Fatima Fertilizer Prospectus

ADVICE FOR GENERAL PUBLIC THE INVESTORS AR E STRONGLY ADVISED IN THEIR OWN INTEREST TO CAREFULLY READ THE CONTENTS
OF TH IS PROS PECTUS, ES PECIALLY TH E RIS K F ACTORS G IVEN AT PARA 5.16, BEFORE MAKING ANY INVESTMENT D ECISION. SUBMISS ION OF F ICTITIOUS AND MULTIPLE APPLICATIONS (MORE TH AN ONE APPLICATIONS BY SAME PERSON) IS PROHIBITED AND SUCH APPLICATIONS MONEY IS LIABLE TO CONFIS CATION UNDER SECTION 18A OF THE SECURITIES AND EX CH ANGE ORD INANCE, 1969. ADVICE FOR INSTITUTIONAL INVESTORS AND HIGH NETWORTH INDIVID UAL INVES TORS A SINGLE INVESTOR CANNOT SUBMIT MOR E THAN ONE BIDDING APPLICATIONS EXCEPT IN THE CASE OF REVISION OF BID. IF AN INVESTOR SUBMITS MORE THAN ONE BIDDING APPLI CATIONS THEN ALL SU CH APPLICATIONS SHALL B E SUBJECT TO REJECTION
FATIMA FERTILIZER COMPANY LIMITED

PRELIMINARY PROSPECTUS
For Issu e o f 200 millio n ord in ary sh ares (10% of th e total p aid up cap ital) at p ar value o f PKR 10/- share (th e Flo or Price) th rough the BOOK BUILDING PROCESS Boo k Buildin g portion of the Issue comprises o f 150,000,000 sh ares (75% of th e total Issu e) Gen eral Pub lic po rtion of th e Issu e comp rises of 50,000,000 sh ares (25% of the total Issu e) BIDDING PERIOD DATES: From 11 January, 2010 to 13 Janu ary, 2010 (BOTH DAYS INCLUSIV E) DATE OF PUBLIC SUBSCRIPTION: Fro m 27 January, 2010 to 28 January, 2010 (B OTH DAY S INCL USIVE) DURING BA NKING H OURS
LEAD MANAGER & BOOK RUNNER
Book Bu ild ing po rtion underwritten b y:
General public portion und erwritten by: (To be filled in within 10 working days of closing of Bidding Period i.e before submission of application to the exchange for allocation of dates for publication of Prospectus and subscription of shares by the general public as required under clause 6 of Appendix-4 of the listing regulations)
Th e d ate o f pub lication for th is Pro sp ectus is: 18 Jan uary 2010
Initial Public O ffering of Fatima Fertilizer Company Limited
GLOSSARY OF TECHNICAL TERMS AHL BR CAGR CAN CDA CDC/CDCPL CDM CDS CER CNCEC CNIC CO 2 Co mmission/SECP Co mp an y/FATIMA CPM CVT DAP DPA DSRA ECC FAO FX FYM GDP GOP HNWI ICI IPO Issue Issuer ITO KCI KIBOR KSE/Sto ck Exchange LC LM & BR MMCFD Mn MT MTPA Arif Habib Limited Book Runner Compound Annual Growth Rate Calcium Ammonium Nitrate Central Depositories Act, 1997 The Central Depository Company of Pakistan Limited Clean Development Mechanism Central Depository System Carbon Emission Reduction China National Chemical Engineering Corporation Computeriz ed National I dentity Card Carbon Dioxide The Securities and Exchange Commission of Pakistan Fatima Fertilizer Company Limited Critical Path Management Capital Value Tax Di-Ammonium Phosphate Debt Payment Account Debt Service Reserve Account Economic Coordination Committee Food and Agriculture Organization Foreign Exchange Farm Yard Manure Gross Domestic Product Government of Pakistan High Net Worth I ndividual International Chemical Industries Initial Public Offering Issue of new shares by the Company Fatima Fertilizer Company Limited Income Tax Ordinance, 2001 Potassium Chloride Karachi I nter Bank Offer Rate Karachi Stock Exchange (Guarantee) Limited Letters of Credit Lead Manager & Book Runner Million Standard Cubic Feed Per Day Million Metric Ton metric tons per annum
NFDC NP NPK Ordin an ce PC PERT PFA PFL PKR S&W SAFCO SBP SC SNGPL WHT
National Fertilizer Development Centre Nitro Phosphate Nitrogen Potassium Phosphate The Companies Ordinance, 1984 Privatization Commission Project Evaluation and Review Techniques Project Funds Agreement Pakarab Fertilizers Lim ited Pakistan Rupee(s) Stone & Webster Consultants Limited Saudi Arabian Fertilizer Company State Bank of Pakistan Sojitz Corporation Sui Northern Gas Pipelines Limited Withholding Tax
DEFINITIONS Application Money The total amount of money to be paid by the bidder upon successful allotment of shares w hich is equivalent to the num ber of shares allotted to the bidder at the strike price. An indication to make an offer during the bidding period by a bidder to subscribe to the Ordinary Shares of FATIMA at or above the floor price, including all the revisions thereto. Any prospective investor who makes a bid pursuant to the terms of the Preliminary Prospectus and the Bidding Form. The total amount of the bid placed by the bidder, i.e. num ber of shares multiplied by bid price. means pre-determined places where applications for bidding of shares are collected by the Book Runner on behalf of the Issuer/Offeror and may include offices of Corporate Brokerage Houses, Schedule Banks, Development Financial Institutions and Investment Finance Companies, subject to appointment of these institutions as agent by the Book Runner through an agreement in writing for the purpose, with the consent of the I ssuers/Offerer.. The form used by a bidder to make a bid and which will be considered as the application for subscription of Ordinary Shares through the book building. The period during which bids for subscription of shares will be made by Institutional I nvestors and HNWIs. The Bidding Period commences on DD-MM-YYY and ends on DD-MMYY. The date after which BR will not accept any bids for the Issue. The date on which BR shall start accepting bids for the Issue. A mechanism of price determination through which indication of interest for subscription of shares Offered by the Company is collected from Institutional Investors and HNWIs. Through this process a book is built which gives an idea of demand for the shares at different price levels. The strike price is determined based on the price at which demand for shares at the end of book building period is sufficient to raise the required am ount. An account opened by the Company with the Collection Bank(s) for the Offer. The bidder will pay the margin
Bid
Bidder
Bid Amoun t
Bid Collection Cen tre
Bidding Fo rm
Bidding Perio d
Bidding Process Ending Date
Bidding Process Starting Date
Book Bu ild ing
Book Bu ild ing Account
amount through demand draft, or pay order in favour of this account and the remainder of the application money, if any, shall be paid through this account after successful allocation of shares. Book Runn er or BR Flo or Price General Pu blic Arif Habib Limited The minimum price set by the Company for issuance of shares which is PKR 10 per share. All individual and institutional investors including both Pakistani (residents & non-residents) and foreign investors. The price at which ordinary shares are offered to general public. This price can be at or below the strike price. Individual investor who applies or bids for shares of the value of PKR 1,000,000/- or above in book building process. Both local and foreign institutional investors.
General Pu blic Offer Price
High Net worth Individu al (HNWI) Institution al Investors
Lead Manager and Book Runner Limit Price
Arif Habib Limited The maximum price a prospective institutional investor or HNWI is willing to pay for a share under the Book Building process. The partial or total am ount, as the case may be, paid by a bidder at the time of making a bid. Offer of 200,000,000 Ordinary Shares by Fatima Fertilizer Company Limited of PKR 10/- per share. The Offer constitutes 10% of the paid-up capital of the Company. Offer to Institutional Investors/HNWI: Ordinary Shares - 75% of the total Offer size. 150,000,000
Margin Money
Offer
Offer to General Public: 50,000,000 Ordinary Shares - 25% of the total Offer size. (For details please see Para 3.1) Ordin ary Shares Ordinary Shares of FATIMA having face value of PKR 10 each unless otherwise specified in the context thereof. The preliminary Prospectus containing all the information and disclosures as required under the Companies Ordinance, 1984, approved by the Commission under section 62 read with section 57 of the Companies Ordinance, 1984 and circulated to the Institutional
Prelimin ary Pro spectus
Investors and HNWIs for the Book Building Process. Strike o rder A bid for a specified number of shares at the strike price to be determined through the Book Building process. A series of limit bids at increasing prices. The price of share determined/discovered on the basis of the Book Building process and is the price at which the shares are issued to Institutional Investors and HNWI. The allotment of Ordinary Shares pursuant to the I ssue.
Step bid Strike Price
Subscrip tion/Allot/Allotted
TABLE OF CONTENTS Part Con ten ts Page No.
Part 1 Part 2 Part 3 Part 4 Part 5 Part 6 Part 7 Part 8 Part 9 Part 10 Part 11 Part 12 Part 13
Approvals and Listing on the Stock Exchanges Book Building Procedure Share Capital and Related Matters Underwriting, Commissions, Brokerage and other Expenses History and Prospects Financial Information Management Miscellaneous I nformation Application and Transfer Instructions Bidding Form of Fatima Fertilizer Company Limited Signatories to the Prospectus Memorandum of Association Application Form
08 10 22 29 31 44 51 58 66 70 71 72
PART 1 1. 1.1 APPROVALS AND LISTING ON THE STOCK EXCHANGE APPROVAL OF THE SECURITIES & EXCHANGE COMMISSION OF PAKISTAN Approval of the Securities & Exchange Commission of Pakistan (the SECP or the Co mmission) as required under Section 57(1) of the Companies Ordinance, 1984 (the Ordinance) has been obtained by Fatima Fertilizer Company Limited (the Comp an y) for the issuance, circulation and publication of this Prospectus. It must be distin ctly understood that in giving th is app ro val, the SECP does not take an y responsibility fo r th e fin an cial soundness o f any sch eme stated herein or for th e correctn ess o f any of the statemen ts made or opin ion s exp ressed with regards to them. The SECP h as no t evaluated quality o f the Offer, and its approval of the Prospectus should not b e construed as an y commitment of th e same. Th e public/investors should conduct their own ind ep endent investigatio n and analysis regardin g the quality of th e Offer before subscrib ing. 1.2 CLEARANCE O F PROSPECTUS BY THE KARACHI STOCK EXCHANGE (GUARANTEE) LIMITED The Pro spectus has been cleared b y the Karachi Sto ck Exch an ge (Gu arantee) Limited (KSE), in acco rd an ce with the requ irements under their Listin g Regu lation s. While clearing th is Pro sp ectus, th e Karachi Sto ck Exch an ge neith er gu arantees the co rrectn ess o f the conten ts of this Prospectu s nor th e viability of the Company. The KSE h as no t evalu ated th e qu ality of th e Offer, and its clearance should not b e con strued as any commitmen t o f the same. The public/investors should conduct their o wn ind ep endent in vestigation and an alysis regard ing the quality of th e Offer before subscrib ing. 1.3 FILING OF PROSPECTUS AND OTHER DOCUMENTS WITH THE REGISTRAR OF COMPANIES The Company has filed with the Registrar, Companies Registration O ffice Multan, as required under Section 57(3) and (4) of the Com panies Ordinance 1984, a copy of this Prospectus signed by all the Directors of the Company on behalf of the Company, along with the following Prospectus attached hereto:
a)
Letter No. 443 dated September 28, 2009 from Auditors of the Company, A.F. Ferguson & Co., Chartered Accountants, consenting to the publication of their names in the Prospectus, which contains in Part 6 certain statements and reports issued by them as experts (which consent has not been withdrawn), as required under Section 57(5) of the Companies Ordinance, 1984. Copies of Material Contracts and Agreements mentioned in Part 8 of this Prospectus as required under Section 57(4) of the Ordinance.
b)
Initial Public O ffering of Fatima Fertilizer Company Limited c)
Written confirmations of the Legal Advisor to this Issue and Bankers to this Issue, mentioned in this Prospectus consenting to act in their respective capacities, as required under Section 57(5) of the Companies Ordinance, 1984. Consent of Directors, Chief Executive and Company Secretary of the Company who have consented to their respective appointments being made and their having been named or described as such Directors and Chief Executive in this Prospectus, as required under Section 57(3) of the Ordinance, read with sub-clause (1) of clause (4) of Section 1 of Part 1 of the Second Schedule to the Ordinance.
d)
1.4
LISTING AT THE KARACHI STOCK EXCHANGE An Application has been made to the KSE for permission to deal in and for quotation of the shares of the Company. In accordance with the Regulation for Future Trading in Provisional Listing Companies of the KSE, the Company shall stand provisionally listed for trading and for quotation of its shares on the Stock Exchange, from the date of publication of this Prospectus or any other date as may be specified by the Stock Exchange. If for any reason, the application for formal listing is not accepted by the KSE, the Company undertakes to publish immediately in the press a notice to that effect and thereafter to refund the application money to the applicants in pursuance of the Prospectus as required by the provisions of Section 72 of the Ordinance.
PART 2 2 2.1 BOOK BUILDING PROCEDURES BRIEF STRUCTURE OF THE ISSUE The Presen t Issu e Fatima Fertilizer Company Limited (hereinafter referred as the Company), is issuing 200,000,000 Ordinary Shares of the face value of PKR 10 each for cash at par (the Issue). The issue constitutes 10% of total paid-up capital of the Company. The Issue is being made through the Book Building process with a floor price of PKR 10/- per share, whereby 75% of the total Issue size i.e. 150,000,000 Ordinary Shares of PKR 10 each will be issued through the book building process to Institutional Investors and High Net Worth Individuals (HNWI), while the remaining 25% of the total I ssue size i.e. 50,000,000 Ordinary Shares of PKR 10 each will be issued to the general public at or below the Strike Price. IN CASE THE COMPANY DOES NOT RECEIVE BIDS FOR THE MINIMUM NUMBER OF SHARES BEING OFFERED AT FLOOR PRICE, IT MAY WITHDRAW THE OFFER. In case the Company opts for withdrawal of the Offer, Margin money will be refunded to bidders within 03 working days of closing of the bidding period without any markup, interest, etc. 2.2 BOOK BUILDING PROCEDURES Book building is a process whereby investors bid for a specific number of shares at various prices. The LM & BR, with the consent of the Company, sets a reference/floor price which is the lowest price an investor can bid at. An order book of bids from investors is maintained by the BR, which is then used to determine the strike price. For determination of the strike price Dutch Au ction Method will be used. Under the Dutch Auction Method, the strike/ price is determined by lowering the price to the extent that the total number of shares that the Company intends to issue through the Book Building process is subscribed. Bidders can submit their bids at the allocated bidding centers in person or through facsimile. A bid by a potential investor can be a Limit Bid, Strike Bid or a Step B id, which are explained below. Limit Bid: Limit bid is at the limit price, which is the maximum price an investor is willing to pay for a specified number of shares. In such a case a bidder explicitly states a price at which he is willing to subscribe to the shares. For instance, a bidder may bid for 2 million shares at PKR 15 per share. Since the bidder has placed a limit price of PKR 15 per share, this indicates that he is willing to subscribe at or below PKR 15 per share. Strike Ord er: A bid for a specified number of shares at the strike price.
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The bidders explicitly bid that they will be willing to buy say 2.0 million shares at the strike price determined through the Book Building Process. Step Bid: A series of limit bids at different prices. Under this bidding strategy, bidders place a number of limit bids at different price levels. The bidders may, for instance, make a bid for 2.0 million shares at PKR 15 per share, 1.5 million shares at PKR 16 per share and 1.0 million shares at PKR 17 per share. Once the bid period is over and book has been built, the BR determines the strike price. Successful bidders will be intimated about the strike price and num ber of shares allotted to them within two working days, subsequently successful institutional bidders shall deposit remaining money within three working days of closing of the bidding period. 2.3 LEAD MANAGER AND BOOK RUNNER Arif Hab ib Limited has been mandated by the Company to act as a Lead Manager and Book Runner to this Issue, which is being made through the Book Building Process as laid out in Appendix 4 of the Listing Regulations of the KSE. Arif Habib Limited (AHL) is ranked among the premium brokerage houses in Pakistan and its Investment Banking team is among the most active in carrying out financial advisory services in Pakistan s capital markets. Since 2006, as part of its business expansion strategy, AHL has further strengthened its corporate finance function to offer a fuller range of financial services to clients. The quantum of equity and tender offerings managed by AHL in recent years exceeds PKR 10.7 billion. During CY2007, AHL advised and arranged one-half of all the equity offerings at the KSE. Its expertise and strong delivery capacity act as catalysts in achieving the most valueadditive investment solutions for clients. The spread of AHLs corporate finance services includes public and private offerings of debt and equity securities, valuation, risk underwriting, restructurings, syndication, securitization, tender offerings and Shariacompatible instruments. AHL corporate finance team comprises four qualified and well-experienced professionals with a sound project management and advisory record. Address: Arif Habib Limited Arif Habib Centre, 23, M. T. Khan Road Karachi Attn: Mr. Kashif Suhail Attn: Mr. Usman Saeed Tel: +92-21-3241 5213, 3246 0717 Cell: +92333 234 6098 Fax: +92-21-3242 9653 Email: kashif.suhail@arifhabib.com.pk usman.saeed@arifhabibltd.com
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2.4
ROLE AND FUNCTIONS OF LEAD MANAGER AND BOOK RUNNER The Lead Manager and Book Runner to the Issue:
i. ensures that all disclosures as required under the Companies Ordinance, 1984 and Appendix 4 of the Listing Regulations of the Karachi Stock Exchange have been made in the Prospectus; ii. ensures that necessary infrastructure and electronic system/software is available to collect bids and to carry out the Book Building process in a fair, efficient and transparent manner; iii. obtains on behalf of the Company, all approvals/consents/NOCs relating to the Issue; iv. ensures that the preliminary Prospectus has been uploaded on its own as well as the Companys website; v. conducts awareness campaigns through presentations, meetings, road shows etc; vi. establishes bid collection centers at the following addresses: Karachi Attn: Mr. Kashif Suhail Attn: Mr. Usman Saeed Arif Hab ib Limited Arif Habib Centre 23, M. T. Khan Road Karachi. Tel: +92-21-3241 5213, 3246 0717 Cell: +92333 234 6098 Fax: +92-21-3242 9653 Email: kashif.suhail@arifhabib.com.pk usman.saeed@arifhabibltd.com Lahore Attn: Mr. Muhammad Nouman Direct: 042-3628 0857 Arif Hab ib Bank Limited Lahore Stock Exchange Branch Office No. 5, LSE Building 19, Aiwan e Iqbal Road Lahore. Tel: 042-628 0852-8, 042-627 1715-6 Fax: 042-628 0851
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Islamabad Attn: Ms. Sabahat Nazir Arif Hab ib Bank Limited Plot No. 6B, F-6 Super Market Islamabad. Tel: 051 2279168 - 70, Ext 224 Fax: 051-227 9166 Email: sabahatnazir@arifhabibbank.com vii. collects bid applications and applications money, security, margin as the case may be from the Institutional Investors and HNWI in the manner as mentioned in the Appendix 4 of the Listing Regulations of the Karachi Stock Exchange. viii. puts serial number, date and time on each bidding form at the time of collection of the same from the bidders; ix. vets the bidding applications; x. builds an order book showing demand for the shares at various prices; xi. discovers the strike price at the close of the bidding period; xii. enters into underwriting agreement with the Company; xiii. maintains record of the bids received for subscription of the shares. xiv. circulates copies of the preliminary Prospectus and bidding form cleared by the Exchange and approved by the Commission to the prospective I nstitutional Investor and HNWI. xv. publishes an advertisement, approved by the Commission, in one Urdu and one English daily Newspaper having wide circulation to invite the Institutional investor and HNWI to participate in the bidding process. 2.5 OPENING AND CLOSING OF THE BIDDING PERIOD The b idd in g p eriod shall remain open for 3 wo rking days co mmencing from the bu sin ess hours at 09:30 a.m. on 11 Jan uary, 2010 an d will close at 05:00 p.m. on 13 Janu ary, 2010 at the close o f business hours.
BIDDING PROCESS STARTS ON
11 Janu ary 2010
BIDDING PROCESS ENDS ON

