Oman Oil Balance Sheet

OMAN OIL MARKETING COMPANY SAOG

Financial statements

31 December 2007

Registered address Principal place of business

P.O. Box 92 Mina Al Fahal

Postal code 116 Sultanate of Oman

Sultanate of Oman


Financial statements 31 December 2007

Contents Page

Report of the Auditors 1

Balance sheet 2

Income statement 3

Cash flow statement 4

Statement of changes in equity 5

Notes 6-22

REPORT OF THE AUDITORS TO THE SHAREHOLDERS OF


Report on the financial statements We have audited the accompanying financial statements of Oman Oil Marketing Company SAOG ("the Company") set out on pages 2 to 22, which comprise the balance sheet as at 31 December 2007, and the income statement, statement of changes in equity and cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory notes.

Board of Directors responsibility for the financial statements The Board of Directors is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, the disclosure requirements of the Capital Market Authority and the Commercial Companies Law of 1974, as amended. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessments of the risks of material misstatements of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity‘s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity‘s internal control. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of the accounting estimates made by management, 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 opinion.

Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Oman Oil Marketing Company SAOG as at 31 December 2007 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Report on other Legal and Regulatory Requirements

In our opinion, the financial statements of Oman Oil Marketing Company SAOG as at and for the year ended 31 December 2007, in all material respects comply with:

the relevant disclosure requirements of the Capital Market Authority; and the Commercial Companies Law of 1974, as amended.

22 January 2008 KPMG

Page 2


Balance Sheet as at 31 December

2007 2006

Notes RO RO

Assets

Property, plant and equipment 3 12,638,672 10,647,439

Interest in Joint Venture 4 &18 - 17,007

Deferred tax 13 46,048 ─────────

62,981 ─────────

Total non-current assets 12,684,720 ─────────

10,727,427 ─────────

Inventories 5 3,430,395 3,589,735

Trade and other receivables 6 15,319,389 16,465,147

Cash and cash equivalents 5,997,240 ─────────

1,790,027 ─────────

Total current assets 24,747,024 ─────────

21,844,909 ─────────

Total assets 37,431,744 32,572,336

═════════ ═════════

Equity

Share capital 7 6,450,000 6,450,000

Statutory reserve 8 2,150,000 2,150,000

Retained earnings 9,176,176 6,559,417

───────── ─────────

Total equity 17,776,176 ─────────

15,159,417 ─────────

Liabilities

Employees‘ end of service benefits 9 329,806 335,326

Provision for site restoration and abandonment cost 10 268,056 ─────────

240,241 ─────────

Total non-current liabilities 597,862 ─────────

575,567 ─────────

Trade and other payables 11 17,596,184 13,888,722

Payable to Joint Venture 4 &18 36,637 -

Short-term loan 12 - 2,000,000

Income tax 13 834,038 653,038

Environmental provision 14 590,847 295,592

───────── ─────────

Total current liabilities 19,057,706

__________

16,837,352

__________

_

Total liabilities

Total equity and liabilities

19,655,568

____________

37,431,744

17,412,919

__________

_

32,572,336

═════════ ═════════

Net assets per share 21&7 0.276 0.235

═════════ ═════════

The notes on pages 6 to 22 form an integral part of these financial statements.

These financial statements were approved and authorized for issue by the Board of Directors on 22 January

2008 and signed on their behalf by:

Chairman Chief Executive Officer

The report of the Auditors is set forth on page 1.

Page 3


Income statement for the year ended 31 December

2007 2006

Notes RO RO

Revenue 18 152,663,594 121,397,435

Cost of sales

(137,781,096) ─────────

(109,578,451) ─────────

Gross Profit 14,882,498 11,818,984

Other income 340,121 308,040

Administrative expenses

Distribution expenses

3,14,15 &18 (6,652,081)

(1,229,476)

(5,861,974)

(1,127,202)

Other expenses (722,494) (383,278) ───────── ─────────

Result from operating activities 6,618,568

________

4,754,570

__________

Finance income

Finance expenses

18

18

4,731

(127,990)

7,068

(171,174)

Net finance cost (123,259)

_________

(164,106)

________

Share of net loss from joint venture 18 (53,644)

_________

(30,519)

________

Profit before income tax 6,441,665 4,559,945

Income tax expense 13 (761,156) (543,915)

───────── ─────────

Profit for the year 5,680,509 ═════════

4,016,030 ═════════

Basic earnings per share 20 0.088 ═════════

0.062 ═════════



Page 4


Cash flow statement for the year ended 31 December

2007 2006

Note RO RO

Cash flows from operating activities

Profit before income taxes and after directors remuneration

Add : Share of loss from joint venture

6,441,665

53,644

4,559,945

30,519

Adjustments for:

