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Oman Cables Industry (SAOG)

Annual Report 2010

OCI ANNUAL REPORT 2010

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2 OCI ANNUAL REPORT 2010


29OCI ANNUAL REPORT 2010


His Majesty Sultan Qaboos bin Said







3

Our VisionTo ensure that through our product offering, we remain a leader in our

industry in quality and performance, exceeding the expectations of our

customers and stakeholders

Our MissionTo continuously strive for excellence in all aspects of our business through

the integration of sustainable business development and innovation,

enhancing shareholder value and outstanding customer service

Values & PrinciplesBuild Sustainable Growth through Innovation

Transparency in all our actions

Promoting an environment of open Communication for all

Integrity driven by Accountability

Continued integration of World Class Quality Management

Safety is not compromised

Responsible corporate citizenship in compliance to Environmental norms







5

Contents

Board of Directors 7

Report of the Board of Directors 9 - 13

Management Discussion & Analysis 14 – 16

Auditors report to the Shareholder on Corporate Governance 17

Corporate Governance Report 18 – 23

Report of the Auditors 26 - 27

Statement of Financial Position 28

Income Statement 29 - 30

Statement of Changes in Equity 31 - 32

Cash Flow Statement 33

Notes 34 - 70







7

Mustafa Bin Mukhtar Bin Ali Al LawatiChairman

Hussain Salman Al LawatiVice Chairman & Managing Director

Maqbool Ali SalmanDirector

Christian RaskinDirector

Dr. Mohammed ShihabDirector

Salim RabbaniDirector

Hilal Al AhsaniDirector

Board of Directors







OCI’s management cautiously applies all its

business strategies with a primary objective to

ensure sustainability and to retain the inherent

strength of the Company that has been built with

hard toil over two decades







9

To our esteemed shareholders

With the grace and mercy of God, Allah (Subhanahu

Wattalla), on behalf of the Board of Directors of Oman Cables

Industry (SAOG), we are pleased to welcome you all to the

22nd Annual General Meeting (AGM) of Oman Cables Industry

(SAOG) and we wish you all a Blessed and Prosperous New

Year.

It is a great privilege to mention that Oman Cables has won

two prestigious awards i.e. Corporate Governance Excellence

Award in the Industrial category and Overall Excellence

Award in the entire listed companies on the Muscat Securities

Market. This highly regarded recognition was awarded to

our company by the Capital Market Authority of Oman on 2nd

January 2011. It is a reflection of OCI’s consistent adherence

to Corporate Governance over the years, with constant

enhancement. We congratulate each and every shareholder

as well as all stakeholders of the company. We extend our

sincere gratitude to the authorities of CMA for this unique

recognition which will enable OCI’s Management to strive

further to enhance the Corporate Governance at OCI.

We are pleased to report to you on the improved performance

of our company for the year 2010. Following the Global

financial crises and the consequent changes in the economies,

have proved once again that successful enterprises needs

to have resilience to withstand the dramatic volatilities

witnessed in the recent past. OCI remains undeterred and

demonstrated resilience against the economic fluctuations

by taking proactive and constructive measures to protect

shareholder’s value.

BASEC (British Approvals Service for Cables) accreditation

provides product certification and services for electrical

cables that is synonymous with quality and safety of the

products. OCI obtained BASEC certification for complete range

of products and has successfully supplied BASEC certified

products. BASEC certification will further strengthen OCI’s

Quality Management System and is expected to enhance

OCI’s position in the countries where BASEC certified products

are valued with a premium against non-BASEC products.

The year 2010 witnessed a recovery in demand for OCI’s

products especially in our home market, however, there are

continued pressure on the sales and profitability due to the

increased competition from International competitors.

The demand in the regional market has witnessed moderate

growth and the emphasis remains focused on megatrends

with the development of Power, Telecom, Water and

Transportation sectors.

Sales in the international markets are slowly returning to

previous levels and it is anticipated that increased growth

will be seen as the economies return to normality. The

company has added further dimensions to its international

markets by successfully entering new markets. These

initiatives will broader the customer base and targeted to

achieve significant progress.

The fluctuations in commodity prices has also put pressure on

the Gross Profit, however, OCI has tackled this by countering

with its low cost base and effectively strengthening its

markets; which stood OCI in good stead to compete in the

changing market scenario. Despite these challenges, the

company achieved a sales of RO 191.8 million, a growth

Report of the Board of Directors







of 23% and achieved a profitability of RO 8.3 million, an

increase of 23%.

The management is continually focusing on key drivers of

growth with emphasis on enhancing the product offering as

well as new international accreditations in selected market

sectors. The company remains committed to a consistent

Capital Investment Programme to ensure that the company’s

strategic objectives are achieved.

During the year, our company has further enhanced its

operations and its internal efficiencies and has become an

Efficient Manufacturing Industry to service its customers

across the Globe.

Aluminum Rod Plant at Sohar – (OAPIL)

Oman Aluminium Processing Industries LLC (OAPIL) is a joint

venture between Oman Cables and Takamul Investment Co

(Oman Oil). In continuation of the regular quarterly updates

we are pleased to inform that the project has been finally

completed after overcoming the initial teething difficulties

within the budgetary cost. OAPIL was capable to obtain

in a short span of time its product approval locally and

internationally.

The company successfully exported aluminum rods to various

countries during the year under review and the total Sales for

the part of the year since commissioning arrived to RO 11.8

million with the Net Loss of RO 185,000/- which is lower

than what was budgeted.

It is further to mention that the Omanization has been given

top priority since inception and the current work force consists

about 100 employees and more than 70% are Omanis.

Omani engineers had extensive training at the operations

of Southwire, which is OAPIL’s equipment supplier and also

operates the largest Aluminium Rod and Overhead Line

Conductor Plant in United States. This will greatly contribute

to the smooth operations of the plant in the future.

The designed capacity of the plant is around 48,000 tonnes

and it is expected that the plant will operate at full capacity

in 2011 of Aluminium to Rod and Overhead line conductors.

OAPIL is equipped with the latest technology and

manufacturing plant in the region is well positioned to

ensure a sustainable market position in the future. The aim

of the shareholders is to make OAPIL, a truly Global player in

the Aluminium industry.

OAPIL is a subsidiary of Oman Cables and hence OAPIL

accounts are consolidated with that of Oman Cables Industry

and reported as “Group”.

Human Resources

OCI believes that its people are the biggest strength to

realize its vision to create a world-class organization. OCI

is a young, energetic and vibrant company that attracts

global professionals and the company has sourced some

outstanding local and global talent to emerge far stronger

and to drive its growth strategy going forward.

It is further to mention that the Omanization

has been given top priority since inception

and the current work force consists about 100

employees and more than 70% are Omanis.

Omani engineers had extensive training at

the operations of Southwire, which is OAPIL’s

equipment supplier and also operates the

largest Aluminium Rod and Overhead Line

Conductor Plant in United States. This will

greatly contribute to the smooth operations of

the plant in the future.







11

We have today over 630 employees with 55% Omanization.

Omanization is constantly increasing noticeably in the

technical functions of the company. The company focused

to the development of Omani engineers by exposing them

with sound business knowledge, leadership and technical

skills on a continuous basis. Omani engineers and graduates

have been deputed to the developed countries on a regular

basis to hone their skills to operate advanced technological

processes. Further our company is collaborating with local

institutions with the aim to build local talent to meet OCI’s

requirements. These initiatives added immense value to

the organization’s objective to build sustainability into the

operations and embedded a culture of belongingness to the

company.

Corporate Governance

The Company has internal systems and manuals to assist the

management in day-to-day operations. These systems and

manuals are regularly reviewed and updated in-line with

statutory requirements while meeting the organizations

goals that gives transparency to all transactions and in-line

with Capital Market Authority regulations as a public listed

company on the Muscat Securities Market and International

Financial Reporting Standards (IFRS).

We have in place a well qualified Internal Audit team

reporting directly to the Audit Committee of the Board to

audit and advise on financial and operating systems, to

ensure that all financial and other operational reporting is a

true reflection of the business of the company.

OCI shares the information with all stakeholders and public

in general through regular publication of its quarterly and

annual results in print media, on MSM and OCI’s website.

The Board will continue to monitor the operations with

the input from the Audit Committee and the Strategic Risk

Committee.

Community Support

OCI believes in giving back to the society through its Corporate

Social Responsibility (CSR) programme. Oman Cables CSR has

a strong base, that provides assistance to the organizations

that are dedicated to improve the quality of life for the less

privileged people in the society.

Future Outlook

The recovery in demand indicates that the medium and long-

term outlook for the cable industry remains promising as the

demand for energy generation, transmission and distribution

is rising Globally. OCI is well placed to benefit from a upward

recovery given its strong customer base, low cost structure,

continued organic growth programme, and sound financial

position. Our priorities are focused on further strengthening

our position in the markets we serve and we are cautiously

optimistic of the future growth.

Omani engineers and graduates have been

deputed to the developed countries on a

regular basis to hone their skills to operate

advanced technological processes. Further our

company is collaborating with local institutions

with the aim to build local talent to meet

OCI’s requirements. These initiatives added

immense value to the organization’s objective

to build sustainability into the operations and

embedded a culture of belongingness to the

company.







The global financial and economic crisis of 2008/2009 was a

major test for all the Gulf countries, but Oman’s steady and

well planned Government development policy and its long-

term vision kept Oman relatively immune from the worst

implications of the crisis. As the World economy is on the path

of recovery and oil prices are on the rise again, the Sultanate

is geared for further economic growth and development

through enhancing and modernizing its infrastructure. OCI

through its management will strive and put all efforts to

benefit from these major projects in Oman and the Region.

OCI has invested in broadening its product range for the oil

and gas sector and is expected that it will further enhance

OCI’s market share through a broader customer base.

Operational Review

Sales:

Despite the challenging market conditions, our sales

performance is better than the previous year and the

Company’s market share in key customer segments has

shown significant improvement due to the strategic intent

to broaden the company’s product offering as well as

developing new market sectors, Globally.

We have witnessed constant growth and are pleased to

report sales revenues of RO 191.8 million for the company

for the year 2010, an increase of 23% compared to 2009 and

the sales of RO 200.9 million for the Group, an increase of

29% compared to 2009.

The increased sales is attributable to further penetration

of selected Global markets, recovery in the copper prices

and the increased demand for OCI’s products in the local

market due to the Government’s continued expenditure on

infrastructure development.

The Net Profit of the company for the year 2010 has increased

to RO 8.3 million compared to RO 6.7 million achieved in

2009, an increase of 23%. The Net Profit for the Group for

the year 2010 has increased to RO 8.1 million compared to

RO 6.6 million achieved in 2009, an increase of 22%.

The improved profitability is due to management’s continued

initiatives towards cost optimization, managing overheads in

spite of increased volumes, alternate raw material sourcing

and tight working capital management. The company has

achieved excellent progress on international accreditations

which has also contributed positively to the operating

results. The continuous focusing on improving operational

efficiencies and processes to maintain and enhance our cost

base is reflected in the operating margins.

Dividend

The Board of Directors, during the board meeting No

01/2011 held on 22 January 2011 reviewed the company’s

annual accounts. Considering the guidelines issued by

the Capital Market Authority, the liquidity requirements

for OCI’s operational needs and OCI’s uninterrupted record

of declaration of dividend, the Board members propose

distributing a cash dividend to OCI’s shareholders.

Taking into account the financial performance for 2010, the

Board recommends to distribute 40% dividend on paid-up

capital, ie RO 0.040 baiza for each share value of RO 100

baiza, to the shareholders registered as on the date of

Annual General Meeting.

The improved profitability is due to

management’s continued initiatives towards

cost optimization, managing overheads in spite

of increased volumes, alternate raw material

sourcing and tight working capital management.

The company has achieved excellent progress

on international accreditations which has

also contributed positively to the operating

results. The continuous focusing on improving

operational efficiencies and processes to

maintain and enhance our cost base is reflected

in the operating margins.







13

The Board of Directors also recommends to the shareholders

at the AGM to approve the total Director’s remuneration of RO

200,000 (including meeting attendance fees) to be paid to

the Board of Directors, in recognition and appreciation of their

efforts towards their responsibilities and for their continuous

inputs, guidance and support to the management.

Conclusion

We have faith in the management of OCI and the two

decades of growth history will enable OCI to create

sustainable stakeholder wealth and enlarge our contribution

to the Omani Society.

We acknowledge the role played by our local and global

customers, business associates, the finance fraternity, and

all other stakeholders for their support during the past year.

OCI acknowledges the great support extended by the

Government of His Majesty Sultan Qaboos Bin Said, the

Authorities in the Ministry of Commerce & Industry as well

as all other Ministries.

We pray to the Almighty to help our beloved Oman to

develop even more under the wise leadership of His Majesty

Sultan Qaboos Bin Said by granting His Majesty with good

health and longevity.

Mustafa Bin Mukhtar Bin Ali Al Lawati

Chairman of the Board of Directors

(Arabic version prevails over the English)







1. Industry Structure and Development

The Energy sector is an important element of infrastructure

development Globally and is viewed as a strategic sector

in any country. The Electrical industry is one of the major

players within the energy sector and the Cable Industry is a

key component in the chain.

While the Energy sources have evolved and diversified

over the years mainly from Hydrocarbon to Nuclear and

Renewable sources, the method of transmission and

distribution of electric power has essentially remained the

same using different types of conductors and cables.

The development within the cable industry is further refined

to the conducting materials such as copper, aluminium,

aluminium alloys and enhanced insulating materials with

unique properties for specific applications.

Oman Cables is well positioned in having the complete

product spectrum for transmission and distribution of electric

power and is also at the forefront of the latest technology

developments in the application fields.

2. Opportunities and Threats

With the consistent development of the infrastructure in

the Middle East driven primarily by Oil revenues and other

emerging economies, presents OCI the opportunities for

accelerated growth.

OCI’s focused strategies on backward integration and product

diversification is to capitalize on opportunities in Oman,

MENA region and selected World markets. OCI has further

expanded its marketing network beyond GCC in-line with

OCI’s strategic intent and capabilities.

OCI’s Balance Sheet has inherent strength that can be

leveraged quickly to seize the growth opportunities which

are expected to emerge from strong economic indicators in

the markets we operate.

As the Global economy is slowly recovering from the financial

crises, the competitive forces in the Global market has

increased currently, however, the forecasted Global growth

is likely to negate the present imbalance over the long term.

Oman Cables has the resilience in the local and regional

markets to sustain its growth and is well placed to further

enhance its position viewed in-line with the opportunities

identified.

3. Segment Performance

OCI has further diversified its market segments and

successfully achieved growth across all the geographic

markets. The domestic market has shown the better

growth for the year under review in-line with Oman’s robust

infrastructure development programme across a broad

spectrum.

OCI’s export programme remains a key focus of the business

strategy and in this regard OCI has grown and developed new

products for new markets. OCI’s backward integration project

in Aluminium rod and conductor manufacturing has added a

new dimension to OCI’s product offering and is expected to

contribute to growth in the years ahead.

Management Discussion and Analysis Report







15

4. Outlook

The outlook for the cable industry remains promising as the

demand for energy generation, transmission and distribution

is rising Regionally and Globally. OCI is poised to benefit from

a upward recovery given its low cost base, market driven

growth programmes, loyal customer relationships coupled

with a sound financial position. Priorities are focused on

further enhancing OCI position in the Global markets it serves

and OCI remains positive to achieve future growth.

Management strategy is to constantly evaluate and enhance

its product range and in this regard the company has an

investment programme in place to enter the oil and gas

sector which is a major growth market in the years to come.

The joint venture project of Aluminium rod and conductor

in Sohar, Oman is now in full commercial production. The

continued growth for power transmission and distribution

leading to increase demand of conductors and cables

especially in the emerging markets will result in achieving

the anticipated growth.

5. Risk and Concerns

With the slow Global recovery in many parts of the World,

the business has shifted to emerging markets. The local

market remains active due to Oman’s Governments robust

infrastructure spend which is positive, however, it has brought

also the fierce competition from Global Cable manufacturers

that has excess capacity in their own territories. This resulted

in strong competition at the cost of the local manufacturers

offering high quality products. Management remains

cautious until the fair rules will be introduced to enhance the

local industries participation on national projects.

