His Majesty King Hamad bin Isa Al Khalifa. His Royal Highness Prince Khalifa bin Salman Al Khalifa

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2 His Royal Highness Prince Khalifa bin Salman Al Khalifa The Prime Minister His Majesty King Hamad bin Isa Al Khalifa King of the Kingdom of Bahrain His Royal Highness Prince Salman bin Hamad Al Khalifa The Crown Prince and Deputy Supreme Commander Delmon Poultry Company 2012 Annual Report 1

3 2 Delmon Poultry Company 2012 Annual Report

4 Contents VISION 04 Mission 05 General Information 06 BOARDS OF DIRECTORS 07 BOARDS OF DIRECTORS REPORT 08 CORPORATE Governance Report 11 OrganizATION Structure 21 Financial statements INDEPENDENT AUDITORS REPORT TO THE SHAREHOLDERS 24 STATEMENT OF FINANCIAL POSITION 25 INCOME STATEMENT 26 STATEMENT OF COMPREHENSIVE INCOMe 27 STATEMENT OF CHANGES IN EQUITY 28 STATEMENT OF CASH FLOWS 30 NOTES TO THE FINANCIAL STATEMENT 31 Delmon Poultry Company 2012 Annual Report 3

5 4 Delmon Poultry Company 2012 Annual Report VISION To become the pioneers in the poultry industry through the continuous development of the level of production and services by adopting quality standards to reach customer satisfaction.

6 MISSION Provide national Products with high quality standards in line with the international norms and standards. Delmon Poultry Company 2012 Annual Report 5

7 GENERAL INFORMATION Commercial registration Board of directors Executive COMMITTee Audit COMMITTee Governance COMMITTee NOMINATION & Remuneration COMMITTee General MANAGer Principal bankers Auditors Share registrar (Bahrain joint stock company) Yousuf Saleh Al Saleh (Chairman) Abdul Nabi Nasser Salman (Vice chairman) Jaffar Habib Ahmed Abdul Rahman Mohamed Jamsheer Abdulredha Mohamed Al Daylami Abdulhussain Khalil Dewani Ibrahim Abdali Al Daissi Jaffar Mohamed Ali Al Dhaif Talal Mohamed Abdulla Al Mannai Yousuf Saleh Al Saleh (Chairman) Abdul Nabi Nasser Salman (Vice chairman) Jaffar Habib Ahmed Abdul Rahman Mohamed Jamsheer Abdulredha Mohamed Al Daylami (Chairman) Abdulhussain Khalil Dewani Ibrahim Abdali Al Daissi Talal Mohamed Abdulla Al Mannai Talal Mohamed Abdulla Al Mannai (Chairman) Abdulredha Mohamed Al Daylami Abdulhussain Khalil Dewani Ibrahim Abdali Al Daissi Abdul Rahman Mohamed Jamsheer (Chairman) Abdul Nabi Nasser Salman Jaffar Habib Ahmed Abdul Karim Ismaeel Al Alawi Ahli United Bank Bahrain Islamic Bank Bank of Bahrain and Kuwait National Bank of Bahrain KPMG fakhro Karvy Computershare w.l.l Offices and plants Administration and chicken processing plant - Hamala: Telephone , Fax Feed Mill - Mina Salman: Telephone , Fax Hatchery - Al-Buhair: Telephone , Fax PO Box 20535, Manama, Kingdom of Bahrain depco@batelco.com.bh Website: 6 Delmon Poultry Company 2012 Annual Report

8 BOARD OF DIRECtoRS Yousuf Saleh Al Saleh Chairman Abdul Nabi Nasser Salman Vice Chairman Jaffar Habib Ahmed Board Member Abdul Rahman Mohamed Jamsheer Board Member Abdulredha Mohamed Al Daylami Board Member Abdulhussain Khalil Dewani Board Member Ibrahim Abdali Al Daissi Board Member Jaffar Mohamed Ali Al Dhaif Board Member Talal Mohamed Abdulla Al Mannai Board Member Delmon Poultry Company 2012 Annual Report 7

9 BOARD OF DIRECtoRS REPORT For the year ended 31 December 2012 YousUf Saleh Al Saleh CHAIRMAN Delmon Poultry Company was able to achieve good results in 2012 despite big challenges resulted from unprecedented increase in prices of primary raw material internationally. Despite difficult circumstances, the Company achieved net profit of BD 1,170,013 in 2012 showing a decrease of 0.08% over BD 1,170,937 net profits in This has an impact in earning per share to remain steady in 2012 at 38 fils same as last year. The following are the financial and operational results achieved across all of the Company s segments: 1. Feedmill Plant: The net loss of Feedmill Plant for after government grant to stabilise the sale price of feeds to broiler chickens farmers- has increased by 40.7% as compared to The result of the Plant in 2012 showed net loss of BD 562,441 (against net loss of BD 399,633 in 2011).This is attributed to the rise in the feed production costs due to the increase in prices of the international raw materials and increase in total quantities of feed sold by 7.3%. In addition, the government grant did not cover the difference between the production costs and the selling prices for subsidised feeds sold to chicken farmers which is under negotiation with respective parties. 2. CHICKen Processing Plant: The net profit of the Chicken processing plant in after the government grant to stabilise sale price of chicken- was BD 1,575,701 (compared to 2011 net profit of BD 1,014,869). This was due to the increase in quantity of chicken sold by 22.3% in 2012 as compared to 2011 and increase in average net weight of processed chicken. 3. CHICKs HatCHery: The hatchery operations in 2012 showed net loss of BD 315,962 (compared to net loss of BD 424,274 in 2011) with a decrease by 25.5% as compared to This is attributed to the decrease in prices of hatching eggs purchased used for chicks production and increase in hatchability percentage above the contracted percentage which has resulted a decrease in the average production costs. 4. Investments: The Company achieved a net profit of BD 466,948 in 2012 (2011 : net profit of BD 972,587) with a decrease in net investment profits by BD 505,639 which pertains to the following: Decrease in share in profits of the associate company - Bahrain Livestock Company B.S.C (closed) by BD 465,629 in 2012 as compared to 2011 due to suspension of importing livestock from Australia and continuous focus of the company to import chilled meat by air to meet the demand of the local market. 8 Delmon Poultry Company 2012 Annual Report

