OMAN & EMIRATES INVESTMENT HOLDING CO SAOG
Chairman’s Report
Tribute to a Great Visionary:
It is with great love and reverence, I take this opportunity to express on behalf of
Oman & Emirates Investment Holding Co our deepest condolences on the sad
demise of Sheikh Zayed bin Sultan Al Nahyan, the founding father of UAE, during
2004 and we pray to the Almighty Allah to bestow eternal bliss on the departed soul.
It is due to his grand vision integrated with the exceptional zeal of His Majesty Sultan
Qaboos Bin Said, the ruler of Sultanate of Oman, our Company has come into
existence in 1993, occupying a significant place in the corporate map of Oman and
UAE.
Let us rededicate all our efforts towards carrying this flame, which has been
thoughtfully handed over to us by the great rulers, to further frontiers of excellence.
We also pray for Almighty’s Grace to pour forth on His Highness Sheikh Khalifa bin
Zayed Al Nahyan, on his ascendancy as the new President of UAE and also towards
continuing his endeavour in the path of prosperity, growth and development.
Positive Turnaround:
It is pleasing to note that the benevolent gesture from the Governments of Oman
and UAE with the grant of an exceptional financial assistance towards the end of
2001 and the determined efforts initiated by the company towards revival of the
operations have in fact steered the company away from the multitude of difficulties
and chartered its actions towards the path of safety and stability. The course
correction carried out with the new strategy, after a period of turbulence till 2000 and
careful implementation of the focussed measures by the company have given the
positive turnaround to this company.
Financial Performance:
It is indeed a moment of great happiness to unfold before you, on behalf of the
Board of Directors, a report outlining the fine performance of Oman & Emirates
Investment Holding Co SAOG and its subsidiaries for the year 2004, which
coincided with the completion of 10 years by this company in the service of the two
nations. A snapshot of the consolidated results for 2004 in comparison with the
result of 2003, which is summarized in the following table of financial performance
would point out the overall features of improvements while the Management
Discussion and Analysis Report that is appended would bring out a detailed review
of the operations of the group.
A.Profitability Highlights:
Particulars
Net Profit before provision
Less: Provisions for doubtful debts
guarantees
Net Profit for year
Earnings Per Share
and
31.12.2004
9.134
1.366
R O in Millions
31.12.2003
3.596
2.974
7.768
0.622
RO 1.093
RO 0.089
B. Assets and Liabilities:
Particulars
Share Capital
Reserves & Retained Earnings
Total Equity
Represented by:
Fixed Assets
Investments
Less: Net Liabilities
Net Assets
Net Assets per share
31.12.2004
7.108
10.014
17.112
5.552
41.339
(29.779)
17.112
R O 2.407
R O in Millions
31.12.2003
29.474
(20.916)
8.558
60
27.451
(18.953)
8.558
R O 0.290
It is pleasing to note that the shareholders equity has doubled in size in one year
and the Net Asset Value per share has jumped to a strong level at RO 2.407 at
31.12.2004. The earnings per share became attractive at RO 1.093 and the net
profit of 2004 has endorsed a return of 91% on the opening shareholders equity.
The gains in the stock market investments, the exceptional performance of some our
subsidiaries and associates, the successful rejuvenation of few unstable project
companies, implementation of new working systems and constant monitoring of the
same by the company have all enhanced the financial performance to an
exceptional level during the year 2004. It is heartening to note that the Balance
Sheet has become strong with a diversified investment portfolio, well balanced
between long term and short-term securities and a fine mix of fixed and variable
income earning securities.
Equally heartening is the responsible role being played by the parent company as a
promoter towards rejuvenating the operations of the unstable project companies
under its fold. The major actions such as restructuring the capital with injection of
new capital from institutional investors, extension of financial assistance for the
operations, issuance of corporate guarantees to secure credit facilities, restructuring
the debt obligations and finalisation of certain production and raw material sourcing
arrangements have all given a new lease of life to the ailing project companies.
However, their negative performance had its adverse financial impact and eroded a
portion of the overall profitability of the Group.
On the project development side, we were unfortunate in having lost our bid for a
major and prestigious project in 2004, which had the great potential to bring in new
dimension to the company’s operations. Nevertheless, we are relentless in our
efforts in scanning new opportunities and identifying profitable avenues for long term
investment. We are confident that our efforts would meet with success in the current
year.
We all remain committed to excel the healthy trend that has set in and continue our
efforts towards generating consistent returns in the years to come.
Capital Reduction:
We are pleased to inform you that statutory approval has been received towards the
reduction in the share capital from RO 30 Million to RO 7.5 Million in March 2004.
The effect of this landmark reduction in capital combined with the good performance
during the current year has resulted in phasing out the accumulated losses of RO
23.249 Million as at the beginning of the year and setting in a positive retained
earnings position of RO 5.241 Million as at 31.12.2004.
Dividend:
The Board is very much pleased to recommend a dividend of 250 Baizas per Share,
representing a payout of 25% of the ordinary paid up share capital of the company.
This attractive level of dividend generates a yield of 8.4 % on the share price as at
31st December 2004. This is an expression of our gratitude towards the unstinted
support extended by the shareholders during the difficult phase and a reward for the
high sense of patience exhibited all along. We are sure that this step would certainly
pave the way for enhancing the shareholders’ confidence on the company and also
in enlisting their support for the future actions of the group.
Special Reserve:
Keeping in view the guarantee obligations extended towards an associate company,
it is thought prudent to set apart a part of the retained earnings and to be utilized for
the specific purpose of discharging such obligations, if and when arisen in future.
Hence, RO 1 Million is being transferred and conserved as a Special Reserve.
People:
The integrated and focused efforts of the motivated people of the company
combined with their sense of commitment have chiseled the company’s growth to
greater heights during the year. On behalf of the Board, I commend their efforts and
convey my heart-felt appreciation to the General Manager and all the members of
his team.
Corporate Governance:
We take this opportunity to reaffirm our resolve in establishing a sound corporate
culture manifested with values and transparent governing policies on continuous
basis. Our company’s governance system has been fully integrated with ethical
business practices, which would certainly meet the high standards expected by the
authorities. Supplementing the efforts of the management in setting up healthy
operating procedures and systems, an internal audit system is in place to monitor
strict compliance of the same. The corporate governance report, which is appended,
has more information.
The Future:
The outlook for the year 2005 is generally strong going by the favourable oil prices
and the strong wave of economic development that is set in the Sultanate of Oman
and UAE. Foreign institutional investors have greatly increased their exposure in
these two countries and this has snow-balled the liquidity in the capital market. The
local investors are now tuned up with a new but cautious wave of orientation towards
stock market investments and their investment decisions are now purely guided by
strong fundamentals rather than by reckless speculation. The overwhelming success
of initial public offers in the recent times, has awakened the resourcing instincts of
the corporates. It is believed that the capital market is fully geared to witness its best
during 2005 and the benefits of the same would surely percolate into the earnings
stream of our company.
Going by the encouraging trend witnessed on the investment front during the I
quarter of 2005, it is our earnest belief that this positive orientation would continue to
benefit our company with added gains in 2005, subject to careful monitoring of risk
vis-à-vis rewards. Equally, we are hopeful, that the steps taken by the ailing project
Companies towards rejuvenating the operations would yield positive results in the
coming months, in terms of controlling the losses, preventing further erosion of their
capital and restoring their financial stability.
With all these positive signals of improvement, we sincerely look forward to source a
stable but sustained return and a well grown asset base, barring unforeseen
circumstances, which are beyond the control of the management.
Acknowledgement:
Finally, on behalf of the Board, I would like to express my sincere gratitude to the
Great Rulers of the two countries, officials of the two Governments, banks, capital
market authorities, company’s shareholders, suppliers, clients and employees for
their whole hearted support and co-operation in all these years.
May God help us to serve better and better for the furtherance of both the countries
under the wise guidance and leadership of His Majesty Sultan Qaboos Bin Said and
His Highness Sheikh Khlifa Bin Zayed Al Nahyan. May God’s Grace be bestowed on
them in abundance towards achieving greater success in all their endeavours.
