson) Aishath Rayaheen Shareef Committee and Compliance Corporate Governance Aishath Rafiyya Mohamed Farshath Amir Mansoor(Chairman) Risk Committee Premium Paid-up Capital Unauthorized Capital Total Public Government Share details 1,126,910 Shares 919,869 207,041 No. of State BankofIndia,Male’ Société GeneralBank,Singapore Seylan Bank,Colombo Nations Trust Bank,Colombo Maldives IslamicBank,Male’ HSBC, HongKong HSBC, Male’ Habib BankLimited,Male’ BNP Paribas, Singapore Bank ofMaldivesPlc..Male’ Bank ofCeylon,Male’ Bankers www.sto.mv [email protected] F: +9603344511 Call Centre:+9603344333 Contact Details Republic ofMaldives Male’ 20345 Maafannu, Boduthakurufaanu Magu, State Trading OrganizationPlc. Registered Address @MVR. 50/- 100,000,000 56,345,500 56,345,500 45,993,450 10,352,050 27,814,500 81.63 18.37 100 % 68 STO ANNUAL REPORT 2015 ALLIED MALDIVES INSURANCE STO MALDIVES MALDIVE GAS STUCTURAL COMPANY OF (SINGAPORE) PVT. LTD. PRODUCTS PVT. THE MALDIVES PTE. LTD. LTD.* PVT. LTD.

Insurance Trading Gas Roofing Sheet Company Company Distributor Manufacturer

Incorporated Incorporated Incorporated Incorporated & operated in & operated in & operated in & operated in Maldives Singapore Maldives Maldives

Share % as at 31/dec/2015 Share % as at 31/dec/2015 Share % as at 31/dec/2015 Share % as at 31/dec/2015

STO 99.9% STO 100% STO 90% STO 50% MGPL 0.01 % Champa Oil & Gas 10 % Rainbow Investment 50 %

69 Associate Company**JointVenture * MALDIVES PVT. FUEL SUPPLIES Share %asat31/dec/2015 & operatedin Incorporated Distributor STO 99.9% MNOC 0.01% Maldives LTD. LTD. Fuel

Share %asat31/dec/2015 CEMENT PVT. & operatedin Incorporated MALDIVES STO 25% Lafarge (Zurich)75% Distributor LAFARGE Maldives Cement LTD.**

OPN LTD.COMPANY NATIONAL OIL Share %asat31/dec/2015 in Maldives& Incorporated operated in Singapore MALDIVE STO 99.9% Allied 0.01% Trader Fuel

STO HOTELS & RESORTS PVT. Share %asat31/dec/2015 & operatedin Incorporated FSM 0.01% STO 99.9% Maldives Tourism Sector LTD.

70 STO ANNUAL REPORT 2015 STO DIRECTORY

+960 334 4333

[email protected]

