tmfb_tsc_2012_prospectus.pdf

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TAMEER MICROFINANCE BANK LIMITED(A MICRO FINANCE BANK INCORPORATED UNDER THE COMPANIES ORDINANCE 1984 AND

LICENSED UNDER THE MICROFINANCE INSTITUTIONS ORDINANCE, 2001)

PROSPECTUS

PUBLIC OFFER OF RATED LISTED AND PARTIALLY SECURED*TERMFINANCE CERTIFICATES

[TAMEER SARMAYA CERTIFICATES TFC 1andTFC 2]

FOR AN AGGREGATE AMOUNT OF PKR 1,000,000,000,

* [THE ISSUE WILL BE SECURED PARTIALLY THROUGH THE MICROFINANCE CREDIT GUARANTEE

FACILITY PROVIDED BY THE STATE BANK OF PAKISTAN. THE SECURITY WILL BE A PARTIALGUARANTEE OF 40% OF THE OUTSTANDING PRINCIPAL COMPONENT. FOR DETAILS PLEASE REFERTO PART 6 OF THE PROSPECTUS TITLED TRUSTEE AND SECURITY]

TAMEER SARMAYA CERTIFICATES ARE FIXED RATE AND FIXED TENORINSTRUMENTS

AS ILLUSTRATED HEREINBELOW:

Type Tenor Issue AmountIn PKR

(Million)

Profit Rate

TFC 1 13 months 500 12.00% p.a.TFC 2 24 months 500 12.50% p.a.Total 1,000

INSTRUMENT RATING A (Single A)ENTITY RATING A (Single A)

BY JCR-VIS Credit Rating Company Limited

PUBLIC SUBSCRIPTION: From November 21st2012 to February 21st2013(both days inclusive).

DATE OF PUBLICATION OF THIS PROSPECTUS IS 14THNovember2012

ADVICE FOR INVESTORS

INVESTORS ARE STRONGLY ADVISED IN THEIR OWN INTEREST TOCAREFULLY READ THE CONTENTS OF THE PROSPECTUS, ESPECIALLYTHE RISK FACTORS AT PARA 4.4 BEFORE MAKING ANY INVESTMENT

DECISION.


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ProspectusTameer Sarmaya Certi fi cate

Tameer M icro F inance Bank L imi ted Page 2 of 83

GLOSSARY OF ABBREVIATIONS AND TERMS

The capitalized terms used in this Prospectus unless otherwise defined therein, shall havethe following meaning:

1. Definitions1.1. ALCO means the Asset Liability Committee of Tameer Bank1.2. Call Option Redemption Prior to Final Redemption Date(For details please refer to para

2.15.of the prospectus titled Call and Put Options);

1.3. Call Option Notice has the meaning ascribed thereto in Paragraph 2.15 (Call and PutOptions);

1.4. CDC means the Central Depository Company of Pakistan Limited;1.5. CDC Regulations means the Central Depository Company of Pakistan Limited

Regulations;

1.6. CDS means the Central Depository System of the CDC;1.7. Closed Period has the meaning ascribed thereto in sub-paragraph 2.1.1 (Registered

Instruments and Register of TFC Holders) of Paragraph 2.1 (Instrument Registration);

1.8. Closing Date means the last date of the Subscription Period on which the subscriptionmoney in respect of the Issue is received by the Bankers to the Issue;

1.9. Date of Investment means the date when an Eligible Investors subscription money isreceived by any of the Bankers to the Issue;

1.10. Declaration of Trust has the meaning ascribed thereto in Paragraph 6.1 (Declaration ofTrust) of PART 6 (Trustee and Security);

1.11. Eligible Investors has the meaning ascribed thereto in Paragraph 2.1 (Eligible Investors);1.12. Events of Default has the meaning ascribed thereto in Paragraph 6.4 (Events of Default

and Consequences) of PART 6 (Trustee and Security);

1.13. Guaranteed Obligations has the meaning ascribed thereto in Paragraph 6.1.1 (MCGFGuarantees) of PART 6 (Trustee and Security);

1.14. GPRS POS Technology a mobile POSsystem with GPRS technologyand allows to takePOSwherever one go.

1.15. Initial Issue Expenses has the meaning ascribed thereto in Paragraph 3.3 (Expenses of theIssue) of PART 3 (Commission, Brokerage and Other Expenses of the Issue);

1.16. Interim Period means the period commencing from the Closing Date and ending on theIssue Date;

1.17. Issue has the meaning as ascribed thereto in Paragraph 2.1 (Issue) of PART 2 (TFCs andRelated Matters);


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1.18. Issue Date means the date on which the TFCs are issued (dispatched/credited)to theTFC Holders;

1.19. Issuer means Tameer Microfinance Bank Limited;1.20. Investors means those Eligible Investors to whom the TFCs will be allotted in

accordance with the provisions of this Prospectus;

1.21. KSE Approval has the meaning ascribed thereto in Sub-paragraph 1.2.1 (Approval of theProspectus by KSE) & (Approval, Consents and Listings);

1.22. Lead Advisor means the bank appointed to arrange and manage all aspects of the Issuelead advisor appointed for Tameer TFC is Standard Chartered Bank (Pakistan) Limited(Standard Chartered) ;

1.23. Legal Advisor means the legal counsel engaged as the transaction counsel in respect ofthe Issue, legal advisor appointed for Tameer TFC is Mandviwalla and Zafar Associates ;

1.24. Listing Regulations means the Listing Regulations of the Karachi Stock ExchangeLimited;

1.25. Material Contracts means the contracts listed in Paragraph 9.1.6 (Material Contracts /Documents) of PART 9 (Miscellaneous Information);

1.26. MCGF Guarantees has the meaning ascribed thereto in sub-paragraph2.1.3.1 ofParagraph 2.13 (MCGF Guarantee);

1.27. MCGF Guidelines means the Microfinance Credit Guarantee Facility (MCGF)Guidelines issued by the State Bank of Pakistan, Agricultural Credit & Microfinance

Department under AC&MFD Circular No. 3 of 2012 dated June 21,2012http://www.sbp.org.pk/acd/2012/C3-AnnexA.pdf;

1.28. Microfinance Ordinance means the Microfinance Institutions Ordinance, 2001 issued bythe State Bank of Pakistanhttp://www.sbp.org.pk/l_frame/MF_Inst_Ord_2001.pdf;

1.29. Obligations means inter aliathe Redemption Amount and all other amounts payable bythe Issuer to the TFC Holders in respect of the TFCs and includes the amounts payable bythe Issuer to the TFC Holders pursuant to the Declaration of Trust and the Terms andConditions (For details please refer to definition of the term Obligations given in Section6.1.1);

1.30. Ordinance means the Companies Ordinance,1984http://www.secp.gov.pk/corporatelaws/pdf/Comp_Ord1984.pdf;

1.31. Put Optionmeans the option to sell the TFC; For details please refer to para2.15.2of theprospectus titled Call and Put Options)

1.32. Redemption Amount means, in respect of TFC 1 and TFC 2, the amounts payable by theIssuer to the TFC Holders on each Redemption Date for such TFCs, and comprising of theprincipal component and the profit calculated on the profit rate;

1.33.

Redemption Date means each date on which the Redemption Amount is payable by theIssuer in respect of TFC 1 and TFC 2, being the dates that shall be set out in theRedemption Schedule;
http://www.sbp.org.pk/acd/2012/C3-AnnexA.pdfhttp://www.sbp.org.pk/acd/2012/C3-AnnexA.pdfhttp://www.sbp.org.pk/acd/2012/C3-AnnexA.pdfhttp://www.sbp.org.pk/l_frame/MF_Inst_Ord_2001.pdfhttp://www.sbp.org.pk/l_frame/MF_Inst_Ord_2001.pdfhttp://www.sbp.org.pk/l_frame/MF_Inst_Ord_2001.pdfhttp://www.sbp.org.pk/l_frame/MF_Inst_Ord_2001.pdfhttp://www.sbp.org.pk/acd/2012/C3-AnnexA.pdf


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1.34. Subscription Period means the period during which the Issue is open for subscription tothe public, being the period commencing from [November 21 st2012] and ending on[February 21st2013] (both days inclusive);

1.35. Successful Subscribers means the members of the public that have subscribed to theIssue during the Subscription Period and to whom the TFCs have been allotted inaccordance with the provisions of this Prospectus;

1.36. Telenor means Telenor Pakistan Limited;1.37. Terms and Conditions means the terms and conditions governing the TFCs attached as

Schedule 6 to the Declaration of Trust;

1.38. TFC Holders means the persons registered as the holders of the TFCs in the register ofthe TFCs maintained by the Issuer in accordance with the Declaration of Trust; and

1.39. TFC Subscription Application means the application for subscription to the Issue in theprescribed format, available with the Bankers to the Issue and to be duly filled and filed byeach Eligible Investor for the purpose of subscription to the Issue.

1.40. Trigger EventsIn the event Telenor divests its shareholding in the Issuer and / or theIssuer has knowledge that Telenor intends to divest its shareholding in the Issuer, whichwould result in Telenor being less than 51% shareholder in the Issuer, then the Issuer shallimmediately inform the Trustee of the same (Trigger Event).

