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Hirco plc (HRCO)

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Wednesday 27 March, 2013

Hirco plc

Annual Financial Report

RNS Number : 9296A
Hirco plc
27 March 2013
 



 

Hirco PLC

 

Results for the year ended 30 September 2012

 

Hirco PLC ("Hirco" or "the Company"), a closed end investment company that specialises in Indian real estate projects for development, today announces its results for the year ended 30 September 2012.

 

 

For further information please contact:

 

IOMA Fund & Investment Management Limited

Tel: +44 (0)1624 681250

Philip Scales




N+1 Singer


James Maxwell/Nick Donovan

+44 (0) 20 7496 3000



Chairman's Letter

Dear Fellow Shareholders,

During the full year ended 30 September 2012 the Company reported an after tax loss of £53.6million or 53p per share.  This loss is primarily non-cash and represents the Board's decision to write down the Company's investments based on CBRE's 30 September 2012 valuation. Administration costs over the period were £2.7 million, which includes some exceptional professional costs.  Based on the accounting policies adopted in respect of the interest of the Company in the Burke companies, the disclosed net asset value of the Company has declined to £197.8 million or £1.97 per share.  The Company continues to accrue the 12 percent return on the participating preference share interests in the Burke Companies; however, there is no visibility as to when that accrual might be paid in cash.

Progress on the projects continues to be modest and both Chennai and Panvel remain at least a decade away from completion.  As at 31 December 2012, 1,689 of Chennai's 2,665 available residential units and 2,556 of Panvel's 2,968 available residential units had been sold. The average selling price per square foot as of at the year-end was Rs 4,382 at Chennai and Rs 5,106 at Panvel.  We estimate that approximately Rs 12.2 billion in cash has been collected from the Panvel and Chennai residential sales (£142.8 million at year end exchange rates) though we have no visibility as to when any cash will be returned to the Burke companies.  The completion of Chennai and Panvel Phase One Residential are now projected for September 2015 and November 2015 respectively. Newcastle and Edinburgh, the two office buildings at Panvel totalling 1.9 million square feet gross, are now projected to be completed later this year. No tenants have been secured for these buildings. Shareholders should note that the Panvel and Chennai projects comprise over one hundred million square feet of developable area.  This figure is equivalent to many times the size of Canary Wharf.  Currently approximately eight per cent of the total developable area (or eight million square feet) is under development with the remaining ninety-two percent to be developed in the future. 

The information flow about the financial and technical aspects of the projects, the progress on the projects and the sharing of cash with Hirco Plc has not been what investors envisioned when Hirco was floated.  We still do not have complete clarity over who is really in control of the projects in India.  In addition we are two years behind in receiving audited financial statements from the Burke companies, the Mauritius entities in which we hold preference shares, and we have not been informed over the period of these accounts of the fees payable to the Hiranandani entities that provide marketing and development management services in connection with the projects. We have raised issues of transparency and reporting with the Hiranandani family on many occasions; our concerns have not yet been satisfactorily addressed. In light of this plainly unsatisfactory situation, we have put a lot of effort into trying to negotiate an exit from these investments and have had many meetings over the last year with various family members. However, these efforts have so far been fruitless and notwithstanding what you may have read in the media we have not so far received settlement indications in the form and substance which we think our shareholders would find acceptable. We consequently retained counsel over a year ago to examine our legal options. 

As a consequence of this legal analysis and our view of the likelihood of success of these negotiations in the foreseeable future, the Board issued proceedings in February against two former Company directors, Niranjan Hiranandani, the Company's former Chairman and Priya Hiranandani-Vandrevala, the Company's former CEO, in the English High Court and in the Isle of Man courts.  The timing of this decision was dictated by relevant statutes of limitations, which, had we not filed when we did, may have barred forever any claims that were not then asserted.

The Company regards litigation as a last resort. It is never a decision taken lightly. All other reasonable attempts to achieve a satisfactory level of transparency, involvement and reassurance in respect of the underlying investments have failed. And there is no clarity at all about the likelihood of a return being paid on the preference share interests in the Burke companies. The litigation (and arbitrations referred to below) will be complex but have been commenced with the benefit of an exhaustive analysis of our legal rights and remedies conducted over the last 12 months. Although it would be imprudent ever to ignore the risk inherent in all litigation, and the cost of it, the board firmly believes this is the best course of action in the current circumstances.

The English proceedings against Niranjan Hiranandani and Priya Hiranandani-Vandrevala were issued in the High Court on 6 February 2013.  The High Court claim seeks damages of almost £220 million. Both defendants have indicated their intention to contest the proceedings and also to contest the jurisdiction of the English High Court. The same proceedings against those two former directors were also issued in the Isle of Man courts to protect the Company from the possible expiry of limitation periods.  These proceedings have not yet been served, and the Board would wish to emphasise to all shareholders that the possible outcome of any litigation, should proceedings commence, or the possible amount of any negotiated settlement, may differ materially from both the amount claimed in damages of £220 million and the net asset value of £197.8 million. In anticipation of these claims, Priya Hiranandani-Vandrevala commenced her own proceedings in the Isle of Man that she ought fairly to be excused for any breaches of duty of which she is found to be liable.

Besides the High Court proceedings, the Company's Mauritius subsidiary is also involved in a related arbitration with Mr Hiranandani and his wife Kamal. These proceedings were commenced on 6 February 2013 by the Hiranandani's. Separately, the Company and its Mauritius subsidiary have brought separate arbitration proceedings against the Burke Companies and their shareholder, Burke Consolidated Limited ("BCL") to assert rights over the control of the Company's investment and information fklow we are contractually entitled to.  The proceedings against the Burke Companies and BCL were initiated on 5 March 2013. 

The confidential nature of arbitration proceedings prevents us from disclosing further details as to the substance of these actions.

The attention of shareholders is drawn to the paragraphs set out under the heading "Disclaimer of opinion on financial statements" which are included within the Report of the Independent Auditors on pages 8 to 10, and to the further information contained in the  Notes to the financial statements which are detailed in these paragraphs

I hope when writing to you next in reporting our mid-year results to be able to give you a further update on all these matters.

David Burton

Chairman of Hirco Plc



 

Report of the Directors

The Directors hereby submit their annual report together with the audited consolidated financial statements of Hirco Plc  (the "Company") and its subsidiaries (together "the Group") for the financial year ended 30 September 2012.

