ADVICE FOR INVESTORS. Allied Bank Limited. Offer for Sale of Shares

Transcription

1 ADVICE FOR INVESTORS ELIGIBLE INVESTORS SHALL NOT PLACE CONSOLIDATED BIDS. A BID APPLICATION WHICH IS BENEFICIALLY PLACED (FULLY OR PARTIALLY) BY PERSONS OTHER THAN THE ONE NAMED THEREIN SHALL BE DEEMED TO BE A CONSOLIDATED BID. INVESTORS ARE STRONGLY ADVISED IN THEIR OWN INTEREST TO CAREFULLY READ THE CONTENTS OF THIS OFFER FOR SALE DOCUMENT ( OFSD ), ESPECIALLY THE RISK FACTORS GIVEN AT PARA 5.5 BEFORE MAKING ANY INVESTMENT DECISION A SINGLE INVESTORCANNOT SUBMIT MORE THAN ONE BIDDING APPLICATION EXCEPT IN THE CASE OF REVISION OF A BID. IF AN INVESTOR SUBMITS MORE THAN ONE BIDDING APPLICATION THEN ALL SUCH APPLICATIONS SHALL BE SUBJECT TO REJECTION AND SUCH INVESTOR S APPLICATION MONEY SHALL BE LIABLE TO CONFISCATION UNDER SECTION 18A OF THE SECURITIES AND EXCHANGE ORDINANCE, ADDITIONALLY, MAKING OF CONSOLIDATED BIDDING APPLICATION IS ALSO PROHIBITED AND SHALL BE SUBJECT TO REJECTION. PLEASE NOTE THAT THIS IS AN OFSD FOR BOOK BUILDING AND DOES NOT CONTAIN A FLOOR PRICE FOR THE OFFER. FOR AVOIDENCE OF DOUBT THERE WILL BE NO SUBSEQUENT OFFER FOR SALE DOCUMENT AND THE FLOOR PRICE AFTER APPROVAL BY THE PC BOARD & CCoP WILL BE NOTIFIED THROUGH ANNOUCEMENT BY STOCK EXCHANGES AND/OR PLACED ON THEIR WEBSITES AND/OR ON THE WEBSITES OF ELIXIR SECURITIES PAKISTAN (PVT.) LTD, MCB BANK LTD AND AKD SECURITIES LTD. AFTER CLOSE OF MARKET HOURS ON DECEMBER 09, 2014 Allied Bank Limited Offer for Sale of Shares THE PRESENT OFFER CONSISTS OF 131,275,073 ORDINARY SHARES REPRESENTING 11.5% OF THE TOTAL PAID UP SHARE CAPITAL OF ALLIED BANK LIMITED AT A FLOOR PRICE WHICH SHALL BE AT A PREMIUM TO THE PAR VALUE OF PKR 10/- PER SHARE (THE OFFER ) THE OFFER IS BEING MADE THROUGH THE BOOK BUILDING ONLY TO THE INSTITUTIONAL INVESTORS AND HIGH- NETWORTH INDIVIDUAL INVESTORS BIDDING PERIOD DATE: DECEMBER 10 TH & 11 TH, 2014 FROM 9:00 AM TO 5:00 PM* *PLEASE NOTE THAT BIDS CAN BE ENTERED INTO THE SYSTEM TILL 5:00 PM BUT CAN BE REVISED TILL 7:00 PM ON THE LAST DAY AND CAN ONLY BE WITHDRAWN TILL 5:00 PM THIS IS NOT A PROSPECTUS BY ALLIED BANK LIMITED (THE BANK ) BUT AN OFFER FOR SALE BY THE GOVERNMENT OF PAKISTAN, PRIVATISATION DIVISION OF THE MINISTRY OF FINANCE, REVENUE, ECONOMIC AFFAIRS, STATISTICS AND PRIVATIZATION ACTING THROUGH THE PRIVATISATION COMMISSION (THE OFFERER ) FOR THE SALE OF GOVERNMENT OF PAKISTAN S RESIDUAL SHAREHOLDING IN THE BANK Joint Lead Managers Joint Book Runners The date of publication of this Offer for Sale Document is December 05, 2014 Ahmed Rajani P: E: arajani@elixirsec.com For further queries you may contact: Jawad Taj Mohammad Yasir Khan P: P: E: jawad.taj@mcb.com.pk E: yasir.khan@akdsecurities.net

2 STATEMENT ON OFFERER S ABSOLUTE RESPONSIBILITY: The Offerer, having made all reasonable inquiries, accepts responsibility for the disclosures made in this OFSD and confirms that: This OFSD contains all necessary information with regards to the Bank, the Offerer and the Offer, which is material in the context of the Offer and nothing has been concealed; The information contained in this OFSD is materially true and correct to the best of our knowledge and belief; The opinions and intentions expressed herein are honestly held; and There are no other facts, the omission of which makes this document as a whole or any part thereof misleading. For and on behalf of the Offerer, -sd- Sardar Ahmad Nawaz Sukhera Additional Secretary (Incharge) Privatisation Division, Ministry of Finance, Revenue, Economic Affairs, Statistics & Privatisation Government of Pakistan

3 GLOSSARY OF TECHNICAL TERMS & ABBREVIATIONS AKD AKD Securities Ltd ABL / Bank Allied Bank Limited ALCO Assets and Liability Management Committee BOD Board of Directors CCoP Cabinet Committee on Privatisation CDA Central Depositories Act, 1997 CDC/CDCPL The Central Depository Company of Pakistan Limited CDS Central Depository System CGT Capital Gains Tax CNIC Computerized National Identity Card Commission / SECP Securities and Exchange Commission of Pakistan CVT Capital Value Tax EBTDA Earnings before Taxes, Depreciation & Amortization ES Elixir Securities Pakistan (Pvt.) Limited FDI Foreign Direct Investment FED Federal Excise Duty GMT Greenwich Mean Time GoP Government of Pakistan ISE Islamabad Stock Exchange Limited IRR Internal Rate of Return ITO Income Tax Ordinance, 2001 JBR Joint Book Runner JLM Joint Lead Manager KSE Karachi Stock Exchange Limited LSE Lahore Stock Exchange Limited MCB MCB Bank Limited NPL Non-Performing Loan OFS/OFSD Offer for Sale/Offer for Sale Document Ordinance The Companies Ordinance, 1984 PACRA The Pakistan Credit Rating Agency Limited PC Privatisation Commission PKR Pakistan Rupee PST Pakistan Standard Time (GMT + 05:00 hours) SBP SCRA Stock Exchanges TFC WHT WWF WPPF YoY State Bank of Pakistan Special Convertible Rupee Account ISE, KSE and LSE (collectively referred to as Stock Exchanges ) Term Finance Certificate Withholding Tax Worker s Welfare Fund Worker s Profit Participation Fund Year on Year

4 DEFINITIONS Application Money Bid Bidder Bid Amount Bid Collection Center Bid Application Bidding Form Bidding Period Book Building Book Building Account Dutch Auction Method The total amount of money payable by a successful bidder which is equivalent to the product of the Strike Price and the number of shares to be allocated. Refer to 2.2 for illustrations An indication to make an offer during the Bidding Period by a bidder to subscribe to the Ordinary Shares of Allied Bank Limited at or above the Floor Price, including all the revisions thereto Eligible Investor who makes a Bid pursuant to the terms of the OFSD and the Bidding Form The total amount of the Bid which is equivalent to the product of the bid price and the number of shares bid for. Refer to 2.2 for illustrations Pre-determined places where the applications for bidding are collected by the Joint Book Runners on behalf of the Offerer and it may include offices and branches of Joint Book Runners or branches of Scheduled Banks. For the purpose of this Offer they are defined in Section 2.3 Bidding Form duly filled and submitted by the Bidder The form prepared by the Offerer for the purpose of making bids which will be considered as the application for subscription of Ordinary Shares The period during which bids for subscription of shares of the Bank will be made by Eligible Investors. The Bidding Period commences on December 10, 2014 at 09:00 AM and closes at 05:00 PM on December 11, The Bidding time both days will be from 9:00 AM to 5:00 PM. On December 11, 2014, no new Bids shall be collected after 05:00 PM. The Bid(s) received shall be entered into the KSE System till 05:00 PM and no new Bid(s) including those received at the Bid Collection Centres shall be entered into the KSE System after 05:00 PM. Online revision will, however, be allowed to the bidders till 07:00 PM on the last day. A mechanism of price determination through which indication of interest for subscription of shares offered by the Offerer is collected from the Eligible Investors. Through this process a book is built which gives an idea of demand for the shares at different price levels. The Strike Price is determined based on the price at which demand for shares at the end of book building period is sufficient for the subscription of the shares offered. The Strike Price is approved by the PC Board and the CCoP. Account(s) opened by the Offerer with the Collection Bank(s). The Bidder will pay the Margin Money/Bid Amount through demand draft or pay order only, in favor of this account as per the instructions given in paragraph 2.9 and the balance of the Application Money, if any, shall be paid through this account after successful allocation of shares under Book Building. The method through which the Strike Price is determined. Under this method, all bids are arranged in descending order, in terms of price offered per share, along with the numbers of shares bid for at each price level and the cumulative number of shares bid for. The Strike Price is then determined by estimating the maximum price at which all the shares the Offerer intends to offer through the Book Building process are subscribed.

5 Eligible Investor(s) Floor Price High Net worth Individual ( HNWI ) Institutional Investor JBR JLM KSE System Legal Advisor Limit Bid Limit Price Market Hours Margin Money Both Institutional Investor and HNWI as defined below The minimum price set by the Offerer for the Offer for sale of Shares. This will be notified through announcement through the Stock Exchanges and/or placed on their websites and on the websites of JBRs after close of Market hours on December 09, 2014 after approval of PC Board and the CCoP. A bid placed below the Floor Price will not be entertained by the JBRs Individual investor who places a Bid of at least the Minimum Bid Size of PKR 500,000/- 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) who place a Bid of at least the Minimum Bid Size Elixir Securities Pakistan (Pvt.) Limited and AKD Securities Limited being the Joint Book Runners in relation to the Offer Elixir Securities Pakistan (Pvt.) Limited, MCB Bank Limited and AKD Securities Limited being the Joint Lead Managers in relation to the Offer A Book Building software employed by the KSE for displaying the live pricedemand position of the Offer. The software has been commonly used for previous equity offerings in Pakistan Mohsin Tayebaly & Company The Bid for a specified number of shares at the Limit Price The maximum price a prospective Eligible Investor(s) is willing to pay for a share under the Book Building process The daily trading hours of the Stock Exchanges (Mon-Thurs: 09:30 AM PST to 3:30 PM, Friday: 09:15 AM to 12:00 PM and 02:30 PM to 04:30 PM) The partial or total Bid Amount, as the case may be, paid by a Bidder at the time of making a Bid Minimum Bid Size Bid of amount not less than PKR 500,000/- Offer Offer is defined in Section 2.1 Offer Price Offerer OFSD The Strike Price determined through the Book Building process and duly approved by the PC Board and CCoP The Government of Pakistan, Privatisation Division of the Ministry of Finance, Revenue, Economic Affairs, Statistics and Privatization acting through the Privatisation Commission The OFSD containing all the information and disclosures as required under the Companies Ordinance, 1984, and Listing Regulation of the Stock Exchanges approved by the Commission under section 62 read with section 61 and 57(1) of the Companies Ordinance, 1984 and circulated amongst the Eligible Investors for bidding of shares through the Book Building Process

6 Ordinary Shares PC Board Privatisation Step Bid Strike Price Ordinary Shares of ABL having par value of PKR 10/- each unless otherwise specified in the context thereof PC Board shall have the meaning assigned to the Board in the Privatisation Ordinance, 2000 Privatisation shall have the meaning assigned to the same in the Privatisation Ordinance, 2000 Step Bid means a series of limit bids at increasing prices. In case of step bid the amount of any step shall not be less PKR 125,000/- The price of share determined/discovered on the basis of Book Building process in the manner provided in the Rule Book titled Listing of Companies and Securities Regulation of the Karachi Stock Exchange Limited, Listing Regulation of Lahore Stock Exchange Limited and Islamabad Stock Exchange Limited. The shares are offered to successful bidders i.e. institutional investors and HNWI at this price, subject to approval of the PC Board and the CCoP

7 Contents 1. Approvals of the Stock Exchanges and Securities & Exchange Commission of Pakistan Approval of the Securities & Exchange Commission of Pakistan Clearance of the Offer for Sale Document by the Stock Exchanges Filing Of the OFSD and Other Documents with the Registrar of Companies Listing on the Stock Exchanges Statement by the Offerer Statement by the Bank Book Building Procedure Brief Offer Structure Book Building Procedure Role and Functions of Joint Lead Managers & Book Runners Opening and Closing of the Bidding Period Eligibility to Participate In Bidding Information for Bidders Bidding Form and Procedure for Bidding Bank Account for Book Building Payment into the Book Building Account Payment by Foreign Investors Revision of Bids by the Bidder Rejection of Bids by the Book Runner Withdrawal of Bids by the Bidder Withdrawal of Offer by the Offerer Mechanism for Determination of Strike Price Basis of Allocation of Shares Refund of Margin Money Bid Collection Centers Exemptions Statement by Joint Lead Managers Statement by Joint Book Runners Share Capital and Related Matters Share Capital as at 30 September Offerer Offer for Sale through Book Building Opening and Closing of the Book Building Refund of Subscription Money to Unsuccessful Applicants Credit and Transfer of Share Certificates under Book Entry System Shares Issued In Preceding Years Principal Purpose for the Offer for Sale of Shares Interest of Shareholders Dividends Eligibility for Dividend Deduction of Zakat Capital Gains Tax Withholding Tax on Dividends Income Tax Deferred Taxation Sales Tax on Sale/Purchase of Shares

8 3.18 Capital Value Tax ( CVT ) On Purchase of Shares Tax Credit for Investment in Shares acquired through Privatisation Justification for the Premium Underwriting, Commissions, Brokerage and Other Expenses Underwriting Buy back/repurchase agreement Commission to the Bankers to the Offer Brokerage Expenses to the Offer History and Prospects The Bank The Sponsors Product & Services Demand Outlook & Future Prospects Risk Factors Financial Information Auditors Report Share Break-Up Value Certificate Auditors Certificate on Issued, Subscribed, And Paid-Up-Capital of the Bank Unaudited Financial Statements for September 30, Significant Financial Information for the Last 5 Years Board and Management Board of Directors of the Bank Overdue Loans Dividend Record of Associated Companies - Listed On Stock Exchange(s) Dividend Payout by Listed Companies in which the Bank s Directors hold Directorship Profiles of Directors Management Profiles Number of Directors Qualification of Directors Remuneration of the Directors Remuneration for Extra Service Benefits to the Promoters and Officers Interest of Directors Interest of Directors in Property Acquired By the Bank Appointment of Chief Executive/President Appointment/Election of Directors Voting Rights Board Audit Committee and Board Human Resources & Compensation Committee Internal Audit Borrowing Powers Powers of Directors Indemnity Investment in Associated Companies Investment in Subsidiaries Miscellaneous Information

9 8.1 Registered Office Head Office Company Secretary Auditors of the Bank Legal Advisor of the Bank Legal Counsel to the Offer Share Registrar Bankers to the Offer Joint Lead Managers Joint Book Runners Material Contracts / Documents Inspection of Documents and Contracts Legal Proceedings Memorandum of Association Revaluation of Assets Financial Year of the Bank Capitalization of Profits Dividend History of the Bank Bid Application and Allocation Instructions Signatories Signatory to the OFSD Memorandum of Association of Allied Bank Limited Bid Application Forms / Bidding Forms

10 1. Approvals of the Stock Exchanges and Securities & Exchange Commission of Pakistan 1.1 Approval of the Securities & Exchange Commission of Pakistan Approval of the Securities & Exchange Commission of Pakistan (the "Commission" or "SECP") as required under Section 62 read with sections 61 and 57 of the Companies Ordinance, 1984 (the "Ordinance") has been obtained for the issue, circulation and publication of this Offer for Sale Document ( OFSD ). DISCLAIMER: IT MUST BE DISTINCTLY UNDERSTOOD THAT IN GIVING THIS APPROVAL, SECP DOES NOT TAKE ANY RESPONSIBILITY FOR THE FINANCIAL SOUNDNESS OF THE BANK AND ANY OF ITS SCHEMES STATED HEREIN OR FOR THE CORRECTNESS OF ANY OF THE STATEMENTS MADE OR OPINIONS EXPRESSED HEREIN. SECP HAS NOT EVALUATED THE QUALITY OF THE OFFER AND SECP S APPROVAL FOR ISSUANCE, CIRCULATION AND PUBLICATION OF OFSD SHOULD NOT BE CONSTRUED AS ANY COMMITMENT OF THE SAME. THE PUBLIC/INVESTORS SHOULD CONDUCT THEIR OWN INDEPENDENT DUE DILIGENCE AND ANALYSIS REGARDING THE QUALITY OF THE OFFER BEFORE SUBSCRIBING. 1.2 Clearance of the Offer for Sale Document by the Stock Exchanges The OFSD has been cleared by Karachi Stock Exchange Limited ( KSE ), Lahore Stock Exchange Limited ( LSE ) and Islamabad Stock Exchange Limited ( ISE ), in accordance with the requirements of the Rule Book titled Listing of Companies and Securities Regulation of KSE and the Listing Regulations of LSE and ISE respectively. THE STOCK EXCHANGES HAVE NOT EVALUATED THE QUALITY OF THE OFFER INCLUDING THE JUSTIFICATION OF PREMIUM, AND THEIR CLEARANCE OF THE OFSD SHOULD NOT BE CONSTRUED AS ANY COMMITMENT IN RESPECT OF THE SAME. THE PUBLIC/INVESTORS SHOULD CONDUCT THEIR OWN INDEPENDENT INVESTIGATION AND ANALYSIS REGARDING THE QUALITY OF THE OFFER BEFORE SUBSCRIBING. THE PUBLICATION OF THIS OFSD DOES NOT REPRESENT SOLICITATION BY THE STOCK EXCHANGES. THE CONTENT OF THIS OFSD DOES NOT CONSTITUTE AN INVITATION TO INVEST IN SHARES OR SUBSCRIBE FOR ANY SECURITIES OR OTHER FINANCIAL INSTRUMENT BY THE STOCK EXCHANGES, 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 THE STOCK EXCHANGES. IT IS CLARIFIED THAT INFORMATION IN THIS OFSD SHOULD NOT BE CONSTRUED AS ADVICE ON ANY PARTICULAR MATTER BY THE STOCK EXCHANGES AND MUST NOT BE TREATED AS A SUBSTITUTE FOR SPECIFIC ADVICE. 10

