HCL - Annual Report 2020 Final
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Muhammad YasirHCL - Annual Report 2020 Final
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Muhammad YasirEager to Grow
ANNUAL REPORT
FOR THE YEAR ENDED
JUNE 30, 2020
TABLE OF CONTENTS
Contents Page No.
Vision and Mission Statements 3
Company Information 4
Notice of Annual General Meeting 5
Chairman‟s Review Report 9
Chairman‟s Review Report – in Urdu 11
Directors‟ Report to the Members 14
Directors‟ Report to the Members – in Urdu 19
Key Financial Data for the Last Six Years 25
Statement of Compliance with the Listed Companies (Code of Corporate
26
Governance) Regulations, 2019
Review Report to the Members on Statement of Compliance contained in
28
Listed Companies (Code of Corporate Governance) Regulations, 2019
Independent Auditors‟ Report to the Members 30
Statement of Financial Position 35
Statement of Profit or Loss 36
Statement of Comprehensive Income 37
Statement of Changes in Equity 38
Statement of Cash flows 39
Notes to the Financial Statements 40
Pattern of Shareholding 57
Form of proxy 60
VISION AND MISSION STATEMENTS
OUR VISION
Our vision is to be the state-of-the art supplier of Information Technology (I.T.)
products and I.T. related services in the market and ambitious to be
a quality product and service-oriented Company,
and explore other products for the
customers, shareholders
and employees.
To achieve this goal, we will be driven by an obsession even we are better
than make ourselves be the best not focusing on destination
but make a continuous onward journey.
Quality product/ service means a sustained, dedicated and commitment
tomeet and exceed stakeholder expectations. Aswe will to go the
“Mile & Miles”to delight our customers with products
and services that exceed their expectations.
OUR MISSION
The Company‟s aims to become one of the leading suppliers of I.T. related
other products and services in the market through commitment to
providing products and services that best suits need ofour
customers. We will manage our affairsthrough
modern technology, collectivewisdom
and institutionalizedleadership
and asresult achieves
zero defects
everything
we do.
We aimed doing good business, with good clients with high integrity. We will
not compromise our principles and we will like to be known as a
responsible corporate citizen, aware of our obligation to the
Government,religion, and the society we serve.
Page 3
COMPANY INFORMATION
Chairman
S. Muhammad Imran
Chief Executive
Mr. Naveed Hamid
Directors
Mr. Muhammad Farrukh Bashir Executive director
Mr. Saad Aftab Shamsi Independent director
Mr. Ahtesham Ashraf Non-executive
Mrs. Mehnaz Manzoor Non-executive
Mr. Abdul Rahim Non-executive
Mr. S. Muhammad Imran Non-executive
Mr. Zubair Ahmed Khan Independent director
Audit Committee
Mr. Zubair Ahmed Khan Chairman and Member
Mr. Ahtesham Ashraf Member
Mrs. Mehnaz Manzoor Member
HR & Remuneration Committee
Mr. Saad Aftab Shamsi Chairman and Member
Mr. Muhammad Farrukh Bashir Member
Mr. Abdul Rahim Member
Chief Financial Officer
Mr. Muhammad Farrukh Bashir
Company Secretary
Mrs. Kishwar Parveen
External Auditors
M/s. S. M. Suhail & Co.
Chartered Accountants
Legal Advisor
Mr. Bhagwan Das
Advocate High Court
Shares Registrar
M/s. F.D. Registrar Services (SMC-Private) Limited
Bankers
Habib Metropolitan Bank Limited
OFFICE OF THE COMPANY
Registered Office Karachi
Suite # 1001/1005, Uni Centre, 10th Floor,
I.I. Chundrigar Road,
Karachi, Pakistan.
Phone: 021-32414419, 37011105
Fax: 021-32416288
Email: [email protected]
Web: www.hiclpk.com
Page 4
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the 41st,Annual General Meeting of the Shareholders of Hallmark
Company Limitedwill be held on, Thursday, November 26, 2020 at 11:00A.M. at Office
# 1001/1005, 10th Floor, Uni Centre, I.I. Chundrigar Road,Karachi, to transact the following
business:
ORDINARY BUSINESS
1. To confirm the minutes of the 40th Annual General Meeting held on July 30, 2019.
2. To receive, consider and adopt the Audited Financial Statements of the Company for the
year ended June 30, 2020,together with the Directors‟ and Auditors‟ Reports thereon.
3. To appoint Auditors for the year ending on June 30, 2021 and fix their remuneration. The
retiring Auditors, M/s. S.M. Suhail & Co., Chartered Accountantsare eligible and, have
provided their consent and the Directors have recommended for their reappointment.
4. Election and appointment of directors in place of existing Board at the request of the
acquirer, under the Listed Companies (Substantial Acquisition of Voting Shares &
Takeovers) Regulations, 2017. The existing directors are not willing to continueas directors
of the Company.
Following members of the Company, have communicated their interest to contest inthe
election, scheduled in the upcoming AGM.
1) Mr. Salman - as Executive Director
2) Mr. Muhammad Saad Iqbal - as Non-Executive Director
3) Mr. Sharjeel- as Non-Executive Director
4) Mr. Jawad- as Non-Executive Director
5) Ms. Irsa Faruqui- as Non-Executive Director
6) Mr. Muhammad Ashfaq - as Independent Director, and
7) Ms. Areej Rafique - as Independent Director
5. To transact any other business with the permission of the Chairman.
By Order of the Board
Company Secretary
Karachi: November 4, 2020
Page 5
NOTES:
1. Number directors to be elected are 7 (seven) in accordance with the provisions of
section 159(1) of the Companies Act, 2017, the number of directors to be elected has
been fixed at 07 (Seven).
2. Any member who seeks to contest the election of Directors, should file with the
Company at its registered office not later than 14 (fourteen) days before the day of the
meeting, a notice of his/her intention to offer himself/herself for election as a Director in
terms of Section 159(3) of the Companies Act, 2017, along with and comply with the
relevant provisions of the listing regulations of Pakistan Stock Exchange.
3. A member is entitled to attend and vote at the Annual General Meeting, may appoint
another member as his/her proxy to attend, speak and vote instead of him/her.
4. The Share Transfer Book of the Company will be closed from November 20, 2020 to
November 26, 2020 (both days inclusive). Transfers received in order, by our Shares
Registrar, the F.D. Registrar Services (SMC-Private) Limited, located at, 17th Floor, Trade
Centre, I.I. Chundrigar Road, Karachi, at the close of the business, on November 19, 2020
will be considered in time to attend and vote at the meeting and for the entitlement of
Dividend (if any).
5. The Forms of proxy, in order to be valid, must be properly filled-in, executed and
received at the registered office of the Company not later than 48 hours before the time
of the meeting.
6. Members are requested to notify to the Share Registrar of the Company, promptly of
any change in their addresses.
7. Notice to Shareholders who have not provided CNIC Pursuant to the directive of the
Securities & Exchange Commission of Pakistan (SECP) contained in SRO 831(1)/2012
dated July 05, 2012 for the issuance of future dividend warrants etc., and in absence of
such information, payment of dividend may be withheld in terms of SECP‟s above
mentioned directive, Shareholders are therefore, requested to submit a copy of their
updated/ valid CNIC (if not already provided) to the Share Registrar.
8. Video Conference Facility, the Members can also avail video conference facility. In this
regard, please submit to registered address of the Company, the following request 10
days before holding of the Annual General Meeting.
“I/We, ____________________ of _____________, being a member of Hallmark Company
Limited, holder of __________ ordinary share(s) as per registered Folio / CDC Account
No. _______________ hereby opt for video conference facility at
_________________________.”
9. E-Voting Facility, in pursuant to the Notification vide SRO.43 (1)/2016 of January 22, 2016,
the SECP has directed to facilitate the members of the Company for e-voting if the
Company receives demand for poll from at least five (5) members or by any member or
members having not less than one tenth of the voting power. In this regard, please
submit to the registered address of the Company, the following request, 10 days before
holding of the Annual General Meeting.
“I/We, ____________________ of _____________, being a member of Hallmark Company
Limited, holder of __________ ordinary share(s) as per registered Folio / CDC Account
No. _________________ hereby opt for e-voting through Intermediary and hereby
consent the appointment of execution officer as proxy and will exercise e-voting as
per the Companies (e-voting) Regulations, 2016 and hereby demand for poll for
resolutions.
My/our secured email address is _______________, please send login details, password
and electronic signature through email.”
Page 6
10. Mandate for E-Dividends for Shareholders
In order to make process of payment of cash dividend more efficient, e-dividend
mechanism has been envisaged where shareholders can get amount of dividend
credited into their respective bank accounts electronically without any delay. In this
way, dividend may be instantly credited to respective bank accounts and there are no
chances of dividend warrants getting lost in the post, undelivered or delivered to the
wrong address, etc.
The SECP, through Notice No. 8(4) SM/CDC208 dated April 5, 2013, had advised to all
listed companies to adopt e-dividend mechanism due to the benefits it entails for
shareholders. In view of the above, you are hereby encouraged toprovide the
Company, a dividend mandate in favor of e-dividend by providing mandate form duly
filled in and signed. The dividend mandate form is available at website of the Company.
11. Electronic Transmission of Financial Statements
The SECP, through notification No., SRO 787(I)/2014 dated September 8, 2014 has
allowed companies to circulate Annual Financial Statements along with notice of
Annual General Meeting through email instead of sending the same through post, to
those members who desires to avail this facility. The members who desire to opt to
receive aforesaid statements and notice through e-mail are requested to provide their
written consent on Standard Request Form available at registered office of the
Company.
12. Form of Proxy is enclosed at the ending part of this annual report.
STATEMENT UNDER SECTION 166(3) OF THE COMPANIES ACT, 2017
Independent Directors shall be elected through election process of Directors, in terms of
Section 159 of the Companies Act, 2017, as they shall meet the criteria prescribed under
Section 166(2) of the Companies Act, 2017.
The present independent directors are not eligible being nonmember, therefore, are not
consented to be reappointed as Independent Directors of the Company.