The Company

The Company was incorporated in the Isle of Man and was established to invest in certain FDI-compliant Indian real estate development projects.  Its investment policy is set out below.

Results and Dividends

The results of the Company and the Group for the fiscal year are set out on pages 11. The Directors do not intend to declare a dividend at this time. In accordance with the provisions of Section 3 of the Isle of Man Companies Act 1982, no separate statement of comprehensive income has been presented for the Company.

The Company's Board of Directors

 

Name

Date appointed

Remuneration**

David Burton*

26 November 2006

£108,000

Peter Barge*

1 July 2010

£104,000

John Chapman*

20 May 2011

£100,000

Eitan Milgram

12 October 2011

£25,000

Vikram Talwar*

29 August 2012

£100,000

*Considered independent and satisfy the UK Corporate Governance Code independence guidelines.

** Remuneration represents the annual director fee payable for a 12 month period.

The interests of the Directors in the share capital of the Company as at 30 September 2012 are as follows:

David Burton - 25,000 (2011 - 25,000)

Eitan Milgram (due to his connection to Weiss Asset Management) - 22,272,351

Material Contracts

Details of Hirco's material contracts can be seen on pages 80-86 of the Hirco Plc Admission Document, which is available at www.hircoplc.co.im

Corporate Governance

Hirco's Board of Directors is committed to high standards of corporate governance.  The Board holds at least four formal meetings annually, and has established audit, nomination, remuneration committees and an investment and strategy committee. 

However, since the resignations of Priya and Niranjan Hiranandani from the Board and the closure of the office in the US, the Board have effectively operated in an executive capacity and accordingly the present structure of Board sub committees is not appropriate to the needs of the business and so are not currently operational.

Independent Auditors

Our auditors, KPMG Audit LLC, being eligible, have expressed their willingness to continue in office in accordance with Section 12(2) of the Companies Act, 1982.

Internal Control

There are inherent limitations in any system of internal control and such a system can provide only reasonable, but not absolute, assurances against material misstatement or loss.  The Company does not have its own internal audit function, but places reliance on the compliance and other control functions of its service providers.

Where necessary, the Board obtains specialist advice from its auditors and other advisers as appropriate. 

Disclosure of Additional Information

The Board has decided to disclose information from the results of valuation reports of Hirco Plc's underlying investment projects.  By releasing this information to shareholders, we hope to enable the investing public to better understand the historical performance of the projects and to have an informed opinion of the likely future performance and current market status.  This information is available on the company's website at www.hircoplc.co.im.



 

Statement of Directors' Responsibilities in Respect of the Directors' Report and the Financial Statements

The Directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year, which meet the requirements of Isle of Man company law.  In addition, the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union.

The financial statements are required by law to give a true and fair view of the state of affairs of the Group and Parent Company and of the profit or loss of the Group for that period. 

In preparing these financial statements, the Directors are required to:

•           select suitable accounting policies and then apply them consistently;

•           make judgements and estimates that are reasonable and prudent;

•           state whether they have been prepared in accordance with International Financial Reporting Standards as adopted by the Eurpean Union; and

•           prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Parent Company will continue in business.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Parent Company and to enable them to ensure that its financial statements comply with the Companies Acts 1931 to 2004.  They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website.  Legislation governing the preparation and dissemination of financial statements may differ from one jurisdiction to another.

By order of the Board

Philip Scales
Secretary



Report of the Independent Auditors, KPMG Audit LLC, to the Members of Hirco plc

We were engaged to audit the financial statements of Hirco Plc for the year ended 30 September 2012 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Company Statement of Financial Position, the Consolidated and Company Statements of Changes in Equity and the Consolidated Statement of Cash Flows and the related notes.  The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the Company's members, as a body, in accordance with Section 15 of the Companies Act 1982.  Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and Auditor

As explained more fully in the Directors' Responsibilities Statement set out on page 7, the Directors are responsible for the preparation of financial statements that give a true and fair view.  Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements.

Basis for disclaimer of opinion on financial statements

In seeking to form an opinion on the financial statements, we have considered the implications of the significant uncertainties disclosed in the financial statements concerning the following matters:

·    Notes 3 and 11 to the financial statements set out the significant uncertainty regarding the carrying value of the Group's participating preference share interests in Burke 1 Limited, Burke 2 Limited, Burke 3 Limited and Burke 4 Limited ("the Burke companies"), including accrued preference dividends.  The carrying value of the preference share interests and accrued preference dividends is based on cost less impairment.  The assessment of impairment is undertaken by the Directors based on the unaudited net asset value of each of the Burke companies and the order of distribution of net assets set out in the respective investment agreements, as adjusted to include independent valuations of the underlying property development projects. As detailed in note 11, there are a number of uncertainties regarding the adjusted net asset value of the Burkecompanies, including the extended timelines for the projects, the sensitivity of the valuations to key assumptions, the availability of external finance in order to complete the projects and the lack of control able to be exercised by the Group over the projects and distribution of cash from the projects. The carrying value of the Group's participating preference share interests, including accrued preference dividends, in the Burke companies is therefore inherently uncertain.

·    Note 20 to the financial statements sets out the significant uncertainty regarding the outcome of various litigation and arbitration proceedings being pursued by the Company and Group against certain former directors and promoters and arbitrations involving the Company, its Mauritius subsidiary, members of the Hiranandani family, the Burke Companies and BCL. The outcome of this litigation/arbitration and any associated negotiations cannot be estimated with any reasonable degree of certainty and may be concluded at amounts significantly different from the amount of damages being claimed and to the net asset value as stated in the balance sheet.

There is potential for these uncertainties to interact with one another such that we have not been able to obtain sufficient appropriate audit evidence regarding the possible effect of the uncertainties taken together.

Disclaimer of opinion on financial statements

Because of the significance of the possible combined effect of the uncertainties described in the basis for disclaimer of opinion on financial statements paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly we do not express an opinion on the financial statements.

Matters on which we are required to report by exception 

In respect solely of the limitation of our work due to the possible effect of the uncertainties referred to above taken together, we have not obtained all the information and explanations that are considered necessary for the purpose of our audit.

