Annual Report 2010

2010 ANNUAL REPORT

Financial Information Shaukat Khanum Memorial Trust

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, 2010 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 generally accepted auditing standards. 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 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, 2010 and of its surplus and cash flow for the year then ended in accordance with the approved accounting standards as applicable in Pakistan.

Lahore, October 18, 2011

A. F. Ferguson & Co. Chartered Accountants

Financial Information

SHAUKAT KHANUM MEMORIAL TRUST BALANCE SHEET AS AT DECEMBER 31, 2010 Note FUND BALANCE

General fund Rupees

Endowment fund Rupees

2010 Rupees

2009 Rupees

2,536,652,309

991,490,674

3,528,142,983

3,365,733,921

6 7 8 9

2,264,045,521 228,030,267 9,306,677 139,853,459

-

2,264,045,521 228,030,267 9,306,677 139,853,459

1,998,405,326 122,409,281 196,002,080

10 11

5,613,301 33,215,424 2,680,064,649

630,984,857 630,984,857

5,613,301 664,200,281 3,311,049,506

4,634,552 617,219,464 2,938,670,703

21,627,316 213,496,078 62,229,000 94,996,507

-

21,627,316 213,496,078 62,229,000 94,996,507

21,752,387 263,437,991 58,022,000 61,206,961

15 16 17

62,249,696 1,808,967 305,067,167 761,474,731

2,927,402 96,800,000 260,778,415 360,505,817

65,177,098 98,608,967 565,845,582 1,121,980,548

48,077,033 577,370,518 185,272,789 1,215,139,679

20 21 18 19

50,782,570 73,002,190 80,780,847 269,121,227 473,686,834

-

50,782,570 73,002,190 80,780,847 269,121,227 473,686,834

51,136,281 46,937,038 218,316,527 197,862,538 514,252,384

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

20

149,063,605

-

149,063,605

205,859,254

21 22 23 24

84,015,753 43,323,600 125,000,000 29,797,279 431,200,237

-

84,015,753 43,323,600 125,000,000 29,797,279 431,200,237

42,436,794 25,528,029 273,824,077

Contingencies and commitments

25

2,536,652,309

991,490,674

3,528,142,983

3,365,733,921

REPRESENTED BY NON-CURRENT ASSETS Property, plant and equipment Assets subject to finance lease Intangible assets Capital work-in-progress Long term advances, receivables and security deposits Investments CURRENT ASSETS Stores and spares Stocks Donations in kind Trade receivables Advances, deposits, prepayments and other receivables Investments Cash and bank balances LESS:

CURRENT LIABILITIES

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

12 13 14

NON-CURRENT LIABILITIES

The annexed notes 1 to 37 form an integral part of these financial statements.

28

SHAUKAT KHANUM MEMORIAL TRUST INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2010 Note

General fund Rupees

Endowment fund Rupees

2010 Rupees

2009 Rupees

CLINICAL INCOME

26

1,553,844,162

-

1,553,844,162

1,280,870,988

OTHER INCOME

27

1,459,145,471

33,783,967

1,492,929,438

1,573,012,374

3,012,989,633

33,783,967

3,046,773,600

2,853,883,362

2,202,776,678 554,052,427 106,354,159 40,706,793 2,903,890,057 109,099,576

2,975,192 2,975,192 30,808,775

2,202,776,678 554,052,427 106,354,159 43,681,985 2,906,865,249 139,908,351

1,841,772,644 431,916,893 79,830,569 68,717,897 2,422,238,003 431,645,359

-

-

-

-

109,099,576

30,808,775

139,908,351

431,645,359

TOTAL INCOME EXPENSES Clinical expenses General and administrative expenses Marketing expenses Finance cost

28 29 30 31

Surplus before taxation Provision for taxation Surplus of income over expenditure

The annexed notes 1 to 37 form an integral part of these financial statements.

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2010 General fund Rupees

Surplus of income over expenditure Other comprehensive income: Revaluation surplus on land Unrealized (loss)/gain on investments Gain transferred to comprehensive income on disposal Other comprehensive income for the year Total comprehensive income for the year

Endowment fund Rupees

2010 Rupees

2009 Rupees

109,099,576

30,808,775

139,908,351

431,645,359

(1,730) (1,730) 109,097,846

31,798,146 (9,295,705) 22,502,441 53,311,216

31,796,416 (9,295,705) 22,500,711 162,409,062

402,741,250 57,025,215 459,766,465 891,411,824

The annexed notes 1 to 37 form an integral part of these financial statements.

29

1,091,826,250

-

1,091,826,250

689,085,000 402,741,250 -

Revaluation surplus on land (Note 5)

Total General Fund

Unrealized (loss)/gain on investments

803,549,275 2,474,322,097 89,860,767 891,411,824 43,069,416

Total

862,259,277 32,799,943 43,069,416

936,479,458 3,365,733,921

Endowment Fund Accumulated Total surplus of Endowment income over Fund expenditure

(58,710,002) 57,060,824 -

938,128,636

Rupees

(1,649,178)

981,744,715 1,670,772,822 398,845,416 801,551,057 (43,069,416) (43,069,416) (92,502) 1,337,520,715 2,429,254,463 (1,730)

30,808,775 1,700,000

162,409,062 -

22,502,441 -

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

53,311,216 1,700,000

109,097,846 (1,700,000)

970,637,411

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

109,099,576 (1,700,000)

20,853,263

(56,893) (35,609) -

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

SHAUKAT KHANUM MEMORIAL TRUST STATEMENT OF CHANGES IN FUNDS FOR THE YEAR ENDED DECEMBER 31, 2010

Balance as on January 01, 2009 Total comprehensive income for the year Transfer from general fund to endowment fund Balance as on December 31, 2009 Total comprehensive income for the year Transfer from general fund to endowment fund Balance as on December 31, 2010

The annexed notes 1 to 37 form an integral part of these financial statements.

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SHAUKAT KHANUM MEMORIAL TRUST CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2010 Cash flows from operating activities Operating surplus Adjustments for: Depreciation on property, plant and equipment Depreciation on assets subject to finance lease Amortisation on intangible assets (Gain)/loss on disposal of property, plant and equipment Finance cost Exchange gain Interest income Amortisation of gain on investment Provision for deferred liabilities Provision against investment unrealisable Provision for donation unrealisable Provisions and unclaimed balances written back Revaluation loss on property, plant and equipment Provision against doubtful receivables Receivables written off Advances written off Revaluation (gain)/loss on donations in kind Surplus before working capital changes

Note

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 Cash generated from operations Finance cost paid Taxes paid Payments for retirement benefits

2010

Rupees

139,908,351

431,645,359

187,104,347 28,862,697 2,605,967 (1,337,360) 43,681,985 (10,624,885) (26,870,640) (218,440) 46,394,873 1,440,000 (104,550) 2,877,416 (2,790,000) 410,929,761

163,279,728 18,652,258 (82,622) 68,717,897 (42,783,138) (20,364,463) 38,449,565 10,500,000

125,071 49,941,913 (2,857,000) (33,789,546) (16,271,940)

3,681,354 (83,240,618) (9,033,150) (29,833,175) 31,060,226

1,428,000 2,471,508 377,528 1,252,150 673,543,770

74,727,963 71,876,461 482,806,222

(123,017,940) (210,383,303) 463,160,467

392,804,388

352,982,231

(47,151,259) (829,502) (42,021,073)

Net cash inflow from operating activities

2009

(75,157,571) (581,821) (34,438,844)

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

(238,508,649) 2,109,091 (5,633,382) 590,964,770 (125,840,000) 28,649,234

(168,632,500) 473,094 1,821,240 (94,432,399) 20,262,677

Cash flows from financing activities Repayment of long term loans Repayments of finance lease liabilities Proceeds from long term advances

(57,149,360) (112,611,219) 43,323,600

(64,793,926) (79,186,837) -

Net cash inflow/(outflow) from investing activities

Net cash outflow from financing activities Net increase/(decrease) 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

The annexed notes 1 to 37 form an integral part of these financial statements.