*(B oth Days Inclusive)
13 Janu ary 2010
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2.6
ELIGIBILITY TO PARTICIA PTE IN BIDDING Eligible investors who can place their bids in the Book Building process are Institutional Investors and HNWI. Institutional I nvestors include both local and foreign institutional investors. HNWI investors are individual investors who apply or bid for shares of value of PKR 1,000, 000/ or above in the Book Building process.
2.7
INFORMATION FOR BIDDERS The Preliminary Prospectus for issuance of Shares duly cleared by the Karachi Stock Exchange and approved by SECP and the bidding form can be obtained from the Registered Office of FATIMA, AHL and the bid collection centers. Preliminary Prospectus can be at the website of BR and the Company. Eligible investors who are interested in subscribing to the Ordinary Shares should approach LM & BR at the addresses provided in Para 2.4 to register their Bids. THE BIDS SHOULD BE SUBMITTED ON THE PRESCRIBED BIDDING FORM IN PERSON OR THROUGH FAX AT NUMBER: (Karachi) +92-21-3242 9653, (Lah ore) +92-42-3628 0851, (Islamab ad ) +92-51-3227 9166.
2.8
BIDDING FORM AND PROCEDURE FOR BIDDING Standardized bidding form has been prescribed by the BR. Bids shall be submitted at the bid collection centers in person or through fax (Karachi) +92-21-3242 9653, (Laho re) +92-423628 0851, (Islamabad) +92-51-3227 9166 on the standard bidding form duly filled in and signed in duplicate. The bidding form shall be serially numbered at the bid collection centers and date and time stamped, at the time of collection of the same from the bidders. Upon completion and submission of the bidding form, the investors are deemed to have authorized the Company to make necessary changes in the preliminary Prospectus as would be required for filing the final Prospectus with the Stock Exchange and SECP, without prior or subsequent notice of such changes to the investor. The bidding procedure under the Book Building Process is outlined below:
i. Copy of approved preliminary Prospectus shall be circulated by the Company through LM & BR to prospective investors and a copy will also be placed on websites of the Company and BR. ii. An advertisement, approved by the Commission, shall be published at least in one Urdu and one English daily Newspaper having wide circulation in the federal and all the provincial capitals, inviting the institutional investors and HNWI to participate in the bidding. iii. A Book Building Account shall be opened by the Company for collection of bid amount. iv. The bidding form shall be issued in duplicate signed by the bidder and countersigned by the BR, with first copy for BR, and the second copy for the bidder. v. Bids shall be submitted through the bid collection centers or through facsimile (Karach i) +92-21-3242 9653, (Lah ore) +92-42-3628 0851, (Islamabad) +92-51-3227 9166 on the
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standard bidding form duly filled in and signed in duplicate. The addresses for the bid collection centers are given in Para 2.4. vi. Bids can be placed at limit price, strike order or step bid. vii. Bids/margin money shall be deposited through demand draft/pay order/cheque in favor of In itial Pub lic Offering o f Fatima Fertilizer Comp an y Limited Boo k Buildin g Account. viii. BR shall collect an am ount to the extent of 100% of the application money as bid/margin money in respect of bids placed by HNWIs. ix. BR shall collect an amount of not less than 25% of the application money as margin money in respect of bids placed by institutional investors. x. BR may reject a bid p laced by an in stitu tio nal in vesto r/HNWI fo r reason s to be recorded in writin g and th e reasons shou ld be disclosed to su ch bidder forthwith. Decision o f BR shall not be challen geab le by th e b idd er or its asso ciates. xi. The bidders will receive back the duplicate form upon submission of their bids which will be proof of their bid submission. In case of facsim ile, a copy of form with receiving will be faxed back to the bidder. xii. Bidders can revise or withd raw their bid s during th e bidding period (for details please refer Para 2.12 and 2.14). xiii. BR shall maintain record of the bids received. xiv. BR shall ensure that all the bids received by the bid collection centers are entered into the system developed by the Exchange for the purpose of book building. The Exchange shall display live an order book showing the demand for shares at various prices. The order book should also show the revised bids and the bids withdrawn. xv. At the close of the bidding period, the BR shall determine the strike price with the consent of the Company. xvi. Successful bidders shall be intimated, within two working days of the closing of the bidding period, the strike price and the number of shares provisionally allotted to each of them. xvii. The successful bidders shall, within three working days of the closing of the bidding period, deposit the balance amount as consideration against allotment of shares. xviii. Where a successful bidder defaults in payment of shares allotted to him, the margin money deposited by such bidder shall be forfeited. xix. Margin money of unsuccessful bidders will be refunded within three working days of the close of the bidding period. xx. Final allotment of shares out of the Book Building Issue shall be made after receipt of full subscription money from the successful bidders; however, shares to such bidders shall be dispatched or credited, as the case may be, at the time of transfer of shares out of the public portion of the Issue to successful applicants. 2.9 BOOK BUILDING AND GENERAL PUBLIC BANK ACCOUNT The Com pany has opened two separate bank accounts for collection of applications money, one each for the Book Building portion and the Public portion of the Issue. The bidders shall draw demand draft/pay order in favor of In itial Public Offerin g of Fatima Fertilizer Company Limited Book Buildin g Account which has been opened at Arif Habib Bank Limited. The collection bank shall keep and maintain the bid money in the said account. Once the strike price is determined and allottees are finalized, the collection bank
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shall transfer the money of successful and accepted applications to the Company s account(s) after obtaining NOC from KSE and manage refund of the bid money to unsuccessful bidders. 2.10 PAYMENT INTO THE BOOK BUILDING ACCOUNT The bidders shall draw a demand draft/pay order favoring In itial Public Offerin g o f Fatima Fertilizer Company Limited Book Building Accoun t and submit it at the designated bid collection center either in person or through facsimile along with a duly filled in bidding form. CASH MUST NOT BE SUBMITTED WITH BIDDING FORMS AT THE BID COLLECTION CENTER. ONLY PAY ORDER, BANK DRAFT, CHEQUE AND ANY OTHER APPROPRIATE INSTRUMENT ACCEPTABLE TO BR AND DRAWN IN FAVOR OF INITIAL PUBLIC OFFERING OF FATIMA FERTILIZER COMPANY LIMITED BOOK BUILDING ACCOUNT ARE ACCEPTABLE. Since the investors can bid for shares through limit price, strike order or step bid therefore payment procedure is explained below for all the three methods. a. PA YMENT FOR LIMIT PRICES If investors are placing their bids through limit price then they shall deposit the margin money based on the number of shares they are bidding for at their stated bid price. For instance, if an investor is applying for 5.0 million shares at a price of PKR 11 per share, then the total application money w ould amount to PKR 55 million. In such a case, (i) HNWI shall deposit PKR 55 million in the Book Building account as the bid amount which is 100% of PKR 55 million (ii) Institutional Investors shall deposit at least PKR 13.75 million which is 25% of PKR 55 million. b. PAYMENT FOR STRIKE ORDERS If investors are placing a strike order, then they shall deposit the margin m oney equal to the number of shares they are bidding for at PKR 10 per share assuming that strike price is discovered at PKR 10 per share. For instance, if the investor is applying for 5.0 million shares then the total application money would be PKR 50 million. In such a case, (i) HNWI shall deposit PKR 50 million in the Book Building account as margin/bid amount which is 100% of PKR 50 million. (ii) Institutional I nvestors shall deposit PKR 12.5 million in the Book Building Account as margin amount which is at least 25% of PKR 50 million. c. PAYMENT FOR STEP BIDS If investors are placing a step bid, which is a series of limit prices, then they shall deposit the margin money based on the total number of limit prices which they are bidding for. For instance, if the investor bids for 0.5 million shares at PKR 14 per share, 0.4 million shares at PKR 15 per share and 0.3 million shares at PKR 16 per share, then in essence the investor has placed one step bid or three limit price bids. The margin money would amount to Rs. 17.8 million, which is arrived at by multiplying number of shares with the price and aggregating all the three bids. I n such a case, (i) HNWI shall deposit PKR 17. 8 million in the Book Building account as margin/bid amount which is 100% of PKR 17.8 million. (ii) Institutional I nvestors shall deposit PKR 4.45 million in the Book Building account as margin money w hich is at least 25% of PKR 17.8 million.
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2.11 PAYMENT BY FOREIGN INVESTORS Foreign investors may subscribe using their Special Convertible Rupee Accounts (SCRA), as set out under Chapter 20 of the State Bank of Pakistan s Foreign Exchange Manual. Payments made by foreign investors shall be supported by proof of receipt of foreign currency through normal banking channels. Such a proof shall be submitted along with the Bidding Application by the foreign investors. 2.12 REVISION OF BIDS BY THE BIDDER The bidders shall have the right to revise their bids any time during the bidding period. In case the bidders decide to revise their bid, they shall submit the revised bidding form along with the duplicate copy of bid application at any of the designated bid collection centers. The bidders shall collect the revised duplicate copy of bid application from the bid collection centre which shall indicate the new/revised bid price and number of shares. This can also be done through facsimile (Karach i) +92-21-3242 9653, (Laho re) +92-42-3628 0851, (Islamab ad ) +92-51-3227 9166. 2.13 REJECTION OF BIDS BY THE BOOK RUNNER In terms o f clau se 8.4 o f Ann exure 4 of th e listing Regulations of Karachi Stock Exchange, BR may reject a bid p laced by an in stitu tional in vesto r/HNWI fo r reasons to be recorded in writin g and the reasons shou ld be disclosed to su ch bidder forthwith. Decision o f BR shall no t b e challengeab le by th e b id der o r its asso ciates. 2.14 WITHDRAWAL OF BIDS BY THE BIDDER A bidder has the right to withdraw placed bid from the bidding system any time during th e biddin g period. In case bidder decides to withdraw a bid, a request shall be submitted for withdrawal of the bid along with the duplicate copy of bid application. The Bidder shall collect back the duplicate copy of bid application from the concerned officer of BR and check that Bid/Offer With drawn stamp has been properly marked on both the original bid form and duplicate thereof along with proper date and time of withdrawal of bid and initials of the concerned officer. 2.15 WITHDRAWAL OF ISSUE BY THE COMPANY According to clause 3.10 of Appendix 4 of the listing regulations of Karachi Stock Exchange, in case the Company does not receive bids for the minimum number of shares Offered at floor price, it may withdraw the Offer. 2.16 MECHANISM FOR DETERMINATION OF STRIKE PRICE One Hundred & Fifty (150) million ordinary shares, which constitute 75% of the total issue size, would be offered to I nstitutional Investors and High Net worth I ndividuals through the Book Building process. The remaining Fifty (50) million ordinary shares constituting 25% of the total issue size would be offered to the general public at or below the strike price determined through the Book Building process. The bidding period shall last for 5 working days for receiving the bids from potential investors. At the close of the bidding period, the strike price would be determined by the BR in consultation with the Company. The mechanism for determination of strike price can be understood by the following illustration. Quantity of sh ares being Offered : 150. 00 million Ordinary Shares
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Floo r p rice: PKR 10 per share Biddin g Period : December 02, 2009 December 06, 2009
Price (PKR per share) 16.00 14.00 14 13.50 12.00 X 11.00 11.00 11.00 Quantity (shares in million) 25.00 37.50 25 43.75 43.75 25.00 56.25 50.00 56.25 Cumulative number of shares 25.00 37.50 62.50 106.25 150.00 175.00 231.25 281.25 343.75 Category of order Limit price Step bid Revis ed bid Limit price Limi t price Strike order Limit price Withdraw n Bid Step bid Limit price
Bidder Ins titution A Ins titution B Ins titution A HNWI A Ins titution C Ins titution E HNWI B Ins titution B Ins titution D
Date Decem ber 02, 2009
December 03, 2009

