| TRG Pakistan (A) - 2005 |
======================================================================================== BALANCE SHEET As at June 30, 2005 ======================================================================================== June 30, June 30, 2005 2004 Notes (Rupees in '000) ======================================================================================== ASSETS NON-CURRENT ASSETS FIXED ASSETS: Property, plant and equipment 5 15,610 2,350 Intangible asset 6 171 259 Long-term investments 7 2,794,265 957,686 Long-term deposits 8 2,385 644 2,812,431 960,939 CURRENT ASSETS: Receivables from a related party 9 25,349 14,244 Deposits and prepayments 159 17 Accrued interest 10 11,326 97 Other receivables 11 588 - Advance tax 1,192 1,138 Cash and bank balances 12 4,582 8,411 53,196 23,907 Total assets 2,865,627 984,846 EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVES SHARE CAPITAL: Authorised 13 4,562,500 4,562,500 Issued, subscribed and paid-up 13 2 408,692 720,000 CAPITAL RESERVES: Share premium account 6,792 REVENUE RESERVE: Accumulated losses (100,567) (97,577) 2,314,917 622,423 Subscription against issue of right shares - 3,130 2,314,917 625,553 NON-CURRENT LIABILITIES: Liabilities against assets subject to finance lease 14 9,191 732 CURRENT LIABILITIES: Accrued and other liabilities 15 11,146 3,703 Accrued mark-up on short-term borrowing 3,096 3,711 Payable to related parties 21,777 998 Short-term borrowing 16 500,000 350,000 Current portion of liabilities against 14 149 assets subject to finance lease 541,519 358,561 Total equity and liabilities 2,865,627 984,846 ========================================================================================STATEMENT UNDER SECTION 241(2) OF THE COMPANIES ORDINANCE, 1984. The Chief Executive of the company being presently out of the country, the financial statements have been signed by two directors. ======================================================================================== PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2005 ======================================================================================== June 30, 2005 June 30, 2004 Notes (Rupees in '000) ======================================================================================== Revenue 17 20,201 17,661 Operating expenses 18 (18,941) (15,293) Operating profit 1,260 2,368 Other income 93 - Other charges 19 (473) (31,612) Profit/(loss) from operations 880 (29,244) Reversal / (provision) for impairment 19,341 (19,341) loss on investment in subsidiary Finance cost 20 (23,211) (7,338) Net loss for the year 2,990) (55,923) Basic loss per share (Rupees) 21 (0.01) (0.31) ========================================================================================STATEMENT UNDER SECTION 241(2) OF THE COMPANIES ORDINANCE, 1984. The Chief Executive of the company being presently out of the country, the financial statements have been signed by two directors. =========================================================================================================================== STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2005 =========================================================================================================================== Capital Revenue reserve reserve Share Accumulated Issued, subscribed and paid up capital Premium losses Total Class 'A' Class 'B' Total account Notes (Rupees in '000) =========================================================================================================================== Balance as at June 30, 2003 580.290 120,000 700,290 - (41,654) 658,636 Shares issued for cash 19,710 - 19,710 - - 19,710 Net loss for the year - - - - (55.923) (55,923) Balance as at June 30, 2004 600,000 1 20,000 720,000 - (97,577) 622,423 Shares issued for cash 1,688,692 - 1,688,692 - - 1.688,692 Premium on issue of shares 13.7 - - - 49,738 - 49.738 Share /TFC issue costs 13.7 - - - (42,946) - (42,946) Net loss for the year - - - - (2,990) (2,990) Balance as at June 30, 2005 2,288,692 120,000 2,408,692 6,792 (100,567) 2,314,917 ===========================================================================================================================STATEMENT UNDER SECTION 241(2) OF THE COMPANIES ORDINANCE, 1984. The Chief Executive of the company being presently out of the country, the financial statements have been signed by two directors. ======================================================================================== CASH FLOW STATEMENT FOR THE YEAR ENDED JUNE 30, 2005 ======================================================================================== June 30, June 30, 2005 2004 Note (Rupees in '000) ======================================================================================== CASH FLOW FROM OPERATING ACTIVITIES: Net loss for the year (2,990) (55,923) ADJUSTMENTS FOR: Depreciation and amortisation 5,710 468 (Reversal)! provision for impairment (19,341) 19,341 loss on investment in subsidiary Interest/ mark-up / profit (14,702) (8,778) Mark-up on short-term borrowing 14,621 3,711 Finance charges on leased assets 937 27 (Gain) / loss on disposal of fixed asset (93) 17 (12,868) 14,786 Increase in deposits, prepayments (679) (4,412) and other receivables (Increase) / decrease in receivable from a related party (10,107) 9,512 Increase in tax refundable (54) (1,008) Increase in accrued and other liabilities 7441 2,611 Increase in payable to related parties 20,779 998 Cash generated from / (used in) operations 1,522 (33,436) Interest/ mark-up/ profit received 3,473 10,203 Long-term deposits paid (1,834) (344) Mark-up paid on short term borrowings (15,236) - Finance