Dynamics that affect global indicators have an indirect effect on Pakistan’s economy as well. According to IMF projections global growth is expected to slow down from estimated 3.5 percent in 2022 to 3.0 percent for the year 2023, which is well below the historical annual average of 3.8 percent achieved from 2000-19. Geopolitical tensions remain elevated with the Ukraine-Russia conflict entering its second year and although supply chain disruptions have largely recovered in the aftermath of the pandemic and the war, global commodity prices remain on the higher side. Persistent inflationary pressures are forcing central banks across the globe to continue with monetary tightening policies, which has raised the cost of borrowing and eroded credit availability for financial institutions.

On the domestic front, FY 2023 have been a particularly challenging year with devastating floods inundating one third of the country and causing widespread losses (estimated at US$30 Billion), a highly unstable political situation, runaway inflation crossing into double digits, and a balance of payments crisis that sharply reduced FX Reserves and forced curbing of imports. Although, Pakistan achieved a high growth rate of 6.1 percent in FY 2022, in hindsight, it was unsustainable and the subsequent overheating of the economy led the government to adopt measures to arrest the situation.

Such global and domestic challenges combined have contributed to the slowdown of the economic growth to just 0.29 percent in FY 2023, which was well below the Government projections of a 5.0 percent GDP growth for the period. Sector wise growth remained weak with the Agriculture sector witnessing growth of 1.55 percent, Industrial sector (2.94) percent and growth of 0.86 percent in the Services sector. The CPI Inflation at 29.4 percent by end of FY 2023 is one of the highest in the country, and touched a peak of 37.97 percent in May 2023 due to a weak exchange rate, high prices of essential food items resulting from supply side disruptions from flood damage and elevated global demand, and steady incremental increase in tariffs on electricity and fuel. To fight inflationary pressure, SBP continues with monetary tightening policies, increasing the interest rate by a cumulative 8.25 percent from July-June FY 2023, to a record high of 22 percent.

The Government in its annual economic survey had highlighted a broad based agenda “moving towards sustainable macroeconomic stabilization which is primarily focused on rationalization of expenditures, removing unproductive subsidies to reduce burden on the budget, significant cuts in expenditures to reduce the budgetary deficit, increasing the tax and non-tax revenue of the Government, and a tight monetary policy to fight inflation”. Challenges to these aims continue to persist due to global and domestic headwinds; however, the experts believe that the latest political development relating to appointment of caretaker setup may prove to be instrumental factor in determining the next course of action to put Pakistan back on track towards sustainable growth for the next fiscal year.

On the Stock Market front, the KSE-100 index witnessed a decline from 41,540 points to 40,000 points from june 30, 2022 to march 31, 2023 registering a negative growth of 3.7 percent over this period, however the market have rebounded since then to close at 41,452 points as of june 30, 2023. The index posted its highest figure on august 17, 2022, closing at 43,676 points. The average daily volume decreased from 305 million shares in last year to 204 million shares for FY 2023, which translates to a 33 percent decline. Number of listed companies as of june 30, 2023 stood at 524 with a total market capitalization of pkr 6,369 billion.

Performance of regional peers had mixed results over the same period with India, Singapore, Thailand and Philippines registering positive percentage growth of 11.26, 5.05, 2.60 and 5.59 in their respective indices while China, Vietnam, Hong Kong, Indonesia and Malaysia remained in the negative with (3.70) (14.03), (6.68), (1.54) and (1.50) percentage growth in their respective indices. Overall, the MSCI Emerging Markets index which is a cumulative index of 24 emerging stock markets declined by 1 percent. The disparity highlights the differences in the level of resilience of regional stock markets to handle internal and external pressures.

Stock market performance is vulnerable to economic indicators and investor confidence. The events of FY 2023 with unprecedented mass flooding, rising inflation and interest rates eroding purchasing power, the political standoff, and the balance of payments crisis negatively affected investor confidence. However, with the recent positive activity witnessed in the Stock Market after securing the IMF Staff Level Agreement on a US$3 Billion Standby Arrangement, market expectations for future seem to be more optimistic.

Despite volatility in the overall economy and capital market, the Company has performed well. The Company’s revenue for the year 2022-23 is Rs. 3,005 million against Rs. 2,530 million of previous year showing an increase of 19%. The profit before and after tax is Rs. 1,335 million and Rs. 812 million respectively showing growth of 21% and 5% respectively compared to the previous year’s results.

