Annual Report 2012

Annual Report

2012

Shaukat Khanum Memorial Cancer Hospital and Research Centre

Shaukat Khanum Memorial Cancer Hospital and Research Centre

34

Annual Report 2012

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HONORARY AUDITORS' REPORT TO THE BOARD OF GOVERNORS We have audited the annexed balance sheet of Shaukat Khanum Memorial Trust (the Trust') as at December 31, 2012 and the related income and expenditure account, statement of comprehensive income, statement of changes in funds and cash flow statement together with the notes forming part thereof (hereinafter referred to as the "financial statements") for the year then ended.

It is the responsibility of the Board of Governors to establish and maintain a system of internal control, and prepare and present the financial statements in conformity with the approved accounting standards as applicable in Pakistan. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting policies used and significant estimates made by the management, as well as, evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Trust as at December 31, 2012 and of its surplus and cash flows for the year then ended in accordance with the approved accounting standards as applicable in Pakistan.

Lahore Lahore, July 08, 2013 July 08, 2013

A. F. FERGUSON & CO. Chartered Accountants

36

Annual Report 2012

SHAUKAT KHANUM MEMORIAL TRUST

Note

BALANCE SHEET AS AT DECEMBER 31, 2012

FUND BALANCE REPRESENTED BY NON-CURRENT ASSETS

General Fund Rupees

Endowment Fund Rupees

2012 Rupees

2011 Rupees

4,231,603,943 1,173,425,377 5,405,029,320 4,393,728,264

Property, plant and equipment 6 2,697,286,547 Assets subject to finance lease 7 171,728,481 Intangible assets 1,364,902 8 Capital work-in-progress 165,040,243 9 Long term advances, receivables and security deposits 10 11,637,786 Investments 381,320 11 3,047,439,279

- 2,697,286,547 2,413,954,084 171,728,481 216,530,255 1,364,902 5,335,796 69,207,825 165,040,243 6,055,837 11,637,786 259,280,237 525,241,520 524,860,200 524,860,200 3,572,299,479 2,970,364,034

CURRENT ASSETS Stores and spares Stocks Donations in kind Trade receivables Advances, deposits, prepayments and other receivables Investments Cash and bank balances

12 13 14 15 16 17

22,238,631 257,466,116 68,301,000 109,177,350 100,079,940 417,911,085 894,365,260 1,869,539,382

22,238,631 21,552,314 257,466,116 244,227,642 58,917,000 68,301,000 122,589,423 109,177,350 18,999,598 122,008,715 119,079,538 628,338,408 1,046,249,493 976,163,023 1,227,171 637,867,313 895,592,431 648,565,177 2,518,104,559 2,183,325,430

LESS: CURRENT LIABILITIES Current maturity of long term loans -secured Current maturity of lease liabilities Short term borrowings - secured Trade and other payables

20 21 18 19

7,225,532 58,931,645 - .

333,193,262 399,350,439

-

7,225,532 58,931,645 333,193,262 399,350,439

46,012,599 77,550,308 57,754,185 233,973,187 415,290,279

Long term loans - secured Liabilities against assets subject to finance lease Deferred government grant Deferred liability

20 21 22 23

101,160,018 14,916,572 125,000,000 44,947,689 286,024,279

-

101,160,018 14,916,572 125,000,000 44,947,689 286,024,279

104,715,527 74,001,712 125,000,000 40,953,682 344,670,921

Contingencies and commitments

24

LESS: NON-CURRENT LIABILITIES

1,173,425,377 5,405,029,320 4,393,728,264 The annexed notes 1 to 36 form an integral part of these financial statements.

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SHAUKAT KHANUM MEMORIAL TRUST

Note

INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2012

CLINICAL INCOME OTHER INCOME TOTAL INCOME

General Fund Rupees

Endowment Fund Rupees

2012 Rupees

2011 Rupees

25 2,202,076,541 26 2,989,576,227 5,191,652,768

- 2,202,076,541 1,971,521,463 95,930,561 3,085,506,788 2,381,028,001 95,930,561 5,287,583,329 4,352,549,464

27 3,139,230,727 28 839,809,723 29 201,497,385 30 23,351,835 4,203,889,670 987,763,098 987,763,098

67,850,000 54,421 67,904,421 28,026,140 28,026,140

EXPENSES Clinical expenses General and administrative expenses Marketing expenses Finance cost Surplus before taxation Provision for taxation Surplus of income over expenditure

3,139,230,727 2,637,153,273 907,659,723 650,226,063 201,497,385 149,138,814 44,945,331 23,406,256 4,271,794,091 3,481,463,481 871,085,983 1,015,789,238 871,085,983 1,015,789,238

The annexed notes 1 to 36 form an integral part of these financial statements.

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Annual Report 2012

SHAUKAT KHANUM MEMORIAL TRUST STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2012 General Fund Rupees

Surplus of income over expenditure

987,763,098

Endowment Fund Rupees

2012 Rupees

28,026,140 1,015,789,238

2011 Rupees 871,085,983

Other comprehensive income: Unrealized (loss)/gain on available for sale investments Reclassification adjustment to income and expenditure account relating to gain realized on disposal of available for sale investments Other comprehensive (loss)/income for the year Total comprehensive income for the year

245,911

245,911 988,009,009

7,279,800

7,525,711

7,031,419

(12,013,893) (12,013,893) (4,734,093) (4,488,182) 23,292,047 1,011,301,056

(12,532,121) (5,500,702) 865,585,281

The annexed notes 1 to 36 form an integral part of these financial statements.

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Annual Report 2012

SHAUKAT KHANUM MEMORIAL TRUST STATEMENT OF CHANGES IN FUNDS FOR THE YEAR ENDED DECEMBER 31, 2012 General Fund Revaluation surplus on land - note 5

Unrealized (loss)/gain on investments

Accumulated Total surplus of general fund income over expenditure

Rupees Balance as on January 01, 2011 Surplus of income over expenditure Other comprehensive income: Unrealized (loss)/gain on available for sale investments Reclassification adjustment to income and expenditure account relating to gain realised on disposal of available for sale investments Total comprehensive (loss)/income for the year Balance as on December 31, 2011 Surplus of income over expenditure Other comprehensive income: Unrealized (loss)/gain on available for sale investments Reclassification adjustment to income and expenditure account relating to gain realised on disposal of available for sale investments Total comprehensive (loss)/income for the year Transfer from general fund to endowment fund Balance as on December 31, 2012

1,091,826,250

(94,232) 1,444,920,291 2,536,652,309

-

-

807,009,997

807,009,997

-

(67,372)

-

(67,372)

1,091,826,250

(67,372) 807,009,997 806,942,625 (161,604) 2,251,930,288 3,343,594,934

-

-

987,763,098

987,763,098

-

245,911

-

245,911

1,091,826,250

987,763,098 988,009,009 245,911 - (100,000,000) (100,000,000) 84,307 3,139,693,386 4,231,603,943

Endowment Fund Unrealized Accumulated (loss)/gain on surplus of investments income over expenditure

Total endowment fund

Total

Rupees Balance as on January 01, 2011 Surplus of income over expenditure Other comprehensive income: Unrealized (loss)/gain on available for sale investments Reclassification adjustment to income and expenditure account relating to gain realised on disposal of available for sale investments Total comprehensive (loss)/income for the year Balance as on December 31, 2011 Surplus of income over expenditure Other comprehensive income: Unrealized (loss)/gain on available for sale investments Reclassification adjustment to income and expenditure account relating to gain realised on disposal of available for sale investments Total comprehensive (loss)/income for the year Transfer from general fund to endowment fund Balance as on December 31, 2012

20,853,263

970,637,411

991,490,674 3,528,142,983

-

64,075,986

64,075,986

871,085,983

7,098,791

-

7,098,791

7,031,419

(12,532,121) (12,532,121) (12,532,121) (5,433,330) 64,075,986 58,642,656 865,585,281 15,419,933 1,034,713,397 1,050,133,330 4,393,728,264 28,026,140 7,279,800

-

28,026,140 1,015,789,238 7,279,800

(12,013,893) (12,013,893) (12,013,893) (4,734,093) 28,026,140 23,292,047 1,011,301,056 100,000,000 100,000,000 10,685,840 1,162,739,537 1,173,425,377 5,405,029,320

The annexed notes 1 to 36 form an integral part of these financial statements.

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7,525,711

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Annual Report 2012

SHAUKAT KHANUM MEMORIAL TRUST

Note

CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2012

Cash flows from operating activities Operating surplus Adjustments for: Depreciation on property, plant and equipment Depreciation on assets subject to finance lease Amortization on intangible assets Gain on disposal of property, plant and equipment Finance cost Exchange gain Interest income Amortization of gain on investment Provision for deferred liabilities Provisions and unclaimed balances written back Provision against recoverability of investments Consultancy and design charges for fourth POD building written off Receivables written off Assets written off Advances written off Revaluation loss/(gain) on donations in kind Surplus before working capital changes Effect on cash flow due to working capital changes (Increase)/decrease in current assets: Stores and spares Stocks Donations in kind Trade receivables Advances, deposits, prepayments and other receivables Increase/(decrease) in current liabilities: Trade and other payables

2012 Rupees

1,015,789,238

2011 Rupees

871,085,983

244,559,222 209,139,329 36,450,976 37,501,545 3,970,894 3,970,881 318,330 (150,000) 23,406,256 44,945,331 (22,790,442) (20,394,829) (95,378,316) (53,223,705) (1,352,344) (1,277,041) 3,994,007 11,156,403 (1,567,549) 67,850,000 11,649,990 1,485,190 3,110,977 422,375 197,256 408,536 3,709,000 (178,000) 1,290,664,150 1,108,145,343

(686,317) (13,238,474) (9,206,000) 15,264,513 2,520,641

75,002 (30,731,564) (397,000) (27,592,916) (39,748,762)

Cash generated from operations

(34,112,609) 99,220,075 93,874,438 (132,507,849) 975,637,494 1,384,538,588

Finance cost paid Taxes paid Net cash inflow from operating activities

(20,959,853) (800,604) 1,362,778,131

Cash flows from investing activities Fixed capital expenditure Sale proceeds of property, plant and equipment disposed off Long term advances and security deposits Proceeds from the disposal of investment Investments purchased Interest received Net cash (outflow)/inflow from investing activities Cash flows from financing activities Repayment of long term loans Repayments of finance lease liabilities Net cash outflow from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year

(628,759,390) (274,998,494) 150,000 2,054,424 (4,386,833) (5,581,949) 238,053,722 1,031,651,894 (1,397,739,874) (691,839,300) 39,607,619 81,301,042 (917,073,853) (693,413,286) (52,521,172) (51,214,887) (77,703,803) (88,194,820) (130,224,975) (139,409,707) 315,479,303 95,048,393 485,064,735 580,113,128 580,113,128 895,592,431 31

The annexed notes 1 to 36 form an integral part of these financial statements.