Dr.Hamad Bin Hashim Bin Al Dhahab
Chairman
27th March 2005
Oman & Emirates Investment Holding
Company SAOG and its Subsidiaries
CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2004
AUDITORS' REPORT TO THE SHAREHOLDERS OF
OMAN & EMIRATES INVESTMENT HOLDING COMPANY SAOG AND ITS
SUBSIDIARIES
We have audited the accompanying consolidated balance sheet of Oman & Emirates
Investment Holding Company SAOG and its Subsidiaries as of 31 December 2004, and the
related consolidated statements of income, cash flows and changes in equity for the year then
ended. These consolidated financial statements are the responsibility of the company’s board of
directors. Our responsibility is to express an opinion on these financial statements based on our
audit.
We conducted our audit in accordance with International Standards on Auditing. Those
Standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
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 consolidated financial statements:i)
present fairly in all material respects, the consolidated financial position of the group
as of 31 December 2004, and the results of its consolidated operations and its
consolidated cash flows for the year then ended in accordance with International
Financial Reporting Standards.
ii)
comply, in all material respects, with the relevant disclosure requirements of the
Commercial Companies Law of 1974, as amended, and the minimum disclosure
requirements for Public Joint Stock Companies issued by the Capital Market
Authority.
Without qualifying our opinion above, we draw attention to note 31 (i) relating to corporate
guarantees of RO 5,697,000 provided by the company to commercial banks on behalf of
Dhofar Fisheries Industries and Company SAOG (DFIC) in respect of credit facilities
restructured in 2004, amounting to RO 4,586,964 as at 31 December 2004. Should DFIC fail
to settle its remaining or future borrowings from the same commercial banks, the company
will be liable to its bankers to the extent of the guarantee amounts.
27 March 2005
Muscat
AUDITORS' REPORT TO THE SHAREHOLDERS OF
OMAN & EMIRATES INVESTMENT HOLDING COMPANY SAOG AND ITS
SUBSIDIARIES
We have audited the accompanying consolidated balance sheet of Oman & Emirates
Investment Holding Company SAOG and its Subsidiaries as of 31 December 2004, and the
related consolidated statements of income, cash flows and changes in equity for the year then
ended. These consolidated financial statements are the responsibility of the company’s board of
directors. Our responsibility is to express an opinion on these financial statements based on our
audit.
We conducted our audit in accordance with International Standards on Auditing. Those
Standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
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 consolidated financial statements:i)
present fairly in all material respects, the consolidated financial position of the group
as of 31 December 2004, and the results of its consolidated operations and its
consolidated cash flows for the year then ended in accordance with International
Financial Reporting Standards.
iii)
comply, in all material respects, with the relevant disclosure requirements of the
Commercial Companies Law of 1974, as amended, and the minimum disclosure
requirements for Public Joint Stock Companies issued by the Capital Market
Authority.
Without qualifying our opinion above, we draw attention to note 31 (i) relating to corporate
guarantees of RO 5,697,000 provided by the company to commercial banks on behalf of
Dhofar Fisheries Industries and Company SAOG (DFIC) in respect of credit facilities
restructured in 2004, amounting to RO 4,586,964 as at 31 December 2004. Should DFIC fail
to settle its remaining or future borrowings from the same commercial banks, the company
will be liable to its bankers to the extent of the guarantee amounts.
27 March 2005
Muscat
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
CONSOLIDATED BALANCE SHEET
At 31 December 2004
2004
RO
2003
RO
1,631,841
26,713,674
3,581,799
162,320
3,548,927
8,075,917
3,000,000
5,552,099
57,049
────────
52,323,626
────────
940,020
20,671,130
4,558,448
1,551,742
5,227,913
60,484
84,494
────────
33,094,231
────────
5
31
13
14
15
16
4,099,435
88,125
643,076
2,758,794
6,450,058
18,800,000
────────
32,839,488
────────
19,484,138
════════
2,253,477
1,020,000
643,076
476,211
3,633,195
15,000,000
────────
23,025,959
────────
10,068,272
════════
17
18
19
20
7,108,417
2,411,271
1,000,000
1,350,895
5,241,435
────────
17,112,018
29,474,068
1,634,504
698,990
(23,249,472)
────────
8,558,090
2,372,120
────────
19,484,138
════════
821,308
════════
1,510,182
────────
10,068,272
════════
1,120,866
════════
Notes
ASSETS
Bank balances and cash
Trading investments
Accounts receivable and prepayments
Inventories
Investment available for sale
Investment in associates
Investment held to maturity
Property, plant and equipment
Goodwill
5
6
8
6
9
10
11
12
TOTAL ASSETS
LIABILITIES
Bank overdrafts
Provision for bank guarantees
Provision for taxation
Accounts payable and accruals
Term loans
Loans from Governments
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Legal reserve
Special reserve
Cumulative changes in fair value
Retained earnings (accumulated losses)
Total equity
Minority interest
TOTAL EQUITY AND MINORITY INTERESTS
Securities held under trust management agreements
22
The financial statements were authorised for issue in accordance with a resolution of the directors on 27 March
2005.
Ahmed Rashid Al Ma’amary
Director
Awad Mohammed Faraj Bamkhalef
General Manager
The attached notes 1 to 35 form part of these financial statements.
2
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
Year ended 31 December 2004
Notes
Interest income
Brokerage commission income
Realised gain on sale of investments
Dividend income
Unrealised gain on investments held for trading (net)
Gross loss on sale of food products
Other income
Write back of provision for doubtful debts
25
28
26
8
OPERATING INCOME
Staff related expenses
Administration expenses
Project development expenses
Portfolio management fees
Provision for bad and doubtful debts
Provision for bank guarantees
Amortisation and impairment of goodwill
Directors’ remuneration
28
27
8
31
12
OPERATING EXPENSES
PROFIT FROM OPERATIONS
Finance costs
Negative goodwill on acquisition of a subsidiary
Profit on sale of a subsidiary
Share of profit (loss) from associates (net)
9
NET PROFIT FROM ORDINARY ACTIVITIES
28
Minority Interests
NET PROFIT FOR THE YEAR
Basic earnings per share
24
The attached notes 1 to 35 form part of these financial statements.
