Chairman’s Report
On behalf of Board of Directors, it gives me pleasure to welcome you to the second
Annual General Meeting of Hotels Management Company International SAOG.
I
would also like to avail this opportunity to present to you the second annual
report
of Hotels Management Company International SAOG for the year ended December 31st
2004.
The company was operating smoothly during the year which was a very successful year
for the hotel, where it succeeded to make a Gross Operation Profit of RO. 1.2 Million
against the budget of RO. 0.69 Million.
The announcement of Gulf Air to introduce a daily non-stop flight from Muscat to
London Heathrow airport facilitated in increase traveler’s from London to arrive
Muscat. Oman Air launched its first non-stop flight to Bahrain in April 2004 which
attracted lot of customers from Bahrain to Muscat.
The government of His Majesty had continued its full support to the tourism sector by
creating Ministry of Tourism as an independent ministry, a step highly valued
appreciated by the whole sector, in the Sultanate.
With the sincere efforts of the Board of Directors, the company has managed to obtain
government soft loan of RO. 3 Million and commercial term loan of RO. 6 Million to pay
off private loans and outstanding to the project contractors. The balance amount was
injected in to the operations.
I am delighted to inform the shareholders that our hotel received the following awards
during the year 2004.
a)
2004 Oman Today’s wining Restaurant Award for: Best Service
 Best International Cuisine
 Best Ambience.
b)
Deepa Hotel Awards 2004 for The Best Architectural design hotel in
Middle East.
c)
Conde Nast Traveler Hot List 2004 listed our hotel as one of the 100 best
new hotels in the world and one of the 66 Hot New Restaurants
in
the world.
d)
Harpers & Queen 2004 selected The Chedi Muscat as one of the 100 best
places on earth & best hotel experience.
Considering the trend of future booking and the growth of tourism sector in Sultanate of
Oman, the company expects a very successful year 2005.
In conclusion and before ending my report, I am proud to convey our sincere thanks and
appreciation to His Majesty’s government for their endeavors in implementing His
Majesty’s goals and objectives and in particular, the Ministry of Commerce
and
Industry, Ministry of Tourism, Capital Marketing Authority and Muscat Securities
Market.
I also wish to record our sincere thanks to all our clients and well wishers for their
valuable confidence in our company. We also thank and record our appreciation for the
special efforts of the staff and the management of our Company in particular.
Mohamed Bin Thuwainy Bin Shihab Al Said
Chairman
MANAGEMENT DISCUSSION AND ANALYSIS
1. Key Financial high lights:
 Company has achieved an overall occupancy of 54.14% during the period
ended
31st December 2004 with an Average Rooms Rate of R.O.
58.76.
 Total Revenue during the period is R.O. 3,693,100 comprised of Room
Revenue
R.O. 1,781,566, Food and Beverages R.O. 1,609,878 and
other department
R.O. 301,656.
 The Company recorded a net loss of R.O. 574,352 for the year 2004.
 Major portion of the loss is comprised of finance cost and depreciation.
2. Industry structure and development:
Tourism has picked up in Sultanate of Oman. People are more aware that country
can offer a compelling sense of exploration and discovery, culture and adventure
holiday that few would imagine possible.
Oman benefits from a diversity of natural attractions which include vast deserts
with rolling san dunes, white sand beaches with clean water, coral reefs offering
excellent diving, dramatic mountain ranges, and fertile valleys with attractive
wadis and fruit plantations. While the interior is rich in heritage and historical
sites like forts and castles, the eastern area offers totally different opportunities.
Beaches, the sea and diving are popular attractions in summer.
The Government continued its full support to the tourism sector by creating
Ministry of Tourism as an independent ministry, a step highly valued and
appreciated by the tourism sector in the Sultanate.
3. Opportunities and Threats:
a)
Opportunities:
It is getting unavoidable to get more flexible with visa procedure and to
enhance and spread up the process at the airport. The first impression the
tourist on their arrival at airport is one of the most important factors in the
tourism industry.
We continue to focus on the existing market price and nationality mix where
we have a healthy mix from local GCC residents and European visitors as
well as a healthy mix of tourist and corporate business.
With the new development of Barr Al Jissah Resort opening by end of 2005,
the competition increases where at the same time we don’t expect any loss of
room night to us. The country’s, new resorts will help to put Oman on the
international map. The Chedi has already achieved a very good reputation in
the international market and substantially increased the awareness about
Chedi as well as Sultanate of Oman nationally and internationally.
The Chedi has done an excellent job in promoting itself and at the same time
the Sultanate of Oman. The awareness of Oman in Europe is much wide
spread than year before. The tourist from Europe is trying to avoid the
construction site of Dubai
b)
Threats:
With a lot of upcoming new projects in the Middle East the competitive
pressure will increase once all the developments are in place. The
introduction of minimum rate agreement will have no effect on us as the
rates are already much higher.
4. Analysis of segment and product wise performance:
a)
Total Revenue by Geographical Segment:
Region
GCC
Europe
USA/Canada
Asia
South East Asia
Total
b)
Total Revenue
417,092
2,574,775
55,262
592,891
53,080
3,693,100
Percentage
11.29%
69.72%
1.50%
16.05%
1.44%
100%
Production of Rooms segment wise:
Market
Corporate Local
Cor Prefered
Govt./Diplomate Disc
Long Term Rental
Company meeting Corp
Tour Operator
Special Package
Rack Rate
Travel Industry
Total
Room Nights
5,735
3,884
762
Revenue
331,084
155,174
44,109
ARR
57.12
38.37
47.91
217
13,663
2,654
3,322
84
30,321
8,868
748,215
154,030
333,637
6,449
1,781,566
47.12
54.43
58.38
98.91
64.87
58.76
5. Future out look:
We expect a considerable increase in the occupancy as well as in the Average Room
Rate during the year 2005. Operational results for the initial months of year 2005
and the future bookings ensure an excellent performance for 2005. Currently The
Chedi Muscat is well known in Europe as well as GCC countries and considered as
one of the exclusive destinations.
6. Risk & Concern:
Due to the increasing demand for SPA and Health Club facilities, up-gradation is
needed for these facilities in the coming year.
The Air traffic noise is one of the major concerns from the Guest.
A drastic increase of the payroll is to be expected due to the minimum rate structure
given by the government for local staff members.
7. Internal control system and their adequacy:
We believe that development of employees and effective systems are critical for the
success of any business in today’s competitive tourism industry. Apart from our
investment is selection and training of our employees, we also invested fully
computerized system to ensure the internal control system in the key areas of the
business. The Fidelio system in the front office and back office, Micros system in
the Food and Beverages department and material and asset management system in
the material receipt areas ensure the strict internal control system of the company. A
telephone call accounting system is installed to ensure the control of telephone usage.
