Ffc 2006 Consolidated

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Consolidated

Financial Statements

20062006





85Auditors' Reportto the Members of Fauji Fertilizer Company Limited

We have audited the annexed consolidated financial statements comprising consolidated balance sheet of Fauji

Fertilizer Company Limited (“the Company”) as at December 31, 2006 and the related consolidated profit and

loss account, consolidated cash flow statement and consolidated statement of changes in equity together with

the notes forming part thereof, for the year then ended. These financial statements are responsibility of the

Company’s management. Our responsibility is to express our opinion on these financial statements based on our

audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards

require that we plan and perform the audit to obtain reasonable assurance about whether the above said

statements are free of any material misstatement. An audit includes examining, on a test basis, evidence

supporting the amounts and disclosures in the above said statements. An audit also includes assessing the

accounting policies and significant estimates made by management, as well as, evaluating the overall presentation

of the above said statements. We believe that our audit provides a reasonable basis for our opinion.

In our opinion the consolidated financial statements present fairly the financial position of Fauji Fertilizer

Company Limited as at December 31, 2006 and the results of its operations, its cash flows and changes in equity

for the year then ended in accordance with the approved accounting standards as applicable in Pakistan.

Islamabad KPMG TASEER HADI & CO.

January 26, 2007 CHARTERED ACCOUNTANTS

Annual Report 2006



Consolidated Balance Sheetas at December 31, 2006

86

2006 2005

Note (Rupees '000) (Rupees '000)

SHARE CAPITAL AND RESERVES

Share capital 3 4,934,742 4,934,742

Capital reserve 4 276,184 276,184

Revenue reserve 5 7,336,881 6,407,444

12,547,807 11,618,370

MINORITY INTEREST 4,194,102 3,793,197

16,741,909 15,411,567

NON CURRENT LIABILITIES 6 9,273,744 10,167,878

DEFERRED TAXATION 7 5,030,339 3,723,283

CURRENT LIABILITIES

Trade and other payables 8 6,337,033 9,380,596

Interest and mark-up accrued 10 238,991 175,992

Short term borrowings 11 9,062,926 4,741,612

Current portion of:

- Long term financing 6.1 1,304,271 2,262,603

- Long term murabaha 6.2 38,679 80,346

- Long term loan 6.3 648,201 648,201

- Liabilities against assets subject to finance lease 6.4 2,586 4,015

Taxation 1,305,606 1,414,418

18,938,293 18,707,783

CONTINGENCIES AND COMMITMENTS 12

49,984,285 48,010,511

The annexed notes 1 to 39 form an integral part of these consolidated financial statements.



87

2006 2005


PROPERTY, PLANT AND EQUIPMENT 13 24,538,295 23,747,830

GOODWILL 14 1,569,234 1,673,849

LONG TERM INVESTMENTS 15 3,068,202 2,039,951

LONG TERM LOANS AND ADVANCES 16 76,647 64,545

LONG TERM DEPOSITS AND PREPAYMENTS 17 19,747 20,830

CURRENT ASSETS

Stores, spares and loose tools 18 2,999,367 2,731,400

Stock in trade 19 1,753,440 1,583,429Trade debts 20 1,192,699 774,794

Loan and advances 21 156,405 154,626

Deposits and prepayments 22 30,546 29,403

Other receivables 23 2,765,488 890,874

Short term investments 24 2,955,237 6,195,252

Cash and bank balances 25 8,858,978 8,103,728

20,712,160 20,463,506

49,984,285 48,010,511

Chairman Chief Executive Director

Annual Report 2006



Consolidated Profit and Loss Accountfor the year ended December 31, 2006

88

2006 2005


Sales 26 44,680,986 39,757,510

Cost of sales 27 30,265,238 25,987,200

GROSS PROFIT 14,415,748 13,770,310

Administrative expenses and distribution cost 28 4,269,199 3,744,096

10,146,549 10,026,214

Finance cost 29 929,732 585,816

Other expenses 30 978,405 884,315

8,238,412 8,556,083

Other income 31 1,673,615 1,621,987

NET PROFIT BEFORE TAXATION 9,912,027 10,178,070

Provision for taxation 32 3,661,056 3,782,811

NET PROFIT AFTER TAXATION 6,250,971 6,395,259

ATTRIBUTABLE TO:

Equity holders of Fauji Fertilizer Company Limited 5,049,946 5,192,610

Minority interest 1,201,025 1,202,649

6,250,971 6,395,259





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Annual Report 2006

Consolidated Cash Flow Statementfor the year ended December 31, 2006

2006 2005


CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operations 33 5,884,188 13,092,939

Payments for :

Finance cost paid (866,733) (504,606)

Income tax paid (2,570,085) (1,636,184)

Payment to pension fund (36,438) (32,249)

Payment to gratuity fund (51,920) (43,462)

Payment to Workers' Profit Participation Fund (546,114) (501,012)

Compensation from Government of Pakistan–net 51,800 –

(4,019,490) (2,717,513)

Net cash from operating activities 1,864,698 10,375,426

CASH FLOWS FROM INVESTING ACTIVITIES

Fixed capital expenditure (2,583,479) (1,753,073)

Proceeds from sale of property, plant and equipment 21,269 25,383

Interest received 388,092 753,844

Investment in Pakistan Maroc Phosphore S.A., Morocco (1,015,313) (563,862)

Investments at fair value through profit or loss (500,000) –

Profit received on bank balances 512,525 –

(Increase)/decrease in other investments (27,335) 1,226,305

Net cash used in investing activities (3,204,241) (311,403)

CASH FLOWS FROM FINANCING ACTIVITIES

Long term financing – disbursements 1,100,000 –

– repayments (2,262,602) (2,642,699)

Long term loans – repayments – (1,741)

Long term murabaha – repayments (80,345) (80,345)

Short term borrowings 1,996,667 2,400,908

Finance lease paid (4,413) (7,448)

Dividends paid (4,705,842) (5,874,147)

Net cash used in financing activities (3,956,535) (6,205,472)

Net (decrease)/increase in cash and cash equivalents (5,296,078) 3,858,551

Cash and cash equivalents at beginning of the year 11,871,419 8,010,318

Effect of exchange rate changes 13,240 2,550

Cash and cash equivalents at end of the year 34 6,588,581 11,871,419





Consolidated Statement of Changes in Equityfor the year ended December 31, 2006

90

A t t r i b u t a b l e t o e q u i t y h o l d e r s o f F a u j i F e r t i l i z e r C o m p a n y L i m i t e d M i n o r i t y T o t a l

S h a r e C a p i t a l R e s e r v e f o r G e n e r a l U n a p p r o p r i a t e d i n t e r e s tc a p i t a l r e s e r v e i s s u e o f r e s e r v e p r o f i t / ( l o s s )

b o n u s s h a r e s( Ru p ees ' 0 0 0 )

B a la n ce a t D e ce m b er 3 1 , 2 00 4 2 ,9 49 ,7 03 2 76 ,1 84 4 42 ,4 55 7 ,4 50 ,0 00 5 8 , 75 3 3 ,5 11 ,1 33 1 4, 68 8, 22 8

T r a n s f e r t o g e n e r a l r e s e r v e d u e t o c h a n g e i n

a c c o u n t in g p o l ic y (n o t e 2 .1 9 . 2 ) – – ( 4 4 2 , 4 5 5 ) 4 5 0 , 0 0 0 ( 7 , 5 4 5 ) – –

R e s t a t e d b a la n c e a t D e c e m b e r 3 1 , 2 0 0 4 2 ,9 4 9 , 7 0 3 2 7 6 ,1 8 4 – 7 ,9 0 0 , 0 0 0 5 1 , 2 0 8 3 , 5 1 1 , 1 3 3 1 4 , 6 8 8 , 2 2 8

T r a n s f e r f r o m g e n e r a l r e s e r v e – – – ( 5 1 0 , 0 0 0 ) 5 1 0 , 0 0 0 – –

F F C F in a l d iv id e n d 2 0 0 4 : R s 3 . 0 0 p e r s h a r e – – – – ( 8 8 4 , 9 1 1 ) – ( 8 8 4 , 9 1 1 )

N e t p r of it f o r t h e y e ar e n d e d D e c e m b er 3 1 , 2 0 05 – – – – 5 ,1 9 2, 61 0 1 ,2 0 2, 64 9 6 ,3 9 5, 25 9

F F C D i v i d e n d s

F ir st in te rim 2 00 5: R s 2 .5 0 p e r s h ar e – – – – ( 8 48 ,0 39 ) – (8 48 ,0 39 )

S e c o n d in t e r im 2 0 0 5 : R s 4 .0 0 p e r s h a r e – – – – ( 1 , 5 6 0 , 3 9 3 ) – ( 1 , 5 6 0 , 3 9 3 )

T h i rd in t e r im 2 0 0 5 : R s 3 . 2 5 p e r s h a re – – – – ( 1 , 4 5 7 , 9 9 2 ) – ( 1 , 4 5 7 , 9 9 2 )

D i v i d e n d t o F F B L m i n o r i t y h o l d e r s

F ir st in te r im 2 00 5: R s 1 .2 5 p e r s ha re – – – – – ( 57 3, 54 4) (5 73 ,5 44 )

S e c o n d in t e r im 2 0 0 5 : R s 0 .7 5 p e r s h a r e – – – – – ( 3 4 4 , 1 2 6 ) (3 4 4 , 1 2 6 )

B o n u s s h a r e s i s s u e d 1 ,9 8 5 , 0 3 9 – – – ( 1 , 9 8 5 , 0 3 9 ) – –