3
2004
RO
2003
RO
628,100
276,947
1,729,312
762,422
5,340,278
(208,707)
117,830
606,958
────────
9,253,140
────────
535,932
101,298
798,070
582,760
3,316,787
13,680
110,934
────────
5,459,461
────────
(664,837)
(395,978)
(59,678)
(169,581)
(1,929,893)
(43,125)
(146,976)
(200,000)
────────
(3,610,068)
────────
5,643,072
(493,629)
(293,326)
(329,263)
(19,082)
(2,064,783)
(1,020,000)
(504,496)
────────
(4,724,579)
────────
734,882
(336,718)
2,636,190
────────
7,942,544
(171,788)
105,792
320,000
(70,196)
────────
918,690
(174,870)
────────
7,767,674
════════
1.093
════════
(296,907)
────────
621,783
════════
0.089
════════
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 31 December 2004
Notes
2004
RO
2003
RO
7,942,544
918,690
OPERATING ACTIVITIES
Net profit before minority interests
Adjustments for:
Share of results of associates
Depreciation and amortisation
Dividend and interest income
Realised gain on sale of investments
Unrealised gain on trading investments (net)
Profit on disposal of subsidiary
Negative goodwill on acquisition of subsidiary
Accrual for end of service benefits
Provision / (write back) for bad and doubtful debts, net
Provision for bank guarantees
Profit on disposal of equipment
Interest expense
Operating loss before changes in operating assets and liabilities
Receivables
Payables
Inventories
Cash used in operations
Interest paid
End of service benefits paid
Bank guarantee liabilities paid during the year
Net cash used in operating activities
(2,636,190)
350,846
(1,390,522)
(1,729,312)
(5,340,278)
20,075
1,322,935
43,125
336,718
────────
(1,080,059)
(3,907,952)
1,768,301
(35,861)
────────
(3,255,571)
(336,718)
(1,899)
(975,000)
────────
(4,569,188)
────────
70,196
528,888
(1,118,692)
(798,070)
(3,316,787)
(320,000)
(105,792)
11,480
1,953,849
1,020,000
(166)
171,788
────────
(984,616)
(1,041,786)
44,010
────────
(1,982,392)
(171,788)
(12,124)
(31,225)
1,390,522
207,973
498,504
(119,531)
1,908,203
(3,000,000)
(5,589,035)
5,335,305
────────
600,716
────────
(29,021)
650
1,118,692
33,473
1,169,225
(645,809)
(477,092)
3,440,394
(3,797,170)
────────
813,342
────────
6,381,012
(3,701,026)
134,349
────────
2,814,335
────────
(1,154,137)
1,956,377
(1,624,084)
2,400
────────
334,693
────────
(1,018,269)
(1,313,457)
────────
(2,467,594)
════════
(295,188)
────────
(1,313,457)
════════
────────
(2,166,304)
────────
INVESTING ACTIVITIES
Purchase of equipment
Proceeds from sale of property, plant and equipment
Dividend and interest income
Dividend from associates
Acquisition of a subsidiary
Purchase of associate
Purchase of goodwill on a associate
Proceeds from sale of an associate
Purchase of Government Development Bonds
Proceeds from sale of investments
Purchase of investments
4(ii)
Net cash from investing activities
FINANCING ACTIVITIES
New term loans
Repayment of term loans
Proceeds of share capital calls in arrears
Net cash from financing activities
DECREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the beginning of the year
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
The attached notes 1 to 35 form part of these financial statements.
4
5
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2004
Notes
At 1 January 2003
Calls in arrears
Net profit for the year
Net movement in cumulative changes in fair values
Transfer to legal reserve
At 31 December 2003
Calls in arrears received
Reduction of capital
Net profit for the year
Net movement in cumulative changes in fair values
Transfer to legal reserve
Transfer to special reserve
At 31 December 2004
17
20
17
20
18
19
Share
capital
RO
29,471,668
2,400
───────
29,474,068
134,349
(22,500,000)
───────
7,108,417
═══════
The attached notes 1 to 35 form part of these financial statements.
5
Legal
reserve
RO
1,572,326
62,178
───────
1,634,504
776,767
───────
2,411,271
═══════
Special
reserve
RO
───────
1,000,000
───────
1,000,000
═══════
Cumulative
changes in
fair value
RO
320,739
378,251
───────
698,990
651,905
───────
1,350,895
═══════
(Accumulated
losses)
/retained
earnings
RO
(23,781,644)
621,783
(27,433)
(62,178)
────────
(23,249,472)
22,500,000
7,767,674
(776,767)
(1,000,000)
────────
5,241,435
════════
Total
RO
7,583,089
2,400
621,783
350,818
────────
8,558,090
134,349
7,767,674
651,905
────────
17,112,018
════════
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
1
ACTIVITIES
Oman & Emirates Investment Holding Company SAOG (the company) is registered as an Omani joint stock
company. It is engaged in investment activities and related services in accordance with Royal Decree No. 10/93
and its Articles of Association. The company is licensed to carry out financial investment activities through its
branch in the United Arab Emirates (the UAE) by the Central Bank of the UAE. The company’s registered head
office address is at PO Box 2205, Ruwi, Postal Code 112, Sultanate of Oman.
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries (the group) operate in the
Sultanate of Oman and the UAE and employed 81 employees (including 49 employees of subsidiaries) as of 31
December 2004 (31 December 2003 – 31).
2
BASIS OF PREPARATION
The financial statements have been prepared in accordance with Standards issued, or adopted by the
International Accounting Standards Board, interpretations issued by the International Financial Reporting
Interpretations Committee, and applicable requirements of the Commercial Companies Law and the Capital
Market Authority of the Sultanate of Oman.
The financial statements have been presented in Rial Omani.
3
SIGNIFICANT ACCOUNTING POLICIES
Accounting convention
The consolidated financial statements are prepared under the historical cost convention modified to include the
measurement at fair value of trading and available for sale investments.
Basis of consolidation
The consolidated financial statements comprise the audited financial statements of Oman & Emirates
Investment Holding Company SAOG and its subsidiaries, United Brokerage Company LLC (UBC), Majan
Special Opportunities Joint Investment Account (MSOJIA) and Oman Euro Food Industries Co SAOG
(OEFIC), drawn up to 31 December 2004.
Subsidiaries are consolidated from the date on which control is transferred to the group and cease to be
consolidated from the date on which control is transferred out of the group.
All intercompany balances and transactions and unrealised profits arising from intra-group transactions, are
eliminated.
Companies are classified as subsidiaries where the company’s holding is more than 50%.
Minority interests represent the interest in subsidiaries not held by the group.
Cash and cash equivalents
Cash and cash equivalents comprise cash at hand, bank balances and short term deposits with an original maturity
of three months or less.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents
defined above, net of outstanding bank overdrafts.
Trading investments
These are initially recognised at cost and subsequently remeasured at fair value. All related realised and unrealised
gains and losses, and dividends received are included in the income statement.
6
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
3
SIGNIFICANT ACCOUNTING POLICIES (continued)
Investments available for sale
After initial recognition, investments are classified “available-for-sale,” and are remeasured at fair value.
Unrealised gains and losses on remeasurement to fair value are reported as a separate component of equity until
the investment is derecognised or the investment is determined to be impaired. On derecognition or impairment
the cumulative gain or loss previously reported in equity, along with any transition adjustment to retained
earnings arising from the adoption of IAS 39, is included in the statement of income for the period.
Investments in associates
The group’s investments in associates are accounted for under the equity method of accounting. These are entities
in which the group has between 20% to 50% of the voting power or over which it exercises significant influence.
Investments in associates are carried in the balance sheet at cost, plus post-acquisition changes in the group’s share
of net assets of the associate, less any impairment in value. The statement of income reflects the group’s share of
the results of its associates.
Investments held to maturity
Investments held to maturity represent investments of the group which it intends to hold to maturity. These are
initially recorded at cost and subsequently re-measured at amortised cost using the effective interest method,
less any provision for impairment. Amortised cost is calculated by taking into account any discount or premium
on acquisition over the period to maturity. For investments carried at amortised cost, gains and losses are
recognised in income when the investments are derecognised or impaired, as well as through the amortisation
process.
Impairment and uncollectibility of financial assets
An assessment is made at each balance sheet date to determine whether there is objective evidence that a
financial asset or group of financial assets may be impaired. If such evidence exists, the estimated recoverable
amount of that asset is determined and any impairment loss recognised for the difference between the
recoverable amount and the carrying amount. Impairment losses are recognised in the statement of income.
Inventories
Inventories are stated at the lower of cost or net realisable value. Cost is determined based on a weighted
average basis. Raw materials and packing materials cost represents the invoice value of materials and related
direct expenses. Work in progress cost represents a proportionate cost of the raw materials, direct labour and
other attributable overheads. Finished goods cost represents the cost of the raw materials, direct labour and other
attributable overheads. Net realisable value is based on estimated selling price in the ordinary course of business
less any further costs expected to be incurred to completion and sale.
Accounts receivable
Accounts receivable are stated at original invoice amount less a provision for any uncollectible amounts. An
estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are
written off as incurred.
Plant, property and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value.
Depreciation is calculated on a straight line basis over the estimated useful lives of the assets as follows:
Building
Plan and machinery
Furniture, fixtures and office equipment
Leasehold improvements
Vehicles
over 20 years
over 20 years
over 3 to 5 years
over 5 years
over 4 years
7
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
3
SIGNIFICANT ACCOUNTING POLICIES (continued)
Plant, property and equipment (continued)
Expenditure for major additions and improvements are capitalised, while maintenance and repairs which do not
enhance the economic lives of the assets, its capacity or reducing substantially operating costs are charged to
expense when incurred. When items of property, plant and equipment are retired or otherwise disposed off the
related cost and accumulated depreciation thereto are removed and any resultant gain or loss is included in the
income statement.
