BankIslami Pakistan : Notice of Extraordinary General Meeting

NOTICE OF EXTRA ORDINARY GENERAL MEETING

Notice is hereby given that the Extra Ordinary General Meeting of the Members of BankIslami Pakistan Limited (the "Bank") will be held Inshallah on Monday, October 10, 2022 at 11:00 a.m. to transact following business. The meeting will be held via Zoom and shareholders are encouraged to attend the meeting via Zoom facility in view of Covid-19 pandemic. Shareholders who elect to attend the EOGM in person can assemble at 10th Floor, Progressive Square, Shahrah-e-Faisal, Karachi.

ORDINARY BUSINESS

1- To confirm minutes of 18th Annual General Meeting of the Bank held on March 30, 2022.

SPECIAL BUSINESS

2- To consider and, if thought fit, approve the conversion of Sukuk Certificates into Ordinary Shares of the BankIslami Pakistan Limited (the "Bank") upon the occurrence of a conversion event as determined by the State Bank of Pakistan and in that connection to pass the following resolutions:

"RESOLVED that in respect of the proposed Sukuk issue of PKR 1,000,000,000/- (Pak Rupees One Billion), to be issued by the Bank ("Sukuk") in accordance with the in-principal approval issued by the State Bank of Pakistan ("SBP") vide letter bearing reference number SBPHOK-BPRD-BACPD-BIS-230131 dated June 16, 2022 ("In-PrincipleApproval") and instructions of SBP under the 'Instructions for Basel III Implementation in Pakistan' ("Basel III Rules") issued under BPRD Circular No. 06 dated August 15, 2013, as amended from time to time, regarding loss absorbency, in the event (i) all or part of the Sukuk are subject to a mandatory conversion into common shares at the discretion of SBP in case of the Bank's inability to exercise the lock-in clause, or (ii) all or part of the Sukuk are converted into common shares upon the declaration by the SBP of the occurrence of a Point of Non-Viability event (PONV); or (iii) all or part of the Sukuk are converted into common shares by the Bank upon the occurrence of a Pre-specified Trigger Event (collectively the "Conversion Events"), such ordinary shares shall be issued other than by way of rights as per the applicable provisions of the Companies Act, 2017 ("Additional Shares").

FURTHER RESOLVED that the issuance of such Additional Shares shall be based on the market value of the shares of the Bank on the date of trigger of the Conversion Event as declared by SBP and shall be subject to a cap of 90,000,000 (ninety million) additional ordinary shares being issued, or such other number as may be agreed to in consultation with SBP and shall further be subject to approval of the Securities and Exchange Commission of Pakistan in accordance with the applicable provisions of the Companies Act, 2017.

FURTHER RESOLVED that the President & Chief Executive, Chief Financial Officer and Company Secretary or their delegates (the "Authorized Representatives") of the Bank, be and are hereby singly authorized to take all steps, necessary, ancillary and incidental to the above, and are further authorized to sign, execute and deliver all necessary documents, agreements and letters on behalf of the Bank, as may be deemed appropriate and as may be required for the purposes abovementioned."

3- To increase Authorized Capital of the Bank.

"RESOLVED that the Bank as per the In-Principle Approval is required to maintain sufficient cushion for the issuance of Additional Shares upon the Conversion Events and accordingly the Authorized Share Capital of the Bank be increased from PKR 13 Billion to PKR 15 Billion. The Company Secretary be and is hereby authorized to do all necessary acts in connection with the proposed alteration in the authorized share capital, including but not limited to obtaining SBP approval for the proposed amendments.

FURTHER RESOLVED that as a consequence of the said increase in the authorized share capital of the Bank:

Subject to receipt of SBP approval, the existing Clause 5 of the Memorandum of Association of the Company be replaced accordingly to read as follows:

The Authorized Capital of the Bank is PKR 15,000,000,000/- (Pak Rupees Fifteen Billion) divided into 1,500,000,000 (one billion five hundred million) Ordinary Shares of PKR 10/- each with the powers to the Bank from time to time to increase its capital in accordance with the provisions of the Companies Act, 2017.

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FURTHER RESOLVED that, all acts, deeds, and actions taken by the Authorized Persons pursuant to the above resolutions for and on behalf of and in the name of the Bank shall be binding acts, deeds and things done by the Bank."

