P.O. Box 435 Safat Kuwait Tel : (+965) Fax : (+965) / 6 / 7 E.mail :

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1 P.O. Box 435 Safat Kuwait Tel : (+965) Fax : (+965) / 6 / 7 E.mail : admin@yiacokuwait.com

2 In The Name Of Allah

3 Sabah Al Ahmed Al Sabah Amir Of The State Of Kuwait Nawaf Al Ahmed Al Sabah Crown Prince Of The State Of Kuwait Jaber Al Moubarak Al Sabah The Prime Minister Of The State Of Kuwait

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6 Our Vision To serve as Focal Point In healthcare services in the state of Kuwait while being the landmark of all Regional Healthcare business relation. Our Mission To be the first choice in our region when it comes to healthcare supplies Representing the largest number of world wide recognized multinational pharmaceutical principals. Providing the highest quality & latest technology in medical equipments business. Being the best healthcare provider in our business entities. Our Values Excellence Leadership We are dedicated for excellence in all our offerings and services. In the market we seek to maintain our leading position and role models. Improvement Stand still is unacceptable; we improve whenever it serves our Innovation customers, patients and colleagues. Professionalism We believes in efficient processes, in structures, and in systematic analyses when dealing with each other internally, with our market partners, and with our competitors. Honesty When dealing with the market, we strive for transparency and open exchange. International If necessary, we have no problem in going the extra mile or Business even on detour; not only for our principals and patients but also for our colleagues, our subordinates, and our superior. Flexibility Whenever there is a better way, we make the effort and try to take it. Relationship Trust is the basis of our business; we prefer long term orientation when developing relationship and net works. Organization Learning organization as hard as we may try, we know that we can always do even better; progress is improvement which has been achieved.

7 Overview Yiaco Medical Company (YIACO), Yusuf Ibrahim Alghanim & Co., was incorporated as a Kuwaiti W.L.L. Company in 1969 with a capital of 2 Million at an aim to market multinational research based pharmaceutical manufacturers, medical supplies and other health care services in Kuwait. In 2001, the company was bought by The Securities House and became known as YIACO Medical Company that reflects the abbreviation for the name of Yusuf Ibrahim Alghanim & Company. YIACO was listed on the Kuwait Stock Exchange in November 2007 and currently has a paid- up capital of Million divided into 165 million shares. The principal activity of the company is focused on sales, marketing and distribution of health care products that includes pharmaceuticals, skincare, veterinary, Medical and Dental Equipments. In addition to the completion of a modern development in our field and enter the supply of medical services and assistance to government hospitals YIACO, currently represents more than 98 top diversified multinational researched based companies such as Sanofi Aventis, GSK, Schering, Pfizer, Merck, Abott, Bayer, Intervet, Roche, Philips, Johnson & Johnson, Astra Zenica which was acquired recently and many more. Meanwhile the company owns & provides superior health services through its largest chain of 30 pharmacies in different areas in Kuwait. The top management has clearly indicated that it is committed to work on the defined future strategy, focus on the core activities. Further, a move to support its expansion plans, currently the company runs its business in three countries, Egypt, Kuwait and UAE through its subsidiaries where the group has influential interest in equity stake. Also to mark its presence in the Home Care Services, the company acquired 100% stake in Al Raya Health Care Company W.L.L. during After listing on KSE, the management has given utmost attention to improving the operations in order to increase efficiency. This required tremendous and continuous effort on the part of the management during 2009, 2011 and One of the most important undertakings of the company in 2009, 2010 & 2011 is strategy implementation, which includes following through the growth path, improving performance, and focusing on the prospects of increasing profitability. This was achieved with the cooperation of a foreign consultancy company. Most of the personnel also participated in determining the objectives, growth and directions of the company, It has reviewed its activities and made very important decisions that improved performance and efficiency, The management has undertaken an organizational restructuring and, as a result, hired new employees in accordance with the professional qualifications required by company standards.

8 This was done to support the continuous growth of its operations and increase its competitiveness in the field of medical services. The work in progress is on the plan to direct the company operations, reevaluate its activities, analyze overhead costs and reduce operating expenses. All these utilized the company s efforts in 2010 & Another work in progress is improving the IT infrastructure to address the growing need of the company for a reliable management information system and improving the efficient warehousing and logistics services,the management is working on the preparation and maintenance of written standard policies and operating procedures as well as control and administrative procedure with cooperation of internal auditor, When these have been completed, staff will be trained to extent necessary to understand and apply them, The management is also restructured and reorganized the finance department including documenting accounting policies, procedures and control which is still under process. The company is also striving to expand its presence in the local market by developing new services through acquiring new international agencies and new technologies according to the need of the Kuwaiti community. And the company has a positive step by moving its offices to new headquarters in the Salmiya area they wish for change, renewal, and expansion desired by the administration and the different sections.