We have nothing to report in respect of the following matters where the Companies Acts 1931 to 2004 require us to report to you if, in our opinion: 

•           proper books of account have not been kept by the Parent Company and proper returns adequate for our audit have not been received from branches not visited by us; or 

•           the Parent Company's statement of financial position and statement of comprehensive income are not in agreement with the books of account and returns; or 

•           certain disclosures of Directors' remuneration specified by law are not made.

KPMG Audit LLC

Chartered Accountants

Heritage Court

41 Athol Street

Douglas

Isle of Man IM99 1HN

26 March 2013  

 

Consolidated statement of comprehensive income for the year ended 30 September 2012

Amount in £000


Note

2012

2011





Investment income

5

21,461

 26,940

Foreign exchange loss


(12)

 (18)





Net investment income


21,449

26,922

Impairment loss on debt instruments

11

(53,857)

 (296,953)

Administrative expenses

6

(2,700)

(3,307)

Impairment of previously accrued income

12

(18,437)

-





Loss before taxation


(53,545)

(273,338)





Income tax expense

7

(2)

 (15)





Loss for the year


(53,547)

(273,353)





Other comprehensive income




Exchange difference on translation of foreign operations


(2)

(8)





Total comprehensive loss for the year


(53,549)

(273,361)





Weighted average number of ordinary shares


100,526,984

82,773,559

Loss per share (pence), basic and fully diluted

9

(53)

(330)





 

The Directors consider that all results derive from continuing activities.



 

Consolidated and Company statements of financial position as at 30 September 2012

Amount in £000

ASSETS

Note

Group

Company

2012

2011

2012

2011

NON-CURRENT ASSETS






Investments

11

-

53,857

 -

 -

Due from subsidiaries

19

 -

-

 -

 55,347

Accrued income

12

 187,901

185,054

 187,901

183,564



 187,901

238,911

 187,901

238,911







CURRENT ASSETS






Other debtors and prepayments


 158

131

 157

115

Other current assets


 202

57

 159

 -

Cash and cash equivalents

14

 11,712

13,321

 11,543

 13,119



 12,072

13,509

 11,859

 13,234







Total assets


199,973

252,420

199,760

252,145







LIABILITIES






CURRENT LIABILITIES






Trade and other payables

15

 2,152

1,050

 2,093

 891







Total liabilities


2,152

1,050

2,093

891







Net assets


197,821

251,370

197,667

251,254







EQUITY






Share capital

17

 1,005

1,005

 1,005

 1,005

Share premium


 372,833

372,833

 372,833

372,833

Foreign currency translation reserve


 22

22

 -

 -

Retained earnings


 (176,039)

(122,490)

 (176,171)

 (122,584)







Total equity


197,821

251,370

197,667

251,254

Number of ordinary shares

10

100,526,984

100,526,984

100,526,984

100,526,984

Net Assets Value per share (Pence)

10

197

250

195

250

The financial statements were approved by the board on 26 March 2013 and signed on their behalf by:

DAVID G BURTON                                                           PETER A BARGE

CHAIRMAN                                                                     DIRECTOR

 

Consolidated  and company statements of changes in equity for the year ended 30 September 2012

Amount in £000

GROUP

Share
Capital

Share
Premium

Currency Translation Reserve

Retained Earnings

Total







Balance at 1 October 2010

765

 361,871

30

 150,863

 513,529







Total comprehensive income






Loss for the year

-

-

-

(273,353)

(273,353)

Other comprehensive income

-

-

 (8)

-

 (8)

Total comprehensive income for the year

-

-

(8)

(273,353)

(273,361)







Transactions with owners of the company, recognised directly in equity






Issue of ordinary shares

240

11,760

-

-

 12,000

Share issue costs

 -

 (798)

-

-

(798)







Total contributions by and distributions to owners of the company

 240

10,962

 -

 -

11,202

Balance at 30 September 2011

 1,005

372,833

22

(122,490)

251,370







Loss for the year

-

-

-

 (53,547)

 (53,547)

Other comprehensive income

-

-

-

 (2)

 (2)

Total comprehensive income for the year

-

-

-

 (53,549)

 (53,549)







As at 30 September 2012

 1,005

 372,833

 22

 (176,039)

 197,821

 

COMPANY

Share
Capital

Share
Premium

Currency Translation Reserve

Retained Earnings

Total







As at 1 October 2010

765

 361,871

-

 153,788

516,424







Total comprehensive income






Loss for the year

-

-

-

 (276,372)

(276,372)







Total comprehensive income for the year

 -

 

-

 -

(276,372)

(276,372)

Transactions with owners of the company, recognised directly in equity






Issue of ordinary shares

240

11,760

-

-

12,000

Share issue costs

-

(798)

-

-

(798)

Total contributions by and distributions to owners of the company

240

10,962

-

-

11,202

Balance at 30 September 2011

 1,005

372,833

 -

(122,584)

251,254







Loss for the year




 (53,587)

 (53,587)

Total comprehensive income for the year




 (53,587)

 (53,587)

As at 30 September 2012

 1,005

 372,833

 -

 (176,171)

 197,667







Consolidated statement of cash flows for the year ended 30 September 2012

Amount in £000



2012

2011





Cash flows from operating activities



Loss before taxation :

(53,545)

 (273,338)

Adjustment for:



            Loss on investments


53,857

296,953

            Depreciation


-

 4

            Bank interest income


(177)

 (12)

            Other income


-

 (3)

            Foreign exchange loss


12

 18

Operating profit before working capital changes

147

23,622

Change in debtors and prepayments

(3,021)

 (26,844)

Change in creditors and other accruals

102

493

Change in provisions

1,000

 -



(1,772)

(2,729)

Bank interest received

177

 12

Tax paid

(2)

 (15)





Net cash used in operating activities

(1,597)





Cash flows from investing activities



Purchase of property, plant and equipment

-

-

Net cash used in investing activities

-





Cash flows from financing activities



Proceeds from issue of share capital


-

12,000

Payment of share issue costs


-

(798)





Net cash generated from financing activities

-





Decrease in cash during the year

(1,597)

 8,470

Effect of exchange rate fluctuations on cash balances

(12)

 (9)

Cash and cash equivalents at the beginning of the year

13,321

4,860

Cash and cash equivalents at the end of the year

11,712



 

Notes to the Consolidated Financial Statements

1            GENERAL INFORMATION

Hirco Plc  (the "Company") is a public limited company incorporated in the Isle of Man on 2 November 2006. It was admitted to AIM on 13 December 2006.

