golden harvest

8/18/2019 Golden Harvest

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Issuer Company: Golden Harvest Agro Industries Ltd. Issue Manager: Banco Finance & Investment Ltd.

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General Information

• Banco Finance and Investment Limited, the Issue manager, has prepared this Information Memorandum

(“IM”) based on the information provided by Golden Harvest Agro Industries Ltd. (the Company/the Issuer)

and also upon several discussions with the Managing Director and concerned executives of the issuer

company. The Directors, including Managing Director of Golden Harvest Agro Industries Ltd. and Banco

Finance and Investment Limited collectively and individually, having made all reasonable inquires, confirm

that to the best of their knowledge and belief, the information contained herein is true and correct in all

material aspects and that there are no other material facts, the omission of which would make any statement

herein misleading.

• No person is authorized to give any information or to make any representation not contained in this

prospectus, and if given or made, any such information or representation must not be relied upon as having

been authorized by the Issuer or Issue Manager.

• The Issue as contemplated in this document is made in Bangladesh and is subject to the exclusive

jurisdiction of the courts of Bangladesh. Forwarding this prospectus to any person resident outside

Bangladesh in no way implies that the Issue is made in accordance with the laws of that country or is subject

to the jurisdiction of the laws of that country.


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Table of Contents

Particulars Page No

Section 1: Risk Factors 6-8

Section 2: Financial Structures 9-10

Section 3: Golden Harvest Agro Industries Ltd: An Overview 11-12

Section 4: Business Details 13-14

Section 5: Competitive Condition 15-17

Section 6: Business Expansion/Diversification Plan 18-20

Section 7: Directors of the Company 21-24

Section 8: Description of Management 25-26

Section 9: Description of Property 27-28

Section 10: Plan of Operations & Discussion of Financial Condition 29-31

Section 11: Determination of Offering Price 32-34

Section 12: Book Building Method 35-36

Section 13: Market for Securities Being Offered 37

Section 14: Description of Securities Outstanding or Being Offered 38-40

Section 15: Availability of Securities 41

Section 16: Involvement of directors and officers in certain legal proceedings 42

Section 17: Certain Relationships and Related Transactions 43

Annexure: 01 Bankers to the Issue 44

Annexure: 02 Corporate Directory 44Annexure: 03 Financial Statements as at and for the Period Ended 30th September 2010 45-63


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Section – I Risk Factors

An investment in equity shares involves a high degree of risk. The Company is operating in an industry involving both externaland internal risk factors having direct as well as indirect effects on the investment by the investors. All the investor should

carefully consider all of the information in this memorandum, including the risk factors, both external and internal, andmanagement perception thereabout enumerated hereunder before making an investment decision. If any of following risksactually occurs, their business, result of operations and financial condition could suffer, the trading price of their equity sharesdecline, and investors may lose all or part of their investment.

(a) Interest rate risks:

Interest rate is concerned with borrowed funds of short term & long‐term maturity. Interest rate risk is the risk that Companyfaces due to unfavorable movements in the interest rates. Volatility in money market & increase in demand for loans/investment funds raise the rate of interest. A change in the government’s policy also tends to increase the interest rate. Highrate of interest enhances the cost of fund of a company. Such rises in interest rates however mostly affect companies havingfloating rate loans.

Management perception

Golden Harvest Agro Industries Limited (Golden Harvest) maintains low debt/ equity ratio; and accordingly, adverse impact ofinterest rate fluctuation is insignificant. The project was started with the Company’s own funds and the capacity was alsoexpanded with own funds. Additionally, the management of the Company emphasizes on equity base financing to reduce thedependency on borrowing. Therefore, management perceives that the fluctuation of interest rate on borrowing would havelittle impact upon the performance of the Company.

(b) Industry risks:

Industry risk refers to the risk of increased competition from foreign and domestic sources leading to lower prices, revenues,profit margin, and market share which could have an adverse impact on the business, financial condition and results ofoperation. Agro industry in Bangladesh is an emerging sector with vast local demand for its different product lines. Locallyproduced frozen food products now play a significant role in this sector, which has been dominated by imports in the past.

However, the infrastructure required for this industry is inadequate in Bangladesh, as can be noted below:

• No organized collection centers for agricultural produce exist in Bangladesh; as a result, there is a high fluctuation inprices both for the growers and for processors.

• Absence of Cold Chains, although the whole process of collection, processing and distribution depends on coldtemperature maintenance due to the nature of business.


Golden Harvest Agro Industries Ltd. (Golden Harvest) has established its brand name in Frozen Food market with its qualityproducts, range of products and customer services. However, to develop an infrastructure, both public and private sectorparticipation is required. This is the focal point of Golden Harvest’s future expansion plans. To eliminate fluctuation in pricesboth for the growers and for the processors, Golden Harvest will organize collection centers to eliminate intermediary cost forboth the parties. Deploying 15,000 refrigerators with 24 cold storages at ‐30 degree Celsius nationwide, Golden Harvest willhave infrastructure backbone of Cold Chain which will ensure proper supply of Frozen Foods all over the country through its 60temperature controlled transport. Our neighboring country like India has over 50 cold chains, generating revenue over US$3.5billion which is targeted to reach US$8 .5 Billion by 2015.


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(c) Market Risks:

Market risk refers to the risk of adverse market conditions affecting the sales and profitability of the company. Mostly, the riskarises from falling demand for the product or service which would harm the performance of the company. On the other hand,strong marketing and brand management would help the company increase their customer base.


Market for Ready to Cook frozen foods in Bangladesh is growing at an exponential rate with growth of urbanization andincremental income level of consumers along with their preference to convenience. In spite of high growth of this market, thereis scarcity of investment in this sector which creates a huge void resulting in very expensive imports. International market forReady to Cook frozen food sector is already matured and is growing further at a high rate. Golden Harvest Agro Industries Ltd.(Golden Harvest) is one of the earliest entrants in international market with very promising and loyal customer base in USA,Canada, Australia, Europe, Middle East, and South Asia. In Bangladesh market, Golden Harvest has made a rapid penetrationand has captured the leading position with its unique branding and positioning strategy taking opportunity of this fast growingmarket.

(d) Technology -related Risks:

Technology always plays a vital role for the existence of any industrial concern, ensuring better services to the customers andminimizing the cost in various aspects. The production facilities of the Company are based on currently available technology.Any invention of new and more cost involving technology may cause technological obsolescence and negative operationalefficiency. Any serious defects in the plant and machinery may affect production and profitability calling for additionalinvestment for replacement. Since Golden Harvest deals in food processing, health risk is the most critical factor to beaddressed.


The key to securing market share in FMCG (Fast Moving Consumer Goods) is by satisfying the needs of the customers. GoldenHarvest utilizes a fully equipped Research & Development (R & D) setup that is continuously working for in‐depthunderstanding of the customer needs and preferences and accordingly blending its product range. The product line is carefullydeveloped for the consumers with longer shelf life, creating a true niche market in Bangladesh.

USAID is the major partner of R & D of Golden Harvest. A team of USAID experts in Food Engineering and Microbiology withforeign and local expertise are involved in the R & D continuously. Quality is ensured at every stage of the process, starting fromreceiving raw material, different stages of processing up to finished packaged frozen foods. The in‐house fully equipped QualityAssurance Laboratory is carrying out all types of Physical, Chemical and Biological tests using most modern European testingequipment. Hygiene factors are uncompromised at all level of the process.


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(e) Regulation -related Risks:

The Company operates under Companies Act 1994 and other related regulation, Income‐tax Ordinance 1984, Income Tax Rules1984, Value Added Tax (VAT) Act 1991 and Value Added Tax (VAT) Rules 1991. Any abrupt changes of the policies made by theregulatory authorities may adversely affect the business of the Company.

Government incentives given to Agro Industry are insufficient compared to other countries. Agro based Frozen Food sector isexempted from VAT in many countries, whereas it is imposed in Bangladesh. Incentives are also sporadic and non categorizedand sometimes, discriminated in similar categories.


