| TRG Pakistan (A) - 2006 |
|
BALANCE SHEET AS AT JUNE 30, 2006
====================================================================================
June 30, June 30,
2006 2005
Note Rs. '000 Rs. '000
====================================================================================
ASSETS
NON-CURRENT ASSETS
Fixed assets
Property, plant and equipment 5 10,251 15,610
Intangible 6 82 171
Long-term investments 7 3,558,355 2,794,265
Long-term advance to a related party 8 5,000 11,884
Long-term deposits 9 2,385 2,385
Accrued interest 8 10,763 10,504
3,586,836 2,834,819
CURRENT ASSETS
Advance to a related party 10 12,000 -
Short-term prepayments 183 159
Accrued interest 11 590 822
Other receivables 12 9,906 14,053
Advance tax 1,198 1,192
Cash and bank balances 13 50,388 14,582
74,265 30,808
TOTAL ASSETS 3,661,101 2,865,627
EQUITY AND LIABILITIES
SHARE CAPITAL AND RESERVES
Share capital
Authorised 14 5,830,000 4,562,500
Issued, subscribed and paid-up 14 2,408,692 2,408,692
Capital reserves
Share premium account 4,173 6,792
Revenue reserve
Accumulated losses (236,479) (100,567)
Subscription against issue of right shares 2,176,386 2,314,917
250 -
2,176,636 2,314,917
NON-CURRENT LIABILITIES
Liabilities against
assets subject to finance 15 3,069 9,191
CURRENT LIABILITIES
Accrued and other liabilities 16 2,267 11,146
Accrued mark-up on short-term borrowings 53,003 3,096
Payable to related parties 17 19,983 21,777
Short-term borrowings 18 1,400,000 500,000
Current portion of liabilities against 15 6,143 5,500
assets subject to finance lease
1,481,396 541,519
TOTAL EQUITY AND LIABILITIES 3,661,101 2,865,627
Revenue 19 29,340 20,201
Operating expenses 20 (25,743) (18,941)
Operating profit 3,597 1,260
Other income 0 93
Other charges 21 (500) (473)
Profit from operations 3,107 880
Reversal of provision for impairment - 19,341
loss on investment in subsidiary
Finance cost 22 (139,019) (23,211)
Net loss for the year (135,912) (2,990)
Basic loss per share (Rupees) 23 (0.56) (0.01)
====================================================================================STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2006===============================================================================================================================
Capital reserve Revenue reserve
Issued, subscribed Premium Share Accumulated
and paid-up capital account losses Total
Class 'A' Class 'B' Total
Note Rs.'000
===============================================================================================================================
Balance as at June 30, 2004 600,000 120,000 720,000 - (97,577) 622,423
Shares issued for cash 1,688,692 - 1,688,692 - - 1,688,692
Premium on issue of shares - - - 49,738 - 49,738
Share/TFC issue costs 14.7 - - - (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
Share issue costs 14.7 - - - (2,619) - (2,619)
Net loss for the year - - - - (135,912) (135,912)
Balance as at June 30, 2006 2,288,692 120,000 2,408,692 4,173 (236,479) 2,176,386
===============================================================================================================================
====================================================================================
June 30, June 30,
2006 2005
Note Rs. '000 Rs. '000
====================================================================================
CASH FLOW FROM OPERATING ACTIVITIES
Net loss for the year (135,912) (2,990)
Adjustments for:
Depreciation and amortisation 7,399 5,710
Reversal of provision for impairment - (19,341)
loss on investment in subsidiary
Interest/mark-up/profit (22,016) (14,702)
Mark-up on short-term borrowings 135,038 14,621
Finance charges on leased assets 1,190 937
Gain on disposal of fixed asset (10) (93)
121,601 (12,868)
(Increase)/decrease in current assets
Advance to a related party 12,000 -
Short-term prepayments (24) (142)
Other receivables 4,147 (8,608)
Advance tax (6) (54)
(7,883) (8,804)
Increase/(decrease) in current liabilities
Accrued and other liabilities (8,879) 7,441
Payable to related parties - 20,779
(10,673) 28,220
Cash (used in)/generated from operations (32,867) 3,558
Interest/ mark-up/profit received 21,989 3,473
Long-term deposits paid - (1,834)
Mark-up paid on short term borrowings (85,131) (15,236)
Finance charges paid on leased assets (1,190) (937)
(64,332) (14,534)
Net cash used in operating activities (97,199) (10,976)
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of fixed assets (1,978) (1,722)
Sale proceeds from sale of fixed assets 37 93
Investment in subsidiaries (764,090) (1,817,238)
Repayment of long-term advance to a related party 6,884 (2,036)
Net cash used in investing activities (759,147) (1,820,903)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds against issue of shares - 1,735,300
Share and TFC issue costs (2,619) (42,946)
Subscription received against 250 -
issue of rights shares
Short-term borrowings 900,000 150,000
Repayment of liabilities against (5,479) (4,304)
assets subject to finance lease
Net cash generated from financing activities 892,152 1,838,050
Net increase in cash and cash equivalents 35,806 6,171
Cash and cash equivalents at 14,582 8,411
the beginning of the year
Cash and cash equivalents at the end of the year 50,388 14,582
CASH AND CASH EQUIVALENTS COMPRISE OF
13 50,388 14,582
