Galfar Engineering & Contracting SAOG (under transformation) PROSPECTUS

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2 Galfar Engineering & Contracting SAOG (under transformation) Postal Address : P.O.Box 533, P.C: 113, Ruwi, Sultanate of Oman Ghala Industrial Area, Al Omaran Street, Building # 760, Way # 5222 Tel: Fax: PROSPECTUS Initial Public Offering of 100,000,000 Ordinary Shares Offer price: RO per share (comprising nominal value of Baisas 100, premium of Baisas 500 and Issue Expenses of Baisas 2 per share) Financial Advisor Gulf International Bank B.S.C. Al-Dowali Building, P.O.Box 1017, Manama, Bahrain Tel: Fax: Issue Manager Oman Arab Bank SAOC Investment Management Group P.O. Box 2010, Postal Code: 112, Sultanate of Oman Tel: Fax: Lead Issue Manager The Financial Corporation Co. SAOG P.O. Box 782, Postal Code:131, Sultanate of Oman Tel: Fax: Underwriters BankMuscat SAOG National Bank of Oman SAOG Oman Arab Bank SAOC The Financial Corporation Co. SAOG Collecting Banks BankMuscat SAOG Oman Arab Bank SAOC National Bank Of Oman SAOG Bank Dhofar SAOG OFFERING PERIOD Opening Date : 12 th August 2007 Closing Date : 10 th September 2007 The Capital Market Authority (CMA) assumes no responsibility for the accuracy and adequacy of the statements and information contained in this Prospectus nor shall it have any liability for any damage or loss resulting from the reliance upon or use of any part of the same by any person. This Prospectus has been prepared in accordance with the requirements as prescribed by the CMA. This is an unofficial English translation of the original Prospectus prepared in Arabic and approved by the CMA in accordance with the Administrative Decision no. E24/2007 dated 31st July 2007.

3 Important Notice to Investors The aim of this Prospectus is to present material information that may assist investors to make an appropriate decision as to whether or not to invest in the securities offered. This Prospectus contains all material information and data and does not contain any misleading information or omit any material information that would have positive or negative impact on the decision of whether or not to invest in the offered securities. The Promoters/Selling shareholders of the issuer entity are jointly and severally responsible for the integrity and adequacy of the information contained and confirm that to their knowledge that due diligence had been observed in the preparation of this Prospectus and further confirm no material information has been omitted, the omission of which would render this Prospectus misleading. All investors should examine and carefully review this Prospectus in order to decide whether it would be appropriate to invest in the securities offered by taking into consideration all the information contained in this Prospectus in the context. Investors should not consider this Prospectus a recommendation by the issuer entity of the offered securities to buy the offered securities. Every investor shall bear the responsibility of obtaining independent professional advice on the investment in the offered securities and conduct independent valuation of the information and assumption contained herein using whatsoever analysis or projections he/she sees fit as to whether or not to invest in the securities offered. It is noteworthy that no person has been authorized to make any statements or provide information on the company or the offered securities other than the persons whose names are indicated herein. Where any person makes any statement or provide information it should not be taken as authorized by the issuer entity or the issue manager. ADDITIONAL POINTS TO BE NOTED This Prospectus includes relevant information that is deemed important and does not include any misleading information nor exclude any principal information, the omission of which may materially influence any investor s decision pertaining to the investment in Shares through this Prospectus. All summaries of documents or provisions of documents provided in this Prospectus should not be relied upon as being comprehensive statements in respect of such documents and are only to be seen as being a brief summary of such documents. All equity investments carry market risks to varying degrees. The value of any security can fall as well as rise depending on the market conditions. FORWARD-LOOKING STATEMENTS This Prospectus contains forward-looking statements, including realistic statements about Galfar s beliefs and expectations. These statements are based on Galfar s current plans, estimates and achievable projections as well as its expectations of external conditions and events. Forward-looking statements involve inherent risks and uncertainties and speak only as at the date they are made. Galfar cautions investors that a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements. These factors include, but are not limited to, the following: the level of demand for Galfar s services the actions of Galfar s competitors regulatory, legal and fiscal developments the success of Galfar s investments and capital expenditure programs the performance of the Omani economy and the other factors described under "Risk Factors and Mitigants" 2

4 Table of Contents IMPORTANT NOTICE...2 CHAPTER 1 General Information of Issue and Issuer...4 CHAPTER 2 Share Split and its Effect...8 CHAPTER 3 Issue Expenses...10 CHAPTER 4 Underwriting Arrangements...11 CHAPTER 5 Objective of the Issue and Utilisation of proceeds...12 CHAPTER 6 Objectives and Approvals...13 CHAPTER 7 Shareholding details...17 CHAPTER 8 The Economy...24 CHAPTER 9 Description of the company and business overview...27 CHAPTER 10 Unaudited Financial Statements for the Period ended 31st May CHAPTER 11 Summary Financials CHAPTER 12 Summary of the Projected Financials CHAPTER 13 Dividend Policy CHAPTER 14 Valuation and Price justification CHAPTER 15 Related party Transactions CHAPTER 16 Risk factors and Mitigants CHAPTER 17 Corporate Governance CHAPTER 18 Rights and liabilities of Shareholders CHAPTER 19 Subscription Procedures and Conditions CHAPTER 20 Undertakings