10 On behalf of myself and the Board of Directors, it is my pleasure to present to you the annual report of Delmon Poultry Company B.S.C. for the financial year ended 31 December Increase in income from available for sale investments, held to maturity investments and fixed deposits by BD 35,394 in 2012 as compared to Increase in impairment of available for sale investments by BD 75,404 in 2012 as compared to 2011 result of decline in the market value for some investments available for sale. It s worth mentioning that the total investment fair value reserve included under equity reserves of the Company s Financial Position for the year ended 31 December 2012 reached BD 1,699,614. I would like to note that, according to corporate governance, we have announced on 3rd of September 2012 that Bahrain Livestock Company B.S.C (closed) an associate of Delmon Poultry Company with stake of 36.26% may incur losses. The losses cannot be determined at this stage which may reach USD 4 million (for the value of shipment which was not allowed to discharge its load by veterinary authorities in Kingdom of Bahrain) in addition to other legal cases and financial consequences. As the matter is under discussion with respective parties, the Bahrain Livestock Company has not taken any provisions in its financial statements for the year ended 31 December 2012, and the same will be considered in 2013 based on the results reached. Based on the achieved results, the Board of Directors has recommended for the approval of shareholders, the following appropriations: a- Distribute cash dividends of 20% of par value, which is equal to BD 616,226. b- Retain BD 2,590,838 as retained earnings for next year. The Board also recommends approving the payment of BD 90,000 as remuneration to the Board of Directors for the financial year 2012 (2011: BD 90,000) which was already included in the income statement as provision for board of directors remuneration. During the financial year 2012, the amounts paid to the members of the Board of Directors against sitting fees and allowances, which was included in the income statement, BD 46,500 ( 2011 :BD 46,000 ). Delmon Poultry Company 2012 Annual Report 9

11 BOARD OF DIRECtoRS REPORT For the year ended 31 December 2012 In 2012, Delmon Poultry Company has completed phase one of Information Technology upgrade. The strategic plans and aspirations of the Company in 2013 is to complete the study of establishing of parent stock project which is intended to be set up in the Sultanate of Oman with strategic partners from GCC to produce hatching eggs. The formation committee has appointed a consultant to conduct a feasibility study for the project. In addition to, completion of studies related to production activities of Delmon Poultry Company related to rehabilitation or construction of new chicken processing plant, develop and rehabilitate the feedmill plant, increase the production capacity of chick s hatchery to produce oneday old chicks. With regard to the implementation of the Corporate Governance Charter, the Board of Directors approved all the regulations, procedures and documents pertaining to the Charter of Corporate Governance in Moreover, during 2012 the Board of Directors approved the formation of Nomination and Remuneration Committee, as well as Corporate Governance Committee besides the current existing committees (the Executive Committee and the Audit Committee) to meet the requirements of the charter. The Board of Directors continues to enhance implementation of best practice of requirements of Charter of Corporate Governance. I am pleased to express on my behalf and on behalf of the Board of Directors and the shareholders our great appreciation and obligations to His Majesty King Hamad Bin Isa Al Khalifa, The King of Kingdom of Bahrain, His Royal Highness Prince Khalifa Bin Salman Al Khalifa, The Prime Minister and His Royal Highness Prince Salman Bin Hamad Al Khalifa the Crown Prince and Deputy Supreme Commander, may Allah bless them all, for their wise leadership and continued support to the economic development of the Kingdom of Bahrain. We also extend our thanks and appreciation to His Excellency Shaikh Khalid Bin Abdulla Al Khalifa Deputy Prime Minister, Chairman of Ministerial Committee of Service and Infrastructure for his wise guidance to achieve food security in the Kingdom of Bahrain, and to the Ministries and Government organizations for their cooperation and continuous support, in particular to His Excellency the Minister of Industry and Commerce, His Excellency the Minister of Finance and His Excellency the Minister of Municipalities affairs and Urban Planning for their continuous support. Finally, we would like to express our appreciations and thanks to our shareholders and customers for their trust and support they have provided to the company, as well as to the Management and employees of the Company for their commitment loyalty and efforts during 2012, in which we were able collectively to achieve another good year for Delmon Poultry Company which make us optimistic for the future. Yousuf Saleh Al Saleh CHAIRMAN 13 th February Delmon Poultry Company 2012 Annual Report