11 THE STOCK EXCHANGES DISCLAIM ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWEVER ARISING FROM OR IN RELIANCE UPON THIS OFSD TO ANY ONE, ARISING FROM ANY REASON, INCLUDING, BUT NOT LIMITED TO, INACCURACIES, INCOMPLETENESS AND / OR MISTAKES, FOR DECISIONS AND / OR ACTIONS TAKEN, BASED ON THIS OFSD. THE STOCK EXCHANGES NEITHER TAKE RESPONSIBILITY FOR THE CORRECTNESS OF CONTENTS OF THIS OFSD NOR THE ABILITY OF THE BANK TO FULFILL ITS OBLIGATIONS THERE UNDER. ADVICE FROM A SUITABLY QUALIFIED PROFESSIONAL SHOULD ALWAYS BE SOUGHT BY INVESTORS IN RELATION TO ANY PARTICULAR INVESTMENT. 1.3 Filing Of the OFSD and Other Documents with the Registrar of Companies The Offerer has filed with the Registrar, Companies Registration Office, as required under Section 57 (3) and (4) of the Companies Ordinance 1984, a copy of this OFSD signed on behalf of the Offerer, along with the following documents attached thereto: a) Letter dated December 01, 2014 from Ernst & Young Ford Rhodes Sidat Hyder, Chartered Accountants (Auditors of the Bank) providing consent for publication of its name in the OFSD. Ernst & Young Ford Rhodes Sidat Hyder has issued certain statements contained in Part 6 of the OFSD as required under Section 57 (5) of the Ordinance (for which consent has not been withdrawn). b) Written confirmations from the Legal Advisor and Banker to the Offer, mentioned in this OFSD to act in their respective capacities, as required under Section 57 (5) of the Ordinance. c) Consents of Directors, Chief Executive and the Company Secretary of the Bank with regards to their respective appointments and publication of their names and roles such as Directors, Chief Executive and the Company Secretary in this OFSD, as required under Section 57 (3) of the Ordinance, read with sub-clause (1) of Clause (4) of Section 1 of Part 1 of the Second Schedule to the Ordinance. 1.4 Listing on the Stock Exchanges The Bank is already listed on all the three Stock Exchanges of the country namely KSE, LSE and ISE. The closing price of the Bank s share as on December 05, 2014 was PKR per share. The maximum price during last one year was PKR per share (on June 30, 2014) with an all-time high of PKR per share (as on February 26, 2008). 11

12 1.5 Statement by the Offerer The General Manager, Karachi Stock Exchange Limited, Stock Exchange Building, Stock Exchange Road, Karachi. The General Manager, Lahore Stock Exchange Limited, Lahore Stock Exchange Building, 19, Khayaban-e-Aiwan-e-Iqbal, Lahore. The General Manager, Islamabad Stock Exchange Limited, ISE Towers, 55-B, Jinnah Avenue, Islamabad. On behalf of the Offerer, we confirm that all material information as required, unless exempted, under the Companies Ordinance, 1984 and the Listing Regulations of the Stock Exchanges has been disclosed in the Offer for Sale Document and that whatever is stated in the Offer for Sale Document and the supporting documents is true and correct to the best of our knowledge and belief and that nothing has been concealed. For and on behalf of Offerer, -sd- Sardar Ahmad Nawaz Sukhera Additional Secretary (Incharge) Privatisation Division, Ministry of Finance, Revenue, Economic Affairs, Statistics & Privatisation Government of Pakistan 12

13 1.6 Statement by the Bank The General Manager, Karachi Stock Exchange Limited, Stock Exchange Building, Stock Exchange Road, Karachi. The General Manager, Lahore Stock Exchange Limited, Lahore Stock Exchange Building, 19, Khayaban-e-Aiwan-e-Iqbal, Lahore. The General Manager, Islamabad Stock Exchange Limited, ISE Towers, 55-B, Jinnah Avenue, Islamabad. We, the undersigned Chief Executive Officer and Chief Financial Officer of Allied Bank Limited, a banking company incorporated under the Companies Ordinance, 1984, having its registered office at 3 Tipu Block, Main Boulevard, New Garden Town, Lahore ( ABL or the Bank ), hereby attest and confirm, in our capacity as the Chief Executive Officer and Chief Financial Officer, respectively, that all statements and disclosures made by the Bank in this Offer for Sale Document, are materially true and accurate, to the best of our knowledge. -sd- Tahir Hassan Qureshi Chief Financial Officer -sd- Tariq Mahmood Chief Executive Officer 13

14 2 Book Building Procedure 2.1 Brief Offer Structure The Government of Pakistan is offering its residual shareholding (approx. 11.5%) in ABL through Privatisation. The present Offer consists of 131,275,073 Ordinary Shares representing 11.5% of the total paid up share capital of ABL being offered through a Book Building mechanism to Institutional Investors and High Net worth Individuals (HNWIs) at a Floor Price which shall be at a premium to the Par Value of PKR 10/- per share and will be notified by the Offerer separately. 2.2 Book Building Procedure Book Building is a process whereby Eligible Investors may bid for a specific number of shares at various prices. The Offerer shall set a Floor Price, after approval from PC Board and CCoP, which shall be the lowest price Eligible Investor(s) can bid at, and will be notified through Stock Exchanges and/or JLMs. JBRs will enter the Bid into the KSE System for Book Building, after ensuring correctness and completeness of the Bid. The KSE System will then be used to determine the Strike Price through the Dutch Auction Method. Under the Dutch Auction Method, the Strike Price is determined by estimating the maximum price at which all the shares the Offerer intends to offer through the Book Building process are subscribed. Please note that the Offer Price will be finalized by the Offerer following the approval of the PC Board and CCoP after the completion of the Book Building process. Shares will be allocated to successful bidders at the Offer Price. The minimum bid amount is PKR 500,000. A bid by a potential investor can be a Limit Bid or a Step Bid, which are explained below. a) Payment for Limit Bid If investors are placing their bids through Limit Bid then they shall deposit the Margin Money based on the number of shares they are bidding for at their stated bid price. For instance, if an Eligible Investor is applying for 0.8 million shares at a price of PKR 125 per share, then the total Bid Amount would amount to PKR 100,000,000 /-. In such a case, (i) a HNWI investor shall deposit PKR 100,000,000 in the specified Book Building account as the Margin Money which is 100% of PKR 100,000,000, and (ii) an Institutional Investor shall deposit at least PKR 25,000,000 in the specified Book Building account as the Margin Money, which is 25% of PKR 100,000,

15 b) Payment for Step Bids If investors are placing a Step Bid, which is a series of Limit Bids at increasing prices, then they shall deposit the Margin Money/Bid Amount based on the total number of shares they are bidding for at their stated bid prices. For instance, if the investor bids for 0.7 million shares at PKR 135 per share, 0.5 million shares at PKR 140 per share and 0.25 million shares at PKR 142 per share, then in essence the investor has placed one Step Bid comprising three limit bids at increasing prices. The Bid Amount in this instance would be PKR 200,000,000/-. In such a case, (i) an HNWI investor shall deposit PKR 200,000,000 in the specified Book Building account as the Margin Money which is 100% of PKR 200,000,000, and (ii) an Institutional Investor shall deposit at least PKR 50,000,000 in the specified Book Building account as the Margin Money, which is 25% of PKR 200,000,000. A single Eligible Investor shall not place more than one bid; however, investors/bidders can revise their Bids. The Eligible Investors shall not place consolidated bids. A bid application which is fully or partially beneficially owned by persons other than the one named therein is to be considered as consolidated bids. At the close of the Book Building period, the Strike Price will be determined via the Dutch Auction Method, and shall be finalized after approval from the PC Board & CCoP. Successful Bidders shall be intimated, within two (2) working days of the closing of the Bidding Period, about the Offer Price and the number of shares provisionally allocated to each of them. The successful institutional Bidders shall, within five (5) working days of the closing of the Book Building period shall deposit the balance amount as consideration against allocation of shares. Where a successful Bidder defaults in payment of shares allotted to him/her/it, the Margin Money deposited by such Bidder shall be forfeited to the Offerer. As per Clause 8.16 of Appendix-2 to Chapter 5 Listing of Companies and Securities Regulations of the KSE Rule Book, Clause 8.15 of Appendix-4 of Listing Regulations of LSE and Clause 8.16 of Appendix-4 of Listing Regulations of ISE, the successful Bidders shall be issued shares in the form of book-entry securities to be credited in their respective CDS accounts. All the Eligible Investors shall, therefore, duly provide their CDS account numbers in the Bidding Form. 2.3 Role and Functions of Joint Lead Managers & Book Runners The Joint Lead Managers & Joint Book Runners to the Offer shall: Conduct awareness campaigns through presentations, meetings, road shows etc.; Ensure that all disclosures, as required under the Companies Ordinance 1984 and the Listing Regulations of the Stock Exchanges have been made in the OFSD; 15

16 Ensure that necessary infrastructure is available to collect Bids and to carry out book building process in a fair and efficient manner; Publish an advertisement, approved by the Commission, in at least one Urdu and one English daily Newspaper having wide circulation in the Federal and all the provincial capitals, to invite Eligible Investors to participate in the Bidding process; and Ensure that the OFSD, after approval of the Commission, be uploaded on the JLMs, and Privatisation Commission s website; Collect Bid applications and Bid Amount, Margin Money, as the case may be, from Eligible Investors in the manner as specified in the Offer for Sale Document; Put serial number, date and time on each Bid at the time of collection from the Bidders; Vet the Bidding Applications; Maintain record of the Bids received for subscription of the Shares; Ensure that each Bidding Application contains CDC account number of the Bidder maintained with CDC wherein shares shall be credited in case the bid is successful; Not accept multiple Bids i.e. more than one bid applications by the same person; Circulate copies of the OFSD cleared by the Exchange and approved by the Commission along with the Bidding Forms to Eligible Investors; JBRs have established Bid Collection Centers at the following addresses: Bid Collection Centers Karachi Contact Person Waqar Ali Shaheer Shaikh Syed Furqan Ahmed Phone Fax Number wali@elixirsec.com sshaikh@elixirsec.com sfurqan.ahmed@akdsecurities.net Postal Address Elixir Securities, 8 th Floor, Dawood Centre, M. T. Khan Road, Karachi Islamabad Contact Person Asim Ghafoor Najeeb Altaf Malik Khalid Hussain Phone aghafoor@elixirsec.com naltaf@elixirsec.com malik.khalid@akdsecurities.net Postal Address Elixir Securities, House # 68, Main Margalla Road, F-6/2, Islamabad Lahore Contact Person Tahir Maqbool Imtiaz Ahmed Bhatti Ehsan Ahmad Qureshi Phone tmaqbool@elixirsec.com iabhatti@elixirsec.com ehsan.ahmad@akdsecurities.net Postal Address Elixir Securities, Office # 2, Ground Floor, Rehman Business Centre, 32-B-III, Lahore Ensure that all the Bids received by the Bid Collection Centers are entered into the system developed by the KSE for the purpose of Book Building. As per the criteria for Book Building issued by SECP, the JBRs shall not accept or enter any Bid after 05:00 PM during the Bidding Period, except for the last day when no fresh Bid(s) shall be collected after 05:00 PM. The Bid(s) received shall be entered into the KSE System till 05:00 PM and no new Bid(s) including those 16

17 received at the Bid Collection Centers shall be entered into the KSE System after 05:00 PM. Online revision will, however, be allowed to the bidders till 07:00 PM on the last day. The Bids should be submitted on the prescribed Bidding Form in person through the Bid Collection Centers. For Eligible Investors residing outside the city of Bid Collection Centers, they may come in person to the following designated branches to submit their Bid and Application Money. The Bid will be verified and checked for completeness by the designated person in each of the branch mentioned below. The designated person will then forward the verified Bid to the JBRs via fax or . Designated Branches for Eligible Investors Residing Outside the City of Bid Collection Centres No. Code Branch Name Branch Manager Address Phone # MCB Circular Road Branch, Faisalabad MCB Hayatabad Branch, Peshawar Corporate The Mall Branch, Rawalpindi Corporate Branch, Abdali Road, Multan Mr. Muhammad Asif Awan Mr. Umer Zia Mr. Muhammad Shehzad Saleem Mr. Muhammad Rohail Akhtar Ground Floor, MCB Building, Circular Road, Faisalabad Phase V, Back side of Pak Tobacco Board, Hayatabad, Peshawar 35 B, Haider Road, Rawalpindi Cantt 59 A, Abdali Road Multan , , , , , muhammad.awan@mcb.com.pk mcb1448@mcb.com.pk ops0890@mcb.com.pk rohail.akhtar@mcb.com.pk mcb1039@mcb.com.pk International Investors may submit their Bids via or fax to the Bid Collection Centers. 2.4 Opening and Closing of the Bidding Period The Bidding Period shall remain open for two (2) working day during business hours. The Book Building process will open at 09:00 AM and close at 05:00 PM on December 10, 2014 and December 11, On December 11, 2014, no new Bids shall be collected after 05:00 PM. The Bid(s) received shall be entered into the KSE System till 05:00 PM and no new Bid(s) including those received at the Bid Collection Centres shall be entered into the KSE System after 05:00 PM. Online revision will, however, be allowed to the bidders till 07:00 PM on the last day. 2.5 Eligibility to Participate In Bidding Eligible Investors, both Institutional Investor and HNWI as mentioned in definitions above can participate. Institutional Investors are 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) who place a Bid of at least the Minimum Bid Size of PKR 500,000/- HNWI Investors are Individual investor who places a Bid of at least the Minimum Bid Size of PKR 500,000/- 17

18 2.6 Information for Bidders a) The OFSD has been duly cleared by the Stock Exchanges and approved by the SECP. b) The OFSD and the bidding form can be obtained from the registered offices of the JLMs and the Bid Collection Centers. The OFSD and Bidding Forms can also be downloaded from the following websites: c) Eligible Investors who are interested in subscribing to the Ordinary Shares should approach the JBRs at the addresses provided in paragraph 2.3 to register the Bids. d) THE BIDS SHOULD BE SUBMITTED ON THE PRESCRIBED BIDDING FORM IN PERSON OR THROUGH FAX NUMBERS GIVEN IN PARAGRAPH Bidding Form and Procedure for Bidding a) Standardized Bidding Form has been prescribed by the JBRs. Bids shall be submitted at the Bid Collection Centers in person given in paragraph 2.3 on the standard Bidding Form duly filled in and signed in duplicate. The Bidding Form shall be serially numbered at the Bid Collection Centers and date and time stamped, at the time of collection from the Bidders. b) The bidding procedure under the Book Building Process is outlined below: Copy of approved OFSD shall be circulated by the JBRs to a maximum number of the Institutional Investors and HNWI, but not less than ten in each of the two categories inviting them for participation in the Bidding process. Copy of the OFSD will also be placed on the websites of the Offerer and the JLMs. An advertisement, approved by the Commission, shall be published at least in one Urdu and one English daily newspaper having wide circulation in the Federal and all the provincial capitals, inviting the Eligible Investors for participation in the Bidding. A Book Building Account shall be opened by the Offerer for collection of Bid Amounts. The Bidding Form shall be issued in duplicate signed by the Bidder and countersigned by the JBR, with first copy for the JBR, and the second copy for the Bidder. Bids shall be submitted through the Bid Collection Centers only as provided in paragraph 2.3 and on the standard Bidding Form duly filled in and signed in duplicate. Eligible Investors residing outside the city of Bid Collection Centers may submit their respective Bids through Designated Branches identified in paragraph 2.6. Bids can be placed at Limit Price or Step Bid. Bid Amount/Margin Money shall be deposited through demand draft or pay order only in favor of Offer for Sale of Shares of Allied Bank Limited Book Building Account 18