The internal audit department of General Hotel Management Co., periodically
review the key issues related to employees, business process and internal controls in
all department and all key areas of operations.
With the fast changing business environment and technology, the process of review
and up gradation of business process and control/systems is a continuous one. The
up gradation of the existing version of the Fidelio system is expected with in couple
of months to increase the accuracy of control system.
We the management and the employees will deliver sustainable and profitable
growth and long term value creation for our share holders.
York Brandes
General Manager
CORPORATE GOVERNANCE REPORT
(a)
Company Philosophy:
In accordance with the Capital Market Authority code of coporate governance
issued vide circular No.11/2002 as amended by circular 1/2003 to govern the
organization and management of public liability companies, Hotel Management
Company International (S.A.O.G) has adopted, since its formation, a strategy of
clarity, planning, transparency and strict compliance with the laws.
We are pleased to explain as follows:
(b) Constitution of the Board of Directors of the Company:
The Board of Directors has 10 members as follows:
No.
Name of the Board of Director
Position
1
H.H. Sayyid Mohamed Thuwainy Chairman
Shihab Al Said
2
Mr. Abdullah Humaid Al Maamri
3
H.H. Sayyidah
Shihab Al Said
4
Mr. Ahmed Bin Said Al Mehrezi
5
Category
Representing Company
Non Exec./Non Independent
Al Shahba Investment Co. LLC.
Non Exec./ Independent
Sultan’s Special Force Pension Fund.
Non Exec./Non Independent
Al Shahba Investment Co. LLC.
Director
Non Exec./Independent
Civil Service Employee Pension Fund.
Mr. Mohamed Khamis Al Hasani
Director
Non Exec./Independent
Project Investment LLC.
6
Dr. Abdullah Ali Al Harthy
Director
Non Exec./Independent
Royal Oman Police Pension Trust LLC
7
Mr. Mosobah Saif Al Muthairy
Director
Non Exec./Independent
Royal Guard of Oman Pension Fund.
8
Mr. Pankaj Khimji
Director
Non Exec./Non Independent
Wadi Al Nuiman Enterprises LLC.
9
Mr. Darab Bomanji Dubash
Director
Non Exec./Independent
Al Arkan Trading Ltd.,
10
Mr. Majid El Solh
Director
Non Exec./Independent
Capital Financial Group Ltd.,
Aliya
Vice Chairman
Thuwainy Director
The board has the following two sub committees:
 Audit committee
 Executive committee
The audit committee has been formed from the following board members:
Mr. Mosobah Saif Al Muthairy
Dr. Abdullah Ali Al Harthy
Mr. Mohamed Khamis Al Hasani
-
Chairman
Member
Member
The executive committee has been formed from the following members:
Mr. Abdullah Humaid Said Al Maamri
H.H. Sayyidah Aliya Thuwainy Shihab Al Said
Mr. Ahmed Bin Said Al Mehrezi
(c)
-
Chairman
Member
Member
Functions and responsibilities of the Board of Directors:
Functions:
The Board of Directors is responsible for supervising the company’s operational
work through setting strategies, rules and regulations as well as implementing
them in accordance to local regulations.
Responsibilities:
Setting over all strategic directions of the company and approving the business
and strategic plans.
Monitoring performance and evaluating the management of the company.
Approving interim and annual financial statements.
Forming various board sub-committees and reviewing the functions of these
committees.
Reviewing all audit reports.
(d) Board Meetings:
According to laws, Board of Directors is required to hold a minimum of four
meeting a year
(i.e. minimum one meeting every three months). These
meetings aimed to execute board duties and responsibilities through discussing
financial and management reports and taking necessary decisions on this regard.
(e) Executive administration:
The company under an operating and management agreement with GHM
delegated the operational responsibilities of the hotel to GHM. The management
company performs its responsibilities and duties in accordance with the
agreement between GHM and the company.
GHM is responsible for managing the hotel and receives fees based on the total
revenue and gross profit. The Board broadly overseas the functioning of the hotel
and regularly reviews and monitors the hotel’s performance. GHM prepares
budget and marketing plan and the Board of Directors reviews and approves
them.
It has been recently agreed between the Board and GHM to update the
Management Agreement omitting the share of severn holding company from the
management fees.
(f)
Number of Meetings of the Board:
The company held 11 Board Meetings during the year 2004
Dates of meetings and director’s attendance:
2004
January
March
25th
07th
February
April
22nd
04th, 18th
May
05th, 08th,
June
06th, 30th
September
6th
November
30th
No:
Name of the Board of Director
1
H.H. Sayyid Mohamed Thuwainy
Shihab Al Said
Mr. Abdullah Humaid Siad Al
Maamri
H.H. Sayyidah Aliya Thuwainy
Shihab Al Said
Dr. Abdullah Ali Al Harthy
Mr. Mosobah Saif Al Muthairy
Mr. Pankaj Khimji
Mr. Ahmed Bin Said Al Mehrezi
Mr. Mohamed Khamis Al Hasani
Mr. Darab Bomanji Dubash
Mr. Majid El Solh
2
3
4
5
6
7
8
9
10
(g)
Position
No: of meetings
attended
8
Last AGM
Attendance
Yes
Vice Chairman
11
Yes
Director
4
Yes
Director
Director
Director
Director
Director
Director
Director
9
11
6
11
11
---
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Chairman
Audit Committee:
The Board has established an Audit Committee comprising of 3 members Mr.
Mosobah Saif Al Muthairy (Chairman), Dr. Abdullah Ali Al Harthy (member),
and Mr. Mohamed Khamis Al Hasani (member).
The objective of the Audit Committee is to review the company’s monthly
operational results, annual financial statements, budgets and marketing plans,
review the accounting policies, financial status and performance of the hotel.
Number of meetings of audit committee:
A total of 12 meetings were held by the audit committee during the period 01st
January 2004 to 31st December 2004.
Dates of meetings and member’s attendance:
2004
January
28th
February
18th
st
March
21
April
04th, 24th
June
06th, 29th
September
06th,
October
13th, 31st
November
03rd
December
19th
No: Name of the Audit Committee Member Position No: of meetings attended
1 Mr. Mosobah Saif Al Muthairy
Chairman
12
2 Dr. Abdullah Ali Al Harthy
Member
8
3 Mr. Mohamed Khamis Al Hasani
Member
10
(h) The Auditors and the internal audit system:
In accordance with the prevailing regulations, the appointment of company’s
external auditors is approved at the constitutive general meeting. This duty was
given to AGN Mak Ghazali LLC while internal audit was carried out by the
management company (GHM) auditor. The Board of Director recruited new
Internal Auditor/Compliance Officer during the year 2004. However due to his
unsatisfactory performance he was asked to vacate the office. Thus the Internal
Auditor was in office only for 3 months during the year 2004.