Decem ber 04, 2009
December 03, 2009 December 04, 2009 December 05, 2009 December 04, 2009 December 05, 2009 December 06, 2009
STRIKE PRICE DETERMINED THROUGH THE DUTCH AUCTION METHOD
TOTAL SHAR ES SUBSCRIBED
Settin g Strike Price On the basis of the figures provided in the above illustration, according to the Dutch Auction Method, the strike price would be set at PKR 12/- per share to sell the required number of 150.0 million ordinary shares. At PKR 16 per share, investors are willing to buy only 25 million shares. Since 125 million shares are still available, therefore the price will set lower. At Rs. 14 per shares, investors are willing to buy 37.50 millions shares. Since 87.50 million shares are still available, therefore, the price will set lower. At Rs. 13.50 per shares, investors are willing to buy 43.75 millions shares. Since 43.75 million shares are still available, therefore, the price will set lower. At Rs. 12 per shares, investors are willing to buy 43.75 millions shares. Since after bidding for 43.75 million shares at Rs. 12 per share no shares will be available, therefore, the strike price will be set at Rs. 12 per share for the entire lot of 150 million ordinary shares. The bidders, who have submitted bids at prices above the strike price, will be issued shares at the strike price and the differential would be refunded. Investors, who have bid below PKR 12/- per share, do not qualify for allotment and their money would be refunded. For allotment of shares priority will be given to investors who placed higher bids. In case the number of shares bid for at the Strike Price and the number of shares bid for at Strike Order exceeds the available number of shares, then such available shares shall be allotted to the bidders who have made bids for shares at Strike Price and Strike Order, however, preference will be given to the bidder who has made the bid earlier.. 2.17 BASIS OF ALLOTMENT OF SHARES After the closure of bidding period, the BR will analyze the demand generated at various price levels. Only successful bidders shall be eligible for allotment of shares. Shares to successful bidders, out of the book building portion, shall be dispatched/credited shares at the time of the dispatch/credit of shares out of the public portion. 2.18 REFUND OF MARGIN MONEY Investors who have bid lower than the strike price are not eligible for allotment of shares. Margin money of the unsuccessful bidders shall be refunded within three (3) w orking days of the close of the bidding period.
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2.19 UNDERWRITING After determination of the strike price BR shall within two (2) working days of the closing of the bidding period enter into an underwriting agreement with the Company stating that it has underwritten the entire Book Building portion at the Strike price. The Underwriting Agreement would also disclose the number of shares underwritten, the rate and amount of the underwriting Commission/Fee to be charged. 2.20 PUBLICATION OF THE PROSPECTUS The underwriting agreement for the public portion shall be finalized within ten (10) working days from closing of the bidding period. The LM shall, on the same day or any other day but not later than the ten (10) working days from the closing of the bidding period, shall submit an application to KSE for allocation of dates for publication of the final Prospectus and subscription of shares by the general public. The final Prospectus in full or in abridged form m ust be published within seventeen (17) working days of the closing of the bidding period in the manner as specified in Section 53 of the Companies Ordinance, 1984. Public subscription for the shares shall be held at any date(s) within thirty days of the publication of the final Prospectus but not earlier than seven days of such publication. 2.21 ADDRESSES OF BID COLLECTION CENTRES Bid Collection Centers have been established at Karachi, Lahore and Islamabad to collect the bids for the Book Building Portion of the I ssue of shares of Fatima Fertilizer Company Limited in order to provide convenient access to bidders to participate in the bidding process. The bidding form can also be submitted through facsim ile at fax number (Karach i) +92-21-3242 9653, (Laho re) +92-42-3628 0851, (Islamab ad ) +92-51-3227 9166 Karachi Attn: Mr. Kashif Suhail Attn: Mr. Usman Saeed Arif Habib Limited Arif Habib Centre, 23, M. T. Khan Road 23, M. T. Khan Road Karachi. Tel: +92-21-3241 5213, 3246 0717 Cell: +92333 234 6098 Fax: +92-21-3242 9653 Email: kashif.suhail@arifhabib.com.pk usman.saeed@arifhabibltd.com Lahore Attn: Mr. Muhammad Nouman Direct: 042-3628 0857 Arif Hab ib Bank Limited Lahore Stock Exchange Branch Office No. 5, LSE Building 19, Aiwan e Iqbal Road Lahore.
19
Tel: 042-628 0852-8, 042-627 1715-6 Fax: 042-628 0851 Islamabad Attn: Ms. Sabahat Nazir Arif Hab ib Bank Limited Plot No. 6B, F-6 Super Market Islamabad. Tel: 051 2279168 - 70, Ext 224 Fax: 051-227 9166 Email: sabahatnazir@arifhabibbank.com
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2.22 STATEMENT BY THE COMPANY
Date: 29 October 2009 Ref: Fatima Fert/KSE/001 The General Manager, Karachi Stock Exchange (Guarantee) Limited, Stock Exchange Building, Stock Exchange Road, Karachi. Dear Sir, On behalf of the Company, we confirm that all material information as required under the Companies Ordinance, 1984 and the Listing Regulations of the Karachi Stock Exchange (Guarantee) Limited have been disclosed in the Prospectus and that whatever stated in the Prospectus and the supporting documents is true and correct to the best of our knowledge and belief and that nothing has been concealed.
For and on behalf of FATIMA FERTILIZER COMPANY LIMITED
-Sd-
-Sd-
Fawad Ahmed Mukhtar (Chief Executive Officer)
Iftikhar Mah mood Baig (Company Secretary)
21
2.23 STATEMENT BY LEAD MANAGER & BOOK RUNNER
21 October 2009
The Gen eral Manager, Karachi Stock Exchange (Guarantee) Limited, Stock Exchange Building, Stock Exchange Road, Karachi.
Being mandated as Lead Manager and Book Runner to this public Issue of Fatima Fertilizer Company Limited, we confirm that all material information as required under the Companies Ordinance, 1984 and Appendix 4 of the Listing Regulations of the Karachi Stock Exchange (Guarantee) Limited have been disclosed in this Prospectus and that whatever stated herein and in the supporting documents is true and correct to the best of our knowledge and belief and that nothing has been concealed.
On behalf of Arif Habib Limited:
-Sd-
Samad Hab ib Chief Executive Arif Habib Limited
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PART 3 3 3.1 SHARE CAPITA L AND RELATED MATTERS SHARE CAPITA L Shares 2,500,000,000 1,800,000,000 Descrip tion Authorized cap ital Ordinary shares of Rs 10/- each Issu ed , subscribed & p aid up cap ital Ordinary shares of Rs 10/- each The existing capital of the Company is h eld as fo llo ws: Directo rs Muhammad Arif Habib Fawad Ahmed Mukhtar Fazal Ahm ed Sheikh Faisal Ahmed Mukhtar Nasir Butt Samad A. Habib Abad Khan Amount 25,000, 000, 000 18,000,000,000
67, 494,837 47, 629,028 58, 422,920 58, 422,920 5,000 5,000 5,000 231,984,705
674,948,370 476,290,280 584,229,200 584,229,200 50,000 50,000 50,000 2,319,847,050
900,000,000 17, 968,135 150,731,084 34, 387,480 139,570,865 180,000,000 1,422,657,564
Asso ciated Comp an ies Pakarab Fertilizers Limited Reliance Weaving Mills Limited Reliance Commodities (Pvt.) Limited Fazal Cloth Mills Limited Fatima Sugar Mills Limited Arif Habib Securities Limited
9,000,000,000 179,681,350 1,507,310,840 343,874,800 1,395,708,650 1,800,000,000 14,226,575,640
18,542 5,373, 907 8,565, 563 5,373, 907 4,769, 882 7,021, 500 7,735, 809 5,373, 907 5,157, 206 5,373, 907 5,157, 206 5,157, 206 7,735, 809 1
Friend s & Family Members Aamir Naseem Abbas Mukhtar Abdullah Aamir Ali Mukhtar Ambreen Fawad Amin Rehman Asad M uhammad Sheikh Fahad Mukhtar Ibrahim Mukhtar Meraj Fatima Mohid Muhammad Ahmed Muhammad Fazeel Mukhtar Muhammad Mukhtar Sheikh Nasim Beg
185,420 53,739,070 85,655,630 53,739,070 47,698,820 70,215,000 77,358,090 53,739,070 51,572,060 53,739,070 51,572,060 51,572,060 77,358,090 10
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1,205, 899 1,388, 845 8,213, 326 669,584 8,565, 563 52,500,162 145,357,731 *1,800,000,000 Shares
Nighat Naseem Rehman Naseem Sadek Rehman Sheikh Naseem Ahmed Yousuf Aamir Zetun Arif
12,058,990 13,888,450 82,133,260 6,695,840 85,655,630 525,001,620 1,453,577,310 18,000,000,000 Amount
Total Presen t Issu e The present Issue consists of 200 million ordinary shares of face value of PKR 10/- per shares to the general public. The issue constitutes 10% of the total paid up capital of the Com pany. Boo k Buildin g Po rtion Shares Offered to institutions/ high-net-worth individuals (through the book building mechanism) of face value of PKR 10/- per share Shares allocated to employees of the Company Sub to tal Gen eral Pub lic Po rtion General public Shares allocated to employees of the Company Sub to tal Grand To tal
142,500,000
1,425, 000,000
7,500, 000 150,000,000
75,000,000 1,500,000,000
47, 500,000 2,500,000 50,000,000 2,000,000,000
475,000,000 25, 000,000 500,000,000 20,000,000,000
* Including 225 million s hares issued by Pakarab Fertilizers Limited to its shareholders as s pecie dividend. For detail please see Note No. (viii).
Notes:
(i). (ii). (iii). The spons ors of the Company shall at all times retain at least 25% of the capital of the Company; The shares allotted to sponsors in e xcess of 25% shall not be saleable for a period of si x mont hs from the date of public subscription; The Commission, vide its letter No. SMD/Co.57(1)/05 /2009 dated December 18, 2 009 has give n relaxation t o the Company from the requirements of Re gulation 6 A(2 ) of the Listing Regulations of the KSE under Regulation 6 A(6 ) thereof; The shares allotted to investors other than the sponsors shall not be saleable and transferable for a period of si x months from the date of public subscription; The Commission, vide its letter (No. SMD/Co.57(1)/05 /2009 ) dated December 10, 2009 has give n relaxation t o the Company from t he requirements of 3(I)(iii) of the Companies (Issue of Capital) Rules, 1996 thereof; The employees of the Company have been given a preferential allocation of 7,500,000 ordi nary shares under book building portion and 2,500,00 0 ordi nary shares under general public portion. Employees will subscribe their book building portion at the strike price determined at t he close of bi dding period. Employees will also subscribe t heir public porti on on the day of subscription; The shares subscribed by the employees of the Company shall not be saleable for a period of 6 months from the date of public subscription as per Listing Re gulation 6 (A)7 (ii);
(iv). (v).
(vi).
(vii).
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(viii). Pakarab Fertilize rs Limited has issued specie dividend t o its shareholders in the year 2007 (75%), 2 008 (50%) a nd 20 09 (50%). These shares were allocated t o the e xisting shareholders of P FL on pro-rate basis. Detail on shares allotment is mentioned in part (b) hereunder; The Company has obtained a letter (re ference # KSE/SECP-12 948) dated December 17, 2009 from the Karachi Stock Excha nge (G) Limited stating that at least 30% of the plant and machinery has been installed and the last consignment of the plant and machinery is scheduled by October 2010; The Company will submit progress report on the implementation of its project, to the KSE and the SECP on quarterly basis, till its c ompletion; The shares allotted to investors, other than sponsors, shall not be saleable and transferable for a period of six mont hs from the date of public subscription; The Company and the Book Runner shall not accept bids from associated persons of the Company in excess of 5% of the shares of t he book building portion of the offer; No distribution (including declaration and payment of divide nd) is allowed unless the Distribution Request in respect there of has been countersigned by the Age nt Bank. In this respect the Agent Bank is required t o (in consultation with the Monitori ng Bank) countersign the Distribution Re quest, unless, having made such inquiries as it deems appropriate, it determines that the amount of distribution requested in the Distribution Request is not permitted to be withdrawn under Section 6.3.2 of the CTA or has not bee n c orrectly calculated in accordance with t he terms of loan Agreement; The Sponsors have disbursed Rs. 4,000 million to the Company as shares subscription money against the issuance of cumulative re deemable/convertible Pre ference Shares as of November 2 009. Status of the approval of t he proposed issue of prefe rence and their salient features are as under:
(ix).
(x). (xi). (xii). (xiii).
(xiv).
(a)
Approval status:
The Board of Directors of Com pany in its meeting held on October 27, 2009 has recomm ended is suance of PKR 4,000 million cumulative redeemable/convertible preference shares. The is suance of thes e preference s hares has been approved by the members in general m eeting held on Novem ber 26, 2009 s ubject to approval of the Com mission. The existing shareholders have, however, depos ited full contribution as advance agains t the propos ed preference s hares . Salient features of the Preference S hares: Company / Issuer Fatima Fertilizer Company Limited (F atima o r the Company) a Public Limited Company inco rporated in Pakis tan under the Com panies Ordinance, 1984. Non-Voting, Non-Participatory, Convertible and Cumulative Preference Shares (Preference Shares or PS). To finance the capital expenditure of the Company and other business permitted by its Mem orandum and Articles of Association. Shareholders of the Company PKR 4,000 million PKR 10/- per s hare PKR 10/- per s hare D ate of dis bursement of the PS funds
Annualized cumulative dividends at Bas e rate + 3 % p.a. The Base Rate is defined as 6-months Karachi Inter-Bank Offered Rate
Instrument
Purpose
Proposed Investors Issue size Face v alue Issue price Issue date Dividend on PS
(KIBOR). KIBOR is defined as the Average rate, As k Side, for the relevant tenor, as publis hed on Reuters page KIBOR or as publis hed by the Financial Markets As sociation of Pakis tan in case the Reuters page is unavailable. The dividend on PS will be s et on the las t w orking day pre ceding the beginning of each year, for the profit due for that year.
25
Initial Public O ffering of Fatima Fertilizer Company Limited (The average rate is the average rate of the particular day) Accum ulation of Preferred Dividends
In case the profits in any year are ins ufficient to pay dividends on the PS, the
dividend on PS (together with any pre viously accum ulated and unpaid dividend) will be accumulated and payable in next year.
There w ill be no compounding on the accumulated dividends . No dividend on Ordinary S hares (OS) will be payable until all dividends on
Preferred S hares, including any and all arrears, have been paid. Call option and timing Call Price Sinking fund The Company may, at its option, redeem the PS at any time by giving at least 60 days prior written notice to the PS holders . Means the price at w hich PS s hall be redeemed and it is the face value of the preference share. The Company shall create a Sinking Fund reserve account from the profits of the Company. An y payments on accounts of the call option will only be made from the Sinking Fund reserve account created out of the profits of the Company. The Company will build up the reserve account as it considers appropriate to ens ure that it is sufficient to s ervice the exercis e of Call Option. PS holders will have the option to serve a notice to con ve rt the PS into the OS of the com pany within the Conve rs ion Period by pro viding w ritten notice to the Company. In this regard a 60 days prior w ritten notice will be given to the Company. The PS inves tors w ill have the option to s erve the Convers ion Notice after the end of the 2 years from the Issue Date of PS. The PS (at face value) will be convertible into OS at 20% discount on fair value of the ordinary s hare at the tim e of convers ion. Fair value shall be the w eighted average price of the ordinary shares as traded during the period of sixty days f rom the date of issuance of notice if s uch ordinary s hares are lis ted at that time, or as determined by one of the chartered accountant firms (i) KPMG Taseer Hadi & Co, or (ii) Ford Rhodes Sidat H aider , as selected by the Company, w ithin sixty days of iss uance of conve rs ion notice if such ordinary shares are not lis ted at that time. Dividends (together w ith any pre viously accumulated and unpaid dividend) on the Preference Shares accrued till the date of redemption or convers ion s hall be accumulated and be payable (w henever such dividend is declared and dis tributed by the Com pany at its dis cretion) to the Preference Shareholders existing at the date of s uch redemption or conversion. Fair Value Fair value shall be the w eighted average price of the ordinary shares as traded during the period of sixty days f rom the date of issuance of notice if s uch ordinary s hares are lis ted at that time, or as determined by one of the chartered accountant firms (i) KPMG Taseer Hadi & Co, or (ii) Ford Rhodes Sidat H aider , as selected by the Company, w ithin sixty days of iss uance of conve rs ion notice if such ordinary shares are not lis ted at that time. The Company w ill upon receiving the Conversion Notice from PS holders have the option to Call the PS for which Convers ion Notice has been is s ued and make paym ent to the PS investors th rough the Sinking Fund w ithin 60 days of receiving the Con ve rsion Notice or is s ue OS to PS holders . The con version of preference s hares shall be made at m arket value of ordinary s hares (if listed) less 20% discount. Fo r example the market value of ordinary s hare is PKR 20 and dis counted value is PKR 16 ( 20- 20*20% ) The number of ordinary s hares will be equivalent to the value of preference s hares (e.g PKR 4,000,000,000) divided by PKR 16 (i.e. dis counted fair value of ordinary shares).
Conversion Notice
Conversion Period
Conversion Price
Conversion Methodology
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Initial Public O ffering of Fatima Fertilizer Company Limited H ow ever, redem ption shall be on par value of preference shares . Inv estor Rig hts Inves tors in this Iss ue will enjoy the following rights : Preferred dividends Convers ion Option Preferential right of s ubs cription to this iss ue will be available to the exis ting ordinary s hareholders i.e. the ordinary s hareholders w ho are on the Companys m em bers register as on Novem ber 19, 2009. The preference s hareholders will have a right to receive annual and quarterly financial s tatements Transferable PS holder will have the option to convert the PS in to the OS of the Company in case any of the following event occurs : 1. 2. If the Com pany pa ys dividend on common s tock ahead of preference s hares; If the Com pany fails to honor the con version right of the preference s hareholders as m entioned in the Convers ion Notice, Convers ion Period, Con ve rsion Price and Con ve rs ion Methodology sections of this docum ent.
Transferability Conversion option in certain events
In case of any of the above events , the Preferen ce Shares (at face value) will be converted into com mon s hares @ 25% dis count to the fair value of the ordinary s hares at the tim e of convers ion. In such event, fair value shall be ascertained as des cribed in Con version Price above pro vided that the period for determ ining fair value if ordinary s hares are lis ted at that tim e s hall be 60 days prior to occurren ce of foregoing event and for as certaining fair value if ordinary shares of the Company are not lis ted shall be w ithin 60 days after occu rren ce of the foregoing events . Dividends (together with any previously accumulated and unpaid dividend) accrued till the date of convers ion s hall be accumulated and payable (w henever s uch dividend is declared and distributed by the Company at its discretion to the Preference Shareholders exis ting at the date of s uch convers ion. Preferred Liquidation Rig hts Anti dilutiv e adjustm ent provision In case of liquidation, the PS holders s hall be entitled to preferred liquidation rights , prior to the O rdinary Shareholders. If during the time between iss uance of the PS and two years from the date of s uch iss uance, the Com pany; a. Capitalizes profit or res erves; (is s ue bonus s hares); b. Iss ue ordinary s hares by way of rights, except fo r is suance of ordinary s hares of up to face value of Rs . 2 billion, or 10% of paid up capital of the Com pany (determined after iss uance of s uch shares), whichever i s higher, or ordinary s hares as a res ult of Initial Public Offering or otherwis e; c. Merger w ith another Company. The conve rsion price will be s ubject to appropriate adjus tment to reflect the change in intrinsic value of the ordinary s hares .
27
Illustration of Conversion of Preference Shares (PS) into Ordinary Shares (OS) in the Merged Entity Number of shares Fair value per share Fair value of equity
Ordinary shares of FFCL Preference shares of FFCL Total Fair Value of FFCL
A C
* *
B (B*80%)
= =
A*B C*(B*80%)
= A*B+C*(B*80%)
MERGER WITH COMPANY - X Value of merged entity
D A*B+C*(B*80%)
* +
E D*E
= =
D*E F
Fair value of preference shareholders in merged entity
(A*B)*100 F
The discount percentage applicable to conversion of PS into OS of merged entity
G*100 20
Preference shares shall be recorded at face value in merged entity redeemable at face value and convertible at a discount of H Per Share in merged entity.
Other Terms & Conditions
Fatima undertakes the following: 1. It will report compliance of the State Bank of Pakis tans Prudential Regulations until maturity of PS (i.e. either PS have been redeem ed or con verted to ordinary s hares ); Iss uance of PS has been approved b y the board of Fatima pass ed on October 27, 2009 via a Board Resolution and by the shareholders of Fatima through the appropriate s hareholders res olution(s ) pas sed on November 26, 2009; Obtain all relevant regulatory and corporate appro vals including but not limited to SECP.
2.
3.
(b) Name
D etails on Specie dividend paid by PFL to its existing shareholders: @50% 21 Sep 09 67,500,000 35,625,279 25,312,438 19,687,562 15,471,618 15,471,618 12,895,305 6,250,000 1,349,050 2,015,215 2,015,215 2,015,215 2,015,215 1,788,706 3,568,306 3,215,563 3,215,563
M/s Arif H abib Securities Limited M/s Fatim a Sugar Mills Limited Mr. Muhamm ad Arif Habib Mrs . Zetun Arif Mr. Fazal Ahmed Sheikh Mr. Fais al Ahmed Mukhtar M/s Fazal Cloth Mills Ltd Mr. Fawad Ahmed Mukhtar Mr. Rehman Naseem Mr. Fahd Mukhtar Mr. Ali Mukhtar Mr. Abbas Mukhtar Miss . Merai Fatima Mrs . Amb reen Fawad M/s Reliance Commodities (Pvt) Ltd Mr. Muhamm ad Yous uf Amir Mr. Abdullah Amir Fazal
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Initial Public O ffering of Fatima Fertilizer Company Limited Mr. Sadek Rehm an Mr. Am in Rehman Fazal Mrs . Niqhat Nas eem Mr. Sh. Naseem Ahmad G rand total 3,038,326 1,846,500 452,212 251,094 225,000,000
3.2
OPENING AND CLOSING OF THE PUBLIC SUBSCRIPTION PERIOD The pub lic subscrip tion will o pen at the co mmencemen t of busin ess hou rs on 27 Janu ary, 2010 and will clo se on 28 January, 2010 at the close o f business hours.
3.3
INVESTOR ELIGIBILITY FOR PUBLIC ISSUE Eligible investors include Pakistani citiz ens residing in Pakistan, companies, bodies corporate or other legal entities incorporated or established in Pakistan (to the extent permitted by their constitutive documents and existing regulations as the case may be); provident/pension/gratuity funds/trusts (subject to the terms of their Trust Deed and existing regulations) and branches in Pakistan of companies and bodies corporate incorporated outside Pakistan.
3.4
MINIMUM AMOUNT OF APPLICATION AND BASIS FOR ALLOTMENT OF SHARES OUT OF THE PUBLIC PORTION OF THE ISSUE The basis and conditions of allotment to the general public shall be as follows:
a) b) c)
Application for shares below the total value of PKR [] (Issue Price x 500 Shares) shall not be entertained. The minimum amount of application for subscription of 500 ordinary shares is PKR [] (Issue Price x 500 Shares) Applications for shares must be made for 500 shares or in multiples of 500 shares only. Applications which are neither for 500 shares nor for multiples of 500 shares shall be rejected. SUBMISSION OF FICTITIOUS AND MULTIPLE APPLICATIONS (MORE THAN ONE APPLICA TIONS BY SAME PERSON) IS PROHIBITED AND SUCH APPLICATIONS` MONEY SHALL BE LIABLE TO CONFISCATION UNDER SECTION 18-A OF THE SECURITIES AND EXCHANGE ORDINANCE, 1969. If the shares to be issued to the general public are sufficient for the purpose, all applications shall be accommodated. If the shares applied for by such applicants are in excess of the shares Offered, the distribution shall be made by computer balloting, in the presence of the representative(s) of KSE in the following manner: (i) If all the applications for 500 shares can be accommodated, then all such applications shall be accommodated first. If all applications for 500 shares can not be accommodated then balloting will be conducted among applications for 500 shares only. (ii) If all the applications for 500 shares have been accommodated and shares are still available for allotment, then all applications for 1,000 shares shall be accommodated. If all applications for 1,000 shares can not be accommodated then balloting will be conducted among applications for 1,000 shares only.
d)
e) f)
29