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

Issuance of Commemorative Stamp by Pakistan Post:

It was a proud moment for CDC this year when Pakistan Post, with the approval of the Honorable Prime Minister of Pakistan, issued a commemorative stamp to mark CDC’s Silver Jubilee. This achievement was possible with the support of SECP, which acknowledges CDC’s perseverance. It is indeed a tremendous accomplishment for CDC to be honored as a national level institution 

An organization can only remain relevant with its environment if it constantly adapts to the changes taking place around itself. This is only possible if an organization remains vigilant and keeps on monitoring its Strategic vision. With this objective, CDC developed its 2019-21 Strategic plan and implemented it very successfully, and now in its continuation and with an ambition of transforming the Company from “Good to Great”, CDC has developed its new 2022-24 Strategic Plan.

Despite the recent challenges, and the developments related to Pakistan Capital Market and also considering that in last three years, CDC has performed exceptionally well and implemented or initiated various projects for the support and facilitation of Capital market, the future outlook of the Company looks positive. Throughout the last three years, CDC’s focus remained on Market Development for which CDC stretched its resources to the maximum level to facilitate the market participants and offered almost all solutions free of cost. Here, it is important to note that CDC, being the Infrastructure Organization, will not expand alone; instead, it will also help in the expansion of the financial markets by providing them the right platforms. Considering the aforementioned scenarios, CDC has developed its new strategic plan and had it approved from the Board. This plan incorporated the following Strategic Objectives for CDC to continue playing the role of an ENABLER for the development of Pakistan Capital Market:

The new Strategic Plan is broadly classified into five broad objectives, namely:

1. Collaboration for Market Development
2. Digitization of internal and external processes
3. New Initiatives & Innovation to ensure path of diversification and to stay relevant
4. Restructure & Realign to maximize efficiency
5. ESG Initiatives to contribute towards Market and Society development (through ESG funds)

The new plan has now been in effect, and every objective has milestones along with KPIs, impediments and quantifiable targets that the management has to achieve.

CDC’s Management Team exhibits thorough understanding of Capital Markets, resolute alignment with the Strategic Objectives and focused delivery with a visionary approach in execution of their roles and duties. 

We have successfully delivered on all aspects of the strategic plan. The core responsibility was to ensure seamless, secure and efficient DEPOSITORY Services, and all possible initiatives to achieve this objective; resultantly, huge numbers of new securities were added under the custody of CDC Investor Accounts Services.

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:

With continuous induction of different categories of Funds including several REIT Schemes under the Trusteeship, CDC’s Trustee Business continued to flourish and has shown a growth of 18.81% in revenue generated from this business segment. Total Net Assets under custody increased by 27.72% and reached rs. 1,852 billion. Confidence of the unit holders on the Asset Management Companies and increasing trend of policy rate played a vital role in increasing the size of Mutual Fund Industry. CDC, in its role as Trustee, maintained market leadership in the following segments:

• Trustee Services to the Collective Investment Schemes (CIS) including Voluntary Pension Schemes (VPS): The market share of CDC is 96% with number of funds increased to 253 against 227 as at june 30, 2022.
• Trustee Services To The Real Estate Investment Trust Scheme (REITs): Similar to Trusteeship of CISs, CDC is also the market leader of Trustee Business for Real Estate Investment Trusts. We currently have REIT Assets of more than rs. 95 billion under this segment of trustee business. As of june 30, 2023, CDC has provided Trustee Services to eleven (11) Developmental REIT Schemes, a Rental REIT Scheme and a Hybrid REIT Scheme.
• Custody Services to Discretionary Portfolio (DP) Clients: The Custodian business for DP clients has again shown inclining trend wherein our clientele has reached 409. On the same lines, Net Assets under custodianship have also increased by rs. 14.7 billion and reached rs. 80.04 billion at the end of current financial year.
• Trustee to Punjab Government Pension Fund: We are the only trusteeship provider to the Government backed Pension Funds whose size is increasing continuously and has reached rs. 125.88 billion as at june 30, 2023.
• Trustee to Exchange Traded Fund: We are also the only trustee of equity and debt oriented Exchange Traded Funds (ETFs) launched by different Asset Management Companies having Net Assets of rs. 834.23 million. Trust Deeds of five Exchange Traded Funds has been signed during the year which are not yet operational.
• Trustee to KPK Government Pension Fund: We are the only trusteeship provider to the KPK Government backed Pension Funds. During the year, we have signed ten Trust Deeds of KPK Pension Funds being managed by different Asset Management Companies whereas consents has been issued for nine Funds.