1.43 Touchpoints Touchpoint is the interface of a product, a service or a brand withcustomers, non-customers, employees and other stakeholders before, during and after atransaction.
http://en.wikipedia.org/wiki/Product_%28business%29http://en.wikipedia.org/wiki/Service_%28economics%29http://en.wikipedia.org/wiki/Brandhttp://en.wikipedia.org/wiki/Customerhttp://en.wikipedia.org/wiki/Stakeholder_%28corporate%29http://en.wikipedia.org/wiki/Stakeholder_%28corporate%29http://en.wikipedia.org/wiki/Customerhttp://en.wikipedia.org/wiki/Brandhttp://en.wikipedia.org/wiki/Service_%28economics%29http://en.wikipedia.org/wiki/Product_%28business%29


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2. Abbreviations

ALCO Asset and Liability Committee;

CAGR Compounded Annual Growth Rate;

CEOChief Executive Officer;

CROthe Companies Registration Office of the SECP;

CGAP Consultative Group to Assist the Poor;

CVT Capital Value Tax;

DFID Department for International Development, United Kingdom;

EMI Equal Monthly Installment;

GAAP Generally Accepted Accounting Principles;

GoP the Government of Pakistan;

GLP Gross Loan Portfolio

IPO Initial Public Offering;

ISE Islamabad Stock Exchange;

JCR JCR-VIS Credit Rating Company Limited;

KSE Karachi Stock Exchange Limited;

LSE Lahore Stock Exchange;

SCRA Special Convertible Rupee Account;

SECP the Securities and Exchange Commission of Pakistan;

SBP the State Bank of Pakistan;

TDR Term Deposit Receipt;

TFC Term Finance Certificate and it includes two types of TFCs i.e. Tameer SarmayaCertificate 1 and Tameer Sarmaya Certificate 2;

TFC 1 Tameer Sarmaya Certificate 1 @ 12% for thirteen months.

TFC 2 Tameer Sarmaya Certificate 2 @ 12.5% for two years.

WHTWithholding Tax.


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TABLE OF CONTENTS

PART -1

1. APPROVALS, CONSENT AND LISTING ON THE STOCK EXCHANGE----9

PART-II2. TERM FINANCE CERTIFICATES AND RELATED MATTERS----------------12

PART-III

3. COMMISSIONS,BROKERAGE AND OTHER EXPENSES OF THE ISSUE--24

PART-IV

4. HISTORY AND PROSPECTS--------------------------------------------------------------26

PART-V

5.

FINANCIAL INFORMATION & CREDIT RATING REPORT-------------------39

PART-VI

6. TRUSTEE AND SECURITY----------------------------------------------------------------59

PART-VII

7. MANAGEMENT OF THE COMPANY--------------------------------------------------63

PART-VIII

8. MISCELLANEOUS INFORMATION----------------------------------------------------68

PART-IX9. APPLICATION AND ALLOTMENT INSTRUCTIONS-----------------------------71

PART-X

10.SIGNATORIES TO THE PROSPECTUS------------------------------------------------76

PART-XI

11.MEMORANDUM OF ASSOCIATION---------------------------------------------------78

PART-XII

12.SUBSCRIPTION FORM----------------------------------------------------------------------86


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1. SUMMARY OF THE ISSUE

Issuer Tameer Microfinance Bank Limited(Tameer or the Bank)

Issue / Transaction Rated, Listed and partially Secured Term Finance Certificates (TFCs)issued as an instrument of redeemable capital under Section 120 of the

Companies Ordinance, 1984.

Purpose

Total Issue Amount

The proceeds of the issue will be utilized for expansion of the Issuers

Advances portfolio( For details refer to paragraph 2.12)

Upto PKR 1000 million as per the table given below.

Tenor and Amount

Offered

TFC 1 TFC 2

Tenor 13 months 24 months

Amount (PKR Mn) 500 500

Profit Rate

Profit Payment Frequency

TYPE OF TFCs RATE

TFC-1 12.0% per annum

TFC-212.5% per annum

TYPE OF TFCs FREQUENCY

TFC-1 MonthlyTFC-2 Monthly

Subscription Period 3 months for both types of TFCs from November 21st 2012 to February

21st2013.

Profit Accrual From the Date of Investment in the Issue

Security The Issue will be secured partially through the Microfinance CreditGuarantee Facility, provided by the State Bank of Pakistan. Through thisfacility, each TFC 1 and TFC 2 are guaranteed up to the extent of 40% ofthe outstanding principal component of the Redemption Amount as onthe date of event of default by the Bank ( For details please refer toparagraph 6.1.1).

Issue Rating A (Single A) by JCR VIS

Entity Rating A (Single A) by JCR VIS

Minimum Investment PKR 5,000/- or in multiples thereof;


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Listing Karachi Stock Exchange Limited (KSE ;)

Lead Advisor &

Structuring Bank

Issue Schedule

Standard Chartered Bank (Pakistan) Limited (Standard Chartered or

Lead Advisor & Structuring Bank or LA);

Date of Opening of subscription period November 21st,2012

Date of Closing of Subscription period February 21st,2013

Date of Interim Profit Payment March 15th,2013

Issue Date March 16th,2013

Profit Payments Please refer to para 2.14

Principle Repayment/Redemption Please refer to para 2.14

Maturity Date Please refer to para 2.14

Bankers to The Issue

Underwriting

Standard Chartered Bank (Pakistan) Limited

Bank Al Falah LimitedAskari Bank LimitedFaysal Bank LimitedTameer Micro Finance Bank LimitedBank Al Habib LimitedSummit Bank LimitedHabib Metropolitan Bank LimitedKASB Bank LimitedSindh Bank Limited

None

Listing Karachi Stock Exchange Limited (KSE)

Market Maker

Allotment basis

Holding of TFCs

Put Option(Early

Redemption)

Registrar& Transfer Agent

Trustee

Risk Factors

JS Global Capital Limited

First come first serve basis

TFCs may be held either in physical form or in book entry(scrip-less) form through CDS of CDC

Exercisable only upon the occurrence of a Trigger Event as described inpara 2.15.2

THK Associates (Pvt) Ltd

IGI Investment Bank Ltd.

For details refer to para 4.6


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PART I

1. APPROVALS, CONSENT AND LISTING ON THE STOCK EXCHANGE

1.1. APPROVAL OF THE SECURITIES AND EXCHANGE COMMISSION OFPAKISTAN

Approval of the Securities and Exchange Commission of Pakistan as required under section57(1) of the Companies Ordinance, 1984 (the Ordinance) has been obtained for the issue,circulation and publication of this Prospectus.

Disclaimer

It must be distinctly understood that in giving this approval, the Securities and ExchangeCommission of Pakistan (SECP) does not take any responsibility for the financial soundnessof the Issuer and any of its schemes stated herein or for the correctness of any of thestatements made or opinions expressed with regards to them by the Tameer MicrofinanceBank Ltd (Tameer or the Company or the Issuer) in this Prospectus.

SECP has not evaluated quality of the issue and its approval for the issue, circulation andpublication of this prospectus should not be construed as any commitment of the same. Thepublic/ investors should conduct their own independent due diligence and analysis regardingthe quality of the issue before investment in the TFC being offered through this prospectus.

1.2. CLEARANCE OF PROSPECTUS BY KARACHI STOCK EXCHANGE

The Prospectus for the issue of rated, listed and partially secured Term Finance Certificate(TFCs) has been cleared by the Karachi Stock Exchange Limited (KSE) in accordance withthe requirements under its Listing Regulations.

Disclaimer

The publication of this document does not represent solicitation by KSE.

The contents of this document do not constitute an invitation to invest in TFCs or subscribefor any securities or other financial instrument by KSE, nor should it or any part of it form thebasis of, or be relied upon in any connection with any contract or commitment whatsoever ofKSE.

It is clarified that information in this Prospectus should not be construed as advice on anyparticular matter by KSE and must not be treated as a substitute for specific advice.

KSE disclaims any liability whatsoever for any loss howsoever arising from or in relianceupon this document to any one, arising from any reason, including, but not limited to,inaccuracies, incompleteness, and/ or mistakes, for decisions and/ or actions taken based onthis document.

KSE neither takes responsibility for the correctness of contents of this document nor theability of the Issuer to fulfill its obligations thereunder.

Advice from a suitably qualified professional should always be sought by investors in relationto any investment in securities.


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1.3. FILING OF PROSPECTUS AND OTHER DOCUMENTS WITH THEREGISTRAR OF COMPANIES

The Company has delivered to the Registrar of Companies, Karachi as required undersections 57 (3) and (4) of the Companies Ordinance 1984, a copy of this Prospectus signed byall the Directors of the Company together with the following documents attached thereto:

(a) Auditors Report bearing reference number AC2/419/12 dated April 3, 2012 underSection 53(1) read with Clause 28(1) of Section 2 of Part 1 of the Second Schedule ofthe Ordinance;

(b) Letter from the Auditors bearing reference number AC2/418/12 dated April 3, 2012being the Consent under Section 55 of the Ordinance;

(c) Auditors Certificate on Break-up Value per Share bearing number AC2/420/12 datedApril 3, 2012;

(d)Auditors Certificate on Issued, Subscribed and Paid-up Capital bearing numberAC2/421/12 dated April 3, 2012;

(e) Interim Condensed Financial Statements for the Half Year Ended June 30, 2012issued on July 20, 2012;

(f) Copies of Contracts listed in sub-paragraph 9.1.6 of PART9 (MiscellaneousInformation);

(g) Written confirmations of the Auditors, Legal Advisors and Bankers to the Issue,mentioned in the Prospectus consenting to act in their respective capacities, asrequired under Section 57(3)(a) of the Ordinance;

(h) Consent of Directors and Chief Executive of the Issuer to their respectiveappointments being made and their having been named or described as such Directorsand Chief Executive in the Prospectus as required under Section 57(3) of theOrdinance, read with sub-clause (1) and (4) of Section 1 of Part 1 of the SecondSchedule of the Ordinance. The Issuer has filed written confirmations of suchconsents, as required under Section 184 of the Ordinance.