====================================================================================1. The Company and its OperationsTRG 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 (SECP) to undertake 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 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 Asia and Africa. 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 it to expose upto 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, 1984 and the directives issued by the SECP. 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 SECP 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. Standards, interpretation and amendments to published approved accounting standards that are not yet effective ==================================================================================
(i) IAS-19, "Employee Benefits"-Amendments effective from January 1, 2006
(ii) IAS-39, "Financial Instruments : Recognition and Measurement"
- Fair Value Option effective from January 1, 2006
(iii) IAS-1, " Presentation of Financial Statements"
- Capital Disclosures effective from January 1, 2007
==================================================================================Adoption of the above amendments may only impact the extent of disclosures presented in the financial statements.In addition to above, a new series of standards called "International Financial Reporting Standards (IFRSs)" have been introduced and seven IFRSs have been issued by IASB. Out of these following three IFRSs have been adopted by Institute of Chartered Accountants of Pakistan (ICAP) however since these have not been adopted by SECP therefore, do not form part of the approved local financial reporting frame work: ========================================================================== (i) IFRS-2 "Share-based Payments"; (ii) IFRS-3 "Business Combinations"; and (iii) IFRS-5 "Non-current Asset Held for Sale and Discontinued Operations" ===========================================================================The company expects that the adoption of these pronouncements mentioned above will have no significant impact on the Company's financial statements in the period of initial application. 4.2. Critical accounting estimates and judgements and key sources of estimation uncertainty The preparation of financial statements in conformity with the above requirements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company's policies. The matters involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in respective notes to the financial statements. 4.3. 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 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. 4.4. 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. 4.5. 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. 4.6. Shares and term finance certificate 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. 4.7. Revenue recognition Profit / interest on bank deposits and advances is recorded on an accrual basis. 4.8. Acquisition costs All expenses incurred in acquiring an interest in a subsidiaryssociated undertaking are taken to the profit and loss account currently. 4.9. Taxation The company is exempt from tax upto June 30, 2014 under the provisions of clause 101 of Part 1of the Second Schedule to the Income Tax Ordinance, 2001. 4.10. 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 obligation. 4.11. 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. 4.12. 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. 4.13. Financial instruments All the financial assets and financial liabilities are recognized 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. 4.14. Offsetting of financial assets and financial liabilities All financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if the company has a legally enforceable right to set off the recognized amounts and intends either to settle these on net basis or to realize the assets and settle the liabilities simultaneously. 4.15. Transactions with related parties Transactions with related parties are based on the policy that all transactions between the company and the related parties are carried out at arm's length. These prices are determined in accordance with the methods prescribed in the Companies Ordinance, 1984. 4.16. Staff retirement benefits During the year the company established a defined contribution plan (i.e. recognized provident fund scheme) for all its permanent employees. Equal monthly contributions @ 6.5% of the gross salary are made to the Fund both by the company and employees. The assets of the Fund are held separately under the control of the Trustees. 5. FIXED ASSETS 5.1. Property, plant and equipment ==================================================================================================================================================================================================
COST DEPRECIATION
Additions Deletions As at As at Deletions As at Net Book
As at during during June July Charge for during June Value as at
Note July 01,2005 the year the year 30,2006 01, 2005 the year the year 30,2006 June 30,2006 Rate %
Rs.'000
==================================================================================================================================================================================================