charges on leased assets paid (937) (26) - (14,534) 9,833 Net cash used in operating activities (13,012 (23,603) CASH FLOW FROM INVESTING ACTIVITIES PURCHASE OF FIXED ASSETS: Sale proceeds from sale of fixed assets (1,722) (1,803) Investment in subsidiaries 93 - Net cash used in investing activities (1,817,238) (857,667) (1,818,867) (859,470) CASH FLOW FROM FINANCING ACTIVITIES: Proceeds against issue of shares 1,735,3000 5,770 Share and TFC issue costs (42,946) - Subscription received against issue of rights shares - 3,130 Short-term borrowing 150,000 350,000 Repayment of liabilities against (4,304) (59) asset subject to finance lease Net cash generated from financing activities 1,838,050 358,841 Net increase / (decrease) in cash and cash equivalents 6,171 (524,232) Cash and cash equivalents at the beginning of the year 8,411 532,643 Cash and cash equivalents at the end of the year 4,582 8,411 CASH AND CASH EQUIVALENTS COMPRISE OF: Cash and bank balances 12 14,582 8,411 ========================================================================================NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2005 1. THE COMPANY AND ITS OPERATIONS TRG Pakistan Limited (the company) was incorporated in Pakistan as a public limited company on December 2, 2002 under the Companies Ordinance, 1984 and is quoted on the Karachi Stock Exchange. The operations of the company effectively started on April 11, 2003.The registered office of the company is situated at 7th Floor, Block-B, Finance and Trade Centre, Shahra-e-Faisal, Karachi, Pakistan. The company obtained a license on May 14, 2003 from the Securities and Exchange Commission of Pakistan (SEC) to under take venture capital investment as a Non-Banking Finance Company in accordance with Rule 5 of the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 (NBFC Rules). The principal activity of the company is to directly and / or indirectly acquire, manage and / or maintain the business of telephone answering services, call centres, and other business process outsourcing companies. To date, the company has acquired call centre operations in North America and Europe, through its wholly owned subsidiary which include companies that are presently experiencing losses, to improve their profitability and cash flows by migrating a proportion of the labour requirements to be served by its sub subsidiary's lower cost call centre operations in Pakistan. Rule 22(a) of the NBFC Rules (formerly Rule 5(a) of the Venture Capital Companies and Venture Capital Fund Rules) has been relaxed for the company permitting the company to expose up to 100% of its equity attributable to venture capital investment in its subsidiary. 2. STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan, the requirements of the Companies Ordinance, I 984 and the directives issued by the SEC. Approved accounting standards comprise of such International Accounting Standards as notified under the provisions of the Companies Ordinance, 1984.Wherever, the requirements of the Companies Ordinance, 1984 or directives issued by the SEC differ with the requirements of these standards, the requirements of the Companies Ordinance, 1984 or the requirements of the said directives take precedence. 3. BASIS OF PREPARATION These financial statements have been prepared on the basis of historical cost convention. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 4.1. FIXED ASSETS Property, plant and equipment Owned These are stated at cost less accumulated depreciation and impairment, if any. Depreciation on property, plant and equipment is provided on a straight line basis. A full month's depreciation is charged in the month of addition, and no depreciation is charged in the month of disposal. Rates of depreciation, which are disclosed in note 5, are designed to write-off the cost over the estimated useful lives of the assets. Normal repairs and maintenance costs are charged to the profit and loss account as and when incurred. Major renewals and improvements are capitalised. Gains and losses on disposal of fixed assets are taken to the profit and loss account. Assets subject to finance lease Assets subject to finance lease are initially recorded at the lower of the present value of minimum lease payments under the lease agreements and the fair value of the leased assets. The related obligations under the lease less financial charges allocated to future periods are shown as a liabilities. These financial charges are allocated to accounting periods in a manner so as to provide a constant periodic rate of charge on the outstanding liabilities. Depreciation on assets subject to finance lease is provided on the same basis as the company's owned assets. Intangible assets These are stated at cost less accumulated amortisation and impairment, if any. Amortisation is provided on a straight line basis. A full month's amortisation is charged in the month of addition, and no amortisation is charged in the month of disposal. Rate of amortisation, which is disclosed in note 6, is designed to write-off the cost over the estimated useful life of the asset. Impairment of fixed assets The carrying values of fixed assets are reviewed for impairment when events or changes in circumstances indicate that the carrying values may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amounts, the fixed assets are written down to their recoverable amounts. 4.2. LONG-TERM INVESTMENTS Investments in subsidiary companies are carried at cost, less impairment, if any. The carrying values of long-term investments are reviewed for impairment when events or changes in circumstances indicate that the carrying values may not be recoverable. Where the carrying values exceed the estimated recoverable amounts, investments are written down to their recoverable amounts. 