1.4. LISTING ON KARACHI STOCK EXCHANGE

Application has been made to the KSE for permission to deal in and for quotation of the TFCsof the Company.

If for any reason, the Application for Listing is not accepted by KSE, the Issuer undertakes toimmediately publish a notice in the press a notice to that effect and to thereafter to refund thesubscription money with profit at the rate of 12.00% and 12.50% (depending on investmentin TFC 1 or TFC 2 respectively) without surcharge as required under Section 72 of theOrdinance, and if any such money is not refunded within eight (8) days after the Issuerbecomes liable to refund it, the Directors of the company shall be liable to refund the moneyfrom the expiration of the said eighth (8th) day together with surcharge at the rate of 1.5% permonth as required under the provisions of Section 72 of the Ordinance.


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PART II

2. TERM FINANCE CERTIFICATES AND RELATED MATTERS

2.1. ISSUE OF LISTED TFCS TO THE GENERAL PUBLIC

The Total TFC Issues consists of PKR 1,000,000,000 to be issued in the form of rated, listedand partially secured Term Finance Certificates (TFCs) being the instrument ofredeemableCapital under section 120 of the Ordinance for the tenors of thirteen (13) months, and twentyfour (24) months as follows:

PKR Million TFC 1 TFC 2

Tenor 13 Months 24 Months

Amount(Rs. in million)

500 500

Profit Payment Monthly Monthly

These are the first listed TFC Issues by Tameer Microfinance Bank Limited. The TFCs willbe offered to the general public under the brand name of Tameer Sarmaya Certificateeach set having an aggregate face value of PKR 5,000/- or in multiples thereof. TFCs will beissued in two classes i.e. Tameer Sarmaya Certificate 1 (TFC 1) and Tameer SarmayaCertificate 2 (TFC 2) and both these classes of term finance certificates shall comprise ofsuch number of coupons as correspond to the number of Redemption Dates. The minimumamount of application for the subscription of TFCs is PKR 5,000/-. The TFC is structuredto redeem as per para 2.13. The redemption value of the TFCs shall be specified on the TFC

itself. For more details, please refer to paragraph 2.13.

Notwithstanding that the TFCs shall be issued as TFC 1 and TFC 2, both classes of TFCsshall entitle the holder thereof to the same rights and benefits and both TFCs shall be identicalas to the rights of the TFC Holders and the Trustee and the obligations of the Issuer, exceptdifferences in the Redemption Dates in respect of the principal component, the finalRedemption Date and the Profit Rate.

Each TFC shall have a face value of PKR 5,000 and may be issued in multiples thereof.

There is no pre-IPO placement; the entire amount is available for subscription by the publicincluding both individual and institutional investors for three (3) months from the date ofcommencement of public subscription. However, if the target amount i.e. PKR 1,000,000,000

is subscribed before the end of the subscription period, the subscription period will be closedimmediately. Since there is no minimum subscription requirement, all subscription amountsup to the target amount of PKR 1,000 Million will be listed on KSE.

2.2 PARTIALLY SECURED TERMFINANCE CERTIFICATES

The Issue will be secured partially through the Microfinance Credit Guarantee Facility,provided by the State Bank of Pakistan.Through this facility, each TFC1 and TFC 2 are guaranteed up to the extent of 40% of theoutstanding principal component of the Redemption Amount as on the date of event of defaultby the Bank ( For details please refer to para 6.1.1).


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2.3.INTEREST OF TFC HOLDERS

The TFC Holders have no special interest or other interest in the property, assets and / orprofit of the Issuer except as the holders of the TFC.

2.4.OPENING AND CLOSING OF SUBSCRIPTION

THESUBSCRIPTION LIST SHALL BE OPEN FOR 3 MONTHSBOTH FOR TFC-1 andTFC-2 AT THE COMMENCEMENT OF BANKING HOURS ON NOVEMBER 21ST2012AND CLOSE AT THE END OF BANKING HOURS ON FEBRUARY 21ST2013 (BOTHDAYS INCLUSIVE)

2.5.INVESTOR ELIGIBILITY

The following persons can invest in the Issue:

Pakistani citizens residing in or outside Pakistan;

Persons holding dual nationalities including Pakistani nationality; Foreign Nationals whether residing in or outside Pakistan; Companies, bodies corporate or other legal entities incorporated or established in or

outside Pakistan (to the extent permitted by their constitutive documents and existingregulations, as the case may be);

Mutual Funds, Provident/pension/gratuity funds/trusts, (subject to the terms of theTrust Deed and existing regulations);

Branches in Pakistan of companies and bodies corporate incorporated outsidePakistan; and / or

Such other Persons that are permitted to invest in TFCs pursuant to the relevantprovisions of the Ordinance and their constituent documents.

Additional Instructions for Foreign/Non-Resident Investors

In case of foreign investors who are not individuals, applications must be accompanied with aletter on applicants letterhead stating the legal status of the applicant, place of incorp orationand operations and line of business. A copy of memorandum of association or an equivalentdocument should also be enclosed, if available. Where applications are made by virtue ofPower of Attorney, the same must be lodged with the application. Copies of these documentscan be attested by the bank manager/officer in the country of applicants residence.

Such applicants may also subscribe using their Special Convertible Rupee Account (SCRA)as set out in the State Bank of Pakistans Foreign Exchange Manual.

2.6.MINIMUM AMOUNT OF APPLICATIONAND BASIS OF ALLOTMENT OFTFCS

The minimum amount of application for subscription to the Issue is PKR 5,000;

Applications for subscription of less than one (1) TFC, i.e. an application for subscription foran amount less than PKR 5,000shall not be entertained.

Application for TFCs by the general public, including institutions and individuals, must bemade fora minimum of the aggregate face value of Rs. PKR 5,000 or in multiples thereof.

Allotment of TFCs shall be subject to scrutiny of applications for subscription.


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Allotment of TFCs shall be made on a Fir st Come-F ir st Served Basis and applications forsubscription of TFCs shall not be accepted once the issue amount for each class of TFCs hasbeen fully subscribed. In case Bankers to the Issue on any given day accept subscriptionswhich result in the target amount under each TFC 1 and TFC 2 being exceeded, then all

applications in excess of the target amount will be returned to the applicants along with profitat the rate of 12.00% and 12.50% (depending on TFC-1 or TFC-2, respectively) per annumfor the number of days for which such applicants are deprived of their money. Therefore therewill be no over subscription. In order to ensure that the allotment of the TFCs is made to theInvestors on a First Come-First Served basis, the Bankers to the Issue shall mark eachapplication for subscription with the date and time of receipt and all applications shall beprocessed in a chronological order. The applications not marked with the date and time ofreceipt shall be accommodated after all the applications properly marked with the date andtime have been accommodated. Allotment of TFCs shall be subject to scrutiny of applicationsfor subscription.

Profit Payment for TFC Investment Monies

Profit will be paid at a fixed rate of profit at the rate of 12.00% and 12.50% per annum,depending on investment in TFC 1 or TFC 2 respectively from the Date of Investment.

To bring all TFCs at par, an interim profit payment for the period from the Date of Investmenttill the Issue Date will be made of the TFCs after the close of subscription period on March15th,2013.

From the Issue Date, all subsequent profits shall be payable monthly (for TFC 1 and TFC 2)in arrears on the outstanding Principal amount.

2.7.REFUND OF MONEY TO UNSUCCESSFUL APPLICANTS

The Issue has been structured on Fir st Come-F ir st Served Basis as such there will be nooversubscription. However in the event upon the Issue being fully subscribed, the Bankers tothe Issue accept any applications for subscriptions that results in the Bankers to the Issuereceiving an amount in excess of the issue amount of each class of TFCs, then the Bankers tothe Issue shall refund such excess amount to the applicants along with profit accrued on suchexcess amount calculated as follows:

a) all excess subscription monies received in respect of TFC 1 (TFC 1 RefundAmount) shall accrue profit at the rate of 12.00% p.a., to be calculated from the Dateof Investment till the actual date of payment plus three (3) additional days; and

b) all excess subscription monies received in respect of TFC 2 (TFC 2 RefundAmount) shall accrue profit at the rate of 12.50% p.a., to be calculated from the Dateof Investment till the actual date of payment plus three (3) additional days;

2.8.MINIMUM SUBSCRIPTION

The Issue is not subject to any minimum subscription requirement as the issue is not projectspecific but the proceeds of the issue will be utilized to expand Tameers portfolio, and tomeet short term working capital requirements.


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2.9.ISSUE,CREDIT AND DESPATCH OF TFCS

The Company shall credit or dispatch, as the case may be, TFCs within thirty (30) days from theDate of Investment. TFCs will be issued either in scripless form in the Central Depository System(CDS) or in the shape of physical scrips on the basis of option exercised by the successfulapplicants. TFCs in physical form shall be delivered to the applicants through registered mail orcourier service, whereas scripless TFCs shall be directly credited through book entries into the

respective CDS accounts of allottees maintained with the Central Depository Company ofPakistan Limited (CDC). The TFCs issued directly for induction in the CDS, without theissuance of the physical certificates and the TFC scrips (with the terms and conditions), shallbe subject to the terms and conditions for the issuance of the TFCs specified in Schedule E ofthe Trust Deed dated February 14, 2012 executed between the Company and the Trustee forthe TFC Issue.