(iii) If all applications for 500 shares and 1,000 shares have been accommodated and shares are still available for allotment, then all applications for 1,500 shares shall be accommodated. If all applications for 1,500 shares can not be accommodated then balloting will be conducted among applications for 1,500 shares only. (iv) If all applications for 500 shares, 1, 000 shares and 1,500 shares have been accommodated and shares are still available for allotment, then all applications for 2,000 shares shall be accommodated. If all applications for 2,000 shares can not be accommodated then balloting will be conducted among applications for 2,000 shares only. (v) After the allotment in the above mentioned manner, the balance shares, if any, shall be allotted in the following manner: (a) If the remaining shares are sufficient to accommodate each application for over 2,000 shares, then 2,000 shares shall be allotted to each applicant and remaining shares shall be allotted on prorate basis. (b) If the remaining shares are not sufficient to accommodate all the remaining applications for over 2,000 shares, then balloting shall be conducted for allocation of 2,000 shares each to the successful applicants. g) If the Issue is over subscribed in terms of amount only, then allotment of shares shall be made in the following basis: (i) First preference will be given to the applicants who applied for 500 shares; (ii) Next preference will be given to the applicants who applied for 1,000 shares; (iii) Next preference will be given to the applicants who applied for 1,500 shares; and then (iv) Next preference will be given to the applicants who applied for 2,000 shares. h) i) j) k) After allotment of the above, the balance shares, if any, shall be allotted on a pro rata basis to the applicants who applied for more than 2,000 shares. Allotment of shares will be subject to scrutiny of applications for subscription of shares. Applications, which do not meet the above requirements, or applications which are incomplete, will be rejected. The employees of the Company have been given a preferential allocation of 7,500,000 ordinary shares under book building portion and 2,500,000 ordinary shares under general public portion. Employees will subscribe their book building portion at the strike price determined at the close of bidding period. Employees will also subscribe their public portion on the day of subscription;. If the employee quota remains unsubscribed, the remaining shares will be allotted to the general public. REFUND OF SUBSCRIPTION MONEY TO UNSUCCESSFUL APPLICANTS The Company shall take a decision within ten (10) days of the closure of subscription list as to which applications have been accepted or are successful and refund the money in cases of unaccepted or unsuccessful applications within ten (10) days of the date of such decision, as required under Section 71 of the Ordinance.
l)
3.5
30
As per sub-section (2) of Section 71 of the Ordinance, if refund as required under Subsection (1) of Section 71 of the Ordinance is not made within the time specified therein, the Company shall be liable to repay the money with surcharge at the rate of 1.5%, for every month or part thereof from the expiration of the 15th day and, in addition, to a fine not exceeding PKR 5,000/- and in case of continuing offense to a further fine not exceeding PKR 100/- per day after the said 15th day of which the default continues. Provided that the Company shall not be liable if he/she proves that the default in making the refund was not due to any misconduct or negligence on his/her part. 3.6 CREDIT AND DISPATCH OF SHARE CERTIFICATES The Company will dispatch share certificates to successful applicants through their Banker to the Issue or by crediting the respective Central Depository System (CDS) accounts of the successful applicants within thirty (30) days of the close of public subscription, as per Listing Regulations of the Stock Exchanges. Shares will be issued either in scrip-less form in the CDS of Central Depository Company of Pakistan Limited (CDC) or in the shape of physical scrips on the basis of option exercised by the successful applicants. Shares in the physical scrips shall be dispatched to the Bankers to the I ssue within thirty (30) days from the date of close of subscription list, whereas scripless shares shall be directly credited through book entries in the respective accounts maintained with the Central Depository Company of Pakistan (CDCPL) Limited. The applicants who opt for receipt of shares in scrip-less form in CDS should fill in the relevant columns of the Application Form. In order to exercise the scrip-less option, the applicant(s) should have CDS account at the time of subscription. If the Company makes a default in complying with the requirements of the Listing Regulations of the Stock Exchanges, it shall pay to the Stock Exchange a penalty of PKR 500/per day or part thereof during which the default continues. The Stock Exchange may also notify the fact of such default and the name of the Com pany by notice and also by publication in its Ready-Board Quotation. 3.7 3.7.1 TRANSFER OF SHARES Physical Scrips: The Company shall not refuse to transfer any fully paid share unless the transfer deed for any reason is defective or invalid under the provisions of Section 77 of the Companies Ordinance, 1984, provided that the Company shall within 30 days from which the instrument of transfer was lodged with it, notify the defect or invalidity to the transferee who shall, after the removal of such defect or invalidity be entitled to re-lodge the transfer deed with the Company. 3.7.2 Tran sfer under boo k entry system: The shares maintained with the CDS in the book entry form shall be transferred in accordance with the provisions of the Central Depositories Act, 1997 and the Central Depository Company of Pakistan Limited Regulations.
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3.8
SHARES ISSUED IN PRECEDING YEARS The details of the shares Issued by the Company in preceding years are as follows: No. o f shares 7 34,993 70,420,470 9,965, 000 494,609,178 168,449,185 150,000,000 906,521,167 1,800,000,000 Par value 10 10 10 10 10 10 10 10 10 Amount 70 349,930 704,204,700 99,650,000 4,946,091,780 1,684,491,850 1,500,000,000 9, 065,211,670 18,000,000,000 Consid eration Cash Cash Cash Cash Cash Cash Cash Cash Date of Issue 15 Dec 2003 27 Feb 2004 29 Apr 2006 20 Oct 2006 21 Nov 2007 31 Dec 2007 16 Apr 2008 21 Sep 2009
Other than the above mentioned shares, there have been no other shares issued since its incorporation. No shares have been issued or agreed to be issued for consideration other than cash. 3.9 PRINCIPAL PURPOSE OF THE PUBLIC ISSUE The principal purpose of the public issue is to partially meet the cost of the Companys fertilizer project. The detail of the project is given under part-5 of the Prospectus. Further the management has decided to list the shares of the Company on the stock exchange to broaden its investors base and invite general public to participate in the profits of the Company by providing them with an avenue of investment in the Company. 3.10 INTEREST OF SHAREHOLDERS None of the holders of the issued shares of the Company have any special or other interest in the property or profits of the Company other than as holders of the ordinary shares in the capital of the Company. Arif Habib Limited (AHL) is acting as Lead Manager and Book Runner. Mr. Samad A. Habib, the director and shareholder of the Company () is also director/CEO in AHL. Mr. Samad A. Habib may be interested in LM & BR fee to be paid to AHL. 3.11 DIVIDEND POLICY The rights in respect of capital and dividends attached to each share other than preference shares are and will be the same. The Company in its general meetings may declare dividends but no dividends shall exceed the amount recommended by the Directors. The Directors may from time to time pay to the members such interim dividends as appear to the directors to be justified by the profits of the Company. No dividends shall be paid otherwise than out of the profits of the Com pany for the year or any other undistributed profits. No unpaid dividend shall bear interest or mark-up against the Company. The dividend shall be paid within the period laid down in the Ordinance.
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3.12 ELIGIBILITY FOR DIVIDEND The Company in this matter will follow the provisions of Section 92 (2) of the Companies Ordinance 1984, which reads as under: "Th e sh ares b eing issued shall ran k pari-p assu with th e existin g shares o f the class in all matters, in clu ding th e righ t to such bonus or righ t issu e and divid end as may be declared by th e Company subsequent to the issu e o f such n ew sh ares". 3.13 DEDUCTION OF ZAKAT Income distribution will be subject to deduction of Zakat at source, pursuant to the provisions of Zakat and Ushr Ordinance, 1980 (XVIII of 1980). 3.14 WITHHOLDING TAX ON DIVIDENDS Dividend distribution to the shareholders will be subject to withholding tax under section 150 of the Income Tax Ordinance, 2001 at the rate of 10% as specified in part I, Division III of First Schedule to the said Ordinance or any time to time amendments therein. In terms of the provision of Section 8 of the said Ordinance, said deduction at source, shall be deemed to be full and final liability in respect of such profits. 3.15 EXEMPTION FROM CA PITAL GAINS Capital gains derived from the sale of listed securities are not liable to income tax pursuant to Clause (110) of Part 1 of the Second Schedule of the I ncome Tax Ordinance, 2001. This exemption is presently available up to the tax year ending June 30, 2010. 3.16 DEFERRED TAXATION Deferred tax is accounted for using the liability method in respect of all temporary differences at the balance sheet date between the tax base of assets and liabilities and their carrying amount. Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that the temporary difference will reverse in the future and the taxable profits will be available against which the temporary differences can be utilized. The carrying amount of deferred tax asset is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow deferred tax asset to be utilized. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on the tax rates that have been enacted or subsequently enacted at the balance sheet date. The Company has booked no deferred tax asset/liability as of June 30, 2009.
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3.17 FEDERAL EXCISE DUTY, CAPITAL VALUE TAX (CVT) & WITHHOLDING TAX ON SALE/PURCHASE OF SHARES
a)
Following the announcement of the Federal Budget 2009-2010, the government has imposed 16% Federal Excise Duty (FED) on stock brokerage under the provision of Section 7 of the Act S.R.O 475 (I)/2009 dated June 13, 2009 whereby value of excisable services for the purpose of levy of duty shall be the gross commission charged from clients in respect of purchase or sale of the shares in the Stock Exchanges. Moreover, it has been announced in the Federal Budget 2009-2010 that 0.02% Capital Value Tax (CVT) on transaction of shares of listed companies shall be abolished. 0.01% Withholding Tax will be charged on the sale of all shares, Modaraba certificates and instruments of redeemable capital as defined in the Ordinance.
b)
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PART 4 4 4.1 UNDERWRITING, COMMISSIONS, BROKERAGE AND OTHER EXPENSES UNDERWRITING Book Bu ild ing Po rtion Arif Habib Limited has been mandated to act as the Book Runner & Lead Manager to the Issue. The Book Runner will underwrite the Book Building Issue (portion) of 150 million Ordinary Shares of the Issue within two (2) working days of the closing of the bidding period at the strike price determined through the book building process. In the opinion of the Directors, the resources of the Underwriter are sufficient to discharge their underwriting commitments. Public Po rtion The Public portion of the Offer of 50 million shares will be underwritten within ten (10) working days after the closing of bidding period. Names and number o f shares underwritten b y each o f the underwriter shall be disclo sed in the fin al Prospectu s. 4.2 UNDERWRITING COMMISSION The underwriter will be paid an underwriting commission at the rate of 0.25% on the amount of Book Building portion underwritten by the Book Runner. In addition to the underwriting comm ission, the Book Runner will be paid a take-up comm ission @ 1.00% of the amount taken up. The commission to be paid to the underwriters for underwriting the public portion shall be decided after the closing of the Book Building and will be disclosed in final Prospectus. 4.3 COMMISSION TO THE BANKERS TO THE ISSUE Commission at the rate of 0.25% of the amount collected on allotment in respect of successful applicants will be paid by the Company to the Bankers to this Issue for services to be rendered by them in connection with this Public Issue, plus out-of-pocket expenses, if any. 4.4 BROKERAGE For this I ssue, brokerage shall be paid to the members of KSE, LSE and ISE at the rate of 1.0% of the value of shares actually sold through them. No brokerage shall be payable in respect of shares taken up by the Underwriters by virtue of their underwriting commitments.
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4.5
LEAD MANAGER AND BOOK RUNNER REMUNERATION/EXPENSES The Lead Manager and Book Runner will be paid remuneration of PKR 10 million excluding the underwriting commission & take-up commission for underwriting the Book Building Portion of the Issue.
4.6
PRELIMINARY EXPENSES Preliminary expenses are estimated to be PKR 2,000,000/-. The breakup of these preliminary expenses is given below:
Particu lars Printing of Memorandum and Articles of Association and other printing expenses Marketing expenses To tal 4.7 ESTIMATED EXPENSES OF THE ISSUE
Amount (PKR) 500,000 1,500,000 2,000,000
The expenses of this Issue are estimated to be PKR 67,250,000 (including underwriting and take-up commission). Exp en se Underwriting commission book building Underwriting commission general public Take up commission Bankers to the I ssue commission Brokerage to members of the stock exchange LM & BR fees Printing, publication and notice costs KSE fees and listing charges CDC fees and deposits CDC fresh Issue fees SECP Application and processing fee Legal & professional fees Balloting agent Marketing expenses Miscellaneous cost TOTAL Rate 1.00% 1.00% 1.50% 0.25% 1.00% 0.50% Amount (PKR) 15,000,000 5,000, 000 7,500, 000 1,250, 000 20,000,000 10,000,000 1,000, 000 2,500, 000 100,000 100,000 100,000 1,000, 000 1,200, 000 2,000, 000 500,000 67,250,000
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PART 5 5 5.1 HISTORY AND PROSPECTS THE COMPAN Y Fatima Fertilizer Company Limited (Fatima or the Company), was incorporated in Pakistan on December 24, 2003 as a non-listed public company under the Companies Ordinance, 1984. The certificate of commencement of business was obtained on March 30, 2004. The registered office of the company is located at 2nd Floor, Trust Plaza, L.M.Q. Road Multan. The main object of the Company is the production and sale of chemical fertilizers and its byproducts. Other objects of the company have been set out in the Memorandum of Association of the com pany. 5.2 THE SPONSORS
5.2.1 The Fatima Group The Fatima Group (FG) is one of the leading corporate groups in Pakistan. FG comprises of Pakarab Fertilizers Limited, Fatima Fertilizer Company Limited, Fatima Sugar Mills Limited, Reliance Weaving Mills Limited, Fazal Cloth Mills Limited, Reliance Commodities (Pvt.) Limited and Fatima Energy Lim ited. The individuals at the helm of affairs of FG are very well versed in all phases of running a business that is setting-up, operating and managing large industrial units and also enjoys good business relations with different trading houses all over the world. These factors have contributed significantly towards the progress of FG and the turnover has increased sharply over the years and has also acquired a sound segment of the international trade. FG has over the years acquired the experience of managing businesses in different sectors including Fertilizer, Textile, Sugar, and Foreign Trade. The Sponsors have been engaged in various industrial and trading businesses since 1936 and over the years, the market reputation, financial standing, and strength of the Group has grown. 5.2.2 The Arif Habib Group The Arif Habib Group ranks amongst the fastest growing blue-chip conglomerates in Pakistan. It has an enviable brand franchise built on stakeholder trust, better returns for the public shareholder and its orientation towards continuous investment in staff, systems and service capacity. Good corporate governance and insistence on the voluntary adoption of global best practices are two additional themes that set the Group apart from its competitors. The Group operates through its holding company Arif Habib Securities Limited (AHSL). AHSL is amongst the top performing companies listed at the Karachi Stock Exchange. On account of its good corporate performance, AHSL has won the prestigious Top Companies Award in each year since its listing at the KSE. The Group has, over the years, built up a strong capacity to identify and develop successful business ventures, implementing turnarounds, and generating super-normal returns in variety of market conditions. Its joint ventures with reputed business groupsboth Pakistani
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and multi-nationalare testaments of the Groups ability to identify opportunities, assemble strong consortia, and create value for stakeholders. Many of the private equity investments made by the Group have involved participation in privatization of state owned enterprises. The financial and management strength of the Group enables it to qualify, on a stand-alone basis, as eligible bidder for big ticket privatizations. The Group has successfully acquired large fertilizer and cement plants through privatizations. Group entities operating across the entire spectrum of the Pakistan financial services industry provide unparalleled expertise and synergies that help ensure success of the sponsored ventures. The Group holds controlling or substantial interests in successful companies competing across the securities brokerage, investment and financial advisory, investment management, commercial banking, commodities, private equity, cement, real estate, steel, and fertilizer industries. The Group Chairman, Mr. Arif Habib has served as the President / Chairman of the Karachi Stock Exchange six times in the past, and has been instrumental in introducing a number of reforms including introduction of Central Depository System, computerized trading and risk management system. He is the Founding Member and Former Chairman of the Central Depository Company of Pakistan Limited. He has served as Member of the Privatization Commission, Board of Investment, Tariff Reforms Commission and Securities & Exchange Ordinance Review Committee. The Arif Habib Group structure is mentioned as follows:
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5.3
THE PROJECT Fatima Fertilizer Company Lim ited is a fully integrated fertilizer complex of Nitro Phosphate (NP), Nitrogen Potassium Phosphate (NPK), Calcium Ammonium Nitrate (CAN) and Urea plants with off sites and utilities. The Project envisages achieving an optimal balance between the production of NP, NPK, CAN and Urea, while aiming to fully exploit the synergies in marketing the four products. Fatima Fertilizer has signed a Gas Sale and Purchase Agreement (GSPA) with Mari Gas Company Limited, which was finally approved by Oil and Gas Regulatory Authority (OGRA). The tenor of GSPA is of ten years from the date of commissioning extendable for other periods as mutually agreed. The price will be determined as per the provisions of the Fertilizer Policy 2001. For feed stock, the price is fixed at US cents 70 per MMBTU whereas the pricing for fuel gas will be the same as for other industrial consumers in the country. The total installed capacity of the project is 1.58 million tones. The required gas of 110 MMCFD has been allocated by Government of Pakistan from Mari Gas fields. Total cost of the Project is US$ 701 million (Capital cost of per tons capacity of the Project comes to US$ 443) equivalent to Pak Rupees 59. 24 billion, which has been financed through debt of PKR 33. 00 billion and equity /subordinated loans of PKR 26.24 billion. The Sponsors have fully subscribed the ordinary share of PKR 18.00 billion and paid Rs. 4.00 billion to the Company as shares subscription money against the issuance of cumulative redeemable/convertible Preference Shares as of November 2009.
5.4
PROJECT LOCATION The plant is located at Mukhtar Garh, Sadiqabad, Rahim Yar Khan, Punjab, Pakistan on an area of 948 Acres of freehold land.
5.5
PLANT CAPACITY Brief design and projected capacity specification of the plants, the licensor/manufacturer and the origins are provided as follows: Annu al design cap acity (Mt.) Mech an ical Comp letion Oct-2009 Oct-2009 Oct-2009 Oct-2010 Oct-2009 Oct-2010
Licensor/manufactu rer Kellogg, U.K & Sojitz Corporation, Japan UHDE, Germany Stamicarbon/Kawasaki/Sojitz Corporation, Japan CFIh, France UHDE, Germany CNCEC China & CFlh, France
Expected Commercial Production Dec-2009 Jan-2010 Jan-2010 Jan-2011 Nov-2009 Jan-2011
Ammonia Nitric Acid Urea NP CAN NPK
500,000 500,000 500,000 360,000 420,000 300,000
The commissioning of the Ammonia Plant (which required commencement of provision of contractual quantities of natural gas by Mari Gas from the first delivery date under the GSPA), has commenced from Novem ber 27, 2009; It is expected that such commissioning would be completed within December 2009;
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The commissioning of the Urea Plant, which is dependent on commissioning of the Ammonia Plant, is expected to commence in December 2009 or early January 2010, and upon successful commissioning of the Urea plant, commercial production is also expected to commence by end of January 2010; Ammonia Plant and Nitric Acid Plant will produce intermediary products i.e Ammonia and Nitric Acid. The Urea Plant, CAN Plant, NP Plant and NPK Plant are dependant on Ammonia and/or Nitric Plant and these four plants can operate simultaneously/independently; The CAN Plant has already commenced its production in November 2009.
5.6
PROJECT COST & MEANS OF FINANCING The actual project cost incurred as of 30 June 2009 is PKR 48,242 million as against the total cost of PKR 59,238 million. A b rief summary of th e Pro ject cost is given b elo w: Estimated (PKR millio n) 340 4,188 44,693 7,350 569 2,098 59,238 Actu al Jun e 30, 2009 (PKR millio n) 366 3,982 36,562 4,456 494 2,382 48,242 %age of actual cost against estimated 107% 95% 82% 61% 87% 114% 81%
Description Land Buildings and Structures Plant and Equipment Interest during Construction Commitment/arrangement/ monitoring fee Working Capital, Pre-operating Expenses, fees, commissions and others Total Mean s o f financing are as u nd er:
Descrip tion Equity Ordinary Shares Sponsors Issued, subscribed and paid up capital Deposit for shares IPO/Pre-IPO Cumulative redeemable/convertible preference shares Subordinated loans
Estimated (Rs) millio n
Actu al June 30, 2009 (Rs) millio n
% o f actual co st incu rred again st estimated co st
18,000 18,000 2,000 20,000 4,000 2,238 26,238
8,935 11,1031 20,038 20,038 - - 20,038
100%
76%
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Debt Long Term Syndicated Loans Commercial and new facility (CF & NF) Pakarab Fertilizers Limited To tal
23,000 7,900 2,100 33,000 59,238
23,000 5,204 28,204 48,242
100% 66% 85% 81%
1 The ordina ry shares of Rs. 9,065 million out of the a bove bala nce have been issued by the Company subsequent to June 30, 2009 a nd the remaining balance of Rs. 2,038 million will be util ized for issuance of redeemable preference shares; 2. Deposit for cumulative redeemable/convertible preference sha res; 3. Certain Letters of credit issued on behalf of Fatima have been guara nteed by Paka rab and it is intended that funding for their retirement shall be provided by Pakarab. On such retir ement the funds adva nced to Fatima shall be in the form of subordinated loa ns to Fa tima. For details please refer to Para 8.11.3; 4. Includes paya ble s for im ported g oods & services of PKR 1.3 billion a nd Mark-up on long term loa ns of PKR 2.3 bil lion capitalized in Pla nt and Machinery; 5. Syndicates include: Habib Bank Limited, Nationa l Ba nk of Pakistan, United Ba nk Limited, Allied Bank Limited a nd Faysa l Bank Lim ited.
5.7
PLANT AND MACHINERY
Plant and Machinery costs comprised of six main plants, Off-sites & utilities and engineering & project management services. World reputed firms have provided technical services for the integration and smooth operation of the whole complex. Detail of plant and machinery is as under:
Desi gn capacity (M TPA) Technology/Lice nsor/ Manufacturer/Supplie r %age Value Shi pped/ shipped/ arri ve d arri ved at site at site NEW PLA NT AND MACHINERY Estimated Cost (PKR Million) 8,643 4,385 7,011 466 Ammonia5,000 tons and Nitric Acid-7,600 m3 100% 0% 99% 8643 6941 %age Installed Value Installed Yet to be shipped Last shi pment to arrive
Desc ripti on
Urea NP
1
500,000 360,000
Stamicarbon/Kawasaki/ Sojitz Corporation Japan CFIh, France
100% 0% 97%
8643 6,801
4,385 70 October 2010 December 2009
Offsite and 2 Utilities Enginee ring Services Storage Tanks Project M anagement Services Electric al and Instrume ntation Raw water pumping station Product Handling system M iscellaneous Capital Spares Railway Siding
1 2
Officine Maraldi, Italy and Flow Serve, Austria
586
100%
586
100%
586
Sojitz, Japan
618 2,502 98% 98% 2452 499 98% 90% 2,452 458 50 10 January 2010 November 2009
KSB Pumps
509
CNCEC , China
1,560 876 559
100% 100% 51% 88%
1560 876 254 779
83% 100% 0% 88%
1,295 876 779
305 102 June 2010 June 2010
RAI LCOP, SNGPL
881
Plant a nd equipment including vessels, pipes, e xchanges and c ompressors Small value items including spares for plant, valves, etc
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and Gas 3 pipeline s REFURBISHED PLANT A ND MACHINERY Ammoni a
4
500,000 500,000 420,000 420,000
Kellogg, UK, Sojitz Corporation Japan UHDE, Germany UHDE, Germany CNCEC China, CFIh France
5,946 3,494 1,273 548
98% 99% 99% 89%
5822 3459 1260 488
98% 99% 99% 0%
5,822 3,459 1,260 -
124 35 13 60
Nitric Aci d CAN NPK

