Renaissance Annual Report 2007 (English)

H I S M A J E S T Y S U LT A N Q A B O O S B I N S A I D

In 2007, we continued our sponsorship

of Adrian Hayes on his 3-poles

challenge to reach the 3 summits

of the earth: Mount Everest, and

the North and South Poles. Under Renaissance

sponsorship this year, Adrian reached

the North Pole on 25 April 2007 and

reached the South Pole on 29

December 2007, completing the

3-Poles challenge to all 3 summits in a world record

19 months. We are pleased to be associated with the

charities supported by Adrian’s expeditions.

Renaissance's spirit of enterprise is aligned with

Adrian's spirit of adventure. The metaphors of

reaching the highest summit and expanding

our business horizons from Pole to

Pole are obvious, but

meaningful.

16-31 CEO’S REPORT

4-5 BOARD OF DIRECTORS

6-7 FINANCIAL HIGHLIGHTS

CONTENT

32 AUDITORS’ REPORT ON CORPORATE GOVERNANCE

8-15 CHAIRMAN’S REPORT

33 REPORT ON CORPORATE GOVERNANCE

39 AUDITORS’ REPORT ON FINANCIAL STATEMENTS

40 FINANCIAL STATEMENTS

76 MANAGEMENT TEAM

HH Sayyid Tarik bin Shabib bin TaimurDirector

Colin RutherfordDirector

Samir J. FancyChairman

Rishi Ajit KhimjiDirector

Yeshwant C. DesaiDirector

Sunder GeorgeDirector

Ali bin Hassan SulaimanDirector

BOARD OF DIRECTORS

FINANCIAL HIGHLIGHTS

Note:-

1. Basic earnings and dividends per share have been adjusted for changes made in share capital in subsequent years.

2. All figures converted @ US$ 1 = RO 0.385

2005 2006 2007 2005 2006 2007

RO MILLION US$ MILLION

106.4 142.9 199.2 REVENUE 276.4 371.3 517.4

34.3 43.9 54.4 GROSS PROFIT 89.0 113.9 141.4

16.4 21.8 27.6 PROFIT FROM OPERATIONS 42.6 56.6 71.6

28.4 33.6 43.1 EARNINGS BEFORE TAX, INTEREST, DEPRECIATION AND AMORTISATION 73.9 87.2 111.9

15.7 17.8 22.3 PROFIT BEFORE TAX 40.7 46.2 58.0

13.9 14.3 17.3 PROFIT AFTER TAX (BEFORE MINORITY) 36.2 37.0 45.0

101.7 121.8 148.6 NET FIXED ASSETS 264.2 316.4 386.0

82.2 91.8 109.4 TOTAL EQUITY 213.5 238.4 284.1

70.5 77.4 98.0 TERM LOANS 183.2 201.2 254.7

0.074 0.066 0.078 BASIC EARNINGS PER SHARE 0.191 0.172 0.203

0.025 0.025 0.025 DIVIDEND PER SHARE 0.065 0.065 0.065

SUMMARY FINANCIAL INFORMATION

2005 2006 2007

CURRENT RATIO 1.14 1.06 1.10

GEARING 0.94 0.87 0.90

TOTAL LIABILITIES/NET WORTH 1.42 1.42 1.52

INTEREST COVER 6.63 4.94 5.10

RETURN ON CAPITAL EMPLOYED (%) 10.50 10.92 10.94

RETURN ON AVERAGE EQUITY(%) 26.01 16.38 17.24

SIGNIFICANT RATIOS

2005 2006 2007

600

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02005 2006 2007

60

70

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40

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02005 2006 2007

1.2

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0.4

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Gearing Total Liabilities/Net worth

2005 2006 2007

5

10

15

20

25

0

Return on Capital Employed (%) Return on Average Equity (%)Profitfrom Operations

Profitbefore Tax

Profit after Tax(before Minority)Revenue Gross Profit

Earnings Before Tax InterestDepreciation & Amoritisation

USD

MIL

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N

USD

MIL

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CHAIRMAN’S

REPORTOn behalf of the Board of Directors, it gives me great pleasure to present to you the

annual report and audited accounts for Renaissance Services SAOG (Renaissance) for

the year ended 31 December 2007. This report is in full compliance with the new

guidelines on disclosure standards for Directors’ reports issued by the Capital Market

Authority (CMA) effective 1 October 2007. It pleases me to say that in earlier years all

these issues were always covered between our Chairman’s Statement and CEO Report.

2007 was another record year for Renaissance. We continued to deliver value to all our stakeholders and to make strategic investments that will drive sustained, superior performance over the long term.

We set a new safety record in 2007, our third consecutive year of improvement, with Lost Time Injury Frequency (LTIF) per million manhours worked, down from 1.63 to 0.9. However, we will never be satisfied until we reduce the number of safety-related incidents to zero.

For the sixth successive year, the 2007 financial results show the highest revenue and profits in the history of the company. The results also show strong growth in comparison to the previous record set in the last fiscal year with revenue up 39.4%, operating profit up 26.68%, EBITDA up 27.9%, and Net Profit up 21.7%

These results show a compounded annual growth of 44.2% in revenue and 33.8% in operating profit over the last five years period (2003-2007). The return on shareholder funds has increased to 17.2% compared to 16.4% in the previous year. EPS has improved to 78 baisas per share against 66 baisas in 2006.

Our dividend policy is based on the proposition that cash is returned in the form of higher dividend payouts when there are no credible value-creating opportunities to invest in the business. Our ongoing growth plans require reinvestment of profits in the business to create

substantial higher value for our shareholders. For the current fiscal year we have recommended a cash dividend of 15% and a stock dividend of 10%.

The current year profit of RO 17.3 million is before considering any capital gain from the divestment of our 100% subsidiary United Media Services LLC (UMS). In December 2007, we had announced that we have accepted an offer from a group of Omani led strategic investors to sell our 100% holding in UMS. The value of the deal is RO 3 million and is expected to realise a net capital gain of RO 1.5 million. The legal formalities related to the transfer of share ownership are yet to be completed, subject to approvals from the concerned authorities. As required under the International Financial Reporting Standards (“IFRS”) we will only account the full impact of UMS divestment in our financials if the transfer of ownership is approved, registered and

completed.

In 2007 we have invested more than RO 44.6 million (US$ 116 million) in our businesses for capital assets required as part of our declared RO 195.5 million (US$ 508 million)investment programme.

During the year the company made public

statements announcing each new contract win for all contracts valued above US$ 15 million. The aggregate value of the 9 contracts falling into this category amounted to US$ 767 million; and the aggregate value of all contracts won, including smaller contracts, contract renewals and contracts bound by confidentiality clauses, exceeded US$ 1 billion.

Each business had significant achievements in the year – to mention a few: the oil & gas fabrication business had its first jacket rollout, just one of many high-end oil & gas fabrication contracts completed in the year ;

98

2007 2006 2007 2006

Amount in OMR million Amount in USD million

Revenue 199.2 142.9 517.4 371.2

EBITDA 43.0 33.6 111.8 87.4

Operating profit 27.6 21.8 71.6 56.7

Net profit 17.3 14.3 45.0 37.0

Adyard Workshop & Yard Facility - Abu Dhabi

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the ship repair business completed its first year of operations in Bautino, Kazakhstan and Salalah, Oman; the offshore support vessel fleet businesses placed orders for 5 new vessels and 8 ice-class barges and signed new JV agreements in Azerbaijan and Saudi Arabia; and the contract services business completed the 30% expansion of its PAC facilities in Oman’s oilfields and fully established its contract operations in Angola.

These results; these investments; these contract wins; and these business achievements all combine to make 2007 a year of outstanding success for our company and, more importantly, provide a platform for sustained economic growth and value in the years ahead.

Underpinning this is a strong competitive position, strengthened by our diversity and geographical spread. The oil & gas fabrication business, based in Abu Dhabi, is the dominant local and regional player in its sector with a focus on offshore construction. The ship afloat repair business is the clear leader in the region and has strengthened its international reach with bases in Azerbaijan, Kazakhstan, Oman and multiple sites in UAE. The offshore support vessel fleet holds market leadership positions in the Caspian with approximately 70% of the Azerbaijan market and 44% of the Kazakhstan market. The contract services business leads its home market of Oman with 45% market share (up from 35% last year) and has established a creditable 11% share of business in its newer international markets.

This strong competitive position is reinforced by a primary focus across a robust oil & gas sector, with minimal reliance on any one single client or supplier. In individual markets, no single customer or supplier represents >10% of each individual company’s revenue with three exceptions: for contract services, Petroleum Development Oman (PDO) and its contractors represent 20% of

business in Oman; and for the offshore support vessel fleet businesses BP represents 90% of revenue in Azerbaijan and Agip KCO represents 46% of business in Kazakhstan – but this reflects the current single dominant oil & gas producer status in the Caspian markets. These positions are mitigated by the companies concerned holding long-term contracts of 10, 20, 30 years and more with blue chip clients in the oil & gas sector.

Looking ahead, the company is committed to its strategy to strengthen and grow its primary oil & gas services focus. This shall be achieved through divestment of non-core businesses; capital investment in our oil & gas services businesses, onshore and offshore; strategic acquisitions in the oil & gas services sector; widening and strengthening geographical presence including formation of strategically important Joint Ventures (JV) to attract quality local content ownership to add value in key markets.

Specifically, the divestment programme is already well-advanced in sourcing new ownership for the technology and training businesses. Both of these businesses have performed superbly again this year, which is attracting interest from both financial investors and industry players locally, regionally and internationally, who want to invest in the future of these businesses to the benefit of all stakeholders, especially existing employees and customers.

We continue to invest in our existing businesses through the US$ 508 million 2007-09 investment strategy announced last year: to increase the size and reduce the age profile of our offshore support vessel fleet; to develop additional capacity and capability in our oil & gas fabrication and ship repair businesses; and to expand capacity and geographical spread of our permanent accommodation for contractors (PAC) facilities in remote oilfields.

At the present time we are close to concluding a major acquisition, which would increase the size and geographical spread of our offshore support vessel fleet businesses. We are bound by confidentiality so may not divulge more information at present. But if successful, this will give our growth plans a boost early in the year. If not, we have other opportunities under consideration, but these would not fructify until later in the year.

In 2007 we reaffirmed local JV content in Azerbaijan, where we have a long and successful relationship through the BUE-KMNF Alliance. A new Saudi JV is under formation between Topaz Energy and Marine Ltd. (Topaz) and Gentas Ltd. We are close to concluding arrangements for an important new JV in Kazakhstan. If we are successful in concluding this deal, we believe the new JV will be in a very strong position to build on our existing market leadership position for the OSV fleet. We have also concluded a JV agreement with Kazmortransflot and Caspian Services Incorporated for a boat yard and dry docking services in Bautino.

We are also considering optimum corporate structure for focus and value in our two principal business units: the oil & gas, marine & engineering businesses; and the contract services and infrastructure businesses. It is clear that even at a time of volatility in international markets, with severe credit pressure arising from the sub-prime crisis, these businesses are sustaining and growing value. We continue to work closely with our advisors Simmons & Co. on strategies for growth and value creation.

Our financing structure in the balance sheet provides a robust balance between earning adequate returns on the capital employed and the need to cover financial and business risks. Our banking partners include Omani, regional and

international banks which have been playing a major role in supporting our investments in capital assets. In 2007, the RO 44.6 million (US$ 116 million) investment in capital assets were funded from a mix of internal cash flows and term loan facilities. The gearing in our balance sheet continues to be below one, demonstrating that we have a strong balance sheet to support our future expansion plans. Our planned capex for 2008 shall be funded from internal cash flows and new funding facilities from banks. The divestment programme shall provide additional liquidity.

Renaissance is an Omani company with significant international operations. We are one of the largest exporters of services from Oman; and one of the largest publicly-listed owners of foreign assets bringing profit and wealth to Oman. However, current tax rules and export incentives in Oman do not provide any tax support for ‘services’ export initiatives. Recent changes in tax practices, applied retrospectively to all pending tax assessments, have resulted in dividend income from overseas subsidiaries being taxed in Oman. This is despite the fact that in the past overseas dividend income was not being taxed and dividends received locally continue not to be taxed. We should point out that such changes in tax practices have been initiated without any changes to the tax laws. This would have an impact, for example, on our Topaz businesses, raising additional tax liabilities applicable to the period prior to Renaissance ownership. The Renaissance acquisition of Topaz was carried out with full transparency and scrutiny required of a public company and the tax judgements we made were based on prevailing Omani tax law and prevailing Omani tax practices at that time. Most importantly, prior to the transaction, Topaz had already been assessed by the tax authorities for certain years and dividend income received from overseas subsidiaries were not taxed.

CHAIRMAN’S

REPORT

CSG operated sewage treatment plant facility for Bechtel in Oman Adyard - Topside Loadout in Abu Dhabi for Atlantis

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If new tax practices are introduced in retrospect, then it would become impossible to identify and disclose all potential tax liabilities at the time of the transaction. In this particular case, the additional taxes are not material to the balance sheet but the issue of taxing overseas dividend income remains; and we are seeking assurance from the concerned authorities that this will not be applicable in this clear-cut case. Furthermore, due to the prospect of taxation on foreign venture income your company has been forced to provide for further tax. So we have also taken up these matters with the relevant government departments to seek the fairest possible deal for Omani companies engaged in international competition, where we perceive Omani companies are at a competitive tax disadvantage, including, in some cases, paying double-tax on the same profits (locally and overseas). Given the government’s strong support for private enterprise, we hope there may be a review of the principle of taxation of overseas income in the best interests of Omani competitiveness abroad.

One of the key drivers of our international competitiveness is our belief in independently accredited and certified Quality Systems that provide the coverage and protection of the ISO loop for all management systems and processes including Health, Safety and Environment (HSE) and Management Information Systems (MIS). All Renaissance companies have ISO 9001:2000 and many have additional esoteric accreditations where relevant, including ISO 14000, ISO 18000, HACCP, CIEH, IiP and others. Renaissance is driven by a continuous improvement credo: never satisfied, always innovative.

There have been no changes to the top management team during the financial year; with the exception that the company appointed a CFO at the beginning of the year, who only stayed with the company for a short period for personal reasons.

The Auditors have issued an unqualified report and the Board of Directors is pleased to commend the accounts for approval.

On 6 June 2007 Cyclone Gonu struck the Sultanate of Oman. Renaissance, as you would rightly expect, played its part in the relief effort with initiatives such as assisting the government in housing and feeding some 3,000 displaced individuals, helping with food lifts for remote afflicted areas, environmental clean up and assistance with rehabilitation of displaced families. These costs have been absorbed in the operating costs of the contract services group, as is our practice when providing any support or sponsorship in kind from within line company operations. In addition to these efforts, specific cash donations, pledges and cash sponsorships this year amount to RO 158,790. Further abroad, we were pleased to sponsor SANAD to showcase Omani fashion and young Omani fashion designers at the UNESCO fashion show in Paris. We have made donations towards the improvement of the Mosque in Aktau, Kazakhstan; provided gym equipment for an orphanage there; and made a donation to developing an international community library for expatriates in Azerbaijan. The Board has recommended a sum of RO 170,000 for Corporate Social responsibility Programmes in 2008.

We continue our commitment to the environment and the support of the local communities in which we serve. Specifically in Oman, the contract services group continues to invest in environmental friendly technology and equipment for its facilities, including installation of auto sensors to control utility consumption, and deployment of CFC-free equipment. A specific donation of RO 100,000 has been pledged, but not yet expended, for a Ministry of Manpower initiative to provide technical training facilities for communities in Oman’s interior.

We continued our sponsorship of Adrian Hayes on his 3-poles challenge to reach the 3 summits of the earth: Mount Everest, and the North and South Poles. Under Renaissance sponsorship this year, Adrian reached the North Pole on 25 April 2007 and reached the South Pole on 29 December 2007, completing the 3-Poles challenge to all 3 summits in a world record 19 months. We are pleased to be associated with the charities supported by Adrian’s expeditions. Renaissance's spirit of enterprise is aligned with Adrian's spirit of adventure. The metaphors of reaching the highest summit and expanding our business horizons from Pole to Pole are obvious, but meaningful.

CHAIRMAN’S

REPORTShip repair workshop facility at Nico International

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The 2007 performance is just part of a strategic journey. Our company has grown, is growing, and will continue to grow based on decisions already taken and investments already made. We continue to seek out new opportunities to blend into and add onto this established sustainable growth path. With a primary focus on oil and gas, we are in the right industry where global demand will continue to grow and where supply will rely on innovation and investment in new technologies, efficiency gains, energy conservation, and availability of resources. We have an ever-expanding source of assets, geographical presence, competencies, relationships and – above all – skilled people, to provide essential efficient services to keep the industry operational and moving forward in the markets where we operate.

Investors and other stakeholders see a consistency in our strategy and approach to the business; a consistency in our long-term view and our approach to creating value.

Customers and other stakeholders see clear integrity in our commitment to high ethical standards and operating excellence.

Bankers, professional advisers and other stakeholders see prudent discipline in our approach to investment in new assets, new projects and inorganic growth.

Above all, all our stakeholders see that Renaissance can be relied upon to deliver: This starts at the operating level where people trust Renaissance operations to be safer, more customer-focused, more efficient and more profitable; and permeates through to the corporate level where people trust Renaissance to be transparent, well resourced, well advised and well governed.

In this regard I would like to thank my fellow board members for their effort, commitment and counsel in guiding and directing our company. The entire board joins me in thanking all our stakeholders for their continued support: Shareholders, customers, bankers, professional advisers, suppliers, contractors, local communities and, of course, our people.