The consolidated financial statements of Hirco Plc comprise the Company and its subsidiaries (together referred to as the "Group"). The parent company financial statement presents information about the Company as a separate entity and not about its Group. The consolidated financial statements have been prepared for the period from 1 October 2011 to 30 September 2012 and are presented in GBP.

The principal activities of the Group includes investment in FDI compliant Indian real estate projects for developments of large-scale, mixed-use township communities which could include co-located special economic zones ("SEZs") in India.

As at 30 September 2012, the Group had no (2011: one) employees.

2            SIGNIFICANT ACCOUNTING POLICIES

(A) BASIS OF PREPARATION

The consolidated financial statements have been prepared on a historical cost basis with the exception of equity interests in unquoted companies, which are stated at fair value.

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS") and also to comply with the Isle of Man Companies Acts 1931 to 2004. In accordance with the provisions of Section 3 of the Isle of Man Companies Act 1982, no separate statement of comprehensive income has been presented for the Company.

(B) BASIS OF CONSOLIDATION

The consolidated financial statements incorporate the results of the Company and entities controlled by the Company (its subsidiaries) made up to 30 September 2012. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. The financial statements of the subsidiaries are prepared for the same period as the Company, using consistent accounting policies.

The results of subsidiaries acquired during the period are included in the consolidated income statement from the effective date of acquisition.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Group.

(C) FOREIGN CURRENCY TRANSLATION

The consolidated financial statements are presented in British Pounds, which is the Company's functional and presentation currency. The functional currency for all of the subsidiaries within the Group are as mentioned below;

 

• Hirco Holdings LimitedGBP

• Hirco IncUSD

• Hirco Real Estate Services Private LimitedINR

Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rate of exchange ruling at the balance sheet date. Differences arising therefrom are taken to the statement of comprehensive income.

Income and expenses of subsidiaries are translated at the average rate of exchange for the period. Year end balances are taken at the year-end exchange rate. Differences arising therefrom are transferred to Foreign Currency Translation Reserve in Equity.

(D) REVENUE RECOGNITION

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. In particular:

Preference dividend income

Preference Dividend income is recognized on an effective interest rate basis. That is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset.

Interest income

Interest income is recognized on a time proportionate basis, using the effective interest rate method.

Fair value gain on investments

The Directors determine unrealized fair value gain/loss on investments bi-annually based on the fair market value assessment of the projects carried out by CBRE, an independent valuer, using the valuation standards prescribed by the Royal Institute of Chartered Surveyors. This gain/loss is translated at the exchange rate as on the date of valuation for the recognition of revenue.

(E) INCOME TAX

Current income tax

Current income tax assets and liabilities are measured at the balance sheet date at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amounts are those that are enacted or substantively enacted by the balance sheet date (see note 7).

Deferred income tax

Deferred income tax is recognized on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.

Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply to the year when the related asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Sales tax/VAT

Revenues, expenses and assets are recognized net of the amount of sales tax except:

•where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognized as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

•receivables and payables that are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

(F) INVESTMENTS

The Group's interest in Participating Preference Shares issued by Burke 1 Limited, Burke 2 Limited, Burke 3 Limited and Burke 4 Limited (note 12) is a compound financial instrument, comprising a debt component in relation to the preference dividend and preferred capital return and an equity component equivalent to the share in residual profits.

The debt component is stated at amortized cost, with interest recognized in the statement of comprehensive income on the effective interest rate basis. Impairment provisions are made where necessary - see note 2 (N).

The Directors consider that the Group is a venture capital organization and have elected under IAS 31 to designate the equity component of its investment in jointly controlled entities, Burke 1 Limited, Burke 2 Limited, Burke 3 Limited and Burke 4 Limited (investee companies through which investments in the property development projects are made), as at fair value through profit or loss. Accordingly, under IAS 39, changes in fair value on the equity component are recognized in profit or loss.

The fair value of the equity component and the assessment of the carrying value of the debt component (including accrued preference dividends) of the Group's investments are determined by the Directors based on the net asset value of the investee companies as adjusted for an independent valuation of the underlying projects carried out by CBRE, an independent valuer, using the valuation standard prescribed by the Royal Institute of Chartered Surveyors.

(G) TRADE RECEIVABLES

Trade receivables are initially stated at cost, which approximates their market value and subsequently at amortised cost, less an allowance for impairment. An allowance for impairment is made when there is objective evidence that the Group will not be able to collect the debts. Bad debts are written off when identified.

(H) CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash at bank and on hand, bank demand and time deposits with maturities of three months or less.

(I) TRADE AND OTHER PAYABLES

Trade and other payables are initially stated at cost, which approximates their market value and subsequently measured at amortised cost.

(J) EQUITY INSTRUMENTS

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

(K) PROVISIONS

Provisions are recognized when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Director's best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

(L) DIVIDENDS

Dividend distributions to the Company's shareholders are recognized as a liability in the Group's financial statements in the period in which the dividends are paid or are approved by the Company's shareholders.

Subject to the provisions of the Articles, the Company's Board of Directors, may by ordinary resolution declare that out of profits available for distribution in accordance with Isle of Man law dividends be paid to members according to their respective rights and interests in the profits of the Company available for distribution. However, no dividend shall exceed the amount recommended by the Board. There is no fixed date on which an entitlement to dividend arises.

(M) IMPAIRMENT OF FINANCIAL ASSETS

A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognized in profit or loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For financial assets measured at amortized cost the reversal is recognized in profit or loss.