The GCC has become a net exporter of cables due to the

excess capacity that was installed on the assumption of

growth period of 2006-2007. This has had a negative

impact on price levels at a time when the demand is on

a downward trend. Oman Cables has been capable to tap

the emerging markets but can only do it successfully with a

strong local base.

The sharp and sudden rise in metal prices has disrupted

the execution of the orders by the customers in time, thus

exerting pressure on the company’s production planning and

imbalance in capacity utilization.

6. Internal Control Systems and Their Adequacy

OCI has sound internal control systems and operating manu-

als in place. Its operations are audited by a professional in-

ternal audit team, external statutory financial auditors and

ISO auditors. This ensures that the systems and procedures

laid down are being adhered to and helps Management in

monitoring the same. Continuous refinements are being

made to operating procedures and policies to ensure that OCI

builds in sustainability on its fast track growth path.

7. Expansion Project

In-line with OCI’s strategy of market demand driven

expansion of its manufacturing capability, management

has undertaken an expansion project within the existing

premises of OCI to expand the current capacity for selective

product and introducing a new product range.

With the slow Global recovery in many parts of

the World, the business has shifted to emerging

markets. The local market remains active due

to Oman’s Governments robust infrastructure

spend which is positive, however, it has brought

also the fierce competition from Global Cable

manufacturers that has excess capacity in their

own territories. This resulted in strong competition

at the cost of the local manufacturers offering

high quality products. Management remains

cautious until the fair rules will be introduced

to enhance the local industries participation on

national projects.







8. Sales and Profitability

The operational performance of the Company for the last 5

years is as under:

2006 2007 2008 2009** 2010**

Sales (RO’ 000) 125,718 217,445 304,377 155,603 200,885

Profit after Tax (RO’ 000)

9,537 15,134 6,173 6,674 8,165

Equity (RO’ 000) 13,789 27,914 31,537 41,510 46,899

Dividend (%) 210% 40% 20% 30% 40%*

*recommended ** for Group

9. Conclusion

OCI demonstrated resilience in dealing under very

challenging market conditions that was caused by the

Global financial crises and the subsequent slow recovery of

Global markets especially the low level of GDP expenditure

in matured World regions. With the ability to have shown

consistent growth and enhanced year by year performance,

with our excellent relationship with our vast client base

and other stakeholders including our loyal employees, the

Executive Management with the guidance of the Board of

Directors, the Management is confident that the company is

on a sound footing to consistently improve its Global market

position and shareholder value.








17







Company’s philosophy on Code of Corporate Governance

The Board of Directors of Oman Cables Industry (SAOG) are

firmly committed to the highest standards of Corporate

Governance by committing to adopt the best practices. The

provisions of the Code of Corporate Governance for MSM

listed Companies, issued by Capital Market Authority (CMA)

have been followed by the Company as detailed below. The

Company’s ensures good Corporate Governance through a

combination of factors like:

z Instituting Internal Regulations and Operating

Procedures by constantly updating the Human Resource

and Administration Manual and Operations Manual

for Finance, Marketing and Procurement, with the

objective of ensuring effective Internal Controls

z Monitoring adherence to the Internal Regulations and

Operating procedures through frequent internal checks,

conducting Internal Audit, submission of report to Audit

Committee comprising of Board Member, carrying out

regular ISO Audits on documentation compliance

z Regular management reviews and structured written

reports by Management to the Board

z Periodical communication with shareholders

z Adherence to the process of nomination and election

of Directors laid down by CMA, thus ensuring that the

Board is constituted of skilled Directors to oversee the

company operations

z Ensuring the compliance with relevant laws and

regulations

Corporate governance includes the relationships among

the stakeholders like shareholders, the board of directors,

employees, customers, creditors, suppliers, and the

community at large and the goals for which the corporation

is governed.

Key elements of good corporate governance adopted by OCI

include honesty, trust and integrity, openness, performance

orientation, responsibility and accountability, mutual respect,

and commitment to the organization.

The directors and management of OCI has developed a model

of governance that aligns the values of the Company and

then evaluate this model periodically for its effectiveness.

The senior executives of OCI conduct themselves honestly

and ethically, especially concerning actual or apparent

conflicts of interest, and disclosure in financial reports.

OCI has also set up an Audit Committee Charter, an Internal

Audit Charter, Disclosure and Insider Trading Policy which has

been duly approved by the Board and which are all based on

the regulations of CMA.

Report on Corporate Governance







19

Board of Directors

The Board comprises of seven Directors. The Board of Directors were elected on 24 March 2009 at the Annual General Meeting.

Following are the relevant details of the Directors:

Name Designation in OCI Category Other Directorships held


Chairman Non-executive Non-independent

Chairman: Al Saleh Enterprises, Jenfel LLC, Jenfel Heavy EquipmentsMember : Shubaila LLC

Hussain Salman Al Lawati

Vice Chairman & Managing Director

ExecutiveNon-independent

Member : Al-Saleh Enterprises, Jenfel LLC, Jenfel Heavy Equipments and Shubaila LLCChairman: Oman Aluminium Processing Industries LLCDirector: Shumookh Investment and Services (SAOC)

Maqbool Ali Salman Director Non-executive & Independent

Vice Chairman & Managing Director: Al Hassan Engineering Co. SAOGMember: Al Hassan Electrical LLC

Dr. Mohammed Shihab Director Non-executive & Independent

NA

Christian Raskin Director Non-executive & Independent

NA

Salim Rabbani Director Non-executive & Independent

NA

Hilal Al-Ahasani Director Non-executive & Independent

Chairman: Oman & Emirates Investment Holding Co. (SAOG)Vice Chairman: Financial Corporation Co. (SAOG )

Chairman

Mr. Mustafa Bin Mukhtar Bin Ali Al Lawati is Chairman of

Board of Directors and one of the founders of Oman Cables

Industry (SAOG). He has a Masters Degree in International

Relations and has total experience of 45 years including 11

years in Banking Industry. He held his last position as Director

General (Administration & Financial Affairs) in Ministry of

Water & Electricity, and has business experience since 1975

in Al-Saleh Enterprises.

Company Management

The names, designations, description of responsibilities in

OCI and brief profile of the Company Management personnel

is as follows:

z Hussain Salman Al Lawati - Vice Chairman & Managing

Director since last 25 years and one of the founders

of Oman Cables Industry, with 43 years enterprising

experience, of which 36 years in electrical and cable

industry. Responsible for the overall strategic management

of the Company, reporting to the Board of Directors.

z Cornelis Johannes (Hans) Meiring - Chief Executive

Officer

Experience of 37 years in Cable industry, of which 30

years at executive management levels. Responsible

for all the operations of the Company reporting to Vice

Chairman & Managing Director.

z M. M. Vaidya - General Manager – Corporate Finance

Experience of 28 years, of which 23 years at executive

management levels. Responsible for Finance and Risk

Management functions.

z Louis Dupreez - General Manager – Sales and Marketing

Experience of 31 years in industry, of which 21 years

at executive management levels. Responsible for Sales,

Marketing and Customer Service.

z V. Duggal - General Manager – Works

Experience of 38 years in manufacturing in Cable

industry, of which 18 years at executive management

levels. Responsible for Manufacturing and Quality

Assurance.







z Ahmed Farooqui – General Manager – Procurement and

Supply Chain

Experience of 28 years in industry, of which 16 years at

executive levels

z Mohammed Mustafa Mukhtar Al Lawati – General

Manager – Corporate Projects

Experience of 10 years, of which 3 years in senior levels.

Responsible for Projects in the Company

z Fawzi Mubarak Al Kiyumi – General Manager – Human

Resources and Administration


levels

z Kuldip Chadha – General Manager – Strategic Business

Development


levels

Board Meetings held during the year:

During the year 2010 the company held five Board Meetings

on the following dates:

18 January 2010, 17 April 2010, 12 July 2010, 10 October

2010 and 4 November 2010.

Number of Board meetings attended by Directors are:

Name of DirectorNumber of Board

meetings attended

Mustafa Bin Mukhtar Bin Ali Al Lawati 4

Hussain Salman Al Lawati 5

Maqbool Ali Salman 4

Dr. Mohammed Shihab 5

Christian Raskin 5

Salim Rabbani 4

Hilal Al-Ahasani 3

The meetings were coordinated by the Board secretary,

under the guidance of Vice Chairman and Managing Director.

The meetings were conducted with exhaustive agenda and

proceedings were minuted. The Chief Executive Officer’s

reports were reviewed during the meeting. All related issues

were also discussed regarding the growth and progress of

the company.

All the Directors attended the Annual General Meeting of

the company held on 23 March 2010 except Mr. Mustafa Bin

Mukhtar Bin Ali Al Lawati (due to sickness).

Committees of the Board of Directors:

Audit Committee

In line with the regulations issued by the Capital Market

Authorities, the company has formed an Audit Committee.

The Audit Committee approves the audit plan for the year,

reviews the report of the Auditors, issues guidance to

management and oversees that operating management is

adhering to company policies.

The Audit Committee comprised of the following three Non–

executive Independent Directors as members:

Name Designation

No. of

meetings

attended

Maqbool Ali Salman Chairman 4

Christian Raskin Dy. Chairman 4

Dr. Mohammed Shihab Member 4

During the year 2010, Audit Committee met and conducted

four meetings on the following dates, 17 January 2010, 15

April 2010, 10 July 2010 and 9 October 2010.

The committee has reviewed the Audit Reports issued

during the period. Such reports have also been reviewed

by the executive management and necessary guidance was

issued by the Audit Committee. The quarterly accounts were

reviewed by the audit committee before the same were put

up to the Board of Directors for approval.







21

Strategic Risk Management Committee

The following are the members of the Risk Committee:

Name Designation

No. of

meetings

attended

Christian Raskin Chairman 2

Hussain Salman Al Lawati Member 2

During the year 2010, Committee met and conducted two

meetings on the following dates, 10 October 2010 and 3

November 2010.

The committee has reviewed and discussed the Risk

Assessment Report submitted by the Company. The

committee also reviewed and discussed the top 10 key risks

of the company and the IT risk profile.

Process of nomination of the Directors

The Company follows the guidelines issued by the Commercial

Law and CMA in this regard. The Company has made efforts

to have a Board with appropriate skills, experience and

vision.

Remuneration matters

Directors remuneration: Apart from remuneration derived

as “Sitting Fees” of RO 9,700 for (arrived at, in line with

the Articles of Association of the company and as approved

in the previous Annual General Meeting) Board Meetings

and Audit Committee Meetings attended and the proposed

Director’s remuneration of RO 190,300, the Directors have no

other pecuniary relationship or transaction with the company

– except for the Chairman and Vice Chairman & Managing

Director.

Operating Management Remuneration

Salary and perquisites of the five top senior officers (including

Vice Chairman and Managing Director) paid during the year

2010 is RO 675,323 (2009: RO 672,091), which includes RO

549,956 (2009: RO 575,156) as fixed component and RO

125,367 (2009: RO 96,935) linked to performance of 2009.

The severance notice period of these executives is one

month except Vice Chairman and Managing Director whose

notice period is three months, with end of service benefits

payable as per Omani Labour Law. Over and above periodic

salary reviews; OCI also operates an incentive scheme for its

employees. The scheme is based on group productivity.

Employment Contract

OCI enters into a formal Contract of Employment with each

employee and such contracts are in line with the regulation

of Ministry of Manpower and Omani Labour Law.

Details of non-compliance by the Company

There are no instances of non-compliance by the company

which is evident from the fact that there are no penalties

or strictures imposed by Muscat Securities Market / Capital

Market Authority or any other statutory authority; on the

company regarding any matter related to capital market

during last three years.

Means of Communication with Share Holders and Investors

As required by Capital Market Authority, OCI publishes its

quarterly, half yearly, three quarterly and yearly financial

results in two local newspapers. The financial results are

also posted on the website of Muscat Securities Market

and company’s website www.omancables.com. Further

OCI also includes a statement in each of these reports that

shareholders can obtain further details, if required, from

the company registered office and such details are made

available to any shareholder who requests for it. Besides

this the company, at the end of each year, sends to all the

shareholders, financiers and others who are associated with

OCI, the Annual Financial Statements by post.







The company has an appropriate disclosure policy and

adequate procedures are in place to ensure implementation

and monitoring of compliance of the policy with laws and

regulations in place.

In regard to the Annual audited accounts, after the Annual

General Meeting’s approval, such financial statements are

published in two local newspapers and submitted to Capital

Market Authorities. This information is also posted on the

Company’s website.

All relevant major events impacting the company are

conveyed to the Capital Market Authority.

The Annual Report contains a separate Management

Discussion and Analysis report.

Market price data

During the period 2010 the share price of RO 0.100 face value

moved in the range of high of RO 1.730 to a low of RO. 1.000.

The share price as on 31 December 2010 was RO 1.175.

0.000

0.500

1.000

1.500

2.000

5,500

6,000

6,500

7,000

7,500

8,000

8,500

Low 1.451 1.435 1.400 1.317 1.050 1.000 1.050 1.220 1.215 1.255 1.195 1.147

High 1.730 1.540 1.510 1.510 1.335 1.119 1.285 1.290 1.340 1.379 1.265 1.240

Index 6,532 6,689 6,698 6,830 6,294 6,058 6,295 6,257 6,473 6,553 6,592 6,755

Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

The distribution of Major Shareholding is as follows:

Shareholder % of Shares Held of total

Draka Holding (NV) 34.78%


12.54%

Hussain Salman Al Lawati 12.24%

Company does not have any ADR/GDR/Warrants or any

other Convertible Instruments as on 31 December 2010 and

hence likely impact on equity is Nil.

Areas of non-compliance of the provisions of Corporate Governance

There are no areas in which OCI is non-compliant with the

provisions of Code of Corporate Governance.

Profile of Statutory Auditors

Ernst & Young are the statutory auditors of the Company. Ernst

& Young is one of Oman’s oldest established accounting firms,

having had a permanent office in the country since 1974. The

practice comprises one hundred and eighty professionals, and

is working under the direction of four partners. The Oman

office forms part of Ernst & Young’s MENA practice, with over

120 partners and over 4,100 other professionals in 20 offices

in 15 countries throughout the region. The MENA practice is

member firm of Ernst & Young Global, operating in more than

140 countries with approximately 141,000 personnel world-

wide. The Audit fee for the year 2010 is RO 10,500.







23

Any other Aspects

Internal Auditor

In order to ensure the compliance with statutory regulations

and internal controls, the company has a full time internal

audit unit, to carry on an independent assessment and

reports to the Audit Committee.

Board of Directors Acknowledge that

The company has all its systems and procedures formally

documented and in place. The company has “Internal

Regulations” separately compiled as per regulatory

requirements. The Board of Directors have reviewed this

manual and approved it. The “Internal Regulations” has all

the necessary and prescribed procedures. The Board has

reviewed these regulations.

The Board of Directors are responsible to ensure that the

financial statements have been prepared in accordance with

International Financial Reporting Standards (IFRS) issued

by the International Accounting Standards Board (IASB),

interpretations issued by the International Financial Reporting

Interpretations Committee (IFRIC) and the requirements of

the Commercial Companies Law of the Sultanate of Oman

1974 (as amended) and the rules for disclosure requirements

prescribed by the Capital Market Authority.

There are no material events affecting the continuation of

OCI and its ability to continue its operations during the next

financial year.