PROFILE OF CANDIDATES AND APPOINTMENT OF FEMALE DIRECTOR ARE AS UNDER
1- Mr. Salman Yousuf has consented to be appointed as executive director. He has
completed his MBA (Masters in Business Administration) from Iqra University and has
more than 10 years of experience in the field of Information Technology. He has acted
as Executive Vice President (Digital Marketing) for four years and presently working as
Chief Operating Officer for over three years in a reputed tech company. He is a tax
filer and eligible to be appointed in the Board.
2- Mr. Muhammad Saad Iqbal has shown his consented to be appointed as non-
executive director. He has completed his master‟s degree in business administration
(MBA). He has started his career back in 2003 and since then he has been associated
with big companies of IT and media groups. He has worked as Senior Manager
Business Unit for more than 11 years and currently he is associated with reputed tech
company as President – Executive Management since 2016. He is a tax filer and
eligible to be appointed in the Board.
Page 7
1- Mr. Sharjeel has shown his consent to be appointed as non-executive director. He is a
sole proprietor and associated with many groups of real estate development. He is a
certified Realtor from Real Estate Regulatory Authority, Dubai. He has completed his
graduation from University of Karachi and has completed MIS (Management
Information System) courses from American Intercontinental University AIU (UK). He
has extensive experience in marketing and real estate. He is a tax filer and eligible to
be appointed in the Board.
2- Mr. Jawad was working as Executive Director for two and half years, in the Inter-
market Securities (Pvt.) Ltd. and prior to that, has worked as CFO and Company
Secretary in the same Company. He is a member of The Institute of Chartered
Accountants of Pakistan and had completed his mandatory Chartered Accountancy
Article from PWC.
3- Ms. Irsa Faruqui has shown her consent to be appointed as non-executive female
director. She has completed her graduation in media sciences (advertising) from Iqra
University and begun her career in advertising in 2007. She has remarkable working
experience with large names like Tohfay.com. She has worked as Senior Strategy and
Events Manager and currently she is acting as President – Executive Management
since 2016 in a reputed tech company. She is tax filer and eligible to be appointed in
the Board.
4- Mr. Muhammad Ashfaq partner of Alluhaid and Alyahya firm and also Chief
Executive of AA Global advisory Firm. In addition to this, he is also serving as
corporateadvisor of Mansour Al Mosaid Group of companies that base in Saudia
Arabia. He is Chartered Accountant with varied certifications including ACMA
(UK), CGMA (UK)and CPA (Australia) with over 22 years of audit, financial and
corporate advisory experience primarily inn Financial services.
5- Ms. Areej Rafique an independent director of Sana Industries Limited and also the
Product Market Manager at Pakistan Oxygen Limited (formerly Linde Pakistan). She
has also served at Pakistan Telecommunication Company Limited and Landmark
Group (Dubai). She holds masters degree in Business Administration from Heriot Watt
University (Scotland-UK) and BE-Telecommunication from NED University of
Engineering and technology, Karachi.
By Order of the Board
Karachi: November 4, 2020
COMPANY SECRETARY
Page 8
Chairman’s Review
It gives me immense pleasure to present this report to the members of Hallmark Company
Limited (the Company) pertaining to the overall performance of the Board and
effectiveness of its role in attaining overall objectives of the Company.
Business Performance
The current financial year was a real test due to the outbreak of COVID – 19 pandemic.
More than four months of the financial year have suffered due to the pandemic and
impacted the financial performance of the Company. I am delighted to mention here
that, even after this pandemic we are able to report profits in our financial performance.
The amount of profit is significantly declined from past trend due to the fact that our cost
to procure inventory has increased and we did not implement any rigid measure against
our employees to cut second major cost for the Company.
There is significant need of establishing new procedures and controls due to the growing
size of the Company. In such circumstances, administrative cost was very difficult to be
controlled, but due to the selfless efforts of the executive and non-executive directors, the
Company hasbeen able to restrict the increase in administrative expense at very low
margin. The Board of directors is still not receiving any remuneration from the Company for
their services and this is saving a significant cost to the Company. I really appreciate the
efforts of the Board and involved staff for the progress of the Company in such difficult
times, when it has very scant resources and business environment in the country is going
through difficult crises.
The challenge of being price competitive for a new trading company is very difficult
specially where the Company is expected to earn profit over its every transaction to
survive in the operations. The Board has effectively managed the equilibrium in overall
functions of the Company especially during the period of COVID – 19. The Company is still
able to generate sizeable gross profits. Still the Company has able to generate gross profit
margin of 28% in comparison to last year 33%.
Public Offer to Acquire Control
During the financial year under review, a public intention to acquire controls of the
Company has been received in the month of April 2020,and finally, the public offer has
been made. I appreciate the vigilance of the Board who had managed all the reporting
and other related requirements of substantial acquisition in addition to existing compliance
requirements.
The public offer has been completed subsequent to the year end, and shares have been
transferred. The acquirer has now requested to hold fresh election of directors and our
present Board is not willing to reelect and has effectively managed to hold election of
directors in the upcoming 41st, Annual General Meeting.
Financial Management
The Company remained focused on effective management of funds in such a manner as
to accomplish the objectives of the Company. The aim of our financial management is to
maximize profits. During the year, the inventory levels and trade receivables were
managed effectively to accomplish business objectives which added value for the
shareholders. It has been focused to receive the outstanding dues from customers within
due date and avoid sale on credit to those who are doubtful to pay full amount on time.
Page 9
Throughout the year, the management was much focused on cost effectiveness and profit
improvement.
Internal Audit
The Company has an independent internal audit department, which leads the internal
audit function. The internal audit function is concerned with evaluating and improving the
effectiveness of risk management, control and governance process in the Company. It is
an independent appraisal activity in the Company to examine and evaluate its financial
and operational matters. The objective of internal audit is to achieve operational
efficiency, safeguard of profitability and Company‟s interests and establishment and
observance of internal control.
Acknowledgement
On behalf of the Board of Directors, I would like to express gratitude to our stakeholders for
their continued support and encouragement and place on record the appreciation of the
valuable services rendered by the employees of the Company. I also acknowledge the
commitment and diligence of our Chief Executive and his team and thank them for their
concerted efforts.
S. Muhammad Imran
Chairman
Karachi
Dated: November 4, 2020
Page 10
COVID-19
COVID-19
Page 11
28%33%
2020
41
Page 12
Page 13
DIRECTORS REPORT TO THE MEMBERS
The Directors of the Company are pleased to present the 41st, Annual Report with the
Financial Statements of the Company for the year ended on June 30, 2020.
Company’s Performance
The Company has successfully completed this year despite a challenging business
environment and potential adverse effect of COVID – 19 pandemic on the economy.The
year under review is relatively tough year and it is apparent from the financial results of the
Company. During thisyear it has earned a net profit after tax of Rs. .382 million as
compared to last year Rs. 1.314 million. The current performance has declined mainly due
to the impact of COVID – 19 in the last four months of the financial year. It was completely
unexpected and caused loss to the Company during initial phase of lockdown when
management was mainly concerned establishing new operational environment where
remote working was possible. Due to the small size of the Company, the impact is clearly
apparent in its financial performance. Throughout the pre-COVID – 19 periods, the
Company keeps its pace above the budgeted amounts,whereas in last quarter the
Company is still able to secure net profit after tax and it is carrying business successfully in
subsequent period too. We are continuously working hard not only to sustain this growth but to
perform further than this in the current market situation.
The summarized operating results of the Company for the year are as follows:
Operating Results
Actual activity for Activities of last
the year year
(Rs.) (Rs.)
Revenue 15,874,970 18,121,036
Gross Profit 4,477,438 6,015,605
Other Income Nil 215,500
Profit After Taxation 322,833 1,314,450
Earnings per Share 0.77 2.63
With the decline in revenue, as compared to last year and increase in cost of purchases,
the results of current year are little discomforting due to the adverse impact of COVID – 19
and small size of the Company but still it has able to secure earning per share of Rs. 0.77
We observed a decline in gross profit margin by 5% only, which shows our management‟s
dedication in performing their duties and generating return over the capital of the
Company.It is a sign of appreciation and hope that we are earning profits since
commencement of the new business and at an increasing trend from main business
activities.It is a great relief for the management and the Company.
Page 14
Due to extension plan in operations, the management decided to locate its operations to
some larger place, and due to shortage of funds it was assessed that the Company
cannot presently bear the cost of owning any premises therefore,a premises has been
obtained during the year on rent for operations. First rent is commenced from financial
year 2021.
Despite of commencement of business and consistent profits, the Directors of the
Company are still not receiving any remuneration from the Company with their consent.
This has saved significant cost of the Company.
Future Outlook
Our 2021 budget is focused on increasing the working capital of the Company with
significantly higher amount through injection of further equity and achieving increased
growth which we shall hopefully achieve. This shall going to be attributed to the following
factors:
The Company has engaged in trading of used personal computers, laptops and
notebooks, and has large market available to access but, due to the financial
constraints and limited liquidity it has restricted its operations to limited markets. The
injection of capital will let the Company to concentrate on those unaddressed markets
to increase its volume of profit.
Through increase in volume of sales, the Company shall be able to reduce its fixed
cost per unit and ultimately will be earning gross profit margin prevailing in the
market.
We are also intended to invest in sectors other than Information Technology too, to
earn profits from there and reduce the dependability of the Company in any one
sector.
The capital injected shall initially be invested in secured investments most probably
debt securities of high credit ranking so that no working capital is left without
generating further return.
The Company is going through a takeover process and its future course shall mainly be
decided by the acquirer with approval of other members. Presently, the Company has
available resources to continue its existing business in normal course.
Dividend
The Company has earned profit during the year, and the accumulated deficit has now
become surplus. However, as the Company needs funds for further growing of the business,
thus the situation does not permit presently,to consider payment of dividend; therefore, no
dividend is being recommended by the Board for the year. However,as earlier disclosedwe
are heading towards and expecting to declare our next dividend very soon.
Evaluation of the Board’s Performance and Directors’ Training Program
The Board has developed a mechanism of annual performance evaluation. Every member of
the Board ensures his active participation in all the meetings of the Board. Detailed discussions
are held on strategic matters and clear directions are provided to the management, which are
Page 15
regularly monitored by the Board and its committees. The Board ensures that the Company
adopts the best possible practices of corporate governance. The Board also has planned to
review performance of business at each quarter with an aim to improve the same.