9 Contents Agenda of the ordinary General Assembly Board of Directors Report of the Board of Directors Independent auditors report Consolidated income statement Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement cash flow statement Consolidated statement of changes in equity Notes to the consolidated financial statements

10 The agenda of the Extraordinary General Assembly YIACO Medical Co. (Kuwaiti Shareholding Company) For the financial year ended on 2013/12/31 First: Increasing the company s capital from 17,325,000 (Seventeen million and three hundred and twenty-five thousand Kuwaiti dinars) by 866,250 to become 18,191,250 (Eighteen Million and one hundred and ninety-one thousand two hundred and fifty Kuwaiti Dinars) through the distribution of bonus shares for the ended financial year on 31/12/2013 (by 5 shares for every one hundred shares) distributed to 181,912,500 shares (one hundred and eighty-one million nine hundred and twelve thousand and five hundred shares) with a value of 100 fils per share (one hundred fils ) and all the shares are in cash, for the registered shareholders on the previous business day to the day of price adjustment per share in accordance with Article I of the decision of market Committee No. 1 of 2013 issued by the Kuwait Stock Exchange, which states, Second : bonus shares distribution: share price shall be adjusted after three days on the market and following the market receiving a written notification from the Board of Directors regarding the completion of the procedures for the month in relation to the decision of the Extraordinary General Assembly for announcing the distribution of bonus shares for the registered shareholders in the records of the company as of the previous business day to the day of share price adjustment. Second: Amendment of Article (6) of the Memorandum of Association and Article (5) of the Statute as follows: The current text of Article (6) of the Memorandum of Association and Article (5) of the Statute The company s capital amounted: 3,500,000 (Three million and five hundred thousand dinars distributed over 35 Thirty-five million shares, the value is 100 fils per share and all of the in kind shares. Under issued memorandum by the Department of joint stock companies No. 345/2013 dated on the basis of the decision of the Extraordinary General Assembly meeting held on It has approved the following: Raising the capital to ,000 (Seventeen million and three hundred and twenty five thousand Kuwaiti Dinars) distributed over 173,250,000 shares (One hundred and seventy three million two hundred and fifty thousand shares) the value is 100 fils per share (one hundred fils). It belongs to registered shareholders in the company records at the date of the General Assembly Taking into consideration that the increase in capital resulting from the distribution of bonus shares (by 5 shares for each 100 shares) The proposed text of Article (6) of the Memorandum of Association and Article (5) of the Statues: The proposed text: Increasing the capital from 17,325,000 (Seventeen million and three hundred and twenty-five thousand Kuwaiti dinars) by 866,250 to become 18,191,250 (Eighteen million and one hundred and ninety-one thousand two hundred and fifty Kuwaiti Dinars) through the distribution of bonus shares for the financial year ended on 31/12/2013 by (5 shares for each one hundred shares) distributed to 181,912,500 shares (one hundred and eighty-one million nine hundred and twelve thousand and five hundred shares) the value is 100 fils per share (One hundred fils). All shares are cash after the approval of the specified authorities. Third: The proposed amendments to the Statute of YIACO Medical Co. are according to the provisions of Companies Act and the Executive Regulations.

11 The agenda of the Extraordinary General Assembly YIACO Medical Co. (Kuwaiti Shareholding Company) For the financial year ended on 2013/12/31 1 Hearing the report of the Board of Directors regarding the financial year ended on /12/ and approving it. 2 Hear auditors report for the financial year ended on /12/ and approving it. 3 Hearing the report of the legitimate observer. 4 Hearing the report of sanctions and irregularities that have been imposed on the company by the regulatory authorities for the financial year ended on /12/. 5 Accreditation of the balance sheet and profit and loss accounts for the financial year ended on /12/. 6 Accreditation of members of the Board of Directors rewards, as well as rewards of board committees for Approving the proposal of the Board to distribute bonus shares to shareholders of 5% from the capital with amount of (8,662,500 shares) for the registered shareholders in the records of the company as of the previous business day to the day of price adjustment per share in accordance with Article I of the decision of the Market Committee No. 1 of 2013 issued by the Kuwait Stock Exchange, which provides for the Second: The bonus shares : share price shall be adjusted after three days on the market and following the market receiving written notification from the Board of Directors regarding the completion of the procedures of the month in relation to the decision of the Extraordinary General Assembly for announcing the distribution of bonus shares for the registered shareholders in the records of the company as of the previous business day to the day of share price adjustment. 8 Approval of the company s dealings with related parties. 9 Disclaiming the members of the board and clearing all their legal financial liabilities for the financial year ended on /12/. 10 Appointing or re-appointing the legitimate observer. 11 Appointing or re-appointing company auditors for the financial year ended on /12/ and authorizing the Board of Directors to assign their fees.