12 CORPORATE GOVERNANCE REPORT Delmon Poultry Company 2012 Annual Report 11

13 CORPORATE GOVERNANCE REPORT The Board of Directors of Delmon Poultry Company is responsible for the overall supervision of the Company, protecting the rights of its shareholders and adding value to their ownership in the Company. In achieving these goals, the Board is following best practices and regulatory requirements relating to Corporate Governance, in order to reach the highest levels of transparency, integrity and accountability in all transactions as well as commitment to apply State laws, rules established by the regulatory authorities and the Corporate Governance Charter. Appropriate constituent framework has been established by the Board to provide guidance to achieve effective governance of the company, and to promote the implementation of the principle of segregation of duties and responsibilities at the level of the Board of Directors and executive management so that each party is totally aware of tasks and responsibilities and able to carry them properly. The Corporate Governance Charter which was adopted in 2011, included Corporate Governance Guidelines, Corporate Governance Framework, Charter of the Board of Directors, Charter of the Nomination and Remuneration Committee, Charter of the Corporate Governance Committee, Charter of the Executive Committee, Charter of the Audit Committee, Compliance Manual, Disclosure Policy, Code of Ethics, Conflict of Interests Policy, Related Party Transactions Policy, Whistleblower Policy, the Induction Program for the Board of Directors, Board Appraisal Process, Directors Appointment Letter, Succession Plan for Executive Management, and Terms of Reference of the Secretary of the Board and committees. The year 2012 also witnessed the activation of the functions of the Nomination and Remuneration Committee and The Governance Committee as well as enhancing the practices of other Board committees in accordance with the Corporate Governance Charter applied by the company. It is worth mentioning, that given the current number of the Board members (9 members) including two appointed non-independent members and one independent executive member, in addition all elected and appointed members of the Board for a period of three years for the term are ended by 31 December 2012, Delmon Poultry Company discloses the following: 1- Membership in the boards of directors of public shareholding companies: All members are not participating in the membership of more than three boards of directors of public shareholding companies in The Kingdom of Bahrain, with the exception of Mr. Yousuf Saleh Al Saleh who holds membership of four public shareholding companies in the Kingdom of Bahrain, three of them through elections and the fourth company through the appointment by Bahrain Mumtalakat Holding Company B.S.C (Closed) as Chairman of the Board of Directors of Bahrain Flour Mills Company (B.S.C). 2- Membership of the Nomination and Remuneration Committee: Composed of three members, chaired by an independent member and two other non-independent members of the Board of Directors appointed by Social Insurance Organization and General Poultry Company, both of them own more than 10% of the Company s capital. 3- Appointment letters of members of the Board of Directors were not issued as their election and appointment in the Board of Directors for the term came in the Annual General Meeting held on 24 March 2010, in addition to that, all members of the Board of Directors are having excellent professional background and highly experienced. Delmon Poultry Company is seeking to apply optimally all requirements relating to the application of the Corporate Governance Charter issued by the Ministry of Industry and Commerce and the Central Bank of Bahrain. 12 Delmon Poultry Company 2012 Annual Report

14 CORPORATE GOVERNANCE REPORT SHAREHOLDING OF DELMON POULTRY COMPANY: The Shares of Delmon Poultry Company are listed on Bahrain Bourse. The total number of fully paid shares issued is 31,209,277 shares with a nominal value of 100 fils per share. The following table shows a summary of the shareholding structure of Delmon Poultry Company, including shareholders who own 5% or more of the paid-up capital as at 31 December 2012: Shareholders Nationality No. of Shares Holding % Other Shareholders Bahrain 13,587, % Other Shareholders Kuwait 4, % Social Insurance Organization Bahrain 6,002, % General Poultry Company Bahrain 4,576, % General Trading and Food Processing Company Bahrain 3,054, % Abdulhameed Zainal Mohammed Bahrain 2,015, % Fuad Ebrahim Yusuf Al Mutawa Bahrain 1,969, % Total - 31,209, % The following table shows the distribution of shares held by shareholders of Delmon Poultry Company by categories as at 31 December 2012: Categories No. of shares No. of Shareholders Total Outstanding Shares % Less than 1 % 9,614,417 1, % 1 % up to less than 5 % 3,977, % 5 % up to less than 10 % 7,038, % 10 % up to less than 20 % 10,578, % More than 20 % % Total 31,209,277 1, % THE BOARD OF DIRECTORS: The Board of Directors of Delmon Poultry Company consists of nine members, seven members are elected and two other members are appointed representing Social Insurance Organization and General Poultry Company who both own more than 10% of the Company s capital. Each member shall hold, whether elected or appointed, membership for three consecutive years, subject to renewal by re-election and/or appointment in a new term in the Annual General Meeting. The quorum of the meetings of the Board of Directors shall be valid in the presence of five members provided that the Chairman and/or Vice Chairman are among them. Delmon Poultry Company 2012 Annual Report 13

15 CORPORATE GOVERNANCE REPORT The main functions and responsibilities of the Board of Directors of Delmon Poultry Company include the protection of shareholders interests and achieving financial returns on the long run, formulation of general policies and setting the strategic goals and objectives to be achieved, follow-up of the Company affairs to ensure the implementation of agreed plans, monitor the performance of the executive management, approving the financial statements prepared in accordance to the agreed standards which disclose accurately the financial position of the company, ensure that no conflict of interests exist, prevent transactions that may be manipulated by third parties, ensure compliance with laws and regulations, approving capital projects and monitor their implementation and to ensure fair treatment of shareholders. During the Annual General Meeting held on 24 th March 2010 seven members of the Board of Directors were elected for the term for a period of three years ending on 31 December A member representing Social Insurance Organization and another member representing General Poultry Company were appointed as both own more than 10% of the Company s capital. The Board of Directors is composed of members with excellent professional background and highly experienced. There have been no resignations in the Board of Directors or its committees during 2012 and there has been no change in the appointed members of the Board of Directors during The following are disclosures relating to the members of the Board of Directors, including data related to their in the membership boards of directors of public companies: 1- PERSONAL DATA: Members Yousuf Saleh Al Saleh. Independent / Executive. Abdul Nabi Nasser Salman. Non-Independent / Non-Executive. Jaffar Habib Ahmed. Non-Independent / Non-Executive. Abdul Rahman Mohamed Description Chairman of Delmon Poultry Company (B.S.C) Board of Directors. Chairman of Executive Committee of Delmon Poultry Company (B.S.C). Elected for the term by the Shareholders in the Annual General Meeting held on 24 March Joined the membership of Delmon Poultry Company (B.S.C) Board of Directors in Chairman of Bahrain Flour Mills Company (B.S.C) Board of Directors. Vice Chairman of Trafco Group (B.S.C) Board of Directors. Member of Esterad Investment Company (B.S.C) Board of Directors. Vice Chairman of Delmon Poultry Company (B.S.C) Board of Directors. Vice Chairman of Executive Committee of Delmon Poultry Company (B.S.C). Member of Nomination and Remuneration Committee of Delmon Poultry Company (B.S.C). Appointed Member by Social Insurance Organization. Re-Appointed for the term by Social Insurance Organization. Joined the membership of Delmon Poultry Company (B.S.C) Board of Directors in Member of Delmon Poultry Company (B.S.C) Board of Directors. Member of Executive Committee of Delmon Poultry Company (B.S.C). Member of Nomination and Remuneration Committee of Delmon Poultry Company (B.S.C). Appointed Member by General Poultry Company. Re-Appointed for the term by General Poultry Company. Joined the membership of Delmon Poultry Company (B.S.C) Board of Directors in Member of Delmon Poultry Company (B.S.C) Board of Directors. 14 Delmon Poultry Company 2012 Annual Report