In compliance with the provisions of Listed Companies (Code of Corporate Governance)
Regulations, 2019, Directors‟ orientation program hadalso beenplanned in current financial
year.However, due to takeover intimation and subsequent public offer,the Directors expect
discontinuation of Board and due to shortage of funds with the Company it has not made
expenditure on trainings.
Statutory Auditors
The present auditors M/s. S. M. Suhail and Co., Chartered Accountants shall retire, and are
eligible to continue as auditors of the Company.As suggested by the Audit Committee the
Board has recommended M/s. S. M. Suhail and Co., Chartered Accountants for re-appointment
as auditors of the Company for the ensuing year.
Corporate Social Responsibility
In the developing countries like Pakistan, there is anintense need to work together to address
social issues as effectively and efficiently as possible. The Company values the importance of
working together with its employees and with all other stakeholders to focus towards social
responsibilities. Basic needs which areneeded to be addressed in our society include
education, health and safety, women empowerment, economic opportunity, equity of rights,
law enforcement, and environmental protection and community grants.
Presently, due to scarce resources, the Company is unable to participate through monetary
means. However the Company has acknowledged and discharged its responsibility towards
society through following measures:
Dealing in products of only those companies which are certified as Energy Star and only those
products are sold which are recyclable and energy efficient. For compliance, certifications
over products are strictly observed. Also the policy of paper less environment has been
adopted as strictly as possible. The policies are adopted as step towards environmental
protection.
The Company has established a policy of providing interest free loan convertible to Qarz-e-
Hasna to its employees, for the purposes of higher education and treatment of serious medical
injuries.
Compliance with Corporate Governance Environment
The requirements of the Listed Companies (Code of Corporate Governance) Regulations, 2019
set out by the Securities and Exchange Commission of Pakistan, relevant for the year ended
June 30, 2020 have mostly been complied with. A statement to this effect is part of this annual
report.
Statement of Ethics and Business Practices
The Board has adopted the statement of Ethics and Business Practices,wherever practicable
and shall continue to improve its‟ implementationall over the Company.
Page 16
Audit Committee
The Company has established Audit Committee as required by the Listed Companies (Code of
Corporate Governance) Regulations, 2019. The Chairman of the Committee is an independent
director and the Committee comprises of three members as detailed below:
Mr. Zubair Ahmed Khan Chairman and Member
Mr. Ahtesham Ashraf Member
Mrs. Mehnaz Manzoor Member
The Audit Committee has met 4 times during the year and all the members of the meeting
have attended all the meetings.
HR and Remuneration Committee
The Company has established HR & Remuneration Committee as required by the Listed
Companies (Code of Corporate Governance) Regulations, 2019. The Committee comprises of
three members and details of the members are as follows:
Mr. Saad Aftab Shamsi Chairman and Member
Mr. Muhammad Farrukh Bashir Member
Mr. Abdul Rahim Member
The Chairman of the Committee is an independent director. The Committee has met 4
times during the year and all the members of the meeting have attended all the meetings.
Corporate and Financial Reporting Framework
a) The financial statements prepared by the management of the Company, present fairly its
financial position, the result of its operations, cash flows and changes in equity.
b) Proper books of accounts have been maintained by the Company.
c) Appropriate accounting policies have been consistently applied in preparation of
financial statements and accounting estimates are based on reasonable and prudent
judgment,except for changes in accounting policy as mentioned in note 3.3 to the
financial statements.
d) The International Accounting and Financial Reporting Standards, as applicable to the
Company in Pakistan, have been followed in preparation of these financial statements.
e) The system of internal control is sound in design and has been effectively implemented
and monitored.
f) The Company‟s shall continue as a going concern.
g) There has been no material departure from the best practices of Corporate Governance,
as detailed in the Listed Companies (Code of Corporate Governance) Regulations, 2019.
h) The key operating and financial data for the last six years is annexed herewith.
i) During the year, four meetings of the Board of directors were held and the number of
meetings attended by each director is given hereunder:
Page 17
NAME OF DIRECTOR MEETINGS ATTENDED
Mr. Muhammad Farrukh Bashir 4
Mr. Saad A. Shamsi 2
Mr. S Muhammad Imran 4
Mr. Ahtesham Ashraf 3
Mr. Zubair Ahmed Khan 4
Mrs. Mehnaz Manzoor 4
Mr. Abdul Rahim 4
j) The pattern of shareholding in the Company as at June 30, 2020 is included in thisannual
report.
k) Information about taxes and levies is given in the notes forming part of the financial
statements.
Acknowledgements
Directors of your company take this opportunity to express their deep sense of gratitude for all
the stakeholders for their encouragement and continued support and look forward to your
continued collaboration with the Company as we move forward to meet and execute our
targets together.
Further, we appreciate the Company‟s management and supporting staff for their satisfactory
performance and devotion to duty and we are grateful to all Government Institutions, Auditors,
the SECP, the PSXand its bank,for their valuable support and cooperation throughout the year.
Naveed HamidS. Muhammad Imran
Chief Executive Chairman November 4, 2020
Page 18
41
2020 30
COVID-19
Rs.382,833
Rs.1,314
COVID-19
COVID-19
18,121,036 15,874,970
6,015,605 4,477,438
215,500
1,314,450 322,833
2.63 0.77
Page 19
Rs.0.77
COVID-19
5%
/
2021
2021
Page 20
2019
.
Page 21
2019
2020 30
2019
4
Page 22
2019
4
a
b
3.3
e
f
g
2019
h
i
Page 23
4
2
4
3
4
4
4
2020 30 j
k
2020 4 2020 4
Page 24
KEY FINANCIAL DATA FOR LAST SIX YEARS
June, 2020 June, 2019 June, 2018 June,2017 December, December,
2016 2015
Total sales revenue 15,874,970 18,121,036 14,844,275 4,169,260 - -
Cost of sales (11,397,532) (12,105,431) (10,551,973) (2,560,662) - -
Gross profit 4,477,438 6,015,605 4,292,302 1,608,598 - -
Other income 215,500 1,780,000 1,165,000 1,898,238 300,000
Administration expenses (3,285,755) (2,934,607) (2,541,520) (450,515) (985,405) (125,000)
Other expenses (803,002) (1,301,175) (1,270,260) (395,148) (275,000) -
Profit before taxation 388,681 1,995,323 2,260,521 1,927,936 912,833 175,000
Taxation - net (5,848) (680,873) (131,975) (100,424) - -
Profit after taxation 382,833 1,314,450 2,128,546 1,827,511 912,833 175,000
Earning per share 0.77 2.63 4.26 3.66 1.28 0.35
Shareholders equity excluding loan 6,712,641 6,329,810 5,015,360 2,886,815 1,059,304 421,471
Non current assets 4,009,685 4,192,597 5,329,194 2,537,964 1,775,473 1,775,473
Cash and bank balances 221,477 587,269 280,954 498,507 192,691 487,313
Trade debts 1,578,052 1,296,906 1,003,564 1,095,446 - -
Total debt – Financing - 300,000 1,800,000 1,500,000 250,000 -
Creditor and other payable 549,938 1,219,179 1,358,387 799,371 500,000 500,000
Tax payable 238,125 359,177 15,980 44,693 - -
Total Assets at book value 7,500,704 8,274,018 8,223,491 5,286,610 2,318,164 3,165,323
Page 25
Statement of Compliance with Listed Companies
(Code of Corporate Governance) Regulations, 2019
Name of Company: Hallmark Company Limited
Year ending: June 30, 2020
The company has complied with the requirements of the Regulations in the following manner:
1. The total number of directors are 07 as per the following:
i.Male:06 ii.Female:01
2. The composition of board is as follows:
i. Independent Directors: Mr. Saad Aftab Shamsi
Mr. Zubair Ahmed Khan
ii. Other Non-executive Director: Mr. Ahtesham Ashraf
Mrs. MehnazManzoo
Mr. Abdul Rahim
Mr. S. Muhammad Imran
iii. Executive Directors Mr. Muhammad Farrukh Bashir
3. The directors have confirmed that none of them is serving as a director on more than five
listed companies, including this company.
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.
5. The board has developed vision and mission statements, overall corporate strategy and
significant policies of the company. A complete record of particulars of significant policies
along with the dates on which they were approved or amended has been maintained.
6. All the powers of the board have been duly exercised and decisions on relevant matters
have been taken by board/ shareholders as empowered by the relevant provisions of the
Companies Act, 2017 and the Listed Companies (Code of Corporate Governance)
Regulations, 2019.
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 the Companies Act, 2017 and Listed Companies (Code of Corporate
Governance) Regulations, 2019 with respect to frequency, recording and circulating minutes
of meeting of the board.
8. The board of directors has a formal policy and transparent procedures for remuneration of
directors in accordance with the Companies Act, 2017 and Listed Companies (Code of
Corporate Governance) Regulations, 2019.
9. The Board shall arrange Directors‟ Training program in due course of time.
10. The board has approved appointment of CFO and Company Secretary including their
remuneration and terms and conditions of employment and complied with relevant
requirements of the Listed Companies (Code of Corporate Governance) Regulations, 2019.
Page 26
11. CFO and CEO duly endorsed the financial statements before approval of the board.
However, head of Internal Audit is not yet been appointed due to the heavy cost
involved in his appointment as the business has recently commenced.
12. The board has formed committees comprising of members given below:
Audit Committee
Mr. Zubair Ahmed Khan Chairman and Member
Mr. Ahtesham Ashraf Member
Mrs. Mehnaz Manzoor Member
HR and Remuneration Committee
Mr. Saad Aftab Shamsi Chairman and Member
Mr. Muhammad Farrukh Bashir Member
Mr. Abdul Rahim Member
13. The terms of reference of the aforesaid committees have been formed, documented and
advised to the committee for compliance.
14. The frequency of quarterly meetings of the committee were as per following:
Audit Committee 4 meetings were held during FY 2020
HR and Remuneration Committee 4 meetings were held during FY 2020
15. The board has set up an effective internal audit function, which is considered suitably
qualified and experienced for the purpose and are 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 ICAP and registered with
Audit Oversight Board of Pakistan, that they and 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 close relative (spouses, parent dependent and non-dependent
children) of the Chief Executive Officer, Chief Financial Officer, Head of Internal Audit,
Company Secretary and 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, these regulations or any other
regulatory requirement and the auditors have confirmed that they have observed IFAC
guidelines in this regard.