Depreciation 3 1,734,946 1,498,698

(Profit)/Loss on disposal of property, plant and equipment (27,142) 64,769

Net finance costs 123,259 164,106

───────── ────────

Operating profit before working capital changes 8,326,372 6,318,037

Change in inventories 5 159,340 (1,478,426)

Change in receivables 6 1,145,758 (4,168,376)

Change in payables

Change in provisions and employee benefits

11

9

3,707,462

317,550

───────

5,704,560

24,684

───────

Cash from operations 13,656,482 6,400,479

Interest paid (127,990) (171,174)

Income tax paid 13 (563,223) (387,853)

─────── ───────

Net cash from operating activities 12,965,269

───────

5,841,452

───────

Cash flows from investing activities

Interest received 4,731 7,068

Proceeds from disposal of property, plant and equipment 55,296 5,643

Acquisition of property, plant and equipment 3 (3,754,333) (2,562,326)

─────── ───────

Net cash used in investing activities (3,694,306)

───────

(2,549,615)

───────

Cash flows from financing activities

Decrease in short term loan (2,000,000) (900,000)

Dividends paid (3,063,750) (2,902,500)

─────── ───────

Net cash used in financing activities (5,063,750)

───────

(3,802,500)

───────

Net change in cash and cash equivalents 4,207,213

(510,663)

Cash and cash equivalents at 1 January 1,790,027

───────

2,300,690

───────

Cash and cash equivalents at 31 December 5,997,240

═══════

1,790,027

═══════



Page 5


Statement of changes in equity for the year ended 31 December

Share

capital

Statutory

reserve

Retained

earnings

Total

RO RO RO RO

1 January 2006 6,450,000 2,150,000 5,445,887 14,045,887

Dividends paid – 2005 - - (2,902,500) (2,902,500)

Net profit for the year - - 4,016,030 4,016,030

————─ ————— ————— —————

31 December 2006 6,450,000 2,150,000 6,559,417 15,159,417

════════ ════════ ════════ ════════

1 January 2007 6,450,000 2,150,000 6,559,417 15,159,417

Dividends paid – 2006 - - (3,063,750) (3,063,750)

Net profit for the year - - 5,680,509 5,680,509

————─ ————— ————— —————

31 December 2007 6,450,000 2,150,000 9,176,176 17,776,176

════════ ════════ ════════ ════════



Page 6


Notes (forming part of the financial statements)

1 Legal status and principal activities

Oman Oil Marketing Co. SAOG (―the Company‖) is registered as a joint stock company under the

Commercial Companies Law of Oman and is engaged in the marketing and distribution of petroleum

products. The Company is a subsidiary of Oman Oil Company SAOC, a closed joint stock Company

registered in the Sultanate of Oman. The Company has entered into a ‗Trademark License

Agreement‘ with Oman Oil Company SAOC dated 22nd September 2003, for the right to use the

trademark ‗Oman Oil‘, in exchange for an annual fee of 0.09% of all fuel sales.

2 Basis of preparation and significant accounting policies

Basis of preparation

a) Statement of compliance

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

Standards (―IFRS‖), the disclosure requirements of the Capital Market Authority and the

requirements of the Commercial Companies Law of 1974, as amended.

b) Basis of measurement

The financial statements have been prepared on the historical cost basis except for provisions for site

restoration and abandonment cost which are measured at amortized cost.

c) Functional currency

These financial statements are presented in Riyal Omani (RO), which is the Company‘s functional

currency.

d) Use of estimates and judgments

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

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

liabilities, income and expenses. Actual results may differ from these estimates.

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

estimates are recognized in the period in which the estimate is revised and in any future periods

affected. In particular, estimates that involve uncertainties and judgments which have a significant

effect on the financial statements include: provisions for impairment of receivables (note 6), provision

for environmental remediation (note 14) and provision for site abandonment and restoration cost

(note 10).

Significant accounting policies

The accounting policies set out below have been applied consistently by the Company and are

consistent with those used in the previous year.

a) Foreign currencies

Transactions in foreign currencies are translated to the Company‘s functional currency at exchange

rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign

currencies at the reporting dates are retranslated to the functional currency at the exchange rate at

that date. The foreign currency gain or loss on monetary items is the difference between amortized

cost in the functional currency at the beginning of the period, adjusted for effective interest and

payments during the period, and the amortized cost in foreign currency translated at the exchange

rate at the end of the period. Foreign currency differences arising on retranslation are recognized in

the profit or loss.

Page 7



2 Basis of preparation and significant accounting policies (continued)

b) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and

impairment losses.

Costs include expenditures that are directly attributable to the acquisition of the asset. The cost

includes any other cost that is directly attributable to bringing the asset to a working condition for its

intended use, and the costs of dismantling and removing the items and restoring the site on which

they are located.

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

for as separate items (major components) of property, plant and equipment.