At the centre of our success are our people; the men and women of Renaissance. They run our operations safely, reliably and efficiently, in some of the toughest conditions imaginable. They strive to exceed customer expectations. They adopt or develop best practices that improve our operations today and create new business opportunities for tomorrow. They ensure we contribute to a better quality of life in every community where we serve. They conduct themselves with integrity and dignity. They create meaningful and sustainable value. We thank them and applaud them for their outstanding performance.

We thank His Majesty Sultan Qaboos bin Said whose wise leadership has brought stability, progress, prosperity and opportunity to our home market of Oman. This has provided the platform upon which an Omani company like Renaissance has been able to establish world class credentials at home in order to seek opportunity abroad and challenge the very best in international competition.

Samir J. FancyChairman

CHAIRMAN’S

REPORT

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Renaissance Permanent Accommodation for Contractors (PAC) at Qarn Alam, Oman

CHIEF EXECUTIVE OFFICER’S REPORT

At Renaissance we understand the business we are in. We have a clear Vision - We know where we are, and we know where we want to be. We have a clear strategy to direct us. We have clear values to guide us. We have best practice systems and processes to inform and instruct us. We have high performance targets and business plans to stretch us and keep us focused. Above all, we have great people. People to implement our programmes; realise our vision; strive for our high aspirational targets; and go about our daily business of exceeding customer expectations safely, efficiently and profitably.

Our task in 2007, like any other business year, is about implementation.

The 2007 performance underlines the fact that the Renaissance team can be relied upon to do what we said we would do – and more. We have delivered another record year. We have delivered growth in the business and growth in shareholder value. We have made further strategic investments to drive sustained, superior performance over the years ahead. We have been decisive and consistent in implementing our declared strategy.

As a result, we have a positive story to tell about 2007, and we have real momentum to carry forward into 2008 and beyond.

WHAT IS RENAISSANCE; AND WHAT DOES RENAISSANCE DO?

Renaissance Services SAOG(Renaissance) is an international services company listed on the Muscat Securities Market in the Sultanate of Oman, with a primary focus on providing safe, quality, efficient services to the oil & gas industry. Renaissance owns and operates a combined offshore support vessel fleetcomprising of 61 vessels with another 11 vessels currently under construction. Renaissance has engineering businesses in oil & gas fabrication and afloat ship repair; and is a

leading turnkey contract services provider, providing facilities management, facilities establishment, contract catering, operations & maintenance services.

Renaissance employs over 10,000 people operating in over 16 countries with principal bases in the Middle East and Caspian regions; and an increasing presence in South-East Asia, Africa and Europe. In 2007, the company has achieved revenue of RO 199.2 million (US$ 517.4 million) and profits of RO 17.3 million (US$ 45 million).

Renaissance core businesses are structured in two principal operating groups: The Marine & Engineering Group (MEG) and the Contract Services Group (CSG). The company also owns successful businesses engaged in Technology and Training: The Business Technology Group (BTG) and the Education & Training Group (ETG). An offer to acquire the company’s media businesses, the Media Communications Group (MCG), has been accepted at the end of the year, subject to completion of regulatory formalities.

NICO International built crew boat, the NEMO

NEMO leaves the yard in Fujairah

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Azerbaijan

Angola

Bermuda

Panama

Cyprus IraqJordan

Kazakhstan

Kuwait

Norway

Oman

Qatar

SingaporeThailand

Turkmenistan

Yemen

Vanuatu

UAE

HOW DOES RENAISSANCE GO ABOUT ITS BUSINESS?

Renaissance has a clear VISION: We want Renaissance to be recognised as a world-class, internationally competitive, premier service company; with a primary focus on oil & gas services.

We are confident that our vision shall be achieved through the quality of our customer service; good governance; outstanding systems - HSE (Health Safety & Environment), Quality and MIS (Management Information); a sustained growth and profit record; and a proven ability to improve the economic well-being and quality of life of all stakeholders: Customers, Employees, Shareholders, Suppliers and the Communities in which we serve.

CHIEF EXECUTIVE OFFICER’S

REPORT

GEOGRAPHICAL LOCATIONS

ActivitiesProviding solutions in offshore Support Vessel Fleet; Afloat Ship Repair; Fabrication and Maintenance for the Oil & Gas and Energy Services sectors

Business Segments• Offshore Support Vessel Fleet• Afloat Ship Repair• Oil & Gas – Fabrication & Maintenance

• Topaz Energy & Marine Ltd., Dubai

• NICO World

• NICO International

• Adyard Abu Dhabi LLC

• BUE Caspian (Azerbaijan)

• BUE Kazakh (Kazakhstan)

2006 2007

Revenue (RO’m) 87.8 122.7

Profit from operations (RO’m) 14.7 20.2

People (nos) 2,832 4,976

Marine & Engineering Group (MEG)

Renaissance has a clear STRATEGY: To focus primarily on oil & gas services; build market leadership positions in the markets where we serve; divest non-core businesses and investments; take a disciplined approach to long-term investment in assets to serve the oil & gas sector; create sustainable visibility through viable assets and long-term contracts with major international oil & gas producers; generate funds for these investments through highly cash-generative pure services initiatives; increase geographical spread in oil & gas based markets, with a balance between high-risk/higher-return and low-risk/lower-return environments.

Completed BP Deep Water Gunashli Platform loaded out on Barge STB1, Azerbaijan

Fabrication of LNG loading module for Chiyoda Technip JV at Adyard - Product destined for berth 5 / Qatargas

Chemical & water injection module being installed on floating production storage and offloading barge Golphinho-II in Dubai Aluminium boats for refurbishment in

Nico International's Bautino Marine Yard in Kazakhstan

*This map is not an Authority on boundary

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ActivitiesProviding IT Solutions & Technology services to key industrial and business domains including E-Governance, Healthcare, Education and Financial Services.

Business Segments• Healthcare Informatics• Financial Services IT• IT Infrastructure• Project Delivery and Support Services• Education & Training

• Imtac LLC

• Imtac Technologies LLC, Dubai

• United Telecommunications LLC

• Imtac Yemen Ltd

Business Technology Group (BTG)

2006 2007



People (nos) 211 235

Within this strategic framework, Renaissance also has a clear INVESTMENT STRATEGY focused on three core initiatives for the period 2007-09:

• Increasing the size and reducing the age profile of the offshore support vessel fleet – prudently balancing investment between the fleet engaged in high demand spot markets and the fleet engaged in long-term stable contracts with major oil and gas producers and operators

• Developing additional capacity and capability in the oil & gas fabrication and ship repair businesses

• Expanding capacity and geographical spread of the company’s permanent accommodation for contractors (PACs) facilities in remote oilfields

While each of these three investment areas are driven primarily by organic growth, we also actively seek out potential strategic acquisitions that match the investment criteria. The current planned investment value of RO 195 million (> US$ 0.5 billion) over this 3-year timeframe, was announced in the 2006 Annual Report, in addition the investments of RO 32.9 million (US$ 85 million) already made in that year. In 2007 we have invested RO 44.6 million (US$ 116 million) in new assets as part of this programme.

ActivitiesProviding turnkey solutions for Catering, Cleaning, Laundry, Accommodation, Operations & Maintenance (O&M), Leisure, Property, Estate Services, Facilities Management and Facilities Establishment (Build, Own, Operate); including rapid deployment capabilities in emergencies for harsh, remote or beleaguered environments. Serving Oil & Gas, Energy Services, Healthcare, Education, Military, Commerce & Industry, Ports & Marine sectors

Service segments• Catering – Oil & Gas sector, Universities, Schools, Hospitals, Military, Commerce & Industry • Facilities Management & Facilities Establishment – Build, Own, Operate : Camps, Dining Facilities (DFACs) and Life Support Accommodation (LSA), Permanent Accommodation for Contractors (PACs)• Cleaning , Laundry, Accommodation Services• Operations & Maintenance (O&M)• Leisure Services• Property & Estate Services

• Tawoos Industrial Services Company LLC

• Rusail Catering & Cleaning Services LLC

• RS PAC Division

• RS Overseas Division

• Renaissance Contract Services AS , Norway

• Norsk Offshore Catering AS, Norway

• Renaissance Contracts Services Qatar WLL

• Renaissance Catering Company WLL Kuwait

2006 2007



People (nos) 3,798 4,662

Contract Services Group (CSG)

CSG operated water distribution operating system in Oman

Renaissance Permanent Accomodation for Contractors (PAC) extension at Fahud, Oman

IMTAC @ MEFTEC, Bahrain

CSG Kitchen in Oman


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ActivitiesProviding people solutions in HSE, Technical, Hospitality, Retail, IT and Administration training, with expertise in developing indigenous workforces in developing countries. Providing services to Oil & Gas, Energy Services, Construction, Hospitality, Tourism and Retail sectors.

Business segments• HSE & Driver Training• Technical Training – Mechanical, Electrical, Welding, Construction• Hospitality Training – Hotel, Restaurant, Catering, Front Office, Travel Agency• IT Training – New Horizons Computer Learning Centres• Administration & Management Training

• National Training Institute LLC

• National Hospitality Institute SAOG

• New Horizons Computer Learning Centres

Education & Training Group (ETG)

2006 2007



People (nos) 132 126

Within the same strategic framework, Renaissance also

has a clear DIVESTMENT STRATEGY: We have

always acted swiftly to remove non-performing assets

and ensure the company only carries assets that

maximise value. However, in order to rationalise the

business portfolio with a primary focus on oil & gas

services it has become necessary for the company to

consider divestment of its high-performance,

high-potential technology, media and training

businesses. We shall divest these businesses if the price

offers realisation of value for shareholders; and if the

investment strategy or industry focus of the buyer,

offers a platform for these companies to meet their

ongoing growth potential to the maximum advantage

of employees and customers of these businesses. We

have agreed an offer for the media businesses at the

end of 2007, subject to completion of legal approvals

and formalities for owning media businesses in Oman.

We are currently considering serious offers for the

technology businesses; and will shortly start the

process for divestment of the training businesses.

A strong performance by the training businesses in

2007 has naturally attracted the attention of potential

investors in Oman and internationally.

Water injection module ready for loadout to VWS Westgarth by Adyard in Dubai

Caspian Pride joined the fleet in Azerbaijan in 2007

NTI safety training course for Oman's oilfields

NHI trained waiters take up jobs in International Hotels

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Renaissance has clear VALUES: We value People;Health, Safety & Environment (HSE);Integrity; Reward; Efficiency & Productivity;Customers; Growth; Merit; SocialResponsibility; Transparency; Quality; and

Profit. These values provide us with the necessary signposts and guidelines for how we behave in the conduct of our business.

Renaissance adopts and applies BEST PRACTICE SYSTEMS AND PROCESSES: The company aligns itself with the values, priorities and best practices of the oil & gas sector. The company is committed to gaining third party accreditation and certification of its systems and processes, which are set up under the coverage and protection of the ISO loop and other appropriate industry standards. This serves to enhance the quality and value of the services we offer to all our customers, both inside and outside the oil & gas industry.

Renaissance sets itself HIGH PERFORMANCE TARGETS AND BUSINESS PLANS: Renaissance does not manage earnings nor provide earnings guidance. In fact, the company is prepared to make strategic decisions and complete strategic acquisitions that maximise expected value, even at the expense of lowering near-term earnings. This does not prevent us internally from driving our businesses forward with ambitious but realistic plans coupled with high but realistic aspirational targets. We work on the philosophy that it is better to have aimed high and fall short, than to aim low and reach the target.

Within the parameters of approved business plans and authorised expenditures; under the coverage and protection of clear policies on levels of authority; with unambiguous clarity of strategic direction; and with the immune system of a corporate culture built around principle-centered vision, purpose and values; Renaissance is able to operate through the EMPOWERMENT OF PEOPLE. At Renaissance we actively encourage innovative thinking and action throughout every business, in an atmosphere of autonomy and entrepreneurship that is hands-on and values driven.

Giving professional, trustworthy people the FREEDOM TO SUCCEEDreleases talent, energy and commitment that is at the very heart of Renaissance’s success.

The final piece of the jigsaw of how Renaissance goes about its business is the conviction that staying CLOSE TO THE CUSTOMER and making the loyal customer want to stay close to the company delivers benefits that go well beyond revenues and profits. Loyal and delighted customers act as ambassadors for the business, help to attract and retain the best employees and also serve to keep investors loyal and happy. “CUSTOMER CENTRICITY” creates a virtuous spiral of sustainable success. But customer needs and expectations change and those businesses that prosper on the back of delighted customers must keep in the forefront of timely change. We are in the business of giving customers what they want not what we think they want. We value each and every one of our clients and customers and we thank them for their patronage. In return, we assure them that Renaissance is committed to complying with customer specifications and contracts, underpinned by our corporate culture of EXCEEDING CUSTOMER EXPECTATIONS SAFELY AND PROFITABLY. That is why Renaissance needs to attract and retain the best employees; employees that are smart enough to be able to respond to the emerging needs of customers at lowest possible costs.

HOW HAS RENAISSANCE PERFORMED IN 2007?

The 2007 performance is encouraging in every respect. Renaissance again delivered consistent organic growth, with revenue up 39.4%, operating profit up 26.68%, EBITDA up 27.9%, and Net Profit up 21.7%. Alongside improved performance against all our measurement criteria, we have reinvested in the businesses with over RO 44.6 million invested in 13 new vessels for the offshore support vessel fleet; we have expanded our onshore permanent accommodation for contractors (PACs) facilities by some 30% with 336 additional rooms; and we have expanded the capacity, capability and infrastructure of our engineering businesses. We have achieved this while delivering cash to shareholders and our share price hit a new high this year.Our dividend policy remains unchanged based on the proposition that cash is returned in the form of higher dividend payouts when there are no credible value-creating opportunities to invest in the business. Even in the midst of a US$ 508 million investment programme that is securing sustainable growth for the company we are still able to deliver cash and stock dividend to our shareholders consistent with last year.


MEG - NICO World ISM

ISO 9001 : 2000

MEG – Nico International

OHSAS 18001 Occupational Health & Safety Management

ISO 14001 Environmental Management System

ISO 9001:2000 Quality Management System

Recognition status for in-water survey – ABS, DNV,

Lloyds Register, Bureau Veritas, GL, NKK, RMRS, KRS

MEG - Adyard ISO 9001 : 2000

ASME (U,U2,PP,S,R)

API 2B

MEG - BUE Caspian ISO 9001 QMS

MEG - BUE Kazakhstan ISO 9001 : 2000

ISM Code

CSG ISO 9001-2000

Centre Charter Certificate (Chartered Institute of

Environmental Health,UK)

HACCP (Hazard Analysis Critical Point)

BTG Microsoft Gold Certified Partner

Technical Certification from HP, Oracle &

Microsoft for employees

ETG - NTIISO 9001: 2000

HR Compliance Verification Certificate

Health Safety & Environment Management System –

OPAL CVC

Microsoft Gold Certified Partner for Learning Solutions

Oracle University Centre

ACCA Tuition Provider

Authorised Training Provider for EC Council

ETG - NHIISO 9001: 2000

Investor in People (IiP)

Chartered Institute of Environmental Health

American and Hotel Lodging Association (AHLA)

International Air Transport Association - Canada (IATA)

City and Guilds (C&G)

ACCREDITATIONSHELD WITHIN THE GROUP

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TEAM SIAM at Shogklha

The overall group target for Lost Time Incident Frequency (LTIF), which measures the number of lost time incidents per million manhours worked, was 0.90, down from 1.63 last year and below the target of 1.0. However, this improved performance was marred by the fatality suffered this year, when a colleague fell from height while working on an assignment for a client in Abu Dhabi. It should also be noted that 20 of the 25 LTIs occurred in one single line company outside the oil & gas sector. That company is improving its safety performance, but currently continues to bring down the overall safety performance of the group. We remain committed to improving the safety performance of all the companies in all operations. We shall not be satisfied until we achieve zero incidents.

WHAT ARE THE KEY CHALLENGES, OBSTACLES AND RISKS FACING RENAISSANCE GOING FORWARD?

It is appropriate to observe that the business climate in which the 2007 performance has been delivered is becoming increasingly complex and frequently more testing as we seek to deliver further performance growth in 2008. Understanding challenges and changes in the business environment ensures they may be met and mitigated with confidence.

The outlook for Renaissance is positive: We have already made investments in assets and have won long-term contracts that ensure continued and sustainable economic growth; we have already got 11 vessels under construction to join our offshore support vessel fleet in 2008/09; we have already identified potential synergistic

acquisition targets in the oil & gas sector to fast-track our growth ambitions. Our current cash-flows and balance sheet support our declared US$ 508 million investment programme – and improving cash flows suggest we may be able to more.

The primary challenges, obstacles and risks we must be alert to in implementing our growth programme are: potential exposure to exchange rate issues, in particular the potential de-linking of various GCC currencies from the US Dollar; availability and cost of financing in the post-subprime period; rising inflation in several key markets; availability of resources in the oil & gas sector – people, materials and infrastructure; availability of shipyard capacity and demand and potential over-supply of vessels in the marine industry; and any negative volatility in the oil & gas sector, including volatility of oil price.

Balancing the cost benefit economics we have hedged some portion of our US Dollar denominated transactions to mitigate the possible exposure from any changes in currency policy in the GCC. So far, while there has been some post-subprime upward pressure on financing costs we have found our presence in the oil & gas sector and the nature of many of our assets being linked to long-term safe contracts, mean that our business remains an attractive proposition for financiers.


