ADVICE FOR GENERAL PUBLIC THE INVESTORS ARE STRONGLY ADVISED IN THEIR OWN INTEREST TO CAREFULLY READ THE

CONTENTS OF THIS OFFER FOR SALE DOCUMENT, ESPECIALLY THE RISK FACTORS GIVEN AT SECTION 5.4, BEFORE MAKING ANY INVESTMENT DECISION. SUBMISSION OF FICTITIOUS AND MULTIPLE APPLICATIONS (MORE THAN ONE APPLICATIONS BY SAME PERSON) IS PROHIBITED AND SUCH APPLICATIONS MONEY IS LIABLE TO CONFISCATION UNDER SECTION 18A OF THE SECURITIES AND EXCHANGE ORDINANCE, 1969. ADVICE FOR INSTITUTIONAL INVESTORS AND HIGH NETWORTH INDIVIDUAL INVESTORS A SINGLE INVESTOR CANNOT SUBMIT MORE THAN ONE BIDDING APPLICATION EXCEPT IN THE CASE OF REVISION OF BID. IF AN INVESTOR SUBMITS MORE THAN ONE BIDDING APPLICATION THEN ALL SUCH APPLICATIONS SHALL BE SUBJECT TO REJECTION.

INTERNATIONAL STEELS LIMITED

(Incorporated in Pakistan under Companies Ordinance, 1984) PRELIMINARY OFFER FOR SALE DOCUMENT FOR OFFER FOR SALE OF SHARES

Present Offer Consists of 110,008,000 Ordinary Shares (25.29% of the Total Paid Up Capital) of Face Value of PKR 10.00 each Book Building Portion of the Offer comprises of 61,875,500 Ordinary Shares (56.25% of the Total Offer) at a floor price of PKR 12.90 per share Pre-IPO allocation to foreign investors comprises of 20,626,500 Ordinary Shares (18.75% of the Total Offer) at strike price to be determined through the Book Building Process General Public Portion of the Offer comprises of 27,506,000 Ordinary Shares (25% of the Total Offer) at a price of PKR [------] per share including premium of PKR [----] per share THIS IS NOT A PROSPECTUS BY INTERNATIONAL STEELS LIMITED BUT AN OFFER FOR SALE DOCUMENT BY INTERNATIONAL INDUSTRIES LIMITED, THE SPONSOR, OUT OF ITS SHAREHOLDING IN THE COMPANY BIDDING PERIOD DATES: From 12 APRIL 2011 to 14 APRIL 2011 (BOTH DAYS INCLUSIVE) FROM 9:00 A.M. TO 5:00 P.M. DATE OF PUBLIC SUBSCRIPTION: From DD/MM, 2011 to DD/MM, 2011 (BOTH DAYS INCLUSIVE) DURING BANKING HOURS FINANCIAL ADVISOR

HabibBankLimited
LEAD MANAGERS AND ARRANGERS

HabibBankLimited

CassimInvestments(Pvt.)Limited
JOINT BOOK RUNNERS

CassimInvestments(Pvt.)Limited
Book Building Portion Underwritten by:

AKDSecuritiesLimited
General Public Portion Underwritten by:

(To be filled in within 10 working days of closing of Bidding Period i.e. before submission of application to the Exchange for allocation of dates Cassim Investments (Pvt.) Limited for publication of the final OFSD and subscription of shares by the & general public as required under clause 6 of Appendix-4 of the listing AKD Securities Limited regulations of Karachi Stock Exchange (G) Limited)
Date of Publication of this Offer for Sale Document: [--]

Page 1 of 57

GLOSSARY OF TECHNICAL TERMS

CDA CDCPL CDS CIL CNIC Commission / SECP Company / ISL COD CRC FDI FX GOP HBL HDGC HNWI HRC IFC IPO IIL ISL ITO KIBOR KSE/Stock Exchange/Exchange NOC OFS OFFER OFFERER OFSD Ordinance PKR SCRA Sumitomo USD WHT Central Depositories Act, 1997 The Central Depository Company of Pakistan Limited Central Depository System Cassim Investments (Private) Limited Computerized National Identity Card Securities and Exchange Commission of Pakistan International Steels Limited Commercial Operations Date Cold Rolled Coils Foreign Direct Investment Foreign Exchange Government of Pakistan Habib Bank Ltd Hot Dipped Galvanized Coils High Net Worth Individual Hot Rolled Coils International Finance Corporation Initial Public Offer International Industries Limited International Steels Limited Income Tax Ordinance, 2001 Karachi Inter Bank Offer Rate Karachi Stock Exchange (Guarantee) Limited No Objection Certificate Offer for Sale Offer for Sale of Shares of the Company by the Offerer International Industries Limited Offer for Sale Document The Companies Ordinance, 1984 Pakistan Rupee(s) Special Convertible Rupee Account Sumitomo Corporation of Japan US Dollars Withholding Tax

Page 2 of 57

DEFINITIONS
Application Money In case of bidding for shares out of the book building portion, the total amount of money payable by a successful bidder which is equivalent to the product of the strike price and the number of shares to be allotted. AND In case of application for subscription of shares out of the general public portion, the amount of money paid along with application for subscription of shares which is equivalent to the product of the offer price and the number of shares applied for. Bid An indication to make an offer during the bidding period by a bidder to subscribe to the Ordinary Shares of International Steels Limited at or above the floor price, including all the revisions thereto. Any eligible prospective investor who makes a bid pursuant to the terms of the Preliminary OFSD and the Bidding Form. The total amount of the bid which is equivalent to the product of the bid price and the number of shares bid for. Pre-determined places where applications for bidding of shares are collected by the Joint Book Runners on behalf of the Offerer and may include offices of Corporate Brokerage Houses, Schedule Banks, Development Financial Institutions and Investment Finance Companies, subject to appointment of these institutions as agent by the Joint Book Runners through an agreement in writing for the purpose, with the consent of the Offerer. The form prepared by the Offerer on the format mentioned in the Listing Regulations of the Exchange for the purpose of making bids which will be considered as the application for subscription of Ordinary Shares out of the book building portion. The period during which bids for shares of the Company shall be made by Institutional Investors and HNWI Investors. The Bidding Period commences on MM/DD, 2011 and ends on MM/DD, 2011 (daily from 9:00 a.m. to 5:00 p.m.). The date after which Joint Book Runners will not accept any bid. The date on which Joint Book Runners shall start accepting bids. A mechanism of price determination through which indication of interest for subscription of shares offered by the Offerer is collected from Institutional Investors and HNWI Investors. Through this process a book is built which gives an idea of demand for the shares at different price levels. The strike price is determined based on the price at which demand for shares at the end of book building period is sufficient to raise the required amount. An account opened by the Offerer with the Collection Bank(s). The bidder will pay the margin money/bid amount through demand draft, pay order or cheque in favor of this account and the balance of the application money, if any, shall be paid through this account after successful allocation of shares.
Page 3 of 57

Bidder Bid Amount Bid Collection Centre

Bidding Form

Bidding Period

Bidding Process Ending Date Bidding Process Starting Date Book Building

Book Building Account

Final OFSD

A document containing all the information and disclosures as required under the Companies Ordinance, 1984 together with disclosure of the strike price, results of the Book Building process, the date of publication of OFSD and, the date(s) for subscription of shares out of the general public portion. Habib Bank Limited The minimum price set by the Offerer for Offer for sale of shares which is PKR 12.90 per share. A bid placed below the floor price will not be entertained by the Joint Book Runners. All individual and institutional investors including both Pakistani (residents & non-residents) and foreign investors. The price at which ordinary shares of the Company are offered to the general public. The Offer Price will be equivalent to the Strike Price. Individual investor who bids for shares of the value of PKR 1,000,000/- or above. Both local and foreign institutional investors. Cassim Investments (Private) Limited & AKD Securities Limited. Habib Bank Limited & Cassim Investments (Private) Limited. The maximum price a prospective institutional investor or HNWI Investor is willing to pay for a share under the Book Building process. The partial or total amount, as the case may be, paid by a bidder at the time of making a bid Ordinary Shares of International Steels Limited having face value of PKR10 each unless otherwise specified in the context thereof. The preliminary OFSD containing all the information and disclosures as required under the Companies Ordinance, 1984, and Listing Regulation of the Stock Exchange approved by the Commission under section 62 read with section 57(1) of the Companies Ordinance, 1984 and circulated amongst the Institutional Investors and HNWI Investors for bidding of shares out of the book building portion through the Book Building Process. A bid for a specified number of shares at the strike price to be determined through the Book Building process The price of share determined/discovered on the basis of book building process in the manner provided in the Listing Regulations of KSE at which the shares are issued to the successful bidders.

Financial Advisor Floor Price

General Public Offer Price

High Net worth Individual (HNWI) Institutional Investors Joint Book Runners Lead Managers Limit Price

Margin Money Ordinary Shares

Preliminary OFSD

Strike order Strike Price

Page 4 of 57

Table of Contents
1 2 3 4 5 6 7 8 9 10 11 12 APPROVAL AND LISTING ON THE STOCK EXCHANGE ..................................................... 6 BOOK BUILDING PROCEDURE ............................................................................................. 8 SHARE CAPITAL AND RELATED MATTERS ....................................................................... 20 UNDERWRITING, COMMISSIONS, BROKERAGE AND OTHER EXPENSES .................... 28 HISTORY AND PROSPECTS ................................................................................................ 30 FINANCIAL INFORMATION................................................................................................... 37 MANAGEMENT OF THE COMPANY .................................................................................... 43 MISCELLANEOUS INFORMATION ....................................................................................... 48 APPLICATION AND ALOTTMENT INSTRUCTIONS ............................................................ 51 BIDDING FORM OF INTERNATIONAL STEELS LIMITED ................................................... 54 SIGNATORIES TO THE OFFER FOR SALE DOCUMENT ................................................... 55 MEMORANDUM OF ASSOCIATION ..................................................................................... 56

Page 5 of 57

PART 1 1
1.1

APPROVAL AND LISTING ON THE STOCK EXCHANGE APPROVAL OF THE SECURITIES & EXCHANGECOMMISSION OF PAKISTAN
Approval of the Securities & Exchange Commission of Pakistan (SECP or the Commission) as required under Section 62, read with Section 57 of the Companies Ordinance, 1984 (the Ordinance) has been obtained by the Offerer for the issue, circulation and publication of this Offer for Sale Document (OFSD). IT MUST BE DISTINCTLY UNDERSTOOD THAT IN GIVING THIS APPROVAL, SECP DOES NOT TAKE ANY RESPONSIBILITY FOR THE FINANCIAL SOUNDNESS OF THE COMPANY AND ANY OF ITS SCHEMES STATED HEREIN OR FOR THE CORRECTNESS OF ANY OF THE STATEMENTS MADE OR OPINIONS EXPRESSED WITH REGARDS TO THEM. SECP HAS NOT EVALUATED QUALITY OF THE OFFER AND ITS APPROVAL FOR ISSUE, CIRCULATION AND PUBLICATION OF OFSD SHOULD NOT BE CONSTRUED AS ANY COMMITMENT OF THE SAME. THE PUBLIC/INVESTORS SHOULD CONDUCT THEIR OWN INDEPENDENT DUE DILIGENCE AND ANALYSIS REGARDING THE QUALITY OF THE OFFER BEFORE BIDDING / SUBSCRIBING.

1.2

CLEARANCE OF THE OFFER FOR SALE DOCUMENT BY STOCK EXCHANGE

THE OFSD HAS BEEN CLEARED BY THE KARACHI STOCK EXCHANGE (GUARANTEE) LIMITED (KSE) IN ACCORDANCE WITH THE REQUIREMENTS UNDER ITS LISTING REGULATIONS. WHILE CLEARING THE OFSD, THE KSE NEITHER GUARANTEES THE CORRECTNESS OF THE CONTENTS OF THIS OFSD NOR THE VIABILITY OF THE COMPANY. THE KSE HAS NOT EVALUATED THE QUALITY OF THE OFFER AND ITS CLEARANCE SHOULD NOT BE CONSTRUED AS ANY COMMITMENT OF THE SAME. THE PUBLIC/INVESTORS SHOULD CONDUCT THEIR OWN INDEPENDENT DUE DILIGENCE AND ANALYSIS REGARDING THE QUALITY OF THE OFFER BEFORE BIDDING / SUBSCRIBING.

1.3

FILING OF OFFER FOR SALE DOCUMENT AND OTHER DOCUMENT WITH THE REGISTRAR OF COMPANIES
On behalf of the Offerer, the Company has filed with the Registrar of Companies, Companies Registration Office (CRO) Karachi, as required under Sections 57(3) and (4) of the Ordinance, a copy of this OFSD signed by two directors of International Industries Limited who are also the directors of the Company, together with the following documents attached thereto: a) Letter Reference # KA-MU-776 dated 28th January 2011from the Auditors of the Company, M/s. KPMG Taseer Hadi & Co.- Chartered Accountants consenting to the publication of their names in the OFSD, which contains in Part 6 certain statements and reports issued by them as experts (for which consent has not been withdrawn), as required under Section 57(5) of the Companies Ordinance, 1984. b) Copies of material contracts and agreements mentioned in Part 8 of this OFSD as required under Section 57(4) of the Ordinance. c) Written confirmations of the Legal Advisor to this Offer and Bankers to this Offer, mentioned in this OFSD consenting to act in their respective capacities, as required under Section 57(5) of the Companies Ordinance, 1984. d) Consents of the Directors, the Chief Executive and the Company Secretary of the Company who have consented to their respective appointments being made and their having been named or described as such Directors and Chief Executive in this OFSD, as required under Section 57(3) of the Ordinance, read with sub-clause (1) of clause (4) of Section 1 of Part 1 of the Second Schedule to the Ordinance.

1.4

LISTING ON THE STOCK EXCHANGE

Application has been submitted by the Offerer to KSE for permission to deal in and for quotation of the shares of the Company. Page 6 of 57

If for any reason the application for formal listing is not accepted by the Stock Exchange the Offerer undertakes that a notice to that effect will immediately be published in the press, and thereafter the Offerer undertakes to refund application money to the applicants without surcharge as required under the provisions of Section 72 of the Ordinance.

Page 7 of 57

PART 2 2
2.1

BOOK BUILDING PROCEDURE BRIEF OFFER STRUCTURE

The Present Offer The Offerer is offering 110,008,000 Ordinary Shares of PKR 10 each for cash at a price of PKR [--]per share (including a share premium of PKR [--] per share) aggregating to PKR [] million (the Offer). The Offer constitutes 25.29% of the existing paid-up capital of the Company. The Offer is being made through the Book Building process at a floor price of PKR 12.90 per share, whereby 56.25% of the total Offer size i.e. 61,875,500 Ordinary Shares of PKR 10 each will be offered through the book building process to Institutional Investors and High Net Worth Individuals (HNWI), further 18.75% of the total Offer size i.e. 20,626,500 Ordinary Shares will be allocated to PreIPO Foreign Investors at Strike Price while the balance 25% of the total offer size i.e. 27,506,000 Ordinary Shares will be offered to the general public at the Strike Price.