The applicants who opt for issuance of TFCs in scripless form in the CDS should fill in therelevant columns in the Application Form. In order to exercise the scripless option, the

applicant must also have a CDS account at the time of subscription. In case where the CDSaccount is not mentioned or is not correct, physical TFC certificates will be issued.

If the Company defaults in complying with the requirements of the Listing Regulations, itwill pay to the KSE a penalty of PKR 5000/- per day for the period during which the defaultcontinues. The KSE may also notify the fact of such default and the name of the Company bynotice and also by publication in the Daily Quotation.

2.10. TRANSFER OF TFCS

2.10.1. Physical Scrips

TFCs shall be transferred in the manner as provided under the Companies Ordinance,1984.Transfer of TFCs will be subject to payment of the applicable stamp duty levied by theProvincial Government. Stamp duty on initial issuance will be borne by the Company, whilestamp duty on subsequent transfer will be on account of the TFC holders.

2.10.2. Transfer under Book Entry System

TFCs will be declared as eligible security through the CDS of CDC and will be eligible fortransfer after the Issue Date. Stamp duty on initial issuance will be borne by the Company.TFCs, which are in the CDS, shall subsequently be transferred in accordance with the CentralDepositories Act, 1997 and the Central Depository Company of Pakistan Limited regulations.The transfer fee for all subsequent transfers shall be borne by the TFC holders.

2.10.3. Stamp Duty and Costs and Charges

The stamp duty applicable on the transfer of TFCs shall be borne by the TFC Holdersaffecting such transfer.

All costs and charges of the CDC applicable on the transfer of the TFCs in the CDS shall beborne by the TFC Holder affecting such transfer.

Notwithstanding anything contained in this Prospectus, the term transfer as used in thisProspectus does not mean and / or include, nor shall be deemed to and / or interpreted tomean and / or include the initial issuance of the TFCs to the Investor by the Issuer.


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2.11. TFC ISSUES IN PRECEDING YEARS

The Issuer has not issued any term finance certificates, whether privately placed and / oroffered to the public in the preceding years.

2.12. PRINCIPAL PURPOSE OF SUBSCRIPTION MONEY

The proceeds of the Issue, comprising of the subscription monies shall be utilized by theIssuer towards the expansion of the Issuers advances portfolio.

2.13. REGISTERED INSTRUMENT

TFCS WILL BE IN REGISTERED FORM AND THE COMPANY SHALLMAINTAIN OR CAUSE TO BE MAINTAINED A REGISTER OF TFC HOLDERS.

2.14.

REDEMPTION OF TFCS

A register of TFC holders will be maintained or cause to be maintained by the Company.The register of TFC holders will be closed for a period of 7 days prior to the profit payment.

The Company will give a minimum of 14 days notice to the Exchange prior to the BookClosure for Profit payments. All payments will be made either through crossed cheque, payorder or direct bank deposit on the basis of option exercised by the applicant in the TFCsSubscription Application. In case of cheque or pay order, the instrument will be dispatched tothe mailing address of the registered holder of the TFC.

Redemption Schedule for TFC 1

The illustrative Redemption Schedule in respect of TFC 1 having a Face Value of PKR 5000based on a profit rate of 12% (as set out in Column III) for thirteen (13) months investment asset out in Column (I):

I II III IV V VI VII VIII

Months Principal

Redemption

Indicative

Profit @

12.00 %

Zakat

@

2.5%

Withholding

Tax @ 10%

Total

Payment

Principal

Payment

in %

Principal

Amount

Outstanding

0 5,000.00

1 1 50 0.03 5 45.97 0.02% 4,999.00

2 1 49.99 0.03 5 45.96 0.02% 4,998.00

3 1 49.98 0.03 5 45.95 0.02% 4,997.00

4 1 49.97 0.03 5 45.94 0.02% 4,996.00

5 1 49.96 0.03 5 45.93 0.02% 4,995.00

6 1 49.95 0.03 5 45.92 0.02% 4,994.00

7 1 49.94 0.03 4.99 45.92 0.02% 4,993.00

8 1 49.93 0.03 4.99 45.91 0.02% 4,992.00

9 1 49.92 0.03 4.99 45.9 0.02% 4,991.00

10 1 49.91 0.03 4.99 45.89 0.02% 4,990.00

11 1 49.9 0.03 4.99 45.88 0.02% 4,989.00

12 1 49.89 0.03 4.99 45.87 0.02% 4,988.00

13 4,988 49.88 124.7 4.99 4908.19 99.76% 0

Total 5,000.00 649.22 125 64.92 5,459.23 100.00%


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Redemption Schedule for TFC 2

The illustrative Redemption Schedule in respect of TFC 2 having a Face Value of PKR 5000based on a profit rate of 12.5% (as set out in Column III) for twenty-four (24) months

investment (as set out in Column I):

I II III IV V VI VII VIII

Months Principal

Redemption

Indicative

Profit @

12.50 %

Zakat @

2.5%

Withholding

Tax @ 10%

Total

Payment

Principal

Payment

in %

Principal

Amount

Outstanding

0 5,000.00

1 1 52.08 0.03 5.21 47.84 0.02% 4,999.00

2 1 52.07 0.03 5.21 47.83 0.02% 4,998.00

3 1 52.06 0.03 5.21 47.82 0.02% 4,997.00

4 1 52.05 0.03 5.21 47.81 0.02% 4,996.00

5 1 52.04 0.03 5.2 47.81 0.02% 4,995.00

6 1 52.03 0.03 5.2 47.8 0.02% 4,994.00

7 1 52.02 0.03 5.2 47.79 0.02% 4,993.00

8 1 52.01 0.03 5.2 47.78 0.02% 4,992.00

9 1 52 0.03 5.2 47.77 0.02% 4,991.00

10 1 51.99 0.03 5.2 47.76 0.02% 4,990.00

11 1 51.98 0.03 5.2 47.75 0.02% 4,989.00

12 1 51.97 0.03 5.2 47.74 0.02% 4,988.00

13 1 51.96 0.03 5.2 47.73 0.02% 4,987.00

14 1 51.95 0.03 5.19 47.73 0.02% 4,986.00

15 1 51.94 0.03 5.19 47.72 0.02% 4,985.00

16 1 51.93 0.03 5.19 47.71 0.02% 4,984.00

17 1 51.92 0.03 5.19 47.7 0.02% 4,983.00

18 1 51.91 0.03 5.19 47.69 0.02% 4,982.00

19 1 51.9 0.03 5.19 47.68 0.02% 4,981.00

20 1 51.89 0.03 5.19 47.67 0.02% 4,980.00

21 1 51.88 0.03 5.19 47.66 0.02% 4,979.00

22 1 51.86 0.03 5.19 47.64 0.02% 4,978.00

23 1 51.85 0.03 5.19 47.63 0.02% 4,977.00

24 4,977 51.84 124.43 5.18 4899.23 99.54% 0

Total 5,000.00 1,247.13 125 124.71 5997.29 100.00%


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The following table illustrates the tentative profit payment for the interim period and for theTFC 1 and TFC 2 commencing from the Issue Date:

TFC 1

Profit Payment Profit Period Profit Payment Date

From To

Interim Interim Period (Date of Investment until the Issue Date) March 15, 2013

First March16, 2013 April15th, 2013 April 15th, 2013

Second April 16, 2013 May 15, 2013 May 15, 2013

Third May 16, 2013 June 15, 2013 June 15, 2013

Fourth June 16, 2013 July 15, 2013 July 15, 2013

Fifth July 16, 2013 August 15, 2013 August 15, 2013

Sixth August 16, 2013 Sep 15, 2013 Sep 15, 2013

Seventh Sep 16, 2013 Oct 15, 2013 Oct15, 2013

Eighth Oct 16, 2013 Nov 15, 2013 Nov 15, 2013

Ninth Nov 16, 2013 Dec 15, 2013 Dec 15, 2013Tenth Dec 16, 2013 Jan 15, 2014 Jan 15, 2014