Unless any policy change that may negatively and materially affect the industry as a whole, the business of the Company isexpected not to be affected significantly. Agro industry in Bangladesh is an emerging sector with considerable local demand fordifferent product lines. Therefore, it is highly unlikely that the Government will initiate any fiscal measure that may haveadverse effect on the growth of the industry.

(f) Operational Risks:

The core business operation of Golden Harvest is directly related to very low temperature maintenance. Country wide severepower shortage is compelling Golden Harvest to utilize captive power which builds up cost. Also port congestion and inlandimmobility due to political instability poses a great operational risk to Golden Harvest


Bangladesh Government is meeting this challenge by opening the energy generation to private sector; and also making massiveinvestment, which is expected to ensure availability of energy for uninterrupted operation. Golden Harvest perceives thatallocation of its resources properly with contingency approaches can reduce this risk factor to great extent.

(g) Input Cost Risks:

Input cost risk is the risk of a business when procuring materials or commodities in high global demand. Increasing demandand supply shortages create volatility in these commodity values; and therefore, the timing, quantity and price of purchase mustbe closely planned.

Management Perception:

Management of Golden Harvest would hedge their exposure to input price volatility by making purchases of inputs in season;and providing for contingency against such inputs in its selling price.

(h) Distribution Risk:

For any company, the most crucial wing is the distribution channel. Wide distribution network and monitoring over thenetwork is essential to make its product available to the consumer at right time and price. Golden Harvest every now and thenfaces this challenge from non accessibility for its wide range of products.


Golden Harvest offers a wide range of frozen food products both in global and local market. Its distribution strategy comprisesof distributors for international markets and distribution network of dealers and outlets for domestic market. Golden Harvestplans to eliminate distribution risk implications by smartly planning its distribution network with great flexibility.


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Section – II Financial Structure

Issue Size and Purpose of Public Offering

Capital Structure

The capital structure of Golden Harvest Agro Industries Limited before and after IPO will be as under: Particulars No. of Shares Amount (Taka)

Capital structure prior to IPO

Issued, subscribed and paid up capital as on 30 September 2010 (as per audited accounts)

10,000,000 100,000,000

Share money deposits converted into paid up capital* 25,000,000 250,000,000

Paid up capital (Pre IPO) 35,000,000 350,000,000

Capital Raising: Proposed

Through IPO under Book Building Method 30,000,000 300,000,000

Paid up capital after IPO 65,000,000 650,000,000

* The Company raised its paid up capital from Taka 100,000,000 to Taka 350,000,000 on 13 October 2010 in terms of Securities and Exchange Commission Consent letter no. SEC/CI/ CPLC‐250/2010 ‐301 dated September 26, 2010.

Use of Proceeds from IPO

Future Plan of IPO Fund Utilization

Sources of Fund: Taka

Issue size (Number of share to be issued) 30,000,000 Issue price (including premium Taka 70 each) 80

2,400,000,000 Less: Income Tax‐3% 63,000,000

2,337,000,000

Application of Fund: Establishment of Cold Chain 1,212,631,200

Establishment of Ice Cream Factory 408,673,903

Term Loan Repayment 224,451,329

Equipments for new “Ready to Eat” product line 101,427,883

Working Capital requirement 389,815,685

2,337,000,000

Notes:

1. Source of fund will primarily be used for establishing Cold Chain. The Company is planning to set up county wide cold chain,

covering six divisions. A central cold storage depot in Dhaka will link 24 Cold Storages at ‐30 Degree Centigrade and 15,000 freezers/refrigerators with retail outlets across the country. In line with this, a Central warehouse in Dhaka city, is planned to be set up. Necessary transportation system will be engaged to carry frozen products. The estimated cost for establishing Cold Chain Project is as follows: ‐


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Taka

a) Ware House

‐ Land & Building 350,000,000

‐ Infrastructures 20,000,000

b) Depot ‐ 24 nos. all over the country at ‐30 Degree Centigrade 113,911,200

c) Freezers/Refrigerators ‐15,000 nos. 550,000,000

d) Refrigerator Truck (up to ‐30 Degree Centigrade) ‐ 46 nos. 178,720,000

Total 1,212,613,200

The cold chain is expected to be fully in place within March 2012.

2. The Company is also planning to establish an Ice cream factory which has huge potential market in the country. The total set up cost has been estimated as below:

Building Construction Taka Taka

Renovation of existing building for Ice Cream factory 25,000,000 Construction of new Cold Storage 10,000,000

Other construction 4,000,000 39,000,000

Machineries & Equipments

Imported Machineries 260,165,622

Local Machineries & Equipments 57,000,000 317,165,622

Duties, Taxes & Installation of machineries 25,508,281

Power Generator 12,000,000

Voltage Stabilizer 3,000,000

Contingencies 12,000,000

Total 408,673,903

The ice cream project is expected to be completed and operative from January 2012. The project is expected to fetch an annual net profit of Taka 275.62 million on a turnover of Taka 818.17 million in 2012 ‐13.

3. To enhance the market, the Company is planning to add new product line “Ready to Eat” in addition to Ready to Cook line. The cost of Machineries (including Duties, Taxes & Installation of machineries) has been estimated to be Taka101.43 million. The “Ready to Eat” line is expected to be completed and operative from October 2011.

4. An aggregate sum of Taka 224.45 million will be used for repayment of Bank Loans and other lease finance liabilities. These loans and obligations are expected to be repaid within September 2011.

5. The remaining Taka 389.82 million will be used for meeting the IPO‐related costs and working capital. These funds are expected to be used within September 2011.

6. After full utilization of IPO fund within March 2012, the Company expects to fetch an annual net profit of Taka 453.06 million (i.e., an EPS of Taka 6.97) on a turnover of Taka 1,335.38 million in 2012 ‐13.


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Section – III Golden Harvest Agro Industries Ltd: An Overview A Group Overview:

Golden Harvest Agro Industries Ltd is a member of Golden Harvest Group which is a diversified Group of companies, having operation in various sectors. The Group excels in Information Technology, Agro Products, Commodities Trading, Real Estate, Design/Publication

& Consultancy, and Logistics.

The Group's activities range from being one of the leading IT service provider, digitizing data and software development for US companies, setting up a successful joint venture partnership business with Denmark, UK, Japan and Singapore based companies, providing comprehensive financial solutions to 26 commercial banks, processing information from photogram metric equipment to logistic services and air cargo etc.

The Group has an experienced team of Traders, selling different commodities directly from Chicago Board of Trade (CBOT), Bursa Malaysia Derivates (BMD), New York Board of Trade (NYBOT) at present Intercontinental Exchange (ICE), and London Metal Exchange (LME). The Group represents world largest commodity suppliers such as Louis Dreyfus Commodities Suisse SA, Adani Wilmar, Noble Grain, Inter ‐Continental Oils and Fats Ltd & Stemcor UK Ltd for supplying Crude Edible Oils, Food Grains, Cottons, Oil Seeds, Raw & Refined Sugar, and Steels in Bulk Quantity.

Golden Harvest Group also has an Architectural designing studio with modern, premium quality and value added real estate projects.

Publication house and carbon credit trading consultancies are newest in the Group’s business portfolio.

The thriving Group has benchmarked itself in each of the sectors establishing itself as a market leader with a highly satisfied clientele. At Golden Harvest “Perfection and Excellence” are the main focuses along with the acknowledgement that “business organizations are members of society”, and are thus highly aware of their social responsibilities towards the greater community. With this purview the Group activities encompasses a wide array of CSR initiatives such as Charitable Hospital, supporting mentally challenged children, providing aid in any natural disaster, scholarship for under privileged meritorious students, leadership role in a Human Rights foundation giving legal aid to victims of social abuses.