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(46,561,190) (1,204,918) 927,871,386

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SHAUKAT KHANUM MEMORIAL TRUST NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012 1.

Legal status and nature of business Shaukat Khanum Memorial Trust ('the Trust') was registered in Pakistan on February 27, 1990 under the Societies Registration Act, XXI of 1860. The Board of Governors the Trust serve in an honorary capicity. The primary purpose of the Trust is to raise funds in Pakistan and abroad for establishing and maintaining general hospitals with emphasis on cancer specialist centres in Pakistan. Funds raised in the United Kingdom and United States of America are incorporated in the accounts of charitable trusts that are separate legal entities registered in the respective countries.

The Trust also has a branch office in Dubai which is registered with Jebel Ali Free Zone Authority, Dubai, for creating awareness about the Trust, its hospital and for fundraising.

Currently, the Trust is managing Shaukat Khanum Memorial Cancer Hospital and Research Centre in Lahore and a diagnostic center and chemotherapy facility in Karachi whereas it is also in the process of constructing cancer hospital in Peshawar.

2.

Basis of preparation

2.1

These financial statements have been prepared in accordance with the requirements of International Financial Reporting Standards as applicable in Pakistan.

2.2

Initial application of standards, amendments or an interpretation to existing standards The following amendments to existing standards have been published that are applicable to the Trust's financial statements covering annual periods, beginning on or after the following dates:

2.2.1

Amendments to published standards that are effective in the current year Certain standards, amendments and interpretations to approved accounting standards are effective for accounting periods beginning on January 1, 2012 but are considered not to be relevant or to have any significant effect on the Trust's operations and are, therefore, not detailed in these financial statements.

2.2.2

Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Trust There are certain standards, amendments to the approved accounting standards and interpretations that are mandatory for the Trust's accounting periods beginning on or after January 1, 2013 but are considered not to be relevant or to have any significant effect on the Trust's operations and are, therefore, not detailed in these financial statements.

3.

Basis of measurement

3.1

These financial statements have been prepared under the historical cost convention modified by the revaluation of certain financial instruments, freehold land and properties included in donations in kind at fair value.

3.2

The Trust's significant accounting policies are stated in note 4. Not all of these significant policies require the management to make difficult, subjective or complex judgments or estimates. The following is intended to provide an understanding of the policies the management considers critical because of their complexity, judgment of estimation involved in their application and their impact on these financial statements. Estimates and judgments are continually evaluated and are based on historical experience, including expectations of future events that are believed to be reasonable under the circumstances. These judgments involve assumptions or estimates in respect of future events and the actual results may differ from these estimates.

a)

Provision for taxation The Trust takes into account the current income tax law and the decisions taken by appellate authorities. Instances where the Trust's view differs from the view taken by the income tax department at the assessment stage and where the Trust considers that its views on items of material nature is in accordance with law, the amounts are shown as contingent liabilities.

42 b)

Annual Report 2012

Useful lives and residual values of property, plant and equipment The Trust reviews the useful lives of property, plant and equipment on regular basis. Any change in estimates in future years might affect the carrying amounts of the respective items of property, plant and equipment with a corresponding effect on the depreciation charge and impairment.

4.

Significant accounting policies The significant accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.

4.1

Taxation The income of the Trust is exempt from tax under clause 58(3) of Part I of the Second Schedule to the Income Tax Ordinance, 2001.

4.2

Property, plant and equipment Property, plant and equipment except freehold land are stated at cost less accumulated depreciation and any identified impairment loss. Freehold land is stated at revalued amount less any identified impairment loss. Revaluation is carried out after five years to ensure that the carrying amount of assets does not differ materially from their fair value. Revalued amount has been determined by an independent professional valuer on the basis of present market value.

Expenditure attributable to acquisition of medical equipment till its commissioning is capitalized to form part of the cost of the asset.

Increases in the carrying amount arising on revaluation of land are credited to 'revaluation surplus on land' in the fund.

Decreases that offset previous increases of the same assets are charged against this surplus, all other decreases are charged to income and expenditure account.

Depreciation on property, plant and equipment is charged to income and expenditure account using the straight line method so as to write off the depreciable amount of the assets over their estimated useful lives, without taking into account any residual value as considered immaterial, at the rates given in note 6. The assets' residual values and useful lives are reviewed, at each year end, and adjusted if impact on depreciation is significant. The Trust's estimate of the residual value of its property, plant and equipment as at December 31, 2012 has not required any adjustment as its impact is considered insignificant.

Depreciation on additions to property, plant and equipment is charged from the month in which the asset is available for use, while no depreciation is charged for the month in which the asset is disposed off.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount (note 4.5).

Subsequent costs 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 flow to the Trust and the cost of the item can be measured reliably. All other repair and maintenance costs are charged to income during the period in which they are incurred.

The gain or loss on disposal or retirement of an asset represented by the difference between the sale proceeds and the carrying amount of the asset is recognized as an income or expense.

4.3

Capital work-in-progress Capital work-in-progress is stated at cost less any identified impairment loss. All expenditure connected with specific assets incurred during installation and construction period are carried under capital work-in-progress. These are transferred to property, plant and equipment as and when these are available for use.

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Intangible assets Computer software Expenditure incurred to acquire computer software is capitalized as intangible asset and stated at cost less accumulated amortization and any identified impairment loss. Computer software is amortized using the straight line method over a period of three years.

Amortization on additions to computer software is charged from the month in which the asset is available for use while no amortization is charged for the month in which the asset is disposed off.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount (note 4.5).

4.5

Impairment of non-financial assets Assets that have an indefinite useful life - for example, land - are not subject to depreciation/amortization and are tested annually for impairment. Assets that are subject to depreciation/amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cashgenerating units). Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

4.6

Leases The Trust is the lessee:

4.6.1

Finance leases Leases where the Trust has substantially all the risks and rewards of ownership are classified as finance leases. At inception, finance leases are capitalized at the lower of present value of minimum lease payments under the lease agreements and the fair value of the assets.

The related rental obligations, net of finance cost, are included in liabilities against assets subject to finance lease as referred to in note 21. The liabilities are classified as current and non-current depending upon the timing of the payment.

Each lease payment is allocated between the liability and finance cost so as to achieve a constant rate on the balance outstanding. The interest element of the rental is charged to income over the lease term.

Assets acquired under a finance lease are depreciated over the useful life of the asset on straight line method at the rates given in note 7. Depreciation of leased assets is charged to income.

Depreciation on additions to leased assets is charged from the month in which an asset is available for use while no depreciation is charged for the month in which the asset is disposed off.

4.6.2

Operating leases Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to income on a straight-line basis over the lease term.

4.7

Investments Investments intended to be held for less than twelve months from the balance sheet date or to be sold to raise operating capital are included in current assets, all other investments are classified as non-current. Management determines the appropriate classification of its investments at the time of the purchase and re-evaluates such designation on a regular basis.

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Annual Report 2012

Investments made by the Trust are classified for the purpose of measurement into the following categories as explained in note 4.8.

4.8

Financial assets

4.8.1

Classification The Trust classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, available for sale and held to maturity. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at the time of initial recognition.

a)

Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading and financial assets designated upon initial recognition as at fair value through profit or loss. A financial asset is classified as held for trading if acquired principally for the purpose of selling in the short term. Assets in this category are classified as current assets if expected to be settled within twelve months, otherwise, they are classified as non-current.

b)

Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than twelve months after the balance sheet date, which are classified as non-current assets. Loans and receivables comprise loans, advances, deposits and other receivables and cash and cash equivalents in the balance sheet.

c)

Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investments within twelve months from the balance sheet date.

d)

Held to maturity Financial assets with fixed or determinable payments and fixed maturity, where management has the intention and ability to hold till maturity are classified as held to maturity and are stated at amortized cost.

4.8.2

Recognition and measurement All financial assets are recognized at the time when the Trust becomes a party to the contractual provisions of the instrument. Regular purchases and sales of investments are recognized on trade-date – the date on which the Trust commits to purchase or sell the asset. Financial assets are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed in the income and expenditure account.

Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Trust has transferred substantially all the risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investments are carried at amortized cost using the effective interest rate method.

Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are presented in the income and expenditure account in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognized in the income and expenditure account as part of other income when the Trust's right to receive payments is established.

Changes in the fair value of securities classified as available-for-sale are recognized in other comprehensive income.

