Financiers agree to settle outstanding CFS issue

[Naveed Yaseen]

AHMED MALIK
KARACHI (December 28 2008): The financiers have agreed to settle the outstanding CFS issue and the proposed CFS Mk-II square-up scheme will be started from Sunday (today). In this regard the National Clearing Company of Pakistan Limited has issued consent letters of the proposed CFS Mk-II square-up scheme agreed among authorised financiers and financees to all the participants.

The NCCPL has asked the participants to sign consent letter latest by 3pm on December 28, 2008 to join the scheme. The NCCPL said that this is a voluntary scheme and those participants not entering this programme will be squared up through a tender process. Only those will be able to join this scheme, who will sign the requisite consent letter till 3pm on Sunday.

According to the scheme, the financiers and government owned institutions will buy 50 percent each out of the total outstanding CFS shares at 12.5 percent discount on December 24, 2008 closing prices. A meeting of all stakeholders was held here on Saturday to finalise the programme.

The meeting was chaired by Securities and Exchange Commission of Pakistan Chairman Razi-ur-Rehman. MD KSE Adnan Afridi, MD NCCPL Muhammad Lukman, Chairman Mutual Fund Association of Pakistan Najam Ali, Nasim Baig, Aqeel Karim Dhedhi, Dawood Jan Muhammad and representatives of various asset management companies attended the meeting.

It is learnt that the signed requisite consent letters received from the participants will be incorporated in the settlement system and the settlement process will be completed by Wednesday.

Presently there are 17 suspended brokers. All the suspended brokers and other CFS financees and financiers can join the system, however, only those participants will be considered for settlement whose signed requisite consent letter will be submitted till 3pm on December 28, 2008. The SECP has given guarantee to both sides ie financiers and financees that new CFS contracts will not be started until the settlement of the proposed square-up scheme is completed.

Sources said that the big brokerage houses like Arif Habib and Jahangir Siddiqui have decided not to sign the requisite consent letter as they feel that they have adequate financial strength and do not need to join the scheme.

The NCCPL in a notice said that the said scheme is being implemented with the consent of the authorised financiers and financees. NCCPL is only acting as CFS Mk-II facilitation agent to facilitate the implementation of the scheme without incurring any liability. The NCCPL offices at all locations shall remain open on December 28, 2008 to receive the said consent letters.

Three farmers of performa letters issued by NCCPL are appended: (on Letter Head) For Authorised Financiers December ...., 2008 National Clearing Company of Pakistan Limited 8th Floor, KSE Building Stock Exchange Road Karachi.

Dear Sir

CFS Mk-II Square-up Scheme - Confirmation of Participation

WHEREAS:

(a) after consultations among all the stakeholders a scheme has been formulated for squaring up of all open CFS Mk-II ® Transactions as on close of business on CFS Mk-II System in December 24, 2008 (the "Open CFS Mk-II ® Transactions") which scheme is attached herewith as Annex A (the "Scheme");

(b) acceptance of and participation in the Scheme by CFS Mk-II Participants is on a voluntary basis;

© as a condition of participation in the Scheme, the consenting CFS Mk-II Participants are required to execute this confirmation;

NOW THEREFORE:

1. We hereby agree to participate in the Scheme and abide by its terms.

2. Without prejudice to the generality of paragraph 1 above, we undertake to:

(a) invest upto 30% of the principal amount of finance payable to us under the Open CFS Mk-II ® Transactions to which we are a party as an Authorised Financier by purchasing:

(i) in case of suspended Financees, the CFS Mk-II Financed Securities which are subject matter of such Open CFS Mk-II ® Transactions and the securities that have been deposited as margin against such Open CFS Mk-II ® Transactions;

(ii) in case of Financees who are not suspended, the CFS Mk-II Financed Securities which are subject matter of such Open CFS Mk-II ® Transactions;

(b) accept the payment of the amounts distributed by NCCL after completion of the squaring-up process as full and final settlement of all amounts payable to us in respect of the Open CFS Mk-II ® Transactions to which we are a party as an Authorised Financier;

3. We shall immediately withdraw any proceedings that have been initiated by us and is currently pending in any court or before any other forum.

4. We hereby waive our rights to raise any claim at any time in respect of the Open CFS Mk-II ® Transactions to which we are a party as an Authorised Financier.

5. We hereby agree to indemnify NCCL against any losses, damages, costs or expenses that NCCL may suffer or incur as a result of any breach of this confirmation by us or any person claiming through or under us.

6. We agree that except as expressly provided otherwise in the Scheme, all matters relating to the Open CFS Mk-II ® Transactions shall be governed by the NCC Regulations.

7. We hereby confirm that we have read and understood the terms of the Scheme and have taken independent legal advice in this regard.

For and on behalf of .....................

Name: ......................................

Title: Authorised Signatory to the NCCPL Agreement

Witnesses:

1.______________2. _______

NIC __NIC__________

Name:____Name:______

(On Letter Head)For Non-Suspended CMs

December..., 2008

National Clearing Company of Pakistan Limited 8th Floor, KSE Building Stock Exchange Road Karachi.

