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					DHOFAR MARBLE AND GRANITE COMPANY (SAOG) SALALAH – SULTANATE OF OMAN

FINANCIAL STATEMENTS & AUDITORS’ REPORT 31st DECEMBER 2004

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Corporate Governance Report During the year 2004, DHOFAR MABILE & GRANITE Co. (SAOG). The company has adopted general principle and policies to implement transparency to it's final and administrative operation within the limit of commercial practice. The aim of these principles and policies is to promote the culture of Corporate Governance Standards adopted by CMA that will secure durability and long term gross to the company The establishment of internal control system and the appointment of internal auditor have been among the major elements of the measures adopted. Board of Directors: The board of directors is elected by the company's Ordinary General Assembly in compliance with the law, Ministerial Decree No 137/2002 dated 23/10/2002 and a memorandum and Articles of Association. Presently the board comprises Of 5 directors all director are non –executive Presently the following directors form the Board Name 1 2 3 4 5 Sh.Bakheet Jadeed Jidad Mr. Mohmed Ahmed Tahir Muqaibal Mr. Nabeel Eid Salim Mr. Hussain Salim Abullah Muqaibal Mr. Khalid Ahmed Tahir Mugaibal Designation Chairman D/Chairman Director Director Director Category Independent independent independent independent independent

Board meeting In the year 2004, the board held 4 ordinary meeting in the pursuance to the Ministerial Decree No (137/2002). The following schedule represents details of the board meetings Meeting No 1/2004 2/2004 3/2004 4/2004 Date 14/1/2004 24/3/2004 27/4/2004 27/7/2004 Number of Director 5 5 5 5 Number of attendance 4 3 4 4

The following schedule presents meeting held in the year as follows: Name/ meeting no 1 2 1 2 3 4 5 Sh.Bakheet Jaded Jidad Mr. Mohamed Ahmed Tahir Muqaibal Mr.Nabeel Eid Salem Mr. Hussein Salem Abdullah Muqaibal Mr. Khalid Ahmed Tahir Muqaibal 1 1 1 1 1 1 1

3 1 1 1 1

4 2 1 1 1 1 4 1 4 4

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The appointment of new directors has been endorsed by Ordinary General Assembly Meeting held in April 2004 Executive Committee:

The Board Executive Committee comprises of three directors who were elected by board in it's ordinary meeting held in 22/4/2004. The following is the list of directors form the executive committee

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Member of executive committee up to 22/4/2004 Designation Mr. Mohamed Ahmed Tahir Muqaibal Mr. Hussein Salem Abdullah Muqaibal Head D/Head

Member of executive committee

It held 6 schedule meeting in the year as follows : Name Mr. Mohamed Ahmed Tahir Muqaibal Mr. Hussein Salem Abdullah Muqaibal 1 1 1 2 1 1 3 1 1 4 1 1 5 1 1 6 1 1 total 6 6

Since established no penal measure has been brought against the company by CMA, MSM, or any other regularity party Audit Committee The Board Audit Committee comprises of three directors who were elected by board in its ordinary meeting held in 30/9/2003. The following is the list of directors form the audit committee Name 1 2 Mr. Hussein Salem Abdullah Muqaibal Mr. Nabil Eid Salim Designation Head member

It held 2 schedule meeting in the year2004 as follow: Name 1 2 Mr. Nabil Eid Salim Mr. Hussein Salem Abdullah Mugaibil 1 1 1 2 1 1 total 2 2

Communication with share holders

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The company hold regular general meeting. Invitation for the assembly and closing account were sent regularly to share holders in regular basis. The Company publishes it's quarterly financial statement as per CMA requirements. Remuneration No remuneration has been given to directors during the year

Employees Salary, allowance and perquisites paid to top 5 employees during the year amounted to R.O.23,292/-

