200 6 - BEXIMCO · Company Profile Head Quarter 17 Dhanmondi R/A, Road No. 2, Dhaka -1205 Phone: 880-2-8611891 ... A S F Rahman Chairman Salman F Rahman Vice Chairman Chowdhury Hafizur

2006 Annual ReportBangladesh Online Limited

1

B A N G L A D E S H O N L I N E L I M I T E D

Table of Contents

2 Company Profile3 Corporate Directories4 Mission Statement5 About us6 Financial Highlights7 Notice8 Chairman's Statement12 Directors' Report16 Corporate Governance18 Five Years Statistics19 Wheel of Growth20 Annual General Meeting of 200622 Report of Auditors' to the Share Holders23 Balance Sheet24 Profit and Loss Account25 Statement of Changes in Equity26 Cash Flow Statement27 Notes to The Financial Statements

A printable version is also available at the BOL web site: www.bol-online.com

2


Company Profile Head Quarter 17 Dhanmondi R/A, Road No. 2, Dhaka -1205

Phone: 880-2-8611891

Operational Head QuarterPlot No. 19 , Road No. 35, Gulshan-1212

Phone: 880-2-8815559

Share Office17 Dhanmondi R/A, Road -2, Dhaka -1205

Phone: 880-2-8611891

Date of IncorporationNovember 3, 1996

Date of Commercial OperationDecember 1, 1999

Nature of Business ActivitiesDial -up Internet Service

Corporate Broadband Service Software Development

Legal Status Public Limited Company registered in Joint Stock

of Bangladesh

Authorized Capital (Taka)2,000 million

Paid-up Capital (Taka)202.81 million

Member of Share MarketDhaka Stock Exchange

Chittagong Stock Exchange

Number of Shareholders1,559

Number of Employee63

3


Corporate Directories

B O A R D O F D I R E C T O R S

A S F Rahman ChairmanSalman F Rahman Vice ChairmanChowdhury Hafizur Rahman Managing DirectorIqbal Ahmed DirectorOsman Kaiser Chowdhury Director

Company Secretary Md. Asad Ullah, FCS

M A N A G E M E N T C O M M I T T E E

Chowdhury Hafizur Rahman Managing DirectorSyed Samiul Wadood Chief Operating OfficerErshad Shafi Chowdhury Chief Information Officer

MISSION Each of our activities must benefit and add value to the common wealth of our society. We firmly believe that , in the final analysis we are accountable to each of the constituents with whom we interact ; namely : our employees , our customers ,our fellow citizens and our shareholders.

VISIONBOL is the leader in providing internet services software & systems integration services. We ensure that our customers are successful by understanding and being responsive to their needs as well as working collaboratively with them to provide one -stop faster, cost-competitive and scalable services that create competitive advantages in the world of electronic communication.

OBJECTIVES/GOALOur goal is to make internet services available to everyone in Bangladesh. Addition-ally we aim to be internationally renowned as a high quality software developer.

VALUESAt BOL, we believe that how we do business is paramount to our success. Our commitment is exemplified by "The Beximco Way" a core values statement which highlights the importance of Customer and Market Focus, High Performance, Integrity and Respect, Spirit, Collaboration and People Development. BOL's employees are the key to living these values and BOL is committed to providing a work environment for our employees that fosters The Beximco way. We are extremely proud of our employees, who take seriously their responsibility to embody these values in their relationships with each other, and with our customers, shareholders, suppliers and community. We also are extremely proud of our commitment to the communities where our employees live and work. We believe that being part of the community includes a responsibility to contribute more than just jobs.

EQUAL EMPLOYEMENT OPPORTUNITIESBOL's longstanding policy is to afford equal employment opportunities to all qualified individuals without regard to race, color, religion, national origin, age, sex or handicap.

4


5


About Us

Bangladesh Online limited, a Beximco company, is the leading Internet Service Provider in the country. Since its launch inAugust 1998, BOL has been able to set an example of excellence with its subscribers with the help of updated technology anddedicated support service.

Responding to the information needs of the country, Bangladesh Online Limited(BOL) was established with the soleaim ofkeeping the customers in the information super highway with the fastest access to the net. BOL has succeeded as the bestinternet Service Provider of the country, by using the latest technology available. We are a public limited company and ourshares have been traded in Stock Exchange since October 2001.

OUR SOFWARE DEVELOPMENTGlobally the software & services industry continues to grow at an explosive pace. We have just began to reap the benefits ofthis multibillion dollar market. We are extremely proud of our talented employees for creating high-end software, which wasaccepted and recognized to follow best practices in the industry.

MARKET LEADERSHIPBOL is still the leading and largest IT firm in Bangladesh . We have maintained this position by being able to respond rapidlyto market forces. The management closely follows market trends and can thereby make swift and decisive strategic changesCoupled with an environment that encourages innovation, we were able to serve our customers better and offer services thatthey demanded before the competition could respond.

All of these reasons, BOL is the most successful IT firm in Bangladesh.

OUR SERVICE AREAS:

GulshanBananiBaridharaDhanmondiEskatonKawran BazarMotijheelNaya poltonUttaraKonabariTejgaonMohammadpurSyletChittagong

OUR SUPPORT SYSTEM

With regularly scheduledsystems support andmaintenance, we keepsystems running smoothlyand virus free, minimizingfrustrating download timeand boosting productivity.We also offer remote sitemanagement and a helpdesk that allow us totroubleshoot manyproblems over the phone,door-to -door steps, savingorganizations' both time &money.

OUR SOLUTIONS

From implementing a newwireless network to settingup a new computer tobuilding a web site todetermining the best way tocollect, rack and report data, our experts createsolutions that usetechnology to helporganizations run moreeffectively.

OUR CUSTOMERS

Government bodiesShipping LinesAir LinesFinancial InstitutionsCorporate GroupsMultinational CompaniesForeign MissionsDonor AgenciesNGOsEducational InstitutionsResearch InstitutionsIndividual

(Figure in '000' Taka)

Particulars 2006 2005 Changes Amount %

Financial Data

Total Revenue 233,455 200,971 32,484 16.16Total Expenses 112,558 68,680 43,878 63.89Net Profit 120,897 132,291 (11,394) (8.61)Capital Expenditure 85,520 5,746 79,774 1,388.34Total Assets 801,069 518,731 282,337 54.43Total Debts & Liabilities 265,570 85,692 179,878 209.91Shareholders' Equity 535,499 433,040 102,459 23.66

Operating DataNetwork Operating Centers 3 5 (2) (40.00)POP's 14 8 6 75.00No. Dial-up Telephone Lines 573 573 - -Number of employees-closing 63 57 6 10.52

Investment informationNumber of Shareholders 1,559 1600 (41.00) (2.56)Stock price-closing 52.86 52.02 0.84 1.61Shareholders' equity per share 26.40 23.55 2.85 12.10Earning per share 5.96 6.52 (0.56) (8.59)Proposed Dividend (Cash) 10.00% (10.00) (100.00)Proposed Dividend (Stock) 20.00% 10.00% 10.00 100.00

6


Financial Highlights

7


Notice of the Tenth Annual General Meeting

BANGLADESH ONLINE LIMITED17, DHANMONDI R.A, ROAD NO.2, DHAKA-1205

NOTICE OF THE TENTH ANNUAL GENERAL MEETING

Notice is hereby given that the TENTH ANNUAL GENERAL MEETING of the Shareholders of Bangladesh Online Limited willbe held on Thursday, the 6th September, 2007 at 3.30 p.m. at 1, Shahbag C/A, Dhaka to transact the following business :

AGENDA

1. To receive, consider and adopt the Audited Financial Statements of the Company for the year ended 31st December, 2006together with reports of the Auditors and the Directors thereon.

2. To elect Director.

3. To declare 20% Stock Dividend.

4. To appoint Auditors for the year 2007 and to fix their remuneration.

5. To transact any other business of the Company with the permission of the Chair.

By order of the Board,

Dated : 28th June, 2007 (MD. ASAD ULLAH, FCS)Company Secretary

NOTES:

(1) The Record Date shall be on 1st August 2007. The Shareholders whose names will appear in the Share Register of theCompany or in the Depository Register on that date will be entitled to attend at the Annual General Meeting and toreceive the dividend.

(2) A member entitled to attend and vote at the General Meeting may appoint a Proxy to attend and vote in his/her stead. TheProxy Form, duly stamped, must be deposited at the Registered Office of the Company not later than 48 hours before thetime fixed for the meeting.

(3) Admission to the meeting room will be strictly on production of the attendance slip sent with the Notice as well asverification of signature of Member(s) and/or proxy-holder(s).

