shaukat khanum memorial cancer hospital and research centre endowment fund

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DOI: 10.1177/0972820114538343

2014 11: 71Asian Journal of Management CasesAyesha Bhatti, Junaid Ashraf and M. Farhan Akhtar

Shaukat Khanum Memorial Cancer Hospital and Research Centre Endowment Fund

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Editor’s Introduction 71

Shaukat Khanum Memorial Cancer Hospital and Research Centre Endowment Fund

Ayesha BhattiJunaid AshrafM. Farhan Akhtar

Abstract

The case looks at issues pertaining to the financial management of the Endowment Fund of Shaukat Khanum Memorial Cancer Hospital and Research Centre (SKMCH&RC). The Chairman of SKMCH& RC, Mr Imran Khan, is also the head of the political party Pakistan Tehreek-e-Insaaf (PTI), the key contender in the general elections of May 2013. One of the key figures of a rival political party PML-N, Mr Khawaja Asif has accused Mr Imran Khan of ‘gambling’ with donated funds leading to significant financial losses of money which should have been used for the treatment and care of the poor cancer patients of the hospital. The case is intended to be used for Executive Teaching and should be assigned and read together with the Technical Note ‘Understanding Endowment Funds.’ Together the technical note and the case aim to offer a number of learning objectives for managers of nonprofit organizations. The technical note lists the main types of endowment funds and, by considering the endowment funds of Harvard University and Yale University (considered to be two well managed funds), discusses matters related to their finan-cial management and accounting and reporting requirements. After reading this note, students will have acquired some technical understanding of how to address the key questions in the case.

Keywords

Nonprofits, endowment fund, financial management

Introduction

On 1 August 2013, Khawaja Asif, a prominent member of the Pakistani political party, PML-N, called a press conference together with two other party members, in which he accused Imran Khan, the founder

Asian Journal of Management Cases 11(2) 71–87

© 2014 Lahore University of Management Sciences

SAGE PublicationsLos Angeles, London,

New Delhi, Singapore, Washington DC

DOI: 10.1177/0972820114538343http://ajc.sagepub.com

This case was written by Research Associate M. Farhan Akhtar under the supervision of Assistant Professor Ayesha Bhatti ([email protected]) and Associate Professor Junaid Ashraf ([email protected]) at Lahore University of Management Sciences to serve as basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. This material may not be quoted, photocopied or reproduced in any form without the prior written consent of the Lahore University of Management Sciences. This research was made possible through support provided by the United States Agency for International Development. The opinions expressed herein are those of the author(s) and do not necessarily reflect the views of the US Agency for International Development or the US Government.

Case

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72 Ayesha Bhatti, Junaid Ashraf and M. Farhan Akhtar

Asian Journal of Management Cases, 11, 2 (2014): 71–87

and central leader of the main rival political party, Pakistan Tehreek-e-Insaaf (PTI), of financial misman-agement of sadqaat, fitrana and zakat 1 resulting in serious losses. These allegations were related to Shaukat Khanum Memorial Cancer Hospital and Research Centre (SKMCH&RC), the biggest cancer hospital in Pakistan. The cancer treatment centre was also one of the largest nonprofit organizations of the country. Imran Khan served as the Chairman of the Board of Directors of SKMCH&RC and was also the Chairman of PTI. Khawaja Asif accused Imran Khan of financial mismanagement of the hospital endowment fund.

The money which should have been used for the treatment and care of the poor cancer patients of Pakistan had instead been used in a ‘gambling investment’ stated Asif. ‘This was the money of the Pakistani nation which had been sent abroad.’ (Express Tribune, 1 August 2013). Citing examples of large international endowment funds like Harvard and Yale, Asif said, ‘Yes they make investments in real estate but these investments are made in downtown New York or Boston, not in some newly developed real estate project in a country outside the US.’ (Television Report, 1 August 2013).

The seriousness and severity of the accusations resulted in an immediate backlash from Imran Khan and his supporters, who denied the allegations as completely ‘baseless’ and stated that not a single rupee of the donations had ever been used for personal purposes. He went on to say that the hospital’s financial reports had transparently disclosed all of the financial information relating to the matter and were publi-cally available on the official website (2 August 2013).

These two political parties were arch rivals and contenders for the new government to be formed after the forthcoming elections of May 2013. SKMCH&RC was also often regarded as a model of good gov-ernance by Imran Khan and his political party. Imran Khan claimed that if his party came to power, the whole country would be run on similar high standards of governance. Keeping this context in mind, two matters warranted investigation. First, a factual understanding of the charges made by Khawaja Asif was required in terms of whether endowment funds could invest money in overseas real estate projects in the manner done by SKMCH&RC. Secondly, how transparent was SKMCH&RC in providing details of its endowment fund activities to its stakeholders. This transparency had to be judged in the light of the legal requirements and best practices on the financial management and accounting disclosures of nonprofit endowment funds.