When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognized in the fund are reclassified from the fund to income and expenditure account as a reclassification adjustment. Interest on available-for-sale securities calculated using the effective interest method is recognized in the income and expenditure account. Dividends on available-for-sale equity instruments are recognized in the income and expenditure account when the Trust’s right to receive payments is established.

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The fair values of quoted investments are based on current prices. If the market for a financial asset is not active (and for unlisted securities), the Trust measures the investments at cost less impairment in value, if any.

The Trust assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss is removed from the fund and recognized in the income and expenditure account. Impairment losses recognized in the income and expenditure account on equity instruments are not reversed through the income and expenditure account.

Impairment testing of trade debts and other receivables is described in note 4.16.

4.9

Financial liabilities All financial liabilities are recognized at the time when the Trust becomes a party to the contractual provisions of the instrument.

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expired. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in respective carrying amounts is recognized in the income and expenditure account.

4.10

Offsetting of financial assets and financial liabilities Financial assets and financial liabilities are offset and the net amount is reported in the financial statements only when there is a legally enforceable right to set off the recognized amount and the Trust intends either to settle on a net basis or to realize the assets and to settle the liabilities simultaneously.

4.11

Sale and repurchase agreements Securities purchased under an agreement to resell (reverse repo) are not recognized in the financial statements as investments and the amount extended to the counter party is included in advances, deposits, prepayments and other receivables. The difference between the sale and repurchase price is recognized as markup earned and included in other income.

4.12

Employees' benefits

4.12.1

Provident fund (Defined contribution plan) The Trust operates a funded contributory provident fund scheme for all permanent employees. Equal monthly contributions, at the rate of 7.5 percent of gross salary, are made both by the Trust and employees.

4.12.2

Accumulating compensated absences Provisions are made annually to cover the obligation for accumulating compensated absences and are charged to income.

Retirement benefits are payable to staff on completion of prescribed qualifying period of service under these schemes.

4.13

Donations in kind Land and properties received as donations are initially measured at the market value prevailing at the time of acquisition of the property. At subsequent reporting dates, these are remeasured at their fair value prevailing at the balance sheet date and the difference in the fair values is charged to income.

4.14

Stores and spares Usable stores and spares are valued principally at weighted average cost, while items considered obsolete are carried at nil value. Items in transit are valued at cost comprising invoice value plus other charges incurred thereon.

46 4.15

Annual Report 2012

Stocks Stocks are valued principally at the lower of weighted average cost and net realizable value. Cost is arrived at on a moving average basis.

Materials in transit are stated at cost comprising invoice value plus other charges incurred thereon.

Net realizable value signifies the estimated selling price in the ordinary course of operation less costs necessary to be incurred in order to make a sale.

4.16

Trade debts and other receivables Trade debts and other receivables are recognized initially at invoice value, which approximates fair value, and subsequently measured at amortized cost using the effective interest method, less provision for doubtful debts. A provision for doubtful debts is established when there is objective evidence that the Trust will not be able to collect all the amount due according to the original terms of the receivable. Significant financial difficulties of the debtors, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the trade debt is impaired. The provision is recognized in the income and expenditure account. When a trade debt is uncollectible, it is written off against the provision. Subsequent recoveries of amounts previously written off are credited to the income and expenditure account.

4.17

Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts / short term borrowings. Bank overdrafts are shown within short term borrowings in current liabilities on the balance sheet.

4.18

Trade and other payables Trade and other payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. Exchange gains and losses arising on translation in respect of liabilities in foreign currency are added to the carrying amount of the respective liabilities.

4.19

Provisions Provisions are recognized when the Trust has a present legal or constructive obligation as a result of past events, 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. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate.

4.20

Government grants Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the Trust will comply with all attached conditions.

Government grants relating to costs are deferred and recognized in the income and expenditure account over the period necessary to match them with the costs that they are intended to compensate.

Government grants relating to property, plant and equipment are included in non-current liabilities as deferred government grants and are credited to the income and expenditure account on a straight-line basis over the expected lives of the related assets.

4.21

Income recognition Income is recognized when it is probable that the economic benefits will flow to the entity and the income can be measured reliably. Clinical income is recognized at the time when services are rendered. Zakat and donations are recognized when received. Return on deposits is accrued on a time proportion basis by reference to the principal outstanding and the applicable rate of return. Dividend income on equity investments is recognized as income when the right of receipt is established. Service revenue in respect of sale of software is recognized over the contractual period or as and when services are rendered to customers.

Messages

4.22

At a glance

Medical Performance

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Offices & Collection Centres

Financials

Annual Report 2012

47

Borrowings Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost, any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income and expenditure account over the period of the borrowings using the effective interest method. Finance costs are accounted for on an accrual basis and are reported under trade and other payables to the extent of the amount remaining unpaid.

Borrowings are classified as current liabilities unless the Trust has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.

4.23

Borrowing costs Borrowing costs incurred for the construction of any qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for its intended use. Other borrowing costs are expensed in the income and expenditure account in the period in which they arise.

4.24

Foreign currency transactions and translation

a)

Functional and presentation currency Items included in the financial statements of the Trust are measured using the currency of the primary economic environment in which the Trust operates (the functional currency). The financial statements are presented in Pak Rupees, which is the Trust’s functional and presentation currency.

b)

Transactions and balances Foreign currency transactions are translated into Pak Rupees using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income and expenditure account.

4.25

Endowment Fund This is a restricted fund. The main objective of the fund is to generate income for the operating expenses of Shaukat Khanum Memorial Cancer Hospital & Research Centre.

5.

Revaluation reserve on land This represents the surplus on revaluations of the following lands: - donated to the Trust by the Government of Punjab for the purpose of construction of a cancer hospital only, in Johar Town, Lahore - used for the diagnostic centre at Jail Road, Lahore - used for the diagnostic centre in Defence Housing Authority, Karachi - designated for Karachi Hospital located at Bin Qasim Town, Education City, Karachi The revaluations had been done as at December 31, 2010 by an independent professional valuer on the basis of open market value.

48

Annual Report 2012

Freehold land Buildings on freehold land

Medical and surgical equipment

Rupees

6.

Property, plant and equipment

COST/REVALUED AMOUNT Balance as at January 01, 2011 Additions during the year Transfers from leased assets Disposals during the year Balance as at December 31, 2011

1,243,255,000 1,243,255,000

571,787,711 1,369,391,385 120,161,385 107,046,966 42,437,012 691,949,096 1,518,875,363

Balance as at January 01, 2012 Additions during the year Transfers from leased assets Disposals during the year Balance as at December 31, 2012

1,243,255,000 1,243,255,000

691,949,096 1,518,875,363 19,592,738 377,077,650 6,729,432 - (193,756,264) 711,541,834 1,708,926,181

DEPRECIATION Balance as at January 01, 2011 Charge for the year Transferred from leased assets Depreciation on disposals Balance as at December 31, 2011

-

225,346,935 942,231,026 29,717,415 119,523,103 18,735,722 255,064,350 1,080,489,851

Balance as at January 01, 2012 Charge for the year Transferred from leased assets Depreciation on disposals Balance as at December 31, 2012

-

255,064,350 1,080,489,851 34,820,684 137,693,452 2,854,464 - (193,756,260) 289,885,034 1,027,281,507

Book value as at December 31, 2011

1,243,255,000

436,884,746

438,385,512

Book value as at December 31, 2012

1,243,255,000

421,656,800

681,644,674

-

5

15

Annual depreciation rate %

Messages

At a glance

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Offices & Collection Centres

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Annual Report 2012

HVAC and Furniture electrical and fixtures equipment Rupees

Vehicles

49 Total

133,778,978 15,951,527 149,730,505

93,493,175 35,762,361 25,619,375 154,874,911

314,223,678 13,654,507 27,948,025 355,826,210

33,624,434 6,228,786 39,853,220

27,610,720 3,787,165,081 3,515,000 302,320,532 96,004,412 (740,210) (740,210) 30,385,510 4,184,749,815

149,730,505 28,891,379 (5,345,304) 173,276,580

154,874,911 25,037,711 (14,192,424) 165,720,198

355,826,210 42,681,395 6,318,818 (925,592) 403,900,831

39,853,220 7,078,363 (3,174,317) 43,757,266

30,385,510 4,184,749,815 20,917,746 521,276,982 13,048,250 (4,649,363) (222,043,264) 46,653,893 4,497,031,783

75,863,770 13,687,997 89,551,767

63,797,366 19,235,477 15,350,711 98,383,554

180,892,757 20,877,368 5,190,619 206,960,744

16,513,332 2,895,031 19,408,363

18,474,374 1,523,119,560 3,202,938 209,139,329 39,277,052 (740,210) (740,210) 20,937,102 1,770,795,731

89,551,767 15,938,121 (4,909,326) 100,580,562

98,383,554 24,978,267 (14,186,642) 109,175,179

206,960,744 23,211,513 1,842,989 (897,309) 231,117,937

19,408,363 3,606,120 (3,114,521) 19,899,962

20,937,102 1,770,795,731 4,311,065 244,559,222 4,697,453 (3,443,112) (220,307,170) 21,805,055 1,799,745,236

60,178,738

56,491,357

148,865,466

20,444,857

9,448,408 2,413,954,084

72,696,018

56,545,019

172,782,894

23,857,304

24,848,838 2,697,286,547

15

20 to 33

10

10

20

6.1

The carrying amount of freehold land as at December 31, 2012 would have been Rs 172.014 million (2011: Rs 172.014 million) had there been no revaluation.

6.2

The cost of fully depreciated assets which are still in use as at December 31, 2012 is Rs 925.201 million (2011: Rs 940.482 million).

6.3

Property valuing Rs 4.558 million has been transferred to fixed assets from donations in kind during the year. The title of this property is held in the name of the Chief Executive Officer on behalf of the Trust.