Dear Sir

CFS Mk-II Square-up Scheme - Confirmation of Participation

WHEREAS:

(a) after consultations among all the stakeholders a scheme has been formulated for squaring up of all open CFS Mk-II ® Transactions as on close of business of CFS Mk-II System on December 24, 2008 (the "Open CFS Mk-II ® Transactions") which scheme is attached herewith as Annex A (the "Scheme");

(b) acceptance of and participation in the Scheme by CFS Mk-II Participants is on a voluntary basis;

© as a condition of participation in the Scheme, the consenting CFS Mk-II Participants are required to execute this confirmation;

NOW THEREFORE:

1. We hereby agree to participate in the Scheme and abide by its terms.

2. Without prejudice to the generality of paragraph 1 above, we:

(a) confirm that the CFS Mk-II Financed Securities which are subject matter of the Open CFS Mk-II ® Transactions to which we are a party as a Financee may be sold by NCCPL in accordance with the Scheme;

(b) undertake to pay any amount that is payable by us in respect of the Open CFS Mk-II ® Transactions to which we are a party as a Financee and which amount remains outstanding after the sale of CFS Mk-II Financed Securities and margin securities in accordance with the Scheme. Such amount shall be paid by us in accordance with the NCCPL Regulations as and when demanded by NCCPL by issuing a Final Demand Notice and upon our failure to pay such amount NCCPL shall be entitled to proceed in accordance with NCCPL Regulations; and

© agree that above arrangement for sale of CFS Mk-II Financed Securities are subject to the extent agreed by the Authorised Financier who is the underlying counter party to Open CFS Mk-II ® Transactions.

3. We shall immediately withdraw any proceedings that have been initiated by us and are currently pending in any court or before any other forum.

4. We hereby waive our rights to raise any claim at any time in respect of the Open CFS Mk-II ® Transactions to which we are a party as a Financee.

5. We hereby agree to indemnify NCCL against any losses, damages, costs or expenses that NCCL may suffer or incur as a result of any breach of this confirmation by us or any person claiming through or under us.

6. We agree that except as expressly provided otherwise in the Scheme, all matters relating to the Open CFS Mk-II ® Transactions shall be governed by the NCC Regulations.

7. We hereby confirm that we have read and understood the terms of the Scheme and have taken independent legal advice in this regard.

For and on behalf of Name: ............

Title: Authorised Signatory to the NCCPL Agreement

Witnesses:

1._______

2. NIC_________________

NIC_____________

Name:______

Name:____________

(On Letter Head)-For Suspended CMs

December ...., 2008

National Clearing Company of Pakistan Limited 8th Floor, KSE Building Stock Exchange Road Karachi.

Dear Sir

CFS Mk-II Square-up Scheme - Confirmation of Participation

WHEREAS:

(a) after consultations among all the stakeholders a scheme has been formulated for squaring up of all open CFS Mk-II ® Transactions as on close of business of CFS Mk-II System on December 24, 2008 (the "Open CFS Mk-II ® Transactions") which scheme is attached herewith as Annex A (the "Scheme");

(b) acceptance of and participation in the Scheme by CFS Mk-II Participants is on a voluntary basis;

© as a condition of participation in the Scheme, the consenting CFS Mk-II Participants are required to execute this confirmation;

NOW THEREFORE:

1. We hereby agree to participate in the Scheme and abide by its terms.

2. Without prejudice to the generality of paragraph 1 above, we:

(a) confirm that the CFS Mk-II Financed Securities which are subject matter of the Open CFS Mk-II ® Transactions to which we are a party as a Financee and any securities that have been deposited by us as margin against such Open CFS Mk-II ® Transactions may be sold by NCCPL in accordance with the Scheme;

(b) undertake to pay any amount that is payable by us in respect of the Open CFS Mk-II ® Transactions to which we are a party as a Financee and which amount remains outstanding after the sale of CFS Mk-II Financed Securities and margin securities in accordance with the Scheme. Such amount shall be paid by us in accordance with the NCCPL Regulations as and when demanded by NCCPL by issuing a Final Loss Notice and upon our failure to pay such amount NCCPL shall be entitled to proceed in accordance with NCCPL Regulations; and

© agree that above arrangement for sale of CFS Mk-II Financed Securities are subject to the extent agreed by the Authorised Financier who is the underlying counter party to Open CFS Mk-II ® Transactions.

3. We shall immediately withdraw any proceedings that have been initiated by us and are currently pending in any court or before any other forum.

4. We hereby waive our rights to raise any claim at any time in respect of the Open CFS Mk-II ® Transactions to which we are a party as a Financee.

5. We hereby agree to indemnify NCCL against any losses, damages, costs or expenses that NCCL may suffer or incur as a result of any breach of this confirmation by us or any person claiming through or under us.

6. We agree that except as expressly provided otherwise in the Scheme, all matters relating to the Open CFS Mk-II ® Transactions shall be governed by the NCC Regulations.

7. We hereby confirm that we have read and understood the terms of the Scheme and have taken independent legal advice in this regard.

For and on behalf of Name:.......

Title: Authorised Signatory to the NCCPL Agreement

Witnesses:

1._______________

2.______________

NIC __________________NIC________

Name:__________Name:________

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