coverfinal.indd C1 11/09/14 7:37 pm

His Majesty Sultan Qaboos bin Said

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PROSPECTUS

This Prospectus has been prepared in accordance with the requirements prescribed by the Capital Market Authority (the “CMA”). This is an unofficial English translation of the original Prospectus prepared in Arabic and approved by the CMA in accordance with Administrative Decision no. KH/44/2014 dated 3rd September 2014. The CMA assumes no responsibility for the accuracy and adequacy of the statements and information contained in this Prospectus nor will it have any liability for any damage or loss resulting from the reliance upon or use of any part of the same by any person.

This prospectus does not constitute an offer to sell or an invitation by or on behalf of the Company to subscribe to any of the Shares in any jurisdiction outside of Oman where such distribution is, or may be, unlawful.

Al Maha Ceramics SAOG(Under Transformation)

(PO Box: 482, PC: 322, Falaj Al Qabail, Sohar, Sultanate of Oman) Tel; +968 26752322, Fax: +968 26752177

www.almahaceramics.com

Initial Public Offering of 20,000,000 Ordinary SharesOffer Price: Bzs 397 per Share

(Comprising a nominal value of Baizas 100 per share, Share premium of Bzs 295 per share, and Offer expenses of Baizas 2 per share)

OFFER PERIOD

Offer Opens on: 16th September 2014;Offer Closes on: 15th October 2014

FINANCIAL ADVISOR AND ISSUE MANAGER

Oman Arab Bank SAOCInvestment Management Group

P.O. Box 2010, P.C. 112, Ruwi, Sultanate of OmanTel: +968 2482 7399 Fax: +968 2482 7367

www.oabinvest.com

LEGAL ADVISORS TO THE COMPANYCOLLECTING BANKS

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Important Notice to InvestorsAll investors are advised to read this notice

The objective of this Prospectus is to present material information that may assist investors to make an appropriate and informed decision as to whether or not to invest in the Shares.

This Prospectus includes all material information and data and does not contain any misleading information or omit any material information that would have a positive or negative impact on the decision of whether or not to invest in the Shares.

The Directors of the Company are jointly and severally responsible for the integrity and adequacy of the information contained in and confirm that to their knowledge appropriate due diligence has been conducted in the preparation of thisProspectus and further confirm that no material information has been omitted, the omission of which would render this Prospectus misleading.

All investors should examine and carefully review this Prospectus in order to decide whether it would be appropriate to invest in the Shares by taking into consideration all the information contained in this Prospectus in its proper context. Investors should not consider this Prospectus as a recommendation by the Company, by the Directors, the Issue Manager or the Legal Advisors to buy the Shares. Every investor shall bear the responsibility of obtaining independent professional advice on the investment in the Shares and shall conduct independent evaluation of the information and assumptions contained herein using appropriate analysis or projections.

No person has been authorized to make any statements or provide information in relation to the Company or the Shares other than the persons whose names are indicated in this Prospectus to do so. Where any person makes any statement or provides information it should not be taken as authorized by the Company, the Issue Manager or the Legal Advisors.

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Forward Looking StatementThis Prospectus contains statements that constitute statements relating to intentions, future acts and events. Such statements are generally classified as forward-looking statements and involve known and unknown risks, uncertainties and other important factors that could cause those future acts, events and circumstances to materially differ from the way implicitly portrayed within this Prospectus. The use of any of the words “aim”, “anticipate”, “continue”, “estimate”, “objective”, “plan”, “schedule”, “intend”, “expect”, “may”, “will”, “project”, “propose”, “should”, “believe” “will continue”, “will pursue” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are not historical facts but reflect current expectations regarding future results or events and are based on various estimates, factors and assumptions. The Company believes the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct.Moreover, forward-looking statements involve inherent risks and uncertainties and speak only as at the date they are made and should not be relied upon as representing the Company’s estimates as of any subsequent date.

The Company cautions investors that a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements. These factors include, but are not limited to, the following:

• Level of demand for the Company’s products and services;• The competitive environment; the potential increase in number of suppliers;• Regulatory, legal and fiscal developments;• Fluctuations in foreign exchange rates, equity prices or other rates or prices;• The inability to estimate future performance;• The performance of the Omani economy; and• Other factors described under chapter 10 “Risk Factors and Mitigants” in this Prospectus.

The Company cannot provide any assurance that forward-looking statements will materialize. The Company, the Issue Manager and the Legal Advisors and any of their respective affiliates disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise unless required by securities laws.

For a description of material factors that could cause the Company’s actual results to differ materially from the forward-looking statements in this Prospectus, see chapter 10 titled “Risk Factors and Mitigants” of this Prospectus. The risk factors described in this Prospectus are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in the forward-looking statements.

After listing on the MSM, the Company will adhere to the disclosure rules and regulations of the CMA, which includes making timely disclosure in relation to the Company’s financial results. The Company advises prospective Applicants and Shareholders to track any information or announcements made by it after listing through the MSM website at www.msm.gov.om

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Presentation of Financial and Other InformationFinancial Data: This Prospectus includes certain projections. The projections are based on the expectations of external conditions and events relating to the Company, the competitive environment in Oman and the industry in which the Company operates. These projections are forward-looking statements that involve inherent risks and uncertainties. Prospective Applicants are cautioned that a number of important factors could cause actual results or outcomes relating to the Company to differ materially from those expected in these projections.

In addition, the Issue Manager has not independently verified any of the projections and financial/ other data prepared by the Directors or the firm engaged to prepare the feasibility study and business plan. Please see the chapter “Risk Factors and Mitigants”.

The Company’s Financial Year commences on January 1 and ends on December 31 of each year. In this Prospectus, any discrepancy between the total and the sum of the relevant amounts listed is due to rounding.

Currency of Presentation: All references to “Rials” or “RO” are to Omani Rials, the official currency of Oman. The Omani Rial is pegged to the U.S. Dollar and the pegged exchange rate is 1 Omani Rial = 2.6008 US$. 1 Omani Rial is composed of 1000 Baizas.

Summary or Extracts of Documents: Any summaries of documents or extracts of documents contained in the Prospectus should not be relied upon as being comprehensive statements in respect of such documents.

Industry and Market Data: Industry and market data in this Prospectus has been obtained from third parties or from public sources such as websites and publications. Neither the Directors of the Company nor the Issue Manager nor the Legal Advisors have independently verified any of the data from third party sources referred to in this Prospectus or ascertained the underlying assumptions relied upon by such sources. In addition, the Issue Manager or the Legal Advisors have not independently verified any of the industry data or other sources referred to in this document. Therefore, its accuracy and completeness is not guaranteed and its reliability cannot be assured. The extent to which the Industry and Market data used in this Prospectus is meaningful depends on the reader’s familiarity with and understanding of the methodologies used in compiling such data.

Additional points to be noted

Scope of information: The information contained in this Prospectus is intended to provide a Prospective Applicant with adequate information relating to the investment opportunity and background information on the IPO. However, this Prospectus does not necessarily contain all the information that a prospective Applicant may consider material. The content of this Prospectus is not to be construed as legal, business or tax advice. Each prospective Applicant should consult his own lawyer, financial adviser or tax adviser for legal, financial or tax advice in relation to any subscription, purchase or proposed subscription or purchase of the Shares.

Investor due diligence: Prior to making any decision as to whether to subscribe for the Shares, prospective Applicants should read this Prospectus in its entirety. In making an investment decision, prospective Applicants must rely upon their own examination of the terms of this Prospectus and the risks involved in making an investment.

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Equity risk: All equity investments carry market risks to varying degrees. The value of any security can fall as well as rise depending on the market conditions. Potential investors should read the chapter related to “Risk Factors and Mitigants” of this Prospectus.

Restrictions on distribution of this Prospectus: The distribution of this Prospectus and the Shares may, in certain jurisdictions, be restricted by law or may be subject to prior regulatory approvals. This Prospectus does not constitute an offer to sell or an invitation by or on behalf of the Company to subscribe to any of the Shares in any jurisdiction outside of Oman where such offer or invitation would be unlawful. This Prospectus may not be distributed in any jurisdiction where such distribution is, or may be, unlawful. The Company, the Issue Manager, the Legal Advisors and the Collecting Banks require persons into whose possession this Prospectus comes, to inform themselves of and observe, all such restrictions. None of the Company, the Issue Manager, the Legal Advisors or the Collecting Banks accept any legal responsibility for any violation of any such restrictions on the sale, offer to sell or solicitation to subscribe for Shares by any person, whether or not a prospective Applicant, in any jurisdiction outside Oman where such sale, offer to sell or solicitation to subscribe would be unlawful.

Restrictions on use of information contained in this Prospectus: The information contained in this Prospectus may not be published, duplicated, copied or disclosed in whole or in part or otherwise used for any purpose other than in connection with the Offer, without the prior written approval of the Company and the Issue Manager.

Disclaimer of implied warranties: Except as required under applicable law and regulations, no representation or warranty, express or implied, is given by the Company, the Issue Manager, the Legal Advisors or the Collecting Banks, or any of their respective directors, managers, accountants, lawyers, employees or any other person as to the completeness of the contents of this Prospectus; or of the projections included within; or of any other document or information supplied at any time in connection with the Offer; or that any such document has remained unchanged after the issue thereof.

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Table of Contents

Table of Contents 8

1. Abbreviations and Definitions 9

2. Offer Summary 11

3. Estimated Offer Expenses 15

4. Purpose of the Offer and Use of Proceeds 16

5. Objects and Approvals 17

6. Shareholding Details 21

7. Economy of Oman 26

8. Construction Sector Overview 29

9. Description of The Company and Business Overview 31

10. Risk Factors and Mitigants 46

11. Source of Financing 54

12. Historical Financial Statements 56

13. Projected Financial Statement 2014-2018 88

14. Audited Financial Statement – for the period ended 30th June 2014 (First Half) 110

15. Dividend Policy 116

16. Valuation and Price Justification 118

17. Related Party Transactions and Material Contracts 122

18. Corporate Governance 124

19. Rights and Liabilities of Shareholders 134

20. Subscription Conditions and Procedures 137

21. Undertakings 145

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1. Abbreviations and Definitions

AGM Annual general meeting of the Shareholders

Al Maha or the Company

Al Maha Ceramics SAOG (Under Transformation)

AoA or Articles or Articles of Association

The Company’s Articles of Association (as amended from time to time) as approved by the MOCI and CMA and registered with the MOCI

Applicant The individual person who applies for the Offer Shares pursuant to the terms of this Prospectus

Application The Application Form duly filled and submitted to the Collecting Bank together with the Application Money as specified in the Chapter “Subscription Conditions and Procedures” of this Prospectus

Application Form The application form used to apply for the Offer Shares pursuant to the terms of this Prospectus

Application Money The amount to be paid by the Applicants at the time of submission of his/her Application as specified in the Chapter “Subscription Conditions and Procedures” of this Prospectus

Baiza(s) or Bz(s) One thousandth of an Omani Rial (Bzs 1000 = 1 Omani Rial)

BMI Business Monitor International

Board/ Board of Directors

The board of directors of the Company elected and holding office in accordance with the Articles, the CCL, the Code and the Rules and Conditions for Election of Directors of Public Joint Stock Companies (Ministerial Decision 137/2002, as amended)

CAGR Compounded Annual Growth Rate

Capital Market Law / CML

The Capital Market Law of Oman promulgated by Royal Decree Number 80/98 (as amended)

CCL The Commercial Companies Law of Oman promulgated by Royal Decree 4/74 (as amended)

CEO The Chief Executive Officer of the Company

Chairman The Chairman of the Board

CMA The Capital Market Authority of Oman

Collecting Bank The banks appointed to receive the Applications during the Offer Period

Code The CMA code of corporate governance for public joint stock companies issued by circular 1/2003 (as amended)

Cubic Meter or m3 Unit of Natural Gas consumption

DCF Discounted Cash Flow methodology for valuation

ECGA Export Credit Guarantee Agency

EGM Extraordinary general meeting of the Shareholders

Executive Regulations

Executive Regulations of the Capital Market Law (as amended) issued vide Administrative Decision No.1/2009 of the CMA

FCFE Free Cash Flow to Equity

FCFF Free Cash Flow to Firm

Financial Year/ Fiscal Year/ FY

The period of twelve months starting on January 1 and ending on December 31 of that particular year

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GCC The Gulf Cooperation Council which is composed of Oman, United Arab Emirates, Saudi Arabia, Qatar, Bahrain and Kuwait

GDP Gross domestic product

Government The government of Oman

IFRS International Financial Reporting Standard

Independent Director

As defined in the Code

IPO Initial public offer

IRR Internal rate of return

Financial Advisor and Issue Manager

Oman Arab Bank SAOG – Investment Management Group

MCD Muscat Clearing and Depository Company SAOC

MEED Middle East Economic Digest

MOCI The Ministry of Commerce and Industry of Oman

MOF The Ministry of Finance of Oman

MSM Muscat Securities Market

Nominal Value Bzs 100 per Share

Offer/ Public Offer The offer to the public through this Prospectus of the Offer Shares

Offer Closing Date The closing date of the Offer, which is described in the Chapter “Subscription Conditions and Procedures” of this Prospectus

Offer Opening Date The opening date of the Offer, which is described in the Chapter “Subscription Conditions and Procedures” of this Prospectus

Offer Period The period between the Offer Opening Date and the Offer Closing Date inclusive of both days during which an Applicant can submit an Application Form

Offer Price The price at which the Offer Shares are being offered for subscription through this Prospectus

Offer Proceeds/ Proceeds

The proceeds of the Offer

Offer Shares The offer for sale of 20,000,000 existing Shares of the Company by the Selling Shareholders through this Prospectus

OGM Ordinary General Meeting of the Shareholders

O&M Operations & maintenance

Oman The Sultanate of Oman

PB Price to book value per share

PE Price earnings ratio

Principal Activity The principal activity of Al Maha is to produce ceramic tiles

RO/ Omani Rial The lawful currency of the Sultanate of Oman

SAOC Omani Closed Joint Stock Company

SAOG Omani Public Joint Stock Company

Selling Shareholders As per details provided in Chapter 6 of this document

Shares/ Ordinary Shares

The equity shares of the Company of nominal value Bzs 100 each

Shareholders The shareholders of the Company as registered with the MCD. Details provided in Chapter 6

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2. Offer Summary Name of the Company

Al Maha Ceramics SAOG (under transformation).

Commercial Registration No.

1809148

Date of Registration 15th November 2005

Address PO Box: 482, Postal Code: 322, Falaj Al Qabail, Sohar, Sultanate of Oman, Tel; +968 26752322, Fax: +968 26752177

Duration Unlimited.

Authorized Share capital of the Company

RO 10,000,000 (Omani Rial Ten Million Only) divided into 100 million Shares of nominal value of Bzs 100 each.

Paid-up Share capital of the Company (before and after IPO)

RO 5,000,000 (Omani Rial Five Million only) divided into 50 million Shares of nominal value of Bzs 100 each that have been subscribed and paid in full.

Shares offered for subscription

20,000,000 (Twenty Million Only) Ordinary Shares of nominal value Bzs 100 each, aggregating RO 2,000,000 (Omani Rial Two Million only) representing 40% of the issued and paid-up capital of the Company.

Name of Shareholders Pre-Public Offer and number of Shares

# Name Number of Shares before transformation (nominal value Bzs 100 per share)

01 Al Anwar Holdings SAOG 18,027,87002 Mustafa Sultan Enterprises LLC 4,850,00003 Ministry of Defence Pension Fund 4,850,00004 Manar Al Sharq LLC 2,425,00005 Al Khonji Investment 2,425,00006 AbuDhabi National Foods Comp. 2,425,00007 H.E. Ali bin Khalfan Al Dhaheri 2,425,00008 Ms. Mariam Saied Al Shamsi 2,425,00009 Ms. Manar M. Humaid Al Harthy 1,940,00010 Mr. Abdulaziz Masoud Humaid Al Harthy 1,940,00011 Dr. Ali bin Jaffer bin Mohammed 1,455,00012 Mr. Masoud Humaid Al Harthy 1,378,25013 Sawson Co LLC 1,212,50014 Mr. Nasser Sultan Malik Al Harthy 970,00015 Employees (refer Chapter 6) 339,81016 Mr. Abdulredha Mustafa Sultan 165,74017 Mr. Shabir Moosa Al Yousef 165,74018 Mr. Qaboos Al Khonji 165,74019 Mr. Mahmood Nasser Al Riyami 165,74020 Mr. Hamad Al Dhehari 165,74021 Mr. Reji Joseph 41,43022 Mr. Sanjay Kumar Tiwari 41,440

Total 50,000,000

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Name of Selling Shareholders and number of Offer Shares being sold

# Name Number of Shares to be sold(nominal value Bzs 100 per share)

01. Al Anwar Holdings SAOG 7,400,00002. Mustafa Sultan Enterprises LLC 2,000,00003. Ministry of Defence Pension Fund 2,000,00004. Manar Al Sharq LLC 1,000,00005. Al Khonji Investment 1,000,00006. AbuDhabi National Foods Comp. 1,000,00007. H.E. Ali bin Khalfan Al Dhaheri 1,000,00008. Ms. Mariam Saied Al Shamsi 1,000,00009. Mr. Abdulaziz Masoud Humaid Al Harthy 800,00010. Ms. Manar M. Humaid Al Harthy 800,00011. Dr. Ali bin Jaffer bin Mohammed 600,00012. Mr. Masoud Humaid Al Harthy 500,00013. Sawson Co LLC 500,00014. Mr. Nasser Sultan Malik Al Harthy 400,000

Total 20,000,000

Types and characteristics of offered Shares

All the equity Shares issued by the Company and the entire equity capital of the Company consists only of Ordinary Shares and each single Share carries the right to one vote at any General Meeting of the Company.

Offer Price Bzs 397 only per Share; comprising a nominal value of Bzs. 100 per Share, Share Premium of Bzs. 295 and issue expenses of Bzs. 2 per Share.

Purpose of Offer (Use of Proceeds)

The Company is undertaking the Public Offer to convert the company from a closed joint stock company to a public listed joint stock company.

Persons eligible to subscribe for the Offer

The Offer will be open to individuals (natural persons) and mutual funds registered at the CMA in Oman, who have their accounts with the MCD, as on the date and / or during the Offer period. Total foreign ownership following listing shall not exceed 70% of the paid up share capital of the Company. It should be noted that pursuant to Ministerial Decision 205/2007 issued by the former Ministry of National Economy, all GCC nationals are treated as Omani nationals in respect of ownership of and trading in shares and the establishment of companies in Oman.

Opening Date of Offer

16th September, 2014

Closing Date of Offer

15th October, 2014

Expected listing date on MSM

3rd November, 2014

Prohibitions on subscription

The following prohibitions apply for the Offer: 1. Sole Proprietorship Establishments and juristic persons (other than

mutual funds registered at the CMA in Oman) cannot apply for the Shares. However, the owners of sole proprietorship establishments may submit Applications in their personal names.

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2. Multiple Applications are not permitted. An Applicant may not submit more than one Application.

3. Joint Applications (i.e. Applications made in the name of more than one individual, including Applications made on behalf of legal heirs) are not permitted. These applications should only be made in their personal names.

4. Trust Accounts cannot apply for the Shares. Brokers shall advise their clients to subscribe in their personal names.

All applications falling in any of above categories will be rejected without notifying the Applicant.

Minimum limit for the subscription under one (1) Application

For Individuals (Natural persons): 500 Shares and in multiples of 100 thereafter.For Mutual Funds registered at the CMA in Oman: 100,100 shares and in multiples of 100 thereafter.

Maximum limit for the subscription under one (1) Application

For all Applicants: 10% of the total Offer size i.e. 2,000,000 (Two Million only) Shares

Proposed allotment In case of over-subscription of the Offer, the eligible Applications shall be segregated into two Categories and the offered Shares will be allotted among the eligible Applicants, as follows:

Category I:14,000,000 (Fourteen Million) Shares, being 70% of the offered Shares will be allocated on a pro-rata basis to individuals (natural persons) applying for 100,000 shares or less.

Category II:6,000,000 (Six Million), being 30% of the offered Shares will be allocated on a pro-rata basis to individuals (natural persons) applying for more than 100,000 shares and mutual funds registered at the CMA in Oman.

The CMA may decide to allocate a minimum number of Offer Shares equally to all eligible Applicants, taking into consideration the small subscribers, and the remaining Offer Shares shall be distributed on a pro-rata basis.

The CMA in co-ordination with the Issue Manager will finalise the actual basis of allocation.

In case of a shortfall in subscription, the Offer Shares will be adjusted in proportion to the number of Shares offered by the Selling Shareholders.

Any under subscription in any Category shall be carried over to the other Category as described in more detail in the Chapter “Subscription Conditions and Procedures” of this Prospectus.

Allotment for foreign nationals will be limited to a maximum of 70% of the paid up capital of the Company.

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Financial Advisor and Issue Manager

Oman Arab Bank SAOC – Investment Management GroupPO Box 2010, P.C. 112, Ruwi, Muscat, Sultanate of Oman.Tel: +968 2482 7399, Fax: +968 2482 7367Email: corporatefinance@oabinvest.comWebsite: www.oabinvest.com

Collecting Banks 1. Oman Arab Bank SAOC P.O. Box Box 2010, P.C. 112, Ruwi, Muscat, Tel: + 968 2482 7399, Fax: +968 2482 73672. Bank Muscat SAOG P.O. Box Box 134, P.C. 112, Ruwi, Muscat, Tel: + 968 24768064, Fax: +968 247877643. National Bank of Oman SAOG P.O. Box Box 751, P.C. 112, Ruwi, Muscat Tel: + 968 24778757, Fax: +968 24778993

Statutory Auditors of the Company (For the last Three years)

KPMG Oman 4th Floor, HSBC Bank Building, MBD PO Box 641, P.C. 112 Sultanate of Oman Tel: +968 2470 9181; Fax: +968 2470 0839 Website: www.kpmg.com/om

Reporting Accountants

KPMG Oman 4th Floor, HSBC Bank Building, MBD PO Box 641, P.C. 112 Sultanate of Oman Tel: +968 2470 9181; Fax: +968 2470 0839 Website: www.kpmg.com/om

Legal Advisors Means the legal advisors to the Company:Dentons & Co Oman BranchSecond Floor, Al Fannar Building, Shatti al QurumPO Box 3552, Ruwi, Postal Code 112Sultanate of OmanTelephone: +968 2457 3000, Fax: +968 2457 3097Website: www.dentons.com

S & A Law FirmSariya Al Hady & Abdelrahman El-Nafie & Co Advocates and Legal ConsultantsFirst Floor, Al Fannar Building, Shatti al QurumPO Box 3552, Ruwi, Postal Code 112Sultanate of OmanTelephone: +968 2457 3000, Fax: +968 2457 3090Website: www.sandalaw.com

Registration and Transfer Agent

Muscat Clearing and Depository Co. SAOC PO Box 952, PC 112, Ruwi, Sultanate of OmanTel: 24822222, Fax: 24817491Website : www.csdoman.co.om

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3. Estimated Offer ExpensesThe following are the details of estimated Offer expenses:

Amount (RO)

Financial Advisor & Issue Manager fees 115,000

Legal Advisors fees 45,000

Reporting Accountants Fees 18,500

Collecting Banks’ fees 40,000

CMA & MCD fees 30,000

Printing, Marketing, Advertising & Publicity expense 65,000

Miscellaneous expense 3,500

Total 317,000

Offer expenses to be collected at RO 0.002 per Share through the Offer 40,000

Difference between amount to be collected towards expenses and estimated Offer expenses

277,000

The above are indicative estimates only and may differ from actual Offer expenses. The estimated expense works out to 4% of the Offer, in value terms if all Offer Shares are sold.

The total Offer expenses will be partially met out of the amount collected towards issue expenses (being Bzs 2 per Offer Share paid by the Applicant) and the amount collected shall be paid directly to the Company by the Issue Manager. Any Offer expense in excess of the amount collected will be borne by the Selling Shareholders. If the actual Offer expenses are less than the amount collected from the Applicants, the surplus will be retained by the Selling Shareholders. The Company will not bear any expense related to the offer.

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4. Purpose of the Offer and Use of Proceeds

4.1. Purpose of the Offer

The purposes offering the shares by the Company are as follows:

- Transforming the Company from SAOC to SAOG and listing of the Company’s shares on Muscat Securities Market as approved by EGMs held on 4th of August 2013 and 25th February 2014; and

- Partial divestment of shares by the Selling Shareholders.

4.2. Use of Proceeds of the Offer

The Offer Shares do not represent an issuance of new Shares by the Company. The Offer represents the sale/divestment of a part of the Selling Shareholders’ Shares. The proceeds of the Offer (including the premium) net of the issue expenditure shall therefore accrue to the current Selling Shareholders in the ratio of Offer Shares offered (as mentioned in point 6.3 under the section of Shareholding). As such, the Proceeds (including the premium) will not have any impact on the Company’s financial statements. The Baizas 2 per Offer Share collected towards the Offer expenses will cover a portion of the expenses incurred in relation to the Offer.

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5. Objects and Approvals

5.1. The Company’s Objects

As per its Articles of Association, the objects of the Company are the manufacturing, trading, import and export of:

1. Ceramic and/or porcelain wall tiles;2. Ceramic and/or porcelain floor tiles;3. Sanitary wares;4. Bathroom fittings and accessories;5. Kitchen equipment;6. Ceramic and/or porcelain gift items;7. Ceramic and/or porcelain insulation;8. Ceramic/marble and/or porcelain tiles;9. Cement profiles, polygonal building materials; and10. Other building materials.

The Company’s objects shall also include:

1. Owning, operating, leasing and/or managing quarries;2. Investing in shares and other securities of corporate bodies, whether incorporated in the

Sultanate of Oman or elsewhere;3. Owning, managing, leasing any land, property, office or showroom in relation to the business

of the Company; and4. Manufacturing, trading, sale, export and other dealings in any raw materials and intermediate

products (meaning raw materials that have been processed in some manner but which do not necessarily constitute finished products for sale to end-users).

Notwithstanding the foregoing, the Company may also do all such other things as may seem or be considered necessary, suitable, convenient or proper pursuant to the conduct of its permitted activities as may be allowed under the laws of the Sultanate of Oman from time to time, and may carry out all necessary related and complementary activities, each of which will be construed as being within the objectives of the Company. Accordingly, the objectives of the Company shall have no limit except as may be specified by the prevailing laws in the Sultanate of Oman, the Articles of Association, or the decision of the board of directors of the Company, or the decision of the Shareholders in general meeting.

Without prejudice to the generality of the foregoing, in order to achieve its objectives the Company may:

1. Obtain technical and administrative assistance from local and foreign persons, corporations or businesses;

2. Enter into various agreements with individuals or local and foreign companies or organizations or establishments which perform activities similar to the Company that may help the Company to achieve its objectives inside or outside the Sultanate of Oman;

3. Conduct all dealings and contracts which the Company deems are necessary to facilitate and achieve its goals; and

4. Invest in, Own, lease, obtain usufruct rights and/or obtain any other interest in land, whether in the Sultanate of Oman or elsewhere.

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5.2. Permits and Licenses

The Company was incorporated in the Sultanate of Oman as a Closed Joint Stock Company (SAOC) with the name Al Maha Ceramics Company SAOC and registered in the commercial register of the MOCI on 15 November 2005.

At EGMs held on 4th August 2013 and 25th February 2014, the Shareholders resolved to transform the Company into a public joint stock company (“SAOG”) organized under the laws of Oman and to amend its Articles of Association accordingly.

The Company holds the following material permits and licenses:

Ministry of Commerce and Industry: Commercial Registration Commercial Registration Number: 1809148 Registered Headquarters: Al Batinah Region/Sohar/Falaj Al Qabaiel Postal Address: PO Box: 482, PC 322Date of Registration: 15 November 2005 Expiry Date: 14 November 2015Duration: Unlimited

The Company has recently changed its registered headquarters to the Sohar factory address from Muscat.

The Company has been registered with the MOCI with the following activities at Headquarters PO Box 482, PC 322: The said activities are as follows:

- Retail of sanitary ware and fittings thereof - Manufacture of marble products including kitchen, wash basins, ornaments, statues, sculpture

etc.- Trade of construction and oil civil engineering heavy equipment and maintenance thereof.- Export and import offices.- Sale of spare parts (excluding vehicles parts). - Retail of household appliances (radio, television, refrigerators, crockery etc).

The Company’s factory at Sohar Industrial Estate, Al Batinah Region, Sohar PO Box 482, PC 322. Falaj Al Qabail, Sultanate of Oman, is allowed to manufacture of wall and flooring tiles (ceramic and faience).