(i)
Executive Committee:
The executive committee consists of three members Mr. Abdullah Humaid Said
Al Maamri (Chairman), H.H. Sayyidah Aliya Thuwainy Shihab Al Said
(Member) and Mr. Ahmed Bin Said Al Mehrezi (Member). The objective of the
committee is to discharge the responsibilities on behalf of the board in deciding in
specific policy matters beyond the powers delegated to the management of the
company.
(j)
Number of Executive Committee Meetings:
The Executive Committee held 5 meetings during the period from 01st January
2004 to
31st December 2004.
Dates of meetings and member’s attendance:
2004
April
June
October
04th
30th
24th
May
September
No: Name of the Executive Committee member
Position
1 Mr. Abdullah Humaid Said Al Maamri
Chairman
2 H.H.
Sayyidah
Aliya
Thuwainy Member
Shihab Al Said
3 Mr. Ahmed Bin Said Al Mehrezi
Member
(k)
17th
06th
No: of meetings attended
5
3
5
Remuneration Matters:
1.
Directors:
As all members of the board are non- executive directors, no fixed salary or
performance linked incentives are applicable. The non executive directors
are paid sitting fees for attending the board/committee meetings. Directors
sitting fees paid during 2004 are as follows:
Name of the Board of
Director
H.H. Sayyid Mohamed
Thuwainy Shihab Al Said
Mr. Abdullah Humaid Al
Maamri
H.H.
Sayyidah
Aliya
Thuwainy Shihab Al Said
Dr. Abdullah Ali Al Harthy
Mr. Mosobah Saif Al
Muthairy
Mr. Pankaj Khimji
Mr. Ahmed Bin Said Al
Mehrezi
Mr. Mohamed Khamis Al
Hasani
Total
Directors
remuneration
Position
BOD
meeting
1,200
Exec:
Vice
Chairman
Director
1,650
750
2,400
600
450
1,050
Director
Director
1,350
1,650
Director
Director
900
1,650
Director
1,650
Chairman
10,650
Audit
Total
1,200
1,200
1,800
900
2,400
750
1,950
2,550
3,450
1,500
3,150
4,500
17,100
2.
Executives:
The companies Top Five Executives are:
No:
1
2
3
4
5
Name
Mr. York Brandes
Mr. Thomas Mathew
Mr. Ahmed Bin Salim Al Kharbooshi
Mr. Gregory McLean
Mr. Andrew King/Mr. Morton Johnston
Details of remuneration paid to the top 5
89,696
Employees in aggregate
18,140
Position
General Manager
Financial Controller
Director
of
Human
Resource
Executive Chef
Room Division Manager
- Salary
R.O.
- Allowances R.O.
- Total
R.O.
107,836
Details of fixed components and performance
paid
linked incentives along with performance
criteria
- No such incentives are
Service contracts, notice period and
years
Severance pay
month
- Service contract - 2
- Notice period - One
- Severance pay - One
month
The hotel is under a management agreement signed during foundation with
(GHM) group. Though this agreement (GHM) has the authority to operate this
agreement will be valid as detailed in its articles. Future steps and plans will be
negotiated between (HMCI) and (GHM).
GHM is managing the hotel against agreed fees, which is a percentage from gross
operating profit and another fixed % from total revenue.
Board of Directors is constantly supervising, assisting and reviewing the hotel
performance. GHM proposes annual budget and marketing plans, while the
Board of Directors review and approves these plans.
(l)
Market Price:
600,000/- shares were transferred by Financial Corporation to Al Shahba
Investment LLC., during the year 2004, for a total price of R.O. 612,000/- The
company’s shares were not traded during the year 2004 except the above said
transaction.
(m)
Other Aspects:
A case has been filed against the company by Khimji Ramdas Group for non
payment of dues. However during the last Board Meeting two of the Board
Members are assigned to discuss with the representatives of Khimji Ramdas
Group and try to finalize this issue through an outside court settlement.
(n) Rules for related parties transactions:
All contracts and transactions between the company and related parties are
within the company’s standard procedure adopted with other clients.
(o)
Details of non compliance by the company
In view of the fact that the company has fulfilled all its obligations and fully
complied with the laws and regulations, no penalties were imposed against the
company by MSM/CMA or any statutory authority on any matter related to
capital market since its formation.
During CMA Audit visit number of administrative issues were raised which has
been rectified immediately.
(p)
Specific areas of non-compliance with the provisions of corporate governance
and reasons:
(i) Due to the fact that the company did not have its own internal auditor the
Board of Director depended on (GHM) auditor’s reports and will continue
to do so until it has its own.
(q)
Means of Communication with shareholder and investors:
Whether the half-yearly results are sent
Directors’
each of the shareholders
-
No.
However
the
report and the company’s
quarterly
results
are
published
in daily newspapers in
Arabic
and English.
Name of the web-site where these are posted having its
The
company
is not
own website.
Presentations made to institutional investors made to
No presentation were
institutional investors.
Whether Management Discussion & Analysis is a part of annual report or not
(r)
Major share holders:
Share Holders
Al Shabha Investment Co LLC
Capital E Financial Group Ltd
Nordic Investments LLC
Wadi Al Nuiman Enterprise LLC
Civil Service Employees Fund
Sultan Special Force Pension Fund
Project investment LLC
Royal Guard of Oman Pension Fund
Al Arkan trading Ltd
ROP Pension Trust LLC
Salim Hassan Maki LLC
Total
(s)
Yes
No: of Shares
1,200,000
300,000
300,000
300,000
180,000
170,000
150,000
150,000
120,000
100,000
30,000
3,000,000
%
40%
10%
10%
10%
6%
5.67%
5%
5%
4%
3.33%
1%
100%
Professional Profile of the Statutory Auditor
AGN Mak Ghazali LLC., statuary auditors, is a reputed firm operating in the
Sultanate of Oman and is a member firm of AGN International U.K. They are
the 14 largest accounting networks operating in 80 countries with 500 offices
world-wide and employing around 10,000 staff.
Chairman
Vice Chairman
Report of Factual Findings in connection with corporate governance report of Hotels
Management Company International SAOG and the application of corporate
governance practices in accordance with the Capital Market Authority (CMA) code of
corporate governance
TO THE SHAREHOLDERS OF HOTELS MANAGEMENT COMPANY
INTERNATIONAL SAOG
We have performed the procedures prescribed in CMA circular no. 16/2003, dated 29
December 2003 with respect to the accompanying corporate governance report of Hotels
Management Company International SAOG and its application of corporate governance
practices in accordance with the CMA code of corporate governance issued under circular no.
