annual report
2020
Log-on to:
www.nccpl.com.pk
NATIONAL CLEARING COMPANY
OF PAKISTAN LIMITED
Smooth Sail
Head Office:
8th Floor, Stock Exchange Building,
Stock Exchange Road Karachi - 74000, Pakistan
Tel: (92-21) 32460811-19
Fax: (92-21) 32460827
Branch Office - Karachi:
9th Floor, Bahria Complex -III Building
M.T. Khan Road, Karachi
Tel: (92-21) 35621175-82
Fax: (92-21) 35621198
Branch Office - Karachi (DR-site):
4th Floor, Dadex House, 34-A/1 Block-6
PECHS Shahra-e-Faisal Karachi - 75400, Pakistan
Tel: (92-21) 34302362-69
Fax: (92-21) 34302361
Lahore Office:
Room No. M-14 Mezzanine Floor,
LSE Plaza, 19 Khayaban-e-Aiwan-e-Iqbal,
Lahore - 54000
Tel: (92-42) 36280816-7
Fax: (92-42) 36280818
Islamabad Office:
Office # 409, 4th Floor ISE Towers,
55-B Jinnah Avenue, Blue area, Islamabad-44000
Tel: (92-51) 2895460-2
Fax: (92-51)2895463
twitter:@NCCPLPK
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(92-21) 111-111-622
annual report
2020
Content
Financial Statements
About NCCPL
05
Financial Highlights
Statement of Financial Position
73
Vision
06
Resources including financial, technological
Statement of Profit or Loss
74
Mission
09
and human resources utilized by NCCPL
Statement of Comprehensive Income
75
Statement of Ethics and Business Practices
10
Analysis of Status of the compliance of the
Statement of Cash Flows
76
Policy Statement
12
Company with its obligations
49
Statement of Changes in Equity
77
Company Information
14
Chairman’s Message
50
Notes to the Financial Statements
78
Committee
15
Directors’ Report
52
Pattern Of Shareholding
Board of Directors
16
Notice of the 19th Annual General Meeting
63
As at June 30, 2020
112
Profiles of Directors
18
Independent Auditors’ Review Report
68
Proxy Form
114
Nccpl Organogram
31
Independent Limited Assurance Report
69
Executive Steering Committee
32
Independent Auditors’ Report
71
Regulatory framework
35
Description of the activities undertaken
36
by NCCPL
Typical Settlement Flow in NCSS
40
NCSS Operational Highlights
44
47
48
annual report
2020
About
NCCPL
National Clearing Company of Pakistan Limited (NCCPL or the
Company) is a licensed clearing house which provides Clearing,
Settlement and Risk Management Services at par with international
best practices. At NCCPL, the expertise and knowledge-based
resources nurture continuous provisioning of one window facilities and
services.
In addition to Clearing, Settlement and Risk Management of all trades
and transactions carried out at Pakistan Stock Exchange (PSX), NCCPL
also provides other value added services like Institutional Delivery
System (IDS), Unique Identification Number (UIN), Financial Institution
Margining System (FIRMS), Margin Trading System (MTS), Margin
Financing System (MFS), Murabaha Share Financing System (MSF),
Securities Landing & Borrowing (SLB) and National Custodial Services
(NCS) etc. NCCPL also computes, determines, collects and deposits
Capital Gain Tax (CGT) on disposal of listed Securities, units of open
ended mutual funds and gain or loss arising on trading of future
commodity contracts as per CGT regime implemented by Federal
Board of Revenue (FBR). Further, NCCPL also act as Centralized Know
Your Customer – KYC Registration Organization (“CKO”) for the
investors of the capital market.
NCCPL is an Information Security Management System (“ISMS”)
certified entity as per ISO/IEC 27001:2013(E) and a certified Business
Continuity Management entity as per ISO 22301:2012.
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05
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Vision
To be the leading Institute of Pakistan providing efficient,
effective and reliable Clearing, Settlement & Risk
Management Services at par with the best business
practices and international standards acting as a Central
Counterparty (CCP) to ensure growth and prosperity of the
Capital Market.
annual report
2020
Mission
The Mission of NCCPL is to inculcate exemplary Corporate
Governance based on high levels of integrity, confidentiality and
availability of automated business systems for all stake holders
in Capital Market of Pakistan. NCCPL is committed to develop
state-of-the-art business and technology infrastructure for
efficient and cost effective integration of capital and financial
markets. NCCPL endeavors to achieve its goals by striving for
excellence in personnel and technical resources.
annual report
2020
At NCCPL, the most valuable assets are “Confidentiality, Security, Integrity and Trust”. NCCPL
believes in the highest standard of personal and professional ethics and integrity. Due care is
required from every employee for achieving results in his/her respective area making it
mandatory to maintain the highest norms of ethical standards. Our image and reputation is built
on the personal integrity and guided by the following principles in its pursuit of excellence in all
activities for attainment of the organizational objectives:
Integrity
NCCPL is established on trust and its business is managed ethically, lawfully and fairly. We do
business only for the best interest of the valuable National Clearing and Settlement System
(“NCSS”) Elements and the entire Capital Market.
STATEMENT OF
ETHICS AND
BUSINESS
PRACTICES
Confidentiality
We guarantee confidentiality of all transactions and give assurance that the highest degree of
confidentiality is maintained in our services to all clearing members. At NCCPL, we require that all
employees shall maintain strict confidentiality regarding business affairs of the Company.
Excellence
We believe in striving hard to provide high-quality product and services to clearing members.
Efficiency
We never compromise on efficiency and ensure that our crystal clear vision, focused approach and
comprehensive work methodology are combined to provide efficient, targeted and proficient
services to clearing members.
Fairness
We at NCCPL apply fairness to our fellow employees, shareholders and NCSS Elements through
adherence to all applicable laws, regulations and policies and maintain a high standard of
behavior respecting and valuing their opinion and feedback.
Company Reputation
The conduct of the employees is a gauge of the Company’s reputation. The maintenance of
corporate reputation to the highest ethical standards is the responsibility of all employees. For
this purpose, it is not only necessary for employees to regulate their own actions but they should
also be aware of the character and actions of their members and others around them.
Relationship with NCSS Element and Colleagues
The Company demands that all its employees demonstrate the highest degree of integrity and
NCSS Elements receive high respect and excellent service and behavior at all times. The Company
is committed to the maximum utilization of its employees’ abilities and to the principles of equal
employment opportunity.
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11
POLICY
STATEMENT
annual report
2020
13. The directors and employees shall adhere to the information security policies and procedures and shall not
disclose confidential information, including commercial secrets, technologies, advertising and sales promotion
plans, unpublished price sensitive information, unless such disclosure is expressly approved by the Board or
required by law.
14. The directors and senior management officers shall submit the necessary disclosures/statement of holdings /
dealings in securities as required by the Regulations or Articles of Association or as required by SECP from time to
time.
All directors and employees are expected to understand the Code of Conduct as set forth below and abide by them
to the best of their abilities in order to set the highest ethical practices and encourage the spirit of compliance
across all levels in the organization.
15. Unless otherwise required by law, directors and employees maintain confidentiality and shall not
divulge/disclose any information obtained in the discharge of their duty and no such information shall be used for
personal gains.
1.
16. All directors and senior management must perform their duties in an independent and objective manner and
avoid activities that may impair, or may appear to impair, their independence or objectivity or official duties.
Follow the Code of Conduct by strictly adhering to the rules and procedures as approved by the Board.
2. Strive and work diligently for providing extraordinary services to valuable members of the Company and
strengthen the operations of the Company.
3. Ensure shareholders’ satisfaction through excellent products and services; and place priority for redressing
investors’ grievances and encouraging fair business practices, so that the clearing house becomes an engine for
growth of the capital market.
4. Ensure that affairs of the Company are being carried out prudently with high business ethics in compliance to
all applicable regulatory frameworks including but not limited to provisions of the Securities Act, 2015 (“the Act”),
Futures Market Act, 2016, the Clearing Houses (Licensing & Operations) Regulations, 2016 (“the Regulations”), the
Companies Act 2017, and other applicable rules, regulations, codes, guidelines, circulars and directives issued by
regulators from time to time.
5. The directors and senior management officers shall participate in the formulation and execution of strategies
in the best interest of the clearing house and contribute towards pro-active decision making; and shall not support
any decision in the meeting of the Board which may adversely affect the interest of investors and shall report
forthwith any such decision to the Securities & Exchange Commission of Pakistan (“SECP”).
6. The directors and employees are required to ensure efficient and effective use of Company’s resources and
give benefit of their experience and expertise to the clearing house and provide assistance in strategic planning
and execution of decisions.
7. The directors and senior management officers shall endeavor to ensure that the clearing house takes steps
commensurate to honor the time limit stipulated by the SECP for corrective action.
8. The directors and senior management officers endeavor to analyze and administer the clearing house issues
with professional competence, fairness, impartiality, efficiency and effectiveness.
9. No director and employee shall engage in any act involving moral turpitude, dishonesty, fraud, deceit, or
misrepresentation or any other act prejudicial to the administration of the clearing house.
10. The directors and employees must maintain the highest standards of personal integrity, truthfulness, honesty
and fortitude in discharge of their duties in order to inspire public confidence and shall not engage in acts
discreditable to their responsibilities.
11. No funds or assets of the Company shall be established or maintained that is not reflected on the books and
records of the Company. Further, no funds or assets of the company shall be used for any purpose, in violation of
any applicable laws or regulations.
12. No transaction shall be effected and no payment shall be made by or on behalf of the Company with the
intention or understanding that the transaction or payment is other than as described by the Company from time
to time.
12
17. In any dealings with NCSS Elements, government officials, or other persons/entities, no officer or employee of
the Company shall request, accept, or give any significant thing of value, the purpose or result of which could be to
influence the bonafide business relationship between the Company and such persons or entities.
18. Employees are restricted to engage in investment and trading of listed securities in capital market of Pakistan.
19. The Company expects all employees to maintain good discipline at all times in order to promote a healthy
atmosphere needed for smooth conduct of business activities. Accordingly, employee must avoid all such acts
deemed to indiscipline and / or misconduct as per Office Rule Book.
20. Every director of the NCCPL shall endeavor to ensure that all agenda items of a meeting are properly discussed
and if not, the said matter may be discussed in the next meeting to be held within reasonable timeframe as the
Board may determine for considering the remaining items; and endeavor to have the date of next meeting fixed at
each board meeting in consultation with other members of the Board.
21. No contributions shall be made by or on behalf of the Company to any political candidate, party, or campaign
either within or outside the Country.
22. The independent directors, in addition to the above stated clauses, shall ensure compliance of following
clauses:
a) Endeavor to attend all meetings of the Board and shall be liable to vacate office if they do not attend fifty
percent of the total meetings of the Board in a calendar year.
b) Participate constructively and actively in the committees of the Board in which they are chairpersons or
members
c) Strive to attend the general meetings of the NCCPL; where they have concerns about running of the NCCPL or
a proposed action, ensure that these are addressed by the Board and, to the extent that these are not resolved,
insist that their concerns are recorded in the minutes of the Board’s meeting.
d) Keep them well informed about the affairs and matters of the clearing house and the external environment in
which it operates.
e) Pay sufficient attention and ensure that adequate deliberations are held before approving related party
transactions and ensure that the same are in NCCPL’s interest.
f) Ascertain and ensure that the clearing house has an adequate and functional grievance resolution mechanism
and to ensure that the interests of a person who uses such mechanism are not prejudicially affected on account of
such use.
g) Report concerns about unethical behavior, actual or suspected fraud or violation of the code of conduct of the
NCCPL and acting within its authority, assist in protecting the legitimate interests of the NCCPL, shareholders and
its employees.
23. This Policy Statement is applicable to all directors and employees.
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annual report
2020
Company Information
Committee
Audit Committee
Chief Executive Officer
Muhammad Lukman
Information Technology and Digital Committee
Imran Ahmed Khan
Mr. Khalid Zaman Khan
Mr. Muhammad Ashraf Bawany
Mr. Muhammad Sibghatullah Khalid
Mr. Rashid Rehman Mir
Mr. Jawed Muhammad Siddiq
Registered Office
Human Resource and Remuneration Committee
Nomination Committee
Mr. Humayun Bashir
Mr. Muhammad Lukman
Mr. Khalid Zaman Khan
Mr. Imran Ahmed Khan
Bankers
Mr. Humayun Bashir
Mr. Muhammad Lukman
Mr. Khalid Zaman Khan
Mr. Ahmed Chinoy
Ms. Asiya Yousuf
Chief Financial Officer & Company Secretary
8th Floor,
Stock Exchange Building
Stock Exchange Road
Karachi-74000
Allied Bank Limited
Askari Bank Limited
Bank Al-Habib Limited
Bank Al-Falah Limited
Bank Islami Pakistan Limited
Bank of Khyber
Dubai Islamic Bank (Pakistan) Limited
Citi Bank NA Pakistan
Deutsche Bank AG
Habib Bank Limited
Habib Metropolitan Bank Limited
JS Bank Limited
MCB Bank Limited
MCB Islamic Bank Limited
Meezan Bank Limited
National Bank of Pakistan Limited
Sindh Bank Limited
Soneri Bank Limited
Standard Chartered Bank (Pakistan)
United Bank Limited
Auditors
Mr. Ahmed Chinoy
Mr. Muhammad Lukman
Mr. Humayun Bashir
Mr. Zahid Latif Khan
Mr. Imran Ahmed Khan
Executive Steering Committee
Legal Advisors
Mr. Muhammad Lukman
Mr. Imran Ahmed Khan
Mr. Kashif Alam Khan
Mr. Shafiq-ur-Rehman
Mr. Amir Mobin
Mr. Muhammad Asif
Mr. Aamir Akhtar Jamili
Mr. Jawed Muhammad Siddiq
Ms. Asiya Yousuf
Shareholding
As at June 30, 2020
Shareholders
Number of Shares Held
Pakistan Stock Exchange Limited
LSE Financial Services Limited
ISE Towers REIT Management Company Limited
Pakistan Kuwait Investment Company (Private) Limited
General Public
47,460,917
23,730,461
11,865,238
17,797,853
11
14
% of Shareholding
47.06
23.53
11.76
17.65
-
Mr. Humayun Bashir
Mr. Muhammad Lukman
Mr. Farrukh H. Khan
Mr. Shafiq Ur Rehman
Mr. Aamir Akhtar Jamili
Chairman
Member
Member
Member
Secretary
Investment Advisory and Building Committee
KPMG Taseer Hadi & Co. Chartered Accountants
Bawaney & Partners
Chairman
Member
Member
Member
Secretary
Chairman
Member
Member
Member
Secretary
Chairman
Member
Member
Member
Member
Member
Member
Member
Member
Risk Committee
Mr. Jamil Iqbal
Mr. Muhammad Lukman
Ms. Sabiha Sultan Ahmad
Mr. Farid Vardag – nominee of PBA
Ms. Mashmooma Zehra Majeed– nominee of MUFAP
Dr. Ahmed Junaid – nominee from Academia
Mr. Ali Nasir Qureshi – nominee from Institute of Actuaries
Chief Regulatory Officer – PSX
Mr. Amir Mobin (Ex officio as Chief Regulatory Officer)
Mr. Kashif Alam Khan (Ex officio as Chief Risk Officer)
Chairman
Member
Member
Member
Member
Member
Member
Member
Member
Secretary
15
Chairman
Member
Member
Member
Secretary
Chairman
Member
Member
Secretary
annual report
2020
Board of Directors
Ahmed Chinoy
Shareholder Director
Humayun Bashir
Chairman & Independent
Director
Muhammad Lukman
Chief Executive Officer
Farrukh H.
Khan
Shareholder Director
Independent Director
Shareholder Director
Sabiha Sultan
Ahmad
Independent Director
Independent Director
Zahid Latif
Khan
Shareholder Director
Muhammad Ashraf
Bawany
Shareholder Director
Hamid Ateeq
Sarwar
FBR Nominee Director
16
Shareholder Director
Jamil Iqbal
Muhammad
Sibghatullah Khalid
Khalid Zaman
Khan
Rashid Rahman
Mir
17
Naeem Sattar
Shareholder Director
annual report
2020
Profiles of
Directors
Humayun Bashir
Muhammad Lukman
Chairman & Independent Director
Chief Executive Officer
Mr. Humayun Bashir is serving as an independent director and the Chairman of NCCPL’s Board of
Directors.
He holds an Engineering degree and has completed various business management and leadership
courses from Institute of Business Administration (“IBA”), IBM Academy NY, INSEAD France and Boston
University, USA. He is a certified director from Pakistan Institute of Corporate Governance (“PICG”).
Mr. Humayun brings 40 years of diversified experience with IBM in Pakistan, Afghanistan, Iran, and MEA
headquarters Dubai. He was Country General Manager & CEO of IBM Pakistan for 16 years where he
started multiple new lines of services businesses. He introduced technology solutions for banking, capital
markets and telecom sectors. He was closely associated with capital markets and banking sector and
brought state of art payment, settlement, ATM switch solutions, stock exchange and CDC solutions to
Pakistan. He is also engaged with Incubators, Fintechs, Momentum Startup Ecosystems and served on
Startups Advisory Boards.
Mr. Humayun had earlier served as independent director on the Boards of SILKBANK, Pakistan Oxygen
Limited (formerly Linde Pakistan Limited), Karachi Port Trust and Export Processing Zone Authority. He
was elected as President of the Overseas Investors Chamber of Commerce & Industry for the year 2012
and as President of the American Business Council for the year 2011.
Mr. Humayun is the Chairman of Information Technology & Digital Committee and Human Resource &
Remuneration Committee. He is also a member of the Investment Advisory & Building Committee and
the Default Management Committee constituted by NCCPL Board.
Mr. Muhammad Lukman is a fellow member of the Institute of Chartered Accountants of Pakistan (ICAP),
Institute of Cost & Management Accountants of Pakistan (ICMAP), a qualified Corporate Secretary from
the Institute of Corporate Secretaries of Pakistan (“ICSP”) and a certified director from ICAP.
Mr. Lukman joined the Company in 2004 as Chief Operating Officer and assumed the position of Chief
Executive Officer in July 2006. He has over twenty-five years enriched and diversified experience with
national and multinational companies. He started his career with M/s A.F. Ferguson & Co., (a member
firm of the PwC global network) in assurance services and also worked in their tax services. He had
served as a member of the Financial Impact Team in Coca Cola F & N Singapore and also served as
Finance Head in Rhone - Poulenc Rorer Pakistan Limited. He had also served Central Depository
Company (CDC) as Head of Finance in 1997 and he during his tenure, along with reorganization of the
finance department, also initiated the trusteeship operations.
Mr. Lukman has represented NCCPL on various committees formed by Capital Markets, Mutual Funds
Association of Pakistan and SECP. He has also represented NCCPL on the Legal and New Product
Development Committees of Asia Pacific CDS Group (“ACG”) which deliberated the drafting of different
Regulations of the Asia Pacific region. He has attended specific trainings and workshops on Capital
Markets including training organized by US Securities & Exchange Commission in Washington DC.
Mr. Lukman is the first Pakistani national appointed as an expert advisor of Shanghai Institute for Real
Economy, a research based institute and a think tank. He has been a keynote speaker on various forums
conducted by ICAP and ICMAP. He also supports various education, training & development initiatives.
In addition to NCCPL, Mr. Humayun is currently serving on the Boards of:
•
•
•
•
NBP Funds;
Khushali Microfinance Bank; and
Foree (Payment Fintech)
Management Association of Pakistan
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2020
Profiles of
Directors
Jamil Iqbal
Khalid Zaman Khan
Independent Director
Independent Director
Mr. Jamil Iqbal has been appointed as an independent director on NCCPL Board. He holds a degree of
Bachelor of Arts with majors in Economics, Political Science & English Literature. He has specialized
expertise in banking operations, technology implementation, operational risk management, business
process reengineering and statutory compliances.
Mr. Khalid Zaman Khan has been appointed as an independent director on NCCPL Board. He holds a
Master’s Degree in Business Administration from Pakistan Institute of Management when it was
associated with IBA Karachi. He did his MPA with a major in Public Administration from University of
Karachi. He is a certified Director from Center for Executive Education, IBA, Karachi.
Mr. Jamil has a rich experience of over 46 years in the banking sector with local and foreign banks both
overseas and in Pakistan. He had served Habib Bank Limited for about 15 years in different capacities
including Head of global operations and the Chief Compliance Officer and played an instrumental role in
the implementation of FATCA for domestic and overseas branches. He had also served American
Express Banks, Emirates Bank International, Bank of Credit and Commerce and Grind Lays Bank Plc in
different managerial positions.
Mr. Khalid is currently working as Senior Executive Vice President & Group Head of Human Resource,
Learning & Development at Meezan Bank Limited (MBL). He reports to the President & CEO and
manages the human resource and learning function of over 10,000 plus employees. He is also a member
of the Bank’s Core Strategy Team. He is instrumental in bringing number of reforms in the area of human
resources at MBL, which are not only recognized internally but also externally as he got the first prize in
the category of "Best HR Practices" from Employer Federation of Pakistan (in October, 2016) in the
International HR Conference. In 2017, MBL got the award of Best Place to Work in the financial sector
from the Pakistan Society of Human Resource Management.
Mr. Jamil is also the Chairman of the Risk Committee constituted by NCCPL Board. He also assists the
Board in overseeing regulatory affairs.
Mr. Khalid has served HSBC Pakistan and ABU DHABI as Country Head of Human Resources. He
implemented Broad Banding in Pakistan and his forte was Talent and Performance Management. He
also worked for Commercial Union Life Assurance Company (Pakistan) Limited, New Zealand
immigration Services, Govt. of New Zealand and Karachi Stock Exchange. During his 25 years of
professional career, he has had the opportunity to attend numerous Leadership and Management
courses globally. He is a regular speaker / panelist at various Business Schools, Conferences and
Seminars. He holds membership in numerous professional societies including MAP. He served as the
Vice President (2012-2014) of Pakistan Society of Human Resource Management.
Mr. Khalid was also selected by the Overseas Human Resources and Industry Development Association
(HIDA) and the Japan Industrial Training Association to attend the fully funded Management Training
Program by the Japanese Ministry of Health, Labour and Welfare and HIDA. His candidature along with
5 other nominations was presented to HIDA by Employer Federation of Pakistan of which he was
selected from Pakistan.
Mr. Khalid is the Chairman of Audit Committee. He is also a member of the Human Resource &
Remuneration Committee and the Nomination Committee constituted by NCCPL Board.
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2020
Profiles of
Directors
Sabiha Sultan Ahmad
Muhammad Ashraf Bawany
Independent Director
Shareholder Director
Ms. Sabiha Sultan Ahmad has been appointed as an independent director on NCCPL Board. She is a
law graduate from University of London Westminster along with Diploma in European Law from
European Institute. She is also qualified as a Barrister to practice common law in England & Wales. She
has obtained an advanced certificate in Compliance Regulations Singapore and has passed CMFAS
exams modular 1B and 6.
Ms. Sabiha is currently working as Director International Sales at Cenkos Asia. She is involved in building
Cenkos’ client data base in Asia and helping to source deals along with providing strategic and regulatory
advices to clients. She has an enrich international experience of more than 25 years with two decades of
experience in Senior Level Management positions.
Ms. Sabiha has served as Director in various international organizations including Standard Chartered
Bank (Singapore), JP Morgan (Pakistan), Athenaeum Limited (Singapore) and Rovida Asset
Management Limited (Singapore). She is also serving in advisory role in Hakluyt since 2013.
Ms. Sabiha is also serving as a member of Risk Committee constituted by NCCPL Board
Ms. Sabiha is currently serving on the Boards of:
•
•
TPL Corp (Pakistan); and
TRG Pakistan Ltd.
Mr. Muhammad Ashraf Bawany has been nominated to represent Pakistan Stock Exchange (PSX) on
NCCPL Board. He had also served on NCCPL Board in an earlier tenure from March 2011 to March
2016.
Mr. Bawany is a fellow member of ICMAP and ICSP, holds a bachelor’s degree in Commerce and Laws
and has done various advanced management courses from local and foreign institutions. He is also a
Certified Director from PICG.
Mr. Bawany is currently holding the position of President at Ghani Global Group of companies,
comprising Ghani Global Holdings Limited, Ghani Global Glass Limited and Ghani Chemical Industries
Limited (formerly Ghani Gases Limited). Prior to that he remained Chief Executive Officer and Managing
Director of Linde Pakistan Limited – (a subsidiary of BOC Group plc and a Member of Linde AG,
Germany) and then as Advisor to its Chairman & Board. He Served Linde Pakistan Limited for more than
30 years in various leadership roles and was responsible for successfully executing several local,
regional and global initiatives and strategies in the country and across other Linde Group companies
Mr. Bawany takes keen interest in the promotion of education, trade and industry and strongly advocate
these causes through various professional, corporate / trade and Welfare platforms. He also led ICMAP
and Pakistan Institute of Public Finance Accountants (PIPFA) as President and Pakistan German
Business Forum as Chairman.
Mr. Bawany is a member of the Audit Committee constituted by NCCPL Board. He also served as
Chairman of Audit Committee in his earlier tenure.
Mr. Bawany is currently serving as:
•
•
•
•
•
•
•
22
Director, PSX
Director, Central Depository Company of Pakistan Limited (CDC)
Chairman, CDC Share Registrar Services Limited
Director, IT Minds Limited
Director, VIS Credit Rating Company Limited ( Formerly JIS/VIS)
Director PICG
Member, Quality Assurance Board, ICAP
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annual report
2020
Profiles of
Directors
Ahmed Chinoy
Mr. Farrukh H. Khan
Shareholder Director
Shareholder Director
Mr. Ahmed Chinoy has been nominated to represent PSX on NCCPL Board. He is a fellow member of
ICMAP and holds graduate degree in Commerce from University of Karachi. He is also a certified director
from PICG.
Mr. Farrukh H. Khan has been nominated to represent PSX on NCCPL Board. He is a qualified Chartered
Accountant from the Institute of Chartered Accountants in England & Wales, United Kingdom and holds
a BA (Hons.) in Economics and Finance from the University of Manchester.
Mr. Chinoy is currently serving as the Managing Partner of Arch Group of Companies and oversees
various businesses in different sectors such as security investments, textiles, real estate and poultry.
Mr. Farrukh is currently the Chief Executive Officer of PSX. He is an experienced entrepreneur and a
leading business and financial advisor who has advised on many landmark transactions. In his 30 years’
tenure, he has held senior positions with Acumen in Pakistan & the UK, including Country Director &
CEO, Pakistan, Senior Director Business Development, Chief Business Development Officer and
member of the Management Committee. He was the founding partner and CEO of BMA Capital
Management Limited. Under his stewardship, BMA established itself as the leading investment banking
group in Pakistan and received several international awards, including the 2010 Euromoney award for
the best investment bank in Pakistan. His experience includes lead managing the US$813 million GDR
offering and London listing of OGDCL, Pakistan’s largest listed company, and successfully advising
Etisalat on their $2.6 billion acquisition of Pak telecom, the largest mergers and acquisition transaction
and the largest foreign direct investment in Pakistan’s history. Other historical transactions include the
US$ 1.5bn privatization of Kot Addu Power Company and the US$898 million GDR offering for Pak
Telecom. He has advised, either on the buy or sell side, on almost 50% of all successful privatizations in
Pakistan, totaling over $4bn in value. He has also worked with American Express Bank in Pakistan and
Deloitte in London.