R e s t a t e d b a la n c e a t D e c e m be r 3 1 , 2 0 0 5 4 ,9 3 4 , 7 4 2 2 7 6 ,1 8 4 – 7 ,3 9 0 , 0 0 0 ( 9 8 2 , 5 5 6 ) 3 , 7 9 6 , 1 1 2 1 5 , 4 1 4 , 4 8 2

T r a n s fe r f r o m g e n e r a l r e s e r v e – – – ( 1 ,2 0 0 , 0 0 0 ) 1 , 2 0 0 , 0 0 0 – –

F F C f in a l d iv id e n d 2 0 0 5 : R s 2 . 2 5 p e r s h a r e – – – – ( 1 , 1 1 0 , 3 1 7 ) – ( 1 , 1 1 0 , 3 1 7 )

F F B L f i n a l d i v i d e n d 2 0 0 5 t o m i n o r i t y h o l d e r s :R e : 0 . 5 p e r o r d in a r y s h a r e – – – – – ( 2 2 9 , 4 3 9 ) (2 2 9 , 4 3 9 )

N e t p r o f i t fo r t h e y e a r e n d e d D e c e m b e r 3 1 , 2 0 0 6 – – – – 5 , 0 4 9 , 9 4 6 1 , 2 0 1 , 0 2 5 6 , 2 5 0 , 9 7 1

F F C D i v i d e n d s

F i r s t in t e r im 2 0 0 6 : R s 2 .2 5 p e r s h a r e – – – – ( 1 , 1 1 0 , 3 1 7 ) – ( 1 , 1 1 0 , 3 1 7 )

S e c o n d in t e r im 2 0 0 6 : R s 2 .0 0 p e r s h a r e – – – – ( 9 8 6 , 9 4 8 ) – (9 8 6 , 9 4 8 )

T h i rd i n t e r im 2 0 0 6 : R s 1 . 8 5 p e r s h a re – – – – ( 9 1 2 , 9 2 7 ) – ( 9 1 2 , 9 2 7 )

D i v i d e n d t o F F B L m i n o r i t y h o l d e r s

F i r s t in t e r i m d i v i d e n d 2 0 0 6 R e . 0 . 5 p e r o r d i n a r y s h a r e – – – – – ( 2 29 ,4 38 ) ( 2 29 ,4 38 )

S e c o n d i n t e r i m d i v i d e n d 2 0 0 6 R e . 0 . 7 5 p e r o r d i n a r y s h a r e – – – – – ( 3 44 ,1 58 ) ( 3 44 ,1 58 )

B al a nc e a t D ec e m be r 3 1, 2 00 6 4 , 9 34 ,7 42 2 76 ,1 84 – 6 ,1 90 ,0 00 1 ,1 46 ,8 81 4 ,1 94 ,1 02 1 6 ,7 41 ,9 09





91

Annual Report 2006

Notes to the Consolidated F inancial Statementsfor the year ended December 31, 2006

1. STATUS AND NATURE OF BUSINESS

1.1 Fauji Fertilizer Company Limited (FFC / parent company) and its subsidiary, Fauji Fertilizer Bin

Qasim Limited (FFBL) are incorporated in Pakistan as public limited companies and their shares are

quoted on the Karachi, Lahore and Islamabad stock exchanges of Pakistan. The registered offices

of the companies are situated in Rawalpindi, Pakistan. The principal activity of FFC and its subsidiaryis manufacturing, purchasing and marketing of fertilizers and chemicals including investment in

chemical manufacturing operations.

1.2 Basis of consolidation

The consolidated financial statements include the financial statements of FFC and its subsidiary,

FFBL with 50.88% holding (2005: 50.88%) ("the Group companies/FFC and FFBL").

Subsidiaries are those enterprises in which parent company directly or indirectly controls, beneficially

owns or holds more than 50% of the voting securities or otherwise has power to elect and appoint

more than 50% of its directors. The financial statements of the subsidiary are included in the

consolidated financial statements from the date control commences until the date that control

ceases.

The assets and liabilities of subsidiary company have been consolidated on a line by line basis and

the carrying value of investment held by the parent company is eliminated against the subsidiary

shareholders' equity in the consolidated financial statements.

Material intra-group balances and transactions have been eliminated.

Minority interests are that part of net results of the operations and of net assets of the subsidiary

attributable to interests which are not owned by the parent company. Minority interest are presented

as a separate item in the consolidated financial statements.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Statement of compliance

These consolidated financial statements have been prepared in accordance with the approved

accounting standards as applicable in Pakistan and the requirements of the Companies Ordinance,

1984. Approved accounting standards comprise of such International Accounting Standards as notified

under the provisions of the Companies Ordinance, 1984. Wherever, the requirements of theCompanies Ordinance, 1984 or directives issued by the Securities and Exchange Commission of

Pakistan differ with the requirements of these standards, the requirements of the Companies

Ordinance, 1984 or the requirements of the said directives take precedence.

2.2 Accounting convention and basis of preparation

These consolidated financial statements have been prepared under the historical cost convention

except that investments available for sale and investments at fair value through profit and loss are

measured at their fair values. The identifiable assets and liabilities of Pak Saudi Fertilizers Limited

(PSFL) have been measured at their fair value on acquisition.

The preparation of financial statements in conformity with the approved accounting standards

require management to make judgments, estimates and assumptions that affect the application

of policies and reported amounts of assets and liabilities, income and expenses. The estimates and

associated assumptions are based on historical experience and various other factors that are believed

to be reasonable under the circumstances, the results of which form the basis of making the

judgments about carrying values of assets and liabilities that are not readily apparent from other

sources. Actual results may differ from these estimates.

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

estimates are recognised in the period in which the estimates are revised if the revision affects

only that period, or in the period of the revision and future periods. Judgments made by management

in application of the approved accounting standards that have significant effect on the financial

statements and estimates with a significant risk of material adjustment in the next year are discussed

in respective policy notes.




92

2.3 Retirement benefits

FFC and FFBL operate the following retirement benefit schemes:

Funded gratuity scheme

Defined benefit funded gratuity for all eligible employees who complete qualifying periodof service and age.

Contributory Provident Fund

Defined contributory provident fund for all eligible employees for which contributions are charged

to profit and loss account.

Funded Pension Scheme

FFC has defined benefit funded pension for eligible employees who complete qualifying period of

service and age.

These funds are administered by trustees. Annual contributions to the gratuity and management

staff pension funds are based on actuarial valuation using Projected Unit Credit Method, related

details of which are given in note 9 to the consolidated financial statements. All contributions are

charged to profit and loss account for the year. The actuarial gains/losses in excess of corridor

limit (10% of the higher of fair value of assets and present value of obligation) are recognized over

the average remaining service life of the employees. Transitional liability in respect of FFBL is being

recognized on a straight line basis over a period of five years

Gratuity and pension contributions require assumptions to be made of future outcomes which mainly

includes increase in remuneration, expected long-term return on plan assets and the discount rate

used to convert future cash flows to current values. Calculations are sensitive to changes in the

underlying assumptions.

Compensated absences

The Group companies have the policy to provide for encashable compensated absences of its

employees in accordance with respective entitlement on cessation of service; related expected

cost thereof has been included in the consolidated financial statements.

2.4 Taxation

Provision for current taxation is based on taxable income at the current rates of taxation after

taking into account tax credits, tax rebates and exemptions available, if any, or minimum tax on

turnover, whichever is higher.

Deferred tax is accounted for using the balance sheet liability method in respect of all temporary

differences arising from differences between the carrying amount of assets and liabilities in the

consolidated financial statements and the corresponding tax bases used in the computation of

taxable profit. Deferred tax liabilities are recognized for all taxable temporary differences and

deferred tax assets are recognized to the extent that it is probable that taxable profits will be

available against which the deductible temporary differences, unused tax losses and tax credits

can be utilized.

Deferred tax is calculated at the rates that are expected to apply to the period when the differences

reverse, based on tax rates that have been enacted.

The Group companies takes into account the current income tax law and decisions taken by thetaxation authorities. Instances where the Group companies view differ from the income tax

department at the assessment stage and where the Group companies considers that its view on

items of material nature is in accordance with law, the amounts are shown as contingent liabilities.

2.5 Property, plant and equipment and capital work in progress

Owned assets

Property, plant and equipment including those acquired on PSFL acquisition, are stated at cost less

accumulated depreciation except freehold land and capital work in progress, which are stated at

cost. Cost comprises acquisition and other directly attributable costs. Property, plant and equipment

acquired on PSFL acquisition are stated at their cost to FFC, which represents their fair value on

acquisition, less accumulated depreciation.



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Annual Report 2006

Depreciation is provided on the straight-line basis and charged to profit and loss account to write

off the depreciable amount of each asset over its estimated useful life at the rates specified in

note 13.

Maintenance and repairs are charged to profit and loss account as and when incurred. Major renewalsand improvements are capitalized and the assets so replaced, if any, are retired. Gains and losses

on disposal of property, plant and equipment, if any, are included in profit and loss account

currently.

Initial fill of catalysts in the ammonia plant is capitalized with plant and machinery whereas costs

of subsequent replacements of such catalysts are included in property, plant and equipment and

depreciated on a straight line basis over their estimated useful lives.

Assets subject to finance lease

Leased property, plant and equipment in terms of which FFBL assumes substantially all the risks

and rewards of ownership are classified as finance leases. Leased assets are stated at an amount

equal to the lower of its fair value and the present value of minimum lease payments at the

inception of the lease, less accumulated depreciation and impairment losses, if any.

Rental obligations of leased assets, net of finance charges not due are included in liabilities against

assets subject to finance lease.

Each lease payment is allocated between the liability and finance charge so as to achieve a constant

rate on the balance outstanding. Finance charge on leased assets is charged to profit and loss

account over the lease term.

Depreciation on assets subject to finance lease is recognized in the same manner as for owned

assets.