Om

an C

able

s In

dust

ry O

pera

tion

al P

rese

nce

& E

xpor

t D

esti

nat

ion

s

Expo

rt D

estin

atio

n

Ope

ratio

nal P

rese

nce

Mus

cat

Soha

r







25







Oman Cables Industry saOg and Its subsIdIary COnsOlIdated statement Of fInanCIal POsItIOn at 31 deCember 2010

Notes Group Parent Company Group Parent Company

2010 2010 2009 2009

ASSETS RO RO RO RO

Non-current assetsProperty, plant and equipment 10 33,078,889 20,218,134 27,992,703 20,832,963

Investment in a subsidiary 11 -- 2,226,660 -- 1,275,000

Investment in an associate 12 712,513 712,513 729,533 729,533

Available for sale investments 13 523,043 523,043 9,005 9,005

Held to maturity investments 14 1,251,204 1,251,204 1,251,204 1,251,204

Total non-current assets 35,565,649 24,931,554 29,982,445 24,097,705

Current assetsInventories 15 42,407,893 40,256,772 25,035,599 25,035,599

Trade and other receivables 16 49,945,723 46,456,035 40,952,326 40,836,465

Due from related parties 26 1,664,286 1,365,802 990,683 990,683

Cash and bank balances 17 2,462,617 1,969,164 3,107,428 2,368,696

Total current assets 96,480,519 90,047,773 70,086,036 69,231,443

Total assets 132,046,168 114,979,327 100,068,481 93,329,148

EQUITY AND LIABILITIESEquityShare capital 18 a 8,970,000 8,970,000 8,970,000 8,970,000

Share premium 18 b 977,500 977,500 977,500 977,500

Legal reserve 18 c 2,990,000 2,990,000 2,990,000 2,990,000

General reserve 18 d 2,620,231 2,620,231 1,794,222 1,794,222

Retained earnings 30,376,205 30,542,090 25,727,773 25,799,008

Cumulative changes in fair values 28 (890,539) (761,321) (105,859) (105,859)

Equity attributable to equity holders of the parent 45,043,397 45,338,500 40,353,636 40,424,871

Non-controlling interests 1,855,809 -- 1,156,558 --

Total equity 46,899,206 45,338,500 41,510,194 40,424,871

LiabilitiesNon-current liabilitiesTerm loans 19 10,246,218 495,500 6,779,805 1,724,867

Deferred government grant 19 7,282 7,282 21,633 21,633

Deferred tax liability 8 812,475 812,475 826,278 826,278

Total non-current liabilities 11,065,975 1,315,257 7,627,716 2,572,778

Current liabilitiesTrade and other payables 21 31,404,577 24,316,032 14,300,662 13,701,590

Due to related parties 26 75,199 1,408,327 104,650 104,650

Bank borrowings 20 40,200,244 40,200,244 34,475,490 34,475,490

Current maturities of term loans 19 1,243,718 1,243,718 1,251,000 1,251,000

Taxation 8 1,157,249 1,157,249 798,769 798,769

Total current liabilities 74,080,987 68,325,570 50,930,571 50,331,499

Total liabilities 85,146,962 69,640,827 58,558,287 52,904,277

Total equity and liabilities 132,046,168 114,979,327 100,068,481 93,329,148

Net assets per share 23 0.502 0.505 0.450 0.451

The financial statements were authorised for issue in accordance with a resolution of the directors on 22nd January 2011.

……………………………. …………………………. Chairman Chief Executive Officer

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







29

Oman Cables Industry saOg and Its subsIdIary COnsOlIdated InCOme statement fOr tHe year ended 31 deCember 2010


2010 2010 2009 2009

RO RO RO RO

Sales 200,884,822 191,750,779 155,603,066 155,603,066

Cost of sales 3 (183,769,636) (175,074,138) (140,748,788) (140,748,788)

Gross profit 17,115,186 16,676,641 14,854,278 14,854,278

Other income 4 123,337 87,674 369,882 366,384

Administrative expenses 5 (3,509,554) (3,235,130) (3,210,440) (3,105,130)

Selling and distribution expenses 6 (3,155,549) (2,953,793) (2,271,453) (2,271,453)

Depreciation (140,499) (123,735) (169,484) (164,286)

Operating profit 10,432,921 10,451,657 9,572,783 9,679,793

Finance costs 7 (1,171,200) (1,003,644) (2,209,814) (2,209,814)

Finance income 119,980 119,277 117,265 109,404

Share of results of an associate 12 iii (35,965) (35,965) 52,646 52,646

Profit before income tax 9,345,736 9,531,325 7,532,880 7,632,029

Income tax expense 8 (1,271,234) (1,271,234) (907,414) (907,414)

Profit for the year 8,074,502 8,260,091 6,625,466 6,724,615

Loss for the year attributable to Non-controlling interests

90,939 -- 48,583 --

Profit for the year Attributable to Shareholders of the parent company

8,165,441 8,260,091 6,674,049 6,724,615

Basic and diluted earnings per share attributable to ordinary equity holders of the parent company

22 0.091 0.092 0.074 0.075

Gross profit margin 8.52% 8.70% 9.55% 9.55%

Net profit margin 4.02% 4.31% 4.26% 4.32%









2010 2010 2009 2009

RO RO RO RO

Profit for the year 8,074,502 8,260,091 6,625,466 6,724,615

Other comprehensive (loss) income

Net movement in hedging commodity and currency future contracts

(931,813) (678,445 ) 3,931,435 3,931,435

Net movement in available for sale investments

13 4,038 4,038 (831) (831)

Exchange difference on foreign currency translation of associate

18,945 18,945 26,551 26,551

Other comprehensive (loss) income for the year (908,830) (655,462 ) 3,957,155 3,957,155

Total comprehensive income for the year 7,165,672 7,604,629 10,582,621 10,681,770

Attributable to:

Equity holders of the parent 7,380,761 7,604,629 10,631,204 10,681,770

Non-controlling interests (215,089) -- (48,583) --

7,165,672 7,604,629 10,582,621 10,681,770


Oman Cables Industry saOg and Its subsIdIary COnsOlIdated statement Of COmPreHensIVe InCOme fOr tHe year ended 31 deCember 2010







31

Om

an

Ca

bles

Ind

ustr

y sa

Og

an

d It

s su

bsId

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CO

nsO

lIda

ted

sta

tem

ent

Of

CHa

ng

es In

eQ

uIty

fOr

tHe

yea

r en

ded

31

deC

embe

r 20

10

Att

ribu

tabl

e to

the

equ

ity h

olde

rs o

f th

e pa

rent

Gro

up

Shar

e ca

pita

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are

prem

ium

Lega

l re

serv

eG

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al

rese

rve

Reta

ined

Cu

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ange

s in

N

on-

cont

rolli

ng

Tota

l

(not

e 18

a)(n

ote

18b)

(not

e 18

c)(n

ote

18d)

earn

ings

fair

val

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Tota

lin

tere

sts

equi

ty

(not

e 28

)

RORO

RORO

RORO

RORO

RO

As

at 1

Janu

ary

2009

8,97

0,00

097

7,50

02,

990,

000

1,12

1,76

021

,520

,186

(4,0

63,0

14)

31,5

16,4

3271

5,14

132

,231

,573

Profi

t fo

r th

e ye

ar--

----

--6,

674,

049

--6,

674,

049

(48,

583)

6,62

5,46

6

Oth

er c

ompr

ehen

sive

inco

me

----

----

--3,

957,

155

3,95

7,15

5--

3,95

7,15

5

Tota

l com

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com

e6,

674,

049

3,95

7,15

510

,631

,204

(48,

583)

10,5

82,6

21

Acq

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tion

of a

sub

sidi

ary

(not

e 11

)--

----

----

----

490,

000

490,

000

Div

iden

d fo

r th

e ye

ar 2

008

(not

e 18

e)--

----

--(1

,794

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)--

(1,7

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00)

--(1

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Tran

sfer

to

gene

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----

672,

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(672

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)--

----

--

At

31 D

ecem

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2009

8,97

0,00

097

7,50

02,

990,

000

1,79

4,22

225

,727

,773

(105

,859

)40

,353

,636

1,15

6,55

841

,510

,194

As

at 1

Janu

ary

2010

8,97

0,00

097

7,50

02,

990,

000

1,79

4,22

225

,727

,773

(105

,859

)40

,353

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1,15

6,55

841

,510

,194

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t fo

r th

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ar--

----

--8,

165,

441

--8,

165,

441

(90,

939)

8,07

4,50

2

Oth

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ompr

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me

----

----

--(7

84,6

80)

(784

,680

)(1

24,1

50)

(908

,830

)

Tota

l com

preh

ensi

ve in

com

e--

----

--8,

165,

441

(784

,680

)7,

380,

761

(215

,089

)7,

165,

672

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in in

vest

men

t in

a s

ubsi

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1)--

----

--91

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4,34

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(not

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----

--(2

,691

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(2,6

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00)

--(2

,691

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Tran

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to

gen

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res

erve

----

--82

6,00

9(8

26,0

09)

----

----

At

31 D

ecem

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2010

8,97

0,00

097

7,50

02,

990,

000

2,62

0,23

130

,376

,205

(890

,539

)45

,043

,397

1,85

5,80

946

,899

,206

The

atta

ched

not

es 1

to

32 f

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par

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the

se c

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Pare

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fai

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(not

e 18

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(not

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earn

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(not

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)To

tal

RORO

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1 Ja

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098,

970,

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977,

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2,99

0,00

01,

121,

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55(4

,063

,014

)31

,537

,101

Profi

t fo

r th

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ar--

----

--6,

724,

615

--6,

724,

615

Oth

er c

ompr

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inco

me

----

----

--3,

957,

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3,95

7,15

5

Tota

l com

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com

e--

----

--6,

724,

615

3,95

7,15

510

,681

,770

Div

iden

d fo

r th

e ye

ar 2

008

(not

e 18

e)--

----

--(1

,794

,000

)--

(1,7

94,0

00)

Tran

sfer

to

gene

ral r

eser

ve--

----

672,

462

(672

,462

)--

--

At

31 D

ecem

ber

2009

8,97

0,00

097

7,50

02,

990,

000

1,79

4,22

225

,799

,008

(105

,859

)40

,424

,871

At

1 Ja

nuar

y 20

108,

970,

000

977,

500

2,99

0,00

01,

794,

222

25,7

99,0

08(1

05,8

59)

40,4

24,8

71

Profi

t fo

r th

e ye

ar--

----

--8,

260,

091

--8,

260,

091

Oth

er c

ompr

ehen

sive

inco

me

----

----

--(6

55,4

62)

(655

,462

)

Tota

l com

preh

ensi

ve in

com

e--

----

--8,

260,

091

(655

,462

)7,

604,

629

Div

iden

d fo

r th

e ye

ar 2

009

(not

e 18

e)--

----

--(2

,691

,000

)--

(2,6

91,0

00)

Tran

sfer

to

gene

ral r

eser

ve--

----

826,

009

(826

,009

)--

-

At

31 D

ecem

ber

2010

8,97

0,00

097

7,50

02,

990,

000

2,62

0,23

130

,542

,090

(761

,321

)45

,338

,500

The

atta

ched

not

es 1

to

32 f

orm

par

t of

the

se c

onso

lidat

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nanc

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tate

men

ts.

Om

an

Ca

bles

Ind

ustr

y sa

Og

an

d It

s su

bsId

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CO

nsO

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ted

sta

tem

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Of

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es In

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uIty

fOr

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yea

r en

ded

31

deC

embe

r 20

10







33

Group Parent Company Group Parent Company

2010 2010 2009 2009

RO RO RO RO

OPERATING ACTIVITIES

Cash receipt from sales 190,171,076 185,827,468 159,728,257 159,728,257

Cash paid towards cost of sales and expenses (188,256,803) (183,228,119) (110,412,361) (110,355,149)

Cash generated from operations 1,914,273 2,599,349 49,315,896 49,373,108

Interest received 119,980 119,277 123,653 115,792

Income tax paid (926,557) (926,557) (724,482) (724,482)

Directors’ remuneration and meeting attendance fees paid (200,050) (200,050) (200,950) (200,950)

Net cash flows used in operating activities 907,646 1,592,019 48,514,117 48,563,468

INVESTING ACTIVITIES

Investment in a subsidiary -- (951,660) -- (510,000)

Purchase of property, plant and equipment (7,096,681) (1,285,128) (7,104,065) (861,718)

Purchase of held to maturity investment - - (1,251,205) (1,251,205)

Purchase of available for sale investments (510,000) (510,000) - -

Proceeds from available for sale investments - - 123,401 123,401

Proceeds from disposal of property, plant and equipment

4,400 4,400 5,704 5,704

Movement in short term deposits -- -- 2,000,000 2,000,000

Net cash flows used in investing activities (7,602,281) (2,742,388) (6,226,165) (493,818)

FINANCING ACTIVITIES

Repayment of term loans (1,251,000) (1,251,000) (1,551,051) (1,551,051)

Proceeds from term loans 4,695,780 -- 5,054,938 --

Dividends paid to equity holders of the parent (2,691,000) (2,691,000) (1,794,000) (1,794,000)

Net movement in short term loans 2,229,915 2,229,915 (27,918,200) (27,918,200)

Net movement in loans against trust receipts 6,792,191 6,792,191 (18,778,083) (18,778,083)

Interest paid (1,163,710) (1,031,917) (2,550,286) (2,550,286)

Capital contribution in the subsidiary from

non-controlling interest 735,000 -- 490,000 --

Net cash flows from financing activities 9,347,176 4,048,189 (47,046,682) (52,591,620)

Net increase (decrease) in cash and cash equivalents during the year 2,652,541 2,897,820 (4,758,730) (4,521,970)

Cash and cash equivalents at 1 January (392,223) (1,130,955) 4,366,507 3,391,015

Cash and cash equivalents at 31 December 2,260,318 1,766,865 (392,223) (1,130,955)

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

Current accounts 2,423,362 1,955,070 3,091,677 2,354,529

Cash in hand 39,255 14,094 15,751 14,167

2,462,617 1,969,164 3,107,428 2,368,696

Bank overdraft (202,299) (202,299) (3,499,651) (3,499,651)

2,260,318 1,766,865 (392,223) (1,130,955)


Oman Cables Industry saOg and Its subsIdIary COnsOlIdated statement Of CasH flOWs fOr tHe year ended 31 deCember 2010







1. LEGAL STATUS AND PRINCIPAL ACTIVITIES

Oman Cables Industry SAOG (“the company/the parent

company”) is registered in the Sultanate of Oman as

a public joint stock company. The company’s principal

activity is the manufacture and sale of electrical cables

and conductors.

The company holds 51% shareholding in Oman

Aluminium Processing Industries LLC (“the subsidiary”)

which was incorporated in the Sultanate of Oman in

2008 and commenced its operations during the year

[see note11].

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

These consolidated and parent company financial

statements have been prepared in accordance with

International Financial Reporting Standards, and

applicable requirements of the Commercial Companies

Law and the Capital Market Authority of the Sultanate of

Oman.

These financial statements have been presented in Rial

Omani which is the functional and reporting currency

for these financial statements.

Changes in accounting policy and disclosures

The accounting policies are consistent with those used

in the previous financial year except as follows:

The group has adopted the following new and amended

IFRS and IFRIC interpretations as of 1 January 2010:

y IFRS 2 Share-based Payment: Group Cash-settled

Share-based Payment Transactions effective 1

January 2010

y IFRS 3 Business Combinations (Revised) and IAS 27

Consolidated and Separate Financial Statements

(Amended) effective 1 July 2009, including

consequential amendments to IFRS 2, IFRS 5 IFRS 7,

IAS 7, IAS 21, IAS 28, IAS 31 and IAS 39

y IAS 39 Financial Instruments: Recognition and

Measurement – Eligible Hedged Items effective 1

July 2009

y IFRIC 17 Distributions of Non-cash Assets to Owners

effective 1 July 2009

y Improvements to IFRSs (May 2008)

y Improvements to IFRSs (April 2009)

These amendments resulting from improvements

to IFRSs did not have any impact on the accounting

policies, financial position or performance of the group.

The following standards, amendments and

interpretations are not yet effective:

Other IASB Standards and Interpretations that have

been issued but are not yet mandatory, and have not

been adopted by the group, are not expected to have a

material impact on the group’s financial statements.

IAS 24 Related Party Disclosures (Amendment)

The amended standard is effective for annual periods

beginning on or after 1 January 2011. It clarified the

definition of a related party to simplify the identification

of such relationships and to eliminate inconsistencies in

its application. The revised standard introduces a partial

exemption of disclosure requirements for government

related entities. The Group does not expect any impact

on its financial position or performance. Early adoption

is permitted for either the partial exemption for

government-related entities or for the entire standard.