251,741,064

32

(126,436,979) 518,108,473 (33,043,738) 485,064,735

(240,507,888)

(143,980,763) (31,506,420) (1,537,318) (33,043,738)

31

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 1. Legal status and nature of business Shaukat Khanum Memorial Trust ('the Trust') was registered in Pakistan on April 3, 1989 with the Registrar of Trusts. The primary purpose of the Trust is to raise funds in Pakistan and abroad for establishing and maintaining a general hospital 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 a cancer hospital in Peshawar and Karachi.

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 New and amended standards, and interpretations mandatory for the first time for the financial year beginning January 01, 2010 but not currently relevant to the Trust (although they may affect the accounting for future transactions and events): IFRS 2 (amendments), ‘Group cash-settled share-based payment transactions’ is effective from January 1, 2010. In addition to incorporating IFRIC 8, ‘Scope of IFRS 2’, and IFRIC 11, ‘IFRS 2 – Group and treasury share transactions’, the amendments expand on the guidance in IFRIC 11 to address the classification of group arrangements that were not covered by that interpretation.

IFRS 3 (revised), ‘Business Combinations’ is effective from July 1, 2009. The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the income statement. There is a choice on an acquisition-by-acquisition basis to measure the noncontrolling interest in the acquiree at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs should be expensed.

IFRS 5 (amendment), ‘Measurement of non-current assets (or disposal groups) classified as held-for-sale’. The amendment is part of the IASB’s annual improvements project published in April 2009. The amendment provides clarification that IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations. It also clarifies that the general requirement of IAS 1 still apply, particularly paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation uncertainty) of IAS 1.

IAS 1 (amendment), ‘Presentation of Financial Statements’. The amendment is part of the IASB’s annual improvements project published in April 2009. The amendment provides clarification that the potential settlement of a liability by the issue of equity is not relevant to its classification as current or non current. By amending the definition of current liability, the amendment permits a liability to be classified as non-current (provided that the entity has an unconditional right to defer 32

settlement by transfer of cash or other assets for at least 12 months after the accounting period) notwithstanding the fact that the entity could be required by the counterparty to settle in shares at any time.

IAS 7 (amendment), 'Statement of Cash Flows' is effective from January 1, 2010. The amendment provides clarification that only expenditure that results in a recognised asset in the balance sheet can be classified as a cash flow from investing activity. The clarification results in an improvement in the alignment of the classification of cash flows from investing activities in the cash flow statement and the presentation of recognised assets in the balance sheet.

IAS 17 (amendment), 'Leases' is effective from January 1, 2010. Prior to the amendment, IAS 17 generally required a lease of land with an indefinite useful life to be classified as an operating lease, unless title passed at the end of the lease term. The amendment provides clarification that when a lease includes both land and buildings, classification as a finance or operating lease is performed separately in accordance with IAS 17’s general principles. A lease newly classified as a finance lease should be recognised retrospectively.

IAS 27 (revised), ‘Consolidated and Separate Financial Statements’, requires the effects of all transactions with noncontrolling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in income statement.

IAS 36 (amendment), ‘Impairment of Assets’, is effective from January 1, 2010. The amendment clarifies that the largest cash-generating unit (or group of units) to which goodwill should be allocated for the purposes of impairment testing is an operating segment, as defined by paragraph 5 of IFRS 8, ‘Operating segments’ (that is, before the aggregation of segments with similar economic characteristics).

IAS 38 (amendment), ‘Intangible Assets’. The amendment is part of the IASB’s annual improvements project published in April 2009. The amendment clarifies guidance in measuring the fair value of an intangible asset acquired in a business combination and it permits the grouping of intangible assets as a single asset if each asset has similar useful economic lives.

IAS 39 (amendment), 'Cash flow hedge accounting'. This amendment provides clarification when to recognise gains or losses on hedging instruments as a reclassification adjustments in a cash flow hedge of a forecast transaction that results subsequently in the recognition of a financial instrument. The amendment clarifies that gains or losses should be reclassified from equity to income statement in the period in which the hedged forecast cash flow affects income statement.

IFRIC 17, 'Distribution of non-cash assets to owners' is effective from July 1, 2009. It sets out requirements as to how an entity should measure distributions of assets other than cash made as a dividend to its owners. The amendment requires the Trust to recognise a liability for a non-cash distribution to owners when the dividend is authorised and is no longer at the discretion of the entity. The dividend payable is measured at the fair value of the net assets to be distributed and the difference between the dividend paid and the carrying amount of the net assets distributed, is recognised in profit or loss.

IFRIC 18 'Transfers of assets from customers' is effective from July 01, 2009. The interpretation provides guidance on how to account for items of property, plant and equipment received from customers or cash that is received and used to acquire or construct specific assets. This interpretation is only applicable to such assets that are used to connect the customer to a network or to provide ongoing access to a supply of goods or services or both.

There are a number of minor amendments in other IFRS and IAS which are part of annual improvement project published in April 2009 (not addressed above). These amendments are unlikely to have any impact on the Trust's financial statements and therefore have not been analysed in detail.

33

2.2.2 Standards, amendments, and interpretations to existing standards that are not yet effective and have not been early adopted by the Trust The following amendments and interpretations to existing standards have been published and are mandatory for the Trust's accounting periods beginning on or after January 01, 2011 or later periods, but the Trust has not early adopted them: IFRS 9, ‘Financial Instruments’, issued in December 2009. This addresses the classification and measurement of financial assets and is likely to affect the Trust’s accounting for its financial assets. The standard is not applicable until January 1, 2013 but is available for early adoption. IFRS 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading. Fair value gains and losses on available-for-sale debt investments, for example, will therefore have to be recognised directly in profit or loss. The Trust has not yet decided when to adopt IFRS 9.

Revised IAS 24, ‘Related Party Disclosures’, issued in November 2009. It supersedes IAS 24, ‘Related Party Disclosures’, issued in 2003. The revised IAS 24 is required to be applied from January 1, 2011. Earlier application, in whole or in part, is permitted. It is not expected to have any material impact on the Trust's financial statements.

‘Classification of rights issues’ (Amendment to IAS 32), issued in October 2009. For rights issues offered for a fixed amount of foreign currency, current practice appears to require such issues to be accounted for as derivative liabilities.

The amendment states that if such rights are issued pro rata to all the entity’s existing shareholders in the same class for a fixed amount of currency, they should be classified as equity regardless of the currency in which the exercise price is denominated. The amendment should be applied for annual periods beginning on or after February 1, 2010. Earlier application is permitted. It is not expected to have any impact on the Trust's financial statements.

Prepayments of a minimum funding requirement’ (Amendments to IFRIC 14), issued in November 2009. The amendments correct an unintended consequence of IFRIC 14, ‘IAS 19 – The limit on a defined benefit asset, minimum funding requirements and their interaction’. Without the amendments, entities are not permitted to recognise as an asset some voluntary prepayments for minimum funding contributions. This was not intended when IFRIC 14 was issued, and the amendments correct the problem. The amendments are effective for annual periods beginning January 1, 2011. Earlier application is permitted. The amendments should be applied retrospectively to the earliest comparative period presented.