Golden Harvest Agro Industries Ltd (Golden Harvest):

Golden Harvest Agro Industries Ltd (Golden Harvest) is located in Monipur, Gazipur and came into operation in May 2006. It is the first ever purpose built frozen vegetables and snack food processing plant in Bangladesh. The entire Plant was designed and supervised by the Danish experts with the full technical assistance from DANIDA (Danish International Development Agency under the Danish Embassy). Golden Harvest is set up on a 54,261 square feet state ‐of ‐the ‐art purpose built, fully computerized processing facility built in international standards with the capacity to expand by additional 100,000 SFT.

Golden Harvest is a BRC‐Food certified (British Retail Consortium ‐Food) food processing facility. BRC Food is regarded as the highest global standard for best practice in the food processing Industry. Golden Harvest is also the only TESCO approved Food Processing factory in Bangladesh .TESCO is the third largest retail chain superstores in the world. Golden Harvest is also a member of SEDEX which upholds Ethics in industry in all aspects.

Golden Harvest is processing over sixty varieties of frozen food products, such as Chicken Nuggets, Chicken Burger Patty, Beef Burger Patty, French Fries, Tortilla, Tempura, Chicken Cutlet, Fish Cutlet, Meat Ball, Lentil stuffed Tortilla, Potato stuffed Tortilla, Somosas, Vegetable Puff, Stuffed Potato Balls, Fish Fingers, Fish Ball, Spring Roll, Pop Corn Chicken, Pop Corn Shrimp, Hash Brown and different kinds of Vegetables and Fruits. All products are hygienically processed and packed in frozen Ready ‐to ‐Cook form.

Golden Harvest’s procurement, production/processing and marketing are well structured and clearly defined meeting the international standards. These include food safety certification such as Hazard Analysis Critical Control Points (HACCP) and Good Manufacturing Practice (GMP). Safety control mechanism is of high standard specially by conforming to standards of European Union (EU), Australian Quarantine Inspection Services (AQIS) and United States Food & Drug Administration (USFDA) food quality benchmarking. Golden Harvest is approved by EU, USA, UAE, Australia and Russian Health and Quarantine authority for export of Frozen Foods from Bangladesh.


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Section – IV Business in Details

Location of Business, Logistic Support and Resources

Golden Harvest Agro Industries Ltd (Golden Harvest) is located at a very strategic place, with linkage to national Highways enabling smooth transportation.

1. Location of processing plant

The processing facility is located at a place called Monipur, in the district of Gazipur. The place is about Fifty Kilometers from Dhaka city. An Asphalt road leading to Mymensingh town from Dhaka town connects the place. Golden Harvest is the first ever Agro based plant in the District of Gazipur and first of its kind in terms of International Standards in Bangladesh.

2. Electricity

Electricity is supplied by the Rural Electrification Board (REB). There is also a stand ‐by generator of a capacity that can support 100% of the factories’ requirement under full production load during power disruption. It may be mentioned that the Government of Bangladesh under its policy has provided with a rebate of 20% on the Electricity Bill only for Agro based exporting companies such as ours. As Golden Harvest has already made several exports, therefore application has already been placed with the REB office for

claiming the

rebate

on

the

bills

paid

as

well

as

future

bills.

3. Water

Plenty of water is required to clean and wash the vegetables. Water supply is obtained by installation of its own deep tube ‐well within the factory premises with proper regulatory and environmental approval. The water prior to use is subjected to USA origin Filtration at 15 Micron and Ultraviolet treatment, enabling us to get rid of suspended minerals, particles and germs.

4. Gas

Gas supply is connected from the national grid of the Titas Gas company for Pre ‐production processing.

5. Waste Water Disposal / Effluent Water Treatment

Since the waste water is non ‐toxic as no chemicals are used in the process of the factory, yet, we are chlorinating the waste water including straining for solid particles before discharging back to the environment.

With respect to environmental issues, Golden Harvest is meeting all laws and regulations. Under the Pest Control Products Act and regulations pursuant to this Act, Golden Harvest check pesticide residue levels in their products to ensure that they are within regulation levels.

6. Employment

Due to modern machineries with mostly automated processes, Golden Harvest is not a labor intensive unit. The factory houses 120 employees of various levels of competence and responsibilities with accommodation facility within its premises. Another 480 workers

are accommodated in rented houses with close proximity to the factory. Accommodation is limited and prevents migration of workers who are trained in‐house. Golden Harvest is an Equal Opportunity Employer in reality.


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7. Source of Raw Material

Golden Harvest’s Primary source of raw material is all over Bangladesh on contract farming basis directly with the farmers. Golden Harvealso has a contract with USAID (PRICE), who is also supporting the farmers with direct forward linkage to Golden Harvest which enable

the farmers

to

get

premium

price

for

premium

quality

by

eliminating

middle

man/brokers.

Golden Harvest Organic Aquaculture holding Ltd, a sister organization of Golden Harvest is working as backward linkage with different farmers groups. As Vegetable production needs a close relationship between growers and frozen food processors in this sector, crops for processing are grown under contracts which often specify varieties, sizes, and colors, tolerance levels for blemishes and bruising as well as price.

Through USAID‐PRICE support program, specialists are providing technical advice, expertise, and direction on spraying crops with pesticides. Thus, Golden Harvest exercises some control over the conditions under which fruits and vegetables are planted, grown, harvested and delivered to the processing plant.

Golden Harvest also procures other items from reputed business house such as BRAC, Bangladesh Edible Oil, City Group.

8. Refrigerated Transportation

Golden Harvest has a fleet of Refrigerated Transports which maintain ‐30 Degree Celsius and can accommodate a full load equivalent to40 Feet Reefer container for export, enabling Golden Harvest to make export shipment to load the container in Chittagong port.


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Section – V Competitive Condition

1. Market Size and Growth:

As per market research, Bangladesh market for convenient frozen food has grown at a staggering rate of 37% during 2009 ‐2010; and

is further growing at greater pace with expected total turnover of Taka 850 million by the fiscal year 2010 ‐2011.

According to various surveys, international market for processed frozen food is growing at a rate of over 26%; and has become a multi ‐billion dollar industry.

2. Market Segmentation:

Market segments include International and Local market.

The International Market segment consists of processed ready to cook food and processed packaged vegetables. Demand for frozen

foods with regular addition of different varieties in the international market is enormous; also the international market is established

and emerging at a prospering rate with the growing numbers of customers from different part of socio cultural taste who prefer the

domestic flavor in their daily food. The buyers are mostly from UK, USA, Australia, Canada and the Middle Eastern Countries.

In Bangladesh, products are consumed by the households, city dwellers, busy families, young adults, who look for convenient cooking.

The number of potential buyers is increasing at a fast rate because of the various promotional campaigns by Golden Harvest and also

for its unique product attributes that attract people from all walks of life, irrespective of age, occupation and locality.

3. Market Share and Competition:

Golden Harvest enjoys majority of the total processed ready to cook food market in Bangladesh, fulfilling a prerequisite of a market

leader.

The competition scenario is somewhat sporadic and there is hardly any direct competition with Golden Harvest due to its multiplicity

of products. The competitors include Aftab, Harvest Rich brands which have their low range of product line up and imported French


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Fries like McCain, Lamb Weston, and imported chicken nuggets like Doux and imported range of frozen products from Al Kabeer

Group are also competing in the local market.

However, Golden Harvest’s competitive advantage allows it to carefully select its profitable yet high demanding product lines in a

market Niche and at the same time, enjoys a high degree of independence. Thus, Golden Harvest is benchmarking itself in the Ready to cook frozen food industry in terms of quality, pricing and the exotic brand flavors with customer satisfaction.

4. Market distribution:

4.1 International Market:

Products are regularly distributed to the entry port of respective buyer’s country conforming to all export regulations prevailing in

Bangladesh. From the entry port, assigned distributors are taking the products to the end users abroad. Golden Harvest has a number

of high performing distributors for each of its global destinations. British Retail Consortium (BRC) is giving us certified access to

distribute our product to internationally reputed retail chains like TESCO.