16 CORPORATE GOVERNANCE REPORT Abdul Rahman Mohamed Jamsheer. Independent / Non-Executive. Abdulredha Mohamed Al Daylami. Independent / Non-Executive. Abdulhussain Khalil Dewani. Independent / Non-Executive. Ibrahim Abdali Al Daissi. Independent / Non-Executive. Jaffar Mohamed Ali Al Dhaif. Independent / Non-Executive. Talal Mohamed Abdulla Al Mannai. Independent / Non-Executive. Member of Delmon Poultry Company (B.S.C) Board of Directors. Member of Executive Committee of Delmon Poultry Company (B.S.C). Chairman of Nomination and Remuneration Committee of Delmon Poultry Company (B.S.C). Elected for the term by the Shareholders in the Annual General Meeting held on 24 March Joined the membership of Delmon Poultry Company (B.S.C) Board of Directors in Vice Chairman of Khaleeji Commercial Bank (B.S.C) Board of Directors. Member of Esterad Investment Company (B.S.C) Board of Directors. Member of Delmon Poultry Company (B.S.C) Board of Directors. Chairman of Audit Committee of Delmon Poultry Company (B.S.C). Member of Governance Committee of Delmon Poultry Company (B.S.C). Elected for the term by the Shareholders in the Annual General Meeting held on 24 March Joined the membership of Delmon Poultry Company (B.S.C) Board of Directors in Member of Trafco Group (B.S.C) Board of Directors. Member of Delmon Poultry Company (B.S.C) Board of Directors. Member of Audit Committee of Delmon Poultry Company (B.S.C). Member of Governance Committee of Delmon Poultry Company (B.S.C). Elected for the term by the Shareholders in the Annual General Meeting held on 24 March Joined the membership of Delmon Poultry Company (B.S.C) Board of Directors in Vice Chairman of Bahrain National Holding Company (B.S.C) Board of Directors. Member of Delmon Poultry Company (B.S.C) Board of Directors. Member of Audit Committee of Delmon Poultry Company (B.S.C). Member of Governance Committee of Delmon Poultry Company (B.S.C). Elected for the term by the Shareholders in the Annual General Meeting held on 24 March Joined the membership of Delmon Poultry Company (B.S.C) Board of Directors in Member of Delmon Poultry Company (B.S.C) Board of Directors. Elected for the term by the Shareholders in the Annual General Meeting held on 24 March Joined the membership of Delmon Poultry Company (B.S.C) Board of Directors in Member of Delmon Poultry Company (B.S.C) Board of Directors. Member of Audit Committee of Delmon Poultry Company (B.S.C). Chaiman of Governance Committee of Delmon Poultry Company (B.S.C). Elected for the term by the Shareholders in the Annual General Meeting held on 24 March Joined the membership of Delmon Poultry Company (B.S.C) Board of Directors in Delmon Poultry Company 2012 Annual Report 15

17 CORPORATE GOVERNANCE REPORT 2- OWNERSHIP OF DELMON POULTRY SHARES BY THE BOARD OF DIRECTOR MEMBERS: The following table shows the number of shares owned by the members of the Board of Directors in Delmon Poultry Company as at 31 December 2012 compared to the same period of 2011: Members Type 31 December December 2011 No. % No. % Yousuf Saleh Al Saleh Ordinary 319, % 319, % Abdul Nabi Nasser Salman * Ordinary % % Jaffar Habib Ahmed ** Ordinary % % Abdul Rahman Mohamed Jamsheer Ordinary 157, % 157, % Abdulredha Mohamed Al Daylami *** Ordinary 21, % 21, % Abdulhussain Khalil Dewani Ordinary 420, % 420, % Ibrahim Abdali Al Daissi Ordinary 105, % 105, % Jaffar Mohamed Ali Al Dhaif Ordinary 111, % 111, % Talal Mohamed Abdulla Al Mannai Ordinary 262, % 262, % Total Ordinary 1,397, % 1,397, % Total Issued Share Ordinary 31,209, % 31,209, % * Mr. Abdul Nabi Nasser Salman appointed member by Social Insurance Organization, which owns % of the total number of shares of Delmon Poultry Company. ** Mr. Jaffar Habib Ahmed appointed member by General Poultry Company, which owns % of the total number of shares of Delmon Poultry Company, and there are 105,000 shares (representing 0.336%) registered jointly in the name of General Poultry Company / Jaffar Habib Ahmed. *** Mr. Abdulredha Mohamed Al Daylami a total of 105,000 shares (representing 0.336%) registered jointly in the name of the General Trading and Food Processing Company (BSC) / Abdulredha Mohamed Al Daylami. It is worth mentioning, that no shares of Delmon Poultry Company were traded by any member of the Board of Directors during Delmon Poultry Company 2012 Annual Report