4.3. SECURITIES UNDER RESALE AGREEMENTS Securities purchased with a corresponding commitment to resale at a specified future date (reverse repos) are not recognised in the balance sheet as investments. Amounts paid under these obligations are included in fund placements. The difference between purchase and resale price is accrued as an income over the life of the reverse repo agreement. 4.4. SHARES AND DEBENTURES ISSUE COST As per the provisions of Section 83 of the Companies Ordinance, 1984, direct expenses incurred on issue of shares and term finance certificates are off-set against the share premium account to the extent of available balance. Any residual expenses are taken to the profit and loss account. 4.5. REVENUE RECOGNITION Profit / interest on bank deposits and advances is recorded on an accrual basis. 4.6. ACQUISITION COSTS All expenses incurred in acquiring an interest in a subsidiary / associated undertaking are taken to the profit and loss account currently. 4.7. TAXATION The company is exempt from tax up to June 30, 2007 under the provisions of clause 101 of Part 1 of the Second Schedule of the Income Tax Ordinance, 2001. 4.8. PROVISIONS A provision is recognised in the balance sheet when the company has a legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. 4.9. FOREIGN CURRENCY TRANSLATION Transactions in foreign currencies are translated into rupees at the rates of exchange approximating those prevailing on the date of transactions. Monetary assets and liabilities in foreign currencies are translated into rupees at the rates of exchange approximating those prevailing at the balance sheet date. Exchange gains and losses are included in the profit and loss account. Non-monetary foreign currency assets and liabilities which are carried at historical cost in foreign currencies are translated into rupees at the rates of exchange existing on the date of transaction. 4.10. CASH AND CASH EQUIVALENTS For the purpose of the cash flow statement, cash and cash equivalents consist of cash in hand, cheques in hand and deposits in banks. 4.11. FINANCIAL INSTRUMENTS All the financial assets and financial liabilities are recognised at the time when the company becomes a party to the contractual provisions of the instruments. The company derecognises a financial asset or a portion of financial asset when, and only when, the company loses control of the contractual rights that comprise the financial asset or portion of financial asset. While a financial liability or part of financial liability is derecognised from the balance sheet when, and only when, it is extinguished i.e. when the obligation specified in the contract is discharged, cancelled or expired. Any gain or loss on the recognition, de-recognition of the financial assets and liabilities is taken to profit and loss account. 5. FIXED ASSETS - PROPERTY, PLANT AND EQUIPMENT ==============================================================================================
Computers
and office Motor
equipment vehicles Total
Cost: Note (Rupees in '000)
==============================================================================================
As at July 1, 2004 559 2,257 2,816
Additions 19,524 1,251 20,775
Disposals (102) (2,137) (2,239)
As at June 30, 2005 19,981 1,371 21,352
DEPRECIATION:
Rates 20%-33.33% 20%
As at July 1, 2004 129 336 465
Charge for the year 5,149 472 5,621
Disposals (51) (293) (344)
As at June 30,2005 5,227 515 5,742
Net book value as at June 30, 2005 5.1 14,754 856 15,610
Net book value as at June 30, 2004 429 1,921 2,350
==============================================================================================5.1. This includes fixed assets under finance lease with the carrying value of Rs 14.16 million (June 30, 2004: Rs 0.85 million).These assets are being used by TRG (Private) Limited - a subsidiary. The cost of these is being recovered from the subsidiary (refer to notes 9.2 and 17.1). 5.2. DETAILS OF SALE OF PROPERTY, PLANT AND EQUIPMENT ===========================================================================================
Sales Mode of Particulars
Description Cost Book Value proceeds Gain disposal of the buyer
(Rupees in'000)
===========================================================================================
Motor vehicle 939 846 939 93 Negotiation Anas Ahmed
Ex Employee
Motor vehicle 1,198 998 998 - Transfer TRG (Pvt) Ltd
Subsidiary
2,137 1,844 1,937 93
===========================================================================================6. FIXED ASSETS - INTANGIBLE============================================================
Computer
software
(Rupees in '000)
============================================================
COST:
As at July 1, 2004 267
Additions -
Disposals -
Total as at June 30, 2005 267
AMORTISATION:
Rate 33.33%
As at July 1, 2004 7
Charge for the year 89
Disposals -
As at June 30, 2005 96
Net book value as at June 30, 2005 171
Net book value as at June 30, 2004 259
============================================================7. LONG TERM INVESTMENTS========================================================================================
2005 2004
Notes (Rupees in '000)
========================================================================================
Investments in related parties - cost less impairment
The Resource Group International Limited
(TRG International)
- a subsidiary company
47.7 million (2004: 12.0 million) ordinary shares at
paid-up value of USD 1 each 7.1, 7.2 & 7.3 2,794,265 693,464
iSKY , Inc.