Owned
Computers and office equipment 927 414 (42) 1,299 331 372 (15) 688 611 20-33.33
Motor Vehicles 1,371 1,564 - 2,935 515 587 - 1,102 1,833 20
2,298 1,978 (42) 4,234 846 959 (15) 1,790 2,444
Leased:
Computers and office equipment 5.1.1 19,054 - - 19,054 4,896 6,35 I - 11,247 7,807 33.33
June 30, 2006 21,352 1,978 (42) 23,288 5,742 7,310 (15) 13,037 10,251
==================================================================================================================================================================================================
COST DEPRECIATION
Additions Deletions As at As at Deletions As at Net Book
As at during during June July Charge for during June Value as at
Note July 01, 2004 the year the year 30, 2005 01, 2004 the year the year 30, 2005 June 30, 2005 Rate %
Rs.'000
==================================================================================================================================================================================================
Owned
Computers and office equipment 559 470 (102) 927 129 253 (51) 331 596 20-33.33
Motor Vehicles 2,257 1,251 (2,137) 1,371 336 472 (293) 515 856 20
2,816 1,721 (2,239) 2,298 465 725 (344) 846 1,452
Leased:
Computers and office equipment 5.1.1 - 19,054 - 19,054 - 4,896 - 4,896 14,158 33.33
June 30, 2005 2,816 20,775 (2,239) 21,352 465 5,621 (344) 5,742 15,610 -
==================================================================================================================================================================================================5.1.1.These assets are being used by TRG (Private) Limited - an indirect subsidiary from whom the cost is being recovered (refer to notes 12.1 and 19.1). 5.2. Details of sale of property, plant and equipment ==================================================================================
Sales Mode of Particulars
Description Cost Book Value proceeds Gain disposal of the buyer
Rs.'000
==================================================================================
Computer 42 27 37 10 Negotiation Evernew
Technologies
42 27 37 10
==================================================================================6. FIXED ASSETS - Intangible====================================================================================
2006 2005
Rs. '000 Rs. '000
====================================================================================
Computer Software
Cost:
As at July 1, 267 267
Additions - --
Disposals - -
Total as at June 30 267 267
Amortisation:
Rate
As at July 1, 96 7
Charge for the year 89 89
Disposals - -
As at June 30 185 96
Net book value as at June 30 82 171
====================================================================================7. Long-term Investments====================================================================================
2006 2005
Note Rs. '000 Rs. '000
====================================================================================
Investments in related parties - cost less impairment
The Resource Group International Limited (TRG IL)
-- a subsidiary company
60.45 million (2005:47.7 million) ordinary shares at
paid-up value of USD 1 each 7.1 & 7.2 3,558,355 2,794,265
Less: Provision for impairment loss 7.3 - -
3,558,355 2,794,265
====================================================================================7.1. This represents investment in a 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 TRGIL 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, TRGIL 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 Asia and Africa.7.2. Investments in TRGIL during the year ====================================================================================
Number
of Shares '0 USD '000 Rs. '000
====================================================================================
Balance as at July 01, 2005 47,700 47,700 2,794,265
Shares acquired through direct remittances 12,750 12,750 764,090
Balance as at June 30,2006 60,450 60,450 3,558,355
Balance as at June 30, 2005 47,700 47,700 2,794,265
====================================================================================7.3. Movement in provision for impairment loss is as follows:====================================================================================
2006 2005
Rs. '000 Rs. '000
====================================================================================
Opening Balance - 19,341
Charge for the year - -
Reversals - (19,341)
Closing Balance - -
====================================================================================8.. Long-term Advance to a Related Party - Considered goodThis represents an unsecured advance to TRG (Private) Limited (an indirect subsidiary), carrying mark-up at the rate of 9 percent (2005: 9 percent) per annum to maintain the infrastructure of call centre facility. Principal amount is receivable latest by May 2009, and interest on the advance will be received upon final settlement of the principal amount. Maximum aggregate amount outstanding at the end of any month was Rs. 11.884 million (2005: Rs. 251.884 million). 9. Long Term Deposits ====================================================================================
2006 2005
Rs. '000 Rs. '000
====================================================================================