Mr. Chinoy is a prominent figure and has served the society in different capacities in the field of crime
issues, business, education, health and social services. He also served as the Chief of Citizen Police
Liaison Committee from the years 2010 to 2015. He was awarded prestigious national awards of
Hilal-e-Imtiaz and Sitara-e-Imtiaz for his services to general public.
Mr. Chinoy is the Chairman of the Investment Advisory & Building Committee, a member of the Human
Resource & Remuneration Committee and Default Management Committee constituted by NCCPL
Board.
Mr. Chinoy is currently serving on the Boards of:
•
•
•
•
•
PSX;
AKD REIT Management Company Limited
Creek Developers (Private) Limited
CDC and
Pakistan Mercantile Exchange Limited
Mr. Farrukh has an excellent network and deep knowledge of global business and investments. He has
previously served as President of Overseas Investors Chamber of Commerce & Industry (OICCI),
Chairman of the Young Presidents’ Organization, Pakistan Chapter and on the boards of prominent
public and private sector organizations. He was also associated with the Securities and Exchange
Commission of Pakistan as a member of its Policy Board from 2018 to 2019. Mr. Khan was selected by
Euromoney as one of the top 50 global financial leaders, below age of 40 years. His philanthropic
interests include children’s health and education.
He is also a member of the Information Technology and Digital Committee. He holds directorships/
offices in following Companies/ Institutions:
•
•
•
•
24
Acumen Pakistan, Non-Executive Director
Pakistan International Airlines Corporation Limited, Non-Executive Director
Acumen Academy, UK, Trustee &
Pakistan Environment Trust, UK, Trustee/Director.
25
annual report
2020
Profiles of
Directors
Rashid Rahman Mir
Muhammad Sibghatullah Khalid
Shareholder Director
Shareholder Director
Mr. Rashid Rahman Mir has been nominated to represent LSEFSL on NCCPL Board. He is a Senior
Partner at Rahman Sarfaraz Rahim Iqbal Rafiq, Chartered Accountants and carries over three decades
of experience in audit, tax, management consultancy, project analysis and corporate law matters.
Mr. Rahman is a fellow member of the ICAP & PIPFA and a certified Director from ICAP. He has also
served as the President of ICAP and PIPFA. He has been the Member of Committees, Boards and
Councils of various entities of Public and Private Sector.
Mr. Rahman is also a member of the Audit Committee constituted by NCCPL Board.
Mr. Rahman also holds the office of the Chairman of the LSEFSL’s Investor Protection Fund, TREC
Holders Contribution Fund and Members Contribution Fund Trusts.
Mr. Muhammad Sibghatullah Khalid has been nominated to represent LSE Financial Services Limited
(“LSEFSL”) on NCCPL Board. He is a fellow member of the ICAP. He holds a graduate degree in
Commerce from Punjab University, Lahore and has attended various advanced management courses
from local and foreign institutions.
Mr. Khalid is currently the Chief Executive Officer / Managing Director of LSEFSL. He has over two
decades of diversified experience and has worked on several assignments e.g. Microfinance institutions
and Banks, Commercial Banks, manufacturing concerns, both in Pakistan and abroad. He has worked
with organizations including Khushhali Bank, Mobilink, FINCA Afghanistan, First Microfinance Bank,
Afghanistan; and the Attieh Steel KSA. During his various assignments, he has had extensive exposure
to Financial Controls and regulatory compliance, working capital management, ERPs development and
implementation, cross border project financing facilities including export credit agencies and multilateral
lending agencies financing facilities, due diligence methodologies, portfolio management, financial
analysis and Risk management practices.
Mr. Khalid is also a member of Audit Committee constituted by NCCPL Board.
Mr. Khalid is currently serving on the Boards of LSEFSL and CDC.
26
27
annual report
2020
Profiles of
Directors
Mr. Zahid Latif Khan
Naeem Sattar
Shareholder Director
Shareholder Director
Mr. Zahid Latif Khan has been nominated to represent ISE Towers REIT Management Company Limited
(“ISEREIT”) on NCCPL Board. He holds Bachelor’s degree in Science and a graduate of National
Security Workshop organized by National Defense University. He is also a certified director from PICG.
Mr. Naeem Sattar has been nominated to represent Pakistan Kuwait Investment Company (Pvt.) Limited
(“PKIC”) on NCCPL Board. He has also served on NCCPL Board in an earlier tenure from December
2014 to February 2017.
Mr. Zahid is the Chairman and Director of ISEREIT. He also served ISEREIT as Chairman and director
in earlier term during year 2016 to 2019. He currently holds the office of the Chairman and Chief
Executive Officer of M/s Zahid Latif Khan Securities (Private) Limited, a leading corporate brokerage
house of PSX. having a wide branches network in Islamabad and adjoining areas.
Mr. Naeem is a fellow member of the ICMAP and a certified director from PICG. He has over 20 years of
experience in the financial sector and is currently working as Company Secretary of PKIC. His work
experience includes the fields of Accounting, Taxation, Budgeting, and Corporate Secretarial affairs. He
has also worked with M/s. A. F. Ferguson & Co – Chartered Accountants.
Mr. Zahid has played an effective role on Boards of capital market entities. He has been quite
instrumental in implementation of modern corporate governance standards and to promote corporate
social responsibility. He played a key role in the establishment of Unified Trading Platform between
Lahore & Islamabad Stock Exchanges and in the operational launch of Pakistan Mercantile Exchange.
both of which are considered to be the landmark initiatives at capital market landscape of the country.
Mr. Naeem is also a Nominee Director on the Board of Al-Meezan Investment Management Company
Limited.
Mr. Zahid’s most prominent landmark initiative has resulted in the integration of Pakistan’s capital market.
He has played very effective role towards creation of PSX which emerged on integration of three stock
exchanges (Karachi, Lahore and Islamabad). This measure has done away the market fragmentation
and as a result the concept of one country, one exchange and one price across nation. He also played a
dynamic role in business/community services He has been the President of Rawalpindi Chamber of
Commerce & Industries during the term 2017-18.
Mr. Zahid has a diversified experience of the stock brokerage business spanning over a period of
twenty-five years. During his association with the capital market, Mr. Zahid has achieved extensive hands
on familiarity with multifaceted operational aspects such as Initial Public Offerings, Book Buildings, Risk
Management Operations, Buy Back Pricing Models, Customer Account Relationships, Order Executions
and Clearing & Settlement functions, etc. As the Chairman & CEO of his securities firm, Mr. Zahid has
expanded the network of retail brokerage outlets which has seen remarkable growth in the business of
his firm besides promoting the culture of stock investments amongst the smaller investors.
Mr. Zahid is a member of Investment Advisory and Building Committee constituted by NCCPL Board.
Mr. Zahid also serves on the Board of Pakistan Mercantile Exchange Limited and NCEL Building
Management Limited.
28
29
annual report
2020
NCCPL
ORGANOGRAM
Profiles of
Directors
NCCPL BOARD
Dr. Hamid Ateeq Sarwar
Nominee Director- Federal Board of Revenue
HUMAN RESOURCE
& REMUNERATION
COMMITTEE
RISK
COMMITTEE
AUDIT
COMMITTEE
Dr. Hamid Ateeq Sarwar is a hard-core tax professional, qualified CSS in 1992 and posted in the Income
Tax Department at Lahore in 1994 after training in the Civil Services Academy and Directorate of Training
& Research (Income Tax) Lahore. He has undertaken a number of professional and management related
training programs like the Senior Management and National Management Courses at the Staff College,
Lahore and other short-term training courses both in Pakistan and overseas.
Chief Executive Officer
Muhammad Lukman
Dr. Hamid has served as the Member, Inland Revenue (“IR”) Policy at Federal Board of Revenue
(“FBR”), Revenue Division, Islamabad till June 30, 2020. His rich professional experience, spanning over
27 years, right from Income Tax Officer, Deputy Commissioner of Income, Additional Director,
Directorate General of Training, Income Tax. Commissioner IR, Chief Commissioner, IR Policy. He has
the distinction of serving in various capacities in the corporate zones dealing with cases of
companies/corporations for over a period of 25 years. He also worked as Member (FATE), FBR,
Islamabad.
Dr. Hamid, as Member IR Policy, is responsible for formulation and interpretation of tax policy relating to
Income Tax, Sales Tax, Federal Excise, CVT law and relevant rules. He is also engaged in formulation
of budgetary proposals and drafting of Finance Bill. He also deals with issues relating to Avoidance of
Double Taxation Agreements Multilateral Conventions, issues relating to money laundering and vetting /
concurrence in article on taxation in different international agreements and conventions. He is also
heading the Exchange of Information and Fiscal Evasion Cell specially formed in FBR for exchange of
information with treaty partners.
Dr. Hamid, during his illustrious career, was declared as the best Additional Commissioner and has also
got LUMS NMF GOLD MEDAL in EMBA 2010, Merit Scholarship at LUMS in 2005, President’s Gold
Medal for 1st position in Final Passing Out Examination conducted by Federal Public Service
Commission in 1994. He also got several Meritorious rewards by the Chairman, FBR. He was also
awarded as the Best Teacher by Directorate General of Direct Tax Training in 2001.
Chief Risk
Officer
Kashif Alam Khan
Head of PD, CS
& Marketing
Head of
Operations
Vacant
Muhammad Asif
CFO/ Company
Secetary
Head of
Administration
Imran Ahmed Khan
Head of Human
Resources
Asiya Yousuf
Chief Information
Officer
Shafiq-ur-Rehman
Dr. Hamid has subsequently resigned from NCCPL Board and he has replaced by Mr. Ch. Muhammad
Tarique, the new Member, Inland Revenue (Policy) on August 25, 2020.
30
31
Chief Information
Security Officer
Chief Internal
Auditor
Chief Regulatory
Officer
Amir Akhtar Jamili
Jawed Muhammad
Siddiq
Amir Mobin
annual report
2020
Executive Steering
Committee
Muhammad Lukman
Chief Executive Officer
Imran Ahmed Khan
Chief Financial Officer &
Company Secretary
Kashif Alam Khan
Chief Risk Officer
Shafiqur Rehman
Chief Information Officer
Amir Mobin
Chief Regulatory Officer
Muhammad Asif
Head of Operations
Mr. Lukman is serving the
Company since 2004. He is a
Fellow Chartered Accountant,
Cost & Management Accountant,
Corporate Secretary by
qualification and a certified
director from ICAP. He started his
career with M/s A.F. Ferguson &
Co. in Audit and Assurance
department. He has more than
twenty-five years of enriched and
diversified managerial experience
with national and multinational
companies including
Rhone-Poulenc Rorer Limited,
Coca Cola Beverages Pakistan &
CDC.
Mr. Imran is serving the Company
since 2007 as Chief Financial
Officer and Company Secretary.
He is a Chartered Accountant by
qualification, a Fellow member of
ICAP and a certified director from
ICAP. He started his career with
KPMG Pakistan in Audit and
Assurance department. He has
more than twenty-five years of
diversified experience of working
on senior management positions.
Before joining the Company, he
had been associated with Dewan
Mushtaq Group and Orion Group
of Industries.
Mr. Kashif joined the Company in
the year 2007 as Chief Internal
Auditor. He is a Fellow member of
ICAP and ACCA. He also holds
memberships of Institute of
Internal Auditors (IIA), USA and
ISACA, USA. He is a certified
Information Systems Auditor and
Certified Director from ICAP. He
has assumed the position of the
Chief Risk Officer in April 2017. He
has more than twenty years of
diversified experience of serving
organizations in Pakistan and
Middle East. Before joining the
Company, he was the Head of
Internal Audit at Tele Card
Limited.
Mr. Shafiq is serving the Company
as Chief Information Officer since
2011. He is a computer system
engineer holding B.E. degree from
NED University and MBA in MIS
(Gold medalist) from SZABIST. He
has over around 20 years of
experience of serving several
financial and capital market
institutions of Pakistan in
different capacities, including UBL
Fund Managers, JS Investments
and CDC. He has played
instrumental role in the
development and successful
deployment of many capital
market products such as e-CDS,
NCSS, RMS, CGT, CKO and
Murabaha Share Financing.
Mr. Amir joined the Company in
April 2014 as Chief Compliance &
Risk Officer. He is a fellow
member of ICAP. He has over ten
years of enriched experience. He
has assumed the role of Chief
Regulatory Officer with effect
from January 2, 2017 to lead the
compliance and regulatory
function. He has held the position
of CFO and Company Secretary of
Lakson Investments Limited. He
also worked as Assistant Vice
President - Operations at IGI
Funds Limited.
Mr. Asif is serving the Company
since 2002. He is MBA Finance
from KASBIT. He has over twenty
years of capital market
experience which includes
Clearing, Settlement, Risk
Management, Product
Development and Surveillance.
Before joining the Company, he
was the member of Clearing,
Settlement and Risk Management
Operations team of PSX. He was
also the Member of NCSS
Operations team of CDC.
32
33
Executive Steering
Committee
annual report
2020
Regulatory
framework
Since incorporation on July 03, 2001, the Company has focused to provide continuous support in
the development of Capital Market and has implement robust projects & plans by applying
Jawed Muhammed Siddiq
Chief Internal Auditor
Mr. Siddiq joined the Company in
2017 as Chief Internal Auditor. He
is a Fellow member of ICAP and
ICMAP. He has over twenty years
enriched and diversified
experience in assurance, finance
and consulting and has served
multinational/multibillion dollar
organizations and Big4
professional firms in the Middle
East and Pakistan. Before joining
NCCPL, he was associated with
Ooredoo Qatar and Etisalat Group.
Previously he served KPMG Lower
Gulf, Libertas Capital Group Dubai
and Sidat Hyder (Andersen S.C.
representative firm in Pakistan).
Asiya Yousuf
Head of Human Resources
Ms. Asiya Yousuf joined the
Company as Head of Human
Resources in October 2017. She is
an MBA with majors in Human
Resource Management from
Pakistan Institute of Management
and Bachelors of Commerce from
Govt. College of Commerce and
Economics.She has over ten years
of enriched experience in leading
and managing the HR function.
Prior to joining the Company, she
was associated with Alfalah GHP
Investment Management Limited
as Head of Human Resources.
34
Mr. Amir Akhtar Jamili
Chief Information Security
Officer
Mr. Amir Akhtar Jamili joined the
Company in 2016 as the Head of
Information Security. He holds
master’s degree in Computer
along with various related
certifications. He is also certified
Lead Auditor - Information
Security Management System,
Information Technology Service
Management & Business
Continuity Management System.
He has over 15 years of enriched
experience in Information
Security, Business Continuity &
Disaster Management, IT Services
Management, Robotic Process
Automation, Artificial Intelligence,
Business Process Improvement, IT
Governance, Software Application
and Development. Prior to NCCPL,
he has also worked with Telenor
Pakistan, CDC and few other
prominent organizations.
maximum available resources in the most efficient manner. It is evident that the Company in a
very short span of time has achieved various milestones and is providing significant relief to
market participants in performing their business activities.
The operations of the NCCPL are governed by the following legislations:
Securities Act, 2015;
Futures Market Act, 2016;
Clearing Houses (Licensing and Operations) Regulations, 2016;
Centralized Know Your Customer (KYC) Organization (CKO) Rules, 2017;
Clearing House (Registration & Regulations) Rules, 2005;
Securities (Leverage Markets and Pledging) Rules, 2011;
NCCPL Regulations, 2015;
Centralized Know Your Customer (KYC) Organization (CKO) Regulations, 2017;
NCSS Procedures;
Companies Act, 2017;
Listed Companies Code of Corporate Governance Regulations, 2019;
Income Tax Ordinance, 2001; and
Income Tax Rules, 2002.
35
Description of the activities
undertaken by NCCPL
In accordance with its objectives, the Company strived towards ensuring uninterrupted and seamless provision of
its services portfolio throughout the current financial year. A brief overview of the activities undertaken by the
Company is enumerated below:
1. Products and Services
A. Clearing & Settlement
NCCPL provides clearing & settlement services to trades and/ or transactions executed at the PSX through its
automated clearing & settlement system known as National clearing & Settlement System (“NCSS”). All trades /
transactions are settled in NCSS on the settlement date on Delivery Vs Payment (DVP) basis. NCCPL performs
clearing and settlement services of the following markets:
•
•
•
•
Regular Market;
Futures Market;
Negotiated Deal Market (NDM); and
Debt Market
The analytical and statistical details of the clearing and settlement related activities undertaken by the Company
are included in this Annual Report.
B. Risk Management
After the promulgation of the Securities Act, 2015 (“the Act”), NCCPL assumed the role of a Central Counterparty
(“CCP”) with effect from May 2, 2016 whereby it interposes between transacting counter-parties – a seller vis-à-vis
the original buyer and a buyer vis-à-vis the original seller – to guarantee execution of the transactions. In order to
discharge this obligation efficiently, the NCCPL undertakes the entire risk management functions of capital market
trades and/or transactions that are executed and settled by Clearing Members (“CMs”). NCCPL has established a
well-funded and liquid Settlement Guarantee Fund (“SGF”) to manage the risk of default.
The details relating to the margins held by the Company and the amount standing to the credit of SGF have been
presented under relevant sections of this Annual Report.
C. Capital Gain Tax (“CGT”)
NCCPL continued to excel and enhance the efficiency of its CGT system during the current financial year. The
Company successfully and swiftly implemented the amendments introduced through the Finance Act, 2019 relating
to the CGT regime.
The growing confidence of FBR on the efficient and transparent CGT service has led to extension of the regime to
include foreign institutional investors, unit holders of mutual funds and investors of Pakistan Mercantile Exchange
Limited.
D. Margin Trading System (“MTS”)
The transactions in the MTS are executed through on-line trading platform provided by NCCPL to market
participants on undisclosed basis between Financees and Financiers. Financing in MTS is only made available on
pre-identified ready market purchases termed as ‘Leverage Buy’. All transactions executed in MTS Market are
based on Financing Participation Ratio (“FPR”) of 15%. Financees are required to pay Marked-to-Market (MtM)
losses to NCCPL on daily basis in Cash only till the settlement of the entire MT Contract. The MtM losses collected
from Financees are paid to the respective Financiers on daily basis.
E. Margin Financing System (“MF”)
NCCPL provides a system to MF participants for recording and settlement of MF Transactions. MF facility is made
available to all CMs against net ready market purchases of their clients and proprietary positions. MF can be
obtained as per agreed FPR. However, minimum of 25% or VaR whichever is higher should be contributed by
Financee. Financing terms and conditions are pre-determined by Margin Financee and Margin Financier. All MF
Transactions are based on counterparty risk in a disclosed manner.
36
annual report
2020
F. Securities Lending & Borrowing (“SLB”)
SLB is a temporary transition of securities from lenders to borrowers within a certain period of time on undisclosed
basis. The SLB service assists CMs to avoid delivery failure in ready market or to make a short sale. Moreover, this
service serves the lenders to earn additional earnings / return on their idle securities.
G. National Custodial Services (“NCS”)
NCCPL has developed a centralized clearing; settlement and custody service named as NCS. The capital market
investors opting to avail the NCS services will continue to transact in the capital markets through their TREC Holders,
the CMs of NCCPL. however, they will be able to directly settle their trades with NCCPL. All securities and cash
balances of NCS Clients will be maintained by NCCPL to ensure safe custody of securities and deposits of clients.
H. Unique Identification Number (“UIN”)
NCCPL provides a centralized mechanism for registration of investors in NCSS by assigning UIN in order to maintain
a traceable link for each trade and transactions executed in the stock market. All registered UINs are provided to the
stock exchange by NCCPL and stock exchange link up the UINs with the trading systems at their end and it is
mandatory for the CMs to enter UIN while placing any order in the trading system. The trading systems of the stock
exchanges verify the UIN registration details on Pre-trade basis and reject any order failing this validation. This facility
provides traceable links for all trades and transactions executed in the Capital Market of Pakistan.
I. UIN Information System (“UIS”)
In order to bring transparency, to foster the investors’ confidence on capital market and to prevent any misuse of
their UINs, NCCPL has developed a web-based UIS so as to enable registered investors to view all their trading,
settlement and relevant information with their respective brokers in a smooth and efficient manner through
dedicated User ID and Password.
J. Un-Listed TFC Reporting through NCSS
It facilitates market participants to record their deals, executed in Un-Listed Debt Securities, in a disclosed manner
by initiation and affirmation process. Accordingly, Reported Trades are disseminated to the Pakistan Stock Exchange
Limited for its onward recording and intimation to all participants.
K. Interbank Fund Transfer (“IBFT”)
In order to provide facilitation in money settlement, NCCPL provides IBFT facility between CMs through their accounts
maintained in the Designated Branches of a Settling Bank. As per the electronic instruction given by CMs, through a
specific interface in NCSS, NCCPL provides fund transfer screen to the Designated Branch as per the Designated Time
Schedule. Accordingly, the Designated Branch debit / credit the account of CMs.
L. Centralized Know Your Customer (KYC) Organization (CKO)
NCCPL has implemented a centralized mechanism to perform KYC only once as an independent organization in order
to avoid duplication of KYC process of investors with every intermediary,
Under the CKO regime, the trading account opening form and CDC Sub-Account opening form have been merged into
a single Customer Relationship Form (CRF). Furthermore, customer would be able to update their KYC related
information into the database by approaching any of the Authorized Intermediary (AI).
The implementation of CKO functionality is expected to significantly enhance the authenticity and reliability of the
customer registration details. This will facilitate market participants in the client account opening process and bring
consistency in the KYC process applied on the investors of the capital market.
M. SMS & E-Mail Alerts Service
NCCPL disseminates trading information via SMS and E-mail to the capital market investors at the end of business
every day free-of-cost. NCCPL has taken this initiative to keep the investors informed & conversant, in a transparent
& confidential manner, about their respective trades by sharing this set of information.
37
annual report
2020
2. Significant Developments during the Financial Year
3. FUTURE OUTLOOK
A. Implementation of Murabaha Share Financing (“MSF”) System
Online Account Opening
Shariah complaint financing has emerged as a viable alternate to conventional interest-based financing in many
countries. In light of this emergence, NCCPL has introduced MSF, as a new avenue for investors of Pakistani Capital
Market.
With the objective of promoting ease of doing business for capital market participants and to enhance the overall
liquidity in capital market, NCCPL is working to introduce online account opening functionality in line with the
international best practice as advised by international consultants in the Financial Market Development Plan. The
said process aims to complete the online account opening process within 24 hours to be counted from submission
of on-line form to initiation of trading activity.
MSF is a Shariah compliant product to provide investors with interest-free financing option for capital market
investments. The product has been introduced in strict compliance with Islamic laws in the country after seeking
approval from SECP. It is envisaged that MSF will have a positive avenue for investors to diversify portfolio at their
disposal, especially for those who want to invest through Shariah compliant modes of finance.
B. Reforms Introduced in NCC Systems
With consultation and under guidance of SECP, NCCPL has made some necessary reforms in order to help market
participants and smoothen their day to day business operations.
Additionally, during the year in order to improve the overall Risk Management measures, modifications were made
in VAR margins and applicable haircuts. Further, revised slabs of liquidity margins have also been introduced in the
recent restructuring.
C. Simplification of know your customer “KYC” process and extension of CKO regime for investors of PMEX
NCCPL has taken several initiatives with respect to its CKO function, which are aimed at promoting ease of doing
business for capital market participants which includes addition in types of documents to be accepted, use of
mobile number of close family member, enhancing time available to CMs for removing discrepancies noted in KYC
Form, relaxation of biometric verification during COVID 19 scenario at the time of opening of account etc. The KYC
functionality has also been implemented for brokers of Pakistan Mercantile Exchange Limited with effect from July
8, 2019.
D. Clearing, Settlement and Risk Management of Exchange traded funds (“ETFs”)
NCCPL, after amending its regulatory and risk management framework and finalizing operational modalities, has
implemented clearing, settlement and risk management of the ETF product introduced by PSX in March 2020. The
new Product ETF aims to track the specified bench mark index, while providing real time price of the fund
throughout the day.
E. Business Continuity Measures in Pandemic conditions
RMS Measures
Following risk management measures/ improvements are under consideration for implementation in the FY
2020-21:
- Introduction of portfolio based risk management model where market participant’s trades in futures and
derivatives market having same underlying stocks would be considered as portfolio. The envisioned change would
bring efficiency in setting trade margin requirements for participants without compromising on the risk
management mandate of clearing house.
- Designing of risk management for products to be launched by PSX and to involve stake holders in ascertaining
optimal level of margins to be charged for existing products.
Take - over of Margin Trading System (“MTS”) application from PSX
NCCPL has been undertaking the Margin Trading System since 2011. As part of its continued endeavor to develop
and implement latest technologies and to provide user-friendly and robust system to facilitate the clients, NCCPL
is in the process of implementing in-house Margin Trading System for Trading Financiers & Financees.
Professional Clearing Member (“PCM”)
NCCPL in coordination with other stakeholders is working to implement the concept of PCM in Pakistan’s capital
market. The PCM will be an independent institution offering custodial, clearing, settlement and risk management
services to Trading Only category of Securities Brokers.
Extension of CKO regime to MUFAP
With the successful extension of CKO regime to the investors of PMEX, this functionality will further be extended
to MUFAP (unit holder of CIS) thus broadening the horizon.
During the COVID 19 scenario, NCCPL implemented robust business continuity measures to provide seamless
service to capital market participants. These measures included provision of remote connectivity to staff and CMs
in work from home scenario, distribution of core operational and technical teams to multiple physical locations and
fully operational alternative processing site in order to ensure that NCSS and related services can be rendered
seamlessly.