The carrying value of these assets are reviewed for impairment when events or changes in circumstances indicate
the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the
estimated recoverable amount, the assets are written down to their recoverable amount.
Goodwill arising on acquisition
Goodwill arising on acquisition represents the excess of the cost of acquisition over the fair value of net identifiable
assets of a subsidiary or an associate at the time of acquisition. Goodwill is amortised on a straight-line basis over
its economic useful life and is charged to the income statement. Goodwill is reviewed for impairment when events
or changes in circumstances indicate that the carrying value may not be recoverable. Goodwill is stated at cost less
accumulated amortisation and any impairment in value.
Provisions
Provisions are recognised when the group has an obligation (legal or constructive) arising from a past event, and
the costs to settle the obligation are both probable and able to be reliably measured.
Taxation
Taxation is provided for in accordance with Omani fiscal regulations.
Deferred income taxation is provided using the liability method on all temporary differences at the balance sheet
date. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period
when the asset is realised or the liability is settled, based on laws that have been enacted at the balance sheet date.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income
tax asset to be utilised.
Accounts payable and accruals
Liabilities are recognised for amounts to be paid in the future for services received, whether billed or not.
Term loans
Term loans are carried on the balance sheet at their principal amount. Interest is charged as an expense as it
accrues, with unpaid amounts included in accounts payable and accruals.
Employees’ end of service benefits
The group provides end of service benefits to its expatriate employees. The entitlement to these benefits is based
upon the employees’ final salary and length of service, subject to the completion of a minimum service period.
The expected costs of these benefits are accrued over the period of employment.
With respect to its Omani employees, the group makes contributions to the Omani Government Social Security
scheme under Royal Decree 72/91 calculated as a percentage of the employees’ salaries. The group’s obligations
are limited to these contributions, which are expensed when due.
8
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
3
SIGNIFICANT ACCOUNTING POLICIES (continued)
Fiduciary assets
Assets held in trust or in a fiduciary capacity are not treated as assets of the group.
Revenue recognition
Sales are recognised when the significant risks and rewards of ownership of the goods have passed to the buyer
and can be reliably measured.
Brokerage commission is recognised on completion of each deal.
Interest revenue is recognised on an accrual basis net of related provisions for amounts considered doubtful of
collection.
Dividends are recognised when the right to receive the dividend is established.
Foreign currencies
i) Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance
sheet date. All differences are taken to the income statement.
ii) The accounting records of UBC are maintained in UAE Dirhams. The Rial Omani amounts included in the
consolidated financial statements have been translated at an exchange rate of 0.1047 Rial Omani to each UAE
Dirham for the income statement and the balance sheet items. As both the Rial Omani and UAE Dirham are
pegged to the US Dollar, no differences arise on translation.
Trade and settlement date accounting
All “regular way” purchases and sales of financial assets are recognised on the trade date, i.e. the date that the
entity commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets
that require delivery of assets within the time frame generally established by regulation or convention in the
market place.
Fair values
For investments traded in organised financial markets, fair value is determined by reference to quoted market
bid prices at the close of business on the balance sheet date. For unquoted investments, a reasonable estimate of
the fair value is determined by reference to the market value of a similar investment or is based on the expected
discounted cash flows.Where fair values cannot be reliably measured investments are measured at cost.
The fair value of interest-bearing items is estimated based on discounted cash flows using interest rates for items
with similar terms and risk characteristics.
9
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
4
INVESTMENTS IN SUBSIDIARIES
i)
The consolidated financial statements include the financial statements of the parent company and the
subsidiaries listed in the following table:
Activity
Country of
incorporation
Financial services
UAE
Sultanate of
Oman
Sultanate of
Oman
Company name
United Brokerage Company LLC
Majan special opportunities joint
investment accounts (MSOJIA)
Omani Euro Food Industries Co
SAOG (OEFIC)
Financial services
Manufacture of
baby food
2004
Proportion
held
2003
Proportion
held
100%
100%
55.58%
55.58%
65.74%
39.63%
During 2003 the tenure of MSJOIA has been renewed for an additional period of five years ending 16
November 2007. The tenure of MSJOIA can further be renewed subject to the approval of 75% of the unit
holders.
(ii) Acquisition of a subsidiary:
During 2004, OEFIC restructured its capital, reducing 97% of the original paid up capital from RO 4.2 million
to RO 126,000 against its accumulated losses. The capital was then increased to RO 4.2 million by offering new
shares to the existing shareholders and the public at the par value of RO 1 per share. The group acquired an
additional holding in the increased capital by converting a part of its existing loan to OEFIC amounting to RO
2,709,817 to share capital thus increasing its share holding in OEFIC to 65.74% effective 20 June 2004. The
group carried an impairment provision of RO 2,023,000 against the loan. The portion of the loan not recovered
amounting to RO 1,416,041 (note 8) was written off against the impairment provision. The remaining unutilised
impairment provision amounting to RO 606,958 was released to statement of income. Consequently, OEFIC has
become a subsidiary of the group.
The fair value of identifiable assets and liabilites of OEFIC as of 30 June 2004 acquired together with the
goodwill arising on acquisition is as follows:
RO
498,504
132,549
126,459
15,898
562
5,664,260
(3,800,000)
(632,983)
Cash and bank balances
Accounts receivables
Inventories
Prepayments, deposits and advances
Investments
Property, plant and equipment – net
Term loans
Payables
────────
Fair value of net assets of OEFIC
2,005,249
────────
Proportionate net asset value 65.74% shares acquired
Less: Post reduction shares held by the group
1,318,251
(24,475)
────────
1,293,776
────────
Purchase consideration settled through conversion of the loan
1,293,776
────────
Goodwill arising on acquisition
══════
The cash outflow on acquisition was RO nil.
The cash inflow arising from the acquisition was RO 498,504.
10
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
4
INVESTMENTS IN SUBSIDIARIES (continued)
The movement in the OEIFC loan account and its impairment provision during the year was as follows:
RO
Balance as at 1 January 2004
Utilised for acquisition of OEIFC
2,709,818
(1,293,776)
────────
1,416,042
(2,023,000)
────────
(606,958)
Less: impairment provision at 30 June 2004
Unutilised impairment provision written back (note 8)
══════
5
CASH AND CASH EQUIVALENTS
Cash and cash equivalents included in the statement of cash flows comprise the following balance sheet
amounts:
2004
RO
Bank balances and cash
Bank overdrafts
1,631,841
(4,099,435)
────────
(2,467,594)
═══════
2003
RO
940,020
(2,253,477)
────────
(1,313,457)
═══════
Bank balances and cash include:
i)
a bank deposit of RO 100,000 (31 December 2003 – RO 352,056l) with a commercial bank in Oman.
These are denominated in Rial Omani with an effective annual interest rate of 0.75% (31 December
2003 – 0.25% to 1.25%).
ii)
a bank deposit of RO 535,212 (31 December 2003- RO 531,920) with a commercial bank in the
UAE. This is denominated in UAE Dirhams, with an effective annual interest rate of 1.44% (31
December 2003 – 0.675% to 1.06%). The bank deposit has been pledged against overdraft facilities.
Bank overdrafts include:
i)
balances of RO 1,102,928 (31 December 2003 – RO 152,958) with commercial banks in Oman.
These are denominated in Rial Omani with an effective annual interest rate of 5.5% to 6% (31
December 2003 – 8.50% to 9%).
ii)
balances of RO 2,996,507 (31 December 2003 – RO 2,100,519) with commercial banks in the UAE.
These are denominated in UAE Dirhams with an effective annual interest rate of 3.55 to 4.10% (31
December 2003 – 2.25% to 2.40%).