19 JBRs shall collect an amount of 100% of the application money as Bid Amount in respect of Bids placed by HNWI JBRs shall collect an amount of 25% of the application money as Margin Money in respect of Bids placed by Institutional Investors JBRs may reject a Bid placed by an Eligible Investor for reasons to be recorded in writing and the reasons should be disclosed to such Bidder forthwith. Decision of JBRs shall not be challengeable by the Bidder or its associates. JBRs shall not accept the Bids made at a price lower than the Floor Price. The Bidders will receive back the duplicate form upon submission of their Bids which will be proof of their Bid submission. The Bidders shall not be provided with any receipt if a duly filled duplicate form is not submitted along with the Bid application. The Bidders shall provide a valid address in their bid forms so that the relevant ID, password and form number can be ed to them upon placement of the Bid. Bidders can revise or withdraw their Bids during the Bidding Period (for details please refer to paragraphs 2.11 and 2.13). JBRs shall maintain a record of the Bids received/rejected/revised/withdrawn along with identities of the Bidder and evidence of amount received. JBRs shall ensure that all the Bids received and accepted by the Bid Collection Centers are immediately entered into the KSE System for the purpose of Book Building as per Clause 8.6 of Appendix-2 of Chapter 5 titled Listing of Companies and Securities Regulations of the KSE Rule Book, Clause 8.6 of Appendix-4 of Listing Regulations of LSE and ISE. The system shall be capable of displaying live order book in descending order with respect to Bid prices, showing the demand for shares at various prices and accumulative number of shares bid for along with percentage of the total shares offered. The order book should also show the revised bids and the bids withdrawn. At the close of the Bidding Period, the Strike Price shall be determined via the Dutch Auction Method. However, the Strike Price shall be finalized after due approvals from the PC Board and CCoP Successful Bidders shall be intimated, within two (2) working days of the closing of the Bidding Period, the Offer Price and the number of shares provisionally allocated to each of them. The successful Institutional Investors shall within five (5) working days of the Book Building or three (3) working days from the intimation of successful provisional allocation, whichever is earlier, deposit the balance amount as consideration against allocation of shares. Where a successful bidder defaults in payment of shares allocated to it, in any manner whatsoever, the Margin Money/Bid Amount deposited by such bidder shall be forfeited to the Offerer. Margin Money/Bid Amount of unsuccessful Bidders will be refunded within five (05 working days of the close of the Bidding Period. Final allocation of shares out of the Offer shall be made after receipt of Application Money from the successful Bidders. Shares to successful bidders, subject to requisite clearances, if any, shall be transferred/credited within eight (08) working days of the book building process. 19

20 Associated persons or other related persons or parties of the Offerer shall not make, in aggregate, bid(s) for shares in excess of 5% of the Book Building portion of the offer. To check this threshold, the Offerer shall provide the Book Runner and the Book Runner shall obtain from the Offerer, list of associated persons of the issue before commencement of the bidding period and the Book Runner shall make sure that the said list has been provided to the employees deployed at the collection centers for collection of bids and entry thereof in the system. 2.8 Bank Account for Book Building The Offerer has opened bank accounts for collection of money for the Offer. The bidders shall draw demand draft or a pay order in favor of Offer for Sale of Shares of Allied Bank Limited Book Building Account which has been opened at MCB Bank Limited (the Collection Bank ). The Collection Bank shall keep and maintain the Bid Money in the said account. Once the Offer Price is determined and allocation list is finalized, the JBRs, after obtaining the requisite approvals from PC, may request in writing to the Collection Bank for transfer of the money of successful and accepted applications to the Offerer s account(s) and advise for refund of the Bid Money to unsuccessful Bidders. 2.9 Payment into the Book Building Account The Bidders shall draw a demand draft or a pay order favoring Offer for Sale of Shares of Allied Bank Limited Book Building Account and submit it at the designated Bid Collection Center along with the duly filled Bid forms. CASH MUST NOT BE SUBMITTED WITH THE BIDDING FORM AT THE BID COLLECTION CENTER. BID AMOUNT MUST BE PAID THROUGH A DEMAND DRAFT OR A PAY ORDER ONLY OR ONLINE TRANSFER TO ACCOUNT NUMBER TITLED OFFER FOR SALE OF SHARES OF ALLIED BANK LIMITED BOOK BUILDING ACCOUNT MAINTAINED AT MCB BANK LIMITED, SHAHEEN COMPLEX BRANCH, KARACHI. Eligible Investors can place bid for shares based on the procedure as explained earlier in paragraph Payment by Foreign Investors Foreign investors may subscribe using their Special Convertible Rupee Accounts ( SCRA ), as set out under Chapter 20 of the State Bank of Pakistan s Foreign Exchange Manual. Payment in respect of investment in the shares of the Company has to be made in foreign currency through an inward remittance or through surplus balances in SCRA. Local currency cash account(s) opened for the purpose of Foreign Portfolio Investment (FPI) is classified as SCRA. Underlying client names/beneficial owners are required to be disclosed at depository level. 20

21 Key Documents required for individual(s) are: 1. Account opening request 2. Passport / ID General documentation required for opening of SCRA account by corporate are: 1. Account opening request 2. Board Resolution & Signatories list 3. Passport / ID of Board of Directors 4. Passport / ID of all authorized signatories 5. Certificate of Incorporation (COI) Equivalent / supporting documents: Trade Registry Certificate, Business Registration Certificate, Certificate of Commencement of Business 6. Memorandum & Articles of Association 7. Withholding tax registration certificate / Certificate of country of domicile of client 8. Latest Annual Report 9. List of Board of Directors 10. List of Shareholders (>10% holdings) and key officers It is however pertinent to note that the procedure and requirements of each institution differs, hence it is advised to request the procedure from each relative institution. Payments made by foreign investors shall be supported by proof of receipt of foreign currency through normal banking channels. Such a proof shall be submitted along with the Bidding Application by the foreign investors Revision of Bids by the Bidder The Bidders shall have the right to revise their Bids any time during the Bidding Period up to 07:00 PM on December 11, Online revision of the Bids may be allowed to the Bidders through KSE System. This will however be subject to the condition that the Bidder shall comply with the requirements of bidding as stipulated under Appendix-2 of Chapter 5 titled Listing of Companies and Securities Regulations of the KSE s Rule Book and Appendix-4 of the Listing Regulations of the LSE and ISE, and any other condition or procedure disclosed in the OFSD Rejection of Bids by the Book Runner As per Clause 8.4 of Appendix-2 of Chapter 5 titled Listing of Companies and Securities Regulations of the KSE Rule Book, Clause 8.4 of Appendix-4 of Listing Regulations of LSE and ISE, JBRs may reject a Bid placed by an Eligible Investor for reasons to be recorded in writing and the reasons should be disclosed to such Bidder forthwith. Decision of the JBRs shall not be challengeable by the Bidder or any of its associates Withdrawal of Bids by the Bidder A Bidder has the right to withdraw a Bid from the bidding system any time during the Bidding Period till 05:00 PM. Online withdrawal of the Bids may be allowed to the Bidders through system 21

22 software. This will, however, be subject to the condition that the Bidder shall comply with the requirements of bidding as disclosed under Appendix-2 of Chapter 5 titled the Listing of Companies and Securities Regulations of the KSE Rule Book and Appendix-4 of the Listing Regulations of the LSE and ISE, and any other condition or procedure disclosed in the OFSD Withdrawal of Offer by the Offerer a) According to Clause 3.10 of Appendix-2 of Chapter 5 titled Listing of Companies and Securities Regulations of the KSE s Rule Book, Clause 3.10 of Appendix-4 of Listing Regulations of LSE and ISE, in case the Offerer does not receive Bids at or above the Floor Price for the number of shares offered, it may withdraw the Offer. The decision of withdrawal shall be taken within a period of not more than three (03) working days from the closing of Bidding Period. b) The Offerer shall withdraw the Offer if the total bids received are less than fifteen. c) The withdrawal shall be immediately intimated to the SECP and the Stock Exchanges. d) In case the Offer is withdrawn the Margin Money/Bid money will be refunded to Bidders within five (05) working days of the decision of withdrawal without any markup, interest etc Mechanism for Determination of Strike Price a) At the close of the Bidding Period, the Offerer, in consultation with the JLMs shall determine the Strike Price on the basis of Dutch Auction Method. Under this methodology, the Strike Price is determined by lowering the price to the extent that the total number of shares offered is subscribed. b) The order book shall display the Bid prices in a descending order along with the quantity for each price level as well as the cumulative quantity at each price level. c) For the purpose of allocation of shares, the Limit Bid(s) placed above the Strike Price will be allocated the total shares that they placed the bid for. At the Strike price, such Bidders who placed their Bid(s) earlier will be given preference d) Once the Strike Price is determined all those Bidders whose bids have been found successful shall become entitled for allocation of shares. The Bidders, who have made bids at prices above the Strike Price, will be issued shares at the Strike Price and the difference will be refunded. Bidders who placed bids below the Strike Price shall not qualify for allocation of shares and Margin Money of such Bidders shall be refunded. The mechanism for determination of Strike Price can be understood by the following illustration: a) Number of shares: 131,275,073 Ordinary Shares 22

23 b) Floor Price: Will be notified through announcement by Stock Exchanges and/or placed on their websites and on the websites of Elixir Securities Pakistan (Pvt.) Ltd, AKD Securities Ltd. and MCB Bank Ltd. after close of market hours on December 09, 2014 c) Bidding Days: December 10-11, 2014 d) Bidding Time: 09:00 AM 05:00 PM e) Bid Withdraw Time: 09:00 AM 05:00 PM f) Bidding Revision Time: 09:00 AM 05:00 PM on December 10, 2014 and 09:00 AM 07:00 PM on December 11, 2014 Bidder Price (PKR/sh) Quantity (mn Cumulative Number shares) of Shares Category of Order Institution - A Limit Price Institution - E Limit Price Institution - B Limit Price Foregin Institution - F Limit Price HNWI - A Step Bid Institution - C Step Bid HNWI - E Limit Price Institution - C Step Bid Institution - B Limit Price HNWI - A Step Bid Institution - C Step Bid Bid Withdrawn Strike Price determined through Dutch Auction Method Bid has been revised and placed Total Shares Subscribed On the basis of the figures provided in the above illustration, according to the Dutch Auction Method, the Strike Price would be set at PKR per share to sell the required quantity of 131,275,073 Ordinary Shares. At PKR 140 per share, investors are willing to buy only 20 million shares. Since million shares are still available out of the Offer, therefore additional shares at lower price will be included for purposes of Strike Price calculation. At PKR 135 per share, investors are cumulatively willing to buy 60 million shares. Since million shares are still available out of the Offer, therefore additional shares at lower price will be included for purposes of Strike Price calculation. At PKR 132 per share, investors are cumulatively willing to buy 90 million shares. Since million shares are still available out of the Offer, therefore additional shares at lower price will be included for purposes of Strike Price calculation. At PKR 131 per share, investors are cumulatively willing to buy 110 million shares. Since million shares are still available out of the Offer, therefore additional shares at lower price will be included for purposes of Strike Price calculation. 23

24 At PKR 130 per share, investors are cumulatively willing to buy 130million shares. Since million shares are still available out of the Offer, therefore additional shares at lower price will be included for purposes of Strike Price calculation. At PKR 125 per share, investors are cumulatively willing to buy 140 million shares. Since after bidding for million shares at PKR 125 per shares no share will be available, therefore, the Strike Price will be set at PKR 125 per share for the entire lot of million shares. The Bidders, who have placed bids at prices above the Strike Price (which in this illustration is PKR 125 per share), will become entitled for allocation of shares at the Strike Price. Share allocation will be based on top-down approach starting from the highest Bid following to the Strike Price. The Bidders, who have placed bids below PKR 125 per share, will not qualify for allocation of shares. After allocation in the aforementioned manner, million shares are still available for allocation. These shares will be allocated to the Bidders who placed bid(s) at PKR 125 per share. These million shares will be allocated to such bidders who placed their bids earlier Basis of Allocation of Shares The final allocation of Shares will be determined by Offerer, as approved by PC Board and CCOP, based on allocable demand. Final allocation of Shares shall be made after receipt of full Application Money from the successful Bidders. Shares to successful Bidders shall be transferred within eight (08) working days of the Book Building process Refund of Margin Money Investors who have bid lower than the Strike Price are not eligible for allocation of Shares. Margin Money of the unsuccessful bidders shall be refunded without any interest or mark up within five (05) working days of the close of the Bidding Period. Successful investors who submitted bids at a price higher than the Strike Price would be refunded the balance amount within five (05) working days of the close of the Bidding Period Bid Collection Centers Bid Collection Centers have been established at Karachi, Lahore and Islamabad to collect the bids for the Offer. Addresses, details of contact persons and fax numbers of the Bid Collection Centers are given in paragraph Exemptions Following exemptions have been approved by SECP to facilitate seamless and efficient execution of the transaction 24

25 Relaxation Date Letter Ref Exemption to offer the shares at a minimum bid size of PKR 500,000 instead of PKR 1,000,000 and in case of a Step Bid to fix the minimum amount of any step at PKR 125,000/- Exemption to allow Audit Certificates for Audited Accounts 2013 to suffice for the Offer Relaxation from applicability of Regulation 5.4.1(b) and 6(1)(b) of KSE Rulebook, ISE and LSE pertaining to the retail offer Relaxation to conduct the entire Offer through Book Building Relaxation has been sought which allows for the successful bidders to deposit their balance amount within five (5) working days of the close of Book Building Relaxation has been sought which allows the JBRs to refund the margin money of unsuccessful bidders or the balance amount of the successful bidders within five (05) working days Relaxation from the requirements of rule 9 (iii) & (iv) of the Companies (Issue of Capital) Rule, 1996 (the CI Rules) under Rule enabling the GoP to offer these shares without underwriting arrangement. Further, the SECP has also relaxed the requirement for underwriting of the Book Building Exemption from Clause 1 of the letter issued by SECP, SMD/CIW/Mis 14/2007 dated July 24, 2014 which defines a price band having an upper and lower price limit with a spread of 30% Exemption from Clause 3 of the letter issued by SECP, SMD/CIW/Mis 14/2007 dated July 24, 2014 to allow Book Building to continue for two (2) working days Exemption from Clause 8 of the letter issued by SECP, SMD/CIW/Mis 14/2007 dated July 24, 2014 which restricts any person, other than associate, to hold more than 10% shares offered under the Book Building Dec 04, 2014 Dec 01, 2014 Dec 02, 2014 Dec 02, 2014 Dec 04, 2014 Dec 04, 2014 Dec 04, 2014 Dec 04, 2014 Dec 04, 2014 Dec 04, 2014 Dec 04, 2014 Dec 04, 2014 SMD/CO62/04/2014 KSE/GEN-7916 LSE Letter ISE-OPS/14/3402 SMD/CO62/04/2014 SMD/CO62/04/2014 SMD/CO62/04/2014 SMD/CO62/04/2014 SMD/CO62/04/2014- II SMD/CO62/04/2014 SMD/CO62/04/2014 SMD/CO62/04/

26 2.20 Statement by Joint Lead Managers December 01, 2014 The General Manager, Karachi Stock Exchange Limited, Stock Exchange Building, Stock Exchange Road, Karachi. The General Manager, Lahore Stock Exchange Limited, Lahore Stock Exchange Building, 19, Khayaban-e-Aiwan-e-Iqbal, Lahore. The General Manager, Islamabad Stock Exchange Limited, ISE Towers, 55-B, Jinnah Avenue, Islamabad. Being mandated as Joint Lead Managers to this Offer for Sale of Shares of Allied Bank Limited through the Book Building process, we confirm that all material information as required, unless exempted, under the Companies Ordinance, 1984 and the Listing Regulations of the Stock Exchanges has been disclosed in this Offer for Sale Document and that whatever is stated in the Offer for Sale Document and in the supporting documents is true and correct to the best of our knowledge and belief and that nothing has been concealed. -sd- -sd- -sd- Babur Rais SVP, Head of Corporate Finance Elixir Securities Pakistan (Pvt.) Ltd. Amna Hasan Acting Head, Investment Banking Group MCB Bank Limited Syed Khurram Shahid SVP, Head of Investment Banking AKD Securities Limited 26

27 2.21 Statement by Joint Book Runners December 01, 2014 The General Manager, Karachi Stock Exchange Limited, Stock Exchange Building, Stock Exchange Road, Karachi. The General Manager, Lahore Stock Exchange Limited, Lahore Stock Exchange Building, 19, Khayaban-e-Aiwan-e-Iqbal, Lahore. The General Manager, Islamabad Stock Exchange Limited, ISE Towers, 55-B, Jinnah Avenue, Islamabad. Being mandated as Joint Book Runners, to this Offer for Sale of Shares of Allied Bank Limited through the Book Building process, we confirm that all material information as required, unless exempted, under the Companies Ordinance, 1984 and the Listing Regulations of the Stock Exchanges has been disclosed in this Offer for Sale Document and that whatever is stated in the Offer for Sale Document and in the supporting documents is true and correct to the best of our knowledge and belief and that nothing has been concealed. -sd- Babur Rais SVP, Head of Corporate Finance Elixir Securities Pakistan (Pvt.) Ltd. -sd- Syed Khurram Shahid SVP, Head of Investment Banking AKD Securities Limited 27