CDC has been at the forefront of spearheading the digitization drive in the Capital Market through innovative products and services aimed at creating efficiency and ease of doing business. This years efforts were directed towards enriching and consolidating the existing services while striving to introduce new services that would add more value in Market development and strengthen the role of CDC as Enabler while allowing investors and stakeholders to leverage the latest technology to execute business processes seamlessly and efficiently. Following is an overview of the projects and achievements of this year:

i) Centralized Gateway Portal (CGP): In the current market scenario, each time an investor wishes to open an account in any investment category (such as in Stock Market, Mutual Fund, Insurance, etc.), he/she has to repeat the same process of filling out account opening forms with information and documents and completing the KYC process for every institution. Recognizing the urgent need in the market to facilitate investors to invest in the diversified sectors of the capital market through a standardized on-boarding procedure without having to repeat mandatory and implied KYC requirements, CDC, with the support of SECP and capital market players, has conceptualized and developed the Centralized Gateway Portal. The portal will function as a KYC repository, collecting investor information and documents and performing verifications as per the standards laid out by SECP in its “Circular 06 of 2023”. CGP enables the investor to then use this standard profile for on-boarding any institution in any investment category falling under the regulatory domain of SECP. For this purpose, one of the main achievement for CDC was to get a “Master Circular” issued by SECP wherein they have synchronised requirements of data and documents for all Asset Classes. Another feature of this portal would be to perform screening of all the investors through an “Algorithm” which is also approved by SECP. The portal is planned to be launched in the 1st quarter of next financial year.

ii) Induction of National Saving Certificates (NSCs) in CDS: The Central Directorate of National Savings (CDNS) serves an important socio-economic function in Pakistan, simultaneously fulfilling Government internal financing requirements through savings generated from the individual members of the public while extending social security and financial assurance to the marginalized and middle income segments of society. However, all schemes issued by National Savings are in physical form and are thus prone to many risks. To promote digitization and operational efficiency in the handling of NSCs as well as to provide ease of access to the investors, CDC, in collaboration with CDNS, has successfully enabled the induction of “Special Saving Certificates” in CDS. Investors can now convert their physical certificates into electronic form or have them digitally issued in their CDC account. CDC will handle the encashment and pledge functions associated with these digital certificates. Now, in the subsequent phases of this project, other schemes of National Savings will also be dematerialized.

iii)RAAST facilitation for Mutual Fund Industry: In order to promote the growth of the Mutual Fund industry, CDC, in its capacity as the primary Trustee and Custodial service provider, took the initiative to take up the role of an aggregator providing service for the collection of funds from investors’ bank accounts to AMCs’ Fund accounts utilizing the RAAST P2P mechanism launched by SBP. In this regard, SBP has approved that through a special arrangement, CDC will be able to generate IBAN with CDCP as the entity identifier for payment facilitation through the banks portals. Pilot implementation of the same is expected soon.

iv) Induction of Developmental REITs for CDC’s Trustee & Custodial services: CDC aims to be the custodian of all asset classes, including Developmental REITs set up for the development of Real Estate for Industrial, Commercial or Residential purposes. Currently, CDC is acting as the Trustee for more than 13 REIT Schemes including Developmental REITs. REIT Assets are held on behalf of unit holders by CDC Trustee.

v) Collaboration in SECP’s Regulatory Sandbox: CDC has more than 25 years of experience in the capital market industry and has successfully executed a multitude of projects that have gone on to become full-fledged businesses in their own right. CDC is now partnering with SECP to extend its expertise and guidance to new start-up businesses by acting as an “Evaluator”, for the cohorts of SECP’s Regulatory Sandbox (RSB) initiative. This is a testament of the trust placed in CDC by our Regulator. All applicants to SECP’s RSB will be initially screened by SECP for their business cases and viability, after which the shortlisted applicants will be forwarded to CDC for the technical and IT Security related evaluation.

vi) E-Meeting & E-Voting: As a consequence of the Covid pandemic, there was radical shift towards digital solutions to replace manual practices. Even in such a dire situation, CDC was foresighted in its approach to fulfil the needs of the capital market, and launched the E-Meeting and E-Voting platforms for the facilitation of the Issuer companies. These platforms enable Issuers to conduct and take part in such events virtually, removing the need for physical presence. This year, these platforms were further enhanced with new features to make this facilitation even more efficient and fulfilling for CDC’s Issuer clients and their shareholders. Around 100 Issuers have availed
one of the two services.

vii) Successful operationalization and broker induction for Professional Clearing Member (EClear): EClear Services Ltd. (ESL) was launched with the collaboration of other capital market SROs to provide settlement services to the new category of Trading Only Brokers created under the new PCM regime. Currently, ESL is providing services to more than 50 Trading Only Brokers, with more expected to come on-board soon. ESL is also developing value added services, such as launching a state of the art Online Management System (OMS) and providing enhanced compliance related functions, to further facilitate the on-boarded Brokers.

