Ethics

NUST Business School
FIN-327 Ethics Risk & Corporate Governance
Assignment # 3
Submitted to;
Sir Umair Ashraf
Submitted by;
Zahra Ashfaq Nizami
Syeda Amir Hamza
Neha Afzaal
Mehak Fatima
Mahnoor Saleem
BS A&F 2K16 B
Date: March 14, 2019.
Cover
Story
We, at Fauji Fertilizer, understand the
importance of resilience, as a team
we have had to power through various
struggles, and we’re proud to say that
we have emerged stronger than ever.
With a brighter future ahead, we
cherish our place in the world as a
team that can play a significant part in
providing better opportunities for
growth. Our focus is on the future
while we work hard to make the
present more meaningful.
Vision
To be a leading national enterprise with global aspirations, effectively
pursuing multiple growth opportunities, maximizing returns to the
stakeholders, remaining socially and ethically responsible
Mission
To provide our customers with premium quality products in a safe, reliable, efficient
and environmentally sound manner, deliver exceptional services and customer
support, maximizing returns to the shareholders through core business and
diversification, providing a dynamic and challenging environment for our employees
Contents for Analysis (from annual report)
Management
4 7 8 9 10 12 13
Product Portfolio Geographical Code of Conduct Core Values Company Profile & Organizational Highlights 2018
Presence Group Structure Chart
14 16 18 20 21 22 27
Strategy and Company How we Evolved Business Model Calendar of Major Profile of the Board Committees
Resource Information Events during the Board
Allocation Year
30 31 32 34 38
Management SWOT Analysis Stakeholders’ Notice of Annual
Committees Engagement General Meeting
Board’s Reviews
40 41 42 43 44 49 50
Chairman’s Review CE & MD’s Financial Capital Financial
Overview Performance
53 54 55 56 60 61 72
Horizontal & Horizontal Analysis Vertical Analysis Six Year Analysis of DuPont Analysis Quarterly Analysis Key Risks and
Vertical Analysis Statement of Statement of Financial Position - 2018 Opportunities
Statement of Profit Financial Position Financial Position and Performance
or Loss
87 91 93 94 98 110 112
‫قعامورواتاخطرںا �یںما‬ Social and Statement of Value Manufactured Corporate Intellectual Capital Human Capital
Relationship Added Capital Governance
Capital
114 116
Forward Looking
Statement
Sustainability Report
118 122 129 138 146 168 169
Contents Overview Positioned for Creating Value How we Create Forward Looking Appendices
Value Creation in a Sustainable and Share Value Statement
Manner
Financial Statements
191 194 196 197 200 202 203
Report of the Audit Statement of Review Report to Independent Statement of Statement of Statement of
Committee on Compliance with the Members on Auditors’ Report to Financial Position Profit or Loss Comprehensive
Adherence to the Listed Companies the Statement of the Members Income
Code of Corporate (Code of Corporate Code of Corporate
Governance Governance) Governance
Regulations, 2017
204 205 206

Statement of Statement of Notes to the
Cash Flows Changes in Equity Financial
Statements
Consolidated Financial Statements

254 255 256 275 276 278 279
Chairman’s Review Directors’ Report Consolidated Horizontal Analysis Vertical Analysis
on Consolidated on Consolidated Financial Consolidated Consolidated
Financial Financial Performance Statement of Statement of
Statements Statements Financial Position Financial Position
280 281 284 286 287 288 289

Horizontal & Independent Consolidated Consolidated Consolidated Consolidated Consolidated
Vertical Analysis Auditors’ Report to Statement of Statement of Statement of Statement of Cash Statement of
Consolidated the Members Financial Position Profit or Loss Comprehensive Flows Changes in Equity
Statement of Income
Profit or Loss
290
Notes to the
Consolidated
Financial
Statements
Shareholders’ Information
346 353 354 355 356 357 361
Pattern of Financial Calendar Pattern of Definitions & Form of Proxy
Shareholdings Shareholding - Glossary of Terms
- FFC FFCEL & FFF
363
Product Portfolio:
A product portfolio is the collection of all the products or services offered by a company. Product
portfolio analysis can provide nuanced views on stock type, company growth prospects, profit
margin drivers, income contributions, market leadership and operational risk. This is essential for
investors conducting equity research by investors or analysts supporting internal corporate
financial planning. Product portfolio is an important element of financial analysis, because it
provides context and granularity.
According to Section 27(A)(iii) of Companies Act 2017, the memorandum of association shall the
principal business of the company.
Geographical Presence:
According to Section 27(A)(ii) of Companies Act 2017, the memorandum of association shall state
the Province or the part of Pakistan not forming part of a Province, as the case may be, in which
the registered office of the company is to be situate.
Code of Conduct
The internally developed code of conduct, policy statement of ethics and business statement, code
of corporate governance and best available practices in corporate governance are guiding pillars
for FFC. It conducts its business in compliance with the applicable laws and rules laid down by
SECP. Extensive information regarding code of conduct is communicated to all hierarchal levels
and there are set standards for meetings that all FFC’s employees have to abide by.
All the statements listed below hold true for all the companies of Pakistan as stated by the
Companies Act 2017:
Section 264. Power of Commission to initiate action against management. -(1) If from any report
made under section 262, the Commission is of the opinion that-
(b) the person concerned in the formation of the company or the management of its affairs have
in connection therewith been guilty of fraud, misfeasance, breach of trust or other misconduct
towards the company or towards any of its member or have been carrying on unauthorized
business; or
(c) the affairs of the company have been so conducted or managed as to deprive the shareholders
thereof of a reasonable return; or
(e) any shares of the company have been allotted for inadequate consideration; or (f) the affairs
of the company are not being managed in accordance with sound business principles or prudent
commercial practices.
Section 172. Disqualification orders. -(1) In any of the circumstances stated hereunder, the
Commission may pass a disqualification order against a person to hold the office of a director of a
company for a period up to five years beginning from the date of order-
(d) the business of the company in which he is or has been a director, has conducted to defraud its
creditors, members or any other persons or for a fraudulent or unlawful purpose, or in a manner
oppressive of any of its members or that the company was formed for any fraudulent or unlawful
purpose; or
(e) the person concerned in the formation of the company or the management of its affairs have in
connection therewith been guilty of fraud, misfeasance, breach of trust or other misconduct
towards the company or towards any of its member; or
(f) the affairs of the company of which he is a director have been conducted in a manner which
has deprived the shareholders thereof of a reasonable return; or
(g) the person has been convicted of allotment of shares of a company for inadequate
consideration; or
(h) the person is involved in illegal deposit taking; or
(i) the person has been convicted of financial irregularities or malpractices in a company or
(j) the company of which he is a director has acted against the interests of the sovereignty and
integrity of Pakistan, the security of the State, friendly relations with foreign States; or
(l) the person is convicted of insider trading or market manipulation practices; or
(n) the person has been declared a defaulter by the securities exchange;
(o) that it is expedient in the public interest so to do.