38
39
annual report
2020
Typical Settlement
Flow in NCSS
NCCPL Staff
Typical Settlement Flow in NCSS:
Buying Broker
Selling Broker
T
Execution of Trades at the
Stock Exchange
Online Trade feed to NCSS
T+1
SD-1
Generation of NE
Transactions
Netting of trades
Payment orders and Delivery Receive order
T+2
SD
Money Receive order and Delivery order
Delivery of NCSS eligible securities (with blocked status)
Buying Broker
Collect Payment
Unblocking of securities on payment /
Delivery Confirmation
Payment to NCSS
40
Selling Broker
Release Payment
41
annual report
2020
NCCPL Staff
42
NCCPL Staff
43
annual report
2020
Monthly Per Day Average of
Value of Trade - Regular Market
300,000
NCSS OPERATIONAL
HIGHLIGHTS
250,000
200,000
150,000
100,000
50,000
Number of Securities in NCSS as at June 30,2020
500
Number of Securities added during the year
24
Number of Securities deleted during the year
33
Number of Broker CMs as at June 30,2020
206
Number of Broker CM added during the year
2
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Mar-20
Apr-20
May-20
Jun-20
Mar-20
Apr-20
May-20
Jun-20
Mar-20
Apr-20
May-20
Jun-20
Monthly Per Day Average of
Number of Broker CM deleted during the year
19
Number of Non-Broker CMs as at June 30,2020
196
Number of Non-Broker CM added during the year
20
Number of Non-Broker CM deleted during the year
6
Number of Custodian CMs as at June 30,2020
7
Number of Custodian CMs added during the year
NIL
Volume of Trade - Regular Market
7,000
6,000
5,000
4,000
3,000
Number of Custodian CMs deleted during the year
1
Number of Settling Banks as at June 30,2020
19
Number of Settling Banks added during the year
NIL
Number of Settling Banks deleted during the year
NIL
Average Per Day Volume of Trade Feed
185,256,228
Average Per Day Value of Trade Feed
7,214,438,049
Average Per Day Volume of IDS Transactions
29,154,549
Average Per Day Value of IDS Transactions
2,279,008,066
Average Per Day Number of Shares Settled
133,891,452
2,000
1,000
-
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Monthly Per Day Average of
Value of Trades - DFC
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
-
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Monthly Per Day Average of
Volume of Trades - DFC
3,000
Average Per Day Value of Settlement
4,655,214,269
2,500
2,000
Summary of Properties deposited as collateral by CM
NIL
1,500
1,000
Action to combat emergency in settlement
NIL
500
0
44
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
45
Jan-20
Feb-20
Monthly Per Day Average of
Value of Trade - NDM
25,000
20,000
15,000
10,000
5,000
-
Jul-19
Continued growth requires change. The success depends on the adaptability to change and how you proceed about it.
Muhammad Lukman, CEO - NCCPL
Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20
Financial Highlights
Monthly Per Day Average of
Volume of Trade - NDM
2020
70
60
------------------------- Rupees in '000 -------------------------
50
40
BALANCE SHEET
30
20
10
0
2019
Jul-19
Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20
Share holders' equity
1,738,135
1,492,827
Non-Current Assets
742,457
356,929
14,018,184
13,088,151
27,465
10,050
12,995,041
11,942,203
1,045,782
953,505
665,136
645,204
30,173
28,473
Profit/Loss before Tax
350,473
279,828
Profit/Loss after Tax
251,973
202,358
14.5%
13.6%
Debt to Equity
0.02
0.01
Current Ratio
1.08
1.10
EPS (before tax)
3.48
3.70
Current Assets
Long term Liabilities
Current Liabilities
Disciplinary Action
OPERATING RESULTS
The Company had issued 288 notices to 84 CMs requiring them to fulfill their money obligations within the thirty minutes of the
issuance of notice in accordance with NCCPL Regulations, 2015. The CMs had fulfilled their obligation within designated timelines and
hence no further action was taken against them. In 3 instances the CMs were suspended as they failed to settle money obligation with
designated time line. However, these CMs were subsequently restored after receipt of their money obligation on the same date. All
charges imposed due to delay in payment/ delay in submission of collaterals were are included in operating income (others) in note
23 of the financial statement.
In addition to the above, the Company had issued 87 notices of suspension/ restriction/ termination to 74 CMs during the year, on
account of non-compliance with respect to applicable regulatory framework including 22 notice of termination which were issued to
CMs on their request for voluntary termination.
Funds Maintained by NCCPL
Total Income
Total Expenses
Contribution to Funds
RATIOS
Return on Equity
Particulars
Settlement
Provident Fund
Gratuity Fund
Guarantee Fund
--------------- Rs in million ---------------
EPS (after tax)
2.50
2.68
Opening balance
3,440
42
185
Break-up value per share
17.23
19.74
Amount contributed including surplus for the year
420
16
57
Profit/Loss before tax as % of Income
33.51%
29.35%
Amount utilized
-
(6)
(10)
Closing balance
3,860
52
232
Expense as % of Income
63.60%
67.67%
Net profit Margin
24.09%
21.22%
46
47
annual report
2020
Resources including financial,
technological and human resources
utilized by NCCPL
Analysis of Status of the
compliance of the Company
with its obligations
The Company, during the current financial year, had utilized its financial, technological and human resources in an optimally to
ensure compliance with its obligations. This can be witnessed as follows:
The Company, to the best of its knowledge and belief, considers that the activities undertaken by the Company and the
resources utilized have resulted in full compliance with its obligations under the applicable laws and regulations, in all material
aspects. During the year, the Company carried out the following successful operational, financial and IT certification, reviews
and audits to analyze the company’s status of compliance with its obligations:
•
The net assets of the Company as of June 30, 2020 amounted to Rs. 1.74 billion (2019: Rs 1.50 billion) which depicts
sufficiency of its financial resources.
•
Total assets of the Company including exposure and other margins as at June 30, 2020 stood at Rs 9.85 billion (2019: Rs
9.10 billion) ensuring the adequacy of the financial resources to meet its obligations. Additionally, NCCPL, as on June 30,
2020, maintains SGF amounting Rs 3.86 billion as compared to Rs 3.44 billion in the preceding year.
•
•
The Company has been able to generate profits and positive cash flows for past several years enabling the company to
distribute dividends to meet its obligations towards shareholders besides retaining and accumulating sufficient funds for
meeting its obligation and performing its role as prescribed under the applicable regulatory framework.
The Company continuously strived to provide the state of the art services to the capital market participants and
accordingly invested heavily in human resources functions. NCCPL, being a specialized entity with complex operational
processes & information technology infrastructure having a sensitive regulatory and compliance oriented role, has to
engage specialized skill set which carry established market value. The Company has employed Human Capital with an
enriched and diversified experience of local and foreign national and multinational companies. NCCPL’s team comprises
professional accountants of the recognized and foreign accounting institutions, graduates and masters, IT professionals
and Engineers of recognized local and foreign educational institutions. The Company invest its financial and other
resources heavily to ensure retention of such skill set and the critical staff. In addition to, the cycle of selection,
recruitment and settling-in of hired resources, due to slow learning curve, involve considerable investment to make an
employee productive. The Company has ensured that the senior management and the Board of Directors of the Company
adequately meet the Fit and Proper Criteria prescribed under the applicable laws and regulations.
•
The Company believes that in order to remain effective and efficiently provide seamless services, it has to invest heavily
in the technological sector. The Company feels pride to declare that it owns and administers latest servers and
networking equipment’s. In order to ensure continuity of services, the company has entered into various support
contracts for hardware and software licenses with globally prominent brands such as IBM, Cisco, Hewlett Packard and
Juniper etc. to ensure that the Company remains compliant with the international best practices. The enclosed financial
statements reflect that the IT infrastructure including hardware and software comprises major components of the fixed
assets of the Company.
•
NCCPL already holds ISMS Certification on ISO – 27001 standards by SGS, the accredited certifying auditors. Further, this
certification has been carried out at the latest available standard of 2013. NCCPL was the first entity to attain the
certification on this updated standard in Pakistan. Further, NCCPL has become Pakistan's resilient organization to be
certified against ISO 22301 international standard for its Business Continuity Management program.
•
During COVID 19 scenario, NCCPL implemented robust business continuity measures to provide seamless service to capital
market participants. These measures included provision of remote connectivity to staff and CMs in work from home
scenario, distribution of core operational and technical teams to multiple physical locations and fully operational
alternative processing site. This mejsures enableb the company to provied NCSS and releted services seamlessly to
market participants.
•
Half yearly review and Annual audit including review of Code of Corporate Governance conducted by M/s. KPMG Taseer
Hadi & Co.;
•
Annual Audit of Operations, Regulatory functions and IT systems conducted by Grant Thornton Anjum Rahman Chartered
Accountants in accordance with the requirements of the Act and the Regulations;
•
Certification from the statutory auditor on the adequacy of internal control system implemented by NCCPL, the
appropriateness of the resources in the regulatory function and the implementation of effective procedures and
reporting mechanism to detect and report any non-compliance in a timely manner;
•
Annual audit of Settlement Guarantee Fund conducted by M/s. KPMG Taseer Hadi & Co;
•
Audit of KYC system, controls and procedure conducted by Grant Thornton Anjum Rahman Chartered Accountants.
•
ISMS Surveillance Audit by SGS as per ISO 27001:2013; and
•
ISO 22301 Business Continuity Management certification by SGS and accredited the United Kingdom Accreditation Service
after series of comprehensive audits.
Further, the Company has established a regulatory compliance department to ensure that the Company complies with
applicable laws and regulations. Moreover, the Company has also established an independent internal audit department. The
Chief Internal Auditor (CIA) functionally reports to the Audit Committee and administratively to the Chief Executive Officer of
the Company.
Therefore, it can reasonably be concluded that the Company has employed adequate financial, technological and human
resources during the year to ensure compliance with its obligations as the clearing house.
48
49
annual report
2020
Dear Shareholders,
their expertise include competencies relating to
robust governance frameworks, private equity,
investment banking and human resource management. The Board, by leveraging its diverse skill set for
shared leadership, endeavors to operate the Company in strict compliance with regulatory framework
and to create profitable growth.
It is my pleasure to present the Annual Report for
the year ended June 30, 2020.
The capital market operations witnessed significant
volatility throughout the current financial year. The
daily average trading values (ready and derivatives)
plunged from as low as Rs.4.65 billion in the month
of July 2019 to as high as 16.01 billion in the month of
December 2019. The daily average trading values, on
overall annual basis, stood at Rs.10.4 billion as
against Rs 9.1 billion of preceding year.
Mr. Humayun Bashir
Chairman’s
Message
The audit committee ensures that the governance
structure is fully compliant, whilst it monitors the
high standards of ethics, control procedures, and
risks associated with the business as identified by
the Board. The risk committee frames risk management policies and procedures to manage risks including legal, credit, liquidity, general business and operational risks to further strengthen the role as a
central counterparty. The human resources and
remuneration committee recommends and evaluates management performance against key performance indicators and objectives agreed with the
Board. The Board also carried out its annual self-assessment along with annual self-assessment of its
Committees and its members, acting in the best
interest of shareholders and capital market at all
times.
In last quarter of the current financial year,
Pakistan’s economic growth got adversely impacted
due to outbreak of COVID-19 pandemic in line with
global trend. This impacted revenues, profitability
and supply chain of all major business sectors including capital market entities. While revenue streams of
NCCPL also carries an impact in its last quarter to a
certain extent, the Company has been able to register 10% growth in revenues and 25% growth in profitability in comparison with preceding year.
It is important to mention that NCCPL, in due recognition of persistent volatility in trading level and
pandemic, took timely measures to mitigate its
impact on its revenues and profitability. These measures include efficient treasury management, curtailing operating expenses, deferring capital expenditure and above all ensuring seamless continuity of
business operations.
On behalf of the Board, it is my pleasure to confirm
that in our view, that the Annual Report and Financial Statements, taken as a whole, are fair, balanced
and understandable.
On behalf of the Board, I express my gratitude to all
stake-holders including the Securities and Exchange
Commission of Pakistan, the Federal Board of Revenue, the State Bank of Pakistan, Pakistan Stock
Exchange, shareholders and capital market participants for your continued support and confidence.
The State Bank of Pakistan (“SBP”), in order to
contain inflation and promote liquidity in context of
COVID-19 pandemic, slashed the Policy rate by 625
BPS. The reduction in Policy rate and relief packages
announced by Government and SBP are likely to
enhance the trading level at PSX and the index is
expected to rise provided that COVID-19 outbreak is
contained.
It is my pleasure to share that the Board of Directors
is providing guidance in all significant policy matters
to the management. All members of the Board are
well-versed in their roles and responsibilities and
50
________-sd-______________
Humayun Bashir
Chairman – NCCPL Board
Karachi, August 25, 2020
51
annual report
2020
Directors’ Report
On behalf of the Board of Directors, we are pleased to present the 19thAnnual Report of NCCPL along with the
audited financial statements and Auditors’ Report thereon for the year ended June 30, 2020.
THE ECONOMY & CAPITAL MARKET REVIEW
ECONOMY REVIEW
The global macroeconomics and financial landscape is witnessing un-paralleled fluctuations as COVID-19 pandemic
has emerged as the biggest threat to economic growth. The IMF has projected negative 4.9% growth in the
calendar year 2020 due to economic challenges caused due to current pandemic and the situation may get worse
if pandemic continues in the second half of the calendar year or resurges.
On the national front, the demand compression led policies initially narrowed CAD from US$ 19.9 billion (FY 2018)
to US$ 13.8 billion (FY2019) which further shrank massively to US$ 2.9 billion (FY 2020). The fiscal deficit also
reduced to 3.8% of GDP in the nine months’ period (July 2019 to March 2020) as against 5% of GDP in similar period
of preceding year on account of sharp rise in collection of non-tax revenues and significant improvement in
provincial surplus.
The outbreak of COVID-19 has adversely affected Pakistan’s economic growth due to significant reduction in
exports, foreign investment, remittances and increased external debt. These factors caused the National Accounts
Committee to re-estimate the current financial year’s GDP growth rate at -0.4% as against +2.5% GDP growth
estimated earlier by Ministry of Finance and IMF. This implies that Pakistan is witnessing negative GDP growth
after a long time since 1951. Pakistan’s domestic production and exports have also suffered due to less supply of
intermediate goods followed by decrease in global demand and commodity prices. The economic slump in China,
USA, EU and Middle East is also affecting Pakistan’s exports and remittances.
The Government, in order to reduce the impact of COVID-19, announced various relief packages to support
individuals, SMEs industries, construction and other business sectors. The significant reduction in policy rate by 625
bps since March 2020 and other incentives announced by SBP for business sectors would also contribute to
stimulate the economic boost.
BUSINESS AND FINANCIAL REVIEW
The capital market, during the current financial year, outperformed preceding year’s trading levels despite
un-anticipated pandemic. The daily average trading values (ready and derivatives) stood at Rs.10.4 billion as
against Rs 9.1 billion of preceding year. The Pakistan’s economy got adversely impacted due to outbreak of
COVID-19 in line with global trend which impacted revenues, profitability and supply chain of all major business
sectors including capital market entities. While revenue streams of NCCPL also carries an impact in its last quarter
to a certain extent, the Company has been able to register 10% growth in revenues and 25% growth in profitability
in comparison with preceding year.
NCCPL adopted a cautious approach throughout the year in realization of market volatility & uncertainties and also
took necessary measures during pandemic conditions, in order to reduce impact on revenues and profitability.
These measures include:
• Implemented robust business continuity measures to provide seamless service to capital market in pandemic
through provision of remote connectivity for staff to work from home, distributed operational teams to multiple
physical locations and ensuring all NCSS services can be rendered through fully operational alternative processing
site.
•
Reduced tariff for a few products to reduce cost of doing business for certain class of investors
• Efficiently managed treasury function to enhance treasury yield without compromising quality of instruments
and risk profiles of institutions with due regards to parameters of investment policy. The higher treasury yield
helped NCCPL to surpass budgeted and preceding year’s level of total revenues.
• Curtailed operating expenses to the possible extent without compromising quality of service, risk
management and information security standards; and
• Deferred capital expenditures of Rs 47 million budgeted this year without compromising on the quality of
services. This helped us in saving operating cost and to enhance treasury yield.
During the current year, NCCPL has achieved following operational accomplishments:
CAPITAL MARKET REVIEW
The capital market operations remained volatile/fluctuating throughout the current financial year. In the first
quarter, daily average trading values (ready and derivatives) were as low as Rs.6.1 billion which rose to Rs.13.3
billion in the second quarter and then dropped to Rs.11.8 billion in the third quarter and Rs. 9.9 billion in the fourth
quarter. On annualized basis, average daily trading values in the current financial year stood at Rs.10.4 billion as
against Rs. 9.1 billion of the preceding year.
On the fallout concerns of pandemic, stock markets across the globe remained under significant pressure and MSCI
World Index, MSCI Emerging Markets Index and MSCI AC Asia Pacific Index initially fell by 21%, 20% and 17%
respectively. However, as the impact of pandemic and lock down on capital markets across the globe has started
recovering at a steady pace.
In order to deal with pandemic conditions for containing inflation and promoting liquidity, the SBP has slashed the
Policy rate by 625 BPS. The reduction in Policy rate and relief packages announced by Government and SBP have
demonstrated positive effect through enhancement in trading levels and rise in index in the month of July &
August 2020.
The KSE 100 index increased by 20% in the first half of current financial year to reach a level of 40,735 as on
December 31, 2019 and then fell by 18% to level of 34,422 as on June 30, 2020 which includes the impact of
pandemic as well. However, KSE 100 index crossed level of December 2019 in the recent month.
52
• Successful launch of Murabaha Share Financing System;
• Extension of CKO regime to investors of PMEX;
• ISMS Surveillance audit as per ISO 27001:2013;
• Re-certification of Business Continuity Management as per ISO 22301;
• Implementation of Decibel (automated payroll management software);
• Implementation of Balanced Score Card mechanism to automate performance management and goal setting
exercise;
• Clearing, settlement and risk management of Exchange Traded Funds;
• Implementation of Business Continuity measures with respect to workplace safety, hygiene, travel advisory,
availability of remote connectivity for staff to test work from home scenario, distribution of operational teams in
multiple physical locations and fully functional alternative processing site in its Business Continuity Plan;
• Implementation of RMS Portal for submission of monthly NCB/ Liquid Capital;
• Implementation of risk management measures including acceptance of Near Cash Instruments as Market
Collaterals, widening of Circuit Breakers and introduction of Market Halts and adjustment of exposure limits of
Securities Brokers in all markets on the basis of monthly unaudited NCB statement; and
• Release of 50% Marked to Market profit in DFC market on T+1 basis.
The description of principal activities undertaken by the Company have been narrated comprehensively in the
Annual Report.
53
annual report
2020
FINANCIAL
HIGHLIGHTS
COMPLIANCE WITH THE CODE OF LISTED COMPANIES (CODE OF CORPORATE GOVERNANCE)
REGULATIONS, 2019 (“CODE”)
The Company, in order to establish a framework of good corporate governance, had voluntarily adopted the Code of Corporate
Governance since 2005 and had complied to the possible extent with all applicable requirements. The revised regulatory framework
applicable to clearing house has made it mandatory for NCCPL to ensure compliance with the Code as applicable to listed companies.
In this respect, the Company has ensured compliance with the Code to the extent consistent with the revised regulatory framework.
The summarized financial results of the Company for the last six years are as follows:
Rupees in Million
Particulars
Gross Income
Contribution to SGF
Total Income (net)
Expenses
Profit before taxation
Taxation
Profit after taxation
EPS (basic and diluted)
Dividend per share
2019-20
2018-19
2017-18
2016-17
2015-16
2014-15
1,045.78
953.51
836.06
1,063.88
645.51
651.16
(30.17)
(28.47)
(27.45)
(27.21)
(21.05)
(23.14)
1,015.61
(665.14)
350.47
(98.50)
251.97
2.50
-
925.03
(645.20)
279.83
(77.47)
202.36
2.01
808.61
(592.53)
216.08
(63.23)
152.85
1.52
4.0
1,036.66
(576.05)
460.61
(141.11)
319.50
3.17
-
624.46
(426.83)
197.63
(59.69)
137.94
1.37
1.9
628.02
(370.05)
257.97
(76.41)
181.56
1.80
9
OPERATIONAL STATISTICS
The financial highlights of current year demonstrate that the Company is able to dilute the impact of significant
reduction of trading values on its revenues while its impact is clearly reflected in the operational statistics. The Company
however continued to improve the quality of service to market participants and made positive improvements in its
product offerings.
The operational statistics during the current year have been summarized hereunder:
Particulars
Number of Securities in NCSS
Number of Broker CMs
Number of Non-Broker CMs
Number of Custodian CMs
Average Per Day Volume of Trade Feed
Average Per Day Value of Trade Feed (Rs.)
Average Per Day Volume of IDS Transactions
Average Per Day Value of IDS Transactions (Rs.)
Average Per Day Number of Shares Settled
Average Per Day Value of Settlement(Rs.)
Number of Settling Banks
Number of Settling Branches
2019-20
500
206
196
7
185,256,228
7,214,438,049
29,154,549
2,279,008,066
133,891,452
4,655,214,269
19
27
54
2018-19
517
226
163
7
192,052,130
6,363,551,313
27,857,461
1,750,170,366
109,277,965
4,347,302,239
19
27
The Board and management are cognizant of their responsibilities and supervise the Company’s operations to enhance the accuracy,
completeness and transparency of financial and non-financial information.
The Directors are pleased to state that:
• The financial statements present fairly its state of affairs, the results of its operations, cash flows and changes in equity.
• The Company has maintained proper books of accounts.
• Appropriate accounting policies have been consistently applied in preparation of the financial statements. The
accounting estimates are based on reasonable and prudent judgment;
• The system of internal control in place is sound in design and has been effectively implemented and monitored. The
controls are monitored by the internal and external auditors as well as the Board of Directors and the Audit Committee.
The Board reviews the effectiveness of established internal controls through the Audit Committee and suggests,
wherever required, further improvement in the internal control systems;
• International Financial Reporting Standards, as applicable in Pakistan, have been followed in preparation of financial
statements and any departure there from has been adequately disclosed;
• There are no significant doubts about the Company’s ability to continue as a going concern; and
• There has been no material departure from the best practices of corporate governance.
BOARD OF DIRECTORS
NCCPL’s Board of Directors (“the Board”) comprises 7 members representing shareholding institutions, 4 independent directors, the
Chief Executive Officer by virtue of his position as per statute and a representative from the Federal Board of Revenue. All members
of the Board meet the Fit & Proper Criteria prescribed in the Companies Act, 2017 and Clearing Houses (Licensing & Operations)
Regulations, 2016 for holding office of director.
The tenure of the office of directors is three years. On expiry of the term, elections are held to appoint a new Board in accordance
with the statute. The directors representing shareholding institutions have no direct interest in the Company’s business. The directors
are well aware of their duties and responsibilities outlined in applicable corporate laws.
The composition and structure of the Board is in accordance with the governance structure prescribed in the applicable regulatory
framework.
Currently, the Board consists of 12 male directors and a female director as follows:
S. No
Name of Directors
Description
1
Mr. Humayun Bashir
Chairman and Independent Director
2
Mr. Muhammad Lukman
Chief Executive Officer (Executive Director)
3
Mr. Muhammad Ashraf Bawany
Non-Executive Director (PSX Nominee)
4
Mr. Ahmed Chinoy
Non-Executive Director (PSX Nominee)
5
Mr. Farrukh H. Khan
Non-Executive Director (PSX Nominee)
6
Mr. Jamil Iqbal
Independent Director
7
Mr. Khalid Zaman Khan
Independent Director
8
Ms. Sabiha Sultan Ahmad
Independent Director
9
Mr. Muhammad Sibghatullah Khalid
Non-Executive Director (LSEFSL Nominee)
10
Mr. Rashid Rahman Mir
Non-Executive Director (LSEFSL Nominee)
11
Mr. Zahid Latif Khan
Non-Executive Director (ISEREIT Nominee)
12
Mr. Naeem Sattar
Non-Executive Director (PKIC Nominee)
13
Mr. Hamid Ateeq Sarwar
Non-Executive Director (FBR Nominee)
55
annual report
2020
Following Directors resigned, joined, or ceased to hold the office of Director:
S. No
Name of Directors
1
2
3
4
5
6
Mr. Inayat Ullah Niazi
Mian Ayyaz Afzal
Mr. Rashid Rahman Mir
Mr. Zahid Latif Khan
Mr. Shahnawaz Mahmood
Mr. Farrukh H. Khan
Date of appointment
Date of resignation/
retirement
….
….
December 17, 2019
December 17, 2019
….
March 25, 2020
December 17, 2019
December 17, 2019
….
….
March 25, 2020
….
The attendance of directors in meetings of the Board held during the year or in his/ her tenure were as follows:
S. No
Name of Directors
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Mr. Humayun Bashir
Mr. Muhammad Lukman
Mr. Ahmed Chinoy
Mr. Muhammad Ashraf Bawany
Mr. Shahnawaz Mahmood (till March 25, 2020)
Mr. Farrukh H. Khan (from March 25, 2020)
Mr. Jamil Iqbal*
Mr. Khalid Zaman Khan
Ms. Sabiha Sultan Ahmad*
Mr. Muhammad Sibghatullah Khalid
Mr. Inayat Ullah Niazi (till December 17, 2019)
Mr. Rashid Rahman Mir (from December 17, 2019)
Mian Ayyaz Afzal (till December 17, 2019)
Mr. Zahid Latif Khan* (from December 17, 2019)
Mr. Naeem Sattar
Mr. Hamid Ateeq Sarwar*
Attendance as against meetings
held during the year/ tenure
8/8
8/8
8/8
8/8
5/5
3/3
7/8
8/8
7/8
8/8
2/2
5/5
2/2
5/6
8/8
2/8
*Leave of absence was granted to members who could not attend some of the meetings.
AUDIT COMMITTEE
The Audit Committee (“AC”), comprising of four members, is constituted by the Board in accordance with the requirements
of the Code.
The Terms of Reference (“ToR”) of the AC, developed in accordance with the Code and best practices, has been approved by
the Board.
The Chief Internal Auditor acts as Secretary to this Committee and reports directly to its Chairman with an administrative
responsibility towards the Chief Executive Officer.
The attendance of directors in meetings of the Board held during the year or in his/ her tenure were as follows:
S. No
Name of Committee Members
1
2
3
4
5
6
Mr. Khalid Zaman Khan
Mr. Muhammad Ashraf Bawany
Mr. Muhammad Sibghatullah Khalid
Mr. Rashid Rehman Mir
Mian Ayyaz Afzal (till December 17, 2019)
Mr. Inayat Ullah Niazi (till December 17, 2019)
HUMAN RESOURCES & REMUNERATION COMMITTEE
The Human Resources & Remuneration Committee (“HRC”), comprising of four members, is constituted by the Board under
the requirements of the Code.
The HRC reviews the human resource architecture and ensures that human resource strategy is aligned to the overall
corporate strategy. The ToR of the HRC, developed in accordance with the Code and best practices, has been approved by
the Board. The Head of Human Resource acts as Secretary to this committee.
During the current year, the Directors’ attendance in four meetings were as follows:
S. No
Name of Committee Members
1
2
3
4
Mr. Humayun Bashir
Mr. Muhammad Lukman
Mr. Ahmed Chinoy
Mr. Khalid Zaman Khan
Attendance as against meetings
held during the year/ tenure
4/4
4/4
4/4
3/4
RISK COMMITTEE
The Risk Committee (“RC”), comprising of nine members, is constituted by the Board under the requirements of the
Regulations.
The RC assists the Board in developing the risk management system policies and procedures in line with international
standards and best practices. The ToR of the RC has been developed in accordance with the Clearing House (Licensing &
Operations) Regulations, 2016 which is approved by the Board. The Chief Risk Officer acts as Secretary to this committee.