4.2 Domestic Market:

Domestic Market requires Golden Harvest to set up a distribution channel throughout the country. Products are sold nation wide via

dealers nominated for various districts. Technology based temperature controlled logistics is made available for transportation of

products from manufacturing plant to the dealer’s/outlets across the country.

a. Dealer Management:

Golden Harvest has appointed 28 dealers for a comprehensive coverage in Bangladesh. The dealers in turn sell to around 5,000 retailers with retail price tagged by Golden Harvest. The basis of business for both the wholesaler and the retailer is pre ‐agreed commission.

b. Key retail outlet Management: Considering large business volume, Golden Harvest keeps a close tie up with the large retail stores in Bangladesh. Supplies to major retail chain stores such as, Nondon, Agora, Meena Bazaar, PQS, Swapno, Lavender, Prince Bazaar, fall under this category. High volume consumers include 5 star Hotels like Radisson, University campuses like North South University, AIUB, Stamford University, Hospitals, Restaurants are distributed directly from own network resources. Golden Harvest regularly devises promotional programs for generating thrust to boost up revenues; current activities include already distributed 500 refrigerators deployed country wide and this number will grow over 15,000 along with Golden Harvest’s expansion.


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c. Distribution Logistics:

Golden Harvest has a full backup of logistic equipments and transportations required for its distribution activity. A fleet of 9 (nine) large refrigerated trucks of various capacities are continuously utilized for distributing to the channels of both internal and external buyers at home and abroad maintaining temperature of ‐30 degree Celsius.

d. E‐ Commerce:

E‐commerce enables companies to interact with consumers, suppliers, and retailers. Over the past few years, websites have become a dominant media to provide brand promotion, product information, recipes, and industry related information, customer queries and comments.

e. Media campaign:

With media campaign, new consumers and new products are added at an exponential rate in the local market. After the campaign, French fry has created a huge response in the local market. Previously, French fry market in Bangladesh was absolutely dependent on import as a backward linkage to the fast food sector. French fry has now become a household necessity.


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Section ‐VI Business Expansion/Diversification Plan

Bangladesh has a population of 160 million and growing at a rate of 1.55%. Distribution channels for perishables, such as Agricultural, Fisheries, Dairies, Pharmaceuticals, Livestock and Poultry produces are highly scattered and uneven in Bangladesh creating imbalance in supply and demand regularly. Vaccination programs are always become difficult and stagnant due to lack of proper logistical

infrastructure. Also because of deficiency of transportation and storage most of our horticultural produce goes to a waste. It has been surveyed that the Horticulture segment of Bangladesh suffers a loss of up to 44%. These post harvest loss of 44% and seasonal availability of horticultural produce are the main resultant of extreme price variation prevailing in the market. Golden Harvest aims at fulfilling this vacuum by devising and implementing its mega business expansion plan.

a. Cold Chain:

Introduction of a cold chain seems to be the only solution to the problem stated above. A cold chain is a logistics system, which helps in maintaining and providing a series of facilities for ensuring ideal storage conditions for the perishables from the point of origin to the point of sale. A well developed and efficiently organized cold chain reduces wastage, spoilage and helps keep the perishables intact thereby helping to maintain the quality of the harvested food products ultimately making the whole system cost effective which ensures highest quality to the end user. Our neighboring countries like India, Nepal, Pakistan, Myanmar has the Cold Chain infrastructure already in place, but Bangladesh unfortunately has no Cold Chain or the related infrastructure for operation throughout the country.

Post harvest loss of agricultural, fisheries, dairies, livestock and poultry sector in Bangladesh is at a very alarming stage, just alone in the horticulture sector in Bangladesh it is at an alarming 44% of the total produce, which is the primary cause for such drastic variation in price in the local market. Fishery sector suffers massive threat of usage of Formalin, also growth of poultry and dairy sector suffers due to absence of temperature controlled transportation. Pharmaceuticals sector being the second largest sector after RMG industry requires very low temperature controlled maintenance for it’s raw material and finished product this sector is facing huge setback due absence of Cold Chain. Vaccination programs in Bangladesh often becomes stagnant and sluggish due to absence of proper logistics for it’s maintenance and transportation. These sector wise losses could be easily avoided with Cold Chain management, enabling prices to be lower which in turn increases the market size and translating into bigger sales volume as a normal consequence.

Golden Harvest will set up a Country Wide Network covering 7 divisions and 22 districts with cold storage facility maintaining ‐30 degree Celsius for preserving perishables like frozen food, poultry, dairy, fisheries, pharmaceutical and horticultural products. Golden Harvest Agro Industries Limited will set up a central depot in Dhaka and will sequentially link with 24 depots at ‐30 degree Celsius and 15,000 freezers in retail outlets all over Bangladesh from its own resources. For Cross Country Transportation a Fleet of 50 refrigerated trucks maintaining temperature at ‐30 degree will be deployed to facilitate transportation for this logistics network.

The cold chain will generate revenues mainly from the storage space and longer shelf life of perishable products of Golden Harvest as well as product from similar business operators from other industries like poultry, fisheries, pharmaceuticals, dairy etc, which will be maintained and distributed by this network. Rental charges for cross country transportation will also generate revenues from internal cost savings and external service rendered commercially to other operators requiring low temperature management logistics.

The entire cold chain operation model is being designed and will be operated under technical supervision and assistance from USAID.

b. Ready ‐to ‐Eat Line of Frozen Food Products

Rapid growth of urbanization in Bangladesh and life style and upward mobility of income class, need for convenience and hygiene is

driving the demand for ready to eat products. In Bangladesh most of the street side restaurants are unhygienic, or proper restaurants are very expensive or home made food in hot pot is highly inconvenient.

Day by day, people are being more and more aware on food hygiene, as can be seen from the exponential growth in the bottled mineral water sector which in the past was thought to be a luxury but today it has proved to be a necessity. Golden Harvest has identified the potential for Ready ‐to ‐Eat line of frozen food products for the corporate offices and working people which alone are a massive market opportunity.

Golden Harvest intends to serve local and exotic dishes from daily meals to cuisines at very affordable price. Convenience of longer shelf life and round the year availability will be ensured at international hygiene standard.


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Golden Harvest is presently developing the process line with technical assistance from Foreign Experts provided through assistance by USAID. Some of the Ready ‐to ‐Eat line of products planned for launching includes Deshi Food line such as Steamed Rice with Chicken, Dal and Bhaji, Chinese Food, Thai Food and etc. Other than food designed for office, Golden Harvest will also launch special foods like Murog Pulau, Elish Pulau, Kachchi Biryani, Mutton Tehari, assorted gravy dishes such as Rezala, Bhuna and wide range of Kababs and etc. These products will be marketed at an affordable yet competitive price than the prices charged by the general restaurants. The products will have a shelf life of 2 years and will be made available through out the country through cold chain of Golden Harvest.

c. Premium Ice Cream Products

Bangladesh being a tropical country and the winter lasting between 4 to 6 weeks, the annual market demand for Ice Cream throughout the country is huge. According to a Market Survey, in 2010, the Ice cream Market size of Bangladesh is of approximately Taka 360 Crore and is growing at a promising rate of 36%, which is still untapped with only 2 major brands dominating the market.

ICE Cream Market Growth

Total Size of Ice Cream Market in 2009 (Both Branded & Non Branded)

Category Revenue in Crore Taka Share

Branded 208.00 58%

Non‐branded 150.00 42%

Total (approx.)

358.00

100%

According to market survey, branded ice creams controls 58% share of total revenue against the non branded 42%.With the cold chain logistics the ice cream business can make a quick penetration with products for customers all over Bangladesh.

Due to lack of logistical support, branded ice creams cannot provide nationwide coverage. The most competitive advantage of Golden Harvest is the infrastructure backbone of cold chain which is under the frame work of this expansion plan which can create large scale competition in the Ice cream industry.