Background

SKMCH&RC was founded by Imran Khan with its formal inauguration on 29 December 1994. Since 1994 Imran Khan was serving as the Chairman Board of Governors. SKMCH&RC was registered in Pakistan with the Registrar of Trusts, and was awarded the prestigious Corporate Excellence Award by the Management Association of Pakistan in November 20102. The hospital had a total capacity of 176 beds and a staff of 1,524, which included 59 consultants, physicians and surgeons. It was spread over an area of 20 acres. According to the official website of SKMCH&RC, 75 per cent of the total patients received financial support. Operational statistics for 2011 included: 9,480 new registrations, 141,806 outdoor patient visits, 75,907 chemotherapy and radiation treatments, 6,560 surgical proce-dures, 3,251,680 pathology tests, 144,216 imaging studies and 931,848 pharmacy dispensations3.

After the success of the cancer hospital and his interest in social welfare, Imran Khan wanted to bring about a larger-scale change in the country. Therefore, on 25 April 1996, PTI was founded in Lahore. PTI started with slow electoral success in the past, but then became one of the country’s mainstream



Shaukat Khanum Memorial Cancer Hospital and Research Centre Endowment Fund 73


national political parties especially after 30 October 2011 when thousands of people gathered in Lahore to support it. According to a survey by International Republican Institute (IRI), as of May 2012, PTI topped the list of popular political parties in the country4.

Financial Mismanagement of the Endowment Fund—The Allegation

On 1 August 2012, Khawaja Asif claimed that Imran Khan lost a huge amount of money donated to his social welfare hospital in a real estate gamble5. Khawaja Asif questioned as to why an investment was made in real estate and that too, in another country. He also pointed out that unlike SKMCH&RC; NGOs prefer to invest in prime locations like London and Manhattan, etc. Table 1 categorizes the investment pattern of SKMCH&RC according to their asset class for the last four years (2007–2010).

According to Facts sheet on the business and realities behind Shaukat Khanum Memorial Hospital6 issued by the official website of PML-N, one of the major claims made was that a fictitious company with the name of HBG was first formed in Dubai, and then US$ 4.5 million were invested through it in real estate7. It would be important to note the structure of investment on which PML-N imposed the allegations. SKMCH&RC’s endowment fund management committee entrusted HBG Holdings Company, based in Dubai, to manage its fund. HBG in turn invested SKMCH&RC’s funds in 3,000,000 shares of one of its subsidiaries, Cinnabar International Services Limited (CISL). These shares had a par value of US$ 1 each, and they did not have voting powers, and hence it could be considered as a passive investment. Furthermore, CISL owned 3,000 shares in Sugarland Real Estate Limited (SREL), another subsidiary of HBG. The loss of investment stated by PML-N was actually related to a price of land owned by SREL. This land had an impairment loss as of 30 December 2010 and, according to Khawaja Asif, the value of the investment was reduced by 64 per cent8.

Transparency and Reporting of Endowment Fund—The Response

In response to the allegations put forward by Khawaja Asif, the two key points put forward by Imran Khan were that first, no funds had been taken out of Pakistan for investment purposes and secondly SKMCH&RC had transparently disclosed all financial information related to their endowment fund.

The following extract from the Express Tribune, 1 August 2012 clarifies the first part of Khan’s response in relation to the investment of the funds:

Calling the accusation that Zakat money was invested abroad a lie; Khan said that the hospital receives money from donors within the country and from those outside of it. He said that the amount of money the hospital gets in zakat is never enough to provide free health service and so fund raising events are organized to bridge the shortfall. He further explained that the foreign donations are collected in a dollar account which is managed by the hospital’s endowment fund. ‘The endowment fund uses this money for investment and earns profit on it,’ he declared. ‘The endowment fund has its own board which decides how to use the money, a board of which I’m not a member,’ Khan said, adding that the board decided to invest money in Dubai as property prices were rising back then.





Answering the accusations point by point, Khan said that the money never went abroad from Pakistan as it was a part of the endowment fund and the company, where the hospital’s endowment fund invested, was owned by Imtiaz Haideri, who is also the chief executive. ‘The investment crashed all of a sudden,’ Khan admitted, but, said, the owner had promised them that they will earn profit on the investment and will not incur losses9.

The second key line of defence taken by Khan was that all of the information quoted by Asif was publi-cally available and that the PML-N leader had in fact relied on their public balance sheet to pick out all the numbers for his accusation. In the earlier mentioned article, he also stated:

[T]he $3 million amount mentioned by Khawaja is already stated in hospital’s balance sheet. If we had misused the money, we would have not mentioned it in our accounts.