During the current year, member’s attendance in five meetings were as follows:
S. No
Name of Committee Members
1
2
3
4
5
6
7
8
9
10
Mr. Jamil Iqbal
Ms. Sabiha Sultan Ahmad
Mr. Muhammad Lukman
Mr. Amir Mobin
Mr. Abbas Mirza*
Ms. Mashmooma Zehra Majeed
Dr. Ahmed Junaid
Mr. Saeed Zafar*
Mr. Fareed Vardag
Mr. Ali Nasar Qureshi *
Attendance as against meetings
held during the year/ tenure
5/5
4/4**
5/5
5/5
4/5
5/5
5/5
1/3**
5/5
1/2**
* Leave of absence was granted to the members who could not attend some of the meetings.
** Member has joined the committee during the year.
Attendance as against meetings
held during the year/ tenure
5/5
4/5
5/5
2/2
2/2
2/2
56
57
annual report
2020
INFORMATION TECHNOLOGY AND DIGITAL COMMITTEE
DIRECTORS TRAINING PROGRAM
The Information Technology and Digital Committee (“ITDC”) comprises four members. The Committee convened three meetings
during the year ended June 30, 2020.
Ten directors out of thirteen directors, have obtained certification under the Directors’ Training Program, while the Company
is arranging Directors’ Training Program for remaining directors. The Company has made appropriate arrangements to carry
out orientation for their directors to acquaint them with the requirements of Code, applicable laws, their duties and
responsibilities to enable them to effectively govern the affairs of the Company for and on behalf of shareholders.
The ITDC guides the management and assist the Board to oversee and control the implementation of information system
related strategies, policies, practices and procurements. The Head of Information Security Group acts as Secretary to this
committee.
During the current year, the members’ attendance in the ITDC meeting were as follows:
S. No
Name of Committee Members
1
2
3
4
Mr. Humayun Bashir
Mr. Muhammad Lukman
Mr. Shafiq Ur Rehman
Mr. Shahnawaz Mahmood (till March 25, 2020)
Attendance as against meetings
held during the year/ tenure
3/3
3/3
3/3
2/2*
Mr. Mehmood Siddiq, the CIO PSX was invited to 27th and 28th BIDC meetings. He attended 28th meeting only.
DIRECTORS’ REMUNERATION POLICY & PACKAGE
All directors, except the Chief Executive Officer, are entitled to a fixed fee for attending the meetings of the Board and its
Committees as approved by the Board from time to time. The Directors are also entitled for reimbursement of their
reasonable expenses incurred in connection with attending the meetings of the Board and its Committees. The
remuneration package paid to the Chief Executive Officer and other directors for attending meetings of the Board and
Committees have been disclosed in Note 30 of the annexed financial statements.
PATTERN OF SHAREHOLDING
The Pattern of Shareholding as at June 30, 2020 is as follows:
Shareholders
% of Holding
*Mr. Shahnawaz Mehmood was invited to 26th and 27th BIDC meetings. He attended both.
INVESTMENT ADVISORY & BUILDING COMMITTEE
The Investment Advisory & Building Committee (“IABC”), comprise of four members. The Committee convened one meeting
during the current year.
The IABC assists the Board to devise investment strategy and sets parameters for proposed diversification of investment
portfolio to optimize the return without compromising on credit risk. This committee is also mandated by the Board to finalize
proposals for NCCPL’s corporate office project. The Chief Financial Officer acts as Secretary to this committee.
During the current year, members’ attendances in the IABC meetings were as follows:
S. No
Name of Committee Members
1
2
3
4
5
Mr. Ahmed Chinoy
Mr. Muhammad Lukman
Mr. Humayun Bashir
Mr. Inayat Ullah Niazi (till December 17, 2019)
Mr. Mian Ayyaz Afzal (till December 17, 2019)
Attendance as against meetings
held during the year/ tenure
1/1
1/1
1/1
1/1
1/1
Pakistan Stock Exchange Limited
47.06%
LSE Financial Service Limited
23.53%
ISE Towers REIT Management Company Limited
11.76%
Pakistan Kuwait Investment Company (Private) Limited
17.65%
General Public
0.00%
PROVIDENT AND GRATUITY FUNDS
The funded retirement benefit plans i.e. the provident and gratuity funds of the employees are maintained by trustees of
these funds who get them audited on yearly basis. The trustees have informed the Company that as per the latest financial
statements, the total assets of the two funds were as follows:
Provident Fund
Gratuity Fund
Rs. 52.0 million (2019: Rs. 42.2 million)
Rs. 231.9 million (2019: Rs. 184.6 million)
APPROPRIATIONS
Rupees in Million
Appropriation out of un-appropriated profits
NOMINATION COMMITTEE
Un-appropriated profit brought forward
708.40
Total Comprehensive Income for the year
245.31
The Nomination Committee comprises of following 3 members:
Proposed Bonus shares i.e. 1 share for every 3 shares held
(224.12)
Un-appropriated profit carried forward
729.59
S. No
Name of Directors
1
2
3
Mr. Humayun Bashir
Mr. Khalid Zaman Khan
Mr. Muhammad Lukman
Appropriation out of Share Premium Account
This Committee recommends the composition, structure and size of the committees to be constituted by the Board. It has also
been mandated to propose names for inclusion in the Panel for appointment of independent directors. The Chief Financial
Officer acts as Secretary to this committee. The Committee convened no meeting during the current year.
58
Share Premium brought forward
28.02
Proposed Bonus shares i.e. 1 share for every 3 shares held
(28.02)
Share Premium carried forward
Nil
DISTRIBUTION TO SHAREHOLDERS
The Board of Directors in its 153rd meeting held on August 25, 2020 has proposed nil dividend for the year ended June 30,
2020 (2019: Bonus issue 33.33%).
59
AUDITORS
annual report
2020
Other factors that may affect our NCCPL’s business, operations and financial results,
that are beyond our control include:
The Board, on the recommendation of Audit Committee, has approved re-appointment of M/s. KPMG Taseer Hadi & Co.
Chartered Accountants ("KPMG") as statutory auditors of the Company for the year ending June 30, 2021 subject to approval
of the shareholders.
The KPMG has been given a satisfactory rating under the Quality Control Review Program of the Institute of Chartered
Accountants of Pakistan (ICAP). The KPMG has confirmed that their firm is fully compliant with the Code and the International
Federation of Accountants (IFAC) Guidelines on Code of Ethics, as adopted by the ICAP. The KPMG has indicated their willingness
to act as statutory auditor of the Company for the year ending June 30, 2021.
•
•
•
•
•
•
•
•
Trends in business and finance, including industry-specific circumstances;
Social and civil unrest, terrorism and war;
Inflationary trends and level of institutional or retail confidence;
Changes in government monetary policy and foreign currency exchange rates;
Changes in tax policy;
The perceived attractiveness of Pakistan’s capital market;
Unforeseen market closures or other disruptions in trading; and
National or Global Pandemic.
The KPMG has not been appointed to provide any other service, which may impair their independence except in accordance with
the Code and they have confirmed their compliance with IFAC guidelines in this respect.
Risk of Market Fluctuations
ADEQUACY OF INTERNAL FINANCIAL CONTROLS AND RISK MANAGEMENT
NCCPL’s business, operations and financial results are dependent, to a certain extent, on trading levels at PSX and hence
the same may fluctuate from one period to another.
Internal controls and risk management policies are designed to provide reasonable assurance regarding the effectiveness and
efficiency of the Company’s operations, reliability of financial information and compliance with applicable laws and regulations.
The management ensures an efficient and effective Internal Controls and Risk Management System by carrying out risk
assessment, identifying controls, reviewing pertinent policies/ procedures, and establishing relevant control procedures and
monitoring systems. The Internal Control and Risk Management System has been designed to provide reasonable assurance to
the shareholders and Board of Directors. The management considers that the existing Internal Control and Risk Management
System is adequate and has been effectively implemented and monitored.
Risk of Interest Rate Variation
DIRECTORS’ RESPONSIBILITY IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS AND
RISK MANAGEMENT
It is the duty of the Board to ensure that a system of sound internal control and risk management is established, which is
effectively implemented and maintained at all levels within the company.
Moreover, the Audit Committee constituted by and reporting to the Board, among other matters, is also mandated to ascertain
that the internal control systems, including financial and operational controls, with due consideration of the relevant risks for
that area, accounting systems for timely and appropriate recording of revenue and expenditure, receipts and payments, as well
as assets and liabilities, along with the reporting structure, are adequate and effective.
Environmental Impact
The Company’s business has no negative impact on the environment.
Corporate Social Responsibility
NCCPL, being a national institution and a responsible corporate citizen, strongly realizes its duty towards society. In this
respect, NCCPL has developed a well-defined Policy for Corporate Social Responsibility and sets asides amounts each year for
such activities.
During the year under review, employees and NCCPL contributed amounts for medical treatment of few employees in lower
salary grades.
Regulatory Risk
NCCPL operates in a highly regulated industry and is subject to extensive regulations. The SECP regulates NCCPL and has
powers to withhold approvals with respect to amendments in Rules and Regulations, product range or infrastructure or
market development initiatives. In the event that SECP exercises such powers, this may affect our business, operations and
financial results.
MAINTENANCE & ENHANCEMENT OF QUALITY OF SERVICE TO CAPITAL MARKET
Despite challenging economic & capital market conditions, NCCPL, within its budgeted limits, has continuously invested in
human resources, technology and other assets as we believe that these aspects are pivotal to the organization’s
sustainability and growth.
NCCPL has been continuously investing significant amounts to upgrade technology infra-structure and has taken measures
to ensure meticulous compliance of regulatory environments. We have also kept staff motivation as our priority, keeping in
view the uniqueness of NCCPL operations and the specialized nature of the Company`s business. Training & Development
(technical and soft skills) is an important element of our human resource strategy.
With a lot of new initiatives under consideration to provide automated value added services and expected consistency in the
capital market performance combined with stable economic and political outlook, the future prospects for the entity are
considered to be bright and promising.
ACKNOWLEDGMENT
FUTURE OUTLOOK
National Clearing Company of Pakistan Limited, a pivotal institution of Pakistan’s capital market, is continuously striving to
support persistent growth of capital market through steady improvements in the efficiency and reliability of the NCSS. With
many new initiatives under NCCPL’s consideration, there exists a promising future prospect
With focus on the future, some of the projects under development by the Company are as under:
•
•
•
•
•
NCCPL is exposed to the effects of fluctuations in the discount rate and thus changes in interest rates may affect the value
of our investments and profitability. Interest rates are sensitive to many factors, including governmental, monetary and tax
policies, domestic and international economic and political considerations, fiscal deficits, trade surpluses or deficits,
regulatory requirements and other factors.
Implementation of CKO regime to existing investors and unit holders of collective investment schemes (“CIS”).
Take - over of MTS application from PSX.
Participation in the Joint venture for undertaking functionality of professional clearing member.
Online account opening facility for investors.
Improvement in risk management measures.
RISK OF MARKET TRENDS AND MACROECONOMIC FACTORS
NCCPL’s business, operations and financial results are dependent, to a certain extent, upon level of trading activities at PSX,
the only securities exchange in Pakistan. The level of trading values, number of new listings, liquidity and similar factors, directly
or indirectly effects NCCPL’s revenues and profitability.
61
We acknowledge that the financial and operational efficiency which your Company witnessed during the year under review
would not have been possible without the untiring efforts and sound corporate governance rendered by the management
and the enthusiastic, persistent and affirmative efforts of the employees of the Company at all levels. The Board also
acknowledges the valuable contribution of its committees.
On behalf of the Board, we wish to place on record our gratitude to all stake-holders including the Securities and Exchange
Commission of Pakistan, the Federal Board of Revenue, the State Bank of Pakistan, Pakistan Stock Exchange and Central
Depository of Pakistan for their guidance and valuable assistance. We are also grateful to all market participants and our
valuable shareholders for their trust reposed in the Board and extended to the Company.
For and on behalf of the Board of Directors
________-sd-____________
________-sd-____________
Humayun Bashir
Muhammad Lukman
Chairman
Chief Executive Officer
Karachi, August 25, 2020
62
annual report
2020
Notice of the 19th
Annual General Meeting
NOTICE IS HEREBY GIVEN that the 19th Annual General Meeting (“AGM”) of NCCPL will be held on Tuesday, October 27,
2020, at 12:30 p.m. at its registered office situated at 8th Floor, Stock Exchange Building, Stock Exchange Road, Karachi to
transact the following business:
Notes:
1.
A Corporation or any other company registered under the Companies Act, 2017 (“Act”) or Companies Ordinance, 1984,
where such Corporation or such other Company, is a member of the Company may, any resolution of its directors,
authorize any of its officials or any other person to act as its authorized representative at the proposed general meeting
of the Company, and the person so authorized shall be entitled to exercise the same powers on behalf of such
Corporation or such other Company if he was an individual shareholder of the Company.
2.
A member of the Company, entitled to attend and vote, may appoint another member/ authorized representative as
his/her proxy to attend and vote instead of him/her.
3.
The instrument appointing a proxy shall be in writing under the hand of the appointer or of his Attorney duly
authorized in writing or if such appointer is a Corporation under its common seal or the hand of its Attorney.
Special Business:
4.
The proxy form shall be witnessed by two persons whose names, addresses and CNIC numbers shall be mentioned on
the form.
To review and approve amendments in NCCPL’s Memorandum and Articles of Association to align the same with the Companies
Act, 2017, Securities Act, 2015 and Future Market Act, 2016.
5.
Attested copies of CNIC or the passport of the proxy shall be furnished with the proxy form.
6.
The proxy shall produce his / her original CNIC or passport at the time of the meeting if requested.
7.
The instrument appointing a proxy and the Power-of-attorney or other authority (if any), under which it is signed or a
notarially certified copy of that power or authority, shall be deposited at the Registered Office of the Company not less
than forty-eight hours before the time of above general meeting of the Company.
8.
Members are requested to promptly notify any change in their address.
Ordinary Business:
1.
2.
3.
4.
5.
To confirm minutes of the 18th AGM of the Company held on October 22, 2019;
To review, consider and adopt the Annual Audited Accounts for the year ended June 30, 2020 together with Directors’,
Auditors’ Reports thereon and Statement of Compliance with the Listed Companies (Code of Corporate Governance)
Regulations, 2019;
To approve appropriation of profits as recommended by the Board of Directors of the Company;
To appoint Auditors and fix their remuneration for the year 2020-21; and
To transact any other business with the permission of the chair.
By order of the Board
_________-sd-__________
Imran Ahmed Khan
Chief Financial Officer &
Company Secretary
Dated: October 6, 2020
Karachi
63
64
annual report
2020
National Clearing Company of Pakistan Limited
Statement of Compliance with the Listed Companies
(Code of Corporate Governance) Regulations,
2019 for the Year ended June 30, 2020
This statement is being presented to comply with the Listed Companies (Code of Corporate Governance) Regulations, 2019
(“Code”) for the purpose of establishing a framework of good governance. The Company, although not being a listed Company,
had voluntarily adopted the Code of Corporate Governance since 2005, however, with the promulgation of the Securities Act,
2015 and Clearing Houses (Licensing and Operations) Regulations, 2016 (“the Regulations”), the Company is mandatorily
required to comply with the Code to the extent consistent with the revised regulatory framework. Consequently, Company has
complied with the Code to the extent consistent with the revised regulatory framework.
8.
The Board has a formal policy and transparent procedures for remuneration of directors in accordance with the Act and
the Code;
9.
Out of thirteen directors, ten directors have obtained certification under the Directors’ Training Program, while the
Company will arrange Directors’ Training Program for remaining directors. The Company has made appropriate
arrangements to carry out orientation for their directors to acquaint them with the requirements of Code, applicable
laws, their duties and responsibilities to enable them to effectively govern the affairs of the Company for and on behalf
of shareholders;
10.
The Board approves the appointment of Chief Financial Officer, Company Secretary and Head of Internal Audit, including
their remuneration, terms & conditions of employment in compliance with relevant requirements of the Code. However,
there was no new appointment of Chief Financial Officer, Company Secretary and Head of Internal Audit during the year.
As the requirement with respect to segregating the positions of Chief Financial Officer and Company Secretary is not
mandatory in the Code and the same is not specified in the Regulations, the Board considered that there is no need to
comply with the same;
11.
The Chief Financial Officer and Chief Executive Officer have endorsed the financial statements before approval of the
Board;
12.
The Board has formed following committees in accordance with the requirements of the Code, the details of
committees and their members are as follows:
The Company has complied with the requirements of the Code in the following manner:
1.
The total number of directors are 13 as follows:
a. Male: 12
b. Female: 01
2. The Composition of the Board as of June 30, 2020 is as follows:
Category
Names
Independent Directors
Mr. Humayun Bashir
Mr. Jamil Iqbal
Mr. Khalid Zaman Khan
Ms. Sabiha Sultan Ahmad
Non-Executive Directors
Mr. Muhammad Ashraf Bawany
Mr. Ahmed Chinoy
Mr. Farrukh H. Khan
Mr. Muhammad Sibghatullah Khalid
Mr. Rashid Rahman Mir
Mr. Zahid Latif Khan
Mr. Naeem Sattar
Mr. Hamid Ateeq Sarwar
Executive Director
Mr. Muhammad Lukman
Female Director
Ms. Sabiha Sultan Ahmad
3.
The directors have confirmed that none of them is serving as a director on more than seven listed companies, including
this Company;
A. Audit Committee
1.
Mr. Khalid Zaman Khan
Chairman
2.
Mr. Muhammad Ashraf Bawany
Member
3.
Mr. Muhammad Sibghatullah Khalid
Member
4.
Mr. Rashid Rahman Mir
Member
5.
Mr. Jawed Muhammad Siddiq (Ex officio as Chief Internal Auditor)
Secretary
B. Human Resources & Remuneration Committee
1.
Mr. Humayun Bashir
Chairman
2.
Mr. Muhammad Lukman
Member
4.
The Company has prepared a Code of Conduct and has ensured that appropriate steps have been taken to disseminate
it throughout the Company along with its supporting policies and procedures;
3.
Mr. Khalid Zaman Khan
Member
4.
Mr. Ahmed Chinoy
Member
5.
The Board has developed a vision/mission statement, overall corporate strategy and significant policies of the
Company. The Board has ensured that complete record of particulars of the significant policies along with their date of
approval or updating is maintained by the Company;
5.
Ms. Asiya Yousuf (Head of Human Resource)
Secretary
6.
All the powers of the Board have been duly exercised and decisions on relevant matters have been taken by the Board/
shareholders as empowered by the relevant provisions of the Companies Act, 2017 (“Act”) and the Code;
7.
The meetings of the Board were presided over by the Chairman and, in his absence, by a director elected by the Board
for this purpose. The Board has complied with the requirements of Act and the Code with respect to frequency,
recording and circulating minutes of meeting of the Board;
65
C. Nomination Committee
1.
Mr. Humayun Bashir
Chairman
2.
Mr. Muhammad Lukman
Member
3.
Mr. Khalid Zaman Khan
Member
4.
Mr. Imran Ahmed Khan (Company Secretary and CFO)
Secretary
66
annual report
2020
D. Risk Management Committee
1
Mr. Jamil Iqbal
Chairman
2
Ms. Sabiha Sultan Ahmad
Member
3
Mr. Muhammad Lukman
Member
4
Mr. Amir Mobin (Chief Regulatory Officer)
Member
5
Mr. Abbas Mirza – Acting Chief Regulatory Officer – PSX
Member
6
Ms. Mashmooma Zehra – nominee of Mutual Fund Association of Pakistan
Member
7
Dr. Ahmed Junaid – nominee from Academia
Member
8
Mr. Ali Nasar Qureshi – nominee from Institute of Actuaries
Member
9
Mr. Fareed Vardag – nominee of Pakistan Bankers Association
Member
10
Mr. Kashif Alam Khan (Chief Risk Officer)
Secretary
13.
The terms of reference of all the aforesaid committees have been formed, documented and advised to the
committees for compliance;
14.
The frequency of meetings of the committees were as follows:
1.
Audit Committee
Five meeting were held
2.
Human Resource & Remuneration Committee
Quarterly
3.
Nomination Committee
None
4.
Risk Management Committee
Five meeting were held
15.
The Board has set-up an effective internal audit function, which is considered suitably qualified and experienced
for the purpose and is conversant with the policies and procedures of the Company;
16.
The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under
the Quality Control Review program of the Institute of Chartered Accountants of Pakistan and registered with
Audit Oversight Board of Pakistan, that they and all their partners are in compliance with International
Federation of Accountants (IFAC) guidelines on code of ethics as adopted by the Institute of Chartered
Accountants of Pakistan and that they and the partners of the firm involved in the audit are not a close relative
(spouse, parent, dependent and non-dependent children) of the chief executive officer, chief financial officer,
head of internal audit, Company secretary or director of the Company;
17.
The statutory auditors or the persons associated with them have not been appointed to provide other services
except in accordance with the Act, the Code or any other regulatory requirement and the auditors have
confirmed that they have observed IFAC guidelines in this regard; and
18.
We confirm that all requirements of clause 3, 6, 7, 8, 27,32, 33 and 36 of the Code have been complied with.
Independent Auditors’
Review Report
to the Members on Statement of Compliance contained
in the Listed Companies (Code of Corporate Governance)
Regulations, 2019
We have reviewed the enclosed Statement of Compliance with the Listed Companies (Code of Corporate Governance)
Regulations, 2019 (‘the Regulations’) prepared by the Board of Directors of National Clearing Company of Pakistan Limited
(“the Company”) for the year ended 30 June 2020 in accordance with the requirements of regulation 36 of the Regulations.
The responsibility for compliance with the Regulations is that of the Board of Directors of the Company. Our responsibility is
to review whether the Statement of Compliance reflects the status of the Company’s compliance with the provisions of the
Regulations and report if it does not and to highlight any non-compliance with the requirements of the Regulations. A review
is limited primarily to inquiries of the Company's personnel and review of various documents prepared by the Company to
comply with the Regulations.
As part of our audit of the financial statements we are required to obtain an understanding of the accounting and internal
control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider
whether the Board of Directors’ statement on internal control covers all risks and controls, or to form an opinion on the
effectiveness of such internal controls, the Company’s corporate governance procedures and risks.
The Regulations require the Company to place before the Audit Committee, and upon recommendation of the Audit
Committee, place before the Board of Directors for their review and approval, its related party transactions and also ensure
compliance with the requirements of section 208 of the Companies Act, 2017. We are only required and have ensured
compliance of this requirement to the extent of the approval of the related party transactions by the Board of Directors upon
recommendation of the Audit Committee. We have not carried out procedures to assess and determine the Company’s
process for identification of related parties and that whether the related party transactions were undertaken at arm's
length price or not.
Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance does
not appropriately reflect the Company’s compliance, in all material respects, with the requirements contained in the
Regulations as applicable to the Company for the year ended 30 June 2020.
For and on behalf of the Board of Directors
________-sd-____________
________-sd-____________
Humayun Bashir
Muhammad Lukman
Chairman
________-sd-____________
Chief Executive Officer
KPMG Taseer Hadi & Co.
Chartered Accountants
Date: September 24, 2020
Karachi
Karachi, August 25, 2020
67
68
Independent Limited
Assurance Report
To the Board of Directors of NCCPL on Operations, Regulatory Functions and
Information Technology Systems
Introduction
We were engaged by National Clearing Company of Pakistan Limited (the Company or NCCPL) in pursuance to the requirements
of Section 37 (1) (d) of the Securities Act, 2015 and Regulation 18 (7) and 18 (8) of the Clearing House (Licensing & Operations)
Regulations, 2016 (the Regulations), to carry out limited assurance engagement in respect of Operations, Regulatory Functions
and Information Technology (IT) Systems of the Company for the year ended June 30, 2020 in accordance with the criteria
stipulated below
Applicable Criteria
a)
IT Systems
Criteria for IT Systems limited review is based on industry leading standards and best practices including relevant / applicable
clauses of International Organization for Standardization 27001 - Information Security Management System (ISO 27001) and
International Organization for Standardization 22301 - Business Continuity Management (ISO 22301).
b)
Operations and Regulatory Functions
The below mentioned criteria has been stipulated in Annexure III of the Regulations:
i)
ii)
iii)
iv)
v)
vi)
vii)
viii)
Securities Act, 2015;
Central Depositories Act, 1997;
Companies Act, 2017;
Clearing House (Licensing and Operations) Regulations, 2016;
NCCPL Regulations;
Policies, procedures, directives, guidelines, circulars, issued/approved by the Securities and Exchange Commission of
Pakistan or the Board of Directors of the Company;
Memorandum and Articles of Association of the Company; and
Policies and procedures to identify and prevent conflict of interest of directors with the interest of capital market,
investors and the Company.
annual report
2020
Our Responsibility
Our responsibility is to carry out procedures to review the Company's compliance with the applicable requirements and to report
thereon in the form of an independent limited assurance conclusion.
We conducted our review in accordance with International Standard on Assurance Engagement (ISAE 3000) “Assurance
Engagements other than Audits or Reviews of Historical Financial Information”. This standard requires that we comply with
independence requirements and plan perform our procedures to obtain limited assurance. A limited assurance engagement
includes examining, on a test basis, evidences supporting the compliance with and disclosure of the applicable requirements.
The procedures selected depends on our judgement, including the assessment of the risk of material non-compliance of the
applicable requirements due to omissions, misrepresentation and errors. In making these risk assessments, we considered
internal controls relevant to regulatory function of the Company for design, implementation and monitoring of the applicable
requirements in order to design appropriate assurance procedures, but not for the purpose of expressing a conclusion on the
effectiveness of the Company’s internal control systems.
We carried out the following review procedures:
•
performed enquiry, walkthrough and test of controls on sample basis to ensure existence of and compliance with the
policies and procedures relating to Operations, Regulatory Functions and IT Systems applicable to all major activities /
procedures.
•
performed procedures to ensure Company’s systems and related functions operate in compliance with the
requirements stipulated in the Regulations.
•
performed procedures to identify deviations/weaknesses and non-compliance of relevant regulatory frame works,
Articles and Memorandum of Associations and directives issued by the Securities and Exchange Commission of
Pakistan.
•
reviewed policies and procedures to ensure that policies and procedures are formulated to identify and prevent conflict
of interest of directors with the interest of capital market, investors and the Company.
•
reviewed existing IT policies and procedures to check whether the Company's IT Operations are in accordance with
industry leading standards and best practices including the relevant / applicable clauses of ISO 27001 and ISO 22301.
•
reviewed the reports issued by ISO auditor and other IT and IS audits to understand the gaps identified in the
respective areas and performed test on sample basis that the gaps are rectified.
Inherent Limitations
Non-financial information is subject to more inherent limitations than financial information, given the characteristics of the
selected information and the methods used for determining and ascertaining such information. Qualitative interpretations of
relevance, materiality and the accuracy of data are subject to individual assumptions and judgements. Further, nature and
methods used to determine such information, as well as the evaluation criteria and the precision thereof, may change over
time.
Certain controls specified in NCCPL Regulations could only be achieved if complementary controls of Pakistan Stock Exchange
(PSX), Central Depository Company (CDC) and Clearing Member Controls, contemplated in the design of the controls of the
Company, are suitably designed and operating effectively, along with related controls at the Company. We have not evaluated
the suitability of the design and / or operating effectiveness of such PSX, CDC and Clearing Member Controls.