an indirect subsidiary
Nil shares (2004: 639 ordinary shares at
paid up value of USD 7667 each) 7.3 - 283,563
2,794,265 977,027
Less: Provision for impairment loss 7.4 - 19.341
2,794,265 957,686
========================================================================================7.1. This represents investment in a wholly owned subsidiary incorporated in Bermuda.Par value of each share is USD 0.01 and the additional paid in capital per share amounts to USD 0.99. The principal activity of TRG International is to directly and/or indirectly acquire, manage and/or maintain the business of telephone answering services, call centres and other business process outsourcing companies. To date, TRG International has acquired call centre operations in North America and Europe, which include companies that are presently experiencing losses, to improve their profitability and cash flows by migrating a proportion of their labour requirements to be served by its lower cost call centre operations in Pakistan. 7.2. INVESTMENTS IN TRG INTERNATIONAL DURING THE YEAR ============================================================================================================
Number
Note of Shares in '000 (USD in '000) (Rupees in '000)
============================================================================================================
Balance as at July 1, 2004 12,000 12,000 693,464
Shares acquired through direct remittances 13,800 13,800 825,168
Shares acquired through transfer of invest 7.3 21,900 21,900 1,275,633
Balance as at June 30, 2005 47,700 47,700 2,794,265
============================================================================================================7.3. On July 17, 2004 the company made equity investments of USD 17.0 million in four companies in the US to pursue further acquisitions of call centres.The purchase consideration for these investments is as follows: =============================================================================================================
Paid-up
value
Number of Ownership per share
Name of the company shares percentage USD (USD in '000) (Rupees in '000)
=============================================================================================================
Fibonacci Investment, Inc 1,500 100 2,667.67 4,000 233,429
PHI Holdings Corp 1,500 100 2,133.33 3,200 186,743
Patek Capital, Inc 1,500 100 3,266.67 4,900 285,949
Telespectrum Inc 1,500 100 3,266.67 4,900 285,949
17,000 992,070
=============================================================================================================On October 25, 2004,Telespectrum Inc bought out a group of call centres from Telespectrum Worldwide Inc Telespectrum Inc borrowed USD 4.0 million and USD 3.2 million from Fibonacci Investment Inc and PHI Holdings Corp respectively to fund these acquisitions.On April 1, 2005 Fibonacci Investment, Inc and PHI Holdings, Corp merged into Telespectrum, Inc by virtue of entering into agreements of merger with Telespectrum, Inc. Each share of both PHI Holdings, Corp and Fibonacci Investment, Inc was converted into one share of Telespectrum resulting in creation of 3,000 shares of Telespectrum, Inc. Consequently, the share capital of Telespectrum, Inc increased to 4,500 shares with a total paid up value of USD 12.1 million. Simultaneously, on April 1, 2005, the company transferred its following investments to TRG International in exchange for 21 .9 million shares of TRG International fully paid in cash at value of USD I per share: ========================================================================================
Paid-up
Number of value
shares USD '000
========================================================================================
SKY, Inc:
Telespectrum, Inc 639 4,900
Patek Capital, Inc 4,500 I 2,100
1,500 4,900
21,900
========================================================================================These investments have been transferred to TRG International Limited, a wholly owned subsidiary, for administrative reasons in exchange for equivalent US Dollar value shares of TRG International Limited.The investments made have been recorded at the historical exchange rate of the investments which were transferred, resulting in no gain or loss on the transaction. This is because, in substance, this transaction has riot resulted in an increase in the economic benefits to the company or the group. 7.4. MOVEMENT IN PROVISION FOR IMPAIRMENT LOSS IS AS FOLLOWS ========================================================================================
2005 2004
(Rupees in '000)
========================================================================================
Opening balance 19,341 -
Charge for the year - 19,341
Reversals (19,341) -
Closing balance - 19,341
========================================================================================7.4.1. The above reversal of Rs 19.3 million has been made by the company as TRG International Limited (a wholly owned subsidiary) has sold its 40% holding in Centratel LLC (an associated company of TRG International Limited) with a carrying value of USD 525,000 (Rs 30.01 million) for USD 500,000 (Rs 29.90 million).The carrying value of the investment in TRG International is Rs 77 million in excess of the book value of this investment as per the financial statements of TRG International. This difference is not considered to be an impairment based on the present value of future projected cash flows of this investment approved by the board of directors of the company, which are based on the model of acquiring loss making call centre operations and improving their profitability by migrating the operations to Pakistan. 8. LONG TERM DEPOSITS This include security deposits amounting to Rs 1.9 million (2004: Rs 0.1 million) in respect of finance leases. 9. RECEIVABLES FROM A RELATED PARTY - CONSIDERED GOOD ========================================================================================
2005 2004
Notes (Rupees in '000)
========================================================================================