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Currently the manufacturers of Ice cream in Bangladesh run their processes with poor machineries and process control system. As a result, new products developed in the international markets are not present in Bangladesh. For this reason, the import based ice creams have curved a niche market for themselves in Bangladesh which includes Movenpick, Baskin Robins, Andersons, Hagen Dazs. Considering this, Golden Harvest is in the process of setting up a world class European Ice Cream plant with globally standardized process control systems for such a sensitive delicacy.

Major Category and their Contribution

Category Type Size Price

segment Contribution

Stick Normal Taka 8 – 18 22%

Premium Taka 20 –30

12%

Cup & Cone

Cup 100 ml 12%

Cone 100 ml 18%

Liter Normal ½, 1, 2 & 5 liter 26%

Premium 1 liter 5%

Cake ‐ 1 & 1½ liter 5%

Total 100%

Premium Branded Ice Cream Sector is by far the fastest growing of the ice cream market showing an increase of 36% over the period 2007 ‐8 compared to a static market for non branded ice cream over the same period.

Golden Harvest intends to launch some new line like Ice Pop, Lollies (bi flavors, tri flavors and twisters), variety of Choc‐bar and Cone, Cups, Liters and Ice Cream cakes, Sorbets etc., Golden Harvest will also launch for the very first time in Bangladesh a wide range and

variety of Premium and Specialty Ice Cream products. Golden Harvest expects to secure 30% of the Bangladesh market with wide variety of ice cream products, higher quality and lower distribution cost.


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Section ‐VII Directors of the Company

Name Designation Age

Mr. Matthew Graham Stock Chairman 42 yrs

Mr. Ahmed Rajeeb Samdani Managing Director & CEO 36 yrs

Mr. Mohius Samad Choudhury Director & COO 41 yrs

Mr. Ahmed Mehdi Samdani Director 30 yrs

Ms. Nadia Khalil Choudhury Director 29 yrs

Mr. Azizul Huque Director 39 yrs

Mr. Moqsud

Ahmed

Khan

Director

65 yrs

Information regarding directors and directorship

Name Designation Date of becoming

Director for the first

time

Mr. Matthew Graham Stock Chairman 20 November 2004

Mr. Ahmed Rajeeb Samdani Managing Director & CEO

10 August 2004

Mr. Mohius Samad Choudhury Director & COO 10 August 2004

Mr. Ahmed Mehdi Samdani Director 10 August 2004

Ms. Nadia Khalil Choudhury Director 30 June 2010

Mr. Azizul Huque Director 10 August 2004

Mr. Moqsud Ahmed Khan Director 20 November 2004


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Directors’ involvement in other organization:

Name Designation in the Company Directorship/Sponsorship/Ownership with other Organization Position

Matthew Graham Stock Chairman Golden Harvest Agro Industries Ltd. Chairman

Greenfields Distribution UK Ltd.

Chairman

Stemcor UK Limited Director

Stemcor India Pvt Ltd. Managing Director Ahmed Rajeeb Samdani Managing Director & CEO Golden

Harvest Agro Industries Ltd Managing Director Golden Harvest Commodities Ltd. Managing Director

Golden Harvest Logistics Ltd Managing Director

Golden Harvest Cottons Ltd Managing Director

Golden Harvest Developers Ltd Managing Director

Futurescape Developments Ltd Managing Director

Golden Harvest InfoTech Ltd Managing Director

Golden Harvest Seafood and Fish Processing Ltd Managing Director

Golden Harvest Organic and Aquaculture Holdings Ltd. Managing Director

Golden Harvest Scankort GIS Ltd Managing Director

Golden Harvest Aviation Ltd The City Bank Limited

Managing Director Director

Climate Action BD LtdDirector

Brain Train LtdManaging Director

Bangladesh Electronic Payment Systems Ltd Director

Ahmed Mehdi Samdani Director Golden Harvest Agro Industries Ltd Director

Golden Harvest Commodities Ltd. Director

Golden Harvest Logistics Ltd Director

Golden Harvest Cottons Ltd Director

Golden Harvest Developers Ltd Director

Futurescape Developments Ltd Director

Golden Harvest InfoTech Ltd Director

Golden Harvest Sea Food and Fish Processing Ltd Director

Golden Harvest Organic and Aquaculture Holdings Ltd. Director

Golden Harvest Scankort GIS Ltd Director

Golden Harvest Aviation Ltd Director

Brain Train Ltd Director

Mohius Samad Choudhury Director & COO Golden Harvest Agro Industries Ltd Chief Operating Offic


Golden Harvest Logistics Ltd Director


Golden Harvest Developers Ltd Director





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Golden Harvest Scankort GIS Ltd Director


Ms. Nadia Khalil Choudhury Director Golden Harvest Agro Industries Ltd Director


Khalil and Khalil Investments Ltd Director

KRC Composite Director

ATIA Trading Director


Brain Train Ltd Director

Azizul Huque Director Golden Harvest Agro Industries Ltd Director





Golden

Harvest

Scankort

GIS

Ltd Director


Moqsud Ahmed Khan Director Golden Harvest Agro Industries Ltd Director

Family relationship among directors and top officials:

There are no family ties among the directors and top officials of the company, except Mr. Ahmed Rajeeb Samdani who is brother of Ahmed Mehdi Samdani and spouse of Mrs. Nadia Khalil Choudhury

Short bio ‐data of the directors:

Mr. Matthew Graham Stock, Chairman and sponsor Director Mr. Matthew Graham Stock is the Chairman and sponsor Director of Golden Harvest Agro Industries Ltd. Mr. Stock, Chairman of Greenfields Distribution UK Ltd, a leading Cold Chain with extensive network in the UK and Europe. Mr. Stock is also Director of Stemcor UK Limited, one of the largest Steel Trading House in the world with annual turnover of more than of 11 Billion US Dollars. Also Mr. Stock is the Managing Director of Stemcor India Limited. According to Forbes July 2010 issue, Mr. Stock for his outstanding performance has been awarded Iron Man 2 of India recognition for his leadership role in the Steel Industry of India. Mr. Stock brings his vast experience in Cold Chain from UK which is a great asset for Golden Harvest Agro Industries Ltd. Mr. Stock is holding an honors degree in Economics from University College London.

Mr. Ahmed Rajeeb Samdani, Managing Director & CEO

Mr. Ahmed Rajeeb Samdani is the Managing Director & CEO of the Golden Harvest Agro Industries Ltd., and the Managing Director of Golden Harvest Group, a seasoned, creative and visionary entrepreneur, involved in diversified business, holding several key positions in the financial sector of Bangladesh including Director of The City Bank Ltd, he has a number of Joint venture projects that are currently operating in Bangladesh and few are waiting commissioning. He always looks to the future, believes in himself. He is driven by his dreams of creating business that are models of not only excellence and success, but also of profitability, innovation and social responsibility. Mr. Samdani also a founder of a 100% Charitable Hospital, Alvina Samdani Trust and also holding the post of Secretary General of Human Rights Foundation of Bangladesh.


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Mr. Mohius Samad Choudhury, Director & Chief Operating Officer

Mr. Mohius Samad Choudhury is a Director and the Chief Operating Officer of Golden Harvest Agro Industries Ltd. Mr. Choudhury, is an Associate Member of the Association of Business Executive United Kingdom (AMBE) and a qualified MBA (Business Administration) from Glamorgan University, United Kingdom. He has vast experience in the Food Industry and Distribution sector in United Kingdom covering almost a decade when Mr. Choudhury worked for Food Service and Distribution and handling international brands. Mr. Choudhury joined Golden Harvest Group in 2000 on his return from UK. As a primary sponsor and initial member of the company, Mr. Choudhury is nurturing the company from it’s cradle to the present thriving growth stage. With his global exposure, Mr. Choudhury has contributed the company in the core business areas of finance, production and international business including overall operation.

