Director’s Report

Direction that translates
into concrete results

The underlying ‘fault lines’ have caused the economic gains of past to meltdown, primarily due to, inter-alia, monetary and fiscal tightening, currency devaluation, high energy tariffs and interest rates and inflationary effects, which have also deteriorated the economic fundamentals and competitiveness of the economy. Nevertheless, the country was on path towards stabilization until the pandemic hit and hence, any assessment of the economic performance should be made with respect to both pre and post COVID 19 basis.

The pre-pandemic situation was marked by recovery on the external front, driven by a plunge in the current account deficit during July-April FY20. It was mainly due to contraction in trade deficit and increase in workers’ remittances.

This was accompanied by a surge in foreign direct investment of 137.3pc to $2.1bn in July-March, attributable towards the improvement in the Ease of Doing Business index by 28 places.

Similarly, improvements witnessed on the fiscal side, where the Government even posted a primary surplus in year-on-year growth in tax collection – despite missing the target of 2019-20.

However, in the post-pandemic situation, the economy has taken a hit with shrinkage in GDP. To help stave off the effect of the pandemic, the government has launched an aggressive policy response including a Rs. 1.24tr stimulus package.

There are some positive indicators such as declining current account deficit, increasing foreign remittances and expected increase in Foreign Direct Investment. Moreover, the Federal Government has also been focused towards structural reforms.

Despite Covid-related challenges, the Pakistan Stock Exchange managed to close the fiscal year 2019-20 in green, registering a gain of 1.5pc. Although the growth in FY20 has been nominal, it is significant given the fact that the exchange had closed in red in the previous two years (FY18 and FY19).

The benchmark KSE-100 Index had touched a high of 43,468.22 on January 14, 2020. However, following news of the first confirmed COVID-19 case in Pakistan on February 25, the index gradually dropped to 27,046.71 by March 26, 2020 while the lockdown was already imposed.

June 30, 2020 June 30, 2019
(Rupees in ‘000’)
Operating and other income 2,044,743 2,014,780
Operating income from discontinued operations - 105,701
Less: Operating and administrative expenses (1,162,659) (1,127,616)
Less: Operating and administrative expenses from discontinued operations - (90,454)
Profit from operation and other activities 882,084 902,411
Less: Other expenses (22,738) (8,931)
Profit before income tax 859,346 893,480
Less: Income tax expense (230,914) (271,295)
Profit for the year 628,433 617,476
Earnings per share - basic and diluted (in Rs.) 3.14 3.08

The turnaround witnessed in April following the announcement of government fiscal stimulus, and the gradual opening of the economy, however, provided some respite to the index, helping it close the year in green. But this upward trend suggests that the upcoming year may prove to be a strong one for PSX if the stimulus remains.

The KSE-100 Index was the third-best performing market in the region, after China and Taiwan, with returns of 0.1pc and 14pc, respectively.

The Company’s revenue for the year 2019-20 is Rs. 2,045 million against Rs. 2,015 million (continued operations) of previous year showing an increase of 2%. The profit before and after tax is Rs. 860 million and Rs. 628 million respectively showing reduction of 2% and increase of 2% respectively compared to the previous year’s results.

The market performance was lower than the budgeted expectation, however, the shortfall in revenue target was covered to an extent by controlling expenses and diversified operations.

A tabular presentation reflecting revenue growth of its main segments over the years is as follows:

Revenue sources CAGR 2020 2019 2018 2017 2016 2015 2014 2013
(Rupees in million)
Depository Services 8% 976 1,062 1,222 1,204 996 934 738 577
Trustee & Custodial services 9% 581 640 637 581 462 403 326 311
Share Registrar services - - 107 99 65 40 34 27 20

* The Business of Share Registrar Services has been transferred to 100% owned Subsidiary

CDC has revolutionized the workings of Pakistan Capital Market with the establishment of Central Depository System which has brought efficiency and transparency to the market processes. With regular advancement in its systems and introduction of new products, services and convenience facilities, CDC continues to increase investors’ trust in market processes and drive the Capital Market into a new phase of development through digitalization and automation. The increase in number of shares in CDS is exhibited below in the same reference:

A comprehensive executable strategic plan for 2019 – 2021 has been prepared based on the situational analysis of both local and regional business environment. The plan is in line with the international best practices having clear & quantifiable targets with specific KPIs and possible Impediments. The plan has been devised with quarterly milestones for proper quarterly tracking. The strategic plan is also based on the Mission and Vision statement of the company includes, policies & guidelines with approved targets and plan based the following seven objectives that harmoniously balances the needs of all stakeholders:

  1. Reforms for Investor Awareness and Protection.
  2. Enhancing ease of doing business.
  3. Implementation of stringent risk management framework.
  4. Organizational growth through diversification and process improvement.
  5. Information technology infrastructure enhancements.
  6. Strengthening organizational efficiency and effectiveness.
  7. Support market development.