11/2002 dated 3 June 2002 and its amendments. Our engagement was undertaken in
accordance with the International Standard on Auditing applicable to agreed–upon
procedures engagements. The procedures were performed solely to assist you in evaluating
the extent of the company’s compliance with the code as issued by the CMA.
We report our findings below:
1.
We found the company’s corporate governance report omits discussion on the
following areas as suggested in Annexure 4 of the code:
i)
ii)
2.
Number of other Boards or Board committees of which he/ she is a member or
chairperson;
Process of nomination of directors.
We found that company’s corporate governance report omits discussion on the
company’s non compliance with the code in the following area:
i)
iii)
Company has two directors representing Al Shahba Investment Co llc. This is
in violation of Article 1 of Ministerial decision 137/2002, which stipulates that
a juristic person shall not be represented by more than one Director in the
Board.
Minutes of the meeting of the Audit committee are not placed before the
Board.
Company is yet to formulate work and procurement policy.
iv)
Company is yet to formulate the Charter of Audit Committee
ii)
v)
vi)
The Board resolution and nomination forms for change in the Directors,
effected during the year 2004 have not been duly communicated to CMA.
The Directors have not conducted a review of the effectiveness of the
company’s system of internal control.
We also draw attention to the following paragraphs of the Board of Director’s corporate
governance report:
i)
Paragraph (h) states that the Internal auditor was in office only for three
months during the year 2004.
ii)
Paragraph (p) which states that the company has not made any representations
to institutional investors.
Because the above procedures do not constitute either an audit or a review made in
accordance with International Standards on Auditing, we do not express any assurance on the
corporate governance report.
Had we performed additional procedures or had we performed an audit or review of the
corporate governance in accordance with International Standards on Auditing, other matters
might have come to our attention that would have been reported to you.
Our report is solely for the purpose set forth in the first paragraph of this report and for your
information and is not to be used for any other purpose. This report relates only to the
accompanying Board of Director’s corporate governance report to be included in the
company’s annual report for the year ended 31st December 2004 and does not extend to any
financial statements of Hotels Management Company International SAOG, taken as a whole.
Place: Muscat
Date :
DAVIS KALLUKARAN
AGN MAK GHAZALI llc
CHARTERED CERTIFIED ACCOUNTANTS
MH/1/95
HOTELS MANAGEMENT COMPANY INTERNATIONAL SAOG
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2004
Contents
Auditors report
Income statement
Page
1-2
3
Balance sheet
4
Cash flow statement
5
Statement of changes in equity
6
Notes to the financial statements
7-17
Report Of The Auditors To The Shareholders Of
Hotels Management Company International SAOG
We have audited the accompanying balance sheet of Hotels Management Company
International SAOG (“the company”) as at 31 December 2004 and the related statements
of income, changes in equity and cash flows for the year then ended.
Respective responsibilities of the Board of Directors and Auditors
These 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.
The financial statements of the company as at 31 December 2003 were audited by
another auditor whose report dated 17 April 2004 expressed an unqualified opinion on
those financial statements.
Basis of opinion
We conducted our audit in accordance with International Standards on Auditing as
promulgated by the International Federation of Accountants. 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.
Opinion
In our opinion, the financial statement presents fairly, in all material respects, the financial
position of Hotels Management Company International SAOG as at 31 December 2004
and the results of its operations and its cash flows for the year then ended in accordance
with International Financial Reporting Standards, and comply, in all materials respects,
with the relevant disclosure requirements of the Capital Market Authority and the
Commercial Companies Law of 1974, as amended.
Without qualifying our opinion, we draw attention to the following:
i) As more fully explained in note 2 to the financial statements, the company has
incurred a net loss of RO 574,352 during the year and the accumulated losses at 31
December 2004 amounted to RO 3,813,760. At that date, its share capital has been eroded
and the company has net liabilities of RO 667,117. These factors raise a substantial doubt
that the company will be able to continue as a going concern without the continued
support of the shareholders.
Report Of The Auditors To The Shareholders Of
Hotels Management Company International SAOG (continued)
ii) As stated in note 1(c) to the financial statements, the Board of Directors have
appointed forensic professionals to review the cost outlay during hotel construction period.
The Board of Directors is yet to receive the report of findings. The ultimate findings of the
matter described cannot presently be determined.
iii) Loan outstanding of RO 1,668,633, inclusive of interest payable, due to Gulf Eyes
Trading as on 31st December 2004 has not been independently confirmed.
iv) The independent consultant to the hotel construction project has notified the company
about probable interest payments to contractors for delayed payments. The board of
directors disputes these claims and are confident that no liability will arise. As stated in
note 21 to the financial statements, the ultimate outcome of the matter described cannot
presently be determined and no provision for liability that may result has been included in
these financial statements.
Place: Muscat
Date :
DAVIS KALLUKARAN
AGN MAK GHAZALI llc
CHARTERED CERTIFIED ACCOUNTANTS
MH/1/95
Hotels Management Company International SAOG
INCOME STATEMENT
For the year ended 31st December 2004
Notes
01/01/2004
to
31/12/2004
(12 months)
01/11/2002
to
31/12/2003
(14
months)
RO
RO
1,194,998
Revenue
4
3,693,100
Direct costs
5
(1,521,616)
───────
2,171,484
Gross profit
Administration expenses
Depreciation
Management and license fees
Other operating expenses
8
(907,282)
───────
287,716
(956,849)
(699,369)
(184,605)
(236,866)
───────
93,795
(732,365)
(795,848)
(71,783)
(50,746)
───────
(1,363,026)
(700,279)
32,132
───────
(574,352)
(748,898)
(586,562)
───────
(2,698,486)
═══════
═══════
Profit/(Loss) from operations
Pre-operating income and establishment expenses (net)
Finance costs
Deferred government grant income
6
13
7
Net loss for the year
19
(0.191)
(0.899)
Basic loss per share
═══════
3
═══════
Hotels Management Company International SAOG
INCOME STATEMENT
For the year ended 31st December 2004
The attached notes 1 to 25 form part of these financial statements.