ANY OTHER BUSINESS

4- To transact any other business with the permission of Chair.

Venue of Extra Ordinary General Meeting ("EOGM") and Participation of Shareholders through Electronic means:

In the wake of the current situation related to Covid-19 virus and in the light of the relevant guidelines issued by Securities & Exchange Commission of Pakistan vide its letter no. SMD/SE/2(20)/2021/117 dated December 15, 2021, its Circular no. 4 of 2021 dated February 15, 2021 and its Circular no. 6 of 2021 dated March 3, 2021 respectively, the following arrangements have been made by the Bank for the participation of Shareholders:

• The Directors/Management of the Bank will be present at the Bank's Registered Office at 11th Floor, Executive Tower, Dolmen City, Marine Drive, Clifton Block-4, Karachi, to coordinate with the shareholders and consolidate the proxies to ensure the quorum.
• 10th Floor, Progressive Square, Shahrah-e-Faisal, Karachi will be the venue for the shareholders who elect to attend the meeting physically. As per SECP instructions given in the Circular No. 4 of 2021 dated February 15, 2021 shareholders who intends to participate physically in the EOGM will be allowed to participate keeping in view the COVID-19 related SOP's issued by the Provincial and / or the Federal Government.
• The Shareholders are encouraged to participate in the EOGM through Zoom facility organized by the Bank. In order to attend the EOGM through Zoom facility, the shareholders are requested to get themselves registered with the Company Secretary at least 24 hours before the time of EOGM at the following e-mail address:

Email address: [e-mail]

• The shareholders are requested to provide the information as per below format. The details of the Zoom facility will be sent to the shareholders on the email address provided in the below table:

Sr.	Name of the	CNIC	Folio / CDC	Cell	Email address
No.	shareholder	Number	Account	Number
			Number

The login facility will be opened at 10:45 a.m. October 10, 2022 enabling the participants to join the proceedings which will start at 11:00 a.m. sharp.

By Order of the Board

Dated: September 19, 2022	Muhammad Shoaib
Company Secretary

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Statements under section 134 (3) of the Companies Act 2017 pertaining to special business are enclosed.

STATEMENTS UNDER SECTION 134(3) OF THE COMPANIES ACT 2017

These statements set out the material facts concerning the resolution contained in item 2 and 3 of the Notice pertaining to the special business to be transacted at the Extra Ordinary General Meeting of the Bank to be held on October 10, 2022.

To consider and, if thought fit, approve conversion of Sukuk into Ordinary Shares of the Bank upon the occurrence of a conversion event as determined by the State Bank of Pakistan

On April 26 2022 the Board of Directors of BankIslami Pakistan Limited ("BIPL" or the "Bank") resolved to raise Shariah compliant Additional Tier 1 Capital through issuance of redeemable capital under s. 66 of the Companies Act, 2017 in the amount of PKR 1,000,000,000/- (Pak Rupees One Billion) (the "Sukuk Issue" or the "Sukuk") to eligible investors in terms of BPRD Circular Number 08 dated June 27, 2006 and as updated vide BPRD Circular Number 06 of August 15, 2013 (as amended from time to time), read with all relevant rules, regulations, circulars and approvals of State Bank of Pakistan ("SBP").

SBP through BSD Circular No. 7 dated April 15, 2009 had directed all banks to achieve and maintain the minimum CAR of 10% by December 2013. SBP vide its Circular No. 6 of Banking Policy and Regulation Department ("BPRD") dated August 15, 2013 ("BaseI III Circular"), covering Basel III reforms, gave a roadmap to increase the minimum CAR up to 12.5% in a phased manner by December 31, 2019. The Sukuk Issue is intended to comply with the State Bank of Pakistan's ("SBP") regulation to maintain the minimum Capital Adequacy Ratio ("CAR"), sustain the regulatory deductions as directed by SBP and to support on-going business operations of the Bank.

As per the requirements of Basel III under the aforementioned Basel III Circular, the terms and conditions of the ADT 1 must have a provision of "loss absorbency" for it to be qualified as Additional Tier 1 Capital instrument.