Investor Awareness and Protection

CDC undertook all initiatives outlined in the Strategic Plan to approach existing investors like employing social media and print media campaigns, conducting workshops, dissemination of awareness SMS and circulation of account statements, etc. These initiatives proved very successful, and, consequently, around 60% shares are now under the custody of CDC Investor Account Services. Financial literacy workshop on Capital Market was also held in CDC House. This was also live screened on YouTube in the form of a webinar.

Enhancing Ease of Doing Business through Automation

In order to provide positive customer experience, CDC focused on bring efficiency through automation and accordingly various steps are undertaken which include:

eIPO Master TREC Holder Facility: CDC introduced yet another enhancement in CDC eIPO service by the name of Master TREC Holder. The new facility allows Brokers to subscribe for IPOs on behalf of their clients, further broadening IPO participation. As a result, around 82% of total subscriptions were attracted through the CDC eIPO platform in the last IPO

ePayment facility: CDC IAS Payment option is live on 1BILL functionality of 1LINK. Investors can pay their dues or top up existing amount by entering prefix assigned by 1LINK along with their IAS account number. Recently, we have also added Telenor Easypaisa platform for the payment of CDC IAS dues, making CDC the first entity to be connected through M-Wallet.

Zakat Repository: CDC formally launched the electronic repository system as a recognized mechanism for matters concerning CZ-50 under the Zakat Law as well as for Zakat Audit purposes. The Repository will facilitate the entire Capital Market by eliminating the use of paper CZ50 forms. CDS Participants can now simply upload the Zakat Form (CZ-50) or Solemn Affirmation Letter for their existing and new clients.

Online Pledge Facility for IAS account holders: Investors are now able to pledge their securities from their IAS account with relevant pledgees online. This new digital solution helps eliminate the need for investor to visit CDC premises for the transaction


Risk management at CDC is considered vital to the creation and enhancement of shareholders’ value. The uncertainties and risks that may influence the achievement of our corporate goals and objectives are managed while opportunities are tapped into.

COSO principles based Enterprise Risk Management framework has been adopted by the Company thereby calibrating the comprehensive Enterprise Risk Registers with each and every business activity. Risks are ranked based on their impact on CDC and probability of occurrence. Upon identification of risks, mitigating strategies and action plans are developed, implemented and monitored. In this respect, CDC has employed various levels of security mechanisms to protect its information assets and technology infrastructure from potential risks and hazards. Regular guidelines are issued encompassing risk policies, risk management methodologies and tools for increasing employee awareness.

Third Party Verifications on internal controls is always been the strong focus of CDC, besides continuous IT Audits by the Internal Audit team, CDC successfully conducted Annual Review, penetration testing and source code reviews by external Auditors / Consultants.

Data Protection for CDC is always a matter of prime importance for which continuous investments are made to increase the security. CDC has also deployed State of the Art solutions including but not limited to ‘Advance Threat Defense’ system, Zero day defense solution, and Data Loss prevention tools. During the year we closely reviewed and monitored the risk of various business activities mainly focusing on operational, legal and reputational risk. In order to further protect the Company from any monetary loss, CDC has also obtained risk insurance policy covering computer crimes, professional indemnity and employee infidelity from reputed insurance company

International best practices of Information & Physical security are followed and ensured complete compliance of ISMS guidelines, the visitor area of CDC House has been completely redesigned in such a manner that now almost all visitors will be restricted to the Ground and Mezzanines floors. This redesigning will also help us in maintaining social distancing in the post COVID-19 operations. BCP site of the Company has been redesigned to fulfil the requirements of ISO 22301:2012 globally accepted business continuity standard and BCI Good Practice Guidelines. The new BCP site was formally inaugurated on February 24, 2020 by honorable SECP chairman who applauded CDC’s BCP measures and regarded them at par with any international institution.

While CDC continued to test its preparedness to resume and continue its operations in unforeseen circumstances for the past two decades as part of its BCP, these current times have tested our preparedness to the fullest. We have immediately reacted with a threefold strategy covering major areas and ensured compliance of SOPs issued by Government and Health authorities from time to time.

Organizational Growth through Diversification and Process Improvement

ITMinds Limited (Wholly owned subsidiary)

It is a pleasure to state that the subsidiaries are now contributing to the profitability of the Company. ITMinds Limited for the first time since inception i.e. 2012 has reached the breakeven last year and now ITMinds is expected to earn profit before taxation of Rs. 10 million.