www.sto.mv

71 Warehouse STO ConstructionMaterials Construction Materials158 Thilafushi Warehouse STO ConstructionMaterials,K. Fuel &Lubricants Construction MaterialsOffice Materials Energy andConstruction Human Resources Administration and Company Secretariat Technology Communication Information Internal Audit STO Staples STO SupermartWarehouse STO Supermart Food andBeverages S. HulhumeedhooStore S. MaradhooFeydhooStore S. FeydhooStore S. HithadhooStore Gdh. ThinadhooStore Ga. VillingiliStore L. FonadhooStore K. Villimale’ Store K. Hulhumale’ Store B. EydhafushiStore Hdh. Kulhudhuhfushi Store Ha. HoarafushiStore Regional Sales STO IGMH-Warehouse STO IGMHPharmacy Medical Warehouse Medical Store Medical Service-Male’ Sh.Funadhoo Pharmacy Sh.Milandhoo Pharmacy Hdh.Hanimaadhoo Pharmacy Hdh.Finey Pharmacy Hdh.Naivaadhoo Pharmacy Hdh.Hirimaradhoo Pharmacy Hdh.Nolhivaranfaru Pharmacy Hdh.Nellaidhoo Pharmacy Hdh.Nolhivaram Pharmacy Hdh.Kurinbi Pharmacy Hdh.Kulhudhufushi Pharmacy Hdh.Kumundhoo Pharmacy Hdh.Neykurendhoo Pharmacy Hdh.Vaikaradhoo Pharmacy Hdh.Makunudhoo Pharmacy Ha.Baarah Pharmacy Ha.Utheemu Pharmacy Ha.Muraidhoo Pharmacy Ha.Thakandhoo Pharmacy Ha.Maarandhoo Pharmacy Ha.Filladhoo Pharmacy Ha.Dhihdhoo Pharmacy Ha.Vashafaru Pharmacy Ha.Kelaa Pharmacy Ha.Ihavandhoo Pharmacy Ha.Hoarafushi Pharmacy Ha.Molhadhoo Pharmacy Ha.Uligamu Pharmacy Ha.Thuraakunu Pharmacy Regional Medical Services- R.Ungoofaaru Pharmacy R.Maakurathu Pharmacy R.Rasmaadhoo Pharmacy R.Innamaadhoo Pharmacy R.Maduvvaree Pharmacy R.Inguraidhoo Pharmacy R.Fainu Pharmacy R.Meedhoo Pharmacy R.Kinolhas Pharmacy R.Hulhudhuffaaru Pharmacy R.Dhuvaafaru Pharmacy N.Henbandhoo Pharmacy N.Kendhikolhudhoo Pharmacy N.Maalhendhoo Pharmacy N.Kudafaree Pharmacy N.Landhoo Pharmacy N.Maafaru Pharmacy N.Lhohi Pharmacy N.Miladhoo Pharmacy N.Magoodhoo Pharmacy N.Manadhoo Pharmacy N.Holhudhoo Pharmacy N.Foddhoo Pharmacy N.Velidhoo Pharmacy Sh.Kanditheemu Pharmacy Sh.Noomaraa Pharmacy Sh.Goidhoo Pharmacy Sh.Feydhoo Pharmacy Sh.Feevah Pharmacy Sh.Bileffahi Pharmacy Sh.Foakaidhoo Pharmacy Sh.Narudhoo Pharmacy Sh.Maroshi Pharmacy Sh.Lhaimagu Pharmacy Sh.Komandoo Pharmacy Sh.Maaungoodhoo Pharmacy 72 STO ANNUAL REPORT 2015 R.Angolhitheemu Pharmacy Aa.Bodufulhadhoo Pharmacy Dh.Hulhudheli Pharmacy

R.Rasgetheemu Pharmacy Aa.Mathiveri Pharmacy Dh.Rinbudhoo Pharmacy

R.Vaadhoo Pharmacy Aa.Ukulhas Pharmacy Dh.Bandidhoo Pharmacy

R.Alifushi Pharmacy Aa.Rasdhoo Pharmacy Dh.Meedhoo Pharmacy

B.Goidhoo Pharmacy Aa.Thoddoo Pharmacy Th.Omadhoo Pharmacy

B.Fehendhoo Pharmacy Adh.Maamingili Pharmacy Th.Kinbidhoo Pharmacy

B.Fulhadhoo Pharmacy Adh.Dhiddhoo Pharmacy Th.Veymandoo Pharmacy

B.Hithaadhoo Pharmacy Adh.Fenfushi Pharmacy Th.Thimarafushi Pharmacy

B.Thulhaadhoo Pharmacy Adh.Dhigurah Pharmacy Th.Gaadhiffushi Pharmacy

B.Eydhafushi Pharmacy Adh.Dhangethi Pharmacy Th.Hirilandhoo Pharmacy

B.Maalhos Pharmacy Adh.Mandhoo Pharmacy Th.Vandhoo Pharmacy

B.Dharavandhoo Pharmacy Adh.Mahibadhoo Pharmacy Th.Kandoodhoo Pharmacy

B.Dhonfanu Pharmacy Adh.Kunburudhoo Pharmacy Th.Guraidhoo Pharmacy

B.Kihaadhoo Pharmacy Adh.Omadhoo Pharmacy Th.Dhiyamingili Pharmacy

B.Kendhoo Pharmacy Adh.Haggnaameedhoo Th.Madifushi Pharmacy Pharmacy B.Kamadhoo Pharmacy V.Rakeedhoo Pharmacy Th.Vilufushi Pharmacy