2.2

BOOK BUILDING PROCEDURE

Book Building is a process whereby investors bid for a specific number of shares at various prices. The Lead Managers and Joint Book Runners, with the consent of Offerer, sets a floor price which is the lowest price an investor can bid at. An order book of bids from investors is maintained by the Book Runner, which is then used to determine the strike price through the Dutch Auction Method. Under the Dutch Auction Method, the strike price is determined by lowering the price to the extent that the total number of shares that the Offerer intends to offer through the Book Building process is subscribed. However, while determining the strike price the bids placed through strike orders shall not be taken into consideration. A bid by a potential investor can be a Limit Bid, Strike Bid or a Step Bid, each of which are explained below. Limit Bid: Limit bid is at the limit price, which is the maximum price an investor is willing to pay for a specified number of shares. In such a case a bidder explicitly states a price at which he/she/it is willing to subscribe to a specific number of shares. For instance, a bidder may bid for 2.0 million shares at PKR 15 per share. Since the bidder has placed a limit price of PKR 15 per share, this indicates that he/she/it is willing to subscribe at or below PKR 15 per share. Strike Order: A bid for a specified number of shares at the strike price to be determined through the Book Building Process. In Strike Order the bidder explicitly states the number of shares he/she/it is willing to subscribe at the Strike Price. For instance, a bidder may bid for 2.0 million shares at the strike price to be determined through the Book Building Process. Step Bid: A series of limit bids at increasing prices. The aggregate amount of step bid shall not be less than PKR 1,000,000/- and the amount of any step shall not be less than PKR 250,000/-. Under this bidding strategy, bidders place a number of limit bids at different increasing price levels. The bidders may, for instance, make a bid for 2.0 million shares at PKR 13 per share, 1.5 million shares at PKR 14 per share and 1.0 million shares at PKR 15 per share. A SINGLE INVESTOR SHALL NOT MAKE MORE THAN ONE BIDS, HOWEVER, A BID CAN BE REVISED THE INVESTORS SHALL NOT PLACE CONSOLIDATED BIDS. A BID APPLICATION WHICH IS FULLY OR PARTIALLY BENEFICIALLY OWNED BY PERSONS OTHER THAN THE ONE NAMED THEREIN IS TO BE CONSIDERED AS CONSOLIDATED BID. Once the bid period is over and book has been built, Book Runner shall determine the strike price. Page 8 of 57

Successful bidders shall be intimated, within two (2) working days of the closing of the bidding period, the strike price and the number of shares provisionally allotted to each of them. The successful institutional bidders shall, within seven (7) working days of the closing of the bidding period, deposit the balance amount as consideration against allotment of shares. Where a successful bidder defaults in payment of shares allotted to him, the margin money deposited by such bidder shall be forfeited to the Book Runner under clause 8.11 of Appendix 4 of the Listing Regulations of KSE. AS PER REGULATION 8.16 OF THE KSE LISTING REGULATIONS, THE SUCCESSFUL BIDDERS SHALL BE ISSUED SHARES IN THE FORM OF BOOK-ENTRY SECURITIES TO BE CREDITED IN THEIR CDS ACCOUNTS. ALL THE INSTITUTIONAL AND HNWI INVESTORS SHALL, THEREFORE, PROVIDE THEIR CDC ACCOUNT NUMBERS IN THE BID APPLICATION. 2.3

LEAD MANAGERS AND JOINT BOOK RUNNERS

Habib Bank Limited (HBL) and Cassim Investments Limited (CIL) has been mandated by the Offerer to act as a Lead Managers and Arrangers to this Offer, which is being made through the Book Building Process as laid out in Appendix 4 of the Listing Regulations of the KSE. CIL and AKD Securities Limited (AKDS) will act as Joint Book Runners.

2.4

ROLE AND FUNCTIONS OF LEAD MANAGERS AND JOINT BOOK RUNNERS

a) The Lead Managers and Joint Book Runners to the Offer ensure that:

i. all disclosures as required under the Companies Ordinance, 1984 and the Appendix 4 of the
Listing Regulations of the Karachi Stock Exchange have been made in the OFSD; carry out the Book Building process in a fair, efficient and transparent manner;

ii. necessary infrastructure and electronic system/software is available to collect bids and to iii. it has obtained on behalf of the Offerer, all approvals/consents/NOCs relating to the Offer; iv. the preliminary OFSD will, after approval of the Commission, be uploaded on its own as well
as on the Companys website; and

v. it has established bid collection centers at the following addresses:

Karachi Contact Officer: Direct No.: Mobile No.: PABX No.: Fax No.: Email: Postal Address: Mr. Habib Ali +92-21-3246-2616 +92-333-219-3783 +92-21-3241-5459, +92-21-3241-1933 +92-21-3241-4742 investments@cassim.net Cassim Investments (Private) Limited Room 26-28, Karachi Stock Exchange Building, Stock Exchange Road, Karachi Mr. Syed Khurram Shahid +92-21-3537-4301 +92-333-310-4756 +92-21-111-253-111 Ext. 636 +92-21-3586-7992, +92-21-3537-3211 Khurram.shahid@akdsecurities.net AKD Securities Limited 6th Floor, Continental Trade Centre Block 8, Clifton, Karachi Mr. Ehsan Ahmad Qureshi +92-42-3628-0742, +92-42-3628-0743, +92-42-3628-0744 +92-334-411-1253 +92-42-111-253-111 +92-42-3628-0745 ehsan.ahmad@akdtrade.com AKD Trade Page 9 of 57

Karachi Contact Officer: Direct No.: Mobile No.: PABX No.: Fax No.: Email: Postal Address:

Lahore Contact Officer: Direct No.: Mobile No.: PABX No.: Fax No.: Email: Postal Address:

Room No. 512/513, 5th Floor Lahore Stock Exchange Building, Lahore Islamabad Contact Officer: Direct No.: Mobile No.: PABX No.: Fax No.: Email: Postal Address:

Mr. Khalid Hussain +92-51-2894325 +92-332-212-5525, +92-333-532-6580 +92-51-289-4321 +92-51-289-4323 malik.khalid@akdtrade.com AKD Trade 303, 3rd Floor, ISE Tower Jinnah Avenue, Blue Area, Islamabad

b)

The Lead Managers and Joint Book Runners to the Offer shall:

i. conduct awareness campaigns through presentations, meetings, road shows etc; ii. collect bid applications and applications money, security, margin as the case may be from
the Institutional Investors and HNWI in the manner as mentioned in the Appendix 4 of the Listing Regulations of the Karachi Stock Exchange. same from the bidders;

iii. put serial number, date and time on each bidding application at the time of collection of the iv. vet the bidding applications; v. ensure that each bid application contains depository account number of the bidder
maintained with CDCPL wherein shares shall be credited in case the bid is successful;

vi. not accept multiple bids i.e. more than one bid applications by the same person; vii. build an order book showing demand for the shares at various prices; viii. discover the strike price at the close of the bidding period; ix. the Joint Book Runners shall enter into underwriting agreement with the Offerer; x. maintain record of the bids received for subscription of the shares; xi. circulate copies of the preliminary OFSD and bidding form cleared by the Exchange and
approved by the Commission to the prospective Institutional Investor and HNWI;

xii. publish an advertisement, approved by the Commission, in at least one Urdu and one

English daily Newspaper having wide circulation in the Federal and all the provincial capitals, to invite the Institutional investor and HNWI to participate in the bidding process; Dutch Auction Methodology for display of the order book and determination of the strike price, on the terms and conditions as may be agreed in writing between the Exchange and the Joint Book Runners; the Exchange, also live display the same order book simultaneously on its own website till closing of the bidding period; and developed by the Exchange for the purpose of Book Building. Joint Book Runners shall not accept and ENTER any bid after 5:00 p.m. during the days of the bidding period, except the last day when no fresh bid(s) shall be collected after 5:00 p.m. and the bid(s) collected thus far, shall be entered into the system by 7:00 p.m. on the same day and thereafter no bid shall be entered into the system or be revised in any way and for any reason even if the bid applications have been received from the investor.

xiii. use the software for Book Building process provided by the Exchange, which is based on

xiv. for information of the investors, in addition to live display of the order book on the website of

xv. Ensure that all the bids received by the bid collection centers are entered into the system

Page 10 of 57

2.5

OPENING AND CLOSING OF THE BIDDING PERIOD

The bidding period shall remain open for 3 working days commencing from the business hours at 09:00 a.m. on 12 April 2011 and will close at 05:00 p.m. on 14 April 2011 at the close of business hours BIDDING PROCESS STARTS ON BIDDING PROCESS ENDS ON
*(Both Days Inclusive)

12 April 2011 14 April 2011

2.6

ELIGIBILITY TO PARTICIAPTE IN BIDDING

Eligible investors who can place their bids in the Book Building process are Institutional Investors and HNWI. Institutional Investors include both local and foreign institutional investors HNWI investors are individual investors who bid for shares of value of PKR 1,000,000/- (Pak Rupees One Million Only) or above in the Book Building process.

2.7

INFORMATION FOR BIDDERS

a) The Preliminary OFSD for sale of shares has been duly cleared by the Karachi Stock Exchange and also approved by SECP. The preliminary OFSD and the bidding form can be obtained from the Registered Office of IIL, CIL, AKDS and the bid collection centers. Preliminary OFSD and bidding forms can also be downloaded from the website of Financial Advisor, Joint Book Runners and the Company. b) Eligible investors who are interested in subscribing to the Ordinary Shares should approach Joint Book Runners at the addresses provided in paragraph 2.4 to register their Bids. c) THE BIDS SHOULD BE SUBMITTED ON THE PRESCRIBED BIDDING FORM IN PERSON OR THROUGH FAXNUMBERS GIVEN IN PARAGRAPH 2.4.

2.8

BIDDING FORM AND PROCEDURE FOR BIDDING

a) Standardized bidding form has been prescribed by the Joint Book Runners. Bids shall be submitted at the bid collection centers in person or through fax number given in paragraph 2.4 on the standard bidding form duly filled in and signed in duplicate. The bidding form shall be serially numbered at the bid collection centers and date and time stamped, at the time of collection of the same from the bidders b) Upon completion and submission of the bidding form, the bidders are deemed to have authorized the Offerer to make necessary changes in the preliminary OFSD and the bidding form as would be required for finalizing and filing the final OFSD with KSE and SECP, without prior or subsequent notice of such changes to the bidders. c) The bidding procedure under the Book Building Process is outlined below:

i. Copy of the approved preliminary OFSD shall be circulated by the Offerer through Joint

Book Runners to at least ten prospective investors in each of the two categories and a copy will also be placed on the websites of the Company, CIL and AKDS. one English daily newspaper having wide circulation in the Federal and all the provincial capitals, inviting the institutional investors and HNWI for participation in the bidding.

ii. An advertisement, approved by the Commission, shall be published at least in one Urdu and

iii. A Book Building Account shall be opened by the Offerer for collection of bid amount. iv. The bidding form shall be issued in duplicate signed by the bidder and countersigned by the
Joint Book Runners, with first copy for Joint Book Runners and the second copy for the bidder.

Page 11 of 57

v. Bids shall be submitted through the bid collection centers or through fax numbers given in
paragraph 2.4 on the standard bidding form duly filled in and signed in duplicate. The addresses for the bid collection centers are given in paragraph 2.4.

vi. Bids can be placed at limit price, strike order or step bid. vii. Bid money/margin money shall be deposited through demand draft, pay order or cheque in
favor of Offer for Sale of shares of International Steels Limited Book Building Account. in respect of bids placed by HNWIs.

viii. Joint Book Runners shall collect an amount of 100% of the application money as bid money ix. Joint Book Runners shall collect an amount of not less than 25% of the application money
as margin money in respect of bids placed by institutional investors

x. Joint Book Runners may reject a bid placed by an Institutional Investor/HNWI for reasons to
be recorded in writing and the reasons should be disclosed to such bidder forthwith. Decision of Joint Book Runners shall not be challengeable by the bidder or its associates.

xi. Joint Book Runners shall not accept the bids made at a bid price lower than the Floor Price. xii. The Offerer and Joint Book Runners shall not accept bids from associated persons of the
Offerer and the Company in excess of five percent (5%) of the size of the book building portion.

xiii. The bidders will receive back the duplicate form upon submission of their bids which will be

proof of their bid submission. In case of facsimile, a copy of form with receiving will be faxed back to the bidder. to paragraphs 2.12 and 2.14).

xiv. Bidders can revise or withdraw their bids during the bidding period (for details please refer xv. Joint Book Runners shall maintain record of the bids received / rejected / revised/ withdrawn
along with identities of the bidder and evidence of amount received.

xvi. Joint Book Runners shall ensure that all the bids received by the bid collection
centers are entered into the system developed by the Exchange for the purpose of the book building according to the procedure given in paragraph 2.4 (b) (xiii) and as per clause 8.6 of Appendix 4 of the Listing Regulations of KSE. The system shall be capable to display live an order book, in descending order with respect to the bid price, showing the demand for shares at various prices and accumulative number of shares bid for along with percentage of the total shares offered. The order book should also show the revised bids and the bids withdrawn.

xvii. At the close of the bidding period, the Joint Book Runners shall determine the strike price
with the consent of the Offerer

xviii. Successful bidders shall be intimated, within two (2) working days of the closing of the
bidding period, the strike price and the number of shares provisionally allotted to each of them. bidding period, deposit the balance amount as consideration against allotment of shares.

xix. The successful institutional bidders shall, within seven (7) working days of the closing of the xx. Under rule 8.11 of the Listing Regulations, where a successful institutional bidder defaults in
payment of shares allotted to it, the margin money deposited by such institutional bidder shall be forfeited by Joint Book Runners. close of the bidding period.

xxi. Margin money of unsuccessful bidders will be refunded within three (3) working days of the xxii. Final allotment of shares out of the Book Building portion shall be made after receipt of full
subscription money from the successful bidders; however, shares to such bidders shall be Page 12 of 57

transferred at the time of transfer of shares out of the general public portion of the offer to successful applicants.

xxiii. An associated person or any other related person or party of the Offerer shall not make
bid(s) for shares in excess of 5% of the book building portion of the offer. 2.9

BANK ACCOUNT FOR BOOK BUILDING AND PUBLIC PORTION

The Offerer has opened two separate bank accounts for collection of applications money, one each for the Book Building portion and the General Public portion of the Offer. The bidders shall draw demand draft, pay order or cheque in favor of Offer for Sale of Shares of International Steels Limited Book Building Account which has been opened at Habib Bank Limited. The collection bank shall keep and maintain the bid money in the said account. Once the strike price is determined and list of allottees is finalized, the Lead Manager, after obtaining NOC from KSE, may request in writing to the collection bank for transfer of the money of successful and accepted applications to the Offerers account(s) and advise for refund of the bid money to unsuccessful bidders.