Advances - unsecured 9.1 11,884 9,848
Current account 9.2 13,465 4,396
25,349 14,244
========================================================================================9.1.This represents advances to TRG (Private) Limited (an indirect subsidiary), at the rate of 9 percent (2004: 9 percent) per annum to maintain the infrastructure of call centre facility. 9.2. This represents lease rentals receivable and reimbursable expenses incurred on behalf of TRG (Private) Limited (refer to notes 5.1 and 17.1). 10. ACCRUED INTEREST This includes interest accrued on advances to a related party, TRG (Private) Limited, amounting to Rs 10.50 million (2004: Rs 0.07 million). 11. OTHER RECEIVABLES This includes Rs 0.51 million receivable from the Chief Executive of the company representing expenses paid by the company on his behalf. The payments were in line with the policy of the company and as per the terms of the employment of the Chief Executive. The amount has subsequently been received by the company. 12. CASH AND BANK BALANCES ========================================================================================
2005 2004
(Rupees in '000)
========================================================================================
BANK BALANCES:
Current accounts 615 4,358
PLS savings accounts 13,956 4,048
14,571 8,406
Cash in hand 11 5
14,582 8,411
========================================================================================13. SHARE CAPITAL13.1. AUTHORISED SHARE CAPITAL ===================================================================================================
2005 2004
Number Paid up value Number Paid up value
of shares '000 Rs'000 of shares '000 Rs'000
===================================================================================================
Ordinary class 443,250 4,432,500 443,250 4,432,500
A shares of Rs 10 each
Ordinary class I 3,000 I 30,000 13,000 130,000
B' shares of Rs 10 each
456,250 4,562,500 456,250 4,562,500
===================================================================================================13.2. ISSUED, SUBSCRIBED AND PAID-UP CAPITAL===================================================================================================
Number Paid up value Number Paid up value
Note of shares '000 Rs'000 of shares '000 Rs'000
===================================================================================================
ORDINARY CLASS 'A'
SHARES OF Rs 10 EACH:
Shares allotted for consideration
paid in cash 13.6 228,869 2,288,692 60,000 600,000
ORDINARY CLASS 'B'
SHARES OF Rs 10 EACH:
Shares allotted for consideration
paid in cash 2,375 23,750 2,375 23,750
Shares allotted for consideration
other than cash 9,625 96,250 9,625 96,250
12,000 120,000 12,000 I 20,000
240,869 2,408,692 72,000 720,000
===================================================================================================13.3. Class A shares and class B shares in all respects rank pari passu, save for the purposes of Section 178(5) of the Companies Ordinance, 1984 (viz, election of directors) each class 'B' share carries I .36 votes and each class 'A' shares carries 1 vote.13.4. Upon expiry of five years from the date of issuance of certificate of commencement of business of the company, all issued and outstanding class 'B' shares will be automatically converted into class 'A' shares, whereupon all outstanding class 'B' shares will automatically be re-designated as class 'A' shares. 13.5. Rule 3(ii)(e) of the Companies (Issue of Capital) Rules, 1996 has been relaxed during the year by the SEC for the company permitting the sponsors of the company to retain 16.67 percent of the share capital for five years from the date of public subscription instead of 25 percent as required under the said rule. Further relaxation was granted to the company permitting the sponsors to retain at least 10 percent (instead of 25 percent) of the enhanced capital of the company, if the sponsors exercise their rights, and retained the right shares for a period of one year from the date of allotment of right shares. Furthermore, the shareholding of 12.0 million shares initially taken up by the sponsors shall continue to be locked in for a period of five years from the date of their initial subscription. 13.6. During the year, the company successfully completed its rights issue, drawing in Rs 1,440 million from issue of 144 million Class 'A' ordinary shares of Rs 10 each offered to the shareholders, of which only 0.62 million Class 'A' ordinary shares remained unsubscribed, which were taken up by the underwriters. 13.7. During the year, the company issued 24.87 million Class 'A' ordinary shares of Rs 10 each to the International Finance Corporation (IFC) for the consideration of Rs 298.4 million (equivalent to USD 5.0 million).The consideration included a premium of Rs 49.74 million calculated at Rs 2 per share. As per the provisions of Section 83 of the Companies Ordinance, 1984, the company has utilised the share premium account to write-off its expenses incurred in connection with the rights issue, shares issued to the IFC and the issue of Term Finance Certificates. The details of these expenses is given hereunder: =======================================================================
2005
Notes (Rupees in '000)
=======================================================================
SHARE ISSUE COSTS:
Underwriting commission 13.8 7,226
Advisory and arrangement fee 13.8 18,064
Bank commission 4,779
Printing expenses 264
Legal and professional charges 7,103
Stamp duty 1,731
Stock exchange fee 300
CDC Fee 1,088
Miscellaneous 137
40,692
TFC ISSUE COSTS:
Arrangement fee 1,500
Routing fee 56
Commitment fee 60
Stamp duty 20
Credit rating fee 318
Legal and professional charges 100
Trustee fee 200
2,254
Total 42,946