IAS 32 Financial Instruments: Presentation –

Classification of Rights Issues (Amendment)

The amendment to IAS 32 is effective for annual periods

beginning on or after 1 February 2010 and amended

the definition of a financial liability in order to classify

rights issues (and certain options or warrants) as equity

instruments in cases where such rights are given pro

rata to all of the existing owners of the same class of an

entity’s non-derivative equity instruments, or to acquire

a fixed number of the entity’s own equity instruments

for a fixed amount in any currency. This amendment will

have no impact on the Group after initial application.

Oman Cables Industry saOg and Its subsIdIary nOtes tO tHe COnsOlIdated fInanCIal statements at 31 deCember 2010







35


2 SIGNIFICANT ACCOUNTING POLICIES (cont.)

IFRS 9 Financial Instruments: Classification and

Measurement

IFRS 9 as issued reflects the first phase of the IASBs work

on the replacement of IAS 39 and applies to classification

and measurement of financial assets as defined in IAS 39.

The standard is effective for annual periods beginning on

or after 1 January 2013. In subsequent phases, the IASB

will address classification and measurement of financial

liabilities, hedge accounting and derecognition. The

completion of this project is expected in early 2011. The

adoption of the first phase of IFRS 9 will have an effect

on the classification and measurement of the Group’s

financial assets. The Group will quantify the effect in

conjunction with the other phases, when issued, to

present a comprehensive picture.

IFRIC 14 Prepayments of a minimum funding

requirement (Amendment)

The amendment to IFRIC 14 is effective for annual periods

beginning on or after 1 January 2011 with retrospective

application. The amendment provides guidance on

assessing the recoverable amount of a net pension

asset. The amendment permits an entity to treat the

prepayment of a minimum funding requirement as an

asset. The amendment is expected to have no impact

on the financial statements of the Group.

IFRIC 19 Extinguishing Financial Liabilities with

Equity Instruments

IFRIC 19 is effective for annual periods beginning on

or after 1 July 2010. The interpretation clarifies that

equity instruments issued to a creditor to extinguish

a financial liability qualify as consideration paid. The

equity instruments issued are measured at their fair

value. In case that this cannot be reliably measured,

the instruments are measured at the fair value of the

liability extinguished. Any gain or loss is recognised

immediately in profit or loss. The adoption of this

interpretation will have no effect on the financial

statements of the Group.

Improvements to IFRSs (issued in May 2010)

The IASB issued Improvements to IFRSs, an omnibus of

amendments to its IFRS standards. The amendments

have not been adopted as they become effective for

annual periods on or after either 1 July 2010 or 1 January

2011. The amendments listed below, are considered to

be relevant for the group:

y IFRS 3 Business Combinations

y IFRS 7 Financial Instruments: Disclosures

y IAS 1 Presentation of Financial Statements

y IAS 27 Consolidated and Separate Financial

Statements

y IFRIC 13 Customer Loyalty Programmes

The Group, however, expects no impact from the

adoption of the amendments on its financial position or

performance.

a) Accounting Convention

These financial statements have been prepared on

the historical cost basis except for derivative financial

instruments, government soft loan, fair value through

profit or loss and available-for-sale financial assets

that have been measured at fair value. The parent

company’s investment in an associate is recorded at fair

value in the parent company financial statements and is

designated as fair value through profit or loss.

b) Basis of consolidation

The consolidated financial statements comprise those of

Oman Cables Industry SAOG and its subsidiaries as at

31 December each year. The financial statements of the

subsidiaries are prepared for the same reporting period

as the parent company using consistent accounting

policies. Adjustments are made to bring into line any

dissimilar accounting policies which may exist.

Subsidiaries are fully consolidated from the date on

which control is transferred to the group and cease

to be consolidated from the date on which control is

transferred out of the group.

All intercompany balances, transactions, income and

expenses and profits and losses resulting from intra-

group transactions are eliminated in full.









Non-controlling interest represent the portion of profit

or loss and net assets not held by the group and is

presented separately in the income statement and

within equity in the consolidated statement of financial

position, separately from parent shareholders’ equity.

Losses within a subsidiary are attributed to the non-

controlling interest even if that results in a deficit

balance. A change in the ownership interest of a

subsidiary, without a loss of control is accounted for as

an equity transaction.

c) Property, plant and equipment

Property, plant and equipment is stated at cost less

accumulated depreciation and any impairment in value.

Capital work in progress is not depreciated. Depreciation

is calculated on a straight line basis over the estimated

useful lives of the assets as follows:

Years

Buildings 20

Plant and machinery 20

Electrical equipment and installations 10

Motor vehicles 4

Furniture, fixtures and fittings 4

Office equipment 4

Material handling equipment 10

Loose tools 10

Laboratory equipment 10

The carrying values of property, plant and equipment

are reviewed for impairment when events or changes

in circumstances indicate the carrying value may not

be recoverable. If any such indication exists and where

the carrying values exceed the estimated recoverable

amount, the assets are written down to their recoverable

amount, being the higher of their fair value less costs to

sell and their value in use.

Expenditure incurred to replace a component of an item

of property, plant and equipment that is accounted for

separately is capitalised and the carrying amount of

the component that is replaced is written off. Other

subsequent expenditure is capitalised only when it

increases future economic benefits of the related item

of property, plant and equipment. All other expenditure

is recognised in the income statement as the expense

is incurred.

An item of property, plant and equipment is derecognised

upon disposal or when no future economic benefits

are expected from its use or disposal. Any gain or loss

arising on de-recognition of the asset (calculated as the

difference between the net disposal proceeds and the

carrying amount of the asset) is included in the income

statement in the year the asset is derecognised.

The asset’s residual values, useful lives and methods of

depreciation are reviewed, and adjusted if appropriate,

at each financial year end.

d) Derivative financial instruments

Initial recognition and subsequent measurement

The group uses derivative financial instruments such

as forward currency contracts and forward commodity

contracts to hedge its foreign currency risks and

commodity price risks, respectively.

These derivative financial instruments, which qualify

for hedge accounting and meet the criteria for cash

flow hedge are initially recognized at cost and are

subsequently stated at fair market value. The effective

portion of the gain or loss on the hedging instrument

is recognized directly as other comprehensive income

in the cumulative changes in fair value reserve, while

any ineffective position is recognized immediately

in the income statement. Subsequently the gains or

losses recognized as other comprehensive income are

transferred to the cost of inventories or the income

statement.







37



e) Investments

Subsidiary

A subsidiary is a company in which the group owns more

than one half of the voting power or otherwise exercises

control. The financial statement of the subsidiary is

included in the consolidated financial statements. In the

parent company’s separate financial statements, the

investment in the subsidiary is carried at cost.

Investment in an associate

The group’s investment in its associates is accounted for

under the equity method of accounting. An associate is

an entity in which the group has significant influence

and which is neither a subsidiary nor a joint venture.

Under the equity method, the investment in the

associate is carried in the statement of financial position

at cost plus post- acquisition changes in the group’s

share of net assets of the associate. Goodwill relating

to an associate is included in the carrying amount of the

investment. After application of the equity method, the

group determines whether it is necessary to recognise

any additional impairment loss with respect to the

group’s net investment in the associate. The income

statement reflects the share of the results of operations

of the associate. Where there has been a change

recognised directly in the equity of the associate, the

group recognises its share of any changes and discloses

this, when applicable, in the statement of changes in

equity. Profits and losses resulting from transactions

between the group and the associate are eliminated to

the extent of the interest in the associate.

The associates’ accounting policies conform to those

used by the group for like transactions and events in

similar circumstances.

The consolidated financial statements include the

group’s share of the total recognised gains or losses of

associate on an equity accounted basis.

Financial instruments – initial recognition and

subsequent measurement

Financial assets

Initial recognition and measurement

Financial assets within the scope of IAS 39 are classified

as financial assets at fair value through profit or loss,

loans and receivables, held-to-maturity investments,

available-for-sale financial assets, or as derivatives

designated as hedging instruments in an effective

hedge, as appropriate. The Group determines the

classification of its financial assets at initial recognition.

All financial assets are recognised initially at fair value

plus, in the case of investments not at fair value through

profit or loss, directly attributable transaction costs.

Subsequent measurement

The subsequent measurement of financial assets

depends on their classification as follows:

Investments carried at fair value through profit or loss

Financial assets at fair value through profit or loss, has two

sub categories namely financial assets held for trading

and those designated at fair value through profit or loss at

inception. Investments typically bought with the intention

to sell in the near future are classified as held for trading.

For investments designated as at fair value through profit

or loss, the following criteria must be met:

y the designation eliminates or significantly reduces

the inconsistent treatment that would otherwise

arise from measuring the assets or liabilities or

recognizing gains or losses on them on a different

basis; or

y the assets and liabilities are part of a group of

financial assets, financial liabilities or both which

are managed and their performance evaluated

on a fair value basis, in accordance with a

documented risk management or investment

strategy; or

y the financial instrument contains an embedded

derivative, unless the embedded derivative does

not significantly modify the cash flows or it is

clear, with little or no analysis, that it would not

be separately recorded.









These investments are initially recorded at fair value.

Subsequent to initial recognition, these investments

are remeasured at fair value. Fair value adjustments

and realized gain and loss are recognized in the income

statement.

Investments Available for sale

After initial recognition, investments which are

classified “available for sale” are normally re-measured

at fair value, unless fair value cannot be reliably

determined in which case they are measured at cost

less impairment. Fair value changes, are reported as

a separate component of equity until the investment

is derecognised or the investment is determined

to be impaired. On de-recognition or impairment

the cumulative gain or loss previously reported as

“cumulative changes in fair value” within equity, is

included in the income statement for the period.

Investments Held-to-maturity

Non-derivative financial assets with fixed or

determinable payments and fixed maturities are

classified as held-to maturity when the group has the

positive intention and ability to hold it to maturity.

After initial measurement held-to-maturity investments

are measured at amortised cost using the effective

interest rate method (EIR), less impairment. Amortised

cost is calculated by taking into account any discount

or premium on acquisition and fee or costs that are an

integral part of the EIR. The EIR amortisation is included

in finance income in the income statement. The losses

arising from impairment are recognised in the income

statement in finance costs.

De-recognition of financial instruments

Financial assets

A financial asset (or, where applicable a part of a

financial asset or part of a group of similar financial

assets) is de-recognized when:

the rights to receive cash flows from the asset have

expired; or

the group has transferred its rights to receive cash flows

from the asset or has assumed an obligation to pay the

received cash flows in full without material delay to a

third party under a ‘pass-through’ arrangement; and

either (a) the group has transferred substantially all

the risks and rewards of the asset, or (b) the group

has neither transferred nor retained substantially all

the risks and rewards of the asset, but has transferred

control of the asset.

When the group has transferred its rights to receive

cash flows from an asset or has entered into a pass

through arrangement, and has neither transferred nor

retained substantially all the risks and rewards of the

asset nor transferred control of the asset, a new asset

is recognized to the extent of the group’s continuing

involvement in the asset.

Continuing involvement that takes the form of a

guarantee over the transferred asset, is measured at

the lower of the original carrying amount of the asset

and the maximum amount of consideration that the

group could be required to repay.

When continuing involvement takes the form of a

written and/or purchased option (including a cash

settled option or similar provision) on the transferred

asset, the extent of the group’s continuing involvement

is the amount of the transferred asset that the group

may repurchase, except that in the case of a written

put option (including a cash settled option or similar

provision) on an asset measured at fair value, the extent

of the group’s continuing involvement is limited to the

lower of the fair value of the transferred asset and the

option exercise price.

Financial liabilities

A financial liability is derecognised when the obligation

under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another

from the same lender on substantially different terms,

or the terms of an existing liability are substantially

modified, such an exchange or modification is treated

as a de-recognition of the original liability and the

recognition of a new liability, and the difference in the

respective carrying amounts is recognised in the income

statement.







39



f) Inventories

Inventories are stated at the lower of cost and net

realisable value. Net realisable value is the estimated

selling price in the ordinary course of business, less the

estimated costs of completion and selling expenses. The

cost of inventories is based on the weighted average

principle and includes expenditure incurred in acquiring

the inventories and bringing them to their existing

location and condition. In the case of finished goods and

work in progress, cost includes an appropriate share of

overheads based on normal operating capacity.

The liability for goods in transit is recorded when

significant risks and rewards of ownership of the goods

are transferred to the group.

g) Trade and other receivables

Trade and other receivables are stated at original

invoice amount less an allowance for any

uncollectible amounts. An estimate for doubtful

debts is made when collection of the full amount

is no longer probable. Bad debts are written off

as incurred.

h) Cash and cash equivalents

For the purpose of the Cash Flows Statement, cash

and cash equivalents consists of cash and bank

balances, net of outstanding bank overdrafts, and

bank deposits with original maturities of three

months or less.

i) Impairment

Impairment and uncollectibility of financial

assets

An assessment is made at each reporting date to

determine whether there is objective evidence

that a specific financial asset may be impaired.

If such evidence exists, any impairment loss is

recognised in the income statement. Impairment

is determined as follows:

(a) For assets carried at fair value, impairment is the

difference between cost and fair value;

(b) For assets carried at cost, impairment is the

difference between cost and the present value

of future cash flows discounted at the current

market rate of return for a similar financial asset.

(c) For assets carried at amortised cost, impairment

is the difference between carrying amount and

the present value of future cash flows discounted

at the original effective interest rate.

Impairment of non-financial assets

The group assesses at each reporting date whether

there is an indication that an asset may be impaired. If

any such indication exists, or when annual impairment

testing for an asset is required, the group makes an

estimate of the asset’s recoverable amount. An asset’s

recoverable amount is the higher of an asset’s or cash-

generating unit’s fair value less costs to sell and its

value in use and is determined for an individual asset,

unless the asset does not generate cash inflows that

are largely independent of those from other assets or

groups of assets. Where the carrying amount of an asset

exceeds its recoverable amount, the asset is considered

impaired and is written down to its recoverable

amount. In assessing value in use, the estimated future

cash flows are discounted to their present value using

a pre-tax discount rate that reflects current market

assessments of the time value of money and the risks

specific to the asset. In determining fair value less costs

to sell, an appropriate valuation model is used. These

calculations are corroborated by valuation multiples or

other available fair value indicators.

An assessment is made at each reporting date as

to whether there is any indication that previously

recognised impairment losses may no longer exist or

may have decreased. If such an indication exists, the

group makes an estimate of the recoverable amount.

A previously recognised impairment loss is reversed

only if there has been a change in the estimates used

to determine the asset’s recoverable amount since

the last impairment loss was recognised. If that is the

case the carrying amount of the asset is increased to

its recoverable amount. That increased amount cannot

exceed the carrying amount that would have been

determined, net of depreciation, had no impairment

loss been recognised for the asset in prior years. Such a

reversal is recognised in the income statement.









The following criteria are also applied in assessing

impairment of specific assets:

Associates

After application of the equity method, the group

determines whether it is necessary to recognise an

additional impairment loss of the group’s investment in

its associates. The group determines at each reporting

date whether there is any objective evidence that the

investment in associate is impaired. If this is the case

the group calculates the amount of impairment as being

the difference between the fair value of the associate

and the acquisition cost and recognises the amount in

the income statement.

j) Dividend on ordinary shares

Dividends on ordinary shares are recognised as a liability

and deducted from equity when they are approved by

the company’s shareholders.

k) Employees’ end of service benefits

Payment is made to the Omani Government Social

Security scheme under Royal Decree 72/91 for Omani

employees.

The group provides end of service benefits to its

expatriate employees. The entitlement to these

benefits is based upon the employees’ final salary

and length of service, subject to the completion of a

minimum service period. The expected costs of these

benefits are accrued over the period of employment.

l) Provisions

Provisions are recognised when the group has an

obligation (legal or constructive) arising from a past

event, and the costs to settle the obligation are both

probable and able to be reliably estimated. If the effect

of the time value of money is material, provisions are

discounted using a current pre tax rate that reflects,

where appropriate, the risks specific to the liability.

Where discounting is used, the increase in the provision

due to the passage of time is recognised as a finance

cost.

m) Accounts payable and accruals

Liabilities are recognised for amounts to be paid in the

future for goods or services received, whether billed by

the supplier or not.

n) Deferred Government grant

Interest subsidy is recognised in the statement of

financial position initially as a deferred Government

grant when there is reasonable assurance that it will

be received and that the Group will comply with the

conditions attached to it. This deferred Government

grant is amortised over the life of the loans to which

it relates on a systematic basis in the same periods in

which the interest expense is incurred. Amortisation of

the deferred Government grant is recognised within net

financing costs.

o) Revenue recognition

Revenue is recognised to the extent that it is probable

that the economic benefits will flow to the group and

the revenue can be reliably measured. Revenue is

measured at the fair value of the consideration received,

excluding discounts, rebates, and sales taxes or duty.