12 Board of Directors Mr. Nafel Mohammad Eisa Al Hathal Chairman Mr. Jasem Bader Yusef Al Majed Vice Chairman Dr. Ershaid Abdulhadi AlHouri Board Director Mr. Abdulkarim Ali Mubarak Board Director Mr. Abdullah Fouad Al Thaqeb Board Director Mr. Hamad Khaled Al Raqam Board Director Mr. Dharar Al Dakhil Board Director

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14 Report of the Board of Directors for the financial year Ended on December 2013,31 Dear Shareholders On behalf of the Board of Directors, it is my pleasure to welcome you to the General Assembly of YIACO Medical Company; also I am honored to put the annual report for the fiscal year ended December 31, 2013 between your hands praying the Almighty God to guide us all to His obedience. The year of 2013 was another year full of fluctuations and political economic changes that took place in many countries of the region, which was the product of a continuing fear among investors and the continued volatility in the capital markets. In spite of the negative ups and downs, and thanks first and foremost to the Almighty God and second, to the tireless efforts of the integrated team, YIACO Medical Company was able to exceed these difficulties and maintain leadership in the medical corporate sector, especially in the medical field of pharmaceuticals to prove and confirm that it is the best and strongest company among the medical sector companies operating in Kuwait. The company has achieved thanks to the Almighty in 2013, an increase in the value of assets by 13.5% which amounted to 96 million dinars compared to 2012 (84.7 million dinars), also the company achieved in 2013 an increase in the percentage of sales equivalent to 19.8%, which reached 115 million dinars compared to sales in 2012 (96 million dinars), and despite of this increase, there was a decrease in the company s profits by 28.5% which amounted to 3.6 million Kuwaiti dinars compared to 2012 (5 million dinars), also earnings per share decreased by 28.68% which amounted to fils per share, compared with 2012 (29.11 fils per share) This decrease was a result of the difficult challenges faced by the company in light of the unstable market conditions, as well as for the company taking some necessary provisions and absorbing expenses beyond its control in order to uphold and respect the principles of disclosure and transparency. In addition, we would like indicate that the company has been internally restructured, with some departments and divisions canceled and merged to save costs and to improve the level of communication between divisions and departments of the company in order to move and respond quicker than ever before to the requirements of the customers and partners, and to eliminate the bureaucracy that affected the performance of the company previously. Also, there are new investment decisions that have been made, such as the establishment of new medical centers and new Point of Sale outlets within and outside the State of Kuwait in order to avoid the risk of focused activity and to face any changes or challenges the future may hold. We, at YIACO Medical Company, look forward to a better tomorrow, God willing, and a promising future full of achievements and successes; accordingly, we have assessed all the weaknesses and strengths of the company and evaluated all the risks and investment opportunities, taking into account the continued application of the strategic plan of the company after the addition of some necessary adjustments to adapt with the current changes and developments, whereas new resources have been added to the company including young Kuwaiti leaders that will hopefully have a larger role in the leadership of the company in order to overcome the above-mentioned difficulties as well as in elevating the

15 level of services provided by the company. YIACO Medical Company is also studying new opportunities within the company, particularly in the field of medical care that we continue to see as holding promising investment opportunities in Kuwait, therefore we look forward to the inclusion of new foreign agencies in the field of pharmaceuticals and medical equipment; thus we are currently studying some of latest, modern and most innovative products that adhere to the company s rules, regulations and specifications set by us to always select the best for the Kuwaiti society; while working diligently to make sure these new innovations have a positive impact on the economic and financial performance of the company in the near future, God willing. I would also like to note that we have actually begun the gradual application of the governing rules of companies, which was released by the Capital Markets Authority on through the development of new policies and making the necessary adjustments to the inner regulations of the company in order for better harmonization of the laws and emerging legislation from the governing rules of companies. We are also in constant and continuous contact with the responsible regulatory authorities to provide periodic reports required for the inquiry and query about any new interpretations or any subsequent memoranda on such legislation, in which we are very confident and optimistic that these laws better serve trade and investment in Kuwait. We, with the help of God, are optimistic about the year 2014 and we have the intention and will to improve the operational performance of the company and are determined to provide new solutions to increase sales opportunities and investments for the company and optimal utilization of available resources; as we will harness all our capabilities to support and develop our human resources in all categories, for that they are our main capital asset while continuing our full commitment to our customers, shareholders and the communities we serve. Finally, I would like to thank all of our business partners towards our commercial development for their confidence and their interaction with us and our shareholders for their sound vision, as well as our esteemed staff and administrators for adopting our system of institutional work, which is based on high professional ethics and dedicated hard work with complete transparency and loyalty to the institution not to the individuals. Hence, we renew our commitment to continue working together for a better future. We ask God to guide and help us in our endeavors; Peace, mercy and blessings of God upon you Mr. Nafel Mohammad Eisa Nafel Mohammad Eisa Al Hathal CHAIRMAN OF THE BOARD