18. We confirm that all requirements of regulations 3, 6, 7, 8, 27, 32, 33 and 36 of the Regulations
have been complied with.
On behalf of the Board of directors
S. Muhammad Imran
Chairman
Karachi
November 4, 2020
Page 27
an independent member firm
a network firm
INDEPENDENT AUDITOR’S REVIEW REPORTTO THE MEMBERS OF
HALLMARK COMPANY LIMITED
Review Report on the 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 Hallmark Company Limited (the Company) for the year ended June
30, 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 a 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. 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.
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 June 30, 2020.
Further, we highlight below instance of non-compliance with the requirement of the
Regulations as reflected in the note reference, where it is stated in the Statement of
Compliance:
Main Office
Suite No. 1001, 1014,
10th Floor, Uni Centre,
Karachi I.I. Chundrigar Road,
Lahore Karachi, Pakistan.
Islamabad Phone: + 92-21-32414057
Page 28 UAE + 92-21-32414163
Canada E-mail: [email protected]
Australia URL: www.smsco.pk
Note
Reference Description
09 The Board has not arranged Director‟s Training Program for half of
Its directors on their Board
11 There was no appointment of head of Internal Audit during the
year.
S.M. Suhail& Co.
Chartered Accountants
Karachi.
Engagement Partner: S. M. Suhail, FCA
Our Ref: SMS-A-1742021
Date: November 4, 2020
Page 29
an independent member firm
a network firm
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF
HALLMARK COMPANY LIMITED
ON THE AUDIT OF THE FINANCIAL STATEMENTS OF JUNE 30, 2020
Opinion
We have audited the annexed financial statements of Hallmark Company Limited(the
Company), which comprise the statement of financial position as at June 30, 2020, and the
statement of profit or loss, 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, statement of profit or loss, 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 June 30, 2020 and of the profit and other
comprehensive income, the changes in equity and its cash flows for the year then ended.
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
Auditor's 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.
Main Office
Suite No. 1001, 1014,
10th Floor, Uni Centre,
Karachi I.I. Chundrigar Road,
Lahore Karachi, Pakistan.
Islamabad Phone: + 92-21-32414057
Page 30 UAE + 92-21-32414163
Canada E-mail: [email protected]
Australia URL: www.smsco.pk
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the financial statements of the current period. These matters
were addressed in the context of our audit of the financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these
matters.
We have determined the matters described below to be the Key Audit Matters to be
communicated in our report:
S. No. Key audit matters How the matters were addressed in our audit
1 Adoption of IFRS-9 “Financial Instruments”
As referred in note 5.2 and given in We have reviewed and understood the
note 29 to the financial statements, requirements of the IFRS 9. Our audit
IFRS 9 „Financial Instruments‟ is procedures included the following:
adopted by the Company during the
current year. It replaced IAS 39 - Considered the management‟s process to
„Financial Instruments: Recognition assess the impact of adoption of IFRS 9 on
andMeasurement‟. the Company‟s financial statements.
IFRS 9 requires the recognition of - Reviewed the appropriateness of the
expected credit losses („ECL‟) on assumptions used (future and historical), the
financial assets rather than incurred methodology and policies applied to assess
credit losses, which is a fundamentally the ECL in respect of financial assets of the
different approach. Management is Company. Reviewed the working of
required to determine the expected management for expected credit losses.
credit loss that may occur over either - We reviewed and assessed the impact
a 12-month period or the remaining and disclosures made in the financial
life of an asset, depending on the statements with regard to the effect of
categorization of the individual asset. adoption of IFRS 9.
In accordance with IFRS 9, the
measurement of ECL reflect a range
of unbiased and probability weighted
outcomes, time value of money,
reasonable and supportable
information based on the
consideration of historical events,
current conditions and forecasts of
future economic conditions. The
calculation of ECLs in accordance
with IFRS 9 is therefore, complex and
involves a number of judgmental
assumptions.
The Company has adopted IFRS 9
using the allowed modified
retrospective approach. We
considered this as key audit matter
due to the significant changes
involved and significant judgments
made by management regarding the
matter.
Page 31
Information Other than the Financial Statements and Auditor's Report Thereon
Management is responsible for other information. The other information comprises the
information included in the Annual Report, but does not includethe financial statements
and our auditor‟s report thereon.
Our opinion on the financial statements does not cover the other information and 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 material
misstatement of this other information, we are required to report that fact. We have
nothing to report in this regard.
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 the 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.
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 is responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objective is 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 auditor's 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.
Page 32
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 auditor's 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 auditor's 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.
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.
From the matters communicated with the board of directors, we determine those matters
that were of most significance in the audit of the financial statements of the current period
and are therefore the key audit matters. We describe these matters in our auditor's report
unless law or regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh
the public interest benefits of such communication.
Page 33
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, 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).
The engagement partner on the audit resulting in this independent auditor's report is
S. M.Suhail, FCA.
S. M. Suhail & Co.
Chartered Accountants
Karachi
Ref: SMS-A-1742021
Date 4 November, 2020
Page 34
HALLMARK COMPANY LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT JUNE 30, 2020
2020 2019
ASSETS Note Rupees Rupees
Non-Current Assets
Furniture, fixtures and office equipment 9 845,130 907,595
Intangibles 10 1,605,000 1,785,000
Deferred tax asset 15 59,555 -
Security deposit for rent 1,500,000 1,500,000
4,009,685 4,192,595
Current Assets
Stock in trade 854,990 2,044,149
Trade debts - considered good 1,578,052 1,296,906
Loans and advances 11 836,500 153,097
Cash and bank balance 12 221,477 587,269
3,491,019 4,081,421
TOTAL ASSETS 7,500,704 8,274,017
EQUITY AND LIABILITIES
Share Capital And Reserves
Authorized Share Capital
1,000,000 (2019: 1,000,000) Ordinary Shares of
10,000,000 10,000,000
Rs. 10/- each
Issued, subscribed and paid-up capital 13 5,000,000 5,000,000
Accumulated profits 1,712,641 1,329,809
Capital contribution from Directors 14 - 300,000
6,712,641 6,629,809
Non Current Liabilities
Deferred tax liability 15 - 65,852
Current Liabilities
Trade creditor 156,050 314,504
Contract liabilities - 411,174
Accrued and other payables 16 370,738 470,351
Unclaimed dividends 17 23,150 23,150
Provision for taxation 238,125 359,177
788,063 1,578,356
TOTAL EQUITY AND LIABILITIES 7,500,704 8,274,017
Contingencies and commitments 18
The annexed notes from 1 to 34 form an integral part of these financial information.
Chief Executive Director Chief Financial Officer
Page 35
HALLMARK COMPANY LIMITED
STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED JUNE 30, 2020
Note 2020 2019
Rupees Rupees
Sales 19 15,874,970 18,121,036
Cost of sales 20 (11,397,532) (12,105,431)
Gross profit 4,477,438 6,015,605
Administrative expenses 21 (1,156,347) (1,077,209)
Selling expense 22 (2,129,408) (1,857,399)
Other income 23 - 215,500
Other expenses 24 (803,002) (1,301,175)
Profit before taxation 388,681 1,995,322
Taxation 25 (5,848) (680,873)
Profit after taxation 382,833 1,314,449
Earning per share 26 0.77 2.63
The annexed notes from 1 to 34 form an integral part of these financial information.
Chief Executive Director Chief Financial Officer
Page 36
HALLMARK COMPANY LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED JUNE 30, 2020
2020 2019
Rupees Rupees
Profit after taxation 382,833 1,314,449
Other comprehensive income - -
Total comprehensive income for the year 382,833 1,314,449
The annexed notes from 1 to 34 form an integral part of these financial information.
Chief Executive Director Chief Financial Officer
Page 37
HALLMARK COMPANY LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED JUNE 30, 2020
Revenue
Capital and Reserves
reserves
Issued subscribedCapital Total Equity
and paid up contribution Accumulated
capital from Directors profits
--------------------------------- (Rupees) ----------------------------------
Balance as at June 30, 2018 5,000,000 1,800,000 15,360 6,815,360
Total comprehensive income for the
- - 1,314,449 1,314,449
year
Capital contribution refunded to
- (1,500,000) - (1,500,000)
directors
Balance as at June 30, 2019 5,000,000 300,000 1,329,809 6,629,809
Total comprehensive income for the
- - 382,833 382,833
year
Capital contribution refunded to
- (300,000) - (300,000)
directors
Balance as at June 30, 2020 5,000,000 - 1,712,641 6,712,641
The annexed notes from 1 to 34 form an integral part of these financial information.
Chief Executive Director Chief Financial Officer
Page 38
HALLMARK COMPANY LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2020
2020 2019
Rupees Rupees
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation 388,681 1,995,322
Adjustments for:
Depreciation 123,165 84,638
Amortization 180,000 263,500
Gain on intangible - (215,500)
Operating Profit Before Working Capital Changes 691,846 2,127,960
Changes in working capital
(Increase)/ decrease in current assets:
Stock in trade 1,189,159 (527,307)
Trade receivable (281,146) (293,342)
Other receivable (683,403) (60,160)
Increase / (decrease) in current liabilities:
Trade creditor (158,454) 131,039
Contract liabilities (411,174) 151,174
Other payable (99,613) (421,421)
Total Changes In Working Capital 247,215 1,107,942
Taxes paid (252,308) (305,588)
Net Cash (Outflow)/ Inflow From Operating Activities (5,093) 802,354
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for procurement if fixed assets (60,700) (210,040)
Refund from intangible - 2,214,000
Proceeds from for advance for office premises - 500,000
Payment for security deposit - (1,500,000)
Net Cash (Outflow)/ Inflow From Investing Activities (60,700) 1,003,960
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of capital contribution (300,000) (1,500,000)
Net Cash (Outflow) From Financing Activities (300,000) (1,500,000)
Net (decrease)/ increase in cash and cash equivalents (365,793) 306,314
Cash and cash equivalents at the beginning of the year 587,269 280,954
Cash and cash equivalents at the end of the year 221,477 587,269
The annexed notes from 1 to 34 form an integral part of these financial information.
