Renaissance DNA

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Renaissance DNA

Renaissance Services has evolved

a unique business DNA.

The primary building blocks of our

business DNA are Renaissance’s

12 core values bound together by

our commitment to ethical conduct,

empowered people, and

a prudent entrepreneurial spirit.


His Majesty Sultan Qaboos bin Said


Renaissance Services SAOG

Renaissance Services SAOG (Renaissance)

is an Omani multinational company listed

on the Muscat Securities Market (MSM30)

in the Sultanate of Oman. Renaissance’s

core operations are focused on providing

safe, efficient and quality services to energy

leaders predominantly in the oil & gas

industry. Renaissance currently employs

over 14,000 people, operates in 16

countries. 2011 revenues were in excess

of US$ 0.75 billion.

This is our DNA

Vision

We want Renaissance to be

recognised as a world-class,

internationally competitive,

premier oil & gas service

company. This shall be achieved

through the quality of our

customer service; good

governance; outstanding HSE,

Quality and MIS systems; a

sustained growth and profit

record; and a proven ability to

improve the economic

well-being and quality of life of

all stakeholders.

Values

PEOPLE

HEALTH, SAFETY & ENVIRONMENT (HSE)

INTEGRITY

REWARD

EFFICIENCY & PRODUCTIVITY

CUSTOMERS

GROWTH

MERIT

SOCIAL RESPONSIBILITY

TRANSPARENCY

QUALITY

PROFIT

Modus Operandi

Safe; Efficient; Green; Local

Safe:

No harm to people

Efficient:

Cost-effective quality services

Green:

No harm to the environment

Local:

Serious about in-country value


C

ntents

Board of Directors

Groups Overview

Financial Highlights

Chairman’s Report

Chief Executive’s Report

Sustainability Report

Auditors’ Report on Corporate Governance

Report on Corporate Governance

Auditors’ Report on Financial Statements

Financial Statements

Media Highlights

8-9

12-19

32-39

41-47

49-105

6-7

10-11

20-31

40

48

106

Renaissance Services SAOG

P.O. Box 1676, PC 114, Muttrah

Sultanate of Oman.

Tel.: +968 24796636

Fax: +968 24796639

www.renaissance-oman.com


Colin Rutherford

Director

Ekaterina A. Sharashidze

Director

Sunder George

Director

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Board of Direct rs

Samir J. Fancy

Chairman

HH Sayyid Tarik bin Shabib

bin Taimur

Director

Yashwant C. Desai

Director

Ali bin Hassan Sulaiman

Director

& ITS SUBSIDIARY COMPANIES

7


GROUPS

MARINE

ENGINEERING

Main Segments

and Activities

Topaz Marine’s offshore vessel

operation ranks within the top ten

largest in the world. With 100+

vessels, the company supports major

offshore projects in the regions in

which it operates, with

anchor-handling vessels, platform

supply vessels, survey vessels,

specialised barges and ice-breakers

among many others.

Topaz’s Engineering group

companies, Adyard Abu Dhabi and

Nico International, form the

foundation of the engineering

division. Each of these businesses

has established capabilities and

excellent results for onshore and

offshore fabrication.

Total # of

Employees

2011 – 1561

2010 – 1193

2009 – 1045

2011 – 4196

2010 – 3289

2009 – 4211

Subsidiaries,

Divisions and

Companies

Topaz Energy and Marine Limited

1) Topaz Holdings Limited

2) Nico Middle East Limited

(and subsidiaries)

BUE Marine Limited

(and subsidiaries)

Jointly Controlled Entities

Topaz Marine Engineering:

Topaz Marine Repair (TMR) and Topaz Ship

Building (TSB)

1) Nico International

2) Adyard Abu Dhabi

3) Doha Marine Services

Topaz Oil and Gas Engineering:

Topaz Fabrication & Construction (TFC) and

Topaz Maintenance Services (TMS)

1) Nico International

2) Adyard Abu Dhabi

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CONTRACT SERVICES

EDUCATION AND

TRAINING

MEDIA

COMMUNICATIONS

Contract Service businesses (CSG)

provide facilities management,

facilities establishment, contract

catering, property operations and

other maintenance services to large

scale projects, with rapid deployment

capabilities in emergencies, including

for harsh, remote or beleaguered

environments. The businesses serve

diverse clients within the Oil & Gas,

Energy Services, Healthcare,

Education, Military, Commerce &

Industry, Ports & Marine sectors.

Education & Training Group

(ETG) provides high-quality

training solutions in energy,

construction, retail and

hospitality sectors, and

specialises in developing local

workforces. ETG businesses

offer people solutions in HSE,

information technology,

business management,

financial studies and

hospitality training.

As specialised

communications solutions

providers, Media

Communications businesses

(MCG) provide 360-degrees

media and communications

solutions encompassing

advertising, interactive & IT

solutions, publishing, media

representation, media

distribution and

communications logistics,

public relations, and event

management.

2011 – 7895

2010 – 6544

2009 – 5701

2011 – 219

2010 – 182

2009 – 193

2011 – 175

2010 – 201

2009 – 168

1) Tawoos Industrial Services Company LLC

2) Rusail Catering & Cleaning Services LLC

3) Renaissance Services - PAC Division

4) Renaissance Services - Overseas Division

5) Renaissance General Services LLC, Iraq

6) Renaissance Contract Services AS (RS-NOC),

Norway

7) Renaissance Contratos e Servicos

Angola LDA

8) Renaissance Contract Services

Afghanistan LLC

9) Renaissance Facilities Management

Services LLC, Abu Dhabi

10) Al Wasita Emirates for Services &

Catering LLC, Abu Dhabi

11) Renaissance Catering Services LLC,

Dubai

1) National Training Institute LLC

(NTI)

2) National Hospitality Institute LLC

3) New Horizons Computer

Learning Centers

4) Nakshatra Hospitality India (NHI)

5) National Training Institute WLL,

Qatar

1) United Media Services LLC,

Oman

2) United Press & Publishing LLC

3) Oryx Advertising Co. WLL, Qatar

4) United Media Services LLC,

Bahrain (Branch)

& ITS SUBSIDIARY COMPANIES

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Financial

Highlights

800.0

700.0

600.0

US$ Million

643.1

658.3

753.0

140.0

120.0

100.0

US$ Million

105.4

126.7

100.7

96.9

500.0

400.0

300.0

80.0

60.0

84.9

74.1

83.9

200.0

100.0

194.0

160.4

200.6

184.7

178.7

167.0

40.0

20.0

20.1

6.0

0

0

2009 2010 2011

2009 2010 2011

Revenue

Gross Profit

Earnings Before Tax Interest

Depreciation & Amortisation

Profit from

Operations

Profit

Before Tax

Earnings After Tax

(Before Minority)

Summary Financial Information

2009 2010 2011 2009 2010 2011

RO Million

US$ Million

247.6 253.4 289.9 REVENUE 643.1 658.3 753.0

74.7 77.2 68.8 GROSS PROFIT 194.0 200.6 178.7

40.6 48.8 37.3 PROFIT FROM OPERATIONS 105.4 126.7 96.9

61.8 71.1 64.3 EARNINGS BEFORE TAX, INTEREST, DEPRECIATION AND AMORTISATION 160.4 184.7 167.0

32.7 38.8 7.8 PROFIT BEFORE TAX* 84.9 100.7 20.1

28.5 32.3 2.3 PROFIT AFTER TAX (BEFORE MINORITY)* 74.1 83.9 6.0

282.7 391.6 454.8 NET FIXED ASSETS 734.4 1,017.0 1,181.4

168.4 195.8 193.2 TOTAL EQUITY 437.4 508.7 501.7

188.6 284.8 360.7 TERM LOANS 489.8 739.8 937.0

0.094 0.103 (0.004) BASIC EARNINGS PER SHARE 0.244 0.268 (0.010)

0.012 0.012 - DIVIDEND PER SHARE 0.031 0.031 -

Note:-

*Including Topaz one-offs of RO 11,418K

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2.40

Ratio

2.38

25.00

Ratio

2.00

1.60

1.66

1.47

1.87

1.91

20.00

15.00

18.57

17.73

1.20

0.80

1.14

10.00

10.08

8.80

0.40

5.00

3.64

0.00

0

1.18

2009 2010 2011

2009 2010 2011

Gearing

Total Liabilities/Net Worth

Return on Capital

Employed ()

Return on Average

Equity ()

Significant Ratios

2009 2010 2011

CURRENT RATIO 1.22 1.06 1.00

GEARING 1.14 1.47 1.91

TOTAL LIABILITIES/NET WORTH 1.66 1.87 2.38

INTEREST COVER 5.17 4.75 2.05

RETURN ON CAPITAL EMPLOYED (%) 10.08 8.80 3.64

RETURN ON AVERAGE EQUITY (%) 18.57 17.73 1.18

& ITS SUBSIDIARY COMPANIES

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Chairman’s Rep rt

The company is

emerging stronger.

In 2012

we anticipate

improved stability

and growth.

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On behalf of the Board of Directors, I present the

audited accounts for Renaissance Services SAOG

for the twelve-month period ending 31 December

2011.

2011 was a difficult year. The company faced

unforeseen and unprecedented challenges, which

are now behind us. Solutions are in place. Some

consequences remain. After 10 successive years of

growth and record results, we regard the downturn

in 2011 performance as contained and reversed.

We have responded to the difficulties and

challenges. The company is emerging stronger. In

2012 we anticipate improved stability and growth.

Stakeholders recognise and value Renaissance for

its growth record. The Marine business and the

Contract Services business are world-class,

internationally competitive enterprises. Their

strength and assured future is of great value to

Renaissance shareholders. We have made progress

to restore the same viability to the Engineering

business in 2012, although we still have work to do

to achieve that.

The company ends the year with Rial 653.7 million

(US$ 1.7 billion) of assets and more than Rial 37

million (US$ 96.2 million) of cash on its balance

sheet. We are meeting all financial commitments

and obligations. The company invested Rial 90.4

million (US$ 235 million) in new assets for growth

during 2011. Our business is secure, healthy and

robust in spite of a torrid year.

Financial performance

In the face of numerous setbacks and one-off

financial impacts, the company’s revenues

continued to grow. This demonstrates the solid and

sustainable strength of the Renaissance franchise.

Customers appreciate the professionalism of our

people, value the quality of our services and rely on

the integrity of our assets. We have increased

revenue from existing customers and we have

opened new income streams with new customers.

Stakeholders trust Renaissance companies to

exceed customer expectations safely and efficiently.

The result is a 14.4% growth in revenue in 2011.

& ITS SUBSIDIARY COMPANIES

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Chairman’s Rep rt

Further growth in bottom line shall follow this

sustained growth in top line, as we reverse the

setbacks and apply efficiency controls to new

business gains.

Financial Performance

2011 2010

Rial Million US$ Million Rial Million US$ Million

Revenue 289.9 753.0 253.4 658.3

EBITDA 64.3* 167.0 71.1 184.7

Operating Profit 37.3 96.9 48.8 126.7

Net Profit 2.3** 6.0 32.3 83.9

Note:

* EBITDA and Operating Profit are before any extraordinary expenses.

** Net Profit is after providing for extraordinary expense of Rial 11.418 million (US$

29.7 million), and write back of tax provision of Rial 3.121 million (US$ 8.1 million).

A series of extraordinary items has impacted profit in

2011. The company has addressed these

exceptional issues. The total one-off cost was Rial

11.4 million (US$ 29.7 million), written off in the

Topaz subsidiary. These include write-off of expenses

of Rial 3 million (US$ 7.8 million) for an attempted

Initial Public Offering (IPO) of Topaz in London; and

a further Rial 8.4 million (US$ 21.8 million)

primarily related to one-off items in the Topaz

Engineering business. The impact is offset partially

by write back of tax provisions of Rial 3.1 million

(US$ 8.06 million), based on a tax ruling issued by

the Supreme Court in Oman on foreign dividends.

The downturn in 2011 operating performance is due

also to weaker performance in the Engineering

business. The Oman-based businesses absorbed

higher unplanned employment costs. Finance cost

throughout the group increased from Rial 10.3

million (US$ 26.8 million) to Rial 18.2 million

(US$ 47.3 million). This is a consequence of the

financial setbacks in the Topaz business.

Marine

Marine Group Rial Million US$ Million

2011 2010 2011 2010

Revenue 112.5 93.2 292.2 242.1

Operating Profit 36.2 35.2 94.0 91.4

The Marine business is set to deliver a record

performance in 2012. The young age of the

100-vessel Offshore Support Vessel (OSV) fleet

(average age 6.5 years), the geography and markets

where it operates, and its relevance to the

International Oil Companies (IOC) it serves, bode

well for the coming year in spite of global economic

uncertainty. We expect growth in the Caspian and

MENA markets. Following successful 2011 entry to

the West Africa market we expect further growth

opportunity in 2012. So far, the foray into the

Brazil market has been unsuccessful and costly.

We have had to take account of additional unseen

operating costs for the two vessels deployed in

Brazil, which has had further negative impact on

the final period result. We are correcting these

setbacks in the Brazil market. We are also

correcting any other under-performing assets in the

fleet. These corrections will allow the positive

performance of the majority of the fleet to increase

over the year and dominate 2012 results.

Engineering

Engineering Group Rial Million US$ Million

2011 2010 2011 2010

Revenue 66.4 65.5 172.5 170.4

Operating Profit (8.5) 3.1 (22.1) 8.1

We have experienced a crisis year of losses and

write-offs in the Engineering business. We have

taken all necessary measures to contain one-off

negative cost impacts and reduce costs. These

one-off cost impacts include our exit from some

loss-making businesses, such as the investment in

a ship repair yard in Kazakhstan. Most important, a

new management team is succeeding in getting key

engineering projects back on schedule. Setbacks

are temporary, so it is important that they are not

allowed to dominate the agenda, where the

customer must remain our primary focus. Some

residual loss-making contracts carry forward into

the first half of 2012.

At the same time, the company is close to securing

several new profitable contract opportunities.

We expect performance to move from losses to

profit by the half-year; and we are maintaining a

target for Engineering to break even over the whole

of 2012. We recognise that the full turnaround of

the Engineering business is not complete and

requires continued effort going into 2012. We shall

monitor that process closely and adjust remedial

action if necessary. This priority is taking longer

than we wish. However, we believe in the business

and the people. We have to be a little more patient,

but we remain resolute and determined to succeed.

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Contract Services

Contract Services Rial Million US$ Million

Group

2011 2010 2011 2010

Revenue 100.8 84.2 261.8 218.7

Operating Profit 13.6 12.6 35.3 32.7

In 2011 we absorbed Rial 5.5 million (US$ 14.3

million) in unplanned additional costs in the

Contract Services business, arising from mandatory

increased employment and other costs in the key

home market of Oman. In spite of this, the company

still achieved profits. The additional costs tempered

profit growth and margin of profitability. Clients in

the oil & gas sector allowed claims to mitigate 80%

of the cost increases, but the company absorbed

100% of increased costs in all other sectors. This

cost impact shall prevail until cyclical renewal of

contracts over the next 1 to 5 years. The company

has embraced the changes with good grace and

takes a positive view that this is an investment in

future growth. Oman remains the most important

market for this business.

Good people

throughout this great

company of ours have

made all the difference

in overcoming

difficult times.

& ITS SUBSIDIARY COMPANIES

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Chairman’s Rep rt

Annus Horribilis 2011

Annus Horribilis is a Latin phrase meaning ‘horrible

year’. It alludes to John Dryden’s poem about

London in the year 1666, titled Annus Mirabilis

(‘wonderful year’). In fact, 1666 had been a year of

calamity, including the Great Plague and the Great

Fire of London. But Dryden saw something to

appreciate in the way London faced disaster and

avoided even greater disaster. He was inspired by

the vigour, courage and resourcefulness of the city

in the face of such setbacks.

At the outset, 2011 looked like a potential Annus

Mirabilis for Renaissance but turned out to be an

unprecedented Annus Horribilis. We have put these

events behind us. We carry some valuable lessons

with us. We move on stronger for the experience.

Global events in the first quarter of 2011 conspired

to change market sentiment so our planned London

listing of Topaz could not go ahead. Subsequent

negative impacts on the company, and how we have

dealt with those issues, are well-documented in our

quarterly statements and other disclosures. Yet the

fundamental strengths of our business remain.

Through the robust due diligence process of the

IPO, a coalition of top professionals - investment

banks, legal, accounting, compliance and PR

advisors - concurred with our view that Renaissance

owns world-class companies, delivering operational

excellence to blue-chip clients from key market

leadership positions, with visible scope for

sustainable profitable growth. That fundamental has

not changed.

We have strengthened controls and assurance

processes to ensure our commitment that all

Renaissance business conduct is legal, fair and

honest. Potential failings in that standard in some

foreign subsidiaries, no matter how immaterial, have

been disclosed and self-reported by the company in

the relevant jurisdictions. Within the business itself,

we are able to state categorically that these matters

are behind us.

Key stakeholders in the investor, analyst and

regulator communities told us they have come to

expect Renaissance to uphold the highest

international standards of governance and

disclosure. We have developed our policies to ensure

we live up to those expectations. One-off negative

surprises are not the norm in Renaissance and we

have taken steps on risk and compliance to ensure

the events of 2011 shall not be repeated. We are

ensuring greater transparency in reporting from

subsidiaries to the parent company and the Board,

which in turn ensures greater speed and

transparency of reporting to the market.

We have restructured and streamlined the Topaz

business: Topaz Marine and Topaz Engineering are

now separate enterprises. Each is an independent

legal, financial and operational entity. We have

retained the flexibility to house the businesses

together or apart in any future IPO or M&A initiative.

The Engineering business is structured as two

divisions: Topaz Oil & Gas Engineering and Topaz

Marine Engineering. We have made substantial

reductions in overhead costs at corporate and

subsidiary levels. We have increased investment and

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focus in processes and project management.

The Topaz structure is flatter and leaner with

increased emphasis and focus on customer service.

We have reasserted the basic priorities of the

business on the things that matter most to our

customers: safety, quality, compliance, efficiency,

on-time in-cost project and contract delivery, and

developing and empowering outstanding people.

We have also taken steps to ensure the continuing

financial strength and stability of the business.

We have completed the first phase of the re-financing

initiative and have a signed term sheet in excess of

US$ 200 million. This concludes the material part of

the re-financing and has the effect of releasing

trapped equity in excess of US$ 50 million.

The second phase shall include funding for vessels

under construction and future new investments.

We shall conclude this in the coming months.

For future financing, numerous bilateral opportunities

have arisen, particularly from Islamic Banks that

could not participate in the original syndication.

The marine business model resonates well with this

form of financing.

The company has given a mandate to BankMuscat to

raise Rial 40 million (US$ 104 million) new capital

as Zero Coupon Convertible Bonds. We have

completed the financial and legal due diligence

process. We shall present this capital raise proposal

to shareholders for approval in the Extraordinary

General Meeting (EGM), scheduled for 25 March

2012. If approved, this new capital shall strengthen

the company’s balance sheet and provide additional

capital for growth. Subscription shall be open to

existing and new shareholders.

In the Q3 statement we anticipated announcing the

appointment of a new Topaz CEO in Q4. This has not

happened yet. We are taking our time with a

thorough search process. We are comfortable that the

operational leadership in each of the businesses

meets our criterion of ‘best team in the field’.

This allows us time and space to make an

appointment that complements the existing team

and adds value to the strategic leadership provided

by Renaissance.

& ITS SUBSIDIARY COMPANIES

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Chairman’s Rep rt

Outlook

Some consequences remain from the issues we have

faced in 2011, which shall be seen in muted

performance for the first half of the year, but this

should not blind us to the fact that we have resolved

the key challenges and are back on a growth path.

In the natural business cycle of Renaissance,

performance is always negatively affected in the first

half of the year, with seasonal impacts such as ice

in the Northern Caspian. This year the major portion

of dry-docking for the Marine business is scheduled

for the same period, which has a temporary higher

cost / lower revenue impact. We are also carrying

some loss-making engineering contracts into the first

half of 2012.

We have confidence in the turnaround of the

Engineering businesses although we have previously

been premature in our predictions when that

turnaround will be complete. The important point is

that the businesses are structured correctly with the

right management teams, headed in the right

direction. The geographic position of these

businesses could not be better, with yards and

assets located on both the Arabian Gulf and Indian

Ocean seaboards. The investment in project

management and better business processes is

focused where it should be – on-time and in-cost

delivery to the customer.

The important point

is that the businesses

are structured

correctly with the

right management

teams, headed in the

right direction.

Even with uncertainty in the global economy,

industry and market trends look positive for our

businesses. Barclays Capital estimates that global

exploration and production (E&P) spending in 2012

will be up 10%, with Middle East E&P spending

expected to rise 12% due to a pickup in activity

particularly in Iraq, Saudi Arabia and Kuwait. This is

good news for all our businesses, not just

Engineering. The Economist survey of senior

executives in the oil & gas industry predicts oil

prices shall remain high and benchmark oil prices

should still average US$ 83/barrel one year from

now. Renaissance companies show resilience even

in times of recession and low oil prices. So these

predictions bode well. Added to that, there is

specific opportunity ahead for the Marine business

in the Caspian, the Northern Gulf and West Africa.

In Oman, government infrastructure investment

plans offer growth opportunity for Contract Services.

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We have no current plans to revive the IPO initiative

in 2012, although this remains a realistic ambition

for the company – in particular for the Marine

business. We believe our priority should be to press

ahead with growth in the business and wait for an

upturn in global economic sentiment before

considering any independent listing. Nevertheless,

we still believe individual listing of Renaissance’s

most valuable assets may offer the most effective

way to optimise future growth opportunities, achieve

true value recognition and increase shareholder

value. A sum-of-parts valuation of the group’s

individual businesses, based on international

comparative multiples in each sector, illustrates the

true embedded value of the Renaissance franchise.

When the time is right, there is no reason why this

value may not be realized, either through listing

individual assets, such as the Marine business or

Contract Services business, under Renaissance

founder ownership, on the appropriate international

bourse; or through private placement; or similar

value-creation initiatives.

Appreciation

I would like to thank my fellow Directors for their

unswerving support and guidance through a difficult

year. The entire Board, wish to thank all our

stakeholders who have seen us through this Annus

Horribilis. Without them our progress would be

impossible, with them our future is secure – our

shareholders, our business partners, our bankers, our

professional advisors (accounting, legal and

strategic), suppliers, contractors, and the countries

and communities in which we serve. We reserve

special thanks for our customers, our employees and

our management. Good people throughout this great

company of ours have made all the difference in

overcoming difficult times – Thank you.

As an Omani public company we are proud to pay

tribute and thanks to His Majesty Sultan Qaboos bin

Said. The stability and growth of Oman’s economy

and the pace of its social and economic

development, provide a bedrock foundation for our

company to thrive and prosper as an international

enterprise.

Samir J. Fancy

Chairman

& ITS SUBSIDIARY COMPANIES

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Chief Executive’s Rep

rt

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Integrity is the primary genetic characteristic of Renaissance DNA.

It informs how we go about our business. It sustains us in adversity.

We faced a number of stern tests in 2011.

HSE

Tragedy hit us hard. Two of our colleagues died

while attending a marine repair job offshore, in the

vicinity of a third party incident explosion. Three of

our colleagues died in non-work related incidents –

a car crash, a bus crash and a suicide. We share in

the grief and loss of the families and assure them

of our support. What we should be doing is sending

home their loved ones safe and sound. We cannot

redeem that now, but we can honour these lost

colleagues by learning from these tragic incidents.