The group assesses its revenue arrangements against

specific criteria in order to determine if it is acting as

principal or agent. The group has concluded that it is

acting as a principal in all of its revenue arrangements.

The following specific recognition criteria must also be

met before revenue is recognised:

Sales

Revenue from the sale of goods net of sales commission

and trade discount is recognised in the income

statement 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.

Interest

Interest revenue is recognised as the interest accrues

using the effective interest rate method, under which

the rate used exactly discounts, estimated future cash

receipts through the expected life of the financial asset

to the net carrying amount of the financial asset.







41



Dividend

Dividend revenue is recognised when the right to

receive the dividend is established.

p) Leases

The determination of whether an arrangement is,

or contains a lease is based on the substance of the

arrangement at inception date, whether fulfilment of

the arrangement is dependent on the use of a specific

asset or assets or the arrangement conveys a right to

use the asset.

For arrangements entered into prior to 1 January 2005,

the date of inception is deemed to be 1 January 2005 in

accordance with the transitional requirements of IFRIC 4.

Operating lease payments are recognised as an expense

in the income statement on a straight line basis over

the lease term.

q) Borrowing costs

Borrowing costs directly attributable to the acquisition,

construction or production of an asset that necessarily

takes a substantial period of time to get ready for its

intended use or sale are capitalised as part of the cost

of the respective assets. All other borrowing costs are

expensed in the period they occur. Borrowing costs

consist of interest and other costs that an entity incurs

in connection with the borrowing of funds.

r) Foreign currency translation

The consolidated financial statements are presented

in Rial Omani, which is the parent company’s and the

subsidiary’s functional currency. Each entity in the

group determines its own functional currency and

items included in the financial statements of each

entity are measured using that functional currency.

Transactions in foreign currencies are initially recorded

in the functional currency rate ruling at the date of the

transaction. Monetary assets and liabilities denominated

in foreign currencies are retranslated at the functional

currency rate of exchange ruling at the reporting date.

All differences are taken to the income statement. Non-

monetary items that are measured in terms of historical

cost in a foreign currency are translated using the

exchange rates as at the dates of the initial transactions.

Non-monetary items measured at fair value in a foreign

currency are translated using the exchange rates at the

date when the fair value was determined.

Translation of foreign operations

Exchange differences arising on equity accounting

of foreign associates are taken directly to the foreign

currency translation reserve. Foreign currency translation

reserve is recognized in equity under cumulative

changes in fair value. On disposal of the foreign

associate, such exchange differences are recognised in

the income statement as part of the profit or loss on

sale. A write down of the carrying amount of a foreign

operation does not constitute a disposal.

s) Income tax

Taxation is provided for based on relevant tax laws of

the respective countries in which the group operates.

Deferred income tax is provided, using the liability

method, on all temporary differences at the reporting

date between the tax bases of assets and liabilities and

their carrying amounts.

Deferred income tax assets and liabilities are measured

at the tax rates that are expected to apply to the period

when the asset is realised or the liability is settled,

based on laws that have been enacted at the reporting

date.

Deferred income tax assets are recognised for all

deductible temporary differences and carry-forward of

unused tax assets and unused tax losses to the extent

that it is probable that taxable profit will be available

against which the deductible temporary differences and

the carry-forward of unused tax assets and unused tax

losses can be utilised.









The carrying amount of deferred income tax assets

are reviewed at each reporting date and reduced to

the extent that it is no longer probable that sufficient

taxable profit will be available to allow all or part of the

deferred income tax asset to be utilised.

Income tax relating to items recognised directly in

equity are recognised in equity and not in the income

statement.

t) Directors’ remuneration

The parent company follows the Commercial Companies

Law 1974 (as amended), and other latest relevant

directives issued by CMA, in regard to determination

of the amount to be paid as Directors’ remuneration.

Directors’ remuneration is charged to the income

statement in the year to which they relate.

u) Significant accounting judgments, estimates

and assumptions

The preparation of the group’s financial statements

requires management to make judgments, estimates

and assumptions that affect the reported amounts of

revenues, expenses, assets and liabilities, and the

disclosure of contingent liabilities, at the reporting date.

However, uncertainty about these assumptions and

estimates could result in outcomes that could require a

material adjustment to the carrying amount of the asset

or liability affected in the future.

v) Term deposits

Term deposits are carried on the reporting at their

principal amount.

w) Interest bearing loans and borrowings

All loans and borrowings are initially recognised at the

fair value of the consideration received less directly

attributable transaction costs.

After initial recognition, interest-bearing loans and

borrowings are subsequently measured at amortised

cost using the effective interest method.

Gains and losses are recognised in profit or loss when

the liabilities are derecognised as well as through the

amortisation process.

x) Fair values

For investments traded in organised financial markets,

fair value is determined by reference to quoted market

bid prices.

For unquoted equity investments, fair value is

determined by reference to the market value of a

similar investment or is based on expected discounted

cash flows. Fair value cannot be reliably measured for

certain unquoted foreign investments. Such investments

are measured at cost.

The fair value of interest-bearing items is estimated

based on discounted cash flows using interest rates for

items with similar terms and risk characteristics.







43


3 COST OF SALES

2010 Group

2010 Parent Company

2009 Group

2009 Parent Company

RO RO RO RO

Cost of materials consumed 176,335,133 168,806,651 134,515,688 134,515,688

Employee costs 2,975,304 2,668,929 2,527,820 2,527,820

Electricity and water 684,656 558,870 566,156 566,156

Stores, consumables, repair and maintenance 1,349,900 980,495 1,470,543 1,470,543

Insurance claim receivable towards damage to stores and consumables -- -- (462,322) (462,322)

Land lease rent 53,509 30,916 30,916 30,916

Depreciation 2,053,066 1,737,936 1,700,702 1,700,702

Provision for slow moving inventories [note 15] -- -- 78,829 78,829

Other direct costs 318,068 290,341 320,456 320,456

183,769,636 175,074,138 140,748,788 140,748,788

4 OTHER INCOME

2010Group

2010 Parent Company

2009Group

2009Parent Company

RO RO RO RO

Insurance claim 66,806 66,806 42,240 42,240

Gain on sale of property, plant and equipment 3,887 3,887 3,591 3,591

Commercial understanding fee (see note below) -- -- 132,900 132,900

Miscellaneous income 52,644 16,981 191,151 187,653

123,337 87,674 369,882 366,384

The parent company had entered into a commercial understanding agreement with Draka Holding NV, relating to future co-

operation, for which an equivalent amount will be received by the parent company from Draka Holding NV annually for 5 years

which commenced in 2005 and was fully paid in 2009.








5 ADMINISTRATIVE EXPENSES

2010Group

2010Parent Company

2009Group

2009Parent Company

RO RO RO RO

Employee costs 2,391,162 2,170,075 2,149,269 2,085,655

Insurance 358,938 358,938 247,721 247,721

Communication 67,762 56,949 51,263 48,537

Travelling 62,541 60,089 58,133 58,133

Repairs and maintenance 18,701 18,701 9,910 9,910

Vehicle running, repairs and maintenance 23,503 15,411 16,829 14,533

Allowance for credit losses (note 16) -- -- 121,889 121,889

Legal and professional charges 81,699 72,418 82,820 70,963

Printing and stationery 31,239 26,452 23,516 22,417

Service charges 19,800 19,800 19,800 19,800

Directors’ remuneration 190,300 190,300 190,350 190,350

Directors’ meeting attendance fees 9,700 9,700 9,650 9,650

Contributions to local organizations 10,375 10,375 18,600 18,600

Other sundry expenses 243,834 225,922 210,690 186,972

3,509,554 3,235,130 3,210,440 3,105,130

6 SELLING AND DISTRIBUTION EXPENSES

2010Group

2010Parent Company

2009Group

2009Parent Company

RO RO RO RO

Marketing and freight 2,064,577 1,894,886 1,533,957 1,533,957

Employee costs 595,799 582,624 516,534 516,534

Advertisement and sales promotion 389,668 383,246 168,254 168,254

Travelling 105,505 93,037 52,708 52,708

3,155,549 2,953,793 2,271,453 2,271,453

7 FINANCING COSTS

2010Group

2010Parent company

2009Group

2009Parent company

RO RO RO RO

Financing cost 1,339,217 1,169,424 2,856,908 2,856,908

Less: foreign currency translation (168,017) (165,780) (647,094) (647,094)

1,171,200 1,003,644 2,209,814 2,209,814







45


8 TAXATION

2010Group and Parent

Company


CompanyRO RO

Statement of comprehensive income

Current year income tax charge 1,157,249 750,495

Prior year income tax charge 127,788 -

Deferred tax:

Relating to origination and reversal of temporary differences (13,803 ) 156,919

Income tax expense reported in the income statement 1,271,234 907,414

Statement of financial position

Current liability

Current year 1,157,249 750,495

Previous year -- 48,274

1,157,249 798,769

Non current liability

Deferred tax liability 812,475 826,278

Deferred tax liability:

At 1 January 826,278 669,359

Movement for the year (13,803) 156,919

At 31 December 812,475 826,278

The deferred liability comprises the following types of temporary differences:2010

Group and Parent Company


CompanyRO RO

Difference between the tax base of property, plant and equipment and its written down value in the books 1,004,475 1,018,278

Provision for doubtful debts (96,000) (96,000)

Provision for inventory (96,000) (96,000)

812,475 826,278Reconciliation of income tax expense

The following is a reconciliation of income taxes calculated on accounting profits at the applicable tax rates with the income

tax expense:

2010 2010 2009 2009


RO RO RO RO

Profit before income tax 9,345,736 9,531,325 7,532,880 7,632,029

Income tax as per rates mentioned above 1,266,918 1,266,918 913,732 913,732

Incomes exempt and tax losses of subsidiaries not allowed as deduction

4,316 4,316 (6,318) (6,318)

Total income tax expense in the income statement

1,271,234 1,271,234 907,414 907,414








8 TAXATION (continued)

The tax rate applicable to the parent company is 12% (2009 - 12%). For the purpose of determining the tax expense for

the year ended 31 December 2010, the accounting profit has been adjusted for tax purposes. Adjustments for tax purposes

include items relating to both income and expenses.

Assessments of the parent company with the tax department have been completed till year 2009.

Deferred tax asset has been computed at the tax rate of 12% (2009-12%).

The subsidiary company has not made a provision for tax in view of the taxable loss incurred during the year. The subsidiary

expects to receive a exemption from income tax for a period of 5 years from the date of commencement of commercial

production; accordingly no deferred tax asset has been recognized in respect of carry forward losses. None of the subsidiary’s

tax assessments have been finalized till date.

The Board of Directors believe that, any additional tax liability likely to arise on the completion of the assessments of the

above year would not be material to the financial position of the group at the reporting date.

9 EMPLOYEE COSTS

a) Employee costs included under notes 3, 5 and 6 above comprise of:

2010Group

2010Parent Company

2009Group

2009Parent Company

RO RO RO RO

Salaries 2,282,697 1,619,265 1,630,855 1,428,936

Other benefits 3,664,893 3,570,777 3,596,348 3,522,221

Contributions to defined retirement plan for Omani employees 110,457 90,424 83,061 79,088

Increase in liability for unfunded defined benefit retirement plan 146,743 141,162 106,846 99,764

Transferred to capital work in progress (242,525) -- (223,487) --

5,962,265 5,421,628 5,193,623 5,130,009

b) Movement in the liability recognised in the statement of financial position is as follows:

2010Group

2010Parent Company

2009Group

2009Parent Company

RO RO RO RO

Liability as at 1 January 665,174 658,092 630,812 630,812

Accrued during the year 146,743 141,162 106,846 99,764

Employees’ end of service benefits paid (27,482) (26,709) (72,484) (72,484)

Liability as at 31 December (note 21) 784,435 772,545 665,174 658,092







47

Om

an

Ca

ble

s In

du

stry

sa

Og

an

d I

ts s

ub

sId

Iary

nO

tes

tO t

He

COn

sOlI

dat

ed

fIn

an

CIa

l st

atem

ents

at

31 d

eCem

ber

201

0

10

PR

OP

ERTY

, PLA

NT

AN

D E

QU

IPM

ENT

Gro

upYe

ar e

nde

d

31 D

ecem

ber

2010

Build

ings

Pl

ant

and

mac

hine

ry

Elec

tric

al

equi

pmen

t a

nd

inst

alla

tions

M

otor

ve

hicl

es

Furn

iture

, fix

ture

s an

d fit

tings

O

ffice

eq

uipm

ent

Mat

eria

l ha

ndlin

g eq

uipm

ent

Loos

e to

ols

Labo

rato

ry

equi

pmen

t Ca

pita

l wor

k in

pro

gres

s To

tal

RORO

RORO

RORO

RORO

RORO

RO

Cost

At

31

Dec

embe

r 20

096,

338,

973

20,6

82,3

631,

259,

781

184,

575

439,

241

584,

231

2,04

9,34

715

8,23

484

0,71

67,

706,

164

40,2

43,6

25

Add

ition

s du

ring

the

year

77

,439

226,

550

7,03

726

,113

81,3

9881

,565

151,

273

35,0

4511

0,99

66,

520,

621

7,31

8,03

7D

ispo

sals

dur

ing

the

year

(55,

947)

(605

)--

(24,

025)

(3,5

98)

(709

)(1

1,29

0)--

----

(96,

174)

Tran

sfer

s3,

435,

584

7,50

7,38

162

1,60

9--

--37

,600

--6,

948

44,5

85(1

1,65

3,70

7)--

At

31 D

ecem

ber

2010

9,79

6,04

928

,415

,689

1,88

8,42

718

6,66

351

7,04

170

2,68

72,

189,

330

200,

227

996,

297

2,57

3,07

847

,465

,488

Dep

reci

atio

n

At

31 D

ecem

ber

2009

2,11

8,44

26,

609,

416

772,

895

133,

792

386,

489

458,

588

1,19

1,56

113

2,98

344

6,75

6--

12,2

50,9

22

Char

ge f

or t

he y

ear

404,

400

1,17

6,61

213

0,63

431

,662

31,0

1677

,821

262,

629

5,81

372

,978

--2,

193,

565

Rela

ting

to d

ispo

sals

(18,

175)

(603

)--

(24,

022)

(3,1

40)

(659

)(1

1,28

9)--

----

(57,

888)

At

31 D

ecem

ber

2010

2,50

4,66

77,

785,

425

903,

529

141,

432

414,

365

535,

750

1,44

2,90

113

8,79

651

9,73

4--

14,3

86,5

99

Net

boo

k va

lue

At

31 D

ecem

ber

2010

7,29

1,38

220

,630

,264

984,

898

45,2

3110

2,67

616

6,93

774

6,42

961

,431

476,

563

2,57

3,07

833

,078

,889

At

31 D

ecem

ber

2009

4,22

0,53

114

,072

,947

486,

886

50,7

8352

,752

125,

643

857,

786

25,2

5139

3,96

07,

706,

164

27,9

92,7

03







Om

an

Ca

ble

s In

du

stry

sa

Og

an

d I

ts s

ub

sId

Iary

nO

tes

tO t

He

COn

sOlI

dat

ed

fIn

an

CIa

l st

atem

ents

at

31 d

eCem

ber

201

0

10

PR

OP

ERTY

, PLA

NT

AN

D E

QU

IPM

ENT

(con

tin

ued)