Chief Executive Director Chief Financial Officer
Page 39
HALLMARK COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
1 CORPORATE INFORMATION, OPERATIONS AND LEGAL STATUS
Hallmark Company Limited was incorporated as a Public Limited Company on 31 October, 1981 under the
repealed Companies Act, 1913 (now the Companies Act, 2017), and obtained registration in the year 1983 under
repealed Insurance Act, 1938, (now the Insurance Ordinance, 2000) as an insurer. The Company is listed on
Pakistan Stock Exchange.
With promulgation of Insurance Ordinance, 2000 requirement of minimum paid up capital was introduced. The
Company did not find itself in a position to increase its paid up capital to the required minimum level of Rs. 350
million and had ceased to underwrite insurance business w.e.f. January 01, 2003 and subsequently the Company
voluntarily got its insurance license revoked on November 22, 2016.
After revocation of insurance license the Company's principal business activity comprises of engaging in trading
of used laptops, used personal computers and, development and sale of software and provision of allied
services. The Company has commenced its new trading business activities during the financial year June 30,
2017; and continued successfully carrying its business activities.
Geographical location and address of business units - Address Purpose
Registered office
Suite 1001/1005, Uni Centre, 10th Floor, I.I. Chundrigar Road, Karachi.
2 SIGNIFICANT TRANSACTIONS AND EVENTS THAT EFFECTED THE COMPANY'S FINANCIAL
POSITION AND PERFORMANCE
Public Offer to Acquire Controlling Shares
During the year on April 1, 2020, a public offer to acquire control of the Company and more than 50% of
shareholding has been made under the Listed Companies (Substantial Acquisition of Voting Shares and
Takeovers) Regulations, 2017 (the Regulation). Directors of the Company have been entered into share
purchase agreement with acquirer at the rate already disclosed in the public offer. For details, refer the directors
report. The takeover process may be completing by the end of following month.
3 FINANCIAL AND OPERATIONAL IMPACT DUE TO COVID 19
During the year, global pandemic COVID-19 was outbreak. It was first surfaced in China and then spread all
over the world. The World Health Organization declared this outbreak as pandemic in the mid of March, 2020.
Government of Pakistan has declared complete lockdown of social and business activities from March, 2020 to
control the spread of the pandemic. Currently the potential impact of COVID-19 is uncertain on the overall
economy. Business activities were allowed in the month of June, 2020 to some extent, with some measures and
these situations are being monitored by the governing bodies closely. The management of the Company is also
monitoring the situation and due to restriction on imports procurement, cost of IT items has increased
significantly which is mitigated through rise in selling prices to the possible extent to keep demand available in
the market. Company did not opt for any redundancies or curtailment of employees' salaries. Operations of the
Company has been impacted to some extent. However, as IT products are now have become necessity,
therefore management assumes that increase in market selling price would maintain the approximate pre-
COVID profit margin. In longer term management does not expect any significant adverse financial impact on
financial position, performance and cash flows of the Company due to COVID 19 outbreak.
4 BASIS OF PREPARATION
4.1 STATEMENT OF COMPLIANCE
These financial statements have been prepared in accordance with the approved accounting and reporting
standards as applicable in Pakistan. The approved accounting and reporting standards applicable in Pakistan
comprise of International Financial Reporting Standards (IFRSs) issued by the International Accounting
Standards Board (IASB) as notified under the Companies Act, 2017 and provisions and directives issued under
the Companies Act, 2017. Where provisions and directives issued under the Companies Act, 2017 are differ,
from the IFRSs, the provisions and directives issued under the Companies Act, 2017 shall prevail.
4.2 BASIS OF MEASUREMENT
These financial statements have been prepared under historical cost convention and on an accrual basis of
accounting, except for cash flow information reported in statement of cash flows.
5 CHANGES IN SIGNIFICANT ACCONTING POLICIES
During the year, the Company has adopted International Financial Reporting Standard 9 (IFRS 9) "Financial
Instruments" and IFRS 16 "Leases". The detail of new significant accounting policies adopted and the nature and
effect of the changes to previous accounting policies are set out below:
Page 40
HALLMARK COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
5.1 IFRS 16 'Leases'
IFRS 16, 'Leases' has been adopted by the Company from July 1, 2019 for interim and annual reporting. IFRS 16
will affect primarily the accounting by lessees and will result in the recognition of almost all leases on statement
of financial position. The standard removes the current distinction between operating and financing leases and
requires recognition of an asset (the right to use the leased item) and a financial liability to pay rentals for
virtually all lease contracts. An optional exemption exists for short-term and low-value leases.
The accounting by lessors will not significantly change. Some differences may arise as a result of the new
guidance on the definition of a lease. Under IFRS 16, a contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company has not entered into any lease agreement under the scope of IFRS 16. Accordingly, the
applicability of this standard did not has any impact on the Company.
5.2 IFRS 9 'Financial Instruments'
IFRS 9 “Financial Instruments” (IFRS 9) replaces IAS 39 “Financial Instruments: Recognition and Measurement”.
It introduces new requirements for the classification and measurement of financial assets and financial liabilities
and impairment for financial assets.
IFRS 9 permits either a full retrospective or a modified retrospective approach for adoption. The Company has
adopted the standard using the modified retrospective approach for classification, measurement and
impairment. This means that the cumulative impact, if any, of the adoption is recognized in unappropriated
profit as of July 1, 2019 and comparatives are not restated. Details of these new requirements as well as their
impact on the Company’s financial statements are described below:
i)
Classificati
IFRS 9 no longer has an “Available-for-sale” classification for financial assets. The new standard has
different requirements for debt or equity financial assets. It requires the Company to assess the
classification of financial assets on its statement of financial position in accordance with the cash flow
characteristics of the financial assets and the relevant business model that the Company has for a specific
class of financial assets.
Debt instruments are classified and measured either at:
• Amortized cost, where the effective interest rate method will apply;
• Fair value through other comprehensive income, with subsequent recycling to the profit or loss upon
disposal of the financial asset; or
• Fair value through profit or loss.
Investments in equity instruments, other than those to which consolidation or equity accounting apply,
should be classified and measured either at:
• Fair value through other comprehensive income, with no subsequent recycling to the profit or loss upon
disposal of the financial asset; or that are highly liquid, readily convertible to known amounts of cash with
insignificant risk of changes in value and have original maturity period of less than three months from the
date of acquisition; or
• Fair value through profit or loss.
Application of IFRS 9 had no impact on financial liabilities of the company.
Assessment of financial impact of measurement requirements on adoption of IFRS 9 as at July 1, 2019 is as
follows:
Measurement category Carrying amount
Under IAS 39 Under IFRS 9 Under IAS 39 Under IFRS 9
(Original (New (Original (New Difference
adoption) adoption) adoption) adoption)
Financial Assets
Security deposit for rent Loans and Amortized 1,500,000 1,500,000 -
receivable Cost
Trade debts Loans and Amortized 1,578,052 1,578,052 -
receivable Cost
Loans and advances Loans and Amortized 836,500 836,500 -
receivable Cost
Cash and bank balance Loans and Amortized 221,477 221,477 -
receivable Cost
There is no impact on financial liabilities of the company as result of application of IFRS 09.
Page 41
HALLMARK COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
The following table presents the transitional impact of that adoption of IFRS 9 have on the opening statement of
financial position of the Company as of July 1, 2019:
ii) Impairment of financial assets
IFRS 9 introduces the Expected Credit Loss (ECL) model, which replaces the incurred loss model of IAS 39
whereby an allowance for doubtful debt was required only in circumstances where a loss event has
occurred. By contrast, the ECL model requires the Company to recognize an allowance for doubtful debt on
all financial assets carried at amortized cost (including, for example, trade debts and other receivables), as
well as debt instruments classified as financial assets carried at fair value through other comprehensive
income, since initial recognition, irrespective whether a loss event has occurred. For trade receivables and
other receivables, the Company applies IFRS 9 simplified approach to measure the expected credit losses
(loss allowance) which uses a lifetime expected loss allowance while general 3-stage approach for other
financial assets i.e. to measure ECL through loss allowance at an amount equal to 12-month ECL if credit
risk on a financial instrument or a group of financial instruments has not increased significantly since initial
recognition. If risk has significantly increased then credit loss over the whole life of the assets shall be
recognized and in case of happening of actual event the impairment shall be recorded.
6 NEW AND AMENDED STANDARDS AND INTERPRETATIONS
6.1 Standards, interpretations, amendments to published approved accounting standards that are
effective in the current year
In addition to IFRS 9 "Financial Instruments", and IFRS 16 "Leases" the Company has adopted the following
new standards, amendments to published standards and interpretations of IFRSs which became effective during
the current year. However, some standards and amendments are not relevant to company's operations or are
not expected to have significant impact on company's financial statements other than certain additional
disclosures:
Standard or Interpretation Effective for Annual accounting
period beginning on or after
IFRS 14 'Regulatory Deferral accounts' July 1, 2019
IFRS 16 'Leases' January 1, 2019
IFRS 3 Previously held interest in a joint operation January 1, 2019
IFRS 9 Prepayment features with negative compensation January 1, 2019
IFRS 11 Previously held interest in a joint operation January 1, 2019
IFRIC 23 'Uncertainty over Income Tax Treatments' January 1, 2019
IAS 28 'Long-term Interests in Associates and Joint Ventures' (Amendments to IAS 28) January 1, 2019
IAS 19 'Plan Amendment, Curtailments or Settlements' (Amendments to IAS 19) January 1, 2019
Annual improvements to IFRSs 2015 - 2017 Cycle January 1, 2019
Certain annual improvements have also been made to a number of standards, which have not been enumerated
here for brevity.
6.2 Standards, interpretations and amendments to published approved accounting standards that are
not yet effective
The following standards, amendments and interpretations of approved accounting standards will be effective for
the Company, for the accounting periods beginning on or after 01 July 2020:
Effective for Annual accounting
period beginning on or after
IFRS 3 'Definition of a business' Amendment to IFRS 3 January 1, 2020
IAS 1/IAS 8 'Definition of Material' (Amendments to IAS 1 and IAS 8) January 1, 2020
IFRS 7, IFRS 9, and IAS 39 - Interest Rate Benchmark Reform January 1, 2020
Various Amendments to References to the Conceptual Framework in IFRS Standards January 1, 2020
The Company is in the process of assessing the impact of these Standards, amendments and interpretations to
the published standards on the financial statements of the Company.