(ii) Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognized in the carrying

amount of an item if it is probable that future economic benefits embodied within the part will flow to

the company and its cost can be measured reliably. The costs of the day-to-day servicing of property,

plant and equipment are recognized in the income statement as incurred.

(iii) Depreciation

Depreciation is recognised in the income statement on a straight-line basis over the estimated useful

lives of each part of the property, plant and equipment. Assets under construction are not

depreciated. The estimated useful lives for the current and comparative periods are as follows:

Years

Buildings 10 to 20

Plant, equipment and vehicles 2 to 13

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

c) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories include

expenditures incurred in acquiring the inventories and bringing them to their existing location and

condition, as follows:

Petroleum products and lubricants: purchase cost on a first-in-first out basis

Stores: at weighted average cost

Net realizable value is the estimated selling price in the ordinary course of business less the estimated

costs of completion and selling expenses.

Page 8




d) Impairment

(i) Financial assets

A financial asset is considered to be impaired if objective evidence indicates that one or more events

have had a negative effect on the estimated future cash flows of that asset.

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

difference between its carrying amount, and the present value of estimated future cash flows

discounted at the original effective interest rate.

Individually significant financial assets are tested for impairment on an individual basis. The

remaining financial assets are assessed collectively in groups that share similar credit risk

characteristics.

All impairment losses are recognized in income statement.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the

impairment loss was recognized. For financial assets measured at amortized cost, the reversal is

recognized in the income statement.

(ii) Non-financial assets

The carrying amounts of the Company‘s non-financial assets are reviewed at each reporting date to

determine whether there is any indication of impairment. If any such indications exist then the asset‘s

recoverable amount is estimated.

An impairment loss is recognized if the carrying amount of an asset or cash generating unit is the

greater of its value in use and its fair value less costs to sell. In assessing the value in use, the

estimated future cash flows are discounted to their present value using a pre-tax discount rate that

reflects current market assessments of the time value of money and the risks specified to the asset.

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

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

change in estimates used to determine the recoverable amount. An impairment loss is reversed only to

the extent that the asset‘s carrying amount does not exceed the carrying amount that would have been

determined, net of depreciation or amortization, if no impairment loss had been recognized.

e) Employee benefits

Defined contribution plan

Obligations for contributions to a defined contribution retirement plan, for Omani employees, in

accordance with the Oman Social Insurance Scheme, are recognized as an expense in the income

statement as incurred.

The Company's obligation in respect of non-Omani terminal benefits, under defined contribution

retirement plan, is the amount of future benefit that such employees have earned in return for their

service in the current and prior periods. The obligation is calculated using the projected unit credit

method and is discounted to its present value. The discount rate used reflects current market

assessments of the time value of money.

Page 9




f) Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or

constructive obligation that can be estimated reliably, and it is probable that an outflow of economic

benefits will be required to settle the obligation. An environmental provision is recognised when the

Company, through environmental assessments, identifies a requirement for environmental

remediation as a result of a past event and the associated costs can be reasonably estimated.

Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects

current market assessments of the time value of money and the risks specific to the liability.

g) Revenue

Revenue from the sale of goods is measured at the fair value of the consideration received or

receivable, net of returns, allowances and trade discounts. Revenue is recognised when the significant

risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is

probable, the associated costs and possible return of goods can be estimated reliably and there is no

continuing management involvement with the goods.

Transfers of risks and rewards vary depending on the individual terms of the contract of sale.

h) Leases

Payments made under operating leases are recognised in profit or loss on a straight line basis over the

term of the lease. Lease incentives received are recognised as an integral part of the total lease

expense, over the term of the lease.

i) Income tax

Income tax comprises current and deferred tax. Income tax expense is recognised in the income

statement except to the extent that it relates to items recognized directly in equity, in which case it is

recognized in equity.

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

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

years.

Deferred tax is calculated using the balance sheet liability method, providing for temporary

differences between the carrying amounts of assets and liabilities for financial reporting purposes and

the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to

be applied to the temporary difference when they reverse, based on the laws that have been enacted or

substantively enacted by the reporting date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will

be available against which the temporary differences can be utilized. Deferred tax assets are reviewed

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

benefit will be realized.

Page 10




j) Earnings per share

The Company presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is

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

weighted average number of ordinary shares outstanding during the period.

k) New standards and interpretation not yet effective

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

year ended 31 December 2007, and have not been applied in preparing these financial statements:

IFRS 8 Operating Segments introduces the ―management approach‖ to segment reporting. IFRS 8,

which becomes mandatory for the Company‘s 2009 financial statements, will require the disclosure

of segment information based on the internal reports regularly reviewed by the Company‘s Chief

Operating Decision Maker in order to assess each segment‘s performance and to allocate resources

to them. The Company will be required to present segment information in respect of retail,

commercial, lubes and aviation segments.