Safety performance is the primary measure of success

Consolidated Safety Performance 2011 2010 Change

Total Manhours Worked 43,224,723 39,012,550 +4,212,173

Number of Fatalities 2 0 +2

Number of Lost Time Incidents (LTI) 21 17 +4

Lost Time Incident Frequency (LTIF) 0.532 0.436 +0.096

Road Traffic Accidents (RTA) 23 9 +14

Total Kilometres Driven 17,805,024 12,245,630 +5,559,394

2011 safety performance is unacceptable. We have committed to goal zero – no harm to people, no harm to

the environment. We have fallen very short of that commitment.

Business Sector Marine Engineering Engineering Contract Other

HSE Performance (Oil & Gas) (Marine) Services Groups

Total Manhours Worked 3,639,667 7,374,495 4,749,313 26,852,290 608,958

Number of Fatalities 0 0 2 0 0

Number of Lost Time Incidents (LTI) 3 8 9 1 0

Lost Time Incident Frequency (LTIF) 0.824 1.085 2.316 0.037 0

Road Traffic Accidents (RTA) 2 3 9 3 6

Total Kilometres Driven 1,351,649 1,886,881 2,392,999 10,176,737 1,996,758

There is a direct correlation between the companies

with the best HSE performance and the best

financial performance. We have appointed new

leadership in the areas of weakest safety

performance in the Engineering businesses.

The Marine Repair business (within Marine

Engineering) is the area of greatest concern.

But I say to the Marine Repair team, do not be

discouraged. Thank you for your honesty in

reporting. You will see better performance this year

through your increased focus in identifying hazards

and mitigating risks; and through developing the

correct behaviours. We will not let you down.

& ITS SUBSIDIARY COMPANIES

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Chief Executive’s Rep

rt

Organisation

Renaissance has three core businesses: Marine,

Engineering and Contract Services. In 2011, we

formally divided the Engineering business into two

distinct divisions: Oil & Gas Engineering and

Marine Engineering. The company also owns

smaller non-core, but important, businesses in

education and training, and media

communications.

In 2011 we responded to financial and operational

challenges with a fundamental review of the

subsidiary Topaz organisation. We went back to

basics in terms of ensuring a flat, lean,

customer-focused operation. We removed the

mezzanine Topaz corporate overhead and functional

hierarchy. We removed unnecessary subsidiary

overheads that had burgeoned in some silo

divisions. We assigned the best business leaders,

corporate officers and functional professionals in

the line businesses. We increased focus and

resource in managing risk and business processes

and, most important, in project management and

business delivery to the customer. Responsibility

and Empowerment are back in the operating

businesses where they belong. We are recruiting a

new Topaz CEO. We have retained the flexibility to

decide whether the new CEO shall lead both Marine

and Engineering, or focus specifically on Marine.

This flatter structure is closer to the customer and

is delivering business turnaround.

Renaissance

Services

Topaz

Marine

Topaz

Engineering

Contract

Services

Group

TM MENA

TM Caspian

TM New

Markets

Topaz Marine

Engineering

(TME)

Topaz Oil and

Gas Engineering

(TOGD)

Other

Groups

Revenue

Net Profit

Total Equity

300

Rial Million

289.9

40

Rial Million

200

Rial Million

196

193

250

200

199

234

248

253

30

26

29

32

150

139

168

150

100

143

20

14

17

100

92

109

50

10

2.3

50

0

2006 2007 2008 2009 2010 2011

0

2006 2007 2008 2009 2010 2011

0

2006 2007 2008 2009 2010 2011

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2011 Performance

The net profit of the company for 2011 is Rial 2.3

million. This derives from four sources: The parent

company (which houses the Contract Services PAC

operations) contributed net profit of Rial 3.2

million; the remaining Contract Services business

under TISCO, contributed net profit of Rial 2.1

million; Topaz (which houses the Marine and

Engineering businesses) made net losses of Rial

4.3 million; and other businesses and investments

contributed net profit of Rial 1.3 million.

We can understand individual business segment

performance best by seeing revenue and operating

profit in each of the core businesses. In 2011,

Engineering is reporting as one segment. During

2012 we shall provide clearer separation between

Oil & Gas Engineering and Marine Engineering.

Revenue

Rial millions

Segments 2011 2010

Marine 112.5 93.2

Engineering 66.4 65.6

Contract Services 100.8 84.2

Operating Profit

Rial millions

Segments 2011 2010

Marine 36.2 35.2

Engineering (8.5) 3.1

Contract Services 13.6 12.6

The clarity is that we have two high-value

businesses that continue to perform well (Marine

and Contract Services). We have another substantial

business that has a negative financial impact on

overall performance, which we must reverse and

restore to health (Engineering). In addition, we

should ensure any parent company cost or overhead

sitting on top of these businesses is necessary,

efficient and only exists to add value.

Within the bad news of Topaz Engineering losses

there are some positive factors that affect current

and future performance. We have closed down one

loss-making subsidiary and withdrawn our

shareholding from another. The negative effect of

these actions is a one-off cost impact. There are

other one-off negatives ring-fenced in 2011.

There were two contractual disputes: One Marine

Engineering contract ended in lost litigation and all

the costs are taken in 2011. One Oil & Gas

Engineering contract, completed and handed over

to the client in 2010, has had the warranty bond

called in due to questions regarding a

subcontractor’s performance during the execution of

the contract. The warranty bond costs have been

taken in 2011. We are actively seeking to clarify

the client’s position and recovery of costs from the

subcontractor.

At the time of the change in management and

organisation structure, there were four other

projects that, without urgent intervention, appeared

destined for dispute through time and cost overrun:

One in Marine Engineering (where the client is

Topaz Marine); and three in Oil & Gas Engineering.

Under the new organisation structure, with

improved process control and customer-centric

project management focus, all four projects have

gained lost time. In three cases full time catch-up

is not possible and in all cases cost overrun is

inevitable. So we must carry the consequences of

these loss-making contracts into the first half of

2012. But there are two positives to take from this:

Client satisfaction is being restored; and the new

management team is proving its quality project

management capability.

The Topaz Marine business continues to grow,

strong and profitable. Even so, there is scope for

further improvement within existing operations. A

number of investments made in the Marine

business in 2011 have not performed in line with

the criteria submitted by management for

investment approval. The Marine team is already

working on corrections in under-performing assets

and this bodes well for 2012.

Dividend Track Record

2007 2008 2009 2010 2011

% RO’000 % RO’000 % RO’000 % RO’000 % RO’000

Cash dividend 15 3,344 10 2,453 12 3,385 12 3,385 - -

Stock dividend 10 2,229 15 3,679 - - - - - -

Total dividend 25 5,573 25 6,132 12 3,385 12 3,385 - -

& ITS SUBSIDIARY COMPANIES

23


Chief Executive’s Rep

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100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Azerbaijan

Jan

Feb

The Fleet Utilisation graph (below) looks alarming

at first sight, but is in fact encouraging when

explained. The two large profitable OSV fleets in

Azerbaijan and MENA are performing well and

utilisation remains high in those key markets.

OSV Fleet Utilisation

Kazakhstan

Mar

Apr

May

Turkmenistan

Jun

Jul

A positive trend in the main OSV Fleet

Aug

MENA

Sep

Oct

Total Marine

Nov

Dec

In Azerbaijan, long-term contracts secure and

sustain rates. Four new vessels joined the fleet in

2011 and we have secured contracts for four new

vessels joining in 2012. This assures growth.

In MENA, rates are increasing in line with independent

market predictions. We have made successful new

market entries into West Africa and Saudi Arabia.

Elsewhere, the market entry into Brazil has been

costly, but we are working on a positive initiative to

turn that around.

In Kazakhstan, utilisation is down at the end of the

year, but this only affects the small craft and some

Flat Top Barges, due to delays in Kashagan capital

investment projects. The full integration of the

North Caspian Operating Company (NCOC) is

scheduled to happen by 2013. This is important

for our long-term opportunities. The core business

of the OSV fleet is not affected.

In Turkmenistan, our deployment has been a great

success, but the construction contract that

engaged our vessels is now complete. The vessels

are re-deploying to Kazakhstan, and we are

pursuing opportunities in both those markets.

The Contract Services Group had a remarkable year

of growth and profit in spite of enormous

unplanned challenges. One loss-making project in

UAE affected performance but the company

compensated for this with more positive outcomes

in other projects. The loss-making project arose

from pricing error and occupancy shortfall, but the

company still delivered compliant standards to a

delighted customer. The contract ends in early

2012 and may be re-bid through cyclical re-tender.

Oman is the Contract Services business’ largest

market, where it enjoys a substantial market

leadership position. In March the company

committed to support the country’s National

Objectives spelt out by His Majesty Sultan Qaboos,

who called for improved employment terms and

increased employment opportunities for Omani

citizens. The company participated in the

discussions and initiatives of the oil & gas sector

and the private sector at large. By year end the

Contract Services team had employed a net

increase of 786 Omanis in the year, raising the

total number of Omanis employed in Contract

Services to 2,200. There has been an additional

cost impact due to mandatory increases in

employment terms and conditions, partially offset

by 80% allowable claims in oil & gas contracts. But

the company regards this as an investment, not a

cost. We are committed to doing more in 2012.

Permanent Accommodation for Contractors

(PAC) Occupancy

100%

80%

60%

40%

20%

Nimr PAC

Jan

Feb

Fahud PAC

Mar

Apr

May

Qarn Alam PAC

Aug

Marmul PAC

Sep

One further challenge for Contract Services in

2011 was the continued slow build-up of

occupancy in the new PAC facilities at Marmul and

Bahja, which have currently settled around 70%

occupancy with long-term residents. There is scope

for increase with contract residents in 2012.

Overall, occupancy levels on these projects are high

and the PAC programme remains one of our finest

investments.

Jun

Jul

Oct

Nov

Bahja PAC

Dec

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Strategic Direction

At the Corporate level, Renaissance remains

committed to building a world-class, internationally

competitive oil & gas services business. We want

the businesses we own to become the same in their

specific service fields. We already have two

businesses that meet those criteria: Topaz Marine

and the Contract Services Group. We have a third

business that can quickly match those criteria once

it recovers from a temporary crisis period: Topaz

Engineering.

We favour the public company model as a route to

unlocking value, raising capital and retaining an

ownership interest. We have gained valuable

experience from the aborted initiative to list Topaz

(Marine & Engineering) in London earlier this year.

One lesson is that we shall achieve greater clarity of

value by listing businesses in clearly defined

industry sectors. So this year we have ensured the

legal and financial independence of Topaz Marine

and Topaz Engineering. Within Topaz Engineering

we have ensured the operational separation of Topaz

Oil & Gas Engineering and Topaz Marine

Engineering. We shall ensure the legal and financial

independence of those businesses in due course.

Within the next one to three years, two of our

businesses will be ready for potential IPO

initiatives: Topaz Marine, possibly listing

independently in a market such as London or

Singapore; and Contract Services, possibly listing in

a market such as its home base of Muscat. Topaz

Marine Engineering and Topaz Oil & Gas

Engineering may follow in due course.

We are not obsessed with creating independent

public company status for our subsidiaries as the

only route to creating shareholder value - of course

not. But we are very serious at driving public

company behaviours, and independent IPO

aspirations at > US$ 0.5 billion to < US$ 1 billion

values, within the management teams of the

companies under Renaissance stewardship. We

want all our companies, whether they are ultimately

listed or not, to apply international best practices of

governance, transparency and disclosure, and

business ethics. These are businesses that are

financially sound applying best accounting

practices, risk and compliance procedures, within

financial ratios and parameters appropriate to their

business sector.

Evidence shows that independence as a public

company fosters innovation and growth through

transformational change and strengthening of:

Corporate Governance – direct scrutiny of an

independent board, committees, investors,

analysts, media and other stakeholders

Human Resources – enhanced motivation

through independent listed status, talent

retention and new talent attraction, market

benchmarking, and increased

entrepreneurialism

Finance – funding for growth, new investors

for a more focused business. Value realisation

through markets that have volume, scale and

specialised sector knowledge

Renaissance stature shall be enhanced as an MSM

listed company that is the principal founder

shareholder of listed subsidiaries that become

household names in their respective industries.

For Renaissance Shareholders the true value of

Renaissance’s holding in its best subsidiaries shall

be recognised through the scrutiny of a robust and

independent IPO process and ongoing market

performance.

Also why Oil & Gas? Already, a business like

Contract Services has major clients in sectors

outside Oil & Gas. But it has an Oil & Gas base

founded on the Renaissance operating mantra of

Safe, Efficient, Green and Local. So we want all our

businesses to serve blue chip International Oil

Company (IOC) and State Oil Company (SOC)

clients, while applying Oil & Gas industry standards

of HSE, Quality and Compliance, no matter what

other sectors they may also serve in.

For these reasons we are building world class

companies, specialised in their respective fields,

applying best of class international public company

and oil & gas industry standards in all that they do.

Individual Business Unit Strategies work towards

the overall Corporate Strategy and are tempered by

current realities in their respective operations and

markets.

& ITS SUBSIDIARY COMPANIES

25


Chief Executive’s Rep

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Topaz Marine

Topaz Marine continues to increase the size

and reduce the age profile of its Offshore

Support Vessel (OSV) fleet. Observers will note

the size of the fleet has remained either side

of 100 vessels for over two years now. That is

true of individual vessel count, but in reality,

smaller, older tonnage is being replaced by

state-of-the-art, often larger vessels. In 2012,

Topaz Marine has already secured contracts

with BP in Azerbaijan for two, 190-tonne

AHTS and two, 80-tonne AHTS. Topaz Marine

has a unique service differential in the

markets where it leads, in terms of the scale

of local onshore support on the ground, or in

the region, in the form of General

Management, operational, engineering, HSE,

and other functional support professionals. In

2012 Topaz Marine shall:


tenders offered by existing or new major

clients in existing major markets of the

Caspian and MENA, including,

Azerbaijan, Kazakhstan, Qatar, Saudi

Arabia and Turkmenistan. Our existing

clients are assured of our readiness to

compete and invest if successful.


African markets with IOC clients and

consider establishing local content and

support base there.


opportunities in spot markets or longer

term assignments round the world. The

company already has operations in the

North Sea wind farm sector and other

assignments in the Baltic, Brazil and

South-East Asia.


Brazil market.


Kazakhstan fleet. The company has

already invested over US$ 100 million in


local content partnership and local

investment in 2012.


local national crews for our vessels.

Topaz Engineering

Topaz Engineering has put in place a new

leadership team in a new structure. The focus


the problems of 2011, some consequences

carry forward to 2012, and the focus of the

businesses has to be primarily concerned with

turnaround initiatives:


disputes.


satisfaction of ongoing projects.





significant sales pipeline in view.


potential in existing yards at Adyard and

Liwa.


Maintenance Services at Adyard and



Contract Services Group

Contract Services Group is considering the


through a local management buy-out (MBO).

The deal is close to completion. Contract

Services Group shall continue its UAE



Renaissance’s short tenure of ownership of


Renaissance no longer requires an overlapping

business with potential duplication of

overhead costs in the same market. The


pursuing some contracts that are not within

Renaissance criteria of interest. It therefore

makes sense for the company to divest


arrangement with our valued colleagues who

shall continue to manage and own the

business. The 2012 programme for Contract

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Services Group is growth-oriented with a

primary focus on the opportunities offered in

the home market of Oman:


existing overseas markets: Angola and

Norway.


opportunities in Qatar as a potential new

market, with possible interest in other

GCC countries.


Services & Catering LLC through MBO.


experience in turnkey integrated facilities

management capabilities.


opportunities such as the PAC facilities,

whenever the competitive opportunity

arises.


international projects and service

contracts, if and when opportunities arise

(including major regional sporting events).


procurement capability, using newly-built

central facilities as a hub, to drive down

unit food costs for the company and

clients.


market.


and development of Omani workforce, with

special focus on senior management and

supervisory positions.


in-country value within Oman.

We are building

world class companies,

specialised in their respective

fields, applying best of class

international public company

and oil & gas industry

standards in all

that they do.

& ITS SUBSIDIARY COMPANIES

27


Chief Executive’s Rep

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respective markets. The fact these businesses

do not fit the core Oil & Gas strategy of

Renaissance does not diminish their stature

and reputation in their respective fields. We

continue to nurture and support their progress


remains that we shall divest these businesses

at an appropriate time and value if the right

prospective owner is found.

The focus on

operational

excellence is

in place.

Operating Strategy

Operating Strategy is similar for all

Renaissance companies. Our operating mantra

is clear, we want all Renaissance companies to


What do we mean by that?





This operating mantra expands in a full

explanation of the Renaissance Modus

Operandi.

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Renaissance Modus Operandi

How does Renaissance go about its business?

Renaissance is committed to provide safe, reliable, affordable services in a responsible manner

that enables economic progress and improves the economic well-being and quality of life of all

stakeholders: This is the operating agenda that drives Renaissance businesses:

Operational Excellence: Safely and reliably providing quality services

Driving growth: Anticipating, understanding and satisfying customer needs profitably

Best practice systems and processes: Maximising resources and asset value; deploying

state-of-the-art technology; prudent control; quality systems

Empowering people: Giving people the freedom and resources to succeed in flat, efficient

organisation structures; developing the next generation of leaders for our business

Good governance: Integrity, transparency, responsibility and accountability to protect the

interests of all stakeholders

Corporate social responsibility: Improving energy efficiency and minimising environmental

impacts; providing meaningful employment to indigenous workforces; developing and assisting

people and communities where we operate

What does it take to drive this operating agenda forward each year?

It requires an understanding of the long-term nature of our businesses.

It requires a consistent, systematic business model with the flexibility to adapt to changing

business conditions.

It requires a commitment to invest in and develop people, innovative technology, and projects

that grow shareholder value.

It requires a company of leaders with unwavering commitment to integrity, operational excellence

and community development.

It requires belief. Belief in our people and all our stakeholders; belief in our businesses and the

integrity of our assets.

How does Renaissance align itself with the best in the oil & gas industry?

Continuous improvement of HSE

Continuous upgrading and renewal of assets and infrastructure

Serious commitment to local content and in-country value in every host nation





Drive efficiency and lower cost base





& ITS SUBSIDIARY COMPANIES

29


Chief Executive’s Rep

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Geographical Presence 2011

Revenue - Geographical

Comparison in Rial Millions

Others, 54

Oman, 65

People

Three things have grown in 2011: Customers,

Revenue and the number of people employed by

the group. The company now employs over 14,000

people:

Employees 2011 2010

Marine 1,561 1,193

Engineering 4,196 3,289

Contract Services 7,895 6,544

Caspian, 78

MENA, 93

Media Communications 175 201

Education and Training 219 182

Oman, 65

MENA, 93

Caspian, 78

Others, 54

The home market of Oman represents 22% of the

company’s business; the Caspian region is 27%

and MENA is 32%.

Sustainability

The sustainability movement presents an

opportunity for companies to align their corporate

goals with those of society. Renaissance is

committed to promote sustainable economic

development and to collaborate with employees,

their families and the local community and society

at large to help foster a better quality of life.

This year we have incorporated Global Reporting

Initiative (GRI 3.1) disclosure parameters for the

first time in an effort to enhance the focus and

transparency of our reporting. The selection and

prioritisation of our reporting parameters seeks to

acknowledge the material concerns of our

stakeholders whom the company engages through a

variety of open communication channels throughout

the year. Through this integrated report we have

introduced new measurements for the company’s

financial, social and environmental performance in

areas that our stakeholders view as material for our

business. Renaissance’s vision for a safe and

sustainable future is reflected throughout the

report. Specific additional GRI measures follow the

CEO Report.

Renaissance companies have a track record for

retention and longevity of service. It is rare that we

have a large scale exodus of people. The overall

growth in employee numbers for growing operations

masks some significant changes in personnel at the

Topaz Corporate Office and line company overheads.

The significant problems we faced required changes

to be made in order to reassert the priorities of the

business and its direction. Others have lost their

jobs as a consequence of the need for cost-cutting

arising from poor performance results. That does not

happen often in our group and I am saddened to see

people forced to leave for those reasons. Others

decided to leave of their own accord due to the

alarm and uncertainty caused by events in the

company. I would like to thank all of you who stood

firm through this crisis. Through your efforts the

company has faced down peril and we are able to

look forward to a period of recovery that will restore

prosperity. The worst is behind us. We still have

more work to turn around Engineering, but that

prospect improves every day through the efforts of

our people – Thank you and well done.

Key Geographies

MENA Sultanate of Oman, Qatar, Saudi Arabia, United Arab Emirates

CASPIAN Azarbaijan, Kazakhstan

OTHERS Angola, Brazil, Norway

Renaissance groups have carried out operations in 19 countries in 2011.

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The order of seasonal and projected events in

2012, and enduring consequences from 2011,

means we will have a low performance in Q1 and

Q2 of 2012. But as secured new contracts and

growth commence during the course of the year,

I am confident we shall all be reading a far

happier report one year from now.

Stephen R. Thomas OBE

Chief Executive Officer

& ITS SUBSIDIARY COMPANIES

31


Sustainability Rep

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Communicating with Stakeholders

Renaissance is committed to a continuous effort to

increase stakeholder engagement. The company

takes a firm commitment to transparency and to

reporting the company’s progress, plans and

problems to all its stakeholders in a timely manner.

Renaissance has a very good track record of

compliance with MSM Regulations and Guidelines

which provide the regulatory framework in Oman.

Measuring Performance

Rising to the sustainability challenge requires a

coordinated effort. In the 2011 Annual Report, we

have presented new indicators relating to

operational impact on the triple bottom line of

economy, environment and society. This report

encompasses the boundaries of our groups and

diverse service operations which are detailed on

page 10-11, and reports on the performance period

of the fiscal year (January 1 – December 31,

2011). The report specifies where limitations were

encountered in light of the opportunities arising

from the consistent measurement of these

indicators. To achieve our sustainability reporting

objectives we commit to report on these indicators

on an annual basis. This report is presented at the

company’s annual general meeting and made

available to stakeholders through the company

website and Company Secretary. Our company has

self-declared a grade C against the GRI G3.1

Guidelines.

Materiality

Stakeholders regard Renaissance as not just a local

company, but rather as an Omani multinational

company, and as such have come to expect the

company to abide by the highest international

standards of governance and disclosure. We have

committed to live up to this requirement. The

following chart identifies our stakeholder groups,

the frequency and channels by which we engage

them, and summarises the material aspects of

stakeholder concerns and how the company

responds to them.