11
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
6
INVESTMENTS
Local quoted investments:
Banking and investment sector
Manufacturing sector
Services and other sectors
Overseas quoted investments:
Banking and investment sector
Services and other sectors
Local unquoted investments:
Banking and investment sector
Service
Industrial
Foreign unquoted investment
Banking and investment sector
Industrial
Total
Available for
sale
RO
2003
Total
RO
2003
Original cost
Available
for sale
RO
18,482,881
748,308
2,042,976
───────
21,274,165
───────
489,562
1,908,989
498,300
───────
2,896,851
───────
18,972,443
2,657,297
2,541,276
───────
24,171,016
───────
22,420,968
4,975,348
2,446,869
───────
29,843,185
───────
15,457,680
1,535,876
1,163,122
───────
18,156,678
───────
433,500
31,800
532,500
───────
997,800
───────
15,891,180
1,567,676
1,695,622
───────
19,154,478
───────
22,181,214
1,547,040
1,323,402
───────
25,051,656
───────
2,630,995
2,808,514
───────
5,439,509
───────
───────
───────
2,630,995
2,808,514
───────
5,439,509
───────
1,220,530
1,799,977
───────
3,020,507
───────
1,111,330
1,403,122
───────
2,514,452
───────
───────
───────
1,111,330
1,403,122
───────
2,514,452
───────
1,152,351
1,469,786
───────
2,622,137
───────
───────
───────
250,000
41,240
160,000
───────
451,240
──────
250,000
41,240
160,000
───────
451,240
───────
250,000
41,240
160,000
───────
451,240
───────
───────
───────
250,000
41,240
160,000
───────
451,240
───────
250,000
41,240
160,000
───────
451,240
───────
250,000
41,240
160,000
───────
451,240
───────
───────
───────
26,713,674
═══════
54,967
145,869
───────
200,836
───────
3,548,927
═══════
54,967
145,869
───────
200,836
───────
30,262,601
═══════
54,967
213,588
───────
268,555
───────
33,583,487
═══════
───────
───────
20,671,130
═══════
102,702
───────
102,702
───────
1,551,742
═══════
102,702
───────
102,702
───────
22,222,872
═══════
213,588
───────
213,588
───────
28,338,621
═══════
-
2004
2004
Total Original cost
RO
Held for
trading
RO
Held for
Trading
RO
-
Investments aggregating RO 15,508,550 (31 December 2003 – RO 9,408,212) are pledged to commercial banks as security against credit facilities.
Unquoted investments are carried at cost. The fair value for unquoted investments cannot be reliably determined due to the unpredictable nature of future cash flows.
12
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
7
DETAILS OF SIGNIFICANT INVESTMENTS
Details of the group’s investment securities in which its holding exceeds 10% of the market value of its
investment portfolios, “ held for trading” and “available for sale”, as of 31 December 2004 are set out below:
31 December 2004:
Portfolio held for trading:
Quoted local securities:
Bank Muscat SAOG :
Shares
Loan Notes
Holding
% of
investment
portfolio
Number of
securities
17
15
1,056,717
2,248,633
Carrying
value
RO
Fair value
RO
Original
Cost
RO
6762,989
5,958,877
6,762,989
5,958,877
7,968,336
6,843,041
────────
12,721,866
═══════
────────
12,721,866
═══════
────────
14,811,377
═══════
Holding
%
Investments available for sale:
Quoted local securities:
Oman Fiber Optics Co SAOG
16
569,820
1,418,852
1,418,852
700,745
31 December 2003:
Portfolio held for trading:
Quoted local securities:
Bank Muscat SAOG :
Shares
Loan Notes
18
22
1,020,750
2,248,521
5,073,130
6,205,918
────────
11,279,048
═══════
5,073,130
6,205,918
────────
11,279,048
═══════
8,091,615
6,849,540
────────
14,941,165
═══════
Investments available for sale:
Nil
13
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
8
ACCOUNTS RECEIVABLE AND PREPAYMENTS
Amounts due from related parties (note 30)
Claims receivable
Advance for shares pending allotment
Other receivables
Trade receivables
Amounts due from trust clients
Loan receivable (note 30)
Prepaid expenses
Provision for doubtful debts
Provisions for doubtful debts on 1 January
Provision charged during the year
Transfer from provision for bank guarantees (note 31(i))
Loan receivable written off on acquisition of OEFIC (note 4 (ii))
Receivables written off
Write back of provision no longer required (note 4 (ii))
Provision for bad and doubtful debts on 31 December
2004
RO
3,903,852
1,469,143
1,145,232
530,183
1,664,680
201,037
47,069
23,412
───────
8,984,608
(5,402,809)
───────
3,581,799
══════
2003
RO
4,152,689
1,469,143
155,232
379,109
243,117
201,037
2,462,501
16,535
────────
9,079,363
(4,520,915)
────────
4,558,448
═══════
4,520,915
1,929,893
975,000
(1,416,041)
(606,958)
────────
5,402,809
══════
3,546,121
2,064,783
(979,055)
(110,934)
────────
4,520,915
═══════
Amounts due from trust clients are partly secured by securities held in trust for these clients. Provision has been
made in respect of the entire amount due, after considering the fair market value of the securities held.
Claims receivable represent amounts due from three former trust account customers to whom trust account
facilities were extended in previous years. It was later established that the granting of these facilities by the
former senior management was considered to be inappropriate and hence legal action was initiated for the
recovery of the amount in these trust accounts. Legal proceedings are in process to recover the amounts due.
However, provision has been made against the entire amount dues.
14
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
9
INVESTMENTS IN ASSOCIATES
a) The investments in associates are as follows:
Notes
Associate
Activity
Holding
2004
Carrying
value
2004
RO
Cost
2004
RO
Share of
Carrying
results of
value
associates Holding
2003
2003
2004
(%)
RO
RO
Cost
2003
RO
Share of
results of
associates
2003
RO
(%)
Emirates Ship Investment Company LLC (ESIC)
(formerly Combined Cargo LLC UAE (CCU))
The Financial Corporation SAOG
(FINCORP)
Dhofar Fisheries Industries Company
SAOG (DFIC)
Oman Medical Projects Co SAOG
(OMPC)
Oman Fiber Optic Company SAOG
(OFOC)
Oman Euro Food Industries Company
SAOG (OEFIC)
9 b Cargo
handling
Financial
Services
(i) Fish
processing
(i) Medical
Services
(ii) Manufacture
of optical
cables
(iii) Manufacture
of baby food
34
7,027,444
3,149,208
2,501,030
26 2,133,532
595,914
637,407
20
1,048,473
1,000,000
51,890
20 1,046,582
1,000,000
46,582
49
-
1,502,176
-
25
-
1,410,365
(267,998)
30
-
2,131,462
(110,340)
30
110,340
2,131,462
(499,058)
41 1,937,459
1,858,057
12,871
40
1,887,784
──────
8,883,582
══════
──────
8,075,917
══════
193,610
──────
7,782,846
══════
──────
2,636,190
══════
──────
5,227,913
══════
(i)
Due to the negative net worth of DFIC and OMPC as at 31 December 2004, the group has carried these investments at nil value.
(ii)
The group’s holding in OFOC was reduced from 41% to 16% effective July 2004 consequent to a sale of 25% of its holdings.
(iii)
Consequent to an acquisition of further shares of OEFIC the investee become a subsidiary effective 20 June 2004 (note 4 (ii)).
(iv)
Investments aggregating RO 267,920 (31 December 2003 – RO 9,408,212) are pledged to commercial banks as security against credit facilities.
15
──────
(70,196)
══════
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
9
INVESTMENTS IN ASSOCIATES (continued)
b)
Acquisition of associates
i)
Effective 1 January 2004, the group increased its holding in Emirates Ship Investment Company LLC
(ESIC) from 26% to 34.22% through acquiring an additional 8.22% shareholding at a purchase
consideration of RO 1,123,912 (USD 2,919,388). The purchase consideration was paid through the
conversion of part of the group’s loan to ESIC to share capital.
