As you are aware, Federal Government has decided to introduce the above certificates with a view to providing better investment opportunities. The Salient features of the scheme are recapitulated below:-

(i) These certificates shall be issued in U.S. Dollar and Pound Sterling in the following denominations:-

U.S. Dollar 1,000 5,000 10,000 & 100,000
Pound Sterling 1,000 5,000 10,000 & 50,000

(ii) These certificates will be issued at par for a period of three years from date of issue and will carry floating rates of profit which shall be paid on half-yearly basis. The profit will be paid on the basis of Barclays Bank, London’s bid rate as published by the Foreign Exchange Rates Committee plus a margin as indicated on each coupon envisaging payment of half-yearly profit. No profit will, however, be paid for the broken period or for the period the certificates are held beyond the maturity date. These certificates may be encashed after a minimum holding period of 6 months without any penalty. Banks can also discount these certificates after a period of six months. The discounted value would be payable, at the option of the holder, either in the respective foreign currency or in equivalent Pakistan rupees at the Authorized Dealer’s buying rate for the respective currency. In the former case the bank discounting the certificates shall pay the amount out of its NOSTRO balances. The banks will themselves determine the discounting rates keeping in view the market conditions. The banks after discounting the certificates will hold the discounted certificates with them till maturity and will be entitled to receive the periodical profit and the principal amount on maturity in Pakistan rupees only.

(iii) These certificates may be purchased without any limit by individuals, firms, institutions and bodies corporate irrespective of their nationalities and place of residence, excluding banks and Financial Institutions operating in Pakistan.

(iv) Payments for purchase of the Certificates can be made by means of remittance in the relative foreign currency from abroad in favour of an office of issue from a foreign currency account held with an Authorized Dealer in Pakistan, tender of respective foreign currency notes or travelers cheques issued outside Pakistan or encashment proceeds of Foreign Exchange Bearer Certificates. After issue of certificates, the issuing office will deliver the same to an authorized person in Pakistan or export it abroad as per the directive of the buyer.

(v) Subject to the provisions of para 19 of the Notification No.SRO.59(I) / 98 dated the 7th February, 1998 issued by the Government of Pakistan, the profit earned on these certificates shall neither be liable to income tax nor shall it be taken into account for the purpose of determining the rate of income tax on total income.

(vi) No compulsory deduction of Zakat will be made. Investment in these certificates will also be exempt from wealth tax.

(vii) There are no restrictions on possession, import of export of these certificates and they can be transferred by mere delivery.

(viii) The payment of encashment proceeds and payment of periodical profit will be made in Pakistan Rupees or at the option of the holder in relative foreign currency in the shape of foreign currency notes, Travelers Cheques, Demand Drafts / Telegraphic Transfers / Mail Transfers in the name of the beneficiary indicated by the holder or by credit to the foreign currency account maintained with an Authorized Dealer in Pakistan.

(ix) These certificates will not be issued against foreign exchange which represents sale proceeds of goods exported from Pakistan, earnings of residents on account of services and the earnings / profits of the offices / branches of Pakistani firms / Companies / banks working abroad.

2. The issue / discounting / encashment of these certificates will be subject to the procedure advised to the Authorized Dealers by the Securities Department, State Bank of Pakistan, Central Directorate, Karachi.