Industrial LicenseIndustrial License Number: 03005869; Industrial Registration Number: 10001582Expiry Date: 14 November 2015

Oman Chamber of Commerce & Industry: Membership Registration Number: 1581; Expiry Date: 30 October 2014

Ministry of Commerce & Industry- Mining Department: Exploration license for clay.License Number: 034/234/5/77491/2013; Expiry Date: 12th December 2014

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Safety License Number: 744/2014Expiry Date: 11/09/2015

Quality Management System - ISO 9000 Certification

The Company holds an ISO 9001:2008 certification for manufacturing, testing and commissioning of all its products. The certificate was issued on 11 December 2012 and will expire in December 2015. ISO 9001:2008 is one of the series of the ISO 9000 that addresses various aspects of quality management standards.Expiry Date: 10/12/2015

5.3. The Company’s Memorandum and Articles of Association

A copy of the Memorandum and Articles of Association of the Company is available for perusal at the Company’s and Issue Manager’s website and at the office/ factory of the Company located at Sohar Industrial Estate (Phase 3 plot number 248-245 & plot number 274 of Phase 4), Falaj Al Qabail, Oman during business hours.

5.4. Resolutions Passed by the Company

The Shareholders of the Company passed the following resolutions in their meeting held on 4th August 2013:

1. Approved the proposal to allocate 33,981 ordinary shares of RO 1 each in the capital of the Company to employees of the Company within a maximum limit of 5% of the issued capital, at the price of RO 1.588 per share, to be allotted in the amounts which the Board of Directors determine, in accordance with Article 82 of the Commercial Companies Law, (promulgated by Sultani Decree 4/1974, as amended (“CCL”) to the employees who shall be determined by the Board of Directors (“Employee Private Placement”).

2. Approved the proposal to allocate 116,019 ordinary shares of RO 1 each in the capital of the Company to the directors of the Company, at the price of RO 1.588 per share, to be allotted in accordance with Article 82 of the CCL and to approve the Director Private Placement to be entered into with the directors as related parties (“Director Private Placement”).

3. Approved the new authorized share capital of the Company which would be increased from RO 5,000,000 (five million) to RO 10,000,000 (ten million).

4. Approved the proposal of the Company to commence work in relation to the conversion of the Company from a closed joint stock company (SAOC) to a public joint stock company (SAOG) and to make an initial public offering of the Company’s shares and listing on the Muscat Securities Market (IPO).

5. Approved the appointment of SNR Denton & Co (Now Dentons and Co.) as legal advisors to the Company for the IPO.

6. Approved the appointment of Oman Arab Bank (IMG) as Issue Manager for the IPO.

7. Approved the appointment of KPMG as the reporting Accountants for the IPO

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The Shareholders of the Company unanimously passed the following resolutions in their meeting held 25th February 2014:

1. Approved the conversion of the Company from an Omani closed joint stock company (SAOC) to an Omani public joint stock company (SAOG) through an initial public offering of the Company’s shares and listing on the Muscat Securities Market (the “IPO”).

2. Approved the proposed amendments to the Articles of Association of the Company as per the requirements of the CCL and Capital Market Authority for public joint stock companies.

3. Approved the split of the nominal value of the Company’s equity shares from R.O. 1.000 per share to Bzs 100 per share, thereby increasing the total number of issued shares from 5 million to 50 million.

4. Approved the offer to the public of 40% of the issued share capital of the Company (comprising 20,000,000 ordinary shares) by way of sale by some of the Company’s existing shareholders (“Selling Shareholders”), such shares to be offered to the public and sold by the Selling Shareholders in such proportions as may subsequently be agreed between the Selling Shareholders and the Company.

5. Approved to authorize the Board of Directors of the Company to carry out the following matters:

a. To approve the price at which shares are to be offered for sale in the IPO; b. To negotiate, finalize and sign on behalf of the Company all agreements to be entered into

by the Company with third party advisers and service providers engaged for the IPO and complete all necessary procedures in relation to the IPO;

c. To approve and sign on behalf of the Board of Directors and the Company the prospectus and all other documents relating to the IPO; and

d. To do all other acts, sign all documents, file and register any documents with any relevant authority, obtain consents and approvals on behalf of the Company and the Selling Shareholders which may be deemed appropriate or necessary in connection with the IPO including listing of the Company’s shares on the Muscat Securities Market.

6. Approved the payment of expenses incurred in relation to the IPO from the offer expenses component of the offer price (Bzs 2 per Offer Share) and that any expenses in excess of this amount shall be borne by the Selling Shareholders.

7. Approved to ratify all actions taken by the Board of Directors of the Company in relation to the IPO prior to the date of the EGM.

5.5. Selling Shareholder Approvals

The Selling shareholders have conveyed to the Company their approval for selling a proportion of their equity holding and participate in the IPO as per the proportions stated in Chapter 2 of this prospectus “Offer Summary”.

5.6. Continuing Obligations

In accordance with the CCL, all existing obligations of the Company, prior to its transformation to a public joint stock company, shall continue in the SAOG.

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6. Shareholding Details

6.1. Shareholding as at 3 August 2006 as a Closed Joint Stock Company

Shareholder’s Name Nationality Number of shares held of Nominal Value of RO 1.000 each

% of Total Aggregate Nominal Value (RO)

1 AL ANWAR HOLDINGS SAOG Omani 960,000 32.00% 960,000

2 MUSTAFA SULTAN ENTERPRISES LLC Omani 300,000 10.00% 300,000

3 MINISTRY OF DEFENCE PENSION FUND Omani 300,000 10.00% 300,000

4 MANAR AL SHARQ LLC Omani 150,000 5.00% 150,000

5 AL KHONJI HOLDING LLC Omani 150,000 5.00% 150,000

6 ABUDHABI NATIONAL FOODS COMPANY UAE 150,000 5.00% 150,000

7 H.E. Ali bin Khalfan Al Dhaheri UAE 150,000 5.00% 150,000

8 Ms. Mariam Saied Al Shamsi UAE 150,000 5.00% 150,000

9 BANK MUSCAT Omani 150,000 5.00% 150,000

10 Ms. Manar Masoud Humaid Al Harthy Omani 120,000 4.00% 120,000

11 Mr. Abdul Aziz Masoud Humaid Al Harthy Omani 120,000 4.00% 120,000

12 Dr. Ali Jaffer Mohammed Omani 90,000 3.00% 90,000

13 SAWSON CO LLC Omani 75,000 2.50% 75,000

14 UNITED SECURITIES LLC Omani 75,000 2.50% 75,000

15 Mr. Nasser Sultan Malik Al Harthy Omani 60,000 2.00% 60,000

TOTAL 3,000,000 100% 3,000,000

The entire capital at incorporation was subscribed to in cash.

6.2. Subsequent changes to shareholding

1. In January 2011, the Company’s equity capital was increased by RO 500,000/- to RO 3,500,000/- through issue of additional capital at par, which was subscribed to on a pro-rata basis by the existing shareholders for cash.

2. In April 2011, United Securities sold its holding of 2.5% to Mr.Masoud Malik Al Harthy.

3. In February 2013, Bank Muscat sold its holding of 5% to Al Anwar Holdings SAOG.

4. Following a stock dividend of RO 500,000 in March 2013, the equity capital increased to RO 4,000,000 and a further stock dividend of RO 850,000 in August 2013 , the equity capital increased to RO. 4,850,000/-.

5. In September 2013, the Company carried out a private placement of shares to eligible employees (33,981 Ordinary Shares) and its Directors (116,019 Ordinary Shares), by issuing

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150,000 Ordinary Shares at a price of RO 1.588 per share, which was subscribed to in cash. The private placement to the Directors was approved by the Shareholders at their EGM held on 4th August 2013.

Being an SAOC company at the time of the private placement, there was no market price available for the Company’s shares. Therefore, the shares to employees and Directors were issued at a price of RO 1.588 per share which is equivalent to the net asset value (book value) per share as at 30th June 2013.

6. As part of the private placement of shares to its Directors, Sanjay Kumar Tiwari was allotted 16,574 Ordinary Shares of nominal value RO 1 each. Mr Tiwari is Al Anwar Holdings SAOG’s (Al Anwar) nominee director and therefore these shares were held by him on behalf of Al Anwar. On the instruction of Al Anwar, Mr. Tiwari transferred 8,287 Ordinary Shares to Al Anwar and 4,143 Ordinary Shares to Mr Reji Joseph, CEO of Al Anwar. Mr Tiwari retained 4,144 of these Ordinary Shares in the Company.

Table showing the increase in Capital from date of incorporation till date:

Share Issue Date Mode of Issue Number of shares issued

Issue Price per share (RO)

Post issue capital (RO)

At Incorporation - - - 3,000,000

January 2011 A Right Issue 500,000 1.000 3,500,000

March 2013 Stock Dividend 500,000 - 4,000,000

August 2013 Stock Dividend 850,000 - 4,850,000

September 2013 Private Placement to Employees & Directors 150,000 1.588 5,000,000

6.3. Founders/Shareholders of the company (before transformation)

Shareholder’s Name Nationality Number of shares held of Nominal Value

of RO 0.100 each

% of Total

Aggregate Nominal

Value (RO)

1 AL ANWAR HOLDINGS SAOG Omani 18,027,870 36.06% 1,802,787

2 MUSTAFA SULTAN ENTERPRISES LLC Omani 4,850,000 9.70% 485,000

3 MINISTRY OF DEFENCE PENSION FUND Omani 4,850,000 9.70% 485,000

4 AL KHONJI HOLDING LLC Omani 2,425,000 4.85% 242,500

5 MANAR AL SHARQ LLC Omani 2,425,000 4.85% 242,500

6 ABUDHABI NATIONAL FOODS COMPANY UAE 2,425,000 4.85% 242,500

7 H.E. Ali bin Khalfan Al Dhaheri UAE 2,425,000 4.85% 242,500

8 Ms. Mariam Saied Al Shamsi UAE 2,425,000 4.85% 242,500

9 Ms. Manar Masoud Humaid Al Harthy Omani 1,940,000 3.88% 194,000

10 Mr. Abdul Aziz Masoud Humaid Al Harthy Omani 1,940,000 3.88% 194,000

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11 Dr. Ali bin Jaffer bin Mohammed Omani 1,455,000 2.91% 145,500

12 Mr. Masoud Humaid Al Harthy Omani 1,378,250 2.76% 137,825

13 SAWSON CO LLC Omani 1,212,500 2.43% 121,250

14 Mr. Nasser Sultan Malik Al Harthy Omani 970,000 1.94% 97,000

15 Employees 339,810 0.68% 33,981

16 Mr. Abdulredha Mustafa Sultan Omani 165,740 0.33% 16,574

17 Mr. Shabir Moosa Al Yousef Omani 165,740 0.33% 16,574

18 Mr. Qaboos Al Khonji Omani 165,740 0.33% 16,574

19 Mr. Mahmood Nasser Al Riyami Omani 165,740 0.33% 16,574

20 Mr. Hamad Al Dhehari UAE 165,740 0.33% 16,574

21 Mr. Reji Joseph Indian 41,430 0.08% 4,143

22 Mr. Sanjay Tiwari Indian 41,440 0.08% 4,144

Total 50,000,000 100% 5,000,000

6.4. Post Offer Equity Structure

The Public shareholding and the minimum Promoters’/Selling Shareholders’ shareholding after the IPO is envisaged as under, assuming the entire Offer is fully subscribed. Offer Shares not subscribed at the end of the offer shall be retained by the Selling Shareholders.

Shareholder’s Name Nationality Number of shares held prior to IPO, of Nominal Value of RO 0.100 each

Number of Shares sold through the

IPO

Number of shares held post IPO,

of Nominal Value of RO 0.100 each

% of Total

1 AL ANWAR HOLDINGS SAOG Omani 18,027,870 7,400,000 10,627,870 21.26%

2 MUSTAFA SULTAN ENTERPRISES LLC Omani 4,850,000 2,000,000 2,850,000 5.70%

3 MINISTRY OF DEFENCE PENSION FUND Omani 4,850,000 2,000,000 2,850,000 5.70%

4 AL KHONJI HOLDING LLC Omani 2,425,000 1,000,000 1,425,000 2.85%

5 MANAR AL SHARQ LLC Omani 2,425,000 1,000,000 1,425,000 2.85%

6 ABUDHABI NATIONAL FOODS COMPANY UAE 2,425,000 1,000,000 1,425,000 2.85%

7 H.E. Ali bin Khalfan Al Dhaheri UAE 2,425,000 1,000,000 1,425,000 2.85%

8 Ms. Mariam Saied Al Shamsi UAE 2,425,000 1,000,000 1,425,000 2.85%

9 Ms. Manar Masoud Humaid Al Harthy Omani 1,940,000 800,000 1,140,000 2.28%

10 Mr. Abdul Aziz Masoud Humaid Al Harthy Omani 1,940,000 800,000 1,140,000 2.28%

11 Dr. Ali bin Jaffer bin Mohammed Omani 1,455,000 600,000 855,000 1.71%

12 Mr. Masoud Humaid Al Harthy Omani 1,378,250 500,000 878,250 1.76%

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13 SAWSON CO LLC Omani 1,212,500 500,000 712,500 1.43%

14 Mr. Nasser Sultan Malik Al Harthy Omani 970,000 400,000 570,000 1.14%

15 Employees 339,810 339,810 0.68%

16 Mr. Abdulredha Mustafa Sultan Omani 165,740 165,740 0.33%

17 Mr. Shabir Moosa Al Yousef Omani 165,740 165,740 0.33%

18 Mr. Qaboos Al Khonji Omani 165,740 165,740 0.33%

19 Mr. Mahmood Nasser Al Riyami Omani 165,740 165,740 0.33%

20 Mr. Hamad Al Dhehari UAE 165,740 165,740 0.33%

21 Mr. Reji Joseph Indian 41,430 41,430 0.08%

22 Mr. Sanjay Tiwari Indian 41,440 41,440 0.08%

23 Public 20,000,000 40.00%

Total 50,000,000 20,000,000 50,000,000 100%

6.5. Selling Shareholders’ Voting Rights

Pursuant to the IPO and transformation into a Public Joint Stock Omani Company, the issued and paid up share capital of the Company will be RO 5,000,000 (Omani Rial Five million only) divided into 50 million Ordinary Shares with a nominal value of Bzs 100 each. Each single share will carry the right to one vote at the General Meeting of the Company including any Extraordinary General Meeting.

Following the IPO, the Selling Shareholders and Employees will hold 30 million Ordinary Shares (assuming full subscription to the Offer) which will have one vote per share, the same as other Ordinary Shares issued to the public. The Selling Shareholders and Employees will effectively have 60% of the voting rights following the IPO.

6.6. Brief profile of the Main Shareholders

6.6.1. Al Anwar Holdings SAOG

Al Anwar Holdings SAOG (AAH) was promoted and established in the year 1994 by a group of prominent business families in Oman with the prime objective to contribute in the industrial development of Sultanate of Oman. Financial services and insurance form the core sector focus, wherein AAH has strategic holdings in prominent companies such as Taageer Finance Company SAOG and Falcon Insurance Company SAOC. On the industrial front AAH has promoted and nurtured leading companies in the transformers and switchgears, ceramic tiles and packaging sectors. Voltamp Energy SAOG, Al Maha Ceramics SAOC and Sun Packaging Company LLC form its strategic holdings in these sectors. Over the years, AAH has made successful divestments which include industry leaders such as Al Anwar Ceramics SAOG, National Aluminum Products SAOG, Majan Glass Company SAOG.

Under the visionary board and professional management, AAH has been instrumental in pioneering socio economic development in Oman for the last twenty years and is amongst the leading investment holding companies in Oman.

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Board of Directors

# Name of the Director Independent / Non Independent

Position

1 Brig. Masoud Humaid Al Harthy Independent Chairman

2 Mr. Qais Mohamed Al Yousef Independent Deputy Chairman

3 Mr. Mehdi Mohamed Al Abduwani Independent Director

4 Mr. Abdulredha Mustafa Sultan Independent Director

5 Mr. Shabir Moosa Abdullah Al Yousef Independent Director

6 Mr. Qaboos Abdullah Al Khonji Independent Director

7 Sheikh Mohamed Abdullah Said Al Rawas Independent Director

The Board of Al Anwar is comprised of eminent personalities from business and industry and it has a highly professional management team.

Details of its current investments, financial performance and vision can be accessed through its website, www.alanwarholdings.com. As the company is listed its financial performance can also be accessed through the MSM website.

6.6.2. Mustafa Sultan Enterprises

Founded in 1972, Mustafa Sultan Enterprises is a premier group in Oman with a strong entrepreneurial history. Mustafa Sultan Enterprises is a diverse entity, organized into various subsidiaries. The diverse business interests of Mustafa Sultan Enterprises comprise of Security and Communications Consumer Electronics, Medical and Industrial Supplies, Oil & Gas supplies and services, Information Technology, Consumer Electronics, Consumer and Industrial Lighting, Telecommunications and VSAT, , Office Equipment, Defence Equipment, Restaurants, Money Exchange, Insurance, Real Estate, Entertainment, Air-Conditioning, Logistics and many more.

Associate businesses which come under Mustafa Sultan Enterprises are:

1. Mustafa Sultan Science & Industry Co. LLC

2. City Exchange Co. LLC

3. Mustafa Sultan Security & Communication Co. LLC

4. Mustafa Sultan Electronics LLC

5. Mustafa Sultan Office Technology Co. LLC

6. Mustafa Sultan Exchange Co. LLC

7. Mustafa Sultan Telecommunications Co. LLC

8. Middle East Restaurant & Catering Co. LLC

9. Gulf Telecommunication Co. LLC

10. BDP Logistics Co. LLC

11. Voltas Oman LLC

12. Gourmet Foods LLC

13. Mustafa Sultan Refrigeration & Air Conditioning Services Co. LLC

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7. Economy of Oman

7.1. Background

Strategically positioned at the crossroads of Asia and Europe, Oman has historically been a center of trade and commerce. With a population of about 3.9 million spread over a land area of 309,500 square km, Oman is perceived as a country with stable political, economic and social systems. The country has created a strong infrastructure, healthcare, communication, international trade network and advanced transportation systems on the backbone of a flourishing oil-based economy. The continued focus of the Government to diversify the economy and gradually reduce its dependence on oil, has witnessed a steady growth of the non-oil sectors. Currently, according to the data published by the National Centre for Statistics & Information, oil contributes about 50% of the 2013 Gross Domestic Product (“GDP”) at current market prices, which the Government aims to reduce in the future.

7.2. Economy

The Omani economy is reported to have grown by 5% in 2013, supported by the relative stability in crude oil prices in the international markets. Despite the uncertain global outlook, the domestic market witnessed improved demand across various sectors with the GDP growth.

The national economy continued to perform well despite the uncertain global environment, with GDP at market prices growing at 18.6% in 2011 and 11.5% in 2012. For 2013, it is estimated to have grown at 2.8% and is expected to grow at an accelerated rate during the year 2014, primarily driven by the increase in oil production rate, stability of global oil prices, the continuation of the rate of government spending as well as strong domestic demand.

Structure of Gross Domestic Product (End of March 2014)

Although the global economy shows signs of stabilizing, the overall situation continues to be uncertain on account of the debt problems of the developed economies in Europe and weak growth.

Oman has a credit rating of “A” by Standard & Poor’s and “A1” by Moody’s Investor Services. The Omani Rial is pegged to the U.S. Dollar at a fixed exchange rate of 1 RO = 2.6008 US$.

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Oman Oil Production and Average Price

Government Revenues and Expenditures (Mn. R.O) Merchandise Imports and Exports (Mn. R.O)

Source: Monthly Statistical Bulletin- June 2014, National Centre for Statistics & Information

7.3. Public Finance

(The data in this section is based on information gathered from publications of National Centre for Statistics & Information)

For the year 2013, the Government budgeted public revenue of RO 11.2 billion based on an estimated price of oil at USD 85 per barrel. The total government expenditure for 2013 was proposed at RO 12.9 billion which is 12% higher than the revised budget expenditure for 2012. The actual Government revenue for the year 2013 was estimated at RO 14.08 billion with a corresponding government expenditure of RO 13.68 billion, leading to a budget surplus of RO 0.4 billion. The average price of Oman crude during 2013 was $ 105.5/barrel as against the level of $85 proposed in the budget.

The government’s budget for the year 2014 projects public revenue of RO 11.7 billion based on an oil price of US$ 85 a barrel, an increase of 4.5% compared with revenue budgeted for the year 2013. The government spending in 2014 is budgeted at RO 13.5 billion which is 5% higher than the revised budget expenditure for 2013. Thus, the budget deficit amounts to about RO 1.8 billion, or by 15 % of budgeted revenue and 6 % of GDP.

The oil and gas revenues accounts for 83% of total revenues, while non-oil revenues accounts for the balance 17 % of which about 50 % is estimated proceeds of taxes and fees.

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For the 5 month period ended May 2014, the actual total government revenue was RO 6.04 billion with a surplus of RO 0.58 billion. As against the budgeted oil price of US$ 85 per barrel, the actual realization for the 5 month period was US $105.46 per barrel.

In November 2013, the Government announced the standardizing of salaries and grades in the civil service sector which is expected to cost the state exchequer about RO 800-900 million per year. The Government also announced amendments to the pension rules, whereby the pension for the Omanis insured with the Public Authority for Social Insurance (PASI) will be calculated on the basis of the gross salary, instead of calculating it on basic salary. According to the Royal Decree, the changes came into effect from July 1, 2014.

Source: (Monthly Statistical Bulletin- June 2014, National Centre for Statistics & Information and Government budget estimates for 2014)

7.4. Development Plans

The Government has drawn up the Eighth Five-Year Development Plan (2011-15) which proposes substantial public investments with focus on the infrastructure sector. These investments are expected to improve the domestic demand and further increase the diversification of the Omani economy.

The Government has projected cumulative revenue of RO 37.5 billion over the plan period with an overall public expenditure of RO 42.71 billion over the five year plan period. The plan expects non-oil activities to grow at a rate of 10% (at current prices) and 6% (at constant prices). This emphasizes the continuing efforts to further diversify the economy. The five year plan provides for investment in new projects worth RO 5.6 billion excluding projects worth RO 6.4 billion carried over from the previous plan period. The five year plan targets to provide employment to 200,000 to 275,000 Omani citizens.

7.5. Key Economic Indicators

Years 2010 2011 2012 2013

GDP at market price (RO billions) 22.55 26.73 29.80 30.63

Population (millions) 2.77 3.30 3.62 3.96

Per capita GDP at market price (RO) 8,163 8,100 8,232 7,735

Oil and gas industry as % of GDP 46 53 52 50

Annual Inflation (%) 3.3 4.1 2.9 1.1

MSM total market capitalization (RO billions) 10.9 10.3 11.7 14.2

Crude oil production (million barrels) 316 323 336 344

Sources:

National Centre for Statistics & Information-Monthly Statistical Bulletin-June 2014 & Statistical Year Book 2012

MSM bulletins

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8. Construction Sector Overview

8.1. GCC Construction Sector Overview

The total projects (planned or underway) in GCC amounts to US$ 1.9 trillion, with 39% and 30% share belonging to Kingdom of Saudi Arabia (KSA) and United Arab Emirates (UAE) respectively. The distribution projects across the GCC are provided here.

The total ‘building’ projects amounting approximately to US$ 69 billion were finished during 2012 as compared to US$ 47 billion in 2011. New projects to be sanctioned in the GCC during 2013-2014 are expected to be worth US$ 65 billion.

Sector-wise ‘building’ projects completed in GCC during 2012-2013 is led by the residential sector with more than US$ 29 billion worth of projects completed followed by commercial and hospitality sector.

It is expected that residential, retail and commercial sectors will grow at a slower rate of 4.4%, 4.0%, and 13.0% respectively, while hospitality, educational and medical will grow at a faster pace of 27%, 69%, and 79% respectively during 2013-2014.

Residential building projects will remain the largest segment of the real estate market in terms of projects with an estimated market share of 43%.

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8.2. Oman’s Construction Sector Overview

The Oman projects market is expected to undergo a radical transformation over the next five years, as it proceeds with a number of strategic projects aimed at transforming Oman. During this period, $65 billion-worth of projects is due to be awarded, almost double the $33 billion awarded in the previous five-year period. Omani projects (planned or underway) share in GCC projects market is around 6%.

The increase in activity will primarily be the result of a handful of long-term strategic projects, such as BP’s US$ 15 billion Khazzan tight gas project, the US$ 10 billion development of a refinery and petrochemical complex at Duqm, a nationwide railway construction programme, construction / renovation of airports all across the Sultanate, and many tourism related residential and commercial projects.

Break-up of US$ 115 billion projects (planned or underway)

The government target of diversification of the economy from oil share of more than 40% in 1996 to 9% in 2020 is providing major stimulus in development of non-oil sectors. As a result the infrastructure development in Oman is expected to be approximately US$ 80 billion during 2011-2015.

Transport accounts for a major part of the construction initiative. However substantial expenditure is also estimated in other areas like airports and port development. Construction initiatives in the energy and resources sector accounts for approximately 25% of total initiatives.

The government drive to diversify the economy is providing increased impetus to the construction industry. The government is also eager to provide attractive concessions to both local and foreign investors to increase the economy’s capacity.

The construction sector can benefit from opportunities available through increase in infrastructure spending both directly and indirectly as various projects in tourism and new businesses will get underway. The government is keen on developing the rail network which will assist in re-directing resources in other construction projects instead of expanding road network, thus improving Oman’s access across the region.

Number of sources utilized for the purpose of this chapter, but not limited to the following:

- Business Monitor International (BMI)- Middle East Economic Digest (MEED)- Arabian Business Website

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9. Description of The Company and Business Overview

9.1. About the Company and its Operations

The Company commenced commercial production in April 2008 and now is considered one of the biggest companies that produce ceramic tiles in Oman. The Company has received ISO 9001:2008 certification from TUV SUD as it has established and applies a quality management system for manufacture and supply of Ceramic Tiles.

The plant which is located in Sohar Industrial Estate is equipped with fully automated Italian machineries that use high quality glaze raw materials imported mainly from Europe for the production of tiles. The Company constantly focuses on updating its technology. Recently two digital printing machines were installed , which were supplied by leading Italian ceramic plant machinery manufacturers. Among the Omani ceramic tile manufactures, the Company is the first to launch digital printed tiles and high strength tiles with thickness of 12 mm.

The annual production capacity of the plant is currently around 6 Million Sq. mts which is likely to be enhanced in the future. The product range of tiles that conform to EN 14411:2003 standard specifications includes glazed wall, floor, skirting, border and highlighter tiles in a variety of designs and shades to suit every decor. The Company manufactures floor tiles and wall tiles and it has recently launched premium ceramic tiles printed with digital machines under the brand name “Al Maha Digiplus”. The Company has made its presence felt across the entire Middle East market, with exports to UAE, Saudi Arabia, Qatar, Bahrain, Jordan, Lebanon, Syria, Yemen and Africa and South Asia.

9.1.1. Organization Structure

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9.1.2. Technology

The Company utilizes dry grinding technology which gives the advantage of a lower cost of production due to:

• Lowerconsumptionofwater; • Lowerenergyconsumption • Lowmanpowerrequirement;and • Faster grinding time.

The Company has a fully automated plant sourced from SITI B & T Group, Italy, which is a leading machinery manufacturer for ceramic tile plant. The Company has the capability to produce a wide range of products, in a number of different sizes.

Recently, the company installed the latest technology digital printing machines at its production lines which enabled the Company to offer high resolution contemporary designs to its customers. The Company is also planning to invest in an automatic sorting system to further improve the quality control to ensure that the customer receives the highest quality ceramic tiles.

9.1.3. Plant Capacity and Production

The current installed capacity of the plant is approx. 16,500 sq.m. per day that is 6.0 Million sq.m. per annum for the year 2013. The Company has been able to utilize more than its installed capacity, on account of various modifications and improvements in its production lines.

Year 2011 2012 2013

Capacity Utilization (%) 80% 104% 102%

The Company enhanced its production capacity from 5.5 million sq.m to 6 million sq.m in 2013 through addition of a press and certain other modification in the factory. The factory land area is approx. 120,000 sq.m which can be utilized to expand if and when necessary.

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9.1.4. Manufacturing process and main equipment

Process

Once the raw materials are received in the factory, a number of steps take place to create the finished product. These include the tile production process involving batching, mixing and grinding, forming/pressing, drying, glazing, firing, sorting and packing. Many of these steps are accomplished using automated machines /equipment.

Batching

As for ceramic tiles production, the body composition is determined by the amount and type of raw materials which also determines the color of the tile body. The right amounts of raw materials are mixed to achieve the desired properties of a tile. Batch calculations consider both the physical properties and chemical composition of the raw materials.

Mixing and grinding

Once the ingredients are weighed as per the desired composition; mixed together and are transported to a hammer mill where the bigger lumps are reduced to fine grains. These grains are moved to silos and fed into a pendular mill to pulverize further into fine powder. The resultant powder is screened, combined with water and stored in silos for the next processes which involve pressing, shaping and forming.

Body RawMaterial 3

Body Preparation DeptWeighing, Crushing, grinding,

wetting & Store

Pressing & Drying Dept. Shaping the tiles

Glazing Dept.Glaze application, design printing

Glaze Preparation Dept.Weighing, milling, store

Intermediate StorageBox Storage & LGV operation

Firing Dept.Tiles are being fired at 1140 deg.

Sorting & Packing Dept.Grade classification, packing

palletizing, strapping & wrapping

Finished Goods wareHose & Dispatch Dept.