It is worth mentioning that according to the Trust Act 1882, under which SKMCH&RC was registered, there were no prescribed accounting and reporting requirements. In the absence of any mandatory dis-closure requirements, its disclosures with regard to the endowment fund included the following:

1. Main Body of Financial Statements: The financial statements of SKMCH&RC were audited by one of the top four accountancy firms of the country. Figures 1–5 present the financial state-ments of SKMCH&RC for the year 2010. The total value of the endowment fund was PKR 991.5 million (Figure 1: Balance Sheet). This included PKR 631 million of investment in non-current and PKR 360 million of investment in current assets. These financial statements reveal an increase of PKR 53.3 million in the endowment fund from 2009 to 2010. This increase included a surplus of PKR 30.8 million over expenditures (Figure 2: Income and Expenditure Account) and other comprehensive income of PKR 22.5 million (Figure 3: Statement of Comprehensive Income). There was also a transfer of PKR 1.7 million from general fund to endowment fund (Figure 4: Statement of Changes in Funds). Figure 6 gives the details of non-current investments whereas the details of current investment can be found in Figure 7.

Table 2 illustrates movements in revenues and expenses over the last ten years. It can be observed that almost 50 per cent or more of the revenues came from donations. This table also shows financial stability of SKMCH&RC as surplus on income can be observed over these ten years, except for year 2002 where there was a deficit of PKR 31 million. The hospital had a bud-get of PKR 3.6 billion for 201010. Table 3 illustrates movements in its endowment fund11 and general fund for the last ten years. A continuous growth can be observed for endowment and general fund from 2001 to 2010. The value of endowment fund at the end of the year 2010 stood at PKR 991 million while general fund stood at PKR 2.5 billion.

2. Accounting Policy Note: The objective of SKMCH&RC’s endowment fund as stated in note 4.22, Notes to and forming part of the financial statements for the year ended 31 December 2010 was, Endowment fund is a restricted fund. The main objective of the fund is to generate income for the operating expenses of SKMCH&RC12.

3. Note 11.4: In Note 11.4 to the financial statements, SKMCH&RC explained the reason for not realizing this impairment loss. According to this note, the net realizable value upon completion of the project was expected to be higher than its carrying value as at 31 December 2010.

It should be noted that the chairman and the CEO message was given in the Sections ‘Message from the Chairman’ and ‘Message from the CEO’s Desk,’ respectively.



Tabl

e 1.

SK

CM

H&

RC

Inve

stm

ent

Patt

ern

SKC

MH

&R

C In

vest

men

t Pa

tter

n

Ass

et C

lass

2010

2009

2008

2007

Dom

estic

Equ

ities

15,9

96,0

001.

6%13

,364

,400

1.2

%6,

058,

700

0.6%

7,01

5,00

01.

0%Fi

xed

Inco

me

100,

063,

672

10.1

%21

,546

,032

1.9

%12

4,22

2,30

912

.4%

90,2

03,1

6613

.0%

Inte

rnat

iona

l Equ

ities

––

––

Alte

rnat

ive

Stra

tegi

es*

211,

800,

000

21.4

%21

1,80

0,00

018

.4%

211,

800,

000

21.2

%–

0.0%

Shor

t-te

rm S

ecur

ities

402,

852,

587

40.6

%85

4,47

6,43

574

.4%

627,

277,

293

62.7

%57

1,96

2,28

082

.5%

Cas

h26

0,77

8,41

526

.3%

47,1

02,2

44 4

.1%

31,6

46,3

69 3

.2%

24,0

09,1

013.

5%77

9,69

0,67

493

6,48

9,11

178

9,20

4,67

169

3,18

9,54

7

*Alt

erna

tive

Ass

ets

Priv

ate

Equi

ty–

––

––

––

–M

arke

tabl

e A

ltern

ativ

e St

rate

gies

––

––

––

––

Vent

ure

Cap

ital

––

––

––

––

Priv

ate

Equi

ty (

Rea

l Est

ate)

211,

800,

000

21.4

%21

1,80

0,00

018

.4%

211,

800,

000

21.2

%–

0.0%

Ener

gy a

nd N

atur

al

Res

ourc

es–

––

––

––

–

Dis

tres

sed

Deb

t–

––

––

––

–To

tal

991,

490,

674

1,14

8,28

9,11

11,

001,

004,

671

693,

189,

547

So

urce

: C

ase

Wri

ters

’ Ana

lysi

s.N

ote

s:

•D

om

esti

c E

quit

ies

incl

udes

sha

res

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ub P

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Com

pany

Lim

ited

for Y

ear

2010

, 200

9, 2

008

and

2007

.