6.3

The depreciation charge for the year has been allocated as follows: - note 27 - note 28 - note 29

Clinical expenses General and administrative expenses Marketing expenses

2012 Rupees

2011 Rupees

163,694,551 77,227,863 3,636,808 244,559,222

152,466,699 54,929,677 1,742,953 209,139,329

50

Annual Report 2012

Medical and surgical equipment

7.

Support services equipment

OfďŹ ce equipment

HVAC and electrical equipment

(Rupees) Total

Assets subject to ďŹ nance lease

COST Balance as at January 01, 2011 Addition during the year Transfer to property, plant and equipment Balance as at December 31, 2011

181,093,927 36,976,135 (42,437,012) 175,633,050

12,623,557 24,893,695 37,517,252

25,619,375 (25,619,375) -

59,960,362 20,859,067 (27,948,025) 52,871,404

279,297,221 82,728,897 (96,004,412) 266,021,706

Balance as at January 01, 2012 Addition during the year Transfer to property, plant and equipment Balance as at December 31, 2012

175,633,050 (6,729,432) 168,903,618

37,517,252 37,517,252

-

52,871,404 (6,318,818) 46,552,586

266,021,706 (13,048,250) 252,973,456

DEPRECIATION Balance as at January 01, 2011 Charge for the year Transfer to property, plant and equipment Balance as at December 31, 2011

30,684,541 27,523,610 (18,735,718) 39,472,433

1,469,353 3,137,502 4,606,855

13,600,923 1,749,788 (15,350,711) -

5,512,137 5,090,645 (5,190,619) 5,412,163

51,266,954 37,501,545 (39,277,048) 49,491,451

Balance as at January 01, 2012 Charge for the year Transfer to property, plant and equipment Balance as at December 31, 2012

39,472,433 25,840,242 (2,854,463) 62,458,212

4,606,855 5,626,538 10,233,393

-

5,412,163 4,984,196 (1,842,989) 8,553,370

49,491,451 36,450,976 (4,697,452) 81,244,975

Book value as at December 31, 2011

136,160,617

32,910,397

-

47,459,241

216,530,255

Book value as at December 31, 2012

106,445,406

27,283,859

-

37,999,216

171,728,481

15

15

20

10

Annual depreciation rate %

2012 Rupees

7.1

2011 Rupees

The depreciation charge for the year has been allocated as follows:

Clinical expenses General and administrative expenses

- note 27 - note 28

31,677,408 4,773,568 36,450,976

31,187,187 6,314,358 37,501,545

Messages

8.

At a glance

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Annual Report 2012

51

Intangible assets Rupees Computer Software

Cost Balance as at January 01, 2011 Additions during the year Balance as at December 31, 2011

11,912,644 11,912,644

Balance as at January 01, 2012 Additions during the year Balance as at December 31, 2012

11,912,644 11,912,644

Amortization Balance as at January 01, 2011 Charge for the year Balance as at December 31, 2011

2,605,967 3,970,881 6,576,848

Balance as at January 01, 2012 Charge for the year Balance as at December 31, 2012

6,576,848 3,970,894 10,547,742

Book value as at December 31, 2011

5,335,796

Book value as at December 31, 2012

1,364,902

Annual amortization rate %

33 2012 Rupees

8.1

The amortization charge for the year has been allocated as follows:

Clinical expenses General and administrative expenses

9.

2011 Rupees

-note 27 -note 28

370,860 3,600,034 3,970,894

370,857 3,600,024 3,970,881

129,207,118 -

29,874,688 9,234,203

1,079,920 1,102,665 4,880,244 23,252,240 500,000 250,000 20,000 4,748,056 35,833,125 165,040,243

4,880,244 8,885,225 2,366,421 1,285,140 1,031,914 18,448,944 11,649,990 69,207,825

Capital work-in-progress

Advances to suppliers Medical and surgical equipment in transit Civil works - Auditorium - Radiation Bunkers - Karachi hospital - Peshawar hospital - HVAC System Isolation Room - HVAC System Pathology - New MRI Radiology - Women Imaging Unit - ICU Extension - Operation Theater Consultancy and design charges for fourth POD building

52

Annual Report 2012

2012 Rupees

10.

Long term advances, receivables and security deposits

Advances to employees - unsecured and considered good Receivables from patients - unsecured and considered good Less: Current maturity - Advances to employees - Receivables from patients

- note 10.1

10,135,349 9,587,496 19,722,845

5,641,780 8,408,120 14,049,900

- note 15 - note 15

4,034,862 8,625,303 12,660,165 7,062,680 4,575,106 11,637,786

3,509,507 7,619,662 11,129,169 2,920,731 3,135,106 6,055,837

Security deposits

10.1

Includes interest free advances of Rs 13,189 (2011: Nil) and Nil (2011: Rs 747,997) to Chief Executive Officer and Chief Financial Officer respectively which have been repaid subsequent to the year end.

General Fund Rupees

11.

2011 Rupees

Endowment Fund Rupees

2012 Rupees

2011 Rupees

Investments

Held to maturity Term Finance Certificates: - Pakistan Mobile Communications Limited Musharika Certificates

- note 11.1 & 11.2 - note 11.2

Available for sale Shares in Hub Power Company Limited National Investment Trust units ABN AMRO Bank Notes: - CROCI Alpha Pairs Note (USD 1,000,000) - Global Healthcare Sector Note (USD 1,000,000) - Climate Change Note (USD 1,500,000) - Credit Agricole Private Bank FFD (USD 2,015,000) - ABN AMRO Dubai TDR (USD 1,015,000) Shares in Cinnabar International Services Limited - note 11.3

32,721,855 1,100,000 33,821,855

-

32,721,855 1,100,000 33,821,855

33,031,481 1,100,000 34,131,481

381,320

19,453,200 -

19,453,200 381,320

14,706,000 306,756

381,320 34,203,175

195,253,500 98,353,500 211,800,000 524,860,200 524,860,200

195,253,500 98,353,500 211,800,000 525,241,520 559,063,375

88,515,840 102,538,240 131,886,720 211,800,000 549,753,556 583,885,037

32,721,855 1,100,000 33,821,855

-

32,721,855 1,100,000 33,821,855

1,664,000 1,664,000

381,320

524,860,200

525,241,520

88,515,840 102,538,240 131,886,720 322,940,800 259,280,237

Less : Current maturity Held to maturity Term Finance Certificates: - Pakistan Mobile Communications Limited Musharika Certificates Available for sale ABN AMRO Bank Notes: - CROCI Alpha Pairs Note (USD 1,000,000) - Global Healthcare Sector Note (USD 1,000,000) - Climate Change Note (USD 1,500,000)

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Annual Report 2012

53

11.1

These have been specifically invested for Physician's endowment fund and Clinical research fund as disclosed in note 19.

11.2

Return on investments held to maturity ranges from 13.56% to 14.93% per annum.

11.3

This represents investment in 3,000,000 class 'B' ordinary shares of USD 1 each of Cinnabar International Services Limited ('CISL'), a company incorporated in British Virgin Islands (BVI). The Trust owns the entire class 'B' ordinary share capital of the company, which do not carry any voting rights in the company. Consequently, the Trust does not have significant influence over the company due to which the company is not considered an associate of the Trust. This investment has been made through an investment company, HBG Management Partners Limited, based in Dubai, United Arab Emirates. Further, CISL is a subsidiary of HBG Investment Holdings Limited ('HBG').

CISL owns 8,430 shares (representing 30% ownership interest) as at December 31, 2012 in Sugarland Real Estate (BVI) Limited, a special purpose entity incorporated by HBG to undertake the development of a real estate project in Oman. Sugarland Real Estate (BVI) Limited is also a subsidiary of HBG since HBG has 70% ownership interest in it as of December 31, 2012. The land purchased and development costs incurred for the project are currently appearing in the financial statements of Sugarland Real Estate (BVI) Limited.

During the year, through a letter dated January 03, 2012, the Trust has requested HBG to sell-down its shares in CISL to other investors or purchase these shares. Consequently, the Trust and HBG have entered into an agreement dated December 05, 2012 whereby HBG has undertaken to make best efforts to sell the abovementioned shares to other investors and the Trust has agreed that it will provide no objection to the sale of the abovementioned shares to other investors. Further, HBG has agreed that any proceeds received from further capital raised in CISL will first be utilized to buy back any unsold shares and HBG has also agreed to purchase all unsold shares from the Trust as at July 31, 2015.

In line with the requirements of IAS 39 – Financial Instruments: Recognition and Measurement, the Trust’s management has assessed whether there is an indication that the Trust's investment is impaired as of December 31, 2012. Under the above circumstances, the Trust’s management feels that there is no indication that the investment is impaired since HBG has undertaken to purchase all the shares of USD 3 million on July 31, 2015 in case these are not sold to any other party. Consequently, no provision for impairment has been recognized in these financial statements as of December 31, 2012.

12.

2012 Rupees

2011 Rupees

68,352,194 75,112,877 110,210,359 3,790,686 257,466,116

86,420,836 65,401,227 89,020,840 3,384,739 244,227,642

Stocks

Medicines Medical and surgical supplies Laboratory supplies Others

54

Annual Report 2012

2012 Rupees

13.