28 3 Share Capital and Related Matters 3.1 Share Capital as at 30 September 2014 No. of shares Total (PKR) AUTHORIZED CAPITAL 1,500,000,000 Ordinary shares of PKR 10/- each 15,000,000,000 ISSUED, SUBSCRIBED, & PAID UP CAPITAL 406,780,094 Issued for Cash: Ordinary shares of PKR 10/- each 4,067,800, ,745,186 Issued as Bonus Shares: Ordinary Shares of PKR 10/- each 7,207,451,860 9,148,550 18,348,550 Ordinary shares of PKR 10 each, determined pursuant to the Scheme of Amalgamation in accordance with the swap ratio stipulated therein less 9,200,000 Ordinary shares 91,485,500 of PKR 10 each, held by Ibrahim Leasing Limited on the cut-off date (September 30, 2004). 8,400,000 8,400,000 Ordinary shares of PKR 10 each, determined pursuant to the Scheme of Amalgamation of First Allied Bank Modaraba 84,000,000 with Allied Bank Limited in accordance with the share swap ratio stipulated therein. 1,145,073,830 Total 11,450,738,300 No. of shares Percentage Held THE ISSUED, SUBSCRIBED & PAID-UP CAPITAL OF THE BANK IS HELD AS FOLLOWS: Shares held by Directors of the Bank 250,669,148 Mohammad Naeem Mukhtar ,651,586 Muhammad Waseem Mukhtar ,741,423 Sheikh Mukhtar Ahmed ,620 Abdul Aziz Khan 0 5,390 Mubashir A. Akhtar& Taqdees Akhtar 0 5,314 Parvaiz Iqbal Butt 0 13,900 Jalees Ahmed* 0 726,113,381 Sub-Total *Resigned on 20 November Please see note 7.9 of this OFSD No. of shares Shares held by Others Percentage Held 194,041,916 Ibrahim Fibres Limited ,269,939 State Bank of Pakistan* ,926,437 General Public & Others ,385,743 Trustees of ABL Employees Superannuation Funds ,005,134 Federal Government of Pakistan*

29 13,734,303 Banks, DFIs and NBFIs ,953,738 Modarabas and Mutual Funds ,627,795 Insurance Companies ,444 NIT and ICP ,960,449 Sub-Total ,145,073,830 Total 100 *Shares forming part of the current Offer 3.2 Offerer The Shares of the Bank constituting this Offer are owned by SBP pursuant to specific directives of the GoP. The following shareholders are divesting approx. 11.5% of their shareholding in ABL, the details of which are given below: No. of shares Offerer Percentage holding 131,275,073 GoP 11.5% 131,275,073 Total 11.5% 3.3 Offer for Sale through Book Building No. of shares The present Offer 131,275,073 Ordinary Shares (i.e. approx. 11.5% of paid-up capital) having Par Value of PKR 10/- each at a Floor Price which shall be at a premium to the Par Value Face value (PKR) Premium (PKR) Total (PKR) 3.4 Opening and Closing of the Book Building The Bidding Period shall remain open for two (2) working days during business hours. The Book Building process will open at 9:00 AM PST and close at 5:00 PM PST on December 10, 2014 and December 11, Refund of Subscription Money to Unsuccessful Applicants On behalf of the Offerer, the JLMs shall take a decision within 2 day(s) of the closure of the Book Building process as to which applications have been accepted or are successful and refund the Bid Amount in cases of unaccepted or unsuccessful Bids without the interest or mark up within five (05 days of the closure of the Book Building process. If refund as required under the above paragraph is not made within the time specified therein, the Offerer shall be liable to repay that money with surcharge at the rate of one and a half percent (1.5%) for every month or part thereof from the expiration of the 15 th day and, in addition, to a fine not exceeding five thousand rupees and in case of continuing offense to a further fine not exceeding one hundred rupees for every day after the said 15 th day on which the default continues. Provided 29

30 that the Offerer shall not be liable if he/she proves that the default in making the refund was not due to any misconduct or negligence on his/her part. 3.6 Credit and Transfer of Share Certificates under Book Entry System Shares acquired through Book Building shall be transferred in scrip-less form by crediting the respective Central Depository System ("CDS") of Central Depositary Company of Pakistan Limited ( CDC or CDCPL ) accounts of the successful applicants. The Shares will be transferred within eight (08) working days of the close of the Offer, subject to fulfillment of requisite clearances, if any. The applicants should fill in the relevant columns of the Bidding Form for transfer of shares and should have CDS account in their name at the time of subscription. The shares maintained with the CDS in the book entry form shall be transferred in accordance with the provisions of the Central Depositories Act, 1997 and the CDC Regulations. 3.7 Shares Issued In Preceding Years A total of 1,145,073,830 shares have been issued by the Bank since its inception with an aggregate of 704,609,715 fully paid Ordinary Shares of the face value of PKR 10/- each have been issued after the year The details of share issued are as follows: No of shares Par value Amount Premium Date of Consideration (PKR) (PKR) (PKR) issue 440,464, ,404,641,150 - Issued Prior to ,400, ,000,000 - Merger of FABM* ,772, ,728,230 - Bonus Issue ,727, ,077,273,870 - Bonus Issue ,636, ,364,330 - Bonus Issue ,10, ,000,760 - Bonus Issue ,210, ,100,830 - Bonus Issue ,031, ,310,920 - Bonus Issue ,634, ,342,000 - Bonus Issue ,097, ,040,976,210 - Bonus Issue 2014 *First Allied Bank Modaraba 3.8 Principal Purpose for the Offer for Sale of Shares The primary purpose of the Offer includes: Mobilize savings of individuals, households and institutions of Pakistan and allow them to take ownership in the successful businesses of the economy 30

31 Improving standing of domestic capital markets by attracting maximum Foreign Portfolio and Institutional Investment ( FPI ), increased investment from overseas Pakistanis and other foreign investors Strengthen the domestic capital markets Maximize sale proceeds for GoP 3.9 Interest of Shareholders None of the holders of the issued shares of the Bank have any special or other interest in the property or profits of the Bank other than as holders of the Ordinary shares in the capital of the Bank Dividends The rights in respect of capital and dividends attached to each share are and will be the same. The Bank in its general meeting may declare dividends but no dividends shall exceed the amount recommended by the Directors. Dividend, if declared in the general meeting, shall be paid according to the terms of the provisions of the Ordinance. The Directors may from time to time pay to the shareholders such interim dividends as appear to the Directors to be justified by the profits of the Bank. No dividends shall be paid otherwise than out of the profits of the Bank for the year or any other undistributed profits. No unpaid dividends shall bear interest or mark-up against the Bank. The dividends shall be paid within the period laid down in the Ordinance. Those investors who intend that their cash dividend, if any, is directly credited in their Bank Account, must fill-in the relevant part of the shares subscription Form under the heading, Dividend Mandate Option. For Dividend History of the Bank please refer to Para Eligibility for Dividend The Bank in this matter will follow the provisions of Section 92 (2) of the Companies Ordinance, 1984 and the dis-invested Shares shall rank pari-passu with all other existing shares in all matters, including the right to such bonus or right issue and dividends as may be declared by the Bank subsequent to the transfer of shares Deduction of Zakat Income distribution will be subject to deduction of Zakat at source, pursuant to the provisions of Zakat and Ushr Ordinance, (XVIII of 1980) as may be applicable from time to time. 31

32 3.13 Capital Gains Tax Capital gains derived from sale of listed securities are taxable in the following manner under Section 37A of the Income Tax Ordinance, 2001 at the following rates: S. No. Tax Year less than twelve months Tax Rate Holding period of securities more than twelve months and less than twenty four months more than twenty four months % 10.0% 0.0% Through the Finance Act, 2014, amendments have been made in the Income Tax Ordinance, 2001 to the effect that gain resulting from sale of securities for period between 12 to 24 months shall also be taxable under the said Ordinance and as such exemption is to be available only where the holding period of securities exceeds 24 months. Accordingly, the gain on disposal of listed securities for tax year 2015 is chargeable to tax at the rate of 12.5% for listed securities held for a period of less than 12 months, 10% for listed securities held between 12 to 24 months and 0% for listed securities held for a period of more than 24 months. In the Finance Act, 2014 no rate has been prescribed for tax year 2016 and onwards. Banks are liable to capital gains tax at separate rates. Under the Seventh Schedule to the said Ordinance, Banks are subject to capital gains tax on the disposal of shares of listed company at the rate of 12.5% where shares are held for a period of more than one year whereas tax will be payable at the rate of 35% if shares are held for a period of less than one year. In addition, allocation of expenses will also be made as per the requirements contained in seventh Schedule. Please refer to relevant law and regulations for detailed provisions applicable. Please note that a shareholder (being a non-resident person of Pakistan) can avail concessions as per the provisions of relevant laws, in respect of capital gains, if any, provided in the respective Double Tax Treaty which Pakistan has signed with the country of his / her / its residence Withholding Tax on Dividends Dividend distribution to the shareholders will be subject to withholding tax under Section 150 of the Income Tax Ordinance, 2001 as specified in Part I, Division III of the First Schedule to the said Ordinance except for shareholders who are exempt from tax withholding; or subject to concession, if any, provided in the Double Tax Treaty. The applicable rates, as laid out in the Finance Act, 2014, are as follow: 1. Rate of Tax Deduction for filers 10% 2. Rate of Tax Deduction for non-filers 15% 32

33 Moreover, tax at the rate of 5% of the value of bonus shares determined on the basis of the day end ex-price on the first day of book closure shall be collected by the Company issuing the bonus shares, which will be the final tax liability on such income of the shareholder Income Tax The income of the Bank is subject to Income Tax under the Income Tax Ordinance Deferred Taxation Deferred tax is recognized using the liability method on all major temporary differences between the amounts attributed to assets and liabilities for financial reporting purposes and amounts used for taxation purposes. Deferred tax is calculated at the rates that are expected to apply to the period when the difference are expected to reverse, based on tax rates that have been enacted or substantively enacted at the statement of financial position date. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets are reduced to the extent that is no longer probable that the related tax benefit will be realized. The Bank also recognizes deferred tax asset/liability on surplus/deficit on revaluation of fixed assets and securities which is adjusted against the related surplus/deficit in accordance with the requirements of International Accounting Standards (IAS 12) dealing with Income Taxes Sales Tax on Sale/Purchase of Shares Under the Constitution of Pakistan and Articles 49 of the 7th NFC Award the Government of Sindh, Government of Punjab and the Government of Khyber Pakhtunkhwa have promulgated the Sindh Sales Tax on Services Act, 2011, Punjab Sales Tax on Services Act, 2012 and the Khyber Pakhtunkhwa Sales Tax on Khyber Pakhtunkhwa Finance Act, 2013 respectively. The Sindh Revenue Board, the Punjab Revenue Authority and the Khyber Pakhtunkhwa Revenue Authority administer and regulate the levy and collection of the Sindh Sales Tax ( SST ), Punjab Sales Tax ( PST ) and Khyber Pakhtunkhwa Sales Tax ( KST ) respectively on the taxable services provided or rendered in Sindh, Punjab or Khyber Pakhtunkhwa respectively. The value of taxable services for the purpose of levy of sales tax is the gross commission charged from clients in respect of purchase or sale of shares in a Stock Exchange. The Second Schedule of the above mentioned Acts levy a sales tax on Brokerage at the rate of 15%. Sales tax charged under the aforementioned Acts is withheld at source under statutory requirements Capital Value Tax ( CVT ) On Purchase of Shares Pursuant to amendments made in the (Finance Act 1989) through Finance (Amendments) Ordinance, 2012 promulgated on April 24, 2012, 0.01% Capital Value Tax will be applicable on the purchase value of shares. 33

34 3.19 Tax Credit for Investment in Shares acquired through Privatisation Under Section 62 of the Income tax Ordinance, 2001, a resident person other than a company, shall be entitled to a tax credit for a tax year in respect of the cost of acquiring in the year new shares offered to the public by a public company listed on a stock exchange in Pakistan, provided the resident person is the original allottee of the shares or the shares are acquired from the Privatisation Commission of Pakistan. Where a person makes a disposal of the share within 24 months of the date of acquisition, the amount of tax credit allowed to him under section 62 will be added to his taxable income in the year of disposal Justification for the Premium The Offerer has, inter alia, decided to offer 131,275,073 Ordinary Shares 11.5% of paid-up capital) having par value of PKR 10/- each at a premium to their par value, which premium shall be determined by the Offerer The premium on shares of ABL is adequately justified, based on the following considerations: Market Capitalization - One of the top 5 Pakistani bank by market capitalization, loans and deposits with over 70 years of history of successful operations in Pakistan. Its Market Cap as on December 05, 2014 stood at PKR billion at the closing price of PKR /share Extensive Branch Network - 5th largest branch network with a total of 977 branches as at September 30, 2014 across Pakistan. Strong Credit Rating - A long term rating of AA+ and short term rating of A1+ by PACRA Experienced Management - Senior management team (average of >15 years of experience) has extensive industry and leadership experience in the banking and financial sector domestically and with international banks and corporations Superior Asset Quality ABL has an NPL ratio of 7.7% as on 30 Sep 2014(vs. 13% for sector). This has helped drive a 5yr NPAT CAGR of 29% in CY13. Attractive Return on Equity - ROE of 24.8% in 2013 vs. 17.9% for the sector (inclusive of revaluation surplus). This is despite higher CAR of 18.0% vs. 15% for the sector. One of the largest Asset AMC - ABL Asset Management Company, a wholly owned subsidiary of ABL is the second highest Pakistani startup Asset Management Company with a paid up capital of PKR500mn. Accolades & Awards -Winner of numerous awards and recognitions a testament to ABL s focus on excellence. A few of its awards include: o Best Investment Bank in Pakistan 2014 by the Euromoney Magazine (UK) o Best Domestic Investment Bank 2014 by The Asset Triple A Magazine (HK) 34

35 o 2 nd position in Corporate/Sustainability Reporting Awards 2013 from joint committee of ICAP/ICMA for the annual report 2013 o Awarded Certificate of Merit for Annual Report 2013 by South Asian Federation of Accountants o Acknowledged by Temenos for successfully rolling out and utilizing T24 on the largest branch network in the region o Awarded Optimas Award 2014 for Learning & Talent Development by Workforce Magazine (USA) o Awarded Best Managed Bank Achievement Award 2013 by the Asian Banker o 2011 Bank of the Year in Pakistan Award, awarded by The Banker Magazine, an affiliate of the Financial Times, UK o Best Retail Bank in Pakistan 2011 by The Asian Banker o Best Domestic Investment Bank in Pakistan 2009 by The Asset Magazine Hong Kong o The Banker magazine UK, honored ABL with the The Banker Deal of the Year 2008 Pakistan award o The Corporate Finance House of the Year, by the CFA Association of Pakistan, the local body of the CFA Ins. o The Corporate Finance House of the Year, award by the CFA Association of Pakistan, the local body of the CFA Institute, USA. o The Corporate Finance House of the Year, by the CFA Association of Pakistan, the local body of the CFA Institute, USA 35

36 4 Underwriting, Commissions, Brokerage and Other Expenses 4.1 Underwriting Under the provisions of rule 9(iii) of the Companies (Issue of Capital) Rules, 1996, underwriting is required for the public offer where a premium is being charged. Also, underwriting of the bookbuilding portion is required under Clause 5 of Appendix-2 of Listing of Companies and Securities Regulations of the KSE Rule Book, Clause 5 of Appendix-4 of Listing Regulations of LSE and of ISE. This Offer for Sale has not been underwritten. A relaxation from the requirements of the said rules has been obtained by the Offerer from the SECP vide letter no. SMD/CO62/04/2014-II and SMD/CO62/04/2014 respectively dated December 04, In case a successful bidder defaults in payment of shares allocated to it, in any manner whatsoever, the Margin Money/Bid Amount deposited by such bidder shall be forfeited to the Offerer. The shares allocated to such bidder would then be offered to the next investor who placed bid at the Strike Price. In case of more than one available bidder(s) at the Strike Price, preference would be given to such investors who placed their bids earlier. These investors would be required to deposit the balance amount, if any, within one (01) working day of the intimation of their success. In case of non-availability of any bids at the Strike Price, such shares would be offered at the Strike Price to next investor(s) who placed their bids below the Strike Price, with preference given to investor(s) who placed their bids first. In the event that no investor, who placed the bid below the Strike Price, is willing to purchase the shares offered at Strike Price, then the Offerer may request the JLMs to purchase the remaining shares at the Strike Price net off the Margin Money/Application money forfeited to the Offerer. However, the Offerer may retain such shares in the event no investor is willing to purchase the shares that were defaulted by the successful bidders. 4.2 Buy back/repurchase agreement The JLMs and/or JBRs have not entered into any buy back/re-purchase agreement with the Offerer or any other person in respect of this offer. 4.3 Commission to the Bankers to the Offer Commission at the rate of 0.10% of the amount collected on allocation in respect of successful applicants will be paid by the Offerer to the Bankers to this Offer for services to be rendered by them in connection with this Offer, plus out-of-pocket expenses, if any. 4.4 Brokerage For this Issue, brokerage shall be paid to the Trading Right Entitlement Certificate Holders of KSE, LSE and ISE at the rate of 0.25% on the value of Shares actually sold through them. 36

37 4.5 Expenses to the Offer The expenses of this Offer are estimated to be approximately PKR million.the breakup of expenses to this offer is given in the table below: Expense Rate Amount (Rupees) Bankers to the Offer commission* 0.10% 13,000,000 Financial Advisor & Arranger fees - 1 Brokerage to the members of KSE, LSE & ISE* 0.25% 33,000,000 KSE Bookbuilding Software Charges 500,000 KSE, ISE & LSE Service Charges 110,000 SECP Application and processing fees 250,000 Printing, publication etc. NOTE 8,000,000 Total 54,860,001 * Estimated Figure, actual amount will be determined based on the final size after the determination of Strike Price NOTE: These are estimates. Actual cost will be determined at the time of publication 37