18 CORPORATE GOVERNANCE REPORT 3- MEETINGS OF THE BOARD OF DIRECTORS AND ATTENDANCE REGISTER: The Board of Directors meets at least four times during the year. The quorum of the Board meetings is valid in the presence of five members including the Chairman and/or Vice Chairman. In 2012 the Board of Directors held five meetings and attendance of members of the Board of Directors as follows: Members 22 Feb. 9 May 8 Aug. 2 Sept. 4 Nov. % Attended Yousuf Saleh Al Saleh 100 % Abdul Nabi Nasser Salman X 80 % Jaffar Habib Ahmed 100 % Abdul Rahman Mohamed Jamsheer X 80 % Abdulredha Mohamed Al Daylami 100 % Abdulhussain Khalil Dewani X X X 40 % Ibrahim Abdali Al Daissi 100 % Jaffar Mohamed Ali Al Dhaif 100 % Talal Mohamed Abdulla Al Mannai 100 % STANDING COMMITTEES EMANATING FROM THE BOARD OF DIRECTORS: There are four committees established by the Board of Directors, The Executive Committee, the Audit Committee, the Nomination and Remuneration Committee and the Governance Committee. The following are members of the Committees of the Board of Directors, and their roles and responsibilities: 1 - THE EXECUTIVE COMMITTEE: The Executive Committee consists of four members, and the quorum of the Committee is valid if three members are present including the Chairman and/or Vice Chairman. The decisions of the Committee can be passed in writing. The main functions and responsibilities of the Executive Committee are to follow up the implementation of the executive management of their responsibilities with regard to the management of the company, monitoring the implementation of decisions of the Board, managing the investment portfolio of the Company, monitoring the implementation of capital projects approved by the Board of Directors, communicating with ministries and public and private institutions, particularly those related to government subsidy. The following table shows the members and attendance of the meetings of the Executive Committee during 2012: Members Status of Director 14 Feb. 2 May 3 June 20 June % Attended Yousuf Saleh Al Saleh Independent / Executive 100 % Abdul Nabi Nasser Salman Jaffar Habib Ahmed Abdul Rahman Mohamed Jamsheer Non-Independent / Non- Executive Non-Independent / Non- Executive Independent / Non- Executive X 75 % X 75 % 100 % Delmon Poultry Company 2012 Annual Report 17

19 CORPORATE GOVERNANCE REPORT 2 THE AUDIT COMMITTEE: The Audit Committee consists of four members and meets at least four times a year. The main functions and responsibilities of the Audit Committee are to review reports of external auditors on the annual financial statements and quarterly interim statements, review activities and reports of internal auditor, assessing the independence of the external auditor, review the internal control and risk management systems, review of accounting policies, regulations and procedures and applicable laws, and to ensure company's compliance with legal and regulatory requirements. The following table shows the members and attendance of the meetings of the Audit Committee during 2012: Members Status of Director 16 Feb. Abdulredha Mohamed Al Daylami Independent / Non- Executive Abdulhussain Khalil Dewani Independent / Non- Executive Ibrahim Abdali Al Daissi Independent / Non- Executive Talal Mohamed Abdulla Al Mannai Independent / Non- Executive 30 April 31 July 21 Oct. % Attended 100 % 100 % 100 % 100 % 3 THE NOMINATION AND REMUNERATION COMMITTEE: The Nomination and Remuneration Committee consists of three members and meets at least twice a year. The main functions and responsibilities of the Nomination and Remuneration Committee are to identify qualified persons to join the membership of the Board of Directors and executive management of the company, to make recommendations to the Board of Directors on potential candidates for membership of the Board of Directors to be included by the Board on the agenda of the next meeting of the Annual General Meeting, to make recommendations to the Board of Directors on changes that the Committee believes required for the number of members of the Board or any of its committees of the Board of Directors, review the company's policies related to the remuneration of the members of the Board of Directors and executive management and make recommendations in this regard, as well as ensuring the existence of a succession plan for the executive management. The following table shows the members and attendance of the meetings of the Nomination and Remuneration Committee during 2012: Members Status of Director 22 April 25 Dec. % Attended Abdul Rahman Mohamed Jamsheer Independent / Non-Executive 100 % Abdul Nabi Nasser Salman Independent / Non-Executive 100 % Jaffar Habib Ahmed Independent / Non-Executive 100 % 18 Delmon Poultry Company 2012 Annual Report

20 CORPORATE GOVERNANCE REPORT 4 THE GOVERNANCE COMMITTEE: The Governance Committee consists of four members, and meets at least twice a year. The main functions and responsibilities of the Governance Committee are to develop and review policies and procedures for the required changes in the applied Corporate Governance Charter of the company and make recommendations in this regard to the Board of Directors, review the charters of the Committees of the Board of Directors and make recommendations on any changes or amendments required, to verify that the adopted Corporate Governance Charter has achieved its desired objectives. The following table shows the members and attendance of the meetings of the Governance Committee during 2012: Members Status of Director 30 April 27 Dec. % Attended Talal Mohamed Abdulla Al Mannai Independent / Non-Executive 100 % Abdulredha Mohamed Al Daylami Independent / Non-Executive 100 % Abdulhussain Khalil Dewani Independent / Non-Executive 100 % Ibrahim Abdali Al Daissi Independent / Non-Executive 100 % REMUNERATION OF THE BOARD OF DIRECTORS: During fiscal year 2012 the director s remuneration, expenses of attending meetings and allowances calculated in the financial statements amounted BD 136,500 (2011: BD 136,000) including director s remuneration for the fiscal year 2012 listed for approval at the current Annual General Meeting for the amount of BD 90,000 (2011: BD 90,000) and the expenses of attending meetings and other allowances of BD 46,500 (2011: BD 46,000). RELATED PARTY TRANSACTIONS: Included details of transactions with related parties in note No:18 of the financial statements for the fiscal year ended 31 December 2012, and for more details, shareholders can refer to the indicated note. DISCLOSURE AND COMMUNICATION STRATEGY: Delmon Poultry Company is following a clear policy of disclosure on the activities and business to all shareholders and stakeholders in a professional, fair and transparent manner. The Company holds the Annual General Meeting annually which is attended by Chairman and the Board of Directors members, the executive management, representatives of official bodies and external auditors to present the annual financial statements and to respond to questions and inquiries of the shareholders. The quarterly and annual interim financial statements are published in the local press, and can be obtained from the share registrar. Information on any developments regarding the company are also provided through local press. In addition, disclosure of activities, businesses, developments, financial information and data are also provided through the company's website "dawajen.bh". Delmon Poultry Company 2012 Annual Report 19