16 Independent auditors report To the shareholders of YIACO Medical Company - KPSC Kuwait Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of YIACO Medical Company KPSC (the Parent Company ) and its subsidiaries (Collectively the Group ), which comprise the consolidated statement of financial position as at 31 December 2013, and the consolidated statements of profit or loss, statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity s preparation and fair presentation of the consolidated 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 policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

17 Independent auditors report Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31 December 2013, and their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards. Report on Other Legal and Regulatory Matters In our opinion, proper books of account have been kept by the Parent Company and the consolidated financial statements, together with the contents of the report of the Parent Company s board of directors relating to these consolidated financial statements, are in accordance therewith. We further report that we obtained all the information and explanations that we required for the purpose of our audit and that the consolidated financial statements incorporate all information that is required by the Companies Law No. 25 of 2012 and by the Parent Company s articles and memorandum of associations, as amended, that an inventory was duly carried out and that, to the best of our knowledge and belief, no violations of the Companies Law No. 25 of 2012 nor of the Parent Company s articles and memorandum of associations, as amended, have occurred during the year that might have had a material effect on the business or financial position of the Parent Company. WALEED A. AL OSAIMI LICENCE NO. 68-A OF ERNST & YOUNG AL AIBAN, AL OSAIMI & PARTNERS Abdullatif M. Al-Aiban (CPA) (LICENCE NO. 94-A) OF GRANT THORNTON AL-QATAMI, AL-AIBAN & PARTNERS 26 March 2013 Kuwait

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20 Consolidated statement of profit or loss Note Year ended 31 Dec Year ended 31 Dec Sales 8 115,282,085 96,206,605 Cost of sales (92,497,257) (74,127,673) 22,784,828 22,078,932 Gross profit Other operating income 82,047 93,508 Distribution costs (5,579,155) (4,141,373) Administrative expenses (12,803,094) (12,314,593) Allowance for bad and doubtful debts 17 (290,004) (285,007) Profit from operating activities 4,194,622 5,431,467 Loss on disposal of property, plant, equipment and intangible assets (1,539) (1,548) Share of results of associate , ,771 Unrealised loss on investments carried at fair value through profit or loss (150,920) (43,645) Finance costs (1,016,654) (833,363) Profit for the year before income tax 4,005,849 5,412,682 Income taxes for overseas subsidiaries (83,475) (44,574) Profit before contribution to Kuwait Foundation for the Advancement of Sciences (KFAS), National Labour Support Tax (NLST), Zakat and Directors remuneration, 3,922,374 5,368,108 Contribution to KFAS (25,243) (39,508) Provision for NLST (126,659) (158,295) Provision for Zakat (40,863) (54,720) Directors remuneration (105,000) (49,000) Profit for the year 9 3,624,609 5,066,585 Attributable to: Owners of the Parent Company 3,596,205 5,043,575 Non-controlling interests 28,404 23,010 3,624,609 5,066,585 Basic and diluted earnings per share attributable to the owners of the Parent Company Fils Fils The notes set out on pages 8 to 42 form an integral part of this consolidated financial statements.

21 Consolidated statement of comprehensive income Year ended 31 Dec Year ended 31 Dec Profit for the year 3,624,609 5,066,585 Other comprehensive income: Items to be reclassified to profit or loss in subsequent periods Exchange differences arising on translation of foreign operations (119,432) (27,839) Total other comprehensive income (119,432) (27,839) Total comprehensive income for the year 3,505,177 5,038,746 Total comprehensive income attributable to: Owners of the Parent Company 3,494,647 5,020,999 Non-controlling interests 10,530 17,747 3,505,177 5,038,746 The notes set out on pages 8 to 42 form an integral part of this consolidated financial statements.