5 Chapter 1 General Information of Issue and Issuer Name of the Issuing Body: Commercial Registration No: Galfar Engineering & Contracting SAOG (Under Transformation) dated 29/5/2007 issued by the Ministry of Commerce & Industry Principal place of business Ghala Industrial Area, Al Omaran Street, Building # 760, Way # 5222 Postal Address: Post Box 533, Muscat, Postal Code 113, Sultanate of Oman. Company s duration: Financial Year: Ordinary Shares: Preferential Voting Rights Share (PVRS): Unlimited Financial year shall commence on 1st January and end on 31st December of each year Equity Shares carrying the right to one vote at the Constitutive General Meeting, any General Meeting including any Extraordinary General Meeting and otherwise ranking pari-passu with Shares with Preferential Voting Rights in all aspects including the dividend receipt. Means Equity Shares carrying the Right to two votes at the Constitutive General Meeting, any General Meeting of shareholders including any Extraordinary General Meeting and, otherwise ranking pari-passu with Ordinary Shares in all aspects including the dividend receipt. Authorised Share Capital of the The Authorised share capital of the Company shall be RO. 50,000,000, Company: divided into 500,000,000 shares with a face value of 100 Baisas each consisting of two classes of shares as follows: (i) (ii) Ordinary Shares: 350,000,000 shares (representing 70% of the Authorised Capital) Preferential Voting Rights Shares: 150,000,000 shares (representing 30% of the Authorised Capital) Issued and Paid up Share Capital of the Company (Post IPO): The Issued and Paid up share capital of the company shall be RO. 25,000,000, divided into 250,000,000 shares with a face value of 100 Baisas. Each consisting of two classes of shares as follows: i) Ordinary Shares: 175,000,000 shares (representing 70% of the Issued and Paid up Capital). (ii) Preferential Voting Rights Shares: 75,000,000 shares (representing 30% of the Issued and Paid up Capital) Nominal Value of the Shares: Baisas 100 per Share Share Capital of the Company RO 21,000,000 (Omani Rial Twenty One Million) divided into 210,000,000 prior to IPO: (Two hundred Ten Million) Ordinary Shares at a nominal value of Baisas 100 per Share Total Number of Shares offered for Subscription: 100,000,000 Ordinary Shares at an Offer price of Baisas 600 per Share (plus Issue Expenses of Baisas 2 per Share) aggregating to RO 60,200,000 (Omani Rial Sixty Million Two Hundred Thousand). The Offer comprises of two components: 1. Issue of 40,000,000 New Ordinary Shares by the Company representing an increase in Capital each with a nominal value of Baisas 100 and an Offer price of Baisas 600 (plus Issue Expenses of Baisas 2 per Share) 4

6 2. Offer for Sale of 60,000,000 existing Ordinary Shares by the Selling Shareholders of the Company each with a nominal value of Baisas 100 and an Offer price of Baisas 600 (plus Issue Expenses of Baisas 2 per Share) Promoters/Selling Shareholders: The current partners/shareholders of the Company prior to the IPO. Current Shareholders who are offering a portion of their Shares through an Offer for Sale under this Prospectus to the extent of 60,000,000 Shares out of their combined holding of 210,000,000 Shares. Details of the number of Shares being offered by the Current Shareholders are set out in the Chapter 6 on Objectives and Approvals Shares held by the Promoters 150 million Shares consisting of 75 million Ordinary shares and 75 million after the IPO: Preferential Voting Rights Shares of 100 Baisas nominal value of each Share. (Details of the individual holdings are set out in the Chapter 7) Subscription Price of the Shares: Baisas 602 per Share consisting of Baisas 100 nominal value, Baisas 500 share premium and Baisas 2 towards Issue Expenses Ratio of Offered Shares (100 million Shares) to post IPO issued and paid up Share Capital (250 million Shares) : Purpose for which the proceeds of the Subscription would be utilized: 40% of the Issued Share Capital of the Company Proceeds from the New Issue of Ordinary Shares Issue proceeds under this category aggregating to RO 24 Million will accrue to the Company, and would be utilized by the Company for financing the ongoing capital expenditure and for meeting its long term working capital requirements Proceeds from the shares sold by the Promoters/Selling Shareholders Issue proceeds under this category aggregating to RO 36 Million would accrue to the Selling Shareholders only and not to the Company. The amount of RO 200,000 being collected towards part of the Issue Expenses from the total issue will accrue to the Company. Persons qualified to subscribe for the Shares Offered: Persons Prohibited from subscribing to the Shares Offered Permissible Level of Non-Omani Shareholding after Listing: Subscription shall be open to Omani, Non Omani Individuals and Corporate bodies/institutions/investment Funds/Pension Funds. Sole Proprietorship Establishments/Trust Accounts/Multiple Applications/Applications under joint names are prohibited to subscribe for the Shares applied. Once the Shares are listed for trading on Muscat Securities Market, it would be permissible for non-omanis to own up to 70% of the Share Capital of the Company in accordance with the Memorandum & Articles of Association of the Company. Commencement Date of the 12th August 2007 Subscription: Closing Date of the 10th September 2007 Subscription: 5