viii) Efficient Payment Mechanism (EPM): In its vision to facilitate the Mutual Funds industry through digitization and innovation of new products and services, CDC has streamlined the payment instruction delivery mechanism between AMCs and banks by integrating its in-house system FMS with banks’ systems. With a growing number of banks joining the EPM initiative, around 90 percent of the total volume of payments has been processed through EPM, thus exceeding the initial target.

ix) Shared KYC Project: Shared KYC project is an initiative of SBP to extend the digital on-boarding facilitation, offered by banks to Non-Resident Pakistanis under the Roshan Digital Account framework, to resident Pakistanis as well. This service aims to facilitate the investor account-opening in investment categories, such as Stock Market and Mutual Funds, on the basis of information and documents obtained, and KYC verifications performed by banks during bank account opening process. CDC has already enabled this facilitation successfully for Stock Market investment and has now extended it to the Mutual Fund investment category by developing connectivity between Banks and AMCs to enable investors to open mutual fund accounts digitally.

x) WhatsApp Payment for Centralized E-IPO System (CES): CDC’s E-IPO service is still the best performing electronic IPO subscription and payment system in the market six years after its initial launch, processing more than 70% of the total IPO subscriptions. As part of its continuous efforts for creating ease for customers to participate in the IPO process, CDC had introduced IPO subscriptions facilitation through WhatsApp in the last year. This feature is now further enhanced this year, with the upgrade named as e-IPO Ultra, which enables the investors to make payments against IPOs through WhatsApp as well.

Collaboration with Regulatory bodies, ministries and other stakeholders: CDC Management has consistently represented CDC and its subsidiaries across multiple platforms, engaging with stakeholders both locally and internationally, providing expert opinions, and preparing various papers on subjects such as risk management, investor protection,
broker regime, and compliance structure. Additionally, CDC has been an integral member of reform committees within SECP (Securities and Exchange Commission of Pakistan) and has been assigned specific tasks related to market development.

In conjunction with SECP, CDC has worked closely with other key stakeholders such as the Central Directorate of National Savings and the Ministry of Finance to ensure the successful and timely dematerialization of CDNS (Central Directorate of National Savings) schemes. Likewise, CDC has collaborated extensively with SBP (State Bank of Pakistan) on various
matters, actively supporting the Capital Market and Mutual Fund Industry by working on projects like RAAST P2P (Real-Time Automated Securities Trading) and Shared KYC (Know Your Customer) for Mutual Funds.

Other SROs: CDC has maintained a close working relationship with PSX (Pakistan Stock Exchange) and NCCPL (National Clearing Company of Pakistan Limited) on various matters, particularly in support of Capital Market development.

Professional bodies and forums: As an active proponent of market development, CDC strives to enrich its network and relationships with other business and professional bodies—such as the Pakistan Business Council, Insurance Association of Pakistan, Mutual Fund Association of Pakistan, and Pakistan Brokers Association—to collaborate on various endeavors for the development of Pakistan’s financial landscape.

International bodies and forums: CDC is an active member of various international forums, including Asia Pacific CSD (Central Securities Depository) Group (ACG) and World Forum of Central Securities Depositories (WFC). CDC was both a partner as well as the key organizer for the International Islamic Capital Market Conference 2023, a landmark initiative by SECP and AAOIFI (Accounting & Auditing Organization for Islamic Financial Institutions) for the development and transformation of Islamic Financial landscapes in line with the best global practices.

Within ACG, CDC has actively participated as a member of the Executive Committee and served as the Convener of the “Risk Management Task Force.”

CDC has a well-planned organizational structure and an experienced management team to ensure achievement of key strategic objectives as well as smooth processing of key businesses/functions. All of the SMOs, along with their teams, are diligently working towards increasing efficiency as well as effectiveness of their functions.

Enterprise Risk Management (ERM): CDC became the first organization in the Capital Market to implement the COSO (Committee of Sponsoring Organizations of Treadway Commission) based ERM Framework in its business for improved decision-making in governance, strategy, and day-to-day operations. The ERM framework was implemented successfully across all departments, and relevant employees were trained to build a strong risk culture. Moreover, regular review of the implementation and control testing is being performed. In order to cultivate the stronger risk management culture, ERM is now established as a separate function.
Compliance: Multiple operational, statutory and regulatory audits were carried out during the year; however, no major observation was identified.

Details of these audits are given below:

• ISAE 3000 Limited Assurance Audit has been successfully completed by Grant Thornton Anjum Rahman, Chartered Accountants who have given a clean opinion that CDC is in compliance with all the applicable laws and regulations in accordance with the scope defined under the Central Depositories (Licensing & Operations) Regulations, 2016, which has also been shared with SECP.