Conclusion
Management's Responsibilities
The management of the Company is primarily responsible to ensure that the Company complies with the applicable
requirements of Operations, Regulatory functions and IT Systems including for prevention / detection of fraud. The
management of the Company is also responsible for ensuring that the staff involved in managing the compliance of the
applicable requirements are properly trained and systems are properly updated.
Our conclusion has been performed on the basis of, and is subject to, the matters outlined in this report. We believe that the
evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion.
Based on the procedures performed and evidence obtained, nothing has come to our attention that causes us to believe that
the Company is not in compliance with the requirements related to Operations, Regulatory function and IT Systems during the
review period, in all material respects.
Our Independence and Quality Control
We have complied with the independence and other ethical requirements of the Code of Ethics for Chartered Accountants
issued by the Institute of Chartered Accountants of Pakistan, which is founded on fundamental principles of integrity,
objectivity, professional competence and due care, confidentiality and professional behavior.
The Firm applies International Standard on Quality Control 1 "Quality Control for Firms That Perform Audits and Reviews of
Historical Financial Information and Other Assurance and Related Services Engagements" and accordingly maintains a
comprehensive system of quality control including documented policies and procedures regarding compliance with ethical
requirements, professional standards and applicable legal and regulatory requirements.
________-sd-____________
Grant Thornton Anjum Rahman
Chartered Accountants
Date: October 8, 2020
Karachi
69
70
Independent
Auditors’ Report
annual report
2020
Auditors’ Responsibilities for the Audit of the Financial Statements
To the members of National Clearing Company of Pakistan Limited
Report on the Audit of the Financial Statements
Opinion
We have audited the annexed financial statements of National Clearing Company of Pakistan Limited (the Company), which
comprise the statement of financial position as at 30 June 2020, and the statement of profit or loss account, the statement of
comprehensive income, the statement of changes in equity, the statement of cash flows for the year then ended, and notes to
the financial statements, including a summary of significant accounting policies and other explanatory information, and we
state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were
necessary for the purposes of the audit.
In our opinion and to the best of our information and according to the explanations given to us, the statement of financial
position, the statement of profit or loss account, the statement of comprehensive income, the statement of changes in equity
and the statement of cash flows together with the notes forming part thereof conform with the accounting and reporting
standards as applicable in Pakistan and give the information required by the Companies Act, 2017 (XIX of 2017), in the manner
so required and respectively give a true and fair view of the state of the Company's affairs as at 30 June 2020 and of the profit
or loss, the statement of comprehensive income, the changes in equity and its cash flows for the year then ended.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs as applicable in Pakistan
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
As part of an audit in accordance with ISAs as applicable in Pakistan, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
•
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
•
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant
doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we
are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a
going concern.
•
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and
whether the financial statements represent the underlying transactions and events in a manner that achieves fair
presentation.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs) as applicable in Pakistan. Our
responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial
Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards
Board for Accountants’ Code of Ethics for Professional Accountants as adopted by the Institute of Chartered Accountants of
Pakistan (the Code) and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Information Other than the Financial Statements and Auditors’ Report Thereon
Management is responsible for the other information. The other information comprises the information included in the Annual
Report, but does not include the financial statements and our auditors’ report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
We communicate with the board of directors regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the board of directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on
our independence, and where applicable, related safeguards.
Report on Other Legal and Regulatory Requirements
Based on our audit, we further report that in our opinion:
a)
proper books of account have been kept by the Company as required by the Companies Act, 2017 (XIX of 2017);
b)
the statement of financial position, the statement of profit or loss account, the statement of comprehensive income,
the statement of changes in equity and the statement of cash flows together with the notes thereon have been drawn
up in conformity with the Companies Act, 2017 (XIX of 2017) and are in agreement with the books of account and returns;
c)
investments made, expenditure incurred and guarantees extended during the year were for the purpose of the
Company’s business; and
d)
no zakat was deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980).
Responsibilities of Management and Board of Directors for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with the
accounting and reporting standards as applicable in Pakistan and the requirements of Companies Act, 2017 (XIX of 2017) and for
such internal control as management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
The engagement partner on the audit resulting in this independent auditors’ report is Zeeshan Rashid.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Board of directors are responsible for overseeing the Company’s financial reporting process.
71
Date: September 25, 2020
Karachi
________-sd-____________
KPMG Taseer Hadi & Co.
Chartered Accountants
72
Statement of
Financial Position
annual report
2020
Statement of
Profit or Loss
As at 30 June 2020
For the year ended 30 June 2020
Note
2020
2019
(Rupees in '000)
ASSETS
Non-current assets
Property and equipment
Intangible assets
Long-term loans
Investments
Current assets
Trade receivables
Loans and advances
Short-term prepayments, deposits and other receivables
Investments
Mark-up accrued
Securities transactions settlement receivables
Advance tax - net
Bank balance held for Federal Board of Revenue (FBR)
in respect of Capital Gain Tax (CGT) and Dividend
Cash and bank balances
6
7
8
12
220,660
121,673
23,477
376,647
742,457
222,633
106,012
28,284
356,929
9
10
11
12
134,332
13,457
53,164
1,160,551
42,921
2,871,183
165,461
115,448
12,171
46,345
1,131,777
49,160
3,932,961
76,549
2,036,687
7,540,428
14,018,184
14,760,641
411,343
7,312,397
13,088,151
13,445,080
20
19
13
Total assets
Note
2020
2019
(Rupees in'000)
INCOME
Operating income - net
Other income
Total income
23
25
808,095
207,514
1,015,609
794,100
130,932
925,032
24
24.5
26
(655,110)
(8,081)
(1,945)
(665,136)
(634,953)
(7,941)
(2,310)
(645,204)
350,473
279,828
(98,500)
(77,470)
251,973
202,358
EXPENSES
EQUITY AND LIABILITIES
Operating and administrative expenses
Supervision fee
Other charges
Total expenses
Share capital and reserves
Authorized share capital
110,000,000 (30 June 2019: 110,000,000)
ordinary shares of Rs. 10 each
14
15
Issued, subscribed and paid-up share capital
Reserves
1,100,000
1,100,000
1,008,545
729,590
1,738,135
756,408
736,419
1,492,827
LIABILITIES
27
Taxation
Profit after taxation
(Rupees)
Non-current liabilities
Employee benefits
Lease liabilities
Deferred taxation
16
6
17
8,922
13,264
5,279
27,465
8,070
1,980
10,050
Current liabilities
Deposits, accrued and other liabilities
Current portion of lease liabilities
CGT and Dividend payable to FBR
Securities transactions settlement payables
18
6
19
20
8,055,266
31,905
2,036,687
2,871,183
12,995,041
14,760,641
7,597,899
411,343
3,932,961
11,942,203
13,445,080
Total equity and liabilities
(Restated)
28
Earnings per share - Basic and Diluted
2.50
The annexed notes from 1 to 36 form an integral part of these financial statements.
22
CONTINGENCIES AND COMMITMENTS
__________-sd-___________
Chairman
The annexed notes from 1 to 36 form an integral part of these financial statements.
_________-sd-__________
Chairman
Profit before taxation
__________-sd-___________
Chief Executive Officer
73
__________-sd-_____________
Chief Executive Officer
____________-sd-____________
Chief Financial Officer
74
____________-sd-_____________
Chief Financial Officer
2.01
Statement of
Comprehensive Income
Statement of
Cash Flows
For the year ended 30 June 2020
For the year ended 30 June 2020
annual report
2020
Note
2020
2019
(Rupees in '000)
CASH FLOWS FROM OPERATING ACTIVITIES
Note
2020
2019
(Rupees in '000)
251,973
Profit for the year
202,358
Other comprehensive income
29
Cash generated from operations
Long-term loans
Staff gratuity paid
Income tax paid
Net cash used in operating activities
109,434
4,807
(31,485)
(181,391)
(98,635)
62,918
2,119
(35,778)
(123,223)
(93,964)
(10,846)
(27,754)
716
(865,166)
327,205
(575,845)
(42,115)
(31,258)
667
(449,945)
257,167
(265,484)
(31,424)
(31,424)
-
(705,904)
(359,448)
1,036,693
330,789
1,396,141
1,036,693
CASH FLOWS FROM INVESTING ACTIVITIES
Items that will never be re-classified subsequently to
profit or loss account
16.1.4
Re-measurements on staff retirement benefits
Related tax
Related deferred tax - prior
Total comprehensive income
(9,387)
2,722
-
(6,153)
1,784
(4,885)
(6,665)
(9,254)
245,308
193,104
The annexed notes from 1 to 36 form an integral part of these financial statements.
Acquisition of property and equipment
Acquisition of intangible assets
Proceeds from disposal of property and equipment
Investments - net
Mark-up received - net
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of lease liabilities
Net cash used in financing activities
Net decrease in cash and cash equivalents during the year
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
13.1.1
The annexed notes from 1 to 36 form an integral part of these financial statements.
__________-sd-___________
Chairman
____________-sd-____________
Chief Executive Officer
______________-sd-___________
Chief Financial Officer
__________-sd-_____________
Chairman
75
__________-sd-_____________
Chief Executive Officer
76
____________-sd-_____________
Chief Financial Officer
Notes to the
Financial Statements
Statement of
Changes in Equity
annual report
2020
For the year ended 30 June 2020
For the year ended 30 June 2020
1.
CORPORATE AND GENERAL INFORMATION
1.1
Legal status and operations
National Clearing Company of Pakistan Limited (the Company) is an unlisted public limited company
incorporated in Pakistan on July 3, 2001 under the repealed Companies Ordinance, 1984 (repealed with
the enactment of the Companies Act, 2017). The registered office of the Company is situated at 8th
Floor, Stock Exchange Building, Stock Exchange Road, Karachi, Pakistan.
Note
Issued,
subscribed and
paid up capital
Capital reserve
Revenue reserves
Share
premium
Unappropriated
profit
The principal activity of the Company is clearing and settlement of securities through the National
Clearing and Settlement System (NCSS). In addition, the Company administers the working and function
of NCSS and is involved in the collection of CGT on behalf of FBR. After the promulgation of Securities
Act, 2015 ("the Act"), the Company has undertaken the entire risk management of capital market trades
with effect from 2 May 2016.
Total
--------------------------------------- (Rupees in '000) --------------------------------------Balance as at 1 July 2018
504,272
Tot al comprehens ive income for t he year
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
-
280,151
515,300
1,299,723
-
202,358
(9,254)
193,104
202,358
(9,254)
193,104
Trans act ion wit h owners of t he C ompany
Bonus issue in the proportion of 1 share for
every 2 shares held
252,136
(252,136)
Balance as at 30 June 2019
756,408
28,015
708,404
1,492,827
-
-
-
251,973
(6,665)
245,308
251,973
(6,665)
245,308
Trans act ion wit h owners of t he C ompany
Bonus issue in the proportion of 1 share for
every 3 shares held
252,137
(28,015)
(224,122)
-
-
729,590
1,008,545
The Company has also been licensed by SECP on 09 April 2016 to act as a future clearing houses (for
future contracts based on securities only) under regulation 4 of Clearing House (Licensing and Operations)
Regulations, 2016.
-
Tot al comprehens ive income for t he year
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Balance as at 30 June 2020
The Company has been licensed by the Securities and Exchange Commission of Pakistan (SECP) to act as
a Centralized Know Your Customer Organization (CKO) under the Centralized Know Your Customer
Organization Rules, 2017 (the "Rules") through a license issued by the SECP. For the performance of CKO
functions, NCCPL has developed the KYC Information System “KIS” which has been implemented with
effect from June 17, 2019.
1.2
Summary of significant events and transactions in the current reporting period
On March 11, 2020, the World Health Organisation declared that the outbreak of coronavirus (COVID-19)
is characterised as a pandemic. This pandemic significantly affected the financial markets around the
globe. As a result stock markets worldwide have declined sharply and volatility has increased. For many
assets and liabilities, fair values may have changed significantly, reflecting changes in cash flow
forecast, higher uncertainty and elevated risks. The fair value of an asset (or liability) should reflect
market conditions at the measurement date.
The Government, Central Banks including financial institutions affiliated to those banks, and regulators
have taken measures and issued directives to support businesses, including extensions of deadlines,
facilitating continued business through social-distancing and easing pressure on credit and liquidity
in the market, to reduce the adverse impacts COVID-19.
1,738,135
The annexed notes from 1 to 36 form an integral part of these financial statements.
The Company has evaluated and concluded that as the impact of COVID-19 on overall economy
subsides, there is no material adverse impact on its financial position and performance due to COVID-19.
__________-sd-_____________
Chairman
__________-sd-_____________
Chief Executive Officer
2.
BASIS OF PREPARATION
2.1
Statement of compliance
These financial statements have been prepared in accordance with the accounting and reporting standards
as applicable in Pakistan. The accounting and reporting standards applicable in Pakistan comprise of:
____________-sd-_____________
Chief Financial Officer
-
International Financial Reporting Standards (IFRS Standards) issued by the International Accounting
Standards Board (IASB) as notified under the Companies Act, 2017; and
-
Provisions of and directives issued under the Companies Act, 2017.
Where provisions of and directives issued under the Companies Act, 2017 differ from the IFRS Standards,
the provisions of and directives issued under the Companies Act, 2017 have been followed.
2.2
Basis of measurement
These financial statements have been prepared under the historical cost convention except for certain
77
78
annual report
2020
investments which are stated at fair values and employee benefits which are stated at present value less
fair value of plan assets.
2.3
Functional and presentation currency
These financial statements are presented in Pak Rupees which is the functional currency of the Company.
All amounts have been rounded to the nearest thousand rupees unless otherwise indicated.
2.4
-
On 29 March 2018, the International Accounting Standards Board (the IASB) has issued a revised Conceptual Framework for
Financial Reporting which is applicable immediately contains changes that will set a new direction for IFRS in the future. The
Conceptual Framework primarily serves as a tool for the IASB to develop standards and to assist the IFRS Interpretations
Committee in interpreting them.It does not override the requirements of individual IFRSs and any inconsistencies with the
revised Framework will be subject to the usual due process – this means that the overall impact on standard setting may take
some time to crystallize. The companies may use the Framework as a reference for selecting their accounting policies in the
absence of specific IFRS requirements. In these cases, companies should review those policies and apply the new guidance
retrospectively as of 1 January 2020, unless the new guidance contains specific scope outs.
-
Interest Rate Benchmark Reform which amended IFRS 9, IAS 39 and IFRS 7 is applicable for annual financial periods beginning
on or after 1 January 2020. The G20 asked the Financial Stability Board (FSB) to undertake a fundamental review of major
interest rate benchmarks. Following the review, the FSB published a report setting out its recommended reforms of some major
interest rate benchmarks such as IBORs. Public authorities in many jurisdictions have since taken steps to implement those
recommendations. This has in turn led to uncertainty about the long-term viability of some interest rate benchmarks. In these
amendments, the term 'interest rate benchmark reform' refers to the market-wide reform of an interest rate benchmark
including its replacement with an alternative benchmark rate, such as that resulting from the FSB's recommendations set out in
its July 2014 report 'Reforming Major Interest Rate Benchmarks' (the reform). The amendments made provide relief from the
potential effects of the uncertainty caused by the reform. A company shall apply the exceptions to all hedging relationships
directly affected by interest rate benchmark reform. The amendments are not likely to affect the financial statements of the
Company.
-
Amendments to IFRS-16- IASB has issued amendments to IFRS 16 (the amendments) to provide practical relief for lessees in
accounting for rent concessions. The amendments are effective for periods beginning on or after 1 June 2020, with earlier
application permitted. Under the standard’s previous requirements, lessees assess whether rent concessions are lease
modifications and, if so, apply the specific guidance on accounting for lease modifications. This generally involves remeasuring
the lease liability using the revised lease payments and a revised discount rate. In light of the effects of the COVID-19 pandemic,
and the fact that many lessees are applying the standard for the first time in their financial statements, the Board has provided
an optional practical expedient for lessees. Under the practical expedient, lessees are not required to assess whether eligible
rent concessions are lease modifications, and instead are permitted to account for them as if they were not lease modifications.
Rent concessions are eligible for the practical expedient if they occur as a direct consequence of the COVID-19 pandemic and if
all the following criteria are met:
Key judgements and estimates
The preparation of financial statements in conformity with accounting and reporting standards, as
applicable in Pakistan, requires management to make estimates, assumptions and use judgments that
affect the application of policies and the reported amounts of assets, liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience and various other factors
that are believed to be reasonable under the circumstances, the results of which form the basis of making
the judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that
period or in the period of the revision and future periods if the revision affects both current and future
periods. In the process of applying the Company's accounting polices, management has made the
following accounting estimates and judgments which are significant to the financial statements and
estimates with a significant risk of material adjustment in future years are discussed below:
-
2.4.1
Taxation (notes 5.6 and 27);
Employee benefits (notes 5.3 and 16);
Property and equipment and intangible assets (notes 5.1, 5.2, 6 and 7);
Classification and valuation of financial instruments (note 5.5) and;
Contingencies (note 22);
Change in useful life
During the year, the Company conducted an operational efficiency review of its in-house developed software
and licenses,which resulted in changes in expected usage of softwares. The software that management had
previously estimated to amortise at five years useful life, is now expected to remain in use for 10 years from
the date of capitalization. As a result, the expected useful life of software and infrastructure increased and its
estimated residual value decreased. The effect of these changes on actual and expected amortization expense
included in "operating and administrative expenses" was as follows:
For the year ending 30, June
2020
2021
2022
2023
2024
Later
------------------------------------ (Rupees in '000) ------------------------------------(Decrease) / increase in
amortization / depreciation expense
3.
(22,980)
(18,610)
(8,296)
(5,002)
1,340
57,003
Standards, interpretations and amendments to published accounting and reporting standards
that are not yet effective
The following International Financial Reporting Standards (IFRS Standards) as notified under the Companies Act, 2017 and the
amendments and interpretations thereto will be effective for accounting periods beginning on or after 01 July 2020
-
Amendment to IFRS 3 ‘Business Combinations’ – Definition of a Business (effective for business combinations for which the
acquisition date is on or after the beginning of annual period beginning on or after 1 January 2020). The IASB has issued
amendments aiming to resolve the difficulties that arise when an entity determines whether it has acquired a business or a
group of assets. The amendments clarify that to be considered a business, an acquired set of activities and assets must include,
at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. The
amendments include an election to use a concentration test. The standard is effective for transactions in the future and
therefore would not have an impact on past financial statements.
-
-
the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than,
the consideration for the lease immediately preceding the change;
-
any reduction in lease payments affects only payments originally due on or before 30 June 2021; and
-
there is no substantive change to the other terms and conditions of the lease.
Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) effective for the annual period beginning
on or after 1 January 2022. Clarifies that sales proceeds and cost of items produced while bringing an item of property, plant
and equipment to the location and condition necessary for it to be capable of operating in the manner intended by
management e.g. when testing etc, are recognized in profit or loss in accordance with applicable Standards. The entity
measures the cost of those items by applying the measurement requirements of IAS 2. The standard also removes the
requirement of deducting the net sales proceeds from cost of testing. An entity shall apply those amendments retrospectively,
but only to items of property, plant and equipment that are brought to the location and condition necessary for them to be
capable of operating in the manner intended by management on or after the beginning of the earliest period presented in the
financial statements in which the entity first applies the amendments. The entity shall recognize the cumulative effect of initially
applying the amendments as an adjustment to the opening balance of retained earnings (or other component of equity, as
appropriate) at the beginning of that earliest period presented.
The following annual improvements to IFRS standards 2018-2020 are effective for annual reporting periods beginning on or after
1 January 2022:
-
Amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors (effective for annual periods beginning on or after 1 January 2020). The amendments are intended to make the definition of
of material in IAS 1 easier to understand and are not intended to alter the underlying concept of materiality in IFRS Standards.
In addition, the IASB has also issued guidance on how to make materiality judgments when preparing their general purpose
financial statements in accordance with IFRS Standards.
79
80
annual report
2020
4.
-
IFRS 9 – The amendment clarifies that an entity includes only fees paid or received between the entity (the borrower) and
the lender, including fees paid or received by either the entity or the lender on the other’s behalf, when it applies the ‘10 per
cent’ test in paragraph B3.3.6 of IFRS 9 in assessing whether to derecognize a financial liability.
accumulated depreciation and impairment losses, and adjusted for certain remeasurements of the
lease liability. When a right-of-use asset meets the definition of investment property, it is presented
in investment property. The right-of-use asset is initially measured at cost, and subsequently
measured at fair value, in accordance with the Company’s accounting policies.
-
IFRS 16 – The amendment partially amends Illustrative Example 13 accompanying IFRS 16 by excluding the illustration of
reimbursement of leasehold improvements by the lessor. The objective of the amendment is to resolve any potential
confusion that might arise in lease incentives.
The lease liability is initially measured at the present value of the lease payments that are not paid
at the commencement date, discounted using the interest rate implicit in the lease or, if that rate
cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company
uses its incremental borrowing rate as the discount rate.
-
IAS 41 – The amendment removes the requirement in paragraph 22 of IAS 41 for entities to exclude
taxation cash flows when measuring the fair value of a biological asset using a present value
technique.
CHANGES IN ACCOUNTING POLICIES
The lease liability is subsequently increased by the interest cost on the lease liability and decreased
by lease payment made. It is remeasured when there is a change in future lease payments arising
from a change in an index or rate, a change in the estimate of the amount expected to be payable
under a residual value guarantee, or as appropriate, changes in the assessment of whether a
purchase or extension option is reasonably certain to be exercised or a termination option is
reasonably certain not to be exercised.
The Company has initially adopted IFRS 16 Leases from 1 July 2019. IFRS 16 introduced a single, on-balance
sheet accounting model for lessees. As a result, the Company, as a lessee, has recognised right-of-use assets
representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease
payments. Lessor accounting remains similar to previous accounting policies.
The Company has applied judgement to determine the lease term for some lease contracts in which
it is a lessee that include renewal options. The assessment of whether the Company is reasonably
certain to exercise such options impacts the lease term, which significantly affects the amount of
lease liabilities and right-of-use assets recognised.
ii) Transition
The Company has applied IFRS 16 using the modified retrospective approach, under which the cumulative
effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the
comparative information presented for 2019 has not been restated – i.e. it is presented, as previously
reported, under IAS 17 and related interpretations. The details of the changes in accounting policies are
disclosed below.
Previously, the Company classified property leases as operating leases under IAS 17. These
include property where offices of the Company are situated. The leases typically run for a period of
3 years. Some leases include an option to renew the lease for an additional years.
At transition, for leases classified as operating leases under IAS 17, lease liabilities were measured
at the present value of the remaining lease payments, discounted at the Company’s incremental
borrowing rate as at 1 July 2019. Right-of-use assets are measured at an amount equal to the lease
liability, adjusted by the amount of any prepaid or accrued lease payments.
A) Definition of a lease
Previously, the Company determined at contract inception whether an arrangement was or contained a
lease under IFRIC 4 Determining Whether an Arrangement contains a Lease. The Company now
assesses whether a contract is or contains a lease based on the new definition of a lease. Under IFRS
16, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified
asset for a period of time in exchange for consideration.
C) As a lessor
The accounting policies applicable to the Company as a lessor are not different from those under IAS
17. However, when the Company is an intermediate lessor the sub-leases are classified with reference
to the right-of-use asset arising from the head lease, not with reference to the underlying asset. The
Company is not required to make any adjustments on transition to IFRS 16 for leases in which it acts
as a lessor. However, the Company has applied IFRS 15 Revenue from Contracts with Customers to
allocate consideration in the contract to each lease and non-lease component.
At inception or on reassessment of a contract that contains a lease component, the Company
allocates the consideration in the contract to each lease and non-lease component on the basis of their
relative stand-alone prices. However, for leases of properties in which it is a lessee, the Company has
elected not to separate non-lease components and will instead account for the lease and non- lease
components as a single lease component.
D)
B) As a lessee
The Company leases properties. As a lessee, the Company previously classified leases as operating
or finance leases based on its assessment of whether the lease transferred substantially all of the
risks and rewards of ownership. Under IFRS 16, the Company recognises right-of-use assets and
lease liabilities for most leases – i.e. these leases are on-balance sheet.
Impacts on financial statements
i.
Impacts on transition
On transition to IFRS 16, the Company recognised additional right-of-use assets and additional lease
liabilities, recognising the difference in retained earnings. The impact on transition is summarised
below.
The Company presents right-of-use assets that do not meet the definition of investment property in
‘property, plant and equipment’, the same line item as it presents underlying assets of the same nature
that it owns. The carrying amounts of right-of-use assets are as below:
Property
and
equipment
Right-of-use assets presented in property and equipment
Other assets - advance rent
Lease liabilities
1 July 2019
(Rs in '000)
76,265
(5,450)
70,815
(Rupees in '000)
Balance at 1 July 2019
Balance at 30 June 2020
76,265
47,214
When measuring lease liabilities for leases that were classified as operating leases, the Company
discounted lease payments using its incremental borrowing rate at 1 July 2019. The rate applied is
13%.
(Rs in '000)
The Company presents lease liabilities in the statement of financial position.
i) Significant accounting policies
The Company recognises a right-of-use asset and a lease liability at the lease commencement
date. The right-of-use asset is initially measured at cost, and subsequently at cost less any
81
Undiscounted operating lease commitments as on 30 June 2019
Lease liabilities recognised on 1 July 2019
82
73,480
70,815
annual report
2020
ii.
Impacts for the period
the asset. Otherwise, it is recognised in profit or loss account as incurred. Subsequent to initial recognition,
development expenditure is measured at cost less accumulated amortisation and any accumulated impairment
losses. Other intangibles acquired by the Company and have finite useful lives are measured at cost less
accumulated amortisation and any accumulated impairment losses.
As a result of initially applying IFRS 16, in relation to the leases that were previously classified as
operating leases, the Company recognised Rs. 76.26 million of right-of-use assets and Rs. 70.81
million of lease liabilities as at 1 July 2019.
Subsequent expenditure
Also in relation to those leases under IFRS 16, the Company has recognised depreciation and
interest costs, instead of operating lease expense. During the year ended 30 June 2020, the
Company recognised Rs. 34.03 million of depreciation charges and Rs. 7.53 million of interest
costs from these leases.
5.
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in
the specific asset to which it relates.
Amortization
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Amortization on additions to intangible assets is charged from the month in which an asset is acquired or
capitalized while no amortization is charged for the month in which that asset is disposed off. Intangible
assets are amortised using the straight-line method over a period of five years.
The significant accounting policies applied in the preparation of these financial statements are set out below:
5.1
Property and equipment
Recognition and measurement
5.3
Employee benefits
Items of property and equipment are measured at cost less accumulated depreciation and accumulated
impairment losses, if any.
5.3.1
Defined benefit scheme - Gratuity
If significant parts of an item of property and equipment have different useful lives, then they are
accounted for as separate items (major components) of property and equipment.
Capital work-in-progress is stated at cost less impairment losses, if any. All expenditure connected to the
specific assets incurred during installation and construction period are carried under capital work- in-progress.