21 CORPORATE GOVERNANCE REPORT EXECUTIVE MANAGEMENT: Mr. Abdul Karim Ismaeel Al Alawi. General Manager. Eng. Khalil Ebrahim Al Derazi. Assistant General Manager. Eng. Najeeb Aboud Salam. Hatchery Manager. Dr. Adel Ahmed Attia. Chicken Processing Plant Manager. Eng. Abdulhadi Mirza Jaffer. Feed Mill Manager. Mr. Alawi Sayed Jaffer Yusuf. Human Resources Manager. Mr. Ayman Ahmed Dawood. Financial Resources Manager. Mr. Hussain Abdulmajeed Falah. Information Technology Manager. Bachelor in Administration - University of Basra - Republic of Iraq Years Experience. Joined Delmon Poultry Company in Master in Science Desert and Arid Lands Arabian Gulf University Kingdom of Bahrain Bachelor in Agricultural Sciences - Baghdad University - Republic of Iraq Years Experience. Joined Delmon Poultry Company on Bachelor in Agricultural Science Cairo University Arab Republic of Egypt years Experience. Joined Delmon Poultry Company in Bachelor of Veterinary Science - Cairo University Arab Republic of Egypt years Experience. Joined Delmon Poultry Company in Bachelor of Electrical Engineering - University of Bahrain Kingdom of Bahrain years Experience. Joined Delmon Poultry Company in Bachelor of Commerce Beirut Arab University Republic of Lebanon years Experience. Joined Delmon Poultry Company in Bachelor of Accounting - University of Bahrain Kingdom of Bahrain years Experience. Joined Delmon Poultry Company in Master of Business Administration New York Institute of Technology Kingdom of Bahrain Bachelor of Computer Science - University of Bahrain Kingdom of Bahrain years Experience. Joined Delmon Poultry Company in Delmon Poultry Company 2012 Annual Report

22 CORPORATE GOVERNANCE REPORT GOVERNANCE COMMITTEE MANAGER INFORMATION TECHNOLOGY MANAGER HUMAN RESOURCES NOMINATION AND REMUNERATION COMMITTEE MANAGER PROCESSING PLANT Delmon Poultry Company 2012 Annual Report 21

23 FINANCIAL STATEMENTS 22 Delmon Poultry Company 2012 Annual Report

24 Delmon Poultry Company 2012 Annual Report 23

25 24 Delmon Poultry Company 2012 Annual Report

26 STATEMENT OF FINANCIAL POSITION as at year 31 December 2012 Note 31 December December 2011 ASSETS CURRENT ASSETS Cash and bank 485, ,112 Short-term bank fixed deposits 4,060,728 3,028,364 Trade receivables 3 854, ,858 Accrued income and other receivables 4 1,421,784 1,696,500 Inventories 5 1,375,057 1,669,613 Total current assets 8,197,723 7,398,447 NON-CURRENT ASSETS Available-for-sale investments 6 3,742,637 4,288,711 Held-to-maturity investments 7 500, ,000 Investment in associate company 8 2,244,274 2,096,809 Property, plant and equipment 9 724, ,886 Total non-current assets 7,211,030 7,379,406 Total assets 15,408,753 14,777,853 LIABILIIES AND EQUITY CURRENT LIABILITIES Trade payables 272, ,721 Accrued expenses and other liabilities , ,188 Total current liabilities 848, ,909 NON-CURRENT LIABILITIES Provision for labour law obligations 20 38,906 33,005 Total liabilities 887, ,914 EQUITY Share capital 11 3,061,071 3,069,097 Reserves 8,253,078 8,234,896 Retained earnings 3,207,064 2,653,946 Total equity (page 7) 28) 14,521,213 13,957,939 Total liabilities and equity 15,408,753 14,777,853 The financial statements consisting of pages 25 to 51 were approved by the board of directors on 13 February 2013 and signed on its behalf by: Yousuf Saleh Al Saleh Chairman Abdul Nabi Nasser Salman Vice chairman Delmon Poultry Company 2012 Annual Report 25

27 INCONE STATEMENT for the year ended 31 December 2012 Note SALES 12 14,647,408 12,717,299 Cost of sales 13 (15,487,685) (13,870,542) GROSS LOSS (840,277) (1,153,243) OTHER OPERATING EXPENSES 14 (609,565) (531,635) OPERATING LOSS BEFORE GOVERNMENT SUBSIDY (1,449,842) (1,684,878) GOVERNEMENT SUBSIDY 15 2,146,992 1,859,402 OPERTATING INCOME 697, ,524 OTHER INCOME / (EXPENSES) Investment income , ,141 Share of profit of associate 8 294, ,309 Impairment of AFS investments 6 (131,267) (55,863) Other income 5,915 23,826 PROFIT FOR THE YEAR 1,170,013 1,170,937 Earning per share fils 38 fils The financial statements consisting of pages 25 to 51 were approved by the board of directors on 13 February 2013 and signed on its behalf by: Yousuf Saleh Al Saleh Chairman Abdul Nabi Nasser Salman Vice chairman 26 Delmon Poultry Company 2012 Annual Report

28 STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December Profit for the year Other comprehensive income: Fair value reserve (AFS investments): Change in investments fair value Company s share of change in fair value of the investments and other reserves of the associate Transferred to income statement on AFS impairment Transferred to income statement on sale of AFS investment 1,170,013 1,170,937 (23,497) (405,195) 20,492 (51,347) 37,820 55,863 (16,633) (70,290) Other comprehensive income for the year Total comprehensive income for the year 18,182 (470,969) 1,188, ,968 These financial statements consist of pages 25 to 51 Delmon Poultry Company 2012 Annual Report 27