Revised IAS 23 Borrowing Costs removes the option to expense borrowing costs and requires that

an entity capitalise borrowing costs directly attributable to the acquisition, construction or

production of a qualifying asset as part of the cost of that asset. It is not expected that revised IAS

23 will have any significant impact on the financial statements.

IFRIC 11 IFRS 2 – Company and Treasury Share Transactions requires a share-based payment

arrangement in which an entity receives goods or services as consideration for its own equity

instruments to be accounted for as an equity-settled share-based payment transaction, regardless of

how the equity instruments are obtained. IFRIC 11 is not expected to have any significant impact

on the financial statements.

IFRIC 12 Service Concession Arrangements provides guidance on certain recognition and

measurement issues that arise in accounting for public-to-private service concession arrangements.

IFRIC 12, which becomes mandatory for a company‘s 2008 financial statements, is not expected to

have any significant effect on the Company‘s financial statements.

IFRIC 13 Customer Loyalty Programmes addresses the accounting by entities that operate, or

otherwise participate in, customer loyalty programmes for their customers. It relates to customer

loyalty programmes under which the customer can redeem credits for awards such as free or

discounted goods or services. IFRIC 13, which becomes mandatory for the Company‘s 2009

financial statements, is not expected to have any significant impact on the financial statements.

IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and

their Interaction clarifies when refunds or reductions in future contributions in relation to defined

benefit assets should be regarded as available and provides guidance on the impact of minimum

funding requirements (MFR) on such assets. It also addresses when a MFR might give rise to a

liability. IFRIC 14 will become mandatory for the Company‘s 2008 financial statements, is not

expected to have any significant impact on the financial statements.

l) Directors’ remuneration

The total remuneration paid to non-executive directors comprising sitting fees and remuneration is in

accordance with the provisions, and within the limits of, the Commercial Companies Law; the CMA

guidance; and the Articles of Association of the Company. Executive directors, if any, apart from

their contractual benefits and performance linked pay are not eligible for any sitting fees or fixed

remuneration. Director‘s remuneration is recognised in the income statement.

Page 11




m) Joint venture

Joint venture: jointly controlled assets

Investment in jointly controlled assets is recognized only to the extent of the Company‘s share of

assets, classified according to the nature of assets, liabilities which it has incurred, income from the

sale or use of its share of the output of the joint venture, together with its share of any expenses

incurred by the joint venture.

Joint venture: jointly controlled entity

Investment in a jointly controlled entity is recognized using the equity method, from the date the

Company obtains joint control, at cost plus the Company‘s share of post acquisition retained results

and other changes in net assets.

The Company discontinues the use of the equity method from the date on which it ceases to have joint

control over, or have significant influence in, a jointly controlled entity.

n) Dividends

Dividends are recommended by the Board after considering the profit available for distribution and

the Company‘s future cash requirements and are subject to approval by the shareholders at Annual

General Meeting. Dividends are recognized as a liability in the period in which they are declared.

o) Determination of fair values

A number of the Company‘s accounting policies and disclosures require the determination of fair

value, for both financial and non-financial assets and liabilities. Fair values have been determined for

measurement and /or disclosure purposes based on the following methods. Where applicable, further

information about the assumptions made in determining fair values is disclosed in the notes specific

to the asset or liability.

(i) Property, plant and equipment

The market value of property is the estimated amount for which a property could be

exchanged on the date of valuation between a willing buyer and a willing seller in an arm‘s

length transaction after proper marketing wherein the parties had each acted knowledgeably,

prudently and without compulsion. The market value of items of plant and equipments is

based on the quoted market prices for similar items.

(ii) Inventory

The fair value of inventory is determined based on its estimated selling price in the ordinary

course of the business less the estimated costs of completion and sale, and a reasonable profit

margin based on the effort required to complete and sell the inventory.

(iii) Trade and other receivables

The fair value of trade and other receivables approximates to their carrying amount due to

their short term maturity.

Page 12



p) Share capital

Ordinary and multi vote shares are classified as equity.

3 Property, plant and equipment

Buildings

Plant,

equipment

and vehicles

Assets under

construction

Total

RO RO RO RO

Balance at 1 January 2007, net of

accumulated depreciation 2,622,230 7,565,466 459,743 10,647,439

Additions - 13,401 3,740,932 3,754,333

Transfers 765,098 1,776,622 (2,541,720) -

Disposals - (28,154) - (28,154)

Depreciation for the year (203,951) (1,530,995) - (1,734,946)

──────── ──────── ──────── ────────

Balance at 31 December 2007,

net of accumulated depreciation

3,183,377 7,796,340 1,658,955 12,638,672

════════ ════════ ════════ ════════

Property, plant and equipment:

Cost 4,031,228 14,675,987 1,658,955 20,366,170

Accumulated depreciation (847,851) (6,879,647) - (7,727,498)

──────── ──────── ──────── ────────

Net carrying amount 3,183,377 7,796,340 1,658,955 12,638,672

════════ ════════ ════════ ════════

The Company‘s 50% share of plant and equipment and assets under construction at the main storage

depot at Mina Al Fahal (―the depot‖) in the amount of RO 987,692 (2006: RO 1,036,378) and

RO 12,953 (2006: RO 11,670), respectively, are included in property, plant and equipment. Under an

agreement dated 6 December 1995 between the Company and Al Maha Petroleum Products

Marketing Company SAOG (―Al Maha‖):

such assets are controlled jointly with Al Maha and cannot be sold without the mutual consent of

the Company and Al Maha;

costs of this depot are shared equally with Al Maha; and

the depot is operated by the Company for agreed management fees.

The land, on which the main storage depot and buildings are located, is leased from the Ministry of

Oil and Gas jointly with Al Maha under a lease which commenced on 23 November 1998 and expires

on 22 November 2008.

4 Interest in Joint Venture

The Company has entered into a joint venture agreement with Al Sarooj Group LLC dated 10 June

2004 (―the Agreement‖). Under the terms of the Agreement the Company has a 50% interest in a

jointly controlled entity, Oman Oil Marketing & Sarooj Group LLC (―the Joint Venture‖), a limited

liability company incorporated in the Sultanate of Oman with share capital of RO 40,000. The Joint

Venture was registered on 10 August 2004. The Joint Venture‘s principal activity is to carry out

commercial activities in the oil and gas sector outside the Sultanate of Oman.

Page 13



4 Interest in Joint Venture (continued)

The Company‘s share of assets and liabilities of the Joint Venture is as follows:

2007 2006

RO RO

Current assets 190,774 274,446

Non-current assets 4,626 4,626

Current liabilities (236,690) (261,228)

Non-current liabilities (2,265) (837)

──────── ────────

(43,555)

═══════

17,007

═══════

5 Inventories

2007 2006

RO RO

Oil and lubricants 3,422,898 3,581,279

Stores 7,497 8,456

──────── ────────

3,430,395

═══════

3,589,735

═══════

6 Trade and other receivables

2007 2006

RO RO

Trade receivables 14,135,898 15,779,253

Less: impairment provision (954,848) (1,028,329)

──────── ───────

13,181,050 14,750,924

Amounts due from related parties (note 18) 644,944 370,615

Other receivables

Prepaid expenses

306,349

1,187,046

378,130

965,478

─────── ───────

15,319,389

═══════

16,465,147

═══════

Changes in the impairment provision for trade accounts receivable during the year are as follows:

2007 2006

RO RO

Balance at 1 January 1,028,329 575,183

(Released) provided during the year (73,367) 458,490

Written off during the year (114) (5,344)

──────── ──────

Balance at 31 December 954,848

═══════

1,028,329

══===══

The Company has accepted guarantees / collateral valued at RO 469,215 (2006: RO 9,304) from

customers to secure fully/ partly their dues to the Company.

Page 14



6 Trade and other receivables (continued)

The maximum exposure to credit risk for trade receivables (considered as being the gross carrying value before impairment provisions) at the reporting date by type of customer was: Carrying amount 2007 2006 RO RO Aviation 2,192,879 5,080,883 Commercial 5,653,749 7,037,955 Fuel Card 3,661,111 1,442,979 Lubes 620,673 352,366 Retail 2,186,427 2,211,911 Others 535,323 46,206 ─────── ─────── 14,850,162 16,172,300 Less: Related party receivables (644,944) (370,615) Others (103,119) (31,845) Add: Receivable from Joint venture 33,799 9,413 ─────── ─────── 14,135,898

════════ 15,779,253 ════════

Whilst the Company sells its products to a large number of customers in Oman, its five largest customers account for 33% of trade receivables at 31 December 2007 (2006: 38%). The aging of trade receivables at the reporting date was: Gross Impairment Gross Impairment 2007 2007 2006 2006 In thousands of Rials Not past due 10,599,389 91,807 9,746,772 43,248 Past due 1-90 days 3,337,693 40,301 5,017,669 49,462 Past due 91-360 days 289,319 244,031 754,430 329,379 More than one year 623,761 578,709 653,429 606,240 ─────── ─────── ─────── ─────── 14,850,162

════════ 954,848

════════ 16,172,300 ════════

1,028,329 ════════

7 Share capital

The shareholders in the extraordinary general meeting held on 25 March 2006 have resolved to amend the authorized share capital from 15,000,000 to 150,000,000 shares and the issued and fully paid share capital from 6,450,000 to 64,500,000 shares by reducing the nominal value of share from RO 1 per share to baizas 100 per share. The Company‘s authorized share capital consists of 150,000,000 (2006: 150,000,000) shares of baizas 100 each (2006: Baizas 100 each). The Company‘s issued and fully paid up share capital comprises 64,500,000 (2006: 64,500,000) shares of baizas 100 each (2006: Baizas 100 each) as follows: 20074 2006 Number of

shares Number of

shares Multi-vote shares 3,225,000 3,225,000 Ordinary shares 61,275,000 61,275,000 ─────── ─────── 64,500,000

════════ 64,500,000 ════════

In accordance with Article 5 of chapter two of the Company‘s Articles of Association, the holder of each multi-vote share is entitled to two votes at the annual general meeting of the Company.