• During the financial year, no non-compliances have been reported or highlighted which may attract imposition of penalty. Resultantly, effectiveness of compliance function prevented the Company from any of such financial loss.

• In coordination with Internal Audit dept., the CDS Annual Review was conducted by Grant Thornton (GT) in September 2022 with no observations raised by the system auditor. The clean opinion expressed by the auditor signifies the absence of any findings or concerns, both in the cover letter and management letter. ISAE 3402 report is a very strong third party assurance mechanism that relates to review of internal IT controls. In case of CDC, there are 11 control objectives and 146 control activities whose design and implementation was reviewed by GT.

• Successful execution of re certification audit of ISO 22301 and surveillance audit of ISO 27001 in December 2022.

• Over the years, ISO 27001 has enabled CDC with a comprehensive ISMS framework that includes a requirement for detailed documentation of IT policies and procedures. With successful third party review of compliance to ISO 27001 standard, all stakeholders are assured regarding CDC having a strong foundation of Information Security principles that are well designed and correctly implemented.

• ISO 22301 has also provided CDC with a structured framework to plan, establish, implement, operate, monitor, review, maintain and continually improve its business continuity management system.

CDC as part of Joint Inspection Regime conducts inspections of security brokers under the Joint Inspection Regulations 2015. Further, Chief Compliance Officer represents CDC on the Oversight Committee formed by SECP under these regulations to overall supervise the regime.

Robust Internal Audit: In addition to the Risk Based IA plan which includes I.T. audits, 27 extra audits/consultancy assignments were carried out during the year.

Information Security: Information Security is one of the key drivers in CDC’s business model to ensure reliable and smooth services to our clients. CDC has an established ISO/IEC 27001:2013 certified Information Security Management System (ISMS) for monitoring threats / vulnerabilities and their effective risk mitigation and timely issue resolution. CDC has been continuously and rigorously demonstrating its commitment and focus to safeguard the information critical to the functioning of Pakistan Capital Market.

• For the first time in CDC history, we engaged third party consultants as RED team who tried MITRE ATT&CK techniques to hack systems, processes and staff. They targeted bypassing physical security and cybersecurity controls around the year and attempted social engineering techniques to get insider knowledge via fake job interviews, USB freebies, fake identity, etc. This framework included various tactical categories consisting of technical objectives of an adversary and applied 193 techniques including DDOS, phishing, APT infection, password cracking, USB baiting, information gathering from darknet, Rogue Wi-Fi AP, etc. All attempts were blocked successfully by CDC controls, and no impact could be created.

• CDC have improved it business continuity arrangements and has transformed its BCMS program to the latest ISO 22301:2019 version of the standard.

• We have introduced internal Red team and enhanced the capabilities of the internal team for performing Red team activities using MITRE technique as conducted by 3rd party consultants. This includes the DDOS, Password cracking, data exfiltration, APT infection, privilege escalation etc.

ITMinds Limited (Wholly owned subsidiary): During the year, ITMinds Limited while following its diversification policy started some new business ventures like SaaS (system as a service) for SMA Clients, BPO service for REITs to REIT Management Company and induction of digital AMCs where the Company provides its services in an integrated manner through APIs with no manual intervention.

ITMinds Limited has been able to onboard its budgeted clients, however, due to overall economic slowdown the businesses of its clients were started with certain delays which has an impact on its revenues and corresponding impact on profits.

Considering that ITMinds Limited has intention to acquire back office software from the Parent Company, it has performed a gap analysis of the software in comparison to other back office software’s available in the market. Few elements have been identified which are necessary for the development of application for offering in the market as a complete solution to any prospective clients as well as for own consumption. The same are under development in coordination with IT team.

This is the first year that the subsidiary has been able to pay dividend to its shareholders.

CDC Share Registrar Services Limited (Wholly owned subsidiary): Since the launch of Share Registrar Services in 2008, CDC has been successful redefining the Share Registrar service standards for the industry and now caters to 290 securities, including various listed public sector entities, making it the Number 1 R/TA service provider in the market. Share Registrar business began the financial year 2022-23 with having 250 clients on board. During the year, we have signed and entered into “Share Registrar Services Agreements” with 54 listed and unlisted companies due to deep penetration in the market, aggressive approach, continual efforts resulting in revenue earned of Rs 188 Million

CDC Share Registrar Services Limited (CDCSR) with its state of the art technology, tradition of providing one-window operations, professional staff, service excellence and performance has managed to consolidate itself as a hi-tech solution provider. The company is pioneer in introducing various automated solutions for maximum facilitation of shareholders and investors including e-Voting, e-Meeting solutions via video conferencing and electronic payment of stamp duty via franking machine in coordination with Sindh Board of Revenue. In order to promote digital drive and paperless environment, we have also introduced to our RTA clients an online portal for their physical shareholders. In 2020, CDCSR managed to achieve another milestone by obtaining the license of Intermediary Services under the Intermediaries (Registration) Regulations 2017 and currently, we are providing services to 15 listed and unlisted companies. The idea of having it under CDC umbrella was to stand out among our competitors.