Lease 1,905 1,905
Rent 400 400
Others 80 80
2,385 2,385
====================================================================================10. Advance to a Related Party - Considered good====================================================================================
2006 2005
Note Rs. '000 Rs. '000
====================================================================================
Virtual World (Private) Limited - a relate 10.1 12,000 -
====================================================================================10.1. This represents an unsecured advance to Virtual World (Private) Limited (an indirect subsidiary), for operational requirements carrying mark-up at the rate of 9 percent per annum due on monthly basis. Principal amount is receivable earliest of June 30, 2007 or the date that immediately precedes the date on which it would become unlawful under any applicable law for the Company to maintain the advance.11. Accrued Interest ====================================================================================
2006 2005
Note Rs. '000 Rs. '000
====================================================================================
Money market funds - 705
Bank balances 321 117
Advance to Virtual World (Private) Limited 10.1 269 -
590 822
====================================================================================12. Other Receivables====================================================================================
2006 2005
Note Rs. '000 Rs. '000
====================================================================================
Receivable from related party - considered 12.1 9,161 13,465
Others 12.2 745 588
9,906 14,053
====================================================================================12.1.This represents lease rentals receivable and reimbursable expenses incurred on behalf of TRG (Pvt.) Limited (refer to notes 5.1.1 and 19.1). 12.2. This represents/includes Rs. 0.745 million (2005: Rs. 0.513 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. 13. Cash and Bank Balances ====================================================================================
2006 2005
Note Rs. '000 Rs. '000
====================================================================================
Bank balance
Current accounts 593 615
PLS savings accounts 13.1 49,778 13,956
50,371 14,571
Cash in hand 17 11
50,388 14,582
====================================================================================13.1. The balances in PLS saving accounts bear mark-up ranging from 3% to 12% per annum (2005: 0.25% to 3.5% per annum).14. Share Capital 14.1. Authorised =======================================================================================================
2006 2005
Number Paid up value Number Paid up value
of shares '000 Rs. '000 of shares '000 Rs. '000
=======================================================================================================
- Ordinary class 'A' shares of Rs. 10 each 570,000 5,700,000 443,250 4,432,500
- Ordinary class 'B' shares of Rs. 10 each 13,000 130,000 13,000 130,000
583,000 5,830,000 456,250 4,562,500
=======================================================================================================14.2. Issued, subscribed and paid-up =======================================================================================================
2006 2005
Number Paid up value Number Paid up value
of shares '000 Rs. '000 of shares '000 Rs. '000
=======================================================================================================
- Ordinary class 'A' shares of Rs. 10 each
shares allotted for consideration paid in ca 228,869 2,288,692 228,869 2,288,692
- Ordinary class 'B' shares of Rs. 10 each
shares allotted for consideration paid in ca 2,375 23,750 2,375 23,750
shares allotted for consideration other than 9,625 96,250 9,625 96,250
12,000 120,000 12,000 120,000
=======================================================================================================
240,869 2,408,692 240,869 2,408,692
=======================================================================================================In October, 2005, the company signed a preferred stock purchase agreement with AIG Capital Partners and its related funds (AIG) whereby AIG has committed to invest USD 30 million (approximating to Rs. 1,794 million) into TRGIL as a convertible preferred stock subject to certain regulatory approvals and other conditions precedent. The preferred stock of TRGIL is convertible into common stock of TRGIL at the option of AIG and exchangeable into company's share capital subject to shareholders' and regulatory approvals. If TRGIL has not consummated a qualified public offering (as defined in the agreement) on or before the third anniversary of the initial closing date (October 04, 2005), then AIG have the right to cause TRGIL to sell to a third party all or a portion of either (1) TRGIL's issued common stock or (2) the consolidated assets of TRGIL and its subsidiaries. If AIG exercises this right, then TRGIL has the right to purchase back the shares at a price not less than the original issue price (USD 1.12).14.3. 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' shares carries 1.36 votes and each class 'A' shares carries 1 vote. 14.4. 