2011 Rupees

Donations in kind

Properties: Zamindar Hotel, McLeod Road, Lahore 3-D, Block-C, Samanabad, Lahore 108-B, Faisal Town, Lahore 160-E, Eden Cottages, Iqbal Park, Lahore 39-F, Jinnah Market, Karmabad, Wahdat Road, Lahore 132-E, Eden Cottages, Iqbal Park, Lahore - note 13.2 309 - 3rd Floor, Eden Centre, 43 - Jail Road, Lahore - note 13.2 185-F, LDA Avenue I, Raiwind Road, Lahore 428-A, Satellite Town, Sargodha House No. SVII-25S-15/R, Bhoond Pura, Mozang, Lahore Plot No. 45/522, Khasra No. 1206, Garhi Awan, HaďŹ zabad 29, Victoria Park, The Mall, Lahore Plot No. 5-B, Iqbal Avenue, Johar Town, Lahore Plot No. 4-A, Pakistan Expatriates Co-operative Housing Society, Lahore OfďŹ ce Nos 09 & 09-A, 2nd Floor Davis Hytes, Davis Road, Lahore Khasra No. 58, Khata No. 1985/1988, Khatooni No. 2045, Scheme # 3 Civil Park, Tehsil Burewala, District Vehari Shop No. G-7, Ground Floor, Hassan Tower, Property No.114-E-I, Gulberg Scheme No. 3, Lahore House No. B-1-56, Aziz Street, Bhimber Road, Gujrat House No. 263, Block 3, Quaid-e-Azam Scheme Township, Lahore - note 13.2 Plot No. 1563, Phase II in Jammu & Kashmir Cooperative Housing Society, Kashmir Model Chakri Road, Rawalpindi - note 13.2 Less: Provision against donations unrealizable

- note 13.3

.

6,000,000 5,500,000 7,500,000 5,201,000 2,339,000 4,425,000 3,800,000 3,776,000 2,987,000 840,000 9,728,000 12,000,000 1,440,000 1,846,000

.

6,000,000 5,500,000 7,500,000 5,201,000 2,372,000 4,465,000 4,558,000 3,800,000 3,776,000 3,055,000 874,000 9,761,000 12,000,000 1,440,000 -

3,135,000

-

8,720,000 6,302,000 2,805,000

5,801,000 2,857,000

397,000 88,741,000 20,440,000 68,301,000

397,000 79,357,000 20,440,000 58,917,000

13.1

The Trust has recognized a gain of Rs 0.178 million (2011: loss of Rs 3.709 million) during the year on the revaluation of its properties carried out at year end by an independent professional valuer.

13.2

The titles of these properties are held in the name of the Chief Executive on behalf of the Trust.

2012 Rupees

13.3

2011 Rupees

Provision against donations unrealizable

Opening balance Provision for the year Closing balance

-note 28

20,440,000 20,440,000

20,440,000 20,440,000

Messages

At a glance

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Annual Report 2012

2012 Rupees

14.

- Hide sales - considered good - Corporate clients - considered good - Collection centers - considered good - considered doubtful

- note 14.1

Less: Provision for doubtful receivables

- note 28

General Fund Rupees

700,000 4,963,417 5,663,417 48,216,334 26,373,869

48,161,974 2,471,508 50,633,482 111,648,858 2,471,508 109,177,350

47,299,220 2,471,508 49,770,728 130,024,348 7,434,925 122,589,423

7,434,925 4,963,417 2,471,508

2,471,508 4,963,417 7,434,925

Endowment Fund Rupees

2012 Rupees

2011 Rupees

4,034,862 8,625,303 3,016,327 37,170,408 3,181,434 31,694,842 21,720,530 4,544,508 5,091,324 119,079,538

3,509,507 7,619,662 5,028,998 24,941,024 3,402,087 17,617,568 51,628,046 3,743,904 4,517,919 122,008,715

2012 Rupees

2011 Rupees

Advances, deposits, prepayments and other receivables

Current portion of long term: advances to employees receivables from patients Advances to employees Advances to suppliers Prepayments Interest receivable Advances for letters of credit Income tax recoverable Others

15.1

1,100,000 1,100,000 35,021,444 24,893,932

Provision for doubtful receivables

Opening balance Add: Provision for the year Less: Receivables written off Closing balance

15.

2011 Rupees

Trade receivables

Accounts receivable: - Software sales - considered good - considered doubtful

14.1

55

- note 10 - note 10 - note 15.1

4,034,862 8,625,303 3,016,327 37,170,408 3,181,434 13,409,345 21,720,530 3,830,407 5,091,324 100,079,940

18,285,497 714,101 18,999,598

Includes advances against expenses to the following key management personnel:

Chief Financial OfďŹ cer Director Marketing

15,000 125,000 140,000

590,306 3,060 593,366

56

Annual Report 2012

Endowment Fund Rupees

General Fund Rupees

16.

2012 Rupees

2011 Rupees

Investments

Held to maturity Term Deposit Receipts ('TDRs') with: 4,400,000 - The Bank of Punjab (one year) - The Bank of Punjab (one year) (GBP 700,000) - The Bank of Punjab (six months) (GBP 500,000) - ABN AMRO Bank (one year) (USD 1,000,000) - Credit Agricole (Suisse) S.A (one year) (USD 2,004,000) - Trust Investment Bank Limited (one year) - Faysal Bank Limited (one year) - Habib Bank Limited - Habib Metropolitan Bank Limited - Bank Alfalah Limited (USD 1,670,975) - Habib Bank Limited (USD 2,000,000) - Allied Bank Limited 79,386,060 - Habib Bank Limited (six months) (GBP 507,000) 100,000,000 - Habib Bank Limited (six months) 150,000,000 - Habib Metropolitan Bank Limited (six months) 50,000,000 - United Bank Limited (six months) - Barclays Bank Limited (one year) 383,786,060 10,500,000 Defence Savings Certificates 394,286,060 Available for sale Shares in Abbott Laboratories Limited 303,170

4,400,000 69,000,000 69,000,000 58,700,000 58,700,000 125,500,000 125,500,000 161,888,408 161,888,408 193,800,000 193,800,000 87,300,000 87,300,000 79,386,060 100,000,000 150,000,000 50,000,000 696,188,408 1,079,974,468 10,500,000 696,188,408 1,090,474,468

2,700,000 161,723,000 69,045,000 89,600,000 179,558,400 69,000,000 29,800,000 -

50,000,000 651,426,400 10,500,000 661,926,400

-

303,170

131,823

32,721,855 1,100,000

-

32,721,855 1,100,000

1,664,000 -

-

-

-

88,515,840 102,538,240 131,886,720 322,940,800

428,411,085

696,188,408 1,124,599,493

986,663,023

10,500,000 417,911,085

10,500,000 67,850,000 67,850,000 628,338,408 1,046,249,493

10,500,000 976,163,023

Current maturity of long term investments Held to maturity Term Finance Certificates: - Pakistan Mobile Communications Limited Musharika Certificates Available for sale ABN AMRO Bank Notes: - CROCI Alpha Pairs Note (USD 1,000,000) - Global Healthcare Sector Note (USD 1,000,000) - Climate Change Note (USD 1,500,000)

Less: Provision against recoverability of investments Defence Savings Certificates Trust Investment Bank Limited (One year)

- note 16.1

Messages

At a glance

Medical Performance

Offices & Collection Centres

Research Performance

General Fund Rupees

16.1

Annual Report 2012

Endowment Fund Rupees

2012 Rupees

57

2011 Rupees

Provision against recoverability of investments 10,500,000 10,500,000

Opening balance Provision for the year Closing balance

17.

Financials

67,850,000 67,850,000

10,500,000 67,850,000 78,350,000

10,500,000 10,500,000

727,123

639,766,919

521,997,748

Cash and bank balances

Balances at bank: - note 17.1 639,039,796 In savings accounts - USD 1,196,751 (2011: USD 331,944) - GBP 2,323,189 (2011: GBP 414,131) - AED 309,377 (2011: AED 600,537) - Pak Rupees 147,560,272 (2011: Pak Rupees 420,478,780) In current accounts - USD 3,624 (2011: USD 7,700) - GBP 37,337 (2011: GBP 951) - Euro 2,113 (2011: 2,113) - AED 691,165 (2011: AED 590,676) - B.D Nil (2011: B.D 456) - Pak Rupees 91,225,236 (2011: Pak Rupees 60,271,124)

110,756,871

500,048

111,256,919

75,910,415

In deposit accounts - GBP 803,000 (2011: GBP 200,000) Cash in hand

125,733,740

-

125,733,740

27,618,000

18,834,853 894,365,260

1,227,171

18,834,853 895,592,431

12,341,150 637,867,313

- note 17.1

17.1

The balances in savings accounts and deposit accounts bear mark up which ranges from 0.2% to 11.25% per annum and 2.05% per annum respectively.

17.2

These include bank accounts of Rs 1,206,387 (2011: Rs 1,581,390) for physician's endowment fund and Rs Nil (2011: Rs 706,629) for Clinical research fund respectively as disclosed in note 19. Bank account for clinical research fund has been closed during the year.

18.

Short term borrowings - secured

18.1

Short term borrowing - General Fund Short term running finance available from a commercial bank under mark up arrangements amounts to Rs 200 million (2011: Rs Rs 200 million). The amount utilized as at December 31, 2012 is Nil (2011: Rs 57.144 million).The rate of markup is 1 month Karachi Inter-Bank Offered Rate (KIBOR) + 0.85 % per annum, payable quarterly. This is secured against first exclusive charge on current assets of the Trust. The effective mark-up rate charged during the year on the outstanding balance ranges from 12.88% to 12.99% per annum.

Of the aggregate facility of Rs 400 million (2011: Rs 400 million) for opening letters of credit and Rs 30 million (2011: Rs 30 million) for guarantees, the amount utilized as at December 31, 2012 was Rs 258.026 (2011: Rs 95.449 million) and Rs 25.614 million (2011: Rs 22.111 million) respectively. The facility for letters of guarantee is secured against hypothecation charge on machinery and medical equipment.

58

Annual Report 2012

General Fund Rupees

19.