FFBL accounts for lease obligations by recording the asset and corresponding liability, there against

determined on the basis of discounted value of total minimum lease payments. Finance charge is

recognized in the profit and loss account using the effective mark-up rate method.

The Group companies review the useful lives and residual value of property, plant and equipment

on a regular basis. Any change in estimates in future years might affect the carrying amounts of

the respective items of property, plant and equipment with a corresponding effect on the depreciation

charge.

2.6 Impairment

The carrying amount of the Group companies' assets are reviewed at each balance sheet date to

identify circumstances indicating occurrence of impairment loss or reversal of previous impairment

losses. If any such indications exist, the recoverable amounts of such assets are estimated and

impairment losses or reversal of impairment losses are recognized in the profit and loss account.

Reversal of impairment loss is restricted to the original cost of the asset.

2.7 Goodwill

On acquisition of an entity, difference between the purchase consideration and the fair value of

the identifiable assets and liabilities acquired, is initially recognized as goodwill and amortized on

a straight line basis over the period of 20 years.

2.8 Investments

2.8.1 Investment in joint ventureJoint ventures are those entities over whose activities the Group companies have joint control

established by the contractual arrangement. The Group comapnies recognizes their interest in joint

venture using equity method under which the investment is initially recognized at cost and the

carrying amount is increased or decreased to recognize the Group companies' share of the profit

or loss of joint venture after the date of joint control. The method is applied from the date that

joint control commences until the date that joint control ceases.

2.8.2 Investments available for sale

These are initially recognised at cost and at subsequent reporting dates measured at fair values.

Gains or losses from changes in fair values are taken to equity until disposal at which time these

are recycled to profit and loss account.




94

2.8.3 Investments held to maturity

Investments with fixed or determinable payments and fixed maturity, where the Group companies

have the positive intent and ability to hold to maturity, are carried at amortized cost, using the

effective interest rate method less impairment losses, if so determined.

2.8.4 Investments at fair value through profit or loss

Investments which are acquired principally for the purpose of selling in the near term or the

investments that are part of a portfolio of financial instruments exhibiting short term profit taking

are classified as investments at fair value through profit or loss. These are stated at fair values

with any resulting gains or losses recognized directly in the profit and loss account. The fair value

of such investments representing listed equity securities are determined on the basis of prevailing

market prices.

2.9 Stores, spares and loose tools

These are valued at weighted average cost except for items in transit, which are valued at invoice

price and related expenses incurred upto the balance sheet date. For items which are slow moving

and/or identified as surplus to the Group companies' requirement, a provision is made for excess

of book value over estimated net realizable value. The Group companies review the carrying amount

of stores and spares on a regular basis and provision is made for obsolescence.

2.10 Stock in trade

Stocks are valued at the lower of cost and net realizable value except for stock in transit which is

valued at invoice price and related expenses incurred upto the balance sheet date. Cost includes

applicable purchase cost and manufacturing expenses.

Cost is determined as follows:

Raw materials at weighted average cost

Work in process at weighted average cost of purchases and

Finished goods applicable manufacturing expenses

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

estimated cost of completion and selling expenses.

2.11 Foreign currencies

Transactions in foreign currencies are recorded in the books at the rates of exchange prevailing

on the date of transaction. Monetary assets and liabilities in foreign currencies at each period end

are translated into rupees at the rates prevailing on the balance sheet date. Exchange differences

are included in the profit and loss account for the year.

2.12 Revenue recognition

Sales revenue is recognized at the time of dispatch of goods to customers. Return on bank deposits

and investments and interest on loans are accounted for on a time proportion basis using the

applicable rate of return/ interest. Scrap sales and miscellaneous receipts are recognized on realized

amounts. Dividend income is recognized when the right to receive the dividend is established.

2.13 Mark-up bearing borrowings

Mark-up bearing borrowings are recognised initially at cost being the fair value of consideration

received, less attributable transaction costs. Subsequent to initial recognition, mark-up bearingborrowings are stated at original cost less subsequent repayments.

2.14 Government compensation

FFBL recognizes Government compensation received in lieu of the fertilizer policy, 1989 as income

subject to compliance with the related conditions.

2.15 Phosphatic fertilizer subsidy for farmers

Subsidy on potassic and phosphatic fertilizers announced by the GOP for farmers is recognized in

the profit and loss account by adjusting the amount of subsidy against the related cost of

purchase/production on a systematic basis in the same period in which these costs are incurred.



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Annual Report 2006

2.16 Borrowing costs

Borrowing costs incurred upto the date of commencement of commercial production are capitalized.

All other borrowing costs are recognized as an expense in the period in which these are incurred.

2.17 Research and development costsResearch and development costs are charged to income as and when incurred.

2.18 Provisions

Provisions are recognized when, the Group companies have a present legal or constructive obligation

as a result of past events, it is probable that an outflow of resources embodying economic benefits

will be required to settle the obligation and a reliable estimate can be made of the amount of

obligation.

2.19 Dividend appropriation

2.19.1 Dividend is recognized as a liability in the period in which it is declared.

2.19.2 Declarations of bonus shares and other reserves' appropriations after the balance sheet date but

before the authorisation of financial statements for issue are now recognized in the period in which

these announcements or appropriations are made in compliance with the Circular No. 06/2006

dated June 19, 2006 of the Institute of Chartered Accountants of Pakistan. Previously such declarationsand appropriations were recognized at the balance sheet date.

Comparative figures have been restated in compliance with International Accounting Standard 8

"Accounting Policies, Changes in Accounting Estimates and Errors". Had the policy not been changed,

general reserve as at December 31, 2004 would have been lower by Rs 450,000 thousand and reserve

for issue of bonus shares would have been higher by Rs 442,455 thousand with corresponding effect

on un-appropriated profit at the year end.

2.20 Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at their nominal values. For the purpose

of cash flow statement, cash and cash equivalents comprise cash in hand, cash with banks on

current, saving and deposit accounts, other short term highly liquid investments that are readily

convertible to known amounts of cash which are subject to insignificant risk of change in value and

short term running finances of FFBL.

2.21 Offsetting

Financial assets and liabilities are offset and the net amount is reported in the balance sheet if

the Group companies have a legally enforceable right to setoff the recognised amounts and the

Group companies intend to settle either on a net basis, or realise the asset and settle the liability

simultaneously.

2.22 Operating leases

Rentals payable under operating leases are charged to profit and loss account on a straight line

basis over the term of the relevant lease.

2.23 Financial instruments

Financial assets and liabilities are recognised when the Group companies become a party to the

contractual provisions of the instrument and assets and liabilities are stated at fair value and

amortised cost respectively. The Group companies derecognise the financial assets and liabilitieswhen they cease to be a party to such contractual provisions of the instruments. The Group

companies recognise the regular way purchase or sale of financial assets using settlement date

accounting.

a) Trade and other payables

Liabilities for trade and other amounts payable are carried at cost which is the fair value of the

consideration to be paid in the future for goods and services received.

b) Trade and other receivables

Trade and other receivables are recognised and carried at original invoice amount/cost less an

allowance for any uncollectible amounts. Carrying amounts of trade and other receivables are

assessed on a regular basis and if there is any doubt about the realisability of these receivables,

appropriate amount of provision is made.




96

2.24 New accounting standards and International Financial Reporting Interpretation Committee(IFRIC) interpretations that are not yet effective

The following standards, amendment and interpretation of approved accounting standards are

effective for next financial year:

IFRS 3 – Business Combinations

IFRS 5 – Non Current Assets Held for Sale and Discontinued Operations

Amendment to IAS 1 – Presentation of Financial Statements Capital Disclosures

IFRIC 10 – Interim Financial Reporting and Impairment

Except for IFRS 3 – Business Combinations the above standards, amendment and interpretation of

approved accounting standards are not expected to have a significant effect on the Group Companies'

financial statements. FFC believes that the major impact of IFRS 3 – Business Combinations will

be the cessation of amortisation of goodwill with annualized tests for impairment.

2006 2005

(Rupees '000) (Rupees '000)

3. SHARE CAPITAL

ISSUED, SUBSCRIBED AND PAID UP CAPITAL

Numbers

256,495,902 Ordinary shares of R s 10 each fully paid in cash 2,564,959 2,564,959

236,978,328 Ordinary shares of Rs 10 each issued as fully paid bonus shares 2,369,783 2,369,783

493,474,230 4,934,742 4,934,742

AUTHORISED SHARE CAPITAL

This represents 500,000,000 (2005: 500,000,000) ordinary shares of Rs 10 each.

3.1 Fauji Foundation held 44.35% (2005: 44.35%) ordinary shares of FFC at the year end.

2006 2005


4. CAPITAL RESERVE

Share premium 4.1 156,184 156,184

Capital redemption reserve 4.2 120,000 120,000

276,184 276,184

4.1 Share premium

This represents premium of Rs 5 per share received on public issue of 8,000 thousand ordinary

shares of FFC in 1991 and its share in share premium of FFBL received on public issue of 45,670

thousand ordinary shares in 1996 at the rate of Rs 5 per share.

4.2 Capital redemption reserve

This represents reserve setup by FFC on redemption of preference shares of Rs 120,000 thousand

in 1996.



