4.1.

BACKGROUND AND 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 which were on the soil of India.
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, 2000. 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.

PRINCIPAL ACTIVITIES
ABL is a scheduled bank and provides retail, commercial, corporate banking and
investment banking services.
BOARD OF DIRECTORS AND MANAGEMENT
The Board of Directors of ABL comprises of well experienced professionals who
formulate the strategic and operating plans and policies and review their implementation
and effectiveness on regular intervals to ensure that the performance of ABL remains as
per performance objectives set by it. Major decisions are taken by the Board, meetings of
which convene on a regular basis.
The management of ABL comprises of a professional team that is qualified to meet the
challenges of a dynamic market. The Chairman and the Chief Executive and their team of
qualified professionals manage the day-to-day affairs of ABL.
BRANCH NETWORK
ABL operates through an extensive countrywide network of 766 branches of which most
are located in large metropolitan areas, namely Karachi, Islamabad, Faisalabad, Lahore,
Multan, Peshawar and Hyderabad.

OPERATIONAL & FINANCIAL PERFORMANCE

OPERATIONS
The following is a brief description of the main operations of the Bank:
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 and Financial Institutions & Cash
Management so that focused approach can be maintained on different aspects of business
requirements.
The Bank has won ‘The Corporate Finance House of the Year (Banks)” award in 2007,
for the second consecutive year. CFA Association of Pakistan, a member society of CFA
Institute – USA, conferred the award on Allied Bank based on the highest value and
number of Corporate Finance transactions concluded during July 2006 – December 2007.
It has also received international recognition when “The Banker” magazine UK,
conferred the “Deal of the year 2008 – Pakistan”.
Commercial and Retail Banking Group
The Commercial & Retail Banking Group (CRBG) manages all the liability relationships
and SME/Commercial loan book. It operates through 4 front-end geographical groups
that are further divided into 27 Regions and 766 branches. CRBG provides value added
services & convenience to its customers through Online branch network and 460 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 to over 2.5
million liability relationships and almost 8 thousand lending relationships.
Treasury Group
The Treasury group is actively involved in fund management through transactions in inter
bank market and management of investments in government securities open end mutual
fund (fixed income). The group is also responsible for managing regulatory reserve
requirements. During current calendar year ,ABL has broadened its activities in Foreign
Exchange Market and are active pricing maker for USD/PKR both in ready as well as
forward, this helped the Bank grew its FCY deposit base in multi fold. With the help of
pricing making activity Foreign Exchange Volumes are sharply increasing and it helps in
providing price 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 which they utilize to maximize the returns. The group is divided into
Money Market Desk, Foreign Exchange & Treasury Marketing Unit
Risk Management Group
The primary objectives of Risk Management Group (“RMG”) are to assess the risk
profile of various businesses, to initiate and propose risk policies, risk measurement
methodologies and risk limits in order to aggregate and control credit, market and
operational risks across the Bank. In pursuance of these objectives, RMG has taken up
the challenge to foster a proactive risk culture by creating the risk management functions
by business specialization. The Risk Management Group continues to promote sound
business decisions consistent with the Bank’s risk tolerance levels and drives th
maximization of long-term shareholder return.
Consumer & Personal Banking Group
Consumer and Personal Banking Group (CPBG) was been restructured recently with the
focus on launching various consumer products in the market. The primary function of this
group is to full fill every day financial needs of Pakistani consumers. CPBG is in the
process of putting up the required infrastructure to enable ABL to offer various
Consumer Asset products. At Allied Bank “Consumer” is the nucleus of everything the
Bank does. CPBG’s mission is to exceed customer expectations in terms of service
quality, innovation and simplicity. CPBG recognizes that its biggest asset is its people.
Audit and Credit 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 Credit 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.
Operations Group
Operations Group, apart from re-engineering the existing procedures to ensure smooth
flow of Bank’s operational activities, also focuses on supporting 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.

Bonds TFC http://www.reliancepakistan.com/products/faq_03.php

What is a Term Finance Certificate (TFC)
A corporate debt instrument issued by companies to generate short and medium-term
funds. Corporate TFCs offer institutional investors, in particular retirement funds and
insurance companies, with a viable high yield alternative to the National Saving Schemes
(NSS) and bank deposits.
TFCs are also an essential complement to risk free, lower yielding government bonds
such as PIB.
TFCs can be issued both as a fixed or floating rate instrument and may have a call or put
option.
TFC Rating
A TFC must be rated before issuance.
The rating reflects the credit risk of The TFC, i.e. the issuer’s ability and commitment to
repay scheduled TFC payments. Currently two rating agencies PACRA and JCR-VIS are
operating in Pakistan.
Income/Return structure of TFC

Like bonds, TFCs are structured to provide regular income in the form of coupons.
Unlike a generic bond, a TFCs principal may gradually be redeemed over the tenor of the
instrument.
TFCs are exempt from Capital gain tax. However, coupons payments are subject to
income tax. Invest only in listed scrips and carries a minimum BBB rating.
2.1 THE SECOND TFC ISSUE
The total second issue consists of Rs. 3,000 million to be issued in the form of rated,
listed, unsecured and subordinated Term Finance Certificates (“Issue” or “TFCs”) being
instruments of Redeemable Capital under section 120 of the Ordinance for a tenor of ten
(10) years. The amount of Rs. 3,000 million comprises of Private Placement (“Pre-IPO”)
of Rs. 2,250 million and Initial Public Offer (“IPO”) of Rs. 750 million.
The TFCs will be offered to the general public in sets of twenty (20) scrips (TFCs) with a
accompanying “Certification of Holding of Term Finance Certificates”, each set having
an aggregate face value of Rs. 5,000/-. In the case of private placement, each set of TFCs
shall have the face value of Rs. 1,000,000/-, Rs.100, 000/- or Rs 5,000/- or in multiples
thereof or such other denomination as may be agreed between ABL and the Pre-IPO
investors. The instrument is structured to redeem, 0.38% of principal amount in the first
114 months and remaining principal of 99.62% of the Issue amount, at 120th month from
the date of issuance of TFCs i.e. at maturity. The redemption value of the TFCs shall be
specified on the TFC itself. For more details please refer to clauses 2.15 to 2.17.

UNSECURED SUBORDINATED TFCS

The TFCs are being issued in terms of BSD Circular No. 05 dated March 25, 2003 of
State Bank of Pakistan which allows banks to issue redeemable capital which is to be
unsecured and subordinated as to payment of principal and profit to all other
indebtedness of the bank, including deposits and will not be redeemable before maturity
without approval of State Bank of Pakistan. Where the Bank has breached its obligation
to make redemption payments, the Trustee may enforce the Bank’s obligation by way of
filing an application for winding up under Section 49 of the Banking Companies
Ordinance 1962 (Ordinance no. LVII) of 1962 and / or any other applicable law
(“Winding Up Application”). It is clarified however, that in the event of default, the TFC
holders acting through the trustee shall be entitled to initiate legal proceedings against the
Bank, including filing of Winding Up Application for recovery of the outstanding amount
payable under the TFCs.

In the event of a winding up order, payments to the TFC Holders shall be subordinate to
and rank inferior to all other debts of the bank including deposits. Furthermore, the
investors have no rights to accelerate redemption of the TFCs, except as may be
permissible in relation to the winding up or any other legal proceedings.
In the case of a breach by the Bank which is not related to the redemption obligations of
the Bank arising as a result of the TFC issue, the Trustee, subject to the terms of the Trust
Deed, may institute such proceedings as may be permissible under the law.