ITMinds Limited provides Business Process Outsourcing (BPO) services to mutual funds, retirement benefit schemes as well as other corporate clients. Our objective is to let our clients to focus on their core activities by outsourcing their back office works to ITMinds. Our focus on Retirement Benefit Schemes (RBS) has resulted in positive response from a corporate seeking BPO service for its RBS. Moreover, Post COVID 19 situation has escalated the process for digitization/online arrangements where people will prefer to perform their financial transactions through this arrangement. Accordingly, to avail the advantage of this business opportunity, it has been planned to provide online portal service to mutual fund industry. This will be a service not only to AMCs for tapping new investors but to investors as well where they can analyze and evaluate the market players in a more educated and learned manner while taking their investment decisions in an efficient and timely manner.

CDC Share Registrar Services Limited (Wholly owned subsidiary)

Since its launch in 2008, CDC has been successful in redefining the Share Registrar service standards for the industry and now caters to 204 securities, including various listed public sector entities, making it the Number 1 R/TA service provider in the market within a decade of its launch. CDC Share Registrar Services have deeply penetrated in the country’s banking sector and has acquired 55% listed banks on its clients list. Apart from this, CDC as Share Registrar is also the Share Registrar of major listed companies of KSE100 list. CDC Share Registrar Services Limited is expected to earn profit before taxation of Rs. 39 million.

CDC Share Registrar Services Limited with its state of the art technology, tradition of providing one window operations, processional staff through service excellence and performance has managed to convert Share Registrar services into a hi-tech solution provider. Moreover, responding with agility to the requirements arising due to the spread of recent pandemic, CDC Share Registrar Services launched the “eMeetings Solution” which allows issuers to meet their Regulatory obligation of holding AGM/EoGM without any delay while maintaining complete social distancing.

Trustee and Custodial Services - Net Assets under Custody reached PKR 947 billion as on June 30, 2020

The overall momentum of Trustee & Custodial Business remained on positive side despite the fact that in the last fiscal year, the capital market often faced declining trend in KSE 100 Index which also impacted the size of Mutual Fund Industry. However, CDC as Trustee maintained market leadership in the following segments:

  1. Trustee Services to the Collective Investment Schemes (CIS) including Voluntary Pension Schemes (VPS): The market share of CDC remained 97% on which Assets under our Trusteeship including VPS reached Rs. 892 billion with number of funds increased to 207 against 195 as at June 30, 2019.
  2. Trustee Services to the Real Estate Investment Trust (REITs): We are the only trustee of rental REITs in Pakistan having Net Assets of Rs. 48.8 billion under trusteeship.
  3. Custody Services to Discretionary Portfolio (DP) clients: The Custodian business for DP clients has shown tremendous growth wherein our clientele has reached to 269 against 225 as at June 30, 2019. On the same lines, Net Assets under custodianship have also increased by 15 billion and reached Rs. 55 billion as at current financial year end.
  4. Trustee to Punjab Government Pension Fund: We are the only trusteeship provider to the Government backed Fund whose relevant size is increasing day by day and have reached to Rs. 74.87 billion as at June 30, 2020.
  5. Induction of Developmental RIETs: CDC Trustee team remained involved in the preparation & finalization of feasibility, development of SOPs, Constitutive Documents and performing Risk Assessment for the seamless induction of Developmental RIET funds. Resultantly, Trust Deed has been signed and registered for a project.

  6. Number of Funds
    2014 2015 2016 2017 2018 2019 2020
    148 162 167 173 183 195 207

    Number of DP
    2014 2015 2016 2017 2018 2019 2020
    32 62 87 130 170 225 269

    Insurance Repository: The first phase of the Insurance Repository for the Life Insurance Industry participants was successfully launched on February 24, 2020 with SECP Chairman as Chief Guest. This phase focuses on building a database of insurance policies, the information of which will be available to SECP and also in relevant format among the insurers to aid them in their underwriting decision process.

    With the establishment of this Insurance Repository, CDC has stepped up to further facilitate the Life Insurance industry in Pakistan by the centralization of policy information as part of SECP’s mission of facilitating Ease of Doing Business. The Centralized Information Repository will take this industry-wide information sharing even further by allowing the critical policy-related information to be shared and made available to the relevant stakeholders across the Industry and of-course, to the apex Regulator, SECP. All private life insurers have uploaded the data of their active individual life policies, which add up to a total of more than 1.5 million policies in the Policy Register. State Life has also initiated its data migration of more than 5 million policies. To leverage this data for analytics purposes for the Regulator, CDC has also taken up the development of analytics using BI tools. Now that the first step of data consolidation has been achieved through the Repository, CDC envisions to reap far greater benefits for all stakeholders through the system as it evolves and matures.