5
December 2009 November 2009 January 2010 October 2010
Hedging Cost Total
Forei gn Exc hange Rate vari ation cost 4,836 44,693 33,619 32,431 5,154
Note: Calculation of percentage of plant & machinery ins talled, shipped/arrived at site and yet to be s hipped: D escription Plant & Machinery Shipped/arrived at site Plant &Machinery to be s hipped Plant & Machinery ins talled
a
Percentage (33,619 / 38,773a = 86.71%) (5,154 / 38,773=13.29% ) (32,431 / 38,773=83.64%) 86.71% 13.29% 83.64%
44,693 ( 466+618+4,836) = 38,773
Significant items included in offsite and utilities are as follow s:
Description Power Plant Heat Recovery Steam Generator Cooling Tower De-erator/Water Treatment Nitrogen System Pipes/Bulk Material etc
Design cap acity 56 2X75 53,000 1,600 300
Unit of Tech no lo gy/Licen so r/ measuremen t Manufacturer/Supp lier MW t/h m3/h m3/hr Nm3/h GE Oil & Gas, Italy Del Tek, China SPIG S. P.A. Piazza, Italy Saline Water Systems, Italy Linde Cryoplants, UK
Co ndition New New New New New New
Estimated cost (PKR millio n) 1,340 528 424 639 141 2,620
Note 5.7.1: Imported Plant and Machinery constitutes about 98% of the total plant & machinery. Note 5.7.2: NP Plant constitutes 9.81% of the total cost of machinery.
3 4
Railway siding and accessories Small value items like gaskets and spares et c 5 Small value items like shafts and valves etc 6 Structures, bolts, instrumentals and paints etc
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5.8 5.8.1
PLANT INFORMATION Urea Plan t The new urea plant is based on latest Stamicarbon Technology System 2000 plus with patented safurax material using Total Recycle, carbon dioxide stripping with pool reactor process (approximately 66 percent of new Urea plants in the world are based on this technology). Kawasaki Plant Systems Ltd. Kobe, Japan, as the nominated subcontractor under the agreement with Sojitz has procured & supplied the plant and technology. M/s Stamicarbon is the licensor of Urea Plant in favor of FATIMA. Sojitz Corporation has supplied the Urea plant and provided the engineering services and process guarantees for Urea Plant.
5.8.2 NP Plant The plant is brand new and based on modern European technology. CFIH has significantly completed the basic engineering and detailed engineering is at advance stage of completion. When commissioned, the plant will be capable of producing 1200 MT of NP per day. Ordering of machines and equipments is being made on the basis of detailed engineering. The plant has been designed to use low grade rock phosphate in order to maximize profitability. 5.8.3 CAN Plan t The CAN Granulation Plant was designed and manufactured by Uhde GmbH and has been relocated to Pakistan. The plant remained in operation from 2000 to 2002. Since the plant has actually been operated for only two years, it is still in very good condition. The production capacity of CAN granulated product is 1,400 MT per day. 5.8.4 NPK Plan t It consists of an Ammonium Nitrate plant and a NPK granulation plant. The plant is based on latest pipe reactor technology and is being re-engineered, constructed and installed by CNCEC. The plant has the capacity to produce 1,000 MT per day of NPK fertilizer. 5.8.5 Ammon ia Plant M/s. Kellogg, Brown and Roots (KBR) has given license and also conducted basic engineering of Ammonia Plant under an agreement with Sojitz Corporation. The plant stopped production in 2000 due to economic reasons. When operational, the plant was producing 1,500 to 1,700 MT ammonia per day. Stone & Webster (Shaw Energy) has completed the detailed engineering of ammonia plant. The machines and equipment of Ammonia plant have been refurbished/ revamped by General Electric and Maintenance Partners. Refurbishment has substantially mitigated operational risks of the relocated plant. Sojitz Corporation has provided performance guarantee for the plant. 5.8.6 Nitric Acid plant The NA plant was designed and manufactured by Uhde GmbH, Germany and relocated to Pakistan. The plant remained operational up to 2002 after which it was shut down due to
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economic reasons. The plant is based on latest dual pressure UHDE technology and was designed by UHDE Germany. UHDE, the original manufacturer and licensor of the plant has re-engineered the plant for operation at FATIMAs site conditions. 5.8.7 O & U/Power Plant/Water Treatment/boilers/ Nitrogen Air etc. Plants and equipment that have been installed for O&U, power production, water treatment, boilers and Nitrogen air etc are all new. 5.9 Mach inery Supp liers/En gin eers So jitz Corporation , Japan The Sojitz Group was formed through the business integration between Nichimen Corporation and Nissholwai Corporation, two companies with over a century of history. Sojitz is one of the largest trader in the Asian region in areas extending to methanol, PTA, industrial salt, and the fertilizer businesses. Keeping in view rich profile of Sojitz Corporation in Chemical area, the contracts of manufacture and supply of new Urea Plant, basic engineering of Ammonia Plant and Project Management Services (PMS) were awarded to Sojitz Corporation. Sojitz Corporation is the licensor of MW Kelloggs technology used in the Ammonia Plant and performance guarantor of Ammonia plant installed at Fatima Fertilizer. M. W. Kellogg M. W. Kellogg as the nominated subcontractor under the agreement between Sojitz Corporation and Fatima is on the leading edge of ammonia plant technology. M. W. Kellogg ammonia plants have long been recognized worldwide for their superior performance and serving as a cornerstone of the nitrogen fertilizer industry. M. W. Kellogg is renowned for designing ammonia plants that set industry standards for safety and reliability. All aspects of safety and reliability are thoroughly addressed in its design and operating procedures. This responsibility is incumbent on all disciplines during the Project execution. M.W Kellogg conducted the basic engineering of Ammonia Plant and Sojitz Corporation is the licensor of MW Kellogg s technology used in the Ammonia Plant, and is the licensor and performance guarantor of Ammonia plant installed at Fatima Fertilizer. Stamicarbon of Neth erland B.V Stamicarbon is the licensing subsidiary of DSM, a leading producer of life science products, performance material and industrial chemicals, headquartered in the Netherlands. The company sells license know-how and related services to the chemical process industry and has vast number of the projects in the diversified field including fertilizers, polyethylene, caprolactam, phenol, melamine, EPDM-rubber, mercury removal from gas condensates and butadiene to ethyl benzene. Stamicarbon specializes in the licensing of urea with more than 220 projects and a global share of nameplate capacity of approximately 70%, Stamicarbon is world market leader in Urea technology. Stamicarbon is Technology provider of Urea Plant for Fatima Fertilizer.
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Kawasaki Plant Systems (KPS), Ltd ., Kob e, Japan Kawasaki internationally deals in Engineering, Manufacturing, Fixing, Maintaining and Selling of many kinds of plants. Its primary area of expertise revolves around guiding its customers about environment protection, , energy saving, higher productivity, overseas procurement, project management, quality control, examination & check-up, maintenance, and controlling system of technology. KPS, as the nominated subcontractor under the Sojitz Agreement, is responsible for Project Management Services (PMS) and procurement of Urea Plant with Sojitz Corporation.
Ch ina Nation al Chemical Engineering Co rporation (CNCEC), Chin a CNCEC is a large comprehensive corporation directly administered by the State Council of China. The Company has diversified exposure in the fields of Fertilizer, Petrochemicals, Oil Refinery, Power, rubber, Fine Chemical and Mines etc. CNCEC has completed more than 90% projects of Chinas chemical projects, 60% of petrochemical plants, 30% of refineries as well as a number of projects in power, construction, environment protection, etc. CNCEC is responsible for the Civil Construction, Mechanical Construction and Commissioning of Fatima Project.
UHDE GmbH With more than 2,000 plants to its credit, UHDE is one of the worlds leading engineering companies in the design and construction of chemical, refining and other industrial plants. UHDE has subsidiaries and associates located all over the w orld. This worldwide network with over 4,300 employees is active in a number of different fields like; fertilizer plants, refining technologies, organic intermediates and polymers, electrolysis plants, gas technologies, plants for oil, coal and residue gasification, coke plant technologies and pharmaceuticals. UHDE offers not only cost- effective high-tech solutions in industrial plant construction and the entire range of services associated with an EPC contractor but also comprehensive service packages for the entire life cycle of the plants. UHDE has been assisting Fatima in implementation of Nitric Acid (NA) and Calcium Ammonium Nitrate (CAN) Plants and is also helping with the implementation of Clean Development Mechanism (CDM) for Fatima Project and is providing technology and certain plant for the abatement of certain greenhouse gases.
Mitsubishi Co rporation (MC), Japan MC is Japans largest general trading company (sogo shosha) with over 200 bases of operations in approximately 80 countries worldwide. Together with its over 500 group companies, MC employs a multinational workforce of approximately 48,000 people and has operating transactions of US$ 160 billion for the year 2005. MC has long been engaged in business with customers around the world in virtually every industry, including energy, metals, machinery, chemicals, food and general merchandise. MC has world experience of pollution abatement of N2O and NOx and has worked with the group for completion of project at Pakarab Fertilizers, which is first project in the country and second in the world in the fertilizer field.
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MC is assisting in im plementation and registration of Fatima CDM Project with United Nations. 5.10 BUILDINGS AND STRUCTURES Building and structure has been completed except for NP, NPK and Product Handling. The work at Product Handling is at advance stage of completion. Civil work at NP plant has also started. Actual cost incurred up till June 30, 2009 is PKR 3.982 billion representing 95% of the total estimated cost. 5.11 OFFSITES AND UTILITIES 5.11.1 Power The plant has its own gas fired power generation facility of 56 MW, sufficient for power needs of the Project. 5.11.2 Gas Natural gas of 110 MMCFD has been allocated to the company from Mari Shallow Reservoir under Fertilizer Policy, 2001. Pipeline of 47 Km has been commissioned. 5.11.3 Water Line installation completed. Water filling of the line is started under gravity. 5.11.4 Raw Material Fatima Fertilizer complex requires basic raw materials like Natural Gas and Rock Phosphate. - Natural Gas: its usage can be categorized into (a) as primary raw material for manufacturing of nitrogenous fertilizers and (b) as fuel to facilitate fertilizer manufacturing process. Long term gas supply agreement has been executed with Mari Gas Company Limited for uninterrupted gas supply. Furthermore, EPC contract has been executed with SNGPL to construct dedicated 20 gas pipeline of 47 km from Mari gas field to the complex which has been completed and commissioned. - Phosphoric Acid / Rock Phosphate: Phosphate Fertiliz er manufacturing companies have been importing rock phosphate into Pakistan. Therefore handling facilities at ports already exist and Pakistan railways and road transporters are well experienced. Fatima Fertilizer does not foresee any problems in handling Rock Phosphate. It will provide all necessary facilities at its plant site for this purpose. The supply agreement for Rock Phosphate is under negotiation and is expected to be finalized shortly.
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5.12 PROJECT IMPLEMENTATION SCHEDULE Acquisition of land Civil work Completion of arrival o f mach inery Completion of erection/installation o f machinery Acquired 97% completed except NP and NPK plants All plants 100% arrived at site except NP plant. All plants are 99% complete except NP and NPK plants The CAN plant has already been commissioned and has started its production. The Project will achieve commissioning of the Ammonia Plant by end of 2009 and of the Urea plant by January 2010; Significant plants of O& U including power plant, Steam Generators, Nitrogen System, Natural Gas and water facilities have already commissioned; The NP plant will be commissioned by fourth quarter of 2010 and subsequently the NPK plant will be commissioned. The Mechanical Completion dates and expected Commercial production dates have been described in Para 5.5 above.
Plan t Commissionin g
5.13 CURRENT STATUS The Project except for the N P and NPK Plants is currently about 99% complete and pre commissioning and commissioning activities are progressing well as per schedule. Milestones like setting up and installation of the Fire water system, Natural Gas pipeline, raw water system and Power plant has been successfully com pleted and now water, gas and power is available at site. Different plants are at various stages of completion and about PKR 48 billion has already been invested in the Project. The Project has achieved significant progress and will achieve commissioning of the Ammonia, Urea CAN 2009. Significant plants of O& U have already commissioned. The NP plant will be commissioned by fourth quarter of 2010 and subsequently the NPK plant will be commissioned. 5.14 Clean Development Mechanism The Management is endeavoring to get CDM Project of the Company registered with the United Nations for Carbon Credits to generate revenue from CERs. It is expected that about 1.3 Million CERs per annum will be accrued from the start of the project up to 2020. MC is assisting in implementation and registration of Fatima CDM Project with United Nations. UHDE is providing technology and equipment and also helping with the implementation of Clean Development Mechanism (CDM) for Fatima Project 5.15 SECTOR REVIEW The sector has witnessed a CAGR of 5. 8% in the last 5 years and is expected to depict a m ore robust growth. Limited supply side internationally may also add to the growing prices of the fertilizers, which are already at their peak throughout the world, followed by closure of fertilizer plants in North America. Locally, industry is expected to prosper with prudent SBP policies supporting agriculture credit, increase in cultivable land by construction of dams, canals and placement of tube-wells and higher support prices for the crops.
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UREA MARKET 281k tonnes was imported in 2006-07 to meet the 181 kt (2007-08) shortfall. Local production was 4.7 million tonnes in 2006-07 versus 4.8 million Tonnes in 2005-06 Prices have increased at an average rate of 5.0% per annum in the last decade. Average price of Urea increased by 25.5% during 2007-08.
PHOSPHATES MARKET Industry sales increased by 15-% in 2006-07 vs 2005-06. 23% in 2007-08 vs 2006-07. Industry import of phosphates was 1,023 kT in 2006-07 to meet the local requirement. 1217 K (2007-08). DAP prices averaged US$ 1,163.8 (2007-08).
Peer comp arison : Pro duction capacity/ Cu rrent capacity (million tonnes) Urea DAP CAN NP NPK Key financials 'millio n' As on December 31, 2008 To tal assets Paid-up capital To tal liability Fin an ce co st Equity Cash balan ces FFC 2.38 FFC 31,919 6,790 19,634 3,847 14,140* 8,873 FFBL 0.65 0.68 FFBL 46,772 9,341 36,285 2,792 10,486 7,942 ENGRO 2.28 0.16 ENGRO 60,289 2,970 9,125 1,509 25,609** 1,872 Dawood Hercules 0.45 Dawood Hercules 25,630 1,094 8,247 901 17,382 934 Pak Arab 0.09 0.45 0.30 Pak Arab 45,523 3,000 20,442 2,296 11,976 85 Fatima Fertilizer 0.50 0.42 0.36 0.30 Fatima Fertilizer 48,783 8,935*** 28,938 5 19,884 235
*FFC equity is inclusive of bonus share **ENGRO's equity is inclusive of right shares *** Paid up capital of the Company as on June 30, 2009 is P KR 18 billion
Key ratios Gross margin Net margin Return on equity (ROE) Debt:Equity Cu rrent ratio To tal asset tu rnover Divid end yield Price to earning
Sourc e: AHL Research
FFC 40.40% 21.33% 53.11% 30:70 0.82 0.96 9.34 8.12
FFBL 30.67% 10.81% 26.87% 49:51 1.09 0.57 6.79 10
ENGRO 26.57% 18.18% 16.56% 55:45 2.55 0.39 1.13 15.25
Dawood Hercules 42.00% 41.00% 17.62% 32:68 1.28 0.29 1.76 N/A
Pak Arab 66.23% 37.54% 59.20% 56:46 1.14 0.41 N/A N/A
Fatima Fertilizer N/A N/A N/A 56:44 0.12 N/A N/A N/A
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5.16
RISK FACTORS Apart from the above mentioned strengths, the management has also considered some other risk factors associated with the project. These risk factors and t heir mitigating factors are described as follows: Risk o f Cost Overruns The Project cost of FATIMA is PKR 59,238 million out of which plant and equipment cost accounts for approximately PKR 43,812 million. As certain components of the Project cost were estimated based on certain assumptions, any change in these assumptions may result in increasing the Project cost in turn impacting the viability of the Project. Mitigant: Since the Project is nearing completion and most of the plant machinery and equipment other than for the NP Plant are already on the site, the risk of cost overrun is expected to be minimal. Risk o f Delayed Implementation of th e Pro ject As the Project envisages supply of plant and machinery from different suppliers, delay or failure of commitment by any supplier or contractor to complete its assigned responsibility will lead to delay in the Projects commissioning. Mitigant: Plant and machinery except for NP Plant is already on site and erections/installation of the plants other than NP and NPK Plants have been substantially completed; there is no risk of delay resulting from the shipping and supply. Risk o f Inefficien t Integration The Project entails setting up of an integrated fertilizer complex which has been setup for production facilities for manufacturing 2 intermediate products i.e. ammonia and nitric acid, the production of which will have to be integrated with the production of end products i.e. Urea, NP, NPK and CAN. Any problem in the integration will impact the overall production of the plant. Mitigant: In order to minimize the integration problems, the Company has executed project management contracts with renowned and experienced com panies like Sojitz Corporation Japan, who are supported by Kawasaki Plant Services Japan as a nominated subcontractor. The experience of these companies is expected to result in smooth implementation of the Project. Further, construction of the entire Complex is entrusted to CNCEC. It is also pertinent to mention that the challenge of integration essentially lies in designing off-sites and utilities in a manner that all the six plants continue to operate at optimum capacity; otherwise all the six plants are capable of running on their own (apart from the Ammonia plant whose output is required for NA, Urea, NP, and CAN plants). The above measures serve to largely mitigate the integration problem related to the Project.
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Physical Damage and Lo ss of Pro perty Risk There is a risk that the Project suffers physical damage as a result of an accident or otherwise, during construction Mitigants: Appropriate insurance covers are in place. The Sponsors have appointed Marsh, the worlds leading risk and insurance services firm as their insurance managers and obtained requisite project insurance during construction. Moreover, Miller Consulting Services has advised upon adequacy of types and quantum of insurance arrangements for the Project. Commissionin g Risk The risk that the Complex once installed may not meet expected performance levels. Mitigants: The representatives of the licensors, integration engineers, re-engineering companies, vendors project management service providers and Stone & Webster (who are technical advisors to financial institutions) are available during the construction pha se of the Project. The performance tests are being conducted in the presence of the above mentioned experts. I f a test fails, remedies to a certain extent are available in the respective contracts in the form of liquidated damages and make good clauses. CNCEC is also responsible for commissioning the entire Project under the advice of the licensors and the integration engineer. Regulato ry Risk Regulatory risk relates to uncertain GOP policies affecting the industry in the future. Changes in the regulatory framew ork can greatly influence the performance of any sector. Mitigants: GOP has already developed Fertilizer Policy 2001 to promote this sector. Moreover, it is also expected that in order to support this new industrial segment and to promote local production of fertilizer, the GOP may introduce further favorable regulatory framework which in return contribute towards agricultural growth of the country. Power Risk Electricity Shortage in the supply of electricity can adversely affect the production capacity of plant. Mitigants: The plant has its own gas fired power generation facility of 56 MW therefore the risk of shortage of electricity are minimal. Natural Gas Natural gas is used as raw material in the production of fertilizer. Shortage in the supply of Natural gas can adversely affect the production capacity of plant.
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Mitigants: GOP has allocated 110 MMCFD gas to the company from Mari Gas Shallow Reservoir dedicated to fertiliz er sector for supply of gas without any interruption and curtailment. Instru ment Sp ecific Risks Under Subscription Risk This is the risk that the public offer may get under-subscribed on account of lack of investor interest. Mitigant: This risk is mitigated by strong performance of the fertiliz er sector in t he past due to virtually guaranteed demand of fertilizer products. With striking demand outlook coupled with proagri government policies are likely to attract potential investors at large. Price Risk This is the risk that the share price of FATIMA will decline due to bearish trends at the Karachi Stock Exchange. In addition to that, this risk can get amplified if the Company fails to sustain its impressive growth. Mitigant: This risk is mitigated by recognizing the star performance of its parent company Pak Arab Fertilizer Limited, whose business model has been adopted for FATIMA as well. Moreover, production of specialized fertilizer product (CAN) will also distinguish the Company amongst its peers. Technological Obso lescence Risk The Fertilizer companies profitability and competitiveness can be adversely affected by potential obsolescence of etymology process technology. Mitigant: The Company has put a fertilizer complex which runs on the latest technology. To meet the up coming challenges, the Company will keep on upgrading its plant through BMR and debottle necking process. Foreign Exchange risk Foreign exchange exposure may increase the cost of the project and might also affect the operational profitability. Mitigant: The Company has already purchased 92% of its plant and machinery whereas for the rest of the 8% of the plant and machinery and LCs has already been opened. Whereas the operational profitability will depend upon the regular revision of phosphoric rock prices. Liq uid ity Risk The company will not be able to meet its future funding requirements.
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Mitigant: In order to mitigate the liquidity risk the Company is listing itself at the Karachi Stock Exchange and offering its share to the general public. The Company is also arranging adequate amount of financing to meet its milestones. In future the Company will maintain adequate amount of cash and marketable securities. Econo mic Slowdown The growth of the agriculture sector is largely dependent upon the economic conditions prevailing in the country. An economic slow down in the country / region may adversely affect the growth and performance of the sector. Mitigant: Keeping in view the importance of fertilizer for agriculture sector, the short fall in demand and supply of the fertilizer and diversified product portfolio of the Company, will protect the sales of the Company from effects of economic slowdown Political Risk Any change in political structure will affect the performance of the Company and the fertilizer sector. Mitigant: Any Political changes will not effect the Company as all new fertilizer polices that are made on mutual understanding. It is stated th at all material risks factors, with respect to th is Issue, h ave b een disclo sed and th at no th ing h as been concealed .
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PART 6 6 6.1 FINANCIAL INFORMATION Auditors report under section 53 (1) read with clause 28 of sectio n 2 p art I of th e Second Sch edule to the Co mp an ies Ordinance, 1984, for th e pu rpo se of in clu sion in the Prospectu s of Fatima Fertilizer Co mpany Limited Sep temb er 28, 2009 442 The Board of Directors Fatima Fertilizer Company Limited Multan. Gentlemen, CERTIFICATE UNDER SECTION 53(1) READ WITH CLAUSE 28(1) O F SECTION 2 OF PART 1 OF SECOND SCHEDULE TO THE COMPANIES ORDINANCE, 1984 We have audited the financial statements of Fatima Fertilizer Company Limited for the periods ended June 30, 2007 to June 30, 2009. However, the financial statements of Fatima Fertilizer Company Limited for the years ended Decem ber 31, 2005 and December 31, 2006 have been audited by another firm of chartered accountants. In accordance with section 53(1) read with clause 28(1) of section 2 of Part 1 of Second Schedule to the Companies Ordinance 1984, we report that: (a) The assets and liabilities of Fatima Fertilizer Company Limited as at June 30, 2009; and (b) Audited profit and loss accounts of Fatima Fertilizer Company Limited for the periods ended December 31, 2006 to June 30, 2009 were as follows:
SUMMARY OF ASSETS AND LIABILITES OF FATIMA FERTILIZER COMPANY LIMITED AS AT JUNE 30, 2009 Rupees in th ousand ASSETS AND LIABILITES Non cu rrent assets Property plant and equipment Capital work in progress Long term loans and deposit 667,635 47, 574,497 5,578 48,247,710
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Cu rrent Assets Stores and spares Loans, advances, deposits, prepayments and receivables Derivative financial instruments Cash and bank balances 3,398 296,787 204 234,515 534,904
Less: Cu rrent liabilities Trade and other payables 4,323,335 (3,788, 431) 44,459,279
Represented by: Share capital and reserves: - I ssued, subscribed and paid-up capital - Share deposit money - Accumulated loss
8,934,788 11, 103,353 (193,667) 19,844,474
Long term liabilities - Long term loans secured - Retirement benefits
24, 578,662 36,143 24,614,805 44,459,279
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PROFIT AND LOSS ACCOUNTOF FATIMA FERTILIZER COMPANY LIMITED FOR THE PERIOD ENDED JUNE 30, 2009
For the period ended June 30, 2009 For the y ear Ended Decem ber 31, 2008 For the period Ended D ecember 31, 2007 For the period ended June 30, 2007 For the y ear Ended Decem ber 31, 2006 (restated)
Rupees in thousand Op erating expenses Administrative expenses Other operating income Pro fit/(loss) from operations Finance cost Pro fit/(loss) b efore taxatio n Taxation Pro fit/(loss) after taxation We further state that: (a) No dividend has been paid by Fatima Fertilizer Company Limited since its incorporation on December 23, 2003. (b) Contingencies and commitments of the Company as at June 30, 2009 were as follows: (i) Post dated cheques not provided for in the financial statements, furnished by the Company to the Collector of Customs to cover excess import levies on plant and machinery of Rs. 1.268 million. Liabilities under these post dated cheques can arise in respect of such plant and machinery which will be treated as part of cost of such plant and machinery. (ii) Commitments in respect of: Contracts for capital expenditures are Rs. 4,404.844 million Contracts for other than capital expenditure are Rs. 66.913 million. The amount of future payments under non-cancellable operating leases and the period in which these payments will become due are as follows: Rupees in thou sand Not later than one year Later than one year and not later than five years 1,018 1,018 (43,238) 7,852 (35,386) (4,995) (40,381) (40,381) (57,908) 56 (57,852) (86,343) (144,195) (144,195) (11,366) 70,010 58,644 (430) 58,214 58,214 (11,910) (11,910) (27,009) (38,919) (38,919) (18,907) (18,907) (1,904) (20,811) (20,811)
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(c) The Company changed its accounting policy in June 30, 2007 regarding capitalization of incidental operations and other administrative and general overheads. Therefore no profit and loss account was prepared prior to December 31, 2006. (d) No financial statements have been audited by us subsequent to the audit of the financial statement for the period ended June 30, 2009. Yours truly, Sd/A.F. Ferguson & Co. Chartered Accountants
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6.2
SHARE BREAK-UP VALUE CERTIFICATE
Sep temb er 28, 2009 441 The Board of Directors Fatima Fertilizer Company Limited Multan Gentlemen CERTIFICATE ON BREAK-UP VALUE OF SHARES FATIMA FERTILIZER COMPANY LIMITED Based on the audited financial statements for the half year ended June 30, 2009, the break-up value of an ordinary share of Rs 10 each of Fatima Fertilizer Company Limited is Rs. 9.78 as computed below:
Issued, subscribed and paid up capital Accumulated loss Total shareholders equity Rup ees
8,934, 788,000 (193,667,000) 8,741, 121,000
Number of ordinary shares Break-up value per share Yours truly, Sd/A.F. Ferguson & Co. Chartered Accountants Rup ees
893,478,833 9.78
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MANAGEMENT NOTE The revised break up value of the Company is given under three scenarios below. Scenario A gives the break-up value on the basis of the 893,478,833 shares subscribed as at June 30, 2009. Furthermore, in Scenario B, the Com pany issued additional 906, 521, 167 million shares, making the total paid up shares up to 1,800,000,000. The Scenario C gives the break-up value on the basis of 2,000,000,000 shares subscribed. All the scenarios use accumulated loss of the Company as at June 30, 2009. Scen ario A In itial p aid up cap ital as at June 30, 2009 Issued, subscribed and paid up capital Accumulated loss Total shareholders equity Rup ees Number of ordinary shares Break-up value per share Scen ario B Additional equ ity injection Issued, subscribed and paid up capital Accumulated loss Total shareholders equity Number of ordinary shares Break-up value per share
8,934, 788,000 -193,667,000 8,741, 121,000 893,478,833 9.78
Rup ees
Rup ees
18,000,000,000* -193,667,000 17,806,333,000 1,800, 000,000 9.89
Rup ees
* The Companys enhanced paid up capital as on 30 September 2009