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. 14.5. Rule 3(ii)(e) of the Companies (Issue of Capital) Rules, 1996 has been relaxed 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. 14.6. Subsequent to June 30, 2006, the company completed the subscription process of the right issue, announced on April 13,2006. Out of the 144,521,500 (Rs. 1,445,215,000) right shares offered at Rs. 10/- each, 32,773,054 (Rs. 327,730,544) shares were subscribed by the shareholders while the remaining 111,748,446 (Rs. 1,117,484,456) shares were taken up by the underwriters to the issue. 14.7. 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 and the issue of Term Finance Certificates. The detail of these expenses is given hereunder: ====================================================================================
2006 2005
Note Rs. '000 Rs. '000
====================================================================================
Share issue costs
Underwriting commission - 7,226
Advisory and arrangement fee 14.8 500 18,064
Bank commission - 4,779
Printing expenses 382 264
Legal and professional charges - 7,103
Stamp duty 100 1,731
Stock exchange fee 1,373 300
CDC Fee - 1,088
Miscellaneous 264 137
2,619 40,692
TFC issue costs
Arrangement fee - 1,500
Routing fee - 56
Commitment fee - 60
Stamp duty - 20
Credit rating fee - 3 18
Legal and professional charges - 100
Trustee fee - 200
- 2,254
Total 2,619 42,946
====================================================================================14.8. This expense relates to an underwriting agreement entered by the company with a financial institution (the underwriter), pursuant to company's Board of Directors' resolution passed in its meeting on October 28, 2004. The night issue was exercised by shareholders and underwriter subsequent to year end on July 20, 2006.15. 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: ================================================================================================================
2006 2005
Minimum Present value Minimum Present value
lease payment of payments lease payments of payments
================================================================================================================
Within one year 6,679 6,143 6,625 5,500
After one year but not more than five years 3,093 3,069 9,713 9,191
Total minimum lease payments 9,772 9,212 16,338 14,691
Less: amounts representing finance charges 560 - 1,647 -
Present value of minimum lease payments 9,212 9,212 14,691 14,691
Less: current portion shown under current liabilities 6,143 6,143 5,500 5,500
3,069 3,069 9,191 9,191
================================================================================================================15.1. Rentals are payable in monthly instalments by the year 2007. The leases have floating rate of KIBOR plus 300 basis points with floor of 10% and KIBOR plus 375 basis points with floor of 8% and ceiling of 12% (2005: KIBOR plus 300 basis points with floor of 10% and KIBOR plus 375 basis points with floor of 8% and ceiling of 12%). At the end of the lease term, the ownership of the assets shall be transferred to the company against security deposits paid.16. Accrued And Other Liabilities ====================================================================================
2006 2005
Rs. '000 Rs. '000
====================================================================================
Reimbursement of expenses - employees 14 106
Commitment fee - 2,011
Advisory fee - 2,200
Underwriting commission 951 6,226
Others 1,302 603
2,267 11,146
====================================================================================17. Payable To Related Parties2====================================================================================
2006 2005
Note Rs. '000 Rs. '000
====================================================================================
Trakker (Private) Limited - current account 17.1 295 234
TRGIL - current account 17.1 19,688 21,543
19,983 21,777
====================================================================================17.1. These represent reimburseable expenses included by related parties on behalf of the company.18. Short Term Borrowings - secured On 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 was sanctioned to the company for the purpose of meeting its acquisition requirements. 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. Out of the total facility of Rs. 1,400 million (2005: Rs. 1,400 million), Rs. Nil (2005: Rs.900 million) remains unutilized as at June 30, 2006. The rate of mark-up has been agreed at 3-month KIBOR plus a margin of 3.25% per annum (2005: KIBOR plus a margin of 3.25% per annum) and is payable quarterly in arrears. Total short-tem borrowing of Rs. l,400 million has been subsequently repaid on 24, 2006, from the proceeds of right shares exercised by shareholders and underwriters as disclosed in note 14.6. 19. Revenue ====================================================================================
2006 2005
Note Rs. '000 Rs. '000
====================================================================================
Return on bank balances 19,645 1,204
Return on reverse repurchase transactions 1,842 3,062
Interest income on advances 529 10,436
Cost recovery for assets used by subsidiar 19.1 6,668 5,499