2.10 PAYMENT INTO THE BOOK BUILDING ACCOUNT The bidders shall draw a demand draft, pay order or cheque favoring Offer for sale of shares of International Steels Limited Book Building Account and submit it at the designated bid collection center either in person or through facsimile along with a duly filled in bidding form. CASH MUST NOT BE SUBMITTED WITH THE BIDDING FORM AT THE BID COLLECTION CENTER. PAY ORDER, BANK DRAFT, CHEQUE OR ANY OTHER APPROPRIATE INSTRUMENT ACCEPTABLE TO JOINT BOOK RUNNERS AND DRAWN IN FAVOR OF OFFER FOR SALE OF SHARES OF INTERNATIONAL STEELS LIMITED BOOK BUILDING ACCOUNT ARE ACCEPTABLE. Since the investors can bid for shares through limit price, strike order or step bid therefore payment procedure is explained below for all the three (3) methods. a) PAYMENT FOR LIMIT PRICES If investors are placing their bids through limit price then they shall deposit the margin money based on the number of shares they are bidding for at their stated bid price. For instance, if an investor is applying for 5.0 million shares at a price of PKR 17 per share, then the total application money would amount to PKR 85 million. In such a case, (i) HNWI shall deposit PKR 85 million in the Book Building account as the bid amount which is 100% of PKR 85 million; and (ii) Institutional Investors shall deposit PKR 21.25 million in the Book Building account as the margin amount which is at least 25% of PKR 85 million. b) PAYMENT FOR STRIKE ORDERS If investors are placing a strike order, then they shall deposit the margin money/bid money equal to the product of the number of shares they are bidding for and the Floor Price which in this case is PKR 12.90 per share assuming that strike price is discovered at the Floor Price. For instance, if an investor is applying for 5.0 million shares then the total application money would be PKR 64.5 million. In such a case, (i) HNWI shall deposit PKR 64.5 million as bid amount which is 100% of PKR 64.5 million and (ii) Institutional Investors shall deposit at least PKR 16.125 million as margin money which is 25% of PKR 64.5 million. In the event where limit and step orders are insufficient to determine price through the Book Building mechanism, all strike orders will be considered for allocation of shares at floor price. For details please refer to para 2.16 below. c) PAYMENT FOR STEP BIDS If investors are placing a step bid, which is a series of limit bids at increasing prices, then they shall deposit the margin money/bid money based on the total number of shares they are bidding for at their stated bid prices. For instance, if the investor bids for 0.5 million shares at PKR 13 per share, 0.4 million shares at PKR 14 per share and 0.3 million shares at PKR 15 per share, then in essence the investor has placed one step bid comprising three limit bids at increasing prices. The margin money would amount to PKR. 16.60million, which is the sum of the products of the number of shares bid for and Page 13 of 57

the bid price of each limit bid. In such a case, (i) HNWI shall deposit PKR 16.60 million in the Book Building Account as bid amount which is 100% of PKR 16.60 million and (ii) Institutional Investors shall deposit at least PKR 4.15 million in the Book Building Account as margin money which is 25% of PKR 16.60 million. 2.11 PAYMENT BY FOREIGN INVESTORS Foreign investors may subscribe using their Special Convertible Rupee Accounts (SCRA), as set out under Chapter 20 of the State Bank of Pakistans Foreign Exchange Manual. Payments made by foreign investors shall be supported by proof of receipt of foreign currency through normal banking channels. Such a proof shall be submitted along with the Bidding Application by the foreign investors. 2.12 REVISION OF BIDS BY THE BIDDER The bidders shall have the right to revise their bids any time during the bidding period and on the last day till 05:00 pm. Online revision of the bids may be allowed to the bidders through system software. This will however be subject to the condition that the bidder shall comply with the requirements of bidding as disclosed under Appendix 4 of the Listing Regulations and any other condition or procedure disclosed in the OFSD. 2.13 REJECTION OF BIDS BY THE JOINT BOOK RUNNERS In terms of clause 8.4 of Appendix 4 of Listing Regulations of KSE, Joint Book Runners may reject a bid placed by an institutional investor/HNWI for reasons to be recorded in writing and the reasons should be disclosed to such bidder forthwith. Decision of the Joint Book Runners shall not be challengeable by the bidder or its associates. 2.14 WITHDRAWAL OF BIDS BY THE BIDDER A bidder has the right to withdraw placed bid from the bidding system any time during the bidding period and on the last day till 05:00 pm. Online withdrawal of the bids may be allowed to the bidders through system software. This will however be subject to the condition that the bidder shall comply with the requirements of bidding as disclosed under Appendix 4 of the Listing Regulations and any other condition or procedure disclosed in the OFSD. 2.15 WITHDRAWAL OF OFFER BY THE OFFERER a) According to clause 3.10 of Appendix 4 of the listing regulations of KSE, in case the Offerers do not receive bids at or above the floor price for the minimum number of shares offered, it may withdraw the Offer. The decision of withdrawal shall be taken within a period not more than three (3) working days of the closing of bidding period. b) The Offerers shall withdraw the offer if the total bids received are less than fifteen. c) The withdrawal shall be immediately intimated to the Commission and the Exchange. d) In case the offer is withdrawn the margin money/bid money will be refunded to bidders within three (03) working days of the decision of withdrawal without any markup, interest etc. 2.16 MECHANISM FOR DETERMINATION OF STRIKE PRICE a) At the close of the bidding period, the Offerer, in consultation with the Joint Book Runners shall determine the strike price on the basis of Dutch Auction Method. Under this Methodology, the strike price is determined by lowering the price to the extent that the total number of shares offered is subscribed. However, while determining the strike price, the bids placed through strike order(s) shall not be taken into consideration. b) The order book shall display the bid prices in a descending order along with the quantity for each price level as well as the cumulative quantity at each price level. The bids at strike orders shall, however, be displayed in the order book in the following manner: i. after the lowest limit bid, in case the limit bids placed are not sufficient for full allotment of the shares offered, or, ii. immediately, after the limit bid at which all the shares offered can be allotted, in case the limit bids placed are sufficient for full allotment of the shares offered. Page 14 of 57

c) For the purpose of allotment of shares, the limit bid(s) entered at the price determined/discovered as Strike Price through Book Building Process and the bids placed as strike order shall be ranked equally and preference will be given to the bidder who has made the bid earlier. d) Once the strike price is determined all those bidders whose bids have been found successful shall become entitled for allotment of shares. The bidders, who have made bids at prices above the strike price, will be issued shares at the strike price and the differential will be refunded. The bidders, who have made bids below the strike price, shall not qualify for allotment of shares and their margin money shall be refunded. The mechanism for determination of strike price can be understood by the following illustration. a) Number of shares being offered through the Book Building: 61.88 million ordinary shares b) Floor price: PKR 12.90 per share c) Bidding Period: 12 April 2011 14 April 2011
Bidder Price (PKR per share) Quantity (shares in Cumulative Category of Order Millions) Number of Shares Date

Institution - A Institution - E Institution - B Foreign Institution - F HNWI - A Institution - C Institution - Y Institution - S HNWI - E Institution - C Institution - B HNWI - A Institution - C

22.00 21.50 20.75 20.00 19.25 18.25 X X 18.05 17.50 17.25 17.10 17.05

5.00 10.00 8.00 10.00 10.00 15.00 5.00 5.00 15.00 3.00 4.00 2.75 6.00

5.00 15.00 13.00 23.00 33.00 48.00 53.00 58.00 73.00 76.00 80.00 78.75 84.75

Limit Price Limit Price Limit Price Limit Price Step Bid Step Bid Strike Bid Strike Bid Limit Price Step Bid Limit Price Step Bid Step Bid

Day 1 Day 3 Day 2 Day 2 Day 3 Day 1 Day 1 Day 3 Day 2 Day 1 Day 2 Day 3 Day 1

Total Shares Subscribed Strike Price determined through Dutch Auction Method Bid Withdrawn Bid has been Revised and placed at PKR20.75 per share

a) Setting Strike Price On the basis of the figures provided in the above illustration, according to the Dutch Auction Method, the strike price would be set at PKR 18.05 per share to sell the required quantity of 61,875,500 ordinary shares. At PKR 22 per share, investors are willing to buy only 5 million shares. Since 56.88 million shares are still available, therefore the price will set lower. At PKR 20.75 per shares, investors are willing to buy 8 million shares. Since 48.88 million shares are still available, therefore, the price will set lower. At PKR 20.00 per shares, investors are willing to buy 10 million shares. Since 38.88 million shares are still available, therefore, the price will set lower. At PKR 19.25 per shares, investors are willing to buy 10 million shares. Since 28.88 million shares are still available, therefore, the price will set lower. At PKR18.25 per share, investors are willing to buy 15 million shares. Since 13.88 million shares are still available, therefore, the price will set lower. At PKR18.05 per share, investors are willing to buy 15 million shares. Since after bidding for 15 million shares at PKR 18.05 per shares no share will be available, therefore, the Strike Price will be set at PKR 18.05 per share for the entire lot of 61.88 million shares. The bidders, who have placed bids at prices above the strike price (which in this illustration is PKR 18.05 per shares), will become entitled for allotment of shares at the strike price. The bidders, who have placed bids below PKR 18.05 per share, will not qualify for allotment of shares. Page 15 of 57

After allotment in the aforementioned manner, 13.88 million shares are still available for allotment. These shares will be allotted to the bidders who have placed bid(s) at PKR 18.05 and who have placed bid(s) at the strike order, however, for the purpose of allotment of these 13.88 million shares preference will be given to the bidder who has placed the bid earlier. 2.17 BASIS OF ALLOTMENTOF SHARES After the closure of bidding period, the Joint Book Runners will analyze the demand generated at various price levels. Only successful bidders shall be eligible for allotment and transfer of shares. Final allotment of shares out of the Book Building portion shall be made after receipt of full subscription money from the successful bidders; however, shares to such bidders shall be dispatched or credited, as the case may be, at the time of transfer of shares out of the public portion of the offer to successful applicants. 2.18 REFUND OF MARGIN MONEY Investors who have bid lower than the strike price are not eligible for allotment of shares. Margin money of the unsuccessful bidders shall be refunded within three (3) working days of the close of the bidding period as required under clause 8.12 of Appendix 4 of the KSE Listing Regulations. 2.19 UNDERWRITING After determination of the strike price the Joint Book Runners shall within two (2) working days of the closing of the bidding period enter into an underwriting agreement with the Offerer indicating the number of shares that Joint Book Runners would underwrite at the strike price and the underwriting Commission/Fee to be charged. 2.20 PUBLICATION OF THE FINAL OFFER FOR SALE DOCUMENT The underwriting agreement for the public portion of the Offer shall be finalized within ten (10) working days from the closing of bidding period. Upon finalization of the underwriting agreements, the Lead Managers shall, within ten (10) working days from the date of closing of the bidding period, submit an application to KSE for allocation of dates for publication of the final OFSD and subscription of shares by the general public. The final OFSD in full or in abridged form must be published within seventeen (17) working days of the closing of the bidding period in the manner as specified in Section 53 of the Companies Ordinance, 1984. Public subscription for the shares shall be held at any date(s) within thirty days (30) of the publication of the final OFSD but not earlier than seven (7) days of such publication. 2.21 ADDRESSES OF BID COLLECTION CENTRES Bid Collection Centers have been established at Karachi, Lahore and Islamabad to collect the bids for the Book Building portion of International Steels Limited in order to provide convenient access to bidders to participate in the bidding process. Addresses, detail of contact persons and fax numbers of the Bid Collection Centers are given in paragraph 2.4.

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2.22 STATEMENT BY OFFERER

January 25, 2011 The General Manager, Karachi Stock Exchange (Guarantee) Limited, Stock Exchange Building, Stock Exchange Road, Karachi.

On behalf of the Offerer, I confirm that all material information as required under the Companies Ordinance, 1984 and the Listing Regulations of the Karachi Stock Exchange (Guarantee) Limited have been disclosed in the Offering Document and that whatever stated in the Offering Document and the supporting documents is true and correct to the best of our knowledge and belief and that nothing has been concealed.

For and on behalf of the Offerer International Industries Limited

-Sd-

Towfiq H. Chinoy Chief Executive Officer

Page 17 of 57

2.23 STATEMENT BY LEAD MANAGERS

February 8, 2011 The General Manager, Karachi Stock Exchange (Guarantee) Limited, Stock Exchange Building, Stock Exchange Road, Karachi.

Being mandated as Lead Managers to this Offer for sale of shares of International Steels Limited through the Book Building process, we confirm that all material information as required under the Companies Ordinance, 1984 and Appendix 4 of the Listing Regulations of the Karachi Stock Exchange (Guarantee) Limited have been disclosed in this OFSD and that whatever stated herein and in the supporting documents is true and correct to the best of our knowledge and belief and that nothing has been concealed.

On behalf of:

-Sd-

_______________________ M. Khalid Sulaiman, IBG Habib Bank Limited

_________________________________ Firozuddin Cassim, Chairman Cassim Investments (Private) Limited

Page 18 of 57

2.24 STATEMENT BY JOINT BOOK RUNNERS

February 8, 2011 The General Manager, Karachi Stock Exchange (Guarantee) Limited, Stock Exchange Building, Stock Exchange Road, Karachi.

Being mandated as Joint Book Runners to this Offer for sale of shares of International Steels Limited through the Book Building process, we confirm that all material information as required under the Companies Ordinance, 1984 and Appendix 4 of the Listing Regulations of the Karachi Stock Exchange (Guarantee) Limited have been disclosed in this OFSD and that whatever stated herein and in the supporting documents is true and correct to the best of our knowledge and belief and that nothing has been concealed.

On behalf of:

-Sd-

_______________________ Firozuddin Cassim, Chairman Cassim Investments (Private) Limited

_________________________________ Umair Aijaz, Head - IBG AKD Securities Limited

Page 19 of 57

PART 3

3
3.1

SHARE CAPITAL AND RELATED MATTERS SHARE CAPITAL

No. of shares AUTHORIZED Ordinary shares of PKR 10/- each ISSUED, SUBSCRIBED AND PAID UP CAPITAL 417,716,700 17,283,300 435,000,000 Issued under a scheme of arrangement* of PKR 10/= each Issued for Cash of PKR 10/- each Total The existing issued, subscribed & paid up capital of the Company is held as follows: SHAREHOLDERS / SPONSORS 435,000,000 International Industries Limited 10 4,350,000,000 10 10 4,177,167,000 172,833,000 4,350,000,000 Face value (PKR) Premium (PKR) Total (PKR)

500,000,000

10

5,000,000,000

435,000,000 Total Paid up Capital 4,350,000,000 *Issued pursuant to courts order dated 12 August 2010 passed in Judicial Miscellaneous Application No. 1 of 2010 3.1.1 Divestment The Board of Directors of IIL, the holding company, has resolved to divest upto 195,750,000 ordinary shares of PKR 10 each out its holding in the Company. In aggregate the proposed offer is 45% of the issued, subscribed and paid up capital of the Company. Firstly upto 61,875,500 shares i.e.14.22% of the issued and paid up capital of the Company will be offered through the book building process to institutional investors and HNWI investors at a floor price of PKR 12.90 per share.

On the completion of the Book Building process and discovery of the Strike Price following allocation will be made: 43,506,000 shares i.e. 10% of the issued and paid up capital of the Company will be offered to the International Finance Corporation at 20% discount to premium obtained in the book building process. For details please refer to paragraph 3.1.2. 42,235,500 shares i.e. 9.71% of the issued and paid up capital of the Company will be offered to Sumitomo Corporation at 20% discount to premium obtained in the book building process. For details please refer to paragraph 3.1.3. 20,626,500 ordinary shares i.e. 4.74% of the issued and paid up capital of the Company will be offered to Pre-IPO foreign investors at strike price. For detail please refer to paragraph 3.1.4 27,506,000 i.e. 6.3% of the issue and paid up capital of the Company will be offered to general public at Strike Price.