Page 42
HALLMARK COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
6.3 Further, the following standards have been issued by IASB which are yet to be notified by the
Securities and Exchange Commission of Pakistan (SECP) for the purpose of applicability in Pakistan
IFRS-1 First-time adoption of International Financial Reporting Standards
IFRS-17 Insurance Contracts
7 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of these financial statements in conformity with approved accounting standards as applicable in
Pakistan, requires management to make estimates, assumptions and use judgments that effect the reported
amounts of assets and liabilities and income and expenses. It also requires managements to exercise judgment
in application of its accounting policies. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under the circumstances. These
estimates and assumptions are reviewed on, an ongoing basis. Revisions to accounting estimates are recognized
in the period in which the estimate is revised and applied prospectively.
Areas where assumptions and estimates are significant to the financial statements are:
- useful life of depreciable assets
- provision for doubtful debts
- provision for taxation and
- provision for obsolete stock
8 SIGNIFICANT ACCOUNTING POLICIES
The principle accounting policies applied in the preparation of these financial statements are set out below.
These accounting policies have been consistently applied to all the years presented, unless otherwise stated.
8.1 Property, Plant and Equipment
8.1.1 Owned
These are stated at historical cost less accumulated depreciation and accumulated impairment loss, if any.
Depreciation is charged to statement of profit or loss over the useful life of the assets applying the reducing
balance method at the rates specified in the relevant note to these financial statements. Depreciation on
additions is charged from the date when it is available for use up to the date of disposal or transfer to the group
held for sale whichever is earlier.
An asset's carrying amount is written down immediately to its recoverable amount if the recoverable amount is
assessed lower than the carrying amount.
Where major components of an item of property, plant and equipment have different useful lives, they are
accounted for as a separate group, under the property, plant and equipment.
Subsequent costs, if any are included in the asset’s carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will follow to the
Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is
derecognized. All other repairs and maintenance are charged to the statement of profit or loss , during the
financial year in which they are incurred.
Disposal of asset is recognized when significant risk and rewards incidental to ownership have been transferred
to buyers. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount
and are taken to the statement of profit or loss.
8.2 Intangibles
Intangibles are initially recognized at cost only when there is technical feasibility exists and future inflow of
economic benefits are probable. It is amortized at the rates mentioned in relevant note on straight line basis.
These are measured at cost less amortization and impairment losses, if any.
Amortization is charged to the statement of profit or loss from the date when it is made available for use till the
date of disposal or transfer.
Page 43
HALLMARK COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
8.3 Stock in Trade
Stock-in-trade is valued at the lower of weighted average cost and estimated net realizable value.
Cost comprises, all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to
their present location and condition. Net realizable value signifies the estimated selling price in the ordinary
course of business less net estimated costs of completion and selling expenses.
Items in transit, if any, are valued at cost comprising of invoice value plus other charges incurred thereon up to
the reporting date.
8.4 Trade Debts and Other Receivables
Trade debts and other receivables are recognized at original invoice amount less provision for doubtful debts, if
any. A provision for doubtful debts is established when there is an objective evidence that the Company will not
be able to collect amounts due, according to the original terms of receivables. Bad Debts are written off when
identified.
8.5 Cash and Cash Equivalents
For the purpose of statement of cash flows, cash and cash equivalents comprise cash in hand, bank deposits
and highly liquid short term investments.
8.6 Trade Creditor and Other Payable
Liabilities for trade and other payables are carried at their fair value of the consideration to be paid in the future
for goods and services received whether or not billed to the Company.
8.7 Impairment
8.7.1 Financial Assets
A financial assets are assessed at each reporting date to determine whether there is any objective evidence that
financial assets or a group of financial assets is impaired. These are considered to be impaired, only if, there is
an objective evidence of impairment as a result of one or more events that has any adverse impact over
estimated future cash flows, that can be reliably estimated.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial
assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses on
financial assets that are being carried at amortized cost are recognized in statement of profit or loss.
8.7.2 Non Financial Assets
The carrying amount of the Company's non-financial assets other than inventories and deferred tax assets are
reviewed at each reporting date to determine whether there is any indication of impairment. If such an
indication exists, or when annual impairment testing of an asset is required, the recoverable amount of the asset
is estimated in order to determine the extent of impairment loss, if any. An impairment loss is recognized for the
amount by which the asset's carrying amount exceeds its estimated recoverable amount. The recoverable
amount is the higher of an asset's fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted at present value of money and the risk specific to the asset. The fair
value less cost to sell is based on available data on binding sales transactions, conducted at arms length.
A previously recognized impairment loss is reversed if there has been a change in the assumptions used to
determine the asset's recoverable amount since the last impairment loss is recognized or on subsequent
assessment it has been identified that the carrying value of the asset falls short of recoverable amount assessed.
The reversal is limited so that the carrying amount of the assets does not exceeds its recoverable amount, nor
exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been
recognized for the asset in prior years. Such reversal is recognized in the statement of profit or loss.
8.8 Provisions
Provisions are recognized when the Company has a present legal or constructive obligation as a result of past
event and it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation, and a reliable estimate of the amount can be made.
8.9 Dividend
Dividend distribution to the Company's shareholders is recognized as liability at the time of their approval.
Page 44
HALLMARK COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
8.10 Taxation
Current
Provision for taxation is based on the taxable income for the year at current tax rates after taking into account
tax credits and tax rebates, if any, computed in accordance with the enacted tax laws and based on minimum
tax @1.50% of turnover, Alternate Corporate Tax @ 17% of accounting profit or normal corporate tax @29%
of taxable income whichever is higher. Taxable income is computed in accordance with the provisions of the
Income Tax Ordinance, 2001.
Deferred
Deferred tax, is a tax attributable to the temporary differences, that is, difference between the carrying amount
of assets or liability and its corresponding tax base.
Deferred tax is accounted for using the statement of financial position liability method in respect of all temporary
timing differences arising from difference between the carrying amount of the assets and liabilities in the
financial statements and corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are
recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be
available against which the deductible temporary differences, unused tax losses and tax credits can be utilized.
8.11 Revenue Recognition
Revenue comprises of the fair value of the consideration received or receivable for the sale of goods and
services in the ordinary course of the Company’s activities.
The Company recognizes revenue at the point of time or over the period of time, whichever is applicable, as and
when the related performance obligation of the Company is satisfied, amount of revenue can be reliably
measured and it is more than probable that future economic benefits will flow to the Company. Generally the
performance obligation is deemed to be satisfied when following specific criteria has been met:
- in case of services, when these are rendered, and
- in case of goods when these are dispatched to the customers.
8.12 Financial Instruments
Financial assets
The company's principal financial assets are cash and bank balances, trade debtors and other receivables. These
are stated at their cost which approximates their fair value.
Financial liabilities
Financial liabilities are classified according to the substance of the contractual arrangements entered into.
Significant financial liabilities include creditors, loans and other liabilities. These are stated at the amount
required to offset them presently which is also its fair value.
Offsetting of Financial assets and liabilities
A financial asset and a financial liability are offset, and the net amount is reported in the financial statements if
the company has a legally enforceable right to set-off the recognized amounts and intends either to settle on a
net basis or to realize the asset and settle the liability simultaneously.
8.13 Related Party Transaction
All transactions involving related parties arising in the normal course of business are conducted at arm's length,
at normal commercial rates on the same terms and conditions as third party transactions using valuation modes,
as admissible, except in extremely rare circumstances where, subject to the approval of the Board of Directors,
it is in the interest of the Company to do so.
8.14 Earning Per Share
Basic earning per share is calculated by dividing profit or loss attributable to shareholders of the Company
divided by weighted average number of ordinary shares outstanding during the year. Diluted earning per share
is calculated by adjusting the profit or loss attributable to shareholders and the weighted average number of
outstanding shares during the year for the effects of dilutive ordinary potential shares.
8.15 Functional and Presentation Currency
These financial statements are presented in Pakistani Rupees, which is also the functional currency of the
Company.
Page 45
HALLMARK COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
9 FURNITURE FIXTURES AND OFFICE EQUIOMENT
Computer
Furniture Office
Description Generator and allied Total
and fixtures equipment
equipment
(--------------------------------Rupees-------------------------------)
YEAR 2020
COST
Balance at beginning of the year 2,761,543 829,130 45,700 169,640 3,806,013
Additions during the year 45,700 - - 15,000 60,700
Balance at end of year 2,807,243 829,130 45,700 184,640 3,866,713
DEPRECIATION
Accumulated depreciation at beginning of
the year 2,299,207 553,208 15,717 30,286 2,898,418
Charge for the year 48,519 27,592 2,998 44,056 123,165
Balance at end of year 2,347,726 580,800 18,715 74,342 3,021,583
CARRYING VALUE - 2020 459,517 248,330 26,985 110,298 845,130
Depreciation rate 10% 10% 10% 30%
YEAR 2019
COST
Balance at beginning of the year 2,761,543 753,290 45,700 35,440 3,595,973
Additions / transfers during the year - 75,840 - 134,200 210,040
Balance at end of year 2,761,543 829,130 45,700 169,640 3,806,013
DEPRECIATION
Accumulated depreciation at beginning of the
year 2,247,836 530,274 12,385 23,284 2,813,779
Charge for the year 51,371 22,934 3,332 7,002 84,639
Balance at end of year 2,299,207 553,208 15,717 30,286 2,898,418
CARRYING VALUE - 2019 462,336 275,922 29,983 139,354 907,595
Depreciation rate 10% 10% 10% 30%
9.1 Reconciliation of carrying values
Carrying Additions Depreciation Carrying value
Items value at during the Charged for at
July 1, 2019 year the year June 30, 2020
YEAR 2020 (-----------------------Rupees--------------------------)
Furniture and fixtures 462,336 45,700 (48,519) 459,517
Office equipment 275,922 - (27,592) 248,330
Generator 29,983 - (2,998) 26,985
Computer and allied equipment 139,354 15,000 (44,056) 110,298
Total 907,595 60,700 (123,165) 845,130
YEAR 2019
Furniture and fixtures 513,707 - (51,371) 462,336
Office equipment 223,016 75,840 (22,934) 275,922
Generator 33,315 - (3,332) 29,983
Computer and allied equipment 12,156 134,200 (7,002) 139,354
Total 782,194 210,040 (84,639) 907,595
9.2 Allocation of depreciation
Complete amount of depreciation has been charged to administrative expenses (note 21)
Page 46
HALLMARK COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
2020 2019
Rupees Rupees
10 INTANGIBLES
ERP Single user license 10.1 1,605,000 1,785,000
1,605,000 1,785,000
10.1 ERP Single user license
Carrying amount at beginning of year 1,785,000
Cost incurred during the year - 1,800,000
1,785,000 1,800,000
Less: Amortization charged @ 10% - Straight line (180,000) (15,000)
Carrying value at end of the year 1,605,000 1,785,000
11 LOANS AND ADVANCES
Loan to employees 536,500 153,097
Advance rent 300,000 -
836,500 153,097
12 CASH AND BANK BALANCE
Cash in hand 135,105 95,430
Cash at bank - Current 86,372 491,839
221,477 587,269
13 ISSUED, SUBSCRIBED AND PAID-UP CAPITAL
500,000 (2019: 500,000) Ordinary Shares of Rs. 10/- each
5,000,000 5,000,000
fully paid in cash
14 CAPITAL CONTRIBUTION FROM DIRECTORS
Unsecured 14.1 - 300,000
14.1 This capital contribution was made in the nature of loan, and was repayable at the discretion
of the Company on availability of the funds and now stand at nil.