2011 Rupees

91,603,461 275,334 560,921 841,191 34,872,264 35,393,022 435,734 56,156,628 8,414,300 528,543 6,531,753 26,591,518 36,762,115 435,500 97,585 33,693,393 333,193,262

-

91,603,461 275,334 560,921 841,191 34,872,264 35,393,022 435,734 56,156,628 8,414,300 528,543 6,531,753 26,591,518 36,762,115 435,500 97,585 33,693,393 333,193,262

59,614,720 2,318,793 41,329 922,536 6,692,671 13,610,176 26,471,462 710,020 35,122,647 5,264,300 5,659,254 25,046,947 26,491,228 1,042,845 395,500 34,774 75,470 24,458,515 233,973,187

108,385,550 108,385,550

-

108,385,550 108,385,550

105,077,050 45,651,076 150,728,126

7,225,532 7,225,532 101,160,018

-

7,225,532 7,225,532 101,160,018

6,567,336 39,445,263 46,012,599 104,715,527

Long term loans - secured

French protocol loan Term loans

- note 20.1 - note 20.2

Less: Current maturity - French protocol loan - Term loans

20.1

2012 Rupees

Trade and other payables

Trade creditors Interest payable on long term loans - secured Markup accrued on short term borrowings - secured Markup accrued on ďŹ nance lease Retention money Accrued liabilities Advances from patients Advances from customers Accounts payable Security deposits Peads welfare fund Provident fund Physician's endowment fund Clinical research fund Cancer Symposium fund Adult Oncology fund Head and Neck Conference Radiology fund Others

20.

Endowment Fund Rupees

French protocol loan 2012 2011 (French Francs)

5,543,472

5,913,038

2012 2011 (Rupee equivalent)

108,385,550

105,077,050

Rate of interest per annum

Number of installments payable

1.4% payable semi annually

30 equal semi annual installments ending on November 07, 2027

The loan has been obtained by the Government of Pakistan from the French Government under Pak French Protocol and has been re-lent to Shaukat Khanum Memorial Trust. The loan comprises of 50% state credit and 50% commercial credit. Commercial credit has been repaid. The loan has been secured by way of a hypothecation charge on the medical and surgical equipment of the Trust in favor of the Government of Pakistan.

Messages

20.2

At a glance

Medical Performance

Research Performance

Offices & Collection Centres

Financials

2012 Rupees

2011 Rupees

Annual Report 2012

59

Term loans

Lender

Rate of interest per annum

Number of installments payable

Habib Bank Limited (HBL) Loan 3

-

14,622,007

3 months KIBOR+1% payable quarterly

-

Loan 4

-

31,029,069

3 months KIBOR+1% payable quarterly

-

45,651,076 Loan 4 repayment Trust has repaid HBL loan 4 by an early settlement before its due date of March 31, 2013.

Effective markup rate The rate of mark-up charged during the year on the outstanding balance of above term loans is as follows: Rate per annum HBL - Loan 3 - Loan 4

21.

12.91% to 12.99% 12.91% to 12.99% 2012 Rupees

2011 Rupees

73,848,217 58,931,645 14,916,572

151,552,019 77,550,308 74,001,711

Liabilities against assets subject to finance lease

Present value of minimum lease payments Less: Current portion shown under current liabilities

The minimum lease payments have been discounted at an implicit interest rate of KIBOR plus 1.25% and 1.50% reset at the beginning of every six months. The implicit interest rate used during the period to arrive at the present value of minimum lease payments ranges from 10.60% to 14.63%. Since the implicit interest rate is linked with KIBOR so the amount of minimum lease payments and finance charge may vary from period to period. The lessee has the option to purchase the assets after expiry of the lease term.

Taxes, repairs, replacements and insurance costs are to be borne by the lessee.

The amount of future payments of the lease and the period in which these payments will become due are as follows:

Minimum lease payments Rupees Not later than one year Later than one year and not later than five years

63,603,011 15,639,978 79,242,989

Future finance cost Rupees 4,671,366 723,406 5,394,772

Present value of lease liability 2012 Rupees 58,931,645 14,916,572 73,848,217

2011 Rupees 77,550,308 74,001,712 151,552,020

60

Annual Report 2012

22.

This represents the fair value of grant of land measuring 50 kanals located at Hayatabad, Phase V, Peshawar by the Government of Khyber Pakhtunkhwa ('GOKP') to develop, build and operate a cancer hospital. According to the Memorandum of Understanding (MoU) signed between GOKP and the Trust, the Trust has to develop the cancer hospital within ten years from its signing and the land cannot be used for any purpose inconsistent with the objectives of the Trust and the development of the cancer hospital. Fair value of land has been determined by an independent professional valuer on the date of transfer of land to the Trust.

23.

This represents provision for accumulating compensated absences.

24.

Contingencies and commitments

24.1

Contingencies

(ii)

The Trust purchased radiology, radiotherapy and operation theatre equipment financed by the French protocol loan and failed to make payments on the due dates resulting in penal interest of French Francs 1.624 million (2011: French Francs 1.624 million) equivalent to Rs 31.986 million (2011: Rs 28.867 million). Management is in negotiations with the lender to waive the penal interest. No provision has been made in these financial statements as the management of the Trust is of the opinion that there are meritorious grounds that the liability is not expected to materialize.

(ii)

Guarantees issued by banks on behalf of the Trust in favor of: (a) (b)

Sui Northern Gas Pipelines Limited amounting to Rs 21.346 million (2011: Rs 21.346 million).

Collector Customs amounting to Rs 4.268 million (2011: Rs 0.766 million)

(iii)

The Trust has agreements with certain employees wherein, based on certain terms and conditions, it would bear the tax liability of the aforesaid employees in case it is assessed/determined by the tax authorities. However, the Trust’s management considers that there are meritorious grounds that the liability would not materialise. Consequently, no provision has been made in these financial statements for the abovementioned tax estimated at Rs 27.375 million (2011: 27.375 million)

24.2

Commitments

(i)

Commitments in respect of capital expenditure Rs 360.43 million (2011: Rs 17.806 million).

(ii)

Letters of credit other than for capital expenditure Rs 64.308 million (2011: Rs 77.330 million).

2012 Rupees

25.

Clinical income

Diagnostic services Treatment services

25.1

2011 Rupees

1,466,171,713 1,278,773,406 735,904,828 692,748,057 2,202,076,541 1,971,521,463

Clinical income

Gross income Less: Waived as financial support to indigent patients - Radiology - Nuclear Medicine - Pathology - Medical Oncology - Radiation Therapy - Internal Medicine - Ancillary Health Services - Surgery - Pharmacy

4,630,352,793 3,885,012,409

Less:

6,036,920 5,795,058 298,679,752 236,615,436 304,716,672 242,410,494 2,202,076,541 1,971,521,463

Net income

Discount to corporate clients Commission to franchised collection centers

130,329,724 165,155,121 54,304,426 60,158,923 292,341,188 331,491,921 153,439,604 179,550,138 235,404,012 294,099,170 66,867,194 104,124,498 4,993,804 2,053,186 288,111,768 225,871,877 695,874,237 510,469,241 2,123,559,580 1,671,080,452 2,506,793,213 2,213,931,957

Messages

At a glance

Medical Performance

Research Performance

Offices & Collection Centres

General Fund Rupees

26.

Financials

Endowment Fund Rupees

Annual Report 2012

2012 Rupees

Income from non-financial assets - Donations - Zakat - Gain on sale of property, plant and equipment - Provisions and unclaimed balances written back - Sale of software - Cafeteria sales - Revaluation gain on donations in kind - Miscellaneous

8,347,242 44,457,188 42,727,571 95,532,001

22,789,883 19,784,003 48,776,675 91,350,561

1,155,737,553 1,668,707,173 318,330 1,567,549 693,548 55,425,736 178,000 11,416,337 2,894,044,226 2,989,576,227

2,000,000 2,580,000 4,580,000 95,930,561

31,137,125 64,241,191 91,504,246 186,882,562

2,505,670 50,718,035 33,477,066 86,700,771

1,157,737,553 903,827,127 1,668,707,173 1,345,084,737 318,330 150,000 1,567,549 3,254,617 693,548 35,461,411 55,425,736 178,000 6,549,338 13,996,337 2,898,624,226 2,294,327,230 3,085,506,788 2,381,028,001 2012 Rupees

2011 Rupees

Clinical expenses

Medicines and drugs Pathology, nursing and other supplies Salaries and benefits Consultants' fee Utilities Repairs and maintenance Vehicle running Telephone, postage and courier Printing, stationery and periodicals Traveling and entertainment Promotional and development Insurance Recruitment and training Subscriptions, legal and professional charges Uniforms Outsourced medical services Rent, rates and taxes Depreciation on property, plant and equipment Depreciation on assets subject to finance lease Amortization on intangible assets Miscellaneous

27.1

2011 Rupees

Other income

Income from financial assets - Income from deposits and investments: Foreign currency Local currency - Exchange gain

27.

61

- note 27.1

- note 6.3 - note 7.1 - note 8.1

639,596,649 542,106,959 897,690,158 728,836,398 791,375,082 632,266,373 352,446,440 321,530,807 118,358,129 85,963,110 93,420,145 94,277,850 361,212 237,040 6,777,019 6,246,300 8,278,202 12,098,951 7,014,352 6,719,923 267,400 6,734,074 7,730,051 2,625,310 7,291,637 2,367,915 2,556,178 3,799,266 3,433,222 6,122,918 6,106,293 918,779 1,006,005 152,466,699 163,694,551 31,187,187 31,677,408 370,857 370,860 9,157 47,134 3,139,230,727 2,637,153,273

Salaries and benefits include Rs 28.725 million (2011: Rs 22.869 million) and Rs 5.980 million (2011: Rs 8.856 million) in respect of provident fund contribution by the Trust and accumulating compensated absences respectively.