38 5 History and Prospects 5.1 The Bank Brief History Allied Bank Limited was registered as Australasia Bank Limited in 1942 at Lahore. In 1947, the Bank lost over 50% of its operations and assets due to partition. In 1971, the Bank lost more than half of its assets and network due to secession of the then East Pakistan. The Bank not only survived this serious crisis but also regained its financial strength maintaining the growth rates in key performance indicators. In 1974, the Government of Pakistan nationalized all financial institutions in the country. Realizing the robust financial strength of Australasia Bank Limited among all the nationalized financial institutions, the Government decided to merge three financially weak institutions, namely Sarhad Bank Limited, Lahore Commercial Bank Limited and Pak Bank Limited into Australasia Bank Limited and renamed it as Allied Bank of Pakistan Limited. In September 1991 the Government divested portion of its shareholding and handed over the control and management of the Bank to its employees. The financial health of the Bank deteriorated during employees management compelling SBP to replace the employee directors by its nominees in August, During 2004, as advised by the Privatization Commission, the State Bank of Pakistan (SBP) undertook reconstruction of the Bank s capital whereby the Ibrahim Group, as a result of bidding process, took over control of the Bank by virtue of acquiring 325 million shares of the Bank, representing 75.35% of the enhanced share capital. The Bank is now well positioned to expand, grow and diversify its portfolio of products and services Objective of the Bank ABL is a scheduled bank and provides retail, commercial, corporate banking and investment banking services. The bank has also started its Islamic banking operations. 5.2 The Sponsors Allied Bank is part of the Ibrahim Group, one of the largest industrial conglomerates in Pakistan with business in textile, trading, polyester fibers, energy and financial services sectors. 5.3 Product & Services ABL offers a full suite of products and services, tailor-made to cater to the requirements of each segment of its customer base. The Bank aims to provide comprehensive solutions to all their customers, wherever they are located on their financial graph including customers just beginning a banking relationship to those with more sophisticated banking needs. The Bank s operations are 38

39 ably supported by its nationwide network of over 977 online branches (as at September 30, 2014) and extensive network of ATM strategically located to help provide ease of banking. Corporate and Investment Banking Group The Corporate and Investment Banking Group ( CIBG ) focuses on attracting and servicing large customers. The group has expertise in providing exemplary customized and personalized service to its Corporate Customers under the Relationship Management concept which is basically catering to all the customer needs through One Window operations. CIBG has been strategically segmented into Corporate Banking, Investment Banking, Commodities Financing, Financial Institutions & Cash Management and capital market operations so that focused approach can be maintained on different aspects of business requirements. Commercial and Retail Banking Groups Commercial and Retail Banking Group ( CRBG ) has been managing all the liability relationships and SME/Commercial loan book through front-end geographical groups that are divided into 30 Regions and 977 branches as at December 31, CRBG provides value added services & convenience to its customers through Online branch network and 700 plus ATMs spread across the country. CRBG has dedicated professional teams to manage the portfolios of SME/Commercial lending, Agriculture Finance & Liability Products. The Group provides innovative & market competitive products and services Effective from September 2014, CRBG group has been segregate into two separate functions, i.e., Commercial Banking Group ( CBG ) and Retail Banking Group ( RBG ), with two separate dedicated Chiefs and hierarchical structure. The objective is segregation is to keep the business development function focused. RBG is focusing on low cost deposits, bringing the technology and convene ice together rewarding loyalty by offering full suite of tailor made financial products and services to SME & Agriculture sectors and focused consumer financing. RBG has a vast network of branches across the country CBG, with its selected branch network, and dedicated professional staff, CBG is focusing on the critical areas of commercial lending with stronger focus towards cautious build-up of the credit portfolio and trade finance activities in middle market segment; while also maintaining the deposit relationships specially with the institutional depositors. Treasury Group The Treasury group is actively involved in fund management through transactions in interbank market and management of investments in government securities open end mutual fund (fixed income). The group is also responsible for managing regulatory reserve requirements. it is also an active player in in Foreign Exchange Market, participating in pricing activity for USD/PKR both in ready as well as forward, thus enabling the Bank steadily grow its FCY deposit base. With the help of pricing making activity Foreign Exchange Volumes are continuously increasing and providing price 39

40 support to their Corporate franchise as well to the bottom of line of Bank. The group has qualified and experienced professionals who have specialized expertise in treasury functions. Risk Management Group Risk Management is an integral part of ABL s Organizational Structure, with the key purpose to identify, analyze, monitor, review and report the principal risks to which the Bank is exposed. RMG is mandated to manage risks through a framework of sound risk principles as a function independent of commercial lines of business, working under the guidance of Board s Risk Management Committee ( BRMC ). Risk management functions have been segregated by business specialization i.e. Corporate & FI Risk, Commercial & Retail Risk, Credit Administration, Research & Technical Evaluation, and Enterprise Risk that comprises Risk Architecture, Market Risk, and Operational Risk. All these functions are operating in tandem to improve and maintain the health of the lending portfolio and keeping aggregate risk within the Bank s overall risk taking capacity. Audit and Risk Review Group In the context of changes in regulatory requirements, the role of internal audit has become very pivotal as a second line of defense against financial indiscipline and mismanagement besides an integrated system of internal control. As a part of good governance practice, the Audit and Risk Review Group primarily performs its functions independent of the management and reports to the Audit Committee of the Board of Directors. This Group s main objective is to change the traditional internal auditing systems into risk based valued added consultative activity and to help the Bank to accomplish its overall objectives by bringing a systematic disciplined approach to evaluate and improve effectiveness of Risk Management, Control and Corporate Governance process. Special Asset Management Group SAM Group is committed to achieving the strategic goals of the organization and bringing the NPLs to an optimum level within minimum possible time through effective policies and focused efforts. SAM Group mainly concentrates on persuasion of defaulting borrowers through dialogue and constant follow-up aiming at amicable settlements, resolving disputes with the clients, by participating with regulatory bodies, taking appropriate legal action in order to recover the blocked funds. Finance Group Finance Group plays a central role in strategic decision making through transparent and timely financial reporting. It also provides support to other business groups in performance analysis and launching of new products and initiatives. Finance Group translates financial and operational data into strategic information for efficient and effective decision making. It provides support in the formulation of corporate strategies and business plans. It plays a pivotal role in maintaining financial discipline and budgetary control while comparing the performance of the Bank with peers. 40

41 Corporate Affairs Group Corporate Affairs Group ensures compliance of legal directives issued by Regulators and Stock Exchanges relating to corporate and company secretarial matters. This Group facilitates the Board in discharging their fiduciary responsibilities. This Group arranges holding of Board and Board Committees meetings and disseminates directives and decisions of the Board for implementation by various Groups in the Bank. It also coordinates with the Bank s Share Registrar for matters relating to shares, dividends etc. and holds statutory meetings of shareholders. Banking Services Group Banking Services Group ( BSG ) is responsible for smooth running of bank s operations, apart from re-engineering the existing procedures to ensure smooth flow of Bank s operational activities, also focuses on Operations & Policies, Central Processing and E-Banking. It also supports the field offices in pursuit of their business objectives and goals while maintaining adequate controls from a risk perspective. The group also assisted in launching of a variety of value added services facilitating bank s account holders / customers by offering them a wider product range and efficient delivery. Information Technology Group The Bank is committed to serving it clients with banking solutions based on state of the art technology. The Information Technology ( IT ) Group is responsible for meeting the automation needs of the Bank. Its core responsibilities include branch computerization and automation of processes at the branches and controlling offices to make the operations more efficient and provide the management with accurate and timely information. Besides, IT Group is responsible for launching and managing technology based products and services for the Bank s customers such as ATM network, debit card services, online inter-branch transaction services, Internet banking services, Help Line services, etc., and to ensure continuity of these services round-the clock. The Bank now has the largest ATM online branch network in Pakistan. All customers of the Bank can avail ATM card, internet banking and inter-branch online transaction facilities and services include inter-branch and inter-bank Funds Transfer through ATM as well as Internet, Utility Bill payment through ATM and Internet, Real-time alerts through SMS/ linked to operation in customer accounts, etc. The Bank has implemented a leading international core banking system Temenos T24 in all its branches. This system has significantly improved the Bank s ability to focus on customer centric business delivery and be able to launch new products and service more rapidly. Islamic Banking Group The bank has recently established its Islamic banking group with a vision To be the first choice Sharia Compliant Financial Services Provider for the customers. With this vision and prospects, a well experienced team has been formed. 41

42 IBG started its operations in June 2014 and our long terms strategy is to expand gradually and invest in Islamic banking outreach and become major player in this business segment Compliance Group Compliance Group ensures effective compliance with all the prudential regulations and other laws affecting banks as well as to ensure adherence to bank s own policies and procedures. Banking and financial service activities are conducted within a framework of obligations imposed by the regulators and the law. Complying with such requirements is mandatory, therefore, it is important that there is a robust framework of procedures and controls in place to minimize control risks and that everyone understands their roles and responsibilities in this process. The Compliance Group takes care of the monitoring of Banks day to day operations to ensure effective controls, compliance with all regulatory requirements and adherence to internal policies & procedures. 5.4 Demand Outlook & Future Prospects ABL s future prospects remain positive as the bank will build on the strategies that have resulted in a strong performance over the years: These strategies are described below: Bank s strategic impetus is to remain resilient during these rapidly evolving market dynamics and geo-political situation with continuous focus on quality growth and consistently improving service delivery channels Cognizant and responsive emphasis shall remain on keeping abreast with the latest technological advancements in the global financial services sector with a strong focus on risk management, cost rationalization, sustained investment in network expansion and technology driven product offerings As lending opportunities remain low, fee based income shall be the main focus to increase profitability Bank will continue to leverage its extensive branch network and technology based products to generate non-fund based income as well as low cost deposits Expansion in Islamic Banking will also add to the product suite offered to our customers Centralization and outgoing automation of processes shall lead to greater cost savings, keeping operating costs in check despite inflationary trends The Bank is striving to inculcate a culture of service excellence, while at the same time, attracting, developing, and retaining the best human resources talent to ensure realization of our future strategic goals. The above initiatives are expected to assist the bank in showing sustainable growth and a consistent profitability trend in future 5.5 Risk Factors Risk Management The Bank is exposed to the following risks in general: 42

43 Credit Risk Credit risk is the risk that a customer or counterparty may not settle an obligation for full value, either when due or at any time thereafter. This risk arises from a potential client/counterparty s inability to meet its obligation, resulting in an economic loss to the Bank. The credit risk management process is driven by the Bank's Risk Management Team which manages this risk according to a framework of sound risk analysis principles supported by an optimum organizational structure, robust risk assessment models and effective monitoring systems in an upto-date IT enabled environment to mitigate all types of long term and short term credit risks. Market Risk Market risk is the risk that the fair value of a financial instrument will fluctuate due to movements in market prices. It results from changes in interest rates, exchange rates and equity prices as well as from changes in the correlations between them. Each of these components of market risk consists of a general market risk and a specific market risk that is driven by the nature and composition of the portfolio. Market Risk Management performs risk measurement, monitoring and control functions as per the guidelines provided in Board approved Market Risk Management Policy duly supplemented by related procedures and robust models. The Market Risk Team regularly analyses, reviews and reports the market risk exposures to ALCO, BRMC and Board. Foreign Exchange Risk It is the risk that the fair value of a financial instrument will fluctuate due to changes in foreign exchange rates. Foreign Exchange Risk is the risk of loss arising from fluctuations of exchange rates. The Bank s FX risk is first controlled through substantially matched funding policy. On the mismatched exposures, the Bank utilizes appropriate derivative instruments such as Forwards and Swaps. FX Exposures are monitored by currency to ensure that they remain within the established limits for each currency. Exposures are also monitored on an overall basis to ensure compliance with the Bank s SBP approved Foreign Exchange Exposure Limit. The majority of net foreign currency exposure is in US Dollars. The Bank is carefully monitoring the net foreign currency exposure and the effect of exchange rate fluctuations by conducting sensitivity analysis and stress testing, as well as utilizing the currency forwards and swaps to hedge the related exposure. Equity position risk Equity position risk is the risk that the fair value of a financial instrument will fluctuate due to changes in the prices of individual stocks or the levels of equity indices. Bank s equity investment may be classified as Held for Trading ( HFT ), Available for Sale ( AFS ) or Investment in Subsidiaries 43

44 and Associate. The objective of HFT portfolio is to make short-term capital gains, whilst the AFS portfolio is maintained with a medium view of earning both capital gain and dividend income. Some of the equity investments are listed and traded in public through stock exchanges, while other investments are unlisted. In accordance with the requirements of the SBP, quoted securities are carried at market value whereas investments in subsidiaries are accounted for in accordance with the relevant International Accounting Standard as applicable in Pakistan. The unrealized surplus / (deficit) arising on revaluation of the Bank s held for trading investment portfolio is taken to the profit and loss account. The surplus / (deficit) arising on revaluation of quoted securities classified as available for sale is kept in a separate account shown in the balance sheet below equity. The surplus / (deficit) arising on these securities is taken to the profit and loss account when actually realized upon disposal. Unquoted equity securities are valued at the lower of cost and break-up value. Subsequent increases or decreases in the carrying value are credited / charged to profit and loss account. Breakup value of equity securities is calculated with reference to the net assets of the investee company as per the latest available audited financial statements. Investments in other unquoted securities are valued at cost less impairment losses, if any. Provision for diminution in the value of securities is made after considering impairment, if any, in their value. Yield / interest rate risk It is the risk that is the fair value of a financial instrument will fluctuate as a result of changes in interest rates, including changes in the shape of yield curves. Government securities (PIBs & T-Bills), Bonds, Debentures, etc. and other money market investments are subject to interest rate risk. To capture the risk associated with these securities extensive modelling is being done with respect to duration analysis. Stress testing and scenario models are also in place to capture the sensitivity of the portfolio to adverse movement in interest rates. The interest rate sensitivity is prepared on a quarterly basis based on the re-pricing or contractual / behavioral maturities of assets and liabilities. For prudent risk management, all money market investments are marked to market to assess changes in the market value of investments due to interest rate movements. Liquidity risk Liquidity risk is the risk that the Group is unable to fund its current obligations or to fund increases in assets as they fall due without incurring unacceptable cost or losses. The Assets and Liability Management Committee ( ALCO ) is the forum empowered by Board to oversee liquidity management and meets on a monthly basis or more frequently, if required. ALM & Liquidity Risk Team is responsible for in-depth Analysis of the Balance Sheet at Bank level and 44

45 establish / monitor Risk Appetite Limits to enable effective Liquidity and ALM Risk Management. The team prepares and monitors analytics on ALM & Liquidity Structure such as Un-Utilized Commitments, Wholesale Funding, Core Funding, Deposit Concentrations and Liquidity Gaps. In addition, it also performs Stress Tests and Scenario Analyses. Based on the results produced, ALCO devises the liquidity management strategy to maintain adequate liquidity at all times. Operational risk Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. The Bank, like all financial institutions, is exposed to many types of operational risks, including the potential losses arising from internal activities or external events caused by breakdowns in information, communication, physical safeguards, business continuity, supervision, transaction processing, settlement systems and procedures and the execution of legal, fiduciary and agency responsibilities The Bank has in place a BOD approved Operational Risk Framework. Various policies and procedures with respect to this framework are currently being implemented across the Bank. The Bank maintains a system of internal controls designed to keep operational risk at appropriate levels, in view of the bank s financial strength and the characteristics of the activities and market in which it operates. These internal controls are periodically updated to conform to industry best practice. The Bank has also developed a Business Continuity Plan applicable to all its functional areas, with assistance of a consultant. The Bank is currently in the process of implementing internationally accepted Internal Control- Integrated Framework published by the Committee of Sponsoring Organizations of the Tread way Commission ( COSO ), with a view to consolidate and enhance the existing internal control processes. During 2012, the Bank Achieved permission from SBP to initiate Parallel Run for Alternate Standardized Approach ( ASA ) for Basel II Operational Risk Capital Charge Reporting, which signifies readiness of the Bank to move to advance approach. Business Risks The major risks that are relevant to the business of the Bank include: a. Risk of lower profit margins This includes the possible risk that the Bank s profit margins can reduce to a lower level due to various economic and market factors; the major factor being increased competition in the 45

46 banking sector and change in regulations that may result in pressure on the spread earned by the Bank because of overall higher cost of funds. b. Risk of reduced credit demand In the event of an upward movement in the interest rates and the increase in financing options available to the borrower, the Bank may face a risk of reduced credit off-take. c. Competition The consolidation of banks through acquisitions of smaller banks by established banks may increase the competition in the banking industry. d. Risk due to Non-Performing Loans (NPLs) An increase in the infected portfolio of the Bank may result in lower profitability/losses and subsequently result in reduction in equity. e. Risk due to change in Investment Policy Any change in the Bank s Investment Policy may lead to an impact on the price risk, interest rate risk etc. that ABL is exposed to. Mitigants The Bank has demonstrated significantly healthy financial performance over the past three years with net income of PKR 11.5 billion in 9MCY14, an increase of 39% over the same period last year. The Bank has one of the lowest NPL to asset amongst its peers. Its NPL ratio at 7.7% is almost half of sector average of 13%. Further, the Bank has a coverage ratio of 80% against the industry average of 78% ABL has a diversified asset portfolio which limits excessive exposure to any industrial sector. ABL has strong and vibrant capital markets function which managed to return sizeable capital gains (9MCY14: PKR 10.0bn on listed equities), which can be judiciously utilized to boost earnings growth. ABL has witnessed strong growth in branch network by ~13% in the last two years, which enabled the Bank to boost its deposit base. The Bank has one of the lowest cost structures amongst its peers. ABL s Cost-to-Income stands at 44% with a view to converge to 40%- 42% in medium term. ABL has strong Capital base with CAR standing at 18% compared to minimum requirement of 10% which can support fast-track growth in assets. The Bank has highly experienced senior management with extensive (over 20 years) experience in domestic and international markets. Regulatory Risk There is a risk that unanticipated changes in regulations could have an adverse impact on the Bank. However, such regulatory changes could reasonably be expected to affect all players within the sector and would therefore not affect ABL s competitive position or business in isolation. 46