Section 259. Inspector to be a Court for certain purposes.-(1) Notwithstanding anything contained
in any other law for the time being in force, the Commission may either on its own motion or on
the basis of any information received, is of the view that any offence has been committed under
this Act or any person is engaged in any fraud, misfeasance, misconduct or any other activity
prejudice to the public interest shall have all the powers as provided under the Securities and
Exchange Commission of Pakistan Act, 1997(XLII of 1997).
(3) Any contravention of or non-compliance with any orders, directions or requirement of the
inspector exercising powers of a Court under sub-section (1) shall, in all respects, entail the same
liabilities, consequences and penalties as are provided for such contravention, noncompliance or
default under the Code of Civil Procedure, 1908 (Act V of 1908) and Pakistan Penal Code, 1860
(Act XLV of 1860).
Section 291. Management by Administrator.− (1) If at any time a creditor or creditors having
interest equivalent in amount not less than sixty percent of the paid up capital of a company,
represents or represent to the Commission that−
(c) the affairs of the company have been so conducted or managed as to deprive the members
Section 315. Appointment of official liquidator.–(12) The Commission may of its own, remove
the name of any person from the panel maintained under sub-section (1) on the grounds of
misconduct, fraud, misfeasance, breach of duties or professional incompetence:
Section 316. Removal of official liquidator.− (1) The Court may, on a reasonable cause being
shown including but not limited to lack of independence or lack of impartiality, remove the
provisional manager or the official liquidator, as the case may be, on any of the following grounds,
namely:
(a)misconduct;
The rules and regulations made by SECP significantly demonstrate that the misconduct of any
kind is not acceptable. Every company has its own code of conduct which they have to follow.
FFC strongly emphasize on its ‘Code of Conduct’ to be strictly followed by each representative of
FFC.
Furthermore, with respect to the Code of Corporate Governance there are a few statements as well:
CHAPTER III Responsibilities of Board of Directors and its members
(3) The board of directors of a company shall ensure that:
(ii) a formal code of conduct is in place that promotes ethical culture in the company and prevents
conflict of interest in their capacity as member of the board, senior management and other
employees. The board shall take appropriate steps to disseminate code of conduct throughout the
company along with supporting policies and procedures and these shall be put on the company’s
website.
It is clearly mentioned both in the Code of Corporate Governance and the Companies Act 2017
that no misconduct of any kind is acceptable in the corporate world and the one who misconducts
will be held accountable and the SECP will take strict actions against that individual.
Analysis
FFC’s well-written code of conduct clarifies the company’s mission, values and principles, linking
them with standards of professional conduct. The code also articulates the values the organization
wishes to foster in its directors and employees and, in doing so, defines desired behavior.
Therefore, as made obligatory by the SECP, FFC encourages its employees to follow the code of
conduct and take strict actions against the FFC representatives who do not stand by it. And lastly,
FFC tends to act ethically and socially responsible for its stakeholders to progress profoundly.
Core Values
At FFC core values are focused on uncompromising integrity through each individual’s effort
towards quality products for the customers, maximizing returns to the shareholders and making
sizable contributions to the National Exchequer. The main core values that are followed by FFC
are shown in the diagram below:
Moreover, FFC also follows the highest business ethics and code of conduct in order to ensure that
the personal conduct is above reproach and complies with the highest standards of conduct and
business ethics. The Company’s reputation and its actions as a legal entity depend on the conduct
of its directors and employees. Each one of the employees are expected to act according to the
highest ethical standards and to be aware of and abide by applicable laws. The Company’s Code
of Business Ethics and Code of Conduct is enforced at all levels fairly and without prejudice
Requirement by law
Code of Corporate Governance
Chapter 3- BOARD OF DIRECTORS OF THE COMPANY
Subsection 4- Operations of the Board of Directors
4.12. A company may wish to establish an ethics committee to ensure that the
company complies with ethical standards and contributes to the creation of an atmosphere of
trust within the company.
The ethics committee defines the ethical standards for the company’s operations, taking into
account its area of activity. It is recommended that the company develop internal regulations,
which should be approved by the board of directors and contain a description of the ethical
standards by which the company is guided in its operations (hereinafter referred to as “Ethical
Standards”).
These Ethical Standards should reflect the company’s
social responsibilities and, in particular, state its duty to
maintain high standards of quality for its products,
comply with environmental and safety regulations, as
well as the company’s awareness of the need to develop
and implement new technologies and improve
conditions of labour. In addition, the Ethical Standards
should prevent the officers of the company from
misusing their authority to the detriment of the company
and third parties through, among other things, illegal use
of confidential and insider information. The Ethical Standards should be designed to reflect
fundamental social values, such as honesty, mutual respect, and equity, and business principles,
such as profitability, customer satisfaction, quality of products, workplace health care, safety and
efficiency of labour. It is recommended that the ethics committee should detect and prevent
violations of the applicable legislation and ethical standards.
Company Profile & Group Structure
Company Profile and Group structure tends to explain the company’s joint venture, group of
associated companies and related parties. It is the amount of subsidiaries that the company holds,
along with its percentage of stockholding.
Compliance with Companies Act 2017 & Code of Corporate Governance

As per Companies Act 2017 Fourth Schedule Part 1 VI, the following shall be disclosed in the
financial statements, namely:
(v) Name of associated companies or related parties or undertakings along with the basis of
relationship describing common directorship and percentage of shareholding.
Therefore, it is binding on every listed company to adequately disclose the associated companies,
subsidiaries and joint ventures.
Analysis
FFC not only complies with the laws and regulations stated by Companies Act 2017, but it steps
ahead by giving in extra information regarding the group of companies associated with it.
Fauji Fertilizer has committed to enhance value for its stakeholders, driven through resilience of
their business model and determination of their workforce in conjunction with their diversified
portfolio and contribution to the economy has made them one of the robust and accomplished
businesses in Pakistan. By explaining in detail of each related parties and subsidiaries, FFC builds
a good relation with its shareholders, by not only disclosing the percentage of shareholding but
also explaining how well are those respective companies performing in isolation, owing to have
expertise in which area and in what way does FFC help them in flourishing by every passing day.
These aspects tend to gain maximum attention of potential investors, who tends to skeptically
analyze each key area of an organization before investing in it.
Strategy & Resource Allocation
Resource allocation is a central management activity that allows for strategy execution. The real
value of any resource-allocation program lies in the resulting accomplishment of an organization's
objectives. The fundamental success of a strategy depends on three critical factors: a firm’s
alignment with the external environment, a realistic internal view of its core competencies and
sustainable competitive advantages, and careful implementation and monitoring. Therefore, one
of the many reasons to add this component as part of their annual report is to assure the
shareholders that their investment is in safe hands and attract more investors to invest into the
shares of FFC.
Compliance with Companies Act 2017

Even though there are no clear signals of incorporating Strategy & Resource Allocation as part of
a financial statement, however, there are few laws that subtly and indirectly indicate public
companies to be as elaborative as they possibly can as it carries public interest. Moreover, the
framework under which limited companies need to comply with also does not state any such
obligation on a company to disclose these details. Hence, FFC incorporating this component to
their financial statement refers to their own will and desire to include it.
Analysis
FFC has added Strategy and Resource Allocation to their annual report in order to enlighten the
public of their actions and thereby also attract new investors and build relations with them. The
company’s main motive is to maintain their competitive position in the core business. And so they
employ their brand name, unique organizational culture, professional excellence and financial
strength diversifying in local and multinational environments through acquisitions and new
projects thus achieving synergy towards value creation for their stakeholders. The company has
been very careful at maintaining good relations with its shareholders and potential investors by
providing much more in their annual financial statements that what is legally required by them. A
sign of good faith and morals can be seen as the company tries to develop trust among their
shareholders by keeping them informed of such strategies that go in line with the shareholders’
interest.
Company Information
FFC has included following critical information in its financial statements about the company:
Board of Directors
Requirement by law
The company is required by law to include this information in its financial statements.
Companies Act, 2017.
227. Contents of directors’ report and statement of compliance.-
Subsection (2)- In the case of a public company or a private company which is a subsidiary of a
public company, the directors report, in addition to the matters specified in sub-section (1) must
state- 116 (a) the names of the persons who, at any time during the financial year, were directors
of the company;
Registered Office Address
Requirement by law
The company is required by law to disclose the address of its registered office in the financial
statements.
IAS 1, Section 138(a): An entity shall disclose the following, if not disclosed elsewhere in
information published with the financial statements: a) the domicile and legal form of the entity,
its country of incorporation and the address of its registered office (or principal place of business,
if different from the registered office).
FFC has entered this information in order to show that it has a registered office because certain
notices have to be sent to the registered office of the company under the law such as in Companies
Act, 2017 Section 85 (1)- “A notice may be given by the company to any member to his registered
address or if he has no registered address in Pakistan to the address, if any, supplied by him to the
company for the giving of notices to him against an acknowledgement or by post or courier service
or through electronic means or in any other manner as may be specified by the Commission.”
Auditors
Requirement by law
There is no requirement by law to include the names of auditors in the financial statements.
Bankers
Requirement by law
The law does not require bankers information to be disclosed in the financial statements. However,
the company has does so to show publicly the transactions it has with different banks.
How we evolved
Since its incorporation in 1978, FFC has evolved
remarkably. It was established to fill the projected
gap in demand and indigenous production. Now in
1978 2018, it has the highest ever all products Revenue of
Rs 108 billion including subsidy and has been
Fauji
Fertilizer awarded 1st position in Chemical & Pharmaceuticals
Company sector – Best Corporate Report Award 2017 held by
Limited
ICAP and ICMAP. It is essential to make the
interested parties educated about the conditions that
2018 the company is experiencing over the years.
Mission of FFC
To provide our customers with premium quality products in a safe, reliable, efficient and
environmentally sound manner, deliver exceptional services and customer support, maximizing
returns to the shareholders through core business and diversification, providing a dynamic and
challenging environment for our employees.
Companies must continually evolve to stay relevant, innovative, and competitive. In the case of
FFC, the main reason of its evolution is its competent operations and production at large scale.
The initial share capital of the company was 813.9 Million Rupees. The present share capital of
the company stands above Rs 8.48 Billion. Additionally, FFC has more than Rs 8.3 Billion as long
term investments which include stakes in the subsidiaries FFBL, FFCEL and associate FCCL. FFC
highly values its customers and the investors, thus, it focuses majorly on the achieving the vision
and the mission of the company.
FFC has included ‘How we evolved’ in its Annual Reports because for a large scale company,
consistency is very imperative. FFC to convey to its interested parties and stakeholders that it has
been performing consistently over the period of many years since its incorporation. This will lead
the investors to further invest in the company, employees to develop a sense of belonging towards
the company, customers to feel important for the company and the general public to showcase a
positive repute about the company.
There is no such law that requires companies in Pakistan to add ‘How we evolved’ component in
their Annual Reports, however FFC wishes to give its finest to all of its stakeholders.
It is stated in the Companies Act 2017 that:
WHEREAS it is expedient to reform company law with the objective of facilitating corporatization
and promoting development of corporate sector, encouraging use of technology and electronic
means in conduct of business and regulation thereof, regulating corporate entities for protecting
interests of shareholders, creditors, other stakeholders and general public, inculcating principles
of good governance and safeguarding minority interests in corporate entities and providing an
alternate mechanism for expeditious resolution of corporate disputes and matters arising out of
or connected therewith.
Section 204. Duties of directors.-(1) Subject to the provisions of this Act, a director of a company
shall act in accordance with the articles of the company.
(2) A director of a company shall act in good faith in order to promote the objects of the company
for the benefit of its members as a whole, and in the best interests of the company, its employees
the shareholders the community and for the protection of environment.
(3) A director of a company shall discharge his duties with due and reasonable care, skill and
diligence and shall exercise independent judgment.
Section 227. Contents of directors’ report and statement of compliance
(b) the principal activities and the development and performance of the company‘s business during
the financial year;
(c) a description of the principal risks and uncertainties facing the company;
(d) any changes that have occurred during the financial year concerning the nature of the business
of the company or of its subsidiaries, or any other company in which the company has interest.
Analysis
According to Section 204: (1), it is evident that the Board has to, at any cost, act in the best interest
of its stakeholders. FFC proceeds in accordance with the Companies Act by disclosing its many
years of advancement to the general public. Moreover, with respect to Section 227, the Annual
Report (which contains the director’s report) needs to include any significant changes that occurred
and raised concerns about the going concern principle of the company. FFC has satisfied all of
these requirements in its Annual Report (in its ‘Directors Report’ and ‘How we evolved’
component and it continues to emerge in the coming years as well.
Business Model:
A business model is a company's plan for how it will generate revenues and make a profit. It
explains what products or services the business plans to manufacture and market, and how it plans
to do so, including what expenses it will incur.
It is also a content in Memorandum of Association made essential by companies act 2017.