•F

ixed

Inc

om

e in

clud

es A

KD

Opp

ortu

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Fun

d U

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and

Pak

ista

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com

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201

0; T

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Fin

ance

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ates

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and

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com

e Fu

nd U

nits

, les

s C

urre

nt M

atur

ity T

FCs

for

2009

; Te

rm F

inan

ce C

ertif

icat

es o

f Jah

angi

r Si

ddiq

ui &

Com

pany

Lim

ited,

AK

D In

com

e Fu

nd U

nits

, AK

D O

ppor

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tan

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U

nits

, les

s C

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atur

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r 20

10, 2

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m s

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itie

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sh/o

ther

incl

udes

ABN

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ro B

ank

note

s an

d cu

rren

t as

sets

for

year

201

0, 2

009,

200

8 an

d 20

07.





Figure 1. Balance Sheet

Financial Information

SHAUKAT KHANUM MEMORIAL TRUSTBALANCE SHEET AS AT DECEMBER 31, 2010

NoteGeneral

fund RupeesEndowment fund Rupees

2010 Rupees

2009 Rupees

FUND BALANCEREPRESENTED BYNON-CURRENT ASSETS 2,536,652,309 991,490,674 3,528,142,983 3,365,733,921

Property, plant and equipment 6 2,264,045,521 – 2,264,045,521 1,998,405,326Assets subject to finance lease 7 228,030,267 – 228,030,267 122,409,281Intangible assets 8 9,306,677 – 9,306,677 –Capital work-in-progress 9 139,853,459 – 139,853,459 196,002,080Long term advances, receivables and security deposits

10 5,613,301 – 5,613,301 4,634,552

Investments 11 33,215,424 630,984,857 664,200,281 617,219,4642,680,064,649 630,984,857 3,311,049,506 2,938,670,703

CURRENT ASSETSStores and spares 21,627,316 – 21,627,316 21,752,387Stocks 12 213,496,078 – 213,496,078 263,437,991Donations in kind 13 62,229,000 – 62,229,000 58,022,000Trade receivables 14 94,996,507 – 94,996,507 61,206,961Advances, deposits, prepaymentsand other receivables 15 62,249,696 2,927,402 65,177,098 48,077,033Investments 16 1,808,967 96,800,000 98,608,967 577,370,518Cash and bank balances 17 305,067,167 260,778,415 565,845,582 185,272,789

761,474,731 360,505,817 1,121,980,548 1,215,139,679LESS: CURRENT LIABILITIESCurrent maturity of long term loans-secured

20 50,782,570 – 50,782,570 51,136,281

Current maturity of lease liabilities 21 73,002,190 – 73,002,190 46,937,038Short term borrowings-secured 18 80,780,847 – 80,780,847 218,316,527Trade and other payables 19 269,121,227 – 269,121,227 197,862,538

473,686,834 – 473,686,834 514,252,384LESS: NON-CURRENT LIABILITIESLong term loans-secured 20 149,063,605 – 149,063,605 205,859,254Liabilities against assets subject tofinance lease 21 84,015,753 – 84,015,753 42,436,794Long term advances 22 43,323,600 – 43,323,600 –Deferred government grant 23 125,000,000 – 125,000,000 –Deferred liabilities 24 29,797,279 – 29,797,279 25,528,029

431,200,237 – 431,200,237 273,824,077Contingencies and commitments

25

2,536,652,309 991,490,674 3,528,142,983 3,365,733,921

Source: https://www.shaukatkhanum.org.pk/images/skm_img/downloads/Audits/financial10.pdfThe annexed notes 1 to 37 form an integral part of these financial statements.





Figure 2. Income and Expenditure Account

SHAUKAT KHANUM MEMORIAL TRUSTINCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2010

NoteGeneral

fund RupeesEndowmentfund 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

TOTAL INCOME 3,012,989,633 33,783,967 3,046,773,600 2,853,883,362

EXPENSES

Clinical expenses 28 2,202,776,678 – 2,202,776,678 1,841,772,644General and administrative expenses

29 554,052,427 – 554,052,427 431,916,893

Marketing expenses 30 106,354,159 – 106,354,159 79,830,569Finance cost 31 40,706,793 2,975,192 43,681,985 68,717,897

2,903,890,057 2,975,192 2,906,865,249 2,422,238,003Surplus before taxation 109,099,576 30,808,775 139,908,351 431,645,359Provision for taxation – – – –Surplus of income over expenditure

109,099,576 30,808,775 139,908,351 431,645,359


Figure 3. Statement of Comprehensive Income

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

Generalfund Rupees

Endowmentfund Rupees

2010 Rupees

2009 Rupees

Surplus of income over expenditure 109,099,576 30,808,775 139,908,351 431,645,359Other comprehensive income:Revaluation surplus or land – – – 402,741,250Unrealized (loss)/gain on investments (1,730) 31,798,146 31,796,416 57,025,215Gain transferred to comprehensive income on disposal

