TO ALL THE AUTHORIZED DEALERS
IN FOREIGN EXCHANGE,

Dear Sirs,

PERMISSION OF PAKISTANI BRANCHES OF FOREIGN BANKS TO INVEST IN CORPORATE
FIXED INCOME SECURITIES

Authorized Dealers are aware that in terms of para 15 Chapter XX of the Foreign Exchange Manual (1992 Edition), branches of foreign banks operating in Pakistan are permitted to underwrite public issue of registered corporate debt instruments like PTCs, TFCs, Modaraba Certificates etc. without any limit provided that where the terms and conditions of issue of such securities give an option to the holders to convert the same into ordinary shares, such underwriting is restricted to 30% of the public offering or 30% of their paid-up capital and reserves, whichever is less.

It has now been decided to permit the branches of foreign banks in Pakistan and foreign controlled investment banks incorporated in Pakistan to invest in registered corporate debt instruments like TFCs etc through initial public offerings and secondary market purchases, provided that in the case of investment in registered debt securities convertible into shares their holding does not exceed 30% of the paid up share capital of the issuing company.

Consequently, a new para as paragraph 16 is added in Chapter XX of the Foreign Exchange Manual as under:-

"16. Branches of foreign banks in Pakistan and foreign controlled investment banks incorporated in Pakistan are permitted to invest in Pak Rupee. Denominated registered corporate Debt instruments issued in Pakistan provided investment in those debt instruments which are convertible into shares does not exceed 30% of the paid up share capital of the issuing company. The profit / interest accruing on such investment will be treated as their income for the purpose of profit / dividend remittance."