    Launch of First Collateral Management Company: CDC has played a pivotal role in the launch of Naymat Collateral Management Company Limited – the first Collateral Management Company in Pakistan which will provide the basis for transformative development of Pakistan’s agriculture sector. The Company has invested 10% in the paid-up capital of Naymat Collateral Management Company Limited. Their Board has approved the FMA proposed by CDC. A Service Level Agreement (SLA) based on the proposal has been signed. This achievement is in recognition of CDC’s goodwill and the efforts & contribution in the initial conceptualization of this project.

    Naymat Collateral Management Company Limited has been setup under the CMC Regulations 2019. As per its operational mode, the Company will accredit warehouses after inspection of their facilities, processes, and risk mitigation as prescribed by the CMC regulations. Accredited Warehouse Operators will issue eWHRs against each lot of commodity placed in their warehouses. This eWHR based regime will allow the owner of an eligible commodity to get it tested for entry into an accredited warehouse/silo and secure bank financing against their warehouse receipt as collateral. Naymat Collateral Management Company, operating under this regime, will thus facilitate in not only bringing financial access to farmers but also creating strong incentives for crop testing, grading, and standardization, proper storage, reduction in post-harvest losses, and preservation of crop quality for exports.

    Information Technology Infrastructure Enhancements

    CDC undertakes an annual Information Technology assessment exercise by reviewing its overall IT infrastructure while preparing Gap Analysis keeping in mind the planned business initiatives. CDC conducts this exercise for the transformation of its business applications in order to better apprehend the challenges ahead and further enhancement were to augment the IT infrastructure which include Data Backup Solution, Implementation of New two-factor authentication (2-FA), McAfee Advanced Threat Defense, replacement of Existing Core Servers and Enhancement of NOC monitoring.

    Strengthening Organizational Efficiency and Effectiveness

    There is always an imminent necessity for redefining the organizational structure to support the present and future business needs. The present growth of the organization and the initiatives demand that we re-define and rationalize our manpower by reviewing the processes in each business unit and internal functions.

    Process Improvements: In order to streamline and automate the processes for better efficiency and control, SAP Business One is being implemented. We have evaluated the system from both Business Process Reengineering and Enterprises Security Risk perspectives. The initial business processes to be re-engineered using the system will include procurement, billings, payments, budget controlling, etc. CDC plans to effectively implement the same across the organization including the subsidiaries and Naymat Collateral Management Company Limited. For an efficient visitor management, a comprehensive visitor policy in light of ISMS is being implemented including the digital Visitor Management System.

    In line with the “digitalization across the organization” initiative, CDC has focused on the digitalization of all support functions to promote efficiency and a paperless environment. CDC has successfully executed the implementation of the new HRMS system.

    Human Resource Development: The extra ordinary growth by the Company was not possible without the adoption of new Technologies and development of Human Resource. Company strives to foster a culture that places people at the core of everything it does, celebrates diversity, is forward looking, and provides equal opportunity in its drive to achieve its objectives and long-term goals. A clear approach towards employee motivation and continuous learning is adapted through rewards, trainings and job rotations which is reflected in the Work From Home scenario during the COVID-19 pandemic where CDC’s Senior Management and employees showed an extraordinary resolve to keep the work going in the challenging circumstances.

    CDC is clearly focused towards the health & safety of its employees, customers, and all other stakeholders. We foster the culture of precautionary measures by implementing the means and measures that ensure minimum health and safety risk in performance of our activities and rendering services. At CDC, we strive to implement all applicable environmental, health and safety requirements and promote energy efficiency to ensure protection of environment. In times of unforeseen circumstances, our first priority and line of action is to save human life.

    CDC has always shown keen interest in developing and grooming its employees through diverse training programs which include both internal and external trainings. Over the course of the last year, employees have participated in various external workshops. Furthermore, many in-house trainings programs were also conducted. As a major initiative by CDC, the first batch of the Capital Market course commenced with 25 participants and concluded successfully in December 2019. The self-learning program has been started for in-house training aiming at transferring the core knowledge pertain to capital market. This was a unique program and its all-encompassing knowledge was not available in any academic institution of Pakistan. While the training was conducted completely by in-house faculty of CDC, the course material was also developed internally by the same faculty. The said training has now become a regular feature of CDC staff training program.