Cost recovery of off shore accountancy services 656 -
29,340 20,201
====================================================================================19.1. This represents monthly charges to a subsidiary, TRG (Private) Limited, for assets utilized by the subsidiary.These assets are held under the finance lease by the company on behalf of the subsidiary (refer to notes 12.1 and 5.1.1). 20. Operating Expenses ====================================================================================
2006 2005
Note Rs. '000 Rs. '000
====================================================================================
Salaries 20.1 6,419 5,682
Rent 295 595
Advertising 770 288
Printing, stationery and periodicals 2,112 1,124
Travelling and conveyance 2,351 1,796
Insurance 978 260
Communication 967 1,196
Legal and professional charges 963 669
Auditors' remuneration 20.2 2,004 953
Depreciation and amortisation 7,399 5,710
Repairs and maintenance 245 150
Other administrative expenses 20.3 1,240 518
25,743 18,941
====================================================================================20.1. This includes company's contribution to retirement benefit amounting to Rs. 0.26 million (2005: Rs. Nil)20.2. Auditors' remuneration ====================================================================================
2006 2005
Rs. '000 Rs. '000
====================================================================================
400 325
Audit fee 100 110
Half yearly review 200 150
Audit of consolidated financial statements 680 3 10
Taxation services and other certifications 571 -
Other services 53 58
Out of pocket expenses 2,004 953
====================================================================================20.3. This includes Rs. 54,000 (2005: Rs. Nil) in respect of penalties imposed by the Regulatory Authorities due to delay in holding the Annual General Meeting for the year ended June 30, 2005.21. Other Charges ====================================================================================
2006 2005
Rs. '000 Rs. '000
====================================================================================
Credit rating fee 500 -
Debt raising expenses
Legal and professional charges - 250
Agency fee - 100
Out of pocket expenses - 123
500 473
====================================================================================22. Finance Cost====================================================================================
2006 2005
Rs. '000 Rs. '000
====================================================================================
Commitment fee 2,791 2,011
Arrangement fee - 5,600
Mark up on short-term borrowings 135,038 14,621
Finance charges on leased assets 1,190 937
Foreign exchange loss - 42
139,019 23,211
====================================================================================23. Basic Loss Per Share====================================================================================
2006 2005
Note Rs. '000 Rs. '000
====================================================================================
Net loss for the year (Rs. '000) (135,912) (2,990)
Number of shares ('000)/Weighted
average number of shares ('000)
outstanding during the year 23.1 240,869 210,681
Basic loss per share (Rupees) (0.56) (0.01)
====================================================================================23.1. As required under International Accounting Standard (IAS) 33, the weighted average number of ordinary shares outstanding as at June 30, 2005 have been adjusted to incorporate the effect of the bonus element in the rights issue.23.2. No figure for diluted loss per share has been presented as the effect on basic loss per share due to right shares offered by the Company during the year is not considered material. 24. 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: =============================================================================================
2006 2005
Director Executives Total Director Executives Total
Rs.'000 Rs.'000
=============================================================================================
Managerial remuneration 1,025 1,880 2,905 1,025 2,036 3,061
House rent 270 767 1,037 270 562 832
Medical allowance 102 188 290 102 204 306
Utilities 103 188 291 103 204 307
=============================================================================================
Total 1,500 3,023 4,523 1,500 3,006 4,506
=============================================================================================
Number of persons 1 3 4 I 2 3
=============================================================================================24.1. No remuneration was paid to the chief executive during the year.24.2 Certain executives are provided with the free use of company maintained cars. 25. Financial Instruments 25.1. Liquidity risk Liquidity risk is the risk that the company will be unable to meet its funding requirements. The table below summarises 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. =============================================================================================
2006
=============================================================================================
Within One year to Over five
Total one year five years years
Rs. '000