22 Consolidated statement of financial position Note Year ended Year ended 31 Dec Dec Assets Non-current assets Property, plant and equipment 11 7,110,306 8,229,401 Inventory assigned to customers ,426 Intangible assets 13 2,763,799 1,067,501 Investment in associates 14 8,447,868 7,467,528 Investments carried at fair value through profit or loss , ,180 Available for sale investments 79,380 78,120 19,222,100 17,836,156 Current assets Inventories 16 26,485,812 24,816,169 Accounts receivable and prepayments 17 44,691,486 33,337,627 Bank balances and cash 5,751,180 8,737,537 76,928,478 66,891,333 Total assets 96,150,578 84,727,489 Equity and liabilities Equity Share capital 18 17,325,000 16,500,000 Statutory reserve 19 4,111,483 3,722,086 Voluntary reserve , ,622 General reserve , ,472 Foreign currency translation reserve (109,562) (8,004) Retained earnings 11,996,497 11,264,689 Equity attributable to the owners of the Parent Company 34,081,512 32,236,865 Non-controlling interests 205, ,800 Total equity 34,286,842 32,431,665 Non-current liabilities Murabaha payables 20 20, ,748 Employees end of service benefits 21 2,589,237 1,913,390 2,609,439 2,023,138 Current liabilities Accounts payable and accruals 22 24,164,751 25,179,040 Murabaha payables 20 35,089,546 25,093,646 59,254,297 50,272,686 Total liabilities 61,863,736 52,295,824 Total equity and liabilities 96,150,578 84,727,489 Nafel Mohammad Eissa Al Hathal Chairman Dr. Hamed A. Hamadah Chief Executive Officer The notes set out on pages 8 to 42 form an integral part of this consolidated financial statements.

23 Consolidated statement of changes in equity Share capital Statutory reserve Attributable to owners of the Parent Company Voluntary reserve General reserve Foreign currency translation reserve Retained earnings Sub-total Noncontrolling interests Total equity Balance at 1 January ,500,000 3,722, , ,472 (8,004) 11,264,689 32,236, ,800 32,431,665 Issuance of bonus shares (Note 18) 825, (825,000) Dividend paid (Note 18) (1,650,000) (1,650,000) - (1,650,000) Transactions with owners 825, (2,475,000) (1,650,000) - (1,650,000) Profit for the year ,596,205 3,596,205 28,404 3,624,609 Other comprehensive income (101,558) - (101,558) (17,874) (119,432) Total comprehensive income for the year (101,558) 3,596,205 3,494,647 10,530 3,505,177 Transfer to statutory reserve - 389, (389,397) Balance at 31 December ,325,000 4,111, , ,472 (109,562) 11,996,497 34,081, ,330 34,286,842 Balance at 1 January ,500,000 3,187, , ,472 14,572 9,230,624 29,690, ,053 29,867,919 Dividend paid (Note 18) (2,475,000) (2,475,000) - (2,475,000) Transactions with owners (2,475,000) (2,475,000) - (2,475,000) Profit for the year ,043,575 5,043,575 23,010 5,066,585 Other comprehensive income (22,576) - (22,576) (5,263) (27,839) Total comprehensive income for the year (22,576) 5,043,575 5,020,999 17,747 5,038,746 Transfer to statutory reserve - 534, (534,510) Balance at 31 December ,500,000 3,722, , ,472 (8,004) 11,264,689 32,236, ,800 32,431,665 The notes set out on pages 8 to 42 form an integral part of this consolidated financial statements.

24 Consolidated statement of cash flows Note Year ended 31 Dec Year ended 31 Dec OPERATING ACTIVITIES Profit for the year 3,624,609 5,066,585 Adjustments: Depreciation and amortisation 11,13 1,890,156 2,169,522 Provision for employees end of service benefits , ,504 Loss on disposal of property, plant, equipment and intangible assets 1,539 1,548 Unrealised loss on investments carried at fair value through Profit or loss 150,920 43,645 Finance costs 1,016, ,363 Allowance for bad and doubtful debts , ,007 Utilised inventory assigned to customers 12 21,939 3,993 Provision for slow moving and expired items 9 245, ,025 Share of results of associates 14 (980,340) (859,771) Income taxes for overseas subsidiaries 83,475 44,574 7,201,554 8,346,995 Working capital changes: Inventories (1,915,043) (1,057,554) Accounts receivable and prepayments (11,643,863) (8,098,098) Accounts payable and accruals (1,211,265) 396,769 Cash used in operations (7,568,617) (411,888) Employees end of service benefits paid 21 (181,351) (116,459) Income taxes paid of overseas subsidiary paid (83,475) (44,574) Net cash used in operating activities (7,833,443) (572,921) INVESTING ACTIVITIES Proceeds from disposal of property, plant, equipment and intangible assets 311,967 2,485 Purchase of property, plant, equipment and intangible assets (986,001) (1,170,248) Addition to intangible assets (1,802,555) (4,082) Proceeds from disposal of investment carried at fair value through profit or loss - 119,275 Dividend received from associate - 273,012 Net cash used in investing activities (2,476,589) (779,558) FINANCING ACTIVITIES Finance costs paid (854,652) (820,130) Net drawn down of murabaha payable 9,906,354 7,929,448 Dividend paid (1,608,595) (2,475,000) Net cash from financing activities 7,443,107 4,634,318 Net (decrease)/increase in cash and cash equivalents (2,866,925) 3,281,839 Net impact of foreign currency translation adjustments (119,432) (22,056) Cash and cash equivalents at 1 January 8,737,537 5,477,754 Cash and cash equivalents at 31 December 5,751,180 8,737,537 The notes set out on pages 8 to 42 form an integral part of this consolidated financial statements.

