I N D E X

                                                                           Page No.

Board of Directors Report                                         1

Unaudited Summary of Performance                          2

Unaudited Statement of Profit & Loss                        3

Unaudited Balance Sheet                                           4

Statement of Changes in Equity                                  5

Unaudited Statement of Cash Flow                            6

Notes to the Financial Statements                               7 - 15

Dear Shareholders,

I have great pleasure on behalf of the Board Of Directors of INTERIOR HOTELS COMPANY SAOG, to present the Un-audited Results for the Nine Months ended 30th  September  2007.

Revenue Analysis

For the Nine Months ended 30th September 2007, we have achieved a turnover of RO 1,140,414/- as compared to RO 862,953/-, for the corresponding period of previous year. You will note that your turnover has increased during this period by RO 277,461/- showing growth of 32%.

Profit for the period

The Board has great pleasure in reporting a healthy Net Profit after tax of RO 327,849/- as compared to a Net profit of RO 172,626/-(before tax) of last year, for the same period recording 90% growth as compared to last year before tax profit.

Government Soft Loans

The Company has repaid the  installment of RO 65,000 of Oman Arab Bank – Soft Loan which was due in March 2007.With the continuous efforts of the Management to improve the business and profit, the Company do not see any difficulty in the  repayment of final installment of RO 250,500/- is due in November 2007.

Future Perspective

Our property being a Resort Property in the interior region of Oman, business is directly related to inflow of tourists in the country. Things seem to have been favorable and we expect this trend to continue.

Conclusion

Finally the Board of Directors on behalf of the Shareholders would like to express our gratitude to His Majesty Sultan Qaboos Bin Said and his wise government for their continued support and encouragement to the Tourism and Hospitality Industry.

Thanking you,

Nasser Khamis Al Hashar
Chairman

Notes To The Financial  Statements for Nine Months Ended 30th September 2007

1      Legal status and principal activities

Interior Hotels Company SAOG (“the company”) is an Omani General Joint Stock Company registered under the Commercial Companies Law of the Sultanate of Oman. The principal place of business of the company is located at Hayy Thurath Area, Nizwa, Sultanate of Oman. The principal activity of the company is the ownership and operation of the Golden Tulip Nizwa Hotel, located at Nizwa.

2      Summary of significant accounting policies
The principal accounting policies are summarised below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

2.1   Basis of preparation
(a)   The financial statements are prepared on the historical cost basis and in accordance with  International Financial Reporting Standards (IFRS) and comply with the disclosure requirements set out in the Rules for Disclosure and Proformas issued by the Capital Market Authority of the Sultanate of Oman. 

(b)   The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates.  It also requires management to exercise its judgment in the process of applying the company’s accounting policies. 

2.2   Segment reporting

A segment is a distinguishable component of the company that is engaged 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 and rewards that are different from those of other segments.

2.3   Revenue

Revenue consists of the invoiced value of services and goods supplied during the year, net of discounts and municipal and tourism taxes.  Room revenue is recognised on a daily basis based on occupancy, other revenue is recognised at the time goods are supplied or services rendered.

Dividend income is included in the income statement in the year in which entitlement to receive the dividend is established.

2.4   Interest income and expense
Interest income and expense are accounted on the accrual basis.

2.5   Foreign currency transactions

Items included in the financial statements of the company are measured using the currency of the primary economic environment in which the company operates (‘the functional currency’). The financial statements are presented in Rials Omani, which is the company’s functional and presentation currency.   

Foreign currency transactions are translated into Rials Omani at the exchange rate prevailing on the transaction date.  Foreign currency assets and liabilities are translated into Rials Omani at the exchange rate prevailing at the balance sheet date. Differences on exchange are dealt with in the income statement.

2.6   Dividend distribution

Dividend distribution to the company’s shareholders is recognised as a liability in the company’s financial statements only in the period in which the dividends are approved by the company’s shareholders.

2.7   Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately, including major inspection and overhaul expenditure, is capitalised. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the item of property, plant and equipment and can be measured reliably.  All other expenditure is recognised in the income statement as an expense as incurred.

The cost of the property plant and equipment is written down to residual value in equal instalments over the estimated useful lives of the assets. The estimated useful lives are:

Land improvements                                                        10 years
Buildings                                                                         40 years
Plant and equipment                                                  7 - 10 years
Motor vehicles                                                                  5 years

The assets residual values and useful lives are reviewed and adjusted, if appropriate, at each balance sheet date.

Where the carrying amount of an asset is greater than its estimated recoverable amount it is written down immediately to its recoverable amount.  

Gains and losses on disposals of property, plant and equipment are determined by reference to their carrying amounts and are taken into account in determining profit before taxation.

2.8   Inventories

Inventories are stated at the lower of cost and net realisable value.  The cost of inventories is based on the first-in-first-out basis and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of selling expenses. 

2.9   Trade and other receivables

Trade and other receivables are stated at their cost less impairment losses.  A provision for impairment of trade receivables is established when there is objective evidence that the company will not be able collect all amounts due according to the original terms of receivables.  Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired.  The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement within “operating costs”.

2.10 Cash equivalents

For the purpose of the cash flow statement, cash and cash equivalents comprise cash balances and bank deposits with a maturity of three months or less from the date of placement.