Gro

upYe

ar e

nde

d

31 D

ecem

ber

2009

Build

ings

Pl

ant

and

mac

hine

ry

Elec

tric

al

equi

pmen

t a

nd

inst

alla

tions

M

otor

ve

hicl

es

Furn

iture

, fix

ture

s an

d fit

tings

O

ffice

eq

uipm

ent

Mat

eria

l ha

ndlin

g eq

uipm

ent

Loos

e to

ols

Labo

rato

ry

equi

pmen

t Ca

pita

l wor

k in

pro

gres

s To

tal

RORO

RORO

RORO

RORO

RORO

RO

Cost

At

31

Dec

embe

r 20

086,

338,

973

19,0

78,6

981,

245,

906

166,

375

422,

390

565,

096

2,08

1,55

614

9,84

380

6,38

71,

621,

844

32,4

77,0

68

Add

ition

s du

ring

the

year

-

16,6

4313

,875

18,2

0023

,318

19,1

358,

871

8,39

134

,329

7,67

1,34

27,

814,

104

Dis

posa

ls d

urin

g th

e ye

ar-

- -

- (6

,467

)-

(41,

080)

- -

- (4

7,54

7)

Tran

sfer

s-

1,58

7,02

2-

- -

- -

- -

(1,5

87,0

22)

--

At

31 D

ecem

ber

2009

6,33

8,97

320

,682

,363

1,25

9,78

118

4,57

543

9,24

158

4,23

12,

049,

347

158,

234

840,

716

7,70

6,16

440

,243

,625

Dep

reci

atio

n

At

31 D

ecem

ber

2008

1,81

4,88

95,

642,

453

684,

619

104,

481

344,

320

364,

939

961,

052

126,

523

382,

894

--10

,426

,170

Char

ge f

or t

he y

ear

303,

553

966,

963

88,2

7629

,311

46,5

2493

,649

271,

588

6,46

063

,862

--1,

870,

186

Rela

ting

to d

ispo

sals

- -

- -

(4,3

55)

- (4

1,07

9)-

- -

(45,

434)

At

31 D

ecem

ber

2009

2,11

8,44

26,

609,

416

772,

895

133,

792

386,

489

458,

588

1,19

1,56

113

2,98

344

6,75

6--

12,2

50,9

22

Net

boo

k va

lue

At

31 D

ecem

ber

2009

4,22

0,53

114

,072

,947

486,

886

50,7

8352

,752

125,

643

857,

786

25,2

5139

3,96

07,

706,

164

27,9

92,7

03

At

31 D

ecem

ber

2008

4,52

4,08

413

,436

,245

561,

287

61,8

9478

,070

200,

157

1,12

0,50

423

,320

423,

493

1,62

1,84

422

,050

,898

a)

Dep

reci

atio

n of

RO

2,0

53,0

66 (

2009

– R

O 1

,700

,702

) is

incl

uded

und

er c

ost

of s

ales

(no

te 3

).

b)

Capi

tal w

ork

in p

rogr

ess

at t

he r

epor

ting

date

incl

udes

exp

endi

ture

incu

rred

on

plan

t an

d m

achi

nery

and

ele

ctri

cal e

quip

men

t an

d in

stal

latio

ns.

c)

Capi

tal w

ork

in p

rogr

ess

of t

he g

roup

incl

udes

bor

row

ing

cost

s am

ount

ing

to R

O 2

40,7

81 (

2009

– 1

24,2

63)

that

are

dire

ctly

att

ribu

tabl

e to

the

acq

uisi

tion

and

cons

truc

tion

of

mac

hine

ry a

nd b

uild

ing

of t

he s

ubsi

diar

y.

d)

Prop

erty

, pla

nt a

nd e

quip

men

t of t

he s

ubsi

diar

y, w

hich

are

bei

ng c

onst

ruct

ed a

nd in

stal

led

are

mor

tgag

ed a

gain

st te

rm lo

an a

vaile

d fr

om a

loca

l com

mer

cial

ban

k (r

efer

not

e 19

).







49

Om

an

Ca

ble

s In

du

stry

sa

Og

an

d I

ts s

ub

sId

Iary

nO

tes

tO t

He

COn

sOlI

dat

ed

fIn

an

CIa

l st

atem

ents

at

31 d

eCem

ber

201

0

10

PR

OP

ERTY

, PLA

NT

AN

D E

QU

IPM

ENT

(con

tin

ued)

Pare

nt C

ompa

nyYe

ar e

nde

d

31 D

ecem

ber

2010

Build

ings

Pl

ant

and

mac

hine

ry

Elec

tric

al

equi

pmen

t a

nd

inst

alla

tions

M

otor

ve

hicl

es

Furn

iture

, fix

ture

s an

d fit

tings

O

ffice

eq

uipm

ent

Mat

eria

l ha

ndlin

g eq

uipm

ent

Loos

e to

ols

Labo

rato

ry

equi

pmen

t Ca

pita

l wor

k in

pro

gres

s To

tal

RORO

RORO

RORO

RORO

RORO

RO

Cost

At

31

Dec

embe

r 20

096,

338,

973

20,6

82,3

631,

259,

781

166,

375

438,

122

573,

474

2,04

9,34

715

8,23

484

0,71

657

0,72

933

,078

,114

Add

ition

s du

ring

the

year

77

,004

44

,652

4,97

522

,363

23,2

8634

,602

23,9

216,

788

90,0

1895

7,51

91,

285,

128

Dis

posa

ls d

urin

g th

e ye

ar(5

5,94

7)

(605

)-

(24,

025)

(3,5

98)

(709

)(1

1,29

0)-

--

(96,

174)

Tran

sfer

s10

6,80

8 -

--

--

--

-(1

06,8

08)

--

At

31 D

ecem

ber

2010

6,46

6,83

820

,726

,410

1,26

4,75

616

4,71

345

7,81

060

7,36

72,

061,

978

165,

022

930,

734

1,42

1,44

034

,267

,068

Dep

reci

atio

n

At

31 D

ecem

ber

2009

2,11

8,44

26,

609,

416

772,

895

130,

378

386,

336

456,

384

1,19

1,56

113

2,98

344

6,75

6-

12,2

45,1

51

Char

ge f

or t

he y

ear

320,

486

996,

589

89,1

6426

,452

25,9

9471

,289

257,

162

4,29

370

,242

-1,

861,

671

Rela

ting

to d

ispo

sals

(18,

175)

(603

)-

(24,

022)

(3,1

40)

(659

)(1

1,28

9)-

--

(57,

888)

At

31 D

ecem

ber

2010

2,42

0,75

37,

605,

402

862,

059

132,

808

409,

190

527,

014

1,43

7,43

413

7,27

651

6,99

8-

14,0

48,9

34

Net

boo

k va

lue

At

31 D

ecem

ber

2010

4,04

6,08

513

,121

,008

402,

697

31,9

0548

,620

80,3

5362

4,54

427

,746

413,

736

1,42

1,44

020

,218

,134

At

31 D

ecem

ber

2009

4,22

0,53

114

,072

,947

486,

886

35,9

9751

,786

117,

090

857,

786

25,2

5139

3,96

057

0,72

920

,832

,963







10

PR

OP

ERTY

, PLA

NT

AN

D E

QU

IPM

ENT

(Con

tin

ued)

Pare

nt C

ompa

nyYe

ar e

nde

d

31 D

ecem

ber

2009

Build

ings

Pl

ant

and

mac

hine

ry

Elec

tric

al

equi

pmen

t an

d in

stal

latio

ns

Mot

or

vehi

cles

Furn

iture

, fix

ture

s an

d fit

tings

O

ffice

eq

uipm

ent

Mat

eria

l ha

ndlin

g eq

uipm

ent

Loos

e to

ols

Labo

rato

ry

equi

pmen

t Ca

pita

l wor

k in

pro

gres

s To

tal

RORO

RORO

RORO

RORO

RORO

RO

Cost

At

31

Dec

embe

r 20

086,

338,

973

19,0

78,6

981,

245,

906

166,

375

422,

390

560,

520

2,08

1,55

614

9,84

380

6,38

71,

413,

295

32,2

63,9

43

Add

ition

s du

ring

the

year

-

16,6

4313

,875

- 22

,199

12,9

548,

871

8,39

134

,329

744,

456

861,

718

Dis

posa

ls d

urin

g th

e ye

ar-

- -

- (6

,467

)-

(41,

080)

- -

- (4

7,54

7)

Tran

sfer

s-

1,58

7,02

2-

- -

- -

- -

(1,5

87,0

22)

-

At

31 D

ecem

ber

2009

6,33

8,97

320

,682

,363

1,25

9,78

116

6,37

543

8,12

257

3,47

42,

049,

347

158,

234

840,

716

570,

729

33,0

78,1

14

Dep

reci

atio

n

At

31 D

ecem

ber

2008

1,81

4,88

95,

642,

453

684,

619

104,

481

344,

320

364,

367

961,

052

126,

523

382,

894

- 10

,425

,598

Char

ge f

or t

he y

ear

303,

553

966,

963

88,2

7625

,897

46,3

7192

,017

271,

588

6,46

063

,862

1,86

4,98

7

Rela

ting

to d

ispo

sals

- -

- -

(4,3

55)

- (4

1,07

9)-

- -

(45,

434)

At

31 D

ecem

ber

2009

2,11

8,44

26,

609,

416

772,

895

130,

378

386,

336

456,

384

1,19

1,56

113

2,98

344

6,75

6-

12,2

45,1

51

Net

boo

k va

lue

At

31 D

ecem

ber

2009

4,22

0,53

114

,072

,947

486,

886

35,9

9751

,786

117,

090

857,

786

25,2

5139

3,96

057

0,72

920

,832

,963

At

31 D

ecem

ber

2008

4,52

4,08

413

,436

,245

561,

287

61,8

9478

,070

196,

153

1,12

0,50

423

,320

423,

493

1,41

3,29

521

,838

,345

a)

Dep

reci

atio

n of

RO

1,7

37,9

36 (

2009

– R

O 1

,700

,702

) is

incl

uded

und

er c

ost

of s

ales

(no

te 3

).

b)

Capi

tal w

ork

in p

rogr

ess

at t

he r

epor

ting

date

incl

udes

exp

endi

ture

incu

rred

on

plan

t an

d m

achi

nery

and

ele

ctri

cal e

quip

men

t an

d in

stal

latio

ns.

Om

an

Ca

ble

s In

du

stry

sa

Og

an

d I

ts s

ub

sId

Iary

nO

tes

tO t

He

COn

sOlI

dat

ed

fIn

an

CIa

l st

atem

ents

at

31 d

eCem

ber

201

0







51


11 INVESTMENT IN SUBSIDIARY

%Holding Activity

Year of incorporation

2010Parent Company

2009Parent Company

RO RO

Oman Aluminium Processing Industries LLC (OAPIL) 51%

Manufacture of aluminium rods and overhead conductors 2008 2,226,660 1,275,000

The Parent Company has 51% shareholding in Oman Aluminium Processing Industries LLC (OAPIL). The Subsidiary has

commenced its commercial operations during 2010. During the year the Parent Company contributed RO 951,660 (2009:

RO 510,000) being 51% of the share towards the share capital call made during the year.

The income statement of the group has been made after consolidating the OAPIL accounts and the 49% share of loss of RO

90,939 (2009: RO 48,583) has been shown as non-controlling interest in consolidated income statement.

The Parent Company had a 100% interest in Oman Power Conductors LLC (“subsidiary”), a company registered in the

Sultanate of Oman. The subsidiary was formed during 2001, had not yet commenced commercial operations, and its

shareholders had not contributed towards its capital. In 2006 the subsidiary’s registration had expired and during the year,

the liquidation of this company has been announced in the official gazette. Consequently, there are no assets and liabilities

or results of the subsidiary to be consolidated into the Company’s financial statements.

The following further notes apply:

1. Investment in OAPIL has been set off against the capital and reserves of the subsidiary in the consolidated financial

statements.

2. The Board of Directors of the Parent Company believe that no impairment has arisen in the investment in OAPIL.

12 INVESTMENT IN ASSOCIATE

2010Group and Parent Company


i) Name of the associate % HoldingCarrying

value Cost % HoldingCarrying

value Cost

RO RO RO RO

Associated Cables Pvt Ltd, India (ACPL) 40% 712,513 -- 40% 729,533 --

The associate registered in India is engaged in the manufacture and sale of electrical cables.

ii) During the year 2006, the Parent Company had acquired 35% stake and in 2009 an additional 5% stake in the

associate at nil consideration. This acquisition was in accordance with the terms of the commercial understanding

agreement with Draka Holding NV, the Associate Company’s major shareholder.








12 INVESTMENT IN ASSOCIATE (Continued)

iii) The carrying value of the investment in an associate is as follows:

Group2010

Parent Company Group2009

Parent Company RO RO RO RO

At the beginning of the year 729,533 729,533 650,336 650,336

Share of results / fair value changes of associate (35,965) (35,965) 52,646 52,646

Effect of foreign currency translation 18,945 18,945 26,551 26,551

At the end of the year 712,513 712,513 729,533 729,533

The share of results is based on the unaudited financial statements of the associate as at 31 December 2010; the associate

prepares audited financial statements at 31 March each year.

The summarised financial position of the associate at the statement of financial position date is as follows:

2010 2009

RO RO

Associate’s statement of financial position:

Current assets 1,605,556 1,635,179

Non-current assets 729,402 861,322

Current liabilities (313,761) (276,556)

Non-current liabilities (239,915) (397,341)

Net assets 1,781,282 1,822,604

Associate’s revenue and profit:

Revenue 2,618,034 2,614,787

(Loss)/profit (89,915) 131,614

Carrying amount of investments 712,513 729,533

13 AVAILABLE FOR SALE INVESTMENTS

2010 2009

Group and Parent Group and Parent

Company Company

Market value Cost Market value Cost

RO RO RO RO

Unquoted investments (refer note below) 510,000 510,000 -- --

Marketable securities listed on the Muscat Securities Market

13,043 2,544 9,005 2,544

523,043 512,544 9,005 2,544







53


13 AVAILABLE FOR SALE INVESTMENTS (Continued)

During the year, the company invested RO 450,000 in 15% shareholding of Shumookh Investment & Services SAOC. The

company is incorporated for the purpose of promoting projects of infrastructure development in the premises of PEIE and

has not yet commenced its operations. These shares are unquoted and carried at cost as its fair value cannot be reliably

determined due to the unpredictable nature of future cash flows.

During the year, the company invested RO 60,000 in units of Oman fixed income fund. The units were not traded during

the period ended 31 December 2010 and are thus carried at cost.

Movements in cumulative changes in fair values arising from available for sale investments are as follows:

2010 2009

Group and Parent company

RO RO

Net unrealised gains 4,038 2,960

Net realised gains reclassified to the income statement on disposal -- (3,791)

4,038 (831)

14 HELD TO MATURITY INVESTMENTS

Held to maturity investments comprise bonds with a commercial bank in Sultanate of Oman. The bonds earn interest at a

rate of 8% per annum.

15 INVENTORIES

2010Group

2010Parent Company


CompanyRO RO RO

Raw materials 8,057,977 6,922,739 9,541,208

Spares, consumables and scrap 1,245,520 1,062,523 860,869

Finished goods 16,428,205 15,637,913 8,372,241

25,731,702 23,623,175 18,774,318

Work in progress 3,619,666 3,577,072 1,721,107

Goods in transit 13,856,525 13,856,525 5,340,174

43,207,893 41,056,772 25,835,599

Less provision for slow moving and obsolete items (800,000) (800,000) (800,000)

42,407,893 40,256,772 25,035,599

The movement in the provision for slow moving inventories is as follows:2010



CompanyRO RO

At the beginning of the year 800,000 721,171

Provision created during the year (note 3) -- 78,829

At the end of the year 800,000 800,000








16 TRADE AND OTHER RECEIVABLES

Group2010



Trade receivables 48,734,192 45,360,366 39,854,378 39,854,378

Less: allowance for credit losses (800,000) (800,000) (800,000) (800,000)

47,934,192 44,560,366 39,054,378 39,054,378

Advances 1,591,830 1,503,583 1,067,694 979,155

Other receivables and prepayments 419,701 392,086 830,254 802,932

49,945,723 46,456,035 40,952,326 40,836,465

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


Company


Company

RO RO

At the beginning of the year 800,000 678,111

Provision created during the year (note 5) -- 121,889

At the end of the year 800,000 800,000

The company offers credit to its customers, after which trade receivables are considered to be past due. At the reporting

date, gross trade receivables amounting to RO 627,763 (2009 – RO 565,619) were assessed as impaired by the management,

for which allowance for credit losses has been established. In addition an amount of RO 172,237 (2009 – RO 234,381) has

also been established as a collective provision for credit losses against unsecured trade receivables.