=======================================================================13.8. These expenses relate to an underwriting agreement entered by the company with a financial institution (the underwriter), pursuant to the company's Board of Directors' resolution passed in its meeting on October 28, 2004 declaring a 60% rights issue, The rights issue is expected to be made after the completion of one year of the issuance of the previous rights issue, i.e., after August 30, 2005 and is expected to increase the company's paid-up capital by Rs 1,445 million.14. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE Future minimum lease payments under finance lease together with the present value of the net minimum lease payments are as follows: ==============================================================================================
2005 2004
Minimum Present value Minimum Present value
lease lease lease of payments
payments payments payments
==============================================================================================
Within one year 6,625 5,500 205 149
After one year but not more than five years 9,713 9,191 826 732
Total minimum lease payments 16,338 14,691 1,03 I 881
Less: amounts representing finance charges 1,647 - 150 -
Present value of minimum lease payments 14,691 14,691 881 881
Less: current portion shown under 5,500 5,500 149 49
current liabilities 9,191 9,191 732 732
==============================================================================================14.1. Rentals are payable in equal monthly instalments by the year 2007.The leases have floating financing rates ranging from 7 percent to 12 percent per annum (2004: 7.75 percent).At the end of the lease term, the ownership of the assets shall be transferred to the company against security deposits paid. 15. ACCRUED AND OTHER LIABILITIES ========================================================================================
2005 2004
(Rupees in '000)
========================================================================================
Reimbursement of expenses - directors - 440
Reimbursement of expenses - employees 106 126
Commitment fee 2,011 -
Advisory fee 2,200 -
Underwriting commission 6,226 -
Bankers' commission - 2,389
Others 603 748
11,146 3,703
========================================================================================16. SHORT-TERM BORROWING - SECUREDOn May 2, 2005, the company entered into a syndicated Term Finance agreement with two banking companies, United Bank Limited (UBL) and Habib Bank Limited (HBL). As per the agreement, a total of Rs 1,400 million is sanctioned to the company for the purpose of meeting its acquisition requirements, and this sum is repayable within nine months of signing of the agreement. This is secured by way of a floating charge created over all of the company's present and future assets comprising of movable and fixed assets (including the benefits, privileges and rights in respect of the entire shareholding, ownership and control of TRG International and related dividends and all other assets of the company) in favour of UBL and HBL. The charge created is subject to a maximum of Rs 1,867 million. Total draw down from this facility during the year was Rs 500 million, with Rs 900 million remains unutilised as at June 30, 2005. The rate of mark-up has been agreed at KIBOR plus a margin of 3.25% per annum and is payable quarterly in arrears. The effective rate of mark-up for the year was 11.3 percent per annum. 17. REVENUE ========================================================================================
2005 2004
Note (Rupees in '000)
========================================================================================
Return on bank balances 1,204 8,778
Return on carry over transactions - 7,777
Return on reverse repurchase transactions 3,062 1,038
Interest income on advances 10,436 68
Cost recovery for assets used by subsidiary 17.1 5,499 -
20,201 17,661
========================================================================================17.1. This represent monthly charges to a subsidiary, TRG (Private) Limited, for assets utilised by the subsidiary.These assets are held under finance lease by the company on behalf of the subsidiary (refer to notes 9.2 and 5.1). 18. OPERATING EXPENSES ========================================================================================
2005 2004
Note (Rupees in '000)
========================================================================================
Salaries 5,682 5,152
Rent 595 1,200
288 270
Advertising 1,124 744
Printing, stationery and periodicals 1,796 2,895
TRAVELLING AND CONVEYANCE:
Insurance 260 54
Communication 1,196 1,338
669 2,031
Legal and professional charges 18.1 953 849
AUDITORS' REMUNERATION:
Depreciation and amortisation 5,710 468
Repairs and maintenance I 50 60
518 232
Other administrative expenses 18,941 I 5,293
========================================================================================18.1. AUDITORS' REMUNERATION========================================================================================
2005 2004
(Rupees in '000)
========================================================================================
Audit fee 325 250
Half yearly review 110 60
Audit of consolidated financial statements 150 100
Taxation services and other certifications 3 10 415
Out of pocket expenses 58 24
953 849
========================================================================================19. OTHER CHARGES========================================================================================
2005 2004
(Rupees in '000)
========================================================================================
Loss on disposal of fixed asset - 17
SHARE ISSUE EXPENSES:
Underwriting commission - 15,000
Bankers' commission - 2,390
Stamp duty - 257
Advertising - 39
Printing, stationery and periodicals - 1,566
Legal and professional charges - 1,125
Stock exchange fee - 2,057
SEC fee - 8,035
- 30,469
DEBT RAISING EXPENSES:
Stamp duty - 676
Legal and professional charges 250 200
Remuneration to trustee - 70
Credit rating fee - 180
Agency fee 100 -
Out of pocket expenses 123 -
473 1,126
473 31,612
========================================================================================20. FINANCE COST========================================================================================