Profile of the Board
Chief
Chairman and Non-
Executive &
Non-Executive Executive
Managing
Director Director
Director
Non-
Independent Independent
Executive
Director Director
Director
Chief Non-
Company
Financial Executive
Secretary
Officer Director
FFC shares its Profile of the Board in its Annual Reports with all of its stakeholders which consist
of the Chairman, CFO, CEO, Independent Directors, Non-Executive Directors and the Company
Secretary. It can be interpreted by looking at the Profile of the Board, that FFC is a well-built
company with qualified and experienced directors. FFC has not introduced any specific quotas for
women, specific nationalities, ethnic minorities or special age groups for the Board of Directors.
The members of the Board of Directors also hold significant positions in other companies, the
details of which also can be found.
The Profile of the Board comprises of the skills, work experiences, education and professional
achievements of its directors. Sharing this information with stakeholders of the company helps
build trust and integrity. FFC’s investors may feel more connected to the company when they get
to know about the people operating it.
The role of the board of directors has increasingly come under scrutiny in light of corporate
scandals such as those at Enron, WorldCom and HealthSouth, in which the directors failed to act
in investors' best interests. Although the Sarbanes-Oxley Act of 2002 made corporations more
accountable, investors should still pay attention to what a corporation's board of directors is up to.
According to the Companies Act 2017, there are certain requirements for a person to be a director.
So by providing its stakeholders with additional information regarding its directors, FFC has
managed to improve its company’s image in the corporate world.
Section 153. Ineligibility of certain persons to become director.- A person shall not be eligible for
appointment as a director of a company, if he —
(a) is a minor;
(b) is of unsound mind;
(c) has applied to be adjudicated as an insolvent and his application is pending;
(d) is an undischarged insolvent;
(e) has been convicted by a court of law for an offence involving moral turpitude;
(f) has been debarred from holding such office under any provision of this Act;
(g) is lacking fiduciary behaviour and a declaration to this effect has been made by the Court under
section 212 at any time during the preceding five years;
(h) does not hold National Tax Number as per the provisions of Income Tax
A person also has to be qualified enough to be a director of a certain company. SECP holds actions
against such unqualified persons that falsely act as directors of certain companies in Section 175
& 177 and place restrictions on the directors of more than 7 companies in Section 155: (2).
Section 175: Penalty for unqualified person acting as director.-If a person who is not qualified to
be a director or chief executive or who has otherwise vacated the office of director or chief
executive describes or represents himself or acts as a director or chief executive, or allows or
causes himself to be described as such, shall be liable to a penalty of level 1 on the standard scale.
Section177: Ineligibility of bankrupt to act as director.- If any person being an un-discharged
insolvent acts as chief executive or director of a company, he shall be liable to imprisonment for a
term not exceeding two years or to a fine not exceeding one hundred thousand rupees, or to both.
Section 155. Number of directorships.
(2) A person holding the position of director in more than seven companies on the commencement
of this Act shall ensure the compliance of this section within one year of such commencement.
FFC has abided by the requirements of SECP by providing the current occupation, work
experience and the qualifications of its directors in the Profile of the Board. As, FFC is a huge
company, it tries to act in the best interest of all of its stakeholders. So, in order to let them know
that it has a qualified, truthful and experienced board, FFC provide them with details of its board
members in their Annual Report.
Moreover, the Code of Corporate Governance lays down certain guidelines for companies
operating in Pakistan to follow.
CHAPTER II Number of Directorship and Composition of Board
4. Diversity in Board.- The board of directors shall comprises of members having the core
competencies, diversity, requisite skills, knowledge, experience and fulfills any other criteria
relevant in the context of the company’s operations.
6. Independent Director.- (1) The independent directors of each listed company shall not be less
than two members or one third of the total members of the board, whichever is higher.
7. Female Director.- The board of directors shall have at least one female director when it is next
reconstituted not later than expiry of its current term or within the next one years from the effective
date of these Regulations, whichever is later.
8. Executive Director.- The executive directors, including the chief executive officer, shall not be
more than one third of its board of directors.
9. Chairman of Board.- The Chairman and the chief executive officer of a company, by whatever
name called, shall not be the same person.
CHAPTER XIII Reporting & Disclosure
36. Composition of Board.- The board shall state in the Directors’ Report the following: Total
number of Directors: (a) Male: (b) Female: Composition: (i) Independent Directors (ii) Other
Nonexecutive Directors (iii) Executive Directors
Above are some restrictions placed on company’s board by SECP in order to operate effectively
in Pakistan. FFC, by including its Profile of the Board in its Annual Reports determines that it has
the right number of non-executive directors and independent directors. Also, the board includes
one female independent director as well and the Chairman and the CEO are not the same in FFC.
It informs its stakeholders about the diversity of its board by including the above-said information
in its Profile of the Board.
CHAPTER VIII Chief Financial Officer, Company Secretary and Head of Internal Audit
23. Qualification of chief financial officer.- No person shall be appointed as the chief financial
officer of a company unless:
a) he/ she has at least three years of managerial experience in fields of audit or accounting or in
managing financial or corporate affairs functions of a company and is a member of the Institute of
Chartered Accountants of Pakistan or Institute of Cost and Management Accountants of Pakistan;
or
b) he/ she has at least five years of managerial experience in fields of audit or accounting or in
managing financial or corporate affairs functions of a company and is either a member of
professional body of accountants whose qualification is recognized as equivalent to post graduate
degree by HEC or has a postgraduate degree in finance from a university in Pakistan or equivalent
recognized and approved by the Higher Education Commission of Pakistan (HEC).
c) he/ she has atleast seven years of managerial experience in fields of audit or accounting or in
managing financial or corporate affairs functions of a company and has a suitable degree from a
university in Pakistan or abroad equivalent to graduate degree, recognized and approved by the
Higher Education Commission of Pakistan (HEC). The Commission, on application from the
company, shall determine the suitability of such candidate.
25. Qualification of Company Secretary.- No person shall be appointed as the Company Secretary
unless he holds the qualification as specified under the relevant Regulations by the Commission.
Certain qualifications are too in place according to the Code of Corporate Governance Chapter
VIII that each company has to keep in mind when selecting or promoting someone to be its CFO
or Company’s Secretary. All details are provided by FFC to the public to ensure their trust and
loyalty and for the betterment of the company.
Analysis
The board of directors is appointed to act on behalf of the shareholders to run the day to day affairs
of the business. The board of directors' key purpose is to ensure the company's prosperity by
collectively directing the company's affairs, whilst meeting the appropriate interests of its
shareholders and stakeholders. In addition to business and financial issues, boards of directors
must deal with challenges and issues relating to corporate governance, corporate social
responsibility and corporate ethics.
Concluding that, it is of vital important for FFC to incorporate ‘Profile of the Board’ and provide
details regarding its director’s qualifications, occupations and education in order to ensure honesty
of the company towards its stakeholders and follow the laws of the Companies Act 2017 and act
according to the Code of Corporate Governance.
Board Committees:
35. Directors’ report. - The quarterly unaudited financial statements of companies
shall be published and circulated along with directors’ review on the affairs of the
company.
36. Composition of Board. - The board shall state in the Directors’ Report the
following:
Total number of Directors:
(a) Male:
(b) Female:
Composition:
(i) Independent Directors
(ii) Other Nonexecutive Directors
(iii) Executive Directors
37. Committees of the Board. - The names of Members of board committees shall be
disclosed in each Directors’ Report of the company.
Analysis:
In case of our company which under the purview is FFC the annual report of 2018 contains the
header of directorate committee’s which has been followed keeping in view the considerations and
requirements of both the concerned IFRS and IAS pertaining to the presentation of the corporate
affairs. Moreover, all such committees formed have been disclosed as per the proceedings carried
out in the Board meeting of the company under our purview.
Management Committees
FFC has included the names of its management committee in its annual reports.
The management committee of FFC comprises of:

Requirement by law
Code of Corporate Governance
Chapter 3- BOARD OF DIRECTORS OF THE COMPANY
Subsection 4- Operations of the Board of Directors
4.7. The board of directors should create committees for preliminary consideration
of the most important matters assigned to the authority of the board of directors
4.7.1. One of the conditions for effective performance of its functions by the board of
directors is the creation of standing committees. The role of such committees is to hold
preliminary discussions on the most important matters and issue recommendations based upon
which the board of directors can make informed decisions on such matters. Considering the basic
functions performed by the board of directors, it is advisable that the company’s charter provide
for a strategic planning committee, an audit committee, a human resources and remuneration
committee, and a corporate conflicts resolution committee. The board of directors may establish
other permanent or ad hoc (for resolution of specific matters) committees as it may deem
necessary, in particular, a risk management committee and an ethics committee. Establishment of
such committees staffed by members of the board of directors with experience and knowledge in
the appropriate areas will enhance the efficiency and improve the quality of work performed by
the board of directors and, as a result, will facilitate creation of effective control mechanisms to
supervise the operation of the company’s executive bodies.
SWOT Analysis
SWOT analysis is a framework used to evaluate a company's competitive position and to develop
strategic planning. SWOT stands for strengths, weaknesses, opportunities, and threats. SWOT
analysis assesses internal and external factors, as well as current and future potential. A SWOT
analysis is designed to facilitate a realistic, fact-based, data-driven look at the strengths and
weaknesses of an organization or an industry. The organization produces its swot analysis as it
perceives it as a way of interacting with its shareholders, since the analysis portrays accurate facts
regarding the company by avoiding pre-conceived beliefs or gray areas and instead focusing on
real-life contexts.
A company can use a SWOT for overall business strategy sessions or for a specific segment such
as marketing, production or sales, or to build relation with its potential investors. This way, a
potential investor can see how the overall strategy developed from the SWOT analysis will filter
down to the segments below before he or she commits to it.
Analysis
There is no legal requirement to incorporate SWOT analysis in the financial report, however the
companies add it to their annual report for the investors to analyze the internal and external
standing of the organization as a whole. It stimulates a point of comparison between the company
and other relating companies so that a potential investor could be sure of what he/she loses or gains
by making an investment in the company. At FFC, effective management and control systems are
in place that integrate identification and management of risks related to long term sustainability
and opportunities of further business integration, both vertical and horizontal and diversification
to augment profitability. And details of Opportunities are discussed in the ‘SWOT Analysis’. Even
though there is no legal requirement for SWOT Analysis to be a part of the annual report, yet FFC
includes it in their report so that the investors could gain maximum relevant information regarding
the industry, while getting to know potential threats and weaknesses that the organization pertains
to.
Stakeholders’ Engagement
“To be a leading national enterprise with global aspirations, effectively pursuing multiple growth
opportunities, maximizing returns to the stakeholders, remaining socially and ethically
responsible.”
Vision of FFC evidently shows that stakeholders are a major part of the company. FFC’s success
and performance depend upon the loyalty of its stakeholders. Stakeholders also give FFC practical
and financial support. They are the ones ranging from employees to loyal customers and investors.
They broaden the pool of people who care about the well-being of the company, making FFC less
alone in corporate world. At its best, the relationship between FFC and its stakeholders is symbiotic
and healthy.
FFC include Stakeholders’ Engagement in its Annual Reports because it is meaningfully stated by
the SECP, in the Companies Act 2017, to protect the interest of these stakeholders:
WHEREAS it is expedient to reform company law with the objective of facilitating corporatization
and promoting development of corporate sector, encouraging use of technology and electronic
means in conduct of business and regulation thereof, regulating corporate entities for protecting
interests of shareholders, creditors, other stakeholders and general public, inculcating principles
of good governance and safeguarding minority interests in corporate entities and providing an
alternate mechanism for expeditious resolution of corporate disputes and matters arising out of
or connected therewith.
Institutional Investors/Shareholders
The providers of capital allow FFC the means toachieve its vision.
Customers & Suppliers

FFC's success and performance depend upon the loyalty of its customers,
their preference of the ‘Sona’ brand and its supply chain management.
Banks & Other Lenders

Dealings with banks and lenders is key to FFC’s performance in terms of
the following:
• Access to better interest rates and loan terms
•Minimal fees
•Higher level of customer service
•Effective planning for the future
Media
By informing the media of the developments and activities of FFC,
effective awareness is created regarding the Company and the products
and services offered, indirectly having a positive impact.
Regulators
Laws and regulations, determination of prices and other factors
controlled by the Government affect FFC and its performance.
Analysts
In order to attract potential investors, FFC regularly engages with
analysts on details of projects already disclosed to the regulators, with
due regard to regulatory restrictions imposed on inside information and
/ or trading, to avoid any negative impact on the Company’s reputation
or share price.
Employees
FFC’s commitment to its most valued resource, a dedicated and
competent workforce, is at the core of its human resource strategy. FFC
provides a nurturing and employee friendly environment while investing
considerably in local and foreign employee trainings. Besides monetary
compensations, FFC has also invested in health and fitness activities for its
employees.
Local Community & General Public

In addition to local communities near plant sites, FFC engages with
general public at large through its CSR Department. This engagement
helps to identify needed interventions in the field of education, health and
general economic uplift of the society. The Company has also aligned its
interventions with the UN’s Sustainable Development Goals.
The Companies Act 2017 states that:
Section 216: A Company deemed to be a public interest company in certain circumstances.
(1) Notwithstanding anything contained in this Act, a company shall be deemed to be a

company with public interest as envisaged in the Third Schedule.
(2) Upon being deemed as a company with public interest, the company shall be required to
comply with such disclosure and reporting requirements as may be specified by the
Commission.
Thus, FFC is a public interest company according to Section 216: (1) & (2) of Companies Act
2017, so it should abide by the reporting requirements as specified by the SECP. It is mandatory
for FFC to disclose all of its activities and decisions that affect the stakeholders.
Stakeholder’s Engagement provides the investors, customers and banks with an overall size and
relations of the company as it shows how much the stakeholders are of value to it. Engagement of
shareholders is also important for CSR reporting. By engaging with stakeholders, as part of FFC’s
processes for CSR reporting, FFC can ensure its materiality assessment is robust and inclusive.
Section 264: (1)-(c), (d) & (f) make the inclusion of Stakeholders’ Engagement necessary in the
Annual Reports of FFC.
Section 264: Power of Commission to initiate action against management. - (1) If from any report
made under section 262, the Commission is of the opinion that-
(c) the affairs of the company have been so conducted or managed as to deprive the shareholders
(d) that the members of the company have not been given all the information with respect to its
affairs which they might reasonably expect; or
(f) the affairs of the company are not being managed in accordance with sound business principles
or prudent commercial practices;
The Commission may apply to the Court and the Court may, after taking such evidence as it may
consider necessary.
The Annual Report of FFC should contain all the contents and information related to its
shareholders in order to represent effective operations and avoid actions against the company by
SECP. Even little hidden information might result in huge loss to the company.
Moreover, according to the Code of Corporate Governance a company should make decisions in
good faith that may benefit its stakeholders in the long run.
CHAPTER III - Responsibilities of Board of Directors and its members
10. (1) In exercise of powers under Section 183 of the Act and in terms of Section 204 of the Act,
the board of directors of a company shall carry out its fiduciary duties with a sense of objective
judgment and in good faith in the best interests of the company and its stakeholders.
(4) The board of directors shall maintain a complete record of particulars of the significant policies
along with their date of approval or updating. The significant policies may include but are not
limited to the following:
-e) communication policy and investors’/shareholders’ relations.
Therefore, according to Chapter III: (1) & (4)-(e) of Code of Corporate Governance the Board is
required to maintain complete record of stakeholder’s relations which FFC has comprised in its
Stakeholders’ Engagement.
Analysis
FFC’s governance structure is central to its ability and positions it to create value for its wide range
of stakeholders. Relations of the company with its stakeholders have to be disclosed in the Annual
Reports as required by the Code of Corporate Governance and Companies Act 2017. However,
FFC takes a step ahead. FFC reports its engagement with the stakeholders, profile of the board,
management and board committees, social and relationship capital and disclosures of any related
parties. This shows that FFC is dedicated and truthful with its customers, employees, investors,
media and the general public. It also greatly values all of its stakeholders and intends to act in their
best interests. FFC’s continuous commitment to engage with its stakeholder helps it to understand
the concerns, devise appropriate strategies and deliver to the expectations of its stakeholders.
Notice of Annual General Meeting:

Section 132.
Annual general meeting
(1) Every company, shall hold, an annual general meeting within sixteen months from the date of
its incorporation and thereafter once in every calendar year within a period of one hundred and
twenty days following the close of its financial year: Provided that, in the case of a listed company,
the Commission, and, in any other case, the registrar, may for any special reason extend the time
within 83 which any annual general meeting, shall be held by a period not exceeding thirty days.
(2) An annual general meeting shall, in the case of a listed company, be held in the town in which
the registered office of the company is situate or in a nearest city:
Provided that at least seven days prior to the date of meeting, on the demand of members residing
in a city who hold at least ten percent of the total paid up capital or such other percentage as may
be specified, a listed company must provide the facility of video- link to such members enabling
them to participate in its annual general meeting.
(3) The notice of an annual general meeting shall be sent to the members and every person who is
entitled to receive notice of general meetings at least twenty-one days before the date fixed for the
meeting:
Provided that in case of a listed company, such notice shall be sent to the Commission, in addition
to its being dispatched in the normal course to members and the notice shall also be published in
English and Urdu languages at least in one issue each of a daily newspaper of respective language
having nationwide circulation.
(4) Nothing in this section shall apply to a single member company.
(5) Any contravention or default in complying with requirement of this section shall be an offence
liable-
(a) in case of a listed company, to a penalty of level 2 on the standard scale; and
(b) in case of any other company, to a penalty of level 1 on the standard scale.
Case of Extra-Ordinary AGM:

133. Calling of extraordinary general meeting:
(1) All general meetings of a company, other than the annual general meeting referred to in section
132 and the statutory meeting mentioned in section 131, shall be called extraordinary general
meetings.
(2) The board may at any time call an extraordinary general meeting of the company to consider
any matter which requires the approval of the company in a general meeting.
(3) The board shall, at the requisition made by the members-
(a) in case of a company having share capital, representing not less than one-tenth of the total
voting power as on the date of deposit of requisition; and
(b) in case of a company not having share capital, not less than one-tenth of the total members;
forthwith proceed to call an extraordinary general meeting.
(4) The requisition shall state the objects of the meeting, be signed by the requisitionists and
deposited at the registered office of the company.
(5) If the board does not proceed within twenty-one days from the date of the requisition being so
deposited to cause a meeting to be called, the requisitionists, may themselves call the meeting, but
in either case any meeting so called shall be held within ninety days from the date of the deposit
of the requisition.
(6) Any meeting called under sub-section (5) by the requisitionists shall be called in the same
manner, as nearly as possible, as that in which meetings are to be called by board.
(7) Any reasonable expenses incurred by the requisitionists in calling a meeting under sub-section
(5) shall be reimbursed to the requisitionists by the company and the sums so paid shall be deducted
from any fee or other remuneration payable to such of the directors who were in default in calling
the meeting.
(8) Notice of an extraordinary general meeting shall be served to the members in the manner
provided for in section 55:
Provided that in case of a company other than listed, if all the members entitled to attend and vote
at any extraordinary general meeting so agree, a meeting may be held at a shorter notice.
(9) Any contravention or default in complying with requirement of this section shall be an offence
liable-
(a) in case of a listed company, to a penalty of level 2 on the standard scale; and
(b) in case of any other company, to a penalty of level 1 on the standard scale.
Analysis:
We have visualized from the annual report of FFC Pakistan that the company has been complying
with all relevant laws applicable to it under the Companies act 2017 section 132 pertaining to
Annual General Meeting. This can be seen as from the fact that the notes attached thereof have
shown to be in regulation to all sections specified as per companies act and other regulatory frame
works. AGM are held in accordance to the resolutions that need to be passed as per the company’s
applicable framework. In addition to this we have also seen the occasions as mentioned in the foot
notes and special resolutions pertaining to the general meetings have all been conveyed to
shareholders periodically in each term.
Chairman’s Review
FFC has included chairman’s review where the Chief Executive and Managing director ahs
addressed the shareholders by highlighting the main achievements of the company in the year
2018, and how the company plans to move forward.
Chairman’s review is generally the first part of an annual report. The chairman’s letter will set the
tone, establish a theme, and most importantly summarize the report for the readers. The letter will
highlight the company’s accomplishments for the
year, as well as the company’s failures. The letter
will state what led to the company’s successes and
will also address how it dealt with its failures or
issues.
The chairman’s letter will provide an analysis of

overall business performance, insights into the
markets it’s in, and any opportunities for growth.
The letter will also point out any challenges or risks
facing the company such as changing market conditions, recent scandals, consumer trends, etc.
The letter often ends by giving a sense of corporate direction for the next year.
Requirement by law
Section 192. Chairman in a listed company.-
Subsection (4) Every financial statements circulated under section 223 of this Act shall contain a
review report by the chairman on the overall performance of the board and effectiveness of the
role played by the board in achieving the company‘s objectives.
And there is no requirement by law to provide a translated version of Chairman’s review in Urdu.
Corporate Governance And CE & MD’s
Overview
Corporate Governance is basically a framework of rules and practices by which a board of directors
ensures accountability, fairness, and transparency in a company's relationship with its all
stakeholders (e.g. shareholders, customers, management, government, and the community). Good
governance is the basic requisite for a successful business and is essential for long term sustainable
growth. Code of Corporate Governance has been introduced in Pakistan after the bizarre incidents
of Enron and WorldCom. It was the fall of Arther Anderson, one of the top audit firms, that
triggered the need of a stringent mechanism for corporate governance. Additionally, the corporate
corruption cases in Pakistan are also countless. Yet this was not the primary reason why SECP
come up with the Code of Corporate Governance, but the code rather came into existence because
of the “International Wave” that had a motive to curb corporate frauds.
Compliance with Code of Corporate Governance

The listed companies Code of Governance tends to provide a framework for the companies that
hold them responsible to produce financial report in its accordance, along with corporate
compliance to the set regulations. The following are the guidelines for the management to follow
while preparing the financial annual report of the company.
Section 26. Financial statement endorsed by chief financial officer and chief executive officer.
- The chief executive officer and the chief financial officer shall duly endorse the quarterly, half-
yearly and annual financial statements under their respective signatures prior to placing and
circulating the same for consideration and approval of the board of directors.
Section 27. External Auditor. - Chief executive officer and chief financial officer shall have the
annual and interim financial statement (both separate and consolidated where applicable) initialed
by the external auditors before presenting it to the audit committee and the board of directors for
approval.
The above two sections aim to remove transparency concerns from a company since company
frauds have become very common since 2001. The whole idea of getting the annual report
endorsed by the two highest ranked corporate individuals under section 26 is to hold them
responsible if any discrepancy in the report is spotted. Since the violation of the code by any means
can lead to an unpleasant penalty, therefore a disciplined action is expected to be taken by the two
members of the company. Moreover, the second section tends to add presence of a third, unbiased
party who could scrutinizes the report and see for any error or manipulated figures and statements
which can later on become a concerning situation for the company as it may raise concern over
the accountability and fair view of the company.
Analysis
The Board of FFC, being cognizant to its responsibility has established a robust governance
mechanism surpassing the legal and regulatory requirements which regularly evaluates the
processes to ensure growth in stakeholders’ value besides safeguarding the interests of minority
shareholders. The company has maintained its high standards of professionalism, ethical practices,
accountability and transparency, in line with the global best practices and statutory requirements
in its governance structure through implementation of sound internal controls, Code of Conduct,
Whistle Blowing Policy and Code of Business Ethics of the Company.
The company provides Report of the Audit Committee on adherence to the Code of Corporate
Governance, Statement of Compliance with the Code of Corporate Governance by the
Chairman and the Chief Executive & Managing Director and Auditors Report thereon also
form part of the annual report and are stated as well. In addition, FFC tries to elaborate its business
activities that exceed the legal requirements. FFC’s commitment towards adherence to the highest
levels of moral and ethical values is demonstrated by voluntary adoption of best business practices
in addition to the stipulated regulatory requirements. Some of the governance practices exceeding
legal requirements that have been adopted by the Company include:
• Adoption of framework for UN Global Compact

• Implementation of Directors training program ahead of prescribed timeframe
• Best reporting practices recommended by ICAP / ICMAP and SAFA
Moreover, the company tries its best to maintain an organizational culture that demonstrates best
ethical practices. By pertaining to such friendly and honest office environment, FFC indicates
towards a fair and trustworthy culture, upon which shareholders can count.
Financial & Intellectual Capital:
Capital disclosures
An entity discloses information about its objectives, policies and processes for managing capital.
[IAS 1.134] To comply with this, the disclosures include: [IAS 1.135]
• qualitative information about the entity's objectives, policies and processes for managing
capital, including>
▪ description of capital it manages