Transaction with the related parties Transaction with the related parties during year 2004 only for Khalid Ahmed Taher Muqaibal for purchasing assets and adjusting some loans. Net amount R.O. 909,863/Transaction with the related parties owning 10% of equity

Movement of company Shares Price in MSM for the year 2004 No information available during the year External Auditors The company external auditors are M/s Almusaaid Audit Bureau recognized as one of the national audit firm established in 1992

---------------------Managing director

-----------Chairman

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TO THE SHAREHOLDER DHOFAR MARBLE & GRANITE COMPANY (SAOG) SALALAH SULTANATE OF OMAN Auditor’s Report

We have audited the accompanying balance sheet of DHOFAR MARBLE & GRANITE COMPANY (SAOG) as at 31/12/2004and the related profit and loss account statement of change in shareholders, equity and statement of cash flow for the year then ended These financial statements are responsibility of the board of directors, our responsibility is to express an opinion on these financial statement based on our an information that we obtained and we consider necessary for the purposes of our audit examination. We conducted our audit in accordance with generally accepted auditing standards those

standards require that we plan and Perform the audit to obtain reasonable assurance about where her financial statements are free from material misstatements. An audit includes examining on test basis, evidence supporting the accounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimated by management, as well as evaluating the over all financial statements presentation

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.We believe that our audit provides a reasonable basis of our opinion. In our opinion the financial statements referred to the above present fairly in all material respect, the financial position of DHOFAR MARBILE & GRANITE CO (SAOG) operations and cash flow for the year then ended in conformity with general accepted accounting principles in all material respects with relevant disc lure requirements of the commercial company law of 1974 as amended ( expected as staled below) and the minimum disclosure requirements for public joint stock companies Authority. 1-at the balance sheet date the company has accumulated loss RO 3,748,582 with is represent more than paid up share capital. According to Article 14D and article 129 of the commercial company law of 1974, the management is require to convince and extra ordinary general meeting to determine the futures of the company. 2- Without qualifying our opinion we draw your attention that the financial statements with more fully explain that the commercial validity of the company depends on arrangement of financial support and achieving its business targets. Subject to stated above , In our opinion the financial statements referred to the above present fairly in all material respect, the financial position of DHOFAR MARBILE& GRANITE CO (SAOG) operations and cash flow for the year ended in conformity with general accepted accounting principles issued by the Capital Market

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ALMussaid Audit Bureau

31March / 2005

DHOFAR MARBLE AND GRANITE CO (SAOG) BALANCE SHEET AS AT 31st DECEMBER 2004 (All amounts are express in rails omani) EMPLOYMENT OF CAPITAL NOTES ASSETS Fixed Assets 3 Current assets Inventories 4 Account receivable 5 Pre-paid expenses &other receivable Cash in hand and at bank 6 Total current assets less: current liabilities Accounts payables Current portion of long term loan Accrued expenses Other payable Total current liabilities Net current assets (liabilities) Total Net Asset FUNDS EMPLOYED: CAPITAL AND RESEVES Share Capital account Accumulated loss Net shareholder's equity NON –CURRET LIABILITIES Term loan Deferred income Loan from related party NET LIABILITIES 2004 1,058,669 168,223 56,117 36,091 2,070 262,501 2003 1151615 600,408 77,207 40,134 71,431 789,180

7 8 9

50,229 461,364 176,012 687,605 (42,5103) 633,565

71,033 601,385 418,683 1,091,101 (301,921) 849,694

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1,439,318 (3,748,582) (2,309,264) 1,175,685 204,337 1,562,807 2,942,829 633,565

1,439,318 (3,377,069) (1,937,751) 617,757 260,863 1,908,825 2,787,445 849,694

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Accompanying notes form and integral parts of the financial statement) Bakheet Bin Jedeed Jidad Chair man Khalid Bin Ahmed Tahir Director

DHOFAR MARBLE AND GRANITE CO(SAOG) SALALAH, SULTANATE OF OMAN Profit and loss account for the year ended 31st Dec 2004 (All amounts are express in rails omani)