Past due but not impaired

TotalRO

Neither past due nor impaired

RO

3 -6 monthsRO

6 - 12 monthsRO

>1 yearRO

2010 44,732,603 42,684,097 1,504,431 99,275 444,800

2009 39,288,759 38,917,566 258,214 -- 112,979

At the reporting date 50% of group’s trade receivables are due from 8 customers (2009- 61% from 8 customers). Trade

receivables amounting to RO 42,684,097 (2009 – RO 38,917,566) are neither past due nor impaired and are estimated as

collectible based on historical experience. 72% (2009 – 66%) of the trade receivables are secured against letters of Credit,

bank guarantees or other credit risk cover. The balance amounts are mainly due from Government authorities.

Other receivables include amounts totaling RO 351,535 (2009 – RO 207,585) that relates to derivative financial assets in

relation to raw materials required to meet confirmed sales orders in the year 2010.







55


17 CASH AND BANK BALANCES

Group2010


Parent CompanyRO RO RO RO

Cash in hand 39,255 14,094 15,751 14,167

Cash at bank – current accounts 2,423,362 1,955,070 3,091,677 2,354,529

2,462,617 1,969,164 3,107,428 2,368,696

18 SHARE CAPITAL AND RESERVES

a) Share capital

i) The Parent Company’s authorised share capital comprises 120,000,000 shares of 100 baisas each (2009 – 120,000,000

shares of 100 baisas each).

ii) The Parent Company’s issued and fully paid up share capital comprises 89,700,000 shares of 100 baisas each

(2009 – 89,700,000 shares of 100 baisas each).

iii) Shareholders who own 10% or more of the Parent Company’s share capital at the reporting date and the number of

shares they hold are as follows:

2010 2009

No of shares held % No of shares held %

Draka Holding NV 31,200,000 34.78 31,200,000 34.78

Mustafa Mukhtar Ali Al Lawati 11,247,040 12.54 11,247,040 12.54

Hussain Salman Al Lawati 10,978,130 12.24 10,938,130 12.19

53,425,170 59.56 53,385,170 59.51

b) Share premium

Share premium represents the excess of amounts received over the nominal value of shares issued to shareholders

during 1998.

c) Legal reserve

As required by Article 106 of the Commercial Companies Law of 1974 of Sultanate of Oman, 10% of the net profit

of the Parent Company is to be transferred to a non-distributable legal reserve until the amount of the legal reserve

becomes equal to one-third of the Parent Company’s issued share capital. The Company has discontinued such

transfers as the reserve has reached the statutory minimum of one third of the capital.

As the subsidiary has incurred a loss during the year, no transfer has been made to the legal reserve.

The balance at the end of the year in the Group’s legal reserve represents the amounts relating to the Parent Company.








18 SHARE CAPITAL AND RESERVES (continued)

d) General reserve

This reserve represents a distributable reserve initially created at 31 December 2001, to address any impact of

unforeseen events in view of the Parent Company’s growing operations. 10% of the net profit of the Parent Company

has been transferred to this reserve during the year.

e) Dividend per share

i) During the year, dividends of 30 baisas (2009: 20 baisas) per share totaling RO 2,691,000 (2009: RO 1,794,000)

relating to the year 2009 were declared and paid.

ii) The Board of Directors have recommended a dividend of 40 baisas (2009: 30 baisas) per share for the year 2010

amounting to RO 3,588,000 (2009: RO 2,691,000), subject to the approval of the shareholders at the forthcoming

Annual General Meeting.

19 TERM LOANS

2010 2009


RO RO RO RO

Non-current liabilities

Loans from commercial banks 10,246,218 495,500 6,551,438 1,496,500

Government soft loan -- -- 250,000 250,000

10,246,218 495,500 6,801,438 1,746,500

Deferred government grant -- -- (21,633) (21,633)

10,246,218 495,500 6,779,805 1,724,867

Current liabilities

Loans from commercial banks 1,001,000 1,001,000 1,001,000 1,001,000

Government soft loan 250,000 250,000 250,000 250,000

1,251,000 1,251,000 1,251,000 1,251,000

Deferred government grant (7,282) (7,282) -- --

1,243,718 1,243,718 1,251,000 1,251,000

Total term loans 11,489,936 1,739,218 8,030,805 2,975,867

Loans are stated at amortised cost subsequent to initial recognition.

Loans availed by the Parent Company from commercial banks include a loan denominated in US Dollars of RO 1,496,500

(2009 – RO 2,497,500) repayable in five semi annual installments of RO 499,500 each up to February 2012. The loans

are secured by a registered mortgage over the Parent Company’s property, plant and equipment acquired with the loan

proceeds. The loan agreements contain restrictive covenants that relate to the disposal of the Parent Company’s property,

plant and equipment. The loans carry interest at commercial rates.

The subsidiary company has drawn US denominated loan of RO 9,750,718 (2009: RO 5,054,938) out of the sanctioned loan

amount of RO 12,900,000 as at the reporting date. The loan is repayable in 12 equal half yearly installments commencing:

y 42 months from the date of drawdown; or

y 24 months from the date of commercial operation, whichever is earlier.







57


19 TERM LOANS (continued)

Accordingly the entire amount is classified under non-current liabilities. This term loan is secured by:

y A first ranking legal mortgage over the existing and future lease hold (leasehold rights) and building at Sohar

y A first ranking commercial mortgage on plant and machinery and other assets registered with the ministry of

Commerce and Industry and

y Endorsement of insurance policy

The Government soft loan is secured by a registered mortgage of the Parent Company’s property, plant and equipment and

endorsement of the insurance policy in respect of the property, plant and equipment of the Parent Company in favour of the

bank and the Government of the Sultanate of Oman. The loan agreements contain restrictive covenants that relate amongst

others to the disposal of the Parent Company’s property, plant and equipment and the compliance to certain stipulated ratios.

The Government soft loan include an amount of RO 250,000 (2009 – RO 500,000), availed in 2005, disbursed by a commercial

bank in Oman and is repayable in annual installments of RO 250,000 each.

The amortised cost of the Government soft loan has been determined by the management using the effective interest rate

method. The effective interest rate adopted was 6% per annum. The Government subsidy on loans is recognised in the

statement of financial position as ‘deferred Government grant’ and amortised over the life of the loans to which the subsidy

relates on a systematic basis in the same periods in which the loan is repaid. The amortisation of the deferred Government

grant for the year 2010 amounted to RO 7,282 (2009 - RO 21,633).

The following further note applies:

The maturity profile of the non-current portion of term loans based on the remaining period to maturity from the statement

of financial position date is as follows:

2010Group

2010Parent Company

2009Group

2009Parent Company

RO RO RO RO

Between 1 and 2 years 495,500 495,500 1,724,867 1,724,867

Between 2 and 5 years 9,750,718 -- 5,054,938 -

10,246,218 495,500 6,779,805 1,724,867

20 BANK BORROWINGS

2010Group

2010Parent Company

2009Group

2009Parent Company

RO RO RO RO

Overdrafts 202,299 202,299 3,499,651 3,499,651

Loans against trust receipts 28,856,230 28,856,230 22,064,039 22,064,039

Short term loans 11,141,715 11,141,715 8,911,800 8,911,800

40,200,244 40,200,244 34,475,490 34,475,490

Loans against trust receipts (LTRs) are secured by a first charge over all the current assets including inventories and

receivables. The Parent Company avails short-term loans from commercial banks for a period ranging from 30 to 180 days

(2009 – same period). Bank borrowings carry interest at commercial rates.








21 TRADE AND OTHER PAYABLES

Group2010



Trade payables 24,079,495 18,507,695 10,209,456 9,754,202

Other payables 2,867,890 1,824,890 642,597 567,046

Accruals 3,672,757 3,210,902 2,783,435 2,722,250

Employees’ end of service benefits (note 9 b) 784,435 772,545 665,174 658,092

31,404,577 24,316,032 14,300,662 13,701,590

Other payables of the group, includes an amount of RO 1,177,210 (2009 – RO 218,432) that relates to commodity future

contracts that is more fully explained in note 28 to the financial statements.

Other payables of the parent company, includes an amount of RO 923,842 (2009 – RO 218,432) that relates to commodity

future contracts that is more fully explained in note 28 to the financial statements.

22 BASIC EARNINGS PER SHARE

The basic earnings per share is calculated by dividing the net profit of the Group and Parent Company for the year attributable

to the shareholders of the Parent Company, by the weighted average number of shares outstanding during the year.

Group2010


Parent Company

Net profit for the year (RO) 8,165,441 8,260,091 6,674,049 6,724,615

Weighted average number of shares outstanding during the year 89,700,000 89,700,000 89,700,000 89,700,000

Basic earnings per share (RO) 0.091 0.092 0.074 0.075

As the Group and Parent Company does not have any dilutive potential shares, the diluted earnings per share is the same

as the basic earnings per share.

23 NET ASSETS PER SHARE

Net assets per share, is calculated by dividing the equity attributable to the shareholders of the Group and Parent Company

at the reporting date by the number of shares outstanding.

Group2010


Parent Company

Net assets (in RO) 45,043,398 45,338,500 40,353,636 40,424,871

Number of shares outstanding at the reporting date 89,700,000 89,700,000 89,700,000 89,700,000

Net assets per share (in RO) 0.502 0.505 0.450 0.451







59


24 SEGMENTAL REPORTING

The group and its subsidiary manufactures electrical cables and conductors as per different specifications based on market

requirements. The subsidiary has commenced commercial operations in the current year. Accordingly, specific segmental

information in respect of parent company and its subsidiary has not been provided. A substantial portion of the products

are sold for use within Middle East and North Africa (MENA) and international markets.

Geographic information

Revenues from external customers

Group2010



Oman 93,886,110 93,886,110 68,160,890 68,160,890

Middle East and North Africa (MENA) 96,356,966 91,969,550 82,461,272 82,461,272

Others 10,641,746 5,895,119 4,980,904 4,980,904

Total 200,884,822 191,750,779 155,603,066 155,603,066

25 CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS

Contingent liabilities

Group2010



Letters of credit 16,938,644 14,776,362 12,096,376 8,707,162

Letters of guarantee 9,821,318 9,821,318 5,566,641 5,566,641

26,759,962 24,597,680 17,663,017 14,273,803

Capital Commitments

a) Authorised and contracted 1,957,231 1,624,393 2,390,610 404,274

b) At the reporting date, the Parent Company has commitment of RO 323,340 (2009: RO 1,275,000) against uncalled

share capital of OAPIL, the subsidiary.

26 RELATED PARTY TRANSACTIONS

The Group has entered into transactions with Directors and entities in which certain Directors of the Parent Company and the

subsidiary have an interest. In the ordinary course of business, the Group sells goods to related parties and procures goods

and services from related parties. These transactions are entered into on terms and conditions, which the Directors believe

could be obtained on an arms’ length basis from independent third parties.

During the year the related party transactions, which are subject to shareholders’ approval at the forthcoming Annual

General Meeting, are as follows:








26 RELATED PARTY TRANSACTIONS (continued)

Group

2010 2009

Sales and other income

Purchases and other expenses Others



RO RO RO RO RO RO

Associated companies 776,780 1,254,554 -- 344,597 1,538,683 --

Shareholders -- 1,663 -- -- 4,537 132,900

Other related parties 4,835,706 383,275 -- 3,609,910 60,399 --

5,612,486 1,639,492 -- 3,954,507 1,603,619 132,900

Parent

2010 2009





RO RO RO RO RO RO

Associated companies 776,780 1,254,554 -- 344,597 1,538,683 --

Shareholders -- 1,663 -- -- 4,537 132,900

Other related parties 4,835,706 3,032,084 -- 3,609,910 60,399 --

5,612,486 4,288,301 -- 3,954,507 1,603,619 132,900

Compensation of key management personnel

The key management personnel compensation for the year comprises:

Group Parent company

2010 2009 2010 2009

RO RO RO RO

Short term employment benefits 845,049 800,366 845,049 800,366

End of service benefits 33,259 17,004 33,259 17,004

Directors’ meeting attendance fees 9,700 9,650 9,700 9,650

Directors’ remuneration [see note below] 190,300 190,350 190,300 190,350

1,078,308 1,017,370 1,078,308 1,017,370

Apart from specific bonus provisions to certain top management, the Company makes an overall provision for employees’

bonus each year. Of the amounts so provided in the previous year, amounts paid to key management personnel are

included in short term employment benefits. The Directors’ remuneration and employees’ end of service benefits are

included under other payables.







61


26 RELATED PARTY TRANSACTIONS (continued)

Amounts due from related parties at the reporting date are as follows:

2010 2009

GroupParent

Company Group Parent Company

RO RO RO RO

Associate 99,226 99,226 645 645

Other related parties 1,565,060 1,266,576 990,038 990,038

1,664,286 1,365,802 990,683 990,683

Amounts due to related parties:

2010 2009

GroupParent

Company Group Parent Company

RO RO RO RO

Associate 63,921 63,921 101,527 101,527

Other related parties 11,278 1,344,406 3,123 3,123

75,199 1,408,327 104,650 104,650

The amounts due from and due to related parties are on normal terms of credit and consideration to be settled in cash.

There have been no guarantees given in respect of amounts due from or due to related parties. An amount of RO 881,424

(2009 – RO 327,417) due from a related party is secured by a credit instrument and the balance amounts are unsecured.

At the reporting date, the entire due from related parties are due from two related parties (2009 - two related parties).

Amounts due from related parties and from associate are neither past due nor impaired and are estimated as collectible

based on historical experience. There has been no impairment assessed on dues from related parties and the associate and

accordingly no allowance for credit losses against these dues has been considered necessary.

27 LEASES

The Parent Company has leased land for factory premises, at Rusayl, from the Public Establishment for Industrial Estates

(PEIE), under agreements that expire over periods ranging up to 1 January 2031. Payment of lease rentals to PEIE in respect

of the plot that expires on 22 June 2026 will commence after 2 June 2011 as the lease rentals until that date will be set off

against certain amounts due to the Parent Company for having developed the land. The subsidiary has entered into a lease

agreement on 6 January 2009 in respect of the land used for factory premises, which is valid until 5 January 2034. At the

reporting date future minimum lease commitments under non-cancelable operating leases were as follows:

Group2010


Parent Company

RO RO RO RO

Less than one year 75,917 30,917 51,691 30,917

Between one and five years 350,937 170,937 341,959 161,959

More than five years 1,535,867 725,868 1,615,281 760,281

1,962,721 927,722 2,008,931 953,157








28 CUMULATIVE CHANGES IN FAIR VALUES

The following summarises the cumulative changes in fair values as of reporting date:

2010Group

2010Parent Company


RO RO RO

Unrealised (loss) / gain relating to:

Hedging commodity and currency future contracts (maturing within 12 months) (see note below)

(1,052,312) (923,094) (244,649)

Fair value of investments available for sale [note 13] 10,499 10,499 6,461

Others 151,274 151,274 132,329

(890,539) (761,321) (105,859)

The following further note applies:

Any positive or negative fair value adjustments of commodity future contracts designated as cash flow hedges will be included in the subsequent period on the maturity of the contracts, as cost of inventories and ultimately as cost of sales in the income statement (see also note 16).

The cumulative change in fair value relating to the unrealised loss in commodity future contracts of RO 1,053,060 (2009 - RO 218,432) is mainly on account of differences between the original values of the future commodity contracts entered into by the Group in the normal course of business and the market value of these contracts as at the reporting date attributable to equity holders of the parent company. RO 124,150 attributable to non controlling interest is disclosed separately in statement of changes in equity as a component of non controlling interests.

The cumulative change in fair value relating to the unrealised loss in commodity future contracts of RO 923,842 (2009 - RO 218,432) is mainly on account of differences between the original values of the future commodity contracts entered into by the parent company in the normal course of business and the market value of these contracts as at the reporting date.

The reported fair value changes on account of commodity future contracts mentioned above, does not have an impact on the year 2010 profitability, as it relates to the cost of purchase in the year 2011.