Page 15



7 Share capital (continued)

Shareholders of the Company who own 10% or more of the Company‘s shares, whether in their name

or through a nominee account, are as follows:

20074 2006

No. of shares No. of shares

Oman Oil Company SAOC – Multi-vote shares 3,225,000 3,225,000

– Ordinary shares 28,380,000 28,380,000

─────── ───────

31,605,000 ════════

31,605,000 ════════

8 Legal reserve

As required by the Commercial Companies Law of the Sultanate of Oman, 10% of the profit of each

year is transferred to a legal reserve until the reserve reaches a minimum one-third of the issued share

capital. The Company has resolved to discontinue any further transfers to this reserve, as the reserve

equals one-third of the issued share capital. This reserve is not available for distribution.

9 Employees’ end of service benefits

2007 2006

RO RO

Movements in the liability recognised in the balance sheet are as

follows:

Accrual as at 1 January 335,326 310,642

Accrued during the year 45,752 41,586

End of service benefits paid (51,272) (16,902)

_______ _______

Accrual as at 31 December 329,806 ══════

335,326 ══════

10 Provision for site restoration and abandonment cost

Movements in the provisions are as follows:

2007 2006

RO RO

As at 1 January 240,241 207,678 Additional provision (net) 13,401 20,102 Unwind of discount (included in finance costs) 14,414 12,461 _______ _______ As at 31 December 268,056

══════ 240,241 ══════

The key assumptions underlying the estimate of this provision are as follows:

the average cost per filling station of restoration and abandonment is RO 4,000;

the expected cash flows are discounted over the estimated life of the filling stations using an

interest rate of 6%; and

the estimated life of filling station is ten years.

Page 16



11 Trade and other payables

2007 2006 RO RO Trade accounts payable 14,510,619 12,907,631 Accrued expenses 3,010,565 908,591 Directors‘ remuneration payable 75,000 72,500 ————— ————— 17,596,184

════════ 13,888,722 ════════

The Company in accordance with Capital Markets Authority (CMA) regulations transfers dividends

unclaimed for a period of more than 6 months from the date they became due to the CMA‘s investor

fund. Such unclaimed dividends transferred during the year amounted to approximately RO 23,728

(2006: RO 9,031). Eligible shareholders who have not received their dividends are entitled to claim

them from the CMA. Trade accounts and other payables are payable within 45 days on average from

the balance sheet date.

12 Short-term loan

The loan was repayable within one year of the balance sheet date. The loan was unsecured and carried

interest at current market rates.

13 Income tax

2007 2006

RO RO

Current liability:

Current year 778,000 583,000

Prior years 56,038 70,038

──────── ────────

834,038 653,038

════════ ════════

Income statement:

Current year 778,000 583,000

Reversal of excess tax provision relating to earlier years (33,777) -

Deferred tax relating to the origination and reversal of

temporary differences 16,933

(39,085)

──────── ────────

761,156 543,915

════════ ════════

Deferred tax asset:

At 1 January 62,981 23,896

Movement for the year (16,933) 39,085

──────── ────────

At 31 December 46,048 62,981

════════ ════════

The deferred tax asset comprises the following temporary differences:

Provisions and other charges 237,778 281,704

Property, plant and equipment (191,730) (218,723)

──────── ────────

46,048 62,981

════════ ════════

Page 17



13 Income tax (continued)

The Company is subject to income tax in accordance with the income tax law of the Sultanate of

Oman at the enacted tax rate of 12% of taxable income in excess of RO 30,000. For the purpose of

determining the tax expense for the year, the accounting profit has been adjusted for tax purposes.

The reconciliation of tax as per accounting profit to effective tax is set out below:

Reconciliation of effective tax rate

2007 2006

Rate % RO Rate % RO

Profit before tax 6,441,665 4,559,945

Income tax 12.00 769,400 12.00 543,593

Effect of tax specific allowances (1.83) (117,212) (0.16) (7,127)

Effect of tax specific

disallowances

1.70 108,968 1.16 7,449

──────── ────────

Effective tax 11.87 761,156 12.00 543,915

════════ ════════

The adjustments are based on the current understanding of the existing tax laws, regulations and

practices.