62

Annual Report 2012

General Fund Rupees

28.

29.

2012 Rupees

2011 Rupees

General and administrative expenses

Food, laundry and other supplies Salaries and benefits - note 28.1 Utilities Repairs and maintenance Vehicle running Telephone, postage and courier Printing, stationery and periodicals Traveling and entertainment Promotional and development Insurance Recruitment and training Conferences and seminars Uniforms Landscaping and gardening Subscriptions, legal and professional charges Rent, rates and taxes Depreciation on property, plant and equipment - note 6.3 Depreciation on assets subject to finance lease - note 7.1 - note 8.1 Amortization on intangible assets Receivables written off Consultancy and design charges for fourth POD building written off Advances written off Assets written off - note 14.1 Provision for doubtful receivables Provision against recoverability of investments Revaluation loss on donations in kind Miscellaneous

28.1

Endowment Fund Rupees

76,961,746 380,958,328 127,661,753 85,418,879 7,551,623 4,840,957 6,598,918 8,294,716 228,756 5,567,083 1,374,571 14,265,312 2,563,240 8,312,296 5,639,239 2,300,906 77,227,863 4,773,568 3,600,034 3,110,977

-

76,961,746 380,958,328 127,661,753 85,418,879 7,551,623 4,840,957 6,598,918 8,294,716 228,756 5,567,083 1,374,571 14,265,312 2,563,240 8,312,296 5,639,239 2,300,906 77,227,863 4,773,568 3,600,034 3,110,977

60,173,855 294,794,206 97,926,900 72,224,106 6,714,902 5,073,628 8,273,048 8,432,338 179,155 5,380,013 662,518 1,082,305 6,708,440 6,201,749 1,137,519 54,929,677 6,314,358 3,600,024 1,485,190

11,649,990 408,536 422,375 78,057 839,809,723

67,850,000 67,850,000

11,649,990 408,536 422,375 67,850,000 78,057 907,659,723

197,256 4,963,417 3,709,000 62,459 650,226,063

Salaries and benefits include Rs 17.078 million (2011: Rs 14.397 million) and Rs 2.622 million (2011: Rs 6.065 million) in respect of provident fund contribution by the Trust and accumulating compensated absences respectively.

2012 Rupees

2011 Rupees

57,010,666 2,262,026 1,158,487 3,239,044 5,710,305 1,122,726 3,251,342 120,526,077 645,896 192,220 1,942,707 695,277 3,636,808 103,804 201,497,385

41,383,416 2,545,455 2,199,440 2,680,656 4,576,354 903,509 3,670,092 85,929,929 512,653 90,975 2,249,785 468,600 1,742,953 184,997 149,138,814

Marketing expenses

Salaries and benefits Utilities Repairs and maintenance Vehicle running Telephone, postage and courier Printing, stationery and periodicals Traveling and entertainment Advertisements, events and campaigns Insurance Recruitment and training Subscriptions, legal and professional charges Rent, rates and taxes Depreciation on property, plant and equipment Miscellaneous

- note 29.1

- note 6.3

Messages

29.1

At a glance

Medical Performance

Research Performance

Offices & Collection Centres

1,434,671 3,039,993 279,218 15,032,065 3,565,888 23,351,835 General Fund Rupees

2012 Rupees

2011 Rupees

54,421 54,421 Endowment Fund Rupees

1,434,671 3,039,993 279,218 15,032,065 3,620,309 23,406,256

2012 Rupees

1,675,746 10,309,761 4,814,313 24,254,424 3,891,087 44,945,331

2011 Rupees

Cash and cash equivalents

Cash and bank balances Short term borrowings

32.

Endowment Fund Rupees

Finance cost

Interest / markup on: - French protocol loan - secured - Term loans - secured - Short term borrowings - secured - Finance lease Bank charges

31.

63

Annual Report 2012

Salaries and benefits include Rs 1.895 million (2011: Rs 1.481 million) and Rs 0.647 million (2011: Rs 0.647 million) in respect of provident fund contribution by the Trust and accumulating compensated absences respectively.

General Fund Rupees

30.

Financials

894,365,260 894,365,260

1,227,171 1,227,171

895,592,431 895,592,431

637,867,313 (57,754,185) 580,113,128

Remuneration of key management personnel The aggregate amount charged in the financial statements for the year for remuneration, including certain benefits, to the key management personnel is as follows: Chief Executive 2012 2011 Rupees Rupees

Managerial remuneration Housing Retirement benefits Bonus and incentives Utilities

Number of persons

8,800,000 3,520,000 990,000 1,100,000 880,000 15,290,000 1

6,024,333 2,409,733 677,738 721,500 602,433 10,435,737 1

Executive Directors and CFO 2012 2011 Rupees Rupees 17,939,345 7,175,738 1,233,654 1,999,276 1,793,934 30,141,947 5

15,659,091 6,263,637 1,925,824 2,923,170 1,565,909 28,337,631 5

The Trust also provides the chief executive, CFO and directors with free transport. Free residential facility is provided to the chief executive.

33.

Transactions with related parties The related parties comprise key management personnel and post employment benefit plan. Remuneration of key management personnel is disclosed in note 32 while the expense charged in the financial statements in respect of retirement benefit plan is Rs 73.013 million (2011: Rs 63.263 million). Other related party transactions have been disclosed in respective notes to the financial statements. (All transactions with related parties have been carried out on commercial terms and conditions).

64

Annual Report 2012

34.

Financial risk management

34.1

Financial risk factors The Trust's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Trust’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on its financial performance.

Risk management is carried out by the Trust's Board of Governors (the Board). The Trust's finance department evaluates and hedges financial risks. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as currency risk, interest rate risk, credit risk, use of derivative and nonderivative financial instruments and investment of excess liquidity.

a)

Market risk

ii)

Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency risk arises mainly from future commercial transactions or receivables and payables that exist due to transactions in foreign currencies.

The Trust is exposed to currency risk arising from various currency exposures, primarily with respect to the United States Dollar (USD), Pound Sterling (GBP), French Francs, and UAE Dirhams. Currently, the Trust's foreign exchange risk exposure is restricted to foreign currency investments, foreign currency bank balances, foreign currency loans and amounts receivable from / payable to the foreign entities.

At December 31, 2012 if the Rupee had weakened/strengthened by 5% against the USD with all other variables held constant, the impact on surplus for the year would have been Rs 37.926 million (2011: Rs 29.782 million) higher/lower respectively, mainly as a result of exchange gains/losses on translation of USD denominated financial instruments.

At December 31, 2012 if the Rupee had weakened/strengthened by 5% against the GBP with all other variables held constant, the impact on surplus for the year would have been Rs 22.682 million (2011: Rs 12.443 million) higher/lower respectively, mainly as a result of exchange gains/losses on translation of GBP denominated financial instruments.

At December 31, 2012 if the Rupee had weakened/strengthened by 5% against the French Francs with all other variables held constant, the impact on surplus for the year would have been Rs 5.432 million (2011: Rs 5.263 million) higher/lower respectively, mainly as a result of exchange gains/losses on translation of French Franc denominated financial instruments.

At December 31, 2012 if the Rupee had weakened/strengthened by 5% against the UAE Dirhams with all other variables held constant, the impact on surplus for the year would have been Rs 1.321 million (2011: Rs 1.453 million) higher/lower respectively, mainly as a result of exchange gains/losses on translation of UAE Dirhams denominated financial instruments.

ii)

Other price risk Other price risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Trust is not exposed to commodity price risk since it does not hold any financial instrument based on commodity prices. The Trust is exposed to equity securities price risk because of investments held by the Trust and classified as available for sale. To manage its price risk arising from investments in equity securities, the Trust diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Board.

Messages

iii)

At a glance

Medical Performance

Research Performance

Offices & Collection Centres

Financials

Annual Report 2012

65

Cash flow and fair value interest rate risk Interest rate risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Trust's interest rate risk arises from investments, long term loans, lease liabilities, long term advances and short term borrowings. Borrowings obtained and investments made at variable rates expose the Trust to cash flow interest rate risk.

At the balance sheet date, the interest rate profile of the Trust's significant interest bearing financial instruments was: 2012 Rupees

2011 Rupees

Fixed rate instruments Financial assets Investments Financial liabilities Long term loans Net exposure

1,373,581,468

652,526,400

108,385,550 1,265,195,918

105,077,050 547,449,350

32,721,855 765,500,659 798,222,514

33,031,481 597,908,163 630,939,644

73,848,217 73,848,217 724,374,297

45,651,076 151,552,019 57,754,185 254,957,280 375,982,364

Floating rate instruments Financial assets Investments Bank balances - savings accounts & deposit accounts Financial liabilities Long term loans Liabilities against assets subject to finance lease Short term borrowings Net exposure Fair value sensitivity analysis for fixed rate instruments The Trust does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rate at the balance sheet date would not affect the surplus of the Trust.

Cash flow sensitivity analysis for variable rate instruments If interest rates on both financial assets and liabilities, at the year end date, had been 1% higher / lower with all other variables held constant, surplus for the year would have been Rs 61.334 million (2011: Rs 53.162 million) higher / lower, mainly as a result of higher / lower interest income on floating rate instruments.

66 b)

Annual Report 2012

Credit risk Credit risk represents the risk of financial loss being caused if counter party fails to discharge an obligation.

Credit risk of the Trust arises from certain investments, cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to collection centers, corporate clients and patients, including outstanding receivables and committed transactions. The management assesses the credit quality of the collection centers, corporate clients and patients, taking into account their financial position, past experience and other factors.