3
Hotels Management Company International SAOG
BALANCE SHEET
As at 31 December 2004
31/12/2004 31/12/2003
RO
RO
ASSETS
Non-current assets
Property, plant and equipment
8
9,484,566
10,098,159
─────────
─────────
9,484,566
10,098,159
─────────
─────────
182,736
504,678
14,173
1,392,805
353,658
227,963
8,015
37,506
─────────
─────────
2,094,392
627,142
─────────
─────────
Current assets
Inventories
Trade and other receivables
Due from related parties
Bank balances and cash
9
10
18
TOTAL ASSETS
EQUITY AND
11,578,958
═══════
10,725,301
═══════
LIABILITIES
Capital and reserves
Share capital
Accumulated losses
Replacement reserve
11
12
3,000,000
3,000,000
(3,813,760) (3,092,765)
146,643
─────────
(667,117)
─────────
(92,765)
Net deficit
─────────
─────────
Non-current liability
Term loans
Deferred Government grant
13
13
Employees’ end of service benefits
14
8,353,206
396,794
22,852
13,485
─────────
─────────
8,772,852
13,485
─────────
─────────
341,433
955,899
335,964
3,538,161
288,801
Current liabilities
Term loans - current maturities
Trade and other payables
Due to related parties
13
15
18
5
Hotels Management Company International SAOG
BALANCE SHEET
As at 31 December 2004
Loans from related parties
16
1,839,927
6,977,619
─────────
─────────
3,473,223 10,804,581
─────────
─────────
TOTAL EQUITY AND LIABILITIES
11,578,958 10,725,301
Net liabilities per share (RO)
═══════
(0.222)
═══════
═══════
(0.031)
═══════
The attached notes 1 to 25 form part of these financial statements.
These financial statements were approved and authorised for issue by the board of directors on
__________ and signed on their behalf by.
Chairman
Director
Auditors report - Pages 1 to 2
6
Hotels Management Company International SAOG
CASH FLOW STATEMENT
For the year ended 31 December 2004
01/01/2004
to
31/12/2004
(12
months)
RO
01/11/2002
to
31/12/2003
(14
months)
RO
(574,352)
(2,698,486)
OPERATING ACTIVITIES
Net loss for the period
Adjustments for:
Depreciation
Operating equipment charge off
Provision for employees’ end of service benefits
Profit on disposal of equipment
Interest expense
Deferred government grant income
Operating profit/Operating (loss) before working capital
changes
Inventories
Receivables
Payables
Cash used in operations
Interest paid
Employees’ end of service benefits paid
Net cash used in operating activities
699,369
155,920
17,288
795,848
14,875
(150)
741,288
700,279
(32,132)
───────
───────
966,372 (1,146,625)
15,002
(353,658)
57,182
(282,873)
624,715
(2,733,994)
───────
───────
(2,035,493)
(818,386)
(377,819)
(741,288)
(7,921)
(1,390)
───────
───────
(2,421,233) (1,561,064)
───────
───────
INVESTING ACTIVITIES
Purchase of property, plant and equipment
Proceeds from disposal of equipment
(85,776) (2,079,126)
2,923
───────
───────
(85,776) (2,076,203)
───────
───────
Net cash used in investing activities
FINANCING ACTIVITIES
9,000,000
Term Loans
Loans from related parties
Repayment of loans from related parties
(5,137,692)
Net cash from financing activities
INCREASE (DECREASE) IN CASH
Cash at the beginning of the period
7
3,652,481
(3,048,000)
───────
───────
3,862,308
───────
1,355,299
(3,032,786)
37,506
───────
3,070,292
═══════
604,481
───────
Hotels Management Company International SAOG
CASH FLOW STATEMENT
For the year ended 31 December 2004
CASH AT THE END OF THE YEAR/PERIOD
The
attached
notes
1
to
25
form
8
part
of
these
1,392,805
37,506
═══════
═══════
financial
statements.
Hotels Management Company International SAOG
STATEMENT OF CHANGES IN EQUITY
At 31st December 2004
Share
capital
Accumulat Replaceme
ed losses nt reserve
RO
Balance at 1 November 2002
Net loss for the period
Balance at 31 December 2003
(394,279)
3,000,000
- (2,698,486)
─────── ───────
3,000,000 (3,092,765
)
-
-
2,605,721
- (2,698,486)
───────
(92,765)
(574,352)
-
─────── ─────── ───────
3,000,000 (3,813,760
146,643
)
═══════ ═══════ ═══════
───────
(667,117)
The attached notes 1 to 25 form part of these financial statements.
9
(574,352)
(146,643)
RO
146,643
Net loss for the year
Transfer to replacement reserve
Balance at 31 December 2004
Total
RO
═══════
Hotels Management Company International SAOG
NOTES TO THE FINANCIAL STATEMENTS
At 31 December 2004
1(a) LEGAL STATUS AND PRINCIPAL ACTIVITIES
Hotels Management Company International SAOG (“ the company” ) is registered as a public
joint stock company in the Sultanate of Oman. The company is engaged in the business of
establishing, owning, leasing, and managing hotels, motels, rest houses and other tourism
projects. The company owns and operates the Chedi hotel (“the hotel”) in Muscat. The
registered address of the company is PO Box 964, Postal Code 133, Al Khuwair, Sultanate of
Oman.
The company operates in the Sultanate of Oman and employed 305 employees as of 31 December
2004 (2003:215).
1(b) MANAGEMENT AGREEMENT
The company has entered into agreements with GHM Services (Muscat) Ltd for managing the
operations of the hotel. The management agreements are effective from 20 January 2003 for a
period of 15 years and can be extended for a further period of 5 years. The company pays
management fees to GHM Services (Muscat) Ltd based on a percentage of the gross revenue.
The company has entered into an agreement with GHM (Mauritius) Ltd, for the use of
trademarks and brands owned by General Hotels Management Company Ltd. The agreement is
effective from 20 January 2003. The company pays licence fees to GHM (Mauritius) Ltd based
on a percentage of the gross revenue.
The company has entered into an offshore service agreement with GHM Ltd, British Virgin
Islands. The company pays offshore service fees based on a percentage of the Gross Operating
Profit.
1(c) SUBSEQUENT EVENT
The Board of directors has appointed a professional firm of auditors to conduct forensic audit.
This forensic audit is with reference to the project period of the hotel and covers the project cost.
The Board is yet to receive the report of findings.
2 FUNDAMENTAL ACCOUNTING CONCEPT
Although the company has incurred a net loss for the year and has accumulated losses in excess of its share capital, the
financial statements have been prepared under the going concern concept on the assumption that the shareholders will
continue to provide adequate funds to the company, and arrange for appropriate loan financing for the company, to
meet its liabilities as they fall due.
10
Hotels Management Company International SAOG
NOTES TO THE FINANCIAL STATEMENTS
At 31 December 2004
3 PRINCIPAL ACCOUNTING POLICIES
(a) Basis of preparation
The financial statements have been prepared in accordance with the International
Financial Reporting Standards (“IFRS”) promulgated by the International Accounting
Standards Board (“IASB”), interpretation issued by the International Financial Reporting
Interpretations Committee of the IASB, the disclosure requirements of the Capital Market
Authority and the requirements of the Commercial Companies Law of 1974, as amended.