8


ßY~JroqJPjr kKfPmhj

IJkjJPhr ßTJŒJjL mJÄuJPhv IjuJAj KuKoPaPcr hvo mJKwtTxJiJre xnJ~ ßTJŒJjLr kKrYJujJ kKrwh S IJoJr mqJKÜVfkã ßgPT IJkjJPhr xmJAPT ˝JVf \JjJKòÇ ßTJŒJjLrxÄKã¬ TJptâo S 2006 xJPur IJKgtT S jLKrãPTr kKfPmhjIJkjJPhr xJoPj Ck˙Jkj TrPf ßkPr IJKo UMmA IJjKªfÇ

TJptâo

F mZr ßTJŒJjLr KmâP~r kKroJj KZu 233,454,865 aJTJpJ Vf mZr KZu 200,970,854 aJTJ IgtJ“ Kmâ~ kmOK≠rkKroJj vfTrJ 16.16 nJVÇ 2006 xJPu IJorJ120,896,402 aJTJ oMjJlJ I\tj TPrKZÇ TJptâPor xMwokmOK≠ KjKÁf TrJr \jq IJorJ 157,000,000 aJTJ oNPuqrpπkJKf IJKgtT A\JrJr oJiqPo Vyj TPrKZÇ IJorJ KmvõJx TKrFA xÄPpJ\j IJoJPhr nKmwq“ TJptâoPT IJrS VKfvLuTrPmÇ

ßv~JrPyJflJrPhr ATáqAKa”

2005 xJPu IJoJPhr xJKmtT ßv~JrPyJflJrPhr ATáqAKa KZu433,039,633 aJTJ, 2006 xJPu pJ 535,498,535 aJTJ~CjúLf y~ IgtJ“ 2005 xJPur fáujJ~ kmOK≠r yJr vfTrJ23.66 nJVÇ ßv~JrPyJflJrPhr ßv~Jr kKf ATáqAKa 2006-FmOK≠ ßkP~ 26.40 aJTJ yP~PZ pJ 2005 xJPu KZu 23.55aJTJÇ ßTJŒJjLr kJrK÷T kptJ~ ßgPT F âoJVf kmOK≠ m\J~rJUPf ßkPr IJorJ Vmt IjMnm TrKZÇ

nKmwqf kKrT·jJ

mJÄuJPhv xrTJr IJV´yL kã xoNyPT KnSIJAKk mqmxJkKrYJujJr \jq uJAPx¿ khJPjr KxiJ∂ Vyj TPrPZÇ xÄKväÓIJAjL TJbJPoJPf k´P~J\jL~ xÄPvJij k´Kâ~JiLj IJPZÇ FTKa

vLwt˙JjL~ A≤JrPja ßxmJ k´hJjTJrL k´KfÔJj KyPxPmxmtxJiJrPjr \jq CjìMÜ yS~J oJ© IJorJ FA xMPpJPVr kNetxÆmqmyJr TrPf YJAÇ FA jfáj KnSIJAKk mqmxJPT Vyj TrJr\jq IJorJ IJoJPhr ToLtmJKyjLPT kKvKãf TPrKZÇ IJoJPhrA≤JrPja ßxmJPT Y¢VJo S ßhPvr IjqJjq mz vyrèPuJPfKm˜JPrr \jq kKrT·jJ TrKZÇ

TotxÄ˙JPjr xMPpJV xOKÓ

ßhPvr ßmTJr xoxqJr Kmw~Ka oJgJ~ ßrPU mJÄuJPhv IjuJAjKu” xmxo~A jfáj TJ\ xOKÓ TPrPZ, fJr xPñ uãq ßrPUPZnKmwqf ßkvJVf x÷JmjJ, xMÔá TJP\r kKrPmv FmÄ \Lmj pJ©Jrmq~ mOK•r xPñ xñKfkNet IJTwtjL~ ßmfj TJbJPoJr kKfÇ FrlPu ßhPvr xJKmtT ßmTJr xoxqJ KTZMaJ yPuS y∑Jx kJ~Ç

mJÄuJPhv IjuJAj KuKoPaPcr ToLt mJKyjLr kKfKa xhxqAfJPhr hJK~Pfôr mqJkJPr xŒNetnJPm xPYfj FmÄ TJptâPor oNuCP¨vq xoPº xoqTnJPm ImKyfÇ

\JfL~ rJ\˝ IJP~ ImhJj

2006 xJPu mJÄuJPhv IjuJAj Ku” oNuq xÄPpJ\j Tr FmÄIJ~TPrr IJTJPr 9.85 KoKu~j aJTJ \JfL~ rJ\˝ ßTJwJVJPrkhJj TPrPZÇ Vf mZr pJ KZu 7.85 KoKu~j aJTJÇ

‰mPhKvT oMhsJ I\tj

IPjT IK\tf xJlPuqr oPiq mJÄuJPhv IjuJAj Ku”175,005,769 aJTJ oNPuqr xlaS~qJr r¬JjL TrPf ßkPrVKmftÇ Vf mZr pJ KZu 151,309,731 aJTJ IgtJ“ 2006xJPur kmOK≠ vfTrJ 16 nJVÇ

Kk~ ßv~JrPyJflJrmOª,

9


ßY~JroqJPjr kKfPmhj

unqJÄv

kKrYJujJ kwth 2006 xJPur \jq 20% ˆT KcKnPc¥ k˜JmTPrPZÇ 2005 xJPuS unqJÄv KZu 20% pJr oPiq jVhunqJÄv 10%FmÄ ˆT KcKnPc¥ 10%Ç

CkxÄyJr

kKrPvPw IJKo hO|nJPm muPf YJA 2006 xJu KZu IJkjJPhrßTJŒJKjr xlufJr mZr, FA xJluq IK\tf yP~PZ IJkjJPhrKmvõ VJyT,ToLtmJKyjLr KjÔJ, hãfJ, kKrvso FmÄ IJoJPhrÊnJTJÄUL pgJ mqJÄTJr, xrmrJyTJrL FmÄ mqmxJ~L IÄvLhJrPhrxogtPjr lPuÇ xPmtJkKr IJorJ IJoJPhr ßv~JrPyJflJrPhrKjTa Tífù FA TJrPe ßp, xmtxoP~A fJyJPhr oNuqmJj xogtj,xyPpJKVfJ S krJoPvtr TJrPe ßTJŒJjL mftoJj Im˙J~ßkRPZPZÇ

FA xMPpJPV IJKo xÄKväÔ xTPur kKf IJoJr IJ∂KrT ijqmJh\JjJA FmÄ nKmwqPfS fJPhr xJyJpq xyPpJKVfJ ImqJyfgJTPm, FA IJvJ rJKUÇ

F Fx Fl ryoJjßY~JroqJj

fJKrU ” 28ßv \Mj, 2007dJTJÇ

10


Chairman's Statement

On behalf of the Board of Directors and on my behalf Iwelcome you all to the 10th Annual General Meeting ofyour company, Bangladesh Online Limited.

It is indeed my pleasure to present a brief resume of theaffairs of the company together with the financialstatements and Auditors' Report for the year 2006.

Performance

During the year under review, the company attained salesof Tk. 233,454,865 against Tk. 200,970,854 of theprevious year, which represents sales growth of 16.16%.We achieved net profit of Tk. 120,896,402 in 2006. Wehave acquired equipment worth Tk. 157,000,000 throughfinance lease to ensure steady operational growth. Webelieve this addition will enhance our performance in thefuture.

Shareholders' Equity

Our total shareholders' equity in 2005 was 433,039,633and in 2006 it increased to 535,498,535, i.e. 23.66%growth in 2006 compared to the year 2005. Shareholders'equity per share in 2006 has risen to Tk. 26.40 comparedto Tk. 23.55 in 2005. We feel proud to maintain thiscontinuous growth since the very beginning stage of thecompany.

Future Plan

Bangladesh Government has decided to issue license foroperating VOIP business to interested parties. Necessaryamendment in the relevant legal framework is under way.As a leading ISP, we would like to make best use of thisopportunity as soon as it is opened for public. We havetrained our human resources for taking up the newbusiness in VOIP. We are also planning to expand our ISP

11


Chairman's Statement

services in Chittagong and other major cities ofthe country.

Creating Employment Opportunity

BOL always offers jobs with career prospects,excellent working environment with attractiveremuneration package, taking into considerationthe cost of living and reduction of unemploymentin the country. We also ensure good training andother facilities for development of our staff. Everyone in BOL is aware of their duties andresponsibilities and strives towards the commongoal of BOL.

Contribution to National Exchequer

During the year 2006, BOL contributed Tk. 9.85Million to the National Exchequer in the form ofValue Added Tax and Income Tax. Last year, itwas Tk. 7.85 million

Foreign Exchange Earnings

Among many achievements, BOL is proud tohave exported Tk. 175,005,769 worth ofsoftware in 2006. Last year, it was Tk151,309,731, a growth of 16% in 2006.

Dividend

The Board of Directors recommended stockdividend of 20% for the year 2006. For 2005, itwas also 20% consisting of 10% cash and 10%stock dividend.

Acknowledgement

Finally, I would like to reiterate that, 2006 hasbeen a successful year for your company. This

result has been possible because of our loyalcustomers, the sincere and tireless efforts of ourstaff and the support received from our bankers,suppliers and business associates. Above all, weare grateful to our shareholders for extending atall times their invaluable support and co-operation to bring the company to the level it hasreached today.

I avail this opportunity to express my sincerethanks to all concerned and look forward to thecontinued support and co-operation in the future.