NOTES

2004

2003

Sales Less: Cost of sales Gross (loss) profit Less: General and Administration Finance charges
Depreciation

441451 12 13 (609884) (168433) (67496) (93336)
(22344)

255305 (349822) (94517) (87264) (77498)
(22344)

Other income Net loss for the year before adjustment Prior year adjustment Net profit for the year after adjustment Accumulated loss at the beginning of the year Accumulated loss at the end of the year

10187 (341422) (30091) (371513) (3377069) (3748582)

145640 (251524 (40713) (176696) (3200373) (3377069)

(The accompanying notes form and integral parts of the financial statement)

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DHOFAR MARBLE AND GRANITE CO(SAOG) STATEMENT OF CHANGES IN SHAREHOLDER,S EQUITY For the year ended 31st December2004 (All amounts are express in rails omani) Share Capital accumulated losses total

1st January 2003 net loss for the year 31 December 2003
st

1439318 -------1439318

(3200373) (176696) (3377069)

(1761055) (176696) (1937751)

Net loss for the year 31st December 2004

---1439318

(371513) (3748582)

(371513) (2309264)

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DHOFAR MARBLE AND GRANITE CO(SAOG) Cash flow statements for the year ended 31st Dec 2004 (All amounts are express in rails omani) 2004 Operating Activities Net profit (loss) for the year Adjustment: Depreciation Interest expenses prior year adjustment Gains on sales of fixed assets operation profits (loss)before working capital change Changing in operation activities (Increase) /decrease in inventories (Increase) /decrease in account receivable (Increase) /decrease in pre-paid exp and other receivable Increase /(decrease) in r account payables Increase /(decrease) in accrued expenses Net cash provided by or (used in) operating activities Interest paid Net cash provided by or (used in) operating activities Investing activities Fixed assets acquired Sales of fixed assets Net cash provided by or (used in) investing activities Financing activities Long term loan Loan from related party Net cash provided by or (used in) financing activities Net cash inflow (out flow) Cash in hand and bank at the beginning for the year (371513) 90032 93336 -----(24831 (212976) 432185 21090 4043 (160825) (242671) 159154) (93336) (252490) (3266) 31011 27745 2003 (135983) 76978 77498 (40713) (12950) (35170) 194239 (25795) (7236) 42766 111037 279841 (77498) 202343 (21743) 18000 (3743)

501402 (346018) 155384 (69361) 71431

------(183012) (183012) 15588 55843

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Cash in hand and bank at the end for the year

2070

71431

DHOFAR MARBLE AND GRANITE CO(SAOG) NOTES RELATED TO FINANCIAL STATEMENTS AS AT 31st December 2004 (All amounts are express in rails omani)

1-LEGAL STATUS &ACTIVITIES DHOFAR MARBLE AND GRANITE CO(SAOG) is Omani Joint Stock company registered in the Sultanate Of Oman on April 20,1992 .It is engaged in the extraction , manufacturing and marketing of marble and granite stones. The comerical operation of the company commented on April 1993.

2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIE a- going concern a) These financial statements has been prepared in accordance with the accounting standard issued by the International Accounting Standard Committee ( IASC) interpretation issued by the Standing Interpretation Committee of the IASC and the requirement of the commercial Company law of 1974 as amended b) Accounting convention these financial statements have been prepared under the historical cost basis c) revenue Revenue from sales of goods is recognized in the profit and loss account when the significant risks and rewards of the on ownership have been transferred to the buyer. d- Going concern The commercial validity of the company is depended upon its liability to extract raw material and covert the materials and to obtain adequate financial support. However since the commercial of operation, the company has not able to achieve its business targets At the balance sheet date the company has accumulated loss OR 3748582 with is represent more than paid up share capital. According to Article 14D and article 129 of the commercial company law of 1974, the management is require to convince and extra ordinary general meeting to determine the futures of the company.