2005 2004
(Rupees in '000)
========================================================================================
Commitment fee 2,011 -
Arrangement fee 5,600 3,600
Mark up on short-term borrowing 14,621 3,711
Finance charges on leased assets 937 27
Foreign exchange loss 42 -
23,211 7,338
========================================================================================21. BASIC LOSS PER SHARE========================================================================================
Note 2005 2004
========================================================================================
Net loss for the year (Rs in'000) (2,990) (55,923)
Weighted average number of shares (in '000) 21.1 210,681 179,040
outstanding during the period
Basic loss per share (Rupees) (0.01) (0.3 I)
========================================================================================21.1. As required under International Accounting Standard (IAS) 33, the weighted average number of ordinary shares outstanding as at June 30, 2005 and June 30, 2004 have been adjusted to incorporate the effect of the bonus element in the rights issue referred to in note 13.6. 21.2. No figure for diluted earnings per share has been presented as the company has not issued any instruments which could have an impact on earnings per share when exercised. Therefore, diluted earnings per share is same as basic earnings per share. 22. REMUNERATION OF CHIEF EXECUTIVE, DIRECTOR AND EXECUTIVES The aggregate amount charged in the financial statements for remuneration, including all benefits to chief executive, director and executives of the company is as follows: =============================================================================================
2005 2004
Directors Executives Total Directors Executives Total
(Rupees in '000) (Rupees in '000)
=============================================================================================
Managerial remuneration 1,025 2,036 3,061 1,250 2,833 4,083
House rent 270 562 832 - - -
Medical allowance 102 204 306 125 99 224
Utilities 103 204 307 125 284 409
Total 1,500 3,006 4,506 1,500 3,216 4,716
Number of persons 1 2 3 1 2 3
=============================================================================================22.1. No remuneration was paid to the chief executive during the year.22.2. Certain executives are provided with the free use of company maintained cars. 23. FINANCIAL INSTRUMENTS 23.1. LIQUIDITY RISK Liquidity risk is the risk that the company will be unable to meet its funding requirements. The table below summanises the maturity profile of the company's assets and liabilities. The contractual maturities of assets and liabilities at the year end have been determined on the basis of the remaining period at the balance date to the contractual maturity date and do not take account of the effective maturities as indicated by the company's deposit retention history and the availability of liquid funds. Assets and liabilities not having a contractual maturity are assumed to mature on the expected date on which the assets / liabilities will be realised / settled. =========================================================================================
2005
Total Within One year to Over five
one year five years years
(Rupees in'000)
=========================================================================================
ASSETS
FIXED ASSETS:
Property, plant and equipment 15,610 - - 15,610
Intangible asset 171 - - 171
Long-term investments 2,794,265 - - 2,794,265
Long-term deposits 2,385 - 2,310 75
Receivables from a related party 25,349 25,349 - -
Deposits and prepayments 159 159 - -
Accrued interest 11,326 11,326 - -
Other receivables 588 588 - -
Advance tax 1,192 1,192 - -
Cash and bank balances 14,582 14,582 - -
2,865,627 53,196 2,310 2,810,121
LIABILITIES:
Liabilities against assets
subject to finance lease 14,691 5,500 9,191 -
Accrued and other liabilities 11,146 11,146 - -
ACCRUED MARK-UP ON:
short-term borrowing 3,096 3,096 - -
Payable to related parties 21,777 21,777 - -
Short-term borrowing 500,000 500,000 - -
550,710 541,519 9,191 -
Net assets 2,314,917 (488,323) (6,881) 2,810,121
REPRESENTED BY:
Issued, subscribed and paid-up 2,408,692
Share premium account 6,792
Accumulated losses (100,567)
2,314,917
=========================================================================================
=========================================================================================
2004
Total Within One year to Over five
one year five years years
(Rupees in '000)
=========================================================================================
ASSTES:
Fixed assets 2,350
Property, plant and equipment 2,350 - - 259
Intangible asset 259 - - 957,686
Long-term investments 957,686 - - 150
Long-term deposits 644 - 494 -
Receivables from a related party 14,244 14,244 - -
Deposits and prepayments I 7 I 7 - -
Accrued interest 97 97 - -
Advance tax 1,138 1,138 - -
Cash and bank balances 8,411 8,411 - -
984,846 23,907 494 960,445
LIABILITIES:
Liabilities against assets
subject to finance lease 881 149 732 -
Accrued and other liabilities 3,703 3,703 - -
Accrued mark-up on short-term borrowing 3,711 3,711 - -
Payable to related parties 998 998 - -
Short term borrowing 350,000 350,000 - -
359,293 358,561 732 -
Net assets 625,553 (334,654) (238) 960,445
REPRESENTED BY:
Issued, subscribed and paid-up 720,000
Subscription against issue of right shares 3,130
Accumulated losses (97,577)
625,553
=========================================================================================23.2. INTEREST RATE / YIELD RISKInterest rate / yield risk is the risk of decline in earnings due to adverse movement of the yield curve. Interest rate / yield risk arises from the possibility that changes in interest rates will affect the value of the financial instruments. The company is exposed to interest rate risk as a result of mismatches or gaps in the amounts of financial assets and liabilities and off balance sheet instruments that mature or reprice in a given period. The company manages this risk by matching the repricing of financial assets and liabilities through risk management strategies. The position for financial instruments is based on the earlier of contractual repricing date or maturities. ===================================================================================================================