▪ nature of external capital requirements, if any
▪ how it is meeting its objectives
• quantitative data about what the entity regards as capital
• changes from one period to another
• whether the entity has complied with any external capital requirements and
• if it has not complied, the consequences of such non-compliance.
Analysis:
Under our selected Annual Report 2018 of FFC we can visualize the fact that performance
indicators pertaining to majority of the financial and intellectual considerations have been prepared
and presented in accordance with the specified IAS and IFRS which require the particular
highlights and disclosures of all such policies in hand. The analysis has also been presented in the
annual report under each separate class of header so as to make the shareholder present with clarity
on the situation faced by the company.
Financial Performance:
Comparative information
IAS 1 requires that comparative information to be disclosed in respect of the previous period for
all amounts reported in the financial statements, both on the face of the financial statements and in
the notes, unless another Standard requires otherwise. Comparative information is provided for
narrative and descriptive where it is relevant to understanding the financial statements of the
current period. [IAS 1.38]
An entity is required to present at least two of each of the following primary financial statements:
[IAS 1.38A]
• statement of financial position*
• statement of profit or loss and other comprehensive income
• separate statements of profit or loss (where presented)
• statement of cash flows
• statement of changes in equity
• related notes for each of the above items.
* A third statement of financial position is required to be presented if the entity retrospectively

applies an accounting policy, restates items, or reclassifies items, and those adjustments had a
material effect on the information in the statement of financial position at the beginning of the
comparative period. [IAS 1.40A]
Where comparative amounts are changed or reclassified, various disclosures are required. [IAS
1.41]
Analysis:
In case of our company which under the purview is FFC the annual report of 2018 contains the
header of financial performance which has been followed keeping in view the considerations and
requirements of both the concerned IFRS and IAS pertaining to the presentation of the financial
statements. Moreover, the comparative information provided in the annual report consists of a
period from 2013-2018 which constitutes 5 fiscal years as per the requirement of law in disclosing
and providing a comparative analysis.
Horizontal and Vertical Analysis of Financial
Statements:
14. Significant issues. - The chief executive officer of the company shall place
significant issues for the information, consideration and decision, as the case may be, of
the board of directors or its committees that include but are not limited to the following:
(ii) annual business plan, cash flow projections, forecasts and strategic plan;
(iii) budgets including capital, manpower and overhead budgets, along with
variance analysis;
(iv) matters recommended and/or reported by the audit committee and other
committees of the board;
(v) quarterly operating results of the company as a whole and in terms of its
operating divisions or business segments;
(vi) internal audit reports, including cases of fraud, bribery, corruption, or
irregularities of material nature;
(vii) management letter issued by the external auditors;
(viii) details of joint venture or collaboration agreements or agreements with
distributors, agents etc.;
(ix) promulgation of or amendment to a law, rule or regulation, applicability of
financial reporting standard and such other matters as may affect the
company and the status of compliance therewith;
(x) status and implications of any law suit or proceedings (show cause notice,
demand or prosecution notice) of material nature, filed by or against the
company;
DUPont Analysis
The DuPont analysis is a framework for analyzing fundamental performance popularized by the
DuPont Corporation. DuPont analysis is a useful technique used to decompose the different drivers
of return on equity (ROE). Decomposition of ROE allows investors to focus on the key metrics of
financial performance individually to identify strengths and weaknesses. The ratio can be helpful
when comparing two companies that are very similar. Because average assets include components
like inventory, changes in this ratio can signal that sales are slowing down or speeding up earlier
than it would show up in other financial measures. If a company's asset turnover rises, its ROE
will improve.
Compliance with Companies Act 2017

There are no legal requirement as per Companies Act 2017 for companies to add DUPont Analysis
in their financial report. Neither are there any guidelines set by the Code of Corporate Governance
so as for companies to abide by. Yet there are still few companies who add this component in their
financial report so investors can critically analyze the financial performance of companies and its
trend over 6 years’ time.
Analysis
Fauji fertilizer company has included DUPont as part of their financial report so that the investors
can compare between two companies easily and thereby make a smart investment related decision.
FFC also adds in previous year’s DUPont analysis as well so that the investor could notice any
significant change in a critical financial ratio, for example net profit margin. With a Dupont
analysis, investors and analysts can dig into what drives changes in ROE, or why an ROE is
considered high or low. That is, a Dupont analysis can help deduce whether its profitability, use
of assets or debt that’s driving ROE.
Key Risk and Opportunities why FFC needs
to publish it?
Section 227 Companies Act 2017. Contents of directors’ report and statement of compliance:
(a) the names of the persons who, at any time during the financial year, were directors of the
company;
(b) the principal activities and the development and performance of the company’s business
during the financial year;
(d) any changes that have occurred during the financial year concerning the nature of the
business of the company or of its subsidiaries, or any other company in which the
company has interest,
(e) the information and explanation in regard to any contents of modification in the auditor ‘s
report;
Further Code of Corporate Governance States:
CHAPTER III
Responsibilities of Board of Directors and its members
10. (1) In exercise of powers under Section 183 of the Act and in terms of Section 204
of the Act, the board of directors of a company shall carry out its fiduciary duties with a
sense of objective judgment and in good faith in the best interests of the company and its
stakeholders.
(2) The board of directors is responsible for the governance of risk and for determining the
company’s level of risk tolerance by establishing risk management policies. The board shall
undertake at least annually, an overall review of business risks to ensure that the management
maintains a sound system of risk identification, risk management and related systemic and
internal controls to safeguard assets, resources, reputation and interest of the Company and
shareholders.
Social and Relationship Capital
FFC has included the following information under this topic:
1. Social and Environmental Responsibility Policy
2. Highlights of Sustainability
3. Highlights of Corporate Social Responsibility

4. Certifications Acquired and International Standards Adopted
5. Statement of Value Added – 2018
Requirement by law
Subsection (1) The directors shall make out and attach to the financial statements, a report with
respect to the state of the company‘s affairs and a fair review of its business
Subsection (3) In the case of a listed company, the

business review must, to the extent necessary for
understanding the development, performance or position
of the company‘s business, include
(a) the main trends and factors likely to affect the future
development, performance and position of the company‘s
business;
(b) the impact of the company‘s business on the environment;
(c) the activities undertaken by the company with regard to corporate social responsibility during
the year; and
(d) directors‘ responsibility in respect of adequacy of internal financial controls as may be
specified.
Subsection (4)- The board shall make out and attach to the financial statement such statement of
compliance as may be specified.
Manufactured Capital
The Director’s Report of the Fauji Fertilizer company also contains information about the
manufactured capital.
The Company’s
manufactured capital
primarily comprises
of its infrastructure at
plant sites, head office
and its extensive
marketing and
distribution network.
Concerted efforts are
made to protect and
develop this capital as
its strength and sustainability directly impacts the Company’s ability to create value. FFC
Manufactured Capital section covers the following broadly:
Marketing Overview
Requirement by law
state-
(b) the principal activities and the development and performance of the company‘s business during
the financial year;
Effect of Seasonality on Business

There are two principal crop seasons in Pakistan namely “Kharif” and “Rabi” impacting the
fertilizer offtake in the Country. The Company manages seasonality through advance sales, proper
inventory management and production / import planning, keeping our products available according
to the customers’ demand.
Requirement by law
state-
Major Projects at Plant sites

The following major projects were undertaken by FFC during the year:
Gas Compression Facility - Goth Machhi & Mirpur Mathelo and,
Neem Oil Coated Urea Manufacturing System - Goth Machhi
Requirement by law
state-
of the company or of its subsidiaries, or any other company in which the company has interest,;
Directors Report & Board of Directors:

Section 227 of Companies act 2017:
Contents of directors’ report and statement of compliance:
(1) The directors shall make out and attach to the financial statements, a report with respect to the
state of the company’s affairs and a fair review of its business, the amount (if any), that the
directors recommend should be paid by way of dividend and the amount (if any), they propose to
carry to the Reserve Fund, General Reserve or Reserve Account.
(2) In the case of a public company or a private company which is a subsidiary of a public
company, the directors report, in addition to the matters specified in sub-section (1) must state:
(a) the names of the persons who, at any time during the financial year, were directors of the
company;
(b) the principal activities and the development and performance of the company’s business during
the financial year;
of the company or of its subsidiaries, or any other company in which the company has interest:
(e) the information and explanation in regard to any contents of modification in the auditor’s
report;
(f) information about the pattern of holding of the shares in the form specified;
(g) the name and country of origin of the holding company, if such company is a foreign company;
(j) information about defaults in payment of any debts and reasons thereof;
(k) comments in respect of adequacy internal financial controls;
(l) any material changes and commitments affecting the financial position of
the company which have occurred between the end of the financial year
of the company to which the financial statement relates and the date of
the report; and
(m)any other information as may be specified.
Relevant Disclosures: Board Composition