2003 2004 2005 2006 2007

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

Cash dividend 25 1,572 35 2,311 25 5,068 15 3,041 15 3,344

Stock dividend 5 315 10 661 62.5 7,415 10 2,027 10 2,229

Total dividend 30 1,887 45 2972 87.5 12,483 25 5,068 25 5,573

DIVIDEND TRACK RECORD

2006 2007 Change

Total Manhours worked 22,716,247 31,034,893 +8,318,646

Number of Fatalities 0 1 +1

Number of Lost Time Incidents (LTI) 37 28 -9

Lost Time Incident Frequency (LTIF) 1.63 0.90 -0.73

Road Traffic Accidents (RTA) 16 25 +9

Total Kilometers Driven 8,690,044 11,897,134 +3,207,090

SAFETY PERFORMANCE

The safety of our people and all those affected by our work remains the top priority in the service of our customers, and the efficient and profitable operation of our business. The group had far greater exposure this year with significant increases in the number of manhours worked and - with road safety a key risk area - the number of kilometres driven.

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TEAM Oman working on windfarm in Holland for Oceanteam Installation of jacket in the Umm al Quwain off shore field for Atlantis Holding Norway

RENAISSANCE INVESTING IN SUSTAINABLE GROWTH SOME MILESTONES IN 2007

• Adyard bags US$ 35 million Abu Dhabi contract

• Forms Saudi JV with Gentas Ltd

• Wins US$ 210 million contract from BP in Azerbaijan

• Inks US$ 37 million finance facility with Bank Muscat & Bank Dhofar

• Builds Nemo, the first vessel from NicoCraft

• Signs US$ 50 million Syndicated Islamic lease finance facility

• Builds new AHTS vessels worth US$ 23million

• Wins US$ 20 million contract in Thailand

• Wins US$ 350 million contract for Agip KCO in Kazakhstan

• Enters Angola with Contract Services Group

• Wins US$ 24 million Oil Storage Terminal Contract from FAL Energy

• Plans US$ 508 million investments in 3 years

• Renews US$ 48 million contracts with BP in Caspian

• Supports Adrian Hayes’ Expedition to the North Pole

• Signs US$ 47 million contract for cable Lay Vessel TEAM Oman

• Wins US$ 18 million contracts in North Sea Oil & Gas sector

Rising inflation in the region has been a matter of concern and we are keeping a close watch on rising costs especially while bidding for new contracts. Some contracts have inflation-proof clauses, others don’t. Whilst there is sometimes a time lag between rising costs filtering through to price, we are generally able to mitigate the impact through cyclical re-tendering. One inflationary issue that causes most concern is the spiraling cost of living and its impact on human resource costs. We are dealing with this by conducting fair independent reviews of cost of living in the markets that we serve. We have an excellent track record on people retention and this is a key factor when addressing shortage of resources in the booming oil & gas industry. We handle shortages in materials, infrastructure and shipyard capacity by maintaining a high level of industry expertise in our management team, focused on sourcing optimum economic and technical solutions to meet our growth needs.

We draw on the same industry expertise to ensure we are comfortable with concerns about potential over-supply of vessels in the coming years. For this we consider the markets we are in, the balance of long-term contracts with short-term contract assignments, and the type of offshore support vessels we own.

In 2007, 76% of Renaissance revenues of RO 199.2 million (US$ 517.4 million) were generated providing services to the oil & gas sector, and as we implement our declared strategy, the oil & gas content share of our business will increase further still. This does not mean that oil & gas customers are any more important than customers in other sectors like Healthcare, Defence, Education, Marine, Commerce & Industry, that generate the other 24% of our income. Not at all, each and every one of our customers is of intrinsic value to us. In fact, aligning ourselves with the values and priorities of the oil & gas sector enhances the quality and value of the services we offer to all our customers. However, this also requires us to consider any potential exposure to volatility in the energy sector and its dependence on stable and sufficient oil price. Here we consider three important factors: First, the energy sector is going through a boom cycle that is increasingly viewed as sustainable. The traditional volatility of boom and bust in the industry is increasingly seen as likely to enjoy higher-highs and lower-lows. This is driven by the increasing demand for energy in a growing and developing world, and the spectre of decreasing supply of a finite commodity – which demands

greater investment in new technology to recover diminishing and previously inaccessible or economically unviable reserves. Second, we have to consider the services we provide – looking after people and infrastructure has proved to be generally far more immune to economic cycles in the industry, as the oilfields still have to be sustained during downturns. Third, we have a significant number of long-term 10, 20, 30 and more year contracts with leading oil & gas producers in many markets. We are convinced that the oil & gas sector is the right place for Renaissance to be for the long-term.

Beyond the generic risks and challenges discussed here, we do have two specific areas of concern that we are addressing: The first of these is our concern about changes in practice for taxing overseas dividend income applied retrospectively. This has been discussed at length in the Chairman’s Report and we are hopeful that the concerned authorities will understand our position on this and tax of overseas income in general. The second is a specific problem we have encountered in a contract given out by our subsidiary BUE Kazakh to build 4 barges in Ukraine:

BUE Kazakh is building 8 special purpose ice class barges for its contract with Agip Kazakhstan North Caspian Operating Company N.V. (Agip KCO). Four of the barges under construction in Ukraine have met a delay problem with a change in ownership of the shipyard, which has given rise to questions of ownership of the work-in-progress on our barges. We have an exposure of US$ 10 million of materials and deposits. However, our international and Kazakh legal advisers are completely confident that the matter will be resolved in our favour. The dispute is effectively between the past and current owners of the shipyard and our project is temporarily caught in the middle. Our legal advisers are certain that the evidence of our rights is clear and our status as a valued foreign investor will prevail as soon as the local dispute is resolved. This of course takes time, so we have moved swiftly to provide alternative solutions to ensure uninterrupted service to our client. We have now decided to build 4 replacement barges in other shipyards and the Ukraine barges will subsequently be used as option barges on the contract when required. In a company of our size and international operations profile, we will always meet problems and challenges of this kind. It is the nature of business. But our scale, diversity and flexibility allow us to manage turbulence without deflecting us from our obligations, our vision and our purpose.

WHAT IS THE OUTLOOK FOR RENAISSANCE GOING FORWARD?

In aligning ourselves with the oil & gas industry that we serve, there are three things that are already an integral part of our Renaissance leadership and operating paradigm that we are giving even greater focus in 2008; and these are of enormous importance to our oil & gas clients in all markets:

Continuous improvement of HSE

Serious commitment to local content Training and development of indigenous workforce Shortening the supply line to be as local as is efficiently and qualitatively possible Local partners Local community benefit and social responsibility initiatives

Drive efficiency and lower cost base Sharing our clients’ own concern to drive down the unit cost of production Programmes to measure and reduce our own energy usage Conservation initiatives Efficiency / cost reduction suggestions for clients

These operational initiatives, allied to our investment and divestment strategies, supported and sustained by our values-driven culture, all blend to suggest an extremely positive outlook for Renaissance. Our vision will be accomplished with the continued support of our outstanding people employed throughout our group, who I cannot thank enough for their achievements and endeavours. Our purpose will be accomplished through our highly successful relationships with customers, suppliers, financiers, professional advisors and the communities in which we serve. We thank them all for their continued support and trust.

In 2008 we are committed to delivering further superior performance that will be sustainable over the long-term. We are committed to enhancing the economic well-being and quality of life of all those whose lives are touched by our business. Our commitment extends to every aspect of the way we do business. It is reflected in our determination to meet the highest standards of probity and transparency. It is our intention to build a business that is enduring. A business that consistently produces excellent results and a business that consistently does the right thing.

Stephen R. ThomasChief Executive Officer


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Shah Deniz Gas Production / Drilling Unit nears completion at Zykh YardBaku Azerbaijan

CSG catering services in Oman

IMTAC Customer service centre in Oman


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OUR CUSTOMERS

SAFETY MILESTONES & AWARDS

Marine & Engineering Group – Nico World

Nico World – 0.5m LTI free man hours

Marine & Engineering Group – Nico International

Dubai Maritime EHS Gold Award

Marine & Engineering Group – BUE Caspian

BUE Caspian – 8m LTI free manhours

Tabriz Khalibeylei reached end of 5 year charter with Zero LTI

Marine & Engineering Group – BUE Kazakhstan

BUE Kazakh – 4m LTI free manhours

Marine & Engineering Group – Adyard

Adyard – 3.87m LTI free manhours

Contract Services Group

Team award for 7.5m LTI free manhours for Sohar Alumunium

Smelter Project for Bechtel and all contractors

1m LTI free manhours by Tisco at Bechtel

868 days LTI free days at RS Overseas division – KBR Camp

Jackson DFAC

150 days LTI free days at RS Overseas division – KBR C1.1

DFAC construction

7 years operations without LTI at RS PAC Nimr

5 years operations without LTI at RS PAC Qarn Alam

Education & Training Group

LTI free operations

IN ALPHABETICAL ORDER

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REPORT ON CORPORATE GOVERNANCE

Parul BurmanGroup Chief

Internal Auditor

Pramod BalakrishnanChief Financial Officer

Lawrence AlvaGeneral Manager, NTI

Robert MacleanPrincipal, NHI

Gautam Dey Chief Strategic Officer

Keith LaddimanBusiness Development ManagerOffshore Oil & Gas

Joaquim D’ CostaOperations Manager

Private Sector

Karim ShaikhFinance Manager

Ananda FernandoGeneral Manager

Commercial Adil Bahwan

General Manager Operations

Philip CaineOperations ManagerRS Overseas Division

Ingvar VarhaugGeneral Manager

NOC Norway

Baqar HaiderOperations ManagerFacility Management

Services

Saad Abdullah AliCompany Secretary

Hilal Al EsryGeneral Manager GLDVishal Goenka

Financial Controller

Arindam Ray Executive Assistant to CEO

MANAGEMENT TEAM

Ashok Sardiwal Chief Executive Officer

CORPORATE OFFICE

MARINE & ENGINEERING GROUP

CONTRACT SERVICES GROUP

BUSINESS TECHNOLOGY GROUP EDUCATION & TRAINNING GROUP

Saalim GaimaSupport Services

Manager

Peter JamesQA/HSE Advisor

Richard SteeleGeneral Manager

BUE KazakhRonald Clark General Manager

Nico World

Roy DonaldsonGeneral Manager

BUE Caspian

Jim MastertonGeneral Manager

Adyard

Carl RolastonChief Strategic Officer

Peter RolesOperations Manager

Angola

Hilal Al HabsyOperations Manager

Oil & Gas Sector

Stephen R.ThomasChief Executive Officer

Fazel FazelbhoyChief Executive Officer

P.O. Box: 1750, Ruwi 112Muscat, Sultanate of Oman

6th FloorBank Dhofar BuildingMuttrah Business DistrictMuscat, Sultanate of Oman

Telephone: 24703105Fax: [email protected]/me

C.R. No. 1/36809/5P.R. No. MH/4

A Member of Ernst & Young Global

RReeppoorrtt ooff FFaaccttuuaall FFiinnddiinnggss oonn tthhee ccoorrppoorraattee ggoovveerrnnaannccee rreeppoorrttiinngg ooff RReennaaiissssaannccee SSeerrvviicceess SSAAOOGG aanndd iittss aapppplliiccaattiioonn ooff tthhee ccoorrppoorraattee ggoovveerrnnaanncceepprraaccttiicceess iinn aaccccoorrddaannccee wwiitthh tthhee CCMMAA ccooddee ooff ccoorrppoorraattee ggoovveerrnnaannccee

TTOO TTHHEE SSHHAARREEHHOOLLDDEERRSS OOFF RREENNAAIISSSSAANNCCEE SSEERRVVIICCEESS SSAAOOGG

We have performed the procedures prescribed in Capital Market Authority (CMA) circular no 16/2003, dated 29 December 2003 with respect to theaccompanying corporate governance report of Renaissance Services SAOG and its application of corporate governance practices in accordance withthe CMA Code of Corporate Governance issued under circular no. 11/2002 dated 3 June 2002 and the CMA Rules and Guidelines on disclosure,issued under CMA administrative decision 5, dated 27 June 2007. Our engagement was undertaken in accordance with the International Standard onRelated Services applicable to agreed-upon procedures engagements. The procedures were performed solely to assist you in evaluating the extent of thecompany's compliance with the code as issued by the CMA.

We report our findings below:

We found that the company's corporate governance report fairly reflects the company's application of the provisions of the code and is free from anymaterial misrepresentation.

Because the above procedures do not constitute either an audit or a review made in accordance with International Standards on Auditing or InternationalStandards on Review Engagements, we do not express any assurance on the corporate governance report.

Had we performed additional procedures or had we performed an audit or review of the corporate governance report in accordance with InternationalStandards on Auditing or International Standards on Review Engagements, other matters might have come to our attention that would have been reportedto you.

Our report is solely for the purpose set forth in the first paragraph of this report and for your information and is not to be used for any other purpose. Thisreport relates only to the accompanying Board of Director's corporate governance report to be included in its annual report for the year ended31 December 2007 and does not extend to any financial statements of Renaissance Services SAOG, taken as a whole.

20 February 2008Muscat

RREEPPOORRTT OONN CCOORRPPOORRAATTEE GGOOVVEERRNNAANNCCEE

The Board and Management of Renaissance Services SAOG(“the Company”) are committed to adopt the best practices ofcorporate governance that promotes ethical standards andindividual integrity. This report describes how the Principles ofGovernance and the provisions of the Code of CorporateGovernance, set out in the Capital Market Authority’s (CMA)Code of Corporate Governance for companies listed on theMuscat Securities Market (MSM), and the CMA Rules &Guidelines on Disclosure, are adhered to by the Company.

In accordance with the CMA Rules & Guidelines on Disclosure,Ernst & Young has issued a separate Factual Findings Report onthe Company’s Corporate Governance Report for the yearended 31 December 2007.

11.. CCoommppaannyy’’ss PPhhiilloossoopphhyyThe Company upholds a governance philosophy that aims atenhancing long term shareholder value while at the same timeadheres to the laws and observes the ethical standards of thebusiness environment within which it operates.

According to the Company’s governance paradigm themanagement assumes accountability to the Board, and theBoard assumes accountability to the Shareholders. The Board’srole is to be an active participant and decision- maker in fosteringthe overall success of the Company by enhancing Shareholdervalue, selecting & evaluating the top management team,approving & overseeing the corporate strategy & management’sbusiness plan and acting as a resource for management inmatters of planning and policy. The Board monitors corporateperformance against the strategic and business plans, and

evaluates on a regular basis whether those plans pay off in termsof operating result.

In order that it can effectively discharge its governanceresponsibilities, the Board ensures that the majority of Boardmembers are non-executive, at least one third of Directors areindependent and that the majority of committees formed by theBoard consist of independent Directors. Furthermore, the Boardaccesses independent legal and expert advice of professionalswho also assist the Management. The Board also encouragesactive participation and decision making on the part ofshareholders in General meeting proceedings.

The Board maintains a positive and ethical work environmentthat is conducive to attracting, retaining and motivating a diversegroup of top quality employees at all levels. The Board throughthe Compensation Committee reviews and decides theparameters for assessment and compensation of key personnel.

The Board ensures ethical behaviour and compliance with all lawsand regulations. The Company’s Manuals of Procedures (internalregulations), which are already in place, cover a wide range offunctions including but not limited to Corporate Information &Disclosure Policy, Rules for Related Party Transactions,Procurement Manual and Financial Authority Manual.

22.. BBooaarrdd ooff DDiirreeccttoorrssDuring 2007 the Board consisted of 7 Directors. All theDirectors are Non-Executive and Independent. Six Directors onthe Board are Shareholder/ representative of Shareholder andonly one Director is a Non-Shareholder Director.

22..11 TThhee CCoommppoossiittiioonn aanndd CCaatteeggoorryy ooff DDiirreeccttoorrss,, AAtttteennddaannccee ooff BBooaarrdd MMeeeettiinnggss

SSll NNaammee ooff DDiirreeccttoorr PPoossiittiioonn CCaatteeggoorryy NNoo.. ooff BBooaarrdd NNoo.. ooff WWhheetthheerrNNoo.. mmeeeettiinnggss BBooaarrdd aatttteennddeedd

hheelldd dduurriinngg mmeeeettiinnggss llaasstt AAGGMMllaasstt yyeeaarr aatttteennddeedd

1 Samir J. Fancy Chairman Independent Non-Executive 4 4 YesShareholder

2 HH Sayyid Tarik bin Shabib Director Independent Non-Executive 4 3 Yesbin Taimur Shareholder

3 Ali bin Hassan Director Independent Non-Executive 4 4 YesSulaiman Shareholder

4 Sunder George Director Independent Non-Executive 4 4 YesNon-Shareholder

5 Yeshwant C. Desai Director Independent Non-Executive 4 3 YesRepresentative of Shareholder

6 Rishi Khimji Director Independent Non-Executive 4 4 YesRepresentative of Shareholder

7 Colin Rutherford Director Independent Non-Executive 4 4 NoRepresentative of Shareholder

33

34


22..22 SSttaatteemmeenntt ooff tthhee NNaammeess && PPrrooffiilleess ooff DDiirreeccttoorrss aanndd TTooppMMaannaaggeemmeenntt The Renaissance Board brings together core competencies ofdirectors with vision, strategic insight, and industry knowledge,who provide direction to the executive management.

SSaammiirr JJ.. FFaannccyy -- CChhaaiirrmmaannMr. Samir J. Fancy is the Chairman of the Board of Directorssince 1996. He held senior positions and undertook leading rolessuch as:

• Founder and Vice Chairman of Tawoos Group since1983, since 2005 Chairman of the Tawoos Group.

• Chairman of Topaz Energy & Marine SAOG sincefoundation and up to its acquisition by the Company inMay 2005.

• Chairman of Amani Financial Services SAOCsince 1997.

• Chairman of Topaz Energy & Marine Ltd.• Director of National Hospitality Institute SAOG.