7 Listing: The Shares would be listed for trading on the Muscat Securities Market Minimum Limit for the Individuals : 1,000 (One Thousand) Shares and in multiples of Subscription under 100 thereafter One Application: Non-Individuals : 10,100 (Ten Thousand One Hundred) Shares and in multiples of 100 thereafter Maximum Limit for the Individuals and 10% of the total Issue size which works out to Subscription under One Non-Individuals : 10,000,000 (Ten Million) Shares Application: Proposed Allocation Procedure: In case of over-subscription the Offering of 100,000,000 Ordinary Shares shall be split among the eligible investor groups, in the following portions: Category I: 60 million Ordinary Shares, being 60% of the Offering, for Individual applicants applying for a maximum of 10,000 (Ten thousand) Shares. Distribution of shares shall be on pro-rata basis. Category II: 40 million Ordinary Shares, being 40% of the Offering, for Individual applicants applying for more than 10,000 shares and for Corporate bodies/ Institutions/ Investment Funds. Distribution of shares shall be on pro-rata basis. Any under subscription in any Category shall be carried to the other Category. Allotment for Non-Omani will be limited to a maximum of 40% of the total Shares offered. Non-Omani Individual is defined as an Individual applicant who is not an Omani National and a Non Omani Corporate Body/ Institution/ Investment Fund is defined as one which is not incorporated in the Sultanate of Oman. The final allocation on the above basis will be decided by the Lead Issue Manager and the Company in consultation with the CMA. Basis for Undersubscribed In case of shortfall in subscription Shares: i) shortfall to be adjusted against the 60 million Shares offered by the selling shareholders ii) remaining shortfall, if any, to be subscribed by the Underwriters as per Chapter 4 of the Prospectus Underwriting Arrangements: Financial Advisor: The issue of 40 million New Ordinary Shares aggregating issue amount of RO 24 million is underwritten by BankMuscat SAOG, National Bank of Oman SAOG, Oman Arab Bank SAOC and The Financial Corporation Co. SAOG Gulf International Bank B.S.C. Investment Banking, P.O. Box 1017, 3 Palace Avenue, Manama Kingdom of Bahrain Tel: Fax:

8 Lead Issue Manager: Issue Manager: The Financial Corporation Co. SAOG (FINCORP) P.O. Box 782, Al Hamriya. P.C Sultanate of Oman Tel: Fax: Oman Arab Bank SAOC Investment Management Group P.O. Box 2010, PC 112, Ruwi Sultanate of Oman Tel: Fax: Reporting Accountants Ernst and Young (E&Y) (who have reviewed the P.O. Box 1750 Ruwi Postal Code 112 Historical and Projected Sultanate of Oman Financials): Tel: Fax: Statutory Auditors Deloitte & Touche (M.E.) (for years 2004 to 2006): P.O. Box 258. Ruwi, Postal Code 112 Sultanate of Oman Tel: Fax: Legal Advisor For IPO: In House Legal Counsel Collecting Banks: Hassan Al Ansari Legal Consultancy Al Safa House, PO Box 331, Ruwi 112 Sultanate of Oman Tel: Fax: Mr. Abdelbagi Dafalla Abdul Rauf P.O.Box 533, Postal Code 113, Sultanate of Oman Tel: Fax: BankMuscat SAOG Oman Arab Bank SAOC National Bank Of Oman SAOG Bank Dhofar SAOG. 7

9 Chapter 2 Share Split And Its Effect Introduction The Company has split the nominal value of the shares from RO to Baisas 100 resulting in splitting each share into ten shares. This chapter elaborates on the effect of this decision. It is recommended that each subscriber read and understand it. Definition of Share split Share split refers to the intention of a Company to split its existing shares to number of shares by reducing the nominal value of the share and increasing the number of shares without any effect on the total value of the Company s paid up Capital, or the total market capitalization of the shares owned in the Company, even if the total of the number of shares will increase as a result of this division. Objectives of Share split The Company is of the view that share split will achieve the following goals: Reduce the nominal value of the share making it affordable for a larger number of retail investors. Increase liquidity by multiplying the number of shares available for trading; and Facilitate a larger participation by the small/individual shareholders Impact of share split The decision of share split will not have any impact on the shareholding or the extent of each shareholders liabilities in the Company. The only direct impact is an increase in the number of shares. The Company considers that the benefits gained from the share split such as increase in liquidity and the shares that will be available for trading for all investors and participants in the Muscat Securities Market, will be in the best interests of the public. The following table presents the impact of share split for the Company according to the financial statement for the year ended 31 st December, 2006: Before Split After Split Nominal value per Share RO 1 Baisas 100 Number of issued capital shares 20,000,000 shares 200,000,000 shares Paid up capital RO 20,000,000 RO 20,000,000 Shareholders Equity RO 30,072,000 RO 30,072,000 Book Value per share RO RO Net Annual profit RO 16,512,000 RO 16,512,000 Earning per share RO RO Effect of share split The decision to split shares does not have any impact on the total market capitalization of the shares. In fact, share split is dividing the nominal value of the share in the same percentage. 8

10 The following is an explanation: Assume, - number of shares before split: 100 shares - share price in MSM on the date of the general meeting: RO Therefore after dividing one share into 10 shares, the result will be as follows: Before Split After Split Number of shares 100 shares 1000 shares Share price RO RO Total nominal shares value RO 602 RO 602 Share split effects on dividend: The decision of share split will not affect the Company s policy regarding dividend distribution or dividend ratio. The dividend distribution system in the Sultanate of Oman is based upon accounting dividend as a percentage of nominal paid up value per share. Thus the nominal paid up value per share will be Baisas 100 after split and not RO 1.000; e.g. if the Company declared previously (before share split) dividend distribution of Baisas 100 per share (10% of nominal value before split), and presumably the Company decided to maintain this policy, this dividend will be after share split Baisas 10 per share (10% of the nominal value after split). For instance, if the shareholder holds 100 shares before share split, dividend distribution will be as follows: Before share split After share split Number of holding shares 100 shares 1000 shares Nominal value of the share RO Baisas 100 Dividend per share Baisas 350 Baisas 35 Dividend ratio to nominal value 35% 35% Total distributed dividend RO 35 RO 35 9