    Support Market Development

    CDC remained continuously engaged with all stakeholders both locally and internationally while advising with expert opinion, preparation of various papers on different subjects such as risk management, leverage products, investor protection, broker regime, professional clearing member, compliance structure etc. As a recognition, SECP includes CDC as an integral member of various reform committees. In addition to SECP, CDC remained engaged with other key stakeholders and entities like State Bank of Pakistan, Federal Board of Revenue, NADRA, Ministry of Finance, Ministry of Information Technology, Ministry of Poverty Alleviation, National Information Technology Board (NITB), Ministry of Housing, Sindh Revenue Board and others. Apart from the public sector entities, CDC also remained engaged with other business and professional bodies like Pakistan Business Council, Overseas Chamber of Commerce & Industries, Insurance Association of Pakistan, Mutual Funds Association of Pakistan, Pakistan Brokers Association and others. The Company also remained in close contact with different diplomatic missions of countries from where huge Portfolio Investments ae coming to Pakistan like the UK and the USA. The Company also remained in close contact with multilateral local and foreign agencies for different new projects like IFC, ADB, World Bank, Karandaaz, etc.

    Exchange Traded Funds (ETFs): CDC, in its capacity as Trustee & Depository, successfully supported induction of ETFs by National Investment Trust and UBL Funds with substantially reduced tariff. In this regard, CDC also provided special tariff subsidy to Market Makers of ETF

    Support in the successful Induction of Sukuks of PHL Energy of PKR 200 billion. The Sukuks were credited in record time by CDC in the CDC accounts of the investors. Central Depository Company’s role in this entire process was of Depository and as well as of The Registrar Service provider. Our able team of Share Registrar and Transfer Agents remained committed throughout the entire process, meeting efficient timelines to ensure the entire process remains seamless and as per the plan agreed with the Ministry.

    Tariff Rationalization: Ever since start of operations in 1997, it has been CDC’s endeavor to provide efficient and cost effective services to all its participants and rationalized its Tariff over the period. This year another comprehensive exercise was conducted to rationalize substantial reduction in tariff structure to pass the benefit to market elements. Similar exercise was also conducted to rationalize the trustee fee for small sized mutual funds / schemes by permanently eliminating the minimum fee component and implementing flat rate instead of slab system. This reduction will facilitate Asset Management Companies in making their funds / schemes more investment-worthy in the current challenging times.

Micro Payment Gateway (MPG): State Bank is introducing Micro Payment Gateway infrastructure which is a payment switch acting as an alternative to other switches already in operation in Pakistan such as 1LINK. CDC has the privilege to be appointed by SBP as the first use case for the implementation and utilization of MPG in Pakistan.. For this purpose, CDC has also successfully acquired the status of “Paying Agent” from SECP vide amendments in the “Companies (Distribution of Dividends) Regulations 2017”. CDC eDividend facility will use the services of MPG and other payment switches to disburse dividends directly into the accounts of shareholders which will resolve the issues of investors in receiving their dividends.

Non-resident Pakistanis (“NRP”) Rupee Value Account: State Bank has taken the initiative to attract the large Pakistani diaspora residing overseas to bring investment into Pakistan from overseas by introducing special NRP Rupee Value Account (NRVA) account titled Roshan Digital Account which is a PKR account opened by a Non-resident with a bank in Pakistan on repatriable basis. Non-resident Pakistanis (NRPs) who hold NRVA will be able to invest in stocks using the option available on the portal/mobile app of their Banks. Upon the NRP’s consent, the Bank will transmit the required details and soft copies of the NRIP’s documents to CDC. CDC will open NRP IAS account and enable Direct Settlement Service. To facilitate trading account opening and UIN creation, CDC will transmit the information and soft copies of documents to NCCPL and the respective Brokerage House as chosen by the NRIP. Here, CDC will play the central role in enabling the NRPs to start trading and bring investment into capital market of Pakistan in a seamless manner and it is yet another project of national importance where CDC has been chosen by SBP to play an instrumental role in its implementation and successful operation.

Mutual Fund Digital Portal (MFDP): Through this project, CDC envisages to provide a digital platform to Mutual Funds across the Asset Management Industry by facilitating digital investor on-boarding, investment & other transactions. The main value proposition of the portal for Asset Management Companies will be the ability to offer retail investors low cost and convenient access to investment opportunities without having to go through traditional financial intermediaries. CDC has been actively involved with MUFAP and its Board members for finalizing the operational and business modalities of the project.

Professional Clearing Member (PCM): At present, all Stock Brokers in Pakistan Capital Market are engaged in clearing, settlement process and also providing the Custodial Services to their clients, in addition to the provision of core Brokerage services. However, as per the new broker regime introduced by SECP, trading only brokers will only be allowed to trade on behalf of their clients. For settlement and custody purposes they have to engage a third party service provider. SECP has asked CDC to work with other stakeholders of Capital Market to offer a high tech solution

Mortgage Registry: This project is an off-shoot of the Land Repository project that CDC has been working on and had propagated on multiple forums. Consequently, CDC has been approached by SBP to work on this project which is backed by a new law for Housing Finances, the draft of “Recovery of Housing Finances Act, 2020. The law has specific provisions for the registration of mortgages with CDC.