Eleventh Jan 16, 2014 Feb 15, 2014 Feb 15, 2014

Twelfth Feb 16, 2014 March 15, 2014 March 15, 2014

Thirteenth & final March 16, 2014 April 15, 2014 April 15, 2014

TFC 2

Profit Payment Profit Period Profit Payment Date

From To

Interim Interim Period (Date of Investment until the Issue Date) March 15, 2013

First March 16, 2013 April 15, 2013 April 15, 2013

Second April 16, 2013 May 15, 2013 May 15, 2013

Third May 16, 2013 June 15, 2013 June 15, 2013

Fourth June 16, 2013 July 15, 2013 July 15, 2013

Fifth July 16, 2013 August 15, 2013 August 15, 2013

Sixth August 16, 2013 Sep 15, 2013 Sep 15, 2013

Seventh Sep 16, 2013 Oct 15, 2013 Oct 15, 2013

Eighth Oct 16, 2013 Nov 15, 2013 Nov 15, 2013

Ninth Nov 16, 2013 Dec 15, 2013 Dec 15, 2013

Tenth Dec 16, 2013 Jan 15, 2014 Jan 15, 2014

Eleventh Jan 16, 2014 Feb 15, 2014 Feb 15, 2014

Twelfth Feb 16, 2014 March 15, 2014 March 15, 2014

Thirteenth March 16, 2014 April 15, 2014 April 15, 2014

Fourteenth April 16, 2014 May 15, 2014 May 15, 2014

Fifteenth May 16, 2014 June 15, 2014 June 15, 2014

Sixteenth June 16, 2014 July 15, 2014 July 15, 2014

Seventeenth July 16, 2014 August 15, 2014 August 15, 2014

Eighteenth August 16, 2014 Sep 15, 2014 Sep 15, 2014

Nineteenth Sep 16, 2014 Oct 15, 2014 Oct 15, 2014

Twentieth Oct 16, 2014 Nov 15, 2014 Nov 15, 2014

Twenty-First Nov 16, 2014 Dec 15, 2014 Dec 15, 2014

Twenty-Second Dec 16, 2014 Jan 15, 2015 Jan 15, 2015

Twenty-Third Jan 16, 2015 Feb 15, 2015 Feb 15, 2015

Twenty-Fourth & final Feb 16, 2015 March 15, 2015 March 15, 2015


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2.14.1. Mode of Payment of Redemption Amount

The Redemption Amount shall be paid by the Issuer to the TFC Holders either by way of acrossed cheque, pay order or by direct credit in the TFC holders bank account maintainedwith any bank in Pakistan including Easypaisa on the basis of the mode of payment elected bythe Investor in the TFC Subscription Application. In the event the TFC Holder elects forpayment by way of a cheque or pay order then such payment instrument shall be dispatchedto the mailing address of the registered TFC Holder as on each Redemption Date.

2.14.2. Profit

The Face Value of each TFC shall accrue profit from the Date of Investment at the fixedprofit rate applicable to TFC 1 and TFC 2.

The profit rates applicable to the TFCs are as follows:

TFC 1 TFC 2

Profit Rate

(Fixed Rate)

12.00% p.a. 12.50% p.a.

2.15. CALL AND PUT OPTIONS

2.15.1. Call Option (Early Redemption at Issuers Option)

The TFCs are subject to an early redemption option, at any time prior to the final RedemptionDate, at the option of the Issuer, in respect of the total Face Value of the Issue (CallOption), subject to the fulfillment of the following conditions:

the Issuer has issued a notice in writing to the Trustee at least fifteen (15) days beforethe proposed date of exercise of the Call `Option and such proposed date falls on aRedemption Date;

upon exercise of the Call Option the Issuer shall be obliged to make payment of theentire Outstanding Face Value in respect of the relevant TFC plus a Call Optionpremium calculated at the rate of 1% of Outstanding Face Value. In case of anydispute as to the amount payable against any TFC, the determination of the Trustee in

this regard, save for manifest error, shall be final and binding on the Issuer and therespective TFC Holders;

the Issuer shall not be entitled to redeem the TFCs before their stipulated maturityexcept in accordance with the terms hereof;

no TFC redeemed in exercise of the Call Option may subsequently be re-issued norany of the TFC Holders shall be obliged to purchase back any of such redeemedTFCs; and

the Call Option may be exercised by the Issuer to redeem the TFCs.


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2.15.2. Put Option (Redemption Prior to Final Redemption Date)

The TFCs are subject to an early redemption option exercisable at any time prior to the finalRedemption Date, at the option of the TFC Holder, either in respect of the total or partial FaceValue of the Issue (Put Option), upon the occurrence of the Trigger Event subject to thefulfillment of the following conditions:

In the event Telenor divests its shareholding in the Issuer and / or the Issuer has knowledgethat Telenor intends to divest its shareholding in the Issuer, which would result in Telenorbeing less than 51% shareholder in the Issuer, then the Issuer shall immediately inform theTrustee, Karachi Stock Exchange and TFC holders of the same (Trigger Event).

The following conditions shall be applicable to the Put Option:

the TFC Holder exercising the Put Option issues fifteen (15) days prior notice (PutOption Notice);

the option is exercised in respect of TFCs having an aggregate Face Value of PKR5000 or in multiples thereof;

a Put Option premium calculated at the rate of 1% of the Outstanding Face Valueshall be paid by the Issuer to the TFC Holders exercising the Put Option.

In case of TFCs held in CDC, TFC holders can exercise the Put Option as per thecentral Depositary Company of Pakistan Limited Regulations under Section 5.5B(www.cdcpakistan.com); and

TFCs applied for redemption will not be tradable in the secondary market. In case ofphysical certificates the investor will have to surrender the certificates along with theredemption notice. TFCs held in CDC will be cancelled when the redemption noticeis received by the company.

2.16. REDEMPTION RESERVE

No Redemption Reserve is being created for the redemption of the TFCs. In view of theprojected cash flows of the Issuer and the fact that the redemption amounts in respect of theTFCs are partially guaranteed by the SBP BSC and the good credit rating of the TFCs i.eSingle A for both TFCs , the Issuer is expected to have adequate funds to meet its financialobligations arising from the Issue.

2.17. ZAKAT AND TAXES

2.17.1. Zakat

Zakat is deductible in case of TFCs held by Muslim citizens of Pakistan, except where a statutorydeclaration of exemption is filed, and in case of certain non-corporate entities such as Trusts,Funds (subject to being qualified for non-deduction of Zakat in terms of the Zakat and Ushr

Ordinance, 1980) etc. Zakat shall be deducted at the time of redemption of the principalamount of the TFCs or on the market value based on the closing rate on the KSE on the firstday of Ramzan, whichever is lower, at the rate of 2.50% on such dates as the concerned TFCbecomes due for redemption in a Zakat year.


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2.17.2. Income Tax

Any income derived from the Term Finance Certificates shall be subject to income tax inaccordance with the applicable provisions of the Income Tax Ordinance, 2001 (TaxOrdinance).

Tax shall be deducted @ 10% of the gross amount of profit paid, as per the First Schedule,Part 3, Division 1, Para (a) of the Tax Ordinance and shall be deemed to be the final dischargeof tax liability on the profit arising to a tax payer other than a company, under subsection 3 ofSection 151 of the Income Tax Ordinance.

2.17.3. Withholding Tax

In terms of Clause 59, part (IV), Second Schedule of the Tax Ordinance, the Issuer is requiredto withhold tax, currently at the rate of 10%, from profit payments to all investors exceptcompanies and resident individuals whose investment amount is up to PKR 150,000.

2.17.4. Capital Gains Tax

Any capital gains derived from the sale of Term Finance Certificates shall be subject toCapital Gains Tax in accordance with the Income Tax Ordinance 2001.

2.17.5. Withholding Tax on Sale and Purchase of TFCs

Withholding Tax (WHT) of 0.01% will be charged on the sale/purchase of allshares, Modaraba certificates, and instruments of redeemable capital as defined inthe Companies Ordinance, 1984.

2.18. MARKET MAKING

In accordance with the Regulations Governing Market Makers of Karachi Stock ExchangeLimited (Market Maker Regulations), JS Global Capital Limited has been appointed andshall act as the market maker for the Issue in accordance with the Market Maker Regulations(Market Maker).

The role of the Market Maker shall be to offer bid and ask quotes in the debt market securityof the issuer on daily basis during trading hours of the Exchange with the maximum spread of2.5%(Spread Limit) till complete redemption of debt market security. Price shall bedetermined by the Market Maker based on the prevailing liquidity, interest rates and credit

risk of the Issuer.

2.19. DEFERRED TAXATION

Deferred tax is provided using the Balance Sheet method, providing for all temporarydifferences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for taxation purposes. Deferred tax is measured at the tax ratesthat are expected to be applied to the temporary differences when they reverse, based on thelaws that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognized only to the extent that it is probable that future taxableprofits will be available against which the assets can be utilized. Deferred tax assets are

reduced to the extent that is no longer probable that the related tax benefit will be realized.


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The balance of deferred asset liability as at December 31, 2011 is PKR 213.886 million.Break up is as follows:

Amount in000

DEFERRED TAX ASSET - net 2011 2010

Deductible temporary differences arising in respect of:

Carry forward tax losses 232,903 293,905

Provision against non-performing loans and advances 5,644 17,678

Deferred grant 6,174 9,725

Deficit on revaluation of assets 10 156

244,731 321,464Taxable temporary differences arising in respect of:

Accelerated depreciation allowance (22,560) (11,167)Unrealized gain on derivative financial

instrument (8,285) (21,092)

(30,845) (32,259)

213,886 289,205


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PART III

3. COMMISSION, BROKERAGE AND OTHER EXPENSES OF THE ISSUE

3.1. COMMISSION TO BANKERS TO THE ISSUE

An overall commission at a maximum rate of 1.6% of the amount collected, in respect ofaccepted applications will be paid to the Bankers to the Issue for services to be rendered bythem in connection with the public offer.

3.2. BROKERAGE

The Issuer shall pay a brokerage fee in respect of the IPO to the members of KSE, LSE andISE at the rate of 0.25% of the value of TFCs actually sold through them.

3.3.EXPENSES OF THE ISSUE

The initial expenses of the Issue paid or payable by the Issuer, inclusive of all commissionsare estimated to be PKR 63,197,500 (Initial Issue Expenses).