A S F RahmanChairman

Dated: 28 June, 2007Dhaka

12


The Directors' Report to the Shareholders

The Directors have pleasure in submitting their report andthe audited financial statements of the Company for theyear ended 31 December 2006 together with the Auditors'Report thereon.

Principal Activities

The company is primarily engaged as an Internet ServiceProvider (ISP) and Software Developer in and outsideBangladesh.

Financial Results and Profit Appropriations

(Figure in '000' Taka )2006 2005

Net Profit after Tax 120,896 132,290Add: Un-appropriated profit

from the previous year 211,788 31,453Add: Tax holiday reserve

no longer required - 84,921Profit available for appropriation 332,685 248,664

Recommended for appropriationsProposed Dividend:Cash Dividend - 18,438Stock Dividend at 20%(2005- 10 %) 40,563 18,438

(40,563) (36,876)Un-appropriated profit carried

to the next year 292,122 211,788

Dividend

The Board of Directors has recommended 20% Stockdividend; i.e., 1(one) Bonus Share of Tk 10 each for 5(five) ordinary shares held, fully paid up, for approval ofthe shareholders for the year ended 31 December 2006.

Directors

In accordance with the Articles 125 and 126 of theArticles of association of the Company, Mr. Osman KaiserChowdhury, being nominee of Beximco Holdings Ltd,retires by rotation and being eligible offers himself for re-election.

Board Meeting and Attendance

During the year, 4 (for) Board Meetings were held. Theattendance record of the directors is as follows:

Name of Directors Meetings attended

A S F Rahman 4Salman F Rahman 4Chowdhury Hafizur Rahman 4Iqbal Ahmed 4Osman Kaiser Chowdhury 4

Board Audit Committee

There was no audit Committee till 31 December 2006.The Company however constituted the Committee in2007 with Mr. O K Chowdhury FCA as Chairman andMessrs Salman F. Rahman and Iqbal Ahmed as Members.Corporate & Financial ReportingThe Company has complied with all the requirements ofCorporate Governance as required by the Securities andExchange Commission.Accordingly, the Directors are pleased to confirm thefollowing:a) The Financial statements together with the notes

thereon have been drawn up in conformity with theCompanies Act, 1994 & Securities and ExchangeRules, 1987. These statements present fairly thecompany's state of affairs, the result of its operations,cash flow and changes in equity.

b) Proper books of accounts of the Company have beenmaintained.

c) Appropriate Accounting Policies have beenconsistently applied in preparation of the financialstatements and that the accounting estimates are basedon reasonable and prudent judgment.

d) The International Accounting Standards as applicablein Bangladesh have been followed in preparation ofthe financial statements.

e) The systems of internal control are sound and havebeen effectively implemented and monitored.

f) There is no significant doubt upon the Company'sability to continue as a going concern.

g) The profitability of the Company for the year hasdecreased due mainly to financial expenses notcharged in the previous year.

h) The key operating and financial data for the last fiveyears is annexed.

13


Company Profile

(i) The pattern of shareholding is as follows:Name wise details Share held

(i) Parent/subsidiary/Associate companiesAnd other related parties:Beximco Holdings Limited 4,757,500

(ii) Directors, Chief Executive Officer,Company Secretary, Chief FinancialOfficer, Head of Internal Audit and TheirSpouses and Minor Children:Mr. A S F Rahman, Chairman 687,500Mr. Salman F Rahman, Vice Chairman 687,500Mr. Iqbal Ahmed, Director 13,750Mr. O K Chowdhury, Director 13,750Mr. Chowdhury Hafizur Rahman, Managing Director NILMr. M. A. Qasem (Sponsor) 13,750Mr. A.B.S Rahman (Sponsor) 13,750Company Secretary, Spouses and minor children NILChief Financial Officer, Spouses and minor children NILHead of internal Audit, Spouses and minor children NIL

(iii) Executives NIL(iv) Shareholders holding ten percent (10%) or

More voting interest in the companyBeximco Holdings Limited 4,757,500Asia IT Capital Investments Limited 2,791,250South Asia Equities Limited 4,125,000

Corporate Governance Compliance Report

In according with the requirement of the Securities and Exchange Commission, "Corporate Governance ComplianceReport" is annexed.

Auditors

The retiring Auditors, Messrs M.J. Abedin & Co. Chartered Accountants, National Plaza(6th floor), 1/G, Free SchoolStreet, Sonargaon Road, Dhaka-1205, being eligible, offer themselves for re-appointment as Auditors of the Company forthe year 2007.

On behalf of the Board

A S F RahmanChairman 28 June, 2007Dhaka.

14


Corporate Governance Compliance Status Report

ANNEXURE

Status of compliance with the conditions imposed by the Commission's Notification No. SEC/CMRRCD/2006-158/Admin/02-08dated 20th February, 2006 issued under section 2CC of the Securities and Exchange Ordinance,1969 :(Report under ConditionNo.5.00)

Condition Title Compliance Status ExplanationNo. [Put(a) in the for non-compliance

appropriate column] with the conditionComplied Not Complied

1.1 Board's Size a1.2 (i) Independent Directors a1.2 (ii) Independent Directors' Appointment a1.3 Chairman & Chief Executive a1.4(a) Directors' Report on Financial Statements a1.4(b) Books of Account a1.4(c) Accounting Policies a1.4(d) IAS Applicable in Bangladesh a1.4(e) System of Internal Control a1.4(f) Going Concern a1.4(g) Deviations in Operating Results a1.4(h) Key Operating and Financial Data a1.4(i) Declaration of Dividend a1.4(j) Number of Board Meetings a1.4(k) Pattern of Shareholdings a2.1 CFO, HIA and CS Appointment a2.2 Board Meeting Attendance a3.00 Audit Committee a3.1(i) Composition of Audit Committee a3.1(ii) Audit Committee Members Appointment a3.1(iii) Terms of Service of Audit Committee a3.2(I) Chairman of Audit Committee a3.2(Ii) Audit Committee Chairman's Qualification a3.3.1(I) Reporting to the Board of Directors a3.3.1(ii)(a) Report of Conflicts of Interest a3.3.1(ii)(b) Defect in the Internal Control System a3.3.1(ii)© Suspected infringement of laws a3.3.1(ii) (d) Any other matter a3.3.2 Reporting to the Authorities a3.4 Reporting to the Shareholders a4.00 (I) Appraisal or Valuation Services a4.00(ii) Financial Information Systems a4.00(ii) Book Keeping or other services a4.00(iv) Broker Dealer Services a4.00(v) Actuarial Services a4.00(vi) Internal Audit Services a4.00(vii) Any other services a

15


Corporate Governance

The maintenance of effective corporate governanceremains a key priority of the Board of BangladeshOnline Limited. Recognizing the importance of it, theboard and other senior management remainedcommitted to high standards of corporate governance.To exercise clarity about directors' responsibilitiestowards the shareholders, corporate governance mustbe dynamic and remain focused to the businessobjectives of the Company and create a culture ofopenness and accountability. Keeping this in mind,clear structure and accountabilities supported by wellunderstood policies and procedures to guide theactivities of Company's management, both in its day-today business and in the areas associated withinternal control have been instituted.

INTERNAL FINANCIAL CONTROL

The directors are responsible for the Company'ssystem of internal financial control. Although nosystem of internal control can provide absoluteassurance against material misstatement and loss, theCompany's system is designed to provide the directorswith reasonable assurance that problems are timelyidentified and dealt with appropriately. Keyprocedures to provide effective internal financialcontrol can be described in following heads:

Management structure - The Company is operatingthrough a well defined management structure headedby chief executive officer (CEO) under whom thereare executive directors, general managers for variousdepartments and according to hierarchy, varioussenior and mid level management staffs. The CEO andthe executive directors, general managers meet atregular intervals represented also by finance,marketing and personnel heads.

Budgeting - There are comprehensive managementreporting disciplines which involve the preparation ofannual budgets by all operating departments.Executive management reviews the budgets and actualresults are reported against the budget and revisedforecasts are prepared at regular intervals.

Asset management - The Company has sound assetmanagement policy, which reasonably assures thesafeguarding of assets against unauthorized use ordisposition. The Company also follows properrecords and policy regarding capital expenditures.

Functional reporting - In pursuance with keeping thereliability of financial information used within thebusiness or for publication, the management hasidentified some key areas which are subject tomonthly reporting to the chairman of the board.These include monthly treasury operations andfinancial statements. Other areas are also givenemphasis by reviewing on a quarterly basis. Theseinclude information for strategy, environmental andinsurance matters.