IFRIC 19, ‘Extinguishing financial liabilities with equity instruments’. This clarifies the requirements of IFRSs when an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to accept the entity’s shares or other equity instruments to settle the financial liability fully or partially. The interpretation is effective for annual periods beginning on or after July 1, 2010. Earlier application is permitted.

Improvements to International Financial Reporting Standards 2010, issued in May 2010.

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 34

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. b) 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 from donations, voluntary contributions, subscriptions, house property and investment in government securities is exempt from tax under clause 58(1) 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 is stated at cost less accumulated depreciation and any identified impairment loss. Freehold land is stated at revalued amount. Expenditure attributable to acquisition of medical equipment till its commissioning is capitalized to form part of the cost of the asset.

Depreciation on property, plant and equipment is charged to income 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, 2010 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 4.4).

Subsequent costs are included in the assets' carrying amount or recognised 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 recognised 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.

35

4.3 Intangible Assets Computer Software Expenditure incurred to acquire computer software is capitalised as intangible asset and stated at cost less accumulated amortisation and any identified impairment loss. Computer software is amortised using the straight line method over a period of three years.

Amortisation on additions to computer software is charged from the month in which the asset is available for use while no amortisation 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 4.4).

4.4 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 recognised 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 (cash-generating units). Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

4.5 Leases The Trust is the lessee: 4.5.1 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 capitalised 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.

4.5.2 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.

4.6 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 36

appropriate classification of its investments at the time of the purchase and re-evaluates such designation on a regular basis.

Investments made by the Trust are classified for the purpose of measurement into the following categories as explained in note 4.7.

4.7 Financial Instruments 4.7.1 Financial assets 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 amortised cost.

All financial assets are recognised at the time when the Trust becomes a party to the contractual provisions of the instrument. Regular purchases and sales of investments are recognised on trade-date – the date on which the Trust commits to purchase or sell the asset. Financial assets are initially recognised 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 recognised 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 heldto-maturity investments are carried at amortised 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 recognised 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 recognised in other comprehensive income.

When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in 37

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 recognised in the income and expenditure account. Dividends on available-for-sale equity instruments are recognised in the income and expenditure account when the Trust’s right to receive payments is established.

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 recognised in the income and expenditure account. Impairment losses recognised 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 4.13.

4.7.2 Financial liabilities All financial liabilities are recognised 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 recognised in the income and expenditure account.

4.7.3 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.

4.8 Sale and repurchase agreements Securities purchased under an agreement to resell (reverse repo) are not recognised 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 recognised as markup earned and included in other income.

4.9 Employees’ benefit 4.9.1 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.

The Trust has also provided liability for gratuity for the period prior to the introduction of provident fund scheme.

4.9.2 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.

4.10 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 38

date and the difference in the fair values is charged to income.

4.11 Stores and spares Usable stores and spares are valued principally at moving 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.

4.12 Stocks Stocks are valued principally at the lower of weighted average cost and net realisable 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 realisable value signifies the estimated selling price in the ordinary course of operation less costs necessary to be incurred in order to make a sale.

4.13 Trade debts and other receivables Trade debts and other receivables are recognised initially at invoice value, which approximates fair value, and subsequently measured at amortised 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 reorganisation, and default or delinquency in payments are considered indicators that the trade debt is impaired. The provision is recognised 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.

4.14 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.

4.15 Trade and other payables Trade and other payables are recognised initially at fair value and subsequently measured at amortised 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.

4.16 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.

4.17 Government grants Grants from the government are recognised 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 recognised in the income statement 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 statement on a straight-line basis over the expected lives of the related assets.

39

4.18 Income recognition Income is recognised 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 recognised 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 recognised over the contractual period or as and when services are rendered to customers.

4.19 Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost, any difference between the proceeds (net of transaction costs) and the redemption value is recognised 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.

4.20 Borrowing costs Borrowing costs incurred for the construction of any qualifying asset are capitalised 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.

4.21 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 recognised in the income and expenditure account.

4.22 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 and Research Centre.

5. Revaluation reserve on land This represents the surplus on revaluations 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.

• Used for Karachi Hospital located at Bin Qasim Town, Education City, Karachi.

The revaluations had been done as at December 31, 2009 by an independent professional valuer on the basis of open market value.

40

41

203,334,240 22,012,695 225,346,935 224,971,133 346,440,776 5

-

1,118,255,000

1,243,255,000 -

Balance as at January 01, 2010 Charge for the year Depreciation on disposals Balance as at December 31, 2010

Book value as at December 31, 2009

Book value as at December 31, 2010

Annual depreciation rate %

182,523,068 20,811,172 203,334,240

-

DEPRECIATION Balance as at January 01, 2009 Charge for the year Depreciation on disposals Transfer in from leased assets Balance as at December 31, 2009

57,915,208 15

15

36,565,113

65,419,489 10,444,281 75,863,770

58,911,356 6,508,133 65,419,489

101,984,602 31,794,376 133,778,978

83,389,223 18,595,379 101,984,602

Support services equipment

427,160,359

495,775,577

816,696,398 125,534,628 942,231,026

691,191,507 112,967,065 12,537,826 816,696,398

428,305,373 1,312,471,975 56,919,410 143,482,338 571,787,711 1,369,391,385

1,118,255,000 125,000,000 1,243,255,000

Balance as at January 01, 2010 Additions during the year - note 6.3 & 6.4 Disposals during the year Balance as at December 31, 2010

Medical and surgical equipment

946,754,440 412,576,616 340,087,387 15,728,757 (88,470) 25,718,618 428,305,373 1,312,471,975

Buildings on freehold land

716,941,750 402,741,250 (1,428,000) 1,118,255,000

Freehold land

COST/REVALUED AMOUNT Balance as at January 01, 2009 Additions during the year Surplus on revaluation - note 5 Loss on revaluation - note 29 Disposals during the year Transfer in from leased assets Balance as at December 31, 2009

6. Property, Plant and Equipment

20 to 33

29,695,809

18,624,122

55,011,212 8,855,154 (69,000) 63,797,366

47,086,989 8,033,853 (109,630) 55,011,212

73,635,334 19,926,841 (69,000) 93,493,175

67,042,432 6,766,437 (173,535) 73,635,334

Office equipment

10

133,330,921

80,051,538

166,077,587 14,815,170 180,892,757

155,745,788 10,344,627 (12,828) 166,077,587

246,129,125 68,094,553 314,223,678

212,100,940 34,175,560 (147,375) 246,129,125

HVAC and electrical equipment

10

17,111,102

14,408,327

14,002,862 2,510,470 16,513,332

11,690,230 2,312,632 14,002,862

28,411,189 5,213,245 33,624,434

25,380,589 3,030,600 28,411,189

Furniture and fixtures

20

9,136,346

9,754,516

19,114,795 2,931,949 (3,572,370) 18,474,374

18,647,944 2,302,246 (1,835,395) 19,114,795

28,869,311 3,085,510 (4,344,101) 27,610,720

23,473,853 7,334,403 (1,938,945) 28,869,311

Vehicles

2,264,045,521

1,998,405,326

1,339,656,583 187,104,347 (3,641,370) 1,523,119,560

1,165,796,882 163,279,728 (1,957,853) 12,537,826 1,339,656,583

3,338,061,909 453,516,273 (4,413,101) 3,787,165,081

2,487,659,843 425,718,523 402,741,250 (1,428,000) (2,348,325) 25,718,618 3,338,061,909

Total

Rupees

6.1 The carrying amount of freehold land as at December 31, 2010 would have been Rs 172.014 million (2009: Rs 47.014 million) had there been no revaluation.