Quarterly Reports

Shareholder meetings

Open Investor Relations meetings

with upper management

Open Conference Calls

Open Letters, Company

Statements and Press Releases

Trade-related Conferences

Website

Maintaining reliable

financial returns and

sustainable growth

Key disclosures during the IPO

process and the disclosure of

material changes in core groups

Expressed desire for increased

Omanisation across

management

Shareholders

and Providers

of capital

GRI Index

1.1-1.2

Page 24-32

3.5-3.8; 3.10-3.12

Page 34-35

2.1-2.10

Page 10-13; 24;41

4.1-4.4

Page 43-48

EC1

Page

12-13; 16-17

3.1-3.3

Page 34

4.14-4.15

Page 34-35

3.4

Page 5

Enhancing the

content and analysts’ data

in quarterly reports

Increased number of statements

addressing shareholder and

market concerns, adopting open

platforms to engage with

external stakeholders fairly

and transparently

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PR1, PR2, PR5

Page 36

EC6

Page 39

Quarterly Reports

QHSE Reports

Monthly Customer Service Surveys

Emails and Meetings

Brochures and Websites

Advertising and Publicity

Events and Conferences

Website

Customers

and

Suppliers

New organisational

structure at Topaz to

streamline efficiencies

Continuous HSE and

quality management

Maintaining reliable

and safe operations while

minimising adverse impacts

to environment

Shortening the supply line

to be as local as efficiently

and qualitatively possible

Monthly

Management Reports

Policies, HSE and

Quality Manuals

Training

Emails and Meetings

Company Newsletter

Staff Events

Volunteer Programmes

Events and Conferences

CSR Programme

Advertising and Publicity

EN1, EN2,

EN3, EN5, EN8,

EN12, EN14,

EN16, EN22

Page 40-41

Website

Local

Communities

Supporting

national initiatives

focusing on

education,

environment and

youth

Environmental

and social

impacts on

the local

community

LA7

Page 23

LA10

Page 39

Engagement

Method

Recruitment and

retention assessments,

specifically with

increased hiring in CSG

Roll-out of a business

ethics and conduct

assessments with strict

internal auditing

Stakeholder’s

Priorities

Employees

and other

workers

Company

Responses

Business conduct,

working conditions

Engagement and

Development

GRI Indicator and

page reference

& ITS SUBSIDIARY COMPANIES

33


Sustainability Rep

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Our Customers

The main way in which we try to achieve our vision

for sustainable impact is through the services we

offer and from the way we manage our customer

relationships. Renaissance encourages a close to

the customer standard whereby our companies are

challenged to exceed customer expectations.

With our Safe, Efficient, Green and Local,

customer-centric business model, we seek to

sustain and grow our leadership positions in current

markets and light up new markets that would

welcome the quality and competitiveness we bring.

We have a blue-chip customer base in every market

that we serve and our portfolio includes many of

the world’s leading producers, operators and service

contractors of the oil and gas industry, as well as

governments and leading institutions. Renaissance

businesses regularly conduct product/service safety

audits and customer service surveys to ensure best

business practices and standards are consistently

measured.

GRI Indicators on Product and Service Quality (PR1, PR2, PR5)

Marine Engineering CSG

Other

Groups

Does the company

follow a life cycle or

stages in which health

and safety impacts of

products and services

are assessed for

improvement?

Yes. Monthly

performance review

meetings with the

client to review KPI’s

for improvement.

Products are supplied

with a Material Safety

Data Sheet (MSDS).

Yes. Periodic audits,

preventative

maintenance, HSE

inspections,

management visits.

Yes. With particular

attention to food

safety, Should a food

product be unfit for

consumption it is kept

in a non-conforming

product area and

returned to the

supplier with an NCR.

No significant

health and

safety risks in

products and

services.

Did the company have

incidents of

non-compliance with

regulations and

voluntary codes

concerning health and

safety impacts of

products and services

during the year?

No

No

No

No

Does the company

conduct surveys or have

customer satisfaction

practices in place to

maintain customer

satisfaction?

Yes. Data is monitored

by commercial

departments and

reviewed with the client

in meetings and safety

forums for further

improvement against

KPI’s.

A new system has

been developed for

implementation in


Yes. Customer

Satisfaction is a part

of our ISO standard.

Views are collected on

customer survey forms

and results are

compiled and

discussed with the

crew and executed.

Another best practice

is meeting clients

daily and taking

feedback on

day-to-day service.

Yes. Business

review forums

held at regular

intervals ensure

service levels

and client

statisfaction.

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Oil & Gas Related Customers

Non-Oil & Gas Related Customers

Abu Dhabi National Oil Company

(ADNOC, ADNATCO and NGSCO)

Azerbaijan International Operating Company

AGIP

BG Oman

BP

Dubai Petroleum

Exxon Mobil

Fujairah Refinery

Malaysia Marine & Heavy Engineering

Maersk Contractors Norge AS

MAERSK OIL

Occidental Petroleum

Oman LNG

Oman Refineries & Petrochemical Co.

Petroleum Development Oman (PDO)

Qalhat LNG

ROC Oil

SAIPEM

Schlumberger

TOTAL

Vela International

Oman

Diwan of Royal Courts

Haya Water

Ministry of Health

Ministry of Education

Ministry of Defense

Ministry of Manpower

Oman Aviation Services

Oman Dry Dock

Oman Mining Company

Port of Salalah

Royal Guard of Oman

Shangrila Hotel

Sultan Qaboos University

Sultan Qaboos University Hospital

Vale Oman Palletizing Company

International

ADMAR

Alderly Plc

APL Shipping

International DynCorp International

Kellogg Brown & Root LLC (KBR)

Lamprell

Maersk Line

Royal Navy of Oman

SEHA Abu Dhabi

United Nations Assistance Mission Iraq (UNAMI)

US Navy

UK Navy

Van Oord

Wilhelmsen Group

Accreditations held within the group

Topaz Marine
















Topaz Engineering











CSG





Other Groups























& ITS SUBSIDIARY COMPANIES

35


Sustainability Rep

rt

Social and Environmental Impact

Renaissance is committed to being a good

corporate citizen through protecting our employees

and all those affected by our work, supporting local

communities and safeguarding the environment in

which we operate. Today, many companies regard

Corporate Social Responsibility (CSR) as a

standard for being responsible, and CSR is evolving

towards Corporate Responsibility (CR) which

entails integrated commitments in the company’s

people, suppliers and local community. Sustainable

economic development impacts the local

community and society at large to help realise a

better standard of living. Renaissance promotes

sustainable economic development by employing

and training local workforces, using local suppliers

of goods and services, and investing in initiatives

to support local development and good causes.

We have a simple philosophy that says we must not

reap where we have not sown. It is one of the

important factors that give people throughout our

organisation a great sense of purpose in what we

do. Our progress is reported under the following

areas:






People are a vital source of competitive advantage.

At the heart of building a high performance

company is talent management – attracting and

hiring the right people to the organisation.

Renaissance thrives on the skill, hard work,

ingenuity and enterprise of talented people from

around the world who are the heart and soul of all

our businesses.

Throughout 2011, several Renaissance businesses

have reorganised at several intervals, and the

impacts on performance have been acknowledged

in the CEO Report. In addition to business-related

goals, normal job expectations have been

intensified during restructuring, with promotions

and increased spending on the development of

employees across the groups. Renaissance strives

to meet shareholder expectations for higher

Omanisation rates in senior executive roles.

At year-end 2011, Renaissance had 14,406

employees, compared to 11,483 employees the

previous year. The company has over 40

nationalities represented in its staff. Renaissance

has an equal opportunity policy for all employees,

irrespective of their nationality, gender or age.

While remaining competitive, the company and its

groups provide compensation packages that meet

or exceed the standard wage averages at national

scales, and our full-time employees, which

represent the majority of our company’s workforce,

are given full benefits that match or exceed the

labor laws of our host nation. Further, due to the

nature of our core operations our core groups have

low male to female employee ratios, however

enabling female employees is high on our agenda

for developing competence.


Renaissance has laid down its Omanisation Policy

since the company’s start in 1986. The policy

states that Omanisation is a prime business

objective to be managed and measured on a par

with the company’s other business objectives.

This is especially relevant for the company’s

Contract Services Group (CSG), which by year end

employed 2,200 Omanis. Of new hires for CSG,

786 new employees, or 58.2%, were Omani.

Parallel to its boost in new hires, CSG has rolled

out in 2011 an assessment programme across its

Oman-based locations, to manage, measure and

organise the requirements for the large scale

Omanisation drive, as well as ensure the

development and performance of its current staff.

CSG has positioned its Omani talent to work side

by side with expatriates, so that within a year or

two there can be a successful replacement of jobs,

to achieve what we regard as meaningful

Omanisation. That does not mean that our

expatriate leaves the company, as CSG has many

projects overseas and the group head office has

strengthened its capabilities to tender and mobilise

overseas contracts over several years.

While there is no significant requirement of our

companies operating outside of Oman to hire local

residents, our companies are encouraged to train

and employ local workforces in reflection of our

sustainable economic impact, and we are

committed to reporting increased indicators in

future reports. Within our Topaz Marine

subsidiaries, many of our offices have achieved

high local employment rates – 85% in Azerbaijan,

51% in Kazakhstan, and 73% in Turkmenistan.

Additionally, CSG operations in Angola have

maintained a local employee rate of 90%, while

CSG’s workforce in Norway is 100% from the local

workforce. Renaissance believes that indigenous

people provide the local connections and

knowledge needed for the company to grow in

international markets.

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Renaissance recognises that on the job training is

an important part of competence development and

leads to higher job satisfaction. Programmes for

continuous training and development are in place

to assess and support career development, and we

commit to achieving higher figures across groups in

the year. The following chart reflects the responsive

measurement of average hours of training for

employees across all groups.


Average

number of

hours of

training in

2011

Marine Engineering Contract Other

Services Groups

32 hours 18 hours 22 hours 12.5 hours


Renaissance actively supports using local suppliers

for materials and services wherever possible and

feasible. Investing in local supply chains generates

value that is core to the sustainability of local

businesses. Renaissance is itself a “home-grown”

Omani company that integrated into the fabric of

the supply chain in Oman and grew from its core

competencies in efficient and quality services.

The Local principle is one of four drivers in our

operating mantra: Safe, Efficient, Green, Local,

where we assign to the responsibility of being

serious about local content.

Renaissance businesses use a wide-range of

services and materials that are required for

operations that are equally varied. In reporting on

the policy and proportion of spending on

locally-based suppliers (GRI EC6), our Oman-born

businesses assessed their responsible business

practices with a satisfactory degree of transparency.

The company’s smaller businesses, represented by

the flagship companies NTI under the ETG group

and UMS for MCG group, account over 90% of

total purchases in 2011 to local suppliers. While

these businesses are small in scale of

Renaissance’s core businesses, the Contract

Services Group, a market-leader in Oman,

attributes 62% of total purchases in 2011 from

local Omani companies. In the Engineering group,

based on analysis of top 100 suppliers covering

70% of total procurement value, the expenditure of

local stocks averages 40%. In the Marine group,

our Topaz Marine Azerbaijan division monitors local

spend in a programme entitled ‘Commitment to the

Local Economy’ and reports local expenditure for

2011 to be 76%. In the coming year we aim to

reach an even higher level of reporting for our core

groups and geographies that reflect over 20% of

our business income.


Corporate Social Responsibility (CSR) is one of the

12 Renaissance Values that provide the signposts

and guidelines of how and why we conduct our

business. At the Renaissance corporate level we

allocate 1% of the previous year’s profit to CSR for

the coming year. In line with Capital Market

regulations we have the CSR allocation approved by

our shareholders at the Annual General Meeting.

Since 2008, the company has announced its

donations transparently as a reflection of good

governance, and can be found within our annual

reports and company website.

The downturn in the company’s financial position

has impacted the high activity of the company’s

CSR programmes this year. As a result, the

company has provisioned approximately 36% of the

total CSR 2011 budget, or approximately Rial

117,000 from Rial 323,000, in order to sustain

financial support to ongoing initiatives in 2012.
























& ITS SUBSIDIARY COMPANIES

37


Sustainability Rep

rt

Recognising the need for collaborative CSR

models, Renaissance aims to work closely with

stakeholders such as its employees as well as

non-profit, sustainability, and civil society

organisations to address societal challenges across

the communities we serve. Renaissance’s CSR

programme is currently focused on addressing our

home nation of Oman, however, our groups do

engage in meaningful CSR practice and activities

abroad. One such initiative is Topaz Marine’s

support of The Flying Angel, which was recognised

during the year at the 8th CSR Summit in Dubai as

Best Corporate Social Responsibility Initiative in

the Private Sector. The company’s CSR Policy and

key impacts of our CSR Programme are detailed in

the company website, while the monetary support

distributed in 2011 can be found in the Annual

Report on page 105.

Allocation of CSR fund across key social aspects:

Environmental Impact

2011 2010

Community 9% 7%

Education 20% 56%

Environment 30% 2%

Health 4% 5%

Sport 37% 30%

Being recognised as a green company reinforces

one of four core values in our organisation under

Safe, Efficient, Green and Local, and contributes to

the successful implementation of our strategy for

sustainability. The table in this section shows

results of our premiere company-wide survey on

environmental matters. We are proud of the focus

and progress on environmental impact shown by

Renaissance people throughout the group. We do

have a focus on environmental issues in our HSE

management systems, but we are planning to

seriously step up our activity in this regard to help

us achieve recognised credentials as a truly green

company. We are looking at initiatives to measure

and manage waste better, and we are being even

more environmentally conscious at the design stage

when we build things – whether vessels,

infrastructure or onshore life support facilities.

Wind and solar energy projects present an

opportunity for our organisation’s operations in

Marine and Engineering. The Marine Group has

supported the offshore wind industry in the North

Sea operations for two years. The Topaz

Engineering’s Oil & Gas subdivision is looking to

position the business to be able to work on new

energy projects for new builds. The Contract

Services Group has given support to a solar power

project on site of PAC Bahja and is reviewing new

technologies that reduce power consumption and

operate on reduced energy. These new growth

opportunities take into consideration the wider

range of environmental, social and economic

impacts that arise during the course of our

services. Through the services we deliver to our

customers, we seek to deliver a greater positive

impact on the environment than the negative

impact of our operations.

Environmental impacts that represent the concerns

of our stakeholders in Oman and abroad include

water and energy use, waste management and

impact to biodiversity. The tragic Deepwater

Horizon accident in the Gulf of Mexico in 2010

has led to greater controls for safety and

environmental risks in offshore activities, where

there is growing concern the impact on the ocean’s

biodiversity. The company’s Marine group does

have minor exposure to some hazardous oil-related

material such as empty oil drums, oil filters and oil

contaminated spill kit material.

Topaz Marine has introduced in 2012 an IMO

ballast water-management plan which aims to

mitigate the harmful impacts to marine

ecosystems. Also during 2011, MEG’s Caspian

operations were successfully accredited with

International Safety Management Code for the Safe

Operation of Ships and for Pollution Prevention.

Further, none of our groups has received fines for

non-compliance with environmental laws and

regulations, and the company does not own, lease,

or manage any land in, or adjacent to, a protected

area or area of high biodiversity value.

Within the company’s CSR programme, financial

support to environmental initiatives increased

tenfold, whereby in 2011 approximately 30% of

the total CSR budget was allocated to an

environmental project, in comparison to 3%

allocated in 2010. The financial support is primary

extended to a new initiative launched in 2011

entitled the Renaissance Whale and Dolphin

Research Project (RWDP), which bridges the

relevance of the company’s marine operations and

geographical relevance to research being

conducted on unique populations of Oman’s

marine species. The impacts of the RWDP project

will assist decision makers in Oman’s Ministry of

Fisheries, Ministry of Environment and Climate

Affairs and other governmental bodies to plan a

healthy balance between marine environments and

economic development, and to design effective

conservation strategies to ensure the survival of

species under threat of extinction. Our aim is to

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support the project into further tangible impacts

such as guidelines for eco-tourism and other

economic verticals, and to be documented for

Oman’s future marine studies and museums.

Renaissance launched an Office Green Team (OGT)

initiative in 2010 with the purpose of engaging

employees and promoting the green activities and

efficiencies taking place at the company’s various

businesses and locations. Through OGT, groups

reported on replacing office lights with energy

saving lights, conducting energy audits and

examples of office lighting and air conditioning

controls, reducing and recycling paper and plastic

programmes, and controlling domestic water usage

at various locations. Concurrently in the UAE, the

Topaz group launched Topaz Earth in 2010 with

the intention of influencing corporate culture and

became a corporate member of the Emirates

Environmental Group. Renaissance was honoured

among winners of the Oman Green Awards 2011 in

recognition of the company’s green initiatives,

winning the title of ‘Green Champion’ among the

nine categories.

Amount of Waste and Energy Expenditure Generated By Reporting Locations

Marine Engineering CSG

Other

Groups

Opportunities/Risk

identified by climate

change

Topaz Marine has

introduced new tonnage

and propulsion machinery

designed to reduce

emissions to the

atmosphere. Monitoring

of engine gasses is a

potential competitive

advantage.

No near-term risks

although our business is

entirely part of the Oil &

Gas Sector. We are

looking to position

ourselves on both wind

and solar energy projects

in new builds.

Climate change is slowly

impacting business through

drought and flood, declining

crop yields and water

shortages. Current food stock

is measured at 14,000 tonne.

Studies regarding new

technologies that reduce

power and water consumption

i.e. kitchen equipment to

reduce energy.

Opportunities for

conducting awareness

programmes to corporates,

government and individuals.

Increasing cost in paper

and material impact the

bottom line. Opportunities

for digital media and

sustainability awareness

events that shape consumer

and customer habits.

Significant Gas Emissions

– CO 2

emissions in tonnes

102,644 tonne

1,229 tonne

2,921 tonne

573 tonne

Significant Water

Consumption and

Recycling Initiatives

Domestic water usage

controlled signs posted.

Municipal supply:

29,200 m 3 . No water is

recycled.

CSG uses potable water

supplied by local Municipal

Authorities and through client

provided systems i.e. reverse

Osmosis. Total volume of

water consumption 2,083,832

m 3 . Total volume of water

recycled 514,829 m 3 or 25%.

Water discharge is not

significant.

Significant Waste and

Recycling Initiatives

Hazardous material

include oil-related items

and chemical waste from

containers and

equipment. Office lighting

and air conditioning

controlled.

On site recycling bins set

up for collecting plastic,

paper and metal.

Hazardous waste measured at

14.321 tonne while a

non-hazardous waste

measured at 620.716 tonne.

Cooking oil is recycled via the

client’s oil recovery process.

Energy conservation signs

posted at all PACs since

opening.

The company encourages

reuse and recycling for

primary material, namely

stationary (paper, printers

and computers) and saving

electricity by switching off

lights and utilising digital

tools. Reduction in energy

consumption by 10% by

utilising energy saving

devices and reducing

unnecessary light points.

Disposal methods

Waste is disposed of by

government-approved

waste management

companies.

All waste material is

segregated and removed

by specialist vendors.

Solid waste is disposed of in

landfills by waste companies

approved by the Ministry of

Environment and Climate

Affairs and meeting client

requirements.

Waste discharge is not

significant.

& ITS SUBSIDIARY COMPANIES

39


41 to 47.

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Rep

rt On Corporate Governance

Corporate governance is an internal system

encompassing policies, processes and people,

which serves the needs of Shareholders and other

stakeholders, by directing and controlling

management activities with good business savvy,

objectivity, accountability and integrity. Sound

corporate governance is not only about structure

and clarity in management and areas of

responsibility, but it also encourages transparency

so that Shareholders can understand and monitor

the development of the Company.

The Board and the Management of Renaissance

Services SAOG (“the Company”) are committed to

adopt the best practices of corporate governance

that promotes ethical standards and individual

integrity. The Company will continue to focus on its

resources, strengths and strategies for creating,

safeguarding and enhancing the Shareholders’

value while at the same time protecting the

interests of its stakeholders.

This report describes how the Principles of

Corporate Governance and the provisions of the

Code of Corporate Governance, set out in the

Capital Market Authority’s (CMA) Code of Corporate

Governance for companies listed on the Muscat

Securities Market (MSM), and the Provisions for

Disclosure stipulated in the Executive Regulations

of the Capital Market Law, are adhered to by the

Company.

The Company believes that the Code prescribes a

minimum framework for governance of a business.

The Company’s philosophy is to develop this

minimum framework and institutionalise its

principles as an ingredient of its corporate culture.

This will lay the foundation for further development

of a model of governance with superior governance

practices, which are vital for growing a successful

business. The Company recognises that

transparency, disclosure, financial controls and

accountability are the pillars of any good system of

corporate governance.

In recognition of the Company’s excellent and

exemplary model of corporate governance, the

Company has been awarded the Corporate

Governance Excellence Award for the year 2010 in

the Services Sector, in the contest organised by

Oman Centre for Corporate Governance of the CMA.

In accordance with the provision for disclosure

stipulated in the Executive Regulation of the

Capital Market Law, KPMG has issued a separate

Factual Findings Report on the Company’s

Corporate Governance Report for the year ended

31 December 2011.

1. Company's Philosophy

The Company upholds a governance philosophy that

aims at enhancing long term Shareholder value

while at the same time adheres to the laws and

observes the ethical standards of the business

environment within which it operates.

According to the Company’s governance paradigm,

the Management assumes accountability to the

Board, and the Board assumes accountability to the

Shareholders. The Board’s role is to be an active

participant and a decision-maker in fostering the

overall success of the Company by enhancing

Shareholder value, selecting & evaluating the Top

Management team, approving & overseeing the

corporate strategy & Management’s business plan

and acting as a resource for Management in

matters of planning and policy. The Board monitors

corporate performance against the strategic and

business plans, and evaluates on a regular basis

whether those plans pay off in terms of operating

result.

In order that it can effectively discharge its

governance responsibilities, the Board ensures that

the majority of Board members are Non-Executive,

at least one-third of Directors are Independent and

that the majority of committees formed by the

Board consist of Independent Directors.

Furthermore, the Board accesses independent legal

and expert advice of professionals who also assist

the Management. The Board also encourages active

participation and decision-making on the part of

Shareholders in General Meeting proceedings.

The Board maintains a positive and ethical work

environment that is conducive to attracting,

retaining and motivating a diverse group of top

quality employees at all levels. The Board, through

the Compensation Committee, reviews and decides

the parameters for assessment and compensation

of key personnel.

The Board ensures ethical behaviour and

compliance with all laws and regulations and has

developed a Code of Ethics that promotes values

among its employees. The Company’s Manuals of

Procedures (internal regulations) cover a wide range

of functions, including but not limited to, Corporate

Information & Disclosure Policy, Rules for Related

Party Transactions, Procurement Manual and

Financial Authority Manual, IT Policies Manual,

and HR Manual.

2. Board of Directors

During 2011 the Board consisted of 7 Directors. All

the Directors are Non-Executive and Independent.

Five Directors on the Board are Shareholders/

representatives of Shareholders and two Directors

are Non-Shareholder Directors.

& ITS SUBSIDIARY COMPANIES

41


Rep

rt On Corporate Governance

2.1/3 The Composition and Category of Directors, Attendance of Board Meetings




held during attended

last year



Shareholder



Shareholder



bin Taimur

Shareholder









Representative of

Shareholder



Representative of

Shareholder



Representative of

Shareholder


2.2 Statement of the Names & Profiles of

Directors and Top Management

The Renaissance Board brings together core

competencies of Directors with vision, strategic

insight, and industry knowledge, who provide

direction to the Executive Management.

Samir J. Fancy – Chairman

Mr. Samir J. Fancy is the Chairman of the Board of

Directors since 1996. He has held senior positions

and undertaken leading roles such as:



2005.


foundation and up to its acquisition by the

Company in May 2005.


since 1997.


Ltd.






Ali bin Hassan Sulaiman – Deputy Chairman


Board of Directors of the Company since 1996 and

is Deputy Chairman since March 2010. He is a


of the following companies:


several years up to its acquisition by the Company

in May 2005.







Committee

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HH Sayyid Tarik bin Shabib bin Taimur –

Director

HH Sayyid Tarik bin Shabib bin Taimur is a

member of the Board of Directors of the Company


the following:






since 1995.


Sunder George – Director


Directors of the Company since 2001. He has



including the following



Yeshwant C. Desai – Director

Mr. Yeshwant C Desai is a member of the Board of

Directors of the Company since 2001 and is the


successful career and extensive experience in





several years up to its acquisition by the

Company in May 2005.