– (9,295,705) (9,295,705) –

Other comprehensive income for the year (1,730) 22,502,441 22,500,711 459,766,465Total comprehensive income for the year 109,097,846 53,311,216 162,409,062 891,411,824




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The

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es 1

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(Figure 5 continued)

Figure 5. Cash Flow Statement

SHAUKAT KHANUM MEMORIAL TRUSTCASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2010

2010 2009

Notes Rupees

Cash flows from operating activitiesOperating surplus 139,908,351 431,645,359Adjustments for: Depreciation on property, plant and equipment 187,104,347 163,279,728 Depreciation on assets subject to finance lease 28,862,697 18,652,258 Amortisation on intangible assets 2,605,967 – (Gain)/loss on disposal of property, plant and equipment (1,337,360) (82,622) Finance cost 43,681,985 68,717,897 Exchange gain (10,624,885) (42,783,138) Interest income (26,870,640) (20,364,463) Amortisation of gain on investment (218,440) – Provision for deferred liabilities 46,394,873 38,449,565 Provision against investment unrealisable – 10,500,000 Provision for donation unrealisable 1,440,000 Provisions and unclaimed balances written back (104,550) – Revaluation loss on property, plant and equipment – 1,428,000 Provision against doubtful receivables – 2,471,508 Receivables written off – 377,528 Advances written off 2,877,416 – Revaluation (gain)/loss on donations in kind (2,790,000) 1,252,150Surplus before working capital changes 410,929,761 673,543,770

Effect on cash flow due to working capital changes(Increase)/decrease in current assets: Stores and spares 125,071 3,681,354 Stocks 49,941,913 (83,240,618) Donations in kind (2,857,000) (9,033,150) Trade receivables (33,789,546) (29,833,175) Advances, deposits, prepayments and other receivables (16,271,940) 31,060,226Increase/(decrease) in current liabilities: Trade and other payables 74,727,963 (123,017,940)

71,876,461 (210,383,303)Cash generated from operations 482,806,222 463,160,467

Finance cost paid (47,151,259) (75,157,571)Taxes paid (829,502) (581,821)Payments for retirement benefits (42,021,073) (34,438,844)

Net cash inflow from operating activities 392,804,388 352,982,231





SHAUKAT KHANUM MEMORIAL TRUSTCASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2010

2010 2009

Notes Rupees

Cash flows from investing activitiesFixed capital expenditure (238,508,649) (168,632,500)Sale proceeds of property, plant and equipment disposed off 2,109,091 473,094Long term advances and security deposits (5,633,382) 1,821,240Proceeds from the disposal of investment 590,964,770 –Investments purchased (125,840,000) (94,432,399)Interest received 28,649,234 20,262,677

Net cash inflow/(outflow) from investing activities 251,741,064 (240,507,888)

Cash flows from financial activitiesRepayment of long term loans (57,149,360) (64,793,926)Repayments of finance lease liabilities (112,611,219) (79,186,837)Proceeds from long term advances 43,323,600 –

Net cash outflow from financing activities (126,436,979) (143,980,763)Net increase/(decrease) in cash and cash equivalents 518,108,473 (31,506,420)Cash and cash equivalents at the beginning of the year

(33,043,738) (1,537,318)

Cash and cash equivalents at the end of the year 32 485,064,735 (33,043,738)


Figure 6. Details of Non-Current Investments

11. Investments NoteGeneral


2010 Rupees

2009 Rupees

Held to maturityTerm Finance Certificates: •JahangirSiddiqui&CompanyLimited – – – 38,149,336 •PakistanMobileCommunications

Limited33,418,440 – 33,418,440 4,993,000

33,418,440 – 33,418,440 43,142,336Musharika Certificates 1,100,000 – 1,100,000 1,100,000

34,518,440 – 34,518,440 44,242,336Available for saleShares in Hub Power Company Limited – 15,996,000 15,996,000 13,364,400National Investment Trust units 11.3 360,984 – 360,984 347,542AKD Income Fund units – – – 18,609,062AKD Opportunity Fund units – 34,898,073 34,898,073 30,012,861

(Figure 5 continued)







2010 Rupees

2009 Rupees

Pakistan Income Fund units – 65,165,599 65,165,599 57,907,159ABN AMRO Bank Notes: •CROCIAlphaPairsNote

(US$ 1,000,000)– 84,208,820 84,208,820 81,021,940

•GlobalHealthcareSectorNote (US$ 1,000,000)