2020 2019
Rupees Rupees
15 DEFERRED TAX (ASSETS)/ LIABILITY
Relating to deductible temporary difference
On accelerated depreciation 65,585 64,052
On accelerated amortization 1,800 1,800
Minimum tax (126,940) -
(59,555) 65,852
Page 47
HALLMARK COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
16 ACCRUED AND OTHER PAYABLES
Audit fee payable 350,000 175,000
Workers' profit participation fund 16.1 - 93,675
Salaries payable - 169,540
Accrued charges 20,738 32,136
370,738 470,351
16.1 Workers' profit participation fund
Balance at beginning of year 93,675 -
Provision for the year 24.2 - 93,675
93,675 93,675
Less: Paid during the year (93,675) -
- 93,675
17 UNCLAIMED DIVIDENDS
For the year ended 31-12-1998 5,150 5,150
For the year ended 31-12-1995 18,000 18,000
23,150 23,150
18 CONTINGENCIES AND COMMITMENTS
There was no contingency or commitment as at year end (2019: Nil)
19 OPERATING REVENUE
Sale of used computers and accessories 15,874,970 17,156,955
Advisory - 964,081
15,874,970 18,121,036
2020 2019
20 COST OF SALES Rupees Rupees
Opening stock 2,044,149 1,516,842
Purchase of imported used computers 9,468,829 11,816,115
Transportation 310,347 329,292
Packaging, inspection and handling 429,197 487,331
12,252,522 14,149,580
Less: Closing stock (854,990) (2,044,149)
11,397,532 12,105,431
Page 48
HALLMARK COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
21 ADMINISTRATIVE EXPENSES
Salaries 380,463 341,949
Printing and stationary 13,583 11,005
Advertisement 75,981 36,923
Rent and utilities 143,826 121,992
Travelling and conveyance 85,349 70,228
Entertainment 63,980 49,662
Legal and professional charges 90,000 75,000
Depreciation expense 123,165 84,639
Amortization 180,000 263,500
Miscellaneous expenses - 22,312
1,156,347 1,077,209
22 SELLING EXPENSE
Salaries 1,742,040 1,551,396
Printing and stationary 98,385 114,757
Advertisement 102,099 57,597
Travelling and conveyance 113,363 55,511
Entertainment 73,521 78,138
2,129,408 1,857,399
23 OTHER INCOME
Gain on exchange of ERP license - 215,500
- 215,500
24 OTHER EXPENSES
Listing fee Stock Exchange 303,002 117,500
Auditor's remuneration 24.1 500,000 490,000
Professional charges - 600,000
Workers Profit Participation Fund 24.2 - 93,675
803,002 1,301,175
24.1 Auditor's remuneration
Annual audit 350,000 350,000
Review of half yearly financial statements 150,000 140,000
500,000 490,000
The company was voluntarily offering profit participation fund to its employees, as not been an
24.2
industrial undertaking, and it has been engaged in only trading of used computers. Thus does not
cause any value addition activities, therefore, considering the decrease in turnover and profits due
to COVID -19 situation, it has been discontinued from the current year.
Page 49
HALLMARK COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
2020 2019
Rupees Rupees
25 TAXATION
Current 238,125 500,737
Prior (106,869) 148,048
131,256 648,785
Deferred (reversal)/ charge (125,407) 32,088
5,848 680,873
25.1 Relationship between tax expense and accounting profit
Accounting profit before tax 388,681 1,995,322
Tax on accounting profit @ 29% - 578,643
Effect of prior year tax - 148,048
Effect of tax rate difference - (1,125)
Effect of tax credits - (44,693)
- 680,873
Average tax rate - 34.12%
As the applicable tax in current year is turnover tax (minimum tax), therefore, no reconciliation of
accounting profit with taxable income is disclosed.
25.2 The management has provided sufficient tax provision in financial statements in accordance with
Income Tax Ordinance, 2001. Following is the comparison of tax provision as per financial
statements vis a vis tax assessment for last three years.
As per
As per Accounts
Assessment
Accounting year ended June 30, 2019 500,737 393,868
Accounting year ended June 30, 2018 153,943 301,991
Accounting year ended June 30, 2017 44,693 44,693
2020 2019
Rupees Rupees
26 EARNING PER SHARE
Profit after taxation 382,833 1,314,449
Weighted average number of Ordinary shares 500,000 500,000
Basic earning per share 0.77 2.63
Diluted earnings per share has not been presented as the Company do not have any convertible
instruments in issue as at June 30, 2020 and June 30, 2019, which could have any effect on the
earnings per share.
Page 50
HALLMARK COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
27 REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND OTHER EXECUTIVES
Although, the commercial activity has been commenced but remuneration of Directors and Chief
Executive have been decided as, it is no more payable, therefore, the arrears of remuneration
shall neither be paid nor to be charged in these financial statements. There is no employee of the
Company who meets the criteria of the executives, as defined in the Companies Act, 2017, thus
no remuneration is payable by the Company.
28 TRANSACTIONS WITH RELATED PARTIES
The Company has related party relationship with its associated companies including under
common directorship, its directors and executive officers. Transactions with related parties
essentially pertains to payment and receipts of capital contribution in nature of loan and salaries
and other benefits, if any. These transactions are carried at arm's length basis or the terms
decided in accordance with the approval of the Board of Directors of the Company.
Key management personnel are those persons having authority and responsibility for planning,
directing and controlling the activities of the Company. The Company considers all members of
their management team, including Chief Executive Officer, and Directors to be its Key
Management Personnel.
2020 2019
Rupees Rupees
Basis of
Transaction Relationship
relationship
Capital contribution Directorship, holding
Directors (300,000) (1,500,000)
(returned)/ received 19.3% shares
Account Balances
Directorship, holding
Capital contribution Directors - 300,000
19.3% shares
The Company operates from a place owned by executive director of the Company and all furniture
and equipment are being set at that premises. The premises is controlled by the Company except
for the right of sale or letting to third parties. The Company does not pay any rent or any other
consideration for exercising this control on the premises.
There was no transaction with key management personnel, associated undertakings and other
related parties during the year except as disclosed above. The balances outstanding are strictly in
accordance with the terms as disclosed in note 14 of these financial statements.
29 FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
Financial risk management objectives
The Company finances its operations mainly through its own working capital and from long term
markup free finances from directors with a view to maintaining an appropriate mix between
various sources of finance to minimize the risk.
Company's activities exposes it to a variety of financial risks:
- Market risk (including fair value interest rate risk, fuel price risk and currency risk)
- Credit risk
- Liquidity risk
Page 51
HALLMARK COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
The Board of directors has overall responsibility to establish and oversight the Company's risk
management framework and plan and implement risk management policies. The Company's
overall risk management plan focuses on the unpredictability of financial markets and seeks to
minimize potential adverse effects on the Company's financial performance. Risk measured and
managed by the company are explained in notes 29.1 to 29.4, of these notes.
29.1 Credit risk
Credit risk represents the risk of loss that would be recognized at the reporting date if counter
parties failed to perform as contracted. The carrying amount of financial assets represents the
maximum credit exposure with quality of financial assets and other detail are as follows:
2020 2019
Rupees Rupees
Trade receivable 1,578,052 1,296,906
Other receivable 536,500 153,097
49 Deposit with -
Habib Metropolitan Bank PACRA A1+ 86,372 491,839
1,306,962 1,306,962
29.1.1 Quality of financial assets
Aging analysis of the trade debts is as follows:
Gross Amount
Neither past due nor impaired 1,169,600 910,500
Past due but not impaired
31 to 60 days 98,500 195,730
61 to 180 days 309,930 190,676
181 to 360 days - -
360 days and above 22 -
1,578,052 1,296,906
Based on the past experience, the management believes that no impairment needs to be charged
for past due amount, as there are reasonable grounds to believe that the amount will be
recovered in small course of time.
Other receivable comprises of loan to employees which are highly probable to be received.
Deposits with Habib Metropolitan Bank Limited is provided credit ranking of A1+ for short term
deposits and AA+ for long term deposit by Pakistan Credit Rating Agency (PACRA).
Page 52
HALLMARK COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
29.2 Market risk
Market risk is the that fair value of cash flows from financial instruments of the Company will
fluctuate because of changes in market prices. Market risk comprises of currency risk, interest
rate risk and other price risk. The objective of market risk management is to manage and control
market risk exposures within acceptable parameters, while optimizing the return.
29.2.1 Currency Risk
Currency risk represents the risk that the fair value of future cash flows of a financial instrument
will fluctuate because of changes in foreign exchange rates. Currency risk arises mainly from
future economic transactions or receivables and payables that exist due to transaction in foreign
exchange.
There is no foreign currency risk arises on the financial instruments of the Company.
Sensitivity Analysis
The Company does not hold any asset or liability in foreign currency at reporting date. Therefore,
any change in exchange rate of PKR against foreign currency would not affect statement of profit
or loss.