97

Annual Report 2006

2006 2005


5. REVENUE RESERVES

General reserve 6,190,000 7,390,000

Unappropriated profit/(loss) 1,146,881 (982,556)

7,336,881 6,407,444

6. NON CURRENT LIABILITIES

Long term financing - secured 6.1 2,653,054 2,857,325

Long term murabaha - secured 6.2 135,373 174,051

Long term loan- Government of Pakistan 6.3 6,482,007 7,130,208

Liabilities against assets subject to finance lease 6.4 3,310 6,294

9,273,744 10,167,878

6.1 Long term financing - securedFauji Fertilizer Company Limited

Loans from banking companies 6.1.1

i) ABN Amro Bank - Syndicated 6.1.1 (a) 91,667 275,000

ii) MCB Bank Limited (MCB) 6.1.1 (a) 100,000 300,000

iii) National Bank of Pakistan (NBP-1) 6.1.1 (a) 166,667 500,000

iv) Habib Bank Limited (HBL- 1) 6.1.1 (a) 281,250 468,750

v) Habib Bank Limited (HBL- 2) 6.1.1 (a) 62,500 125,000

vi) United Bank Limited (UBL-1) 6.1.1 (a) 62,500 125,000

vii) National Bank of Pakistan (NBP-2) 6.1.1 (a) 500,000 –

viii) Habib Bank Limited (HBL- 3) 6.1.1 (b) 500,000 –ix) Askari Commercial Bank Limited (ACBL) 6.1.1 (b) 100,000 –

x) United Bank Limited (UBL-2) – 100,000

xi) United Bank Limited (UBL-3) – 500,000

1,864,584 2,393,750

Other loans

Term Finance Certificates (TFC's) 6.1.2 216,493 432,987

Fauji Fertilizer Bin Qasim Limited 6.1.3

From banking companies and financial institutions

Habib Bank Limited (HBL) 584,080 713,875Standard Chartered Bank (SCB) 333,990 408,210

MCB Bank Limited (MCB) 575,777 703,727

Askari Commercial Bank Limited (ACBL) 128,571 157,143

Saudi Pak Industrial and Agricultural Investment

Company (Pvt) Limited (SAPICO) 48,116 58,808

1,670,534 2,041,763

From associated undertaking

Pak Kuwait Investment Company (Pvt) Limited (PKIC),

an associated undertaking 205,714 251,428

3,957,325 5,119,928

Less: Current portion shown under current liabilities 1,304,271 2,262,603

2,653,054 2,857,325

Restated




98

6.1.1 Terms and conditions of long term finances availed by FFC are given below:

Lender Mark-up No. of half- Date of final

rate p.a. yearly repayment

(%) instalments

outstanding

i) ABN 6 months' Treasury Bill rate+1.3 1 May 29, 2007

ii) MCB 6 months' Treasury Bill rate+1.3 1 May 30, 2007

iii) NBP-1 6 months' Treasury Bill rate+1.3 1 May 29, 2007

iv) HBL-1 6 months' Treasury Bill rate+1.3 3 May 30, 2008

v) HBL-2 6 months' Treasury Bill rate+1.0 2 December 31, 2007

vi) UBL-1 6 months' Treasury Bill rate+1.0 2 December 31, 2007

vii) NBP-2 6 months' KIBOR+0.5 On maturity May 31, 2008

viii) HBL-3 6 months' KIBOR+1.45 8 November 30, 2011

ix) ACBL 6 months' KIBOR+0.4 On maturity December 30, 2008

6.1.1 (a) Finances (i) through (vi) are secured by an equitable mortgage on assets of FFC and hypothecation

of all assets including plant, machinery, tools and spares, and all other moveable properties

situated at Goth Machhi including stocks and book debts ranking pari passu with each other.

Finance (vii) is secured against lien on Pakistan Investment Bonds. These finances have been

obtained for the acquisition of PSFL.

6.1.1 (b) Finances (viii) and (ix) have been obtained to meet the debottlenecking requirements of FFC.

Finance (viii) is secured by an equitable mortgage on assets of FFC and hypothecation of all assets

including plant, machinery, tools and spares, and all other moveable properties situated at Goth

Machhi including stocks and book debts ranking pari passu with each other. Finance (ix) is secured

against lien on Pakistan Investment Bonds.

6.1.2 These represent private placement with 2 institutional investors for a period of 5 years. The

annual rate of profit is State Bank of Pakistan discount rate plus 1.5% with a floor of 11% and

cap of 16%. The balance amount of principal of TFCs at December 31, 2006 is to be repaid in 2

half-yearly instalments in arrears. These are secured by an equitable mortgage on assets of FFCand hypothecation of all assets including plant, machinery, tools and spares, and all other

moveable properties situated at Goth Machhi including stocks and book debts ranking pari passu

with each other.

6.1.3 Terms and conditions of long term finances availed by FFBL are given below:

Lenders Purchase Marked-up No. of price p rice quarterly Repayment

Mark-up rate instalments commencedoutstanding from

(Rupees '000)

HBL 908,571 1,690,772 12 months' Treasury bill rate 18 July 2004SCB 519,539 966,819 12 months' Treasury bill rate 18 July 2004

MCB 895,653 1,666,735 12 months' Treasury bill rate 18 July 2004

ACBL 200,000 372,183 12 months' Treasury bill rate 18 July 2004

SAPICO 74,847 139,283 12 months' Treasury bill rate 18 July 2004

PKIC 320,000 595,493 12 months' Treasury bill rate 18 July 2004

These finances are secured by first equitable mortgage charge created on all immovable properties

of FFBL and by way of hypothecation of movable properties of FFBL. These charges rank pari passu

with the charges already created or to be created in favour of other foreign and local lenders.



99

Annual Report 2006

2006 2005


2006 2005


6.2 Long term murabaha - secured

Faysal Bank Limited (FFC) – 41,667Faysal Bank Limited (FFBL) 6.2.2 174,052 212,730

174,052 254,397

Less: Current portion shown under current liabilities 38,679 80,346

135,373 174,051

No. of

q ua rte rly R epa ym ent

Lenders Facility Purchase price Mark-up rate instalments commenced from

outstanding

(Rupees '000)

FBL 270,748 503,840 12 months' Treasury bill rate 18 July 2004

This facility is secured by first equitable mortgage charge created on all immovable properties of

FFBL and by way of hypothecation of movable properties of FFBL. The charge ranks pari passu with

the charges already created or to be created in favour of other foreign and local lenders.

6.3 Long term loan - Government of Pakistan

Unsecured

Government of Pakistan (GOP) loan-FFBL 4,860,646 5,148,455

Deferred Government assistance-FFBL 2,269,562 2,629,954

7,130,208 7,778,409Less: Current portion shown under current liabilities 648,201 648,201

6,482,007 7,130,208

This represents balance amount of GOP loan amounting to Rs 9,723,011 thousand which is repayable

in equal instalments in 16 years with 1 year grace at zero percent effective November 30, 2001.

Final instalment will be paid in June 2017. This loan in accordance with International Accounting

Standard-39 "Financial Instruments: Recognition and Measurement" is stated at its fair value and

the difference is recognised as Deferred Government assistance. Deferred Government assistance

is being amortised to fully offset the financial charge on the loan at an imputed rate of 7%. The

amount amortised and offset against financial charges during the year amounted to Rs 360,392

thousand.

Under the terms of restructuring with GOP, the excess cash, which may arise based on a pre-defined

mechanism, shall be shared by FFBL with GOP through prepayment of GOP loan.

Loans from Export Credit Agencies (ECA), which were assumed by the GOP, were initially secured

by a guarantee issued by Habib Bank Limited (HBL) on behalf of a local syndicate of banks and

financial institutions, which guarantee is secured by first equitable mortgage created on all

immovable properties of FFBL and by way of hypothecation of movable properties of the Company.

The charge ranks pari passu with the charges to be created in favour of other foreign and local

lenders. The local syndicate had requested FFBL to obtain an indemnity from GOP confirming that

it is GOP's absolute obligation to indemnify and keep related banks and financial institutions harmless

from any possible exposure on this account. Accordingly, on December 16, 2002, GOP had conveyed

its agreement by assuming ECA loan liabilities by absolving related banks and financial institutions

of their liabilities for which they earlier issued guarantees to ECA. As a result, two ECA have released

the guarantee of HBL and have returned the original documents.

Since two ECA have yet to release HBL from its responsibility as guarantor therefore, the above

referred guarantee and related charge on assets of the FFBL have not been vacated upto December31, 2006. FFBL is making efforts in getting this guarantee released.




2006 2005


6.4 LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE

2006 2005

M in im um F inan cial Prin cip al M in im um F inan cial P rin cipallease charges for out- lease charges for out-

p ay me nt s f utur e p er iods s ta nd ing p ay me nt s f u tu re p er iods s ta nd ing


Not later than one year 2,801 215 2,586 4,489 474 4,015

Later than one year but not

later than five years 3,338 28 3,310 6,553 259 6,294

6,139 243 5,896 11,042 733 10,309

Lease rentals include finance charge ranging between 8% to 16% per annum, which have been used as

discounting factor and are payable on monthly and quarterly basis. FFBL has an option to purchase the assets

upon completion of lease period by adjusting the security deposits amounting to Rs 2,045 thousand (2005:Rs 2,966 thousand) and has intention to exercise the option.