Colin Rutherford – Director

Mr. Colin Rutherford is a member of the Board of

Directors since 2005 and has formerly chaired BUE

Marine Holdings prior to its acquisition by the


public and private companies having served on

many Boards around the world. He is a Chartered

accountant and a former corporate financier and

currently holds the following positions within his

diverse portfolio:




He holds further positions in global fund

management, retail, specialist building products



Ekaterina Sharashidze – Director


Board of Directors of the Company since 2011.



high level posts such as the Minister of Economic

Development. She has 15 years of business


developed markets, which include:






Stephen R. Thomas OBE – Chief Executive

Officer



LLC in1988. He took over as Chief Executive



following positions:









Marine Ltd.

2.4 Membership of Other Boards / Board

Committees (SAOG Companies in Oman)



Boards Committees

in which in which

Director Member

1 Samir J. Fancy 1 1


3 HH Sayyid Tarik bin 1 1

Shabib bin Taimur





& ITS SUBSIDIARY COMPANIES

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Rep

rt On Corporate Governance

2.5 Number & Dates of Meetings of the

Board of Directors

The Board held four meetings during 2011 on the

following dates:

January 29, 2011 - February 27, 2011 - May 25,

2011 - September 24, 2011

3. Audit Committee & Other Sub-committees

Audit Committee

The Audit Committee is a sub-committee of the

Board comprising of three Directors, majority of

who have to be Independent Directors.

3.1 Brief Description & Terms of Reference

The functions of the Audit Committee are as

follows:


in the context of their independence, fee and

terms of engagement for approval by the

Shareholders.


whether Statutory Auditors have full access to all

relevant documents.


with particular reference to reviewing the scope

of internal audit plan for the year, reports of

internal auditors pertaining to critical areas,

efficacy of internal auditing and whether the

internal auditors have full access to relevant

documents.


and Internal Audit Reports.




and the disclosure of its financial information to

ensure accuracy, sufficiency and credibility of the

financial statements.


of appropriate accounting policies and principles

leading to fairness in financial statements.


and recommend to the Board.


Statutory & Internal Auditors and the Board.



transactions for making appropriate

recommendations to the Board.


into small value transactions with related party

without securing prior approval of Audit

Committee & the Board.


provide non-audit services, in accordance with

CMA Circular E/12/2009.

3.2 Composition of Audit Committee and

Attendance of Meetings

In 2011 the Audit Committee of the Company was

comprised of the three Non-Executive Independent

Directors as members. The following table shows

the composition of the Audit Committee and the

attendance of its meetings.

Sr. Name Position Meetings Meetings

No held attended

during during

the year the year

1 Yeshwant Chairman 4 4

C. Desai

2 Ali bin Hassan Member 4 4

Sulaiman

3 Sunder George Member 4 3

During its meetings the Audit Committee discussed

and approved the annual internal audit plan. The

Committee reviewed and recommended to the


related party transactions. The Committee had

recommended the appointment of the Statutory

Auditors for the year 2011. The Committee also

looked at certain specific areas of the Company’s

operations and reported on these to the Board.

3.3 The Compensation Committee

The Compensation Committee was formed as a

Board Committee to lay down and update the

parameters for assessment and compensation of

key personnel, undertake their performance

assessment and report to the Board on the

compensation & personnel policies. The

Committee, which consists of the following

Directors held one meeting during 2011:

Sr. Name Position Meetings Meetings

No held attended

during during

the year the year

1 Yeshwant Chairman 1 1

C. Desai

2 Colin Member 1 1

Rutherford

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4. Process of Nomination of the Directors

In nominating and screening candidates to fill a

casual vacancy, the Board seeks candidates with the

skills and capacity to provide strategic insight &

direction, encourage innovation, conceptualise key

trends and evaluate strategic decisions. The Board

focuses on professionalism, integrity, accountability,

performance standards, leadership skills,

professional business judgment, financial literacy

and industry knowledge as core competencies of the

candidates. While nominating competent

candidates, the Board ensures that the Shareholders

retain the power of electing any candidate,

irrespective of his candidature being recommended

by the Board or otherwise, and that any Shareholder

has the full right of nominating himself.

Remuneration Matters

5. Remuneration Matters

As per the approval accorded by the AGM held on

28 March 2011, the Chairman is paid Rial 1,000/-

for attending Board meetings and other Directors

are paid Rial 500/- as sitting fees per meeting.

Sitting fees of Rial 750/- are paid to Committees’

Chairmen and sitting fees of Rial 650/- are paid to

Committees’ members. The remuneration, sitting

fees and travelling expenses relating to the

attending of the meetings paid to the Chairman &

Directors for 2011 are as follows:

Sr. Name of Director Position Sitting Fees Paid Remuneration Travelling

No for Board & Paid for 2010 Expenses

Sub-committees’

Meetings for 2011

1 Samir J. Fancy Chairman 4,000/- 56,784/- 2,472/-

2 Ali bin Hassan Deputy 4,600/- 19,195/- 1,926/-

Sulaiman

Chairman

3 HH Sayyid Tarik bin Director 1,500/- 28,391/- 297/-

Shabib bin Taimur

4 Sunder George Director 3,450/- 19,195/- 1,410/-

5 Yeshwant C. Desai Director 5,750/- 24,195/- 4,392/-

6 Colin Rutherford Director 2,650/- 14,195/- 9,130/-

7 Ekaterina Director 1,500/- - 6,270/-

Sharashidze

8 Rishi Khimji * Director 500/- 14,195/- -

TOTAL 23,950/- 176,150/- 25,897/-

* Tartan LLC appointed Ms. Ekaterina Sharashidze in replacement to Mr. Rishi Khimji in February 2011.

For the financial year 2011, no remuneration is

recommended for Directors. The remuneration paid

during 2011 for the financial year 2010 amounted

to Rial 176,150/-.

Total remuneration paid to the top five senior

executives of the Company (including its

subsidiaries) during the year was Rial 843,838/-.

This includes salary and benefits paid in cash,

monetary value of all benefits calculated as per

Company rules and a variable amount based on

performance as recommended by the Compensation

Committee of the Board.

Majority of the top 5 officers of the Company have

been with the Company for a long time and the

employment contracts are usually entered into for

an initial period of 2 years which are automatically

renewed unless terminated in accordance with the

terms mentioned therein. The notice period for

termination of employment contracts for all the key

personnel is 2 months and the gratuity is

computed and paid in accordance with the

applicable Labour Laws.

The Company has a Senior Management Incentive

Plan (SMIP). Under the plan the company has

created an overseas based trust structure under the

name of Renaissance Services SMIP Limited, and

uses trustees from an independent professional

firm to oversee and administer the employees’

long-term benefit scheme independently from the

Company. The scheme is a rolling programme that

allows a part of the Company’s Senior Management

bonus payments every year to be paid into the

independent trust and the underlying structure. The

proceeds are invested by the trustees in the shares

& ITS SUBSIDIARY COMPANIES

45


Rep

rt On Corporate Governance

of the Company through the MSM. The shares are

directly released to the employees by the trustees

proportionately over a period of 3 years. The

structure and the operation mechanism ensure

independency and transparency so that the

employees are fully aware of the management and

liquidity of their long-term employment benefits.

6. Details of Non-Compliance by the Company

There were no penalties or strictures imposed on the

Company by the MSM/ CMA or any statutory

authority for the last three years. There are no areas

in which the Company is still not compliant with the

Code of Corporate Governance.

8.2 Renaissance Share Price movement in

comparison to the MSM Index and MSM

Services Index

Share Price in Rial

RS Closing price

MSM Index

MSM Index

7. Means of Communication

7.1 The Company has been sending financial results

and material information to the MSM Website via

the MSM Electronic Transmission System. The

Company has also been publishing annual audited &

quarterly un-audited financial results and material

information in the English and Arabic newspapers.

The annual audited accounts & Chairman’s Report

are despatched to all Shareholders by mail, as

required by law.

7.2 The financial results and information on the

company are posted at: www.renaissance-oman.com

7.3 Meetings are held with analysts and members of

the financial press in line with internal guidelines of

disclosure.

7.4 The CEO’s Report, provided in the Annual

Report, includes the Management Discussion &

Analysis of the year’s performance.

8. Stock Market Data

8.1 High / Low share prices during each

month of 2011:

(Source of statistics: MSM)

High/Low share price movement

Month High (Rial) Low (Rial)

January 2011 1.250 1.119

February 2011 1.354 0.977

March 2011 1.225 0.942

April 2011 1.106 0.984

May 2011 1.065 0.816

June 2011 0.874 0.835

July 2011 0.898 0.799

August 2011 0.824 0.521

September 2011 0.730 0.635

October 2011 0.642 0.575

November 2011 0.627 0.500

December 2011 0.575 0.520

Share Price in Rial

Closing price

MSM Services Index

8.3 Distribution of Shareholding as on

31 December 2011

(Source of statistics: Muscat Clearing & Depository Co SAOC)

Sr. Category Number No. of % Share-

No of Share- shares holding

holders

1 Less than

100,000 4,689 18,540,421 6.57%

shares

2 100,000 – 48 6,573,277 2.33%

200,000

shares

3 200,001 –

500,000

shares 52 17,094,672 6.06%

4 500,001 –

2,700,000

shares 45 48,713,139 17.27%

5 1% - 1.99%

of share capital 8 33,266,795 11.79%

6 2% - 6% of

share capital 11 115,368,123 40.90%

7 10% of share

capital & above 1 42,538,025 15.08%

TOTAL 4,854 282,094,452 100%

MSM Service Index

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8.4 The Company does not have any

outstanding GDRs / ADRs / Warrants or any

convertible instruments.

9. Professional Profile of the Statutory

Auditors

The Shareholders of the Company have appointed

KPMG as the auditors for the year 2011. KPMG is

one of the leading accounting firms in Oman. The

Oman practice of KPMG, which forms part of

KPMG Lower Gulf, was established in 1974 and

employs more than 130 people, including 4

partners, 5 directors and 19 managers. KPMG

Lower Gulf (UAE and Oman), is a member of the

KPMG network of independent firms affiliated with

KPMG International Co-operative. The KPMG

network operates in 150 countries and employs

138,000 people worldwide. KPMG in Oman is

accredited by the Capital Market Authority (CMA) to

audit joint stock companies (SAOGs).

As per Article 9 (para b) of the Code of Corporate

Governance pertaining to the rotation of external

auditors, KPMG have completed four years as

Statutory Auditors of the Company by the end of

2011 , and therefore, are not eligible for

re-appointment as Statutory Auditors of the

Company for the financial year 2012.

rigorous implementation of the new Code of

Business conduct, Management has taken further

steps, including greater oversight of the activities of

the Group by Senior Management of the Holding

Company and strengthening the relevant internal

controls. Management is confident that, based on

the foregoing measures and the rigorous

implementation of the new Code of Business

Conduct, they will ensure that such instances do

not recur in the future.

The Board of Directors confirms its accountability

for the preparation of the financial statements in

accordance with the applicable standards and

rules.

The Board of Directors confirms that it has

reviewed the efficiency and adequacy of the

internal control systems of the Company. The Board

is pleased to inform the Shareholders that adequate

and efficient internal controls are in place and that

they are in full compliance with the Internal Rules

& Regulations.

The Board of Directors also confirms that there are

no material things that affect the continuation of

the Company and its ability to continue its

operations during the next financial year.

10. Audit Fees paid to the Auditors

During the year 2011 , aggregate professional fees

in the amount of Rial 605,482/- were rendered to

KPMG Oman and other KPMG offices in respect of

the services provided (Rial 242,297/- for audit,

Rial 275,185/- for tax and Rial 88,000/- for other

services).

11. Confirmation by the Board of Directors

Renaissance is committed to conducting business

legally and professionally under the highest

standards of business ethics and moral code. This

same high standard is expected and required of all

Renaissance subsidiary companies and people

working at every level throughout the Group.

In the process of announcing and implementing a

new Code of Business Conduct (COBC) in one of its

subsidiaries outside Oman, the Company uncovered

circumstances suggesting financial misconduct.

The Company immediately appointed and

instructed independent auditors to carry out an

investigation. Also, the Management promptly took

all appropriate steps within their power to ensure

that any inappropriate practices ceased

immediately and permanently, and ended the

employment of certain personnel. In addition to

_____________________

Chairman

_____________________

Director

& ITS SUBSIDIARY COMPANIES

47


49 104,

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December

2011 2010

Notes RO’000 RO’000

Revenue 289,922 253,429

Operating expenses (221,126) (176,209)

Gross profit 68,796 77,220

Administrative expenses (31,505) (28,457)

Profit from operations 37,291 48,763

Net finance costs 19 (18,194) (10,338)

Other non-operating expenses 20 (11,418) -

Amortization of intangible assets 4 (33) (13)

Share of profit from associate companies 6 109 368

Net gain on investments 1 3

Net profit before income tax 7,756 38,783

Income tax expenses 18 (5,465) (6,501)

Net profit for the year 19 2,291 32,282

Other comprehensive income (loss)

Foreign currency translation differences 14 5

Effective portion of changes in fair value of cash flow hedges (1,628) (143)

Other comprehensive loss for the year (1,614) (138)

Total comprehensive income for the year 677 32,144

Net (loss) profit attributable to:

Shareholders of the Parent Company (1,000) 27,648

Non-controlling interest 3,291 4,634

Net profit for the year 2,291 32,282

Total comprehensive (loss) income attributable to:

Shareholders of the Parent Company (2,614) 27,510

Non-controlling interest 3,291 4,634

Total comprehensive income for the year 677 32,144

Basic and diluted (loss) earnings per share (RO) 21 (0.004) 0.103

Dividend per share:

Cash dividend (RO) 22 - 0.012

The attached notes 1 to 32 form an integral part of these financial statements.

The Parent Company statement of comprehensive income is presented as a separate schedule attached to the financial statements.

The report of the Auditors is set forth on page 48.

& ITS SUBSIDIARY COMPANIES

49


CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 31 December

2011 2010

Notes RO’000 RO’000

Non-current assets

Property, plant and equipment 3 454,838 391,555

Intangible assets 4 38,871 38,855

Investments 6 1,919 1,734

Deferred tax asset 18 1,255 448

Total non-current assets 496,883 432,592

Current assets

Trading investments 16 15

Inventories and work in progress 8 8,991 13,270

Trade and other receivables 9 110,453 93,779

Cash and bank balances 10 37,354 22,437

Total current assets 156,814 129,501

Current liabilities

Trade and other payables 11 74,516 62,422

Bank borrowings 10 & 12 8,245 3,485

Term loans 13 73,858 56,308

Total current liabilities 156,619 122,215

Net current assets 195 7,286

Non-current liabilities

Term loans 13 286,886 228,508

Non-current payables and advances 14 10,368 9,871

Staff terminal benefits 15 6,657 5,667

Total non-current liabilities 303,911 244,046

Net assets 193,167 195,832

Equity

Share capital 16 28,209 28,209

Share premium 16 19,496 19,496

Treasury shares 16 (1,704) (1,704)

Legal reserve 16 10,771 10,577

Subordinated loan reserve 13&16 5,714 -

Proposed distribution 22 - 3,385

Retained earnings 105,746 112,479

Hedging reserve 16 (1,859) (231)

Exchange reserve 16 121 107

166,494 172,318

Non-controlling interest 26,673 23,514

Total equity 193,167 195,832

Net assets per share (RO) 17 0.622 0.644

The financial statements were authorized for issue in accordance with a resolution of the Directors on 27 February 2012.

Chairman Director

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The attached notes 1 to 32 form an integral part of these financial statements.

The Parent Company statement of financial position is presented as a separate schedule attached to the financial statements.

The report of the Auditors is set forth on page 48.


CONSOLIDATED STATEMENT OF CASH FLOWS

for the year ended 31 December

2011 2010

Notes RO’000 RO’000

OPERATING ACTIVITIES

Cash receipts from customers 261,019 252,547

Cash paid to suppliers and employees (217,924) (195,126)

Cash generated from operations 43,095 57,421

Net finance costs (19,142) (10,522)

Income tax paid (4,669) (6,273)

Cash flows from operating activities 19,284 40,626

INVESTING ACTIVITIES

Acquisition of property, plant and equipment (82,588) (134,355)

Acquisition of intangible assets (49) (149)

Investment in an associate (76) -

Acquisition of a subsidiary - (5,964)

Dividend received 198 176

Cash used in investing activities (82,515) (140,292)

FINANCING ACTIVITIES

Net receipt of term loans 75,928 96,232

Net movement in related party balances 977 120

Cash dividends paid (3,385) (3,385)

Funds paid to non-controlling interest (132) (1,521)

Cash flows from financing activities 73,388 91,446

Net increase (decrease) in cash and cash equivalents 10,157 (8,220)

Cash and cash equivalents at the beginning of the year 18,952 27,172

Cash and cash equivalents at the end of the year 10 29,109 18,952

Cash and cash equivalents comprise the following:

Cash and bank balances 37,354 22,437

Bank borrowings (8,245) (3,485)

29,109 18,952

The attached notes 1 to 32 form an integral part of these financial statements.

The Parent Company statement of cash flows is presented as a separate schedule attached to the financial statements.

The report of the Auditors is set forth on page 48.

& ITS SUBSIDIARY COMPANIES

51


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2010

Share

capital

Share

premium

Attributable to Shareholders’ of the Parent Company

Treasury

shares

Legal

reserve

Proposed

distribution

Retained

earnings

Hedging

reserves

Exchange

reserves Total

Noncontrolling

interest Total

RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO ‘000 RO’000 RO’000 RO’000 RO’000

1 January 2010 28,209 19,496 (1,704) 10,440 3,385 88,176 (88) 102 148,016 20,401 168,417

Total comprehensive income for the year:

Net profit for the year - - - - - 27,648 - - 27,648 4,634 32,282

Other comprehensive income:

Changes in fair value of cash flow hedge - - - - - - (143) - (143) - (143)

Foreign currency translation differences - - - - - - - 5 5 - 5

Total comprehensive income for the year - - - - - 27,648 (143) 5 27,510 4,634 32,144

Transactions with owners, directly

recorded in equity:

Dividend paid - - - - (3,385) - - - (3,385) - (3,385)

Proposed dividend - - - - 3,385 (3,385) - - - - -

Income from treasury shares - - - - - 177 - - 177 - 177

Transfers to legal reserve - - - 137 - (137) - - - - -

Movement related to non-controlling

interests - - - - - - - - - (1,521) (1,521)

Transactions with owners, directly

recorded in equity - - - 137 - (3,345) - - (3,208) (1,521) (4,729)

31 December 2010 28,209 19,496 (1,704) 10,577 3,385 112,479 (231) 107 172,318 23,514 195,832

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2011

Share

capital

Share

premium

Treasury

shares

Attributable to shareholders’ of the Parent Company

Legal

reserve

-Sub

ordinated

loan reserve

Proposed

distribution

Retained

earnings

Hedging

reserves

Exchange

reserves Total

Noncontrolling

interestTotal

RO’000 RO’000 RO’000 RO’000 RO,000 RO’000 RO’000 RO ‘000 RO’000 RO’000 RO’000RO’000

1 January 2011 28,209 19,496 (1,704) 10,577 - 3,385 112,479 (231) 107 172,318 23,514 195,832

Total comprehensive income for the year:

Net profit for the year - - - - - - (1,000) - - (1,000) 3,291 2,291

Other comprehensive income:

Changes in fair value of cash flow hedge - - - - - - - (1,628) - (1,628) - (1,628)

Foreign currency translation differences - - - - - - - - 14 14 - 14

Total comprehensive income for the year - - - - - - (1,000) (1,628) 14 (2,614) 3,291 677

Transactions with owners, directly

recorded in equity:

Dividend paid - - - - - (3,385) - - - (3,385) - (3,385)

Income from treasury shares - - - - - - 175 - - 175 - 175

Transfers to legal reserve - - - 194 - - (194) - - - - -

Transfer to subordinated loan reserve

- - - - 5,714 - (5,714) - - - - -

Movement related to non-controlling

interest - - - - - - - - - - (132)(132)

Transactions with owners, directly

recorded in equity - - - 194 5,714 (3,385) (5,733) - - (3,210) (132)(3,342)

31 December 2011 28,209 19,496 (1,704) 10,771 5,714 - 105,746 (1,859) 121 166,494 26,673 193,167

The attached notes 1 to 32 form an integral part of these financial statements.

The Parent Company statement of changes in equity is presented as a separate schedule attached to the financial statements.

The report of the Auditors is set forth on page 48.

& ITS SUBSIDIARY COMPANIES

53


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

1 LEGAL STATUS AND PRINCIPAL ACTIVITIES

Renaissance Services SAOG (the “Parent Company”) is incorporated in the Sultanate of Oman as a public joint

stock company. The business activities of Renaissance Services SAOG and its subsidiary companies (together

referred to as the “Group”) include investments in companies and properties, providing solutions in offshore

support vessel fleet, ship building, purchase and sales of vessels, afloat ship repair, fabrication and maintenance

for the oil & gas and energy services sectors, a leading turnkey contract services provider providing facilities

management, facilities establishment, contract catering, operations and maintenance services, provision of

training services, media publishing, advertising and distribution, manufacturing, general trading and related

activities.

2 SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting

Standards (“IFRS”) and applicable requirements of the Commercial Companies Law of 1974 and the minimum

disclosure requirements of the Capital Market Authority (“CMA”).

These financial statements have been prepared in Rial Omani (“RO”) rounded to the nearest thousand, unless

otherwise stated.

The consolidated financial statements are prepared under the historical cost convention modified to include

the measurement at fair value of the following assets:

• Held for trading investments;

• Available for sale investments; and

• Derivative financial instruments.

Basis of consolidation

Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or

indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

In assessing control, potential voting rights that currently are exercisable are taken into account. The financial

statements of subsidiaries are included in the consolidated financial statements from the date that control

commences until the date that control ceases. Losses applicable to the non-controlling interest in a subsidiary

are attributed to the non-controlling interests even if this results in the non-controlling interests having a deficit

balance.

Upon loss of control the Group derecognises the assets and liabilities of the subsidiary, any non-controlling

interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss

of control is recognised in the statement of comprehensive income. If Group retains any interest in the previous

subsidiary, then such interest is measured at fair value at the date that the control is lost. Subsequently, it is

accounted for as equity accounted investee or as an available for sale financial asset depending on the level of

influence retained.

Special purpose entities (“SPEs”) are consolidated if, based on the evaluation of the substance of the relationship

of the entity with the Group and the SPEs risks and rewards, the Group concludes that it controls the SPEs.

The financial statements of the subsidiaries are prepared for the same reporting year as the Parent Company,

using consistent accounting policies.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

Basis of consolidation (continued)

Associates

Associates are those entities in which the Group has significant influence, but not control, over the financial and

operating policies. The consolidated financial statements include the Group’s share of the total recognised gains

and losses of associates on an equity accounting basis, from the date that significant influence commences

until the date that significant influence ceases. When the Group’s share of losses exceeds the carrying amount

of the associate, the carrying amount is reduced to nil and recognition of further losses is discontinued except

to the extent that the Group has incurred obligations in respect of the associate.

Investments in jointly controlled entities

Jointly controlled entities are those entities in which the Group has joint control, established by contractual

agreement and requiring unanimous consent for strategic financial and operating decisions. Investments in the

jointly controlled entities are accounted for under the proportionate consolidation method whereby the Group

accounts for its share of the assets and liabilities, income and expenses in the jointly controlled entity.

Jointly controlled operations

A jointly controlled operation is a joint venture carried on by each venturer using its own assets in pursuit of

the joint operations. The consolidated financial statements include the assets that the Group controls and the

liabilities that it incurs in the course of pursuing the joint operation and the expenses that the Group incurs and

its share of the income that it earns from the joint operation.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised gains arising from intra-group transactions, are

eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with

associates are eliminated to the extent of the Group’s interest in the entity, against the investment in the

associate. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that

there is no evidence of impairment.