STATEMENT OF DIRECTORS'RESPONSIBILITIES FOR PREPARATION ANDPRESENTATION OF THE FINANCIALSTATEMENTS

The following statement is made with a view todistinguishing for shareholders the respectiveresponsibilities of the directors and the auditors inrelation to the financial statements. The CompaniesAct, 1994 requires the directors to prepare financialstatements for each financial year which give a trueand fair view of the state of affairs of the company asat the end of the financial year and of the profit for theyear to that date. In preparing those financialstatements, the directors:

u select suitable accounting policies and then applythem in a consistent manner;

u make reasonable and prudent judgments andestimates where necessary;

u state whether all applicable accounting standardshave been followed, subject to any materialdepartures disclosed and explained in the notes tothe financial statements;

u take such steps as are reasonably open to them tosafeguard the assets of the Company and toprevent and detect fraud and other irregularities;

u ensure that the Company keeps accountingrecords which disclose with reasonable accuracythe financial position of the Company;

u ensure that the financial statements comply withdisclosure requirements of the Companies Act,1994 and the Securities and Exchange Rules,1987; and

16


Corporate Governance

u prepare the financial statements on a goingconcern basis unless it is inappropriate to presumethat the Company will continue in business.

BOARD COMMITTEES

The board - The board is responsible to theshareholders for the strategic development of thecompany, the management of the Company's assets ina way that maximizes performance and the control ofthe operation of the business.

The board of directors is responsible for approvingCompany policy and is responsible to shareholders forthe Company's financial and operationalperformance. Responsibility for the development andimplementation of Company policy and strategy, day-to-day operational issues is delegated by the board tothe management of the Company.

Board structure and procedure - The membership ofthe board during the year end as on 31-12-2006 stoodat four directors. All directors are equally accountableas per law to the shareholders for the proper conductof the business.

The Company's board currently comprises theChairman, Vice-Chairman and other two directors.The Vice-Chairman and other two directors arenominated by Bangladesh Export Import CompanyLimited. The name of the directors appears on page 3.The quorum for the board is at least three directorspresent in person.

GOING CONCERN

After making enquires, the directors, at the time ofapproving the financial statements, have determinedthat there is reasonable expectation that the Companyhave adequate resources to continue operation for theforeseeable future. For this reason, the directors haveadopted the going concern basis in preparing thefinancial statements.

RIGHTS AND RELATIONS WITHSHAREHOLDERS

Control rights of shareholders - At annual generalmeeting, shareholders have rights of participation.They have the right to ask questions on and requestfrom information from the board regarding item on

the agenda to the extent necessary to make aninformed judgment of the Company's' affairs.

Relations with shareholders - The annual generalmeeting are used as an important opportunity forcommunication with both institutional and generalshareholders. In addition, the Company maintainsrelations with its shareholders through the corporateaffairs secretarial department.

The following information can be addressed throughthe secretarial department :

u Dividend payment enquires;

u Dividend mandate instruction;

u Loss of share certificate/dividend warrants;

u Notification of change of address; and

u Transfer of shares.

The board believes that it is important to respondadequately to all the queries of both institutional andgeneral shareholders. At the AGM, the shareholdersare offered an opportunity to raise with the board anyspecific question they have concerning the Company.In addition, meetings are also held between individualdirectors and institutional shareholders at varioustimes during the year.

17


5 years' statistics

Particulars 2006 2005 2004 2003 2002

Results of operationsTurnover 233,455 200,971 173,162 106,761 96,481Total Expense 112,558 68,681 70,794 69,293 61,255Net Profit 120,897 132,290 102,368 37,468 35,226Cash inflow from operating activities 185,365 206,980 29,046 20,182 32,154Basic earnings per share 5.96 6.52 5.55 2.54 2.39Equity per share 26.40 23.48 20.97 15.68 14.64Cash Dividend - 10% 5% 15% 15%Stock Dividend 20% 10% 25% - -Financial PositionsTotal Assets 801,069 518,732 376,983 393,403 368,265Total Current Assets 369,702 301,127 145,440 108,466 80,461Total Current Liabilitis 201,819 85,692 67,608 49,558 39,764Paid up capital 202,813 184,375 147,500 147,500 147,500Shareholders' equity 535,499 433,040 309,375 231,345 216,001Key Financial Ratios & FiguresReturn on paid up capital 59.61% 71.75% 69.40% 25.4% 24.17%Return on Investment 15.09% 25.50% 27.15% 9.52% 9.68%Price Earning Ratio 8.87 7.26 14.70 10.01 9.35Current Ratio 1.83:1.00 3.51:1.00 2.15:1.00 2.19 : 1 2.02 : 1Acid Test Ratio 1.82:1.00 3.49:1.00 2.13:1.00 2.12: 1 1.98 : 1Number of Shareholders 1,559 1,600 1,144 841 781Stock price - closing 52.87 52.05 81.58 25.42 22.32Number of Employee 62 57 53 49 50

(Financial information in nearest '000 Taka except percentag/ratio)

0

10

20

30

40

50

60

EARNING FROM INTERNET SERVICE

200620052004

47.76 49.6652.37

0

50

100

150

200

EARNING FROM SOFTWARE

200620052004

60.01

151.31

181.09

0

50

100

150

200

250

TOTAL REVENUE

200620052004

173.16200.97

233.45

0

30

60

90

120

150

NET PROFIT

200620052004

102.37

132.29120.90

0

50

100

150

200

250

300

350

RETAINED EARNING

200620052004

76.95

248.66

332.69

0

100

200

300

400

500

600

SHAREHOLDERS EQUITY

200620052004

309.37

433.04

535.50

VALUE IN MILLION TAKA

18


Wheel of Growth

19


Ninth Annual General Meeting

Ninth Annual General Meeting (AGM) ofshareholders of Bangladesh Online Limited was heldon 24th June 2006 at 12.00 pm at 1, Shabagh C/A,Dhaka. A good number of shareholders attended theAGM. In absence of Mr. A S F Rahman, Chairman ofthe company, MR. Salman F Rahman, Vice Chairmanof the Company, presided over the meeting. Versesfrom the Holy Quran along with its translation inBengali were recited at the very outset of the meeting.The Chairman of the meeting welcomed theshareholders in the AGM. With the permission of thechair the meeting began and the shareholdersexpressed their valued opinion on the auditedfinancial statements of the Company for the yearended 31 December 2005 and also on other affairs.Mr. Salman F Rahman replied to the queries andexplained various comments of distinguishedshareholders. He also given the hints of futureactivities of the Company. After approving the auditedfinancial statements, electing directors, proposeddividend @ 10% Stock & 10% Cash and fixing theremuneration of the auditors by the shareholders, themeeting ended with a vote of thanks from the chair.

20


21

We have audited the accompanying Balance Sheet of Bangladesh Online Limited as of December 31, 2006 andthe related Profit and Loss Account, Statement of Changes in Equity and Statement of Cash Flows for the yearthen ended. These financial statements are the responsibility of the company's management. Our responsibilityis to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements prepared in accordance with Bangladesh Accounting Standards (BAS),give a true and fair view of the state of the company's affairs as of December 31, 2006 and of the results of itsoperations and its cash flows for the year then ended and comply with the applicable sections of the CompaniesAct, 1994, the Securities and Exchange Rules, 1987 and other applicable laws and regulations.

We also report that :

(a) we have obtained all the information and explanations which to the best of our knowledge and belief werenecessary for the purpose of our audit and made due verification thereof ;

(b) in our opinion, proper books of accounts as required by law have been kept by the company so far as itappeared from our examination of those books ;

(c) the company's balance sheet and profit and loss account dealt with by the report are in agreement with thebooks of accounts; and

(d) the expenditures incurred were for the purposes of the company's business.

National Plaza (6th Floor) M. J. ABEDIN & CO.1/G, Free School Street Chartered AccountantsSonargaon Road, Dhaka-1205.

Dhaka : June 28, 2007

to the shareholders of bangladesh online limited

Au d i t o r s ' R e p o r t

22


ASSETS Notes 2006 2005

Non-Current Assets 431,367,120 217,605,027Property, Plant and Equipment - Carrying Value 20 353,566,505 212,788,395Long Term Security Deposits 21 1,819,540 1,819,540Deferred Assets 22 73,481,075 497,092Investment (at Cost) 23 2,500,000 2,500,000

Current Assets 369,701,575 301,126,680Inventories 24 786,037 1,608,080Account and Other Receivables 25 311,463,445 249,160,591Advances, Deposits and Prepayments 26 53,302,621 46,938,397Cash and Cash Equivalents 27 4,149,472 3,419,612

TOTAL ASSETS Tk. 801,068,695 518,731,707

EQUITY AND LIABILITIESShareholders' Equity 535,498,535 433,039,632Share Capital 28 202,812,500 184,375,000Retained Earnings- as per Statement of Changes in Equity 332,686,035 248,664,632

Non- Current Liabilities 63,750,963 -Long Term Lease Obligation 39 63,636,743 -Deferred Tax Liability 42 114,220 -

Current Liabilities and Provisions 201,819,197 85,692,075Account Payable & Other Liabilities 29 121,012,025 78,263,609Current Lease Obligation 39 75,246,998 -Income Tax Payable 30 5,560,174 7,428,466

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY Tk. 801,068,695 518,731,707

The attached Notes are integral parts of the Financial Statements.

Approved and authorised for issue by the Board of Directors on 28 June, 2007 and signed for and on behalfof the Board.

C. H. Rahman Osman Kaiser Chowdhury Shibli NomanManaging Director Director Chief Financial Officer

Per our report of even date.