Scen ario C Po st-IPO p aid-up cap ital Issued, subscribed and paid up capital Accumulated loss Total shareholders equity Number of ordinary shares Break-up value per share
Rup ees
20,000,000,000 -193,667,000 19,806,333,000 2,000, 000,000 9.90
Rup ees
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6.3
AUDITORS CERTIFICATE ON ISSUED, SUBSCRIBED, AND PAID-UP-CAPITAL OF THE COMPANY
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PART 7 7 7.1 MANAGEMENT BOARD OF DIRECTORS OF THE COMPANY Designation Muhammad Arif Habib 86/2, 10t h street, Khayaban-e-Sehr, Phase VI, DHA Karachi. Directorsh ip in oth er co mp an ies Arif Habib Securities Limited Arif Habib Bank Limited Thatta Cement Company Limited Real State Modaraba Management Company Limited Al-Ameera Arif Habib (Pvt.) Limited Pakistan Private Equity Management Limited Arif Habib DMCC Pakistan Engineering Co. Limited Safe Mix Concrete Products (Pvt.) Limited Pakarab Fertilizers Limited Aisha Steel Mills Limited International Com plex Projects Limited Askari Siddiqsons Development Company Limited Javedan Cement Limited Arif Habib Foundation Attock Refinery Limited Pakarab Fertilizers Ltd Fazal Cloth Mills Ltd Reliance Weaving Mills Ltd Fatima Sugar Mills ltd Reliance Commodities (Pvt.) Ltd Farrukh Trading Co. (Pvt.) Ltd Fatima Energy Ltd Fatima Trading Co. (Pvt.) Ltd Air One (Pvt.) Ltd. Pakarab Fertilizers Ltd Fazal Cloth Mills Ltd Reliance Weaving Mills Ltd Fatima Sugar Mills ltd Reliance Commodities (Pvt.) Ltd Fatima Energy Ltd Fatima Trading Co. (Pvt.) Ltd Air One (Pvt.) Ltd Fatima Sugar Mills Limited Reliance Weaving Mills Limited Fazal Cloth Mills Limited Reliance Comm. (Pvt.) Limited
Name, Address & Person al Details
Chairman
Fawad Ahmed Mukhtar 43-A, Qasim Road, Multan
Chief Executive/ Director
Fazal Ahm ed Sheikh 43-A, Qasim Road, Multan
Director
Faisal Ahmed Mukhtar 43-A, Qasim Road, Multan
Director
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Nasir Butt 172, Islam Block, Azam Gardens, Multan Road, Lahore Director
Mukhtar Trading Co. (Pvt.) Limited Pakarab Fertilizers Limited Fatima Energy Limited Fatima Trading Co. (Pvt.) Limited Air One (Pvt.) Limited
NIL Arif Habib Limited Arif Habib Equity (Pvt.) Limited Rotocast Engg. (Pvt.) Limited Nooriabad Spinning Mills (Pvt.) Limited Real Estate Modaraba Management Company Limited Arif Habib DMCC Pakarab Fertilizers Limited NIL Dewan Cement Limited National Assets Fullerton Management Co. Limited Fauji Oil Terminal & Distribution Co. United National Bank England Nishat Power Limited Atlas Power Limited NBP Exchange Company Limited
Samad A. Habib 86/2, 10t h street, Khayaban-e-Sehr, Phase VI, DHA Karachi.
Director
Abad khan House No. 69/C, Tack Society, Lahore.
Director
Masood Karim Shaikh
Nominee Director(NBP)
7.2
OVER DUE LOANS There are no overdue loans (local or foreign currency) on the Company or its Directors.
7.3
CASH DIVIDEND/BONUS PAID BY GROUP COMPANIES 2004 80% Nil 150% 150%B Nil Nil Nil 10% 20%B 7.5% 2005 80.17% Nil 100% 50%B Nil Nil 20%B 10% Nil 2007 Nil Nil 303.7%B 2,562.1%B 75% SD* 100% 75% 66.66%B 322%B 100% 100%B 10%B Nil 10%B Nil 25%B 30% 100% Nil 15%B Nil 90% 2006 2008 2009 Nil Nil 50%B 50% SD 50% SD 15% Nil 25%B 25% 15% 25%B 25%B 25% Nil 11.11%B 50%B Nil Nil Nil Nil Nil 125% Nil
Co mpany Pakarab Fertilizers Limited Arif Habib Securities Limited Arif Habib Limited Arif Habib Bank Limited Arif Habib Investments Limited Fazal Cloth Mills Limited Reliance Weaving Mills Limited Pakistan Engineering Company Ltd. Javedan Cement Limited
*SD Speci e Divid end
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7.4
PROFILE OF KEY MANAGEMENT PERSONNEL
7.4.1 Mr. Fawad Ah med Mukhtar Chief Executive Officer Mr. Fawad Ahmed Mukhtar is the Chief Executive Officer (CEO) of Pakarab Fertilizers Limited (PFL) and Fatima Fertilizer Company Limited. He has rich experience of manufacturing/industrial management. He received his Bachelors from Government College, Multan (BZU). He is also the director in the following companies: Pakarab Fertilizers Ltd Fazal Cloth Mills Ltd Reliance Weaving Mills Ltd Fatima Sugar Mills ltd Reliance Commodities (Pvt.) Ltd Farrukh Trading Co. (Pvt.) Ltd Fatima Energy Ltd Fatima Trading Co. (Pvt.) Ltd Air One (Pvt.) Ltd.
7.4.2 Mr. Fazal Ahmed Sheikh Executive Director Mr. Fazal Ahmed Sheikh is a Director of both PFL and FATIMA and looks after finance and administration matters of the companies. He holds a Bachelor of Economics Degree from the University of Michigan, USA. He is also the director in the following companies: Pakarab Fertilizers Ltd Fazal Cloth Mills Ltd Reliance Weaving Mills Ltd Fatima Sugar Mills ltd Reliance Commodities (Pvt.) Ltd Fatima Energy Ltd Fatima Trading Co. (Pvt.) Ltd Air One (Pvt.) Ltd.
7.4.3 Mr. Muh ammad Abad Khan Advisor to CEO Mr. Muhammad Abad Khan is a mechanical engineer from the University of Engineering & Technology, Lahore. He has experience of more than 50 years, having worked for major fertilizer companies in Pakistan like Fauji Fertilizer Company Limited, Engro Chemicals Pakistan Limited, Fauji Fertilizer Bin Qasim Limited and PFL. He has received extensive training and availed useful learning opportunities in technical and managerial fields at home and abroad. 7.4.4 Mr. Iftikhar Mah mood Baig Finance, Corporate & Business Development Mr. Iftikhar Mahmood Baig is a Chartered Secretary and has over 23 years experience in Corporate & Financial Management of Com panies. He is Company Secretary of FATIMA. He is also working as Company Secretary of PFL since its acquisition in 2005. Mr. Baig was pivotal in the acquisition of PFL and its subsequent turnaround. Mr. Baig is associated with
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the Fatima Group since 1996 and held various middle and senior level management positions and now working as GM Corporate & Business Development of the Group. Op erations Man agemen t Team 7.4.5 Mr. Muh ammad Nasir Butt Technical Director Mr. Muhammad Nasir Butt is a senior fertilizer industry professional. Have served PFL as its Managing Director for nearly six years before privatization and has served as Managing Director at Pak American Fertilizer Limited, Daudkhel, for three and half years and at Pak Saudi Fertilizer Limited for a year and a half. He has received nine months technical training in the fertilizer industry with M/s Saint Gobain of France and M/s Inventa of Switzerland. Fatima is the 2 nd fertilizer plant in Pakistan that produces CAN and NP so Mr. Butts training with I nternational Chemical I ndustries (ICI) fertilizer plants, Billingam U.K, M/s UHDE of West Germany, and M/s Stamicarbon of Holland for running modern plants of NA and CAN is of immense value. 7.4.6 Mr. Arif-ur-Rehman Project Director Mr. Arif Ur Rehman is a chemical engineer and has over 26 years of experience in the fertilizer and petrochemical industries. He has been part of a number of successful projects from construction to commissioning and normal operation. These include Fauji Fertilizer plant in Goth Macchi, Fauji Fertilizer Bin Qasim and ICI, PTA Bin Qasim plants. He held various middle and senior level management positions before joining FATIMA in April 2007. He has had extensive foreign job assignments and has gone through numerous international technical and management training. 7.4.7 Mr. Eduard Horn Operations Manager He is responsible for the overall operations of the project Mr. Eduard Horn is a Chemical Engineer and has over 30 years of experience in the fertiliz er industry ranging from the operation, maintenance and engineering of Ammonia plants through Urea and Ammonia Nitrate to NPK and liquid fertiliz ers. For the past 18 years he has been the senior technical manager at the Gulf Petrochemical Industries Co., Bahrain ( GPIC) He has received extensive job training and availed useful learning opportunities in technical and managerial fields in various countries. 7.5 NUMBER OF DIRECTORS Pursuant to Section 174 of the Ordinance, the number of directors of the Com pany shall not be less than seven. At present, the Companys Board of Directors consists of eight directors including the Chief Executive & a Nominee Director from NBP. 7.6 QUALIFICATION OF DIRECTORS No person shall be appointed as a director of the Company who is ineligible to be appointed as director on any one or more of the grounds enumerated in Section 187 or any other law for the time being in force.
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7.7
REMUNERATION OF THE DIRECTORS Pursuant to the Articles of Association of the Company, the remuneration of a Director for performing extra services, including holding of the office of Chairman, and the remuneration to be paid to any director for attending meetings of the Directors or a committee of Directors shall from time to time be determined by the Board of Directors in accordance with the law.
7.8
BENEFITS TO THE PROMOTERS AND OFFICERS No amount of benefits has been paid or given during the last year or is intended to be paid or given to any promoter or to any officer of the Company other than as remuneration for services rendered as whole-time executive of the Company and the rem uneration for services shall be borne by the Company.
7.9
INTEREST OF DIRECTORS The directors may be deemed to be interested to the extent of fees payable to them for attending Board meetings. The directors performing w hole time service to the Company may also be deemed interested in the remuneration payable to them from the Company. The directors may also be deemed to be interested, to the extent of any shares held by each of them in the Company and the dividends to be declared on their shareholding in the Company. The director of the Com pany (Mr. Samad A. Habib) is also director/CEO in Arif Habib Limited.
7.10 INTEREST OF DIRECTORS IN PROPERTY A CQUIRED BY THE COMPANY None of the Directors of the Company have or had any interest in any property acquired by the Company. 7.11 ELECTION OF DIRECTORS The directors shall subject to the provision of Section 178 of the Ordinance fix the number of directors and the directors shall be elected by the members of the Company in General Meeting. The present directors of the Company were elected in the annual general meeting of the Company held on 30-04-2008. The next election of directors is due on or before 30-04-2011. 7.12 VOTING RIGHTS The rights and privileges, including voting rights, attached to the ordinary shares of the Company are equal. 7.13 AUDIT COMMITTEE/CONSTITUTION O F AUDIT COMMITTEE Audit Committee of the Board has been formed to comply with the Code of Corporate Governance, which comprises of the following three directors. Majority of which are nonexecutives directors: Mr. Fazal Ahmed Sheikh Mr. Abdus Samad Mr. M. Abad Khan
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7.14 INTERNAL AUDIT The board has setup an effective internal audit function managed by suitable qualified and experienced personnel who are conversant with the policies and procedures of the Company and are involved in the internal audit function on a full time basis. 7.15 BORROWING POWERS Subject to the provisions of the Ordinance, the Board of Directors may from time to time borrow any money for the purposes of the Com pany from its members or from any other person, firms, companies, corporations, Government Agencies, institutions or the directors may themselves lend moneys to the Com pany. 7.16 POWERS OF DIRECTORS The business of the Company shall be managed by the directors, who may pay all expenses incurred in promoting and registering the Com pany, and may exercise all such powers of the Company as are not by the Ordinance or any statutory modification thereof for time being in force, or by the Articles of Association, required to be exercised by the Company in General Meeting. 7.17 INDEMNITY Section 103 of the Companys Article of A ssociation reads as follows: Every Director, Managing Director, Chairman, Manager or Officer of the company or any person (whether an officer of the com pany or not) employed by the company as Auditor or Advisor, shall be indemnified out of the funds of the Company against any liability incurred by him as such Director, Managing Director, Chairman, Manager, Officer, Auditor or A dvisor in defending and proceedings, whether civil or criminal, in which judgment is given in connection with any application of a provision of the Ordinance in which relief is granted to him by the Court. 7.18 INVESTMENTS IN ASSOCIATED COMPANIES The Com pany has not made any investment in any of associated companies nor has any resolution been passed for investment in associated companies under Section 208 of the Ordinance. 7.19 INVESTMENT IN SUBSIDIARIES The Company has not sponsored nor acquired any subsidiaries nor has any resolution been passed for sponsoring or acquiring any subsidiaries under Section 208 of the Ordinance.
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PART 8 8 8.1 MISCELLANEOUS INFORMATION REGISTERED OFFICE/CORPORATE O FFICE Head Office, 2 nd Trust Plaza L.M.Q. Road Multan - Pakistan. Tel: 061 451 2031-451 3036 Fax: 061 451 1677-458 4288 URL: www.fatima-group.com E-mail: iftikhar.baig@fatima-group.com 8.2 BANKERS TO THE ISSUE FOR BOOK BUILDING Arif Habib Bank Limited 8.3 BID COLLECTION CENTRE Karachi Attn: Mr. Kashif Suhail Attn: Mr. Usman Saeed Arif Habib Limited Arif Habib Centre 23, M. T. Khan Road Karachi. Tel: +92-21-3241 5213, 3246 0717 Cell: +92333 234 6098 Fax: +92-21-3242 9653 Email: kashif.suhail@arifhabib.com.pk usman.saeed@arifhabibltd.com Lahore Attn: Mr. Muhammad Nouman Direct: 042-3628 0857 Arif Hab ib Bank Limited Lahore Stock Exchange Branch Office No. 5, LSE Building 19, Aiwan e Iqbal Road Lahore. Tel: 042-628 0852-8, 042-627 1715-6 Fax: 042-628 0851 Islamabad Attn: Ms. Sabahat Nazir Arif Hab ib Bank Limited Plot No. 6B, F-6 Super Market Islamabad. Tel: 051 2279168 - 70, Ext 224 Fax: 051-227 9166 Email: sabahatnazir@arifhabibbank.com
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8.4
MAJOR BANKERS OF THE COMPANY National Bank of Pakistan Habib Bank Limited United Bank Limited Allied Bank Limited Faysal Bank Limited Standard Chartered Bank
8.5
AUDITORS OF THE COMPANY M/s. A.F. Fergusons & Co. Chartered Accountants 505-509, 5th floor Alfalah Building, PO BOX 39 Shahrah e-Quaid-e-Azam Lahore, Pakistan. Phone: (042) 628 5078-85 Fax: (042) 628 5088 Website: ferguson@brain.net.pk
8.6
BANKERS TO THE ISSUE Arif Habib Bank Limited Bank Alfalah Limited The Bank of Punjab Bank AL Habib Limited Faysal Bank Limited First Dawood I slamic Bank Limited Habib Bank Limited Habib Metropolitan Bank Limited J.S. Bank Limited MCB Bank Limited United Bank Limited
8.7
LEGAL ADVISOR OF THE COMPANY M/s. Chima & Ibrahim 1-A/ 245, Tufail Road Lahore Cantt, Pakistan. Phone: (042) 3668 1265-67 Fax: (042) 3668 7790
8.8
LEGAL ADVISOR TO THE ISSUE Mohsin Tayebaly & Co. Barristers & Advocates 2nd Floor Dime Centre, BC-4 Block 9 KDA Scheme 5, Clifton, Karachi. Phones: 5375658, 5375659 Fax: 5870240
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8.9
LEAD MANAGER AND BOOK RUNNER Arif Hab ib Limited Arif Habib Centre 23, M. T. Khan Road Karachi. Tel: 92-21-3241 5213 Fax: 92-21-3242 9653 www.arifhabibltd.com
8.10 COMPUTER BALLOTER AND SHARES REGISTRAR THK Associated (Pvt.) Limited Ground Floor, State Life Building No. 3 Dr. Ziauddin Ahmed Road Karachi. Phone: 021-111-000-322 Fax: 021 - 5655595
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8.11 MATERIAL CONTRACTS/DOCUMENTS Sr. No 1 Party Name Mari Gas Com pany Limited (MGCL) National Engineering Services Pakistan (Pvt) Limited (NESPAK) Sojitz Corporation, Japan China National Chemical Engineering Group Corporation (CN CEC) Sui Northern Gas Pipeline Limited. (SNGPL) National Bank of Pakistan Limited (NBP) As agent bank and Consortium Sojitz Corporation, Japan General Electric Oil and Gas ( GE) Nuovo Pignone S.P.A Stone & Webster Management Consultants INC, USA Sui Northern Gas Pipeline Limited (SNGPL) Descrip tion Gas Sale and Purchase Agreement (GSPA) for 110 MMCFD Natural Gas from Mari Shallow Reservoir, as amended. For consultancy services Date July 12, 2005 April 07, 2006
For 1,500 MTPD urea plant and other technical services For construction and installation of Ammonia, urea, NA, CAN, Utility and offsite plants and engineering & construction of NPK plant For construction of 20 DIA X 47 KM gas pipeline from Mari Shallow Reservoir Gas Fields to Fatima Fertilizer Company Limited Long term syndicated loan and certain L/C facilities
June 27, 2006 September 18, 2006
November 02, 2006
November 25, 2006
For supply of 1,500 MTPD refurbished ammonia plant and sub-license of ammonia process Gas turbine generator packages and associated accessories For the detailed engineering of relocated ammonia plant Construction of approximately 12 Km long water pipeline of 28 diameter from downstream flange of the Raw Water Pumping stations to the Raw water reservoir in side boundary wall of Fatima.
May 11, 2007 2007
January 25, 2008 February 21, 2008
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11
12
13
China National Chemical Engineering Group Corporation (CN CEC) National Bank of Pakistan Limited (NBP) As agent bank and Consortium CFI Holding Private Limited (CFIh)
Supply of product handling and storage system
April 19, 2008
Commercial and new facility including a syndicated loan and L/C facilities
March 06, 2009
Full Engineering Package and related services for the new Nitro Phos (NP) Plant
May 23, 2008
8.11.1 Syndicated term fin an ces Initial Debt Facility Deb t Facility Up to PKR 23,000 million Curren cy Pakistan Rupee (PKR) Habib Bank Limited (HBL) National Bank of Pakistan (NBP) United Bank Limited (UBL) Allied Bank Limited (ABL) Faysal Bank Limited (FBL) Standard Chartered Bank(SCB) National Bank of Pakistan One hundred and forty-four (144) months, inclusive of Grace Period. App licable up to COD (i.e. to b e levied du rin g the Grace Period ): Base Rate p lus 335 bps p er annum with no floor or cap. App licable after COD: Base rate p lu s 300 bp s p er annu m with no floor or cap Base rate is defined as the average 6-month Karachi Inter Bank Offered Rate (KIBOR). KIBOR Mark up Rate is defined as the Average rate, Ask Side, for the relevant tenor, as published on Reuters page KIBOR or as published by the Financial Markets Association of Pakistan in case Reuters page is unavailable. The Base Rate will be set on the last business day before the first drawdown and subsequently on the last business day prior to the beginning of each semi-annual period for the mark-up due at the end of that period (Rate Setting Date). Prin cip al Repaymen t Not less then seventeen (17) consecutive, semi-annual installments, the first such installment falling due not later than the end of the fortyeighth (48th) month from the Facility Effective Date.
Lead Adviso rs and Arrangers (Lead Arrangers)
Agent Bank Tenor
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Mark up Paymen ts
Semi-annually in arrears. The first Mark-up Payment shall fall due at the end of six (6) months from the Facility Effective Date and subsequently every six (6) months thereafter. Facility security includes: a. First ranking hypothecation charge over all present and future fixed assets excluding land and building of Fatima Fertilizer with a margin; b. First ranking mortgage over land and building of Fatima Fertilizer with a margin; c. Assignment over Fatima Fertilizer's rights and benefits under all Project agreements, any amendments thereto and any performance guarantees issued there under; d. Lien over certain Project Accounts such as on (i) a Debt Service Reserve Account (DSRA) after the Commercial Operation Date, equal to six (6) months worth of mark-up and principal repayment installment to be funded or backstopped by a Standby Letter of Credit equaling six (6) months worth of mark-up and principal repayment or any other cash equivalent security acceptable to the banks; (ii) a Debt Payment Account (DPA) comprising of a balance equal to the upcoming installment amount (markup payment during the Availability Period and markup and principal repayment after the Availability Period). The DPA shall be maintained by the Agent Bank and amount held in the account will be reset to zero at each installment payment date. The am ount of the DPA to be built up in three (3) equal monthly installments on the fifteenth (15th) day of the fourth (4th), fifth (5th) and sixth (6th) months of every semi-annual installment period throughout the Tenor of the Facility. This account will be reset to zero at each installment payment date; (iii) the Collection Account (CA) (iv) certain reserve accounts under certain terms (including cost overrun reserve account, excess cash reserve account ), as applicable; f. Assignment over all rights and benefits of Fatima Fertilizer under any and all project insurances and cut-through agreements for reinsurance; and g. Pledge of Certain Sponsors shares to the extent that will represent: (i) 51% of the total shares of Fatima Fertilizer, and (ii) 51% of direct or indirect ownership and control, in favour of the Lenders throughout the Tenor of the Facility; h. Personal Guarantees of three (3) sponsoring directors.
Secu rity
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8.11.2 Supplemen tal Debt Facility Supp lemental Deb t Up to a maximum of PKR 10,000 Million Facility Cu rrency Pakistan Rupee (PKR) Habib Bank Limited (HBL) Lead Ad visors and Arrangers (Lead Arrangers) National Bank of Pakistan (NBP) United Bank Limited (UBL) Allied Bank Limited (ABL) Faysal Bank Limited (FBL) Agen t Ban k Teno r National Bank of Pakistan Maximum tenor (Tenor) not to exceed one hundred and twenty (120) months from the Facility Effective Date or November 30, 2018 whichever is earlier 6-month Karachi I nter Bank Offered Rate (KIBOR) plus 375 basis points per annum with no floor or cap Not less than seventeen (17) consecutive, semi-annual installments, the first such installment shall fall due earlier of the end of 18t h month from the Facility Effective Date or the first installment payment of the initial debt Facility Semi-annually in arrears Facility security includes, on a pari-passu basis with the Existing Syndicate all Security provided to the Syndicate of financial institutions that have provided financing in terms of the Initial Debt Facility (Original Facility Lenders) The following additional security has been provided to the financial institutions that have provided funds under the Supplemental Debt Facility (Supplemental Facility Lenders) a. Pledge over 30% shares of PFL, held by certain mem bers of the Arif Habib Group and Fatima Group, to be in the custody of Security Trustee/Agent until cum ulative debt amount under the Original Facility and Supplemental Debt Facility reaches or falls below PKR 26,000 Million. The pledge over shares of PFL will not be available to the Original Facility Lenders b. Personal Guarantees of Mr. Arif Habib, Mian Fazal A hmed Sheikh and Mian Fawad Ahmed Mukhtar in favor of Supplemental Facility Lenders throughout the Tenor of the Supplemental Debt Facility. c. c. Hypothecation of certain current assets (excluding Project Accounts) in favour of Supplemental Facility Lenders with permission to create a senior charge of up to PKR 5,333 million in favour of financial institutions providing working capital financing to Fatima.
Mark up Rate Principal Rep ayment
Mark up Paymen ts
Secu rity
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8.11.3 Lo an fro m Pakarab Fertilizers Limited This loan facility of PKR 2.11 Billion has been obtained from Pakarab Fertilizers Limit ed till October 13, 2009. No security has been provided as the investor company is an associated company. The facility carries mark up at Base Rate + 250bps (with no floor and no cap) which will remain applicable up to five years and thereafter, mark-up would be equal to the borrowing cost of Pakarab. This loan is to be repaid no later than 2018. 8.12 UNDERWRITING AGREEMENTS Names o f Und erwriter To b e in clud ed in the Final Prospectus TOTAL 8.13 INSPECTION OF DOCUMENTS AND CONTRACTS Copies of the Memorandum and Articles of Association, the audited financial statements, the Auditors Certificates, Information Memorandum, Appraisal Report, Financial Plan and copies of agreements referred to in this Prospectus may be inspected during usual business hours on any working day at the registered office of the Company during the bidding period/public subscription period. 8.14 LEGAL PROCEEDINGS There are no legal proceeding pending against the Company and the Company has not initiated any legal proceedings against any party or person. 8.15 MEMORANDUM OF ASSOCIATION The Memorandum of Association, inter alias, sets forth the objects for which the Company was incorporated and the business, which the Company is authorized to undertake. A copy of the Memorandum of Association is annexed to this Prospectus. 8.16 FINANCIAL YEAR OF THE COMPANY The financial year of the Company commences from 1st day of January and ends on the 31st day of December each year. No. of Sh ares Amount (PKR) Date
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PART 9 9 9.1 APPLICA TION AND ALLOTMENT INSTRUCTIONS Eligible investors include: a. Pakistani citizens resident in or outside Pakistan or Persons holding two nationalities including Pakistani nationality; b. Foreign Nationals whether living in or outside Pakistan; c. Companies, bodies corporate or other legal entities incorporated or established in or outside Pakistan (to the extent permitted by their constitutive documents and existing regulations, as the case may be); d. Mutual Funds, Provident/pension/gratuity funds/trusts, (subject to the terms of the Trust Deed and existing regulations); and e. Branches in Pakistan of companies and bodies corporate incorporated outside Pakistan. 9.2 9.3 APPLICA TION MUST BE MADE ON THE COMMISSIONS APPROVED APPLICATION FORM OR A LEGIBLE COPY THEREOF ON A PA PER OF A4 SIZE WEIGHING ATLEAST 62 GMS. Copies of this Prospectus and applications forms can be obtained from members of Karachi Stock Exchange (Guarantee) Limited, the Bankers to the Issue and their Branches, the Lead Manager & Book Runner, and the registered office of the Company. The Prospectus and the application form can also be dow nloaded from the following website: www.arifhabibltd.com and www.fatima-group.com. The applicants opting for scripless form of shares are required to complete the relevant sections of the application. In accordance with the provisions of the Central Depositories Act, 1997 and the CDCPL Regulations, credit of such shares is allowed ONLY in the applicants own CDC account. In case of discrepancy between the information provided in the application form and the information already held by CDS, the Company reserves the right to issue shares in physical form. Name(s) and address(es) must be written in full block letters, in English and should not be abbreviated. All applications must bear the name and signature corresponding with that recorded with the applicant's banker. In case of difference of signature with the bank and Computerized National Identity Card (CNIC) or National I dentity Card for Overseas Pakistanis (NICOP) or Passport both the signatures should be affixed on the application form. APPLICA TIONS MADE BY INDIVIDUAL INVESTORS (i) In case of individual investors, an attested photocopy of CNIC (in case of Resident Pakistanis)/Passport (in case of Non-Resident Pakistanis) as the case may be, should be enclosed and the number of CNIC/Passport should be written against the name of the applicant. Copy of these documents can be attested by any Federal/Provincial Government Gazetted Officer, Councilor, Oath Commissioner or Head Master of High School or bank manager in the country of applicant's residence.
9.4
9.5
9.6
9.7
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(ii) Original CNIC/Passport, along with one attested photocopy, m ust be produced for verification to the banker to the Issue and the applicant's banker (if different from the banker to the Issue) at the time of presenting the application. The attested photocopy will, after verification, be retained by the bank branch along with the application. 9.8 APPLICA TIONS MADE BY INSTITUTIONAL INVESTORS (i) Applications made by companies, corporate bodies, mutual funds, provident/pension/gratuity funds/trusts and other legal entities must be accompanied by an attested photocopy of their Mem orandum and Articles of Association or equivalent instrument/document. W here applications are made by virtue of Power of Attorney, the same should also be submitted along with the application. Any Federal/Provincial Government Gazetted Officer, Councilor, Bank Manager, Oath Commissioner and Head Master of High School or bank manager in the country of applicant's residence can attest copies of such documents. (ii) Attested photocopies of the documents mentioned in 8(i) must be produced for verification to the banker to the Issue and the applicant's banker (if different from the banker to the I ssue) at the time of presenting the application. The attested copies, will after verification, be retained by the bank branch along with the application. 9.9 Only one application will be accepted against each account, however, in case of joint account, one application may be submitted in the name of each joint account holder.
9.10 Joint application in the name of more than two persons will not be accepted. In case of joint application each applicant must sign the application form and submit attested copies of their CNICs/Passport. The Shares will be dispatched to the person whose name appears first on the application form while in case of CDS, it will be credited to the CDS account mentioned on the face of the form and where any amount is refundable, in whole or in part, the same will be refunded by cheque or other means by post, or through the bank where the application was submitted, to the person named first on the application form, without interest, profit or return. Please note that joint application will be considered as a single application for the purpose of allotment of Shares. 9.11 Subscription money m ust be paid by cheque drawn on applicant's own bank account or pay order/bank draft payable to one of the Bankers to the I ssue A/C INITIAL PUBLIC OFFERING OF FATIMA FERTILIZER COMPAN Y LIMITED and crossed A/C PAYEE ONLY. 9.12 For the applications made through pay order/bank draft, it would be permissible for a banker to the Issue to deduct the bank charges while making refund of subscription money to unsuccessful applicants through pay order/bank draft individually for each application. 9.13 The app licant shou ld have at least one bank accoun t with any o f the co mmercial banks. The app licants not having a ban k account at all (n on -accoun t holders) are n ot allowed to sub mit app lication fo r subscription of Sh ares. 9.14 Applications are not to be made by minors and/or persons of unsound mind. 9.15 Applicants should ensure that the bank branch, to which the application is submitted, completes the relevant portion of the application form.