The relevant portion of the Basel III Circular relating to "loss absorbency" is reproduced below:

"A-5-2 Loss Absorption of Additional Tier-1 Instruments at a Pre-specified Trigger:

1. The additional Tier-1 capital instruments (classified as other than equity at issuance) must have loss absorption clause whereby these instruments will be permanently converted to common shares when the bank's CET1 ratio falls to or below 6.625% of RWA {i.e. minimum CET1 of 6.0% plus 25% of capital conservation buffer of 2.5% (0.625%)}. Moreover, the bank should immediately notify SBP upon reaching the trigger point.
2. A bank will have full discretion to determine the amount of Additional Tier-1 instruments to be converted into common shares subject to following conditions:
3. 1. Where a bank's CET1 reaches the loss absorption trigger point, the aggregate amount of Additional Tier-1 capital to be converted must at least be the amount sufficient to immediately return the CET1 ratio to above 6.625% of total RWA (if possible).
   2. The converted amount should not exceed the amount needed to bring the CET1 ratio to 8.5% of RWA (i.e. minimum CET1 of 6.0% plus capital conservation buffer of 2.5%).
4. The contractual terms and conditions of Additional Tier-1 instruments must also include a clause requiring full and permanent conversion of the instrument into common shares at the point of non-viability (mentioned below in Section A-5-3).
5. The conversion method will describe and follow the order (hierarchy of claims) in which they will absorb losses in liquidation / gone concern basis. These terms must be clearly stated in the offer documents.

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"A-5-3 Loss Absorbency of Non-Equity Capital Instruments at the Point of Non-Viability:

1. The terms and conditions of all non-CET1 and Tier 2 instruments issued by banks must have a provision in their contractual terms and conditions that the instruments, at the option of the SBP, will either be fully and permanently converted into common share upon the occurrence of a non-viability trigger event called the Point of Non-Viability (PONV) as described below;
2. The PONV trigger event is the earlier of;
3. 1. A decision made by SBP that a conversion is necessary without which the bank would become non-viable.
   2. The decision to make a public sector injection of capital, or equivalent support, without which the bank would have become non-viable, as determined by SBP.
4. The issuance of any new shares as a result of the trigger event must occur prior to any public sector injection of capital so that the capital provided by the public sector is not diluted.
5. The amount of non-equity capital to be converted will be determined by the SBP.
6. Where an Additional Tier-1 capital instrument or Tier-2 capital instrument provides for conversion into ordinary shares, the terms of the instruments should include provision that upon a trigger event the investors holding 5% or more of paid-up shares (ordinary or preferred) will have to fulfill fit and proper criteria (FPT) of SBP.
7. The conversion terms of the instruments must contain pricing formula linked to the market value of common equity on or before the date of trigger event. However, to quantify the maximum dilution and to ensure that prior shareholder / regulatory approvals for any future issue of the required number of shares is held, the conversion method must also include a cap on the maximum number of shares to be issued upon a trigger event.
8. The conversion method should describe and take into account the order (hierarchy of claims) in which the instruments will absorb losses in liquidation / gone concern basis. These terms must be clearly stated in the offer documents. However, such hierarchy should not impede the ability of the capital instrument to be immediately converted.
9. There should be no impediments (legal or other) to the conversion i.e. the bank should have all prior authorizations (sufficient room in authorized capital etc.) including regulatory approvals to issue the common shares upon conversion.
10. The contractual terms of all Additional Tier 1 and Tier 2 capital instruments must state that SBP will have full discretion in deciding / declaring a bank as a non-viable bank. SBP will, however, form its opinion based on financial and other difficulties by which the bank may no longer remain a going concern on its own unless appropriate measures are taken to revive its operations and thus, enable it to continue as a going concern. The difficulties faced by a bank should be such that these are likely to result in financial losses and raising the CET1 / MCR of the bank should be considered as the most appropriate way to prevent the bank from turning non-viable. Such measures will include conversion of non-equity regulatory capital into common shares in combination with or without other measures as considered appropriate by the SBP."

In addition to the above conversion conditions, it is expected that SBP will also require conversion of the Sukuk ADT 1 where all or part of the Sukuk ADT 1 are subject to a mandatory conversion into common shares at the discretion of SBP in case of the Issuer's inability to exercise the lock-in clause as follows:

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