Dhaka M. J. Abedin & Co.28 June, 2007 Chartered Accountants

At 31 December 2006

Ba l a n c e S h e e t

23


Notes 2006 2005

Revenue (Turnover) from Net Sales 31 233,454,865 200,970,854Costs of Revenues 32 (64,448,427) (52,491,782)

Gross Profit 169,006,438 148,479,072

(47,367,802) (15,127,031)Administrative and Selling Expenses 33 31,768,222 14,672,849Financial Expenses 39 15,599,580 -Amortisation of Preoperating Expenses - 454,182

Net Profit Before Tax 121,638,636 133,352,041

Income Tax Expense/(Income) 34 742,234 1,061,658Current Tax 130,921 2,809,292Deferred Tax Expense/(Income) 611,313 (1,747,634)

Net Profit After Tax Transferred to Statement of Changes in Equity 120,896,402 132,290,383Basic EPS & adjusted EPS of 2005 (Par value Tk. 10/-) 35 5.96 6.52Number of shares used to compute EPS 20,281,250 20,281,250

The Notes are integral part of the Financial Statements.

Approved and authorised for issue by the board of directors on 28 June, 2007 and signed for and on behalfof the Board :




For the year ended 31 December 2006

P r o f i t a n d L o s s Ac c o u n t

24


Particulars Share Tax holiday Retained TotalCapital Reserve Earnings

Balance at 01.01.05 147,500,000 84,920,607 76,954,184 309,374,791Changes in accounting policy(Deferred Tax effect up to 2004) (1,250,541) (1,250,541)Restated Balance at 01.01.05 147,500,000 84,920,607 75,703,643 308,124,250Net Profit after Tax for 2005 132,290,383 132,290,383Tax Holiday Reserve no longer required (84,920,607) 84,920,607 -Stock dividend of prior period (2004) 36,875,000 (36,875,000) -Cash dividend of prior period (2004) (7,375,000) (7,375,000)Balance at 01.01.06 184,375,000 - 248,664,633 433,039,633Net Profit after tax for 2006 120,896,402 120,896,402Stock dividend of prior period (2005) 18,437,500 - (18,437,500) -Cash dividend of prior period (2005) (18,437,500) (18,437,500)

At 31 December, 2006 Tk. 202,812,500 - 332,686,035 535,498,535

Total Number of Shares 20,281,250Shareholders' Equity per share Tk. 26.40


Approved and authorised for issue by the board of directors on 28 June, 2007 and signed for and on behalf ofthe Board :





S t a t e m e n t o f C h a n g e s i n E q u i t y

25


N o t e s t o t h e A c c o u n t s

2006 2005

Cash Flows from Operating Activities :

Cash receipts from customers and others 274,294,908 308,959,576Cash paid to suppliers and Others (88,929,470) (101,979,148)Cash Generated from Operations 185,365,438 206,980,428Income Tax paid and deducted at source (1,999,213) (428,656)Net cash Generated From Operating Activities 183,366,225 206,551,772

Cash Flows from Investing Activities :Acquisition of Property, Plant and Equipment (242,520,061) (5,746,300)Asset Sold and Leased Back 157,000,000 -Net cash Used in Investing Activities (85,520,061) (5,746,300)

Cash Flows from Financing Activities :Dividend paid (15,679,363) (7,020,000)Lease payments (Principal) (27,836,942)Payments to Associated Undertakings (53,600,000) (192,400,000)Net cash Used in Financing Activities (97,116,305) (199,420,000)

Increase in Cash and Bank Balances 729,860 1,385,472Cash and Bank Balances at Beginning of Year 3,419,612 2,034,140Cash and Bank Balances at end of Year Tk. 4,149,472 3,419,612


Approved and authorised for issue by the Board of Directors on 28 June, 2007 and signed for and on behalfof the Board.





Ca s h F l ow S t a t e m e n t

26


N o t e s t o t h e Ac c o u n t sFor the year ended 31 December 2006

1. REPORTING ENTITY Bangladesh Online Limited (BOL/ the Company) was incorporated in Bangladesh in November 3, 1996 under theCompanies Act, 1994 as a Public Limited Company. It commenced its commercial operation on December 1, 1999. Thecompany became a listed company in 2000.The shares of the Company are traded in Dhaka and Chittagong Stock Exchanges of Bangladesh.The registered office of the company is located at House No. 17, Road No. 2, Dhanmondi R/A, Dhaka-1205. The salesand administrative office of the company is located at House-19, Road-35, Gulshan, Dhaka-1212.

2. NATURE OF BUSINESS OPERATIONSBangladesh Online Limited is an Internet Service Provider (ISP) and Software Developer. It makes both local sales andexport of software. BOL's ISP services include Dial-up Internet Access, Corporate Broad Band Service, Web Designing& Web Hosting Services and Corporate Network Solutions.

3. BASIS OF MEASUREMENT OF ELEMENTS OF FINANCIAL STATEMENTS The financial statements have been prepared on the Historical Cost basis, and therefore, do not take into considerationthe effect of inflation.Accordingly, historical cost is employed to determine the monetary amounts at which the elements of the financialstatements are to be recognized and carried in the balance sheet and income statement. Under the Historical Cost, assets are recorded at the amount of cash or cash equivalents paid or the fair value of theconsideration given to acquire them at the time of their acquisition. Liabilities are recorded at the amount of proceedsreceived in exchange for the obligation, or in some circumstances (for example, income taxes), at the amounts of cash orcash equivalents expected to be paid to satisfy the liability in the normal course of business.

4. STATEMENT OF COMPLIANCE WITH LOCAL LAWS

The financial statements have been prepared in compliance with the requirements of the Companies Act, 1994; theSecurities & Exchange Rules, 1987; the Listing Regulations of Dhaka and Chittagong Stock Exchanges and other relevantlocal laws as applicable.

5. STATEMENT OF COMPLIANCE OF BANGLADESH ACCOUNTING STANDARDS The financial statements have been prepared in accordance with the applicable Bangladesh Accounting Standards (BASs)adopted by the Institute of Chartered Accountants of Bangladesh (ICAB) based on International Accounting Standards(IASs) and International Financial Reporting Standards (IFRSs).

6. STRUCTURE, CONTENT AND PRESENTATION OF FINANCIAL STATEMENTS Being the general purpose financial statements, the presentation of these financial statements are in accordance with theguidelines provided by BAS 1: Presentation of Financial Statements.

7. REPORTING PERIODThe financial period of the company covers one calendar year from 1st January to 31st December consistently.

8. APPROVAL OF FINANCIAL STATEMENTS The financial statements were approved by the Board of Directors on 28 June 2007.

9. FUNCTIONAL AND PRESENTATIONAL (REPORTING) CURRENCYThe financial statements are prepared and presented in Bangladesh Currency (Taka), which is the company's functionalcurrency. All financial information presented have been rounded off to the nearest Taka except where indicated otherwise.

10. COMPARATIVE INFORMATION AND REARRANGEMENT THEREOF Comparative information has been disclosed in respect of the year 2005 for all numerical information in the financialstatements and also the narrative and descriptive information where it is relevant for understanding of the current year's

27



financial statements. Figures for the year 2005 have been re-arranged wherever considered necessary to ensure better comparability with thecurrent year without causing any impact on the profit and value of assets and liabilities as reported in the financialstatements.

11. RISK AND UNCERTAINTY FOR USE OF ESTIMATES AND JUDGMENTSThe preparation of financial statements in conformity with Bangladesh Accounting Standards requires management tomake judgments, estimates and assumptions that affect the application of accounting policies and the reported amountsof assets, liabilities, income and expenses, and disclosure requirements for contingent assets and liabilities during and atthe date of the financial statements. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis.Revisions of accounting estimates are recognized in the period in which the estimate is revised and in any future periodsaffected as required by BAS 8: Accounting Policies, Changes in Accounting Estimates and Errors.

12. PROVISIONS In accordance with the guidelines as prescribed by BAS 37: Provisions, Contingent Liabilities and Contingent Assets,provisions are recognized in the following situations:a. when the company has an obligation (legal or constructive) as a result of past events; b. when it is probable that an outflow of resources embodying economic benefits will be required to settle the

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

13. ACCRUED EXPENSES AND OTHER PAYABLES Liabilities are recognized for the goods and services received, whether paid or not for those goods and services. Payablesare not interest bearing and are stated at their nominal value.

14. GOING CONCERNThe company has adequate resources to continue in operation for the foreseeable future. For this reason, the directorscontinue to adopt going concern basis in preparing the accounts. The current credit facilities and resources of thecompany provides sufficient fund to meet the present requirements of its existing business.

15. FINANCIAL INSTRUMENTS Non-derivative financial instruments comprise accounts and other receivables, cash and cash equivalents, borrowings andother payables and are shown at transaction cost.

16. IMPAIRMENT In accordance with the provisions of BAS 36 : Impairment of Assets, the carrying amount of non-financial assets, otherthan inventories are reviewed at each reporting date to determine whether there is any indication of impairment. If anysuch indication exists, then the asset's recoverable amount is estimated and impairment losses are recognized in profit andloss account. No such indication of impairment has been raised till to date.