11 Chapter 3 Issue Expenses The costs of the Issue are estimated at RO 970,000 (Rial Omani Nine hundred seventy thousand) only, which equates to approximately 1.61% of the total proceeds of the Offering. The breakdown of the estimated expenses is contained in the table below: Estimated Cost and Expenses Amount (RO) Advisors 294,500 Issue Managers 75,000 Collecting Banks 350,000 Underwriting fees 60,000 CMA & MDSRC Fees 52,500 Legal Advisor 6,500 Reporting Accountant 5,500 Marketing, advertising and publicity 80,000 Mailing and postage 7,000 Other expenses and contingencies 39,000 Total Issue Expenditure 970,000 Issue Expenses 2 Baisas per share 200,000 Difference between estimated expenses & the collection of issue expenses 770,000 The costs of the Issue will be partially met out of additional subscription amount of Baisas 2 per Share paid by the applicants towards Share Issue Expenses. The actual costs of the Issue less Issue expenses collected, estimated at RO 770,000, will be charged to the Shareholders Equity of the Company. 10

12 Chapter 4 Underwriting Arrangements In case of shortfall in subscription: i) shortfall to be adjusted against the 60 million Shares being offered by the selling shareholders ii) remaining shortfall, if any, to be subscribed by the Underwriters as set out in this chapter The Issue of New Ordinary Shares, being 40 million equity shares of nominal value 100 Baisas each, is underwritten as under: Underwriter Amount Underwritten Number of 600 Baisas per share shares underwritten (Million Rial Omani) BankMuscat SAOG 16,666, National Bank of Oman SAOG 15,000,000 9 Oman Arab Bank SAOC 5,000,000 3 The Financial Corporation Co. SAOG 3,333,333 2 Total 40,000, The Company has entered into underwriting arrangements with the above entities. The underwriting fee is estimated at RO 60,000. In the event of any devolvement, the underwriters will subscribe to the extent of the shortfall as stated above, at a price of Baisas 600 per share and the Company shall not claim the issue expense of Baisas 2 per share, from the underwriters on such devolved shares. 11

13 Chapter 5 Objectives Of The Issue And Utilisation Of Proceeds Objectives of the Issue: Raising capital to fund the Company s capital investment programme, and meet long-term working capital requirements. Listing the Company s Shares on the MSM. Partial divestment of Shares by the Selling Shareholders Utilization of the proceeds of the Issue 1. Of the aggregate proceeds from the Offering, an amount of RO 36 Million in consideration for 60,000,000 Shares will be distributed to the Selling Shareholders through this Offering, which is at an Offer Price of RO (Baisas Six hundred) per share excluding Issue expenses. 2. The Baisas 2 per share collected towards Issue Expenses will cover a portion of the expenses incurred by the Company in relation to the IPO. 3. The Company will receive the proceeds amounting to RO 24 Million relating to Issue of New Shares, which will be utilized for the purpose of financing its ongoing capital expenditure and additional working capital requirements. The target timetable of the Company for the use of the Issue proceeds is as follows: Nature of Use Amount RO TIme frame for utilization Capital expenditure 20,000, /2008 Working capital 4,000, Total 24,000,000 12

14 Chapter 6 Objectives And Approvals Overview Galfar was registered in 1975 and subsequently was incorporated in 1986 as a limited liability company ( LLC ). Galfar is currently undergoing the due process of transformation into an open joint stock company ( SAOG ) organized under the laws of the Sultanate of Oman. The Company holds the following material permits and licences: Ministry of Commerce and Industry : Commercial Registration Commercial Registration Number : Headquarters : Muscat Governorate/ Bowshar/ Ghala Postal Address : P.O.Box 533, P.C: 113, Ruwi, Sultanate of Oman Telephone : Fax : galfar@omantel.net.om Date of Registration : 24 th August 1975 The Company is registered with the Oman Chamber of Commerce and Industry (Registration No. 317) as an Excellent Grade contractor. The Company is also registered with the Tender Board, Sultanate of Oman and the Ministry of Defence, Sultanate of Oman as an Excellent Grade contractor. The Company is also approved by the Petroleum Development Oman (PDO) as a service vendor for various categories of services and by the Oman Refinery Company LLC as an approved vendor. Galfar is a member of the Oman Society for Petroleum Services (OPAL) who has certified the Company for health, safety and environment (HSE) management and for minimum employment standards. The Company holds the following certifications: ISO 9001: 2000 certification for project management, design & engineering, procurement, fabrication, construction, and installation relating to oil & gas sector, roads & highways, process plants, pipelines, etc. ISO 14001: 2004 for environment management system; and OHSAS 18001: 1999 for occupational health safety & assessment. Company Objectives As per the Memorandum and Articles of Association of the Company, the main objectives of the Company are as under: 1- To work in the field of Engineering and Contracting, as Engineers and/or Main or Sub-contractors, to carry out all Engineering works in their different kinds and specializations of civil, mechanical, electrical and electronic engineering, including execution of works on Turnkey basis. 2- To carry out in particular, works of designing, drawing, excavating, filling-up, demolishing, exploding, dismantling, removing, building, constructing, installing, erecting, connecting, commissioning and maintenance of all kinds of Engineering works, which includes without limitation: a) Civil Works to Projects of: Oil and gas, petrochemical, roads and high ways, bridges, flyovers, planes run ways, harbours, jetties, Corniche, dams and dyke, stadiums, educational premises, hospitals, commercial and/or housing complexes, prisons, mosques, public utilities and all other buildings and infrastructure projects. 13