An analysis of the fair value of the assets acquired and the resulting goodwill arising is set out as follows:
RO
Assets
Liabilities
41,588,090
(27,915,195)
──────
13,672,895
1,123,912
(1,123,912)
──────
Nil
══════
Fair value of net assets of ESIC
Proportionate 8.22% share in the fair value of ESIC’s net assets
Purchase consideration settled through conversion of loan
Goodwill arising on acquisition of associate
The purchase consideration was determined based on the fair value of net assets of ESIC as of 31 December
2003.
Effective 11 December 2004 ESIC increased its paid up share capital from RO 377,300 to RO 4,154,150
through the issue of additional share capital of 3,776,850 to its existing shareholders. The group acquired
34.22% of the additional share capital at its nominal value by converting a substantial part of its remaining
loan to ESIC amounting to RO 1,292,425.
The conversion of the loan to share capital has been excluded from the consolidated statement of cash flows
as no cash transaction occurred.
ii)
10
Effective 19 April 2004, the group increased its holding in Dhofar Fisheries Industries Co SAOG (DFIC)
from 25% to 49% through an additional acquisition of 1,190,547 shares at a purchase consideration of RO
119,531 paid in cash. The entire equity of DFIC had eroded as on the date of acquisition and therefore there
is no allocable net asset value on acquisition. The entire purchase consideration of RO 119,531 was initially
considered as goodwill arising on acquisition. The goodwill was subsequently written off as it is considered
by the group’s management to be of no economic value (note 12).
INVESTMENT HELD TO MATURITY
2004
RO
Government Development Bonds:
- 32nd Issue – maturity in March 2009
- 33rd Issue – maturity in August 2009
1,000,000
2,000,000
───────
3,000,000
══════
2003
RO
──────
──
═════
══
The Government Development Bonds (GDB) are issued by the Government of the Sultanate of Oman,
carry an interest at 4.50% per annum. They are pledged to a commercial bank in Sultanate of Oman as
16
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
security towards associated term loans (note 15). As per the loan agreement terms the GDBs are to be sold
should their market value fall below 80%.
16
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
11
PROPERTY, PLANT AND EQUIPMENT
Buildings
RO
Balance at 1 January 2004, net of accumulated depreciation
Acquisition of a subsidiary (note 4 (ii))
Additions
Depreciation charge for the year
Balance at 31 December 2004, net of accumulated depreciation
At 1 January 2004
At cost
Accumulated depreciation
At 31 December 2004
At cost
Accumulated depreciation
Plant &
Machinery
RO
Leasehold
improvements
RO
Office
Equipment
RO
Vehicles
RO
Total
RO
995,241
(30,996)
───────
964,245
═══════
4,631,149
(138,225)
───────
4,492,924
═══════
1,975
5,358
78
(2,583)
───────
4,828
═══════
22,142
(6,093)
───────
16,049
═══════
15,442
17,706
11,433
(11,734)
───────
32,847
═══════
20,925
14,806
19,714
(14,239)
───────
41,206
═══════
60,484
5,664,260
31,225
(203,870)
───────
5,552,099
═══════
───────
═══════
───────
═══════
107,058
(105,083)
───────
1,975
═══════
99,896
(77,754)
───────
22,142
═══════
94,691
(79,249)
───────
15,442
═══════
57,677
(36,752)
───────
20,925
═══════
359,322
(298,838)
───────
60,484
═══════
1,309,274 5,528,996
(345,029) (1,036,072)
─────── ───────
964,245
4,492,924
═══════
═══════
146,798
(141,970)
───────
4,828
═══════
99,896
(83,847)
───────
16,049
═══════
163,839
(130,992)
───────
32,847
═══════
108,667
(67,461)
───────
41,206
═══════
7,357,470
(1,805,371)
───────
5,552,099
═══════
The depreciation charge for the year has been dealt with in the income statement as follows:
RO
Cost of sales
Administration expenses (note 27)
Furniture
and
fixtures
RO
174,530
29,340
────────
203,870
════════
17
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
12
GOODWILL
2003
RO
2004
RO
Balance at 1 January
Goodwill arising on acquisition of associate (note 9)
Impairment of goodwill
Amortisation charge for the year
84,494
119,531
(119,531)
(27,445)
─────────
57,049
─────────
Balance at 31 December
13
111,898
477,092
(477,092)
(27,404)
─────────
84,494
─────────
TAXATION
a)
The tax authorities in Oman follow the legal entity Concept. There is no concept of group taxation in
Oman
b) The group’s taxable entities consist of Oman & Emirates Investment Holding Company SAOG and
Subsidiaries, United Brokerage Company LLC, Majan Special Opportunities Joint Investments Accounts
and Omani Euro Food Industries Company SAOG.
c)
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
The tax rate applicable to the company is 12% (31 December 2003 - 12%). For the purpose of
determining the taxable result for the year, the accounting profit has been adjusted for tax purposes.
Adjustments for tax purposes include items relating to both income and expense. The adjustments are
based on the current understanding of the existing tax laws, regulations and practices.
The adjustments to accounting profit for the year has resulted in a taxable loss. Therefore, the applicable
tax rate is nil. The average effective tax rate cannot be determined in view of the taxable loss.
The company has taxation losses available for offset against future taxable profits as follows:
Available to 31 December 2005 (declared)
Available to 31 December 2006 (declared)
Available to 31 December 2007 (declared)
Available to 31 December 2008 (declared)
Available to 31 December 2009 (estimated)
2004
RO
2003
RO
2,201,934
1,281,924
279,620
2,093,510
2,752,418
2,201,934
1,281,924
279,620
2,093,510
-
The assessment of the company has been issued by the tax department up to tax year 1999. The company
has filed an appeal with the Tax Committee contesting certain adjustments made by the tax department in
the assessment for tax year 1994 to 1999. The decision on the appeal is still pending.
Deferred tax asset arise on the timing difference of provisions and brought forward losses. No deferred
tax asset has been recognized as it is not probable that future taxable profits will be available against
which the company can utilise the benefits there from.
d) United Brokerage Company LLC
United Brokerage Company LLC is a limited liability company registered and incorporated in the United
Arab Emirates and is engaged in providing brokerage Services. The company is not subject to taxation in
UAE.
18
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
13
TAXATION (continued)
e)
Majan Special Opportunities Joint Investments Accounts
In accordance with the Royal Decrees 54 and 55 of 2003, amending certain provisions of the income tax
laws, investment funds incorporated in Sultanate of Oman are exempt from tax with effect from 1 January
2003. Accordingly, Majan JIA has not made any provisions for tax for the year ended 31 December 2004.
Majan JIA is liable to tax at 12% of the taxable income in excess of RO 30,000 for the years’ ended up to
31 December 2002.
Majan JIA’s income tax assessments for the years 2000 to 2002 have not yet been finalized by the tax
authorities. The Investor’s Committee is of opinion that any additional taxes, which may be assessed in
respect of the open tax years relating to 2000 to 2002, would not be significant to the Majan JIA’s
financial position as of 31 December 2004.
f)
Omani Euro Food Industries Company SAOG.
The financial statement do not include provision for current tax since the Company incurred continuous
losses. It is not possible to determine what impact carry forward losses and temporary timing differences
will have on the Company’s taxation position as of 31 December 2004.
The Company has a carry forward loss for the tax purposes of approximately RO 6.5 million as of 31
December 2004.The Company’s tax assessments are completed up to 1999.
Deferred tax arises on the timing difference of depreciation and brought forward losses. No deferred tax
has been recognized due to continuous losses.
14
ACCOUNTS PAYABLE AND ACCRUALS
2004
RO
496,533
1,706,807
236,576
69,991
48,887
200,000
───────
2,758,794
═══════
Other payables and accruals
Accounts payable
Interest payable
Employees’ end of service benefits (note 23)
Unclaimed dividend
Directors’ remuneration
2003
RO
155,492
195,506
12,650
46,873
65,690
──────
476,211
══════
Accounts payable are normally settled within 60 days.