17. CASH FLOW STATEMENTS The Cash Flow Statement has been prepared in accordance with the requirements of BAS 7: Cash Flow Statements.

The cash generating from operating activities has been reported using the Direct Method as prescribed by the Securitiesand Exchange Rules, 1987 and as the benchmark treatment of BAS 7 whereby major classes of gross cash receipts andgross cash payments from operating activities are disclosed.

18. EVENTS AFTER THE BALANCE SHEET DATE In compliance with the requirements of BAS 10: Events After the Balance Sheet Date, post balance sheet events thatprovide additional information about the company's position at the balance sheet date are reflected in the financialstatements and events after the balance sheet date that are not adjusting events are disclosed in the notes when material.

28



19. ACCOUNTING POLICIES FOR SIGNIFICANT ITEMS

(a) The accounting policies and methods of computation used in preparation of financial statements for the year ended31st December, 2006 are in consistent with those adopted in thefinancial statementsfor the year ended 31stDecember, 2005 except for a change in accounting policy as explained in (b) below.

(b) Accounting of "Deferred Tax" By First Time Adoption of BAS 12: Income TaxesIn the year 2006, the company has adopted for the first time BAS 12: Income Taxes adopted by the ICAB which isconsidered as a change in accounting policies.

The principal effect of the implementation of BAS- 12 is in relation to "Deferred Tax".The Particulars, computation and consequential effects have elaborately been stated in the Notes 19.8 and 42.

19.1 REVENUE RECOGNITION POLICY

In compliance with the requirements of BAS 18 : Revenue, revenue from receipts from customers against sales isrecognized when products are dispatched to customers, that is, when the significant risk and rewards of ownership havebeen transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goodscan be estimated reliably, and there is no continuing management involvement with the goods.

Receipts from customers comprise sales price against domestic sales including value added tax paid to the Governmentof Bangladesh. However, VAT included in sales is not considered as revenue as it is collected on behalf of customers.

19.2 PROPERTY, PLANT AND EQUIPMENT

19.2.1 RECOGNITION AND MEASUREMENT

Property, plant and equipment are capitalized at cost of acquisition and subsequently stated at cost less accumulateddepreciation in compliance with the requirements of BAS 16: Property, Plant and Equipment. The cost of acquisition ofan asset comprises its purchase price and any directly attributable cost of bringing the asset to its working condition forits intended use inclusive of inward freight, duties and non-refundable taxes.

19.2.2 SUBSEQUENT EXPENDITURE

The company recognizes in the carrying amount of an item of property, plant and equipment the cost of replacing partof such an item when that cost is incurred and when it is probable that the future economic benefits embodied with theitem will flow to the company and the cost of the item can be measured reliably. Expenditure incurred after the assetshave been put into operation, such as repairs and maintenance is normally charged off as revenue expenditure in theperiod in which it is incurred. In situation where it can be clearly demonstrated that the expenditure has resulted in anincrease in the future economic benefit expected to be obtained from the use of the fixed assets, the expenditure iscapitalized as an additional cost of the assets. All other costs are recognized to the profit and loss account as expenses ifincurred. All up-gradation/enhancement are generally charged off as revenue expenditure unless they bring similarsignificant additional benefits.

19.2.3 DISPOSAL OF FIXED ASSETS

On disposal of fixed assets, the cost and accumulated depreciation are eliminated and gain or loss on such disposal isreflected in the income statement which is determined with reference to the net book value of the assets and net salesproceeds except on Asset Sold and Leased Back transactions as referred to in note 19.9.

19.2.4 DEPRECIATION ON FIXED ASSETS

No depreciation is charged on Land and Land Development and Telephone Line Cost. In respect of all other fixed assets,depreciation is provided to amortize the cost less residual value of the asset, over their expected useful economic lives.Depreciation is calculated using the straight-line method. Half year's depreciation is charged on additions and nodepreciation is provided on disposal, irrespective of date of addition or disposal respectively.

29



The annual depreciation rates applicable to the principal categories of assets are :

Internet System Hardware 18%Furniture & Fixture 10%Air Conditioner 18%Office Equipment 20%V-Sat Tower 10%Under Ground Cable Installation 10%Generator 15%Transport & Vehicle 20%

19.3 INVESTMENT IN SHARES OF BEXIMCO ZENITH LIMITED

In compliance with the requirements of BAS 25: Accounting for Investments, investment in shares of other entity beingclassified as long-term assets, are carried in the balance sheet at cost.

19.4 INVENTORIES

Inventories are carried at the lower of cost and net realizable value as prescribed by BAS 2: Inventories. Cost is determinedon weighted average cost basis. The cost of inventories comprises of expenditure incurred in the normal course of businessin bringing the inventories to their present location and condition. Net realizable value is based on estimated selling priceless any further costs expected to be incurred to make the sale.

19.5 ACCOUNTS RECEIVABLES

Accounts Receivables are recognized at cost which is the fair value of the consideration given for them.

19.6 ADVANCES, DEPOSITS AND PREPAYMENTS

Advances are initially measured at cost. After initial recognition, advances are carried at cost less deductions, adjustmentsor charges to other account heads. Deposits are measured at payment value.

Prepayments are initially measured at cost. After initial recognition, prepayments are carried at cost less charges to profitand loss account.

19.7 CASH AND CASH EQUIVALENTS

Cash and cash equivalents are carried in the balance sheet at cost and include cash in hand and with banks on currentand deposit accounts which are held and available for use by the company without any restriction. There is insignificantrisk of change in value of the same.

19.8 INCOME TAX EXPENSE/(INCOME)

Income tax expense/(Income) comprises current and deferred tax. Income tax expense/(Income) is recognized in profit andloss account and accounted for in accordance with the requirements of BAS 12 : Income Tax.

Current Tax

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or subsequentlyenacted after the reporting date, and any adjustment to tax payable in respect of previous years. The company qualifiedas a "Publicly Traded Company", hence the applicable Tax Rate is 30%.

Deferred TaxDeferred Tax has been introduced in 2006. The deferred tax asset up to 2004 has been incorporated by making prioryears' adjustment in the Statement of Changes in Equity. Deferred Tax income of 2005 has been shown by restatingcomparative figures of 2005 in the Profit and Loss Account in accordance with the requirements of BAS 8 : AccountingPolicies, Changes in accounting Estimates and Errors. The company has recognized deferred tax using balance sheetmethod in compliance with the provisions of BAS 12 : Income Taxes. The company's policy of recognition of deferredtax assets/ liabilities is based on temporary differences (Taxable or deductible) between the carrying amount (Book value)of assets and liabilities for financial reporting purpose and its tax base, and accordingly, deferred tax income/expenses has

30



been considered to determine net profit after tax and earnings per shares (EPS).

A deferred tax asset is recognized to the extent that it is probable that future taxable profit will be available against whichtemporary differences can be utilized. Deferred tax assets are reviewed at each reporting date and reduced to the extentthat it is no longer probable that the related tax benefit will be realized.

19.9 LEASE ASSETS

In compliance with the BSA 17: Leases, costs of assets acquired under finance lease along with related obligation havebeen accounted for as assets and liabilities respectively of the company, and the interest element has been charged off asexpenses. Loss on Asset Sold and Leased Back transactions are amortized over the Lease Term.

19.10 LEASE PAYMENT

Lease payments made under finance leases are apportioned between the finance expenses and the reduction of theoutstanding liability.

19.11 PROPOSED DIVIDEND

Proposed dividend is accounted for after approval by the shareholders in the annual general meeting.

19.12 ACCOUNTING FOR DIVIDEND OF PRIOR YEAR (2005)

In the 9th Annual General Meeting of the Company held on June 24, 2006 Shareholders approved 10% cash dividendand 10% stock dividend for the year 2005. Accordingly, the total cash dividend of Tk. 18,437,500 and stock dividendof Tk. 18,437,500 have been accounted for in 2006.

19.13 EARNINGS PER SHARE (EPS)

This has been calculated in compliance with the requirements of BAS 33 : Earnings Per Share by dividing the basicearnings by the weighted average number of ordinary shares outstanding during the year.

Basic Earnings

This represents earnings for the year attributable to ordinary shareholders. As there was no preference dividend, minorityinterest or extra ordinary items, the net profit after tax for the year has been considered as fully attributable to theordinary shareholders.

Weighted Average Number of Ordinary Shares Outstanding during the year Current Year (2006)The Bonus Shares issued during the year 2006 were treated as if they always had been in issue. Hence, in computing theBasic EPS of 2006, the total number of shares including the said bonus shares has been considered as the WeightedAverage Number of Shares Outstanding during the year 2006.

Earlier Year (2005)The number of shares outstanding before the bonus issue has been adjusted for the proportionate change in the numberof shares outstanding as if the bonus issue had occurred at the beginning of the earliest period reported (2005), andaccordingly, in calculating the Adjusted EPS of 2005, the total number of shares including the subsequent bonus issue in2006 has been considered as the Weighted Average Number of Shares Outstanding during the year 2005.