These are transferred to specific assets as and when assets are available for intended use.
Subsequent expenditure
Subsequent expenditure is capitalised only if the future economic benefits associated will flow to the entity.
The cost of the day to day servicing of property and equipment are recognised in profit and loss account as
incurred.
Depreciation
Depreciation is calculated on cost of property and equipment less their estimated residual values using the
straight-line method over their useful lives and is recognised in profit and loss account. The estimated
useful lives of property and equipment are disclosed in note 6.1 to the financial statements.
Depreciation on additions to property and equipment is charged from the month the asset is available for
use up to the month prior to the month of disposal.
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if
appropriate.
Gains and losses on disposal
Any gain or loss on disposal of an item of property and equipment is recognised in the profit and loss
account.
5.2
The Company operates a funded gratuity scheme for its staff. The scheme covers all the employees with a
qualifying service period of one year.
The Company’s net obligation in respect of defined benefit plans is calculated separately by estimating the
amount of future benefit that employees have earned in the current and prior periods, discounting that
amount and deducting fair value of any plan asset.
The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected
unit credit method. When the calculation results in a potential asset for the Company, the recognised asset
is limited to the present value of economic benefits available in the form of any future refunds from the plan
or reductions in future contributions to the plan. To calculate the present value of economic benefits,
consideration is given to any applicable minimum funding requirements.
Re-measurements of the net defined benefit liability, which comprise actuarial gains and losses, the return
on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are
recognised immediately in Other Comprehensive Income. The Company determines the net interest
expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate
used to measure the defined benefit obligation at the beginning of the annual period to the then net defined
benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during
the period as a result of contributions and benefit payments. Net interest expense and other expenses
related to defined benefit plans are recognised in profit or loss account.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that
relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss account.
The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement
occurs.
5.3.2 Defined Contribution Plan - Provident Fund
All permanent employees are covered under a recognised provident fund scheme. Equal monthly
contributions are made by the Company and the employees to the fund at the rate of 10% of employees'
basic salary.
Intangible assets
Recognition and measurement
Intangible assets arising from the development expenditure is capitalised only if the expenditure can be
measured reliably, the product or process is technically and commercially feasible, future economic benefits are
probable and the company intends to and has sufficient resources to complete development and to use or sell
83
5.3.3 Compensated absences
The Company recognises the liability for compensated absences in respect of employees in the period in
which they are earned up to the reporting date.
84
annual report
2020
5.4
Deposits, accrued and other liabilities
Deposits, accrued and other liabilities are recognised initially at fair value plus directly attributable cost, if
any, and subsequently measured at amortised cost.
5.5
Financial instruments
5.5.1
Recognition and initial measurement
The Company makes an assessment of the objective of the business model in which a financial asset is
held at a portfolio level because this best reflects the way the business is managed and information is
provided to management. The information considered includes:
Trade receivables are initially recognised when they are originated. All other financial assets and financial
liabilities are initially recognised when the Company becomes a party to the contractual provisions of the
instrument.
A financial asset (unless it is a trade receivable without a significant financing component) or financial
liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly
attributable to its acquisition or issue. A trade receivable without a significant financing component is
initially measured at the transaction price.
5.5.2
F inancial as s et s - B us ines s model as s es s ment :
Classification and subsequent measurement
-
the stated policies and objectives for the portfolio and the operation of those policies in practice. These
include whether management's strategy focuses on earning contractual interest income, maintaining a
particular interest rate profile, matching the duration of the financial assets to the duration of any related
liabilities or expected cash outflows or realising cash flows through the sale of the assets;
-
how the performance of the portfolio is evaluated and reported to the Company's management;
-
the risks that affect the performance of the business model (and the financial assets held within that
business model) and how those risks are managed;
-
how managers of the business are compensated - e.g. whether compensation is based on the fair value
of the assets managed or the contractual cash flows collected; and
-
the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales
and expectations about future sales activity.
Financial assets
On initial recognition, a financial asset is classified as measured at: amortised cost, FVOCI -debt
investment, FVOCI -equity investment, or FVTPL.
Financial assets are not reclassified subsequent to their initial recognition unless the Company changes
its business model for managing financial assets in which case all affected financial assets are
reclassified on the first day of the first reporting period following the change in the business model.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not
designated as at FVTPL:
-
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
-
its contractual terms give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated
as at FVTPL:
-
it is held within a business model whose objective is achieved by both collecting contractual cash
flows and selling financial assets; and
-
its contractual terms give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
On initial recognition of an equity investment that is not held for trading, the Company may irrevocably
elect to present subsequent changes in the investment's fair value in OCI. This election is made on an
investment-by-investment basis.
All financial assets not classified as measured at amortised cost or FVOCI as described above are
measured at FVTPL on initial recognition. The Company may irrevocably designate a financial asset that
otherwise meets the requirements to be measured at amortised cost or at FVOCI or at FVTPL if doing so
eliminates or significantly reduces an accounting mismatch that would otherwise arise.
85
Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not
considered sales for this purpose, consistent with the Company's continuing recognition of the assets.
Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value
basis are measured at FVTPL.
F inancial as s et s - A s s es s ment whet her cont ract ual cas h flows are s olely payment s of principal and
int eres t :
For the purposes of this assessment, 'principal' is defined as the fair value of the financial asset on initial
recognition. 'Interest' is defined as consideration for the time value of money and for the credit risk
associated with the principal amount outstanding during a particular period of time and for other basic lending
risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the Company
considers the contractual terms of the instrument. This includes assessing whether the financial asset
contains a contractual term that could change the timing or amount of contractual cash flows such that it
would not meet this condition. In making this assessment, the Company considers:
-
contingent events that would change the amount or timing of cash flows:
terms that may adjust the contractual coupon rate, including variable-rate features;
prepayment and extension features: and
terms that limit the Company's claim to cash flows from specified assets (e.g. non-recourse features).
A prepayment feature is consistent with the solely payments of principal and interest criterion if the
prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount
outstanding, which may include reasonable additional compensation for early termination of the contract.
Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature
that permits or requires prepayment at an amount that substantially represents the contractual par amount
plus accrued (but unpaid) contractual interest (which may also include reasonable additional compensation
for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is
insignificant at initial recognition.
86
F inancial as s et s - S ubs equent meas urement and gains and los s es :
Financial assets at FVTPL
Financial assets at Amortised
cost
Debt investments at FVOCI
Equity investments at FVOCI
These assets are subsequently measured at fair value. Net gains
and losses, including any interest or dividend income, are
recognised in profit or loss account.
These assets are subsequently measured at amortised cost using
the effective interest method. The amortised cost is reduced by
impairment losses. Interest income, foreign exchange gains and
losses and impairment are recognised in profit or loss account. Any
gain or loss on derecognition is recognised in profit or loss account.
These assets are subsequently measured at fair value. Interest
income calculated using the effective interest method, foreign
exchange gains and losses and impairment are recognised in profit
or loss. Other net gains and losses are recognised in OCI. On
derecognition, gains and losses accumulated in OCI are reclassified
to profit or loss account.
These assets are subsequently measured at fair value. Dividends
are recognised as income in profit or loss account unless the dividend
clearly represents a recovery of part of the cost of the investment.
Other net gains and losses are recognised in OCI and are never
reclassified to profit or loss account.
Financial liabilities - Classification, subsequent measurement and gains and losses
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as
at FVTPL if it is classified as held-for-trading. Financial liabilities at FVTPL are measured at fair value and net
gains and losses, including any interest expense, are recognised in profit or loss account. Other financial
liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense
and foreign exchange gains and losses are recognised in profit or loss account. Any gain or loss on
derecognition is also recognised in profit or loss account.
5.5.3
5.5.5
annual report
2020
Impairment
(i)
Financial assets
The Company recognises loss allowances for ECLs on:
-
financial assets measured at amortised cost;
debt instruments measured at FVOCI; and
contracts assets.
The Company measures loss allowances at an amount equal to lifetime Expected Credit Losses (ECLs),
except for the following, which are measured at 12-month ECLs:
-
debt securities that are determined to have low credit risk at the reporting date;
other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the
expected life of the financial instrument) has not increased significantly since initial recognition.
When determining whether the credit risk of a financial asset has increased significantly since initial
recognition and when estimating ECLs, the Company considers reasonable and supportable information
that is relevant and available without undue cost or effort. This includes both quantitative and qualitative
information and analysis, based on the Company's historical experience and informed credit assessment
and inducing forward-looking information.
The Company assumes that the credit risk on a financial asset has increased significantly if it is more
than 30 days past due.
The Company considers a financial asset to be in default when:
-
the borrower is unlikely to pay its credit obligations to the Company in full, without recourse by the
Company to actions such as realising security (if any is held); or
Derecognition
-
the financial asset is more than 90 days past due.
Financial assets
Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a
financial instrument.
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial
asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which
substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the
Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not
retain control of the financial asset.
The Company enters into transactions whereby it transfers assets recognised in its statement of financial
position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these
cases, the transferred assets are not derecognised.
Financial liabilities
The Company derecognises a financial liability when its contractual obligations are discharged or cancelled,
or expire. The Company also derecognises a financial liability when its terms are modified and the cash
flows of the modified liability are substantially different, in which case a new financial liability based on the
modified terms is recognised at fair value.
On derecognition of a financial liability, the difference between the carrying amount extinguished and the
consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or
loss.
The maximum period considered when estimating ECLs is the maximum contractual period over which
the Company is exposed to credit risk.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present
value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance
with the contract and the cash flows that the Company expects to receive).
ECLs are discounted at the effective interest rate of the financial asset.
Credit impaired financial assets
At each reporting date, the Company assesses whether financial assets carried at amortised cost are
credit-impaired. A financial asset is 'credit-impaired ' when one or more events that have a detrimental
impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable data:
5.5.4
Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial
position when, and only when, the Company currently has a legally enforceable right to set off the amounts
and it intends either to settle them on a net basis or to realise the asset and settle the liability
simultaneously.
87
-
Significant financial difficulty of the borrower or issuer;
a breach of contract such as a default or being more than 90 days past due;
the restructuring of a loan or advance by the Company on terms that the Company would not
consider otherwise;
it is probable that the borrower will enter bankruptcy or other financial reorganization; or
the disappearance of an active market for a security because of financial difficulties.
88
annual report
2020
Presentation of allowance for ECL in the statement of financial position
5.8
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying
amount of the assets.
Trade receivables, loans, advances, deposits and other receivables are recognised initially at fair value and
subsequently measured at amortised cost less provision for impairment, if any. A provision for impairment is
established when there is an objective evidence that the Company will not be able to collect all amounts due
according to the original terms of receivables.
Write-off
The gross carrying amount of a financial asset is written off when the Company has no reasonable
expectations of recovering a financial asset in its entirety or a portion thereof. Financial assets that are
written off could still be subject to enforcement activities in order to comply with the Company's
procedures for recovery of amounts due.
5.9
5.10
Foreign currency translation and transactions
Transactions in foreign currencies are translated into Pak Rupees at the rates of exchange prevailing on the
date of transactions. Monetary assets and liabilities in foreign currencies are translated into Pakistan Rupees
at the rates of exchange ruling on the balance sheet date. Exchange differences are included in the profit and
loss account.
5.11
Revenue
Revenue from services is recognised as and when the services are rendered (i.e. in proportion to the stage of
completion to the transaction at the reporting date). The following specific recognition criteria must also be
met before revenue is recognised.
An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated
recoverable amount. Impairment losses are recognised in profit or loss account.
5.6
Cash and cash equivalents
Cash and cash equivalents comprise of cash in hand and deposits held with banks. Cash equivalents are
short-term highly liquid investments that are readily convertible to known amounts of cash, are subject to an
insignificant risk of changes in value, and are held for the purpose of meeting short-term cash commitments
rather than for investment or other purposes.
(ii) Non-financial assets
The carrying amounts of non-financial assets are reviewed at each reporting date to determine whether
there is any indication of impairment. If any such indication exists, then the asset's recoverable amount
is estimated. The Company's corporate assets do not generate separate cash inflows. If there is an
indication that a corporate asset may be impaired, then the recoverable amount is determined for the
CGU to which the corporate asset belongs. The recoverable amount of an asset or cash-generating unit
is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessment of the time value of money and the risks specific to the asset or
CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped
together into the smallest group of assets that generates cash inflows from continuing use that are
largely independent of the cash inflows of other assets or Company's of assets (the “cash-generating
unit, or CGU”).
Trade receivables, loans, advances, deposits and other receivables
-
Exchange trade fee and other fees charged on trading of securities are recognised on trade date
basis when the services are rendered, which is at a point in time when the transaction have taken
place.
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit and loss
account except to the extent that it relates to item recognised directly in other comprehensive income in
which case it is recognised in other comprehensive income.
-
Revenue from services are recognised when services are rendered.
-
Mark-up on bank deposit is recognised on time apportioned basis using effective interest rate method.
Current
-
Gains / (losses) arising on sale of investments are included in the profit and loss account in the period
in which they arise.
-
Unrealised gains / (losses) arising on revaluation of securities classified as 'at fair value through profit
or loss' are included in profit and loss account in the period in which they arise.
-
Dividend income is recognised when the right to receive dividend is established.
Taxation
Provision for current taxation is based on taxable income at the enacted or substantively enacted rates of
taxation after taking into account available tax credits and rebates, if any. The charge for current tax includes
adjustments to charge for prior years which arises from assessments / developments made during the year, if
any.
Deferred tax
5.12
Deferred tax is recognised using balance sheet method, in respect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation
purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement
of the carrying amount of assets and liabilities, using the enacted or substantively enacted rates of taxation.
Dividend distribution to the Company's shareholders and appropriation to reserves is recognised in the
period in which these are approved.
6
The Company recognises deferred tax asset to the extent that it is probable that taxable profits for the
foreseeable future will be available against which the asset can be utilised. Deferred tax assets are reduced
to the extent that it is no longer probable that the related tax benefit will be realised.
5.7
Provisions
A provision is recognised in the balance sheet when the Company has a legal or constructive obligation as a
result of a past event, and it is probable that an outflow of economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of obligation. The amount recognised as a
provision reflects the best estimate of the expenditure to settle the present obligation at the reporting date.
89
Dividend distribution
PROPERTY AND EQUIPMENT
2020
2019
(Rupees in '000)
Operating property and equipment
C apit al work-in-progres s
Advances for
- Office equipment
90
220,604
222,633
56
220,660
222,633
6.1
annual report
2020
The following is a schedule of the Company's operating property and equipment:
Property and equipment
2020
Office
premises
Motor
vehicles
Furniture
and fixtures
Computers and
ancillary
equipment
Office
equipment
Capital work in
progress (CWIP)
Right of use
Asset
Total
--------------------------------------------------------------------------------- (Rupees in '000) ---------------------------------------------------------------------Cost
Accumulated depreciation
Carrying amount at 30 June 2019
75,188
(17,835)
57,353
17,143
(8,752)
8,391
90,871
(48,412)
42,459
44,892
(28,818)
16,074
364,003
(265,647)
98,356
-
Additions / transfers
Transferred from CWIP
Disposals - carrying amount
Depreciation charge for the year
Carrying amount at 30 June 2020
1,236
(3,781)
54,808
(3,036)
5,355
2,144
(121)
(6,718)
37,764
1,500
(121)
(5,540)
11,913
5,910
(88)
(40,627)
63,551
56
56
(34,031)
47,213
92,090
(330)
(93,733)
220,660
76,424
(21,616)
54,808
17,143
(11,788)
5,355
90,162
(52,398)
37,764
44,260
(32,347)
11,913
318,113
(254,562)
63,551
56
56
81,244
(34,031)
47,213
627,402
(406,742)
220,660
The carrying amount as at 30 June 2020
is aggregate of:
Cost
Accumulated depreciation
20
Useful life (years)
5
5-10
2-5
-
592,097
(369,464)
222,633
81,244
7
INTANGIBLE ASSETS
2020
2019
(Rupees in '000)
Computer software
CWIP
Software under development
7.1
The following is a schedule of the Company's intangible assets :
Motor
vehicles
Furniture
and fixtures
Computers and
ancillary
equipment
38,163
(15,773)
22,390
Additions / transfers
Transferred from CWIP
Disposals - carrying amount
Depreciation charge for the year
Carrying amount at 30 June 2019
The carrying amount as at 30 June 2019
is aggregate of:
Cost
Accumulated depreciation
7,501
106,012
CWIP
Total
----------------------- (Rupees in '000) ----------------------Capital Work in
progress
(CWIP)
16,667
(7,771)
8,896
79,318
(37,940)
41,378
40,970
(23,732)
17,238
379,917
(246,357)
133,560
23,493
23,493
578,528
(331,573)
246,955
37,025
(2,062)
57,353
3,067
(475)
(3,097)
8,391
11,553
(10,472)
42,459
4,886
(24)
(6,026)
16,074
9,077
(1)
(44,280)
98,356
37,697
(61,190)
-
103,305
(61,190)
(500)
(65,937)
222,633
75,188
(17,835)
57,353
17,143
(8,752)
8,391
90,871
(48,412)
42,459
44,892
(28,818)
16,074
364,003
(265,647)
98,356
-
592,097
(369,464)
222,633
20
5
261,215
(162,704)
98,511
Cost
Accumulated amortization
Carrying amount as at 01 July 2019
Total
--------------------------------------------------------------------------------- (Rupees in '000) ---------------------------------------------------------------------Cost
Accumulated depreciation
Carrying amount at 01 July 2018
7,746
121,673
2020
4-5
Office
equipment
98,511
Computer
Softwares
2019
Office
premises
113,927
27,509
Additions
Transferred from CWIP
Amortization charge for the year
Carrying amount as at 30 June 2020
(12,093)
113,927
7,501
7,501
268,716
(162,704)
106,012
25,299
(25,054)
7,746
52,808
(25,054)
(12,093)
121,673
10
Useful life (years)
2019
Computer
Softwares
CWIP
Total
----------------------- (Rupees in '000) ----------------------Useful life (years)
6.2
5
2-5
4-5
The details of cost of fully depreciated assets as at 30 June 2020 amounting to Rs. 224.92 million (2019: Rs.195.08 million) are as follows:
2020
2019
(Rupees in '000)
1,962
25,560
17,010
180,392
224,924
Motor vehicles
Furniture and fixtures
Office equipment
Computers and ancillary equipment
6.3
Details of disposals of property and equipment
2020
Cost
Assets
1,962
27,494
9,499
156,129
195,084
Carrying
amount
Sale price
Gain on
disposal
Particulars of the
purchaser
Mode of disposal
Relationship with the purchaser
8
----------------------------------------------------- (Rupees in '000) -----------------------------------------------------
6.4
Furniture and fixture
Office equipment
2,853
2,132
121
121
249
339
128
218
Computers and ancillary equipment
51,801
88
128
40
56,786
330
716
386
Various
Employees /
various dealers
Tender
Tender
Employees /
various dealers
Tender
Scrap dealer
Employment / scrap dealers
Employment / scrap dealers
Cost
Accumulated amortization
Carrying amount as at 01 July 2018
202,855
(138,657)
64,198
34,603
34,603
237,458
(138,657)
98,801
Additions
Transferred from CWIP
Amortization charge for the year
Carrying amount as at 30 June 2019
58,360
(24,047)
98,511
26,870
(53,972)
7,501
85,230
(53,972)
(24,047)
106,012
Useful life (years)
5
-
LONG-TERM LOANS
Note
2020
(Rupees in '000)
- Secured (considered good)
Due from employees and related parties
Less: current portion
8.1 & 8.2
10
29,303
(6,953)
22,350
33,443
(6,830)
26,613
Discounting of interest free loan
Less: current portion
8.1 & 8.2
11
2,411
(1,284)
1,127
23,477
3,139
(1,468)
1,671
28,284
1,462
11,688
4,369
182
153
17,854
(3,082)
14,772
2,632
13,063
4,736
324
181
20,936
(3,082)
17,854
2020
Lease liabilities
(Rupees in '000)
Maturity analysis - contractual undiscounted cash flows:
Less than one year
One to five years
More than five years
Total undiscounted lease liabilities at 30 June
35,534
13,758
49,292
Lease liabilities included in the statement of financial position at 30 June 2020
Current
Non-current
31,905
13,264
8.1
Amounts recognised in statement of profit or loss account
Interest on lease liabilities
(7,526)
Amounts recognised in the statement of cash flows
Total cash outflow for leases
31,424
91
This includes long-term loans to related parties and other executives as follows:
Mr. Muhammad Lukman (CEO)
Mr. Imran Ahmed Khan (CFO)
Mr. Amir Mobin (CRO)
Mr. Asad Ahmed Ali (Senior Manager Finance)
Discounting of interest free loan
45,169
8.4
Less: Current portion
8.1.1
2019
The maximum amount due as at the end of any month during the year was Rs. 20.35 million (2019: Rs. 23.20 million).
92
annual report
2020
9.3.1
8.2
Interest free loans are provided to employees for purchase of cars which are secured against documents of vehicles whereas houeloans are provided at a
rate being one percent (1%) less than the policy rate announced by State Bank of Pakistan (SBP) from time to time (secured against documents of
property). Car loans are recovered in monthly installments over a period of five years, whereas house loan is recoverable within fifteen years or attaining of
60 years of age by an employee, whichever is earlier. The loans are measured at amortised cost upon recognition and the difference between loan amount
Total
disbursed and amortised cost is recognised as discounting of interest free loan.
8.2.1
Employee loans include interest free house loan of Rs. 1.6 million (2019: Rs. 2.8 million) to CEO. This loan is duly approved by SECP.
8.3
All the related requirements of the Companies Act, 2017 have been complied with.
8.4
Reconciliation of carrying amount of loan to Chief Executive
Officer and Other Executives
Note
Name of related party
2020
Amount past due
Amount
not past
due
Past due
0-30 days
Past due
31-60 days
Past due
91-365
days
Past due
61-90
days
Past due
365
days
Total gross
amount due
----------------------------------------------------- (Rupees in '000) -----------------------------------------------------
2020
2019
Pakistan Kuwait Investment
Company (private) Limited
61
-
-
-
-
-
61
LSE Financial Services Limited
30
-
-
-
-
-
30
91
-
-
-
-
-
91
(Rupees in '000)
20,936
(3,082)
17,854
Balance as at 1 July
Disbursements / adjustment
Repayments
Balance as at 30 June
9
Age analysis of trade receivables from related parties
23,540
478
(3,082)
20,936
Name of related party
2019
Amount past due
Amount
not past
due
TRADE RECEIVABLES
Past due 030 days
Past due 3160 days
Past due 6190 days
Past due 91-365
days
Past due 365
days
Total gross
amount due
----------------------------------------------------- (Rupees in '000) ----------------------------------------------------Pakistan Kuwait Investment
Company (Private) Limited
Considered good
Receivable against:
Exchange trade fee
Non - exchange transaction fee
Capital gain tax fee
Unique Identification Number (UIN) maintenance fee
Margin trading system laga (MTS) fee
Others
9.1
9.3
9.1
This includes receivable from Non - Broker Clearing Members (NBCMs) amounting to Rs. 4.256 million (2019: Rs. 3.912 million).
9.2
There are no past due and impaired trade receivables as at 30 June 2020, therefore, ageing is not included.
9.3
Trade receivables from related parties
16,114
10,823
90,739
6,078
4,164
6,414
134,332
15,000
7,552
80,242
4,960
2,767
4,927
115,448
LSE Financial Services
Limited
10
97
-
-
-
-
-
97
222
-
-
-
-
-
222
319
-
-
-
-
-
319
Note
LOANS AND ADVANCES
2020
Considered good
Current portion of loan due from employees
Advances to employees
8
10.1
2020
Name of related party
Note
Gross amount
due
Past due
amount
Impairment against
doubtful
receivables
Net amount
due
Maximum
amount
outstanding at
any time during
the year
10.1
This includes advances of Rs. 3.50 million (2019: Rs. 4.10 million) to executives.
11
SHORT-TERM PREPAYMENTS, DEPOSITS AND
OTHER RECEIVABLES
Prepayments
Prepayments
------------------------------- (Rupees in '000) ------------------------------Pakistan Kuwait Investment Company
(Private) Limited
LSE Financial Services Limited
61
30
91
9.3.1
-
-
61
30
91
146
280
426
Net amount
due
Maximum
amount
outstanding at
any time during
the year
Deposits and other receivables
Deposits
Trade fee SECP
Current portion of discounting of interest free loan
Others
2019
Name of related party
Gross amount
due
Past due
amount
Impairment against
doubtful receivables
------------------------------- (Rupees in '000) ------------------------------Pakistan Kuwait Investment Company
(Private) Limited
LSE Financial Services Limited
97
222
319
9.3.1
-
-
2019
(Rupees in '000)
97
222
319
97
250
347
11.1
8
11.2,11.3 and 11.4
6,953
6,504
13,457
6,830
5,341
12,171
25,185
25,714
5,849
906
1,284
19,940
53,164
4,999
448
1,468
13,716
46,345
11.1
This represents trade fee at the rate of 0.3 per Rs. 100,000 value of trade to be collected from clearing members (CMs) on behalf of SECP.
11.2
This includes an amount of Rs. 3.6 million (2019: Rs. 3.6 million) which pertains to a delinquent CM and shall be recovered from Pakistan Stock Exchange
(PSX) as per clause 3.2(a) of the Trust Deed of Settlement Guarantee Fund (SGF) and under the Karachi Stock Exchange (KSE) Investors' Protection
Fund Regulations.
As per clause 3.2(a) of the above mentioned Trust Deed, the Company will refund this amount immediately to SGF after recovery through the
sale of such rights / assets of the member which are in control of the Company.
However, the recovery is delayed because the matter is sub judiced (between PSX and the CM) and a stay has been granted by the Court. Further,
as per KSE Investors' Protection Fund Regulations, the admitted claims of investors which remained unsatisfied or partially satisfied after pro rata
sharing against a member declared defaulter/ expelled or whose Trading Rights Entitlement (TRE) Certificate was cancelled / forfeited shall continue
to be paid from the Investors' Protection Fund to the extent of maximum amount of Rs. 75 million. Consequently, the management believes therefore,
that the amount will be recovered, and no provision has been made in these financial statements.