47 Capital Market Risk Prices of shares depend on behavior of stock markets and the performance of the Bank. Hence, prices of shares may increase/ decrease based on market movement. The increase/ decrease in prices is mainly governed by market forces, however, from a fundamental point of view, the investor sentiment is mainly driven by strong financial performance. The Bank has strong fundamentals based on its asset size (i.e. amongst the top 5 largest private sector Bank in Pakistan), experienced management with proven track record. In making the investment decision, the investor may also take into consideration the following risk factors: a) Any variation in the quoted price of the Shares as a consequence of this Offer or publication of OFSD or otherwise; NOTE: IT IS STATED THAT ALL MATERIAL RISK FACTORS HAVE BEEN DISCLOSED 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 WE CURRENTLY DEEM TO BE LESS SIGNIFICANT, WHICH MAY MATERIALLY AND ADVERSELY AFFECT ABL S BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROSPECTS. 47

48 6 Financial Information 6.1 Auditors Report Auditors Report Under Section 53(1) Read With Clause 28(1) And 28(2) of Section 2 of Part I of the Second Schedule To The Companies Ordinance, 1984 for the Purpose of Inclusion In The OFSD of Allied Bank Limited 48

49 49

50 50

51 51

52 52

53 53

54 54

55 55

56 56

57 57

58 58

59 59

60 6.2 Share Break-Up Value Certificate 60

61 6.3 Auditors Certificate on Issued, Subscribed, And Paid-Up-Capital of the Bank 61

62 6.4 Unaudited Financial Statements for September 30,

63 63

64 64

65 65

66 6.5 Significant Financial Information for the Last 5 Years Unconsolidated Financial Statements Amounts in PKR mn Key Financial Ratios Return on equity 30.50% 28.80% 29.40% 28.40% 30.00% Return on assets 1.81% 1.89% 2.10% 2.03% 2.14% Profit before tax ratio 42.70% 43.70% 47.00% 49.20% 47.20% Gross spread ratio 45.50% 50.20% 48.60% 37.10% 40.00% Return on Capital employed 28.00% 25.60% 26.70% 26.10% 27.90% Advances to deposits ratio (ADR) - Gross 76.00% 72.10% 65.60% 56.10% 46.90% Advances to deposits ratio (ADR) - Net 72.20% 68.00% 61.20% 52.70% 43.90% Income / Expense ratio Cost to revenue ratio 39.00% 40.80% 42.60% 46.20% 50.50% Growth in gross income 36.00% 15% 14% 0% -3% Growth in net profit after tax 71.00% 15.00% 23% 15% 26% Total assets to shareholders funds (Tier 1) Total assets to shareholders funds (Tier 2) Intermediation cost ratio 3.10% 3.30% 3.60% 3.20% 2.80% NPL ratio 6.50% 7.00% 7.80% 7.20% 6.80% Net infection ratio 1.60% 1.30% 1.10% 1.10% 0.40% Weighted average cost of debt 6.84% 6.13% 6.35% 6.39% 5.66% Capital Adequacy ratio 13.47% 13.84% 13.43% 16.17% 17.85% BVPS excl. Reval BVPS incl. Reval Weighted Average cost of deposit 6.10% 5.15% 5.38% 5.39% 5.07% Earning asset to total asset ratio 86.10% 85.60% 85.60% 86.70% 87.60% Gross Yield on Earning Assets 11% 12% 12% 9% 8% Share Information Cash Dividend Per Share (PKR) Bonus Shares issues 10% 10% 10% 10% 10% Dividend Yield Ratio (cash dividend) 6.80% 5.70% 9.30% 8.80% 5.80% Dividend payout ratio (Total payout) 50% 48% 51% 61% 44% Earnings Per Share (EPS)(PKR) (2) Price to earnings ratio (1) Price to book value ratio (1) Net assets per share (PKR) (2)

67 Industry Share Deposits 7.50% 7.20% 6.80% 7.70% 8.10% Advances 7.50% 7.70% 7.80% 7.70% 7.20% Total Assets 6.90% 6.60% 6.60% 7.10% 7.70% Other Information EBTDA 11,169 13,194 16,139 17,077 16,458 Non - performing loans (NPLs) 16,281 18,688 20,452 20,668 19,424 Imports and Exports business 196, , , , ,104 Number of employees - Permanent 8,713 8,947 9,496 9,291 9,675 Number of employees - Total 11,690 12,588 13,029 9,932 10,213 Number of branches Number of ATMs Source: ABL financial statements Note: 1. Closing price as of November 28, Based on shares as of September 30,

68 7 Board and Management The Bank s affairs are governed by a Board of Directors, which currently consists of the President and Chief Executive Officer and eight other Directors. The President and Chief Executive Officer has an overall power of control and supervision over the affairs of the bank. 7.1 Board of Directors of the Bank Name Designation Directorships in other companies Mohammad Naeem Mukhtar Address: Ibrahim Fibres, Ibrahim Center -1, Ahmed Block, New Garden Town Lahore Sheikh Mukhtar Ahmad Address: Ibrahim Centre, 15 Club Road, Faisalabad Chairman / Non- Executive Sponsor Director Non-Executive Sponsor Director Ibrahim Fibres Ltd. Ibrahim Agencies (Pvt) Ltd. ABL Asset Management Company Ltd. Ibrahim Fibres Ltd. Ibrahim Agencies (Pvt) Ltd. ABL Asset Management Company Ltd. Other Occupation Businessman Businessman Muhammad Waseem Mukhtar Address: Ibrahim Centre, 15 Club Road, Faisalabad Abdul Aziz Khan Address: 176-B Sui Northern Officers Housing Society, DHA Lahore Cantt. Mubashir A. Akhtar Address: PSO Mozang Filling Station, 45- Mazang Road, Lahore Pervaiz Iqbal Butt Address: 59 W, AIBAK Block, New Garden Town, Lahore. Non-Executive Sponsor Director Independent Director Independent Director Independent Director Ibrahim Fibres Ltd. Ibrahim Agencies (Pvt) Ltd. ABL Asset Management Company Ltd. Faisalabad Industrial Estate Development Company (FIEDMC) None None Polytek Associates (Pvt.) Limited. Businessman Retired Banker Businessman Businessman 68

69 A. Akbar Sharifzada Address: House No. 365, Gall No.18, I-10/2, Islamabad Room No. 424, Q Block, Pak Secretariat, Islamabad GoP Nominee Director None Government Service Tariq Mahmood Address: House No. 107/2, Block-B, Phase-I, DHA, Lahore Muhammad Raffat Address: 3 Tipu Block, Main Boulevard, New Garden Town Lahore President & CEO Habib Allied International Bank (HAIB), UK ABL Asset Management Company Limited. None Company Secretary None None 7.2 Overdue Loans There are no overdue loans (local or foreign currency) payable by the Bank or its Directors. 7.3 Dividend Record of Associated Companies - Listed On Stock Exchange(s) None of the Bank s associated companies (except Ibrahim Fibers Limited- an associated company) or subsidiaries are listed on the Stock Exchanges. 7.4 Dividend Payout by Listed Companies in which the Bank s Directors hold Directorship Ibrahim Fibers Limited Year Cash Stock Total % 0% 15% % 0% 0% % 0% 0% % 0% 0% % 0% 15% % 0% 0% % 0% 20% % 0% 30% % 0% 30% % 0% 35% 69

70 7.5 Profiles of Directors Mohammad Naeem Mukhtar Chairman / Non-Executive Sponsor Director He has 28 years of experience in finance and industry. He has an MBA degree from Cardiff Business School, a post graduate diploma in Textiles, from U.K., and has done Chartered Textile Engineering from the textiles institute in Manchester. Apart from being the chairman of the Board of Directors at ABL, he is also the CEO on M/s Ibrahim Fibres Limited, the director of M/s Ibrahim Agencies (Pvt.), ABL Asset Management Company Ltd and member board of Governors of National Management Foundation, which is the parent body of LUMS Sheikh Mukhtar Ahmad Non-Executive Sponsor Director He has a vast experience of 52 years in the establishment and successful management of various industrial and financial companies. He is a "certified director" from the Pakistan Institute of Corporate Governance. Apart from being on the BoD of ABL, he is also the chairman of M/s Ibrahim Fibres Limited, Ibrahim Agencies (Pvt.) Limited and ABL Asset Management Company Ltd Muhammad Waseem Mukhtar Non-Executive Sponsor Director He is an Executive MBA from the University of Chicago Booth School of Business, Illinois, USA. He also holds a Master s degree in Total Quality Management (TQM) from University of Glamorgan, Wales, U.K. Mr. Waseem has 16 years of diversified experience in Finance, IT and Industry. His strategic guidance played a vital role in technological up-gradation of the Bank. He has been on the Board of Directors of Allied Bank Limited since 2004 and is a Certified Director from Pakistan Institute of Corporate Governance. He is also a Director on the Boards of M/s Ibrahim Fibres Limited, Ibrahim Agencies (Pvt.) Limited, ABL Asset Management Company Limited, Arabian Sea Country Club and Faisalabad Industrial Estate Development Company (FIEDMC) Abdul Aziz Khan Independent Director He has been on the board of ABL since 2004, and has a diversified and extensive experience of over 50 years, in the fields of General Banking, Credit, Lease Finance, Business Development and Administration. In addition, he also has 9 years of international banking experience while holding key positions in different countries. 70

71 7.5.5 Mubashir A. Akhtar Independent Director He has 47 years of banking experience, locally as well as internationally. As financial consultant for the Asian Development Bank, he has worked on various assignments pertaining to the industry. Furthermore, amongst various other institutions, he is also fellow of Institute of Bankers, Institute of Chartered Secretaries & Managers and Institute of Marketing Management. He is also Certified Director from Pakistan Institute of Corporate Governance Pervaiz Iqbal Butt Independent Director He is an Electrical Engineer with 44 years of experience in marine engineering, amongst other heavy industries. He has been on the board of Directors of ABL since 2007, and is a "Certified Director" from Pakistan Institute of Corporate Governance A. Akbar Sharifzada GoP Nominee Director He has a vast experience in policy making and administration due to his 27 years in Civil Service. Currently he is serving as additional finance secretary in the ministry of finance in Islamabad. His educational background includes masters in English Literature and Economics. He has been on the board of ABL since January 2012, after being nominated by the Government of Pakistan Tariq Mahmood President & CEO He, being one of the senior most bankers in the country, has over 40 years of experience. He has a post graduate degree in commerce, as well as a certification in Islamic Banking. In addition to his past experience in Habib Bank for 9 years, Middle East Bank, as Branch Manager, and Askari Bank as Senior Executive Vice President, he has been instrumental in the transformation of ABL from Unibank to Temenos T24. He was appointed as CEO by the BOD in June Management Profiles Tahir Hassan Qureshi Chief Financial Officer He is a fellow member of the Institute of Chartered Accountants of Pakistan. He has diversified experience of more than 21 years including over 17 years of experience in the banking industry where he has held senior management positions in Finance, Taxation and Corporate Affairs in HBL and BOP. He also served as CFO in MCB bank. He is a member of financial sector committee of the Institute of Chartered Accountants of Pakistan and Pakistan Banking Association s subcommittee on Accounting and Taxation. He joined ABL as Group Chief, Audit & Risk Review (A & RR) in 2008 and was made Chief Finance/CFO in September

72 7.6.2 Muhammad Jawaid Iqbal Chief Corporate & Investment Banking Mr. Iqbal is a Chartered Financial Analyst and holds a Masters in Business Administration degree with extensive experience in the field of Corporate & Investment Banking. Allied Bank is one of the leading corporate and investment banks in the country. The Corporate & Investment Banking Group has been the recipient of numerous awards conferred by locally and internationally recognized institutions Mr. Jawaid joined Allied Bank Limited in May 2005 and currently serving as Chief, Corporate and Investment Banking Group Ahmad Faheem Khan Chief Treasury Group Mr. Ahmed Faheem Khan started his career as Assistant Director, State Bank of Pakistan (Exchange & Debt Management Department) in April 1997 and served there at various areas including onsite inspection, offsite monitoring and market research till June Thereafter, Mr. Faheem joined, Habib Bank Limited as Assistant Vice President (Audit Division) and worked there from 2000 to He also served Standard Chartered Bank (Pakistan) for one year as Head of Fixed Income Trading before joining Allied Bank Limited. Mr. Ahmed Faheem Khan joined Allied Bank Limited in January 2008 and currently heading Treasury functions as its Chief Abdul Hafeez Butt Chief Islamic Banking Hafeez Butt has been instrumental in helping teams successfully achieve objectives in the field of Risk Management and Banking Operations. Under his leadership, projects such as centralization of Trade Factory and Business Process Re-engineering have been successfully completed. He has over 44 years of experience in both local and foreign banks with a record of meeting and achieving targets. He has been directly involved in improving ABL s branch Banking Operations and Risk Management Function. He holds a Masters degree in Business Administration. Mr Abdul Hafeez is currently serving Allied Bank as Chief, Islamic Banking. Considering his multi-faceted experience in banking Muhammad Shahzad Sadiq Chief Risk Management He is a fellow member of the Institute of Chartered Accountants of Pakistan. He possesses vast & diversified experience of having worked for more than 24 years in multinational and local banks as well as in leading industrial organizations of Pakistan. While working with various institutions he held the key positions like Chief Financial Officer, Head of Planning & Corporate Affairs, Head of 72

73 Credit & Marketing besides representing his institution on the Board of Directors of various companies as nominee director. Currently he is serving ABL as chief Risk Management Fareed Vardag Chief Compliance He is a seasoned banker having more than 28 years of extensive experience in the areas of trade finance, corporate banking and risk management with distinguished international and domestic banking institutions. He joined Allied Bank in March 2005 as Chief Risk Officer and successfully revamped the critical function of Risk Management in line with modern best practices. As part of Allied Bank s human capital development strategy, Group Chiefs are rotated on an on-going basis across various groups to broaden their exposure and in August 2011 Mr. Fareed Vardag was therefore transferred as Group Chief of Audit & Risk Review. This change augmented the Bank s audit function inducing a new perspective and vigor. Mr Fareed is currently serving the Bank as Chief, Compliance Group Shafique Ahmed Uqaili Chief Human Resource and General Services He joined the bank in year He is a seasoned HR specialist having multi-faceted national and international professional work experience in a wide variety of HR functions for over 26 years in different business sectors, including commercial banking, non-banking financial institutions, pharmaceuticals industry and retail/consumer businesses. He has a Bachelors degree in engineering, a Masters degree in computer science and business administration with specialization in human resource management. Besides Human Resources, he has also assigned role of general services Saif ul Islam Chief Banking Services Group He is a seasoned banker having more than 30 years of diversified experience in the banking industry. He is an Associate of Institute of Bankers, Pakistan and holder of distinction in Banking Law & Practice. He has attended numerous courses/seminars in Pakistan and abroad on different issues confronting Banking and Finance Mr. Saif Ul Islam joined Allied Bank Limited as Group Head Business, Commercial & Retail Banking in November He was assigned function of Chief Special Asset Management in October Currently, Mr. Saif Ul Islam is serving ABL as Chief Banking Service Mujahid Ali Chief Information Technology 73

74 He joined Allied Bank in 2008 as Group Chief Information Technology and possesses over 23 years of experience in the area of IT Planning & Development, Project Management & Systems Implementation. Prior to joining Allied Bank, Mr. Mujahid was heading the IT Department at Ibrahim Group. He has to his credit the successful implementation of various IT projects during his extensive career, such as T-24 core banking application, and a host of other IT initiatives aimed at enhancing customers experience and bank s operational efficiency Muhammad Mohsin Chief Audit & Risk Review Mr. Mohsin is a fellow member of the Institute of Chartered Accountants of Pakistan and possesses over 20 years of diversified experience in the fields of accounting, auditing, financial management and corporate affairs. During his professional career, he has held varying and increasingly responsible positions and had served as Head of Finance, Accounting, Operations, Leasing and Internal Audit of various prominent organizations. He joined ABL in 2009 and has a proven track record in team building process re-engineering, system development and establishing effective Internal Audit Function Afzal Haider Bukhari Group Special Assets Management Group Afzal Haider Bokhari, a veteran banker, has to his credit over 40 years of banking experience in diversified field of banking. Basically he is a retail banker who started his banking career with United Bank Limited in 1972 and served in various capacities for 27 years, holding senior portfolio management positions. He also served UBL in UAE. Prior to joining Allied Bank as Group Head, Commercial & Retail Banking, he served Askari Commercial & Faysal Bank. Mr. Bukhari did his Bachelor (Hons) and Master in Commerce from Hailey College of Commerce, University of the Punjab. He also holds DAIBP from Institute of Banker Pakistan. Apart he has attended quite a good number of seminars, courses & workshops at National & International level. Currently, Mr. Afzal H. Bukhari is serving ABL as Chief, SAM Tahir Yaqoob Bhatti Chief Commercial Banking Group He is a seasoned banker having more than 28 years of diversified experience in the banking industry. He holds MBA Degree in Finance from University of the Punjab, Lahore and DAIBP from Institute of Bankers of Pakistan. He started his career from National Bank of Pakistan and then served at senior positions in various reputable Banks before joining Allied Bank Limited in September 2012 as Group Head Business, Commercial & Retail Banking Group. Currently, he is serving ABL as Chief, Commercial Banking Group. 74