HHHH SSaayyyyiidd TTaarriikk bbiinn SShhaabbiibb bbiinn TTaaiimmuurr-- DDiirreeccttoorrHH Sayyid Tarik bin Shabib bin Taimur is a member of the Boardof Directors of the Company since 1996. Other positions held byhim include the following:

• Founder and Director of Tawoos Group. • Chairman of Marina Bander Al Rowdha SAOG for six

years until its takeover by the Government of theSultanate of Oman in April 2003.

• Chairman of National Hospitality Institute SAOGsince 1995.

• Director of Fund for Development of Youth ProjectsSAOC up to 2007.

AAllii bbiinn HHaassssaann SSuullaaiimmaann –– DDiirreeccttoorr Mr. Ali bin Hassan Sulaiman is a member of the Board ofDirectors of the Company since 1996. He is a founder of Ali andAbdul Karim Group and a director of the following companies:

• Director of Topaz Energy & Marine SAOG for severalyears up to its acquisition by the Company in May 2005.

• Director of Majan Glass Manufacturing Co SAOG. • Director of National Hospitality Institute SAOG.

SSuunnddeerr GGeeoorrggee -- DDiirreeccttoorrMr. Sunder George is a member of the Board of Directors of theCompany since 2001. He has extensive experience in Banking &Finance and held senior executive positions in Oman & abroad,including the following:

• Deputy Chief Executive of Bank Muscat SAOG.• Director of Bank Muscat International BSC.• Director of Centurion Bank of Punjab Ltd.

YYeesshhwwaanntt CC.. DDeessaaii -- DDiirreeccttoorrMr. Yeshwant C. Desai is a member of the Board of Directors ofthe Company since 2001 and Chairman of the AuditCommittee. He has had a successful career and extensiveexperience in Banking & Finance and held senior executivepositions in Oman & abroad, which include:

• Ex CEO of Bank Muscat SAOG.

• Director of Topaz Energy & Marine SAOG for severalyears up to its acquisition by the Company in May 2005.

• Director of Topaz Energy & Marine Ltd.

RRiisshhii KKhhiimmjjii -- DDiirreeccttoorrMr. Rishi Khimji is a member of the Board of Directors of theCompany since 2004. He is also a director of the followingcompanies:

• Director of Ajit Khimji Group of Companies.

• Director of Mumtaz International Services LLC.

• Director of Asha Enterprises LLC.

CCoolliinn RRuutthheerrffoorrdd -- DDiirreeccttoorrMr. Colin Rutherford has been a member of the Board ofDirectors since 2005 having formerly chaired BUE MarineHoldings prior to its acquisition by Renaissance Group. He hasvast experience of public and private companies having servedon many Boards around the world. He is a CharteredAccountant and former Corporate financier and currently enjoysthe following positions within his diverse portfolio.

• Chairman Midas Capital plc.• Chairman Argent Energy Group plc.• Chairman Imagine Homes limited. • Chairman Avance Group limited.

He also holds further positions in global fund management, retail,specialist building products and technology.

SStteepphheenn RR.. TThhoommaass –– CChhiieeff EExxeeccuuttiivvee OOffffiicceerrMr. Stephen R. Thomas joined Tawoos Group as GeneralManager of Tawoos Industrial Service Co LLC in 1988. He tookover as Chief Executive Officer of Renaissance Services SAOGin 1998. He held senior positions in the Group including thefollowing positions:

• Director of Renaissance Hospitality Services SAOGsince foundation and until its merger with RenaissanceServices SAOG in April 2002.

• Director of National Hospitality Institute SAOG.• Founder and former Chairman of Oman Society for

Petroleum Services (“OPAL”) .


SSll NNaammee ooff DDiirreeccttoorr NNuummbbeerr ooff ootthheerr BBooaarrddss NNuummbbeerr ooff ootthheerr BBooaarrddss

NNoo.. iinn wwhhiicchh DDiirreeccttoorr CCoommmmiitttteeeess iinn wwhhiicchh MMeemmbbeerr

1 Samir J. Fancy 1 1

2 HH Sayyid Tarik bin Shabib bin Taimur 1 1

3 Ali bin Hassan Sulaiman 2 1

4 Sunder George - -

5 Yeshwant C. Desai - -

6 Rishi Khimji - -

7 Colin Rutherford

22..33 MMeemmbbeerrsshhiipp ooff OOtthheerr BBooaarrddss // BBooaarrdd CCoommmmiitttteeeess ((SSAAOOGG CCoommppaanniieess iinn OOmmaann))

22..44 NNuummbbeerr && DDaatteess ooff MMeeeettiinnggss ooff tthhee BBooaarrdd ooff DDiirreeccttoorrss

The Board held four meetings during 2007 on the followingdates:

9 January 200728 February 200714 June 200716 September 2007

33.. AAuuddiitt CCoommmmiitttteeee && OOtthheerr SSuubbccoommmmiitttteeeess

AAuuddiitt CCoommmmiitttteeee

The Audit Committee is a sub-committee of the Boardcomprising of three Directors, majority of whom have to beindependent Directors.

33..11 BBrriieeff DDeessccrriippttiioonn && TTeerrmmss ooff RReeffeerreennccee

The functions of the Audit Committee are as follows:

• Recommend to the Board the Statutory Auditors in thecontext of their independence, fee and terms ofengagement for approval by the Shareholders.

• Review the audit plan and results of the audit andwhether Statutory Auditors have full access to allrelevant documents.

• Oversee the Internal Audit function in general and withparticular reference to reviewing of scope of internal auditplan for the year, reports of internal auditors pertaining tocritical areas, efficacy of internal auditing and whether theinternal auditors have full access to relevant documents.

• Oversee the adequacy of internal control systems andInternal Audit Reports.

• Review of any non-compliance with disclosurerequirements prescribed by CMA.

• Oversee the Company’s financial reporting process andthe disclosure of its financial information to ensurethe accuracy, sufficiency and credibility of thefinancial statements.

• Ensure that proper system is in place for adoption ofappropriate accounting polices and principles leading tofairness in financial statements.

• Review annual and quarterly financial statements andrecommend to the Board.

• Serve as a channel of communication between Statutory &Internal Auditors and the Board.

• Review risk management policies.

• Review proposed specific related party transactions formaking appropriate recommendations to the Board.

• Make recommendations to the Board for entering intosmall value transactions with related party withoutsecuring prior approval of Audit Committee & the Board.

33..22 CCoommppoossiittiioonn ooff AAuuddiitt CCoommmmiitttteeee aanndd AAtttteennddaanncceeooff MMeeeettiinnggss

In 2007 the Audit Committee of the Company was comprised ofthe three non-executive independent Directors as members. Thefollowing table shows the composition of the Audit Committeeand the attendance of its meetings:

SSll NNaammee PPoossiittiioonn MMeeeettiinnggss hheelldd dduurriinngg MMeeeettiinnggss aatttteennddeeddNNoo.. tthhee yyeeaarr dduurriinngg tthhee yyeeaarr

1 Yeshwant C. Desai Chairman 5 5

2 Ali bin Hassan Sulaiman Member 5 5

3 Sunder George Member 5 535

36

During its meetings the Audit Committee discussed andapproved the annual internal audit plan. The Committeereviewed and recommended to the Board the audited andquarterly accounts, the related party transactions. TheCommittee had recommended the appointment of the StatutoryAuditors for the year 2008. The Committee also looked atcertain specific areas of the company’s operations and reportedon these to the Board.

33..33 TThhee CCoommppeennssaattiioonn CCoommmmiitttteeee

The Compensation Committee was formed as a BoardCommittee to lay-down and update the parameters forassessment and compensation of key personnel, undertake theirperformance assessment and report to the Board on thecompensation & personnel polices. The Committee, whichconsists of the following directors held two meetingsduring 2007:

The Board has changed the membership of the CompensationCommittee for 2008, with Mr. Yeshwant C. Desai appointed asChairman and Mr. Colin Rutherford appointed as a Member.

44.. PPrroocceessss ooff NNoommiinnaattiioonn ooff tthhee DDiirreeccttoorrssIn nominating and screening candidates to fill a casual vacancy,the Board seeks candidates with the skills and capacity to provide

strategic insight & direction, encourage innovation,conceptualise key trends and evaluate strategic decisions. TheBoard focuses on professionalism, integrity, accountability,performance standards, leadership skills, professional businessjudgment, financial literacy and industry knowledge as corecompetencies of the candidates. While nominating competentcandidates, the Board ensures that the shareholders retain thepower of electing any candidate, irrespective of his candidature

being recommended by the Board or otherwise and that anyshareholder has the full right of nominating himself.

55.. RReemmuunneerraattiioonn MMaatttteerrssUp to March 2007 each Director of the company was paid RO300/- as sitting fees for attending Board and CompensationCommittee meetings. Sitting fees for attending the AuditCommittee meetings were paid at the rate of RO 400/- permeeting. In the AGM held in March 2007 the shareholdersapproved new rates for sitting fees with effect from 1st April2007. As per the revised sitting fees for attending Boardmeetings, the Chairman is paid RO 1,000/- and other directorsare paid RO 500/- as sitting fees per meeting. Sitting fees of RO750/- are paid to both Committees Chairmen and sitting fees ofRO 650/- are paid to committees members. The remuneration,sitting fees and travelling expenses paid to the Chairman &Directors for 2007 are as follows:

SSll NNaammee ooff DDiirreeccttoorr PPoossiittiioonn SSiittttiinngg FFeeeess RReemmuunneerraattiioonn TTrraavveelllliinnggNNoo.. PPaaiidd ffoorr ((PPrrooppoosseedd ffoorr EExxppeennsseess

BBooaarrdd && 22000077))SSuubb--ccoommmmiitttteeeess’’

MMeeeettiinnggss ffoorr22000077((RROO)) ((RROO)) ((RROO))

1 Samir J. Fancy Chairman 3,200/- 57,763/- 2,642/-

2 HH Sayyid Tarik bin Shabib bin Taimur Director 1,300/- 28,882/- -

3 Ali bin Hassan Sulaiman Director 4,350/- 19,441/- -

4 Sunder George Director 4,350/- 19,441/- -

5 Yeshwant C. Desai Director 4,750/- 24,441/- 2,007/-

6 Rishi Khimji Director 1,600/- 14,441/- -

7 Colin Rutherford Director 1,600/- 14,441/- 13,558/-

TTOOTTAALL 2211,,115500//-- 117788,,885500//-- 1188,,220077//--

SSll NNaammee PPoossiittiioonn MMeeeettiinnggss hheelldd dduurriinngg MMeeeettiinnggss aatttteennddeeddNNoo.. tthhee yyeeaarr dduurriinngg tthhee yyeeaarr

1 Samir J. Fancy Chairman 2 2

2 Yeshwant C. Desai Member 2 2


For the financial year 2007, it is proposed to pay a Directors’remuneration of RO 178,850/-, while the remuneration paidduring 2007 for the financial year 2006 amounted toRO 182,100/-.

Total remuneration paid to the top five senior executives of theCompany (including its subsidiaries) during the year was RO1,046,025. This included salary and benefits paid in cash,monetary value of all benefits calculated as per company rulesand a variable amount based on performance as recommendedby the Compensation Committee of the Board.

Majority of the top 5 officers of the company have been with thecompany for a long time and the employment contracts areusually entered for an initial period of 2 years which areautomatically renewed unless terminated in accordance with theterms mentioned therein. The notice period for termination ofemployment contracts for all the key personnel is 2 months andthe gratuity is computed and paid in accordance with theapplicable Labour Laws.

66.. DDeettaaiillss ooff NNoonn--CCoommpplliiaannccee bbyy tthhee CCoommppaannyy

There were no penalties or strictures imposed on the company byMSM/ CMA or any statutory authority for the last three years.There are no areas in which the company is still not compliantwith the Code of Corporate Governance.

77.. MMeeaannss ooff CCoommmmuunniiccaattiioonn

7.1 The Company has been sending financial results and materialinformation to MSM Website via the newly set up MSMElectronic Transmission System. The Company has also beenpublishing annual audited & quarterly un-audited financial resultsand material information in the English and Arabic newspapers.The annual audited accounts & Chairman’s Report aredespatched to all shareholders by mail, as required by law.

7.2 The financial results and information on the company areposted at: www.renaissance-oman.com.

7.3 Meetings are held with analysts and members of the financialpress in line with internal guidelines of disclosure.

7.4 The CEO’s Report, provided in the Annual Report, includesthe Management Discussion & Analysis of the year performance.

88.. SSttoocckk MMaarrkkeett DDaattaa

8.1 High/Low share prices during each month of 2007:

(Source of statistics: MSM)

MMoonntthh HHiigghh//LLooww sshhaarree pprriiccee mmoovveemmeenntt

HHiigghh ((RROO..)) LLooww ((RROO..))

January 0.605 0.528

February 0.630 0.592

March 0.644 0.570

April 0.643 0.570

May 0.621 0.580

June 0.660 0.590

July 0.670 0.625

August 0.723 0.655

September 0.811 0.700

October 0.960 0.800

November 1.095 0.940

December 1.390 1.025


37

88..22 RReennaaiissssaannccee SShhaarree PPrriiccee mmoovveemmeenntt iinn ccoommppaarriissoonn ttoo tthheeMMSSMM IInnddeexx aanndd MMSSMM SSeerrvviicceess IInnddeexx

Jan 2007

Feb 2007

Mar 2

007

Apr 2007

May 2007

June 2007

July 2007

Aug 2007

Sept 2007

Oct 2

007

Nov 2007

Dec 2007

Jan 2007

Feb 2007

Mar 2

007

Apr 2007

May 2007

June 2007

July 2007

Aug 2007

Sept 2007

Oct 2

007

Nov 2007

Dec 2007

38


88..33 DDiissttrriibbuuttiioonn ooff SShhaarreehhoollddiinngg aass oonn 3311 DDeecceemmbbeerr 22000077

(Source of Statistics: Muscat Depository & Securities Registration Co SAOC)

SSll NNoo.. CCaatteeggoorryy NNuummbbeerr ooff SShhaarreehhoollddeerrss NNoo ooff sshhaarreess %% SShhaarreehhoollddiinngg

1 Less than 100,000 shares 4,831 16,892,037 7.57

2 100,000 – 200,000 shares 52 7,246,805 3.25

3 200,001 – 500,000 shares 48 15,445,842 6.93

4 500,001 – 2,200,000 shares 31 32,764,090 14.69

5 1 % - 1.99% of share capital 10 29,294,200 13.14

6 2 % - 6% of share capital 12 94,813,122 42.52

7 10% of share capital & above 1 26,543,472 11.90

TToottaall 44,,998855 222222,,999999,,556688 110000

88..44 The company does not have any outstanding GDRs / ADRs / Warrants or any convertible instruments.

99.. PPrrooffeessssiioonnaall PPrrooffiillee ooff tthhee SSttaattuuttoorryy AAuuddiittoorrss

Ernst & Young is one of Oman’s oldest established accountingfirms, having had a permanent office in the country since 1974.The practice comprises some eighty professionals, and is underthe direction of four partners.

The Oman office forms part of Ernst & Young’s Middle Eastpractice, with over 80 partners and nearly 1,700 otherprofessionals in 16 offices throughout the region.

The Middle East practice is a member of Ernst & Young Global,operating in more than 130 countries with approximately100,000 personnel worldwide.

As per article 9 (para b) of the Code of Corporate Governancepertaining to the rotation of external auditors, Ernst & Younghave completed four years as statutory auditors of the Companyby the end of 2007. Therefore, the Annual General Meeting ofShareholders has to appoint new statutory auditors for the yearending 31st December 2008 and approve their fees.

1100 AAuuddiitt FFeeeess ppaaiidd ttoo tthhee AAuuddiittoorrss

For the year 2007, audit fees of RO 213,913/- were paid by theCompany and its subsidiaries, in Oman and abroad, while thefees paid for other services amounted to RO 107,468/-.

1111.. CCoonnffiirrmmaattiioonn bbyy tthhee BBooaarrdd ooff DDiirreeccttoorrss

The Board of Directors confirms its accountability for thepreparation of the financial statements in accordance with theapplicable standards and rules.

The Board of Directors confirms that it has reviewed theefficiency and adequacy of the Internal Control Systems of theCompany. The Board is pleased to inform the shareholders thatadequate and efficient Internal Controls are in place and that theyare in full compliance with the Internal Rules & Regulations.

The Board of Directors also confirms that there are no materialthings that affect the continuation of the Company and its abilityto continue its operations during the next financial year.

Director Director

IINNDDEEPPEENNDDEENNTT AAUUDDIITTOORRSS’’ RREEPPOORRTT TTOO TTHHEE SSHHAARREEHHOOLLDDEERRSS OOFF RREENNAAIISSSSAANNCCEE SSEERRVVIICCEESS SSAAOOGG

RReeppoorrtt oonn tthhee ffiinnaanncciiaall ssttaatteemmeennttssWe have audited the accompanying financial statements of Renaissance Services SAOG (“the Company”), and its subsidiaries (the Group) whichcomprise the consolidated balance sheet as at 31 December 2007 and the consolidated income statement, cash flow statement and statement of changesin equity for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Board of Directors’ Responsibility for the Financial StatementsThe Board of Directors is responsible for the preparation and fair presentation of these financial statements in accordance with International FinancialReporting Standards and the relevant disclosure requirements of the Commercial Companies Law of 1974, as amended and the Rules and Guidelines ondisclosure issued by the Capital Market Authority, effective 1 October 2007. This responsibility includes: designing, implementing and maintaining internalcontrol relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error;selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with InternationalStandards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurancewhether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selecteddepend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statementsin order to design audit procedures that are appropriate for the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theentityís internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimatesmade by Company’s Board of Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements present fairly, in all material respects, the financial position of the group as of 31 December 2007 and its financialperformance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

RReeppoorrtt oonn OOtthheerr LLeeggaall aanndd RReegguullaattoorryy RReeqquuiirreemmeennttssIn our opinion the financial statements comply, in all material respects, with the relevant disclosure requirements of the Commercial Companies Law of1974, as amended and the Rules and Guidelines on disclosure issued by the Capital Market Authority, effective 1 October 2007.