2005
Exposed to
interest rate/
yield risk
Effective Within one One year to Over five Not
interest rate Total year five years years exposed
(Rupees in '000)
===================================================================================================================
FINANCIAL ASSETS:
Long-term deposits - 2,385 - - - 2,385
Receivables from a related party 9.00 25,349 11,884 - - 13,465
Deposits - 100 - - - 100
Accrued interest - 11,326 - - - 11,326
Other receivables - 588 - - - 588
Cash and bank balances 0.25-3.50 14,582 13,956 - - 626
Total 54,330 25,840 - - 28,490
FINANCIAL LIABILITIES:
Liabilities against assets
subject to finance lease 7.00 -12 14,691 5,500 9, 191 - -
Accrued and other liabilities - 11,146 - - - 11,146
Accrued mark-up on
short-term borrowing - 3,096 - - - 3,096
Payable -to related parties - 21,777 - - - 21,777
Short-term borrowing 11.30 500,000 500,000 - - -
Total 550,710 505,500 9,191 - 36,019
On balance sheet gap (496,380) (479,660) (9,191) - (7,529)
Off balance sheet gap - - - -
Total interest rate/
yield sensitivity gap (488,851) (479,660) (9,191) -
Cumulative interest rate/
yield sensitivity gap (479,660) (488,851) (488,851)
===================================================================================================================
===================================================================================================================
2004
Exposed to
interest rate/
yield risk
Effective Within one One year to Over five Not
interest rate Total year five years years exposed
(Rupees in'000)
===================================================================================================================
FINANCIAL ASSETS:
Long-term investments - 957,686 - - - 957,686
Long-term deposits - 644 - - - 644
Receivables from a related party 9.00 14,244 14,244 - - -
Accrued interest - 97 - - - 97
Cash and bank balances 0.50 -4.00 8,411 4,048 - - 4363
Total 981,082 18,292 - - 962,790
FINANCIAL LIABILITIES:
Liabilities against assets
subject to finance lease 7.75 881 149 732 - -
Accrued and other liabilities - 3,703 - - - 3,703
Accrued mark-up on
short-term borrowing - 3,711 - - - 3,711
Payable to related parties - 998 - - - 998
Short-term borrowing 9.00 350,000 - - - 350,000
Total 359,293 149 732 - 358,412
On balance sheet gap 621,789 18,143 (732) - 604,378
Off balance sheet gap - - - - - -
Total interest rate / yield
sensitivity gap 17,411 18,143 (732) - -
Cumulative interest rate / yield
sensitivity gap 18,143 17,411 17,411
===================================================================================================================23.3. CREDIT RISKCredit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The company is not materially exposed to credit risk as most of its dealings are with related parties. 23.4. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying values of all financial assets and liabilities reflected in the financial statements approximate their fair values. The fair value is determined on the basis of objective evidence at each reporting date. 23.5. FOREIGN EXCHANGE RISK Foreign currency risk is the risk of exposures to movement in foreign exchange rates. Company has an -investment in a foreign subsidiary, which is accounted for at the historical rates. The company is exposed to foreign currency risk only in respect of payable to TRG International, a subsidiary. 24. TRANSACTIONS WITH RELATED PARTIES Related parties of the company comprise holding company, subsidiaries, associates, directors and key management personnel. Material transactions with related parties, other than remuneration and benefits to the directors and key management personnel under the terms of their employment, are given below: ========================================================================================
2005 2004
(Rupees in '000)
========================================================================================
TRAKKER (PRIVATE) LIMITED - (COMMON DIRECTORSHIP):
Purchase of fixed asset - 37
Services acquired 14 12
Use of office premises and facilities 1,821 1,950
and reimbursement of expenses at actuals
Balance payable 234 634
========================================================================================24.1. The above transactions are at arm's length using admissible valuation methods.24.2. Transaction with subsidiaries have not been disclosed as the company is exempted under paragraph 4(b) of IAS - 24 "Related Party Disclosures". 25. NUMBER OF EMPLOYEES The total number of employees at the end of the year was seven (2004: six). 26. DATE OF AUTHORISATION These financial statements were authorised for issue on 30th January, 2006 by the Board of Directors of the company. 27. CORRESPONDING FIGURES Prior year's figures have been reclassified, wherever necessary for the purposes of comparison. Major change is as follows: ===================================================================================================================
Statement Component Reclassification from Reclassification to Reason Rs in '000
===================================================================================================================
Balance Sheet Rent paid on Deposits and Receivable from a For better presentation 4,396
behalf of subsidiary prepayments related party
===================================================================================================================28. GENERALFigures presented in these financial statements have been rounded off to the nearest thousand. STATEMENT UNDER SECTION 241(2) OF THE COMPANIES ORDINANCE, 1984. The Chief Executive of the company being presently out of the country, the financial statements have been signed by two directors. |