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9.16 Applicants should retain the bottom portion of their application forms as provisional acknowledgement of submission of their applications. This should not be construed as an acceptance of the application or a guarantee that the applicant will be allotted the num ber of Shares for which the application has been made. 9.17 Making of any false statements in the application or willfully embodying incorrect information therein shall make the application fictitious and the applicant or the bank shall be liable for legal action. 9.18 Bankers to the Issue are prohibited to recover any charges from the subscribers for collecting subscription applications. Hence, the applicants are advised not to pay any extra charges to the bankers to the I ssue. 9.19 It would b e permissible for a Ban ker to the Issu e to refund subscription money to unsuccessful applican ts havin g an account in its b an k b y crediting su ch accoun t instead o f remittin g the same b y chequ e, pay o rd er or bank draft. App lican ts should, therefore, no t fail to give their bank account numbers. 9.20 Sub mission o f Fictitious and multiple application s (more than one app licatio n by same person) is proh ibited and su ch app licatio n money sh all be liab le to confiscatio n under sectio n 18A o f th e Securities and Exch ange Ordinance, 1969. ADDITIONAL INSTRUCTIONS FOR FOREIGN/NON-RESIDENT INVESTORS 9.21 In case of foreign investors who are not individuals, applications must be accompanied with a letter on applicant's letterhead stating the legal status of the applicant, place of incorporation and operations and line of business. A copy of memorandum of association or an equivalent document should also be enclosed, if available. Where applications are made by virtue of Power of Attorney, the same must be lodged with the application. Copies of these documents can be attested by the bank manager in the country of applicant's residence. 9.22 Applicants may also subscribe using their Special Convertible Rupee Account (SCRA) as set out under the State Bank of Pakistan's Foreign Exchange Manual. BASIS OF ALLOTMENT 1. The minimum amount of application for subscription of 500 Shares is PKR [ ]/-. Application for Shares below the total value of PKR [ ]/- shall not be entertained. 2. Application for Shares must be made for 500 Shares or in multiple thereof only. Applications, which are neither for 500 Shares nor for multiple thereof, shall be rejected. 3. Allotment/Transfer of Shares to successful applicants shall be made in accordance with the allotment criteria/ instructions disclosed in the Prospectus. 4. Allo tment of Sh ares sh all be subject to scrutiny of applicatio ns in acco rd an ce with th e criteria d isclo sed in the Prospectu s and /o r the in structions by th e Securities & Exchange Commission o f Pakistan.
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5. Application s, which do not meet the abo ve requ irements, or applicatio ns which are incomplete will be rejected . The app licants are, th erefo re, requ ired to fill in all d ata field s in the Applicatio n Form. 6. The Company will dispatch Shares to successful applicants through their Bankers to the Issue or credit the respective CDS accounts of the successful applicants (as the case maybe). Ban kers to the Issue Cod e No . 01 02 03 04 05 06 07 08 09 10 11 Bank
Arif H abib Bank Limited Bank Alfalah Limited Bank of Punjab Bank Al-Habib Limited Fays al Bank Limited First Dawood Islamic Bank Limited H abib Bank Limited H abib Metropolitan Bank Limited J.S. Bank Limited M CB Bank Lim ited United Bank Limited
Cod e o f Occup ation Code No . 01 02 03 04 05 Occupation Business Business Executive Service Housewife Household Code No . 06 07 08 09 10 Occupation Professional Student Agriculturist Industrialist Others
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PART 10 10 BIDDING FORM OF FATIMA FERTILIZER COMPANY LIMITED
(This space has been left blank intentionally)
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PART 11 11 SIGNATORIES TO THE PROSPECTUS
__________________ Muhammad Arif Habib
__________________ Fawad Ahmed Mukhtar
________________ Fazal Ahmed Sheikh
_________________ Faisal Ah med Mu kh tar
__________ M. Nasir Bu tt
___________ Abdus Samad
___________ M. Ab ad kh an
_________________ Masood Karim Shaikh
Sign ed by th e above in th e presence o f witn esses:
_______________________ Iftikhar Mah mood Baig CNIC: 36302-8145686-3 Address: 140-Hassan Parwana Colony, Multan.
____________________ Kashif Suhail CNIC: 42201-8799408-7 Address: A-39, Block4/A, Gulshan-e-Iqbal, Karachi.
Date: Place:
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PART 12 12 MEMORANDUM OF ASSOCIATION Th e Companies Ordin an ce 1984 Comp an y Limited b y Shares MEMORANDUM OF ASSOCIATION OF FATIMA FERTILIZER COMPANY LIMITED
I. The name of the Company is FATIMA F ERTILIZER COM PANY LIMITED .
II. The Regis tered Office of the Company w ill be situated in the Province of Punjab. III. The objects for which the Company is es tablis hed are: 1. To enter into and carry on the busines s of manufacturing, producing, buying, selling importing and exporting or otherw is e dealing in or with chemicals and fertilizers of any and all kinds, including, but w ithout limiting the generality of the foregoing, artificial or natural fertilizers , compound, complex, nitrogenous, phos phatic and potassium fertilizers , nitro phos phates , calcium , ammonium nitrate, urea, nitric acid, hydrochloric acid, s ulphuric and other acids, all chemicals produced with the hel p of s ulphuric acid, ammonia and other derived produ cts of sulphuric acid and ammonia , amm onium , ammonium s ulphate and other compounds of ammonia, oxygen, carbon dioxide and s uper phos phate, s oil am endments , micronutrients , s uper-phosphates , phos phoric acid, intermediates , dips , s prays , vermifuges , fungicides , insecticides, herbicides , pesticides, medicines , animal feed s upplements of any and all kinds and any products and by-products which m ay be derived, produced, prepared, de veloped, com pounded, made or m anufactured there from and any s ubs tance obtained by m ixing any of the fo regoing with other s ubs tances and to preserve, pack and trans port the said products ; to ow n, pu rchas e or othe rwis e acquire and to sell or otherwis e dis pose of any mines , m anufactories , plant, machinery, appliances, tools, s upplies , materials , and any other property of any nature whats oever, s uitable, convenient or necessary for any of the purposes aforesaid or which m ay lawfully be us ed in connection therewith and to establis h agencies and w arehous es for the storage, sale and dis tribution of said products as incidental to the carrying on of any s uch bus iness and in connection therewith or as a part the reof, to carry on any bus iness , trade, or o ccupation necessary, convenient or us eful therein or thereto, or which is or may be customarily carried on by others engaged in conducting a chemical or fertilizer business . To purchase, manufacture, produ ce, refine, prepare, im port, export, s ell and generally to deal in and use of heavy chemicals, fertilizers and all products and by-products thereof and to acquire, cons tru ct and operate or otherwise deal in s uch things as may furnis h materials for the m anufacture of all kinds of fertilizers and to deal in s uch other chemicals and fertilizers as can be conveniently m anufactured and calculated directly or indirectly to contribute to the general econom y of the process and will aid in the economy of the operations or othe rwise enhance the profits of the Company and to do all things as may be proper or neces sary in connection w ith the above or any of them. To purchase or otherwise acquire, sell, supply, market, dis tribute, exchange, or otherwis e dis pose of import, expo rt, store, hold, package, transport, us e, experiment with, handle, trade, dis pens e, apply and generally deal in s ubstances used in the m anufacture and treatm ent of chemicals , fertilizers and chemical products and agricultural products and equipment and perform services and operations related thereto, and s o far as m ay be conductive to the attainment of the s aid objects or as is convenient or advantageous in connection therew ith. To acquire and take over from National Fertilizer Corporation (NFC), the fertilizer factory, godowns and other buildings and erections already built or now being built by the said Corpo ration under the nam e of FFCL w ith the land appertaining thereto a nd all the s tock in trade, book debts , goodwill and all other as sets and liabilities in res pect thereof and all the benefits of all s ubsis ting contracts
2.
3.
4.
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Initial Public O ffering of Fatima Fertilizer Company Limited and orders together with the rights and privileges relating to the s aid Fertilizer Factory through Privatization process. 5. To establis h, take or give on lease all sorts of fertilizer factories to carry on all or any of the bus iness of m anufacturing and s ellers of and dealers and workers in fertilizer of all kinds of packing and other m aterial including polythene, polyprop ylene, jute, Hessian cloth, gunny bags , paper bags and conveniences of all kinds . To own, lease, licens e, purchas e or otherwis e acquire, maintain, work, gather, get in, and develop gas , minerals and chemicals and other s ubstances of all kinds and to pipe, trans port s tore, proces s , refine, treat, supply and deal in all such substances . To carry on all or any of the business of chemists , druggis ts, chemical manufacturers , importers and exporters , manufacturers of and dealers in pharmaceutical and medicinal preparation. To cons truct, own, pu rchas e, acquire, lease, build, erect, ins tall, es tablis h, operate, manage and m aintain plants , laboratories , equipment, apparatus and other facilities for the manufacture, refining, proces s ing, s torage, s ale and distribution of fertilizers and chemical products. To carry on business in Pakis tan or elsewhere as dealers , wholes alers , and retailers in drugs , chemicals patent medicines , dyes , dye-wares , colours , com pounds , starch, s izing material and all other articles and things the business of w hich in the opinion of the Directors m ay be conveniently carried on and for that purpos e to buy, sell, res ell, import, e xport, orde r ou t and ob tain indents for and to act as agents and repres entatives for dealing in all in any of the abo ve produ cts , articles and things.
6.
7. 8.
9.
10. To purchase or otherwise acquire, become interested in, deal in and with, inves t in, hold, sell, m ortgage, pledge, or othe rwise dis pose of, turn to account or realize, all form s of securities , including s hares , bonds , debentures , notes, evidence of indebtedness , securities of any nature of form convertible into or exchangeable for other s ecurities of any nature or fo rm , certificates of interes t, participation certificates , and certificates evidencing s hares of or interest in trus ts and trus ts estates or as sociations , certificates of trust of beneficial interes ts in trus ts , mortgages and other instrum ents , securities and rights . 11. To carry on the bus iness of manufacturers , expo rters and im porters and dealers in Petro- Chemicals , alkalis, essences , cordials, chemical, industrial and other preparations and articles of any kind w hatsoever s uch as Urea Formidhide, Polyethylene, Polys trene, Polys ter Fibre, Man-Made Fibre s uch as Nylon, Rayon and G lass Fibres, Mineral and other waters, cem ent, oils , paints, pigments and varnishes , paint and colour grinders , analytical chemists , drys alters , oil and colourmen, makers of and dealers in proprietary articles of all kind and of electrical, chemical, photographical, s urgical and scientific appliances , apparatus and materials and any similar or allied business and either in connection w ith the said business or as dis tinct or s eparate bus iness . 12. To institute, participate in, or promote comm ercial, mercantile, financial and indus trial enterpris es and operations . 13. To acquire by purchas e or otherwis e, ow n, hold, buy, s ell, conve y, lease, m ortgage or encum ber real es tate and other property, at any place or places in Pakis tan, or anywhere in the world, pers onal or mixed, and to s urvey, subdivide, plan, improve and develop lands for purpos es of sale or o therw ise, and to do and perfo rm all things needful and law ful for the de velopment and improvem ent of the s ame for residence, trade or business . 14. To s upply any cities , towns , villages, comm unities, counties , and the inhabitants thereof, corporations , partners hips, individuals , places of amusement or exhibition, or any two o r m ore of either or the same, with water, light, heat, gas and/or electric power, and to do any and all things incidental, necessary, and/or proper in furtherance of and/or in connection with the foregoing objects and purpos es . 15. To apply for, obtain, regis ter, purchas e, lease or otherwise to acquire, and to hold, use, own, operate and introduce and to sell, assign or otherwise dis pos e of, any trade-m arks, trade-names , copyrights , patents , inventions , improvem ents and s ecret pro cess es used in connection with or s ecured under entry of any certificate of trade-marks or otherwise, and to use, exercis e, develop and grant licenses in res pect of, or otherwis e turn to account any such trade-marks , copyrights ,
81
Initial Public O ffering of Fatima Fertilizer Company Limited patents , licenses, proces ses and the like or any s uch p roperty o r rights , necessary or incidental thereto. 16. To purchase, take on lease, or tenancy or in exchange o r allotment or hire, or otherwise acquire, erect, maintain; equip, cons truct, reconstruct, repair, renovate, or adopt moveable or immoveable property including buildings , work, res idential bungalow , labour lines , quarters , offices , places of w ors hip, schools , institutions, hospitals, dis pens aries, canteens, recreation room s, clubs , w arehous es, godowns , w orks hops, mill structures, erections , foundries , engines , tools electric and telephone ins tallations, access ories, implements , appliances , apparatus es , articles and other things found neces sary or con venient for the pu rposes of the company or fo r the welfare of the employees of the company and also to expand the business of the company by purchasing , acquiring , getting trans ferred , adding to , altering , enlarging , all or any of the buildings , mills , factories, premises , places , being the property of the company on all or any of the lands for the time being the property of the com pany or in posses sion of the company and by s pending from time to time such s um or s ums of m oney as may be necess ary or expedient for improving , adding to , altering , repairing and maintaining the buildings, structures, machinery plant and property for the tim e being of the company and to s ell or mortgage o r let out on hire or otherwise dis pos e of all or any portion of the s am e as may be thought desirable. 17. To buy, leas e, s ell, exchange or otherwise acquire and to cons truct, lay, maintain and operate pipelines and other conveyo rs for the transportation of gases , liquids, minerals and chemicals and other s ubs tances. 18. To cons truct, e rect and build s tructu res and buildings including, but w ithout prejudice to the generality of the foregoing, factories , w arehous es, works hops , offices, s heds , dw ellings, s tores and any other works or con venience which m ay s eem directly or indirectly condu cive to any of the objects of the Company. 19. To purchase, cons truct, improve, maintain, develop, work, manage, carry out, control and s uperintend any huts, markets , roadways , tram ways , railw ays , branches or sidings , bridges , reservoirs , canals, water cours es , ferries, piers , hydraulic w orks, electric works , telephone works , factories, bus tees , villages , wharves , jetties, manufactories , w arehous es, shops , s tores and other w orks and conveniences which m ay s eem calculated directly or indirectly to advance the Com panys interes t, and to contribute, subsidis e, or otherw is e assis t or take part in construction, improvem ent, m aintenance, w orking, management, carrying out, or control thereof. 20. To buy, sell, manufacture, s tore, repair, alter, improve, exchange, hire, import, expo rt and deal in all factories, works, plant, m achinery, tools, utensils , aircraft, vehicles , appliances , apparatus , products, materials , s ubs tances, articles and things capable of being us ed in any business which the Com pany is competent to carry on or required by any cus tomers of or pers ons dealing with the Com pany or comm only dealt with by persons engaged in any s uch business or w hich may s eem capable of being profitably dealt with in connection therewith and to m anufacture, experim ent w ith, render marketable and deal in all products of res idue and by-products incidental to or obtained in any of the business carried on by the Company. 21. To purchase, take on lease or tenancy or in exchange, hire, take options over or othe rwis e acquire for any es tate or interes t whatsoever and to hold develop, w ork cultivate, deal with, dispose of and turn to account concessions , grants , decrees , licens es , privileges , claims , options, leas es , property, m oveable or im moveable, or rights or powers of any kind which may appear to be necessary or convenient for any business of the Company or for pu rposes of inves tment or re-inves tment and to purchas e, charter, hire, build or otherw is e acquire vehicles of any or every s ort or des cription and to use the same for the carriage of m erchandise or pass engers of all kinds and to carry on the business of ow ners of trucks , lorries, motor-cars and air-craft in all or any of their res pective branches. 22. to s ell, exchange, m ortgage or let on lease or ro yalty all or any of the property of the Com pany and to g rant licenses , easements , options or other rights over the s am e and to accept s uch cons ideration as m y be thought fit for the s am e. 23. To cons truct and provide or otherwis e acquire, w hether by purchase, lease or otherwis e, residential accommodation for pers ons engaged in the business of the Com pany. 24. To provide the industrial classes with commodious and healthy lodgings and dwellings .
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Initial Public O ffering of Fatima Fertilizer Company Limited 25. To purchase natural gas , coal, diesel oil, petrol, timber, s alt, keros ene oil, food grain and other cereal, edible oil, plant, machinery, s tores , goods and merchandis e, and to deal with and dis pos e of the s am e by s ale or otherwise. 26. To manage, improve, farm, cultivate, maintain, lease, underlet, exchange, s ell or otherwis e deal w ith and dis pos e of all or any part of the lands and buildings or other real property of the Company, not required for the purpos es of the Company. 27. To purchase, im port or otherwis e deal with any raw m aterial and machinery, f rom any market w hether in Pakis tan or any part of the w orld. 28. To appropriate any part or parts of the property of the Com pany fo r the purpos es of, and to build and let or sell, s hops, offices and other places of business . 29. To advertise all or any of the m anufactures or goods of the Company in any way that may be thought advisable, including the pos ting of bills in relation thereto, and the iss ue of books , pam phlets and price lists , and the conducting of competitions and the giving of prizes therefore. 30. To purchase or otherwise acquire and undertake the whole or any part of the bus iness , property, assets and liabilities of any pers on, firm, body or company carrying on any bus iness which the company is authorized to carry on , o r pos sessed of property suitable for the purpose of this Com pany. 31. To purchas e, take on lease, or otherwis e acquire any mines , mining rights and m ateliferous land in Pakistan or elsewhere and any interest therein, and to explore, work, e xercis e, develop and turn to account the s ame. 32. To apply for and obtain any provisional orders of any Governm ent department or Minis try for any of the purpos es within the objects of this Com pany. 33. To s upport and subs cribe to any charitable or public object, and any ins titution, society or club w hich may be for the benefit of the Company or its employees or may be conne cted w ith any tow n or place w here the Company carries on business; to give pensions , gratuities or charitable aid to any persons who may have been Directors of o r m ay ha ve served the Company, or to the wives , children, or other relatives or dependents of such persons ; to make paym ents towards ins urance, and to form and contribute to provide and benefit funds for the benefit of any s uch pers ons, or of their wives , children, or othe r relatives or dependents . 34. To p rocure the Company to be regis tered or recognized in any foreign country o r place and to take all s teps w hich may be necessary or e xpedient to enable it to carry on busines s there. 35. To enter into an y arrangem ent and to take all necessary o r p roper s teps with the Governm ent of Pakistan, and, w ith the approval of the Go vernm ent of Pakis tan, w ith any pro vincial governm ent or foreign governm ent or public authority, local, municipal or otherwise or with any corporation or private pers ons or all or any of these for the purpos es of directly or indirectly carrying out the objects of the Company o r effecting any modification in the constitution of the Company or furthering the interes ts of the Company and to oppos e any s uch s teps taken by any other authority, firm or person which the Company considers likely, directly or indirectly, to p rejudice its interests , and to obtain from any s uch gove rnmental or other public authority an y charters, con tracts , decrees , rights, grants , loans, s ubsidies , privileges, concessions , indemnities, sanctions or cons ents as the Company may think proper. 36. To enter into partners hip or into any arrangem ent for s haring profits , union of interest, cooperation, joint venture, reciprocal conces sion or amalgamation with any pers on or Company carrying on o r engaged in , or about to carry on o r engaged in any business or trans action which this Com pany is authorized to carry on o r engaged in , or any business or transaction capable of being conducted which m ay, directly or indirectly, benefit this Com pany, and to lend m oney to, guarantee the contracts of , o r o therwise assist, any s uch pers on or com pany, and to take or otherwise acquire s hares and s ecurities of any such Company, and to s ell, hold, re-iss ue with or without guarantee, or otherw ise deal with the sam e. 37. To d raw, make, accept, dis count, endors e, execu te or negotiate and is s ue cheques , promissory notes, bills of exchange, hundies, bills of landing and other negotiable or trans ferable s ecurities and to advance, deposit w ith or lend money, s ecurities or property to s uch pers ons , firm or company
83
Initial Public O ffering of Fatima Fertilizer Company Limited and on such terms w ith or without security, as the Company deem s fit, but not to operate as a banking and/or inves tment company. 38. To expend m oney in experimenting on and tes ting and in im proving or seeking to improve any patents , rights, inventions , dis coveries , process es or information of the Company or which the Com pany may acquire or propose to acquire. 39. To form , incorpo rate or promote any company o r com panies whether in Pakistan or in any foreign country, having am ongs t its or their objects the acquisition of all or any of the assets or control, m anagement or development of the Company or any other ob jects or object which in the opinion of the Company could or m ight directly or indirectly assist the Company in the management of its business or the de velopment of its properties or otherw is e prove advantageous to the Company and to pay all or any of the cos ts and expens es incurred in connection with any such promotion or incorporation and to rem unerate any pers on or com pany in any m anner it shall think fit for s ervices rendered or to be rendered in obtaining subs criptions for o r placing or assis ting to place or to obtain subscription for or for guaranteeing the subs cription of or the placing of any share in the capital of the Company o r any bonds, debentures , obligations or securities of any other company held or ow ned by the Company o r in which the Com pany may have an interes t or the p romotion or form ation of any other company in which the Com pany may have an interest subject to prior permiss ion of the Federal G overnment. 40. To take or otherw is e acquire and hold shares, stock, debentures , debenture-s tock and other s ecurities whether convertible into s hares to acquire and undertake the whole or any part of the s hares , business , property or liabilities of any other com pany having objects altogether or in part similar to those of the Company o r ca rrying on any business capable of being conducted s o as directly or indirectly to benefit the Company. 41. To grant pens ions , allowances and bonus es to employees (including Directors ) or ex-employees of the Company including payment of p remiums on life policies on employees or their dependents, to establis h and operate Pro vident Funds for the same and to establish and s upport or aid any s chools and any educational, s cientific, literary, religious or charitable ins titutions or trade s ocieties w hether s uch s ocieties be s olely connected with the trade carried on by the Company or not, an any club or other es tablis hment calculated to advance the interes ts of the Company or its employees . 42. To pay any premiums or salaries and to pay for any prope rty rights or privilege acquired by the Com pany or for services rendered in connection with the prom otion of the objects or the business of the Company or in connection wi th the acquisition of any property, rights or p rivileges for the Com pany or o therw is e how soever, either wholly or partially in cas h or in s hares , bonds , debentures or other s ecurities of the Company and to iss ue any s hares , bonds, debentures or other securities , and to charge any s uch bonds, debentures or any part of the property of the Com pany. 43. To s ubs cribe or guarantee money for any national, charitable, benevolent, public, general or us eful object o r for any exhibition. 44. To aid, pecuniarily or otherw ise, any ass ociation, body or m ovem ent having for an object the s olution, s ettlement or s urmounting of indus trial or labour problems or troubles or the promotion of indus try or trade. 45. To establish, provide, maintain and conduct or otherwis e s ubsidize research laboratories and experimental w orkshops for s cientific and technical research and experim ents and undertake and carry on all scientific and technical researches , and tests of all kinds, to promote s tudies and research both scientific and technical inves tigation and invention by providing or assis ting laboratories , w orkshops , libraries, lectures , m eetings and conferences and by providing the remuneration of s cientific or technical teachers and for providing for the award of scholars hips , prizes, grants and bursaries to s tudents or independent s tudents or otherwis e and generally to encourage, prom ote and reward s tudies , research, investigations, experiments , tests and inventions of any kind that may be considered likely to as sist any of the business w hich the Company is authorized to carry on. 46. To pay all costs , charges and expenses w hich the Company m ay lawfully pay with respect to the form ation and regis tration of the Company.
84
Initial Public O ffering of Fatima Fertilizer Company Limited 47. To do all or any of the things herein in any part of the w orld either as principals, agents , trus tees , contractors or othe rw ise, and either alone or in conjunction with others . 48. To do all and everything necess ary, s uitable or proper o r incidental or condu cive to the accomplis hm ent of any of the purposes or the attainment of any of the objects or the furtherance of any of the pow ers hereinbefore set forth, either alone or in as s ociation with other corpo rate bodies , firms or individuals and to do every othe r act o r thing incidental or appurtenant to or arising out of or connected with the business or powers of the Com pany or part the reof, pro vided the s ame be lawful. 49. It is declared that notwithstanding anything contained in the foregoing objects clauses of this Memorandum of Ass ociation nothing contained therein s hall be construed as empowering the Com pany to undertake or to indulge in busines s of banking, leasing, inves tment, lottery schemes , instalm ent s chemes, etc. prepaym ent s ales s cheme, m anaging agency o r insurance bus iness directly or indirectly as res tricted under the law or any unlawful operation. IV. V. The liability of the members is limited. The Autho ris ed Capital of the Com pany is Rs . 25,000,000,000 (Rupees tw enty five billion) divided into 2,500,000,000 s hares of Rs .10/- each with the rights , p rivileges and conditions attaching thereto as are provided by the regulations of the Company for the time being, with power to increase and reduce the capital and to divide the s hares in the capital for the time being into s everal classes . We, the s everal pers ons whose names and addresses are s ubscribed below, are desirous of being formed into a com pany, in pu rs uance of this Memorandum of Ass ociation, and we res pectively agree to take the num ber of shares in the capital of the Company as set opposite our respective names: Name & Number Surname Nationality of (Present & Fathers/H usbands With any Residential Shares Form er) Occupation Sig nature Name in Full Former Address taken in F ull Nationality By each (In Block Subscriber Letters) FAWAD Mian Mukhtar Pakistani Indus trialis t 43-A Qasim 1 AHMED Ahmed Sheikh Road, Multan One MUKHTAR Cantt. SdSHEIKH NIC 363022741274- 7 FAZ AL Mian Mukhtar Pakistani Indus trialis t 43-A Qasim 1 AHMED Ahmed Sheikh Road, Multan One SHEIKH Cantt. SdNIC 363020543241- 9 FAISAL Mian Mukhtar Pakistani Indus trialis t 43-A Qasim 1 MUKHTAR Ahmed Sheikh Road, Multan One SHEIKH Cantt. SdNIC 322-87026025 Mrs . Mian Mukhtar Pakistani Indus trialis t 43-A Qasim 1 FARUKH Ahmed Sheikh Road, Multan One MUKHTAR Cantt. SHEIKH SdNIC 363028330081- 0 AMANULLAH Haji H abib Ullah Pakistani Service 1936 Inside Pak 1 NIC 36302(Private) Gate, Multan One 046074-9 Sd-
85
Initial Public O ffering of Fatima Fertilizer Company Limited M.NASIR BUTT NIC 272-34461719 IFTIKHAR MAH MOOD BAIG NIC 363028145686- 3 ABDUL SATTAR Pakistani Service (Private) 172-Is lam Block, Azam Gardens ,Multan Road, Lahore 140-H as san Parwana Colony, Multan 1 One Sd1 One Sd-
SULTAN BAIG
AH MED
Pakistani
Service (Private)
D ated the 16th day of Decem ber 2003. Witness to above Signature: Name: Addres s : NIC:
TOTAL
7 (Se ven)
86