The details of the Initial Issue Expenses are as follows:

Expenses Category Rate Amount in PKR*

Commission to Bankers to the Issue* 16,000,000

Advisory Expenses 10,000,000

Brokerage to the members of Stock Exchanges 0.25% 2,500,000

Stamp DutySindh 0.05% 500,000

Rating FeeInitial 600,000

Initial Listing Fee of the Karachi StockExchange 500,000

Processing Fee of the Securities & ExchangeCommission of Pakistan 100,000

Annual Listing Fee of the Karachi Stock

Exchange 80,000

CDC Fee 67,500

Trustee Fee 250,000

Registrar Fee 500,000

Printing & Publication Expenses of Prospectus 1,000,000

Print Marketing5,000,000

Electronic Marketing 25,000,000


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Legal Expenses 1,000,000

Out of Pocket Expenses 100,000

Total 63,197,500*Represents maximum Expense related to the Issue


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PART IV

4. HISTORY AND PROSPECTS

4.1. Background and History of the Issuer

The Issuer is a Microfinance Bank incorporated in August 2005 under the CompaniesOrdinance 1984and licensed by the State Bank of Pakistan in 2005 under the MicrofinanceOrdinance, to provide organizational, financial and infrastructural support to poor persons,thereby mitigating poverty and promoting social welfare and economic justice throughcommunity building and social mobilization and to provide for matters connected therewithor ancillary thereto. The Issuer aspires to contribute to the economic prosperity of Pakistan byproviding low cost microfinance banking services across the less developed areas of Pakistanthrough a wide array of banking services (loans, savings and insurance) to the under-servedand un-banked market of the country.

At present, the Issuer is providing banking services to a wide range of low-income, self-

employed and entrepreneurial section of the society through a variety of financial productsdesigned to assist the growth of businesses and produce significant economic multipliereffects on the economy of Pakistan.

The Issuer has 104 business locations in both Sindh and Punjab (as of June2012), with over144,850active accounts as at June2012 and has extended over 435,963 loans up to June2012,since its inception. Of the active accounts, close to 34% are women borrowers, which is oneof the highest percentages amongst microfinance banks in Pakistan.

Shareholding Structure

In December 2008 Telenor acquired 51% of the Issuers share capital.

As of December 2011 the shareholding structure of the Issuer is as follows:

Shareholding Breakdown as of December 31, 2011

Shareholder % Shareholding

Telenor Pakistan 51.0Emerging Markets Consulting Limited 29.4Centurion Limited 7.4International Finance Corporation 4.9Other Individuals 7.3

Total 100.0*Source: Annual Audited Accounts 2011 of Tameer Micro Finance Bank Limited

The Issuer and Telenor Pakistan have jointly launched the first ever Cellular Phone Banking /Branchless Banking in Pakistan, using Telenors Cellular Phone network and GPRS POStechnology. The Issuer aims to introduce to the Pakistani market efficient, highly secure andinstant financial products such as mobile wallets, utility bill payments and cash deposit andwithdrawal services in their mobile-commerce initiative. After the launch of their jointEasypaisa program in 2009, the Issuer has moved to the forefront of Branchless Banking in

Pakistan and the year 2011, the Issuer has collected more than 15.3 million utility bills and

over PKR 26 billion of domestic remittances.


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4.2. PROSPECTS

4.2.1. Principal Microfinance Loan Products

In its core branch banking, the Issuer has been steadily focusing on cautious expansion into

the Microfinance market. With portfolio growing at a 3 year CAGR of 49% and deposits at62%%, the bank will achieve scale with profitability through the introduction of severalefficiency and productivity initiatives.

Description 2011 2009

Outstanding

Portfolio(000)

5,054,297 1,513,247

CAGR- Portfolio 49%

Deposits(000) 5,405,031 1,267,829

CAGR-Deposits 62%

The Issuers goal of poverty elimination, sustainable development and economicempowerment are made possible by building a viable business model that meets the totalbanking needs of an individual, their house hold unit, their business and sources of earningand the community at large. The four most popular products of the Issuer are as follows:

Tameer Karobar Loan

This loan provides working capital for Microfinance entrepreneurs for growingtheir business unit and provides critical cash flows necessary for keeping Microsector businesses above the poverty line. The average loan size is PKR 30,000 and istargeted towards small shopkeepers, traders and business owners. A loan of this

kind is currently not offered by general competition.

Tameer Housing Loan

Tameer Housing Loan was launched in May 2008 to cater for the diverse needs of Microsector customers ranging from seasonal crop financing, purchasing shop inventory to buyingof machinery and tools for business use. The loan is secured by the deed of a house and hasan average loan size of PKR 150,000.

Tameer Emergency Loan

Emergency offers potential customers an opportunity to borrow funds in a time of distress

against assets owned by them. These assets may be in the form of government securities, termdeposits, and gold jewelry. So, instead of selling or terminating the hard-earned assets whichusually appreciate with time, the customer can rather momentarily pledge those assets to meettheir short-term or mid-term needs. The Issuer uses specialized jewelers to verify thejewellery/gold before loan disbursement. The collateral is kept in a sealed packet in securedvaults. Emergency proved a great success and constitutes 78% of all new disbursements. Theaverage loan size is PKR 65,000.

Tameer Group Loan

The Issuer provides Group loans to men and women in both urban and rural areas with easyloan qualifying terms as the social collateral (group-lending) and relationship quality is made

more reliable and more productive for the customer as well as more risk efficient for theIssuer. The Issuer has so far introduced Group Lending with groups of 5 only and verifies the


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e-CIB and CNIC of all borrowers in the group. The average loan size is PKR 15,000. TameerGroup Loan is offered in three variants i.e. General (EMI based), Women (EMI based) &agriculture (bullet).

The below table illustrates the disbursement and outstanding portfolio for Loan Products as ofJune 2012:

Products Disbursal As of June

2012

Portfolio As of June

2012

Rs in 000

Tameer Karobar Loan 4,635,037 458,178

Tameer Housing Loan 416,784 164,501

Tameer Emergency

Loan

13,501,378 5,203,066

Tameer Group Loan 1,944,771 352,916

4.2.2. Core Bank Loan Programme

While Tameer Karobar Loan and Tameer Group Loan remained the primary revenue earnersfor the Issuer, portfolio growth came from the gold-secured Tameer Emergency Loan (TEL)which today stands at almost 80% of the portfolio. This high concentration in secured loans isexpected to dilute overall yields. Future plan maintains this trend as a strategic choice toensure low infection in portfolio. Gross advances as at 31 December 2011 stood at > Rs. 5billion, which is expected to double by the end of 2013.

Gold secured TEL shall form the catalyst to growth, crossing PKR 6,000 million by 2012.The Issuer would also be focusing on the challenge of expanding its portfolio in TameerGroup Loan and Tameer Karobar Loan, both of which being in the form of equal monthlyinstallment based loans have high repayments and hence high turnover. Historically the Issuerhas maintained an average retention ratio of less than 15% on unsecured lending tillDecember 2010. Through careful analysis and operational risk adjusted process changes, thisis increased to 30% during 2011 to funnel future growth.

The Issuer has largely kept its portfolio prices stable since 2008 despite increasing cost offunds resulting from the pressure on the risk free rate. TEL price has been phased over theyear to prevent any breakage in sale momentum.

4.2.3. Branchless Banking

While Core Microfinance Banking remains an integral part of the Issuers operations,branchless banking now forms a vital element for future growth and strategic positioning forthe Issuer. Customers with m-wallet accounts on Easypaisa have outstripped the customerbase acquired by the Issuer in 5 years through conventional channels. With over 15,500signed agents, Easypaisa is the largest consumer bank offering in Pakistan today in terms ofnumber of touch points. The Bank along with Telenor plans to expand the Easypaisa networkto 19,000 agents by end of 2012. Easypaisa represents one of the Banks most vital strengthssince it enables it to offer its expanding stable of products to customers all over the countrywith relatively little investment, taking advantage of Telenors excellent agent networkinfrastructure. The Bank intends to effectively leverage the said agent network and its Mwallet offering to develop a base which can help raise low cost mass deposits.


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4.2.4. Geographic Expansion

The Issuer feels that through innovative use of new channels, there is considerable room toleverage the existing geographical footprint. Therefore, the plan envisages only a very limitedincrease in branches over the next four years but instead puts investment behind existing

channel renovation, and low cost options like community centers and cheaper touch pointslike booths and branchless banking.

The experience of the last five years has helped to rationalize the capacity model to attain adisbursement capacity of approximately Rs. 7 billion per annum. This has been supported bya distribution base of 104 points while maintaining a default of less than 1%. This is a rareaccomplishment by any MFB in the market. It typically takes up to 12-18 months for a touchpoint to reach a level of optimum efficiency.

Between 2009 and 2010, the Issuer almost doubled its branch loan disbursement capacityfrom PKR 4.60 million a month to PKR 10.00 million a month with the largest branch inGujranwala achieving PKR 26.00 million a month. The Issuer feels that with support through

ancillary channels, these branches can again double their capacity and are expected to reachPKR 15 million of disbursements a month. As before, the dependency will be on largerbranches in Central Punjab to carry the bulk of the growth.

The steady improvement in the revenue to expense ratio over the last 3 years is testimony tothe fact that the management has been able to develop a scalable model. The managementintends to scale up by expanding its Hub and Spoke distribution network. Through this, thebank has been able to achieve extensive geographic reach while remaining frugal in cost andresource deployment demonstrating a high level of efficiency. Out of the planned new touchpoints, 20% will be upgrades from Community Center to low cost Financial Center whereasthe rest would constitute newly opened touch points.