– 95,572,640 95,572,640 82,687,120

•AsianIndexNote(US$1,000,000) – – – 84,983,050 •ClimateChangeNote(US$1,500,000) – 123,343,725 123,343,725 116,209,380Shares in Cinnaber International Services Limited

11.4 – 211,800,000 211,800,000 211,800,000

360,984 360,984,857 631,345,841 696,942,514

34,879,424 630,984,857 665,864,281 741,184,850Less: Current maturityHeld to maturityTerm Finance Certificates: •JahangirSiddiqui&CompanyLimited – – – 38,149,336 •PakistanMobileCommunications

Limited1,664,000 – 1,664,000 833,000

1,664,000 – 1,664,000 38,982,336Available for saleABN AMRO Bank Notes: •AsianIndexNote(US$1,000,000) – – – 84,983,050

1,664,000 – 1,664,000 123,965,38633,215,424 630,984,857 664,200,281 617,219,464

Source: https://www.shaukatkhanum.org.pk/images/skm_img/downloads/Audits/financial10.pdf

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’).

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 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 above mentioned 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.

Figure 7. Details of Current Investments



2010 Rupees

2009 Rupees

Held to maturityTerm Deposit Receipts with: •TheBankofPunjab(sixmonths) – – – 37,050,000 •TheBankofPunjab(oneyear) – – – 61,780,000 •NIBBankLimited(oneyear) – – – 18,015,000 •TrustInvestmentBank(oneyear) – 96,800,000 96,800,000 –

– 96,800,000 96,800,000 116,845,000Defence Savings Certificates 10,500,000 – 10,500,000 10,500,000

10,500,000 96,800,000 107,300,000 127,345,000Available for saleCaylon Financial Products (Guernsey) Limited •MomentumInvestNote

(US$ 4,000,000)– – – 336,400,000

Shares in Abbott Laboratories Limited 144,967 – 144,967 160,132

144,967 – 144,967 336,560,132





Message from the Chairman

Over the years, my faith in the goodness of mankind has increased greatly. Shaukat Khanum Memorial Cancer Hospital and Research Centre is indeed a living tribute to your kindness and generosity. I am personally grateful to all those individuals who made a contribution to launch the Hospital and to those of you who have continued to support us in helping patients fight against cancer. While nearly 50 per cent of our revenue is generated by our Hospital services, the rest comes from your zakat and generous donations. We need your support now more than ever. The Hospital has a budget of ` 3.6 billion for 2010. Because of your support, I was able to carry out my dream of building a world-class hospital for cancer and I sincerely hope that I can look forward for your continued support to help the Hospital provide services to those victims of cancer with nowhere else to turn.

Imran KhanSource: SKMCH&RC General Report (2010), p.6.

https://www.shaukatkhanum.org.pk/images/skm_img/downloads/Audits/general10.pdf



2010 Rupees

2009 Rupees

Current maturity of long term investmentsHeld to maturityTerm Finance Certificates: •JahangirSiddiqui&CompanyLimited – – – 38,149,336 •PakistanMobileCommunications

Limited1,664,000 – 1,664,000 833,000

1,664,000 – 1,664,000 38,982,336Available for saleABN AMRO Bank Notes: •AsianIndexNote(US$1,000,000) – – – 84,983,050

12,308,967 96,800,000 109,108,967 587,870,518Less: Provision for investment unrealisable –Defence Savings Certificates 16.1 10,500,000 – 10,500,000 10,500,000

1,808,967 96,800,000 98,608,967 577,370,518

16.1 Provisions for investment unrealisable Note

General fund Rupees

Endowment fund Rupees

2010 Rupees

2009 Rupees

Opening balance 10,500,000 – 10,500,000 –Provision for the year 29 – – – 10,500,000Closing balance 10,500,000 – 10,500,000 10,500,000

Source: https://www.shaukatkhanum.org.pk/images/skm_img/downloads/Audits/financial10.pdf