The income tax assessment of the Company for the year 2006 has not been finalized with the Secretariat

General of Taxation Affairs at the Ministry of Finance. The Management considers that additional tax

liability, if any, in respect of open tax years would not be material to the financial position of the

Company as at 31 December 2007. The deferred tax asset has been computed at the tax rate of 12%.

14 Environmental provision

2007 2006

RO RO

Balance as at 1 January 295,592 322,606

Provided during the year 360,010 2,558

Utilised (64,755) (29,572) ─────── ───────

Balance as at 31 December 590,847 295,592 ═══════ ═══════

The Company provides for environmental remediation costs based on environmental contamination

assessments made on its delivery and storage sites. The entire provision of RO 590,847 is expected to be

used as per site specific remediation plans drawn up by the Company with their environmental

consultants.

15 Employee costs

2007 2006

RO RO

Wages and salaries (907,382) (830,312)

Other benefits (1,028,606) (866,203)

Contributions to a defined contribution retirement plan (60,276) (52,704)

Increase in liability for unfunded defined benefits retirement plan (45,751) (41,586)

────── ──────

(2,042,015) (1,790,805) ═══════ ═══════

Page 18



16 Expenditure commitments

Operating leases

The Company has entered into certain long-term non-cancellable operating leases. Under the terms

of these leases the future rental payments are as follows:

2007 2006

RO RO

Future minimum lease payments:

Not later than one year 472,542 402,870

Later than one year and not later than five years 727,114 612,378

More than five years 454,911 ───────

559,034 ───────

1,654,567 ═══════

1,574,282 ═══════

Capital Commitments

Contracted 505,156 405,298 ═══════ ═══════

17 Segmental information

The Company‘s operating revenues arise primarily from the marketing and distribution of petroleum

products in the Sultanate of Oman.

18 Related party transactions

The Company has provided a corporate guarantee to a bank on behalf of the Joint Venture (refer note

22) for no consideration.

The Company has entered into transactions with entities over which certain Directors are able to

exercise significant influence. In the normal course of business, the Company provides services on

commercial terms to related parties and avails services from related parties. The Directors believe

that the terms of providing and receiving such services are comparable with those that could be

obtained from third parties.

The volumes of significant related party transactions during the year and with parties with a

shareholding of 10% or more in the Company and / or related to Directors, were as follows:

2007 2006

RO RO

Fuel sales to filling stations owned by Directors 3,832,531 3,125,667

Fuel sales to commercial customers related to Directors of the

Company

Brand royalty

555,299

(133,699)

-

(106,208)

IT and other services from companies owned directly or indirectly by

Directors

(47,002) (65,136)

Remuneration to Directors (75,000) (72,500)

Directors‘ sitting fees (20,300) (17,300)

Net interest paid 31,436 53,684

Fee for accounting services 6,000 6,000

Share of losses of Joint Venture (53,644) (30,519)

Sale of company car - 5,500

Page 19



18 Related party transactions (continued)

Amounts due from related parties are disclosed in note 6. Bank balances in the amount of

RO 419,002 (2006: RO 1,196,392) are with a related party bank.

At 31 December 2006, an amount of RO 27,759 was due from an entity over which the Directors are

able to exercise significant influence.

19 Dividends paid and proposed

During the year, dividends of RO 0.0475 per share totaling RO 3,063,750 relating to 2006 were

declared and paid (2006- RO 0.0450 per share totaling RO 2,902,500 relating to 2005).

The Board of Directors has proposed a cash dividend of RO 0.0475 per share for 2007, totaling

RO 3,063,750, which is subject to the approval of the shareholders at the Annual General Meeting.

20 Basic earnings per share

Earnings per share are calculated by dividing the net profit for the year by the weighted average

number of shares outstanding during the year as follows:

2007 2006

Net profit for the year after deducting Directors‘ remuneration (RO) 5,680,509 4,016,030 ─────── ───────

Weighted average number of shares outstanding during the year (Nos.) 64,500,000 64,500,000

────── ──────

Earnings per share (RO) 0.088 0.062 ═══════ ═══════

21 Net assets per share

The calculation of net assets per share is based on net assets for the year ended 31 December 2007

attributable to ordinary shareholders of RO 17,776,176 (31 December 2006: RO 15,159,417) and on

64,500,000 shares (31 December 2006: 64,500,000 shares).

22 Contingencies

At 31 December 2007 the Company had contingent liabilities in respect of guarantees and other

matters arising in the ordinary course of business, from which it is anticipated that no material

liabilities will arise, amounting to RO 534,887 (2006: RO 1,364,314).

The Company has also provided a corporate guarantee of RO 500,000 (2006: RO 500,000), to secure

a credit facility of RO 1 million for the joint venture (see note 4).