6.2 The cost of fully depreciated assets which are still in use as at December 31, 2010 is Rs 826.414 million (2009: Rs 509.597 million).

6.3 Included in additions is land of Rs 125 million measuring 50 kanals located at Hayatabad, Phase V, Peshawar which has been granted to the Trust by the Government of Khyber Pakhtunkhwa to develop, build and operate a cancer hospital as referred to in note 23.

6.4 Included in additions are vehicles aggregating Rs 2.955 million which have been purchased from Indus Motors Company Limited, a related party.

6.5 The depreciation charge for the year has been allocated as follows: Note Clinical expenses General and administrative expenses Marketing expenses

42

28 29 30

2010 Rupees 152,116,356 33,040,750 1,947,241 187,104,347

2009 Rupees 131,972,595 29,544,425 1,762,708 163,279,728

7. Assets subject to finance lease

Medical and surgical equipment

Support services equipment

Rupees

HVAC and electrical equipment

Office equipment

Total

COST Balance as at January 01, 2009 Additions during the year

Transfer to property, plant and equipment Balance as at December 31, 2009 Balance as at January 01, 2010 Additions during the year

Balance as at December 31, 2010

63,895,653

-

25,619,375

-

-

36,627,017

3,804,451

74,804,052

3,804,451

(25,718,618) 74,804,052

106,289,875

3,804,451 8,819,106

-

89,515,028

-

(25,718,618)

40,585,660

144,813,538

-

40,585,660

25,619,375

40,585,660

-

19,374,702

25,619,375

181,093,927

12,623,557

25,619,375

12,936,652

-

3,353,173

-

-

59,960,362

81,017,128

144,813,538 134,483,683 279,297,221

DEPRECIATION Balance as at January 01, 2009 Charge for the year

Transfer to property, plant and equipment Balance as at December 31, 2009 Balance as at January 01, 2010 Charge for the year

Balance as at December 31, 2010

Book value as at December 31, 2009 Book value as at December 31, 2010 Annual depreciation rate %

12,060,454

475,561

12,459,280 18,225,261

(12,537,826) 12,459,280

992,368

22,404,257

8,477,048

992,368

993,792

5,123,875

4,519,769

17,142,327

39,593,292

475,561

8,477,048 13,600,923

150,409,386

11,154,204

12,018,452

3,328,890 15

Note 28 29

(12,537,826)

475,561

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

Clinical expenses General and administrative expenses

-

992,368

1,469,353

15

16,289,825

5,123,875

30,684,541 62,344,772

-

5,512,137

54,448,225

20

18,652,258 22,404,257 28,862,697 51,266,954

122,409,281 228,030,267

10

2010 Rupees

20,482,817 8,379,880 28,862,697

2009 Rupees

13,009,926 5,642,332 18,652,258

43

8. Intangible Assets

(Rupees) Computer software

COST Balance as at January 01, 2010 Additions during the year Balance as at December 31, 2010

11,912,644 11,912,644

AMORTISATION Balance as at January 01, 2010 Charge for the year Balance as at December 31, 2010

2,605,967 2,605,967

Book value as at December 31, 2010

9,306,677

Annual amortisation rate %

8.1 The amortisation charge for the year has been allocated as follows: Note Clinical expenses General and administrative expenses

28 29

9. Capital work-in-progress Note Advances to suppliers Advances to contractors Medical and surgical equipment in transit Civil works - Diagnostic centre, Karachi - Fourth POD building - Pet Scan - Karachi hospital - Peshawar hospital - Nursing inpatient rooms HVAC and electrical equipment - Diagnostic centre, Karachi - In transit Furniture and fixture - Diagnostic centre, Karachi

9.1

9.1

33

2010 Rupees

2009 Rupees

123,619 2,482,348 2,605,967

2010 Rupees

-

2009 Rupees

6,829,802 24,203,286

22,653,858 2,242,404 -

11,649,990 4,178,115 4,880,244 587,750 67,992,893 89,288,992

130,177,272 11,649,990 4,880,244 2,422,817 149,130,323

19,531,379 19,531,379

21,455,815 21,455,815

139,853,459

519,680 196,002,080

9.1 This represents the cost of 'medical and surgical equipment' and 'HVAC and electrical equipment' which is financed 44

through advances from Meezan Bank Limited as referred to in note 22 and will be capitalised upon receipt of the assets.

10 Long term advances, receivables, and security deposits Note Advances to employees - unsecured and considered good Receivables from patients - unsecured and considered good Less: Current maturity - Advances to employees - Receivables from patients Security deposits

2010 Rupees

2009 Rupees

10.1

5,368,255 6,072,294 11,440,549

5,594,693 3,776,590 9,371,283

15 15

2,953,706 5,913,612 8,867,318 2,573,231 3,040,070 5,613,301

3,948,520 3,141,581 7,090,101 2,281,182 2,353,370 4,634,552

10.1 Includes an interest free advance of Rs 700,000 (2009: Rs 278,193) to the Chief Financial Officer, which has been repaid subsequent to the year end.

45

11. Investments Note Held to maturity Term Finance Certificates: - Jahangir Siddiqui & Company Limited

- Pakistan Mobile Communications Limited

11.3

- Global Healthcare Sector Note (US$ 1,000,000)

- Asian Index Note (US$ 1,000,000) - Climate Change Note (US$ 1,500,000) Shares in Cinnabar International Services Limited Less : Current maturity Held to maturity Term Finance Certificates: - Jahangir Siddiqui & Company Limited - Pakistan Mobile Communications Limited Available for sale ABN AMRO Bank Notes: - Asian Index Note (US$ 1,000,000)

Endowment fund Rupees

-

33,418,440 1,100,000 34,518,440

-

2009 Rupees

-

38,149,336

-

33,418,440 33,418,440 1,100,000 34,518,440

43,142,336 1,100,000 44,242,336

360,984 -

15,996,000 34,898,073 65,165,599

15,996,000 360,984 34,898,073 65,165,599

13,364,400 347,542 18,609,062 30,012,861 57,907,159

-

84,208,820

84,208,820

81,021,940

-

123,343,725 211,800,000

1,664,000

-

1,664,000 33,215,424

630,984,857

11.4

2010 Rupees

-

33,418,440

Musharika Certificates Available for sale Shares in Hub Power Company Limited National Investment Trust units AKD Income Fund units AKD Opportunity Fund units Pakistan Income Fund units ABN AMRO Bank Notes: - CROCI Alpha Pairs Note (US$ 1,000,000)

General fund Rupees

360,984 34,879,424

1,664,000

95,572,640

630,984,857 630,984,857

-

95,572,640

4,993,000

82,687,120

- 84,983,050 123,343,725 116,209,380 211,800,000 211,800,000 631,345,841 696,942,514 665,864,281 741,184,850

1,664,000 1,664,000

38,149,336 833,000 38,982,336

- 84,983,050 1,664,000 123,965,386 664,200,281 617,219,464

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 14.86% to 16.44% per annum.

11.3 Included in these are 5,100 units held by the Trust that are in the name of the donor of this investment.

11.4 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').

46

CISL owns 3,000 shares as at December 31, 2010 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. The land purchased and development costs for the project are currently appearing in the financial statements of Sugarland Real Estate (BVI) Limited at an aggregate cost of USD 28.323 million reduced by an impairment loss of USD 18.256 million, thereby resulting in a carrying amount of USD 10.067 million as at December 31, 2010.