The increase in touch points will also provide greater opportunity to support the cashmanagement in the field with better results to support the initiative of Bank on Wheels. Theproposed touch points if deployed during 2012 will help to build the disbursals volumes in2013 and 2014, as these touch points will reach their optimum performance level in 12-18months. In parallel, the deposit generation is expected to pick up due to specialization ofbranches/ Financial Centers in deposit. The distribution strategy will achieve its optimumefficiency in 12-18 months while affording gradual deployment of capital to retain thepositive equation of revenue to expense ratio.

4.2.5. Management of Delinquencies

The Issuer has invested heavily in technology infrastructure as it forms the backbone in

maintaining a control over loan disbursements and repayments despite losing geographicalproximity. Strong focus on technology, as well as internal controls in credit approvals andportfolio performance reviews, has consistently helped in maintaining the Issuersdelinquencies in unsecured loans. The low delinquency number has been further cemented bythe Issuers expansion into secured lending which now comprises the bulk of the portfolio.Thus, while the entire banking and microfinance sector is plagued with delinquencies that areincreasing, the Issuer has managed to reduce and maintain delinquency level to around 1%.

Year Portfolio At Risk

2008 1.33%

2009 1.20%

2010 0.47%

2011 0.69%2012(June12) 1.24%


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Onward maintenance at this level is a bigger challenge due to the recent floods and expectedimpact of inflationary pressure on the microfinance market. The role of the credit risk controlfunction will have to be improved to provide better risk management as well as analysis of thedata to allow predictive scoring.

4.2.6. Deposit Plan

A much bigger challenge to the Issuer today remains its ability to scale up in depositgeneration. Pakistan has the lowest saving to GDP ratio in South Asia at 14.3% as comparedto 18.2% in Sri Lanka, 32% in Bangladesh and 37% in India.1 However, this data is not a truedepiction of the reality. Even now majority of the people in rural and semi urban areas savetheir money in a safe place in their home. Going forward the Issuer plans to take a numberof initiatives to ramp up deposits.

Three products form the cornerstone of the Issuers deposit strategy:

Mahana Sukh Chain: at a monthly profit payment of 12.34% p.a., this product istargeted towards low income segment of the population. Through monthly profitpayment on investment the product meets the regular business needs of thecustomer.

Khas Bachat Certificate: targeted towards widows, and pensioners, the certificategives an annual, back loaded return of 14% p.a. Launched recently, the product isexpected to meet medium term saving needs of the market.

Tameer Shajar: Targeted towards senior citizens, the certificate gives a monthlyreturn on investment on competitive rates for 1, 2 & 3 years.

All of these products have carried a comprehensive go-to-market strategy with deposit targets

for sales team as well as advertising on local cable and mainstream channels.

The experience of opening two 24 hour branches, one in Karachi Fish Harbor (KFH) andanother in Karachi Sabzi Mandi has helped in deposit generation. The deposits from KFHbranch after 15 months of operations stood at PKR 300 million, whereas SM branch had adeposit of approximately Rs. 100 million. Plans are expand penetration in otherMandis/commodity markets through installation of booths.

Up until now, the Issuer has not hired dedicated deposit generation sales force in the branchesto support the lending and collection teams but has relied on existing teams to generateliabilities. Given the deposit growth challenge for 2012 and beyond, there is a need to hire

and develop a deposit specific sales force. The concept has been successfully piloted in 2011and will be rolled out nationwide in a phased approach in 2012.

Apart from improving small TDRs and saving accounts, the bank is also making an effort toincrease current account mix within deposits. A substantial gain was due to the launch ofclearing facility by the Issuer, as this was instrumental to offer a diverse range of transactionalbanking services to its account holders.

With savings and current account constituting almost 50% of total deposits, the Issueranticipates the cost of funds to remain steady under the prescribed target of 10-11% in theyear 2012.

1

http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/0,,menuPK:476823~pagePK:64165236~piPK:64165141~theSitePK:469372,00.html


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Overall, Tameer has a deposit base of about PKR 4.5 billion in deposits as of December 2011.

4.2.7. Access to Grants

The Issuer historically has been a recipient of grants from agencies like CGAP, DFID and Bill& Melinda (Gates Foundation) for initiating and managing its technology agenda. However,as the Issuer enters a stage in its existence where market development is the basis to achievingscale in core banking, it has broadened its partnerships to approach various agencies withinand outside Pakistan to support it in generating deposits as well as support research anddevelopment for new product development. Recently, SBP had provided grant under theFinancial Inclusive Program-2, after the successful completion of FIP-1 project, for thepurpose of establishing a separate Treasury Function, Home Remittance Cell and for theRemittance Gateway Project.

4.3.Human Resource Program

To ensure that the Bank maintains a skilled workforce while moving towards greaterempowerment and leadership from within the ranks, extra emphasis has been placed oninternal capacity building. The Bank is amongst the few institutions in the industry that haveinternally developed programs such as employee satisfaction surveys, medical awarenesssessions and roll out of the organizations vision and mission through a structured plan.

The Bank has also set up an in-house training department to manage internal orientation andboth train new employees and ensure existing employees stay on top of their game coveringtechnical training on Microfinance Banking and Core Banking Application, and soft skills.

It is intended that the Bank will continue to invest in its Human Resource in order to support

the planned growth in a sustainable manner.

With high levels of growth and market based compensation, the Issuer has seen increasedlevels of manpower retention especially at junior management levels. In addition, the Issuersreputation of being an innovator has served to improve the quality of personnel attracted toand retained in management positions. HR is fully empowered and equipped to play an activeand strategic role in the overall business process by designing HR systems and procedureswhich are aligned with the Issuers priorities and business objectives.

4.4.RISK FACTORS

Prospective investors should carefully consider the risks and uncertainties described below, inaddition to the other information contained in this Prospectus prior to making any investmentdecision relating to the TFCs.

Additional risks and uncertainties not known to the Issuer or that the Issuer currently believesto be immaterial may also have an adverse effect on the business, financial condition andresult of operations of the Issuer and the trading price of the TFCs which could consequentlyhave an adverse impact on all or part of the Investors investment and / or the redemptionamounts payable in terms of the TFCs.

The financial and other related implications of the risks concerned, wherever quantifiable,have been disclosed in the risk factors, detailed below. Unless otherwise stated in the relevant

risk factors set forth below, the Issuer is not in a position to specify or quantify the financialor other implications of any of the risks mentioned herein.


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The ordering of the risk factors is intended to facilitate ease of reading and reference and thesame does not in any manner indicate the importance of one risk factor over another.

This Prospectus contains forward looking statements that involve risks and uncertainties. The

Issuers actual results could differ materially from those anticipated in these forward lookingstatements as a result of several factors, including the considerations described below andelsewhere in this Prospectus.

Investors are advised to read the following risk factors carefully before making an investmentin the TFCs offered in the Issue. The Investors must rely on their own due diligence of theIssuer and the Issue, including the risks and uncertainties.

BUSINESS RISKS

1. Credit Risk

The Issuers core focus remains managing the credit risk of its microfinance business.However, entering a new and as yet untested business through Branchless Banking hasintroduced a fresh spectrum of risk parameters for the bank to monitor and evaluate itsbusiness growth on.

Mitigants in respect of Credit Risk are as follows:

In both cases, the Issuer benefits from its strong focus on technology and access tocomprehensive MIS that allows for analytical reviews and stress tests.

On the core microfinance side, the bank had a NPL to Gross portfolio ratio of 0.69%in the year 2011;

Further, the Issuer will be focused on maintaining its defined system base andmanual process controls for loan verification, disbursal and repayment leading tobetter span of control and reduced incidence of fraud and delinquency;

Secured Emergency Loan constitutes about 80% of the portfolio; The Issuer has in place a regular process of conducting periodic stress tests on the

portfolio to provide early warning on portfolio vulnerabilities;

The Issuer plans to invest in its systems to implement a process for comprehensivestatistical analytics of its portfolio along product, approver, market, demographic

lines;

In addition, the Issuer will continue to improve the stress test parameters to exploredeeper into the data; and

The Issuer will create a Credit Scoring Methodology based on historical data tobetter allow analysis and predictability of future lending portfolio.


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S.No 2008 2009 2010 2011 2012-HY

NPL(000) 12,028 18,412 14,613 34,761 77,495

NPL(% ofAdvances)

1.33% 1.2% 0.48% 0.69% 1.24%

2. Operational Risk

While the Issuer has low incidence of losses through operational risk, there is a need todevelop a more formal process of identification and mitigating risk in this area.

Mitigants in respect of Operational Risk are as follows:

In 2010, the bank introduced an operational risk matrix to review its operationalrisks based on market environment and business factors. This was further fine-tuned in 2011; and

In 2012, it is planned to enhance the matrix to evaluate across business lines i.e. inboth Branch and Branchless Banking to ensure an optimal level of controls to limitoperational losses and has been effectively implemented.

3. Market and Liquidity

The Issuers market and liquidity risk is being managed by its Asset Liability Committee(ALCO)which meets periodically to review and manage these parameters. Historically, the

Issuer has supported a conservative view limiting treasury investments to restrictedinstitutions in the interbank market.