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 man power by reviewing the processes in each business unit and internal functions.

Business Continuity Planning (BCP): In line with CDC’s BCP program, the following drills and audits were successfully executed during the year to ensure readiness for the continuity of CDC’s operations in case of any unforeseen events:

• CDC is the first entity in the Capital Market to execute a surprise IT datacenter failure BCP drill during business hours with no prior knowledge to staff, and the success of this drill is the testament of CDC’s Business Continuity Planning. All systems were recovered within 2 hours RTO from alternate datacenter, and business operations were performed without any delay. CDC also performs regular fire drills.
• Just like the previous year, this year also CDC reached out to NCCPL to carry out a combined business continuity and IT disaster recovery drill to demonstrate their joint readiness for uninterrupted clearing and settlement operations from their respective alternate sites without any change at their client ends. These drills not only help both organizations to test their inter dependencies of data connectivity and system integration but also help maintain their ISO 22301 certification milestone as recommended by the auditor SGS Pakistan.
• CDC successfully conducted second recovery exercise to handle ransomware situations with six different tests including virtual machines & operating systems, core business applications & databases, backup & email systems and above all bare metal recovery. Such bare metal recovery exercise from ransomware is not at a common practice in the industry. The purpose of these exercises is to build and refine CDC teams’ recovery capabilities for restoration of core business applications and establish time duration required to do so. The lesson learned from these exercises were also shared with other capital market entities for mutual benefit.

People Management: The incredible growth in the Company would not have been possible without an inclusive strategic plan, sound leadership and the efforts of our employees. The Company strives to foster a culture that is conducive to achieving equal employment opportunities while ensuring a workplace free of discrimination and harassment. CDC is fully committed to hiring and retaining talent that can contribute towards the achievement of all defined targets. CDC is an equal opportunity employer and also supports people with special needs.

Capital Market Future Leaders Program: As part of the Strategic Plan to combine Capital Market organizations into projects that enhance its people development, a joint CDC-PSX-NCCPL Capital Markets Future Leaders Program has been launched to induce fresh candidates. This program is designed to train young graduates and provide them with career opportunities at the Hub of Pakistan’s Capital Market after an extensive training of 18 months. Eventually they are to be absorbed for long term Succession Planning.

Environment, Social and Governance: Being the only depository in the country, CDC acknowledges its corporate responsibility towards the environment, society and community and returns back. Every year CDC allocates 3% of its profit before tax to ESG projects and makes a humble contribution for the impoverished and underprivileged class of the society to provide them with basic human needs. CDC’s contributions are directed towards Health, Education and Technical Skill Development as well as Community Development. Over the past few years, we have increased our reach across Pakistan covering areas like Baluchistan and Khyber Pakhtunkhwa etc. Some of the major projects sponsored by CDC are The Citizen Foundation School at Mirpur Khas, Cyber Knife project of JPMC, FESF’s Parents Sign Language Training Program, and Indus’s Cancer Clinic Project, besides regular contributions to the Patients’ Behbud Society by AKUH, SIUT, Kharadar General Hospital, Pakistan Sweet Home Orphanage, Islamabad, The Habib University, The Garage School, Broghil Yarkhun Local Support Organization Chitral and etc.

Employee Engagement: Various Employee Engagements activities and awareness sessions were conducted such as 14th August Independence Day Celebration, Sports tournaments where female employees participated in Badminton and male employees took part in Cricket and Badminton both.

Town Hall 2023: As this year marks CDC’s 25 years of excellence in the Capital Market Industry of Pakistan, a Town Hall meeting was organized. The event was attended by CDC’s Chairman, the CEO, Management Committee and all employees of CDC. The meeting provided an opportunity to employees to get the insight of strategical goals for the upcoming years, the company’s overall growth, challenges and strengths. Most importantly, it gave a singular platform where the CEO and Management Committee directly addressed employee concerns.

Diversity, Equity and Inclusion: As part of Diversity, Equity and Inclusive (DE&I) Initiative, CDC has on-boarded differently-abled employees in collaboration with Deaf Reach School and Training Centre. Subsequently, sensitization sessions were also organized for our Management Committee members and other employees to create awareness. In accordance with CDC’s annual practice, International Women’s Day was also celebrated with full zeal this year in which Ms. Musarat Jabeen Executive Director SECP and Ms. Maleeha Mimi Bangash Director EClear Services were invited as guest speakers along with the CEO and Management of CDC. With the objective of promoting gender inclusion, female ratio has also been significantly increased since last year.