Page 20 of 57

The post divestment share holding structure is expected to be as follows: (however please note the actual share holding will be determined only after the book building process is complete and the Strike Price is discovered) Number of Shares 239,250,500 43,506,000 42,235,500 61,875,500 20,626,500 27,506,000 SHAREHOLDERS 1) International Industries Limited (IIL) 2) International Finance Corporation (IFC or Pre-IPO Investor) refer to 3.1.2 3) Sumitomo Corporation of Japan (Sumitomo) (Pre-IPO investor) refer to 3.1.3 4) Institutional Investors / HNWI Investors 5) Foreign Investors (refer to 3.1.4) 6) General Public % Share 55.00% 10.00% 9.71% 14.23% 4.74% 6.32%

435,000,000 3.1.2

Total Paid up Capital

100%

Pre- IPO Placement - (International Finance Corporation) IIL intends to divest part of its shareholding in ISL to IFC as per the conditions set out in the Loan Agreement signed between the Offerer, ISL and IFC dated 27th June 2008 amounting PKR 535,998,000. The shares will be issued at 20% discount to the premium determined, if any, through the Book Building process. For details please refer paragraph 5.3.3 and paragraph 8.9.7. Rationale IFC has invested in ISL since inception and has provided loan amounting to PKR 536mn which is convertible in to equity of ISL at the time of listing. Placement of ISL shares to IFC should give extra comfort to other institutions as well as retail investors as IFC is considered among the most prestigious equity partners and consider equity participation on strict merit where sponsors are of high reputation with track record of delivering quality projects.

3.1.3

Pre-IPO Placement (Sumitomo Corporation) The Offerer also intends to divest part of its shareholding in ISL to Sumitomo as Pre-IPO Placement at 20% discount to the premium determined, if any, through the Book Building process. Sumitomo has already signed a share purchase agreement with the Offerer dated 26 January 2011. Rationale Sumitomo Corporation is one of the largest steel producers of Japan having presence in 66 countries across the world. Sumitomo has been in business since 1919, and considered amongst the pioneers of steel and allied products. Sumitomo is engaged in multi-faceted businesses including, Metal Products, Transportation Infrastructure development and Real Estate. Sumitomos inclination to become equity partner validates the technical viability of ISL and provides comfort to upcoming investors. Mechanism for Determination of the amount of Discount The amount of discount per share will be determined once the Strike Price per share is determined through the Book Building process. In case the strike price is determined as PKR 12.90 per share then the discount will be of PKR 0.58 per share and IFC and Sumitomo Corporation will be issued shares at PKR. 12.32 per share. In case the Offerer does not receive bids for the minimum number of shares offered to institutional investors and HNWI investors and decides to issue the shares at face value of Rs. 10/- per share then there will be no discount and IFC and Sumitomo Corporation will be issued shares at Rs. 10/- per share.

3.1.4

SUBSCRIPTION BY PRE-IPO FOREIGN INVESTORS The pre-IPO foreign investors will be offered the shares allocated to them at the Strike Price. They will subscribe these shares within seven days of the close of the Bidding Period at the strike price determined through the book building process and as soon as the custodian/broker confirms receipt of the remittance through official channel and the order is placed in writing to the Book Runner. The Book Runner will immediately confirm to the Commission, the Company, the Offerer and the foreign investor in writing regarding the allocation of shares. The allocation will be based on first come first Page 21 of 57

serve basis. In case all or a part of the shares allocated to Pre-IPO foreign investors remain unsubscribed, then, such unsubscribed shares will be added to the Public Portion of the Offer. These foreign investors shall not come under the purview of regulation 6(7)(ii) of KSE Listing Regulations and the foreign investor shall not be liable to hold the shares for a period of 6 months from the last date of public subscription. Names of Pre-IPO foreign investors will appear in final OFSD. 3.1.5 PRESENT OFFER The present Offer is being made to Institutional investors and HNWI investors through the Book Building process and the general public through IPO. Notes: a) As per paragraph 3(I)(iv) of the Companies (Issue of Capital) Rules, 1996, the sponsors shall, at all times, retain at least twenty five percent (25%) of the capital of the Company; b) As per Regulation No. 6 (7) (i) of the KSE Listing Regulations, sponsors shareholding in excess of twenty five percent (25%) shall not be saleable for a period of six months from the date of public subscription. c) As directed by the Commission vide its letter No. SMD/CO.62/01/2011 dated 1 April 2011, shares allotted to International Finance Corporation and Sumitomo Corporation as mentioned in paragraph 3.1.2 and 3.1.3 above shall not be saleable and transferrable for a period of two (2) years commencing from the last date for public subscription. The Offerer may, however, approach to the Commission for relaxation of this restriction. d) The Commission vide letter No. SMD/CIW/CI/01/2011 dated 31 March 2011 has granted relaxation from the requirements of sub-rule (ii) of rule 9 of the Companies (Issue of Capital) Rules, 1996 (the CI Rules). 3.2

OPENING AND CLOSING OF THE SUBSCRIPTION LIST

The subscription list will open at the commencement of banking hours on MM DD, 2011 and will close on MM DD, 2011 at the close of banking hours

3.3

INVESTOR ELIGIBILITY FOR PUBLIC OFFER

Eligible investors include a) Pakistani citizens residing in or outside Pakistan or persons holding two nationalities including Pakistani Nationality; b) Foreign nationals whether living in or outside Pakistan; c) Companies, bodies corporate or other legal entities incorporated or established in or outside Pakistan (to the extent permitted by their respective constitutive documents and existing regulations as the case may be); d) Mutual funds, provident/pension/gratuity funds/trusts (subject to the terms of their respective Trust Deeds and existing regulations); and e) Branches in Pakistan of companies and bodies corporate incorporated outside Pakistan.

3.4

FACILITIES AVAILABLE TO NON-RESIDENT PAKISTAN AND FOREIGN INVESTORS

Non-resident Pakistani investors and foreign investors may subscribe for the shares being offered through this OFSD by using their SCRA as set out in Chapter 20 of the Foreign Exchange Manual of the State Banks of Pakistan. MINIMUM AMOUNT OF APPLICATION AND BASIS FOR ALLOTMENT OF SHARES OUT OF THE PUBLIC PORTION OF THE OFFER The basis and conditions of allotment to the general public shall be as follows:

Page 22 of 57

a) b) c) d) e)

Application for shares below the total value of PKR [] (Offer Price x 500 Shares) shall not be entertained. The minimum amount of application for subscription of 500 ordinary shares is PKR [] (Offer Price x 500 Shares) Applications for shares must be made for 500 shares or in multiples of 500 shares only. Applications which are neither for 500 shares nor for multiples of 500 shares shall be rejected. Transfer fee shall be borne by the investors including investors mentioned in sub paragraph 3 of paragraph 3.6. SUBMISSION OF FICTITIOUS AND MULTIPLE APPLICATIONS (MORE THAN ONE APPLICATIONS BY SAME PERSON) IS PROHIBITED AND SUCH APPLICATIONS` MONEY IS LIABLE TO CONFISCATION UNDER SECTION 18A OF THE SECURITIES AND EXCHANGE ORDINANCE, 1969. If the shares offered to the general public are sufficient for the purpose, all applications shall be accommodated. If the shares applied for are in excess of the shares offered, the distribution shall be made by computer balloting, in the presence of the representative(s) of KSE in the following manner: (i) If all the applications for 500 shares can be accommodated, then all such applications shall be accommodated first. If all applications for 500 shares cannot be accommodated then balloting will be conducted among applications for 500 shares only. (ii) If all the applications for 500 shares have been accommodated and shares are still available for allotment, then all applications for 1,000 shares shall be accommodated. If all applications for 1,000 shares cannot be accommodated then balloting will be conducted among applications for 1,000 shares only. (iii) If all applications for 500 shares and 1,000 shares have been accommodated and shares are still available for allotment, then all applications for 1,500 shares shall be accommodated. If all applications for 1,500 shares cannot be accommodated then balloting will be conducted among applications for 1,500 shares only. (iv) If all applications for 500 shares, 1,000 shares and 1,500 shares have been accommodated and shares are still available for allotment, then all applications for 2,000 shares shall be accommodated. If all applications for 2,000 shares cannot be accommodated then balloting will be conducted among applications for 2,000 shares only. (v) After the allotment in the above mentioned manner, the balance shares, if any, shall be allotted in the following manner: (a) If the remaining shares are sufficient to accommodate each application for over 2,000 shares, then 2,000 shares shall be allotted to each applicant and remaining shares shall be allotted on pro-rata basis. (b) If the remaining shares are not sufficient to accommodate all the remaining applications for over 2,000 shares, then balloting shall be conducted for allocation of 2,000 shares each to the successful applicants.

f) g)

h)

If the offer is over subscribed in terms of amount only, then allotment of shares shall be made in the following manner: (i) (ii) (iii) (iv) First preference will be given to the applicants who applied for 500 shares; Next preference will be given to the applicants who applied for 1,000 shares; Next preference will be given to the applicants who applied for 1,500 shares; and then Next preference will be given to the applicants who applied for 2,000 shares.

i) j)

After allotment of the above, the balance shares, if any, shall be allotted on pro rata basis to the applicants who applied for more than 2,000 shares. Allotment of shares will be subject to scrutiny of applications for subscription of shares. Page 23 of 57

k)

Applications, which do not meet the above requirements, or applications which are incomplete, will be rejected.

3.5

REFUND OF SUBSCRIPTION MONEY TO UNSUCCESSFUL APPLICANTS

The Company shall take a decision within ten (10) days of the closure of subscription list as to which applications have been accepted or are successful and refund the money in cases of unaccepted or unsuccessful applications within ten (10) days of the date of such decision, as required under Section 71 of the Ordinance. As per sub-section (2) of Section 71 of the Ordinance, if refund as required under Sub-section (1) of Section 71 of the Ordinance is not made within the time specified therein, the Offerer shall be liable to repay the money with surcharge at the rate of 1.5%, for every month or part thereof from the expiration of the 15th day and, in addition, to a fine not exceeding PKR 5,000/- and in case of continuing offense to a further fine not exceeding PKR 100/- per day after the said 15th day of which the default continues. Provided that the Offerer shall not be liable if he/she proves that the default in making the refund was not due to any misconduct or negligence on his/her part.

3.6

CREDITAND DISPATCH OF SHARE CERTIFICATES

The Company, on behalf of the Offerer, will dispatch share certificates to successful applicants through their Banker to the Offer or by crediting the respective Central Depository System (CDS) accounts of the successful applicants within thirty (30) days of the close of public subscription, as per Listing Regulations of the Stock Exchanges. Shares will be transferred either in scrip-less form in the CDS of CDCPL or in the shape of physical scripts on the basis of option exercised by the successful applicants. Shares in the physical scripts shall be dispatched to the Bankers to the Offer within thirty (30) days from the date of close of subscription list, whereas scripless shares shall be directly credited through book entries in the respective accounts maintained with the CDCPL. The applicants who opt for receipt of shares in scrip-less form in CDS should fill in the relevant columns of the Application Form. In order to exercise the scrip-less option, the applicant(s) should have CDS account at the time of subscription. Stamp duty on transfer of shares in the names of the successful applicants shall not be borne by the Offerer. If the Company makes a default in complying with the above requirements, it shall pay to the Stock Exchange a penalty of PKR 5,000/- per day for every day during which the default continues. The Stock Exchange may also notify the fact of such default and the name of the Company by notice and also by publication in its Ready-Board Quotation of the Stock Exchange. The name of the Company be notified to the members of the Stock Exchange and placed on the website of the Stock Exchange.

3.7

TRANSFER OF SHARES
a) Physical Scripts Under the provisions of Section 77 of the Ordinance, the Directors of the Company shall not refuse to transfer any fully paid share unless the transfer deed is, for any reason, defective or invalid or is not accompanied by the relevant share certificate. Provided that the Company shall within thirty (30) days from the date on which the instrument of transfer was lodged with it, notify the defect or invalidity to the transferee who shall, after the removal of such defect or invalidity, be entitled to re-lodge the transfer deed with the Company. b) Transfer under book entry system The shares maintained with the CDS in the book entry form shall be transferred in accordance with the provisions of the Central Depositories Act, 1997 and the CDCPL Regulations.

Page 24 of 57

3.8

SHARES ISSUED IN PRECEDING YEARS AT PAR

Date of Allotment 03-12-2007 22-10-20101 30-12-2010 Number of shares 30,000 417,716,700 17,253,300 435,000,000 The Board of Directors of IIL in its meeting held on 23 July 2009, approved a scheme of arrangement (Scheme) for the reconstruction of IIL by separation of the steel project (Project) and vesting of the Project in ISL. Under the Scheme, assets and liabilities of the Project including without limitation, properties of all kinds and by whatever title held and whether moveable or immovable or tangible or intangible, and without limiting the generality of the foregoing in particular and related liabilities including loans, creditors etc. were transferred and vested into ISL in accordance with the Scheme and pursuant to the courts order dated 12 August 2010. As of the said date net assets of PKR 4,177,167,000 were transferred and vested into ISL against which 417,716,700 ordinary shares of PKR 10/- were issued to IIL.
1

Considerations Cash Issued pursuant to courts order dated 12 August 2010 passed in Judicial Miscellaneous Application No. 1 of 2010 Cash

3.9

PRINCIPAL PURPOSE OF THE PUBLIC OFFER

The purpose of this Offer for Sale of Shares is to expand and diversify the capital base, attracting prestigious foreign equity strategic partners like IFC and Sumitomo, bringing in foreign investment, improving the governance structure of the Company, improving liquidity and consequent access to alternate capital resources.