Body RawMaterial 4

Body RawMaterial 5

Body RawMaterial 2

Body RawMaterial 1

Glaze Raw Materials

Colors & Stains

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Pressing and Drying

Most tiles are formed by dry pressing. The free flowing powder, containing a low percentage of moisture, flows from a hopper into the forming die. The material is compressed in a steel cavity by steel plungers and is ejected by the bottom plunger. Automated hydraulic presses are used with operating pressures as high as 2,500 tons. The tile body is dried (at high relative humidity) after forming, in continuous or horizontal driers, which are heated using gas.

Glaze and glaze application

The raw materials are weighed and wet milled to prepare the glaze after a batch is finalised. The milled glazes are applied using one of the many methods available, including centrifugal glazing, bell/waterfall method, or spray method. Screen printing or roto design cylinder or a digital machine printing is used to transfer the designs on to the tiles. Dry glazing is also being used for heavy duty applications. This involves the application of powders, crushed frits (glass materials) and granulated glazes onto a wet-glazed tile surface. After firing, the glaze particles melt into each other to produce a surface like granite.

Firing

After glazing, the tiles are fired at 1130 -1150 degrees centigrade in a roller earth kiln. The intense heat causes various physical and chemical changes in the tile, giving it the desired strength, size, surface appearance and texture (glossy, matt, etc), porosity and water absorption.

Sorting and packing

The finished ceramic tile is categorized by color/shade, size and quality. The tiles are then sorted, packed and stacked on pallets with the help of packing machines.

Main machines/equipment installed includes:

• Dry grinding equipment from Manfredini and Schianchi; which is one of the latest in this field.

• Hydraulic presses of Siti B&T/ SACMI (each of approx. 2500 tons capacity);

• Two roller earth kilns of about 132 meters length of Siti B&T with operating temperature of 1150 degree Celsius;

• Two multilayer horizontal driers of Siti B&T with a length of 24.5 meters;

• Three glaze lines each of about 120 meters with advanced application/ decoration units like digital printing, roto cylinder, bell and flat printing;

• Fully automated laser guided vehicles to load the kilns;

• De-dusting plants from SACMI and CAMI, Italy;

• Two fully automated smart lines from Siti B&T to carry out gradation of products;

• Skirting plant from Tecnema;

• Independent decoration plant to produce border/ highlighter tiles; and

• Two transformers of 2500 KVA for regulated power supply and a 1000 KVA generator for back-up power.

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9.1.5. Raw material

The main raw materials in ceramics tile manufacturing are:

1. Shale /clay; 2. Quartzite; 3. Lime stone; 4. Frits and glaze; 5. Pigments; 6. Kaolin; 7. Printing inks; and 8. Packing materials.

Raw materials used for the tile body like clay/ shale, quartzite and limestone are procured mainly from GCC region.

Glaze/frits, pigments, digital machine inks are procured from leading suppliers in Europe & Asia . Packaging materials are provided by suppliers from the local market as well as the UAE.

The Company does not have formal purchase agreements with suppliers for its raw materials. As there are multiple renowned suppliers available in the market, the Company has not faced any difficulties in meeting its raw material requirements. Further, raw material prices have been stable during the last two years.

9.1.6. Utilities and consumables

The major utilities required by the Company such as natural gas, water and electricity are supplied by Public Establishment for industrial Estate (PEIE) and Majan Electricity Company SAOC.

The Company utilizes natural gas for its manufacturing operations for which it had entered into a Gas Supply Agreement with PEIE (please refer to the Chapter “Risk Factors and Mitigants”). Other consumables such as hammers, punches, roto cylinders etc. are available in the local market.

9.1.7. Environment and safety

The Company neither consumes nor produces any major hazardous chemicals or pollutants.

Technologically advanced de-dusting plants sourced from reputed suppliers are installed to maintain a low dust environment. The factory’s environment and pollution control certification from the Environment Ministry of Oman, issued on 31 August 2012 is valid till 30 August 2014.

The Company strives to comply with the safety measures recommended by the Ministry Environment /Royal Oman Police (ROP). The Company’s fuel storage approval, from ROP and Ministry of Environment, was issued on 2 April 2013 and is valid till 1 April 2015. The Company’s safety license is valid till 11th September 2015.

The Company awards regular maintenance contracts to well qualified firms for the maintenance of safety and security equipment. A safety audit was also carried out by TUV SUD Middle East LLC in August 2013.

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9.1.8. Products

The Company manufactures two main types of products:

A. Floor tiles (Monocottura) and B. Wall tiles (Monoporosa)

The Company has recently launched a premium range of ceramic tiles printed with digital machines, under the brand name “Al Maha Digiplus” which has had an encouraging response from the market. The printing quality using the digital printing machines is much superior than the conventional ceramic tiles produced using the flat printing machines or roto cylinder printing machines. The digital printing machine can provide excellent printing quality similar to a photograph with very high resolution.

Products & Sizes:

Product Sizes

1 Wall tiles 25x40, 25x50, 30x45 cm

2 Floor tiles 30x30, 45x45, 50x50 cm

3 Highlighter tiles 25x40, 25x50, 30x45 cm

4 Borders 7x30, 8x30, 9x30, 10x30, 9x45, 9x40, 9x50 cm

5 Skirting 8x45, 8x50 cm

The Company sells mainly to the retail market and commercial project sales account for only a small portion of its turnover. The Company aims to produce higher volumes of digital printed tiles in order to achieve higher price realization in the future.

9.1.9. Market segments, selling arrangements and sales network

Major geographical segments of the company’s sales are given below:

Sales (RO) 2008 2009 2010 2011 2012 2013 CAGR%

Segment

Oman 865,564 2,224,701 2,269,141 3,642,905 5,836,870 6,276,136 49%

GCC other than Oman 828,095 1,282,592 1,425,185 2,205,000 2,687,722 2,966,099 29%

Others 106,419 92,307 306,621 264,491 494,046 525,491 38%

Total Sales 1,800,078 3,599,599 4,000,947 6,112,396 9,018,638 9,767,726 40%

The key export markets for the company include the Kingdom of Saudi Arabia, United Arab Emirates, Lebanon, Jordan, Qatar and Yemen. The Company sells its products mainly through channel sales i.e. sales through dealers and distributors. Its top dealers have a wide coverage of their network, with multiple outlets in their respective territories. These dealers have been associated with the Company for many years, thereby reinforcing the acceptance of the Company’s brand and service level. There are no formal distribution agreements in place with these dealers. However they purchase stock in continuous basis throughout the year.

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The Company actively carries out various marketing activities like:

• For the last three years the Company has participated in major exhibitions and trade shows in the GCC e.g. the Big Show-Muscat, Big 5-Dubai, Big5-Jeddah, Project Qatar-Doha, Saudi Build-Riyadh.

• Annual advertisement campaigns with leading newspapers in Oman.• Dealer signage across the dealer outlets in Oman and UAE. • In shop branding to main dealer outlets e.g. see through branding, LED light boards, roll

up stands, rotating light boxes, sample display boards and stands, display cassette to select dealers.

• Quarterly press releases and public relation activities.• Bilingual website in Arabic as well as English. The Company is currently updating the

website.• Advertisement campaigns in various mass media.• Listing in local trade directories and yellow pages• Providing distributors with samples for free of cost.• Design marketing schemes and offers for new products and low selling items.

9.1.10. Future plans

• The Company plans to move towards digital printing technology for its production. The Company will be carrying out certain modifications to improve the production output marginally and enhance the efficiency of operations. The Company also plans to invest in high technology automatic sorting system which will improve the quality of tiles to the customers.

• The Company will continue with its marketing strategy of launching ceramic tiles in new size and designs regularly in the future.

• The Company has plans to add two more lines with a capacity of 3.5 million sq.m of tiles per line. However, this is subject to the Company receiving additional allocation of natural gas by the Public Establishment for Industrial Estates or installing a synthetic gas plant. The Company does not have any clarity on the availability of additional natural gas. Therefore, the Company is yet to prepare firm plans for the expansion of capacity. The Company has not considered any expansion for the purposes of its projected financial performance as set out in the Chapter “Projected Financial Statements”

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Projected Revenue, EBITDA and PBT are as follows:

Years 2014 2015 2016 2017 2018

RO. In Million RO. In Million RO. In Million RO. In Million RO. In Million

Revenue 10.78 11.40 11.82 12.30 12.75

EBITDA 3.34 3.58 3.65 3.76 3.87

PBT 2.64 2.82 2.90 3.08 3.18

9.1.11. Corporate Social Responsibility (CSR)

During the last few years, the Company has developed its Corporate Social Responsibility by making certain contributions to the events organized or promoted by PEIE, Nakhal Wali’s office and Oman Chamber of Commerce. The Company also made contributions towards construction of mosques in Nakhal and Mudaibhi, sponsoring sports events in the Walayat of Nakhal and making donations to the Environment Society of Oman. The Company plans to participate in further programs organized by the Government and NGOs for the welfare of the people of Oman.

9.1.12. Company property details

- Leasehold:

The Company’s factory is situated in the leased land from PEIE. The land is leased for an initial period of 25 years.

- Liwa land –15000 Sq.M. of land was purchased by the Company in Wilayat of Liwa with the purpose of constructing staff accommodation. The same was registered in the name of related parties. Please see paragraph 10.20 of this Prospectus for further details.

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9.1.13. Insurance

Policy Cover Sum insured

Consequential loss insurance

Loss of gross profit and/or increased cost of working as a consequence of an interruption to the business resulting from loss or damage to the property occasioned by the occurrence of an insured peril. The indemnity period is 12 months.

RO 7,010,000

Contractor’s plant and machinery insurance

Covers the contractor’s plant and machinery such as wheel loaders, forklifts etc.

RO 181,272

Electronic equipment insurance

Covers electronic equipment. RO 120,000

Fidelity guarantee insurance

Covers loss of money or property belonging to the insured or held in trust or commission or cash, custody caused by a fraudulent or dishonest act committed by an employee.

RO 10,000 - limit for any one occurrence; RO 50,000 - aggregate limit

Fire and perils insurance

Covers fire, subterranean fire, standard explosion, aircraft damage, earthquake, smoke, riot, strike and civil commotion, malicious damage, storm, tempest, hail, flood, bursting or overflowing or escape of water or fluids from pipes or tanks or apparatus, impact (including own vehicles, trees, aerials, receivers and masts), sprinkler leakage and burglary/ theft due to forcible entry into or exit from premises.

RO 12,810,000

Loss of profit following machinery breakdown insurance

Covers loss of profit following machinery breakdown. Period of indemnity is 12 months.

RO 7,010,000

General open policy insurance for marine cargo

Covers imports and exports spares, machinery and ceramic tiles.

RO 250,000 - limit per location / conveyance; RO 250,000 - limit per shipment; RO 1,500,000 - total annual turnover

General open policy insurance for marine cargo

Cover import and export of ceramic items. RO 100,000 - limit per location / conveyance;RO 250,000 - limit per shipment; RO 2,050,000 - total annual turnover

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Machinery Break Down

As per Standard Machinery Breakdown Policy

RO 7,600,000

Money Insurance As per Standard Money Insurance Policy Ro 5,000 to RO 300,000

Public Liability Damages in respect of body injury (including death or disease) to any person other than an employee and loss of or damage to property other than belonging to insured

Any one occurrence RO 500,000Aggregate during policy period RO 500,000

Directors & Officers Liability

All loss arising out of a claim for wrongful act for which coverage applies except when and to the extent that the company has indemnified the insured persons for such loss.

Limit of liability RO 1,000,000

9.1.14. Employees

The Company has approximately 181 employees as at June 2014. The Company has achieved the required Omanization percentage of 35%.

9.1.15. Tax Status

The Company had obtained exemption from the Ministry of Finance for five years commencing from 1 June 2008 to 31 May 2013. The Company has applied for an extension of the exemption period for a further five years pending approval of the Ministry of Commerce and Industry but on a prudent basis has provided and paid for the taxation liability from the month of June 2013.

9.2. GCC Ceramics Tile Market

(Unless otherwise stated all data and forecasts have been obtained from Frost & Sullivan report on Analysis of Ceramic Tile Market, 2012)

The Middle East, Africa and Levant regions has witnessed a growing appetite for tiles and sanitary ware products. This is because of the growing construction market, coupled with an increasing population. UAE, Egypt and Saudi Arabia are among the 30 top tiles manufacturing countries in the world.

GCC Ceramic Tile Market Estimate

Market Size (2011) 278 Million Sq.m

Market Size at End of Forecast Period (2021) 987 Million Sq.m

Base Year Market Growth Rate (2011) 11%

10 Year Forecast Market Growth Rate (CAGR) 14%

Source: Frost & Sullivan report on Analysis of Ceramic Tile Market, 2012.

9.2.1. GCC Ceramic Tile Market Overview

Ceramic is widely used and is a popular material used in all kinds of buildings. Demand for ceramic tiles in GCC is continuing to increase with the help of construction growth in countries like Saudi Arabia and Qatar.

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The construction sector is expected to grow well in Oman, Saudi Arabia, Qatar and UAE in the next few years. Oman’s five year development plan for 2011-2015 has budgeted a total government expenditure of 78 billion USD which is 113% higher than the last 5 year plan. This expenditure is likely to improve the growth rate of the construction sector.

Market demand in Saudi Arabia is expected to remain buoyant in 2013-17 as the Saudi Arabian government has announced a 120 billion USD investment for the development of six new economic cities and a plan for constructing 0.5 million houses by 2015. The local production capacity in Saudi Arabia is not adequate to cater to this growing demand of tiles.

Tile manufacturers in the UAE and Oman are expected to benefit from this growing demand in Saudi Arabia and are expected to export larger volumes of tiles to Saudi Arabia in the next 3-5 years.

9.2.2. GCC Ceramic Tile Market Snapshot

In Million Sq.mt

Country Ceramic Tiles Production Capacity

Ceramic tiles Consumption/ Demand (2011)

Saudi Arabia 78 120

UAE 61 77

Oman 21 28

Kuwait [0] 25

Qatar [0] 17

Bahrain [0] 11

Total 160 278

Source: Frost & Sullivan report on Analysis of Ceramic Tile Market, 2012

9.2.3. Ceramic Tiles – Market Demand

- Total ceramics tiles demand in 2011 was 278 Million Sq.mt.

- About 120 Million Sq.mt of this demand was from Saudi Arabia where there is a surge in demand from the residential sector.

- UAE consumed about 77 Million Sq.mt of tiles contributing to 28% of the demand.

- Demand from Oman was about 28 Million Sq.mt in 2011. This gets converted to 10% of the share in GCC.

- GCC manufacturers of ceramic tiles produce approximately 160 Million Sq.mt of tiles each year.

- A significant portion (more than 25%) of the total production is exported to non-GCC countries.

- 40% of the total demand in GCC is supplied by GCC manufacturers. About 25% of the GCC demand is met by European companies. Chinese brands supply to about 30% of the market demand. The remaining is met by imports from other countries such as Malaysia, India and Egypt.

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9.2.4. GCC Ceramic Tiles Market Forecast

Total Ceramic Tiles Market : Middle East (GCC), 2011-2021

Note: All figures are rounded. The base year is 2011.

9.3. Ceramic Tile Market

(Unless otherwise stated all data and forecasts have been obtained from Frost & Sullivan report on Analysis of Ceramic Tile Market, 2012.)

9.3.1. Sultanate of Oman

The manufacturing sector in Oman has improved, with the residential and commercial sectors being the most important. Malls and hotels are the major end users among commercial end-users. Industrial demand is also estimated to be significant in creating demand for tiles. Oman tiles manufacturers meet a small portion of the demand, as the demand for Chinese and other Asian brands is high.

Sales by End user type

Sales by End user type

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Manufacturers from neighboring GCC countries play an important role in meeting the demand for tiles in Oman. High-end residential apartment and hotels are noticed to be using European brands which could be estimated as 10 % of the total demand. Oman has not encouraged imports from other countries, such as India or Malaysia etc. Hence only about 7% of the demand is met through them in Oman. This composition is likely to remain the same in the near future, unless there is aggressive change in sales plans for domestic companies.

9.3.2. United Arab Emirates

Residential and commercial sectors are the biggest demand creators in UAE and about 70 % of the tiles sold in UAE are consumed by these two segments.

Being the commercial hub of the Middle East, 40% of tiles is used in commercial sectors. Public infrastructure such as metros, airports, ports etc. demanded about 19 Mn Sq.mt of tiles in 2011.

Out of the total demand for tiles in UAE, 40% is supplied through Chinese imports. Most industry participants opine that this trend would continue to prevail in the forthcoming years as well. 25% of the demand for tiles in the UAE is supplied through local manufacturers in UAE. Imports from Saudi Arabia and Oman play a significant role in meeting the demand for tiles in the UAE.

9.3.3. Kingdom of Saudi Arabia

Ceramic tiles sales in Saudi Arabia are more than 120 million Sq.mt. (2011) and are estimated to grow at the rate of 16.2% from 2011 – 2021.

Saudi Arabia’s recent expansion of the manufacturing sector has seen an upsurge in economic activity. According to MEED, Saudi Arabia is known to have about 1mn shortage of homes; hence the market for residential construction is expected to pick up momentum in the forthcoming years. At the same time, Bloomberg estimates suggest a 2mn home shortage by 2014. Similarly, public infrastructure development projects have increased as a part of the country’s long term vision. Hence public infrastructure projects are expected to play a significant role in creating demand for tiles and other building materials.

Sales by End user type

Demand & Supply Analysis - UAE

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9.3.4. Qatar

Qatar is witnessing a considerable amount of demand from the renovation or re-construction market. Ceramic tiles are expected to be demanded in huge volumes for stadiums and entertainment centers to be built for the Football World Cup in 2022. According to Business & Economy Digest, Qatar has a low population and the property ownership laws are stringent for expats, the contribution of demand from the residential property market is currently low. This is compensated by the economic activities and the rise of commercial sector. About 10 Mn Sq.m of tiles was demanded by the commercial sector in 2011. Public infrastructure has been on the rise since 2005 and in 2011 it contributed to about 20% of the total demand.

Currently there is no manufacturing of tiles prevailing in Qatar, but several building materials companies are exploring the possibilities of entering the tiles market. Qatar is also promoting its local manufacturing set up to be self-sufficient for the construction of 2022 Football World Cup stadiums. Qatar is encouraging local manufacturing of building materials in order to be able to easily supply to the demand which is expected to rise from 2016 onwards. Currently, the majority of the demand for tiles in Qatar is met through imports from China, followed by GCC companies and then imports from Europe and other countries.

Sales by End user type

Demand & Supply Analysis - KSA

Sales by End user type

Demand & Supply Analysis - Qatar

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9.3.5. Kuwait

Kuwait is one of the top 30 countries in the world for importing ceramic tiles. There is a significant demand for new construction projects. However, Kuwait witnesses a large portion of its demand arising out of the reconstruction or renovation market. Like most other countries, residential and commercial developments contribute to about 70% of the total demand. Public infrastructure projects, including mosques, witnessed an uplift in 2011.

Kuwait is currently a slow growth market with limited economic activity and high dependence on oil based revenues. Half of the total annual demand for tiles is met through imports from China and about 25% of the demand is catered by the local GCC companies. There is one local manufacturer in Kuwait who produces a limited quantity of ceramic tiles which is insignificant to the market.

9.3.6. Bahrain

Bahrain has predominantly been a commercial and banking hub of GCC alongside Dubai. Bahrain is now shifting its focus on mixed use projects. In 2011, residential and commercial construction projects together contributed to 70% of the demand for tiles in Bahrain. Renovation of public infrastructure increased the demand for tiles in that segment and it contributed to 15% of the total demand for tiles in Bahrain. Currently, imports from China occupy in the majority of the market for tiles in Bahrain. However, local GCC companies, especially from Saudi Arabia have a strong foothold in Bahrain due to easy accessibility. Due to low demand and slow growth there are no local manufacturers expected in the near future in this market, however the demand is expected to increase once the government measures are fully implemented.

Demand & Supply Analysis - Kuwait

Demand & Supply Analysis - Bahrain

Source: Frost & Sullivan report on Analysis of Ceramic Tile Market, 2012

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10. Risk Factors and Mitigants

Prospective investors should carefully consider the risks described below in addition to all other information presented in this Prospectus, including the financial statements set out in this Prospectus, before deciding to purchase any of the Shares offered for subscription.

Forecasts are projections made by the Company based on best estimates and actual results might vary. Investors may note that the risks and mitigating factors mentioned below reflect the Company’s opinion based on the current knowledge and the information available to it. Additional risks and uncertainties not presently known to the Company or that the Company currently believes to be immaterial may also have a material adverse effect on the Company’s financial condition or business success. The actual risks and the impact of such risks could be materially different from that mentioned herein and could have a material adverse effect on the Company’s business, results of operations, financial condition and prospects and cause the market price of Shares to fall significantly and investors to lose all or part of their investment. Unless otherwise stated in the risk factors set out below, the Company is unable to specify or quantify the financial or other risks mentioned therein.

10.1. Demand

The performance of the Company is directly linked to the level of activity in the construction sector and the resulting demand of its products from the residential and commercial construction sector. A fall in demand due to economic downtrend in the construction sector or any other factor adversely affecting the economy could affect the performance of the Company.

Mitigant: The Government of Oman is implementing a number of large infrastructure projects (such as roads, airports, ports, power and water plants) and other large projects are being considered (e.g. rail network). Similar growth is expected across the GCC region. The Company believes Oman’s economic activity will provide it with a strong platform to sustain demand for its products and its projected growth plans. Further, as per the market report (referred to in Chapter 9), the demand for ceramic tiles in the GCC region is expected to grow at a CAGR of 14% over the period 2011-2021 and the region is a net importer of ceramic tiles.

10.2. Competition including risk of International/new competitors

The Company faces competition from existing as well as new entrants into the sector, both within Oman and in external markets, where there are large international competitors. If the Company is unable to effectively compete, its business growth and financial performance may be affected, together with the market price for the Shares.

Mitigant: The Company has grown over the years and has established itself in the market (the Company estimates a 16% market share of the tile industry in Oman) with its products receiving wide customer acceptance, as evidenced by its steady growth in sales (sales CAGR for the period 2008-2013 was 40%). With its experienced Board of Directors and executive management team, the Company believes that it is well positioned to face the market competition.

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10.3. Revenue and credit

The Company has recorded a steady increase in revenue over the past few years and expects it to grow further in the future, as may be noted from its past and projected financial statements. However, the Company operates in a competitive market which exposes it to the risk that its revenues may not grow or sustain at the projected levels. The Company derives a substantial portion of its sales from the local, regional and international markets, where it faces competition from large established companies. Further, the Company does not have any long term supply contracts with its customers or distributors, thereby exposing it to the risk of fluctuations in its sales. Further, as the Company offers credit facilities to its customers/ distribution channels, it also faces credit risk from potential defaults or delays in realization of its receivables.

As of December 31, 2013, 55% of Company’s trade receivables are due from 6 customers (2012: 52% from 6 customers) (2011: 55% from 6 customers). (2010: 58% from 6 customers). However, the composition of these 6 customers is different for each of these years and the Company has not had to make any provision or write-off in respect of these customers. Most of the trade receivables were collected within the 90 days specified in the terms of business between the Company and its customers.

Mitigant: The Company has been successfully facing various competitive pressures and has grown over the past years. It has an experienced Board of Directors, management team and a well-established sales network in Oman and in the regional and international markets. Its products have been well accepted in the market with repeat orders from its customers. Although the Company does not have any long term supply contracts, it believes that its wide customer base provides stability without excessive reliance on any large customers.

The Company’s sales /exports are fully covered by Letters of Credit (L/Cs), post-dated cheques and ECGA cover, thereby substantially reducing the risk of non-recoveries. Further, in the last 4 year period (2010-2013), the Company recorded aggregate sales of RO.28.89 Million of which it has recovered an amount of RO28.83 Million till date, which is 99.8% of the sales. The Company also monitors its receivables position and periodically reviews its exposures and credit policies to its customers/ distribution channels to manage such risks.

10.4. Gas Supply

The Company uses natural gas for its manufacturing operations for which it has a gas supply agreement with the Public Establishment for Industrial Estates (“PEIE”) dated 4 March 2008 (“Gas Supply Agreement”). The Company has enhanced its production in recent years and this has resulted in its natural gas consumption being significantly more than its allocated quota under the Gas Supply Agreement. In April 2014, the Company received correspondence from the PEIE stating that the Company’s over consumption of gas affected the PEIE’s ability to supply gas to other companies as per PEIE’s obligations and requested that the Company restrict its gas usage to its allocated quota.

This has been followed by further correspondence which has left the matter inconclusive and there is a risk that the natural gas supplied to the factory could be restricted at any time between now and October 2014 when a synthetic natural gas plant should be operational. The Company has estimated the maximum financial impact of this risk as follows:

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For the period of 6 months ending 31st December 2014

As per Financial

Projections

Projection considering impact of possible restriction in gas

consumption

Production (million sq.m) 3.0 2.6

Revenues (RO mln)* 5.12 4.4

PAT (RO mln) 1.26 0.98

EPS (RO) annualised 0.051 0.039

Dividend Rate 35% 20%

* Revenue impact is offset by projected sale from existing stock of finished goods

Of course, if the restriction on the natural gas supply is either for a period that is less than 2 months or does not restrict the supply to the allocated quota level, then the financial impact will be less severe than indicated above. The PEIE continues to bill the Company for the gas used and the Company continues to pay for it.

Mitigants: The Company has applied to the PEIE and the Ministry of Commerce and Industry for its quota of natural gas to be increased and the PEIE has informed the Company that this will happen when further gas is available in Sohar Industrial Estate. The Company has also contracted with Innovative Energy Systems LLC for the supply and installation of a synthetic natural gas plant in order to supplement its supplies of natural gas. The capital cost of the plant is approximately RO 350,000 and it is expected to be commissioned by October 2014. The financial impact of using synthetic gas rather than natural gas has been taken in to account in the financial projections.

10.5. Raw Materials

The main raw materials required by the Company are:

(i) For the production of ceramics; Shale/clay, limestone and quartzite which are all available in abundance in the GCC region and the Company currently procures most of these materials from suppliers in Oman and the UAE; and

(ii) For the production of glazed coatings on tiles, frits, engobes and inks/pigments which are currently imported from Europe and Asia from various suppliers.

In the past the Company has been fined by both the MECA and the MOCI for mining with only a prospecting license, however for some time the Company has not carried out mining activities. The Company has, however, applied for a full mining licence from the MOCI.

The Company is currently in discussions with the MOCI to negotiate and settle payments in respect of mining of clay carried out at its sites in Wilayat Nakhal with only a prospecting license. The MOCI have recently informed the Company that they must pay RO. 750,000 for the value of clay which they estimate has been extracted with only a prospecting license. The Company has made full provision in its accounts in respect of such payments.

Mitigant: Despite the Company making a full provision in its accounts for the amount of payment sought by the MOCI, the Company is to seek a review of the levied charges of

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extracted clay and is hopeful that the above payment will be reduced. The Company has also applied for mining /quarry licenses to the Mining Department of the MOCI to procure shale/clay from certain sites in Oman and is hopeful that it will be granted in the near future.

The Company is procuring its entire requirement of clay from suppliers in the UAE at competitive prices. Hence, non-availability of the mining license is not expected to affect the Company’s operations or profitability.

The Company has also identified alternative suppliers for the materials in different geographies. Short-term disruption in supplies of raw materials due to regulatory, statutory or technical reasons is always a risk, however this is unlikely to adversely affect the Company’s production.

10.6. Performance

While the Company has a robust demand for its products, the success and profitability of the Company primarily depends on its ability to successfully maintain its production levels, quality standards and cost efficiencies. Any shortfall in supply and/or quality will adversely impact the Company’s financial performance, reputation and prospects. Such failure may be on account of various factors including those on which the Company does not have any control, such as fluctuations in raw material prices or non-availability of raw materials, consumables or utilities.

Mitigant: The Company has a credible track record of timely delivery of products and at the same time maintaining the quality (e.g. it has not had any commercial disputes in relation to defective batches). It has focused on developing its expertise, resources and technical skills to ensure that it is fully equipped to meet all its future commitments. The Company’s Board of Directors and management have extensive experience in plant operations as well as handling the competitive market.

10.7. Technology

New technologies may be introduced by competitors in areas such as manufacturing process, product design or product usage which may have an impact on the Company’s market position.

Mitigant: The Company uses dry grinding technology which is a more energy efficient process than older technologies. Its machinery has been supplied by leading reputed international manufacturers and has been installed for only 5-7 years. The Company’s management monitors potential advances in technology and the Company is prepared to invest in upgrading its manufacturing facilities as and when required.

10.8. Operations

The Company’s operations could be adversely affected on account of breakdown of plant and equipment, non-availability or shortage of gas, power, water, other utilities and spare parts, accidents and mishaps such as fire, disruptions in the industrial area where the plant is located and other such causes, which may be beyond the Company’s ability to control.

Mitigant: The Company has been successfully operating its plant for the past several years. Further, the Company has obtained various insurance policies (as mentioned in paragraph 9.1 of this Prospectus) such as loss of profit, machinery breakdown, fire and perils, and electronic equipment insurance to cover some of these risks.