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According to the above plans the company has been prepared its financial statements on going concern basis of accounting.

e- Inventories Inventories are stated at lower of cost f- Trade and other receivables Trade and other receivables are stated at their cost less impairment losses g- Trade and other payables - Trade and other payables are stated at cost h- Government soft loan The company has received an interest free loan from the government i- Employee benefits provision for non Omani employee terminal contributions which is an un- funded define benefit requirement plan Is made in accordance with Omani Labour law s and is based on liabilities that would arise if the employment of all employment of all employees were terminated at the balance sheet date. j- Fixed asset Fixed asset are stated at cost less accumulated depreciation Fixed assets are depreciated so as to write off the cost by equal installments over their estimated useful economic live. The management has estimated the economic useful lives of the fixed assets as follows: Year Building 50 Plant and machinery 25 Plant vehicle and others 10-20 Furniture and fixture 10 Equipments 5-6 Electrical installation and development 6-25

k- Inventories Inventories are stated at the lower cost and net realizable value. Net realizable value is the estimated costs of completion and selling price in the ordinary course of business, less the estimated cost of completion and selling expenses 3- Fixed assets a) The movement of fixed assets during the year is set out on page 13 b) The building is constructed on land lease from the government on yearly renewable lease

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Inventories

2004 82071 92183 174254 (6031) 168223)

2003 507693 98477 606439 (6031) 600408

Marble and granite Engineering spares & consumables Provision for slow moving stock

5- Accounts receivables Sundry trade debtors Due from related parties Provision for doubtful debts

2004 102117 -----(46000) 56117

2003 122337 870 (46000) 77207

6- Cash in hand and at bank Cash in hand cash at bank

2004 93 1977 2070 2004 50229 ----50229

2003 17227 54204 71431 2003 69839 1194 71033

7- Accounts payable Sundry trade creditors Due to relate parties

8- long- term loan Secured government loan Secured ODB loan Less, Deferred income on 31st December Prepayment due within one year Non – current liabilities

2004 1000000 841385 1841385 (204337) 1684342 (461364) 1175684

2003 1000000 480005 1480005 (260863) 1219142 (601385) 617757

a) the government loan granted by the government of the sultanate of Oman is interest free and repayable in the equal amount installment of RO 100000 COMMENCING 1st Jan 2003 , the loan is secured by mortgage over the company assets and endorsement of insurance policies in fever of Oman l developments bank . Interest is charged on overdue installments at the rate of 10% per annum. The company was unable to repay the installments during the year b) The aggregated estimated fair value of government loan as at 31st December 2004 amounted to OR 800,000- . The management using the average market borrowing and deposit

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rate of interest has determined the fair value, the discount the future contractual cash flows. c) the loan from Oman Development Bank of OR480,005- with interest outstanding amounting to OR 841385 is repayable in thirteen equal squarely instilments of 38447 and an installment of OR 38460 with revised repayment schedule commencing on 14th March 2002 ,inters t is charged at rate of 9%per annum and no subsidy received since the original repayment schedule expired o 1st June 1998 . The loan is secured by mortgage over the company assets and endorsements of insurance policies. Penal interest charged on over due installments, as the revise repayment schedule was not honorable.

9- Accrued expenses and other payables Accrued expenses Accrued interest Provision for leave salaries Other payables

2004 64306 65082 10375 36249 176012

2003 74454 333269 8710 2250 418683

10 share capital 2004 2003 . Issued and paid up capital 1439318 1439318 authorized capital is RO 15000000 divided into 1.5 million shares of OR 1 each Share holders holding 10% or more of the share capital of the company as at 31st December 2004 is as follows: Name of the shareholder Khalid Ahmed Tahair Mogaible Services finance company 11- Loan from related parties Mr. Ahmed Taher Mogaible Mr. Ahmed Taher Mogaible International marble company Sh . Saeed Ahmed Al Shanfari M/s Ofsat Limited Comoany LLC
Percentages holding No of shares held