The land represents capital contribution in kind by one of HBG Group's shareholders, Sheikh Salim Al Mashani ('the shareholder'). HBG's management have assessed the realizable value of the plot of land at December 31, 2010 by obtaining market valuation from an independent valuer and noted a decline in the value of the plot of land by USD 18.256 million, which is to be adjusted through reduction of capital contributed by the shareholder by virtue of an agreement with him. In accordance with the agreement with the shareholder dated December 15, 2010, the shareholder agreed for a reduction in his capital contribution commensurate with the reduction in the value of land which shall mutually be agreed between HBG and the shareholder. HBG's management is currently into advanced stages of negotiations with the shareholder to agree a final revised value of the plot of land, after which a resolution shall be passed at an extra-ordinary general meeting of the shareholders to effect the capital reduction. Based on the above, the carrying value of the plot of land has been adjusted based on the independent valuation obtained as of December 31, 2010 against proposed reduction in the capital by an equivalent amount in the financial statements of Sugarland Real Estate (BVI) Limited for the year ended December 31, 2010.

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 at December 31, 2010. Under the above circumstances, the Trust’s management feels that there is no indication that the investment is impaired since the impairment loss on the abovementioned land would be borne by the shareholder. However, based on the decline in the project land’s value, the Trust’s management performed a further evaluation by reviewing the recoverable amount of the asset (the project) by reference to the present value of expected future cash flows. The estimation of revenues on unsold properties depends on demand and market conditions. Based on these, the Trust’s management is of the opinion that the net realizable value of the project upon completion of development will be higher than its carrying amount as at December 31, 2010. Consequently, no provision for impairment has been recognized in these financial statements as at December 31, 2010.

12. Stocks

Medicines Medical and surgical supplies Laboratory supplies Others

2010 Rupees 71,589,901 63,249,710 75,302,056 3,354,411 213,496,078

2009 Rupees 107,745,403 71,818,582 81,006,473 2,867,533 263,437,991

47

13. Donations in kind Note 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 428-A, Satellite Town, Sargodha 309 - 3rd Floor, Eden Centre, 43 - Jail Road, Lahore 185-F, LDA Avenue I, Raiwind Road, Lahore House No. SVII-25S-15/R, Bhoond Pura, Mozang, Lahore Plot No. 45/522, Khasra No. 1206, Garhi Awan, Hafizabad 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 House No. B-1-56, Aziz Street, Bhimber Road, Gujrat House No. 263, Block 3, Quaid-e-Azam Scheme Township, Lahore

13.2 13.2

Less: Provision against donations unrealisable

13.3

2010 Rupees

2009 Rupees

6,000,000 5,500,000 7,500,000 5,640,000 2,522,000 4,849,000 3,806,000 5,259,000 4,000,000 2,855,000 908,000 10,192,000 13,000,000 1,440,000 6,341,000 2,857,000 82,669,000

6,000,000 5,500,000 7,500,000 5,201,000 2,522,000 4,465,000 3,806,000 5,259,000 4,000,000 2,855,000 908,000 10,225,000 11,000,000 1,440,000 6,341,000 77,022,000

20,440,000

19,000,000

62,229,000

58,022,000

13.1 The Trust has recognised a gain of Rs 2.79 million (2009: loss of Rs 1.252 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.

13.3 Provision against donations unrealisable Note

Opening balance Provision for the year Closing balance

48

29

2010 Rupees

2009 Rupees

19,000,000

19,000,000

1,440,000

-

20,440,000

19,000,000

14. Trade receivables Note Accounts receivable: - Software sales - considered good - Hide sales - considered good - Corporate clients - considered good - Collection centres - considered good - considered doubtful

Less: Provision for doubtful receivables

14.1

14.1 Provision for doubtful receivables Note Opening balance Provision for the year

29

Less: Bad debts written off against provision Closing balance

15. Advances, deposits, prepayments and other receivables Note 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

10 10 15.1

General fund Rupees 2,953,706 5,913,612 1,486,677 28,913,644 1,550,143 1,581,223 14,420,847 2,031,843 3,398,001 62,249,696

Endowment fund Rupees 2,420,259 507,143 2,927,402

15.1 Includes advances against expenses to the following key management personnel:

Medical Director Chief Financial Officer Director Marketing

2010 Rupees

2009 Rupees

3,940,252 35,865,365 22,403,108

5,133,442 19,910,064 13,826,653

32,787,782 2,471,508 35,259,290 97,468,015

22,336,802 2,471,508 24,808,310 63,678,469

2,471,508 94,996,507

2,471,508 61,206,961

2010 Rupees

2009 Rupees

2,471,508 -

222,870 2,471,508

2,471,508

222,870 2,471,508

2,471,508

2010 Rupees 2,953,706 5,913,612 1,486,677 28,913,644 1,550,143 4,001,482 14,420,847 2,538,986 3,398,001 65,177,098 2010 Rupees 52,000 385,000 95,000 532,000

2,694,378

2009 Rupees 3,948,520 3,141,581 1,606,582 19,937,587 1,699,940 5,780,076 10,070,209 1,709,484 183,054 48,077,033 2009 Rupees 40,000 24,600 64,600 49

16. Investments Note

General fund Rupees

Endowment fund Rupees

2010 Rupees

2009 Rupees

Held to maturity

Term Deposit Receipts with: - The Bank of Punjab (six months) - The Bank of Punjab (one year) - NIB Bank Limited (one year) - Trust Investment Bank (one year) Defence Savings Certificates Available for sale

Caylon Financial Products (Guernsey) Limited - Momentum Invest Note (US$ 4,000,000) Shares in Abbott Laboratories Limited Current maturity of long term investments

10,500,000 10,500,000

96,800,000 96,800,000 96,800,000

96,800,000 96,800,000 10,500,000 107,300,000

37,050,000 61,780,000 18,015,000 116,845,000 10,500,000 127,345,000

144,967 144,967

-

144,967 144,967

336,400,000 160,132 336,560,132

1,664,000

-

1,664,000

38,149,336 833,000

12,308,967

96,800,000

109,108,967

84,983,050 587,870,518

10,500,000

-

10,500,000

10,500,000

Held to maturity

Term Finance Certificates: - Jahangir Siddiqui & Company Limited - Pakistan Mobile Communications Limited

1,664,000

Available for sale

ABN AMRO Bank Notes: - Asian Index Note (US$ 1,000,000) Less: Provision for investment unrealisable Defence Savings Certificates

16.1

16.1 Provisions for investment unrealisable

Note

Opening balance Provision for the year Closing balance

50

29

1,808,967

General fund Rupees

10,500,000 10,500,000

-

1,664,000

96,800,000

98,608,967

Endowment fund Rupees

-

38,982,336

577,370,518

2010 Rupees

2009 Rupees

10,500,000 10,500,000

10,500,000 10,500,000

17. Cash and bank balances Note Balances at bank: In savings accounts - US$ 2,215,465 (2009: US$ 190,000) - Pound Sterling 735,572 (2009: Pound Sterling 27,186)

17.1

- DHMS 52,626 (2009: DHMS 14,111) - Pak Rupees 94,540,130 (2009: Pak Rupees 13,446,661)

In current accounts

- US$ 1,008,479 (2009: US$ 68,665) - Pound Sterling 951 (2009: Pound Sterling 302,915)

Euro 2,113 (2009: 2,113) DHMS 99,091 (2009: DHMS 170,139) B.D 17,261 (2009: B.D 9,202) Pak Rupees 25,399,681 (2009: Pak Rupees 19,856,825) In deposit accounts 17.1 - Pound Sterling 300,000 (2009: Pound Sterling 500,000)

General fund Rupees

Endowment fund Rupees

2010 Rupees

208,686,192 174,292,657 382,978,849

31,948,626

86,485,758 118,434,384

2009 Rupees 33,299,862

72,766,255

-

- AED 300,000 (2009: Nil) Cash in hand

46,701,000

-

46,701,000

67,540,000

17,731,349 - 17,731,349 11,666,672 305,067,167 260,778,415 565,845,582 185,272,789

17.1 The balances in savings accounts and deposit accounts bear mark up which ranges from 0.23% to 10.5% per annum and from 11.75% to 16.5% per annum respectively.