35. Directors’ report: The quarterly unaudited financial statements of companies shall be published
and circulated along with directors’ review on the affairs of the company
36. Composition of Board. - The board shall state in the Directors’ Report the following: Total
number of Directors:
(a) Male:
(b) Female: Composition:
(i) Independent Directors
(ii) Other Nonexecutive Directors
(iii) Executive Directors
37. Committees of the Board: The names of Members of board committees shall be disclosed in
each Directors’ Report of the company.
38. Director’s remuneration:
(1) The Directors in their report to members shall state the remuneration policy of non-executive
directors including independent directors, as approved by the board of directors. This includes
disclosing the significant features and elements thereof. Companies are also encouraged to post on
the company’s web site the key elements of the directors’ remuneration policy.
(2) The company's Annual Report shall contain details of aggregate amount of remuneration
separately of executive and non-executive directors, including salary/fee, perquisites, benefits and
performance-linked incentives etc.
39. Disclosure of significant policies on website: Company may post the key elements of its
significant policies on its website.
40. Compliance Statement and Auditor Review:
(1) All companies shall publish and circulate a statement, as given under annexure A, along with
their annual reports to set out the status of their compliance with the requirements of Regulations.
The statement shall be specific and deemed to be supported by the necessary evidence held by the
company making the said statement.
(2) All companies shall ensure that the statement of compliance is reviewed and certified by
statutory auditors as per relevant Regulations specified by Commission. Statutory auditors of
company shall ensure that any non-compliance with these Regulations is highlighted in their
review report.
Vision Mission:
(i) a vision and/or mission statement and overall corporate strategy for the
company is prepared, adopted and reviewed as and when deemed
appropriate by the board.
(ii) a formal code of conduct is in place that promotes ethical culture in the
company and prevents conflict of interest in their capacity as member of the
board, senior management and other employees. The board shall take
appropriate steps to disseminate code of conduct throughout the company

along with supporting policies and procedures and these shall be put on the
company’s website;
Quarterly Analysis – 2018
It can be determined by the quarterly analysis 2018 of FFC that it has proved to perform greatly
throughout the 4 quarters. Quarterly reports are usually accompanied by presentations from a
company's management where key performance indicator data are presented to investors and
analysts. Management often provides guidance for future financial results by looking at these
statements as well.
In the Code of Corporate Governance of Pakistan, it is enforced that a company should make
quarterly financial statements along with yearly financial statements. It is also required that the
company shall disclose these statements in their Annual Reports. FFC’s Annual Report consists
of quarterly financial statements. Furthermore, FFC has added a quarterly analysis for those
statements as well for the same financial year.
CHAPTER IX Responsibility for Financial Reporting and Corporate Compliance
26. Financial statement endorsed by chief financial officer and chief executive officer.- The chief
executive officer and the chief financial officer shall duly endorse the quarterly, half-yearly and
annual financial statements under their respective signatures prior to placing and circulating the
same for consideration and approval of the board of directors.
There are certain requirements for the preparation of quarterly financial statements in the
Companies Act 2017 similarly.
Section 237. Quarterly financial statements of listed companies.− (1) Every listed company shall
prepare the quarterly financial information within the period of-
(a) one month of the close of first and third quarters of its year of accounts; and
(b) two months of the close of its second quarter of its year of accounts:
(2) The quarterly financial statements shall be posted on the company‘s website for the
information of its members and also be transmitted electronically to the Commission, securities
exchange and with the registrar within the period specified under sub-section (1):
Provided that a copy of the quarterly financial statements shall be dispatched in physical form if
so requested by any member without any fee.
Provided further that the Commission may specify the time period for which the quarterly financial
statements shall be made available on the website of the company.
(3) The provisions of section 232 shall be applicable to the quarterly financial statements.
(4) If a company fails to comply with any of the requirements of this section, every director,
including chief executive and chief financial officer of the company who has by his act or omission
been the cause of such default shall be liable to a penalty of level 2 on the standard scale.
Analysts following companies often publish estimates of key metrics for future reporting periods.
Financial publications average these estimates to arrive at street consensus estimates. Companies
that exceed these estimates are said to have beaten expectations. Companies whose performances
are in-line with estimates are said to have met expectations. Companies whose results are below
estimates are said to have missed expectations. However, there is no such law that requires the
preparation of an analysis report along with the quarterly financial statement.
Analysis
FFC, being a large scale company, it probably is going offer all information regarding its company
to the general public through its Annual Report, hence the inclusion of the Quarterly Analysis-
2018 in its Annual Report. The vision and mission of FFC strongly encourages its directors to act
in the best interest of all the stakeholders, so with the aim to do such, FFC endeavors to be
consistently legitimate with its stakeholders.
Six Year Analysis of Financial Position and

Performance
Financial Performance in broader sense refers to the degree to which financial objectives being or
has been accomplished and is an important aspect of finance risk management. It is the process of
measuring the results of a firm's policies and operations in monetary terms. Six Year Analysis of
Financial Position and Performance is used to measure firm's overall financial health over a 6
years’ time and can also be used to compare similar firms across the same industry or to compare
industries or sectors in aggregation. It is for the interest of other firms and interested groups such
as managers, shareholders, creditors, and tax authorities.
In correspondence with the Companies Act 2017, FFC prepares its yearly financial statements.
Though, it is not obligatory, but FFC also analyze its performance for the last six years.
Section 192. Chairman in a listed company.-
(4) Every financial statements circulated under section 223 of this Act shall contain a review report
by the chairman on the overall performance of the board and effectiveness of the role played by
the board in achieving the company‘s objectives.
Section 225. Contents of Financial Statements.-(1) The financial statements shall give a true and
fair view of the state of affairs of the company, comply with the financial reporting standards
notified by the Commission and shall be prepared in accordance with the requirements contained
in the Third Schedule for different class or classes of companies.
Financial reporting standards do not specify for a company to reveal a six year analysis of its
financial position and performance. But FFC, to gain the trust of its stakeholders, aim to provide
them all the available information about the company.
CHAPTER IX Responsibility for Financial Reporting and Corporate Compliance
26. Financial statement endorsed by chief financial officer and chief executive officer.- The chief
executive officer and the chief financial officer shall duly endorse the quarterly, half-yearly and
annual financial statements under their respective signatures prior to placing and circulating the
same for consideration and approval of the board of directors.
There is a compulsion on the CFO and CEO to produce the quarterly, half-yearly and annual
financial statements as specified in the Code of Corporate Governance of Pakistan.
Analysis
FFC ‘Six Year Analysis of Financial Position and Performance’ includes analysis and
interpretation of financial statements in such a way that it undertakes full diagnosis of the
profitability and financial soundness of the business. Investors of FFC are interested in the trend
of the earnings of FFC since the past years, management is concerned about the internal control,
better financial condition and performance of the company and the competitors are interested in
the liquidity performance of the company since the past years. To satisfy and help all of these
stakeholders in making investment decisions, FFC analyses its six year financial position and
performance.
Statement of Value Addded

FFC’s Value Added Statement depicts the wealth created in a financial year and how is that wealth
distributed among various stakeholders. The various stakeholders comprise of the employees,
shareholders, government, creditors and the wealth that is retained in the business.
FFC distributes its wealth to employees as remuneration, to Government as taxes, to shareholders

as dividends and to providers of finance. Also some of it is retained within the business and is
distributed in the society.
Revenue
Rs 115,629 million
Purchases
Rs 53,688 million
Wealth Generated
Rs 61,941 million
10. (1) In exercise of powers under Section 183 of the Act and in terms of Section 204 of the Act,
the board of directors of a company shall carry out its fiduciary duties with a sense of objective
judgment and in good faith in the best interests of the company and its stakeholders.
(2) The board of directors is responsible for the governance of risk and for determining the
company’s level of risk tolerance by establishing risk management policies. The board shall
undertake at least annually, an overall review of business risks to ensure that the management
maintains a sound system of risk identification, risk management and related systemic and internal
controls to safeguard assets, resources, reputation and interest of the Company and shareholders.
(iv) a system of sound internal control is established, which is effectively implemented and
maintained at all levels within the company.
Analysis
With respect to the Code of Corporate Governance of Pakistan, it is vital for the directors to fulfill
their responsibilities and gain control of the company. FFC appropriately apportions the value to
various stakeholders. There is no definite law that requires the statement of value added to be
created, but it promotes a positive status to the society and all of the stakeholders of the company.
Therefore, FFC has included the ‘Statement of Value Added’ in its Annual Reports as it views that
the primary road to success is to be truthful to its stakeholders.
Organizational Chart
FFC has a centralized organization structure which means that the top management makes most of
the decisions for the company. There is also a need to ensure the execution of standardized
procedures set by the management of FFC. The organizational structure shows the flow of
information in FFC from the top management to the lower management, and also from the lower
management to the top management. It can be seen that the FFC has a functional structure; giving
autonomy to functional departments to flourish and lead to the overall success of the company.
The organizational structure is:
The organizational structure shows each employee to whom he/she reports, what functional areas
he/she is responsible for and who reports to him/her. These clear lines of authority prevent
confusion. Lower level employees of FFC report to their functional department heads e.g. an
employee in the Finance Department has to report to the CFO or the Finance Manager of the
company. This ensures that the CEO does not have too wide a span of management -- too many
people directly reporting to him than he can effectively supervise.
A well-formed organizational structure effectively manages a company's ongoing business,

supports the audit, anticipates growth needs as organizational changes occur and helps in
evaluating performance of the board, managers and as well as employees.
Section 192. Chairman in a listed company.
(2) The board shall clearly define the respective roles and responsibilities of the chairman and
chief executive.
(3) The chairman shall be responsible for leadership of the board and ensure that the board plays
an effective role in fulfilling its responsibilities.
It is the responsibility of the management to recruit and evaluate the performance of its employees
and provide them with proper information regarding their job and reporting requirements. And, it
is the responsibility of the Board to ascertain that the management is effectively practicing control
over the employees. Looking at the laws made by SECP in the Companies Act 2017 Section 192:
(2) & (3), FFC impressively enlightens its employees about their reporting requirements and the
culture of the organization.
A system of strong internal control is a result of an effectively operational organizational structure.