25 Notes to the consolidated financial statements 1. Incorporation and activities The Group comprises of YIACO Medical Company KPSC ( the Parent Company ) and its subsidiaries (collectively the Group ) disclosed in Note 7 The Parent Company is a Kuwaiti closed shareholding Company and its shares are listed on the Kuwait Stock Exchange. The Parent Company was incorporated on 15 January 1969 in Kuwait and is governed by the Islamic Sharee a in its activities. The Group is engaged in the import and sale of medical, chemical and dental products and equipments and mainly operates in Kuwait and Egypt. The Companies Law issued on 26 November 2012 by Decree Law no 25 of 2012 (the Companies Law ), which was published in the Official Gazette on 29 November 2012, cancelled the Commercial Companies Law No 15 of The Companies Law was subsequently amended on 27 March 2013 by Law No. 97 of On 29 September 2013, Ministry of Commerce and Industry issued its regulation No. 425/2013 regarding the Executive by-laws of the Companies Law. All existing companies are required to comply with articles of these by-laws within one year from the date of its issuance. The address of the Parent Company s registered office is P.O. Box 435, Safat 13005, State of Kuwait. The consolidated financial statements of the Group for the year ended 31 December 2013 were authorized for issue in accordance with a resolution of the Parent Company s Board of directors on 12 March The general assembly of the shareholders has the power to amend the consolidated financial statements after their issuance. 2. Basis of preparation The consolidated financial statements are prepared under the historical cost convention modified to include the measurement at fair value of investments at fair value through profit or loss and available for sale financial assets. The Group has elected to present the consolidated statement of comprehensive income in two statements: the consolidated statement of profit or loss and a consolidated statement of comprehensive income. The consolidated financial statements are presented in Kuwaiti Dinars () which is the functional and presentation currency of the Parent Company. 3. Statement of compliance The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and applicable requirements of Ministerial Order No. 18 of Changes in accounting policies The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those used in the previous year, except for adoption of new and amended standards discussed below:

26 4. Changes in accounting policies (continued) 4.1 New and amended standards adopted by the Group The Group applies, for the first time, certain standards and amendments that require restatement of previous financial statements. These include IFRS 10 Consolidated Financial Statements, IFRS 13 Fair Value Measurement and amendments to IAS 1 Presentation of Financial Statements. In addition, the application of IFRS 12 Disclosure of Interest in Other Entities has resulted in additional disclosures in the annual consolidated financial statements. Several other new standards and amendments apply for the first time in However, they do not impact the annual consolidated financial statements of the Group or the interim consolidated financial statements of the Group. The nature and the impact of each new standard/amendment is described below: Standard Effective for annual periods beginning IAS 1 Presentation of Financial Statements amendment 1 July 2012 IFRS 10 Consolidated Financial Statements and IAS 27 Separate Financial Statements 1 January 2013 IFRS 11 Joint Arrangements and IAS 28 Investments in Associates and Joint Ventures 1 January 2013 IFRS 12 Disclosure of Interests in Other Entities 1 January 2013 IFRS 13 Fair Value Measurement 1 January 2013 IFRS 7 Financial Instruments: Disclosures amendments 1 January 2013 Annual Improvements January 2013 IAS 1 Presentation of Financial Statements The amendment to IAS 1 requires entities to group other comprehensive income items presented in the consolidated statement of comprehensive income based on those: Potentially reclassifiable to consolidated statement of profit or loss in a subsequent period, and That will not be reclassified to consolidated statement of profit or loss subsequently. The amendments to IAS 1 changed the current presentation of the consolidated statement of comprehensive income of the Group; however the amendment affected presentation only and had no impact on the Group s financial position or performance. IFRS 10 Consolidated Financial Statements and IAS 27 Separate Financial Statements IFRS 10 establishes a single control model that applies to all entities including special purpose entities. IFRS 10 replaces the parts of previously existing IAS 27 Consolidated and Separate Financial Statements that dealt with consolidated financial statements and SIC 12 Consolidation Special Purpose Entities. It revises the definition of control together with accompanying guidance to identify an interest in a subsidiary. To meet the definition of control in IFRS 10, all nine criteria must be met, including: (a) an investor has power over an investee; (b) the investor has exposure, or rights, to variable returns from its involvement with the investee; and (c) the investor has the ability to use its power over the investee to affect the amount of the investor s returns. These new requirements have the potential to affect which of the Group s investees are considered to be subsidiaries and therefore change the scope of consolidation. However, the requirements and procedures of consolidation and the accounting for any non-controlling interests and changes in control remain the same. IFRS 10 did not change the classification (as subsidiaries or otherwise) of any of the Group s existing investees.