(N) FUTURE CHANGES IN ACCOUNTING POLICIES

IASB (International Accounting Standards Board) and IFRIC (International Financial Reporting Interpretations Committee) have issued the following standards and interpretations with an effective date after the date of these financial statements:

New/Revised International Financial Reporting Standards (IAS/IFRS)

Effective Date (accounting periods commencing on or after)

IAS 27 Consolidated and Separate Financial Statements - Reissued as IAS 27  Separate Financial Statements (as amended in May 2011)

1 January 2013

IAS 28 Investments in Associates - Reissued as IAS 28 Investments in  Associates and Joint Ventures (as amended in May 2011)

1 January 2013

IFRS 9 Financial Instruments - Classification and Measurement

1 January 2013

IFRS 10 Consolidated Financial Statements*

1 January 2013

IFRS 11 Joint Arrangements*

1 January 2013

IFRS 12 Disclosure of Interests in Other Entities*

1 January 2013

IFRS 13 Fair Value Measurement*

1 January 2013

IFRIC Interpretation

* Original issue May 2011

The Directors do not anticipate that the adoption of the standards and interpretations noted above to have a material impact on the Group's financial statements in the period of initial application.

3            SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Valuation of unquoted equity investments

The fair value of the equity component of the Group's investments was determined by the Directors based on the net asset value of the investee companies, as adjusted for the valuation of the underlying projects carried out by CBRE, an independent valuer, using the valuation standard prescribed by the Royal Institute of Chartered Surveyors.

Impairment of financial assets

The carrying value of the debt component of the Group's investments and accrued preference dividends was assessed for impairment based on the net asset value of the Burke Companies, as adjusted to state underlying projects at valuation, and the order of distribution of the net assets of those companies (see note 11).

Litigation

The Group is involved in litigation with certain former directors and the promoters of the Indian development projects in which it invests (see note 20).

4            SEGMENT REPORTING

The Group has only one business and geographic segment, which is the investment in real estate in India and hence no separate segment report has been presented.

5            INVESTMENT INCOME


2012

2011


£000

£000

Preference dividends less impairment (see note 11)

21,284

26,925

Bank interest

177

12

Other income

-

3


21,461

26,940

The above dividends are after deduction of impairment provisions of £47.1m  (2011: £34.1m)

6            ADMINISTRATIVE EXPENSES


2012

2011


£000

£000

Employee costs

44

605

Occupancy costs

-

143

Professional fees

2,219

1,601

Directors' fees

372

459

Other administration costs

65

495

Depreciation

-

4


2,700

3,307

7            INCOME TAX EXPENSE

The major components of income tax expense for the year ended 30 September 2012 are:


2012

2011


£000

£000

Income tax



Current tax charge

2

15

The Isle of Man introduced a general zero per cent tax rate for Companies with effect from 6 April 2006. The rate of withholding tax on dividend payments to non-residents for Companies within the zero per cent corporate income tax regime is also reduced to zero per cent with effect from 6 April 2006. Accordingly, the Company will have no liability to Isle of Man income tax on its income or gains and there will be no requirement to deduct withholding tax from payments of dividends to shareholders. There are no incorporation, capital gains or inheritance taxes payable in the Isle of Man.

Certain subsidiaries may be subject to foreign taxes in respect of foreign sources of income, for which adequate accruals are made in the accounts.

The current income tax charge represents tax charges on profit arising in the subsidiaries, Hirco Inc, USA and Hirco Real Estate Services Pvt. Ltd, India. These subsidiaries have contracts under which they are eligible for fees for services at a mark-up on cost. This income is subject to tax in their respective countries at the applicable corporate tax rates. These companies are no longer active.

8            AUDITORS' REMUNERATION

              The following are the details of fees paid to the auditors, in various capacities for the year:


2012

2011


£000

£000

Fees paid as:



Statutory auditors

77

67

Non-audit services

-

123

9            LOSS PER SHARE

Basic loss per share for the year ended 30 September 2012 is based on the loss attributable to equity holders of the Company of £(53,547,224) (2012: loss of £273,353,871) and the weighted average number of ordinary shares outstanding during the year ended 30 September 2012 of 82,773,559 (2011: 82,773,559).

 


2012

2011


£000

£000

Loss attributable to equity holders of the parent (£) 

(53,547,224)

(273,353,871)

Weighted average number of ordinary shares

100,526,984

82,773,559





PENCE

PENCE

Basic and diluted loss per share

(53)

(330)

There are no dilutive potential ordinary shares. There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements.

10          NET ASSET VALUE PER SHARE

Net asset value per share is calculated by dividing the net assets attributable to the equity holders of the Company of £197,820,963 (2011: £251,369,304) by the number of ordinary shares as at 30 September 2012 of 100,526,984 (2011: 100,526,984).


2012

2011


£000

£000

Net assets attributable to equity holders of the parent (£)

197,820,963

251,369,304

Number of ordinary shares

100,526,984

100,526,984





PENCE

PENCE

Net asset value per share

197

250

 

11          GROUP INVESTMENTS

Company

Projects in India

Date of Investment

Book Value As at 30 Sep 11

Book Value Impairment loss for the period

Book Value As at 30 Sep 12

Cost of Acquisition




£000

£000

£000

£000

Investment in participating preference shares of:





Burke 1 Limited

Chennai township projects

13-Feb-2007

-

-

-

77,847

Burke 2 Limited

Chennai commercial projects

23-Mar-2007

-

-

-

47,889

Burke 3 Limited and Burke 4 Limited

Panvel SEZ, commercial and residential projects

19-Jul-2007 and 25-Oct-2007

53,857

(53,857)

-

225,074

Balance as at 30 September 2012



53,857

(53,857)

-

350,810

              The participating preference share interests in Burke 1 Limited, Burke 2 Limited, Burke 3 Limited and Burke 4 Limited entitle the Group to an accrued preference dividend of 12% per annum compounded annually, a preferred capital return and a 40% share in residual profits. As detailed in the accounting policy, the debt component of this compound financial instrument, representing the preference dividend and the preferred capital return, is stated at amortized cost, with the preference dividend accrued under the effective interest method. The equity component representing the 40% residual profit share is stated at fair value. The cost of acquisition of £350.8 million is treated as the debt component; hence there is no cost attributable to the equity component.  The equity component was written down to nil as at 30 September 2010.

The carrying value of the Group's investments and accrued preference dividends were assessed for impairment based on the net asset value of the Burke Companies and the order of distribution of net assets of those companies based on the investment agreements as set out below.  This gave rise to an impairment provision against the investments of £350.8m and against the preference dividends of £99.7m. Of these amounts £297.0m and £34.1m were recognised as at 30 September 2011.