15 b) Installation and Erection Works of: pipelines, turbines, power systems, insulation materials, refractory lining and corrosion resistant lining, steel structures, workshops and factories, equipments, storage facilities, depots and petrol service stations. c) Electro-Mechanical and Cooling Works of: commercial and residential complexes, factories, cold stores, high and low tension lines, sub stations, cablings, building management and monitoring systems, fire alarm and smoke detection. d) Water and Environment Hygiene Projects of: supply of water, desalination plants, sanitation and sewage system, water treatment plants, and solid waste management system. 3- To carry out in connection with its objects, the business of processing and manufacturing of ready-mix mortar, crusher, asphalt, blocks, interlock, tiles of its all kind and shape, various carpentry and metal products such as doors, windows, fences, grills and others, whether for the Company s usage or for marketing purposes. 4- To carry out the business of heavy carriage and transportation of machineries, equipment and materials whether for the Company s usage or for interest of other parties against charges. 5- To carry out the business of imports, exports, purchasing, selling, hiring of plants, machineries, equipment, building materials and others that related to its objects. 6- To conduct the business of general trading and to carry out in accordance with the Commercial Agencies Law, the business of agencies and commercial representation to international companies, corporations and manufacturers, and to give agencies and commercial representations to others to represent the Company locally and abroad. Resolutions Passed The Company has passed the following resolutions in its meeting of the shareholders held on 31 st May Approved that the proposal for conversion of the Company from Limited Liability Company (LLC) to Stock Associate Omani General (SAOG) as per provisions of the Commercial Companies Law 4/ Approved that the new authorized share capital of the Company would be RO 50 million and the current paid-up share capital to be raised from RO 21 million to RO 25 million after transformation is divided into 250 million shares: out of which 175 million are Ordinary Shares of face value Baisas100 each and 75 million are Preferential Voting Rights Shares of face value Baisas100 each. The preferential voting rights shares will represent 30% of the issued and paid-up share capital of the company. It is further approved that the transformation would be part of the process of selling/issuing the shares of the Company to the public through an Initial Public Offering IPO for a number of 100 million Ordinary Shares. The IPO will comprise of two (2) components:- i) Offer for sale of 60 million Ordinary Shares of face value Baisas 100 each and issue price of Baisas 602 per share to the public by the existing shareholders (Promoters). ii) Fresh issue of 40 million new Ordinary Shares by the Company, to the public of face value Baisas 100 each and issue price of Baisas 602 per share Further resolved that, post IPO, the current shareholders (promoters) will hold 60% of the issued share capital of the company and the public will hold the remaining 40%. 14

16 Further it was resolved according to Para 2 i), that the consent of the current Shareholders in the Company, to offer a portion of their ordinary shares to the public as part of the IPO is hereby approved. The number of shares to be offered by each of the promoter shareholders is as shown hereunder. Sl. No. Shareholder s Name Number of shares held of face value 100 Baisas each Number of ordinary shares of face value 100 Baisas each to be offered by the promoters for sale to Public as part of IPO 1 Said bin Said Hamed Al Fannah Al Araimi 63,000,000 18,000,000 2 P. Mohamed Ali 35,833,330 10,833,330 3 Al Siraj Investment & Project LLC 43,750,000 12,500,000 4 Aimaar United Investment & Project LLC 42,000,000 12,000,000 5 PMA International Ltd. (BVI Company) 16,666,670 4,166,670 6 Qhassya Projects & Investment LLC 8,750,000 2,500,000 Total 210,000,000 60,000,000 Further it was resolved that the said initial public offering shall be in compliance with statutory and regulatory requirements and approvals. Further resolved and approved to form a constitutive committee consisting of three Promoters (i) Sheikh. Salim Said Al Fannah Al Araimi - Chairman (ii) Dr. P. Mohamed Ali - member (iii) Al Siraj Investment & Projects LLC represented by Miss Budoor Mohamed Rashid Al Araimi - Member and authorizing the Commitee to: a) Finalize the terms and conditions of the Issue (including timing and pricing) as well as all other relevant issues. b) Take necessary decisions to enable the Company to finalize the IPO and its offer document and approve same on behalf of the Company and the promoter shareholders. c) Do all other acts and give any approvals on behalf of the Company and the Promoter Shareholders which may be deemed necessary in connection with the IPO, including change in the legal shape of the Company into a Joint Stock Company, listing its shares at MSM and authorized in general to have assistance of concerned persons in the Company as steering crew. 3. Resolved Unanimously, that the draft of the Memorandum & Articles of Association of the Company as amended per requirements of the Commercial Companies Law No.4/74 and its subsequent amendments pertaining to SAOGs is hereby approved to be sanctioned by the competent authorities. 4. Resolved Unanimously, that Gulf International Bank (GIB), the Financial Corporation Co. SAOG (FINCORP),), and Oman Arab Bank (OAB) or their representatives are hereby authorized to complete the due diligence and all legal, financial and accounting matters pertaining to conversion and transformation of Galfar from LLC to SAOG company and preparation of IPO documents as required by the concerned official bodies. 15