27 4. Changes in accounting policies (continued) 4.1 New and amended standards adopted by the Group (continued) IFRS 11 Joint Arrangements and IAS 28 Investments in Associates and Joint Ventures IFRS 11 supersedes IAS 31 Interests in Joint Ventures (IAS 31). It aligns more closely the accounting by the investors with their rights and obligations relating to the joint arrangement. In addition, IAS 31 s option of using proportionate consolidation for joint ventures has been eliminated. IFRS 11 now requires the use of the equity accounting method, which is currently used for investments in associates. As a consequence of the new IFRS 11, IAS 28 brings investments in joint ventures into its scope, however, the equity accounting methodology under IAS 28 remains unchanged. IFRS 12 Disclosure of Interests in Other Entities IFRS 12 integrates and makes consistent the disclosure requirements for various types of investments including subsidiaries, joint arrangements, associates and unconsolidated structured entities. It introduces new disclosure requirements about the risks to which an entity is exposed from its involvement with structured entities. IFRS 12 disclosures are provided in Note 7 to 14. IFRS 13 Fair Value Measurement IFRS 13 does not affect which items to be fair valued, but clarifies the definition of fair value and provides related guidance and enhanced disclosures about fair value measurements. The scope of IFRS 13 is broad and it applies for both financial and non-financial items for which other IFRSs require or permit fair value measurements or disclosures about fair value measurements except in certain circumstances. The application of IFRS 13 has not materially impacted the fair value measurements carried out by the Group. IFRS 13 applies prospectively for annual periods beginning on or after 1 January Its disclosure requirements need not be applied to comparative information in the first year of application. The Group has however included as comparative information the IFRS 13 disclosures that were required previously by IFRS 7, Financial Instruments; Disclosures. The Group has applied IFRS 13 for the first time in the current year, see Note 28. IFRS 7 Financial Instruments: Disclosures Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7) Qualitative and quantitative disclosures have been added to IFRS 7 Financial Instruments: Disclosures (IFRS 7) relating to gross and net amounts of recognised financial instruments that are (a) set off in the statement of financial position and (b) subject to enforceable master netting arrangements and similar agreements, even if not set off in the statement of financial position. The required disclosures are required to be provided retrospectively. The adoption of this amendment did not have any significant impact on the financial position or performance of the Group. Annual Improvements (the Annual Improvements) The Annual Improvements (the Annual Improvements) made several minor amendments to a number of IFRSs. The amendments relevant to the Group are summarised below: Clarification of the requirements for opening statement of financial position (amendments to IAS 1): Clarifies that the appropriate date for the opening statement of financial position ( third balance sheet ) is the beginning of the preceding period (related notes are no longer required to be presented) Addresses comparative requirements for the opening statement of financial position when an entity changes accounting policies or makes retrospective restatements or reclassifications, in accordance with IAS 8.

28 4. Changes in accounting policies (continued) 4.1 New and amended standards adopted by the Group Annual Improvements (the Annual Improvements) (continued) Clarification of the requirements for comparative information provided beyond minimum requirements (amendments to IAS 1): Clarifies that additional financial statement information need not be presented in the form of a complete set of financial statements for periods beyond the minimum requirements Requires that any additional information presented should be presented in accordance with IFRS and the entity should present comparative information in the related notes for that additional information. Tax effect of distribution to holders of equity instruments (Amendments to IAS 32): Addresses a perceived inconsistency between IAS 12 Income Taxes (IAS 12) and IAS 32 Financial Instruments: Presentation (IAS 32) with regards to recognising the consequences of income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction Clarifies that the intention of IAS 32 is to follow the requirements in IAS 12 for accounting for income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction. The amendment did not have an impact on the consolidated financial statements for the Group, as there are no tax consequences attached to cash or non-cash distribution. 4.2 IASB Standards issued but not yet effective At the date of authorisation of these consolidated financial statements, certain new standards, amendments and interpretations to existing standards have been published by the IASB but are not yet effective, and have not been adopted early by the Group. Management anticipates that all of the relevant pronouncements will be adopted in the Group s accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Group s financial statements is provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Group s financial statements. Standard Effective for annual periods beginning IAS 32 Financial Instruments: Presentation amendments 1 January 2014 IAS 36 Impairment of Assets- Amendments 1 January 2014 IAS 39 Financial Instruments: Recognition and Measurement 1 January 2014 IFRS 9 Financial Instruments 1 January 2015 IFRIC 21 Levies 1 January IAS 32 Financial Instruments: Presentation - Amendments The amendments to IAS 32 add application guidance to address inconsistencies in applying IAS 32 s criteria for offsetting financial assets and financial liabilities in the following two areas: the meaning of currently has a legally enforceable right of set-off that some gross settlement systems may be considered equivalent to net settlement.