              The Burke Companies' net assets were adjusted to reflect the valuation of the underlying projects carried out by CBRE, an independent valuer, using the valuation standard prescribed by the Royal Institute of Chartered Surveyors. The valuation done by CBRE is based on the details of pre-sales achieved, project progress, expected revenue and anticipated cost of construction as on the valuation date. The valuers have also made reference to market evidence of transaction prices for similar projects.

11          GROUP INVESTMENTS


Burke 1 Limited

Burke 2 Limited

Burke 3 & Burke 4 Limited

Total


£000

£000

£000

£000

Net worth post valuation as on 30 September 2012 before charging Preference dividend

18,771

14,817

154,313

187,901

DISTRIBUTION IN THE ORDER OF CONTRACTUAL PREFERENCE:





Preference dividend

(18,771)

(14,817)

(154,313)

 (187,901)

Repayment of the Group's participating preference shares

-

-

-

-

Repayment of the Ordinary Shares, denominated in US dollars (which are subordinated to the participating preference shares)

-

-

-

-

Share of the Group (40%) of the residual net worth

-

-

-

-

Share of the ordinary shareholders (60%) of the residual net worth

-

-

-

-

Total distribution

(18,771)

(14,817)

(154,313)

 (187,901)

Burke Companies summary assets and liabilities as at 30 September 2012


Burke 1 Limited

Burke 2 Limited

Burke 3 & Burke 4 Limited

Total


£000

£000

£000

£000

Non-current assets:





Property, plant and Equipment

10,397

2,077

3,379

15,853

Construction Work in Progress

9,989

1,086

5,989

17,064

Other non-current assets

-

-

3,159

3,159

Current Assets:





Inventory

142,796

19,773

265,659

428,228

Land

72,500

45,264

230,264

348,028

Other current assets

12,024

301

23,881

36,206

Cash

2,380

275

1,071

3,726

Current Liabilities

(135,958)

(45,985)

(257,957)

(439,900)

Long term debt

(71,294)

-

(43,347)

(114,641)

Other non-current liability

-

-

(3,098)

(3,098)

Net assets

42,835

22,793

229,000

294,628

 

Adjustments to arrive at the figures for contractual distribution above:





Add back cumulative dividend liability

69,740

41,862

176,000

287,602

Remove assets and liabilities included in valuation:





Construction Work in Progress

(9,989)

(1,086)

(5,988)

(17,063)

Mobilisation advances and deposits

(7,093)

(27)

(19,673)

(26,793)

Advances received

47,921

2,766

71,898

122,585

Inventory and land

(215,296)

(65,038)

(495,924)

(776,258)

Add projects at valuation

90,654

13,546

199,000

303,200

Net worth post valuation as on 30 September 2012 before charging preference dividend

18,771

14,817

154,313

187,901

The above figures have been extracted from the Burke Companies' statements of financial position as at 30 September 2012 as per the unaudited Group Reporting Packs provided by Hirco Development Property Limited.

Audits of the Burke Companies and the underlying Indian SPVs are carried out by KPMG Mauritius and KPMG India. The last such audits to be signed off for the Burke Companies were as at 31 March 2010. The figures for 30 September 2012 disclosed above have been subjected to limited review procedures but are unaudited.

There are a number of key uncertainties regarding the methodology to assess the carrying value of the Group's investment in preference shares (and accrued preference dividend):

- The Burke Companies' group reporting packs, used for the net asset value calculation, are unaudited.

- The project valuations are highly sensitive to key assumptions, including discount rates, project timelines, cost and revenues.

- Completion of the projects will likely take at least another ten years.

- Significant external finance will likely be required to complete the projects, with the inevitable uncertainties regarding availability and terms thereof.

- The Group does not have control over the timing and amounts of distributions from the projects.

12          ACCRUED INCOME


2012

2011


£000

£000

Non-current assets



Participating preference shares dividends due

 187,901

  185,054

Current assets



Participating preference shares dividends due

  -

   -

Total

  187,901

 185,054

 

Reconciliation of preference share dividends


2012

2011


£000

£000

Value brought forward

 185,054

  158,129

Dividend accrued in year

68,400

61,025

Impairment of current year income

(47,116)

(34,100)

Impairment of prior year income

(18,437)

-

Carried forward

  187,901

 185,054

The participating preference share interests in Burke 1 Limited, Burke 2 Limited, Burke 3 Limited and Burke 4 Limited are entitled to a cumulative preference dividend of 12% per annum compounded annually. The above amount is stated after an impairment provision of £99.7m (2011: £34.1m).

13          INVESTMENT IN SUBSIDIARY



£

Balance at 30 September 2011


   51

Balance as at 30 September 2012


  51

The investment in subsidiary in the Company's financial statements relates to Hirco Holding Ltd, which is stated at cost (See Note 18).

14          CASH AND CASH EQUIVALENTS

 


Group

Company


2012

2011

2012

2011


£000

£000

£000

£000

Cash at bank and in hand

670

   3,315

522

   3,113

Short-term deposits

11,042

 10,006

11,021

  10,006

Total

11,712

13,321

11,543

 13,119

Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. The weighted average effective interest rate on short-term deposits was approximately 1% per annum. The fair value of cash and short-term deposits is equivalent to cost.

15          TRADE AND OTHER PAYABLES


Group

  Company


2012

2011

2012

2011


£000

£000

£000

£000

Trade and other payables

373

  174

322

   123

Accrued expenses

1,779

  876

1,772

   768

Total

2,152

   1,050

2,094

  891

16          FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Group's activities expose it to a variety of financial risks: market risk (including currency risk, price risk and interest rate risk), credit risk and liquidity risk. Risk management is carried out by the Board of Directors.

(a)  Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

(i)   Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Indian Rupee. Foreign exchange risk arises from future commercial transactions, recognized monetary assets and liabilities and investments in foreign companies. The principal foreign exchange risk relates to the interest in the participating preference share investments in Burke 1 Limited, Burke 2 Limited, Burke 3 Limited and Burke 4 Limited (holding companies of the Indian property companies) (see note 11) - which are revalued each reporting period and translated at the exchange rate on the date of the valuation.

At the reporting date, the Group's currency exposure was as follows:


2012

2011


£000

£000

British pounds

9,740

   12,370

US dollars

180

   89

Indian rupees

187,901

   238,911

Net Assets

197,821

 251,370

If the Indian rupee appreciated/depreciated by 5% against the British pound the effect on net assets would be to increase/decrease net assets by £9.4m (2011: £14.2m).