The basis of computation of number of shares as stated above is in line with the provisions of BAS 33 "Earnings PerShare". The logic behind this basis, as stated in the said BAS is, that the bonus shares are issued to the existingshareholders without any consideration, and therefore, the number of shares outstanding is increased without an increasein resources generating new earnings.

Diluted Earnings Per Share: No diluted EPS is required to be calculated for the year as there was no scope for dilution during the year under review.

19.14 FOREIGN CURRENCY TRANSACTIONS

The financial records of the company are maintained and the financial statements are stated in Bangladesh Taka. Foreigncurrency transactions are recorded at the applicable rates of exchange ruling at the transaction date.

31



The monetary assets and liabilities, if any, denominated in foreign currencies at the balance sheet date are translated atthe applicable rates of exchanges ruling at that date. Exchange differences are charged off as revenue expenditure incompliance with the provisions of BAS 21 : The Effects of Changes in Foreign Exchange Rates.

The rates of relevant foreign exchanges at year end are :

2006 2005

1 US Dollar $ = Tk. 69.75 68.07

20. PROPERTY, PLANT AND EQUIPMENT : TK. 353,566,505

Particulars Cost Depreciation Carrying CarryingAt 31 Additions Leased At 31 At 31 Provision At 31 Value at 31 Value at 31

December in Sale Back in December December Adjustment made in December December December2005 2006 2006 2006 2005 2006 2006 2006 2005

Land & Land Development 180,000,000 - 180,000,000 - - - 180,000,000 180,000,000Telephone Line Cost 11,281,500 - 11,281,500 - - - 11,281,500 11,281,500Internet System Hardware 88,655,459 49,775,058 (78,393,118) 23,208,000 83,245,399 78,141,926 (27,261,146) 6,676,548 57,557,329 25,688,071 10,513,533Air Conditioner 1,046,310 - - - 1,046,310 1,000,452 45,847 1,046,299 11 45,858Office Equipment 9,731,969 123,776,450 (122,701,742) 82,221,449 93,028,126 9,153,466 8,794,877 17,948,343 75,079,783 578,503Vehicle 221,167 27,500 248,667 147,546 38,350 185,896 62,771 73,621Furniture & Fixture 2,305,134 22,129,975 (18,751,200) 14,868,626 20,552,535 2,069,092 1,074,601 3,143,693 17,408,842 236,043VSAT Tower 1,600,638 248,900 1,849,538 784,822 172,509 957,331 892,207 815,815Cable 14,247,426 46,562,178 (46,285,725) 36,701,925 51,225,804 5,468,548 2,785,620 8,254,168 42,971,636 8,778,878Generator 1,936,987 - - - 1,936,987 1,472,343 - 282,960 1,755,303 181,684 464,644

Total 311,026,590 242,520,061 (266,131,785) 157,000,000 444,414,866 98,238,195 (27,261,146) 19,871,312 90,848,362 353,566,505 212,788,395

21. LONG TERM SECURITY DEPOSITS : TK. 1,819,540 2006 2005

These were deposited :For Telephone Line 1,370,000 1,370,000For Bandwidth 449,540 449,540

Tk. 1,819,540 1,819,540

22. DEFERRED ASSETS : TK 73,481,075

Deferred Tax Asset (Note 42) - 497,093Deferred Loss on Asset Sold and Leased Back Transactions 73,481,075 -

Tk. 73,481,075 497,093

23. INVESTMENT : TK. 2,500,000

This represents 250,000 shares of Tk. 10 each of Beximco Zenith Limited a Joint Venture company incorporatedin Bangladesh. BOL owns 50% of total paid-up capital of Beximco Zenith Limited. This is a non-listed company,and thefore,no market value is avail

24. INVENTORIES : TK. 786,037 2006 2005

This consists of :PIN Mailers 659,468 1,464,569CD Rom 126,569 143,511

Tk. 786,037 1,608,080

25. ACCOUNT AND OTHER RECEIVABLES : TK. 311,463,445

This is unsecured but considered good. This amount includes Tk. 246,000,000 due from associated undertakings.

32



No amount was due by the Directors (including Managing Director), Managing Agent, Manager and other officersof the company and any of them severally or jointly with any other person.

26. ADVANCES, DEPOSITS AND PREPAYMENTS : TK. 53,302,621 2006 2005

This consists of :Advances : 43,214,837 45,093,244Advance for Land 40,000,000 40,000,000Advance against Expenses 3,214,837 5,093,244

Deposits : 10,044,784 1,264,237Lease Deposit 8,289,332 161,635Sundry Security Deposits 1,673,306 1,020,456Earnest Money 82,146 82,146

Prepayments : 43,000 580,916Rent - Network Operating Centers 43,000 284,000Office Insurance - 224,293Group Insurance - 72,623

Tk. 53,302,621 46,938,397

No amount was due by the Directors (including Managing Director), Managing Agent, Managers and OtherOfficers of the company and any of them severally or jointly with any other person.

The advances are good and unsecured.

27. CASH AND CASH EQUIVALENTS : TK. 4,149,472 2006 2005

This consists of :Cash in hand 538,419 694,825Cash at Banks in Current Deposit Accounts 3,611,053 2,724,787

Tk. 4,149,472 3,419,612

28. SHARE CAPITAL : TK. 202,812,500 2006 2005

This represents :(a) Authorized :

200,000,000 Ordinary Shares of Tk. 10/- each Tk. 2,000,000,000 2,000,000,000

(b) Issued, Subscribed and Paid-up :20,281,250 Ordinary Shares of Tk. 10/- eachfully paid-up Tk. 202,812,500 184,375,000

(c) Compositions of Shareholdings :

Particulars 2006 2005No. of Shares % No. of Shares %

Sponsors 6,187,500 30.51 5,625,000 30.51Foreign Investors 6,976,749 34.40 6,342,500 34.40Local Financial Institutions 3,725,552 18.37 1,455,000 7.89General Public 3,391,449 16.72 5,015,000 27.20

Total 20,281,250 100.00 18,437,500 100.00

33



(d) Distribution Schedule - Disclosure under the Listing Regulations of Stock Exchanges :This distribution schedule showing the number of Shareholders and their Shareholdings in percentage has beendisclosed below as a requirement of the Listing Regulations of Dhaka & Chittagong Stock Exchanges :

Shareholders Range in number of Shares Number of % of Total Number of % of ShareHolders Holders Shares Capital

Less than 500 shares 369 23.67 48,075 0.24500 to 5,000 shares 1,005 64.46 1,422,759 7.025,001 to 10,000 shares 83 5.32 610,847 3.0110,001 to 20,000 shares 47 3.01 641,810 3.1620,001 to 30,000 shares 21 1.35 530,466 2.6230,001 to 40,000 shares 8 0.51 286,511 1.4140,001 to 50,000 shares 7 0.45 315,499 1.5650,001 to 100,000 shares 9 0.58 692,541 3.41100,001 to 1,000,000 shares 7 0.45 2,827,492 13.94Over 1,000,000 shares 3 0.19 12,905,250 63.63

Total 1,559 100.00 20,281,250 100.00(e) Option on unissued shares :

There is no option regarding authorized capital not yet issued but can be used to increase issued, subscribedand paid-up capital through the issuance of new shares.

(f) Market Price :The shares of the Company are listed in the Dhaka and Chittagong stock exchanges and quoted at Tk. 52.64per share and Tk. 53.09 per share in the Dhaka and Chittagong stock exchanges respectively on the lasttrading day of the year.

(g) Voting Rights :The rights and privileges of the shareholders are stated in the Bye-laws ( Articles of Association) of theCompany.

29. ACCOUNT PAYABLE & OTHER LIABILITIES : TK.121,012,025 2006 2005This is payable against:Advance against Sales 103,142,897 67,250,000Audit Fee Payable 78,375 78,375Others 17,790,753 10,935,234

Tk. 121,012,025 78,263,609

30. INCOME TAX PAYABLE :TK. 5,560,174 2006 2005This consists of :Opening Balance 7,428,466 5,018,641Provision for the year (Note 34) 130,921 2,809,293Tax paid during the year (1,999,213) (399,468)

Year end balance Tk. 5,560,174 7,428,466

31. REVENUE (TURNOVER) FROM NET SALES: TK. 233,454,865 2006 2005This consists of :Sales of Internet services 60,223,437 57,110,291

Less : VAT 7,855,230 7,449,168

Net Sales After VAT 52,368,207 49,661,123

Sales of Software 181,086,658 151,309,731

Tk. 233,454,865 200,970,854

34



32. COST OF REVENUES: TK. 64,448,427 2006 2005This represents Operating Expenses as follows:VSAT Charge 24,762,317 19,555,720Depreciation 12,296,057 17,327,148Telephone Line Rental 1,177,092 1,177,092SMS Charge 133,158 197,061Rent - NOC & Others 4,069,000 1,381,648Salaries & Allowances 11,227,878 9,437,272Cost of PIN Mailer & CD Rom 839,060 1,177,210Optical Fiber Set up and Maintenance 6,882,270 -Repairs & Maintenance 1,021,036 186,785Electricity, Gas and Water 782,764 919,486Insurance Premium 225,967 269,213Renewal, Rates, Registration 1,031,828 863,147