=============================================================================================
Assets
Fixed assets
Property, plant and equipment 10,251 - - 10,251
Intangible 82 - - 82
Long-term investments 3,558,355 - - 3,558,355
Long-term advance to a related party 5,000 - 5,000 -
Long-term deposits 2,385 - 2,385 -
Accrued interest - non-current asset 10,763 - 10,763 -
Advance to a related party 12,000 12,000 - -
Short-term prepayments 183 183 - -
Accrued interest - current assets 590 590 - -
Other receivables 9,906 9,906 - -
Advance Tax 1,198 1,198 - -
Cash and bank balances 50,388 50,388 - -
=============================================================================================
3,661,101 74,265 18,148 3,568,688
=============================================================================================
Liabilities
=============================================================================================
Liabilities against assets
Subject to finance lease 9,212 6,143 3,069 -
Accrued and other liabilities 2,267 2,267 - -
Accrued mark-up on
short-term borrowings 53,003 53,003 - -
Payable to related parties 19,983 19,983 - -
Short-term borrowings 1.400,000 1,400,000 - -
1,484,465 1,481,396 3,069 -
Net assets 2,176,636 (1,407,131) 15,079 3,568,688
=============================================================================================
Represented by:
=============================================================================================
Issued, subscribed and paid-up 2,408,692
Subscription against issue of right 250
Share premium account 4,173
Accumulated losses (236,479)
2,176,636
================================================
=============================================================================================
2005
Within One year to Over five
Total one year five years years
Rs. '000
=============================================================================================
Assets
Fixed assets
Property, plant and equipment 15,610 - - 5,610
Intangible 171 - - 171
Long-term investments 2,794,265 - - 2,794,265
Long-term advance to a related party 11,884 - 11,884 -
Long-term deposits 2,385 - 2,385 -
Accrued interest - non-current asset 10,504 - 10,504 -
Advance to a related party - - - -
Short-term prepayments 159 159 - -
Accrued interest - current assets 822 822 - -
Other receivables 14,053 14,053 - -
Advance Tax 1,192 1,192 - -
Cash and bank balances 14,582 14,582 - -
=============================================================================================
2,865,627 30,808 24,773 2,810,046
=============================================================================================
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 borrowings 3,096 3,069 - -
Payable to related parties 21,777 21,777 - -
Short-term borrowings 500,000 500,000 - -
=============================================================================================
550,710 541,519 9,191 -
=============================================================================================
Net assets
2,314,917 (510,711) 15,582 2,810,046
=============================================================================================
Represented by:
=============================================================================================
Issued, subscribed and paid-up 2,408,692
Share premium account 6,792
Accumulated losses (100,567)
2,314,917
================================================25.2. 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. =======================================================================================================================
2006
=======================================================================================================================
Exposed to interest rate/yield risk
Effective Within One year to Over five Not
Interest rate Total one year five years years exposed
Rs.'000
=======================================================================================================================
Financial Assets
Long-term investments 3,558,355 - - - 3,558,355
Long-term advance to a related party 9.00 5,000 - 5,000 - -
Long-term deposits 480 - - - 480
Accrued interest - non-current assets 10,763 - - - 10,763
Advance to a related party 9.00 12,000 12,000 - - -
Accrued interest - current assets 590 - - - 590
Other receivables 9,906 - - - 9,906
Cash and bank balances 3.00-12.00 50,388 49,778 - - 610
=======================================================================================================================
Total 3,647,482 61,778 5,000 - 3,580,704
=======================================================================================================================
Financial liabilities
Liabilities against assets
subject to finance lease Note 15.1 9,212 6,143 3,069 - -
Accrued and other liabilities 2,267 - - - 2,267
Accrued mark-up on
short-term borrowings 53,003 - - - 53,003
Payable to related parties 19,983 - - - 19,983
Short-term borrowings 3-month 1,400,000 1,400,000 - - -
KIBOR
plus 3.25%
Total 1,484,465 1,406,143 3,069 - 75,253
On balance sheet gap 2,163,017 (1,344,365) 1,931 - 3,505,451
=======================================================================================================================
Off balance sheet gap - - - - -