29 STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2012 STATEMENT OF CHANGES IN EQUITY Share capital Treasury shares 2012 Statutory reserve General reserve Reserves Development and raw material reserve Investments fair value reserve Retained earnings Total At 1 January ,120,928 (51,831) 1,560,464 3,993,000 1,000,000 1,681,432 2,653,946 13,957,939 Comprehensive income: Profit for the year ,170,013 1,170,013 Other comprehensive income: Fair value reserve (AFS investments): Change in investments fair value (23,497) - (23,497) Company s share of net change in fair value of the investments and other reserves of the associate ,492-20,492 Transferred to income statement as a result of AFS impairment ,820-37,820 Reserve transferred to income statement upon sale of AFS investment (16,633) - (16,633) Total other comprehensive income for the year ,182-18,182 Total comprehensive income for the year ,182 1,170,013 1,188,195 Purchase of treasury shares - (8,026) (8,026) Dividend declared for (616,895) (616,895) At 31 December ,120,928 (59,857) 1,560,464 3,993,000 1,000,000 1,699,614 3,207,064 14,521,213 These financial statements consist of pages 4 to 30. These financial statements consist of pages 25 to Delmon Poultry Company 2012 Annual Report

30 STATEMENT OF CHANGES IN EQUITY for the year ended 31 December Share Treasury Statutory capital shares reserve General reserve Reserves Development and raw material reserve Investments fair value reserve Retained earnings Total As at 1 January ,120,928 (51,831) 1,516,749 3,993,000 1,000,000 2,152,401 2,143,619 13,874,866 Comprehensive income: Profit for the year ,170,937 1,170,937 Other comprehensive income: Fair value reserve (AFS investments): Change in investments fair value (405,195) - (405,195) Company s share of net change in fair value of the investments and other reserves of the associate (51,347) - (51,347) Transferred to income statement as a result of AFS impairment ,863-55,863 Reserve transferred to income statement upon sale of AFS investment (70,290) - (70,290) Total other comprehensive income for the year (470,969) - (470,969) Total comprehensive income for the year (470,969) 1,170, ,968 Dividend declared for (616,895) (616,895) Transfer to statutory reserve , (43,715) - At 31 December ,120,928 (51,831) 1,560,464 3,993,000 1,000,000 1,681,432 2,653,946 13,957,939 These financial statements consist of pages 25 to 51 Delmon Poultry Company 2012 Annual Report 29

31 STATEMENT OF CASH FLOWS for the year ended 31 December OPERATING ACTIVITIES Cash received from customers 11,548,676 10,206,608 Subsidies received from Bahrain Government 3,665,636 1,269,356 Payments to suppliers (12,149,688) (10,661,778) Payments to employees and others (1,546,223) (1,632,285) Directors' remuneration paid (90,000) (81,000) Cash flows from operating activities 1,428,401 (899,099) INVESTING ACTIVITIES Purchase of plant and equipment (431,217) (42,382) Proceeds from sale of available-for-sale investments 408, ,285 Payments to purchase held-to-maturity investment - (500,000) Proceeds from sale of plant and equipment - 8,887 Interest and dividends received 289, ,342 Dividends received from an associate 167, ,776 Cash flows from investing activities 434, ,908 FINANCING ACTIVITIES Dividends paid (607,151) (596,277) Cash flows from financing activities (607,151) (596,277) Net increase/(decrease) in cash and cash equivalents 1,255,504 (1,238,468) CASH AND CASH EQUIVALENTS at 1 st January 3,290,476 4,528,944 CASH AND CASH EQUIVALENTS at 31 st December 4,545,980 3,290,476 Comprising: Cash and bank 485, ,112 Short-term bank fixed deposits 4,060,728 3,028,364 4,545,980 3,290,476 These financial statements consist of pages 25 to Delmon Poultry Company 2012 Annual Report

32 NOTES to the financial statements for the year ended 31 December STATUS AND OPERATIONS Delmon Poultry Company BSC is a public joint stock company, established by Amiri Decree 2/1980. The principal objects of the company include establishing or investing in: Facilities for processing, packing and storing frozen chicken; Feed factories; Integrated project for broiler meat; Distribution network affording easy accessibility for consumers; and Similar or supporting activities in Bahrain or abroad. The Company is also allowed to invest its surplus funds in all types of investments. Current operations, all in Bahrain, are as follows: Chicken processing plant at Hamala Feedmill at Mina Salman Chicks hatchery at Al-Buhair 2 SIGNIFICANT ACCOUNTING POLICIES a) Statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards and Bahrain Commercial Companies Law of b) Basis of measurement The financial statements are prepared on the historical cost basis except for certain available-for-sale investments which are stated at fair value. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year. c) Standards, amendments and interpretations effective on or after 1 January 2012 (i) Improvements to IFRSs (2011) Improvements to IFRS issued 2011 contained numerous amendments to IFRS that the IASB considers nonurgent but necessary. Improvements to IFRS comprise amendments that result in accounting changes to presentation, recognition or measurement purposes, as well as terminology or editorial amendments related to a variety of individual IFRS standards. There were no material changes to the current accounting policies of the Company as a result of these amendments. (ii) IFRS 7 (amendment) Disclosures: Transfer of financial assets The amendments to IFRS 7 introduce new disclosure requirements about transfers of financial assets including disclosures for financial assets that are not derecognised in their entirety; and financial assets that are derecognised in their entirety but for which the entity retains continuing involvement. The adoption this amendment had no significant impact on the financial statements. d) New Standards, amendments and interpretations issued but not yet effective A number of new standards, amendments to standards and interpretations are effective for annual periods beginning on or after 1 January 2013, and have not been applied in preparing these financial statements. Those which are relevant to the Company are set out below. The Company does not plan to early adopt these standards. Delmon Poultry Company 2012 Annual Report 31