Individual risk limits are set based on internal or external ratings in accordance with limits set by the Board. The utilization of credit limits is regularly monitored and all transactions with these persons are settled in cash. For banks and financial institutions, only independently rated parties with a strong credit rating are accepted.

The Trust monitors the credit quality of its financial assets with reference to historical performance of such assets and available external credit ratings. The carrying values of financial assets are as under: 2012 Rupees

Investments Long term advances, receivables and security deposits Trade receivables Advances, deposits and other receivables Short term investments Bank balances

2011 Rupees

559,063,375 583,885,037 11,637,786 6,055,837 109,177,350 122,589,423 122,008,715 119,079,538 651,558,223 1,080,277,638 625,526,163 876,757,578 2,755,993,265 2,111,623,398

The carrying amount of financial assets represents the maximum credit exposure. The ageing analysis of trade receivable balances is as follows:

Upto 90 days 90 to 180 days 181 to 365 days More than 365 days

2012 Rupees

2011 Rupees

102,623,387 3,511,146 2,311,526 3,202,799 111,648,858

107,289,763 8,944,617 9,413,417 4,376,551 130,024,348

2,471,508 2,471,508

7,434,924 7,434,924

The age of impairment loss against trade receivables is as follows: Upto 90 days 90 to 180 days 181 to 365 days More than 365 days

Messages

At a glance

Medical Performance

Research Performance

Offices & Collection Centres

Financials

Annual Report 2012

67

The management estimates the recoverability of trade receivables on the basis of financial position and past history of its customers based on the objective evidence that it will not receive the amount due from the particular customer. A provision for doubtful receivables is established when there is objective evidence that the Trust will not be able to collect all the amount due according to the original terms of the receivable. Significant financial difficulties of the debtors, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the trade debt is impaired. The provision is recognized in the income statement. The provision is written off by the Trust when it expects that it cannot recover the balance due. Any subsequent repayments in relation to amount written off, are credited directly to income statement.

The credit quality of Trust's bank balances can be assessed with reference to external credit ratings as follows: Rating Short term A1+ Allied Bank Limited A1+ Askari Bank Limited Not available ABN AMRO Bank N.V (Dubai) A1+ Bank Alfalah Limited A1+ Bank Al-Habib Limited A1 Bank Islami A-1+ Barclays Bank Limited A-2 Burj Bank Limited A-1 Citibank, N.A. P-1 Credit Agricole (Suisse) S.A. A-1 Dubai Islamic Bank Limited A-2 Emirates NBD Bank A2 Al- Baraka Bank (Pakistan) Limited A1+ Faysal Bank Limited A2 First Women Bank Limited A1+ Habib Bank Limited Not available Habib Allied International Bank plc UK A1+ Habib Metropolitan Bank P-1 HSBC Bank Middle East Limited A3 KASB Commercial Bank Limited A-1+ Meezan Bank Limited A1+ MCB Bank Limited A-1+ National Bank of Pakistan A1+ NIB Bank Limited A-2 Silkbank Limited Standard Chartered Bank (Pakistan) Limited A1+ A1 Tameer Microfinance Bank Limited A1+ The Bank of Punjab A2 The Bank of Khyber A-1+ United Bank Limited A-2 Summit Bank Limited

Long term

Rating Agency

2012 Rupees

2011 Rupees

AA+ AA

PACRA PACRA

AA AA+ A AAA A+ Aa3 A AAAA AAA+

PACRA PACRA PACRA Standard & Poor's JCR-VIS Standard & Poor's MOODY'S JCR-VIS MOODY'S PACRA PACRA PACRA PACRA

AA+ A1 BBB AAAAA AAA AAAAAA A AAAAA+ A

PACRA MOODY'S PACRA JCR-VIS PACRA JCR-VIS PACRA JCR-VIS PACRA PACRA PACRA PACRA JCR-VIS JCR-VIS

1,795,553 1,211,615 585,037 146,518,427 181,528,662 154,152 162,203 19,809 185,519 201,147 18,232,924 64,587 62,707,657 26,063 66,270,857 1,382,254 348,487 139,261 109,234 5,075,423 6,832,999 3,637,630 360,043 532,646 11,378,993 13,763 123,404,116 76,756 243,701,710 100,051 876,757,578

1,894,407 1,593,454 1,066,225 199,740,054 893,078 653,716 52,084,788 52,853,445 28,052,441 36,086 103,763 14,406,586 195,292 126,322,023 261,611 7,997,504 7,356,474 100,027 278,964 167,907 24,311,086 4,769,956 2,538,161 1,427,666 407,970 20,327,568 33,225 63,352,833 26,114 12,273,739 625,526,163

Due to the Trust's long standing business relationships with these counterparties and after giving due consideration to their strong financial standing, management does not expect non-performance by these counter parties on their obligations to the Trust. Accordingly, the credit risk is minimal.

68 c)

Annual Report 2012

Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities. Due to the nature of the Trust's operations, the Board maintains flexibility in funding by maintaining availability under committed credit lines.

Management monitors the forecasts of the Trust’s cash and cash equivalents (note 31) on the basis of expected cash flow. This is generally carried out in accordance with practice and limits set by the Trust. These limits vary by location to take into account the liquidity of the market in which the entity operates. In addition, the Trust's liquidity management policy involves projecting cash flows in each quarter and considering the level of liquid assets necessary to meet its liabilities, monitoring balance sheet liquidity ratios against internal requirements, and maintaining debt financing plans.

The table below analyses the Trust’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows as the impact of discounting is not significant.

Rupees Less than One to five one year years

Carrying amount At December 31, 2012 Long term loans Liabilities against assets subject to finance lease Short term borrowings Trade and other payables

At December 31, 2011 Long term loans Liabilities against assets subject to finance lease Short term borrowings Trade and other payables

34.2

More than five years

108,385,550 73,848,217 333,193,262 515,427,029

7,225,532 58,931,645 333,193,262 399,350,439

28,946,822 14,916,572 43,863,394

72,213,196 72,213,196

150,728,126 151,552,020 57,754,185 233,973,187 594,007,518

46,012,599 77,550,308 57,754,185 233,973,187 415,290,279

32,474,835 74,001,712 106,476,547

72,240,692 72,240,692

Fair value estimation The carrying values of all financial assets and liabilities reflected in financial statements approximate their fair values.

Fair value is determined on the basis of objective evidence at each reporting date. The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped in to levels 1 to 3 based on the degree to which fair value is observable: Rupees Level 1

Level 2

Rupees Total

Level 3

At December 31, 2012 Available for sale Investments Total assets Liabilities

313,744,690 313,744,690

-

-

313,744,690 313,744,690

-

-

-

-

338,085,379 338,085,379

-

-

338,085,379 338,085,379

-

-

-

-

At December 31, 2011 Available for sale Investments Total assets Liabilities

Messages

At a glance

Medical Performance

Research Performance

Offices & Collection Centres

Financials

Annual Report 2012

69

The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The quoted market price used for financial instruments held by the Trust is the current bid price. These financial instruments are classified under level 1 in above referred table. The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value a financial instrument are observable, those financial instruments are classified under level 2 in above referred table. The Trust has no such type of financial instruments as on December 31, 2012 and December 31, 2011.

If one or more of the significant inputs is not based on observable market data, the financial instrument is classified under level 3. The Trust has no such type of financial instruments as on December 31, 2012 and December 31, 2011.

The carrying amount less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Trust for similar financial instruments.

In 2012, there were no reclassifications of financial assets.

Available for sale At December 31, 2012 Assets as per balance sheet Investments Long term advances, receivables and security deposits Trade receivables Advances, deposits and other receivables Short term investments Bank balances

Rupees Held to Loans and maturity receivables

Total

525,241,520 525,241,520 11,637,786 11,637,786 111,648,858 111,648,858 119,079,538 119,079,538 303,170 1,113,796,323 - 1,114,099,493 876,757,578 876,757,578 525,544,690 1,113,796,323 1,119,123,760 2,758,464,773 Financial liabilities at amortized cost Rupees

At December 31, 2012 Liabilities as per balance sheet Long term loans Liabilities against assets subject to finance lease Short term borrowings Trade and other payables

108,385,550 73,848,217 333,193,262 515,427,029

Available for sale At December 31, 2011 Assets as per balance sheet Investments Long term advances, receivables and security deposits Trade receivables Advances, deposits and other receivables Short term investments Bank balances

226,812,756 323,072,623 549,885,379

Rupees Held to Loans and maturity receivables

34,131,481 653,090,400 687,221,881

Total

260,944,237 6,055,837 6,055,837 130,024,348 130,024,348 122,008,715 122,008,715 976,163,023 625,526,163 625,526,163 883,615,063 2,120,722,323

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Annual Report 2012

Financial liabilities at amortized cost Rupees At December 31, 2011 Liabilities as per balance sheet Long term loans Liabilities against assets subject to finance lease Short term borrowings Trade and other payables

35.

150,728,126 151,552,020 57,754,185 233,973,187 594,007,518

Date of authorization These financial statements were authorized for issue on ________________________ by the Board of Governors of the Trust.

36.

Corresponding figures Corresponding figures have been re-arranged, wherever necessary, for the purposes of comparison. However, no significant re-arrangement has been made.

Member

Member

Shaukat Khanum Memorial Cancer Hospital and Research Centre

Shaukat Khanum Memorial Cancer Hospital and Research Centre 7A Block R-3, Johar Town, Lahore, Pakistan.

UAN: 111 55 555 | Fax: +92 42 3594 5208 Email: marketing@skm.org.pk | Web: www.shaukatkhanum.org.pk Š 2013 Shaukat Khanum Memorial Cancer Hospital and Research Centre. All rights reserved.

No part of this annual report may be used in any form without prior written approval from the Marketing and Resource Development Department.