Mitigants in respect of the Risks associated with Market and Liquidity are as follows:

Periodic ALCO meetings are scheduled to gauge the entitys liquidity and marketrisk; and

The Issuer has developed a comprehensive risk and mitigant matrix to allow the bankto enter into more sophisticated capital market transactions.

4. Compliance / Legal / Regulatory

The Issuers foray into Branchless Banking exposes it to compliance, legal and regulatoryrisk. To manage this, in 2009, the Issuer established an independent compliance function thatreports to the CEO and is now enhanced to manage the above risks for the Issuer.

Mitigants in respect of Compliance, Legal and Regulatory Risks are as follows:

Regulatory risk management framework is prepared and monitored on regular basis; With business complexity and sophistication increasing on Easypaisa, 2012 require

the Compliance Function to spend more time ensuring business needs are being metin line with the regulatory requirements; and


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Anti-Money Laundering (AML) system is in place which has the ability to raise riskflags and exception risk.

5. Business Risk Mitigants

The overall mitigant to Business Risk is Self-Assessment. While the Issuer has an internallydeveloped process for Self-Assessment at branch and department level, in 2011 this processwill be rolled out again with more comprehensive training to the users, and regularmonitoring at the central level so that its implementation is sustainable.

INSTRUMENT RISK

1. Payment and Default Risk

This risk is associated with the repayment capacity of the Issuer and the Issuers ability to

service the principal (bullet) component of the redemption amount as well as the profit.Further since the TFCs will be repaid through a bullet payment at maturity, payment risk islargely weighted on those particular redemption dates.

The Mitigants in respect of Payment and Default Risk are as follows:

The Instrument has received rating ofA by JCR-VIS Limited which depicts lowprobability of default;

The redemption amounts payable by the Issuer have been partially guaranteed by theMCGF Guarantee to the extent of 40% of the principal component of the redemptionamount due and payable by the Issuer; and

Furthermore, 80% of Issuers loan portfolio is backed by gold collateral anddelinquency ratio has been maintained around 1% indicating low payment/defaultrisk.

2. Liquidity Risk

By investing in the TFC the investor assumes the risk of not being able to sell the TFCwithout adversely affecting the price of the instrument.

Mitigants associated with Liquidity Risk are as follows:

The TFCs are to be listed on KSE, which will act as provider of liquidity for TFCsduring the life of the instrument by facilitating secondary market trades. In addition,the market maker, JS Global (for details about the market maker please refer to para2.18 of the prospectus) would also provide liquidity for secondary trading of theIssue.

3. Interest Rate or Price Risk

The TFC issue will be listed on KSE and the TFC holders of the Issuer will be able to sell or

buy TFCs through the members of KSE and through market makers subsequent to the listingof the issue. Price of TFCs will depend on the TFC market behavior and the performance of


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the Issuer. Hence price may rise or fall and result in increase or decrease in the value of TFCsto any extent. Fluctuations in interest rates, and underlying inflation, may adversely affect theyield to investors.

The Mitigants for the Interest Rate Risk are as follows:

The TFCs are to be listed on the KSE and can be traded in the secondary market. Inaddition, the market makers would also provide liquidity for secondary trading of theIssue.

4. Financial Projection Risk

The Issuer has prepared financial projections on the basis of various assumptions related tomarket conditions and is subject to change. Any unforeseen events such as problems arising

out of lower than projected portfolio growth has not been taken into account. The investorsassume the risk that due to the unforeseen events the Issuer may not be able to maintainconsistent growth.

5. Changes in Tax Regime

Any adverse change in the existing Tax regime for investment in TFCs, may affect theredemption and profit for the TFC investors.

6. Regulatory Risk

Changes in the regulatory framework may have an effect on the returns to investors in so far

as such changes impact the return on TFCs.

Mitigants in respect of Regulatory Risk are as follows:

As these are fixed rate instruments this risk is expected to be minimal.

7. Exchange Rate Risk

Depreciation of the Pakistani Rupee may affect the yield to overseas investors.

8. Security Risk

The Issue will be secured partially through the Microfinance Credit Guarantee Facility,provided by the State Bank of Pakistan. Through this facility, each TFC 1 and TFC 2 areguaranteed up to the extent of 40% of the outstanding principal component of the RedemptionAmount as on the date of event of default by the Bank ( For details please refer to paragraph6.1.1). The investors may however note that both TFC1 and TFC2 are unsecured to theextent of 60% of the principal component of the outstanding Obligation and 100% of the

profit due and payable by the Issuer in respect of each class of TFCs, as on the date of

occurrence of the Event of Default by the bank.

Mitigants in respect of Security Risk are as follows:

The MCGF Guarantees, guarantee the payment of 40% of the Obligations, due andpayable by the Issuer as on the date of occurrence of the default; this is a payment


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guaranteed by the Guarantor and shall be made within five (5) Business Days fromthe date of receipt of a Guarantee claim from the TFC holders, without therequirement of initiating any legal action and / or filing a claim in the courts forrecovering the guaranteed amount;

As compared to other forms of security which require an enforcement of the securityand thereafter the distribution of the proceeds recovered from the liquidation of thesecurity, which is a time consuming process, and also involves a certain degree ofrisk. However, with the MCGF Guarantees not only is 40% of the principal amountguaranteed but it is also payable within five (5) days from the date of filing the claimby trustee with the SBP BSC, subject to a claim having been filed with SBP BSCafter ninety (90) days from the date of default. Accordingly as compared to otherforms of security, the MCGF Guarantees guarantee a specified amount and the timeof payment of such amount;

The Trustee has the right to take the actions specified in sub-section 9.4.2 of theDeclaration of Trust to recover the balance amount (as set out in sub-paragraph

7.3.1.5 for ease of reference).


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PART V

FINANCIAL INFORMATION AND CREDIT RATING REPORT

5.1. AUDITORS REPORT DATED APRIL 3, 2012 UNDER SECTION 53(1)READ WITH CLAUSE 28(1) OF SECTION 2 OF PART 1 OF THE SECOND

SCHEDULE OF THE ORDINANCE.


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5.2. AUDITORS CERTFICATE FOR BREAK UP VALUE OF SHARES.


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5.3. AUDITORS CERTIFICATE ON ISSUED, SUBSCRIBED AND PAID UPCAPITAL.


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5.4. INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE HALFYEAR ENDED JUNE 30, 2012


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5.5. FINANCIAL SUMMARY

FINANCIAL SUMMARY : 2009 2010 2011Rs on 000

Total Assets 2,789,009 5,279,100 8,281,106

Total Liabilities 1,663,857 3,927,848 6,805,261

Share Capital 1,346,939 1,346,939 1,346,939

Reserves 343,469 405,812 439,430

Accumulated Profit/Loss (616,026) (428,997) (328,145)

Total Equity 1,074,382 1,323,754 1,458,224

Mark-up Interest Income 439,691 753,406 1,277,002

Mark-up Income Expense (351,296) (181,769) (445,874)

Profit Before Tax

Profit/Loss After Tax

Breakup Value Per Share

Earnings/Loss Per Share

(119,436)

(2543)

8.4

(0.1)

7,067

249,372

10.1

1.9

226,721

134,470

11

1

Ratio Analysis

Return on Assets (4%) 0.13% 3%

Return on Equity (11%) 1% 16%

Advances to Deposits 1.19 1.03 1.12

Financial Leverage Ratio 0.28 0.5 1.23

CAR 61% 39% 60%


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[PAGE INTENTIONALLY LEFT BLANK]


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5.6. CREDIT RATING REPORTThe Credit Report in respect of the Issue is attached hereinbelow.


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PART VI

6. TRUSTEE AND SECURITY

6.1. SECURITY

6.1.1. MCGF Guarantee

Each class of TFCs is partially secured by way of MCGF Guarantees issued by the SBP BSC,vide letter No: DFSD-MCGF (IGI)/492/2012, dated 25th September, 2012; under the MCGFGuidelines, guaranteeing forty percent (40%) of the principal component of the RedemptionAmount due and payable by the Issuer in respect of TFC 1 and TFC 2, upon the occurrence ofEvent of Default under TFC 1 and TFC 2 (Guaranteed Obligations).

The MCGF Guarantees shall come into effect on the Issue Date and shall remain valid and inforce during the entire term of the relevant class of TFCs.

The MCGF Guarantees have been issued by the SBP BSC in favour of the Trustee andpursuant to the Declaration of Trust, the Trustee has confirmed that the Trustee holds thebenefit of (a) the MCGF Guarantee issued by SBP BSC to secure TFC 1, in trust for and forthe benefit of TFC Holders holding TFCs 1; and the MCGF Guarantee issued by SBP BSC tosecure TFC 2, in trust for and for the benefit of TFC Holders holding TFCs 2.

Upon the failure of the Issuer to effect payment of the amounts outstanding in respect ofTFCs 1 and / or TFCs 2, the Trustee has the right to take the actions as set out in Paragraph7.2.5 (Enforcement Upon Event of Default), and to serve a claim upon the Guarantor forpayment of the Guaranteed Obligations under the MCGF Guarantees, in accordance withthe MCGF Guidelines.

The Trustee also has the right to recover the Obligations by taking any or all of thefollowing actions against the Issuer:

to file suits for the recovery of the Obligations, including with obligation for theappointment of receivers and prompt attachmen

tmfb_tsc_2012_prospectus.pdf

Documents

date of publication

date of investment

state bank of pakistan

instrument rating

subscription period

central depository system

option redemption

initial issue expenses