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10.9. Force Majeure

Any force majeure event such as acts of war, armed conflicts, blockades, acts of rebellion, riots, civil commotions, strikes, sabotage, terrorist acts, lightning, fires, floods, earthquakes, tsunamis, floods, storms, cyclones, typhoons, tornados or other natural calamities or acts of God could affect the Company’s operations and financial position.

Mitigant: These risks are common to any business operation.

10.10. Increase in cost of electricity and consumables

Any increase in the cost of raw materials, gas, electricity, water and consumables may adversely impact the Company’s margins and profit, as the Company may not be in a position to increase the price it charges to its customers. The market price of the Shares may therefore be adversely affected.

Mitigant: The Company believes that such increases are likely to impact all similar businesses including its competitors within Oman and hence it may not be at a disadvantage in the local market.

10.11. Manpower

The Company is dependent on its experienced Board of Directors, management team and personnel for its performance. If the Company is not able to recruit additional qualified personnel as per its requirements or replace those who leave the services of the Company, it could have a material adverse effect on its operations, performance and financial condition of the Company, including the market price of the Shares. Further, the Company needs to engage Omani employees to maintain its Omanisation targets. If the Company is not able to identify and recruit suitable Omani personnel, it could face action from the Ministry of Manpower.

Mitigant: The technology used by the Company enables less manpower intensive operations thereby reducing its need for recruiting large number of personnel. The Company places high importance on developing conducive Human Resource policies aimed at achieving employee satisfaction and motivation. Moreover, the Company is aiming through various programmes to induct additional Omani employees for meeting its Omanisation targets and reducing its need for expatriate personnel.

10.12. Interest rate

As the Company has availed debt funding, any increase in interest rates could increase its cost of borrowing, thereby impacting its profitability.

Mitigant: The Company has a low debt equity ratio which reduces the level of risk. It may also consider the possibility of hedging its interest rate exposures through swaps, if required.

10.13. Exchange rate movement

The Company is exposed to foreign exchange risk as it exports its products regionally and internationally. It is also required to import some of its raw materials and technology/ capital expenditure, which are designated in foreign currency. Any adverse movement in exchange rate could materially affect the financial performance of the Company and the market price

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for the Shares. In case the Omani Rial is depegged from the US Dollar, this could expose the Company to additional risks.

Mitigant: As most of the GCC currencies, including the Omani Rial, are pegged to the US Dollar, this reduces the extent of foreign exchange risk faced by the Company in excess of those faced by its competitors. Further, for its import of glaze materials from Europe, the Company enters into suitable forward contracts to protect itself against fluctuations in foreign exchange rates of Euro.

10.14. Accounting policy and International Financial Reporting Standards (IFRS)

Any changes to the Company’s accounting policy including on account of changes in accounting standards or regulations, could impact the Company’s financial statements and have a bearing on its ability to declare dividends.

Mitigant: Such changes are expected to affect all businesses and companies in general.

10.15. Regulatory

Any adverse policy action or changes in regulations by the Government or its agencies, either in Oman or other jurisdictions where the Company operates, could affect the Company’s business, profitability and financial position. The Company’s operations are subject to regulations in Oman. Regulations that specifically apply to the Company’s business include: corporate existence, power and authority to conduct its business; environmental regulation; and regulation of health and safety. The Company is subject to a varied and complex body of laws and regulations that both public officials and private parties may seek to enforce.

The Company conducts business operations under several licenses, leases and permits. Such licenses, permits and leases may be suspended, terminated or revoked if the Company does not comply with their respective requirements. The Company’s business could also be materially adversely affected by changes in existing law, the interpretation of existing laws or the adoption of new laws applicable to the Company. The imposition of fines or penalties, or the revocation or suspension of licenses, permits or lease arrangements could have a material adverse effect on the business, results of operations and financial condition of the Company, including the market price of the Shares.

Mitigant: The Company believes that the Government’s policies will continue to be aimed at encouraging the growth of the industrial and manufacturing sector.

10.16. Authorizations, Permits and Approvals

A number of authorizations, permits and approvals from various Government authorities are required to enable the Company to conduct its business in the Sultanate of Oman. There is no guarantee or assurance that these will be given or, if given, upon what terms and conditions and for those licenses already obtained, that they will not be revoked.

Mitigant: The Company believes that it has and will actively pursue to receive any required authorizations, permits and approvals to conduct its business in the Sultanate of Oman.

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10.17. Oil Prices and Geo-Political

The Company’s operations and main customer markets are in Oman and the GCC. As economic growth of the GCC is primarily driven by their oil exports, oil prices have a significant impact on the level of economic activity in the region which in turn affects the construction sector which is the primary consumer of the Company’s products. Further, geo political and security risks in the region also affect economic growth of the region and could have a material adverse effect on the market price for the Shares.

Mitigant: It is generally expected that the oil prices will continue to remain within the prevailing price band in the short to medium term and that the development of infrastructure will contribute to economic growth, particularly in Oman.

10.18. Ownership of Factory Land

The site used for the factory is owned by the PEIE which, under the terms of a lease agreement, has granted a lease over the factory site at Sohar to the Company with a term of 25 years from the effective date, which may be renewed for a further term of 25 years. If Company is in material breach of the terms of the lease agreement, the PEIE may, at its option, elect to terminate the lease agreement early, evict the Company from, and repossess, the site. A termination of the lease agreement would have a material adverse effect on the business, results of operations and financial condition of the Company, including the market price of the Shares.

Mitigant: The Company aims to comply with the terms of the contract signed with PEIE and avoid any material breach of the terms. Similar terms apply to other companies having their facilities in in the industrial zone of the PEIE.

10.19. Corporate Governance

As an SAOG company, it will be subject to greater corporate governance requirements. Any default in compliance could lead to regulatory action and / or penalties. Further, these requirements may require substantial management oversight which may divert their attention from the day-to-day business operations.

Mitigant: The Company’s Board of Directors and the management consist of well experienced persons who are familiar with the corporate governance requirements. The Company will also be enhancing its compliance processes as necessary in order to meet regulatory requirements.

10.20. Liwa Land

The Company has land in its books (valued at approximately RO 225,000) with an area of 15,000 sq.m. which is situated in Liwa. The Company paid for this land and the intention was for staff accommodation to be built on the land. However the Company subsequently decided not to build this staff accommodation and therefore the land could not be registered in the name of the Company because companies may only own land for use as part of their business. Accordingly the land was registered in the names of the Company’s Chairman, Mr Masood Bin Humaid Bin Malik Al Harthy and Mr Shabeer Mustafa Abdul Redha Sultan (who are shareholders and related party) under a trust arrangement with the registered owners holding the land in trust for the Company. The effectiveness of this trust arrangement could be challenged legally although the Board of Directors has no reason to believe that it will be. Moreover the value of the land is insignificant in comparison to the size of the Company’s balance sheet.

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Mitigant: The Company is currently seeking a buyer for the land.

10.21. Risk factors relating to the Shares

No trading history: The Shares that are being offered for subscription will be listed on the MSM as per the timetable given in this Prospectus. There is no prior history of trading in the Shares.

Share price fluctuation: After listing of the Shares on the MSM, the share price may fluctuate for various reasons and may go below the Offer Price.

Liquidity: There are no guarantees that an active market will exist in the Shares subsequent to the listing on the MSM. To that extent Applicants face the risk of holding shares that may not be actively traded.

Future Increase of Equity Capital: The Company may in the future, increase its equity capital through further issues (either on rights basis or otherwise). Such capital increases could impact the share price of the Company on the MSM.

Dividends: Dividend payments are not guaranteed and the Board of Directors may decide in its absolute discretion to not recommend dividends or recommend dividends lower than the projected levels.

Market Fluctuations: Market fluctuations and other factors may adversely affect the trading price of the Shares regardless of the actual operating performance of the Company. All equity investments carry market risks to varying degrees. The value of any security can fall as well as rise depending on market conditions.

Dividend Policy: Dividend payments are not guaranteed and the Board of Directors may decide, in its absolute discretion, at any time and for any reason, not to pay dividends. Any payment of future dividends will be made taking into account the sufficiency of distributable reserves and liquidity in order to ensure the Company’s operational needs and/or business growth are not limited by the unavailability of funds, as well as the Company’s known contingencies and compliance with any funding facility covenants.

Further, any dividend policy, to the extent implemented, will significantly restrict the Company’s cash reserves and may adversely affect its ability to fund unexpected capital expenditures, as well as the ability to make interest and principal repayments on its outstanding loan facilities. As a result, the Company may be required to borrow additional money or raise capital by issuing equity securities, which may not be possible on attractive terms or at all.

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11. Source of Financing

11.1. Term Loans

Government soft loan:

The Government soft loan was obtained at a fixed interest rate of 3% per annum. The loan is repayable in 28 quarterly instalments of RO 35,714 commencing from May 2011. The gross amount outstanding as at 30th June 2014 was RO 535,714 (RO 607,143 as on 31st December 2013). The loan is carried at fair value and is secured through a first ranking charge over the Company’s fixed assets.

11.2. Other Facilities

The Company had bank borrowings in an aggregate amount of RO 750,418 as on 30th June 2014 (RO 615,228 as on 31st December 2013). Apart from the above, the Company has other facilities approved by certain banks, which it has not utilized on a regular basis. Bank borrowings comprise bank overdraft, loan against trust receipts and bill discounting facilities from local commercial banks carrying interest at rates ranging from 2.5% to 6% (31 December 2013: 3.25% to 6.5%) per annum. The interest rates are either subject to re-negotiation with the bank upon renewal of the facilities, which generally takes place on an annual basis or are reviewable on a quarterly basis at the bank’s discretion. The bank borrowings are secured by a second ranking charge on usufruct rights in respect of the Company’s factory land at Sohar Industrial Estate and a second ranking commercial mortgage over the Company’s fixed assets.

11.3. Status of Facilities

As of 31st December 2013, the details of loan facilities outstanding are as under:

Facility Outstanding amount (RO million)

Bank borrowings 0.615

Term Loan 1.15

Performance Bonds Nil

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11.4. Sources of Financing

RO ‘000

Category as on 31st December 2012 as on 31st December 2013

Amount % Amount %

Short term debt

Term loan (current portion) 1,192.8 792.9

Bank Borrowing 150.0 615.2

Trade & other payables 1,932.9 2,772.3

Due to related parties 3.2 -

Sub-total 3,278.9 4,180.4

Long term debt

Term loan (non-current portion) 1,735.2 360.5

Total debt 5,014.1 4,540.9

Total Liabilities 5,432.6 47.1 5,000.7 42.3

Equity capital 3,500.0 5,000.0

Share Premium - 88.2

Legal reserve 354.6 605.9

Retained Earnings 2,254.4 1,117.2

Total Equity 6,109.0 52.9 6,811.4 57.7

Total financing sources 11,541.5 11,812.1

Total Liabilities/ Shareholders’ Equity

0.89 0.73

The IPO will not affect the sources of financing as it is only an offer for sale of existing shares of the Company held by the shareholders.

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12. Historical Financial Statements

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Historical financial statements

31 December 2010 to 31 December 2013

Contents

Accountant’s report on the compilation of historical financial statements

Historical statement of financial position

Historical statement of profit or loss and other comprehensive income

Historical statement of changes in equity

Historical statement of cash flows

Historical notes

Schedule I

57

58

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)Historical statement of financial positionas at 31 December

2013 2012 2011 2010Note RO RO RO RO

Non-current assetsProperty, plant and equipment 4 7,874,063 7,847,336 7,445,693 7,656,304 Investment property 5 225,000 285,000 285,000 285,000

Total non-current assets 8,099,063 8,132,336 7,730,693 7,941,304

Current assetsInventories 6 1,763,422 1,407,676 1,528,785 1,199,799 Trade and other receivables 7 1,867,190 1,872,898 1,409,536 1,361,415 Cash in hand and at bank 8 82,439 128,620 8,783 5,874

Total current assets 3,713,051 3,409,194 2,947,104 2,567,088

Total assets 11,812,114 11,541,530 10,677,797 10,508,392

EquityShare capitalShare premium

9 (a)9 (a)

5,000,00088,199

3,500,000-

3,500,000-

3,000,000-

Legal reserve 9 (b) 605,988 354,562 115,729 14,994Retained earnings (accumulated losses)

1,117,229 2,254,397 279,904 (626,710)

Total equity 6,811,416 6,108,959 3,895,633 2,388,284

Non-current liabilitiesTerm loan 10 360,481 1,735,252 2,887,631 4,223,128 Deferred Government grant 10 (a) 104,005 122,091 162,569 204,930Deferred tax liability 19 252,318 224,217 - -End of service benefits 14 (c) 103,549 72,086 45,260 31,580

Total non-current liabilities 820,353 2,153,646 3,095,460 4,459,638

Current liabilitiesTerm loan 10 792,857 1,192,857 992,857 828,142Bank borrowings 11 615,228 150,000 1,127,626 1,933,702 Trade and other payables 12 2,772,260 1,932,859 1,473,427 724,263 Amount due to related parties 18 - 3,209 92,794 174,363

Total current liabilities 4,180,345 3,278,925 3,686,704 3,660,470

Total liabilities 5,000,698 5,432,571 6,782,164 8,120,108

Total equity and liabilities 11,812,114 11,541,530 10,677,797 10,508,392

Net assets per share - restated 20 1.362 1.260 0.803 0.549

The historical financial statements were approved and authorised for issue by the Board of Directors on 27-03-2014 and signed on their behalf by:

Chairman Director Chief Executive OfficerThe notes form an integral part of these historical financial statements.The Accountant’s report is set forth on page 1.

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AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)Historical statement of profit or loss and other comprehensive incomeFor the year ended 31 December

2013 2012 2011 2010Note RO RO RO RO

Revenue 9,767,726 9,018,638 6,112,396 4,000,947

Cost of sales 13 (5,501,001) (5,147,824) (4,082,872) (2,945,836)

Gross profit 4,266,725 3,870,814 2,029,524 1,055,111 Administrative and general expenses

15 (747,892) (558,005) (384,137) (316,509)

Selling and distribution expenses 16 (660,626) (565,103) (329,264) (198,280)Other income 17 55,945 97,117 54,476 127,078

Profit from operations 2,914,152 2,844,823 1,370,599 667,400Loss on fair value of investment property

5 (60,000) - - (15,000)

Finance charges 10&11 (122,690) (232,280) (363,250) (502,457)

Profit before tax 2,731,462 2,612,543 1,007,349 149,943

Income tax 19 (217,204) (224,217) - -

Total comprehensive income and net profit for the year

2,514,258 2,388,326 1,007,349 149,943

Basic earnings per share - restated

21 0.512 0.492 0.214 0.034

The notes on pages 6 to 26 form an integral part of these historical financial statements.The Accountant’s report is set forth on page 1.

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AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Historical statement of changes in equity

(Accumu-lated

losses) Share Share Legal retained

capital premium reserve earnings TotalRO RO RO RO RO

1 January 2010 3,000,000 - - (761,659) 2,238,341

Transfer to legal reserve - - 14,994 (14,994) -

Total comprehensive income for the yearNet profit for the year - - - 149,943 149,943

31 December 2010 3,000,000 - 14,994 (626,710) 2,388,284 Transfer to legal reserve - - 100,735 (100,735) -

Transactions with shareholders recorded directly in equityIssue of share capital 500,000 - - - 500,000Total comprehensive income for the year

Net profit for the year - - - 1,007,349 1,007,349

31 December 2011 3,500,000 - 115,729 279,904 3,895,633

Transfer to legal reserve - - 238,833 (238,833) -Transactions with shareholders recorded directly in equityDividend paid - - - (175,000) (175,000)Total comprehensive income for the yearNet profit for the year - - - 2,388,326 2,388,326

-31 December 2012 3,500,000 - 354,562 2,254,397 6,108,959

Transfer to legal reserve - - 251,426 (251,426) -Transactions with shareholders recorded directly in equityDividend paid - - - (2,050,000) (2,050,000)Bonus share issue 1,350,000 - - (1,350,000) -Issue of share capital 150,000 88,199 - - 238,199Total comprehensive income for the yearNet profit for the year - - - 2,514,258 2,514,258

31 December 2013 5,000,000 88,199 605,988 1,117,229 6,811,416

The notes on pages 6 to 26 form an integral part of these historical financial statements.The Accountant’s report is set forth on page 1.

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AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Historical statement of cash flowsFor the year ended 31 December

2013 2012 2011 2010RO RO RO RO

Cash flows from operating activitiesProfit before tax for the year 2,731,462 2,612,543 1,007,349 149,943

Adjustments for :Depreciation

554,381 507,297 478,644 463,650

(Gain) loss on sale of property and equipment

(1,300) 379 - (5,486)

Provision for debtors and inventory 37,617 27,903 (22,616) (12,199)Loss on fair value of investment property 60,000 - - 15,000Finance charges 122,690 232,280 363,250 502,457End of service benefits charge 34,540 27,867 21,031 19,310

3,539,390 3,408,269 1,847,658 1,132,675(Increase) decrease in inventories (355,746) 116,991 (293,727) 772,316Decrease (increase) in trade and other receivables

5,708 (487,147) (60,764) (642,694)

Increase (decrease) in trade and other payables and amount due to related parties

609,472 369,847 667,595 (31,379)

End of service benefits paid (3,077) (1,041) (7,351) (11,426)Net cash generated from operating activities

3,795,747 3,406,919 2,153,411 1,219,492

Cash flows from investing activitiesPurchase of property, plant and equipment (581,108) (909,319) (268,033) (274,686)Proceeds from sale of property and equipment

1,300 - - 7,000

Net cash used in investing activities (579,808) (909,319) (268,033) (267,686)Cash flows from financing activitiesIncrease in share capital 238,199 - 500,000 -Dividend paid (2,050,000) (175,000) - -Term loans obtained (repaid) – net (1,792,857) (992,857) (1,213,143) 400,000 Bank borrowings repaid (150,000) (921,352) (844,161) (866,230)Finance charges (122,690) (232,280) (363,250) (502,457)Net cash used in financing activities (3,877,348) (2,321,489) (1,920,554) (968,687)Net change in cash and cash equivalents (661,409) 176,111 (35,176) (16,881)

Cash and cash equivalents at the beginning of the year

128,620 (47,491) (12,315) 4,566

Cash and cash equivalents at the end of the year

(532,789) 128,620 (47,491) (12,315)

Cash and cash equivalents at the end of the year comprise of:

Cash in hand and at bank (note 8) 82,439 128,620 8,783 5,874Bank overdraft (note 11) (615,228) - (56,274) (18,189)

(532,789) 128,620 (47,491) (12,315)

The notes on pages 6 to 26 form an integral part of these historical financial statements.The Accountant’s report is set forth on page 1.

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AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)

1 Legal status and principal activities

Al Maha Ceramics Company SAOC (“the Company”) (under transformation to SAOG) is a closed joint stock company registered on 15 November 2005 in the Sultanate of Oman. The principal activity of the Company is manufacturing of ceramic tiles.

The Company intends to go for an initial public offering which is expected during year 2014.

2 Basis of preparation

These historical financial statements are prepared for the purpose of the inclusion in public offering document and have been derived from the audited financial statements of the Company for the years ended 31 December 2010 to 31 December 2013.

a) Statement of compliance

The historical financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and the Commercial Companies Law of 1974, as amended.

b) Basis of measurement

The historical financial statements have been prepared on the historical cost basis except for derivative financial instruments and investment property, which are stated at fair value.

c) Functional and presentation currency

These historical financial statements are presented in Rial Omani (“RO”), which is the Company’s functional currency.

d) Use of estimates and judgments

The preparation of historical financial statements requires Management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, 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 recognized in the period in which the estimate is revised and in any future periods affected. In particular, estimates that involve uncertainties and judgments which have a significant effect on the historical financial statements include provisions for impairment of receivables and inventories.

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AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)

3 Significant accounting policies

3a Changes in accounting policies

Except for the changes below, the Company has consistently applied the accounting policies set out in Note 3b to all periods presented in these financial statements.

a) Disclosures- offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7)

As a result of the amendments to IFRS 7, the Company has expanded its disclosures about the offsetting of financial assets and financial liabilities.

b) Fair value measurement

IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements when such measurements are required or permitted by other IFRSs. It unifies the definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It replaces and expands the disclosure requirements about fair value measurements in other IFRSs, including IFRS 7. As a result the Company has included additional disclosures in this regard.

c) Presentation of items of Other Comprehensive Income

As a result of the amendments to IAS 1, the Company has modified the presentation of items of other comprehensive income in its statement of profit or loss and other comprehensive income, to present separately items that would be reclassified to profit or loss from those that would never be.

3b Significant accounting policies

The following accounting policies have been applied consistently to all periods presented in these historical financial statements:

(a) Foreign currencies

Transactions in foreign currencies are translated to the Company’s functional currency at exchange rates on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting dates are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the period. Foreign currency differences arising on retranslation are recognized in the profit or loss.

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AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)

(b) Financial instruments

(i) Non-derivative financial instruments

Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, term loan, bank borrowings, trade and other payables and amounts due from and due to related parties. Cash and cash equivalents comprise cash balances and call deposits and term deposits with original maturity not greater than three months.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs.

Subsequent to initial recognition, non-derivative financial instruments are measured as described below.

Held-to-maturity investments

If the Company has the positive intent and ability to hold debt securities to maturity, then they are classified as held-to-maturity. Held-to-maturity investments are measured at amortised cost using the effective interest method, less any impairment losses.

Available-for-sale financial assets

The Company’s investments in equity securities and certain debt securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, and foreign exchange gains and losses on available-for-sale monetary items, are recognised in other comprehensive income. When an investment is derecognised, the cumulative gain or loss in other comprehensive income is transferred to profit or loss.

Financial assets at fair value through profit or loss

An instrument is classified at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit or loss if the Company manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Company’s documented risk management or investment strategy. Upon initial recognition attributable transaction costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss.

Other

Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses.

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as deduction from equity, net of any tax effects.

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AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)3 Significant accounting policies (continued)

(ii) Derivative financial instruments

The Company holds derivative financial instruments to hedge its interest and foreign exchange risk exposures.

Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes there on are recognised in profit or loss.

(c) Property, plant and equipment

Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Subsequent expenditure is capitalised only when it substantially increases the future economic benefits embodied in the item of property, plant and equipment. All other expenditure is recognised in profit or loss as an expense when incurred. Gains and losses on disposal are determined by the difference between the sale proceeds and the carrying value.

Depreciation is charged to profit or loss on a straight-line basis over the estimated useful economic lives of the following classes of assets as follows:

Years

Buildings 20

Plant and machinery 20

Heavy equipment 15

Furniture and office equipment 5

Motor vehicles 4

Depreciation methods, useful lives and residual values are reassessed at each reporting date.

(d) Investment property

Property, which is held for capital appreciation is classified as investment property. The investment property is fair valued every three years, as assessed by an independent professional valuer. Changes in the fair value are recognised in profit or loss.

(e) Inventories

Inventories are stated at lower of cost and net realisable value. Net realisable value is the price at which inventories can be sold in the normal course of business after allowing for the costs of realisation. The cost of inventories is based on the weighted average cost principle and includes expenditure in acquiring the inventories and bringing them to their existing location and condition. Provision is made where necessary for obsolete, slow moving and defective items.

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AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)3 Significant accounting policies (continued)

(f) Impairment

(i) Financial assets

All impairment losses are recognized in profit or loss.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For financial assets measured at amortized cost, the reversal is recognized in profit or loss.

(ii) Non-financial assets

The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indications exist then the asset’s recoverable amount is estimated. An impairment loss is recognized if the carrying amount of an asset or cash generating unit is lower than its estimated recoverable amount. Recoverable amount is the greater of its value in use and its fair value less costs to sell. In assessing the 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 the time value of money and the risks specific to the asset.

Impairment losses recognized 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 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 recognized.

(g) Employee benefits

Obligations for contributions to a defined contribution retirement plan, for Omani employees, in accordance with the Oman Social Insurance Scheme, are recognized as an expense in profit or loss as incurred.

The Company’s obligation in respect of non-Omani terminal benefits, under defined contribution retirement plan, is the amount of future benefit that such employees have earned in return for their service in the current and prior periods. The obligation is calculated using the projected unit credit method and is discounted to its present value. The discount rate used reflects current market assessments of the time value of money.

(h) Provisions

A provision is recognised in the statement of financial position when the Company has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits 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 liability.

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AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)3 Significant accounting policies (continued)

(i) Revenue

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership have been transferred to the buyer. Revenue is not recognised if there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

(j) Leases

Payments made under operating leases are recognised in profit or loss on a straight line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

(k) Income tax

Income tax comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognized directly in equity or in other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is calculated in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to the temporary difference when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized. 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 realized.

(l) Directors’ remuneration

The total remuneration paid to the Directors is in accordance with the Articles of Association of the Company.

(m) Finance cost and finance income

Finance cost comprises interest payable on borrowings calculated using the effective interest rate method. Interest costs attributable on the acquisition and construction of property, plant and equipment are capitalised as part of the cost of those assets. Other interest costs are expensed in the period as incurred.

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AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)3 Significant accounting policies (continued)

Interest income is recognised in profit or loss as it accrues taking into account the effective yield on the asset.

(n) Government grant

The loan from the Government of the Sultanate of Oman is carried on the statement of financial position at its fair value being the fair value of consideration received. The fair value of the consideration received is the sum of all future cash payments, discounted using market borrowing rates of interest for loans having similar maturity to discount the future contractual cash flows.

The difference between the fair value and the book value is treated as a government grant and is deferred over the period of the loan.

(o) New standards and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations are not yet effective for annual periods beginning on or after 1 January 2013, and have not been applied in preparing these historical financial statements. None of these will have an effect on the historical financial statements of the Company, 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, which 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. Earlier application is permitted.

Management have assessed that the standard will not have a significant impact on the historical financial statements of the Company.

4 Property, plant and equipment

a) The movement of property, plant and equipment during the year is set out in Schedule I.

b) Factory building is constructed on land leased from the Public Establishment for Industrial Estates (Sohar Industrial Estate). The lease is for an initial period of 25 years up to the year 2030 and is renewable for a further period of 25 years [note 22 (d)].

c) The property, plant and equipment is mortgaged as security against term loans and bank borrowings availed from a commercial bank [notes 10 (b) and 11].

69

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)4 Property, plant and equipment (continued)

d) The depreciation charge for the period has been allocated as follows:

2013 2012 2011 2010RO RO RO RO

Cost of sales (note 13) 509,797 468,289 445,720 434,740Administrative and general expenses (note 15)

41,570 37,177 32,924 28,045

Selling and distribution expenses (note 16) 3,014 1,831 - 865

554,381 507,297 478,644 463,650

5 Investment property

Investment property comprises of a portion of land which has been jointly registered, in the name of certain Directors, beneficially for and on behalf of the Company.

The investment property stated at its fair value of RO 285,000, which was determined by the Management during the year 2010 and revalued at fair value of RO 225,000 by an independent professional valuer as on 31 December 2013.

6 Inventories

Finished goods 677,608 379,491 550,258 610,249Raw materials and packing materials 618,581 640,835 700,439 498,057 Consumables 510,087 396,945 283,565 132,229

1,806,276 1,417,271 1,534,262 1,240,535Less: provision for slow moving and obsolete inventories

(42,854) (9,595) (5,477) (40,736)

1,763,422 1,407,676 1,528,785 1,199,799

Movement in provision for slow moving and obsolete inventories is as follows:

I January 9,595 5,477 40,736 59,410Provided (witten back) during the year 33,259 4,118 (35,259) (18,674)

31 December 42,854 9,595 5,477 40,736

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AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)

7 Trade and other receivables

Trade receivables 1,803,712 1,872,617 1,343,302 1,151,515 Less: impairment allowance (67,312) (62,954) (39,169) (26,526)

1,736,400 1,809,663 1,304,133 1,124,989 Advances to suppliers 25,397 20,422 85,998 -Prepayments 65,059 28,562 19,405 44,190 Other receivables 29,224 14,251 - 192,236

1,856,080 1,872,898 1,409,536 1,361,415

a) As at 31 December 2013: 55% (2012: 52%; 2011: 55%; 2010: 58%) of Company’s trade receivables are due from 6 major customers.

b) Receivables covered under Export Credit Guarantee Agency (ECGA) as at 31 December 2013 amounted to RO1,593,549 (2012: RO 1,570,606; 2011: RO 818,672; 2010: RONil).

c) The aging of trade receivables at the reporting dates was:

2013 2012 2011 2010Gross trade receivables RO RO RO RO

Not past due 1,692,814 1,753,908 1,272,970 959,045Past due 1-90 days 48,144 55,578 46,858 166,414Past due 91 days and above 62,754 63,131 23,474 26,056

1,803,712 1,872,617 1,343,302 1,151,515

Impairment

Not past due - - - -Past due 1-90 days 4,558 - 15,695 470Past due 91-365 days and above 62,754 62,954 23,474 26,056

67,312 62,954 39,169 26,526

The movement in impairment allowance assessed on past due trade receivables is as follows:

1 January 62,954 39,169 26,526 20,051Provided during the year 4,358 23,785 12,643 6,475

31 December 67,312 62,954 39,169 26,526

71

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)

8 Cash in hand and at bank

Cash in hand 3,551 3,331 523 4,170Cash at bank: Current account 62,901 97,039 6,262 - Call account 15,695 27,958 1,706 1,412 Margin account 292 292 292 292

82,439 128,620 8,783 5,874

9 (a) Share capital

As at 31 December 2013, the share capital of the Company comprises 5,000,000 (2012 and 2011: 3,500,000, 2010: 3,000,000) fully paid ordinary shares of RO 1 each [note 23 (b)].