20 February 2008Muscat

Philip D StantonPartner

P.O. Box: 1750, Ruwi 112Muscat, Sultanate of Oman

6th FloorBank Dhofar BuildingMuttrah Business DistrictMuscat, Sultanate of Oman

Telephone: 24703105Fax: [email protected]/me

C.R. No. 1/36809/5P.R. No. MH/4

A Member of Ernst & Young Global

40

22000077 2006 Notes RROO’’000000 RO’000

Revenue 119999,,221133 142,939

Operating expenses ((114444,,779922)) (99,068)

GGrroossss pprrooffiitt 5544,,442211 43,871

Administrative expenses ((2266,,886633)) (22,064)

PPrrooffiitt ffrroomm ooppeerraattiioonnss 2277,,555588 21,807

Share of profit from associate companies 330000 592

Impairment and amortisation of intangible assets 4 ((8833)) (82)

Net finance costs ((55,,444411)) (4,517)

Net profit/(loss) on investments -- (11)

PPrrooffiitt bbeeffoorree iinnccoommee ttaaxx 2222,,333344 17,789

Income tax expenses 18 ((44,,999922)) (3,538)

NNeett pprrooffiitt ffoorr tthhee yyeeaarr 19 1177,,334422 14,251

NNeett pprrooffiitt aattttrriibbuuttaabbllee ttoo::

Shareholders of the Parent Company 1166,,552255 14,039

Minority interests 881177 212

1177,,334422 14,251

BBaassiicc aanndd ddiilluutteedd eeaarrnniinnggss ppeerr sshhaarree ((RROO)) 20 00..007788 0.066

DDiivviiddeenndd ppeerr sshhaarree ((RROO)) 21 00..002255 0.025

The attached notes 1 to 30 form part of these financial statements.The parent company income statement is presented as a separate schedule attached to the financial statements.

CCOONNSSOOLLIIDDAATTEEDD IINNCCOOMMEE SSTTAATTEEMMEENNTT FFOORR TTHHEE YYEEAARR EENNDDEEDD 3311 DDEECCEEMMBBEERR 22000077

41

22000077 2006 Notes RROO’’000000 RO’000

NNoonn--ccuurrrreenntt aasssseettssProperty, plant and equipment 3 114488,,662255 121,827Intangible assets 4 3344,,224477 34,274Investments 6 22,,555544 3,186Deferred tax asset 18 11,,667755 1,123

TToottaall nnoonn--ccuurrrreenntt aasssseettss 118877,,110011 160,410

CCuurrrreenntt aasssseettssTrading investments 6 3311 30Inventories and work in progress 8 1133,,008866 8,081Trade and other receivables 9 5599,,660033 48,368Cash and bank balances 10 1155,,997744 4,916

TToottaall ccuurrrreenntt aasssseettss 8888,,669944 61,395

CCuurrrreenntt lliiaabbiilliittiieessTrade and other payables 11 6600,,112255 38,233Bank borrowings 10,12 777799 2,629Term loans and leases 13 1199,,888899 17,329

TToottaall ccuurrrreenntt lliiaabbiilliittiieess 8800,,779933 58,191

NNeett ccuurrrreenntt aasssseettss 77,,990011 3,204

NNoonn--ccuurrrreenntt lliiaabbiilliittiieessTerm loans and leases 13 7788,,116600 60,116Non current payables and advances 14 33,,779988 8,829Staff terminal benefits 15 33,,664477 2,903

TToottaall nnoonn--ccuurrrreenntt lliiaabbiilliittiieess 8855,,660055 71,848

NNeett aasssseettss 110099,,339977 91,766

CCaappiittaall aanndd rreesseerrvveessShare capital 16 2222,,330000 20,273Share premium 16 2255,,114466 28,052Treasury shares 16 ((11,,770044)) (1,687)Legal reserve 16 88,,002244 7,105Proposed distribution 21 55,,557755 5,068Retained earnings 4444,,998844 31,889Exchange gain on investment in foreign subsidiaries 331188 137

110044,,664433 90,837MMiinnoorriittyy iinntteerreessttss 44,,775544 929

TToottaall eeqquuiittyy 110099,,339977 91,766

NNeett aasssseettss ppeerr sshhaarree ((RROO)) 17 00..449944 0.472

The financial statements were authorised for issue in accordance with a resolution of the directors on 20 February 2008.

Chairman Director

The attached notes 1 to 30 form part of these financial statements.The parent company balance sheet is presented as a separate schedule attached to the financial statements.

CCOONNSSOOLLIIDDAATTEEDD BBAALLAANNCCEE SSHHEEEETT AASS AATT 3311 DDEECCEEMMBBEERR 22000077

42

22000077 2006 Notes RROO’’000000 RO’000

OOPPEERRAATTIINNGG AACCTTIIVVIITTIIEESSCash receipts from customers 118866,,771155 135,056Cash paid to suppliers and employees ((114433,,881100)) (106,029)

Cash generated from operations 4422,,990055 29,027Net finance costs ((55,,444411)) (4,517)Income tax paid ((55,,553311)) (3,142)

CCaasshh fflloowwss ffrroomm ooppeerraattiinngg aaccttiivviittiieess 3311,,993333 21,368

IINNVVEESSTTIINNGG AACCTTIIVVIITTIIEESSAcquisition of property, plant and equipment ((4444,,664444)) (32,868)Proceeds from sale of property, plant and equipment 33,,992244 2,209Proceeds from sale of investments 8899 11Acquisition of a subsidiary (net of cash acquired) -- (1,247)Dividend received 11,,221144 263

CCaasshh fflloowwss uusseedd iinn iinnvveessttiinngg aaccttiivviittiieess ((3399,,441177)) (31,632)

FFIINNAANNCCIINNGG AACCTTIIVVIITTIIEESSNet receipts of term loans 2200,,660044 6,913Net movement in related parties 22,,882299 (112)Cash dividends paid ((33,,004411)) (5,068)

CCaasshh fflloowwss ffrroomm ffiinnaanncciinngg aaccttiivviittiieess 2200,,339922 1,733

NNeett iinnccrreeaassee//((ddeeccrreeaassee)) iinn ccaasshh aanndd ccaasshh eeqquuiivvaalleennttss 1122,,990088 (8,531)Cash and cash equivalents at the beginning of the year 22,,228877 10,818

CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss aatt tthhee eenndd ooff tthhee yyeeaarr 10 1155,,119955 2,287

CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss ccoommpprriissee tthhee ffoolllloowwiinngg::

Cash and bank balances 1155,,997744 4,916Bank borrowings ((777799)) (2,629)

CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss aatt tthhee eenndd ooff tthhee yyeeaarr 10 1155,,119955 2,287

The attached notes 1 to 30 form part of these financial statements.The parent company cash flow statement is presented as a separate schedule attached to the financial statements.

CCOONNSSOOLLIIDDAATTEEDD CCAASSHH FFLLOOWW SSTTAATTEEMMEENNTT FFOORR TTHHEE YYEEAARR EENNDDEEDD 3311 DDEECCEEMMBBEERR 22000077

43

CCOONNSSOOLLIIDDAATTEEDD SSTTAATTEEMMEENNTT OOFF CCHHAANNGGEESS IINN EEQQUUIITTYY FFOORR TTHHEE YYEEAARR EENNDDEEDD 3311 DDEECCEEMMBBEERR 22000077

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44

11 LLEEGGAALL SSTTAATTUUSS AANNDD PPRRIINNCCIIPPAALL AACCTTIIVVIITTIIEESS

Renaissance Services SAOG (the “Parent Company”) is incorporated in the Sultanate of Oman as a public joint stock company.The business activities of Renaissance Services SAOG and its subsidiary companies (together referred to as the “Group”) includeinvestments in companies and properties, catering and cleaning services, sale of computers, development, sale and service ofcomputer related software, telecommunications and medical equipments, provision of training services, media publishing anddistribution, construction, repair and chartering of ships and vessels, fabrication and maintenance for oil and gas industries,manufacturing, general trading and related activities.

22 SSIIGGNNIIFFIICCAANNTT AACCCCOOUUNNTTIINNGG PPOOLLIICCIIEESS

BBaassiiss ooff pprreeppaarraattiioonnThe consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS)and applicable requirements of the Commercial Companies Law of 1974 and the minimum disclosure requirements of the CapitalMarket Authority (CMA).

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

The consolidated financial statements are prepared under the historical cost convention modified to include the measurement atfair value of the following assets:

- Held for trading investments - Available for sale investments - Certain revalued assets

BBaassiiss ooff ccoonnssoolliiddaattiioonn

SubsidiariesSubsidiaries are those entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, togovern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements ofsubsidiaries are included in the consolidated financial statements from the date that control commences until the date that controlceases.

The financial statements of the subsidiaries are prepared for the same reporting year as the parent company, using consistentaccounting policies.

AssociatesAssociates are those entities in which the Group has significant influence, but not control, over the financial and operating policies.The consolidated financial statements include the Group’s share of the total recognised gains and losses of associates on an equityaccounting basis, from the date that significant influence commences until the date that significant influence ceases. When theGroup’s share of losses exceeds the carrying amount of the associate, the carrying amount is reduced to nil and recognition offurther losses is discontinued except to the extent that the Group has incurred obligations in respect of the associate.

Investments in jointly controlled entitiesInvestments in the jointly controlled entities are accounted for under the proportionate consolidation method whereby the Groupaccounts for its share of the non-current and current assets and liabilities, income and expenses in the jointly controlled entity.

Jointly controlled operationsWhere the Group participates in jointly controlled operations as defined in International Accounting Standard 31 the Groupaccounts only for its own share of assets and liabilities, income and expenditure.

NNOOTTEESS TTOO TTHHEE CCOONNSSOOLLIIDDAATTEEDD FFIINNAANNCCIIAALL SSTTAATTEEMMEENNTTSS FFOORR TTHHEE YYEEAARR EENNDDEEDD 3311 DDEECCEEMMBBEERR 22000077

45

22 SSIIGGNNIIFFIICCAANNTT AACCCCOOUUNNTTIINNGG PPOOLLIICCIIEESS ((ccoonnttdd..))

Transactions eliminated on consolidationIntra-group balances and transactions, and any unrealised gains arising from intra-group transactions, are eliminated in preparingthe consolidated financial statements. Unrealised gains arising from transactions with associates are eliminated to the extent of theGroup’s interest in the entity, against the investment in the associate. Unrealised losses are eliminated in the same way as unrealisedgains, but only to the extent that there is no evidence of impairment.

MMiinnoorriittyy iinntteerreessttssMinority interests represent the portion of profit or loss and net assets not held by the Group and are presented in the incomestatement and within equity in the consolidated balance sheet, separately from parent shareholders’ equity. Acquisitions of minorityinterests are accounted for using the parent entity extension method, whereby, the difference between the consideration and thebook value of the share of the net assets acquired is recognised as goodwill.

CChhaannggeess iinn aaccccoouunnttiinngg ppoolliicciieessThe accounting policies are consistent with those used in the previous year except as follows:

The Group has adopted the following new and amended IFRS and IFRIC interpretations during the year. Adoption of these revisedstandards and interpretation did not have any effect on the financial performance or position of the Group. They did however giverise to additional disclosures:

IFRS 7 Financial Instruments: DisclosuresIAS 1 Amendment - Presentation of financial statements

The principal effects of these changes are as follows:

IFRS 7 Financial lnstruments DisclosuresThis standard requires disclosures that enable users of the financial statements to evaluate the significance of the Group’s financialinstruments and the nature and extent of risks arising out of those financial instruments. The new disclosures are includedthroughout the financial statements.

lAS I Presentation of financial statementsThis amendment requires the Group to make new disclosures to enable users of the financial statements to evaluate the Group’sobjectives, policies and processes for managing capital. These new disclosures are shown in note 34.

IASB Standards and Interpretations issued but not adoptedThe Group has not adopted the new accounting standards or interpretations that have been issued but are not yet effective. Thesestandards and interpretations except for revised IAS 1, are not likely to have any significant impact on the consolidated financialstatements of the Group in the period of their initial application.

The Group has not adopted the revised IAS 1 “Presentation of Financial Statements” which will be effective for the year ending31 December 2009. The application of this standard will result in amendments to the presentation of the consolidated financialstatements.

RReevveennuuee rreeccooggnniittiioonnShip repair and oil & gas servicesRevenue comprises amounts derived from ship repair, provision of mechanical, electrical and instrumentation services, fabricationand maintenance services, turbocharger services and marine boiler repairs. Revenue is recognised under the percentage ofcompletion method and is stated net of discounts and allowances. Where the outcome of a contract can be assessed withreasonable certainty, a prudent estimate of attributable profit is recognised in the consolidated income statement. Full provision isimmediately made for all known or expected losses on individual contracts, when such losses are foreseen.


46


Goods sold and services renderedRevenue from the sale of goods is recognised in the income statement when the significant risks and rewards of ownership havebeen transferred to the buyer i.e. delivery of goods and acceptance by the customer.

Revenue from services rendered is recognised in the income statement in proportion to the stage of completion of the transactionin the accounting period in which the services are rendered and the right to receive the consideration is established. No revenue isrecognised if there are significant uncertainties regarding the recovery of the consideration due, associated costs or the possiblereturn of goods.

Long-term contractsAs soon as the outcome of a long-term contract can be estimated reliably, contract revenue and expenses are recognised in theincome statement in proportion to the stage of completion of the contract. An expected loss on a contract is recognisedimmediately in the income statement. No revenue is recognised if there are significant uncertainties regarding the recovery of theconsideration due, associated costs or the possible return of goods.

Maintenance contractsIncome from maintenance contracts is recognised in the income statement on a straight line basis evenly over the term of the contract.

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

Investment income and gain or loss on disposalsOn disposal of an investment, the resultant gain or loss between the net disposal proceeds and the carrying amount is recognisedin the income statement.

Dividend incomeDividend income is recognised in the income statement on the date that the dividend is declared.

Marine charterRevenue comprises operating lease rent from charter of marine vessels, revenue from provision of on-board accommodation,catering services and sale of fuel and other consumables.

Lease rent income is recognised on a straight line basis over the period of the lease. Revenue from provision of on-boardaccommodation and catering services is recognised over the period of hire of such accommodation while revenue from sale of fueland other consumables is recognised when delivered.

TradingRevenue from sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to thebuyer and the amount of revenue can be measured reliably.

InterestInterest revenue is recognised as the interest accrues.

PPrrooppeerrttyy,, ppllaanntt aanndd eeqquuiippmmeenntt

Owned assetsItems of property, plant and equipment are stated at cost or revalued amounts less accumulated depreciation and impairmentlosses, if any. Subsequent to initial recognition or certain assets are carried at revalued amount, being their fair value at the date ofthe revaluation less any subsequent accumulated depreciation. The revaluation of these assets is carried out at regular intervals onan open-market basis to ensure that the carrying amount does not differ materially from the fair value. Surplus arising on revaluationis credited to a revaluation surplus account within equity.


47


Subsequent expenditureExpenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately,including major inspection and overhaul expenditure is capitalised. Other subsequent expenditure is capitalised only when itincreases the future economic benefits embodied in property, plant and equipment. All other expenditure is recognised in theincome statement as an expense as incurred.

DepreciationDepreciation is charged to the income statement on a straight line basis over the estimated useful lives of items of property, plantand equipment. The estimated useful lives are as follows:

YearsBuildings and improvements 5 - 25Furniture and fixtures 3 - 5Plant, machinery, and office equipment 1 - 15 Marine vessels revalued (from the date of latest revaluation) 10 Marine vessels acquired 15 - 25 Expenditure on marine vessel dry docking (included as a component of marine vessels) 3 Jetty and land development 25 Floating dock 25 Motor vehicles 3

Freehold land is not depreciated. The cost of certain assets used on specific contracts is depreciated to estimated residual valueover the period of the respective contract, including extensions if any.

Capital work-in-progressCapital work-in-progress is stated at cost and comprises all costs directly attributable to bringing the assets under constructionready for their intended use. Capital work-in-progress is transferred to property, plant and equipment at cost on completion.

DDrryy ddoocckkiinngg ccoossttssThe expenditure incurred on vessel dry docking, a component of property, plant and equipment, is amortised over the period fromthe date of dry docking, to the date on which the management estimates that the next dry docking is due.

VVeesssseell rreeffuurrbbiisshhmmeenntt ccoossttssLeased assetsCosts incurred in advance of charter to refurbish vessels under long term charter agreements are capitalised within property, plantand equipment in line with the use of the refurbished vessel. Where there is an obligation to incur future restoration costs undercharter agreements which would not meet the criteria for capitalisation within property, plant and equipment, the costs are accruedover the period to the next vessel re-fit to match the use of the vessel and the period over which the economic benefits of its use arerealised.

Owned assetsCost incurred to refurbish owned assets are capitalised within property, plant and equipment and then depreciated over the shorterof the estimated economic life of the related refurbishment or the remaining life of the vessel

GGooooddwwiillllGoodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combinationover the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initialrecognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually,or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.


48


For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to eachof the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of thecombination, irrespective of whether other assets and liabilities of the Group are assigned to those units or groups of units. Eachunit or group of units to which the goodwill is so allocated:

• Represents the lowest level within the Group at which the goodwill is monitored for internal management purposes;

• And is not larger than a segment based on either the Group’s primary or the Group’s secondary reporting format determinedin accordance with IAS 14 Segment Reporting.

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units), towhich the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units) is less thanthe carrying amount, an impairment loss is recognised. Where goodwill forms part of a cash-generating unit (group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of isincluded in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposedof in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generatingunit retained.