3.10 INTEREST OF SHAREHOLDERS None of the holders of the issued shares of the Company have any special or other interest in the property or profits of the Company other than as holders of the ordinary shares in the capital of the Company. 3.11 DIVIDEND POLICY The rights in respect of capital and dividends attached to each share are and will be the same. The Company in its general meeting may declare dividends but no dividends shall exceed the amount recommended by the Directors. Dividend, if declared, in the general meeting, shall be paid according to the terms of the provisions of the Ordinance. The Directors may from time to time pay to the members such interim dividends as appear to the Directors to be justified by the profits of the Company. No dividends shall be paid otherwise than out of the profits of the Company for the year or any other undistributed profits. No unpaid dividends shall bear interest or mark-up against the Company. The dividends shall be paid within the period laid down in the Ordinance. 3.12 ELIGIBILITY FOR DIVIDEND The shares being offered for sale shall rank pari-passu with the existing shares in all matters, including the right to such bonus or right issue and dividend as may be declared by the Company subsequent to the offer of such shares. 3.13 DEDUCTION OF ZAKAT Income distribution will be subject to deduction of Zakat at source, pursuant to the provisions of Zakat and Ushr Ordinance, 1980. (XVIII of 1980) as may be applicable from time to time. 3.14 CAPITAL GAINS (SECTION 37-A) The capital gain arising on or after the first day of July 2010, from disposal of securities held for a period of less than a year, shall be chargeable to tax at the rates specified as follows: Page 25 of 57

S.No 1

Period Where holding period of security is less than six (6) months

Where holding period of security is more than six (6) months but less than twelve (12) months

Where the holding period of the security is more than one year

Tax Year 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2016 -

Rate of Tax 10.0% 10.0% 12.5% 15.0% 17.5% 7.5% 8.0% 8.5% 9.0% 9.5% 10.0% 0%

Capital Gain Tax is not applicable to a banking company and an insurance company. The holding period of a security shall be reckoned from the date of acquisition (whether before, on or after the thirtieth day of June, 2010) to the date of disposal of such security falling after the thirtieth day of June, 2010. Where a person sustains a loss on disposal of securities in a tax year, the loss shall be set off only against the gain of the person from any other securities chargeable to tax and no loss shall be carried forward to the subsequent tax year. 3.15 WITHHOLDING TAX ON DIVIDENDS Dividend distribution to the shareholders will be subject to withholding tax under section 150 of the Income Tax Ordinance, 2001 at the rate of 10% as specified in part I, Division III of First Schedule to the said Ordinance or any time to time amendments therein. In terms of the provision of Section 8 of the said Ordinance, said deduction at source, shall be deemed to be full and final liability in respect of such profits. 3.16 DEFERRED TAXATION Deferred tax is accounted for using the liability method in respect of all temporary differences at the balance sheet date between the tax base of assets and liabilities and their carrying amount. Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that the temporary difference will reverse in the future and the taxable profits will be available against which the temporary differences can be utilized. The carrying amount of deferred tax asset is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow deferred tax asset to be utilized. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on the tax rates that have been enacted or subsequently enacted at the balance sheet date. The Company has booked a deferred tax liability of PKR 120,169,000 as at November 30, 2010. 3.17 FEDERAL EXCISE DUTY& WITHHOLDING TAX ON SALE/PURCHASE OF

SHARES
a) Federal Excise Duty (FED) of 16% is charged on brokerage commission on purchase / sale of shares on a Stock Exchange. b) Withholding Tax of 0.01% will be charged on sale/purchase value on the purchase / sale of shares /Modaraba certificates / instruments of redeemable capital. 3.18 TAX CREDIT FOR INVESTMENT IN IPO Under section 62 of the Income Tax Ordinance, 2001, tax credit on investment in Initial Public Offerings (IPOs) up to a maximum investment of PKR 300,000/= is available where investment is made on July 1, 2006 and onward. Page 26 of 57

3.19 JUSTIFICATION FOR PREMIUM Internationally renowned Partners: International Finance Corporation and Sumitomo Corporation of Japan have already invested in ISL highlighting the strategic dominance of ISL in the steel industry. Further, ISL will benefit from Sumitomos presence and expertise. Since Sumitomo has been in the steel industry for more than 60 years, ISL will benefit from its strategic partner in terms of better pricing, timely delivery establishing relationships with other regional players, access to latent markets, and inventory management. Sponsor Profile: Principal Sponsor of International Steels Limited, International Industries Limited is one of Pakistans leading manufacturer and sellers of GI Pipe, Steel Tubes and Pipes, API Line Pipe, Cold Rolled Coils & Polyethylene Line Pipes. The Sponsor has a track record of building successful projects in the steel and cable industry and considered as one of the pioneers in cold rolled steel and pipe industry. ISL will not only capitalize on the market reputation of its sponsors to proliferate its business through use of existing distribution network and brand equity comfort, but will also benefit from the astute industry experience of its parent company to manage its operations converging in financial and operational efficiencies. The earnings per share of IIL was PKR 10.27 during the year ended June 2010 (Audited financial statements) and PKR 2.75 in the half year ending December 2010 (Unaudited financial statements). Book value as at the same period was PKR 46.75/- and PKR 39.62/- respectively. Management Team with Proven Track Record: ISL has a strong emphasis on recruiting and retaining the best professionals who are central to its business model. The management team boasts exemplary industrial, educational and professional backgrounds from top tier institutions across the world as mentioned in paragraph 7.4. Further the Companys sponsors i.e. IIL have a record of almost 50 years in the steel industry and for the past 20 years has been manufacturing CRC, both for its own consumption and for supplies in the local market. IIL has transferred certain experienced professionals to ISL to get maximum advantage from their expertise. Moreover ISL has also hired some Expat engineers on a long term basis to head the critical cold rolling mill operation and coil galvanizing line. Deficit Product: Domestic demand for CRC in 2009-10 was estimated at 470,000 tons, which was primarily met through imports except 110,000 tons which is produced by Pakistan Steel Mills (70,000 tons) and IIL (40,000 tons).Similarly, demand for HDGC during 2009-10 was estimated at 291,000 tons which was met through imports only except 30,000 tons produced by Pakistan Steel Mills. World Class Infrastructure: A well established plant spread over an area of 32 acres with a capacity of 250,000 tons of CRC and 150,000 tons of HDGC. Out of the 250,000 CRC produced, ISL intends to produce and sell c.150,000 tons of HDGC whereas the remainder 100,000 tons will be sold as CRC. ISL is equipped with a dedicated combined cycle 18MW power plant, Acid regeneration, Hydrogen and Nitrogen gas generation facilities. The state of the art facility ensures uninterrupted production of prime quality products with maximum level of efficiencies. The facility is comparable to any top class steel plant in the region and was built at a much lesser cost as compared to any new plant. Key advantages of ISL over its competitors: Since the Project was constructed using in-house expertise, the Company did not incur significant Engineering, Procurement and Construction costs Impact of PKR devaluation over the past two years, means that similar project will cost atleast 20% higher in PKR terms IIL has considerable experience in the steel sector, including domestic and international relationships, and thus was able to negotiate procurement at better rates for larger volumes. This benefit may not be available to others IIL was able to obtain financing at concessional rates under the SBP LTFF facility. Under the said facility, ISL cost of debt is on average 8.75% as compared to conventional borrowing rates which may be offered to other entrants into this market

Buyer Benefits / Competitive Advantage: Currently the domestic requirement for CRC and HDGC is being catered through imports exposing the buyers to inventory management and exchange rate fluctuations. Similarly, there is a time lag of c.3-4 months between order and delivery which requires huge amount of cash deployment. With the presence of ISL the buyers will not have to maintain huge inventories and risk the pricing fluctuations. Similarly the US$ risk will be minimized and reduce the lead time required to purchase the product. Page 27 of 57

PART 4 4 UNDERWRITING, COMMISSIONS, BROKERAGE AND OTHER EXPENSES UNDERWRITING

Book Building Portion Cassim Investments Limited and AKD Securities Limited have been mandated to act as the Joint Book Runners to the Offer. The Joint Book Runners shall underwrite the Book Building Portion of the offer of 61,875,500 ordinary shares within two (2) working days of the closing of the bidding period as required under clause 5 of Appendix 4 of the listing regulations of the Karachi Stock Exchange at the strike price determined through the book building process. In the opinion of the Directors, the resources of the Underwriter are sufficient to discharge its underwriting obligations/commitments. Public Portion As required under clause 6 of Appendix 4 of the listing regulations of the Karachi Stock Exchange, the Public Portion of the offer of 27,506,000 ordinary shares will be underwritten within ten (10) working days after the closing of bidding period. Names and number of shares underwritten by each of the underwriters shall be disclosed in the final OFSD. 4.2

4.1

UNDERWRITING COMMISSION
No underwriting commission will be paid for the amount of Book Building portion underwritten by the Joint Book Runners. Amount of security deposited by the defaulting bidder shall however, be forfeited to the Joint Book Runners. No take-up commission will be paid for the amount of Book Building portion taken-up by the Joint Book Runners.

4.3

BUY BACK/REPURCHASE AGREEMENT

THE UNDERWRITERS HAVE NOT ENTERED INTO ANY BUY BACK/RE-PURCHASE AGREEMENT WITH THE OFFERER OR ANY OTHER PERSON IN RESPECT OF THIS PUBLIC OFFER. ALSO, NEITHER THE OFFERER NOR ANY OF ITS ASSOCIATES HAVE ENTERED INTO ANY BUY BACK/REPURCHASE AGREEMENT WITH THE UNDERWRITERS OR THEIR ASSOCIATES. THE OFFERER AND ITS ASSOCIATES SHALL NOT BUYBACK/REPURCHASE SHARES FROM THE UNDERWRITERS AND THEIR ASSOCIATES.

4.4

COMMISSION TO THE BANKERS TO THE OFFER

A commission at the rate of 0.25% of the amount collected on allotment in respect of successful applicants will be paid by the Offerer to the Bankers to the Offer for services to be rendered by them in connection with this offer for sale.

4.5

BROKERAGE
For the public offering, the Offerer will pay brokerage to the Members of all three stock exchanges at the rate of 1.00% of the value of shares (including premium) actually sold through them. No brokerage shall be paid to the Members in respect of shares taken up by the underwriters by virtue of their underwriting commitments.

Page 28 of 57

4.6

EXPENSES TO THE OFFER FOR SALE

The expenses of this offer are estimated not to exceed PKR [--] (excluding underwriting, take-up commission) of which the listing fees and CDCPL charges shall be borne by the Company while the expenses to the Offer shall be borne by the Offerer. Details of the expenses are mentioned below: Expenses Financial Advisor & Lead Arrangers Fee Joint Book Runners Fee Underwriting Commission General Public* Take up Commission* Bankers to the offer (Book Building) Commission Joint Book Runners Commission Brokerage to Members of the Stock Exchange Public Portion Bankers to the offer (Public portion) Commission Printing, Publication and notice Costs KSE Fees and Listing Charges KSE Software Charges CDC Annual Fees for Eligible Security CDC Fresh Issue Fees SECP Application and Processing Fee Legal & Professional Fees Balloting Agent Miscellaneous Cost Total *The underwriting commission for the general public portion and take up commission will be disclosed in the final OFSD. Rate 1.25% 0.25% []% []% 0.25% 1.00% 1.00% 0.25% Amount (PKR) [] [] [] [] [] [] [] [] 1,000,000 2,762,500 500,000 67,500 1,957,500 150,000 1,000,000 250,000 1,000,000

Page 29 of 57

PART 5 5
5.1

HISTORY AND PROSPECTS BRIEF HISTORY

Parent Company / Offerer International Industries Limited (IIL) the parent company is in the business of producing and marketing of various kinds of pipes for more than 45 years, which includes GI Pipe, Steel Tubes and Pipes, API Line Pipe and Polyethylene Line Pipes throughout the world. IIL achieved the landmark of gross sales of more than PKR 15.5 billion during 2009-10, including gross profit of more than PKR 1 billion, domestic sales of more than PKR 11.9 billion while the exports figures reached more than US$ 43.27 million. In 2009-10 IIL produced more than 2 million tons of pipes, maintaining its edge as the brand leader in terms of quality in domestic market but also in exports to 30 countries across 6 continents. IIL invested in a Steel Project comprising 250,000 tpa cold rolling mill and 150,000 tpa metal coating steel plant to be located at plot bearing Survey No. 399-405, Deh Sharabi, Landhi Town, Karachi and an 18MW gas fired power plant. The Company International Steels Limited (ISL) was incorporated on 3rd September 2007 and was registered at Karachi as a public unlisted company under the name CRGS Limited. On 8th November 2007, the name of the company was changed to its present name International Steels Limited. The certificate for commencement of business for ISL was issued on 11th February 2009. In March 2009, the Company implemented a Scheme of Arrangement for reconstruction of IIL by hive down of the Steel project from IIL and vesting of the Steel Project in International Steel Ltd (ISL), which at present is a public unlisted company.

5.2

COMMERCIAL OPERATIONS
International Steels Limited subsequent to successful trial operations of its production facilities (dated 1st January to 19th January 2011) has confirmed that the project has achieved the desired st specification and the project has achieved commercial operations from 1 January 2011.

5.3

THE STEEL PROJECT

The Steel Project undertaking comprises of a 250,000 tons per annum Cold Rolling Mill and a 150,000 tons per annum Metal Coating Steel Plant on the basis of 100% output. Out of the 250,000 tons Cold Roll Coil (CRC), 150,000 will be used to manufacture Hot Dipped Galvanized Coils (HDGC) and the balance will be sold as CRC. The Steel Project was audited by Lloyds Register Quality Assurance (LRQA) and has recently been awarded ISO 9001, ISO 14001 & OHSAS 18001 Certifications The Steel Project is a fully automated controlled production facility for all product variants of sheet metal as Rolled, Annealed, Galvanized, Profile, cut to length etc The complex mainly comprises of: 1) Cold Rolling Mill 2) Sheet Galvanizing Plant 3) Annealing Plant 4) Pickling Line 5) Skin Pass Mill 6) Rewinding Line 7) Slitter Line and 8) Allied utilities, which include 18 MW Captive Gas Fired Power Generation plant, Hydrogen Nitrogen production, RO Plant, De-mineralizing Water Plant, Sewage Treatment, Effluent Treatment & steam turbine and boiler. The Steel Project is designed to add a 2nd Rolling Stand and thereby increase Rolling capacity to 400,000 Metric Tons per Year. Civil work for this has been incorporated and implemented in the Original Layout. Cost of Capacity Increase at present is 5,000,000 based on an offer received from SMS-Siemag.

Page 30 of 57

Similarly the Annealing capacity can be increased by a further 50,000 from the Current 100,000 Metric Tons per Year by the addition of 3 bases 1 Furnace and 2 Cooling hoods at an approx. cost of 30% of the original cost of the Annealing equipment. Process technology, knowledge, license and commissioning supervision is being provided by the following manufacturers and suppliers; Technological Layout by M/s International Industries Limited Utilities by M/s International Industries Limited Civil Structures & Steel Structure Design by M/s Ranjan Structomech Engineering Consultant ETP/STP by M/s International Industries Limited Services for engineering, construction, fabrication, erection, installation and project management of this project are being provided by the following; o M/s Mahmood & Co. and, o A.H Fabricator Civil construction mainly by o M/s Riaz & Co, o Pearl Construction, and o Attaullah

5.3.1

Project Cost The total cost of project PKR 8.7bn as of November 30, 2010 and is tabulated below:
Description Land Buildings Plant & Machinery* Power Plant Financial Charges Pre-operating expenses Total PKR M n 860 800 5,640 600 500 300 8,700

* An amount of PKR 50 million is estimated to be incurred by the company as highlighted in paragraph 5.3.2 5.3.2 List of Plant and Machinery Total Cost of the Machinery and Commissioning Schedule is as follows:
S. No. 1 2 3 4 5 6 7 8 Description Pickling Line 4 Hi Reversing Mill Rewinding Line Annealing Furnaces 4 Hi Skin pass Mill Sheet Galvanizing Line Hydrogen and Nitrogen Gas Various miscellaneous equipment like Roll Grinder, Roll de-chocking machine, lathes, shapers, overhead cranes, coil transfer trolleys and other ancillary machinery and equipment Amount 280 2,000 70 200 250 1,000 175 Status Operational Operational Operational Operational Operational Operational Operational

1,265

Operational

Total
Other Auxiliary Machinery 9 Cut to length Line 10 Acid Regeneration Plant 11 Slitter Line

5,240 50 300 50 Operational Currently under commissioning phase Commissioning expeceted in May 2011

Total
Grand Total

400 5,640

Page 31 of 57

5.3.3

Means of Financing the Project The above project has been financed through the following means. Description PKR Mn Equity 4,350 SBP Financing at fixed interest average rate of 8.75% p.a. for 10 years* 4,000 Commercial Borrowing** 350 Total 8,700 * Agreement with a syndicate of banks comprising Habib Bank Limited, United Bank Limited, Bank Al-Habib Limited and Standard Chartered Bank of Pakistan Limited (collectively referred to as Syndicate) for PKR 4.0 billion under the Long Term Financing Facility of the State Bank of Pakistan. 8.75% is the average rate of financing. (PKR Millions) Habib Bank Limited United Bank Limited Bank Al-Habib Limited Standard Chartered Bank of Pakistan Limited Facility Amount 1,212 1,091 606 1,091 Drawdown 1,212 1,091 606 1,091