75 Tariq Javed Ghumman Chief Retail Banking Group He holds MBA Degree in Finance from Bahauddin Zakariya University Multan and more than 20 years of banking experience in diversified and senior roles. He started his career from State Bank of Pakistan in May Thereafter, he served at senior positions in Bank Al-Habib Limited and Askari Commercial Bank. He joined Allied Bank Limited in February 2006 as Regional Head (Operations) and then served as Group Head SME, Commercial & Retail Banking. Currently, he is serving ABL as Chief, Retail Banking Group 7.7 Number of Directors Until otherwise determined by a general meeting, the number of directors shall not be less than seven and more than eleven. At present, the Board consists of 8 Directors including the President/ CEO. There is one casual vacancy created in the board on 20th November, 2014 which will be filled in due course in accordance with the requirements of relevant laws 7.8 Qualification of Directors Until otherwise determined by a general meeting, the qualification of every Director, (not being Chief Executive and Director nominated by the Federal Government) shall be his holding in his own name shares of the nominal value of PKR 25,000. Chief Executive need not hold any qualification shares. 7.9 Remuneration of the Directors Until otherwise determined by a General Meeting, each director shall receive out of funds of the company by way of remuneration for attending the meeting of the directors or a committee of directors such sum per meeting as is determined by board of directors from time to time The directors may allow and pay to any director who for the purpose of attending a board meeting is not a bonafide resident of the place where meeting is held and is required to travel from his place of residence to the place of meeting, a sum as the directors may consider fair compensation for his travelling and accommodation expenses in addition to his fee for attending such meeting. Currently PKR 100,000/- per meeting (Board and Sub Committees) is being paid to independent and Govt. Nominee Director of the Bank 7.10 Remuneration for Extra Service As per Articles of Association, the remuneration of a Director for performing extra services, including the holding of the office of Chairman shall be determined by the directors or the company in a General Meeting 75

76 Currently no other remuneration is paid to Directors for performing extra services, including the holding of office of Chairman Benefits to the Promoters and Officers No benefit has been given or is intended to be given by the Bank to the promoters and officers of the Bank other than remuneration for services rendered by them as full time executives of the Bank Interest of Directors The directors may be deemed to be interested to the extent of fees payable to them for attending Board and Committee 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 shareholders in the capital of the Bank Interest of Directors in Property Acquired By the Bank None of the Directors of the Bank had or has any interest in any property acquired by the Bank within the last two years Appointment of Chief Executive/President Subject to the provisions of Companies Ordinance and SBP rules and regulations, the Directors may from time to time, appoint a Chief Executive for the business of Company for a term not exceeding three years and many from time to time (Subject to the terms of any contract with him) remove or dismiss him from the office and appoint any other person in his place. The terms and conditions of appointment of a Chief Executive shall be determined by the Directors (or the Company in General Meeting). The Chief Executive shall be deemed to be a Director and shall be entitled to all the rights and privileges and be subject to all the liabilities of that office Appointment/Election of Directors The Directors of the Bank are elected for a term of three years in accordance with the procedure laid down in section 178 of the Ordinance. The Directors shall comply with the provisions of Sections 174 to 178 and Sections 180 and 184 relating to the election of Directors and matters ancillary thereto. Subject to the provisions of the Ordinance, the Bank may from time to time increase or decrease the number of Directors. 76

77 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. A Director may be removed by the State Bank of Pakistan in accordance with Section 41-A of the Banking Companies Ordinance, 1962 and by the Company in accordance with Section 181 of the Companies Ordinance, Voting Rights The rights and privileges, including voting rights, attached to the Ordinary Shares of the Bank are equal Board Audit Committee and Board Human Resources & Compensation Committee Board Audit Committee and Board Human Resources & Compensation Committee of the Board have been formed to comply with the Code of Corporate Governance 2012 in accordance with the Listing Regulations of KSE, LSE & ISE. The Board Audit Committee of the Bank comprises of the following individuals: Mubasshir A. Akhtar (Chairman) Pervaiz Iqbal Butt (Member) A. Akbar Sharifzada (Member) Board Human Resources & Remuneration Committee comprises of following individuals: 7.18 Internal Audit Abdul Aziz Khan (Chairman) Muhammad Waseem Mukhtar (Member) Pervaiz Iqbal Butt(Member) Tariq Mahmood(Member) The Board of Directors has setup an effective internal audit function managed by suitable qualified and experienced personnel who are conversant with the policies and procedures of the Bank and are involved in the internal audit function on a full time basis Borrowing Powers The Directors may from time to time raise or borrow any sum or sums of money or make any arrangement for finance for the purpose of the Company on such terms and conditions and on such rates of return, mark-up, profit, fee, commission and charges and against such security or otherwise as the Directors may think. 77

78 7.20 Powers of Directors As required under section 196 of the Companies Ordinance, 1984, and the Articles of Association of the Bank, the authority to conduct the 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 Ordinance, 1984 or the Articles of Association of the Bank or by a special resolution, to be exercised by the Bank in the general meeting of the shareholders Indemnity Every Director, Chief Executive, officer or auditor of the Bank may be indemnified out of the funds of the Bank against all liability incurred by him as such Director, chief executive, officer or auditor in defending any proceedings, whether civil or criminal, in which judgment is given in his favor, or in which he is acquitted, or in connection with any application under the relevant provisions of the Ordinance in which relief is granted to him by the court Investment in Associated Companies The Bank holds Investments in the following associated companies (based on common directorship) as at December 31, 2013: Associated Company Investment Percentage Holding Habib Allied International Bank PKR 275mn 9.24% Arabian Sea Country Club Limited PKR 5mn 6.45% 7.23 Investment in Subsidiaries Extent of the interest of Allied Bank Limited (the holding company) in the equity of its subsidiaries is as follows: Subsidiary Company Investment Percentage Holding ABL Asset Management Company PKR 500 mn 100.0% 78

79 8 Miscellaneous Information 8.1 Registered Office 3 Tipu Block Main Boulevard, New Garden Town Lahore UAN: info@abl.com Fax: Head Office 3 Tipu Block Main Boulevard, New Garden Town Lahore UAN: Contact Centre: Website: info@abl.com 8.3 Company Secretary Mohammad Raffat Company Secretary 3 Tipu Block Main Boulevard, New Garden Town Lahore 8.4 Auditors of the Bank M/s. Ernst & Young Ford Rhodes Sidat Hyder & Co. Chartered Accountants Mall View Building, 4- Bank Square Lahore 8.5 Legal Advisor of the Bank M/s. Mandviwala & Zafar Associates 7/B-1, Aziz Avenue, Canal Bank Gulberg V, Lahore Telephone: Fax: mz@mandviwallaandzafar.com ali@mandviwallaandzafar.com 79

80 8.6 Legal Counsel to the Offer Mohsin Tayebaly & Company 2nd Floor Dime Centre, BC-4 Block 9 KDA Scheme 5, Clifton, Karachi 8.7 Share Registrar M/s. Technology Trade (Pvt.) Limited Dagia House, 241-C Block-2, PECHS Karachi 8.8 Bankers to the Offer MCB Bank Limited MCB House 15-Jail Road Gulberg Lahore Website: UAN Joint Lead Managers Elixir Securities Pakistan (Pvt.) Limited 8 th Floor, Dawood Center M.T. Khan Road Karachi, Pakistan MCB Bank Limited 20 th Floor, MCB Tower I.I. Chundrigar Road Karachi, Pakistan AKD Securities Limited 602, Continental Trade Centre Clifton Block 8 Karachi, Pakistan

81 8.10 Joint Book Runners Elixir Securities Pakistan (Pvt.) Limited 8 th Floor, Dawood Center M.T. Khan Road Karachi, Pakistan AKD Securities Limited 602, Continental Trade Centre Clifton Block 8 Karachi, Pakistan Material Contracts / Documents Material contracts other than those entered into in the Ordinary course of business are as follows: Contracts/ Documents in respect of Term Finance Certificate-1 ( TFC ), details of which are set out in Prospectus dated December 06, A total amount of PKR 2,500 million was raised through these TFC s. The TFC have tenure of 8 years and rank subordinate as per the payment of principal and profit to all other ineptness of the bank (including deposit). The TFC carry a markup of 6 months KIBOR plus 1.90% to be paid semi-annually( effective rate at the time of issuance was 12.46%). 0.24% of principal shall be redeemed in the first 72 months and remaining shall be redeem in 4 equal semi-annually installment of 24.94% each of the issue amount respectively, starting form 78 th installment. Contracts/ Documents in respect of Term Finance Certificate-2 ( TFC ), details of which are set out in Prospectus dated August 28, A total amount of PKR 3,500 million was raised through these TFC s. The TFC have tenure of 10 years and rank subordinate as per the payment of principal and profit to all other ineptness of the bank (including deposit). The TFC carry a markup of 6 months KIBOR plus 0.85% to be paid semi-annually for first 5 years and 6 month KIBOR plus 1.30% from the start of 6 th year (effective rate for first five years is 12.92% and 13.37% for the last five at the time of issue). The issuer has the right to seek redemption after the eleventh redemption date of entire TFC issues, prior to its stated maturity. The instrument is structured to redeem 0.38% of principal in the first 114 months and the remaining principal of 99.62% of the issue at 120 th month from the date of issuance of TFC i.e. at maturity 81

82 8.12 Inspection of Documents and Contracts Copies of Memorandum and Articles of Association of the Company, the Auditors Certificate, Information Memorandum, Credit Rating Report and copies of agreements referred to in the OFSD may be inspected during usual business hours on any working day at the registered office of the Bank from the date of publication of the OFSD until the closing of subscription list Legal Proceedings The bank is not a party to any material legal proceedings other than cases incidental to the business of bank and/or those explained in part 6.1 of this OFSD 8.14 Memorandum of Association The Memorandum of Association, inter alia, contains the objects for which the Bank was incorporated and the business which the Bank is authorized to undertake. A copy of the Memorandum of Association is annexed to this Offer for Sale and is being published with all issues thereof except those released as newspaper advertisements Revaluation of Assets Bank arranged for valuation of Properties as at December 31, 2011 from three independent valuer listed on Pakistan Banks Association Panel(The Panel) (Akbani & Javed, Asif Associates and Harvester Services ). The revalued amounts of properties have been determined on the basis of Fair Value Model. The revaluation resulted in net increase in the carrying values of the properties by PKR million. Had there been no revaluation, the carrying amount of revalued assets as at December 31,2013 would have been as follows: PKR million Land 5,663 Buildings 3, Financial Year of the Bank The financial year of the Bank commences from the 1 st day of January and ends on the 31 st day of December each year Capitalization of Profits The Bank has issued a total of 720,745,186 bonus shares (each with a par value of PKR 10 per share) amounting to PKR 7,207 million. 82

83 8.18 Dividend History of the Bank Dividends Paid Year Cash Stock Total % 25% 0% 0% 0% 25% % 20% 45% % 20% 50% % 10% 35% % 10% 50% % 10% 50% % 10% 60% % 10% 75% % 10% 62.50% June 2014* 27.5% % *Interim dividend paid till 30 June 2014 Dividends are a percentage of PAR value of shares (i.e. PKR 10) 83

84 9 Bid Application and Allocation Instructions Instructions for Filling the Bidding Form 1. The Bidding Period shall remain open for two (2) working days during business hours. The Book Building process will open at 9:00 AM PST and close at 5:00 PM PST on December 10, 2014 and December 11, Fill in all the particulars of the form accurately in BLOCK LETTERS. 3. Kindly provide a copy of CNIC or passport (in case of HNWI) or NTN Certificate (in case of financial institution) or Certificate of Incorporation (in case of companies) along with the bidding form. 4. Applicants are requested to provide accurate contact details. Please provide accurate landline number(s), mobile number(s), fax number(s) and address(es). 5. Submit complete bidding form along with the margin money via Demand Drafts or Pay Orders only. Please Note: 1. For deposit of Margin Money/Bid Amount, only Pay Orders or Demand Draft will be accepted or online transfer to Account Number titled Offer for Sale of Shares of Allied Bank Limited Book Building Account maintained at MCB Bank Limited, Shaheen Complex Branch, Karachi 2. Receiving will only be provided on duplicate bidding form. Please ensure that a duly filled duplicate bidding form is submitted with at the time of placement of bid. 3. The bidder is required to duly fill Additional Payment Form for depositing additional funds for enhancement of deposit amount. 4. Investors can revise and withdraw their bids by notifying either of the Joint Book Runners. Bid revisions and withdrawal facility will be available throughout the entirety of the Book Building process. 5. All Payments to be made in favor of Offer for Sale of Shares of Allied Bank Limited - Book Building Account at any of the following bidding centers: Bid Collection Centers Karachi Contact Person Waqar Ali Shaheer Shaikh Syed Furqan Ahmed Phone Fax Number wali@elixirsec.com sshaikh@elixirsec.com sfurqan.ahmed@akdsecurities.net Postal Address Elixir Securities, 8 th Floor, Dawood Centre, M. T. Khan Road, Karachi Islamabad Contact Person Asim Ghafoor Najeeb Altaf Malik Khalid Hussain 84

85 Phone Postal Address Elixir Securities, House # 68, Main Margalla Road, F-6/2, Islamabad Lahore Contact Person Tahir Maqbool Imtiaz Ahmed Bhatti Ehsan Ahmad Qureshi Phone tmaqbool@elixirsec.com iabhatti@elixirsec.com ehsan.ahmad@akdsecurities.net Postal Address Elixir Securities, Office # 2, Ground Floor, Rehman Business Centre, 32-B-III, Lahore 6. Eligible Investors residing outside the city of Bid Collection Centers, may submit their Bid(s) at the Designated Branches of MCB mentioned below. Designated Branches for Eligible Investors Residing Outside the City of Bid Collection Centres No. Code Branch Name Branch Manager Address Phone # MCB Circular Road Branch, Faisalabad MCB Hayatabad Branch, Peshawar Corporate The Mall Branch, Rawalpindi Corporate Branch, Abdali Road, Multan Mr. Muhammad Asif Awan Mr. Umer Zia Mr. Muhammad Shehzad Saleem Mr. Muhammad Rohail Akhtar Ground Floor, MCB Building, Circular Road, Faisalabad Phase V, Back side of Pak Tobacco Board, Hayatabad, Peshawar 35 B, Haider Road, Rawalpindi Cantt 59 A, Abdali Road Multan , , , , , muhammad.awan@mcb.com.pk mcb1448@mcb.com.pk ops0890@mcb.com.pk rohail.akhtar@mcb.com.pk mcb1039@mcb.com.pk 7. International Investors may submit their Bids via or fax to the Bid Collection Centers. 8. CASH SHOULD NOT BE SUBMITTED WITH BIDDING FORM AT THE BID COLLECTION CENTER. 9. THE BID SHOULD BE SUBMITTED ON THE PRESCRIBED BIDDING FORM IN PERSON as mentioned in note 6 above. 10. The bidders are requested to fill in both the original and duplicate copy of bidding forms completely. Upon submission, they will receive back the duly singed and stamped duplicate form of their bids which will be proof of their bid submission. In case of facsimile, a copy of form with receiving will be faxed back to the bidder. The bidder will not be provided with any receiving if a duly filled duplicate form is not submitted along with the bid. 11. Bids can be placed at limit price or step bid. c) Payment for Limit Price If investors are placing their bids through limit price then they shall deposit the Margin Money based on the number of shares they are bidding for at their stated bid price. For instance, if an Eligible Investor is applying for 0.8 million shares at a price of PKR 125 per share, then the total Bid Amount would amount to PKR 100,000,000 /-. In such a case, (i) an HNWI investor shall deposit PKR 100,000,000 in the specified Book Building account as the Margin Money which is 100% of PKR 100,000,000, and (ii) an Institutional Investor shall 85

86 deposit at least PKR 25,000,000 in the specified Book Building account as the Margin Money, which is 25% of PKR 100,000,000. d) Payment for Step Bids If investors are placing a Step Bid, which is a series of limit bids at increasing prices, then they shall deposit the Margin Money/Bid Amount based on the total number of shares they are bidding for at their stated bid prices. For instance, if the investor bids for 0.7 million shares at PKR 135 per share, 0.5 million shares at PKR 140 per share and 0.25 million shares at PKR 142 per share, then in essence the investor has placed one Step Bid comprising three limit bids at increasing prices. The Bid Amount in this instance would be PKR 200,000,000/-. In such a case, (i) an HNWI investor shall deposit PKR 200,000,000 in the specified Book Building account as the Margin Money which is 100% of PKR 200,000,000, and (ii) an Institutional Investor shall deposit at least PKR 50,000,000 in the specified Book Building account as the Margin Money, which is 25% of PKR 200,000, Joint Book Runners shall collect an amount of 100% of the application money as Bid Amount in respect of Bids placed by HNWI 13. Joint Book Runners shall collect an amount of 25% of the application money as Margin Money in respect of Bids placed by Institutional Investors 14. The Bidding Period shall remain open for two (2) working day during business hours. The Book Building process will open at 9:00AM PST and close at 5:00PM PST on December 10, 2014 and December 11, Bidders can revise and withdraw their bids by notifying either of the Joint Book Runners. Bid revisions and withdrawal facility will be available throughout the entirety of the Book Building process. For details, please refer to Para 2.10 and 2.12 of the Offer for Sale Document. 16. Successful bidders shall be intimated, within two (2) working days of the closing of the bidding period, the strike price and the number of shares provisionally allotted to each of them. 17. Successful institutional investors would be required to deposit the remaining balance within five (5) working days of the Book Building or three (3) working days from the intimation of successful provisional allocation, whichever is earlier. 18. Where a successful bidder defaults in payment of shares allotted to him, in any manner whatsoever, the margin money deposited by such bidder shall be forfeited to the Offerer. 19. Final allocation of shares out of the Book Building Issue shall be made after receipt of full subscription money from the successful bidders. Shares to successful bidders shall be transferred within eight (08) working days of the book building process. 20. Unsuccessful bid shall be refunded within five (05) working days of the close of the bidding period, through courier, to the address submitted on the Bidding Form. 86