Accounting for business combinations

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the

date on which control is transferred to the Group. Control is the power to govern the financial and operating

policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into

consideration potential voting rights that currently are exercisable.

The Group measures goodwill at the acquisition date as:

• the fair value of the consideration transferred; plus

• the recognised amount of any non-controlling interests in the acquiree; plus if the business combination

is achieved in stages, the fair value of the existing equity interest in the acquiree; less

• the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the

Group incurs in connection with a business combination are expensed as incurred.

& ITS SUBSIDIARY COMPANIES

55


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

Non-controlling interests

Non-controlling interests represent the portion of profit or loss and net assets not held by the Group and

are presented in the statement of comprehensive income and within equity in the consolidated statement

of financial position, separately from parent shareholders’ equity. Acquisition of non-controlling interests is

accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised

as a result of such transactions. The adjustments to non-controlling interests arising from transactions that do

not involve the loss of control are based in a proportionate amount of net assets of the subsidiary.

Revenue recognition

Marine charter

Revenue comprises operating lease rent from charter of marine vessels, mobilisation income, and revenue

from provision of on-board accommodation, catering services and sale of fuel and other consumables.

Lease rent income is recognised on a straight line basis over the period of the lease. Revenue from provision of

on-board accommodation and catering services is recognised over the period of hire of such accommodation

while revenue from sale of fuel and other consumables is recognised when delivered. Income generated from

the mobilisation or demobilisation of the vessel to or from the location of charter under the vessel charter

agreement is recognised when the mobilisation or demobilisation service has been rendered.

Ship building, ship repair and oil and gas engineering services

Revenue comprises amounts derived from ship repair, provision of mechanical, electrical and instrumentation

services, fabrication and maintenance services, turbocharger services and marine boiler repairs. Revenue

is recognised under the percentage of completion method and is stated net of discounts and allowances.

Percentage of completion is determined by reference to the proportion that accumulated costs up to the period

end bear to the estimated total costs of the contract. Cost includes all expenditure directly related to specific

projects and an allocation of fixed and variable overheads incurred in the Group’s contractual activities. Where

the outcome of a contract can be assessed with reasonable certainty, a prudent estimate of attributable profit

is recognised in the statement of comprehensive income. Full provision is immediately made for all known

or expected losses on individual contracts, when such losses are foreseen. Revenue arising from contract

variations and claims is not accounted for unless it is probable that the customer will approve the variations/

claims and the amount of revenue arising from the variations/claims can be measured reliably.

Goods sold and services rendered

Revenue from the sale of goods is recognised in the statement of comprehensive income when the significant

risks and rewards of ownership have been transferred to the buyer i.e. delivery of goods, acceptance by the

customer and the amount of revenue can be measured reliably.

Revenue from services rendered is recognised in the statement of comprehensive income in proportion to the

stage of completion of the transaction in the accounting period in which the services are rendered and the

right to receive the consideration is established. No revenue is recognised if there are significant uncertainties

regarding the recovery of the consideration due, associated costs or the possible return of goods.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue recognition (continued)

Long-term contracts

As soon as the outcome of a long-term contract can be estimated reliably, contract revenue and expenses are

recognised in the statement of comprehensive income in proportion to the stage of completion of the contract.

An expected loss on a contract is recognised immediately in the statement of comprehensive income. No

revenue is recognised if there are significant uncertainties regarding the recovery of the consideration due,

associated costs or the possible return of goods.

Maintenance contracts

Income from maintenance contracts is recognised in the statement of comprehensive income on a straight line

basis evenly over the term of the contract.

Commission income

Commission income is recognised when the amount is notified to the Group entities by the principal.

Investment income and gain or loss on disposals

On disposal of an investment, the resultant gain or loss between the net disposal proceeds and the carrying

amount is recognised in the statement of comprehensive income.

Dividend income

Dividend income is recognised in the statement of comprehensive income on the date that the dividend is

declared.

Sale of vessels

Revenue from sale of vessels is recognised in the statement of comprehensive income when pervasive evidence

exists, usually in the form of an executed sales agreement, that significant risks and rewards of ownership have

been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible

return of goods can be estimated reliably, there is no continuing management involvement with the vessel and

the amount of revenue can be measured reliably.

Tuition fee

Revenue from tuition fee represents the fee value of courses conducted during the year, net of provisions

for drop outs. Fees are billed at different stages of the course; however, income is accrued evenly over the

duration of each course. No revenue is recognised if there are significant uncertainties regarding recovery of

the consideration due or associated losses.

Others

Sale of operating assets and other miscellaneous income like insurance claims, provision write back and other

income are shown as part of revenue and recognised when the right to receive is established.

Earnings per share

The Group presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share

is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted

average number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted earnings

per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted

average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive

potential ordinary shares.

& ITS SUBSIDIARY COMPANIES

57


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

Property, plant and equipment

Owned assets

Items of property, plant and equipment are stated at cost or revalued amounts less accumulated depreciation

and impairment losses, if any. Cost of marine vessels includes purchase price paid to third party including

registration and legal documentation costs, all directly attributable costs incurred to bring the vessel into

working condition at the area of planned use, mobilisation costs to the operating location, sea trial costs,

significant rebuild expenditure incurred during the life of the asset and financing costs incurred during the

construction period of vessels. In certain operating locations where the time taken for mobilisation is significant

and the customer pays a mobilisation fee, certain mobilisation costs are charged to profit or loss. Costs for other

items of property, plant and equipments include expenditure that is directly attributable to the acquisition of the

asset. When parts of an item of property, plant and equipment have different useful lives, they are accounted

for as separate items of property, plant and equipment.

Subsequent to initial recognition certain assets are carried at revalued amount, being their fair value at the date

of the revaluation less any subsequent accumulated depreciation. The revaluation of these assets is carried out

at regular intervals on an open-market basis to ensure that the carrying amount does not differ materially from

the fair value. Surplus arising on revaluation is recorded in other comprehensive income and presented in the

revaluation reserve in equity.

Subsequent expenditure

Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for

separately, including major inspection and overhaul expenditure is capitalised. Other subsequent expenditure

is capitalised only when it increases the future economic benefits embodied in property, plant and equipment.

All other expenditure is recognised in the statement of comprehensive income as an expense as incurred.

Depreciation

Depreciation is charged to the statement of comprehensive income on a straight line basis over the estimated

useful lives of items of property, plant and equipment. The estimated useful lives are as follows:

Years

Buildings and improvements 5 - 25

Furniture and fixtures 3 - 5

Plant, machinery and office equipment 1 - 15

Marine vessels revalued (from the date of latest revaluation) 10

Marine vessels acquired 15 - 30

Expenditure on marine vessel dry docking (included as a component of marine vessels) 3

Jetty and land development 25

Floating dock 25

Motor vehicles 3

Freehold land is not depreciated. The cost of certain assets used on specific contracts is depreciated to

estimated residual value over the period of the respective contract, including extensions if any. Depreciation

method, useful lives and residual values are reviewed at each reporting date.

Vessels that are no longer being chartered and are held for sale are transferred to inventories at their carrying

value.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

Property, plant and equipment (continued)

Capital work-in-progress

Capital work-in-progress is stated at cost and comprises all costs directly attributable to bringing the assets

under construction ready for their intended use. Capital work-in-progress is transferred to property, plant and

equipment at cost on completion. No depreciation is charged on capital work-in-progress.

Dry docking costs

The expenditure incurred on vessel dry docking, a component of property, plant and equipment, is amortised over

the period from the date of dry docking, to the date on which the management estimates that the next dry docking

is due.

Vessel refurbishment costs

Leased assets

Costs incurred in advance of charter to refurbish vessels under long-term charter agreements are capitalised

within property, plant and equipment in line with the use of the refurbished vessel. Where there is an obligation

to incur future restoration costs under charter agreements which would not meet the criteria for capitalisation

within property, plant and equipment, the costs are accrued over the period to the next vessel re-fit to match

the use of the vessel and the period over which the economic benefits of its use are realised.

Owned assets

Cost incurred to refurbish owned assets are capitalised within property, plant and equipment and then

depreciated over the shorter of the estimated economic life of the related refurbishment or the remaining life of

the vessel.

Goodwill

Goodwill that arises with acquisition of subsidiaries is presented within intangible assets. Goodwill is initially

measured at the fair value of consideration transferred plus the recognised amount of any non-controlling

interest in the acquiree plus, if the business combination is achieved in stages, the fair value of pre-existing

equity interest in the acquiree less the net recognised amount (generally fair value) of the identifiable assets

acquired and liabilities assumed. Any negative goodwill is immediately recognised in profit or loss. Following

initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed

for impairment, annually, or more frequently if events or changes in circumstances indicate that the carrying

value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition

date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are

expected to benefit from the synergies of the combination, irrespective of whether other assets and liabilities of

the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is so

allocated:

• represents the lowest level within the Group at which the goodwill is monitored for internal management

purposes; and

• is not larger than a segment based on the Group’s operating segment format determined in accordance

with IFRS 8 Operating Segments.

& ITS SUBSIDIARY COMPANIES

59


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

Goodwill (continued)

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cashgenerating

units), to which the goodwill relates. Where the recoverable amount of the cash-generating unit

(group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. Where

goodwill forms part of a cash-generating unit (group of cash-generating units) and part of the operation within

that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying

amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of

in this circumstance is measured based on the relative values of the operation disposed of and the portion of

the cash-generating unit retained.

Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets

acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition,

intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.

The useful lives of intangible assets are assessed to be either finite or indefinite.

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment

whenever there is an indication that the intangible asset may be impaired. The amortisation period and the

amortization method for an intangible asset with a finite useful life are reviewed at least at each financial year-end.

Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied

in the asset is accounted for by changing the amortisation period or method, as appropriate, and treated as

changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in

the statement of comprehensive income in the expense category consistent with the function of the intangible

asset.

Computer software costs represent expenditure incurred on implementing an ERP solution for the Group.

Amortisation is charged on a straight line basis over a period of five years, from the date of completion.

Investments

Held for trading investments are stated at fair value, with any resultant gain or loss recognised in the statement

of comprehensive income. Other investments held by the Group are classified as being available for sale and

are stated at fair value. Unrealised gains and losses on re-measurement to fair value are reported in other

comprehensive income and presented as fair value reserve in equity until the investment is derecognised or

the investment is determined to be impaired. Upon impairment any loss, or upon de-recognition any gain or

loss, previously reported as “cumulative changes in fair value” within equity is included in the statement of

comprehensive income for the period.

Inventories and work-in-progress

Inventories are valued at the lower of cost and net realisable value. Cost is determined applying the first-in, firstout

and the weighted average methods and includes all costs incurred in acquiring and bringing them to their

present location and condition. Net realisable value signifies the estimated selling price in the ordinary course

of business, less estimated costs of completion and selling expenses.

60 4

ANNUAL

REP RT

2 11


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

Inventories and work-in-progress (continued)

Construction contracts in progress represent the gross unbilled amount expected to be collected from customers

for contract work performed to date. It is measured at cost plus profit recognised to date less progress billings

and recognised losses. Cost includes all expenditure related directly to specific projects and an allocation of

fixed and variable overheads incurred in the Group’s contract activities based on normal operating capacity.

Construction contracts in progress is presented as part of current assets for all contracts in which costs incurred

plus recognised profits exceed progress billings. If progress billings exceed costs incurred plus recognised

profits, then the difference is presented as billings in excess of valuation in the current liabilities.

Trade and other receivables

Trade and other receivables are stated at cost less impairment losses, if any.

Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares

are recognised as a deduction from equity, net of any tax effects.

Treasury shares

Own equity instruments which are reacquired (treasury shares) are deducted from equity. No gain or loss is

recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity

instruments. Any gain or loss or income related to these shares are directly transferred to retained earnings and

shown in the statement of changes in equity.

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.

Bank borrowings that are repayable on demand and form an integral part of the Group’s cash management are

included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

Trade and other payables

Liabilities are recognised for amounts to be paid in the future for goods or services received, whether billed by

the supplier or not.

Interest bearing borrowings

Interest bearing borrowings are recognised initially at the fair value of the consideration received less directly

attributable transaction costs. Subsequent to initial recognition interest bearing borrowings are stated at

amortised cost with any difference between cost and redemption value being recognised in the statement of

comprehensive income over the period of the borrowings on an effective interest basis.

& ITS SUBSIDIARY COMPANIES

61


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

Provisions

A provision is recognised in the statement of financial position when the Group has a legal or constructive

obligation as a result of a past event, and it is probable that an outflow of economic benefit will be required

to settle the obligation. If the effect is material, provisions are determined by discounting the expected future

cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where

appropriate, the risks specific to the liabilities.

Onerous contracts

A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from

a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is

measured at the present value of the lower of the expected cost of terminating the contract and the expected

net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment

loss on the assets associated with that contract.

Leases

Group as a lessee

Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the

leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the

present value of the minimum lease payments. Lease payments are apportioned between the finance charges

and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the

liability. Finance charges are charged directly to the statement of comprehensive income.

Capitalised leased assets are depreciated over the estimated useful life of the asset or the lease term, whichever

is less.

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as

operating leases. Operating lease payments are recognised as an expense in the statement of comprehensive

income on a straight-line basis over the lease term.

Group as a lessor

Leases where the Group does not transfer substantially all the risks and benefits of ownership of the asset

are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to

the carrying amount of the leased asset and recognised over the lease term on the same basis as lease rental

income. Contingent rents are recognised as revenue in the period in which they are earned.

Employee benefits

Contributions to a defined contribution retirement plan for Omani employees, in accordance with the Oman

Social Insurance Scheme, are recognised as an expense in the statement of comprehensive income as incurred.

The Group provides end of service benefits to its expatriate employees. Provision from non-Omani employee

terminal contributions, which is an unfunded defined benefit retirement plan, is made in accordance with Oman

Labor Law and calculated on the basis that the liability that would arise if the employment of all employees were

terminated at the reporting date. The entitlement to these benefits is based upon the employees’ salary and

length of service, subject to completion of a minimum service period. The expected costs of these benefits are

accrued over the period of employment.

62 4

ANNUAL

REP RT

2 11


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

Employee benefits (continued)

For non-Omani companies the end of service benefits are provided as per the respective regulations in their

country.

Dividends

Dividends are recognised as a liability in the period in which they are declared.

Directors’ remuneration

The Board of Directors’ remuneration of the Parent Company is accrued within the limits specified by the Capital

Market Authority and the requirements of the Commercial Companies Law of the Sultanate of Oman.

Term loans

Term loans are carried on the statement of financial position at the fair value of the consideration received

less directly attributable transaction costs. Installments due within one year are shown as a current liability.

Interest expense is accrued on a time-proportion basis with unpaid amounts included in accounts payable and

accruals.

Net finance costs

Net finance costs comprise interest payable on borrowings calculated using the effective interest rate method

and interest received on funds invested. After initial recognition, interest bearing loans and borrowings are

subsequently measured at amortised cost using the effective interest method. Financing costs are recognised

as an expense in the statement of comprehensive income in the period in which they are incurred.

Borrowing costs, net of interest income, which are directly attributable to the acquisition of items of property,

plant and equipment, are capitalised as the cost of property, plant and equipment. Borrowing costs incurred

beyond the construction period are recognised in the statement of comprehensive income.

Interest income is recognised in the statement of comprehensive income as it accrues, taking into account the

effective yield on the asset.

Segment reporting

An operating segment is the component of the Group that engages in business activities from which it may earn

revenues and incur expenses, including revenue and expenses that relate to transaction with any of the Group’s

other components, whose operating results are reviewed regularly by the Group CEO (being the chief operating

decision maker) to make decisions about resources allocated to each segment and assess its performance,

and for which discrete financial information is available.

Segment results that are reported to the Group CEO include items directly attributable to a segment as well as

those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets and

head office expenses.

Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment,

and intangible assets other than goodwill.

& ITS SUBSIDIARY COMPANIES

63


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

Income tax

Income tax is provided for in accordance with the fiscal regulations of the country in which the Group operates.

Income tax on the profit or loss for the year comprises current and deferred taxation. Income tax is recognised

in the statement of comprehensive income except to the extent that it relates to items recognised directly in the

equity or other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially

enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences at the reporting date between the carrying

amounts of assets and liabilities for financial reporting purposes and the amounts use for taxation purposes.

The amount of deferred tax provided is based on the expected manner of realistic settlement of the carrying

amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.

Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and tax credits

to the extent that it is probable that taxable profit will be available against which they can be utilised. Deferred

tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that

the related tax benefit will be realised.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets

and liabilities and they relate to income taxes levied by the same tax authority on the same taxable entity, or

on different taxable entities, but they intend to settle current tax assets and liabilities on a net basis or their tax

assets and liabilities will be realised simultaneously.

In determining the amount of current and deferred tax the Group takes into account the impact of uncertain

tax positions and whether additional taxes and interest may be due. The Group believes that its accruals for tax

liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations

of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series

of judgments about future events. New information may become available that causes the Group to change its

judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense

in the period that such a determination is made.

Foreign currency transactions

Transactions denominated in foreign currencies are translated to the respective functional currencies of

the Group entities at exchange rates ruling at the dates of the transactions. Monetary assets and liabilities

denominated in foreign currencies at the reporting date are retranslated to the functional currency at the

exchange rate ruling at that date. The foreign currency gain or loss on monetary items is the difference between

amortised cost in functional currency at the beginning of the year, adjusted for effective interest and payments

during the year and the amortised cost in foreign currency translated at the exchange rate at the end of the

year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are

retranslated to the functional currency at the exchange rate at the date that the fair value was determined.

Non-monetary items in a foreign currency that are measured based on historical cost are translated using the

exchange rate at the date of the transaction.

64 4

ANNUAL

REP RT

2 11


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

Foreign currency transactions (continued)

Foreign currency differences arising on retranslation are recognised in profit or loss except for differences

arising in retranslation of a financial liability designated as a hedge of the net investment in a foreign operation,

or qualifying cash flow hedges, to the extent these hedges are effective, which are recognised in other

comprehensive income.

Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on

acquisition, are translated to Rial Omani at exchange rates at the reporting date. The income and expenses

of foreign operations are translated to Rial Omani at exchange rates at the dates of the transactions. Foreign

currency differences are recognised in other comprehensive income and are reflected in the exchange reserve

in equity. When a foreign operation is disposed of, in part or in full, the relevant amount in the exchange reserve

is transferred to statement of comprehensive income as part of the profit or loss on disposal. Foreign exchange

gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement

of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment

in a foreign operation and are recognised in other comprehensive income, and are presented within the equity

in the translation reserve.

Impairment

Financial assets

A financial asset is assessed at each reporting date to determine whether there is objective evidence that it is

impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the

initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows

of that asset that can be estimated reliably.

Objective evidence that financial assets are impaired can include default or delinquency by a debtor,

restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications

that a debtor or issuer will enter bankruptcy. The Group considers evidence of impairment of financial assets

at both a specific asset and collective level. All individually significant financial assets are assessed for

specific impairment. All individually significant financial assets found not to be specifically impaired are then

collectively assessed for any impairment that has been incurred but not yet identified. Financial assets that are

not individually significant are collectively assessed for impairment by grouping together financial assets with

similar risk characteristics.

In assessing collective impairment the Group uses historical trends of the probability of default, timing of

recoveries and the amount of loss incurred, adjusted for management’s judgment as to whether current

economic and credit conditions are such that the actual losses are likely to be greater or less than suggested

by historical trends.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference

between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s

original effective interest rate. Losses are recognised in the statement of comprehensive income and reflected

in an allowance account against receivables. Interest on the impaired asset continues to be recognised through

the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease,

the decrease in impairment loss is reversed through the statement of comprehensive income.

& ITS SUBSIDIARY COMPANIES

65


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

Impairment (continued)

Non-financial assets (other than goodwill)

The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine

whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount

is estimated. An impairment loss is recognised if the carrying amount of an asset or its cash generating unit

exceeds its recoverable amount. Impairment losses are recognised in the statement of comprehensive income.

The recoverable amount of an asset or its cash generating unit is the greater of its value in use and its fair value

less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present

value using a pre-tax discount rate that reflects current market assessments of time value of money and risks

specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group

of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of

other assets or groups of assets (the “cash-generating unit”).

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that

the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the

estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that

the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of

depreciation or amortization, if no impairment loss had been recognised.

Derivatives

Derivatives are stated at fair value.

For the purposes of hedge accounting, hedges are classified into two categories: (a) fair value hedges which

hedge the exposure to changes in the fair value of a recognised asset or liability; and (b) cash flow hedges which

hedge exposure to variability in cash flows of a recognised asset or liability or a highly probable transaction.

The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures.

On initial designation of the hedge, the Group formally documents the relationship between the hedging

instrument and hedged item, including the risk management objectives and strategy in undertaking the hedge

transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship.

The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing

basis, whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the

fair value or cash flows of the respective hedged items during the period for which the hedge is designated,

and whether the actual results of each hedge are within a range of 80-125 percent. For a cash flow hedge of

a forecast transaction, the transaction should be highly probable to occur and should present an exposure to

variations in cash flows that could ultimately affect reported profit or loss.

Derivatives are recognised initially at fair value, attributable transaction costs are recognised in profit or loss

as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are

accounted for as described below.

66 4

ANNUAL

REP RT

2 11


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

Derivatives (continued)

Cash flow hedges

When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable

to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that

could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in other

comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in

the fair value of the derivative is recognised immediately in profit or loss.

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated,

exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative

gain or loss previously recognised in other comprehensive income and presented in the hedging reserve in

equity remains there until the forecast transaction affects profit or loss. When the hedged item is a non-financial

asset, the amount recognised in other comprehensive income is transferred to the carrying amount of the asset

when the asset is recognised. If the forecast transaction is no longer expected to occur, then the balance in

other comprehensive income is recognised immediately in profit or loss. In other cases the amount recognised

in other comprehensive income is transferred to profit or loss in the same period that the hedged item affects

profit or loss.

Other non-trading derivatives

When a derivative financial instrument is not designated in a hedge relationship that qualifies for hedge

accounting, all changes in its fair value are recognised immediately in profit or loss.

New standards and interpretation not yet effective

A number of new standards, amendments to standards and interpretations are not yet effective for the year

ended 31 December 2011, and have not been applied in preparing these financial statements. None of these

will have an effect on the financial statements of the Group, with the exception of:

• IFRS 9 Financial Instruments, published on 12 November 2009 as part of phase I of the IASB’s

comprehensive project to replace IAS 39, deals with classification and measurement of financial assets.

The requirements of this standard represent a significant change from the existing requirements in IAS

39 in respect of financial assets. The Standard contains two primary measurement categories for financial

assets: amortised cost and fair value. The standard eliminates the existing IAS 39 categories of held

to maturity, available for sale and loans and receivables. The standard is effective for annual periods

beginning on or after 1 January 2015.

• IFRS 10 Consolidated financial statements, published in May 2011, establishes principles for the

presentation and preparation of consolidated financial statements when an entity controls one or more

entities. The IFRS supersedes IAS 27 Consolidated and Separate Financial Statements and SIC 12 –

Consolidation – Special Purpose Entities and is effective for annual periods beginning or after 1 January

2013.

• IFRS 11 Joint Arrangements, published in May 2011, establishes principles for financial reporting by

parties to a joint arrangement. The IFRS is concerned principally with addressing two aspects of IAS 31:

first that the structure of the arrangement was the only determinant of the accounting and, second, that an

entity had a choice of accounting treatment for interests in jointly controlled entities. IFRS 11 improves IAS

31 by establishing principles that are applicable to the accounting for all joint arrangements. The standard

is effective for annual periods beginning on or after 1 January 2013.