The syndicated term finance facility is obtained for plant and machinery of the Steel Project and is secured by way of mortgage of land located at Survey No. 399-405, Landhi Town Karachi. Further, corporate guarantee is issued by IIL to the Syndicate to cover for any cost overruns which may be incurred by the Steel Project. ** Financing of PKR 350 million has not been obtained as of yet. This financing will be obtained once payment for auxiliary equipments will be made. It is further clarified that IIL has obtained financing from International Finance Corporation amounting to PKR 535.998 million (USD 6.4 million) which is convertible into ordinary shares of ISL once strike price is determined through the book building process. This loan is and shall remain in the books of IIL unless converted into ordinary shares of ISL and does not form part of means through which the Project was financed. For further clarification refer to paragraph 8.9.7 below. 5.3.4 Plant Location The Plant is located at plot measuring 32 acres bearing survey No. 399-405, Rehri Road, Deh Sehrabi, Landhi Town, Karachi. 5.3.5 Project Implementation Schedule Date 25.11.2006 06.07.2007 Event Plot measuring 32 acres purchased by IIL at Deh Sharabi, Survey 399-405, Landhi Town, Karachi IIL BOD approves the downstream steel project for manufacture of 250,000 tons Cold Rolled Coils per annum plus Galvanizing plant of capacity of 150,000 tons p.a IFC enters into agreement with IIL & ISL [Co-borrowers] for two loans; Loan- C for USD 6.4mn was drawn down by IIL (in April 2010)and the outstanding amount of this loan shall be converted into equity of ISL @ 80% of the premium of the share value of ISL shares at the time of public offer for sale. Loan- A for USD 12 mn has not yet been utilized by IIL/ISL. Certificate for Commencement of Business of ISL Sindh High Court sanctions the Scheme of Arrangement under section 284-287 of CO 1984 IIL s Board of Directors approved to divest 45% shareholding in ISL , partly to strategic investors IFC & Sumitomo Corporation, partly to institutional investors and high net worth individuals through Book building and partly to the general public at the price determined through Book building. The Boards Divestment Committee was authorized to make the necessary decisions for the divestment. ISO 9001, ISO 14001 and OHSAS 18001 Certification awarded by Lloyds Register Quality Assurance Ltd. ISL Commercial Operations started. Page 32 of 57

27.06.2008

11.02.2009 12.08. 2010

22.12.2010

31.12.2010 01.01.2011

5.3.6

Plant Implementation Schedule

S. No. 1 2 3 4 5 6 7 8

Description Pickling Line 4 Hi Reversing Mill Rewinding Line Annealing Furnaces 4 Hi Skin pass Mill Sheet Galvanizing Line Hydrogen and Nitrogen Gas Generation Plant Various miscellaneous equipment like Roll Grinder, Roll dechocking machine, lathes, shapers, overhead cranes, coil transfer trolleys and other ancillary machinery and equipment

Commissioning Date 15-Oct-10 30-Nov-10 30-Nov-10 15-Dec-10 1-Jan-11 Sep-10 Aug-10 Dec-10

Other Auxiliary Machinery 9 Cut to length Line 10 Acid Regeneration Plant 11 Slitter Line

Mar-11 Apr-11 May-11

5.3.7

Other Equipments a) 18 MW Power Plant The Project includes an 18 MW gas fired power plant. The power plant has been in operation since 2008. Before the commencement of the Steel Project, entire generation from the power plant is being supplied to KESC. However, post commercial operations, only the available excess st capacity is provided to KESC as per the agreement with KESC dated 31 August 2007. The profit from supply of power to KESC during this period is PKR 333 million. The excess capacity is approximately 10MW. This sale will continue till phase 2 i.e. expansion of the Steel Project capacity to c.400,000 tons after which the units supplied to KESC will further decline. The cost of the power plant is approximately PKR 600 million. The cost is based on a dollar / rupee parity of PKR 62/-. The current replacement cost of a similar power plant would be approximately PKR 900 million. The current cost per unit generated is approximately PKR 4.52 per unit whereas the current cost of unit supplied by KESC is PKR 10.70. There will be a saving of PKR6.18 per unit. b) Effluent Treatment Plant ISL has set up an Effluent Treatment Plant to support the project activities. This plant will ensure collection, neutralization and filtration of the entire solvent based wastages generated during the process and will make them re-usable or discharge them in conformity with National Environmental Standards. c) Water Treatment Plant ISL will use reverse osmosis to generate over 100m3/hr of water to meet its industrial requirements and thus will not rely on the already over loaded water system within the vicinity. This investment will help ISL to: Reduce the water usage for industrial purposes Reduce industrial waste going to the drains Improve water availability for local residents by re using the industrial water

d) Hydrogen & Nitrogen Plants The factory is equipped with a 375 nm Nitrogen Plant and 50 nm Hydrogen plant to provide gas for the Annealing of Cold rolled and also of Galvanized Coils. Gases are produced by the Pressure Swing Adsorption process. Page 33 of 57

5.3.8

Other Auxiliary Equipments a) Acid Regeneration Plant The used hydrochloric acid from the strip pickling line is re-generated so that 98% is re-used and only 2% neutralized and discharged b) Cut to Length Line The Cold Rolled/ Galvanized Coils are required to be cut into specific lengths as per market requirements. This equipment is to be used for cutting the Rolls into specific lengths. c) Slitter Line The Cold Rolled Coils/ Galvanized Coils are manufactured in standard widths. This line is to be used to Slit the width of the Coil into smaller width as per requirements of the market e.g. pipes would need a relatively smaller width coil, which is slitted accordingly and marketed.

5.3.9

Civil Works Civil Work pertaining to plant, building and machinery at site is 100% complete. Further, civil work for the increased rolling capacity has been completed and is in place.

5.3.10 Availability of raw material Hot rolled coils will be imported from JFE Steel Mills Japan, MMK Russia, Saldanha South Africa, or any other International source that produces the required quality of Hot rolled Coils. Zinc will be imported from Glencore, China and Sumitomo Corporation, Japan. 5.3.11 Demand Outlook Currently the demand for CRC exceeds 400,000 tons. Out of this demand approximately 110,000 tons is being met through domestic production (40,000 tons IIL and 70,000 tons by PSML) whereas the remainder is being met through imports. Similarly demand for HDG Coils approximates 300,000 tons which is in part catered through domestic production (30,000 tons by Pakistan Steel Mills Limited) whereas primary demand is being met through imports. ISL is in a position to take advantage of the existing gap between domestic demand and supply thus replacing imports with good produced locally, with the current demand sufficient to out run ISLs production capacity. 5.3.12 Off-take IIL, the sponsor company of ISL, produces 80,000 tons of CR based tubing. Out of this, 40,000 tons CR is produced through in-house production and 40,000 tons from imports. It is expected that approximately 30-40 thousand tons will be purchased by IIL. 5.3.13 Expected Group Synergies Post IPO, IIL will hold atleast 55% of the equity in ISL. Being the market leader in the steel pipe industry and enjoying good market reputation will give an edge to ISL in the marketing of its products. Quality is associated with IILs name. ISLs products will be readily accepted in the market because of IILs association. ISL will benefit from the technical expertise of IIL in the field of Cold Rolling. IIL has the experience of operating a cold rolling mill for the past 20 years. IIL will provide technical assistance in operation and maintenance of the cold rolling mill. During the construction and implementation phase, since the Project was part of IIL all Engineering, Procurement and Construction services were provided on no charge basis. Pre-operating expenses were PKR 300 million which mainly constitute direct salaries of site personnel. The raw material for both IIL and ISL is HR coils. IIL being in the industry for more than 45 years enjoys good contacts with international suppliers which can be used effectively to achieve Page 34 of 57

economies of scale while procuring HR coils for both IIL and ISL. Buying in bulk will enable both IIL and ISL to avail quantity discounts. Similarly, in the procurement of local supplies, ISL can utilize the expertise of IIL. IIL has well defined HR and IT policies. These can be adopted by ISL. 5.3.14 Foreign Experts ISL has acquired the services of two foreign experts who will advise and train the staff for two years. One of the foreign experts bring with them extensive experience of working in major steel units in UK, Libya, Mexico, Iran and Vietnam while the other expert has vast experience of working in Galvanizing plants at Port Kambla Works, Australia, Sumitomo Wakayama Plant, Japan, Federal Iron Works, Malaysia and other units in Indonesia, Vietnam, Philippines and Thailand. This will ensure that the smooth operations, optimal utilization of the plants and development of indigenous expertise in the work force. 5.3.15 Major Clients The Bulk of Galvanized sheets will be used for roofing and sold through the existing wholesale channels. Cold Rolled Coils will mainly be used for the manufacture of tubing and the bicycle and motorcycle industries and for multifarious uses including the manufacture of steel drums. It is expected that IIL will purchase approximately 30-40,000 tons of Cold Rolled Coil from ISL for its business purpose. However, transaction between IIL and ISL will take place at arms length thus ensuring implementation of best corporate governance practices. 5.4 5.4.1

RISK FACTORS
Raw Material Supply / Price Risk Adverse price movement or non-availability of raw materials may hinder smooth production Mitigant The IIL Group has been in the steel industry for more than 45 years and has a credible market reputation. Post IPO, IIL will continue to own majority stake i.e. 55% of the total shareholding of ISL thus making ISL part of the same group.ISL is expected to capitalize on the expertise of management to procure raw material and enjoy established contacts with key suppliers. This combination will assist ISL to effectively plan and manage inventory levels, which is the key to success in the steel sector.

5.4.2

Operational Risk ISL is first of its kind project in Pakistan. The Company does not have sufficient expertise to operate the project. Mitigant The Companys management has adequate experience to manage the operations as is detailed in paragraph 7.4. Further, the Company has procured services of two foreign experts, one to manage the operations of the Cold Rolling Mill and the other to manage the operations of the Sheet Galvanizing Plant of the Company for a period of two years. During this time, they will train local engineers thus ensuring preparation of indigenous resource for the Company.

5.4.3

Gas Supply Risk Unavailability of Gas may hinder the power generation process thus resulting in loss of operations. Mitigant The current generation capacity of the power plant is 18MW. ISLs power requirement is c.40% of the total generation capacity. As per the contract entered into with SSGCL, ISL may suffer low flow of gas during the months of November to January. It is expected that even during the low flow period the power generated will be sufficient to cater to ISLs operational requirement. However, in case generation requirement cannot be met, ISL will resort to use of electricity supplied by KESC to meet its operational requirement, which may result in increase in cost of production. Page 35 of 57

5.4.4

Business Risk Decrease in demand for products may have an adverse impact on the business Mitigant Currently the demand for CR and HDGC exceed their domestic production (c. 400,000 and 300,000 tons demand against estimated domestic production of 110,000 and 30,000 tons). Bulk of the domestic requirement is being imported. ISL will primarily substitute imports through domestic production.

5.4.5

Foreign Exchange Risk Adverse foreign exchange movement might affect imports and operational profitability, thereby negatively impacting the sales revenue and value of the Company. Mitigant The Foreign exchange risk is contained to a minimum level as the product is import substitute. Prices of finished goods, namely CRC and HDGC, are linked to prices in the international market, which are quoted in USD, thus protecting the Company from any adverse fluctuations in foreign exchange risk. However, time lag in transfer of price may have an impact on profitability.

5.4.6

Capital Market Risk The risk relates to the price performance of the share after getting listed on at the Karachi Stock Exchange Mitigant The IIL Group has a good track record of providing higher returns to its shareholders as is witnessed from average performance for the last 10 years of IIL. Return for investors in case of ILL, has been c.48.3% against a 27% return for KSE 100 Index, which is reflective of the groups capabilities. However, past performance is not a guarantee for future performance.

5.4.7

Liquidity Risk The risk that the investors might face difficulty in selling the shares in the secondary market Mitigant After the OFS, a sizeable portion, approximately 45% of the total paid up capital of the Company, would be owned by outside investors. Since the free float of the Company will be high therefore the liquidity risk will be minimized.

5.4.8

Competition Risk Competition from other new organized and unorganized market players may result in business loss for the Company Mitigant Currently the domestic requirement for CRC and HDGC is being catered through imports exposing the buyers to inventory management and exchange rate fluctuations. Similarly, there is a time lag of c.3-4 months between order and delivery requiring importers to maintain buffer stock thus increasing their working capital requirements. With the presence of ISL the buyers will not have to maintain huge inventories and risk the pricing fluctuations similarly the US$ risk will be minimized and reduce the lead time required to purchase the product. Further, the Project is capital intensive which requires above average technical knowledge to procure high quality equipment at a comparatively low cost.

Note: It is stated that all material risk factors have been disclosed and that nothing has been intentionally concealed in this respect. Page 36 of 57

PART 6 6
6.1

FINANCIAL INFORMATION AUDITORS REPORT UNDER SECTION 53(I) READ WITH CLAUSE 28 OF SECTION 2 OF PART I OF THE SECOND SCHEDULE TO THE COMPANIES ORDINANCE, 1984, FOR THE PURPOSE OF INCLUSION IN THE OFFER FOR SALE DOCUMENT

Page 37 of 57

Page 38 of 57

Page 39 of 57

Page 40 of 57

6.2

SHARE BREAK-UP VALUE CERTIFICATE

Management Note
The breakup value of shares of ISL based on the audited accounts for period from 1st July 2010 to 30th November 2010 is PKR 9.83. However, the breakup value of ISL on the basis of the total paid up capital of PKR 4.35 billion is given as follows: Total Issued subscribed and paid up capital (000s) Accumulated profit as on December 31, 2010 (000s) Total Shareholders Equity Rupees (000s) Number of Ordinary Shares Break-up value per share Rupees Page 41 of 57 4,350,000 (105,835) 4,244,165 435,000,000 9.76

6.3

SUMMARY FINANCIAL HIGHLIGHTS

PKR in 000

Equity Fixed Assets Current Assets Total Assets Current Liabilities Non-current Liabilities Total Liabilities 6.4

30 Nov 10 4,107,616 8,425,770 2,792,413 11,218,183 3,257,051 3,853,516 7,110,567

23 Aug 10 4,177,167 7,951,454 1,548,115 9,499,569 1,491,299 3,831,103 5,322,402

30 Jun 10 (12,484) 371 371 12,855 112,855

30 Jun 09 260 295 295 35 35

30 Jun 08 300 305 305 5 5

FINANCIAL RATIOS
PKR Earnings per share Breakup value per share 30 Nov 10 (0.14) 9.83 23 Aug 10 n/a 9.97 30 Jun 10 (424.8) (416.14) 30 Jun 09 (1.35) 9.82 30 Jun 08 n/a 10

The Company has commenced commercial operations from 1 January 2011 hence return on assets and return on equity ratios have been deemed irrelevant.

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PART 7 7
7.1

MANAGEMENT OF THE COMPANY POLICY MATTERS

All policy-related matters are managed by the Board of Directors, headed by the Chairman of the Board. At present, the Board comprises of 9 Directors including the CEO. The Directors are elected by the shareholders in accordance with the relevant provisions of the Ordinance.