17 Further Resolved that M/s Ernst & Young, be appointed as the reporting Accountants for the IPO and M/s. Hassan Al Ansari Legal Consultancy, be appointed as the legal Advisor for the IPO. ARRANGEMENT BETWEEN THE COMPANY AND THE PROMOTERS The following are the Minutes approved by the then Members of Galfar Engineering & Contacting LLC at the Promoters Assembly Meeting held on 29 th March 2007 : Agenda: 1. To consider the desire of the Promoters to protect the integrity and value of the name Galfar and all trademark and commercial indications upon changing status of the Company to an Omani Joint Stock Public Company. After due consideration and discussion on the subject of Agenda, the existing Promoters, i.e. Salim Said Hamed Al Fannah Al Araimi, P. Mohamed Ali and Heirs of Late Mr. Mohamed Rashid Abdullah Al Fannah Al Araimi, unanimously resolved the following : 1. Hereby record that the overall goodwill of the Company including its trade name and trademarks and commercial indications, has been largely developed by the existing Promoters, and under their stewardship. 2. Hereby note that the trade name and trademarks relating to the name Galfar have over the years been used and continue to be used by several non-omani entities in which the existing Promoters or some of them, have a shareholding along with local partners in Qatar, UAE, Brunei and India. Hereinafter termed existing entities or interests. 3. Resolved to maintain the status quo regarding the use of the name and mark Galfar as it is. 4. The existing Promoters irrevocably agree that the Joint Public Stock Company named Galfar Engineering & Contracting SAOG ( the Company ) to exercise its right in perpetuity, to continue and maintain its trade name Galfar, and use all trademarks and commercial indications related to such name and the Company s commercial purposes as an exclusive right in the Sultanate of Oman. Further, the Company may operate subsidiaries bearing the name Galfar including joint ventures in any jurisdiction except where the Promoters have existing entities or interests. In this regard, it may be noted that the Company s business operations are located in Oman and its entire revenue is generated from the Omani market. Further, the financial projections contained in this Prospectus (and the corresponding equity valuation) have been prepared on the assumption that the Company s business will be generated only in Oman. It may be noted from the above resolution that the Promoters of the Company have incorporated other businesses in countries outside Oman, specifically in Brunei, United Arab Emirates, India and Qatar, that share the same name ( Galfar ) and are in similar lines of business. All these companies (including this Company) are envisaged to operate independent of each other in their respective markets and continue sharing the Galfar name. 16

18 Chapter 7 Shareholding Details Promoters and Selling Shareholders of the Company (before transformation) Sl. No. Promoters/Selling Shareholders Number of shares of face value RO 1/- one Rial each. held in Galfar LLC Company Nationality Nature of shareholding Shareholding % in the Share Capital Number of shares equivalent to the face value of Baisas 100 for each share held pre -offer 1. Salim bin Said Hamed Al Fannah Al Araimi Omani Individual 6,300, % 63,000, Parambathekandi Mohamed Ali Indian Individual 3,583, % 35,833, Al Siraj Investment & Project LLC Omani Company Corporate 4,375, % 43,750, Aimmar United Investment & Projects LLC Omani Company Corporate 4,200, % 42,000, PMA International Ltd. BVI Company Corporate 1,666, % 16,666, Qhassya Projects & Investment LLC Omani Company Corporate 875, % 8,750,000 Total 21,000, % 210,000,000 During the current financial year, the share capital of the Company was increased from RO 20 million as at 31 December 2006 to RO 21 million through an issue of additional Shares of RO 1 million to the Promoters/Selling Shareholders for cash at par. 17

19 Post Offer Equity Structure The Public shareholding and the minimum Promoters /Current shareholders shareholding after the IPO is envisaged as under: Sl 1. Promoter/Selling Shareholder and Public Salim bin Said Hamed Al Fannah Al Araimi Nationality Omani No. of Paid Shares Preferential Ordinary Voting Shares 45,000,000 22,500,000 22,500,000 Nominal Ratio to Value by Capital RO 4,500, % 2. Parambathekandi Mohamed Ali Indian 25,000,000 12,500,000 12,500,000 2,500, % 3. Al Siraj Investment & Project LLC Omani Company 31,250,000 15,625,000 15,625,000 3,125, % 4. Aimmar United Investment & Projects LLC Omani Company 30,000,000 15,000,000 15,000,000 3,000, % 5. PMA International Ltd. BVI Company 12,500,000 6,250,000 6,250,000 1,250, % 6. Qhassya Projects & Investment LLC Omani Company 6,250,000 3,125,000 3,125, , % Sub-Total 150,000,000 75,000,000 75,000,000 15,000, % 7. Public ,000, ,000, ,000,000 40% Promoters Voting Rights Pursuant to the IPO and conversion into a General Joint Stock Omani Company, the issued and paid-up share capital of the Company will be RO 25,000,000 (Rial Omani Twenty Five millions) divided into 250,000,000 (Two Hundred Fifty millions) Shares with a nominal value of Baisas One Hundred each, of which 175,000,000 (One Hundred Seventy Five millions) Shares are Ordinary Shares and 75,000,000 (Seventy-Five millions) Shares are Preferential Voting Rights Shares (PVRS). The Promoters and Selling Shareholders will hold 75,000,000 Ordinary Shares and 75,000,000 Preferential Voting Rights Shares. As per the Articles of Association of the Company, the PVRS carry two votes at all General Meeting and otherwise ranking pari-passu with Ordinary Shares in all rights including the dividend receipt. Therefore, the Promoters and the Selling Shareholders will effectively have 69.23% of the voting rights. 18

20 Brief profile of the key Promoters: Dr. Salim Said Hamed Al Fannah Al Araimi Sheikh Salim born in Sur, Oman in 1940 belongs to the distinguished Al Fannah Al Araimi family. He is an astute businessman with an impeccable reputation within business community in the Sultanate of Oman. Furthermore, Sheikh Salim is widely respected for his entrepreneurial skills. Sheikh Salim is the Chairman of Galfar and over the years has been involved in a number of prestigious projects in the Sultanate of Oman as a promoter and founder. In addition to Galfar, the following are the companies in Middle East where Sheikh Salim is involved either as a promoter or a board director : National Drilling & Services LLC United Gulf Energy Resources SAOC Al Dastoor Contracting & Trading LLC Al Khalij Heavy Equipment & Engg LLC Al Harthy Al Araimi Travels LLC Sea Pearls LLC Oman Filling Station & Services LLC Omani Packaging Co. SAOG Musandam International General Trading LLC, Dubai Al Araimi General Trading LLC, Dubai Galfar Al Misnad Engg. & Cont. WLL Qatar Galfar Engg & Cont WLL- Abu Dhabi Galfar Pembinan Dan Perusahaan (B) Sdn Bhd. (Brunei) Sheikh Salim has also participated in developing educational institutions within the Sultanate. Some of the renowned ventures in which he actively participated include the Caledonian College of Engineering, and Oman Medical College. Sheikh Salim has keenly played an active role in developing the business environment for the private sector in the Sultanate of Oman, and has served as the Vice President of Oman Chambers of Commerce and Industry, Board member of Franco-Arab Chamber of Commerce, France, and Board member of Arab-Belgium- Luxembourg Chambers of Commerce, Brussels. He is also conferred with an honorary degree of Doctor of Technology by the Glasgow Caledonian University, UK in July Dr. Parambathekandi Mohamed Ali Dr. P. Mohamed Ali is a respected businessman both in the Middle East and India. As the Managing Director of Galfar, he has led the development and growth of the Company since its beginning in 1972, and is one of the prime sources of its success. He has several business interests spanning the Middle East and India. Dr. Mohamed Ali is currently on the board of the following Companies: Al Dastoor Contracting & Trading LLC, Oman 19