If the US dollars appreciated/depreciated by 5% against the British pound the effect on net assets would be to decrease/increase net assets by £9,000 (2011: £5,000).

(ii)   Equity price risk

The Group is exposed to equity price risk with regards to its 40% equity interest in the Indian property companies. The Indian companies are unquoted and are valued by the Directors, based on underlying property valuation, see note 12.

The Group's equity interest was written down to NIL as at 30 September 2012.

 (iii) Interest rate risk

The Group holds financial assets that are interest bearing. As a result the Group is subject to interest rate risk due to fluctuations in the prevailing levels of market interest rates. Any excess cash and cash equivalents are invested at short-term market interest rates.

The table below summarises the Group's exposure to interest rate risks. It includes the Group's financial assets and liabilities at the earlier of contractual re-pricing or maturity date, measured by the carrying values of assets and liabilities. Since the maturity date is not certain, the debt component of the investments is stated as due after five years.

 

30 September 2012

Less than 1 month

1-3 months

3 months to 1 year

1-5 years

Over 5 years

Non-interest bearing

Total


£000

£000

£000

£000

£000

£000

£000

FINANCIAL ASSETS








Accrued income

-

-

-

187,901

-

-

187,901

Other debtors and prepaid expenses

-

-

-

-

-

158

158

Other current assets

-

-

-

-

-

202

202

Cash and cash equivalents

11,712

-

-

-

-

-

11,712

Total financial assets

11,712

-

-

187,901

-

360

199,973

FINANCIAL LIABILITIES








Trade and other payables

-

-

-

-

-

2,152

2,152

Total interest rate sensitivity gap

11,712

-

-

187,901

-



 

30 September 2011

Less than 1 month

1-3 months

3 months to 1 year

1-5 years

Over 5 years

Non-interest bearing

Total


£000

£000

£000

£000

£000

£000

£000

FINANCIAL ASSETS








Accrued income

 -

 -

 -

 -

 53,857

   -

  53,857

Other debtors and prepaid expenses

 -

 -

  -

  185,054

  -

   -

185,054

Other current assets

 -

 -

 -

 -

 -

   131

   131

Cash and cash equivalents

 -

 -

  -

  -

  -

   57

   57

Total financial assets

13,321

  -

 -

 -

 -

 -

  13,321

FINANCIAL LIABILITIES

13,321

  -

  -

  185,054

 53,857

   188

 252,420

Trade and other payables








Total interest rate sensitivity gap

-

-

-

-

-

1,050

1,050

 

(a)  Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Group.

The carrying amounts of financial assets best represent the maximum credit risk exposure at the balance sheet date.

At the reporting date, the Group's financial assets exposed to credit risk are as follows:


2012

2011


£000

£000




Investments

-

53,857

Accrued income

187,901

185,054

Other debtors and prepaid expenses

158

131

Other current assets

202

57

Cash and cash equivalents

11,712

13,321


199,973

252,420

Management does not expect any counterparty to fail to meet its obligations.

(b)  Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation. The Group's liquidity position is monitored by the Board of Directors.

Residual undiscounted contractual maturities of financial liabilities:

30 September 2012

Less than 1 month

1-3 months

3 months to 1 year

1-5 years

Over 5 years

No stated maturity


£000

£000

£000

£000

£000

£000

FINANCIAL LIABILITIES







Trade and other payables

2,152

-

-

-

-

-

Total interest rate sensitivity gap

2,152

-

-

-

-

-

 

30 September 2011

Less than 1 month

1-3 months

3 months to 1 year

1-5 years

Over 5 years

No stated maturity


£000

£000

£000

£000

£000

£000

FINANCIAL LIABILITIES







Trade and other payables

1,050

-

-

-

-

-

Total interest rate sensitivity gap

1,050

-

-

-

-

-

FAIR VALUES

Set out below is a comparison by category of carrying amounts and fair values of the entire Group's and the Company's financial instruments that are carried in the financial statements.


2012 Carrying amount

Fair value

2011 Carrying amount

Fair value


£000

£000

£000

£000

Group





FINANCIAL ASSETS





Cash

11,712

11,712

13,321

13,321

Investments in preference shares - debt

-

-

53,857

53,857

Accrued income

187,901

187,901

185,054

185,054

Company





FINANCIAL ASSETS





Cash

11,543

11,543

13,119

13,119

Investments in Subsidiary

0*

0*

0*

0*

*Investment in subsidiary relates to Hirco Holdings Limited of £51.

17          ISSUED CAPITAL


Number of shares

Share capital £

AUTHORIZED



As at 30 September 2011

100,526,984

1,005,270

Increase during the year

-

-

As at 30 September 2012

100,526,984

1,005,270




ISSUED AND FULLY PAID



As at 30 September 2011

100,526,984

1,005,270

Issued during the year

-

-

As at 30 September 2012

100,526,984

1,005,270

Capital Management

The Board's policy is to maintain a sufficient capital base. Company capital comprises share capital, share premium and reserves. There were no changes in the Group's approach to capital management during the year. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.

18          GROUP ENTITIES

Name

Country of incorporation

Field of activity

Ownership interest

Type of share held

HELD BY THE COMPANY





Hirco Holdings Limited

Mauritius

Holding Company

100%

Ordinary

 

HELD BY HIRCO HOLDINGS LIMITED





Hirco Inc

United States of America

Holding Company

100%

Ordinary

Hirco Real Estate Services Pvt. Ltd.

India

Holding Company

100%

Ordinary

Development Holdings Co. Limited

Mauritius

Holding Company

100%

Ordinary

 

19          RELATED PARTIES

TERMS AND CONDITIONS OF TRANSACTIONS WITH SUBSIDIARIES

The amount due from subsidiaries of the Company comprises an unsecured loan of £352,000,000 (2011: £352,000,000), which is repayable on demand and is interest-bearing at 12 per cent per annum and a loan amount of £5,996,615 (2011: £5,996,615), which is an interest free advance. The aforementioned amounts are stated prior to impairments made.  