7. DEFERRED TAXATION

The balance of deferred tax is in respect of the

following major temporary differences:

Accelerated depreciation 5,102,641 3,791,633

Provision for slow moving/surplus spares, doubtful debts,

other receivables and short term investments (70,238) (64,742)

Liabilities against assets subject to finance lease (2,064) (3,608)

5,030,339 3,723,283

8. TRADE AND OTHER PAYABLES

Creditors 1,792,874 2,802,220

Accrued liabilities 1,376,848 1,266,624

Other liabilities 43,708 43,898

Sales tax payable - net 158,371 135,938

Deposits 84,634 66,665

Retention money 25,463 21,522

Advances from customers 841,746 3,353,929

Workers' Profit Participation Fund 8.1 389,965 395,934

Workers' Welfare Fund 454,531 346,444Payable to gratuity fund 3,769 –

Unclaimed dividend 1,165,124 947,422

6,337,033 9,380,596

8.1 Workers' Profit Participation Fund

Balance at beginning of the year 395,934 340,912

Interest on funds utilised in Group companies' business 180 100

Allocation for the year 539,965 555,934

Payment to fund during the year (546,114) (501,012)

389,965 395,934

100



101

Annual Report 2006

9. RETIREMENT BENEFIT FUNDS

a) Movement in the liability recognised in the balance sheet:

Funded Funded Total Total

gratuity pension 2006 2005(Rupees '000) (Rupees '000)

Balance at beginning of the year – – – (929)

Expense for the year 55,689 36,438 92,127 76,640

Payments to funds during the year (51,920) (36,438) (88,358) (75,711)

Balance at end of the year 3,769 – 3,769 –

b) Reconciliation of the liability recognised in the balance sheet:


gratuity pension 2006 2005


P re se nt va lu e o f defin ed benefit obligatio n 704,583 664,505 1,369,088 1,222,412

Fair value of plan assets (613,389) (684,985) (1,298,374) (1,106,764)

Deficit / (surplus) 91,194 (20,480) 70,714 115,648

Unrecognised actuarial (loss) / gain (86,218) 20,480 (65,738) (113,234)

Unrecognised transitional liability (1,207) – (1,207) (2,414)

Net liability 3,769 – 3,769 –

c) The following amounts have been charged to the profit and loss account during the current

year in respect of these schemes.


gratuity pension 2006 2005(Rupees '000) (Rupees '000)

Current service cost 44,518 34,240 78,758 70,888

Interest cost 56,249 54,176 110,425 82,329

Expected return on plan assets (48,211) (51,978) (100,189) (78,174)

Actuarial loss recognised 1,926 – 1,926 390

Recognised transitional liability 1,207 – 1,207 1,207

Expense for the year 55,689 36,438 92,127 76,640

Actual return on plan assets 57,214 93,814 151,028 125,520

d) Actuarial valuation of these plans was carried out as at December 31, 2006 using Projected

Unit Credit Method. Significant actuarial assumptions used were as follows:

Gratuity Pension

Discount factor per annum 9–10% 9%

Expected rate of increase in salary level per annum 10–12% 11–12%

Expected rate of return on plan assets per annum 9–10% 9%

e) "Salaries, wages and benefits" expense, stated in note 27 and 28 include retirement benefits in

respect of gratuity, provident fund, pension plans and compensated absences amounting to

Rs 51,635 thousand, Rs 60,036 thousand, Rs 32,443 thousand and Rs 61,299 thousand respectively

(2005: Rs 34,210 thousand, Rs 57,767 thousand, Rs 26,463 thousand and Rs 34,984 thousand

respectively).




2006 2005


10. INTEREST AND MARK-UP ACCRUED

On long term financing

From banking companies and financial institutions 80,827 108,066

From PKIC, an associated undertaking 4,669 5,571

On murabaha financing 3,830 4,875

On short term borrowings 149,665 57,480

238,991 175,992

11. SHORT TERM BORROWINGS - SECURED

Short term loans – 500,000

Short term import credit - FFC 11.1 4,031,090 1,544,963

Short term running finance 11.2 5,031,836 2,696,649

9,062,926 4,741,612

11.1 Short term import credit

Import credit facilities of Rs 4,031,090 thousand (2005: Rs 1,544,963 thousand) have been arranged

from various banks under mark-up arrangements at six months' LIBOR + 0.5% - 0.6% per annum

(2005: three months' LIBOR + 0.5% and six months' LIBOR + 0.5% per annum).

These facilities are secured by way of hypothecation of current and fixed assets of FFC.

11.2 Short term running finance

This includes short term facilities arranged by FFBL from various banks on mark-up basis aggregating

Rs 4,700,000 thousand (2005: Rs 2,300,000 thousand). These facilities carry mark-up ranging from

10.23% to 10.71% per annum (2005: 9.15% to 9.7% per annum) at the year end and are secured byhypothecation charge over stocks and current assets of FFBL and lien on bank deposits. The purchase

prices are repayable on various dates by FFBL.

Short term running finance facilities available to FFC from various banks under mark-up arrangements

amounting to Rs 5,250,000 thousand (2005: Rs 4,000,000 thousand). These facilities have various

maturity dates upto December 31, 2007.

These are secured by hypothecation of present and future current and fixed assets of the Company

ranking pari passu in all respects with the first charge holders. The rates of mark-up range from

one month KIBOR + 0.50% to 0.80% per annum to six months' KIBOR + 0.25% per annum (2005: one

month KIBOR + 0.25% to 0.80% per annum to three months' KIBOR + 0.50% per annum).

102



103

Annual Report 2006

2006 2005


12. CONTINGENCIES AND COMMITMENTS

a) Contingencies

i) Guarantees issued by banks on behalf of the

Group companies. 46,697 41,176

ii) Disputed demands for income tax and levy of

contribution to Workers' Welfare Fund related to

former PSFL decided in favour of FFC by the Income

Tax Appellate Authorities, are currently in appeal by the

department. FFC is confident that there are reasonable

grounds for a favourable decision. 295,590 295,590

iii) Income tax demands, not acknowledged as debt, have

been challenged by the FFBL and are currently in appeal;

FFBL expects favourable outcome of appeal. 50,727 57,147

iv) Claims against the Group companies and/or potential

exposure not acknowledged as debt. 85,974 74,772

v) Indemnity bonds and undertakings given to the customs

authorities for machinery imported by FFBL for installation

at plant site 119,650 119,650

b) Commitments in respect of:

i) Contracted capital expenditure. 1,675,156 1,201,404ii) Purchase of fertilizer, stores, spares and other revenue items. 785,459 1,151,064

iii) Commitment for equity investment in Pakistan Maroc

Phosphore S.A.(PMP) – 933,750

iv) Group's share of commitments in PMP including minority interest.

PMP itself is committed to incur capital expenditure of MAD

1,326,000 thousand (2005: MAD 1,199,000 thousand)

equivalent Pak Rs 9,600,240 thousand

(2005: Rs 7,963,000 thousand). 3,600,090 2,986,125

v) Rentals under lease agreements:

Premises – not later than one year 28,579 19,382 – later than one year and not later than five years

2008 23,721 23,629

2009 21,452 19,486

2010 17,712 17,776

2011 6,413 15,423

– later than five years – 3,842

Vehicles – not later than one year 73,669 66,783

– later than one year and not later than five years

2008 64,296 57,702

2009 55,483 51,182

2010 26,449 40,294

2011 16,957 12,988

– later than five years 2,917 3,628





105

Annual Report 2006

13.2 Depreciation charge has been allocated as follows:

Cost of sales 27 1,766,454 1,677,284Administrative expenses and distribution cost 28 21,526 31,620

1,787,980 1,708,904

13.3 Details of property, plant and equipment sold

Book Sale

Description Cost value proceeds

(Rupees '000)

Vehicles

By Group companies' policy to employees

Syed Ali Nazim 939 564 692

Mr. Abdul Majid Zia 939 376 532

By tender to outsiders

Mr. Waseem Younis 372 74 251

Mr. Nasir Khan 317 63 242

Mr. S. Nasir Hussian 1,100 330 764

Mr. Shamas-ul-Qamar 1,400 420 741

Mr. Shamas-ul-Qamar 1,250 375 480

Mr. Farjat Abbas 1,100 330 357

Mr. Jam Fida Hussain Rahim 200 60 193

Mr. Muhammad Mudassar 225 67 99

Aggregate of other items of property, plant and

equipment with individual book values not exceeding

Rs 50 thousand 133,701 922 16,918

141,543 3,581 21,269

13.4 CAPITAL WORK IN PROGRESS

Advances to suppliers 4,715 19,914

Civil works 265,020 1,025,895

Plant, machinery and equipment 2,060,382 176,3582,330,117 1,222,167

14. GOODWILL

Balance at beginning of the year 1,673,849 1,778,464

Less: Amortisation for the year (104,615) (104,615)

1,569,234 1,673,849

2006 2005


2006 2005





2006 2005


15. LONG TERM INVESTMENTS

Investment in joint venture – at costPakistan Maroc Phosphore S.A. Morocco 15.1 2,117,075 1,101,762

Investments available for sale

Certificates of Investment 15.2 293,124 279,998

Arabian Sea Country Club Limited (ASCCL)

(300,000 shares of Rs 10 each) 15.3 3,000 3,000

Less: Impairment in value of investment (3,000) (3,000)

– –

293,124 279,998

Investments held to maturity 15.4

Pakistan Investment Bonds 600,000 600,000

Term Finance Certificates 149,930 99,980749,930 699,980

3,160,129 2,081,740

Less: Current portion shown under short

term investments 24


Certificates of investment 91,867 41,749

Investments held to maturity

Term Finance Certificates 60 40

91,927 41,789

3,068,202 2,039,951

15.1 Investment in joint venture – at cost

The Group companies have 37.5% equity participation in Pakistan Maroc Phosphore S.A. (PMP),

amounting to Moroccan Dirhams (MAD) 300,000 thousand equivalent to Rs 2,117,075 thousand (2005:

Rs 1,101,762 thousand). PMP is a joint venture between the Group companies, Fauji Foundation

and Officie Cherifien Des Phosphates, Morocco. The principal activity of PMP is to manufacture and

market Phosphoric acid, fertilizer and other related products in Morocco and abroad.

According to the shareholders' agreement, the Group companies cannot sell the shares of PMP

outside Fauji Group (consisting of FFC, FFBL and Fauji Foundation) for a period of five years effective

September 14, 2004. Further, if any legal restriction is laid on dividends by PMP; the same will

be converted to interest bearing loan.