Induction of National Savings Certificate in the CDS: CDC has submitted a ‘Proposal for Induction of National Savings Certificates in the Central Depository System’ in June 2019, after having detailed meetings and discussions with the CDNS team. CDC’s perseverance and consistent follow-up with authorities has paid off and MoIT took up the issue at the Cabinet level, and in response, the Ministry of Finance has responded in a letter that CDNS will engage CDC for the Dematerialization of the National Savings Certificates in 2023.

Good Governance lies at the core of our values and ethical standards. The Board is aware of its responsibilities towards the shareholders, value of inputs from our stakeholders, besides upholding the reputation of CDC.

The Company firmly believes in the importance of good governance and best practices, and the mechanism for good governance encompasses the highest standards of professionalism, ethical practices, accountability and transparency,

The Board and management of the Company are committed to good corporate governance and complying with the best practices. Over the years, CDC has positioned itself to surpass the legal requirements and adhere to global best practices and standards of governance. Statement of Compliance with Listed Companies (Code of Corporate Governance) Regulations, 2019 and the review report by the Company’s Auditors are attached.

Composition of Board of Directors: Apart from regulatory requirements, execution of the Company’s current and future strategic objectives define the parameters for the qualification and composition of the Board of Directors. This enables the Company to achieve highest levels of good governance, transparency, awareness of Board’s responsibilities in achieving Company’s objectives, besides ensuring smooth business operations.

CDC’s board comprises of a mixture of individuals representing shareholding institutions as well as independent directors. Total number of directors on the Board is 12 comprising of 01 female and 11 male Directors.

Precisely, the Board comprises of seven non-executive directors representing shareholding institutions, four independent directors and the Chief Executive Officer by virtue of position as per statute. All the Directors of the Company meet the eligibility criteria laid down under the Companies Act, 2017, Listed Companies (Code of Corporate Governance) Regulations, 2019 and the Fit & Proper Criteria incorporated in the Licensing Regulations.

The tenure of office of a director is three years. Upon expiry of which, elections are held to appoint a new Board in accordance with the statute. Directors representing respective shareholding institutions have no direct interest in the Company’s business.

The Board of Directors remained actively involved during the year in performing its duties and functions as specified under the Listed Companies (Code of Corporate Governance) Regulations, 2019 and Central Depositories (Licensing & Operations) Regulations, 2016.

Annual Evaluation of Board’s Performance: Board’s Evaluation Mechanism facilitates the Board of Directors to evaluate and assess performance for providing strategic leadership and oversight to the management. Accordingly, procedures have been developed based on emerging and leading practices to assist in the self-assessment of individual director, committees of the Board and the full Board’s performance and the guidelines issued by the SECP for performance evaluation of Board. The main criteria for the Board’s evaluation is as follows:

- Board Composition
- Compensation
- Strategic Planning
- Board Procedures
- Board Interaction
- Board Information
- Effectiveness
- Board Committees

Changes in the Board: Casual vacancies incurred during the year were filled in accordance with the Companies Act, 2017. The Board places on record its appreciation for the valuable contribution made by the outgoing Directors.

Board & Committee Meetings: As prescribed by the regulatory framework, the Board is required to meet at least once every quarter to monitor achievements of the Company’s objectives. CDC’s Board met 7 times in the year 2019-20 to discuss routine and special matters besides providing guidance to the management on achieving Company’s objectives.

Notices / agendas of the meetings were circulated in advance, in a timely manner and in compliance of applicable laws. The quorum of all the meetings also exceeded the minimum requirements as prescribed by the Companies Act 2017, with the Chief Financial Officer and Company Secretary also in attendance. The Company Secretary meticulously noted the proceedings and maintained minutes of the meetings encompassing details regarding all decisions taken by the Board and explanations provided by the management. The minutes were circulated to the Directors within the prescribed time and were approved in the subsequent Board meetings. The Board’s attendance status is mentioned as under:

Name of Directors No. of meetings held in tenure No. of meetings attended*
Mr. Moin M. Fudda (Chairman) 7 7
Mr. Badiuddin Akber 7 7
Syed Majid Ali 7 7
Ms. Jehan Ara*** 3 3
Mr. Wang Baojun** 3 3
Mr. Muhammad Ashraf Bawany 7 7
Mr. Ahmed Chinoy 7 7
Mr. Muhammad Abid Ali Habib 7 7
Mr. Muhammad Sibghatullah Khalid 7 7
Dr. Aamir Matin 7 6
Mr. Aqeel Ahmed Nasir 7 5
Mr. Muhammad Tariq Rafi 7 5
Mr. Shahnawaz Mahmood** 7 3
Syed Masoud Ali Naqvi*** 7 2

* Leave of absence was granted to the Directors who could not attend some of the meetings. ** Mr. Shahnawaz Mahmood resigned from the Board of CDC in February 2020 and Mr. Wang Baojun was appointed in his place. *** Syed Masoud Ali Naqvi resigned from the Board of CDC in December 2019 and Ms. Jehan Ara was appointed in his place.