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 (2009: Rs 200 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 12.98% to 13.83% per annum.

Of the aggregate facility of Rs 610 million (2009: Rs 610 million) for opening letters of credit and Rs 30 million (2009: Rs 30 million) for guarantees, the amount utilised as at December 31, 2010 was Rs 70.41 million (2009: Rs 56.70 million) and Rs 21.35 million (2009: Rs 21.35 million) respectively. The facility for letters of guarantee is secured against hypothecation charge on machinery and medical equipment.

18.2 Short term finance - Endowment fund This has been repaid during the year. The effective mark-up rate charged during the year on the outstanding balance ranges from 1.77% to 2.74% per annum.

51

19. Trade and other payables Note Trade creditors Interest payable on long term loans - secured Markup accrued on short term borrowings - secured Markup accrued on finance 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 Others

19.1

General fund Rupees

Endowment fund Rupees

2010 Rupees

2009 Rupees

63,536,949 3,819,405

-

63,536,949 3,819,405

50,302,799 5,214,577

250,412 828,700 10,551,847 20,153,080 22,997,168 250,068 70,804,277 5,304,300 215,627 6,812,855 22,622,943 17,550,641 8,569,686 406,500 14,446,769 269,121,227

-

250,412 828,700 10,551,847 20,153,080 22,997,168 250,068 70,804,277 5,304,300 215,627 6,812,855 22,622,943 17,550,641 8,569,686 406,500 14,446,769 269,121,227

2,324,514 10,120,784 11,018,948 22,514,775 2,076,929 34,808,937 4,824,300 422,527 20,651,794 16,580,359 9,484,034 273,000 7,244,261 197,862,538

2010 Rupees

2009 Rupees

19.1 Includes an amount of Rs 122,876 (2009: Nil) due to EFU General Insurance Limited, a related party. It is in the normal course of business and is interest free.

20. Long term loans - secured Note French protocol loan Term loans Less: Current maturity - French protocol loan - Term loans

52

20.1 20.2

General fund Rupees

Endowment fund Rupees

109,875,833 89,970,342 199,846,175

-

109,875,833 89,970,342 199,846,175

122,705,928 134,289,607 256,995,535

6,463,302 44,319,268 50,782,570 149,063,605

-

6,463,302 44,319,268 50,782,570 149,063,605

6,817,014 44,319,267 51,136,281 205,859,254

20.1 French protocol loan 2010 6,282,604

2009 6,652,170

2010 109,875,833

2009 122,705,928

Rate of interest per annum

Number of installments payable

1.4% payable semi-annually

34 equal semi-annual installments ending on November 7, 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.

20.2 Term loans

Lender

2010 Rupees

2009 Rupees

Rate of interest per annum

Number of installments payable

Habib Bank Limited (HBL) Loan 3

34,118,020

53,614,032

3 months KIBOR+1% payable quarterly

7 equal quarterly installments ending on August 28, 2012

Loan 4

55,852,322

80,675,575

89,970,342

134,289,607

3 months KIBOR+1% payable quarterly

9 equal quarterly installments ending on September 30, 2012

Security: The loans of HBL are secured through first exclusive charge on land of the hospital and exclusive hypothecation charge on medical equipment financed through these loans.

Effective Mark-up Rate: The effective rate of mark-up charged during the year on the outstanding balance of above term loans is as follows: Habib Bank Limited (HBL) Loan 3 Loan 4

Rate per annum

13.29% to 14.09% 13.29% to 14.09%

53

21. Liabilities against assets subject to finance lease

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

2010 Rupees

2009 Rupees

157,017,943 (73,002,190) 84,015,753

89,373,832 (46,937,038) 42,436,794

The minimum lease payments have been discounted at an implicit interest rate of KIBOR plus 1.25% 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 13.83% to 14.85%. 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

90,331,700 94,188,924 184,520,624

Future finance cost Rupees

17,329,510 10,173,171 27,502,681

Present value of lease liability

2010 Rupees

73,002,190 84,015,753 157,017,943

2009 Rupees 46,937,038 42,436,794 89,373,832

22. This represents advances from Meezan Bank Limited under leasing arrangements and carry interest at rates ranging from 14.85% to 15% per annum to finance the assets which are included in capital work in progress. The balance would be transferred to liabilities against assets subject to finance lease on the receipt of respective assets as referred to in note 9.1.

23. 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 as referred to in note 6.3.

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.

24. Deferred liabilities

These are composed of: Provision for gratuity Accumulating compensated absences

54

2010 Rupees 29,797,279 29,797,279

2009 Rupees 104,550 25,423,479 25,528,029

25. Contingencies and commitments 25.1 Contingencies (i) 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 (2009: French Francs 1.624 million) equivalent to Rs 28.410 million (2009: Rs 29.965 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) The Trust has issued guarantees in favor of Sui Northern Gas Pipelines Limited Rs 21.346 million (2009: Rs 21.346 million). (iii) Claims not acknowledged by the Trust Rs 15.858 million (2009: Rs 15.858 million).

25.2 Commitments (i) Commitments in respect of capital expenditure Rs 14.328 million (2009: Rs 16.446 million). (ii) Letters of credit other than for capital expenditure Rs 56.086 million (2009: Rs 40.308 million).

26 Clinical income

2010 Rupees

Diagnostic services Treatment services

26.1 Clinical income

Gross income Less:

Less: Net income

979,736,191 574,107,971 1,553,844,162

2010 Rupees

Waived as financial support to indigent patients - Radiology - Nuclear Medicine - Pathology - Medical Oncology - Radiation Therapy - Internal Medicine - Ancillary Health Services - Surgery - Pharmacy Discount to corporate clients Commission to franchised collection centers

2009 Rupees 790,239,784 490,631,204 1,280,870,988

2009 Rupees

3,031,670,650

2,594,895,043

94,225,196 33,183,151 193,031,344 116,152,821 219,861,894 42,175,435 1,552,689 155,040,445 447,626,066 1,302,849,041 1,728,821,609 4,807,557 170,169,890 174,977,447 1,553,844,162

85,870,791 23,026,035 157,832,604 99,831,897 207,689,219 36,608,275 995,094 130,692,668 438,936,136 1,181,482,719 1,413,412,324 3,585,494 128,955,842 132,541,336 1,280,870,988 55

27. Other income

General fund Rupees

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

Endowment fund

Rupees

2009

Rupees

601,651 5,177,073 5,778,724

9,717,438 11,374,478 10,624,885 31,716,801

10,319,089 16,551,551 10,624,885 37,495,525

1,084,338 19,280,125 29,364,220 49,728,683

607,657,535 807,018,400

10,000 -

607,667,535 807,018,400

620,451,528 865,340,993

1,337,360

-

1,337,360

82,622

104,550 6,253,279 24,501,529 2,790,000 3,704,094 1,453,366,747 1,459,145,471

2,057,166 2,067,166 33,783,967

104,550 6,253,279 24,501,529 2,790,000 5,761,260 1,455,433,913 1,492,929,438

2,253,889 7,901,157 20,672,739 6,580,763 1,523,283,691 1,573,012,374

28. Clinical expenses Note 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 Amortisation on intangible assets Miscellaneous 56