21 Al Khalij Heavy Equipment & Engg LLC, Oman Chemmanur Jewellers LLC, UAE. Galfar Engg & Cont WLL- Abu Dhabi Galfar Al Misnad Engg. & Cont. WLL Qatar Galfar Pembinan Dan Perusahaan (B) Sdn Bhd. (Brunei) Golden Circles Development Ltd., UAE National Drilling & Services Co. LLC, Oman Tecton Engineering & Construction LLC, UAE UTCC Wade Adams UAE Additionally, Dr. Mohamed Ali holds the position of Chairman/Director in several companies in India. Cochin International Airport Ltd. Galfar India (Pvt.) Ltd. Indo German Carbons Ltd. Mfar Constructions Ltd. Mfar Hotel Ltd. Mfar Holdings Pvt. Ltd. In addition to his business interests, Dr. Mohamed Ali is actively involved in developing the educational sector, and is the promoter of several educational institutes in Oman and India, including: Indian School, Al Ghubra, Caledonian College of Engineering, and Oman Medical College. He also sits on several high-powered committees in Oman, which include: Omanisation Joint Committee (Vice Chairman), Oman Petroleum Alliance (Founder Chairman), and Omani Society of Contractors (Deputy Chairman). Dr. Mohamed Ali is conferred with many Awards like Oman Civil Order Award by His Majesty the Sultan of Oman in Jan 2002, Pravasi Bharatiya Samman Award by the Prime Minister of India in Jan 2004, honorary degree of Doctor of Science by the Glasgow Caledonian University, UK in July Dr. P Mohamed Ali is an Indian national born in Aimmar United Investment & Project LLC Aimmar is an Omani Limited Liability Company incorporated in the Sultanate of Oman on CR/ with a share capital of RO2,000,000/- and with a par value of RO 1/- for each share. The shareholders in the company are : Sheikh Salim Said Hamad Al Fanah Al Araimi - 97% Mrs. Aliya bint Salim Ali Al Ghilani - 1% Rua Salim Said Al Fanah Al Araimi - 1% Samaa Salim Said Al Fanah Al Araimi- 1%. The main objects of the company are to carry on the business of commercial agents, real estate and construction. 20

22 The registered office of the company is situated at Jalaan House, Building No.455, Way No.3534, Al Khuwair, and the address for communication is Post Box 599, Postal Code 130, Azaiba, Sultanate of Oman. Phone: (968) / , Fax: PMA International Ltd. A Limited Liability BVI business company incorporated in the British Virgin Islands on under registration number with a share capital of US$50,000/- and with par value of US$1.00 each. The shareholders in the company are: P. Mohamed Ali - 51% Mohiuddin Mohamed Ali - 49% The company is licensed to carry on or undertake any investment business and to enter into any transactions. The registered office of the company is situated at British Virgin Islands and the address for communication is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands, C/o Offshore Incorporations Limited. Al Siraj Investments & Projects LLC An Omani Limited Liability Company incorporated in the Sultanate of Oman on , CR/ with a share capital of RO2,000,000/- and with a par value of RO1/- for each share. This company has purposely been formed by the legal heirs of Late Mr. Mohamed Rashid Al Fannah Al Araimi (the Ex-Vice Chairman and Partner who was involved in developing Galfar Engineering & Contracting LLC) to takeover the inherited shares of the wife, two adult daughters, two adult sons and two minor sons. The company was formed with the consent of the competent Court. Miss Budoor bint Mohamed Rashid Al Fannah Al Araimi, the lawful attorney of the said heirs and appointed trustee by the Court for the minors is managing Al Siraj Investment & Projects LLC. with the assistance of Miss Khalood bint Mohamed Rashid Al Fannah Al Araimi. The shareholding in Al Siraj is: Khadija bint Hamad Hamood Al Araimi - 15% Budoor Mohamed Rashid - 8.5% Khalood Mohamed Rashid - 8.5% Badar Mohamed Rashid - 17% Khalid Mohamed Rashid - 17% Qees Mohamed Rashid - 17% Fahad Mohamed Rashid - 17% The main objects of the company are to carry on the business of commercial agents, real estate, construction and general investment in securities. The registered office of the company is situated at Sur Centre, Mezzanine Floor, Al Khuwair Main Road and the address for communication is Post Box 72, Postal Code 130, Azaiba, Sultanate of Oman. Phone: (968) / , Fax: Qhassya Projects & Investments LLC An Omani Limited Liability Company incorporated in the Sultanate of Oman on CR/ with a share capital of RO150,000/- and with a par value of RO1/- for each share. 21