When the employees are in order and know who to report to, the flow of information is fast which
leads to more productivity. It is mentioned in the Code of Corporate Governance that the Board
should maintain a sound internal control.
(iv) a system of sound internal control is established, which is effectively implemented and
maintained at all levels within the company;
Analysis
FFC following the code and the regulations of SECP has enclosed their hierarchal chart for the
learning of its financial specialists for them to distinguish that the company is working successfully
with defined levels of responsibilities and reporting. There is no such law that requires a company
to disclose its organizational chart to the public; however FFC is a listed company which has a
decent reputation in the corporate world. In this way, so as to keep their status, the company
functions in the best possible way.
Below attached is the memorandum of association provided by SECP, in evidence for the
above statement facts.
MOA
FERTILIZER
THE COMPANIES ACT, 2017 (XIX of 2017)
(COMPANY LIMITED BY SHARES)
MEMORANDUM
OF
ASSOCIATION
OF
……… Limited/(Private) Limited/(SMC-Private)

Limited
______________________________________________________________
(PLEASE ENTER NAME OF THE COMPANY)
THE COMPANIES ACT, 2017 (XIX of 2017)
(COMPANY LIMITED BY SHARES)
MEMORANDUM OF ASSOCIATION
OF
“_________________________________Limited/(Private) Limited/(SMC-Private) Limited” (Delete
whichever is not applicable).
1. The name of the company is ____________ Limited/(Private) Limited/(SMC-Private) Limited

(Delete whichever is not applicable).
2. The registered office of the Company will be situated in Islamabad Capital Territory / Gilgit-
Baltistan / in the Province of Punjab / Balochistan / Sindh / Khyber Pakhtunkhwa. (Delete
whichever is not applicable)
3. (i) The principal line of business of the company shall be to carry on the business of
manufacturers and distributors of manures and fertilizers, phosphates (give full details of
the varieties of the manures and fertilizers proposed to be manufactured), dips, fats, sprays,
vermifuges, fungicides, insecticides, herbicides, vedicides, liquid fertilzers, pest-
medicines, fine chemicals, and all kinds of agricultural, fruit-growing and other chemical,
whether produced from vegetable or animal matter or by any chemical process and all other
by-products (give full details) which can be needed, devised, invented, utilized and
produced with any other material, substances or goods for agricultural purposes.
(ii) Except for the businesses mentioned in sub-clause (iii) hereunder, the company may
engage in all the lawful businesses and shall be authorized to take all necessary steps and
actions in connection therewith and ancillary thereto.
(iii) Notwithstanding anything contained in the foregoing sub-clauses of this clause nothing
contained herein shall be construed as empowering the Company to undertake or indulge,
directly or indirectly in the business of a Banking Company, Non-banking Finance
Company (Mutual Fund, Leasing, Investment Company, Investment Advisor, Real Estate
Investment Trust management company, Housing Finance Company, Venture Capital
Company, Discounting Services, Microfinance or Microcredit business), Insurance
Business, Modaraba management company, Stock Brokerage business, forex, managing
agency, business of providing the services of security guards or any other business
restricted under any law for the time being in force or as may be specified by the
Commission.
(iv) It is hereby undertaken that the company shall not:
(a) engage in any of the business mentioned in sub-clause (iii) above or any unlawful
operation;
(b) launch multi-level marketing (MLM), Pyramid and Ponzi Schemes, or other
related activities/businesses or any lottery business;
(c) engage in any of the permissible business unless the requisite approval, permission,
consent or licence is obtained from competent authority as may be required under
any law for the time being in force.
4. The liability of the members is limited.
5. The authorized capital of the company is Rs___________ (Rupees ___________ only) divided into
____________ (__________ thousand) ordinary shares of Rs.___/- (Rupees __ only) each.
We, the several persons whose names and addresses are subscribed below, are desirous of being formed
into a company, in pursuance of this memorandum of association, and we respectively agree to take the
number of shares in the capital of the company as set opposite our respective names:
Name and NIC No. Father's/ Nationality Usual Number of

surname (in case of Husband's (ies) with residential addr shares taken
(present & foreigner, Name in any former ess in full or the by each
Occupation
Signatures
former) in Passport full Nationality registered/ subscriber (in
full (in No) principal office figures and
Block address for a words)
Letters) subscriber other
than natural
person
Total number of shares taken (in figures and words)
Dated the____________ day of_________________, 20___
Witness to above signatures: (For the documents submitted in physical form)
Signature
Full Name (in Block Letters)
Father’s/ Husband’s name
Nationality
Occupation
NIC No.
Usual residential address
(Applicable in case of single member company)
I, whose name and address is subscribed below, am desirous of forming a company in pursuance of this
memorandum of association and agree to take the number of shares in the capital of the company as set
opposite my name:
Name NIC No. Father's/ Nationality Usual Number of shares

and (in case of Husband's (ies) with residential taken by the
surname foreigner, Name in any former address subscriber (in
(present Passport full Nationality in full or figures and
& No) the words)
Occupation
former) registered/
Signature
in full (in principal
Block office
Letters) address
for a
subscriber
other than
natural
person
Dated the____________ day of_________________, 20______
Witness to above signatures: (For the documents submitted in physical form)
Signature
Full Name (in Block Letters)
Father’s/ Husband’s name
Nationality
Occupation
NIC No.
Usual residential address

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NUST Business School

FIN-327 Ethics Risk & Corporate Governance

204 205 206

Consolidated Financial Statements

280 281 284 286 287 288 289

(h) the person is involved in illegal deposit taking; or

(l) the person is convicted of insider trading or market manipulation practices; or

(o) that it is expedient in the public interest so to do.

CHAPTER III Responsibilities of Board of Directors and its members

(3) The board of directors of a company shall ensure that:

Chapter 3- BOARD OF DIRECTORS OF THE COMPANY

Subsection 4- Operations of the Board of Directors

Compliance with Companies Act 2017 & Code of Corporate Governance

Compliance with Companies Act 2017

It is stated in the Companies Act 2017 that:

Section 227. Contents of directors’ report and statement of compliance

It is also a content in Memorandum of Association made essential by companies act 2017.

(b) is of unsound mind;

(c) has applied to be adjudicated as an insolvent and his application is pending;

(d) is an undischarged insolvent;

Section 155. Number of directorships.

CHAPTER II Number of Directorship and Composition of Board

Total number of Directors:

(i) Independent Directors

(ii) Other Nonexecutive Directors

(iii) Executive Directors

disclosed in each Directors’ Report of the company.

The management committee of FFC comprises of:

Chapter 3- BOARD OF DIRECTORS OF THE COMPANY

Subsection 4- Operations of the Board of Directors

Customers & Suppliers

Banks & Other Lenders

Local Community & General Public

The Companies Act 2017 states that:

Section 216: A Company deemed to be a public interest company in certain circumstances.

(1) Notwithstanding anything contained in this Act, a company shall be deemed to be a

CHAPTER III - Responsibilities of Board of Directors and its members

-e) communication policy and investors’/shareholders’ relations.

Notice of Annual General Meeting:

Annual general meeting

(4) Nothing in this section shall apply to a single member company.

Case of Extra-Ordinary AGM:

(3) The board shall, at the requisition made by the members-

The chairman’s letter will provide an analysis of

Section 192. Chairman in a listed company.-

Compliance with Code of Corporate Governance

• Adoption of framework for UN Global Compact

▪ description of capital it manages

• quantitative data about what the entity regards as capital

• changes from one period to another

• if it has not complied, the consequences of such non-compliance.

• statement of financial position*

• statement of profit or loss and other comprehensive income

• separate statements of profit or loss (where presented)

• statement of cash flows

• statement of changes in equity

• related notes for each of the above items.

* A third statement of financial position is required to be presented if the entity retrospectively

committees of the board;

operating divisions or business segments;

(vi) internal audit reports, including cases of fraud, bribery, corruption, or

irregularities of material nature;

(vii) management letter issued by the external auditors;

(viii) details of joint venture or collaboration agreements or agreements with

Dated the day of___, 20_

Dated the__ day of_, 20