2010

Rupees

28.1

28.2

6.5 7.1 8.1

2010 Rupees 544,594,598 573,563,338 472,269,547 271,872,744 49,123,456 70,733,868 499,906 5,372,799 10,559,204 5,037,870 964,907 6,797,406 7,446,256 1,986,465 2,197,330 6,178,996 847,541 152,116,356 20,482,817 123,619 7,655 2,202,776,678

2009 Rupees 476,311,880 492,027,664 371,996,263 220,335,768 26,671,042 69,252,020 233,612 4,736,433 9,191,465 4,842,548 7,500 5,511,423 6,131,550 1,518,934 2,825,158 3,711,963 1,477,820 131,972,595 13,009,926 7,080 1,841,772,644

28.1 Salaries and benefits include Rs 17.342 million (2009: Rs 12.933 million) and Rs 24.609 million (2009: Rs 20.009 million) in respect of provident fund contribution by the Trust and accumulating compensated absences respectively.

28.2 This relates to EFU General Insurance Limited, a related party.

29. General and adminstrative expenses Note Food, laundry and other supplies Salaries and benefits Utilities Repairs and maintenance Vehicle running Telephone, postage and courier Printing, stationery and periodicals Traveling and entertainment Promotional and development Insurance Recruitment and training Uniforms Landscaping and gardening Subscriptions, legal and professional charges Rent, rates and taxes Depreciation on property, plant and equipment Depreciation on assets subject to finance lease Amortisation on intangible assets Provision for doubtful receivables Provision for investment unrealisable Provision for donation unrealisable Receivables written off Advances written off Loss on revaluation of donations in kind Loss on revaluation of property, plant and equipment Miscellaneous

29.1

29.2

6.5 7.1 8.1 14.1 16.1 13.3 13.1 6

2010 Rupees 59,130,271 246,614,896 92,095,625 67,394,346 5,143,170 3,834,955 7,238,551 7,140,711 89,134 5,206,159 832,861 1,436,014 3,985,050 3,429,768 2,101,320 33,040,750 8,379,880 2,482,348 1,440,000 2,877,416 140,273 18,929 554,052,427

2009 Rupees 44,869,234 198,088,695 34,752,142 66,155,445 3,702,223 3,471,365 7,383,757 5,251,487 49,500 3,820,222 429,426 882,856 3,498,475 5,518,845 947,033 29,544,425 5,642,332 2,471,508 10,500,000 377,528 268,028 1,252,150 1,428,000 1,612,217 431,916,893

29.1 Salaries and benefits include Rs 12.461 million (2009: Rs 9.881 million) and Rs 19.737 million (2009: Rs 16.549 million) in respect of provident fund contribution by the Trust and accumulating compensated absences respectively.

29.2 This relates to EFU General Insurance Limited, a related party.

57

30. Marketing expenses

2010 Rupees

Note

31,150,188 1,530,765 394,774 2,052,942 3,518,327 966,777 2,400,170 60,726,705 623,762 89,825 759,087 147,236 1,947,241 46,360 106,354,159

30.1

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

30.2

6.5

2009 Rupees 24,655,303 934,987 475,724 1,531,294 2,523,971 2,555,567 888,423 42,742,561 474,261 168,000 531,141 586,629 1,762,708 79,830,569

30.1 Salaries and benefits include Rs 1.362 million (2009: Rs 1.201 million) and Rs 2.049 million (2009: Rs 1.991 million) in respect of provident fund contribution by the Trust and accumulating compensated absences respectively.

30.2 This relates to EFU General Insurance Limited, a related party.

31. Finance cost

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

General fund Rupees 1,596,315 15,575,609 2,147,838 16,944,077 1,205,609 3,237,345 40,706,793

Endowment fund Rupees

2010 Rupees

2,914,317 60,875 2,975,192

1,596,315 15,575,609 5,062,155 16,944,077 1,205,609 3,298,220 43,681,985

2009 Rupees 1,747,147 24,347,345 22,123,451 13,615,382 4,062,051 2,822,521 68,717,897

32. Cash and cash equivalents General fund Rupees Cash and bank balances Short term borrowings

58

Endowment fund Rupees

2010 Rupees

305,067,167

260,778,415

-

(80,780,847)

(218,316,527)

224,286,320

260,778,415

485,064,735

(33,043,738)

(80,780,847)

565,845,582

2009 Rupees 185,272,789

33. Remuneration of key management personnel The aggregate amount charged in the financial statements for the year for remuneration, including certain benefits, to the Chief Executive, Chief Financial Officer (CFO) and full time working directors of the Trust is as follows: Chief Executive

2010 Rupees

2009 Rupees

Managerial remuneration Housing Retirement benefits Bonus and incentives Utilities

5,486,000 2,194,400 617,175 650,000 548,600 9,496,175

4,600,000 1,840,000 517,500 500,000 460,000 7,917,500

Number of persons

1

1

Directors and CFO

2010 Rupees

14,082,460 5,632,984 846,102 1,235,000 1,408,246 23,204,792 4

2009 Rupees 9,180,119 3,352,048 1,326,045 364,065 1,074,293 15,296,570 4

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

34. 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 33 while the expense charged in the financial statements in respect of retirement benefit plan is Rs 46.395 million (2009: Rs 38.549 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.

35. Financial risk management 35.1 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 minimise 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 non-derivative financial instruments and investment of excess liquidity. a. Market risk 1. 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) and French Francs. 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.

59

At December 31, 2010 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 28.993 million (2009: Rs 27.613 million) higher/lower respectively, mainly as a result of exchange gains / losses on translation of USD denominated financial instruments.

At December 31, 2010 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 6.696 million (2009: Rs 5.483 million) higher/lower respectively, mainly as a result of exchange gains / losses on translation of GBP denominated financial instruments.

At December 31, 2010 if the Rupee had weakened / strengthened by 5% against the French Franc with all other variables held constant, the impact on surplus for the year would have been Rs 3.204 million (2009: Rs 6.150 million) lower/higher respectively, mainly as a result of exchange losses / gains on translation of French Franc 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.

The Trust's investments in equity of other entities that are publicly traded are listed on the following three stock exchanges, Karachi Stock Exchange, Lahore Stock Exchange and Islamabad Stock Exchange.

The table below summarises the impact of increases/decreases of the KSE-100 index on the Trust’s surplus for the year and on the fund. The analysis is based on the assumption that the KSE-100 index had increased/decreased by 10% with all other variables held constant and all the Trust's equity investments moved according to the historical correlation with the KSE-100 index: Impact on surplus 2010 2009 Rupees

Karachi Stock Exchange

-

-

Impact on the fund 2010 2009 Rupees

1,564,949

1,263,798

Surplus for the year would increase/decrease as a result of gains/losses on equity securities classified as at fair value through profit or loss. Fund balance would increase/decrease as a result of gains/losses on equity securities classified as available for sale. iii. 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.