23 This company is formed by the legal heiress Sheikha bint Himaid Rashid Al Araimi to takeover the shares inherited from her late son Mr. Mohamed Rashid Al Fannah Al Araimi, Ex-Vice Chairman and Shareholder in Galfar Engineering & Contracting LLC. The shareholding in Qhassya Projects & Investment LLC is: Sheikha bint Himaid Rashid Al Araimi - 70% Salman bin Rashid Al Fannah Al Araimi - 10% Nasir bin Rashid Al Fannah Al Araimi - 10% Abdulla bin Rashid Al Fannah Al Araimi - 10%. Mr.Salman Rashid, the lawful attorney of his mother Sheikha bint Himaid Al Fannah Al Araimi is managing the company as Signatory Manager. The main objects of the company are to carry on the business of commercial agents, real estate, import and export and construction. The registered office of the company is situated at South Al Ghubra and the address for communication is Post Box 1129, Postal Code 130, Azaiba, Sultanate of Oman. Phone: (968) / , Fax: IMPORTANT NOTE CLARIFYING THE GALFAR GROUP : The following may please be noted: The Promoters of Galfar Engineering & Contracting S.A.O.G. (under transformation) in their own right, singly or jointly, hold controlling shares in other entities in the Sultanate of Oman and other countries such as UAE, Brunei, Qatar and India. These entities together are some times referred to as the Galfar Group of Companies. Galfar Engineering & Contracting S.A.O.G. (under transformation) has no direct connection with such Group companies other than that of Related Parties. The Shares on offer in terms of this Prospectus are Ordinary Shares of Galfar Engineering & Contracting S.A.O.G. (under transformation), the Omani entity only, and not those of any other companies in the Galfar Group either based in Oman or outside. Particulars of other companies with the name Galfar, in which the Promoters/Selling Shareholders hold capital, are as follows: Galfar Al Misnad Engineering & Contracting WLL (Qatar) Galfar Pembinan Dan Perusahaan (B) Sdn Bhd. (Brunei) Galfar Engineering & Contracting WLL (Abu Dhabi) Galfar India (Pvt. ) Ltd. (India) Disclosure on the status of Galfar Al Misnad Engineering & Contracting WLL The Company (Galfar Engineering & Contracting LLC, Oman) sold its entire investment in its subsidiary Galfar Al Misnad Engineering & Contracting WLL, Qatar on 1 st January 2005 to the then members of the Company. However the divestment is yet to be reflected in the Commercial Register of the State of Qatar as the restructuring process as stipulated by the Commercial Company Law of Qatar is still under process. 22

24 Restrictions imposed on the Promoters: In accordance with Article 77 of the Commercial Companies Law and its amendments thereof, the Promoters of the Company shall not withdraw from the Company or dispose of their Shares prior to publication of two Balance Sheets pertaining to two consecutive financial years, effective from the date of listing of the Shares on the Muscat Securities Market. Exception to this shall be the cases of assignment of the Shares amongst the Shareholders themselves and cases of inheritance. The period during which the Promoters are not permitted to withdraw or dispose of the Shares may be extended for further one year through a Decision to be passed by the Minister of Commerce & Industry, at the request of the Capital Market Authority, without prejudice to the right held by the Founders in executing mortgage of second Grade in such Shares. If any defect has taken place in the procedures pertaining to incorporation of the Company, the party concerned may within a period of five years from the incorporation of the Company, serve notice to it for remedying such a defect. However, if the Company fails to take the initiative within one month of such notice for necessary remedial measures, the person concerned may have recourse to the competent court to pass a decision for dissolution of the Company. The Promoters, Members of the Board of Directors, First Auditors of Accounts shall be held liable severally and jointly for the damages arising from the dissolution of the Company for their negligence and default in the incorporation of the Company. 23

25 Chapter 8 The Economy Overview Oman has stable political, economic and social systems complemented by excellent relationships with its neighbouring countries. Spread over 309,500 sq km, Oman consists of eight regions/governorates. In October 2002 Oman became a member of WTO, and signed in January 2006 a Free Trade Agreement (FTA) with the USA. The agreement includes an immediate liberalisation in trade in the industrial and consumer goods sectors while tariffs on agricultural goods are to be lifted over a 10-year period. Economic Growth Oman s economy grew by about 17 per cent in 2006 (preliminary estimates) as against a 24 per cent growth recorded in In terms of constant prices, GDP growth for 2006 was about 6%. Modest inflation, large surpluses in fiscal and balance of payments positions, easy domestic liquidity conditions with soft interest rates, comfortable level of foreign exchange reserves, significant progress on diversification and privatisation of the economy, and a sound banking system were the key elements that helped the economy grow and witness a robust macroeconomic performance in The gross domestic product (GDP) at current prices grew by about 17 per cent to about RO 13.8 billion in 2006 as against RO billion recorded in In 2006 petroleum sector, which contributes about 50 per cent of the country s GDP, witnessed a significant growth of about 18 per cent, while the non-oil activities registered a growth of about 15 per cent. Oman s economic prospects in 2007 remain positive owing to high oil prices, ongoing infrastructure development projects and buoyant consumption. GDP per capita is projected to exceed $15,000 by year-end 2007, compared with less than $10,000 in Furthermore, an increase in Government expenditure on large infrastructure and industrial projects, driving the non-oil GDP growth, has led to increased investment opportunities which have buoyed the investors confidence. Sector Growth in 2006 (% over 2005) GDP 16.8% Oil Sector 17.9% Non-Oil Sector 15.6% LNG 60.7% Tourism 22.4% Exports 15.4% Oil Exports 8.2% Non-Oil exports of Omani Origin 11.4% Re-exports 21.6% Imports 15.5% Source: State General Budget 2007, Ministry of National Economy 24