IInnttaannggiibbllee aasssseettssIntangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a businesscombination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less anyaccumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed to be eitherfinite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairmentwhenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method foran intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or theexpected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisationperiod or method, as appropriate, and treated as changes in accounting estimates. The amortisation expense on intangible assetswith finite lives is recognised in the income statement in the expense category consistent with the function of the intangible asset.

Computer software costs represent expenditure incurred on implementing an ERP solution for the Group. Amortisation is chargedon a straight line basis over a period of five years, from the date of completion.

IInnvveessttmmeennttssHeld for trading investments are stated at fair value, with any resultant gain or loss recognised in the income statement. Otherinvestments held by the Group are classified as being available for sale and are stated at fair value. Unrealised gains and losses onremeasurement to fair value are reported as a separate component of equity until the investment is derecognised or the investmentis determined to be impaired. Upon impairment any loss, or upon derecognition any gain or loss, previously reported asî cumulativechanges in fair valueî within equity is included in the income statement for the period.

IInnvveennttoorriieess aanndd wwoorrkk--iinn--pprrooggrreessssInventories are valued at the lower of cost and net realisable value. Cost is determined applying the first-in, first-out and theweighted average methods and includes all costs incurred in acquiring and bringing them to their present location and condition.Net realisable value signifies the estimated selling price in the ordinary course of business, less estimated costs of completion andselling expenses.

Work-in-progress in the case of short-term contracts is stated at the invoice value of goods and services supplied less amountsreceived or receivable. In the case of long-term contracts, work-in-progress is stated at cost, which includes direct costs and allattributable overheads, plus profit recognised to date less a provision for foreseeable losses, uncertainty and progress billings. Costincludes all expenditure related to specific contracts and an allocation of fixed and variable overheads incurred in the Group’scontract activities based on normal operating capacity.


49


TTrraaddee aanndd ootthheerr rreecceeiivvaabblleessTrade and other receivables are stated at cost less impairment losses, if any.

TTrreeaassuurryy sshhaarreess Own equity instruments which are reacquired (treasury shares) are deducted from equity. No gain or loss is recognised in profitor loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments.

CCaasshh aanndd ccaasshh eeqquuiivvaalleennttssCash and cash equivalents comprise cash at hand, bank balances and short-term deposits with an original maturity of three monthsor less.

Bank borrowings that are repayable on demand and form an integral part of the Group’s cash management are included as acomponent of cash and cash equivalents for the purpose of the statement of cash flows.

TTrraaddee aanndd ootthheerr ppaayyaabblleessLiabilities are recognised for amounts to be paid in the future for goods or services received, whether billed by the supplier or not.

IInntteerreesstt bbeeaarriinngg bboorrrroowwiinnggssInterest bearing borrowings are recognised initially at the fair value of the consideration received less directly attributabletransaction costs. Subsequent to initial recognition interest bearing borrowings are stated at amortised cost with any differencebetween cost and redemption value being recognised in the income statement over the period of the borrowings on an effectiveinterest basis.

PPrroovviissiioonnssA provision is recognised in the balance sheet when the Group has a legal or constructive obligation as a result of a past event, andit is probable that an outflow of economic benefit will be required to settle the obligation. If the effect is material, provisions aredetermined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the timevalue of money and, where appropriate, the risks specific to the liabilities.

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

LLeeaasseessGroup as a lesseeFinance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, arecapitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum leasepayments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve aconstant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income.

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

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases.Operating lease payments are recognised as an expense in the consolidated income statement on a straight-line basis over thelease term.

Leases where the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operatingleases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset andrecognised over the lease term on the same basis as lease rental income. Contingent rents are recognised as revenue in the periodin which they are earned.


50


EEmmppllooyyeeee bbeenneeffiittssContributions to a defined contribution retirement plan for Omani employees, in accordance with the Oman Social InsuranceScheme, are recognised as an expense in the income statement as incurred.

The Group provides end of service benefits to its expatriate employees. The entitlement to these benefits is based upon theemployees’ salary and length of service, subject to completion of a minimum service period. The expected costs of these benefitsare accrued over the period of employment.

RReettiirreemmeenntt BBeenneeffiitt CCoossttssPayments to defined contribution retirement benefit schemes are charged as an expense as they fall due. Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the Group’s obligationsunder the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.

DDiirreeccttoorrss’’ rreemmuunneerraattiioonnThe Board of Directors’ remuneration is accrued within the limits specified by the Capital Market Authority and the requirementsof the Commercial Companies Law of the Sultanate of Oman.

TTeerrmm llooaannssTerm loans are carried on the balance sheet at the fair value of the consideration received less directly attributable transaction costs.Installments due within one year are shown as a current liability. Interest expense is accrued on a time-proportion basis with unpaidamounts included in accounts payable and accruals.

NNeett ffiinnaannccee ccoossttssNet finance costs comprise interest payable on borrowings calculated using the effective interest rate method and interest receivedon funds invested. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised costusing the effective interest method. Financing costs are recognised as an expense in the income statement in the period in whichthey are incurred.

Borrowing costs, net of interest income, which are directly attributable to the acquisition of items of property, plant and equipmentare capitalised as the cost of property, plant and equipment. Borrowing costs incurred beyond the construction period arerecognised in the income statement.

Interest income is recognised in the income statement as it accrues, taking into account the effective yield on the asset.

OOppeerraattiinngg lleeaassee ppaayymmeennttssPayments made under operating leases are recognised in the income statement on a straight line basis over the term of the lease.

SSeeggmmeenntt rreeppoorrttiinnggA segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment)or in providing products or services within a particular economic environment (geographical segment), which is subject to risks andrewards that are different from those of other segments.

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

Income tax on the profit or loss for the year comprises current and deferred taxation. Income tax is recognised in the incomestatement except to the extent that it relates to items recognised directly to equity in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at thebalance sheet date, and any adjustment to tax payable in respect of previous years.


51


Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carryingamounts of assets and liabilities for financial reporting purposes and the amounts use for taxation purposes. The amount of deferredtax provided is based on the expected manner of realistic settlement of the carrying amount of assets and liabilities, using tax ratesenacted or substantially enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which theunused tax losses and credits can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that therelated tax benefit will be realised.

FFoorreeiiggnn ccuurrrreennccyy ttrraannssaaccttiioonnssTransactions denominated in foreign currencies are translated to Rial Omani at the foreign exchange rate ruling at the date of thetransaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to RialOmani at foreign exchange rates prevailing on the balance sheet date. Foreign exchange differences arising on conversion arerecognised in the income statement. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fairvalue are translated into Rial Omani at the foreign exchange rates ruling at the dates the values were determined. Exchangedifferences, arising on a monetary item that, in substance, forms part of the Group’s net investment in a foreign entity, are classifiedas equity until the disposal of the net investment, at which time they are recognised as income or as expenses, as the case may be,in the same period in which the gain or loss on disposal is recognised.

IImmppaaiirrmmeennttAn assessment is made at each balance sheet date to determine whether there is objective evidence that a specific financial assetmay be impaired. If such evidence exists, any impairment loss is recognised in the consolidated income statement. Impairment isdetermined as follows:

(a) For assets carried at fair value, impairment is the difference between cost and fair value, less any impairment loss previouslyrecognised in the consolidated income statement;

(b) For assets carried at cost, impairment is the difference between carrying value and the present value of future cash flowsdiscounted 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 futurecash flows discounted at the original effective interest rate.

DDeerriivvaattiivveess Derivatives are stated at fair value.

For the purposes of hedge accounting, hedges are classified into two categories: (a) fair value hedges which hedge the exposure tochanges in the fair value of a recognised asset or liability; and (b) cash flow hedges which hedge exposure to variability in cash flowsof a recognised asset or liability or a highly probable transaction.

In relation to effective fair value hedges any gain or loss from remeasuring the hedging instrument to fair value, as well as relatedchanges in fair value of the item being hedged, are recognised immediately in the consolidated income statement.

In relation to effective cash flow hedges, the gain or loss on the hedging instrument is recognised initially in equity and eithertransferred to the consolidated income statement in the period in which the hedged transaction impacts the consolidated incomestatement, or included as part of the cost of the related asset or liability.

For hedges which do not qualify for hedge accounting, any gains or losses arising from changes in the fair value of the hedginginstrument are taken directly to the consolidated income statement for the year.


52


Fair value hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longerqualifies for hedge accounting. For fair value hedges of financial instruments with fixed maturities any adjustment arising fromhedge accounting is amortised over the remaining term to maturity. For cash flow hedges, any cumulative gain or loss on thehedging instrument recognised in equity remains in equity until the hedged transaction occurs. If the hedged transaction is nolonger expected to occur, the net cumulative gain or loss recognised in equity is transferred to the consolidated income statement.

FFaaiirr vvaalluueessFor investments traded in organised financial markets, fair value is determined by reference to Stock Exchange quoted market bidprices at the close of business on the balance sheet date.

For unquoted investments, a reasonable estimate of the fair value is determined by reference to the market value of a similarinvestment or is based on the expected discounted cash flows. Fair value cannot be reliably measured for certain unquoted foreigninvestments. Such investments are measured at cost.

The fair value of interest-bearing items is estimated based on discounted cash flows using market interest rates for items with similarterms and risk characteristics.

JJuuddggeemmeennttssIn the process of applying the group’s accounting policies, management has made the following judgements, apart from thoseinvolving estimations, which have the most significant effect in the amounts recognised in the financial statements:

Classification of investmentsManagement decides on acquisition of an investment whether it should be classified as held to maturity, held for trading, carried atfair value through profit and loss account, or available for sale.

The group classifies investments as trading if they are acquired primarily for the purpose of making a short term profit by the dealers.

Classification of investments as fair value through profit and loss account depends on how management monitor the performanceof these investments. When they are not classified as held for trading but have readily available reliable fair values and the changesin fair values are reported as part of profit or loss in the management accounts, they are classified as fair value through profit andloss.

All other investments are classified as available for sale.

EEssttiimmaatteess aanndd aassssuummppttiioonnssThe key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have asignificant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year arediscussed below

Impairment of GoodwillThe Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the ‘value in use’ ofthe cash-generating units to which the goodwill is allocated. Estimating a value in use amount requires management to make anestimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order tocalculate the present value of those cash flows. Further details are given in Note 4.

Deferred Tax AssetsDeferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available againstwhich the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets thatcan be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.Further details are contained in Note 18.


53

33 PPRROOPPEERRTTYY,, PPLLAANNTT AANNDD EEQQUUIIPPMMEENNTT

Freehold Jetty Machinery Furniture Capitalland and Marine and and Motor and work inbuildings vessels Dock equipment vehicles Fixtures progress TotalRO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000

Cost or valuation

1 January 2007 27,730 116,697 2,107 15,328 1,525 2,086 10,830 176,303

Additions 2,352 15,610 - 5,374 610 230 20,880 45,056

Disposals/transfers 7,290 (93) 361 1,583 (101) (223) (15,538) (6,721)

31 December 2007 3377,,337722 113322,,221144 22,,446688 2222,,228855 22,,003344 22,,009933 1166,,117722 221144,,663388

Depreciation

1 January 2007 11,755 27,679 589 11,588 1,183 1,682 - 54,476

Charge for the year 3,248 9,252 135 2,072 327 188 - 15,222

On disposal - (3,224) - (107) (141) (213) - (3,685)

31 December 2007 1155,,000033 3333,,770077 772244 1133,,555533 11,,336699 11,,665577 -- 6666,,001133

Net carrying amount

31 December 2007 2222,,336699 9988,,550077 11,,774444 88,,773322 666655 443366 1166,,117722 114488,,662255

31 December 2006 15,975 89,018 1,518 3,740 342 404 10,830 121,827

Cost or valuation

1 January 2006 24,984 94,574 2,035 13,065 1,432 1,891 7,705 145,686

Additions 1,603 1,754 72 2,462 236 339 26,402 32,868

Disposals/transfers 1,143 20,369 - (199) (143) (144) (23,277) (2,251)

31 December 2006 27,730 116,697 2,107 15,328 1,525 2,086 10,830 176,303

Depreciation

1 January 2006 10,454 19,896 490 10,439 1,032 1,660 - 43,971

Charge for the year 1,344 7,947 99 1,365 284 163 - 11,202

On disposal (43) (164) - (216) (133) (141) - (697)

31 December 2006 11,755 27,679 589 11,588 1,183 1,682 - 54,476

Net carrying amount

31 December 2006 15,975 89,018 1,518 3,740 342 404 10,830 121,827

31 December 2005 14,530 74,678 1,545 2,626 400 231 7,705 101,715


54

33 PPRROOPPEERRTTYY,, PPLLAANNTT AANNDD EEQQUUIIPPMMEENNTT ((ccoonnttdd..))

Certain marine vessels were revalued at 31 December 2003, based on independent valuations undertaken by professionallyqualified valuers. The independent valuations were based on an open market basis for existing use. The net book value of revaluedassets was RO 12,829,740 (2006: RO 14,531,440). Had these assets been carried at cost less depreciation, the net book valueswould have been RO 10,184,790 (2006: RO 11,295,900).

Marine vessels with a net book value of RO 80,503,000 (2006: RO 69,894,000) and plant and machinery with a net bookvalue of RO 2,621,000 (2006: RO 1,832,000) are pledged against bank loans obtained.

Certain marine vessels are subject to commercial agreements with a third party whereby that third party has a call option topurchase each of the relevant vessels owned by the Group at a price related to the US Dollar borrowing remaining outstandingagainst those vessels. The Group has not been notified of any intention to exercise such a call option and consequently the calloption and associated implications are not reflected in these financial statements.

The net carrying value of marine vessels includes an amount of RO 239,000 (2006: RO 378,000) in respect of assets held underfinance leases.

Capital work in progress includes progress payments for the construction of new vessels. This will not be depreciated until thevessels are fully complete and fit for operational use.

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

22000077 2006 RROO’’000000 RO’000

Operating expenses 1144,,226633 10,429Administrative expenses 995599 773

1155,,222222 11,202

44 IINNTTAANNGGIIBBLLEE AASSSSEETTSS

GGooooddwwiillll 22000077 2006 RROO’’000000 RO’000

Goodwill at 1 January 4411,,444411 39,913Additions 5566 1,528

31 December 4411,,449977 41,441

Impairment 1 January 77,,335566 7,356Impairment charge during the year -- -

31 December 77,,335566 7,356

Net carrying amount at 31 December 3344,,114411 34,085


55

44 IINNTTAANNGGIIBBLLEE AASSSSEETTSS ((ccoonnttdd..))

Goodwill represents the excess of the cost of acquiring shares in certain subsidiaries companies over the aggregate fair value oftheir net assets.

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

GGooooddwwiillll 22000077 2006 RROO’’000000 RO’000

Topaz Energy and Marine Group 2266,,008833 26,083

Industrial Management Technology and Contracting LLC 33,,114455 3,145

Tawoos Industrial Services Company LLC 11,,990000 1,900

Norsk Offshore Catering AS 11,,000077 951

Others 22,,000066 2,006

3344,,114411 34,085

The recoverable amount of each cash-generating unit is determined based on a value in use calculation, using cash flow projectionsbased on financial budgets approved by senior management. The key assumptions of the value in use calculations are thoseregarding discount rates, growth rates and expected changes to selling prices and direct costs during the period. Managementestimates discount rates that reflect current market assessments of the time value of money and the risks specific to each cash-generating unit. The growth rates are based on management estimates having regard to industry growth rates. Changes in sellingprices and direct costs are based on past practices and expectations of future changes in the market.

SSeennssiittiivviittyy ttoo cchhaannggeess iinn aassssuummppttiioonnss:: With regard to the assessment of value in use of the cash generating units, management believes that no reasonably possiblechange in any of the key assumptions would cause the carrying value of the unit to materially exceed its recoverable amount.

For the year ended 31 December 2007, there have been no events or changes in circumstances to indicate that the carrying valuesof goodwill of the above cash-generating units may be impaired.

CCoommppuutteerr ssooffttwwaarree 22000077 2006 RROO’’000000 RO’000

1 January 118899 249

Addition on acquisition of subsidiary - 22

Amortisation ((8833)) (82)

Net carrying amount at 31 December 110066 189

Total intangible assets 3344,,224477 34,274


56

55 SSUUBBSSIIDDIIAARRIIEESS AANNDD AASSSSOOCCIIAATTEESS

The Group and Parent company investments in Subsidiary and Associate companies are as follows

Ownership interest (%)22000077 2006

Subsidiary Companies

Topaz Energy and Marine Limited (“TOPAZ”) (incorporated in UAE) 110000 100Industrial Management Technology and Contracting LLC (“IMTAC”) 110000 100Tawoos Industrial Services Company LLC (“TISCO”) 110000 100United Media Services Company LLC (“UMS”) 110000 100National Training Institute LLC (“NTI”) 110000 100National Hospitality Institute SAOG (“NHI”) 4466 46

Associate CompaniesDubai Wire FZE (“DW”) (incorporated in the UAE) 2200 20Darium Thai Offshore Limited (incorporated in Thailand) 4499 49Mezon Stainless Steel FZE Zone company (incorporated in UAE) 2200 20

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

Subsidiary Companies of TOPAZNico Middle East Limited (incorporated in Bermuda) 110000 100

Nico Middle East Limited has a subsidiary BUE Marine Ltd, incorporated in UK, which operates through its subsidiaries andengaged principally in charter of marine vessels and vessel management.