BOARD OF DIRECTORS OF THE COMPANY

Name Mr. Kemal Shoaib Address 142, 29th Street, Off; Kh. Muhafiz, DHA Phase6, Karachi NIC: 42301-1126596-5 Designation Chairman Directorship in other Companies Al-Aman Holdings (Pvt) Ltd. Century Paper & Board Ltd International Industries Ltd International Advertising (Pvt) Ltd. Premier Box (Pvt) Ltd. Safeway Fund Ltd. ZIL Ltd. BOC Pakistan Ltd HBL Asset Management Ltd IGI Investment Bank Ltd International Industries Ltd Mohatta Palace Gallery Trust New Jubilee Insurance Co New Jubilee Life Ins Co ltd Packages Ltd Pakistan Cables Ltd Pakistan Centre for Philanthropy Gallileo Pak. (Pvt) Ltd. Global e-Commerce Services (Pvt) Ltd. Intermark (Pvt) Ltd. International Industries Ltd Pakistan Cables Ltd Security Papers Ltd Atlas Insurance Ltd International Industries Ltd National Fullerton Asset Management Ltd Pakistan Cables Ltd Pakistan Security Printing Corp. (Pvt) Ltd. n/a

Mr. Towfiq H. Chinoy

45-B, Circular Street, DHA, Karachi NIC: 42301-2608847-9

MD & CEO

Mr. Mustapha Chinoy

Grey House, 30, Clifton, Karachi NIC: 42301-2866622-5

Director

Mr. Kamal Chinoy

Grey House, 30, Clifton, Karachi NIC: 42301-1401852-5

Director

Syed Salim Raza

Mr. Tariq Iqbal Khan

64/1 , 15th Street, Phase V, DHA, Karachi NIC: 42301-8289235-1 House 33, Street 23, Sector F-10/2, Islamabad NIC: 61101-1856569-1

Director

Director

Mr. Kamran Mirza

Syed Hyder Ali

H # 79, 4th Street, Off: Khayaban-eSehar, Phase-VI, D.H.A., Karachi. NIC: 42301-1126838-3 70, F.C.C. Gulberg, Lahore

Director

Director

Attock Refinery Limited Fauji Energy Limited Interstate Gas System Limited Pakistan Electric Agency (Pvt) Limited Sanofi Aventis Pakistan Limited Silkbank Limited Sui Northern Gas Pipeline Company Ltd Abbott Laboratories Board of Investment Competitive Support Fund National Commodity Exchange Ltd Pakistan Business Council State Bank of Pakistan Packages Limited Packages Lanka (Pvt) Limited

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NIC: 35201-1655225-1

Mr. M. Ateequllah

D-104, Block-5,Clifton, Karachi NIC: 42301-0959883-3

Director

Ali Institute of Education Babar Ali Foundation Bulleh Shah Paper Mill (Pvt) Ltd IGI Insurance Limited Pakistan Business Council Pakistan Centre for Philanthropy National Management Foundation Nestle Pakistan Limited Sanofi Aventis Pakistan Limited Tetra Pak Pakistan Limited Tri-Pack Films Limited WWF- Pakistan Pakistan Wire Industries

7.2

OVER DUE LOANS

There are no overdue loans (local or foreign currency) on the Company or its Directors.

7.3

DIVIDEND PAYOUT BY LISTED COMPANIES

ISL is a company which has only recently gone into operations; however its sponsoring affiliate company IIL has had a long history of dividend payout since 1980s. The Dividend payout of IIL during the last three [3] years is as below: 2008 25% 25% 2009 2010 22.5% 40% 0 20%

Cash dividend Bonus 7.4

PROFILE OF DIRECTORS
Mr. Kemal Shoaib
Mr. Kemal Shoaib holds a M.S. degree in Chemical Engineering from M.I.T., Cambridge, Massachusetts. He is currently a consultant on the capital market and serves on the Board of several companies including mentioned in paragraph 7.1 above.. He has been associated with such prestigious organizations such as Wyeth Laboratories (Pakistan) Ltd., Bank of Credit and Commerce Intl., S.A. London, Independence Bank, California Commerce Bank Limited, Karachi, Indus Bank Ltd. and Sana Industries Ltd.

Mr. Towfiq H. Chinoy

Mr. Towfiq Habib Chinoy has been associated with International Industries Limited since 1964. He is presently holding the charge as CEO of IIL & ISL; The non- executive Chairman of New Jubilee Insurance Company Ltd., Packages Ltd. and Pakistan Cables Ltd. He holds directorship of a number of companies as mentioned in paragraph 7.1 above. He is also the Trustee of Mohatta Palace Gallery Trust and Director of Pakistan Centre of Philanthropy. Mr. Chinoy has served as the Member of the Engineering Development Board, Government of Pakistan, the Advisory Board of Ports and Shipping Sector, Ministry of Communications, Director on Board of Port Qasim Authority, National Refinery Ltd and Pakistan Business Council. He has held various appointments at the Aga Khan Economic Planning Board.

Mr. Kamal A. Chinoy

Mr. Kamal A. Chinoy has a B.Sc. Economics degree from The Wharton School, University of Pennsylvania, USA. After an internship with Banque Rothschild in Paris he worked in London and UAE, returning to Pakistan in 1980. He is Honorary Consul General of Cyprus. Mr. Kamal Chinoy is a member of the executive committee of the International Chamber of Commerce (ICC), Pakistan and also the Management Association of Pakistan. He has served as the Chairman of the Aga Khan Foundation (Pakistan), NGO Resource Centre and Aga Khan University Foundation (Pakistan) and also as a Director of Pakistan Centre of Philanthropy - an institution engaged in promotion of indigenous philanthropy in Pakistan. Page 44 of 57

Mr. Mustapha A. Chinoy

Mr. Mustapha A. Chinoy is a B.Sc in Economics from Wharton School of Finance, University of Pennsylvania, USA with majors in Industrial Management and Marketing. Upon return from United States he took up the position of Marketing Manager at International Industries Ltd. He has previously served on the Board of Union Bank Ltd. until it was acquired by Standard Chartered Bank. He is the Honorary Consul General of Greece in Pakistan.

Mr. Tariq Iqbal Khan

Mr. Khan is a fellow of Institute of Chartered Accountants, Pakistan, with diversified experience of more than 40 years. He was pivotal in founding Islamabad Stock Exchange where he subsequently served as President as well. He has also served as the Member Tax Policy & Co-ordination in the Central Board of Revenue, followed by being appointed as Commissioner SECP, where he was instrumental in restructuring the SECP. He also held the charge of Chairman SECP (acting) for a brief period. He served on prominent national level committees like Committee for formulation of Take Over law. CLA Committee for review of Security and Exchange Ordinance 1969, Committee for formulation of CDC law and regulations and Prime Ministers Committee for Revival of Stock Market. He served as the Chairman and MD of NIT for more than 8 years, which played the role of a catalyst in establishing, strengthening and stabilizing the capital markets. Additionally, during this period, he held the charge of Chairman & MD of ICP, for almost 5 years. He has served on Boards of the top companies like CDC, Faysal Bank, Bank Al Habib, GSK, ICI, Siemens, and Packages etc.

Mr. Kamran Y. Mirza

Mr. Mirza is a fellow Chartered Accountant of the Institute of Chartered Accountants in England & Wales. After serving at A.F.Ferguson & Co for 2 years, he joined Abbott Laboratories, where he rose to CEO in 1977, and remained in that post for 29 years. Presently he is the CEO of Pakistan Business Council. He is also the Chairman of the Task Force for the Pharmaceutical Industry set up by Planning Commission. Previously he served as Chairman KSE, Chairman EPZA, President OICCI, American Business Council and as a director on the Boards of PSO, NBP, Pakistan Textile City and NAVTEC etc. He has also remained on Economic Advisory Board of Federal Govt. and Sindh Wild Life Board.

Mr. Salim Raza

He served as Governor of the State Bank of Pakistan from January, 2009 to June, 2010. From February, 2006 to January 2009, Mr. Raza has been the Chief Executive Officer of Pakistan Business Council (PBC)which is an organization established by some of Pakistans largest business houses focusing on expanding the capacity of Pakistans businesses through development of Corporate Laws, Capital Markets and Business Practice Infrastructure. Previously Mr. Raza had spent 36 years with Citibank in positions that included Country and Regional Management, across the Middle East, Africa and the UK, Central and Eastern Europe,based in London from 1989 to 2006. His business experience covers Credit and Corporate Finance, Real Estate and Global Asset (Bonds & Equities) Management. Mr. Raza was Country Head for Citibank in Pakistan from 1983 1987.

Mr. Muhammad Ateequllah

Mr. Ateequllah is a graduate in Mechanical and Electrical Engineering and has a vast experience of more than 50 years. He has served a Head of Machine Tool Shop at Karachi Ship Yard & Engineering Works, followed by serving as the Managing Director in Metropolitan Steel Corporation and Hashoo Steel Industries. Subsequently he had been associated with International Industries Ltd for the last 16 years, while he has recently joined International Steel as Executive Director.

Syed Hyder Ali

Mr. Hyder Ali is a Chemical Engineer from University of Michigan, after which he has done his M.S in Paper Technology from The Institute of Paper Chemistry, Appleton, Wisconsin, USA; and subsequently also attended the Program for Management Development from Harvard Business School, Boston, MA, USA. Page 45 of 57

He started his career as a Research Engineer at Weyerhaeuser Company, Federal Way, Washington, U.S.A. and then worked as a Management Trainee at Tetra Pak, Denton, U.S.A. Subsequently he worked as Manager Projects, Packages Limited, Lahore and then served at Tetra Pak, USA. In 1995 he joined IGI Insurance as MD where he served for 10 years, after which he joined Packages Limited, Lahore as Managing Director and CEO, a position which is held by himtill date. He is also a Co-author of two USA patents for recycling of milk cartons and drink boxes as well as being the Honorary Consul-General of Sweden in Lahore since 1998. 7.5

NUMBER OF DIRECTORS
Pursuant to Section 174 of the Ordinance, the number of directors of the Company shall not be less than Seven (7). The Board consists of nine (9) Directors as detailed in paragraph 7.1 above.

7.6

QUALIFICATION OF DIRECTORS
A director must be a member unless he is a person representing the Government or an institution or authority that is a member, or is a whole time working director who is an employee of the Company, or a Chief Executive or a person representing a creditor. In case of directors representing special interests holding shares of the requisite value, no such share qualification shall be required provided intimation in writing as to such representation is lodged with the Company within two months of the appointment of such directors.

7.7

APPOINTMENT/ ELECTION OF DIRECTORS

The Directors shall comply with the provisions of Sections 174 to 178, 180, and 184 of the Ordinance, relating to the election of Directors and matters ancillary thereto. The present Directors of the Company were duly elected on November 22, 2010 for a term of three years.

7.8

BENEFITS OF PROMOTERS AND OFFICERS DURING THE LAST TWO YEARS

No amount or benefit has been paid or given within the last two years or is intended to be given to any promoter/ or officer of the Company otherwise than as remuneration for services rendered as wholetime executives of the Company.

7.9

REMUNERATION OF THE DIRECTORS

The remuneration to be paid to the Directors for attending the meetings of the Directors or a committee of Directors shall be determined by the Board from time to time. Any Director appointed to any executive office including for the purpose of Article 63 of the Articles of Association of the Company the office of Chief Executive or Chairman, or to serve in any Committee or to devote special attention to the business of the Company or who otherwise performs extra services, which in the opinion of the Directors are outside the scope of the ordinary duties of the Directors, may be paid such extra remuneration by way of salary, fees, percentage of profits or otherwise as shall from time to time be determined by the Board of Directors.

7.10 INTEREST OF DIRECTORS IN THE COMPANY The directors may be deemed to be interested to the extent of fees payable to them for attending Board meetings. The directors performing whole time service to the Company may also be deemed interested in the remuneration payable to them from the Company. The directors may also be deemed to be interested, to the extent of any shares held by each of them in the Company and the dividends to be declared on their shareholding in the Company. 7.11 INTEREST OF DIRECTORS IN PROPERTY ACQUIRED BY THE COMPANY None of the Directors of the Company had or have any interest in any property acquired by the Company within the last two years or now proposed to be acquired by the Company.

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7.12 VOTING RIGHTS The rights and privileges, including voting rights, attached to the ordinary shares of the Company are equal. 7.13 AUDIT COMMITTEE/CONSTRUCTION OF AUDIT COMMITTEE Audit Committee of the Board has been formed to comply with the Code of Corporate Governance, which comprises of the following non - executive directors: 1- Mr. Tariq Iqbal Khan 2- Mr. Kamran Y. Mirza 3- Mr. Kamal A. Chinoy The audit committee meeting shall be held on quarterly basis after the Company is listed on the Stock Exchange, as per provisions of the Code of Corporate Governance. The Committee has its terms of reference which were determined by the Board of Directors in accordance with the guidelines provided in the Listing Regulations. 7.14 INTERNAL AUDIT The Sponsor of the Company has a history of appointing professional consultants for its internal audit function. The same approach is expected to be adopted by the Company. However, formal appointment of a consultant is yet to be made 7.15 POWERS OF DIRECTORS The business of the Company shall be managed by the Directors who may pay all expenses incurred in setting up and registering the Company and may exercise all such powers of the Company as are not by the Ordinance or by any other law or the Articles of Association of the Company, required to be exercised by the Company in General Meeting subject nevertheless to any regulations of the Articles of Association of the Company, to the provisions of the Ordinance and to such regulations being not inconsistent with the aforesaid regulations or provisions, as may be prescribed by the Company in General Meeting but no regulation made by the Company in General Meeting shall invalidate any prior act of the Directors which would have been valid if that regulation had not been made. 7.16 BORROWING POWERS OF DIRECTORS Subject to the provisions contained in the Articles of Association of the Company, the Directors may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking property and uncalled capital, or any part thereof, and to issue securities and debentures whether outright or as security for any debt, liability or obligation of the Company or of any third party. 7.17 INDEMNITY Subject to the provisions of the Ordinance every Director, Chief Executive, Managing Agents, Manager or other Officer or Servant of the Company shall be indemnified by the Company and it shall be the duty of the Directors to pay out of the funds of the Company all costs, losses and expenses which any such Director, Chief Executive, Managing Agents, Manager, Officer or Servant may incur or become liable to by reason of any contract entered into or act or thing done by him as such Director, Chief Executive, Managing Agents, Manager, Officer, or Servant or in any way in discharge of his duties including travelling expenses, and the amount for which such indemnity is provided shall immediately attach as lien to the property of the Company and have priority as between the members over all other claims.
.

7.18 INVESTMENT IN ASSOCIATED COMPANIES The Company has not made any investment in any of associated companies nor has any resolution been passed for investment in associated companies under Section 208 of the Ordinance. 7.19 INVESTMENT IN SUBSIDIARIES The Company has not sponsored nor acquired any subsidiaries nor has any resolution been passed for sponsoring or acquiring any subsidiaries under Section 208 of the Ordinance except for its investment in ISL.