At the end of the reporting periods, the shareholders of the Company who own 10% or more of the Company’s shares whether in their name, or through a nominee account, and the number of shares they hold are as follows:

Holding % 2013 2012 2011 2010

Al Anwar Holdings SAOG 36.06 32 32 32Ministry of Defence Pension Fund 9.70 10 10 10Mustafa Sultan Enterprises LLC 9.70 10 10 10

Number of shares heldAl Anwar Holdings SAOG 1,802,787 1,120,000 1,120,000 960,000Ministry of Defence Pension Fund 485,000 350,000 350,000 300,000Mustafa Sultan Enterprises LLC 485,000 350,000 350,000 300,000

During the year, the Company has issued 1,350,000 bonus shares; further 150,000 shares have been issued to Directors’ and certain employees at a premium of RO 88,199.

Being the closed joint stock company, the shares are not traded on the Muscat Securities Market. The Company derived at fair value of RO 1.588 per share of face value RO 1,which is equivalent to the net asset value as at 30 June 2013, by considering various factors which may have the effect on the future profitability and expected dividend yield.

9 (b) Legal reserve

Article 106 of the Commercial Companies Law of 1974 requires that 10% of a Company’s net profit for the year be transferred to a non-distributable legal reserve until the amount of the legal reserve becomes equal to one-third of the Company’s share capital.

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AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)

10 Term loan

2013 2012 2011 2010RO RO RO RO

Government soft loan (a) 607,143 750,000 892,857 1,000,000 Deferred Government grant (104,005) (122,091) (162,569) ( 204,930)

503,138 627,909 730,288 795,070Term loan (b) 650,200 2,300,200 3,150,200 3,761,200 Term loan (c) - - - 495,000

1,153,338 2,928,109 3,880,488 5,051,270 Less: Current portion of term loan (792,857) (1,192,857) (992,857) (828,142)

Non-current portion of term loan 360,481 1,735,252 2,887,631 4,223,128

a) The Government soft loan was obtained at an interest rate of 3% per annum. The loan is repayable in 28 quarterly installments of RO 35,714 commencing from May 2011. The loan is carried at fair value. The fair value is the sum of all future cash payments, discounted using borrowing rates of interest applicable to similar loans.

The difference between the carrying value and fair value of the Government soft loan is treated as “Deferred Government grant” and is released to the statement of income over the period of loan as necessary to match with the related costs, which is intended to compensate on systematic basis.

b) The Company obtained term loan of RO 5,450,000 from a local commercial bank, secured against the second ranking and usufruct right mortgage over property, plant and equipment of the Company and proportionate guarantees from certain shareholders. The term loan carries interest rate of 6 months LIBOR plus 275 basis points per annum. The term loan is repayable in 8 semi-annual installments ranging from RO 261,000 to RO650,000 commencing from January 2011. The Company entered into an interest rate swap agreement to hedge variability in cash flows attributable to fluctuations in LIBOR at rate of 3.53% per annum up to October 2013.

c) Term loan denominated in Rials Omani, was obtained from a local commercial bank and carried interest at the rate of 7.5% per annum. The term loan was repayable in 10 equal semi-annual installments of RO 55,000, commenced from August 2010. The term loan was fully repaid during July 2011.

73

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)

11 Bank borrowings

2013 2012 2011 2010RO RO RO RO

Overdraft615,228 - 56,274 18,189

Bill discounting - 150,000 1,071,352 1,903,122Loan against trust receipts - - - 12,391

615,228 150,000 1,127,626 1,933,702

Bank borrowings comprise bank overdraft, loan against trust receipts and bills discounting facilities from local commercial banks and carries interest at rates ranging between 3.25% and 6.5% (2010 to 2012: 4.75% and 6.5%) per annum. The interest rate is subject to re-negotiation with the bank upon renewal of the facilities, which generally takes place on an annual basis. The bank borrowings are secured by a second ranking and usufruct right mortgage over property, plant and equipment of the Company and proportionate guarantees from certain shareholders.

12 Trade and other payables

Trade payables 1,636,071 1,476,462 1,182,864 435,845 Advance from customers 80,400 24,097 29,738 10,000 Accrued interest 3,547 3,911 4,275 7,701 Other payables 1,052,242 428,389 256,550 270,717

2,772,260 1,932,859 1,473,427 724,263

13 Cost of sales

Cost of raw materials 3,219,652 3,153,105 2,343,432 1,646,754Depreciation (note 4) 509,797 468,289 445,720 434,740 Employee costs (note 14) 1,246,153 1,010,244 907,293 598,342 Other manufacturing expenses 525,399 516,186 421,686 284,674

5,501,001 5,147,824 4,082,872 2,945,836

74

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)14 Employee costs (continued)

a) Employee costs is allocated as follows:

2013 2012 2011 2010RO RO RO RO

Cost of sales (note 13) 1,246,153 1,010,244 907,293 598,342 Administrative and general expenses (note 15) 382,172 316,873 245,140 167,805 Selling and distribution expenses (note 16)

173,357 145,223 123,562 61,756

1,801,682 1,472,340 1,275,995 827,903

b) Salaries and employee related costs comprise:

Salary, wages and other benefits 1,750,656 1,430,859 1,237,705 794,665

Increase in liability for unfunded defined benefit retirement plan 34,540 27,867 21,031 19,310 Contributions to defined contribution retirement plan

16,486 13,614 17,259 13,928

1,801,682 1,472,340 1,275,995 827,903

c) Movements in end of service benefits liability recognised in the statement of financial position is as follows:

1 January 72,086 45,260 31,580 23,696Add: charge for the year 34,540 27,867 21,031 19,310Less: paid during the year (3,077) (1,041) (7,351) (11,426)

31 December 103,549 72,086 45,260 31,580

75

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)

15 Administrative and general expenses

2013 2012 2011 2010RO RO RO RO

Employee costs (note 14) 382,172 316,873 245,140 167,805 Depreciation (note 4) 41,570 37,177 32,924 28,045 Directors’ remuneration (note 18) 158,000 36,500 - - Directors’ sitting fees (note 18) 29,850 13,350 8,700 9,500 Communication 20,901 19,225 21,531 15,696 Fees and subscription 1,783 4,212 2,338 2,655 Insurance 5,836 2,623 3,414 1,523 Legal and professional fees 32,452 39,239 17,324 49,496 Office expenses 14,208 11,397 9,741 11,394 Printing and stationary 10,420 9,187 4,905 3,338 Vehicle expenses 20,033 21,182 14,230 9,558Provision for impairment of trade receivables 4,358 23,785 12,643 6,475 Miscellaneous 26,309 23,255 11,247 11,024

- 747,892 558,005 384,137 316,509

16 Selling and distribution expenses

Employee costs (note 14) 173,357 145,223 123,562 61,756 Depreciation (note 4) 3,014 1,831 - 865 Freight charges 236,826 199,714 74,759 51,473 Travelling 71,045 63,140 40,461 19,505 Advertisement and sales promotion 160,946 145,975 88,741 62,701 Miscellaneous 15,438 9,220 1,741 1,980

660,626 565,103 329,264 198,280

17 Other income

Foreign exchange (loss) gain (105) 18,619 18,067 11,801 Insurance claim 23,475 11,673 35,445 9,623 Gain (loss) on disposal of property, plant and equipment 1,300 (379) - 5,486 Miscellaneous 31,275 67,204 964 100,168

55,945 97,117 54,476 127,078

76

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)

18 Related party transactions

Holders of 10% or more of the Company’s shares are provided in note 9(a).

The Company has entered into transactions with Shareholders and entities in which certain Shareholders or Directors of the Company have an interest. In the ordinary course of business, the Company procures goods and services from related parties. These transactions are entered at mutually agreed terms.

a) The related party transactions were as follows:

Revenue - 1,764 8,061 820Purchase of equipment - - 88 10,639Other services – insurance 65,390 58,765 37,798 24,752

b) The compensation paid to key management personnel comprises:

Short term employment benefits 251,759 245,646 139,737 137,250End of service benefits 8,807 7,525 7,350 2,738

- - - -260,566 253,171 147,087 139,988

During 2013, the key management personnel have subscribed and alloted 16,500 shares of face value of RO 1 each at the approved price of RO 1.588 per share.

c) Directors’ remuneration 158,000 36,500 - -Directors’ sitting fees 29,850 13,350 8,700 9,500

- - - -187,850 49,850 8,700 9,500

Directors’ sitting fees and remuneration payable at the reporting dates are included in other payables (note 12).

The Directors’ sitting fees for the year 2013 is subject to shareholders’ approval at the forthcoming Annual General Meeting. The Directors’ remuneration for the year 2012 of RO 83,500 was approved at the Annual General Meeting held on 13 March 2013 and the remaining amount of RO 74,500 for the year 2013 is subject to approval at the forthcoming Annual General Meeting

During 2013, the Directors have subscribed and allotted 107,732 shares of face value of RO 1 each at the approved price of RO 1.588 per share.

d) The amounts due to related parties are interest free and repayable on demand.

77

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)

19 Taxation

a) The Company was exempted from income tax for period of five years upto 31 May 2013. The Company has applied for an extension of the exemption period for further five years pending approval of the the Ministry of Commerce and Industry. But on a prudent basis, the Company has provided for the taxation liability from the month of June 2013.

The Company is liable to income tax at the rate of 12% on taxable income in excess of RO30,000 after the exemption period.

The income tax expense recognized in statement of profit or loss comprises the following:

2013 2012

RO RO

Current tax 189,103 -

Deferred tax 28,101 224,217

Tax expense for the year 217,204 224,217Reconciliation of tax computed on accounting profits with tax expense:Profit before tax 2,731,462 2,612,543

Income tax as per the rates mentioned above 324,175 309,905

Tax exempt revenue (106,971) (279,884)

Prior year deferred tax - 194,196

Tax expense 217,204 224,217

b) The Company’s tax assessment for years 2008 to 2012 are not yet finalised by the Secretariat General for Taxation. Management considers that the amount of additional taxes, if any in respect of open tax years would not be significant to the Company’s financial position at 31 December 2013.

c) Deferred income taxes are calculated on all temporary differences using a principal tax rate of 12% (2010 to 2012: 12%). Deferred tax liability in the statement of financial position is as follows:

Recognized in

statement of

profit or loss 2012

2012

Recog-nized in

statement of

profit or loss 2013

2013

RO RO RO RO

Effect of depreciation 224,217 224,217 28,101 252,318

78

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)

20 Net assets per share

Net assets value per share is calculated by dividing the net assets by number of shares at the reporting date adjusted retrospectively from the earliest period presented, for the bonus shares issued [note 23 (b)].

2013 2012 2011 2010

Net assets (RO) 6,811,416 6,108,959 3,895,633 2,388,284

Number of shares at the reporting date (Nos) – (restated)

5,000,000 4,850,000 4,850,000 4,350,000

Net assets per share (RO) – restated 1.362 1.260 0.803 0.549

21 Basic earnings per share

Basic earnings per share is calculated by dividing the net income for the period attributable to shareholders by the weighted average number of shares.

2013 2012 2011 2010RO RO RO RO

Net profit for the year (RO) 2,514,258 2,388,326 1,007,349 149,943

Weighted average number of shares (Nos) – (restated)

4,912,500 4,850,000 4,707,534 4,350,000

Basic earnings per share (RO) – restated 0.512 0.492 0.214 0.034

Weighted average shares have been adjusted retrospectively for the earliest period presented, for the bonus shares issued during the current period [note 23 (b)].

22 Contingencies and commitments

a) The Company has outstanding letters of credit and acceptances as at 31 December 2013 amounting to RO1,611,420 (2012: RO 976,459; 2011: RO 936,282; 2010: RO219,846) in the ordinary course of business.

b) The Company has outstanding guarantees as at 31 December 2013 amounting to RO 5,000 (2012: RO 5,000; 2011: RO 7,500; 2010: RO 11,585).

79

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)

c) The Company has capital commitments as at 31 December 2013 amounting to RO 250,000 (2012: RO250,000; 2011: RO 44,230; 2010: Nil)

d) The Company has entered into a long-term operating lease agreement with the Public Establishment for Industrial Estates for a period of 25 years on the land over which buildings are being constructed. Under the terms of the lease, the future rental payments are as follows:

e) Amounts committed:Upto one year 33,456 33,456 31,956 31,956 Two to five years 234,192 234,192 127,824 127,824 Above five years 836,402 869,858 447,384 479,340

1,104,050 1,137,506 607,164 639,120

f) There is a legal case pending against the Company with a potential liability of RO 10,402. However based on the legal opinion, the Board of Directors believe that no liabilities would arise and the Management would be successful in resisting the claim.

23 Dividend paid

a) The cash dividend of RO 1,050,000 was approved by the shareholders at the Annual General Meeting held on 13 March 2013 and paid during the period.

b) The Shareholders approved a bonus share issue of 14.286% amounting to 500,000 shares of RO 1 each in the Annual General Meeting held on 13 March 2013, and a bonus share issue of 21.25% amounting to 850,000 shares of RO 1 each in the Extra-ordinay General Meeting (“EGM”) held on 30 December 2013. In addition, a cash dividend of RO 1,000,000 was approved in the EGM and paid during the year.

c) The Shareholders approved a cash dividend of RO 500.000 at the Annual General Meeting held on 25th February 2014 and paid during the period.

24 Financial instruments and risk management

Financial instruments carried on the statement of financial position comprise trade and other receivables, cash and cash equivalents, bank borrowings, term loans, amount due to and due from related parties and trade and other payables.

The Company has exposure to the following risks from its use of financial instruments:

80

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)

24 Financial instruments and risk management (continued)

(i) Credit risk(ii) Liquidity risk(iii) Market risk

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the receivables from customers. The Company has a credit policy in place and exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit. The Company does not require collateral in respect of financial assets.

The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:

Revenue 2013 2012 2011 2010RO RO RO RO

Sultanate of Oman and GCC Countries 9,242,235 8,524,592 5,853,148 3,694,326Other countries 525,491 494,046 259,248 306,621

-9,767,726 9,018,638 6,112,396 4,000,947

Trade receivables (net)

Sultanate of Oman and GCC Countries 1,246,411 1,766,781 1,133,446 1,124,989Other countries 489,989 42,882 170,687 -

- - - -1,736,400 1,809,663 1,304,133 1,124,989

The aging of trade receivables of Company at the reporting date is disclosed in note 7(c) to the historical financial statements.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due that are settled by delivering cash or another financial asset. The Company’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 Company’s reputation.

81

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)

24 Financial instruments and risk management (continued)

The contractual maturities of Company’s undiscounted financial liabilities at reporting date is as below:

31 December 2013

Non-derivative financial liabilities

Carrying amount

Contrac-tual cash

flows

Upto 1 year

2 to 5 year

Over 5 years

RO RO RO RO RO

Terms loans* 1,257,353 (1,313,058) (824,387) (488,671) -Bank borrowings 615,228 (620,611) (620,611) - -Trade and other payables 2,772,260 (2,772,260) (2,772,260) - -

- - - - -4,644,831 (4,705,929) (4,217,258) (488,671) -

31 December 2012Terms loans* 3,050,200 (3,268,835) (1,329,667) (1,903,191) (35,977)Bank borrowings 150,000 (150,000) (150,000) - -Trade and other payables 1,932,859 (1,932,859) (1,932,859) - -Amount due to related parties 3,209 (3,209) (3,209) - -

5,136,268 (5,354,903) (3,415,735) (1,903,191) (35,977)

31 December 2011Terms loans* 4,043,057 (4,441,426) (1,198,565) 3,064,289 178,572Bank borrowings 1,127,626 (1,127,626) (1,127,626) - -Trade and other payables 1,473,427 (1,473,427) (1,473,427) - -Amount due to related parties 92,794 (92,794) (92,794) - -

- - - - -

6,736,904 (7,135,273) (3,892,412) (3,064,289) (178,572)

31 December 2010Term loans* 5,256,200 (5,975,752) (1,117,334) (4,369,748) (488,670) Bank borrowings 1,933,702 (1,933,702) (1,933,702) - -Trade and other payables 724,263 ( 724,263) (724,263) - -Amount due to related parties 174,363 (174,363) (174,363) - -

8,088,528 (8,808,080) (3,949,662) (4,369,748) (488,670) *includes Government grant

82

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)

24 Financial instruments and risk management (continued) Liquidity risk (continued)

At 31 December 2013, the Company’s current liabilities exceed the current assets by RO 467,294. The Management expects to generate suffiecient funds through profits for the forseeable future to meet the Company’s liquidity requirements and its financial obligations as they fall due.

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 Company’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 optimizing the return on risk.

Currency risk

The Company is exposed to currency risk on sales, purchases, receivables and payables that are denominated in a currency other than the functional currency of the Company. The Company’s major sales transactions are in GCC countries on which the Company is not exposed to the currency risk as the Rial Omani (RO) and GCC currencies are effectively pegged to US dollar. The Company is exposed to currency risk in Euro for its purchases and related trade payables but the same is covered through forward exchange contracts.

At 31 December 2013, trade payables in the amount of RO 1,101,355 (2012: RO 1,003,368; 2011: RO 400,437; 2010: RO 233,435) were denominated in Euro. These are covered through the forward exchange contracts.

Interest rate risk

The Company manages the interest rate risk by constantly monitoring the changes in interest rates and ensuring that they are on fixed rate basis. The Company entered into interest rate swap to hedge the variability in cash flows attributable to interest rate risk on its terms loan. At reporting dates, the Company is not significantly exposed to the interest rate risk.

Fair value information

Based on the valuation methodology outlined below, the fair values of all financial instruments at 31 December 2013 are considered by the Management not to be materially different to their book values.

A number of the Company’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 on the following basis:

83

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)

24 Financial instruments and risk management (continued) Fair value information (continued)

(i) Property, plant and equipment

The market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The market value of items of plant and equipment is based on the quoted market prices for similar items.

(ii) Inventory

The fair value of inventory is determined based on its estimated selling price in the ordinary course of the business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventory.

(iii) Trade and other receivables

The fair value of trade and other receivables is estimated at the present value of the future cash flow, discounted at the market rate of interest on the reporting dates.

(iv) Interest rate swap and forward exchange contracts

The fair value of interest rate swaps is based on broker quotes. These quotes are tested for reasonableness by discounting estimated future cash flows based on 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 instrument and include adjustments to take account of the credit risk of the Company and counter party when appropriate.

The fair value of forward exchange contracts and interest rate swaps is determined using level 1 and level 2, respectively of fair value hierarchy based on observable inputs both directly and indirectly.

The Company measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:

Level 1: Quoted market price (unadjusted) in an active market for an identical instrument. Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations.

Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.

84

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)

24 Financial instruments and risk management (continued)

Level 3: Valuation techniques using significant unobservable inputs. This category included all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instrument that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

Capital management

Management’s policy is to maintain an optimum capital base to maintain investor, creditors and market confidence to sustain future growth of business as well as return on capital. The Company’s capital requirements are determined by the Commercial Companies Law of 1974, as amended.

Schedule I (continued)Property, plant, and equipment

Buildings on

leasehold land

Plant and machinery

Heavy equipment

Furniture and office

equipment Motor

vehicles

Capital work in

progress TotalRO RO RO RO RO RO RO

Cost1 January 2010 2,681,069 5,551,468 323,428 78,573 47,900 - 8,682,438 Additions during the year

20,411 107,842 33,667 54,657 16,000 42,109 274,686

Disposals - - - - (16,075) - (16,075)

31December 2010

2,701,480 5,659,310 357,095 133,230 47,825 42,109 8,941,049

Depreciation1 January 2010 238,480 480,549 56,797 24,232 35,598 - 835,656 Charge for the year

134,324 278,186 22,230 17,605 11,305 - 463,650

Disposals - - - - (14,561) - (14,561)

31 December 2010

372,804 758,735 79,027 41,837 32,342 - 1,284,745

Net book value31 December 2010

2,328,676 4,900,575 278,068 91,393 15,483 42,109 7,656,304

85

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)

Schedule I (continued)

Property, plant, and equipment

Buildings on

leasehold land

Plant and machinery

Heavy equipment

Furniture and office

equipment

Motor vehicles

Capital work in

progressTotal

RO RO RO RO RO RO ROCost1 January 2011 2,701,480 5,659,310 357,095 133,230 47,825 42,109 8,941,049

Additions during the year

10,101 212,978 12,731 28,517 - 3,706 268,033

Transfers 42,109 - - - - (42,109) -

31December 2011

2,753,690 5,872,288 369,826 161,747 47,825 3,706 9,209,082

Depreciation1 January 2011 372,804 758,735 79,027 41,837 32,342 - 1,284,745

Charge for the year

135,812 285,790 24,118 28,774 4,150 - 478,644

31 December 2011

508,616 1,044,525 103,145 70,611 36,492 - 1,763,389

Net book value

31 December 2011

2,245,074 4,827,763 266,681 91,136 11,333 3,706 7,445,693

86

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)

Schedule I (continued)

Property, plant and equipment

Buildings on

leasehold land

Plant and machinery

Heavy equipment

Furniture and office

equipment Motor

vehicles

Capital work in

progress TotalRO RO RO RO RO RO RO

Cost1 January 2012 2,753,690 5,872,288 369,826 161,747 47,825 3,706 9,209,082

Additions during the year

115,949 715,070 22,400 49,950 5,950 - 909,319

Transfers 2,256 - - 1,450 - (3,706) -Disposals - - - (610) - - (610)

31December 2012

2,871,895 6,587,358 392,226 212,537 53,775 - 10,117,791

Depreciation1 January 2012 508,616 1,044,525 103,145 70,611 36,492 - 1,763,389Charge for the year

139,190 303,573 25,526 34,388 4,620 - 507,297

Disposals - - - (231) - - (231)

31 December 2012

647,806 1,348,098 128,671 104,768 41,112 - 2,270,455

Net book value31 December 2012

2,224,089 5,239,260 263,555 107,769 12,663 - 7,847,336

87

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the historical financial statements)

Schedule I (continued)

Property, plant, and equipment

Buildings on

leasehold land

Plant and machinery

Heavy equipment

Furniture and office

equipment Motor

vehicles

Capital work in

progress TotalRO RO RO RO RO RO RO

Cost

1 January 2013

2,871,895 6,587,358 392,226 212,537 53,775 - 10,117,791

Additions during the period

41,227 436,375 49,584 45,172 8,750 - 581,108

Disposals - - - - (7,200) - (7,200)

31 December 2013

2,913,122 7,023,733 441,810 257,709 55,325 - 10,691,699

Depreciation

1 January 2013

647,806 1,348,098 128,671 104,768 41,112 - 2,270,455

Charge for the period

144,355 338,031 27,409 37,640 6,946 - 554,381

Disposals - - - - (7,200) - (7,200)

31 December 2013

792,161 1,686,129 156,080 142,408 40,858 - 2,817,636

Net book value

31 December 2013

2,120,961 5,337,604 285,730 115,301 14,467 - 7,874,063

88

13. Projected Financial Statement 2014-2018

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Financial projections

for the period 1 July 2014 to 31 December 2014 and for the years ended 31 December 2015 to 2018

Registered office: Principal place of business:

P.O. Box 482 Sohar Industrial EstatePostal Code 322 SoharSohar, Sultanate of Oman Sultanate of Oman

89

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Financial projections

for the period from 1 July 2014 to 31 December 2014 and for years ended 31 December 2015 to 2018

Independent practitioner’s assurance report

Projected statement of financial position

Projected statement of profit or loss and other comprehensive income

Projected statement of changes in equity

Projected statement of cash flows

Notes

90

91

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Projected statements of financial position

as at 31 December

2014 2015 2016 2017 2018 Note RO RO RO RO RO

Non-current assetsProperty, plant and equipment 4.7 8,611,424 8,320,832 7,964,503 7,592,437 7,204,633Investment property 4.8 225,000 225,000 225,000 225,000 225,000Investments held to maturity 4.9 - - 500,000 1,500,000 2,500,000

Total non-current assets 8,836,424 8,545,832 8,689,503 9,317,437 9,929,633

Current assetsInventories 4.10 1,776,435 2,003,649 2,079,376 2,171,837 2,247,460Trade and other receivables 4.11 2,612,073 2,895,237 3,002,219 3,124,923 3,240,275Cash in hand and at bank 200,000 200,000 200,000 200,000 200,000

Total current assets 4,588,508 5,098,886 5,281,595 5,496,760 5,687,735

Total assets 13,424,932 13,644,718 13,971,098 14,814,197 15,617,368

EquityShare capital 4.12 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000Share premium 4.13 88,199 88,199 88,199 88,199 88,199Legal reserve 4.14 837,955 1,085,112 1,341,217 1,613,748 1,666,667Retained earnings 2,704,925 3,179,334 3,734,280 4,437,057 5,451,970

Total equity 8,631,079 9,352,645 10,163,696 11,139,004 12,206,836

Non-current liabilitiesTerm loan 4.5 265,219 146,772 21,924 - -Deferred Government grant 4.5 56,210 31,800 13,791 - -Deferred tax liability 264,318 279,360 277,611 268,580 253,208End of service benefits 167,181 217,181 267,181 317,181 367,181

Total non-current liabilities 752,928 675,113 580,507 585,761 620,389

Current liabilitiesTerm loan 4.5 142,857 142,857 142,857 35,715 -Bank borrowings 4.5 1,571,742 1,173,216 642,162 480,345 103,796Trade and other payables 4.16 2,326,326 2,300,887 2,441,876 2,573,372 2,686,347

Total current liabilities 4,040,925 3,616,960 3,226,895 3,089,432 2,790,143

Total liabilities 4,793,853 4,292,073 3,807,402 3,675,193 3,410,532

Total equity and liabilities 13,424,932 13,644,718 13,971,098 14,814,197 15,617,368

Net assets per share 4.18 0.173 0.187 0.203 0.223 0.244

The financial projections were approved and authorised for issue by the Board of Directors on --------and signed on their behalf by:

Chairman Director Chief Executive OfficerThe notes form an integral part of these financial projections.The independent practitioners’ report is set forth on page 1.

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AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Projected statements of profit or loss and other comprehensive income

for the period

from 1 July 2014 to 31 December

2014

for the year ended 31

December 2015

for the year ended 31

December 2016

for the year ended 31

December 2017

for the year ended 31

December 2018

Note RO RO RO RO RO

Revenue 4.1 5,122,001 11,404,468 11,821,472 12,301,400 12,750,617Cost of sales 4.2 (2,940,850) (6,917,212) (7,214,103) (7,517,942) (7,842,678)

Gross profit 2,181,151 4,487,256 4,607,369 4,783,458 4,907,939

Administrative and general expenses

4.3 (338,402) (733,853) (765,230) (800,297) (835,530)

Selling and distribution expenses

4.4 (353,584) (816,200) (857,450) (901,522) (941,094)

Other income 3,000 10,000 10,000 40,000 70,000

Profit from operations 1,492,165 2,947,203 2,994,689 3,121,639 3,201,315Finance charges 4.5 (51,744) (125,603) (90,482) (39,052) (20,792)

Profit before tax 1,440,421 2,821,600 2,904,207 3,082,587 3,180,523

Income tax 4.6 (179,153) (350,034) (343,156) (357,279) (362,691)

Total comprehensive income and net profit for the period / year 1,261,268 2,471,566 2,561,051 2,725,308 2,817,832

Basic earnings per share - anualized

4.17 0.050 0.049 0.051 0.055 0.056

The notes form an integral part of these financial projections.The independent practitioners’ report is set forth on page 1.

93

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Projected statements of changes in equity

Share Share Legal Retained capital premium reserve earnings Total

RO RO RO RO RO

1 July 2014 5,000,000 88,199 605,988 1,675,624 7,369,811

Transfer to legal reserve - - 231,967 (231,967) -

Total comprehensive income for the periodNet profit for the period - - - 1,261,268 1,261,268

31 December 2014 5,000,000 88,199 837,955 2,704,925 8,631,079

Transfer to legal reserve - - 247,157 (247,157) -Transactions with shareholders recorded directlyin equityDividend for 2014 - - - (1,750,000) (1,750,000)Total comprehensive income for the yearNet profit for the year - - - 2,471,566 2,471,566

31 December 2015 5,000,000 88,199 1,085,112 3,179,334 9,352,645

Transfer to legal reserve - - 256,105 (256,105) -

Transactions with shareholders recorded directly in equityDividend for 2015 - - - (1,750,000) (1,750,000)Total comprehensive income for the yearNet profit for the year - - - 2,561,051 2,561,051

31 December 2016 5,000,000 88,199 1,341,217 3,734,280 10,163,696

Transfer to legal reserve - - 272,531 (272,531) -

Transactions with shareholders recorded directly in equityDividend for 2016 - - - (1,750,000) (1,750,000)Total comprehensive income for the yearNet profit for the year - - - 2,725,308 2,725,308

31 December 2017 5,000,000 88,199 1,613,748 4,437,057 11,139,004

94

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Projected statements of changes in equity (continued)

Share Share Legal Retained capital premium reserve earnings Total

RO RO RO RO RO1 January 2018 5,000,000 88,199 1,613,748 4,437,057 11,139,004

Transfer to legal reserve - - 52,919 (52,919) -

Transactions with shareholders recorded directly in equityDividend for 2017 - - - (1,750,000) (1,750,000)Total comprehensive income for the yearNet profit for the year - - - 2,817,832 2,817,832

31 December 2018 5,000,000 88,199 1,666,667 5,451,970 12,206,836

The notes form an integral part of these financial projections.The independent practitioners’ report is set forth on page 1.