87 10 Signatory to the OFSD Signed, as required by Section 57(3) read with Section 62(3) of the Companies Ordinance, 1984 by -sd- Sardar Ahmad Nawaz Sukhera Additional Secretary (Incharge) Privatisation Division Ministry of Finance, Revenue, Economic Affairs, Statistics and Privatisation Government of Pakistan, Islamabad Witnesses: sd- Shazia Mushtaq Section Officer (Admin) Privatisation Division Islamabad sd- Anwar Malik Director General (Admin & Finance) Government of Pakistan Privatisation Commission, Islamabad 87

88 11 Memorandum of Association of Allied Bank Limited 88

89 89

90 90

91 12 Bid Application Forms / Bidding Forms INSTRUCTIONS FOR BIDDING OFFER FOR SALE OF RESIDUAL SHAREHOLDING OF GOVERNEMT OF PAKISTAN IN ALLIED BANK LIMITED THROUGH PRIVATISATION AT A FLOOR PRICE The present offer consists of 131,275,073 Ordinary Shares representing 11.5% of the Total Paid Up Share Capital of Allied Bank Limited at a Floor Price which shall be at a premium to the Par Value of PKR 10/- per share (the Offer ) Instructions for Filling the Bidding Form 1. The Bidding Period shall remain open for two (2) working day during business hours. The Book Building process will open at 9:00AM PST and close at 5:00PM PST on December 10, 2014 and December 11, Fill in all the particulars of the form accurately in BLOCK LETTERS. 3. Kindly provide a copy of CNIC or passport (in case of HNWI) or NTN Certificate (in case of financial institution) or Certificate of Incorporation (in case of companies) along with the bidding form. 4. Applicants are requested to provide accurate contact details. Please provide accurate landline number(s), mobile number(s), fax number(s) and address(es). 5. Submit complete bidding form along with the margin money via Demand Drafts or Pay Orders only. Please Note: 1. For deposit of margin money, only Pay Orders or Demand Draft will be accepted or online transfer to Account Number titled Offer for Sale of Shares of Allied Bank Limited Book Building Account maintained at MCB Bank Limited, Shaheen Complex Branch, Karachi. 2. Receiving will only be provided on duplicate bidding form. Please ensure that a duly filled duplicate bidding form is submitted with at the time of placement of bid. 3. The bidder is required to duly fill Additional Payment Form for depositing additional funds for enhancement of deposit amount. 4. Investors can revise and withdraw their bids by notifying either of the Joint Book Runners. Bid revisions and withdrawal facility will be available throughout the entirety of the Book Building process. 5. All Payments to be made in favor of Offer for Sale of Shares of Allied Bank Limited - Book Building Account at any of the following bidding centers: Bid Collection Centers Karachi Contact Person Waqar Ali Shaheer Shaikh Syed Furqan Ahmed Phone Fax Number wali@elixirsec.com sshaikh@elixirsec.com sfurqan.ahmed@akdsecurities.net 91

92 Postal Address Elixir Securities, 8 th Floor, Dawood Centre, M. T. Khan Road, Karachi Islamabad Contact Person Asim Ghafoor Najeeb Altaf Malik Khalid Hussain Phone aghafoor@elixirsec.com naltaf@elixirsec.com malik.khalid@akdsecurities.net Postal Address Elixir Securities, House # 68, Main Margalla Road, F-6/2, Islamabad Lahore Contact Person Tahir Maqbool Imtiaz Ahmed Bhatti Ehsan Ahmad Qureshi Phone tmaqbool@elixirsec.com iabhatti@elixirsec.com ehsan.ahmad@akdsecurities.net Postal Address Elixir Securities, Office # 2, Ground Floor, Rehman Business Centre, 32-B-III, Lahore 6. Eligible Investors residing outside the city of Bid Collection Centers, may submit their Bid(s) at the Designated Branches of MCB mentioned below. Designated Branches for Eligible Investors Residing Outside the City of Bid Collection Centres No. Code Branch Name Branch Manager Address Phone # MCB Circular Road Branch, Faisalabad MCB Hayatabad Branch, Peshawar Corporate The Mall Branch, Rawalpindi Corporate Branch, Abdali Road, Multan Mr. Muhammad Asif Awan Mr. Umer Zia Mr. Muhammad Shehzad Saleem Mr. Muhammad Rohail Akhtar Ground Floor, MCB Building, Circular Road, Faisalabad Phase V, Back side of Pak Tobacco Board, Hayatabad, Peshawar 35 B, Haider Road, Rawalpindi Cantt 59 A, Abdali Road Multan , , , , , muhammad.awan@mcb.com.pk mcb1448@mcb.com.pk ops0890@mcb.com.pk rohail.akhtar@mcb.com.pk mcb1039@mcb.com.pk 7. International Investors may submit their Bids via or fax to the Bid Collection Centers. 8. CASH SHOULD NOT BE SUBMITTED WITH BIDDING FORM AT THE BID COLLECTION CENTER. 9. THE BID SHOULD BE SUBMITTED ON THE PRESCRIBED BIDDING FORM IN PERSON as mentioned in note 6 above. 10. The bidders are requested to fill in both the original and duplicate copy of bidding forms completely. Upon submission, they will receive back the duly singed and stamped duplicate form of their bids which will be proof of their bid submission. In case of facsimile, a copy of form with receiving will be faxed back to the bidder. The bidder will not be provided with any receiving if a duly filled duplicate form is not submitted along with the bid. 11. Bids can be placed at limit price or step bid. e) Payment for Limit Price If investors are placing their bids through limit price then they shall deposit the Margin Money based on the number of shares they are bidding for at their stated bid price. For instance, if an Eligible Investor is applying for 0.8 million shares at a price of PKR 125 per share, then the total Bid Amount would amount to PKR 100,000,000 /-. In such a case, (i) an HNWI 92

93 investor shall deposit PKR 100,000,000 in the specified Book Building account as the Margin Money which is 100% of PKR 100,000,000, and (ii) an Institutional Investor shall deposit at least PKR 25,000,000 in the specified Book Building account as the Margin Money, which is 25% of PKR 100,000,000. f) Payment for Step Bids If investors are placing a Step Bid, which is a series of limit bids at increasing prices, then they shall deposit the Margin Money/Bid Amount based on the total number of shares they are bidding for at their stated bid prices. For instance, if the investor bids for 0.7 million shares at PKR 135 per share, 0.5 million shares at PKR 140 per share and 0.25 million shares at PKR 142 per share, then in essence the investor has placed one Step Bid comprising three limit bids at increasing prices. The Bid Amount in this instance would be PKR 200,000,000/-. In such a case, (i) an HNWI investor shall deposit PKR 200,000,000 in the specified Book Building account as the Margin Money which is 100% of PKR 200,000,000, and (ii) an Institutional Investor shall deposit at least PKR 50,000,000 in the specified Book Building account as the Margin Money, which is 25% of PKR 200,000, Joint Book Runners shall collect an amount of 100% of the application money as Bid Amount in respect of Bids placed by HNWI 13. Joint Book Runners shall collect an amount of 25% of the application money as Margin Money in respect of Bids placed by Institutional Investors 14. The Bidding Period shall remain open for two (2) working day during business hours. The Book Building process will open at 9:00AM PST and close at 5:00PM PST on December 10, 2014 and December 11, Bidders can revise and withdraw their bids by notifying either of the Joint Book Runners. Bid revisions and withdrawal facility will be available throughout the entirety of the Book Building process. For details, please refer to Para 2.10 and 2.12 of the Offer for Sale Document. 16. Successful bidders shall be intimated, within two (2) working days of the closing of the bidding period, the strike price and the number of shares provisionally allotted to each of them. 17. Successful institutional investors would be required to deposit the remaining balance within five (5) working days of the Book Building or three (3) working days from the intimation of successful provisional allocation, whichever is earlier. 18. Where a successful bidder defaults in payment of shares allotted to him, the margin money deposited by such bidder shall be forfeited to the Offerer. 19. Final of shares out of the Book Building Issue shall be made after receipt of full subscription money from the successful bidders. Shares to successful bidders shall be transferred within eight (08) working days of the book building process. 20. Unsuccessful bid shall be refunded within five (05) working days of the close of the bidding period, through courier, to the address submitted on the Bidding Form. 93

94 Bidding Form Tick Joint Book Runners One KHI LHR ISB Others Bidding starts on Dec 10, 2014 Bidding ends on Dec 11, 2014 ALLIED BANK LIMITED Bidding form No. The Government of Pakistan, Privatisation Division of The Ministry Of Finance, Revenue, Economic Affairs, Statistics and Privatization acting through the Privatisation Commission is offering 131,275,073 Ordinary Shares representing 11.5% of the Total Paid Up Share Capital of Allied Bank Limited at a Floor Price which shall be at a premium to the par value of PKR 10/- PLEASE FILL THE FORM IN BLOCK LETTERS. PLEASE MAKE SURE TO PROVIDE ACCURATE DETAILS TO AVOID ANY INCONVENIENCE Please Tick the appropriate box Name Address Local Institutional Investor Foreign Institutional Investor Cell # Resident Nationality Land Line# Non Resident Foreigner High Net Worth Individuals Fax # CNIC/Passport No. NTN Number* Payment Details Payments to be made in favor of: Offer for Sale of Shares of Allied Bank Limited - Book Building Account *Investors are encouraged to disclose their NTN Number for deduction of Tax at the reduced rate of 10% instead of 15% on Dividends Amount in Figures Instrument No. Instrument Date Margin %age Banker s Name, Address & Branch CDC Participant Name Sub House A/C No CDC Investor Service A/C ID CDC Details for Sub A/C and House A/C CDC Participant ID No House A/C No. CDC Details for Investor A/C CDC Investor A/C No DIVIDEND MANDATE (Optional): Mark tick [ ] in the appropriate boxes: Yes [ ] No [ ] Incase the Applicant intends that if shares applied for are issued to him/it and the dividend declared by the company, if any, is credited directly in his/it bank account, instead of issue of dividend warrants, then please fill in the following boxes: Title of Account Account Number Bank Name & Address The Privatisation Division, Ministry of Finance, Revenue, Economic Affairs, Statistics and Privatization 5-A Constitution Avenue, EDB Building, Islamabad, Pakistan Dear Sir, On the basis of Offer for Sale Document by the Privatisation Commission, Government of Pakistan for the sale of Government of Pakistan s residual shareholding in Allied Bank Limited dated December 05, 2014, I/we hereby bid for subscription of shares of the company as under: Bid Details No. of Shares Bid for Bid price per share Bid Amount Bid Option (Please tick) (In Figures) (In figures) (In figures) Limit Order Step Order: Option (1) Option (2) Option (3) Option (4) Total (Shares and Bid) Important Instructions: 1) Bids should be placed for a minimum amount of PKR 500,000. It should also be noted that the number of shares bid for should be rounded & fractional shares will not be acceptable. Please ensure that after rounding the no. of shares multiplied by your bid price is at least PKR 500,000. Signature of Bidder

95 In terms of the Listing Regulations of the Karachi Stock Exchange ( KSE ), Lahore Stock Exchange ( LSE ), and Islamabad Stock Exchange ( ISE ) together collectively referred to as (the Stock Exchanges ), I/we am/are eligible to bid in this Offer For Sale. The amount payable on biding is remitted herewith which is the applicable margin amount. I/We agree to pay the balance amount of application money, if any, upon successful allocation of shares. In case no shares are allotted to me/us you are hereby authorized to return to me/us by demand draft/pay order/cheque application money, within five (05) working days of the close of the bidding period, through courier, to the first address written below or to the bank through which I/we tender this application. I/We agree that this is a binding agreement to accept the number of shares as may be allocated to me/us subject to the terms of the Offer for Sale Document, the bidding form and other applicable laws. I/ we undertake that I/we will sign all such other documents and do all such acts, if necessary on my/our part to enable me/us to be allocated/allotted/transferred the shares and to pay for the same. I/we authorize you to place my/our name(s) on the register of the members of the Company as holder(s) of the Ordinary Shares that will be allocated/allotted/transferred to me/us and to register my/our address as given below. I/ We noted that the Joint Book Runners are entitled, in their absolute discretion to accept or reject this Bidding Application for reason(s) to be recorded in writing and the reason(s) should be disclosed to us forthwith. I/We have no objection if there are necessary changes made in the Offer for Sale Document for filling of the same with the Securities and Exchange Commission of Pakistan ( SECP ). I understand that the Privatisation Commission, the Joint Book Runners, SECP and the Stock Exchanges reserve the right of legal action against me under the law of Pakistan, if I submit a fictitious bid and/or my the instrument deposited by me for margin money is bounced and I submit to the jurisdiction of the courts of Karachi in case of any dispute in relation to this bidding form or related matters. I DECLARE THAT: i) I AM/WE ARE NATIONAL(S) AND RESIDENT(S) OF PAKISTAN; ii) FORIEGNER; iii) I AM/WE ARE NOT MINOR(S); iv) I/ WE HAVE NOT MADE NOR HAVE I/WE INSTRUCTED ANY OTHER PERSON(S)/INSTITUTION(S) TO MAKE ANY OTHER APPLICATION(S) IN MY/OUR NAME(S) OR IN THE NAME OF ANY OTHER PERSON ON MY/OUR BEHALF OR IN ANY FICTITOUS NAME, IN CASE OF ANY INFORMATION GIVEN HEREIN BEING INCORRECT I/WE UNDERSTAND THAT I/WE SHALL NOT BE ENTITLED FOR ALLOCATION/ALLOTMENT/TRANSFER OF SHARES. Important Instructions: Receiving will only be provided on duplicate bidding form. Please ensure that a duly filled duplicate bidding form is submitted with at the time of placement of bid. For deposit of margin money, only Pay Orders or Demand Draft will be accepted. Investors can revise and withdraw their bids by notifying either of the Joint Book Runners. Bid revisions and withdrawal facility will be available throughout the entirety of the bookbuilding process. Yours Faithfully, Signature: To be filled in by the Book Runner Time of Receipt Date Location Amount Pay Order No./ Demand Draft No. Stamp

96 Duplicate Bidding Form Tick Joint Book Runners One KHI LHR ISB Others Bidding starts on Dec 10, 2014 ALLIED BANK LIMITED Bidding ends on Dec 11, 2014 Bidding form No. The Government of Pakistan, Privatisation Division of The Ministry Of Finance, Revenue, Economic Affairs, Statistics and Privatization acting through the Privatisation Commission is offering 131,275,073 Ordinary Shares representing 11.5% of the Total Paid Up Share Capital of Allied Bank Limited at a Floor Price which shall be at a premium to the par value of PKR 10/- PLEASE FILL THE FORM IN BLOCK LETTERS. PLEASE MAKE SURE TO PROVIDE ACCURATE DETAILS TO AVOID ANY INCONVENIENCE Please Tick the appropriate box Name Local Institutional Investor Foreign Institutional Investor High Net Worth Individuals Cell # Resident Nationality Address Land Line# Non Resident Foreigner Fax # CNIC/Passport No. NTN Number* Payment Details Payments to be made in favor of: Offer for Sale of Shares of Allied Bank Limited - Book Building Account *Investors are encouraged to disclose their NTN Number for deduction of Tax at the reduced rate of 10% instead of 15% on Dividends Amount in Figures Instrument No. Instrument Date Margin %age Banker s Name, Address & Branch CDC Participant Name Sub House A/C No CDC Investor Service A/C ID CDC Details for Sub A/C and House A/C CDC Participant ID No House A/C No. CDC Details for Investor A/C CDC Investor A/C No DIVIDEND MANDATE (Optional): Mark tick [ ] in the appropriate boxes: Yes [ ] No [ ] Incase the Applicant intends that if shares applied for are issued to him/it and the dividend declared by the company, if any, is credited directly in his/it bank account, instead of issue of dividend warrants, then please fill in the following boxes: Title of Account Account Number Bank Name & Address The Privatisation Division, Ministry of Finance, Revenue, Economic Affairs, Statistics and Privatization 5-A Constitution Avenue, EDB Building, Islamabad, Pakistan Dear Sir, On the basis of Offer for Sale Document by the Privatisation Commission, Government of Pakistan for the sale of Government of Pakistan s residual shareholding in Allied Bank Limited dated December 05, 2014, I/we hereby bid for subscription of shares of the company as under: Bid Details No. of Shares Bid for Bid price per share Bid Amount Bid Option (Please tick) (In Figures) (In figures) (In figures) Limit Order Step Order: Option (1) Option (2) Option (3) Option (4) Total (Shares and Bid) Important Instructions: 1) Bids should be placed for a minimum amount of PKR 500,000. It should also be noted that the number of shares bid for should be rounded & fractional shares will not be acceptable. Please ensure that after rounding the no. of shares multiplied by your bid price is at least PKR 500,000. Signature of Bidder