The following items represent the share of Group companies' including minority interest in the

assets, liabilities, revenue and expenses of PMP:

Non - current assets 898,373 196,710

Current assets 1,394,361 937,680

Current liabilities (211,730) (77,103)

Net assets 2,081,004 1,057,287

Income 29,318 10,323

Expenses (28,023) (11,286)

2006 2005


106



107

Annual Report 2006

2006 2005


Adjustment for the group companies' share in profit/(loss) of PMP was not considered since the

amount was immaterial.


15.2 These represent placements in certificates of investment of a financial institution for periods rangingfrom one to five years at profit rates ranging from 6% to 15% per annum.

15.3 As per audited accounts of ASCCL for the year ended June 30, 2006, the break-up value of an

ordinary share was Rs 6.33 (June 30, 2005: Rs 8.38).

15.4 Investment held to maturity

These were purchased for a period of 10 years with remaining period ranging between 4 to 6 years.

Profit is payable on a half yearly basis at rates ranging from 11% to 14% per annum. These are under

lien of a bank against loan for PSFL acquisition and debottlenecking requirements. Fair value of

these PIBs as at December 31, 2006 was Rs 661,624 thousand (2005: Rs 689,142 thousand).

These include 20,000 certificates of Rs 5,000 each of Askari Commercial Bank Limited. Profit is

payable on a half yearly basis at the rate of six months' KIBOR + 1.5% per annum. Fair value of these

TFCs as at December 31, 2006 was Rs 101,000 thousand (2005: Rs 101,980 thousand).

These also include 10,000 certificates of Rs 5,000 each of Pakistan Mobile Communications Limited.

Profit is payable on a half yearly basis at the rate of six months' KIBOR +2.85% per annum. Fair

value of these TFCs as at December 31, 2006 was Rs. 50,750 thousand.

16. LONG TERM LOANS AND ADVANCES

Loans and advances, considered good, to:

Executives 78,184 73,698

Other employees 39,297 40,760

117,481 114,458

Less: Amount due within twelve months,

shown under current assets 21 40,834 49,91376,647 64,545

16.1 Reconciliation of carrying amount of loans to executives and other employees:

Opening Disbursements Repayments Closingbalance balance

as at January as at December

01, 2006 31, 2006

(Rupees '000)

Executives 73,698 101,478 96,992 78,184

Other employees 40,760 70,102 71,565 39,297

114,458 171,580 168,557 117,481

2005 106,715 92,993 85,250 114,458

These represent secured house building loans, house rent advances and advances pursuant to

agreement with workers which are repayable within one to ten years. House building loans carry

mark-up at 4% per annum.

The maximum amount of advances to executives outstanding at the end of any month during the

year was Rs 82,548 thousand (2005: Rs 73,698 thousand).




2006 2005


17. LONG TERM DEPOSITS AND PREPAYMENTS

Security deposits 17,361 17,321Prepayments 341 1,322

Lease key money 2,045 2,966

19,747 21,609

Less: Current portion – (779)

19,747 20,830

18. STORES, SPARES AND LOOSE TOOLS

Stores 120,529 126,349

Spares 2,699,408 2,443,915

Provision for slow moving and surplus items (129,595) (113,221)

2,569,813 2,330,694

Loose tools 240 106

Items in transit 308,785 274,251

2,999,367 2,731,400

19. STOCK IN TRADE

Raw materials 275,882 654,594

Raw materials in transit 336,167 –

Work in process 28,285 19,532

Finished goods:

Manufactured fertilizers 133,620 418,110

Purchased fertilizers 979,486 491,193

1,753,440 1,583,429

20. TRADE DEBTS

Considered good

Secured 1,183,301 774,772

Unsecured 8,802 –

1,192,103 774,772

Due from Fauji Foundation, an associated

undertaking-unsecured, considered good 596 22

Considered doubtful 1,951 1,979

1,194,650 776,773

Provision for doubtful debts (1,951) (1,979)

1,192,699 774,794

108



109

Annual Report 2006

2006 2005


21. LOANS AND ADVANCES

Advances to:Executives, unsecured, considered good 795 378

Other employees, considered good 4,935 3,318

5,730 3,696

Advances to suppliers and contractors

Considered good 109,841 101,017

Considered doubtful 45 45

109,886 101,062

Provision for doubtful advances (45) (45)

109,841 101,017

Current portion of long term loans and advances 16 40,834 49,913

156,405 154,626

22. DEPOSITS AND PREPAYMENTS

Deposits (including current portion of long term deposits) 2,592 2,630

Prepayments 27,954 26,773

30,546 29,403

23. OTHER RECEIVABLES

Accrued income on investments and bank deposits 141,053 159,860

Advance tax 23.1 476,489 476,489

Sales tax refundable – net 251,034 157,005

Subsidy receivable from G overnment of Pakistan (GOP) 27.2 & 27.3 1,809,964 –

Other receivables – considered good 23.2 84,994 96,242

– considered doubtful 55,714 55,714

140,708 151,956

Provision for doubtful receivables (55,714) (55,714)

84,994 96,242

Insurance claims 1,954 1,278

2,765,488 890,874

23.1 This represents tax paid by PSFL in excess of admitted tax liabilities prior to its acquisition by FFC.

FFC intends to adjust this amount after finalisation of pending re-assessments by the taxation

authorities.

23.2 This includes unsecured balance of Rs 867 thousand (2005: Rs 716 thousand) receivable from FaujiFoundation on account of expenses incurred on its behalf. This also includes Rs 51,800 thousand

receivable from GOP on account of compensation of Rs 700,000 thousand which was due in June

2006 net of agreed GOP loan repayment of Rs 648,201 thousand (refer note 31.1 for details).




2006 2005


2006 2005


24. SHORT TERM INVESTMENTS

Term deposits with banks and financial institutionsAvailable for sale (net of provision for doubtful

recovery Rs 13,000 thousand) 500,000 500,000

Held to maturity 775,000 4,650,000

Foreign currency

Held to maturity 882,322 905,963

Investments at fair value through profit or loss

Meezan Balanced Fund 24.1 86,000 97,500

National Investment Trust 24.1 96,154 –

Nafa Cash Fund 24.1 21,447 –

Fixed income / money market funds 24.1 502,387 –

Current maturity of long term investments

Available for sale 91,867 41,749

Held to maturity 60 40

2,955,237 6,195,252

24.1 Fair value of these investments are determined using quoted market price and redemption/repurchase

price, whichever is applicable.

25. CASH AND BANK BALANCES

At banks:

Deposit accounts

Local currency 8,069,611 7,616,746

Foreign currency 11,922 31,867

Current accounts

Local currency (includes drafts under collection) 188,187 323,496

8,269,720 7,972,109

Drafts in hand and in transit 587,752 130,109

Cash in hand 1,506 1,510

8,858,978 8,103,728

Balances with banks include Rs 84,634 thousand (2005: Rs 66,665 thousand) in respect of security

deposits received. Local currency deposit accounts include Rs 130,309 thousand (2005: Rs 90,089

thousand) under lien of the bank, against guarantees issued by the banks on behalf of the Group

companies. FFBL deposit accounts include Rs 2,327,529 thousand (2005: Rs 1,315,479 thousand)

which are under pledge with commercial banks against letters of credit.

26. SALES

Sales include Rs 9,560,958 thousand (2005: Rs 6,734,478 thousand) in respect of sale of purchased

fertilizers and are exclusive of commission, trade allowances and sales tax of Rs 443,501 thousand

and Rs 3,471,434 thousand respectively (2005: Rs 408,478 thousand and Rs 3,315,913 thousand

respectively).

110



111

Annual Report 2006

2006 2005


27. COST OF SALES

Raw materials consumed 12,596,739 11,548,925Fuel and power 4,829,512 3,879,317

Chemicals and supplies 224,300 207,292

Salaries, wages and benefits 1,753,517 1,634,729

Training and employees benefits 218,574 179,663

Rent, rates and taxes 38,410 31,754

Insurance 144,960 135,807

Travel and conveyance 144,133 128,970

Repairs and maintenance (includes stores and spares

consumed of Rs 525,952 thousand;

2005: Rs 579,313 thousand) 27.1 973,731 600,801

Depreciation 1,766,454 1,677,284

Communication, establishment and other expenses 510,401 498,628

Provision/(reversal of provision) for doubtful advances – 45

Opening stock – work in process 19,532 14,674

Closing stock – work in process (28,285) (19,532)

Subsidy on DAP fertilizer from Government of Pakistan 27.2 (1,322,110) –

Cost of goods manufactured 21,869,868 20,518,357

Opening stock of manufactured fertilizers 418,110 61,787

Closing stock of manufactured fertilizers (133,620) (418,110)

284,490 (356,323)

Cost of sales- own manufactured fertilizers 22,154,358 20,162,034

Opening stock of purchased fertilizers 491,193 161,447

Purchase of fertilizers for resale 27.3 8,599,173 6,154,912

9,090,366 6,316,359

Closing stock of purchased fertilizers (979,486) (491,193)

Cost of sales- purchased fertilizers 8,110,880 5,825,166

30,265,238 25,987,200

27.1 This includes provision for slow moving and surplus spares amounting to Rs 16,374 thousand (2005:

Rs (165,995 thousand)).

27.2 This represents subsidy of Rs 250 per bag of phosphatic fertilizer produced by FFBL as notified by

the Ministry of Food, Agriculture and Live Stock, Government of Pakistan. The subsidy is being given

on inventories held on September 30, 2006 and production effective October 01, 2006.

27.3 Cost of purchased fertilizer of FFC is net of subsidy of Rs 250 per bag on potassic and phosphatic

fertilizers as notified by the Ministry of Food, Agriculture and Live Stock, Government of Pakistan.

The subsidy is being given on inventories held on September 30, 2006 and imports subsequent to

October 01, 2006.