2.11 End of service benefits

company employees at the balance sheet date, having regard to the requirements of the Oman Labour Law 2003 as amended. Employee entitlements to annual leave are recognised when they accrue to employees and an accrual is made for the estimated liability for annual leave as a result of services up to the balance sheet date. The accrual relating to annual leave and leave passage is disclosed as a current liability, while that relating to end of service benefits is disclosed as a non-current liability
       
Contributions to a defined benefits plan for Omani employees in accordance with the Omani Social Insurance Scheme, are recognised as an expense in the income statement as incurred.

2.12 Government grants

Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with.  When the grant relates to an expense item, it is recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to the income statements over the expected useful life of the relevant asset by equal annual instalments.

2.13 Trade and other payables

Liabilities are recognised for amounts to be paid for goods and services received, whether or not billed to the company.

2.14  Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred.  Borrowings are subsequently stated at amortised cost, any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

2.15  Income tax

Income tax on the results for the year comprises current and deferred tax.  Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

payable in respect of previous years.

Deferred tax liability 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.  The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted 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 the unused tax losses and credits can be utilised.  Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred income tax assets and liabilities are offset as there is a legally enforceable right to offset these in Oman.

3    Financial risk management 

3.1 Financial risk factors

The company’s activities expose it to a variety of financial risks including the effects of changes in interest rates and credit risk.  The company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the company.  Risk management is carried out by the management under policies approved by the Board of Directors.

The company has a credit policy in place and exposure to credit risk is monitored on an ongoing basis. The company does not require collateral in respect of financial assets. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. The company manages concentration of its credit risk by monitoring collections within the credit period.  Credit risk on amounts due from related parties is considered minimal as they are not material and mainly due from members of the Board of Directors.

(ii)   Interest rate risk

The company’s borrowings are interest free. 

(iii)  Liquidity risk

In accordance with prudent liquidity risk management, the company’s aim to maintain sufficient cash balances to meet the company’s requirements.

4    Segment information

4.1 Class of business

The company operates in the hotel industry.  The company’s operating revenues arise primarily from operating the Golden Tulip Hotel in Nizwa, the Sultanate of Oman.
           
4.2 Geographical segment

The company operates in the geographical segment of Oman; 100% of sales and resultant debtors (2006 ‑ 100%) are within this geographical segment.

5    Segment reporting revenue

                                                                         30/09/07                                 30/09/06
                                                                        R.O.                                             R.O.
Rooms                                                       412,444                                      324,268       
Food                                                          232,915                                      158,796
Beverages                                                  282,166                                      229,496
Others                                                       212,889                                      150,393
Total  Revenue                                     1,140,414                                       862,953

6  Bank Loans and Overdrafts / Long Term Loans
           
Long term loans represent two interest free loans from the Government of Sultanate of Oman. The first loan represents an interest free loan of RO 1,125,000/- from the government of Sultanate of Oman. The loan was repayable in 10 annual installments of RO 112,500/- each, commencing 1st November 1998, and is secured by registered mortgage of company's assets.  The second loan represents an interest free loan of RO 500,000/- from government of Sultanate of Oman. This loan was also repayable in 10 annual installments of RO 50,000/- each, commencing 24th March 2001.

The company had managed to reschedule installments for both the loans, with the assistance of Ministry of Finance. These two loans sum up to R.O. 470,500/- as on 30th September 07. The outstanding amount payable is : -

                                                                                  30/09/07                  30/09/06
                                                                                     R.O.                         R.O.
Due Within 1 year (Current portion)                             250,500                  225,000
Due after more than 1 year                               220,000                  535,500  
Total                                                                         470,500                 760,500

7    Investments

7.1 Investment in Associates and Subsidiaries

The Company does not have any investment in Associates and Subsidiaries.

7.2 Investment Income

                                                                                             30/09/07        30/09/06
                                                                                                R.O.                R.O.
Interest  Income                                                                   1/-                     21                   
Total                                                                                 1/-                      21     
 

1. Details of Significant Investments

The Company has invested R.O.300,000 /- in short term deposits with National Bank of Abu Dhabhi, Muscat Branch.

1. Related Parties and Holders of 10% of the Company’s Shares

9 Movement in Provisions

9.1 Provisions
         
Provisions for :                             Advances &                Value of                     
                                                      Receivables                Investment                 Total

Opening Balance                               39,426                        NIL                           39,426
Provided during the period       NIL                           NIL                               NIL
(Released )during the period                NIL                           NIL                               NIL  
(Written Off ) during the period            NIL                           NIL                               NIL
____________________________________________________________________
Provision Balance as                                                                                         
on 30th September 2007             39,426                       NIL                                39,426
____________________________________________________________________

The book value of assets before and after provisions :-

Book Value of Assets                  Advances &           Investments                    Total
                                                      Receivables                                                               

Value before provisions                  296,509                     300,000                     596,509

Provision balance as of
30th September 2007                        39,426                        NIL                         39,426
_____________________________________________________________________
Book value of assets                                                           
as on 30th September 2007           257,083                    300,000                     557,083
_____________________________________________________________________

10 Shareholders

10.1 Shareholders who own 10% or more of the company's shares are as follows:-

                                                                          30/09/07                           30/09/06
                                                                              RO                                   RO
Common Share Holders :-          
           

1. Nasser Bin Khamis Al Hashar         223,300 (24.81%)          223,300  (24.81%)        
2. Al Hashar and Company                    195,500 (21.72%)          195,500  (21.72%)
3. ROP -Pension Trust                          145,940 (16.22%)          145,940 (16.22%)

      Total                                               564,740 (62.75%)         564,740  (62.75%)                                        

10.2   Preferred Share Holders :- NIL