65.451% 24.572% 2004 -----1546784 16023 -------------1562807 2004 600408 65027

942047 353670 2003 636921 ------------252949 1018955 1908825 2003 794647 44885

12- COST OF GOOD SOLD Opening stock Purchase & quarry cost

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Direct cost Less: closing stock Cost of good sold

112671 778106 (168223) 609883

110698 950230 (600408) 349822

13- GENERAL AND ADMINISTRATION EXPENSES Salaries Rent Representative office expenses Miscellaneous expenses Car running expenses Telephone fax and postage Advertisement Traveling and accommodation expense Printing and stationery Electricity and water Discount & sales promotion
Insurance

2004 27912 3950 ----6972 3006 6809 878 4557 312 1161 2465
-------

2003 46290 4765 1942 8213 6951 5029 2488 7096 628 1217 34
2911

Social insurance legal fees medical expenses Labor and immigration office MSM (Security market)

139 4940 753 1522 2120 67496 The average number of employee during the year 2004 55 (2003-57) 14- Finance charges Interest expense on government soft loan Release of deferred income Other interest and charges 2004 56189 (56189) 933336 933336 2004 260526 (56189) 204337

----------87264

2003 56526 (56526) 77498 77498 2003 317389 (56526) 260863

15-deferred income Opening balance Transferred to profit and loss account Balance at end 16- Related party transaction

Transaction with the related parties during year 2004 only for Khalid Ahmed Taher Muqaibal for purchasing assets and adjusting some loans. Net amount R.O. 909,863/-

17-segmental reporting

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Revenue Sultanate of Oman GCC Jordan Indian Netherlands

2004 154594 240096 ----46762 -------441452

2004 203364 16488 7680 17405 10368 255305

18- Income tax In view of the continuing losses incurred by the company, on provision for tax or deferred tax assets has been considered. 19- Lease The company has been leased land for factory premises at Raysut from government Authority under the agreement that is on the yearly renewal lease. 20-Basic earning per share. Basic loss per share is calculated by dividing the net loss for the year by the weighted average number of share out standing during as follow 2004 (371513) 1439318 (0.258) 2003 (135983) 1439318 (.094)

Net loss for the year Number of share out standing decemer2004 Basic loss per share

21- financial instruments Financial assets of the company include cash and receivables. Financial liabilities of the company included long term loan, borrowing and payables. Credit risk
Trade debtors are stated nets of provision for doubtful debts. There is no of credit risk with any single debtors or group of companies or to debtors outside the companies or to debtors outside the industry in with the company operates

Interest risk
The bank borrowing is at floating interest rates at levels, which are generally Oman obtained in sultanate of

Exchange rate risk
There are no significant exchange rate risk are substantially most of the financial asset and the financial liabilities are demonstrated in rails Omani or UAE Durham’s /US Dollars to with the Rials Omani is fixed Fair value

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Fair value represent the amount at which an assets could be exchange, or a liability settled, in an arm’s length transaction .In respect of company’s all financial assets and liabilities, in the opinion of management, the book value approximates to their carrying value

22- Events Occurred After the Balance sheet date
Letter s of credit and guarantee 23-general

2004
9000

2003
9000

The figures in the financial statements are rounded off to the nearest Omani Rials

INDEX 1/ AUDITORS REPORT 2/ BALANCE SHEET 3/PROFIT AND LOSS ACCOUNT `Statement of change in Shareholder Equity 4/ CASH FLOW STATEMENT 5/ NOTES RELATED TO FINANCIAL STATEMENT

PAGE 1-2 3 4 5 6 7/13

DHOFAR MARBLE AND GRANITE COMPANY (S A O G) SALALAH, SULTANATE OF OMAN BALANCE SHEET AS AT 31st Dec 2004 (All amounts are express in rails omani)

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