As per the directives of the Capital Market Authority (“CMA”) amounts of unpaid dividends which are
outstanding for more than seven months are required to be transferred to the “Investors’ Trust Fund” established
by CMA. Unpaid dividends amounting to RO 16,803 have been transferred to the CMA Fund during 2004.
19
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
15
TERM LOANS
The details of the company’s term loans are as follows:
Notes
2004
RO
2003
RO
From a commercial bank in Oman
US dollar term loans
Rial Omani term loans
(i)
(ii)
2,250,000
1,440,990
153,900
1,802,479
From commercial banks in UAE
UAE Dirham term loan
(iii)
2,759,068
───────
6,450,058
═══════
1,676,816
──────
3,633,195
══════
(i)
US dollar term loan carries an effective annual interest rate of 3.97% (31 December 2003 – 4.5%). The
loan is secured by a pledge over Government Development Bond (GDB) and is repayable on maturity of
the bonds from its proceeds (note 10).
(ii)
The Rial Omani term loans carry an effective annual interest rate of 4.5% to 6% (31 December 2003 –
4.5% to 8%). The loans are secured by pledge over company’s trading investments.
(iii)
The UAE dirham loans carry an effective annual interest rates ranging from 3.35% to 4.1% (30
September 2003 – 2.3% to 2.4%). These loans are secured by pledge over company’s trading
investments.
The maturity of the bank loans are as follows:
Due within one year
Due after one year
20
2004
RO
2003
RO
3,583,114
2,866,944
───────
6,450,058
═══════
3,291,957
341,238
──────
3,633,195
══════
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
16
LOAN FROM GOVERNMENTS
Loan from Governments (note i)
Government soft loans availed by OEFIC
Loan 1 (note ii)
Loan 2 & 3 (note iii)
2004
RO
2003
RO
15,000,000
15,000,000
2,200,000
1,600,000
───────
18,800,000
═══════
──────
15,000,000
══════
(i)
In 2001, the company received interest free loans from the governments of Oman and UAE of RO
7,500,000 each amounting to RO 15,000,000. The loans are repayable in November 2011. The loans
have been stated at the fair value of consideration received as represented by the actual cash received.
The terms of the loan agreement provides for payment of 10% interest for any delay in repayment of the
loan on maturity.
(ii)
Loan 1 from the Government of the Sultanate of Oman carry interest at 3% per annum and was repayable
in 10 equal installments of RO 220,000 commencing from January 2004. Following negotiation with the
Government of Oman, the commencement of the repayments has been deferred to January 2007. The
loans are secured against a first ranking legal mortgage over all present and future assets of the company.
(iii)
Loan 2 & 3 from the Government of the Sultanate of Oman carry interest at 3% per annum and were
repayable in 7 equal installments of RO 114,286 commencing from April 2003 and May 2005
respectively. Following negotiation with the Government of Oman, commencement of the repayments
has been deferred to April 2005 and May 2007 respectively. The loans are secured against a first ranking
legal mortgage over all present and future assets of the company.
As OEFIC, a subsidiary was unable to comply with conditions relating to repayment of its loans from the
Government of the Sultanate of Oman the differences between fair values and the principal amounts of the loans
are not accounted as deferred Government grants.
17
SHARE CAPITAL
2004
RO
As at 1 January - authorised and issued – 30,000,000 shares of RO 1 each
Reduction in capital adjusted against accumulated losses
As at 31 December – authorised and issued – 7,500,000 (30,000,000) shares
of RO 1 each
Calls in arrears
2003
RO
30,000,000
30,000,000
(22,108,417)
──────── ────────
7,500,000
(391,583)
────────
7,108,417
════════
30,000,0000
(525,932)
────────
29,474,068
════════
The company received approval from the Capital Markets Authority in March 2002 and from its shareholders in an
extra ordinary general meeting held in May 2002 to reduce its share capital from RO 30,000,000 to RO 7,500,000
by setting off RO 22,500,000 from the accumulated losses against its share capital. Approval of the change in the
capital clause of the Articles of Association from RO 30 Million to RO 7.5 Million was confirmed by Royal
Decree No. 26 / 2004 dated and effective 7 March 2004.
21
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
17
SHARE CAPITAL (continued)
Shareholders of the company who own 10% or more of the company’s shares, whether in their name, or through
a nominee account, and the number of shares they hold are as follows:
2003
2004
Abu Dhabi Investment Company, UAE
18
2,250,000
════════
9,000,000
════════
LEGAL RESERVE
As required by Oman company law, 10% of the profit for the year is transferred to legal reserve until such time as
the reserve totals one third of the paid up share capital. The company may resolve to discontinue such transfers as
the reserve totals one third of the issued share capital. The reserve is not available for distribution.
19
SPECIAL RESERVE
In accordance with the provisions of Article 106 of the Commercial Companies Law of Oman, the company has
established a voluntary “special reserve” for the purpose of covering any contingent risk arising out of the
guarantee issued to its associate (note 31 (i)) .
20
CUMULATIVE CHANGES IN FAIR VALUES
2003
RO
2004
RO
Relating to Available for sale investments
At 1 January
Realised during the year
Net movement in fair values during the year
Re-designated to investment in subsidiary of associates
At 31 December
21
320,739
(31,829)
382,647
27,433
──────
698,990
══════
698,990
(159,592)
811,497
───────
1,350,895
═══════
PROPOSED DIVIDENDS
The Board of Directors have proposed a cash dividend of RO 0.250 (2003 – nil) per share totalling RO 1,875,000
(2003 – nil) which is subject to the approval of the shareholders at the Annual General Meeting to be held in April
2005.
22
SECURITIES HELD UNDER TRUST AND ASSET MANAGEMENT AGREEMENTS
The value of securities held on trust for customers, at market value are analysed as follows:
Amounts held in:
Non discretionary margin trust accounts
Securities held under asset management agreement
22
2004
RO
2003
RO
127,147
694,161
────────
426,705
694,161
────────
821,308
════════
1,120,866
════════
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
23
EMPLOYEES’ END OF SERVICE BENEFIT
In accordance with Oman’s labour law the company accrues for an end of service benefits for its non Omani
employees.
Movements in the liability recognized in the balance sheet are as follows:
2004
RO
46,873
20,075
4,942
(1,899)
───────
69,991
═════
Liability as at 1 January
Expenses recognised in the statement of income
Transfer on acquisition of subsidiary
End of service benefits paid
Liability as at 31 December
24
2003
RO
47,517
11,480
(12,124)
────────
46,873
══════
BASIC EARNINGS PER SHARE
Earnings per share calculated by dividing the net profit for the year by the weighted average number of shares
outstanding during the year is as follows:
2004
RO
Net profit for the year
Weighted average number of shares outstanding during the year
Earnings per share
7,767,674
────────
7,108,417
────────
1.093
════════
2003
RO
621,783
────────
6,974,068
────────
0.089
════════
No figure for diluted earnings per share has been presented because the company has issued no ordinary shares
that may be dilutive.