& ITS SUBSIDIARY COMPANIES

67


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

New standards and interpretation not yet effective (continued)

• IFRS 12 Disclosure of interests in Other Entities, published in May 2011, requires an entity to disclose

information that enables users of its financial statements to evaluate the nature of, and risks associated

with, its interests in other entities and the effects of those interests on its financial positions, financial

performance and cash flows. Interests in other entities are categorized as interests in subsidiaries, joint

arrangements and associates and structured entities that are not controlled by the entity. The standard is

effective for annual periods beginning on or after 1 January 2013.

• In October 2010 the International Accounting Standards Board (“IASB”) issued Disclosures – Transfers of

Financial Assets (Amendments to IFRS 7) with an effective date of 1 July 2011.The amendments relate to

the disclosure requirements for transfers of financial assets to supplement other disclosures requirements

of IFRS 7.

• In June 2011 IASB issued Presentation of items of other comprehensive income (Amendments to IAS

1) with an effective date of 1 July 2012. The amendments improved the consistency and clarity of the

presentation of items of other comprehensive income (“OCI”). The amendments also highlighted the

importance of presenting profit or loss and OCI together and with equal prominence.

• IAS 27 Separate Financial Statements (Amendments to IAS 27), published in May 2011, contains

accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates

when an entity prepares separate financial statements. The Standard requires an entity preparing separate

financial statements to account for those investments at cost or in accordance with IFRS 9 Financial

Instruments. The standard is effective for annual periods beginning on or after 1 January 2013.

• IAS 28 Investments in Associates and Joint Ventures (Amendments to IAS 28), published in May 2011,

prescribes the accounting for investments in associates and sets out the requirements for the application

of the equity method when accounting for investments in associates and joint ventures. The standard is

effective for annual periods beginning on or after 1 January 2013.

• IFRS 13 Fair Value Measurement, published in May 2011, applies when another IFRS requires or permits

fair value measurements or disclosures about fair value measurements (and measurements, such as fair

value less costs to sell, based on fair value or disclosures about those measurements). An entity shall apply

this IFRS for annual periods beginning on or after 1 January 2013.

The Group does not intend to adopt these standards early and the extent of the impact has not been determined.

Determination of fair values

Certain of the Group’s accounting policies and disclosures require the determination of fair value, for both

financial and non-financial assets and liabilities. Fair values have been determined for measurement and

/ or disclosure purposes based on the following methods. When applicable, further information about the

assumptions made in determining fair values is disclosed in the notes specific to the asset or liability.

Forward exchange contracts and interest rate swaps

The fair value of forward exchange contracts is based on their quoted price, if available. If a quoted price is not

available, then fair value is estimated by discounting the difference between the contractual forward price and

the current forward price for the residual maturity of the contract using a credit adjusted risk free interest rate

(based on government bonds).

68 4

ANNUAL

REP RT

2 11


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

Determination of fair values (continued)

Forward exchange contracts and interest rate swaps (Continued)

The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness

by discounting estimated future cash flows based on the terms and maturity of each contract and using

market interest rates for a similar instrument at the measurement date. Fair values reflect the credit risk of the

instrument and include adjustments to take account of the credit risk of the Group entity and counterparty

when appropriate.

Investments

For investments traded in organised financial markets, fair value is determined by reference to Stock Exchange

quoted market bid prices at the close of business on the statement of financial position date. (Level 1)

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. Fair value cannot be reliably

measured for certain unquoted foreign investments. Such investments are measured at cost. (Level 3)

Other interest bearing items

The fair value of interest-bearing items is estimated based on discounted cash flows using market interest rates

for items with similar terms and risk characteristics. (Level 3)

Judgments

In the process of applying the Group’s accounting policies, management has made the following judgements,

apart from those involving estimations, which have the most significant effect in the amounts recognised in the

financial statements:

Classification of investments

Management decides on acquisition of an investment whether it should be classified as held to maturity, held

for trading, carried at fair value through profit and loss account, or available for sale.

The Group classifies investments as trading if they are acquired primarily for the purpose of making a short

term profit by the dealers.

Classification of investments as fair value through profit and loss account depends on how management

monitor the performance of these investments. When they are not classified as held for trading but have readily

available reliable fair values and the changes in fair values are reported as part of income statement in the

management accounts, they are classified as fair value through profit and loss.

All other investments are classified as available for sale.

Estimates and assumptions

The preparation of financial statements requires management to make judgments, estimates and assumptions

that affect the application of accounting policies and reported amounts of assets and liabilities, income and

expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates

are recognised in the period in which the estimate is revised and in any future periods affected.

& ITS SUBSIDIARY COMPANIES

69


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

3 PROPERTY, PLANT AND EQUIPMENT

Freehold

land and

buildings

RO’000

Marine

vessels

Jetty

and dock

Machinery

and

equipment

Motor

vehicles

Furniture

and fixtures

Capital

work in

progress Total

RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000

Cost or valuation

1 January 2011 89,352 356,190 2,055 34,397 2,947 2,265 20,879 508,085

Transfer from current assets - 8,078 - - - - - 8,078

Additions 2,837 37,149 - 5,571 361 610 35,800 82,328

Transfers 519 18,339 - 9 24 - (18,891) -

Disposals - - - (415) (161) (131) - (707)

31 December 2011 92,708 419,756 2,055 39,562 3,171 2,744 37,788 597,784

Depreciation

1 January 2011 26,637 64,193 648 21,257 2,087 1,708 - 116,530

Charge for the year 4,910 16,739 108 4,271 509 338 - 26,875

Transfers - - - 8 (8) - - -

Disposals - - - (199) (142) (118) - (459)

31 December 2011 31,547 80,932 756 25,337 2,446 1,928 - 142,946

Net carrying amount

31 December 2011 61,161 338,824 1,299 14,225 725 816 37,788 454,838

31 December 2010 62,715 291,997 1,407 13,140 860 557 20,879 391,555

70 4

ANNUAL

REP RT

2 11


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

3 PROPERTY, PLANT AND EQUIPMENT (continued)

Freehold

land and

buildings

RO’000

Marine

vessels

Jetty

and dock

Machinery

and

equipment

Motor

vehicles

Furniture

and fixtures

Capital

work in

progress Total

RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000

Cost or valuation

1 January 2010 49,340 248,559 2,055 29,945 2,553 1,852 45,562 379,866

Adjustment on deconsolidation of a subsidiary (1,276) - - (711) (10) - (542) (2,539)

Acquisitions through business combination 8 - - 422 - 43 - 473

Additions 10,344 70,349 - 5,256 665 399 49,311 136,324

Transfers 32,157 40,463 - 24 - - (72,644) -

Disposals (1,221) (3,181) - (539) (261) (29) (808) (6,039)

31 December 2010 89,352 356,190 2,055 34,397 2,947 2,265 20,879 508,085

Depreciation

1 January 2010 22,513 52,998 504 17,780 1,869 1,453 - 97,117

Adjustment on deconsolidation of a subsidiary - - - - (1) - - (1)

Acquisitions through business combination 2 - - 96 - 10 - 108

Charge for the year 4,135 13,270 144 3,681 467 261 - 21,958

Disposals (13) (2,075) - (300) (248) (16) - (2,652)

31 December 2010 26,637 64,193 648 21,257 2,087 1,708 - 116,530

Net carrying amount

31 December 2010 62,715 291,997 1,407 13,140 860 557 20,879 391,555

31 December 2009 26,827 195,561 1,551 12,165 684 399 45,562 282,749

& ITS SUBSIDIARY COMPANIES

71


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

3 PROPERTY, PLANT AND EQUIPMENT (continued)

Most of the assets including vessels, plant and equipment, buildings and other assets are pledged against bank

loans and bank borrowings.

Marine vessels with a net book value of RO 296,125,000 (2010: RO 231,188,000) and plant and machinery

with a net book value of RO 3,543,000 (2010: RO 2,314,000) are pledged against bank loans obtained.

Buildings with a net book value of RO 3,782,000 (2010: RO 4,671,000) are pledged against bank overdrafts

(refer note 13).

Building amounting to RO 2,458,000 (2010: RO 2,426,000) is situated on leased hold premises which is

renewable every year. The Management of the Group believes that the lease will continue to be available to the

Group for the foreseeable future.

Capital work in progress includes progress payments for the construction of new vessels and workshop facilities for

marine repair and fabrication and construction. During the year, capital work in progress includes RO 9,673,000

relating to two marine boats constructed by the Engineering Division of Topaz for the Marine division, which are

transferred from work in progress to capital work in progress. These vessels relate to a cancelled contract with one

of the Group’s customers (refer note 20).

Advances or deposits paid for construction or acquisition of assets are classified as advances to suppliers

and contractors, and the amount will be transferred to capital work in progress after the commencement of

construction.

Transfer from current assets represents capitalisation of advances given for the acquisition of vessels.

During the year 2011, the Group has capitalised borrowing cost amounting to RO 1,114,000 (2010:

RO 2,074,000).

The depreciation charge has been allocated in the statement of comprehensive income as follows:

2011 2010

RO’000 RO’000

Operating expenses 25,063 20,251

Administrative expenses 1,812 1,707

26,875 21,958

4 INTANGIBLE ASSETS

Goodwill

Initial goodwill 44,656 39,960

Additions - 4,696

31 December 44,656 44,656

Amortisation and impairment

1 January and 31 December 5,968 5,968

Net carrying amount

31 December 38,688 38,688

72 4

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

4 INTANGIBLE ASSETS (continued)

Goodwill represents the excess of the cost of acquiring shares in certain subsidiaries companies over the

aggregate fair value of their net assets.

The carrying amount of goodwill at 31 December allocated to each of the cash-generating units:

Goodwill 2011 2010

RO’000 RO’000

Topaz Energy and Marine Group 29,079 29,079

Tawoos Industrial Services Company LLC 1,900 1,900

Al Wasita Emirates Catering Services LLC 4,696 4,696

Norsk Offshore Catering AS 1,007 1,007

Others (UMS, NTI and NHI) 2,006 2,006

38,688 38,688

The recoverable amount of each cash-generating unit is determined based on a value in use calculation, using

cash flow projections based on financial budgets approved by senior management. The key assumptions of

the value in use calculations are those regarding discount rates, growth rates and expected changes to selling

prices and direct costs during the period. Management estimates discount rates that reflect current market

assessments of the time value of money and the risks specific to each cash-generating unit. The growth rates

are based on management estimates having regard to industry growth rates. Changes in selling prices and

direct costs are based on past practices and expectations of future changes in the market.

Sensitivity to changes in assumptions

With regard to the assessment of value in use of the cash generating units, management believes that no

reasonably possible change in any of the key assumptions would cause the carrying value of the unit to

materially exceed its recoverable amount.

For the year ended 31 December 2011, there have been no events or changes in circumstances to indicate

that the carrying values of goodwill of the above cash-generating units may be impaired.

Computer software 2011 2010

RO’000 RO’000

1 January 167 31

Additions 49 149

Amortisation (33) (13)

31 December 183 167

Total intangible assets 38,871 38,855

& ITS SUBSIDIARY COMPANIES

73


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

5 SUBSIDIARIES AND ASSOCIATES

The Group and Parent Company investments in subsidiary and associate companies are as follows:

Ownership interest (%)

2011 2010

Subsidiary Companies

Topaz Energy and Marine Limited (“TOPAZ”)

(incorporated in the UAE) 100 100

Tawoos Industrial Services Company LLC (“TISCO”) 100 100

United Media Services Company LLC (“UMS”) 100 100

National Training Institute LLC (“NTI”) 100 100

National Hospitality Institute SAOG (“NHI”) 46 46

Renaissance Energy Limited (“REL”) (incorporated in the UAE) 100 100

Associate Companies

Dubai Wire FZE (“DW”) (incorporated in the UAE) 37.65 20

Global Fasteners Limited (“GFL”) (incorporated in the Isle of Man) 43.50 10

National Saudi Training Institute for Development LLC (“NSTI”)

(incorporated in KSA) 49 -

In 2011 the Parent Company has increased its holding in DW and GFL by 17.65% and 33.50% respectively for

nil consideration. This acquisition of shares is through an agreement, where the Parent Company has provided

a corporate guarantee of RO 4,200,000 to a bank to provide financing facilities to DW and GFL. An additional

guarantee of RO 11,200,000 has been provided to a bank to provide working capital loan to DW and GFL.

The corporate guarantees have been provided jointly and severally by both the Parent Company and the other

shareholder (refer note 24).

During 2011, the Group has incorporated a new associate NSTI in KSA, for the provision of various training

services.

The Group’s subsidiaries have investments in the following subsidiaries:

Subsidiary Companies of TOPAZ

Nico Middle East Limited (incorporated in Bermuda) 100 100

Topaz Holding Limited (incorporated in the UAE) 100 100

Topaz Energy and Marine Services DMCC (incorporated in the UAE) 100 100

Topaz Energy and Marine Plc (incorporated in the UK) 100 -

Topaz Engineering Limited (incorporated in Bermuda) 100 -

Nico Middle East Limited has a subsidiary BUE Marine Ltd, incorporated in UK, which operates through its

subsidiaries and engaged principally in charter of marine vessels and vessel management.

In 2011 Topaz incorporated a new wholly owned subsidiary Topaz Energy and Marine Plc (“Topaz Energy”) in

the UK with the objective of listing Topaz in the London Stock Market and raising equity capital from the public

markets. At 31 December 2011 Topaz Energy was dormant.

Topaz Engineering Limited is a wholly owned subsidiary of Topaz, incorporated in 2011. It has been formed for

the purpose of taking over business, assets and liabilities of Topaz Engineering division (refer note 31).

74 4

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

5 SUBSIDIARIES AND ASSOCIATES (continued)

Ownership interest (%)

2011 2010

Subsidiary Companies of TISCO

Rusail Catering and Cleaning Services LLC (“RCCS”) 100 100

Supraco Limited (incorporated in Cyprus) 100 100

Renaissance Contract Services International LLC (“RCSI”) 100 100

Al Wasita Catering Services LLC (“Al Wasita”) 100 100

Al Wasita through its subsidiary in UAE provides catering services.

Supraco Limited through its subsidiaries in Norway provides contract catering services.

RCSI through its subsidiaries in Angola and Abu Dhabi, UAE provides catering and allied services in the

respective countries. RCSI subsidiaries in Iraq, Qatar and Dubai, UAE are dormant as at 31 December 2011.

Renaissance Facilities Management Services LLC, a subsidiary of RCSI, started its operations during 2011.

Subsidiary Companies of UMS

Ownership interest (%)

2011 2010

United Press and Publishing Company LLC (“UPP”) 100 100

Oryx Advertising Company WLL (incorporated in Qatar) 49 49

Subsidiary Company of NHI

Nakshatra Hospitality India Private Limited (“NHI India”)

(incorporated in India) 100 100

Subsidiary Company of NTI

National Training Institute Qatar WLL (“NTI Qatar”)

(incorporated in Qatar) 100 100

As at 31 December 2011, NHI India and NTI Qatar are dormant.

Except as otherwise stated, the companies are incorporated in Oman.

6 INVESTMENTS

2011 2010

RO’000 RO’000

Non-current investments

Investment in associate companies 1,597 1,343

Available for sale investments 322 391

1,919 1,734

& ITS SUBSIDIARY COMPANIES

75


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

6 INVESTMENTS (continued)

Investment in associates

The movement in the carrying value of the Group’s investments in associates is as follows:

2011 2010

RO’000 RO’000

1 January 1,343 975

Investment made during the year 76 -

Reclassification from available for sale investments 69 -

Share in associates’ profits 109 368

1,597 1,343

Investment made during the year represents the investment made by the Group in NSTI (refer note 5).

During 2011, the Group increased its holding in GFL from 10% to 43.50% (refer note 5) resulting in a

reclassification of investment from available for sale to investment in associate.

Available for sale investments

Available for sale investments represent the cost of investments in the following entities:

Ownership interest (%)

2011 2010

Fund for Development of Youth Projects SAOC 2.33 2.33

Industrial Management Technology & Contracting LLC 1.25 1.25

7 INVESTMENTS IN JOINTLY CONTROLLED ENTITIES

The Group’s share of income, expenses, assets and liabilities in the jointly controlled entities at 31 December

are set out below:

2011 2010

RO’000 RO’000

Current assets 8,406 9,293

Current liabilities (5,714) (6,530)

Non-current assets 7,192 8,167

Non-current liabilities (8,489) (6,430)

Net assets 1,395 4,500

Revenue 8,200 10,029

Cost of sales (8,270) (8,858)

Administrative expenses (795) (1,493)

Finance cost (232) (373)

Other income 1 9

Tax 186 (39)

Net loss for the year (910) (725)

76 4

ANNUAL

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2 11


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

7 INVESTMENTS IN JOINTLY CONTROLLED ENTITIES (continued)

Investments in jointly controlled entities are in:

Ownership interest (%)

2011 2010

Nico Doosan Babcock (previously known as Nico Mitsui Babcock) 50 50

DMS Jaya Marine WLL 51 51

Jaya DMS Marine Pte Ltd. 50 50

Mangistau Oblast Boat Yard LLP (refer note 5) 50 50

Nico Doosan Babcock

Nico Doosan Babcock (“Nico Doosan”), incorporated in the UAE, is a joint venture between Nico International

Limited and Doosan Energy Services Limited. The principal activities of Nico Doosan include provision of

services relating to marine boiler repairs and related works (refer note 31).

DMS Jaya Marine WLL

DMS Jaya Marine WLL (“DMS Jaya”), incorporated in Qatar, is a joint venture between Doha Marine Services

WLL and DMS Jaya Marine (W.L.L.). The principal activities of DMS Jaya include ship owning, ship chartering,

ship operations and agency and other related activities.

Jaya DMS Marine Pte Ltd.

Jaya DMS Marine Pte Ltd (“Jaya Marine”), incorporated in Singapore, is a joint venture between Doha Marine

Services WLL and Jaya DMS Marine Pte Ltd. The principal activities of Jaya Marine are to carry out the business

of ship owning and ship chartering.

Mangistau Oblast Boat Yard LLP

Mangistau Oblast Boat Yard LLP (“MOBY”), incorporated in Kazakhstan, is a joint venture between Kyran

Holdings Ltd. (50%), KazMor Transflot JSC (30%) and Balykshi LLP (20%). The principal activities of MOBY

include repair of vessels at the workshop located in Mangistau Oblast, Bautino. The Group is in the process of

exiting from this joint venture, which is expected to be completed during 2012 (refer note 20). Accordingly all

the provisions relating to closure of MOBY have been made as at 31 December 2011.

8 INVENTORIES AND WORK IN PROGRESS

2011 2010

RO’000 RO’000

Stock and consumables – net 7,666 7,981

Work in progress 1,325 5,289

8,991 13,270

& ITS SUBSIDIARY COMPANIES

77


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

9 TRADE AND OTHER RECEIVABLES

2011 2010

RO’000 RO’000

Trade receivables - net 77,359 59,897

Prepayments and other receivables 24,658 20,598

Advances to suppliers and contractors 7,966 11,914

Amounts due from related parties (note 23) 470 1,370

110,453 93,779

As at 31 December 2011, trade receivables of RO 4,131,000 (2010: RO 3,725,000) were impaired.

Movements in the allowance for impairment of receivables were as follows:

2011 2010

RO’000 RO’000

1 January 3,725 3,902

Charge for the year 612 533

Amounts written off (206) (263)

Unused amounts reversed - (447)

31 December 4,131 3,725

As at 31 December, the ageing of unimpaired trade receivables is as follows:

Total

RO’000

Neither

past

due nor

impaired

RO’000

< 30 days

RO’000

Past due but not impaired

30 – 60

days

RO’000

60 – 90

days

RO’000

90 – 120

days

RO’000

>120 days

RO’000

2011 77,359 50,885 10,537 7,077 3,161 2,083 3,616

2010 59,897 43,261 6,500 2,858 2,393 1,576 3,309

Unimpaired receivables are expected, on the basis of past experience, to be fully recoverable. It is not the practice

of the Group to obtain collateral over receivables and the vast majority are, therefore, unsecured.

10 CASH AND CASH EQUIVALENTS

2011 2010

RO’000 RO’000

Cash and bank balances 37,354 22,437

Bank borrowings (note 12) (8,245) (3,485)

29,109 18,952

78 4

ANNUAL

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

10 CASH AND CASH EQUIVALENTS (continued)

Included in cash and bank balances are fixed and call deposits of RO 17,869,000 (2010: RO 5,217,000)

maintained with commercial banks. These are denominated mainly in Rial Omani, US Dollar, UAE Dirham and

Qatari Rial and are short term in nature.

11 TRADE AND OTHER PAYABLES

2011 2010

RO’000 RO’000

Trade payables 25,928 22,792

Accrued expenses and other payables 40,065 33,507

Income tax payable 7,373 5,050

Amounts due to related parties (note 23) 1,150 1,073

74,516 62,422

12 BANK BORROWINGS

Certain of the Group’s bank borrowings are secured by a registered first mortgage over Group’s certain assets,

guarantees and assignment of receivables. Bank borrowings carries interest rates ranging from 4% to 9% per

annum (2010: 3% to 9.5% per annum).

13 TERM LOANS

1 year 2-5 More than

31 December 2011 Total or less Years 5 years

RO’000 RO’000 RO’000 RO’000

Parent company – term loans 140,452 25,898 99,213 15,341

Parent company – subordinated loan 40,000 - 30,000 10,000

Subsidiary companies 180,292 47,960 112,199 20,133

360,744 73,858 241,412 45,474

1 year 2-5 More than

31 December 2010 Total or less Years 5 years

RO’000 RO’000 RO’000 RO’000

Parent company 110,399 27,026 66,504 16,869

Parent company - subordinated loan 20,000 - 10,000 10,000

Subsidiary companies 154,417 29,282 103,362 21,773

284,816 56,308 179,866 48,642

Included in term loans from bank are the following:

Term loans in Parent Company

Term loans in Parent Company amounting to RO 140,452,000 (2010: RO 110,399,000) are secured by charge

over certain assets, investment rights on leasehold land, assignment of certain project receivables, assignment

of insurance interests in certain contract assets and guarantees.

& ITS SUBSIDIARY COMPANIES

79


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

13 TERM LOANS (continued)

Subordinated loan in Parent Company

In 2010 the Parent Company has raised a subordinated loan of RO 40,000,000 through an issue of subordinated

loan notes, which is secured by a second charge over the assets of the Parent Company and its subsidiaries.

The loan has been raised by the Parent Company for funding its subsidiary company, TOPAZ for meeting the

financing requirements of the expansion plans in Topaz’s marine and engineering businesses.

The first drawdown of RO 20,000,000 of the loan was made on 6 December 2010 and the second drawdown

of RO 20,000,000 on 28 February 2011. The tenure of the loan is 7 years with repayment of four annual

installments of RO 10,000,000 with effect from November 2014. Pursuant to the subordinated loan agreement,

the Parent Company is required to restrict dividends, raise additional capital and create a subordinated reserve

by transferring an amount equal to 1/7 th of the outstanding aggregate amount of loan notes out of annual profit

after tax of the company from 31 December 2011. The subordinated loan carries a fixed interest rate of 8.5%

per annum. During the year, the Parent Company has made a transfer of RO 5,714,000 from retained earnings

to a subordinated loan reserve.