The financial statements have been presented in Rial Omani.
(b) Accounting convention
The financial statements are prepared under the historical cost convention modified to include the fair value o
Government soft loan. The accounting policies are consistent with those used in the previous period.
11
Hotels Management Company International SAOG
NOTES TO THE FINANCIAL STATEMENTS
At 31 December 2004
3 SIGNIFICANT ACCOUNTING POLICIES (continued)
(c) Property, plant and equipment
Items of property, plant and equipment are stated at cost less accumulated depreciation and
impairment losses, if any.
Depreciation is charged to the income statement on a straight line basis over the estimated useful lives of items of
property, plant and equipment as follows:
Buildings
Plant and machinery
Equipment
Furniture and fittings
Motor vehicles
Library books
25 years
7 years
7 years
7 years
5 years
7 years
Where the carrying values of property, plant and equipment are greater than its estimated
recoverable amount, the assets are written down immediately to their recoverable amount.
Borrowing costs that are directly attributable to the acquisition and construction of property, plant
and equipment are capitalised as a part of the cost of these assets up to the date the asset is
commissioned for use.
(d) Inventories
Inventories are stated at the lower of cost and net realisable value. The Cost of inventories is based
on the weighted average cost principles, and includes expenditure incurred in bringing the
inventories to its present location and condition.
Net realisable value is based on estimated selling price less any further costs expected to be
incurred on completion and disposal.
(e) Accounts receivable
Accounts receivable are stated at original invoice amount less an estimate made for
doubtful receivables based on a review of all outstanding balances at the year end. Bad
debts are written off during the year in which they are identified.
(f) Impairment
An assessment is made at each balance sheet date to determine whether there is an
indication of impairment of any financial asset. If any such indication exists, the estimated
recoverable amount of that asset is determined and an impairment loss recognised for the
difference between the recoverable amount and the carrying amount. Impairment losses
are recognised in the income statement.
12
Hotels Management Company International SAOG
NOTES TO THE FINANCIAL STATEMENTS
At 31 December 2004
(g) Income tax
Income tax on the profit or loss for the year comprises current and deferred tax. Current
tax is the expected tax payable on the taxable income for the year, using tax rates enacted
or substantially enacted at the balance sheet date, and any adjustment to tax payable in
respect of previous years.
Deferred tax is calculated using the balance sheet liability method, providing for
temporary differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. The amount of deferred
tax provided is based on the expected manner of realisation or settlement of the carrying
amount of assets and liabilities, using tax rates enacted or substantially enacted at the
balance sheet date.
3 SIGNIFICANT ACCOUNTING POLICIES (continued)
A deferred tax asset is recognised only to the extent that it is probable that future taxable
profits will be available against which the asset can be utilised. Deferred tax assets are
reduced to the extent that it is no longer probable that the related tax benefit will be
realised.
(h) Account payable and accruals
Liabilities are recognised for amounts to be paid for goods and services received, whether
or not billed to the company.
(i) Loans from related parties
Loans from related parties are carried on the balance sheet at their principal amounts. Interest is
charged as an expense as it accrues, to the extent they are not directly attributable to the
acquisition or construction of assets, with unpaid amounts included in accounts payable and
accruals.
(j) Subsidized loan
Interest free/subsidised loans from the Government of Oman are carried on the Balance
sheet at its fair value, being the fair value of consideration received. The fair value of the
consideration received is the sum of all future cash payments, discounted using the market
borrowing rates of interest for loans having similar maturity.
The difference between book value and fair value is treated as government grant and is
deferred over the period of the loan.
(k) Deferred Government Grant
13
Hotels Management Company International SAOG
NOTES TO THE FINANCIAL STATEMENTS
At 31 December 2004
Deferred government grant is recognized as income over the period necessary to match it
on a systematic basis to the cost, which it is intended to compensate.
(l) Employees’ end of service benefits
The company provides end of service benefits to its expatriate employees. The entitlement
to these benefits is based upon the employee’s 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.
Contributions to a defined contribution retirement plan for Omani employees in
accordance with the Omani Social Insurance Scheme, are recognised as an expense in the
income statement as incurred.
(m) Revenue
Revenue comprises the invoiced value of services provided, excluding municipality and
tourism tax.
(n) Interest expenses
Interest expenses are accounted on the accrual basis.
(o) Foreign currencies
Transactions denominated in foreign currencies are translated into Rials Omani at the
foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet are translated into Rials Omani at
exchange rates prevailing on the balance sheet date. Foreign exchange differences arising
on translation are recognised in the income statement.
(p) Replacement reserve
In terms of the agreement, an amount equivalent to 3% of the Hotel’s revenue shall be
credited to a reserve created for the replacement of and additions to, the Hotel’s
furnishings and equipments.