25
INTEREST INCOME
Interest on bonds
Interest on fixed deposits
Others
26
2004
RO
2003
RO
608,628
18,777
695
────────
628,100
════════
514,918
17,828
3,186
────────
535,932
════════
2004
RO
2003
RO
37,097
46,375
34,358
────────
117,830
════════
1,862
11,818
────────
13,680
════════
OTHER INCOME
Fund management income
Discount on purchase of bonds
Miscellaneous income
23
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
27
ADMINISTRATION EXPENSES
Legal and professional fees
Securities market fees and charges
Travelling expenses
Rent
Others
Advertisement and promotion
Depreciation
Sitting fees
Postage, fax and telephone
General meeting expenses
Repairs and maintenance
Seminar expenses
28
2004
RO
2003
RO
68,217
54,403
52,021
48,204
45,158
35,440
29,340
21,800
18,635
12,378
6,451
3,931
───────
395,978
═══════
40,081
44,647
30,892
44,249
27,314
28,549
24,392
16,200
15,534
12,332
6,719
2,417
───────
293,326
═══════
2004
RO
2003
RO
462,135
20,075
16,353
166,274
───────
664,837
══════
362,987
11,480
10,069
109,093
───────
493,629
══════
5,849,274
(508,996)
───────
5,340,278
══════
3,656,344
(339,557)
───────
3,316,787
══════
NET PROFIT FOR THE YEAR
The net profit for the year is stated after:
Staff costs:
Salaries and benefits
Employees’ end of service benefits
Contribution towards Public Authority for Social Insurance Scheme
Other benefits
Net unrealised gain on trading investments:
Unrealised gain on trading investments
Unrealised loss on trading investments
24
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
29
PERFORMANCE DATA
Net assets
Net assets per share
30
2004
RO
2003
RO
17,112,018
────────
2.407
═══════
8,558,090
────────
0.290
═══════
RELATED PARTY TRANSACTIONS
These represent transactions with related parties as set out in accordance with International Accounting Standard
24, related party disclosures. Pricing policies and the terms of the transactions are approved by the company’s
management.
Transactions with related parties, or holders of 10% or more of the company’s shares or their family members,
included in these financial statements are as follows:
Loans to associates and guarantee settlements
Investment and subscription of shares in associate
Interest and development fee waived
Management fee income
Portfolio management fees
Investors Committee fess
Brokerage income
Directors’ remuneration and sitting fees
2004
RO
2003
RO
2,452,124
1,292,364
37,097
54,641
25,900
8,744
221,800
1815,137
1,865,373
677,760
7,236
31,167
10,200
16,200
Loans, advances and receivables due from related parties or holders of 10% or more of the company’s shares, or
their family members, minus all provisions and write offs which have been made on these accounts at any time,
can be further analysed as follows:
Omani Euro Food Industries Co SAOG
Emirates Ship Investment Company LLC
Dhofar Fisheries & Industries Co SAOG
The Financial Corporation SAOG
Oman Medical Projects Co SAOG
Provisions
Amounts due from related parties
25
2004
RO
2003
RO
47,069
3,887,105
5,916
10,831
────────
3,950,921
(3,671,655)
────────
279,266
════════
2,816,894
2,462,501
1,280,215
44,749
10,831
────────
6,615,190
(3,148,861)
────────
3,466,329
════════
Oman & Emirates Investment Holding Company SAOG and its Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2004
30
RELATED PARTY TRANSACTIONS (continued)
Dhofar Fisheries & Industries Co SAOG (DFIC) is an associate of the group to which the company has granted
bridge finance loans. As of 31 December 2004 the accumulated principal and interest amounted to RO
3,887,105 (31 December 2003 – RO 1,280,215) against which the company is carrying a provision for RO
3,671,655 and interest suspense of RO 215,450 (31 December 2003 - RO 1,218,454). As of 31 December 2004,
DFIC’s accumulated losses were in excess of its share capital, resulting in a deficiency of assets. The company
has also issued corporate guarantees on behalf of DFIC for an amount of RO 5,697,000 to certain commercial
banks in Oman (note 31).
31
COMMITMENTS AND CONTINGENCIES
i)
The company’s bankers have issued, on behalf of the company, an unconditional guarantee to the
Securities Markets in United Arab Emirate of Abu Dhabi aggregating to RO 1,047,000 (31 December
2003: RO 1,047,000) for carrying out brokerage activities.
The company’s bankers have issued a letter of guarantee to the Central Bank of the UAE on behalf of
the company for RO 314,100 (31 December 2003: RO 314,100) for carrying out investment banking
activities.
The company has issued corporate guarantees amounting to RO 5,697,000 (31 December 2003: RO
6,165,000) to commercial banks towards credit facilities granted to DFIC amounting to RO 4,586,964
as at 31 December 2004 (31 December 2003: RO 6,377,426). During 2004, DFIC concluded a debt
restructuring programme with its banks. The restructuring programme involved write-off of a portion
of the past interest, reduction in contracted rate of interest and re-schedulement of existing debt for a 12
year term.
ii)
During 2003 a trust account holder had lodged a claim against the company at the Commercial Circuit
of the Primary Court concerning a dispute over settlement of a trust account. The legal proceedings are
in progress.
Management of the company is confident that no liability will ultimately arise. No provision for any
financial effect that may arise has been included in the financial statements.
26
Oman & Emirates Investment Holding Company SAOG and Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 March 2004
32
SEGMENTAL INFORMATION
The company operates in the investment industry. The group’s operating revenues arise primarily from
investment activities which are based mainly in the Sultanate of Oman. The group operates in two geographic
locations; the Sultanate of Oman and the United Arab Emirates. The geographical analysis of income, expenses,
profit and assets and liabilities is based primarily upon the location of the branch responsible for reporting the
results.
Oman
2004
Operating income
Overheads
Net income
Finance cost
Provision for
doubtful debts
Provision for bank
guarantee
Share of (losses)
profits of associates
Amortisation of
goodwill and fair
value consideration
Directors’
remuneration
Negative goodwill
on acquisition of a
subsidiary
Profit on sale of
subsidiary
Minority interest
UAE
2003
2004
Total
2003
2004
2003
4,860,691
598,770
5,459,461
6,013,105
3,240,035
9,253,140
(951,504)
(183,796) (1,290,254) (1,135,300)
(943,317)
(346,937)
─────── ─────── ─────── ─────── ─────── ───────
3,909,187
414,974
4,324,161
5,069,788
2,893,098
7,962,886
─────── ─────── ─────── ─────── ─────── ───────
(67,328)
(104,460)
(171,788)
(163,884)
(172,834)
(336,718)
(1,924,016)
(2,039,460)
(43,125)
(1,020,000)
(5,877)
(25,323)
-
-
2,501,029
637,406
(1,929,893)
(2,064,783)
(43,125)
(1,020,000)
135,161
(707,603)
(119,351)
(477,092)
(27,445)
(27,404)
(146,976)
(504,496)
(200,000)
-
-
-
(200,000)
-
-
105,792
-
-
-
105,792
320,000
(296,907)
(174,870)
─────── ─────── ───────
Net profit for the
(273,411)
2,579,703
5,187,971
year
═══════ ═══════ ═══════
2,636,190
(70,196)
───────
895,193
320,000
(296,907)
(174,870)
─────── ───────
621,783
7,767,674
═══════
═══════ ═══════
Other information:
Segment assets
Segment liabilities
36,750,651
═══════
17,909,090
═══════
25,071,718
═══════
11,609,385
═══════
8,022,513
15,572,975
═══════ ═══════
14,930,398 11,416,574
═══════ ═══════
27
52,323,626 33,094,231
═══════ ═══════
32,839,488 23,025,959
═══════ ═══════
33
RISK MANAGEMENT
Interest rate risk
The group is exposed to interest rate risk on its interest bearing assets and liabilities (bank deposits, bank
overdraft and short term loan). The management monitors the interest rate risk by setting limits on the interest
rate gaps for stipulated periods.
Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the
other party to incur a financial loss. The group attempts to control credit risk by monitoring credit exposures,
limiting transactions with specific counter parties and continually assessing the creditworthiness of counter
parties.
Liquidity risk
The group limits its liquidity risk by ensuring bank facilities are available. Client and broker receivables, included in
trade receivables are settled within 30 days. Trade accounts payable are normally settled within 60 days of the date
of purchase.
34
FAIR VALUES OF FINANCIAL INSTRUMENTS
Financial instruments comprise financial assets, financial liabilities.
Financial assets consist of cash and bank balances, investments and receivables. Financial liabilities consist of
bank overdrafts, term loans, payables, and accrued expenses.
The fair values of financial instruments, with the exception of certain available-for-sale investments carried at cost
(note 6) are not materially different from their carrying values.
35
COMPARATIVE FIGURES
Certain corresponding figures for previous year have been reclassified in order to conform with the presentation in
the current year. Such reclassifications do not affect previously reported net profit or shareholders’ equity.