95

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Projected statements of cash flows

for the year ended 31 December

for the period

from 1 July 2014 to 31 December

2014

for the year ended 31

December 2015

for the year ended 31

December 2016

for the year ended 31

December 2017

for the year ended 31

December 2018

RO RO RO RO ROCash flows from operating activitiesNet profit for the period/year 1,440,421 2,821,600 2,904,207 3,082,587 3,180,523Adjustments for :Depreciation 317,398 640,592 656,329 672,066 687,804Provision for debtors and inventory 1,000 34,213 35,464 36,904 38,252Finance charges 51,744 125,603 90,482 39,052 20,792End of service benefits charge 50,000 50,000 50,000 50,000 50,000

1,860,563 3,672,008 3,736,482 3,880,609 3,977,371Increase/(Decrease) in inventories 2,081 (261,427) (111,191) (129,365) (113,875)Increase in trade and other receivables (471,902) (283,164) (106,982) (122,704) (115,352)(Decrease) / Increase in trade and other payables and amount due to related parties (1,161,665) (50,428) 131,076 110,091 101,222

Income tax paid - (310,003) (334,992) (344,905) (366,310)

Net cash generated from operating activities 229,077 2,766,986 3,314,393 3,393,726 3,483,056Cash flows from investing activitiesPurchase of property, plant and equipment (800,158) (350,000) (300,000) (300,000) (300,000)Investments held to maturity - - (500,000) (1,000,000) (1,000,000)

Net cash used in investing activities (800,158) (350,000) (800,000) (1,300,000) (1,300,000)Cash flows from financing activitiesDividend paid - (1,750,000) (1,750,000) (1,750,000) (1,750,000)Term loans obtained repaid (71,429) (142,857) (142,857) (142,857) (35,715)Bank borrowings availed (repaid) 821,324 (398,526) (531,054) (161,817) (376,549)Finance charges (51,744) (125,603) (90,482) (39,052) (20,792)

Net cash generated from (used in) financing activities 698,151 (2,416,986) (2,514,393) (2,093,726) (2,183,056)Net change in cash and cash equivalents 127,070 - - - -Cash and cash equivalents at the beginning of the period / year 72,930 200,000 200,000 200,000 200,000

Cash and cash equivalents at the end of the period / year 200,000 200,000 200,000 200,000 200,000

The notes form an integral part of these financial projections.The independent practitioners’ report is set forth on page 1.

96

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the financial projections)

1 Legal status and principal activities

Al Maha Ceramics Company SAOC (“the Company”) (under transformation to SAOG) is a closed joint stock company registered on 15 November 2005 in the Sultanate of Oman. The principal activity of the Company is manufacturing of ceramic tiles. The Company is in the process of transformation to a Joint Stock Company under the Commercial Companies Law of Sultanate of Oman.

2 Basis of preparation

These financial projections of the Company have been prepared by the Company’s management in accordance with the accounting policies and key assumptions set out in notes 3 and 4 respectively.

The profit projections are intended to show a possible outcome based on the stated assumptions. Because of the length of the period covered by the profit projections, the assumptions are necessarily more subjective than would be appropriate for the profit forecast. The profit projections do not therefore constitute a forecast.

Since the projections relate to the future, actual results are likely to be different from the projected results because events and circumstances do not occur as expected, and the differences may be material.

a) Statement of compliance

The financial projections have been presented in accordance with International Financial Reporting Standards (“IFRS”) and the Commercial Companies Law of 1974, as amended..

b) Basis of measurement

The finanical projections have been prepared on the historical cost basis except for derivative financial instruments and investment property, which are stated at fair value, and investments held to maturity, which is stated at amortized cost.

c) Functional and presentation currency

These financial projections are presented in Rial Omani (“RO”), which is the Company’s functional currency.

d) Use of estimates and judgments

The preparation of financial projections requires Management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

97

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the financial projections)

2 Basis of preparation (continued)

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. In particular, estimates that involve uncertainties and judgments which have a significant effect on the summarized historical financial statements include provisions for impairment of receivables and inventories.

3 Significant accounting policies

The following accounting policies have been applied consistently to all periods presented in these financial projections:

(a) Foreign currencies

Transactions in foreign currencies are translated to the Company’s functional currency at exchange rates on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting dates are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the period. Foreign currency differences arising on retranslation are recognized in the profit or loss.

(b) Financial instruments

(j) Non-derivative financial instruments

Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, term loan, bank borrowings, trade and other payables and amounts due from and due to related parties. Cash and cash equivalents comprise cash balances and call deposits and term deposits with original maturity not greater than three months.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs.

Subsequent to initial recognition, non-derivative financial instruments are measured as described below.

Held-to-maturity investments

If the Company has the positive intent and ability to hold debt securities to maturity, then they are classified as held-to-maturity. Held-to-maturity investments are measured at amortised cost using the effective interest method, less any impairment losses.

98

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the financial projections)

3 Significant accounting policies (continued)

Available-for-sale financial assets The Company’s investments in equity securities and certain debt securities are classified as

available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, and foreign exchange gains and losses on available-for-sale monetary items, are recognised in other comprehensive income. When an investment is derecognised, the cumulative gain or loss in other comprehensive income is transferred to profit or loss.

Financial assets at fair value through profit or loss An instrument is classified at fair value through profit or loss if it is held for trading or is

designated as such upon initial recognition. Financial instruments are designated at fair value through profit or loss if the Company manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Company’s documented risk management or investment strategy. Upon initial recognition attributable transaction costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognised in the profit or loss.

Other Other non-derivative financial instruments are measured at amortised cost using the effective

interest method, less any impairment losses.

Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue

of ordinary shares and share options are recognised as deduction from equity, net of any tax effects.

(ii) Derivative financial instruments The Company holds derivative financial instruments to hedge its interest and foreign

exchange risk exposures. Derivatives are recognised initially at fair value; attributable transaction costs are recognised

in profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes there on are recognised in profit or loss.

(c) Property, plant and equipment

Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Subsequent expenditure is capitalised only when it substantially increases the future economic benefits embodied in the item of property, plant and equipment. All other expenditure is recognised in the profit or loss as an expense when incurred. Gains and losses on disposal are determined by the difference between the sale proceeds and the carrying value.

99

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the financial projections)

3 Significant accounting policies (continued)

Depreciation is charged on a straight-line basis over the estimated useful economic lives of the following classes of assets as follows:

Years

Buildings 20Plant and machinery 20Heavy equipment 15Furniture and office equipment 5Motor vehicles 4

Depreciation methods, useful lives and residual values are reassessed at each reporting date.

(d) Investment property

Property, which is held for capital appreciation is classified as investment property. The investment property is fair valued every three years, as assessed by an independent professional valuer. Changes in the fair value are recognised in profit or loss.

(e) Inventories

Inventories are stated at lower of cost and net realisable value. Net realisable value is the price at which inventories can be sold in the normal course of business after allowing for the costs of realisation. The cost of inventories is based on the weighted average cost principle and includes expenditure in acquiring the inventories and bringing them to their existing location and condition. Provision is made where necessary for obsolete, slow moving and defective items.

(f) Impairment

(ii) Financial assets

All impairment losses are recognized in profit or loss.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For financial assets measured at amortized cost, the reversal is recognized in profit or loss.

(iii) Non-financial assets

The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indications exist then the asset’s recoverable amount is estimated. An impairment loss is recognized if the carrying amount of an asset or cash generating unit is lower than its estimated recoverable amount. Recoverable amount is the greater of its value in use and its fair value less costs

100

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the financial projections)

3 Significant accounting policies (continued)

to sell. In assessing the 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 the time value of money and the risks specific to the asset.

Impairment losses recognized 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 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 recognized.

(g) Employee benefits

Obligations for contributions to a defined contribution retirement plan, for Omani employees, in accordance with the Oman Social Insurance Scheme, are recognized as an expense as incurred.

The Company’s obligation in respect of non-Omani terminal benefits, under defined contribution retirement plan, is the amount of future benefit that such employees have earned in return for their service in the current and prior periods. The obligation is calculated using the projected unit credit method and is discounted to its present value. The discount rate used reflects current market assessments of the time value of money.

(h) Provisions

A provision is recognised in the statement of financial position when the Company has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits 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 liability.

(i) Revenue

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership have been transferred to the buyer. Revenue is not recognised if there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

(j) Leases

Payments made under operating leases are recognised in profit or loss on a straight line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

101

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the financial projections)

3 Significant accounting policies (continued)

(k) Income tax

Income tax comprises current and deferred tax. Income tax expense is recognised in the profit or loss except to the extent that it relates to items recognized directly in equity or in other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is calculated in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to the temporary difference when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized. 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 realized.

(l) Directors’ remuneration

The total remuneration paid to the Directors is in accordance with the Articles of Association of the Company.

(m) Finance cost and finance income

Finance cost comprises interest payable on borrowings calculated using the effective interest rate method. Interest costs attributable on the acquisition and construction of property, plant and equipment are capitalised as part of the cost of those assets. Other interest costs are expensed in the period as incurred. Interest income is recognised in the profit or loss as it accrues taking into account the effective yield on the asset.

(n) Government grant

The loan from the Government of the Sultanate of Oman is carried on the statement of financial position at its fair value being the fair value of consideration received. The fair value of the consideration received is the sum of all future cash payments, discounted using market borrowing rates of interest for loans having similar maturity to discount the future contractual cash flows.

The difference between the fair value and the book value is treated as a government grant and is deferred over the period of the loan.

(o) New standards and interpretations not yet effective

A number of new standards, amendments to standards and interpretations not yet effective for the year ended 31 December 2014, have not been applied in preparing these financial projections. None of these will have an effect on the financial projections of the Company, with the exception of

102

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the financial projections)

3 Significant accounting policies (continued)

• IFRS9FinancialInstruments,publishedon12November2009aspartofphaseIoftheIASB’s comprehensive project to replace IAS 39, which 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 2018. Earlier application is permitted.

• IFRS15Revenuefromcontractswithcustomers,publishedon28May2014.Thestandardsupersedes IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’ and a number of revenue related interpretations. The new standard provides a single, principles based five-step model to be applied to all contracts with customers. The five steps are: identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contracts, and recognising revenue when (or as) the entity satisfies a performance obligation. The standard is effective for annual periods beginning on or after 1 January 2017. Earlier application is permitted.

Management have assessed that these standards will not have a significant impact on the financial projections of the Company.

4 Key assumptions

The illustrative financial projections of the Company’s activities for the period / year 2014 to 2018 have been prepared by the Company’s management in good faith and with due care and attention, based on assumptions, which they consider appropriate. A careful effort has been made to estimate the future plant capacity utilisation and the related income generated by the Company on the basis of existing facilities to arrive at the illustrative statement of projected income. However, there can be no certainty as to the extent to which the actual results will match the projections or whether the assumptions will remain valid.

4.1 Revenue

The Company’s revenue comprises the sale proceeds from ceramics tiles and decorations. The details of the projected revenue are set out below:

for the period from 1 July 2014 to 31 December

2014

for the year ended 31

December 2015

for the year ended 31

December 2016

for the year ended 31

December 2017

for the year ended 31

December 2018

Production (sqm)

3,000,000 6,350,000 6,400,000 6,425,000 6,450,000

Sales (sqm) 2,925,032 6,350,000 6,375,000 6,425,000 6,450,000

Sales (RO) 5,122,001 11,404,468 11,821,472 12,301,400 12,750,617

The sales price is projected to increase at a rate of approximately 3% to 4% in line with expected inflation.

103

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the financial projections)

4 Key assumptions (continued)

4.2 Cost of sales

The estimated cost of sales is:

for the period from 1 July 2014 to 31

December 2014

for the year ended 31

December 2015

for the year ended 31

December 2016

for the year ended 31

December 2017

for the year ended 31

December 2018

RO RO RO RO RO

Cost of raw materials 1,630,170 3,925,554 4,124,026 4,324,739 4,552,371Depreciation 293,867 598,520 614,007 629,494 644,982Employee cost 642,486 1,330,054 1,396,557 1,466,385 1,539,704Other manufacturing expenses 374,327 1,063,084 1,079,513 1,097,324 1,105,621

2,940,850 6,917,212 7,214,103 7,517,942 7,842,678

The Company has assumed an inflationary increase of 3% to 9% in the cost of raw material and an increase of 5% in salaries and wages. Other manufacturing cost is assumed to increase in line with increase in sales. Symthetic Natural Gas charges have been considered from October 2014, over all above the allocated Natural gas quota at the prevailing price of LPG at RO 133/MT.

4.3 Administrative and general expenses

Administrative and general expenses are projected in line with the projected business plan of the Company. The Company has projected an annual increase of 3% to 5% for all administrative general expenses other than depreciation and directors’ sitting fees and remuneration.

for the period from 1 July 2014 to 31

December 2014

for the year ended 31

December 2015

for the year ended 31

December 2016

for the year ended 31

December 2017

for the year ended 31

December 2018

RO RO RO RO ROEmployee related cost 199,508 406,110 426,114 447,110 469,425Insurance 3,010 6,190 6,377 6,568 6,766Legal and professional expense 17,695 35,100 36,504 37,964 39,482Travelling expenses 8,455 21,866 22,959 24,107 25,312Depreciation 23,531 42,072 42,322 42,572 42,822Director sitting fees and remuneration

34,455 96,600 100,900 107,500 113,100

Others 51,748 125,915 130,054 134,476 138,623

338,402 733,853 765,230 800,297 835,530

104

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the financial projections)

4 Key assumptions (continued)

4.4 Selling and distribution expenses

Selling and distribution expenses are projected as follows:

for the period from 1 July 2014 to 31 December

2014

for the year

ended 31 December

2015

for the year

ended 31 December

2016

for the year

ended 31 December

2017

for the year

ended 31 December

2018RO RO RO RO RO

Employee related cost103,175 223,998 235,197 246,957 259,305

Advertisement and sales promotion

90,000 200,000 210,000 220,000 225,000

Freight 111,408 284,817 299,498 316,172 332,477Others 49,001 107,385 112,755 118,393 124,312

353,584 816,200 857,450 901,522 941,094

Employee related cost is projected to increase by 5% each year. Advertisement and sales promotion is projected at 2% to 3% of revenue. Freight charges per unit sold are projected to increase by 3% to 5%.

4.5 Finance cost

a) The Company had obtained a Government soft loan of RO 1,000,000 at an interest rate of 3% per annum. The loan is repayable in 28 quarterly installments of RO 35,714 commencing from May 2011. The loan is carried at fair value. The fair value is the sum of all future cash payments, discounted using borrowing rates of interest applicable to similar loans.

The difference between the carrying value and fair value of the Government soft loan is treated as “Deferred Government grant” and is released to the statement of income over the loan period as necessary to match with the related costs, which is intended to compensate on systematic basis.

105

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the financial projections)

4 Key assumptions (continued)

Repayment of loans is as follows:

for the period

from 1 July 2014 to 31 December

2014

for the year ended 31

December 2015

for the year ended 31

December 2016

for the year ended 31

December 2017

for the year ended 31

December 2018

RO RO RO RO ROOpening balance 535,715 464,286 321,429 178,572 35,715 Repayment (71,429) (142,857) (142,857) (142,857) (35,715)

-31 December 464,286 321,429 178,572 35,715 -

b) Bank borrowings comprise bank overdraft, loan against trust receipts and bills discounting facilities from local commercial banks and carries interest at rates ranging between 3.5% and 6.5% per annum. The interest rate is subject to re-negotiation with the bank upon renewal of the facilities, which generally takes place on an annual basis. The bank borrowings are secured by a second ranking and usufruct right mortgage over property, plant and equipment of the Company and proportionate guarantees from certain shareholders.

4.6 Taxation

The taxation charges comprise:

for the period

from 1 July 2014 to 31 December

2014

for the year ended 31

December 2015

for the year ended 31

December 2016

for the year ended 31

December 2017

for the year ended 31

December 2018

RO RO RO RO ROCurrent 171,051 334,992 344,905 366,310 378,063Deferred 8,102 15,042 (1,749) (9,031) (15,372)

- - - - -179,153 350,034 343,156 357,279 362,691

The Company is liable to income tax at 12% of taxable income in excess of RO 30,000. For the purpose of determining the tax expense for the respective years, the accounting profit has been adjusted for tax purposes.

106

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the financial projections)

4 Key assumptions (continued)

A reconciliation of income taxes calculated on accounting profits at the applicable tax rate with the income tax for the projected period / years is set out below:

for the period

from 1 July 2014 to 31 December

2014

for the year ended 31

December 2015

for the year ended 31

December 2016

for the year ended 31

December 2017

for the year ended 31

December 2018

RO RO RO RO RO

Profit before taxation 1,440,421 2,821,600 2,904,207

3,082,587 3,180,523

- - - - -Tax on accounting profit 171,051 334,992 344,905 366,310 378,063Tax exempt revenue and

others 8,102 15,042 (1,749) (9,031) (15,372)- - - - -

179,153 350,034 343,156 357,279 362,691

4.7 Property, plant and equipment

Additions to property, plant and equipment are forcasted as follows:

for the period

from 1 July 2014 to 31 December

2014

for the year ended 31

December 2015

for the year ended 31

December 2016

for the year ended 31

December 2017

for the year ended 31

December 2018

RO RO RO RO RO Additions 800,158 350,000 300,000 300,000 300,000

4.8 Investment property

Investment property comprises of a portion of land which has been jointly registered, in the name of certain Directors, beneficially for and on behalf of the Company.

The investment property stated at its fair value of RO 225,000 has been determined by an independent professional valuer on 31 December 2013 and is not expected to change significantly over the projection period.

4.9 Investments held to maturity

Management intends to invest surplus cash available during the years 2016, 2017 and 2018 in suitable investment opportunities.

107

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the financial projections)

4 Key assumptions (continued)

4.10 Inventories

The inventories are based on inventory turnover days projected as follows:

RO 2014 2015 2016 2017 2018Finished goods 367,758 392,792 392,792 421,083 421,083Raw and packing materials and consumables

1,408,677 1,610,857 1,686,584 1,750,754 1,826,377

1,776,435 2,003,649 2,079,376 2,171,837 2,247,460

Turnover daysFinished goods (calculated on total cost of sales) 32 20 20 20 20

Raw and packing material and consumables (calculated on cost of raw material) 140 140 146 145 143

4.11 Trade and other receivables

The trade receivables are projected based on turnover days as per the past experience and the market scenarios.

RO 2014 2015 2016 2017 2018Trade receivables 2,532,858 2,812,061 2,914,883 3,033,222 3,143,988Prepayments 79,215 83,176 87,336 91,701 96,287

- - - - -2,612,073 2,895,237 3,002,219 3,124,923 3,240,275

Debtor turnover days 77 86 88 88 88

4.12 Share capital

Authorised share capital comprises 100,000,000 ordinary shares of RO 0.100 each. Issued and fully paid share capital of the Company is RO 5,000,000 (50,000,000 ordinary shares of RO 0.100 each). The existing shareholders of the Company are divesting a portion of their shareholding from the Company in accordance with the regulatory requirements through an Initial Public Offering (“IPO”) of 20,000,000 ordinary shares of RO 0.100 baisa per share. The issued and fully paid up share capital of the Company is assumed to remain unchanged during the projection period. The IPO proceeds and related share issue expenses will accrue to the existing shareholders who are divesting their shares in the Company. Accordingly, the IPO will be cash neutral to the Company.

108

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the financial projections)

4 Key assumptions (continued)

4.13 Share premium

In 2013, the Company issued 1,350,000 bonus shares; further 150,000 shares have been issued to Directors’ and certain employees at a premium of RO 88,199.

Being the closed joint stock company, the shares are not traded on the Muscat Securities Market. The Company derived at fair value of RO 1.588 per share of face value RO 1,which is equivalent to the net asset value as at 30 June 2013, by considering various factors which may have the effect on the future profitability and expected dividend yield.

4.14 Legal reserve

In accordance with the article 106 of commercial Companies Law of 1974, annual appropriations of 10% of the net profit for the year are transferred to this reserve until such time as the legal reserve amounts to at least one-third of the Company’s share capital. The legal reserve is not available for distribution.

4.15 Dividend

The Company intends to distribute dividend of 35% on the paid up share capital which is subject to regulatory requirements and shareholders’ approval at the forthcoming annual general meetings.

4.16 Trade and other payables

The trade payable are projected with the historic experience based on the turnover days as below. Other payables are projected to increase by tax expense over the projected period due to increase in profits.

RO 2014 2015 2016 2017 2018Trade payables 1,110,688 887,096 982,706 1,055,894 1,118,862Other payables 1,215,638 1,413,791 1,459,170 1,517,478 1,567,485

2,326,326 2,300,887 2,441,876 2,573,372 2,686,347

Creditor turnover days - annualized

62 37 33 34 35

109

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Notes

(forming part of the financial projections)

4 Key assumptions (continued)

4.17 Basic earnings per share

Basic earnings per share are calculated by dividing the profit attributable to shareholders by the weighted average number of ordinary shares in issue during the period / year.

for the period from 1 July 2014 to 31 December

2014

for the year ended 31

December 2015

for the year ended 31

December 2016

for the year ended 31

December 2017

for the year ended 31

December 2018

Profit for the year (RO) 1,261,268 2,471,566 2,561,051 2,725,308 2,817,832

Average shares outstanding during the period / year (Nos) 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000

Basic earnings per share-annualized (RO) 0.050 0.049 0.051 0.055 0.056

4.18 Net assets per share

Net assets value per share is calculated by dividing the net assets by number of shares at the reporting date.

Net assets (RO) 8,631,079 9,352,645 10,163,696 11,139,004 12,206,836

Shares outstanding as at year end (Nos)

50,000,000 50,000,000 50,000,000 50,000,000 50,000,000

Net assets per share (RO) 0.173 0.187 0.203 0.223 0.244

4.19 Commitments

The Company has entered into a long-term operating lease agreement with the Public Establishment for Industrial Estates for a period of 25 years on the land over which buildings are being constructed. Under the terms of the lease, the future rental payments are as follows:

for the period from 1 July 2014 to 31 December

2014

for the year ended 31

December 2015

for the year ended 31

December 2016

for the year ended 31

December 2017

for the year ended 31

December 2018

RO RO RO RO ROAmounts committed:Upto one year 31,956 66,912 66,912 66,912 66,912Two to five years 228,419 228,419 228,419 228,419 228,419Above five years 763,344 696,432 629,520 562,608 495,696

1,023,719 991,763 924,851 857,939 791,027

110

14. Audited Financial Statement – for the period ended 30th June 2014 (First Half)

AL MAHA CERAMICS COMPANY SAOC (under transformation to SAOG)

Audited financial statements

1st January 2014 to 30th June 2014

Registered office: Principal place of business:

P.O. Box 482 Sohar Industrial EstatePostal Code 322 SoharSohar, Sultanate of Oman Sultanate of Oman

111

112

AL MAHA CERAMICS COMPANY SAOC

Statement of financial position

as at

30 June2014

31 December2013

RO RO

Non-current assetsProperty, plant and equipment 8,085,788 7,874,063Investment property 225,000 225,000

Total non-current assets 8,310,788 8,099,063

Current assetsInventories 1,779,515 1,763,422Trade and other receivables 2,180,827 1,856,080Amount due from related parties 2,220 11,110Cash in hand and at bank 72,930 82,439

Total current assets 4,035,492 3,713,051

Total assets 12,346,280 11,812,114

EquityShare capitalShare premium

5,000,00088,199

5,000,00088,199

Legal reserveRetained earnings

605,9881,675,624

605,9881,117,229

Total equity 7,369,811 6,811,416

Non-current liabilitiesTerm loan 322,212 360,481Deferred government grant 70,645 104,005Deferred tax liability 256,216 252,318End of service benefits 117,181 103,549

Total non-current liabilities 766,254 820,353

Current liabilitiesTerm loan current portion 142,857 792,857Bank borrowings 750,418 615,228Trade and other payables 3,316,440 2,772,260Amount due to related parties 500 -

Total current liabilities 4,210,215 4,180,345

Total liabilities 4,976,469 5,000,698

Total equity and liabilities 12,346,280 11,812,114

Net assets per share 0.147 0.136

These financial statements were approved and authorised for issue by the Board of Directors and signed on their behalf by:

Chairman Director Chief Executive Officer

113

AL MAHA CERAMICS COMPANY SAOC

Statement of profit or loss and other comprehensive income

for the six months ended 30 June

2014 June 2013RO RO

Revenue 5,660,787 4,801,304Cost of sales (3,721,208) (2,657,480)

Gross profit 1,939,579 2,143,824Administrative and general expenses (342,168) (390,439)Selling and distribution expenses (374,685) (351,940)Other income 15,991 26,021

Profit from operations 1,238,717 1,427,466Finance charges (37,472) (87,767)

Profit before tax 1,201,245 1,339,699Income tax (142,850) (46,199)

Total comprehensive income and net profit for the year 1,058,395 1,293,500

Basic earnings per share annualized 0.042 0.053

114

AL MAHA CERAMICS COMPANY SAOC

Statement of changes in equity

for the six months ended 30 June 2014

Share Share Legal Retained capital premium reserve earnings Total

RO RO RO RO RO1 January 2013

3,500,000 - 354,562 2,254,397 6,108,959Total comprehensive income for the periodNet profit for the period - - - 1,293,500 1,293,500Transactions with owners of the companyDividend paid for 2012 - - - (1,050,000) (1,050,000)Bonus shares issued 500,000 - - (500,000) -

30 June 2013 4,000,000 - 354,562 1,997,897 6,352,459

1 January 2014 5,000,000 88,199 605,988 1,117,229 6,811,416Total comprehensive income for the periodNet profit for the period - - - 1,058,395 1,058,395

Transactions with owners of the companyContributions and distributions

Dividend paid - - - (500,000) (500,000)

30 June 2014 5,000,000 88,199 605,988 1,675,624 7,369,811

115

AL MAHA CERAMICS COMPANY SAOC

Statement of cash flows

for the six months ended 30 June

2014 2013RO RO

Cash flows from operating activitiesProfit before tax for the period 1,201,245 1,339,699Adjustments for:Depreciation

293,908 271,622

Gain on sale of property, plant and equipment (6,667) (1,300)Provision for trade receivables and inventories 19,121 5,358Income tax paid (180,908) -Finance charges 37,472 87,767End of service benefits charge 22,585 17,393

1,386,756 1,720,539Changes in:(Increase)/decrease in Inventories (16,093) (173,624)(Increase)/decrease in trade and other receivables (315,857) 121,844Increase/(decrease) in trade and other payables 567,515 128,885End of the service benefits paid (8,953) (915)

Net cash generated from operating activities 1,613,368 1,796,729

Cash flows from investing activities:Purchase of property, plant and equipment (506,966) (304,435)Proceeds from disposal of property, plant and equipment 8,000 1,300

Net cash used in investing activities (498,966) (303,135)

Cash flows from financing activitiesDividend payout (500,000) (1,050,000)Repayment of term loans (721,629) (571,429)Bank borrowings availed 719,419 200,000Finance charges (37,472) (87,767)

Net cash used in financing activities (539,682) (1,509,196)

Net change in cash and cash equivalents 574,720 (15,602)Cash and cash equivalents at the beginning of the period (532,789) 128,620

Cash and cash equivalents at the end of the period 41,931 113,018

Cash and cash equivalents at the end of the year comprise of:Cash at bank 3,304 3,949Cash at bank 69,626 109,069Bank overdraft (30,999) -

41,931 113,018

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15. Dividend Policy

15.1. Dividends

The Offer Shares will rank equally with all other Shares for right to any dividends that may be declared and paid in respect of the financial year ending in December 2014 and any subsequent Financial Years. Following the Offer, the Shareholders’ register maintained by the MCD will be updated to enable new shareholders to receive future dividends declared.

In accordance with the CCL, 10% of the profits of every corporation incorporated in Oman must be transferred to a legal reserve until the reserve amounts to at least one third of the corporation’s share capital. The legal reserve shall not be distributed to shareholders by way of dividend.

15.2. Dividend Policy

The Company proposes to follow a reasonable dividend payout policy, subject to debt repayments, working capital and operational expenditures requirements. The amount of annual dividends and the determination of whether to pay dividends in any year may be affected by a number of other factors including the Company’s business prospects, financial performance, free cash availability, facilities agreements’ covenants and the outlook for the sector.

Any decision to pay dividends to Shareholders and the amount of such dividends will be at the discretion and upon the recommendation of the Company’s Board, subject to the Articles of Association, the proposed dividend payment being approved by the passing of the shareholders resolution at an annual general meeting, applicable laws, as well as the provisions of the Facilities Agreement entered into in respect of the loans (including any prepayment clauses).