Employee Wellness: At CDC, we strive to implement all applicable environmental, health and safety requirements and promote energy efficiency to ensure protection of the environment. In times of unforeseen and stressful circumstances, our first priority and line of action is always to ensure the safety & well-being of human life. With that in mind, CDC organized health awareness sessions such as Pinktober – Breast Cancer Awareness, World Mental Health Day, and Ergonomics. An In-House Medical clinic facility has also been started at the head office of CDC where a qualified and experienced doctor conducts consultations regularly, to support work life balance and save employees from the hassle of external clinics.

• Partnership with Professional Bodies: In partnership with ICAP, ACCA, ICMAP, ICAEW and CIMA as their approved training provider, we are able to hire and retain qualified accounting resources.
• In-House Workshops: CDC’s efforts for career progression and uplifting its employees through various training programs are worth an acknowledgement. This year as well, among other training activities, the third batch of our flagship Capital Market Training was arranged by experts of CDC to impart their knowledge and experience gained over the years. Further, in-house sessions on Advanced MS Excel were also organized for employees sited at Karachi, Lahore and Islamabad offices
• External Learning: In addition to that, CDC also organized a comprehensive Directors Training Program for their senior management tier through ICMAP. Opportunities were given to many employees to attend and participate on various external conferences such as Emerging Leaders Expedition (ICAP), Project Management (REDC, LUMS), Future Summit 2023, ICAP CFO Conference, etc. Employees also participated in the 23rd ACG Cross Training Seminar held at Bali, Indonesia where they had the opportunity to engage with more than 200 participants from different CSDs in the Asia Pacific Region for discussions regarding the latest technologies, products, practices and trends.

e-GO (e-Governance portal): CDC, in collaboration with the Pakistan Institute of Corporate Governance (PICG) has been working on the concept of establishing an e-Governance portal that will serve as a centralized platform to equip shareholders with the necessary information, learning modules, and training resources to promote sound governance practices. The proposed e-Governance portal “e-GO” will be an interactive and user-friendly platform designed to serve as a one-stop hub for resources, training, and learning modules, while catering to shareholders of various levels of experience and expertise. Furthermore, it will also guide shareholders to utilize services to assist in corporate governance functions, such as e-Meetings, e-Voting and e-Proxy, enabling them to participate more actively in governance decisions.

Auto Insurance Repository: CDC, in consultation with key market players and the Regulator, has been working on the conceptualization and industry buy-in for the establishment of an Auto Insurance Repository. The concept of the Auto Insurance Repository aims to provide access to material information for underwriting such as driver’s past record, territory, etc. which are used globally, to facilitate the Insurers in making intelligent business decisions prior to binding a customer. The centralized auto insurance repository will allow the industry to enhance risk mitigation efforts; select quality risks; weed out poor drivers; improve the overall quality of driving behaviour; and provide asset related information to third parties. SECP has been strongly advocating the necessity of establishing this centralized auto-insurance repository, and has stressed on the importance of this requirement and the role of CDC in the recent study on Motor Third Party Insurance by SECP.

Reinsurance Project: CDC is intending to join hands with SECP and key representatives of the Insurance Industry (NICL, Pak Reinsurance & TPL) to develop a portal that will aim to digitize the critical functions in the reinsurance lifecycle, thereby helping to ensure comprehensive reinsurance administration with the creation of centralized database whereby proper reconciliation and magnitude of risk will be available.

e-Proxy: This solution will facilitate the electronic appointment of proxies by shareholders who cannot attend meetings. Benefits of e-Proxy include convenience, accuracy, security, timely submission and real-time updates. Shareholders will be facilitated to appoint proxies electronically and securely, eliminating the need for physical paperwork and allowing for a quick and hassle-free process. This will help the shareholders to submit proxies well in advance of meetings, ensuring that their voting preferences are accurately represented.

Virtual Branch of CDNS: As an extension of CDC’s collaboration with the CDNS in the induction of National Saving Certificates (NSCs) in CDS, CDNS has principally agreed to designate CDC as its first “Virtual Branch”. As a Virtual Branch of CDNS, CDC will be able to on-board investors and issue digital NSCs to investors as well as perform all the roles associated with such NSCs such as facilitation of payment, encashment, pledge and other auxiliary services. Formal approval from the MoF is awaited after which CDC will start operational activities.