At the reporting date, the Parent Company has not complied with certain financial covenants relating to

subordinated loan such as debt service coverage ratio and capitalisation ratio. However, the Parent Company has

obtained a waiver of compliance with the aforesaid ratios at the reporting date from the bank. The management

believes that the breach of covenants has resulted due to the non-recurring, one-off charges incurred by

Topaz during the year (refer note 20) and the decline in the performance of Topaz Engineering Division. The

management has initiated several measures during the year to improve the liquidity and profitability of the

Group to ensure that these breaches are rectified.

Term loans in Subsidiaries

Term loans relate to Topaz and TISCO.

The term loans of TISCO amounting to RO 4,739,000 are secured by the corporate guarantee of the Parent

Company and a subsidiary of TISCO. The borrowing arrangements include undertakings by a subsidiary of

TISCO to comply with various covenants like total debts to net worth ratio and an undertaking to maintain a

minimum net worth of RO 1,574,000. Term loans carry interest rates ranging from 3% to 3.5% per annum.

The term loans of Topaz amounting to RO 175,554,000 are denominated either in USD or UAE Dirham and

are secured by a first preferred mortgage over certain assets of the subsidiaries, the assignment of marine

vessel insurance policies, corporate guarantees, lien on fixed deposits and the assignment of the marine vessel

charter lease income. The equipment finance loan is secured against plant and machinery acquired with the

proceeds of the loan. The property loan is secured by first preferred mortgage over the underlying property.

The borrowing arrangements include undertakings to comply with various covenants like senior interest cover,

current ratio, debt to EBITDA ratio, gearing ratio, total assets to net worth ratio and equity ratio including an

undertaking to maintain a minimum net worth of TOPAZ which, at no time, shall be less than RO 115,385,000

(2010: RO 86,500,000). Term loans carry interest rates ranging from 2% to 7.5% per annum (2010: 4.5% to

9.5% per annum).

At the reporting date, Topaz has complied with all financial covenants except some covenants in respect of

some banks as mentioned above. The management believes that the breach in the covenants has resulted

due to non-operating expenses which are one-off charges incurred by Topaz during the year (refer note 20)

and decline in the performance of Topaz Engineering Division. The long term portion pertaining to these loans

amounted to RO 42,087,000.

80 4

ANNUAL

REP RT

2 11


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

13 TERM LOANS (continued)

During 2011, Topaz’s management, anticipating the covenant breaches as at 31 December 2011, had initiated

negotiations with the lenders to obtain waivers. Topaz has obtained waivers from certain lenders and in addition

has also obtained an addendum to the waiver from a significant lender which in the opinion of the management

indicates that the waiver in principal was agreed before the reporting date by the lender.

Topaz has not defaulted on any of its payment obligations for the bank loans and there has been no formal

demand for prepayment from any lenders arising out of these financing covenants breach.

One of the key measures undertaken by Topaz has been to undertake bank borrowings refinancing initiative,

which is expected to conclude shortly. This will be used to refinance certain existing term loans to improve

liquidity and also provide funds for capital expansion purposes (refer note 31). Further measures include

proposed reorganization of the group structure whereby the parent entities of marine and engineering divisions

will be separated into different legal entities resulting in two independent and separate divisions with distinct

financing facilities (refer note 31).

Topaz will however continue to act as the holding company for both the divisions. In the current situation most

of the covenants are related to facilities for the marine division, however the covenants breaches are tested at

group level.

The new structure will therefore ensure that performance in any one division will not impact the credit facilities

of the other division. Progressively, the Group plans to move towards credit arrangements at each division level

where covenants are tested exclusively to measure the performance of that division. These new arrangements

have been discussed with all the lenders to give them further comfort on the measures initiated by the Group

to improve its liquidity and profitability.

In the intervening period, the Parent Company has provided full and continued support to meet the funding

requirements of the Group, and has undertaken to continue to do so by way of new equity injection and bridge

financing to meet the Group funding requirements.

The management of the Group, on the basis of their review of the measures undertaken and of the presently

ongoing negotiations with the lenders, are of the opinion that these negotiations for restructuring the borrowings

will conclude in a satisfactory manner (as the initial term sheet has already been signed) and will not result in a

discontinuance or immediate demand for repayment of the existing credit facilities. Accordingly, the Group has

continued to classify the term loans into current and non-current portions as per the original loan repayment

schedule.

Term loans are disclosed in the statement of financial position as:

2011 2010

RO’000 RO’000

Non-current liabilities 286,886 228,508

Current liabilities 73,858 56,308

360,744 284,816

& ITS SUBSIDIARY COMPANIES

81


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

14 NON-CURRENT PAYABLE AND ADVANCES

2011 2010

RO’000 RO’000

Deferred income 1,172 2,093

Income tax payable 4,711 5,431

Other payables and advances 4,485 2,347

10,368 9,871

15 STAFF TERMINAL BENEFITS

Movements in the liability recognised in the statement of financial position are as follows:

2011 2010

RO’000 RO’000

1 January 5,667 4,823

Addition on acquisition of a subsidiary - 64

Accrued during the year 1,702 1,897

Pension obligations relating to a subsidiary 228 -

Payments during the year (940) (1,117)

31 December 6,657 5,667

Significant amount of terminal benefits as at 31 December 2011 is comprised of end of service obligations of

Topaz (2011: RO 3,967,000; 2010: RO 3,520,000). Principal actuarial assumptions for Topaz at the reporting

date are:

• Normal retirement age: 60-65 years

• Mortality, withdrawal and retirement: 5% turnover rate. Due to the nature of the benefit, which is a lump

sum payable on exit due to any cause, a combined single decrement rate has been used for maturity,

withdrawal and retirement.

• Discount rate: 5.25% per annum

• Salary increases: 3% - 5% per annum

The pension scheme of one of the Group’s overseas subsidiaries covers a total of 300 employees (2010:

543 employees). The pension scheme gives the right to defined future benefits, which are mainly dependent

on number of years worked, salary level at time of retirement and the amount of payment from the national

insurance fund. The obligations are covered through an insurance company. The calculated pension obligations

are based on actuarial valuation.

The actuarial valuations are based on assumptions of demographical factors normally used within the insurance

industry.

82 4

ANNUAL

REP RT

2 11


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

16 CAPITAL AND RESERVES

Share capital

The authorized share capital of the Parent Company comprises 400,000,000 ordinary shares of RO 0.100

each (2010: 400,000,000 of RO 0.100 each). At 31 December 2011, the issued and fully paid up share capital

comprised 282,094,452 ordinary shares of RO 0.100 each (2010: 282,094,452 of RO 0.100 each).

Details of shareholders, who own 10% or more of the Parent Company’s share capital, are as follows:

2011 2010

Number of

shares

‘000 %

Number of

shares

‘000 %

Tawoos LLC 42,538 15.08 42,538 15.08

Legal reserve

The Omani Commercial Companies Law of 1974 requires that 10% of an entity’s net profit be transferred to

a non-distributable legal reserve until the amount of legal reserve becomes equal to one-third of the entity’s

issued share capital. The legal reserve is not available for distribution. Legal reserve also includes transfer

relating to non-Oman registered subsidiary companies as per the respective regulations in their country of

incorporation. The Parent Company utilises the share premium for transfers to legal reserve. Transfers to legal

reserves made during the year relates to the legal reserves of certain subsidiaries.

Treasury shares

These are shares held by certain subsidiaries in the Parent Company at the cost of RO 1,703,826 (2010: RO

1,703,826). Dividend received on these treasury shares have been directly transferred to retained earnings

and shown as movement in the statement of changes in equity. At 31 December 2011, the subsidiaries

held 14,554,586 shares (2010: 14,554,586) in the Parent Company. The market value of these shares at

31 December 2011 was approximately RO 7,932,000 (2010: RO 16,130,000). Treasury shares are pledged

against a bank loan.

Share premium

The Group utilises the share premium for issuing bonus shares and transfers to legal reserve. No such transfers

took place during 2011.

Subordinated loan reserve

As per the subordinated loan agreement, the Parent Company is required to create a subordinated reserve by

transferring an amount equal to 1/7 th of the outstanding aggregate amount of loan notes out of annual profit after

tax of the Parent Company from 31 December 2011. Accordingly, during the year, the Parent Company has made

a transfer of RO 5,714,000 from retained earnings to a subordinated loan reserve.

Hedging reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow

hedging instruments related to hedged transactions that have not yet occurred.

Exchange reserve

The exchange reserve comprises all foreign currency differences arising from the translation of the financial

statements of foreign operations.

& ITS SUBSIDIARY COMPANIES

83


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

17 NET ASSETS PER SHARE

Net assets per share is calculated by dividing the net assets at the year end attributable to the shareholders of

the Parent Company by the number of shares outstanding as follows:

2011 2010

Net assets

Net assets (RO ‘000) 193,167 195,832

Non-controlling interest (RO ‘000) (26,673) (23,514)

Net assets attributable to the shareholders of the Parent Company

(RO ‘000) 166,494 172,318

Number of shares

Number of shares at 1 January (‘000) 282,094 282,094

Treasury shares (refer note 16) (‘000) (14,555) (14,555)

Number of shares at 31 December (‘000) 267,539 267,539

Net assets per share (RO) 0.622 0.644

18 INCOME TAX

The expense relates to tax payable on the profits earned by the Group, as adjusted in accordance with the

taxation laws and regulations of various countries in which the Group operates.

2011 2010

RO’000 RO’000

Charge for the year 5,465 6,501

Current liability 7,373 5,050

Non-current liability 4,711 5,431

12,084 10,481

Deferred tax asset

1 January 448 1,229

Credited (debited) to statement of comprehensive income 807 (781)

31 December 1,255 448

The deferred tax balance at 31 December 2011 comprises capital allowances in excess of depreciation charge

of RO 912,000 (2010: RO 322,000), short term timing differences of RO 278,000 (2010: RO 125,000) and

timing differences relating to pension obligations of RO 65,000 (2010: nil).

The Parent Company and its Oman incorporated subsidiaries are subject to income tax at the rate of 12% of

taxable income in excess of RO 30,000 in accordance with the income tax law of the Sultanate of Oman.

The Parent Company’s assessments for the tax years 2007 to 2011 have not been finalised with the Secretariat

General for Taxation at the Ministry of Finance (“the Department”).

84 4

ANNUAL

REP RT

2 11


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

18 INCOME TAX (continued)

The Parent Company has filed objection to the Secretariat General for Taxation and appeals to the Tax Committee

and the Courts against certain decisions of the Department on disallowances made by the Department in the

assessments. The main issues under the appeals are taxation of overseas income, taxation of overseas dividend,

double taxation of management fees paid by the subsidiaries to the Parent Company and disallowances relating

to interest and some specific expenses.

On 22 February 2011, the Tax Committee has upheld its decision to nullify double taxation of management

fees, in a case relating to management fees received by the Parent Company from the subsidiaries for the years

2000 and 2001.

The Supreme Court, on 18 January 2012, has ruled in favour of the Parent Company in a case relating

to taxation of overseas dividend received by Topaz Energy and Marine SAOG (later merged with the Parent

Company) for the years 2002 to 2004. In accordance with the Supreme Court decision, the Parent Company

has written back RO 3,121,000 being provisions relating to the taxation of overseas dividend received up to the

year 2009.

The Parent Company has established provisions at 31 December 2011 against the tax liabilities, which might

arise relating to taxation of overseas income and disallowance relating to interest and some specific expenses.

As required under the tax laws, the Parent Company has paid the tax dues relating to those issues and are

continuing to appeal to the higher authorities.

19 NET PROFIT FOR THE YEAR

Net profit for the year is stated after charging: 2011 2010

RO’000 RO’000

Staff costs 95,820 82,896

Net finance costs

Net interest expense 19,141 10,522

Reversal for derivative used for hedging (refer note 26) (947) (184)

18,194 10,338

20 OTHER NON-OPERATING EXPENSES

2011 2010

RO’000 RO’000

Provision for guarantee issued against MOBY bank loan 2,068 -

Write off of IPO costs 3,095 -

Provision for impairment against receivable from MOBY 1,116 -

Provision against litigation and claims 3,767 -

Impairment of claim and other receivables 680 -

Others 692 -

11,418 -

& ITS SUBSIDIARY COMPANIES

85


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

20 OTHER NON-OPERATING EXPENSES (continued)

During 2008, Topaz along with two other partners jointly invested in MOBY, which is involved in providing ship

repair and ship building services in Kazakhstan. MOBY has obtained a facility of RO 3,521,000 with a bank to

finance their operations which is secured by corporate guarantees from the joint venture partners to the extent

of their ownership interest in MOBY. During the year ended 31 December 2011, MOBY has incurred a loss

of RO 468,000 and has net current liabilities and net liabilities of RO 922,000 and RO 177,000 respectively

as at that date. MOBY has further breached certain financial covenants as specified in the loan agreements.

The management of MOBY is of the view that it is highly probable that the bank will call back the loan facility

in which case all the joint venture partners will be required to settle the liability to the extent of the corporate

guarantees provided. Accordingly, Topaz has created a provision of RO 2,068,000 being their share of the

obligations of the loan facility and other related costs of the joint venture (refer note 5).

During the year, Topaz incorporated a wholly owned subsidiary Topaz Energy and Marine Plc, United Kingdom

with the objective of listing the entity on London Stock Exchange and to raise equity capital from the public

market to finance the future growth plans of Topaz. Topaz incurred RO 3,095,000 of IPO costs mainly

including professional and arrangement fees paid to various consultants for their services provided to Topaz

and other related and ancillary costs. However, Topaz decided to postpone the proposed listing. Accordingly,

the management has decided to write off all IPO costs incurred until 31 December 2011 to statement of

comprehensive income.

At the reporting date, Topaz has a total receivable exposure from MOBY amounting to RO 1,116,000 in respect

of services provided to MOBY by certain group entities. Due to continued loss incurred by the joint venture

and its net liability position at the reporting date as mentioned above, Topaz expects the above amount to be

impaired and hence has created a full provision against the exposure.

Provisions against litigations and claims include:

• Provision in respect of certain claims received from a Group’s customer for the reimbursements of alleged

tax savings enjoyed by the Group relating to current and previous years. The Group is in advanced

stage of negotiations with the customer on this matter and estimates that these claims will be settled for

RO 755,000 and has made provision in these financial statements for this amount.

• During 2009, one of the Group’s customers cancelled the contracts for building two marine vessels. The

Group challenged the cancellation in the UK courts since the Directors of the Group were of the view that

the cancellation was a breach of the contract. During the current year, the court has awarded a judgment

in favor of the customer and directed the Group to pay the amount of advances received from the customer

of RO 9,153,000 (already accounted for as a liability in the financial statements of the Group) along with

related costs. Accordingly, the Group has charged off an amount of RO 1,846,000 to profit or loss being

the net settlement costs related to the contract. Later the Marine Division of the Group agreed to take over

those two vessels under construction.

• During the year one of the Group entities was served with a notice of warranty claim by a customer

who called upon the performance bond. The Group entity, in turn served a notice on the sub-contractor

who had carried out the related works. The performance bond along with related costs amounting to

RO 777,000 has been charged off to profit or loss. Until the reporting date, the Group entity has not

received any other notification from the customer declaring any further claim in this regard. Accordingly,

no further provision has been made in these financial statements.

• During the year one of the Group’s customers cancelled a ship building contract. The work in progress of

RO 389,000 relating to such contract has been charged off to the statement of comprehensive income.

86 4

ANNUAL

REP RT

2 11


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

20 OTHER NON-OPERATING EXPENSES (continued)

• In the earlier years, the Group entered into contract with one of its customers for providing marine vessels

on charter. The customer subsequently did not take the delivery of these vessels, pursuant to the delays

made by the Group in the delivery of these vessels. Furthermore, the customer refused to reimburse

the capital expenditure incurred by the Group in respect of those vessels. The management is actively

pursuing the customer for reimbursement of these costs. However, the Group has created a provision of

RO 680,000 against the entire amount receivable from the customer.

• During the year 2011 the Company charged off an amount of RO 692,000 to profit and loss in respect of

the unamortised portion of processing fee for the existing loans, as the Group is planning to restructure the

entire amount of existing loans.

21 BASIC AND DILUTED EARNINGS PER SHARE

Basic and diluted earnings per share is calculated by dividing the net profits for the year attributable to the

shareholders of the Parent Company by the weighted average number of shares as follows:

2011 2010

Net (loss) profit for the year attributable to the shareholders of the Parent

Company (RO‘000) (1,000) 27,648

Weighted average number of shares

Number of shares at 1 January (‘000) 282,094 282,094

Less: weighted average number of treasury shares (‘000) (14,555) (14,555)

Weighted average number of shares (‘000) 267,539 267,539

Basic and diluted (loss) earnings per share (RO) (0.004) 0.103

22 DIVIDEND PER SHARE

Total distribution for the Shareholders (RO ‘000) - 3,385

Number of shares outstanding at 31 December (‘000) 282,094 282,094

Distribution per share (RO) - 0.012

Cash dividend (RO ‘000) - 3,385

No dividend is proposed by the Board of Directors for the year 2011. Dividend for the year 2010 was approved

by the shareholders at the AGM held on 28 March 2011.

As required by CMA regulation, unclaimed dividends of previous years have been deposited with the CMA

Investors’ Trust Fund. There were no unclaimed dividends for 2011.

23 RELATED PARTY TRANSACTIONS

The Group has entered into transactions with entities over which certain Directors are able to exercise significant

influence. In the ordinary course of business, such related parties provide goods, services and funding to the

Group. The Group also provides goods, services and funding to the related parties. The Board of Directors

believes that the terms of purchases, sales, provision of services and funding arrangements are comparable

with those that could be obtained from unrelated third parties.

& ITS SUBSIDIARY COMPANIES

87


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

23 RELATED PARTY TRANSACTIONS (continued)

The value of significant related party transactions during the year was as follows:

2011 2010

RO’000 RO’000

Income

Service rendered and sales 360 408

Net advances due to related parties

Net advances 4,201 14

Expenses

Services received and purchases 1,217 285

Directors’ remuneration and sitting fees

Remuneration - 176

Sitting fees 24 24

Remuneration and sitting fees above relate only to the Parent Company.

Out of above related party transactions, following are the details of transactions entered into with the related

parties holding 10% or more interest in the Parent Company:

Service rendered and sales 21 20

Compensation of key management personnel

The remuneration of key management personnel during the year are as follows:

Short-term benefits 804 1,737

Employees’ end of service benefits 40 263

844 2,000

Topaz Energy and Marine Limited has paid RO 270,900 (2010: RO 270,900) as remuneration to its Executive

Chairman who is also the Chairman of the Parent Company.

Amounts due from and due to related parties have been disclosed in notes 9 and 11 respectively.

Outstanding balances at the year-end arise in the normal course of business. For the year ended 31 December

2011, the Group has not recorded any impairment of amounts owed by related parties (2010: Nil).

88 4

ANNUAL

REP RT

2 11


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

24 COMMITMENTS AND CONTINGENT LIABILITIES

2011 2010

RO’000 RO’000

Commitments

Letters of credit 8,405 4,737

Capital expenditure commitments 28,710 39,297

Contingent liabilities

Corporate guarantee 15,435 -

Letters of guarantee 48,106 46,595

Bills discounted – receivables 992 1,987

The contingent liabilities are non-cash banking instruments like bid bond, performance bond, refund guarantee,

retention bonds etc, which are issued by banks on behalf of group companies to customers and suppliers under

the non-funded working capital lines with the banks. These lines are secured by the corporate guarantee from

various group entities. The amounts are payable only in the event when certain terms of contracts with customers

or suppliers are not met.

25 LEASES

a) Operating leases - receivable

The Group leases its marine vessels under operating leases. The leases typically run for a period between

3 months to 10 years and are renewable for similar periods after the expiry date. The lease rental is usually

renewed to reflect market rentals.

Future minimum lease rentals receivable under non-cancellable operating leases are as follows as of 31

December:

2011 2010

RO’000 RO’000

Within one year 67,986 64,507

Between one and five years 151,927 126,070

More than five years 50,667 52,044

270,580 242,621

b) Operating leases - payable

The Group has future minimum lease payments under operating leases for marine vessels with payments as

follows:

2011 2010

RO’000 RO’000

Within one year 7,005 8,493

Between one and five years 23,807 23,855

More than five years 11,327 14,468

42,139 46,816

During the year an amount of RO 8,521,000 (2010: RO 9,313,000) was recognised as an expense in the

statement of comprehensive income in respect of bareboat charter of marine vessels obtained on operating

lease.

& ITS SUBSIDIARY COMPANIES

89


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

26 DERIVATIVE FINANCIAL INSTRUMENTS

The table below shows the fair values of derivative financial instruments, which are equivalent to the market

values, together with the notional amounts analyzed by the term to maturity. The notional amount is the amount

of a derivative’s underlying asset, reference rate or index and is the basis upon which changes in the value of

derivatives are measured. The notional amounts indicate the volume of transactions outstanding at year end

and are neither indicative of the market risk nor credit risk.

Notional amounts by term to maturity

Positive Negative Notional Over 1

fair fair amount Within 1 year to Over

value value Total year 5 years 5 years

RO’000 RO’000 RO’000 RO’000 RO’000 RO’000

31 December 2011

Interest rate swaps - 3,584 85,620 10,283 72,148 3,189

31 December 2010

Interest rate swaps - 2,903 70,562 5,726 57,394 7,442

The term loan facilities of the Group bear interest at US LIBOR plus applicable margins. In accordance with the

financing documents, the Group has fixed the rate of interest through Interest Rate Swap Agreements (“IRS”)

as follows:

• RO 21,150,000 (2010: RO 21,150,000) at a fixed interest rate of 3.95% (2010: 3.95%) per annum

excluding margin;

• RO 20,785,000 (2010: nil) at a fixed margin of 2.5% (2010: nil) per annum excluding margin;

• RO nil (2010: RO 4,120,000) at a fixed margin of nil (2010: 4.89%) per annum excluding margin;

• RO 19,230,000 (2010: RO 19,230,000) at the rate of 2% (2010: 2%) per annum excluding margin;

• an amount of RO 2,762,000 (2010: RO 3,230,000) at the rate of 3.25% (2010: 3.25%) per annum

excluding margin ; and

• an amount of RO 21,692,000 (2010: 22,810,000) at the rate of 1.97%% (2010: 1.97%) per annum

excluding margin.

At 31 December 2011, the US LIBOR was approximately 0.77% (31 December 2010: 0.46%) per annum.

Accordingly, the gap between US LIBOR and fixed rate under IRS was approximately 3.18%, 1.73%, 1.23%,

2.48% and 1.20% (2010: 3.49%, nil, 1.54%, 2.79% and 1.51%) per annum.

Based on the interest rates gaps, over the life of the IRS, the indicative losses were assessed at

approximately RO 3,584,000 (2010: RO 2,903,000) by the counter parties to IRS. Consequently, in

order to comply with International Accounting Standard 39 Financial Instruments: Recognition and

Measurement fair value of the hedge instruments’ indicative losses in the amount of approximately

RO 3,584,000 (2010: 2,903,000) has been recorded under the current and non-current liabilities and the

impact for the year amounting to RO 947,000 (2010: RO 184,000) has been recorded under the finance

income (refer note 19) and RO 1,628,000 (2010: RO 143,000) has been recognised in the hedging reserve.

90 4

ANNUAL

REP RT

2 11


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

27 OPERATING SEGMENTS

The Group has three reportable segments, as described next, which are the Group’s strategic business units.

The strategic business units offer different products and services, and are managed separately because they

require different technology and marketing strategies. For each of the strategic business units, the Group’s CEO

reviews internal management reports on a regular basis. The following summary describes the operations in

each of the Group’s reportable segments:

Engineering services: includes ship repair, ship building and fabrication and maintenance services for the oil

and gas industry.