Fatima Fertilizer Prospectus

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Fatima Fertilizer Prospectus

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ADVICE FOR GENERAL PUBLIC THE INVESTORS AR E STRONGLY ADVISED IN THEIR OWN INTEREST TO CAREFULLY READ THE CONTENTS

FATIMA FERTILIZER COMPANY LIMITED

LEAD MANAGER & BOOK RUNNER

Book Bu ild ing po rtion underwritten b y:

Initial Public O ffering of Fatima Fertilizer Company Limited

Initial Public O ffering of Fatima Fertilizer Company Limited

Initial Public O ffering of Fatima Fertilizer Company Limited

Bid Collection Cen tre

Bidding Process Ending Date

Bidding Process Starting Date

Book Bu ild ing

Book Bu ild ing Account

Initial Public O ffering of Fatima Fertilizer Company Limited

General Pu blic Offer Price

High Net worth Individu al (HNWI) Institution al Investors

Lead Manager and Book Runner Limit Price

Prelimin ary Pro spectus

Initial Public O ffering of Fatima Fertilizer Company Limited

Step bid Strike Price

Initial Public O ffering of Fatima Fertilizer Company Limited

TABLE OF CONTENTS Part Con ten ts Page No.

Initial Public O ffering of Fatima Fertilizer Company Limited

Initial Public O ffering of Fatima Fertilizer Company Limited c)

Initial Public O ffering of Fatima Fertilizer Company Limited

Initial Public O ffering of Fatima Fertilizer Company Limited

Initial Public O ffering of Fatima Fertilizer Company Limited

Initial Public O ffering of Fatima Fertilizer Company Limited

BIDDING PROCESS STARTS ON

11 Janu ary 2010

BIDDING PROCESS ENDS ON

13 Janu ary 2010

Initial Public O ffering of Fatima Fertilizer Company Limited

Initial Public O ffering of Fatima Fertilizer Company Limited

Initial Public O ffering of Fatima Fertilizer Company Limited

Initial Public O ffering of Fatima Fertilizer Company Limited

Initial Public O ffering of Fatima Fertilizer Company Limited

Date Decem ber 02, 2009

December 03, 2009

STRIKE PRICE DETERMINED THROUGH THE DUTCH AUCTION METHOD

TOTAL SHAR ES SUBSCRIBED

Initial Public O ffering of Fatima Fertilizer Company Limited

Initial Public O ffering of Fatima Fertilizer Company Limited

Initial Public O ffering of Fatima Fertilizer Company Limited

2.22 STATEMENT BY THE COMPANY

For and on behalf of FATIMA FERTILIZER COMPANY LIMITED

Fawad Ahmed Mukhtar (Chief Executive Officer)

Iftikhar Mah mood Baig (Company Secretary)

Initial Public O ffering of Fatima Fertilizer Company Limited

2.23 STATEMENT BY LEAD MANAGER & BOOK RUNNER

On behalf of Arif Habib Limited:

Samad Hab ib Chief Executive Arif Habib Limited

Initial Public O ffering of Fatima Fertilizer Company Limited

674,948,370 476,290,280 584,229,200 584,229,200 50,000 50,000 50,000 2,319,847,050

900,000,000 17, 968,135 150,731,084 34, 387,480 139,570,865 180,000,000 1,422,657,564

9,000,000,000 179,681,350 1,507,310,840 343,874,800 1,395,708,650 1,800,000,000 14,226,575,640

Initial Public O ffering of Fatima Fertilizer Company Limited

12,058,990 13,888,450 82,133,260 6,695,840 85,655,630 525,001,620 1,453,577,310 18,000,000,000 Amount

7,500, 000 150,000,000

47, 500,000 2,500,000 50,000,000 2,000,000,000

475,000,000 25, 000,000 500,000,000 20,000,000,000

Initial Public O ffering of Fatima Fertilizer Company Limited

(x). (xi). (xii). (xiii).

Transferability Conversion option in certain events