IT Export led initiative: Although current financial year remained clouded with grim political and economic stability conditions, however, Alhamdulillah CDC was able to maintain its over two-decade year on year growth trajectory by ensuring a fine balance between growth-oriented investments and operational cost optimization while ensuring that it maintains its technological and human resource edge in the capital and financial industry. The revenue generation of Pakistan by way of exporting IT Services is much lower than other countries despite availability of abundance of talent and CDC aims to excel in this line of business as well keeping the CDC legacy.

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 included in the Annual Report.

Composition of Board of Directors: Apart from regulatory requirements, execution of the Company’s current and future strategic objectives defines 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. In line with the policy of diversity and gender mix, CDC continues to maintain female representation on the Board of Directors with two female members on the Board. Total number of directors on the Board is 12 comprising of 02 female and 10 male Directors. Further, as required by the Listed Companies (Code of Corporate Governance) Regulations, 2019, independent directors have provided their declaration of independence as per the criteria defined in the Companies Act 2017 to the Chairman of the Board.

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 are as follows:

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

As decided by the Board and in line with the practice adopted in the last few years, the Company has digitized the Board Evaluation Questionnaires, and the Directors have to submit their feedback with few clicks.

The overall Board’s performance score has considerably increased to 92% from 78% in the year 2015 with all the components reflecting significant improvement lead by role of Chairman and role of CEO reflecting 99% and 96% respectively,

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 4 times in the year 2022-23 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:

* Leave of absence was granted to the Directors who could not attend some of the meetings.
** Mr. Amir Zia resigned from the Board of CDC in December 2022.
*** Mr. Zahid Latif Khan resigned from the Board of CDC in May 2023

Audit Committee: The Company’s Audit Committee is composed of five members, all of whom have extensive financial management, business and economics experience. The Chairperson 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 Financial Officer and Head of Internal Audit. The attendance status of the Audit Committee is mentioned as under:

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 with 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 Directors. The Human Resource & Remuneration Committee met 1 time during the year and its attendance status is mentioned as under:

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. The RAC also evaluates that the role and responsibilities assigned to the Chief Compliance Officer are performed efficiently and effectively.

The RAC met 4 times during the year and its attendance status is mentioned as under:

Investment Committee: The Board constituted an Investment Committee to guide the management with respect to investment decisions. Subsequently, the Board mandated the Investment Committee to look into the ESG activities in accordance with the ESG policy approved by the Board. The Investment Committee met 1 time during the year and its attendance status is mentioned as under:

Information Technology Steering Committee (“ITSC”): ITSC is setup by the Board to act as a governing body providing strategic guidance in the areas of Technology, Information Security and Digital initiatives. The ITSC met 2 times during the year and its attendance status is mentioned as under:

Nomination & Compensation Committee (“N&CC”): N&CC is constituted by the Board to consider filling up vacant position of Directors and remuneration for attending Board and Committee Meetings. The N&CC comprises of following members and no meeting was required to be held during the year:

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 applies 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. 100,000 and Rs. 75,000 for attending each Board and Committee meetings respectively. Details of aggregate amount of remuneration for executive, non-executive and independent Directors are 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 courses 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.

Precisely, as of June 30, 2023, six 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 four directors, 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, 2023 is mentioned at page 165.

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. In order to avoid known or potential conflict of interest; the Directors are required to formally disclose any vested interest held by them in their individual capacity

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. 484 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. 4,965 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, understanding of environmental limits and strategic alignment. It has made the process, assumptions and evidences 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 which 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 3 of Financial Statements.

Appropriations: The directors, in their meeting held on August 23, 2023, have proposed cash dividend of Rs. 1.1588 per share (interim cash dividend of Re. 0.8045 per share and final cash dividend of Re. 0.3543 per share) making total cash dividend of 50% of Profit After Tax (2022: 55% of the profit after tax) in respect of year ended June 30, 2023.

The unconsolidated financial statements for the year ended June 30, 2023 do not include the effect of the final dividend, 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 on Page 25.

Contribution to National Exchequer and Economy: An amount of PKR 377 Million (2022: PKR 301 Million) was contributed during the year in respect of Income tax. As a responsible citizen of our country, the Company contributed 13% (2022: 12%) 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 43 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 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 eligible, they have offered themselves for re-appointment. The Board has recommended the re-appointment of A. F. Ferguson & Co. – Chartered Accountants as auditor for the ensuing year, as suggested by the Audit Committee, subject to approval by members in the 31st 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 responds appropriately.

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, Insurance Companies, Clients of CDC Share Registrar Services and ITMinds Limited and Shareholders for their trust reposed in the Board and extended to the company.

For and on behalf of the Board

– sd-
________________________

MOIN M. FUDDA
Chairman of the Board

– sd-
________________________

BADIUDDIN AKBER

Chief Executive Officer


Karachi, dated: Wednesday, August 23, 2023