Subsidiary Companies of IMTACUnited Drug Stores LLC (“UDS”) 110000 100IMTAC Yemen Ltd. (“IYL”) (incorporated in Yemen) 4499 49IMTAC Technology LLC (“ITECH”) (incorporated in the UAE) 110000 100United Telecommunications LLC (“UNITEL”) 110000 100

Subsidiary Companies of TISCORusail Catering and Cleaning Services LLC (“RCCS”) 110000 100Supraco Limited (incorporated in Cyprus) (ii) 110000 100Renaissance Contract Services International LLC (“RCSI”) 110000 -

RCSI was set up in 2007 and is providing contract catering services through its subsidiary in Angola.

Supraco Limited through its subsidiaries in Norway provides contract catering services to offshore oil rigs operating in theNorwegian Water.

Subsidiary Companies of UMSUnited Press and Publishing Company LLC (“UPP”) 110000 100Oryx Advertising Company WLL (incorporated in Qatar) 4499 -

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


57

66 IINNVVEESSTTMMEENNTTSS22000077 2006

RROO’’000000 RO’000

Investment in associates 22,,336600 2,992Available for sale 119944 194

22,,555544 3,186IInnvveessttmmeennttss iinn aassssoocciiaatteess

The Group has the following investments in associates

Associate Country of incorporation Ownership interest (%)22000077 2006

Darium Thai Offshore Limited Thailand 4499 49Mezon Stainless Steel Free Zone Company U.A.E. 2200 20Dubai Wire FZE U.A.E. 2200 20

Movements in the investment in associates are set out below:22000077 2006

RROO’’000000 RO’000

At 1 January 22,,999922 2,245Share of income 330000 592Exchange gain (loss) transferred to translation reserve 8833 191Dividend received ((11,,001155)) (36)

At 31 December 22,,336600 2,992

22000077 2006 RROO’’000000 RO’000

SShhaarree ooff aassssoocciiaatteess’’ bbaallaannccee sshheeeettCurrent assets 33,,228811 3,557Non current assets 11,,668844 1,733Current liabilities ((11,,336611)) (1,190)Non current liabilities ((11,,224444)) (1,108)

Net assets 22,,336600 2,992

SShhaarree ooff aassssoocciiaatteess’’ rreevveennuueess aanndd rreessuullttssRevenues 33,,008855 7,852

Result 330000 592

Available for sale investments represent the fair value of investments in the following entitiesOwnership interest (%)

22000077 2006

Global Fasteners Limited (incorporated in the Isle of Man) 1100..0000 10.00Fund for Development of Youth Projects SAOC 22..3333 2.33

22000077 2006 RROO’’000000 RO’000

Held for trading investments 3311 30


58

77 IINNVVEESSTTMMEENNTTSS IINN JJOOIINNTTLLYY CCOONNTTRROOLLLLEEDD EENNTTIITTIIEESS

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

22000077 2006 RROO’’000000 RO’000

Non-current assets - Current assets 11,,773377 535Current liabilities ((11,,226644)) (332)

Net assets 447733 203

Revenue 22,,338822 907Cost of sales ((11,,998811)) (746)Administrative expenses ((113322)) (65)

Net profit for the year 226699 96

Investments in jointly controlled entities are in22000077 2006

%% %Adyard Anglian Water 5511 51Nico Mitsui 5500 50

Both the above entities are incorporated in the UAE.

88 IINNVVEENNTTOORRIIEESS AANNDD WWOORRKK IINN PPRROOGGRREESSSS22000077 2006

RROO’’000000 RO’000

Stocks and consumables, net 44,,223344 3,604Work in progress for long-term contracts 88,,885522 4,477

1133,,008866 8,081

99 TTRRAADDEE AANNDD OOTTHHEERR RREECCEEIIVVAABBLLEESS22000077 2006

RROO’’000000 RO’000

Trade receivables, net 4455,,444455 36,411Prepayments and other receivables 1133,,448877 11,430Amounts due from related parties (Note 22) 667711 527

5599,,660033 48,368

As at 31 December 2007, trade receivables of RO 4,666,000 (2006: RO 3,582,000) were impaired. Movements in theallowance for impairment of receivables were as follows:


59

99 TTRRAADDEE AANNDD OOTTHHEERR RREECCEEIIVVAABBLLEESS

22000077 2006 RROO’’000000 RO’000

At 1 January 33,,558822 3,443Charge for the year 11,,339999 215Amounts written off ((228855)) (62)Unused amounts reversed ((3300)) (14)

At 31 December 44,,666666 3,582

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

PPaasstt dduuee bbuutt nnoott iimmppaaiirreeddNeither past

due nor < 30 30-60 60-90 90-120 > 120 Total impaired days days days days days

RO ‘000 RO ‘000 RO ‘000 RO ‘000 RO ‘000 RO ‘000 RO ‘000

22000077 4455,,444455 3300,,880066 77,,551199 22,,886622 11,,558844 11,,770088 9966662006 36,411 24,315 5,188 1,644 1,719 1,138 2,407

Unimpaired receivables are expected, on the basis of past experience, to be fully recoverable. It is not the practice of the Companyto obtain collateral over receivables and the vast majority are, therefore, unsecured.

1100 CCAASSHH AANNDD CCAASSHH EEQQUUIIVVAALLEENNTTSS22000077 2006

RROO’’000000 RO’000

Cash and bank balances 1155,,997744 4,916Bank borrowings (Note 12) ((777799)) (2,629)

1155,,119955 2,287

Included in cash and bank balances are call deposits of RO 5,524,000 (2006: RO 1,204,000) maintained with commercialbanks. These are denominated mainly in US Dollar and UAE Dirhams, are short term in nature, and earn interest at commercialrates (2006: same terms and conditions).

1111 TTRRAADDEE AANNDD OOTTHHEERR PPAAYYAABBLLEESS22000077 2006

RROO’’000000 RO’000

Trade payables 2200,,881199 16,001Accrued expenses and other payables 3300,,776655 16,645Income tax payable 88,,447777 5,488Amounts due to related parties (Note 22) 6644 99

6600,,112255 38,233


60

1122 BBAANNKK BBOORRRROOWWIINNGGSS

Certain of the Group’s bank borrowings are secured by a registered first mortgage over certain assets, guarantees and assignmentof receivables in certain subsidiary companies. Bank borrowings carry interest at commercial rates (2006: Same terms andconditions).

1133 TTEERRMM LLOOAANNSS AANNDD LLEEAASSEESS

TTeerrmm LLooaannss3311 DDeecceemmbbeerr 22000077

11 yyeeaarr 22 --55 MMoorree tthhaannTToottaall oorr lleessss yyeeaarrss 55 yyeeaarrss

RROO’’000000 RROO’’000000 RROO’’000000 RROO’’000000

Parent company 2266,,331100 55,,773399 2200,,557711 --Subsidiary companies 7711,,449922 1144,,000044 3399,,337733 1188,,111155

9977,,880022 1199,,774433 5599,,994444 1188,,111155

31 December 20061 year 2 -5 More than

Total or less years 5 yearsRO’000 RO’000 RO’000 RO’000

Parent company 15,443 6,014 9,188 241Subsidiary companies 61,615 11,175 32,388 18,052

77,058 17,189 41,576 18,293

Included in term loans from bank are the following:

Term loans in Parent Company Term loans in Parent company are secured by charge over certain assets, rights on leasehold land, assignment of certain projectreceivables, assignment of insurance interests in certain contract assets and guarantees. Interest is charged at commercial rates(2006 : same terms and conditions).

Term loans in Subsidiaries 1) Term loans to TOPAZ amounting to RO 70,789,000 are secured by a first preferred mortgage over selective assets of the

Group, the assignment of marine vessel insurance policies, and in the event of default, the assignment of the marine vessel charterlease income. The equipment finance loan is secured against plant and machinery acquired with the proceeds of the loan.

2) Another short term loan of RO 950,000 is related to an Omani registered subsidiary. Interest is charged at commercial terms.

LLeeaasseess 22000077 2006 RROO’’000000 RO’000

Total lease payments outstanding as at 31 December 224477 387Less: Due within one year (disclosed as current liabilities) ((114466)) (140)

Long term lease obligations (Note 24 c) 110011 247


61

1133 TTEERRMM LLOOAANNSS AANNDD LLEEAASSEESS ((ccoonnttdd..))

Term loans and leases are disclosed in the balance sheet as:22000077 2006

RROO’’000000 RO’000Non current liabilities:Term loans 7788,,005599 59,869Leases 110011 247

7788,,116600 60,116Current liabilities:Term loans 1199,,774433 17,189Leases 114466 140

1199,,888899 17,329

1144 NNOONN CCUURRRREENNTT PPAAYYAABBLLEE AANNDD AADDVVAANNCCEESS22000077 2006

RROO’’000000 RO’000

Other payables and advances 33,,779988 6,399Deferred income - 2,430

33,,779988 8,829

1155 SSTTAAFFFF PPOOSSTT EEMMPPLLOOYYMMEENNTT BBEENNEEFFIITTSS

((II)) DDEEFFIINNEEDD CCOONNTTRRIIBBUUTTIIOONN PPLLAANN22000077 2006

RROO’’000000 RO’000

Movements in the liability recognised in the balance sheet are as follows:1 January 22,,990033 2,608Accruals during the year 11,,116611 755Payments during the year ((441177)) (460)

31 December 33,,664477 2,903

((IIII)) DDEEFFIINNEEDD BBEENNEEFFIITT PPLLAANNThe pension scheme of one of group’s subsidiary covers a total of 183 employees (2006 - 99 employees). The pension schemegives the right to defined future benefits, which are mainly dependent on number of years worked, salary level at time of retirementand the amount of payment from the national insurance fund. The obligations are covered through an insurance company. Thecalculated pension obligations are based on actuarial valuaion.

The actuarial valuations are based on assumptions of demographical factors normally used within the insurance industry.

1166 CCAAPPIITTAALL AANNDD RREESSEERRVVEESS

Share capital

The authorised share capital of the Parent Company comprises 400,000,000 ordinary shares of RO 0.100 each (2006:40,000,000 of RO 1 each). At 31 December 2007, the issued and fully paid up share capital comprised 222,999,568 ordinaryshares of RO 0.100 each (2006: 202,726,880 of RO 0.100 each). During 2007, the share capital increased by RO 2,027,269due to the issue of 20,272,688 bonus shares.


62

1166 CCAAPPIITTAALL AANNDD RREESSEERRVVEESS ((ccoonnttdd..))

Details of shareholders, who own 10% or more of the Parent Company’s share capital, are as follows

22000077 2006NNuummbbeerr Numberooff sshhaarreess % of shares %

‘000000 ‘000

Tawoos LLC 2266,,554433 1111..9900 24,130 11.90Kuwait & Middle East Financial Inv Co - -- 20,664 10.19

Legal reserveThe Omani Commercial Companies Law of 1974 requires that 10% of an entity’s net profit be transferred to a non-distributablelegal reserve until the amount of legal reserve becomes equal to one-third of the entity’s issued share capital. The legal reserve isnot available for distribution. Legal reserve also includes transfer relating to non Oman registered subsidiary companies as per therespective regulations in their country of incorporation.

Treasury sharesThese are shares held by certain subsidiaries in the parent company at the cost of RO 1,703,826 (2006: RO 1,686,587). Dividendreceived on these treasury shares have been directly transferred to retained earnings and shown as movement in the statement ofchanges in equity. At 31 December 2007, the subsidiaries held 11,505,604 shares (2006: 10,459,636) in the Parent Company.The market value of these shares at 31 December 2007 was approximately RO 15.45 million (2006: RO 5.54 million).

Share premium During the year company has declared proposed dividend of RO. 5,574,989 for the year ended on 31st December 2007. Out ofthis RO 2,229,995 (10%) is in the form of stock dividend and has been adjusted against the share premium in the statement ofchanges in equity.

1177 NNEETT AASSSSEETTSS PPEERR SSHHAARREE

Net assets per share is calculated by dividing the net assets at the year end attributable to the shareholders of the Parent Companyby the number of shares outstanding as follows

22000077 2006 RROO’’000000 RO’000

Net assetsNet assets 110099,,339977 91,766Minority interest ((44,,775544)) (929)

Net assets attributable to the shareholders of the Parent Company 110044,,664433 90,837

Number of sharesNumber of shares at 1 January 220022,,772277 20,273Bonus shares issued 2200,,227733 - Treasury shares (refer note 16) ((1111,,550066)) (1,046)

Number of shares at 31 December 221111,,449944 19,227

Effect of 1:10 stock split - 173,043

Number of shares at 31 December 221111,,449944 192,270

Net assets per share (RO) 00..449944 0.472


63

1188 IINNCCOOMMEE TTAAXX

The expense relates to tax payable on the profits earned by the subsidiaries, as adjusted in accordance with the taxation laws andregulations of the countries in which the Group operates.

22000077 2006 RROO’’000000 RO’000

Charge for the year 44,,999922 3,538

Current liability 88,,447777 5,488

Non-current liability -- 2,976

DDeeffeerrrreedd ttaaxx aasssseett

Opening as on 1 January 11,,112233 1,675

Credited (debited) to Income Statement 555522 (552)

At 31 December 11,,667755 1,123

The Parent Company and its Oman incorporated subsidiaries are subject to income tax at the rate of 12% of taxable income inexcess of RO 30,000 in accordance with the income tax law of the Sultanate of Oman.

The income tax assessments of the Parent Company for the years 2002 to 2006 have not yet been finalised by the SecretariatGeneral for Taxation at the Ministry of Finance (the ‘Department’).

The Department has completed the assessment of certain Oman incorporated subsidiaries up to the year 2002 disallowing themanagement fees paid by them to the Parent Company. The Parent Company and its subsidiaries have filed objections and appealsagainst the Department’s assessment. The Company has established provisions at 31 December 2007 against the potential taxliabilities which might arise in this regard (see Note 23 for the contingent liability in respect of taxation of overseas dividendsreceived from a UAE subsidiary).

1199 PPRROOFFIITT FFOORR TTHHEE YYEEAARR

The profit for the year is stated after charging

22000077 2006 RROO’’000000 RO’000

Staff costs 5588,,555522 28,510

2200 BBAASSIICC AANNDD DDIILLUUTTEEDD EEAARRNNIINNGGSS PPEERR SSHHAARREE

Basic and diluted earnings per share are calculated by dividing the net profits for the year attributable to the shareholders of theParent Company by the weighted average number of shares as follows:


64

2200 BBAASSIICC AANNDD DDIILLUUTTEEDD EEAARRNNIINNGGSS PPEERR SSHHAARREE ((ccoonnttdd..))22000077 2006

RROO’’000000 RO’000

Net profit for the year attributable to the shareholders of the parent company 1166,,552255 14,039

Weighted average number of shares (’000) 222222,,999999 202,727Bonus shares issued (’000) -- 20,272

222222,,999999 222,999

Less: Treasury shares (’000) ((1111,,550066)) (10,460)Less: Bonus shares issued (’000) -- (1,046)

((1111,,550066)) (11,506)

Weighted average number of shares (’000) 221111,,449933 211,493

Basic and diluted earnings per share (RO) 00..007788 0.066

During 2006, the company had split its shares by a multiple of 10 from RO 1 per share to RO 0.100 (100 baisas) per share. Theeffect of increase in number of shares has been considered in the opening balance of 2006.

2211 DDIIVVIIDDEENNDD PPEERR SSHHAARREE22000077 2006

Total distribution for the Shareholders (RO ’000) 55,,557755 5,068

Number of shares outstanding at 31 December (’000) 222233,,000000 202,727

Dividend per share (RO) 00..002255 0.025

Proposed cash dividend (RO) 33,,334444,,999944 3,040,903Proposed bonus shares, at par (RO) 22,,222299,,999955 2,027,269

The dividend proposed by the Board of Directors is subject to the approval of shareholders at the Annual General Meeting (AGM)of the company on 29 March 2008. Dividend for the year 2006 was approved by the shareholders at the AGM held on 28 March2007.

As required by CMA regulation, unclaimed dividends of previous years have been deposited with the CMA Investors’ Trust Fund.There were no unclaimed dividends for 2007.

2222 RREELLAATTEEDD PPAARRTTYY TTRRAANNSSAACCTTIIOONNSS

The Group has entered into transactions with entities over which certain Directors are able to exercise significant influence. In theordinary course of business, such related parties provide goods, services and funding to the Group. The Group also providesgoods, services and funding to the related parties. The Board of Directors believes that the terms of purchases, sales, provision ofservices and funding arrangements are comparable with those that could be obtained from unrelated third parties. The value ofsignificant related party transactions during the year was as follows:


65

2222 RREELLAATTEEDD PPAARRTTYY TTRRAANNSSAACCTTIIOONNSS ((ccoonnttdd..))22000077 2006

RROO’’000000 RO’000IncomeService rendered and sales 33,,779966 2,653Interest income - 2Management fees - 15

ExpensesServices received and purchases 221100 563Interest 22 -

Directors’ remuneration and sitting feesRemuneration 117799 182Sitting fees 2211 18

Remuneration and sitting fees above relate only to the Parent Company.

Out of above related party transactions, the following are the details of transactions entered into with the related parties holding10% or more interest in the Parent Company:

Service rendered and sales 2233 55

Compensation of key management personnelThe remuneration of directors and other members of key management during the year was as follows

22000077 2006 RROO’’000000 RO’000

Short-term benefits 999988 783Employees’ end of service benefits 4488 37

11,,004466 820

Amounts due from and due to related parties have been disclosed in notes 9 and 11 respectively.

Outstanding balances at the year-end arise in the normal course of business. For the year ended 31 December 2007, theCompany has not recorded any impairment of amounts owed by related parties (2006: nil).