B.Kudarikilu Pharmacy V.Keyodhoo Pharmacy Th.Burunee Pharmacy

Lh.Olhuvelifushi Pharmacy V.Felidhoo Pharmacy L.Kunahandhoo Pharmacy

Lh.Kurendhoo Pharmacy V.Thinadhoo Pharmacy L.Hithadhoo Pharmacy

Lh.Naifaru Pharmacy V.Fulidhoo Pharmacy L.Maamendhoo Pharmacy

Lh.Hinnavaru Pharmacy M.Maduvvaree Pharmacy L.Gaadhoo Pharmacy

K.Guraidhoo Pharmacy M.Dhiggaru Pharmacy L.Fonadhoo Pharmacy

K.Maafushi Pharmacy M.Kolhufushi Pharmacy L.Maavah Pharmacy

K.Gulhi Pharmacy M.Naalaafushi Pharmacy L.Gan Pharmacy

K.Himmafushi Pharmacy M.Muli Pharmacy L.Mundoo Pharmacy

K.Huraa Pharmacy M.Mulah Pharmacy L.Maabaidhoo Pharmacy

K.Thulusdhoo Pharmacy M.Veyvah Pharmacy L.Dhanbidhoo Pharmacy

K.Dhiffushi Pharmacy M.Raimmandhoo Pharmacy L.Isdhoo Pharmacy

K.Gaafaru Pharmacy F.Nilandhoo Pharmacy Ga.Kanduhulhudhoo Pharmacy

K.Kaashidhoo Pharmacy F.Dharanboodhoo Pharmacy Ga.Gemanafushi Pharmacy

K.Vilimale Pharmacy F.Magoodhoo Pharmacy Ga.Kondey Pharmacy

K.Hulhumale’ Pharmacy F.Bileddhoo Pharmacy Ga.Dhevvadhoo Pharmacy

Aa.Himandhoo Pharmacy F.Feeali Pharmacy Ga.Dhaandhoo Pharmacy

Aa.Maalhos Pharmacy Dh.Kudahuvadhoo Pharmacy Ga.Nilandhoo Pharmacy

Aa.Feridhoo Pharmacy Dh.Maaenboodhoo Pharmacy Ga.Maamendhoo Pharmacy

73 and PublicRelations Business Development Goods Procurement –General Goods Procurement –Essential Finance Affairs Corporate andLegal Transport Service Centre Home Improvementand S.Hithadhoo Pharmacy S.Hulhumeedhoo Pharmacy S.Maradhoo Pharmacy S.Feydhoo Pharmacy Gn.Fuvahmulah Pharmacy Gdh.Madaveli Pharmacy Gdh.Hoandeddhoo Pharmacy Gdh.Nadella Pharmacy Gdh.Rathafandhoo Pharmacy Gdh.Gaddhoo Pharmacy Gdh.Vaadhoo Pharmacy Gdh.Fiyoaree Pharmacy Gdh.FaresMaathodaa Pharmacy Gdh.Thinadhoo Pharmacy Ga.Kolamaafushi Pharmacy Ga.Viillingili Pharmacy Group Companies Website: www.maldivegas.com E:[email protected] F:+9603335615 Magu, T: +960 3335614 STO Trade Centre, Orchid Maldive GasPvtLtd, 2ndFloor, E: [email protected] F: +9603315316 T: +9603315313 Orchid Magu 01-01 STO Trade Centre, Lafarge MaldivesCement PvtLtd, Website: www.fuelmaldives.com E: [email protected], F: +9603313881 T: +9603336655 Magu, Male’ 20-05,Maldives Building, Boduthakurufaanu Block A,4thFloor, STO Aifaanu Fuel SuppliesMaldivesPvtLtd, Website: www.allied.mv E: [email protected] F: +9603325035 T: +9603300033 Maldives Ameenee Magu,Male’, 20375, Fen Building,2ndFloor, the MaldivesPvt.Ltd. Allied InsuranceCompanyof E: [email protected] T: (65)6324 4668 079903, International Plaza,,Singapore 10, AnsonRoad,, #39-10 STO Maldives(Singapore)PteLtd E: [email protected] F: +9603344599 T: +96033443883344374 Maafannu Boduthakurufaanu Magu, STO Building,6thFloor, STO HotelsandResorts PvtLtd E: [email protected] F: +9603337721 T: +9603337720 Alikilegefaanu Magu G.Marline Spike Building,2/10 Pvt Ltd Maldives Structural Products Website: www.mnoc.com.mv E: [email protected] F: +9603344533 T: +9603325635 Maldives Maafannu, Male’ 20345, Boduthakurufaanu Magu, Ltd Maldives NationalOilCompany 74 STO ANNUAL REPORT 2015 INDEPENDENT AUDITOR’S REPORT & FINANCIAL STATEMENTS

75