Message from the CEO’s Desk

Shaukat Khanum Memorial Cancer Hospital and Research Centre (SKMCH&RC) has continued to provide quality care to all segments of society. The year 2010 proved to be quite difficult for Pakistan. The devastation caused by the monsoon floods and its aftermath was immeasurable and impacted every individual and institution in the country. SKMCH&RC was also affected. Our focus in these difficult times was to prudently manage our resources and keep hope alive for the thousands of poor cancer patients being treated at the Hospital. I am pleased to share with you that because of your faith and enduring support for our institution and what it stands for, there was no impact to the number of patients accepted for treatment nor the standards of cancer care practiced at the Hospital. The construction of the new inpatient unit, which will increase the number of inpatients at the Hospital by two-fold, continued throughout the year. Our Karachi Diagnostic Centre and Clinic started to provide chemotherapy facilities. In Peshawar, the Government of Pakistan recognised the Hospital’s credibility and awarded the institution land for another cancer hospital. The Peshawar facility is expected to be up and run-ning within the next three years. The Hospital was also awarded the prestigious Corporate Excellence Award by the Management Association of Pakistan in November 2010. The award affirms the Hospital’s adherence to the best management practices and endorses its image as the best, quality-driven healthcare institution in the country. The cost of providing cancer care in line with international recommendations is continuously on the rise and the annual budget for 2011 is approximately PKR 3.6 billion, or US$ 40 million. A number of new equipment and resources are required to manage the increasing workload at the Hospital, which will need to be purchased on priority in 2011. I invite you to join us in contributing to build and support this national institution, which has the potential to change not only the medical but also the social fabric of Pakistan. SKMCH&RC is a success story that showcases the collective will of our people and the affirmation of some of the greatest positives of our society.

Dr. Faisal SultanSource: SKMCH&RC General Report (2010), p.7.



Tabl

e 2.

Mov

emen

t of

Rev

enue

and

Exp

ense

s of

SK

MC

H&

RC

ove

r th

e Ye

ars

(in P

KR

)

2010

2009

2008

2007

2006

2005

2004

*20

0320

0220

01

Inco

me

Clin

ical

Inco

me

1,55

3,84

4,16

21,

280,

870,

988

1,12

4,97

9,15

495

3,73

6,90

074

9,66

2,08

657

2,53

6,04

159

5,42

4,39

726

1,33

4,65

223

4,20

2,69

221

1,46

3,81

2

Oth

er In

com

e1,

492,

929,

438

1,57

3,01

2,37

41,

274,

120,

719

1,10

6,12

2,60

783

8,87

3,38

863

6,21

1,30

61,

104,

977,

482

458,

675,

896

356,

392,

555

378,

066,

956

3,04

6,77

3,60

02,

853,

883,

362

2,39

9,09

9,87

32,

059,

859,

507

1,58

8,53

5,47

41,

208,

747,

347

1,70

0,40

1,87

972

0,01

0,54

859

0,59

5,24

758

9,53

0,76

8

Exp

ense

s

Clin

ical

Exp

ense

s2,

202,

776,

678

1,84

1,77

2,64

41,

578,

170,

397

1,42

6,84

5,67

01,

069,

027,

710

861,

648,

695

974,

275,

086

460,

812,

242

425,

265,

186

448,

375,

652

Gen

eral

and

A

dmin

istr

ativ

e Ex

pens

es55

4,05

2,42

743

1,91

6,89

332

9,90

0,47

029

7,03

1,71

724

4,68

4,52

917

8,82

9,45

523

0,89

6,32

312

9,52

3,43

412

3,53

3,56

6

Mar

ketin

g Ex

pens

es10

6,35

4,15

979

,830

,569

71,5

52,2

8779

,447

,745

73,0

28,8

3557

,653

,768

86,9

32,0

0233

,861

,617

30,5

47,0

9628

,827

,427

Fina

nce

Cos

t43

,681

,985

68,7

17,8

9773

,833

,841

52,2

28,3

3640

,417

,746

25,1

41,5

1043

,497

,510

37,8

27,2

7514

,222

,967

21,1

40,2

64

Exch

ange

Los

s–

––

––

––

–28

,451

,024

–

2,90

6,86

5,24

92,

422,

238,

003

2,05

3,45

6,99

51,

855,

553,

468

1,42

7,15

8,82

01,

123,

273,

428

1,33

5,60

0,92

166

2,02

4,56

862

2,01

9,83

949

8,34

3,34

3

Prov

isio

n fo

r Tax

atio

n–

––

––

(1,0

21,4

24)

(190

,106

)–

(132

,187

)(3

0,00

9)Su

rplu

s af

ter T

axat

ion

fo

r th

e ye

ar13

9,90

8,35

143

1,64

5,35

934

5,64

2,87

820

4,30

6,03

916

1,37

6,65

486

,495

,343

364,

610,

852

57,9

85,9

80(3

1,55

6,77

9)91

,157

,416

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com

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s fo

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Dec

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Tabl

e 3.