2006 2005


28. ADMINISTRATIVE EXPENSES AND DISTRIBUTION COST

Product transportation 3,299,463 2,842,133Salaries, wages and benefits 550,606 496,057

Rent, rates and taxes 66,699 65,689

Insurance 42 450

Technical services 5,826 4,853

Travel and conveyance 95,128 83,079

Sale promotion and advertising 40,004 39,652

Communication, establishment and other expenses 41,486 51,239

Warehousing expenses 49,817 29,139

Depreciation 21,526 31,620

Administrative expenses 98,602 100,185

4,269,199 3,744,096

29. FINANCE COST

Mark-up on long term financing, loans and murabaha 393,587 446,663

Mark-up on long term financing from PKIC,

an associated undertaking 19,692 18,402

Mark-up on short term borrowings 463,029 111,202

Exchange loss 48,812 5,199

Interest on Workers' Profit Participation Fund 180 100

Finance charges on leased property, plant and equipment 461 1,051

Bank charges 3,971 3,199

929,732 585,816

30. OTHER EXPENSES

Amortisation of goodwill 104,615 104,615

Research and development 30.1 113,981 87,750

Workers' Profit Participation Fund 539,965 555,934

Workers' Welfare Fund 217,264 133,504

Auditors' remuneration

Audit fee 1,420 1,420

Fee for half yearly review, audit of consolidated

accounts and certifications for Government

and related agencies 1,020 952

Out of pocket expenses 140 140

978,405 884,315

30.1 With a view to identify separately, these amounts have been re-grouped from cost of sales.

112



Annual Report 2006

2006 2005


2006 2005


31. OTHER INCOME

Income from financial assetsIncome on loans, deposits and investments 31.1 881,810 825,578

Income on tax-exempt investments – 15,362

Loss on remeasurement of investments at fair value

through profit or loss (11,512) (3,800)

Gain on sale of NIT units – 2,021

Exchange gain on financial instruments 16,121 7,130

Income on payments made on behalf of

Fauji Foundation - a related party – 105

Income from non-financial assets

Gain on sale of property, plant and equipment 17,688 19,549

Other income

Compensation from GOP 31.2 700,000 700,000

Old liabilities written back 9,933 374

Scrap sales 51,868 42,266

Others 7,707 13,402

1,673,615 1,621,987

31.1 This includes income from Meezan Balanced Fund amounting to Rs 20,000 thousand (2005: Rs 10,000

thousand).

31.2 GOP had committed to pay Rs 5 billion over a period of seven years in lieu of non – implementation

of Fertilizer Policy, 1989. On this account, amounts aggregating Rs 3.1 billion have been receivedfrom GOP up to December 31, 2006. GOP compensation of Rs 700,000 thousand which was receivable

in June 2006 is yet to be received. However, this has been accrued in the books of account of FFBL

subject to netting off the agreed GOP loan repayment of Rs 648,201 thousand for the year 2006.

Balance of Rs 1.2 billion will be received in two instalments of Rs 600 million each during the years

2007 and 2008, subject to netting off the agreed GOP loan repayments of Rs 648,201 thousand to

be made by FFBL each year.

32. PROVISION FOR TAXATION

Current – for the year 2,354,000 2,323,000

Deferred – for the year 1,307,056 1,459,811

3,661,056 3,782,811

32.1 Reconciliation of tax charge for the year

Profit before taxation 9,912,027 10,178,070

% %

Applicable tax rate 35.00 35.00

Add: Tax effect of amounts that are not

deductible for tax purpose 1.72 1.93

Tax effect of intra group transactions 0.42 0.47

Less: Tax effect of amounts exempt from tax – (0.06)

Tax effect of amounts taxed at lower rates (0.10) (0.03)

Tax effect of rebates and tax credits (0.10) (0.14)

Average effective tax rate charged on income 36.94 37.17

113




2006 2005


33. CASH GENERATED FROM OPERATIONS

Net profit before taxation 9,912,027 10,178,070

Adjustments for:

Depreciation 1,788,068 1,708,904

Amortisation of goodwill 104,615 104,615

Provision for slow moving and surplus spares 16,374 (182,492)

Provision for doubtful advances – 45

Finance cost 929,732 578,829

Provision for Workers' Profit Participation Fund 539,965 555,934

Compensation from GOP (700,000) (700,000)

Income on loans, deposits and investments (881,810) (841,045)

Gain on sale of property, plant and equipment (17,688) (19,549)

Property, plant and equipment written off – 10,570

Provision for gratuity 51,635 43,462Provision for pension 32,443 33,178

Exchange loss/(gain) 16,220 (3,075)

Loss on remeasurement of investment at fair value through

profit or loss 11,512 3,800

Old liabilities written back (9,933) (374)

1,881,133 1,292,802

11,793,160 11,470,872

Changes in working capital

(Increase)/ decrease in current assets:

Stores and spares (284,341) (301,200)

Stock in trade (170,011) (1,111,997)

Trade debts (417,905) 1,064,188

Loans and advances (1,779) 139,088

Deposits and prepayments (1,143) (2,430)

Other receivables (1,857,709) 43,342

(Decrease)/increase in current liabilities:

Trade and other payables (3,165,065) 1,787,113

(5,897,953) 1,618,104

Changes in long term loans and advances (12,102) 2,783

Changes in long term deposits and prepayments 1,083 1,180

5,884,188 13,092,939

34. CASH AND CASH EQUIVALENTS

Cash and bank balances 8,858,978 8,103,728

Short term running finances (4,531,836) (2,236,649)

Short term highly liquid investments 2,261,439 6,004,340

6,588,581 11,871,419

114







Annual Report 2006

35.2 Risk management

a) Concentration of credit risk

Credit risk represents the accounting loss that would be recognised at the reporting dateif counter parties failed completely to perform as contracted. All the financial assetsexcept cash in hand, are subject to credit risk. The Group companies believe that it is notexposed to major concentration of credit risk. To manage exposure to credit risk, theGroup companies apply credit limits to its customers besides obtaining guarantees and bydealing with variety of major banks and financial institutions.

b) Foreign exchange risk management

Financial assets and liabilities exposed to foreign exchange rate risk amount to Rs 894,244thousand (2005: Rs 937,830 thousand) and Rs 4,031,090 thousand (2005: Rs 1,544,963thousand) respectively at the year end.

Foreign currency risk arises mainly where receivables and payables exist due to transactionsin foreign currencies. Currently, the Group companies' foreign exchange risk exposure isrestricted to foreign currency investments and financing. As both foreign currency assetsand liabilities are denominated in US Dollars, the Group companies' exposure emanatingfrom any fluctuations in the Pak Rupee / US Dollar parity gets hedged to a large extent.

c) Interest rate riskFinancial assets and liabilities include balances of Rs 8,465,064 thousand (2005: Rs 7,846,093thousand) and Rs 13,215,173 thousand (2005: Rs 8,993,785 thousand) respectively, whichare subject to interest rate risk. The Group companies have long term Rupee and foreigncurrency based loans at variable and fixed rates. Applicable interest rates for financialassets and liabilities have been indicated in respective notes.

Variable rate long term financing except Term Finance Certificates (TFCs) is hedged againstinterest rate risk by holding "prepayment option", which can be exercised upon any adversemovement in the underlying interest rates. TFCs are hedged against the interest rate riskby instituting interest rate caps and floors.

d) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketablesecurities, the availability of funding to an adequate amount of committed credit facilitiesand the ability to close out market positions due to the dynamic nature of the business.The Group companies' treasury aim at maintaining flexibility in funding by keeping committedcredit lines.

35.3 Fair value of financial assets and liabilities

The carrying values of all financial assets and liabilities reflected in the consolidated financialstatements approximate their fair values except investments held to maturity which are carriedat amortised cost.

36. REMUNERATION OF CHIEF EXECUTIVES, DIRECTORS AND EXECUTIVES

The aggregate amounts charged in these consolidated financial statements for the year in respectof remuneration including benefits applicable to the chief executives, directors and executives of the Group companies are given below:

2006 2005

Chief Executives Chief ExecutivesExecutives Executives


Managerial remuneration 6,380 595,820 4,663 455,946

Contribution to provident fund 328 30,679 263 23,374

Bonus – 44,666 – 28,136

Good performance award – 148,925 – 106,250

Others 4,325 187,237 2,300 121,614

Total 11,033 1,007,327 7,226 735,320

No. of persons 2 357 2 284

The above were provided with m edical facilities; the chief executives and certain executives were also providedwith some furnishing items and vehicles in accordance with the Group companies' policy. Gratuity is payableto the chief executives in accordance with the terms of employment while contributions for executives in

respect of gratuity and pension are based on acturial valuations. Leave encashment of Rs 766 thousand (2005:Rs nil) to chief executives and Rs 10,574 thousand (2005: Rs 3,488 thousand) to executives was paid onseparation, in accordance with the G roup companies' policy.

In addition, 26 (2005: 21) directors were paid aggregate fee of Rs 202 thousand (2005: Rs 150 thousand).

117




37. RELATED PARTY TRANSACTIONS

Fauji Foundation holds 44.35% (2005: 44.35%) shares of FFC at the year end. Therefore all subsidiaries

and associated undertakings of Fauji Foundation are related parties of FFC and FFBL. In addition,

Pak Kuwait Investment Company (Pvt) Limited (PKIC) and Pak Maroc Phosphore S.A. Morocco are

also related parties of the Group due to common directorship. The related parties comprise of

directors, key management personnel, entities over which the directors are able to exercise

influence, major suppliers and employees' funds. Transactions with related parties and balances

outstanding at the year end are given below. The remuneration of chief executives, directors and

executives is disclosed in note 36 to the consolidated financial statements.