4 REVENUE
Year
ended
31/12/2004
RO
14
01/11/2002
to
31/12/2003
(14
months)
RO
Hotels Management Company International SAOG
NOTES TO THE FINANCIAL STATEMENTS
At 31 December 2004
Rooms
Food and beverages
Others
1,781,566
1,609,878
301,656
──────
3,693,100
══════
404,389
702,230
88,379
──────
1,194,998
══════
Year
ended
31/12/2004
01/11/2002
to
31/12/2003
(14
months)
RO
5 DIRECT COSTS
RO
Rooms
Food and beverages
Others
391,705
998,480
131,431
──────
1,521,616
══════
230,793
604,629
71,860
──────
907,282
══════
6 PRE-OPERATING INCOME AND ESTABLISHMENT EXPENSES
(NET)
Year
ended
31/12/2004
Pre-operating income
Finance costs
Staff costs
RO
01/11/2002
to
20/1/2003
(3 months)
RO
-
23,535
(154,726)
-
Administration costs
Management fees
Legal and professional fees
──────
══════
15
(207,697)
(398,785)
(6,000)
(5,225)
──────
(748,898)
══════
Hotels Management Company International SAOG
NOTES TO THE FINANCIAL STATEMENTS
At 31 December 2004
7 NET LOSS FOR THE YEAR/PERIOD
The net loss for the year is stated after charging:
Year
ended
31/12/2004
RO
Staff costs
01/11/2002
to
31/12/2003
(14
months)
RO
1,068,371
858,214
══════ ══════
16
Hotels Management Company International SAOG
NOTES TO THE FINANCIAL STATEMENTS
At 31 December 2004
8 PROPERTY, PLANT AND EQUIPMENT
Buildin
gs
RO
Cost
At 1 January 2004
Additions
At 31 December 2004
Depreciation
At 1 January 2004
Charge for the year
At 31 December 2004
Net book value
At 31 December 2004
Plant and
Furniture
machiner Equipment
and
y
fittings
RO
RO
RO
Motor
vehicles
Library
books
Total
RO
RO
RO
8,439,327 357,539
1,174,779 804,569
17,432
140
─────── ──────
─
8,456,759 357,679
17,420
34,859
15,925
─────── ─────── ──────
─
1,192,199 839,428
125,456
═══════ ══════
═
═══════ ═══════ ══════
═
393,990
59,575
338,194
51,086
─────── ──────
─
732,184
110,661
─────── ──────
─
190,752
128,329
21,806
168,754
117,228
22,966
─────── ─────── ──────
─
359,506
245,557
44,772
─────── ─────── ──────
─
7,724,575 247,018
832,693
17
593,871
109,531
80,684
7,985
10,893,73
0
85,776
─────── ───────
7,985
10,979,50
6
═══════ ═══════
1,119
795,571
1,141
699,369
─────── ───────
2,260
1,494,940
─────── ───────
5,725
9,484,566
Hotels Management Company International SAOG
NOTES TO THE FINANCIAL STATEMENTS
At 31 December 2004
At 31 December 2003
═══════ ══════
═
8,045,337 297,964
═══════ ═══════ ══════
═
984,027
676,240
87,725
═══════ ══════
═
═══════ ═══════ ══════
═
═══════ ═══════
6,866
10,098,15
9
═══════ ══════
═
The company has entered into an usufruct and development agreement with H.H. Sayyid Thuwainy Shihab Al Said (a related party) for the
grant of a lease of the land on which buildings are constructed. The lease contract is for a period of 25 years commencing from the date of
company’s commercial operations. No rent is payable for the grant of lease. As consideration for the grant of the lease, at the end of the lease
period the company will transfer the ownership of the hotel, improvements and all the movable assets to H.H. Sayyid Thuwainy Shihab Al
Said.
18
Hotels Management Company International SAOG
NOTES TO THE FINANCIAL STATEMENTS
At 31 December 2004
9 INVENTORIES
31/12/200 31/12/2003
4
RO
RO
Cutlery, crockery, glassware and utensils
Linen and general stores
Food and beverages
72,910
68,290
41,536
──────
182,736
══════
184,608
131,785
37,265
──────
353,658
══════
10 TRADE AND OTHER RECEIVABLES
31/12/2004
RO
31/12/2003
RO
Trade receivables
220,761
438,071
(8,108)
Less: Provision for doubtful debts
(3,408)
──────
──────
429,963 217,353
22,541
5,462
52,174
5,148
──────
──────
504,678
227,963
══════
══════
Prepaid expenses
Other receivables
11 SHARE CAPITAL
The company’s authorised share capital comprises 10 million shares of RO 1 each and
the issued and paid up share capital comprises 3,000,000 (2003 - 3,000,000) shares of
RO 1 each.
Shareholders owning 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:
At 31 December, the shareholders who own 10% or more of the company’s shares are:
31/12/2004
Number
of shares
19
%
31/12/2003
Number
of shares
%
Hotels Management Company International SAOG
NOTES TO THE FINANCIAL STATEMENTS
At 31 December 2004
Al Shahba Investment Co. LLC
The Financial Corporation SAOG
Nordic Investment LLC
Capital E Financial Group Limited
Wadi Al Numan Enterprises LLC
1,200,000
40
600,000
20
-
10
10
10
600,000
300,000
300,000
300,000
20
10
10
10
300,000
300,000
300,000
12 REPLACEMENT RESERVE
In accordance with the agreement, a reserve is established for the replacement,
substitution and additions
to
the hotel’s furniture and
equipments.
20
Hotels Management Company International SAOG
NOTES TO THE FINANCIAL STATEMENTS
At 31 December 2004
13 TERM LOAN
Non-current liabilities
Loan from a commercial bank
Government soft loan
Deferred government grant
31/12/2004
RO
31/12/2003
RO
5,750,000
3,000,000
(396,794)
──────
8,353,206
-
──────
Current liabilities
Loan from a commercial bank
341,433
-
──────
8,694,639
-
Total term loans
══════
(a) The loan RO 6,000,000 from a commercial bank, at 6% interest per annum, is
repayable in 33 varying quarterly instalments, commencing from December 2005.
This loan is secured by (i) Lien over fixed deposit of RO 6,000,000 held in the name of H.H Sayyid
Thuwainy Bin Shihab Al Said, a related party
(ii) Registered mortgage over the usufruct agreement and the hotel buildings and
improvements on plot no. 117 at Al Ghubra/Bousher, and.
(iii) A commercial charge over the plant, machinery, equipment and other moveable
assets of the company.
(b) The Government soft loan represents RO 3,000,000 obtained under the
government soft loan scheme at 3% interest per annum. The loan is repayable in 7
equal annual instalments of RO 428,572 each, commencing 3 years after the first
draw down. This loan is secured by (i) Registered mortgage over the usufruct agreement and the hotel buildings and
improvements on plot no. 117 at Al Ghubra/Bousher.
(ii) A commercial charge over the plant, machinery, equipment and other moveable
assets of the company.
The Government soft loan is reported at the fair value of the consideration received.
The fair value of the consideration received is the sum total of all future payments
21
Hotels Management Company International SAOG
NOTES TO THE FINANCIAL STATEMENTS
At 31 December 2004
discounted using the market borrowing rate for loans having similar maturity. The
difference between ‘fair value’ and ‘book value’ is reported as a ‘Deferred
Government Grant’ and is released to income over the loan period.
14 EMPLOYEES’ END OF SERVICE BENEFITS
31/12/2004 31/12/2003
RO
RO
At 1 January
Accrued during the year
Payments during the year
At 31 December
13,485
17,288
(7,921)
──────
22,852
══════
14,875
(1,390)
──────
13,485
══════
31/12/2004
RO
31/12/2003
RO
312,446
172,242
193,180
238,385
39,646
───────
955,899
═══════
289,034
2,339,860
93,187
744,398
71,682
───────
3,538,161
═══════
15 TRADE AND OTHER PAYABLES
Trade payables
Contractors’ payable
Accrued expenses
Interest payable to related parties (note 18)
Other payables
22
Hotels Management Company International SAOG
NOTES TO THE FINANCIAL STATEMENTS
At 31 December 2004
16 LOANS FROM RELATED PARTIES
Loans from related parties (note 18) are unsecured and are denominated in Rial
Omani with effective annual interest rates ranging from 9% to 9.5%. The loans are
repayable on demand.