93
94
annual report
2020
11.3
Other receivables from related parties
12.1
Name of mutual funds
As at 01 July 2019
Purchases during the
year
Dividend
Reinvestment
Sales During the
year
Carrying Value as Market value as at Unrealized loss as at
at 30 June 2020
30 June 2020
30 June 2020
As at 30 June
2020
2020
Name of related party
Note
Gross amount due
Past due amount
Impairment
against doubtful
receivables
Net amount due
------------------------------------------- (Number of units) -------------------------------------------
Maximum amount
outstanding at any
time during the year
ABL Cash Fund
ABL Government Securities Fund
------------------------------------------- (Rupees in '000) -------------------------------------------
Settlement Guarantee Fund
- management fee receivable
11.2 & 11.3.2
- funds receivable
11.3.1
3,428
-
-
3,428
3,474
3,633
3,633
-
3,633
3,834
7,061
3,633
-
7,061
7,308
2019
Name of related party
Gross amount due
Past due amount
Provision for
doubtful
receivables
9,593,519
Net amount due
Maximum amount
outstanding at any
time during the year
-
11.2 & 11.3.2
11.3.1
- funds receivable
11.3.1
5,021
-
-
5,021
6,967
3,834
3,633
-
3,834
7,997
8,855
3,633
-
8,855
14,964
Note
Amount not past due
Past due 0-30
days
Past due 31-60
days
Past due 61-90
days
Past due 91-365
days
Past due 365
days
- funds receivable
11.3.2 / 11.2
3,428
-
-
-
-
3,428
-
-
-
-
Amount not past due
11.3.2
3,428
3,633
3,633
221,973
4,098
2,708
(1,390)
-
260,124
5,439
3,006
(2,433)
-
5,439,924
55,467
55,548
-
-
(6,163)
ABL Islamic Income Fund
-
5,439,924
Al Ameen Islamic Sovereign Fund
-
196,496
Al Ameen Shriah Stock Fund
108,626
Alflah GHP Money Market Fund
449,708
Alflah GHP Stock Fund
32,063
Past due 0-30
days
Past due 31-60
days
Past due 61-90
days
Past due 91-365
days
Past due 365
days
5,021
- funds receivable
201
5,222
12
-
-
-
-
-
5,021
-
-
-
-
3,633
3,633
3,834
8,855
This represents electricity bill receivable from PSX using storage facility in NCCPL Islamabad office. The amount is recorded as receivable on the basis of average monthly billing and the invoice is yet to be issued,
2020
At amortised cost
- Term deposit receipts (TDR)
- Pakistan Investment Bonds (PIBs)
- Market Treasury Bills (T-Bills)
12.5
12.6
12.6
302,400
12.1
12.4
12.3
48,605
-
-
32,063
5,695
3,035
-
16,219
8,338
8,427
-
-
-
92
(2,660)
-
14,835
1,384
Atlas Money Market Fund
-
30,417
59,681
-
75,844
8,590
-
84,434
8,489
8,524
35
608
-
35,586
20,762
18,388
(2,374)
-
215,855
21,954
21,989
35
213,800
21,788
21,808
214,176
21,722
16,582
(5,140)
170
34,978
-
Faysal Money Market Fund
-
196,640
19,215
JS Cash Fund
-
2,025,871
24,465
214,176
NBP Financial Sector Income Fund
4,807,740
NBP Money Market Fund
2,561,114
31,996,929
2,580,238
1,836,536
-
-
544,211
318,563
-
-
54,992
186
1,207
5,028,599
2,638
17,936
56,176
56,346
27,628
27,667
-
2,580,238
43,079
30,881
(12,198)
-
56,385
4,676
3,170
(1,506)
9,109,712
7,826
20
5,351,951
4,442,735
181,310
89
-
2,799,575
32,077,031
-
4,078,475
-
90,098
-
-
-
39
-
-
4,442,735
45,132
50,762
5,630
207,072
21,907
21,872
(35)
493,426
465,581
Net unrealised diminution on re-measurement of investment classified
as 'fair value through profit or loss'
2020
(27,845)
2019
(Rupees in '000)
465,581
(493,426)
(27,845)
34,516
349
7,020
350,745
(385,261)
(34,516)
25,318
(10,464)
(19,662)
Term deposit receipt and certificate of investment
Term Deposit Receipts
U Microfinance Bank Limited
Soneri Bank Limited
FINCA Microfinance Bank
Meezan Bank Limited
Bank rating
A
AAA
AA+
Profit rate
%
Maturity date
21-Oct-20
10-Jul-20
2020
Tenure
2019
(Rupees in '000)
11.65
13.31
6 months
6 months
481,032
100,400
202,000
-
103,032
378,000
302,400
481,032
-
465,581
350,745
200,000
100,000
765,581
200,000
100,000
650,745
1,537,198
1,131,777
Investments - At amortised cost
376,647
Current
1,160,551
1,131,777
1,537,198
1,131,777
Issue date
Tenor
Purchases during
the year
Effective yield
Sales / matured
during the year
As at June 30,
2020
Amortised Cost as
at June 30, 2020
------------------------------------------------- (Rupees in '000) ------------------------------------------------Pakistan Investment Bonds (PIBs)
Market Treasury Bills (T-Bills)
Investments-Maturity
Non Current
95
13,106
48,513
12.5
12.6
- Mudaraba Sukuk Certificates
- Term finance certificates (TFCs)
19,269
The Company has subscribed sukuks of Meezan Bank Limited having face value of Rs. 100 million. These carry mark-up at the rate of 3 months KIBOR plus base rate of up to 1.75% and are perpetual in nature.
Average mark-up rate during the period was in the range of 9.99% to 15.64% per anum. (30 June 2019: 9.72% to 11% per anum). The Company has subscribed these Sukuks as part of private placement plan
and therefore, they are recognised at their face value which is the fair value.
(Rupees in '000)
At fair value through profit or loss
- Mutual funds
109,621
495,270
12.4
2019
376,647
92,570
-
5,163,416
The Company has subscribed TFCs of United Bank Limited having face value of Rs. 100 million. These carry mark-up at the rate of 3 months KIBOR plus base rate of 1.55% and are perpetual in nature. Average
mark-up rate during the period was 13.55%. The Company has subscribed these TFCs as part of private placement plan and therefore, they are recognised at their face value which is the fair value.
It includes technology fees of amount Rs 9.27 million (2019: Rs 3.00 million) charged to banks for the terminal access provided by NCCPL to connect for settlement transactions at a fixed rate of Rs 100,000 per
month.
Note
995
55,939
81
Atlas Income Fund
Name of the bank
INVESTMENTS
5,153,039
-
12.3
therefore, the same is catergorised as amount not past due.
11.4
196,496
Less: Net unrealised diminution on re-measurement of investments
classified as 'fair value through profit or loss' at beginning of the year
Add: Net unrealised (diminution) / appreciation reversed during the year
Total gross
amount due
---------------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------------
- management fee receivable
-
Market value of investment
Less: cost of investments
3,633
7,061
2019
Name of related party
Settlement Guarantee Fund
-
(137)
-
Total
12.2
- management fee receivable
53,157
-
UBL Government Securities fund
-------------------------------------------------------------------- (Rupees in '000) --------------------------------------------------------------------
Settlement Guarantee Fund
-
266
NIT Government Bond Fund
Total gross
amount due
53,294
-
NIT Money Market Fund
2020
5,296,475
-
National Investment (Unit) Trust
Name of related party
9,334,355
221,707
NBP Stock Fund
Age analysis of other receivables from related parties
-
-
260,124
MCB Pakistan Stock Market Fund
- management fee receivable
14,630,830
------------------------- (Rupees in '000) -------------------------
18,988,359
ABL Stock Fund
Atlas Stock Market Fund
Settlement Guarantee Fund
-
ABL Islamic Stock Fund
Atlas Sovereign Fund
------------------------------------------- (Rupees in '000) -------------------------------------------
9,394,840
July 12, 2018
February 27, 2020
3 Years
1 Year
-
96
13.02% - 13.96%
12.70%
360,211
376,647
360,211
-
360,211
360,211
376,647
88,978
88,978
-
88,978
88,978
92,570
92,570
13
Note
CASH AND BANK BALANCES
2020
annual report
2020
2019
(Rupees in '000)
Cash in hand
Balances with banks:
- deposit and saving accounts
- current accounts
13.2
Cash margins from Non-Broker Clearing Members (NBCMs)
Cash margins against risk management of capital market trades
from NBCMs
Cash margins against risk management of capital market trades
from Broker Clearing Members (BCMs)
Deposits from National Custodial Services (NCS)
18
13
21
329,907
869
330,789
633,627
552,354
3,286
555,661
532,375
21
514,714
259,921
21
18
5,985,966
75,332
7,540,428
5,903,309
61,131
7,312,397
13.1
Cash and cash equivalents
13.1.1
Cash and cash equivalents (used for cash management purposes) include the following for the purposes of the cash flow statement:
Note
2020
2019
15
(Rupees in '000)
Capital reserves
Share premium
13
330,776
330,789
13.2
Mark-up rate on deposit and savings accounts ranges between 3.45% to 14% per annum (2019: 2.25% to 12.75%
per annum).
14
ISSUED, SUBSCRIBED AND PAID-UP SHARE CAPITAL
21
555,640
481,032
1,036,693
-
Revenue reserves
Unappropriated profit
28,015
729,590
708,404
729,590
736,419
16
EMPLOYEE BENEFITS
16.1
Defined Benefit Plan - approved funded gratuity scheme
16.1.1
The Company operates an approved funded gratuity scheme for its permanent employees. The actuarial valuation for staff gratuity has been carried out as at
30 June 2020 on the basis of projected unit credit method as per the requirements of International Accounting Standard 19, "Employee Benefits".
The assumptions used in actuarial valuation are as follows:
16.1.2
Actuarial assumptions
(Rupees in '000)
Cash in hand
Balances with banks
Term deposit receipts
2019
2020
RESERVES
Note
2020
2019
% per annum
The principal actuarial assumptions used are as follows:
Financial assumptions
14.50%
9.25%
8.25%
Discount rate used for interest cost
Discount rate used for year end obligation
Expected rate of salary increase
10.00%
14.50%
13.50%
Demographic assumptions
2020
2020
2019
(Rupees in '000)
(Number of shares in '000)
41,861
58,994
100,855
41,861
33,780
75,641
Ordinary shares of Rs. 10/- each fully paid in cash
418,608
Ordinary shares of Rs. 10/- each issued as bonus
shares
589,937
1,008,545
2020
14.1
Shareholders
Pakistan Stock Exchange Limited
LSE Financial Service Limited
ISE Towers REIT Management
Company Limited
Pakistan Kuwait Investment
Company (Private) Limited
Directors
General Public
Number of
Note
14.1.1
14.2
14.1.1
16.1.3
418,608
% of Holding
% of Holding
47,460,917
23,730,461
47.06%
23.53%
35,595,685
17,797,844
47.06%
23.53%
11,865,238
11.76%
8,898,928
11.76%
17,797,853
11
100,854,480
17.65%
0.00%
0.00%
100.00%
13,348,390
2
9
75,640,858
17.65%
0.00%
0.00%
100.00%
As per the requirements of the Clearing Houses (Licensing and Operations) Regulations, 2016, a single shareholder, other than a securities exchange
or a futures exchange, directly or indirectly, shall not hold more than fifteen percent shares in a clearing house.The timeline specified for compliance
i.e. 09 August 2019 has already elapsed. NCCPL has continuously pursued concerned shareholders for the said compliance since promulgations of
these Regulations. We understand that concerned shareholders have requested SECP to waive the said requirement for existing shareholders
or to seek extension of timelines for compliance.
14.2
The SECP in exercise of its powers conferred through proviso of regulation 6(1) of the Clearing Houses (Licensing and Operations) Regulations, 2016,
directed the management vide letter no. SMD/SF/2(7)/2002, dated 15 December 2017 to enhance the Company's paid up capital to Rs. 1 billion
and net-worth to Rs. 2 billion till June 30, 2020 (Minimum Capital Requirement) subject to the conditions specified in note 31.4.
14.3
During the year company issued bonus shares in the proportion of 1 share for every 3 shares held (2019: every 2 shares held) totalling to 25,214
shares (2019: 25,214 shares).
97
SLIC (2001-05)
(Rupees in '000)
The amount recognised in the balance sheet are as follows:
16.1.4
Number of
Defined benefit liability
Defined benefit obligation
Fair value of plan assets
Net defined benefit liability
337,800
756,408
2019
SLIC (2001-05)
Mortality rate
2019
234,817
(225,895)
8,922
16.1.4
16.1.4
192,697
(184,627)
8,070
Movements in the defined benefit liability
The following table shows a reconciliation from the opening balances to the closing balances for net defined benefit liability and its
components.
Defined benefit obligation
2020
Fair value of plan assets
*
2020
2019
Net defined benefit liability
2019
2020
2019
---------------------------------------------------------- (Rupees in '000) ---------------------------------------------------------Balance as at 1 July
Included in profit and loss
Current service cost
Interest cost / income
Effect of OCI
Actuarial loss / (gain) arising
from:
- financial assumptions
- experience adjustments
- return on plan assets
excluding interest income
Other
Benefits paid
Benefits payable
Contributions
Liability / funds transferred in
Balance as at 30 June
192,697
159,107
184,627
142,263
8,070
16,844
24,062
27,177
51,239
20,974
15,679
36,653
28,289
28,289
15,802
15,802
24,062
(1,112)
22,950
20,974
(123)
20,851
(2,532)
3,953
1,826
(260)
-
-
(2,532)
3,953
1,826
(260)
1,421
1,566
(7,966)
(7,966)
(4,587)
(4,587)
7,966
9,387
4,587
6,153
(4,266)
(363)
(4,629)
(10,540)
31,485
20,945
(4,266)
(363)
35,778
31,149
(31,485)
(31,485)
(35,778)
(35,778)
8,922
8,070
(10,540)
(10,540)
234,817
192,697
98
225,895
184,627
2020
* Plan assets as at 30 June comprise:
(Percentage)
100
Cash and / or deposits
16.1.5
100
Total
17
Maturity profile of the defined benefit obligation
10
Sensitivity analysis on significant actuarial assumptions
on actuarial liability
Deferred tax credits
Accelerated tax depreciation / amortization
Coupon receivable
10
(Rupees in '000)
212,786
260,158
260,450
212,142
Discount rate increases 1%
Discount rate decreases 1%
Salary increases 1%
Salary decreases 1%
Deferred tax liability
17.1
Balance at 1
July 2019
Longevity risk
Salary increase risk
Deferred tax debits
Investments
Provision for gratuity
Finance lease liability
Mortality risk
The risk of actual mortality varying with the actuarial assumptions can impose a risk to the benefit obligation.
(d)
Withdrawal risk
18
Investment risk
Defined contribution plan - recognised provident fund
Net assets of the fund
52,627
40,000
76%
46,402
Cost of investments made
Percentage of investments made
Fair value of investments
1,980
Recognised in
OCI
Balance at 30
June 2019
2019
Recognised in
OCI
Balance at 30
June 2020
Balance at 1
July 2018
Recognised in
profit or loss
account
(note 27)
15,024
-
6,027
8,467
-
21,051
8,467
19,614
-
(4,590)
-
-
15,024
-
(13,044)
1,980
4,626
(13,099)
6,021
(2,722)
(2,722)
(8,418)
(2,722)
(13,099)
5,279
(7,327)
(4,885)
7,402
(5,717)
(10,307)
4,885
4,885
(13,044)
1,980
Note
DEPOSITS, ACCRUED AND OTHER LIABILITIES
Accrued liabilities
Mark-up payable on cash margins
2020
2019
(Rupees in '000)
(Un-audited)
(Audited)
The Company maintains provident fund in a separate trust.
Recognised in
profit or loss
account
(note 27)
Cash margins from NBCMs
Cash margins against risk management of capital market trades from NBCMs
Cash margins against risk management of capital market trades from BCMs
Deposits from NCS customers
Deposit from CMs
The risk of the investment underperforming and being not sufficient to meet the liabilities.
16.2
5,279
18.1 & 13
18.2 & 13
21 & 13
13
18.3
23.9
- Payable to SGF
- Payable to suppliers
- Payable to SECP
- Staff related benefits
- Unearned income
- Payable to Pakistan Stock Exchange (PSX) against Facilities Management Fees
- With holding tax payable
- Sales tax payable
42,226
37,514
89%
37,514
18.4
18.5
Break-up of investments in terms of amount and percentage of the size of the provident fund are as follows:
2020
16.2.1
2019
Investments
(Rupees
in '000)
% of investment
as size of
the Fund
Investments
(Rupees
in '000)
6,402
40,000
46,402
12%
76%
88%
8,514
29,000
37,514
18.1
This represents exposures margins and mark to market losses collected from CMs on their unsettled positions of affirmed
Institutional Delivery System (IDS) transactions based on margin trading, securities lending and borrowings, margin financing
transactions and Bonds Automated Trading System transactions.
18.2
This represents exposures margins and mark to market losses collected from CMs on their unsettled positions of affirmed
Institutional Delivery System (IDS) transactions based on Ready Market trades and Deliverable Future Contract Trades (DFCs).
18.3
These deposits have been received from CMs at the time of admission in NCSS as required under NCCPL Regulations, 2015 and are
non-interest bearing which are utilisable as per Chapter 8 NCCPL Regulations, 2015 . Basic / security deposits are refundable to the
CMs on termination of their membership.
18.4
This represents contribution payable to SGF as required by NCCPL Regulations, 2015. The size of the Fund was determined through
an actuarial valuation conducted by a reputed actuary. As at 30 June 2020, the Company manages SGF with net assets of Rs. 3.867
billion (2019: Rs. 3.440 billion) as per unaudited financial statements of SGF. Details of the Fund are disclosed in note 35.
18.5
This represents facilities management fees payable in respect of provision of software and hardware support for MTS application
managed by PSX under an agreement entered with PSX.
% of investment
as size of
the Fund
20%
69%
89%
Investments out of provident fund have been made in accordance with the provisions of section 218 of the Companies Act, 2017 and the rules formulated for this purpose.
99
2019
633,627
514,714
5,985,966
75,332
678,401
532,375
259,921
5,903,309
61,131
677,301
38,089
52,260
24,768
57,501
6,926
2,124
10,801
6,175
36,115
11,427
2,350
959
6,445
2,306
10,005
7,788
34,314
11,146
8,408
1,181
8,055,266
7,597,899
Other liabilities:
Break-up of investments of provident fund
Balance in savings accounts
TDRs
Mutual Funds
2020
(Rupees in '000)
The risk of actual withdrawals varying with the actuarial assumptions can impose a risk to the benefit obligation. The significance
of withdrawal risk varies with the age, service and the entitled benefits of the beneficiary.
(e)
(13,044)
(13,044)
----------------------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------------------Deferred tax credits
Accelerated tax
depreciation /
amortization
Coupon receivable
The most common type of retirement benefit is one where the benefit is linked with final salary. The risk arises when the actual
increases are higher than expectation and impacts the liability accordingly.
(c)
(8,418)
(2,722)
(13,099)
(24,239)
17.1
2020
The risk arises when the actual lifetime of retirees is longer than expectation. This risk is measured at the plan level over the
entire retiree population.
(b)
15,024
15,024
Movement
Risks associated with defined benefit obligation
(a)
21,051
8,467
29,518
Deferred tax debits
Investments
Provision for gratuity
Finance lease liability
165,230
202,157
202,391
164,735
The sensitivity analysis prepared presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in
assumptions would occur in isolation of one another as some of the assumptions may be correlated.
16.1.7
2020
2019
(Rupees in '000)
Note
DEFERRED TAXATION
(Number of years)
Weighted average duration of the defined benefit obligation
16.1.6
annual report
2020
2019
100
19
CGT AND DIVIDEND PAYABLE TO FBR
Note
Opening balance
CGT collected during the year
Dividend collected during the year
Mark-up income on collection
CGT paid to FBR
Closing balance
19.2
19.1
19.2
annual report
2020
2020
2019
(Rupees in '000)
411,343
2,126,954
13,462
(515,072)
2,036,687
19.1
This represents CGT deducted / withheld, on behalf of FBR, by the Company from investors on disposal of
commodities, securities and units of mutual funds and is being held in a designated bank account.
19.2
This includes an amount of Rs 0.93 million (2019: Rs 0.93 million) on account of dividend collected, on
behalf of FBR, by the Company from investors on bonus shares withheld at the rate of 5% and is being
held in a designated bank account.
20
SECURITIES TRANSACTIONS SETTLEMENT RECEIVABLES / (PAYABLES)
649,466
1,325,474
930
13,145
(1,577,672)
411,343
NCCPL held several meetings with the Chairman SRB and his team to persuade that NCCPL’s services are
ancillary functions of Stock Exchanges and Future Markets which fall under the Federal Legislative List,
not confined to one province and hence SST is not applicable on these services. Initially, it was agreed
that SRB will issue a directive for prospective application of SST on NCCPL’s revenue streams with effect
from May 1, 2020. It was also agreed that SRB will amend the SST Act in order to include NCCPL services
in a new service category with effect from July 1, 2020.
To the contrary, SRB issued Showcause Notice dated June 16, 2020 in respect of tax year 2013-14 and
called upon NCCPL to showcase as to why SST liability amounting Rs.57.3 million may not be assessed
along with default penalties. In addition to this, SRB also issued letter/ notice dated June 22, 2020
confronting the Company to clarify its position or deposit SST amounting to Rs 251.1 million for the tax
period July 1, 2014 to June 30, 2017.
The Company through its legal counsel directly challenged the SRB notice for Tax Year 2014 before the
Sindh High Court as the said Notice is without jurisdiction, barred by limitation and transgresses subject
matter and territorial limits set by the Constitution and statute. The Sindh High Court granted stay order in
favour of the Company in the first hearing of the case.
The Company under its normal course of business will collect and pay settlement amounts of Rs. 2.871
billion (2019: Rs. 3.933 billion) to the capital market participants in accordance with the settlement cycle
of transaction plus two days (T+2).
21
COLLATERAL AGAINST RISK MANAGEMENT OF CAPITAL MARKET TRADES
After the promulgation of the Securities Act, 2015, the Company has undertaken the Risk Management of
the entire capital market of Pakistan and assumed the role of Central Counter Party (CCP) with effect from
2 May 2016. Accordingly, as part of the Risk Management, the Company holds Risk Management System
(RMS) deposits aggregating Rs. 6.500 billion (2019: Rs 6.163 billion) from BCMs and NBCMs to
satisfy margin requirements against their regular market trades and future market contracts.
22
CONTINGENCIES AND COMMITMENTS
22.1
Contingencies
22.1.1
After assuming the role of CCP, the Company provides guaranteed settlement in respect of trades reported
for clearing and settlement in the NCSS. The Company obtains necessary collaterals, exposure margins
and undertakes risk management of capital market trades in the normal course of its business.
The management believes, based on advice of the legal counsel and tax advisor, that Sindh High Court will
decide this matter in favour of the Company and hence no provision in this respect has been made in these
financial statements.
22.2
Commitments
22.2.1
Commitments in respect of capital expenditure
Note
1,709
136
In respect of property and equipment
In respect of intangible assets
23
The SECP, after concluding investigation on information security matters, issued an order dated October
03, 2019, in which the Company was responsible for misconduct under section 150(1)(a) of the Securities
Act, 2015 and had imposed a penalty of PKR 2 million. NCCPL vide its legal counsel had submitted appeal
against SECP’s Order and Penalty which was accepted by Appellant Bench. The Hearing of the Appellant
Bench in this respect is still awaited.
The management believes, on the basis of legal counsel’s advice, that the matter will be decided in
Company’s favour and hence penalty has not been accounted for in these financial statements.
1,915
500
OPERATING INCOME - net
23.4
23.5
23.6
23.1 & 23.2
23.7
23.8
Exchange trade fee
Non-exchange transaction fee
CGT fee
Mark-up income
Leveraged market product fee
UIN maintenance fee
NBCM's fees for using IDS facility
Technology Fee charged to Settling banks
Others
Gross Operating Income
Contribution towards SGF
Net Operating Income
Penalty imposed by SECP on NCCPL
2020
2019
(Rupees in '000)
23.3 & 33
23.1
This represents income earned on deposits and exposure margins received from CMs and NBCMs.
23.2
Mark-up income
Note
Return on:
- Bank deposits on saving accounts with banks and others
- Cash margins of brokers maintained with the Company
23.9
- Clearing members
23.9
145,425
91,867
173,019
198,495
52,499
67,022
49,278
32,400
28,263
838,268
(30,173)
808,095
114,441
83,298
186,436
174,641
89,439
68,120
46,872
33,600
25,726
822,573
(28,473)
794,100
Showcause issued by Sindh Revenue Board (“SRB“)
SRB had issued a notice/ letter dated November 13, 2019 confronting the Company to clarify the position
or deposit Sindh Sales Tax (“SST”) amounting to Rs 38.79 million under the service category of ‘Business
Support Services’ for the tax period July 1, 2013 to June 30, 2014. In addition to above notice/ letter, SRB
also issued another notice/ letter dated November 26, 2019 confronting the amount of Rs 297.94 million for
the tax period July 1, 2014 to June 30, 2018 on the same ground.
101
102
2020
2019
(Rupees in '000)
97,135
664,077
761,212
120,758
398,122
518,880
(562,717)
198,495
(344,239)
174,641
annual report
2020
23.3
23.4
This represents contribution accrued to SGF as required by NCCPL Regulations, 2015. The SGF is created and maintained under an
irrevocable trust and from which CMs obligation to the Company may be satisfied in case of default of such CMs. The details of
the Fund are disclosed in note 35.
24.3
This represents fees at the rates approved by SECP, based on the value of non-exchange transactions.
23.6
This represents fixed annual fees at the rates approved by SECP, based on the values of trades as per NCCPL Regulations, 2015.
2020
2019
(Rupees in '000)
Audit fee
Interim review
Agreed Upon Procedures fee in accordance with Clearing House
(Licensing and Operation) Regulations, 2016
Tax consultancy fee
Out-of-pocket expenses
This represents fees at the rates approved by SECP, based on the value of the exchange trade.
23.5
Auditors' remuneration
504
231
504
231
600
950
97
2,382
600
850
66
2,251
24.4
It includes transaction fee at the rates approved by SECP, based on the value of transaction after considering the number of days
of outstanding contract.
The Directors of the Company and the members of the Committees to the Board other than Chief Executive Officer are entitled to the reimbursement of travelling
expense and a fee for attending the Board and its committee meetings as disclosed in note 30.
24.5
This represents supervision fee at the rate of 1% on operating income as levied by the SECP with effect from 25 October 2012.
23.8
It represents fee as approved by SECP per UIN record for individual, corporate and NBCMs (other than corporate) respectively.
25
OTHER INCOME
23.9
As per NCCPL Regulations, 2015, the Company allows return to CMs on cash amount deposited with the Company as Exposure
Margin, MTM losses and other margins at the rate paid by the respective banks opted by the Clearing Member after retaining
1.5% as service charges.
23.7
23.10
In addition to above service charges an amount of Rs. 31.73 million was received on behalf of SECP i.e. Re. 0.30 per 100,000 value
of trade for regular market, 20% of the IDS facility fee and Re. 0.19 per 100,000 financed value for leveraged market fee.
24
OPERATING AND ADMINISTRATIVE EXPENSES
Note
2020
24.1 & 30
6.1 & 7.1
24.2
24.3
24.4
24.4
2019
2019
25.2
12.2
11,159
99,871
7,956
21,662
89,505
-
14,267
7,020
3,486
25,158
(5,336)
(19,662)
3,457
2,093
35,604
386
2,439
168
207,514
34,399
167
2,218
2,429
130,932
2020
2019
Income from assets other than financial assets
359,183
71,795
34,031
19,648
8,925
7,526
11,824
1,626
1,037
10,509
326,806
89,984
22,957
10,543
39,267
10,976
4,391
2,378
6,036
9,818
41,134
10,965
7,686
3,016
9,751
2,393
5,054
19,601
2,382
9,750
1,776
3,015
2,665
655,110
7,658
37,556
7,412
8,933
2,958
10,904
2,394
3,162
21,379
2,251
7,258
2,819
3,155
3,776
634,953
24.1
This includes a sum of Rs. 12.55 million (2019: Rs. 11.38 million) in respect of employees' provident fund and Rs. 22.95 million (2019:
Rs. 20.85 million) in respect of employees' funded gratuity scheme as more fully explained in note 16.1.4.