Marine services: includes vessel chartering to oil and gas off shore companies.

Contract services: includes facilities management, facilities establishment, contract catering and operations

and maintenance services.

Other operations include the provision of training services, media publishing, advertising and distribution,

manufacturing, general trading, investments and related activities.

Information regarding the results of each reportable segment is included next. Performance is measured based

on segment profit before income tax, as included in the internal management reports that are reviewed by the

Group’s CEO. Segment profit is used to measure performance as management believes that such information

is the most relevant in evaluating the results of certain segments relative to other entities that operate within

these industries. Inter-segment pricing is determined on an arm’s length basis.

& ITS SUBSIDIARY COMPANIES

91


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

27

OPERATING SEGMENTS (continued)

Information about reportable segments:

Engineering services Marine services Contract services Others Adjustments Total

2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010

RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000

Total revenues 82,656 77,376 112,995 94,931 100,974 84,387 11,164 14,083 (859) (3,552) 306,930 267,225

Less: Inter-segment revenue (16,245) (11,822) (493) (1,705) (174) (174) (96) (95) - - (17,008) (13,796)

External revenue 66,411 65,554 112,502 93,226 100,800 84,213 11,068 13,988 (859) (3,552) 289,922 253,429

Net finance (cost)/income (502) (353) (13,607) (9,005) (3,203) (1,473) (853) 493 (29) - (18,194) (10,338)

Depreciation and amortisation (3,599) (3,143) (17,028) (13,558) (5,348) (4,412) (643) (858) (289) - (26,907) (21,971)

Reportable segment profit after

income tax (15,063) 2,732 15,649 22,331 8,931 9,540 (7,524) 1,341 298 (3,662) 2,291 32,282

Reportable segment assets 70,534 56,735 410,592 373,054 137,514 117,576 91,667 50,017 (56,610) (35,289) 653,697 562,093

Capital expenditure 3,918 2,819 47,354 119,566 18,163 12,741 419 2,146 12,523 (475) 82,377 136,797

Reportable segment liabilities 46,333 33,800 207,499 220,849 85,685 71,500 230,417 66,251 (109,404) (26,139) 460,530 366,261

Reportable segment profit after income tax of Engineering, Marine and Other segments for the year 2011 include non-operating expense of RO 6,196,000, RO 1,435,000

and RO 3,787,000 respectively.

92 4

ANNUAL

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

27 OPERATING SEGMENTS (continued)

Geographical segments:

Revenue as based on the geographical location of the business activities is as follows:

2011 2010

RO’000 RO’000

Oman 65,254 56,075

Middle East and North Africa (excluding Oman) 92,414 85,201

Caspian 78,239 70,174

Others 54,015 41,979

289,922 253,429

28 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

Financial instruments carried on the statement of financial position comprise investments, trade receivables,

amount due from related parties, cash in hand and at bank, term loans, bank borrowings, trade and other

payables and amount due to related parties.

The Group has exposure to the following risks from its use of financial instruments:

(i) Credit risk

(ii) Liquidity risk

(iii) Market risk

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives,

policies and processes for measuring and managing risk, and the management of capital. Further quantitative

disclosures are included throughout these financial statements.

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk

management framework. The Group’s risk management policies are established to identify and analyse the

risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to

limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions

and the Group’s activities. The Group, through its training and management standards and procedures, aims

to develop a disciplined and constructive control environment in which all employees understand their roles

and obligations.

The Audit Committee oversees how management monitors compliance with the Group’s risk management

policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks

faced by the Group. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit

undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which

are reported to the Audit Committee.

& ITS SUBSIDIARY COMPANIES

93


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

28 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued)

During the year, the Group implemented a new code of business conduct across various Group entities. Whilst

implementing this code, management uncovered potential financial misconduct in a Group entity and an

urgent investigation was immediately undertaken. The outcome of the investigation suggested that certain

unacceptable financial and ethical practices had taken place in the entity concerned over a number of years.

In particular, it emerged that, over several years, in aggregate approximately RO 1.1 million of cash payments

had not been properly approved and / or classified and may have been used for improper purposes, although,

as the payments had been recorded as expenses in the relevant years, there was no misstatement of the profit

for any period.

At an early stage, the Group established a special committee with an independent chairman to assist in resolving

these matters including, where appropriate, reporting certain findings to the relevant authorities. Further

investigations were also undertaken to determine whether there might be issues elsewhere in the Group.

Management promptly took all appropriate steps within their power to ensure that any inappropriate practices

ceased immediately and permanently, and ended the employment of certain personnel. In addition to rigorous

implementation of the new code of business conduct, management has taken further steps, including greater

oversight of the activities of the Group by senior management of the Parent Company and strengthening the

relevant internal controls. Management is confident that, based on the foregoing measures and the rigorous

implementation of the new code of business conduct, they will ensure that such instances do not recur in the

future.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to

meet its contractual obligations, and arises principally from the receivables from customers and investments.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to

credit risk at the statement of financial position date was:

2011 2010

RO’000 RO’000

Investments 338 406

Trade receivables 77,359 59,897

Amount due from related parties 470 1,370

Cash and bank balances 37,354 22,437

115,521 84,110

The Group has a credit policy in place and exposure to credit risk is monitored on an ongoing basis. Credit

evaluations are generally performed on all customers requiring credit over specified amounts. The Group does

not require collateral in respect of financial assets.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the

statement of financial position.

With respect to credit risk arising from the other financial assets of the Group, including cash and cash

equivalents, and derivative instruments with positive values, the Group’s exposure to credit risk arises from

default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.

94 4

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

28 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued)

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s

approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its

liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking

damage to the Group’s reputation.

The Group limits its liquidity risk by ensuring that bank facilities are available. Short term loans and overdraft are,

on average, utilised for period of 90 days to bridge the gap between collections of receivables and settlement of

payables during the month.

The contractual maturities of financial liabilities, including estimated interest payments and excluding the impact

of netting agreements at statement of financial position date is as below:

31 December 2011

Carrying

amount

RO’000

Contractual

cash flows

RO’000

Upto

1 year

RO’000

1 year to

5 years

RO’000

More than

5 years

RO’000

Term loans 360,744 434,969 111,504 284,091 39,374

Bank borrowings 8,245 8,245 8,245 - -

Trade and other payables 67,143 67,143 67,143 - -

436,132 510,357 186,892 284,091 39,374

31 December 2010

Term loans and leases 284,816 333,262 68,866 210,515 53,881

Bank borrowings 3,485 3,485 3,485 - -

Trade and other payables 57,372 57,372 57,372 - -

345,673 394,119 129,723 210,515 53,881

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity

prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market

risk management is to manage and control market risk exposures within acceptable parameters, while optimising

the return on risk.

The Group also enters into derivative transactions, primarily interest rate swaps and forward currency contracts.

The purpose is to manage the interest rate and currency risks arising from the Group’s operations and its sources

of finance.

Currency risk

Trade accounts payable include amount due in foreign currencies, mainly US Dollars, Euros, Pounds Sterling,

UAE Dirham and Norwegian Krone.

The table below indicates the Group’s foreign currency exposure at 31 December, as a result of its

monetary assets and liabilities. The analysis calculates the effect of a reasonably possible movement of the

RO currency rate against the foreign currencies, with all other variables held constant, on the profit or loss (due

to the fair value of currency sensitive monetary assets and liabilities).

& ITS SUBSIDIARY COMPANIES

95


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

28 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued)

Currency risk (continued)

Effect on profit before tax

Increase/decrease in respective

Currency rate to the RO ‘000

2011 +5% -5%

Euro (EUR) 22 (22)

Azerbaijan Manat (MNT) 11 (11)

Kazakhstan Tenge (KZT) 7 (7)

UK Pound (GBP) 33 (33)

Norwegian Krone (NOK) 32 (32)

Japanese Yen (JPY) 1 (1)

Singapore Dollars (SGD) 23 (23)

2010

Euro (EUR) 23 (23)

Azerbaijan Manat (MNT) 18 (18)

Kazakhstan Tenge (KZT) 12 (12)

UK Pound (GBP) 6 (6)

Norwegian Krone (NOK) 38 (38)

Japanese Yen (JPY) 3 (3)

Singapore Dollars (SGD) 16 (16)

The Group is also exposed to foreign exchange risk on sales, purchases, receivables and payables arising primarily

from GCC currencies and US Dollar exposures which are pegged to the Omani Rial.

Interest rate risk

The Group’s borrowings are on fixed as well as floating interest rate basis. The Group is exposed to interest rate

risk due to fluctuation in the market interest rate of floating interest rate borrowings.

The following table demonstrates the sensitivity of the statement of comprehensive income to reasonably

possible changes in interest rates, with all other variables held constant.

The sensitivity of the profit or loss is the effect of the assumed changes in interest rates on the Group’s profit for

the year, based on the floating rate financial assets and financial liabilities held at 31 December 2011.

2011

Increase/

decrease

in basis points

Effect on profit

for the year

RO’000

Borrowings converted to Rial Omani +15 (265)

Borrowings converted to Rial Omani -10 177

2010

Borrowings converted to Rial Omani +15 (234)

Borrowings converted to Rial Omani -10 156

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

28 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued)

Other market price risk

Equity price risk arises from available-for-sale equity securities. Management of the Group monitors the mix of

debt and equity securities in its investment portfolio based on market indices. Material investments within the

portfolio are managed on an individual basis and all buy and sell decisions are approved by the Board of Directors.

Capital management

The Group’s policy is to maintain an optimum capital base to maintain investor, creditor and market confidence

to sustain future growth of business as well as return on capital.

29 FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value hierarchy

The table below analyses financial instruments carried at fair value, by valuation method. The different levels

have been defined as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability,

either directly (i.e., as prices) or indirectly (i.e., derived from prices);

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Level 1

RO’000

Level 2

RO’000

Level 3

RO’000

Total

RO’000

31 December 2011

Investments 16 - 322 338

Derivative financial instruments - (3,584) - (3,584)

31 December 2010

Investments 15 - 391 406

Derivative financial instruments - (2,903) - (2,903)

30 KEY SOURCES OF ESTIMATION UNCERTAINTY

Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the statement of

financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of

assets and liabilities within the next financial year are discussed below.

Impairment of goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the

value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires

the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose

a suitable discount rate in order to calculate the present value of those cash flows. The net carrying amount of

goodwill at 31 December 2011 was RO 38,688,000 (2010: RO 38,688,000).

& ITS SUBSIDIARY COMPANIES

97


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

30 KEY SOURCES OF ESTIMATION UNCERTAINTY (continued)

Impairment of vessels

The Group determines whether its vessels are impaired when there are indicators of impairment as defined

in IAS 36. This requires an estimation of the value in use of the cash-generating unit which is the vessel

owning and chartering segment. Estimating the value in use requires the Group to make an estimate of the

expected future cash flows from this cash-generating unit and also to choose a suitable discount rate in order

to calculate the present value of those cash flows. The carrying value of the vessels as at 31 December 2011

was approximately RO 338,824,000 (2010: RO 291,997,000).

Impairment of accounts receivable

An estimate of the collectible amount of trade accounts receivable is made when collection of the full amount

is no longer probable. For individually significant amounts, this estimation is performed on an individual

basis. Amounts which are not individually significant, but which are past due, are assessed collectively and a

provision applied according to the length of time past due, based on historical recovery rates.

At the statement of financial position date, gross trade accounts receivable were RO 81,490,000 (2010:

RO 63,622,000) and the provision for doubtful debts was RO 4,131,000 (2010: RO 3,725,000). Any difference

between the amounts actually collected in future periods and the amounts expected will be recognised in the

statement of comprehensive income.

Impairment of inventories

Inventories are held at the lower of cost and net realisable value. When inventories become old or obsolete, an

estimate is made of their net realisable value. For individually significant amounts this estimation is performed

on an individual basis. Amounts which are not individually significant, but which are old or obsolete, are

assessed collectively and a provision applied according to the inventory type and the degree of ageing or

obsolescence, based on historical selling prices.

At the statement of financial position date, gross inventories were RO 8,572,000 (2010: RO 8,596,000) with

provisions for old and obsolete inventories of RO 906,000 (2010: RO 615,000). Any difference between the

amounts actually realised in future periods and the amounts expected will be recognised in the statement of

comprehensive income.

Useful lives of property, plant and equipment

The useful lives, residual values and methods of depreciation of property, plant and equipment is reviewed,

and adjusted if appropriate, at each financial year end. In the review process, the Group takes guidance from

recent acquisitions, as well as market and industry trends.

Provision for tax

The Group reviews the provision for tax on a regular basis. In determining the provision for tax, laws of particular

jurisdictions (where applicable entity is registered) are taken into account. The management considers the

provision for tax to be a reasonable estimate of potential tax liability after considering the applicable laws and

past experience.

98 4

ANNUAL

REP RT

2 11


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

30 KEY SOURCES OF ESTIMATION UNCERTAINTY (continued)

Effectiveness of hedge relationship

At the inception of the hedge, the management documents the hedging strategy and performs hedge

effectiveness testing to assess whether the hedge is effective. This exercise is performed at each reporting

date to assess whether the hedge will remain effective throughout the term of the hedging instrument.

As at the reporting date the cumulative fair value of the interest rate swap was RO 3,584,000 (2010:

RO 2,903,000).

Accounting for investments

The Group reviews its investment in entities to assess whether the Group has control, joint control or significant

influence over the investee. This includes consideration of the level of shareholding held by the Group in the

investee as well as other factors such as representation on the Board of Directors of the investee, terms of any

agreement with the other shareholders etc. Based on the above assessment the Group decides whether the

investee needs to be consolidated, proportionately consolidated or equity accounted in accordance with the

accounting policy of the Group (also refer note 2).

Leases

Management exercises judgments in estimating whether a lease is a finance lease or an operating lease by

assessing whether in substance the risks and rewards of ownership of the assets have been transferred or not. In

the instances where management estimates that the risks and rewards have actually been transferred the lease

is considered as a finance lease, otherwise it is accounted for as an operating lease.

Current and non-current classification of bank borrowings

The Group’s management has exercised significant judgment during the year in determining the current and

non-current classification of bank borrowings. The classification is based on the repayment terms agreed with the

bank, assessing the events and circumstances which can render a loan becoming payable on demand and the

status of any negotiations and communications with the creditor banks in this regard.

Determining percentage completion of contracts in progress and estimating foreseeable losses

Contract work-in-progress is stated at cost plus estimated attributable profits less foreseeable losses and

progress billings. In determining estimated attributable profits or foreseeable losses if any to be recognised, the

Group needs to estimate the outcome of each contract and also the percentage of completion of the contract

which is determined by the actual cost incurred to date in relation to the total estimated costs. The final results

of the contract may differ from the estimates made at the time of preparation of these consolidated financial

statements.

31 SUBSEQUENT EVENTS

Reorganisation of group structure

Subsequent to the year-end, Topaz has undertaken to reorganise its operations with the intention of distinctly

separating the Marine and Engineering divisions. Currently both the division are owned and operated through a

single holding company Nico Middle East Limited (“NMEL”) which in turn is wholly owned by Topaz. Effective 1

January 2012, the Group has decided to transfer the entire business, assets and liabilities of Topaz Engineering

division from NMEL to another wholly owned subsidiary of the Company, Topaz Engineering Limited. Management

expects that the reorganization will result in optimal performance and structural efficiencies for both the divisions.

Since the transaction is between entities which are under common control, hence the transfer of assets and

liabilities is proposed to be accounted for at book values and no goodwill will be recognised thereon.

& ITS SUBSIDIARY COMPANIES

99


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2011

31 SUBSEQUENT EVENTS (continued)

Refinancing of term loans

Subsequent to the year-end, Topaz has entered into an agreement with a syndicate of banks for a financing

facility of RO 146,154,000. The Group intends to use part of this facility to refinance certain existing term loan

facilities and the balance to finance vessels under construction and investment in new vessels (refer note 13).

Raising of new finance

The Parent Company is in the process of raising RO 40,000,000 through Zero Coupon Convertible Bonds

(“ZCCB”). ZCCB will be converted to equity shares on a structured basis over a period of 7 years. The Parent

Company has signed a mandate agreement with BankMuscat SAOG to act as the financial advisor and also

appointed Trowers & Hamlins as the legal advisor for the transaction.

Divestment of a subsidiary

In December 2011 the Group has received an indicative offer from the management of Al Wasita Emirates

Catering Services LLC (“Al Wasita Emirates”) to buy Al Wasita Emirates. The divestment process is expected to

be completed by 31 March 2012.

Dissolution of a joint venture

During January 2012, Nico Doosan has been dissolved and the ship repair unit of Topaz Engineering Limited

is planning to run this boiler unit as an independent business unit within its fold.

32 COMPARATIVE FIGURES

Certain comparative figures for the previous year have been reclassified, where necessary, in order to conform

to the current year’s presentation.

100 4

ANNUAL

REP RT

2 11


SCHEDULE TO THE CONSOLIDATED FINANCIAL STATEMENTS

STATEMENT OF COMPREHENSIVE INCOME (PARENT COMPANY)

for the year ended 31 December

2011 2010

RO’000 RO’000

Revenue 34,428 29,969

Operating expenses (23,747) (22,698)

Gross profit 10,681 7,271

Other income 6,419 6,772

Administrative expenses (3,311) (3,347)

Net finance costs (6,242) (3,796)

Profit before income tax 7,547 6,900

Income tax expense 686 (1,450)

Net profit and total comprehensive income for the year 8,233 5,450

Basic and diluted earnings per share (RO) 0.029 0.019

Dividend per share:

Cash dividend (RO) - 0.012

& ITS SUBSIDIARY COMPANIES

101


SCHEDULE TO THE CONSOLIDATED FINANCIAL STATEMENTS

STATEMENT OF COMPREHENSIVE INCOME (PARENT COMPANY)

as at 31 December

2011 2010

RO’000 RO’000

Non-current assets

Property, plant and equipment 67,482 59,681

Investments 140,238 140,238

Subordinated loan to a subsidiary 40,000 20,000

Total non-current assets 247,720 219,919

Current assets

Inventories 652 831

Trade and other receivables 66,485 35,812

Cash and bank balances 17,014 5,563

Total current assets 84,151 42,206

Current liabilities

Trade and other payables 12,510 9,842

Bank borrowings 3,759 2,796

Term loans 25,898 27,026

Total current liabilities 42,167 39,664

Net current assets 41,984 2,542

Non-current liabilities

Term loans 114,554 83,373

Subordinated loan 40,000 20,000

Non-current payables and advances 5,570 6,220

Amount due to a subsidiary 19,050 7,214

Staff terminal benefits 600 572

Total non-current liabilities 179,774 117,379

Net assets 109,930 105,082

Equity

Share capital 28,209 28,209

Share premium 19,496 19,496

Legal reserve 9,404 9,404

Subordinated loan reserve 5,714 -

Proposed distribution - 3,385

Retained earnings 47,107 44,588

Total equity 109,930 105,082

Net assets per share (RO) 0.390 0.373

102 4

ANNUAL

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2 11


SCHEDULE TO THE CONSOLIDATED FINANCIAL STATEMENTS

STATEMENT OF COMPREHENSIVE INCOME (PARENT COMPANY)

for the year ended 31 December

2011 2010

RO’000 RO’000

OPERATING ACTIVITIES

Cash receipts from customers 26,643 32,014

Cash paid to suppliers and employees (21,541) (20,856)

Cash generated from operations 5,102 11,158

Net finance costs (6,242) (3,796)

Income tax paid (370) (2,341)

Cash (used in) flows from operating activities (1,510) 5,021

INVESTING ACTIVITIES

Acquisition of property, plant and equipment (12,669) (19,181)

Proceeds from sale of property, plant and equipment 1 44

Investments - (38,504)

Dividend received 5,749 6,399

Cash used in investing activities (6,919) (51,242)

FINANCING ACTIVITIES

Net receipts of term loans 50,053 70,024

Net movement in related parties (27,751) (26,022)

Dividend paid (3,385) (3,385)

Cash flows from financing activities 18,917 40,617

Net change in cash and cash equivalents 10,488 (5,604)

Cash and cash equivalents at the beginning of the year 2,767 8,371

Cash and cash equivalents at the end of the year 13,255 2,767

Cash and cash equivalents comprise the following:

Cash and bank balances 17,014 5,563

Bank borrowings (3,759) (2,796)

13,255 2,767

& ITS SUBSIDIARY COMPANIES

103


SCHEDULE TO THE CONSOLIDATED FINANCIAL STATEMENTS

STATEMENT OF COMPREHENSIVE INCOME (PARENT COMPANY)

for the year ended 31 December 2011

Share Share Legal Proposed Retained

capital premium reserve distribution earnings Total

RO’000 RO’000 RO’000 RO’000 RO’000 RO’000

1 January 2010 28,209 19,496 9,404 3,385 42,523 103,017

Total comprehensive income for the year:

Net profit for the year - - - - 5,450 5,450

Total comprehensive income for the year - - - - 5,450 5,450

Transactions with owners, directly recorded

in equity:

Dividend paid - - - (3,385) - (3,385)

Proposed dividend - - - 3,385 (3,385) -

Transactions with owners, directly recorded

in equity - - - - (3,385) (3,385)

31 December 2010 28,209 19,496 9,404 3,385 44,588 105,082

Share Share Legal

Subordinated

loan Proposed Retained

capital premium reserve reserve distribution earnings Total

RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000

1 January 2011 28,209 19,496 9,404 - 3,385 44,588 105,082

Total comprehensive income

for the year:

Net profit for the year - - - - - 8,233 8,233

Total comprehensive income for

the year - - - - - 8,233 8,233

Transactions with owners,

directly recorded in equity:

Dividend paid - - - - (3,385) - (3,385)

Proposed dividend - - - - - - -

Transfer to subordinated loan

reserve - - - 5,714 - (5,714) -

Transactions with owners,

directly recorded in equity - - - 5,714 (3,385) (5,714) (3,385)

31 December 2011 28,209 19,496 9,404 5,714 - 47,107 109,930

104 4

ANNUAL

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ATTACHMENT

LIST OF CORPORATE SOCIAL RESPONSIBILITY (CSR)

DONATIONS PAID IN 2011

At the AGM held on 28 March 2011, Renaissance Shareholders approved a CSR budget of RO 323,000

for the year 2011. During 2011, total donations amounted to RO 196,855 whereas the balance amount of

RO 126,145 has been carried forward as a provision for CSR contributions for the subsequent years.

The total donations made through the year are as follows:

Category Details Amount

(RO)

EDUCATION Outward Bound Oman 24,000

BizPro 2,500

Magic Bus, Child Link India Foundation 8,000

HEALTH UNICEF Oman 3,000

National Association for Cancer Awareness -

Stars in their Eyes Charity Event

2,000

SPORTS Oman Sail 74,550

ENVIRONMENT Whale & Dolphin Research Project 60,000

OCCI Beach Cleanup 2,000

COMMUNITY Charity Event – Friends of Japan 5,000

Charity Event – Colours of Fusion 5,000

Charity Event – Autism Awareness 3,000

Charity Event – Thin Red Line 1,500

Charity Event – Crystal Ball – Women’s Guild in 2,000

Oman

Charity Event – Battle of Britain Ball 1,500

Charity Event – Trafalgar Dinner 1,000

Charity Event – BankMuscat Hearts 1,000

Ramadan Charity Packs 505

Mangalorean Catholic Centre 300

TOTAL 196,855

& ITS SUBSIDIARY COMPANIES

105


IN THE NEWS

2011 Renaissance Services SAOG

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