Audit Committee: The Company’s Audit Committee is composed of five members, all of whom have extensive financial management, business and economics experience. The Chairman of the Audit Committee is an independent director, whereas the remaining members are non-executive directors.

The Audit Committee of the Board continued to perform its duties and responsibilities effectively as per its approved terms of reference. The Committee met 5 times during the year and also held a meeting with the external auditors without the presence of Chief Finance Officer and Head of Internal Audit. The attendance status of the Audit Committee is mentioned as under:

Name of Directors No. of meetings held in tenure No. of meetings attended
Syed Majid Ali (Chairman) 5 5
Mr. Ahmed Chinoy 5 5
Mr. Muhammad Ashraf Bawany 5 5
Mr. Muhammad Sibghatullah Khalid 5 5
Syed Masoud Ali Naqvi* 2 2

* Syed Masoud Ali Naqvi resigned from the Board of CDC in December 2019.

Human Resource and Remuneration Committee: The Human Resource and Remuneration Committee reviews the human resource architecture of the Company and ensures that the human resource strategy is aligned to the overall corporate strategy. The Chairman of the Committee is an independent non-executive Director and all the members of the Committee excluding the Chief Executive Officer are non-executive Director. The Human Resource & Remuneration Committee met 3 times during the year and its attendance status is mentioned as under:

Name of Directors No. of meetings held in tenure No. of meetings attended
Mr. Moin M. Fudda (Chairman) 3 3
Mr. Badiuddin Akber 3 3
Mr. Muhammad Abid Ali Habib 3 3
Syed Majid Ali 3 3
Mr. Muhammad Sibghatullah Khalid 3 3

Regulatory Affairs Committee (“RAC”): The RAC oversees the matters relating to Regulations, Compliances, and Enforcement actions and other related functions as prescribed in the Licensing Regulations and related work performed by the Chief Compliance Officer and makes recommendations to the Board for further improvements in the functions and consider and evaluate that the role and responsibilities assigned to the Chief Compliance Officer are efficiently and effectively performed.

The RAC met 6 times during the year and its attendance status is mentioned as under:

Name of Directors No. of meetings held in tenure No. of meetings attended
Mr. Aqeel Ahmed Nasir (Chairman) 6 6
Mr. Badiuddin Akber 6 6
MSyed Majid Ali 6 6
Mr. Muhammad Abid Ali Habib 6 6
Mr. Shahnawaz Mahmood* 3 3

* Mr. Shahnawaz Mahmood resigned from the Board of CDC in February 2020

Directors’ Remuneration: The Company has a policy for ascertaining Directors’ remuneration (for non-executive and independent directors) with review of external consultant every three years. This policy shall apply to all Non-Executive and Independent Directors who attend Board Meetings, Audit Committee Meetings, Regulatory Affairs Committee Meetings, Human Resource and Remuneration Committee Meeting and any other meeting called by the Board.

The review process is in compliance with legal requirements and remuneration includes fee for attending Board and Committee meetings, boarding and lodging expenses and separate benefit for Chairman of the Board in view of additional roles and responsibilities. The remuneration package includes Rs. 75,000 and Rs. 50,000 for attending each Board and Committee meetings respectively. Details of aggregate amount of remuneration for executive, non-executive and independent Directors is presented in the annual report.

Formal orientation at induction: CDC has detailed an orientation plan for new Board members apprising them on the Company’s long term strategy, business operations and environment, besides encouraging cohesion among the Board members.

Directors’ Training: The Company is committed to arrange orientation course and training programs for its directors to apprise them of their duties and responsibilities. The Board remained fully compliant with the provision of the Code pertaining to Directors training program.

Eight directors of the Company have completed formal directors training program and two Directors have been exempted by the SECP from such certification and for the remaining two director, training will be scheduled accordingly.

Review of related party transactions: As per the requirements of the regulatory framework, the Audit Committee reviews details of all related party transactions, before approval by the Board in view of recommendations made by the Audit Committee.

Pattern of Shareholding: The Pattern of shareholding and categories of shareholders of the Company as at June 30, 2020 are mentioned at page number 176.

