Seeking Public Comments on Draft Prospectus of (TIER-1) Issue of Sukuk Certificates of Bankislami Pakistan Limited

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2. ADVICE FOR INVESTORS INVESTORS ARE STRONGLY ADVISED IN THEIR OWN INTEREST TO CAREFULLY READ THE CONTENTS OF THIS PROSPECTUS , ESPECIALLY THE RISK FACTORS GIVEN AT PARA 4.12 OF THIS PROSPECTUS BEFORE MAKING ANY INVESTMENT DECISION. SUBMISSION OF FALSE AND FICTITIOUS APPLICATIONS IS PROHIBITED AND SUCH APPLICATIONS’ MONEY MAY BE FORFEITED UNDER SECTION 87(8) OF THE SECURITIES ACT, 2015. BANKISLAMI PAKISTAN LIMITED PROSPECTUS THE ISSUE SIZE OF FULLY PAID UP, RATED, PERPETUAL, UNSECURED, SUBORDINATED, NON-CUMULATIVE AND CONTINGENT CONVERTIBLE LISTED MUDARABA SUKUK ISSUE (“SUKUK’) IS PKR 2,000 MILLION, OUT OF WHICH SUKUK OF PKR 1,700 MILLION (85% OF ISSUE SIZE) ARE ISSUED TO THE PRE-IPO INVESTORS AND PKR 300 MILLION (15% OF ISSUE SIZE) ARE BEING OFFERED TO THE GENERAL PUBLIC BY WAY OF INITIAL PUBLIC OFFER THROUGH THIS PROSPECTUS RATE OF RETURN: PERPETUAL INSTRUMENT @ 3 MONTH KIBOR* (ASK SIDE) PLUS 2.75% P.A INSTRUMENT RATING: A- (A MINUS) BY THE PAKISTAN CREDIT RATING COMPANY LIMITED LONG TERM ENTITY RATING: “A+” (A PLUS) SHORT TERM ENTITY RATING: “A1” (A ONE) BY THE PAKISTAN CREDIT RATING AGENCY LIMITED AS PER PSX’S LISTING OF COMPANIES AND SECURITIES REGULATIONS, THE DRAFT PROSPECTUS WAS PLACED ON PSX’S WEBSITE, FOR SEEKING PUBLIC COMMENTS, FOR SEVEN (7) WORKING DAYS STARTING FROM MM/DD/2019 TO MM/DD/2019. NO COMMENTS HAVE BEEN RECEIVED ON THE DRAFT PROSPECTUS. DATE OF PUBLIC SUBSCRIPTION: FROM MM/DD/2019 TO MM/DD/2019 (FROM: 9:00 AM TO 5:00 PM) (BOTH DAYS INCLUSIVE) CONSULTANT TO THE ISSUE BANKERS TO THE ISSUE (RETAIL PORTION) Allied Bank Limited Askari Bank Limited Bank Alfalah Limited Bank AL Habib Limited BankIslami Pakistan Limited Habib Metropolitan Bank Limited JS Bank Limited MCB Bank Limited Meezan Bank Limited Soneri Bank Limited United Bank Limited** **In order to facilitate investors, United Bank Limited (“UBL”) is providing the facility of electronic submission of application (e‐IPO) to their account holders. UBL account holders can use UBL net banking to submit their application via link http://www.ubldirect.com/corporate/ebank. Further, please note that online applications can be submitted 24 hours a day during the subscription period which will close at midnight on DD/MM/2019. The Central Depository Company of Pakistan (“CDC”) in collaboration with 1 Link (G) Limited (1 Link) has developed a Centralized e-IPO System (“CES”) through which applications for subscription of securities offered through IPOs can be made electronically. CES has been made available in this IPO which can be accessed through the web link www.cdceipo.com. Payment of subscription money can be made through 1Link’s member banks available for CES, list of which is available on the web link provided above. For making applications though CES, investors must be registered with CES. Registration with CES is a one-time activity, free of cost, and a self-registration process by filling the CES registration form, which is available 24/7 all around the year. Investors who have a valid Computerized National Identity Card (CNIC), bank account with any of the commercial banks, an email address, mobile phone number and CDS Account (Investor Account or sub Account) may register themselves with CES. Investors who do not have CDS account may visit www.cdcpakistan.com for information and details. For further guidance and queries regarding CES and opening of CDS account, investors may contact CDC at phone Number: 0800 – 23275 (CDCPL) and e-mail: info@cdcpak.com. CES is connected to a number of banks through 1 Link for payment of the subscription money. For further details on CES, please refer para 2.14 of this Prospectus or contact Mr. Farooq Ahmed Butt at Phone 021-34326030 and email: farooq_butt@cdcpak.com. Underwriters for Retail Portion of the Issue: Joint Advisor & Arranger and Designated Market Maker: Shariah Advisor: Shariah Board of BankIslami For investor education, please visit www.jamapunji.com.pk, and read the IPO Investor Guide placed at web link https://www.secp.gov.pk/document/initial-public-offering-ipo-aconcise-guide-for-investors/?wpdmdl=29584 Jama Punji is an investor education initiative of the Securities & Exchange Commission of Pakistan. Prospectus and Subscription Forms can be downloaded from the following websites https://www.psx.com.pk, https://bankislami.com.pk, https://www.jsgcl.com and https://www.nextcapital.com.pk For further queries you may contact: Humaira Asad Syeda Sadaf Munawar Salman J. Virani Muhammad Haris Munawar P: 111 639 825 (Ext. 131) P: 111 247 111 (Ext: 3833) P: 111 639 825 (Ext. 114) P: 111 247 111 (Ext. 3833) E: humaira.asad@nextcapital.com.pk E: sadaf.munawar@bankislami.com.pk E: salman.virani@nextcapital.com.pk E: haris.munawar@bankislami.com.pk DATE OF PUBLICATION OF THIS PROSPECTUS: DD/MM/2019 *Average rate ‘Ask Side’ of the three-month Karachi Inter Bank offered Rate (“KIBOR”) as published on Reuters Page KIBR or as published by the Financial Markets Association of Pakistan in case Reuters page is unavailable on the Rate Fixing Date.
3. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED UNDERTAKING BY THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER DATE: OCTOBER 17, 2019 WE, SYED AMIR ALI, THE PRESIDENT & CEO AND SOHAIL SIKANDAR, THE CHIEF FINANCIAL OFFICER OF BANKISLAMI PAKISTAN LIMITED HEREBY UNDERTAKE THAT: 1. THIS PROSPECTUS CONTAINS ALL INFORMATION WITH REGARD TO THE ISSUER AND THE ISSUE, WHICH IS MATERIAL IN THE CONTEXT OF THE ISSUE AND NOTHING HAS BEEN CONCEALED IN THIS RESPECT; 2. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS TRUE AND CORRECT TO THE BEST OF OUR KNOWLEDGE AND BELIEF; 3. THE OPINIONS AND INTENTIONS EXPRESSED THEREIN ARE HONESTLY HELD; 4. THERE ARE NO OTHER FACTS, THE OMISSION OF WHICH MAKES THIS PROSPECTUS AS A WHOLE OR ANY PART THEREOF MISLEADING; 5. ALL REQUIREMENTS OF THE SECURITIES ACT, 2015, THE DISCLOSURES IN PUBLIC OFFERING REGULATIONS, 2017 FOR PREPARATION OF PROSPECTUS, RELATING TO APPROVAL AND DISCLOSURES HAVE BEEN FULFILLED; AND 6. NO CHARGES, FEE, EXPENSES, PAYMENTS ETC. HAVE BEEN COMMITTED TO BE PAID TO ANY PERSON IN RELATION TO THIS PUBLIC OFFERING EXCEPT FOR THOSE AS DISCLOSED IN PART 03 OF THE PROSPECTUS. FOR AND BEHALF OF BANKISLAMI PAKISTAN LIMITED -sd___________________________ SYED AMIR ALI PRESIDENT & CEO -sd___________________________ SOHAIL SIKANDAR CHIEF FINANCIAL OFFICER The logo of BankIslami Ehad Sukuk depicts the basic purpose of the Sukuk. The word ‘Ehad’ itself means an ‘Era or Epoch’ of new leadership or new vision. Thus, the name Ehad Sukuk has been chosen to reflect fortification of the Bank through its newly structured product Sukuk. The word ‘Ehad’ also means a ‘Promise’ which reaffirms the fact that BankIslami is committed to offer authentic Islamic banking products and provide Halal returns to the Sukuk investors, thus, making them partners in the Bank’s future growth and advancement. This logo design draws its energy and exuberance from its parent brand - BankIslami Pakistan Limited, which is reflected through the brand colors and the use of well thought out fonts. It clearly indicates the full support and empowerment of the parent brand towards this newest product. Page 2 of 127
4. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED GLOSSARY OF ABBREVIATIONS AND TECHNICAL TERMS Additional Tier 1 Capital ALCO BIPL or the Bank or Mudarib / Issuer Basel III Circular Board / BOD CAGR Additional Tier 1 Capital means the additional Tier 1 capital as defined in the Basel III Circular Asset Liability Management Company BankIslami Pakistan Limited Instructions for Basel III Implementation in Pakistan issued by the State Bank of Pakistan under BPRD circular # 06 dated August 15, 2013 (as may be amended, modified or replaced from time to time) Board of Directors of the Bank CDC Compounded Annual Growth Rate Capital Adequacy Ratio; the amount of risk-based capital (Tier 1 and Tier 2) as a percentage of risk-weighted assets The Central Depository Company of Pakistan Limited CDS Central Depository System Consultant to the Issue Next Capital Limited Credit Rating Agency Conditions Pakistan Credit Rating Agency Limited (“PACRA”) Common Equity Tier 1 as defined in chapter 2, section 2.1.1 of the Basel III Circular As described thereto in Paragraph A-5-2 of Annexure 5 of the Basel III Circular. The Issuer shall immediately notify the SBP upon the occurrence of the CET 1 Trigger Event The terms and conditions governing and regulating the Sukuk CY Calendar Year DFI Development Financial Institutions Chapter 5B of the Rule Book of the Pakistan Stock Exchange Limited titled “Listing of Debt Securities Regulations”, as amended from time to time Earnings per Share CAR CET 1 CET 1 Trigger Event DSL Regulations EPS FY General / Mudaraba Pool GOP Investor Agreement Issue Date KIBOR Lock-in-Clause Financial Year The General Pool of funds available to the Mudarib which will be utilized for making investments and financing activities as permitted by Bank’s Memorandum and Articles of Association and in compliance with the SBP Circular and SBP Pool Management Guidelines Government of Pakistan The Investor Agreement entered into between each Pre-IPO Investor and the Issuer, prior to the Issue Date Issue Date means (i) the date of closing of the subscription list for the public offering of the Sukuk Certificates in the event the Sukuk Certificates are fully subscribed, or (ii) in the case of undersubscription, the date on which the entire amount of the Sukuk Issue has been fully subscribed, which shall be achieved by the Issuer by no later than 15 (fifteen) days from the date of closing of the subscription list for the public offering of the Sukuk Certificates Karachi Inter-Bank Offer Rate (Ask Side) The profit payment to Sukuk holders will be subject to the condition that any such payment should not result in non-compliance of the Bank Page 3 of 127
5. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED Designated Market Maker with the applicable regulatory requirement of MCR, CAR and Leverage Ratio (LR) as determined by SBP from time to time Mandatory conversion of the Sukuk certificates into ordinary shares in accordance with the Trust Deed and upon the occurrence of a Mandatory Conversion Event Issuance of a written direction by the SBP to the Issuer to Mandatorily Convert the Sukuk on account of: (i) a CET 1 Trigger Event; (ii) the PONV Trigger Event; (iii) Issuer’s inability to exercise the lock-in clause or (iv) Issuer’s inability to exercise the non-cumulative feature JS Global Capital Limited MCR Minimum Capital Requirement as prescribed by applicable laws NBFC Non - Banking Financial Company NPFs Non-Performing Financings PSX Pakistan Stock Exchange Limited PKR or Rs. Pakistani Rupee PONV Trustee Point of Non-Viability As described thereto in Paragraph A-5-3 of Annexure 5 of the Basel III Circular. The SBP will have full discretion in declaring the PONV Trigger Event State Bank of Pakistan Circular No. 6 dated August 15, 2013 issued by Banking Policy & Regulations Department of SBP The instructions for profit and loss distribution and pool management for Islamic banking institutions issued by the SBP from time to time Securities & Exchange Commission of Pakistan Fully paid up, rated, perpetual, unsecured, subordinated, noncumulative and contingent convertible listed Mudaraba Sukuk Certificates to be issued as instrument of redeemable capital under Section 66 of the Companies Act, 2017 which will qualify as Additional Tier 1 Capital as outlined by State Bank of Pakistan under BPRD Circular No. 6 dated August 15, 2013 Sukuk Holders mean the persons shown as holders of Sukuk in the records of the CDS, who shall be the beneficiaries under the Trust Deed Issuance of Sukuk Certificates of PKR 2,000 million The Tier 2 capital shall bear the meaning ascribed to it under the Basel III Circular 1. Trust Deed 2. The Investor Agreements; 3. Subscription Undertaking; and 4. Sukuk Certificates (when issued) The Trust Deed executed between the Bank and the Trustee dated November 13, 2019 Pak Brunei Investment Company Limited Transfer Agent & Balloter Central Depository Company of Pakistan Limited Transaction Legal Counsel Mohsin Tayebaly & Co. (“MTC”) Mandatory Conversion Mandatory Conversion Event PONV Trigger Event SBP SBP Circular / Circular SBP Pool Management Guidelines SECP or the Commission Sukuk Sukuk Holders Sukuk Issue Tier 2 Capital Transaction Documents Trust Deed Page 4 of 127
6. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED TABLE OF CONTENTS PAGE NO. A): SUMMARY OF THE ISSUE 06 B): SUMMARY OF RISKS RELATED TO THE ISSUE 08 PART 1: APPROVAL, CONSENTS AND LISTING ON THE STOCK EXCHANGE 09 PART 2: SUKUK AND RELATED MATTERS 13 PART 3: UNDERWRITING, COMMISSIONS, BROKERAGE AND OTHER EXPENSES TO THE ISSUE 31 PART 4: HISTORY, PROSPECTS AND RISK FACTORS 33 PART 5: FINANCIAL INFORMATION AND CREDIT RATING REPORT 50 PART 6: TRUSTEE AND SECURITY 92 PART 7: MANAGEMENT OF THE BANK 104 PART 8: MISCELLANEOUS INFORMATION 114 PART 9: APPLICATION AND ALLOTMENT INSTRUCTIONS 118 PART 10: SIGNATORIES TO THE PROSPECTUS 122 PART 11: MEMORANDUM OF ASSOCIATION 123 PART 12: APPLICATION FORM 126 Page 5 of 127
7. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED A) SUMMARY OF THE ISSUE Issue Size : PKR 2,000 million Pre-IPO Placement : PKR 1,700 million Initial Public Offering (IPO) : PKR 300 million Purpose : Utilization of Proceeds : Minimum Investment : Issue Date : Tenor Principal Redemptions : : The proceeds of Issue will contribute toward the Issuer’s Additional Tier I Capital for CAR as per guidelines set by SBP The funds so raised will be utilized in the Bank’s financing and investment activities (General Pool) as permitted by its Memorandum & Articles of Association. With the permission of Sukuk Holders, the proceeds of the Issue shall be commingled with other funds of the depositors (which may include Bank’s own equity) i.e. shall be invested in the General Pool of the Bank under the Investor Agreement. The Sukuk will be offered in denominations of PKR 5,000/- or multiples thereof to the investors subject to a minimum Investment amount of PKR 5,000/(i) the date of closing of the subscription list for the public offering of the Sukuk Certificates in the event the Sukuk Certificates are fully subscribed (ii) in the case of undersubscription, the date on which the entire amount of the Sukuk Issue has been fully subscribed, which shall be achieved by the Issuer by no later than 15 (fifteen) days from the date of closing of the subscription list for the public offering of the Sukuk Certificates Perpetual Not Applicable The expected profit rate shall be as follows: 1) For the period at the end of which the Bank is compliant with the Paid-up Capital (net of losses) – MCR, Capital Adequacy Ratio – CAR and Leverage Ratio – LR Requirements: • Profit Rate Base Rate plus a maximum margin of 2.75% per annum according to the pre-announced profit weightages. : 2) For the period at the end of which the Bank is not compliant with the MCR, CAR and LR Requirements or payment of the profit set out in (1) above for the relevant period may render it non-compliant with such MCR, CAR and LR Requirements: • Expected Profit will be up to 0.005% p.a. calculated based on the reduced monthly weightages assigned by the Bank. Profit Payment Frequency : On monthly basis Issue Price : Par (i.e. each Sukuk having a face value of PKR 5,000) Page 6 of 127
8. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED Security : The Sukuk will be unsecured and subordinated to payment of principal and profit of all other claims except ordinary shares Transaction Legal Counsel : Mohsin Tayebaly & Co. Listing : Entity Rating : Instrument Rating : Subscription Date : Risk Factors Trustee to the Issue Shariah Advisor : : : Compliance Officer : Underwriters to the Issue : Pakistan Stock Exchange Limited Long Term Rating: A+ (A plus) Short Term Rating: A- (A minus) Rating Agency: PACRA A- (A minus), assigned by PACRA DD/MM/YYYY to DD/MM/YYYY (From: 9:00 Am to 5:00 Pm) (both days Inclusive) For details please refer to Part 4.12 of the Prospectus Pak Brunei Investment Company Limited Shariah Board of BankIslami Pakistan Limited Muhammad Shoaib Company Secretary BankIslami Pakistan Limited 14th Floor, Executive Towers, Dolmen City, Block-4, Clifton, Karachi- Pakistan. Tel: +92-21-35839906 Ext. 2112 Fax: +92-21-35372252 Arif Habib Limited and Dawood Equities Limited Designated Market Maker : Bankers to the Issue : Transferability : Governing Law : JS Global Capital Limited 1. Allied Bank Limited 2. Askari Bank Limited 3. Bank Alfalah Limited 4. Bank Al Habib Limited 5. BankIslami Pakistan Limited 6. Habib Metropolitan Bank Limited 7. JS Bank Limited 8. MCB Bank Limited 9. Meezan Bank Limited 10. Soneri Bank Limited 11. United Bank Limited The Sukuk will be inducted into the CDC, transfer shall be made in accordance with the Central Depository Act, 1997 and CDC Regulations The Sukuk shall be subject to the laws of Islamic Republic of Pakistan and non-exclusive jurisdiction of the Pakistan Courts Page 7 of 127
9. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED B) SUMMARY OF RISKS RELATED TO THE ISSUE Following is a summary of key risks related to the Sukuk Issue. Please refer to para 4.12 for detailed description of risk factors. • The Bank will assign and announce weightages for the Sukuk from the profits of General Pool, on a monthly basis; the weightages will be assigned keeping in view of the expected Sukuk profit rate. However, the profit payment to Sukuk Holders will be subject to the condition that any such payment should not result in non-compliance of the Bank with the applicable regulatory requirement of MCR, CAR and Leverage Ratio as determined by SBP from time to time. As per the existing instructions of SBP, in order to implement the Lock-in Clause, the Bank will reduce the monthly profit weightages attributed to the Sukuk Holders until the Bank is in breach of regulatory capital requirements (i.e. the expected profit in this case would be up to 0.005% p.a.). Further, the profit should only be paid from the relevant month’s attributable profit of the General Pool; • the Issue may be called by the Issuer after 5 years from the date of Issuance (either partially or in full), subject to SBP approval; • the Issuer may permanently convert the Sukuk (either partially or in full) into common shares at its own discretion (in case of a pre-specified trigger event, and upon notifying the SBP) or at the discretion of SBP; (the space has been left blank intentionally) Page 8 of 127
10. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED PART 1: APPROVAL, CONSENTS AND LISTING ON THE STOCK EXCHANGE 1.1. APPROVAL OF THE SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN Approval of the Securities and Exchange Commission of Pakistan (the “Commission” or the “SECP”) as required under Section 87(2), read with Section 88(1) of the Securities Act, 2015 (the “Act”) has been obtained for the Issue, circulation and publication of this Prospectus. DISCLAIMER: IT MUST BE DISTINCTLY UNDERSTOOD THAT IN GIVING THIS APPROVAL, SECP DOES NOT TAKE ANY RESPONSIBILITY FOR THE FINANCIAL SOUNDNESS OF THE ISSUER AND ANY OF ITS SCHEMES STATED HEREIN OR FOR THE CORRECTNESS OF ANY OF THE STATEMENTS MADE OR OPINIONS EXPRESSED WITH REGARDS TO THEM BY THE ISSUER IN THIS PROSPECTUS. SECP HAS NOT EVALUATED QUALITY OF THE ISSUE AND ITS APPROVAL FOR ISSUE, CIRCULATION AND PUBLICATION OF PROSPECTUS SHOULD NOT BE CONSIDERED AND CONSTRUED AS ANY COMMITMENT OF THE SAME. THE PUBLIC / INVESTORS SHOULD CONDUCT THEIR OWN INDEPENDENT DUE DILIGENCE AND ANALYSIS REGARDING THE QUALITY OF THE ISSUE BEFORE SUBSCRIBING. 1.2. APPROVAL OF THE PROSPECTUS BY THE PAKISTAN STOCK EXCHANGE LIMITED The Prospectus for the issue of fully paid-up, rated, perpetual, unsecured, subordinated, non-cumulative and contingent convertible listed Mudaraba Sukuk Issue (“Mudaraba Sukuk” or “Sukuk”) has been approved by the Pakistan Stock Exchange Limited (“PSX”) in accordance with the requirements of its Listing of Debt Securities Regulations. DISCLAIMER: A) PSX HAS NOT EVALUATED THE QUALITY OF THE ISSUE AND ITS APPROVAL SHOULD NOT BE CONSIDERED AND CONSTRUED AS ANY COMMITMENT OF THE SAME. THE PUBLIC / INVESTORS SHOULD CONDUCT THEIR OWN INDEPENDENT INVESTIGATION AND ANALYSIS REGARDING THE QUALITY OF THE ISSUE BEFORE SUBSCRIBING. B) THE PUBLICATION OF THIS DOCUMENT DOES NOT REPRESENT SOLICITATION BY PSX. C) THE CONTENTS OF THIS DOCUMENT DO NOT CONSTITUTE AN INVITATION TO INVEST IN SUKUK OR SUBSCRIBE FOR ANY SECURITIES OR OTHER FINANCIAL INSTRUMENT BY PSX, NOR SHOULD IT OR ANY PART OF IT FORM THE BASIS OF, OR BE RELIED UPON IN ANY CONNECTION WITH ANY CONTRACT OR COMMITMENT WHATSOEVER OF PSX. D) IT IS CLARIFIED THAT INFORMATION IN THIS PROSPECTUS SHOULD NOT BE CONSTRUED AS ADVICE ON ANY PARTICULAR MATTER BY PSX AND MUST NOT BE TREATED AS A SUBSTITUTE FOR SPECIFIC ADVICE. E) PSX DISCLAIMS ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWSOEVER ARISING FROM OR IN RELIANCE UPON THIS DOCUMENT TO ANY ONE, ARISING FROM ANY REASON, INCLUDING, BUT NOT LIMITED TO, INACCURACIES, INCOMPLETENESS, AND/OR MISTAKES, FOR DECISION AND/OR ACTIONS TAKEN BASED ON THIS DOCUMENT. Page 9 of 127
11. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED F) PSX NEITHER TAKES RESPONSIBILITY FOR THE CORRECTNESS OF CONTENTS OF THIS DOCUMENT NOR THE ABILITY OF THE ISSUER TO FULFIL ITS OBLIGATIONS THERE UNDER. G) ADVICE FROM A SUITABLY QUALIFIED PROFESSIONAL SHOULD ALWAYS BE SOUGHT BY INVESTORS IN RELATION TO ANY INVESTMENT IN SECURITIES. 1.3. APPROVAL FROM STATE BANK OF PAKISTAN In-principle Approval In-principle approval of the State Bank of Pakistan (“SBP”) has been obtained vide SBP’s letter No. BPRD/BA&CP/649/12591/2019 dated May, 29 2019, for the issuance of fully paid up, rated, perpetual, unsecured, subordinated, non-cumulative and contingent convertible listed Mudaraba Sukuk certificates of up to PKR 2,000 million, as Additional Tier 1 (ADT-1) capital for CAR purposes subject to certain conditions. Key conditions of the in-principle approval are as follows: a. The subject ADT-1 eligible Mudaraba Sukuk will not be eligible for Minimum Paid up Capital (net of losses) Requirements (MCR) of the Bank. b. In case of public offering, the Mudaraba Sukuk shall be rated throughout the life of the instrument. c. The “Term Sheet”, “Shariah Structure”, “Agreement” and all other related documents of the proposed Sukuk shall be reviewed and approved by the Shariah Board as required under the Para 3-B(ii) of the Shariah Governance Framework notified vide IBD Circular No. 01 of 2018. Copy of the same is required to be shared with SBP while seeking final approval for the subject Mudaraba Sukuk. d. The Mudaraba Sukuk document (i.e. Shariah Structure / pronouncement, term sheet and all the related documents) shall include a clause pertaining to Sukuk Holders’ explicit permission to the Bank to commingle its funds with the Mudaraba Pool (as per SBP’s instructions for Profit & Loss Distributions and Pool Management for Islamic Banking Institutions – IBIs). e. The Bank shall submit an opinion of its Shariah Board regarding the conversion of Sukuk into shares and cap (maximum number of shares to be issued at PONV or CET – trigger event) calculation formula under the loss absorbency clause. f. As per SBP’s existing instructions (para iv of Annexure 2 of BRPD Circular No. 6 of 2013), “Neither the Bank nor a related party over which the Bank exercise control or significant influence should purchase the instrument, nor should the Bank directly or indirectly have funded the purchase of the instrument”. So, in the light of these instructions, the Bank, on its own, would assess the eligibility of its sponsors and affiliates (including employees’ retirement benefit funds of such affiliates) for possible investment in the subject Sukuk to be issued by the Bank. However, investment by Bank’s sponsors and their affiliates (including employees’ retirement benefit funds of such entities) in the proposed ADT-1 eligible Sukuk should not exceed 50% of the total issue size. Moreover, any borrowing relationship of sponsors, affiliates and employees’ retirement benefit funds of such entities with the Bank will make them ineligible from making any investment in the subject Sukuk. In this regard, if any violation of SBP’s relevant instructions is observed, the subject instrument will become ineligible as ADT-1 Capital for CAR purposes to the extent of respective investment share(s) of sponsor(s), affiliates and employees’ retirement benefit funds of such entities. g. The Bank will submit an undertaking to the effect that it will, at all times, maintain sufficient cushion in the authorized capital at least equal to the “cap on the maximum number of shares to be issued at PONV or at the breach of CET-1 trigger event”. h. The Bank will submit an undertaking that it has obtained all the necessary approvals and fulfilled all the preconditions (except SECP’s approvals) necessary for conversion of these instruments at PONV event. i. The Bank will approach SBP for final approval after completion of other legal and regulatory formalities and finalization of the term sheet and Shariah structure, as mentioned above. j. Bank will, at all times, ensure compliance with all the applicable laws, rules and regulations including the Basel III Circular and SBP instructions on the subject matter. Page 10 of 127
12. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED SBP’s approval should not be construed as endorsement of economic, risk and legal aspects of the proposed Mudaraba Sukuk that will remain the sole responsibility of Bank’s management and board of directors. Final Approval Final approval of SBP vide letter No. BPRD/BA&CP/649/77591/19 dated November 11, 2019 has been obtained for the issuance of fully paid-up, rated, perpetual, unsecured, subordinated, non-cumulative, and contingent convertible listed Mudaraba Sukuks up to PKR 2,000 million (inclusive of green shoe option of PKR 500 million) and recognition of the same as Additional Tier 1 capital for CAR purposes, subject to compliance with BPRD Circular No. 6 2013 and all other relevant laws, rules and regulations. The eligibility of the Sukuks as Additional Tier 1 capital of the Bank will be subject to limit as per the applicable instructions issued by SBP from time to time. The bank is required to submit a report to Banking Policy and Regulations Department of SBP, covering the details of Sukuks including the names of investors and relevant amount of investment etc., along with a copy of the offering document, within one month from the date of issue. It may also be noted that SBP’s final approval to treat the proposed Sukuks as Additional Tier-1 capital cannot be construed as ratification of economic risk and legal aspects of these Sukuks that are the sole responsibility of the bank’s management and Board of Directors. Moreover, the Shariah Board of the Bank shall ensure that all the related documents and agreements are in conformity with the rules and principles of Shariah. 1.4. SPECIAL RESOLUTION FROM SHAREHOLDERS ON CONVERSION OF SUKUK Approval of shareholders covering maximum number of shares that can be issued against conversion of the Sukuk has been obtained via special resolution passed by the shareholders of the Bank in the Extraordinary General Meeting held on October 24, 2019. 1.5. FILING OF PROSPECTUS AND OTHER DOCUMENTS WITH THE REGISTRAR OF COMPANIES BankIslami has delivered to the Registrar of Companies as required under Sections 57 (1) of the Act, a copy of this Prospectus signed by all the Directors of BankIslami. 1.6. CONSENT FROM SHARIAH ADVISOR Shariah Board of Bankislami is acting as the Shariah Advisor to the Issue and it has provided its consent to include and publish its name in the Prospectus. 1.7. LISTING AT PSX Application has been submitted by the Issuer to PSX for listing of the Sukuk. If for any reason the application for formal listing is not accepted by PSX or approval for formal listing is not granted by PSX before the expiration of twenty-one days from the date of closing of the subscription period / list or such longer period not exceeding forty-two days as may, within the said twenty-one days, be notified to the applicants for permission by the PSX, the Issuer undertakes that a notice to that effect will immediately be published in the press and will refund subscription money to the applicants without surcharge as required under the provisions of Section 69 of the Companies Act, subject to approval of the State Bank of Pakistan (if applicable/required). Page 11 of 127
13. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED However, and, if any such money is not repaid within eight (08) days after the Bank becomes liable to repay it, the Directors of the Bank shall be jointly and severally liable to repay that money from the expiration of the eighth day together with surcharge at the rate of two per cent (2.00%) for every month or part thereof from the expiration of the eight day and, in addition, shall be liable to a penalty of level 3 on the standard scale in accordance with the provisions of sub-section (2) of Section 69 of the Companies Act. The surcharge mechanism has been mentioned here in order to ensure regulatory compliance. However, from the shariah perspective, since this surcharge is a form of interest, the applicants are advised to dispose any such received amount as charity. As required under sub-section (3) of Section 69 of the Companies Act, the subscription money, shall be deposited and kept in a separate bank account in a scheduled bank so long as the Bank may become liable to repay it under sub-section (2) of Section 69 of the Companies Act. 1.8. COMPLIANCE OFFICER Muhammad Shoaib Company Secretary BankIslami Pakistan Limited 14th Floor, Executive Towers, Dolmen City, Block-4, Clifton, Karachi- Pakistan. Tel: +92-21-35839906 Ext. 2112 Fax: +92-21-35372252 (the space has been left blank intentionally) Page 12 of 127
14. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED PART 2: SUKUK AND RELATED MATTERS 2.1. THE ISSUE BankIslami Pakistan Limited is issuing fully paid up, rated, perpetual, unsecured, subordinated, noncumulative and contingent convertible listed Mudaraba Sukuk Certificates to be issued as instrument of redeemable capital under Section 66 of the Companies Act, 2017 which will qualify as Additional Tier 1 Capital as outlined by SBP under the Basel III Circular. The Sukuks will be subordinated to the payment of principal and profit, to all other indebtedness of the Bank, including deposits. The total Sukuk Issue is of up to PKR 2,000,000,000/- (Pak Rupees Two Billion Only). The Sukuk Certificates are unsecured, subordinated, rated, listed, perpetual and non-cumulative and will be offered in denominations of PKR 5,000/- or multiples thereof to the investors subject to a minimum investment amount of PKR 5,000/. The Sukuk Certificates of PKR 1,700 million have been offered to investors through a pre-IPO subscription (Pre-IPO Portion) and the remaining PKR 300 million shall be offered to general public through this prospectus (IPO Portion). The Issue amount is expected to contribute towards BankIslami’s Additional Tier 1 Capital for CAR as per guidelines set by SBP. The funds raised will be utilized in the Bank’s financing and investment activities (General Pool) as permitted by its Memorandum & Articles of Association. The proceeds of the Issue shall be commingled with other funds of the depositors (which may include Bank’s own equity) i.e. shall be invested in the General Pool of the Bank under the Investor Agreement. The Sukuk Certificates being issued have been assigned a rating of “A-” by PACRA and will carry a floating rate coupon priced at a spread of 275 BPS over 3-month KIBOR. Profit will be payable monthly (365 days in a year) in arrears on the outstanding investment amount. The first such profit payment will fall due at the end of 1st calendar month end from the Issue Date and subsequently every month end thereafter. The profit should only be paid from the relevant month’s attributable profit of the General Pool. In case the Bank reduces the expected profit (because of regulatory reasons or otherwise), the same will not constitute an event of default. In that case the Bank will reduce the expected profit to 0.005% p.a. through adjustment of weightages in the General Pool. The profit payment to the Sukuk Holders will be non-cumulative in nature i.e. In case of exercise of discretion by the Bank for a particular profit payment period, Sukuk Holders will not be compensated subsequently by the Bank for that particular period in any manner. Accordingly, the profit payment made to the Sukuk Holders based on their respective monthly profit weightages will be considered as full & final payment for that particular period. The profit payment to Sukuk Holders will be subject to the condition that any such payment should not result in non-compliance of the Bank with the applicable regulatory requirement of MCR, CAR and Leverage Ratio as determined by SBP from time to time. As per the existing instructions of SBP, in order to implement the above Lock-in Clause, the Bank will reduce the monthly profit weightages attributed to the Sukuk Holders until the Bank is in breach of regulatory capital requirements (i.e. the expected profit in this case would be up to 0.005% p.a.). Any inability to exercise the Lock-in Clause or non-cumulative feature, will subject these Sukuk Certificates to mandatory conversion into common shares at the discretion of SBP. To bring Pre-IPO and IPO investors at par before credit of Sukuk, profit for the interim period (i.e. from the disbursement of funds by the Pre-IPO investors until the day before Issue Date) will be paid separately to the Pre-IPO investors. Call Option may be exercised by the Issuer after obtaining written approval from the SBP at any time on or after a period of 5 (five) years from the Issue Date by giving to the Sukuk Holders and the Trustee at least 30 (thirty) days prior notice in writing, specifying the profit payment date on which the Issuer will redeem all of the then outstanding Sukuk or a portion of the then outstanding Sukuk by payment of the amount(s) calculated in accordance with the provisions of the Trust Deed, whereupon the Sukuk Holders Page 13 of 127
15. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED shall be bound to so accept the redemption. The Call Option, once announced, will be irrevocable. No Put Option shall be available to the Sukuk Holders. Pak Brunei Investment Company Limited has been appointed as trustee to secure the interests of the investors. JS Global Capital has been appointed as the Designated Market Maker for this Issue and the Sukuk shall be listed on the PSX via Initial Public Offering, thereby creating liquidity for the Issue. 2.2. INSTRUMENT STRUCTURE Arbab ul Amwaal (Sukuk Holders) Funds Investor Agreement/Prospectus Sharing of profit/loss on monthly basis by assigning weightages Mudarib (BankIslami) Commingle the funds into the General Pool of Bank GENERAL POOL (Includes the Bank’s shareholders equity; proceeds of all current, savings and investment deposit accounts with the Bank; and any other sources of funds to be included in the pool by the Bank from time to time) Secures interests of the Sukuk Holders Trustee (Pak Brunei Investment Company Limited) Trust Deed The Sukuk has been structured on the basis of Islamic principle of Mudaraba where one partner gives money to another for investment in a business. The capital provider / Sukuk Holders are called "Rabb-ulMaal/Arbab ul Amwaal", while the management and work are the exclusive responsibility of the other partner, the Bank, who is called the "Mudarib". The Mudaraba structure will be as follows: 1. In case of Pre-IPO, the Bank and the Pre-IPO investors will enter into Investor Agreement while in case of IPO, investors will invest in the Sukuk on the basis of this prospectus. After completion of the IPO, Sukuk shall be issued to both the Pre-IPO and IPO participants in scripless form who will then be referred to as the Sukuk Holders 2. The Sukuk proceeds will be intermingled with other depositors' fund in the general pool i.e. invested in the general pool of the Bank wherein it shall be classified as special local currency Sukuk. On the date of the commencement of the Mudaraba, the General Pool shall comprise of: (i) the Bank’s shareholders equity; (ii) proceeds of all current, savings and investment deposit accounts with the Bank; and (iii) any other sources of funds to be included in the pool by the Bank from time to time. As a result, the Sukuk Holders will become partners of other general pool participants 3. The profit or loss arising from the general pool shall be managed in accordance with Shariah principles applicable to Mudaraba and State Bank of Pakistan's “Instructions for Profit and Loss Distribution and Pool Management for Islamic Banking Institutions” 4. The Bank will assign and announce weightages for the Sukuk from the profits of General Pool, on a monthly basis, 3 working days (or fewer days if permitted by SBP) before the start of each month along with the announcement of weightages for other remunerative deposit categories. The weightages will be set keeping in view of the expected Sukuk profit rate. Page 14 of 127
16. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 2.3. TERM SHEET Issuer & Mudarib Instrument/Issue/ Transaction Issue Size Issue Title/Name Tenor Principal Redemption Purpose BankIslami Pakistan Limited (“BIPL” or the “Bank” or the “Issuer” Fully paid up, rated, perpetual, unsecured, subordinated, non-cumulative and contingent convertible listed Mudaraba Sukuk Certificates to be issued as instrument of redeemable capital under Section 66 of the Companies Act, 2017 which will qualify as Additional Tier 1 Capital as outlined by State Bank of Pakistan (“SBP”) under BPRD Circular No. 6 dated August 15, 2013 (hereinafter referred to as the “Circular”); Up to PKR 2,000,000,000/- (Pak Rupees Two Billion Only), inclusive of a Green Shoe Option of PKR 500,000,000/- (Pak Rupees Five Hundred Million Only); The Instrument has been named as “BankIslami Ehad Sukuk” and being marketed under the same; with the logo as mentioned on the top of the Term sheet. Perpetual (i.e. no fixed or final redemption date); Perpetual, hence not applicable; The Issue Amount is expected to contribute towards BIPL’s Additional Tier 1 Capital for capital adequacy ratio as per guidelines set by SBP. The funds so raised will be utilized in the Bank’s financing and investment activities (General Pool) as permitted by its Memorandum & Articles of Association. The proceeds of the Issue shall be commingled with other funds of the depositors (which may include Bank’s own equity) i.e. shall be invested in the General Pool of the Bank under the Investor Agreement; Payment of Profit will be payable monthly (365 days in a year) in arrears on the Profit outstanding investment amount. The first such profit payment will fall due at the end of 1st calendar month end from the issue date and subsequently every month end thereafter. The profit should only be paid from the relevant month’s attributable profit of the General Pool; In case the Bank reduces the expected profit (because of regulatory reasons or otherwise), the same will not constitute an event of default. In that case the Bank will reduce the expected profit to 0.005% p.a. through adjustment of weightages in the General Pool. Profit Lock-in Clause The profit payment to the Sukuk Holders will be non-cumulative in nature i.e. In case of exercise of discretion by the Bank for a particular profit payment period, Sukuk Holders will not be compensated subsequently by the Bank for that particular period in any manner. Accordingly, the profit payment made to the Sukuk Holders based on their respective monthly profit weightages will be considered as full & final payment for that particular period; The profit payment to Sukuk Holders will be subject to the condition that any such payment should not result in non-compliance of the Bank with the applicable regulatory requirement of MCR, CAR and Leverage Ratio (LR) as determined by SBP from time to time. As per the existing instructions of SBP, in order to implement the above Lock-in Clause, the Bank will reduce the monthly profit weightages attributed to the Sukuk Holders (i.e. the expected profit in this case would be up to 0.005% p.a.) of the current month and thereafter until the Bank is in breach of regulatory capital requirements attributed to the Sukuk Holders. Any inability to exercise the lock-in clause or non-cumulative feature, will subject these Sukuk certificates to mandatory conversion into common shares at the discretion of SBP; Page 15 of 127
17. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED Expected Profit Rate Profit Rate Note: The Bank shall make all efforts to ensure that sufficient capital is available to meet the regulatory requirements at all times. However, in an extreme case where the Lock-in clause is invoked then following the regulatory requirements of SBP, the Bank will reduce the monthly profit weightages of the current month. Moreover, this exception should not be considered as a precedent. Base Rate plus a margin of 2.75% per annum. Base Rate is defined as the 3-Month Karachi Interbank Offer Rate (“KIBOR”). KIBOR is defined as Average Ask rate for the relevant tenor, as published on Reuters page KIBR or as published by the Financial Markets Association of Pakistan in case the Reuters page is unavailable. The KIBOR setting mechanism (which will be done on a quarterly basis) shall be covered in the legal agreements; The expected profit rate shall be as follows: 1) For the period at the end of which the Bank is compliant with the Paid-up Capital (net of losses) - MCR, Capital Adequacy Ratio - CAR and Leverage Ratio - LR Requirements: - Base Rate plus a maximum margin of 2.75% per annum according to the pre-announced profit weightages. 2) For the period at the end of which the Bank is not compliant with the MCR, CAR and LR Requirements or payment of the profit set out in (1) above for the relevant period may render it non-compliant with such MCR, CAR and LR Requirements: - Expected Profit will be up to 0.005% p.a. calculated based on the reduced monthly weightages assigned by the Bank; Dividend Stopper Mudarabah Distribution Income Security Face Value Issue Price Minimum Investment Amount Eligible Investors Placement Transferability Call Option and Profit Payment On a monthly basis, Frequency The Bank shall not recommend or declare any distribution or dividend to ordinary / equity shareholders of the Bank in the event that during any Profit Payment Date which has occurred in the immediately preceding [3 (three)] months or financial quarter, the Bank did not pay the expected Profit Payment Amount to the Sukuk Holders on such date; The profit will be calculated on the basis of predetermined profit sharing ratio and monthly weightages announced before the beginning of each month and distributed to Sukuk Holders on a monthly basis as per the Pool Management guidelines issued by SBP; The Sukuk will be unsecured; Pak Rupees Five Thousand per certificate (PKR 5,000); Pak Rupees Five Thousand per certificate (PKR 5,000); Pak Rupees Five Thousand (PKR 5,000); Islamic Banks and Windows, Conventional banks, DFIs, Companies, Mutual Funds, Retirement Funds, etc. and other eligible investors as per S. 66 of the Companies Act, 2017 or as allowed by SECP. Eligible investors also include retail investors as per Public Offering Regulations, 2017. The Sukuk shall be inducted into the Central Depository System of Central Depository Company of Pakistan Limited and shall be transferred in accordance with the Central Depositories Act, 1997 and CDC Regulations; BIPL may exercise a Call Option on the subject Sukuk on or after five years from issuance date subject to the following conditions (the “Call Option Conditions”): (a) prior approval of the SBP has been obtained for exercise of the call; and (b) the Bank replaces the Sukuk with capital of the same or better quality and demonstrates that the capital position of the Bank will be well above the minimum capital requirement prescribed by the SBP after the Call Option is exercised. Page 16 of 127
18. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED (c) Call Option price should be the Outstanding Value of Sukuk (Face Value plus/ minus attributable profit/loss); Put Option Seniority of Claim/ Sub-ordination No put option shall be available to the holders of this instrument; The claims of the investor will rank in case of going concern as well as gone concern (in case the Sukuk are not already converted into the common share of the Bank) basis (i.e.) Sukuk holders are part of General Pool (a) superior to the claims of ordinary shareholders; and (b) pari-passu without preference amongst Sukuk holders; Loss Absorption at Point of Non-Viability (“PONV”): The Issue will be subject to loss absorption and / or any other requirements of SBP upon the occurrence of a Point of Non-Viability event as per Paragraph A-5-3 of Annexure 5 of the Circular, which stipulates that “SBP may, at its option, fully and permanently convert the Additional Tier 1 Capital into common shares of the issuer and / or have them immediately written off (either partially or in full).” For the purposes of this Issue, as per an upfront right given by the Sukuk Holders, the Sukuk will only be converted into ordinary shares of the Bank and the number of shares to be issued to Sukuk Holders at the time of conversion will be equal to the ‘Outstanding Value of the Sukuk’ (Face Value plus/ minus attributable profit/loss) divided by market value per share of the Bank’s common share on the date of PONV event as declared by SBP. To quantify the maximum dilution, the Bank is capping the maximum number of shares to be issued at the time of all conversion events subject to maximum number of shares capped at 184 million in compliance with the requirement of paragraph A-5-3 (vi) of the Basel III Circular. Loss Absorbency Loss Absorption at Pre-Specified Trigger (“PST”): The Issue will be subject to loss absorption upon the occurrence of a Pre-Specified Trigger as per Section A-5-2 of Annexure 5 of the Circular, which stipulates that “if an issuer’s Common Equity Tier 1 (“CET 1”) ratio falls to or below 6.625% of Risk Weighted Assets (“RWA”), the Issuer will have full discretion to determine the amount of Additional Tier 1 Capital to be permanently converted into common shares or written off, subject to SBP regulations / instructions, and the cap specified below”. For the purpose of this Issue, as per an upfront right given by the Sukuk Holders, the Sukuk will only be converted into ordinary shares of the Bank. The conversion rate / price shall be based on the market value of the shares of the Issuer on the date of occurrence of the Pre-Specified Trigger point and the Outstanding Value of the Sukuk. To quantify the maximum dilution, the Bank is capping the maximum number of shares to be issued at the time of all conversion events subject to maximum number of shares capped at 184 million in compliance with the requirement of paragraph A-5-3 (vi) of the Basel III Circular. Fit and Proper Criteria Issuer Rating Instrument Rating Listing and Subscription The Sukuk Holders entitled to 5% or more ordinary shares of the Issuer upon conversion of the Sukuk shall fulfill fit and proper criteria of SBP; A+ (Long Term), A1 (Short Term) by PACRA; A- (A minus) by PACRA; The Mudaraba Sukuk shall be rated throughout the life of the Instrument. Listing will be done via issuance of Prospectus at Pakistan Stock Exchange (PSX); Public The public subscription will remain open for 2 days or any other period approved by the PSX and SECP; Page 17 of 127
19. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED Classification on the Balance Sheet Transaction Legal Counsel Trustee to the Issue Issuer’s Registered Office Compliance Officer Registrar / Transfer Agent Designated Market Maker Joint Advisors & Arrangers (Joint Advisors or JAA) Applicable Laws 2.4. Sukuk shall be classified as "Liabilities" in the Balance Sheet; Mohsin Tayebaly & Co. Pak Brunei Investment Company Limited; 11th Floor, Executive Tower One, Dolmen City, Marine Drive Block 4, Clifton, Karachi, Pakistan; Muhammad Shoaib – Company Secretary; Central Depository Company of Pakistan Limited; JS Global Capital Limited; JS Global Capital Limited and Next Capital Limited; Banking Companies Ordinance, 1962; BPRD circular No. 6 of 2013 dated August 15, 2013 and other SBP Prudential Regulations issued from time to time; Companies Act, 2017, Securities Act, 2015, and rules and regulations issued thereunder by the SECP and PSX Regulations; DISCRETION FOR REDUCTION OF PROFIT In the event where payment of the Profit Payment Amount will result in a shortfall in the Issuer’s MCR, CAR or leverage ratio, or results in an increase in any existing shortfall in MCR, capital adequacy ratio or leverage ratio, the Issuer has the discretion to reduce the weightage of the Sukuk Holders participation in the General Pool (profit distribution ratios for weighted average investment) (to a negligible amount of up to 0.005% p.a.) of the current month and every month thereafter in which the Issuer is in breach of regulatory capital requirements. In case the Bank reduces the expected profit (because of regulatory reasons or otherwise), the same will not constitute an event of default. The profit payment to the Sukuk Holders will be non-cumulative in nature i.e. In case of exercise of discretion by the Bank for a particular profit payment period, Sukuk Holders will not be compensated subsequently by the Bank for that particular period in any manner. Accordingly, the profit payment made to the Sukuk Holders based on their respective monthly profit weightages will be considered as full & final payment for that particular period. 2.5. CONVERSION MECHANISM In conformity with Basel III Circular, the Sukuk shall, if directed by the SBP, be permanently converted into ordinary shares upon: (i) CET 1 Trigger Event; (ii) PONV Trigger Event; (iii) the Lock-In Event; or (iv) Inability to exercise Non-cumulative feature. In the case of CET 1 Trigger Event, the Issuer will have full discretion to determine the amount of Sukuk to be converted into ordinary shares, which amount shall at least be the amount required to immediately return the Issuer’s CET 1 ratio to above the CET 1 Trigger Event but will not exceed the amount required to bring the CET 1 ratio to 8.5% of RWA. In the case of a PONV Trigger Event or Lock-In Event, the amount of Sukuk to be converted will be determined by the SBP in its sole discretion. The number of shares to be issued to Sukuk Holders at the time of conversion will be equal to the ‘Outstanding Face Value of the Sukuk’ (face value plus/ minus attributable profit/loss) divided by market value per share of the Issuer’s ordinary share on the date of trigger of the PONV event, occurrence of the Page 18 of 127
20. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED Pre-Specified Trigger Point or Lock-in Event as declared by SBP, subject to a maximum of 184,000,000 ordinary shares to be issued. The maximum number of shares will not be adjusted on account of any further issue of capital, stock splits, stock dividends or similar corporate actions. As on 05/12/2019 market closing price of the ordinary share of the Bank was Rs. 12.86/-. In the event of conversion of the Sukuk into common shares by SBP, any person consequently holding 5% (five percent) or more of the paid-up share capital of the Issuer will be required to comply with the fit and proper criteria of SBP. The Bank shall, in accordance with directions of the SBP, procure all approvals to enable conversion of the Sukuk into ordinary shares, including approvals in relation to the increase in authorized capital of the Issuer (to the extent necessary). The Bank has obtained approval of the shareholders of the Bank for the conversion of Sukuk and approval of the Securities and Exchange Commission of Pakistan under section 83(1)(b) of the Companies Act, 2017 shall be obtained as per the timeline provided by SECP. 2.6. SHARIAH ADVISOR TO THE ISSUE Shariah Board of the Bank is acting as Shariah Advisor to the Issue. Profiles of the members of the Board are given in section 7.3. (the space has been left blank intentionally) Page 19 of 127
21. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 2.7. SHARIAH OPINION Page 20 of 127
22. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED Page 21 of 127
23. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 2.8. MINIMUM CAPITAL REQUIREMENT The SBP through its BSD Circular No.07 of 2009 dated April 15, 2009 requires the minimum paid up capital (net of losses) for all locally incorporated Banks to be raised to PKR 10 billion in a phased manner from the financial year December 2013 onwards. The paid-up capital of the Bank for the period ended September 30, 2019 stood at PKR ~10 billion and is in compliance with the SBP requirement. 2.9. CAR REQUIREMENT The Capital Adequacy Ratio (CAR) of the Bank is subject to the Basel III capital adequacy guidelines stipulated by the SBP through its Basel III Circular. These instructions are effective from December 31, 2013 in a phased manner with full implementation intended by December 31, 2019. Under Basel III guidelines, Banks are required to maintain the following ratios on an ongoing basis: CAR Requirement 2014 10.0% 2015 10.25% 2016 10.65% 2017 11.28% 2018 11.90% 2019 & onwards 12.50% As of December 31, 2018, BankIslami’s CAR was 15.10%, subject to certain relaxations by SBP while CAR of the Bank as of September 30, 2019 is at 15.6% which is compliant against the SBP’s minimum requirement. 2.10. LEVERAGE RATIO The SBP requires to maintain a minimum Tier 1 Leverage Ratio (“LR”) of 3%. As of September 30, 2019, the Bank is fully compliant with this requirement with an LR of 4.83%. 2.11. MODE OF PAYMENT The payment of profit shall be credited in Sukuk Holders’ bank accounts electronically on monthly basis. The applicants, therefore, must provide their International Bank Account Number (IBAN) in the Sukuk Subscription Form. 2.12. PRE-IPO INVESTORS The Pre-IPO portion for the Sukuk closed at PKR 1,700 million out of the total issue size of PKR 2 billion and the disbursement of Pre-IPO portion was completed on DD/MM/2019. The list of investors in the Pre-IPO portion along with their respective investment amount is provided below: BankIslami Pakistan Limited Additional Tier 1 Sukuk – Pre-IPO Investors List S. No. 01 02 03 04 05 06 07 08 09 Investor Name National Bank of Pakistan Pakistan International Airlines Limited - Pension Fund Pakistan International Airlines Limited - Provident Fund Pak Qatar Family Takaful Limited Habib Bank Limited Pakistan Security Printing Corporation - Employees Pension Fund United Bank Limited UBL Ameen Pak Arab Fertilizers Employees Gratuity Fund Pre-IPO Participation (PKR) 200,000,000 200,000,000 150,000,000 150,000,000 100,000,000 100,000,000 75,000,000 75,000,000 50,000,000 % of Total Issue Size 10.00% 10.00% 7.50% 7.50% 5.00% 5.00% 3.75% 3.75% 2.50% Page 22 of 127
24. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 2.50% KAPCO Employees Provident Fund Trust 50,000,000 2.50% Bank Al Habib Limited 50,000,000 Anwar Khawaja Industries (Pvt) limited - Employees 1.50% 12 30,000,000 Provident Fund 1.50% 13 Pak Qatar Investment (Pvt.) Limited 30,000,000 1.40% 14 Takaful Pakistan Limited 28,000,000 1.25% 15 Soneri Bank Limited 25,000,000 1.00% 16 Zahidjee Employee Contributory Provident Fund Trust 20,000,000 1.00% 17 Pak Qatar General Takaful Limited 20,000,000 1.00% 18 JS Global Capital Limited 20,000,000 Pak Qatar Family Takaful Limited - Employees Provident 0.64% 19 12,800,000 Fund Dubai Islamic Bank Pakistan Limited - Employees Gratuity 0.50% 20 10,000,000 Fund 0.50% 21 Al Baraka Bank (Pakistan) Limited - Staff Provident Fund 10,000,000 0.25% 22 First Habib Modaraba 5,000,000 0.25% 23 Sayyed Engineers Limited - Employees Provident Fund 5,000,000 0.25% 24 Providus Capital (Pvt). Limited 5,000,000 0.25% 25 Meezan Bank Limited - Staff Gratuity Fund 5,000,000 0.13% 26 AK Advisers LLP 2,500,000 0.05% 27 Qatar Group (Pvt.) Limited 1,000,000 28 45 Individual Investors 270,700,000 13.54% Total 1,700,000,000 85.00% Majority of the Pre-IPO investors have signed the Investor Agreements for the above-mentioned participation amount. 10 11 2.13. OPENING AND CLOSING OF SUBSCRIPTION LIST The subscription list will open at the commencement of the banking hours on DD/MM/YYYY and close at the end of banking hours on DD/MM/YYYY. 2.14. PUBLIC SUBSCRIPTION THROUGH E-IPO E-IPO is submission of application for subscription of securities electronically through internet, Automated Teller Machines (ATM) and mobile phones. In order to facilitate the public during IPOs, SECP has introduced the concept of e-IPO. The following two systems are available for e-IPOs: i. Centralized e-IPO System (CES): In order to facilitate investors, CDC in collaboration with 1Link (G) Limited (1Link) has developed a Centralized e-IPO System (“CES”) through which applications for subscription of securities offered to the general public can be made electronically. CES has been made available in this Initial Public Offering (IPO) and can be accessed through the web link www.cdceipo.com. Payment of subscription money can be made through 1LINK’s member banks available for CES, list of which is available on above website. For making application though CES, investors must be registered with CES. Registration with CES is one-time activity, free of cost and can be done under a self-registration process by filling the CES registration form, which is available 24/7 all around the year. Investors who have valid Computerized National Identity Card (CNIC), bank account with any of the commercial bank, email address, mobile phone number and CDS Account (Investor account or sub account) can register themselves with CES. Page 23 of 127
25. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED Investors who do not have CDS account can visit www.cdcpakistan.com for information regarding opening CDS account. For further guidance and queries regarding CES and opening of CDS account, investors may contact CDC at phone number: 0800 – 23275 (CDCPL) and e-mail: info@cdcpak.com or Mr. Farooq Ahmed Butt at Phone 021-34326030 and email: farooq_butt@cdcpak.com. Investors who are registered with CES can submit their applications through the web link www.cdceipo.com 24 hours a day during the subscription period which will close at midnight on DD MM, 2019. ii. E-IPO Facilities by Bankers to the Issue: For this IPO, United Bank Limited (UBL) is providing e-IPO facility to its accountholders. UBL account holders can use UBL Net http://www.ubldirect.com/corporate/ebank. Banking to submit their application via link 2.15. BENEFITS OF E-IPO E-IPO has the following benefits: 1. It enables the investors to make application for subscription of securities including Sukuk through the internet without going to the bank and waiting in long queues; 2. It is efficient and simultaneously facilitative for both the Issuer and the investors; 3. It is available for use 24 hours during the subscription period; and 4. If you are registered with CES or accountholder of a bank providing e-IPO facility, you may get SMS for new IPOs. By applying through CES you can also track your application status. 2.16. INVESTORS ELIGIBILITY 1. 2. 3. 4. 5. Pakistani citizens resident in Pakistan Pakistani citizens residing outside Pakistan Persons holding two nationalities including Pakistani nationality Foreign nationals whether living in or outside Pakistan 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) 6. Mutual funds, provident/pension/gratuity funds/trusts (subject to the terms of their trust deeds and existing regulations; and 7. Branches in Pakistan of companies and bodies corporate incorporated outside Pakistan 2.17. FACILITIES AVAILABLE TO FOREIGN/NON-RESIDENT PAKISTANI INVESTORS Companies are permitted under paragraph 6 (with specific reference to sub para (B) (VIII)) of Chapter 20 of the State Bank of Pakistan’s (“SBP”) Foreign Exchange Manual (the “Manual”) to issue Sukuk on repatriation basis to non-residents who are covered under paragraph 6 (A) of Chapter 20 of the Manual, i.e. (I) A Pakistan national resident outside Pakistan, (II) A person who holds dual nationality including Pakistan nationality, whether living in or outside Pakistan, (III) A foreign national, whether living in or outside Pakistan and (IV) A firm (including a partnership) or trust or mutual fund registered and functioning outside Pakistan, excluding entities owned or controlled by a foreign government, provided the issue price, is paid in foreign exchange through normal banking channel by remittance from abroad or out of foreign currency account maintained Page 24 of 127
26. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED by the subscriber/purchaser in Pakistan and the purchase price (whether negotiated privately or otherwise) is not less than the price quoted on the PSX. Non-residents who wish to subscribe Sukuk out of the general public portion may contact any of the bankers to the issue (retail portion) for taking instructions regarding payment of subscription money against Sukuk offered to general public / retail investors. List of bankers to the issue for retail portion is available on page 1 and para 8.7 of this Prospectus. The Sukuk issued to non-resident investors shall be intimated by the Bank to the designated Authorized Dealer, along with the documents prescribed in the Manual within 30 days of issue. Non-residents who are covered under paragraph 6 (A) of Chapter 20 of the Manual do not require SBP’s approval to invest in the Sukuk being issued in terms of this Prospectus. Furthermore, under paragraph 7(vii)of Chapter 20 of the Manual the Authorized Dealer shall allow repatriation of profit, net of applicable taxes and proceeds on sale of listed Sukuk (i.e. divestment proceeds) not exceeding the market value less brokerage/commission on provision of prescribed documents. Payments made by non-residents shall be supported by proof of receipt of foreign currency through normal banking channels. Such proof shall be submitted along with the Application by the non-residents. 2.18. MINIMUM AMOUNT OF APPLICATION AND BASIS OF ALLOTMENT OF SUKUK The basis and conditions of allotment shall be as follows: a) Face value of the Sukuk is PKR 5,000/-. b) The minimum amount of application for subscription of Sukuk is PKR 5,000/-. c) Applications for Sukuk below the aggregate face value of PKR 5,000/- shall not be entertained. d) Applications for Sukuk by the general public, including institutions and individuals, must be for a minimum of the aggregate face value of PKR 5,000/- or in multiples thereof. e) If the Sukuk to be issued to the general public are sufficient for the purpose, all applications shall be accommodated. f) If the issue is oversubscribed in terms of amount, then all applications shall be accommodated initially for Sukuk of face value of PKR 5,000/- each and the balance Sukuk shall be allotted on prorata basis to all applicants who applied for Sukuk in multiples of PKR 5,000/-. g) If the issue is over-subscribed in terms of number of applications and the amount, the Sukuk shall be allotted through computer balloting in the presence of representatives of PSX. h) Allotment of Sukuk shall be subject to scrutiny of applications for subscription. 2.19. REFUND OF MONEY TO UNSUCCESSFUL APPLICANTS BankIslami 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 regulation 5B 4.19 read with regulation 5B 4.20 of the PSX Rule Book. As per sub-section (2) of Section 68 of the Companies Act, 2017, if a refund is not made within the time specified therein, the Directors of the Company shall be jointly and severally liable to repay the money with surcharge at the rate of 2.00%, for every month or part thereof from the expiration of the 15th day and, in addition, shall be liable to a penalty of level 3 on the standard scale. The surcharge mechanism has been mentioned here in order to ensure regulatory compliance. However, from the shariah perspective, since this surcharge is a form of interest, the applicants are advised to dispose any such received amount as charity. Page 25 of 127
27. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 2.20. MINIMUM SUBSCRIPTION The minimum amount of subscription on which the Directors will proceed to allot Sukuk is PKR 2,000 million. 2.21. ISSUE AND CREDIT OF SUKUK BankIslami shall credit Sukuk to the successful allottees within twenty-one (21) days of closure of subscription list in compliance with the requirements of PSX. Sukuk will be issued only in the Book-Entry Form through credit in their CDS Accounts. The applicants, therefore, must provide their CDS Account Number (Investor Account Number or Sub-Account Number) in the Sukuk Subscription Form. The Sukuk issued shall be subject to the terms & conditions for the issuance of the Sukuk specified in the Trust Deed dated November 13, 2019. If the Bank defaults on complying with the requirements of the Listing Regulations, it will pay to PSX a penalty of PKR 5,000/- per day during which the default continues. PSX may also notify the fact of such default and the name of the Bank by notice and also by publication, in the Daily Quotations. The surcharge mechanism has been mentioned here in order to ensure regulatory compliance. However, from the shariah perspective, since this surcharge is a form of interest, PSX is advised to dispose any such received amount as charity. 2.22. REDEMPTION RESERVE No redemption reserve is being created for redemption of Sukuk as the instrument is perpetual in nature. 2.23. DEDUCTION OF ZAKAT Zakat is deductible in case of the Sukuk being held by Muslim citizens of Pakistan, except where a statutory declaration of exemption is filed, and in case of certain non-corporate entities such as Trusts, Funds, etc. (subject to being qualified for non-deduction of Zakat under the Zakat and Ushr Ordinance, 1980). Zakat is withheld at 2.5% of the redeemed principal amount. 2.24. INCOME TAX Any income derived from investment in Sukuk shall be subject to income tax as per the Income Tax Ordinance, 2001. Withholding tax, as specified in Part III Division IB of the First Schedule of the said ordinance shall be applicable. 2.25. DEDUCTION OF WITHHOLDING TAX Profit paid to Sukuk Holders will be subject to withholding tax under section 150A of the Income Tax Ordinance, 2001 specified in Part III Division IB of the First Schedule of the said Ordinance or any time to time amendments therein. Rates of tax specified under Division IB are as follows: Category Tax Rate for Persons appearing in Active tax Payer List Tax Rate for Persons not appearing in Active tax Payer List Company 15% 30% 12.50% 25% Individual or Association of Persons (If return on Investment is more than one million) Page 26 of 127
28. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED Individual or Association of Persons (If return on Investment is less than one million) 10% 20% 2.26. CAPITAL GAINS Any capital gain derived from the sale of Sukuk shall be subject to capital gain tax as per section 37A of the Income Tax Ordinance, 2001. Applicable Capital Gain Tax Rates for FY20 are as follows: (a) For persons appearing in Active Tax Payer List: 15.0% (b) For persons not appearing in Active Tax Payer List: 30.0% 2.27. MARKET MAKING JS Global Capital Limited will act as Designated Market Maker for the Sukuk. The Designated Market Maker will at all times hold at least one percent (1%) of the Issue size. The Designated Market Maker shall mandatorily make available two-way quotes on daily basis with a maximum spread of 10% till complete redemption of the Sukuk. The Designated Market Maker will be obligated to replenish its orders/quotes within 90 seconds following full execution, withdrawal, expiration or any change in the price of either bid or offer. The Market Making Orders/Quotes are to be maintained on both sides during Market Making period as per Market Making agreement which shall be for the tenure of the Debt Security. The Designated Market Maker shall be allowed to Blank Sale in Debt Security subject to sufficient preexisting interest at the end of each Blank Sale day to validate that the Designated Market Maker can deliver the quantity sold blank during the trading day. Market Marker shall make available copy of the Prospectus to the investors at all times. 2.28. DISCLOSURE OF DEFERRED TAXATION Deferred tax is recognised using the balance sheet liability method on all temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for the taxation purposes. Deferred tax is calculated at the rates that are expected to apply to the period when the differences are expected to reverse based on tax rates that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available, against which the asset can be utilised. The carrying amount of deferred tax asset is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be utilised. The Bank also recognises deferred tax asset / liability on deficit / surplus on revaluation of operating fixed assets and securities which is adjusted against the related deficit / surplus in accordance with the requirements of International Accounting Standard (IAS) 12, ‘Income Taxes’. The balance of deferred tax asset (net) as of September 30, 2019 was PKR 7,231 million. 2.29. SUKUK ISSUED IN PRECEEDING YEARS The Bank has not issued any Sukuk since its incorporation. Page 27 of 127
29. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 2.30. INTEREST OF PRE-IPO INVESTORS Except as provided below, the Pre-IPO Investors only have interest in this Sukuk as Sukuk Holders: • Bank Al Habib Limited, Soneri Bank Limited and United Bank Limited are acting as Bankers to the Issue for the Sukuk and have also participated in the Pre-IPO portion (the space has been left blank intentionally) Page 28 of 127
30. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 2.31. STATEMENT BY THE ISSUER The General Manager Pakistan Stock Exchange Limited Stock Exchange Limited Stock Exchange Road Karachi On behalf of BankIslami Pakistan Limited, (“BankIslami” or the “Bank”), we hereby confirm that all material information as required under the Securities Act, 2015, the Public Offering Regulations, 2017 and the Listing of Companies and Securities Regulations of the Pakistan Stock Exchange Limited has been disclosed in the Prospectus and that whatever is stated in Prospectus 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 BankIslami Pakistan Limited -sd___________________________ Syed Amir Ali President & CEO -sd___________________________ Sohail Sikandar Chief Financial Officer Date: October 17, 2019 Page 29 of 127
31. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 2.32. STATEMENT BY CONSULTANT TO THE ISSUE The General Manager Pakistan Stock Exchange Limited Stock Exchange Limited Stock Exchange Road Karachi Being mandated as Consultant to this Initial Public Offering of Sukuk of BankIslami Pakistan Limited, we hereby confirm that all material information as required under the Securities Act, 2015, the Listing of Companies and Securities Regulation of Pakistan Stock Exchange Limited and Public Offering Regulations, 2017 has been disclosed in this prospectus and that whatever is stated in the prospectus and in the supporting documentations is true and correct to the best of our knowledge and belief and that nothing has been concealed. For and on behalf of Next Capital Limited -sd___________________________ Salman J. Virani MD, Investment Banking Date: October 17, 2019 Page 30 of 127
32. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED PART 3: UNDERWRITING, COMMISSIONS, BROKERAGE AND OTHER EXPENSES TO THE ISSUE 3.1. UNDERWRITING The present Public Issue of Sukuk of PKR 300 million has been fully underwritten as follows: S. No. 01 02 Underwriter Arif Habib Limited Dawood Equities Limited Total No. of Sukuk Certificates 50,000 10,000 60,000 Amount in Rupees 250,000,000 50,000,000 300,000,000 If and to the extent that the Sukuk offered to the general public shall not have been subscribed and paid for in full by the closing date, the underwriters shall within 5 business days of being called upon by BankIslami to do so, subscribe or procure subscribers to subscribe and pay in readily available funds in accordance with their underwriting commitments. In the opinion of the Directors of the Bank, the resources of the underwriters are sufficient to discharge their underwriting obligations. 3.2. NO BUYBACK / REPURCHASE AGREEMENT THE UNDERWRITERS NOR ANY OF THEIR ASSOCIATES HAVE ENTERED INTO ANY BUYBACK OR REPURCHASE AGREEMENT WITH THE SPONSORS, THE BANK OR ANY OTHER PERSON IN RESPECT OF THIS PUBLIC ISSUE. ALSO, NEITHER THE BANK NOR ANY OF ITS ASSOCIATES HAVE ENTERED INTO ANY BUY BACK / REPURCHASE AGREEMENT WITH THE UNDERWRITERS OR THEIR ACCOCIATES. THE BANK AND ITS ASSOCIATES SHALL NOT BUY BACK / RE-PURCHASE CERTIFICATES FROM THE UNDERWRITERS AND THEIR ASSOCIATES. 3.3. UNDERWRITING EXPENSES The underwriters will be paid underwriting management fees of up to 3.00% on the amount of the public portion underwritten by them; 20% of the underwriting management fee shall be paid within 7 days of signing of Underwriting Management Agreement whereas the payment of the remaining portion / Additional Underwriting Management Fee shall be as disclosed in the Underwriting Management Agreement, as advised and approved by the Shariah Advisor. 3.4. FEES AND EXPENSES FOR CENTRAIZED E-IPO SYSTEM The commission on application received through CES will be paid to CDC, which shall not be more than 0.8% of the amount of successful applications. CDC will share the fee with other participants of CES at a ratio agreed amongst them. 3.5. COMMISSION TO THE BANKERS TO THE ISSUE A commission at the rate of 0.25% of the amount collected, in respect of successful applications will be paid to the Bankers to the Issue for services to be rendered by them in connection with the Public Offer. No commission shall be paid to the Bankers in respect of the Sukuk actually taken up by the underwriters by virtue of their respective underwriting commitments. Page 31 of 127
33. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 3.6. BROKERAGE COMMISSION Brokerage shall be paid to the TREC holders of PSX, at the rate of 1.0% of paid-up value of Sukuk actually sold through them. No brokerage shall be payable in respect of Sukuk taken up by the Underwriters by virtue of their underwriting commitment. 3.7. EXPENSES TO THE ISSUE The initial expenses of the issue paid or payable by the Bank inclusive of commission to the Underwriters, Bankers to the Issue and members of the PSX, etc., are estimated to be as follows: Key Expenses to the Issue Commission to Bankers to the Issue Out of Pocket Expenses of Bankers to the Issue CDC e-IPO charges* Other Bank’s e-IPO Charges Underwriting Management Fees - General Public Commission to the TREC Holders of PSX Consultant to the Issue/Advisor and Arranger Fee Processing Fee - Pre IPO Trustee Fee Rating Fee Legal Counsel Fee CDC Annual Fees for Eligible Security CDC Security Deposit CDC Fresh Issue Fee PSX Initial Listing Fee PSX Annual Listing Fee SECP Processing Fee SECP Supervisory Fee Auditors Fee for various certificates Printing & Publication of Prospectus/Application Forms Balloter and Registrar Fee Market Making (first year) Miscellaneous costs Total Rate 0.25% 0.80% up to 3.00% 1.00% 0.25% 0.08% 0.05% 10.0% Amount (PKR) 750,000 500,000 2,400,000 300,000 8,550,000 3,000,000 20,000,000 4,250,000 600,000 1,350,000 2,000,000 680,000 100,000 1,600,000 500,000 50,000 100,000 55,000 1,000,000 6,000,000 200,000 1,500,000 1,000,000 56,485,000 Note: Stamp duty fee (if any) will be calculated based on the advice of Transaction Legal Counsel *CDC E-IPO fee is 0.8% of the general portion actually received through that system. Therefore, the actual cost is dependent on the subscriptions received through E-IPO. Currently only 1 bank is offering E-IPO services for this IPO in addition to CDC. Page 32 of 127
34. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED PART 4: HISTORY, PROSPECTS AND RISK FACTORS 4.1. KEY INFORMATION Name of the Issuer Date of Incorporation Registration Number Listing Information 4.2. BankIslami Pakistan Limited 18 October 2004 0048672 Listed on Pakistan Stock Exchange on April 17, 2006 BACKGROUND & HISTORY BankIslami Pakistan was incorporated on October 2004 as a public limited company to carry out the business of an Islamic Commercial Bank in accordance with principles of Shariah Law. Subsequently, the Bank was granted ‘Scheduled Islamic Commercial Bank’ license by SBP on March 2005 after which it commenced operations from April 2006. The Bank now operates 330 branches including 81 sub branches in 114 cities of Pakistan which offers a full range of services in corporate, commercial, consumer, retail banking and investment banking activities. 4.3. ORGANIZATION STRUCTURE OF THE BANK Board of Directors Shariah Advisory Board Resident Shariah Board Member CEO Strategic Secretariat Security & Govt Relations Compliance Products & Shariah Structuring President & CEO Shariah Compliance Human Resources Finance Company Secretary Internal Audit Risk Management Treasury & FIs Operations Corporate Credit Consume r Credit Administr ation Information Systems Enterprise Risk Management SAM Operatio ns CAD Consumer Collection Information Security Corporate / Business Banking Consumer Banking Mortgage Financing Priority Banking Banca & Funds Auto Finance Investmen t Banking ADC Marketing SME Agri Finance Distribution Corporate / Commercial Banking Trade Finance North South Cash Mgt. Central Liability Products & Cross-sell 4.4. PATTERN OF SHAREHOLDING BankIslami’s major sponsors include Jahangir Siddiqui & Co. Ltd, SAJ Capital, Mr. Ali Hussain and Randeree family, who are financially sound and progressive shareholders. Pattern of shareholding of the Bank as of September 30, 20191 is given below: Page 33 of 127
35. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED Shareholder Category No. of Shares Percentage Associated Companies, Undertakings and Related Parties 616,367,574 61.15% Mutual Funds 18,339,442 1.82% Directors and their Spouses(s) and Minor Children 175,684,449 17.43% 84,000 0.01% 190 0.00% 6,638,339 0.66% 190,798,096 18.93% 1,007,912,090 100.0% Executives Public Sector Companies and Corporations Banks, Development Finance, Institutions, Non-Banking Finance Companies, Insurance Companies, Takaful, Modarabas & Pension Funds General Public (Local & Foreign) Total Shares held by Sponsors Shareholders Name No. of Shares Percentage Jahangir Siddiqui & Co. Limited 214,258,460 21.26% Ali Hussain 158,967,492 15.77% 50,293,194 4.99% 144,200,144 14.31% Shabir Ahmed Randeree 99,023,638 9.82% Ahmed G. M. Randeree 99,023,638 9.82% 765,766,566 75.97% SAJ Capital Management Limited Dubai Bank PJSC 2 Total 1 The Bank recently conducted a 10% Rights Issue for raising PKR 1,007,912,090; the right shares have been credited in CDS on November 28, 2019. Accordingly, as of the date of this Prospectus, the Share capital of the Bank has been increased to PKR 11,087,032,990 divided into 1,108,703,299 ordinary shares of PKR 10 each. 2 Dubai Bank has been acquired by Emirates NBD in 2011. 4.5. AWARDS AND ACHIEVEMENTS International Finance Magazine Award One Touch Banking Muskun – National leader in Housing Finance in Pakistan Green Office initiative International Finance Awards recognizes industry talent, leadership skills, industry net worth and capability on international platform. Winners of this award are declared by a qualified research team based on the strength of their application and past accomplishments. The Bank was nominated for the category of Most Innovative Banking Solution Provider and it emerged as an award winner for International Finance Awards 2018 in the category of – “Most Innovative Banking Solution Provider - Biometric – Pakistan 2018” BankIslami is the first Bank in Pakistan which introduced One Touch Banking – a solution where your Thumb is your bank. BankIslami pioneered Biometric ATMs 13 years back in 2006, followed by launch of Cardless ATMs in 2013 and Chequeless transactions over the counter in 2017. This facility with unique features enables you to perform banking transactions (Payorders, cash withdrawals, IBFTs, Utility bills, etc.) without cheque and debit card just with your Thumb impression. BankIslami’s Muskun (Housing finance) product is a national leader in housing finance in Pakistan’s Banking industry. Currently Muskun portfolio stands around Rs. 13.8 billion. A WWF initiative to help organizations understand the environmental challenges and learn the ways to be instrumental in improving the environment. BankIslami being Page 34 of 127
36. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED cognizant of its social responsibility, is now operating half of its branch network on hybrid energy model with installed capacity to 542 KW solar energy generating nearly 800 megawatt hours of energy per year. 4.6. PRODUCTS AND SERVICES The Bank has a full range of products and services catering to various customer segments. A summary of the products/services offered by the Bank is given below: a) Personal Banking Accounts BankIslami offers a wide variety of accounts fulfilling all the needs of its diverse customer base. Following are the account options offered by the Bank: • Islami Sahulat Account • Islami Bachat Account • Islami Current Account • Islami Asaan Account • Islami Mahana Munafa Account • Islami Amadni Certificate • Islami Dollar Bachat Account • Islami Foreign Currency Account b) Consumer Finance In this category, BankIslami offers a range of home financing, auto financing, takaful and remittance products to its customers. The following products are available for the consumers in the category: • • • • MUSKUN Home Financing Islami Auto Finance BankIslami Takaful Home Remittance c) Alternate Distribution Channels • Mobile Banking: BankIslami brings an array of convenient, secure and personalized services at its customers’ fingertips by its mobile application mBankIslami. It offers its customers to check account balance, pay bills, transfer funds, locate ATMs and branches, view account statement, buy mobile talk-time, set payment reminders and manage beneficiaries and register bills • Online Banking: BankIslami has around 330 branches across 114 cities which provide online banking services which means all these branches are connected digitally with each other. This offers its customers the following: o o o o • Cash Deposit for immediate credit to a remote branch Remote Cheque Encashment from any Online branch Instant Funds Transfer between any 2 Online branches Balance Enquiry and Statement of Account from any Online branch Interbank Fund Transfer (IBFT): IBFT enables its customers to send and receive funds online from and to any account holder of 1Link participating member bank. Page 35 of 127
37. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED • Internet Banking: BankIslami Internet Banking provides its customers the facility to access and manage their accounts and transactions securely via Internet. • PayPak Debit Card: Allows its customers to use their Debit card safely at millions of Retail outlets and ATMs across Pakistan. • Cardless Biometric ATM: BankIslami’s Biometric ATM based on BankIslami’s One Card, provides maximum security through the use of just a finger or thumb impression for identification purposes • 24/7 Phone Banking: BankIslami also offers a 24/7 phone banking service which offers convenience to its customers of making transactions and getting account details easily. d) Corporate Banking BankIslami offers a world class Shariah compliant financing solutions to its corporate customers. The following products and services are offered to help their clients’ business objectives: • Accounts: All basic banking services are offered to cater to the business needs of the corporate customers • Trade Services: A wide range of import and export services are designed to help their clients build on the business opportunities worldwide • Financing: BankIslami offers diverse financing solutions catering to all the needs of their customers which include account services, trade services, working capital financing, project finance, musharakah finance, Mudaraba finance, and Ijarah e) Investment Banking Investment Banking is a high Economic Value-Added franchise of the Bank, specialized in tailoring and structuring varied complex deals in an innovative and Shariah Compliant manner to meet the on-going critical needs of large corporate clientele. Such deals may range from short-term to long-term syndicated deals, raising of redeemable capital through Islamic debt instruments i.e. Islamic Commercial Paper (ICP) and Sukuk, offering of securities to raise equity or typical project & structured financing. 1. Syndication & Debt Capital Markets. 2. Project & Structured Finance. 3. Equity & Advisory. 4. Trustee & Agency services f) SME Financing Small and Medium-sized Enterprises (SMEs) drive economic growth by stimulating innovation, acting as a competitive spur to existing businesses to increase their productivity and making a disproportionately large contribution to job creation. BankIslami is dedicated in supporting SME business with all the products and services available through its branch banking network. The products and services are offered to SME clients strictly under Shariah modes. g) Agri Financing BankIslami provides solution where farmers can purchase tractors & equipments for their farm, based on Diminishing Musharakah under Shirkat-ul-Milk arrangement. Page 36 of 127
38. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 4.7. BRANCH AND ATM NETWORK The Bank has grown its branch and ATM network across the country taking the branch count to 330 branches including 81 sub branches across 113 cities as of December 2018. No. of Branches No. of ATMS 4.8. 2013 201 135 2014 213 187 2015 317 265 2016 321 279 2017 330 302 2018 330 312 ISSUER RATING As of October 08, 2019, Pakistan Credit Rating Agency Limited (“PACRA”) has assigned a long-term rating of “A+” (A plus) to the Bank. The rating indicates strong capacity for timely payment of financial commitments and low expectation of credit risk. The short-term rating consistently stands at “A1” (A One) which also shows the Bank’s strong capacity for timely repayment. Also, the Outlook of the Bank has been maintained at Stable. These ratings reflect BankIslami’ s sustained business profile. Entity rating history of the Bank for the last five reviews are summarized below: Dissemination Date Long Term Rating Short Term Rating Outlook Action 08-Oct-2019 A+ A1 Stable Maintain 30-Apr-2019 A+ A1 Stable Maintain 27-Dec-2018 A+ A1 Stable Maintain 22-Jun-2018 A+ A1 Stable Maintain 13-Dec-2017 A+ A1 Developing Maintain 4.9. OPERATING AND FINANCIAL PERFORMANCE HIGHLIGHTS BankIslami Pakistan Limited principally operates as a licensed and full-fledged scheduled Islamic Commercial Bank. The Bank is operating with 330 branches including 81 sub-branches and offers various Shariah compliant services to its clients. The Bank maintained its CAR at 15.10% in 2018, subject to certain relaxations from SBP. The Bank has grown its CAR by carefully monitoring and managing the risk profile of its asset portfolio which resulted in an improved CAR of 15.55 % as of September 30, 2019 as compared to 14.7% in 2017 which will be further strengthened by the current Sukuk issue. Total deposits of the Bank stand at PKR 213 billion as at September 30, 2019. Deposits have grown at a robust 5-year CAGR of 20% primarily due to the Bank’s focus on its core current and savings account (CASA) base which incorporates 60% of the total deposits as of September 30, 2019. This is also evident from the growth in current account deposits, which has outgrown the total deposits growth, with a 5-year CAGR of 37% compared to the 5-year CAGR of 15% of other deposits (fixed and savings). The Bank is determined to improve its deposit base along with CASA mix even further with its aggressive strategy towards core deposits and planned launch of competitive products. This bodes extremely well for the Bank especially during the prevalent interest rate environment which has been hiked by more than 700 bps since December 2017. Page 37 of 127
39. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED Key highlights of the Bank’s operating and financial performance are given in the charts below: 100% 200 CAGR: 20% 90% 80% PKR bn 150 70% 60% 213 100 154 153 50 185 178 81% 16% 19% 2013 2014 71% 69% 68% 68% 70% 29% 31% 32% 32% 30% 2016 2017 Savings + Fixed 2018 9MCY19 50% 40% 30% 90 75 84% 20% 10% - 0% 2013 2014 2015 2016 2017 2018 9MCY19 Deposits 2015 Current The financings have also seen a tremendous growth with gross financings growing at a 5-year CAGR of 27% during 2013-2018 period. This is in conjunction with a low net infection ratio and a high coverage ratio, which is reflective of the Bank’s healthier position and prudence exercised by the management in extending credits. As of September 30, 2019, the Bank has a net infection ratio of 2.5% with a coverage ratio of 78%. A healthy deposit mix as a result of Bank’s focus on CASA deposit growth has translated into a moderate cost of deposit ratio for the Bank. An increase in the policy rate has also allowed the Bank to experience improved spread margins over the past few years increasing from 40% in 2013 to 46.1% in September 2019. This increase is mainly contributed by increase in earning assets and rise in SBP policy rate. In future, the Bank is expecting further improvement in profit margin, as the asset portfolio will be fully re-priced. PKR bn 150.0 100.0 50.0 130.6 129.6 135.9 CAGR: 27% 80.0% 82.4 38.9 100.0% 89.8 60.0% 40.0% 41.7 86.2% 82.1% 3.7% 3.8% 78.04% 3.1% 3.3% 72.3% 71.0% 2.5% 51.9% 49.4% 1.4% 1.3% 2013 2014 20.0% - 0.0% 2013 2014 2015 2016 2017 2018 9MCY19 2015 2016 2017 Coverage Ratio Gross Advances 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2018 9MCY19 Net Infection Ratio 60.0% 49.3% 49.4% 50.0% 39.7% 42.9% 42.1% 42.8% 46.1% 6.0% 5.3% 5.2% 5.2% 5.0% 40.0% 3.8% 4.0% 30.0% 3.2% 3.0% 20.0% 2.8% 3.0% 2017 2018 9MCY19* 2.0% 10.0% 1.0% 0.0% 0.0% 2013 2014 2015 2016 2017 2018 9MCY19 2013 2014 2015 2016 *annualized Net Spread Margins Cost of Deposit Ratio With remarkable increase in overall net revenue of the Bank and significant reduction in cost to income ratio, operating profits of BankIslami during 9MCY19 has increased to PKR 2,784 million which is 18.3 times higher than the operating profit of PKR 144 million posted during the same period last year. The Bank, taking a prudent view, booked additional provisioning against delinquent financing and other assets, and posted Page 38 of 127
40. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED profit after tax at PKR 973 million for the nine month ended September 30, 2019 which is over 8.8 times higher than last nine month’s profit after tax of PKR 99 million. 2,000 2,784 3,000 1,529 1,500 1,000 510 435 PKR mn PKR mn 2,000 439 500 2013 2014 2015 (1,000) 2016 2017 470 403 157 2013 2014 2015 (500) (1,186) (2,000) 308 0 2018 9MCY19 (235) (754) 844 1,000 2016 2017 2018 9MCY19 (272) Profit Before Taxation Profit Before Povisions and Taxation 4.10. INDUSTRY OVERVIEW No. of Banks Pakistan’s banking industry comprises of 34 commercial banks out which 20 are listed on the PSX. The industry is regulated by the State Bank of Pakistan and is highly concentrated of private commercial banks. A distribution of the Pakistan’s banking sector is provided below: 40 35 30 25 20 15 10 5 0 Structure of Pakistan's Banking Industry 34 20 5 4 5 Specialized Public Sector Foreign Banks Local Private Total Banks Banks Commercial Banks Banks Performance Highlights Performance of the banking industry over the past few years has been robust as indicated by considerable growth in asset base, deposits, advances accompanied by sound financial indicators. Some of the key performance highlights of the banking industry are depicted in the charts below: 25,000 5-yr CAGR of 13.4% 18,342 15,000 14,143 19,682 11,798 12,000 15,831 12,106 10,000 5-yr CAGR of 12.3% 14,000 PKR billion PKR billion 20,000 16,000 21,652 10,000 9,230 13,012 14,254 14,945 10,389 8,000 6,000 Source: Compendium of the Banking System by State Bank of Pakistan, Dec 2018 4,000 5,000 2,000 CY14 CY15 CY16 Total Assets CY17 CY18 9MCY19 CY14 CY15 CY16 CY17 CY18 9MCY19 Total Deposits Page 39 of 127
41. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 14.0 12.3 12.0 17.5 11.4 10.1 8.4 8.8 8.0 16.5 8.0 6.0 Min Regulatory Requirement for 2019 onwards is 12.5% 17.3 17.0 % % 10.0 17.1 17.1 16.2 16.2 15.8 16.0 15.5 4.0 15.0 2.0 14.5 0.0 CY14 CY15 CY16 CY17 CY18 CY14 9MCY19 CY15 CY16 CY17 CY18 9MCY19 Risk Weighted CAR NPL to Total Loans Source: Compendium of the Banking System by State Bank of Pakistan, September 2019 Despite improving performance of the banking industry, Pakistan has very low loan to GDP ratio when compared with regional peers. There exists a huge under penetration having only 404 deposit accounts per 1,000 individuals. 160% Loans to GDP (2017) 144.5% 140% 118.8% 120% 100% 70.9% 80% 60% 40% 20% 38.7% Deposit accounts with commercial banks per 1,000 adults (2017) 4,017 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 - 47.8% 48.8% 17.0% 0% 1,564 1,610 404 1,889 2,227 592 Source: IMF / World Bank Islamic Banking Industry The network of Islamic banking industry consists of 22 Islamic banking institutions; 5 full-fledged Islamic banks (IBs) and 17 conventional banks having standalone Islamic banking branches (IBBs). Branch network of Islamic banking industry was recorded at 2,913 by Jun-19; Punjab and Sindh together constituted more than 77% share in overall branch network of the industry. The number of Islamic banking windows operated by IBBs stood at 1,348. A province wise distribution of the branches is provided below: 1,406 843 149 116 42 17 9 Islamabad Baluchistan AJK GB FATA KPK Sindh 331 Punjab 1,600 1,400 1,200 1,000 800 600 400 200 - No. of Branches Page 40 of 127
42. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED Performance Highlights Deposits of Islamic banking segment increased at a 3-Year CAGR of 17% as compared to a 3-Year CAGR of 11% of the overall banking industry. As a result, market share of Islamic banking deposits in the overall banking industry increased from 13.2% in CY15 to 15.5% during CY18. During 1HCY19, deposits stood at PKR 2,415 billion and the share in overall banking industry was 15.9%. IBs and IBBs accounted for 59.4% and 40.6% share respectively in overall assets of Islamic banking industry. 16,000 13,012 14,000 11,798 12,000 PKR Billion 15,227 14,254 10,389 10,000 8,000 6,000 4,000 2,415 2,203 1,885 1,476 1,375 2,000 0 CY15 CY16 CY17 Total Banking Deposits CY18 1HCY19 Islamic Banking Deposits 25,000 20,000 PKR Billion 19,682 18,342 15,831 14,143 15,000 20,718 10,000 5,000 2,992 2,658 2,272 1,853 1,610 0 CY15 CY16 CY17 Total Banking Assets CY18 1HCY19 Islamic Banking Assets Source: State Bank of Pakistan - Islamic Banking Bulletin and Quarterly Compendium: Banking Statistics Performance of the Islamic banking industry over the past few years has been robust as indicated by considerable growth in asset base, deposits, advances accompanied by sound financial indicators. Some of the key performance highlights of the Islamic banking industry are depicted in the charts below: 45.0 6.0 5.0 40.0 4.9 38.8 32.9 2.4 % 3.0 3.0 2.4 32.6 27.0 30.0 4.0 % 35.1 35.0 4.1 4.1 27.0 23.2 22.4 25.0 28.7 20.0 15.0 2.0 1.0 41.2 10.0 0.5 0.2 0.4 0.3 5.0 - CY15 CY16 NPFs to Financing (gross) CY17 CY18 1HCY19 Net NPFs to Net Financing CY15 CY16 Liquid Asset to Total Assets CY17 CY18 1HCY19 Liquid Assets to Total Deposits Page 41 of 127
43. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 6.8 6.6 6.6 6.7 6.5 40.0 6.4 6.4 6.4 6.0 30.0 6.0 5.8 22.3 25.0 6.0 % % 6.3 6.2 6.2 35.3 35.0 20.0 5.8 15.0 5.6 10.0 5.4 5.0 13.3 0.9 15.4 17.1 1.1 1.0 1.4 2.3 - 5.2 CY15 CY16 Capital to Total Assets CY17 CY18 1HCY19 (Capital-Net NPAs) to Total Assets CY15 CY16 Return on Equity (before tax) CY17 CY18 1HCY19 Return on Assets (before tax) Source: State Bank of Pakistan - Islamic Banking Bulletin Financing by Type 15.3% 2.6% 33.6% Diminishing Musharaka Musharaka 6.1% Murabaha Istisna 8.9% Ijarah Salam 13.5% Others 20.0% Source: State Bank of Pakistan - Islamic Banking Bulletin Financing and related assets (net) of Islamic banking industry increased by PKR ~19 billion to reach PKR 1,544 billion by end of June, 2019 compared to PKR 1,525 billion in the previous quarter. During 1HCY19, in terms of mode wise financing, the share of Diminishing Musharaka remained highest in overall financing of Islamic banking industry followed by Musharaka and Murabaha. Financing by Sector 17.9% Production and transmission of energy Textile Individuals 40.0% 11.6% Agribusiness Sugar Chemical and Pharmaceuticals Cement 11.6% 3.5% 3.7% 3.9% Others 7.8% Source: State Bank of Pakistan - Islamic Banking Bulletin Page 42 of 127
44. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED In terms of sector wise financing, production & transmission of energy and textile sectors remained two leading sectors and their share in overall financing of Islamic banking industry was recorded at 17.9% and 11.6% respectively during 1HCY19. Investment in the Financial sector by the Islamic banking industry is particularly low at 0.5% as compared to an average of 2.6% investment by the overall industry. Financing by Client 10.6% 1.3% Corporate 10.4% SMEs Agriculture 0.5% 3.7% Consumer Financing Commodity Financing Others 73.5% Source: State Bank of Pakistan - Islamic Banking Bulletin In terms of client wise financing, the corporate sector accounted for 73.5% share in overall financing of Islamic banking industry, followed by consumer financing with a share of 10.4% which is significantly higher than the average industry allocation of 6.5%. The share of small and medium enterprises (SMEs) financing and agriculture financing in overall financing of Islamic banking industry was recorded at 3.7% and 0.5% respectively which is significantly lower than the average industry allocation of 5.3% and 3.8% respectively. Page 43 of 127
45. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED Competition in the Islamic Banking Industry A comparison of the Full – fledged Islamic Banks of Pakistan is given below: PKR million Total Assets Deposits Financings NPLs NII (TTM) IDR (%) ADR (%) CAR (%) No. of Branches 1,003,999 838,926 472,814 7,990 42,307 25.6 56.4 17.63 689 263,052 213,211 124,210 14,336 9,248 26.3 58.3 15.55 330 251,150 203,081 165,465 4,354 9,652 24.1 81.5 15.68 200 141,956 114,572 74,582 8,854 4,892 20.9 65.1 11.93 191 108,003 81,134 57,591 363 3,336 20.2 71.0 13.54 178 Note: 1. NPLs: Non-Performing Loans, NII: Net Interest Income (Trailing Twelve Months), IDR: Investments – net to Deposit Ratio, ADR: Islamic Financing and Related Assets – net / Advances to Deposit Ratio, CAR: Capital Adequacy Ratio 2. Source: Unconsolidated financial reports of the banks as of September 30, 2019 4.11. FUTURE OUTLOOK OF THE BANK BankIslami is one of the leading Islamic Banks in Pakistan which offers a complete range of Shariah compliant products and services to its valued customers through a network of 330 branches across the country. The Bank operates with a zero-tolerance policy for any type of non-compliance of Shariah principles therefore it provides extensive training to its staff to help understand and uphold best Shariah compliant banking practices. On the liability side, the Bank primarily focuses on enhancing its deposit base, which depicted growth of 15% during 9MCY19 as compared to CY18. On the assets side, the Bank grew its financing exposure in most of the sectors and continued to actively pursue growth in Corporate / Commercial and Consumer segment. Resultantly, Islamic financing and related assets grew by 4.7% in 9MCY19 as compared to CY18. With extensively-diversified product base, the Bank is well-positioned to cater to all financing needs of its customers in a Shariah compliant manner. In line with changing business dynamics and business requirements, BankIslami continues to focus on new products customized to the needs of diversified customers. BankIslami expects to maintain its persistent trend in growth in the Islamic Banking industry in the upcoming years and is well positioned towards strengthening its place as one of the leading Islamic Bank. To achieve this objective, the Bank has formulated a strategic plan with defined and clear goals at the organizational level, enabling the Bank in establishing a detailed roadmap. The strategic plan sets various KPIs comprising accelerated growth in deposit base, enhancing trade business, improving credit risk profile, leveraging technological innovation in a secured way, attracting and developing high quality human resource, enhancing brand position, maintaining healthy capital base and becoming a customer centric entity. Page 44 of 127
46. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 4.12. RISK FACTORS 4.12.1. RISK FACTORS RELATED TO THE SUKUK ISSUE: 4.12.1.1. Summary of Risk Factors related to the Sukuk Issue: Given the inherent nature and structure of Additional Tier-1 instruments as per Basel III instructions of SBP, following are the risks related to the Sukuk Issue: i) The profit payment to Sukuk Holders will be subject to the condition that any such payment should not result in non-compliance of the Bank with the applicable regulatory requirement of MCR, CAR and Leverage Ratio as determined by SBP from time to time. As per the existing instructions of SBP, in order to implement the Lock-in Clause, the Bank will reduce the monthly profit weightages attributed to the Sukuk Holders until the Bank is in breach of regulatory capital requirements (i.e. the expected profit in this case would be up to 0.005% p.a.). Further, the profit should only be paid from the relevant month’s attributable profit of the General Pool; j) the Issue may be called by the Issuer after 5 years from the date of Issuance (either partially or in full), subject to SBP approval; k) the Issuer may permanently convert the Sukuk (either partially or in full) into common shares at its own discretion (in case of a pre-specified trigger event, and upon notifying the SBP) or at the discretion of SBP; 4.12.1.2. Details on Risk Factors related to the Sukuk Issue: a) Lock-in Clause & Loss Absorbency Clauses Lock-in Clause In the event where payment of the Profit Payment Amount will result in a shortfall in the Issuer’s MCR, CAR or leverage ratio, or results in an increase in any existing shortfall in MCR, CAR or leverage ratio, the Issuer shall take immediate action to reduce the weightage of the Sukuk Holders participation in the General Pool (profit distribution ratios for weighted average investment) (to a negligible amount of up to 0.005%) of the current month and every month thereafter in which the Issuer is in breach of regulatory capital requirements. Loss Absorption at Pre-Specified Trigger The Issue will be subject to loss absorption upon the occurrence of a Pre-Specified Trigger as per Section A-5-2 of Annexure 5 of the Basel III Circular, which stipulates that “if an issuer’s Common Equity Tier 1 (“CET 1”) ratio falls to or below 6.625% of Risk Weighted Assets (“RWA”), the Issuer will have full discretion to determine the amount of Additional Tier 1 Capital to be permanently converted into common shares or written off, subject to SBP regulations / instructions, and the cap specified below”. For the purpose of this Issue, as per an upfront right given by the Sukuk Holders, the Sukuk will only be converted into ordinary shares of the Bank. The conversion rate / price shall be based on the market value of the shares of the Issuer on the date of occurrence of the Pre-Specified Trigger point and the Outstanding Value of the Sukuk. To quantify the maximum dilution, the Bank is capping the maximum number of shares to be issued at the time of all conversion events subject to maximum number of shares capped at 184 million in compliance with the requirement of paragraph A-5-3 (vi) of the Basel III Circular. Page 45 of 127
47. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED Loss Absorption Features at Point of Non - Viability The Issue will be subject to loss absorption and / or any other requirements of SBP upon the occurrence of a Point of Non-Viability event as per Paragraph A-5-3 of Annexure 5 of the Basel III Circular, which stipulates that “SBP may, at its option, fully and permanently convert the Additional Tier 1 Capital into common shares of the issuer and / or have them immediately written off (either partially or in full).” For the purposes of this Issue, as per an upfront right given by the Sukuk Holders, the Sukuk will only be converted into ordinary shares of the Bank and the number of shares to be issued to Sukuk Holders at the time of conversion will be equal to the ‘Outstanding Value of the Sukuk’ (Face Value plus / minus attributable profit / loss) divided by market value per share of the Bank’s common share on the date of PONV event as declared by SBP. To quantify the maximum dilution, the Bank is capping the maximum number of shares to be issued at the time of all conversion events subject to maximum number of shares capped at 184 million in compliance with the requirement of paragraph A-5-3 (vi) of Basel III Circular. b) Instrument Liquidity The perpetual nature of the instrument means that investors would not be able to recoup their investment through principal redemption. Therefore, any recovery would only be possible if the investor sells the instrument on securities exchange or the Bank calls the instrument after 5 years. The risk will be mitigated to some extent by listing the Sukuk on PSX and appointing JS Global Capital Limited as the Designated Market Maker which will facilitate market trading activity. However, market liquidity might not be sufficient to allow investors an exit without incurring a loss. c) Market Interest Rate Market Interest rates and the Sukuk value, in general, carry an inverse relationship; as interest rates fall, the price of instruments in the market place generally rises. Conversely, when interest rates rise, the price of instruments will tend to fall. There is a risk that any increase in KIBOR may adversely affect the profit yield on the Sukuk Certificates and hence lower down its market price. The Sukuk has been priced attractively compared to other ADT-1 instruments in the industry and the weightages to be given to the Sukuk Certificates to distribute profits will be assigned keeping in view the 3Month KIBOR which means that the investors are protected from the adverse effect on Sukuk’s profit yield due to increase in the market rates of interest. While the above instrument features protect investors from market risks to some extent, the Sukuk’s price will be determined by market forces. Therefore, there is no guarantee that market prices will always be favorable to the investors. 4.12.2. RISK FACTORS RELATED TO THE BANK: 4.12.2.1. Market Risk Market risk is defined as the risk of losses in on-and-off balance sheet positions arising from movements in market prices e.g. fluctuations in values in tradable, marketable or leasable assets. The risks relate to the current and future volatility of market values of specific assets and of foreign exchange rates and benchmark yields. The Bank uses various tools and techniques to assess market risk including but not limited to full valuation, stress testing, scenario analysis, VaR. These assessment methods enable the Bank to estimate changes in the value of the portfolio, if exposed to various risk factors. Page 46 of 127
48. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED Moreover, since the Bank does not deal in interest-based products, the impact of the above risks will be very minimal. The Bank does not have positions or forward exchange contracts giving mismatches of maturity unless such risks have been taken care of through some other mechanism. The VaR reports are complemented by various other position and sensitivity limit structures, including stress, sensitivity, gap and scenario analysis. The capital charge for market risk has been calculated by using Standardized Approach. 4.12.2.2. Yield / Profit Rate Risk Yield / Profit rate risk includes all material yield risk positions of the Bank taking into account all repricing and maturity data. It includes current balances and contractual yield rates; the Bank understands that its Islamic financing and related assets shall be repriced as per their respective contracts. The Bank estimates changes in the economic value of equity due to changes in the yield rates on on-balance sheet positions by conducting duration gap analysis. It also assesses yield rate risk on earnings of the Bank by applying upward and downward shocks. 4.12.2.3. Foreign Exchange Risk Currency risk is the risk of loss arising from the fluctuations of exchange rates. In the normal course of conducting commercial banking business, which ranges from intermediation only to taking on principal risk as dealer or as counterparty, the Bank purchases or sells currencies in today / ready and gives or receives unilateral promises for sale or purchase of FX at future dates in a long or short position in different currency pairs. These positions expose the Bank to foreign exchange risk. To control this risk, the Bank primarily uses notional principal limits at various levels to control the open position, and ultimately the residual foreign exchange risk of the Bank. The Bank also strictly adheres to all associated regulatory limits. 4.12.2.4. Equity Position risk Equity position includes strategic investments and investment in equities for generating revenue in short term. These equity investments are accounted for and disclosed as per the provisions and directives of SBP, SECP and the requirements of approved International Financial Reporting Standards as applicable in Pakistan. Provision for diminution in the value of securities is made after considering impairment, if any, in their value and charged to the profit and loss account. 4.12.2.5. Country Risk Country Risk can be defined as the risk of adverse impact of certain factors on a country’s specific economic, political and social scenario which affects the ability of the country (or a borrower in that country) to repay its obligations. 4.12.2.6. Strategic Risk Strategic risk arises due to wrong assumptions in strategic decision making or the failure to react correctly to long-term changes in strategic parameters. The Bank follows a deliberate low-risk strategy. Within the general constraints of its niche market the Bank is aware of the need of reducing risk. The Bank has a well-established strategic planning and evaluation process which involves all levels of management and which is subject to regular review. Page 47 of 127
49. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 4.12.2.7. Systemic Risk Systemic risk is the risk of a total or partial collapse of the financial system. Such a collapse could be due to technical factors or market driven (psychological reasons). Systemic risk is reduced by the activities of both national and international regulatory authorities. The Bank actively supports these organizations through its membership of the relevant banking industry association i.e. Pakistan Banks Association (“PBA”). The Bank also takes account of systemic risk by means of careful management of counter party risks in the inter-bank market. 4.12.2.8. Shariah Non-compliance Risk Shariah non-compliance risk is the risk that arises from an Islamic bank’s failure to comply with the Shariah rules and principles prescribed by the SBP and / or the Shariah Board of the Bank. It remains the most important operational risk for an Islamic bank. Compliance of Shariah guidelines must permeate throughout the organization and its adherence should be reflected in the products and activities. 4.12.2.9. Shariah Compliant Forwards and Futures Shariah compliant forward and future contracts are recognized at fair value. In case of equity futures, the fair value is calculated with reference to quoted market price. Shariah compliant forward and future contracts with positive market values (i.e. unrealized gains) are included in other receivables while those with negative market values (i.e. unrealized losses) are included in other liabilities in the statement of financial position. The resultant gains and losses are taken to the profit and loss account. 4.12.2.10. Credit Risk Credit risk arises from the potential that an obligor is either unwilling to perform on an obligation or its ability to perform such obligations is impaired resulting in economic loss to the Bank. This credit risk arises mainly from both direct financing activities as well as contingent liabilities. The Bank manages credit risk by effective credit appraisal mechanism, approving and reviewing authorities, limit structures, internal credit risk rating system, collateral management and post disbursement monitoring so as to ensure prudent financing activities and sound financing portfolio under the umbrella of a comprehensive Credit Policy approved by the Board of Directors. 4.12.2.11. Liquidity Risk Liquidity risk is the potential loss to the Bank arising from its inability either to meet its obligations (financial) or to fund increases in assets as they fall due without incurring unacceptable costs or losses. BankIslami’s liquidity at various levels (day to day, short term, long term) is managed by the Treasury along with the Asset and Liability Management Committee (ALCO), which is one of the most important management level committees. Its role cannot be overemphasized here, it serves as a part of the critical trio with risk management and treasury department, monitoring and maintaining key liquidity ratios, a viable funding mix, depositor concentration, reviewing contingency plans etc. Liquidity risk is defined as the potential loss arising from the Bank’s inability to meet in an orderly way its contractual obligations when due. Liquidity risk arises in the general funding of the Bank’s activities and in the management of its assets. The Bank maintains sufficient liquidity to fund its day-to-day operations, meet customer deposit withdrawals either on demand or at contractual maturity, meet customers’ demand for new financings, participate in new investments when opportunities arise, and to meet any other commitments. Hence, liquidity is managed to meet known as well as unanticipated cash funding needs. Page 48 of 127
50. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED Bank calculates the Liquidity Coverage Ratio (“LCR”) on monthly basis as per SBP Basel III Liquidity Standards issued under BPRD circular no 08 dated June 23, 2016. The objective of LCR is to ensure the short-term resilience of the liquidity risk profile of Bank which requires banks to maintain sufficient High-Quality Liquid our Assets (HQLAs) to meet stressed cash outflows over a prospective 30 calendar days period. As of December 31, 2018, Bank’s LCR stood at 191.92% against the SBP’s minimum requirement of 100%. In addition, banks are expected to meet the Net Stable Funding Ratio (“NSFR”) requirement of at least 100% on an ongoing basis from December 31, 2017. The objective of NSFR is to reduce funding risk over a longer time horizon by requiring banks to fund their activities with sufficiently stable sources of funding in order to mitigate the risk of future funding stress. TO THE BEST OF OUR KNOWLEDGE IT IS STATED THAT ALL MATERIAL RISK FACTORS HAVE BEEN DISCLOSED IN THIS PARAGRAPH AND THAT NOTHING HAS BEEN CONCEALED IN THIS RESPECT. HOWEVER, THERE MAY BE ADDITIONAL RISK FACTORS, WHICH ARE NOT DISCLOSED HEREIN, THAT ARE NOT PRESENTLY KNOWN TO US OR THAT ARE CURRENTLY DEEMED TO BE LESS SIGNIFICANT, WHICH MAY MATERIALLY AND ADVERSELY AFFECT THE BANK’S BUSINESS, ITS FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROSPECTS. (the space has been left blank intentionally) Page 49 of 127
51. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED PART 5: FINANCIAL INFORMATION AND CREDIT RATING REPORT 5.1. AUDITORS CERTIFICATE UNDER SECTION 2 OF THE FIRST SCHEDULE TO THE PUBLIC OFFERING REGULATIONS, 2017 FOR THE PURPOSE OF INCLUSION IN THE PROSPECTUS FOR PROPOSED ISSUE OF ADDITIONAL TIER 1 SUKUK CERTIFICATES BY THE BANK Page 50 of 127
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67. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 5.3. BREAK-UP VALUE OF SHARES BASED ON UN-AUDITED UNCONSOLIDATED ACCOUNTS OF SEPTEMBER 2019 (PKR Million) 10,000 2,892 969 13,861 Share capital – net Unappropriated profit Reserves Surplus on revaluation of fixed assets and non-banking assets acquired in satisfaction of claims – net of tax Surplus/(deficit) on revaluation of “available-for-sale” securities – net of tax 1,616 (26) 15,451 (Number of shares) Number of ordinary shares 1,007,912,090 (Rupees per share) Break-up value per ordinary share of Rs. 10 each (including surplus on revaluation of assets) 15.33 Break-up value per ordinary share of Rs. 10 each (excluding surplus on revaluation of assets) 13.73 The equity for the purposes of both the above calculations excludes non-controlling interest and includes surplus on available for sale securities. (the space has been left blank intentionally) Page 66 of 127
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80. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 5.7. SUMMARY OF HISTORICAL FINANCIALS (UNCONSOLIDATED) Profit and Loss Account - PKR million Profit / return / earned Profit / return expensed Net Profit / Return Total Other Income Total Income Operating Expenses (Provision)/Reversal of provision and write offs - net Profit before Taxation Profit after Taxation Statement of Financial Position - PKR million Paid-up capital Reserves Unappropriated profit Surplus on revaluation of assets - net of tax Equity including Surplus Total Assets Earning Assets Gross Islamic Financing / Advances Provisions (Specific and General) Islamic Financing – net Non-Performing Financings1 Investments – net Total Liabilities Deposits and Other Accounts Current and Saving accounts (CASA) Borrowings Cost bearing Liabilities Key Ratios Capital Adequacy Ratio (%) Net Spread to Average Earning Assets (%) Net Spread Margins (%) Earnings per Share - After Taxation (PKR) Operating Expenses to Income Ratio (%) Cost of Deposit Ratio (%) Return on Average Equity (%) Return on Average Assets (%) Financings to Deposits (%) Investments to Deposits (%) CA Deposit Ratio (%) CASA Deposit Ratio (%) Infection Ratio (%) - Gross Infection Ratio (%) - Net Coverage Ratio (%) Book Value per Share excluding surplus (PKR) Book Value per Share including surplus (PKR) 9MCY19 16,094 (8,677) 7,417 823 8,240 (5,387) (1,255) 1,529 973 9MCY19 10,000 969 2,892 1,590 15,451 263,052 218,065 135,916 11,830 124,210 14,356 56,065 247,601 213,211 127,659 19,173 167,783 9MCY19 15.6% 5.0%2 46.1% 0.96 65.4% 5.2%2 9.8%2 0.5%2 58.3% 26.3% 30.1% 59.9% 10.6% 2.5% 78.0% 13.73 15.33 CY18 12,204 (6,170) 6,034 1,264 7,298 (6,796) (37) 403 213 CY18 10,000 969 1,695 1,851 14,515 215,743 176,409 129,578 11,164 118,571 15,403 38,832 201,228 184,693 127,102 7,820 132,767 CY18 15.1% 3.4% 49.4% 0.21 93.1% 3.0% 1.5% 0.1% 64.2% 21.0% 32.1% 68.8% 11.9% 3.8% 71.0% 12.57 14.40 CY17 10,354 (5,250) 5,104 965 6,069 (6,282) 392 157 1,563 CY17 10,000 926 1,474 1,276 13,676 217,792 183,421 130,637 11,674 119,155 15,837 42,092 204,116 178,310 134,741 15,570 136,010 CY17 14.7% 3.0% 49.3% 1.55 103.5% 2.8% 12.0% 0.8% 66.8% 23.6% 32.1% 75.6% 12.1% 3.7% 72.3% 12.57 13.57 CY16 10,128 (5,791) 4,336 638 4,974 (6,142) 2,030 844 452 CY16 10,000 614 213 1,618 12,445 182,473 152,493 89,787 12,132 77,817 14,534 46,317 170,029 153,736 109,857 6,066 110,912 CY16 13.4% 2.9% 42.8% 0.45 123.5% 3.2% 3.8% 0.3% 50.6% 30.1% 31.5% 71.5% 16.2% 3.3% 82.1% 11.45 12.35 CY15 8,834 (5,119) 3,715 570 4,285 (5,037) 482 (272) (196) CY15 10,000 523 (171) 834 11,186 175,849 146,200 82,446 13,652 68,709 15,684 35,886 164,663 152,645 101,686 3,198 110,800 CY15 12.3% 3.1% 42.1% (0.24) 117.5% 3.8% -2.2% -0.1% 45.0% 23.5% 29.3% 66.6% 19.0% 3.1% 86.2% 10.25 11.10 CY14 7,812 (4,459) 3,353 632 3,985 (3,462) (40) 470 314 CY14 5,680 273 267 647 6,867 102,093 90,629 41,698 601 41,097 1,062 30,655 95,226 89,961 54,713 561 73,887 CY13 6,289 (3,790) 2,500 454 2,953 (2,488) (127) 308 185 CY13 5,280 210 25 727 6,242 87,391 77,398 38,932 623 38,309 1,109 31,610 81,148 75,085 40,217 2,538 65,317 CY14 16.7% 4.0% 42.9% 0.58 86.9% 5.2% 4.8% 0.3% 45.7% 34.1% 18.5% 60.8% 2.5% 1.3% 49.4% 10.64 11.92 CY13 15.4% 3.5% 39.7% 0.35 84.3% 5.3% 3.1% 0.2% 51.0% 42.1% 16.4% 53.6% 2.8% 1.4% 51.9% 10.65 11.82 1 During May 2015, KASB Bank Limited was merged into BankIslami Pakistan under the Banking Companies Ordinance 1962. KASB Bank at the time of merger was in severe distress and the surge in non-performing financings (NPFs) of BankIslami during 2015 was due to the transfer of NPFs from KASB Bank. Nevertheless, it is pertinent to mention that 100% NPFs transferred from KASB Bank are now specifically covered. 2 These ratios have been calculated by annualizing the numbers of 9MCY19. Page 79 of 127
81. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 5.8. SUMMARY OF HISTORICAL FINANCIALS (CONSOLIDATED) Profit and Loss Account - PKR million Profit / return / earned Profit / return expensed Net Profit / Return Total Other Income Total Income Operating Expenses (Provision) / Reversal of provisions and write offs - net Profit before Taxation Profit after Taxation Statement of Financial Position - PKR million Paid-up capital Reserves Unappropriated profit Surplus on revaluation of assets - net of tax Equity including surplus Non-Controlling Interest Total Assets Gross Islamic Financing / Advances Provisions (Specific and General) Islamic Financing - net Non-Performing Financings Investments - net Total Liabilities Deposits and Other Accounts Due to Financial Institutions 9MCY19 16,075 (8,657) 7,418 823 8,241 (5,392) (1,230) 1,555 999 9MCY19 10,000 969 3,462 1,603 16,034 196 264,354 135,766 11,830 124,060 14,356 56,543 248,125 213,164 19,173 CY18 12,205 (6,146) 6,059 1,225 7,284 (6,810) 3 514 324 CY18 10,000 969 2,237 1,875 15,081 195 216,833 129,328 11,164 118,321 15,403 39,237 201,557 184,430 7,820 CY17 10,324 (5,231) 5,092 965 6,058 (6,296) 392 271 1,690 CY17 10,000 926 1,894 1,202 14,022 205 218,861 130,488 11,674 119,007 15,837 42,364 204,634 178,062 15,570 CY16 10,116 (5,764) 4,352 601 4,952 (6,155) 2,030 1,037 647 CY16 10,000 614 519 1,741 12,874 192 183,977 89,637 12,132 77,667 14,534 46,643 170,911 153,163 6,066 CY15 8,831 (5,099) 3,733 572 4,305 (5,058) 472 (164) (87) CY15 10,000 523 (57) 828 11,294 190 176,268 82,298 13,652 68,561 15,684 35,801 164,784 152,248 3,198 CY14 7,819 (4,456) 3,363 632 3,995 (3,472) (41) 470 314 CY14 5,680 273 269 651 6,873 0 102,101 41,698 601 41,097 1,062 30,511 95,228 89,961 561 CY13 6,290 (3,781) 2,509 454 2,963 (2,494) (127) 313 189 CY13 5,280 210 27 729 6,246 0 87,336 38,932 623 38,309 1,109 31,429 81,090 75,029 2,538 (the space has been left blank intentionally) Page 80 of 127
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93. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED PART 6: TRUSTEE AND SECURITY 6.1. THE SECURITY By virtue of the Basel III Circular, the Sukuk Issue for Additional Tier 1 Capital is being issued without any security. Further, the Sukuk are being issued as subordinated debt as per the guidelines set by the SBP under the Basel III Circular read with the Banking Supervision Department Circular No. 8 dated June 27, 2006. In accordance with Clause 2.7.3 of the Trust Deed, at any time after the occurrence of an Event of Default mentioned in the Trust Deed, the Trustee (to the exclusion of the Sukuk Holders) may, at its discretion (subject to the Trustee being indemnified to its satisfaction against all proceedings, claims and demands to which the Trustee may be liable and all costs, charges and expenses which may be incurred by the Trustee in connection therewith), take such proceedings/actions against the Issuer as may be directed by Sukuk Holders representing more than 50% (fifty percent) of the total outstanding value of the Sukuk to the extent that the same is permissible under law and permitted by the SBP. 6.2. THE TRUSTEE In order to safeguard the interests of the Sukuk Holders, Pak Brunei Investment Company Limited has been appointed to act as Trustee for the Issue. The Issuer shall pay to the Trustee in respect of its acting as Trustee a fixed fee of PKR 600,000/- per annum. The fee shall be payable at the beginning of each year commencing from the date of signing of the Trust Deed and on each subsequent anniversary thereof. Although the Sukuk are unsecured, the rights of the Sukuk holders are still protected as per the terms of the Trust Deed. The Trust Deed executed between the Bank and the Trustee specifies the functions and obligations of the Trustee. Furthermore, the Trustee has all the powers available to it under the Trusts Act, 1882 and the Debt Securities Trustee Regulations, 2017. 6.3. THE TRUST DEED The Trust Deed signed between the Bank and Pak Brunei Investment Company Limited specifies the rights and the obligations of the Trustee. In the event of Issuer defaulting on any of its obligations under the terms of the Trust Deed, the Trustee may enforce Issuer’s obligations in accordance with the terms of the Trust Deed. 6.4. POWERS OF THE TRUSTEE The Trustee shall have all the powers and discretions conferred upon trustees by the Trust Act, 1882 (to the extent not inconsistent with these presents) and in addition thereto and subject to the terms of the DST Regulations, it is expressly declared as follows: (a) the Trustee shall for the benefit of the Sukuk Holders; seek the enforcement and implementation of the Issuer's covenants, in terms provided in Clause 2.9 of the Trust Deed; (b) the Trustee may in relation to any of the provisions of the Trust Deed pay for the advice or services of, and act on the opinion or advice of, or any information obtained (whether by the Trustee or any other person duly authorized by the Trustee), from any lawyer, accountant, banker, broker, surveyor, valuer or other professional advisor or other expert whose advice, services, opinion or information may seem to it reasonably necessary, expedient or desirable and shall not be responsible for any loss occasioned by so acting; (c) any such advice or opinion or information referred to in sub-clause (b) above may be sent or obtained by letter, and the Trustee shall not be liable for acting on any such advice, opinion or Page 92 of 127
94. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED (d) (e) (f) (g) (h) (i) (j) 6.5. information purporting to be conveyed by any such letter although the same may contain some error or may not be authentic provided that such error or lack of authenticity is not manifest; the Trustee shall be at liberty to place the Trust Deed and any other instrument, documents or deed delivered to it pursuant to or in connection with the Trust Deed for the time being in its possession in any safe deposit selected by the Trustee or with any bank, any company whose business includes undertaking the safe custody of documents or any firm of lawyers and the Trustee shall not be responsible for any loss thereby incurred (save that the Trustee shall take reasonable steps to pursue any person who may be liable to it in connection with such loss); save as otherwise expressly provided in the Trust Deed and unless directed to the contrary by the Sukuk Holders in accordance with the terms of the Trust Deed, the Trustee shall in regards to all rights, trusts, powers, authorities and discretions vested in it by this Trust Deed have absolute and uncontrolled discretion as to the exercise or non-exercise thereof and as to the manner and time of any such exercise thereof and provided it shall have acted lawfully, it shall be in no way responsible for any loss, costs, damages, expenses or inconveniences resulting from the exercise or non-exercise thereof; the Trustee (or any of its directors or officers) shall not be precluded by reason of its acting as Trustee hereunder from entering into any contract or other transaction with or from engaging in any other business with, or from accepting or holding the trusteeship of any other trust deed constituting or securing any securities issued by or relating to, the Issuer or any subsidiary thereof or any other company in which the Issuer or any such subsidiary may be interested provided the aforesaid transactions are otherwise permissible under the SBP’s Prudential Regulations for Banks / SECP Rules for Non-Banking Finance Companies. The Trustee shall not be liable to account for any profit made or payment received by it thereby or in connection therewith provided that the Trustee shall ensure that, as far as practicable, the personnel assigned to deal with normal administrative matters in relation to such other trusteeship shall not be assigned to deal with any functions in relation to the trusteeship of the Trust Deed and vice versa; the Trustee may assume that no event which entitles the Sukuk Holders to exercise any of their rights under the Trust Deed has occurred and that the Issuer is not in breach of any of its obligations under the Trust Deed, unless it has received either a written notice to the contrary from the Issuer or a notice or information which the Trustee believes to be accurate regarding an occurrence of an Event of Default; the Trustee shall not be liable for acting in relation to the Trust Deed or any related documents or any notice, request, certificate, direction or other communication or other document purporting to emanate from the Issuer or any other person notwithstanding that the same shall include some error or omission or not be authentic; the Trustee may call for and rely as to any matters of fact which might reasonably be expected to be within the knowledge of the Issuer upon a certificate signed by authorized signatory(ies) of the Issuer, the names of whom shall be conveyed to the Trustee pursuant to the signing of the Trust Deed, as sufficient evidence thereof and shall not be bound in any such case to call for further evidence or be responsible for any loss that may be occasioned by the Trustee failing to do so; and the Trustee shall not be responsible for any recitals or statements, warranties or representations of any party (other than the Trustee) contained herein or for the execution, effectiveness, genuineness, validity, admissibility in evidence or enforceability of any such agreement or other document or any obligations or rights created or purported to be created thereby (nor shall it be responsible or liable to any person because of any invalidity of any provision of such documents, whether arising from statute, law or decision of any court or otherwise). OBLIGATIONS OF THE TRUSTEE The Trustee shall: (a) within 7 (seven) Business Days of receipt by the Trustee, inform the Sukuk Holders of any notice in writing received by it or any information received by it which it believes to be accurate of (i) any Page 93 of 127
95. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED (b) (c) (d) (e) (f) general meeting of the Issuer convened for the purpose of considering any resolution of the winding-up of the Issuer, (ii) any such resolution being proposed (whether in general meeting or otherwise); or (iii) any petition for the winding-up of the Issuer or for the appointment of an administrator of the Issuer or a receiver in respect of the property / assets of the Issuer and any breach or alleged breach by the Issuer of any of its obligations under the Trust Deed; for the purposes of Clause 2.2.2 of the Trust Deed, inform the Sukuk Holders of the notice or notices referred to above in the manner set out in paragraph 2 of Schedule 1 of the Trust Deed. In addition, the Trustee may make available at its offices during business hours a copy of the notice or notices for the inspection of Sukuk Holders; except as herein otherwise expressly provided, be authorized to assume without enquiry, and it is hereby declared to be the intention that it shall assume without enquiry, in the absence of express written notice to the contrary, that the Issuer is duly performing and observing all the provisions contained in the Trust Deed and that all covenants, warranties and undertakings contained in the Trust Deed are being complied with and that no event or circumstances which might constitute an Event of Default has occurred or exists; subject to Clause 2.2.1 of the Trust Deed, be entitled to refrain from exercising any right, power or discretion vested in it hereunder unless and until (i) instructed by the Sukuk Holders as to whether or not such right, power or discretion is to be exercised and, if it is to be exercised, as to the manner in which it should be exercised; and (ii) the Trustee is indemnified or granted security in accordance with Clause 2.5 of the Trust Deed; be entitled to refrain from acting in accordance with any instructions or requests of the Sukuk Holders or of any other person until it shall have received such security and/or indemnity as it may require (whether by way of payment in advance or otherwise) against all costs, claims, expenses (including legal fees) and liabilities which it will or may expend or incur in complying with such instructions or requests; and be entitled to invest the Proceeds (obtained in accordance with the provisions hereof) which, in the opinion of the Trustee, are not to be paid over or cannot legally be paid over promptly to the Sukuk Holders following receipt in the name or under the control of the Trustee, in accordance with the provisions of Section 20 of the Trusts Act, 1882, subject to obtaining the approval of all Sukuk Holders holding Sukuk Certificates at the relevant time, provided that the Trustee shall not be responsible for any loss due to depreciation in value or otherwise of such investments made in accordance with the provisions hereof. The Trustee shall not: (a) be bound to disclose to any other person any information relating to the Issuer if such disclosure would or might in its sole opinion constitute a breach of any law or regulation or be otherwise actionable at the suit of any person, unless otherwise required to be disclosed by law or under any direction or order of any competent authority or court. The Trustee shall give a prior notice to the Issuer and cooperate with the Issuer to enable the Issuer to invoke any remedies that are available under the law to prevent such disclosure; (b) under the Trust Deed, be concerned with the interests of or owe any duty whatsoever to any persons other than the Sukuk Holders; and (c) be under any duty to disclose to any person interested hereunder any confidential information supplied to it which comes to its knowledge through any of its affiliates, directors, employees, delegates or agents and shall not be liable to any person for not doing so. 6.6. TRUSTEE AND SUKUK HOLDERS (i) Subject to the provisions of the Trust Deed and, in particular to the provisions of Clause 2.2.1 and 2.2.2 of the Trust Deed, the Trustee shall: a) act as trustee in accordance with any instructions given to it by the Sukuk Holders; and Page 94 of 127
96. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED b) if so instructed by the Sukuk Holders, refrain from exercising a right, power or discretion vested in it as trustee under these presents. (ii) The instructions of the Sukuk Holders for the purposes of this Clause and the Trust Deed shall be deemed to be given in writing by the Sukuk Holders holding together more than 50% (fifty percent) of the total outstanding value of Sukuk or supported by an Extra Ordinary Resolution passed at the meeting of the Sukuk Holders (as detailed in the Provisions for Meetings of the Sukuk Holders attached in Schedule 1 of the Trust Deed). The Issuer will, on request from the Trustee, promptly give to the Trustee a written certificate in such form as the Trustee may reasonably require setting out all information available to them to facilitate the performance by the Trustee of its rights, trusts, powers, authorities, discretions, duties and obligations under the Trust Deed, such certificate to be signed as contemplated in the clause above. Notwithstanding any other provision of the Trust Deed, the Trustee shall not be obliged to provide any indemnity to, or in favor of, any receiver. Nothing in the Trust Deed shall, in any case in which the Trustee has failed to show the degree of care and diligence required of it as Trustee having regard to the provisions of the Trust Deed imposing or conferring on the Trustee any obligations, powers, authorities or discretions, relieve the Trustee from any liability for breach of trust or any liability which by virtue of any rules of law would otherwise attach to it in respect of any negligence, default, breach of duty or breach of trust of which it may be guilty in relation to its duties under the Trust Deed. (iii) (iv) (v) 6.7. OBLIGATION TO ACT WITH DUE CARE Both the Issuer and the Trustee agree to act in good faith and with due diligence and with all reasonable care which is in the circumstances required in the performance of their duties and obligations under the Trust Deed or when exercising any power, authority or discretion which is vested in them under the Trust Deed. 6.8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ISSUER The Issuer hereby represents and warrants: (a) that the execution by it of the Trust Deed and the issuance of the Sukuk does not contravene any of the provisions of its constitutive documents and rules and regulations, consents, or any law or any agreement to which it is expressed to be a party and constitute valid, legal and binding obligations of the Issuer in terms thereof; (b) that all actions on the part of its officers, directors and shareholders necessary to authorize the execution of and performance by it of the obligations expressed to be assumed by it under the Trust Deed and the Sukuk have been taken; (c) that no Event of Default has occurred as of the date of the Trust Deed; (d) that there is no reason to the knowledge of the Issuer whereby the application of the Issuer for listing of the Sukuk or approval of the Prospectus may be revoked or cancelled by the SECP or the Stock Exchange, as the case may be; (e) that it shall inform the Trustee of (i) any general meeting of the Issuer convened for the purpose of considering any resolution for the winding up of the Issuer; (ii) any such resolution being proposed (whether in a general meeting or otherwise); or (iii) any petition for the winding up of the Issuer or for the appointment of an administrator of the Issuer or a receiver in respect of the property or assets of the Issuer and any breach by the Receiver in respect of the property or assets of the Issuer and any breach or alleged breach by the Issuer of any of its obligations under the Trust Deed; (f) that the Sukuk and the Trust Deed executed by the Issuer are valid, enforceable and binding obligations of the Issuer and there has been no Event of Default in relation to any such documents; and Page 95 of 127
97. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED (g) that all governmental, regulatory, creditors’ and corporate consents, approvals, registrations and authorizations (to the extent required) for the purposes of the Sukuk Issue (other than for the listing on the Stock Exchange and those specifically stated hereunder) have been obtained. The Issuer hereby covenants with the Trustee: (a) that if the redemption option or partial redemption option (as defined in the Trust Deed) has been exercised by the Issuer, the Issuer shall on the option redemption date / partial option redemption date and within 7 (seven) Business Days of each Profit Payment Date, pay to the Sukuk Holders, the option redemption amount/ partial option redemption amount and profit payment amount in accordance with the terms hereof; (b) that the Issuer shall ensure that the Issuer or its appointed registrar will, at all times maintain a correct register of Sukuk Holders showing their names and addresses, the amount of Sukuk held by each and the date on which such Sukuk Holder was registered as the holder and the date on which he ceased to be so registered; provided nevertheless the Issuer shall not be responsible for the foregoing where the Sukuk Holders have not intimated the transfer of the Sukuk in writing to the Issuer or the registrar, as applicable; (c) that the Issuer will duly perform and observe the obligations imposed upon it by the Trust Deed; (d) that as and when requested by the Trustee, the Issuer shall ensure that the Issuer or registrar shall provide to the Trustee the Register of Sukuk Holders and/or extracts therefrom as well as any other document or information pertaining to the Sukuk and the Sukuk Holders, in addition, the Issuer shall ensure that the Issuer or the Registrar shall send extracts of the Register of Sukuk Holders to the Trustee on a monthly basis; (e) that the Issuer shall ensure that the annual audited accounts of the Issuer are available on the Issuer’s website within 30 (thirty) days of publication of such accounts and semi- annual and quarterly accounts within 15 (fifteen) days of publication; (f) that the Issuer shall ensure that during the period that the Sukuk or any of them are outstanding, the Issuer will comply with any laws, regulations or conditions applicable to financial ratios and commitments applicable to the business of the Issuer; (g) that payment of all amounts by the Issuer to the Sukuk Holders in respect of the Sukuk will be made free and clear of deductions of any nature whatsoever except for deductions, if any required compulsorily to be made by law, for which the Issuer will provide suitable evidence of having deposited the amount deducted with the relevant government authority / department / treasury; (h) that the Issuer shall ensure that any investment in the Sukuk by the sponsors of the Issuer, individually or collectively, either at the time of subscription or acquired by transfer, does not exceed in the aggregate, at any time, 50% (fifty percent) of the total amount of the outstanding value of the Sukuk; (i) the Issuer, its sponsors and its affiliated entities which are under the control (including subsidiaries) or significant influence of the Issuer shall be eligible to invest in the Sukuk Issue up to an amount not exceeding 50% (fifty percent) of the total issue size as per the SBP Approval. It is clarified that such sponsors, affiliates and employee’s retirement benefit funds of such entities with a borrowing relationship with the Issuer shall be ineligible for investment in the Sukuk Issue as per the SBP Approval; (j) the Issuer shall not make any payment of dividend on ordinary share of the Issuer in the event of non-payment of the Profit Payment Amount to the Sukuk Holders; (k) that the Issuer shall not directly or indirectly, finance the purchase of any Sukuk Certificates by any person or entity or grant any advances against the security of any Sukuk Certificates issued hereunder to any Sukuk Holder; and (l) that the Issuer shall, at all times, comply with the requirements of applicable laws including, without limitation, the terms and conditions of the Basel III Circular. Page 96 of 127
98. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 6.9. EVENTS OF DEFAULT An Event of Default will be deemed to have occurred, by a declaration in writing of the Trustee informing the Issuer, that the Trustee has been notified in writing by the Sukuk Holders representing more than 50% (fifty percent) of the total outstanding value of the Sukuk or supported by an Extra Ordinary Resolution passed at the meeting of the Sukuk Holder(s) certifying the occurrence of any of the following events: (a) Breach of other obligation The Issuer does not comply with any provision of the Trust Deed or the Sukuk (other than the Issuer’s profit payment obligations and the Issuer’s option redemption obligations defined in the Trust Deed) and such non-compliance continues for 30 (thirty) days after the written notice is received by the Issuer from the Trustee. (b) Misrepresentation A representation, warranty or statement made or repeated in or in connection with the Trust Deed, Sukuk, or in any document delivered by or on behalf of the Issuer under or in connection with the Trust Deed or Sukuk is or proves to have been incorrect or misleading in any material respect or any statement, representation or warranty made or repeated by the Issuer in any notice, certificate or statement referred to or delivered under the Trust Deed is or proves to have been incorrect or misleading in any material respect, or any such statement, representation or warranty is incorrect in any material respect at any time and the defect is not rectified within 30 (thirty) days after the written notice is received by the Issuer from the Trustee. (c) Insolvency i. The Issuer is unable to pay its debts as they fall due or becomes insolvent, or admits inability to pay its Financial Indebtedness as they fall due; or ii. The Issuer suspends making payments on all or any class of its debts or announces an intention to do so or a moratorium is declared in respect of any of its Financial Indebtedness. (d) Insolvency proceedings i. A meeting of the Issuer is convened for the purpose of considering any resolution for (or to petition for) its winding-up or its administration or any such resolution is passed; or ii. Any order for the winding-up or administration of the Issuer is made which is not suspended, revoked or set aside within a period of 45 (forty-five) days; or iii. Any other step (including petition, proposal or convening a meeting) is taken by the Issuer with a view to the rehabilitation, administration, custodianship, liquidation, winding-up or dissolution of the Issuer or any other similar proceedings involving the Issuer. (e) Appointment of receivers and managers i. Any liquidator, trustee in bankruptcy, judicial custodian, compulsory manager, receiver, administrative receiver, administrator or the like is appointed in respect of the Issuer or any part of its assets and is not discharged within 30 (thirty) days of such appointment; or ii. The directors of the Issuer request the appointment of a liquidator, trustee in bankruptcy, judicial custodian, compulsory manager, receiver, administrative receiver, administrator or the like; or iii. Any other steps are taken to enforce any Security Interest and such steps are not stayed within 30 (thirty) days thereof. Page 97 of 127
99. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED (f) Creditors' process Any attachment, sequestration, distress or execution affects any asset owned by the Issuer and is not discharged within 30 (thirty) days of such attachment, sequestration, distress or execution being levied. (g) Cessation of business i. the Issuer ceases, or threatens to cease, to carry on all or a substantial part of its business or any license or permissions to carry on business in Pakistan is suspended or cancelled; or ii. the Issuer’s banking license is suspended or cancelled; or iii. if subsequent to the listing of Sukuk Certificates in terms of Clause 2.13 of the Trust Deed, the Stock Exchange suspends trading of the Sukuk Certificates pursuant to the DSL Regulations and / or any other applicable laws and regulations and the same is not reversed within a period of 60 (sixty) days; iv. failure to procure listing of the Sukuk Certificates in terms of Clause 2.13 of the Trust Deed; v. if subsequent to the listing of the Sukuk in terms of Clause 2.13 of the Trust Deed, if the Issuer fails to comply with or contravenes with any of the provisions of the DSL Regulations and/or any other laws and regulations which may be applicable from time to time including any conditions imposed on it by the Stock Exchange once listed pursuant to the DSL Regulations and the same is not rectified within the prescribed time period. (h) Unlawfulness It is or becomes unlawful for the Issuer to perform any of its material obligations under this Trust Deed or the Sukuk and/or any other document executed by the Issuer in respect thereof and the Issuer and the Trustee have been unable to agree, within a period of 30 (thirty) days from the receipt of a notice from the Trustee, on an appropriate replacement provision containing such terms so as not to relegate either party to a detrimental or less favorable position than that held under the Trust Deed or Sukuk (as originally executed). (i) Change of provisions of the Trust Deed All or any material provisions of the Trust Deed: i. do not have effect or cease to have effect in accordance with its terms; or ii. are or become void, voidable, illegal or unenforceable (j) Compromise or arrangement with the members or creditors Taking of any step by the Issuer for the purpose of entering into a compromise or arrangement with any of its members, or creditors, generally or any class of them under the provisions of the Companies Act, 2017. (k) Cross-default The occurrence of any of the following which has a Material Adverse Effect: i. Any Financial Indebtedness of the Issuer is not paid when due, including any grace period that may be applicable thereto; or ii. An event of default howsoever described occurs under any document relating to Financial Indebtedness of the Issuer; or iii. Any Financial Indebtedness of the Issuer becomes prematurely due and payable or is placed on demand as a result of an event of default (howsoever described) under the document relating to that Financial Indebtedness; or Page 98 of 127
100. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED iv. Any commitment for, or underwriting of, any Financial Indebtedness of the Issuer is cancelled or suspended as a result of an event of default (howsoever described) under the document relating to that Financial Indebtedness; or v. any Security Interest becomes enforceable. 6.10. CONSEQUENCES OF EVENTS OF DEFAULT (a) At any time after the occurrence of an Event of Default mentioned above relating to the Issuer’s non-option redemption obligations (as defined in the Trust Deed), the Trustee (to the exclusion of the Sukuk Holders) may, at its discretion (subject to the Trustee being indemnified to its satisfaction against all proceedings, claims and demands to which the Trustee may be liable and all costs, charges and expenses which may be incurred by the Trustee in connection therewith), take such proceedings/actions against the Issuer as may be directed by Sukuk Holders representing more than 50% (fifty percent) of the total outstanding value of the Sukuk to the extent that the same is permissible under law and permitted by the SBP. (b) The Trustee shall be entitled to prove in any winding-up of the Issuer in respect of any amounts payable in relation to the Sukuk or other moneys payable under any provision of the Trust Deed. 6.11. APPLICATION OF PROCEEDS (a) In the event of a winding up order being made by a court of competent jurisdiction, the Mudaraba relationship shall stand terminated and payments to the Sukuk Holders (in case the Sukuk are not already converted into the common shares of the Issuer), shall be (a) superior to the claims of common shareholders, (b) subordinate to and rank inferior to all other debts of the Issuer including deposits and any Tier 2 Capital instruments, and (c) pari passu without preference amongst themselves. (b) Upon enforcement of the Issuer’s profit payment obligations / the Issuer’s option redemption obligations / Issuer’s non-option redemption obligations in terms of the Trust Deed, any Proceeds recovered / received by the Trustee from such enforcement shall be applied by the Trustee in the following manner: i. firstly, in payment of all costs, charges, expenses and liabilities lawfully incurred and payments made by the Trustee and every receiver, attorney, agent, delegate, sub-delegate or other person appointed by the Trustee in the execution of any powers, authorities or discretions vested in it or him pursuant to the Trust Deed including (without limitation upon the foregoing) the remuneration of the Trustee under these presents and of every such Receiver or such other person; ii. secondly, in or towards payment of the outstanding Issue Price and outstanding Profit Payment Amount to the Sukuk Holders on a pari passu basis in proportion to the amount owed to the respective Sukuk Holders pursuant to the Sukuk; and iii. lastly, the surplus (if any) after the payment of the amounts mentioned in (i) and (ii) above, shall be paid to or to the order of the Issuer or other person for the time being entitled thereto, subject to such person providing evidence as may be required by the Trustee in support of the claim. (c) Payment of the Proceeds to the Sukuk Holders shall be made by the Trustee net of any deductions required under the law (against surrender of the original Sukuk, where applicable). Page 99 of 127
101. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 6.12. MANDATORY CONVERSION Conversion Events include each of the following events: (a) Where all or part of the Sukuk are subject to a mandatory conversion into common shares at the discretion of SBP in case of the Issuer’s inability to exercise the lock-in clause; (b) Where all or part of the Sukuk are subject to a mandatory conversion into common shares at the discretion of SBP in case of the Issuer’s inability to exercise the non-cumulative feature; (c) Where all or part of the Sukuk are converted into common shares upon the declaration by SBP of the occurrence of a Point of Non-Viability event; or (d) Where all or part of the Sukuk are converted into common shares by the Issuer upon the occurrence of a Pre-specified Trigger Event. 6.12.1. Lock‐in clause (a) In the event where payment of the profit payment amount will result in a shortfall in the Issuer’s minimum capital requirement, capital adequacy ratio or leverage ratio, or results in an increase in any existing shortfall in minimum capital requirement, capital adequacy ratio or leverage ratio, the Issuer shall take immediate action to reduce the weightage of the Sukuk Holders participation in the General Pool (profit distribution ratios for weighted average investment) (to a negligible amount of up to 0.005%) of the current month and every month thereafter in which the Issuer is in breach of regulatory capital requirements. (b) In the event where payment of the option redemption amount and partial option redemption amount (as defined in the Trust Deed) will result in a shortfall in the Issuer’s minimum capital requirement, capital adequacy ratio or leverage ratio, or results in an increase in any existing shortfall in minimum capital requirement, capital adequacy ratio or leverage ratio, such payment shall be withheld by the Issuer, however, the Mudaraba relationship will continue between the parties and such payment shall be released once SBP allows the same. (c) Any inability to exercise the lock-in clause will subject the Sukuk to mandatory conversion into common shares, at the discretion of SBP subject to clause 6.12.5 below. 6.12.2. Non‐Cumulative Feature In compliance with the requirements as provided under the Basel III Circular, any unpaid profit will be non-cumulative i.e. the Sukuk Holders will not be compensated subsequently by the Issuer for that particular period. Accordingly, the profit payment made to the Sukuk Holders based on their respective monthly profit weightages, will be considered as full and final payment for that particular period. Any inability to exercise the non-cumulative feature will subject the Sukuk to mandatory conversion of the Sukuk into common shares or their write-off, at the discretion of the SBP subject to clause 6.12.5 below. 6.12.3. Loss Absorbency ‐ Point of Non‐Viability Event As per the requirements of the Basel III Circular, the following loss absorbency conditions will apply to the Sukuk: (a) Upon the occurrence of a Point of Non-Viability (“PONV”) event as defined below, SBP may at its option, fully and permanently convert the Sukuk into common shares of the Issuer (either partially or in full). Page 100 of 127
102. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED Under Basel III Circular, a “PONV” event has been defined as the earlier of: i. A decision made by SBP that a conversion is necessary, without which the Issuer would become non-viable; or ii. The decision to make a public sector injection of capital, or equivalent support, without which the Issuer would have become non-viable, as determined by SBP. (b) The amount to be converted into common shares shall be based on fair value determined in accordance with clause (d) below and as directed by SBP. (c) In the event of conversion of the Sukuk into common shares by SBP, any investor holding 5% (five percent) or more of the paid-up share capital of the Issuer will be required to comply with the fit and proper criteria of SBP. (d) Conversion Mechanism: In the event of conversion of the Sukuk into common shares by SBP, the Sukuk shall be converted in the following manner: i. The Mudaraba relationship with the General Pool shall end and the capital of Mudaraba shall be converted into common shares. ii. The conversion pricing formula will be linked to the market value of the ordinary shares of the Issuer on the date of trigger of the PONV (“Market Value of Shares”) and the fair value of the outstanding value of the Sukuk determined by adding / deducting, from the face value of the Sukuk, the attributable profit / loss of the General Pool and any amount of profit held during the loss absorbency period (“Outstanding Value of Sukuk”). The number of ordinary shares to be issued to the Sukuk Holders, subject to clause 6.12.5 below, shall be determined by dividing the Outstanding Value of Sukuk by the Market Value of Shares. The above conversion will be decided by SBP by keeping in view the conditions of clause (xi) of Annexure 2 of the SBP Circular; and iii. SBP has granted a waiver / deferred from obtaining upfront SECP approval as required under Paragraph (viii) of Annexure A-5-3 of the Basel III Circular in terms of the SBP Approval. 6.12.4. Loss Absorbency ‐ Pre‐Specified Trigger Point (a) The Sukuk shall be permanently converted into common shares of the Issuer upon the occurrence of a Pre-Specified Trigger Point as defined below and the Issuer shall immediately notify SBP upon the occurrence thereof. (b) Under Basel III Circular, a “Pre‐Specified Trigger Point” (“PST”) shall be deemed to occur when the Issuer’s CET-1 (Common Equity Tier 1) ratio falls to or below 6.625% of its Risk Weighted Assets (RWA). (c) In the event of conversion of the Sukuk into common shares, any person consequently holding 5% (five percent) or more of the paid-up share capital of the Issuer will be required to comply with the fit and proper criteria of SBP. (d) Conversion Method: In the event of conversion of the Sukuk into common shares by SBP, the Sukuk shall be converted in the following manner: Page 101 of 127
103. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED i. The Mudaraba relationship with the General Pool shall end and the capital of Mudaraba shall be converted into common shares. ii. Where the Issuer’s CET-1 reaches the loss absorption trigger point, the aggregate amount of Additional Tier 1 Capital to be converted must at least be the amount sufficient to immediately return the CET-1 ratio to above 6.625% of total RWA (if possible); iii. the converted amount should not exceed the amount needed to bring the CET-1 ratio to 8.5% of RWA (minimum CET-1 of 6.0% plus capital conservation buffer of 2.5%); iv. The conversion pricing formula will be linked to the Market Value of the Shares of the Issuer on the date of trigger of the PST and the Outstanding Value of the Sukuk. The number of ordinary shares to be issued to the Sukuk Holders, subject to condition mentioned in clause 6.12.5 (b) below, shall be determined by dividing the Outstanding Value of Sukuk by the Market Value of Shares. The above conversion will be decided by SBP by keeping in view the conditions of clause (xi) of Annexure 2 of the SBP Circular; and v. SBP has granted a waiver / deferred from obtaining upfront SECP approval as required under Paragraph (viii) of Annexure A-5-3 of the Basel III Circular in terms of the SBP Approval. 6.12.5. Conversion Conditions Notwithstanding any other provision of the Trust Deed, the conversion of the Sukuk into common shares to a Conversion Event is subject to: i. The Issuer obtaining approval from the SECP as required under applicable laws; and ii. The maximum number of additional shares being issued in respect of all conversion events not exceeding 184,000,000 (One Hundred Eighty Four Million) additional shares. 6.13. EXERCISE TO THE CALL OPTION (a) Subject to receipt of written approval from SBP and compliance with its minimum capital requirement and capital adequacy ratio, the Issuer will have an option to redeem in full (hereinafter referred to as the “Call Option”, as detailed below) or part, (hereinafter referred to as the “Partial Call Option”) the outstanding value of the Sukuk calculated under the SBP Pool Management Guidelines in terms of Clauses (b) to (g) below. (b) The Call Option or the Partial Call Option may be exercised by the Issuer after obtaining written approval from the SBP at any time on or after a period of 5 (five) years from the Issue Date by giving to the Sukuk Holders and the Trustee at least 30 (thirty) days prior notice in writing, specifying the Profit Payment Date on which the Issuer will redeem (“Option Redemption Date”) all of the then outstanding Sukuk (i.e. the Call Option) or a portion of the then outstanding Sukuk (i.e. the Partial Call Option) by payment of the amount(s) calculated in accordance with the provisions of the Clause (c) to (g) below, whereupon the Sukuk Holders shall be bound to so accept the redemption. Notwithstanding the above, the Issuer shall not implement the Call Option or Partial Call Option unless they replace the amount called with capital of same or better quality and demonstrates that the capital position of the Issuer will be well above the minimum capital requirement prescribed by the SBP after the Call Option is exercised. (c) In case of the exercise of the Call Option, the Issuer will pay (a) the Profit Payment Amount accruing for payment on the Option Redemption Date; and (b) the outstanding value of the Issue Price (subject to the weightage in the General Pool and the profit and loss calculations applicable thereto Page 102 of 127
104. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED (d) (e) (f) (g) under the SBP Pool Management Guidelines) allocated to the then outstanding Sukuk (“Option Redemption Amount”) on the Option Redemption Date as specified in the Call Option notice. In case of Partial Call Option, the Sukuk shall be redeemed from each Sukuk Holder on a pro rata basis. If the pro-rata calculated number of Sukuk so redeemable from a Sukuk Holder is not a whole number, it shall be rounded up to the next whole number. The notice for the exercise of the Partial Call Option above shall specify the portion of the outstanding Issue Price (subject to the weightage in the General Pool and the profit and loss calculations applicable thereto under the SBP Pool Management Guidelines) intended to be redeemed (“Partial Option Redemption Amount”). In case of exercise of the Partial Call Option, the Issuer will pay the Partial Option Redemption Amount on the Partial Option Redemption Date as specified in the Partial Call Option notice. Any notice of Call Option or Partial Call Option, once issued, shall be irrevocable. In case of any dispute as to the amounts payable by the Issuer to the Sukuk Holders upon exercise of Call Option or the Partial Call Option, the determination of the Trustee in this regard, save for manifest error, shall be final and binding on the Issuer and the respective Sukuk Holders. (the space has been left blank intentionally) Page 103 of 127
105. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED PART 7: MANAGEMENT OF THE BANK 7.1. BOARD OF DIRECTORS OF THE BANK The Bank’s affairs are governed by the Board of Directors (the “Board”), which comprises eight directors, including the Chairman and the President and CEO. The Board is responsible for policy related issues and is headed by the Chairman. The President and CEO has overall responsibility for the Bank’s strategic direction and for managing the Bank’s business and its functions. Board of Directors of the Bank Name Mr. Ali Hussain Designation Chairman Mr. Fawad Anwar Vice Chairman Mr. Syed Amir Ali President and CEO Mr. Ali Mohamad Hussain Ali Independent Mohamad Alshamali Director Dr. Amjad Waheed Independent Director Mr. Muhammad Nadeem Farooq Non-Executive Director Mr. Noman Yakoob Non-Executive Director Mr. Siraj Dadabhoy Non-Executive Director Directorships in Other Companies • TechCube8 Pte Ltd • SAJ Capital Management Limited • Alkaram Textile Mills (Pvt) Limited • Lakeside Energy (Pvt) Ltd • Adira Capital Holdings (Private) Limited • Alfa Beta Capital Markets (Pvt) Limited • TPL Properties Limited • Pakistan Oxygen Limited (formerly Linde Pakistan Limited) • None • Amlak Finance • Alfa Electrical llc • NBP Fund Management Limited (formerly, NBP Fullerton Asset Management Limited) • Gul Ahmed Textile Mills Limited • Mehran Sugar Mills Limited • Katha Collieries Pak (Pvt) Limited • Energy Exploration Limited • Spud Energy Pty Limited • Jura Energy Corporation • Spud Oilfield Services Limited • Frontier Holdings Limited • PetExPro Limited • Frontier Oil and Gas Holdings Limited • Alkaram Textile Mills (Pvt) Limited • Pakistan Synthetics Limited • Amna Industries (Pvt) Limited • Adira Capital Holdings (Private) Limited • Aion Holdings Inc, & Subsidiaries, USA • 1508 London Limited, London, UK • Alfa Beta Capital Markets (Pvt) Limited • TPL Properties Limited Page 104 of 127
106. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED • • • • • • Pakistan Oxygen Limited (formerly Linde Pakistan Limited) AION Global Partners Limited Crescent Holdings Inc & Subsidiaries, USA Paradigm Factors Private Limited Paradigm RE Private Limited Paradigm Services Private Limited Profiles of Directors Mr. Ali Hussain – Chairman He is the founder and Managing Director of SAJ Capital Management Limited, BVI, a family office based in Singapore having strategic investments in financial sector in Pakistan, Europe & USA. Mr. Hussain has previously worked at Conics Technology Private Limited, Singapore, Conrac Technology Inc, USA, Hewlett Packard, USA and Fairchild Semiconductors, USA. He has overall 38 years of professional experience and specializes in incubating, acquiring and managing technology companies and converting them in growth champions in Singapore, USA, Germany, UK and Canada. Mr. Hussain has done his M.S. in Electrical Engineering from Stanford University USA and B.S. in Electronics Engineering and also in Electrical Engineering from California State University, USA. Mr. Fawad Anwar Mr. Fawad Anwar has over 20 years of professional experience and currently serves as the Managing Director of Al-Karam Textile Mills (Private) Limited, which is part of one of the most renowned business groups in Pakistan. Mr. Anwar has done his MBA from Drexel University, USA and BBA from Temple University, USA. Mr. Ali Mohamad Hussain Ali Mohamad Alshamali Mr. Alshamali serves as an Independent Director on BankIslami’s Board. He has over 17+ years of experience in Credit and risk management. He is the Vice President, Credit and Risk at Amlak Finance, PJSC, UAE. Before his current position, he worked as Head of Credit and Risk at Amlak Finance and also in the Credit department of the Emirates Bank International. Mr. Alshamali holds an MBA degree from University of Wollongong Dubai and Bachelors in Science degree from Seattle University, USA. In addition to this, he has attended various courses and seminars. Dr. Amjad Waheed, CFA Mr. Waheed currently serves as the Chief Executive Officer of NBP Fullerton Asset Management Limited (NAFA), which is a subsidiary of National Bank of Pakistan with Fullerton Fund Management Company of Singapore as a joint venture partner. Before joining NAFA, he had been the Head of Equity Mutual Funds & Portfolios at Riyadh Bank, Saudi Arabia, Head of Asset Management at NIT, and Chief Operating Officer of FC-ABN AMRO Equities. Page 105 of 127
107. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED He holds a Doctorate in Business Administration with a major in Investments and Finance from Southern Illinois University, USA and is also a Chartered Financial Analyst (CFA) charterholder. Syed Amir Ali Mr. Syed Amir Ali is the President & Chief Executive Officer of BankIslami Pakistan Limited. He excelled in the ambit of Finance, Treasury, Investment & Corporate Banking throughout his association with domestic and international organizations i.e. Price Water House Coopers (PWC), Shell and Meezan Bank Limited. He spearheaded corporate and investment group of Meezan Bank Limited before moving to BankIslami in 2018. His diverse credentials as a Chartered Accountant (Gold Medalist) from Institute of Chartered Accountants of Pakistan and in England & Wales, CFA Charterholder, MBA (Gold Medalist) and LLB are testament to his progression in the Financial Industry. Mr. Muhammad Nadeem Farooq Mr. Nadeem is currently serving as the Chief Executive Officer of Jura Energy Corporation which is an international upstream oil and gas exploration and production company, listed on Toronto Stock Venture Exchange. The corporation’s activities are conducted exclusively in Pakistan, where it has interests in exploration, development and producing assets. Mr. Nadeem is a Chartered Accountant from Institute of Chartered Accountants of Pakistan (ICAP) and has a proven record of excellence in managerial finance, corporate finance, governance, acquisitions, restructurings, accounting, tax, investor relations, negotiations and relationship management with excellent communication skills. Mr. Noman Yakoob Mr. Yakoob currently serves as the Director of Al-Karam Textile Mills Limited and as the Vice-President Landhi Association of Trade and Industry (LATI). Previously he has worked as Director of Amna Industries Limited. Mr. Yakoob has done his BSc (Hons) from Lahore University of Management Sciences (LUMS) and MSc from Kingston University, London. Mr. Siraj Ahmed Dadabhoy Mr. Siraj Dadabhoy has more than 25 years of professional experience in the real estate and financial industries in a range of leadership roles. Currently, he serves as a founding partner and Executive Chairman of AION Partners, a New York based real estate operating and investment management company. Mr. Dadabhoy is also the founder and Managing Director of AION Global; an owner, operator and developer of real estate in the U.K. In addition to this, Mr. Dadabhoy serves as a member of the board of directors of TPL Properties in Pakistan. Mr. Dadabhoy is a 1988 graduate of Indiana University, with a Bachelor of Science in Accounting and Finance. He is also a qualified Certified Public Accountant. Page 106 of 127
108. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 7.2. SENIOR MANAGEMENT Mr. Syed Amir Ali – President & Chief Executive Officer Mr. Syed Amir Ali is the President & Chief Executive Officer of BankIslami Pakistan Limited. He excelled in the ambit of Finance, Treasury, Investment & Corporate Banking throughout his association with domestic and international organizations i.e. Price Water House Coopers (PWC), Shell and Meezan Bank Limited. He spearheaded corporate and investment group of Meezan Bank Limited before moving to BankIslami in 2018. His diverse credentials as a Chartered Accountant (Gold Medalist) from Institute of Chartered Accountants of Pakistan and in England & Wales, CFA Charterholder, MBA (Gold Medalist) and LLB are testament to his progression in the Financial Industry. Mr. Rizwan Ata - Country Head of Distribution Mr. Rizwan Ata is a seasoned banker with over 30 years of rich experience in financial sector including over 17 years of experience in Islamic Banking industry. Prior to joining BankIslami, he was Group Head - Islamic Banking at Bank Alfalah Limited, where he led a network of over 150 branches together with associated business and support functions. Earlier, he led Islamic Banking Group at Allied Bank Limited as the first Group Chief. He also worked with Meezan Bank Limited as Group Head – Branch Network & SME/Commercial. He has also worked in different managerial positions at Lahore, Faisalabad, Sialkot & Multan while working with Emirates Bank International PJSC. Mr. Rizwan holds an MBA degree from LUMS and attended Senior Leadership Program from INSEAD, France. Mr. Syed Abdul Razzaq- Head of Risk Management Mr. Abdul Razzaq is a Fellow Chartered Accountant from the Institute of Chartered Accountants of Pakistan with over 20 years of experience. Prior to joining BankIslami, Mr. Abdul Razzaq was working with Al Baraka Bank Pakistan Limited. His last assignment at Al Baraka Bank, was SEVP/ Group Head – Corporate & Investment Banking since 2012 and previously EVP/ Head of Credits from 2011 to 2012. He has previously been associated with Bank of Punjab, Faysal Bank Limited, A. F. Ferguson & Co., Askari Leasing Limited and Fauji Cement Pakistan Limited. Mr. Sohail Sikandar- Chief Financial Officer Mr. Sohail Sikandar, a Fellow Member of the Institute of Chartered Accountants of Pakistan (ICAP), started his career with Deloitte Yousuf Adil Saleem & Co. Chartered Accountants (A member firm of Deloitte Touche Tohmatsu) where he gained versatile experience of auditing Banks and Non-Banking Financial Institutions and facilitating Mergers and Acquisitions of financial institutions. He is currently serving as a Chief Financial Officer of BankIslami Pakistan Limited since 2016. Prior to joining BankIslami, he has served as Chief Financial Officer at Burj Bank Limited and Dawood Family Takaful Limited. Mr. Sikandar has certificate courses in Islamic Finance and Takaful to his credit. In addition to his superior knowledge of finance and accounting, he also has considerable knowledge and strength in the areas of Business Process Re-engineering, Business & Strategic Planning and Corporate Affairs. Muhammad Shoaib, Company Secretary Mr. Shoaib has been associated with the Bank since 2009 and at present serving as Company Secretary. Previously, he worked for Central Depository Company of Pakistan Limited (CDC) as Manager Legal & Compliance, National Clearing Company of Pakistan Limited (NCCPL) as Company Secretary / Manager Legal Page 107 of 127
109. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED & Compliance. He has over 19 years of experience and looking after Company Secretarial functions. He is LLM from S. M. Law College, Karachi. Mr. S. M. Aamir Shamim - Head of Treasury & Financial Institutions Mr. Aamir has worked in all the spectrum of financial markets both locally as well as abroad. Before joining Bankislami, he was associated with the Islamic Bank of Thailand as Head of Treasury and International Division. He has headed the treasury of Tadhamon International Islamic Bank (Yemen) and also look into the affairs of Tadhamon Capital, an investment banking arm of the bank in Bahrain. Mr. Aamir was the founder member of Dawood Islamic Bank and SME Bank Limited. He holds a Master's degree in Economics from University of Karachi with over 25 years of banking experience. Mr. Syed Arif Mahtab - Head of Operations Mr. Arif Mahtab is serving as Head of Branch Operations since September 2013. He has a diversified experience of 28 years in the banking sector working at senior positions i.e. Head of Centralized & Consumer Operations, Controller of Branches, Head of Retail Operations etc. and had been associated with multiple Banks Samba Bank, Summit Bank, Atlas Bank, Union Bank and Standard Chartered Bank. He holds a degree of MBA major in (Finance) from Al Khair University. Mr. Bilal Fiaz- Head of Consumer Banking Mr. Bilal Fiaz holds an MBA degree and Post Graduate Diploma in Islamic Banking & Takaful from Center for Islamic Economics with over 22 years of experience. Before joining BankIslami he was working with Zarai Taraqiati Bank Ltd as Head of Islamic Banking. He has previously been associated with Bank Sohar, Oman as Head of Retail Banking, Meezan Bank as Head of Strategy & Premium Banking, Standard Chartered Bank and Citibank N.A. Mr. Shehzad Kazmi - Head Corporate / Business Banking Mr. Shehzad Kazmi is a seasoned banker with over 20 years of rich experience in financial sector. Prior to joining BankIslami, Mr. Shehzad has worked in the international & local market. He has also worked with a number of foreign banks including Standard Chartered Bank, Dubai Islamic Bank & CitiBank. He is a hard core Corporate, Commercial and Investment Banking professional, his last assignment with Emirates NBD in the UAE market. Mr. Shehzad holds an MBA degree from South Eastern University Washington DC. Mr. Muhammad Haris Munawar - Head of Investment Banking Mr. Haris Munawar is an experienced Corporate & Investment banker having more than 17 years of progressive experience of Corporate Banking, Corporate Finance, Investment Banking, Project Financing, Structured Finance, Syndications, and Islamic Banking. Before joining BankIslami, he worked with Burj Bank Limited as Head of Corporate Banking South. He also worked at Pak Kuwait Investment Company, Atlas Bank Limited and MCB Bank Limited at senior / managerial positions. Mr. Munawar holds an MBA degree from the IBA, Karachi. He is also an Associate member of ICMA Pakistan and a Diplomaed Associate of Institute of Bankers Pakistan (IBP). Page 108 of 127
110. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED Mr. Muhammad Assadullah Chaudhry - Head of Human Resource Mr. Assadullah is associated with BankIslami Pakistan Limited since last 2 years. Prior to joining BankIslami, Mr. Assadullah has worked with Allied Bank Limited as Group Head - Service Quality. He also worked at various senior positions in Meezan Bank, Union Bank and Citibank NA. Mr. Assad Holds a Master's degree in Business Administration with overall 19 years of experience. Mr. Masood Muhammad Khan - Head of Compliance Mr. Masood Muhammad Khan is associated with BankIslami Pakistan Limited since January 2015. Previously he has worked in senior positions at Bank Al Habib, National Accountability Bureau, Askari Bank and SaudiPak Commercial Bank (now Silk Bank Limited). Mr. Masood Holds a Master's Degree in International Relations from Karachi University, with overall 21 years of working experience. Muhammad Irfan Ahmed - Head of Shariah Compliance Mr. Muhammad Irfan Ahmed is the Head of Shariah Compliance Department at BankIslami and possess more than 12 years of experience in the field of Islamic Banking & Finance. He has been involved in Product Development, Shariah Structuring, Shariah Compliance, Shariah Audit, Shariah Advisory. He also played a major role in development of conversion plan of ex-KASB Bank into an Islamic Bank. He conducts Islamic Banking trainings in BankIslami, and at various forums and educational institutions including NIBAF and Institute of Banker Pakistan (IBP). He has done MBA in Finance and Masters in Economics, and currently pursuing M. Phil in Islamic Banking & Finance. He has also done Certification in Deposit Management, and Capital Markets & Instruments in Islamic Banks from IBA-Karachi. Mr. Kashif Nisar – Head Product & Shariah Structuring Mr. Kashif Nisar has been associated with the Islamic Banking Industry for 15 years and is a well-regarded figure in the Islamic Finance fraternity. He has previously worked with Meezan Bank Ltd., Dubai Islamic Bank Pakistan Ltd. and other Financial Institutions. He holds a Master's degree from the Institute of Business Administration (IBA, Karachi) and a PGD in Islamic Banking & Finance from Centre for Islamic Economics (CIE). He also regularly delivers lectures on Islamic Economics and Finance at different forums and educational institutions including NIBAF (National Institute of Banking and Finance, State Bank of Pakistan). Mr. Rizwan Qamar Lari - Head of Internal Audit Mr. Lari is an experience banker with over 21 years of experience in financial sectors mainly in Islamic Banking. Prior to joining us, he was associated with Alinma Bank, Saudi Arabia as Deputy General Manager for 9 years. Earlier he worked with Meezan Bank Limited as SVP-Finance, Saudi Pak Leasing as CFO and Company Secretary and KPMG-UAE and Pakistan in Audit and Assurance Department. Mr. Lari is a Fellow member of the Institute of Chartered Accountant of Pakistan (ICAP). Mr. Muhammad Uzair Sipra - Head of Legal Affairs Mr. Sipra has been associated with the Bank since November 2015. He possesses professional experience of over 28 years (including over 23 years of experience in Banking industry) and has previously worked with the Bank of Punjab, MCB Bank Limited and KASB Bank Limited in Legal Affairs and Corporate Recoveries. Page 109 of 127
111. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED Mr. Sipra holds MA and LLB degrees from the University of Punjab. Syed Ata Hussain Jaffri - Head of Information System Currently working with BankIslami Pakistan as Head of IT. Having an overall 18 years of professional career and specifically more than 10 years of experience in Core Banking, Alternate Delivery Channels and Payment Systems. He has worked with Local and International technology partners to deliver innovative and effective technology led business solutions. Recently under his leadership, BankIslami IT completed major projects of Core Banking Upgrade and Migration of Defunct KASB bank into BankIslami in a single year. Played a leading role in implementing the Largest Bio Matric enabled ATM network in Pakistan and launched the first-ever Card-less ATM service in Pakistan in 2013. A Computer engineer by education, started the career as Software Programmer and able to evolve the professional career while developing solution for local and international players, including some leading foreign banks. 7.3. SHARIAH BOARD OF THE BANK The Bank has a renowned Shariah Supervisory Board in order to ensure compliance of Shariah guidelines issued by Shariah Board and SBP in all banking operations in general and revenue generating activities. The Bank has a committed professional team in the Shariah Compliance department consisting of Shariah Scholars along with business graduates from reputed organizations. Mufti Irshad Ahmad Aijaz – Chairman, Shariah Supervisory Board Mufti Irshad Ahmad Aijaz has graduated from Jamiat-ul-Uloom Islamiyyah, Binnori Town, Karachi and obtained his Shahadat-ul-Aalamia (Masters in Arabic and Islamic Studies) from there. Afterwards, he completed his Takhassus fil-Iftaa (Specialization in Islamic Jurisprudence and Fatwa) from Jamia Dar-ulUloom, Karachi. He has also completed his MBA program from a leading private university in Karachi, Pakistan. He currently holds advisory position in the following Institutions: • • • • • • • Chairman, Shariah Advisory Committee of State Bank of Pakistan Member, AAOIFI Shariah Standard Committee – Karachi Member, AAOIFI Ethics Committee Shariah Advisor, Al-Hilal Shariah Advisors Consultant, Shariah Review Bureau - Bahrain Member, ICAP- Committee on Accounting & Auditing Standards for Interest Free Modes of Financing and Investments Member of Shariah Board in different Islamic Financial Institutions He is actively involved in providing consultation for development of policies and regulations for regulatory authorities and different Islamic financial institutions. He also regularly delivers lectures on Islamic Economics and Finance at different forums and educational institutions including National Institute of Banking and Finance (State Bank of Pakistan) and Centre for Islamic Economics (a division of Jamia Dar-ulUloom, Karachi). Mufti Muhammad Hussain Khaleel Khail - Member, Shariah Supervisory Board Mufti Muhammad Hussain is a prominent scholar in the field of Islamic jurisprudence. He graduated from Jamia Dar-ul- Uloom, Karachi and obtained his Shahadat-ul-Aalamia (Masters in Arabic and Islamic Studies) Page 110 of 127
112. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED from there. Afterwards, he completed his Takhassus fil-Iftaa (Specialization in Islamic Jurisprudence and Fatwa) from Jamia -tur-Rasheed, Karachi. He has been teaching Islamic studies including Fiqh and Fatwa for years. He has undertaken research work in various topics including economic thoughts in Islam, financial markets, modern economic and financial issues and Islamic banking and finance. His research works include Ushr obligation, Takaful on the basis of Waqf, Shariah rules of wealth earned through impermissible sources and rulings on status of juristic person in Islam. He is the author of famous book on Islamic Commercial Law, named “Asan Fiqh ul Muamalat”. He has also authored several articles and issued verdicts (Fatwas) on various issues. He is associated with Jamiatur-Rasheed, Karachi as a senior Mufti in Darul Iftaa and lecturer in department of Fiqhul Muaamlaat. Mufti Javed Ahmad - Resident Shariah Board Member Mufti Javed Ahmad has completed his Shahadat-ul-Alamia (Masters in Arabic and Islamic Studies) from Jamia Dar-ul-Uloom, Karachi, and Takhassus fi Fiqh-el-Muamlat (Specialization in Islamic Jurisprudence of trade and finance) from Jamia-tur-Rasheed, Karachi. He is also a Certified Shariah Advisor and Auditor (CSAA) from AAOIFI, Bahrain and Chartered Islamic Finance Professional (CIFP) from INCEIF, Malaysia. He has completed M.A. Economics from Karachi University. He has undertaken research work in numerous topics including Islamic Banking and Finance. He is also a member of AAOIFI Editorial Committee for Urdu translation of AAOIFI Shariah Standard, which has successfully completed Urdu translation of all Standards, and which has been published recently in 2018. Prior to joining BankIslami, he was associated with Ernst & Young Ford Rhodes as 'Senior Shariah Consultant' where he was engaged in Shariah Advisory, Shariah Review, Shariah Audit and Shariah Compliance activities for more than four years. He regularly delivers lectures on Islamic Economics and Finance at different forums and educational institutions including National Institute of Banking and Finance (State Bank of Pakistan). 7.4. OVERDUE LOANS The Bank, its Chief Executive and directors; and its associated companies and undertakings have no overdue loans (local and/or foreign currency). 7.5. POWER OF DIRECTORS As required under clause 47 of Part I of Table A of First Schedule of the Companies Act, 2017 and the Articles of Association of the Company, the authority to conduct business of the Bank is vested with its Board of Directors and they may exercise all such powers of the Bank as are not required by the Companies Act, 2017 or the Articles of Association of the Bank or by a special resolution, required to be exercised by the Bank in the general meeting of the shareholders. 7.6. NUMBER OF DIRECTORS Pursuant to section 154 of the Companies Act, 2017, the number of directors of a listed company should not be less than seven (7). At present, the Board consists of eight (8) directors, including the President & CEO. 7.7. QUALIFICATION OF DIRECTORS Pursuant to Article 46 of the Articles of Association of the Bank, save as provided in section 153 of the Companies Act, 2017, no person shall be appointed as Director unless he is a Member and holds qualification shares of Rs. 5,000 (Rupees Five Thousand Only). Page 111 of 127
113. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 7.8. REMUNERATION OF DIRECTORS According to article 53 of the Articles of Association, subject to any approval or limits required by law, the terms and conditions and remuneration of a Director performing extra services, including the holding of the office of Chairman, the Chief Executive and any Director for attending the meetings of the Directors or a committee of Directors shall be determined by the Board of Directors. A Director shall be entitled to obtain reimbursement of all reasonable expenses as he may incur in attending meetings of the Board, or general meetings, or which he may otherwise incur in or about the business of the Bank. 7.9. AMOUNT OF BENEFITS TO SPONSOR SHAREHOLDER AND OFFICERS DURING THE LAST YEAR No amount of benefits has been paid or given during the last year or is intended to be paid or given to any sponsor shareholders or to any officer of the Bank other than as remuneration for services rendered as whole-time executives of the Bank or as meeting fee for attending Directors Committee meetings to nonexecutive directors as per the approved scale of fee. 7.10. INTEREST OF DIRECTORS 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 services in the Bank may also be deemed interested in the remuneration payable to them by the Bank. The nominee directors have interest in the Bank to the extent of representing the sponsors in the Bank. 7.11. ELECTION OF DIRECTORS The Directors of the Bank are elected for a term of 03 years in accordance with the procedure laid down in section 159 of the Companies Act, 2017 and Banking Companies Ordinance, 1962. The Directors shall comply with the provisions of Sections 154 to 159 and Sections 161 and 167 of the Companies Act, 2017 relating to the election of Directors and matters ancillary thereto. Subject to the provisions of the Companies Act, 2017 and Banking Companies Ordinance, 1962, the Bank may from time to time increase or decrease the number of Directors. Any casual vacancy occurring on the Board of Directors may be filled up by the Directors, but the person so appointed shall be subject to retirement at the same time as if he / she had become a Director on the day on which the Director in whose place he / she is chosen was last elected as Director. The Company may remove a Director in accordance with the provisions of the Banking Companies Ordinance, 1962 and the Companies Act, 2017. The present Directors of the Company were elected on April 11, 2017 for a period of 03 years. 7.12. BORROWING POWERS According to article 56 of the Articles of Association of the Bank, the Directors may from time to time raise or borrow any sum or sums of money for the purposes of the Bank provided that such mode of finance is permissible under Islamic Shariah as determined by the Bank’s Shariah Supervisory Board. Page 112 of 127
114. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 7.13. VOTING RIGHTS The Sukuk shall not carry any voting rights in relation to BankIslami. 7.14. INTERNAL AUDIT The Board Audit Committee comprises of the following members: • • • • Dr. Amjad Waheed - Chairman Mr. Ali Mohamad Hussain Ali Mohamad Alshamali - Member Mr. Muhammad Nadeem Farooq - Member Mr. Noman Yakoob - Member 7.15. BOARD HUMAN RESOURCE MANAGEMENT COMMITTEE The Board HR Committee comprises of the following members: • • • • • Mr. Ali Mohamad Hussain Ali Mohamad Alshamali – Chairman Mr. Fawad Anwar – Member Mr. Muhammad Nadeem Farooq - Member Mr. Siraj Ahmed Dadabhoy – Member Mr. Syed Amir Ali – Member 7.16. BOARD REMUNERATION COMMITTEE The Board Remuneration Committee comprises of the following members: • • • • Mr. Ali Mohamad Hussain Ali Mohamad Alshamali – Chairman Mr. Fawad Anwar – Member Mr. Muhammad Nadeem Farooq - Member Mr. Siraj Ahmed Dadabhoy – Member 7.17. BOARD RISK MANAGEMENT COMMITTEE The Board Risk Management Committee comprises of the following members: • • • • Mr. Fawad Anwar – Chairman Mr. Muhammad Nadeem Farooq - Member Mr. Siraj Ahmed Dadabhoy – Member Mr. Syed Amir Ali – Member Page 113 of 127
115. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED PART 8: MISCELLANEOUS INFORMATION 8.1. REGISTERED OFFICE / CENTRAL OFFICE Registered Office Address: 11th Floor, Executive Tower, Dolmen City, Marine Drive, Block 4, Clifton, Karachi, Pakistan Phone: (021)-111-247-111 Fax: (021)-35378373 Email: info@bankislami.com.pk Website: https://bankislami.com.pk 8.2. TRUSTEE Pak Brunei Investment Company Limited Address: Horizon Vista, Commercial 10, Block No.4, Scheme No. 5, Clifton, Karachi. PABX: (92-21) 35361215-19 Fax: (92-21) 35361213, 35370873 Website: www.pakbrunei.com.pk 8.3. AUDITOR OF THE COMPANY M/s. EY Ford Rhodes, Chartered Accountants 8.4. LEGAL ADVISOR TO THE ISSUE Mohsin Tayebaly & Company Address: Dime Centre, Khayaban-e-Iqbal, Block 9, Clifton, Karachi, Sindh, Block 9 Clifton, Karachi Tel: (92-21) 111-682-529 Fax: (92-21) 35870240 Website: http://mtclaw.com.pk 8.5. COMPLIANCE OFFICER Muhammad Shoaib Company Secretary BankIslami Pakistan Limited 14th Floor, Executive Towers, Dolmen City, Block-4, Clifton, Karachi- Pakistan. Tel: +92-21-35839906 Ext. 2112 Fax: +92-21-35372252 8.6. REGISTRAR AND TRANSFER AGENT Central Depository Company of Pakistan Limited Office: CDC House, 99 – B, Block ‘B’, S.M.C.H.S., Main Shahra-e-Faisal, Karachi-74400 UAN: 0800-23275 FAX: (92-21) 34326053 Email: info@cdcpak.com Page 114 of 127
116. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 8.7. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 8.8. BANKERS TO THE ISSUE Allied Bank Limited Askari Bank Limited Bank Alfalah Limited Bank Al Habib Limited BankIslami Pakistan Limited Habib Metropolitan Bank Limited JS Bank Limited MCB Bank Limited Meezan Bank Limited Soneri Bank Limited United Bank Limited CONSULTANT TO THE ISSUE Next Capital Limited Address: 8th Floor, Horizon Tower, Block III, Clifton, Karachi Phone: 111-639-825, 021-35169516 Fax: 021-35292623-21-48 Website: www.nextcapital.com.pk 8.9. DESIGNATED MARKET MAKER JS Global Capital Limited The Center, 17th & 18th Floor, Plot No. 28, S.B.5, Abdullah Haroon Road, Karachi UAN: (+92-21) 111 574 111 Fax: (+92-21) 3280 0167 Website: www.jsgcl.com 8.10. MATERIAL CONTRACTS / DOCUMENTS RELATED TO THE ISSUE 8.10.1. Investor Agreements S. No. 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Pre-IPO Investors National Bank of Pakistan Pakistan International Airlines Limited - Pension Fund Pakistan International Airlines Limited - Provident Fund Pak Qatar Family Takaful Limited Habib Bank Limited Pakistan Security Printing Corporation - Employees Pension Fund United Bank Limited UBL Ameen Pak Arab Fertilizers Employees Gratuity Fund KAPCO Employees Provident Fund Trust Bank Al Habib Limited Anwar Khawaja Industries (Pvt) limited - Employees Provident Fund Pak Qatar Investment (Pvt.) Limited Takaful Pakistan Limited Soneri Bank Limited Zahidjee Employee Contributory Provident Fund Trust Amount (PKR) Date of Agreement 200,000,000 200,000,000 150,000,000 150,000,000 100,000,000 26-Nov-19 26-Nov-19 100,000,000 20-Nov-19 75,000,000 75,000,000 50,000,000 50,000,000 50,000,000 26-Nov-19 26-Nov-19 26-Nov-19 26-Nov-19 29-Nov-19 30,000,000 26-Nov-19 30,000,000 28,000,000 25,000,000 20,000,000 26-Nov-19 26-Nov-19 26-Nov-19 26-Nov-19 26-Nov-19 27-Nov-19 Page 115 of 127
117. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 17 18 19 20 21 22 23 24 25 26 27 28 Pak Qatar General Takaful Limited JS Global Capital Limited Pak Qatar Family Takaful Limited - Employees Provident Fund Dubai Islamic Bank Pakistan Limited - Employees Gratuity Fund Al Baraka Bank (Pakistan) Limited - Staff Provident Fund First Habib Modaraba Sayyed Engineers Limited - Employees Provident Fund Providus Capital (Pvt). Limited Meezan Bank Limited - Staff Gratuity Fund AK Advisers LLP Qatar Group (Pvt.) Limited 45 Individual Investors 20,000,000 20,000,000 26-Nov-19 26-Nov-19 12,800,000 10,000,000 22-Nov-19 10,000,000 5,000,000 5,000,000 5,000,000 5,000,000 2,500,000 1,000,000 270,700,000 14-Nov-19 26-Nov-19 22-Nov-19 26-Nov-19 28-Nov-19 26-Nov-19 26-Nov-19 8.10.2. Underwriting Agreements S. No. 01 02 Underwriters Name Arif Habib Limited Dawood Equities Limited Total Amount (PKR) 250,000,000 50,000,000 300,000,000 Date of Agreement December 5, 2019 December 5, 2019 8.10.3. Other Material Documents S. No. 1 2 3 4 5 6 7 Description Trust Deed between BankIslami Pakistan Limited and Pak Brunei Investment Company Limited Instrument Credit Rating Report by PACRA Entity Credit Rating Report by PACRA Approval of Pakistan Stock Exchange Limited vide letter reference no. PSX/GEN-XXX Approval of the Securities and Exchange Commission of Pakistan vide letter reference no. SMD/CIW/SA-88/XXXX Market Making Agreement between BankIslami Pakistan Limited and JS Global Capital Limited Final Approval of the State Bank of Pakistan vide letter no. BPRD/BA&CP/649/77591/19 Date November 13, 2019 October 08, 2019 October 08, 2019 XX XX October 22, 2019 November 11, 2019 8.11. INSPECTION OF DOCUMENTS AND CONTRACTS All the Balance Sheets and Profit & Loss Accounts, Copies of the Memorandum and the Articles of Association, the Auditor’s Certificates, Trust Deed, the Credit Rating Reports by PACRA, Clearance letter from PSX and the approval letters from SECP, and the copies of agreements referred to in this Prospectus may be inspected during usual business hours on any working day at the registered office of the Bank from the date of publication of this Prospectus until the closing of the Subscription Period. 8.12. LEGAL PROCEEDINGS There are no pending legal proceedings other than those mentioned in note 20.3 of the financials for the period ended September 30, 2019 and note 23 of Annual Report for the year ended December 31, 2018. Page 116 of 127
118. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 8.13. INDEMNITY As per the Article 118 of the Articles of Association, every officer or agent for the time being of the Bank shall be indemnified out of the assets of the Bank against any liability incurred by him in defending any proceedings, whether civil or criminal, arising out of his dealings in relation to the affairs of the Bank, except those brought by the Bank against him in which judgment is given in his favor or which he is acquitted or in connection with any application under section 488 of the Companies Ordinance, 1984 (currently section 492 of the Companies Act, 2017) in which relief is granted to him by Court. 8.14. CAPITALIZATION OF RESERVES There has been no capitalization of reserves. 8.15. REVALUATION OF FIXED ASSETS During the year 2018, the Bank's freehold land and buildings on leasehold land were revalued by M/s. Harvester Services (Pvt.) Ltd., Gandhara Consultants (Pvt.) Ltd. and Akbani & Javed Associates on the basis of their professional assessment of the present market value. As a result of revaluation, the market value of freehold land and buildings on leasehold land were determined at Rs. 4,565.588 million. Revaluation surplus on fixed assets as per audited unconsolidated financial statements for the period ended December 31, 2018 is PKR 1,480 million while for the period ended September 30, 2019, the surplus was PKR 1,590 million. 8.16. MEMORANDUM OF ASSOCIATION The Memorandum of Association, inter alia, contains the objects for which BankIslami was incorporated and the business which BankIslami is authorized to undertake. A copy of the Memorandum of Association annexed to this Prospectus is being published with all issues hereof except those released as newspaper advertisement. 8.17. INVESTMENT IN SUBSIDIARY AND ASSOCIATED COMPANIES The Bank has investments in following subsidiaries and associated companies: Name of Subsidiary / Associated Company BankIslami Modaraba Investments Limited BIPL Securities Limited My Solutions Corporation Limited Structured Ventures (Private) Limited KASB Funds Limited New Horizon Exploration and Production Limited Shakarganj Food Products Limited KASB Capital Limited Percentage Held 100% 77.12% 100% 77.12% 43.89% 20.00% 36.38% 21.78% Page 117 of 127
119. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED PART 9: APPLICATION AND ALLOTMENT INSTRUCTIONS 9.1. ELIGIBLE INVESTORS Eligible Investors include: a) Pakistani citizens resident in or outside Pakistan or persons holding dual 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. 9.2. COPIES OF THE PROSPECTUS Copies of the Prospectus and applications forms can be obtained from the Trading Rights Entitlement Certificate (TREC) Holders of PSX, the Bankers to the Issue and their Branches, the Consultant to the issue and the registered office of the BankIslami Pakistan Limited. The Prospectus and the Application Forms can also be downloaded from the following websites: http://nextcapital.com.pk/, https://bankislami.com.pk and https://eipo.cdcaccess.com.pk/ The applicants are required to complete the relevant sections of the application in order to get the Securities in scrip-less form. In accordance with the provisions of the Central Depositories Act, 1997 and the CDCPL Regulations, credit of such securities is allowed ONLY in the applicant’s own CDC account. 9.3. 9.4. 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 PAKISTANI (NICOP) OR PASSPORT, BOTH THE SIGNATURES SHOULD BE AFFIXED ON THE APPLICATION FORM. 9.5. APPLICATIONS MADE BY INDIVIDUAL INVESTORS a) In case of individual investors, a photocopy of the CNIC (in case of resident Pakistanis) / NICOP or Passport (in case of non-resident Pakistanis) as the case may be, should be enclosed and the number of CNIC / NICOP / Passport should be written against the name of the applicant. b) Original CNIC / NICOP / Passport, along with a photocopy, must be produced for verification to the Banker to the issue and the applicant’s banker (if different from the Banker to the issue) at the time of presenting an application. The photocopy will, after verification, be retained by the branch along with the application. Page 118 of 127
120. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 9.6. APPLICATIONS MADE BY INSTITUTIONAL INVESTORS a) Applications made by companies, corporate bodies, mutual funds, provident / pension / gratuity funds / trusts and other legal entities must be accompanied by a 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. b) Photocopies of the documents mentioned in paragraph (a) above must be produced for verification to the Banker to the Issue and the applicant’s banker (if different from the banker to the issue) at the time of presenting the application. The copies, will after verification, be retained by the bank branch along with the application. 9.7. ADDITIONAL INSTRUCTIONS FOR INVESTORS a) Only one application will be accepted against each account, however, in case of joint accounts, one application may be submitted in the name of each joint account holder. Joint application in name of more than two persons will not be accepted. In case of joint application each applicant must sign the application form and submit copies of their CNICs / NICOP / Passports. The securities 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 application will be considered as a single application for the purpose of allotment of securities. 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 Issue in favor of “IPO of BankIslami Pakistan Limited - Sukuk” and crossed “A/C PAYEE ONLY”. For the application made through pay order / bank draft, it would be permissible for a Banker to the Issue to deduct the bank charges while making refund of subscription money to unsuccessful applicants through pay order / bank draft individually for each application. 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 securities. Applications are not to be made by minors and / or persons of unsound mind. Applicants should ensure that the bank branch, to which the application is submitted, completes the relevant portion of the application form. Applicants should retain the bottom portion of their application forms as provisional acknowledgment 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 securities for which the application has been made. 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. Banker to the issue 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 issue. It would be permissible for a Banker to the issue 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. b) c) d) e) f) g) h) i) j) k) Page 119 of 127
121. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED l) Submission of false and fictitious applications is prohibited, and such Application Money may be forfeited under section 87(8) of Securities Act, 2015. 9.8. ADDITIONAL INSTRUCTIONS FOR FOREIGN / NON-RESIDENT INVESTORS a) 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 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 applications. Copies of these documents can be attested by the Bank Manager in the country of applicant’s residence. b) Foreign / Non-resident investors should follow the payment instructions given in para 2.13 of the prospectus. 9.9. BASIS OF ALLOTMENT The basis and conditions of transfer of securities to the General Public shall be as follows: a) The minimum amount of application for subscription of Sukuk is Rs. 5,000/- Application for Sukuk below the total value of Rs. 5,000/- shall not be entertained. b) Application for Sukuk must be made for Rs. 5,000/- Sukuk or in multiple thereof only. Applications, which are neither for Rs. 5,000/- Sukuk nor for multiple thereof, shall be rejected. c) Allotment/Transfer of Sukuk to successful applicants shall be made in accordance with the allotment criteria/ instructions disclosed in the Prospectus. d) Allotment of Sukuk shall be subject to scrutiny of applications in accordance with the criteria disclosed in the Prospectus 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 Issuer will credit the respective CDS accounts of the successful applicants. 9.10. BANKERS TO THE ISSUE 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Allied Bank Limited Askari Bank Limited Bank Alfalah Limited Bank Al Habib Limited BankIslami Pakistan Limited Habib Metropolitan Bank Limited JS Bank Limited MCB Bank Limited Meezan Bank Limited Soneri Bank Limited United Bank Limited Page 120 of 127
122. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED 9.11. CODE OF OCCUPATIONS Code 01 02 03 04 05 Occupation Business Business Executive Service Housewife Household Code 06 07 08 09 10 Occupation Professional Student Agriculturist Industrialist Other 9.12. PUBLIC SUBSCRIPTION THROUGH E-IPO e-IPO is submission of application for subscription of securities electronically through internet, Automated Teller Machines (ATM) and mobile phones. In order to facilitate the public during IPOs, SECP has introduced the concept of e-IPO. The following two systems are available for e-IPOs: (i) Centralized e-IPO System (CES): The Central Depository Company of Pakistan Limited (CDC) has developed a Centralized e-IPO System (CES) through which applications for subscription of securities offered to the general public can be made electronically. CES has been made available in this IPO and can be accessed through the web link (www.cdceipo.com). Payment of subscription money can be made through 1LINK’s member banks available for CES, list of which is available on above website. For making application though CES, investors must be registered with CES. Registration with CES is free of cost and a self-registration process by filling the CES registration form, which is available 24/7 all around the year. Investors who have valid Computerized National Identity Card (CNIC), bank account with any of the commercial bank, email address, mobile phone number and CDS Account (Investor Account or sub Account) may registered themselves with CES. Investors who do not have CDS account may visit www.cdcpakistan.com for information and details. For further guidance and queries regarding CES and opening of CDS account, investors may contact CDC at phone Number: 0800 – 23275 (CDCPL) and e-mail: info@cdcpak.com For further detail on CES, please refer to para 2.10. (ii) e-IPO facilities by Bankers to the Issue: United Bank Limited (UBL) is providing e-IPO facility to its accountholders for this IPO. UBL account holders can use UBL Net Banking to submit their application via link http://www.ubldirect.com/corporate/ebank 9.13. NATIONALITY CODE Code 001 002 003 004 005 Name of Country U.S.A. U.K. U.A.E. K.S.A. Oman Code 006 007 008 009 Name of Country Bangladesh China Bahrain Other Page 121 of 127
123. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED PART 10: SIGNATORIES TO THE PROSPECTUS Name Designation Mr. Ali Hussain Chairman Mr. Fawad Anwar Signature -sd- Vice Chairman -sd- Mr. Syed Amir Ali President and CEO Mr. Ali Mohamad Hussain Ali Mohamad Alshamali Independent Director Dr. Amjad Waheed Independent Director Mr. Muhammad Nadeem Farooq Non-Executive Director Mr. Noman Yakoob Mr. Siraj Ahmed Dadabhoy -sd- -sd- -sd- -sd- Non-Executive Director -sd- Non-Executive Director -sd- Signed by the above in the presence of following witnesses: Witness 1 Witness 1 -sd_____________________________ Name: Designation: CNIC: -sd_____________________________ Name: Designation: CNIC: Date: DD/MM/2019 Page 122 of 127
124. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED PART 11: MEMORANDUM OF ASSOCIATION Page 123 of 127
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126. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED Page 125 of 127
127. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED PART 12: APPLICATION FORM Page 126 of 127
128. EHAD SUKUK PROSPECTUS | BANKISLAMI PAKISTAN LIMITED APPLICATION AND ALLOTMENT INSTRUCTIONS ELIGIBLE INVESTORS INCLUDE a. Pakistani citizens resident in or outside Pakistan or Persons holding dual 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. 2. COPIES OF THE PROSPECTUS Copies of the Prospectus and application form can be obtained from the Trading Right Entitlement Certificate (TREC) holders of Pakistan Stock Exchange, the Bankers to the Issue and their Branches, the Consultant to the Issue and the central office of BankIslami Pakistan Limited. The Prospectus and the Application Form can also be downloaded from the websites: www.psx.com.pk, https://bankislami.com.pk/, www.nextcapital.com.pk and https://eipo.cdcaccess.com.pk/public/index.xhtml 3. The applicants are required to complete the relevant sections of the application in order to get the Sukuk Certificates in scrip-less form. In accordance with provisions of the Central Depositories Act, 1997 and the CDC Regulations, credit of such Sukuk Certificates is allowed ONLY in the applicant’s own CDC Account. 4. NAME(S) AND ADDRESSES MUST BE WRITTEN IN FULL BLOCK LETTERS, IN ENGLISH AND SHOULD NOT BE ABBREVIATED. 5. 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. 6. APPLICATIONS MADE BY INDIVIDUAL INVESTORS i. In case of individual investors, a photocopy of the CNIC (in case of resident Pakistanis) / NICOP or Passport (in case of non-resident Pakistanis) as the case may be, should be enclosed and the number of CNIC/ NICOP / Passport should be written against the name of the applicant. ii. Original CNIC/NICOP/Passport, along with a photocopy, must be produced for verification to the Banker to the Issue and the applicant’s banker (if different from the Banker to the Issue) at the time of presenting an application. The photocopy will, after verification, be retained by the branch along with the application. 7. 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 a 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. ii. Photocopies of the documents mentioned in 7(i) must be produced for verification to the Banker to the Issue and the applicant’s banker (if different from the Banker to the Issue) at the time of presenting the application. The attested copies, will after verification, be retained by the bank branch along with the application. 8. ADDITIONAL INSTRUCTIONS FOR INVESTORS i. Only one application will be accepted against each applicant, however, in case of joint account, one application may be submitted in the name of each joint account holder. ii. 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/NICOPs/Passport. The Sukuk Certificates 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 securities. iii. 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 Issue in favor of A/C “IPO of BankIslami Pakistan Limited - Sukuk” and crossed “A/C PAYEE ONLY”. iv. For the application made through pay order/bank draft, it would be permissible for a Banker to the Issue to deduct the bank charges while making refund of subscription money to unsuccessful applicants through pay order/bank draft individually for each application. v. 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 securities. vi. Applications are not to be made by minors and/or persons of unsound mind. vii. Applicants should ensure that the bank branch, to which the application is submitted, completes the relevant portion of the application form. viii. 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 Sukuk Certificates for which the application has been made. ix. 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. x. Bankers to the Issue 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 Issue. xi. It would be permissible for a Banker to the Issue 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. xii. Submission of false and fictitious applications is prohibited, and such applications’ money may be forfeited under section 87(8) of the Securities Act, 2015. 1. 9. ADDITIONAL INSTRUCTIONS FOR FOREIGN / NON-RESIDENT INVESTORS 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. ii. Foreign / Non-resident applicants should follow payment instructions given in Section 2.13 of the Prospectus. 10. BASIS OF ALLOTMENT The basis and conditions of transfer of Sukuk Certificates to the General Public shall be as follows: i. The minimum value of application for subscription of a Sukuk Certificate is PKR 5,000/-. Application for amount below the minimum value shall not be entertained. ii. Application for Sukuk Certificates must be made for Rs. 5,000 Sukuk Certificates or in multiple thereof only. Applications, which are neither for Rs. 5,000 Sukuk Certificates nor for multiple thereof, shall be rejected. iii. Allotment / transfer of Sukuk Certificates to successful applicants shall be made in accordance with the allotment criteria / instructions disclosed in the Prospectus. iv. Allotment of Sukuk Certificates shall be subject to scrutiny of applications in accordance with the criteria disclosed in the Prospectus and / or the instructions by the Securities & Exchange Commission of Pakistan. v. 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. vi. The Issuer will credit the respective CDS accounts of the successful applicants. i. 11. CODE OF BANKERS TO THE ISSUE Code No. 01 02 03 04 05 06 12. Code No. 07 08 09 10 11 Bank JS Bank Limited MCB Bank Limited Meezan Bank Limited Soneri Bank Limited United Bank Limited (providing e-ipo services) CODE OF OCCUPATIONS Code No. 01 02 03 04 05 13. Bank Allied Bank Limited Askari Bank Limited Bank Alfalah Limited Bank Al Habib Limited BankIslami Pakistan Limited Habib Metropolitan Bank Limited Occupation Business Business Executive Service Housewife Household Code No. 06 07 08 09 10 Occupation Professional Student Agriculturist Industrialist Others PUBLIC SUBSCRIPTION THROUGH e-IPO e-IPO is submission of application for subscription of securities electronically through internet, Automated Teller Machines (ATM) and mobile phones. In order to facilitate the public during IPOs, SECP has introduced the concept of e-IPO. The following two systems are available for e-IPOs: (i) Centralized e-IPO System (CES): The Central Depository Company of Pakistan Limited (CDC) has developed a Centralized e-IPO System (CES) through which applications for subscription of securities offered to the general public can be made electronically. CES has been made available in this IPO and can be accessed through the web link www.cdceipo.com. Payment of subscription money can be made through 1LINK’s member banks available for CES, list of which is available on above website. For making application though CES, investors must be registered with CES. Registration with CES is free of cost and a self-registration process by filling the CES registration form, which is available 24/7 all around the year. Investors who have valid Computerized National Identity Card (CNIC), bank account with any of the commercial bank, email address, mobile phone number and CDS Account (Investor Account or sub Account) may register themselves with CES. Investors who do not have CDS account may visit www.cdcpakistan.com for information and details. For further guidance and queries regarding CES and opening of CDS account, investors may contact CDC at phone Number: 0800 – 23275 (CDCPL) and e-mail: info@cdcpak.com. (ii) e-IPO facilities by Bankers to the Issue: In order to facilitate investors, United Bank Limited (“UBL”) is providing the facility of electronic submission of application (e-IPO) to their account holders. United Bank Limited account holders can use UBL net banking to submit their application via link http://www.ubldirect.com/corporate/ebank. Further, please note that online applications can be submitted 24 hours a day during the subscription period which will close at midnight on XX, 2019. 14. NATIONALITY CODE Code 001 002 003 004 005 Name of Country U.S.A U.K U.A.E K.S.A Oman Code 006 007 008 009 Name of Banks Bangladesh China Bahrain Other For further queries you may contact: Next Capital Limited - Ms. Humaira Asad P: +92 21 35222207; E: humaira.asad@nextcapital.com.pk BankIslami Pakistan Limited – Ms. Syeda Sadaf Munawar P: 111 247 111 (Ext. 3833), E: sadaf.munawar@bankislami.com.pk Page 127 of 127