2233 CCOOMMMMIITTMMEENNTTSS AANNDD CCOONNTTIINNGGEENNTT LLIIAABBIILLIITTIIEESS22000077 2006

RROO’’000000 RO’000

CommitmentsLetters of credit 11,,331100 984Capital expenditure commitments 2288,,336677 5,759

Contingent liabilitiesLetters of guarantee 1155,,447777 7,259Bills discounted - 1,354


66

2233 CCOOMMMMIITTMMEENNTTSS AANNDD CCOONNTTIINNGGEENNTT LLIIAABBIILLIITTIIEESS ((ccoonnttdd..))

Overseas dividends received by a subsidiary

A former subsidiary Topaz Energy and Marine SAOG, prior to its acquisition by Renaissance Services SAOG had earned dividendincome from its overseas subsidiaries for the years 2002 to 2004. This has been excluded from the taxable income in Omanfollowing management’s view that overseas dividends should not be taxed, as Oman follows a territorial system of taxation, a viewconfirmed by the Supreme Court in a decision given in November 2004. In the event the dividends from these overseasinvestments are taxed, the tax exposure for the open tax years from 2002 to 2004 would be approximately RO 800,000 to theParent Company. The management of the company are confident that they have a strong case and therefore have not establishedany provision.

2244 LLEEAASSEESS

aa)) OOppeerraattiinngg lleeaasseess -- rreecceeiivvaabblleeThe Group leases its marine vessels under operating leases. The leases typically run for a period of ten years and are renewable forsimilar periods after the expiry date. The lease rental is usually renewed to reflect market rentals. Future minimum lease rentalsreceivable under non-cancellable operating leases are as follows as of 31 December:

22000077 2006 RROO’’000000 RO’000

Within one year 4444,,114400 41,519Between one and five years 7711,,222266 59,151More than five years 3322,,669933 26,892

114488,,005599 127,562

bb)) OOppeerraattiinngg lleeaasseess -- ppaayyaabblleeThe Group has future minimum lease payments under operating leases for marine vessels with payments as follows:

22000077 2006 RROO’’000000 RO’000

Within one year 66,,005511 7,957Between one and five years 77,,444499 4,607More than five years 11,,773322 2,839

1155,,223322 15,403

cc)) FFiinnaannccee lleeaassee ccoommmmiittmmeennttssThe Group has entered into finance lease commitments with monthly rentals payable as follows:

PPrreesseenntt vvaalluuee ooff mmiinniimmuumm lleeaassee ppaayymmeennttss

22000077 2006 RROO’’000000 RO’000

Within one year 114466 140After one year but not more than five years 110011 247

Total minimum lease payments 224477 387


67

2255 PPRROOPPOOSSEEDD DDIIVVIIDDEENNDD

The Board of Directors has proposed a dividend amounting to RO 5,575K (2006: 5,068). This dividend will be submitted forapproval at the annual general meeting in 2008.

2266 DDEERRIIVVAATTIIVVEE FFIINNAANNCCIIAALL IINNSSTTRRUUMMEENNTTSS

The table below shows the positive and negative fair values of derivative financial instruments, which are equivalent to the marketvalues, together with the notional amounts analysed by the term to maturity. The notional amount is the amount of a derivative’sunderlying asset, reference rate or index and is the basis upon which changes in the value of derivatives are measured. The notionalamounts indicate the volume of transactions outstanding at year end and are neither indicative of the market risk nor credit risk.

3311 DDeecceemmbbeerr 22000077::NNoottiioonnaall aammoouunnttss bbyy tteerrmm ttoo mmaattuurriittyy

PPoossiittiivvee NNeeggaattiivvee NNoottiioonnaall OOvveerr11ffaaiirr ffaaiirr aammoouunntt WWiitthhiinn 11 yyeeaarr ttoo OOvveerr 55

vvaalluuee vvaalluuee TToottaall yyeeaarr 55 yyeeaarrss yyeeaarrssRROO’’000000 RROO’’000000 RROO’’000000 RROO’’000000 RROO’’000000 RROO’’000000

IInntteerreesstt rraattee sswwaappss 1155 ((772255)) 4433,,112299 99,,449922 3333,,663377 --

31 December 2006:Notional amounts by term to maturity

Positive Negative Notional Over1fair fair amount Within 1 year to Over 5

value value Total year 5 years yearsRO’000 RO’000 RO’000 RO’000 RO’000 RO’000

Interest rate swaps 219 31 20,256 6,935 13,321 -

In 2007, the amount of cash flow hedge ineffectiveness was immaterial.

2277 SSEEGGMMEENNTTAALL RREEPPOORRTTIINNGG

The Group operates four business units and the results are analysed by this classification and not by geographical segment. Intersegment pricing is determined on an arm’s length basis. Information relating to these primary segments is as follows:

22000077 2006 RROO’’000000 RO’000

RReevveennuueeTechnology group 1199,,331177 14,845Contract services group 5544,,559922 37,449Marine Group 5588,,004488 52,794Engineering Group 6644,,666644 35,030Others and inter Company adjustments 22,,559922 2,821

119999,,221133 142,939PPrrooffiitt ffrroomm ooppeerraattiioonnssTechnology group 11,,552222 1,406Contract services group 88,,337733 7,815Marine Group 1155,,771199 12,108Engineering Group 44,,553366 2,638Others and inter Company adjustments ((22,,559922)) (2,160)

2277,,555588 21,807

Others include results of media and communication, education and training and other unallocated cost and revenue.


68

2288 RRIISSKK MMAANNAAGGEEMMEENNTT

Exposure to credit, interest rate, foreign currency and market risk arises in the normal course of the Group’s business.

Credit riskThe Group has a credit policy in place and exposure to credit risk is monitored on an ongoing basis. Credit evaluations aregenerally performed on all customers requiring credit over specified amounts. The Group does not require collateral in respect offinancial assets.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet.

With respect to credit risk arising from the other financial assets of the Company, including cash and cash equivalents, andderivative instruments with positive values, the Company’s exposure to credit risk arises from default of the counterparty, with amaximum exposure equal to the carrying amount of these instruments.

Interest rate riskThe Group’s borrowings are on fixed as well as floating interest rate basis. The Group is exposed to interest rate risk due tofluctuation in the market interest rate of floating interest rate borrowings.

The following table demonstrates the sensitivity of the income statement to reasonably possible changes in interest rates, with allother variables held constant.

The sensitivity of the income statement is the effect of the assumed changes in interest rates on the Company’s profit for one year,based on the floating rate financial assets and financial liabilities held at 31 December 2007.

There is no impact on the Company’s equity.

Increase/decrease Effect on profitIn basis points for the year

RO’0002007RROO ++1155 ((113344))RROO

--1100 ((8899))2006RO +15 118RO -10 (79)

Equity price risk

The Group is not exposed to any significant equity price risk.

Foreign currency riskTrade accounts payable include amounts due in foreign currencies, mainly US Dollars, Euros, Pounds Sterling, and UAE Dirhams.

It is a policy of Group companies to hedge significant exposures in foreign currencies in most cases. As of 31 December 2007, thegroup did not have any significant exposures in foreign currencies.

Market riskBy the nature of its activities, the Group is exposed to fluctuations in market prices for available for sale investments and held fortrading investments.


69

2288 RRIISSKK MMAANNAAGGEEMMEENNTT ((ccoonnttdd..))

Liquidity riskThe group limits its liquidity risk by ensuring bank facilities are available.

The table below summarises the maturities of the Company’s undiscounted financial liabilities at 31 December 2007, based oncontractual payment dates and current market interest rates.

LLeessss tthhaann 11 ttoo 55At 31 December 2007 1122 mmoonntthhss yyeeaarrss >> 55 yyeeaarrss TToottaall

RROO ‘‘000000 RROO ‘‘000000 RROO ‘‘000000 RROO ‘‘000000

Accounts payables and accruals 3399,,008822 33,,779977 -- 4422,,887799Bank Overdraft 777799 -- -- 777799Term Loan 2200,,226644 6699,,997700 2222,,660033 111122,,883377Finance leases 114466 110011 -- 224477

Total 6600,,227711 7733,,886688 2222,,660033 115566,,774422

Less than 1 to 5At 31 December 2006 12 months years > 5 years Total

RO ‘000 RO ‘000 RO ‘000 RO ‘000

Accounts payables and accruals 25,416 5,536 - 30,952Bank Overdraft 2,629 - - 2,629Term Loans 17,628 49,996 24,158 91,782Finance leases 139 247 - 386

Total 45,812 55,779 24,158 125,749

2299 FFAAIIRR VVAALLUUEE OOFF FFIINNAANNCCIIAALL IINNSSTTRRUUMMEENNTTSS

The fair values of all financial assets and liabilities are not significantly different from their carrying amounts.

3300 KKEEYY SSOOUURRCCEESS OOFF EESSTTIIMMAATTIIOONN UUNNCCEERRTTAAIINNTTYY

EEssttiimmaattiioonn uunncceerrttaaiinnttyy The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have asignificant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year arediscussed below.

IImmppaaiirrmmeenntt ooff ggooooddwwiillll The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of thecash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of theexpected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate thepresent value of those cash flows. The net carrying amount of goodwill at 31 December 2007 was RO 34,141,000 (2006 :34,085,000). More details are given in Note 4.

IImmppaaiirrmmeenntt ooff aaccccoouunnttss rreecceeiivvaabblleeAn 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 individuallysignificant, but which are past due, are assessed collectively and a provision applied according to the length of time past due, basedon historical recovery rates.


70

3300 KKEEYY SSOOUURRCCEESS OOFF EESSTTIIMMAATTIIOONN UUNNCCEERRTTAAIINNTTYY ((ccoonnttdd..))

At the balance sheet date, gross trade accounts receivable were RO 50,110,000 ( 2006: 39,993,000) and the provision fordoubtful debts was RO 4,666,000 (2006: 3,582,000). Any difference between the amounts actually collected in future periodsand the amounts expected will be recognised in the consolidated income statement.

IImmppaaiirrmmeenntt ooff iinnvveennttoorriieessInventories are held at the lower of cost and net realisable value. When inventories become old or obsolete, an estimate is made oftheir net realisable value. For individually significant amounts this estimation is performed on an individual basis. Amounts whichare not individually significant, but which are old or obsolete, are assessed collectively and a provision applied according to theinventory type and the degree of ageing or obsolescence, based on historical selling prices.

At the balance sheet date, gross inventories were RO 13,797,000 (2006: 8,742,000) with provisions for old and obsoleteinventories of RO 712,000 (2006: 661,000). Any difference between the amounts actually realised in future periods and theamounts expected will be recognised in the consolidated income statement.


71

SSCCHHEEDDUULLEE TTOO TTHHEE CCOONNSSOOLLIIDDAATTEEDD FFIINNAANNCCIIAALL SSTTAATTEEMMEENNTTSSIINNCCOOMMEE SSTTAATTEEMMEENNTT ((PPAARREENNTT CCOOMMPPAANNYY)) FFOORR TTHHEE YYEEAARR EENNDDEEDD 3311 DDEECCEEMMBBEERR 22000077

22000077 2006RROO’’000000 RO’000

Revenue 2255,,448877 22,433

Operating expenses ((1188,,220044)) (14,729)

GGrroossss pprrooffiitt 77,,228833 7,704

Other income 77,,999911 1,841

Administrative expenses ((22,,554433)) (2,822)

Net finance costs ((11,,332233)) (348)

Net profit/( loss) on investments 110044 (13)

PPrrooffiitt bbeeffoorree iinnccoommee ttaaxx 1111,,551122 6,362

Income tax expenses ((11,,008866)) (706)

NNeett pprrooffiitt ffoorr tthhee yyeeaarr 1100,,442266 5,656

BBaassiicc aanndd ddiilluutteedd eeaarrnniinnggss ppeerr sshhaarree ((RROO)) 00..004466 0.025

PPrrooppoosseedd ddiivviiddeenndd ppeerr sshhaarree ((RROO)) 00..002255 0.025

72

SSCCHHEEDDUULLEE TTOO TTHHEE CCOONNSSOOLLIIDDAATTEEDD FFIINNAANNCCIIAALL SSTTAATTEEMMEENNTTSSBBAALLAANNCCEE SSHHEEEETT ((PPAARREENNTT CCOOMMPPAANNYY)) AASS AATT 3311 DDEECCEEMMBBEERR 22000077

22000077 2006RROO’’000000 RO’000

NNoonn--ccuurrrreenntt aasssseettssProperty, plant and equipment 2244,,339922 22,859Investments 7777,,550011 64,798Due from a subsidiary 33,,112288 4,090

TToottaall nnoonn--ccuurrrreenntt aasssseettss 110055,,002211 91,747

CCuurrrreenntt aasssseettssTrading investments -- 3Inventories 995599 867Trade and other receivables 1188,,117755 11,722Cash and bank balances 11,,225533 507

TToottaall ccuurrrreenntt aasssseettss 2200,,338877 13,099

CCuurrrreenntt lliiaabbiilliittiieessTrade and other payables 1111,,448811 9,254Term loans 55,,773399 6,014

TToottaall ccuurrrreenntt lliiaabbiilliittiieess 1177,,222200 15,268

NNeett ccuurrrreenntt aasssseettss 33,,116677 (2,169)

NNoonn--ccuurrrreenntt lliiaabbiilliittiieessTerm loans 2200,,557711 9,429Staff terminal benefits 443388 355

TToottaall nnoonn--ccuurrrreenntt lliiaabbiilliittiieess 2211,,000099 9,784

NNeett aasssseettss 8877,,117799 79,794

CCaappiittaall aanndd rreesseerrvveessShare capital 2222,,330000 20,273Share premium 2255,,114466 28,052Legal reserve 77,,443333 6,757Proposed distribution 55,,557755 5,068Retained earnings 2266,,772255 19,644

TToottaall ccaappiittaall aanndd rreesseerrvveess 8877,,117799 79,794

NNeett aasssseettss ppeerr sshhaarree ((RROO)) 00..339911 0.394

73

SSCCHHEEDDUULLEE TTOO TTHHEE CCOONNSSOOLLIIDDAATTEEDD FFIINNAANNCCIIAALL SSTTAATTEEMMEENNTTSSCCAASSHH FFLLOOWW SSTTAATTEEMMEENNTT ((PPAARREENNTT CCOOMMPPAANNYY)) FFOORR TTHHEE YYEEAARR EENNDDEEDD 3311 DDEECCEEMMEEBBRR 22000077

22000077 2006RROO’’000000 RO’000

OOPPEERRAATTIINNGG AACCTTIIVVIITTIIEESS

Cash receipts from customers 2255,,117755 23,551

Cash paid to suppliers and employees ((1177,,115555)) (15,997)

Cash generated from operations 88,,556600 7,554

Net finance costs ((11,,332233)) (348)

Income tax paid ((337788)) (603)

CCaasshh fflloowwss ffrroomm ooppeerraattiinngg aaccttiivviittiieess 66,,885599 6,603

IINNVVEESSTTIINNGG AACCTTIIVVIITTIIEESS

Acquisition of property, plant and equipment ((55,,330077)) (9,944)

Proceeds from sale of property, plant and equipment 1166 1

Movements in investments ((1122,,770033)) (10,231)

Proceeds from sale of investments 110077 -

Dividend received 77,,884499 1,629

CCaasshh ((uusseedd iinn)) ffrroomm iinnvveessttiinngg aaccttiivviittiieess ((1100,,003388)) (18,545)

FFIINNAANNCCIINNGG AACCTTIIVVIITTIIEESS

Net receipt of term loans 1100,,886677 3,201

Net (payments to) receipts from related parties ((33,,990011)) 7,319

Cash dividends paid ((33,,004411)) (5,068)

CCaasshh fflloowwss ffrroomm ffiinnaanncciinngg aaccttiivviittiieess 33,,992255 5,452

NNeett iinnccrreeaassee ((ddeeccrreeaassee)) iinn ccaasshh aanndd ccaasshh eeqquuiivvaalleennttss 774466 (6,490)

Cash and cash equivalents at the beginning of the year 550077 6,997

CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss aatt tthhee eenndd ooff tthhee yyeeaarr 11,,225533 507

74

SSCCHHEEDDUULLEE TTOO TTHHEE CCOONNSSOOLLIIDDAATTEEDD FFIINNAANNCCIIAALL SSTTAATTEEMMEENNTTSSSSTTAATTEEMMEENNTT OOFF CCHHAANNGGEESS IINN EEQQUUIITTYY ((PPAARREENNTT CCOOMMPPAANNYY)) FFOORR TTHHEE YYEEAARR

SShhaarree SShhaarree LLeeggaallccaappiittaall pprreemmiiuumm rreesseerrvvee

RROO’’000000 RROO’’000000 RROO’’000000

Balance at 1 January 2006 20,273 33,761 3,075

Dividend paid and bonus shares issued - - -

Proposed dividend - - -

Proposed bonus shares - (2,027) -

Net profit for the year - - -

Transfer to legal reserve - (3,682) 3,682

Balance at 31 December 2006 20,273 28,052 6,757

Dividend paid and bonus shares issued 2,027 - -

Proposed dividend - - -

Proposed bonus shares - (2,230) -

Net profit for the year - - -

Transfer to legal reserve - (676) 676

BBaallaannccee aatt 3311 DDeecceemmbbeerr 22000077 2222,,330000 2255,,114466 77,,443333

75

EENNDDEEDD 3311 DDEECCEEMMBBEERR 22000077

PPrrooppoosseedd RReettaaiinneeddddiissttrriibbuuttiioonn eeaarrnniinnggss TToottaall

RROO’’000000 RROO’’000000 RROO’’000000

5,068 17,029 79,206

(5,068) - (5,068)

3,041 (3,041) -

2,027 - -

- 5,656 5,656

- - -

5,068 19,644 79,794

(5,068) - (3,041)

3,345 (3,345) -

2,230 - -

- 10,426 10,426

- - -

55,,557755 2266,,772255 8877,,117799

Renaissance Annual Report 2007 (English)

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Transcript of Renaissance Annual Report 2007 (English)