To date, the Company has distributed dividends as detailed below:

Dividend relating to the year ending 31st December

Type of Dividend Dividend Rate (%)

Dividend Amount per

share (RO)

Total Dividend Amount (RO)

2011 Cash 5% 0.050 175,000

2012 Cash 30% 0.300 1,050,000

2012 Stock 14.28% 0.143 500,000

2013 Stock 21.25% 0.170 850,000

2013 Cash 30% 0.300 1,500,000

117

The Company’s estimates of dividend (based on chapter 13 “Projected Financial Statements - 2014 - 2018”) for the next five years are as follows (subject to shareholder approvals):

Dividend relating to the year ending 31st

December (payable in the next calendar year)

Dividend Rate (% of share capital)

Expected Dividend Amount per share

(Bzs)*

Total Dividend Amount (RO)

2014 # 35% 35 1,750,0002015 35% 35 1,750,0002016 35% 35 1,750,0002017 35% 35 1,750,0002018 35% 35 1,750,000

* Based on nominal value of Bzs 100 per share# Dividend is also subject to the disclosure as per Section 10.4.

The above are only estimates and the actual dividend may vary from the estimates.

118

16. Valuation and Price JustificationThe equity valuation of the Company takes into account various factors that affect its business and performance. It includes the valuation based on future projected cash flows of the Company as well as comparison with other listed companies having similar business. The Offer is being made at the Offer Price calculated applying a discount on the valuation of the Company.

The following qualitative and quantitative factors lay the foundation for the Offer pricing:

16.1. Qualitative Factors

- Brand Recognition

- Full operational plant with minimal operating risk

- Ample raw material supply

- State-of-the-art Technology

- Technical Collaborations

- Plant location and access

- Product Range

- A plant that is equipped with highly technical and operation facilities

16.2. Quantitative Factors

Capacity:

The Company is currently operating at high capacity utilization levels which it expects to maintain over the projected period.

The Company has a track record of profitable operations and its performance over the past 4 years is as below:

RO millions Period ended (12 months)

2010 2011 20122013

Total Revenues 4.00 6.11 9.02 9.76Gross Profit 1.06 2.03 3.87 4.26Profit before tax 0.15 1.01 2.61 2.73Profit after tax 0.15 1.01 2.39 2.51

16.3. Valuation

The equity valuation for the Company is based on two broad valuation methodologies described below and takes into consideration the projected cash flows of the Company as well as the current market conditions.

- Discounted Cash Flow (DCF) Equity; and - Relative valuation

119

16.3.1. Discounted Cash Flow

Discounted Cash Flow is the most theoretically sound method of financial Valuation. DCF analysis represents the net present value (NPV) of projected cash flows available to all providers of capital, net of the cash needed to be invested for generating the projected growth. The concept of DCF valuation is based on the principle that the value of a business or asset is inherently based on its ability to generate cash flows for the providers of capital.

Key Components of a DCF:

- Free cash flow (FCF)– Cash generated by the assets of the business (tangible and intangible) available for distribution to all providers of capital. FCF is often referred to asunlevered free cash flow, as it represents cash flow available to all providers of capital and is not affected by the capital structure of the business.

- Terminal value – Value at the end of the FCF projection period (horizon period).

- Discount rate– The rate used to discount projected FCF and terminal value to their present values.

The valuation estimate for the Company considering the projected period of 2014 to 2018, using the DCF method comes at a range of Bzs 582 per share to Bzs 465 per share for discount rate range of 11% to 13%.

16.3.2. Relative Valuation

Under relative valuation approach, the valuation is benchmarked against other listed comparable which represent similar risk return profile i.e. operations, cash flows, capital structure, growth plans, etc. The relative valuation is generally based on current financial results or projections for the next 1 to 2 years. The benchmarks which are frequently used for relative valuation include price to earnings multiple, dividend yield and price to book multiple. It captures the prevailing market sentiment and should reflect investor perception of publicly available information. Its effectiveness depends on the ability to identify an appropriate peer set and an active stock market that has sufficient liquidity and trading conditions for the peer set.

The valuation of the Company has been benchmarked on the following parameters:

- Price to Book Value (PB)

- Price to earnings multiple (PE)

For comparable, the current trading multiples of following listed comparable have been used:

- Al Anwar Ceramics SAOG

- Oman Ceramics SAOG

- RAK Ceramics

- Saudi Ceramics

120

Price to Earnings multiple

CompanyEPS for the

year 2014 (H1 annualised)

Market Price per share (last traded price available

as on 30th June 2014)PE

Al Anwar Ceramics SAOG (RO) 0.034 0.578 17.0 Oman Ceramics SAOG (RO) 0.066 0.450 6.8 RAK Ceramics (AED) 0.380 3.300 8.7Saudi Ceramics (SAR) 9.15 142.15 15.54Al Maha Ceramics (RO)* 0.042 0.397 9.45

At Offer Price and Projected EPS for 2014 full year *

Price to Book Value multiple

CompanyBook Value

per Share 30/06/2014

Market Price per share(last traded price available

as on 30th June 2014)PB

Al Anwar Ceramics SAOG (RO) 0.150 0.578 3.85 Oman Ceramics SAOG (RO) 0.495 0.450 0.91 RAK Ceramics (AED) 3.32 3.300 1.00Saudi Ceramics (SAR) 42.1 142.15 3.38Al Maha Ceramics (RO)* 0.147 0.397 2.7

At Offer Price *

Note: Annualised H1 2014 EPS and Book Value per share as on 30th June 2014 have been used for the comparison as these are the latest available figures as per published financial statements.

16.4. Dividend Yield

Dividend yield is the primary relative valuation benchmark for the Company in view of a stable business model.

To be Paid in the year2015 2016 2017

Projected Dividend per Share (RO.) 0.035 0.035 0.035 Dividend yield (%) * (Note) 8.8% 8.8% 8.8%

* based on an Offer price of Bzs 397 per Share.

Note: Dividend yields represent a simple yield without considering the impact of annualisation. The Offer Price results in a favourable comparison based on DCF valuation and relative valuation.

121

16.5. Peer Group Analysis

16.5.1. Al Anwar Ceramic Tiles Co. SAOG

Al Anwar Ceramic Tiles Co. SAOG was established in 1999. During the year 2013 the plant produced 14.98 million sq.m of ceramic tiles signifying growth of 14.2% in production volumes over the previous year.

During 2013 Al Anwar Ceramics have converted 4 of its production lines to digital printing technology enabling the company to produce better designs and finishes. Al Anwar Ceramics has plans install a sophisticated digital printing machine in its Third Fired Products facilities by April 2014. With all these investments, Al Anwar Ceramics is looking to upgrade its product portfolio in 2014, and enhance its sales realizations.

In 2013 the company registered gross revenue of RO 26.4 million and a pre-tax profit of RO 8.95 million, signifying a revenue growth of 18% and a profit growth of 21% over the previous year. After providing for a tax liability of RO 1.07 million for year 2013, the company net profit after tax stands at RO 7.9 million.

Source: Al Anwar Ceramics Annual Report-2013

16.5.2. Oman Ceramics Company SAOG

The company established in 1999, is in the business of manufacturing and selling vitreous china sanitary ware and other allied products. The Company has its manufacturing plant at Sohar in the Sultanate of Oman and sells its products through distributors/dealers appointed in various countries. The Company also has its own sales team in Oman, UAE and Bahrain who work in the GCC markets.

In 2013 the company registered gross revenue of RO 3.8 million and a net profit of RO 9,946 signifying a revenue decline of 7.8% and a net profit decline of 93% over the year 2012.

Source: Oman Ceramics Annual Report-2013

(It must be noted that Oman Ceramics Company SAOG operates in a different market segment compared to the Company; while it manufactures ceramic tiles, Oman Ceramics manufactures sanitary ware and allied products and therefore the companies are not strictly comparable.)

122

17. Related Party Transactions and Material Contracts

17.1. Related party transactions

During the years 2012 and 2013 the Company has entered into transactions with Shareholders and entities in which certain Shareholders or Directors of the Company have an interest. In the ordinary course of business, the Company procures goods and services from related parties. These transactions are entered into on mutually agreed terms.

i. The related party transactions were as follows:

31 December 2013

31 December 2012

RO. RO.Revenue - 1,764Purchase of equipment - -Other services – insurance 65,390 58,765

ii. The compensation paid to key management personnel comprises:

31st December

2013

31st December

2012RO RO

Short term employment benefits 251,759 245,646End of service benefits 8,807 7,525

- -260,566 253,171

Directors’ sitting fees 29,850 13,350Directors’ remuneration 158,000 36,500

- -187,850 49,850

The Directors’ remuneration of RO 83,500 was approved at the Annual General Meeting held on 13 March 2013 and the remaining of RO 74,500 was approved in Annual General Meeting on 25th February 2014.

iii. At an extraordinary general meeting of the Shareholders on 4 August 2013, the Company agreed to a private placement of shares to each of its Directors in an aggregate amount of 116,019 ordinary shares of nominal value RO 1 each at a price of RO 1.588 per share. The Company followed the procedures set out in the CCL and the Code of Corporate Governance for SAOCs (which must be followed for related party transactions) and the Shareholders approved the private placement at the EGM on 4 August 2013.

iv. The amounts due to related parties are interest free and are repayable on demand.

123

v. The Company will continue to do business with related parties in the normal course of business at arm’s length. These transaction will be duly approved at the AGM.

17.2. Material Contracts

i. Land leasing Contract

This agreement was entered into by the Company with the Public Establishment for Industrial Estates for leasing land in Sohar to set up the industrial project for a period of 25 years, with the option to extend for a further period of 25 years. The company is obliged to pay rental of RO 31,956 for the year 2014, RO 47,934 for the year 2015 and RO 66,912 p.a. for the remainder of the term.

ii. Gas Supply Contract

This agreement was entered into by the Company with Public Establishment for Industrial Estates for supply of natural gas in the company’s project for a period of 25 years, with the option to extend for a further period of 25 years. The company has to pay an agreed amount for each cubic meters gas received during the month. Please see further details in relation to this contract at paragraph 10.4 of this Prospectus.

iii. Loan Arrangements

Details of the Company’s loan arrangements are given in section 11.

iv. SNG Plant contract

The Company has contracted with Innovative Energy Systems LLC for the supply and installation of a synthetic natural gas plant in order to supplement its supplies of natural gas. The capital cost of the plant is approximately RO 350,000 and it is expected to be commissioned by October 2014.

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18. Corporate Governance

Certain sections of this chapter summarize the issues relating to corporate governance based on the Articles, the CCL and the rules and regulations issued by the CMA, in particular, the Code. The description provided in this chapter is only a summary and does not purport to give a complete overview of the Articles or of the relevant provisions of the CCL, the Code or the CMA rules and regulations.

18.1. Management Overview

The respective roles and responsibilities of the management bodies of the Company are in large part governed by the provisions of CCL, the Articles and, after listing on the MSM, by the Code and circulars issued by the CMA in respect thereof.

The management of strategic issues of the Company is entrusted to its Board of Directors. The Board may perform all acts necessary or useful for achieving the corporate purposes of the Company, with the exception of those acts that are by law or the Articles explicitly reserved for the shareholders general meeting. The day-to-day management of the Company is performed by its management team.

18.2. Board

The current Board of Directors of the Company is set out in the table below and was elected on 28th March 2012 and its members’ term of office shall expire in three years pursuant to Article 95 of the CCL.

Name Capacity CategoryShare-holder

Represe- ntation

Directorship in other joint stock companies as of [31 March 2014]

Brig. Masoud Humaid Malik Al Harthy

Non Executive

Independent Yes HimselfChairman Al Anwar Holdings SAOG

Chairman Falcon Insurance SAOC.

Abdulredha Mustafa Sultan

Non Executive

Independent Yes Himself

Director, Al Anwar Holdings SAOG

Vice Chairman, Al Jazeera Services Co. SAOG.Director, Voltamp Energy SAOGDirector, Muttrah Real-Estate Development Co. SAOC.

Shabir Moosa Abdullah Al Yousef

Non Executive

Independent Yes Himself Director, Al Anwar Holdings SAOG.

Qaboos Abdullah Al Khonji

Non Executive

Independent Yes HimselfDirector, Al Anwar Holdings SAOG

Director, Oman Hotel & Tourism Co. SAOG

Mahmood Nasser Al-Riyami

Non Executive

Independent YesMinistry of Defence

Pension FundHamed Rashid Al Dhaheri

Non Executive

Independent Yes Himself

Sanjay Kumar Tiwari Non

ExecutiveNon-

IndependentYes

Al Anwar Holdings SAOG

* The above classification as Non-independent/ Independent director is as per the definition that existed prior to the CMA amendment on 24th October 2012.

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A brief on the Board of Directors of the Company is set out below:

Brig. Masoud Humaid Malik Al Harthy - Chairman

Brig. Masoud Al Harthy holds a Diploma in Management and has an experience of 35 years in the military service in addition to over two decades as a businessman. Brig. Masoud is the Chairman of the Board of Al Anwar Holdings and a board member in several other leading companies in Oman.

Mr. Abdulredha Mustafa Sultan - Chairman of Audit Committee

Mr. Abdulredha Mustafa Sultan is a board member in several companies in Oman and abroad and Managing Director in Mustafa Sultan Enterprises LLC. He has over 21 years of experience in various senior management positions in Oman & abroad. He is a member of the Young Presidents’ Organization.

Mr. Abdulredha holds a Bachelor’s degree in Finance & Business Administration from San Diego State University, California, USA.

Mr. Shabir Moosa Abdullah Al Yousef - Chairman of Executive Committee

Mr. Shabir Al Yousef served as the Chief Executive Officer at Oman Investment & Finance Company SAOG. He has more than 15 years of experience in senior management positions in various companies. He served as the Chairman of National Aluminum Products Company SAOG until March 2008 and is currently a Director in several other companies in Oman.

Mr. Shabir Al Yousef holds an MBA from University of Lincolnshire & Humberside (U.K.), Masters Degree in Science from Colorado School of Mines (U.S.A) and Bachelors degree in Electronics & Communication from Sultan Qaboos University. He has more than 4 years experience as Oil Engineer in PDO.

Mr. Qaboos Abdullah Al Khonji - Director

Mr Qaboos Al Khonji is the Deputy Chairman of Al Khonji Holding L.L.C and Managing Director of Al Bina Constructions and Al Khonji Real Estate (Better Homes) and also a board member in several leading companies in Oman. He has an extensive experience in the Construction and Retail Business. Mr Qaboos belongs to a traditional business dominated family and holds a Bachelors degree in Business Administration from U.S. He has previously held positions of General Manager in Moosa Abdul Rahman Hassan & Co., Deputy Chairman of Oman Investment & Finance Co. SAOG (OIFC) and Director of Tageer Finance Co. SAOG.

Mr. Mahmood Nasser Al-Riyami - Director

Mr. Mahmood Nasser Al-Riyami is the Director of Purchasing in the Ministry of Defence, Oman. He has been involved in various projects in business improvement and IT application. During his career of 25 years, Mr. Mahmood has been exposed to business intelligence and knowledge management for strategic business decisions. MrMahmood graduated in 1990 with a degree in Economics and completed M.Sc. in E-Commerce from Leeds Metropolitan University, U.K. in 2012.

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Mr. Hamad Rashid Al Dhaheri - Director

Mr. Hamad Al Dhaheri is the Managing Director of Ali & Sons Industry Co. in Abu Dhabi. He has over 20 years experience in business and is a board member of several companies in UAE. Mr Hamad Al Dhaheri holds a PhD in Management from Lorenz University (U.S.A.) and a Masters degree from Southeastern University, U.S.A.

Mr. Sanjay Kumar Tiwari – Director

Mr.Tiwari is a Chartered Accountant with accreditations from the Institute of Chartered Accountants of India and a graduate in Commerce. He has 25 years of experience in industries ranging from Textile, Cement, Tyre and Engineering to FMCG in Asia and Middle East. He has in depth knowledge of the Middle East, South East and South Asian markets. His core expertise has been to monitor and manage operations of varied industries from financial and commercial viewpoints. He has worked in some of the leading companies in India, UAE and Oman.

18.3. Post-IPO Board Composition

As per the proposed Articles approved at the EGM held on 25th February 2014 the Company shall be managed by a Board comprising 7 members, appointed from amongst the Shareholders or non-Shareholders, provided that the Shareholder candidate owns at least 50,000 shares, elected at the ordinary General Meeting in accordance with the provisions of the CCL and the Articles. Post-IPO, It is intended that the current members of the Board will continue and the entire Board of Directors will be due for re-election in March 2015.

The Company intends to have a Board that complies with applicable CMA and CCL requirements from the date of re-election, including with respect to the number of Independent Directors and Non-Executive Directors, and that represents the interests of all Shareholders, including those who purchase Shares.

18.4. Appointment of Board

The term of office of a member of the Board shall be for a period of 3 years, subject to his re-election more than once. The period stipulated for election to the Board shall be calculated from the date of the AGM at which the Director is elected to the date of the third AGM following it. Where the date of such meeting exceeds the term of three years, the membership shall be extended by Law to the date on which the meeting was convened, it shall not exceed the period stipulated in the CCL for convening an AGM.

Subject to Article 95 of the CCL, and without prejudice to the Articles, nominees to the membership of the Board must:

a. Possess good conduct and reputation; b. Be at least 25 years old; c. Not have been declared insolvent or bankrupt unless his insolvency or bankruptcy has come

to an end in accordance with the law; d. Not have been convicted of an offence of dishonour unless he has been rehabilitated; e. Not be unable to discharge his debts to the Company; f. Not be a member or a representative of a juristic person in more than four public joint stock

companies whose head offices are in Oman once appointed to the board in question. g. In case he is representing a juristic person, be authorised by such juristic person to stand for

election.

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h. Not be a member of the board of directors of a public or closed joint stock company the objects of which are similar to those of the Company, with its principal office based in Oman.

i. Present a declaration which contains a statement of the number of shares he has if he is a Shareholder and that he will not dispose of them to the extent that he shall be deprived of his status as a Shareholder throughout the term of his office.

If a member of the Board ceases to satisfy any of the conditions necessary for the membership, he shall be required to notify the Board of it. Accordingly, his position shall be treated as vacant effective from the date of such notice. Otherwise, his membership shall become cease from the date the Company comes to know of it, without prejudice to his liability as per the provisions of the law. Consequently, his office shall be filled in accordance with the Articles and the CCL.

The Directors shall be elected by direct secret ballot by the Shareholders of the Company. Each Shareholder shall have a number of votes equal to that of the shares held by him. A Shareholder shall have the right to use the entirety of his votes in support of one nominee or divide his shares among other nominees of his choice through the voting card. It follows from that the total number of votes given to the nominees by one Shareholder must not exceed the total number of shares owned by him.

The restrictions stipulated by the CCL and the Code shall be observed upon the election of the Board:

a. The majority of the members of the Board must be Non-Executive Directors and must not be working for the Company in consideration of a fixed monthly or annual remuneration.

b. A minimum of one third of the Directors (subject to a minimum of two) must be Independent Directors.

c. A juristic person shall not be represented on the Board by more than one Director. d. The role of Chief Executive Officer and Chairman shall not be held by the same person

18.5. Powers of Board

The Board shall have extensive authority to perform all acts for the management of the Company to achieve its objects and to execute the resolutions adopted at the General Meeting. This authority shall not be limited or restricted except to the extent provided for in the law or the Articles and AGM resolutions.

The Board shall be, inter alia, responsible for the following:

a. Approve the commercial and financial policies and estimated budget of the Company, so as to achieve its objects and preserve and enhance the rights of its shareholders;

b. Prepare, review and update from time to time the plans necessary to accomplish the Company’s aims and perform its activities, in light of its objects;

c. Adopt the Company’s disclosure policies and monitor their application in accordance with the rules and conditions for disclosure issued by the CMA;

d. Supervise the performance of the executive management and ensure that work is properly attended to, so as to achieve the Company’s aims and perform its activities, in light of its objects;

e. Provide information to shareholders accurately and at the times required by the rules of the CMA;

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f. Appoint the chief executive officer or the general manager provided that neither of them shall be the chairman of the board of directors and appoint the employees who report to each of them pursuant to the organizational structure of the Company and determine their authorities and rights;

g. Assess the performance of the employees mentioned in the previous paragraph and assess the work carried out by committees formed by the board pursuant to article 102 of the CCL;

h. Approve the financial statements related to the activities of the Company and the results of its activities that are submitted by the executive management every three months, so as to disclose its true financial position;

i. Include, in the annual report submitted to the general meeting, a reasoned affirmation of the Company’s ability to continue to carry on its activities and achieve its aims;

j. Appoint a secretary for the board in the first meeting held by it and hold at least four meetings per year provided that the period between any two consecutive meetings shall be a maximum of four months;

k. Appoint the managing director(s) if there is such a post provided that the persons who are appointed shall be appointed on a full time basis; and

l. Include in the financial statements full details of the amounts received by any director of the board during the year including the amounts paid to the directors in their capacity as employees of the Company.

In accordance with the Articles, a Board meeting shall be deemed valid if a simple majority of its members are present or represented by proxy. Within the scope of authority detailed above, and in accordance with the Articles, the Board shall decide on all matters and the Board shall adopt its resolutions by a simple majority of the members present or represented by proxy at the meeting.

The Board shall not perform the following acts unless authorized to do so by a resolution of a General Meeting:

a. To make donations those required by the business wherever they are small and customary amounts;

b. To sell all or a substantial part of the assets of the Company; c. To mortgage or pledge the assets of the Company except to secure its debts incurred in the

normal course of its business; or d. To guarantee debts of third parties with the exception of the guarantees made in the normal

course of business for the purpose of achieving the objects of the Company.

Subject to the provisions of the CCL, the members of the Board shall be liable to the Company, the Shareholders and third parties for damages arising from their acts in violation of the law or their acts beyond the scope of their authority or for any fraud or negligence in the performance of their duties or for their failure to act as prudent men in the specific circumstances. In such cases, the Company has the right to litigate against any member of its Board for the damages sustained by the Company. The decision to appoint a person to pursue the case on behalf of the Company shall be made by resolution of the Board of Directors or the Ordinary General Meeting and authorise him to meet the cost of the proceedings out of the funds of the Company.

Any Shareholder may propose a resolution to start proceedings against the Directors and if his proposal is not adopted by the Ordinary General Meeting, may himself pursue the case on behalf of the Company. If the case is successful, such Shareholder shall receive a reimbursement of the costs and expenditure incurred by him in the proceedings, out of the proceeds of the judgment and the balance of such proceeds shall be paid to the Company.

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The Company shall be bound by all acts performed by its Board of Directors, its Chairman and the Deputy Chairman when acting within the scope of their authority. Any third party acting in good faith shall be entitled to assume that any act performed by the Board of Directors, Chairman and the Deputy Chairman of the Company in pursuance of its business was within the scope of such person’s authority and the Company shall be bound thereby unless the limitation of such person’s authority was registered in the Commercial Register.

A member of the Board or any other party related to the Company shall not have any direct or indirect interest in the transactions or contracts made for the account of the Company, except those concluded in accordance with the regulations issued by the CMA.

A member of the Board of Directors may not participate in the management of a business competitive with that of the Company, except with the prior consent of the Ordinary General Meeting, which consent shall be renewed annually. Also, a member of the Board or any of the key employees of the Company may not make use of any information available to them by virtue of their position for their own interest or for the interest of their dependents or immediate relatives up to the fourth degree as a result of dealing in the Company’s securities. Further, they may not have any interest directly or indirectly in any entity involved in activities which may affect the price of securities issued by the Company. Should they be in breach of the above then Articles 109 and 110 of the CCL shall be applied.

18.6. Remuneration of the Board

The annual remuneration and sitting fees for members of the Board and any sub-committees of the Board shall be determined in accordance with the applicable laws in Oman.

Details of sitting fees and remuneration for the years 2011, 2012 and 2013 of the Board of

Directors is given below:

Name of the Director Sitting Fee (RO) Remuneration (RO) Total (RO)

2011 2012 2013 2011@ 2012 * 2013 * 2011 2012 2013

Brig. Masoud Humaid Malik Al Harthy

1,600 1,600 4,000 6,000 13,500 12,300 7,600 15,100 16,300

Abdulredha Mustafa Sultan 2,350 2,550 4,100 5,500 12,500 11,200 7,850 15,050 15,300

Shabir Moosa Abdullah Al Yousef

1,300 2,450 5,200 5,000 11,500 10,200 6,300 13,950 15,400

Qaboos Abdullah Al Khonji 1,150 1,700 4,900 5,000 11,500 10,200 6,150 13,200 15,100

Mahmood Nasser Al-Riyami 1,500 4,300 - 11,500 10,200 - 13,000 14,500

Hamed Rashid Al Dhaheri - 600 1,950 5,000 11,500 10,200 5,000 12,100 12,150

Sanjay Kumar Tiwari 1900 5400 - 11,500 10,200 - 13,400 15,600

Reji Joseph 300 500 - 5000 - 5,300 500 -

Noah Mohammed Al Zadjali 2,000 550 - 5000 - 7,000 550 -

Total 8,700 13,350 29,850 36,500 83,500 74,500 45,200 96,850 104,350

@ Accounted in the year 2012* Accounted in the year 2013

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18.7. Board Committees

The Company has an Audit Committee and an Executive Committee.

The Audit Committee assists the Board in overseeing the integrity of the Company’s policies and financial statements, including validating and recommending them for approval to the Board. It also oversees the performance of the Company’s internal audit function. The current members of the Audit Committee of the Company are:

1. Mr. Abdulredha Mustafa Sultan, Chairman of Audit Committee

2. Mr. Mahmood Nasser Al-Riyami, Member of Audit Committee

3. Mr. Sanjay Kumar Tiwari, Member of Audit Committee

The Executive Committee assists the Board in reviewing various operational issues and make recommendations to the Board for further approval. The current members are:

1. Mr. Shabir Moosa Abdullah Al Yousef (Chairman of EC)

2. Mr. Qaboos Abdullah Al Khonji (Member EC)

3. Mr. Sanjay Kumar Tiwari (Member EC)

Brief role the committee:

The Board constituted an Executive Committee to take decisions that are beyond the authority of the executive management. The Executive Committee will comprise of 3 members of the Board. A minimum of two members constitutes a quorum for the Executive Committee meeting. The Chairman of the Executive Committee may designate any other Director member of the EC to act as Chairman in his absence. Any matters not unanimously agreed to at the Executive Committee should be referred to the Board of Directors for a decision. The matters which were agreed in the EC meeting will be ratified by the Board.

18.8. Internal Regulations

In accordance with the provisions set out in Article 68 of the CCL, the Company is required to lay down Internal Regulations for regulating the management of the Company, its business and personnel affairs through its Board of Directors, within one year from the date of transformation of the Company with the Commercial Registrar. The Company has already put in place some of the policies and regulations prescribed by the CMA and shall appropriately review the same in the light of its transformation into a SAOG Company and also formulate such additional policies and procedures that may be required in this context within the stipulated time period. These regulations shall cover at least the following apart from the rules laid down by the CMA:

a. Organizational structure of the Company stating therein the responsibilities related to the various posts of the Company and the reporting structure/ procedures.

b. Specifying the extent of the authority vested with each post with regard to approval of the financial expenditure.

c. Fixing the allowance for the meetings, remuneration and other privileges as prescribed in respect of the members of the Board of Directors and Committees constituted under its auspices and the basis for their calculation.

d. The policies related to the purchases and service contracts.

e. The minimum level of information required to be submitted to the Board of Directors.

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f. The authorities, duties and responsibilities relevant to the executive management and subcommittees.

g. The policies related to Human Resources including the salaries, appointment, development, training, promotions and termination of the services etc., covering other relevant aspects.

h. Investment policies of the Company.

i. Policies for related parties’ transactions.

j. Policies and measures for submission of material information in a transparent manner, to the CMA and the MSM within the specified time including a definition of “material information”.

k. Any other regulations that the Board of Directors of the Company may deem necessary to add for achieving adequate level of corporate governance.

18.9. Other Details

Names of the Directors who are shareholders in companies carrying out the same business as the Company

None

Disclosure of the direct or indirect interests of the Directors and top management in the Company

Directors and top management are shareholders of the Company

Disclosure of the names of Directors and officers who are/ were members of in the boards or top management of other public joint stock companies indicating the companies that had been liquidated or distressed within the last five years and the reasons for that.