Tk. 64,448,427 52,491,782

33. ADMINISTRATIVE AND SELLING EXPENSES : TK.31,768,222 2006 2005Salaries & Allowances 4,014,053 2,879,824Office Rent 1,800,000 1,220,000Renewal, Rates, Registration 271,915 90,835Travelling & Conveyance 433,518 318,920Foreign Travel 453,788 -Telephone, Internet, Fax, Pager, Postage 1,089,896 887,441Entertainment 762,573 365,411Printing and Stationery 817,212 587,679Charges for Security Guard 304,170 305,722Electricity, Gas and Water 1,142,080 1,435,078Vehicle Running Expenses 524,298 431,066Car Lease Rental 1,775,400 1,766,370Repairs & Maintenance 611,113 469,884Legal & Professional fees - 75,000General Expenes 161,658 102,912Training 11,700 -Bank Charges 23,977 69,302Insurance Premium 535,468 417,298Auditors' Remuneration 78,375 78,375Depreciation 7,575,255 2,400,282Deferred Loss on Asset Sold and Leased Back written off 8,389,565 -Promotional Expenses 992,208 771,450

Tk. 31,768,222 14,672,849

34. INCOME TAX EXPENSE : TK. 742,234This consists of as follows : 2006 2005Current Tax 130,921 2,809,292Deferred Tax Expense/(Income) (Note - 42) 611,313 (1,747,634)

Tk. 742,234 1,061,65835. BASIC EARNINGS PER SHARE (EPS)

This Computation of EPS is given below : 2006 2005

(a) Earnings attributable to the Ordinary Shareholders (Net Profit after Tax) 120,896,402 132,290,383(b) Weighted average number of Ordinary Shares outstanding during the year 20,281,250 20,281,250

Tk. 5.96 6.52

35



36. PAYMENT/PERQUISITES TO DIRECTORSNo amount of money was spent by the Company for compensating any member of the Board for services rendered.

37. CAPITAL EXPENDITURE COMMITMENTThere was no capital expenditure contracted but not incurred or provided for at 31 December, 2006.

There was no material capital expenditure authorized by the board but not contracted for at 31 December, 2006.

38. OPERATING LEASE COMMITMENTSThe future annual rentals payable against lease of vehicles are as follows :

TakaExpiring within one year -Expiring after one year but not more than five years 4,061,835Expiring after five years -

39. FINANCE LEASE COMMITMENTSThe Company has availed two finance lease facilities from First Lease International Ltd. during the year 2006 for fixed assets.The details of the leases are as follows.

Monthly Interest Expense Due AmountLease Amount Instalment Lease Term in 2006 at 31.12.06

Taka Taka

80,000,000 7,352,720 12 Months 10,981,384 60,440,97377,000,000 2,088,369 60 Months 4,618,196 78,442,768

15,599,580 138,883,741

Current Due 75,246,998Long Term Due 63,636,743

Subsequently as per amendment agreement dated 13 May, 2007, the Lease Term of Tk. 8 Crore Lease was increased to 60months . Monthly instalment was also reduced to Tk. 1,383,243 per month.

40. CLAIMS NOT ACKNOWLEDGED

There was no claim against the Company not acknowledged as debt as on 31 December, 2006.

41. FOREIGN EXCHANGE RECEIVED

In 2006, the company received USD 2,259,180.63 equivalent to BDT 155,718,471 and Great Britain Pound 432,782.86equivalent to BDT 55,180,195.

42. DEFERRED TAX LIABILITY/(ASSET):

(a) Deferred Taxes are calculated as follows:2006 2005 2004

Property, Plant & EquipmentAccounting Basis 73,841,507 20,711,867 28,390,420Tax Basis 73,460,774 22,368,842 24,221,950

Taxable/(deductible) difference 380,733 (1,656,975) 4,168,470

Effective Tax Rate 30% 30% 30%

Deferred Tax Liability/(Asset) 114,220 (497,093) 1,250,541

(b) Deferred Tax Expense/(Income) is arrived as follows:

Closing Deferred Tax Liability/(Asset) 114,220 (497,093) 1,250,541Opening Deferred Tax Liability/(Asset) (497,093) 1,250,541 -Deferred Tax Expense/(Income) Tk. 611,314 (1,747,634) -

36



(c) Deferred Tax Asset upto 2004- Tk. 1,250,541This has been adjusted with balance of retained earnings as of 01.01.05 in the Statement of Changes in Equity incompliance with the provisions of Bangladesh Accounting Standard ( BAS-8) " Accounting Policies, Changes inAccounting Estimates and Errors".

(d) Deferred Tax Income of 2005- Tk. 1,747,634This represents the descrease of deferred tax liability in 2005 in comparison to 2004 which has been shown by restatingcomparative figures of 2005 in the Profit and Loss Account in accordance with the requirements of above referred BAS 8.

(e) Deferred Tax Expense of 2006 Tk. 611,313This represents the decrease of deferred tax asset in 2006 in comparison to 2005 which has been adjusted with the IncomeTax Expense in the Income Statement.

43. PAYMENT IN FOREIGN CURRENCY

In 2006, the company remitted foreign currency in respect of Bandwidth maintenance amounting to USD2,63,705 equivalentto BDT 18,525,530.68

No other expenses including royalty , technical expert and professional advisory fee, etc. was incurred or paid by the companyin foreign currency during the year 2006.

44. POST CLOSING EVENTS

Subsequent to the balance sheet date , (a) the directors recommended 20% Stock Divivend (Bonus shares).The dividendproposed is subject to shareholders' approval at the forthcoming annual general meeting;and (b) Lease Agreement wassubsequently amended as detailed in note 39 above.

Except the fact stated above, no circumstances have arisen since the balance sheet date which would require adjustment to , ordisclosure in, the financial statements or notes thereto.


Dhaka28 June, 2007

Registered Office : 17 Dhanmondi R/A, Road # 2, Dhaka-1205

Ba n g l a d e s h O n l i n e L i m i t e d

P R O X Y F O R M

I/We ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... of ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... beinga member of BANGLADESH ONLINE LIMITED hereby appoint Mr./Mrs/Miss ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... of ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... as my Proxy to attend and votefor me on my behalf at the 10TH ANNUAL GENERAL MEETING of the Company to be held on Thursday the 6thSeptember, 2007 at 3:30 pm at 1, Shahbagh C/A, Dhaka and at any adjournment thereof.

As witness my hand this ... ... ... ... ... ... ... ... ... day of September, 2007. Signed by the said in presence of ... ... ... ... ...... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...

Revenue............................................... Stamp(Signature of the Proxy) Tk. 8.00Date .......................................

........................................................................Signature of the Shareholder(s)

............................................... Register BO ID/Folio No. .................................(Signature of witness) Dated .............................................................

Note : A member entitled to attend and vote at the General Meeting may appoint a Proxy to attend and vote inhis/her stead. The Proxy Form, duly stamped, must be deposited at the Registered Office of the Company notlater than 48 hours before the time appointed for the meeting.

Signature verified....................................................Authorized Signatory

Ba n g l a d e s h O n l i n e L i m i t e dRegistered Office : 17 Dhanmondi R/A, Road # 2, Dhaka-1205

Shareholders ' Attendance S l ip

I hereby record my attendance at the 10TH ANNUAL GENERAL MEETING being held on Thursday the 6thSeptember, 2007 at 1, Shahbagh C/A, Dhaka.

Name of Member/Proxy ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...

Register BO ID/Folio No... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... holding of... ... ... ... ... ... ordinary Shares of

Bangladesh Online Limited.

...................................................Signature of Shareholder(s)

N. B. Please present this slip at the reception desk. Children and non-members will not be allowed at the meeting.

"

Web Sitewww.bol-online.com

Head Quarter 17 Dhanmondi R/A, Road - 2, Dhaka -1205Phone: 880-2-8611891

Operational Head QuarterPlot No. 19 Road No. 35Gulshan Dhaka-1212Phone:880-2-8815559

Share Office17 Dhanmondi R/A, Road -2, Dhaka -1205Phone: 880-2-8611891

Office HoursCustomer Service & Administrative Affairs9 am to 6 pm (Sunday to Thursday)Call Center (Phone Service): 24 hours

Member of Share MarketDhaka Stock ExchangeChittagong Stock Exchange

Annual Shareholder Meeting6 September 2007, 3.30 pm

Proposed DividendStock Dividend 20%

AuditorsM J Abedin & Co.

Legal AdviserHuq & Co

Financial PartnersBank Asia Limited Dhaka Bank limited IFIC Bank LimitedStandard Chartered Bank First Lease International Limited Bay Leasing & Investment Limited

www.bol-online.com

Documents

200 6 - BEXIMCO · Company Profile Head Quarter 17 Dhanmondi R/A, Road No. 2, Dhaka -1205 Phone: 880-2-8611891 ... A S F Rahman Chairman Salman F Rahman Vice Chairman Chowdhury Hafizur