2006 2005


Transactions with associated undertaking/

companies due to common directorship

Sale of fertilizer 1,085 1,708

Rent charged to the Group companies 3,578 3,504

Receipt on account of payment made on behalf of

associated undertaking 338,438 187,813

Income on payments made on behalf of associated

undertaking – 105

Dividend paid 2,101,002 2,556,893

Repayment of principal portion of long term finance 45,714 45,714

Financial charges 19,692 18,402

Medical services 25 27

Purchase of gas as feed and fuel stock 8,090,286 6,928,493

Technical services received 16,106 15,750

Catalyst purchased 161,854 182,502

Balance payable at the year end - unsecured 432,302 348,475Balance receivable at the year end – unsecured 1,499 774

Transactions with joint venture company

Contribution towards equity 1,015,313 563,862

Expenses incurred on behalf of joint venture company 14,877 6,231

Balance of advance against issue of shares 2,117,075 1,101,762

Other related parties

Payments to:

Employees' Provident Fund Trust 137,034 122,086

Employees' Gratuity Fund Trust 51,920 43,462

Employees' Pension Fund Trust 36,438 32,249

Workers' Profit Participation Fund 546,114 501,012

Purchase of raw materials 5,830,625 5,674,401

Balances payable at the year end - unsecured 407,658 395,934

Balances payable at the year end - secured 1,126,636 1,077,141

118



Annual Report 2006

2006 2005


38. POST BALANCE SHEET EVENT

The Board of Directors of FFC in their meeting held on January 26, 2007 have proposed a final

dividend of Rs 3.90 per share while a dividend of Rs 1.25 per share has been proposed by the Board

of Directors of FFBL on January 24, 2007.

39. GENERAL

39.1 Production capacity

Design capacity

Urea 2,455 2,455

DAP 445 445

Production

Urea 2,897 2,892

DAP 450 454

39.2 Facilities of letters of guarantee and letters of credit

Facilities of letters of guarantee and letters of credit amounting to Rs 40,000 thousand and Rs

5,800,000 thousand (2005: Rs 228,900 thousand and Rs 3,325,000 thousand) respectively are available

to FFC under first charge by way of equitable mortgage on all fixed assets of FFC.

39.3 Donations aggregating Rs 28,950 thousand (2005: Rs 60,349 thousand), included under cost of sales

do not include any amount paid to any person or organisation in which the chief executive, directors

or their spouses had any interest.

39.4 Figures have been rounded off to the nearest thousand of rupees unless otherwise stated.

39.5These consolidated financial statements have been authorised for issue by the Board of Directors

of FFC on January 26, 2007.


119



Pattern of Shareholdingas at December 31, 2006

Number of Shareholding Total Number

Shareholders From To of Shares

1422 1 100 72,894

1914 101 500 632,4202202 501 1000 1,925,9162741 1001 5000 6,891,698787 5001 10000 5,742,984324 10001 15000 3,930,327211 15001 20000 3,760,406116 20001 25000 2,614,95166 25001 30000 1,814,63758 30001 35000 1,899,53647 35001 40000 1,767,79739 40001 45000 1,647,90930 45001 50000 1,427,57819 50001 55000 992,47614 55001 60000 800,92721 60001 65000 1,310,43212 65001 70000 810,05814 70001 75000 1,006,61010 75001 80000 775,72614 80001 85000 1,155,1446 85001 90000 524,6526 90001 95000 549,786

16 95001 100000 1,577,2883 100001 105000 307,5587 105001 110000 759,4017 110001 115000 783,8468 115001 120000 934,8317 120001 125000 856,9167 125001 130000 898,1629 130001 135000 1,193,1594 135001 140000 551,8505 140001 145000 719,292

2 145001 150000 294,3826 150001 155000 925,9614 155001 160000 627,7161 160001 165000 161,6066 165001 170000 1,008,5584 170001 175000 696,2983 175001 180000 534,5871 180001 185000 182,0001 185001 190000 187,2521 190001 195000 190,1374 195001 200000 795,3003 200001 205000 604,3403 205001 210000 623,5883 215001 220000 651,3661 220001 225000 223,854

2 225001 230000 454,5691 235001 240000 236,8812 240001 245000 486,6681 245001 250000 247,2951 250001 255000 251,5001 255001 260000 257,0003 260001 265000 787,7612 265001 270000 533,9191 270001 275000 274,3471 275001 280000 276,1073 280001 285000 845,9901 285001 290000 289,5002 290001 295000 583,2921 315001 320000 316,2501 320001 325000 323,5001 325001 330000 325,3001 335001 340000 339,5841 340001 345000 340,0782 355001 360000 711,842

120



Annual Report 2006



2 395001 400000 793,580

1 400001 405000 403,9822 405001 410000 818,0542 420001 425000 842,7912 460001 465000 922,3162 465001 470000 933,4491 490001 495000 491,5001 495001 500000 500,0001 500001 505000 500,6751 505001 510000 508,8112 510001 515000 1,023,9591 525001 530000 530,0001 560001 565000 562,2812 565001 570000 1,136,7101 575001 580000 578,5531 580001 585000 581,9481 585001 590000 587,9391 590001 595000 593,2161 605001 610000 605,9461 610001 615000 613,8001 615001 620000 616,2001 630001 635000 633,7741 640001 645000 644,5171 655001 660000 655,4691 670001 675000 673,3631 675001 680000 678,7001 720001 725000 720,3681 735001 740000 740,0001 740001 745000 743,0001 760001 765000 764,5921 775001 780000 775,1661 790001 795000 791,917

1 805001 810000 809,0872 830001 835000 1,667,8101 835001 840000 837,5241 845001 850000 848,1861 850001 855000 851,0001 855001 860000 857,2082 860001 865000 1,723,5741 910001 915000 912,5201 925001 930000 928,5551 960001 965000 961,9521 965001 970000 967,6001 980001 985000 981,5361 1065001 1070000 1,069,2131 1095001 1100000 1,100,0001 1125001 1130000 1,129,7771 1135001 1140000 1,135,100

1 1145001 1150000 1,150,0001 1195001 1200000 1,196,2191 1225001 1230000 1,225,8211 1315001 1320000 1,315,1491 1355001 1360000 1,357,1211 1380001 1385000 1,383,2031 1445001 1450000 1,446,9551 1495001 1500000 1,500,0001 1605001 1610000 1,607,9171 1790001 1795000 1,793,2221 1950001 1955000 1,954,9481 2000001 2005000 2,004,3881 2100001 2105000 2,101,3271 2165001 2170000 2,168,2561 2235001 2240000 2,236,959

1 2290001 2295000 2,291,1681 2370001 2375000 2,370,2851 2465001 2470000 2,466,3541 2540001 2545000 2,541,962

121



Pattern of Shareholdingas at December 31, 2006



1 3080001 3085000 3,083,255

1 3085001 3090000 3,088,8701 3465001 3470000 3,469,9311 4615001 4620000 4,619,9081 6495001 6500000 6,497,8401 6815001 6820000 6,818,3161 9725001 9730000 9,726,0331 13215001 13220000 13,216,7841 41085001 41090000 41,087,9371 43935001 43940000 43,938,5251 218840001 218845000 218,842,864

10304 493,474,230

NIT & ICP (namewise details) No of Shares

National Investment Trust 45,731,747

Investment Corporation of Pakistan 961

Executives 59,040

Public Sector Companies and Corporations 18,641,763

Banks, Development Finance Institutions, Non-Banking Finance Institutions,Insurance Companies, Modarabas, Mutual Funds 99,640,958

Shareholders holding ten percent or more voting interest

Fauji Foundation 218,842,864

No of No of PercentageSerial Categories of Shareholders share- Shares %No. holders held

1 Investment Companies 26 47,683,116 9.66

2 Insurance Companies 22 49,402,418 10.01

3 Joint Stock Companies 167 6,316,888 1.28

4 Financial Institutions 30 27,242,028 5.52

5 Modarabas 24 501,692 0.10

6 Foreign Investors 49 30,632,281 6.21

7 Leasing Companies 5 380,973 0.08

8 Mutual Funds 34 27,919,699 5.66

9 Charitable Trusts & Others 115 240,663,545 48.77

10 Individuals 9832 62,731,590 12.71

TOTAL 10,304 493,474,230 100.00

122



Annual Report 2006

Form of Proxy

29th Annual General Meeting

I/We

of

being a member(s) of Fauji Fertilizer Company Limited hold

Ordinary Shares hereby appoint Mr / Mrs / Miss

of or failing him / her

of as my / our proxy in my / our absence to attend and vote for

me / us and on my / our behalf at the Twenty Ninth Annual General Meeting of the Company to be held on

February 28, 2007 and / or any adjournment thereof.

As witness my / our hand seal this day of 2007.

Signed by

in the presence of

Folio No. CDC Account No.

Participant I.D. Account No.

Signature on

Five Rupees

Revenue Stamp

The Signature should

agree with the

specimen registered

with the Company

Important:

1. This Proxy Form, duly completed and signed, must be received at the Registered Office of the Company,

93-Harley Street, Rawalpindi not less than 48 hours before the time of holding the meeting.

2. If a member appoints more than one proxy and more than one instruments of proxies are deposited by

a member with the Company, all such instruments of proxy shall be rendered invalid.

3. For CDC Account Holders / Corporate Entities

In addition to the above the following requirements have to be met.

(i) Attested copies of NIC or the passport of the beneficial owners and the proxy shall be provided

with the proxy form.

(ii) The proxy shall produce his original NIC or original passport at the time of the meeting.

(iii) In case of a corporate entity, the Board of Directors resolution / power of attorney with specimen

signature shall be submitted (unless it has been provided earlier alongwith proxy form to the

Company).

123



AFFIX

CORRECT

POSTAGE

Company Secretary

FAUJI FERTILIZER COMPANY LIMITED

93 - Harley Street,Rawalpindi.

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