None

18.10. Senior Management of the Company

# Name Designation NationalityAcademic Qualification

Service in the

Company

Total Years’ Experience

1 Arvind Bindra CEO Indian MBA, BE Mechanical 4.5 18.5

2Ganapathi Subramanian

Finance Manager Indian Masters in Commerce 4 31.5

3 P. Mani Production Manager IndianDiploma in Ceramic Engineering

7.5 33.5

4 Rajesh SinghMaintenance Manager

IndianDiploma in Electrical Engineering

3.5 26.5

5 C. Vijay B. Reddy QC Manager IndianDiploma in Ceramic Technology

3.5 22.5

6 Imran Siddiqui Sales Head (Export) IndianMaster in Business Administration

1 18.5

7Mr Himanshu Bhatia

Sales Manager (Oman)

Indian

Bachelor of Science; Diploma in Computer & Information Management

0.3 16

8Salim Said Khalfan Al Dhahli

HR & Administration Executive

OmaniBachelor of Science (Operation Management)

1.5 3.5

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Arvind Bindra, CEO

Mr Arvind Bindra joined the Company in 2010. He has over 18 years of general management experience in South Asia and Middle East. Prior to joining the Company, he worked in several senior positions with the leading Indian multinational coating company Asian Paints Ltd for over 12 years. During his assignment as the CEO of Berger Paints Emirates Ltd & Director of Asian Paints Lanka Ltd, he managed to turn around and grow the revenues and profitability of these companies successfully. Mr Bindra holds an MBA from London Business School and Bachelor of Mechanical Engineering from Delhi College of Engineering. Ganapathi Subramanian, Finance Manager

Mr Ganapathi Subramanian has 31 years’ experience in the area of accounts, finance, purchase, audit, IT and logistics at several companies operating in the hospitality, manufacturing and trading sectors. Prior to joining the Company, he was heading the finance function at NAPCO, Oman.Mr. Ganapathi holds a Master’s degree in Commerce from India.

P. Mani, Production Manager

Mr Mani has more than 33 years’ experience in the ceramics industry in the Middle East and India. Prior to joining the Company in 2007, he was heading the research and development and quality control functions at Emirates Ceramics Factory, Fujairah and worked there for 20 years.Mr. Mani holds a Diploma in Ceramics Engineering from Institute of Ceramic Technology in Tamil Nadu, India.

Rajesh Singh, Maintenance Manager

Mr. Rajesh has more than 26 years’ experience in the ceramic industry in the Middle East, Kenya and India. Prior to joining the Company in April 2011, he was the head Maintenance Manager at Al Anwar Ceramics for over 13 years.Mr. Rajesh holds a diploma in Electrical Engineering from Govt. Polytechnic in Uttar Pradesh, India. C. Vijay B. Reddy, Quality Control Manager

Mr. Vijay Reddy has more than 22 years’ experience in the Ceramic Industry in Oman and India. Before joining the Company he looked after quality control and production at Al Anwar Ceramics Oman for 5 years, and around 12 years at H&R Johnsons India at various levels.Mr. Reddy holds a Diploma in Ceramic Technology from Government Polytechnic College in Andra pradesh, India.

Imran Siddiqui, Sales Head – Exports

Mr. Imran Siddiqui has 18 years sales and marketing experience in the building material industry. Before joining the Company, he was heading as Assistance General Manager at Bahwan Building Materials, Oman. Prior to that he worked for 2 years at the Company as Marketing Manager and for 13 years at various sales positions in different organisations in India. Mr Imran holds an MBA from Aligarh Muslim University, India and Bachelor’s degree in Commerce from India.

Mr Himanshu Bhatia, Sales Manager (Oman)

Mr Himanshu Bhatia has 16 years of sales & marketing experience in building material industry. Before joining the Company, he worked as Sales Manager at Sadolin Paints, Oman for 4 years. He worked for 12 years in various sales positions in the paints & office stationery companies

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in India & Nepal. Mr Bhatia holds a Degree in Bachelor of Science and Diploma in Computer & Information Management from India.

Salim Said Khalfan Al Dhahli- HR & Administration Executive

Mr Salim Said Khalfan Al Dhahli has about 3 years of experience in the field of Human Resource and Administration. Prior to joining the Company in 2013 he was heading the HR & Administration department at a quarrying company in Sohar. Mr Salim holds a degree in Bachelor of Science (Operation Management) from Sultan Qaboos University, Oman.

All of the employees were given the opportunity to take place in the Employee Private Placement and purchase shares in the capital of the Company. Certain of the employees took up the offer and the Company resolved at an EGM held on 4 August 2013 that an aggregate amount of 33,981 ordinary shares in the capital of the Company be issued to certain of its employees. These employees are not participating in the IPO in the capacity of Selling Shareholders.

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19. Rights and Liabilities of Shareholders

19.1. Shareholder’s Responsibilities

The responsibility of a Shareholder shall be limited to payment of the value of the Shares subscribed. He/she shall not be liable for the debts of the Company except to the limit of the nominal value of the Shares subscribed.

Any person whose shareholding along with his dependent’s shareholding, reaches 10% or more of the Company’s share capital, shall inform the CMA about the same through a written communication. Further, he/she shall inform the CMA regarding any transaction or dealing which leads to the increase of this percentage immediately after it happens.

No single person or related persons up to second degree shall hold 25% or more of the shares of a joint stock company whose shares are offered for public subscription, in accordance with the holding rules set out by the CMA.

19.2. Shareholder’s Rights

All Shares shall enjoy equal rights in regards to declared profits at the General Meeting in accordance with the Commercial Companies Law. These rights include the following:

A. To receive the dividends declared by the General Meeting;

B. The preferential right to subscribe for the Shares;

C. The right to participate in the distribution of the surplus assets of the Company in the event of liquidation;

D. The right to dispose of the Shares in accordance with the law;

E. The right to peruse the balance sheet and profit and loss account of the Company and the Shareholders’ Register;

F. The right to be notified through invitation for the General Meeting and to participate and vote in such meetings either in person or through proxy;

G. The right to apply for annulment of any resolution adopted by the General Meeting or Board of Directors if it is in breach and violation of the Laws, Articles or its Internal Regulations; and

H. The right to sue the members of the Board of Directors and Auditors of the Company on behalf of the Shareholders or the Company in accordance with the provisions set out in Article 110 of the CCL.

The CMA may, upon material reasons raised by Shareholders who own at least 5% of the Shares, suspend the resolutions of the general meeting which are made in favour of a certain category of Shareholders or in the interest of the members of the Board or others.

19.3. Reports and Statements

The Board shall prepare un-audited quarterly financial statements for the first, second and third quarter of each Financial Year. It shall also prepare an annual report within two months from the end of the Financial Year comprising of the audited balance sheet, profit and loss statement, cash flow statement, changes in Shareholder’s equity, report of the Board, report on the discussions held by the Board and their analysis and report on the organization and management of the Company. These statements should be disclosed 2 weeks prior to the AGM through the electronic transmission system through the MSM website.

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The un-audited quarterly financial statements shall be forwarded to the Information Centre of the MSM within thirty days from the end of each quarter or any other legal period prescribed by the disclosure rules and conditions issued by CMA through the private Electronic Transmission System of the Centre. The said Centre shall also be provided with two copies duly endorsed by the Board of Directors of the Company. The Company shall also have it published within the aforementioned period.

On 29 May 2014, the CMA issued a circular to all public joint stock companies strongly urging them to disclose their initial quarterly results within 15 days from the end of each quarter, approved by the executive management and prior to the approval by the board.

19.4. AGM’s

The Board shall extend an invitation to the Shareholders to attend the AGM within three months from date of end of the Financial Year. The AGM shall be responsible for the deliberation of the following:

a. To study and approve of the report of the Board of Directors. b. To study and approve of the report on the management and organization. c. To review the Auditor’s report and approval of the balance sheet and profit and loss

statement. d. To study and approve the corporate governance report. e. To review the report on declaration of dividend. However, such dividend shall be distributed

only from the net profit generated or from the Special Reserves Accounts subject always to the provisions set out in Article 106 of the CCL.

f. To review the report on the sitting allowance for the meetings of the members of Board and committees constituted under it for the forthcoming Financial Year and approve the same.

g. To review the annual remuneration (if any) of the members of the Board of Directors for the Financial Year.

h. To look into the transparency of any transactions held with the related parties during the previous Financial Year (if any).

i. To make a note of any expected transactions with the related parties during the next Financial Year (if any).

j. To appoint Auditors for the next financial year and fix their fees, taking into consideration the provisions laid down in the law.

k. To elect members to the Board in case of expiry of the term of office of one or more of them or in the case of a vacancy that has arisen on the Board.

19.5. Ordinary General Meetings

The Board of Directors may convene a general meeting at any time and such meeting shall be convened whenever required by Law or the Articles of Association, or upon request of one or more Shareholders who represent at least 25% of the capital of the Company.

The Board shall establish the agenda of the general meeting. If the meeting is convened by the auditors, the agenda shall then be established by them. The Board, or the auditors if necessary, shall include in the agenda any proposal put forward by the Shareholders who represent more than 10% of the capital of the Company provided that such proposal is submitted for inclusion in the agenda at least one month before the date of the meeting.

The resolutions of the ordinary meeting shall be void unless the meeting is attended by

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Shareholders or their proxies who represent at least half the capital of the Company. If such a quorum is not formed within one hour of the time stipulated for the start of the meeting, a second meeting shall be called to discuss the same agenda. The second ordinary meeting shall be notified to the Shareholders in the same manner as the first meeting, at least one week prior to the date set for the second meeting. The resolution of the second meeting shall be valid regardless of the number of shares represented, provided that such meeting is held within one month from the date of the first meeting. The resolutions of the ordinary general meeting shall be adopted by relative majority of the vote cast in respect of a given resolution.

19.6. Extraordinary General Meetings

An EGM shall be convened to decide on the following issues:

a. Reduction or increase in the authorised Share Capital of the Company; b. Dissolution, liquidation or merger of the Company; c. Sale of the Company’s business or its disposal in any form or manner; d. Amendment of the Company’s Articles of Association; e. Repurchase some of the Company’s shares which do not exceed 10% of the paid up capital

provided a prior approval is obtained from CMA; f. Transform or change the legal form of the Company to another legal form; and g. Any other matter reserved to the extraordinary general meeting by law.

The resolutions of the EGM shall not be valid unless the meeting is attended by Shareholders or proxies representing at least three-quarters of the Company’s capital. If a quorum is not present within one hour of the time stipulated for the start of the meeting, a second meeting shall be convened to discuss the same agenda. The Shareholders shall be notified of the second extraordinary general meeting in the same manner as the first extraordinary general meeting, at least two weeks prior to the date set for the second meeting.

The resolutions of the second meeting shall be valid if the meeting is attended by shareholders or proxies representing more than half of the Company’s capital, provided such meeting is held within six weeks of the date of the first meeting.

The resolution of the EGM shall be adopted by a majority of three-quarter of the votes cast in respect of any given resolution, provided such resolution shall always receive votes representing more than fifty percent of the Company’s capital.

Any shareholder or any interested party may refer to the Commercial Court (the competent department) within five years from the date on which the meeting was held, to decide on nullification of any decision taken during the meeting in violation of the CCL, or to the provisions of the Articles or by-laws or through fraud or misuse of authority.

19.7. Transfer of Ownership of the Shares

The transfer of ownership of the Shares shall take place through disposition in accordance with the instructions laid down by the MSM. Shareholders may sell and transfer their Shares without restrictions in accordance with the CCL, with the condition that the foreign shareholding shall not exceed 70% of the share capital of the Company under any circumstances.

Similarly, the shareholding of each individual shall not exceed the maximum limit prescribed and provided for in the CCL and CML and its Executive Regulations respectively, unless necessary approvals are secured.

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20. Subscription Conditions and Procedures

20.1. Eligibility for the subscription to the Offer Shares

The subscription to the Offer Shares will be open to individuals (natural persons) and mutual funds registered at the CMA in Oman, who have their accounts with the MCD, as on the Offer Closing Date. All GCC individuals are treated as Omani individuals for the purpose of owning shares in Omani companies.

Post listing on the MSM, non-GCC Shareholders are permitted to own Shares equal to no more than 70% of the paid up capital of the Company.

No single person or related person up to a second degree can hold 25% or more of the shares of a public joint stock company, except with the explicit approval of the CMA.

The Company, the Selling Shareholders, the Issue Manager and the Legal Advisors are not liable for any changes in applicable laws or regulations that occur after the date of this Prospectus.

Applicants are advised to make their own independent investigations to ensure that their Applications comply with prevailing laws and regulations.

20.2. Prohibitions with regard to the Applications for subscription:

The following are prohibited from subscribing to the Offer:

A. Sole Proprietorship Establishments and juristic persons (other than mutual funds registered at the CMA in Oman). However, the owners of sole proprietorship establishments may submit Applications in their personal names.

B. Trust Accounts. Customers registered under trust accounts may only submit Applications in their personal names.

C. Multiple Applications. An Applicant may not submit more than one Application.

D. Joint Applications (i.e. Applications made in the name of more than one individual, including Applications made on behalf of legal heirs). These Applications should only be made in their personal names

All Applications falling in one of the above categories will be rejected without contacting the Applicant.

20.3. Applications on behalf of Minor Children:

1. For the purpose of this Offer, any person born after 15th October 1996 shall be treated as a minor.

2. Only the father may subscribe on behalf of his minor children.

3. If the Application is made on behalf of a minor by any person other than the minor’s father, the person submitting the Application will be required to attach a valid, duly notarised Shari’a (Legal) power of attorney authorising him or her to deal in the funds of the minor through sale, purchase and investment.

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20.4. Shareholder’s (Applicant’s) Number with the MCD:

1. Any Applicant who subscribes for the Offer Shares must have an account and shareholder’s number with the MCD. Any Applicant may apply to obtain an Investor Number and open an account by completing the MCD application form. This may be obtained from the MCD’s Head Office or its website at http://www.csdoman.co.om, or from brokerage companies licensed by the MSM. The completed form may be submitted by an Applicant through any of the following channels:

- At the Head Office of the MCD based in the Commercial Business District, Muscat, Oman.

- At the branch of the MSM based in Salalah, Oman, Tel: +968 23299822, Fax:+96823299833

- At the office of any brokerage company licensed by the MSM. - By sending a facsimile to the MCD at +968 24817491. - By opening an account through the MCD website at http://www.csdoman.co.om.

2. In order to open an account and receive an Investor Number with MCD, a juristic person will be required to furnish a copy of its constitutional documents, in the form prescribed by the MCD, along with a completed MCD application form.

3. Applicants who already hold accounts with the MCD are advised, before the Offer, to re-confirm their MCD account particulars such as full name, postal address, civil ID number or passport number and particulars of bank account. Applicants may update their particulars through any of the channels mentioned above

All correspondence including allocation notices and dividend cheques will be sent to Applicant’s address as recorded at the MCD. Applicants should ensure that their address as provided to the MCD is correct.

4. Applicants after opening their accounts and updating their particulars must obtain from MCD the correct Investor Number to be recorded in the Application Form. Verification of the number is the responsibility of the Applicant. Applications not bearing the correct Investor Number will be rejected without contacting the Applicants.

For more information on these procedures, Applicants should contact the MCD: Muscat Clearing& Depository Co., SAOCTel. 24822222- Fax. 24817491http://www.csdoman.co.om/

20.5. Offer Period:

The Offer shall commence on 16th September 2014 and end on 15th October 2014, with the end of the official working hours of the Collecting Banks.

20.6. Minimum Limit of Public Subscription

The minimum number of Offer Shares is as set out below:

Individuals (natural persons) : 500 Shares Mutual funds registered at the CMA in Oman : 100,100 Shares Applications above the minimum limit shall be in multiples of 100.

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20.7. Maximum Limit of Public Subscription

The maximum number of offered Shares that can be applied for by any investor is as per the CML (Article 7), which stipulates a maximum limit for an Application at 10% of the total Offer size which equates to 2,000,000 (Two Million) Offer Shares. It is not permissible for any Applicant to subscribe for more than this amount.

For the purpose of calculation of this percentage the Application of a father (or guardian) shall be merged with the Applications of his minor children. If the volume of the Shares subscribed exceeds the said percentage, the Shares applied under each Application shall be reduced proportionately before making the allotment.

20.8. Terms of Payment:

Each Collecting Bank will open an escrow account entitled the “Al Maha Ceramics Public Offer” account for the collection of the Application Money. This account will be managed by each Collecting Bank who, after allotment and refunds, will transfer the balances in such account to the account(s) specified by the Issue Manager. Each Applicant can pay by cash, draw a cheque or demand draft for the amount payable at the time of submission of the Application.

20.9 Particulars of the Bank Account:

1. Each Applicant is required to furnish the particulars of its bank account (registered in the name of the Applicant). The Applicant must not use the bank account number of any other person except in the case of minor children only.

2. If the bank account of the Applicant is registered with a bank other than where the Application is submitted, the Applicant will be required to submit a document to confirm the correctness of the bank account particulars. This can be done by submitting any document from the bank of the Applicant that states the account number and name of the account holder. Documents that may be accepted include account statements or a letter or any document issued by the bank confirming this information. The Applicant is responsible for ensuring that the evidence submitted is legible and contains the required information. The Applicant is not obliged to submit any evidence with regard to the accuracy of its bank account if it is subscribing through the Collecting Bank where it maintains its account. In this case, the bank will be required to verify and confirm the correctness of the Applicant’s account through its own system and procedures or through the evidence submitted to it by the Applicant.

3. In accordance with the instructions of the CMA, the details of the bank account will be listed in the records of the MCD for transferring any refund as well as for crediting any dividends paid by the Company in future. For Applicants who already have bank accounts registered with the MCD the account mentioned in the Application will be used for the transfer of refunds only.

4. The Application containing the bank account number of a person other than the Applicant will be rejected, with the exception of the Applications made on behalf of minors that contain bank accounts particulars of their father.

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20.10. Documentation Required

1. Document confirming the accuracy of the bank account number as provided for in the Application (only where the Application is made through a Collecting Bank other than where the Applicant has the account).

2. Copy of a valid Power of Attorney duly endorsed by the competent legal authorities in the event the Application is on behalf of another person (with the exception of the Application made by a father on behalf of his minor children).

3. In case of applications by mutual funds registered in Oman which are signed by a person in his or her capacity as an authorised signatory, a copy of adequate and valid document (CMA Registration and Authorized Signatory Form) should be attached.

20.11. Mode of Application:

1. The Applicant will be responsible for satisfying all the particulars and the validity of the information set out in the Application. Collecting Banks have been instructed to accept only the Applications satisfying all the requirements of the Application Form and the Prospectus.

2. The Applicant, before completing the Application, shall read the Prospectus including the Offer terms and conditions.

3. The Applicant shall fill in the Application with all the relevant details as required by the Application and the Prospectus including the Applicant’s number with MCD, civil number and date of birth for minor children.

4. The Applicant shall submit the Application to one of the Collecting Banks as referred to in the Prospectus, together with the Application money and any relevant documents in support of the Application.

5. Cheques or demand drafts shall be made in favour of “Al Maha Ceramics Public Offer”.

20.12. Bank Receiving the Subscription (Collecting Banks) :

The Applications shall be accepted by one of the following commercial banks during the official working hours only:

- Oman Arab Bank SAOC

- Bank Muscat SAOG

- National Bank of Oman SAOG

The Collecting Bank receiving the Application is required to accept the Application after confirmation of compliance of the procedures set out in the Prospectus. The Collecting Bank must instruct the Applicants to comply and fulfil any requirements set out in the Application.

The Applicant must submit an Application to one of the Collecting Banks on or before the Offer Closing Date. The Collecting Bank shall refuse any Application received after the official working hours on the Offer Closing Date.

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20.13. Rejection of Applications:

The Collecting Banks shall reject Applications in the following circumstances:

1. If the Application is not signed by the Applicant.

2. If the Application money is not paid by the Applicant in accordance with the conditions set out in the Prospectus.

3. If the Application money is paid by cheque and the cheque is dishonoured for whatever reason.

4. If the Application is submitted in joint names.

5. If the Applicant is a sole proprietorship or trust account or a juristic person (other than a mutual fund registered in Oman).

6. If the Application does not include the Applicant’s Investor Number registered with the MCD.

7. If the Investor Number furnished in the Application is incorrect i.e. it does not match with the Applicant’s name.

8. If the Applicant submits more than one Application in the same name, all of them will be rejected.

9. If the supporting documents are not enclosed with the Application.

10. If the Application does not contain all the particulars of the bank account of the Applicant.

11. If the particulars of the bank account provided for in the Application are found to be incorrect

12. If the bank account in the Application does not belong to the Applicant, with the exception of Applications submitted in the names of minor children, who are allowed to make use of the particulars of the bank accounts held by their father.

13. If the power of attorney is not attached to the Application in respect of an Applicant who subscribes on behalf of another person (with the exception of the fathers who subscribe on behalf of their minor children).

14. If the Application does not comply with the legal requirements or other requirements as provided for in the Prospectus.

If the Collecting Bank observes, after receipt of an Application and before the expiry of the time schedule prescribed for handing over of the Applications to the Issue Manager, that the Application has not been complied with the procedures set out in the Prospectus, due effort will be taken to contact the Applicant so that the mistake may be corrected. If the Applicant does not rectify the Application within the period referred to, the Collecting Bank will return the Application together with the Application money to the Applicant and it will not be considered for allotment.

The Issue Manager may reject any Application under any of the conditions referred to above, subject to securing the approval of the CMA and submission of a comprehensive report furnishing the details of the Applications that are rejected and the reasons behind the rejections.

If it appears from the final subscriber register made by all the Collecting Banks that there are Applications with the same Investor number or civil number or the same bank account (except for minor children) all the Applications shall be rejected for belonging to the same subscriber.

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20.14. Enquiry & Complaints:

Applicants who intend to seek clarification or file complaints with regard to the issues related to the allotment or rejected Applications or refund of the Application money in excess of the subscription, may contact the branch of the Bank where the Application was made. In case of the absence of any response from the branch, the Applicant may contact the Collecting Banks as under:

Oman Arab Bank SAOC Person (s) in charge: Ms. Sahar K. Al Zagha

Address: PO Box: 2010, Ruwi, Postal Code 112, Sultanate of OmanPhone: +968 24827328Fax: +968 2482 7367E-Mail: corporatefinance@oabinvest.com

Bank Muscat SAOGPerson (s) in charge: Mr. Ahmed Al Busaidi Address: PO Box 134, Ruwi, Postal Code 112, Sultanate of OmanPhone: +968 2476 8064Fax: +968 2478 7764E-Mail: ahmedbu@bankmuscat.com

National Bank of Oman SAOGPerson (s) in charge: Mr. Hussain Al Abdullah Al LawatiAddress: PO Box 751, Ruwi, Postal Code 112, Sultanate of OmanPhone: +968 2477 8757 / 8610 Fax: +968 2477 8993E-Mail: nbobackoffice@nbo.co.om

If the Collecting Bank fails to resolve the complaint with the Applicant, it will refer the subject matter to the Issue Manager and keep the Applicant informed of the progress and development in respect of the subject matter of the dispute. The Applicant may contact the Issue Manager on the following address:

Oman Arab Bank SAOC Person (s) in charge: Mr. Muhammad Kashif Sabih Mr. Zaydoon Abu-Qarmool Phone: +968 2475 4315 +968 2475 4663

E-mail: corporatefinance@oabinvest.comFax: +968 2482 7367Address: PO Box: 2010, Ruwi, Postal Code 112, Sultanate of Oman

20.15. Overall Offer Split and Allotment Procedures:

In the case of over-subscription of the Offer, the eligible Applications shall be segregated into two Categories and the Offer Shares will be allotted among the eligible Applicants as follows:

Category I: 14,000,000 (Fourteen Million) Shares, being 70% of the Offered Shares will be allocated on a

pro-rata basis to individuals (natural persons) applying for 100,000 shares or less.

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Category II: 6,000,000 (Six Million), being 30% of the Offered Shares will be allocated on a pro-rata basis to

individuals (natural persons) applying for more than 100,000 Shares and mutual funds registered at the CMA in Oman.

The CMA in co-ordination with the Issue Manager will finalise the actual basis of allocation.

The CMA may decide to allocate a minimum number of Offer Shares equally to all eligible Applicants, taking into consideration the small subscribers, and the remaining Offer Shares shall be distributed on a pro-rata basis.

Allotment for non-Omani Shareholders will be limited to a maximum of 70% of the paid up capital of the Company. The final allocation on the above basis will be decided by the Issue Manager and the Company in consultation with the CMA.

20.16. Basis for Undersubscribed Offer Shares:

In case of a shortfall in subscription, the Offer Shares will be adjusted in proportion to the number of Shares offered by the Selling Shareholders.

Any under subscription in a Category shall be carried to the other Category.

20.17. Allotment Letters and Refund of Money:

The Issue Manager will arrange to allot the Offer Shares to the Applicants within 15 days after the end of the Offer Period after receiving the approval of the CMA on the basis of allotment. The Issue Manager will arrange to send allotment letters to the Applicants who have been allotted Shares as per the addresses registered with the MCD immediately after obtaining CMA approval for the allotment.

Where an Applicant has been allocated fewer Shares than indicated in the Application, the excess amount, if any, paid on Application, will be refunded to the Applicant from the escrow account of the respective Collecting Bank(s). The Issue Manager will also instruct the Collecting Banks to refund the excess money to the eligible Applicants within 15 days after the end of the Offer Period and after receiving the approval of the CMA.

The Applicant shall immediately after the announcement of the allotment verify with MCD the Shares allotted to him because allotment notices may take time to reach the Applicant and the listing of the Shares will be as per the proposed timetable.

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20.18. Proposed Timetable:

The following table shows the expected time schedule for completion of the subscription procedures:

Procedure Date*

Commencement of subscription 16th September 2014

Closing of subscription 15th October 2014

Due date for the Issue Manager to receive the subscription data and final registers from the Collecting Banks

22nd October 2014

Notifying the CMA of the outcome of the subscription and the proposed allotment

26th October 2014

Approval of the CMA with regard to the proposed allotment 27th October 2014

Completion of the allotment procedures and commencement of refund 29th October 2014

Listing of the Shares on the MSM 3rd November 2014

*The above are only expected dates and are subject to change.

20.19. Listing and Trading of Shares:

The Shares shall be listed on the MSM in accordance with the laws and procedures that are in force on the date an application is made for the listing and registration. The above listing date is an estimated date and the exact date will be published on the MSM website.

20.20. Responsibilities and Obligations:

The Issue Manager, Collecting Banks and the MCD shall abide by the responsibilities and obligations set out by the directives and regulations issued by the CMA. The Issue Manager and the Collecting Banks must also abide by any other responsibilities that are provided for in the agreements entered into among them and the Company and/or the Selling Shareholders.

The parties concerned will be required to take remedial measures with regard to the damages arising from any negligence committed in the performance of the functions and responsibilities assigned to them. The Issue Manager will be the body responsible before the regulatory authorities in taking suitable steps and measures for repairing such damages.

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21. Undertakings

21.1. Al Maha Ceramics SAOG (Under transformation)

The Board of Directors jointly and severally hereby confirms that, to the best of their knowledge:

1) The information provided in this Prospectus is true and complete.

2) Due diligence has been taken to ensure that no material information has been omitted, the omission of which would render this Prospectus misleading.

3) All the provisions set out in the CML, the CCL, and the rules and regulations issued pursuant to them have been complied with.

Directors who are authorized to sign the Prospectus pursuant to the EGM held on 25 February 2013:

Name Signature

Masood Bin Hameed Bin Malik Al Harthy -sd-

Abdulredha Mustafa Sultan -sd-

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21.2. Financial Advisor and Issue Manager

Pursuant to our responsibilities under Article 3 of the Capital Market Law, Article 13 of the Executive Regulations of the Capital Market Law, issued under Ministerial Decision No. 1/2009 (as amended), and the directives issued by the CMA, we have reviewed all the relevant documents and other material required for the preparation of the Prospectus pertaining to the Offer.

The Board of Directors will bear the responsibility with regard to the correctness of the information provided in the Prospectus, and they have confirmed that to the best of their knowledge no material information has been omitted, the omission of which would have made the Prospectus misleading.

We confirm that we have conducted due diligence required by our profession with regard to the Prospectus which was prepared under our supervision and, based on the reviews and discussions with the Company, its Directors, Shareholders and other related parties, we confirm the following:

1) We have conducted reasonable due diligence to ensure the information given to us by the Founders / Shareholders/ Board of Directors and included in the Prospectus is conformant with the facts in the documents and other material of the Offer.

2) To the best of our knowledge and from the information available from the Company, the Company has not omitted any material information, the omission of which would render the Prospectus misleading.

3) The Prospectus and the Offer to which it relates, is conformant with all the rules and terms of disclosure stipulated for in the Capital Market Law, the Executive Regulation of the Capital Market Law issued under Ministerial Decision No. 1/2009 (as amended), the prospectus models applied by the CMA, the CCL and the directives and decisions issued in this regard.

4) The information contained in this Prospectus in Arabic (and the unofficial translation into English thereof) is true, sound and adequate to assist the Applicants to make the decision as to whether or not to invest in the Shares offered.

-sd-

Oman Arab Bank SAOCInvestment Management Group

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21.3. Legal Advisor

The legal advisor whose name appears below, hereby confirms that all the procedures taken for the offering of the Shares the subject matter of the Prospectus are in line with the laws and legislations related to the Company’s business and the CCL, the Capital Market Law and the regulation and directives issued pursuant to them, the requirement and rules for the issue of the Shares issued by the CMA and the Articles of Association. The Company has obtained all the consents and approvals of the official authorities required to carry out the Offer the subject matter of the Prospectus.

-sd-

Dentons & Co., Oman Branch

-sd-

S & A Law Firmد

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