Mr. Ahmed Mehdi Samdani , Director

Mr. Ahmed Mehdi Samdani , one of the major sponsor ‐Director of Golden Harvest Agro Industries Ltd. Mr. Samdani has over 7 years of experience in Food Commodities Trading , Information Technology, Real Estate Developments, Publishing House, Logistics, etc. He is one of the founders of TACM Charitable Hospital. A diligent young, hard working business leader who is continuously taking the company to new heights. His thoroughness in business operation and relentless efforts for increasing business volume is the inspiration to the company’s growth.

Mrs. Nadia Khalil Choudhury, Director

Mrs. Nadia Khalil Choudhury, an energetic business person with innovative ideas and concepts, is a Director of Golden Harvest Agro Industries Ltd and other units of the group. Mrs. Nadia Khalil Choudhury is actively involved in different Social Businesses. She is also Director of a Publishing House, Real Estate Company and Director of Khalil and Khalil Investments Ltd, KRC Composite. Mrs. Nadia Choudhury is also an internationally renowned Art collector. Mrs. Nadia Choudhury is an advisor of Bangladesh Human Rights Foundation; and a kind hearted charity worker.

Mr. Moqsud Ahmed Khan, Director

Mr. Moqsud Ahmed Khan, is the Sponsor Director of Golden Harvest Agro Industries Ltd, and has excellent track record in his own business in UK and Bangladesh. He has extensive knowledge of Food Business and an active Member of Charitable Organizations in UK and Bangladesh.

Mr. Azizul Huque, Director

Mr. Azizul Huque, a Director of Golden Harvest Agro Industries Ltd, holds a University Higher diploma in Computer Science from Staffordshire University. Having vast experience extended over 14 years in Bulk Food Commodities Trading as well as Information Technology business, has enabled him to have a comprehensive knowledge in the business dynamics and current local and international business policies of different countries. His in‐depth understanding of all aspects of business and expertise on process cost elimination and quality assurance in business processes which is required for international business has proved to be assets for the Company.

Credit information Bureau (CIB) Report

Neither the Company nor any of its directors or shareholders who hold 5% or more shares in the paid ‐up capital of the issuer is loan defaulter in terms of the CIB Report of the Bangladesh Bank.


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Section ‐VIII Description of Management

Mr. Matthew Graham Stock, Chairman Mr. Matthew Graham Stock, Chairman and sponsor Director of Golden Harvest Agro Industries Ltd. Mr. Stock, Chairman of Greenfields Distribution UK Ltd, a leading Cold Chain with extensive network in the UK and Europe. Mr. Stock is also Director of

Stemcor UK Limited, one of the largest Steel Trading House in the world with annual turnover of more than of 11 Billion US Dollars. According to Forbes July 2010 issue, Mr. Stock for his outstanding performance has been awarded Iron Man 2 of India recognition for his leadership role in the Steel Industry of India.

Mr. Faisal Ahmed Chowdhury, Adviser

Mr. Faisal Ahmed Chowdhury, an Adviser of Golden Harvest Agro Industries Ltd, is a Former Secretary of Ministry of Shipping and Ministry of Water Resource, Government of Bangladesh and a Former Vice Chairman of Export Promotion Bureau. Mr. Chowdhury provides a valuable edge over other competitors in the market with his extensive experience in the export policy areas of the Government of Bangladesh.

Mr Ahmed Rajeeb Samdani, Managing Director & CEO

Mr. Ahmed Rajeeb Samdani is the Managing Director & CEO of the Golden Harvest Agro Industries Ltd, and the Golden Harvest Group. A seasoned, creative and visionary entrepreneur, Mr Samdani is involved in diversified business, holding several key positions in the industrial/financial sector of Bangladesh including Director of The City Bank Ltd. Mr. Samdani is also a founder of a 100% Charitable Hospital, Alvina Samdani Trust and holding the post of Secretary General of Human Rights Foundation of Bangladesh.

Mr. Mohius Samad Choudhury, Chief Operating Officer

Mr. Mohius Samad Choudhury is the Chief Operating Officer of Golden Harvest Agro Industries Ltd. Mr. Choudhury worked for Food Service and Distribution and handled international brands. Mr. Choudhury joined Golden Harvest Group in 2000 on his return from UK. Mr. Choudhury has contributed the company in the core business areas of finance, production and international business including overall operation.

Mr. Imam Hassan, FCA, Chief Financial Officer

Mr. Imam Hassan, FCA, the Chief Financial Officer of Golden Harvest Agro Industries Ltd. Mr. Imam Hassan is a professionally qualified Chartered Accountant from the Institute of Chartered Accountants of Bangladesh (ICAB). He has about 18 years of practical experience in the field of accounting, finance, auditing, administration and public relation. He has held core finance position of a number of local conglomerate and multinational companies in Bangladesh.

Mr. Mamun Monowar, Head of Marketing

Mr. Mamun Monowar –Head of Marketing of Golden Harvest Agro Industries Ltd. Mr Mamun started his career in a software company named Dhaka Soft. In the year 2000, he joined Partex Beverage Ltd under Partex Group. He worked in Partex as Market Development Manager and Brand Manager. During his stay at Partex, his first assignment was to look after the Sales and Marketing Department of MUM Drinking Water. He also looked after the Brand Department of RC Cola and other soft drinks brands of Partex. Mr Mamun also worked in James Finlay (former British owned Multinational Company) as Brand Manager over four years. At Finlay, he led both sales & marketing team.

Mr. Riazul Al Nawaz, Head of Human Resource Management

Mr. Riazul Al Nawaz – Head of Human Resource Management of Golden Harvest Agro Industries Ltd. Mr. Riaz, post graduated in English and MBA in Marketing from Dhaka University, obtained his post graduation diploma in HRM. He has about 12 years experience in Human Resources Management and worked for different multinational companies at home and abroad. Mr. Riaz conducted large number of training programs on Personal Effectiveness, Team Building, Performance Management and contemporary HR issues in various leading MNCs and local conglomerates.


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Mr. Babul Aktar, Head of Accounts & Finance

Mr. Babul Aktar is the Head of Accounts & Finance of Golden Harvest Agro Industries Ltd. Mr. Babul Aktar is an MBA with BBA Hons (Major in Accounting). He has about 10 years of practical experience in the fields of accounting, finance, auditing, costing, company law and taxation. He held core finance position of a number of local conglomerate and multinational companies in Bangladesh.

Mr. Sheikh Qumrul Islam, Factory Manager

Mr. Sheikh Qumrul Islam is the Factory Manager of Golden Harvest Agro Industries Ltd. Mr. lslam , a graduate, joined Golden Harvest Group in 2004. He has about 6 years of practical experience in the field of production as well as administration. He held core responsibilities for supervising and managing all the operational aspects of the factory.

Mr. Md. Faisal MSc, Quality Assurance Manager

Md. Faisal MSc is the Quality Assurance Manager of Golden Harvest Agro Industries Ltd. Mr. Faisal has completed his Graduation and Post Graduation from Bangladesh Agricultural University, Mymensing, obtaining the merit position 1st class 1st . He held the responsibility to maintain the world standard product quality; and to supervise to ensure the food safety. As a part of his professional development program, he participated in HACCP, BRC Global Standard and other important training programs, in the area of Food Safety and Quality Assurance. He is experienced in working with the International Organization like USAID‐PRICE.

Mr. Kamruzzaman – Consultant ‐ Plant Management

Md. Kamruzzaman is the Consultant ‐ Plant Management of Golden Harvest Agro Industries Ltd. Mr. Md. Kamruzzaman, BSc. Engineer, MBA is a professionally qualified Engineer; and is a Member & Life Fellow of IEB. He has about 20 years of practical experience in the field of Engineering and Factory Management. He held core engineering positions & been COO of a number of local conglomerates in Bangladesh. He got several overseas Training on Engineering & Management.