29 FINANCIAL INSTRUMENTS AND RELATED RISK MANAGEMENT

The Group’s principal financial liabilities other than derivatives, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to raise finances for the group’s operations. The group has loan and other receivables, trade and other receivables, and cash and short-term deposits that arrive directly from its operations. The Group also holds available-for-sale investments, held to maturity investments and enters into derivative transactions.

The Group’s activities expose it to various financial risks, primarily being, market risk (including currency risk, interest rate risk, and price risk), credit risk and liquidity risk. The Group’s risk management is carried out internally in accordance with the policies approved by the Board of Directors.

Market riskMarket risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise three types of risk: interest rate risk, currency risk, commodity price risk and other price risk, such as equity risk. Financial instruments affected by market risk include loans and borrowings, deposits,

available-for-sale investments, and derivative financial instruments.







63


29 FINANCIAL INSTRUMENTS AND RELATED RISK MANAGEMENT (continued)

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes

in market interest rates.

The Group is exposed to interest rate risk on its interest bearing assets and liabilities (short term bank deposits, held to

maturity investments, bank borrowings and term loans). The management manages the interest rate risk by constantly

monitoring the changes in interest rates and availing lower interest bearing facilities.

For every 0.5% change in interest rate, the impact on the income statement will be approximate to RO 210,000 (2009 – RO

200,000) based on the level of borrowing at the reporting date.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of

changes in foreign exchange rates. The Group operates in international markets and is exposed to foreign exchange risk

arising from various currency exposures, primarily with respect to the US dollar, Euros, Pound sterling and all GCC currencies.

The majority of the Group’s financial assets and financial liabilities are either demoninated in local currency (Rials Omani)

or currency fixed against Rials Omani. Term loan is due in US Dollars. As the Omani Rial is pegged to the US Dollar, balances

in US Dollars are not considered to represent significant currency risk Hence the management believes that there would not

be a material impact on the profitability if these foreign currencies weakens or strengthens against the Omani Rials with

all other variables held constant.

Commodity price risk

The group is affected by the volatility of certain commodities. Its operating activities require the ongoing purchase and

manufacturing of electric cables and therefore require a continuous supply of copper, aluminum and steel. Due to the

significantly increased volatility of the price of the underlying, the group’s Board of Directors has developed and enacted a

risk management strategy regarding commodity price risk and its mitigation.

To manage metal price fluctuation risk, the management uses futures contracts to hedge any significant risks arising from

fluctuations in metal prices. Future contracts have maturities of less than one year after the reporting date. Hence the

management believes that there would not be a material impact on the profitability if these commodity prices weakens

or strengthens.

Equity price risk

The Group is exposed to price risk related to quoted investments held by the Group and traded in organized financial

markets. To manage its price risk arising from investments in equity, the management continuously monitors the market

and the key factors that effect stock market movements. The management believes that the impact of price fluctuation on

the quoted investments will not be material considering the amount of quoted investments at the reporting date.

Credit risk

Credit risk primarily arises from credit exposures to customers, including outstanding receivables and committed transactions.

The Group 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 over a certain amount. The group seeks to limit its credit risk with respect to

banks by only dealing with reputable banks and with respect to customers by setting credit limits for individual customers

and monitoring outstanding receivables.








29 FINANCIAL INSTRUMENTS AND RELATED RISK MANAGEMENT (Continued)

Capital management

The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern and

benefit other stake holders. The management’s policy is to maintain a strong capital base so as to maintain creditor and

market confidence and to sustain future development of the business.

Management is confident of maintaining the current level of profitability by enhancing top line growth and prudent cost

management. The group is not subject to externally imposed capital requirements.

There has been no change in the group’s objectives, policies or process during the year ended 31 December 2010 and 31

December 2009.

Liquidity risk

The group maintains sufficient and approved bank credit limits to meet its obligations as they fall due for payment and is

therefore not subjected to significant liquidity risk.

The table below summarises the maturities of the group and parent company’s undiscounted financial liabilities based on

contractual payment dates.

Parent Company

At 31 December 2010Less than 3

months 3 to 6 months 6 months to 1

yearMore than

1 year Total

RO RO RO RO RO

Trade and other payables 18,129,667 58,212 49,533 272,973 18,510,385

Taxation 1,157,249 - - - 1,157,249

Term loans 536,425 - 769,601 505,161 1,811,187

Short term loan 11,217,959 - - - 11,217,959

Overdraft 202,299 - - - 202,299

Loans against trust receipts 28,978,094 4,684 - - 28,982,778

Amount due to related parties 1,134,797 223,164 6,932 909 1,365,802

61,356,490 286,060 826,066 779,043 63,247,659

At 31 December 2009Less than 3

months 3 to 6 months 6 months to 1

yearMore than

1 year Total

RO RO RO RO RO

Trade and other payables 10,634,839 195,637 743,170 1,948,490 13,522,136

Taxation 750,495 -- -- 48,274 798,769

Term loans 619,399 -- 797,247 1,818,757 3,235,403

Short term loan 8,974,659 -- -- -- 8,974,659

Overdraft 3,499,651 -- -- -- 3,499,651

Loans against trust receipts 22,207,891 -- -- -- 22,207,891

Amount due to related parties 93,498 7,160 -- 3,992 104,650

46,780,432 202,797 1,540,417 3,819,513 52,343,159







65


29 FINANCIAL INSTRUMENTS AND RELATED RISK MANAGEMENT (Continued)

Group

At 31 December 2010Less than 3 months 3 to 6 months

6 months to 1 year

More than 1 year Total

RO RO RO RO RO

Trade and other payables 25,206,322 58,212 49,533 272,973 25,587,040

Taxation 1,157,249 - - - 1,157,249

Term loans 536,425 - 769,601 10,255,879 11,561,905

Short term loan 11,217,959 - - - 11,217,959

Overdraft 202,299 - - - 202,299

Loans against trust receipts 28,978,094 4,684 - - 28,982,778

Amount due to related parties - 24,833 6,932 909 32,674

67,298,348 87,729 826,066 10,529,761 78,741,904

At 31 December 2009Less than 3 months 3 to 6 months

6 months to 1 year

More than 1 year Total

RO RO RO RO RO

Trade and other payables 11,233,911 195,637 743,170 1,948,490 14,121,208

Taxation 750,495 -- 48,274 798,769

Term loans 538,233 -- 750,500 1,746,500 3,035,233

Short term loan 8,946,610 -- -- -- 8,946,610

Overdraft 3,499,651 -- -- -- 3,499,651

Loans against trust receipts 22,170,950 -- -- -- 22,170,950

Amount due to related parties 93,498 7,160 -- 3,992 104,650

47,233,348 202,797 1,493,670 3,747,256 52,677,071







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an

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ble

s In

du

stry

sa

Og

an

d I

ts s

ub

sId

Iary

nO

tes

tO t

He

COn

sOlI

dat

ed

fIn

an

CIa

l st

atem

ents

at

31 d

eCem

ber

201

0

30

FAIR

VA

LUES

OF

FIN

AN

CIA

L IN

STR

UM

ENTS

Fair

val

ues

Fina

ncia

l ins

trum

ents

com

pris

e fin

anci

al a

sset

, fina

ncia

l lia

bilit

ies

and

deri

vativ

es.

Fina

ncia

l as

sets

con

sist

of

bank

bal

ance

s, r

ecei

vabl

es a

nd a

vaila

ble

for

sale

inv

estm

ents

. Fi

nanc

ial

liabi

litie

s co

nsis

t of

ter

m l

oans

, go

vern

men

t so

ft l

oan

and

paya

bles

.

Der

ivat

ives

rel

ates

to

forw

ard

curr

ency

and

com

mod

ity h

edgi

ng c

ontr

acts

.

Set

out

belo

w i

s a

com

paris

on b

y cl

ass

of t

he c

arry

ing

amou

nts

and

fair

val

ue o

f th

e gr

oup’

s fin

anci

al i

nstr

umen

ts t

hat

are

carr

ied

in t

he fi

nanc

ial

stat

emen

ts.

Carr

yin

g am

ount

Fair

val

ue

2010

2009

2010

2009

Gro

upPa

rent

Gro

upPa

rent

Gro

upPa

rent

Gro

upPa

rent

RO

RO

RORO

RO

RO

RORO

Fin

anci

al a

sset

s

Trad

e an

d ot

her

rece

ivab

les

49,9

45,7

2346

,456

,035

40,9

52,3

2640

,836

,465

49,9

45,7

2346

,456

,035

40,9

52,3

2640

,836

,465

Avai

labl

e fo

r sa

le in

vest

men

ts52

3,04

352

3,04

39,

005

9,00

552

3,04

352

3,04

39,

005

9,00

5

Hel

d to

mat

urity

inve

stm

ents

1,25

1,20

41,

251,

204

1,25

1,20

41,

251,

204

1,25

1,20

41,

251,

204

1,25

1,20

41,

251,

204

Due

fro

m r

elat

ed p

artie

s1,

664,

286

1,36

5,80

299

0,68

399

0,68

31,

664,

286

1,36

5,80

299

0,68

399

0,68

3

Cash

and

ban

k ba

lanc

es2,

462,

617

1,96

9,16

43,

107,

428

2,36

8,69

62,

462,

617

1,96

9,16

43,

107,

428

2,36

8,69

6

Inve

stm

ent

in a

ssoc

iate

-71

2,51

3-

729,

533

-71

2,51

3-

729,

533

Tota

l55

,846

,873

52,2

77,7

6146

,310

,646

46,1

85,5

8655

,846

,873

52,2

77,7

6146

,310

,646

46,1

85,5

86

Fin

anci

al li

abili

ties

Trad

e an

d ot

her

paya

bles

31,4

04,5

7724

,316

,032

14,3

00,6

6213

,701

,590

31,4

04,5

7724

,316

,032

14,3

00,6

6213

,701

,590

Due

to

rela

ted

part

ies

75,1

991,

408,

327

104,

650

104,

650

75,1

991,

408,

327

104,

650

104,

650

Ban

k bo

rrow

ings

40,2

00,2

4440

,200

,244

34,4

75,4

9034

,475

,490

40,2

00,2

4440

,200

,244

34,4

75,4

9034

,475

,490

Taxa

tion

1,15

7,24

91,

157,

249

798,

769

798,

769

1,15

7,24

91,

157,

249

798,

769

798,

769

Term

loan

s11

,489

,936

1,73

9,21

88,

030,

805

2,97

5,86

711

,489

,936

1,73

9,21

88,

030,

805

2,97

5,86

7

Tota

l84

,327

,205

68,8

21,0

7057

,710

,376

52,0

56,3

6684

,327

,205

68,8

21,0

7057

,710

,376

52,0

56,3

66







67


30 FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)

The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged

in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

y Cash and short-term deposits, trade receivables, trade payables, and other current liabilities approximate their

carrying amounts largely due to the short-term maturities of these instruments.

y Long-term fixed-rate and variable-rate receivables / borrowings are evaluated by the group based on parameters such

as interest rates, specific country risk factors, individual creditworthiness of the customer and the risk characteristics

of the financed project. Based on this evaluation, allowances are taken to account for the expected losses of these

receivables. As at 31 December 2010, the carrying amounts of such receivables, net of allowances, are not materially

different from their calculated fair values.

y Fair value of quoted instruments is based on price quotations at the reporting date. The fair value of unquoted

instruments, loans from banks and other financial liabilities as well as other non-current financial liabilities is

estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and

remaining maturities.

y Fair value of available-for-sale financial assets are derived from quoted market prices in active markets, if available.

y Fair value of unquoted available-for-sale financial assets is disclosed in note 13.

y The group enters into derivative financial instruments with various counterparties, principally financial institutions

with investment grade credit ratings. Derivatives valued using a valuation techniques with market observable inputs

are mainly, foreign exchange forward contracts and commodity forward contracts. The most frequently applied

valuation techniques include forward pricing using present value calculations. The models incorporate various inputs

including the credit quality of counterparties, foreign exchange spot and forward rates, interest rate curves and

forward rate curves of the underlying commodity.

y As at 31 December 2010, the marked to market value of derivative asset position is net of a credit valuation adjustment

attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on

the hedge effectiveness assessment for derivatives designated in hedge relationship and other financial instruments

recognised at fair value.

Fair value hierarchy

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation

technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable,

either directly or indirectly

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on

observable market data.

As at 31 December, the group had unquoted available for sale investments which are carried at cost as described in note

13 and are under level 3 fair value measurement category.








30 FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)

Assets measured at fair value

31 Dec 2010 Level1 Level2 Level3

RO RO RO RO

Parent Company

Investment in an associate 712,513 -- -- 712,513

Available-for-sale investments 523,043 13,043 -- 510,000

Group


RO RO RO RO-- --

Available-for-sale financial assets 523,043 13,043 -- 510,000


RO RO RO RO

Parent Company

Investment in an associate 729,533 -- -- 729,533

Available-for-sale investments 9,005 9,005 --

Group

Investment in an associate

Available-for-sale financial assets 9,005 9,005 -- --

Liabilities measured at fair value


RO RO RO RO

Parent Company

Commodity and currency forward contract 923,842 -- 923,842 --

Group


RO RO RO RO

Commodity and currency forward contract 1,177,210 -- 1,177,210 --



RO RO RO RO

Commodity and currency forward contract 244,649 -- 244,649 --

During the reporting period ended 31 December 2010, there were no transfers between Level 1 and Level 2 fair value

measurements, and no transfers into and out of Level 3 fair value measurements.

Liabilities measured at fair value

During the reporting period ended 31 December 2009, there were no transfers between Level 1 and Level 2 fair value

measurements, and no transfers into and out of Level 3 fair value measurements.







69


31 KEY SOURCES OF ESTIMATION UNCERTAINTY

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have

a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial

year are discussed below :

Impairment of accounts receivable

An estimate of the collectible amount of trade accounts receivable is made when collection of the full amount is no longer

probable. For individually significant amounts, this estimation is performed on an individual basis. Amounts which are not

individually significant, but which are past due, are assessed collectively and a provision applied according to the length of

time past due.

At the reporting date, gross trade accounts receivable were RO 45,360,366 (2009: RO 39,854,378), and the provision for

doubtful debts was RO 800,000 (2009: RO 800,000). Any difference between the amounts actually collected in future

periods and the amounts expected will be recognised in the income statement.

Impairment of inventories

Inventories are held at the lower of cost and net realisable value. When inventories become old or obsolete, an estimate is

made of their net realisable value. For individually significant amounts this estimation is performed on an individual basis.

Amounts which are not individually significant, but which are old or obsolete, are assessed collectively and a provision

applied according to the inventory type and the degree of ageing or obsolescence, based on anticipated selling prices.

At the reporting date, gross inventories were RO 41,056,772 (2009: RO 25,835,599) with provisions for old and obsolete

inventories of RO 800,000 (2009: RO 800,000) respectively. Any difference between the amounts actually realised in future

periods and the amounts expected will be recognised in the income statement.

Useful lives of property, plant and equipment

The group’s management determines the estimated useful lives of its property, plant and equipment for calculating

depreciation. This estimate is determined after considering the expected usage of the asset or physical wear and tear.

Management reviews the residual value and useful lives annually and future depreciation charge would be adjusted where

the management believes the useful lives differ from previous estimates.

Impairment of equity investments

The group treats available-for-sale equity investments as impaired when there has been a significant or prolonged decline

in the fair value below its cost or where other objective evidence of impairment exists. The determination of what is ‘sig-

nificant’ or ‘prolonged’ requires judgment, which is critically evaluated by the group on a case to case basis.



70


31 KEY SOURCES OF ESTIMATION UNCERTAINTY (continued)

Taxes

Uncertainties exist with respect to the interpretation of tax regulations and the amount and timing of future taxable income.

Given the wide range of business relationships and nature of existing contractual agreements, differences arising between

the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments

to tax income and expense already recorded. The group establishes provisions, based on reasonable estimates, for possible

consequences of finalisation of tax assessments of respective group companies. The amount of such provisions is based

on various factors, such as experience of previous tax assessments and differing interpretations of tax regulations by the

taxable entity and the responsible tax authority.

32 COMPARATIVE AMOUNTS

Certain of the corresponding figures for 2009 have been reclassified in order to conform with the presentation for the

current year. Such reclassifications do not affect previously reported profit or shareholder’s equity.

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