29.2.2 Interest rate risk
Interest rate risk represents the risk that, the future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. At the date of the statement of financial
position the interest rate profile of the Company’s interest-bearing financial instrument is NIL.
Sensitivity Analysis
Fair value sensitivity analysis for fixed rate instruments
The Company does not account for any fixed rate financial assets and liabilities at fair value
through statement of profit or loss. Therefore any change in interest rate at the reporting date
does not affect statement of profit or loss.
Cash flow sensitivity analysis for variable rate instruments
The Company does not hold any variable rate financial assets or liabilities. Therefore a change in
interest rates at the reporting date would not affect cash flows.
29.2.3 Other price risk
Other price risk is the risk that, the fair value of future cash flows of a financial instrument will
fluctuate because of change in market price excluding the impact of changes due to interest rate
or currency risk. The company does not hold any financial asset or financial liability which is
traceable in open market therefore it is not exposed to any other price risk.
29.3 Liquidity risk
Liquidity risk is the risk for a Company, where it will not be able to meet its financial obligations
as they fall due. The Company's approach to managing liquidity risk is to ensure, as far as
possible, that, it will always has sufficient liquidity to meet its liabilities when due, under both
normal and stressed conditions, without incurring unacceptable losses or risking damage to the
Company's reputation. Following are the carrying amount and maturities of the Company's
financial liabilities.
Page 53
HALLMARK COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
2020
|------------------------Rupees-----------------------|
Carrying
Non Interest Bearing Up to one year After one year
amount
Capital contribution - - -
Trade creditors 156,050 156,050 -
Unclaimed dividends 23,150 23,150 -
Accrued expenses 370,738 370,738 -
Total financial liabilities 549,938 549,938 -
2019
|------------------------Rupees-----------------------|
Carrying
Non Interest Bearing Up to one year After one year
amount
51
Capital contribution 300,000 - 300,000
Trade creditors 314,504 314,504 -
Unclaimed dividends 23,150 23,150 -
Accrued expenses 470,351 470,351 -
Total financial liabilities 1,108,005 808,005 300,000
29.4 Fair value of financial assets and liabilities
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to sell the asset or transfer the
liability takes place either:
In the principal market for the asset or liability; or
In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market is accessible by the Company. The fair value of an
asset or a liability is measured using the assumptions that market participants would use when
pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participants ability
to generate economic benefits by using the asset in its highest and best use or by selling it to
another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximizing the use of relevant observable
inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements
are categorized within the fair value hierarchy, described as follows, based on the lowest level
input that is significant to the fair value measurement as a whole:
Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or
liabilities;
Level 2 — Valuation techniques for which the lowest level input that is significant to the fair
value measurement is directly or indirectly observable; and
Level 3 — Valuation techniques for which the lowest level input that is significant to the fair
value measurement is unobservable
Page 54
HALLMARK COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
For assets and liabilities that are recognized in the financial statements at fair value on a recurring
basis, the Company determines whether transfers have occurred between levels in the hierarchy
by re-assessing categorization (based on the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
The Company's Board of director determines the policies and procedures for both recurring fair
value measurement and for non-recurring measurement. External evaluator may be involved for
valuation of significant assets and significant liabilities. For the purpose of fair value disclosures,
the Company determines classes of assets and liabilities on the basis of the nature, characteristics
and risks of the asset or liability and the level of the fair value hierarchy, as explained above.
Presently no financial or non financial asset or liability is valued at fair value. All assets are valued
at their amortized cost which is the most appropriate available valuation basis.
The carrying values of financial assets and financial liabilities reported in the statement of financial
position, are at approximate their fair values.
30 CAPITAL RISK MANAGEMENT
The Company's objective when managing capital is to ensure the Company's ability not only to
continue as a going concern but also to meet its requirements for expansion and enhancement of
its business, maximize return of shareholders and optimize benefits for other stakeholders to
maintain an optimal capital structure and to reduce the cost of capital. The gearing ratio as at the
end of reporting date is as follows:
2020 2019
Rupees Rupees
Total borrowing - 300,000
Cash and bank balances (221,477) (587,269)
(221,477) (287,269)
Total equity 6,712,641 6,329,809
Total capital 6,491,165 6,042,540
Gearing ratio 0% 0%
The Company finances its operations mainly through equity and management of working capital
with a view to maintain an appropriate mix between various sources of finance to minimize risk.
31 OPERATING SEGMENT
These financial statements have been prepared on the basis of a single reportable segment.
There was no change in the reportable segments during the year.
31.1 There is only one source of revenue of the segment which is from sale of used imported laptops.
31.2 All non-current assets of the segment are located in Pakistan.
31.3 All the sales are made to customers located in Pakistan only.
31.4 There is no significant major customer of the segment. Sales are made to number of individuals
and corporate entities on non repetitive basis.
Page 55
HALLMARK COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
32 EVENTS AFTER REPORTING DATE
Subsequent to the reporting date i.e. year end, share transfer process in relation to the Listed
Companies (Substantial Acquisition of Voting Shares & Takeovers) Regulations, 2017, has been
completed and the transfer of control is expected to be completed in upcoming annual general
meeting (AGM), which is scheduled on 26 November, 2020, through the election of directors.
33 NUMBER OF EMPLOYEES
Number of employees as at June 30, 2020 were 6 (2019: 6).
Average number of employees during the year were 6 (2019: 6)
34 GENERAL
34.1 Figures in the financial statement have been rounded off to the nearest of Rupee.
34.2 These financial statements were authorized for issue in accordance with a resolution of the Board
of Directors on 4 November, 2020
Chief Executive Director Chief Financial Officer
Page 56
HALLMARK COMPANY LIMITED
Pattern of Shareholding
As at June 30, 2020
Number of Shareholding Number of
Shareholders From To Shares Held
193 1 - 100 19,300
94 101 - 500 29,270
18 501 - 1000 14,600
35 1001 - 5000 87,710
4 5001 - 10000 29,400
0 10001 - 20000 0
0 20001 - 30000 0
1 30001 - 40000 30,920
6 40001 - 50000 288,800
351 500,000
Categories of Shareholders
Number of Number of Percentage
S.No. Shareholder's Category
Shareholders Shares %
1 Directors /Chief Executive Office and their spous
and minor children 10 208,000 41.60
2 NIT & ICP 1 200 0.04
3 General public 339 291,700 58.34
4 Others 1 100 0.02
351 500,000 100
Page 57
HALLMARK COMPANY LIMITED
Pattern of Shareholding
As at June 30, 2020
Number of Number of Category Wise Percentage
S. No. Shareholder's Category
Shareholders Shares Held No. of Shares %
1 Directors/Chief Executive Office 8 208,000 41.6
Mrs. Mehnaz Manzoor 49,500
Mr. Muhammad Adil 48,500
Mr. S. M. Imran 48,000
Mr. Abdul Rahim 47,000
Mr. Muhammad Farrukh Bashir 2,500
Mr. Saad A. Shamsi 2,500
Mr. Ahtesham Ashraf 2,500
Mr. Zubair Ahmed Khan 2,500
Mr. Naveed Hamid 2,500
Mr. Haris Aftab Shamsi 2,500
Banks, DFIs, NBFIs, Insurance,
2 Modarabas, Mutual Funds & 2 300 0.06
Others.
Investment Corporation of Pakistan 200
Karachi Investment Trust Limited 100
Shareholders holding 5% or more voting rights
Total Paid up Capital 500,000 Shares
5% of the Paid Up Capital 25,000 Shares
Holding %
Directors & Associates
Mrs. Mehnaz Manzoor 49,500 9.9
Mr. Muhammad Adil 48,500 9.7
Mr. S. M. Imran 48,000 9.6
Mr. Abdul Rahim 47,000 9.4
Others
Mr. Shahab Ahmed 48,500 9.7
Mr. Bilal Ahmed 47,300 9.5
Mrs. Chaman Ara 30,920 6.2
Page 58
Page 59
HALLMARK COMPANY LIMITED
Regd. Office: Office # 1001/1005, 10th Floor, Uni Centre, I.I Chundrigar Road, Karachi, Pakistan.
Tel: 021-32414419, 021-37011105 Fax: 021-32416288
Form of Proxy
I/We ___________________________________________________________ of __________________________
__________________________________ being member(s) of HALLMARK COMPANY LIMITEDand
holder of _________________ Ordinary Shares as per Share Register Folio/ CDC Account No. ______
_____________ holding CNIC/ Passport No. _____________________________ hereby, appoint Mr./
Ms. _____________________________ Folio/ CDC Account No. __________________ CNIC/ Passport
No. ___________________________ who is also a member of the Company as my/ our proxy to
attend and vote for me/us and on my/ our behalf at the 41stAnnualGeneral Meeting of the
Company to be held on Thursday, November 26, 2020 at 11:00AM and at any adjournment
thereof.
Rs. 5.00
Signed this __________________ day of ____________, 2020.
Revenue
Stamp
Witnesses:
Signature: ______________________________ Signature: ________________________________
Name: _________________________________ Name: ____________________________________
Address: _______________________________ Address: __________________________________
CNIC/ Passport No. _____________________ CNIC/ Passport No. ________________________
IMPORTANT
1. This form of proxy, duly completed and signed, must be deposited at the Company’s Registered
Office not later than 48 hours before meeting.
2. This form should be signed by the Members or by his/ her attorney duly authorized in writing. If the
member is a Corporation, its common seal should be affixed to the instrument.
3. A member entitled to attend and vote at the meeting may appoint any other member as his/ her
proxy to attend and vote on his/ her behalf except that a corporation may appoint a person who
is not a member.
For CDC Account Holders/ Corporate Entities
In addition to the above, following requirements have to be met:
1. The proxy form shall be witnessed by two persons whose names, address and CNIC/ Passport No.
shall be mentioned on the form.
2. Attested copies of CNIC/ Passport of the beneficial owner and the proxy shall be furnished with the
proxy form.
3. The proxy shall produce his/ her original CNIC/ Passport at the time of the meeting.
4. In case of corporate entity, the Board of Directors’ resolution/ power of attorney with specimen
signature shall be submitted (unless it has been provided earlier) alongwith proxy form of the
Company.
Page 60
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