Mov

emen

t of

End

owm

ent

Fund

and

Gen

eral

Fun

d ov

er t

he Y

ears

(in

PK

R)

2010

2009

2008

2007

2006

2005

2004

*20

0320

0220

01

End

owm

ent

Fun

d

Non

-Cur

rent

630,

984,

857

611,

611,

922

662,

071,

274

380,

247,

189

42,1

81,2

0041

,514

,800

7,38

3,00

029

0,86

0,49

0 29

6,38

0,54

3 2,

955,

500

Cur

rent

360,

505,

817

536,

677,

189

338,

933,

397

312,

942,

358

610,

168,

292

514,

064,

308

446,

308,

008

152,

519,

549

160,

294,

112

280,

262,

718

Less

: Lia

bilit

ies

–(1

70,2

17,0

36)

(197

,455

,396

)–

––

––

––

Due

from

/(to

)

fund

s

(41,

592,

617)

––

––

––

––

Tota

l99

1,49

0,67

493

6,47

9,45

880

3,54

9,27

569

3,18

9,54

765

2,34

9,49

255

5,57

9,10

845

3,69

1,00

844

3,38

0,03

9 45

6,67

4,65

528

3,21

8,21

8

Gen

eral

Fun

d

Non

-Cur

rent

2,68

0,06

4,64

9 2,

327,

058,

781

1,86

9,70

4,60

61,

612,

753,

028

1,52

4,16

0,25

61,

314,

265,

143

1,30

7,42

3,54

7 52

6,80

7,15

933

4,50

7,81

132

0,55

6,58

7

Cur

rent

761

,474

,731

67

8,46

2,49

0 73

0,78

0,95

553

3921

320

468,

251,

184

510,

262,

920

387,

917,

711

298,

333,

871

229,

037,

194

184,

037,

663

Less

: Lia

bilit

ies

(904

,887

,071

)(6

17,8

59,4

25)

(929

,712

,739

)(6

56,0

30,6

02)

(655

,223

,937

)(5

69,7

64,2

57)

(423

,426

,257

)(5

99,9

11,3

42)

(445

,220

,986

)(3

51,8

33,6

28)

Due

from

/(to

)

fund

s–

41,5

92,6

17

––

––

––

––

Net

Bal

ance

2,53

6,65

2,30

92,

429,

254,

463

1,67

0,77

2,82

21,

490,

643,

746

1,33

7,18

7,50

31,

254,

763,

806

1,27

1,91

5,00

122

5,22

9,68

811

8,32

4,01

915

2,76

0,62

2

Non

-Cur

rent

A

sset

s3,

311,

049,

506

2,93

8,67

0,70

32,

531,

775,

880

1,99

3,00

0,21

71,

566,

341,

456

1,35

5,77

9,94

31,

314,

806,

547

817,

667,

649

630,

888,

354

323,

512,

087

Cur

rent

Ass

ets

1,12

1,98

0,54

81,

215,

139,

679

1,06

9,71

4,35

284

6,86

3,67

81,

078,

419,

476

1,02

4,32

7,22

883

4,22

5,71

945

0,85

3,42

038

9,33

1,30

646

4,30

0,38

1

Less

: Lia

bilit

ies

(904

,887

,071

)(7

88,0

76,4

61)

(1,1

27,1

68,1

35)

(656

,030

,602

)(6

55,2

23,9

37)

(569

,764

,257

)(4

23,4

26,2

57)

(599

,911

,342

)(4

45,2

20,9

86)

(351

,833

,628

)N

et A

sset

s3,

528,

142,

983

3,36

5,73

3,92

12,

474,

322,

097

2,18

3,83

3,29

31,

989,

536,

995

1,81

0,34

2,91

41,

725,

606,

009

668,

609,

727

574,

998,

674

435,

978,

840

So

urce

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of D

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2004

, aft

er a

cha

nge

in fi

nanc

ial y

ear

from

July

–Jun

e to

Janu

ary–

Dec

embe

r.





Notes

1. Modes of charity within Islam, which according to religious injunctions have to be spent on specified charitable objectives.

2. Although it is a corporate award, ‘This award affirms the SKMCH&RC’s adherence to best management prac-tices and endorses its image as one of the best quality driven healthcare entity.’ (Source: http://www.shaukakha num.org.pk/component/content/article/7-news/229-printmedia.html)

3. http://www.shaukatkhanum.org.pk/about-us/fast-facts.html 4. http://www.thenews.com.pk/Todays-News-13-14418-IRI-survey-shows-PTI-on-top-of-popularity-list. 5. http://tribune.com.pk/story/415920/imran-khan-lost-donation-money-in-real-estate-gambling-khwaja-asif/. 6. http://pmln.org/facts-sheet-on-the-business-and-realities-behind-shaukat-khanum-memorial-hospital-english/. 7. http://tribune.com.pk/story/415920/imran-khan-lost-donation-money-in-real-estate-gambling-khwaja-asif/. 8. Ibid. 9. http://tribune.com.pk/story/415983/pml-n-can-even-harm-pakistan-for-power-imran-khan/.10. SKMCH&RC General report (2010), Message from the chairman, p. 6.11. Which was formally inaugurated by former President General Pervez Musharraf.12. Financial Report 2010, SKMCH&RC, 2010, p. 40.



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