=======================================================================================================================
Total interest rate/yield
sensitivity gap (1,342,434) (1,344,365) 1,931 -
Cumulative interest rate/yield
sensitivity gap (1,344,365) (1,342,434) (1,342,434)
=======================================================================================================================
2005
=======================================================================================================================
Exposed to interest rate/yield risk
Effective Within One year to Over five Not
Interest rate Total one year five years years exposed
=======================================================================================================================
Rs.'000
=======================================================================================================================
Financial Assets
Long-term investments 2,794,265 - - - 2,794,265
Long-term advance to a related party 9.00 11,884 - 11,884 - -
Long-term deposits 480 - - - 480
Accrued interest - non-current assets 10,504 - - - 10,504
Accrued interest - current assets 822 - - - 822
Other receivables 14,053 - - - 14,053
Cash and bank balances 0.25-3.50 14,582 13,956 - - 626
Total 2,846,590 13,956 11,884 - 2,820,750
=======================================================================================================================
Financial liabilities
=======================================================================================================================
Liabilities against assets
subject to finance lease Note 15.1 14,691 5,500 9, 191 - -
Accrued and other liabilities 11,146 - - - 11,146
Accrued mark-up on -
short-term borrowings 3,096 - - - 3,096
Payable to related parties 21,777 - - - 21,777
Short-term borrowings 3-months 500,000 500,000 - - -
KIBOR
Total plus 3.25% 550,710 505,500 9,191 - 36,019
On balance sheet gap 2,295,880 (491,544) 2,693 - 2,784,731
Off balance sheet gap - - - - -
=======================================================================================================================
Total interest rate/yield
sensitivity gap (488,851) (491,544) 2,693 -
=======================================================================================================================
Cumulative interest rate/yield
sensitivity gap (491,544) (488,851) (488,851)
=======================================================================================================================25.3. 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. 25.4. 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. 25.5. 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 TRGIL, a subsidiary. 26. 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: ====================================================================================
2006 2005
Rs. '000 Rs. '000
====================================================================================
TRGIL - (Direct subsidiary)
Expenses paid by the company 2,086 495
Services acquired by the company 231 5,808
Investment in equity shares of TRGIL 764,090 2,100,801
Balance payable - current account 19,688 21,543
TRG (Private) Limited - (Indirect subsidiary)
Expenses paid by the company 3,474 8,081
Services acquired by the company 682 1,039
Cost recovery of assets 6,668 5,499
Interest income on advance 260 10,436
Sale of fixed assets - 998
Interest receivable 10,763 10,504
Balance receivable - current account 9,161 13,465
Long-term advance receivable 5,000 11,884
Virtual World (Private) Limited
- (Indirect subsidiary)
Advance given by the company 12,000 -
Interest income on advance 269 -
Interest receivable 269 -
Trakker (Private) Limited - (Common directorship)
Purchase of fixed asset 61 -
Services acquired 1,099 14
Use of office premises and facilities and - 1,821
reimbursement of expenses at actual
Balance payable current account 295 234
====================================================================================26.1. The above transactions are at arm's length using admissible valuation methods.27. Date of Authorisation These financial statements were authorised for issue on October 9, 2006 by the Board of Directors of the company. 28. Corresponding Figures Prior year's figures have been reclassified, wherever necessary for the purposes of comparison. Major changes are as follows: ==================================================================================================================================
Statement Components Reclassification from Reclassification to Reason Rs. '000
==================================================================================================================================
Balance Sheet Current Assets/ Receivable from a Long-term advance For better presentation 11,884
Non-current Assets related party to a related party
Balance Sheet Current Assets/ Accrued interest Accrued interest For better presentation 10,504
Non-current Assets (current assets) (non-current asset)
Balance Sheet Current Assets Receivable from a Other receivable For better presentation 13,465
related party
==================================================================================================================================29. GeneralFigures presented in these financial statements have been rounded off to the nearest thousand. |