KEY MANAGEMENT PERSONNEL COMPENSATION

Fees paid to persons or entities considered to be key management personnel of the Group include:


2012

2011


£000

£000

Directors' fees

372

459

Salaries

-

200

The Company has invested in participating preference shares issued by Burke 1 Limited, Burke 2 Limited, Burke 3 Limited and Burke 4 Limited ("the Burke Companies"), subject to a shareholders' agreement with Burke Consolidated Ltd. Burke Consolidated Limited ("Burke") owns all the ordinary shares in the Burke Companies, entitling it to 60% of any residual profits. Burke is owned by the Hiranandani family, ("Hiranandani"). In addition, the project companies have entered into the following Agreements with a company owned by Hiranandani to manage the projects:

A Development Management and General Services Agreement to provide such assistance and advice to the project Companies in the development of the projects and completion of all design and/or construction works involved in the projects as may be reasonably requested by the project Companies. The fees payable for the services for the year ended 30 September 2012 have not been disclosed. 

•A Marketing Services Agreement to provide Sales and Marketing assistance to the Project Companies. The fees payable for the services for the year ended 30 September 2012 have not been disclosed.

20          LITIGATION

Legal proceedings have been issued by the Company against two former directors of the Company, Hiranandani Family Members, Niranjan Hiranandani and Priya Hiranandani-Vandrevala, in the English courts and in the Isle of Man courts.  The Company is also involved in a related arbitration with Niranjan Hiranandani and his wife Kamal Hiranandani. In addition the Company and its Mauritius subsidiary have brought separate arbitration proceedings against the Burke Companies and their shareholder, Burke Consolidated Limited, "BCL", with a view to ensuring compliance by them with their contractual obligations to the Company under the investment agreements the Group has with them.  Further details of these claims are set out in the paragraphs that follow.

The English proceedings against Niranjan Hiranandani and Priya Hiranandani-Vandrevala were issued in the High Court on 6 February 2013 on behalf of the Company and its wholly owned subsidiary Hirco Holdings Limited, ("HHL").  The claim is for damages of almost £220m.  Proceedings were issued at that time in order to protect the Company's position in relation to the possible expiry of limitation periods.  The proceedings have not yet been served on either defendant.  Both defendants have indicated their intention to contest the proceedings, and also to contest the jurisdiction of the English courts.

The same proceedings against Niranjan Hiranandani and Priya Hiranandani-Vandrevala were also issued in the Isle of Man courts on behalf of the Company and HHL on 6 February 2013.  Again this was in order to protect the Company's position in relation to the possible expiry of limitation periods.  These proceedings have not yet been served. In response to the threat of legal action, Priya Hiranandani-Vandrevala issued proceedings in the Isle of Man on 1 February 2013 seeking an order under s337 of the Isle of Man Companies Act 1931 that she ought fairly to be excused for any breaches of duty of which she is found to be liable.

Certain of HHL's claims against Niranjan Hiranandani that would otherwise be heard as part of the English or Isle of Man proceedings detailed above are currently the subject of arbitration proceedings because they fall within the arbitration provisions of an exclusivity agreement between HHL, Niranjan Hiranandani and Kamal Hiranandani.  Niranjan and Kamal Hiranandani initiated those proceedings on 31 January 2013 seeking a declaration that Niranjan Hiranandani has no liability to HHL. 

Separately, the Company and HHL have launched arbitration proceedings against each of the Burke Companies and BCL.  These proceedings, which were initiated on 5 March 2013, are being brought in order to assert the Company and HHL's contractual rights under the investment agreements, being the mechanism by which the Company and HHL can exercise control over the projects and monitor their investments. 

The confidential nature of arbitration proceedings prevents the disclosure of further details as to the substance of these actions.

The Board considers that these actions are necessary and proper, and the best way for the Company to protect its shareholders' investments.  The Board intends to pursue this litigation and the arbitration proceedings while also seeking to resolve its dispute with the Hiranandani Family through negotiation. 

No provision has been made in these financial statements for any possible recovery under these actions. 

21          SUBSEQUENT EVENTS

Other than the matters commented on in Note 20 there are no other events subsequent to the year-end which have an effect on the accounts for the year ended 30 September 2012.

 

SHAREHOLDER INFORMATION

 

Registrar                                                                                  Nominated Advisor

Capita Registrars (Jersey) Limited                                                           N+1 Singer Advisory LLP

12 Castle Street                                                                         One Bartholomew Lane

St Helier                                                                                    London EC2N 2AX

Jersey JE2 3RT

 

Transfer Agents                                                                      Registered Office

Capita Registrars                                                                       IOMA House

34 Beckenham Road                                                                  Hope Street

Beckenham                                                                               Douglas

Kent BR3 4TU                                                                           Isle of Man IM1 1AP

 

Shareholders Enquiries                                                           Auditors

Securities analysts and others                                                    KPMG Audit LLC

seeking investor-related                                                              Heritage Court

information are asked to contact:                                                 41 Athol Street

James Maxwell                                                                          Douglas

Singer Capital Markets Ltd                                                          Isle of Man IM99 1HN

1 Hanover Street

London W1S 1YZ

 

 

FORWARD-LOOKING STATEMENTS

 

Cautionary Note Regarding Forward-looking Statements

 

This Annual Report may include certain forward-looking statements. These statements are based on the current assumptions, assessments, and expectations of the management of Hirco and are subject to risks, uncertainty, and changes in circumstances.

 

The forward-looking statements contained herein include any statements about the future plans and prospects of Hirco and all other statements in this Annual Report other than historical facts. Forward-looking statements include, without limitation, statements typically containing words such as "intend", "expect", "anticipate", "target", "estimate", "plan", "goal", "believe", "will", "may", "should", "would", "could", and words of similar meaning. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These factors include, but are not limited to: changes in economic conditions; changes in the success of business and operating initiatives and objectives; changes in the regulatory environment; fluctuations in interest and exchange rates; the outcome of litigation; government actions; and natural phenomena such as floods, earthquakes, and hurricanes.

 

Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements. Undue reliance should not, therefore, be placed on the forward-looking statements. Hirco does not undertake any obligation to update publicly or revise forward-looking statements, whether as a result of new information, future events, or otherwise, except to the extent legally required.

 

Electronic copies

Hirco PLC's Annual Report and Accounts 2012 is available on the internet at www.hircoplc.im

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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