17 INCOME TAX
The company is liable to income tax in accordance with the income tax laws of the
Sultanate of Oman at 12% (2003 - 12%) of taxable income in excess of RO 30,000.
Provision for income tax has not been made in these financial statements in the view of the
tax loss incurred by the company. Net accumulated tax losses of RO 3,128,766 are
available for set off against taxable income arising in the five years following the year in
which they were incurred. No deferred tax asset has been recognised in respect of these
losses in view of the uncertainty of the timing of future recoverability.
Taxation for the years 2003 and 2004 is subject to agreement with the Oman taxation
authorities.
The company is in the process of applying for an exemption from income tax under the
Omani Income Tax Law.
23
Hotels Management Company International SAOG
NOTES TO THE FINANCIAL STATEMENTS
At 31 December 2004
18 RELATED PARTY TRANSACTIONS
These represent transactions with related parties, i.e. shareholders, directors and
senior management of the company, and companies of which they are principal
owners. Pricing policies and terms of these 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 the financial statements are as follows:
Finance costs on loan from related parties
Management fees to Golden Village Restaurant LLC
Revenues earned
Management and licence fees to GHM
Assets purchased
Expenses incurred
Directors’ sitting fees
Year
ended
31/12/2004
1/11/2002
to
31/12/2003
(14
months)
RO
442,222
15,359
184,605
522
8,418
17,100
744,398
6,000
13,824
71,783
182,735
50,413
15,000
During the year 2004, license fee payable to GHM, has been reduced from 4% to 2% of Gross revenue, with
retrospective effect.
The loans from related parties are disclosed in note 16. The terms of a land lease
agreement with a related party are disclosed in note 8.
Loans and amounts due from and due to related parties or holders of 10% or more of the company’s shares,
or their family members as of balance sheet are as follows:
31/12/200
4
RO
Loans from related parties:
HH Sayyid Thuwainy Shihab Al Said
Al Shahba Investment Company LLC
Gulf Eyes Trading
Mr Pankaj Khimji
31/12/200
3
RO
3,377,253
1,293,044
1,504,873
1,972,268
335,054
335,054
──────── ────────
1,839,927
6,977,619
──────── ────────
Due to related parties:
Khimji Ramdas Group companies
146,153
24
151,779
Hotels Management Company International SAOG
NOTES TO THE FINANCIAL STATEMENTS
At 31 December 2004
General Hotel Management Group
Golden Village Restaurant LLC
Gulf Eyes Trading
165,799
23,945
67
112,972
24,050
──────── ────────
335,964
288,801
═══════ ═══════
25
Hotels Management Company International SAOG
NOTES TO THE FINANCIAL STATEMENTS
At 31 December 2004
18 RELATED PARTY TRANSACTIONS (continued)
31/12/200
4
RO
Due from related parties:
Khimji Ramadas
General Hotel Management Company
Hamad International
Mr. Pankaj Khimji
Mr. Mohammed Khamis Al Hasani
Berzaman International
H.H Sayyid Mohamed Thuwainy Shihab Al Said
H.H Sayyidah Aliya Thuwainy Shihab Al SAid
Mr. Abdullah Al Mamari
Mr. Ahmed Bin Said Al Mehrezi
Lt. Col. Dr. Abdulla Ali Al Harthy
Mr. Nasser Noor
31/12/2003
RO
4,722
2,565
4,238
1,871
223
1,246
3,536
1,040
136
589
311
380
175
206
180
368
78
324
──────── ────────
14,173
8,015
═══════ ═══════
19 BASIC LOSS PER SHARE
Basic loss per share is calculated by dividing the net loss for the year by the weighted average number of
shares outstanding during the year as follows:
Year ended
31/12/2004
(12
months)
RO
(574,352)
Net loss for the year/period
Weighted average number of shares
outstanding during the year/period
Basic loss per share
01/11/2002
to
31/12/2003
(14
months)
RO
(2,698,486)
──────
──────
3,000,000
──────
(0.191)
══════
3,000,000
──────
(0.899)
══════
20 LEGAL RESERVE
The Commercial Companies Law of Oman 1974 requires that 10% of the company’s profit for the year be
transformed to a non-distributable legal reserve until the accumulated balance of the reserve equals one-
26
Hotels Management Company International SAOG
NOTES TO THE FINANCIAL STATEMENTS
At 31 December 2004
third of the value of the company’s paid up share capital. In view of the losses incurred by the company
during the year ended 31 December 2004, no transfer to the legal reserve has been made.
21 CONTINGENCIES
Due to the continued delay in the settlement of final amounts payable to certain
contractors to the hotel construction project, the independent project manager has notified
that interest on the outstanding debts may be payable to the contractors. The company’s
board of directors disputes the basis of this and any other intended claim from these
contractors and are confident that no resultant liability will arise. Therefore no additional
liability for these amounts has been made in the financial statements.
22 SEGMENTAL INFORMATION
The company operates only in the hotel industry. The company’s operating revenues arise from hoteling
activities, which are based in the Sultanate of Oman.
23 COMMITMENTS AND GUARANTEES
31/12/200
4
RO
Capital commitments
Guarantees
31/12/200
3
RO
550,000
-
2,000
-
24 FINANCIAL INSTRUMENTS
Interest rate risk
Interest rate risk is the risk that the value of financial instruments will fluctuate due
to changes in market interest rates.
The company is exposed to interest rate risk on interest bearing loans from related parties. Management
monitors the interest rate risk by setting limits on the interest rate gaps for stipulated periods. Government
soft loan is at fixed interest of 3% per annum. The term loan from a commercial bank is at interest rate 1%
above the weighted average rate on deposit of H.H. Sayyid Thuwainy Shihab Al Said (a related party).
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.
27
Hotels Management Company International SAOG
NOTES TO THE FINANCIAL STATEMENTS
At 31 December 2004
The company seeks to limit its credit risk with respect to its customers by setting
credit limits for individual customers and monitoring outstanding receivables. The
company has a broad based clientele, mainly arising from the nature of its
operations. The credit risk associated with accounts receivable is widely distributed
amongst a large number of individual customers.
Foreign currency risk
Foreign currency risk is minimised as most of the foreign currency transactions are
either in US Dollars which are effectively at fixed Rials Omani rates, or in
currencies using US Dollars exchange rates, which are fixed or effectively fixed.
Fair value
The Board of Directors believe that the fair values of all financial assets and
liabilities approximate their carrying value in the balance sheet
25 COMPARATIVE AMOUNTS
The corresponding figures for the previous period have been reclassified in order to
conform with the presentation in the current year. Such reclassifications do not
affect previously reported net loss or shareholders’ equity.
Auditors report - Pages 1 to 2
28