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PART 8 8
8.1 8.2 8.3

MISCELLANEOUS INFORMATION
REGISTERED OFFICE 101 Beaumont Plaza, 10 Beaumont Road, Karachi Habib Bank Limited Bank Al-Falah Limited Bank Al-Habib Limited Faysal Bank Limited Habib Bank Limited Habib Metropolitan Bank Limited MCB Bank Limited NIB Bank Limited Standard Chartered Bank of Pakistan Soneri Bank Limited United Bank Limited Bank Al-Habib Limited Dubai Islamic Bank Faysal Bank Limited Habib Bank Limited Habib Metropolitan Bank Limited MCB Bank Limited Meezan Bank Limited United Bank Limited M/S. KPMG Taseer Hadi & Co. 1st Floor, Sheikh Sultan Trust Bldg. No. 2 Beaumont Road Karachi Vellani & Vellani Associates th 148, 18 East Street, Phase I Defence Officers Housing Authority Karachi THK Associates Habib Bank Limited 01-HBL Plaza, I.I. Chundrigar Road Karachi

BANKER TO OFFER (BOOK BUILDING PORTION) BANKERS TO OFFER (GENERAL PUBLIC PORTION)

8.4

BANKERS TO THE COMPANY

8.5

AUDITORS

8.6

LEGAL ADVISOR TO THE COMPANY & THE OFFER

8.7

COMPUTER BALLOTER AND SHARES REGISTRAR

8.8

LEAD MANAGERS

Cassim Investments (Pvt.) Limited Rooms 26-28, Karachi Stock Exchange Building Stock Exchange Road, Karachi Cassim Investments (Pvt.) Limited Rooms 26-28, Karachi Stock Exchange Building Stock Exchange Road, Karachi AKD Securities Limited 602, Continental Trade Centre, Block 8, Clifton, Karachi

8.9

JOINT BOOK RUNNERS

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8.10 MATERIAL CONTRACTS / DOCUMENTS 8.10.1 Underwriting Agreements Sr. No. 1 2 3 4 5 6 Name of Underwriter Date of Agreement No. of Shares Amount (PKR)

8.10.2 Due Diligence Reports of the Underwriters Sr. No. 1 2 3 4 5 6 8.10.3 Private Placement Agreements Sr. No. 1 Name of the Investor Sumitomo Corporation Date of Agreement 26 January 2011 Name of the Underwriter Date of Report

8.10.4 Project Related Agreements The Company has signed a Power Acquisition Contract with The Karachi Electric Supply Corporation Limited dated 31 August 2007 for the supply of electricity from its Power Plant for a period of 20 years Initially, the entire generation of 18 MW will be supplied. Upon the commencement of Cold Rolling Mill and the Galvanizing Sheet Plant the company will supply approximately 10 MW to KESC. In addition to the above, agreements have been entered into with the following parties for the purchase of plant and machinery: Name SMS SIEMAG HB ESMECH HB ESMECH HB ESMECH HB ESMECH HYPERTHERM AJAX TOCCO EBNER MHE DEMAG ANDRITZ AG NUBERG Purpose 4-Hi (Quarto) Reversing Mill Supply and Servicing Pull Push Pickling Line Rewinding Line 4-Hi Skin Pass Mill Metal coating line Furnaces for Metal Coating Line Ceramic Zinc Pot for Metal Coating Line Batch type Hydrogen based annealing bases and furnaces Heavy Duty overhead and gantry cranes Acid Regeneration Plant PSA Nitrogen and Hydrogen Gas Plant

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8.10.5 Gas Supply Arrangement Supplier Sui Southern Gas Co. Ltd. Sui Southern Gas Co. Ltd. Agreement # 930/1412/0/1 930/1585/0/4 Nature of Agreement Supply of Gas for Power Plant Supply of Gas for Cold Rolling Mill and Galvanized Sheet Plant

8.10.6 Project Related Financing Agreements The total cost of the Steel Project is estimated at PKR 8.7 billion. 50% of the Steel Project cost is funded by equity and 50% by debt. Following agreements have been entered into with respect to the finances required for the Steel Project. Agreement with a syndicate of banks comprising Habib Bank Limited, United Bank Limited, Bank Al-Habib Limited and Standard Chartered Bank of Pakistan Limited for PKR 4.0 billion under the Long Term Financing Facility of the State Bank of Pakistan. (PKR Millions) Habib Bank Limited United Bank Limited Bank Al-Habib Limited Standard Chartered Bank of Pakistan Limited 8.10.7 Share Purchase Agreement IIL has entered into an agreement with International Finance Corporation (IFC) on 27 June 2008 for USD 18.4 million. This comprises of a C Loan of USD 6.4 million and an A Loan of USD 12 million. As per the terms of the loan agreement, the A loan of USD 12 million will be transferred to ISL when received by IIL or will be directly credited to ISLs bank account, whereas the C loan of USD 6.4 million will be retained by IIL which will be converted into equity by IIL by offering shares of ISL to IFC in accordance with the terms and subject to such conditions as acceptable to IIL and IFC. The A Loan of USD 12 million has not been drawn by IIL or ISL and neither intends to draw down the A Loan of USD 12 million. The C Loan shall be converted into ordinary shares of ISL as per the mechanism referred to in paragraph 3.1.2 Facility Amount 1,212 1,091 606 1,091 Drawdown 1,212 1,091 606 1,091

8.11 INSPECTION OF DOCUMENTS AND CONTRACTS Copies of the Memorandum and Articles of Association, the audited financial statements, the Auditors Certificates, Information Memorandum and copies of agreements referred to in this OFSD may be inspected during usual business hours on any working day at the registered office of the Company from the date of publication of this OFSD until the closing of the subscription list. 8.12 LEGAL PROCEEDINGS There are no legal proceeding pending against the Company involving financial implications and the Company has not initiated any legal proceedings against any party or person. 8.13 MEMORANDUM OF ASSOCIATION The Memorandum of Association, inter alia, contains the objects for which the Company was incorporated and the business which the Company is authorized to undertake. A copy of the Memorandum of Association is annexed to this OFSD and with every issue of the OFSD except the one that is released in newspapers as advertisement. 8.14 VALUATION OF ASSETS The Company has not carried out any revaluation of assets in terms of assets in terms of clause 22(2) of Section 1 of part I of the second Schedule to the Ordinance. 8.15 CAPITALIZATION The Company has not capitalized any profits till the date of publication.

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PART 9 9
9.1 9.1.1

APPLICATION AND ALOTTMENT INSTRUCTIONS GENERAL INSTRUCTIONS

Eligible investors include: a. Pakistani citizens resident in or outside Pakistan or Persons holding two nationalities including Pakistani nationality; b. Foreign Nationals whether living in or outside Pakistan c. Companies, bodies corporate or other legal entities incorporated or established in or outside Pakistan (to the extent permitted by their constitutive documents and existing regulations, as the case may be); d. Mutual Funds, Provident/pension/gratuity funds/trusts, (subject to the terms of the Trust Deed and existing regulations); and e. Branches in Pakistan of companies and bodies corporate incorporated outside Pakistan.

9.1.2 9.1.3

APPLICATION MUST BE MADE ON THE COMPANYS PRINTED FORM Copies of this OFSD and applications forms can be obtained from members of Karachi Stock Exchange (Guarantee) Limited, Lahore Stock Exchange (Guarantee) Limited and Islamabad Stock Exchange (Guarantee) Limited, the Bankers to the offer and their Branches, the Lead Managers and Joint Book Runners, and the registered office of the Company. The OFSD and the application form can also be downloaded from the following website: http://www.isl.com.pk , www.akdsecurities.net The applicants opting for scripless form of shares are required to complete the relevant sections of the application. In accordance with the provisions of the Central Depositories Act, 1997 and the CDCPL Regulations, credit of such shares is allowed ONLY in the applicants own CDC account. In case of discrepancy between the information provided in the application form and the information already held by CDS, the Company reserves the right to issue shares in physical form. Name(s) and address(es) must be written in full block letters, in English and should not be abbreviated. All applications must bear the name and signature corresponding with that recorded with the applicant's banker. In case of difference of signature with the bank and Computerized National Identity Card (CNIC) or National Identity Card for Overseas Pakistanis (NICOP) or Passport both the signatures should be affixed on the application form. APPLICATIONS MADE BY INDIVIDUAL INVESTORS (i) In case of individual investors, an attested photocopy of CNIC (in case of Resident Pakistanis)/Passport (in case of Non-Resident Pakistanis) as the case may be, should be enclosed and the number of CNIC/Passport should be written against the name of the applicant. Copy of these documents can be attested by any Federal/Provincial Government Gazetted Officer, Councilor, Oath Commissioner or Head Master of High School or bank manager in the country of applicant's residence. (ii) Original CNIC/Passport, along with one attested photocopy, must be produced for verification to the banker to the offer and the applicant's banker (if different from the banker to the offer) at the time of presenting the application. The attested photocopy will, after verification, be retained by the bank branch along with the application.

9.1.4

9.1.5

9.1.6

9.1.7

9.1.8

APPLICATIONS MADE BY INSTITUTIONAL INVESTORS (i) Applications made by companies, corporate bodies, mutual funds, provident/pension/gratuity funds/trusts and other legal entities must be accompanied by an attested photocopy of their Memorandum and Articles of Association or equivalent instrument/document. Where applications are made by virtue of Power of Attorney, the same should also be submitted along with the application. Any Federal/Provincial Government Gazetted Officer, Councilor, Bank Manager, Oath Commissioner and Head Master of High School or bank manager in the country of applicant's residence can attest copies of such documents.

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(ii) Attested photocopies of the documents mentioned in 8(i) must be produced for verification to the banker to the offer and the applicant's banker (if different from the banker to the offer) at the time of presenting the application. The attested copies, will after verification, be retained by the bank branch along with the application. 9.1.9 Only one application will be accepted against each account, however, in case of joint account, one application may be submitted in the name of each joint account holder.

9.1.10 Joint application in the name of more than two persons will not be accepted. In case of joint application each applicant must sign the application form and submit attested copies of their CNICs/Passport. The Shares will be dispatched to the person whose name appears first on the application form while in case of CDS, it will be credited to the CDS account mentioned on the face of the form and where any amount is refundable, in whole or in part, the same will be refunded by cheque or other means by post, or through the bank where the application was submitted, to the person named first on the application form, without interest, profit or return. Please note that joint application will be considered as a single application for the purpose of allotment of Shares. 9.1.11 Subscription money must be paid by cheque drawn on applicant's own bank account or pay order/bank draft payable to one of the Bankers to the offer A/C PUBLIC OFFER FOR SALE OF SHARES OF INTERNATIONL STEELS LIMITED and crossed A/C PAYEE ONLY. 9.1.12 For the applications made through pay order/bank draft, it would be permissible for a banker to the offer to deduct the bank charges while making refund of subscription money to unsuccessful applicants through pay order/bank draft individually for each application. 9.1.13 The applicant should have at least one bank account with any of the commercial banks. The applicants not having a bank account at all (non-account holders) are not allowed to submit application for subscription of Shares. 9.1.14 Applications are not to be made by minors and/or persons of unsound mind. 9.1.15 Applicants should ensure that the bank branch, to which the application is submitted, completes the relevant portion of the application form. 9.1.16 Applicants should retain the bottom portion of their application forms as provisional acknowledgement of submission of their applications. This should not be construed as an acceptance of the application or a guarantee that the applicant will be allotted the number of Shares for which the application has been made. 9.1.17 Making of any false statements in the application or willfully embodying incorrect information therein shall make the application fictitious and the applicant or the bank shall be liable for legal action. 9.1.18 Bankers to the offer are prohibited to recover any charges from the subscribers for collecting subscription applications. Hence, the applicants are advised not to pay any extra charges to the bankers to the offer. 9.1.19 It would be permissible for a Banker to the offer to refund subscription money to unsuccessful applicants having an account in its bank by crediting such account instead of remitting the same by cheque, pay order or bank draft. Applicants should, therefore, not fail to give their bank account numbers. 9.1.20 Submission of Fictitious and multiple applications (more than one application by same person) is prohibited and such application money shall be liable to confiscation under section 18A of the Securities and Exchange Ordinance, 1969. ADDITIONAL INSTRUCTIONS FOR FOREIGN/NON-RESIDENT INVESTORS 9.1.21 In case of foreign investors who are not individuals, applications must be accompanied with a letter on applicant's letterhead stating the legal status of the applicant, place of incorporation and operations and line of business. A copy of memorandum of association or an equivalent document should also be enclosed, if available. Where applications are made by virtue of Power of Attorney, the same must be lodged with the application. Copies of these documents can be attested by the bank manager in the country of applicant's residence.

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9.1.22 Applicants may also subscribe using their Special Convertible Rupee Account (SCRA) as set out under the State Bank of Pakistan's Foreign Exchange Manual. BASIS OF ALLOTMENT 9.1.23 The basis and conditions of transfer of shares to the general public shall be as follows: a) The minimum amount of application for subscription of 500 Shares is PKR []/-. Application for Shares below the total value of PKR []/- shall not be entertained. b) Application for Shares must be made for 500 Shares or in multiple thereof only. Applications, which are neither for 500 Shares nor for multiple thereof, shall be rejected. c) Allotment/Transfer of Shares to successful applicants shall be made in accordance with the allotment criteria/ instructions disclosed in the OFSD. d) Allotment of Shares shall be subject to scrutiny of applications in accordance with the criteria disclosed in the OFSD and/or the instructions by the Securities & Exchange Commission of Pakistan. e) Applications, which do not meet the above requirements, or applications which are incomplete will be rejected. The applicants are, therefore, required to fill in all data fields in the Application Form. f) The Company will dispatch Shares to successful applicants through their Bankers to the offer or credit the respective CDS accounts of the successful applicants (as the case maybe).

9.2

BANKERS TO THE OFFER

Code No. 01 02 03 04 05 06 07 08 09 10 Bank
Bank Al-Falah Limited Bank Al-Habib Limited Faysal Bank Limited Habib Bank Limited Habib Metropolitan Bank Limited MCB Bank Limited NIB Bank Limited Standard Chartered Bank of Pakistan Soneri Bank Limited United Bank Limited

9.3

CODE OF OCCUPATION
Code No. 01 02 03 04 05 06 07 08 09 10 Occupation Business Business Executive Service Housewife Household Professional Student Agriculturist Industrialist Others

9.4

NATIONALITY CODE
Code No. 001 002 003 004 005 Name of country U.S.A U.K U.A.E K.S.A Oman Code No. 006 007 008 009 Name of country Bangladesh China Bahrain Other

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PART 10 10 BIDDING FORM OF INTERNATIONAL STEELS LIMITED

(This space has been left blank intentionally)

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PART 11 11 SIGNATORIES TO THE OFFER FOR SALE DOCUMENT

1.

-Sd________________________ Mr. Kemal Shoaib Designation: Chairman CNIC No.: 42301-1126596-5 International Industries Limited

2.

-Sd________________________ Mr. Towfiq H. Chinoy Designation: Chief Executive Officer CNIC No.: 42301-2608847-9 International Industries Limited

Signed by the above in presence of witnesses:

1. _-Sd-_____________________ Name: Irfan Bhatti Address: c/o IIL CNIC # 42201-0621960-3

2. __ -Sd-____________________ Name: Neelofer Hameed Address: c/o IIL CNIC # 42101-1443183-6

Date: -------------Place: Karachi

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PART 12 12 MEMORANDUM OF ASSOCIATION

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