33 NOTES to the financial statements for the year ended 31 December SIGNIFICANT ACCOUNTING POLICIES (continued) (i) IAS 1 (amendment) - Presentation of items of other comprehensive income The amendments to IAS 1 require that an entity present separately the items of other comprehensive income that would be reclassified to profit or loss in the future if certain conditions are met from those that would never be reclassified to profit or loss. The amendment is effective for annual periods beginning on or after 1 July 2012 with an option of early application. The Company is not expecting a significant impact from the adoption of this amendment. (ii) IAS 19 Employee benefits (2011) IAS 19 (2011) changes the definition of short-term and other long-term employee benefits to clarify the distinction between the two. For defined benefit plans, removal of the accounting policy choice for recognition of actuarial gains and losses is not expected to have any impact on the Company. However, the Company may need to assess the impact of the change in measurement principles of the expected return on plan assets. IAS 19 (2011) is effective for annual periods beginning on or after 1 January 2013 with early adoption permitted. The Company is not expecting a significant impact from the adoption of this amendment. (iii) IAS 28 (2011) Investment in Associates and Joint ventures IAS 28 (2011) supersedes IAS 28 (2008). IAS 28 (2011) makes the following amendments: Associates held for sale: IFRS 5 Non-current Assets Held for Sale and Discontinued Operations applies to an investment, or a portion of an investment, in an associate or a joint venture that meets the criteria to be classified as held for sale. For any retained portion of the investment that has not been classified as held for sale, the entity applies the equity method until disposal of the portion held for sale. After disposal, any retained interest is accounted for using the equity method if the retained interest continues to be an associate or a joint venture; and On cessation of significant influence or joint control, even if an investment in an associate becomes an investment in a joint venture or vice versa, the entity does not re-measure the retained interest. The standard is effective for annual periods beginning on or after 1 January 2013 and is applied retrospectively. The Company is not expecting a significant impact from the adoption of this amendment. (iv) Amendments to IFRS 7 and IAS 32 on offsetting financial assets and financial liabilities (2011) Disclosures Offsetting Financial Assets and Financial Liabilities (amendments to IFRS 7) introduces disclosures about the impact of netting arrangements on an entity s financial position. The amendments are effective for annual periods beginning on or after 1 January 2013 and interim periods within those annual periods. Based on the new disclosure requirements the Company will have to provide information about what amounts have been offset in the statement of financial position and the nature and extent of rights of set off under master netting arrangements or similar arrangements. Offsetting Financial Assets and Financial Liabilities (amendments to IAS 32) clarify the offsetting criteria IAS 32 by explaining when an entity currently has a legally enforceable right to set off and when gross settlement is equivalent to net settlement. The amendments are effective for annual periods beginning on or after 1 January 2014 and interim periods within those annual periods. Earlier application is permitted. (v) IFRS 12 - Disclosures of interests in other entities IFRS 12 brings together into a single standard all the disclosure requirements about an entity s interests in subsidiaries, joint arrangements (i.e. joint operations and joint ventures), associates and unconsolidated structured entities. It requires the disclosure of information about the nature, risks and financial effects of these interests. The standard is effective for annual periods beginning on or after 1 January The Company is currently assessing the disclosure requirements for interests in subsidiaries and unconsolidated unstructured entities in comparison with existing disclosures. 32 Delmon Poultry Company 2012 Annual Report

34 NOTES to the financial statements for the year ended 31 December SIGNIFICANT ACCOUNTING POLICIES (continued) (vi) IFRS 13 - Fair value measurement IFRS 13 provides a single source of guidance on how fair value is measured, and replaces the fair value measurement guidance that is currently dispersed throughout IFRS. Subject to limited exceptions, IFRS 13 is applied when fair value measurements or disclosures are required or permitted by other IFRSs. Although many of the IFRS 13 disclosure requirements regarding financial assets and financial liabilities are already required, the adoption of IFRS 13 will require the Company to provide additional disclosures. These include fair value hierarchy disclosures for non-financial assets/liabilities and disclosures on fair value measurements that are categorised in Level 3. IFRS 13 is effective for annual periods beginning on or after 1 January The Company is currently reviewing its methodologies for determining fair values (see Note 22). (vii) IFRS 9 - Financial Instruments IFRS 9 (2009) introduces new requirements for the classification and measurement of financial assets. Under IFRS 9 (2009), financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. IFRS 9 (2010) introduces additions relating to financial liabilities. The IASB currently has an active project to make limited amendments to the classification and measurement requirements of IFRS 9 and add new requirements to address the impairment of financial assets and hedge accounting. IFRS 9 (2010 and 2009) is effective for annual periods beginning on or after 1 January 2015 with early adoption permitted. Given the nature of the Company s operations, this standard is expected to have a significant pervasive impact on the Company s financial statements. (viii) Early adoption of standards The Company did not early-adopt new or amended standards in 2012 and e) Revenue recognition Revenue is measured at the fair value of the consideration received/receivable. Revenue from sale of chickens, feeds and chicks are recognised when goods are delivered to the customers. Dividend income from investments is recognised when declared. Bank interest is recognised on accrual basis. f) Other operating expenses Overhead expenses are allocated to chicken, feed and chicks on the basis of cost of sales. g) Government subsidy Government subsidy related to sale of chickens and feeds in Bahrain received as a compensation due to price control policy exercised by the Government are recognised in the income statement as other operating revenue when the subsidy becomes receivable. Government subsidy toward farmers production of chickens is recognised upon receipt of live chickens from farmers and are treated as a reduction from cost of sales. h) Inventories These are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less estimated selling expenses. The cost of the inventory is based on weighted average principle. Cost includes purchases price, freight, custom duty and direct labour charge and other incidental costs. i) Foreign currency (i) Functional and presentation currency Items included in the financial statements of the Company are measured using ( the functional currency ). The financial statements are presented in, which is the Company s presentation currency. Other components are also in Bahraini Dinar, hence there is no translation difference. Delmon Poultry Company 2012 Annual Report 33