24.2
This represents fee for provision of software and hardware support for MTS application managed by PSX under an agreement
entered into with PSX.
103
2020
(Rupees in '000)
Income from financial assets
Returns on:
- Bank deposits
- Investments in TDRs and COIs
- Investments in PIBs
Realised gain / (loss) on investment - fair value
through profit or loss - net
Unrealized gain / (loss) on re-measurement of investments
Mark-up income on long-term loans
Dividend income on mutual fund units
(Rupees in '000)
Salaries and benefits
Depreciation / amortization
ROUA depreciaiton
Facilities management fee
Legal and professional
Lease assets expense / rental
Insurance
Travelling and conveyance
Training and development
Vehicle running and maintenance
Repairs and maintenance on;
- Offices and equipment
- Hardware
- Software
Office supplies
Security services
Networking and communication
Trade alert charges
Investor awareness
Utility charges
Auditors' remuneration
Directors' remuneration
Directors' meeting and conferences
Fees and subscription
Others
Note
25.1
6.3
Management fee from SGF
Gain on disposal of property and equipment
Rental income
Others
25.1
This represents management fee charged to SGF as per the terms of service level agreement of the company with the trust.
25.2
Mark-up received during the years aggregates to Rs. 14.5 million (2019: Nil).
26
OTHER CHARGES
Note
(Rupees in '000)
Bank charges
Others
27
27.3
17.1
92,479
6,021
98,500
90,623
(2,846)
(10,307)
77,470
350,473
279,828
101,637
(7,659)
(141)
4,663
98,500
81,150
(345)
1,419
(2,846)
(1,908)
77,470
Relationship between tax expense and
accounting profit
Accounting profit before tax
Tax on accounting profit at the rate of 29% (2019: 29%)
Effect of income exempt from tax or taxed at reduced rate
Permanent difference
Prior year tax
Others
27.2
437
1,873
2,310
TAXATION
Current
Prior year
Deferred
27.1
351
1,594
1,945
The returns of income tax have been filed up to and including tax year 2019. Except for tax years mentioned below, all other assessment years are deemed to be
assessed under section 120 of the Income Tax Ordinance, 2001 unless selected for an audit by the taxation authorities.
104
annual report
2020
Tax Year 2011
30
In respect of tax year 2011, the amended assessment is challenged before Appellate Tribunal where treatment of tax withheld on
services as minimum tax is contested by the Company; while levy of minimum tax u/s 113 is disputed by the department. The
hearing is yet to be fixed. Further, the tax year is time barred for any further amendments and no demand is payable for the subject
year. The management is confident that these appeals will be decided in favour of the Company therefore, no provision is required.
REMUNERATION OF CHIEF EXECUTIVE OFFICER, DIRECTORS AND EXECUTIVE
The aggregate amounts charged in the financial statements for the year in respect of remuneration, including benefits to directors and executives of the
Company are as follows:
2020
Tax Year 2016
Tax year 2016, was selected for audit by the tax authorities. On December 31, 2018, an Order was passed whereby the original
assessment was amended by the Assistant Commissioner on certain issues and tax refundable was decreased from Rs. 16.8
million to Rs. 2.8 million. The company challenged the said order in the appeal before commissioner (Appeals) who vide order dated
5 December 2019 deleted the actions of DCIR of disallowing initial allowance on computers and of restricting the amortization of
intangibles by spreading the life of intangibles to ten years however he confirmed the treatment of amortizing the expense incurred
for increasing the share capital being capital expenditure. The company has challenged the order on the issue of amortizing the
expenses incurred for increasing the share capital in the appeal before the Tribunal which is yet to be fixed for hearing.
Managerial remuneration
Meeting attendance fees /
other reimbursements
Bonus and Incentives
Rent and utilities
Contribution to Gratuity
Contribution to Provident
Fund
The management along with its tax advisor is confident that this appeal will be decided in favour of the Company therefore, no
provision is recognised.
This represents income tax reversed in respect of prior tax years on account of difference between tax assessed and tax charge in
the financial statements in the prior years.
27.4
Sufficient provision for tax has been made in these financial statements taking into account the profit or loss account for the year
and various admissible allowances and deduction under the Income Tax Ordinance, 2001. Position of provision and assessment
including returns filed and deemed assessed for last three years are as follows:
2019
2018
--------------- Rupees in ('000) ----------------
28
87,777
61,268
145,479
89,610
60,794
137,625
2020
100,854
(Rupees)
Profit before taxation
Adjustments for non cash charges and other items:
- Depreciation
- Amortization
- Mark-up income
- Gain on disposal of property and equipment
- Staff gratuity expense
- Unrealised / realised loss or gain on remeasurement of investment
at fair value through profit or loss
- Interest expense on lease liability
Working capital changes
29.1
100,854
(Restated)
2.50
Note
136,552
132,810
12,105
792
3,243
9,832
656
2,975
9,750
-
7,258
-
21,954
8,104
19,204
7,743
9,750
34,059
792
11,347
7,258
29,036
656
10,718
1,924
51,420
1,766
45,831
9,750
7,258
5,457
138,711
5,164
134,319
7,381
199,881
6,930
187,408
13
13
18
17
32
31
2020
(Rupees in '000)
1
1
FINANCIAL RISK MANAGEMENT
The Board of Directors has overall responsibility for the oversight of financial risk management for the Company. To assist the Board in discharging its oversight responsibility,
management has been made responsible for identifying, monitoring and managing the Company’s financial risk exposures.
After assuming the role of CCP, the Company provides guaranteed settlement in respect of trades reported for clearing and settlement in the NCSS. The company obtains
necessary collaterals, exposure margins and undertakes Risk management in the normal course of its business.
The main financial risks that the Company is exposed to and how they are managed are set out below:
- Market risk
- Credit risk
- Liquidity risk
202,358
(Restated)
CASH GENERATED FROM OPERATIONS
102,208
31
(Number in '000)
29
103,196
In addition to the above remuneration, CEO is also provided with the free use of two Company maintained cars in accordance with his entitlement.
2019
251,973
Basic and Diluted earnings per share
-
30.1
(Rupees in '000)
Weighted average number of ordinary shares
outstanding during the year
-
2017
Tax provision recognised in the financial statements
Profit after taxation for the year
30,602
The Company is exposed to market risk (including price risk and interest rate risk), credit risk and liquidity risk arising from its business activities. The Company’s overall risk
management strategy seeks to minimize adverse effects from the unpredictability of financial markets on the Company’s financial performance.
Tax charged as per tax returns
EARNINGS PER SHARE - Basic and Diluted
2019
33,356
Number
27.3
Chief Executive
Directors
Executives
Total
2019
2020
2019
2020
2019
2020
------------------------------------------------------------------ (Rupees '000) ------------------------------------------------------------------
2.01
31.1
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of
risks: currency risk, interest rate risk and other price risk.The exposure to these risks and their management is described below:
i.
Currency risk is that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company, at present
majorly carries out its transactions in Pak Rupees but few transactions are also carried out in USD.
2019
350,473
279,828
93,733
12,093
(320,966)
(386)
22,950
65,937
24,047
(289,265)
(167)
20,851
Currency risk
ii.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
6.1
7.1
23.2 & 25
6.3
16.1.4
25
29.1
(21,287)
7,526
(34,702)
19,662
(57,975)
109,434
62,918
Interest rates used on long-term loans measured at amortised cost are constant based on rate used to determine fair value at initial recognition.
At the balance sheet date the interest rate risk profile of the Company’s interest bearing financial instruments is as follows:
Note
2020
2019
(Rupees in '000)
Variable rate instruments
Financial assets
13
12
12
7,540,428
200,000
100,000
16,097
7,856,525
7,309,090
200,000
100,000
17,799
7,626,889
Cash margins from CMs
Collateral against risk management of capital market trades
Deposits from NCS customers
18
18
18
633,627
6,500,680
75,332
7,209,639
532,375
6,163,230
61,131
6,756,736
Fixed rate instruments
Investments - At amortised cost - TDR
Investments - At amortised cost - PIBs
Investments - At amortised cost - Tbills
12
12
12
302,400
376,647
92,570
771,617
481,032
481,032
Cash and bank balances
Investments - At fair value through profit or loss - Sukuk
Investments - At fair value through profit or loss - TFCs
Long-Term Loans
Working capital changes
Financial liabilities
Decrease / (increase) in current assets:
- Trade receivables
- Loans and advances
- Short-term deposits, prepayments and other receivables
- Securities transactions settlement receivables
- Bank balance held for FBR in respect of CGT and Dividend
Increase / (decrease) in current liabilities:
- Deposits, accrued and other liabilities
- CGT and Dividend payable to FBR
- Securities transactions settlement payables
105
(18,884)
(1,286)
(10,318)
1,061,778
(1,625,344)
(594,054)
9,423
(1,937)
(8,701)
(135,157)
238,123
101,751
(4,214)
1,625,344
(1,061,778)
559,352
(34,702)
(56,760)
(238,123)
135,157
(159,726)
(57,975)
106
annual report
2020
Fair value interest rate risk
31.2
Yield / interest rate sensitivity position for on-balance sheet financial instruments is based on the earlier of contractual re-pricing or maturity date and
for off-balance sheet instruments is based on the settlement date.
Effective yield /
interest rate
On-balance sheet financial instruments
Financial assets
Trade receivables
Loans
Deposits and other receivables
Investments
Mark-up accrued
Securities transactions settlement receivables
Cash and bank balances
Financial liabilities
Securities transactions settlement payables
Deposits, accrued and other liabilities
2020
Exposed to yield / interest rate risk
More than
More than
Upto three
three months
one year
months
and upto
one year
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation, without taking into account the fair value of
any collateral.
Total
Not exposed
to yield /
interest rate
risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the balance sheet date was as follows:
Total
Note
5.5% - 11.25%
11.65% - 15.64%
3.45% - 14%
2.25% - 14%
On-balance sheet gap
100,400
100,400
16,097
765,581
781,678
7,209,639
7,209,639
531,907
100,400
781,678
Off-balance sheet financial instruments
Off-balance sheet gap
Total interest rate sensitivity gap
Cumulative interest rate sensitivity gap
531,907
531,907
100,400
632,307
134,332
13,246
26,695
469,217
42,921
2,871,183
882
3,558,476
2,871,183
842,318
3,713,501
(155,025)
781,678
1,413,985
134,332
29,343
26,695
1,537,198
42,921
2,871,183
7,540,428
12,182,100
On-balance sheet financial instruments
Financial assets
Trade receivables
Loans
Deposits and other receivables
Investments
Mark-up accrued
Securities transactions settlement receivables
Cash and bank balances
2.25% - 12.75%
Financial liabilities
Securities transactions settlement payables
Deposits, accrued and other liabilities
2.25% - 12.75%
Exposed to yield / interest rate risk
More than
More than
three months
one year
and upto
one year
Upto three
months
Not exposed
to yield /
interest rate
risk
9.72% - 13.3%
On-balance sheet gap
Off-balance sheet financial instruments
Off-balance sheet gap
Total interest rate sensitivity gap
Cumulative interest rate sensitivity gap
17,799
650,745
668,544
115,448
15,644
19,163
49,160
3,932,961
3,307
4,135,683
115,448
33,443
19,163
1,131,777
49,160
3,932,961
7,312,397
12,594,349
6,756,736
6,756,736
1,033,386
-
668,544
3,932,961
831,574
4,764,535
(628,852)
3,932,961
7,588,310
11,521,271
1,073,078
1,033,386
1,033,386
1,033,386
317,799
1,351,185
-
11,024
Variable rate financial instruments
iii.
(11,024)
31.3
2
16
3
100
Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or other financial assets. The
Company has minimal liquidity risk as it maintains sufficient cash and short-term investments for operations through prudent liquidity risk management. The Company has no
external borrowings.
The financial liabilities of the Company are analysed into the relevant maturity buckets based on their contractual maturity dates in the table below:
2020
Carrying
amount
Contractual
cash flows
Upto three
months
Less than
one month
On balance sheet
More than three
months and upto
one year
More than one
year
----------------------------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------------------------Financial liabilities
Deposits, accrued and other liabilities
Securities transactions settlement payables
2019
Equity / profit or loss
100 bp
100 bp
increase
decrease
(Rupees in '000)
13,512
(13,512)
Other price risk
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate
risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded
in the market.
107
-
The Company has not recognised impairment loss against its financial assets under IFRS 9 as the probability of default of counterparty is remote and negligible.
A change of 100 basis points in interest rates at the reporting date would have increased / (decreased) equity and profit or loss account by the amounts shown below. This analysis
assumes that all other variables remain constant. The analysis is performed on the same basis for 30 June 2020
(Rupees in '000)
31
47
1
Long-term loans are recoverable from employees and are secured against property or vehicle documents, as the case maybe. Deposits represents amount paid as security deposit for facility
occupied on rent and is refundable at the end of the lease term as per registered lease agreement with the lessor. Trade receivables are of short term nature and are cleared within one
month, therefore there is no significant credit risk on trade receivables.
-
a) Cash flow sensitivity analysis for variable and fixed rate instruments
2020
Equity / profit or loss
100 bp
100 bp
decrease
increase
2019
43
37
1
2
16
1
100
AAA
AA+
AA
A-1
A+
AAA
A-
Total
-
115,448
33,443
19,163
1,131,777
49,160
3,932,961
7,312,376
12,594,328
(%)
-
481,032
7,309,090
7,790,122
20
13
134,332
29,343
26,695
1,537,198
42,921
2,871,183
7,540,415
12,182,087
2020
---------------------------------------------------------- (Rupees in '000) ---------------------------------------------------------5.5% - 11.25%
9
8
11
12
Credit Rating wise analysis of balances with bank of the Company are tabulated below:
2019
Effective yield /
interest rate
2019
Investments are made in accordance with NCCPL Regulations and decisions of the investment committee. Market conditions as well as rates available for PIBs and MTBs are regularl
monitored. Bank deposits are also kept with banks with good credit ratings.
2,871,183
8,051,957
10,923,140
1,258,960
-
2020
(Rupees in '000)
Financial assets
Trade receivables
Loans
Deposits and other receivables
Investments
Mark-up accrued
Securities transactions settlement receivables
Bank balances
---------------------------------------------------------- (Rupees in '000) ---------------------------------------------------------202,000
7,539,546
7,741,546
Credit risk
8,009,667
2,871,183
10,880,850
(8,009,667)
(2,871,183)
(10,880,850)
(7,331,266)
(2,871,183)
(10,202,449)
-
-
(678,401)
(678,401)
2019
Carrying
amount
Contractual
cash flows
Less than
one month
Upto three
months
On balance sheet
More than three
months and upto
one year
More than one
year
----------------------------------------------------------------------------- (Rupees in '000) ----------------------------------------------------------------------------Financial liabilities
Deposits, accrued and other liabilities
Securities transactions settlement payables
7,588,310
3,932,961
11,521,271
(7,588,310)
(3,932,961)
(11,521,271)
(6,911,009)
(3,932,961)
(10,843,970)
-
-
(677,301)
(677,301)
The Company manages liquidity risk in case of CMs defaults in accordance with Chapter 13, Money Default Management of NCCPL Regulations, 2015. The Company also uses SGF, detailed
in note 35.
108
31.4
Capital risk management
33
annual report
2020
Related party transactions
The Company's objectives, policies and processes for managing capital are as follows:
-
Related parties comprise of associated companies, directors and key management personnel. Transactions with related parties are at terms
determined in accordance with the agreed rates. Transactions and balances with related parties other than those disclosed elsewhere are as
follows:
to safeguard the Company’s ability to continue to provide returns for shareholders and benefits for other stakeholders; and
to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
The SECP in exercise of its powers conferred through proviso of regulation 6(1) of the Clearing Houses (Licensing and Operations) Regulations, 2016, directed the management vide
letter no. SMD/SF/2(7)/2002, dated 15 December 2017 to enhance the Company's paid up capital to Rs. 1 billion and net-worth to Rs. 2 billion till June 30, 2020 subject to following
conditions.
-
The SECP may at any point in time require the Company to enhance its financial resource requirements, if it is satisfied that the risk associated with the clearing house operations
have increased due to considerable increase in the market activity or due to any other reason; and
-
The Company shall, at least annually, conduct an assessment of capital requirements and operational risk assessment or engage an expert to update the analysis done by Thomus
Murray Data Services (TMDS) and Institute of Business Administration (IBA). The Board shall oversee this process this process and recommend to the SECP to further enhance
financial resource requirements if it is identified that risks associated with clearing house operations have increased.
Name of the related party
Transactions during the year and year end
balances
2019
(Rupees in '000)
Electricity Share ISB office receivable
LAN connectivity charges payable
11,146
-
The net-worth as of June 30, 2020 stands at 1.74 billion.The SECP has recently constituted a committee comprising of chairman and CEO of PSX, CDC and NCCPL to review overall
financial resource requirements of CDC and NCCPL in due consideration of concern raised by PSX on the restriction limit on annual dividend pay-out imposed by SECP. It is expected
that SECP will re-visit the financial resource requirement and its timelines for compliance based on Report of the Committee.
Rent and utilities expense during
the year
18,798
18,325
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
Facilities management fee during
the year
19,648
22,957
Utilities payable
169
266
Receivable against trade
-
6
Two factor receivable
Rent, utilities and reimbursement of
expense during the year
Operating Income
30
5
1,993
4,043
520
316
41
20
37
60
802
327
270
160
2,266
Associated company by holding
47.06% (2019: 47.06%) share
Rent payable
Facilities management fee payable
capital
Fair value is the price that would be received to sell an asset or paid to transfer a liability in orderly transaction between market participants at the measurement date.
The Company classifies fair value measurements of its investments using a hierarchy that reflects the significance of the inputs used in making the measurements. The fair value
LSE Financial Services Limited
hierarchy has the following levels:
Associated company by holding
23.53% (2019: 23.53%) of share
capital
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Inputs for the asset or liability that are not based on observable market date (i.e. unobservable inputs).
32.1
2020
4,379
11,427
585
2,067
Pakistan Stock Exchange
Limited
The Company had capitalized its revenue reserves and issued bonus shares to meet prescribed paid-up capital requirement of Rs 1 billion within stipulated timeline.
32
Relationship
Accounting classifications and fair values
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy for financial instruments
measured at fair value.
Carrying amount
Note
Financial assets
'at amortised
cost'
Financial assets 'at Financial assets 'at
fair value through
fair value through
profit or loss'
other comprehensive
Financial liabilities
measured at
amortised cost
Total
Level 1
Fair value
Level 2
Level 3
Pakistan Kuwait Investment
Company (Private) Limited
Total
Associated company by holding
17.65% (2019: 17.65%) of share
Receivable against trade
Trade receivable - CGT
capital
Operating Income
------------------------------------------------------------------------------- (Rupees in '000) -------------------------------------------------------------------------------
ISE Towers REIT Management
Company Limited
30 June 2020
Financial assets measured
at fair value
Investment in mutual funds
Investment in TFC and Sukuks
Financial assets not measured
at fair value
Investments
Trade receivables
Loans
Deposits and other receivables
Mark-up accrued
Securities transactions settlement
receivables
Cash and bank balances
Total
Financial liabilities not measured
at fair value
Deposits, accrued and other liabilities
Securities transactions settlement
payables
32.1.1
465,581
300,000
32.1.1
32.1.1
32.1.1
32.1.1
32.1.1
771,617
134,332
29,343
26,695
42,921
32.1.1
32.1.1
2,871,183
7,540,428
11,416,519
32.1.1
32.1.1
Note
-
-
-
-
465,581
300,000
465,581
-
Settlement Guarantee Fund
771,617
134,332
29,343
26,695
42,921
765,581
-
-
2,871,183
7,540,428
12,182,100
Directors
8,051,957
Executives
8,051,957
-
2,871,183
10,923,140
-
Financial assets 'at
fair value through
profit or loss'
Financial assets 'at
fair value through
other comprehensive
income'
-
32.1.1
32.1.1
32.1.1
32.1.1
32.1.1
481,032
115,448
33,443
19,163
49,160
32.1.1
32.1.1
3,932,961
7,312,397
11,943,604
350,745
300,000
-
650,745
2,901
Key management personnel
Financial liabilities
measured at
amortised cost
Total
Level 1
Level 2
Level 3
Total
National Clearing Company of
-
350,745
300,000
-
-
481,032
115,448
33,443
19,163
49,160
-
-
3,932,961
7,312,397
12,594,349
32.1.1
-
-
-
7,588,310
7,588,310
-
-
-
3,932,961
11,521,271
3,932,961
11,521,271
The Company has not disclosed fair values for these financial assets and financial liabilities because their carrying amounts are reasonable approximation of fair value.
350,745
-
300,000
-
5,021
6,445
6,926
3,633
3,834
Contribution for the year from NCCPL
30,173
28,473
Revenue
Management fee for the year
35,604
34,399
9,750
7,258
17,854
20,936
171,403
162,502
Contribution to Gratuity
11,347
10,718
Contribution to Provident Fund
7,382
6,930
Repayment of long-term loans
3,082
3,082
31,485
35,778
Long-term loan
Managerial remuneration
Contribution for the year
Retirement benefits fund
3,428
Funds receivable
Board meeting attendance fees and
other reimbursements
Directors
Fair value
32.1.1
109
Management fee receivable
Contribution payable
2,871,183
10,923,140
Pakistan Limited - Employees'
Gratuity Fund
34
-
Associated company by virtue of
common management
496,302
--------------------------------------------------------------------------- (Rupees in '000) ---------------------------------------------------------------------------
Financial assets measured at
fair value
Investment in mutual funds
Investment in TFC and Sukuks
32.1.1
465,581
300,000
-
-
496,302
-
-
-
Financial assets
'at amortised
cost'
300,000
-
-
30 June 2019
Financial liabilities not measured
at fair value
Deposits, accrued and other liabilities
Securities transactions settlement
payables
Utilities payable
Reimbursement of expenses
capital
-
Carrying amount
Financial assets not measured at
fair value
Investments
Trade receivables
Loans
Deposits and other receivables
Mark-up accrued
Securities transactions settlement
receivables
Cash and bank balances
Total
Associated company by holding
11.76% (2019: 11.76%) of share
2020
STAFF STRENGTH
350,745
300,000
2019
(Number)
35
Permanent
Contractual / Trainees
Total number of employees at the reporting date
152
21
173
144
18
162
Average number of employees at the reporting date
168
165
SETTLEMENT GUARANTEE FUND
2020
2019
(Rupees in million)
(Un-audited)
Assets
Investments
Cash at bank
Other assets
Total assets
Liabilities
Net assets
2,971
627
273
3,871
(4)
3,867
110
(Audited)
1,279
1,938
229
3,446
(6)
3,440
annual report
2020
35.1
In addition to above, the Fund has been provided with irrevocable bank guarantee from LSE Financial Services
Limited and ISE Towers REIT Management Limited aggregating Rs. 123 million (2019: Rs. 123 million). LSE
Financial Services Limited and ISE Towers REIT Management Limited will transfer cash and cash equivalents to
the Fund on expiry of these guarantees, and / or as directed by the SECP.
35.2
After assuming the role of CCP, the liability of the Company resulted from Novated Contracts of CMs with the
Company and in respect of losses arising therefrom shall be limited to the extent of the contributions available in
the SGF. The Company shall not be liable for obligations of a CM to NBCM, obligation of a CM to another CM
towards deals not reported or recorded to NCSS.
35.3
Contributions are paid by the Company at the rate of 11 paisas of trade fee, one-half of non-exchange
transaction fee for risk management system on IDS and 30 percent of the monthly fees from NBCMs for using
IDS facility as required by the NCCPL Regulations.
36
EVENTS AFTER THE REPORTING PERIOD
36.1
Events after the reporting period
Pattern Of Shareholding
As at June 30, 2020
No. of Shareholders
Shareholdings From
Shareholdings To
Total shares held
6
1
10,000
13
01
10,001
12,000,000
11,865,237
01
12,000,001
18,000,000
17,797,853
01
18,800,001
24,000,000
23,730,460
01
24,000,001
47,500,000
47,460,917
Total
100,854,480
10
The Board of Directors in their meeting held on August 25, 2020, have proposed nil dividend for the year ended
30 June 2020 (2019: Bonus-252 million).
36.2
Date of authorization for issue
These financial statements were authorized for issue on August 25, 2020 by the Board of Directors of the
Company.
Categories of Shareholders
Number of shares held
%
Associated Companies, undertakings and related parties
Pakistan Stock Exchange Limited
47,460,917
47.06
LSE Financial Services Limited
23,730,461
23.53
ISE Towers REIT Management Company Limited
11,865,238
11.76
Pakistan Kuwait Investment Company (Private) Limited
17,797,853
17.65
17,797,853
17.65
Pakistan Stock Exchange Limited
47,460,917
47.06
LSE Financial Services Limited
23,730,461
23.53
ISE Towers REIT Management Company Limited
11,865,238
11.76
Pakistan Kuwait Investment Company (Private) Limited
17,797,853
17.65
General Public
11
Financial Institution
Pakistan Kuwait Investment Company (Private) Limited
Shareholders holding 5% (or more)
__________-sd-___________
Chairman
_____________-sd-____________
Chief Executive Officer
111
____________-sd-____________
Chief Financial Officer
112
annual report
2020
PROXY FORM
NATIONAL CLEARING COMPANY
OF PAKISTAN LIMITED
We, ___________________ of ___________, being a member of National Clearing Company of Pakistan Limited hereby appoint
_______________________ as our Proxy in our absence to attend and vote for us, and on our behalf at the Annual General
Meeting of the Company to be held on the October 27, 2020 or at any adjournment thereof.
As witness my hand this ___________ day of _____________ 2020 signed by the said.
Signature of Appointer
(Name & Designation)
PROXY
FORM
(Revenue stamp of Rs. 5/-)
WITNESS 1:
Signature:_______________________
Name:__________________________
Designation:_____________________
Address:________________________
CNIC No.:______________________
WITNESS 2:
Signature: _______________________
Name: _________________________
Designation: _____________________
Address: ________________________
CNIC No.: _______________________
114
annual report
2020
__________________
____________ /
________________
/
/
2020
/
/
27
2020 _____________
_____________
5/-
2
1
____________________________________
____________________________________
_____________________________________
_____________________________________
____________________________________
____________________________________
_____________________________________
_____________________________________
________________________
________________________
115
116
annual report
2020
117
118
annual report
2020
119
120
annual report
2020
121
122
annual report
2020
123
124
annual report
2020
125
126
2019-2020
2020
127
128