Ethics and Compliance: Code of Conduct has been disseminated to all employees and Directors of the Company in addition to being available on the Company’s website in compliance with the Listed Companies (Code of Corporate Governance) Regulations, 2019.

Capital Structure and Liquidity Management: The Company’s strategy is to maintain a strong capital base which is built on reserves so as to maintain investors’, creditors’ and market confidence and to sustain future development of the business. This has resulted in Company’s ability to operate in an efficient manner to enable it to provide healthy returns for shareholders and benefits for other stakeholders. During the year an amount of Rs. 659 million was generated from operating activities of the Company.

At the year end, the Company had a liquid fund position comprising of cash/bank balances and short term investments amounting to Rs. 3,934 million.

To ensure sufficient availability of funds at all times whilst generating optimum returns through placement of surplus liquidity in various available investment avenues, the Company has developed and implemented a cash flow monitoring mechanism whereby cash inflows and outflows are projected and monitored on regular basis.

The Company is subjected to comply with financial resource requirements as envisaged in the Central Depositories (Licensing & Operations) Regulations after its promulgation in February 2016.

Materiality Approach: The management has adopted a materiality approach which is based on a combination of stakeholder engagement, under-standing of environmental limits and strategic alignment. It has made the process, assumptions and evidence the base for identifying material issues for more transparent, credible and amenable disclosures to have more transparency on risk and opportunities.

Key Source of Estimation Uncertainty: The preparation of financial statements is in conformity with approved accounting standards requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses as defined in note 2 of Financial Statements.

Community Investments

Every year CDC allocates 2.5% of its profit before tax to Corporate Social Responsibility projects to support underprivileged members of the society. Through this contribution we sponsor wide range of initiatives including health, education, and environmental protection. We believe in playing our role in strengthening of these fundamental building blocks for the development of society. Since inception, CDC has sponsored many projects among which sponsorship for construction of a TCF owned school at Mirpur Khas, and a Cancer Consulting Clinics to The Indus Hospital are two projects to mention among a few that we have sponsored. With such like engagements, our aim is to assist the philanthropists in providing quality education and health services to deserving individuals of the society. Presently, we are working in two provinces, this year we have increased our reach to Baluchistan as well and in years to come we will be reaching across Pakistan.


The directors in their meeting held on September 03, 2020 have proposed bonus shares @ 25% of the paid-up capital i.e. 50 million shares (2019: 50 million shares) and cash dividend at 30% of the profit after tax (2019: 30% of the profit after tax) in respect of year ended June 30, 2020.

The unconsolidated financial statements for the year ended June 30, 2020 do not include the effect of these appropriations which will be accounted for in the period in which it is approved by shareholders. Financial Highlights Key operating and financial data of previous years has been summarized at page number 38 and 40.

Contribution to National Exchequer and Economy

An amount of PKR 259 Million (2019: PKR 305 Million) was contributed during the year in respect of Income tax. As a responsible citizen of our country your Company contributed 13% (2019: 14%) of total revenue back to the Economy.

Statement as to the Value of Investment of Provident Fund

The value of the investment of the provident fund is PKR 65 Million.

Subsequent Events

No material changes or commitments affecting the financial position of the Company have occurred between the end of the financial year of the company and the date of this report.

External Auditors

The present auditors of the company M/s A. F. Ferguson & Co. - Chartered Accountants, audited the financial statements of the Company and have issued unqualified report to the members. The auditors will retire at the conclusion of Annual General Meeting. Being legible they have offered themselves for re-appointment. The Board have recommended the reappointment of M/s A. F. Ferguson & Co. as auditor at existing remuneration for the ensuing year, as suggested by the Audit Committee, subject to approval by members in the 28th Annual General Meeting.

Internal Audit

The Internal Audit function is effectively operating within the framework set out in the Listed Companies (Code of Corporate Governance) Regulations, 2019 and the charter defined by the Audit Committee of the Board. The Board relies on the inputs and recommendations of the Internal Audit function through its Audit Committee on the adequacy and effectiveness of internal controls including internal financial control in the organization and takes appropriate measures.

The Board places on record its gratitude for the hard work and dedication of every employee of the Company. The Board also appreciates and acknowledges the valuable assistance, guidance and cooperation of all stakeholders, Securities and Exchange Commission of Pakistan, State Bank of Pakistan, Pakistan Stock Exchange and National Clearing Company of Pakistan Limited. The Board is also grateful to all CDS Elements, Asset Management Companies, Clients of Share Registrar Services and Shareholders for their trust reposed in the Board and also extended to the company.

For and on behalf of the Board


Chairman of the Board


Chief Executive Officer

Karachi, Dated: Thursday, September 03, 2020