23 Financial instruments

The following note presents information on the risks, arising from the Company‘s use of financial

instruments namely credit risk, liquidity risk and market risk that the Company is exposed to, its

objectives, policies and processes for measuring and managing risk and the Company‘s management

of capital. Further quantitative disclosures are included throughout these financial statements.

Page 20



23 Financial instruments (continued)

The Board of Directors has overall responsibility for the establishment and oversight of the

Company‘s risk management framework. The Board has entrusted the audit committee with the

responsibility of development and monitoring the Company‘s risk management policies and

procedures and its compliance with them.

Risk management policies and systems are reviewed regularly to ensure that reflect any changes in

market conditions and the Company‘s activities. The Company, through its induction and training

program, aims to develop a disciplined and constructive control environment in which all employees

understand their roles and obligations.

Foreign currency risk

Foreign currency risk is minimal as most transactions are either denominated in RO, US Dollars or in

currencies linked to US Dollars. The rate of exchange between RO and US Dollars has remained

unchanged since January 1986.

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial

instrument fails to meet its contractual obligations, and arises principally from the Company‘s

receivables from customers. The carrying amount of financial assets represents the maximum credit

exposure.

Trade and other receivables:

Credit is extended to corporate customers only with an objective of optimizing the Company‘s profits

and the prime responsibility for providing credit to customers and the timely collection of all debts

rests with the functional manager. Credit has a cost to the business and necessary controls and

procedures are established to manage the Company‘s credit risk and its working capital. It is therefore

Oman Oil Marketing Company‘s policy to have effective credit control systems in place which are

flexible enough to respond to changing market needs yet rigorous enough to ensure that customer

credit limits are established and regularly updated on the basis of reliable up-to-date information.

Generally credits are not allowed in excess of agreed credit periods except for government customers

and debts are collected within agreed credit terms and grace days. A stop supply mechanism is in

place which will automatically inactivate customer accounts and stop further supplies in the event of a

delay of payment beyond the credit period and the grace days. All exceptions and overrides are

approved in line with the policy guidelines. Debtor positions are regularly monitored and reviewed to

assess the overall risk and exposure. Though losses on account of default are infrequent, adequate

provisions for impairment based on the ageing of the debts are made to reflect the debtors position as

accurately as possible in the financial statements.

The significant concentration of credit risk has been disclosed in note 6.

The Company establishes an allowance for impairment that represents its estimate of incurred losses

in respect of trade and other receivables. The main components of this allowance are a specific loss

component that relates to individually significant exposures, and a collective loss component

established for groups of similar assets in respect of losses that have been incurred but not yet

identified.

Investments:

The Company does not hold any investments other then its interest in a joint venture.

Page 21




Guarantees:

The Company only provides financial guarantees to government bodies in the form of tender and

performance bond, and a guarantee of RO 0.5 million to Bank Muscat on behalf of its Joint venture

Oman Oil Marketing & Sarooj Group LLC. As at 31st December 2007 the total amount of guarantees

provided was in the amount of RO 1 million.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they

fall due. The Company‘s approach to managing liquidity risk is to ensure, as far as possible, that it

will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed

conditions, without incurring unacceptable losses or risking damage to the Company‘s reputation.

The Company uses local and international banks operating in the Sultanate to ensure that it has

sufficient cash on demand to meet expected operational expenses and sufficient credit facilities to

manage its liquidity risk. The Company has a credit facilities totaling of RO 34 million from 6 banks

which are unsecured and unutilized at the balance sheet date. Short term loans and overdraft ranging

are, on average, utilized for period of 7 to 14 days to bridge the gap between collections of receivables

and settlement of product purchase bills during the middle of every month.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates

and equity prices will affect the Company‘s income or the value of its holdings of financial

instruments. The objective of market risk management is to manage and control market risk

exposures within acceptable parameters, while optimizing the return.

Currency risk

The Company‘s foreign exchange transactions are very minimal and, as a consequence, the

Management do not believe that Company has significant exposure to market risk.

Interest rate risk

The Company manages its exposure to interest rate risk by ensuring that borrowings are on a

contracted fixed rate basis as far as possible.

Other Market risk

The Company is not exposed to other significant market risk.

Capital Management

The Board‘s policy is to maintain a strong capital base so as to maintain investor, creditor and market

confidence and to sustain future development of the business. The Board of Directors monitors the

return on equity, which the Company defines as net profit divided by total shareholders‘ equity. The

Board of Directors also monitors the level of dividends to ordinary shareholders.

There were no changes in the Company‘s approach to capital management during the year.

The Company is not subject to externally imposed capital requirements.

Page 22




The Board of Directors believes that the fair values of financial assets and liabilities are not

significantly different to their carrying amounts at the Balance sheet date

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