Mr. Aktheruzzaman Khan ‐ Consultant ‐ Food Development

Mr. Aktheruzzaman Khan is the Consultant ‐ Food Development of Golden Harvest Agro Industries Ltd. Mr. Aktheruzzaman, MSc (Bio Chemistry), Dhaka University, is a professionally qualified Food Technologist. He has about 33 years of practical experience in the field of Dairy, Food & Beverage and Administration. He held core positions of Production & Administration of a number of local conglomerate and multinational companies in Bangladesh & Abroad. He has got several overseas Training on Food Processing, Dairy & Management


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Section ‐IX Description of Property

Location of principal plants and other properties of the company and their condition:

Golden Harvest Agro Industries Ltd has its factory located in at Bokran Monipur, Bobanipur, Gazipur Sadar, Gazipur measuring land

area at 215.50 Decimal. The Factory is set up on a 54,261 SFT (square feet) state –of ‐the ‐art purpose built processing facility built in international standards with capacity to expand by additional 100,000 SFT. The fixed assets of the company have been revalued to their fair market value as on 30 June 2009. The company has acquired its Corporate Office space around 7,000 square feet at SPL Western Tower, Tejgaon Link Road, Level#5, Gulshan, Dhaka and registration of which is under process. Description of land

(Amount in Taka)

SL. No.

Description Value Location

1 Area of the land is 99 Decimals ( in the name of Golden Harvest Agro industries Limited)

39,600,000 Bokran, Monipur, Bobanipur, Gazipur Sadar, Gazipur

2 Area of the land is 115 decimals ( in the name of Golden Harvest Sea Fish and Food Processing Limited)

46,000,000 Pirujali & Bokran, Monipur, Bobanipur,Gazipur Sadar, Gazipur

85,600,000Deed references of Lands are mentioned hereunder:

i) Deed No. : 17345, Date: 15.08.2004 : 99.00 decimals

ii) Deed No. : 23887, Date: 29.09.2005 : 80.00 decimals

iii) Deed No. : 20361, date: 07.08.2005 : 36.50 decimals

215.50 decimals The Company owns the following operating fixed assets and they are situated at Company’s office and factory premises; and written down value are given below: (Written Down Value in Taka as per Audited Accounts)

Particulars As at September 30, 2010 (Taka) As at June 30, 2010 (Taka)

Lands and Development 85,600,000 85,600,000 Buildings and other constructions 117,977,543 118,606,469 Plant and machinery 110,419,749 111,274,967 Office Equipment 2,789,984 2,825,301 Furniture and Fixtures 16,016,546 16,219,287 Vehicle 10,522,664 8,297,476 Capital Work in Progress 117,455,180 115,514,140

The Company uses latest and most modern machineries and equipments for its production process.


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Lease or Charge over Assets:

1. The Company is having Term Loan facility with Mercantile Bank Limited, Gulshan Branch, Dhaka. According to sanction term, Land, Buildings and Plant & Machineries are mortgaged with them.

2. The following assets have been procured through leasing arrangement from the following leasing companies:

Leasing Company List of Assets Amount Outstanding United Leasing Co Ltd. 2 Refrigerated Cover Van, Taka 1,717,430

1 Sedan Car

IDLC Finance Ltd. 1 Refer Van and 1 Sedan car Taka 1,706,585


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Financial Expenses 5,904,603 27,970,438 5,618,075 Net Profit before Tax 52,342,259 140,671,328 16,569,104

Provision for Tax (16,599,340) (34,800,000) (3,400,000)

Net Profit 35,742,919 105,871,328 13,169,104

The Company starts its operation in the year of 2006 with the objective of 100% export ‐oriented frozen food export. Gradually local market has been created and present response of the market is very encouraging. In the latest financial year, Golden Harvest has concentrated on local sales more vigorously. In that regard, the Company has taken various steps to increase local sales through qualitative improvement, engagement of efficient manpower, installation of new machineries, sales through distributors and appropriate promotional activities that enabled the Company to enhance its local sales significantly. In the year ended 30 June 2010, consolidated local sales amounted to Taka 317.54 million. Gross profit also increased in this year by Taka 181.95 million. Net Profit margin rose significantly to Taka105.86 million.

4. Seasonal aspects of the company’s business

The nature of business is not directly associated with season.

5. Known trends, events or uncertainties

Political unrest, hartal, natural calamities and power crisis are the known events that may affect the Company's future business.

6. Change in the assets of the Company used to pay off any liabilities

No asset of the Company has been used to pay off the liabilities.

7. Future contractual liabilities

The Company

does

not

have

any

plan

within

next

one

year

to

contract

any

new

liabilities.

8. Future capital expenditure

The Company always adopts latest technology for providing better quality product and new product line. With the continuing growth of business, the Company has the plan for adding “Ready to Eat” product line. Setting up of new Ice cream factory and establishing Cold Chain all over the country are also intended projects of the Company.

9. VAT, income tax, custom duty or other tax liability

(a) VAT:

The Company has no outstanding VAT as on 30 September, 2010.


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(b) Tax:

The Company's Income Tax related information is as follows:

Accounting Year

Assessment Year Status

2005 ‐2006 2006 ‐2007 Assessment Completed.

2006 ‐2007 2007 ‐2008 Assessment Completed at DCT level. Appeal to Appellate Tribunal is in progress.

2007 ‐2008 2008 ‐2009 Assessment is in progress at DCT level.

2008 ‐2009 2009 ‐2010 Assessment is in progress at DCT level.

10. Personnel related scheme

Management of the Company always values its employees as human resources. In this respect, there are continuing in‐house training program arranged by the Company. Employees of the Company are also deputed for training arranged by various professional bodies

in Bangladesh and abroad.


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Section ‐XI Determination of the offering price

Golden Harvest Agro Industries Ltd. is a leading processed food company of Bangladesh. The Company is enjoying a high growth in

revenue, net profit and net assets in the past 4.25 years. Thus, Net Asset Value (NAV) and Earning ‐Based Value (EBV) may be used in

determining the indicative price of the shares of the Company. Net Asset Value (NAV) gives asset ‐backing to the shares of the

Company. Earnings Per Share (EPS) indicates profitability against shares of the Company. Earnings ‐based Value and Book Value ‐based

Value of similar stocks have been taken to estimate a theoretical fair price, considering market demand for the shares of the

Company. The weighted average price derived from the four valuation methods, giving equal weight, is the indicative offer price for

the shares of Golden Harvest Agro Industries Ltd. to be issued through the IPO under Book Building Method.

Different methods to determine the fair price per share of the Company are presented below:

Method 1 –P rice based on Net Asset Value (NAV) based price pe r share:

Particulars AmountA. Share Capital as at 30 September 2010 100,000,000

B. Reserve and Surplus as at 30 September 2010 325,877,505

C. Share Money Deposit as at 30 September 2010 250,000,000

D. Total Shareholders' Equity as at 30 September 2010 (A+B+C) 675,877,505

E. Number of shares as of 30 September 2010 35,000,000

F. Net Asset Value (NAV) Per Share as of 30 September 2010 (D/E) 19.31 Method 2 –P rice based on Earning pe r Share (EPS):

The Company’s operational performances and financial results reflect its growth, financial strength, earning and prospects that help investors in making informed investment decision. These are summarized as follows:

Financial Years Net Profit (Taka)

Paid ‐up Capital (Taka)

No. of outstanding

shares

Earning per share (EPS)

(Taka)

30‐Sep‐10 (Diluted and Annualized) 35,742,919 350,000,000 35,000,000 4.0830‐Jun‐10 (Diluted) 105,871,328 192,750,000 19,275,000 5.4930‐Jun‐09 13,169,104 37,500,000 3,750,000 3.5130‐Jun‐08 10,502,894 37,500,000 3,750,000 2.8030‐Jun‐07 ‐602,331 37,500,000 3,750,000 ‐0.16Weighted Average 38,749,156 655,250,000 65,525,000 2.51

The weighted average net profit for last 4.25 (four and one quarter) years stands at Taka 3.87 Crore and weighted average EPS stands at Taka 2.51. If we consider the share price on the basis of price/earning multiple of 20, the earning ‐based value of shares of the Company at a weighted average EPS of 2.51 stands at Taka 50.27.