60

At the balance sheet date, the interest rate profile of the Trust's significant interest bearing financial instruments was: 2010

Fixed rate instruments Financial assets

Investments Bank balances - savings accounts & deposit accounts

Rupees

2009

97,900,000 429,679,849 527,579,849

117,945,000 100,839,862 218,784,862

Long term loans

109,875,833

122,705,928

Net exposure

417,704,016

96,078,934

33,418,440

43,142,336

89,970,342 157,017,943 43,323,600 80,780,847 371,092,732

134,289,607 89,373,832 218,316,527 441,979,966

(337,674,292)

(398,837,630)

Financial liabilities

Floating rate instruments Financial assets Investments

Financial liabilities

Long term loans Liabilities against assets subject to finance lease Long term advances 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 6.770 million (2009: Rs 2.266 million) higher / lower, mainly as a result of higher / lower interest income on floating rate instruments. b. 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 centres, 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 utilisation 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.

61

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 which are neither past due nor impaired are as under: 2010 Investments Long term advances, receivables and security deposits Trade receivables Advances, deposits and other receivables Short term investments Bank balances

Rupees

664,200,281 617,219,464 5,613,301 4,634,552 94,996,507 61,206,961 61,087,969 44,667,609 98,608,967 577,370,518 548,114,233 173,606,117 1,472,621,258 1,478,705,221

The carrying amount of financial assets represents the maximum credit exposure. The ageing analysis of trade receivable balances is as follows: 2010 Rupees

The age of impairment loss against trade receivables is as follows:

2009

2009

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

73,417,639 16,509,406 4,085,103 3,455,867 97,468,015

56,648,385 3,407,170 3,517,612 105,302 63,678,469

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

2,471,508 2,471,508

2,471,508 2,471,508

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 reorganisation, and default or delinquency in payments are considered indicators that the trade debt is impaired. The provision is recognised 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.

62

The credit quality of Trust's bank balances can be assessed with reference to external credit ratings as follows:

Allied Bank Limited Askari Bank Limited ABN AMRO Bank N.V (Dubai) Bank Alfalah Limited Bank Al-Habib Limited Citibank, N.A. Credit Agricole (Suisse) S.A. Dubai Islamic Bank Limited Emirates Bank International PJSC Emirates Global Islamic Banking Faysal Bank Limited First Women Bank Limited Habib Bank Limited Habib Allied International Bank plc UK Habib Metropolitan Bank HSBC Bank Middle East Limited KASB Commercial Bank Limited Meezan Bank Limited MCB Bank Limited National Bank of Pakistan NIB Bank Limited Silkbank Limited Standard Chartered Bank (Pakistan) Limited The Royal Bank of Scotland Limited The Bank of Punjab The Bank of Khyber United Bank Limited

Rating Short term Long term

Rating Agency

A1+ AA A1+ AA Not available A1+ AA A1+ AA+ A-1 A+ P-1 Aa2 A2 A P-1 A2 A2 AA1+ AA A2 BBB+ A1+ AA+

PACRA PACRA

Not available A1+ AA+ P-1 Aa3 A1 A A1 A+ A1+ AA+ A1+ AAA A1+ AAA3 A-

2010

Rupees

2009

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

1,320,684 513,459 86,726,437 102,843,785 264,593 6,217,222 171,824,290 62,422 9,310,804 198,498 556,837 14,638 2,826,526

669,245 920,984 46,979,009 73,532,684 274,776 5,617,064 28,179 125,491 3,896,179 142,058 845,316 106,615 2,363,464

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

2,489,052 88,256 706,529 124,756 20,654,821 1,418,069 2,698,717 892,961 85,769

1,264,081 95,241 130,672 158,519 1,956,938 2,016,326 2,163,314 682,618 60,610

A1+

AAA

PACRA

2,692,351

3,123,788

A1+ A1+ A1+ A1+

AA AAAAAA+

PACRA PACRA PACRA JCR-VIS

119,307,713 10,000 14,265,044 548,114,233

493,970 19,174,875 6,784,101 173,606,117

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. c. 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 dynamic 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 32) 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 63

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.

At December 31, 2010

Carrying amount Long term loans Liabilities against assets subject to finance lease Long term advances Short term borrowings Trade and other payables At December 31, 2009 Long term loans Liabilities against assets subject to finance lease Short term borrowings Trade and other payables

Rupees Less than 1 to 5 1 year years

More than 5 years

199,846,175 157,017,943 43,323,600 80,780,847 269,121,227 750,089,792

50,782,570 73,002,190 80,780,847 269,121,227 473,686,834

71,503,528 84,015,753 43,323,600 198,842,881

77,560,077 77,560,077

256,995,535 89,373,832 218,316,527 197,862,538 762,548,432

51,136,281 46,937,038 218,316,527 197,862,538 514,252,384

117,238,066 42,436,794 159,674,860

88,621,188 88,621,188

35.2 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: As at December 31, 2010

Rupees

Level 1

Level 2

Level 3

Total

Available for sale Investments

419,690,808

-

-

419,690,808

Total assets

419,690,808

-

-

419,690,808

-

-

-

-

Liabilities As at December 31, 2009

Rupees Level 1

Available for sale Investments

821,702,646

Total assets

821,702,646 -

Liabilities 64

Level 2

Level 3

Total -

821,702,646

-

-

821,702,646

-

-

-

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 company 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, 2010 and December 31, 2009.

If one or more of the significant inputs is not based on observable market data, the financial instrument is classified under level 3. 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 company for similar financial instruments. The Trust has no such type of financial instruments as on December 31, 2010 and December 31, 2009.

In 2010, there were no reclassifications of financial assets.

35.3 Financial instruments by categories

As at December 31, 2010 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

Available for sale

631,345,841 144,967 631,490,808

Held to maturity

Loans and receivables

Rupees

32,854,440 98,464,000 131,318,440

Total

- 664,200,281 5,613,301 5,613,301 97,468,015 97,468,015 61,087,969 61,087,969 98,608,967 548,114,233 548,114,233 712,283,518 1,475,092,766 Financial liabilities at amortised cost

As at December 31, 2010 Liabilities as per balance sheet Long term loans Liabilities against assets subject to finance lease Long term advances Short term borrowings Trade and other payables

Rupees

199,846,175 157,017,943 43,323,600 80,780,847 269,121,227 750,089,792

65

Available for sale As at December 31, 2009 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

Held to maturity

Loans and receivables

Total

Rupees 611,959,464 421,543,182 1,033,502,646

5,260,000 155,827,336 161,087,336

4,634,552 63,678,469 44,667,609 173,606,117 286,586,747

617,219,464 4,634,552 63,678,469 44,667,609 577,370,518 173,606,117 1,481,176,729 Financial liabilities at amortised cost

As at December 31, 2009 Liabilities as per balance sheet Long term loans Liabilities against assets subject to finance lease Short term borrowings Trade and other payables

Rupees

256,995,535 89,373,832 218,316,527 197,862,538 762,548,432

36. Date of authorisation These financial statements were authorised for issue on 18th October, 2011 by the Board of Governors of the Trust.

37. Corresponding figures Corresponding figures have been re-arranged, wherever necessary, for the purposes of comparison. Significant re-arrangements made are as follows: Bank balances previously classified as savings accounts, now reclassified and disclosed as current accounts

Bank balances previously classified as current accounts, now reclassified and disclosed as savings accounts

Security deposits with WAPDA previously classified separately, now reclassified in security deposits under long term advances, receivables and security deposits.

Rupees 255,214 81,338

1,519,015

The above figures have been re-arranged as the re-classifications made are considered more appropriate for the purposes of presentation.

66

Published by the Marketing and Resource Development Department Shaukat Khanum Memorial Cancer Hospital and Research Centre 7A Block R-3, Johar Town, Lahore, Pakistan Telephone: +92 42 3594 5100 Ext. 2404 | Fax: +92 42 3594 5208 Email: marketing@skm.org.pk | Web: www.shaukatkhanum.org.pk © 2011 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.