29 4. Changes in accounting policies (continued) 4.2 IASB Standards issued but not yet effective (continued) IAS 32 Financial Instruments: Presentation Amendments (continued) The amendments are effective for annual periods beginning on or after 1 January 2014 and are required to be applied retrospectively. Management does not anticipate a material impact on the Group s consolidated financial statements from these amendments IAS 36 Impairment of Assets Amendments The amendments to IAS 36 reduces the circumstances in which the recoverable amount of assets or cash-generating units is required to be disclosed, clarify the disclosures required, and to introduce an explicit requirement to disclose the discount rate used in determining impairment (or reversals) where recoverable amount (based on fair value less costs of disposal) is determined using a present value technique. The amendments are applicable to annual periods beginning on or after 1 January Management does not anticipate a material impact on the Group s consolidated financial statements from these amendments IAS 39 Financial Instruments: Recognition and Measurement- Amendments Under the IAS 39 amendments Novation of Derivatives and Continuation of Hedge Accounting there would be no need to discontinue hedge accounting if a hedging derivative was novated, provided certain criteria are met. The amendments are effective for annual periods beginning on or after 1 January 2014, with earlier application being permitted IFRS 9 Financial Instruments The IASB aims to replace IAS 39 Financial Instruments: Recognition and Measurement (IAS 39) in its entirety with IFRS 9. To date, the chapters dealing with recognition, classification, measurement and derecognition of financial assets and liabilities, and hedge accounting have been issued. Chapter dealing with impairment methodology is still being developed. The effective date for the entire standard will be determined after completion of the new impairment model. Further, in November 2013, the IASB made limited modifications to IFRS 9 s financial asset classification model to address application issues. Although earlier application of this standard is permitted, the Technical Committee of the Ministry of Commerce and Industry of Kuwait decided on 30 December 2009, to postpone this early application till further notice. The group s management have yet to assess the impact of this new standard on the group s consolidated financial statements. Management does not expect to implement IFRS 9 until it has been completed and its overall impact can be assessed IFRIC 21 Levies IFRIC 21 identifies the obligating event for the recognition of a liability as the activity that triggers the payment of the levy in accordance with the relevant legislation. The Interpretation clarifies that economic compulsion and the going concern principle do not create or imply that an obligating event has occurred. IFRIC 21 provides the following guidance on recognition of a liability to pay levies, a) the liability is recognised progressively if the obligating event occurs over a period of time, and b) if an obligation is triggered on reaching a minimum threshold, the liability is recognised when that minimum threshold is reached. The Group is not currently subjected to any significant levies so this amendment is not expected to have a significant impact on the Group s financial statements. IFRIC 21 is effective for annual periods beginning on or after 1 January 2014.

30 5. Summary of significant accounting policies The significant accounting policies and measurements bases adopted in the preparation of the consolidated financial statements are summarised below: 5.1 Basis of consolidation The Group financial statements consolidate those of the parent company and all of its subsidiaries. Subsidiaries are all entitities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and they are deconsolidated from the date that control ceases. All subsidiaries have a reporting date of 31 December. The details of the significant subsidiaries are set out in Note 7 to the consolidated financial statements. All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a Group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the date the Group gains control, or until the date the Group ceases to control the subsidiary, as applicable. Non-controlling interests, presented as part of equity, represent the portion of a subsidiary s profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests. Losses within a subsidiary are attributed to the non-controlling interests even if that results in a deficit balance. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the group loses control over a subsidiary, it: Derecognizes the assets (including goodwill) and liabilities of the subsidiary Derecognizes the carrying amount of any non-controlling interests Derecognizes the cumulative translation differences, recorded in equity Recognizes the fair value of the consideration received Recognizes the fair value of any investment retained Recognizes any surplus or deficit in profit or loss Reclassifies the parent s share of components previously recognized in other comprehensive income to profit or loss or retained earnings, as appropriate, as would be required if the Group has directly the related assets or liabilities. disposed of 5.2 Business combinations The Group applies the acquisition method in accounting for business combinations. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred. For each business combination, the acquirer measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree s identifiable net assets.