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Method 3 ‐ Price Based On P/ E Ratio of Similar Stocks:

Sl. Company Face Value (Taka)

EPS (Taka)

Market Price (6‐Mon Av)

P/E Ratio

No. (Taka)

1 Apex Foods Limited 100 15.01 1147.00 76.422 Fine Foods Limited 10 0.88 95.93 109.023 Rahima Foods Limited 100 3.03 552.71 182.414 National Tea Co Ltd 100 156.78 4658.71 29.715 Beach Hatchery Ltd 10 1.53 90.32 59.036 Fu‐Wang Foods Limited 10 1.07 77.13 72.09

Simple Average 88.11(Source: DSE Monthly Review, June ‐Nov'10)

Determining the Fair Value of share of GOLDEN HARVEST AGRO INDUSTRIES LIMITED: Average EPS 2.51

Representative P/E Multiple (X) 88.11

Fair Value (Taka) 221.45 Method 4 ‐ Price based on P/BV Ratio of Similar Stocks:

Sl. No.

Company Face Value (Taka)

NAV (Taka) Market Price (6‐Mon Av)

(Taka)

P/BV Ratio

1 Apex Foods Limited 100 703.63 1147.00 1.632 Fine Foods Limited 10 11.15 95.93 8.603 Rahima Foods Limited 100 49.53 552.71 11.164 National Tea Co Ltd 100 502.87 4658.71 9.265 Beach Hatchery Ltd 10 11.15 90.32 8.106 Fu‐Wang Foods Limited 10 12.64 77.13 6.10

Simple Average 7.48(Source: DSE Monthly Review, June ‐Nov'10)

Determining the Fair Value of share of GOLDEN HARVEST AGRO INDUSTRIES LIMITED:

NAV (Diluted) 19.31Representative P/BV Multiple (X) 7.48

Fair Value (Taka) 144.38


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Finding and Calculation of the fair Price of share of Golden Harvest Agro Industries Ltd.:

Particulars Amount

Price based on Net Asset Value (NAV) 19.31

Price based on Earning Per Share (EPS) 50.27

Price Based on P/E Ratio of Similar Stocks 221.45Price Based on P/BV Ratio of Similar Stocks 144.38

Average 108.85 Based on the above calculation the fair value of the Stock of the Company stands at Taka 108.85 and we conservatively fix up the price @ Taka 80.00 per share including a premium of Taka 70.00 per share. Disclaimer : Information presented herein, while obtained from sources we believe to be reliable, is not guaranteed either as to accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation of the purchase or sale of any security. As it acts for public companies from time to time, BANCO may have a relationship with the above mentioned company(s). This report is intended for distribution in only those jurisdictions in which BANCO is registered. Redistribution of this report in any format, to any recipient other than initially intended by the Firm, is strictly prohibited.


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Section ‐XII Book Building Method Book Building is a process through which an issuer attempts to determine the price to offer its security based on demand from

institutional investors. Under the process, the price of an IPO share will be determined through an automated bidding to be

participated by different financial institutions and then the share will be opened for the IPO participant at the cut ‐off price

determined during the book building process. The bidding will be handled through a uniform and integrated automated system of the

stock exchanges, or any other organization as decided by the Commission, especially developed for book building method. The entire

procedure of price discovery under book building method is delineated below:

a) The issuer/issue manager shall issue invitation to the eligible institutional investors, both in writing and through publication

in at least 5 (five) widely circulated national dailies, giving at least 10 (ten) working days time, to the road show/presentation/seminar

indicating time and venue of such event.

b) The invitation letter shall accompany an information document containing all relevant information covering the proposed

issue of the issuer. The eligible institutional investors shall submit indicative price to the issuer/issue manager, signed jointly by the

Chief Executive Officer (CEO) and the Financial Analyst, highlighting the factors taken into consideration in support of the indicative

price, within the next 3(three) working days of the said road show/presentation/seminar;

c) The indicative price band will be fixed based on the past performance, expected future earnings of the issuer and the P/E

ratio of other peer companies in the industry and the determination of indicative price involves the following institutional investors

registered with or approved by SEC in this regard: ‐

- Merchant Bankers except the issue manager of the proposed issue;

- Foreign institutional investors; - Recognized pension funds and provident funds;

- Banks and NBFIs under regulatory control of Bangladesh Bank;

- Insurance Companies regulated under Insurance Act, 1938;

- Institutional venture capital and institutional investors;

- Stock Dealers; and

- Any other artificial judicial person permitted by the SEC for this purpose.

d) Issuer in association with issue manager and eligible institutional investors quote an indicative price in the prospectus with

the rationale for such price and submit the prospectus to the Commission with copy to the stock exchanges.

e) The indicative price range shall be determined as per price indications obtained from at least 15 (fifteen) eligible

institutional investors covering at least 3 (three) different categories including at least 5 (five) merchant banks of such investors.

f) Eligible institutional investors bidding shall commence after getting consent from the Commission for this purpose.

Institutional bidding period will be 3 to 5 (Three to Five) working days which may be changed with the approval of the Commission.


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g) Eligible institutional investors (EIIs) shall not be allowed to participate in the bidding unless they participate and quote in the

Road Show for setting the indicative price. The EII participating in the Road Show and quote price must also participate in the bidding.

The issuer and issue manager will jointly submit the attendance sheet and the quoted price by the EII along with the draft prospectus

to SEC.

h) Prospectus will be posted on the Websites of the Commission, stock exchanges, issue

manager and issuer at least 2 (two) weeks prior to the start of the bidding to facilitate investors to know about the company and all

aspect of offering.

i) The indicative price shall be the basis for formal price building with an upward and downward band of 20% (Twenty

Percent) of indicative price within which eligible institutional investors shall bid for the allocated amount of security.

j) If institutional quota is not cleared at 20% (Twenty Percent) below indicative price, the issue will be considered cancelled

unless the floor price is further lowered within the face value of security. Provided that the issuer’s chance to lower the price shall not be more than once.

k) No institutional investor shall be allowed to quote for more than 10% (Ten Percent) of

the total security offered for sale, subject to maximum of 5 (Five) bids.

l) The volume and value of bid at different prices will be displayed on the monitor of the said system without identifying the

bidder.

m) The institutional bidders will be allotted security on pro ‐rata basis at the weighted average price of the bids that would clear

the total number of securities being issued to them.

n) Institutional bidders shall deposit their bid with 20% (Twenty Percent) of the amount of bid in advance to the designated

bank account and the rest amount to settle the dues against security to be issued to them shall be deposited within 5 (Five) working

days prior to the date of opening subscription for general investors.

o) In case of failure to deposit remaining amount that is required to be paid by institutional bidders for full settlement of the

security to be issued in their favor, 50% (Fifty Percent) of bid money deposited by them shall be forfeited by the Commission. The

securities earmarked for the bidder who defaulted in making payment shall be added to the general investor quota.

p) The time gap between closure of bidding by Eligible Institutional Investors and subscription opening for general investors is 25 working days or as may be determined by the Commission.

q) The securities will be offered to the general investors, NRBs and Mutual Funds at the cut ‐off price determined during the

book building process.


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37

Section ‐XIII Market for Securities Being Offered

The issuer shall apply to all the stock exchanges in Bangladesh within seven working days from the date of consent accorded by the

Commission to issue prospectus.

DECLARATION ABOUT THE LISTING OF SHARES WITH THE STOCK EXCHANGE(S)

None of the stock exchange(s), if for any reason, grants listing within 75 days from the closure of subscription, any allotment in terms

of this Prospectus shall be void and the Company shall refund the subscription money within fifteen days from the date of refusal for

listing by the stock exchange(s), or from the date of expiry of the said 75 days, as the case may be.

In case of non ‐refund of the subscription money within the aforesaid fifteen days, the Company’s Directors, in addition to the issuer

company, shall be collectively and severally liable for refund of the subscription money, with interest at the rate of 2% (two percent)

per month

above

golden harvest

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